8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report:  April 27, 2007

(Date of earliest event reported)

Inland Western Retail Real Estate Trust, Inc.

(Exact name of registrant as specified in its charter)

Maryland	000-51199	42-1579325
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer I.D. No.)

2901 Butterfield Road
Oak Brook, Illinois 60523

(Address of Principal Executive Offices)

(630) 218-8000

(Registrant’s telephone number including area code)

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o

 Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o

 Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)

o

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)

Item 1.01   Entry into a Material Definitive Agreement. 

On April 27, 2007, Inland Western Real Estate Trust, Inc. (the “Company”) and Morgan Stanley Real Estate Advisor, Inc. (“Morgan Stanley”) announced the signing of a definitive agreement to establish a $1 billion joint venture with a state pension fund investor advised by Morgan Stanley. The purpose of this joint venture is to acquire and manage targeted retail properties in major metropolitan areas of the United States.

The joint venture will initially be comprised of $500 million of existing properties from the Company’s portfolio that will be contributed to the joint venture. The Company is contributing select stabilized assets to the joint venture and in exchange will receive equity from the institutional partner. The additional $500 million investment will be focused on selective acquisitions of neighborhood, community, and power centers that will be mutually agreed upon by both parties.  

Under the terms of the operating agreement, which is filed as an exhibit to this report and incorporated by reference into this Item 1.01 in its entirety, Morgan Stanley’s client will contribute 80 percent of the equity to the joint venture and the Company will contribute 20 percent.  The Company will earn fees for acquisitions, dispositions, property management, leasing and administration.

Item 8.01.   Other Events.

On April 27, 2007, the Company issued a press release announcing the joint venture as described above under Item 1.01.  A copy of the press release is furnished herewith as Exhibit 99.1 to this Current Report on Form 8-K.

Item 9.01.  Financial Statements and Exhibits.

(c)	Exhibits:
	Exhibit No.	Description
	10.1	Operating Agreement of MS Inland Fund, LLC.
	99.1	Press release of Inland Western Retail Real Estate Trust, Inc. dated April 27, 2007.

SIGNATURE

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 hereunto duly authorized.

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.
By:	/s/ Steven P. Grimes
Name:		Steven P. Grimes
Title:		Treasurer and Principal Financial Officer
Date:		May 2, 2007

EX-1

OPERATING AGREEMENT

OF

MS INLAND FUND, LLC

(A DELAWARE LIMITED LIABILITY COMPANY)

Dated as of

April ___, 2007

Table of Contents

Page(s)

i

ii

EXHIBITS:

A

Evaluation Materials

B

Funding Conditions

C

Investment Guidelines

D

Form Project Entity Operating Agreement (Single Member)

E

Fee Schedule

F

Addresses for Notice

G

Form Property Management Agreement

H

Existing Portfolio

I

Contribution Agreement

J

Example of Dilution Calculation

K

Example of Capital Event Distributable Cash Calculation

L

Example of Section 7.1(d) Calculation

iii

OPERATING AGREEMENT

OF

MS INLAND FUND, LLC

(a Delaware limited liability company)

*  *  *  *  *

Transfer Restrictions

The interests in MS Inland Fund, LLC (the “Interests”) are subject to the restrictions on transfer and other terms and conditions set forth in this Agreement.

The Interests have been acquired for investment and have not been registered under (a) the securities laws of the State of Delaware (the “Delaware Securities Laws”), (b) any other state securities laws, or (c) the United States Securities Act of 1933, as amended (the “Securities Act”).  

Neither the Interests nor any part thereof may be offered for sale, pledged, hypothecated, sold, assigned, or transferred except in compliance with the terms and conditions of this Agreement and

(1)

pursuant to an effective registration statement under the Delaware Act or in a transaction which either is exempt from registration under the Delaware Securities Laws or is otherwise in compliance with the Delaware Securities Laws,

(2)

pursuant to an effective registration statement under any other applicable state securities laws or in a transaction which either is exempt from registration under any such laws or is otherwise in compliance with such laws, and

(3)

pursuant to an effective registration statement under the Securities Act or in a transaction which either is exempt from registration under the Securities Act or is otherwise in compliance with the Securities Act.

*  *  *  *  *

1

OPERATING AGREEMENT

OF

MS INLAND FUND, LLC

(a Delaware limited liability company)

THIS OPERATING AGREEMENT (this “Agreement”), dated as of April ____, 2007, by and between INLAND WESTERN RETAIL REAL ESTATE TRUST, INC., a Maryland corporation (“Inland”), and THE FLORIDA RETIREMENT SYSTEM TRUST FUND, as defined in Florida Statutes Section 121.021(36), acting by and through The State Board of Administration of the State of Florida, a body created under the laws of the State of Florida (the “Board”).

Statement of Background

In consideration of foregoing and of the mutual agreements and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties to this Agreement hereby agree as follows:

ARTICLE 1
DEFINITIONS

1.1

Definitions.  The following terms used in this Agreement shall have the following meanings (unless otherwise expressly provided herein);

“Acquired Project” means any Approved Project (other than an Existing Portfolio Project) acquired by a Project Entity, including, without limitation, any Additional Inland Project.

“Acquired Portfolio Distributable Cash” means the excess of revenues derived by the Company from the operation of Acquired Projects (exclusive of any Capital Event Distributable Cash), less:  (i) all expenditures for costs and expenses relating to the ordinary and necessary operations of such Acquired Projects, including, but not limited to, third party debt service, commissions, management fees, service charges, insurance charges, legal expenses, salaries, payments to employees and independent contractors, taxes, supplies, and other items which are normally considered operating expenses and (ii) reasonable reserves.

“Acquisition Contract” means a purchase and sale contract entered into by the Company or a Project Entity for the acquisition of a Potential Project other than a Potential Project that would be an Additional Inland Project if acquired by the Company.

“Additional Capital Contribution” has the meaning set forth in Section 7.1(c).

“Additional Inland Project” means any Acquired Project(s) acquired from Inland or any Affiliate of Inland having in the aggregate a value of at least $164,000,000.  Solely for the purposes of Article 9 of this Agreement, Additional Inland Projects shall be deemed to be Existing Portfolio Projects.  

“Additional Inland Project Contribution Agreement” has the meaning set forth in Section 4.3(a) hereof.

“Additional Inland Project Initial Approval Period” has the meaning set forth in Section 4.3(a) hereof.

“Additional Inland Project Value” means the value of any Additional Inland Project as set forth in an Additional Inland Project Contribution Agreement submitted to and approved by the Executive Committee.

 “Affiliate” means with respect to any Person, (a) in the case of an individual, any relative of such Person, (b) any officer, director, trustee, partner, manager, employee or holder of 10% or more of any class of the voting securities of or equity interest in such Person; (c) any corporation, partnership, limited liability company, trust or other entity controlling, controlled by or under common control with such Person; or (d) any officer, director, trustee, partner, manager, employee or holder of 10% or more of the outstanding voting securities of any corporation, partnership, limited liability company, trust or other entity controlling, controlled by or under common control with such Person.  

“Aggregate Fair Market Value” has the meaning set forth in Section 13.6(c) hereof.

“Agreement” means this Agreement as originally executed and as amended from time to time in accordance with the provisions of Section 15.12.

“Annual Budget” has the meaning set forth in Section 11.3(a).

“Approved Annual Budget” means an Annual Budget approved unanimously by the Executive Committee pursuant to Section 5.2 hereof.

“Approved Project” means any Potential Project submitted by Inland to the Executive Committee for consideration for which the Executive Committee has granted Final Approval.

“Approved Project Budget” means with respect to any Approved Project, a Project Budget submitted by Inland to the Executive Committee and unanimously approved and adopted by the Executive Committee in accordance with Section 5.2 hereof.

“Articles of Organization” means the Articles of Organization of the Company, as filed with the Secretary of State of Delaware and as the same may be amended from time to time.

“BIC Funds” has the meaning set forth in Section 7.1(b) hereof.

“Board Funding Commitment” means (i) the equity required to acquire eighty percent (80%) of the Existing Portfolio Projects as the same are set forth on Exhibit H, and as the same may be amended from time to time, but in no case to exceed $200,000,000, which sum shall be contributed by the Board to the Company, a portion of which amount shall be distributed by the Company to Inland in accordance with the Contribution Agreement, plus (ii) $180,000,000, the maximum amount of Project Equity the Board has committed to contribute under this Agreement to acquire Approved Projects (other than the Existing Portfolio) through investment in one or more Project Entities as and when the Approved Projects are acquired.

“Board’s Initial Capital Contribution” means the equity contribution described in clause (i) of the definition of Board Funding Commitment.

“Book Value” shall mean, with respect to any Company asset, the asset’s adjusted basis for Federal income tax purposes, except that the Book Values of all Company assets shall be adjusted to

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equal their respective fair market values (as determined by the Members), in accordance with the rules set forth in Regulations Section l.704-1 (b)(2)(iv)(f), immediately prior to: (a) the date of the acquisition of any additional Membership Interest by any new or existing Member in exchange for services or for more than a de minimis Capital Contribution, or (b) the date of the distribution by the Company of more than a de minimis amount of property to a Member as consideration for a Membership Interest; provided that adjustments pursuant to clauses (a) and (b) above shall be made only if the Members determine that such adjustments are necessary or appropriate to reflect the relative economic interests of the Members.

“Capital Account” has the meaning set forth in Section 7.3 hereof.

“Capital Commitment” means, as applicable, either the Board Funding Commitment or the Inland Funding Commitment.

“Capital Contribution” means the contributions to the capital of the Company made by a Member pursuant to this Agreement. The Members hereby acknowledge and agree that for all purposes of this Agreement, upon the contribution of the Existing Portfolio to the Company pursuant to and in accordance with the terms of the Contribution Agreement, Inland shall be deemed to have made a Capital Contribution to the Company in an amount equal to (x) the Existing Portfolio Value, minus (y) Board’s Initial Capital Contribution, as and when contributed to the Company.

“Capital Event” means any sale, financing or refinancing, condemnation, or realization of insurance claims paid in connection with any casualty loss in connection with any Acquired Project or Existing Portfolio Project.

“Capital Event Distributable Cash” means the excess revenues derived by the Company from a Capital Event, less all amounts required to pay any and all costs, charges and expenses associated with the transaction giving rise to the revenue, less amounts required to fund a reserve in an amount sufficient in the reasonable discretion of the Manager to cover anticipated expenses and liabilities that would not otherwise be provided for.  Capital Event Distributable Cash shall not include BIC Funds or interest earnings thereon, which shall be applied or distributed solely in accordance with Sections 7.1(b), (d) and (e).

“Catch-Up Balance” has the meaning set forth in Section 7.1(d) hereof.

“Closing” has the meaning set forth in Section 12.4 hereof.

“Closing Date” has the meaning set forth in Section 12.4 hereof.

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

“Company” means MS Inland Fund, LLC, a Delaware limited liability company.

“Company Minimum Gain” has the meaning set forth in Section 8.1 hereof.

“Contribution Agreement” means a contribution agreement substantially in the form of Exhibit I attached hereto and hereby made a part hereof to be entered into by Inland and the Company pursuant to which Inland shall contribute one hundred percent (100%) of its ownership interest in the Existing Portfolio SPEs to the Company.

“Core Plus Project” means a Potential Project which, based upon the Investment Guidelines, is designated by the Executive Committee as a “Core Plus Project” during the Evaluation Period.

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“Core Plus Project Entity” means any Project Entity acquiring title to a Potential Project designated as a Core Plus Project.

“Core Plus Project IRR” means, with respect to each Core Plus Project Entity, the discount rate (expressed as a percentage return), compounded monthly, at which the sum of (a) the present value  (determined as of the date of each Capital Contribution with respect to such Core Plus Project Entity) of all Project Equity invested by the Members in such Core Plus Project Entity, as the case may be, through the date of calculation (expressed as a negative number) and (b) the present value of all Distributable Cash received by the Members attributable to such Core Plus Project Entity (expressed as a positive number) equals zero.  Core Plus Project IRR shall be calculated using the latest version of the Microsoft Excel® electronic spreadsheet IRR Financial Function.

 “Default Event” means with respect to or by either Inland or the Board (i) the declaration of bankruptcy, (ii) an appointment of a trustee, liquidator or receiver, (iii) a failure to generally pay its debts as they become due, (iv) a failure to timely perform its obligations under this Agreement, including, without limitation, the obligation to make any Additional Capital Contributions, (v) any attempted assignment of its Interests (in whole or in part) not expressly permitted in this Agreement, (vi) being found guilty of a felony, fraud or wrongdoing in connection with any business activity of the Company, (vii) the intentional misapplication of funds of the Company, (viii) the intentional misrepresentation by it or any Affiliate of a material fact to another Member of the Company or such Member’s Representative, (ix) Inland Management is in default in the o bservance or performance of its obligations as Property Manager pursuant to any property management agreement with the Company or a Project Entity and such default is continuing beyond any applicable grace, notice or cure period, (x) a writ of attachment against either Inland or the Board, and (xi) a dissolution of either Inland or the Board.  The matters set forth in clauses (iv), (v), (vi) and (vii) above shall not constitute a Default Event if such matter does not pertain to wrongdoing involving a criminal conviction and such matter is cured within thirty (30) days following receipt of notice of such failure from the other Member, unless such matter by its very nature is incapable of being cured within such thirty (30) day period and the defaulting Member has commenced and is diligently pursuing a cure, in which event such defaulting Member shall have a commercially reasonable period not to exceed ninety (90) days to effect such cure.

“Default Sale Period” has the meaning set forth in Section 12.4 hereof.

“Delaware Act” means the Delaware Limited Liability Company Act (as from time to time amended).

“Delaware Securities Laws” means the securities laws of the State of Delaware.

“Deposit” has the meaning set forth in Section 12.4(b) hereof.

“Distributable Cash” means, collectively, the Capital Event Distributable Cash and the Operating Distributable Cash.  Distributable Cash shall not include BIC Funds or interest earnings thereon, which shall be applied or distributed solely in accordance with Sections 7.1(b), (d) and (e).

“Entity” means any general partnership, limited partnership, limited liability company, corporation, joint venture, trust, business trust, cooperative or association, any foreign trust or foreign business organization, or any other business entity or organization.

“Evaluation Materials” means (i) with respect to each Potential Project, the information set forth on Exhibit A attached hereto and hereby made a part hereof; and (ii) with respect to the Existing Portfolio, the information set forth on Exhibit A that is in Inland’s possession.

4

“Evaluation Period” has the meaning set forth in Section 4.3 below.

“Exclusive Market Area” means the major metropolitan areas of California, Oregon, Washington, Arizona, Nevada and Colorado.

“Executive Committee” means a committee of five (5) members which shall manage the day to day affairs of the Company consisting of three (3) Representatives of the Board and two (2) Representatives of Inland.

“Existing Portfolio” the retail properties more particularly described on Exhibit H attached hereto, which properties will be contributed by Inland to the Company pursuant to and in accordance with the provisions of the Contribution Agreement.

“Existing Portfolio Distributable Cash” means the excess of revenues derived by the Company from the operation of the Existing Portfolio Projects (exclusive of any Capital Event Distributable Cash), less:  (i) all expenditures for costs and expenses relating to the ordinary and necessary operations of such Existing Portfolio Projects, including, but not limited to, third party debt service, commissions, management fees, service charges, insurance charges, legal expenses, salaries, payments to employees and independent contractors, taxes, supplies, and other items which are normally considered operating expenses and (ii) reasonable reserves, including without limitation budgeted capital items.

“Existing Portfolio Project” means each of the retail properties contained within the Existing Portfolio which are contributed by Inland to the Company or, as the case may be, one or more Project Entities.

“Existing Portfolio Project Equity” means the aggregate amount of Project Equity invested by the Members in the Project Entities holding title to the Existing Portfolio Projects.

“Existing Portfolio SPE” means a single purpose limited liability company or limited partnership which owns an Existing Portfolio Project and wholly owned, directly or indirectly, by Inland prior to the consummation of the transactions contemplated in the Contribution Agreement.

“Existing Portfolio Value” means the difference between (a) $336,000,000.00, the aggregate agreed gross value of the Existing Portfolio Projects, and (b) the amount of any assumed indebtedness as of the date of contribution of the ownership interest in the Existing Portfolio SPEs to the Company pursuant to the terms of the Contribution Agreement.

“Fair Market Value” has the meaning set forth in Section 13.6(c) hereof.

“Final Approval” means with respect to any Potential Project for which Initial Approval has been granted, the Executive Committee’s approval to acquire such Potential Project.

“Fiscal Year” means the Company’s fiscal year, which shall be the calendar year.

“Formation Documents” means for each Project Entity, the formation and organizational documents for such Project Entity, which shall be substantially in the form of Exhibit D attached hereto.

“Funding Conditions” means the matters set forth on Exhibit B attached hereto and hereby made a part hereof.

“Funding Member” has the meaning set forth in Section 7.1(g) hereof.

5

“Identified Project” has the meaning set forth in Section 4.7(b) hereof.

“Initial Approval” means with respect to any Potential Project, the Executive Committee’s approval to pursue such Potential Project during the Initial Approval Period or the Additional Inland Project Initial Approval Period.

“Initial Approval Period” has the meaning set forth in Section 4.3(a) hereof.

“Initial Percentage Interest” means eighty percent (80%) for the Board and twenty percent (20%) for Inland.

“Initiator” has the meaning set forth in Section 12.3(a) hereof.

“Inland Funding Commitment” means (i) one hundred percent (100%) of Inland’s equity ownership interest in the Existing Portfolio SPEs, which ownership interests will be contributed by Inland to the Company in accordance with the provisions of the Contribution Agreement, plus (ii) $45,000,000, the maximum amount of Project Equity Inland has committed to contribute under this Agreement to acquire Approved Projects (other than the Existing Portfolio) through investment in one or more Project Entities as and when the Approved Projects are acquired.

“Inland Management” means, as applicable, Inland Southwest Management LLC, Inland US Management LLC, Inland Pacific Management LLC or any successor entity by merger or consolidation which is an Affiliate of Inland.

“Inland Precluded Activities” has the meaning set forth in Section 4.7 hereof.

“Interests” means interests of each Member in the Company.

“Internal Rate of Return” or “IRR” means the discount rate (expressed as a percentage return), compounded monthly, at which the sum of (a) the present value of all Project Equity invested by the Members, as the case may be, through the date of calculation (expressed as a negative number) and (b) the present value of all Distributable Cash received by the Members through the date of calculation (expressed as a positive number) equals zero. IRR shall be calculated using the latest version of the Microsoft Excel® electronic spreadsheet IRR Financial Function.

“Intra-Member Purchase Price” has the meaning set forth in Section 12.4 hereof.

“Investment Advisor” means, initially, MSRE, or such other Entity the Board may designate from time to time by written notice to Inland.

“Investment Guidelines” means certain investment parameters established by the Company for identifying potential Projects, which guidelines are more particularly described on Exhibit C attached hereto and hereby made a part hereof.

“Investment Period” means that period commencing on the date of this Agreement and ending on the date which is the second (2nd) anniversary of the date of this Agreement or sooner if the Capital Commitment has been fully funded; provided, however, the Investment Period may be extended for a period of one (1) additional year upon the unanimous consent of the Executive Committee.  

“Liquidation Notice” has the meaning set forth in Section 13.6(c) hereof.

6

“Major Decisions” has the meaning set forth in Section 5.2 hereof.

“Manager” means Inland or a successor appointed by the Executive Committee.

“Market Area” means the major metropolitan areas of California, Oregon, Washington, Arizona, Nevada, Colorado, Florida, Georgia, South Carolina, North Carolina, Virginia, Maryland and Texas and each state now or hereafter identified as contained within the Target Market.

“Member” means each of the Board and Inland.

“Member Minimum Gain” has the meaning set forth in Section 8.1 hereof.  

“Member Nonrecourse Debt” has the meaning set forth in Section 8.1 hereof.

“Member Nonrecourse Deductions” has the meaning set forth in Section 8.1 hereof.  

“Membership Interest” means a Member’s entire interest in the Company including such Member’s Percentage Interest and any other rights granted pursuant to the Delaware Act.

“MSRE” means Morgan Stanley Real Estate Advisor, Inc., the Board’s initial Investment Advisor under this Agreement.

“Net Losses” and “Net Profits” have, respectively, the meanings set forth in Section 8.1 hereof.

“Non-Funding Member” has the meaning set forth in Section 7.1(g) hereof.

“Nonrecourse Deductions” has the meaning set forth in Section 8.1 hereof.  

“Nonrecourse Liability” has the meaning set forth in Section 8.1 hereof.

“Operating Distributable Cash” means, as applicable, the Acquired Portfolio Distributable Cash and the Existing Portfolio Distributable Cash.  Operating Distributable Cash shall not include BIC Funds or interest earnings thereon, which shall be applied or distributed solely in accordance with Sections 7.1(b), (d) and (e).

“Percentage Interest” means, at any given time, the interest of each Member in the Company, which is the proportion that a Member’s Capital Contribution bears to the aggregate amount of Capital Contributions of all other such Members, as the same may be adjusted pursuant to Section 7.1(g) below.  

“Person” means any individual or Entity, and the heirs, executors, administrators, legal representatives, successors, and assigns of such “Person” where the context so permits.

“Portfolio” means, at any given time, all of the Acquired Projects and the Existing Portfolio Projects.

“Potential Project” means, except to the extent such existing retail development is not applicable pursuant to the terms of Section 4.7(a), any existing retail development in the Market Area, which Inland deems appropriate to submit to the Executive Committee for consideration as a potential investment opportunity for the Company.

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“Priority Loan” means any loan to the Company made by a Member pursuant to Section 7.1(f) hereof, which loans shall bear interest at a compounding annual interest rate equal to the lesser of 18% or the highest rate allowed by applicable law.

“Project Budget” is defined in item (c) on Exhibit A attached hereto and hereby made a part hereof.

“Project Entity” means the Existing Portfolio SPEs and any other single purpose corporation, partnership or limited liability company in which the Company has an ownership interest formed in accordance with the provisions of Section 4.8 hereof for the purpose of acquiring, owning, and operating an Approved Project.  

“Project Equity” means, as applicable, (i) the aggregate amount of capital a Member is required to contribute to a Project Entity in connection with the acquisition of an Approved Project as set forth in the Approved Project Budget for such Approved Project, (ii) the aggregate amount of capital a Member is required to contribute to the Company in connection with the acquisition of one hundred percent (100%) of Inland's ownership interests in the Existing Portfolio SPEs in accordance with the Contribution Agreement, and (iii) any additional capital contributed by any such Member pursuant to this Agreement which is designated or deemed Project Equity.    

“Property Manager” means, initially, Inland Management or any successor Entity with whom a Project Entity contracts to provide property management and leasing services pursuant to an agreement substantially in the form of Exhibit G attached hereto.

“Proportionate Share” has the meaning set forth in Section 7.1(c) hereof.

“Proposed Net Value” is defined in Section 12.3(a) hereof.

“Pursuit Costs” has the meaning set forth in Section 4.3(b) hereof.

“Reconciliation Calculation” has the meaning set forth in Section 9.5 hereof.

“Representative” means any officer, director or employee of such Member or, in the case of the Board, any Person on the Board’s staff, the Investment Advisor and/or any Person on the Investment Advisor’s staff, selected by such Member to represent such Member on the Executive Committee.  

“Required Third Party Price” has the meaning set forth in Section 12.2 hereof.

“Reserves” means, with respect to any fiscal period, funds set aside or amounts allocated during such period to reserves which shall be maintained in amounts deemed sufficient by the Executive Committee for working capital and to pay taxes, insurance, debt service or other costs or expenses incident to the ownership or operation of the Company’s business.

“Respondent” is defined in Section 12.2(a) hereof.  

“Section 7.1 Amount” has the meaning set forth in Section 7.1(c) hereof.

“Securities Act” means the Securities Act of 1933, as amended.

“Sell Trigger Notice” is defined in Section 12.2(a) hereof.

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“Target Market” means the Market Area plus the major metropolitan areas of those states identified by the Executive Committee pursuant to Section 5.2(pp) hereof

“Tax Matters Member” means for purposes of Code §§ 6221 through 6233, and the initial Tax Matters Member (“TMM”) shall be Inland.

“Third Party Sale Period” has the meaning set forth in Section 12.2 hereof.

“Total Liquidation Price” has the meaning set forth in Section 13.6(c) hereof.

“Treasury Regulations” or “Regulations” means the Federal Income Tax Regulations promulgated under the Code, as such regulations may be amended from time to time; all references in this Agreement to a specific section of the Regulations shall be deemed also to refer to any corresponding provision of succeeding regulations.

“Trigger Date” has the meaning set forth in Section 12.2 hereof.

“Undertakings” has the meaning set forth in Section 15.17 hereof.

“Unresolved Major Decision” means any outstanding Major Decision which the Executive Committee is unable to resolve by a unanimous vote of its members (including an inability to reach agreement with respect to an unfilled vacancy on the Executive Committee as provided in Section 5.8) within sixty (60) days after its presentation to the Executive Committee for consideration.

1.2

Construction.  Whenever the singular number is used in this Agreement and when required by the context, the same shall include the plural and vice versa, and the masculine gender shall include the feminine and neuter genders and vice versa.

1.3

Headings.  The headings in this Agreement are inserted for convenience only and are in no way intended to describe, interpret, define, or limit the scope, extent or intent of this Agreement or any provision hereof.

1.4

Captions.  Titles and captions are inserted for convenience only and in no way define, limit, extend or describe the scope or intent of this Agreement or any of its provisions and in no way are to be construed to affect the meaning or construction of this Agreement or any of its provisions.

ARTICLE 2
FORMATION OF COMPANY

2.1

Effect of this Agreement and the Delaware Act.  Except as otherwise specifically provided for in this Agreement, the rights and obligations of the Members and the administration, dissolution, liquidation, and termination of the Company shall be governed by the Delaware Act.

2.2

Name.  The name of the Company is “MS Inland Fund, LLC.”

2.3

Principal Place of Business.  The mailing address and principal place of business of the Company shall be c/o The Inland Real Estate Group of Companies, Inc., 2901 Butterfield Road, Oak Brook Illinois 60523.  The Company may locate

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its places of business and registered office at any other place or places as the Manager may from time to time deem advisable.

2.4

Registered Office and Registered Agent.  The Company’s initial registered office shall be at the office of its registered agent at 1209 Orange Street, Wilmington, Delaware 19801, and the name of its registered agent at such address is The Corporation Trust Company.  The registered office and registered agent may be changed from time to time by filing the address of the new registered office or the name of the new registered agent, as the case may be, with the Secretary of State of Delaware pursuant to the Delaware Act and the applicable rules promulgated thereunder.

2.5

Filing of Documents.  If not already so filed, immediately following the execution of this Agreement, the Executive Committee shall cause the Certificate of Formation to be filed at all appropriate offices in accordance with the provisions of the Delaware Act.  The Executive Committee will take all necessary action to cause the Company to execute, acknowledge, file, record or publish, as necessary, such amendments to this Agreement as may be required by the terms hereof or by law and such other certificates and documents as may be appropriate to comply with the requirements of law for the continuation, preservation and operation of the Company as a limited liability company under the Delaware Act.

2.6

Qualification in Foreign Jurisdictions.  Prior to the Company’s conducting business in any state other than Delaware, the Manager will cause the Company to qualify the Company as a foreign limited liability company in that jurisdiction to the extent such qualification is required by applicable law or otherwise deemed necessary or advisable  by Manager.  At the request of the Manager each Member will execute, acknowledge, swear to and deliver all certificates and other instruments that conform to this Agreement and that are necessary or appropriate to qualify, continue or withdraw the Company as a foreign limited liability company in any such jurisdiction.

2.7

Ownership; Waiver of Right of Partition.  The interest of each Member in the Company shall be personal property for all purposes.  All property and interests in property, real or personal, owned by the Company shall be deemed owned by the Company as an entity, and no Member, individually, shall have any ownership of such property or interest owned by the Company except as a Member in the Company.  Each of the Members irrevocably waives, during the term of the Company and during any period of its liquidation following any dissolution, any right that it may have to maintain any action for partition with respect to any of the assets of the Company.

2.8

Limitations.  The relationship between and among the parties hereto shall be limited to the carrying on of the business of the Company in accordance with the terms of this Agreement.  No Member, acting alone, shall have any authority to act for, or to undertake or assume, any obligation, debt, duty or responsibility on behalf of any other Member or the Company except as expressly provided in this Agreement.  The Members intend that the Company shall not be a partnership (including a limited partnership) or joint venture, and that no Member shall be a partner or joint venturer of any other Member, for any purposes other than under the Code and the Treasury Regulations and other applicable federal and state tax laws, and this Agreement shall not be construed to suggest otherwise.

2.9

Term.  The term of the Company shall be for a period of seven (7) years from after the date of this Agreement, unless earlier terminated in accordance with the provisions of this Agreement or the Delaware Act.  However, the Executive Committee shall have two (2)

10

one-year options to extend the term of the Company as a Major Decision in accordance with Section 5.2(dd) hereof on or before the date which is three (3) months prior to the expiration of the current term.

2.10

Modification to Structure for ERISA Issues.  In order to qualify and/or preserve the status of the Company as an “operating company” under the plan asset rules of ERISA codified at 29 C.F.R. § 2510.3-101 (the “Plan Asset Rules”), the Members each agree for the benefit of the Company to consent to modifications unanimously approved from time to time by the Executive Committee to the structure of the Company and to the terms of this Agreement including, without limitation the Capital Contribution and allocation and distribution provisions set forth in Articles 7 and 9.  In the event of any conflict or inconsistency between the terms of this Section 2.10 and any other provision of this Agreement, the terms of this Section 2.10 shall control.

2.11

REIT Issues.  Notwithstanding any other provision of this Agreement or any other document governing the management and operation of the Company, the Project Entities and the Portfolio, Inland shall have the right to cause the Company, any Project Entity and/or the Property Managers to take any reasonable action or to refrain from taking any action (including but not limited to using a protective trust to own assets) to (i) preserve the continued qualification of Inland as a real estate investment trust under Section 856 of the Code (a “REIT”), (ii) preserve the continued qualification of any Affiliates of Inland as taxable REIT subsidiaries, and (iii) avoid the imposition of additional taxes on Inland under Section 857 of the Code or Section 4981 of the Code and the Treasury Regulations promulgated thereunder (collectively the “REIT Rules”).   The Members agree that in the event that Inland proposes to take an action (or cause the Company or any Project Entity to take any action) to ensure the continued qualification of Inland as a REIT or to avoid the imposition of additional taxes under the REIT Rules on Inland, Inland shall (x) notify the Executive Committee regarding such action and (y) not have liability to any other Member for monetary damages or otherwise for losses sustained or liabilities incurred in connection with such actions provided that Inland acts in good faith to determine and implement a course of action that preserves Inland’s REIT status or avoids the imposition of additional taxes on Inland in a manner which minimizes the adverse effects on any other Member’s rights and obligations hereunder.

ARTICLE 3
REPRESENTATIONS AND WARRANTIES

Each Member hereby represents and warrants to each other Member, severally and not jointly, with respect to himself as follows:

3.1

Authority; Enforceability.  The execution of this Agreement has been duly authorized by all necessary corporate, partnership, or other action as required under all applicable laws and agreements and organizational documents to which such Member is subject.  This Agreement constitutes the legal, valid and binding obligation of such Member.

3.2

Securities Compliance.  Neither such Member nor any of its Affiliates, nor anyone authorized to act on its or their behalf, has offered, directly or indirectly, any interest in the Company or any security similar to such security the offering of which, for purposes of the Securities Act, would be deemed to be part of the same offering, or solicited any offer to acquire any interest in the Company or any security similar to such security in violation of Section 5 of the Securities Act, and neither it nor any of its Affiliates, nor anyone authorized to act on its or their behalf, will take any action which would subject the issuance or sale of any interest in the Company to the registration requirements of Section 5 of the Securities Act.

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3.3

Compliance With Anti-Terrorism Laws.  By its execution of this Agreement, each Member hereby represents and warrants to the other that such Member (which for this purpose includes its partners, members, principal stockholders owning more than ten percent (10%) of the outstanding common stock of such Member, and any other constituent entities) (i) has not been designated as a “specifically designated national and blocked person” on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control at its official website, http://www.treas.gov/ofac/t11 sdn.pdf or at any replacement website or other replacement official publication of such list, and (ii) is currently in compliance with and will at all times during the term of this Agreement (including any extension thereof) remain in compliance with the regulations of the Office of Foreign Asset Control of the Department of the Treasury and any statute, executive order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action relating thereto.

3.4

Financial Capacity.  Each Member hereby represents and warrants to the other that it currently has the financial capacity to fully fund its respective Capital Commitment.  

ARTICLE 4
BUSINESS OF COMPANY; INVESTMENT ACTIVITIES

4.1

Business of the Company.  The business of the Company shall be to (a) form and invest in one or more Project Entities (i) to acquire the Existing Portfolio, and (ii) to acquire Investment Projects in the Market Area, and (b) to exercise all other powers necessary to or reasonably connected with the Company’s business which powers may be legally exercised by limited liability companies under the Delaware Act.

4.2

Contribution of Existing Portfolio Interest.  

(a)

Contemporaneously with the execution of this Agreement, Inland will enter with the Company into the Contribution Agreement.

(b)

Inland covenants and agrees that it will act diligently and in good faith and in cooperation with MSRE to effect the conveyance to the Company pursuant to the Contribution Agreement of Inland's ownership interest in the Existing Portfolio SPEs subject to the existing financing encumbering the Existing Portfolio without triggering any default, due on sale provisions, or otherwise giving rise to any transfer or assumption fees not contained in the documents provided with the Evaluation Materials.  If required by the Board, Inland agrees to use commercially reasonable efforts to cause the loan documents encumbering the Existing Portfolio to be modified prior to the consummation of the transactions contemplated in the Contribution Agreement to provide (i) that Inland Management may be removed as Property Manager upon the occurrence of a Default Event by Inland hereunder, and (ii) that Inland Management may be removed as Property Manager upon the transfer of Inland's Membership Interest pursuant to Article 12 hereof.

4.3

Identification of Potential Projects/Evaluation Costs.  

(a)

With respect to Potential Projects other than Additional Inland Projects, Inland agrees that during the Investment Period Inland will use its good faith efforts to identify Potential Projects

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which Inland reasonably believes comply with the Investment Guidelines.  Inland will submit to the Executive Committee for review all Potential Projects for which Inland has negotiated a non-binding letter of intent to purchase.  From the date Inland submits an executed non-binding letter of intent (or binding letter of intent if the letter of intent contains a due diligence contingency) for any Potential Project to the Executive Committee, the Executive Committee will have five (5) business days to give its Initial Approval to such Potential Project (the “Initial Approval Period”); provided, however, if the nature of the investment opportunity associated with a particular Potential Project requires a faster response time, the Executive Committee will act diligently and in good faith to make its decision within the time permitted by such circumstances.   With respect to any Potential Project that, if acquired by the Company would be an Additional Inland Project, Inland will submit to the Executive Committee for review a contribution agreement with the same material provisions as the Contribution Agreement (an “Additional Inland Project Contribution Agreement”).  From the date Inland submits an Additional Inland Project Contribution Agreement, the Executive Committee will have five (5) business days to give its Initial Approval to such Potential Project (the “Additional Inland Project Initial Approval Period”).  For any Potential Project for which the Executive Committee has given its Initial Approval, the Executive Committee will have the shorter of (i) twenty (20) days or (ii) the expiration of any inspection period provided under the applicable Acquisition Contract or letter of intent (the “Evaluation Period”) to grant its Final Approval of the Potential Project.  During the Evaluation Period, Inland shall devel op and submit to the Executive Committee the Evaluation Materials as expeditiously as possible under the circumstances.  In the event the Executive Committee has not granted its approval prior to the expiration of the Evaluation Period for the acquisition of a Potential Project that would not be an Additional Inland Project if acquired by the Company, the Manager shall either (i) terminate the Acquisition Contract or (ii) Inland shall be permitted to acquire the Potential Project and if the Acquisition Contract is not already in Inland’s name, the Company shall assign the Acquisition Contract to Inland or an Affiliate of Inland provided the Company, or as the case may be, the Project Entity, is relieved of all obligations, liabilities and responsibilities hereunder.  

(b)

Until such time as a Potential Project is granted Initial Approval by the Executive Committee in accordance with Section 5.2 hereof, Inland agrees that Inland shall be responsible for and will pay all costs and expenses associated with the evaluation of such Potential Project, including, without limitation, all costs and expenses incurred by Inland and its employees in evaluating the Potential Project, all out of pocket costs and expenses, and the costs of obtaining the Evaluation Materials.  Inland shall include in each Project Budget submitted to the Executive Committee as part of the Evaluation Materials a description of the actual third party expenses incurred by Inland in connection with the evaluation of the Potential Project (excluding any travel and entertainment costs incurred by Inland, any general and administrative costs and expenses incurred by Inland and any of Inlan d’s allocable overhead) (the "Pursuit Costs").  If the Executive Committee grants its Initial Approval for a Potential Project, then the Pursuit Costs incurred by Inland in connection with the evaluation of the Potential Project and included in the Evaluation Materials, and all other costs associated with the Potential Project arising from and after the date of the Initial Approval (with the Pursuit Costs, the “Project Costs”), shall immediately become obligations of the Company and shall be reimbursed to Inland upon the earlier to occur of: (i) the initial capitalization of the Project Entity associated with such Potential Project (in which case, the amount of such reimbursement will be included in the Project Equity for such Project Entity, and any and all approved costs and expenses arising thereafter shall be borne by the Company and included in the Project Equity for the applicable Project Entity), or (ii) within fifteen (15) business days following the date upon which the Executive Committee elects not to grant its Final Approval.  Notwithstanding the foregoing, (x) if the Executive Committee elects not to grant its Final Approval for any Potential Project and Inland or an Affiliate of Inland in which Inland owns one hundred percent (100%) of the equity interest acquires such Potential Project, the Company shall have no obligation to Inland with respect to such Project Costs; and (y) if the Executive Committee elects not to grant its Final Approval for any Potential Project and an Affiliate of Inland in which Inland owns less than one-hundred percent (100%) of the equity interest

13

acquires such Potential Project, the Company shall have no obligation to Inland with respect to such Project Costs to the extent such Affiliate utilizes the Evaluation Materials, provided that in the event such Affiliate does not ultimately acquire the Potential Project, the Company shall reimburse Inland for one-half (1/2) the cost of the Evaluation Materials utilized by such Affiliate.  Upon the written request of the Company, Inland shall deliver to the Company a certificate, signed by Inland and such Affiliate of Inland as acquires such Potential Project under clause (y) above, listing all Evaluation Materials utilized by such Affiliate of Inland.

(c)

The parties contemplate that the ownership of all Approved Projects and all Existing Portfolio Projects will be structured as an investment by the Company, with no partners, venturers or equity holders, other than Inland and the Board, participating in the ownership of, as applicable, the Approved Project or the Existing Portfolio Project.  The parties anticipate that the ownership entity will be a special purpose entity formed for the sole purpose of holding title to, and operating the Approved Project or Existing Portfolio Project, such as a single member limited liability company, that will adopt an operating agreement or other organizational documents substantially conforming to the terms and conditions set forth in the Single Member Operating Agreement attached hereto as Exhibit D.  

4.4

Financing.  

(a)

It is the contemplation of the Members that the Company or an applicable Project Entity will obtain financing from a third party institutional lender approved by the Executive Committee in connection with the acquisition of each Approved Project.  With respect to each Approved Project, the parties contemplate that Inland will act diligently and in good faith and in cooperation with MSRE to obtain mortgage financing consistent with the Investment Guidelines.  All financing will be structured in a manner to ensure that the indebtedness will qualify for the exclusion from treatment as “acquisition indebtedness” pursuant to § 514(c)(9) of the Code.

(b)

The Company will use commercially reasonable efforts to ensure that the terms and conditions of any financing for each Project Entity provide (i) that Inland Commercial Property Management may be removed as Property Manager upon the occurrence of a Default Event by Inland hereunder, (ii) that Inland Management may be removed as Property Manager upon the transfer of a Member’s Membership Interest pursuant to Article 12 hereof, and (iii) that the transfer of a Member’s Membership Interest pursuant to Article 12 hereof will not constitute a default or invoke any due on sale provision.

