Document:

EXHIBIT 10.1

   

 EXHIBIT 10.1
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 SHARE EXCHANGE AGREEMENT
  
 by and among
 

 H&H ARIZONA INC.,
 

 NEXT GENERATION HOLDINGS TRUST
 

 [THE SHAREHOLDER OF H&H ARIZONA INC.],
 

  DK SINOPHARMA, INC.
 
 AND
  
 SHAWN ERICKSON
  
 [THE CONTROLLING STOCKHOLDER OF DK SINOPHARMA, INC.]
  
 

  
 dated as of May 20, 2013
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  
 
 SHARE EXCHANGE AGREEMENT
  
 SHARE EXCHANGE AGREEMENT, dated as of May 20, 2013 (this “Agreement”) by and among H&H Arizona Inc., a Antigua and Barbuda corporation (“H&H Arizona”), the entities/individuals listed on Exhibit A attached hereto (collectively, the “H&H Arizona Shareholder”), DK Sinopharma, Inc., a Nevada Corporation (“DKSP”), and Shawn Erickson (the “DKSP Controlling Stockholder”).
  
 WHEREAS, the H&H Arizona Shareholder owns 100% of the issued and outstanding capital stock of H&H Arizona, such capital stock being hereinafter referred to as the “H&H Arizona Shares”; and
  
 WHEREAS, (i) H&H Arizona and the H&H Arizona Shareholder believe it is in their respective best interests for the H&H Arizona Shareholder to exchange all of the H&H Arizona Shares for 50,000,000 newly-issued shares (the “DKSP Shares”) of common stock, $.001 par value per share, of DKSP (“Common Stock”), and (ii) DKSP believes it is in its best interest to acquire the H&H Arizona Shares in exchange for the DKSP Shares, all upon the terms and subject to the conditions set forth in this Agreement (the “Share Exchange”); and
  
 WHEREAS, it is the intention of the parties that: (i) DKSP shall acquire 100% of the H&H Arizona Shares in exchange solely for the number of DKSP Shares set forth herein; (ii) the Share Exchange shall qualify as a tax-free reorganization under Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended (the “Code”); and (iii) the Share Exchange shall qualify as a transaction in securities exempt from registration or qualification under the Securities Act of 1933, as amended and in effect on the date of this Agreement (the “Securities Act”); and
  
 WHEREAS, immediately prior to the Share Exchange, not more than 13,300,001 shares of Common Stock of DKSP shall be issued and outstanding; and
  
 NOW, THEREFORE, in consideration of the mutual terms, conditions and other agreements set forth herein, the parties hereto agree as follows:
  
 ARTICLE I
  
      EXCHANGE OF H&H ARIZONA SHARES FOR DKSP SHARES
  
            Section 1.1                      Agreement to Exchange H&H Arizona Shares for DKSP Shares.  On the Closing Date (as hereinafter defined) and upon the terms and subject to the conditions set forth in this Agreement, the H&H Arizona Shareholder shall assign, transfer, convey and deliver the H&H Arizona Shares to DKSP, and in consideration and exchange therefor DKSP shall assign, transfer, convey and deliver the DKSP Shares to the H&H Arizona Shareholder. At the Closing, the DKSP Shares to be issued to the H&H Arizona Shareholder in exchange for the H&H Arizona Shares shall be issued to the respective H&H Arizona Shareholder in proportion to their respective ownership of the H&H Arizona Shares as described in Exhibit A hereto.
  
 Section 1.2                       Capitalization at the Closing.  On the Closing Date, immediately before the consummation of the Share Exchange,  DKSP shall have as authorized capital stock a total of 75,000,000 shares of Common Stock, $.001 par value per share, of which not more than 13,300,001 shares of Common Stock shall be issued and outstanding.
  
 Section 1.3                        Closing and Actions at Closing.
  
           a.  The closing of the Share Exchange (the "Closing") shall take place at 5:00 p.m. E.S.T. on the day the conditions to closing set forth in Articles V and VI herein have been satisfied or waived, or at such other time and date as the parties hereto shall agree in writing (the "Closing Date"), at the offices of H&H Arizona Inc., Hodges Bay Road, Hodges Bay, St. Johns, Antigua and Barbuda, West Indies.
  
           b.  At the Closing: (i) H&H Arizona Shareholder shall deliver to DKSP the stock certificates representing one hundred percent (100%) of the H&H Arizona Shares, duly endorsed in blank for transfer or accompanied by appropriate stock powers duly executed in blank; (ii) in full consideration and exchange for the H&H Arizona Shares, DKSP shall issue and deliver to the H&H Arizona Shareholder stock certificates representing 
 

 2
 

 

  
 
 all of the DKSP Shares in proportion to their respective ownership of the DKSP Shares as described in Exhibit A hereto. 
 

 ARTICLE II
 

 REPRESENTATIONS AND WARRANTIES OF DKSP AND THE DKSP CONTROLLING STOCKHOLDER
 

            Each of DKSP and the DKSP Controlling Stockholder (where specifically included) hereby, severally and not jointly, represents, warrants and agrees that all of the statements in the following subsections of this Section 2 are true and complete as of the date hereof, and will, except as contemplated by this Agreement, be true and complete as of the Closing Date as if first made on such date:
  
 Section 2.1                     Disclosure Schedules
 

 The disclosure schedule attached hereto as Schedule 2.1 through 2.18 (the “DKSP Disclosure Schedules”) are divided into sections that correspond to the sections of this Section 2. The DKSP Disclosure Schedules comprise lists of all exceptions to the truth and accuracy in all material respects of, and of all disclosures or descriptions required by, the representations and warranties set forth in the remaining sections of this Section 2. For purposes of this Section 2, any statement, facts, representations, or admissions contained in the public filings made by DKSP with the United States Securities and Exchange Commission (the “SEC”), are deemed to be included in the DKSP Disclosure Schedules and all such information is deemed to be fully disclosed to H&H Arizona and the H&H Arizona Shareholder.
 

 Section 2.2                     Corporate Organization
 

                       a.           DKSP is a corporation duly organized, validly existing and in good standing under the laws of Nevada, and has all requisite corporate power and authority to own its properties and assets and to conduct its business as now conducted and is duly qualified to do business and is in good standing in each jurisdiction in which the nature of the business conducted by DKSP or the ownership or leasing of its properties makes such qualification and being in good standing necessary, except where the failure to be so qualified and in good standing will not have a material adverse effect on the business, operations, properties, assets, condition or results of operation of DKSP;
 

                       b.           Copies of the Articles of Incorporation and By-laws of DKSP  with all amendments thereto to the date hereof (the “DKSP Charter Documents”), have been furnished to the H&H Arizona Shareholder and to H&H Arizona , and such copies are accurate and complete as of the date hereof.   The minute books of DKSP are current as required by law, contain the minutes of all meetings of the Board of Directors and stockholders of DKSP from its date of incorporation to the date of this Agreement, and adequately reflect all material actions taken by the Board of Directors and stockholders of DKSP.  DKSP is not in violation of any of the provisions of the DKSP Charter Documents.
 

 Section 2.3                     Capitalization of DKSP.
  
 a.    On the Closing Date, immediately before the consummation of the Share Exchange, the entire authorized capital stock of DKSP consisted of 75,000,000 shares of Common Stock, of which not more than 13,300,001 shares of Common Stock shall be issued and outstanding.  Immediately following the Share Exchange, the H&H Arizona Shareholder will own 79% of the total combined voting power of all classes of DKSP stock entitled to vote on a fully diluted basis.
  
 

                     b.       The issuance of the DKSP Shares will be in accordance with the provisions of this Agreement.  On the Closing Date all of the issued and outstanding shares of Common Stock of DKSP Shares and all of the DKSP Shares to be issued pursuant to this Agreement will have been duly authorized and, when issued, will be validly issued, fully paid and non-assessable, will have been issued in compliance with all applicable securities laws, and will have been issued free of preemptive rights of any security holder.   As of the date of this Agreement there are, and as of the Closing Date there will be, no outstanding or authorized options, warrants, agreements, 
 

 3
 

 

  
 
 commitments, conversion rights, preemptive rights or other rights to subscribe for, purchase or otherwise acquire or receive any shares of DKSP’s capital stock, nor are there or will there be any outstanding or authorized stock appreciation, phantom stock, profit participation or similar rights with respect to DKSP or any Common Stock, or any voting trusts, proxies or other agreements or understandings with respect to the voting of DKSP’s capital stock as of the Closing Date, except with respect to the securities to be issued pursuant to this Agreement.  There are no registration rights, and there is no voting trust, proxy, rights plan, anti-takeover plan or other agreement or understanding to which DKSP is a party or by which it is bound with respect to any equity security of any class of DKSP.
 

 Section 2.4                    Subsidiaries and Equity Investments.  DKSP does not directly or indirectly own any capital stock or other securities of, or any beneficial ownership interest in, or hold any equity or similar interest, or have any investment in any corporation, limited liability company, partnership, limited partnership, joint venture or other company, person or other entity, including without limitation any Subsidiary of DKSP.  For purposes of this Agreement, a “Subsidiary” of a company means any entity in which, at the date of this Agreement, such company or any of its subsidiaries directly or indirectly owns any of the capital stock, equity or similar interests or voting power.
   
 Section 2.5                    Authorization and Validity of Agreements.    Each of DKSP and the DKSP Controlling Stockholder has all corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby.  The execution and delivery of this Agreement by DKSP and the DKSP Controlling Stockholder, and the consummation by DKSP of the transactions contemplated hereby, have been duly authorized by all necessary corporate action of DKSP and the DKSP Controlling Stockholder, and no other corporate proceedings on the part of DKSP are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement constitutes the valid and legally binding obligation of DKSP and the DKSP Controlling Stockholder, and is enforceable in accordance with its terms.  DKSP does not need to give any notice to, make any filings with, or obtain any authorization, consent or approval of any government or governmental agency or other person in order for it  to consummate the transactions contemplated by this Agreement, other than filings that may be required or permitted under states securities laws, the Securities Act of 1933, as amended (the “Securities Act”) and/or the Securities Exchange Act of 1934, as amended (the “Exchange Act”) resulting from the issuance of the DKSP Shares.
 

 Section 2.6                     No Conflict or Violation.  Neither the execution and delivery of this Agreement by DKSP, nor the consummation by DKSP of the transactions contemplated hereby will: (i) violate any provision of the DKSP Charter Documents; (ii) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge or other restriction of any government, governmental agency, court, administrative panel or other tribunal to which DKSP is subject, (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify or cancel, or require any notice under any agreement, contract, lease, license, instrument or other arrangement to which DKSP is a party or by which it is bound, or to which any of its assets is subject; or (iii) result in or require the creation or imposition of any encumbrance of any nature upon or with respect to any of DKSP’s assets, including without limitation the DKSP Shares.
 

             Section 2.7                       Material Agreements.  Except as set forth on Schedule 2.7 attached hereto, DKSP is not a party to or bound by any contracts, including, but not limited to, any:
 

  	 	
	 a.  
	 employment, advisory or consulting contract;

 

  	 	
	 b.  
	 plan providing for employee benefits of any nature;

 

  	 	
	 c.  
	 lease with respect to any property or equipment;

 

  	 	
	 d.  
	 contract, agreement, understanding or commitment for any future expenditure in excess of $5,000 in the aggregate;

 

 

 4
 

 

  
 
 

  	 	
	 e.  
	 contract or commitment pursuant to which it has assumed, guaranteed, endorsed, or otherwise become liable for any obligation of any other person, entity or organization;

 

  	 	
	 f.  
	 agreement with any person relating to the dividend, purchase or sale of securities, that has not been settled by the delivery or payment of securities when due, and which remains unsettled upon the date of this Agreement.

 

            Neither the DKSP Controlling Stockholder nor any of its affiliates is a party to any side agreements relating to the Share Exchange.
 

  Section 2.8                   Litigation.  There is no action, suit, proceeding or investigation (“Action”) pending or, to the best knowledge of DKSP or the DKSP Controlling Stockholder, currently threatened against DKSP or any of its Subsidiaries or any of their respective affiliates, that may affect the validity of this Agreement or the right of DKSP to enter into this Agreement or to consummate the transactions contemplated hereby or thereby.  There is no Action pending or, to the best knowledge of DKSP or the DKSP Controlling Stockholder, currently threatened against DKSP or any of its Subsidiaries or any of their respective affiliates, before any court or by or before any governmental body or any arbitration board or tribunal, nor is there any judgment, decree, injunction or order of any court, governmental department, commission, agency, instrumentality or arbitrator against DKSP or any of its Subsidiaries or any of their respective affiliates.  Neither DKSP nor any of its Subsidiaries or any of their respective affiliates is a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality.  There is no Action by DKSP or any of its Subsidiaries or any of their respective affiliates relating to DKSP currently pending or which DKSP or any of its Subsidiaries or any of their respective affiliates intends to initiate.
 

 Section 2.9                    Compliance with Laws.   DKSP, each of its Subsidiaries, and each of their respective affiliates has been and is in compliance with, and has not received any notice of any violation of any, applicable law, ordinance, regulation or rule of any kind whatsoever, including without limitation the Securities Act, the Exchange Act, the applicable rules and regulations of the SEC, or the applicable securities laws and rules and regulations of any state.  DKSP is not an “investment company” as such term is defined by the Investment Company Act of 1940, as amended.
 

             Section 2.10                     Financial Statements; SEC Filings. DKSP’s financial statements (the “Financial Statements”) contained in its periodic reports filed with the SEC have been prepared in accordance with generally accepted accounting principles applicable in the United States of America (“U.S. GAAP”) applied on a consistent basis throughout the periods indicated and with each other, except that those of the Financial Statements that are not audited do not contain all footnotes required by U.S. GAAP. The Financial Statements fairly present the financial condition and operating results of DKSP as of the dates, and for the periods, indicated therein, subject to normal year-end audit adjustments.  Except as set forth in the Financial Statements or as disclosed in Schedule 2.10, DKSP has no material liabilities (contingent or otherwise). DKSP is not a guarantor or indemnitor of any indebtedness of any other person, firm or corporation.  DKSP maintains and will continue to maintain until the Closing a standard system of accounting established and administered in accordance with U.S. GAAP.
 

             Section 2.11                    Books and Financial Records.  All the accounts, books, registers, ledgers, Board minutes and financial and other material records of whatsoever kind of each of DKSP and any Subsidiary of DKSP have been fully, properly and accurately kept and completed; there are no material inaccuracies or discrepancies of any kind contained or reflected therein; and they give and reflect a true and fair view of the financial, contractual and legal position of DKSP and each such Subsidiary.
 

