Document:

Exhibit 10.14

 

FORM OF OPTION AGREEMENT

(Erskine Village)

 

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

 

R E C I T A L S

 

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

 

WHEREAS, KSK Scottsdale
Mall, L.P., a Delaware limited partnership (the “L.P.”), currently owns that
certain real property as described in Exhibit A hereto (the “Land”) and
the buildings, structures and other improvements situated on the Land or
hereinafter constructed or acquired (the “Property”);

 

WHEREAS, Optionor currently
owns a twenty-five percent (25%) limited partnership interest (the “Percentage
Interest”) in the L.P.;

 

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

 

WHEREAS, As part of the Kite
IPO Transactions, Optionor desires to grant to Kite Realty an option to acquire
all of the right, title and interest in and to Optionor’s partnership interest
in the L.P., including, without limitation, all of Optionor’s Percentage
Interest, voting rights and interests in the capital, profits and losses
arising out of such Percentage Interest (such right, title and interest
hereinafter collectively referred to as the “Partnership Interest”), on the
terms and conditions specified in this Agreement.

 

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

 

 

ARTICLE I - THE OPTION

 

1.1                                 Grant of Option. 
Optionor hereby grants to Kite Realty an option to acquire all right,
title and interest of Optionor in and to the Partnership Interest free and
clear of any encumbrances on the Partnership Interest (other than encumbrances
with respect to the Project Indebtedness (as defined in Section 3.1) or
any Entity Indebtedness (as defined in Section 5.2)) on the terms and
conditions set forth herein (the “Option”).

 

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

 

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

 

1.4                                 Consents.  The consummation of the
transactions contemplated by this Agreement is subject to any consents required
under the organizational documents of the L.P., any consents required under the
“Project Indebtedness” and any “Entity Indebtedness”and (a) in the case of the transfer of the Partnership
Interest,any other consents
required to be obtained prior to the transfer of the Partnership Interest, or
(b) in the case of the transfer of the Member Interests pursuant to
Section 5.2, any other consents required to be obtained prior to the
transfer of the Member Interests. 

 

1.5                                 Subordination.  The
Option granted by this Agreement and the rights of Kite Realty hereunder are
and shall be subordinate to the Project Indebtedness and any Entity
Indebtedness.

 

ARTICLE II - PROCESS FOR EXERCISE OF THE OPTION

 

2.1                                 Exercise.  Subject to Section 1.2
hereof, the Option may be exercised during the Option Term by delivery of
written notice by Kite Realty to Optionor (the “Exercise Notice”), stating that
the Option is exercised on the terms set forth in this Agreement.  The Exercise Notice shall specify the name of
the First Appraiser (as defined in Section 3.1(a)(ii)).  The date upon which the Exercise Notice is
delivered by Optionor in accordance with this Agreement is hereinafter referred
to as the “Exercise Date.”  If the Option
is timely exercised, subject to Section 3.1(f), the Partnership Interest
shall be conveyed, and the closing date of such acquisition, transfer and
conveyance (the “Closing Date”) shall occur, within the later of (a) 15 days
after the last day of the month immediately following the month in which the
Exercise Notice is delivered or (b) 45 days after the determination of the FMV
(as defined in Section 3.1) of the Property at the time in accordance with
Section 3.1.  The exercise of the
Option is subject to the approval of a majority of the “independent” members of
the Board of Trustees of the REIT (as defined in the REIT’s Amended and Restated
Bylaws), as general partner of Kite Realty.

 

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

 

2.3                                 Information.  Optionor agrees to permit Kite
Realty and its agents to review all books, records and other documentation
reasonably requested by Kite Realty with respect to Optionor, the L.P., the
Partnership Interest, the Member Interests and/or the Property, which are in
Optionor’s possession and control. 
Optionor will provide (or cause to be provided), upon request from Kite
Realty, a report of the status of the Partnership Interest and the Property (to
the extent within Optionor’s possession and control), on a quarterly basis,
which report shall include unaudited financials and such other information and
data as Kite Realty may reasonably request regarding the Partnership Interest
and the Property (to the extent within Optionor’s possession and control); it
being understood that, to the extent Kite Realty or any of its subsidiaries or
affiliated companies is providing administrative services to the L.P. and/or
Optionor with respect to the Property and/or the Partnership Interest
(including, without limitation, accounting and record-keeping services),
Optionor shall be deemed to have satisfied its obligation under this
Section 2.3 to the extent that the information requested by this
Section 2.3 is available to Kite Realty or such subsidiaries or affiliated
companies in connection with the performance of such administrative services,
and such information should be deemed to have been delivered by Optionor to
Kite Realty pursuant to this Section 2.3 (notwithstanding any obligations
with respect to such information - confidential or otherwise - contained in any
agreement providing for the performance of such administrative services).

 

ARTICLE III - ACQUISITION
PROCESS

 

3.1                                 Acquisition Consideration.  

 

(a)                                  The
acquisition consideration to be paid by Kite Realty for the Partnership
Interest (the “Acquisition Consideration”) pursuant to an exercise of the
Option under Section 2.1 shall be equal to the lesser of (i) Annualized
NOI divided by 8.5%, less the Project Indebtedness, multiplied by the
Percentage Interest or (ii) the product of (x) the fair market value of the
Property (“FMV”) at the time, as determined in accordance with this
Section 3.1, less the Project Indebtedness, multiplied by (y) the
Percentage Interest.   “Annualized NOI”
shall mean the annualized net operating income for the Property, calculated as
follows: the sum of (i) the net operating income for the Property for the month

 

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immediately
prior to the month in which the Exercise Notice is delivered plus (ii) the net
operating income for the Property for the month in which the Exercise Notice is
delivered plus (iii) the net operating income for the Property for the month
immediately following the month in which the Exercise Notice is delivered, annualized.  “Project Indebtedness” shall mean any
outstanding financing or other arrangements entered into by or on behalf of the
L.P. which relate to the Property, including, without limitation, any mezzanine
or bridge financing, or amendments or extensions thereof.  The transfer of the Partnership Interest as
contemplated by this Agreement shall be subject to any Project Indebtedness.

 

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

 

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

 

(iii)                               In
preparing its FMV determination, each appraiser shall be provided with the same
Property-specific source documents and information and the same access to
personnel.  Each appraiser shall
determine a single point estimate of FMV, not a range of values.  Only qualified real estate appraisers with at
least five years’ prior experience in the valuation of properties comparable to
the Property in the area in which such Property is located, and that do not have
any financial interest in any entities affiliated with the Members (excluding
any existing or prior agreement or contractual arrangement to provide advisory
or appraisal services to any such Members or any affiliates thereof), may be
validly appointed to serve as an appraiser hereunder.  Subject to Section 3.1(f), each of
Optionor and Kite Realty shall pay all fees and costs of the appraiser
designated by it and one-half of all fess and costs of the Third Appraiser, if
any. 