4.5

Guarantees.  It is the intention of the Members that in connection with any financing obtained by any Project Entity, the Company shall provide any and all payment and/or performance guarantees, environmental indemnities (if required from parties other than the Project Entity) and the like required by the applicable financial institution extending the financing to such Project Entity.  In no event will Inland or the Board be required to undertake any recourse or indemnification obligations in connection with any financing obtained by any Project Entity; provided, however, the Company or a Project Entity may undertake recourse liability or indemnification obligations if such liabilities or obligations are expressly limited to the assets of the applicable Project Entity and are in all events expressly non-recourse to the individual Members.  Notwithstanding th e foregoing, if a Member or an Affiliate of a Member shall guaranty any such financing, the Company shall indemnify and hold such Member or Affiliate harmless from any costs, expenses (including attorneys’ fees), liabilities, claims and causes of action incurred by such Member or Affiliate as a result of such guaranty, which amounts shall be paid by the Company prior to any distributions to the Members.

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4.6

Standard of Care.  Inland acknowledges the Board’s fiduciary capacity under its Florida constitutional and statutory investment duties.  Inland and the Board each shall undertake its activities under this Agreement and shall cause its Representatives to undertake their activities under this Agreement as members of the Executive Committee with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of like character and with like goals and investment objectives.

4.7

Exclusivity.  

(a)

Except as otherwise provided in this Section 4.7(a), during the Investment Period Inland will not pursue in the Market Area any acquisitions or seek any ownership opportunities (whether direct or indirect), or third party management opportunities pursuant to which Inland or any Affiliate is entitled to incentive-based compensation (collectively, the “Inland Precluded Activities”), except through its participation in the Company; provided, however, the foregoing restriction shall not apply (i) to any potential transaction that has been submitted to the Company for review and been rejected by the Executive Committee, (ii) to any Entity in which Inland is a constituent member, partner or shareholder so long as such Entity does not engage in the Inland Precluded Activities during the term of this Agreement, (iii) retail properties that are inconsistent with the Investme nt Guidelines, (iv) retail properties located in the Market Area which are owned by Inland as of the date of this Agreement, or (v) contracts or agreements pursuant to which Inland or an Affiliate of Inland provides third-party management and/or leasing services for fixed compensation without any incentive-based compensation.  The foregoing prohibition against Inland engaging in the Inland Precluded Activities will terminate and be of no further force or effect in the event that during any twelve (12) consecutive month period during the Investment Period the Executive Committee either (i) fails to approve Potential Projects requiring the funding by the Members of at least $100,000,000 in Project Equity or (ii) fails to approve four (4) or more of such Potential Projects consistent with the Investment Guidelines submitted by Inland to the Executive Committee for consideration.  Inland will act in good faith to submit Potential Projects to the Executive Committee of sufficient value or in sufficient number to allow the Executive Committee to achieve the foregoing volume of acquisition activity.  

 (b)

During the term of this Agreement, neither Inland nor any Affiliate of Inland will directly or indirectly solicit or otherwise attempt to persuade any tenant of the company or any Project Entity to purchase or to relocate to another property or retail development (whether or not in the Market Area) not owned by the Company or a Project Entity.  Inland shall not discriminate against any Project Entity of the Company in connection with any proposals made to prospective tenants in the Market Area.  During the Investment Period, Inland will provide the Investment Advisor with written notice of any Potential Projects in the Market Area being pursued by Inland on behalf of the Company (each such Potential Project, an “Identified Project”).    

(c)

Notwithstanding the foregoing, nothing contained herein shall prevent the Board from pursuing an investment opportunity within the Exclusive Market Area identified to it through the efforts of an investment advisor other than MSRE and with respect to which investment opportunity the Board has begun actively to consider the acquisition of such investment opportunity, as evidenced by reasonable written documentation, provided that Inland has not previously identified such investment opportunity to the Company as a Potential Project and provided further that MSRE has not previously identified such investment opportunity to the Company as a Potential Project.  If Inland or MSRE identifies an investment opportunity within the Exclusive Market Area to the Board before any investment advisor (other than MSRE) identifies such investment opportunity to the Board, the Board will not pursue such investment opportunity unless it pursues such investment opportunity through the Company; provided, however, the foregoing restriction shall not apply (i) to any potential transaction that

15

has been submitted to the Company for review and been rejected by the Executive Committee if more than six (6) months have elapsed since such rejection, (ii)  retail properties that are inconsistent with the Investment Guidelines, or (iii) retail properties located in the Market Area which are owned by the Board, any Affiliate of the Board or any Entity in which the Board or any Affiliate of the Board has a direct or indirect ownership interest as of the date of this Agreement.  

4.8

Project Entity Formation.  Upon the Final Approval of a Potential Project by the Executive Committee, Manager shall direct the formation of a Project Entity in accordance with the Formation Documents.  The costs associated with the formation of such Project Entity will be included as the Project Equity of such Project Entity.

ARTICLE 5
MANAGEMENT OF THE COMPANY

5.1

Management.  Inland is hereby designated as the Manager and shall be responsible for administering the day to day business and affairs of the Company in accordance with this Agreement.  With the exception of matters which constitute Major Decisions, the Manager shall have the authority to decide all Company matters.  Any Major Decision shall require the unanimous approval of all of the members of the Executive Committee.  The Board acknowledges that Inland may delegate certain of its responsibilities hereunder to the Property Manager; provided, however, no such delegation by Inland of its duties as Manager shall relieve Inland of its obligations hereunder.  Notwithstanding the foregoing, to the extent any provision of this Agreement specifically requires approval by the Board, such provision shall control and the Manager shall not have authority to decide such matters.

5.2

Major Decisions.  Major Decisions shall mean and include the following matters relating to the Company:

(a)

to grant Initial Approval or Final Approval;

(b)

approval of any material modifications to the Formation Documents for any Project Entity;

(c)

taking any action, entering into any agreement, or approving any action or agreement by a Project Entity (other than pursuant to any indebtedness encumbering the Existing Portfolio Projects as of the date of the consummation of the transactions contemplated under the Contribution Agreement) (i) which would impair either Member’s ability to invoke the Right of First Offer or Buy/Sell procedures set forth in Sections 12.2 through 12.4 or their respective rights thereunder, (ii) that will have the effect of subordinating the rights of the Members to exercise their respective rights under Sections 12.2 through 12.4 hereof, or (iii) that will require any pre-payment of indebtedness owed by any Project Entity or the Company as a result of the exercise of the Members’ rights pursuant to Sections 12.2 through 12.4 hereof;

(d)

to engage in a merger or similar transaction;

(e)

to commingle the funds of the Company with the funds of any other Person;

(f)

to confess a judgment against the Company;

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(g)

to incur indebtedness on behalf of the Company other than trade debts incurred in the ordinary course of business or as otherwise contemplated in any applicable Approved Project Budget or Approved Annual Budget;

(h)

approval of the terms and conditions of any loan or other financing arrangement extended to a Project Entity or materially amending, modifying, renewing or extending the same;

(i)

to grant a lien or mortgage on any Project Entity property or on Company property;

(j)

to admit any additional or substitute Member to the Company;

(k)

except as expressly contemplated in this Agreement or included in an Approved Project Budget or Approved Annual Budget, to execute any contract between the Company or a Project Entity and any Member or Affiliate of a Member except as expressly contemplated in this Agreement;

(l)

to obtain insurance coverage or make any modifications to any insurance coverage now or hereafter obtained by the Company unless contemplated in the Approved Annual Budget, an Approved Project Budget or as required by any lender extending financing to the Company or any Project Entity;

(m)

to select a general contractor for any Approved Project or Existing Portfolio Project for construction work in excess of $50,000;

(n)

to expend funds at any time for the management, operation, or maintenance of the business of the Company which expenditures are not included in an Approved Project Budget or Approved Annual Budget or exceed 105% of the aggregate amount included in the Approved Annual Budget or applicable Approved Project Budget, except that in no event shall fees or other amounts payable to any Member or Affiliate of a Member be increased; provided, however, with respect to any expenditures which are not included in an Approved Project Budget or Approved Annual Budget, the making of which do not constitute a Major Decision, prior to making such expenditure, Inland shall provide notice to the Executive Committee of the amount of such expenditure and the underlying reason for making the same;

(o)

to modify an Approved Project Budget or any Approved Annual Budget;

(p)

to extend loans or other credit to any Person or to guaranty any loans or other obligations;

(q)

to make any material tax elections required by any federal, state or local laws for the Company or any Project Entity;

(r)

to change the material elections or choices of methods of reporting income or loss for federal or state income tax purposes provided for in this Agreement unless required under applicable law;

(s)

to enter into any material contract or other agreement which obligates the Company or any Project Entity to make any payments unless contemplated in an Approved Project Budget or Approved Annual Budget;

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(t)

to (i) seek, or consent to, the appointment of a receiver, trustee or custodian for all or any portion of the Company’s property or any property of any Project Entity, (ii) commence on behalf of the Company or any Project Entity any voluntary proceeding, or consent to the commencement of any involuntary proceeding, under present or future federal bankruptcy laws or under any other bankruptcy, insolvency or other laws respecting creditors’ rights, (iii) make an assignment for the benefit of creditors or (iv) admit in writing the Company’s or any Project Entity’s inability to pay its debts generally as they become due;

(u)

to consent to any material re-zoning or subdivision of an Approved Project or any other material change in the legal status thereof not otherwise consistent with management and development of such Approved Project;

(v)

to knowingly introduce or permit to be introduced any environmentally harmful substance or material to any Approved Project (or portion thereof) which was known at the time to be environmentally harmful (except for lawful introductions of any such substance or material);

(w)

to commence any litigation by the Company or any Project Entity involving any material claim by or against the Company;

(x)

to settle any litigation by or against the Company or any Project Entity where the amount in controversy is not covered by insurance and exceeds $25,000;

(y)

to make any decision regarding any environmental matter relating to any Approved Project, including, without limitation, the adoption of and implementation of any operation and maintenance program or any other program to remove or otherwise remediate hazardous materials;

(z)

to release, compromise, assign or transfer any material claims of or any material rights or benefits of the Company or any Project Entity;

(aa)

in the event of fire, other casualty or partial condemnation of an Approved Project where the cost of repair exceeds 10% of the value of the Approved Project immediately prior to such casualty or condemnation, to determine whether to construct or reconstruct improvements unless such construction or reconstruction is required under the terms and provisions of any lease, mortgage or security deed affecting the damaged or condemned portion of the Approved Project;

(bb)

to extend the Investment Period;

(cc)

to enter into any lease for space at an Approved Project in excess of 10,000 rentable square feet, which lease has not already been approved in an Annual Budget;

(dd)

to extend the term of the Company;

(ee)

to make any distributions of Distributable Cash to the Members other than as contemplated in Article 9 below;

(ff)

approval of any material actions of or elections by the TMM set forth in 11.5 hereof;

(gg)

to establish Reserves other than as contemplated in any Approved Annual Budget or as contemplated in Article 9 below;

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(hh)

to select the Company’s independent public accounting firm (the “Accountants”);

(ii)

to select any appraiser (other than those retained by the Board or the Investment Advisor as contemplated under Section 5.4 hereof) or evaluation expert retained by the Company;

(jj)

to make a Capital Call pursuant to Section 7.1(c) below;

(kk)

to indemnify any member of the Executive Committee or officer of the Company pursuant to Section 5.11 hereof;

(ll)

to make adjustments to the Members’ Capital Accounts pursuant to Section 7.3(a) hereof;

(mm)

to elect to cause an interim closing of the Company’s books pursuant to Section 8.10 hereof;

(nn)

winding up the affairs of the Company pursuant to Section 13.6 hereof;

(oo)

to replace the Company Counsel pursuant to Section 11.7 hereof;

(pp)

to identify and include in the Target Market the metropolitan areas of a state not already part of the Target Market; and

(qq)

to approve an Annual Budget or a Project Budget.

Notwithstanding any provision hereof to the contrary, the Members hereby acknowledge and agree that the foregoing Major Decisions shall not apply in any manner to the BIC Funds, and that the Manager shall have the right, in its sole and absolute discretion, to invest and reinvest the funds held in the BIC Fund in any manner that the Manager deems fit.

5.3

Meetings.  All of the members of the Executive Committee must be present to constitute a quorum for the transaction of all Company business requiring Executive Committee approval, which business is limited to Major Decisions.  All resolutions adopted and all business transacted by the Executive Committee shall require the affirmative vote of all of the members of the Executive Committee present at a meeting at which a quorum is present.  The Executive Committee shall meet as necessary to make Major Decisions.  A special meeting of the Executive Committee may be called by any member of the Executive Committee on at least five (5) days’ notice, which may be given orally or by personal delivery, reputable overnight courier, telegram, facsimile transmission or private courier.  The notice shall be deemed given the earlier of (i) one (1) business d ay after its deposit, (ii) when received, or (iii) when delivered in writing to the member of the Executive Committee at his last known principal place of business or residence.  Any meeting of the Executive Committee may be held in either Chicago, Illinois or Atlanta, Georgia, as determined by the party calling the meeting.  Any action required to be taken at a meeting of the Executive Committee, or any action that may be taken at a meeting of the Executive Committee, may be taken without a meeting if a consent in writing setting forth the action taken shall be signed by all of the members of the Executive Committee.  Any such written consent in lieu of a meeting shall be filed with the minutes of the proceedings of the Executive Committee. Any action required to be taken at a meeting of the Executive Committee, or any action that may be taken at a meeting of the Executive Committee, may be taken at a meeting held by means of conference telephone or similar communications equipment by means o f which all persons participating in the meeting can hear each other.  Participation in such a meeting shall constitute presence in person at such meeting.  In all other respects the provisions of this Section 5.3 with respect to meetings

19

of the Executive Committee shall apply to such a meeting.  The discussions at each meeting of the Executive Committee shall be recorded in the minutes of the Company and a copy of such minutes shall be distributed to the Members within ten (10) days after the date of each such meeting.

5.4

Investment Advisor.  The Board has appointed the Investment Advisor as its agent with the full power, authority and discretion to act on behalf of the Board with respect to all matters contemplated in this Agreement.  Any action taken by the Investment Advisor pursuant to this Agreement shall be binding upon the Board to the same extent as though the Board had taken such action directly.  The foregoing appointment is revocable at any time by written notice from the Board to Inland and upon such revocation, the Representatives of the Board, ipso facto, shall be removed from their position on the Executive Committee and the Executive Committee shall have no power to take any action under this Agreement until such time as the Board has designated replacement Representatives to serve on the Executive Committee.  The Board agrees that the Board will a ppoint such Representatives within five (5) days after the date of the revocation notice to Inland.  At the election of the Board, the Board may appoint a replacement Investment Advisor with the same power, authority and discretion to act on the Board’s behalf; provided, however, any such replacement Investment Advisor shall be subject to prior approval by Inland, which approval shall not be unreasonably withheld or delayed and, if Inland disapproves of any proposed replacement, Inland will provide the Board with written notice stipulating the reasons for such disapproval.  Inland acknowledges and agrees that from time to time the Board, independently or through its Investment Advisor, may retain an independent, third party consultant or appraiser to determine the value of its investment in the Company.  Inland acknowledges and agrees that Inland, at no cost to Inland, shall cooperate with the Board, the Investment Advisor and/or such third party in connection therewith and will make avai lable upon request such information, documentation and records as such party reasonably may deem necessary, desirable or appropriate in connection with performing such evaluation.

5.5

Liability for Certain Acts.  Each member of the Executive Committee shall act in a manner such member  believes in good faith to be in the best interest of the Company and shall discharge his or her duties under this Agreement with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like goals and investment objectives.  No member of the Executive Committee will be liable to the Company or its Members for any action taken in managing the business or affairs of the Company if such member performs in compliance with the standard contained in this Section.  No member of the Executive Committee has guaranteed nor shall have any obligation with respect to the return of a Member’ s Capital Contributions or profits from the operation of the Company.  No member of the Executive Committee shall be liable to the Company or to any Member for any loss or damage sustained by the Company or any Member except loss or damage resulting from fraud, misappropriation of funds or any criminal activity committed by such member in its capacity as a member of the Executive Committee.  The members of the Executive Committee shall be entitled to rely on information, opinions, reports or statements, including but not limited to financial statements or other financial data prepared or presented in accordance with the Delaware Act.

5.6

Representatives Have No Exclusive Duty to Company.  The members of the Executive Committee shall not be required to manage the Company as such members sole and exclusive function and the members of the Executive Committee may have other business interests and may engage in other activities in addition to those relating to the Company.  Neither the Company nor any Member shall have any right, by virtue of this Agreement, to share or participate in such other investments or activities of the members of the Executive Committee or to the income or proceeds derived therefrom.  The members of the Executive

20

Committee shall incur no liability to the Company or to any of the Members as a result of engaging in any other business or venture.

5.7

Bank Accounts.  The Manager may from time to time open bank accounts in the name of the Company, and the Manager shall designate the Persons who will serve as the signatories thereon.

5.8

Resignation; Removal.  Any member of the Executive Committee may resign at any time by giving written notice to the Members of the Company.  The resignation of any member of the Executive Committee shall take effect upon receipt of notice thereof or at such later time as shall be specified in such notice; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.  The Member whose Representative has resigned shall appoint a replacement Representative within five (5) days of such Representatives resignation.  Any Member may remove one or more of its Representatives on the Executive Committee at any time upon written notice to the other Member specifying the Representative(s) to be removed and naming a replacement Representative for each Representative so removed.  In the event of a vacanc y on the Executive Committee arising on account of a resignation or removal of a Representative, until such vacancy is filled in accordance with this Section 5.8, the Executive Committee shall have no power to take any action under this Agreement.

5.9

Compensation and Reimbursement.  No member of the Executive Committee shall receive any salary or other compensation from the Company for acting as such.  

5.10

Officers.  The Executive Committee may, but shall not be required to, designate one or more individuals to be officers of the Company, and any officer so designated shall have such title, authorities and duties as the Executive Committee may delegate to them.  Any officer may be removed as such, either with or without cause, by the Executive Committee. The initial officers of the Company and their respective titles shall be:

President:   

Michael O'Hanlon

Vice President:

Steve Grimes

Secretary:

Gary Pechter

5.11

Indemnification of Officers.  The Company shall indemnify each person who is or was a director or officer of the Company (including the heirs, executors, administrators or estate of such person), is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise,  is or was serving as a member of the Executive Committee, or is or was the guarantor of any obligation of the Company or any Project Entity in which the Company owns an interest, to the fullest extent permitted by the Delaware Act.  

(a)

Expenses incurred by a person who is an officer of the Company (including the heirs, executors, administrators or estate of such person), is or was serving at the request of the Company as an officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, in defending a civil or criminal action, suit, or proceeding may be paid by the Company in advance of the final disposition of such action, suit or proceeding, as authorized by the Executive Committee in its discretion, upon receipt of an agreement or an undertaking by or on behalf of such person to repay such amount, unless it is ultimately determined that he or she is entitled to be indemnified

21

by the Company as authorized in, or as permitted by, this Article 5.  If such a person or entity requests reimbursement of expenses pursuant to the foregoing, then the Executive Committee shall consider such request, and if the Executive Committee concludes that it is reasonably probable that such person or entity would be entitled to indemnification or if the Executive Committee concludes the interests of the Company would be served thereby, then the Executive Committee shall direct the payment of the expenses subject to the receipt of an agreement or undertaking as required by the foregoing.  The Executive Committee may pay such expenses of such person upon such other terms and conditions as the Executive Committee deems appropriate.

(b)

All rights to indemnification under this Article 5 shall continue as to a person who has ceased to be an officer, employee or agent, shall inure to the benefit of heirs, executors, administrators and the estate of such person, and shall be deemed to be a contract between the Company and each such person or entity.  This Article 5 shall be binding upon any successor to the Company, whether by way of merger, consolidation or otherwise.

5.12

Project Entity Officers.  The Manager may designate one or more officers for each Project Entity, so long as such officers are employees of Inland.

ARTICLE 6
RIGHTS AND OBLIGATIONS OF MEMBERS

6.1

May Not Bind Company.  Except as provided in Article 5 above, no Member has the right, power, or authority to act for or on behalf of the Company, to do any act that would be binding on the Company, or to incur any expenditures on behalf of the Company.

6.2

Limitation on Liability.  Each Member’s liability shall be limited as set forth in this Agreement, the Delaware Act and other applicable law.  No Member will have any personal liability for any debts or losses of the Company, except as provided by law.  None of the Members nor any of their respective employees, agents or other representatives shall be responsible to the Company or to any other Member for any loss, liability, damage, claim, judgment, cost, obligation or expense sustained, incurred or resulting directly or indirectly from the acts or omissions of the Member or any other Member to the extent that the Member, any other Member or any of their respective employees, agents or other representatives reasonably and in good faith believed such act or omission to be within the express or implied scope of the authority and responsibility vested in t he Member and the Members, respectively, pursuant to this Agreement.

6.3

List of Members.  Upon written request of any Member, the Company shall provide a list showing the names, addresses and Membership Interest of all Members, and the other information required by the Delaware Act and maintained pursuant to Section 11.2.

6.4

Priority and Return of Capital.  Except as expressly provided in this Agreement, no Member shall have priority over any other Member, either as to the return of Capital Contributions or as to Net Profits, Net Losses or distributions.

6.5

Members Have No Exclusive Duty to Company.  Except as expressly set forth in Section 4.7, the Members may have other business interests and may engage in other activities in addition to those relating to the

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Company, regardless of whether the same compete with the activities of the Company.  Neither the Company nor any Member shall have any right, by virtue of this Operating Agreement, to share or participate in such other investments or activities of any Member or to the income or proceeds derived therefrom.  No Member shall incur liability to the Company or to any of the other Members as a result of engaging in any other business or venture.  Notwithstanding the foregoing, as contemplated in Section 4.7 above, Inland shall be obligated to disclose to the Board any acquisition or development transaction Inland undertakes in the Target Market during the Investment Period.

6.6

Indemnification of Members.  To the extent not due to the gross negligence or willful misconduct (including but not limited to fraud, misappropriation of funds, willful misrepresentation or any other intentional tort) of any Member or such Member’s employees, agents or representatives, the Company will indemnify the Members against judgments, fines, amounts paid in settlement and expenses (including attorneys’ fees) reasonably incurred by them in any civil, criminal or investigative proceeding in which they are involved or threatened to be involved by reason of being a Member in the Company, provided that the Member acted in good faith, within what it reasonably believed to be the scope of its authority and for a purpose which it reasonably believed to be in the best interest of the Company or the Members.  The provisions of this Section 6.6, however, s hall not relieve the Member of its obligation as a Member to share in the losses, costs and expenses of the Company.  The provisions of this Section 6.6 shall survive any termination or expiration of this Agreement.

ARTICLE 7
CONTRIBUTIONS TO THE COMPANY AND CAPITAL ACCOUNTS

7.1

Capital Contributions.   

(a)

Contemporaneously with the execution of this Agreement, the Members have made Capital Contributions of cash and real, personal and intangible property in the amounts set forth on Schedule 1 attached hereto.

(b)

Notwithstanding any limitation otherwise provided under Section 5.2 hereof to the contrary, the Manager shall cause that portion of the “BIC Funds” (as defined below), as and when contributed to the Company, to be invested in interest bearing investments pending the acquisition of Acquired Projects.  The Manager shall have sole discretion to determine the nature of such interest bearing investments.  For book and tax purposes, interest earnings on BIC Funds shall be allocable 95% to Inland and 5% to the Board, and all interest earnings on BIC Funds attributable to Inland shall be considered additional BIC Funds and all interest earnings on BIC Funds attributable to the Board shall not be considered additional BIC Funds.  All interest earnings on BIC Funds shall be distributed to Inland and the Board in the manner set forth above, from time to time as the Manager determines.  The Manager shall apply the BIC Funds in accordance with Section 7.1(d).  The “BIC Funds” at any given time shall be equal to (x) the sum of the Existing Portfolio Value and the Additional Inland Project Value, if any, less (y) the sum of all Board Capital Contributions which are distributed by the Company to Inland pursuant to the Contribution Agreement or otherwise under an Additional Inland Project Contribution Agreement with respect to any Additional Inland Projects, less (z) 20% of the sum of the Existing Portfolio Value and the Additional Inland Project Value, if any, less (aa) any BIC Funds distributed to Inland as described in Section 7.1(e), less (bb) any Capital Event Distributable Cash distributed to Inland under Sections 9.3(a)(i) or 9.4(a)(i) to eliminate the BIC Funds prior to the date of the Capital Call in question, less (cc) any Section 7.1 Amount paid from the BIC Funds pursuant to Section 7.1(d), plus (dd) the undistributed interest ear nings on the BIC Funds which are allocable to Inland.  It is expressly understood that, except as set forth in this Section 7.1(b), the amount of any Additional Capital Contribution made in connection

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with any Acquired Project shall not increase the balance of BIC Funds, even if (i) said Additional Capital Contribution is made prior to the contribution of all of the Existing Projects, and (ii) one or more of the Existing Projects is never contributed to the Company.  At the election of the Manager, the BIC Funds may be maintained in separate accounts to segregate the BIC Funds associated with the Existing Portfolio from the BIC Funds associated with one (1) or more Additional Inland Projects, and such accounts may be maintained in the name of the Company or the name of the relevant Project Entity.

(c)

If, in accordance with Section 5.2,  (1) the Manager determines at any time or from time to time that the operating cash flow of the Company (exclusive of the BIC Funds) is insufficient adequately to (x) protect, preserve and/or maintain any Approved Project or the Company’s interest therein, (y) fund expenditures provided for in any current Annual Budget approved by the Executive Committee, or (z) fulfill the working capital needs of the Company, or (2) the Executive Committee has approved the Company’s acquisition of any Acquired Project, then, subject to the limitations set forth herein, the Manager, subject to the approval of the Executive Committee, may require that all of the Members make the necessary additional Capital Contributions (an “Additional Capital Contribution”) to the Company by giving written notice (a “Capital Call”) to the Members s etting forth (i) the total amount of Additional Capital Contributions required, (ii) the reason the Additional Capital Contribution is required pursuant to this Section 7.1(c), (iii) each Member’s proportionate share of the total Additional Capital Contribution (determined in accordance with this Section 7.1(c)), and (iv) the date each Member’s Additional Capital Contribution is due and payable, which date shall be no sooner than thirty (30) days after the notice has been given.  As used herein, funds which are required by the Company pursuant to this Section 7.1(c) shall also be referred to as a “Section 7.1 Amount.”  A Member’s proportionate share of any Additional Capital Contribution shall be equal to the product obtained by multiplying the Member’s Percentage Interest by the total Additional Capital Contribution so required (for each Member, such Member’s “Proportionate Share”).  A Member’s Proportionate Share shall be payable to the Compa ny in immediately available funds.  Any Additional Capital Contribution made by the Members shall constitute Project Equity and be applied as a credit against the balance of such Member’s Capital Commitment.  

(d)

The Members shall make Additional Capital Contributions on or before the due date set forth in the Capital Call, as follows:

(i)

First, until the “Catch-up Balance” (as defined in (iii), below) has been reduced to zero, the Board shall fund 100% of each Additional Capital Contribution (as such amounts shall be reduced in the manner set forth in clause (iv) below), in an amount not to exceed the then-existing Catch-up Balance.

(ii)

After the Catch-up Balance has been reduced to zero but subject to the terms of clause (v) below, 80% of each Additional Capital Contribution shall be funded by the Board and 20% shall be funded by Inland.

(iii)

The “Catch-up Balance” at any given time shall be equal to the product of (x) four (4); multiplied by (y) the outstanding amount of the BIC Funds.

(iv)

When determining the amount of Additional Capital Contributions required to be made, the BIC Funds shall be treated as funds of the Company that are available for payment of a Section 7.1 Amount equal to the amount which would otherwise be required to be contributed by Inland in accordance with Section 7.1(c) if no BIC Funds were available and if the Catch-up Balance would be equal to zero, and the amount of Capital Contributions requested in the Capital Call shall be reduced accordingly.  However, the amount of BIC Funds to be applied to the payment of a Section 7.1 Amount for which the Capital Call is made may not

24

exceed 20% of the Section 7.1 Amount for which the Capital Call is made. See illustrations in clause (vi), below.

(v)

In each case in which the Board makes a Capital Contribution pursuant to clause (i), above, the Section 7.1 Amount for which the Capital Call was made shall be satisfied by applying the Board’s Capital Contribution toward 80% of the Section 7.1 Amount and BIC Funds, if any, towards 20% of the Section 7.1 Amount. In the event that the Section 7.1 Amount exceeds (x) the Board’s Capital Contribution described in the preceding sentence plus (y) the BIC Funds applied towards such 7.1 Amount in accordance with the terms of the preceding sentence, then the balance of such Section 7.1 Amount shall be funded by Inland as an Additional Capital Contribution; provided that for the avoidance of doubt, in no event shall the aggregate of the BIC Funds applied to a Section 7.1 Amount plus the Inland Capital Contribution described in this sentence, excee d 20% of the applicable Section 7.1 Amount.  For the purposes of determining the Percentage Interests of the Members, the portion of the BIC Funds applied towards the Section 7.1 Amount shall be deemed to constitute Capital Contributions funded by Inland. See illustrations in clause (vi) and (vii), below, and as set forth on Exhibit L.  

(vi)

Illustration 1. The Company requires $100 for a Section 7.1 Amount when the Catch-up Balance is $160 and there are $40 of BIC Funds. The Capital Call will be for $80 ($100 of the Section 7.1 Amount, less $20 of the $40 of BIC Funds (BIC Funds utilized cannot exceed 20% of the Section 7.1 Amount pursuant to clause (iv) above).  $80 will be payable solely by the Board. $20 of BIC Funds will be utilized by the Company for the payment of the Section 7.1 Amount (pursuant to clause (v), above).  The Catch-Up Balance is reduced to $80 and the BIC Funds will be reduced to $20.

(vii)

Illustration 2. The Company requires $100 for a Section 7.1 Amount when the Catch-up Balance is $40 and there are $10 of BIC Funds.  The Capital Call will be for $90 ($100 of the Section 7.1 Amount, less the BIC Funds of $10.)  $40 will be payable solely by the Board (i.e., up to the amount of the Catch-Up balance pursuant to clause (i), above). $10 of BIC Funds will be utilized by the Company for the payment of the Section 7.1 Amount (pursuant to clause (v), above). Of the remaining $50 of the Capital Call, the Board will fund $40 and Inland will fund the remaining $10.  The Catch-Up Balance is reduced to $0 and BIC Funds will be reduced to $0.    

(e)

At any time after the earlier to occur of (i) the occurrence of a Default Event with respect to the Board, (ii) in the event of an Unresolved Major Decision proposed by Inland, (iii) in the event the Board and Inland fail to agree upon the identity of a replacement Investment Advisor as contemplated under Section 5.4, (iv) if either Member seeks to transfer its interest in the Company, except with respect to transfers by the Board in accordance with Section 12.5 below and with respect to transfers by Inland in accordance with Section 12.6 below, (v) or at any time after the date that is thirty-six (36) months after the date hereof, the Manager also shall have the right to distribute BIC Funds to Inland (the balance of BIC funds being reduced by the amount of any such distribution), provided that BIC Funds may not be distributed to Inland if at such time said BIC Fund s are required to be applied to the Section 7.1 Amount of the Company pursuant to Section 7.1(d).

(f)

The Manager shall have the right from time to time, in its sole and absolute discretion, to cause the Company to lend an amount equal to up to 85% of the BIC Funds (as determined from time to time), to an entity to be designated by Inland (a “BIC Loan”).  Each BIC Loan shall accrue interest at a rate of 4.8% per annum payable semi-annually, and shall be evidenced by a note with terms and conditions approved by the Manager.  Any and all interest paid in connection with any BIC Loan shall be characterized as interest earned on the BIC Funds for all purposes of this Agreement (specifically

25

including, but not limited to, the provisions of Section 7.1(b) and Section 8.2 hereof).  In the event that (i) one or more BIC Loans are outstanding, (ii) a Capital Call is delivered under Section 7.1(b) hereof, (iii) pursuant to the terms of Section 7.1(d)(iv) hereof, a portion of the Section 7.1 Amount to be funded with respect to such Capital Call is to be funded from the BIC Fund and (iv) the BIC Funds at such time minus the outstanding balance of the BIC Loans at such time, is less than the portion of the Section 7.1 Amount to be funded from the BIC Fund (a “BIC Shortfall”), then the borrower(s) under the BIC Loans shall be required to repay a portion of the outstanding principal balance of the BIC Loans in an amount equal to the BIC Shortfall at such time (which amount shall be applied to the Section 7.1 Amount in accordance with t he provisions of Section 7.1(d)(iv) hereof).  For the avoidance of doubt, BIC Loans shall not be deemed to reduce the BIC Funds and/or the Catch-up Balance.  In the event that the Company makes a distribution of Capital Event Distributable Cash under Section 9.3(a)(i) or Section 9.4(a)(i) at a time that the BIC Funds are equal to or less than the outstanding principal amount under the BIC Loans, then the borrower(s) under the BIC Loans shall be required to repay a portion of the outstanding principal balance of the BIC Loans in an amount equal to the excess of the principal amount of the BIC Loans over the balance of the BIC Funds at such time (determined immediately following the receipt by Inland of such distribution of Capital Event Distributable Cash); it being intended that the outstanding principal amount of the BIC Loans at any time shall not exceed the balance of the BIC Funds at any time.

 (g)

If any Member fails to timely fund its Proportionate Share (any such Member, a “Non-Funding Member”), then the other Member (the “Funding Member”), at its election and as its sole remedy for the Non-Funding Member’s failure to fund its Proportionate Share (or any portion thereof), may either (i) make a Priority Loan to the Company, payable on demand, in the principal amount of the Non-Funding Member’s un-funded Proportionate Share, or (ii) contribute to the Company the Non-Funding Member’s Proportionate Share (or, as applicable, the un-funded portion thereof) as an Additional Capital Contribution.  The amount of any Priority Loan or any Additional Capital Contribution made by a Member will be applied as a credit against the balance of such Member’s Capital Commitment.  If Inland is the Funding Member, at its election, it may direct the Company to cause the Priority Loan to be made from the BIC Funds, which, for purposes of this Section shall be deemed to have been withdrawn by Inland from the Company and loaned to the Company.  If the Funding Member elects to contribute the Non-Funding Member’s Proportionate Share as an Additional Capital Contribution on account of the Non-Funding Member’s failure to fully fund its Proportionate Share, the Non-Funding Member’s Percentage Interest shall be reduced (and the Funding Member’s Percentage Interest shall be increased) by an amount (the “Reduction Percentage”) equal to the product of (x) the Non-Funding Member’s then current Percentage Interest multiplied by (y) the quotient obtained by dividing (A)  the product of the portion of the Non-Funding Member’s Proportionate Share the Non-Funding Member failed to contribute to the Company multiplied by 2 divided by (B) the aggregate amount of Capital Contributions made to the Company by the Members as of the date of the calculation.  In addition, the Non-Funding Member’s Capital Account will be reduced (and the Funding Member’s Capital Account will be increased) by an amount equal to the product of the positive balance of the Non-Funding Member’s Capital Account multiplied by the Reduction Percentage.  For illustration purposes only, an example of the foregoing calculations is set forth on Exhibit J attached hereto.

7.2

Withdrawal of Members’ Contributions to Capital.  Except as provided in this Agreement, no Member may withdraw capital from the Company without the consent of the other Members.  No Member shall be entitled to interest on its contributions of capital to the Company.  The Members agree that no Member shall be personally liable for the return of Capital Contributions of any other Member, if and to the extent that any return is required; and any such return shall be made solely from the assets of the Company, if any.

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7.3

Capital Accounts.  

(a)

A separate “Capital Account” shall be established and maintained for each Member in accordance with the rules set forth in Section 1.704-l(b) of the Regulations.  Subject to the foregoing, generally the Capital Account of each Member shall be credited with the sum of (i) all cash and the fair market value of any property (net of liabilities assumed by the Company and liabilities to which such property is subject) contributed to the Company by such Member as provided in this Agreement, and (ii) all Net Profits, gains and other items of income of the Company allocated to such Member pursuant to Article 8 hereof, and shall be debited with the sum of (x) all Net Losses, items of deduction or loss of the Company allocated to such Member pursuant to Article 8 hereof, (y) such Member’s distributive share of expenditures of the Company described in Section 705(a)(2)(B) of t he Code, and (z) all cash and the fair market value of any property (net of liabilities assumed by such Member and the liabilities to which such property is subject) distributed by the Company to such Member pursuant to Article 9 hereof.  Any references in any Section or subsection of this Agreement to the Capital Account of a Member shall be deemed to refer to such Capital Account as the same may be credited or debited from time to time as set forth above and as otherwise required by Regulations under Section 704(b) of the Code.

(b)

The following additional rules shall apply in maintaining Capital Accounts:

(i)

Amounts described in Section 709 of the Code (other than amounts with respect to which an election is in effect under Section 709(b) of the Code) shall be treated as described in Section 705(a)(2)(B) of the Code.

(ii)

In the case of a contribution to the Company of a promissory note (other than a note that is readily tradable on an established securities market), the Capital Account of the Member contributing such note shall not be increased until (a) the Company makes a taxable disposition of such note, or (b) principal payments are made on such note.

(iii)

If property is contributed to the Company, Capital Accounts shall be adjusted in accordance with Treasury Regulation Sections 1.704-l(b)(2)(iv)(d) and 1.704-l(b)(2)(iv)(g).

(iv)

If, in any Fiscal Year of the Company, the Company has in effect an election under Section 754 of the Code, Capital Accounts shall be adjusted in accordance with Treasury Regulation Section 1.704-l(b)(2)(iv)(m).

(c)

It is the intention of the Members to satisfy the capital account maintenance requirements of Treasury Regulation Section 1.704-l(b)(2)(iv), and the foregoing provisions defining Capital Accounts are intended to comply with such provisions.  If the Executive Committee determines that adjustments to Capital Accounts are necessary to comply with such Regulations, then the adjustments shall be made provided it does not materially impact upon the manner in which property is distributed to the Members in liquidation of the Company.

(d)

Except as may otherwise be provided in this Agreement, whenever it is necessary to determine the Capital Account of a Member, the Capital Account of such Member shall be determined after giving effect to all allocations and distributions for transactions effected prior to the time as of which such determination is to be made.  Any Member, including any substitute Member, who shall acquire an interest or whose interest shall be increased by means of a transfer to him of all or part of the interest of another Member, shall have a Capital Account which reflects such transfer.

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ARTICLE 8
ALLOCATIONS OF PROFITS AND LOSSES

8.1

Definitions Related to Allocations of Net Profits and Net Losses.  For purposes of this Agreement, the following terms shall have the meanings set forth below:

“Net Profits” and “Net Losses” means, for each Fiscal Year or other period, an amount equal to the Company’s taxable income or loss, respectively, for such year or period, determined in accordance with Section 703(a) of the Code (and for this purpose, all items of income, gain, loss, or reduction required to be stated separately pursuant to Section 703(a)(1) of the Code shall be included in taxable income or loss), with the following adjustments:

(i)

Any income of the Company that is exempt from federal income tax and not otherwise taken into account in computing Net Profits or Net Losses pursuant to this Section 8.1 shall be added to such taxable income or loss;

(ii)

Any expenditures of the Company described in Section 705(a)(2)(B) of the Code or treated as 705(a)(2)(B) expenditures pursuant to Regulation Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Net Profits or Net Losses pursuant to this Section 8.1 shall be subtracted from such taxable income or loss;

(iii)

In the event the Book Value of any Company asset is adjusted in compliance with Regulation Section 1.704-1(b), the amount of such adjustment shall be taken into account as gain or loss from the disposition of such asset for purposes of computing Net Profits or Net Losses;

(iv)

Gain or loss resulting from any disposition of Company property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Book Value of the property disposed of notwithstanding that the adjusted tax basis of such property differs from its Book Value;

(v)

In lieu of the depreciation, amortization, and other cost recovery deductions taken into account in computing such taxable income or loss, whenever the Book Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of a Fiscal Year, depreciation, amortization or other cost recovery deductions allowable with respect to an asset shall be an amount which bears the same ratio to such beginning Book Value as the federal income tax depreciation, amortization or other cost recovery deduction for such year bears to such beginning adjusted tax basis; provided, however, that if the adjusted basis for federal income taxes of an asset at the beginning of a year is zero, depreciation, amortization or other cost recovery deductions shall be determined by reference to the beginning Book Value of such asset using any reasonable method selecte d by the Manager; and

(vi)

Notwithstanding any other provision of this Article 8, any items which are specially allocated pursuant to Section 8.6 shall not be taken into account in computing Net Profits or Net Losses.

