Exhibit 4.1
Form of Agreement of Limited Partnership
of Inland Retail Real Estate Limited Partnership
AGREEMENT OF LIMITED PARTNERSHIP
OF INLAND RETAIL REAL ESTATE LIMITED PARTNERSHIP
TABLE OF CONTENTS
PAGE
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Article 1. Definitions and Exhibits. . . . . . . . . . . . . . . . . . . . . 4
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.2 Exhibits, etc.. . . . . . . . . . . . . . . . . . . . . . . . . . .13
Article 2. Organization. . . . . . . . . . . . . . . . . . . . . . . . . . .13
2.1 Formation of Partnership. . . . . . . . . . . . . . . . . . . . . .13
2.2 Partnership Name. . . . . . . . . . . . . . . . . . . . . . . . . .13
2.3 Location of the Principal Place of Business . . . . . . . . . . . .13
2.4 Registered Agent and Registered Office. . . . . . . . . . . . . . .13
Article 3. Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
3.1 Issuance of Units . . . . . . . . . . . . . . . . . . . . . . . . .14
3.2 Redemption Right. . . . . . . . . . . . . . . . . . . . . . . . . .15
3.3 Conversion Right. . . . . . . . . . . . . . . . . . . . . . . . . .16
3.4 Additional Capital. . . . . . . . . . . . . . . . . . . . . . . . .18
3.5 No Third Party Beneficiary. . . . . . . . . . . . . . . . . . . . .18
3.6 Capital Accounts. . . . . . . . . . . . . . . . . . . . . . . . . .18
3.7 No Interest on or Return of Capital . . . . . . . . . . . . . . . .20
3.8 Negative Capital Accounts . . . . . . . . . . . . . . . . . . . . .20
3.9 Limit on Contributions and Obligations of Partner . . . . . . . . .20
Article 4. Purpose and Powers of Partnership . . . . . . . . . . . . . . . .20
4.1 Purposes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
4.2 Compliance with REIT Requirements . . . . . . . . . . . . . . . . .21
Article 5. Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
5.1 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
Article 6. Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . .21
6.1 Profits or Losses . . . . . . . . . . . . . . . . . . . . . . . . .21
6.2 Special Allocations . . . . . . . . . . . . . . . . . . . . . . . .22
6.3 Other Allocation Rules. . . . . . . . . . . . . . . . . . . . . . .23
6.4 Tax Allocations; Code Section 704(c) / Section 1245 and
1250 Recapture . . . . . . . . . . . . . . . . . . . . . . . . . .23
6.5 Nonrecourse Liabilities . . . . . . . . . . . . . . . . . . . . . .24
Article 7. Cash Available For Distribution . . . . . . . . . . . . . . . . .25
7.1 Distributions to Partners . . . . . . . . . . . . . . . . . . . . .25
7.2 REIT Distributions. . . . . . . . . . . . . . . . . . . . . . . . .25
7.3 Consent to Distributions. . . . . . . . . . . . . . . . . . . . . .25
7.4 Liquidating Distributions . . . . . . . . . . . . . . . . . . . . .25
Article 8. Management of Partnership . . . . . . . . . . . . . . . . . . . .25
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8.1 General Partner . . . . . . . . . . . . . . . . . . . . . . . . . .25
8.2 Limitations on Powers and Authorities of Partners . . . . . . . . .28
8.3 Title Holder. . . . . . . . . . . . . . . . . . . . . . . . . . . .29
8.4 Compensation of the General Partner . . . . . . . . . . . . . . . .29
8.5 Standard of Conduct . . . . . . . . . . . . . . . . . . . . . . . .29
8.6 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . .30
8.7 Other Activities of Partners and Agreements with Related
Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
8.8 Other Matters Concerning the General Partner. . . . . . . . . . . .32
Article 9. Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
Article 10. Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . .33
10.1 Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . . . .33
10.2 Books of Account . . . . . . . . . . . . . . . . . . . . . . . . .33
10.3 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
10.4 Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
10.5 Method of Accounting . . . . . . . . . . . . . . . . . . . . . . .33
10.6 Tax Election . . . . . . . . . . . . . . . . . . . . . . . . . . .34
10.7 Tax Matters Partner. . . . . . . . . . . . . . . . . . . . . . . .34
10.8 Administrative Adjustments . . . . . . . . . . . . . . . . . . . .34
Article 11. Transfers of Partnership Interests . . . . . . . . . . . . . . .34
11.1 General Partner. . . . . . . . . . . . . . . . . . . . . . . . . .34
11.2 Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . .36
11.3 Admission Adjustments. . . . . . . . . . . . . . . . . . . . . . .38
Article 12. Rights and Obligations of the Limited Partners . . . . . . . . .38
12.1 No Participation in Management . . . . . . . . . . . . . . . . . .38
12.2 Death, Legal Incompetency, Etc. of a Limited Partner . . . . . . .38
12.3 No Withdrawal. . . . . . . . . . . . . . . . . . . . . . . . . . .38
12.4 Duties and Conflicts . . . . . . . . . . . . . . . . . . . . . . .38
Article 13. Liquidation and Dissolution of Partnership . . . . . . . . . . .39
13.1 Termination Events . . . . . . . . . . . . . . . . . . . . . . . .39
13.2 Method of Liquidation. . . . . . . . . . . . . . . . . . . . . . .39
13.3 Distribution in Kind . . . . . . . . . . . . . . . . . . . . . . .39
13.4 Documentation of Liquidation . . . . . . . . . . . . . . . . . . .40
13.5 Liability of the Liquidating Trustee . . . . . . . . . . . . . . .40
Article 14. Power of Attorney. . . . . . . . . . . . . . . . . . . . . . . .40
Article 15. Amendment of Agreement . . . . . . . . . . . . . . . . . . . . .41
15.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
15.2 Merger, Etc. of General Partner. . . . . . . . . . . . . . . . . .41
Article 16. Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . .41
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16.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
16.2 Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
16.3 Binding Character. . . . . . . . . . . . . . . . . . . . . . . . .42
16.4 Exclusivity. . . . . . . . . . . . . . . . . . . . . . . . . . . .42
16.5 No Alteration of Agreement . . . . . . . . . . . . . . . . . . . .43
Article 17. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . .43
17.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
17.2 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . .43
17.3 Duplicate Originals. . . . . . . . . . . . . . . . . . . . . . . .44
17.4 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . .44
17.5 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . .44
17.6 Other Instruments. . . . . . . . . . . . . . . . . . . . . . . . .44
17.7 General Partner with Interest as Limited Partner . . . . . . . . .44
17.8 Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
17.9 Prior Agreements Superseded. . . . . . . . . . . . . . . . . . . .44
17.10 Purchase for Investment . . . . . . . . . . . . . . . . . . . . .44
17.11 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
17.12 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . .45
17.13 Notice for Certain Transactions . . . . . . . . . . . . . . . . .45
EXHIBIT A: Name of Partners and Number of Units Held by Each Partner under
This Agreement
EXHIBIT B: Form of Notice of Conversion
EXHIBIT C: Form of Notice of Redemption
EXHIBIT D: Capital Account of Each Partner
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AGREEMENT OF LIMITED PARTNERSHIP
OF INLAND RETAIL REAL ESTATE LIMITED PARTNERSHIP
THIS AGREEMENT OF LIMITED PARTNERSHIP (this "Agreement") has been executed
and delivered as of September __, 1998, by and among Inland Retail Real Estate
Trust, Inc., a Maryland corporation ("Inland"), as General Partner, and Inland
Retail Real Estate Advisory Services, Inc., an Illinois corporation, as the
initial Limited Partner, and those other parties, if any, whose names appear on
the signature pages hereto, each such other party as a Limited Partner.
RECITALS
WHEREAS, the Partnership was formed as a limited partnership under the name
"Inland Retail Real Estate Limited Partnership," in accordance with the Revised
Uniform Limited Partnership Act of the State of Illinois, pursuant to a
Certificate of Limited Partnership filed with the Secretary of State of the
State of Illinois on September __, 1998.
WHEREAS, Inland was formed on September 3, 1998, to acquire and manage,
directly or indirectly, a diversified portfolio of real estate primarily
(i) improved for use as retail establishments, principally multi-tenant shopping
centers; or (ii) improved with other commercial facilities which provide goods
or services. Such real estate will be located mainly in the states east of the
Mississippi River in the United States. Inland may also acquire single-user
retail properties located anywhere throughout the United States if they are
leased on a triple-net lease basis by creditworthy tenants.
WHEREAS, this Agreement sets forth certain rights and obligations of the
Partners and the terms and conditions pursuant to which the Partnership shall be
governed.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement, and for other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, agree as follows:
ARTICLE 1. DEFINITIONS AND EXHIBITS.
1.1 DEFINITIONS. As used in this Agreement, the following terms
shall have the meanings set forth below:
"Accountants" shall mean the firm or firms of independent certified public
accountants selected by the General Partner on behalf of the Partnership to
audit the books and records of the Partnership and to prepare statements and
reports in connection therewith.
"Act" shall mean the Revised Uniform Limited Partnership Act of the State
of Illinois, as amended from time to time, and any successor statute.
"Administrative Expenses" shall mean (i) all administrative and operating
costs and expenses incurred by the Partnership and (ii) those administrative
costs and expenses of the General Partner, including salaries paid to trustees,
officers and employees of the General Partner, accounting and legal expenses,
the costs and expenses of preparing reports required to be filed by the General
Partner and costs and expenses incurred in complying with applicable laws, that
are undertaken by the General Partner on behalf of, or for the benefit of, the
Partnership.
"Affected Gain" shall have the meaning provided in Section 6.4.E hereof.
"Affiliate" shall mean, with respect to any Partner (or with respect to
any other Person the affiliates of whom are relevant for purposes of any of
the provisions of this Agreement): (i) any member of the Immediate Family of
such Partner or Person; (ii) any trustee or beneficiary of such Partner or
Person; (iii) any legal representative or successor of any Person referred to
in the preceding clauses (i) and (ii); (iv) any trust for the benefit of any
Person referred to in the preceding clauses (i) through (iii); or (v) any
Entity which, directly or indirectly through one or more intermediaries,
Controls, is Controlled by, or is under common Control with, any Person
referred to in the preceding clauses (i) through (iv).
"Agreement" shall mean this Agreement of Limited Partnership, as it may be
amended, modified, supplemented or restated from time to time, as the context
requires.
"Audited Financial Statements" shall mean financial statements (including,
without limitation, balance sheet, statement of income, statement of partners'
equity and statement of cash flows) prepared in accordance with generally
accepted accounting principles and accompanied by an independent auditor's
report containing (i) an opinion containing no material qualification and
(ii) no explanatory paragraph disclosing information relating to material
uncertainties (except as to litigation) or going concern issues.
"Bankruptcy" of a Partner shall mean (i) the filing by a Partner of a
voluntary petition seeking liquidation, reorganization, arrangement or
readjustment, in any form, of its debts under Title 11 of the United States Code
(or corresponding provisions of future laws) or any other federal or state
insolvency law, or a Partner's filing an answer consenting to or acquiescing in
any such petition, (ii) the making by a Partner of any assignment for the
benefit of its creditors or the admission by a Partner in writing of its
inability to pay its debts as they mature, or (iii) the expiration of sixty (60)
days after the filing of an involuntary petition under Title 11 of the United
States Code (or corresponding provisions of future laws), seeking an application
for the appointment of a receiver for the assets of a Partner, or an involuntary
petition seeking liquidation, reorganization, arrangement or readjustment of its
debts under any other Federal or state insolvency law, provided that the same
shall not have been vacated, set aside or stayed within such 60-day period.
"Business Combination" shall have the meaning set forth in Section 11.1
hereof.
"Capital Account" shall mean the capital account maintained by the
Partnership for each Partner as described in Section 3.6 hereof.
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"Capital Contribution" shall mean, when used with respect to a Partner, the
amount of money and the initial Gross Asset Value of property (other than money)
contributed by a Partner to the capital of the Partnership pursuant to the terms
of this Agreement, including, without limitation, the provisions of Section 3.1
hereof. A Partner's Capital Contribution includes the Capital Contribution made
by a predecessor holder of the Partnership Interest of such Partner.