 

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(b)                                 On the
Closing Date, the Acquisition Consideration shall be payable by Kite Realty, in
the form of units of limited partnership interest in Kite Realty (“Units”) or
cash, in the sole and absolute discretion of Kite Realty.  The value of Units shall be their “Market
Value” as defined in this Section 3.1(b), and the number of Units shall be
rounded to the nearest whole number of Units to avoid the issuance of
fractional Units.  The term “Market
Value” shall mean the average closing price of the common shares of beneficial
interest, $0.01 par value per share, of the REIT (or any successor thereto)
(“Common Shares”) for the 10 consecutive trading days immediately preceding
(but not including) the Closing Date. 
For purposes of determining Market Value, one Unit shall equal one
Common Share, subject to any adjustments required under the Amended and
Restated Agreement of Limited Partnership of Kite Realty, as may be amended
and/or restated from time to time (the “Partnership Agreement”), or to reflect
stock splits, reclassifications, dividends in-kind and the like.

 

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

 

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

 

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

 

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

 

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

 

3.3                                 Withholding.  Optionor shall execute upon the conveyance of
the Partnership Interest such certificates or affidavits reasonably necessary
to document the inapplicability of any federal or state tax withholding
provisions, including, without limitation, those referred to in
Section 7.4 below.  If Optionor
fails to provide such certificates or affidavits, Kite Realty may withhold a portion
of the Acquisition Consideration as required by the Internal Revenue Code of
1986, as amended (the “Code”) or applicable state law.

 

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

 

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

 

(b)                                 Cooperation
and Tax Disputes.  Optionor and the Members,
on the one hand, and Kite Realty, on the other hand, shall provide each other
with such cooperation and information relating to the Partnership Interest, the
Member Interests, and to the extent within Optionor’s possession and control,
the L.P. and the Property, as the parties reasonably may request in (i) filing any
tax return, amended tax return or claim for tax refund, (ii) determining any
liability for taxes or a right to a tax refund or (iii) conducting or defending
any proceeding in respect of taxes.  Any
time after the date hereof, Kite Realty shall promptly notify Optionor or the
Members, as applicable, in writing upon receipt by Kite Realty or any of its
affiliates of notice of (i) any pending or threatened tax audits or assessments
with respect to the Partnership Interest or the Member Interests and (ii) any
pending or threatened federal, state, local or foreign tax audits or
assessments of Kite Realty or any of its affiliates, in each case which may
affect the liabilities for taxes of Optionor or any of the Members with respect
to any tax period ending on or before the Closing Date.  Optionor and each Member shall promptly
notify Kite Realty in writing upon receipt by Optionor or such Member, as the
case may be, of notice of any pending or threatened federal, state, local or
foreign tax audits or assessments relating to the income, properties or
operations of the Optionor or the L.P., the Property, the Partnership Interest
or any of the Member Interests.  Each of
Kite Realty, on the one hand, and Optionor and/or the Members, on the other
hand, may participate at its own expense in the prosecution of any claim or
audit with respect to taxes attributable to any taxable period ending on or
before the Closing Date, provided, that Optionor and/or the Members shall
collectively have

 

6

 

the
right to control the conduct of any such audit or proceeding or portion thereof
for which Optionor and/or such Members, as the case may be, have acknowledged
liability (except as a partner of Kite Realty) for the payment of any additional
tax liability, and Kite Realty shall have the right to control any other audits
and proceedings.  Notwithstanding the
foregoing, neither Kite Realty, on the one hand, nor Optionor and/or the
Members, on the other hand, may settle or otherwise resolve any such claim,
suit or proceeding which could have an adverse tax effect on the other party or
its direct or indirect owners without the written consent of the other party,
such written consent not to be unreasonably withheld or delayed.  Each party shall retain all tax returns,
schedules and work papers, and all material records and other documents
relating thereto, until the expiration of the statute of limitations (and, to
the extent notified by any party, any extensions thereof) of the taxable years
to which such tax returns and other documents relate and until the final
determination of any tax in respect of such years.

 

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

 

(d)                                 Transfer Taxes.  Kite
Realty shall pay the cost of all documentary transfer taxes arising from the
sale of the Partnership Interest pursuant to the exercise by Kite Realty of the
Option or from the transfer of the Member Interests pursuant to
Section 5.2.

 

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

 

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

 

ARTICLE IV - RIGHT
OF FIRST REFUSAL

 

4.1                                 Right of
First Refusal.   If Optionor receives a
bona fide, good faith offer from an unaffiliated third party to purchase all
right, title and interest in and to the Partnership Interest (the “Offer”) at
any time during the term of this Agreement, then, subject only to Kite Realty’s
right of first refusal contained in this Article IV, Optionor shall have
the right to convey 100% of the Partnership Interest to such third party during
the term of this Agreement.  If Optionor
desires to accept the Offer, Optionor shall first give written notice (the
“ROFR Notice”) thereof to Kite Realty (the date the ROFR Notice is delivered by
Kite Realty in accordance with this Agreement is referred to as the “Notice
Date”), which ROFR Notice shall include the proposed purchase price (the
“Purchase Price”), the identity of the proposed transferee (the “Transferee”)
and other material terms (collectively, the “Acquisition Terms”) of the
proposed transfer of the Partnership Interest. 
Kite Realty shall have 30 days from the Notice Date either (i) to
deliver written notice to Optionor (the “OP Notice”) of its election to acquire
100% of the Partnership Interest for the same Purchase Price (payable in cash
or Units, in Kite Realty’s sole and absolute discretion) and otherwise on
substantially the same Acquisition Terms as set forth in the

 

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Offer,
or (ii) if the Option is then exercisable pursuant to Section 1.2 hereof,
to deliver an Exercise Notice pursuant to the exercise of its Option under
Section 2.1.   For purposes of this
Agreement, an “unaffiliated third party” shall mean, with respect to any
Person, any Person directly or indirectly not controlling, not controlled by or
not under common control with such Person. 
For purposes of this definition, “control,” when used with respect to
any Person, shall mean the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms “controlling” and
“controlled” have meanings correlative to the foregoing.  “Person” shall mean a natural person,
partnership (whether general or limited), trust, estate, association,
corporation, limited liability company, unincorporated organization, custodian,
nominee or any other individual or entity in its own or any representative
capacity.