“Nonrecourse Deductions” has the meaning set forth in Sections 1.704-2(b)(1) and 1.704-2(c) of the Regulations.  Subject to the preceding sentence, the amount of Nonrecourse Deductions for a Company Fiscal Year equals the excess, if any, of the net increase, if any, in the amount of Company

28

Minimum Gain during that Fiscal Year (determined under Section 1.704-2(d) of the Regulations) over the aggregate amount of any distributions during that Fiscal Year of proceeds of a Nonrecourse Liability that are allocable to an increase in Company Minimum Gain ( determined under Section 1.704-2(h) of the Regulations).

“Nonrecourse Liability” has the meaning set forth in Section 1.704-2(b)(3) of the Regulations.

“Member Minimum Gain” means an amount, with respect to each Member Nonrecourse Debt, equal to the Company Minimum Gain that would result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability.

“Member Nonrecourse Debt” has the meaning set forth in Section 1.704-2(b)(4) of the Regulations.

“Member Nonrecourse Deductions” has the meaning set forth in Section 1.704-2(i) of the Regulations.  Subject to the foregoing, the amount of Member Nonrecourse Deductions with respect to a Member Nonrecourse Debt for a Company Fiscal Year equals the excess, if any, of the net increase, if any, in the amount of Member Minimum Gain attributable to such Member Nonrecourse Debt during that Fiscal Year over the aggregate amount of any distribution during that Fiscal Year to the Member that bears the economic risk of loss for such Member Nonrecourse Debt to the extent such distributions are from the proceeds of such Member Nonrecourse Debt and are allocable to an increase in Member Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Section 1.704-2(i) of the Regulations.

“Company Minimum Gain” has the meaning set forth in Section 1.704-2(d) of the Regulations.  Subject to the foregoing, Company Minimum Gain shall equal the amount of gain, if any, which would be recognized by the Company with respect to each nonrecourse liability of the Company if the Company were to transfer the Company’s property which is subject to such nonrecourse liability in full satisfaction thereof.

8.2

Allocations of Fiscal Year Items.  The rules of this Section 8.2 shall apply except as provided in Sections 8.6 and subject to the overall direction of Section 8.5.  For each Fiscal Year, each item of income, gain, loss and deduction (other than items allocated pursuant to Section 8.6 of this Agreement) shall be allocated, insofar as possible, so that, following all allocations pursuant to Section 8.6 of this Agreement and the allocation pursuant to this Section 8.2, each Member’s Capital Account shall be equal, to the extent possible, the amount that a Member would receive under Article 9 if:  (a) all of the assets of the Company (other than cash and claims of the Company for contributions) were sold for cash equal to their respective Book Values (or, in the case of assets subject to liabilities for which the creditor’s right is limited to assets of the Company, the amounts of such liabilities, if greater than the aggregate book values of such assets); (b) all unconditional obligations to contribute to the Company were collected in full; and (c) all obligations of the Company were satisfied.  Notwithstanding the foregoing, interest earnings on the BIC Funds shall be allocated 95% to Inland and 5% to the Board.

8.3

Proration of Items.  Except to the extent otherwise required by applicable law and with respect to interest earnings on the BIC Funds: (i) in applying Subsection 8.2 of this Agreement, to the extent possible, each item of income, gain, loss and deduction shall be allocated among the Members in the same proportions as each other such item, and, to the extent permitted by law, each item of credit shall be allocated in such proportions; and (ii) to the

29

extent necessary to produce the result prescribed by Section 8.2 of this Agreement, items of income and gain shall be allocated separately from items of loss and deduction.

8.4

Limitation on Loss Allocations.  Notwithstanding anything in this Agreement to the contrary:

(a)

No loss or item of deduction shall be allocated to a Member if such allocation would cause the Capital Account of such Member to have a deficit in excess of the sum of (i) the amount of additional capital such Member would be required to contribute to the Company if the Company were to dissolve on the last day of the accounting period to which such allocation relates plus, (ii) such Member’s distributive share of Company Minimum Gain as of the last day of such accounting period, determined pursuant to Regulation Section 1.704-2(g)(1), plus (iii) such Member’s share of Member Minimum Gain as of the last day of such year, determined pursuant to Regulation Section 1.704-2(i)(5).  Any amounts not allocated to a Member pursuant to the limitations set forth in this paragraph shall be allocated to the other Members to the extent possible without violating the limitations set fo rth in this paragraph.

(b)

For purposes of the preceding paragraph, the balance of a Member’s Capital Account shall be determined after reducing such Capital Account by (i) all anticipated allocations of loss or deduction pursuant to Sections 704(e)(2) and 706(d) of the Code, and Section 1.751-1(b)(2)(ii) of the Treasury Regulations, and (ii) anticipated distributions to such Member to the extent such anticipated distributions exceed anticipated increases to such Member’s Capital Account during or prior to the year of distribution (other than increases which may not be taken into account pursuant to Section 1.704-1(b)(2)(ii)(d)(6) of the Regulations).

8.5

Intentions and Construction of Allocations.  It is the intention of the Members that the aggregate Net Profits and items of income and gain allocated to the Members pursuant to this Agreement equal the economic profits of the Members (i.e. the excess of distributions over capital contributions to the Company) and that the aggregate Net Losses and items of loss and deduction allocated to the Members pursuant to this Agreement equal the economic losses of the Members (i.e., the excess of capital contributions over distributions).  These provisions shall be so interpreted as necessary to accomplish such result.

8.6

Special Allocations.  The following special allocations shall be made in the following order:

(a)

Minimum Gain Chargeback.  Except as otherwise provided in Section 1.704-2(f) of the Regulations, in the event there is a net decrease in Company Minimum Gain during a Company taxable year, each Member shall be allocated (before any other allocation is made pursuant to this Article 8) items of income and gain for such year (and, if necessary, for subsequent years) equal to that Member’s share of the net decrease in Company Minimum Gain.

(i)

The determination of a Member’s share of the net decrease in Company Minimum Gain shall be determined in accordance with Regulation Section 1.704-2(g).

(ii)

The items to be specially allocated to the Members in accordance with this Section 8.6(a) shall be determined in accordance with Regulation Section 1.704-2(f)(6).

(iii)

This Section 8.6(a) is intended to comply with the Minimum Gain chargeback requirement set forth in Section 1.704-2(f) of the Regulations and shall be interpreted consistently therewith.

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(b)

Member Minimum Gain Chargeback:  Except as otherwise provided in Regulation Section 1.704-2(i)(4), in the event there is a net decrease in Member Minimum Gain during a Company taxable year, each Member who has a share of that Member Minimum Gain as of the beginning of the year, to the extent required by Regulation Section 1.704-2(i)(4) shall be specially allocated items of Company income and gain for such year (and, if necessary, subsequent years) equal to that Member’s share of the net decrease in Member Minimum Gain.

Allocations pursuant to this subparagraph (b) shall be made in accordance with Regulation Section 1.704-2(i)(4).  This subsection 8.6(b) is intended to comply with the requirement set forth in Regulation Section 1.704-2(i)(4) and shall be interpreted consistently therewith.

(c)

Qualified Income Offset Allocation.  In the event any Member unexpectedly receives any adjustments, allocations or distributions described in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6) which would cause the negative balance in such Member’s Capital Account to exceed the sum of (i) its obligation to restore a Capital Account deficit upon liquidation of the Company, plus (ii) his share of Company Minimum Gain determined pursuant to Regulation Section 1.704-2(g)(1), plus (iii) such Member’s share of Member Minimum Gain determined pursuant to Regulation Section 1.704-2(i)(5), items of Company income and gain shall be specially allocated to such Member in an amount and manner sufficient to eliminate such excess negative balance in such Member’s Capital Account as quickly as possible.  This Section 8.6(c) is intended to comply with the alternative test for economic effect set forth in Regulation Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

(d)

Gross Income Allocation.  In the event any Member has a deficit Capital Account at the end of any Company Fiscal Year which is in excess of the sum of (i) any amounts such Member is obligated to restore pursuant to this Agreement, plus (ii) such Member’s distributive share of Company Minimum Gain as of such date, plus (iii) such Member’s share of Member Minimum Gain determined pursuant to Regulation Section 1.704-2(i)(5), each such Member shall be specially allocated items of Company income and gain in the amount of such excess as quickly as possible, provided that an allocation pursuant to this Section 8.6(d) shall be made only if and to the extent that such Member would have a deficit Capital Account in excess of such sum after all other allocations provided for in this Section 8 have been made, except assuming that Section 8.5(c), and this Section 8.5(d) were n ot contained in this Agreement.

(e)

Allocation of Nonrecourse Deductions.  Nonrecourse Deductions shall be allocated to the Members in accordance with their respective Percentage Interests.

(f)

Allocation of Member Nonrecourse Deductions.  Member Nonrecourse Deductions shall be allocated as prescribed by the Regulations.

8.7

Built-In Gain or Loss/Section 704(c) Tax Allocations.  In the event that the Capital Accounts of the Members are credited with or adjusted to reflect the fair market value of the Company’s property and assets, the Members’ distributive shares of depreciation, depletion, amortization, and gain or loss, as computed for tax purposes, with respect to such property, shall be determined pursuant to Section 704(c) of the Code and the Regulations thereunder, so as to take account of the variation between the adjusted tax basis and Book Value of such property, in accordance with the “traditional method” without curative allocations, as provided for under Treasury Regulations Section 1.704-3(b).  Any deductions, income, gain or loss specially allocated pursuant to this Section 8.7 shall not be taken into account for purposes of determining Net Profits o r Net Losses or for purposes of adjusting a Members’ Capital Account.

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8.8

Recapture.  Ordinary taxable income arising from the recapture of depreciation and/or investment tax credit shall be allocated to the Members in the same manner as such depreciation and/or investment tax credit was allocated to them.

8.9

Retention of Section 751 Assets.  Upon the occurrence of an event which would otherwise cause a reduction in a Member’s respective interest in the Company’s Section 751 assets (“substantially appreciated inventory” and “unrealized receivables” as defined in Section 751 of the Code), such as the admission of new Members or otherwise, no such reduction shall occur with respect to Members who were Members immediately preceding such event and who continue to be Members after the occurrence of such event but, rather, each such Member shall retain its respective interest in the Company’s Section 751 assets existing immediately prior to such event.

8.10

Prohibition Against Retroactive Allocations.  Notwithstanding anything in this Agreement to the contrary, no Member shall be allocated any loss, credit or income attributable to a period prior to its admission to the Company.  In the event that a Member transfers all or a portion of its Membership Interest, or if there is a reduction in a Member’s Percentage Interest due to the admission of new Members or otherwise, each Member’s distributive share of Company items of income, loss, credit, etc., shall be determined by taking into account each Member’s varying interests in the Company during the Company’s taxable year.  For this purpose, unless the Executive Committee elects to provide for an interim closing of the Company’s books, each Member’s distributive share shall be estimated by taking the pro rata portion of the distribut ive share such Member would have included in its taxable income had it maintained its Membership Interest throughout the Company year.  Such proration shall be based upon the portion of the year during which such Member held the Membership Interest, except that extraordinary, non-recurring items shall be allocated to the Persons holding Membership Interests at the time such extraordinary items occur.

8.11

Allocation of Nonrecourse Liabilities.  The “excess nonrecourse liabilities” of the Company (within the meaning of Section 1.752-3(a)(3) of the Regulations) shall be allocated to the Members in accordance with their respective Percentage Interests

ARTICLE 9
DISTRIBUTIONS TO MEMBERS

9.1

Existing Portfolio Operating Distributable Cash.

(a)

Existing Portfolio Operating Distributable Cash shall be distributed among the Members on a monthly basis, if available, but in no event less frequently than quarterly as follows:

(i)

First, to the Members to the extent of and in proportion to any accrued and unpaid interest on Priority Loans;

(ii)

Then, to the Members, to the extent of and in proportion to any outstanding principal balances on Priority Loans; and

(iii)

Then, to the Members in proportion to their respective Percentage Interests.

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(b)

Upon a good faith distribution of funds in the manner expressly provided in this Section 9.1, the Manager shall incur no liability on account of such distributions, even though such distributions may result in the Company retaining insufficient funds for the operation of its business, which insufficiency may result in a loss to the Company or necessitate the borrowing of funds by the Company.

9.2

Acquired Project Operating Distributable Cash.

(a)

Acquired Project Operating Distributable Cash shall be distributed among the Members on a monthly basis, if available, but in no event less frequently than quarterly as follows:

(i)

First, to the Members to the extent of and in proportion to any accrued and unpaid interest on Priority Loans;

(ii)

Then, to the Members, to the extent of and in proportion to any outstanding principal balances on Priority Loans; and

(iii)

Then, to the Members in proportion to their respective Percentage Interests.

(b)

Upon a good faith distribution of funds in the manner expressly provided in this Section 9.2, the Manager shall incur no liability on account of such distributions, even though such distributions may result in the Company retaining insufficient funds for the operation of its business, which insufficiency may result in a loss to the Company or necessitate the borrowing of funds by the Company.

9.3

Capital Event Distributable Cash – Existing Portfolio Projects.

(a)

Capital Event Distributable Cash arising with respect to an Existing Portfolio Project shall be distributed among the Members as soon as practicable after the Company’s receipt of the same, but in any event within thirty (30) days after the occurrence of the Capital Event, as follows:

(i)

First, to Inland, in an amount equal to the balance of the BIC Funds at such time;

(ii)

Then, to the Members to the extent of and in proportion to any accrued and unpaid interest on Priority Loans;

(iii)

Then, to the Members, to the extent of and in proportion to any outstanding principal balances on Priority Loans;

(iv)

Then, to the Members in proportion to their respective Percentage Interests.

(b)

Upon the sale or disposition of all of the Existing Portfolio Projects, the Manager shall cause the Company’s accountants to determine (i) the amount of Distributable Cash distributed by the Company to the Board pursuant to Section 9.1 above and this Section 9.3, and (ii) based upon such distributions, the IRR achieved by the Board on its Existing Portfolio Project Equity.  To the extent such calculation determines that the Board received an IRR on its Existing Portfolio Project Equity in excess of

33

11%, the Company's accountants shall determine the amount, in dollar terms, received by the Board over an 11% IRR (the "Excess Return").  Inland shall be entitled to an additional distribution from the Company equal to the product of (i) the Excess Return multiplied by (ii) twenty percent (20%) of the Board’s Percentage Interest.  The Board shall repay to the Company the amount to which Inland is entitled hereunder within thirty (30) days after such computation.

(c)

Upon a good faith distribution of funds in the manner expressly provided in this Section 9.3, the Manager shall incur no liability on account of such distributions, even though such distributions may result in the Company retaining insufficient funds for the operation of its business, which insufficiency may result in a loss to the Company or necessitate the borrowing of funds by the Company.

(d)

For illustration purposes only, an example of the foregoing calculations is set forth on Exhibit K attached hereto.

9.4

Capital Event Distributable Cash – Acquired Projects.

(a)

Capital Event Distributable Cash arising with respect to an Acquired Project which is not an Existing Portfolio Project shall be distributed among the Members as soon as practicable after the Company’s receipt of the same, but in any event within thirty (30) days after the occurrence of the Capital Event, as follows:

(i)

First, to Inland, in an amount equal to the balance of the BIC Funds at such time;

(ii)

Then, to the Members to the extent of and in proportion to any accrued and unpaid interest on Priority Loans;

(iii)

Then, to the Members, to the extent of and in proportion to any outstanding principal balances on Priority Loans;

(iv)

Thereafter:

(A) if the Acquired Project is not a Core Plus Project,

(1)

to the Members in accordance with their respective Percentage Interests until each Member has realized a cumulative IRR equal to eleven percent (11%) from all distributions under Sections 9.2 and 9.4 with respect to non-Core Plus Projects (other than Priority Loans), and

(2)

thereafter eighty percent (80%) to the Members in accordance with their respective Percentage Interests and twenty percent (20%) to Inland; or

(B)  if the Acquired Project is a Core Plus Project,

(1)

to the Members in accordance with their respective Percentage Interests until each Member has realized a cumulative Core Plus Project IRR equal to eleven percent (11%) from all distributions

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under Sections 9.2 and 9.4 with respect to-Core Plus Projects (other than Priority Loans), and

(2)

thereafter, eighty percent (80%) to the Members in accordance with their respective Percentage Interests and twenty percent (20%) to Inland.

(b)

Upon a good faith distribution of funds in the manner expressly provided in this Section 9.4, the Manager shall incur no liability on account of such distributions, even though such distributions may result in the Company retaining insufficient funds for the operation of its business, which insufficiency may result in a loss to the Company or necessitate the borrowing of funds by the Company.

9.5

Annual Reconciliation; Clawback.  

(a)

Upon the expiration of each Fiscal Year, the Manager shall cause the Company’s accountants to ascertain the amount of Distributable Cash for the immediately preceding Fiscal Year each Member should have received pursuant to Sections 9.1, 9.2, 9.3 and 9.4 above (the “Reconciliation Calculation”).  Based upon the Reconciliation Calculations, the Members shall reconcile between themselves any overpayments or underpayments of Distributable Cash received by the Members during the applicable Fiscal Year.  Such reconciliation shall be made within thirty (30) days after the computation of the Reconciliation Calculation.

(b)

Upon the final liquidation of all of the Company’s assets, the Manager shall cause the Company’s accountants to calculate the IRR of the Board with respect to all Capital Contributions and Priority Loans or other sums advanced by the Board to the Company or any Project Entity.  In the event that (i) the IRR of the Board as of such date (taking into account any payments made by the Board to Inland pursuant to Section 9.3(b) above) is less than eleven percent (11%) (the “Threshold Return”) and (ii) Inland, as of such date, has previously received distributions pursuant to Sections 9.4(a)(iii)(A)(2) or 9.4(a)(iii)(B)(2) above or any payment from the Board pursuant to Section 9.3(b) above (collectively, the “Excess Payments”), then Inland shall pay to the Board within thirty (30) days after the date of such calculation an amount equal to the lesser of (x) the sum of the Excess Payments, or (y) the amount required to provide the Board with the Threshold Return.

9.6

Limitation Upon Distributions.  No distribution shall be made to Members if prohibited by Section 18-607 of the Delaware Act.

ARTICLE 10
CERTAIN FEES

10.1

Certain Fees to Inland and Inland Affiliates.  With respect to all Acquired Projects and all Existing Portfolio Projects, Inland and/or certain of Inland’s Affiliates shall be initially engaged to provide certain services pursuant to the form attached as Exhibit G; and to the extent Inland provides such services, Inland (or, as the case may be, its Affiliates) shall be entitled to receive certain fees from the Company or the applicable Project Entity as specified on Exhibit E attached hereto and hereby made a part hereof.   

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ARTICLE 11
BOOKS AND RECORDS

11.1

Accounting Period.  The Company’s accounting period shall be the calendar year.  

11.2

Records.  Proper and complete records and books of account shall be maintained by the Company in conformity with generally accepted accounting principles consistently applied.  All transactions and other matters relating to the Company’s business shall be entered fully and accurately in such records and books of account in such detail and completeness as is customary and usual for businesses of the type engaged in by the Company. The books and records shall at all times be maintained at the principal executive office of the Company and shall be open to the reasonable inspection and examination of the Members or their duly authorized representatives during reasonable business hours following twenty-four (24) hours advance notice to the Manager.  The Company shall also keep at its principal place of business the following records:

(a)

A current list of the full name and last known address of each Member;

(b)

Copies of records to enable a Member to determine the relative voting rights, if any;

(c)

A copy of the Articles of Organization of the Company and all amendments thereto;

(d)

Copies of the Company’s federal, state, and local income tax returns and reports, if any, for the three most recent years;

(e)

Copies of this Agreement, together with any amendments thereto;

(f)

Copies of any financial statements of the Company for the three most recent years; and

(g)

Copies of all minutes from meetings of the Executive Committee.

11.3

Audits and Reports.  Inland shall deliver to the Board the following financial statements and reports at the times indicated below:  

(a)

On or before the execution of this Agreement and thereafter on each subsequent October 1st thereafter during the term of this Agreement, Inland shall prepare and submit to the Executive Committee a budget for each Approved Project (the “Project Budget”) and the Company for the next ensuing calendar year (each such budget an “Annual Budget”).  The Board acknowledges that Inland has submitted a Project Budget and an Annual Budget for 2007 and that the next due date for updated Project Budgets and Annual Budget shall be October 1, 2007.  The Project Budget and the Annual Budget shall include a summary in reasonable detail of all activities or operations contemplated with respect to the applicable Approved Project and the Company for the period in question, including details of anticipated expenditures and revenues.  

(b)

Within forty-five (45) days after the acquisition or disposition of an Approved  Project Inland shall deliver to the Members a complete set of documentation evidencing such acquisition or disposition and such other information as the Members may reasonably request in connection therewith.

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(c)

Within ten (10) days after the expiration of each calendar month, Inland shall deliver or cause to be delivered to the Board and/or its designees in a mutually acceptable format reports showing, among other things, the results of the operations of each Acquired Project and property in the Existing Portfolio for the immediately preceding calendar month and year-to-date, together with an analysis of actual results for such Acquired Project or property in the Existing Portfolio compared to the Annual Budget for such Acquired Project or property in the Existing Portfolio on a month-to-date and year-to-date basis.  Such reports shall also contain a detailed month-to-date and Fiscal-Year-to-date description of all receipts and other collectible charges for each tenant or debtor, plus a schedule of all outstanding receivables.

(d)

Within fifteen (15) days after the expiration of each calendar quarter, Inland, at its sole cost and expense, shall deliver to the Board and/or its designee such other reports, statements and information regarding the Company, the Project Entities and the Approved Projects as the Board may reasonably request from time to time in the Board’s discretion; provided, however, to the extent such requested information gives rise to any third party expenses (other than expenses incurred by Inland Management), the Board shall be responsible for such expenses.

(e)

Within sixty (60) days after the expiration of each taxable year, Inland will provide to the Board a draft of year end financial statements and a draft of all Federal, State and local tax returns for the immediately preceding taxable year for the Company and, to the extent required by any applicable law, code or regulation, each Project Entity.  

(f)

Within ninety (90) days after the expiration of each taxable year Inland shall deliver to the Board financial statements for the Company and each Project Entity prepared by an independent certified public accounting firm acceptable to the Executive Committee in accordance with GAAP consistently applied.

(g)

Within one hundred twenty (120) days after the expiration of each taxable year Inland shall deliver to the Board final tax returns for the preceding taxable year for the Company and, to the extent required by applicable law, each Project Entity.

(h)

Except as set forth in Section 11.3(d) above, the Company shall pay in accordance with the applicable Annual Budget for the Company the costs of any third parties providing the Company with auditing and tax preparation services in connection with the preparation of the reports and financial statements described in this Section 11.3.

(i)

Within thirty (30) days after the settlement of any litigation by or against the Company or any Project Entity where the settlement amount does not exceed $25,000, Inland shall deliver to the Executive Committee notice of such settlement.

11.4

Methods of Accounting.  All income tax and financial reports and returns of the Company shall be prepared in accordance with GAAP consistently applied.  Subject to the provisions of Section 5.2, all elections with respect to tax matters to be made by or for the Company shall be made by the TMM.

11.5

Tax Matters Member.  For purposes of Code §§ 6221 through 6233, the TMM shall have the following duties:

(a)

The TMM shall keep the Members informed of all administrative and judicial proceedings, as required by Code § 6223(g), and shall furnish to the Members a copy of each notice or other communication received by the TMM from the Internal Revenue Service (except such notices or

37

communications as are sent directly to the Members by the Internal Revenue Service).  The TMM is hereby authorized and required by the Members to file all tax returns of the Company and in all instances to elect to treat the Company as a partnership for tax purposes.  The expenses so incurred by the TMM shall be Company expenses and shall be paid by the Company in accordance with the applicable Annual Budget for the Company.

(b)

The TMM shall have the authority, on behalf of the Company, to do all or any of the following:

(i)

enter into a settlement agreement or make any election with the IRS which purports to bind any other Member;

(ii)

file a petition as contemplated in Code §§ 6226(a) or 6228;

(iii)

intervene in any action as contemplated in Code § 6226(b);

(iv)

file any request contemplated in Code § 6227(b);

(v)

enter into an agreement extending the period of limitations as contemplated in Code § 6229(b)(1)(B); and

(vi)

in the event of a transfer of all or any portion of the Interests of any Member, elect pursuant to Section 754 of the Code to adjust the basis of assets of the Company.

Should the TMM wish to resign, the Executive Committee shall promptly appoint a replacement, upon which such resignation shall be effective.

11.6

Matters Concerning Banking.  Funds of the Company shall be deposited in an account or accounts of a type, in form and name of the Company and in a bank or banks selected by the Manager.  All funds of the Company shall be used solely for the business of the Company.

11.7

Legal Counsel.  The legal counsel for the Company (“Company Counsel”) shall be selected by Manager and subject to the reasonable approval of the Board.  The Executive Committee may from time to time replace the Company Counsel with legal counsel selected by the Executive Committee.  All costs and expenses of Company Counsel shall be project expenses and shall be included as a contribution of capital to the relevant Approved Project; provided, however, the parties shall use commercially reasonable good faith efforts to develop and utilize standardized acquisition, disposition and organizational documents to minimize legal costs and expenses where possible.  At the request of the Board, the Company shall cause Company Counsel to confer with outside counsel selected and paid by the Board (the “Board’s Counsel 8;) concerning matters affecting the Company and will provide the Board’s Counsel with copies of such documents and agreements as the Board’s Counsel may reasonably request from time to time in connection with the acquisition or development of Potential Projects.  

11.8

Company Accountants.  The initial Accountants of the Company shall be KPMG.  The Executive Committee shall have the unilateral right to cause the Manager to remove the Accountants of the Company, no less than 120 days prior to the beginning of a new calendar year, in which event the Executive Committee, as a Major Decision pursuant to Section 5.2(hh) above, will select replacement Accountants.  The Board shall have the right, at its cost and expense, to engage a separate indpendent

38

public accounting firm selected by the Board to audit the books and records of the Company from time to time and Manager shall reasonably cooperate with such audit.

ARTICLE 12
TRANSFERABILITY AND WITHDRAWAL

12.1

Transfer Limitations.

(a)

Except as expressly  provided in Sections 12.2 through 12.6 below, no Member shall sell, assign, transfer, mortgage, charge or otherwise encumber, or suffer any third party to sell, assign, transfer, mortgage, charge or otherwise encumber, or contract to do or permit any of the foregoing, whether voluntarily or by operation of law (herein sometimes collectively called a “transfer”), any part or all of its interest in the Company or any Project Entity, or substitute a transferee in its place as a substitute Member of the Company, without the unanimous written consent of all Members and any attempt to do so shall be void.  In no event shall the Manager approve any transfer to any person or entity that is not an “accredited investor” as defined in Regulation D promulgated pursuant to the Securities Act.

(b)

In order to effectuate the purpose of this Section 12.1, each Member that is an entity will seek to transfer its interest in the Company only through a direct transfer of such interest therein in the manner contemplated in this Article 12, and no transfer or other disposition of any stock or partnership or other beneficial interest in any such Entity will be effected, directly or indirectly, unless unanimously approved by the Members.

(c)

In the event of a transfer of any interest in contravention of the provisions of this Section 12.1, the person or entity to whom such transfer is made shall become neither a Member nor an assignee hereunder, and shall not be entitled to participate in any decision or to receive any share of profits or cash in respect of the Company’s business or to share in distributions, if any, in which its assignor would otherwise have been entitled to share, and shall have no right to require any information or accounting of any transactions of the Company, and such assignee shall not be entitled to vote with respect to any Company matter.  No transferee shall be a Member nor shall it have any of the rights thereof until admitted as a Member pursuant to Section 12.1 and until such transferee shall have executed a counterpart of this Agreement and agreed in writing to assume and be bound b y all of the relevant obligations of the transferor.

12.2

Right of First Offer.  

(a)

At any time after the earlier to occur of (i) the occurrence of a Default Event, (ii) in the event of an Unresolved Major Decision, (iii) in the event the Board and Inland fail to agree upon the identity of a replacement Investment Advisor as contemplated under Section 5.4, (iv) if either Member seeks to transfer its interest in the Company, except with respect to transfers by the Board in accordance with Section 12.5 below and with respect to transfers by Inland in accordance with Section 12.6 below, or (v) at any time after the earlier to occur of (A) the second (2nd) anniversary of the close of the Investment Period, or (B) the third (3rd) anniversary of the date of this Agreement (the “Trigger Date”), any Member wishing to sell its Membership Interest (the “Offeror”) may trigger action pursuant to this Section 12.2(a) by written notice to the other Member (a “Sell Trigger Notice”) specifying to the other Member in writing the price at which the Offeror would be willing to sell its entire Membership Interest to the other Member (the “Stated Selling Price”).  Any Sell Trigger Notice shall reference the invocation of this Section 12.2 and shall constitute an irrevocable offer from the Offeror to the other Member (the “Respondent”) to sell all, but not less than all, of the Membership Interest in the Company of the Offeror at the Stated Selling Price.  Within thirty (30) days following a triggering of the provisions

39

of this Section 12.2(a), the Respondent shall notify the Offeror of its intention either (x) to buy all of the Offeror’s Membership Interest in the Company from the Offeror for the Stated Selling Price, or (y) to permit the Offeror to sell its Membership Interest to an independent third-party pursuant to an arm’s length transaction for an amount equal to or greater than the Stated Selling Price (the “Required Third Party Price”), without regard to the restrictions set forth in Section 12.1 above. In the event the Respondent fails to timely notify the Offeror of its election pursuant to this Section 12.2(a), the Respondent shall be deemed to have elected to proceed pursuant to clause (y) above.

(b)

In the event the Respondent elects or is deemed to have elected to proceed pursuant to clause (y) of Section 12(a) above, the Offeror shall have the right for a period of twelve (12) months after the Trigger Date (the “Third Party Sale Period”) to sell its Membership Interest in the Company to a bona fide third party for the Required Third Party Price.  In the event the Offeror fails to consummate the sale of its Membership Interest for the Required Third Party Price prior to the expiration of the Third Party Sale Period, Offeror’s rights to sell its Membership Interest to a third party will be revoked until such time as the Offeror has repeated the process set forth in Section 12.2(a) and provided the Respondent with the right to make its election pursuant to Section 12.2(a) above.     

(c)

In the event the Board is a seller of its interest in the Company pursuant Section 12.2(a) above, the Board shall have the right to sell part or all of its interest to Inland at the Stated Selling Price in exchange for registered shares of common stock in Inland if Inland is a publicly traded company at the time of the transaction, the price of such shares being ninety-five percent (95%) of the thirty (30) day average price of such stock in Inland prior to the date of the transaction.

(d)

Any exercise of the provisions of this Section 12.2 is also subject to the provisions of Section 12.4 below.

12.3

Buy/Sell Agreement.

(a)

At any time after the Trigger Date, any Member may trigger action pursuant to this Section by providing the other Member with written notice (the “Buy/Sell Trigger Notice”) specifying a proposed value of the Company’s assets net of the Company’s liabilities of all assets of the Company (the “Proposed Net Value”).  Any such specification referring to this Section, or otherwise indicating that the provisions hereof are being invoked, shall constitute an irrevocable offer, from the specifying party (“Initiator”) to the other (“Respondent”), either to buy or to sell, but not both, all, but not less than all, of the Membership Interest in the Company of the Initiator or Respondent, as applicable, at the price and on terms as hereinafter described.

(b)

Within thirty (30) days following the delivery of the Buy/Sell Trigger Notice, the Respondent shall notify the Initiator of its intention either to sell all of its Membership Interest in the Company to the Initiator or to purchase all of the Initiator’s Membership Interest in the Company (the “Response Notice”).  Any failure to respond within such period shall be considered a response indicating an intention to sell.

(c)

The price payable in respect of a Membership Interest transferred hereunder (net of liabilities to be assumed by the purchaser, as described in Section 12.4(c)), shall be the amount which would be distributed to the holder of such interest if (i) all of the assets of the Company were sold for (x) assumption of all liabilities of the Company, plus (y) cash in the amount of the Proposed Net Value minus (z) hypothetical transaction costs, and (ii) that cash were then distributed in liquidation of the Company.

(d)

Exercise of the provisions of this Section 12.3 is also subject to the provisions of Section 12.4 below.

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12.4

Provisions Applicable to Right of First Offer and Buy/Sell Agreement.

(a)

If the selling Member under Section 12.2(a)(x) or Section 12.3 has made any outstanding Priority Loans to the Company, then the purchasing Member shall also acquire all debt claims of the seller against the Company, at their respective full amounts owed.

(b)

If any Member elects to purchase the other Member’s Membership Interest pursuant to Section 12.2(a)(x) or Section 12.3 above, the purchasing Member shall deliver to a mutually acceptable escrow agent a non-refundable cash deposit within thirty (30) days of Respondent’s actual or deemed notice in an amount equal to the lesser of (i) five percent (5%) of the Stated Selling Price or the price as determined by Section 12.3(c), as applicable, or (ii) $1,000,000 (the “Deposit”) to secure the purchasing Member’s obligations hereunder.  

(c)

Closing of any sale pursuant to Section 12.2(a)(x) or Section 12.3 above (“Closing”) shall occur on the thirtieth (30th) day following the date of the escrow agent's receipt of the purchasing Member’s deposit as contemplated by Section 12.4(b) above (or, if such day is not a business day, the next succeeding business day) (the “Closing Date”), at the principal place of business of the Company, or at such other time and place as may be mutually agreed upon, and (unless otherwise agreed to by the parties) shall be on a cash basis.  At such Closing: (i) the seller shall convey all of its Membership Interest in the Company, and, if applicable, all of its debt claims against the Company, and warrant that such interests and claims are free of all adverse claims; (ii) the purchaser shall pay the seller, as applicable, either the Stated Selling Price or the price as determined by S ection 12.3(c) of this Agreement, as applicable (the “Intra-Member Purchase Price”), less a credit for the Deposit (which shall be delivered by the escrow agent to the seller and the amount thereof credited against the Intra-Member Purchase Price), and as adjusted by customary closing prorations and customary closing costs, in cash or by certified or cashier’s check; and (iii) all parties shall execute and deliver such other documents as may be appropriate to effect, evidence and perfect the transaction.  Notwithstanding anything in this Section 12.4(c) to the contrary, in the event that any Existing Portfolio Project or Approved Project which is part of the transaction under Sections 12.2 or 12.3 above has been acquired by the Company and the taxes were prorated on a cash basis at the closing of such acquisition, (x) if the Board is a seller of its Membership Interest pursuant to Sections 12.2 or 12.3 above, at the Closing taxes with respect to such Existing Portfolio Project or App roved Project shall be prorated on a cash basis (except that prorations of taxes with respect to vacant space shall be on an accrual basis); and (y) if the Board is a buyer of Inland’s Membership Interest pursuant to Sections 12.2 or 12.3 above, at the Closing taxes with respect to such Existing Portfolio Project or Approved Project shall be prorated on a cash basis (except that prorations of taxes with respect to vacant space shall be on an accrual basis).

(d)

In the event the Respondent elects to proceed pursuant to 12.2(a)(x) or Section 12.3 above, should the purchaser fail timely to close, the seller, as its exclusive remedies in the circumstances, (i) shall be entitled to receive from the escrow agent, as liquidated damages for such failure, the Deposit deposited pursuant to Section 12.4(b) of this Agreement, (ii) shall have the right for a period of twelve (12) months after the scheduled Closing Date (the “Default Sale Period”) to sell its Membership Interest in the Company to a bona fide third party for not less than the Intra-Member Purchase Price, and (iii) the purchaser’s rights pursuant to Section 12.3 shall be suspended for a period of twelve (12) months.  In the event the seller thereafter fails to consummate the sale of its Membership Interests to a third party during the Default Sale Period, the seller’s rights to sell its Members hip Interest to a third party will be suspended until such time as the seller has delivered a Trigger Notice pursuant to Section 12.2(a) or Section 12.3(a) above and provided the purchaser, as the Respondent, with the right to make its election pursuant to Section 12.2 or Section 12.3 above.

41

(e)

In connection with a transfer pursuant to these Sections 12.2 through 12.4, the purchaser may designate another person or persons to acquire the seller’s Membership Interest in the Company, in which event such other person(s) shall acquire such Membership Interest, but no such designation or acquisition shall relieve the purchasers (as determined without regard to this Section 12.4(e)) from any obligation under these Sections 12.2 through 12.4.

(f)

Any Member shall have the right to exercise either the Right of First Offer pursuant to Section 12.2 above or the Buy/Sell Agreement pursuant to Section 12.3 above (such Member being the “Initiating Member”); provided, however, that upon any Member’s exercise of either of these provisions, no Member may again trigger the provisions of either Section 12.2 or Section 12.3 until the termination of all procedures and timeframes pursuant to the Initiating Member’s chosen provision.

(g)

As a condition to any sale by either Member of its Membership Interest in the Company pursuant to either Section 12.2 or this Section 12.3, the selling Member must be released at the closing from any indemnities, guaranties or other credit enhancements granted by such Member on behalf of the Company or any Project Entity to any third party.

12.5

Certain Permitted Transfers by the Board.  Notwithstanding the restrictions on transfers set forth in Section 12.1 above or any other provision of this Agreement purporting to limit the Board's rights to transfer its Membership Interest in the Company, the Board shall have the right to transfer its Membership Interest in the Company in the event the Board is required to do so by virtue of any legislative action, statute or administrative rule or order, provided that (i) the applicable transferee is an institutional investor with financial capacity reasonably acceptable to Inland, so long as such transferee expressly assumes the obligations of the Board hereunder; and (ii) if such transfer triggers a due on sale clause, the Board shall protect the Company against any material adverse economic effect or detriment arising from the transfer.

12.6

Certain Permitted Transfers by Inland.  Provided (i) such transfer does not result in the application of any due on sale clause under any Company or Project Entity financing or otherwise, a default thereunder (unless Inland has obtained the prior written consent of the applicable lender) and (ii) the transferee has financial capacity and expertise similar to Inland, Inland may transfer its Membership Interest (in whole, but not in part) to an Affiliate or other related party of Inland pursuant to a corporate merger or reorganization so long as such transferee expressly assumes the obligations of Inland hereunder.

12.7

Termination of Obligations.  As of the effective date of any transfer not prohibited hereunder by a Member of its entire interest in the Company, such Member’s rights and obligations hereunder shall terminate except as to any indemnity obligations of such Member attributable to acts or events occurring prior to such date.  Thereupon, except as limited by the preceding sentence, this Agreement shall terminate as to the transferring Members but shall remain in effect as to the other Members.  In the event of a transfer of its entire Membership Interest by a Member to another Member, the Member to whom such interest is transferred shall indemnify, defend and hold harmless the Member so transferring its Membership Interest from and against any and all claims, demands, losses, liabilities, expenses, actions, lawsuits, and other proceedings, judgments, awards , and costs and expenses (including but not limited to reasonable attorneys’ fees) incurred in or rising directly or indirectly, in whole or in part, out of operation of the business of the Company, excluding only those liabilities, if any, accruing after to the date of such transfer.

12.8

Restraining Order.  In the event that any Member shall at any time transfer or attempt to transfer its Company interest in violation of the provisions of this Agreement and any rights hereby granted, then the other Member shall, in addition to all rights and

42

remedies at law and in equity, be entitled to a decree or order restraining and enjoining such transfer and the offending Member shall not plead in defense thereto that there would be an adequate remedy at law; it being hereby expressly acknowledged and agreed that damages at law will be an inadequate remedy for a breach or threatened breach of the violation of the provisions concerning transfer set forth in this Agreement.

12.9

No Termination.  Notwithstanding any provision to the contrary in this Article 12, no Member shall transfer all or any part of its Membership Interest to a Person or Entity other than another Member if such transfer would result in a termination of the Company under the Code.