 Section 2.12                  Employee Benefit Plans.  DKSP does not have any “Employee Benefit Plan” as defined in the U.S. Employee Retirement Income Security Act of 1974 or similar plans under any applicable laws.
 

 Section 2.13                   Tax Returns, Payments and Elections.  Each of DKSP and its Subsidiaries has timely filed all Tax (as defined below) returns, statements, reports, declarations and other forms and documents (including, without limitation, estimated tax returns and reports and material information returns and reports) (“Tax Returns”) required pursuant to applicable law to be filed with any Tax Authority (as defined below).  All such Tax 
 

 5
 

 

  
 
 Returns are accurate, complete and correct in all material respects, and each of DKSP and its Subsidiaries has timely paid all Taxes due.  Each of DKSP and its Subsidiaries has withheld or collected from each payment made to each of its employees the amount of all Taxes (including, but not limited to, United States income taxes and other foreign taxes) required to be withheld or collected therefrom, and has paid the same to the proper Tax Authority.  For purposes of this Agreement, the following terms have the following meanings:  “Tax” (and, with correlative meaning, “Taxes” and “Taxable”) means any and all taxes including, without limitation, (x) any net income, alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, value added, net worth, license, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, environmental or windfall profit tax, custom, duty or other tax, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or any penalty, addition to tax or additional amount imposed by any United States, local or foreign governmental authority or regulatory body responsible for the imposition of any such tax (domestic or foreign) (a “Tax Authority”), (y) any liability for the payment of any amounts of the type described in (x) as a result of being a member of an affiliated, consolidated, combined or unitary group for any taxable period or as the result of being a transferee or successor thereof, and (z) any liability for the payment of any amounts of the type described in (x) or (y) as a result of any express or implied obligation to indemnify any other person.
 

 Section 2.14                  Absence of Undisclosed Liabilities.  As of the Closing Date, DKSP will have no liabilities of any kind whatsoever.  DKSP is not a guarantor of any indebtedness of any other person, entity or corporation.
  
 Section 2.15                   No Broker Fees.  No brokers, finders or financial advisory fees or commissions will be payable by or to DKSP or the DKSP Controlling Stockholder of any of their affiliates with respect to the transactions contemplated by this Agreement.
 

 Section 2.16                  No Disagreements with Accountants and Lawyers. There are no disagreements of any kind presently existing, or anticipated by DKSP to arise, between DKSP and any accountants and/or lawyers formerly or presently employed by DKSP.  DKSP is current with respect to fees owed to its accountants and lawyers.
 

 Section 2.17                  Disclosure.  This Agreement and any certificate attached hereto or delivered in accordance with the terms hereby by or on behalf of DKSP in connection with the transactions contemplated by this Agreement, when taken together, do not contain any untrue statement of a material fact or omit any material fact necessary in order to make the statements contained herein and/or therein not misleading.
 

 Section 2.18                   Survival.  Each of the representations and warranties set forth in this Article II shall be deemed represented and made by DKSP and the DKSP Controlling Stockholder at the Closing as if made at such time and shall survive the Closing for a period terminating twenty-four months after the date of the Closing.
 

 ARTICLE III
 

 REPRESENTATIONS AND WARRANTIES OF H&H ARIZONA AND THE H&H ARIZONA SHAREHOLDER
 

            H&H Arizona and the H&H Arizona Shareholder hereby represent, warrant and agree that all of the statements in the following subsections of this Section 3 are true and complete as of the date hereof, and will, except as contemplated by this Agreement, be true and complete as of the Closing Date as if first made on such date.  The disclosure schedule attached hereto as Schedule 3.1 through 3.25 (the “H&H Arizona Disclosure Schedules”) are divided into sections that correspond to the sections of this Section 3.  The H&H Arizona Disclosure Schedules comprise lists of all exceptions to the truth and accuracy in all material respects of, and of all disclosures or descriptions required by, the representations and warranties set forth in the remaining sections of this Section 3.
  
 Section 3.1                        Corporate Organization.    H&H Arizona is organized as a Antigua and Barbuda corporation and is validly existing and in good standing under the laws of Antigua and Barbuda; and has the requisite corporate power and authority to own, lease and operate its assets and properties and to carry on its business as it is now being or currently planned to be conducted.  H&H Arizona is in possession of all franchises, 
 

 6
 

 

  
 
 grants, authorizations, licenses, permits, easements, consents, certificates, approvals and orders (“Approvals”) necessary to own, lease and operate the properties it purports to own, operate or lease and to carry on its business as it is now being conducted and to consummate the transactions contemplated under this Agreement, except where the failure to have such Approvals could not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the business, operations, properties, assets, condition or results of operation of H&H Arizona.  H&H Arizona has delivered to DKSP and the DKSP Controlling Stockholder complete and correct copies of the following documents (referred to herein as the "H&H Arizona Charter Documents"): (a) the articles or certificate of incorporation and the by-laws or code of regulations of a corporation; (b) any other document performing a similar function to the documents specified in clauses (a) or (b) adopted or filed in connection with the creation, formation or organization of a Person (as defined elsewhere in this Agreement); and (c) any and all amendments to any of the foregoing.  H&H Arizona is not in violation of any of the provisions of the H&H Arizona Charter Documents.  The minute books or the equivalent of H&H Arizona contain true and accurate records of all meetings and consents in lieu of meetings of its Board of Directors and stockholders ("Corporate Records"), from the time of its organization until the date hereof.  The stock ledgers and other ownership records of the shares of all of H&H Arizona’s common stock (the “H&H Arizona Share Records”) are true, complete and accurate records of the ownership of the shares of such capital stock as of the date thereof and contain all issuances and transfers of such shares since the time of organization of H&H Arizona.
 

             Section 3.2                      Capitalization of H&H Arizona; Title to the H&H Arizona Shares.  On the Closing Date, immediately before the transactions to be consummated pursuant to this Agreement, H&H Arizona shall have authorized capital consisting of 1,000,000 shares of common stock, no par value, 1,000 shares of which, constituting all of the H&H Arizona Shares, will be issued and outstanding.  All of the H&H Arizona Shares are owned of record by the H&H Arizona Shareholder.  The H&H Arizona Shares are the sole outstanding shares of common stock of H&H Arizona and there are no outstanding options, warrants, agreements, commitments, conversion rights, preemptive rights or other rights to subscribe for, purchase or otherwise acquire any shares of common stock or any un-issued or treasury shares of common stock of H&H Arizona.
 

  Section 3.3                   Subsidiaries and Equity Investments.
 

 a. Each Subsidiary and affiliated company of H&H Arizona is set forth on Schedule 3.3(a).
 

 b.           Except as set forth on Schedule 3.3(a), H&H Arizona does not, directly or indirectly, own any capital stock or other securities of, or have any beneficial ownership interest in, or hold any equity or similar interest, or have any investment in any corporation, limited liability company, partnership, limited partnership, joint venture or other company, person or other entity. For each entity listed thereon, Schedule 3.3(a) sets forth its jurisdiction of organization and the percentage of the outstanding capital stock or other equity interests of such entity that is held by H&H Arizona.  Each entity listed on Schedule 3.3(a) is duly organized and validly existing and, except as set forth on Schedule 3.3(a), is in good standing under the laws of the jurisdiction of its formation; has the requisite corporate power and authority to own its properties and to carry on its business as now being conducted; and, if applicable, is duly qualified as a foreign entity to do business and, to the extent legally applicable, is in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect.
 

  Section 3.4                  Authorization and Validity of Agreements.  H&H Arizona has all corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby.  Each of the H&H Arizona Shareholder has full power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby.  This Agreement constitutes the valid and legally binding obligation of H&H Arizona and the H&H Arizona Shareholder and is enforceable in accordance with its terms against each of them.  Neither H&H Arizona nor the H&H Arizona Shareholder need give any notice to, make any filings with, or obtain any authorization, consent or approval of any government or governmental agency or other person in order for it to consummate the transactions contemplated by this Agreement, other than filings that may be required or permitted under state securities laws, the Securities Act and/or the Exchange Act resulting from the transfer and exchange of the H&H Arizona Shares.  The execution and delivery of this Agreement by H&H Arizona and the H&H Arizona Shareholder, and the consummation by H&H Arizona and by the H&H Arizona Shareholder of the transactions contemplated hereby, 
 

 7
 

 

  
 
 have been duly authorized by all necessary corporate action of H&H Arizona and the H&H Arizona Shareholder, and no other corporate proceedings on the part of H&H Arizona or other actions on the part of the H&H Arizona Shareholders are necessary to authorize this Agreement or to consummate the transactions contemplated hereby.
 

 Section 3.5                     No Conflict or Violation.  Neither the execution and delivery of this Agreement by H&H Arizona or the H&H Arizona Shareholder, nor the consummation by H&H Arizona and/or the H&H Arizona Shareholder of the transactions contemplated hereby will: (i) violate any provision of the H&H Arizona Charter Documents, (ii) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge or other restriction of any government, governmental agency, court, administrative panel or other tribunal to which H&H Arizona and/or the H&H Arizona Shareholder are subject,  (iii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify or cancel, or require any notice under any agreement, contract, lease, license, instrument or other arrangement to which H&H Arizona and/or the H&H Arizona Shareholder is/are a party or by which it/they is/are bound, or to which any of its/their/his assets is subject; or (iv) result in or require the creation or imposition of any encumbrance of any nature upon or with respect to any of H&H Arizona’s or any of the H&H Arizona Shareholder’ assets, including without limitation the H&H Arizona Shares.
 

            Section 3.6                      Compliance with Laws and Other Instruments. Except as would not have a Material Adverse Effect on H&H Arizona, the business and operations of H&H Arizona have been and are being conducted in accordance with all applicable foreign, federal, state and local laws, rules and regulations and all applicable orders, injunctions, decrees, writs, judgments, determinations and awards of all courts and governmental agencies and instrumentalities.  Except as would not have a Material Adverse Effect on H&H Arizona, H&H Arizona is not, and is not alleged to be, in violation of, or (with or without notice or lapse of time or both) in default under, or in breach of, any term or provision of the H&H Arizona Charter Documents or of any indenture, loan or credit agreement, note, deed of trust, mortgage, security agreement or other material agreement, lease, license or other instrument, commitment, obligation or arrangement to which H&H Arizona is a party or by which any of H&H Arizona’s properties, assets or rights are bound or affected.  To the knowledge of H&H Arizona, no other party to any material contract, agreement, lease, license, commitment, instrument or other obligation to which H&H Arizona is a party are (with or without notice or lapse of time or both) in default thereunder or in breach of any term thereof.  H&H Arizona is not subject to any obligation or restriction of any kind or character, nor are there, to the knowledge of H&H Arizona, any event or circumstance relating to H&H Arizona that materially and adversely affects in any way their business, properties, assets or prospects or that would prevent or make burdensome their performance of or compliance with all or any part of this Agreement or the consummation of the transactions contemplated hereby or thereby.  “Material Adverse Effect” means, when used with respect to H&H Arizona, any change, effect or circumstance which, individually or in the aggregate, would reasonably be expected to (a) have a material adverse effect on the business, assets, financial condition or results of operations of H&H Arizona, in each case taken as a whole, or (b) materially impair the ability of H&H Arizona to perform its obligations under this
 Agreement, excluding any change, effect or circumstance resulting from (i) the announcement, pendency or consummation of the transactions contemplated by this Agreement, (ii) changes in the United States securities markets generally, or (iii) changes in general economic, currency exchange rate, political or regulatory conditions in industries in which H&H Arizona operates.
 

 Section 3.7                      Brokers’ Fees. None of the H&H Arizona Shareholder nor H&H Arizona has any liability to pay any fees or commissions or other consideration to any broker, finder, or agent with respect to the transactions contemplated by this Agreement, other than to that listed under Schedule 3.7.
 

            Section 3.8                      Investment Representations.
 

 a.           The DKSP Shares will be acquired hereunder solely for the account of H&H Arizona Shareholder for investment, and not with a view to the resale or distribution thereof.  Each of the H&H Arizona Shareholder understands and is able to bear any economic risks associated with acquiring the DKSP Shares. Each of the H&H Arizona Shareholder have had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the mutual DKSP Shares.
 

            b.           No offer to enter into this Agreement has been made by DKSP to any of the H&H Arizona Shareholder in the United States.  None of the H&H Arizona Shareholder or any of their respective affiliates or any 
 

 8
 

 

  
 
 person acting on their behalf or on behalf of any such affiliate, has engaged or will engage in any activity undertaken for the purpose of, or that reasonably could be expected to have the effect of, conditioning the markets in the United States for the DKSP Shares, including, but not limited to, effecting any sale or short sale of securities, prior to the expiration of any restricted period contained in Regulation S promulgated under the Securities Act (any such activity being defined herein as a “Directed Selling Effort”).  To the best knowledge of each of the H&H Arizona Shareholder this Agreement and the transactions contemplated herein are not part of a plan or scheme to evade the registration provisions of the Securities Act, and the DKSP Shares are being acquired for investment purposes by each of the H&H Arizona Shareholder.  Each of the H&H Arizona Shareholder agree that all offers and sales of the DKSP Shares from the date hereof and through the expiration of any restricted period set forth in Rule 903 of Regulation S (as the same may be amended from time to time hereafter) shall not be made to U.S. Persons (within the meaning of Regulation S) or for the account or benefit of U.S. Persons and shall otherwise be made in compliance with the provisions of Regulation S and any other applicable provisions of the Securities Act.   None of the H&H Arizona Shareholder or any of their representatives has conducted any Directed Selling Effort as that term is used and defined in Rule 902 of Regulation S and neither of them nor any of their respective representatives will engage in any such Directed Selling Effort within the United States through the expiration of any restricted period set forth in Rule 903 of Regulation S.
  
 Section 3.9                    Ownership of Shares.  Each H&H Arizona Shareholder is both the record and beneficial owner of the H&H Arizona Shares set forth opposite such H&H Arizona Shareholder's name on Schedule 3.9 hereto. Each H&H Arizona Shareholder is not the record or beneficial owner of any other H&H Arizona Shares.  The information set forth on Schedule 3.9 with respect to each H&H Arizona Shareholder is accurate and complete.   Each H&H Arizona Shareholder has and shall transfer at the Closing, good and marketable title to the H&H Arizona Shares shown as owned of record by such H&H Arizona Shareholder on Schedule 3.9 to this Agreement, free and clear of all liens, claims, charges, encumbrances, pledges, mortgages, security interests, options, rights to acquire, proxies, voting trusts or similar agreements, restrictions on transfer or adverse claims of any nature whatsoever (“Liens”).
 

            Section 3.10                  Pre-emptive Rights.  At Closing, no H&H Arizona Shareholder has any pre-emptive rights or any other rights to acquire any H&H Arizona Shares that have not been waived or exercised. 
 

