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EXHIBIT 10.4
PROPERTY ACQUISITION SERVICE AGREEMENT
THIS PROPERTY ACQUISITION SERVICE AGREEMENT (this "Agreement") is entered
into as of the ____ day of __________, 2003, by and among Inland Real Estate
Acquisitions, Inc., an Illinois corporation ("Acquisitions"), Inland Western
Retail Real Estate Trust, Inc., a Maryland corporation (the "Company") and
Inland Western Retail Real Estate Advisory Services, Inc., an Illinois
corporation (the "Advisor").
WHEREAS, the Company intends to commence on initial offering of its shares
of common stock, par value $.001 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 "Prospectus"; and
WHEREAS, the Company was incorporated on March 5, 2003 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 "Primary Criteria for Investment"); such real estate will be
located mainly in the states west of the Mississippi River in the United States
(the "Primary Geographical Area of Investment"); the Company 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 as described in the Prospectus; and
WHEREAS, the Company may enter into sale and leaseback transactions,
pursuant to which the Company will purchase a property from a person and lease
the property to such Person; and
WHEREAS, the Advisor and the Company are parties to a certain advisory
agreement (the "Advisory Agreement"), dated the date hereof; and
WHEREAS, under the terms of the Advisory Agreement, the Advisor generally
has responsibility for the day-to-day operations of the Company, administers the
Company's bookkeeping and accounting functions, serves as the Company's
consultant in connection with policy decisions to be made by the directors of
the Company (the "Directors"), manages or causes to be managed by another party
the Company's properties and renders other services as the Directors deem
appropriate; the Advisor is subject to the supervision of the Directors and has
only such functions as are delegated to it by the Directors; and
WHEREAS, the Company, the Advisor and Acquisitions are all affiliates; and
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:
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.
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2. GENERAL SERVICES. During the term of this Agreement, Acquisitions
shall continually present to the Company suitable opportunities to make
investments in real properties consistent with the investment policies of the
Company, the amount of funds the Company has available for investment, and the
investment program adopted by the Directors 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 the Company, and (v) in some cases, enter into
contracts to purchase, real properties that meet the Company's Primary Criteria
for Investment (a "Proposed Property").
3. EVALUATION OF PROPOSED PROPERTIES. In evaluating a Proposed Property,
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 a Proposed Property to be made by the
Company shall be supported by an appraisal prepared by a competent, independent
appraiser who is a member-in-good standing of the Appraisal Institute prior to
the purchase of such Proposed Property.
6. PURCHASE OF PROPERTY. Acquisitions may purchase a Proposed Property in
its own name, assume loans in connection therewith and temporarily hold title
thereto for the purpose of facilitating acquisition or financing by the Company.
7. PROCESS FOR RESOLVING CONFLICTING OPPORTUNITIES. To the extent
possible, the resolution of conflicting investment opportunities between the
Company and other investment entities advised or managed by the Advisor and its
affiliates shall be resolved by giving priority to the Company, provided that
the Proposed Property meets the acquisition criteria of the Company. The Company
shall have the first opportunity to purchase such Proposed Property placed under
contract by Acquisitions, the Advisor or its affiliates, provided the Company is
able to close the purchase of the Proposed Property within 60 days.
Other factors which may be considered in connection with evaluating the
suitability of the Proposed Property for investment include: (i) the effect of
the acquisition on the diversification of each entity's portfolio; (ii) the
amount of funds available for investment; (iii)
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cash flow; and (iv) the estimated income tax effects of the purchase and
subsequent disposition. The Independent Directors of the Company, must, by a
majority vote, approve all actions by the Advisor or its affiliates which
present potential conflicts with the Company as set forth above.
8. BOARD APPROVAL. Any transfer of a Proposed Property from Acquisitions
to the Company must be approved by a majority of the Directors, in each case
including a majority of the Company's Independent Directors.
9. PURCHASE PRICE. The Purchase Price of any Proposed Property acquired
by the 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; and (ii) must be approved by a majority of the
Directors of the Company (including a majority of the Independent Directors) not
interested in the transaction as being fair and reasonable to the Company and
generally at a price to the 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 the 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 the Company exceed its
appraised value as of the date of the 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 the 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 the judgment of the Directors, would adversely
affect the qualification of the Company as a REIT under the Internal Revenue
Code of 1986, as amended, or which would violate any law, rule or regulation of
any governmental body or agency having jurisdiction over the Company or its
securities, or which would otherwise not be permitted by the articles of
incorporation of the Company. If any such action is ordered by the Directors,
Acquisitions shall promptly notify the 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 the Directors.
13. BANK ACCOUNTS. At the direction of the Directors, Acquisitions may
establish and maintain bank accounts in the name of the Company, and may collect
and deposit into and disburse from such accounts moneys on behalf of the
Company, upon such terms and conditions as the 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 the Company may require,
render appropriate accountings of such collections, deposits and disbursements
to the Directors and to the auditors of the Company.
