Document:

Exhibit 10.16

 

FORM OF OPTION AGREEMENT

(126th Street & Meridian II Medical Complex)

 

THIS OPTION AGREEMENT (this
“Agreement”) is made as of
            ,
         2004 by and among, Kite Realty
Group L.P., a Delaware limited partnership (“Kite Realty”), Kite 126th
Street Medical II, 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 II, 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
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 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 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. 

 

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 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. 

 

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

 

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

 

ARTICLE V -  ADDITIONAL AGREEMENTS AND COVENANTS

 

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

 

5.2                                 Alternative
Transaction - Member Interest Acquisition. 

 

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

 

 

(b)                                 Member
Interest Acquisition Consideration.  
Notwithstanding anything to the contrary in this Agreement, the
Acquisition Consideration payable for the Member Interests shall be reduced by
the amount of any Entity Indebtedness assumed or repaid by Kite Realty
(including, without limitation, the payment of any applicable prepayment,
assumption or other fees, costs and penalties). 
For purposes of this Section 5.2(b), the value of outstanding
Entity Indebtedness assumed by Kite Realty shall be the principal amount
thereof and any accrued and unpaid interest, plus any related prepayment,
assumption and other fees, costs and penalties incurred by Kite Realty in
connection with Kite Realty’s assumption of such Entity Indebtedness.  “Entity
Indebtedness” shall mean any outstanding financings or other arrangements
entered into by Optionor (or any affiliate of Optionor) prior to the date
hereof which relate to the LLC Interest, Optionor or the Member Interests and
secured by a pledge of the LLC Interest or Member Interests or which otherwise encumbers
the LLC Interest or Member Interests. 
Notwithstanding anything to the contrary contained herein, “Entity
Indebtedness” shall not include any Entity Indebtedness to the extent that the
aggregate of all Entity Indebtedness (plus accrued and unpaid interest and any
related prepayment, assumption or other fees, costs and penalties) exceeds the
Acquisition Consideration.  Any
financings or other arrangements encumbering the LLC Interest or 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 or approval of a Member or Optionor is
required to effectuate any of the transactions contemplated by this Agreement,
such Member or Optionor shall be deemed to have given such consent, waiver or
approval pursuant hereto.

 

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

 

ARTICLE VI -
TERMINATION

 

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

 

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

 

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

 

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

 

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

 

 

6.2                                 Procedure
if Option Terminates.

 

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

 

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

 

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

 

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

 

ARTICLE VII -
REPRESENTATIONS, WARRANTIES AND COVENANTS

 

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

 

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

 

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

ARTICLE VIII -
INDEMNIFICATION

 

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

 

ARTICLE IX -
ASSIGNMENT; TRANSFER OF MEMBER INTERESTS

 

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

 

 

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

 

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

 

ARTICLE X -
MISCELLANEOUS

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

[Signature page follows]

 

 

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 II, LLC

  c/o Kite Realty Group Trust

  30 S. Meridian Street

  Suite 1100

  Indianapolis, Indiana  46204

  Fax No.: (317) 577-5605

  	
  KITE 126TH STREET
  MEDICAL II, LLC

  
	
   

  
	
  By:

  	
   

  
	
  Name:

  	
   

  
	
  Title:

  	
   

  
	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  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:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  
	
   

  	
   

  
	
   

  	
  MEMBERS:

  
	
   

  	
   

  
	
   

  	
   

  
	
  Alvin E. Kite, Jr.

  c/o Kite Realty Group Trust

  30 S. Meridian Street

  Suite 1100

  Indianapolis, Indiana  46204

  	
   

  
	
   

  	
   

  
	
  Alvin E. Kite, Jr.

  
	
   

  
	
   

  
	
   

  
										

 

 

	
  John A. Kite

  c/o Kite Realty Group Trust

  30 S. Meridian Street

  Suite 1100

  Indianapolis, Indiana  46204

  	
   

  
	
   

  	
   

  
	
  John A. Kite

  
	
   

  
	
   

  
	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Paul W. Kite

  c/o Kite Realty Group Trust

  30 S. Meridian Street

  Suite 1100

  Indianapolis, Indiana  46204

  	
   

  
	
   

  	
   

  
	
  Paul W. Kite

  
	
   

  
	
   

  
	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Thomas K. McGowan

  c/o Kite Realty Group Trust

  30 S. Meridian Street

  Suite 1100

  Indianapolis, Indiana  46204

  	
   

  
	
   

  	
   

  
	
  Thomas K. McGowan

  
	
   

  
	
   

  
	
   

  

 

 

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%Exhibit 10.21

 

KITE REALTY GROUP TRUST

EXECUTIVE BONUS PLAN

 

1.                                                                                      PURPOSE.

 

The
purpose of this Plan is to provide for bonuses to motivate and reward eligible
key executives who through industry, ability and exceptional service,
contribute materially to the success of Kite Realty Group Trust.