 Section 3.11                  Disclosure.  This Agreement, the schedules hereto and any certificate attached hereto or delivered in accordance with the terms hereof by or on behalf of H&H Arizona or any of the H&H Arizona Shareholder in connection with the transactions contemplated by this Agreement, when taken together, do not contain any untrue statement of a material fact or omit any material fact necessary in order to make the statements contained herein and/or therein not misleading.
  
 Section 3.12                   Title to and Condition of Properties.  H&H Arizona owns or holds under valid leases or other rights to use all real property, plants, machinery and equipment necessary for the conduct of the business of H&H Arizona as presently conducted, except where the failure to own or hold such property, plants, machinery and equipment would not have a Material Adverse Effect on H&H Arizona.  The material buildings, plants, machinery and equipment necessary for the conduct of the business of H&H Arizona as presently conducted are structurally sound, are in good operating condition and repair and are adequate for the uses to which they are being put, in each case, taken as a whole, and none of such buildings, plants, machinery or equipment are in need of maintenance or repairs, except for ordinary, routine maintenance and repairs that are not material in nature or cost.
  
 Section 3.13                   Absence of Undisclosed Liabilities.  Except as set forth on Schedule 3.13, H&H Arizona and the H&H Arizona Subsidiaries have no debt, obligation or liability (whether accrued, absolute, contingent, liquidated or otherwise, whether due or to become due, whether or not known to H&H Arizona) arising out of any transaction entered into at or prior to the Closing Date or any act or omission at or prior to the Closing Date, except to the extent set forth on or reserved against on H&H Arizona’s unaudited consolidated financial statements for the fiscal years ended June 30, 2011 and 2012.  All debts, obligations or liabilities with respect to directors and officers of H&H Arizona will be cancelled prior to the Closing.  H&H Arizona has not incurred any liabilities or obligations under agreements entered into, except in the usual and ordinary course of business since June 30, 2012.
 

 Section 3.14               Changes.  H&H Arizona has not, since June 30, 2012:
 

 9
 

 

  
 
  
 a. Ordinary Course of Business.  Conducted its business or entered into any transaction other than in the usual and ordinary course of business, except for this Agreement.
   
 b. Adverse Changes.  Suffered or experienced any change in, or affecting, their condition (financial or otherwise), properties, assets, liabilities, business, operations, results of operations or prospects other than changes, events or conditions in the usual and ordinary course of their business, none of which would have a Material Adverse Effect;
  
 c. Loans.  Made any loans or advances to any Person (for purposes of this Agreement, “Person” means all natural persons, corporations, business trusts, associations, companies, partnerships, limited liability companies, joint ventures and other entities, governments, agencies and political subdivisions) other than travel advances and reimbursement of expenses made to employees, officers and directors in the ordinary course of business;
  
 d. Liens.  Created or permitted to exist any Lien on any material property or asset of H&H Arizona, other than (a) Liens for taxes not yet payable or in respect of which the validity thereof is being contested in good faith by appropriate proceedings and for the payment of which the relevant party has made adequate reserves; (b) Liens in respect of pledges or deposits under workmen’s compensation laws or similar legislation, carriers, warehousemen, mechanics, laborers and materialmen and similar Liens, if the obligations secured by such Liens are not then delinquent or are being contested in good faith by appropriate proceedings conducted and for the payment of which the relevant party has made adequate reserves; (c) statutory Liens incidental to the conduct of the business of the relevant party which were not incurred in connection with the borrowing of money or the obtaining of advances or credits and that do not in the aggregate materially detract from the value of its property or materially impair the use thereof in the operation of its business; and (d) Liens that would not have a Material Adverse Effect (“Permitted Liens”);
  
 e. Capital Stock.  Issued, sold, disposed of or encumbered, or authorized the issuance, sale, disposition or encumbrance of, or granted or issued any option to acquire any shares of their capital stock or any other of their securities or any equity security of any class of H&H Arizona, or altered the term of any of their outstanding securities or made any change in their outstanding shares of capital stock or their capitalization, whether by reason of reclassification, recapitalization, stock split, combination, exchange or readjustment of shares, stock dividend or otherwise;
  
 f. Dividends.  Declared, set aside, made or paid any dividend or other distribution to any of their stockholders;
  
 g. Material DK Contracts.  Terminated or modified any and all agreements, contracts, arrangements, leases, commitments or otherwise, of H&H Arizona, of the type and nature that is required to be filed with the SEC (each a “Material DK Contract”), except for termination upon expiration in accordance with the terms thereof or as set forth in Schedule 3.14(g);
  
 h. Claims.  Released, waived or cancelled any claims or rights relating to or affecting H&H Arizona in excess of US $10,000 in the aggregate or instituted or settled any Action involving in excess of US $10,000 in the aggregate;
  
 i. Discharged Liabilities.  Paid, discharged or satisfied any claim, obligation or liability in excess of US $10,000 in the aggregate, except for liabilities incurred prior to the date of this Agreement in the ordinary course of business;
  
 j. Indebtedness.  Created, incurred, assumed or otherwise become liable for any indebtedness in excess of US $10,000 in the aggregate, other than professional fees;
  
 k. Guarantees.  Guaranteed or endorsed in a material amount any obligation or net worth of any Person;
  
 

 10
 

 

  
 
 l. Acquisitions.  Acquired the capital stock or other securities or any ownership interest in, or substantially all of the assets of, any other Person;
  
 m. Accounting.  Changed their method of accounting or the accounting principles or practices utilized in the preparation of their financial statements, other than as required by U.S. GAAP;
  
 n. Agreements.  Except as set forth on Schedule 3.14(n), entered into any agreement, or otherwise obligated itself, to do any of the foregoing.
  
            Section 3.15                     Material DK Contracts.  H&H Arizona has made available to DKSP and the DKSP Controlling Stockholder, prior to the date of this Agreement, true, correct and complete copies of each written Material DK Contract, including each amendment, supplement and modification thereto.
  
 a.           No Defaults.  Each Material DK Contract is a valid and binding agreement of H&H Arizona and are in full force and effect.  Except as would not have a Material Adverse Effect, H&H Arizona is not in breach or default of any Material DK Contract to which they are a party and, to the knowledge of H&H Arizona, no other party to any Material DK Contract is in breach or default thereof.  Except as would not have a Material Adverse Effect, no event has occurred or circumstance exists that (with or without notice or lapse of time) would (a) contravene, conflict with or result in a violation or breach of, or become a default or event of default under, any provision of any Material DK Contract or (b) permit H&H Arizona or any other Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate or modify any Material DK Contract.  H&H Arizona has not received notice of the pending or threatened cancellation, revocation or termination of any Material DK Contract to which it is a party.  There are no renegotiations of, or attempts to renegotiate, or outstanding rights to renegotiate any material terms of any Material DK Contract.
 

 Section 3.16                    Material Assets.  The financial statements of H&H Arizona reflect the material properties and assets (real and personal) owned or leased by H&H Arizona.
  
 Section 3.17                   Litigation; Orders.  There are no Actions (whether U.S. or non-U.S. federal, state, local or foreign) pending or, to the knowledge of H&H Arizona, threatened against or affecting any of H&H Arizona or any  of H&H Arizona’s properties, assets, business or employees.  To the knowledge of H&H Arizona, there are no facts that might result in or form the basis for any such Action and H&H Arizona is not subject to any Orders.
  
 Section 3.18                  Licenses.  Except as would not have a Material Adverse Effect, H&H Arizona possesses from the appropriate Governmental Authority all licenses, permits, authorizations, approvals, franchises and rights that are necessary for any of H&H Arizona and the H&H Arizona Subsidiaries to engage in their business as currently conducted and to permit H&H Arizona to own and use their properties and assets in the manner in which they currently own and use such properties and assets (collectively, “H&H Arizona Permits”).  H&H Arizona has not received notice from any Governmental Authority or other Person that there are lacking any license, permit, authorization, approval, franchise or right necessary for H&H Arizona to engage in its business as currently conducted and to permit H&H Arizona to own and use its properties and assets in the manner in which it currently owns and uses such properties and assets.  Except as would not have a Material Adverse Effect, H&H Arizona Permits are valid and in full force and effect.  Except as would not have a Material Adverse Effect, no event has occurred or circumstance exists that may (with or without notice or lapse of time):  (a) constitute or result, directly or indirectly, in a violation of or a failure to comply with any H&H Arizona Permit; or (b) result, directly or indirectly, in the revocation, withdrawal, suspension, cancellation or termination of, or any modification to, any H&H Arizona Permit.  H&H Arizona has not received notice from any Governmental Authority or any other Person regarding:  (a) any actual, alleged, possible or potential contravention of any H&H Arizona Permit; or (b) any actual, proposed, possible or potential revocation, withdrawal, suspension, cancellation, termination of, or modification to, any H&H Arizona Permit.  All applications required to have been filed for the renewal of such H&H Arizona Permits have been duly filed on a timely basis with the appropriate Persons, and all other filings required to have been made with respect to such H&H Arizona Permits have been duly made on a timely basis with the appropriate Persons.  All H&H Arizona Permits are renewable by their terms or in the ordinary course of business without the need to comply with any special qualification procedures or to pay any amounts other than routine fees or similar charges, all of which have, to the extent due, been duly paid.
 

 11
 

 

  
 
  
 Section 3.19                   Interested Party Transactions.  Except as disclosed on Schedule 3.19, no officer, director or stockholder of any of H&H Arizona or any affiliate or “associate” (as such term are defined in Rule 405 of the SEC under the Securities Act) of any such Person, have or have had, either directly or indirectly, (1) an interest in any Person which (a) furnishes or sells services or products which are furnished or sold or are proposed to be furnished or sold by H&H Arizona, or (b) purchases from or sells or furnishes to, or proposes to purchase from, sell to or furnish H&H Arizona any goods or services; or (2) a beneficial interest in any contract or agreement to which H&H Arizona is a party or by which they may be bound or affected.
  
 Section 3.20                  Governmental Inquiries.  H&H Arizona has provided to DKSP a copy of each material written inspection report, questionnaire, inquiry, demand or request for information received by H&H Arizona from any Governmental Authority, and H&H Arizona’s response thereto, and each material written statement, report or other document filed by H&H Arizona with any Governmental Authority.
  
 Section 3.21                   Intellectual Property.  Except as set forth on Schedule 3.21 hereto, H&H Arizona does not own, use or license any Intellectual Property in their business as presently conducted.  For purposes of this Agreement, “Intellectual Property” means all industrial and intellectual property, including, without limitation, all U.S. and non-U.S. patents, patent applications, patent rights, trademarks, trademark applications, common law trademarks, Internet domain names, trade names, service marks, service mark applications, common law service marks, and the goodwill associated therewith, copyrights, in both published and unpublished works, whether registered or unregistered, copyright applications, franchises, licenses, know-how, trade secrets, technical data, designs, customer lists, confidential and proprietary information, processes and formulae, all computer software programs or applications, layouts, inventions, development tools and all documentation and media constituting, describing or relating to the above, including manuals, memoranda, and records, whether such intellectual property has been created, applied for or obtained anywhere throughout the world.
  
 Section 3.22                   Stock Option Plans; Employee Benefits.
  
 a. Except as set forth on Schedule 3.22(a) hereto, H&H Arizona has no stock option plans providing for the grant by H&H Arizona of stock options to directors, officers or employees.
   
 b. Except as set forth on Schedule 3.22(b) hereto, H&H Arizona has no employee benefit plans or arrangements covering their present and former employees or providing benefits to such persons in respect of services provided H&H Arizona.
  
 c. Neither the consummation of the transactions contemplated hereby alone, nor in combination with another event, with respect to each director, officer, employee and consultant of H&H Arizona, will result in (a) any payment (including, without limitation, severance, unemployment compensation or bonus payments) becoming due from H&H Arizona, (b) any increase in the amount of compensation or benefits payable to any such individual or (c) any acceleration of the vesting or timing of payment of compensation payable to any such individual.  No agreement, arrangement or other contract of H&H Arizona provides benefits or payments contingent upon, triggered by, or increased as a result of a change in the ownership or effective control of H&H Arizona.
  
 Section 3.23                   Environmental and Safety Matters.  Except as set forth on Schedule 3.23 and except as would not have a Material Adverse Effect:
 

 H&H Arizona has at all time been and are in compliance with all Environmental Laws (as defined below) applicable to H&H Arizona.
  
 d. There are no Actions pending or threatened against H&H Arizona alleging the violation of any Environmental Law (as defined below) or Environmental Permit applicable to H&H Arizona or alleging that H&H Arizona is a potentially responsible party for any environmental site contamination.
  
 e. Neither this Agreement nor the consummation of the transactions contemplated by this Agreement shall impose any obligations to notify or obtain the consent of any Governmental Authority or third 
 

 12
 

 

  
 
 Persons under any Law or other requirement relating to the environment, natural resources, or public or employee health and safety (“Environmental Laws”) applicable to H&H Arizona.
  
 Section 3.24                  Board Recommendation.  The Board of Directors of H&H Arizona, at a meeting duly called and held, has determined that this Agreement and the transactions contemplated by this Agreement are advisable and in the best interests of the H&H Arizona Shareholder and has duly authorized this Agreement and the transactions contemplated by this Agreement.
 

 Section 3.25                   Survival.  Each of the representations and warranties set forth in this Article III shall be deemed represented and made by H&H Arizona and the H&H Arizona Shareholder at the Closing as if made at such time and shall survive the Closing for a period terminating twenty-four (24) months after the date of the Closing.
 

 ARTICLE IV
 

 COVENANTS
 

 Section 4.1                     Certain Changes and Conduct of Business.
 

                       a.           From and after the date of this Agreement and until the Closing Date, DKSP shall conduct its business solely in the ordinary course consistent with past practices and, in a manner consistent with all representations, warranties or covenants of DKSP contained herein.
 

                        b.          From and after the date of this Agreement, H&H Arizona and each of its Subsidiaries will:
 

  	 	
	 i.  
	 continue to maintain, in all material respects, its properties in 
 accordance with present practices in a condition suitable for its 
 current use;

  
  	 	 	 	
	  
	           ii.  
	 file, when due or required, federal, state, foreign and other tax

	  
	 returns and other reports required to be filed and pay when due all taxes, assessments, fees and other charges lawfully levied or assessed against it, unless the validity thereof is contested in good faith and by appropriate proceedings diligently conducted;

 

  	 	
	  
	 iii.     continue to conduct its business in the ordinary course consistent with past practices;

 

  	 	
	  
	 iv.       keep its books of account, records and files in the ordinary course and in accordance with existing practices; and
 

 v.         continue to maintain existing business relationships with suppliers.