"Cash Amount" shall mean, with respect to each Unit held by a Limited
Partner, an amount equal to (i) the Net Equity Value of all property
contributed to the Partnership by such Limited Partner on the date of
contribution of the property, divided by (ii) the total number of Units
received by such Limited Partner for such property contributed.
"Certificate" shall mean the Certificate of Limited Partnership filed with
the Secretary of State of the State of Illinois, as such Certificate may be
amended or restated from time to time.
"Charter" shall mean the Articles of Incorporation of the General Partner,
as they may be amended or restated from time to time.
"Closing Price" on any date shall mean the last sale price, regular way,
or, in case no such sale takes place on such day, the average of the closing bid
and asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the principal national securities exchange on which the
Common Stock is listed or admitted to trading or, if the Common Stock is not
listed or admitted to trading on any national securities exchange, the last
quoted price, or if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by The Nasdaq Stock Market,
Inc. ("NASDAQ") or, if NASDAQ is no longer in use, the principal automated
quotation system that may then be in use, or, if the Common Stock is not quoted
by any such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Common Stock
selected by the General Partner, or, if there is no professional market maker
making a market in the Common Stock, the average of the last ten (10) sales
pursuant to the IPO if the IPO has not concluded, or, if the IPO has concluded,
the average of the last ten (10) purchases by the General Partner pursuant to
its Share Repurchase Program (the "SRP"), and if there are fewer than ten (10)
of such purchases under the SRP, then the average of such lesser number of
purchases, or, if the SRP is not then in existence, the price at which the
General Partner is then offering shares of Common Stock to the public if the
General Partner is then engaged in a public offering of Common Stock, or if the
General Partner is not then offering Common Stock to the public, the price at
which a stockholder may purchase Common Stock pursuant to the General Partner's
Distribution Reinvestment Program (the "DRP") if such DRP is then in existence,
or if the DRP is not then in existence, the fair market value of the Common
Stock as determined by the General Partner in its sole discretion.
"Code" shall mean the Internal Revenue Code of 1986, as the same may be
amended from time to time, and any successor statute.
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"Common Stock" shall mean the shares of the common stock, par value $0.01
per share, of Inland.
"Contributing Partner" shall have the meaning set forth in Section 3.1.B
hereof.
"Control" shall mean the ability, whether by the direct or indirect
ownership of shares or other equity interests, or by contract or otherwise, to
elect a majority of the directors of a corporation, to select the managing
partner of a partnership, or otherwise to select, or have the power to remove
and then select, a majority of those persons exercising governing authority over
an Entity. In the case of a limited partnership, the sole general partner, all
of the general partners to the extent each has equal management control or
authority, or the managing general partner or managing general partners thereof
shall be deemed to have control of such partnership and, in the case of a trust,
any trustee thereof or any person having the right to select any such trustee
shall be deemed to have control of such trust.
"Conversion Factor" shall mean 1.0, provided that in the event the General
Partner (i) declares or pays a dividend on its outstanding shares of Common
Stock in shares of Stock or makes a distribution to all holders of its
outstanding Common Stock in shares of Stock; (ii) subdivides its outstanding
shares of Common Stock; or (iii) combines its outstanding shares of Common Stock
into a smaller number of shares of Common Stock, the Conversion Factor shall be
adjusted by multiplying the Conversion Factor by a fraction, the numerator of
which will be the number of issued and outstanding shares of Common Stock
immediately after such dividend, distribution, subdivision or combination, and
the denominator of which will be the actual number of shares of Common Stock
issued and outstanding on the record date for such dividend, distribution,
subdivision or combination, unless the General Partner concurrently declares,
makes or pays an equivalent dividend, distribution, subdivision or combination
of Units.
"Conversion Right" shall have the meaning set forth in Section 3.3.A below.
"Converting Partner" shall have the meaning set forth in Section 3.3.A
below.
"Deficit Limitation" means the dollar amount of any deficit balance in a
Partner's Capital Account as of the end of any fiscal year of the Partnership,
which deficit such Partner is obligated to restore within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(c), increased by the amount described
under Regulations Section 1.704-2(g)(1) relating to the Partner's Share of
Minimum Gain (as that term is hereinafter defined) and by the amount described
in Regulations Section 1.704-2(i)(5) relating to a nonrecourse loan by a
Partner, and decreased by the items described in Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
"Demand Notice" shall have the meaning set forth in Section 16.2 hereof.
"Depreciation" shall mean, for any fiscal year or portion thereof, an
amount equal to the depreciation, amortization or other cost recovery deduction
allowable with respect to an asset for such period for federal income tax
purposes, except that if the Gross Asset Value of an asset differs from its
adjusted basis for federal income tax purposes at the beginning of such
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period, Depreciation shall be an amount that bears the same relationship to
such beginning Gross Asset Value as the depreciation, amortization or cost
recovery deduction in such period for federal income tax purposes bears to
the beginning adjusted tax basis; provided, however, that if the adjusted
basis for federal income tax purposes of an asset at the beginning of such
period is zero, Depreciation shall be determined with reference to such
beginning Gross Asset Value using any reasonable method selected by the
General Partner.
"Entity" shall mean any general partnership, limited partnership,
corporation, joint venture, trust, business trust, limited liability company,
limited liability partnership, cooperative or association.
"Final Partnership Administrative Adjustment" shall have the meaning set
forth in Section 10.8 hereof.
"FPAA" means a Final Partnership Administrative Adjustment.
"General Partner" shall mean Inland, its duly admitted successors and
assigns and any other person who is a general partner at the time referenced.
"GP Common Units" shall mean the Units held by the General Partner other
than Preferred Units.
"Gross Asset Value" shall mean, with respect to any asset of the
Partnership, the asset's adjusted basis for federal income tax purposes, except
as follows:
(i) The initial Gross Asset Value of any property contributed to
the Partnership shall be the gross fair market value of such property, as
determined by the General Partner;
(ii) The Gross Asset Value of all Partnership property shall be
adjusted to equal its respective gross fair market value, as determined by
the General Partner in its sole and absolute discretion, as of the
following times: (a) the acquisition of an additional Partnership Interest
by any new or existing Partner in exchange for more than a DE MINIMIS
Capital Contribution; (b) the distribution by the Partnership to a Partner
of more than a DE MINIMIS amount of Partnership property as consideration
for a Partnership Interest; (c) the liquidation of the Partnership within
the meaning of Regulations Section 1.704-1(b)(2)(ii)(g); provided, however,
that adjustments pursuant to clauses (b)-(c) above shall be made only
if the General Partner reasonably determines that such adjustments are
necessary or appropriate to maintain Capital Accounts and to provide for
allocations of Profits and Losses that reflect the relative economic
interests of the Partners in the Partnership.
(iii) The Gross Asset Value of any Partnership property distributed
to any Partner shall be adjusted to equal the gross fair market value of
such property, taking Section 7701(g) of the Code into account, on the date
of distribution as determined by the General Partner; and
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(iv) The Gross Asset Values of Partnership property shall be
increased (or decreased) to reflect any adjustments to the adjusted basis
of such property pursuant to Code Section 734(b) or Code Section 743(b),
but only to the extent that such adjustments are taken into account in
determining Capital Accounts pursuant to Regulations
Section 1.704-1(b)(2)(iv)(m) and paragraph (vi) of the definition of
Profits and Losses; provided, however, that Gross Asset Values shall not be
adjusted pursuant to this paragraph (iv) to the extent the General Partner
determines that an adjustment pursuant to paragraph (ii) above is necessary
or appropriate in connection with a transaction that would otherwise result
in an adjustment pursuant to this paragraph (iv).
If the Gross Asset Value of a property has been determined or adjusted
pursuant to paragraphs (i), (ii) or (iv) above, such Gross Asset Value shall
thereafter be adjusted by the Depreciation taken into account with respect to
such property. The General Partner may adjust the Capital Accounts to
reflect any adjustment to the Gross Asset Value of Partnership property if so
required or permitted under Regulations Section 1.704-1(b)(2)(iv).
"Holding Period" shall mean, the period beginning on the date of the
issuance of a Unit and ending on the first anniversary of such date.
"Immediate Family" shall mean, with respect to any Person, such Person's
spouse, parents, parents-in-law, descendants, nephews, nieces, brothers,
sisters, brothers-in-law, sisters-in-law and children-in-law.
"Independent Director" shall have the meaning given such term in the
Articles of Incorporation of Inland.
"Inland" means Inland Retail Real Estate Trust, Inc., a Maryland
corporation.
"Inland Group" shall mean Inland, the Partnership, the Property
Partnerships, and any other Entity in which one or more other members of the
Inland Group has or will have a direct or indirect interest of 50% or more (by
vote or by value).
"IPO" means the General Partner's first sale of shares of its Common Stock
in a public offering pursuant to its first effective registration statement for
such Common Stock filed under the Securities Act of 1933, as amended, which is
expected to commence in 1998.
"IRS" means the Internal Revenue Service.
"Limited Partner" shall mean any Person (i) whose name is set forth as a
Limited Partner on Exhibit A attached hereto or who has become a Limited Partner
pursuant to the terms and conditions of this Agreement and (ii) who holds a
Partnership Interest other than as a Transferee who is not a substituted Limited
Partner.
"LP Common Units" shall mean Units held by a Limited Partner, other than
Preferred Units.
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"Net Equity Value" of a property as of the date of contribution of the
property to the Partnership, generally, will be the purchase price of the
property to the Partnership (I.E., its fair market value), less the amount, as
of the date of contribution, of any liabilities (E.G., mortgages or other
monetary encumbrances) to which the property is subject or which are assumed by
the Partnership in connection with such contribution.
"Nonrecourse Deductions" shall have the meaning set forth in Regulations
Section 1.704-2(b) and (c).
"Nonrecourse Liability" shall have the meaning set forth in Regulations
Section 1.704-2(b)(3).
"Notice of Conversion" shall mean the Notice of Conversion substantially in
the form of Exhibit C to this Agreement.
"Notice of Redemption" shall mean the Notice of Redemption substantially in
the form of Exhibit B to this Agreement.
"Ownership Limit" shall mean the prohibition of beneficial ownership of no
more than 9.8%, by number of shares or by value, of the outstanding shares of
Common Stock of the General Partner, as set forth in the Articles of
Incorporation of Inland, as they may be amended or restated from time to time.
"Partner Nonrecourse Debt" shall have the meaning set forth in Regulations
Section 1.704-2(b)(4).
"Partner Nonrecourse Debt Minimum Gain" shall have the meaning set forth in
Regulations Section 1.704-2(i)(3).
"Partner Nonrecourse Deductions" shall have the meaning set forth in
Regulations Section 1.704-2(i)(2).
"Partners" shall mean, collectively, the General Partner and the Limited
Partners, or any additional or successor partners of the Partnership. Reference
to a Partner shall be to any one of the Partners.
"Partnership" shall mean the limited partnership governed by this
Agreement, as amended and/or restated from time to time.
"Partnership Interest" shall mean the ownership interest of a Partner in
the Partnership at any particular time, including the right of such Partner to
any and all benefits to which such Partner may be entitled as provided in this
Agreement, and to the extent not inconsistent with this Agreement, under the
Act, together with the obligations of such Partner to comply with all of the
terms and provisions of this Agreement and of the Act.
"Partnership Minimum Gain" shall have the meaning set forth in Regulations
Sections 1.704-2(h)(2) and 1.704-2(d).
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"Percentage Interest" of a Partner in the Partnership shall be equal to the
quotient (expressed as a percentage) arrived at by dividing the number of Units
held by the Partner by the total number of Units then outstanding.
"Person" shall mean any individual or Entity.
"Preferred Return" shall mean an amount, either fixed or as a rate of
interest, payable in arrears, which fixed amount or rate of interest (including
the frequency of compounding, if any) shall be determined at the time the
Preferred Unit is issued by the General Partner in its sole and absolute
discretion.
"Preferred Units" shall mean Units issued by the Partnership on which a
Preferred Return is paid or which provides for some other preference over Common
Units.