 

2.                                                                                      DEFINITIONS.

 

When
used herein the following terms shall have the following meanings:

 

(a)                                  “Affiliate” means, with respect to the
Company, any company or other trade or business that controls, is controlled by
or is under common control with the Company within the meaning of Rule 405 of
Regulation C under the Securities Act of 1933, as now in effect or as hereafter
amended, including, without limitation, any subsidiary.  Notwithstanding the foregoing, the persons
listed on Exhibit A, as such Exhibit A is updated from time to
time by the Company, shall not be affiliates of the Company.

 

(b)                                 “Beneficiary” means the beneficiary or
beneficiaries designated by a Participant pursuant to paragraph 5 below to
receive the amount, if any, payable under the Plan upon the death of the
Participant.

 

(c)                                  “Board of Trustees” means the Board of
Trustees of the Company.

 

(d)                                 “Code” means the Internal Revenue Code of
1986, as now in effect or as hereafter amended.

 

(e)                                  “Company” means Kite Realty Group Trust.

 

(f)                                    “Committee” means the Compensation Committee
of the Board of Trustees.  Members of the
Committee are not eligible to participate in the Plan.

 

(g)                                 “Covered Employee” means a Participant who is
a Covered Employee within the meaning of Section 162(m)(3) of the Code.

 

(h)                                 “Effective Date” means
               
     , 2004.

 

(i)                                     “Employee” or “Eligible Employee” means an
employee with the title of Senior Vice Presidentor higher, who is employed by the Company or its Affiliate at
the end of the Plan Year and who has been designated by the Committee as
eligible to receive awards hereunder;

 

 

provided,
however, that if in the judgment of the Committee an Employee has made an
outstanding contribution to the Company, the Employee or the Employee’s
Beneficiary may receive a pro rata bonus award notwithstanding the fact that
Employee’s employment terminated before the end of the Plan Year.

 

(j)                                     “Participant” means any Eligible Employee who
has been awarded a bonus under paragraph 3 below.

 

(k)                                  “Performance Goal” means a performance goal
based on business criteria established by the Committee in accordance with
paragraph 3.

 

(l)                                     “Plan” means this bonus plan for key
executives of Kite Realty Group Trust, as the same may be amended from time to
time.

 

(m)                               “Plan Administrator” means the Committee, or
such other committee consisting of two or more officers of the Company as the
Committee may designate to administer the Plan with regard to Employees who are
not officers of the Company.

 

(n)                                 “Plan Year” means the fiscal year of Kite
Realty Group Trust which as of the Effective Date is the calendar year.

 

3.                                                                                      AMOUNT OF BONUS FUND AND
ALLOCATION THEREOF.

 

(a)                                  Amount of Fund.  The Committee will determine the amount of
the bonus fund available for bonuses for any Plan Year.

 

(b)                                 Allocation. 
The Committee shall determine in its sole discretion the allocation of
individual bonus awards for Eligible Employees by adopting an Appendix to the
Plan establishing each Eligible Employee’s allocation of the bonus fund and the
relevant Performance Goals and business criteria for each Eligible
Employee.  Any such allocation of bonus
awards shall comply with paragraph 3(d).

 

(c)                                  Adjustments. 
Performance Goals shall be subject to such adjustments as determined by
the Committee to be appropriate (i) in conjunction with an acquisition by the
Company or an Affiliate, (ii) in conjunction with any share offering by the
Company or (iii) for changes in accounting principles and/or other items that
are required by generally accepted accounting principles (“GAAP”) to be
separately disclosed in the Company’s or each Affiliate’s financial statements.

 

(d)                                 Covered Employees.