 

 

                         c.         From and after the date of this Agreement, none of the H&H Arizona Shareholder  will sell, transfer, convey, assign or otherwise dispose of, or contract or otherwise agree to sell, transfer, convey, assign or otherwise dispose of any of the H&H Arizona Shares except as provided by this Agreement.
 

 Section 4.2                    Access to Properties and Records.  H&H Arizona shall afford to DKSP’s accountants, counsel and authorized representatives, and DKSP shall afford to H&H Arizona’ accountants, counsel and authorized representatives, full access during normal business hours throughout the period prior to the Closing Date (or the earlier termination of this Agreement) to all of such parties’ properties, books, contracts, commitments and records and, during such period, shall furnish promptly to the requesting party all other information concerning the other party's business, properties and personnel as the requesting party may reasonably request, provided that no investigation or receipt of information pursuant to this Section 4.2 shall affect any representation or warranty of or the conditions to the obligations of any party.
 

 13
 

 

  
 
 

 Section 4.3                     Negotiations.  From and after the date hereof until the earlier of the Closing or the termination of this Agreement, no party to this Agreement, nor any of its officers or directors (subject to such director's fiduciary duties), nor anyone acting on behalf of any party or other persons shall, directly or indirectly, encourage, solicit, engage in discussions or negotiations with, or provide any information to, any person, firm, or other entity or group concerning any merger, sale of substantial assets, purchase or sale of shares of capital stock or similar transaction involving any party.  A party shall promptly communicate to any other party any inquiries or communications concerning any such transaction which they may receive or of which they may become aware.
 

  

 Section 4.4                    Consents and Approvals.  The parties shall: (i) use their reasonable commercial efforts to obtain all necessary consents, waivers, authorizations and approvals of all governmental and regulatory authorities, domestic and foreign, and of all other persons, firms or corporations required in connection with the execution, delivery and performance by them of this Agreement; and (ii) diligently assist and cooperate with each party in preparing and filing all documents required to be submitted by a party to any governmental or regulatory authority, domestic or foreign, in connection with such transactions and in obtaining any governmental consents, waivers, authorizations or approvals which may be required to be obtained connection in with such transactions.
 

 Section 4.5                     Public Announcement.  Unless otherwise required by applicable law, the parties hereto shall consult with each other before issuing any press release or otherwise making any public statements with respect to this Agreement and shall not issue any such press release or make any such public statement prior to such consultation.
 

 ARTICLE V
 

 CONDITIONS TO OBLIGATIONS OF H&H ARIZONA AND THE H&H ARIZONA SHAREHOLDER
 

 The obligations of H&H Arizona and the H&H Arizona Shareholder to consummate the transactions contemplated by this Agreement are subject to the fulfillment, at or before the Closing Date, of the following conditions, any one or more of which may be waived by H&H Arizona and the H&H Arizona Shareholder at their sole discretion:
 

 Section 5.1                     Representations and Warranties of DKSP and the DKSP Controlling Stockholder.   All representations and warranties made by DKSP and the DKSP Controlling Stockholder in this Agreement shall be true and correct in all material respects on and as of the Closing Date as if again made by DKSP and the DKSP Controlling Stockholder on and as of such date and insofar as any inconsistency or inaccuracy does not or will not have a DKSP Material Adverse Effect, except insofar as the representations and warranties relate expressly and solely to a particular date or period, in which case, subject to the limitations applicable to the particular date or period, they will be true and correct in all material respects on and as of the Closing Date with respect to such date or period.
 

 Section 5.2                     Agreements and Covenants. Each of DKSP and the DKSP Controlling Stockholder shall have performed and complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by on or prior to the Closing Date.
 

 Section 5.3                     Consents and Approvals.  All consents, waivers, authorizations and approvals of any governmental or regulatory authority, domestic or foreign, and of any other person, firm or corporation, required in connection with the execution, delivery and performance of this Agreement shall be in full force and effect on the Closing Date.
 

 Section 5.4                    No Violation of Orders.  No preliminary or permanent injunction or other order issued by any court or governmental or regulatory authority, domestic or foreign, nor any statute, rule, regulation, decree or executive order promulgated or enacted by any government or governmental or regulatory authority, which declares this Agreement invalid in any respect or prevents the consummation of the transactions contemplated hereby, or which materially and adversely affects the assets, properties, operations, prospects, net income or financial condition of DKSP shall be in effect; and no action or proceeding before any court or governmental or regulatory authority, domestic or foreign, shall have been instituted or threatened by any government or 
 

 14
 

 

  
 
 governmental or regulatory authority, domestic or foreign, or by any other person, or entity which seeks to prevent or delay the consummation of the transactions contemplated by this Agreement or which challenges the validity or enforceability of this Agreement.
 

 Section 5.5                    Debt Cancellation.  On or prior to Closing, DKSP shall deliver to H&H Arizona such pay-off letters and releases relating to liabilities of DKSP as H&H Arizona shall request, in form and substance satisfactory to H&H Arizona.
 

 Section 5.6                    Certificate of Good Standing.  On or prior to Closing, DKSP shall deliver a certificate of good standing of DKSP dated within five (5) business days of Closing issued by the Secretary of State of Nevada.
 

 Section 5.7                   Other Closing Documents.  Each of the H&H Arizona Shareholder shall have received such certificates, instruments and documents in confirmation of the representations and warranties of DKSP and the DKSP Controlling Shareholder, DKSP’s and the DKSP Controlling Shareholder’s performance of its obligations hereunder, and/or in furtherance of the transactions contemplated by this Agreement as the H&H Arizona Shareholder and/or their respective counsel may reasonably request.
 

 Section 5.8                  Appointment of New Directors.  At the Closing, (i) Shawn Erickson shall resign as sole director of DKSP, and (ii) Grant Johnson shall be appointed director of DKSP and shall constitute the entire board of DKSP.
 

 ARTICLE VI 
   
 CONDITIONS TO OBLIGATIONS OF DKSP
 

 The obligations of DKSP to consummate the transactions contemplated by this Agreement are subject to the fulfillment, at or before the Closing Date, of the following conditions, any one or more of which may be waived by DKSP in its sole discretion:
 

 Section 6.1                     Representations and Warranties of H&H Arizona and the H&H Arizona Shareholder.  All representations and warranties made by H&H Arizona and the H&H Arizona Shareholder in this Agreement shall be true and correct on and as of the Closing Date as if again made by H&H Arizona and the H&H Arizona Shareholder, as applicable, on and as of such date.
 

 Section 6.2                     Agreements and Covenants.  Each of H&H Arizona and the H&H Arizona Shareholder shall have performed and complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by each of them on or prior to the Closing Date.
 

 Section 6.3                     Consents and Approvals.  All consents, waivers, authorizations and approvals of any governmental or regulatory authority, domestic or foreign, and of any other person, firm or corporation, required in connection with the execution, delivery and performance of this Agreement, shall have been duly obtained and shall be in full force and effect on the Closing Date.
 

 Section 6.4                     No Violation of Orders.  No preliminary or permanent injunction or other order issued by any court or other governmental or regulatory authority, domestic or foreign, nor any statute, rule, regulation, decree or executive order promulgated or enacted by any government or governmental or regulatory authority, domestic or foreign, that declares this Agreement invalid or unenforceable in any respect or which prevents the consummation of the transactions contemplated hereby, or which materially and adversely affects the assets, properties, operations, prospects, net income or financial condition of H&H Arizona, taken as a whole, shall be in effect; and no action or proceeding before any court or government or regulatory authority, domestic or foreign, shall have been instituted or threatened by any government or governmental or regulatory authority, domestic or foreign, or by any other person, or entity which seeks to prevent or delay the consummation of the transactions contemplated by this Agreement or which challenges the validity or enforceability of this Agreement.
 

 

 15
 

 

  
 
 Section 6.5                    Other Closing Documents.  DKSP shall have received such certificates, instruments and documents in confirmation of the representations and warranties of H&H Arizona and the H&H Arizona Shareholder, the performance of H&H Arizona and the H&H Arizona Shareholder’ respective obligations hereunder and/or in furtherance of the transactions contemplated by this Agreement as DKSP or its counsel may reasonably request.
 

 ARTICLE VII
 

 POST-CLOSING AGREEMENTS
 

  Section 7.1 

 Consistency in Reporting.  Each party hereto agrees that if the characterization of any transaction contemplated in this agreement or any ancillary or collateral transaction is challenged, each party hereto will testify, affirm and ratify that the characterization contemplated in such agreement was the characterization intended by the party; provided, however, that nothing herein shall be construed as giving rise to any obligation if the reporting position is determined to be incorrect by final decision of a court of competent jurisdiction.
 

 Section 7.2                     Name Change.  DKSP will use its best commercially reasonable efforts to effect a corporate name change after the Closing.
 

 ARTICLE VIII
 

 TERMINATION AND ABANDONMENT
 

 Section 8.1                     Methods of Termination.  This Agreement may be terminated and the transactions contemplated hereby may be abandoned at any time before the Closing:
 

 a. By the mutual written consent of the H&H Arizona Shareholder and DKSP;
 

 b. By DKSP, on a material breach on the part of H&H Arizona or the H&H Arizona Shareholder of any representation, warranty, covenant or agreement set  forth in this Agreement, or if any representation or warranty of H&H Arizona or any of the H&H Arizona Shareholder shall become untrue, in either case such that any of the conditions set forth in Article VII hereof would not be satisfied (a "H&H Arizona Breach"), and such breach, if capable of cure, has not been cured within ten (10) days after receipt by H&H Arizona and the H&H Arizona Shareholder of a written notice from DKSP setting forth in detail the nature of such H&H Arizona Breach;
 

 c. By the H&H Arizona Shareholder, upon a material breach on the part of DKSP of any representation, warranty, covenant or agreement set forth in this Agreement, or, if any representation or warranty of DKSP shall become untrue, in either case such that any of the conditions set forth in Article VI hereof would not be satisfied (a "DKSP Breach"), and such breach, if capable of cure, has not been cured within ten (10) days after receipt by DKSP of a written
  
 d. notice from H&H Arizona Shareholder  setting forth in detail the nature of such DKSP Breach;
 

 e. By either DKSP or the H&H Arizona Shareholder, if the Closing shall not have consummated before ninety (90) days after the date hereof; provided, however, that this Agreement may be extended by written notice of either the H&H Arizona Shareholder or DKSP if the Closing shall not have been consummated as a result of H&H Arizona or DKSP having failed to receive all required regulatory approvals or consents with respect to this transaction or as the result of the entering of an order as described in this Agreement; and further provided, however, that the right to terminate this Agreement under this Section 8.1(d) shall not be available to any party whose failure to fulfill any obligations under this Agreement has been the cause of, or resulted in, the failure of the Closing to occur on or before this date; or
 

 

 16
 

 

  
 
 f. By either H&H Arizona Shareholder or DKSP if a court of competent jurisdiction or governmental, regulatory or administrative agency or commission shall have issued an order, decree or ruling or taken any other action (which order, decree or ruling the parties hereto shall use its best efforts to lift), which permanently restrains, enjoins or otherwise prohibits the transactions contemplated by this Agreement.
 

 Section 8.2                     Procedure Upon Termination.  In the event of termination and abandonment of this Agreement pursuant to Section 8.1, written notice thereof shall forthwith be given by the terminating parties to the other parties and this Agreement shall terminate and the transactions contemplated hereby shall be abandoned, without further action.  If this Agreement is terminated as provided herein, no party to this Agreement shall have any liability or further obligation to any other party to this Agreement; provided, however, that no termination of this Agreement pursuant to this Article VIII shall relieve any party of liability for a breach of any provision of this Agreement occurring before such termination.
 

 ARTICLE IX
 

 MISCELLANEOUS PROVISIONS
 

             Section 9.1                      Survival of Provisions.  The respective representations, warranties, covenants and agreements of each of the parties to this Agreement (except covenants and agreements which are expressly required to be performed and are performed in full on or before the Closing Date) shall expire on the first day of the twenty-four (24) month anniversary of the Closing Date (the “Survival Period”), subject to Sections 2.18 and 3.25.  In the event of a breach of any of such representations, warranties or covenants, the party to whom such representations, warranties or covenants have been made shall have all rights and remedies for such breach available to it under the provisions of this Agreement or otherwise, whether at law or in equity, regardless of any disclosure to, or investigation made by or on behalf of such party on or before the Closing Date.
 

            Section 9.2                       Indemnification.
 

 a. Indemnification Obligations in favor of the Executive Officers, Directors, Employees and Controlling Stockholders of DKSP.  Notwithstanding the limitation set forth in Section 9.1 and subject to the limitation set forth in this Section 9.2, from and after the Closing Date until the expiration of the twenty-four-month anniversary of the Closing Date, H&H Arizona and the H&H Arizona Shareholder shall reimburse and hold harmless the DKSP’s executive officers, directors, employees in office immediately prior to the Closing and DKSP Controlling Stockholder (each such person and his heirs, executors, administrators, agents, successors and assigns is referred to herein as a “DKSP Indemnified Party”) against and in respect of any and all damages, losses, settlement payments, in respect of deficiencies, liabilities, costs, expenses and claims suffered, sustained, incurred or required to be paid by any DKSP Indemnified Party, and any and all actions, suits, claims, or legal, administrative, arbitration, governmental or other procedures or investigation against any DKSP Indemnified Party, which arises or results from a third-party claim brought against a DKSP Indemnified Party to the extent based on (i) a breach of the representations and warranties with respect to the business, operations or assets of H&H Arizona, (ii) the actions or omissions of any officer, director, shareholder, employee, or agent of H&H Arizona after the Closing, or (iii) any actions or omissions or any DKSP Indemnified Party taken in furtherance of the transactions contemplated by this Agreement.
  
                       b.           Indemnification in favor of H&H Arizona and the H&H Arizona Shareholder.  Notwithstanding the limitation set forth in Section 9.1 and subject to the limitation set forth in this Section 9.2, from and after the Closing Date until the expiration of the twenty-four-month anniversary of the Closing Date, the DKSP Controlling Stockholder shall reimburse and hold harmless H&H Arizona, the H&H Arizona Shareholder, and their respective officers, directors, agents, attorneys and employees, and each person, if any, who controls or may “control” (within the meaning  of the Securities Act) any of the forgoing persons or entities (hereinafter referred to individually as a “DK Indemnified Person”) from and against any and all losses, costs, damages, liabilities and expenses arising from claims, demands, actions, causes of action, including, without limitation, legal fees, (collectively, “Damages”) arising out of any (i) any breach of representation or warranty made by DKSP or the DKSP Controlling Stockholder in this Agreement, and in any certificate delivered by DKSP or the DKSP Controlling Stockholder pursuant to this Agreement, (ii) any breach by DKSP or the DKSP Controlling Stockholder of any covenant, obligation or other agreement made by DKSP or the DKSP Controlling Stockholder in 
 

 17
 

 

  
 
 this Agreement, and (iii) a third-party claim based on any acts or omissions by DKSP or the DKSP Controlling Stockholder since the date of inception of DKSP through and including the Closing Date.
 

