UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended June 30, 1999
or
[ ] Transition Report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission File #0-28382
Inland Real Estate Corporation
(Exact name of registrant as specified in its charter)
Maryland #36-3953261
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
2901 Butterfield Road, Oak Brook, Illinois 60523
(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code: 630-218-8000
N/A
(Former name, former address and former fiscal
year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
As of August 12, 1999, there were 54,686,099 shares of common stock outstanding.
-1-
Part I - Financial Statements
Item 1. Financial Statements
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Consolidated Balance Sheets
June 30, 1999 and December 31, 1998
(unaudited)
Assets
------
1999 1998
---- ----
Investment properties (Notes 1, 4 and 6):
Land............................................ $228,810,388 193,093,898
Construction in progress........................ 1,404,254 1,230,448
Building and improvements....................... 549,453,050 452,885,969
------------- -------------
779,667,692 647,210,315
Less accumulated depreciation................... 26,102,496 17,161,998
------------- -------------
Net investment properties....................... 753,565,196 630,048,317
------------- -------------
Cash and cash equivalents including amounts
held by property manager (Note 1)............... 70,101,621 123,056,702
Investment securities (Note 1).................... 6,369,476 -
Restricted cash (Note 1).......................... 21,839,046 15,613,197
Accounts and rents receivable (net of allowance
for doubtful account of $200,000 at June 30,
1999 and December 31, 1998) (Note 4)............ 16,062,070 12,720,962
Mortgage receivable (Note 5)...................... 5,042,500 -
Deposits and other assets......................... 1,422,092 2,854,836
Deferred organization costs (net of accumulated
amortization of $36,223 and $16,477 at June 30,
1999 and December 31, 1998, respectively)
(Note 1)........................................ - 19,746
Loan fees (net of accumulated amortization
of $410,707 and $395,962 at June 30, 1999 and
December 31, 1998, respectively) (Note 1)....... 3,673,570 3,294,787
------------- -------------
Total assets...................................... $878,075,571 787,608,547
============= =============
See accompanying notes to consolidated financial statements.
-2-
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Consolidated Balance Sheets
(continued)
June 30, 1999 and December 31, 1998
(unaudited)
Liabilities and Stockholders' Equity
------------------------------------
1999 1998
Liabilities: ---- ----
Accounts payable................................ $ 992,759 917,483
Accrued offering costs to Affiliates............ - 890,786
Accrued offering costs to non-affiliates........ 224 2,740
Accrued interest payable to Affiliates.......... 4,514 4,558
Accrued interest payable to non-affiliates...... 1,315,133 1,651,334
Accrued real estate taxes....................... 15,604,563 14,384,234
Distributions payable (Note 9).................. 4,022,883 3,844,649
Security deposits............................... 1,836,877 1,561,020
Mortgages payable (Note 6)...................... 356,963,892 288,982,470
Unearned income................................. 1,386,502 448,809
Other liabilities............................... 12,184,296 5,208,755
Due to Affiliates (Note 2)...................... 900,621 32,925
------------- -------------
Total liabilities................................. 395,212,264 317,929,763
------------- -------------
Minority interest (Note 1)........................ 4,929,205 5,214,298
------------- -------------
Stockholders' Equity (Notes 1 and 2):
Preferred stock, $.01 par value, 6,000,000 Shares
authorized; none issued and outstanding at June
30, 1999 and December 31, 1998................ - -
Common stock, $.01 par value, 100,000,000 Shares
authorized; 54,524,700 and 52,394,500 Shares
issued and outstanding at June 30, 1999 and
December 31, 1998, respectively............... 545,247 523,945
Additional paid-in capital (net of offering
costs of $58,817,348 and $57,536,374 at June
30, 1999 and December 31, 1998, respectively of
which $52,218,524 and $51,108,966 was paid
to Affiliates, respectively).................. 503,065,990 481,271,094
Accumulated distributions in excess of
net income.................................... (25,677,135) (17,330,553)
------------- -------------
Total stockholders' equity........................ 477,934,102 464,464,486
------------- -------------
Total liabilities and stockholders' equity........ $878,075,571 787,608,547
============= =============
See accompanying notes to consolidated financial statements.
-3-
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Consolidated Statements of Operations
For the three and six months ended June 30, 1999 and 1998
(unaudited)
Three months Six months
ended ended
June 30, June 30,
-------- --------
1999 1998 1999 1998
Income: ---- ---- ---- ----
Rental income (Notes 1 and 4).... $20,446,223 12,006,760 39,072,302 21,431,176
Additional rental income......... 6,937,095 4,164,116 13,857,666 7,185,041
Interest income.................. 1,221,419 1,058,501 2,747,791 1,834,865
Other income..................... 170,925 15,523 288,264 62,314
----------- ---------- ---------- ----------
28,775,662 17,244,900 55,966,023 30,513,396
Expenses: ----------- ---------- ---------- ----------
Professional services to
Affiliates..................... 26,269 25,023 49,051 43,023
Professional services to
non-affiliates................. 79,758 17,500 220,728 115,698
General and administrative
to Affiliates.................. 149,205 76,665 295,606 147,426
General and administrative
expenses to non-affiliates..... 268,426 29,152 352,334 60,208
Advisor asset management fee..... 850,000 548,193 1,175,000 980,376
Property operating expenses
to Affiliates.................. 1,175,157 654,591 2,246,911 1,149,119
Property operating expenses
to non-affiliates.............. 7,791,855 4,862,097 15,740,043 8,328,591
Mortgage interest to Affiliates.. 13,563 13,814 27,192 27,702
Mortgage interest to
non-affiliates................. 5,553,177 2,985,569 11,197,345 5,304,045
Depreciation..................... 4,611,544 2,817,980 8,940,498 5,018,934
Amortization..................... 7,372 55,041 34,491 97,548
Acquisition cost expenses to
Affiliates..................... 67,397 56,750 282,101 86,750
Acquisition cost expenses to
non-affiliates................. 29,938 8,115 149,396 22,151
----------- ---------- ---------- ----------
20,623,661 12,150,490 40,710,696 21,381,571
Income before minority interest ----------- ---------- ---------- ----------
in earnings...................... 8,152,001 5,094,410 15,255,327 9,131,825
Minority interest in earnings...... 81,981 - 81,543 -
----------- ---------- ---------- ----------
Net income......................... $ 8,233,982 5,094,410 15,336,870 9,131,825
=========== ========== ========== ==========
See accompanying notes to consolidated financial statements.
-4-
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Consolidated Statements of Operations
(continued)
For the three and six months ended June 30, 1999 and 1998
(unaudited)
Three months Six months
ended ended
June 30, June 30,
-------- --------
1999 1998 1999 1998
Net income per common share, ---- ---- ---- ----
basic and diluted................ $ .15 .13 .29 .27
=========== ========== ========== ==========
Weighted average common stock
shares outstanding, basic and
diluted.......................... $54,141,838 38,431,473 53,350,495 33,593,045
=========== ========== ========== ==========
See accompanying notes to consolidated financial statements.
-5-
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Consolidated Statement of Stockholders' Equity
June 30, 1999
(unaudited)
Accumulated
Additional Distributions
Common Paid-in in Excess of
Stock Capital Net Income Total
---------- ----------- ------------ ------------
Balance January 1, 1999..... $ 523,945 481,271,094 (17,330,553) 464,464,486
Net income.................. - - 15,336,870 15,336,870
Distributions declared
($.44 for the six months
ended June 30, 1999 per
weighted average common
stock shares outstanding). - - (23,683,452) (23,683,452)
Proceeds from Offering (net
of Offering costs of
$1,280,974)............... 22,694 23,053,176 - 23,075,870
Repurchases of Shares....... (1,392) (1,258,280) - (1,259,672)
---------- ----------- ------------ ------------
Balance June 30, 1999....... $ 545,247 503,065,990 (25,677,135) 477,934,102
========== =========== ============ ============
See accompanying notes to consolidated financial statements.
-6-
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Consolidated Statements of Cash Flows
For the six months ended June 30, 1999 and 1998
(unaudited)
1999 1998
Cash flows from operating activities: ---- ----
Net income...................................... $ 15,336,870 9,131,825
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation.................................. 8,940,498 5,018,934
Amortization.................................. 34,491 97,548
Minority interest in earnings................. (81,543) -
Rental income under master lease agreements... 840,189 1,069,655
Straight line rental income................... (973,891) (611,079)
Interest on unamortized loan fees............. 227,085 -
Changes in assets and liabilities:
Accounts and rents receivable............... (2,367,217) (3,063,100)
Other assets................................ 1,332,744 (324,062)
Accounts payable............................ 847,008 163,151
Accrued interest payable.................... (336,245) 404,752
Accrued real estate taxes................... 1,220,329 4,222,631
Security deposits........................... 275,857 387,770
Other liabilities........................... 6,975,541 2,018,290
Due to Affiliates........................... 867,696 258,763
Unearned income............................. 937,693 64,578
------------- -------------
Net cash provided by operating activities......... 34,077,105 18,839,656
------------- -------------
Cash flows from investing activities:
Restricted cash................................. (6,225,849) (2,590,795)
Purchase of investment securities............... (6,369,476) -
Additions to investment properties.............. (2,877,058) (646,250)
Purchase of investment properties............... (120,666,196) (163,602,161)
Mortgage receivable............................. (5,042,500) (929,239)
Construction in progress........................ (173,806) -
Proceeds from sale of land...................... 1,117,665 -
Deposits on investment properties............... 100,000 3,018,530
------------- -------------
Net cash used in investing activities............. (140,137,220) (164,749,915)
------------- -------------
See accompanying notes to consolidated financial statements.
-7-
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Consolidated Statements of Cash Flows
(continued)
For the six months ended June 30, 1999 and 1998
(unaudited)
1999 1998
Cash flows from financing activities: ---- ----
Proceeds from offering.......................... 24,356,844 174,199,117
Repurchases of shares........................... (1,259,672) (173,970)
Payments of offering costs...................... (2,174,276) (17,018,631)
Loan proceeds................................... 57,450,000 48,302,000
Loan fees....................................... (620,613) (673,565)
Distributions paid.............................. (23,708,768) (13,478,174)
Principal payments of debt...................... (938,481) (743,111)
------------- ---------------
Net cash provided by financing activities......... 53,105,034 190,413,666
Net increase (decrease) in cash and ------------- ---------------
cash equivalents................................ (52,955,081) 44,503,407
Cash and cash equivalents at beginning of period.. 123,056,702 51,145,587
------------- ---------------
Cash and cash equivalents at end of period........ $ 70,101,621 95,648,994
============== =============
Supplemental schedule of noncash investing and financing activities:
Increase in investment properties................. $(132,136,099) (177,026,344)
Assumption of mortgage debt....................... 11,469,903 13,424,183
-------------- --------------
Purchase of investment properties................. $(120,666,196) (163,602,161)
============== ==============
Distributions payable............................. $ 4,022,883 2,954,326
============== ==============
Interest paid..................................... $ 11,118,153 4,926,995
============== ==============
See accompanying notes to consolidated financial statements.
-8-
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Consolidated Financial Statements
June 30, 1999
(unaudited)
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") for interim financial
information and with instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by GAAP for complete financial statements. Readers of this Quarterly Report
should refer to the audited financial statements of Inland Real Estate
Corporation (the "Company") for the fiscal year ended December 31, 1998, which
are included in the Company's 1998 Annual Report, as certain footnote
disclosures contained in such audited financial statements have been omitted
from this Report. In the opinion of management, all adjustments (consisting of
normal recurring accruals) necessary for a fair presentation have been included
in this quarterly report.
(1) Organization and Basis of Accounting
The Company was formed on May 12, 1994. The Company may acquire existing
Neighborhood Retail Centers and Community Centers located primarily within an
approximate 400-mile radius of its headquarters in Oak Brook, Illinois. The
Company may also acquire single-user retail properties in locations throughout
the United States, some of which may be sale and leaseback transactions, net
leased to creditworthy tenants. The Company is also permitted to construct or
develop properties, or render services in connection with such development or
construction, subject to the Company's compliance with the rules governing real
estate investment trusts under the Internal Revenue Code of 1986, as amended
(the "Code"). Inland Real Estate Advisory Services, Inc. (the "Advisor"), an
Affiliate of the Company, is the advisor to the Company.
On October 14, 1994, the Company commenced an initial public offering, on a best
efforts basis, ("Initial Offering") of 5,000,000 shares of common stock
("Shares") at $10 per Share. As of July 24, 1996, the Company had received
subscriptions for a total of 5,000,000 Shares, thereby completing the Initial
Offering. On July 24, 1996, the Company commenced an offering of an additional
10,000,000 Shares at $10.00 per Share, on a best efforts basis, (the "Second
Offering"). As of July 10, 1997, the Company had received subscriptions for a
total of 10,000,000 Shares, thereby completing the Second Offering. On July 14,
1997, the Company commenced an offering of an additional 20,000,000 Shares at
$10.00 per Share, on a best efforts basis, (the "Third Offering"). As of March
19, 1998, the Company had received subscriptions for a total of 20,000,000
Shares, thereby completing the Third Offering. On April 7, 1998, the Company
commenced an offering of an additional 27,000,000 Shares at $11.00 per Share, on
a best efforts basis, (the "Fourth Offering"). In order to maximize the
Company's flexibility in evaluating strategic alternatives, the Board of
Directors decided to terminate the Fourth Offering on December 31, 1998. The
Company received subscriptions for a total of 16,642,397 Shares in the Fourth
Offering. The Initial, Second, Third and Fourth are collectively called the
"Offerings." In addition, as of June 30, 1999, the Company has issued 3,272,967
Shares through the Company's Distribution Reinvestment Program. As of June 30,
1999, the Company has repurchased a total of 390,085 Shares through the
Company's Share Repurchase Program, for an aggregate amount of $3,644,336. As a
result, gross offering proceeds from the Offerings ("Gross Offering Proceeds")
total $562,428,585, as of June 30, 1999.
-9-
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Consolidated Financial Statements
(continued)
June 30, 1999
(unaudited)
The preparation of consolidated financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities as of the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting periods. Actual
results could differ from management's estimates.
The Company classifies its investment in securities in one of three categories:
trading, available-for-sale, or held-to-maturity. Trading securities are bought
and held principally for the purpose of selling them in the near term. Held-to-
maturity securities are those securities in which the Company has the ability
and intent to hold the security until maturity. All securities not included in
trading or held-to-maturity are classified as available for sale. Investment
securities at June 30, 1999 consist of preferred and common stock investments in
various real estate investment trusts and are classified as available-for-sale
securities. Available-for-sale securities are recorded at fair value.
Unrealized holding gains and losses on available-for-sale securities are
excluded from earnings and reported as a separate component of other
comprehensive income until realized. Realized gains and losses from the sale of
available-for-sale securities are determined on a specific identification basis.
A decline in the market value of any available-for-sale security below cost that
is deemed to be other that temporary results in a reduction in the carrying
amount to fair value. The impairment is charged to earnings and a new cost basis
for the security is established. Dividend income is recognized when earned.
In the opinion of management, the financial statements contain all the
adjustments necessary, which are of a normal recurring nature, to present fairly
the financial position and results of operations for the period presented
herein. Results of interim periods are not necessarily indicative of results to
be expected for the year.
The consolidated financial statements include the accounts of the Company and
Joliet Commons LLC, an Illinois limited liability company ("LLC"). The Company
entered into the LLC with an unaffiliated third party (the "Seller") in order to
purchase the Joliet Commons Shopping Center. The transaction was structured
such that the Company contributed approximately $52,000 for a 1% interest in the
LLC and the Seller contributed a property with a fair market value of
approximately $19,733,000 and debt of approximately $14,569,000 to the LLC for a
99% interest. The Company is the managing member of the LLC. Due to the
Company's ability as managing member to directly control the LLC, it is
consolidated for financial reporting purposes. The Seller's interest is
reflected as a minority interest in the accompanying consolidated financial
statements.
-10-
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Consolidated Financial Statements
(continued)
June 30, 1999
(unaudited)
(2) Transactions with Affiliates
The Advisor and its Affiliates are entitled to reimbursement for salaries and
expenses of employees of the Advisor and its Affiliates relating to each of the
Offerings. Such expenses include postage, data processing and marketing and are
reimbursed at cost. The aggregate cost to Affiliates incurred and paid relating
to the Offerings was $2,349,336. In addition, an Affiliate of the Advisor served
as Dealer Manager of each of the Offerings and was entitled to receive selling
commissions, marketing contributions and due diligence expense allowance fees
from the Company in connection with each of the Offerings. Such amounts
incurred and paid by the Company were $49,869,188, of which approximately
$43,392,000 of these commissions were passed through from the Affiliate to
unaffiliated soliciting broker/dealers.
The Company incurred $58,853,874 of organization and offering costs to
Affiliates and non-affiliates in connection with the Offerings. Pursuant to the
terms of each of the Offerings, the Advisor is required to pay organizational
and offering expenses (excluding sales commissions, the marketing contribution
and the due diligence expense allowance fee) in excess of 5.5% of Gross Offering
Proceeds or all organization and offering expenses (including selling
commissions) which together exceed 15% of Gross Offering Proceeds. At
completion of the offerings, organizational and offering costs expenses did not
exceed the 5.5% and 15% limitations.
The Advisor may receive an annual advisor asset management fee of not more than
1% of the average invested assets, paid quarterly. For any year in which the
Company qualifies as a REIT, the Advisor must reimburse the Company: (i) to the
extent that the advisor asset management fee plus other operating expenses paid
during the previous calendar year exceed 2% of the Company's average invested
assets for the calendar year or 25% of the Company's net income for that
calendar year; and (ii) to the extent that stockholders have not received an
annual distribution equal to or greater than the 8% current return. The Company
incurred $1,175,000 and $980,376 of advisor asset management fees for the six
months ended June 30, 1999 and 1998, respectively, of which $850,000 and
$548,193 remain unpaid at June 30, 1999 and 1998, respectively.