 

(i)                                     If and to the extent that the Committee
determines that a bonus to be granted under the Plan to a Participant who is
designated by the Committee as likely to be a Covered Employee should qualify
as “performance-based compensation” for purposes of Code Section 162(m),
the grant, exercise and/or settlement of such award shall be contingent upon

 

2

 

achievement
of Performance Goals based on one or more of the following business criteria
for the Company, on a consolidated basis, and/or specified Affiliates or
business units of the Company (except with respect to the total shareholder
return and earnings per share criteria): (1) total shareholder return; (2) such
total shareholder return as compared to total return (on a comparable basis) of
a publicly available index such as, but not limited to, the Standard & Poor’s
500 Stock Index; (3) net income; (4) pretax earnings; (5) earnings before
interest expense, taxes, depreciation and amortization; (6) pretax operating
earnings after interest expense and before bonuses, service fees, and
extraordinary or special items; (7) operating margin; (8) earnings per share;
(9) return on equity; (10) return on capital; (11) return on investment; (12)
operating earnings; (13) working capital; (14) ratio of debt to shareholders’
equity; (15) revenue; (16) funds from operations (FFO) and (17) acquisitions.

 

(ii)                                  In the case of bonuses granted to Covered
Employees under this paragraph 3(d), Performance Goals shall be established not
later than 90 days after the beginning of any performance period applicable to
the bonus, or at such other date as may be required or permitted for
“performance-based compensation” under Code Section 162(m).  In addition, the maximum value of a bonus
awarded under the Plan to a single Covered Employee may not exceed $2,000,000
per Plan Year.

 

(iii)                               Prior to payment of any bonus amount under
the Plan to a Covered Employee, the Committee shall certify in writing that the
Performance Goal(s) and all other material terms stated herein have been
attained.  For this purpose, the approved
minutes of a Committee meeting in which a certification is made shall be
treated as a written certification.

 

4.                                                                                      PAYMENT OF AWARDS.

 

(a)                                  Payment of Participants’ Awards.  Settlement of bonuses awarded under the Plan
shall be in cash, common shares of the Company, or other share-based awards
awarded under an equity incentive plan of the Company, in the discretion of the
Committee.

 

(b)                                 Reduction of Bonuses.  The Committee may, in its discretion, reduce
the amount of a settlement otherwise to be made in connection with a bonus based
on the performance of the Employee.

 

(c)                                  Forfeiture of Bonuses.  The Committee shall specify the circumstances
in which a bonus awarded under the Plan shall be paid or forfeited in the event
of termination of employment by the Participant prior to the end of a Plan Year
or settlement of the bonus.  An approved
leave of absence shall not be considered a termination of employment for
purposes of eligibility to receive bonuses under the Plan.

 

5.                                                                                      DESIGNATION OF
BENEFICIARIES.

 

Each
Participant shall file with the Plan Administrator a written designation of one
or more persons as the Beneficiary who shall be entitled to receive the amount,
if any, payable under the Plan upon his or her death.  A Participant may, from time to time, revoke
or

 

3

 

change
his Beneficiary designation without the consent of any prior Beneficiary by
filing a new designation with the Plan Administrator.  The last such designation received by the
Plan Administrator shall be controlling; provided, however, that no
designation, or change or revocation thereof, shall be effective unless
received by the Plan Administrator prior to the Participant’s death, and in no
event shall it be effective as of a date prior to such receipt.

 

6.                                                                                      ADMINISTRATION.

 

(a)                                  The Committee shall have full power and
authority to construe, interpret and administer the Plan.  All decisions, actions or interpretations by
the Committee shall be final, conclusive and binding upon all parties.  If any person objects to any such decision,
action or interpretation, formally or informally, the expenses of the Committee
and its agents and counsel shall be chargeable against any amounts due the
Participant under the Plan.

 

(b)                                 To the maximum extent permitted by applicable
law, current and past members of the Board of Trustees or Committee shall be
indemnified and held harmless by the Company against and from any and all loss,
cost, liability or expense that may be imposed upon or reasonably incurred by
such member in connection with or resulting from any claim, action, suit or
proceeding to which such member may be or become a party or in which such
member may be or become involved by reason of any action taken or failure to
act under this Plan and against and from any and all amounts paid by such
member in settlement thereof (with the Company’s written approval) or paid by
such member in satisfaction of a judgment in any such action, suit or
proceeding, except a judgment in favor of the Company based upon a finding of
such member’s lack of good faith. 
Indemnification pursuant to this provision is subject to the condition
that, upon the institution of any claim, action, suit, or proceeding against
such member, such member shall in writing give the Company an opportunity, at
its own expense, to handle and defend the same before such member undertakes to
handle and defend it on such member’s behalf. 
The foregoing right of indemnification shall not be exclusive of any
other right to which such member may be entitled as a matter of law or
otherwise, or any power that the Company may have to indemnify or hold such
member harmless.