12.10

Withdrawal.  No Member shall have the right to withdraw from the Company without the prior written consent of the remaining Members.

ARTICLE 13
DISSOLUTION AND TERMINATION

13.1

Waiver of Rights.  Each Member does hereby expressly waive any and all rights to dissolve, terminate or liquidate, or to petition a court for the partition, dissolution, termination or liquidation of the Company except as provided in this Article 13.

13.2

Voluntary Termination.  Prior to the expiration of the term specified in Section 2.9, the Company may terminate upon the occurrence of any of the following events:

(a)

the unanimous written consent of all of the Members;

(b)

the expiration of the term; or

(c)

the sale of substantially all the assets of the Company and the distribution to the Members of all proceeds from such sale.

13.3

Events of Involuntary Dissolution.  Unless continued by the Members pursuant to the provisions of Section 13.4, the Company shall be dissolved prior to the date of its termination, upon the occurrence of any of the following events:

(a)

the dissolution of any Member;

(b)

the filing of an involuntary petition in bankruptcy against any Member which is not dismissed within 120 days of such filing;

(c)

Any Member makes an assignment for the benefit of its creditors or the filing by any Member of any petition or answer seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the present or any future Federal Bankruptcy Code or any present or future federal, estate or other statute or law relating to bankruptcy, insolvency or other relief for debtors;

(d)

any Member seeking, or consenting to, or acquiescing in the appointment of any trustee, receiver, conservator or liquidator of it or of all or any substantial portion of its property or interest in the Company; or

43

(e)

the resignation and withdrawal of any Member from the Company.

13.4

Reformation of Company.  Notwithstanding the provisions of Section 13.3, the Company shall not be dissolved upon the occurrence of any of the events enumerated in Section 13.3 in the event that, within sixty (60) days after the date of any of such events, the remaining Members not responsible for the occurrence of such event elect to continue the business of the Company in a reconstituted form.

13.5

Effect of Dissolution.  Upon dissolution, the Company shall cease to carry on its business, except as permitted by Section 18-803 of the Delaware Act.

13.6

Winding Up, Liquidation and Distribution of Assets.

(a)

Upon dissolution, an accounting shall be made by the Company’s independent accountants of the accounts of the Company and of the Company’s assets, liabilities and operations, from the date of the last previous accounting until the date of dissolution.  The Manager shall immediately proceed to wind up the affairs of the Company.

(b)

If the Company is dissolved and its affairs are to be wound up, the Manager shall:

(i)

sell or otherwise liquidate all of the Company’s assets promptly as practicable;

(ii)

allocate any Net Profit or Net Loss or items of income, gain, loss or deduction resulting from such sales to the Members in accordance with Article 8 hereof;

(iii)

discharge all liabilities of the Company, including liabilities to Members who are creditors, to the extent otherwise permitted by law, other than liabilities to Members for distributions, and establish such Reserves as may be reasonably necessary to provide for contingent or liabilities of the Company; and

(iv)

distribute any remaining Distributable Cash in accordance with the provisions of Sections 9.1 through 9.5 hereof, provided that BIC Funds shall be distributed solely to Inland.

(c)

(i)

If the Manager has been unable to completely liquidate its interest in all of the Projects prior to the expiration of the Term, Inland will have sixty (60) days after the expiration of the Term to deliver to the Board written notice (the “Liquidation Notice”) stipulating a price for each of the remaining Projects (each price a “Liquidation Price”, in the aggregate, the “Total Liquidation Price”).  The Board shall have thirty (30) days from the date it receives the Liquidation Notice to elect by written notice to Inland and the Executive Committee either to cause the Company (x) to sell the remaining Projects to Inland for the Total Liquidation Price, or (y) require that the Executive Committee sell the remaining Projects to one or more third party purchasers on the open market for not less than 100% of the Liquidation Price for such Project.  If the Board elects to proceed under clause (x) above, the Company shall sell Inland the remaining assets of the Company for the Total Liquidation Price.  The Closing of such sale shall occur within ninety (90) days after the Board’s election and the Company and Inland shall execute such instruments as are necessary or advisable to consummate such sale.

44

 (ii)

If  the Board fails to deliver notice of its election prior to the expiration of such thirty (30) day period, the Board conclusively will be deemed to have elected to proceed pursuant to clause (c)(i)(y) above.  If the Board elects to proceed pursuant to clause (c)(i)(y) above, either affirmatively or through the passage of time, then the Manager shall market the remaining assets of the Company on the open market and through such marketing effort the Manager shall determine the fair market value of each of the remaining Projects (the “Fair Market Value”).  If the sum of the Fair Market Values for the remaining Projects (the “Aggregate Fair Market Value”) is greater than 97% of the Total Liquidation Price but less than 100% of the Total Liquidation Price, then Inland will have the right to purchase the remaining Projects for the Aggr egate Fair Market Value.  If the Aggregate Fair Market Value is less than 97% of the Total Liquidation Price, then upon the mutual approval of the Members, the Company shall either (x) sell the remaining assets of the Company to Inland for the Aggregate Fair Market Value, (y) sell the remaining assets of the Company to one or more third parties, or (z) extend the term of the Company for one (1) year and the Members shall repeat the foregoing procedure; provided, however, that after the Board receives the Liquidation Notice from Inland, if  the Board elects to require the Executive Committee to sell the remaining assets of the Company to third party purchasers pursuant to clause (c)(i)(y) above, then Inland shall not subsequently have any right to purchase the assets of the Company pursuant to this Section 13.6(c) and the remaining assets of the Company shall be sold by the Executive Committee on the open market to a third party purchaser.  

(d)

Notwithstanding anything to the contrary in this Agreement, upon a liquidation within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Treasury Regulations, if any Member has a deficit Capital Account (after giving effect to all contributions, distributions, allocations and other Capital Account adjustments for all taxable years, including the year during which such liquidation occurs), such Member shall have no obligation to make any Capital Contribution, and the negative balance of such Member’s Capital Account shall not be considered a debt owed by such Member to the Company or to any other Person for any purpose whatsoever.

(e)

Upon completion of the winding up, liquidation and distribution of the assets, the Company shall be deemed terminated.

(f)

All Members and the Manager shall comply with any applicable requirements of applicable law pertaining to the winding up of the affairs of the Company and the final distribution of its assets.

13.7

Certificate of Termination.  When all debts, liabilities and obligations have been paid and discharged or adequate provisions have been made therefor and all of the remaining property and assets have been distributed to the Members, a Certificate of Termination may be executed and filed with the Secretary of State of Delaware in accordance with the Delaware Act.

13.8

Return of Contribution Nonrecourse to Other Members.  Except as provided by law or as expressly provided in this Agreement, upon dissolution, each Member shall look solely to the assets of the Company for the return of its Capital Contribution.  If the Company property remaining after the payment or discharge of the debts and liabilities of the Company is insufficient to return the cash contribution of one or more Members, such Member or Members shall have no recourse against any other Member.

45

ARTICLE 14
ADDITIONAL MEMBERS

14.1

Admission of a New Member.  From the date of the formation of the Company, any Person or Entity acceptable to the Members may become a Member of this Company either by the issuance by the Company of Membership Interests for such consideration as the Executive Committee shall determine, or as a transferee of a Member’s Membership Interest or any portion thereof, subject to the terms and conditions of this Agreement.

ARTICLE 15
MISCELLANEOUS PROVISIONS

15.1

Governing Laws.  This Agreement, and the application of interpretation hereof, shall be governed by its terms and by the laws of the State of Delaware, and specifically the Delaware Act, but shall be subject to the provisions of Chapter 119 of the Florida Statutes, Florida Statute 215.44(a) and (b), and Florida Statute 215.44(9).  In the event of any conflict between the laws of the State of Delaware and the foregoing Florida statues, the Florida statues shall be given effect.

15.2

No Action for Partition.  No Member has any right to maintain any action for partition with respect to the property of the Company.

15.3

Execution of Additional Instruments.  Each Member hereby agrees to execute such other and further statements of interest and holdings, designations, powers of attorney and other instruments necessary to comply with any laws, rules or regulations.

15.4

Waivers.  The failure of any party to seek redress for violation of or to insist upon the strict performance of any covenant or condition of this Agreement shall not prevent a subsequent act, which would have originally constituted a violation, from having the effect of an original violation.

15.5

Rights and Remedies Cumulative.  The rights and remedies provided by this Agreement are cumulative and the use of any one right or remedy by any party shall not preclude or waive the right to use any or all other remedies.  Such rights and remedies are given in addition to any other rights the parties may have by law, statute, ordinance or otherwise.

15.6

Severability.  If any provision of this Agreement or the application thereof to any person or circumstance shall be invalid, illegal or unenforceable to any extent, the remainder of this Agreement and the application thereof shall not be affected and shall be enforceable to the fullest extent permitted by law.

15.7

Heirs, Successors and Assigns.  Each and all of the covenants, terms, provisions and agreements herein contained shall be binding upon and inure to the benefit of the parties hereto and, to the extent permitted by this Agreement, their respective heirs, legal representatives, successors and assigns.

15.8

Third Parties.  None of the provisions of this Agreement shall be for the benefit of or enforceable by any third party.

46

15.9

Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument.

15.10

Certification of Non-Foreign Status.  In order to comply with § 1445 of the Code and the applicable Treasury Regulations thereunder, in the event of the disposition by the Company of a United States real property interest as defined in the Code and Treasury Regulations, each Member shall provide to the Company, an affidavit stating, under penalties of perjury, (i) the Member’s address, (ii) United States Taxpayer identification number, and (iii) that the Member is not a foreign person as that term is defined in the Code and Treasury Regulations.  Failure by any Member to provide such affidavit by the date of such disposition shall authorize the Manager to withhold 10% of each such Member’s distributive share of the amount realized by the Company on the disposition.

15.11

Notices.  Each Notice shall be in writing, and shall be deemed to have been properly given or served when transmitted by facsimile transmission or internet e-mail (with a conforming copy to be delivered by other means) or when delivered to any nationally recognized overnight courier or by personal delivery (which may include delivery by commercial courier service) if receipt is procured.  The time period in which a response to any Notice must be made, or any action taken or payment made with respect thereto, shall start on the date which is three (3) days after the date of the confirmation of receipt of such facsimile transmission, the date of the delivery of such internet e-mail, the date of receipt indicated on the return receipt of the Notice or on the date of personal delivery evidenced by a receipt.  Rejection of or other refusal to accept a Notice, or the inability to deliver because of changed address or status of which no Notice was given, shall be deemed to be receipt of the Notice sent.  By giving to the other Members at least 10 days’ prior Notice thereof, any Member shall have the right from time to time during the term of this Agreement to change its address for the purposes of this Agreement and to specify as its new address any other address within the United States of America.  All dates and time referred to in this Agreement shall be determined based on local time in Atlanta, Georgia.  Initially, Notices shall be sent to the addresses specified in Exhibit F to this Agreement.

15.12

Amendments and Waivers.  Any amendment to or waiver of a provision of  this Agreement shall be made in writing and signed by the Members.  Prior to amending this Agreement, upon the Board's reasonable request, the Manager shall obtain a legal opinion stating that such amendment, in and of itself, will not result in the Company’s assets being deemed “Plan Assets” for the purposes of  the Plan Asset Rules and ERISA.

15.13

Invalidity.  The invalidity or unenforceability of any particular provision of this Agreement shall not affect the other provisions hereof, and the Agreement shall be construed in all respects as if such invalid or unenforceable provision were omitted.  If any particular provision herein is construed to be in conflict with the provisions of the Delaware Act.  The Delaware Act shall control and such invalid or unenforceable provisions shall not affect or invalidate the other provisions hereof, and this Agreement shall be construed in all respects as if such conflicting provision were omitted.

15.14

Further Assurances.  The Members each agree to cooperate, and to execute and deliver in a timely fashion any and all additional documents necessary to effectuate the purposes of the Company and this Agreement.

15.15

Time.  TIME IS OF THE ESSENCE OF THIS AGREEMENT.

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15.16

General Statutory Override.  To the extent permitted by law, the provisions of this Agreement shall govern over all provisions of the Delaware Act which would apply but for (and inconsistently with) this Agreement.  For each question (a) with respect to which the Delaware Act provides a rule (a “default rule”) but permits a limited liability company’s operating agreement to provide a different rule and (b) which is addressed by this Agreement, the default rule shall not apply to the Company.  Without limiting the generality of the foregoing, the following provisions of the Delaware Act shall not apply to the Company: Section 18-304, Section 18-801 and Section 18-804.

15.17

Exculpation.  Notwithstanding anything to the contrary contained in this Agreement or in any exhibits attached hereto or in any documents executed in connection herewith, it is expressly understood and agreed by and between the parties hereto that: (a) the recourse of either Member or any of their respective successors or assigns against the other Members in connection with this Agreement or any action taken by the Company pursuant to this Agreement, including, without limitation, with respect to any alleged act or omission of such Member or any representative of such Member, any misrepresentation (whether allegedly intentional or unintentional) by or on behalf of such Member, or any breach by or on the part of such Member of any representation, warranty, covenant, undertaking, indemnity or agreement contained in this Agreement (collectively, the “Undertakings
48;), will not exceed such Member’s aggregate investment in the Company, subject to Section 15.1, and (b) no personal liability or personal responsibility of any sort with respect to any of the Undertakings or any alleged breach thereof is assumed by, or will at any time be asserted or enforceable against, such Member or any of its respective Affiliates, or against any of their respective shareholders, directors, officers, employees, agents, advisors, constituent partners, members, beneficiaries, trustees or representatives.  Nothing contained in this Section 15.17 shall limit or impair the operation and effect of the dilution provisions set forth in Section 7.1(g).  

[END OF DOCUMENT.  SIGNATURES ON FOLLOWING PAGE.]

48

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

THE BOARD:

THE FLORIDA RETIREMENT SYSTEM TRUST FUND

BY AND THROUGH ITS NOMINEE THE STATE BOARD OF ADMINISTRATION OF THE STATE OF FLORIDA

By:__________________________________________

Coleman Stipanovich

Executive Director

INLAND:

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.,

a Maryland corporation

By:

Name:  __________________________

Title:  ___________________________

49

EXHIBIT A

EVALUATION MATERIALS

(a)

Description of the Potential Project, including a summary of the investment opportunity and investment considerations and a summary of readily identifiable risks and benefits associated with the proposed investment.

(b)

A copy of the current rent roll for the Potential Project.

(c)

A proposed all-in line item acquisition, construction and operating budget for the Potential Project with appropriate contingency and warranty reserves together with all documentary support therefor in such detail as the Executive Committee may reasonably require and including, without limitation, a calculation of the Project Equity requirements for such Potential Project (the “Project Budget”).

(d)

Proposed Formation Documents, including variances from any pre-approved form documents.

(e)

Financial projections (unleveraged and leveraged) with detailed assumptions.

(f)

Historical financials for the Potential Project.

(g)

Market data (including rental and sales comparables).

(h)

Photographs of the Potential Project and maps showing the location of the Potential Project.

(i)

Site Plans for the Potential Project.

(j)

Known environmental and physical issues.

(k)

Due diligence budget and timeline.  

(l)

A competitive submarket survey.

(m)

true, correct and complete copies of all leases, service contracts and agreements affecting or encumbering the Potential Project.  

(n)

Any other information the Board or its Investment Advisor or Inland determines to be necessary or advisable in order to permit the Executive Committee to fully evaluate the Potential Project.  

(o)

All management agreements for the Potential Project.

(p)

All brokerage commission agreements covering the Potential Project.

(q)

All warranties and guarantees covering any equipment, machinery, or other personal property fixtures situated on the Potential Project.

(r)

All appraisals, and all engineering and environmental studies made with respect to the Potential Project during the past three (3) years.

A

(s)

The most current as-built survey of the Potential Project and title insurance policy with respect to the Potential Project (including all exceptions referred to therein).

(t)

Market rates for leasing commissions in the relevant market for each Potential Project.

A

EXHIBIT B

FUNDING CONDITIONS

1.

Receipt by the Board of a written certification from its Investment Advisor that the relevant Potential Project was duly approved by the Executive Committee at least three business days in advance of the capital funding date; and

2.

There being no then continuing Default Event on the part of Inland or events or circumstances with respect to Inland which would become a Default Event upon proper notice and the passage of time.

B

EXHIBIT C

INVESTMENT GUIDELINES

Inland will seek Potential Projects in the Market Area for consideration for investment by the Company which are high quality neighborhood, community and power retail shopping centers in in-fill supply constrained locations with good current cash flow, in good physical condition and with no known environmental conditions.  Inland will also consider lifestyle centers with a dominant retail position against a weak mall competitor.  The typical Potential Project shall have a gross acquisition price in the range of $15,000,000 to the $75,000,000, and the typical holding period of a Potential Project shall be from four to eight years, although such holding period may vary.  The investment objective is to assemble a well diversified  retail portfolio in the Market Area based upon the following target investment criteria:

A.

Core Projects:

Core Projects are defined as existing, stabilized retail properties with good liquidity.

Expected Returns on Core Projects are as follows:

- a minimum 7.5% unleveraged IRR.

- based upon assumed leverage of 55% loan-to-all-in cost, a minimum leveraged IRR of 9.0%.

B.

Core Plus Projects:

Core Plus Projects are defined as existing retail properties requiring some lease-up or minor

  rehab or repositioning.

Expected Returns on Core Plus Projects are as follows:

- a minimum 9.0% unleveraged IRR.

- based upon assumed leverage of 65% loan-to-all-in-cost, a minimum leveraged IRR of 12%.

C.

At least fifty percent (50%) of the Acquired Projects (other than Additional Inland Projects) shall be Core Plus Projects.

C

EXHIBIT D

FORM PROJECT ENTITY OPERATING AGREEMENT

(SINGLE MEMBER)

(SAB DOCUMENT NO. 1342886.1)

OPERATING AGREEMENT

OF

[PROJECT ENTITY NAME]

The undersigned ____________________, a Delaware limited liability company (“Member”), being the sole member of [Project Entity], a __________________________ limited liability company (“Company”) hereby accepts, adopts and ratifies the articles of organization of the Company filed with the Secretary of State of __________________ on ________________, 20__ and executes this Operating Agreement (“Agreement”) as the written operating agreement within the meaning and/or purposes of the ___________________ Limited Liability Company Act [Appropriate State Corporate Code Reference to be Inserted].

1.

Management.  The Company shall be managed by the Member and the Member shall have full authority in its sole discretion to take all actions on behalf of the Company.

2.

Allocations.  All items, income, gain, loss, deduction and credit of the Company shall be allocated to the Member.

3.

Distributions.  As and when determined by the Member in its sole discretion, all cash of the Company available for distribution shall be distributed to the Member.

4.

Effective Date.  This Agreement shall be effective upon the date of the filing on the Company’s statutory articles of organization.

__________________________________, a Delaware limited liability company

By:  

Name:

______________________________

Title:

______________________________

D

EXHIBIT E

FEE SCHEDULE

Inland and/or its Affiliate, Inland Management, will provide acquisition, disposition and property management services to the Company and/or each Project Entity.  Inland, or as the case may be, Inland Management, will be entitled solely to the following fees for the performance of such services:

(i)

Inland shall be paid by the Company an acquisition fee of 0.35% of the gross purchase price for each Acquired Project (excluding the Existing Portfolio);

(ii)

With respect to all properties for which Inland Management serves as Property Manager, Inland Management will receive from the relevant Project Entity a property management fee equal to 4.5% of the actual monthly gross income generated by such Acquired Project provided the leases for the tenants of such Project Entity allow for full recovery of the 4.5% management fee as a pass-through expense.  In the event any such leases do not allow for recovery of any or all of the property management fee, then the property management fee payable by the relevant Project Entity to Inland Management shall be 3.5% of the actual monthly gross income generated by the lease in question (i.e., the fee will be 4.5% for leases which allow for full recovery of the 4.5% management fee as a pass-through expense and 3.5% for all other leases).

Included within this property management fee shall be all legal expenses for leases with any national tenants, the cost of insurance placement, construction supervision of all tenant’s tenant improvement build out, all in-house design work for marketing brochures, all accounting and reporting costs and expenses.

(iii)

Inland Management shall be paid leasing commissions consistent with market rates, as the same are then prevailing in the geographic area in which the Potential Project is located (when an outside broker is involved, the payout is the market rate plus 50%, and on a renewal, the payout is 50%)

In no event shall Inland Management be paid a leasing fee for an Acquired Project that it no longer manages and leases.

(iv)

Inland Management shall be entitled to receive a disposition fee of $30,000 for each Acquired Project (excluding the Existing Portfolio), if the property management fee paid to Inland Management by the applicable Project Entity pursuant to paragraph (ii) above is 3.5%. In the aggregate, such disposition fees shall not exceed $1,000,000.

(v)

In the event that Inland’s brokerage division is engaged by the Company to sell the Portfolio or by any Project Entity to sell an Acquired Project to a third party on behalf of the Company, or as applicable, such Project Entity, the sales commission will be negotiated at that time based upon then-prevailing market rates.

(vi)

Inland or, at Inland’s sole option, Inland Management shall receive an administration fee of 0.25% of total acquisition cost for each Acquired Property to reimburse Inland the costs of any legal costs for the preparation of the purchase and sale documents for acquisition and dispositions,  tax appeals, and the cost of placing all mortgage debt on the properties, to the extent such costs are incurred by Inland and not otherwise reimbursed to Inland pursuant to the Agreement.

E

EXHIBIT F

ADDRESSES FOR NOTICE

If to the Board:

State Board of Administration of Florida

1801 Hermitage Boulevard, Suite 100

Tallahassee, Florida 32308

Attention:  Douglas W. Bennett

Fax No.:  (850) 413-1147

E-mail:  bennett_doug@fsba.state.fl.us

State Board of Administration of Florida

1801 Hermitage Boulevard, Suite 100

Tallahassee, Florida 32308

Attention:  Stephen Spook

Fax No.:  (850) 413-1147

E-mail:  spook_stephen@fsba.state.fl.us

With a copy to:

Morgan Stanley Real Estate Advisors, Inc.

3424 Peachtree Road, NE

Suite 800

Atlanta, Georgia 30326-1118

Attention:  Dexter Warrior

Fax No.:  (404) 812-8359

E-mail:  dexter.warrior@morganstanley.com

Morgan Stanley Real Estate Advisors, Inc.

3424 Peachtree Road, NE

Suite 800

Atlanta, Georgia 30326-1118

Attention:  Ted Klinck

Fax No.:  (404) 846-1493

E-mail:  ted.klinck@morganstanley.com

And to:

Sutherland Asbill & Brennan LLP

999 Peachtree Street, NE

Atlanta, Georgia 30309-3996

Attention:  H. Edward Hales, Jr., Esq.

Fax No.: (404) 853-8806

E-mail:  ed.hales@sablaw.com

To Inland and/or

Inland Western Retail Real Estate Trust, Inc.

the Company:

2901 Butterfield Road

Oak Brook,  IL  60523

Attention:  Steven P. Grimes

Fax No.: (630) 368-2308

E-mail:  grimes@inlandgroup.com

With a copy to:

Inland Western Retail Real Estate Trust, Inc.

2901 Butterfield Road

Oak Brook,  IL  60523

F

Attention:  Gary Pechter, General Counsel

Fax No.:  (630) 218-4900

E-mail:  gpechter@inlandgroup.com

F

EXHIBIT G

FORM PROPERTY MANAGEMENT AGREEMENT

(Copy attached)

G

EXHIBIT H

EXISTING PORTFOLIO

1.

Huebner Oaks – shopping center located in San Antonio, Bexar County, Texas

2.

Oswego Commons – shopping center located in the City of Oswego, Kendall County, Illinois

3.

Lincoln Park – shopping center located in the City of Dallas, Dallas County, Texas

4.

John’s Creek Village – shopping center located in the City of Duluth, Fulton County, Georgia

5.

Gardiner Manor Mall – shopping center in the Town of Islip, Suffolk County, New York

6.

Commons at Royal Palm – shopping center in the Village of Royal Palm Beach, Palm Beach County, Florida

7.

Southlake Corners – shopping center in the City of Southlake, Tarrant County, Texas.

H

EXHIBIT I

CONTRIBUTION AGREEMENT

(Copy attached)

I

EXHIBIT J

EXAMPLE OF SECTION 7.1(G) CALCULATION

By way of example only, assume that $100,000,000 has been contributed by the Members to the capital of the Company upon formation with the Board’s Initial Percentage Interest being 80% and Inland’s Initial Percentage Interest being 20%.  Assume that a Capital Call of $10,000,000 is made pursuant to Section 7.1(c) of the Agreement.  Therefore, the Proportionate Shares for the Board and Inland of such capital call are 80% ($8,000,000) and 20% ($2,000,000), respectively.  Further assume that Inland funds only $1,000,000 of its Proportionate Share and that the Board elects to fund the unfunded portion of Inland’s Proportionate Share ($1,000,000) as an Additional Capital Contribution.  Based upon the foregoing assumptions, Inland’s failure to fully fund its Proportionate Share will have the following result:

(A)

Inland’s Percentage Interest will be reduced by the Reduction Percentage from 20% to 19.64%, calculated using the following formula:

Reduction Percentage = A x ((B x 2)/C))

Where:

A = Inland’s Initial Percentage Interest (0.20)

B = Inland’s Unfunded Proportionate Share ($1,000,000)

C = Total Capital Contributed to the Company ($110,000,000)

[0.20 x ($1,000,000 x 2) / 110,000,000) = 0.0036

Inland’s Percentage Interest will then be reduced by the Reduction Percentage:

0.20 – 0.0036 = 0.1964 or 19.64%

(B)

The Board’s Percentage Interest will be increased by the Reduction Percentage from 80% to 80.36%.

J

EXHIBIT K

EXAMPLE OF SECTION 9.3 CALCULATION

(Copy attached)

K

EXHIBIT L

EXAMPLE OF SECTION 7.1(D) CALCULATION

Section 7.1 Illustrations
Illustration 1:
Required Cash	$     100
Funded from BIC Funds	$       20
Funded by Board	$       80
Remaining  Requirement	$       -0-
Beginning BIC Funds	$         40
BIC Funds used	$         20
Ending BIC Funds	$         20
Beginning Catch-up Balance	$        160
Board Contribution	$          80
Ending Catch-up Balance	$          80
Illustration 2:
Required Cash	$      100
Funded from BIC Funds	$       10
Funded by Board	$       40
Remaining  Requirement	$       50
Inland 20% contribution	$         10
Board 80% contribution	$         40
Total Cash contributed	$         50
Beginning BIC Funds	$       10
BIC Funds used	$       10
Ending BIC Funds	$       -0-
Beginning Catch-up Balance	$          40
Board Contribution	$          40
Ending Catch-up Balance	$          -0-

L

EX-2

AMENDED AND RESTATED MANAGEMENT, CONSTRUCTION MANAGEMENT SERVICES, AND LEASING AGREEMENT

BETWEEN

[ENTER EACH TITLE HOLDING ENTITY]

a Delaware limited liability company [OR ILLINOIS LIMITED PARTNERSHIP]

(OWNER)

AND

 [ENTER APPROPRIATE MANAGEMENT COMPANY]

a Delaware limited liability company

(MANAGER)

Property Located at: [ENTER ADDRESS OF PROPERTY]

AMENDED AND RESTATED MANAGEMENT, CONSTRUCTION MANAGEMENT SERVICES, AND LEASING AGREEMENT

THIS AMENDED AND RESTATED MANAGEMENT, CONSTRUCTION MANAGEMENT SERVICES, AND LEASING AGREEMENT (as amended from time to time, this “Agreement”) is made and entered into to be effective as of April ___, 2007 (the “Effective Date”), by and between  [ENTER NAME OF TITLE HOLDING ENTITY], a Delaware limited liability company, (“Owner”), and [ENTER NAME OF APPROPRIATE MANAGEMENT COMPANY], a Delaware limited liability company, (“Manager”).

RECITALS:

Owner owns or ground leases certain real property commonly known as , and more particularly described in Exhibit A attached hereto and incorporated herein (Owner’s interest in said land, together with any and all improvements now or hereafter erected thereon, are hereinafter collectively referred to as the “Project”).

Owner engaged Manager as an independent contractor for the purpose of performing the Management Services and the Leasing Services (as each term is hereinafter defined),   pursuant to that certain Management Agreement dated ______________ regarding the management of the Project (the “Original Management Agreement”).  Owner and Manager desire to amend and completely restate the Original Agreement with the terms and conditions of this Agreement.  

NOW, THEREFORE, in consideration of the foregoing Recitals, and of the mutual covenants herein contained, the sufficiency of which is hereby mutually acknowledged, Owner and Manager hereby agree as follows:

ARTICLE 1
Engagement and Duties of Manager

Section 1.1

Engagement of Manager; Amendment and Restatement of Original Agreement.

Owner hereby appoints Manager to manage, operate, supervise, service, and maintain the Project as more particularly set forth herein and in accordance with the terms of this Agreement (collectively, the “Management Services”), and Manager hereby accepts such appointment and undertakes and agrees to perform the Management Services and to comply with all of the provisions of this Agreement.  Owner and Manager agree that the terms and conditions of this Agreement shall amend and restate the Original Agreement in its entirety and the Original Agreement shall no longer be in full force and effect.

Section 1.2

Duties of Manager Generally.

Manager shall perform the Management Services on a day-to-day basis, and shall operate and maintain the Project as a high quality first-class Project in an efficient, economical and business-like manner consistent with the goal of maximizing both the value of the Project and Owner’s profits from the Project.  During the term and subject to the provisions hereof, Manager shall perform Owner’s obligations with respect to the Property, including, without limitation, the following subject to any limitations imposed by the Approved Budget, instructions or failures to instruct by Owner, the availability of funds provided by Owner, and actions or failures to act by third parties which are beyond the reasonable control of Manager:

(a)

compliance with and performance of all of Owner’s obligations:

(i)

as landlord under all present and future leases, subleases, licenses, or concessionaire agreements affecting all or any portion of the Project, to the extent copies thereof have been delivered to Manager (collectively, the “Leases”); and

(ii)

as a party to, or subject to, any and all present and future easements, restrictions, covenants, conditions, mortgages, and agreements affecting the Project, to the extent copies thereof have been delivered to Manager (collectively, the “Basic Documents”);

(iii)

as tenant under any ground lease of all or any portion of the Project, to the extent copies thereof have been delivered to Manager; and

(iv)

as a party to any and all trade and service contracts affecting the Project, to the extent copies thereof have been delivered to Manager.

(b)

ensuring compliance with the covenants and obligations of:

(i)

tenants under each and all of the Leases;

(ii)

other parties to, or subject to, the Basic Documents;

(iii)

the lessor under each ground lease of all or any portion of the Project; and

(iv)

trade and service providers under contracts affecting the Project.

(c)

with the prior written approval of Owner, subject to the conditions hereinafter set forth, enforcing all of Owner’s rights and remedies in respect of the foregoing.

Manager shall perform and conduct the Management Services diligently, with the highest ethical standards and in accordance with the criteria set forth herein.  The Management Services to be performed by Manager under this Agreement shall be of a scope and quality equivalent to the performance of professional managers of similar commercial properties of comparable class and size in the greater metropolitan area in which the Project is located.  Manager shall make available to Owner the full benefit of the judgment, experience and advice of the members of the entire Manager’s organization.  Manager shall perform such other services as may be reasonably requested by Owner which are consistent with the standard of performance discussed in this Section 1.2 in managing, operating, leasing, supervising and maintaining the Project.

Section 1.3

Specific Duties of Manager.

Without limiting the generality of Section 1.2 above, Manager shall have the following duties and shall perform the following services:  

(a)

Employment of Personnel and Bonding Requirements.

(i)

Manager agrees to hire, pay, supervise and discharge all employees necessary for the performance of its obligations under this Agreement.  All such personnel shall be the employees or independent contractors of Manager and not of Owner. All matters pertaining to the employment of such employees or independent contractors shall be the sole responsibility of Manager, and Owner shall bear absolutely no responsibility or liability therefor.  Manager shall fully comply with all applicable laws and regulations concerning worker’s compensation, social security, unemployment, tax withholding and reporting, hours of labor, wages, working conditions and all other laws affecting or respecting the employment of such employees or independent contractors.  Manager shall have no authority to enter into any employment contract which purports to be on behalf of Owner, or which otherwise obligates Owner in any respect.  Owner res erves the right from time to time and at any time to require that employees performing or to be performing Management Services hereunder be subject to a satisfactory security check performed by or on behalf of Manager as a reimbursable expense.

(ii)

Manager shall pay, all costs, including, without limitation, salaries, wages, and other compensation and fringe benefits, of all personnel involved directly or indirectly in providing any or all of the Management Services, or otherwise performing services pursuant to this Agreement, which costs shall

2

constitute a reimbursable expense by Owner to the extent included in the Approved Budget or as otherwise approved by Owner.

(iii)

Employees of Manager who are responsible for or have access to money of Owner (including, without limitation, rents, issues or profits arising or accruing from the Project) shall be covered, at the sole cost and expense of Manager, in an amount of not less than One Million Dollars ($1,000,000) by a commercial crime coverage policy issued by a company acceptable to Owner.  Evidence of such coverage, with provisions for certificate cancellation notice to Owner, shall be supplied to Owner prior, to executing this Agreement and subsequently upon Owner’s written request from time to time.  Owner, in its sole discretion, may amend its approval of any  insurance company, but agrees not to increase the amount of the coverage required hereunder.

(b)

Collection of Revenues and Lease Enforcement.

Manager shall demand, collect and receive (i) rents, utility charges, common area charges, insurance charges, and real estate and personal property tax and assessment charges, (ii) all other pass-through or bill-back charges, sums, costs or expenses of any nature whatsoever payable by tenants under the terms of any or all of the Leases and any other agreements relating to all or any portion of the Project, and (iii) all other revenues, issues and profits accruing from the Project (including, without limitation, any and all license, service or other agreements affecting the Project).  Manager shall not collect any such rents, charges, or revenues more than one month in advance of when the same shall be due and payable under any Lease (except to the extent any such advance rental is paid by the tenant, and segregated by the Manager, as a security deposit or such advance payment is otherwise approved by Owner).  Manager may, only with the prior wri tten approval of Owner, in the name of and at the expense of Owner, retain legal counsel to assist with the foregoing and/or to institute legal proceedings for:

(i)

the collection of rent and other sums payable by tenants or other parties under the terms of any Leases or other agreements affecting the Project,

(ii)

the ouster, eviction or ejectment of tenants or other persons from the Project, and

(iii)

the enforcement of any other right, privilege, benefit, or remedy available to Owner pursuant to the Leases, the Basic Documents, or applicable law.

Owner reserves the right, exercisable at any time, to select, supervises and directs counsel acting on behalf of Owner.

(c)

Contracts; Authority to Sign; Contractor Requirements.

(i)

Manager agrees to negotiate and thereafter supervise the performance of all trade, service and supply contracts which shall be executed by Manager as agent for Owner which are required in the prudent conduct of the reasonable and ordinary operation of the Project, including, without limitation, contracts for electricity, gas, telephone, cleaning, groundskeeping, snow removal, security, pest control and other services as set forth in the operating and capital expense budget most recently submitted to and approved in writing by Owner (collectively, the “Contracts”).  Manager shall arrange for the purchase of by Owner, in an economical and efficient manner all inventories, supplies and equipment which, in the ordinary course of business, are necessary and appropriate to maintain and operate the Project in a first class manner.  Manager shall exercise reasonable efforts to qualify for early payment, cash and trade discounts, refunds, rebates, credits, and concessions, and Owner shall be credited with the full amount of any such discount, commission, or compensation obtained or received by Manager, directly or indirectly, in connection with any such purchase.

(ii)

Manager shall have the full authority to enter into Contracts as agent for Owner consistent with the Approved Budget (as defined herein); provided, however, Manager shall not enter into any Contract whatsoever unless the Contract shall:

(A)

require that the contractor provide evidence of insurance satisfying the requirements of Section 1.3(c)(iv) below;

3

(B)

prohibit the contractor’s use or disposal of hazardous or toxic substances at the Project without Owner’s prior written consent;

(C)

provide for a with or without cause right to cancel the Contract which may be exercised by either Owner or Manager, without cost, payment or penalty, upon no more than thirty (30) days’ notice;

(D)

be assignable to a new owner of the Project without the contractor’s consent, or, if not so assignable, then be terminable immediately by Owner without cost, payment or penalty upon a sale or transfer of Owner’s interest in the Project; and

(E)

be on an arm’s-length basis with a person or an entity that is not an Affiliate; provided, however, Manager shall have the authority to enter into certain “Shared Services Agreements” with the Affiliates listed on Exhibit 1.3(c)(ii)(E), but only if the costs relating to such Shared Services Agreements that are to be paid by Owner or MS Inland Fund are set forth in an Approved Budget.

As used herein, the term “Affiliate” shall mean (w) any entity or person directly or indirectly controlling, controlled by, or under common control with, Manager, (x) any entity or person owning or controlling ten (10%) percent or more of the outstanding voting rights, equity, ownership or profits of Manager; (y) any entity which Manager or Manager’s officers or employees own or control; and (z) any employee, officer, director, partner or family member of Manager or of any Affiliate.

(iv)

Manager agrees to recommend the hiring of only qualified, reputable, licensed and insured contractors to work at the Project, and to require each contractor, at such contractor’s sole cost and expense, to:

(A)

have in force, prior to commencement of any work, Worker’s Compensation Insurance which complies with statutory requirements, Employer’s Liability Insurance in a minimum amount of Two Hundred and Fifty Thousand Dollars ($250,000) per accident or occurrence, General Liability, Product and Completed Operations Liability and Contractual Liability Insurance, in a minimum single limit amount of One Million Dollars ($1,000,000) per accident or occurrence;

(B)

add Owner and Manager (and such other party or parties as Owner or Manager may designate) as additional insureds under the contractor’s aforementioned liability coverages; and

(C)

provide to Manager insurance certificates evidencing and confirming the contractor’s compliance with the above requirements prior to commencing work under the relevant contract.

(d)

Repairs and Maintenance; Competitive Bidding.

(i)

Subject to the conditions set forth in clause (ii) below, Manager agrees to keep the Project in good order and repair and in first class condition, and to make all repairs which Owner is obligated to make under the Leases.  Except to the extent that such repairs, maintenance, replacements, substitutions, improvements, or additions have been provided for in the Approved Budget or are undertaken in the ordinary course of business and will not cost in excess of Ten Thousand Dollars ($10,000), all repairs, maintenance, replacements, substitutions, improvements and additions to the Project shall be undertaken or made by Manager only after securing Owner’s prior written approval.  Owner’s approval may be conditioned upon submission to the competitive bidding process set forth in clause (ii) below and/or upon any other reasonable requirements Owner may impose.  Manager agrees to give prompt notice of any emergen cy repairs to Owner and to make reasonable efforts to secure Owner’s prior written approval in accordance with Section 1.7.

(ii)

The competitive bidding process shall be required for any repair, maintenance, replacement, substitution, improvement or addition to the Project which will cost in excess of Ten Thousand Dollars ($10,000) in the aggregate (each, a “Job”) whether or not such expenditure was specifically provided for in the Approved Budget.  In such instances Manager shall obtain:

4

(A)

A minimum of two (2) written bids for each Job which is reasonably expected to cost more than Ten Thousand Dollars ($10,000) but less than Twenty Five Thousand Dollars ($25,000), in the aggregate, and a minimum of three (3) written bids (assuming there are at least three qualified service providers) shall be obtained for each Job which is reasonably expected to cost more than Twenty Five Thousand Dollars ($25,000) in the aggregate.

(B)

Each written bid will be solicited in a form so that substantial uniformity will exist in all bid quotes, such that they are subject to comparison and conducive to informed decision making.

(C)

Manager may accept the lowest bid without prior approval from Owner if the expenditure is for an item listed in the Approved Budget and the cost thereof is not in excess of the amount budgeted therefor.

(D)

Manager must obtain the prior written approval of Owner prior to accepting any bid that (i) is not the lowest bid (ii) is not provided for in the Approved Budget or (iii) is from an Affiliate.

(E)

If Manager recommends acceptance of any bid other than the lowest bid, Manager shall adequately support, in writing, its recommendation to Owner.

(e)

Supervision of Construction.