An Affiliate of the Advisor is entitled to receive Property Management Fees for
management and leasing services. The Company incurred and paid Property
Management Fees of $2,246,911 and $1,149,119 for the six months ended June 30,
1999 and 1998, respectively.
The Advisor and its Affiliates are entitled to reimbursement for salaries and
expenses of employees of the Advisor and its Affiliates relating to selecting,
evaluating and acquiring properties. The costs relating to properties purchased
are included in building and improvements. The costs relating to properties
that were not acquired are included in acquisition cost expenses to Affiliates.
-11-
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Consolidated Financial Statements
(continued)
June 30, 1999
(unaudited)
The Advisor and its Affiliates are entitled to reimbursement for salaries and
expenses of employees of the Advisor and its Affiliates relating to the
administration of the Company. Such costs of $49,051, $295,606 and $282,101
are included in professional services to Affiliates, general and administrative
expenses to Affiliates and acquisition costs expensed to Affiliates,
respectively, for the six months ended June 30, 1999.
(3) Investment Properties
As part of several purchases, the Company receives rent under master lease
agreements on the spaces currently vacant for periods ranging from one to two
years or until the spaces are leased. GAAP requires that as these payments are
received, they be recorded as a reduction in the purchase price of the
properties rather than as rental income. The cumulative amount of such
payments was $3,803,018 and $2,962,829 as of June 30, 1999 and December 31,
1998, respectively.
(4) Operating Leases
Certain tenant's leases contain provisions providing for stepped rent
increases. GAAP requires the Company to record rental income for the period of
occupancy using the effective monthly rent, which is the average monthly rent
for the entire period of occupancy during the term of the lease. The
accompanying consolidated financial statements include increases of $973,891
and $611,079 in 1999 and 1998, of rental income for the period of occupancy for
which stepped rent increases apply and $3,881,458 and $2,907,567 in related
accounts and rents receivable as of June 30, 1999 and December 31, 1998,
respectively. The Company anticipates collecting these amounts over the terms
of the leases as scheduled rent payments are made.
(5) Mortgage Receivable
On May 28, 1999, the Company entered into a construction loan agreement with an
unaffiliated third party, the borrower, for an aggregate loan of $15,500,000.
Disbursements will be made periodically as work progresses in connection with
the reconstruction of Thatcher Woods Shopping Center in River Grove, Illinois.
The construction loan matures on December 31, 2000. The loan requires the
borrower to make monthly interest-only payments on amounts disbursed at a rate
of 9%. Contingent upon certain criteria stated in the contract, the Company
has agreed to purchase this property upon completion, which should occur prior
to year end 2000.
-12-
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Consolidated Financial Statements
(continued)
June 30, 1999
(unaudited)
(6) Mortgages Payable
Current Current Balance at
Interest Maturity Monthly June 30, Dec. 31,
Rate Date Payment(a) 1999 1998
---------- --------- ---------- ----------- -----------
Mortgage payable to Affiliate:
Inland Mortgage
Servicing Corp. (a) 7.65% 05/2004 $ 5,689 $ 707,546 714,443
Mortgages payable to non-affiliates:
Bank One 7.03% 08/2000 (b) 4,277,342 4,312,036
LaSalle National Bank 7.85% 10/2003 57,992 8,865,000 8,865,000
LaSalle National Bank 7.85% 08/2003 25,872 3,955,000 3,955,000
LaSalle National Bank 7.59% 01/2004 81,277 12,850,000 12,850,000
LaSalle National Bank 7.80% 01/2004 83,460 12,840,000 12,840,000
John Hancock (a) (c) 9.00% 10/2001 85,423 9,105,086 9,205,252
LaSalle National Bank 7.65% 06/2004 65,133 10,216,880 10,216,880
LaSalle National Bank 7.49% 06/2004 61,116 9,791,500 9,791,500
LaSalle National Bank 7.23% 01/2005 28,183 4,677,796 4,677,795
Allstate 7.21% 12/2004 38,453 6,400,000 6,400,000
LaSalle National
Bank (d) 3.13% 12/2014 19,740 6,200,000 6,200,000
LaSalle National Bank 7.28% 03/2005 25,041 4,050,000 4,050,000
LaSalle National Bank 6.99% 04/2003 6,827 1,150,000 1,150,000
LaSalle National Bank 7.00% 04/2005 106,404 17,897,500 17,897,500
Allstate 7.00% 02/2005 31,946 5,476,500 5,476,500
Allstate 7.00% 01/2005 23,917 4,100,000 4,100,000
Allstate 7.15% 01/2005 18,173 3,050,000 3,050,000
Allstate 7.10% 03/2003 17,620 2,978,000 2,978,000
Nationwide Life
Insurance Company 8.00% 09/1999 63,333 9,500,000 9,500,000
Allstate 6.65% 05/2005 53,200 9,600,000 9,600,000
Allstate (e) 9.25% 12/2009 30,125 3,908,082 3,908,082
Allstate 6.82% 08/2005 60,243 10,600,000 10,600,000
LaSalle National Bank 6.50% 12/2005 72,123 13,500,000 13,500,000
Allstate 6.66% 10/2003 17,483 3,150,000 3,150,000
-13-
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Consolidated Financial Statements
(continued)
June 30, 1999
(unaudited)
Current Current Balance at
Interest Maturity Monthly June 30, Dec. 31,
Rate Date Payment(a) 1999 1998
---------- --------- ---------- ----------- -----------
Allstate 7.00% 12/2003 65,333 11,200,000 11,200,000
Berkshire Mortgage (a) 7.79% 10/2007 105,719 14,507,950 14,569,482
Woodmen of the World 6.75% 06/2008 26,015 4,625,000 4,625,000
Lehman secured
financing (f) 6.36% 10/2008 299,025 54,600,000 54,600,000
Column secured
financing (g) 7.00% 11/2008 150,695 25,000,000 25,000,000
Principal Life Ins. 6.24% 09/2001 55,820 10,734,710 -
Bear, Stearns secured
financing (h) 6.86% 06/2004 328,662 57,450,000 -
------------ -----------
Mortgages Payable.................................... $356,963,892 288,982,470
============ ============
(a) All payments are interest only, with the exception of the loans secured by
the Walgreens, Regency Point, Aurora Commons and Joliet Commons properties.
(b) Payments on this mortgage are based on a floating interest rate of 180
basis points over the 30-day LIBOR rate, which adjusts monthly, amortizing
over 25 years.
(c) The Company received a credit for interest expense on the debt at closing,
which is included in restricted cash along with an amount set aside by the
Company for principal payments on the debt. Interest income earned on the
restricted cash amounts, when netted with interest expense on the debt,
results in an adjusted interest rate on the debt of approximately 8.2%.
(d) As part of the purchase of this property, the Company assumed the existing
mortgage-backed Economic Development Revenue Bonds, Series 1994 offered by
the Village of Skokie, Illinois. The interest rate floats and is reset
weekly by a re-marketing agent. The current rate is 3.13%. The bonds are
further secured by an Irrevocable Letter of Credit, issued by LaSalle Bank
at a fee of 1.25% of the bond outstanding. In addition, there is a .125%
re-marketing fee paid annually and a trustee fee of $250 paid quarterly.
On January 15, 1998, the Company made a $600,000 paydown on the principal
outstanding.
-14-
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Consolidated Financial Statements
(continued)
June 30, 1999
(unaudited)
(e) The seller deposited money into an escrow account, which together with
interest earnings on the deposit, will provide a sum that will be drawn
down on a monthly basis by the Company to reduce the effective interest
rate paid on the loan to 7% per annum for a period of five years.
(f) The Company paid $636,000 of loan fees and $503,295 of other costs
associated with this financing with Lehman Brothers Holdings, Inc. This
allowed the Company to secure a rate lock agreement to set the interest
rate at the time of execution of this financing, thus protecting the
Company from future interest rate increases.
(g) The Company paid $37,125 of loan fees and $267,884 of other costs
associated with this financing with Column Financial, Inc. This allowed the
Company to secure a rate lock agreement to set the interest rate at the
time of execution of this financing, thus protecting the Company from
future interest rate increases.
(h) The Company paid $415,766 of loan fees and $134,429 of other costs
associated with this financing with Bear, Stearns Funding, Inc. This
allowed the Company to secure a rate lock agreement to set the interest
rate at the time of execution of this financing, thus protecting the
Company from future interest rate increases.
(7) Earnings per Share
Basic earnings per share ("EPS") is computed by dividing income available to
common stockholders by the weighted average number of common shares outstanding
for the period. Diluted EPS is computed by reflecting the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the Company. As of June 30, 1999 and
December 31, 1998, options to purchase 15,000 and 13,500 shares, respectively,
of common stock at prices ranging from $9.05 to $10.45 per share were
outstanding.
As of June 30, 1999, the Company has issued warrants to purchase 1,158,509
shares of common stock at a price of $12.00 per share to soliciting dealers
pursuant to its Offerings. These warrants were not included in the computation
of diluted EPS because the warrants' exercise price was greater than the
average market prices of common shares.
-15-
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Consolidated Financial Statements
(continued)
June 30, 1999
(unaudited)
(8) Segment Reporting
The Company owns and seeks to acquire single-user retail centers, neighborhood
and community shopping centers in the Midwest, generally consisting of the
states of Illinois, Indiana, Michigan, Minnesota, Ohio and Wisconsin. All of
the Company's shopping centers are located within in these states. The
Company's shopping centers are typically anchored by grocery and drug stores
complemented with additional stores providing a wide range of other goods and
services to shoppers.
The Company assesses and measures operating results on an individual property
basis for each of its properties based on net property operations. Since all
of the Company's properties exhibit highly similar economic characteristics,
cater to the day-to-day living needs of their respective surrounding
communities, and offer similar degrees of risk and opportunities for growth,the
properties have been aggregated and reported as one operating segment.
The property revenues and property net operations of the reportable segments
are summarized in the following tables as of June 30, 1999 and 1998, and for
the six month periods then ended, along with a reconciliation to net income.
Property asset information is as of June 30, 1999 and December 31, 1998.
1999 1998
---- ----
Total property revenues......... $ 53,218,232 28,678,531
Total property operating
expenses...................... 17,986,954 9,477,710
Mortgage interest................ 11,224,537 5,331,747
------------- -------------
Net property operations.......... 24,006,741 13,869,074
------------- -------------
Interest income.................. 2,747,791 1,834,865
Less non property expenses:
Professional services.......... 269,779 158,721
General and administrative..... 647,940 207,634
Advisor asset management fee... 1,175,000 980,376
Depreciation and amortization.. 8,974,989 5,116,482
Acquisition cost expense....... 431,497 108,901
Income before minority interest ------------- -------------
in earnings.................... $ 15,255,327 9,131,825
============= =============
Net investment properties........ $753,565,196 630,048,317
============= =============
-16-
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Consolidated Financial Statements
(continued)
June 30, 1999
(unaudited)
(9) Subsequent Events
In July 1999, the Company paid a distribution of $4,022,883 to Stockholders.
Subsequent to June 30, 1999, the Company has purchased two additional
properties from unaffiliated third parties for a total purchase price of
approximately $11,900,000.
On behalf of the Company, the Advisor is currently exploring the purchase of
additional shopping centers from unaffiliated third parties.
-17-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Certain statements in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and elsewhere in this quarterly report on
Form 10-Q constitute "forward-looking statements" within the meaning of the
Federal Private Securities Litigation Reform Act of 1995. These forward-
looking statements involve known and unknown risks, uncertainties and other
factors which may cause the Company's actual results, performance or
achievements to be materially different from any future results, performance or
achievements expressed or implied by these forward-looking statements. These
factors include, among other things, limitations on the area in which the
Company may acquire properties; risks associated with borrowings secured by the
Company's properties; competition for tenants and customers; federal, state or
local regulations; adverse changes in general economic or local conditions;
competition for property acquisitions with third parties that have greater
financial resources than the Company; inability of lessees to meet financial
obligations; uninsured losses; risks of failing to qualify as a REIT; and
potential conflicts of interest between the Company and its Affiliates
including the Advisor.
Liquidity and Capital Resources
On September 28, 1998, the Board of Directors authorized the Company to engage
Everen Securities, Inc. to advise the Company on strategic alternatives
designed to maximize Stockholder value. These alternative include, but are not
limited to, evaluating whether the Company should: (1) become internally
advised and managed by acquiring the Advisor and the Company's property
manager; (2) list its common stock on an exchange or other trading system; or
(3) seek to merge with a third party that is already listed on an exchange or
other trading system. Everen Securities is expected to complete its advisory
engagement by the third quarter 1999.
Cash and cash equivalents consists of cash and short-term investments. Cash
and cash equivalents at June 30, 1999 and December 31, 1998 were $70,101,621
and $123,056,702, respectively. The decrease in cash and cash equivalents
since December 31, 1998 resulted primarily from the use of cash resources to
purchase additional properties since December 31, 1998. The Company intends to
use cash and cash equivalents to purchase additional properties, to pay
distributions and for working capital requirements. The source of future cash
for investing in properties will be from financing obtained on currently
unencumbered properties.
-18-
As of June 30, 1999, the Company had acquired ninety-nine properties. The
properties owned by the Company are currently generating sufficient cash flow
to cover operating expenses of the Company plus pay a monthly distribution on
weighted average shares. Distributions declared for the six months ended June
30, 1999 were $23,683,452, a portion of which represents a return of capital
for federal income tax purposes. The return of capital portion of the
distributions cannot be determined at this time and will be calculated at year
end.
Management of the Company monitors the various qualification tests the Company
must meet to maintain its status as a real estate investment trust. Large
ownership of the Company's stock is tested upon purchase to determine that no
more than 50% in value of the outstanding stock is owned directly, or
indirectly, by five or fewer persons or entities at any time. Management of
the Company also determines, on a quarterly basis, that the Gross Income, Asset
and Distribution Tests imposed by the REIT requirements are met. On an ongoing
basis, as due diligence is performed by the Advisor on potential real estate
purchases or temporary investment of uninvested capital, management determines
that the income from the new asset will qualify for REIT purposes. Beginning
with the tax year ended December 31, 1995, the Company has qualified as a REIT.
Cash Flows From Operating Activities
Net cash provided by operating activities increased from $18,839,656 for the
six months ended June 30, 1998 to $34,077,105 for the six months ended June 30,
1999. This increase is due primarily to the purchase of additional properties
in 1999 and a full six months of operations on properties acquired during 1998.
As of June 30, 1999, the Company had acquired ninety-nine properties, as
compared to sixty-seven properties as of June 30, 1998.
Cash Flows From Investing Activities
Cash flows used in investing activities were utilized primarily for the
purchase of and additions to properties. Additionally, during 1999 the Company
purchased investment securities.
Cash Flows From Financing Activities
For the six months ended June 30, 1999, the Company generated $53,105,034 of
cash flows from financing activities as compared to $190,413,666 of cash flows
generated from financing activities for the six months ended June 30, 1998.
This decrease is due primarily to the termination of the Fourth Offering on
December 31, 1998. For the six months ended June 30, 1998, the Company had
proceeds from the Offerings, net of offering costs paid, of approximately
$157,200,000, compared to offering proceeds received, net of offering costs
paid, for the six months ended June 30, 1999 of approximately $22,200,000. The
decrease is also due to an increase in the distributions paid for the six
months ended June 30, 1999 of approximately $23,700,000, as compared to the
distributions paid for the six months ended June 30, 1998 of approximately
$13,500,000. This decrease was partially offset by an increase in loan
proceeds received from financing placed on previously unencumbered properties
during the six months ended June 30, 1999 of $57,450,000, as compared to the
loan proceeds received during the six months ended June 30, 1998 of
$48,302,000.
-19-
Results of Operations
At June 30, 1999, the Company owned sixty-four Neighborhood Retail Centers,
fourteen Community Centers and twenty-one single-user retail properties.
Total income for the six months ended June 30, 1999 and 1998 was $55,966,023 and
$30,513,396, respectively. This increase was due to the purchase of additional
properties in 1999 and a full six months of operations on properties acquired
during 1998. As of June 30, 1999, the Company had acquired ninety-nine
properties, as compared to sixty-seven properties as of June 30, 1998. The
purchase of additional properties also resulted in increases in additional
rental income, property operating expenses and depreciation expense.
During March 1999, the Company received a lease termination fee of $803,158 on a
lease at one of the Company's properties. This termination fee is included in
additional rental income for the six months ended June 30, 1999. The Company
signed a lease with a new tenant for this space and began receiving rent from
the new tenant in April 1999.
The increase in mortgage interest to non-affiliates for the three and six months
ended June 30, 1999, as compared to the three and six months ended June 30,
1998, is due to the Company obtaining additional financing secured by previously
acquired centers, as well as mortgages assumed as part of the purchase of
properties. The mortgages payable totaled $356,963,892 as of June 30, 1999, as
compared to $288,982,470 as of June 30, 1998.
Interest income is the result of cash and cash equivalents being invested in
short-term investments until a property is purchased.
The increase in professional services to Affiliates and non-affiliates and
general and administrative expenses to Affiliates for the three and six months
ended June 30, 1999, as compared to the three and six months ended June 30,
1998, is due to the management of an increased number of real estate assets and
an increased number of stockholders.
The increase in acquisition cost expenses to Affiliates and non-affiliates is
due to the increased number of properties considered for acquisition by the
Company and not purchased.