 Section 9.3                      Publicity.  No party shall cause the publication of any press release or other announcement with respect to this Agreement or the transactions contemplated hereby without the consent of the other parties, unless a press release or announcement is required by law.  If any such announcement or other disclosure is required by law, the disclosing party agrees to give the non-disclosing parties prior notice and an opportunity to comment on the proposed disclosure.
 

 Section 9.4                      Successors and Assigns.  This Agreement shall inure to the benefit of, and be binding upon, the parties hereto and their respective successors and assigns; provided, however, that no party shall assign or delegate any of the obligations created under this Agreement without the prior written consent of the other parties.
 

 Section 9.5                      Fees and Expenses.  Except as otherwise expressly provided in this Agreement, all legal and other fees, costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such fees, costs or expenses.
 

 Section 9.6                      Notices.  All notices and other communications given or made pursuant hereto shall be in writing and shall be deemed to have been given or made if in writing and delivered personally or sent by registered or certified mail (postage prepaid, return receipt requested) to the parties at the following addresses:
 

 If to H&H Arizona, to:
 

 H&H Arizona Inc.
 Hodges Bay Drive, Hodges Bay
 St. Johns, Antigua and Barbuda
 West Indies
 Fax No.: 1-268-460-8982
 

 86-029-8221-4688
 

 If to DKSP or the DKSP Controlling Stockholder, to:
   
 DK Sinopharma, Inc.
 112 North Curry Street
 Carson City, Nevada 89703
 Fax No.: 1-775-882-1013
 

 with copies, which shall not constitute notice, to:
 

 W.L. Macdonald Law Corporation
 1210 - 777 Hornby Street
 Vancouver, BC, Canada, V6Z 1S4
 Attention: William L. Macdonald
 Fax No.:  (604) 681-4760
 

 or to such other persons or at such other addresses as shall be furnished by any party by like notice to the others, and such notice or communication shall be deemed to have been given or made as of the date so delivered or mailed. No change in any of such addresses shall be effective insofar as notices under this Section 9.6 are concerned unless such changed address is located in the United States of America and notice of such change shall have been given to such other party hereto as provided in this Section 9.6.
 

 Section 9.7                     Entire Agreement.  This Agreement, together with the exhibits hereto, represents the entire agreement and understanding of the parties with reference to the transactions set forth herein and no representations or warranties have been made in connection with this Agreement other than those expressly set forth 
 

 18
 

 

  
 
 herein or in the exhibits, certificates and other documents delivered in accordance herewith.  This Agreement supersedes all prior negotiations, discussions, correspondence, communications, understandings and agreements between the parties relating to the subject matter of this Agreement and all prior drafts of this Agreement, all of which are merged into this Agreement.  No prior drafts of this Agreement and no words or phrases from any such prior drafts shall be admissible into evidence in any action or suit involving this Agreement.
 

 Section 9.8                     Severability.  This Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Agreement or of any other term or provision hereof.  Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Agreement a provision as similar in terms to such invalid or unenforceable provision as may be possible so as to be valid and enforceable.
 

 Section 9.9                     Titles and Headings.  The Article and Section headings contained in this Agreement are solely for convenience of reference and shall not affect the meaning or interpretation of this Agreement or of any term or provision hereof.
 

 Section 9.10                  Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall be considered one and the same agreement.
 

 Section 9.11                  Convenience of Forum; Consent to Jurisdiction.  The parties to this Agreement, acting for themselves and for their respective successors and assigns, without regard to domicile, citizenship or residence, hereby expressly and irrevocably elect as the sole judicial forum for the adjudication of any matters arising under or in connection with this Agreement, and consent and subject themselves to the jurisdiction of, the courts of the State of Nevada and/or the United States District Court for Nevada, in respect of any matter arising under this Agreement. Service of process, notices and demands of such courts may be made upon any party to this Agreement by personal service at any place where it may be found or giving notice to such party as provided in Section 9.5.
 

                 Section 9.12                    Enforcement of the Agreement.  The parties hereto agree that irreparable damage would occur if any of the provisions of this Agreement were not performed in accordance with their specific terms or were 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 hereto, this being in addition to any other remedy to which they are entitled at law or in equity.
 

 Section 9.13                   Governing Law.  This Agreement shall be governed by and interpreted and enforced in accordance with the laws of the State of Nevada without giving effect to the choice of law provisions thereof.
 

                Section 9.14                     Amendments and Waivers.  Except or otherwise provided herein, no amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by all of the parties hereto. No waiver by any party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence.
  
  
 

 

  
  
  
 [REST OF PAGE DELIBERATELY LEFT BLANK]
  
 

 

 

 

 19
 

 

  
 
 

 

 

  
 

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

 

 

 H&H Arizona Inc.
 

 

 By:/s/ Grant Johnson
 Grant Johnson, President
 

 

 

 H&H Arizona Inc. Sole Shareholder Next Generation Holdings Trust
 

 

 By:/s/ Grant Johnson
 Grant Johnson, Trustee
 

 

 

 DK Sinopharma, Inc.
 

 

 By:/s/ Shawn Erickson
 Shawn Erickson, President
 

 

 

 DK Sinopharma, Inc. Controlling Shareholder Shawn Erickson
 

 

 By:/s/ Shawn Erickson
 Shawn Erickson
 

 

 

 

 

 

 

 

 

 

 

 

 20
 

 

  
 
 

 EXHIBIT A
 

 List of H&H Arizona Shareholders
 

  Name

  Number of H&H Arizona Shares Exchanged

 Number of DKSP Shares Received
 

  Next Generation Holdings Trust

  1,000

 50,000,000
 

  Total 

  1,000

 50,000,000
 

 21PEARC_2014 06.30.14-EX10.1

AMENDED AND RESTATED MASTER PROPERTY MANAGEMENT, 
LEASING AND CONSTRUCTION MANAGEMENT AGREEMENT

THIS AMENDED AND RESTATED MASTER PROPERTY, LEASING AND CONSTRUCTION MANAGEMENT AGREEMENT (“Agreement”) is made and entered into as of June 1, 2014, by and among PHILLIPS EDISON – ARC SHOPPING CENTER REIT INC., a Maryland corporation (“REIT”), PHILLIPS EDISON – ARC SHOPPING CENTER OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (“OP”), and PHILLIPS EDISON & COMPANY LTD., an Ohio limited liability company (“PECO”). 
 
R E C I T A L S:

A.    OP is a limited partnership whose limited partner is REIT, and was formed to acquire, own, operate, lease, finance and manage shopping center properties throughout the continental United States.  For purposes of this Agreement, OP and REIT, as well as any of their direct and indirect subsidiaries and any joint ventures into which any of the foregoing may enter and which are controlled by the OP or REIT, are individually or collectively referred to herein as “Owner.”

B.    PECO operates, manages, leases and manages construction with respect to shopping center properties located throughout the continental Unites States.

C.    Owner and PECO entered into that certain Master Property, Leasing and Construction Management Agreement dated as of June 27, 2010 (the “Original Agreement”).

D.    Owner and PECO desire to amend and restate the Original Agreement.

E.    Owner desires to engage PECO, and PECO desires to accept such engagement, to manage the shopping center properties owned or hereafter acquired by Owner under the terms and conditions set forth herein. 

NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 

1.    Definitions.  Except as otherwise specified or as the context may otherwise require, the following terms have the respective meanings set forth below for all purposes of this Agreement, and the definitions of such terms are equally applicable both to the singular and plural forms thereof:

(a)    “Improvements” means buildings, structures, and equipment from time to time located on the Properties and all parking and common areas located on the Properties. 

(b)    “Major Lease” means a lease of premises containing 5,000 square feet of leasable area or more.

1

(c)    “Management Fees” means the fees and expenses payable to PECO pursuant to Section 6, “Compensation” hereof.

(d)    “On-Site Personnel” means persons hired or retained as employees of PECO to perform services at the Properties, which services include, but are not limited to, property management, property-level accounting and book-keeping services; provided, however, that the following persons shall not be considered On-Site Personnel: (i) any manager whose primary responsibility is to manage On-Site Personnel and who is not directly responsible for providing services to a specific Property or group of Properties, and (ii) any person who also serves as an executive officer of PECO and/or as an executive officer of Owner.

(e)    “Owner” has the meaning set forth in Recital A.

(f)    “PECO” has the meaning set forth in the introductory paragraph above.

(g)    “Property” means an individual real estate asset owned by Owner and all tracts acquired by Owner related to that asset subject to this Agreement as more fully described in a Property Addendum (as defined below).

(h)    “Properties” means all of the real estate assets of Owner covered by this Agreement, collectively.

(i)    “Property Addendum” means an addendum (as the same may be modified, amended or supplemented in writing, from time to time) which shall be attached to this Agreement and incorporated herein by reference as each Property is purchased and made subject to this Agreement describing the Property, including its real estate and the improvements thereon.  If any Property is sold by Owner, the Property Addendum with respect to such Property may, at Owner’s election, be deemed of no further force or effect from and after the closing of any such sales, except to the extent of post-closing management and accounting functions thereafter to be performed.

2.    Appointment of PECO.

(a)    Owner hereby engages and retains PECO as the sole and exclusive manager of each Property for which a Property Addendum is executed with respect to the property management function to perform such functions as are specified herein and/or on the Property Addendum related to each such Property.  PECO hereby accepts such appointment.

(b)    Owner hereby engages and retains PECO as the sole and exclusive leasing agent for the leasing of all space in each Property for which a Property Addendum is executed with respect to the leasing agent function as well as for obtaining ground leases on any outparcels.  PECO shall perform such functions as are specified herein and/or on the Property Addendum related to each such Property.  PECO hereby accepts such appointment.

(c)    Owner hereby engages and retains PECO as the sole and exclusive construction manager of each Property for which a Property Addendum is executed with respect to 

2

the construction management function to perform such functions as are specified herein and/or on the Property Addendum related to such Property.  PECO hereby accepts such appointment.  

(d)    PECO shall act under this Agreement as an independent contractor and not as the Owner’s agent or employee. PECO shall not have the right, power or authority to enter into agreements or incur liability on behalf of the Owner except as expressly set forth herein or in a Property Addendum. Any action taken by PECO which is not expressly permitted by this Agreement shall not bind the Owner.

3.    Standards.    PECO shall in good faith, with due diligence and in accordance with generally accepted management and construction management standards in the shopping center industry within the geographical areas of the Properties, perform its management, leasing and construction management duties and obligations described herein.  In all events, such standards of performance shall be consistent with the standards of management, leasing and construction management to which PECO performs with respect to its own portfolio of properties.  PECO shall devote its commercially reasonable efforts to performing its duties hereunder to manage, operate, maintain and lease the Properties in a diligent, careful and professional manner to maximize all potential revenues to the Owner and to minimize expenses and losses to the Owner. The services of PECO are to be of a scope and quality not less than those generally performed by first class, professional managers of properties similar in type and quality to the Properties and located in the same market area as the Properties. PECO will make available to the Owner the full benefit of the judgment, experience and advice of the members of PECO’s organization. PECO will at all times act in good faith, in a commercially reasonable manner and in a fiduciary capacity with respect to the proper protection of and accounting for the Owner’s assets.

4.    Term.    This Agreement shall commence upon full execution of this Agreement and shall continue until terminated in accordance with Section 10.

5.    Duties of PECO.  

(a)    PECO’s duties as property manager for the Properties include the following for each of the Properties (as may be supplemented with additional duties as detailed in the applicable Property Addendum for each Property) and for Owner, as applicable:
            
(i)    For Accounting:  

(A)    Calculate, bill and collect rental payments and other charges due to the Owner from tenants in the Properties under the respective tenant leases or otherwise with regard to the Properties.  To the extent tenant leases affecting any Property so require, PECO shall timely make or verify any calculations that are required to determine the amount of rent due from tenants, including without limitation calculating percentage rent, operating expense “pass-throughs” and consumer price index adjustments and, where required, shall give timely notice thereof to tenants.

3

(B)    Cash Management.  

(1)    PECO will establish on behalf of the OP a concentration account (a “Concentration Account”) at a bank to be specified in writing by Owner, which such Concentration Account will be tied into each Operating Account (as defined below) via a daily automated two-way sweep.  This automated two-way sweep shall work in the following manner: all checks or wires presented on behalf of each Property’s Operating Account will be funded by having the cash automatically pulled down from the Concentration Account to fund the check or wire, and all cash deposited into each Property’s Operating Account or lockbox accounts will be automatically swept up to the Concentration Account on a daily basis.

(2)    Notwithstanding the preceding, if (a) an Owner is not a wholly owned subsidiary of the REIT or OP and its governing documents so require, or (b) the payments in respect of a Property are required by a lender to be made into a lockbox account, or (c) if the payments in respect of a Property are required to be handled otherwise by a contractual restriction agreed to by Owner, then such requirements shall be followed by PECO following written notice thereof by Owner.  Funds released from any such lockbox account or other arrangement to the custody of the Owner shall otherwise follow the above procedures.

(3)    PECO will establish on behalf of the Owner for each Property an operating account (an “Operating Account”) at a bank to be agreed upon in writing by Owner upon receipt of a fully-executed Property Addendum and a W9 completed by the Owner.  The signature card for the Operating Account shall indicate that PECO is dealing with the Operating Account as a fiduciary of the Owner. The Operating Account and all funds therein shall at all times be the property of the Owner.  The Owner shall have electronic banking system access to the Operating Account which shall permit it to obtain account information and make withdrawals from the Operating Account.  

(4)    Notwithstanding anything to the contrary contained herein, the Owner may direct payments or deposits received by PECO or payments or transfers from the Operating Account for a Property to deviate from the above procedures by a written request to PECO.  In such event, PECO shall provide the Owner with all information necessary to effect such deposits, transfers or payments.

(5)    If required by state law, PECO will deposit security deposits and/or advance rentals in separate accounts in the name of the Owner at the financial institution designated by Owner with respect to the applicable Property.  

(6)    PECO agrees to pay all invoices directly from the Operating Account unless directed otherwise by the Owner.

(7)    On or before the 25th day of each month, PECO shall prepare and submit an invoice to the Owner accompanied by a computation of the fees and expense reimbursements due to PECO in accordance with this Agreement.  The Owner shall have the right to review such invoice and obtain any supporting documentation with respect thereto from PECO.  