 

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

 

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

 

ARTICLE V -  ADDITIONAL AGREEMENTS AND COVENANTS

 

5.1                                 Marketing
the Partnership Interest for Sale.  
Optionor agrees not to (i) affirmatively market the Partnership Interest
for sale during the Option Term, or (ii) sell, convey or otherwise transfer, or
agree to sell, convey or otherwise transfer, all or any portion of the
Partnership Interest, other than the sale of 100% of the Partnership Interest
pursuant to Kite Realty’s exercise of the Option or in accordance with
Article IV hereof.  

 

5.2                                 Alternative
Transaction - Member Interest Acquisition. 

 

(a)                                  Consent
to Alternative Transaction. 
Optionor and the Members acknowledge and understand that Kite Realty may
desire to effectuate a transfer of the Partnership Interest, other than through
the direct acquisition of the Partnership Interest as contemplated hereby, and
that Kite Realty may determine that it is more desirable or appropriate to
accomplish the transfer of the Partnership Interest through the acquisition of
100% of the Member Interests (the “Member Interest Acquisition”).  Optionor and the Members hereby consent to
the Member Interest Acquisition, and agree to cooperate with Kite Realty;
provided, that the Members receive, in the aggregate, the amount of cash or
number of Units to which Optionor would be entitled under Section 3.1

 

8

 

upon
the sale of the Partnership Interest pursuant to this Agreement, subject to the
adjustments in Section 5.2(b); it being understood that the form of
consideration shall be determined in the sole and absolute discretion of Kite
Realty.

 

(b)                                 Member
Interest Acquisition Consideration.  
Notwithstanding anything to the contrary in this Agreement, the
Acquisition Consideration payable for the Member Interests shall be reduced by
the amount of any Entity Indebtedness assumed or repaid by Kite Realty
(including, without limitation, the payment of any applicable prepayment,
assumption or other fees, costs and penalties). 
For purposes of this Section 5.2(b), the value of outstanding
Entity Indebtedness assumed by Kite Realty shall be the principal amount
thereof and any accrued and unpaid interest, plus any related prepayment,
assumption and other fees, costs and penalties incurred by Kite Realty in
connection with Kite Realty’s assumption of such Entity Indebtedness.  “Entity
Indebtedness” shall mean any outstanding financings or other arrangements
entered into by Optionor (or any affiliate of Optionor) prior to the date
hereof which relate to the Partnership Interest, Optionor or the Member
Interests and secured by a pledge of the Partnership Interest or the Member
Interests or which otherwise encumbers the Partnership Interest or Member
Interests.  Notwithstanding anything to
the contrary contained herein, “Entity Indebtedness” shall not include any
Entity Indebtedness to the extent that the aggregate of all Entity Indebtedness
(plus accrued and unpaid interest and any related prepayment, assumption or
other fees, costs and penalties) exceeds the Acquisition Consideration.  Any financings or other arrangements encumbering
the Partnership Interest or Member Interests in excess of the amount of the
Acquisition Consideration (as adjusted pursuant to this Section 5.2(b))
shall be the responsibility of Optionor and shall be prepaid or repaid at or
prior to the Closing Date.  Optionor
shall provide Kite Realty with notice of any known default under any Entity
Indebtedness and shall provide copies of any written default notices Optionor
may receive from the lenders of such indebtedness.

 

(c)                                  Acquisition
Process.  In the event that Kite
Realty elects to accomplish the transfer of the Partnership Interest through
the Member Interest Acquisition: (i) the Exercise Notice shall specify that
Kite Realty elects to effectuate the Member Interest Acquisition pursuant to
this Section 5.2; (ii) subject to this Section 5.2, the provisions of
Article III shall govern the Member Interest Acquisition; (iii) the
purchase price to be paid by Kite Realty for the Member Interests shall be
equal to the Acquisition Consideration for the Partnership Interest as
calculated in accordance with Section 3.1, subject to the adjustments in
Section 5.2(b), with each Member entitled to receive such Member’s pro
rata share of such Acquisition Consideration based on such Member’s percentage
interest in Optionor (as set forth in Exhibit B); (iv) subject to
Section 3.1(f), the Member Interests shall be conveyed, and the Closing
Date of such acquisition shall occur, within the later of (a) 15 days after the
last day of the month immediately following the month in which the Exercise
Notice is delivered or (b) 45 days after the determination of the FMV of the
Property at the time in accordance with Section 3.1; and (v) on or prior
to the Closing Date, subject to Section 3.1(f), the Members, Optionor and
Kite Realty shall execute and deliver the closing documentation described on Exhibit
C hereto regarding the Member Interest Acquisition, and, thereafter, the
Members, Optionor and Kite Realty shall additionally acknowledge, execute,
deliver and/or file (as the case may be) any and all other

 

9

 

documents,
agreements or instruments reasonably necessary or appropriate to effectuate the
Member Interest Acquisition in accordance with the terms of this Agreement.

 

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

 

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

 

5.5                                 Obligation
to Sell the Partnership Interest or the Member Interests.   Optionor and the Members hereby acknowledge
and agree that, if Kite Realty does not exercise the Option and/or the
Partnership Interest is not transferred in accordance with Article IV
prior to the termination of this Agreement pursuant to Section 6.1 hereof,
Optionor and the Members shall use their reasonable best efforts to sell,
convey or otherwise transferas
promptly as reasonably practicable100%
of the Partnership Interest or 100% of the Member Interests to an unaffiliated
third party.  Notwithstanding anything to
the contrary herein, this Section 5.5 shall survive any termination of
this Agreement indefinitely.

 

ARTICLE VI -
TERMINATION

 

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

 

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

 

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

 

(c)                                  the
fourth anniversary of the date of commencement of construction of the planned
development on the Property; it being understood that, if on or prior to the
date of such expiration: (i) Kite Realty has properly delivered an Exercise
Notice or OP Notice, this Agreement shall remain in effect for purposes of
effectuating the acquisition of the Partnership Interest or the Member
Interests pursuant to such Exercise Notice or OP Notice, or (ii) Optionor has
received an Offer for which a ROFR Notice has not yet been delivered by Kite
Realty, or less than 30 days was elapsed since the date of the

 

10

 

receipt
by Kite Realty of the ROFR Notice, this Agreement shall remain in effect for
purposes of permitting Kite Realty to exercise its rights under Article IV
hereof and purchase the Partnership Interest or the Member Interests; or

 

(d)                                 the sale,
transfer or contribution by the L.P. of all the parcels comprising the
Property. 