The consolidated financial statements include the accounts of the Company and
Joliet Commons LLC, an Illinois limited liability company ("LLC"). The Company
entered into the LLC with an unaffiliated third party (the "Seller") in order to
purchase the Joliet Commons Shopping Center. The transaction was structured
such that the Company contributed approximately $52,000 for a 1% interest in the
LLC and the Seller contributed a property with a fair market value of
approximately $19,733,000 and debt of approximately $14,569,000 to the LLC for a
99% interest. The Company is the managing member of the LLC. Due to the
Company's ability as managing member to directly control the LLC, it is
consolidated for financial reporting purposes. The Seller's interest is
reflected as a minority interest in the accompanying consolidated financial
statements.
-20-
Year 2000 Issues
General
Many computer operating systems and software applications were designed such
that the year 1999 is the maximum date that can be processed accurately. In
conducting business, the Company relies on computers and operating systems
provided by equipment manufacturers, and also on application software developed
internally and, to a limited extent, by outside software vendors. The Company
has assessed its vulnerability to the so-called "Year-2000 Issue" with respect
to its equipment and computer systems.
State of Readiness
The Company has identified the following three areas for "Year-2000" compliance
efforts:
Business Computer Systems: The majority of the Company's information technology
systems were developed internally and include accounting, lease management,
investment portfolio tracking, and tax return preparation. The Company has
rights to the source code for these applications and employs programmers who are
knowledgeable regarding these systems. The process of testing these internal
systems to determine year 2000 compliance is nearly complete. The Company does
not anticipate any material costs relating to its business computer systems
regarding year 2000 compliance since the Company's critical hardware and
software systems use four digits to represent the applicable year. The Company
does use various computers, so-called "PC's", that may run software that may not
use four digits to represent the applicable year. The Company is in the process
of testing the PC hardware and software to determine year 2000 compliance, but
it must be noted that such PC's are incidental to the Company's critical
systems.
Tenants and Suppliers: The Company is in the process of surveying tenants,
suppliers and other parties with whom the Company does a significant amount of
business to identify the Company's potential exposure in the event such parties
are not year 2000 compliant in a timely manner. At this time, the Company is
not aware of any of these parties anticipating a material year 2000 compliance
issue. However, since this area involves some parties over which the Company
has no control, such as public utility companies, it is difficult, at best, to
judge the status of the outside companies' year 2000 compliance. The Company is
working closely with all suppliers of goods and services in an effort to
minimize the impact of the failure of any supplier to become year 2000 compliant
by December 31, 1999. The Company's investigations and assessments of possible
year 2000 issues are on-going, and currently the Company is not aware of any
material impact on its business, operations or financial condition due to year
2000 non-compliance by any of the Company's tenants or suppliers. The Company
will continue to investigate and assess its tenants through the year ended
December 31, 1999.
Non-Information Technology Systems: In the operation of its properties, the
Company has acquired equipment with embedded technology such as
microcontrollers, which operate heating, ventilation, and air conditioning
systems, fire alarms, security systems, telephones and other equipment utilizing
time-sensitive technology. The Company is in the process of evaluating its
potential exposure and costs if such non-information technology systems are not
year 2000 compliant and expects to be able to complete its assessment during the
third quarter of 1999.
-21-
Year 2000 Costs
The Company's Advisor and its Affiliates estimate that costs to achieve year
2000 compliance will not exceed $100,000. However, only approximately 10% of
these costs will be directly allocated to and paid by the Company. The balance
of the year 2000 compliance costs, approximately 90%, will be paid by the
Advisor and its Affiliates. Total year 2000 compliance costs are not expected
to be material.
Year 2000 Risks
The most reasonable likely worst case scenario for the Company with respect to
the year 2000 non-compliance of its business computer systems would be the
inability to access information which could result in the failure to issue
financial reports. The most reasonable likely worst case scenario for the
Company with respect to the year 2000 non-compliance of its tenants is failure
to receive rental income which could result in the Company being unable to meet
cash requirements for monthly expenses and distributions. The most reasonable
likely worst case scenario for the Company with respect to the year 2000 non-
compliance of its suppliers is the failure to supply necessary utilities;
including, but not limited to heating, as a result of a malfunctioning of non-
information technology systems in some of the Company's properties.
Contingency Plan
The Company expects to be year 2000 compliant in advance of the year 2000. The
Company will continue to monitor its progress and state of readiness, and is in
the process of formulating a contingency plan which the Company will be prepared
to adopt with respect to areas in which evidence arises that it may not become
year 2000 compliant in sufficient time. As part of its contingency plan, the
Company may consider obtaining a line of credit to meet short term cash needs.
In the event of a failure of the Company's business computer systems, the
Company may also consider the need to delay distributions until its business
computer systems could again process distributions or its tenants could begin
payment of rents. As information is obtained that may indicate such parties may
not become year 2000 compliant in sufficient time, the Company is prepared to
develop contingency plans, accordingly.
-22-
Funds from Operations
One of the Company's objectives is to provide cash distributions to its
Stockholders from cash generated by the Company's operations. Cash generated
from operations is not equivalent to the Company's net operating income as
determined under GAAP. Due to certain unique operating characteristics of real
estate companies, the National Association of Real Estate Investment Trusts
("NAREIT"), an industry trade group, has promulgated a standard known as "Funds
from Operations" or "FFO" for short, which it believes more accurately reflects
the operating performance of a REIT such as the Company. As defined by NAREIT,
FFO means net income computed in accordance with GAAP, less extraordinary,
unusual and non-recurring items, excluding gains (or losses) from debt
restructuring and sales of property plus depreciation and amortization and after
adjustments for unconsolidated partnership and joint ventures in which the REIT
holds an interest. The Company has adopted the NAREIT definition for computing
FFO because management believes that, subject to the following limitations, FFO
provides a basis for comparing the performance and operations of the Company to
those of other REITs. The calculation of FFO may vary from entity to entity
since capitalization and expense policies tend to vary from entity to entity.
Items which are capitalized do not impact FFO, whereas items that are expensed
reduce FFO. Consequently, the presentation of FFO by the Company may not be
comparable to other similarly titled measures presented by other REITs. FFO is
not intended to be an alternative to "Net Income" as an indicator of the
Company's performance nor to "Cash Flows from Operating Activities" as
determined by GAAP as a measure of the Company's capacity to pay distributions.
FFO and funds available for distribution are calculated as follows:
June 30, June 30,
1999 1998
---- ----
Net income................................... $15,336,870 9,131,825
Depreciation net of minority interest........ 8,618,178 5,018,934
------------ ------------
Funds from operations (1).................... 23,955,048 14,150,759
Principal amortization of debt............... (103,122) (35,434)
Deferred rent receivable (2)................. (973,891) (611,079)
Acquisition cost expenses (3)................ - 108,901
Rental income received under
master lease agreements (4)................. 840,189 1,069,655
------------ ------------
Funds available for distribution............. $23,718,224 14,682,802
============ ============
(1) FFO does not represent cash generated from operating activities calculated
in accordance with GAAP and is not necessarily indicative of cash
available to fund cash needs. FFO should not be considered as an
alternative to net income as an indicator of the Company's operating
performance or as an alternative to cash flow as a measure of liquidity.
-23-
(2) Certain tenant leases contain provisions providing for stepped rent
increases. GAAP requires the Company to record rental income for the
period of occupancy using the effective monthly rent, which is the average
monthly rent for the entire period of occupancy during the term of the
lease.
(3) Acquisition cost expenses include costs and expenses relating to the
acquisition of properties. These costs are estimated to be up to .5% of
the Gross Offering Proceeds and are paid from the Proceeds of the
Offering.
(4) As part of several purchases, the Company will receive rent under master
lease agreements on some of the spaces currently vacant for periods
ranging from one to two years or until the spaces are leased. GAAP
requires that as these payments are received, they be recorded as a
reduction in the purchase price of the properties rather than as rental
income.
The following table lists the approximate physical occupancy levels for the
Company's properties as of the end of each quarter during 1998 and 1999. N/A
indicates the property was not owned by the Company at the end of the quarter.
1998 1999
------------------------ -------------------------
at at at at at at at at
Properties 03/31 06/30 09/30 12/31 03/31 06/30 09/30 12/31
---------- ----- ----- ----- ----- ----- ----- ----- -----
Walgreens 100% 100% 100% 100% 100% 100%
Decatur, IL
Eagle Crest 95% 95% 100% 100% 100% 94%
Naperville, IL
Montgomery-Goodyear 77% 77% 77% 77% 77% 77%
Montgomery, IL
Hartford/Naperville Plaza 100% 100% 100% 100% 100% 100%
Naperville, IL
Nantucket Square 96% 98% 100% 100% 100% 100%
Schaumburg, IL
Antioch Plaza 68% 68% 68% 68% 68% 68%
Antioch, IL
Mundelein Plaza 95% 95% 92% 100% 100% 100%
Mundelein, IL
Regency Point 97% 97% 97% 97% 97% 97%
Lockport, IL
Prospect Heights 83% 92% 92% 92% 92% 15%
Prospect Heights, IL
Montgomery-Sears 95% 95% 100% 100% 100% 100%
Montgomery,IL
Zany Brainy 100% 100% 100% 100% 100% 100%
Wheaton, IL
Salem Square 97% 97% 97% 97% 97% 97%
Countryside, IL
Hawthorn Village 100% 100% 100% 100% 100% 100%
Vernon Hills, IL
-24-
1998 1999
------------------------ -------------------------
at at at at at at at at
Properties 03/31 06/30 09/30 12/31 03/31 06/30 09/30 12/31
---------- ----- ----- ----- ----- ----- ----- ----- -----
Six Corners 93% 90% 82% 82% 88% 90%
Chicago, IL
Spring Hill Fashion Ctr. 98% 100% 100% 95% 95% 95%
West Dundee, IL
Crestwood Plaza 100% 100% 100% 100% 100% 68%
Crestwood, IL
Park St. Claire 100% 100% 100% 100% 100% 100%
Schaumburg, IL
Lansing Square 90% 90% 88% 98% 98% 98%
Lansing, IL
Summit of Park Ridge 83% 87% 91% 87% 93% 88%
Park Ridge, IL
Grand and Hunt Club 100% 100% 100% 100% 100% 100%
Gurnee, IL
Quarry Outlot 100% 100% 100% 100% 100% 100%
Hodgkins, IL
Maple Park Place 98% 98% 94% 99% 99% 97%
Bolingbrook, IL
Aurora Commons 98% 98% 95% 95% 94% 94%
Aurora, IL
Lincoln Park Place 60% 60% 60% 60% 60% 60%
Chicago, IL
Ameritech 100% 100% 100% 100% 100% 100%
Joliet, IL
Dominicks-Schaumburg 100% 100% 100% 100% 100% 100%
Schaumburg, IL
Dominicks-Highland Park 100% 100% 100% 100% 100% 100%
Highland Park, IL
Niles Shopping Center 60% 100% 100% 100% 100% 100%
Niles, IL
Mallard Crossing 95% 95% 100% 97% 97% 97%
Elk Grove Village, IL
Cobblers Crossing 89% 89% 92% 91% 92% 92%
Elgin, IL
Calumet Square 100% 100% 100% 100% 100% 100%
Calumet City, IL
Sequoia Shopping Center 93% 96% 100% 100% 100% 100%
Milwaukee, WI
Riversquare Shopping Ctr. 95% 100% 100% 97% 95% 95%
Naperville, IL
Rivertree Court 99% 99% 99% 99% 99% 99%*
Vernon Hills, IL
Shorecrest Plaza 96% 96% 96% 87% 89% 89%
Racine, WI
Dominicks-Glendale Heights 100% 100% 100% 100% 100% 100%
Glendale Heights, IL
Party City Store 100% 100% 100% 100% 100% 100%
Oak Brook Terrace, IL
Eagle Country Market 100% 100% 100% 100% 100% 100%
Roselle, IL
-25-
1998 1999
------------------------ -------------------------
at at at at at at at at
Properties 03/31 06/30 09/30 12/31 03/31 06/30 09/30 12/31
---------- ----- ----- ----- ----- ----- ----- ----- -----
Dominicks-Countryside 100% 100% 100% 100% 100% 100%
Countryside, IL
Terramere Plaza 80% 86% 92% 95% 86% 86%
Arlington Heights, IL
Wilson Plaza 100% 100% 100% 100% 100% 100%
Batavia, IL
Iroquois Center 81% 81% 73% 73% 73% 65%*
Naperville, IL
Fashion Square 80% 87% 97% 100% 100% 100%
Skokie, IL
Naper West 88% 88% 90% 83% 91% 92%
Naperville, IL
Dominicks-West Chicago 100% 100% 100% 100% 100% 100%
West Chicago, IL
Shops at Coopers Grove 96% 100% 100% 100% 100% 100%
Country Club Hills, IL
Maple Plaza 100% 100% 100% 100% 100% 100%
Downers Grove, IL
Orland Park Retail 84% 84% 100% 100% 100% 100%
Orland Park, IL
Wisner/Milwaukee Plaza 100% 100% 100% 100% 100% 100%
Chicago, IL
Homewood Plaza 100% 100% 100% 100% 100% 100%
Homewood, IL
Elmhurst City Center 99% 99% 99% 100% 100% 100%
Elmhurst, IL
Shoppes of Mill Creek 97% 98% 98% 98% 98% 98%
Palos Park, IL
Oak Forest Commons 99% 95% 100% 100% 100% 100%
Oak Forest, IL
Prairie Square 94% 90% 90% 90% 83% 83%*
Sun Prairie, WI
Downers Grove Plaza 84% 100% 100% 100% 100% 100%
Downers Grove, IL
St. James Crossing 88% 91% 91% 91% 91% 91%
Westmont, IL
Woodfield Plaza 97% 94% 94% 97% 97% 97%*
Schaumburg, IL
Lake Park Plaza 95% 93% 76% 74% 74% 74%
Michigan City, IN
Chestnut Court 85% 86% 88% 98% 86% 95%
Darien, IL
Western & Howard N/A 100% 100% 100% 100% 100%
Chicago, IL
High Point Center N/A 97% 97% 90% 94% 82%*
Madison, WI
Wauconda Shopping Center N/A 100% 100% 100% 100% 100%
Wauconda, IL
Berwyn Plaza N/A 100% 100% 100% 100% 100%
Berwyn, IL
-26-
1998 1999
------------------------ -------------------------
at at at at at at at at
Properties 03/31 06/30 09/30 12/31 03/31 06/30 09/30 12/31
---------- ----- ----- ----- ----- ----- ----- ----- -----
Woodland Heights N/A 86% 86% 81% 81% 81%
Streamwood, IL
Schaumburg Shopping Center N/A 93% 93% 93% 93% 93%
Schaumburg, IL
Bergen Plaza N/A 99% 98% 98% 97% 97%*
Oakdale, MN
Walgreens-Woodstock N/A 100% 100% 100% 100% 100%
Woodstock, IL
Winnetka Commons N/A N/A 100% 100% 100% 100%
New Hope, MN
Eastgate Shopping Center N/A N/A 91% 91% 87% 91%*
Lombard, IL
Fairview Heights Plaza N/A N/A 78% 78% 78% 78%
Fairview Heights, IL
Orland Greens N/A N/A 100% 100% 100% 97%
Orland Park, IL
Bakers Shoes N/A N/A 100% 100% 100% 100%
Chicago, IL
Staples, Freeport, IL N/A N/A N/A 100% 100% 100%
Two Rivers Plaza
Bolingbrook, IL N/A N/A N/A 100% 100% 100%
Edinburgh Festival
Brooklyn Park, MN N/A N/A N/A 97% 100% 100%
Woodfield Commons-East/West
Schaumburg, IL N/A N/A N/A 89% 89% 86%*
Riverplace Center
Noblesville, IN N/A N/A N/A 100% 100% 100%
Rose Plaza,
Elmwood Park, IL N/A N/A N/A 100% 100% 100%
Marketplace at Six Corners
Chicago, IL N/A N/A N/A 100% 100% 100%
Joliet Commons,
Joliet, IL N/A N/A N/A 97% 97% 97%*
Springboro Plaza
Springboro, OH N/A N/A N/A 100% 100% 100%
Carmax-Schaumburg
Schaumburg, IL N/A N/A N/A 100% 100% 100%
Carmax-Tinley Park
Tinley Park, IL N/A N/A N/A 100% 100% 100%
Hollywood Video-Hammond
Hammond, IN N/A N/A N/A 100% 100% 100%
Park Center Plaza
Tinley Park, IL N/A N/A N/A 71% 72% 84%*
Plymouth Collection
Plymouth, MN N/A N/A N/A N/A 100% 100%
Circuit City
Traverse City, MI N/A N/A N/A N/A 100% 100%
Loehmann's Plaza
Brookfield, WI N/A N/A N/A N/A 100% 100%
Baytown Square & Shoppes
Champaign, IL N/A N/A N/A N/A 97% 97%*
-27-
1998 1999
------------------------ -------------------------
at at at at at at at at
Properties 03/31 06/30 09/30 12/31 03/31 06/30 09/30 12/31
---------- ----- ----- ----- ----- ----- ----- ----- -----
Woodland Commons
Buffalo Grove, IL N/A N/A N/A N/A 100% 99%
Cub Foods-Plymouth
Plymouth, MN N/A N/A N/A N/A 100% 100%
Cub Foods-Indianapolis
Indianapolis, IN N/A N/A N/A N/A 100% 100%
Gateway Square
Hinsdale, IL N/A N/A N/A N/A 96% 96%
Eagle Ridge Center
Lindenhurst, IL N/A N/A N/A N/A N/A 100%
Dominicks-Hammond
Hammond, IN N/A N/A N/A N/A N/A 100%
Randall Square
Geneva, IL N/A N/A N/A N/A N/A 87%*
Eagle-Buffalo Grove
Buffalo Grove, IL N/A N/A N/A N/A N/A 100%
Oak Forest Commons III
Oak Forest, IL N/A N/A N/A N/A N/A 72%*
Oak Lawn Town Center
Oak Lawn, IL N/A N/A N/A N/A N/A 100%
* As part of the purchase of these properties the Company receives rent under
master lease agreements on the vacant space, which results in economic
occupancy ranging from 88% to 100% at June 30, 1999 for each of these centers.