4

To the extent that the Owner believes the computation provided by PECO is inconsistent with the computation permitted hereunder, the Owner and PECO shall work together in good faith to reach a computation of such fees which is reasonably agreeable to both parties.

(8)    Without in any way limiting the foregoing, (i) PECO shall not commingle its funds or property or the funds or property of any other entities for which it provides services with any other funds or property of Owner, and (ii) PECO shall deposit amounts relating to a Property in the respective Property’s Operating Account within one (1) business day of receipt.  PECO shall have no proprietary interest in the Clearing Account or any Operating Account, or in any other account authorized hereby, and all sums collected by PECO relating to the Properties and all sums placed in such account or accounts will be the property of the Owner and to the extent not yet deposited shall be held in trust by PECO for the Owner.  

(C)    Subject to the terms of this Agreement relating to allocation of expenses, pay fees, charges, expenses and commissions of independent contractors, architects, engineers, subcontractors, suppliers which contract with PECO and PECO utilized in the management, operation, maintenance or repair of the Properties, subject to PECO’s review of same to confirm accuracy and agreement with same.

(D)    Owner expressly authorizes PECO to promptly and diligently enforce the Owner’s rights under any tenant leases affecting any Property, including without limitation taking the following actions where appropriate: (i) with the Owner’s prior written consent: (a) terminating tenancies, (b) instituting and prosecuting actions, and evicting tenants, (c) settling, compromising and releasing such actions or suits or re-instituting such tenancies, and (d) recovering rents and other sums due by legal proceedings in a court of general jurisdiction; and (ii) without the Owner’s prior written consent:  (a)  in a magistrates court or other court of special jurisdiction as applicable, signing and serving such notices as are deemed necessary by PECO, and (b) recovering rents and other sums due by legal proceedings in a magistrates court or similar jurisdiction, in each case PECO shall promptly notify the Owner of such action in writing. If authorized by the Owner, PECO shall consult an attorney for the purpose of enforcing the Owner’s rights or taking any such actions and the Owner shall have the right to designate counsel for any matter and to control all litigation affecting or arising out of the operation of any Property. PECO shall keep the Owner informed of any dissatisfaction with the law firm or such services or the reasonableness of the cost thereof.

(E)    Prepare and maintain routine and customary financial and business books and records for Owner and the Properties and to employ and supervise outside accountants for preparation of income and other tax returns and specialty accounting services for Owner and the Properties.  The preparation of income and other tax returns and the performance of such specialty accounting services shall be supervised by PECO but will be completed at Owner’s expense.  PECO will use the accrual method of accounting in accordance with GAAP, with such policies as are to be determined by management subject to Owner’s determination (including without limitation, capitalization policies, depreciation and amortization policies, and such other accounting policies as Owner may direct from time to time).

5

(F)    Maintain fixed asset accounting detail and related depreciation.

(G)     PECO shall prepare and submit to Owner a proposed operating and capital budget, including an itemized statement of the estimated receipts and disbursements in reasonable detail, which shall include, without limitation, reasonable detail as to employee expenses to be reimbursed to PECO for the operation, repair and maintenance of the Properties (the “Budget”) and a marketing and leasing plan on the Properties (a “Plan”) (assuming PECO is retained as leasing agent), in each case for the calendar year immediately following such submission.  Each Budget and Plan will be in the form approved by the Owner prior to the date thereof.  A draft Budget and, as applicable, Plan for each Property shall be submitted to Owner on or prior to October 31 of the year preceding the January 1 of the year to which such budget shall apply.  Owner shall have 21 days after receipt thereof within which to approve or reject in writing such Budget and, as applicable, Plan, any such rejection to be accompanied by a reasonably detailed explanation of such rejection.  PECO shall then submit a revised draft Budget and, as applicable, Plan to Owner within 10 days thereafter.  Owner shall have 10 days after receipt thereof to approve or reject the same in writing, any such rejection to be accompanied by a reasonably detailed explanation of such rejection.  The foregoing process shall then repeat with 10 days between receipt and revision, on PECO’s end, and receipt and acceptance or rejection on Owner’s end, until each Budget and, as applicable, Plan has been approved.  If the parties cannot come to agreement on a Budget and, as applicable, Plan for a Property, PECO shall operate the applicable Property on the Budget and, as applicable, Plan most recently approved by Owner.  To the extent any expenditure to be made by PECO shall exceed the applicable line item in such prior year’s Budget by 5% or more, the same shall require Owner’s prior written consent, provided that, excluded from the foregoing expenditures requiring such consent shall be expenditures related to snow and ice removal, electricity, insurance premiums and emergency items outside of the control of PECO.  PECO shall provide supporting information reasonably requested by the Owner in connection with their review of any Budget or Plan submitted by PECO for their review.

PECO shall implement the Budget and Plan and use its commercially reasonable efforts to ensure that the actual cost of operating the Properties shall not exceed the Budget.  The Budget shall constitute an authorization for PECO to expend necessary monies to manage and operate the Properties in accordance with the Budget and subject to the provisions of this Agreement until a subsequent Budget is approved.  The approval of non-recurring costs and capital improvements in the Budget and Plan shall constitute an authorization for PECO to collect bids for the expenditure and present a final recommendation to the Owner for expenditure of monies to implement such items called for in the Budget and Plan.

Without affecting any other limitation imposed by this Agreement and except as may be expressly provided to the contrary elsewhere in this Agreement, PECO shall secure the prior written approval of Owner prior to incurring any liability or obligation for any item in excess of $10,000 not reflected on the Budget or the Plan approved in writing by Owner except with respect to emergency items as described in this subsection (G) or unless another threshold with respect to any matter is specified elsewhere in this Agreement or in a written directive or authorization of Owner, in which case the threshold for such matter shall be as so set forth.

6

(H)    Pay wages, salaries, commissions and employee benefits of all On-Site Personnel including, without limitation, workers’ compensation insurance, social security taxes, unemployment insurances, other taxes or levies now in force or hereafter imposed, any claims that may arise under the employee health or worker’s compensation programs maintained by PECO, employee-related overhead expenses and associated administrative charges with respect to any such On-Site Personnel (collectively, “Employee Benefits”), all of which shall be deemed an operating expense of the Properties and shall be in accordance with approved Budgets.  The number and classification of employees serving each Property shall be as determined by PECO to be appropriate for the proper operation of each Property.

(I)    Deliver to Owner, within 15 business days after the end of each month during the term hereof, the monthly reporting package detailed on Exhibit A attached hereto which shall relate to the Properties and the immediately preceding calendar month or any portion thereof.  Such reporting package shall be made on an accrual basis and shall include all such transactions, whether or not reimbursable pursuant to the provisions hereof.  

(J)    Deliver to Owner, within 45 days after the end of each calendar quarter during the term hereof, the quarterly reporting package detailed on Exhibit B attached hereto which shall relate to the Properties and the immediately preceding calendar quarter or any portion thereof.  Such reporting package shall be made on an accrual basis and shall include all such transactions, whether or not reimbursable pursuant to the provisions hereof.  

(K)    Deliver to Owner, within 75 days after the end of each calendar year during the term hereof, the annual reporting package detailed on Exhibit C attached hereto which shall relate to the Properties and the immediately preceding calendar year or any portion thereof.  Such reporting package shall be made on an accrual basis and shall include all such transactions, whether or not reimbursable pursuant to the provisions hereof. 

(L)    File real, personal and ad valorem (real or personal) property tax returns required to be filed by Owner with respect to the Properties and pay all such ad valorem taxes and assessments out of the operating accountants of each of the Properties.  PECO shall also utilize, on Owner’s behalf, the services of independent tax consultants and attorneys to appeal or challenge any real, personal and ad valorem (real or personal) property taxes and PECO shall manage such process on Owner’s behalf by supplying needed information and making required payments out of the operating funds for each Property or the separate funds of Owner.  

(ii)    For Operations. PECO shall use commercially reasonable efforts to operate in accordance with the Budget and Plan unless otherwise specifically approved in writing by Owner and except in the case of emergencies:  

(A)    PECO will investigate, hire, train, pay, supervise and discharge the On-Site Personnel necessary to maintain and operate the Properties including, without limitation, property managers who shall have experience and education satisfactory to the Owner.  Such personnel shall in every instance be agents or employees of PECO and not of the Owner, but 

7

Owner shall have the right to approve via the annual budget process, the compensation of PECO’s personnel for which PECO has the right to be reimbursed hereunder.  The Owner shall have no right to supervise or direct such agents or employees.  

PECO, at PECO’s sole cost and expense, shall maintain during the term of this Agreement a bond or applicable insurance covering PECO and all persons who handle, have access to or are responsible for the Owner’s monies, in an amount and form reasonably acceptable to the Owner.  PECO shall provide the Owner with a certificate or other satisfactory documentation evidencing the existence and terms of such bond(s) upon execution of this Agreement.

PECO, shall supervise and at Owner’s cost and expense, shall retain, to the extent such services are not sufficiently provided by On-Site Personnel, but in accordance with the Budget, independent contractors, subcontractors, and suppliers to provide for the management, maintenance, repair and operation of the Properties as well as security functions.  

(B)    If commercially reasonable within the geographic area in which a Property is located, to obtain not less than three (3) competing bids for, contract with and supervise onsite management of, contractors.

(C)    Assist in coordinating the opening and closing of the businesses of tenants, including but not limited to obtaining of insurance and signage approval.

(D)    In accordance with the operating budget, purchase necessary supplies and equipment required for the proper operation, maintenance, repair and restoration of the Properties.

(E)    Make or cause to be made repairs, replacements, renovations and capital improvements on the Properties.

(F)    Contract and pay charges for utilities used in the operation of the Properties, including without limitation water, electricity, gas, telephone and sewerage services unless carried or covered under the respective tenant’s name.

(G)    Contract for and maintain such policies of commercial general liability and bodily injury and property damage insurance with respect to the Properties as are acceptable to Owner.  

(H)    Advertise the Properties by such means and media and at such costs as are in accordance with the Budget and Plan and as PECO shall deem appropriate (and at PECO’s expense, except as set forth in the last sentence of this subsection (H)) to implement an effective leasing program for the Properties on a local and national basis, with no less effort and professionalism than that used for the advertising programs employed by PECO with respect to its own portfolio of properties.  This advertising shall include attendance and facilities for ICSC and related leasing events.  Notwithstanding the foregoing, to the extent Owner shall request specific 

8

advertising that differs from or is in addition to PECO’s planned approach, the incremental cost of such specific advertising shall be borne by Owner.

(I)    Assist in securing leases with temporary tenants or licensees for use of the Properties.

(J)    Actively promote and market the Properties to potential tenants, current tenants and the general community.

(K)    Conduct complete inspections of the Properties as is prudent to determine that the same are in good order and repair, but no less frequently than once per calendar quarter during the term of this Agreement.  

(L)    Forward to Owner promptly upon receipt all notices of violation or other notices from any governmental authority, and board of fire underwriters or any insurance company, and shall make such recommendations regarding compliance with such notice as shall be appropriate.  

(M)    Maintain business-like relations with the tenants of the Properties and respond promptly to tenant complaints in a prudent, businesslike manner.  PECO shall maintain a record of all written tenant complaints for no less than one year and PECO’s response to such complaints which record shall be available for review by Owner.

(N)    Analyze all bills received for services, work and supplies in connection with the maintaining and operating the Properties, issue payment from the Property Owner for all such bills and any other amount payable in respect to the Properties.  PECO shall use reasonable commercial efforts to pay all bills within the time required to obtain discounts, if any.  Owner may from time to time request that PECO forward certain bills to Owner promptly after receipt, and PECO shall comply with any such request.  PECO will ensure timely 1099 reporting to the IRS, with 1099’s filed under the appropriate Property Owner’s  name and  taxpayer identification number (TIN), listing such Owner as the “payer.”  PECO will provide annually a signed declaration indicating compliance with 1099 reporting; PECO will provide this declaration to Owner with the February Reporting Package.  Penalties for misfilings as a result of PECO’s negligence are not to be charged to the property, but are payable by PECO.  

(iii)    Other:

(A)    In accordance with the Budget or as otherwise approved in writing by Owner, employ, in-house or outside attorneys, at Owner’s expense, to handle any legal matters involving the Properties.  It is understood that PECO employs an in-house legal department which will perform some or all of the legal services described herein.  To the extent any employee of such legal department performs any of such services, the cost of such legal department employee, based upon approved Budgets and Plans and consistent with the hourly rates charged internally by PECO to the other property funds for which it performs management and leasing services, shall be deemed an operating expense of the Properties and shall be reimbursable by Owner.  

9

(B)    Perform leasing analysis and credit underwriting with respect to prospective tenants (and subtenants and assignees); prepare leases and other tenant related documents; and engage in a competitive construction bidding process for lease-related construction projects expected to exceed $25,000 not otherwise within the duties of a construction manager (as, for example, pursuant to Section 5(c) below).

(C)    Take such other action and perform such other functions as PECO reasonably deems advisable or necessary for the efficient and economic management, operation and maintenance of the Properties.

(b)    PECO’s duties as leasing agent for any of the Properties indicated on a Property Addendum as being subject to the leasing agent services as provided herein and subject to the Budget and Plan include the following:

(i)    Leasing Functions.    PECO will coordinate and negotiate the leasing of the Properties using reasonable commercial efforts to secure executed leases (both new and renewal) from qualified tenants for available space in the Properties.  Such leases must be consistent with form and terms approved by Owner unless a tenant requires use of its own lease form.  PECO shall be responsible for the hiring of all leasing agents  as necessary for the leasing of the Properties, to work with outside brokers and leasing agents, and otherwise to oversee and manage the leasing process on behalf of Owner.  PECO’s duties in this regard shall include, without limitation, (1) the preparation and distribution of listings to potential tenants and/or their representatives and to reputable and active real estate agents; (2) the supplying of sufficient information to cooperating brokers and agents to enable them to promote the rental of the Properties, (3) to market and promote the Properties, (4) at all times to maintain and update a merchandising and leasing plan for each Property, and (5) to provide an updated leasing budget and leasing reforecast for the following twelve (12) month period.  Additionally, in connection with the budgeting process referred to above, PECO shall submit a yearly leasing budget for approval in accordance (and simultaneously) with the procedure set forth above for the approval of each Property’s budget by Owner.

(ii)    Advertising.    Owner authorizes PECO to advertise and to place signage on the Properties regarding the leasing, provided that such signage complies with all applicable governmental laws, regulations and requirements. PECO will provide a marketing package, aerial photographs, demographic reports, site plans, signage and a two-sided flyer for each Property at PECO’s expense consistent with Section 5(a)(ii)(H). Any additional advertising and promotion requested by Owner will be done at Owner’s expense pursuant to a program and budget agreed upon by Owner and PECO.

