Document:

Exhibit 10.29

 

OPTION AGREEMENT

(Erskine Village)

 

THIS OPTION AGREEMENT (this “Agreement”) is made as of August 16, 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.

 

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 

 

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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
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

 

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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. 

 

(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.  

 

4

 

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).

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 

 

5

 

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 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 

 

6

 

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 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 

 

7

 

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 Interest  to 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 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 

 

8

 

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 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 

 

9

 

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 transfer  as promptly as
reasonably practicable  100% 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 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. 

 

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 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 or  pursuant 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. 
Optionor and each Member have full right, authority, power and capacity:
(a) to enter into 

 

11

 

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
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 Indebtedness  and 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 

 

12

 

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 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, 

 

13

 

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

 

14

 

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.

 

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 SOUTH BEND, LLC

  
	
  Kite South Bend, LLC

  c/o Kite Realty Group Trust

  30 S. Meridian Street

  Suite 1100

  Indianapolis, Indiana  46204

  Fax No.: (317) 577-5605 

  	
   

  
	
  By:

  	
  /s/ JOHN A. KITE

  	
   

  
	
  Name: John A. Kite

  
	
  Title:

  	
  Member

  	
   

  
	
   

  
	
   

  
	
   

  	
   

  
	
   

  	
  KITE REALTY:

  
	
   

  	
   

  
	
  Kite Realty Group, L.P.

  c/o Kite Realty Group Trust

  30 S. Meridian Street

  Suite 1100

  Indianapolis, Indiana  46204

  Fax No.: (317) 577-5605 

  	
  KITE REALTY GROUP, L.P.

  
	
   

  
	
  By:

  	
  KITE REALTY GROUP TRUST, its 

  General Partner

  
	
   

  
	
   

  	
  By:

  	
  /s/ JOHN A. KITE

  	
   

  
	
   

  	
  Name: John A. Kite

  
	
   

  	
   

  	
  Title:

  	
  President and Chief Executive

  Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MEMBERS:

  
	
   

  	
   

  
	
  Alvin E. Kite, Jr.

  c/o Kite Realty Group Trust

  30 S. Meridian Street

  Suite 1100

  Indianapolis, Indiana  46204

  	
   

  
	
   

  
	
  /s/ ALVIN E. KITE, JR.

  	
   

  
	
  Alvin E. Kite, Jr.

  
	
   

  
								

 

 

	
  John A. Kite

  c/o Kite Realty Group Trust

  30 S. Meridian Street

  Suite 1100

  Indianapolis, Indiana  46204

  	
   

  
	
  /s/ JOHN A. KITE

  	
   

  
	
  John A. Kite

  
	
   

  
	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Paul W. Kite

  c/o Kite Realty Group Trust

  30 S. Meridian Street

  Suite 1100

  Indianapolis, Indiana  46204

  	
   

  
	
    /s/ PAUL W. KITE

  	
   

  
	
  Paul W. Kite

  
	
   

  
	
   

  
	
   

  	
   

  
	
  Thomas K. McGowan

  c/o Kite Realty Group Trust

  30 S. Meridian Street

  Suite 1100

  Indianapolis, Indiana  46204

  	
   

  
	
    /s/ THOMAS K. McGOWAN

  	
   

  
	
  Thomas K. McGowan

  
	
   

  
	
   

  

 

 

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 10.30

 

OPTION AGREEMENT

(126th Street & Meridian Medical Complex)

 

THIS OPTION
AGREEMENT (this “Agreement”) is made as of August 16, 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           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

 

2

 

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
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

 

3

 

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.

 

(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

 

4

 

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).

 

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.

 

5

 

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 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

 

6

 

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 “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.

 

7

 

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 Interest  to
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.

 

(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

 

8

 

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 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

 

9

 

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
transfer  as promptly as reasonably practicable  100% 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.

 

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

 

10

 

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 or  pursuant 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. 
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

 

11

 

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 Indebtedness  and 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.

 

12

 

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.

 

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

 

13

 

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, 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.

 

14

 

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:

  	
   /s/
  JOHN A. KITE

  	
   

  
	
  Suite 1100

  	
  Name: John
  A. Kite

  
	
  Indianapolis,
  Indiana  46204

  	
  Title:

  	
  Member

  	
   

  
	
  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:

  	
  /s/ JOHN A.
  KITE

  	
   

  
	
   

  	
   

  	
  Name: John
  A. Kite

  
	
   

  	
   

  	
  Title:
  President and Chief Executive

  
	
   

  	
   

  	
   

  	
  Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MEMBERS:

  
	
   

  	
   

  
	
   

  	
   

  
	
  Alvin E.
  Kite, Jr.

  	
   

  
	
  c/o Kite
  Realty Group Trust

  	
  /s/ ALVIN E.
  KITE, JR.

  	
   

  
	
  30 S.
  Meridian Street

  	
  Alvin E.
  Kite, Jr.

  
	
  Suite 1100

  	
   

  
	
  Indianapolis,
  Indiana  46204

  	
   

  
										

 

 

	
  John A. Kite

  	
   

  
	
  c/o Kite
  Realty Group Trust

  	
  /s/ JOHN A.
  KITE

  	
   

  
	
  30 S.
  Meridian Street

  	
  John A. Kite

  
	
  Suite 1100

  	
   

  
	
  Indianapolis,
  Indiana  46204

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Paul W.
  Kite        

  	
   

  
	
  c/o Kite
  Realty Group Trust

  	
    /s/
  PAUL W. KITE

  	
   

  
	
  30 S.
  Meridian Street

  	
  Paul W. Kite

  
	
  Suite 1100

  	
   

  
	
  Indianapolis,
  Indiana  46204

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Thomas K. McGowan

  	
   

  
	
  c/o Kite Realty Group
  Trust

  	
    /s/ THOMAS
  K. McGOWAN

  	
   

  
	
  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-00070-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00070-of-00352.parquet"}]]