EXHIBIT 10.4
FORM OF
PROPERTY ACQUISITION SERVICE AGREEMENT
PROPERTY ACQUISITION SERVICE AGREEMENT
THIS PROPERTY ACQUISITION SERVICE AGREEMENT (this "Agreement") is
entered into as of the _____ day of __________, 1998, by and among Inland
Real Estate Acquisitions, Inc., an Illinois corporation ("Acquisitions"),
Inland Real Estate Corporation, a Maryland corporation ("REIT I"), Inland
Real Estate Advisory Services, Inc., an Illinois corporation ("REIT I
Advisor"), Inland Retail Real Estate Trust, Inc., a Maryland corporation
("REIT II") and Inland Retail Real Estate Advisory Services, Inc., an
Illinois corporation ("REIT II Advisor"). REIT I Advisor and REIT II Advisor
are sometimes referred to herein individually as an "Advisor" and
collectively, as the "Advisors". REIT I and REIT II are sometimes referred
to herein individually as a "Company" and collectively, as the "Companies".
Acquisitions, REIT I, REIT I Advisor, REIT II and REIT II Advisor are
sometimes referred to herein individually as a "Party" and collectively, as
the "Parties".
WHEREAS, REIT II intends to commence a public offering of its shares of
common stock, par value $0.01 per share, soon after a registration statement
it will file with the Securities and Exchange Commission is declared
effective; a prospectus will be included as part of that registration
statement; such prospectus, while in draft form, the latest draft form
thereof, and then in its final form, as it may be amended or supplemented
from time to time, is hereinafter referred to as the "REIT II Prospectus"; and
WHEREAS, REIT II was formed in September 1998 to acquire and manage a
diversified portfolio of real estate primarily (i) improved for use as retail
establishments, principally multi-tenant shopping centers, or (ii) improved
with other commercial facilities which provide goods or services
(collectively, the "REIT II's Primary Criteria for Investment"); such real
estate will be located mainly in the states east of the Mississippi River in
the United States (the "REIT II's Primary Geographical Area of Investment");
REIT II may also acquire, among other properties, single-user retail
properties located anywhere throughout the United States if they are leased
on a Triple-Net Lease Basis by Creditworthy Tenants (each as defined in the
REIT II Prospectus); and
WHEREAS, REIT II may enter into sale and leaseback transactions,
pursuant to which REIT II will purchase a Property (as defined in the REIT II
Prospectus) from a Person (as defined in the REIT II Prospectus) and lease
the Property to such Person; and
WHEREAS, REIT II Advisor and REIT II have entered into a certain
advisory agreement (the "REIT II Advisory Agreement"), dated __________ __,
1998; and
WHEREAS, under the terms of the REIT II Advisory Agreement, REIT II Advisor
generally has responsibility for the day-to-day operations of REIT II,
administers REIT II's bookkeeping and accounting functions, serves as REIT II's
consultant in connection with policy decisions to be made by the directors of
REIT II (the "REIT II Directors"),
manages or causes to be managed by another party REIT II's properties and
renders other services as the REIT II Directors deem appropriate; REIT II
Advisor is subject to the supervision of the REIT II Directors and has only such
functions as are delegated to it by the REIT II Directors; and
WHEREAS, REIT I has offered for sale shares of its common stock, par value
$0.01 per share, pursuant to several previous and its latest prospectus dated as
of April 7, 1998 (as it may be amended or supplemented from time to time, the
"REIT I Prospectus" and together with the REIT II Prospectus, the
"Prospectuses"); and
WHEREAS, REIT I was formed in 1994 to primarily invest in (i) Neighborhood
Retail Centers (as defined in the REIT I Prospectus) located mainly within a
150-mile radius of REIT I's headquarters in Oak Brook, Illinois, which types of
investments and area were expanded in 1998 to include Community Centers (as
defined in the REIT I Prospectus) and an area within a 400-mile radius of such
headquarters (the "REIT I's Primary Geographical Area of Investment"), and (ii)
single-user retail properties located anywhere throughout the United States if
they are leased on a triple-net lease basis by creditworthy tenants
(collectively, the "REIT I's Primary Criteria for Investment"); and
WHEREAS, REIT I Advisor and REIT I have entered into a certain advisory
agreement (the "REIT I Advisory Agreement"), dated October 14, 1994 (as
amended); and
WHEREAS, under the terms of the REIT I Advisory Agreement, REIT I Advisor
generally has responsibility for the day-to-day operations of REIT I,
administers the REIT I's bookkeeping and accounting functions, serves as the
REIT I's consultant in connection with policy decisions to be made by the
directors of REIT I (the "REIT I Directors" and together with the REIT II
Directors, the "Directors"), manages or causes to be managed by another party
the REIT I's properties and renders other services as the REIT I Directors deem
appropriate; REIT I Advisor is subject to the supervision of the REIT I
Directors and has only such functions as are delegated to it by the REIT I
Directors; and
WHEREAS, Acquisitions seeks properties for REIT I and REIT II, and may do
so for other real estate investment programs sponsored by Inland Real Estate
Investment Corporation ("IREIC" as defined in the REIT II Prospectus), and,
among other things, does due diligence in connection therewith, and negotiates
the terms of such acquisitions; and
WHEREAS, REIT I, REIT I Advisor, REIT II, REIT II Advisor and Acquisitions
are all Affiliates (as defined in the REIT II Prospectus);
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows:
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1. INCORPORATION OF RECITALS. By this reference, the recitals set
forth above are hereby incorporated into this Agreement to the same extent as if
set forth fully herein.