The master lease agreements are for periods ranging from one to two years from
the purchase date or until the spaces are leased.
Subsequent Events
In July 1999, the Company paid a distribution of $4,022,883 to Stockholders.
Subsequent to June 30, 1999, the Company has purchased two additional properties
from unaffiliated third parties for a total purchase price of approximately
$11,900,000.
On behalf of the Company, the Advisor is currently exploring the purchase of
additional shopping centers from unaffiliated third parties.
-28-
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company is exposed to interest rate changes primarily as a result of its
long-term debt used to fund capital expenditures and for expansion of the
Company's real estate investment portfolio and operations. The Company's
interest rate risk management objectives is to limit the impact of interest rate
changes on earnings and cash flows and to lower its overall borrowing costs. To
achieve its objectives the Company borrows primarily at fixed rates and may
enter into derivative financial instruments such as interest rate swaps, caps
and treasury locks in order to mitigate its interest rate risk on a related
financial instruments. The Company does not enter into derivative or interest
rate transactions for speculative purposes.
The fair value of the Company's debt approximates its carrying amount.
-29-
PART II - Other Information
Items 1 through 5 are omitted because of the absence of conditions under which
they are required.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: Required by the Securities and Exchange Commission
Regulations S-K. Item 601.
The following documents are incorporated by reference:
Registration Statement on Form S-11 and related exhibits, as amended,
File No. 333-45233, filed under the Securities Act of 1933.
The following documents are filed as part of this Quarterly report:
10.1 Loan agreement dated as of May 10, 1999 by and between Inland Real
Estate BSC I LLC, as Borrower and Bear Stearns, as Lender.
10.2 Promissory Note dated May 12, 1999.
10.3 Limited Liability Company Agreement of Inland Real Estate BSC I
LLC.
10.4 Registration Rights Agreement dated September 30, 1998.
27 Financial Data Schedule
(b) Report on Form 8-K dated May 12, 1999
Item 2. Acquisition or Disposition of Assets
Item 5. Other Events
Item 7. Financial Statements and Exhibits
-30-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
INLAND REAL ESTATE CORPORATION
/S/ ROBERT D. PARKS
By: Robert D. Parks
Chief Executive Officer
Date: August 12, 1999
/S/ KELLY TUCEK
By: Kelly Tucek
Chief Financial and Accounting Officer
Date: August 12, 1999
-31-
BEAR, STEARNS FUNDING, INC.
245 Park Avenue
New York, New York 10167
COMMITMENT LETTER
May 10, 1999
Mr. Raymond Petersen
c/o Joel Simmons
Cohen Financial
Two North LaSalle Street
Chicago, IL 60602
Re: Inland Real Estate Portfolio (the "Properties");
Loan Number: 25489
Dear Sirs:
Reference is made to that certain Letter of Application (the
"Application") dated as of March 17, 1999 between Inland Real Estate
Corporation ("Inland") and Bear Stearns Commercial Mortgage, Inc.
("BSCMI") and the proposed multi-property financing described therein (the
"Loan"). All capitalized terms not defined herein shall have the meanings
ascribed to them in the Application. All references herein to "Borrower"
shall mean Inland Real Estate BSCI LLC which shall be a Single Purpose
Entity as required by the Application.
This commitment letter shall confirm the agreement of Bear, Stearns
Funding, Inc. ("Lender") to provide, and Borrower to accept, the financing
contemplated by the Application on the terms and conditions set forth
herein and in the Application. This commitment letter and the Application
(which Application is attached hereto as Exhibit A) are hereinafter
collectively referred to as the "Commitment" and all terms and conditions
of the Application are incorporated herein by reference for purposes of
originating the Loan; provided , however that the following terms in the
Application are hereby amended as follows: (i) the Spread (as defined in
the Application) shall be 150 basis points, and (ii) the Term (as defined
in the Application ) shall be 5 years. The Loan Amount set forth in the
Application is a maximum Loan Amount and may be reduced in accordance with
the terms of the Application, Minimum Debt Service Coverage section, using
an actual debt service constant of 7.11%. The determination of the Rate
in accordance with the procedures set forth herein shall hereinafter be
referred to as "Rate Lock".
This Commitment has been issued on the basis of certain information
supplied by you to Lender and Lender's underwriting, market due diligence
and site inspections.
A. Closing Requirements
This Commitment and the consummation of the Loan transaction are
conditioned upon (i) the completion by Lender and Lender's Counsel
(hereinafter defined) of such due diligence investigations with respect to
Borrower, Inland (as defined herein) and the Properties as Lender and
Lender's Counsel shall deem appropriate, and (ii) the execution and
delivery by Borrower of definitive documentation relating to the Loan
acceptable to Lender and Borrower. All such conditions must be satisfied
in a manner reasonably acceptable to Lender.
B. Due Diligence
Lender's due diligence investigations shall include, but not be
limited to, the receipt and review of the following items, each of which
will be obtained at the expense of Borrower and submitted to Lender in
sufficient time for Lender to adequately evaluate its acceptability, and
each of which shall be in form and substance reasonably satisfactory to
Lender: (i) a current title report for each Property and a UCC, judgment
and lien search with respect to Borrower and each Property (each of which
shall include copies of all exceptions and other items referred to
therein); (ii) a survey for each Property certified to Lender by a
licensed surveyor acceptable to Lender; (iii) intentionally deleted; (iv)
all leases, occupancy agreements, management agreements and reciprocal
operating agreements for each Property including all amendments and
guarantees thereof (provided; however, Lender acknowledges that it has
reviewed the leases delivered to date for underwriting purpose but has not
completed its legal due diligence on such leases, which shall be performed
by Lender's Counsel); (v) estoppel certificates of not less than 75% of
the gross leasable area of each Property (provided; however, in the event
that Borrower exercises reasonable commercial efforts to deliver such
estoppels certificates to Lender, Lender agrees that the failure or
inability of Borrower to deliver to Lender the estoppels required hereby
shall be waived by Lender for Closing so long as an estoppel certificate
is delivered for each single occupancy Property and Borrower provides
Borrower's certificates (and which may be blanket for all spaces below
7,500 square feet) with respect to the estoppels Lender has not received
by Closing) and a commercially reasonable number of subordination
agreements from tenants under the leases and, as designated by Lender, a
commercially reasonably number of estoppels from parties under any
reciprocal easement agreements; (vi) intentionally deleted; (vii) evidence
of property, casualty and liability insurance with respect to each
Property and Borrower (including, if required, flood and earthquake
insurance); (viii) commercially reasonable evidence of the compliance of
each Property with applicable law; (ix) copies of all organizational
documents of Borrower and certificates of good standing from applicable
governmental authorities with respect to Borrower; (x) evidence of the
availability of all utility service at each Property; (xi) opinions of
Borrower's counsel with respect to Borrower, and the loan documentation;
(xii) commercially reasonable evidence of the absence of material
litigation adversely affecting Borrower, Inland or any Property; and
(xiii) certificates and affidavits of Borrower and Inland with respect to
certain of the above items and (xiv) such other items as Lender may
reasonably request. In addition, Borrower shall, at its expense, cause
Lender to receive, at the closing of the Loan, a lender's title insurance
policy for each Property.
C. Loan Documentation
The definitive documentation for the Loan shall include a promissory
note, loan agreement, cash management agreement, environmental indemnity
agreement, indemnity agreement, assignment of management agreement and,
for each Property, a first deed of trust or mortgage and security
agreement, an assignment of leases and rents, UCC financing statements,
and, if required by Lender, an asbestos operations and maintenance
agreement (collectively, the "Loan Documents").
D. Lender's Counsel
The Loan documentation shall be prepared, and certain of the due
diligence investigations outlined above shall be conducted, by Cadwalader,
Wickersham & Taft, special counsel for Lender ("Lender's Counsel") and, to
the extent deemed necessary and proper by Lender and Lender's Counsel,
local counsel in the State in which the Property is located.
E. Default Rate; Late Charge
The Loan Documents shall provide that upon the occurrence of any
default, the Loan shall bear interest at a default rate equal to the
lesser of the maximum rate permitted by law and 3% in excess of the stated
interest rate for the Loan. In the event any monthly payment under the
Loan becomes overdue, a late charge of five cents ($.05) for each dollar
of the amount overdue shall become due and payable to Lender.
F. Assignment by Lender
Borrower acknowledges that Lender may assign all or any part of its
interest hereunder and its rights granted herein, after the closing of the
Loan. The Loan Documents will include provisions permitting Lender to
freely transfer the servicing for, or all or a portion of its rights in,
the Loan and shall require Borrower to cooperate (as described in the
Application) in connection with any such transfer, without material cost
to Borrower. Borrower acknowledges that, without limiting the
circumstances in which Lender may transfer the Loan, Lender may transfer
the Loan in connection with a securitization involving the Loan and other
assets.
G. No Assignment by Borrower
Borrower may not assign, transfer or encumber any of its rights
pursuant to this Commitment, directly or indirectly. Any attempt to make
such an assignment, transfer or encumbrance shall render such assignment,
transfer or encumbrance null and void ab initio.
H. Representations and Warranties
1. Leases and Rent Rolls
Borrower represents to Lender that (i) it has previously
provided to Lender (a) true, correct and complete counterpart
executed copies of all leases with tenants at the Property (and all
amendments and supplements thereto and agreements collateral thereto
including, but not limited to, any guarantees thereof) (collectively,
the "Leases"), and (b) a true, complete and correct rent roll of the
Property as of the date set forth thereon (the "Rent Roll"), (ii) to
Borrower's knowledge, the information set forth in the Rent Roll
remains true, complete and correct as of the date hereof, (iii) it
has neither provided nor received any notices of default with respect
to the Leases, except as previously disclosed ;(iv) except as noted
on the Rent Roll, it knows of no default of the landlord or the
tenants under the Leases, and (v) it has not been notified, in
writing or otherwise, by any tenant of the discontinuance of or
intent to discontinue its operations at the Property, except as
previously disclosed or in connection with the anticipated
termination of certain leases. The standard form of lease must be
reasonably satisfactory to Lender. All Leases and the identity of
all tenants and guarantors thereunder must be consistent with the
information set forth in the Rent Roll and satisfactory to Lender.
The Loan Documents shall also provide that all security deposits
under all leases shall be segregated, as required by law.
Borrower shall promptly notify Lender of any facts or
circumstances which result in a change to the information set forth
in the Rent Roll. At the closing of the Loan, Borrower shall deliver
to Lender (i) to Borrower's knowledge, a rent roll for each Property
dated as of the Closing Date (the "Closing Rent Roll") which shall be
consistent in form to the Rent Roll and (ii) a certification of
Borrower that the Closing Rent Roll and all Leases theretofore
provided to Lender by Borrower are true, correct and complete in all
respects. All changes shown on the Closing Rent Roll to the facts
and circumstances shown on the Rent Roll must be reasonably
satisfactory to Lender.
2. Operating Statements
Borrower represents that, to its knowledge, all operating
statements, balance sheets and profit and loss statements, federal
and state income tax returns, tenant sales figures, budgets, site
plans and leasing plans, and all other statements, reports and
information regarding the Properties previously delivered to Lender
are true, complete and correct in all material respects.
3. No Litigation
Except as previously disclosed, Borrower represents to Lender
that there is no action, suit or proceeding, or any governmental
investigation or any arbitration, in each case pending or, to the
knowledge of Borrower, threatened against Borrower, Inland, any
principal of Borrower or the Properties before any governmental or
administrative body, agency or official.
4. No Adverse Change
On the Closing Date, Borrower shall certify to Lender whether
and to which extent there has been a material adverse change in the
occupancy of any Property or the business, financial condition or
results of operations of Borrower, any principal of Borrower,
(including Inland) and/or the Property from that shown on the rent
rolls, financial statements and reports referred to above. Any such
material adverse change must be acceptable to Lender. In connection
with such certification, Borrower shall provide, to the extent
available, updated or current financial statements, occupancy
reports, tenant sales reports, and other reports or information
regarding Borrower, Inland and the Properties as Lender may
reasonably request.
I. Rate Lock
The Rate and the Loan Amount shall be determined by Lender pursuant
to the terms of a rate lock agreement ("Rate Lock Agreement") or an
extended rate lock agreement (an "Extended Rate Lock Agreement") between
Borrower and Lender in form satisfactory to Lender. Lender shall have the
right to condition Rate Lock upon the satisfaction of any conditions set
forth herein for the consummation of the Loan.
J. Costs
Lender hereby acknowledges that Borrower has deposited with Lender an
amount equal to $80,000.00 (the "Expense Deposit"). This Expense Deposit
is in addition to the $94,500.00 previously delivered for third party
costs and expenses. Borrower agrees to pay all recording fees and taxes
and other customary and reasonable closing costs and all out-of-pocket
costs and expenses (including, but not limited to, legal fees and
disbursements) incurred by Lender in connection with the proposed Loan to
the extent such costs and expenses exceed the sums paid by Borrower on the
date hereof or have not otherwise been paid by Borrower on or before the
date hereof. Lender shall pay the fees in connection with the Agreed Upon
Procedures. The Costs are further described in the Application.
K. Waiver
All approvals of or waivers by Lender in respect of any of the terms,
conditions or requirements of this Commitment must be in writing. No
waiver with respect to any condition, breach or other matter shall extend
to or be taken in any manner whatsoever to affect any other condition,
breach or matter or affect Lender's rights resulting therefrom.
L. Brokers
By countersigning below, Borrower agrees to pay, and to indemnify and
hold Lender harmless from any and all loss, cost or expense arising from,
the claims of any brokers or anyone claiming a right to any fees in
connection with the financing of the Property. Borrower represents to
Lender that it has not contracted with, nor does it know of, any broker
other than Cohen Financial or Inland Mortgage Corp. who has participated
in the application for the Loan or the transactions contemplated by this
Commitment. Lender shall pay an origination fee to Cohen Financial at the
closing of the Loan. The provisions of this paragraph shall survive the
closing of the Loan and/or the termination of this Commitment.
M. Termination
Lender may, at its option exercised by written notice to Borrower at
its address shown above, terminate this Commitment, if any of the
following events occurs:
(a) any sale, transfer, pledge, encumbrance or assignment of the
Borrower's interest in the Property or of any equitable or
beneficial ownership interests to the Borrower;
(b) the occupancy of the Properties or the business, financial
condition or results of operations of Borrower, any principal of
Borrower, the Properties or any tenant of the Properties suffers
any material adverse change;
(C) whether or not covered by insurance, any material damage,
destruction or alteration occurs with respect to the
improvements located upon the Properties;
(d) Borrower materially breaches any provision contained in this
Commitment, which remain uncured at Closing;
(e) Borrower has made any representation or warranty to Lender which
was untrue or false when made in a material respect or which
becomes untrue or false in a material respect;
(f) any materially condemnation proceedings are pending or
threatened against any part of any Property;
(g) any petition of bankruptcy, insolvency or reorganization is
filed by or against Borrower or any tenant of any Property,
which is material;
(h) the failure of any condition precedent to the consummation of
the Loan, which remains uncured at Closing; or
(i) the termination of any Rate Lock Agreement or Extended Rate Lock
Agreement. Borrower may elect to terminate the Extended Rate
Lock, provided Lender is fully reimbursed for any costs
associated with the maintenance and termination of any hedging
transaction.
Notwithstanding the above, if a Termination event can be cured by the
removal of a Property (limited to two Properties overall), Lender will
remove the Property or, if consented to by Borrower, reduce the Loan
Amount in an amount reasonably determined by Lender.
Delay in the exercise of Lender's right to terminate this Commitment upon
the occurrence of any of the above events shall not be construed as a
waiver of such right. The failure of Lender to act in any such event
shall not be construed as a waiver of its right to act with respect to any
subsequent event of a similar nature. Upon termination as set forth
above, all of Lender's obligations pursuant to this Commitment shall cease
and be of no further force and effect whatsoever and Lender shall allow
the Third Party Reports to be certified to Borrower after receipt of
Lender's standard release letter. Borrower shall not have a claim against
Lender with respect to the content of the Third Party Reports.
N. Additional Terms and Conditions
Borrower shall assign to Lender as additional collateral all escrows,
security deposits and master lease agreements existing with respect to any
Property including those escrows at Park Center Plaza and Baytowne.
O. Miscellaneous
Borrower hereby waives any right which it may have to a trial by jury
in any action brought on this Commitment or in any way connected with or
related to the Loan. Each of Lender and Borrower hereby agrees that any
legal proceeding relating to this Commitment or the transactions
contemplated hereby (including Rate Lock) shall be maintained in a state
or United States court of competent jurisdiction sitting in the City,
State and County of New York, as Lender shall elect. Lender and Borrower
hereby consent and submit themselves to the jurisdiction of the state and
United States courts of New York for the purposes of the adjudication of
such legal proceedings. The interpretation and enforcement of the parties'
rights and obligations under this Commitment and the Loan shall be
governed by New York law without giving effect to principles of conflicts
of law.
Time shall be of the essence with respect to all dates and time
periods set forth in this Commitment and any Rate Lock Agreement or
Extended Rate Lock Agreement.
This Commitment may be signed in any number of counterparts and by
the different parties hereto on separate counterparts, each of which when
so executed and delivered shall be an original, but all of which shall
together constitute one and the same instrument. Borrower agrees that
Lender shall be released from any conditions and obligations to close the
Loan except as contemplated in this Commitment.
The provisions of this Commitment cannot be waived or modified unless
such wavier or modification is in writing and signed by both Borrower and
Lender. This Commitment is for the benefit only of the parties hereto and
no third party shall have any interest herein or in the proceeds of the
Loan. This Commitment sets forth the entire agreement between Borrower
and Lender, and all other agreements shall be deemed to have merged
herewith.
