Exhibit 10.190
EARN-OUT AGREEMENT
This EARN-OUT AGREEMENT ("Agreement") is made and entered into as of the
23rd day of June, 2004, by and among Hendon/Xxxxx Creek Village, LLC, a Georgia
limited liability company ("HJCV"), and J. Xxxxxxx Xxxxx Creek Village, LLC, a
Georgia limited liability company ("JCJCV"), (each hereinafter referred to as a
"Seller" and together the "Sellers"), and Inland Western Duluth John's Creek, a
Delaware limited liability (hereinafter referred to as "Buyer") and Inland
Western Retail Real Estate Trust, Inc., as guarantor ("Guarantor").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Purchase Agreement dated as of the 13th
day of April, 2004, as amended from time to time (collectively, the "Contract"),
Buyer acquired at a closing (the "Initial Closing") on and as of the date hereof
(the "Closing Date") from Sellers all of the outstanding equity interests of
Hendon/JDN John's Creek Village, LLC, a Georgia limited liability company
("JDN"), the owner of certain real property known as John's Creek Village
shopping center located in Duluth, Georgia (the "Property"); and
WHEREAS, the Property is less than one hundred percent (100%) occupied on
the Closing Date; and
WHEREAS, pursuant to the Contract, if the Property is less than one hundred
percent (100%) occupied on the Closing Date, in addition to the Initial Closing
there shall be possible subsequent earn-out closing(s) to occur upon completion
of the construction and leasing of vacant tenant space at the Property; and
WHEREAS, Buyer will withhold from the portion of the purchase price payable
to Sellers at the Initial Closing an aggregate of Seven Hundred Fifty Two
Thousand Two Hundred Fifty Dollars ($752,250) as an allowance for tenant
improvements and leasing commissions applicable to such vacant space (the "TI/LC
Deposit"), which will be disbursed to the Sellers at such earn-out closing(s) in
accordance with the terms of this Agreement.
NOW, THEREFORE, for and in consideration of the premises hereto, the
covenants and agreements hereinafter made, and for Ten Dollars ($10.00) in
hand, the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
1. EARN-OUT
A. Approximately 50,150 square feet of tenant space at the Property
has not been fully constructed and/or leased as of the Closing Date (the "Vacant
Space"). Buyer hereby hires Sellers to serve as Buyer's exclusive listing agent
for all of the Vacant Space during the term of this Agreement. Sellers shall be
responsible for negotiating the terms of the lease agreements and related
matters and shall bear expenses incurred in connection therewith.
B. Buyer shall make earn-out payments to Sellers at one or more
closings ("Earn-out Closings") upon each tenant's Acceptance of its applicable
portion of the Vacant Space. "Acceptance" shall mean that such tenant has
executed a lease agreement, accepted and taken possession of its premises,
opened for business and commenced full rental payments, including CAM, taxes and
insurance on a pro rata basis and delivered a certificate of occupancy and
tenant estoppel to Buyer. It shall be Sellers' responsibility and sole cost and
expense for leasing out and paying all costs related to placing the tenants into
their leaseable space. Once leased and Accepted as provided above, the premises
occupied by a tenant shall be referred to hereunder as "Accepted Vacant Space."
The amount of the earn-out payment to be paid to Sellers at each Earn-out
Closing (the "Earn-out Amount") for the applicable Accepted Vacant Space shall
be calculated according to the Earn-out Formula attached hereto as EXHIBIT A.
Each Earn-out Closing shall occur upon at least ten (10) business days' prior
written notice ("Notice") by Sellers to Buyer that one or more of the previously
unleased spaces has been leased on terms substantially in accordance with
EXHIBIT B hereto. The aggregate of all Earn-out Amounts payable hereunder is
referred to as the "Aggregate Earn-out Amount," an estimate of which is set
forth on EXHIBIT C hereto. Buyer shall have no obligation to pay any Earn-out
Amount or consummate any Earn-out Closing with respect to any Notice sent after
the date that is eighteen (18) months from the date hereof (the "Termination
Date").
C. The parties acknowledge and agree that the Aggregate Earn-out
Amount and other data set forth on EXHIBIT C hereto are based on estimates of
the parties made at the Closing Date and the actual Aggregate Earn-out Amount
payable to Sellers may be greater or less than such estimate, depending on
actual rent and lease obligations of the tenants.
2. TI/LC DEPOSIT. The TI/LC Deposit is applicable to the Vacant
Space on the basis of the sum of Three Dollars ($3.00) for leasing/brokerage
commissions ("LC"), plus Twelve Dollars ($12.00) for tenant improvement
allowances ("TI"), multiplied by the aggregate number of square feet in the
Vacant Space (approximately 50,150 square feet). At each Earn-out Closing that
occurs in accordance with Section 1 above, that portion of the TI/LC
Deposit attributable to the applicable portion of the Vacant Space shall be paid
to Sellers. To the extent that any funds remain in the TI/LC Deposit (and are
not subject to an outstanding Notice) on the Termination Date, such funds shall
be released to Buyer. To the extent that any funds remain in the TI/LC Deposit
on the date that Earn-out Closings have occurred with respect to 100% of the
Vacant Space, such funds shall be released to Sellers.