Manager will represent Owner in connection with construction or reconstruction of any alterations or improvements to (i) on-floor common areas and facilities of the Project, or (ii) space demised to any tenant under any Lease of all or any part of the Project.  Said construction or reconstruction work is referred to herein as “Tenant and Common Area Construction” (which term shall not include or refer to usual and/or minor maintenance or repairs, as opposed to alterations, made to the Project for which Manager is otherwise obligated under this Agreement).  In addition, Manager will represent Owner in connection with any architectural renovation, asbestos abatement and life safety/operating system alterations to the Project the “Renovation Work “, which term shall not include work which is part of the Tenant and Common Area Construction.  The Renovation Work and the Tenant and Common Area Construction servic es to be performed by Manager, as more particularly set forth in this Section 1.3(e), are collectively referred to herein as the “Construction Management Services”.  As part of the Construction Management Services, Manager shall supervise, oversee, and administer each and every aspect of Tenant and Common Area Construction and/or Renovation Work at the Project.  Manager shall also confirm that any and all necessary permits and approvals for Tenant and Common Area Construction and/or Renovation Work have been obtained, and shall oversee the administration of the applicable construction contracts.  Manager’s responsibilities in performing the Construction Management Services shall include, without limitation: analyzing plans and specifications and suggesting revisions thereof, suggesting contractors and supervising construction; coordinating, when appropriate, with Owner, tenants, architects, engineers, contractors and other consultants to prepare and finalize construction plans; hiring appropriate professional services when required; negotiating all contracts; monitoring the construction schedule and the quality of workmanship (without liability for latent or patent defects); obtaining or causing to be obtained all necessary governmental permits and approvals; obtaining tenants’ written approval of construction documents; coordinating and directing pre-bid conferences with contractors; establishing or causing to be established a project time schedule; administering and coordinating job site construction meetings as necessary to ensure the timely flow of information between tenants, space planners and contractors; coordinating labor and material suppliers; maintaining harmonious labor relations; managing the change order process including providing for the payment of any requested change as set forth in any Lease; obtaining and reviewing all necessary lien waivers and releases; reviewing all payment requests pursuant to the contract documents; inspecting Tenant and Common Area Construction and/or Renovation Work ; assisting contractors in obtaining notices of completion, certificates of occupancy, or equivalent documents; conducting final walk-throughs with tenants, space planners and contractors; obtaining tenant’s written acceptance and acknowledgment of the substantial completion date of Tenant and Common Area Construction and/or Renovation Work ; assisting in the preparation of a final punch list which itemizes all work needed to be completed or requiring repair or adjustment, and representing Owner during the final inspection of the completed Tenant and Common Area Construction and/or Renovation Work ; obtaining from contractors, subcontractors, material suppliers or other consultants all reasonably available guarantees, instructions, equipment manuals, warranties and all other pertinent documents relating to Tenant and Common Area Construction

5

and/or Renovation Work ; and, at Owner’s option, any or all other duties set forth on Exhibit 1.3(e) attached hereto.  Manager shall use all reasonable efforts to (i) ensure that relations between all tenants in the Project and Owner during any period of construction in the Project are as good as is possible under the circumstances, and (ii) settle any labor disputes which may arise during any period of construction.  Any and all contracts entered into pursuant to this Section 1.3(e) shall be subject to the requirements set forth in Section 1.3(c) above (and to Owner’s right to impose, with respect to any given project, more stringent insurance requirements than those set forth in Section 1.3(c)(iv)) , and all such contracts shall be signed by Manager and shall be subject to the competitive bidding requirements set forth in Section 1.3(d) above.

Owner acknowledges that Manager shall have no responsibility or liability for the actual design and/or performance of the Renovation Work and the Tenant and Common Area Construction, and that all liability for the actual performance of such services in accordance with the requirements of the Contracts shall be borne by the third party service providers who have entered into such Contracts with Owner.  Owner shall compensate Manager for the Construction Management Services in accordance with the terms of Exhibit 7.1 attached hereto.

(f)

Hours.

Manager agrees to be available, or cause a representative of Manager to be available, to tenants of the Project at all times during the Project’s normal business hours.  Manager, or its representative, shall be available at all times in the event of an Emergency.

(g)

Certifications.

When requested by Owner, Manager will provide all information relating to the Project which is actually known to the senior on-site property manager to enable Owner to certify to a lender, a title insurance company, a prospective purchaser of the Project, and/or any other party which Owner may designate that:

(i)

the most recent rent roll prepared by Manager (including a listing of security deposits, if any) is true, correct and complete;

(ii)

all contractors who have performed work for Owner at the Project within the period during which mechanics’ liens could be filed have been paid in full;

(iii)

Manager has not received any notices about and has no knowledge of any violations of law at the Project, including, without limitation, violations of any building codes or environmental law;

(iv)

Manager has not received any notices about and has no knowledge of any threatened or pending condemnation or litigation affecting the Project;

(v)

no default by Owner exists under this Agreement or any Lease;

(vi)

Manager has not received any notices about and has no knowledge of any violations of any environmental provision in any Lease; and

(vii)

there are no commissions owing or claimed to be owing by any broker or agent for services rendered or claimed to have been rendered in connection with any sale or leasing of the Project.

(h)

Tenant Issues.

Manager shall promptly notify Owner of: (i) any request by any tenant of the Project for a lease concession, amendment, extension, or termination; (ii) any material default of any Lease at the Project; (iii) any bankruptcy filing affecting a tenant at the Project of which Manager is aware; and (iv) any threatened condemnation or litigation affecting the Project of which Manager is aware.  Manager agrees not to grant any lease concession to any tenant, make any modification to the Lease of any tenant, waive any tenant default, consent to any assignments or subleases, release any guarantors, or terminate any Lease at the Project without first obtaining Owner’s written consent.  Manager agrees to handle complaints and requests from tenants and to notify Owner of any material

6

complaint by a tenant at the Project (including, without limitation, any complaint, communication or state of facts which could give rise to a rental abatement or a right of setoff or termination).

(i)

Assistance with Sale or Financing.

Manager agrees to cooperate with and assist Owner in all attempts by Owner to sell or mortgage all or any part of the Project.  Such cooperation shall not give rise to any claim by Manager for a commission or any compensation for such services unless agreed upon by Owner pursuant to a separate written agreement.  Such cooperation shall include, without limitation (but without including those services typically provided by an asset manager rather than a property manager), but only if requested by Owner: answering prospective purchasers’ questions about the Project or the Leases and notifying tenants about the sale of the Project.  When requested by Owner, Manager shall (i) prepare a list of all personal property owned or leased by Owner and used at or in the operation of the Project; (ii) prepare a schedule of all trade and service contracts affecting the Project accompanied by copies of the same, and (iii) promptly obtain from ten ants, at no cost to Manager, (A) subordination, non-disturbance, and attornment agreements, (B) lease estoppel certificates, and (C) such other certificates or agreements as Owner or any prospective purchaser or mortgagee may require, in each case on a form reasonably satisfactory to Owner or any such purchaser or mortgagee.

(j)

Taxes and Assessments.

Manager shall pay in a timely manner in order to receive all available discounts or reductions of tax liability, before delinquency and prior to the addition thereto of any interest or penalties, all real and personal property taxes and assessments relating to the Project (unless otherwise directed by Owner), and shall make any required filings in conjunction therewith.  Manager shall advise and recommend to Owner whether the amount of any such taxes or assessments should be challenged as inequitable, excessive, or improper. In the event that Owner elects to contest any property tax assessment, Manager agrees to fully cooperate with Owner and with any person or entity designated by Owner to advise, assist or represent Owner in this regard.

(k)

Lease Abstracts.

In addition to any abstracts which may be required pursuant to Article II below, Manager shall promptly after Owner’s request, prepare and deliver to Owner a complete, accurate, and current lease abstract on the form required by Owner for any or all of the Leases identified by Owner.

(l)

Rules and Regulations.

Subject to the approval of Owner, and if requested by Owner, Manager agrees to draft and promulgate reasonable rules and regulations relating to the occupancy, use and operation of the Project (including rules related to signage), and to enforce the same as promulgated.  

7

Section 1.4

Compliance with Laws.

(a)

Compliance with Laws Generally.

Manager shall comply with and abide by all present and future laws, rules, regulations, requirements, orders, notices, determinations and ordinances of all federal, state and municipal governments, courts, departments, commissions, boards and offices, and all present and future requirements of insurance companies covering any of the risks against which the Project is insured.  Manager agrees to (i) procure and maintain any and all certificates of occupancy, licenses and/or operating permits which are necessary or appropriate for the occupancy and operation of the Project, and (ii) procure and maintain, and to cause all of Manager’s employees to procure and maintain, any and all certificates, licenses and/or permits which are necessary or appropriate in order for Manager or such employees to perform the Leasing Services.

(b)

No Discrimination.

Manager shall not, in the performance of the obligations under this Agreement, discriminate against any person on the grounds of race, color, creed, religion, handicap, sex, age or national origin, and Manager hereby agrees to comply with all laws, regulations and ordinances pertaining thereto.

(c)

Intentionally Left Blank.

(d)

Environmental.

(i)

Manager shall be responsible for managing all environmental matters at the Project in a careful, diligent and prudent manner, which responsibility shall include, without limitation,

(A)

assuring that all permits, licenses, registrations, and notifications required of Owner under applicable environmental laws which have been disclosed by Owner to Manager or for which Manager has knowledge thereof have been obtained and Manager shall use commercially reasonable efforts to assure that such are in full force and effect and that the Project is otherwise in compliance with applicable environmental laws;

(B)

assuring that the use and storage of hazardous materials at the Project and the disposal of hazardous materials from the Project by Manager’s personnel and agents are in compliance with applicable environmental laws; and

(C)

enforcing the environmental provisions of all Leases and Contracts.

(ii)

Manager agrees to notify Owner immediately if

(A)

Manager is contacted, orally or in writing, by any federal, state or local governmental agency or authority concerning any environmental investigation of, or any other environmental matter relating to, the Project;

(B)

Manager receives notice of any claim by any third party, including, without limitation, Project tenants and adjoining property owners, concerning any environmental matter at the Project; or

(C)

Manager suspects or becomes aware that any use, storage or disposal of hazardous materials at the Project has resulted in contamination of, or threatens to contaminate, the Project or adjacent properties.

Section 1.5

Insurance.  

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Except as directed by Owner in a manner consistent with the operating agreement for MS Inland Fund (as defined in Section 1.9 below),

(A)

As an operating expense of the Property, Owner or Owner’s representative shall provide and maintain:

(i)

Insurance against loss or damage to the Property for loss by fire and “All-Risk” perils in an amount not less than the 100% physical replacement cost value of the Property; with a deductible not more than $25,000 and insurance against loss by earthquake, flood and wind; with deductibles deemed appropriate by Owner.

(ii)

Business Income and Extra Expense insurance in an amount not less than the 12 months projected gross rental and other income from the Property.

(iii)

Boiler and Machinery insurance covering pressure vessels, air tanks, boilers, machinery, pressure piping, heating and air conditioning, electrical equipment, provided the Property contains equipment of such nature, and insurance against loss of occupancy or use arising from any such breakdown, in such amounts or as Owner may require.

(iv)

Commercial General Liability insurance on an occurrence basis and excess umbrella liability insurance, in a combined overall limit of not less than $25,000,000 per occurrence and in the aggregate.  Owner agrees that its liability insurance coverage shall be primary to any insurance maintained by Manager in respect to any third party claim asserted against Owner and/or Manager arising out of the operation of the Property.  Manager shall be named as an insured on the liability policies maintained by Owner.

(B)

As an operating expense of the Property, the Manager shall provide and maintain:

(i)

Automobile liability insurance covering all owned vehicles used in connection with the performance of the obligations under this Management Agreement in a combined single limit of not less than $1,000,000. for bodily injury, personal injury and property damage liability.

(ii)

Workers’ Compensation insurance, including employer’s liability insurance in an amount not less than $1,000,000, for all employees of Manager engaged in or with respect to the Property.

(C)

At its own expense, Manager shall maintain:

(i)

Comprehensive crime insurance including employee dishonesty covering Manager and all employees of Manager handling Owner’s funds or other documents.

(ii)

Errors and Omissions professional liability insurance in an annual aggregate amount of not less than $2,000,000 with a deductible or self-insured retention of not more than $100,000.

(iii)

Commercial General Liability insurance on an occurrence basis in an amount of not less than $5,000,000 each occurrence.

(D)

Insurance Claims.

Manager shall promptly notify Owner of any and all (i) accidents, injuries, claims or damage relating to the ownership, operation, or maintenance of the Project, or (ii) any casualty, damage, or destruction affecting all or any portion of the Project.  Any such report relating to casualty, damage or destruction shall include Manager’s estimated cost to repair the same.  Upon Owner’s request, Manager shall promptly investigate and make a full, timely, written report to the applicable insurance company, with a copy to Owner, and shall prepare any and all

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reports, filings, or forms which may be required by the relevant insurance company or by Owner in connection therewith.  All such reports shall be filed timely with the insurance company as required under the terms of the insurance policy involved.  Manager shall have no right to settle, compromise, or otherwise dispose of any claims, demands, or liabilities, whether or not covered by insurance, without the prior, written consent of Owner.  Manager agrees to promptly forward to the applicable insurance company and Owner, any summons, subpoena, or other legal document served upon Manager relating to actual or alleged potential liability of Owner, Manager, or the Project.

(E)

Right to Self-Insure.  

If, and when, the Manager and Inland Western Retail Real Estate Trust, Inc. (“Inland”) enter into a business combination under which the Manager becomes a wholly-owned subsidiary of Inland, subject to receiving approval by the Executive Committee of MS Inland Fund, LLC, a Delaware limited liability company, the Manager shall have the right to provide the insurance required at its cost hereunder through any self-insured program provided by Inland.

Section 1.6

Emergencies.

In the event of an imminent present threat:  (a) to the safety of the Project; (b) to the safety of tenants or others; (c) to the necessary services to the Project; or (d) that could lead to exposure to criminal liability (individually and collectively referred to as an “Emergency”), Manager is authorized to make repairs to the Project for items that are not contained in the Approved Budget without obtaining Owner’s prior written approval, provided that:

(a)

Reasonable efforts to secure Owner’s prior approval have been made;

(b)

The repairs are necessary to respond to an Emergency;

(c)

The cost of repairs to respond to the Emergency does not exceed Twenty Thousand Dollars ($20,000); and

(d)

Prompt notice of the repairs is provided to Owner.

Section 1.7

Competition.

Manager shall not use, nor shall Manager permit the use of, information or materials obtained by Manager in conjunction with its performance of the Management Services or the Leasing Services to compete, directly or indirectly, with the Project.  Owner acknowledges that Manager and/or its affiliates, own and manages other properties similar to the Project and in the same general locale and that such properties may compete with the Project for tenants.  Manager covenants and agrees that it will not actively solicit by initiating contact with tenants which occupy space in the Project to relocate the tenants to such other properties without the prior written consent of Owner, per Section 11.21.

Section 1.8

Office Space.

Owner shall provide to Manager rent free (or as a reimbursable expense) adequate on-site office space in the Project for the purposes of performing the Management Services, Leasing Services and Construction Management Services.  The location and build-out of the office shall be subject to Owner’s prior written approval and all costs and expenses incurred in connection therewith shall be the responsibility of Owner.  Owner shall be responsible for the payment of all costs and expenses incurred in connection with the office at the Project, including, without limitation, all costs and expenses for furniture, equipment, supplies, refuse removal, heat, electricity and other utilities except for such costs and expenses for which Owner agrees to reimburse Manager as and to the extent provided in the Approved Budget or other written agreement.  Manager agrees that the office shall be used for the purposes of performing the Management Services, Construction Management Services, and Leasing Services and for no other purpose except with written consent of the Owner.  Upon termination of this Agreement, Manager shall immediately vacate the office and the office shall be clean and free of all debris and all of Manager’s furniture, equipment, supplies and other property.

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Section 1.9

Inconsistencies with Operating Agreement.  Owner is indirectly or directly owned entirely by MS Inland Fund, LLC, a Delaware limited liability company (“MS Inland Fund”).   Owner is an affiliate of Inland Western Retail Real Estate Trust, Inc., a Maryland corporation (“Inland”), which is the managing member of MS Inland Fund.  Nothing in this Agreement shall modify any of Inland’s obligations under the MS Inland Fund operating agreement.  In the event that such operating agreement imposes additional or more demanding management, reporting or leasing requirements on Inland than the terms of this Agreement imposes on Manager, Manager shall assist Inland in performing such requirements.

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ARTICLE 2
Leasing

Section 2.1

Leasing Generally.

Manager shall be Owner’s exclusive leasing agent for all renewal and expansion tenants for the Project and shall use commercially reasonable efforts in (a) retaining tenants for the Project, and (b) assisting and cooperating fully with any third party leasing agent engaged from time to time by an existing or prospective tenant.  Manager shall provide these services  (collectively, the “Leasing Services”) described on Exhibit 2.1 attached hereto.  Manager shall have the right to engage independent, unaffiliated representatives on its behalf to perform the Leasing Services.

Section 2.2

Leasing Commissions.

Manager shall be compensated by Owner in connection with the Leasing Services, whether attributable to efforts of Manager, a third-party leasing agent, or both in accordance with Exhibit 7.1.

ARTICLE 3
Expenses for Services

Section 3.1

Owner’s Expenses.

All expenses provided for in an Approved Budget or otherwise approved by Owner shall be for and on behalf of Owner and for Owner’s account.  Owner shall reimburse or pay to Manager all reimbursable expenses set forth in the Approved Budget or otherwise approved by Owner promptly following the submission of a payment request and customary supporting documentation in the case of non-recurring expenses.  Manager will not be reimbursed for any national or regional oversite of the property including all administrative costs associated with such, without Owner’s written approval.

Section 3.2

Manager’s Expenses.

Manager agrees to pay, without reimbursement from Owner any and all costs and expenses that were not incurred either solely and directly pursuant to the terms of this Agreement or approved by Owner in an Approved Budget.

ARTICLE 4
Budgets

Section 4.1

Annual Budget.

Manager agrees to prepare no later than ninety (90) days prior to the commencement of each fiscal year, capital and operating budgets for the next fiscal year of operation of the Project in a format acceptable to Owner.  Manager agrees to use commercially reasonable efforts to cooperate with Owner in order to have the annual capital and operating budgets approved in writing by Owner by  January 1 of each year (any such budget, if and when approved by Owner, an “Approved Budget”).  Owner’s approval of the capital and operating budgets and each budget category and line item included therein shall be granted or withheld in Owner’s sole discretion.  If no Approved Budget is in place by the commencement of a  fiscal year, Manager shall operate the Project in accordance with those portions of the proposed capital and operating budgets which have been approved by Owner, and otherwise in accordance with t he preceding year’s Approved Budget unless Owner has directed otherwise.

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Section 4.2

Budget Revisions.

Manager shall not make any changes to the Approved Budget or any budget category or line item included therein without Owner’s prior written approval.  Owner shall have the right, exercisable at any time in its reasonable discretion, to eliminate or revise any budget category or line item therein or any amount thereof in the Approved Budget (other than those involving payments to Manager).  Manager shall not make, subject to Section 4.3 below, any expenditure pursuant to this Agreement or in connection with the performance of the Management Services without first obtaining Owner’s prior written approval of such expenditure, unless such expenditure is made pursuant to the terms of this Agreement and is either specifically provided for in the Approved Budget for that year or is made in connection with an Emergency.

Section 4.3

Expenditure Limit.

In no event (other than an Emergency) shall Manager incur any expenses in the performance of the Management Services that would result in the total amount of the Approved Budget being exceeded by the lesser of (i) five percent (5%) in the aggregate, or (ii) Seventy Five Thousand Dollars ($75,000) in the aggregate, or (iii) ten percent (10%) of the amount of the line item for such expense in the then approved Budget without obtaining the prior written approval by Owner, which approval may be granted or withheld in Owner's sole discretion provided that the foregoing shall not preclude payment of real estate taxes and utility expense properly incurred in connection with the Project in excess of such amounts, and the terms of subsection (ii) and (iii) shall not preclude the payment of insurance costs, snow removal costs or other costs outside of the control of Manager in excess of such limits.

ARTICLE 5
Books, Records and Reports

Section 5.1

Books and Records.

Manager agrees to maintain complete and detailed books and records in connection with the performance of the Management Services and the Leasing Services.  Such books and records shall be kept in a manner sufficient to respond to Owner’s information requirements as established from time to time, and all such records shall be retained in accordance with Manager’s record retention policies as approved by Owner.  Manager will make available to Owner, for examination, inspection, audit, or copying, (at Owner’s expense), at Manager’s principal office (which at all times shall be in the continental United States), all records in any way related to the Project, the Management Services, or the Leasing Services.  Owner shall have the right to audit such records at any time.  All such books and records shall be the property of Owner (other than employment records for Manager’s employees, which records shall be the proper ty of Manager).  Upon the termination of this Agreement, Manager shall promptly deliver all such records to Owner upon request by Owner.  Owner and Manager acknowledge and agree that said books and records referred to in this Section 5.1 expressly do not include all books and records of Manager with respect to its own business and/or any other properties managed by manager, either for Manager’s own account or on behalf of third parties.  Under no circumstances whatsoever shall Owner or any third party be entitled, either directly or indirectly, to obtain or review any books and records maintained or held by Manager which are not expressly described in this Section 5.1.

Section 5.2

Rent Roll.

Not later than the twentieth (20^th) day (or such later day as required by Owner’s reporting requirements) of each operating month, Manager shall provide to Owner a rent roll for the immediately preceding or other month, in the form requested by Owner (which form may be modified from time to time in Owner’s sole discretion).

Section 5.3

Monthly and Quarterly Management Reports.

Not later than the twentieth (20th) day (or such later day as required by Owner’s reporting requirements) after the end of each operating month, Manager shall deliver to Owner property operations and cash flow statements for such operating month, and not later than the twentieth (20th) day after the end of each operating quarter, Manager shall deliver to Owner property operations and cash flow statements for such operating quarter and for the portion of

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the fiscal year most recently ended.  All such monthly and quarterly requirements (Exhibit 5.3) shall be in such form and detail as is required from time to time by Owner.

Section 5.4

Data Transmission.

Manager agrees to cooperate with and assist Owner in developing procedures to facilitate the electronic transmission of accounting, budget and operating data from time to time required hereunder to Owner via a medium established by Owner.

Section 5.5

Litigation.

At the request of Owner, Manager agrees to deliver to Owner a report, in a format provided from time to time by Owner, of all ongoing litigation initiated by Manager on behalf of Owner pursuant to the provisions of this Agreement and all other ongoing litigation relating to the Project known to Manager.

ARTICLE 6
Bank Accounts and Disbursement of Funds

Section 6.1

Project Account.

Manager agrees to facilitate prompt deposit of all funds received from the operation of the Project ("Project Funds") in a bank acceptable to Owner in a local account ("Lock Box Account ").  The Lock Box Account shall be established and maintained as required from time to time by Owner.  Manager will electronically transfer funds in the Lock Box Account to a cash concentration account (the “Project Operating Account”), selected by Owner, through the Automated Clearing House System within a time period and at such times as specified from time to time by Owner.  Manager agrees that it will not commingle the Project Funds with funds of Manager or any other party or project (other than another property whose direct or indirect owner is the MS Inland Fund).  Manager agrees to pay for all operating expenses of the Project out of the Project Operating Account in accordance with the provisions of this Agreement.  The Project Operating Account shall at all times be subject to the control of both Manager and Owner, either of whom may draw checks thereon.  Manager agrees to pay all operating expenses of the Project out of the Project Operating Account in accordance with the provisions of this Agreement.  Manager shall make no payment from the Project Operating Account for any expense unless such expense and such payment are (a) directly related to the performance of Management Services, Leasing Services and/or Construction Management Services, (b) expressly approved by Owner in writing or authorized under this Agreement, and (c) either provided for in an Approved Budget or are for an Emergency.  Without first obtaining Owner's prior written consent, Manager shall make no payment from the Project Operating Account for any expense which, under the provisions of this Agreement, requires Owner's prior written approval or consent.  The Lock Box Account, the Project Funds and Proj ect Operating Account shall at all times remain the sole property of Owner.

Section 6.2

Payment Priorities.

If at any time the Project Funds from the Project is not sufficient to pay the bills and charges incurred with respect to the Project, Manager shall give notice thereof to Owner as provided in Section 6.4 and Owner shall provide additional funds pursuant to Section 6.3.

Section 6.3

Working Capital.

On the effective date of this Agreement, and at all times thereafter, Owner shall maintain sufficient working capital for the Project.  Manager shall not be obligated to advance any of its own funds to or for the account of Owner, nor to incur any liability unless Owner shall have furnished Manager with funds necessary for the discharge thereof.

Section 6.4

Operating Deficit.

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Manager shall give Owner ten (10) days’ notice (or as much notice as reasonably possible, if the shortfall is unexpected) of any anticipated operating deficit including the amount of the anticipated deficit.  Owner shall transfer funds to the Project Operating Account to cover such anticipated deficit not later than five (5) days after the receipt of any such notice from Manager.

Section 6.5

Account Signatures.

Checks or other documents of withdrawal on the Project Operating Account shall be signed only by representatives of Manager.  All such representatives of Manager shall be insured at Manager’s expense as set forth in Section 1.3(a)(iii).

ARTICLE 7
Compensation

Section 7.1

Compensation.

Owner shall pay Manager, as compensation for the Management Services, the amounts as calculated and set forth on Exhibit 7.1 attached hereto and made a part hereof.  Manager agrees to accept such payment as full compensation for the Management Services, Leasing Services and the Construction Management Services to be rendered to, or at the request of, Owner hereunder during the term hereof.

Section 7.2

Termination Fee.

In the event of termination of this Agreement, then, upon the completion of all responsibilities set forth in Section 9.4 hereof and upon completion of all other then outstanding Management Services, Owner shall pay Manager its management fee hereunder for the operating month or portion thereof during which the termination became effective.

ARTICLE 8
Notices

Section 8.1

Required Notices.

Notwithstanding anything to contrary provided in this Agreement, Manager shall promptly notify Owner (which notice shall be accompanied by copies of supporting documentation), becoming aware or receiving notice, as the case may be, of:

(a)

any violation or alleged violation in any way related to the Project, and concerning any governmental law, rule, regulation, requirement, order, notice, determination or ordinance of any federal, state or municipal government, court, department, commission, board or office;

(b)

any material defect in the Project;

(c)

any environmental matter set forth in Section 1.5(c);

(d)

any Emergency as set forth in Section 1.6;

(f)

any threatened or pending condemnation or litigation affecting the Project; or

(h)

any default or alleged default by Owner or Manager under a Lease, a service, supply or labor contract, a ground lease, a mortgage, a Basic Document, or any other agreement affecting the Project.

Notwithstanding the foregoing, the failure of Manager to immediately notify Owner as to a matter described above shall not constitute a default under this Agreement unless Owner suffers material adverse consequences as a result of such failure.

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Section 8.2

Addresses.

Any notices required or permitted to be delivered under this Agreement shall be deemed to be delivered if (i) sent by United States mail, postage prepaid, registered or certified mail, return receipt requested, (ii) sent by prepaid, overnight courier delivery; (iii) sent by facsimile with an original delivered by overnight carrier; or (iv) personal delivery; and shall be deemed delivered upon receipt with evidence of delivery or receipt obtained prior to 5:00 p.m. on a business weekday (or if not received prior to 5:00 p.m. on a business weekday, then upon the next business weekday), addressed to the parties at the following addresses:

If to Owner:

[ENTER NAME OF OWNER]

c/o Inland Western Retail Real Estate Trust, Inc.

Attn: Steven Grimes

2901 Butterfield Road

Oak Brook, IL 60523

Fax: (630) 645-7242

If to Manager:

[ENTER NAME OF MANAGER]

Attn: Niall Byrne

2901 Butterfield Road

Oak Brook, IL 60523

Fax: 630/645-7231

With Copy to:

Inland Western Retail Real Estate Trust, Inc.

Attn: General Counsel

2901 Butterfield Road

Oak Brook, IL 60523

Fax: (630) 218-4900

or to such other address as the parties may, from time to time, designate in writing.

ARTICLE 9
Term of Agreement

Section 9.1

Term.

This term of this Agreement shall commence on the Effective Date, and shall continue for a period of four (4) years after which this Agreement shall automatically renew for one (1) year periods unless sooner terminated according to the terms hereof.

Section 9.2

Termination.

This Agreement may be terminated at any time during the term hereof, and the obligations of the parties hereunder shall thereupon cease, upon the occurrence of any of the following:

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(a)

In the event of a sale, transfer, conveyance, or other disposition of the Project or the condemnation or destruction of all or substantially all of the Project, either Owner or Manager may terminate this Agreement upon ten (10) days written notice to the other party;

(b)

If a petition in bankruptcy is filed by either Owner or Manager, or if either shall make an assignment for the benefit of creditors or take advantage of any insolvency act, Owner or Manager may terminate this Agreement upon five (5) days written notice to the other party;

(c)

If either Owner or Manager shall default in the performance of any of its duties or obligations under this Agreement and such default shall continue for ten (10) days after written notice from the non-defaulting party to the defaulting party designating such default (provided, however, the time period for curing such default shall be extended by a reasonable period of time if the default cannot be cured within such ten (10) day period and the defaulting party shall promptly commence such cure within such ten (10) day period and shall thereafter diligently pursue such cure to completion), the non-defaulting party may thereafter terminate this Agreement upon five (5) days written notice to the defaulting party;

(d)

If Manager ceases to comply with the licensing requirements required hereby, and such default shall continue for ten (10) days after written notice of such default to Manager, Owner may terminate this Agreement immediately upon written notice to Manager;

(e)

In the event of any misappropriation of Project Funds, willful misconduct, criminal misconduct, gross negligence or fraud, Owner may terminate this Agreement immediately upon written notice to Manager if such misappropriation, misconduct, gross negligence or fraud is not remedied to Owner’s satisfaction within ten (10) days after Owner gives Manager notice;

(f)

If Inland (as defined in Section 1.9 above) ceases to be a member of the MS Inland Fund (as defined in Section 1.9 above), at the election of Owner, for any reason or no reason, upon thirty (30) days written notice to Manager.

Section 9.3

Termination of Authority.

Upon the effective date of termination of this Agreement for any reason, the authority created hereby shall immediately cease and Manager shall have no further right to act as agent for Owner, draw checks on the Project Operating Account or otherwise perform or be paid for any Management Services or Leasing Services or Construction Management Services with respect to the period following the effective date and except as otherwise set forth in Article 7 above.  Notwithstanding the foregoing, upon written request by Owner, Manager shall continue to perform the Management Services and/or the Leasing Services and/or Construction Management Services on the terms and conditions otherwise herein set forth for a period not in excess of 90 days following termination, and to perform the final accounting upon the expiration of such period, to permit an orderly transition of the Management and/or Leasing Services and/or Construction Management Services.

Section 9.4

Final Accounting.

In the event of termination, Manager agrees to fulfill all reporting and accounting functions hereunder for the period from the end of that covered by the last such report and/or accounting until the date of termination.  On the termination date, Manager shall also immediately:

(a)

surrender and deliver up to Owner possession of the Project and all rents and income, including tenant security deposits, of the Project and other monies of Owner on hand and in any bank account, including, but not limited to the Project Operating Account,

(b)

collect and deliver to Owner, as received, any monies due Owner under this Agreement but received after such termination,

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(c)

deliver to Owner all materials and supplies, keys, contracts and documents, and such other accounting papers and records pertaining to this Agreement as Owner shall request,

(d)

assign any right Manager may have in and to any existing contracts relating to the operation and maintenance of the Project as Owner shall require, and

(e)

deliver to Owner or Owner’s duly appointed agent upon request by Owner, all books and records, contracts, Leases, receipts for deposits, unpaid bills, summary of all the Leases in existence at the time of termination and all other papers or documents which pertain to the Project, provided that Manager’s record retention obligations under Section 5.1 hereof shall survive the expiration or termination of this Agreement.

Manager’s obligations under this Section 9.4 shall survive the expiration or termination of this Agreement.  Owner’s obligations under Sections 3.1, 7.1, 7.2, 11.1, 11.5, 11.13 and 11.14 shall survive the expiration or termination of this Agreement.

ARTICLE 10
Representations and Warranties

Manager represents and warrants to, and covenants and agrees with, Owner:

(a)

that it is a corporation duly organized, validly existing and in good standing under the laws of the state of its formation;

(b)

that its execution and delivery of this Agreement, and the performance of its obligations under this Agreement, have been duly authorized by all necessary action, and this Agreement is a valid and binding obligation, enforceable in accordance with its terms;

(c)

that it has obtained all licenses, permits, certifications and other approvals and authorizations necessary to enable and authorize it to perform its obligations under this Agreement, and all such licenses, permits, certifications, approvals and authorizations are and will remain in full force and effect;

(d)

that all Leasing Services to be furnished under this Agreement shall be of the standard and quality that prevail among brokers of superior knowledge and skill engaged in brokerage practice in the State in which the Project is located;

(e)

that all Management Services to be furnished under this Agreement shall be of the standard and quality that prevail among property managers of superior knowledge and skill engaged in property management in the State in which the Project is located;

(f)

that all persons connected with or employed in connection with the Leasing Services are duly licensed under the laws of the State in which the Project is located if required by applicable law; and

(g)

that it has the skill and professional, competitive, expertise and experience to undertake successfully the obligations imposed by this Agreement;

Manager understands that Owner has relied upon the representations contained herein without independent investigation as a material inducement to enter into this Agreement.

Owner represents and warrants to Manager:

(a)

that it is a corporation duly organized, validly existing and in good standing under the laws of the state of its formation;

(b)

that its execution and delivery of this Agreement, and the performance of its obligations under this Agreement, have been duly authorized by all necessary action, and this Agreement is a valid and binding obligation, enforceable in accordance with its terms.

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ARTICLE 11
Miscellaneous

Section 11.1

Indemnification.

(a)

Manager hereby agrees to defend, indemnify and save Owner and Owner’s agents, officers, employees, directors and shareholders, harmless from and against any and all claims, demands, obligations, liabilities, suits, actions, proceedings, judgments, fines, losses, damages, penalties, charges, costs, and expenses (including, without limitation, reasonable attorneys’ fees) (collectively, the “Claims”) to the extent resulting from (i) any breach of this Agreement, fraud, gross negligence, or willful misconduct by Manager; or (ii) any act by Manager beyond the scope of Manager’s authority hereunder and not otherwise expressly authorized by Owner.

(b)

Owner hereby agrees to defend, indemnify and save Manager and Manager’s agents, officers, employees, directors and shareholders (collectively, “Indemnified Parties”), harmless from and against any and all claims, demands, obligations, liabilities, suits, actions, proceedings, judgments, fines, losses, damages, penalties, charges, costs, and expenses (including, without limitation, reasonable attorneys’ fees) (collectively, the “Manager Claims”) to the extent resulting from (i) any breach of this Agreement, fraud, gross negligence, or willful misconduct by Owner; or (ii) any act by Owner beyond the scope of Owner’s authority hereunder and not otherwise expressly authorized by Manager; provided, however, that such indemnification shall not extend to any such Manager Claims to the extent arising out of any negligent or willful act or omission of Manager or any of the other Indemnified Parties.

(c)

If either Manager or Owner receives notice in writing or obtains actual knowledge of any Claim or Manager Claim under this Section 11, it shall promptly notify the other party of such fact and Owner and Manager shall promptly and in good faith cooperate to attempt to ascertain the factual circumstances underlying such and to minimize the parties’ exposure to such Claim or Manager Claim.  Neither party shall deliberately take any action (such as an admission of liability) or omit to take any action if such action or omission would operate to bar either Owner or Manager from obtaining any protection afforded by any insurance policy or to prejudice the defense of such Claim or Manager Claim.  To the extent that such Claim or Manager Claim is covered by insurance, the parties shall promptly take the appropriate actions required under the insurance policy which would cover such claim.  Nothing contained in this Agreement, including, without limitation t he indemnification provisions hereof, shall be deemed to negate or limit in any way the obligations of any insurance carrier under the terms of any insurance policy obtained in connection with the Property.

Section 11.2

Subordination.

Any and all liens, security interests and other claims in and to all or any part of the Project that Manager or any other person or entity may now have, claim, or hereafter acquire in connection with this Agreement or the performance of the Management Services or the Leasing Services, are and at all times shall be subject, inferior and subordinate to any and all ground leases of the Project (whether presently in effect or hereafter entered into) and to any and all mortgages, deeds of trust and other security agreements encumbering all or any part of the Project, or any interest therein (whether presently in effect or hereafter entered into).  The immediately preceding sentence shall be self-operative, and no further instrument of subordination shall be required to effectuate or confirm such subordination.  Nevertheless, upon request of Owner, Manager from time to time shall promptly execute and deliver to Owner, or to any other person or entity that Owner may designate, such documentation as Owner may require to confirm such subordination.

Section 11.3

Condemnation.

In the event that all or any portion of the Project shall be taken in connection with any exercise of the power of eminent domain or any condemnation, compulsory acquisition or similar proceedings or in the event that there shall be a transfer of all or any portion of the Project in lieu of or under threat of any such taking, Manager shall cooperate with Owner in connection with Owner’s efforts to collect any condemnation award or other compensation

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payable in connection with any such taking or transfer.  Promptly after request by Owner, Manager shall endorse its name on any instrument payable to Manager in payment of such award or other compensation and shall deliver such instrument to Owner.  Manager hereby irrevocably authorizes and irrevocably appoints Owner as Manager’s agent and attorney-in-fact (coupled with an interest), to endorse Manager’s name on any such instrument and deliver such instrument to Owner.  Manager hereby irrevocably waives any and all right or claim that Manager might otherwise have, by virtue of this Agreement, in or to all or any portion of any condemnation award or other compensation payable in connection with any such taking or transfer.

Section 11.4

Assignability.

Manager may not assign this Agreement or any monies due to it hereunder or delegate any of its obligations or responsibilities hereunder to any other person, firm or corporation, in whole or in part, without first obtaining Owner’s prior written consent, which consent Owner may withhold in its sole discretion.  Any purported assignment of this Agreement made by Manager absent Owner’s prior written consent shall be void, and of no force or effect.

Section 11.5

Successors Bound.

This Agreement shall be binding upon and inure to the benefit of Manager and it’s permitted assigns. This provision shall not be construed as to permit the assignment of this Agreement by Manager, which is specifically prohibited elsewhere in this Agreement.

Section 11.6

Manager’s Authority Limited.

Manager’s authority shall be derived wholly from this Agreement, and Manager has no authority, express or implied, to commit, act for or represent Owner, except to the extent specifically provided for herein or specifically authorized in writing by Owner.

Section 11.7

No Benefit to Third Parties.

The terms and provisions of this Agreement are and at all times shall be deemed to be for the exclusive benefit of Owner and Manager and their respective successors and assigns.  Nothing set forth in this Agreement shall be deemed to be for the benefit of any other Person.

Section 11.8

Exclusiveness of Compensation.

The payments to be made to Manager under this Agreement shall be in lieu of all other or further compensation or commissions of any nature whatsoever for the services described herein and this Agreement shall be considered as a special agreement between the parties hereto covering the appointment and compensation of Manager to the exclusion of any other method of compensation unless otherwise agreed to in writing.

Section 11.9

Relationship; No Rights in Project.

Nothing contained in this Agreement shall be construed to create a relationship of employer and employee between Manager and Owner, it being the intent of the parties hereto that the relationship created hereby is, in fact and intent, that of an independent contractor.  Nothing contained in this Agreement shall be deemed to constitute Owner and Manager as partners or joint venturers, and nothing set forth in this Agreement shall be deemed or construed to create a lease, sublease, mortgage or any other transaction between Owner and Manager creating an interest in real property. The Manager shall have no right or interest in the Project, nor any claim of lien with respect thereto, arising out of this Agreement or the performance of the Management Services or Leasing Services.

Section 11.10

Disclosure.