2. GENERAL SERVICES. During the term of this Agreement, Acquisitions
shall continually present to each Company suitable opportunities to make
investments in real properties consistent with the investment policies of such
Company, the amount of funds each Company has available for investment, and the
investment program adopted by the Directors of such Company and in effect at the
time. Towards this end, Acquisitions shall (i) search for, (ii) identify, (iii)
examine and evaluate the potential value, the financial condition, the business
history, the demographics of the surrounding area, the proposed purchase price
and the geographic and market diversification of, (iv) negotiate with proposed
sellers for the purchase of, on behalf of each of the Companies, and (v) in some
cases, enter into contracts to purchase, real properties that meet (a) REIT I's
Primary Criteria for Investment (a "Proposed REIT I Property"), and/or (b) the
REIT II's Primary Criteria for Investment (a "Proposed REIT II Property" and
collectively with the Proposed REIT I Properties, the "Proposed Properties",
each of which, a "Proposed Property").
3. EVALUATION OF PROPOSED PROPERTIES. In evaluating Proposed Properties,
Acquisitions shall consider a number of factors, including a Proposed
Property's: (i) geographic location and type; (ii) construction quality and
condition; (iii) current and projected cash flow; (iv) potential for capital
appreciation; (v) rent roll, including the potential for rent increases; (vi)
potential for economic growth in the tax and regulatory environment of the
community in which the Proposed Property is located; (vii) potential for
expanding the physical layout of the Proposed Property and/or the number of
sites; (viii) occupancy and demand by tenants for properties of a similar type
in the same geographic vicinity; (ix) prospects for liquidity through sale,
financing or refinancing of the Proposed Property; (x) competition from existing
properties and the potential for the construction of new properties in the area;
and (xi) treatment under applicable federal, state and local tax and other laws
and regulations.
4. ENVIRONMENTAL REPORTS. In evaluating any Proposed Property for
purchase, Acquisitions shall require the seller to provide a current Phase I
environmental report and, if necessary, a Phase II environmental report, with
respect to such Proposed Property.
5. APPRAISALS. All acquisitions of Proposed Properties to be made by
either Company shall be supported by an appraisal prepared by a competent,
independent appraiser who is a member-in-good standing of the Appraisal
Institute (as defined in the REIT II Prospectus) prior to the purchase of such
Proposed Property.
6. PURCHASE OF PROPERTY. Acquisitions may purchase Proposed Properties
in its own name, assume loans in connection therewith and temporarily hold title
thereto for the purpose of facilitating acquisition or financing by either of
the Companies.
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7. PROCESS FOR RESOLVING CONFLICTING OPPORTUNITIES. To the extent
possible, the resolution of conflicting investment opportunities between REIT I
and the REIT II shall, as a general rule, be resolved by giving priority to the
investment entity whose primary geographic area of investment is the area where
the Proposed Property is located. REIT I shall have the first opportunity to
purchase a Proposed Property in REIT I's Primary Geographic Area of Investment
placed under contract by Acquisitions, REIT I Advisor or its Affiliates,
provided it is able to close the purchase of the Proposed REIT I Property within
60 days. Subject to the limitation in the following sentence, REIT II shall
have the first opportunity to purchase a Proposed Property in REIT II's Primary
Geographical Area of Investment placed under contract by Acquisitions, REIT II
Advisor or its Affiliates, provided REIT II is able to close the purchase of
such Proposed REIT II Property within 60 days. However, in the event a Proposed
Property is located in both REIT I's and REIT II's Primary Geographical Area of
Investment, and both REIT I and REIT II have funds available to make the
purchase, the Proposed Property will first be offered to REIT I. If REIT I does
not purchase the Proposed Property, it will then be offered to REIT II.