P. Expiration; Extension
Notwithstanding anything contained herein to the contrary, this
Commitment shall terminate on and be of no further force and effect at
2:00 p.m. on May 28, 1999 unless sooner terminated pursuant to the
Extended Rate Lock Agreement.
The expiration date of this Commitment may only be extended by a
written instrument executed by Lender and Borrower specifically providing
for such extension. Borrower acknowledges and agrees that no course of
dealing among Lender, Borrower and their respective counsel (including due
diligence investigations or the negotiation or exchange of draft or final
executed loan documents) prior to or after such expiration date shall
constitute an extension of such expiration date or otherwise form the
basis of any claim against Lender.
Q. Satisfaction of Requirements
Borrower and Lender have cooperated diligently to approve the form and
substance of both the items to be delivered to Lender and the Loan
Documents in order to satisfy the conditions precedent to the closing of
the Loan, as more particularly set forth in Paragraphs A, B, C, D and N
hereof. Lender has approved such items subject to (i) in instances in
which Lender has approved copies of final documents, the delivery of the
original documents, (ii) in instances in which Lender approved the form of
final documents, the delivery of executed originals of such documents,
(iii) in the case of the Loan Documents, the insertion of the applicable
interest rate and monthly payment amount, (iv) in the case of title
insurance policies, delivery of agreed upon pro forma policies in form and
substance reasonably acceptable to Lender.
R. Acceptance
If the above terms and conditions are acceptable to you, please sign
this Commitment in the space provided below and return the same to Lender
together with your check for the Expense Deposit and any other sums due
and payable at Commitment prior to 5:00 p.m. on May 10, 1999. Your
failure to comply with the instructions set forth in the preceding
sentence shall result in this Commitment becoming null and void and of no
further force or effect.
Very truly yours,
BEAR, STEARNS FUNDING, INC.
By: /s/ J. Christopher Hoeffel
Name: J. Christopher Hoeffel
Title: Vice President
AGREED TO AND ACCEPTED THIS
10th DAY OF May, 1999
INLAND REAL ESTATE CORPORATION
By: Roberta S. Matlin
Name: Roberta S. Matlin
Title: Vice President
PROMISSORY NOTE
$57,450,000.00 New York, New York
May 12, 1999
FOR VALUE RECEIVED INLAND REAL ESTATE BSC I LLC , a Delaware
limited liability company, as maker, having its principal place of business
at 2901 Butterfield Road, Oak Brook, Illinois 60523 ("Borrower"), hereby
unconditionally promises to pay to the order of BEAR, STEARNS FUNDING,
INC., a Delaware corporation, as payee, having an address at 245 Park
Avenue, New York, New York 10167 ("Lender"), or at such other place as the
holder hereof may from time to time designate in writing, the principal sum
of Fifty-Seven Million Four Hundred Fifty Thousand AND NO/100 DOLLARS
($57,450,000.00), in lawful money of the United States of America with
interest thereon to be computed from the date of this Note at the Interest
Rate, and to be paid in accordance with the terms of this Note and that
certain Loan Agreement, dated as of May 12, 1999, between Borrower and
Lender (the "Loan Agreement"). All capitalized terms not defined herein
shall have the respective meanings set forth in the Loan Agreement.
ARTICLE 1
PAYMENT TERMS
Borrower agrees to pay the principal sum of this Note and
interest on the unpaid principal sum of this Note from time to time
outstanding at the rates and at the times specified in the Loan Agreement
and the outstanding balance of the principal sum of this Note and all
accrued and unpaid interest thereon shall be due and payable on the
Maturity Date.
ARTICLE 2
DEFAULT AND ACCELERATION
The Debt shall without notice become immediately due and payable
at the option of Lender if any payment required in this Note is not paid on
or prior to the date when due or if not paid on the Maturity Date or on the
happening of any other Event of Default.
ARTICLE 3
LOAN DOCUMENTS
This Note is secured by the Mortgage and the other Loan
Documents. All of the terms, covenants and conditions contained in the
Loan Agreement, the Mortgage and the other Loan Documents are hereby made
part of this Note to the same extent and with the same force as if they
were fully set forth herein. In the event of a conflict or inconsistency
between the terms of this Note and the Loan Agreement, the terms and
provisions of the Loan Agreement shall govern.
ARTICLE 4
SAVINGS CLAUSE
Notwithstanding anything to the contrary, (a) all agreements and
communications between Borrower and Lender are hereby and shall
automatically be limited so that, after taking into account all amounts
deemed interest, the interest contracted for, charged or received by Lender
shall never exceed the maximum lawful rate or amount, (b) in calculating
whether any interest exceeds the lawful maximum, all such interest shall be
amortized, prorated, allocated and spread over the full amount and term of
all principal indebtedness of Borrower to Lender, and (c) if through any
contingency or event, Lender receives or is deemed to receive interest in
excess of the lawful maximum, any such excess shall be deemed to have been
applied toward payment of the principal of any and all then outstanding
indebtedness of Borrower to Lender, or if there is no such indebtedness,
shall immediately be returned to Borrower.
ARTICLE 5
NO ORAL CHANGE
This Note may not be modified, amended, waived, extended,
changed, discharged or terminated orally or by any act or failure to act on
the part of Borrower or Lender, but only by an agreement in writing signed
by the party against whom enforcement of any modification, amendment,
waiver, extension, change, discharge or termination is sought.
ARTICLE 6
WAIVERS
Borrower and all others who may become liable for the payment of
all or any part of the Debt do hereby severally waive presentment and
demand for payment, notice of dishonor, notice of intention to accelerate,
notice of acceleration, protest and notice of protest and non-payment and
all other notices of any kind. No release of any security for the Debt or
extension of time for payment of this Note or any installment hereof, and
no alteration, amendment or waiver of any provision of this Note, the Loan
Agreement or the other Loan Documents made by agreement between Lender or
any other Person shall release, modify, amend, waive, extend, change,
discharge, terminate or affect the liability of Borrower, and any other
Person who may become liable for the payment of all or any part of the
Debt, under this Note, the Loan Agreement or the other Loan Documents. No
notice to or demand on Borrower shall be deemed to be a waiver of the
obligation of Borrower or of the right of Lender to take further action
without further notice or demand as provided for in this Note, the Loan
Agreement or the other Loan Documents. If Borrower is a partnership, the
agreements herein contained shall remain in force and applicable,
notwithstanding any changes in the individuals comprising the partnership,
and the term "Borrower," as used herein, shall include any alternate or
successor partnership, but any predecessor partnership and their partners
shall not thereby be released from any liability. If Borrower is a
corporation, the agreements contained herein shall remain in full force and
applicable notwithstanding any changes in the shareholders comprising, or
the officers and directors relating to, the corporation, and the term
"Borrower" as used herein, shall include any alternative or successor
corporation, but any predecessor corporation shall not be relieved of
liability hereunder. (Nothing in the foregoing sentence shall be construed
as a consent to, or a waiver of, any prohibition or restriction on
transfers of interests in such partnership which may be set forth in the
Loan Agreement, the Mortgage or any other Loan Document.)
ARTICLE 7
TRANSFER
Upon the transfer of this Note, Borrower hereby waiving notice of
any such transfer except as provided in the Loan Agreement, Lender may
deliver all the collateral mortgaged, granted, pledged or assigned pursuant
to the Loan Documents, or any part thereof, to the transferee who shall
thereupon become vested with all the rights herein or under applicable law
given to Lender with respect thereto, and Lender shall from that date
forward forever be relieved and fully discharged from any liability or
responsibility in the matter; but Lender shall retain all rights hereby
given to it with respect to any liabilities and the collateral not so
transferred.
ARTICLE 8
EXCULPATION
The provisions of Section 9.4 of the Loan Agreement are hereby
incorporated by reference into this Note to the same extent and with the
same force as if fully set forth herein.
ARTICLE 9
GOVERNING LAW
(A) THIS NOTE WAS NEGOTIATED IN THE STATE OF NEW YORK, AND MADE
BY BORROWER AND ACCEPTED BY LENDER IN THE STATE OF NEW YORK, AND THE
PROCEEDS OF THIS NOTE WERE DISBURSED FROM THE STATE OF NEW YORK, WHICH
STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND
TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS,
INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS NOTE AND THE OBLIGATIONS
ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND
PERFORMED IN SUCH STATE (WITHOUT REGARD TO PRINCIPLES OF CONFLICT LAWS) AND
ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA. TO THE FULLEST EXTENT
PERMITTED BY LAW, BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES
ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS
NOTE AND THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK PURSUANT TO SECTION 5-1401 OF THE NEW
YORK GENERAL OBLIGATIONS LAW.
(B) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR
BORROWER ARISING OUT OF OR RELATING TO THIS NOTE MAY AT LENDER'S OPTION BE
INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY OF NEW YORK, COUNTY OF
NEW YORK, PURSUANT TO SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS
LAW, AND BORROWER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE
BASED ON VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR
PROCEEDING, AND BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF
ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. BORROWER DOES HEREBY
DESIGNATE AND APPOINT:
CT CORPORATION SYSTEMS
1633 BROADWAY
NEW YORK, NEW YORK 10019
AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF
ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR
PROCEEDING IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES
THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN NOTICE
OF SAID SERVICE MAILED OR DELIVERED TO BORROWER IN THE MANNER PROVIDED
HEREIN SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON
BORROWER IN ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW YORK.
BORROWER (I) SHALL GIVE PROMPT NOTICE TO LENDER OF ANY CHANGED ADDRESS OF
ITS AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY TIME AND FROM TIME TO TIME
DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN OFFICE IN NEW YORK, NEW
YORK (WHICH SUBSTITUTE AGENT AND OFFICE SHALL BE DESIGNATED AS THE PERSON
AND ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL PROMPTLY DESIGNATE
SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN NEW
YORK, NEW YORK OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.
ARTICLE 10
NOTICES
All notices or other written communications hereunder shall be
delivered in accordance with Section 10.6 of the Loan Agreement.
[NO FURTHER TEXT ON THIS PAGE]
IN WITNESS WHEREOF, Borrower has duly executed this Note as of
the day and year first above written.
INLAND REAL ESTATE BSC I LLC, a Delaware
limited liability company
By: Inland Real Estate BSC I Corporation, a
Delaware corporation, its member
By: /s/ Mark Zalatoris
Name: Mark Zalatoris
Title: Vice President
LIMITED LIABILITY COMPANY AGREEMENT
OF
INLAND REAL ESTATE BSC I LLC
This Limited Liability Company Agreement (together with the schedules
attached hereto, this "Agreement") of Inland Real Estate BSC I LLC (the
"Company"), is entered into by Inland Real Estate BSC I Corporation, as the
sole member (the "Initial Member"). Capitalized terms used herein and not
otherwise defined have the meanings set forth on Schedule A hereto.
The Initial Member, by execution of this Agreement, (i) hereby forms
the Company as a limited liability company pursuant to and in accordance
with the Delaware Limited Liability Company Act (6 Del.C. 18-101, et
seq.), as amended from time to time (the "Act"), and (ii) hereby agrees as
follows:
1. Name.
The name of the limited liability company hereby created is
Inland Real Estate BSC I LLC.
2. Principal Business Office.
The principal business office of the Company shall be located at
2901 Butterfield Road, Oak Brook, IL 60523, or such other location as may
hereafter be determined by the Member.
3. Registered Office.
The address of the registered office of the Company in the State
of Delaware is c/o The Corporation Trust Company, Corporation Trust Center,
1209 Orange Street, Wilmington, New Castle County, Delaware 19801.
4. Registered Agent.
The name and address of the registered agent of the Company for
service of process on the Company in the State of Delaware is The
Corporation Trust Company, Corporation Trust Center, 1209 Orange Street,
New Castle County, Wilmington, Delaware 19801.
5. Members.
a. The name and the mailing address of the Initial Member is
set forth on Schedule B attached hereto.
b. Subject to Section 9(b), the Member may act by written
consent.
6. Certificates.
Samuel A. Orticelli, as an "authorized person" within the meaning
of the Act, has executed, delivered and filed the Certificate of Formation
with the Secretary of State of the State of Delaware. Upon the filing of
the Certificate of Formation with the Secretary of State of the State of
Delaware, his powers as an "authorized person" ceased, and the Member
thereupon became the designated "authorized person" and shall continue as
the designated "authorized person" within the meaning of the Act. The
Member shall execute, deliver and file any other certificates (and any
amendments and/or restatements thereof) necessary for the Company to
qualify to do business in Illinois, Indiana, Michigan, Minnesota, Ohio and
Wisconsin and in any other jurisdiction in which the Company may wish to
conduct business.
7. Purposes.
Subject to Section 9(b), the purposes of the Company are to
engage in the following activities:
a. to acquire, own, hold, administer, service, manage, sell
and otherwise deal with the Properties;
b. to issue, authorize and deliver the Note and other Basic
Documents;
c. to execute, deliver and perform the Basic Documents;
d. to do such other things and carry on any other activities
which are necessary, convenient or incidental to any of the foregoing
purposes.
8. Powers.
Subject to Section 9(b), the Company shall have and exercise all
powers necessary, convenient or incidental to accomplish its purposes as
set forth in Section 7 conferred upon limited liability companies formed
pursuant to the Act.
9. Management.
a. Member(s). Subject to Section 9(b), the business and
affairs of the Company shall be managed by or under the direction of the
Member. Subject to Section 9(b), the Member has the authority to bind the
Company.
b. Limitations on the Company's Activities.
(i) This Section 9(b) is being adopted in order to comply
with certain provisions required in order to qualify the Company as a
"special purpose entity" for the purpose of the Indebtedness. So long as
any portion of the Indebtedness is outstanding the provisions of this
Section 9(b) shall supercede and control any other provision hereof to the
contrary.
(ii) The Member shall not, so long as any Indebtedness is
outstanding, amend, alter, change or repeal Sections 7, 8, 9, 20, 21, 22,
24, 26 or 30 of this Agreement without consent of Lender, or after a
securitization of the Loan, only upon (a) confirmation from each Rating
Agency that such action would not result in the qualification, withdrawal
or downgrade of any securities rating assigned in such securitization, and
(b) Lender's consent to such action.
(iii) Notwithstanding any other provision of this
Agreement and any provision of law that otherwise so empowers the Company
or the Member, so long as any Indebtedness is outstanding, neither the
Company nor the Member shall be authorized or empowered, nor shall they
permit the Company without the prior written consent of the Member
including the unanimous consent of the board of directors of the Member, to
institute proceedings to have the Company be adjudicated bankrupt or
insolvent, or consent to the institution of bankruptcy or insolvency
proceedings against the Company or file a petition seeking, or consent to,
reorganization or relief with respect to the Company under any applicable
federal or state law relating to bankruptcy, or consent to the appointment
of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Company or a substantial part of its property, or
make any assignment for the benefit of creditors of the Company, or admit
in writing the Company's inability to pay its debts generally as they
become due, or, to the fullest extent permitted by law, take action in
furtherance of any such action, or dissolve or liquidate the Company, or
consolidate or merge the Company with or into any Person, or sell all or
substantially all of the assets of the Company.
(iv) Unless otherwise provided in the Loan Agreement, so
long as any Indebtedness is outstanding, the Company shall, and the Member
shall cause the Company to do or cause to be done all things necessary to
preserve and keep in full force and effect its existence, rights (charter
and statutory) and franchises. The Company shall, and the Member also
shall cause the Company to:
(1) maintain its own separate books and records and
bank accounts;
(2) at all times hold itself out to the public as a
legal entity separate from the Member and any other Person and not identify
itself as a division of any other person or entity;
(3) observe all limited liability company or other
formalities;
(4) file its own tax returns provided, however, that
Company's assets may be included in a consolidated tax return of its parent
companies if inclusion on such a consolidated tax return is required to
comply with the requirement of generally accepted accounting principles
("GAAP") or any other applicable law. Company shall maintain its books,
records, resolutions and agreements as official records.
(5) not commingle its assets with assets of any other
Person and hold all of its assets in its own name;
(6) conduct its business in its own name;
(7) maintain all of its books, records, financial
statements and bank accounts separate from those of any other person and
Company's assets and liabilities will not be listed as assets or
liabilities on the financial statement of any other person; provided,
however, that Company's assets and liabilities may be included in a
consolidated financial statement of its parent companies if inclusion on
such a consolidated statements is required to comply with the requirements
of GAAP, but only if (i) such consolidated financial statements shall
contain a footnote to the effect that Company's assets and liabilities are
owned by Company and that they are being included on the financial
statement of its parent solely to comply with the requirements of GAAP, and
(ii) such assets and liabilities shall be listed on Company's own separate
balance sheet.
(8) pay its own liabilities and expenses only out of
its own funds;
(9) maintain an arm's length relationship with its
Affiliates and its Member and enter into transactions with Affiliates only
on a commercially reasonable basis;
(10) pay the salaries of its own employees, if any,
from its own funds.
(11) not hold out its credit as being available to
satisfy the obligations of others;
(12) allocate fairly and reasonably any overhead
expenses that are shared with an Affiliate, including paying for shared
office space and services performed by any employee of an Affiliate;
(13) use separate stationery, invoices and checks
bearing its own name;
(14) not pledge its assets for the benefit of any other
Person;
(15) correct any known misunderstanding regarding its
separate identity;
(16) maintain adequate capital and a sufficient number
of employees in light of its contemplated business operations;
(17) not acquire any obligations or securities of its
Affiliates, including the Member; and
(18) not make loans to any other person or entity or to
buy or hold evidence of indebtedness issued by any other person.