"Profits" and "Losses" shall mean, for each fiscal year or portion thereof,
an amount equal to the Partnership's items of taxable income or loss for such
year or period, determined in accordance with Section 703(a) of the Code with
the following adjustments:
(i) any income which is exempt from Federal income tax and not
otherwise taken into account in computing Profits or Losses shall be added
to taxable income or loss;
(ii) any expenditures of the Partnership described in Code
Section 705(a)(2)(B) or treated as Section 705(a)(2)(B) expenditures under
Regulations Section 1.704-1(b)(2)(iv)(i) and not otherwise taken into
account in computing Profits or Losses will be subtracted from taxable
income or loss;
(iii) in the event that the Gross Asset Value of any Partnership
asset is adjusted pursuant to the definition of Gross Asset Value contained
in this Article 1, the amount of such adjustment shall be taken into
account as gain or loss from the disposition of such asset for purposes of
computing Profits and Losses;
(iv) gain or loss resulting from any disposition of Partnership
assets with respect to which gain or loss is recognized for Federal income
tax purposes shall be computed by reference to the Gross Asset Value of the
property disposed of, notwithstanding that the adjusted tax basis of such
property differs from its Gross Asset Value;
(v) in lieu of the depreciation, amortization and other cost
recovery deductions taken into account in computing such taxable income or
loss, there shall be taken into account Depreciation for such fiscal year
or other period;
(vi) to the extent an adjustment to the adjusted tax basis of any
Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is
required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m) to be taken
into account in determining Capital Accounts as a result of a distribution
other than in complete liquidation of a
11
Partner's Partnership Interest, the amount of such adjustment shall be
treated as an item of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases the basis of the asset) from
the disposition of the asset and shall be taken into account for purposes
of computing Profits or Losses; and
(vii) any items specially allocated pursuant to Section 6.2 hereof
shall not be considered in determining Profits or Losses.
"Property Partnerships" means those Entities controlled, directly or
indirectly, by the General Partner, other than the Partnership.
"Redeeming Partner" shall have the meaning set forth in Section 3.2 hereof.
"Redemption Right" shall have the meaning set forth in Section 3.2 hereof.
"Regulations" shall mean the Income Tax Regulations, including Temporary
Regulations, promulgated under the Code, as such regulations may be amended from
time to time (including corresponding provisions of succeeding regulations).
"REIT" shall mean a real estate investment trust as defined in Section 856
of the Code.
"REIT Requirements" shall have the meaning set forth in Section 4.2 hereof.
"REIT Shares Amount" shall mean, with respect to the exercise of a
Redemption Right by a Limited Partner with respect to any Unit, that number of
shares of Common Stock (including fractional shares) having a Closing Price on
the date of the Notice of Redemption equal to the Cash Amount.
"Requesting Party" shall have the meaning set forth in Section 16.2 hereof.
"SEC" shall mean the United States Securities and Exchange Commission.
"Specified Conversion Date" shall mean the tenth (10th) Trading Day after
receipt by the General Partner of a Notice of Conversion from a Limited Partner.
"Specified Redemption Date" shall mean the tenth (10th) Trading Day after
receipt by the General Partner of a Notice of Redemption from a Limited Partner.
"Stock" means any class of stock of Inland.
"Surviving Entity" shall have the meaning set forth in Section 11.1 hereof.
"Tax Matters Partner" shall have the meaning set forth in Section 10.7
hereof.
"TMP" means the Tax Matters Partner.
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"Trading Day" shall mean a day on which the principal national securities
exchange on which the Common Stock is listed or admitted to trading is open for
the transaction of business or, if the Common Stock is not listed or admitted to
trading on any national securities exchange, shall mean any day other than a
Saturday, a Sunday or a day on which banking institutions in the State of
Illinois are authorized or obligated by law or executive order to close.
"Transfer" shall have the meaning set forth in Section 11.2 hereof.
"Transferee" shall have the meaning set forth in Section 11.2 hereof.
"Units" shall have the meaning set forth in Section 3.1 hereof.
1.2 EXHIBITS, ETC. References to an "Exhibit" are, unless otherwise
specified, to one of the Exhibits attached to this Agreement, and references to
a "Section" or "Article" are, unless otherwise specified, to one of the Sections
or Articles of this Agreement. Each Exhibit attached hereto and referred to
herein is hereby incorporated herein by such reference.
ARTICLE 2. ORGANIZATION.
2.1 FORMATION OF PARTNERSHIP. Upon the initial filing of the
Certificate with the Secretary of State of the State of Illinois on September
__, 1998, the Partnership was formed as a limited partnership pursuant to the
provisions of the Act, and all other pertinent laws of the State of Illinois.
The Partners agree that the rights and liabilities of the Partnership shall be
as provided in the Act except as otherwise herein expressly provided. The
Partnership Interest of each Partner shall be personal property for all
purposes.
2.2 PARTNERSHIP NAME. The business of the Partnership shall be
conducted under the name of "Inland Retail Real Estate Limited Partnership";
provided, however, that the General Partner may, from time to time, change the
name of the Partnership or may adopt such trade or fictitious names as it may
determine in its sole and absolute discretion.
2.3 LOCATION OF THE PRINCIPAL PLACE OF BUSINESS. The location of the
principal place of business of the Partnership shall be at 0000 Xxxxxxxxxxx
Xxxx, Xxx Xxxxx, XX 00000, or such other location as shall be selected from
time to time by the General Partner in its sole and absolute discretion.
2.4 REGISTERED AGENT AND REGISTERED OFFICE. The Registered Agent of
the Partnership shall be Xxxxxx X. Xxxx or such other Person as the General
Partner may select in its sole and absolute discretion. The Registered Office
of the Partnership shall be 0000 Xxxxxxxxxxx Xxxx, Xxx Xxxxx, XX 00000, or such
other location as the General Partner may select in its sole and absolute
discretion.
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ARTICLE 3. CAPITAL.
3.1 ISSUANCE OF UNITS.
A. The Partnership Interest of a Partner in the Partnership is
sometimes referred to as being evidenced by one or more "Units." The
aggregate total of all Units outstanding as of the date of this Agreement,
and the names of the Partners holding such Units (including the number of
Units owned by each such Partner) are set forth on Exhibit A.
B. From time to time, the General Partner, subject to the provisions
of this Section 3.1.B, may cause the Partnership to issue additional Common
or Preferred Units to existing or newly-admitted Partners (including
itself) in exchange for a contribution by a Partner (the "Contributing
Partner") of additional Capital Contributions to the Partnership.
C. The number of Common Units issued to a Contributing Partner under
this Section 3.1.C shall be equal to the quotient (rounded to the nearest
whole number) arrived at by dividing (i) the amount of money and the Net
Equity Value of any property contributed as a Capital Contribution by
(ii) the product of (a) the Closing Price of the Common Stock on the date
of contribution and (b) the Conversion Factor.
D. Subject to the provisions of Sections 3.1.B and 3.1.C hereof, the
General Partner is hereby authorized to cause the Partnership from time to
time to issue to the Partners (including the General Partner) or other
Persons additional Common or Preferred Units or other Partnership Interests
in one or more classes, or one or more series of any such class with such
designations, preferences and relative, participating, optional or other
special rights, powers and duties, including rights, powers and duties
senior to the Partnership Interests and Units held by the Limited Partners,
all as shall be determined by the General Partner in its sole and absolute
discretion, including, without limitation (i) the right of such class or
series of Partnership Interests to share in Partnership distributions and
(ii) the rights which each such class or series of Partnership Interests
shall have upon dissolution or liquidation of the Partnership, upon the
terms and conditions determined by the General Partner in its sole and
absolute discretion.
E. No Limited Partner shall, by virtue of being the holder of one or
more Units, be deemed to be a shareholder of, or have any other interest
in, the General Partner.
3.2 REDEMPTION RIGHT.
A. Subject to Sections 3.2.B and 3.2.C hereof, upon the expiration
of the Holding Period applicable to any Unit, each holder of an LP Common
Unit, shall have the right to require the Partnership to redeem on a
Specified Redemption Date such LP Common Unit (the "Redemption Right").
The redemption price for such Unit shall be
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the Cash Amount, which shall be paid by the Partnership. The Redemption
Right shall be exercised pursuant to a Notice of Redemption delivered to
the Partnership (with a copy to the General Partner) by the Limited
Partner who is exercising the Redemption Right (the "Redeeming Partner")
setting forth the number of LP Common Units to be redeemed; provided,
however, that the Partnership shall not be obligated to satisfy such
Redemption Right if the General Partner elects to purchase such LP
Common Units pursuant to Section 3.2.B hereof. Effective as of the
Specified Redemption Date, the Redeeming Partner shall not receive any
dividends or distributions with respect to any such LP Common Unit. The
Transferee of any Limited Partner may exercise the rights of such
Limited Partner pursuant to this Section 3.2, and such Limited Partner
shall be deemed to have assigned such rights to such Transferee and
shall be bound by the exercise of such rights by such Transferee. In
connection with any exercise of such rights by such Transferee on behalf
of such Limited Partner, the Cash Amount shall be paid by the
Partnership directly to such Transferee and not to such Limited Partner.
B. Notwithstanding the provisions of Section 3.2.A hereof, a
Redeeming Partner shall be deemed to have offered to sell the number of LP
Common Units set forth in the Notice of Redemption to the General Partner,
and the General Partner may, in its sole and absolute discretion, elect to
purchase directly and acquire such LP Common Units by paying to the
Redeeming Partner with respect to each LP Common Unit covered by the Notice
of Redemption either (i) the Cash Amount, or (ii) the REIT Shares Amount,
as elected by the General Partner (in its sole and absolute discretion), on
the Specified Redemption Date, whereupon on such date the General Partner
shall acquire the LP Common Units offered for redemption by the Redeeming
Partner and shall be treated for all purposes of this Agreement as the
owner of such LP Common Units. If the General Partner shall elect to
exercise its right to purchase LP Common Units under this Section 3.2.B
with respect to a Notice of Redemption, it shall so notify the Redeeming
Partner within five Trading Days after the receipt by the General Partner
of such Notice of Redemption. If the General Partner (in its sole and
absolute discretion) elects not to exercise its right to purchase LP Common
Units from the Redeeming Partner pursuant to this Section 3.2.B, the
General Partner shall not have any obligation to the Redeeming Partner or
the Partnership with respect to the Redeeming Partner's exercise of the
Redemption Right, and the Partnership shall be required to pay the
Redeeming Partner with respect to each LP Common Unit covered by the Notice
of Redemption the Cash Amount in accordance with the provisions of
Section 3.2.A hereof. In the event the General Partner shall exercise its
right to purchase LP Common Units with respect to the exercise of a
Redemption Right as described in the first sentence of this Section 3.2.B,
the Partnership shall have no obligation to pay any amount to the Redeeming
Partner with respect to such Redeeming Partner's exercise of such
Redemption Right, and each of the Redeeming Partner, the Partnership and
the General Partner, as the case may be, shall treat the transaction
between the General Partner and the Redeeming Partner for federal income
tax purposes as a sale of the Redeeming Partner's LP Common Units to the
General Partner. Each Redeeming Partner agrees to execute such documents
as the General
15
Partner may reasonably require in connection with the issuance of shares
of Common Stock upon exercise of the Redemption Right.
C. Notwithstanding the provisions of Section 3.2.A and Section 3.2.B
hereof, (i) the General Partner shall not be entitled to exercise its right
to pay the Redeeming Partner the REIT Shares Amount in lieu of the Cash
Amount pursuant to Section 3.2.B. hereof if the delivery of shares of
Common Stock to such Partner pursuant to Section 3.2.B hereof would (A)
violate the Ownership Limit; (B) result in the General Partner being
"closely held" within the meaning of Code Section 856(h); (C) cause the
General Partner to own, directly or constructively, 10% or more of the
ownership interests in a tenant of the General Partner's or the
Partnership's property within the meaning of Code Section 856(d)(2)(B); (D)
cause, in the opinion of counsel to the General Partner, the General
Partner to no longer qualify (or create a material risk that the General
Partner would no longer qualify) as a REIT; or (E) cause the acquisition of
Common Stock by such Limited Partner to be "integrated" with any other
distribution of Common Stock for purposes of complying with the
registration provisions of the Securities Act of 1933, as amended. In
addition, a Limited Partner shall not have the right to exercise the
Redemption Right pursuant to Section 3.2.A hereof if in the opinion of
counsel to the General Partner the General Partner would, as a result
thereof, no longer qualify (or if there is a material risk that the General
Partner no longer would qualify) as a REIT.