However, if (i) the Proposed Property is outside the Primary Geographical
Area of Investment of both REIT I and REIT II, (ii) REIT I, REIT II and any
other real estate investment program sponsored by IREIC have funds available to
make the purchase and (iii) the Proposed Property meets each of their
respective acquisition criteria, then the Proposed Property will (x) first be
offered to REIT I, (y) if REIT I does not purchase the Proposed Property, it
will then be offered to REIT II, and (z) if REIT II does not purchase the
Proposed Property, it will then be offered to such other real estate investment
program.
Other factors which may be considered in connection with evaluating the
suitability of the Proposed Property for investment by a particular Company
include: (i) the effect of the acquisition on the diversification of each
Company's portfolio; (ii) the amount of funds available for investment;
(iii) cash flow; and (iv) the estimated income tax effects of the purchase and
subsequent disposition. The Independent Directors of each of the Companies,
respectively, must, by a majority vote, approve all actions by their respective
Advisors or its Affiliates which present potential conflicts with such Company.
8. BOARD APPROVAL. Any transfer of a Proposed Property from
Acquisitions to either of the Companies must be approved by a majority of such
Company's Directors, in each case including a majority of such Company's
Independent Directors (as defined in the REIT I Prospectus and the REIT II
Prospectus, as applicable).
9. PURCHASE PRICE. The Purchase Price of any Proposed Property
acquired by a Company from Acquisitions: (i) may not exceed its fair market
value as determined by a competent independent appraiser who is a member in good
standing of the Appraisal Institute (as defined in the REIT II Prospectus); and
(ii) must be approved by a majority of the Directors of such Company (including
a majority of the Independent Directors) not interested in the transaction as
being fair and reasonable to
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such Company and generally at a price to such Company no greater than the cost
of the Proposed Property to Acquisitions (including the Contract Price for the
Property, as hereinafter defined, and the Acquisition Expenses, as hereinafter
defined); provided that if the price to such Company is in excess of such cost,
substantial justification for such excess must exist and such excess must be
reasonable. In no event may the cost of the Proposed Property to such Company
exceed its appraised value as of the date of such Company's acquisition thereof.
10. NO PARTNERSHIP OR JOINT VENTURE. The Parties to this Agreement are
not, and shall not be deemed to be, partners or joint venturers with each other.
11. RECORDS. Acquisitions shall maintain appropriate books of account and
records relating to services performed hereunder, which shall be accessible for
inspection by either Company at any time during ordinary business hours.
12. REIT QUALIFICATIONS. Notwithstanding any other provision of this
Agreement to the contrary, Acquisitions shall refrain from any action which, in
its reasonable judgment or in any judgment of the Directors of either Company of
which Acquisitions has written notice, would adversely affect the qualification
of such Company as a REIT under the Code (each as defined in the REIT II
Prospectus) or which would violate any law, rule or regulation of any
governmental body or agency having jurisdiction over such Company or its
securities, or which would otherwise not be permitted by the articles of
incorporation of such Company. If any such action is ordered by the Directors
of either Company, Acquisitions shall promptly notify such Directors of
Acquisition's judgment that such action would adversely affect such status or
violate any such law, rule or regulation or such articles of incorporation and
shall refrain from taking such action pending further clarification or
instruction from such Directors.
13. BANK ACCOUNTS. At the direction of the Directors of either Company,
Acquisitions may establish and maintain bank accounts in the name of such
Company, and may collect and deposit into and disburse from such accounts moneys
on behalf of such Company, upon such terms and conditions as such Directors may
approve, provided that no funds in any such account shall be commingled with
funds of Acquisitions. Acquisitions shall from time to time, as such Company may
require, render appropriate accountings of such collections, deposits and
disbursements to the Directors and to the auditors of such Company.
14. FIDELITY BOND. Acquisitions shall not be required to obtain or
maintain a fidelity bond in connection with the performance of its services
hereunder.