3. NOTICES. All notices, requests, consents and other communications
hereunder shall be sent to each of the following parties and be in writing and
shall be personally delivered, sent by Federal Express or other overnight or
same day courier service providing a return receipt, (and shall be effective
when received, when refused or when the same cannot be delivered, as evidenced
on the return receipt) to the following addresses:
If to Buyer: Inland Western Retail Real Estate Trust, Inc.
0000 Xxxxxxxxxxx Xxxx
Xxx Xxxxx, Xxxxxxxx 00000
Attn: Xxxxxx Xxxxxxx
with a copy to: Xxxxxxx X. Xxxxxxxxx, Esq.
0000 Xxxxxxxxxxx Xxxx
0xx Xxxxx
Xxx Xxxxx, Xxxxxxx 00000
If to Sellers: Hendon/Xxxxx Creek Village, LLC
J. Xxxxxxx Xxxxx Creek Village, LLC
c/o Hendon Properties, Inc.
Two Live Oak Center
0000 Xxxxxxxxx Xxxx, XX, Xxxxx 000
Xxxxxxx, XX 00000
Attn: Mr. J. Xxxxxxx Xxxxxx, Xx.
Facsimile: (000) 000-0000
Copy to: Hartman, Simons, Xxxxxxxx & Wood, LLP
0000 Xxxxxx Xxxxx Xxxx, XX, Xxxxx 000
Xxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
4. TERM. The term of this Agreement shall be from the date hereof
until the earlier of (i) Sellers' receipt of the Aggregate Earn-out Amount and
TI/LC Deposit proceeds to which it is entitled under this Agreement or (ii) the
Termination Date.
5. COUNTERPARTS. This Agreement may be executed in counterparts and
shall constitute an agreement binding on all parties notwithstanding that all
parties are not signatories of the original or the same counterpart.
Furthermore, the signatures from one counterpart may be attached to another to
constitute a fully executed original. This Agreement may be executed by
facsimile.
6. TIME OF ESSENCE. Time is of the essence with respect to the
payments and other obligations of the parties under this Agreement.
7. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with Georgia law.
8. GUARANTEE. Buyer's obligation to make earn-out payments under
this Agreement shall be unconditionally guaranteed by Guarantor.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, each of the parties hereto has caused this Earn-out
Agreement to be signed and delivered as of the day and year first above written.
BUYER:
INLAND WESTERN DULUTH JOHN'S CREEK, L.L.C.,
a Delaware limited liability company
By: Inland Western Retail Real Estate Trust, Inc.,
a Maryland corporation
By: /s/ G. Xxxxxx Xxxxxxx
--------------------------------
Name: G. Xxxxxx Xxxxxxx
------------------------------
Its: Authorized Agent
------------------------------
GUARANTOR:
INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.,
a Maryland corporation
By: /s/ G. Xxxxxx Xxxxxxx
--------------------------------
Name: G. Xxxxxx Xxxxxxx
------------------------------
Its: Authorized Agent
------------------------------
SELLERS:
HENDON/XXXXX CREEK VILLAGE, LLC,
a Georgia limited liability company
By: /s/ J. Xxxxxxx Xxxxxx
--------------------------------
Name: J. Xxxxxxx Xxxxxx, Xx.
Its: Manager
J. XXXXXXX XXXXX CREEK VILLAGE, LLC,
a Georgia limited liability company
By: /s/ J. Xxxxxxx Xxxxxx
--------------------------------
Name: J. Xxxxxxx Xxxxxx, Xx.
Its: Manager
EXHIBIT A - EARN-OUT FORMULA
The Earn-out Amount to be paid at each Earn-out Closing in connection with any
Accepted Vacant Space shall be determined as follows:
The actual Base Minimum Rent from the tenant (1) LESS the amount (if any) by
which such tenant's actual obligation for CAM, tax contributions and insurance
expenses is less than such tenant's proportionate share of such costs, and (2)
PLUS the amount, if any, of such tenant's obligations to pay any additional
costs or reimbursement for management fees, and administrative fees. The
resulting amount shall be the "Total Gross Income" derived from the lease(s) for
such Accepted Vacant Space. The Earn-out Amount for any lease(s) of Accepted
Vacant Space shall be the Total Gross Income for such lease divided by 7.78%.
Total payments to Sellers shall be comprised of the applicable Earn-out Amount
plus the applicable amount of the TI/LC Deposit released from the holdback as
provided in the Agreement.
EXHIBIT B - LEASING PARAMETERS
1. The proposed used shall be a use typically found in retail centers of this
type.
2. The proposed use does not violate any exclusions existing in any other
tenant's lease or covenant's existing in any other documents of record.
3. The lease is for an original term of not less than 5 years nor more than 10
years.
4. No concessions shall be provided to the tenant which would be at Buyer's
expense.
5. All leases shall be prepared substantially in accordance with the small
shop lease form previously used by Sellers with respect to leases of
premises in the Property, subject to commercially reasonable variances and
prevailing market parameters, except in the case of tenants that require
the use of their own form of lease agreement.