 

6.2                                 Procedure
if Option Terminates.

 

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

 

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

 

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

 

6.3                                 Effects
of Termination.  In the event of
termination of this Agreement pursuant to Section 6.1, the provisions of
Sections 3.4, 5.5, 6.1, 6.2 and 6.3 and Articles VIII and IX shall survive the
termination of this Agreement; it being understood that, with respect to
termination pursuant to Section 6.1(a), the provisions of this Agreement
that contemplate performance after the Closing Date and the obligations of the
parties not fully performed on the Closing Date shall survive the Closing Date
and shall not be deemed to be merged into or waived by the instruments executed
as of the Closing Date.  Notwithstanding
the foregoing, nothing in this Section 6.3 shall be deemed to release any
party from liability for any breach by such party of the terms or provisions of
this Agreement or to impair the right of any party to enforce its respective
rights hereunder.

 

11

 

ARTICLE VII -
REPRESENTATIONS, WARRANTIES AND COVENANTS

 

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

 

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

 

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

 

7.3                                 Title to
the Member Interests; No Agreements to Sell.  
Each Member owns beneficially and of record, free and clear of any
Encumbrances, and has full power and authority to convey free and clear of any
Encumbrances, the Member Interests listed on Exhibit B hereto as owned
by such Member, except (i) Encumbrances created in favor of Kite Realty by the
transactions contemplated hereby, (ii) Encumbrances that are extinguished at or
prior to the Closing Date, and (iii) Encumbrances relating to the Project
Indebtedness or any Entity Indebtedness. 
Other than this Agreement, such Member is not

 

12

 

currently
a party to any agreement to sell, transfer or otherwise encumber or dispose of,
and has no obligation (absolute or contingent) to sell, the Member Interests
owned by such Member.  Each Member
covenants and agrees not to encumber such Member’s Member Interests during the
Option Term except in connection with the Project Indebtednessand any Entity Indebtedness.

 

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

 

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

 

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

 

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

 

ARTICLE VIII -
INDEMNIFICATION

 

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

 

ARTICLE IX -
ASSIGNMENT; TRANSFER OF MEMBER INTERESTS

 

9.1                                 Kite
Realty’s Right to Assignment.  
Kite Realty may not assign the Option or the right of first refusal
granted pursuant to Article IV hereby without Optionor’s

 

13

 

prior
written consent, which consent may be conditioned, withheld or delayed in
Optionor’s sole and absolute discretion; provided, that Kite Realty may assign
the Option or the right of first refusal granted pursuant to Article IV
hereby without Optionor’s consent to (i) the REIT, (ii) any direct or indirect
controlled affiliate of the REIT or Kite Realty or (iii) any entity into which
Kite Realty has merged or otherwise is the result of a business combination
directly involving Kite Realty.

 

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

 

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

 

ARTICLE X - MISCELLANEOUS

 

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

 

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

 

14

 

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

 

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

 

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

 

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

 

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

 

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

 

15

 

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

 

 

[Signature page follows]

 

16

 

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

 

 

	
  Address:

  	
   

  
	
   

  	
   

  
	
   

  	
  OPTIONOR:

  
	
   

  	
   

  
	
   

  	
  KITE SOUTH BEND, LLC

  
	
  Kite South Bend, LLC

  	
   

  
	
  c/o Kite Realty Group Trust

  	
  By:

  	
   

  	
   

  
	
  30 S. Meridian Street

  	
  Name:

  	
   

  	
   

  
	
  Suite 1100

  	
  Title:

  	
   

  	
   

  
	
  Indianapolis, Indiana 46204

  	
   

  
	
  Fax No.: (317) 577-5605

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  KITE REALTY:

  
	
   

  	
   

  
	
  Kite Realty Group, L.P.

  	
  KITE REALTY GROUP, L.P.

  
	
  c/o Kite Realty Group Trust

  	
   

  
	
  30 S. Meridian Street

  	
  By:

  	
  KITE REALTY GROUP TRUST, its

  
	
  Suite 1100

  	
   

  	
  General Partner

  
	
  Indianapolis, Indiana 46204

  	
   

  	
   

  
	
  Fax No.: (317) 577-5605

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MEMBERS:

  
	
   

  	
   

  
	
   

  	
   

  
	
  Alvin E. Kite, Jr.

  	
   

  
	
  c/o Kite Realty Group Trust

  	
   

  	
   

  
	
  30 S. Meridian Street

  	
  Alvin E. Kite, Jr.

  
	
  Suite 1100

  	
   

  
	
  Indianapolis, Indiana 46204

  	
   

  
											

 

 

	
  John A. Kite

  	
   

  
	
  c/o Kite Realty Group Trust

  	
   

  	
   

  
	
  30 S. Meridian Street

  	
  John A. Kite

  
	
  Suite 1100

  	
   

  
	
  Indianapolis, Indiana 46204

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Paul W. Kite

  	
   

  
	
  c/o Kite Realty Group Trust

  	
   

  	
   

  
	
  30 S. Meridian Street

  	
  Paul W. Kite

  
	
  Suite 1100

  	
   

  
	
  Indianapolis, Indiana 46204

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Thomas K. McGowan

  	
   

  
	
  c/o Kite Realty Group Trust

  	
   

  	
   

  
	
  30 S. Meridian Street

  	
  Thomas K. McGowan

  
	
  Suite 1100

  	
   

  
	
  Indianapolis, Indiana 46204

  	
   

  

 

 

EXHIBITS TO THE OPTION AGREEMENT*

 

	
  Exhibit A

  	
   

  	
  Description of Real Property

  
	
   

  	
   

  	
   

  
	
  Exhibit B

  	
   

  	
  Member Interests

  
	
   

  	
   

  	
   

  
	
  Exhibit C

  	
   

  	
  Closing Documentation

  (Partnership Interest Acquisition/Member Interests Acquisition)

  

 

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

 

 

EXHIBIT B

 

MEMBER INTERESTS

 

	
  Member

  	
   

  	
  Member Percentage
  Interests

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Alvin
  E. Kite, Jr.