D. The General Partner shall, pursuant to Section 3.1 hereof, have
the right, in its sole and absolute discretion, to grant holders of other
classes of Units rights similar to the rights granted to holders of LP
Common Units pursuant to this Section 3.2.
3.3 CONVERSION RIGHT.
A. Subject to Sections 3.3.B and 3.3.C hereof, upon the expiration
of the Holding Period applicable to any Unit, each holder of an LP Common
Unit, shall have the right to require the General Partner to cause such LP
Common Unit to be converted on a Specified Redemption Date into shares of
Common Stock (the "Conversion Right"). The Conversion Right shall be
exercised pursuant to a Notice of Conversion delivered to the Partnership
(with a copy to the General Partner) by the Limited Partner who is
exercising the Conversion Right (the "Converting Partner") setting forth
the number of LP Common Units to be converted. Each LP Common Unit shall
be convertible into that number of shares of Common Stock (including
fractional shares) having a Closing Price on the Specified Conversion Date
equal to the Cash Amount; provided, however, that the General Partner shall
not be obligated to satisfy such Conversion Right in shares of Common Stock
if the General Partner elects to purchase such LP Common Units pursuant to
Section 3.3.B hereof. Effective as of the Specified Conversion Date, the
Converting Partner shall not receive any dividends or distributions with
respect to any LP Common Unit so converted. The Transferee of any Limited
Partner may exercise the rights of such Limited Partner pursuant to this
16
Section 3.3.A, and such Limited Partner shall be deemed to have assigned
such rights to such Transferee and shall be bound by the exercise of such
rights by such Transferee. In connection with the exercise of such rights
by any Transferee on behalf of such Limited Partner, the shares of Common
Stock to be received pursuant to the exercise of the Conversion Right shall
be delivered by the General Partner directly to the Transferee and not to
such Limited Partner. The Limited Partner, the Partnership and the General
Partner shall treat the transaction between the Limited Partner and the
General Partner for federal income tax purposes as a sale of the Limited
Partner's Units to the General Partner. Each Converting Partner agrees to
execute such documents as the General Partner may reasonably require in
connection with the issuance of shares of Common Stock upon exercise of the
Conversion Right.
B. Notwithstanding the provisions of Section 3.3.A hereof, a
Converting Partner that exercises the Conversion Right shall be deemed to
have offered to sell the number of LP Common Units set forth in the Notice
of Conversion to the General Partner for cash, and the General Partner may,
in its sole and absolute discretion, elect to pay such Converting Partner
with respect to each LP Common Unit covered by the Notice of Conversion the
Cash Amount in lieu of issuing shares of Common Stock, on the Specified
Conversion Date, whereupon on such date the General Partner shall acquire
the LP Common Units offered for conversion by the Converting Partner and
shall be treated for all purposes of this Agreement as the owner of such LP
Common Units. If the General Partner shall elect to exercise its right to
purchase LP Common Units under this Section 3.3.B with respect to a Notice
of Conversion, it shall so notify the Limited Partner within five Trading
Days after the receipt by the General Partner of such Notice of Conversion.
C. Notwithstanding the provisions of Section 3.3.A hereof, a Limited
Partner shall not be entitled to exercise the Conversion Right pursuant to
Section 3.3.A hereof if the delivery of shares of Common Stock to such
Limited Partner on the Specified Conversion Date would (A) violate the
Ownership Limit; (B) result in the General Partner being "closely held"
within the meaning of Code Section 856(h); (C) cause the General Partner to
own, directly or constructively, 10% or more of the ownership interests in
a tenant of the General Partner's or the Partnership's property, within the
meaning of Code Section 856(d)(2)(B); (D) cause, in the opinion of counsel
to the General Partner, the General Partner to no longer qualify (or create
a material risk that the General Partner would no longer qualify) as a
REIT; or (E) cause the acquisition of Common Stock by such Limited Partner
to be "integrated" with any other distribution of Common Stock for purposes
of complying with the registration provisions of the Securities Act of
1933, as amended. In addition, the General Partner shall not have the
right to exercise its right to pay the Converting Partner the Cash Amount
pursuant to Section 3.3.B hereof if, in the opinion of counsel to the
General Partner, the General Partner would, as a result thereof, no longer
qualify (or if there is a material risk that the General Partner no longer
would qualify) as a REIT.
17
D. The General Partner shall, pursuant to Section 3.1 hereof, have
the right, in its sole and absolute discretion, to grant holders of other
classes of Units rights similar to the rights granted to holders of LP
Common Units pursuant to this Section 3.3.
3.4 ADDITIONAL CAPITAL. No Partner shall be assessed or required to
contribute additional funds or other property to the Partnership. Any
additional funds or other property required by the Partnership, as determined by
the General Partner in its sole and absolute discretion, may, at the option of
the General Partner and without any obligation to do so, be contributed by the
General Partner as additional Capital Contributions. If and as the General
Partner or any other Partner makes additional Capital Contributions to the
Partnership, each such Contributing Partner shall receive additional Units or
other Partnership Interests as provided for in Section 3.1 hereof. The General
Partner shall also have the right (but not the obligation) to raise additional
funds required for the Partnership by causing the Partnership to borrow the
necessary funds from third parties on such terms and conditions as the General
Partner shall deem appropriate. If the General Partner elects to cause the
Partnership to borrow funds, it may cause one or more of the Partnership's
assets to be encumbered to secure the loan. No Limited Partner shall have the
right to make additional Capital Contributions or loans to the Partnership
without the prior written consent of the General Partner.
3.5 NO THIRD PARTY BENEFICIARY. No creditor or other third party
having dealings with the Partnership shall have the right to enforce the right
or obligation of any Partner to make Capital Contributions or loans or to pursue
any other right or remedy hereunder or at law or in equity, it being understood
and agreed that the provisions of this Agreement shall be solely for the benefit
of, and may be enforced solely by, the parties hereto and their respective
successors and assigns. None of the rights or obligations of the Partners
herein set forth to make Capital Contributions or loans to the Partnership shall
be deemed an asset of the Partnership for any purpose by any creditor or other
third party, nor may such rights or obligations be sold, transferred or assigned
by the Partnership or pledged or encumbered by the Partnership to secure any
debt or other obligation of the Partnership or of any of the Partners.
3.6 CAPITAL ACCOUNTS. A separate Capital Account shall be maintained
for each Partner. Each Partner's Capital Account shall be adjusted as set forth
below in this Section 3.6.
A. To each Partner's Capital Account there shall be credited such
Partner's Capital Contributions, such Partner's distributive share of
Profits and any items in the nature of income or gain which are
specifically allocated pursuant to Article 6 hereof, and the amount of any
Partnership liabilities assumed by such Partner or which are secured by any
Partnership property distributed to such Partner.
B. To each Partner's Capital Account there shall be debited the
amount of cash and the Gross Asset Value of any Partnership property
distributed to such Partner pursuant to any provision of this Agreement,
such Partner's distributive share of Losses
18
and any items in the nature of deductions or losses which are specifically
allocated pursuant to Article 6 hereof, and the amount of any liabilities
of such Partner assumed by the Partnership or which are secured by any
property contributed by such Partner to the Partnership.
C. In the event that all or a portion of a Partnership Interest is
transferred in accordance with the terms of this Agreement (including a
transfer of Units pursuant to Section 3.2 or 3.3 hereof), the Transferee
shall succeed to the Capital Account of the transferor to the extent such
Capital Account relates to the transferred Partnership Interest.
D. In determining the amount of any liability for purposes of
Sections 3.6.A and 3.6.B hereof, there shall be taken into account Code
Section 752(c) and any other applicable provisions of the Code and
Regulations.
E. This Section 3.6 and the other provisions of this Agreement
relating to the maintenance of Capital Accounts (and the determination of
credits and debits thereto) are intended to comply with Section 704(b) of
the Code and Regulations Sections 1.704-1(b) and 1.704-2, and shall be
interpreted and applied in a manner consistent with such Regulations. In
the event the General Partner shall determine that it is prudent to modify
the manner in which the Capital Accounts, or any debits or credits thereto
(including, without limitation, (i) allocations pursuant to Article 6
hereof or (ii) debits or credits relating to liabilities which are secured
by contributed or distributed property or which are assumed by the
Partnership or the Partners) are computed in order to comply with such
Regulations or more accurately reflect the Partners' interests in the
Partnership, the General Partner may make such modification in its sole and
absolute discretion. The General Partner also may (i) make any adjustments
that are necessary or appropriate to maintain equality between the Capital
Accounts of the Partners and the amount of Partnership capital reflected on
the Partnership's balance sheet, as computed for book purposes, in
accordance with Regulations Section 1.704-1(b)(2)(iv)(g), (ii) make any
appropriate modifications in the event unanticipated events might otherwise
cause this Agreement not to comply with Regulations Sections 1.704-1(b) and
1.704-2, and (iii) adopt such conventions and make such elections for
purposes of maintaining Capital Accounts and the allocation of items for
tax purposes as it determines are necessary or appropriate in its sole and
absolute discretion.
F. The Capital Accounts of the Partners shall be adjusted in the
circumstances described in Section (ii) of the definition of Gross Asset
Value
3.7 NO INTEREST ON OR RETURN OF CAPITAL.
A. Except to the extent authorized by Partnership Interests issued
pursuant to Section 3.1.C hereof, no Partner shall be entitled to any
interest on its Capital Account balance or on its Capital Contributions to
the Partnership.
19
B. Except as provided by non-waivable provisions of law, by the
terms of this Agreement, or to the extent authorized by Partnership
Interests issued pursuant to Section 3.1.C hereof, no Partner shall have
the right to demand or to receive the return of all or any part of its
Capital Contributions to the Partnership and there shall be no priority of
one Partner over another as to the return of Capital Contributions or
withdrawals or distributions of Profits and Losses. Except to the extent
authorized by Partnership Interests issued pursuant to Section 3.1.C
hereof, no Partner shall have the right to demand or receive property other
than cash in return for the contributions of such Partner to the
Partnership.
3.8 NEGATIVE CAPITAL ACCOUNTS. Except as otherwise provided by
non-waivable provisions of the law, no Partner shall be required to pay to
the Partnership any deficit or negative balance which may exist in its
Capital Account.
3.9 LIMIT ON CONTRIBUTIONS AND OBLIGATIONS OF PARTNER. Neither the
Limited Partners nor the General Partner shall be required to make any
additional advances, loans, or Capital Contributions to or on behalf of the
Partnership or to endorse or to guaranty any obligations of the Partnership.
ARTICLE 4. PURPOSE AND POWERS OF PARTNERSHIP.
4.1 PURPOSES. The purposes of the Partnership shall be to, directly
or through its ownership interest in other Entities, acquire, hold, purchase,
own, operate, manage, develop, redevelop, construct, improve, maintain, invest
in, finance, refinance, sell, convey, exchange, transfer, encumber, lease and
otherwise deal with the properties of the Partnership and other real and
personal property; to undertake such other activities as may be necessary,
advisable, desirable or convenient to the business of the Partnership, and to
engage in such other ancillary activities as shall be necessary or desirable to
effectuate the foregoing purposes. The Partnership shall have all powers
necessary or desirable to accomplish the purposes enumerated in this
Section 4.1. In connection with the foregoing, but subject to all of the terms,
covenants, conditions and limitations contained in this Agreement and in any
other agreement entered into by the Partnership, the Partnership shall have full
power and authority, directly or through its interests in other Entities, to
enter into, perform and carry out contracts of any kind, to borrow money and to
issue evidences of indebtedness, whether or not secured by mortgage, trust deed,
pledge or other lien, and directly or indirectly to acquire and to construct
additional properties as necessary or useful in connection with its business.