6. The proposed tenant has successful retail and/or business operating
experience including, but not limited to, three years in the type of
business to be operated at the leased premises (or, in the absence of such
a three-year history, be an approved franchisee of a recognized
franchisor).
7. The proposed tenant/franchisor shall have more than one location.
8. The proposed tenant and/or lease guarantor has an aggregate net worth of at
least two years of the total aggregate annualized rent, including all
expenses, for any tenant of the leased premises up to 7,000 square feet.
9. Said leases shall average at least 2% increases per year over the primary
term of the lease.
10. The tenant's lease will not include rent reductions or early termination
clauses of any kind.
11. In addition to tenant's base rent, the leases will include 100%
reimbursement for taxes, insurance and common area maintenance.
12. Buyer shall act in a commercially reasonable manner and in good faith
during its review and determination of the creditworthiness of any tenant
and/or guarantor. Also, Buyer agrees to respond to Sellers' deliveries of
tenant/guarantor credit information within 5 business days of its receipt
by Buyer; otherwise, said tenant/guarantor credit information shall be
deemed approved by Buyer.
13. The lease renewals, if any, will not be less than the primary term amounts
without tenant improvements, free rent, or leasing commissions paid for by
Buyer.
EXHIBIT C - ESTIMATE OF AGGREGATE EARN-OUT AMOUNT
(see attached chart)
EARNOUT CLOSINGS
INLAND PURCHASE PRICE ALLOCATION
AS OF APRIL 12, 2004
EARNOUT CLOSING TENANT SQ.FT. RENT PSF TOTAL
To Be Leased 15,000 $ 14.00 $ 210,000
Xxxxxxx Sports 5,000 $ 14.55 $ 72,750
Florist 1,600 $ 18.00 $ 28,800
To Be Leased (End Cap) 2,400 $ 18.00 $ 43,200
-----------------------------------------------------------------------------------------------------
To Be Leased (Suite 155) 4,625 $ 25.00 $ 115,625
To Be Leased (Suite 150) 6,250 $ 23.00 $ 143,750
To Be Leased (Suite 145) 2,000 $ 30.00 $ 60,000
-----------------------------------------------------------------------------------------------------
To Be Leased 1,700 $ 27.50 $ 46,750
-----------------------------------------------------------------------------------------------------
Lane Xxxxxx (Suites 185,190,195) 4,860 $ 27.30 $ 132,678
To Be Leased (Suite 160) Possible Nutrition Store 3,600 $ 23.50 $ 84,600
To Be Leased (Suite 170) 1,800 $ 23.00 $ 36,800
To Be Leased (Suite 175) 1,515 $ 23.00 $ 34,845
$ -
-----------------------------------------------------------------------------------------------------
TOTALS 50,150 $ 20.14 $ $1,009,798
-----------------------------------------------------------------------------------------------------
REIMBURSEMENTS:
CAM/TAXES/INSURANCE 50,150 $ 2.50 $ 125,375
MGT. RECAPTURE/ADMINISTRATIVE FEES 50,150 $ 0.57 $ 28,385
-----------------------------------------------------------------------------------------------------
TOTAL REIMBURSEMENT 50,150 $ 3.07 $ 153,760
-----------------------------------------------------------------------------------------------------
GROSS POTENTIAL INCOME 50,150 $ 23.20 $ 1,163,558
-----------------------------------------------------------------------------------------------------
VACANCY (5% OF SMALL SHOP RENT) 20,665 23.17 $ 23,937
VACANCY (5% OF SMALL SHOP REIMBURSEMENT) 20,665 $ 3.07 $ 3,379
-----------------------------------------------------------------------------------------------------
EFFECTIVE GROSS INCOME 50,150 $ 22.66 $ 1,136,242
-----------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
MANAGEMENT (3%) 50,150 $ 22.56 $ 34,087
CAM 50,150 $ 1.00 $ 50,150
TAXES 50,150 $ 0.25 $ 12,838
INSURANCE 50,150 $ 1.25 $ 62,688
RESERVES 50,150 $ 0.10 $ ?,015
-----------------------------------------------------------------------------------------------------
TOTAL EXPENSES 50,150 $ 3.28 $ 164,477
-----------------------------------------------------------------------------------------------------
NET OPERATING INCOME 50,150 $ 971,765
-----------------------------------------------------------------------------------------------------
DIVIDED BY: 7.35% CAP. RATE 7.35%
-----------------------------------------------------------------------------------------------------
PURCHASE AMOUNT $ 13,221,294
-----------------------------------------------------------------------------------------------------
INLAND'S DIVISOR FACTOR:
GROSS MINIMUM RENT $ 1,009,796
MGT. RECAPTURE/ADMINISTRATIVE FEES $ 28,385
-----------------------------------------------------------------------------------------------------
TOTAL GROSS INCOME $ 1,038,183
-----------------------------------------------------------------------------------------------------
DIVIDED BY: 7.78%
-----------------------------------------------------------------------------------------------------
PURCHASE AMOUNT $ 13,344,259
-----------------------------------------------------------------------------------------------------
Page 1