  	
   

  	
  30%

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  John
  A. Kite

  	
   

  	
  25%

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Paul
  W. Kite

  	
   

  	
  25%

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Thomas
  K. McGowan

  	
   

  	
  20%Exhibit 10.15

 

FORM OF OPTION AGREEMENT

(126th Street & Meridian Medical Complex)

 

THIS OPTION AGREEMENT (this
“Agreement”) is made as of
             ,
          2004 by and among, Kite
Realty Group L.P., a Delaware limited partnership (“Kite Realty”), Kite 126th
Street Medical, LLC, an Indiana limited liability company (“Optionor”) and
Alvin E. Kite, Jr., John A. Kite, Paul W. Kite and Thomas K. McGowan (each a
“Member” and, collectively, the “Members”). 

 

R E C I T A L S

 

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

 

WHEREAS, 126th
Street Medical, LLC, an Indiana limited liability company (the “LLC”),
currently owns that certain real property as described in Exhibit A
hereto (the “Land”) and the buildings, structures and other improvements
situated on the Land or hereinafter constructed or acquired (the “Property”);

 

WHEREAS, Optionor is a
member and currently owns a fifty percent (50%) limited liability company
interest (the “Percentage Interest”) in the LLC;

 

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

 

WHEREAS, As part of the Kite
IPO Transactions, Optionor desires to grant to Kite Realty an option to acquire
all of the right, title and interest in and to Optionor’s membership interest
in the LLC, including, without limitation, all of Optionor’s Percentage
Interest, voting rights and interests in the capital, profits and losses
arising out of such Percentage Interest (such right, title and interest
hereinafter collectively referred to as the “LLC Interest”), on the terms and
conditions specified in this Agreement.

 

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

 

 

ARTICLE I - THE OPTION

 

1.1                                 Grant of Option. 
Optionor hereby grants to Kite Realty an option to acquire all right,
title and interest of Optionor in and to the LLC Interest free and clear of any
encumbrances on the LLC Interest (other than encumbrances with respect to the
Project Indebtedness (as defined in Section 3.1) or any Entity
Indebtedness (as defined in Section 5.2)) on the terms and conditions set
forth herein (the “Option”).

 

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

 

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

 

1.4                                 Consents.  The consummation of the
transactions contemplated by this Agreement is subject to any consents required
under the organizational documents of the LLC, any consents required under the
“Project Indebtedness” and any “Entity Indebtedness”and (a) in the case of the transfer of the LLC Interest,any other consents required to be obtained
prior to the transfer of the LLC Interest, or (b) in the case of the transfer
of the Member Interests pursuant to Section 5.2, any other consents
required to be obtained prior to the transfer of the Member Interests.

 

1.5                                 Subordination.  The
Option granted by this Agreement and the rights of Kite Realty hereunder are
and shall be subordinate to the Project Indebtedness and any Entity
Indebtedness.

 

ARTICLE II - PROCESS FOR EXERCISE OF THE OPTION

 

2.1                                 Exercise.  Subject to Section 1.2
hereof, the Option may be exercised during the Option Term by delivery of
written notice by Kite Realty to Optionor (the “Exercise Notice”), stating that
the Option is exercised on the terms set forth in this Agreement.  The Exercise Notice shall specify the name of
the First Appraiser (as defined in Section 3.1(a)(ii)).  The date upon which the Exercise Notice is
delivered by Optionor in accordance with this Agreement is hereinafter referred
to as the “Exercise Date.”  If the Option
is timely exercised, subject to Section 3.1(f), the LLC Interest shall be
conveyed, and the closing date of such acquisition, transfer and conveyance
(the “Closing Date”) shall occur, within the later of (a) 15 days after the
last day of the month immediately following the month in which the Exercise
Notice is delivered or (b) 45 days after the determination of the FMV (as defined
in Section 3.1) of the Property at the time in accordance with
Section 3.1.   The exercise of the
Option is subject to the approval of a majority of the “independent” members of
the Board of Trustees of the REIT (as defined in the REIT’s Amended and
Restated Bylaws), as general partner of Kite Realty.

 

2

 

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

 

2.3                                 Information.  Optionor agrees to permit Kite
Realty and its agents to review all books, records and other documentation
reasonably requested by Kite Realty with respect to Optionor, the LLP, the LLC
Interest, the Member Interests and/or the Property, which are in Optionor’s
possession and control.  Optionor will
provide (or cause to be provided), upon request from Kite Realty, a report of
the status of the LLC Interest and the Property (to the extent within Optionor’s
possession and control), on a quarterly basis, which report shall include
unaudited financials and such other information and data as Kite Realty may
reasonably request regarding the LLC Interest and the Property (to the extent
within Optionor’s possession and control); it being understood that, to the
extent Kite Realty or any of its subsidiaries or affiliated companies is
providing administrative services to the LLC and/or Optionor with respect to
the Property and/or the LLC Interest (including, without limitation, accounting
and record-keeping services), Optionor shall be deemed to have satisfied its
obligation under this Section 2.3 to the extent that the information
requested by this Section 2.3 is available to Kite Realty or such
subsidiaries or affiliated companies in connection with the performance of such
administrative services, and such information should be deemed to have been
delivered by Optionor to Kite Realty pursuant to this Section 2.3
(notwithstanding any obligations with respect to such information -
confidential or otherwise - contained in any agreement providing for the
performance of such administrative services).

 

ARTICLE III - ACQUISITION
PROCESS

 

3.1                                 Acquisition Consideration.  

 

(a)                                  The
acquisition consideration to be paid by Kite Realty for the LLC Interest (the
“Acquisition Consideration”) pursuant to an exercise of the Option under
Section 2.1 shall be equal to the lesser of (i) Annualized NOI divided by
8.5%, less the Project Indebtedness, multiplied by the Percentage Interest or
(ii) the product of (x) the fair market value of the Property (“FMV”) at the
time, as determined in accordance with this Section 3.1, less the Project
Indebtedness, multiplied by (y) the Percentage Interest.  “Annualized NOI” shall mean the annualized
net operating income for the Property, calculated as follows: the sum of (i)
the net operating income for the Property for the month immediately prior to
the month in which the Exercise Notice is delivered plus (ii) the net

 

3

 

operating
income for the Property for the month in which the Exercise Notice is delivered
plus (iii) the net operating income for the Property for the month immediately
following the month in which the Exercise Notice is delivered, annualized.  “Project Indebtedness” shall mean any
outstanding financing or other arrangements entered into by or on behalf of the
LLC which relate to the Property, including, without limitation, any mezzanine
or bridge financing, or amendments or extensions thereof.  The transfer of the LLC Interest as
contemplated by this Agreement shall be subject to any Project Indebtedness.