Manager shall disclose to Owner (a) any controlling ownership interest of Manager, any partner, officer, stockholder, or employee of Manager, or any immediate family member (grandparent, parent or parent-in-law,

20

spouse, child, brother or sister, brother-in-law or sister-in-law, or stepparent) of a partner, officer, stockholder or employee of Manager in any corporation, partnership, joint venture or other business which provides any materials, products or services to the Project, and (b) any and all relationships (adversarial or otherwise) with Owner by Manager, any partner, officer, stockholder, or employee of Manager, or any immediate family member (grandparent, parent or parent-in-law, spouse, child, brother or sister, brother-in-law or sister-in-law, or stepparent) of a partner, officer, stockholder or employee of Manager in any corporation, partnership, joint venture or other business, including without limitation, financing relationships, liability obligations and insurance relationships, other than as a policy holder with Owner.

Section 11.11

No Waiver.

No delay or omission of Owner or Manager to insist upon strict performance of any obligation of the other under or in connection with this Agreement or to exercise any right, power or remedy available to such party under or in connection with this Agreement shall waive, exhaust or impair any such obligation or any such right, power or remedy, nor shall any such delay or omission be construed to be a waiver of, or acquiescence in or to, any such nonperformance.  Notwithstanding any such delay or omission by Owner or Manager, such party thereafter shall have the right from time to time and as often as such party may deem advisable, to insist upon and enforce strict performance of any and all obligations of the other under or in connection with this Agreement.  No waiver by Owner or Manager of any nonperformance by the other or of any cause for termination of this Agreement shall extend to or affect any other nonperformance or cause for termination , whether then existing or otherwise.

Section 11.12

Changes.

Neither this Agreement nor any term or provision of this Agreement may be changed, waived, released, discharged, withdrawn, revoked or terminated orally, or by any action or inaction.  In order to be effective and enforceable, any such change, waiver, release, discharge, withdrawal, revocation or termination must be evidenced by a written document or instrument signed by the party against which enforcement of such change, waiver, release, discharge, withdrawal, revocation or termination is sought, and then shall be effective only to the extent specifically provided in such document or instrument.

Section 11.13

Attorneys’ Fees.

In the event of any litigation arising out of this Agreement, the prevailing party shall be entitled to reasonable costs and expenses, including without limitation, reasonable attorneys’ fees.

Section 11.14

Owner’s Liability.

Anything in this Agreement to the contrary notwithstanding, the covenants, undertakings and agreements herein made on the part of Owner are not made or intended for the purpose of binding, and no personal liability shall at any time be asserted or enforceable against Owner’s officers or employees or their respective heirs, legal representatives, successors and assigns on account of this Agreement or on account of any covenant, undertaking or agreement of Owner contained in this Agreement. Upon any sale, transfer, conveyance, or other disposition of Owner’s interest in the Project, provided that Owner shall have notified Manager of any such sale, transfer, conveyance, or other disposition pursuant to Section 9.2(a) above, Owner shall be released from any obligations hereunder arising and relating to the period after the date of any such sale, transfer, conveyance, or other disposition, but no such release shall be deemed to relieve Owner from its obligations that survive termination of this Agreement.

Section 11.15

Rule of Construction.

This Agreement is the product of joint drafting by the parties hereto and shall not be construed against either such party as the drafter hereof.

Section 11.16

Headings.

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The headings of the Articles, Sections, paragraphs and other subdivisions of this Agreement are for convenience of reference only, are not to be considered a part of this Agreement and shall not define, limit, expand or otherwise affect any of the terms or provisions of this Agreement.

Section 11.17

Entire Agreement.

This Agreement is the entire agreement between the parties with respect to the subject matter hereof, and no alteration, modification, or interpretation hereof shall be binding unless in writing and signed by both parties.

Section 11.18

Applicable Law; Jurisdiction.

This Agreement shall be construed and enforced in accordance with the laws of the state in which the Project is located.  Manager hereby agrees that all actions or proceedings arising directly or indirectly under this Agreement may, at the option of Owner, be litigated in courts having sites within the state in which the Project is located, and Manager hereby expressly consents to the jurisdiction of any such local, state or federal court, and confirms that service of process in any such action or proceeding may be made by personal service upon Manager wherever Manager may then be located, or by certified or registered mail directed to Manager at the address set forth in Section 8.2 above.

Section 11.19

Severability.

If any provision of this Agreement or application to any party or circumstances shall be determined by any court of competent jurisdiction to be invalid and unenforceable to any extent, the remainder of this Agreement or the application of such provision to such person or circumstances, other than those as to which it is so determined invalid or unenforceable, shall not be affected thereby, and each provision hereof shall be valid and shall be enforced to the fullest extent permitted by law.

Section 11.20

Confidentiality.

Manager shall keep confidential and not disclose to any person or entity other than Owner non-public information of the following nature (i) any of the terms and conditions of this Agreement or of its engagement as Manager hereunder, (ii) any information related to the finances or operation of the Project, (iii) any of the terms of the Leases or proposed Leases of the Project or any information related to the tenants under the Leases, or (iv) its compensation hereunder or under any other agreement with Owner related hereto or to the Project, unless, in each case, Manager either (a) shall be expressly authorized to disclose such information pursuant to a provision of this Agreement, (b) shall be required to disclose such information pursuant to law, or (c) shall have received Owner’s prior written consent.

Section 11.21

Approval.

With respect to any provision of this Agreement which provide that Manager shall obtain Owner’s prior consent or approval, Owner may withhold such consent or approval for any reason at its sole discretion, unless the provision specifically states that the consent or approval will not be unreasonably withheld.

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IN WITNESS WHEREOF, Owner and Manager have executed this Agreement in duplicate originals on the date set forth below, effective as set forth above.

MANAGER:

[ENTER NAME OF APPROPRIATE MANAGEMENT COMPANY]

By:

Name:

Title:

OWNER:

[ENTER NAME OF OWNER]

By:

Name:

Title:

23

Exhibit A

Legal Description of the Property

 (See Attached)

Doc. No. 101630.2

A - 1

Exhibit 1.3(c)(ii)(E)

Inland Commercial Mortgage Corporation

Inland Mortgage Corporation

Inland Mortgage Servicing Corporation

Inland Office Management, Inc.

Inland Payroll Services, Inc.

Inland Real Estate Acquisitions

Inland Risk and Insurance Management Services, Inc.

TIREG Law

Investors Property Tax Services, Inc.

Inland Computer Services, Inc.

Metropolitan Constructions Service

Inland Communications, Inc.

Exhibit 1.3(e)

Construction Management Services

I.

Workletter (Define and/or Develop the following Services)

·

Define Landlord Scope of Work

·

Define Tenant Scope of Work

·

Design/Construction Schedule/Milestones

·

Develop Budget Landlord Drawing/Document Review Process

·

Determine and negotiate:

-

G.C./Subcontractor Pre-approved Bidders List

-

Insurance Requirements

-

Landlord Turnover Conditions

-

Schedule

-

Contractor and Vendor Guidelines

-

Approved Engineers List

-

Building Standard Material Finishes

·

Selection of Architect/Engineer/General Contractor

·

Define Consultants Selection Process

·

Determine and Negotiate Construction Contract Type - Lump Sum, GMP

·

Bidding/RFP Process

·

Assist GC in Securing of Permit and Certificate of Occupancy

·

Approval Process and Time Frames

·

Change Order Process

·

Approval of Project Budgets/GMPs

·

Identifying and Purchasing of Long Lead Items

·

Punchlist Process

·

Develop Budgets for Cost of Work

·

Landlords Coordination Fee

·

Landlord Services

·

Access by Tenant Prior to Completion of Work

·

Acceptance of Work

·

Miscellaneous

-

Existing Conditions

II.

Design and Pre-Construction Phase

·

Determine All Required Consultants

·

Draft RFP for Space Planners/Engineers, if it is a Turnkey Project for the Landlord

·

Solicit and Evaluate Space Planners/Engineers Responses to the RFPs, if it is a Turnkey Project for Landlord

·

Select Space Planner/Engineer and negotiate Agreement if it is a Turnkey Project for Landlord

·

Draft RFP/Bid Documents for the General Contractor

·

Solicit and Evaluate General Contractor’s Responses to the RFPs

·

Select G.C. and Negotiate Agreement

·

Develop Budget

·

Define Project Schedule

·

Monitor the Design Process, if it is a Turnkey Project

·

Provide Value Engineering

·

Adjust the Budget Throughout Design Process

·

Identify and Pre-purchase Long Lead Items

·

Analyze Existing Site Conditions

·

Manage the Bidding Process

III.

Construction Phase

·

Coordinate and Develop the Following:

-

Change Order Process

-

Shop Drawing/Submittal Process

-

Insurance Requirements

-

Draw Packages

·

Manage the Construction Process

-

Budget

-

Schedule

-

Delivery of Materials

-

Access into the Building

-

Site Logistics

-

Quality and Safety

·

Field Inspections

·

Coordinate Building System Shutdowns

·

Monitor and Enforce Contract Requirements of Contractor/Space Planner

·

Monitor Workletter Requirements

IV.

Post-Construction Move-ln Phase

·

Coordinate F.F. & E. Purchases and Installation of Tenant

·

Prepare a Tenant Move-in Schedule

·

Schedule Freight Usage by Tenant’s Vendors

·

Inspect the Premises Prior to Substantial Completion

·

Develop a Landlord Punchlist with Tenants Representative

·

Complete Landlords Punchlist Items

·

Coordinate “AS BUILTS” Drawings

·

Assist Contractor in Assembling Operation and Maintenance Management Manuals

·

Assist Contractor in Securing Certificate of Occupancy from the City

·

Complete Payments to All Contractors/Vendors

·

Prepare Final Budget and Allowance Reconciliation

Exhibit 2.1

Leasing Services

Manager hereby agrees to implement the marketing and leasing program contained in the Approved Budgets, and to the extent consistent with such Approved Budgets upon the terms and conditions herein provided, agrees to perform the following services:

(i)

To research, analyze and keep Owner fully informed about marketing conditions with respect to prevailing rents, leasing activity, landlords’ contributions to tenant improvements, rents concessions and all other factors relevant to the leasing and renting of office premises in the Project market;

(ii)

To prepare, print and distribute such brochures, fliers, sales aids and advertising materials as Owner and manager deem necessary and appropriate;

(iii)

To negotiate, on behalf of Owner, the renting of all space available or to become available in the Property, with prospective tenants at rental rates approved by Owner and in accordance with guidelines approved by Owner.  The form, content and terms of all leases, and the acceptability of all tenants, shall be subject to the approval of Owner, who may refuse to enter into a lease with a prospective tenant for any reason and whether or not such prospective tenant and such lease comply with Owner’s guidelines.  Owner or Manager, as agent for Owner, shall have sole and exclusive authority to execute leases and agreements to lease, and to otherwise bind itself with respect to occupancy of the property or any part thereof.

(iv)

To furnish to Owner monthly (and more frequently as requested with respect to specific projects) a report containing the status of negotiations with interested prospective tenants and a report of all inquiries and offers received, including inquiries and offers from other brokers;

(v)

To show the Property and parts thereof to prospective tenants, and to furnish such information about the Property to prospects and brokers as they may call for, including prospective tenants procured by other brokers;

(vi)

To assist Owner in preparing and updating a standard form lease to be used for the Property;

(vii)

To prepare and place advertising approved by Owner;

(viii)

To solicit and pursue tenants systematically and aggressively by distribution, mailing and other forms of dissemination of leasing brochures, fliers and other leasing material, and through cooperating with other brokerage and real estate firms;

(ix)

To process and submit to Owner all leasing inquiries, regardless of source;

(x)

To maintain records on current tenancies and on all prospective tenancies; and

(xi)

To advise Owner with respect to negotiating the most cost-effective means of compensating any procuring brokers, and to assist in negotiating all commission agreements or other understandings which will obligate Owner for the payment of any compensation; provided, however, that all such agreements shall be executed by Owner or Manager, as agent for Owner.  

Exhibit 5.3

MONTHLY REPORTING REQUIREMENTS

1.

BANK STATEMENTS AND RECONCILIATIONS

2.

BALANCE SHEET, TRIAL BALANCE AND PROPERTY OPERATING STATEMENT-With budget comparison for the month and year to date.

3.

VARIANCE EXPLANATIONS-For all accounts with a monthly or a year to date variance of at least 10% (but not under $1,000) or for any variance over $5,000.

4.

CAM/REAL ESTATE TAX/INSURANCE BILLING AND COLLECTION REPORTS

5.

LEASING ACTIVITY/OCCUPANCY REPORT

6.

RENT ROLL

7.

CAPITAL EXPENDITURES FOR MONTH

8.

PROPERTY MANAGEMENT FEE CALCULATION-For the month and year to date.  Include a reconciliation of any amounts that cannot be traced to the general ledger.

9.

ACCOUNTS RECEIVABLE AGING REPORT

10.

ACCOUNTS PAYABLE ACCRUAL REPORT

QUARTERLY REPORTING REQUIREMENTS (IN ADDITION TO MONTHLY REQUIREMENTS)

1.

PROPERTY NARRATIVE

Update on Market Conditions

Litigation Update

Construction Activity Summary

Marketing efforts

Leasing narrative

Incident report

2.

RENT ROLL ACTIVITY REPORT

3.

ALLOWANCE FOR DOUBTFUL ACCOUNTS SCHEDULE

4.

MISCELLANEOUS RECEIVABLES SCHEDULE

5.

UNEARNED INCOME REPORT

6.

SECURITY DEPOSIT SCHEDULE

Exhibit 5.3 continued

7.

PREPAID EXPENSE SCHEDULE

8.

LEASE EXPIRATION SCHEDULE

Exhibit 7.1

A.

Management Services Compensation

Manager shall be entitled to receive and is hereby authorized to pay out of the Project Operating Account, as a management fee, an amount equal to 4.5% of the actual monthly gross income generated by the Project provided the leases for the tenants of such Project allow for full recovery of the 4.5% management fee as a pass-through expense.  In the event any such leases do not allow for recovery of any or all of the property management fee, then the property management fee payable hereunder shall be 3.5% of the actual monthly gross income generated by the lease in question (i.e., the fee will be 4.5% for leases which allow for full recovery of the 4.5% management fee as a pass-through expense and 3.5% for all other leases).  For purposes of this calculation “gross income” shall mean rents and/or assessments and other items, including but not limited to tenant payments for real estate taxes, property liability and other insurance, damages and repai rs, common area maintenance, tax reduction fees and all other tenant reimbursements, administrative charges, proceeds of rental interruption insurance, parking fees, income from coin operated machines and other miscellaneous income, due or to become due.

B.

Construction Management Services Compensation

In consideration of the services performed pursuant to this Agreement, Owner and Manager agree that all construction management services shall be included in the Management Services Compensation described in paragraph A above.  No separate construction management fee(s) are included as part of this Agreement.

C.

Leasing Services Compensation

Manager shall be entitled to receive and is hereby authorized to pay out of the Operating Account, as a leasing fee an amount equal to leasing commissions consistent with market rates, as the same are then prevailing in the geographic area in which the Project is located (when an outside broker is involved, the payout is the market rate plus 50%, and on a renewal, the payout is 50%).  

EX-3

CONTRIBUTION AGREEMENT

THIS CONTRIBUTION AGREEMENT (this “Agreement”), dated as of April ___, 2007, is made by and between INLAND WESTERN RETAIL REAL ESTATE TRUST, INC., a Maryland corporation (“Inland”), THE FLORIDA RETIREMENT SYSTEM TRUST FUND, as defined in Florida Statutes Section 121.021(36), acting by and through The State Board Of Administration of the State of Florida (the “Board”), and MS INLAND FUND, LLC, a Delaware limited liability company (the “Company”).

RECITALS

A.

Inland and the Board have entered into that certain Operating Agreement of the Company dated as of April __, 2007 by and between Inland and the Board (the “Venture Agreement”), wherein Inland and the Board agreed to enter into a joint undertaking to invest in and own real property in certain designated markets.

B.

Pursuant to Section 4.2 of  the Venture Agreement, Inland and the Board agreed to identify the Existing Portfolio for contribution to the Company by Inland upon the terms and conditions of a contribution agreement mutually agreeable to Inland and the Board.

C.

Inland is the direct or indirect owner of all of the equity interests in the entities listed on Exhibit A (the “Existing Portfolio SPEs”) and each such entity is the sole owner of the Existing Portfolio Project set forth on Exhibit A by such entity’s name.

D.

Pursuant to Section 4.2(b) of the Venture Agreement, Inland desires to contribute to the Company (or one or more Project Entities designated by the Company) 100% of the equity interest of Inland in the Existing Portfolio SPEs (the “Ownership Interests”) all upon the terms and conditions set forth herein.

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

Section 1.

Definitions

.  As used herein, the following terms shall have the following meanings.  All capitalized terms used but not defined herein shall have the meaning given them in the Venture Agreement.

(a)

“Closing Date” means the date hereof.

(b)

“Evaluation Materials”

 means the information set forth on Exhibit A of the Venture Agreement with respect to the Existing Portfolio Projects, which information has been provided to the Board by Inland.

(c)

“Excluded Liabilities”

 means, with respect to each of the Existing Portfolio SPEs, any and all obligations or liabilities of any kind or character arising prior to the Closing Date, including, without limitation, any claims by tenants with respect to pass-through items, common area maintenance, operating expenses, tort and contract claims, claims by contractors, taxes and insurance, and including, without limitation, any obligations to pay brokerage commissions or similar sums and obligations to pay any tenant improvement

allowances.  Excluded Liabilities shall not include any obligations accruing under existing debt on and after the Closing Date or any sums that are prorated by the parties on the Closing Date in accordance with this Agreement.  In addition, Excluded Liabilities shall include all claims pertaining to common area maintenance, operating expenses, taxes and insurance reimbursements disclosed in any tenant estoppel and shall include all claims for repairs, maintenance, replacement, reimbursement of funds, rent credits and any other claims or defaults referenced in the tenant estoppels provided by the tenants referenced on Exhibit J.

(d)

“Existing Loans”

 means the existing loans encumbering the Existing Portfolio Projects which loans are more particularly described on Exhibit B.

(e)

“Existing Portfolio SPEs”

 has the meaning set forth in the Recitals hereto.

(f)

“Existing Portfolio Value”

 means the fair market value of the Existing Portfolio (net of assumed indebtedness or any refinancing) as of the Closing Date, which amount is set forth in Section 2(b) below.

(g)

“Land”

 means the real property owned by the Existing Portfolio SPEs as of the date hereof, together with the easements, rights-of-way and appurtenances belonging or in any way appertaining to the same.

(h)

“Laws”

 means all federal, state and local laws, moratoria, initiatives, referenda, ordinances, rules, regulations, standards, orders, judicial decisions, common law and other governmental, quasi-governmental and utility company requirements (including those relating to the environment, health and safety, or handicapped persons).

(i)

“Leases”

 means all leases or other occupancy agreements pursuant to which an Existing Portfolio SPE has leased space at an Existing Portfolio Project to a third party, which leases are more particularly described on the Rent Roll for each Existing Portfolio Project.

(j)

Intentionally deleted.

(k)

“Rent Roll”

 means, for each Existing Portfolio Project, the rent roll for such Existing Portfolio Project, attached hereto as Exhibit C.

(l)

“Service Contracts”

2

 means all contracts or agreements between the Existing Portfolio SPE, and any third party relating to the ownership, operation and/or management of the Existing Portfolio Projects.

(m)

“Tax” or “Taxes”

 shall mean any federal, state, local or foreign income, gross receipts, payroll, license, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise, withholding, social security (or similar taxes, including FICA), sales, use, transfer, value added, alternative or add-on minimum or other tax of any kind, including any penalties, interest or other additions thereto.

(n)

“Tax Return”

 shall mean any return, report or similar statement required to be filed with respect to Taxes, including any information return, claim for refund, amended return, or declaration of estimated Taxes.

(o)

“Title Company”

 means Chicago Title Insurance Company.

(p)

“Venture Agreement”

 has the meaning set forth in the Recitals hereto.

Section 2.

Contribution

.  On the Closing Date, Inland shall transfer or caused to be transferred to the Company or to a designated Project Entity the Ownership Interests on the terms and conditions set forth herein.

(a)

Schedule of Allocated Values; Exclusion

.  The Existing Portfolio Value has been allocated among the various Existing Portfolio SPEs as set forth on Exhibit I.

(b)

Existing Portfolio Value

.  Inland and the Board hereby acknowledge and agree that the Existing Portfolio Value is $148,224,567.44, as allocated according to Exhibit I and as the same may be adjusted pursuant to Section 2(a).  Pursuant to and in accordance with Section 5(a)(i) herein, on or before the Closing Date, the Board has contributed to the Company as a capital contribution on the part of the Board an amount equal to eighty percent (80%) of the Existing Portfolio Value (the “Board’s Portfolio Value Payment”), net of the prorations and adjustments set forth herein and in accordance with the Approved Settlement Statement (as defined in Section 5(d)(ii) below), by wire transfer of immediately available funds.  The amount of the Board’s Portfolio Value Payment is deemed a capital contribution to the Company on the part of the Board, and In land has been credited with a capital contribution equal to twenty percent (20%) of the Existing Portfolio Value.

(c)

Prorations and Adjustments.

(i)

All items of income and expense customarily prorated between buyers and sellers of real property shall be equitably prorated between the parties hereto, including, without limitation, any rents and other income or expenses under the Leases, all as and when actually

3

collected (whether such collection occurs prior to, on or after the Closing Date); real property taxes and assessments; water, sewer and utility charges; amounts payable under any of the Service Contracts; annual permits and/or inspection fees (calculated on the basis of the period covered); and any other expenses of the operation and maintenance of the Existing Portfolio Projects.  All such items shall be prorated as of 12:01 a.m. on the day on which the Closing Date occurs, on the basis of a 365-day year.  The Company shall not be credited with any reserves under the existing loans.

(ii)

Notwithstanding anything to the contrary in subsection (i) above, real estate taxes for Oswego Commons shopping center in Oswego, Illinois, shall be prorated on a cash basis pursuant to the terms of thus subsection (ii).  The Company shall be credited for the amount of all real estate tax contributions from tenants under the Leases that have actually been received by the Existing Portfolio SPE but are not used at or prior to the Closing Date to pay for reimbursable real estate tax expenses under the Leases.  The Company shall also receive a credit for real estate taxes attributable to vacant spaces at the Existing Portfolio Projects on an accrual basis, said credit to be based upon the most recent ascertainable tax bill with a later adjustment when the actual tax bill is received.

(iii)

The Company or the applicable Project Entity acquiring title to the Ownership Interests of a given Existing Portfolio SPE will make a good faith effort consistent with Inland’s prior business practice after the Closing Date to cause such Existing Portfolio SPE to collect all sums due and payable under the Leases in the usual course of the applicable Existing Portfolio SPE’s operation of the Existing Portfolio Project in question, but will not be obligated to institute any lawsuit or other collection procedures to collect any such delinquent amounts.  Any such unpaid or delinquent amounts--whether collected by the Existing Portfolio SPEs, Inland, the Company or the Board--on or after the Closing Date shall be applied first to sums owed to the Existing Portfolio SPEs for periods on or after the Closing Date (together with the costs of collection relating to such sums) and then to sums owed to the Existing Portfolio SPEs for periods prior to the Closing Date (together with the costs of collection relating to such sums).  The Company shall promptly remit to Inland any payments received by it and owing to Inland hereunder.

(iv)

If any of the aforesaid prorations and credits cannot be calculated accurately at the Closing Date, then the same shall be calculated as soon as reasonably practicable after the Closing Date and either party owing the other party a sum of money based on such subsequent proration or credit shall promptly pay such sum to the other party.  Inland will cooperate with any post-closing reconciliation of common area maintenance, operating expenses, taxes and insurance to give effect to the prorations contemplated hereby.  To the extent that any error is made in the foregoing prorations, parties agree to correct such error and reprorate the erroneous items within thirty (30) days after the discovery of such error.  The provisions of this Section 2(c) shall survive the Closing Date.

(v)

Inland shall be solely responsible for the 2006 reconciliation of common area maintenance, operating expenses, taxes and insurance with the tenants under the Leases and will be solely responsible for any shortfalls payable to such tenants and solely entitled to any credits due from said tenants resulting from the 2006 reconciliation.

Section 3.

Existing Loans

.  The total outstanding principal balance of each Existing Loan is set forth on Exhibit B.  Inland has obtained from the lenders under the Existing Loans and delivered to the Board beneficiary statements for the Existing Loans.  The parties acknowledge that all out-of pocket costs paid to the holders of the Existing Loans to obtain such consent shall be borne by the Company pursuant to the Venture Agreement.

Section 4.

Tax Treatment of Transaction and Allocation Method

4

.  

(a)

The contribution of the Ownership Interests to the Company and the Project Entities in exchange for membership interests in the Company and cash shall be treated as (i) a tax-deferred contribution to a partnership pursuant to Section 721(a) of the Internal Revenue Code of 1986, as amended (“Code”), in part and (ii) a reimbursement to Inland of capital expenditures incurred by Inland with respect to the Existing Portfolio during the two-year period prior to the contribution of the Ownership Interests to the Company; which reimbursement shall be treated in all respects as a non-taxable “reimbursement of pre-formation expenditures” pursuant to Treasury Regulations Section 1.707-4(d) and not as a taxable sale of all or part of the Existing Portfolio.  The Company, the Board and Inland shall not file, report or treat such contribution and distribution on any federal, state or local income tax returns, filings, protests or appeals in any manner inconsistent with the preceding sentence.  The Company, the Board and Inland shall timely file an information statement with the Internal Revenue Service, as required under Treasury Regulation Section 1.707-8, which statement shall be approved by Inland in its sole and absolute discretion and which statement shall be consistent in all respect with the provisions of clause (ii) above.

(b)

The Company shall use the traditional method without curative allocations as set forth in Treasury Regulation Section 1.704-3(b) with respect to the Existing Portfolio.

Section 5.

Conditions to Close

.  On the Closing Date, the following conditions were satisfied:

(a)

Contribution

.  The Board contributed to the Company the Board’s Portfolio Value Payment, all in accordance with the Approved Settlement Statement, as defined below;

(b)

Receipt of Documents

.  Each party received the following fully executed and (if applicable) acknowledged documents:

(A)

One fully executed original of an Assignment and Assumption in the form attached hereto as Exhibit F (the “Assignment of Ownership Interests”) executed by Inland, the Company and the appropriate Project Entities, with respect to the Ownership Interests;

(B)

One fully executed original of the settlement statement reflecting the payments, credits and prorations contemplated hereby (the “Approved Settlement Statement”); and

(C)

One copy or original of all consents of lenders under the Existing Loans to the transfer of the Ownership Interests pursuant to Section 3;

(c)

Title

.  Title Company issued to the applicable Existing Portfolio SPEs commitments to issue ALTA extended coverage owner’s policies (the “Title Commitments”) (or such other form as may be agreed to by the parties) for each of the Existing Portfolio Projects, in the form as may be requested by the Board.  For purposes hereof, the term “Title Commitments” shall mean the Title Commitments in the latest versions issued by the Title Company on or before the Closing Date.

5

(d)

Existing Loans

.  The lenders under the Existing Loans delivered to the Company the consents to the transfer of the Ownership Interests, all in accordance with Section 3 above.

(e)

Consents

.  Inland obtained and delivered to the Board all requests, consents and approvals for the transfer of the Ownership Interests from Inland to the Company or the applicable Project Entities;

(f)

Estoppel Certificates

.  Inland obtained and delivered to the Board all tenant estoppel certificates executed on or after February 19, 2007, that Inland had in its possession for tenants in the Existing Portfolio Projects; and

(g)

Lender Estoppel Certificates

.  With respect to each of the Existing Loans, Inland obtained and delivered to the Board estoppel certificates from the lenders extending such loans to the applicable Existing Portfolio SPE setting forth the amount of the indebtedness outstanding thereunder, stating that the applicable Existing Portfolio SPE is not in default of its obligations thereunder, and stating the relevant lender’s consent to the transfer of the relevant Ownership Interests pursuant to Section 3.

Section 6.

U.S. Treasury Regulations

.  The purchase and sale of the Existing Portfolio Projects is the sale of “reportable real estate” within the meaning of U.S. Treasury Regulations Section 1.6045-4 (the “Regulation”).  Inland is the “real estate reporting person” within the meaning of the Regulation and shall make all reports to the federal government as required by the Regulation.

Section 7.

Representations and Warranties of Inland; Knowledge

.  In order to induce the Board to enter into this Agreement, Inland represents and warrants to the Board as set forth in this Section 7.  Except as to sub-Sections 7(a)(i) and 7(a)(ii), such representations and warranties are made to Inland’s knowledge as such term is defined in Section 7(b).  The Company and, to the extent applicable, each Project Entity is an  express third party beneficiary of the representations and warranties made in this Section 7 and may rely upon the same.

(a)

Representations and Warranties

.  Inland warrants and represents that:

(i)

This Agreement and all agreements, instruments and documents herein provided to be executed or to be caused to be executed by Inland have been duly authorized, executed and delivered by and, subject to equitable principles generally and covenants of good faith and fair dealing and to the federal Laws relating to the bankruptcy, are binding upon Inland in accordance with their terms.

(ii)

Inland has the capacity and authority to enter into this Agreement and consummate the transactions herein provided and nothing prohibits or restricts the right or ability of Inland to close the transactions contemplated hereunder and carry out the terms hereof.

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(iii)

By its execution of this Agreement, Inland hereby represents and warrants to the Board (which for this purpose includes its partners, members, principal stockholders and any other constituent entities) that Inland has not been notified that it (i) has been designated as a “specifically designated national and blocked person” on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control at its official website, http://www.treas.gov/ofac/t11sdn.pdf or at any replacement website or other replacement official publication of such list, and (ii) is currently in compliance with the regulations of the Office of Foreign Asset Control of the Department of the Treasury and any statute, executive order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Supp ort Terrorism) (the “Regulations”), or other governmental action relating thereto.  Inland will at all times during the term of this Agreement remain in compliance with the Regulations.

(iv)

Inland delivered to the Board complete copies of all Evaluation Materials in its possession, and Inland has received no written notice that any of the Evaluation Materials are incomplete or incorrect in any material respect.  Inland delivered to the Board complete copies of all brokerage agreements and commission agreements pertaining to the Existing Portfolio Projects, and Inland has received no written notice that any of such brokerage agreements and commission agreements are incomplete or incorrect in any material respect.

(v)

Inland, directly or indirectly, is the sole owner of the Ownership Interests and has not previously assigned, pledged, hypothecated, or otherwise encumbered the Ownership Interests.

(vi)

Inland has delivered to the Board complete copies of all material documents, instruments and agreements evidencing and/or securing the Existing Loans.  There has been no default by Inland or any Existing Portfolio SPE under any documents or agreements evidencing or securing the Existing Loans.

(vii)

Inland has delivered to the Board complete copies of all Leases (except that Inland has delivered copies of subleases only to the extent the same are within Inland’s possession or control).  The Rent Roll for each Existing Portfolio Project is true, correct and complete in all material respects.  Except with respect to any existing subleases, the Rent Rolls attached list the terms of all Leases (written or verbal), including the terms of all amendments thereto, which grant any possessory interest in and to any space situated on or in the Property or that otherwise give rights with regard to use of the Property.  Except as set forth on Schedule 7(a)(vii) attached hereto, the Leases are in full force and effect and have not been modified or amended in any respect.  As of the date hereof, (a) the applicable Existing Project SPE is the owner of the lessor
46;s interest in all such Leases relating to the relevant Existing Portfolio Projects, (b) except as set forth on Schedule 7(a)(vii) attached hereto, no Existing Portfolio SPE has modified any such Lease or consented to any assignment or sublease of any such Lease and, except as set forth on the applicable Rent Roll or any tenant estoppel certificate delivered to the Board, none of such Leases has been modified, assigned or sublet in any respect, (c) except as set forth on  Schedule 7(a)(vii) attached hereto or any tenant estoppel certificate delivered to the Board, (i) the Existing Portfolio SPEs have performed all material obligations on the part of the landlord to be performed under each such Lease and (ii) there are no outstanding obligations of any Existing Portfolio SPE under the Leases existing as of the date of this Agreement to perform any tenant improvement work, (d) except as set forth on  Schedule 7(a)(vii) attached hereto or any tenant estoppel certificate delivere d to the Board, all tenant improvements required under such Leases to be constructed by the Existing Portfolio SPEs have been completed, (e) except as set forth in the Leases delivered to the Board, no tenant has any option to purchase the Land, to lease additional space at any of the Existing Portfolio Projects, to extend the term of such tenant’s Lease, to put back to the landlord any space currently subject to such tenant’s

7

Lease, or to terminate such tenant’s Lease, (f) except as set forth on Schedule 7(a)(vii) attached hereto or any tenant estoppel certificate delivered to the Board, (i) no written notice of default has been given or received by Inland or any of the Existing Portfolio Project SPEs with respect to any Lease within the preceding ninety (90) days, and (ii) to Inland’s knowledge, no defaults exist on the part of any of the Existing Portfolio SPEs or any one or more of the tenants under the Leases, and (g) no tenant has paid rent for more than one month in advance.

(viii)

Attached hereto as  Exhibit D is a complete and accurate list of the Service Contracts existing as of the date hereof.  Inland has delivered or made available to the Board complete copies of each of the Service Contracts.  All such Service Contracts are in full force and effect and no party is in default thereunder.

(ix)

Each Existing Portfolio SPE is either (A) a limited liability company duly formed and organized, validly existing and in good standing under the laws of the State of Delaware or (B) a limited partnership duly formed and organized, validly existing and in good standing in the State of Illinois.  Inland has provided the Board with complete copies of the certificate of formation and the Operating Agreement or limited partnership agreement for each Existing Portfolio SPE (the “Formation Documents”), and none of the Formation Documents have been modified or amended in any respect.  Each Existing Portfolio SPE is qualified to conduct business and is in good standing in each State where an Existing Portfolio Project owned by such Existing Portfolio SPE is located.

(x)

Neither the execution and delivery of this Agreement by Inland nor the consummation of the transactions contemplated herein constitute a violation of any of its corporate, governing or organizational documents or agreements or result in the breach of, or the imposition of any lien on any assets of the Existing Portfolio SPEs or a lien on any of the Existing Portfolio Projects pursuant to, or constitute a default under, any indenture or bank loan or credit agreement, or other agreement to which the Inland or any of the Existing Portfolio SPEs is a party or by which any of the Existing Portfolio Projects may be bound or affected.  Except for any consents, releases, approvals or authorizations that will have been obtained on or prior to the Closing Date, no consent, approval, authorization or action by any governmental authority or any person or entity having legal rights against or jurisdiction over Inland or the Existing Portfolio SPEs is required in connection with the execution and delivery by Inland and the Existing Portfolio SPEs of this Agreement or for consummation of the transactions contemplated herein.

(xi)

Each Existing Portfolio SPE has filed all Tax Returns that it was required to file.  All Taxes that have become due and payable by the Existing Portfolio SPEs have been paid.  The Existing Portfolio SPEs have withheld and paid any Taxes due in connection with amounts paid or owing to any employee, independent contractor, or other third party, and all Forms W-2 and 1099 required with respect thereto have been properly completed and timely filed.  There is no pending dispute with any governmental authority over the liability of the Existing Portfolio SPEs for Taxes.  Each Existing Portfolio SPE is disregarded as an entity separate from its owner for U.S. federal income tax purposes.

(xii)

There are no attachments, executions, assignments for the benefit of creditors, or proceedings in bankruptcy or under any other debtor relief laws pending, or threatened or contemplated against the Existing Portfolio Projects or the Existing Portfolio SPEs.  On the Closing Date, with the exception of the Existing Loans, none of the Existing Portfolio Projects will be encumbered by any indebtedness and none of the Existing Portfolio SPEs will have any indebtedness for monies borrowed by such Existing Portfolio SPEs or any other liabilities or obligations of any nature which will become the responsibility of the Board, the Company or any Project Entity, whether absolute, accrued, contingent or otherwise, or whether now due or which will become due after the Closing, other than (A)

8

liabilities and obligations which Inland or the Existing Portfolio SPEs are not otherwise obligated to remove pursuant to the terms of this Agreement, (B) liabilities and obligations otherwise approved in writing by the Board, (C) liabilities or obligations arising under the Service Contracts or (D) obligations or liabilities arising in the ordinary course of business of owning, leasing and operating the Existing Portfolio Projects.

(xiii)

The Existing Portfolio SPEs have not engaged in any business or activities other than the business of owning, leasing and operating the applicable Existing Portfolio Projects owned by such Existing Portfolio SPEs and activities necessarily ancillary to such ownership, leasing and operation of such Existing Portfolio Projects.  The Existing Portfolio SPEs do not own directly or indirectly any capital stock or interest in any partnership, corporation or other entity or business enterprise other than the applicable Existing Portfolio Projects and have no assets other than their ownership interest in the applicable Existing Portfolio Projects and assets related thereto.

(xiv)

There are no employees of the Existing Portfolio SPEs.

(xv)

Except for the condemnation at John’s Creek in Duluth, Georgia, described by those certain plans for the Condemnation entitled “Easement and Right of Way Exhibit for Inland Western Duluth John’s Creek SPE, L.L.C.” dated August 31, 2006, last revised February 27, 2007, and stamped March 6, 2007, which plans were prepared by James J. Lockhart of Hannon Meeks and Bagwell, neither Inland nor any of the Existing Portfolio SPEs has received written notice of any condemnation proceeding affecting any one or more of the Existing Portfolio Projects.

(xvi)

Except as set forth in the Evaluation Materials or any reports obtained by the Board: (A) the Land has not at any time been used for the generation, transportation, management, handling, treatment, storage, manufacture, emission Disposal, Release or deposit of any Hazardous Substances or fill or other material containing Hazardous Substances in violation of levels allowed under applicable Environmental Laws; (B) there are no Releases of Hazardous Substances from any underground storage tanks on the Land; and (C) neither Inland nor any of the Existing Portfolio SPEs has received written notification from any third party, including but not limited to any governmental agency, alleging that the Land is not in material compliance with applicable Environmental Laws.

As used herein, the term “Environmental Laws” shall mean all applicable federal, state or local laws, rules, regulations, governmental permits or other binding determinations of any governmental authority relating to or addressing the environment, including, without limitation, the Occupational Safety and Health Administration, the Comprehensive Environmental Response, Compensation and Liability Act, as amended (“CERCLA”), and the Resource Conservation and Recovery Act, as amended (“RCRA”), the Toxic Substances Control Act, as amended, the Clean Water Act, as amended, the Clean Air Act, as amended, and the Oil Pollution Control Act of 1990, as amended.  As used herein, the terms “Hazardous Substance” and “Release” (as it relates to the release of hazardous substances as opposed to the release of claims) have the meanings specified in CERCLA an d the terms “Solid Waste” and “Disposal” (or “Disposed”) have the meanings specified in RCRA.  If either CERCLA or RCRA is amended to broaden the meaning of any term defined thereby, the broader meaning shall apply to this Section 6.04 after the effective date of the amendment.  Moreover, to the extent that applicable State law establishes a meaning for “Hazardous Substance,” “Release,” “Solid Waste,” or “Disposal” that is broader than that specified in either CERCLA or RCRA, the broader meaning shall apply.

(xvii)

Except as set forth on Schedule 7(a)(xvii), Inland has not received written notification of any: (i) court or administrative judgment or order which affects any one or more of the Existing Portfolio Projects or the current operation thereof; or (ii) legal, administrative or

9

other suit, action, proceeding or arbitration which affects any one or more of the Existing Portfolio Projects or the current operation thereof.

(xviii)

Inland has not received written notification from any governmental agency or any tenant under the Leases alleging that any Existing Portfolio Project is not in compliance with applicable laws.

(xix)

Except as set forth on Schedule 7(a)(xix) or any tenant estoppel certificate delivered to the Board, neither Inland nor any of Existing Portfolio SPEs has received any written notice from any of the tenants under the Leases protesting or requesting an audit of any ancillary charges (including, without limitation, CAM, taxes or insurance charges) assessed under the Leases.  Except as set forth on Schedule 7(a)(xix) or in any tenant estoppels delivered to the Board, neither Inland nor any of Existing Portfolio SPEs has received any written notice of pending or threatened disputes by any tenants with respect to any such ancillary charges which will impact the Company following the Closing Date.

(xx)

Except as set forth on Schedule 7(a)(vii) attached hereto or any tenant estoppel certificate delivered to the Board, all tenant improvement allowance amounts owed to tenants under the Leases have been paid or expended.