(v) So long as any Indebtedness is outstanding, the Company
shall not, and the Member shall not cause or permit the Company to:
(1) guarantee any obligation of any Person, including
any Affiliate;
(2) engage, directly or indirectly, in any business
other than that arising out of the issuance of the Indebtedness or the
actions required or permitted to be performed under Section 7, the Loan
Agreement or this Section 9(b);
(3) incur, create or assume any indebtedness other
than the Indebtedness or as otherwise expressly permitted under the Loan
Agreement;
(4) make or permit to remain outstanding any loan or
advance to, or own or acquire any stock or securities of, any Person;
(5) engage in any dissolution, liquidation,
consolidation, merger, asset sale or transfer of ownership interests other
than such activities as are expressly permitted pursuant to any provision
of the Loan Agreement; or
(6) form, acquire or hold any subsidiary (whether
corporate, partnership, limited liability company or other).
c. For so long as any Indebtedness is outstanding at least one
Member shall be a Special Purpose Entity (the "Special Purpose Member").
d. For so long as (i) any Indebtedness is outstanding and (ii)
there is only one Member of the Company, then:
(A) The death, retirement, resignation, expulsion,
bankruptcy or dissolution of the Member or the occurrence of any other
event that terminates the continued membership of the Member shall not
cause the Company to be dissolved or its affairs to be would up.
(B) The Member shall not cease to be a member of the
Company due to the occurrence of any of the following: (1) if the Member
(aa) makes an assignment for the benefit of creditors; (bb) files a
voluntary petition in bankruptcy; (cc) is adjudged as bankrupt or
insolvent, or has entered against it an order for relief, in any bankruptcy
or insolvency proceeding; (dd) files a petition or answer seeking for
itself any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any statute, law or
regulation; files an answer or other pleading admitting or failing to
contest the material allegations of a petition filed against it in any
proceeding of this nature; (ee) files an answer or other pleading admitting
or failing to contest the material allegations of a petition filed against
him in any proceeding of this nature; (ff) seeks, consents to or acquiesces
in the appointment of a trustee, receiver or liquidator of the Member or of
all or any substantial part of its properties; (2) for failure to have
dismissed any proceeding against the Member seeking reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any statute, law or regulation; or (3) for failure to have the
appointment of a trustee, receiver or liquidator of the Member or of all or
a substantial part of its properties vacated or stayed.
e. For so long as (i) any Indebtedness is outstanding, and (ii)
there is more than one Member of the Company, then:
(A) Upon the dissociation or withdrawal of the Special
Purpose Member from the Company, the Company would appoint a new Member
that is a Special Purpose Entity and deliver an acceptable non-
consolidation opinion to the holder of the Indebtedness and to any
applicable rating agency concerning, as applicable, the Company, the new
Special Purpose Member, and its owners.
(B) The Company's existence shall continue for so long as a
solvent member exists.
(C) The Special Purpose Member shall own at least a 1%
ownership interest in the Company.
(D) If there is a death, dissolution or other "termination
event" for the Company or any Member, the vote of a majority of the
remaining Members shall be sufficient to continue the life of the Company.
(E) Require the unanimous consent of all members (including
that of the Special Purpose Member, which will in turn require the vote of
an Independent Director) for the Borrower to:
(1) File or consent to the filing of any bankruptcy,
insolvency or reorganization case or proceeding; institute any proceedings
under any applicable insolvency law or otherwise seek any relief under any
laws relating to the relief from debts or the protection of debtors
generally;
(2) Seek or consent to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator, custodian or any similar
official for the Borrower or a substantial portion of its properties;
(3) Make any assignment for the benefit of the
Borrower's creditors; or
(4) Take any action in furtherance of any of the
foregoing.
10. INTENTIONALLY OMITTED
11. INTENTIONALLY OMITTED
12. Limited Liability.
Except as otherwise expressly provided by the Act, the debts,
obligations and liabilities of the Company, whether arising in contract,
tort or otherwise, shall be the debts, obligations and liabilities solely
of the Company, and no Member shall be obligated personally for any such
debt, obligation or liability of the Company solely by reason of being a
Member of the Company.
13. Capital Contributions.
The Initial Member is deemed admitted as the Member of the
Company upon the execution and delivery of this Agreement. The Initial
Member has contributed the amount of cash to the Company listed on Schedule
B attached hereto.
14. Additional Contributions.
The Initial Member is not required to make any additional capital
contribution to the Company. However, a Member may make additional capital
contributions to the Company at any time upon the written consent of such
Member. To the extent that the Member makes an additional capital
contribution to the Company, the Member shall revise Schedule B of this
Agreement. The provisions of this Agreement, including this Section 14,
are intended solely to benefit the Member and, to the fullest extent
permitted by law, shall not be construed as conferring any benefit upon any
creditor of the Company (and no such creditor of the Company shall be a
third-party beneficiary of this Agreement) and no Member shall have any
duty or obligation to any creditor of the Company to make any contribution
to the Company or to issue any call for capital pursuant to this Agreement.
15. Allocation of Profits and Losses.
The Company's profits and losses shall be allocated to the
Member.
16. Distributions.
Distributions shall be made at the times and in the aggregate
amounts determined by the Member. Notwithstanding any provision to the
contrary contained in this Agreement, the Company shall not be required to
make a distribution to any Member on account of its interest in the Company
if such distribution would violate Section 18-607 of the Act or any other
applicable law or the Basic Documents.
17. Books and Records.
The Member shall keep or cause to be kept complete and accurate
books of account and records with respect to the Company's business. The
books of the Company shall at all times be maintained by the Member. Each
Member, if more than one, and its duly authorized representatives shall
have the right to examine the Company books, records and documents during
normal business hours. The Company shall not have the right to keep
confidential from the Member any information which would otherwise be
permitted to keep confidential from the Member pursuant to Section 18-
305(c) of the Act. The Company's books of account shall be kept using the
method of accounting determined by the Member. The Company's independent
auditor shall be an independent public accounting firm selected by the
Member.
18. Reports.
a. Within 60 days after the end of each fiscal quarter, the
Member shall cause to be prepared an unaudited report setting forth as of
the end of such fiscal quarter:
(i) unless such quarter is the last fiscal quarter, a
balance sheet of the Company; and
(ii) unless such quarter is the last fiscal quarter, an
income statement of the Company for such fiscal quarter.
b. The Member shall cause to be prepared within 90 days after
the end of each fiscal year, an audited or unaudited report setting forth
as of the end of such fiscal year:
(i) a balance sheet of the Company;
(ii) an income statement of the Company for such fiscal
year; and
(iii) a statement of such Member's capital account.
c. The Member shall, after the end of each fiscal year, use
reasonable efforts to cause the Company's independent accountants to
prepare and transmit to each Member as promptly as such tax information as
may be reasonably necessary to enable such Member to prepare its federal,
state and local income tax returns relating to such fiscal year.
19. INTENTIONALLY OMITTED.
20. Exculpation and Indemnification.
a. No Member, employee or agent of the Company and no director,
officer, employee, representative, agent or Affiliate of the Member
(collectively, the "Covered Persons") shall be liable to the Company or any
other Person who has an interest in or claim against the Company for any
loss, damage or claim incurred by reason of any act or omission performed
or omitted by such Covered Person in good faith on behalf of the Company
and in a manner reasonably believed to be within the scope of the authority
conferred on such Covered Person by this Agreement, except that a Covered
Person shall be liable for any such loss, damage or claim incurred by
reason of such Covered Person's gross negligence or willful misconduct.
b. To the fullest extent permitted by applicable law, a Covered
Person shall be entitled to indemnification from the Company for any loss,
damage or claim incurred by such Covered Person by reason of any act or
omission performed or omitted by such Covered Person in good faith on
behalf of the Company and in a manner reasonably believed to be within the
scope of the authority conferred on such Covered Person by this Agreement,
except that no Covered Person shall be entitled to be indemnified in
respect of any loss, damage or claim incurred by such Covered Person by
reason of such Covered Person's gross negligence or willful misconduct with
respect to such acts or omissions; provided, however, that any indemnity
under this Section 20 shall be provided out of and to the extent of Company
assets only, and no Member shall have personal liability on account
thereof.
c. To the fullest extent permitted by applicable law, expenses
(including legal fees) incurred by a Covered Person defending any claim,
demand, action, suit or proceeding shall, from time to time, be advanced by
the Company prior to the final disposition of such claim, demand, action,
suit or proceeding upon receipt by the Company of an undertaking by or on
behalf of the Covered Person to repay such amount if it shall be determined
that the Covered Person is not entitled to be indemnified as authorized in
this Section 20.
d. A Covered Person shall be fully protected in relying in good
faith upon the records of the Company and upon such information, opinions,
reports or statements presented to the Company by any Person as to matters
the Covered Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable
care by or on behalf of the Company, including information, opinions,
reports or statements as to the value and amount of the assets,
liabilities, or any other facts pertinent to the existence and amount of
assets from which distributions to the Member might properly be paid.
e. To the extent that, at law or in equity, a Covered Person
has duties (including fiduciary duties) and liabilities relating thereto to
the Company or to any other Covered Person, a Covered Person acting under
this Agreement shall not be liable to the Company or to any other Covered
Person for its good faith reliance on the provisions of this Agreement or
any approval or authorization granted by the Company or any other Covered
Person. The provisions of this Agreement, to the extent that they restrict
the duties and liabilities of a Covered Person otherwise existing at law or
in equity, are agreed by the Member to replace such other duties and
liabilities of such Covered Person.
f. The foregoing provisions of this Section 20 shall survive
any termination of this Agreement.
21. Assignments. Without the prior written consent of Lender, neither
Company nor its Member, except as permitted under the Loan Agreement,
shall:
(i) directly or indirectly sell, transfer, convey, mortgage,
pledge, or assign the Properties, any part thereof or any interest therein
(including any ownership interest in Company or Member,
(ii) further encumber, alienate, grant a lien or grant any
other interest in the Properties or any part thereof (including any
ownership interest in Company and the Member) whether voluntarily or
involuntarily, or
(iii) enter into any easement or other agreement granting
rights in or restricting the use or development of the Properties.
If the Member transfers all of its limited liability company interest in
the Company pursuant to this Section 21, the transferee shall be admitted
to the Company as a member of the Company upon its execution of an
instrument signifying its agreement to be bound by the terms and conditions
of this Agreement, which instrument may be a counterpart signature page to
this Agreement. Such admission shall be deemed effective immediately prior
to the transfer, and, immediately following such admission, the transferor
Member shall cease to be a member of the Company. Notwithstanding
anything in this Agreement to the contrary, any successor to a Member by
merger or consolidation in compliance with the Basic Documents shall,
without further act, be a Member hereunder, and such merger or
consolidation shall not constitute an assignment for purposes of this
Agreement.
Notwithstanding anything to the contrary contained in this Section 21, no
transfer of any direct or indirect ownership interest in the Company may be
made such that transferee owns in the aggregate, with the ownership
interest of its Affiliate and family member in the Company, more than 49%
interest in the Company, unless Company delivers a non-consolidation
opinion to the holder of the Indebtedness and to any applicable rating
agency concerning, as applicable, the Company, the transferee and/or their
respective owners.
22. Resignation.
So long as any Indebtedness is outstanding, the Initial Member
may not resign unless consistent with the transfer and substitution
provisions of the Loan Agreement. A Member (other than the Initial Member)
may resign from the Company with the written consent of the Initial Member.
If a Member is permitted to resign pursuant to this Section 22, an
additional member of the Company shall be admitted to the Company upon its
execution of an instrument signifying its agreement to be bound by the
terms and conditions of this Agreement, which instrument may be a
counterpart signature page to this Agreement. Such admission shall be
deemed effective immediately prior to the resignation, and, immediately
following such admission, the resigning Member shall cease to be a member
of the Company.
23. INTENTIONALLY OMITTED
24. Dissolution.
a. Subject to Section 9(b), the Company shall be dissolved, and
its affairs shall be wound up upon the first to occur of the following: (i)
the retirement, resignation or dissolution of the Member or the occurrence
of any other event which terminates the continued membership of the Member
in the Company unless the business of the Company is continued in a manner
permitted by the Act or (ii) the entry of a decree of judicial dissolution
under Section 18-802 of the Act.
b. Notwithstanding any other provision to the contrary, the
Bankruptcy of the Member shall not cause the Member to cease to be a member
of the Company and upon the occurrence of such an event, the business of
the Company shall continue without dissolution. Notwithstanding any other
provision of this Agreement, the Member waives any right it might have
under Section 18-801(b) of the Act to agree in writing to dissolve the
Company upon the Bankruptcy of the Member or the occurrence of an event
that causes a Member to cease to be a member of the Company.
c. In the event of dissolution, the Company shall conduct only
such activities as are necessary to wind up its affairs (including the sale
of the assets of the Company in an orderly manner), and the assets of the
Company shall be applied in the manner, and in the order of priority, set
forth in Section 18-804 of the Act.
25. Waiver of Partition; Nature of Interest.
Except as otherwise expressly provided in this Agreement, to the
fullest extent permitted by law, each Member hereby irrevocably waives any
right or power that such Member might have to cause the Company or any of
its assets to be partitioned, to cause the appointment of a receiver for
all or any portion of the assets of the Company, to compel any sale of all
or any portion of the assets of the Company pursuant to any applicable law
or to file a complaint or to institute any proceeding at law or in equity
to cause the dissolution, liquidation, winding up or termination of the
Company. No Member shall have any interest in any specific assets of the
Company, and no Member shall have the status of a creditor with respect to
any distribution pursuant to Section 16 hereof. The interest of the Member
in the Company is personal property.
26. Benefits of Agreement; No Third-Party Rights.
None of the provisions of this Agreement shall be for the benefit
of or enforceable by any creditor of the Company or by any creditor of any
Member. Nothing in this Agreement shall be deemed to create any right in
any Person (other than Covered Persons) not a party hereto, and this
Agreement shall not be construed in any respect to be a contract in whole
or in part for the benefit of any third Person.
27. Severability of Provisions.
Each provision of this Agreement shall be considered severable
and if for any reason any provision or provisions herein are determined to
be invalid, unenforceable or illegal under any existing or future law, such
invalidity, unenforceability or illegality shall not impair the operation
of or affect those portions of this Agreement which are valid, enforceable
and legal.
28. Entire Agreement.
This Agreement constitutes the entire agreement of the parties
with respect to the subject matter hereof.
29. Governing Law.
This Agreement shall be governed by and construed under the laws
of the State of Delaware (without regard to conflict of laws principles),
all rights and remedies being governed by said laws.
30. Amendments.
Subject to Section 9(b), this Agreement may not be modified,
altered, supplemented or amended except pursuant to a written agreement
executed and delivered by the Member.
31. Counterparts.
This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original of this Agreement and all of
which together shall constitute one and the same instrument.
32. Notices.
Any notices required to be delivered hereunder shall be in
writing and personally delivered, mailed or sent by telecopy, electronic
mail, or other similar form of rapid transmission, and shall be deemed to
have been duly given upon receipt (a) in the case of the Company, to the
Company at its address in Section 2, (b) in the case of a Member, to such
Member at its address as listed on Schedule B attached hereto and (c) in
the case of either of the foregoing, at such other address as may be
designated by written notice to the other party.
33. Enforcement by Board of Directors of Member
Notwithstanding any other provision of this Agreement, the Member
agrees that this Agreement, including, without limitation, Sections 7, 8,
9, 10, 20, 21, 22, 24, 26, 30 or this Section 33, constitutes a legal,
valid and binding agreement of the Member, and is enforceable against the
Member by each member of the board of directors of the Member (including
the Independent Director of the board), in accordance with its terms.
Notwithstanding, any other provision of this Agreement, the Independent
Director of the Member is an intended beneficiary of the Agreement.
IN WITNESS WHEREOF, the undersigned, intending to be legally
bound hereby, has duly executed this Agreement as of the 12th day of April,
1999.
MEMBER:
INLAND REAL ESTATE BSC I
CORPORATION, a Delaware corporation
By: /s/ Mark Zalatoris
Name: Mark Zalatoris
Title: Vice President
IN WITNESS WHEREOF, the Company hereby agrees to be bound by this
Agreement and hereby becomes a party thereto, this 12th day of April,
1999.
INLAND REAL ESTATE BSC I LLC,
a Delaware limited liability company,
By: INLAND REAL ESTATE BSC I
CORPORATION, a Delaware corporation
By: /s/ Mark Zalatoris
Name: Mark Zalatoris
Title: Vice President
SCHEDULE A
Definitions
A. Definitions
When used in this Agreement, the following terms not otherwise defined
herein have the following meanings:
"Act" has the meaning set forth in the preamble to this Agreement.
"Affiliate" has the meaning set forth in the Loan Agreement.
"Agreement" means this Limited Liability Company Agreement of the Company,
together with the schedules attached hereto, as amended, restated or
supplemented form time to time.
"Bankruptcy" means, with respect to any Person, if such Person (i) makes an
assignment for the benefit of creditors, (ii) files a voluntary petition in
bankruptcy, (iii) is adjudged as bankrupt or insolvent, or has entered
against it an order for relief, in any bankruptcy or insolvency proceeding,
(iv) files a petition or answer seeking for itself any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any statute, law or regulation, (v) files an answer or other
pleading admitting or failing to contest the material allegations of a
petition filed against it in any proceeding of this nature, (vi) seeks,
consents to or acquiesces in the appointment of a trustee, receiver or
liquidator of the Person or of all or any substantial part of its
properties, or (vii) if 120 days after the commencement of any proceeding
against the Person seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any statute,
law or regulation, if the proceeding has not been dismissed, or if within
90 days after the appointment without such Person's consent or acquiescence
of a trustee, receiver or liquidator of such Person or of all or any
substantial part of its properties, the appointment is not vacated or
stayed, or within 90 days after the expiration of any such stay, the
appointment is not vacated.
"Basic Documents" means Loan Agreement, Promissory Note, Mortgage and
Security Agreement, Assignment of Leases and Rents, Assignment of
Management Agreement and Subordination of Management Fees, Environmental
Indemnity Agreement, and Cash Management Agreement and any other Loan
Documents executed by the Company in favor of the Lender.