 

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

 

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

 

(iii)                               In
preparing its FMV determination, each appraiser shall be provided with the same
Property-specific source documents and information and the same access to
personnel.  Each appraiser shall
determine a single point estimate of FMV, not a range of values.  Only qualified real estate appraisers with at
least five years’ prior experience in the valuation of properties comparable to
the Property in the area in which such Property is located, and that do not
have any financial interest in any entities affiliated with the Members
(excluding any existing or prior agreement or contractual arrangement to
provide advisory or appraisal services to any such Members or any affiliates
thereof), may be validly appointed to serve as an appraiser hereunder.  Subject to Section 3.1(f), each of
Optionor and Kite Realty shall pay all fees and costs of the appraiser
designated by it and one-half of all fess and costs of the Third Appraiser, if
any. 

 

4

 

(b)                                 On the
Closing Date, the Acquisition Consideration shall be payable by Kite Realty, in
the form of units of limited partnership interest in Kite Realty (“Units”) or
cash, in the sole and absolute discretion of Kite Realty.  The value of Units shall be their “Market
Value” as defined in this Section 3.1(b), and the number of Units shall be
rounded to the nearest whole number of Units to avoid the issuance of
fractional Units.  The term “Market
Value” shall mean the average closing price of the common shares of beneficial
interest, $0.01 par value per share, of the REIT (or any successor thereto)
(“Common Shares”) for the 10 consecutive trading days immediately preceding
(but not including) the Closing Date. 
For purposes of determining Market Value, one Unit shall equal one Common
Share, subject to any adjustments required under the Amended and Restated
Agreement of Limited Partnership of Kite Realty, as may be amended and/or
restated from time to time (the “Partnership Agreement”), or to reflect stock
splits, reclassifications, dividends in-kind and the like.

 

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

 

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

 

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

 

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

 

5

 

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

 

3.3                                 Withholding.  Optionor shall execute upon the conveyance of
the LLC Interest such certificates or affidavits reasonably necessary to
document the inapplicability of any federal or state tax withholding
provisions, including, without limitation, those referred to in
Section 7.4 below.  If Optionor
fails to provide such certificates or affidavits, Kite Realty may withhold a
portion of the Acquisition Consideration as required by the Internal Revenue
Code of 1986, as amended (the “Code”) or applicable state law.

 

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

 

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

 

(b)                                 Cooperation
and Tax Disputes.  Optionor and the Members,
on the one hand, and Kite Realty, on the other hand, shall provide each other
with such cooperation and information relating to the LLC Interest, the Member
Interests, and to the extent within Optionor’s possession and control, the LLC
and the Property, as the parties reasonably may request in (i) filing any tax
return, amended tax return or claim for tax refund, (ii) determining any
liability for taxes or a right to a tax refund or (iii) conducting or defending
any proceeding in respect of taxes.  Any
time after the date hereof, Kite Realty shall promptly notify Optionor or the
Members, as applicable, in writing upon receipt by Kite Realty or any of its
affiliates of notice of (i) any pending or threatened tax audits or assessments
with respect to the LLC Interest or the Member Interests and (ii) any pending
or threatened federal, state, local or foreign tax audits or assessments of
Kite Realty or any of its affiliates, in each case which may affect the
liabilities for taxes of Optionor or any of the Members with respect to any tax
period ending on or before the Closing Date. 
Optionor and each Member shall promptly notify Kite Realty in writing
upon receipt by Optionor or such Member, as the case may be, of notice of any
pending or threatened federal, state, local or foreign tax audits or
assessments relating to the income, properties or operations of the Optionor or
the LLC, the Property, the LLC Interest or any of the Member Interests.  Each of Kite Realty, on the one hand, and
Optionor and/or the Members, on the other hand, may participate at its own
expense in the prosecution of any claim or audit with respect to taxes attributable
to any taxable period ending on or before the Closing Date, provided, that
Optionor and/or the Members shall collectively have the right to control the
conduct of any such audit or proceeding or portion thereof for which Optionor
and/or such Members, as

 

6

 

the
case may be, have acknowledged liability (except as a partner of Kite Realty)
for the payment of any additional tax liability, and Kite Realty shall have the
right to control any other audits and proceedings.  Notwithstanding the foregoing, neither Kite
Realty, on the one hand, nor Optionor and/or the Members, on the other hand,
may settle or otherwise resolve any such claim, suit or proceeding which could
have an adverse tax effect on the other party or its direct or indirect owners without
the written consent of the other party, such written consent not to be
unreasonably withheld or delayed.  Each
party shall retain all tax returns, schedules and work papers, and all material
records and other documents relating thereto, until the expiration of the
statute of limitations (and, to the extent notified by any party, any
extensions thereof) of the taxable years to which such tax returns and other
documents relate and until the final determination of any tax in respect of
such years.

 

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

 

(d)                                 Transfer Taxes.  Kite
Realty shall pay the cost of all documentary transfer taxes arising from the
sale of the LLC Interest pursuant to the exercise by Kite Realty of the Option
or from the transfer of the Member Interests pursuant to Section 5.2.

 

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

 

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

 

ARTICLE IV - RIGHT
OF FIRST REFUSAL

 

4.1                                 Right of
First Refusal.   If Optionor receives a
bona fide, good faith offer from an unaffiliated third party to purchase all
right, title and interest in and to the LLC Interest (the “Offer”) at any time
during the term of this Agreement, then, subject only to Kite Realty’s right of
first refusal contained in this Article IV, Optionor shall have the right
to convey 100% of the LLC Interest to such third party during the term of this
Agreement.  If Optionor desires to accept
the Offer, Optionor shall first give written notice (the “ROFR Notice”) thereof
to Kite Realty (the date the ROFR Notice is delivered by Kite Realty in
accordance with this Agreement is referred to as the “Notice Date”), which ROFR
Notice shall include the proposed purchase price (the “Purchase Price”), the
identity of the proposed transferee (the “Transferee”) and other material terms
(collectively, the “Acquisition Terms”) of the proposed transfer of the LLC
Interest.  Kite Realty shall have 30 days
from the Notice Date either (i) to deliver written notice to Optionor (the “OP
Notice”) of its election to acquire 100% of the LLC Interest for the same
Purchase Price (payable in cash or Units, in Kite Realty’s sole and absolute
discretion) and otherwise on substantially the same Acquisition Terms as set
forth in the Offer, or (ii) if the Option is then exercisable pursuant to
Section 1.2 hereof, to deliver an Exercise Notice pursuant to the exercise
of its Option under Section 2.1. 
For purposes of this Agreement, an

 

7

 

“unaffiliated
third party” shall mean, with respect to any Person, any Person directly or
indirectly not controlling, not controlled by or not under common control with
such Person.  For purposes of this
definition, “control,” when used with respect to any Person, shall mean the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise, and the terms “controlling” and “controlled” have meanings
correlative to the foregoing.  “Person”
shall mean a natural person, partnership (whether general or limited), trust,
estate, association, corporation, limited liability company, unincorporated
organization, custodian, nominee or any other individual or entity in its own
or any representative capacity.