4.2 COMPLIANCE WITH REIT REQUIREMENTS. The Partners acknowledge and
agree that the Partnership shall be operated in a manner that will enable the
General Partner to (i) satisfy the requirements for qualification and taxation
as a REIT under the Code and the Regulations (the "REIT Requirements") and
(ii) avoid the imposition of any federal income or excise tax liability. The
Partnership shall avoid taking any action, or permitting any Affiliate to take
any action, which would result in the General Partner ceasing to satisfy the
REIT Requirements or which would result in the imposition of any federal income
or excise tax liability on the General Partner.
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ARTICLE 5. TERM.
The Partnership shall continue until the Partnership is terminated
upon the earliest to occur of the following events:
A. December 31, 2040;
B. Subject to Section 11.1 hereof, the election to dissolve the
Partnership made in writing by the General Partner.
C. The Bankruptcy, dissolution or termination of the General
Partner, unless, within ninety (90) days after such Bankruptcy, dissolution
or termination, the remaining Limited Partners holding a majority of the
Units held by Limited Partners agree in writing, in their sole and absolute
discretion, to continue the business of the Partnership and to appoint,
effective as of the date of such Bankruptcy, dissolution or termination, a
substitute General Partner;
D. Dissolution required by operation of law; or
E. The sale or other disposition of all or substantially all of the
assets of the Partnership unless the General Partner elects to continue the
Partnership business for the purpose of the receipt and the collection of
indebtedness or the collection of any other consideration to be received in
exchange for the assets of the Partnership (which activities shall be
deemed to be part of the winding up of the affairs of the Partnership).
ARTICLE 6. ALLOCATIONS.
6.1 PROFITS OR LOSSES.
A. ALLOCATION OF PROFITS. Profits for each taxable year shall be
allocated among the Partners, and shall be credited or debited to the
respective Capital Accounts of the Partners, in the following order and
priority:
(i) First, to the holders of the Preferred Units, until the
cumulative amount of Profits allocated to each such holder pursuant to
this Section 6.1.A.(i) and Section 6.1.A.(iii) below for the current
and all prior taxable years is equal to the sum of the cumulative
amount distributed to each such holder pursuant to Section 7.1.A for
the current and all prior taxable years;
(ii) Second, to the Partners, pari passu, until the cumulative
amount of Profits allocated to each such Partner pursuant to this
Section 6.1.A.(ii) and Section 6.1.A.(iv) for the current and all
prior taxable years is equal to the sum of the cumulative amount
distributed to each such Partner pursuant to Section 7.1.B.
21
(iii) Third, to the holders of Preferred Units, if any, pari
passu, to the extent there exists any accrued but unpaid Preferred
Return for which Profits have not previously been allocated
pursuant to this Section 6.1.A.(iii), in proportion to the accrued
but unpaid Preferred Return owned to each such holder for which
Profits have not previously been allocated pursuant to this Section
6.1.A.(iii).
(iv) Fourth, any remaining amounts shall be allocated to the
holders of GP Common Units and LP Common Units (and LP Preferred
Units, if any, which are entitled to share in the Profits of the
Company beyond, or in lieu of, the receipt of a Preferred Return),
pari passu, in proportion to the number of Units owned by each such
holder.
B. ALLOCATION OF LOSSES. Losses for any taxable year shall be
allocated, for purposes of adjusting the Capital Accounts of the Partners,
pro rata to each member in accordance with their relative positive Capital
Account Balances (calculated for this purpose by adding to such Partner's
Capital Account such Partner's share of Partnership Minimum Gain and
Partner Minimum Gain).
6.2 SPECIAL ALLOCATIONS. The following special allocations shall be
made in the following order:
A. MINIMUM GAIN CHARGEBACK. Except as otherwise provided in
Regulations Section 1.704-2(f), but notwithstanding any other provision of
this Article 6 hereof, if there is a net decrease in Partnership Minimum
Gain during any fiscal year, each Partner shall be specially allocated
items of Partnership income and gain for such fiscal year (and, if
necessary, subsequent fiscal years) in an amount equal to such Partner's
share of the net decrease in Partnership Minimum Gain, determined in
accordance with Regulations Section 1.704-2(g). The items to be so
allocated shall be determined in accordance with Regulations Sections
1.704-2(f)(6) and 1.704-2(j)(2) (assuming for this purpose that this
Agreement complies with the requirements of Regulations
Section 1.704-1(e)). This Section 6.2.A is intended to comply with the
minimum gain chargeback requirement in Regulations Section 1.704-2(f) and
shall be interpreted and applied consistently therewith.
B. PARTNER MINIMUM GAIN CHARGEBACK. Except as otherwise provided in
Regulations Section 1.704-2(i)(4), but notwithstanding any other provision
of this Article 6 other than Section 6.2.A, if there is a net decrease in
Partner Nonrecourse Debt Minimum Gain attributable to a Partner Nonrecourse
Debt during any Partnership fiscal year, each Partner who has a share of
the Partner Nonrecourse Debt Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Regulations
Section 1.704-2(i)(5), shall be specially allocated items of Partnership
income and gain for such fiscal year (and, if necessary, subsequent fiscal
years) in an amount equal to such Partner's share of the net decrease in
Partner Nonrecourse Debt Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Regulations
Section 1.704-2(i)(4) (assuming for this purpose that this Agreement
complies with the requirements of Regulations Section 1.704-1(e)). The
items to be so allocated shall be determined in accordance with Regulations
Sections 1.704-2(i)(4) and 1.704-2(j)(2). This Section 6.2.B is intended
to comply with the minimum gain chargeback requirement in Regulations
Section 1.704-2(i)(4) and shall be interpreted and applied consistently
therewith.
22
C. NONRECOURSE DEDUCTIONS. Nonrecourse Deductions for any fiscal
year shall be allocated among the Partners in accordance with their
respective Percentage Interests.
D. PARTNER NONRECOURSE DEDUCTIONS. Any Partner Nonrecourse
Deductions for any fiscal year shall be specially allocated to the Partner
who bears the economic risk of loss with respect to the Partner Nonrecourse
Debt to which such Partner Nonrecourse Deductions are attributable, in
accordance with Regulations Section 1.704-2(i)(1).
6.3 OTHER ALLOCATION RULES.
A. Profits, Losses or any other items allocable to any period shall
be determined on a daily, monthly or other basis, as determined by the
General Partner using any permissible method under Code Section 706 and the
Regulations thereunder (including proration or a closing of the books).
B. The Partners are aware of the income tax consequences of the
allocations made by this Article 6 hereof and hereby agree to be bound by
the provisions of this Article 6 hereof in reporting their shares of
Partnership income and loss for income tax purposes.
6.4 TAX ALLOCATIONS; CODE SECTION 704(c) / SECTION 1245 AND 1250
RECAPTURE.
A. Except as otherwise provided in this Agreement, for federal,
state and local income tax purposes, all items of Partnership income, gain,
loss, deduction, credit, and any other allocations not otherwise provided
for, shall be allocated among the Partners in the same manner as the
corresponding items of income, gain, loss or deduction are allocated
pursuant to the preceding sections.
B. Income, gain, loss and deduction with respect to any property
contributed to the Partnership as a Capital Contribution shall, solely for
tax purposes, be allocated among the Partners so as to take account of any
variation between the adjusted basis of such property to the Partnership
for federal income tax purposes and its initial Gross Asset Value in
accordance with any permissible method under Code Section 704(c) and the
Regulations thereunder. Initially, the Partnership shall use the
traditional method provided for under the Regulations, but, to the extent
permitted by law, the Partnership may adopt such other methods as the
General Partner in its sole and absolute discretion shall deem appropriate.
C. In the event the Gross Asset Value of any asset is adjusted
pursuant to the definition of "Gross Asset Value" contained in Section 1.1
hereof, subsequent allocations of income, gain, loss and deduction with
respect to such asset shall take account of any variation between the
adjusted basis of such asset for federal income tax
23
purposes and its Gross Asset Value in accordance with any permissible
method or methods permitted under Code Section 704(c) and the Regulations
thereunder.
D. Any elections or other decisions relating to tax allocations
pursuant to this Section 6.4 shall be made by the General Partner in any
permissible manner under the Code or the Regulations that the General
Partner may elect in its sole and absolute discretion, and the General
Partner may adopt such conventions and methods for complying with the
requirements of Code Section 704(c) and the Regulations thereunder as the
General Partner shall deem appropriate in its sole and absolute discretion.
Allocations pursuant to this Section 6.4 are solely for purposes of
federal, state, and local taxes and shall not affect, or in any way be
taken into account in computing, any Partner's Capital Account or share of
Partnership distributions.
E. Except as otherwise required under Section 6.1, 6.2 or 6.4.C
hereof, if any portion of gain from the sale of property is treated as gain
which is ordinary income by virtue of the application of Code Section 1245
or 1250 ("Affected Gain"), then, to the extent possible, (i) such Affected
Gain shall be allocated among the Partners in the same proportion that the
depreciation and amortization deductions giving rise to the Affected Gain
were allocated and (ii) other items of gain of the same character that
would have been recognized, but for the application of Code Section 1245
and/or 1250, shall be allocated away from those Partners who are allocated
Affected Gain pursuant to clause (i) so that, to the extent possible, the
other Partners are allocated the same amount, and type, of capital gain
that would have been allocated to them had Code Section 1245 and/or 1250
not applied.
6.5 NONRECOURSE LIABILITIES. The Partners agree that the
Partnership's "excess nonrecourse liabilities" within the meaning of Regulations
Section 1.752-3(a)(3) shall be allocated among the Partners in accordance with
their respective interests in Partnership Profits which, solely for purposes of
Regulations Section 1.752-3(a)(3), shall be deemed to be their Percentage
Interests.
ARTICLE 7. CASH AVAILABLE FOR DISTRIBUTION.
7.1 DISTRIBUTIONS TO PARTNERS. Distributions shall be made at such
times and in such amounts as the General Partner shall determine in its sole and
absolute discretion, in the following order of priority:
A. First, to the holders of the Preferred Units, if any, an amount
equal to the cumulative Preferred Return, if any, reduced by the amount of
any prior distributions pursuant to this Section 7.1.A.
B. Second, any remaining amounts shall be distributed pro rata to
the holders of the GP Common Units and the LP Common Units (and the
holders of LP Preferred Units, if any, which are entitled to share
in the distributions from the Partnership in addition to, or in lieu of,
any Preferred Return) in proportion to the number of Units owned by
each such holder.
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Notwithstanding any other provision of this Agreement, the General
Partner shall have the rights to amend this Section 7.1 to reflect the issuance
of additional classes of Common Units or Preferred Units with rights different
than, and superior to, those of the LP Common Units.
7.2 REIT DISTRIBUTIONS. The General Partner shall use its best
efforts to cause distributions to be made so as to allow the General Partner to
satisfy the REIT Requirements and avoid imposition of any federal income or
excise tax.
7.3 CONSENT TO DISTRIBUTIONS. Each of the Partners hereby consents
to the distributions provided for in this Agreement.
7.4 LIQUIDATING DISTRIBUTIONS. Distributions upon liquidation of the
Partnership shall be made in accordance with Section 13.2 hereof.
ARTICLE 8. MANAGEMENT OF PARTNERSHIP.