15. INFORMATION FURNISHED ACQUISITIONS. The Directors of each Company
will keep Acquisitions informed in writing concerning the investment and
financing policies of such Company, and the amount of funds it has available for
investment. Such Directors shall notify Acquisitions promptly in writing of its
intention to make any investments or to sell or dispose of any existing
investments. Each Company shall furnish Acquisitions with a certified copy of
all financial statements, a signed copy of
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each report prepared by independent certified public accountants, and such other
information with regard to its affairs as Acquisitions may reasonably request.
16. COMPENSATION. Acquisitions shall be paid for services rendered by
Acquisitions under this Agreement as follows:
(a) each Company shall reimburse Acquisitions in full for all Acquisition
Expenses (as defined below) incurred by Acquisitions on behalf of such Company
in connection with its performance of its duties under this Agreement; PROVIDED,
HOWEVER, the total of all Acquisition Expenses paid by a Company in connection
with the purchase of a Proposed Property by such Company may not exceed an
amount equal to 6% of the Contract Price for the Property (as defined below);
(b) "Acquisition Expenses" means expenses related to the selection,
evaluation and acquisition of, and investment in, properties, whether or not
acquired or made, including but not limited to legal fees and expenses, travel
and communications expenses, cost of appraisals and surveys, non-refundable
option payments on property not acquired, accounting fees and expenses, computer
use related expenses, architectural and engineering reports, environmental and
asbestos audits, title insurance and escrow fees, loan fees or points or any fee
of a similar nature, however designated, and personnel and miscellaneous
expenses related to the selection and acquisition of properties; and
(c) "Contract Price for the Property" means the amount actually paid or
allocated to the purchase of a Proposed Property exclusive of Acquisition
Expenses.
17. BUSINESS COMBINATION OF EITHER COMPANY AND ITS ADVISOR. If the
business conducted by an Advisor to a Company is acquired by or consolidated
into the Company for which it serves as Advisor, this Agreement will terminate
as to Acquisitions and the Company and the Advisor involved in that business
combination. However, this Agreement shall continue in effect as to Acquisitions
and the Company and the Advisor whose business has not been so acquired or
consolidated.
18. EXPENSES OF THE COMPANIES. Each Company shall pay all of its own
expenses and shall reimburse Acquisitions for its expenses as provided in
Section 16 hereof.
19. OTHER ACTIVITIES OF ACQUISITIONS. Nothing herein contained shall
prevent Acquisitions from engaging in any other business or activity including
the rendering of services with respect to real estate investment opportunities
to any other person or entity. Directors, officers, employees and agents of
Acquisitions may serve as Directors, trustees, officers, employees or agents of
the Companies, but shall receive no compensation (other than reimbursement for
expenses) from such Company for such service.
20. TERM; TERMINATION OF AGREEMENT. This Agreement shall have an initial
term of one year and, thereafter, will continue in force for successive one-year
renewals
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with the mutual consent of the Parties including an affirmative vote of a
majority of the Independent Directors of each of the Companies. Each extension
shall be executed in writing by each Party hereto before the expiration of the
term of this Agreement or of any extension thereof.
Notwithstanding any other provision of this Agreement to the contrary, the
Parties, by mutual consent, may terminate this Agreement, or any extension
hereof, upon 60 days written notice without cause or penalty. In the event of
the termination of this Agreement, Acquisitions will cooperate with the other
Parties, and take all reasonable steps requested to assist such Parties in
making an orderly transition of the acquisition function.
If this Agreement is terminated pursuant to this Section, such termination
shall be without any further liability or obligation of any of the terminating
Parties to each other.
If this Agreement is terminated because of a business combination as
described in Section 17, all obligations of Acquisitions to offer Proposed
Properties to the Company involved in such business combination for purchase
shall also terminate.
21. ASSIGNMENTS. No Party may assign this Agreement without the written
consent of each other Party hereto; except in the case of assignment by a Party
to a corporation, trust or other organization which is a successor to such
Party. Any assignment of this Agreement shall bind the assignee hereunder in
the same manner as the assignor is bound hereunder.
22. DEFAULT, BANKRUPTCY, ETC. At the option solely of the Companies, this
Agreement shall be terminated immediately upon written notice of termination
from each Board of Directors of the Companies to Acquisitions if any of the
following events occurs:
(a) Acquisitions violates any provisions of this Agreement and after
notice of such violation shall not cure such default within 30 days; or
(b) A court of competent jurisdiction enters a decree or order for
relief in respect of Acquisitions in any involuntary case under the
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or appoints a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of Acquisitions or for any substantial
part of its property or orders the winding up or liquidation of
Acquisition's affairs; or
(c) Acquisitions commences a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
consents to the entry of an order for relief in an involuntary case under
any such law, or consents to the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or
similar official) of Acquisitions or
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for any substantial part of its property, or makes any general assignment
for the benefit of creditors, or fails generally to pay its debts as they
become due.