(xxi)

Except as set forth on Schedule 7(a)(vii) attached hereto, all brokerage fees and commissions that were due and payable prior to the Closing Date have been paid with respect to all Leases.

(xxii)

Each of the Existing Portfolio SPEs has maintained uninterrupted liability insurance throughout its existence with policies that are substantially similar to those policies currently maintained by the Existing Portfolio SPEs and delivered to the Board.

(xxiii)

Each Existing Portfolio SPE has paid its own liabilities and expenses.

(xxiv)

Except for those matters disclosed on Exhibit G attached hereto, there are no encumbrances, liens, restrictions or other matters affecting the title to any of the Land or Existing Portfolio Projects.

(xxv)

Inland has delivered to the Board all executed tenant estoppel certificates executed on or after February 19, 2007, in Inland’s possession for tenants in the Existing Portfolio Projects.

(b)

Inland Knowledge

.  Notwithstanding anything herein to the contrary, the representations and warranties made in this Section 7 are made to Inland’s knowledge, which knowledge shall be defined to mean facts within the actual and present knowledge of Steven P. Grimes, Michael J. O’Hanlon, Niall J. Byrne, and Shane C. Garrison.  In no event shall Inland’s knowledge of the inaccuracy or breach of any representation or warranty contained herein be imputed to the Company or the Project Entities by virtue of Inland being a member in the Company or otherwise.

Section 8.

Representations and Warranties of the Board

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.  In order to induce Inland to enter into this Agreement, the Board represents and warrants, to Inland the following:

(a)

This Agreement and all agreements, instruments and documents herein provided to be executed or to be caused to be executed by the Board are and on the Closing Date will be duly authorized, executed and delivered by and, subject to equitable principles generally and covenants of good faith and fair dealing and to the federal Laws relating to the bankruptcy, are binding upon the Board in accordance with their terms.

(b)

The Board has the capacity and authority to enter into this Agreement and consummate the transactions herein provided and nothing prohibits or restricts the right or ability of the Board to close the transactions contemplated hereunder and carry out the terms hereof.

(c)

By its execution of this Agreement, the Board hereby represents and warrants to Inland (which for this purpose includes its partners, members, principal stockholders and any other constituent entities) that the Board has not been notified that it (i) has been designated as a “specifically designated national and blocked person” on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control at its official website, http://www.treas.gov/ofac/t11sdn.pdf or at any replacement website or other replacement official publication of such list, and (ii) is currently in compliance with the Regulations, or other governmental action relating thereto.  The Board will at all times during the term of this Agreement remain in compliance with the Regulations.

Section 9.

Certain Undertakings.

(a)

Inland Undertakings

.  Inland shall be responsible for and shall defend and reimburse the Board and the Company on account of any obligation, liability, claim (including, but not limited to, any claim for damage to property or injury to or death of any persons), lien, encumbrance, loss, damage, cost or expense, including, without limitation, attorneys’ fees (“Claim”) that (i) arises from any breach of any of the representations and warranties of Inland set forth herein, or (ii) otherwise results from any breach or default by Inland under this Agreement, or (iii) arises on account of or with respect to any Excluded Liability.  The foregoing obligation of Inland shall be limited to the amount of $10,000,000.00 (“Inland’s Maximum Liability”).

(b)

Undertakings by the Board

.  The Board shall be responsible for and shall defend and reimburse Inland with respect to any Claim that (i) arises from any breach of any of the representations and warranties of the Board set forth herein, or (ii) otherwise results from any breach or default by the Board under this Agreement.  The foregoing obligation of the Board shall be limited to the amount of $5,000,000.00 (“The Board’s Maximum Liability”) and subject to the limitations of Florida Statute 215.44(9).  

(c)

General Undertakings Provisions

.  Each undertaking provided for under this Section 9 shall be subject to the following provisions:

(i)

The undertaking shall cover the costs and expenses of the Enforcing Party, including reasonable attorneys’ fees and court costs, related to any actions, suits or judgments incident to any of the matters covered by such undertaking.

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(ii)

The Enforcing Party shall notify the Responsible Party (the “Responsible Party”) of any Claim against the Enforcing Party covered by the Responsible Party’s undertaking within 45 days after it has notice of such Claim, but failure to notify the Responsible Party shall in no case prejudice the rights of the Enforcing Party under this Agreement unless the Responsible Party shall be prejudiced by such failure and then only to the extent the Responsible Party shall be prejudiced by such failure.  Should the Responsible Party fail to discharge or undertake to defend the Enforcing Party against such liability upon learning of the same, then the Enforcing Party may settle such liability, and the liability of the Responsible Party hereunder shall be conclusively established by such settlement, which amount of such liability shall include both the settlement considera tion and the reasonable costs and expenses, including attorneys’ fees, incurred by the Enforcing Party in effecting such settlement.

(iii)

The foregoing undertakings shall also run in favor of any officer, director, employee, advisor, partner or shareholder of the Enforcing Party or any person or entity having a direct or indirect ownership interest in the Enforcing Party.

Section 10.

Miscellaneous.

(a)

Notices

.  Any notice that a party is required or may desire to give the other party shall be in writing, and shall be deemed to have been properly given or served when transmitted by facsimile transmission or internet e-mail (with a conforming copy to be delivered by other means) or when delivered to any nationally recognized overnight courier or deposited with the United States Postal Service or any official successor thereto, designated as registered or certified mail, return receipt requested, bearing adequate postage and addressed as hereinafter provided, or by personal delivery (which may include delivery by commercial courier service) if receipt is procured.  Initially, notices shall be sent to the following address (subject to the right of a party to designate a different address for itself by notice similarly given):

To Inland and/or

Inland Western Retail Real Estate Trust, Inc.

the Company:

2901 Butterfield Road

Oak Brook,  IL  60523

Attention:  Steven P. Grimes

Fax No.: (630) 368-2308

E-mail:  grimes@inlandgroup.com

With a copy to:

Inland Western Retail Real Estate Trust, Inc.

2901 Butterfield Road

Oak Brook,  IL  60523

Attention:  Gary Pechter, General Counsel

Fax No.:  (630) 218-4900

E-mail:  gpechter@inlandgroup.com

To the Board
and/or the Company:

State Board of Administration of Florida

1801 Hermitage Boulevard, Suite 100

Tallahassee, Florida  32308

Attention:  Douglas W. Bennett

Fax No.:  (850) 413-1147

E-mail:  doug.bennett@sbafla.com

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With a copy to:

Morgan Stanley Real Estate Advisors, Inc.

3424 Peachtree Road, NE

Suite 800

Atlanta, Georgia  30326-1118

Attention:  Dexter Warrior

Fax No.:  (404) 846-1414

E-mail:  dexter.warrior@morganstanley.com

And to:

Sutherland Asbill & Brennan LLP

999 Peachtree Street, NE

Atlanta, Georgia  30309-3996

Attention:  H. Edward Hales, Jr.

Fax No.: (404) 853-8806

E-mail:  ed.hales@sablaw.com

(b)

Brokers

.  Inland and the Board each represent and warrant to the other that no broker or finder has been engaged by it, respectively, in connection with any of the transactions contemplated by this Agreement.  In the event of a claim for broker’s or finder’s fee or commissions in connection herewith, then Inland shall be responsible for and defend and reimburse the Board and the Company on account of the same if it shall be based upon any statement or agreement alleged to have been made by Inland, and the Board shall be responsible for and defend and reimburse Inland and the Company on account of the same if it shall be based upon any statement or agreement alleged to have been made by the Board.

(c)

Survival

.  All warranties, representations, covenants, obligations and agreements contained in this Agreement shall survive after the Closing Date and the transfer and conveyance of the Business Property hereunder and any and all performances hereunder for a period of one (1) year.  All warranties and representations shall be effective regardless of any investigation made or which could have been made.

(d)

Further Instruments

.  Each party will, whenever and as often as it shall be requested so to do by the other, cause to be executed, acknowledged or delivered any and all such further instruments and documents as may be necessary or proper, in the reasonable opinion of the requesting party, in order to carry out the intent and purpose of this Agreement.

(e)

Entire Agreement; Amendments; Captions

.  This Agreement and the instruments referenced herein contain the entire agreement between the parties respecting the matters herein set forth and supersede all prior agreements between the parties hereto respecting such matters.  This Agreement may be amended by written agreement of amendment executed by both parties hereto, but not otherwise.  Section headings shall not be used in construing this Agreement.

(f)

Time of the Essence; Non-Business Days

.  Subject to the next full sentence, time is of the essence of this Agreement.  Whenever action must be taken (including the giving of notice or the delivery of documents) under this Agreement during a

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certain period of time or by a particular date that ends or occurs on a non-business day, then such period or date shall be extended until the immediately following business day.  As used herein, “business day” means any day other than Saturday, Sunday or a federal holiday.

(g)

Terminology.

(i)

Whenever the words “including”, “include” or “includes” are used in this Agreement, they should be interpreted in a non-exclusive manner as though the words “, without limitation,” immediately followed the same.

(ii)

Except as otherwise indicated, all Section and Exhibit references in this Agreement shall be deemed to refer to the Sections and Exhibits in or to this Agreement.

(h)

Attorneys’ Fees

.  If either party commences an action against the other to interpret or enforce any of the terms of this Agreement or because of the breach by the other party of any of the terms hereof, the losing party shall pay to the prevailing party reasonable attorneys’ fees, costs and expenses and court costs and other costs of action incurred in connection with the prosecution or defense of such action, whether or not the action is prosecuted to a final judgment.  For the purpose of this Agreement, the terms “attorneys’ fees” or “attorneys’ fees and costs” shall mean  the fees and expenses of counsel to the parties hereto, which may include printing, photostating, duplicating and other expenses, air freight charges, and fees billed for law clerks, paralegals, librarians and others not admitted to the bar but performing services under the supervision of an attorney.  The terms “attorneys’ fees” or “attorneys’ fees and costs” shall also include, without limitation, all such fees and expenses incurred with respect to appeals, arbitrations and bankruptcy proceedings, and whether or not any action or proceeding is brought with respect to the matter for which said fees and expenses were incurred.  The term “attorney” shall have the same meaning as the term “counsel.”

(i)

Governing Law

.  This Agreement, and the application of interpretation hereof, shall be governed by its terms and by the laws of the State of Delaware, but shall be subject to the provisions of Chapter 119 of the Florida Statutes, Florida Statute 215.44(a) and (b), and Florida Statute 215.44(9).  In the event of any conflict between the laws of the State of Delaware and the foregoing Florida statues, the Florida statutes shall be given effect.  Any dispute between the parties hereto shall be adjudicated in the Federal District Court having jurisdiction over Wilmington, Delaware, applying Delaware law; provided that the procedure rules of such District Court will apply.

(j)

Successors and Assigns

.  This Agreement and the terms and provisions hereof shall inure to the benefit of and be binding upon the successors and assigns of the parties hereto.

(k)

Counterparts

.  This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same document.  Any signature page of this Agreement may be detached from any counterpart of this Agreement and re-attached to any other counterpart of this Agreement identical in form hereto but having attached to it one or more additional signature pages.

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(l)

Incorporation of Attachments

.  All Recitals to this Agreement and all exhibits, schedules and other attachments attached to this Agreement and referenced herein are by this reference incorporated herein.

[Signatures on following page]

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

“INLAND”

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC., a Maryland corporation

By:

Its:

“THE COMPANY”

MS INLAND FUND, LLC, a Delaware limited liability company

By:  

Inland Western Retail Real Estate Trust, Inc.

its Manager

By:

Its:

“THE BOARD”

THE FLORIDA RETIREMENT SYSTEM TRUST FUND BY AND THROUGH ITS NOMINEE THE STATE BOARD OF ADMINISTRATION OF THE STATE OF FLORIDA

By:

Morgan Stanley Real Estate Advisor, Inc., its Investor Advisor, as authorized agent

By:

Name:

Title:

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EXHIBIT A

EXISTING PORTFOLIO SPES

Entity	Existing Portfolio Project
Inland Western San Antonio Huebner Oaks Limited Partnership, an Illinois limited partnership	Huebner Oaks
Inland Western Oswego Douglass, L.L.C., a Delaware limited liability company	Oswego Commons
Inland Western Dallas Lincoln Park Limited Partnership, an Illinois limited partnership	Lincoln Park
Inland Western Duluth John’s Creek SPE, L.L.C., a Delaware limited liability company	John’s Creek Village
Inland Western Bay Shore Gardiner, L.L.C., a Delaware limited liability company	Gardiner Manor Mall
Inland Western Royal Palm Beach Commons, L.L.C., a Delaware limited liability company	Commons at Royal Palm
Inland Western Southlake Corners Limited Partnership, an Illinois limited partnership	Southlake Corners

A-1

EXHIBIT B

EXISTING LOANS

Existing Project Entity	Existing Loan
Inland Western San Antonio Huebner Oaks Limited Partnership, an Illinois limited partnership	Deed of Trust to S.P. Franzenburg, Trustee, recorded on June 24, 2004, in Volume 10819, Page 775, in the original principal amount of $31,723,000.00 and $16,277,000.00, payable to Principal Life Insurance Company.
Inland Western Oswego Douglass, L.L.C., a Delaware limited liability company	Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, recorded on December 23, 2004 as Instrument No. 200400035752, in the original principal amount of $19,262,100.00, payable to Nomura Credit & Capital, Inc.
Inland Western Dallas Lincoln Park Limited Partnership, an Illinois limited company	Deed of Trust, Security Agreement and Fixture Filing to Karl V. Hunter, Trustee, dated as of October 8, 2004, recorded in Book 2004239 Page 3140, in the original principal amount of $26,153,000.00, payable to LaSalle Bank National Association.
Inland Western Duluth John’s Creek SPE, L.L.C., a Delaware limited liability company	Deed to Secure Debt, Assignment of Leases and Rents and Security Agreement, recorded July 20, 2004 in Book 38051, Page 594, in the original principal sum of $23,300,000.00, payable to John Hancock Life Insurance Company.
Inland Western Bay Shore Gardiner, L.L.C., a Delaware limited liability company	Severed, Amended and Restated Mortgage and Security Agreement, recorded on _________, 2007, in Book _____, Page ______, in the original principal sum of $36,300,000.00, payable to Mortgage electronic Registration Systems, Inc., as nominee of Bear Stearns Commercial Mortgage, Inc.

B-1

Existing Project Entity (cont’d)	Existing Loan (cont’d)
Inland Western Royal Palm Beach Commons, L.L.C., a Delaware limited liability company	Renewal, Amended, Consolidated and Restated Mortgage, Assignment of Leases and Rents, and Security Agreement dated October 2, 2002, recorded in Book 14231, Page 490, in the original principal sum of $14,143,911.56 payable to Wells Fargo Bank, N.A. (successor by consolidation to Wells Fargo Bank Minnesota, N.A.) as Trustee and REMIC Administrator, under that certain Pooling and Servicing Agreement dated as of November 1, 2003 for certificate holders of Banc of America Commercial Mortgage Inc., Commercial Mortgage Pass-Through Certificates, Series 2003-2.
Inland Western Southlake Corners Limited Partnership, an Illinois limited partnership	Deed of Trust, Security Agreement and Assignment of Leases and Rents to Brenda Tyler, Trustee, recorded on December 29, 2006 as Instrument No. D207003797, in the original principal amount of $20,625,000.00, payable to Principal Commercial Funding, LLC.

B-2

EXHIBIT C

RENT ROLLS

C-1

EXHIBIT D

SERVICE CONTRACTS

Existing Portfolio Project

Service Contracts

Huebner Oaks

1. Service Agreement for power vacuum sweeping (Unit 1), dated January 31, 2007, by and between Inland Southwest Management, LLC and Alamo Lot Maintenance, LTD, L.L.P. 2. Service Agreement for power vacuum sweeping (Unit 2), dated January 31, 2007, by and between Inland Southwest Management, LLC and Alamo Lot Maintenance, LTD, L.L.P. 3. Service Agreement for waste removal, dated April 18, 2006, by and between Inland Southwest Management, LLC and Allied Waste Services 4. Service Agreement for storage unit rental, dated July 26, 2006, by and between Inland Southwest Management, LLC and Falcon Storage 5. Contract for On-Site Security Services, dated May 1, 2006, by and between Inland Southwest Management, LLC and Lender Protective Services, Inc. 6. Service Agreement for lot maintenance, dated February 1, 2007, by and between Inland Southwest Management, LLC and Longhorn Lot Maintenance 7. Service Agreement for maintenance of the waterfall fountain, dated July 20, 2006, by and between Inland Southwest Management, LLC and Longhorn Lot Maintenance 8. Service Agreement for landscaping, dated March 1, 2007, by and between Inland Southwest Management, LLC and MLC Landscaping Co., Inc. 9. Service Agreement for Musak subscription, dated October 15, 2006, by and between Huebner Oaks Center c/o Inland Southwest Management, LLC and Texas Wired Music, Inc. 10. Service Agreement for fire and security services, dated January 8, 2007, by and between Inland Southwest Management Corp. and SimplexGrinnell LP 11. Service Agreement for fire and security services, dated September 1, 2006, by and between Inland Southwest Management Corp. and SimplexGrinnell LP 12. Contract for On-Site Security Services, dated May 1, 2006, by and between Inland Southwest Management, LLC and Lender Protective Services, Inc.

D-1

Oswego Commons

1. Service Agreement for landscaping, dated July 26, 2006, by and between Inland US Management, LLC and Big Timber Landscaping Co. 2. Service Agreement for snow removal, dated October 17, 2006, by and between Inland US Management, LLC and Tovar Snow Professionals 3. Service Agreement for waste removal, dated March 16, 2006, by and between Inland US Management, LLC and Waste Management of Illinois 4. Service Agreement for lot maintenance, dated August 1, 2005 by and between Inland US Management LLC and Active Maintenance. 5. Alarm Services Agreement for alarm monitoring, dated March 1, 2004, by and between Oswego Commons, c/o CB Richard Ellis and LV Tech Inc.

Lincoln Park

1. Service Agreement for alarm monitoring, dated July 1, 2006, by and between Inland Southwest Management, LLC and DSS Fire, Inc. 2. Service Agreement for landscaping, dated July 1, 2005, between Inland Southwest Management, LLC and Precision Landscape Management, Inc. 3. Service Agreement for lot maintenance, dated September 27, 2006, by and between Inland Southwest Management, LLC and Advanced Commercial Solutions 4. Service Agreement for power washing, dated August 3, 2006, by and between Inland Southwest Management, LLC and Advanced Commercial Solutions 5. Contract for On-Site Security Services, dated February 1, 2006, by and between Inland Southwest Management, LLC and Thomas Protective Service, Inc. 6. Service Agreement for power sweeping and maintenance, dated November 10, 2006, by and between Inland Southwest Management, LLC and Circle E Enterprises 7. Service Agreement for waste removal, dated February 2006, by and between Inland Southwest Management, LLC and Waste Management of Texas, Inc. 8. Service Agreement for water meter reading, dated January 1, 2006, by and between Inland Southwest Management and Hocutt, Inc. 9. Contract for On-Site Security Services, dated February 1, 2006, by and between Inland Southwest Management, LLC and Thomas Protective Services, Inc. 10. Service Agreement for lot maintenance, dated February 26, 2007, by and between Inland Western Dallas Lincoln Park LP and Maintenance of America, Inc. 11. Service Agreement for porter service, dated February 26, 2007, by and between Inland Western Dallas Lincoln Park LP and Maintenance of America, Inc.

D-2

John’s Creek Village

1. Pest Control Services Contract, commencing January 1, 2006, by and between Inland US Management LLC and Northwest Exterminating 2. Service Agreement for pest extermination, dated May 1, 2006, by and between Inland US Management, LLC and Northwest Exterminating 3. Service Agreement for Muzak subscription, dated September 20, 2004, by and between Inland Northwest Management and Muzak LLC 4. Service Agreement for hallway maintenance, dated January 20, 2006, by and between Inland US Management, LLC and L.E.F. Inc 5. Service Agreement for landscaping, dated May 15, 2006, by and between Inland US Management, LLC and TruGreen Landcare LLC 6. Service Agreement for lot maintenance, dated March 21, 2007, by and between Inland US Management, LLC and Cleaning Sweeping Services 7. Service Agreement for non-hazardous waste removal, dated November 21, 2003, by and between Hendon Properties on behalf of John’s Creek Village and United, a division of Republic Services of GA, LP 8. Service Agreement for landscaping, dated May 15, 2006, by and between Inland US Management, LLC and TruGreen Landcare LLC

Gardiner Manor Mall

1. Contract for On-Site Security Services, dated July 25, 2006, by and between Inland US Management LLC and A-Aron Security Services, Inc. d/b/a Arrow Security d/b/a Knights Protections Inc. 2. Service Agreement for landscaping, dated April 6, 2006, by and between Inland US Management LLC and The Brickman Group Ltd. 3. Service Agreement for pest control services, dated July 29, 2006, by and between Inland US Management and Orkin Pest Control/Orkin Commercial Services 4. Service Agreement for lot maintenance, dated October 12, 2005, by and between Inland US Management LLC and TEAM Construction Co. Inc 5. Service Agreement for landscaping, dated October 6, 2006, by and between Inland US Management LLC and Terri Associates Landscape Corp. 6. Contract for On-Site Security Services, dated July 25, 2006, by and between Inland US Management, LLC and A-Aron Security Services, Inc. d/b/a Knights Protection Inc.

D-3

Commons at Royal Palm

1. Service Agreement for alarm monitoring, dated August 28, 2006, by and between Inland US Management, LLC and Advance AlarmService Inc. 2. Service Agreement for lot maintenance, commencing October 1, 2006, by and between Inland US Management, LLC and Committed to Detail, Inc. 3. Service Agreement for pressure washing, dated January 8, 2007, by and between Inland US Management, LLC and Committed to Detail, Inc. 4. Service Agreement for landscaping, dated April 3, 2006, by and between Inland US Management, LLC and Palm Beach Maintenance, Inc.

Southlake Corners

1. Service Agreement for lot maintenance and sweeping, dated February 9, 2007, by and between Inland Southwest Management LLC and Champion Sweeping Company 2. Service Agreement for alarm monitoring, dated February 12, 2007, by and between Inland Southwest Management LLC and DSS Fire, Inc. 3. Service Agreement for landscaping, dated February 12, 2007, by and between Inland Southwest Management LLC and Precision Landscape Management 4. Service Agreement for pest control, dated July 20, 2006, by and between Inland Southwest Management LLC and Myers Pest & Termite Services, Inc. 5. Service Agreement for alarm monitoring, dated February 12, 2007, by and between Inland Southwest Management LLC and DSS Fire, Inc. 6. Service Agreement for waste management, dated March 27, 2007, by and between Southlake Corners and Allied Waste Services

D-4

EXHIBIT E

Intentionally deleted.

E-1

EXHIBIT F

ASSIGNMENT AND ASSUMPTION OF OWNERSHIP INTERESTS

THIS ASSIGNMENT AND ASSUMPTION OF OWNERSHIP INTERESTS(“Assignment”), is made and entered into as of ___________, 200_, by and between INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.,, a Maryland corporation (“Transferor”), and MS INLAND FUND, LLC, a Delaware limited liability company [Inset other subsidiaries if any ownership interests will be held indirectly] (each, a “Transferee”).

Transferor, The Florida Retirement System Trust Fund, as defined in Florida Statutes Section 121.021(36), acting by and through The State Board of Administration of the State of Florida, and MS Inland Fund, LLC, a Delaware limited liability company, are parties to that certain Contribution Agreement dated as of _______, 200_ (the “Contribution Agreement”).  All initially capitalized terms used but not defined herein shall have the meanings given to such terms in the Contribution Agreement.

For a valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Transferor hereby sells, grants, conveys, transfers and assigns to Transferee without representation or warranty except as expressly set forth herein or in the Contribution Agreement, all of such of Transferor’s rights, title and interest in and to 100% of the equity interests in the Existing Portfolio SPEs more particularly described on Schedule 1 attached hereto and hereby made a part hereof and all of such Transferor’s right, title and interest in, to and under the limited liability company agreement (each, an “Operating Agreement”),  of each of such Existing Portfolio SPE including, without limitation, all interests of such Transferor in and to distributions, profits and losses and all approval, voting, consent and other rights of such Transferor of any character whatsoever arising under or in connection with the applicable Operating Agreement (as applicable, the “Ownership Interests”).  Transferee hereby assumes the Ownership Interests and all obligations of Transferor under the Operating Agreements.  Transferor hereby withdraws from the applicable Existing Portfolio SPE effective as of the date hereof.

Transferor hereby covenants that it will, at any time and from time to time upon written request therefor, at the Transferee’s sole expense and without the assumption of any additional liability thereby, execute and deliver to Transferee, its successors and assigns, any new or confirmatory instruments and take such further acts as Transferee may reasonably request to fully evidence the assignment contained herein and to enable Transferee, its successors and assigns to fully realize and enjoy the rights and interests assigned hereby.

The provisions of this Assignment shall be binding upon, and shall inure to the benefit of, the successors and assigns of the Transferor and the Transferee, respectively.  This Assignment may be executed in any number of counterparts, each of which shall be deemed an original, but all of which when taken together shall constitute one and the same instrument.

[Signatures on the Following Page]

F-1

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

ASSIGNORS:

[INSERT SIGNATURE BLOCKS]

ASSIGNEES:

[INSERT SIGNATURE BLOCKS]

F-2

SCHEDULE 1

F-3

EXHIBIT G

TITLE MATTERS

Huebner Oaks

·

Terms, conditions and provisions contained in Volume 6832, Page 1116 and Volume 6849, Page 1193 amended by Volume 7104, Page 32, Real Property Records of Bexar, Texas.

·

Reciprocal Easement Agreement recorded at Volume 7032, Page 1332, in Real Property Records of Bexar County, Texas.

·

Declaration of Easement recorded at Volume 7273, Page 466, in Real Property Records of Bexar County, Texas.

·

Matters shown on plat recorded at Volume 9536, Page(s) 79-80, in Real Property Records of Bexar County, Texas.

·

Memorandum of Lease between San Antonio Huebner Oaks, Ltd., and Ross Stores, Inc. recorded at Volume 6820, Page 1669, and Volume 6979, Page 1137, in Real Property Records of Bexar County, Texas.

·

First Amendment to Memorandum of Lease recorded at Volume 6908, Page 432, in Real Property Records of Bexar County, Texas.

·

Subordination, Non-Disturbance and Attornment recorded at Volume 7273, Page 570, in Real Property Records of Bexar County, Texas.

·

Subordination, Non-Disturbance and Attornment Agreement recorded at Volume 7273, Page 558, in Real Property Records of Bexar County, Texas.

·

Memorandum of Lease between San Antonio Huebner Oaks, Ltd., and San Antonio Bed Bath & Beyond Inc., recorded at Volume 6684, Page 1110, in Real Property Records of Bexar County, Texas.

·

Subordination, Non-Disturbance and Attornment Agreement recorded at Volume 7273, Page 580, in Real Property Records of Bexar County, Texas.

·

Memorandum of Lease between San Antonio Huebner Oaks Limited, and Borders, Inc. recorded at Volume 6689, Page 1854, in Real Property Records of Bexar County, Texas.

·

Subordination, Non-Disturbance and Attornment Agreement recorded at Volume 7273, Page 605, in Real Property Records of Bexar County, Texas.

·

Memorandum of Lease between San Antonio Huebner Oaks Limited, and Pier 1 Imports (U.S.), Inc. recorded at Volume 7093, Page 1902, in Real Property Records of Bexar County, Texas.

·

Subordination, Non-Disturbance and Attornment Agreement recorded at Volume 7273, Page 595, in Real Property Records of Bexar County, Texas.

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·

Memorandum of Lease between San Antonio Huebner Oaks Limited, and The Gap (Texas) L.P. recorded at Volume 7390, Page 751, in Real Property Records of Bexar County, Texas.

·

Memorandum of Lease between San Antonio Huebner Oaks Limited, and Banana Republic (East) L.P. recorded at Volume 7408, Page 964, in Real Property Records of Bexar County, Texas.

·

Subordination, Non-Disturbance and Attornment Agreement recorded at Volume 7413, Page 1180, in Real Property Records of Bexar County, Texas.

·

Amendment to SNDA recorded at Volume 9526, Page 500, in Official Public Records of Real Property of Bexar County, Texas.

·

Memorandum of Lease between San Antonio Huebner Oaks Limited, and Renaissant Development Corporation recorded at Volume 7025, Page 191, in Real Property Records of Bexar County, Texas.

·

Subordination, Non-Disturbance and Attornment Agreement recorded at Volume 9391, Page 2131, in Real Property Records of Bexar County, Texas.

·

Amendment to SNDA recorded at Volume 9526, Page 500, in Official Public Records of Real Property of Bexar County, Texas.

·

Subordination, Non-Disturbance and Attornment Agreement recorded at Volume 7433, Page 1547, in Real Property Records of Bexar County, Texas.

·

Subordination, Non-Disturbance and Attornment Agreement recorded at Volume 7433, Page 1562, in Real Property Records of Bexar County, Texas.

·

Assignment of Leases between San Antonio Huebner Oaks, SSH, Ltd., and MNC Restaurant Properties, LP, recorded at Volume 7273, Page 484 in Real Property Records of Bexar County, Texas.

·

Assignment and Assumption of Ground Lease recorded at Volume 10819, Page 947, in Official Public Records of Real Property of Bexar County, Texas.

·

Matters shown on plat recorded at Volume 9540, Page 142, in Deed and Plat Records of Bexar County, Texas.

·

Application and Agreement for Service recorded at Volume 7836, Page 674, Page 689, and Page 692, in Official Public Records of Real Property of Bexar County, Texas.

·

Matters Shown on plat recorded at Volume 9534, page(s) 204-205, in Deed and Plat Records of Bexar County, Texas.

·

Application for Service recorded at Volume 7497, Page 1435, in Official Public Records of Real Property of Bexar County, Texas.

·

Landlord’s Agreement and Waiver, recorded at Volume 10615, page 591, in Official Public Records of Real Property of Bexar County, Texas.

G-2

Oswego Commons

·

Mortgage dated November 23, 2004 and recorded December 23, 2004 as Document 200400035752 made by Inland Western Oswego Douglass, L.L.C., a Delaware limited liability company to Nomura Credit & Capital, Inc. to secure a note for $19,262,100.00.  Assignment to Wells Fargo Bank NA as trustee for the registered holders recorded June 21, 2005 as Document 2005017448.

·

Security Interest of Nomura Credit & Capital, Inc., secured party, in certain described chattels on the land, as disclosed by Financing Statement naming Inland Western Oswego Douglass, L.L.C. as debtor and recorded December 23, 2004 as Document no. 200400035754.

·

Assignment of Leases and Rents recorded December 23, 2004 as Document 200400035753 made by Inland Western Oswego Douglass, L.L.C., a Delaware limited liability company to Nomura Credit & Capital, Inc.

·

Assignment of Rents recorded June 21, 2005 as Document no. 2005017449 made by Nomura Credit & Capital Inc. to JP Mortgage Chase Commercial Mortgage Securities Corp.

·

Report on the Regulation of Construction Within the Flood Plain of Waubansee Creek and its Tributaries recorded October 4, 1976 as Document 76-4993 defining the flood plain and establishing the permit procedure for regulation of construction.

·

Per Plat of Oswego Commons subdivision recorded April 20, 2001 as Document 200100006694, the following:

o

Building lines as follows:  20 feet along the easterly line (along Douglas Road) of Lots 4, 5, and 20; the westerly 30 feet of Lot 20 (along common border with Fox Bend Golf Club only).

o

Lot 20 reserved for storm water easement purposes.

o

30 foot sanitary easement along the easterly line of Lot 20.

o

10’ x 20’ sign easement on the easterly line of Lot 5 (see plat for exact location); 10’ x 20’ sign easement affecting the 10’ x 45’ sign easement at the most southeasterly corner of Lot 20.

o

10 foot drainage easement granted to Village of Oswego, its successor and/or assigns, affecting a portion of Lots 4, 5 and 20 (see plat for exact location).  Oswego commons municipal utility maintenance agreement as set forth on plat recorded April 20, 2001 as Document 200100006694, and the terms and conditions contained therein.

·

Public utility easements granted to Com Ed, the authorized cable TV company, Nicor and Ameritech, their successors and/or assigns, affecting a 10 foot wide area in the southeasterly portion of Lot 4 (see plat for exact location); various areas 10 feet in width on Lot 10 along the northerly and easterly portions thereof (see plat for exact location);

·

Municipal utility easements granted to the village of Oswego, its successors and/or assigns, as set forth on plat aforesaid, of various widths and locations affecting approximately the following:  the northerly portion of Lots 4, 10, and 20; running through the middle of Lot 4 and an easterly portion of Lot 4; through Lot 5, and an easterly portion of Lot 20 (see plat for exact locations and dimensions).

G-3

Note:  no permanent structures obstructions or hard surfaces to be placed in said easement areas.

·

Note:  on the plat of Oswego commons recorded April 20, 2001 as Document 200100006694, that no direct access to highway 34 is allowed from Lots 6 through 9 and 13 through 18.

·

Operation and Easement Agreement between Target Corporation, Home Depot U.S.A., Inc., Dominick’s Finer Foods, Inc. and Ryan Companies US, Inc.  Regarding Oswego Commons dated March 27, 2001 and recorded April 20, 2001 as Document 200100006700, and the terms and conditions contained therein.  First Amendment thereto recorded September 28, 2001 as Document 200100018167.  Second Amendment recorded October 3, 2002 as Document 20020023045.  Third Amendment recorded December 3, 2002 as Document 20020030171.  Fourth Amendment recorded February 11, 2004 as Document 200400003501.  Fifth Amendment dated March 9, 2005 and recorded March 11, 2005 as Document 200500007029, aforesaid records.

·

Restrictive covenant pursuant to the provisions of River, Lakes and Streams Act, 615ILCS 5 (1994 State Bar Edition), made by Ryan Companies US Inc., a Minnesota corporation in connection with planned construction of the Oswego Commons Shopping Center as set forth in Document dated February 28, 2001 and recorded March 13, 2001 as Document 200100004072, in Kendall County, Illinois, affecting the southerly portion of the land (affects Lot 20).

·

Annexation Agreement recorded April 20, 2001 as Document 200100006635 made by and between the Village of Oswego, a municipal corporation and Francis D. Spooner, and the terms and conditions contained therein.

·

Annexation agreement recorded April 20, 2001 as Document 200100006634 made by and between the Village of Oswego, a municipal corporation and Douglas L.L.C., an Illinois limited liability company and Wolfe's Crossing L.L.C., an Illinois limited liability company and the terms and conditions contained therein.

·

Terms, provisions, and conditions relating to the easements described as parcels two, three and four contained in the instruments creating said easements; and

Rights of the adjoining owner or owners to the concurrent use of said easements.

·

Grant of easement to Ryan Companies US, Inc. From Douglas, L.L.C. an Illinois limited liability company, for storm water compensatory storage area and inspection and maintenance required by Village of Oswego ordinance no. 01-R-06 to Ryan Companies US, Inc. dated March 27, 2001 and recorded April 20, 2001 as Document 200100006644, and the terms and conditions contained therein.

·

Grant of easement to Ryan Companies US, Inc. From Douglas, L.L.C. an Illinois Limited liability company for storm sewer purposes to Ryan Companies US, Inc. Dated March 27, 2001 and recorded April 20, 2001 as Document 200100006645, and the terms and conditions contained therein.

·

Ordinance annexing property-Francis D. Spooner, recorded April 20, 2001 as Document 200100006637.

·

Ordinance annexing property-Greenside, recorded April 20, 2001 as Document 200100006636.

G-4

·

Ordinance rezoning certain property and granting a special use for a planned unit development-Greenside recorded April 20, 2001 as Document 200100006638.

·

Ordinance rezoning certain property and granting a special use for a planned unit development-southwest corner of Route 34 and New Douglas Road recorded April 20, 2001 as Document 200100006639.

·

Grant of easement for signage made by Ryan Companies US, Inc. to Douglas, L.L.C. dated March 27, 2001, recorded April 20, 2001, as Document 200100006643.

·

Plat of annexation-Greenside, recorded April 20, 2001 as Document 200100006636 (Flat File 8-14).

·

Plat of annexation-Francis D. Spooner, recorded April 20, 2001 as Document 200100006637 (Flat File 8-15).

·

Lighting agreement supplemental to Operation and Easement Agreement between Ryan Companies US, Inc. and Target Corporation, dated March 27, 2001 and recorded April 20, 2001 as Document 200100006701.

·

Supplement to Operation and Easement Agreement between Ryan Companies US, Inc. and Home Depot U.S.A., Inc., dated March 27, 2001 and recorded April 20, 2001 as Document 200100006702.

·

Exclusive, perpetual easement in favor of Fox Metro Water Reclamation District for the purpose of construction and maintenance of interceptor sewer pipeline dated January 24, 2001 and recorded/filed May 1, 2001 as Document no. 200100007319 affecting parts of Lots 4, 5 and 20, 30 feet in width along Douglas Road, and the terms and provisions contained therein.

·

Agreement by and between Ryan Companies US, Inc. et al. and the Village of Oswego regarding parking and traffic regulation over the common areas on Lots 1 through 5 inclusive and Lot 19, and the portions of the front drive located on Lots 10 and 12 recorded March 13, 2002 as Document 200200006526, and the terms and conditions contained therein.

·

Certificate of correction to the plat of Oswego Commons, recorded March 7, 2002 as Document 200200006006 made by Smith Engineering Consultants, Inc.

·

Lease made by Officemax Inc to Ryan Companies US Inc dated March 31, 2003, a memorandum of which was recorded September 28, 2004 as Document no. 2004026975.

·

Terms, conditions and provisions contained in an Exclusive Agreement recorded April 11, 2002 as Document 200200008848 made by and between Ryan Companies US, Inc. And Brinker Restaurant Corporation,  restricting the lease or sale of space to one and only one of the following on Lots 5,  10 and 12  in said Oswego Commons: Ruby Tuesday's, Bennigans,  TGI Friday's, Applebee's, O'Charley's, Cheddar's, Red Robin, or Houlihan's.

·

Declaration made by Ryan Companies US, Inc. Dated March 15, 2002 and recorded April 5, 2002 as Document 200200008379, restricting the use on Lots 2, 5, 10 and 12

G-5

·

Ordinance # 02-78 granting variance to the Final Planned Unit Development, made by Village of Oswego, recorded January 16, 2003 as Document 20030001649, and the terms and conditions contained therein.

·

Declaration of exclusive use recorded October 14, 2003 as Document 200300037121, made by and between Ryan Companies US, Inc. and West Suburban Bank, owner of Lot 15, that Lots 5 10 and 12 are restricted from being used as a retail banking facility; and the other terms and conditions contained therein.

·

Building set-back lines, easements, covenants conditions and restrictions as set forth on plat of resubdivision of Oswego Commons Lots 2 and 11, being a resubdivision of Lots 2 and 11 of Oswego commons, in Township 37 North, Range 8 East of the Third Principal Meridian, Kendall County, Illinois, according to the plat thereof recorded October 29, 2003 as Document 200300039003.

·

Restrictive covenant dated November 15, 2002 and recorded July 26, 2002 as Document 200200016955 restricting sale, use or occupancy as a quick service restaurant, on Lots 4 and 5

·

Ordinance no. 02-20 recorded June 5, 2002 as Document 200200012934, granting an amendment to the Final Planned Unit Development (P.U.D.) for Oswego Commons Shopping center, Lot 5 in the village of Oswego, Kendall County, Illinois.

·

Ordinance no. 01-91 recorded July 24, 2002 as Document 200200016824, granting approval of a Final Planned Unit Development in the Village of Oswego, Kendall County, Illinois Oswego Commons - outLots 10, 11 and 12.

·

Ordinance no. 03-71 recorded October 29, 2003 as Document 200300039004, granting approval of an amendment to the Final Planned Unit Development in the Village of Oswego, Kendall County, Illinois Lot 11.

·

Ordinance no. 01-111 recorded June 5, 2002 as Document 200200012936, granting a Final Planned Unit Development (P.U.D.) for Oswego Commons Outlot 16 in the Village of Oswego, Kendall County, Illinois.

·

Certificate of correction to plat of Oswego Commons recorded August 2, 2001 as Document 200100014013.