8.1 GENERAL PARTNER. The General Partner shall be the sole manager
of the business of the Partnership, and shall have the right and power to make
all decisions and take any and every action with respect to the property,
business and affairs of the Partnership and shall have all the rights, power and
authority generally conferred by law, or necessary, advisable or consistent with
accomplishing the purposes of the Partnership. All such decisions or actions
made or taken by the General Partner hereunder shall be binding upon all of the
Partners and upon the Partnership. Except as otherwise expressly provided
herein, the powers of the General Partner to manage the Partnership business
shall include, without limitation, the power and authority to:
A. manage, control, invest, reinvest, acquire by purchase, lease,
sell, contract to purchase or sell, grant, obtain, or exercise options to
purchase, options to sell or conversion rights, assign, transfer, convey,
deliver, endorse, exchange, pledge, mortgage, abandon, improve, repair,
maintain, insure, lease for any term and otherwise deal with any and all
property of whatsoever kind and nature, and wheresoever situated, in
furtherance of the purposes of the Partnership;
B. acquire, directly or indirectly, interests in real estate of any
kind and of any type, and any and all kinds of interests therein, and
determine the manner in which title thereto is to be held; manage, insure
against loss, protect and subdivide any of the real estate, interests
therein or parts thereof; improve, develop or redevelop any such real
estate; participate in the ownership and development of any property;
dedicate for public use, vacate any subdivisions or parts thereof,
resubdivide, contract to sell; grant options to purchase or lease; sell on
any terms; convey, mortgage, pledge or otherwise encumber said property, or
any part thereof; lease said property or any part thereof from time to
time, upon any terms and for any period of time, and renew or extend
leases, amend, change or modify the terms and provisions of any leases and
grant options to lease and options to renew leases and options to purchase;
partition or exchange said real property, or any part thereof, for other
real or personal property;
25
grant easements or charges of any kind; release, convey or assign any
right, title or interest in or about or easement appurtenant to said
property or any part thereof; construct and reconstruct, remodel, alter,
repair add to or take from buildings on said premises; insure any Person
having an interest in or responsibility for the care, management or
repair of such property; direct the trustee of any land trust to mortgage,
lease, convey or contract to convey the real estate held in such land trust
or to execute and deliver deeds, mortgages, notes, and any and all
documents pertaining to the property subject to such land trust
or in any matter regarding such trust, execute assignments of all or any
part of the beneficial interest in such land trust;
C. employ, engage or contract with or dismiss from employment or
engagement Persons to the extent deemed necessary by the General Partner
for the operation and management of the Partnership business, including but
not limited to, contractors, subcontractors, engineers, architects,
surveyors, mechanics, consultants, accountants, attorneys, insurance
brokers, real estate brokers and others;
D. enter into contracts on behalf of the Partnership;
E. borrow money, procure loans and advances from any Person for
Partnership purposes, and to apply for and secure from any Person, credit
or accommodations; to contract liabilities and obligations, direct or
contingent and of every kind and nature with or without security; and to
repay, discharge, settle, adjust, compromise, or liquidate any such loan,
advance, credit, obligation or liability;
F. pledge, hypothecate, mortgage, assign, deposit, deliver, enter
into sale and leaseback arrangements or otherwise give as security or as
additional or substitute security, or for sale or other disposition any and
all Partnership property, tangible or intangible, including, but not
limited to, real estate and beneficial interests in land trusts, and to
make substitutions thereof, and to receive any proceeds thereof upon the
release or surrender thereof; to sign, execute and deliver any and all
assignments, deeds and other contracts and instruments in writing; to
authorize, give, make, procure, accept and receive moneys, payments,
property, notices, demands, vouchers, receipts, releases, compromises and
adjustments; to waive notices, demands, protests and authorize and execute
waivers of every kind and nature; to enter into, make, execute, deliver and
receive written agreements, undertakings and instruments of every kind and
nature; to give oral instructions and make oral agreements; and generally
to do any and all other acts and things incidental to any of the foregoing
or with reference to any dealings or transactions which any attorney may
deem necessary, proper or advisable;
G. acquire and enter into any contract of insurance which the
General Partner deems necessary or appropriate for the protection of the
Partnership, for the conservation of the Partnership's assets or for any
purpose convenient or beneficial to the Partnership;
H. conduct any and all banking transactions on behalf of the
Partnership; to adjust and settle checking, savings and other accounts with
such institutions as the
26
General Partner shall deem appropriate; to draw, sign, execute, accept,
endorse, guarantee, deliver, receive and pay any checks, drafts, bills of
exchange, acceptances, notes, obligations, undertakings and other
instruments for or relating to the payment of money in, into, or from
any account in the Partnership's name; to execute, procure, consent to and
authorize extensions and renewals of the same; to make deposits and
withdraw the same and to negotiate or discount commercial paper,
acceptances, negotiable instruments, bills of exchange and dollar drafts;
and to approve and adopt the form of any banking resolutions of any
financial institution as though set forth in full herein;
I. demand, xxx for, receive, and otherwise take steps to collect or
recover all debts, rents, proceeds, interests, dividends, goods, chattels,
income from property, damages and all other property, to which the
Partnership may be entitled or which are or may become due the Partnership
from any Person; to commence, prosecute or enforce, or to defend, answer or
oppose, contest and abandon all legal proceedings in which the Partnership
is or may hereafter be interested; and to settle, compromise or submit to
arbitration any accounts, debits, claims, disputes and matters which may
arise between the Partnership and any other Person and to grant an
extension of time for the payment or satisfaction thereof on any terms,
with or without security;
J. make arrangements for financing, including the taking of all
action deemed necessary or appropriate by the General Partner to cause any
approved loans to be closed;
K. take all reasonable measures necessary to insure compliance by
the Partnership with applicable arrangements, and other contractual
obligations and arrangements entered into by the Partnership from time to
time in accordance with the provisions of this Agreement, including
periodic reports as required to lenders and using all due diligence to
insure that the Partnership is in compliance with its contractual
obligations;
L. maintain the Partnership's books and records;
M. prepare and deliver, or cause to be prepared and delivered by the
Partnership's Accountants, all financial and other reports with respect to
the operations of the Partnership, and preparation and filing of all
Federal and state tax returns and reports;
N. organize one or more partnerships or corporations which are
controlled, directly or indirectly, by the Partnership and make any capital
contributions required pursuant to the partnership agreements of any such
partnerships;
O. except as provided in Article 15 of this Agreement, amend the
Agreement;
27
P. file a voluntary petition seeking liquidation, reorganization,
arrangement or readjustment, in any form, of the Partnership's debts under
Title 11 of the United States Code (or corresponding provisions of future
laws) or any other state or federal insolvency law, or file an answer
consenting or acquiescing to any such petition; make an assignment for the
benefit of the creditors of the Partnership or admit in writing that the
Partnership cannot pay its debts as they mature; and
Q. subject to Section 5.1, elect to dissolve or terminate the
Partnership.
8.2 LIMITATIONS ON POWERS AND AUTHORITIES OF PARTNERS.
Notwithstanding the powers of the General Partner set forth in Section 8.1
hereof, the General Partner shall have no right or power to do any of the
following:
A. do any act in contravention of this Agreement;
B. do any act which would make it impossible to carry on the
ordinary business of the Partnership, except to the extent that such act is
specifically permitted by the terms hereof;
C. possess Partnership property or assign rights in specific
Partnership property for other than Partnership purposes, except as
otherwise provided in this Agreement; or
D. do any act in contravention of applicable law.
8.3 TITLE HOLDER. To the extent allowable under applicable law,
title to all or any part of the properties of the Partnership may be held in the
name of the Partnership, a Property Partnership or the General Partner. Any
such title holder shall perform any and all of its respective functions to the
extent and upon such terms and conditions as may be determined from time to time
by the General Partner.
8.4 COMPENSATION OF THE GENERAL PARTNER. The General Partner shall
not be entitled to any compensation for services rendered to the Partnership
solely in its capacity as General Partner except with respect to reimbursement
for (i) those costs and expenses constituting Administrative Expenses and
(ii) such other amounts for which reimbursement is provided in this Agreement.
8.5 STANDARD OF CONDUCT.
A. No Limited Partner shall be personally liable for any debt,
claim, demand, judgment or obligation of any kind of, against or with
respect to the Partnership by reason of its being a Limited Partner, nor
shall any Limited Partner be subject to any personal liability whatsoever,
in tort, contract or otherwise, to any Person in connection with the
property or the affairs of the Partnership.
28
B. To the extent the General Partner or any officer, director, employee, agent
or shareholder of the General Partner performs its duties in accordance with the
standards provided by Section 2-405.1 of the Maryland General Corporation Law,
as it may be amended from time to time, or under any successor statute thereto,
such Person or Persons shall have no liability by reason of being or having been
the General Partner, or by reason of being an officer, director, employee, agent
or shareholder of the General Partner. To the maximum extent that the Maryland
General Corporation Law and the general laws of the State of Maryland, in effect
from time to time, permit limitation of the liability of directors and officers
of a corporation, the General Partner and its officers, directors, employees,
agents and shareholders shall not be liable to the Partnership or to any Partner
for money damages except to the extent that (i) the General Partner or its
officers, directors, employees, agents or shareholders actually received an
improper benefit or profit in money, property or services, in which case the
liability shall not exceed the amount of the benefit or profit in money,
property or services actually received; or (ii) a judgment or other final
adjudication adverse to the General Partner or one or more of its officers,
directors, employees, agents or shareholders is entered in a proceeding based on
a finding in the proceeding that the General Partner or one or more of its
officers, directors, employees, agents or shareholders action or failure to act
was the result of active and deliberate dishonesty and was material to the cause
of action adjudicated in the proceeding. Neither the amendment nor repeal of
this Section 8.5.B, nor the adoption or amendment of any other provision of this
Agreement inconsistent with this Section 8.5.B, shall apply to or affect in any
respect the applicability of the preceding sentence with respect to any act or
failure to act which occurred prior to such amendment, repeal or adoption. In
the absence of any Maryland statute limiting the liability of the General
Partner or its directors or officers for money damages in a suit by or on behalf
of the Partnership or by any Partner, the General Partner and the officers,
directors, employees, agents and shareholders of the General Partner shall not
be liable to the Partnership or to any Partner for money damages except to the
extent that (i) the General Partner or one or more of its officers, directors,
employees, agents or shareholders actually received an improper benefit or
profit in money, property or services, in which case the liability shall not
exceed the amount of the benefit or profit in money, property or services
actually received; or (ii) a judgment or other final adjudication adverse to the
General Partner or one or more of its officers, directors, employees, agents or
shareholders is entered in a proceeding based on a finding in the proceeding
that the action of the General Partner or one or more of its officers,
directors, employees or shareholders action or failure to act was the result of
active and deliberate dishonesty and was material to the cause of action
adjudicated in the proceeding.
8.6 INDEMNIFICATION.
A. Subject to paragraphs 8.6.B, 8.6.C and 8.6.D, the Partnership
shall, to the fullest extent permitted by Maryland statutory or decisional
law, as amended or interpreted and, without limiting the generality of the
foregoing, indemnify and pay, advance or reimburse reasonable expenses to any
director, officer, employee or agent
29
of the General Partner and to any Partner, employee or agent of the
Partnership (each an "Indemnified Party").
B. As long as Inland qualifies as a REIT, the Partnership shall not
indemnify nor pay, advance or reimburse expenses to an Indemnified Party
unless: (i) the Indemnified Party has determined, in good faith, that the
course of conduct which caused the loss or liability was in the best
interest of the Partnership or of the shareholders of the General Partner;
(ii) the Indemnified Party was acting on behalf of or performing services
on the part of the Partnership or Inland; (iii) such liability or loss was
not the result of negligence or misconduct on the part of the Indemnified
Party except that in the event the Indemnified Party is or was an
Independent Director of Inland, such liability or loss shall not have been
the result of gross negligence or willful misconduct; and (iv) such
indemnification or agreement to be held harmless is recoverable only out of
the Net Assets of the Partnership and not from the Partners.
C. As long as Inland qualifies as a REIT and notwithstanding
anything to the contrary in 8.6.B hereof, the Partnership shall not
indemnify an Indemnified Person for losses, liabilities or expenses arising
from or out of an alleged violation of federal or state securities laws by
such party unless one or more of the following conditions are met:
(i) there has been a successful adjudication on the merits of each count
involving alleged securities law violations as to the particular
Indemnified Party; (ii) such claims have been dismissed with prejudice on
the merits by a court of competent jurisdiction as to the particular
Indemnified Party; or (iii) a court of competent jurisdiction approves a
settlement of the claims and finds that indemnification of the settlement
and related costs should be made and the court considering the request has
been advised of the position of the SEC and the published opinions of any
state securities regulatory authority in which securities of the
Partnership were offered or sold as to indemnification for violations of
securities laws.