"Certificate of Formation" means the Certificate of Formation of the
Company filed with the Secretary of State of the State of Delaware on April
12, 1999, as amended or amended and restated from time to time.
"Collateral" has the meaning assigned to that term in the Loan Agreement.
"Company" means Inland Real Estate BSC I LLC, a Delaware limited liability
company.
"Control" means the possession, directly or indirectly, or the power to
direct or cause the direction of the management or policies of a Person,
whether through the ownership of voting securities or general partnership
or managing member interests, by contract or otherwise. "Controlling" and
"Controlled" shall have correlative meanings. Without limiting the
generality of the foregoing, a Person shall be deemed to Control any other
Person in which it owns, directly or indirectly, a majority of the
ownership interests.
"Covered Persons" has the meaning set forth in Section 20a.
"Indebtedness" means the obligations of the Company arising under the Note.
"Initial Member" means Inland Real Estate BSC I Corporation, as the sole
member of the Company.
"Lender" means Bear, Stearns Funding, Inc., and its successors and assigns.
"Loan Agreement" means that certain Loan Agreement by and between the
Company and Bear Stearns Funding, Inc.
"Member" means the Initial Member and includes any Person admitted as an
additional member of the Company or a substitute member of the Company
pursuant to the provisions of this Agreement.
"Note" shall mean that certain note made by Company in favor of Bear
Stearns Funding, Inc., as the same may be amended, restated, replaced,
supplemented, or otherwise modified from time to time, including any
Defeased Note and Undefeased Note that may exist from time to time.
"Note Trustee" means the note trustee as appointed by Bear Stearns Funding,
Inc.
"Officer's Certificate" has the meaning assigned to that term in the Loan
Agreement.
"Properties" means those properties listed on Schedule C.
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, limited liability partnership, association,
joint-stock company, trust, unincorporated organization, or other
organization, whether or not a legal entity, and any governmental
authority.
"Rating Agency" has the meaning assigned to that term in the Loan
Agreement.
"Rating Agency Condition" means, with respect to any action that each of
the Rating Agencies shall have notified the Lender in writing that such
action will not result in a reduction, qualification, or withdrawal of the
then current rating by such Rating Agency of any Series or Class of the
Notes.
"Special Purpose Entity" has the meaning assigned to that term in the Loan
Agreement.
B. Rules of Construction
Definitions in this Agreement apply equally to both the singular and
plural forms of the defined terms. The words "include" and "including"
shall be deemed to be followed by the phrase "without limitation." The
terms "herein," "hereof" and "hereunder" and other words of similar import
refer to this Agreement as a whole and not to any particular Section,
paragraph or subdivision. The Section titles appear as a matter of
convenience only and shall not affect the interpretation of this Agreement.
All Section, paragraph, clause, Exhibit or Schedule references not
attributed to a particular document shall be references to such parts of
this Agreement.
SCHEDULE B
Member(s)
Agreed Value of Percentage
Name Mailing Address Capital Contribution Interest
Inland Real Estate 2901 Butterfield Rd.
BSC I Corporation Oak Brook, IL 60523 100%
SCHEDULE C
List of the Properties
SPRINGBORO PLAZA SHOPPING CENTER
SW Corner of State Route 73 & Pioneer Blvd.
Springboro, OH
PARK CENTER PLAZA SHOPPING CENTER
SW Intersection of 159th St. and Harlem Ave.
Tinley Park, IL
FAIRVIEW HEIGHTS PLAZA SHOPPING CENTER
Corner of Interstate 64 & Ruby Lane
Fairview Heights, IL
STAPLES STORE
1722 South West Avenue
Freeport, IL
RIVERPLACE CENTRE SHOPPING CENTER
NE Corner of Logan Street & Nixon Street
Noblesville, IN
TWO RIVERS PLAZA SHOPPING CENTER
1108, 1110, 1112, 1116, 1122, 1128 & 1158 Boughton Rd.
Bolingbrook, IL
CIRCUIT CITY STORE
3123 W. South Airport Rd.
Traverse City, MI
HOLLYWOOD VIDEO STORE
1738 165th Street
Hammond, IN
ROSE PLAZA PHASE I - TOTAL BEVERAGE
f/k/a Elmwood Park Place Shopping Center
7330 West North Avenue
Elmwood Park, IL
ROSE PLAZA PHASE II
7330 and 7404 W. North Avenue
Elmwood Park, IL
BAYTOWNE SQUARE SHOPPING CENTER
2001-2023 N. Prospect
Champaign, IL
BAYTOWNE SHOPPES
907 W. Marketview Dr.
Champaign, IL
WENDY'S RESTAURANT
2033 N. Prospect
Champaign, IL
LOEHMANN'S PLAZA AT MARKET SQUARE
17105-17165 W. Mound Rd.
Brookfield, WI
ORLAND GREENS SHOPPING CENTER
NW Corner of 151st & LaGrange Rd.
Orland Park, IL
PLYMOUTH COLLECTION SHOPPING CENTER
4130 Berkshire Lane
Plymouth, MN
CAR MAX
250 E. Golf Road
Schaumburg, IL
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made as of
this 30th day of September, 1998, by and between Inland Real Estate
Corporation, a Maryland corporation (the "Company") and B.I.J. Limited
Partnership, an Illinois limited partnership ("BIJ").
WHEREAS, the Company is the Managing Member of Inland Joliet Commons
L.L.C., an Illinois limited liability company (the "LLC") and BIJ is a
Member of the LLC;
WHEREAS, the LLC was formed for the purposes and upon the terms and
subject to the conditions set forth in an operating agreement dated
September 30, 1998, and entered into by and between the Company and BIJ
(the "Operating Agreement");
WHEREAS, pursuant to the Operating Agreement, BIJ was granted 469,480
membership units in the LLC (the "LLC Units") and BIJ has the right,
subject to the terms and conditions set forth therein, to require the
Company to acquire all or a portion of BIJ's LLC Units (the "Tendered
Units") in Exchange for either REIT Shares or the Cash Amount, as provided
therein; and
WHEREAS, in order to induce BIJ to enter into the Operating
Agreement, the Company has agreed to provide for the benefit of BIJ the
registration rights set forth in this Agreement with respect to BIJ's LLC
Units, subject to the terms and conditions provided herein.
NOW, THEREFORE, in consideration of the foregoing, the mutual
premises and agreements set forth herein, and other valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE 1. CERTAIN DEFINITIONS
A. "Agreement" means this Registration Rights Agreement.
B. "BIJ" means B.I.J. Limited Partnership, an Illinois limited
partnership.
C. "Blackout Notice" means the notice described in Article 5.
D. "Business Day" means all weekdays except Saturday and Sunday and
those days that are legal holidays of the United States
government.
E. "Cash Amount" has the meaning ascribed to it in the Operating
Agreement.
F. "Company" means Inland Real Estate Corporation, a Maryland
corporation.
G. "Demanding Holder" means a Holder demanding registration of its
Registrable Shares in accordance with Article 4.
H. "Effective Date" has the meaning ascribed to it in the Operating
Agreement.
I. "Exchange" has the meaning ascribed to it in the Operating
Agreement.
J. "Expiration Date" means the date described in Article 2(B) of
this Agreement.
K. "Holder" means BIJ and any transferee or assignee permitted under
Article 9 of this Agreement.
L. "Indemnified Party" has the meaning ascribed to it in Article 8
of this Agreement.
M. "Indemnifying Party" has the meaning ascribed to it in Article 8
of this Agreement.
N. "LLC" means Inland Joliet Commons L.L.C., an Illinois limited
liability company.
O. "LLC Unit" means one membership interest in the LLC.
P. "Listing Event" means an event by which the Company lists its
shares on a national securities exchange or designates its shares
for quotation on the NASDAQ National Market System.
Q. "Operating Agreement" means the operating agreement of the LLC
entered into by and between the Company and BIJ dated as of
September 30, 1998.
R. "Person" means any individual, partnership, corporation, limited
liability company, association, unincorporated organization,
trust or other entity.
S. "REIT Shares" has the meaning ascribed to it in the Operating
Agreement.
T. "register," "registered" and "registration" mean the preparation
and filing with the SEC of a registration statement or similar
document in compliance with the Securities Act and the
declaration or ordering of the effectiveness of such registration
statement or document.
U. "Registrable Shares" means: (1) any REIT Shares issued upon the
Exchange of Tendered Units pursuant to the Operating Agreement;
(2) any common stock of the Company issued or issuable with
respect to the securities referred to in (1), by way of a stock
dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other
reorganization and (3) any other shares of common stock of the
Company held by Persons holding securities described in clauses
(1) and (2), inclusive, above. As to any particular Registrable
Shares, such securities shall cease to be Registrable Shares
when: (a) they have been distributed to the public pursuant to an
offering registered under the Securities Act or (b) sold to the
public through a broker, dealer or market maker in compliance
with Rule 144 under the Securities Act (or any similar rule then
in force).
For purposes of this Agreement, a Holder of LLC Units for which
REIT Shares are issuable upon an Exchange but for which an
Exchange has not been completed, shall be deemed to be a Holder
of Registrable Shares and the Registrable Shares shall be deemed
to be in existence and the Holder may exercise rights as a Holder
of Registrable Shares hereunder as of the Effective Date whether
or not an Exchange has occurred. Such Holder shall, however,
complete an Exchange on or prior to the date the SEC declares a
registration pursuant to Article 3 or 4 effective and prior to
the date the Holder initiates a sale pursuant to a registration
under Article 2 and further provided, any such Exchange may be
made with the condition precedent that such registration is
declared effective or such sale be initiated.
V . "Registration Expenses" means all expenses except Selling
Expenses incurred by the Company and Holder(s) while complying
with Article 2, 3 or 4 of this Agreement. Registration Expenses
shall include, without limitation, all registration and filing
fees and other qualification fees, blue sky fees, printing
expenses, and fees and disbursements of the Company's and
Holder's accountants, legal counsel and other representatives
incurred in any registration pursuant to Articles 2, 3 or 4.
Fees and disbursements made to accountants and legal counsel for
the Holder(s) shall be limited to those fees and disbursements
incurred for one accountant and one legal counselor, each
selected by the Holder(s) participating in a registration
holding a majority of the then outstanding Registrable Shares.
In the event the legal counselor representing the Holder(s) is
unable to grant a legal opinion necessary to effect a
registration due to a legal conflict of interest, then the
affected Holder(s) may each select other legal counsel, as
applicable, for the sole purpose of delivering such opinion and
the fees and expenses incurred for such counselor shall be paid
for by the Company.
W. "Requesting Holder" means a Holder requesting registration of its
Registrable Shares in accordance with Article 3 of this
Agreement.
X. "SEC" means the United States Securities and Exchange Commission
or any successor agency.
Y. "Securities Act" means the Securities Act of 1933, as amended
from time to time and any successor statute.
Z. "Selling Expenses" means all underwriting discounts, selling
commissions and stock transfer taxes relating to any Holder's
registered shares.
AA. "Shelf Registration" means the registration described in Article
2 of this Agreement.
BB. "Tendered Units" means those LLC Units owned by a Holder which
the Holder desires the Company to acquire in Exchange for REIT
Shares or the Cash Amount.
ARTICLE 2. SHELF REGISTRATION
A. Right to a Shelf Registration. Concurrent with the Company's
filing of an application to a national securities exchange or the
NASDAQ National Market System to commence a Listing Event, the
Company shall file with the SEC a registration statement on Form
S-3 (or a similar form) and pursuant to Rule 415 (or a similar
rule then in force) promulgated under the Securities Act, as
amended from time to time (the "Shelf Registration"), registering
all Registrable Shares, including all Registrable Shares issuable
upon an Exchange of the LLC Units held by any Holder whether or
not such Exchange has occurred. The Company shall use its
reasonable efforts to cause such Shelf Registration to be
declared effective by the SEC at or near the same time as the
Listing Event. The Company has not and shall not enter into any
agreement which grants to any Person the right to have such
Person's registrable shares registered in the same registration
statement as that filed pursuant to Article 2.
B. Period of Effectiveness of the Shelf Registration. The Company
shall file with the SEC from time to time any amendments and
supplements to the Shelf Registration as may be necessary to keep
the registration effective until the Expiration Date (as defined
below). The "Expiration Date" shall be eighteen (18) calendar
months (or such shorter period as Rule 415 promulgated under the
Securities Act, as amended from time to time, may require; in
which case the Company shall cause another (other)
registration(s) pursuant to this Article 2 to become effective
and such registration(s) shall remain effective for a period of
time so that when such period is added to the period of
effectiveness of any prior registration(s) under this Article 2,
the total period of effectiveness of the registrations caused
pursuant to this Article 2 shall equal eighteen (18) calendar
months) from the later of the following to occur:
1. the date on which the SEC declares the Shelf Registration
effective; or
2. the date one year after the Effective Date.
If during the eighteen (18) month period of effectiveness of the
Shelf Registration, the Company gives to the Holders a Blackout
Notice pursuant to Article 5, the Company shall extend the Shelf
Registration for the same time period as that set forth in the
Blackout Notice or, if such extension is prohibited by Rule 415,
the Company shall cause another (other) registration(s) pursuant
to this Article 2 to become effective and such registration(s)
shall remain effective for a period of time so that when such
period is added to the period of effectiveness of any prior
registration(s) under this Article 2, the total period of
effectiveness of the registrations caused pursuant to this
Article 2 shall equal eighteen (18) calendar months.
C. Notice of Listing Event. When the Company files an application
to list its shares on a national securities exchange or to
designate its shares for quotation on the NASDAQ National Market
System, the Company shall deliver written notice of such filing
to all Holders.
D. Notice of Intent to Sell. A Holder who desires to sell its
Registrable Shares pursuant to the Shelf Registration shall
deliver to the Company written notice of its intent to sell.
Within five (5) Business Days of this notice being given, the
Company shall file any supplement or post effective amendment to
the Shelf Registration with respect to the plan of distribution
of such Holder's ownership interest in Registrable Shares that is
necessary to permit the sale of the Holder's Registrable Shares
pursuant to the Shelf Registration.
E. Notice of Effectiveness. The Company shall notify each Holder of
the SEC's declaration that a registration pursuant to this
Article 2 is effective.
ARTICLE 3. PIGGYBACK REGISTRATION RIGHTS
A. Right to Piggyback. At any time after the Expiration Date, if
the Company proposes to register any equity securities or
securities convertible into or exchangeable for equity securities
(other than a registration relating to the sale of securities to
participants in a dividend reinvestment plan, a registration on
Form S-4 relating to a business combination or similar
transaction permitted to be registered on Form S-4, a
registration on Form S-8 relating to the sale of securities to
participants in a stock or employee benefit plan and Demand
Registrations, as set forth in Article 4 of this Agreement), the
Company shall give written notice to all Holder(s) of Registrable
Shares, of the Company's intention to effect a registration and
include in the registration all Registrable Shares for which the
Company has received written requests from a Holder of
Registrable Shares for inclusion therein within twenty (20) days
after the date the Company's notice has been given (acting in
such capacity the Holder is a "Requesting Holder"); provided
however, that:
1. if, at any time after the Company gives written notice of its
intention to register any securities and, prior to the
effective date of the registration statement filed in
connection with the registration, the Company shall determine
for any reason not to register any securities, the Company
may, at its election, give written notice of its
determination to the Requesting Holder(s) and, thereupon, the
Company shall be relieved of its obligation to register any
Registrable Shares in connection with such withdrawn or
unfiled registration (but not of its obligation to pay the
Registration Expenses in connection therewith pursuant to
Article 6 hereto); and
2. if the registration is in connection with an underwritten
public offering and the underwriter or managing underwriter,
as the case may be, advises the Company that, in its opinion,
the number of shares requested to be included in the
registration or offering exceeds the number of shares which
can be sold in the offering, then the number of shares to be
registered shall first be allocated to the Company; second,
pro rata among the Requesting Holders desiring to participate
in the registration, based on the number of shares initially
proposed to be included in the registration by the Requesting
Holder; and third, pro rata among the other holders of the
Company's shares who requested to be included in the
registration, based on the number of shares initially
proposed to be included by the holders.
B. Selection of Underwriter. If any registration pursuant to this
Article 3 is an underwritten public offering, the Requesting
Holder(s) shall not have the right to select the managing
underwriter to administer the offering and the Requesting
Holder(s) agree to enter into customary agreements (including, if
requested, an underwriting agreement), and take any other
customary actions in connection with the offering as the Company
or the underwriter(s) shall reasonably request to consummate the
registration.
C. Notice of Effectiveness. The Company shall give written notice
to each Holder whose Registrable Shares are included in a
registration statement filed pursuant to this Article 3 of the
SEC's declaration that the registration statement is effective.
ARTICLE 4. DEMAND REGISTRATION RIGHTS
A. Right to Demand Registration. At any time after the Expiration
Date, the Holder(s) of a majority of the then outstanding
Registrable Shares may make a written demand to the Company to
register the offer and sale of all or a portion of the
Registrable Shares held by the Holder(s) (the "Demanding Holder")
under the Securities Act and register or qualify under applicable
securities laws, and subject to this Agreement, the Company shall
effect the demand registration promptly; provided, however:
1. the Company shall have no obligation under this Article 4 if
the demand to register such shares has been made by the
Holder(s) of fewer than a majority of the then outstanding
Registrable Shares;
2. the Company shall have no obligation under this Article 4 if
the registration of the Registrable Shares by the Demanding
Holder(s) is then covered under any other registration
statement (including, a registration pursuant to Article 3
hereof) that includes the offering of such shares on a
continuing basis;
3. if the offering is underwritten and the managing underwriter
advises the Company in writing that in its opinion the number
of shares requested to be included in the registration
exceeds the number which can be sold in the offering, the
Company will include in the registration only the number of
shares which in the opinion of such underwriter can be sold.