Lincoln Park

·

Terms, conditions and provisions contained in Volume 97025, Page 4489 and Volume 97216, Page 2569 Real Property Records, Dallas County, Texas.

·

Easements and or building lines as shown on recorded plat recorded at Volume 97182, Page 4718 in Map Records, Dallas County, Texas.

·

Easement granted by Raymond D. Nasher to Lone Star Gas Company recorded in Volume 90153, Page 1590 on August 6, 1990 in Real Property Records, Dallas County, Texas.

·

Easement granted by Raymond D. Nasher to Southwestern Bell Telephone Company recorded in Volume 90153, Page 1596 on August 6, 1990 in Real Property Records, Dallas County, Texas.

G-6

·

Easement granted by LPC Park Limited Partnership and LPC Park Land Limited Partnership to Texas Utilities Electric Company recorded in Volume 97145, Page 2318 on July 25, 1997 in Real Property Records, Dallas County, Texas.

·

Terms, conditions, easements, assessments and liens securing assessments for Lincolnshire Addition, as set out in covenants and restrictions recorded in Volume 97186, Page 4996; Volume 98121, Page 9718 and Volume 2001247, Page 7213 recorded in Real Property Records, Dallas County, Texas.

·

Agreement Regarding Easement and Restrictions executed by and between LPC Park Land Limited Partnership; LPC Park Limited Partnership and First National Bank of Park Cities, recorded at Volume 97186, Page 5044 on September 24, 1997 in Real Property Records, Dallas County, Texas.

·

Memorandum of Lease Agreement between Lincoln Property Company CSE, Inc., as Lessor, and The Container Store, Inc., as Lessee recorded at Volume 97060, Page 607 on March 27, 1997 in Real Property Records, Dallas County, Texas.

·

Subordination Non-Disturbance and Attornment Agreement recorded at Volume 2004196, Page 10293 on March 27, 1997 in Real Property Records, Dallas County, Texas.

·

Memorandum of Lease Agreement between LPC Park Limited Partnership, as Lessor, and Cheesecake Corporation of America, as Lessee recorded at Volume 98011, Page 6919 on January 16, 1998 in Real Property Records, Dallas County, Texas.

·

Subordination Non-Disturbance and Attornment Agreement recorded at Volume 2004196, Page 10293 on January 16 1998 in Real Property Records, Dallas County, Texas.

·

Lease Agreement by Lincoln Property Company DSE, Inc. as Landlord and Barnes & Noble Booksellers as Tenant.

·

Easement Agreement recorded at Volume 99003, Page 6895 on January 5, 1999 in Real Property Records, Dallas County, Texas.

·

Plat recorded at Volume 97182, Page 4718 in Map Records, Dallas County, Texas.

·

Wastewater Easement by Raymond D. Nasher to City of Dallas recorded at Volume 90153, page 1628 on August 5, 1990 in Deed Records, Dallas County, Texas.

·

Water and Wastewater Easement executed by and between Raymond D. Nasher, a single man and the City of Dallas recorded at Volume 90153, Page 1620 on August 5, 1990 in Deed Records, Dallas County, Texas.

·

Water and Wastewater Easement executed by and between Raymond D. Nasher, a single man and City of Dallas recorded at Volume 94037, Page 5274 on February 25, 1994 in Deed Records, Dallas County, Texas.

·

Plat recorded at Volume 99057, Page 70 in Map Records, Dallas County, Texas.

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·

Easement granted by Lincoln Property Company No. 2396, Ltd. et al to TXO Electric Company recorded at Volume 2000022, Page 6218 on February 2, 2000, in Real Property Records, Dallas County, Texas.

·

Deed of Trust executed by Inland Western Dallas Lincoln Park Limited Partnership to Karl V. Hunter, Trustee payable to LaSalle Bank National Association recorded at Volume 2004195, Page 7262, on October 8, 2004, in Real Property Records, Dallas County, Texas and re-filed at Volume 2004239, Page 3140.

·

Assignment of Leases and Rents recorded at Volume 2004195, Page 7315 in Real Property Records, Dallas County, Texas.

·

Assignment of Note having been assigned to Wells Fargo Bank, N.A., as Trustee for the Registered Holders of COMM 2004-LNB4 Commercial Mortgage Pass-Through Certificates recorded at Volume 2005051, Page 6187 in Real Property Records, Dallas County, Texas.

·

Subordination Non-Disturbance and Attornment Agreements recorded at Volume 2004196, Page 10293; Volume 2004196, Page 10306 and Volume 2004196, Page 10323 in Real Property Records, Dallas County, Texas.

·

Financing Statement recorded at Volume 2004199, Page 40 in Real Property Records, Dallas County, Texas.

·

UCC3 Assigning intent to Wells Fargo Bank, N.A., as Trustee for the Registered Holders of COMM 2004-LNB4 Commercial Mortgage Pass-Through Certificates recorded at Volume 2005051, Page 6203, in Real Property Records, Dallas County, Texas.

·

Leasehold Deed of Trust executed by MESA S.W. Restaurants-Lincoln Park, L.P., to Eugene F. Weiner, Trustee payable to Compass Bank recorded at Volume 98241, Page 5664 on December 11, 1998, in Real Property Records, Dallas County, Texas.

·

UCC-1 Financing Statement given by MESA S.W. Restaurants-Lincoln Park, L.P., granting unto Blue Mesa Grill recorded at Volume 99141, Page 592 on January 21, 1999, in Real Property Records, Dallas County, Texas.

·

Continuation recorded at Volume 2003217, Page 5806, in Real Property Records, Dallas County, Texas.

·

UCC-1 Financing Statement given by Red Door Salons, Inc., granting unto Antares Capital Corporation recorded at Volume 2003136, Page 8131 on July 15, 2003, in Real Property Records, Dallas County, Texas.

John’s Creek Village

·

Survey of subject property prepared for Inland Real Estate Acquisitions, Inc., Inland Western Duluth John’s Creek, L.L.C., Hendon/JDN Johns Creek Village, LLC, a Georgia limited liability company and Chicago Title Insurance Company by James J. Lockhart, Georgia Registered Land Surveyor No. 2068, Hannon, Meeks & Bagwell, Inc., dated June 18, 2004, last revised June 29, 2004 reveals the following:

o

Department of transportation slope easement located in the eastern portion of subject property;

G-8

o

10-foot Sawnee Electric Membership easement located in the eastern portion of subject property;

o

20-foot sanitary sewer easement located in the western portion of subject property;

o

Drainage facilities located in various portions of subject property;

o

Access drive and 20-foot sanitary sewer easement located in the southern portion of subject property; and

o

electrical, gas, water and telephone facilities located in various portions of subject property.

·

Easements, encroachments, overlaps, boundary line disputes, or any other matters which would be disclosed by a current accurate survey and inspection of subject property, subsequent to June 29, 2004.

·

Easements contained in Right-of-Way Deeds to Fulton County, Georgia, as follows:

o

from R.D. Medlock, et al, dated March 1, 1932, recorded in Deed Book 1323, Page 417, Fulton County, Georgia Records;

o

from John t. Settle, et al, to Fulton County, dated February 4, 1957, recorded in Deed Book 3310, Page 366, Fulton County, Georgia Records;

o

from Waltech II Associates dated July 8, 1989, recorded in Deed Book 13516, Page 252, Fulton County, Georgia Records;

o

from Waltech II Associates dated January 16, 1991, recorded in Deed Book 14004, Page 305, Fulton County, Georgia Records; and

o

from Technology Park/Atlanta, Inc., dated June 8, 1992, recorded in Deed Book 15421, Page 142, Fulton County, Georgia Records.

·

Easements contained in Right-of-way Deed from John T. Settle, et al, to Forsyth County, dated February 4, 1957, recorded in Promiscuous Docket Book D, Page 405, Forsyth County, Georgia Records.

·

Department of Transportation State of Georgia Conveyance of Access Rights from Technology Park/Atlanta, Inc. to Department of Transportation, State of Georgia, dated January 24, 1985, recorded in Deed Book 9630, Page 315, Fulton County, Georgia Records.

·

Department of Transportation State of Georgia Conveyance of Access Rights from Waltech II Associates to Department of Transportation, State of Georgia, dated April 20, 1986, recorded in Deed Book 11481, Page 11, Fulton County, Georgia Records.

·

Right-of-Way Easement from Waltech II Associates to Sawnee Electric Membership Corporation, dated February 18, 1991, recorded in Deed Book 14106, page 189, Fulton County, Georgia Records.

·

Amended and Restated Declaration of Protective Covenants for John Creek by Technology Park/Atlanta, Inc., dated as of March 5, 1992, recorded in Deed Book 15076, Page 232, Fulton County, Georgia Records, as amended by instruments recorded in Deed Book 15519, page 330, aforesaid records; Deed Book 17825, Page 253, aforesaid records; Deed Book 19488, Page 337, aforesaid records; Deed Book 20939, Page 300, aforesaid records; Deed Book 22491, Page 36, aforesaid records; Deed Book 23835, Page 251, aforesaid records; and Deed Book 29899, Page 300, aforesaid records.

G-9

·

Flood Plain Indemnification from Technology Park/Atlanta, Inc. to Fulton County, dated April 30, 2001, recorded in Deed Book 30183, Page 637, Fulton County, Georgia Records.

·

Power Easement from Technology Park/Atlanta, Inc. to Sawnee Electric Membership Corporation, dated September 26, 2001, recorded in Deed Book 2107, Page 276, Forsyth County, Georgia Records.

·

All matters shown on Road Dedication plats for West Johns Crossing, prepared by Hannon, Meeks & Bagwell, Surveyors & Engineers, Inc., dated December 13, 2001, recorded in Plat Book 226, Pages 28 through 33, Fulton County, Georgia Records.

·

Restrictive Covenants contained in Corrective Limited Warranty Deed from Technology Park/Atlanta, Inc. to EHCA Dunwoody, LLC, dated as of June 3, 2002, recorded in Deed Book 32697, Page 676, Fulton County, Georgia Records.

·

Restrictions in Limited Warranty Deeds from Technology Park/Atlanta, Inc. to Hendon/JDN Johns Creek Village, LLC, a Georgia limited liability company, as follows:

o

dated as of October 20, 2002, recorded in Deed Book 33430, page 1, Fulton County, Georgia, Records; and

o

dated June xx, 2003, filed for record June 24, 2003 at 3:16 o’clock p.m., recorded in Deed Book 35259, page 501, Fulton County, Georgia, Records.

·

Declaration of Easements and Covenants to Share Costs by Technology Park/Atlanta, Inc., dated as of October 30, 2002, recorded in Deed Book 33430, page 17, Fulton County, Georgia.  Records.

·

Declaration of Pedestrian Access Easement, dated October 30, 2002, recorded in Book Deed 33430, page 47, Fulton County, Georgia Records.

·

Perpetual, non-exclusive easement for sanitary sewer as contained in Sanitary Sewer and Temporary Grading Easement between Technology Park/Atlanta, Inc. and Hendon/JDN Johns Creek Village, LLC, dated January 29, 2003, recorded in Deed Book 34178, page 243, Fulton County, Georgia, Records.

·

Memorandum of Lease between Hendon/JDN Johns Creek Village, LLC and L.A. Fitness International, LLC, dated as of January 27, 2002, recorded in Deed Book 34188, page 135, Fulton County, Georgia, Records; as affected by that Subordination, Non-Disturbance and Attornment Agreement between L.A. Fitness International, LLC, John Hancock Life Insurance Company, and Inland Western Duluth John’s Creek, L.L.C., dated July 10, 2004, recorded in Deed Book 38323, page 370, aforesaid records.

·

Memorandum of Lease between Hendon/JDN Johns Creek Village, LLC and the TJX Companies, Inc., dated as of December 17, 2002, recorded in Deed Book 34226, page 396, Fulton County, Georgia, Records; as affected by that Subordination, Non-Disturbance and Attornment Agreement between the TJX Companies, Inc., John Hancock Life Insurance Company, and Inland Western Duluth John’s Creek, LLC, dated August 11, 2004, recorded in Deed Book 39192, page 159, aforesaid records.

·

Memorandum of Lease between Hendon/JDN Johns Creek Village, LLC and Ross Stores, Inc., dated May 9, 2003, recorded in Deed Book 35282, page 437, Fulton County, Georgia, Records;

G-10

as affected by that Subordination, Non-Disturbance and Attornment Agreement between John Hancock Life Insurance Company, Ross Stores, Inc. and Inland Western Duluth John’s Creek, L.L.C., dated July 20, 2004, recorded in Deed Book 38175, page 47, aforesaid records.

·

Right-of-way Easement from Hendon/JDN Johns Creek Village, LLC to Sawnee Electric Membership Corporation, dated as of July 24, 2003, recorded in Deed Book 36364, page 31, Fulton County, Georgia, Records.

·

Memorandum of Lease between Hendon/JDN Johns Creek Village, LLC and Brinker Georgia, Inc., dated October 14, 2003, recorded in Deed Book 36413, page 143, Fulton County, Georgia, Records.

·

Short Form of Lease between IHOP Realty Corp. and Hendon/JDN Johns Creek Village, LLC, dated as of November 24, 2003, recorded in Deed Book 36743, page 450, Fulton County, Georgia, Records

·

Short Form of Lease between IHOP Realty Corp., and Hendon/JDN Johns Creek Village, LLC, dated as of November 24, 2003 recorded in Deed Book 36743, page 454, Fulton County, Georgia, Records.

·

Declaration of Easement Agreement by and among Inland Western Duluth John’s Creek, L.L.C., Brinker Georgia, Inc., and IHOP Realty Corp., dated January, 2006, recorded in Deed Book 41871, page 389, Fulton County, Georgia Records.

Gardiner Manor Mall

·

Terms, covenants provisions and conditions set forth in that certain Lease Agreement dated 5/4/98 between Gardiner Manor, LLC, landlord, and King Kullen Grocery Co., Inc., tenant, as evidenced in that Subordination, Non-Disturbance, Attornment and Estoppel Agreement among Key Bank National Association, Gardiner Manor LLC and King Kullen Grocery Co. Inc., recorded in Liber 11896 cp 14.

·

Lilco Gas Easements in Liber 5125 cp 294, Liber 5156 cp 64 and Liber 4603 cp 49.

·

Memorandum of Lease dated 5/6/98 recorded 3/16/99 in Liber 11951 cp 578.  Made by Gardiner Manor LLC, as landlord and Genovese Drug Stores, Inc.

o

With regard thereto:  Subordination, Non-Disturbance and Attornment Agreement dated as of 7/19/05 recorded 8/19/05 in Liber 12404 cp 798 between Bank of America, N.A. and Genovese Drug Stores, Inc.

·

Memorandum of Lease by and between Gardiner Manor LLC and Barnes & Noble Booksellers Inc. in Liber 11925 cp 28 amended by Memorandum of Lease in Liber 12267 cp 504.

o

With regard thereto: Subordination, Non-Disturbance and Attornment Agreement dated as of 7/19/05 recorded 8/19/05 in Liber 12404 cp 796 between Bank of America, N.A. and Barnes & Noble Booksellers Inc.

·

Memorandum of Lease by and between Gardiner Manor LLC and The Gap Inc. dated 3/30/99 recorded 4/28/99 in Liber 11959 cp 941.

·

Subject to the burdens of an Operation and Easement Agreement by and between Dayton Hudson Corporation, Gardiner Manor LLC and Robert David Lion Gardiner in Liber 11896 cp11.

G-11

·

First Amendment to Operation and Easement Agreement in Liber 12470 cp 440.

·

Second Amendment to Operation and Easement Agreement in Liber 12470 cp 441.

·

Electric Easements in Liber 5125 cp 294, Liber 5181 cp 454 and Liber 8628 cp 327.  As shown on survey made by C.T. Male Associates, P.C. dated 01/06/07 revised 01/23/07.

·

Lilco Gas Easements in Liber 4869 cp 9, Liber 5156 cp 64 and Liber 4603 cp 49.  As shown on survey made by C.T. Male Associates, P.C. dated 01/06/07 revised 01/23/07.

·

Covenants and Restrictions in Liber 4489 cp 528, Liber 4489 cp 523, Liber 8695 cp 521 and Liber 8695 cp 530.

·

Assignment of Leases and Rents made by Inland Western Bay Shore Gardiner, LLC to Mortgage Electronic Registration Systems, Inc. as nominee for Bear Stearns Commercial Mortgage, Inc. dated 2/6/07 to be recorded in the office of the Suffolk County clerk.

·

Mortgage made by Gardiner Manor, LLC and Robert David Lion Gardiner to Key Bank National Association dated 5/11/98, recorded 5/28/98 in Liber 19338 mp 367 to secure the sym of $36,520,000.00 and interest.  Mortgage tax paid:  $365,200.00.

·

Mortgage 1 was modified, split and severed by Note and Mortgage Splitter, Severance and Modification Agreement made between Gardiner Manor LLC and Gardiner Manor II LLC and Gardiner Holdings LLC and Keybank National Association dated 5/16/01, recorded 2/13/02 in Liber 20026 mp 174 splitting the above mortgage into 2 separate liens; one for $32,750,000.00 (and the other for $3,770,000.00, released from the premises herein).

·

Mortgage 1 as split and severed in the sum of $32,750,000.00 was assigned by Keybank National Association to Merrill Lynch Mortgage Lending Inc. by Assignment of Mortgage dated 5/14/01, recorded 2/13/02 in Liber 20026 mp 177.

·

Spreader, Consolidation and Modification of Mortgage, Security Agreement, Assignment of Rents and Fixture Filing made by and between Gardiner Manor II LLC and Gardiner Holdings LLC and Merrill Lynch Mortgage Lending Inc. dated 5/16/01, recorded 2/13/02 in Liber 20026 mp 178 (as to lien for $32,750,000.00).

·

Mortgage 1 as split and severed was assigned by Merrill Lynch Mortgage Lending Inc. to Wells Fargo Bank, N.A., f/k/a Wells Fargo Bank Minnesota, N.A., as trustee by Assignment of Mortgae and Note dated July 19, 2005 recorded in the Suffolk County clerk’s office on August 8, 2005 in Liber 21102 mp 299.  Mortgage 1 as split and severed was assigned by Wells Fargo Bank, N.A. f/k/a Wells Fargo Bank Minnesota, N.A., as trustee to Mortgage Electronic Registration Systems, Inc. as the nominee for Bank of America, National Association by Assignment of Mortgage and Note dated July 19, 2005 recorded August 8, 2005 in Liber 21102 mp 300.

·

Mortgage and Agreement of Consolidation and Modification of Mortgage, Assignment of Leases and Rents and Security Agreement made by and between Inland Western Bay Shore Gardiner, L.L.C., Inland Western Poughkeepsie Mid-Hudson, L.L.C., Inland Western Saratoga Springs Wilton, L.L.C., Inland Western Westbury Merchants Plaza, L.L.C. and mortgage electronic registration systems, inc., as nominee for Bank of America N.A. dated 7/19/05 recorded 8/18/05

G-12

in liber 21110 mp 231 to secure the sum of $50,136,661.53 and interest.  Mortgage tax paid in Nassau county $526,435.35

Commons at Royal Palm

·

Terms and conditions in the Public Facilities Agreement between the Estate of J.M. Rubin, the Village of Royal Palm Beach, and Palm Beach County, recorded in Official Records book 9554, Page 1737 (as to all parcels).

·

Easement Deed in favor of Lake Worth Drainage District dated November 29, 2000, recorded December 1, 2000 in Official Records Book 12168, page 1302 (as to Parcel III), as shown on Plat of survey made by MK Associates, Inc., dated December 14, 2004, last revised April 8, 2005 under Drawing No. 20040183A1 (“The Survey”).

·

Any right, title or interest of the Lake Worth Drainage District acquired pursuant to Chancery Case No. 407, portions of which are recorded in Official Records Book 6495, page 761 and Official Records Book 6495, Page 1165, including, but not limited to, the right of way of Canal S-2, as disclosed by maps attached by reference to the Affidavit recorded in Official Records Book 1732, Page 612 (as to all parcels).

·

Terms and provisions contained in Palm Beach County – Village of Royal Palm Beach amended potable water, reclaimed water and wastewater utilities franchise and service area agreement recorded in Official Records Book 17664, Page 583 (as to all parcels).

·

Restrictions, terms and conditions in the Personal Representative’s Deed by Robert Owens, as Personal Representative of the Estate of J.M. Rubin, Deceased, in favor of Starwood Wasserman Palm Beach Holding LLC recorded in Official Records Book 12214, Page 1390 (as to Parcels II and III), as shown on The Survey.

·

Terms, conditions, restrictions, covenants and easements in the Private Roadway Access and Maintenance Agreement between Starwood Wasserman Palm Beach Holding LLC, a Delaware limited liability company and Lennar Homes, Inc., a Florida Corporation recorded in Official Records Book 12223, Page 204, and re-recorded in Official Records Book 12278, Page 1053 (as to Parcels I, II and III), as shown on The Survey.

·

Covenants, restrictions, reservations and easements as shown on the Plat of Commons at Royal Palm Beach recorded in Plat Book 93, Page 114 (as to Parcels I, II and III), as shown on The Survey.

·

Covenants and conditions of the Developer Agreement recorded in Official Records Book 12274, Page 903, as amended by the First Addendum to Developer Agreement recorded in Official Records Book 12836, Page 21 (as to Parcels I, II and III).

·

Terms, conditions, restrictions, covenants and easements in the Sewer Easement Agreement recorded in Official Records Book 12683, Page 741 (as to Parcel 4), as shown on The Survey.

·

Easement in favor of Bell South Telecommunications, Inc., a Georgia corporation recorded in Official Records Book 12773, Page 1807 (as to Parcel I), as shown on The Survey.

G-13

·

Grant of Easement in favor of Lennar Homes, Inc., recorded in Official Records Book 13446, Page 861 (as to Parcels I, II and III), as shown on The Survey.

·

Those matters as contained in the unrecorded Conditional Subaqueous Permit Agreement as disclosed by and under the terms and conditions of the Assignment of Conditional Subaqueous Permit Agreement between Wasserman Palm Beach, LLC and Village of Royal Palm Beach in Official Records Book 13473, Page 1008 (as to Parcel III), as shown on The Survey.

·

Terms, covenants, conditions, restrictions, easements, assessments and possible liens created by and set forth in the Declaration of Covenants, Restrictions and Easement recorded in Official Records Book 13556, Page 690, as amended by the First Amendment to Declaration of Covenants, Restrictions and Easement recorded in Official Records Book 15367, Page 755, of the Public Records of Palm Beach County, Florida, including, but not limited to one or more of the following:  provisions for private charges or assessments; liens for liquidated damages; and/or option, right of first refusal or prior approval of a future purchaser or occupant; but omitting any covenant or restriction based on race, color, religion, sex, handicap, familial status or national origin unless and only to the extent that said covenant(s):  (a) is exempt under Chapter 42, Section 3607 of the United States C ode; or (b) relates to handicap, but does not discriminate against handicapped persons (as to Parcels I, II and III).

·

Terms and conditions in the Unity of Title by Southern Centers, Inc., f/k/a diversified Centers, Inc., recorded in Official Records Book 5662, Page 1133 (as to Parcels I, II and III).

·

Right-of-way Easement in favor of Southern Bell Telephone and Telegraph Company recorded in Official Records Book 6339, page 1062 (as to Parcels I, II and III).

·

Covenants, restrictions, reservations and easements as shown on the Plat of Commons at Royal Palm Beach, Plat Two, as recorded in Plat Book 96, Pages 63 through 65 (as to Parcels I, II and III), as shown on The Survey.

·

Terms and conditions in that certain unrecorded Lease in favor of Michaels Stores, Inc., a Delaware corporation, as evidenced by the Memorandum of Shopping Center Lease dated August 30, 2000, recorded December 5, 2000 in Official Records Book 12174, Page 938 (as to Parcel I).

·

Terms and conditions in that certain unrecorded Lease in favor of Toys "R" US-Delaware, Inc., a Delaware corporation, as evidenced by the Memorandum of Lease dated December 22, 2000, recorded January 19, 2001 in Official Records Book 12262, Page 609, as effected by the Commencement Agreement dated February 11, 2002, recorded March 27, 2002 in Official Records Book 13543, Page 739 (as to Parcel I).

·

Terms and conditions in that certain unrecorded Lease in favor of TJX Companies, Inc., a Delaware corporation, as evidenced by the Memorandum of Lease dated December 19, 2000, recorded March 1, 2001 in Official Records Book 12342, Page 780 (as to Parcel I).

·

Terms and conditions in that certain unrecorded Lease in favor of PETsMart, Inc., a  Delaware corporation, as evidenced by the Memorandum of Lease dated March 11, 2001, recorded May 17, 2001 in Official Records Book 12563, Page 852 and in Official Records Book 13509, page 1475 (as to Parcel I), and the Memorandum of Lease dated March 16, 2001, recorded March 15, 2002 in Official Records Book 13509, Page 1475 (as to Parcel I).

G-14

·

Restrictions, covenants, terms, conditions, and obligations as contained in the Assumption and Development Agreement dated May 30, 2003, recorded June 12, 2003 in Official Records Book 15367, Page 778 (as to Parcels I, II and III).

·

Terms, covenants, conditions and other matters contained in the DRI Agreement between the Estate of J.M. Rubin, the Village of Royal Palm Beach, the Department of Community Affairs and Palm Beach County, recorded in Official Records Book 9180, Page 115 (as to Parcels I, II and III).

·

Terms and provisions pertaining to maintenance obligations and indemnification contained in the Sewer Agreement among Starwood Wasserman Palm Beach LLC, Lennar Homes, Inc., Daren Rubenfeld, as Trustee, etc. and LaSalle National Bank, recorded in Official Records Book 12681, Page 741 (as to Parcels I, II and III).

·

Easements granted to BellSouth Telecommunications, Inc. recorded in Official Records Book 12735, Page 1094 (as to Parcels I, II and III).

·

Matters contained in the Notice of Establishment of the Bella Terra Community Development District recorded in Official Records Book 13426, Page 1400 (as to Parcels I, II and III).

·

Survey prepared by MKAssociates, Inc., dated December 14, 2004, last revised April 27, 2005 under Drawing No. 20040183 A1 shows the following:

o

Concrete dumpster pad encroaches onto easements along the westerly line of Parcel 1.

o

Possible easements as evidenced by various light poles, fire hydrants, electric service boxes, manholes, water valves and posts located through subject property.

·

Renewal, Amended, Consolidated and Restated Mortgage, Assignment of Leases and Rents, and Security Agreement which was given by Starwood Wasserman Palm Beach, LLC, a Delaware limited company, in favor of Bank of America, N.A., dated October 2,2002, recorded October 4, 2002 in Official Records Book 14231, Page 490 and assigned to Wells Fargo Bank Minnesota, N.A., as Trustee for the registered holders of Bank of America Commercial Mortgage, Inc., Commercial Mortgage Pass-Through Certificates, Series 2003-2 recorded in Official Records Book 16506, Page 1731, as affected by Assumption Agreement filed May 27, 2005 in Official Records Book 18656, page 647.

·

UCC-1 Financing Statement which was given in favor of Bank of America, N.A.,  recorded October 2, 2002 in Official Records Book 14231, Page 514 and assigned in Official Records Book 16506, Page 1727, as affected by Assumption Agreement filed May 27, 2005 in Official Records Book 18656, page 647.

·

UCC-1 Financing Statement, Inland Western Royal Palm Beach Commons,  L.L.C. - Debtor, Wells Fargo Bank, N.A. - Secured Party, filed May 27, 2005 in Official Records Book 18656, page 669.

Southlake Corners

·

Deed from Wal-Mart Real Estate Business Trust to the State of Texas recorded at Volume 13727, Page 344 on March 26, 1999, in Deed Records of Tarrant County, Texas.

·

Right of way to State of Texas, granted by B.R. Wall recorded at Volume 2569, Page 503, in Deed Records of Tarrant County, Texas.

G-15

·

Partial Release of Easement from the State of Texas recorded as Instrument Number D206319861 on October 11, 2006, in Deed Records of Tarrant County, Texas.

·

Right of Way to Texas Utilities Electric Company, granted by James P. Farrar, Melissa Farrar Auberty, et al recorded at Volume 10997, Page 1428, in Deed Records of Tarrant County, Texas.

·

Matters shown by the Plat recorded at Cabinet A, Slide 1975, in Plat Records of Tarrant County, Texas.

·

Easement granted by W2001 Wal Real Estate Limited Partnership to the City of Southlake recorded at Clerk’s File No. D205114974 on April 25, 2005, in Deed Records of Tarrant County, Texas.

·

Easement granted by W2001 Wal Real Estate Limited Partnership to the City of Southlake recorded at Clerk’s File No. D205114973 on April 25, 2005, in Deed Records of Tarrant County, Texas.

·

Memorandum of Lease by and between W2001 Wal Real Estate Limited Partnership and Circuit City Stores, Inc. recorded at Volume 16944, Page 0123 on July 17, 2003, in Deed Records of Tarrant County, Texas.

·

Subordination, Non-Disturbance and Attornment Agreement recorded at Clerk’s File No. D206319859 on October 11, 2006, in Deed Records of Tarrant County, Texas.

·

Drainage Easement for Highway Purposes granted by W2001 Wal Real Estate Limited Partnership to the State of Texas recorded at Instrument Number D206319857 on October 11, 2006, in Deed Records of Tarrant County, Texas.

·

Deed of Trust executed by Inland Western Southlake Corners Limited Partnership to Brenda Tyler, Trustee, payable to Principal Commercial Funding, LLC recorded at Document No. D207003797 on January 3, 2007, in Deed Records of Tarrant County, Texas.

·

Assignment of Leases and Rents recorded at Document No. D207003798, in Deed Records of Tarrant County, Texas.

·

Financing Statement recorded at Document No. D207003799, in Deed Records of Tarrant County, Texas.

G-16

EXHIBIT H

Intentionally deleted.

H-1

EXHIBIT I

SCHEDULE OF ALLOCATED VALUES

Existing Portfolio Project	Allocated Value
Huebner Oaks	$10,950,291.44
Oswego Commons	$29,000,000.00
Lincoln Park	$30,025,000.00
John’s Creek Village	$22,550,000.00
Gardiner Manor Mall	$21,347,000.00
Commons at Royal Palm	$17,477,276.00
Southlake Corners	$16,875,000.00

I-1

EXHIBIT J

Commons at Royal Palm

1.

The Palms Ballroom

Gardiner Manor

1.

Barnes & Noble

J-1

SCHEDULE 7(a)(vii)

None.

J-1

SCHEDULE 7(a)(xvii)

·

The condemnation at John’s Creek in Duluth, Georgia, described by those certain plans for the Condemnation entitled “Easement and Right of Way Exhibit for Inland Western Duluth John’s Creek SPE, L.L.C.” dated August 31, 2006, last revised February 27, 2007, and stamped March 6, 2007.

J-1

SCHEDULE 7(a)(xix)

None.

J-1

EX-4

Exhibit K

EXHIBIT K

EXAMPLE OF SECTION 9.3 CALCULATION

(Copy attached)

Exhibit K

I-West JV Cash Flows
Sample Waterfall				Feb-07	Feb-07	Mar-07	Apr-07	May-07	Jun-07	Jul-07	Aug-07
			Total	Year 0	Year 1	Year 2	Year 3	Year 4	Year 5	Year 6	Year 7
JV Structure:
MSRE Equity	80.00%
Inland Equity	20.00%
Hurdle	Promote	MSRE % of CF	Inland % of CF
Return of Capital	-	80.0%	20.0%
Hurdle I – 11.00%	-	80.0%	20.0%
Thereafter	20.0%	64.0%	36.0%
Waterfall:
Representative Project Levered Cash Flows				(225,000,000)	19,200,000	19,200,000	19,200,000	19,200,000	19,200,000	327,600,000	-
JV Capital Account – ROC:
BOP				-	225,000,000	205,800,000	186,000,000	167,600,000	148,200,000	129,000,000	-
Capital Invested			225,000,000	225,000,000	-	-	-	-	-	-	-
Return of Capital			(225,000,000)	-	(19,200,000)	(19,200,000)	(19,200,000)	(19,200,000)	(19,200,000)	(129,000,000)	-
EOP				225,000,000	205,800,000	186,600,000	167,400,000	148,200,000	129,000,000	-	-
CF AFTER ROC			198,600,000	-	-	-	-	-	-	198,600,000	-
MSRE distributions to Hurdle I (11.0%)
BOP				-	180,000,000	184,440,400	189,368,400	194,838,924	200,911,206	207,651,438	-
Capital Invested			180,000,000	180,000,000	-	-	-	-	-	-	-
Return of Capital			(180,000,000)	-	(15,360,000)	(15,360,000)	(15,360,000)	(15,360,000)	(15,360,000)	(103,200,000)	-
Accruals			127,293,096	-	19,800,000	20,288,400	20,830,524	21,432,282	22,100,233	22,841,658	-
Distribution to Hurdle I			(127,293,096)	-	-	-	-	-	-	(127,293,096)	-
EOP				180,000,000	184,440,000	189,368,400	194,838,924	200,911,206	207,651,438	-	-
MSRE Distribution under Hurdle I			127,293,096	-	-	-	-	-	-	127,293,096	-
Inland Distribution			31,823,274	-	-	-	-	-	-	31,823,274	-
MSRE CF to Hurdle I			127,293,096	(180,000,000)	15,360,000	15,360,000	15,360,000	15,360,000	15,360,000	230,493,096	-
Partner CF to Hurdle I			31,823,274	(45,000,000)	3,840,000	3,840,000	3,840,000	3,840,000	3,840,000	57,623,274	-
Cash Flow Thereafter			39,483,629	-	-	-	-	-	-	39,483,629	-
MSRE Share (64.0%)			25,269,523	-	-	-	-	-	-	25,269,523	-
Partner Share (36.0%)			14,214,107	-	-	-	-	-	-	14,214,107	-

I-West JV Cash Flows
Sample Waterfall		Feb-07	Feb-07	Mar-07	Apr-07	May-07	Jun-07	Jul-07	Aug-07
	Total	Year 0	Year 1	Year 2	Year 3	Year 4	Year 5	Year 6	Year 7
Total Joint Venture Cash Flows:
MSRE Cash Flows:
Capital Invested	(180,000,000)	(180,000,000)	-	-	-	-	-	-	-
Distributions – ROC	180,000,000	-	15,360,000	15,360,000	15,360,000	15,360,000	15,360,000	103,200,000	-
Distributions – Hurdle I	127,293,096	-	-	-	-	-	-	127,293,096	-
Distributions - Thereafter	25,269,523	-	-	-	-	-	-	25,269,523	-
Total MSRE Cash Flows	152,562,619	(180,000,000)	15,360,000	15,360,000	15,360,000	15,360,000	15,360,000	255,762,619	-
Cumulative MSRE Cash Flows		(180,000,000)	(164,640,000)	(149,280,000)	(133,920,000)	(118,560,000)	(103,200,000)	152,562,619	152,562,619
MSRE Unlevered IRR	12.61%
MSRE Unlevered CFx	1.85x
Nominal Profit	152,562,619
Peak Equity	180,000,000
Inland Cash Flows:
Capital Invested	(45,000,000)	(45,000,000)	-	-	-	-	-	-	-
Distributions – ROC	45,000,000	-	3,840,000	3,840,000	3,840,000	3,840,000	3,840,000	25,800,000	-
Distributions – Hurdle I	31,853,274	-	-	-	-	-	-	31,853,274	-
Distributions - Thereafter	14,214,107	-	-	-	-	-	-	14,214,107	-
Total Inland Cash Flows	46,037,381	(45,000,000)	3,840,000	3,840,000	3,840,000	3,840,000	3,840,000	71,837,381	-
Cumulative Inland Cash Flows		(45,000,000)	(41,160,000)	(37,320,000)	(33,480,000)	(29,640,000)	(25,800,000)	46,037,381	46,037,381
Inland Unlevered IRR	14.45%
Inland Unlevered CFx	2.02x
Nominal Profit	46,037,381
Peak Equity	45,000,000

EX-5

Exhibit 99.1

NEWS RELEASE 18-05-095   2907 Butterfield Road             Oak Brook, Ill. 60523             www.inland-western.com

FOR IMMEDIATE RELEASE

Contact:

Georganne Palffy, The Inland Real Estate Group of Companies, Inc (Analysts)

(630) 218-8000 Ext 2358 or palffy@inlandgroup.com

Darryl Cater, The Inland Real Estate Group of Companies, Inc. (Media)

(630) 218-8000 Ext. 4896 or cater@inlandgroup.com

Alyson D’Ambrisi, Morgan Stanley Real Estate,

(44) 207 425 2431 or alyson.dambrisi@morganstanley.com

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

AND MORGAN STANLEY REAL ESTATE ANNOUNCE

$1 BILLION JOINT VENTURE AGREEMENT

Oak Brook, Ill.  April 27, 2007 – Inland Western Retail Real Estate Trust, Inc. (“Inland Western”) and Morgan Stanley Real Estate today announced the signing of definitive agreements for the creation of a $1 billion joint venture with a state pension fund investor advised by Morgan Stanley Real Estate to acquire and manage targeted retail properties in major metro areas of the United States.  

The joint venture initially will be seeded with up to $500 million of existing properties from Inland Western’s portfolio, with the additional $500 million investment to be made through selective acquisitions of high quality neighborhood, community, and power centers, in addition to repositioning opportunities.  Under the terms of the agreement, Morgan Stanley Real Estate’s client will contribute 80 percent of the equity to the joint venture and Inland Western will contribute 20 percent.  

“Inland Western’s strategic partnership with a venerable firm such as Morgan Stanley in this joint venture highlights our mutual real estate expertise and ability to create value in this competitive marketplace.  The venture underscores our commitment to evolve towards an increasingly asset management-based platform, as we continue to refine and execute our growth strategy,” commented Michael O’Hanlon, senior vice president and director of asset management of Inland Real Estate Investment Corporation, sponsor of Inland Western Retail Real Estate Trust, Inc.

“We look forward to working with Inland Western on this joint venture,” said John Kessler, Chief Operating Officer for Morgan Stanley Real Estate Investing and Global Head of Core Products.  “This partnership will enable our client to expand the retail component of their portfolio into markets that are currently underweighted.”

Inland Western Retail Real Estate Trust, Inc. is a real estate investment trust focused on the ownership and management of strategically located multi-tenant shopping centers and single-user net lease properties.  As of December 31, 2006, the portfolio consisted of 306 properties totaling approximately 45 million square feet, located in 38 states and one Canadian province.  Inland Western is one of four REITs that are, or have been, sponsored by affiliates of The Inland Real Estate Group of Companies, Inc., which collectively owns and manages over $17 billion in assets.  For further information, please see the company website at www.inland-western.com.

Morgan Stanley Real Estate is comprised of three major global businesses: Investing, Banking and Lending. Since 1991, Morgan Stanley has acquired $113.5 billion of real estate assets worldwide and currently manages $72.8 billion in real estate assets on behalf of its clients.  In addition, Morgan Stanley Real Estate provides a complete range of market-leading investment banking services to its clients, including advice on strategy, mergers, acquisitions and restructurings, as well as underwriting public and private debt and equity financings. Morgan Stanley is also a global leader in real estate lending offering approximately $156.0 billion of CMBS through the capital markets since 1997, including $35.5 billion in 2006. For more information about Morgan Stanley Real Estate, go to www.morganstanley.com/realestate.

Morgan Stanley (NYSE: MS) is a leading global financial services firm providing a wide range of investment banking, securities, investment management, wealth management and credit services.  The Firm's employees serve clients worldwide including corporations, governments, institutions and individuals from more than 600 offices in 31 countries.  For further information about Morgan Stanley, please visit www.morganstanley.com.

This press release may contain forward-looking statements.  Forward-looking statements are statements that are not historical, including statements regarding management’s intentions, beliefs, expectations, representations, plans or predictions of the future, and are typically identified by such words as “believe,” “expect,” “anticipate,” “intend,” “estimate,” “may,” “will,” “should” and “could.”  The Company intends that such forward-looking statements be subject to the safe harbors created by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  There are numerous risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements. For a more complete discussion of these risks and uncertainties, please see the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, and each Quarterly Report on Form 10-Q filed thereafter.  Inland Western Retail Real Estate Trust, Inc. disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

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