D. The Partnership may advance amounts to an Indemnified Party for
legal and other expenses and costs incurred as a result of any legal action
for which indemnification is being sought only in accordance with Section
2-418 of the Maryland General Corporation Law, as it may be amended from
time to time, or under any successor statute thereto, and, as long as
Inland qualifies as a REIT, only if all of the following conditions are
satisfied: (i) the legal action relates to acts or omissions with respect
to the performance of duties or services by the Indemnified Party for or on
behalf of the Partnership; (ii) the legal action is initiated by a third
party who is not a Partner or the legal action is initiated by a Partner
acting in his or her capacity as such and a court of competent jurisdiction
specifically approves such advancement; and (iii) the Indemnified Party
receiving such advances undertakes in writing to repay the advanced funds
to the Partnership, together with the applicable legal rate of interest
thereon, in cases in which such party is found not to be entitled to
indemnification.
E. The Partnership shall have the power to purchase and maintain
insurance or provide similar protection on behalf of an Indemnified Party
against any liability
30
asserted which was incurred in any such capacity with the Partnership or
arising out of such status; provided, however, that the Partnership shall
not incur the costs of any liability insurance which insures any person
against liability for which he, she or it could not be indemnified under
this Agreement. Nothing contained herein shall constitute a waiver by any
Indemnified Party of any right which he, she or it may have against any
party under federal or state securities laws. The Partnership shall also
have power to enter into any contract for indemnity and advancement of
expenses with an Indemnified Person who is not a director of the General
Partner to such further extent consistent with law.
8.7 OTHER ACTIVITIES OF PARTNERS AND AGREEMENTS WITH RELATED PARTIES.
The General Partner shall devote its full-time effort in furtherance of the
business of the Inland Group, it being expressly understood that the General
Partner may conduct its activities directly, through members of the Inland Group
as well as and through the Partnership, as the General Partner determines is
appropriate in its sole and absolute discretion. Without limiting the
foregoing, the General Partner, either directly or through other members of the
Inland Group other than the Partnership, may acquire, own, manage, develop,
improve, lease, invest in or otherwise deal with commercial real estate
including, without limitation, any retail establishment, shopping center or
retail project. Except as may otherwise be agreed to in writing, each Limited
Partner and its affiliates shall be free to engage in, to conduct or to
participate in any business or activity whatsoever, including, without
limitation, the acquisition, development, management and exploitation of real
and personal property (other than property of the Partnership), without any
accountability, liability or obligation whatsoever to the Partnership or to any
other Partner, even if such business or activity competes with or is enhanced by
the business of the Partnership. The General Partner, in the exercise of its
power and authority under this Agreement, may contract and otherwise deal with,
or otherwise obligate the Partnership to deal with, entities in which the
General Partner or any one or more of the officers, directors trustees or
shareholders of the General Partner may have an ownership or other financial
interest, whether direct or indirect.
8.8 OTHER MATTERS CONCERNING THE GENERAL PARTNER.
A. The General Partner shall be protected in relying, acting or
refraining from acting on any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, bond,
debenture, or other paper or document believed by it to be genuine and to
have been signed or presented by the proper party or parties.
B. The General Partner may exercise any of the powers granted or
perform any of the duties imposed by this Agreement either directly or
through agents. The General Partner may consult with counsel, accountants,
appraisers, management consultants, investments bankers and other
consultants selected by it, each of whom may serve as consultants for the
Partnership. An opinion by any consultant on a matter which the General
Partner believes to be within its professional or expert competence shall
be full and complete protection as to any action taken or omitted by the
General Partner based on the opinion and taken or omitted in good faith.
The General Partner
31
shall not be responsible for the misconduct, negligence, acts or omissions
of any consultant or contractor of the Partnership or of the General
Partner, and shall assume no obligations other than to use due care in the
selection of all consultants and contractors.
C. No mortgagee, grantee, creditor or any other person dealing with
the Partnership shall be required to investigate the authority of the
General Partner or secure the approval of or confirmation by any Limited
Partner of any act of the General Partner in connection with the conduct of
the Partnership business.
D. The General Partner may retain such persons or entities as it
shall determine (including the General Partner or any Entity in which the
General Partner shall have an interest or with which it is affiliated) to
provide services to or on behalf of the Partnership. The General Partner
shall be entitled to reimbursement from the Partnership for its
out-of-pocket expenses (including, without limitation, amounts paid or
payable to the General Partner or any Entity in which the General Partner
shall have an interest or with which it is Affiliated) incurred in
connection with Partnership business. Such expenses shall be deemed to
include those expenses required in connection with the administration of
the Partnership such as the maintenance of Partnership books and records,
management of the Partnership property and assets and preparation of
information respecting the Partnership needed by the Partners in the
preparation of their individual tax returns.
ARTICLE 9. BANKING. The funds of the Partnership shall be kept in
accounts designated by the General Partner and all withdrawals therefrom shall
be made on such signature or signatures as shall be designated by the General
Partner.
ARTICLE 10. ACCOUNTING.
10.1 FISCAL YEAR. The fiscal and taxable year of the Partnership
shall end on the last day of December of each year, unless another fiscal year
end is selected by the General Partner.
10.2 BOOKS OF ACCOUNT. The Partnership books of account shall be
maintained at the principal office designated in Section 2.3 hereof or at such
other locations and by such person or persons as may be designated by the
General Partner. The Partnership shall pay the expense of maintaining its books
of account. Each Partner shall have, during reasonable business hours and upon
reasonable prior notice, access to the books of the Partnership and, in
addition, at its expense, shall have the right to copy such books. The General
Partner, at the expense of the Partnership, shall cause to be prepared and
distributed to the Partners annual financial data sufficient to reflect the
status and operations of the Partnership and its assets and to enable each
Partner to file its federal income tax return.
10.3 REPORTS. The General Partner shall cause to be submitted to the
Limited Partners promptly upon receipt of the same from the Accountants and in
no event later than April 1 of each year, copies of the consolidated Audited
Financial Statements for the
32
Partnership and the Property Partnerships, together with the reports thereon,
and all supplementary schedules and information, prepared by the Accountants,
including all information necessary for the Limited Partners to prepare their
federal income tax returns. The Partnership shall also cause to be prepared
such reports and/or information as are necessary for the General Partner to
determine its qualification as a REIT and its compliance with the REIT
Requirements.
10.4 AUDITS. Not less frequently than annually, the books and records
of the Partnership shall be audited by the Accountants. The General Partner
shall, unless determined otherwise by the General Partner, engage the
Accountants to audit the books and records of the Property Partnerships and any
other consolidated subsidiary of the Partnership.
10.5 METHOD OF ACCOUNTING. Except for purposes of Article 6 hereof
and the maintenance of Capital Accounts, the Partnership books of account shall
be maintained and kept, and its income, gains, losses and deductions shall be
accounted for, in accordance with sound principles of accounting consistently
applied, or such other method of accounting as may be adopted hereafter by the
General Partner. All elections and options available to the Partnership for
federal or state income tax purposes shall be taken or rejected by the
Partnership in the sole discretion of the General Partner.
10.6 TAX ELECTION. All elections required or permitted to be made by
the Partnership under any applicable tax law shall be made by the General
Partner in its sole discretion.
10.7 TAX MATTERS PARTNER. The General Partner is hereby designated
the Tax Matters Partner (hereinafter referred to as the "TMP") of the
Partnership and shall have all the rights and obligations of the TMP under the
Code.
10.8 ADMINISTRATIVE ADJUSTMENTS. If the TMP receives notice of a
Final Partnership Administrative Adjustment (the "FPAA") or if a request for an
administrative adjustment made by the TMP is not allowed by the United States
Internal Revenue Service (the "IRS") and the IRS does not notify the TMP of the
beginning of an administrative proceeding with respect to the Partnership's
taxable year to which such request relates (or if the IRS so notifies the TMP
but fails to mail a timely notice of an FPAA), the TMP may, but shall not be
obligated to, petition a court for readjustment of partnership items. In the
case of notice of an FPAA, if the TMP determines that the United States District
Court or Claims Court is the most appropriate forum for such petition, the TMP
shall notify each person who was a Partner at any time during the Partnership's
taxable year to which the IRS notice relates of the approximate amount by which
the IRS notice relates of the approximate amount by which its tax liability
would be increased (based on such assumptions as the TMP may in good faith make)
if the treatment of partnership items on his return was made consistent with the
treatment of partnership items on the Partnership's return, as adjusted by the
FPAA. Each such person shall deposit with the TMP, for deposit with the IRS,
the approximate amount of his increased tax "liability" together with a written
agreement to make additional deposits if
33
required to satisfy the jurisdictional requirements of the Court, within
thirty days after the TMP's notice to such person.
ARTICLE 11. TRANSFERS OF PARTNERSHIP INTERESTS.
11.1 GENERAL PARTNER.
A. Except as otherwise provided in this Agreement, the General
Partner may not withdraw from the Partnership or transfer or assign
all (but may assign less than all) of its GP Common Units in the
Partnership (whether by sale, statutory merger or consolidation,
liquidation or otherwise) without the unanimous consent of the Limited
Partners, which may be given or withheld by each Partner in its sole
and absolute discretion. Upon any transfer of a GP Common Unit in
accordance with the provisions of this Section 11.1.A, the transferee
shall become a substitute General Partner for all purposes herein, and
shall be vested with the powers and rights of the transferor General
Partner, and shall be liable for all obligations and responsible for
all duties of the transferor General Partner, once such transferee has
executed such instruments as may be necessary to effectuate such
admission and to confirm the agreement of such transferee to be bound
by all the terms and provisions of this Agreement with respect to the
GP Common Units so acquired. It is a condition to any transfer
otherwise permitted hereunder that the transferee assumes, by
operation of law or express agreement, all of the obligations of the
transferor General Partner under this Agreement with respect to such
transferred GP Common Units, and no such transfer (other than pursuant
to a statutory merger or consolidation wherein all obligations and
liabilities of the transferor General Partner are assumed by a
successor corporation by operation of law) shall relieve the
transferor General Partner of its obligations under this Agreement
without the consent of the Limited Partners, in their reasonable
discretion. In the event the General Partner withdraws from the
Partnership, in violation of this Agreement or otherwise, or otherwise
dissolves or terminates, or upon the incapacity of the General
Partner, all of the remaining Partners may elect to continue the
Partnership business by selecting a substitute General Partner in
accordance with the Act. Notwithstanding anything contained herein to
the contrary the Limited Partners shall not have any right whatsoever
to remove the General Partner from the Partnership.
B. Except as otherwise provided in this Agreement, neither the
General Partner nor the Partnership shall engage in any merger,
consolidation or other combination with or into another person or sale
of all or substantially all of its assets, liquidation or any
reclassification, recapitalization or change of outstanding Stock or
Units (a "Business Combination") unless (i) if the holders of the
Stock approve the Business Combination, the General Partner will not
consummate the transaction unless (a) the General Partner first
conducts a vote of holders of voting Units (including the General
Partner) on the matter; (b) the
34
General Partner votes the Units held by it in the same proportion as
the holders of the Stock voted on the matter at the Stockholder vote;
and (c) the result of such vote of the Unit holders (including the
proportionate vote of the General Partner's Common Units) is that
had such vote been a vote of holders of Stock, the Business
Combination would have been approved (provided that this Section
11.1.B shall not be interpreted to require or enable the General
Partner to engage in a Business Combination which requires the
consent of the holders of the Stock if the General Partner did not
receive such required approval or prevent the General Partner from
engaging in a Business Combination if the consent of the holders of
the outstanding Stock of the General Partner is not required for
such Business Combination), and (ii) the Business Combination has
been approved by Limited Partners holding more than 50% of the
voting power in the Partnership held by Limited Partners or (iii)
except as provided in Section 11.1.C hereof, each holder of a Unit
possessing conversion rights under Section 3.2 of this Agreement
will either receive or will have the right to elect to receive for
each such Unit an amount of cash, securities or other property paid
to the holder of one share of the type of Stock into which such
Unit is convertible, if any, pursuant to the terms of the Business
Combination multiplied by the Conversion Factor; provided that, if
in connection with the Business Combination, a purchase, tender or
exchange offer shall have been made to and accepted by the holders
of a majority of the outstanding Stock, each holder of a Unit
possessing conversion rights under Section 3.2 of this Agreement
shall receive, or shall have the right to elect to receive, the
greatest amount of cash, securities or other property which such
holder would have received had it exercised its conversion rights
and received Stock in exchange for its Units immediately prior to
the expiration of such purchase, tender or exchange offer.