 

7.                                                                                      AMENDMENT OR TERMINATION.

 

(a)                                  The Committee reserves the right at any time
to amend, suspend, or terminate the Plan in whole or in part and for any reason
and without the consent of any Participant or Beneficiary.

 

(b)                                 Notwithstanding paragraph 7(b), no
modification of the Plan by the Committee without approval of the shareholders
will materially increase the maximum amount allocated to a Covered Employee or render
any member of the Committee eligible for a bonus award.  In addition, any modification to the material
terms of the Plan (i.e., employees eligible, business criteria on which the
Performance Goal is based, or maximum amount of bonus payable) shall require
shareholder approval prior to the payment of any benefit.

 

4

 

8.                                                                                      GENERAL LIMITATIONS AND
PROVISIONS.

 

(a)                                  The Company or its Affiliate, as the case may
be, shall have the right to deduct from payments of any kind otherwise due to a
Participant any federal, state, or local taxes of any kind required by law to
be withheld with respect to the vesting of or other lapse of restrictions
applicable to a bonus awarded hereunder.

 

(b)                                 Nothing contained in the Plan shall give any
Employee the right to be retained in the employment of the Company or affect
the right of the Company to dismiss or terminate or modify the compensation or
benefits of any Employee.  The adoption of
the Plan shall not constitute a contract between the Company and any
Employee.  No Employee shall receive any
right to be granted an award hereunder nor shall any such award be considered
as compensation under any employee benefit plan of the Company except as
otherwise determined by the Board.

 

(c)                                  If the Committee shall find that any person
to whom any amount is payable under the Plan is unable to care for his or her
affairs because of illness or accident, or is a minor, or has died, then any
payment due him or her or his or her estate (unless a prior claim therefor has
been made by a duly appointed legal representative), may, if the Committee so
directs the Company, be paid to his or her spouse, a child, a relative, an
institution maintaining or having custody of such person, or any other person
deemed by the Committee to be a proper recipient on behalf of such person
otherwise entitled to payment.  Any such
payment shall be a complete discharge of the liability of the Plan and the
Company.

 

(d)                                 Except insofar as may otherwise be required
by law, no amount payable at any time under the Plan shall be subject in any
manner to alienation by anticipation, sale, transfer, assignment, bankruptcy,
pledge, attachment, charge, or encumbrance of any kind nor in any manner be
subject to the debts or liabilities of any person and any attempt to so
alienate or subject any such amount, whether presently or thereafter payable,
shall be void.  If any person shall
attempt to, or shall, alienate, sell, transfer, assign, pledge, attach, charge,
or otherwise encumber any amount payable under the Plan, or any part thereof,
or if by reason of his or her bankruptcy or other event happening at any such
time such amount would be made subject to his or her debts or liabilities or
would otherwise not be enjoyed by him or her, then the Committee, if it so
elects, may direct that such amount be withheld and that the same or any part
thereof be paid or applied to or for the benefit of such person, his or her
spouse, children or other dependents, or any of them, in such manner and
proportion as the Committee may deem proper.

 

5

 

(e)                                  The Participant shall have no right, title,
or interest whatsoever in or to any investments which the Company may make to
aid it in meeting its obligations hereunder. 
Nothing contained in the Plan, and no action taken pursuant to its
provisions, shall create or be construed to create a trust of any kind, or a
fiduciary relationship between the Company and the Employee or any other
person.  To the extent that any person
acquires a right to receive payments from the Company under this Plan, such
right shall be no greater than the right of an unsecured general creditor of
the Company.  All payments to be made
hereunder shall be paid in cash from the general funds of the Company and no
special or separate fund shall be established and no segregation of assets
shall be made to assure payments of such amounts.

 

(f)                                    The Plan shall be governed by and construed
in accordance with the laws of the State of Maryland(but excluding the choice of law rules thereof).

 

6

 

EXHIBITS TO THE BONUS PLAN AGREEMENT*

 

	
  Exhibit
  A

  	
   

  	
  Exclusion From Affiliates

  

 

*                      The
registrant agrees to furnish, supplementally, a copy of omitted Exhibit A upon
request.

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