If the number of shares which can be sold is less than the
number of shares proposed to be registered, then the number
of shares to be registered shall first be allocated pro rata
among the Demanding Holders based on the number of shares
initially proposed to be included by each Demanding Holder;
and second pro rata among the other holders of the Company's
shares who requested to be included in the registration,
based on the number of shares initially proposed to be
included by the holders; and
4. if, while a registration demand is pending, the Company's
Board of Directors with the advice of counsel, determine that
the filing of a registration statement would require the
disclosure of non-public material information and the
disclosure of which would have a material adverse effect on
the Company or would otherwise adversely affect a material
financing, acquisition, disposition, merger or other
comparable transaction, the Company shall deliver a
certificate to that effect signed by one of its officers to
the Demanding Holder(s). In this case, the Company shall not
be required to effect a registration pursuant to this Article
4 until the date upon which the material information is
disclosed to the public or ceases to be material.
B. Notice to the Company. Each notice to the Company delivered
pursuant to this Article 4 shall set forth: (1) the name of the
Demanding Holder(s) requesting registration and (2) the number of
shares to be registered. Within ten (10) days after receipt of
notice from a Demanding Holder, the Company shall notify all
other Holders, if any, and offer to each other Holder the
opportunity to include their shares in the registration. Each
other Holder shall have fifteen (15) days following receipt of
the Company's notice to elect (by providing to the Company
written notice) to have their Registrable Shares included in the
registration.
C. Selection of Underwriters. If any registration pursuant to this
Article 4 is an underwritten public offering, the Demanding
Holder(s) shall have the right to select the managing
underwriter(s) to administer the offering, subject to the
approval of the Company, which approval shall not be unreasonably
withheld.
D. Notice of Effectiveness. The Company shall give written notice
to each Holder whose Registrable Shares are included in a
registration statement filed pursuant to this Article 4 of the
SEC's declaration that the registration statement is effective.
E. Minimum Period of Effectiveness. The Company shall cause a
registration statement filed pursuant to this Article 4 to remain
effective for at least one hundred eighty (180) days from the
date it is declared or ordered effective by the SEC.
ARTICLE 5. BLACKOUT RIGHTS
Following the effective date of any registration statement filed
pursuant to Article 2, 3 or 4 of this Agreement, the Company shall be
entitled, from time to time, to notify the Holder(s) to discontinue
offers or sales of shares pursuant to such registration statement for
Registrable Shares for the period of time stated in the notice (the
"Blackout Notice"), if the Company determines, in its reasonable
business judgment, that the disclosure required in connection with
the offers and sales of the Registrable Shares could materially
damage the Company's ability to successfully complete an acquisition,
corporate reorganization, securities offering or other voluntary
transaction undertaken by the Company (which information the Company
would not be required to disclose at such time other than in
connection with the Holder's registration statement) that is material
to the Company and its subsidiaries taken as a whole. The time
period for which the Holder(s) must discontinue offers or sales of
shares pursuant to a Blackout Notice shall be for any period the
Company reasonably believes is necessary, and if, the Company is
unable to determine the duration of such period at the time the
Blackout Notice is issued, the Blackout Notice may state that the
period extends "until the Holder(s) is (are) otherwise notified by
the Company." The Company shall not cause more than one hundred
eighty (180) days, in the aggregate, within any period of three
hundred sixty (360) consecutive days to be subject to a Blackout
Notice. The Blackout Notice shall be signed by an authorized officer
of the Company and shall certify the Company's determination. Each
Holder agrees that upon receipt of a Blackout Notice each Holder
shall discontinue offers or sales of Registrable Shares pursuant to
any such registration statement for the period of time stated in the
Blackout Notice.
ARTICLE 6. REGISTRATION EXPENSES
Any Registration Expenses incurred in connection with registering a
Holder's Registrable Shares shall be paid for by the Company in all
registrations pursuant to Article 2 or 3 except any Selling Expenses
relating to shares of any Holder whose shares are included in the
registration shall be borne by the Holder and the Company shall have
no liability therefor. Any Registration Expenses and Selling Expenses
incurred in connection with registering a Holder's Registrable Shares
pursuant to Article 4 shall be paid for by the Holder(s)
participating in such registration and the Company shall have no
liability therefor.
ARTICLE 7. REGISTRATION PROCEDURES
A. Whenever any Registrable Shares are to be registered pursuant to
this Agreement, and whenever the registration is effective, the
Company shall use its reasonable efforts to effect the
registration and the sale of such Registrable Shares in
accordance with the intended method of disposition thereof, and
pursuant thereto the Company shall as expeditiously as possible:
1. prepare and file with the SEC a registration statement with
respect to such Registrable Shares and use commercially
reasonable efforts to cause such registration statement to
become effective (before filing a registration statement,
prospectus or any amendments or supplements thereto, the
Company shall furnish to the counsel selected by the
Holder(s) of a majority of the Registrable Shares covered by
such registration statement copies of all such documents
proposed to be filed and in the case of a registration
pursuant to Article 4, the documents shall be subject to the
review and comment of such counsel);
2. provide to each Holder participating in a registration a
reasonable number of copies, without charge, of the
registration statement, preliminary prospectus and any other
documents as may commercially reasonably be necessary to
facilitate a public offering;
3. subject to Article 5, above, prepare and file with the SEC
any amendments and supplements to the registration statement
and the prospectus used in connection therewith as may be
necessary to keep the registration effective and to comply
with the provisions of the Securities Act with respect to the
disposition of all securities covered by the registration
statement during the effectiveness of the registration
statement and provide copies of any amendments or supplements
to each Holder participating in a registration;
4. use commercially reasonable efforts to register or qualify
all securities covered by a registration statement under the
securities or blue sky laws of each jurisdiction each Holder
reasonably requests, except that the Company shall not for
any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction wherein
it is not so qualified or to consent generally to the service
of process in any such jurisdiction;
5. subject to Article 5, above, immediately notify each Holder
of Registrable Shares covered by a registration statement, at
any time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the happening of any
event as a result of which the prospectus included in the
registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading in light of the
circumstances then existing, and at the request of the Holder
prepare and furnish to the Holder a reasonable number of
copies of a supplement to or an amendment of the prospectus
as may be necessary so that, as thereafter delivered to the
purchasers of the Registrable Shares, the prospectus shall
not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading in
light of the circumstances then existing;
6. enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions
as the Holder(s) of a majority of the Registrable Shares
being sold or the underwriter(s), if any, request in order to
expedite or facilitate the disposition of such Registrable
Shares;
7. make available for inspection by any seller of Registrable
Shares, any underwriter participating in any disposition
pursuant to such registration statement and any attorney,
accountant or other agent retained by any such seller or
underwriter, all financial and other records, pertinent
corporate documents and properties of the Company and cause
the Company's officers, directors, employees and independent
accountants to supply all information reasonably requested by
any such seller, underwriter, attorney, accountant or agent
in connection with such registration statement;
8. if a Listing Event has occurred, the Company shall cause all
securities covered by a registration to be listed on the
national securities exchange or designated for quotation on
the NASDAQ System, whichever the case may be;
9. provide a transfer agent and registrar for the securities
covered by a registration not later than the effective date
of such registration statement;
10. otherwise use commercially reasonable efforts to comply with
all applicable rules and regulations of the SEC and, if the
Company is no longer subject to the reporting requirements of
the Securities Exchange Act of 1934, make available to its
security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve
months beginning with the first day of the Company's first
full calendar quarter after the effective date of the
registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder;
11. in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order
suspending or preventing the use of any related prospectus or
suspending the qualification of any common stock included in
such registration statement for sale in any jurisdiction, the
Company shall use commercially reasonable efforts to obtain
the withdrawal of such order;
12. use commercially reasonable efforts to cause such Registrable
Securities covered by such registration statement to be
registered with or approved by such other governmental
agencies or authorities as may be necessary to enable the
sellers thereof to consummate the disposition of such
Registrable Securities; and
13. use commercially reasonable efforts to obtain a cold comfort
letter from the Company's independent public accountants in
customary form and covering such matters of the type
customarily covered by cold comfort letters as the Company
deems appropriate, or in the case of a registration pursuant
to Article 4, as the Holders of the majority of the
Registrable Shares being included in such registration deem
appropriate; provided, however, in this case, the fees and
expenses incurred in obtaining the cold comfort letter shall
be paid for by such Holders.
ARTICLE 8. INDEMNIFICATION
A. Holder's Right to Indemnification. The Company will indemnify
each Holder of Registrable Shares covered by any registration
statement, its officers, directors and partners and each person
who controls the Holder within the meaning of Section 15 of the
Securities Act against all expenses, claims, losses, damages and
liabilities (or actions in respect thereof), including without
limitation any of the foregoing incurred in the defense and
settlement of any litigation which:
1. arises out of or based upon any untrue statement of a
material fact contained in any registration statement,
preliminary prospectus, final prospectus, supplement to the
prospectus or documents incorporated by reference therein, or
based upon any omission of a material fact required to be
stated therein or necessary to make the statements therein
not misleading, or
2. is incurred or arising out of any violation by the Company of
the Securities Act or any rule or regulation promulgated
under the Securities Act.
Notwithstanding the foregoing, the Company will not be under any
obligation to indemnify any Holder if:
1. any of the foregoing are made in reliance upon information
furnished to the Company by the Holder or any of its agents
(including its underwriter(s)) in writing expressly for
inclusion in the registration statement, preliminary
prospectus, final prospectus, supplement to the prospectus,
or any documents incorporated by reference therein;
2. any of the foregoing are made in a preliminary prospectus or
prospectus and subsequently corrected in the final prospectus
or supplemental to the final prospectus, but the Holder(s)
failed to deliver the final prospectus or supplement;
provided, however, that the Holder(s) were given notice from
the Company that the final prospectus or supplement was
available and copies of the final prospectus or supplement
were made available to the Holder(s); or
3. the Holder(s) fail to deliver a prospectus or otherwise
comply with any federal or state securities laws.
B. Company's Right to Indemnification. Each Holder participating in
a registration pursuant to this Agreement will indemnify the
Company, its directors or officers, each person who controls the
Company within the meaning of Section 15 of the Securities Act,
and each other Holder and each of its officers and directors and
each person controlling the Holder(s) within the meaning of
Section 15 of the Securities Act, against all expenses, claims,
losses, damages and liabilities incurred (or action in respect
thereof) arising out of any untrue statement of a material fact
contained in any registration statement or based upon any
omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading to the
extent made (or not made in the case of an omission) in reliance
upon information furnished to the Company by the Holder or any of
its agents (including its underwriter(s)) in writing expressly
for inclusion in the registration statement and expressly in
response to the Company's specific written request for such
information for inclusion in the registration statement. The
obligation to indemnify shall be individual and not joint and
several.
C. Indemnification Procedure. Each party entitled to
indemnification under this Article 8 ("Indemnified Party") shall
give prompt notice to the party required to provide
indemnification ("Indemnifying Party") as soon as the Indemnified
Party has actual knowledge of any claim for which indemnity may
be sought, and shall permit the Indemnifying Party to assume and
control the defense of any such claim or any litigation resulting
therefrom. The Indemnifying Party may select legal counsel for
such defense, provided however, that if the Indemnified Party,
acting in good faith, believes that it has certain legal
defenses to any claim or litigation which are different from or
in conflict with those defenses available to the Indemnifying
Party, the Indemnified Party may select one independent attorney
to act on its behalf as legal counsel to defend the Indemnified
Party against any claim or litigation. The legal fees of the
independent attorney shall be paid for by the Indemnifying Party.
In any event, the Indemnifying Party, shall not, without the
prior written consent of the Indemnified Party, consent to the
entry of any judgment or enter into any settlement which: (1)
provides for any remedy other than the prompt payment of damages
(and expenses) by the Indemnifying Party, without the admission
of wrongdoing on the part of the Indemnified Party and (2) does
not include an unconditional provision releasing Indemnified
Party from all liability in respect of the claim or litigation.
The failure of any Indemnified Party to give notice of a claim
subject to indemnification shall not relieve Indemnifying Party
of its obligations under this Agreement except to the extent that
the failure to give such notice is materially prejudicial to
Indemnifying Party's ability to defend the claim.
D. Contribution. If the indemnification provided for in this
Article 8 is unavailable to or unenforceable by the Company or
the Holder(s) (or their controlling persons) in respect of any
expenses, claims, losses, damages, and liabilities referred to
herein, then each such Indemnifying Party, in lieu of
indemnifying an Indemnified Party, shall contribute to the amount
paid or payable by the Indemnified Party as a result of any
expenses, claims, losses, damages and liabilities in such
proportions as is appropriate to reflect the relative fault of
and relative benefit to the Indemnifying Party on the one hand
and the Indemnified Party on the other hand. These proportions
shall be determined by balancing equitable considerations such
as, among other things: (1) whether the untrue or alleged untrue
statement of material fact or the omission or alleged omission to
state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party, (2) by such
party's relative intent, knowledge, access to information and
opportunity to correct or prevent the statement or omission, and
(3) by such party's relative benefit received from the making of
the untrue or alleged untrue statement of material fact or the
omission or alleged omission to state a material fact.
The Company and the Holder(s) agree that it would not be just and
equitable if contribution pursuant to this Article 8(d) were
determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable
considerations referred to in the immediately preceding
paragraph. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall
be entitled to contribution from any person who was not guilty of
the fraudulent misrepresentation.
E. Term of Indemnification Obligations. The obligations of the
Company and Holder(s) under this Article 8 shall survive the
completion of any offering of Registrable Shares in a
registration statement under this Agreement or otherwise and
shall extend for a period of two (2) years following completion
of the relevant offering.
ARTICLE 9. TRANSFER RESTRICTIONS
Any Holder's rights under this Agreement may be assigned or
transferred to any transferee or assignee permitted pursuant to
Section 11.3 of the Operating Agreement, who becomes a holder of
Registrable Shares, subject to the transfer restrictions set forth in
the legend contained on the certificates for such Registrable Shares.
ARTICLE 10. MISCELLANEOUS
A. Notices. All notices, requests, consent and other
communications hereunder shall be in writing to the persons set
forth below. Notice shall be deemed to have been given and/or
received: (1) on the date delivered if delivery is made
personally, (2) one (1) day after being deposited with a
reputable overnight courier (all charges prepaid), or (3) five
(5) days after being deposited into a U.S. Mailbox if mailed by
certified or registered mail, return receipt requested and
postage prepaid. Notices shall be delivered to the following
parties (or as otherwise instructed in writing from time to
time):
1. If to the Company:
a. Mr. Sam Orticelli
Inland Real Estate Corporation
2901 Butterfield Road
Oak Brook, Illinois 60523
2. If to BIJ:
a. Mr. Barry Sidel
B.I.J. Limited Partnership
One IBM Plaza
Chicago, Illinois 60611
If BIJ transfers or assigns any of its rights under this
Agreement in accordance with Article 9, above, then BIJ shall
promptly provide to the Company, the name, address and telephone
number of such transferee or assignee.
B. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties in separate counterparts,
each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same
agreement.
C. Headings. The headings in this Agreement are for convenience
only and shall not limit or otherwise affect the meaning hereof.
D. Governing Law. The corporate law of the State of Maryland shall
govern all issues and questions concerning the relative rights of
the Company and its shareholders. All other issues and questions
concerning the construction, validity, interpretation and
enforcement of this Agreement shall be governed by, and construed
in accordance with the laws of the State of Illinois, without
giving effect to any choice of law or conflict of law rules or
provisions (whether of the State of Illinois or any other
jurisdiction) that would cause the application of the laws of any
other jurisdiction other than the State of Illinois. In
furtherance of the foregoing, the internal law of the State of
Illinois shall control the interpretation and construction of
this Agreement, even though under that jurisdictions' choice of
law or conflict of law analysis, the substantive law of some
other jurisdiction would ordinarily apply.
E. Amendments. The provisions of this Agreement may be amended or
waived only upon the prior written consent of the Company and all
of the Holders of Registrable Shares.
F. Severability. In the event that any provision contained herein,
or the application thereof in any circumstance, is held invalid,
illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and
of the remaining provisions contained herein shall not be
affected or impaired thereby. Provided, however, that if the
provision(s) held to be invalid, illegal or unenforceable are
material to this Agreement and without such provision(s) this
Agreement is materially impaired or altered, then the entire
Agreement shall be declared invalid, illegal or unenforceable.
G. Successors and Assigns. All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto shall bind
and inure to the benefit of the respective successors and assigns
of the parties hereto whether so expressed or not. In addition,
whether or not any express assignment has been made, the
provisions of this Agreement which are for the benefit of
purchasers or holders of Registrable Securities are also for the
benefit of, and enforceable by, any subsequent holder of
Registrable Securities.
H. Remedies. Any Person having rights under any provisions of this
Agreement shall be entitled to enforce such rights specifically
to recover damages caused by reason of any breach of any
provision of this Agreement and to exercise any and all legal and
equitable rights available and all other rights granted by law.
The parties hereto agree and acknowledge that money damages may
not be an adequate remedy for any breach of any of the provisions
of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction
(without posting any bond or other security) for specific
performance and for other injunctive relief in order to enforce
or prevent any breach or violation of any provision of this
Agreement.
I. Mutual Covenant. Neither the Company nor the Holders shall enter
into any Agreement which violates the rights granted to each
party in this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
INLAND REAL ESTATE CORPORATION
By: /s/ Roberta S. Matlin
Its: Vice President
B.I.J. LIMITED PARTNERSHIP
By: P.G.P., Inc., its General Partner
By: /s/ E.J. Plesko
Its: President
By: Beavis, Inc., its General Partner
By: /s/ Alan Brody
Its: President
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