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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 will keep
Acquisitions informed in writing concerning the investment and financing
policies of the Company, and the amount of funds it has available for
investment. The Directors shall notify Acquisitions promptly in writing of its
intention to make any investments or to sell or dispose of any existing
investments. The Company shall furnish Acquisitions with a certified copy of all
financial statements, a signed copy of 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) the Company shall reimburse Acquisitions in full for all
Acquisition Expenses (as defined below) incurred by Acquisitions on behalf of
the Company in connection with its performance of its duties under this
Agreement; PROVIDED, HOWEVER, the total of all Acquisition Expenses paid by the
Company in connection with the purchase of a Proposed Property by the Company
may not exceed an amount equal to [3%] 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, nonrefundable
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. From and after
May ___, 2008, the Company shall have the right, but not the obligation, to
acquire the entire business, affairs, operations and assets of the Advisor
(collectively, the "Advisory's Business") in whatever form agreed upon between
the Company and the Advisor (a "Business Combination"), as set forth in writing
between them ("Merger Agreement"). If the Company desires to acquire the
Advisor's Business in a Business Combination, the Company shall send a written
notice to the Advisor to that effect ("Election Notice"). Any agreement with
respect to a Business Combination shall contain provisions providing for: (i)
the termination of this Agreement and all Advisory Agreements entered into
pursuant hereto and the release or waiver of all fees payable by the Company to
the Advisor under the Advisory Agreements (except for the payment of fees due
and payable under the Advisory Agreements for services rendered by the Advisor
up to and until the consummation of the Business Combination); and (ii) the
issuance of a certain number of shares of common stock of the Company as
determined below (the "Shares") to be issued to the Advisor, or its
stockholders, members or other equity holders,
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as the case may be, in connection with the Business Combination. The Advisor
represents to the Company that the Advisor has obtained the consent of its board
of directors and its shareholders to a Business Combination with the Company and
that Advisor will obtain similar consents from any future shareholders, members
or other equity holders of the Advisor.
The number of Shares to be issued by the Company to the Advisor or its
shareholders, members or other equity holders as the case may be, shall be
determined as follows: The net income of the Advisor for the calendar month
immediately preceding the month in which the Merger Agreement is executed, as
determined by an independent audit conducted in accordance with generally
accepted auditing standards, shall be annualized (the "Annual Net Income").
The Annual Net Income shall then be multiplied by ninety percent (90%) and
then divided by the "Funds from Operations per Weighted Average Share" of the
Company. "Funds from Operations per Weighted Average Share" shall be equal to
the annualized Funds from Operations, on the basis of four (4)[nb]times the
Funds from Operations for the fiscal quarter immediately preceding the month
in which the Merger Agreement is executed, per weighted average Share of the
Company for such quarter as stated in the quarterly report on Form 10-Q of
the Company given to its shareholders for such quarter. The resulting
quotient shall constitute the number of Shares to be issued by the Company to
the Advisor or its shareholders, members or other equity holders as the case
may be, with delivery thereof and the closing of the Business Combination to
occur within ninety (90) days after the date the Election Notice is given to
Advisor. Any such transaction will occur, if at all, only if the Board of
Directors of the Company obtains a fairness opinion from an investment
banking or valuation firm to the effect that the consideration to be paid for
the Business Combination is fair, from a financial point of view, to the
Company.
18. EXPENSES OF THE COMPANY. The 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 Company, but shall receive no compensation (other than reimbursement for
expenses) from the 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 with the mutual consent of the parties including an affirmative vote of
a majority of the Independent Directors of the Company. 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 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 Company, this
Agreement shall be terminated immediately upon written notice of termination
from the Board of Directors of the Company 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
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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 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.
(d) 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 the 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 the Company all moneys collected and held for the
account of the Company pursuant to this Agreement;
(b) Deliver to the Board of Directors of the 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 the Company all property and
documents of the Company then in the custody of Acquisitions; and
(d) Cooperate with the Company and take all reasonable steps
requested by the 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:
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Inland Real Estate Acquisitions, Inc.; and
Inland Western Retail Real Estate Advisory Services, Inc.
2901 Butterfield Road
Oak Brook, Illinois 60523
Attention: President
Inland Western Retail Real Estate Trust, Inc.
2901 Butterfield Road
Oak Brook, Illinois 60523
Attention: Ms. Roberta S. Matlin, Vice President - Administration
with a copy to:
Duane Morris LLC
227 West Monroe Street, Suite 3400
Chicago, Illinois 60606
Attention: David Kaufman
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 COMPANY AND TO ITS
STOCKHOLDERS. The parties hereto recognize that their relationship is subject to
various conflicts of interest as set forth in the Prospectus. Acquisitions, on
behalf of itself and its affiliates, acknowledges that Acquisitions and its
affiliates have fiduciary duties to the Company and to its 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
the Company with the interests of Acquisitions and its affiliates in making any
determination where a conflict of interest exists between the 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 the Company) will be made in the manner most favorable to the Company and to
its Stockholders, so as not to breach their respective fiduciary duties to the
Company and to its 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:
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Title:
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INLAND WESTERN REAL ESTATE
TRUST, INC.
By:
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Title:
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INLAND WESTERN RETAIL REAL ESTATE
ADVISORY SERVICES, INC.
By:
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Title:
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