Acquisitions agrees that if any of the events specified in subsections (b)
and (c) of this Section 22 occur, it will give written notice thereof to each
Company within seven days after the occurrence of such event.
23. ACTION UPON TERMINATION. Acquisitions shall not be entitled to
compensation after the date of termination of this Agreement for further
services hereunder, but shall be paid all compensation accruing to the date of
termination. Subject to the provisions of Section 17, Acquisitions shall
forthwith upon a termination:
(a) Pay over to each Company all moneys collected and held for the
account of such Company pursuant to this Agreement;
(b) Deliver to the Board of Directors of each Company a full
accounting, including a statement showing all payments collected by it and
a statement of all money held by it;
(c) Deliver to the Board of Directors of each Company all property
and documents of the Company then in the custody of Acquisitions; and
(d) Cooperate with each Company and take all reasonable steps
requested by such Company to assist its Board of Directors in making an
orderly transition of the acquisition function.
24. AMENDMENTS. This Agreement shall not be amended, changed, modified,
terminated or discharged in whole or in part except by an instrument in writing
signed by each Party hereto, or their respective successors or assigns, or
otherwise provided herein.
25. SUCCESSORS AND ASSIGNS. This Agreement shall bind any successors or
assigns of the Parties hereto as herein provided.
26. GOVERNING LAW. The provisions of this Agreement shall be governed,
construed and interpreted in accordance with the laws of the State of Illinois
as at the time in effect.
27. NOTICES. Any notice, report or other communication required or
permitted to be given hereunder shall be in writing unless some other method of
giving such notice, report or other communication is accepted by the Party to
whom it is given and shall be given by being delivered at the following
addresses of the Parties hereto:
Inland Real Estate Acquisitions, Inc.;
Inland Real Estate Corporation;
Inland Real Estate Advisory Services, Inc.; and
Inland Retail Real Estate Advisory Services, Inc.
0000 Xxxxxxxxxxx Xxxx
0
Xxx Xxxxx, Xxxxxxxx 00000
Attention: President
Inland Retail Real Estate Trust, Inc.
0000 Xxxxxxxxxxx Xxxx
Xxx Xxxxx, Xxxxxxxx 00000
Attention: Xx. Xxxxxxx X. Xxxxxx, Vice President
with a copy to:
Wildman, Harrold, Xxxxx & Xxxxx
000 Xxxx Xxxxxx Xxxxx - Xxx. 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxx
Any Party may at any time give notice in writing to the other Parties of a
change of its address for the purpose of this Section 27.
28. CONFLICTS OF INTEREST AND FIDUCIARY DUTIES TO THE COMPANIES AND TO
THEIR RESPECTIVE STOCKHOLDERS. The Parties hereto recognize that their
relationship is subject to various conflicts of interest as set forth in the
Prospectuses. Acquisitions, on behalf of itself and its Affiliates, acknowledges
that Acquisitions and its Affiliates have fiduciary duties to the Companies and
to their respective Stockholders. Acquisitions, on behalf of itself and its
Affiliates, represents and agrees (i) that Acquisitions and its Affiliates will
endeavor to balance the interests of such Companies with the interests of
Acquisitions and its Affiliates in making any determination where a conflict of
interest exists between a Company and Acquisitions or its Affiliates; and
(ii) that the actions and decisions of Acquisitions and its Affiliates under
this Agreement (including but not limited to actions and decisions in connection
with the purchase of Proposed Properties for such Company) will be made in the
manner most favorable to such Company and to such Company's Stockholders, so as
not to breach their respective fiduciary duties to such Company and to such
Company's Stockholders.
29. HEADINGS. The section headings hereof have been inserted for
convenience of reference only and shall not be construed to affect the meaning,
construction or effect of this Agreement.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
Inland Real Estate Acquisitions, Inc.
By:_________________________________
Title:______________________________
Inland Real Estate Corporation
By:_________________________________
Title:______________________________
Inland Real Estate Advisory Services, Inc.
By:_________________________________
Title:______________________________
Inland Retail Real Estate Trust, Inc.
By:_________________________________
Title:______________________________
Inland Retail Real Estate Advisory Services, Inc.
By:_________________________________
Title:______________________________
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