 

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

 

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

 

ARTICLE V -  ADDITIONAL AGREEMENTS AND COVENANTS

 

5.1                                 Marketing
the LLC Interest for Sale.  
Optionor agrees not to (i) affirmatively market the LLC Interest for
sale during the Option Term, or (ii) sell, convey or otherwise transfer, or agree
to sell, convey or otherwise transfer, all or any portion of the Partnership
Interest, other than the sale of 100% of the Partnership Interest pursuant to
Kite Realty’s exercise of the Option or in accordance with Article IV
hereof. 

 

5.2                                 Alternative
Transaction - Member Interest Acquisition. 

 

(a)                                  Consent
to Alternative Transaction. 
Optionor and the Members acknowledge and understand that Kite Realty may
desire to effectuate a transfer of the LLC Interest, other than through the
direct acquisition of the LLC Interest as contemplated hereby, and that Kite
Realty may determine that it is more desirable or appropriate to accomplish the
transfer of the LLC Interest through the acquisition of 100% of the Member
Interests (the “Member Interest Acquisition”). 
Optionor and the Members hereby consent to the Member Interest
Acquisition, and agree to cooperate with Kite Realty; provided, that the
Members receive, in the aggregate, the amount of cash or number of Units to which
Optionor would be entitled under Section 3.1 upon the sale of the LLC
Interest pursuant to this Agreement, subject to the adjustments in
Section 5.2(b); it being understood that the form of consideration shall
be determined in the sole and absolute discretion of Kite Realty.

 

8

 

(b)                                 Member
Interest Acquisition Consideration.  
Notwithstanding anything to the contrary in this Agreement, the
Acquisition Consideration payable for the Member Interests shall be reduced by
the amount of any Entity Indebtedness assumed or repaid by Kite Realty
(including, without limitation, the payment of any applicable prepayment,
assumption or other fees, costs and penalties). 
For purposes of this Section 5.2(b), the value of outstanding
Entity Indebtedness assumed by Kite Realty shall be the principal amount
thereof and any accrued and unpaid interest, plus any related prepayment,
assumption and other fees, costs and penalties incurred by Kite Realty in
connection with Kite Realty’s assumption of such Entity Indebtedness.  “Entity
Indebtedness” shall mean any outstanding financings or other arrangements
entered into by Optionor (or any affiliate of Optionor) prior to the date
hereof which relate to the LLC Interest, Optionor or the Member Interests and
secured by a pledge of the LLC Interest or Member Interests or which otherwise
encumbers the LLC Interest or Member Interests. 
Notwithstanding anything to the contrary contained herein, “Entity
Indebtedness” shall not include any Entity Indebtedness to the extent that the
aggregate of all Entity Indebtedness (plus accrued and unpaid interest and any
related prepayment, assumption or other fees, costs and penalties) exceeds the
Acquisition Consideration.  Any
financings or other arrangements encumbering the LLC Interest or the Member
Interests in excess of the amount of the Acquisition Consideration (as adjusted
pursuant to this Section 5.2(b)) shall be the responsibility of Optionor
and shall be prepaid or repaid at or prior to the Closing Date.  Optionor shall provide Kite Realty with
notice of any known default under any Entity Indebtedness and shall provide
copies of any written default notices Optionor may receive from the lenders of
such indebtedness.

 

(c)                                  Acquisition
Process.  In the event that Kite
Realty elects to accomplish the transfer of the LLC Interest through the Member
Interest Acquisition: (i) the Exercise Notice shall specify that Kite Realty
elects to effectuate the Member Interest Acquisition pursuant to this
Section 5.2; (ii) subject to this Section 5.2, the provisions of
Article III shall govern the Member Interest Acquisition; (iii) the
purchase price to be paid by Kite Realty for the Member Interests shall be
equal to the Acquisition Consideration for the LLC Interest as calculated in
accordance with Section 3.1, subject to the adjustments in
Section 5.2(b), with each Member entitled to receive such Member’s pro
rata share of such Acquisition Consideration based on such Member’s percentage
interest in Optionor (as set forth in Exhibit B); (iv) subject to
Section 3.1(f), the Member Interests shall be conveyed, and the Closing
Date of such acquisition shall occur, within the later of (a) 15 days after the
last day of the month immediately following the month in which the Exercise
Notice is delivered or (b) 45 days after the determination of the FMV of the
Property at the time in accordance with Section 3.1; and (v) on or prior
to the Closing Date, subject to Section 3.1(f), the Members, Optionor and
Kite Realty shall execute and deliver the closing documentation described on Exhibit
C hereto regarding the Member Interest Acquisition, and, thereafter, the
Members, Optionor and Kite Realty shall additionally acknowledge, execute,
deliver and/or file (as the case may be) any and all other documents, agreements
or instruments reasonably necessary or appropriate to effectuate the Member
Interest Acquisition in accordance with the terms of this Agreement.

 

5.3                                 Further
Assurance.   Optionor and each Member
shall execute and deliver to Kite Realty all such other and further instruments
and documents and take or cause to be taken all such other and further actions
as Kite Realty may reasonably request

 

9

 

in
order to effect the transactions contemplated by this Agreement, including,
without limitation, instruments or documents deemed necessary or desirable by
Kite Realty to effect and evidence the acquisition of the LLC Interest or the
Member Interest Acquisition in accordance with the terms of this Agreement.

 

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

 

5.5                                 Obligation
to Sell the LLC Interest or the Member Interests.   Optionor and the Members hereby acknowledge
and agree that, if Kite Realty does not exercise the Option and/or the LLC
Interest is not transferred in accordance with Article IV prior to the
termination of this Agreement pursuant to Section 6.1 hereof, Optionor and
the Members shall use their reasonable best efforts to sell, convey or
otherwise transferas promptly as
reasonably practicable100% of the
LLC Interest or 100% of the Member Interests to an unaffiliated third
party.  Notwithstanding anything to the
contrary herein, this Section 5.5 shall survive any termination of this
Agreement indefinitely.

 

ARTICLE VI -
TERMINATION

 

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

 

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

 

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

 

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

 

(d)                                 the sale,
transfer or contribution by the LLC of all the parcels comprising the Property.