(iii)    Other Actions.        PECO will take such other action and perform such other functions as PECO or Owner deems reasonably advisable or necessary for the efficient and economic leasing of the Properties.  

10

(c)    PECO’s duties as construction manager for the Properties shall be in accordance with a capital budget established by Owner and PECO prior to the commencement of construction activities and shall include the following:

(i)    General.    PECO shall secure or assist in securing licenses, registrations, or permits required by law and shall comply with ordinances, laws, orders, codes, rules, and regulations pertaining to building improvements and/or the services described herein.  PECO shall secure lien waivers and affidavits and properly file, to the extent required, terminations of notices of commencement prior to payment to contractors.

(ii)    Bidding.    For all projects estimated to cost more than $250,000.00, PECO shall obtain bids from at least three outside contractors, unless the selected contractor is otherwise approved by Owner.  PECO shall select the low bid unless it has supplied Owner with a reasonable justification in writing for the selection of a bidder other than the low bidder (e.g., PECO determines in its reasonable discretion that the bidder to be selected is more likely to complete the job on time, with commercially reasonable workmanship and in the most efficient manner).  PECO shall manage the bidding process consistent with the manner in which it manages bidding for projects within its own portfolio of properties.  

(iii)    New Construction, Tenant Improvements, and Redevelopments.  PECO will perform the following duties for construction of Improvements on undeveloped land (“New Construction”) and for construction of Improvements that are to be made at the direction of, or in conformity with lease obligations to, tenants (“Tenant Improvements”) or for the improvement to Improvements that change the size or nature of such Improvements or for the redevelopment of Improvements (collectively, “Redevelopments”):

(A)    Provide updated and detailed project budgets to Owner.

(B)    Arrange for, coordinate, supervise and advise Owner with respect to the selection of architects, contractors, design firms and consultants, and the execution of design, construction and consulting contracts.

(C)    Review design documents, and drafts thereof, submitted by the architect or other consultants, and notify Owner in writing of any mistakes, errors or omissions that PECO observes in the documents and any recommendations it may have with respect to such mistakes, errors or omissions, provided PECO shall not in any manner be responsible for the accuracy, adequacy or completeness of such documents.

(D)    Evaluate and make recommendations to Owner concerning cost estimates prepared by others.

(E)    Review and evaluate proposed schedules for construction.

11

(F)    Procure subcontractors through a minimum of three quotes for any jobs estimated to involve in excess of $250,000 unless the selected contractor is otherwise approved by Owner.

(G)    Coordinate the work of subcontractors.

(H)    Monitor the progress of construction. 

(I)    Endeavor to work with the general contractor to identify any deficiencies in the work performed by subcontractors.

(J)    Provide Owner with monthly written status reports.

(K)    Advise Owner with respect to alterations and modifications in any design documents submitted by the architect or other consultants that may be in Owner’s interest, including obtaining advantages in terms of cost savings, scheduling, leasing, operation and maintenance issues and other matters affecting the overall benefit of the project.

(L)    Review and advise Owner on change order proposals and requests for additional services submitted to Owner.

(M)    Schedule, coordinate, and attend necessary or appropriate project meetings.

(N)    Monitor and coordinate punch list preparation and resolution by the subcontractors.

(O)    Make recommendations to Owner concerning, and monitor, the use of the site by subcontractors, particularly as it relates to staging and storage, ingress and egress, temporary signage, fencing, barricades, restrictions on hours of operation, safety considerations and similar considerations.

(P)    Coordinate, monitor, supervise and advise Owner with respect to preparation, execution, completion and filing of project-related documents, including, but not limited to, contracts, permit applications, licenses, certifications, zoning requirements, land use restrictions, governmental filings applicable to the project and any other similar documents.

(Q)    Review and advise Owner with respect to draw requests submitted on the project.

(R)    Upon completion of New Construction, Tenant Improvements, or Redevelopments review same to ensure that such Improvements have been completed in accordance with the specifications.  PECO shall cause the subcontractors to repair or replace any items that are determined deficient.

12

(S)    As instructed by Owner, perform additional related project management functions.

(T)    Collect warranties and operation manuals, certificates, guarantees, as-builts and any similar documentation for the benefit of Owner.

(iv)    New Construction and Redevelopments.  In addition, PECO will perform the following duties with respect to New Construction and Redevelopments:

(A)    Provide Owner with a budget for each Improvement to be built prior to beginning construction of the respective Improvement.  

(B)    Meet on a regular basis with Owner’s leasing agents and representatives of prospective tenants.

(C)    Arrange for, coordinate, supervise and advise Owner with respect to various development services prior to design and construction of the Project, including due diligence, site investigations, land use and zoning matters, and similar development services.

(v)    Tenant Improvements.  In addition, PECO will perform the following duties related to Tenant Improvements:

(A)    Arrange for and supervise the performance of all installations and improvements in space leased to any tenant which are either expressly required under the terms of a Lease of such space or which are customarily provided to tenants.

(B)    Meet with tenants and prospective tenants and their architects, engineers, consultants and contractors to facilitate design and construction of leasehold improvements.

(C)    Maintain separate files as to each tenant, and thereby document the entire design and construction process for each tenant.

(D)    Compile and disseminate such data regarding each tenant as Owner may reasonably require.

(vi)    Duties with Respect to Tenant Directed Improvements.    PECO will supervise and facilitate tenant installations performed by the tenant and/or tenant’s contractors, including as such is required under the tenant’s lease:

(A)    Review and evaluate lease exhibit language that identifies the scope and nature of tenant construction of the improvements.

(B)    Review tenant construction documents for compliance with landlord criteria and requirements applicable to the improvements.

13

(C)    Review and evaluate proposed schedules for tenant construction.

(D)    Coordinate delivery of shell space to tenants as required by the tenant’s lease.

(E)    Monitor the progress of tenant construction including but not limited to compliance with scheduling requirements, compliance with rules and regulations of the Property, verify that tenant has obtained proper permits, etc., coordinating requests for tenant improvement allowance draws.

(F)    Maintain appropriate files and records as to each project documenting the design and construction process for each tenant in a manner consistent with PECO’s record retention guidelines.

(vii)    Duties with Respect to All Improvements.    PECO will supervise all Improvement projects, such supervision to include, but not be limited to, preparation of budgets, plans, bidding, subcontractor selection, material selection, job supervision, collection of lien waivers, sworn statements, affidavits and the like.  PECO shall require such lien waivers, sworn statements, affidavits and similar documentation as a condition to disbursement.

(d)    Other.    PECO shall in all events comply with the reasonable requests of Owner related to property management of, leasing of, and construction management of the Improvements to be made to, the Properties.  Owner shall maintain sufficient funds in an account or accounts so that PECO will have funds available to pay all obligations contemplated hereunder when due.  Under no circumstances shall PECO have any obligations or duty to advance funds to or for the account of Owner.

(e)    Ownership Agreements.  Owner agrees to obtain and review copies of all (1) agreements of limited partnership, joint venture partnership agreements and operating agreements of Owner and its affiliates as well as the articles of incorporation, bylaws, and registration statement on Form S-11 (no. 333-164313) of REIT, including all prospectus supplements and post-effective amendments thereto (collectively, the “Ownership Agreements”) and (2) mortgages on all Properties and inform PECO of any restrictions relating to property use arising therefrom.  PECO will use reasonable care to avoid any act or omission which, in the performance of its duties hereunder, in any way conflicts with the terms of the Ownership Agreements or the mortgages in the absence of the express direction of the REIT’s board of directors, and PECO shall promptly notify Owner if any such conflict arises.

(f)    Periodic Meetings.  As reasonably required by Owner, PECO its personnel or contractors engaged or involved in the management, operation, leasing or construction management of the Properties shall meet to discuss the historical results of operations, to consider deviations from any budget, and to discuss any other matters so requested by the Owner upon reasonable notice from Owner.

14

6.    Compensation and Expense Reimbursement.  

(a)    For each Property for which PECO provides property management services, Owner shall pay PECO a monthly management fee equal to four percent (4.0%) of the Gross Receipts (as defined below) for that given month, payable from that month’s receipts.  “Gross Receipts” means (i) all fixed and minimum rent, percentage rent and license fees paid by tenants and other occupants of each Property, (ii) the profit of Owner derived from the sale of electricity (i.e., the spread between the wholesale and retail prices of electricity that is re-sold to tenants of the Properties), utilities and heating, ventilation and air conditioning to tenants and other occupants of each Property, (iii) all amounts paid by tenants and other occupants of each Property for common area maintenance, real estate taxes, insurance, interest and any other payments of any nature (including attorneys’ fees and late fees) made by any such tenants or other occupants, and (iv) proceeds of rent insurance  

(b)    For each Property for which PECO provides leasing services, Owner shall pay PECO leasing fees at market rates as specified on the Property Addendum for such Property.

(c)    For each Property for which PECO provides construction management services, PECO shall be entitled to fees for tenant and tenant directed improvements, capital improvements and construction management services, all at market rates for the geographic area in which the applicable Property is located, as may be more fully set forth on the applicable Property Addendum or another writing executed by PECO and Owner.  

(d)    PECO will pay such other reimbursable expenses and costs as Owner has approved and deems advisable or necessary for the efficient and economic management and leasing of the Properties through its annual budgets or as otherwise provided for in this Agreement (e.g., for marketing or leasing programs that exceed in scope that which PECO would normally utilize for its own properties, as provided for in Sections 5(a)(ii)(H) and 5(b)(ii)).  Owner shall reimburse PECO for such expenses, which shall include, to the extent included in the applicable Property budgets or a general property management and leasing budget to be agreed upon, costs of (i) On-Site Personnel, including wages, salaries, commissions and Employee Benefits of such On-Site Personnel, (ii) roving maintenance personnel to the extent needed at the Properties from time to time, (iii) travel and entertainment, (iv) printing and stationery, (v) advertising, (vi) marketing, (vii) signage, (viii) long distance phone calls and (ix) other direct expenses.  The costs of On-Site Personnel shall be allocated to each Property by dividing the rentable square feet at each Property by the aggregate rentable square feet of all of the Properties for which each employee provides services and then multiplying the resulting quotient by the individual cost of each employee, unless Owner and PECO agree in writing to another basis for such allocation.  The costs of roving maintenance personnel shall be charged to each Property at a reasonable hourly or monthly rate pre-approved by Owner for the actual and reasonably necessary services provided by such roving maintenance personnel at each Property.  Owner shall reimburse PECO for Employee Benefits of On-Site Personnel in an amount equal to 20% of the total compensation payable to each employee.  Such Employee Benefits reimbursed to Owner shall not be reconciled to the actual amounts incurred by Owner for the Employee Benefits of each employee such that Owner will not be required to 

15

reimburse PECO any additional amounts to the extent that the amounts reimbursed to PECO for Employee Benefits of an employee is less than the actual amount of Employee Benefits paid by PECO to such employee, and PECO will not be required to reimburse Owner to the extent the Employee Benefits paid by PECO to an employee are less than the amount of Employee Benefits reimbursed by Owner to PECO for such employee.

7.    Insurance.    PECO shall obtain and keep in full force and effect at Owner’s expense insurance (1) on the Properties, and (2) on activities at the Properties against such hazards as Owner and PECO shall deem appropriate and as may be required under any mortgage or other loan documents binding upon Owner. In any event, PECO shall procure, for the Properties for which PECO is property manager, insurance sufficient to comply with the leases and the Ownership Agreements.  All liability policies shall provide sufficient insurance satisfactory to both Owner and PECO and shall contain waivers of subrogation for the benefit of PECO and the applicable Owner.

(a)    PECO shall obtain and keep in full force and effect, in accordance with the laws of the state in which each Property is located, worker’s compensation insurance covering all employees of PECO at the Properties and all persons engaged in the performance of any work required hereunder.  PECO shall also obtain and keep in full force and effect, in accordance with the laws of the state in which each Property is located, employer’s liability, employee theft, commercial general liability, and umbrella insurance, and PECO shall furnish Owner certificates of insurers naming Owner as co-insureds and evidencing that such insurance is in effect and that insurer will provide directly to Owner no less than 30 days’ notice of any cancellation or non-renewal.  If any work under this Agreement is subcontracted as permitted herein, PECO shall include in each subcontract a provision that the subcontractor shall also furnish Owner, as appropriate, with such a certificate evidencing coverage (and any other coverage PECO deems appropriate in the circumstances) and the naming of Owner as co-insured and evidencing that such insurance is in effect and that insurer will provide directly to Owner no less than 30 days’ notice of any cancellation or non-renewal, as well as indemnification as is customary.  The cost of such insurance procured by PECO shall be reimbursable to the same extent as provided in this Agreement.

(b)    PECO shall cooperate with and provide reasonable access to the Properties to representatives of insurance companies and insurance brokers with respect to insurance which is in effect or for which application has been made.  PECO shall use its good faith efforts in a commercially reasonable manner to comply with all requirements of insurers.

(c)    PECO shall promptly investigate and shall report in detail to the applicable insurance carriers all accidents, claims for damage relating to the ownership, operation or maintenance of the Properties, and any damage or destruction to the Properties and the estimated costs of repair thereof, and shall prepare for approval by Owner all reports required by the applicable insurance company in connection with any such accident, claim, damage, or destruction.  Owner shall reimburse PECO’s third party costs in connection therewith.  PECO shall provide a  report summarizing all claims to Owner on a monthly basis.  PECO is authorized to settle any claim against an insurance company arising out of any policy and, in connection with such claim, to execute proofs of loss and adjustments of loss and to collect and provide receipts for loss proceeds using commercially reasonable good faith efforts.

16

8.    Liability of PECO.    PECO shall not be liable for any errors in judgment or for mistakes of fact or of law or for anything which it may in good faith do or refrain from doing, except in the case of gross negligence, fraud or willful misconduct.

9.    Indemnity.    Owner shall indemnify PECO and its managers, employees and officers against and agrees to defend, protect, hold and save them free and harmless from any liability or expenses (including reasonable attorney’s fees and court costs) arising out of injuries or damages to persons or property by reason of any cause relating to the Properties, except to the extent caused by the gross negligence, fraud or willful misconduct and which is not otherwise covered by insurance held by Owner.  Owner shall name PECO as an “additional insured” or “co-insured” on any and all liability insurance policies for the Properties.  PECO shall indemnify Owner and its employees and officers against and agrees to defend, protect, hold and save them free and harmless from any liability or expenses (including reasonable attorney’s fees and court costs) arising out of injuries or damages to persons or property by reason of any cause relating to the Properties caused by the gross negligence, fraud or willful misconduct, which is not otherwise covered by insurance held by Owner.

10.    Termination.    This Agreement may be terminated by either party upon thirty (30) days’ written notice, in toto or only with respect to any Property, provided such termination shall not affect any rights or obligations accrued to either party prior to termination (subject to any offsetting claims for damages), including, but not limited to payment of property management fees, leasing fees and construction management fees earned to the date of termination (provided that, if termination occurs before a construction project is completed, the construction management fee to be earned shall be prorated based upon the reasonably estimated portion of the applicable project that had been completed up to the date of termination).  If this Agreement is terminated, only commissions and management fees with respect to any Properties that are subject to such termination and that have accrued prior to the termination date shall be due to PECO.  Notwithstanding anything to the contrary contained in this Agreement, if either Owner or PECO defaults in performing any of its obligations under this Agreement, the other party may terminate this Agreement effective upon delivery of notice of such default.  The indemnification obligations of the parties hereunder shall survive the expiration or termination of this Agreement.  PECO’s obligations under this Agreement for physical property management, leasing and construction management may, at Owner’s election, terminate as to any particular Property upon its sale, provided that PECO’s obligations for the performance of accounting and other so-called “back office functions” shall terminate only at such time as a final tax return with respect to the applicable Property has been prepared and filed and such customary and ordinary information related to the Property or Properties has been provided to Owner.  PECO shall cooperate subsequent to any termination of this Agreement as to a particular Property to provide final property reconciliations and other reports as reasonably requested by Owner.

11.    PECO’S Obligations After Termination.    Upon the termination of this Agreement, PECO shall have the following duties:

17

(a)    PECO shall deliver to Owner, or its designee, all books and records (including data files in magnetic or other similar storage media but specifically excluding any licensed software) with respect to the Properties.

(b)    PECO shall transfer and assign to Owner, or its designee, or terminate upon Owner’s direction, all service contracts (designated by Owner for transfer and assignment) and personal property relating to or used in the operation and maintenance of the Properties, except personal property paid for and owned by PECO. PECO shall also, for a period of sixty (60) days immediately following the date of such termination (with respect to this entire Agreement or any Property terminated as being subject to this Agreement), make itself available to consult with and advise Owner, or its designee, regarding the operation, maintenance and leasing of the Properties at no additional cost to Owner.

(c)    PECO shall render to Owner an accounting of all funds of Owner in its possession and shall deliver to Owner a statement of Management Fees claimed to be due PECO and shall cause funds of Owner held by PECO relating to the Properties to be paid to Owner or their designees and shall assist in the transferring of approved signatories on all Accounts.

12.    No Obligation to Third Parties.    None of the obligations and duties of PECO under the Agreement shall in any way or in any manner be deemed to create any obligations of PECO to any third party with the exception of Owner.

13.    Additional Services.    The services contemplated hereunder are normal and customary property management, leasing and general and construction management services.  If PECO is required or requested to perform additional services beyond the scope of this Agreement, then Owner shall pay PECO fees for these additional services at market rates as mutually agreed upon in advance by the parties.

14.    PECO'S Action on Tenant’s Default.    If the reasonably expected costs are less than a threshold to be agreed upon by PECO and Owner with respect to each Property (or with respect to leases or contracts less than certain thresholds with respect to each Property), PECO shall have the right, in its own name or in the name of Owner, to take any and all actions, including distraint, which PECO deems advisable and which Owner shall have the right to take, in the event of any tenant's breach of any covenant, provision or condition binding upon such tenant under its lease with Owner.  Nothing in this paragraph shall be deemed to require PECO to institute legal action against any tenant.  If the reasonably expected costs exceed the agreed upon thresholds, then Owner shall only be responsible for such costs if it pre-approves such actions.  In addition, if Owner desires to commence legal action notwithstanding PECO’s recommendation to the contrary, it shall pay for all costs and reasonable attorneys' fees in connection therewith.

15.    Binding Effect.    This Agreement and all the provisions hereof shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective successors and assigns.

18

16.    Entire Agreement.    This Agreement supersedes all agreements previously made between the parties relating to its subject matter.  There are no other understandings or agreements between them.

17.    Assignment.    PECO may delegate partially or in full its duties and rights under this Agreement but only with the prior written consent of Owner. Except as provided in the immediately preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns.

18.    Amendments.    This Agreement may be amended only by an instrument in writing signed by the party against whom enforcement of the amendment is sought.

19.    Other Business.    Nothing herein contained shall prevent PECO from engaging in other activities or business ventures, whether or not such other activities or ventures are in competition with Owner or the business of Owner, including, without limitation, property management activities for other parties (including other REITs) and the provision of services to other programs advised, sponsored or organized by PECO or its affiliates or third parties; nor shall this Agreement limit or restrict the right of any director, officer, employee, or stockholder of PECO or its affiliates to engage in any other business or to render services of any kind to any other partnership, corporation, firm, individual, trust or association. PECO may, with respect to any investment in which the Owner is a participant, also render advice and service to each and every other participant therein. PECO shall report to the board of directors of REIT the existence of any condition or circumstance, existing or anticipated, of which it has knowledge, which creates or could create a conflict of interest between PECO’s obligations to Owner and its obligations to or its interest in any other partnership, corporation, firm, individual, trust or association.

20.    Notices.    All notices under this Agreement shall be in writing and delivered personally or mailed by certified mail, postage prepaid, addressed to the parties at their last known addresses.   All notices, approvals, consents and other communications hereunder shall be in writing, and, except when receipt is required to start the running of a period of time, shall be deemed given when delivered in person or on the fifth day after its mailing by either party by registered or certified United States mail, postage prepaid and return receipt requested, to the other party, at the addresses set forth after their respect name below or at such different addresses as either party shall have theretofore advised the other party in writing in accordance with this Section.

19

	
		
	OP:

REIT:

With a copy to:

	Phillips Edison – ARC Shopping Center Operating Partnership, L.P.,
11501 Northlake Drive
Cincinnati, OH 45249
Attention:  Co-President

Phillips Edison – ARC Shopping Center REIT Inc.
11501 Northlake Drive
Cincinnati, OH 45249
Attention:  Co-President

DLA Piper LLP (US)
4141 Parklake Drive, Suite 300
Raleigh, NC 27612
Attention:  Robert Bergdolt, Esq.

	PECO:

With a copy to:

	Phillips Edison & Company Ltd.
11501 Northlake Drive
Cincinnati, OH 45249
Attention:  Chief Operating Officer

Phillips Edison & Company Ltd.
222 South Main Street, Suite 1730
Salt Lake City, Utah 84101
Attention:  General Counsel

21.    Non-Waiver.    No delay or failure by either party to exercise any right under this Agreement, and no partial or single exercise of that right, shall constitute a waiver of that or any other right, unless otherwise expressly provided herein.

22.    Headings.    Headings in this Agreement are for convenience only and shall not be used to interpret or construe its provisions.

23.    Severability.    If any term, covenant or condition of this Agreement or the application thereof to any Person or circumstance shall, to any extent, be held to be invalid or unenforceable, then the remainder of this Agreement, or the application of such term, covenant or condition to persons or circumstances other than those as to which it is held to be invalid or unenforceable, shall not be affected thereby, and each term, covenants or condition of this Agreement shall be valid and shall be enforced to the fullest extent permitted by law.

24.    Governing Law.    This Agreement shall be construed in accordance with and governed by the laws of the State of Ohio. Any action to enforce this Agreement or an action for a breach of this Agreement shall be maintained in a binding arbitration proceeding before the American Arbitration Association in Cincinnati, Ohio.

25.    Counterpart.    This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

20

26.    Audit Right.  PECO shall cooperate with the REIT’s independent auditors with respect to the annual audit of the REIT for the purpose of expressing an opinion on the financial statements of the REIT (the “Annual REIT Audit”).  In addition, the REIT shall have the right to conduct an audit of PECO’s books and records solely with respect to the fees and expense reimbursements relating to the services provided pursuant to this Agreement (the “Fee Audit”).   The REIT may conduct the Fee Audit by using its own internal auditors or by employing independent auditors no more than once per year.  Costs associated with conducting such Fee Audits by internal or independent auditors, and costs of the Annual REIT Audit, shall be borne by REIT.  If any Fee Audit conducted by or on behalf of REIT reveals a discrepancy in excess of ten percent (10%), and greater than $10,000, for the aggregate fees and expense reimbursements payable during the period under audit pursuant to the Fee Audit, PECO shall be responsible for the reasonable expenses of such audit.

Signatures on next page.

21

 

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

On behalf of “OWNER”:

OP:

PHILLIPS EDISON – ARC SHOPPING CENTER OPERATING PARTNERSHIP, L.P.,
a Delaware limited partnership

By:    PHILLIPS EDISON SHOPPING CENTER OP GP LLC,
a Delaware limited liability company
General Partner

By:                        
R. Mary Addy, Co-President

REIT:

PHILLIPS EDISON – ARC SHOPPING CENTER REIT INC.
a Maryland corporation

By:                        
R. Mark Addy, Co-President

PECO:
 
PHILLIPS EDISON & COMPANY LTD.,
an Ohio limited liability company

By:                            
Robert F. Myers, Chief Operating Officer

EAST\76294527.2 

EXHIBIT A

MONTHLY REPORTING PACKAGE

For the current month and year to date, statements presenting, on a comparative basis, actual to budget (and/or forecast or other projections), including variance explanations for material variances: 
 
		
	•
	Executive Summary (operations, leasing, capital, tenant/market issues, other)

		
	•
	Balance Sheet

		
	•
	Income Statement

		
	•
	Aged Receivables and Delinquencies Report

		
	•
	Rent Rolls (as requested in writing by Owner)

		
	•
	Month to date and year to date variance report with explanations (budget to actual and actual to previous year actual)

		
	•
	List of any material accrual adjustment that may have been missed on the last business day of each month

		
	•
	Leasing Update

		
	•
	Consolidated Financial Statements

		
	•
	Reforecast operating projections and cash flow

		
	•
	Any additional reports that Owner shall reasonably request

23

EXHIBIT B

QUARTERLY REPORTING PACKAGE

		
	•
	All items in the monthly reporting package.

		
	•
	Variance reports with explanations compared to budget and same period prior year.

		
	•
	Copy of cash receipts ledger entries for such period, if requested.

		
	•
	The originals (or copies, as Owner may request) of all contracts entered into by PECO on behalf of Owner during such period, if requested.

		
	•
	Consolidated financial statements.

		
	•
	Such other reports as may be required by Owner.

24

EXHIBIT C

ANNUAL REPORTING PACKAGE

•All items in the quarterly reporting package which shall include annual operating statements and a list of variances and explanations of material variances (budget to actual and actual to previous year actual).
•All information required for tax filings, as determined by Owner.
•Certifications of assessment, testing and compliance with internal controls.
Any other reports reasonably requested by Owner.

25

 

Form of Property Addendum
 
PROPERTY DESCRIPTION:

	
		
	Property Name:
	

	Street Address:
	

	City, State, Zip Code:
	

	County:
	

	Owner Name:
	

	Owner Tax ID#:
	

	Tax Parcel ID #:

	 

SERVICES TO BE PROVIDED:

□     Property Management Services as specified in this Agreement with:

_____    No changes

_____    Changes as follows:  ________________________________________________
_________________________________________________________________
_________________________________________________________________
Threshold pursuant to Section 14:  _________________________________________________
_________________________________________________________________
_________________________________________________________________

Property Management Fees:
		
	□ 
	Property Management Fee: 4.0% of Gross Receipts, as specified in Section 6(a).

		
	□ 
	Property Management Fee (other calculation): __________________________________

________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

		
	□ 
	Leasing Agreement duties as specified in Section 5(b) of the Agreement except as specified below:

_____    No changes

_____    Changes as follows:  ________________________________________________
_________________________________________________________________
_________________________________________________________________
		
	□ 
	Leasing Agreement Fees:

		
	□ 
	New Lease Commission Percentage: ______ percent (____%) of the gross amount of all base rent under the first _______ (__) years of the primary term of said leases, plus ______ percent (____%) of the gross amount of all base rent under the next _______ (__) years of the primary term, payable [e.g., one-half] upon the full execution of the lease and [one-half] upon tenant opening for business.  

		
	□ 
	Notwithstanding the foregoing, for any new lease for over _________ square feet, the leasing commission shall be at a fixed rate of _______ Dollars ($______) per square foot of leasable area.  

		
	□ 
	Renewals:  For any renewal or extension of a lease (including the exercise of an existing lease option), PECO shall be paid: _______________________________

__________________________________________________________________
__________________________________________________________________
		
	□ 
	Expansions:    For each lease amendment or modification in which the tenant expands its premises, Owner will pay PECO a leasing commission of ______ percent (____%) of the gross amount of the base rent represented by such additional space under the balance of the then current term of the lease, plus ______ percent (____%) of the gross amount of all base rent represented by such additional space under any additional years of the primary term, payable [one-half] upon execution of the amendment or modification document and [one-half] upon the tenant opening for business from the expansion space.

		
	□ 
	Co-Brokers:    As leasing agent for the Properties, PECO may cooperate with independent real estate brokers or agents.  If PECO hires a co-broker in order to assist PECO in securing a tenant or if an opportunity is brought to PECO by an independent broker, the applicable leasing commission payable to PECO by Owner shall be increased by the lesser of (i) the amount of the fee owed to the co-broker or (ii) an amount equal to 50% of the applicable leasing commission payable to PECO by Owner as set forth above.  PECO shall be responsible for 

A-2

payment of the co-broker fee from the applicable leasing commission paid to PECO by Owner.  
		
	□ 
	Payment terms (if other than specified above):  ____________________

		
	□ 
	Construction Management Services as specified in Section 5(c) of the Agreement except as specified below.  In particular, the construction management will include the following (add attachments as necessary):

________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
		
	□ 
	Construction management Fees:

________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

Examples: 

	
		
	  ̈
	The Owner agrees to pay PECO a management fee in the amount of $                     within fifteen (15) days of acceptance of the Improvement by the Owner. 

 
	
		
	 ̈
	As payment for the services to be performed by the PECO hereunder, Owner shall pay the PECO a fee of                          ($                    ), to be paid on the first day of each month of the term of the project in equal monthly installments of                          ($                    ), plus reimbursable expenses referenced in this Agreement. 

 

A-3

	
		
	 ̈
	PECO agrees to collect and provide the Owner with invoices for the work completed on the Improvement on a monthly basis unless the Owner and PECO agree to a more frequent basis. Upon delivery of such invoices, the Owner will be solely responsible for promptly paying the company or companies performing the work. The contract form used by the Owner shall specify that PECO has no responsibility for payment. Reimbursable expenses as described in this Agreement shall be reimbursed to the PECO at cost plus ten percent (10%) and shall be billed on a monthly basis.

A-4

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00234-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00234-of-00352.parquet"}]]