 

10

 

6.2                                 Procedure
if Option Terminates.

 

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

 

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

 

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

 

6.3                                 Effects
of Termination.  In the event of
termination of this Agreement pursuant to Section 6.1, the provisions of
Sections 3.4, 5.5, 6.1, 6.2 and 6.3 and Articles VIII and IX shall survive the
termination of this Agreement; it being understood that, with respect to
termination pursuant to Section 6.1(a), the provisions of this Agreement
that contemplate performance after the Closing Date and the obligations of the
parties not fully performed on the Closing Date shall survive the Closing Date
and shall not be deemed to be merged into or waived by the instruments executed
as of the Closing Date.  Notwithstanding
the foregoing, nothing in this Section 6.3 shall be deemed to release any
party from liability for any breach by such party of the terms or provisions of
this Agreement or to impair the right of any party to enforce its respective
rights hereunder.

 

ARTICLE VII -
REPRESENTATIONS, WARRANTIES AND COVENANTS

 

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

 

7.1                                 Organization;
Authority.  Optionor is duly formed,
validly existing and in good standing (to the extent applicable) under the laws
of its jurisdiction of formation.

 

11

 

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

 

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

 

7.3                                 Title to
the Member Interests; No Agreements to Sell.  
Each Member owns beneficially and of record, free and clear of any
Encumbrances, and has full power and authority to convey free and clear of any
Encumbrances, the Member Interests listed on Exhibit B hereto as owned
by such Member, except (i) Encumbrances created in favor of Kite Realty by the
transactions contemplated hereby, (ii) Encumbrances that are extinguished at or
prior to the Closing Date, and (iii) Encumbrances relating to the Project
Indebtedness or any Entity Indebtedness. 
Other than this Agreement, such Member is not currently a party to any
agreement to sell, transfer or otherwise encumber or dispose of, and has no
obligation (absolute or contingent) to sell, the Member Interests owned by such
Member.  Each Member covenants and agrees
not to encumber such Member’s Member Interests during the Option Term except in
connection with the Project Indebtednessand
any Entity Indebtedness.

 

7.4                                 Status as
a United States Person. 
Neither Optionor nor any of the Members is a foreign person within the
meaning of Section 1445 of the Internal Revenue

 

12

 

Code
(“Section 1445”).  Optionor’s U.S.
taxpayer identification number and each Member’s social security number that
have previously been provided to Kite Realty are correct.  Optionor’s office address and each Member’s
home address are the addresses set forth opposite their signatures below. Upon
request by Kite Realty, Optionor and each Member agree to complete and provide
to Kite Realty a certificate of non-foreign status substantially in the form
provided in Section 1.1445-5(b)(3)(D) of the Treasury regulations.

 

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

 

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

 

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

 

ARTICLE VIII -
INDEMNIFICATION

 

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

 

ARTICLE IX -
ASSIGNMENT; TRANSFER OF MEMBER INTERESTS

 

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

 

13

 

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

 

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

 

ARTICLE X -
MISCELLANEOUS

 

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

 

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

 

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

 

14

 

consent
or agreement deemed necessary or desirable by Kite Realty to effect such
replacement.

 

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

 

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

 

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

 

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

 

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

 

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

 

 

[Signature page follows]

 

15

 

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

 

 

	
  Address:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  OPTIONOR:

  
	
   

  	
   

  
	
  Kite 126th Street Medical, LLC

  	
  KITE 126TH STREET MEDICAL, LLC

  
	
  c/o Kite Realty Group Trust

  	
   

  
	
  30 S. Meridian Street

  	
  By:

  	
   

  	
   

  
	
  Suite 1100

  	
  Name:

  	
   

  	
   

  
	
  Indianapolis, Indiana 46204

  	
  Title:

  	
   

  	
   

  
	
  Fax No.: (317) 577-5605

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  KITE REALTY:

  
	
   

  	
   

  
	
  Kite Realty Group, L.P.

  	
  KITE REALTY GROUP, L.P.

  
	
  c/o Kite Realty Group Trust

  	
   

  
	
  30 S. Meridian Street

  	
  By:

  	
  KITE REALTY GROUP TRUST, its

  
	
  Suite 1100

  	
   

  	
  General Partner

  
	
  Indianapolis, Indiana 46204

  	
   

  	
   

  
	
  Fax No.: (317) 577-5605

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MEMBERS:

  
	
   

  	
   

  
	
   

  	
   

  
	
  Alvin E. Kite, Jr.

  	
   

  
	
  c/o Kite Realty Group Trust

  	
   

  	
   

  
	
  30 S. Meridian Street

  	
  Alvin E. Kite, Jr.

  
	
  Suite 1100

  	
   

  
	
  Indianapolis, Indiana 46204

  	
   

  
											

 

 

	
  John A. Kite

  	
   

  
	
  c/o Kite Realty Group Trust

  	
   

  	
   

  
	
  30 S. Meridian Street

  	
  John A. Kite

  
	
  Suite 1100

  	
   

  
	
  Indianapolis, Indiana 46204

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Paul W. Kite

  	
   

  
	
  c/o Kite Realty Group Trust

  	
   

  	
   

  
	
  30 S. Meridian Street

  	
  Paul W. Kite

  
	
  Suite 1100

  	
   

  
	
  Indianapolis, Indiana 46204

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Thomas K. McGowan

  	
   

  
	
  c/o Kite Realty Group Trust

  	
   

  	
   

  
	
  30 S. Meridian Street

  	
  Thomas K. McGowan

  
	
  Suite 1100

  	
   

  
	
  Indianapolis, Indiana 46204

  	
   

  

 

 

EXHIBITS TO THE OPTION AGREEMENT*

 

	
  Exhibit A

  	
   

  	
  Description of Real Property

  
	
   

  	
   

  	
   

  
	
  Exhibit B

  	
   

  	
  Member Interests

  
	
   

  	
   

  	
   

  
	
  Exhibit C

  	
   

  	
  Closing Documentation

  (LLC Interest Acquisition/Member Interests Acquisition)

  

 

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

 

 

EXHIBIT B

 

MEMBER INTERESTS

 

	
  Member

  	
   

  	
  Member Percentage
  Interests

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Alvin
  E. Kite, Jr.

  	
   

  	
  30%

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  John
  A. Kite

  	
   

  	
  25%

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Paul
  W. Kite

  	
   

  	
  25%

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Thomas
  K. McGowan

  	
   

  	
  20%

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00069-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00069-of-00352.parquet"}]]