C. Notwithstanding Section 11.1.B hereof, the General partner
may engage in a Business Combination with another entity if:
(i) immediately after the Business Combination, substantially all of
the assets directly or indirectly owned by the surviving entity, other
than Units held by the General Partner, are owned directly or
indirectly by the Partnership or another limited partnership or
limited liability company which is the survivor of a Business
Combination with the Partnership (the "Surviving Entity"); (ii) the
Limited Partners own an interest in the Surviving Entity based on the
relative fair market value of the net assets of the Partnership and
the other net assets of the Surviving Entity prior to the consummation
of the Business Combination; (iii) the rights, preferences and
privileges (including, without limitation, any registration,
conversion, or redemption rights) of the Limited Partners in the
Surviving Entity are at least as favorable as those in effect
immediately prior to the consummation of such Business Combination and
as those generally applicable to limited partners or non-managing
members of the Surviving Entity holding a comparable class of
interest; and (iv) such rights of the Limited Partners include the
right to exchange their interests in the Surviving Entity for at least
one of: (a) the consideration available to such Limited Partner under
Section 11.1.B hereof or (b) if the ultimate controlling person of the
Surviving Entity has publicly traded common equity securities, such
common equity securities, with an exchange
35
ratio based on the relative fair market value of such securities and
Common Stock.
D. In connection with any transaction permitted by
Section 11.1.B or 11.1.C hereof, the relative fair market values shall
be reasonably determined by the General Partner as of the time of such
transaction and, to the extent applicable, shall be no less favorable
to the Limited Partners than the relative values reflected in the
terms of such transaction.
11.2 LIMITED PARTNERS.
A. Except as specifically set forth in this Agreement, no Limited
Partner or substituted Limited Partner shall, without the prior written
consent of the General Partner, which consent may be withheld in its sole
and absolute discretion, directly or indirectly, transfer, assign, sell,
offer, offer to sell, contract for sell, pledge, grant any option to
purchase, encumber or otherwise sell or dispose of (or announce any such
transfer, assignment, sale, offer, offer for sale, contract for sale,
pledge, grant, encumbrance or other sale or disposition) (a "Transfer") all
or any part of his interest in the Partnership, except (i) as otherwise
permitted by Section 12.2 hereof and for intervivos intra-family transfers
for estate planning purposes, and (ii) for pledges of LP Common Units by
Limited Partners to secure the repayment of a loan, provided that the
Limited Partner shall have (A) first obtained the written agreement of the
pledgee to exercise its Redemption Right with respect to any pledged LP
Common Units pursuant to Section 3.2.C hereof immediately upon taking any
action with respect to such LP Common Units and (B) submitted a copy of
such agreement and pledge to the General Partner. A Limited Partner shall
notify the General Partner of any Transfers of beneficial interest or other
interest which occurs without a transfer of record ownership, as well as
any pledge or other collateral transfer. No part of the interest of a
Limited Partner shall be subject to the claims of any creditor, any spouse
for alimony or support, or to legal process, or be voluntarily or
involuntarily alienated or encumbered, except as may be specifically
provided for in Section 11.2.A or Section 12.2 hereof. A Limited Partner
shall not be permitted to retire or withdraw from the Partnership except as
expressly permitted by this Agreement.
B. An assignee, legatee, distributee or other transferee (whether by
conveyance, operation of law or otherwise) (a "Transferee") of all or any
portion of a Limited Partner's interest in the Partnership shall be
entitled to receive distributions hereunder attributable to such interest
acquired by reason of such Transfer, from and after the effective date of
the Transfer of such interest; provided, however, anything in this
Agreement to the contrary notwithstanding, except as provided in
Section 11.2.A or Section 12.2 hereof, (i) no Transfer by a Limited Partner
shall be effective until such Transfer has been consented to by the General
Partner, (ii) no Transferee shall be considered a substituted Limited
Partner, (iii) the Partnership and the General Partner shall be entitled to
treat the transferor of such interest as the absolute owner thereof in all
respects, and shall incur no liability for distributions which are made to
such
36
transferor until such time as the written instrument of Transfer has
been received by the General Partner and the "effective date" of the
Transfer has passed, and (iv) the General Partner shall have the right to
require any such transferor to have such transferor's Partnership Interest
redeemed in accordance with the provisions of Section 3.2 hereof. The
"effective date" of any Transfer shall be the last day of the month set
forth on the written instrument of Transfer or such other date consented to
in writing by the General Partner as the "effective date."
C. Notwithstanding anything to the contrary contained in Article 11
hereof, (a) no Transfer shall be effective to the extent that such
Transfer, by treating the Unit or Partnership Interest so transferred as if
it had been tendered for redemption and then acquired by the General
Partner for Common Stock in accordance with Section 3.2 hereof, would be
prohibited by or violate any provision of the Charter of the General
Partner (including those limiting the ownership of Common Stock in certain
instances) and (b) no Transfer of a Partnership Interest by any Partner
shall be made (i) to any Person or Entity that lacks the legal right, power
or capacity to own a Partnership Interest, (ii) in violation of applicable
law, (iii) if such Transfer would cause the General Partner to fail to
qualify as a REIT, (iv) if such Transfer would cause a termination of the
Partnership for federal income tax purposes (unless the General Partner
consents to such transfer), (v) if such Transfer would, in the opinion of
counsel to the Partnership, cause the Partnership or the Property
Partnerships (or any other Entity taxed as a partnership for federal income
tax purposes) (A) to cease to be classified and taxed as a partnership for
federal income tax purposes or (B) to be a "publicly traded partnership"
within the meaning of Section 7704 of the Code, (vi) if such Transfer would
cause the Partnership to become, with respect to any employee benefit plan
subject to Title 1 of ERISA, a "party-in-interest" (as defined in
Section 3(14) of ERISA) or a "disqualified person" (as defined in
Section 4975(c) of the Code), or (vii) if such Transfer would, in the
opinion of counsel to the Partnership, cause any portion of the assets of
the Partnership to constitute assets of any employee benefit plan pursuant
to Department of Labor Regulations Section 2510.3-101.
11.3 ADMISSION ADJUSTMENTS. The General Partner, when necessary,
shall cause this Agreement to be amended from time to time to reflect the
addition or withdrawal of Partners, including the corresponding adjustments to
Percentage Interests and Units required pursuant to Section 3.1 hereof.
ARTICLE 12. RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS.
12.1 NO PARTICIPATION IN MANAGEMENT. Except as expressly permitted
hereunder, the Limited Partners shall not take part in the management of, or
decisions regarding, the Partnership's business, transact any business in the
Partnership's name or have the power to sign documents for or otherwise bind the
Partnership.
12.2 DEATH, LEGAL INCOMPETENCY, ETC. OF A LIMITED PARTNER. The death,
legal incompetency, insolvency, dissolution or Bankruptcy of a Limited Partner
shall not
37
dissolve or terminate the Partnership. Upon ten (10) Trading Days' notice
to the General Partner of the death or incapacity of an individual Limited
Partner, such individual Limited Partner's interest in the Partnership
shall be transferred either by will, the laws of intestacy or otherwise to the
legal representative or successor of such individual Limited Partner who shall
be bound in all respects by the terms of this Agreement, subject to the General
Partner's right to redeem such interest in accordance with the provisions of
Section 3.2 hereof.
12.3 NO WITHDRAWAL. No Limited Partner may withdraw from the
Partnership without the prior written consent of the General Partner.
12.4 DUTIES AND CONFLICTS. The General Partner recognizes that the
Limited Partners and their Affiliates have or may have other business interests,
activities and investments, some of which may be in conflict or competition with
the business of the Partnership, and that such persons are entitled to carry on
such other business interests, activities and investments. The Limited Partners
and their Affiliates may engage in or possess an interest in any other business
or venture of any kind, independently or with others, on their own behalf or on
behalf of other entities with which they are affiliated or associated, and such
persons may engage in any activities, whether or not competitive with the
Partnership, without any obligation to offer any interest in such activities to
the Partnership or to any Partner. Neither the Partnership nor any Partner
shall have any right, by virtue of this Agreement, in or to such activities, or
the income or profits derived therefrom, and the pursuit of such activities,
even if competitive with the business of the Partnership, shall not be deemed
wrongful or improper.
ARTICLE 13. LIQUIDATION AND DISSOLUTION OF PARTNERSHIP.
13.1 TERMINATION EVENTS. The Partnership shall be dissolved and its
affairs wound up in the manner hereinafter provided upon the occurrence of an
event described in Article 5 hereof.
13.2 METHOD OF LIQUIDATION. Upon the happening of any of the events
specified in Article 5 hereof, the General Partner (or if there be no General
Partner, a liquidating trustee selected by those Limited Partners holding in the
aggregate more than fifty percent (50%) of the Percentage Interests held by all
Limited Partners) shall immediately commence to wind up the Partnership's
affairs and shall liquidate the assets of the Partnership as promptly as
possible, unless the General Partner, or the liquidating trustee, shall
determine that an immediate sale of Partnership assets would cause undue loss to
the Partnership, in which event the liquidation may be deferred for a reasonable
time. The Partners shall continue to share distributions during the period of
liquidation in the same proportions as before dissolution. The proceeds from
liquidation of the Partnership, including repayment of any debts of Partners to
the Partnership, shall be applied in the order of priority as follows:
A. Debts of the Partnership, including repayment of principal and
interest on loans and advances made by the General Partner; then
38
B. To the establishment of any reserves deemed necessary or
appropriate by the General Partner, or by the person(s) winding up the
affairs of the Partnership in the event there is no remaining General
Partner of the Partnership, for any contingent or unforeseen liabilities or
obligations of the Partnership. Such reserves established hereunder shall
be held for the purpose of paying any such contingent or unforeseen
liabilities or obligations and, at the expiration of such period as the
General Partner, or such person(s) deems advisable, the balance of such
reserves shall be distributed in the manner provided hereinafter in this
Section 13.2 as though such reserves had been distributed contemporaneously
with the other funds distributed hereunder; then
C. To the Partners in accordance with the provisions of Sections 7.1
and 7.2 hereof.
13.3 DISTRIBUTION IN KIND. The General Partner may make distributions
pursuant to this Agreement in cash or in kind, as it determines is appropriate
in its sole discretion; provided that no in-kind distributions shall be made to
any Limited Partner other than the General Partner. In the event the General
Partner determines that it is necessary or desirable to make a distribution of
Partnership property in kind, the General Partner may transfer and convey such
property to the distributees as tenants in common, subject to any liabilities
attached thereto, so as to vest in them undivided interests in the whole of such
property in proportion to their respective rights to share in the proceeds of
the sale of such property (other than as a creditor) in accordance with the
provisions of Section 13.2 hereof.
13.4 DOCUMENTATION OF LIQUIDATION. Upon the completion of the
resolution and liquidation of the Partnership, the Partnership shall terminate
and the liquidating trustee shall have the authority to execute and record any
and all documents or instruments required to effect the dissolution, liquidation
and termination of the Partnership.
13.5 LIABILITY OF THE LIQUIDATING TRUSTEE. The liquidating trustee
shall be indemnified and held harmless by the Partnership from and against any
and all claims, demands, liabilities, costs, damages and causes of action of any
nature whatsoever arising out of or incidental to the liquidating trustee's
taking of any action authorized under or within the scope of this Agreement;
provided, however, that the liquidating trustee shall not be entitled to
indemnification, and shall not be held harmless, where the claim, demand,
liability, cost, damage or cause of action at issue arose out of:
A. A matter entirely unrelated to the liquidating trustee's action
or conduct pursuant to the provisions of this Agreement; or
B. The proven misconduct or negligence of the liquidating trustee.
ARTICLE 14. POWER OF ATTORNEY. Each Limited Partner hereby irrevocably
constitutes and appoints the Secretary of the General Partner, with full power
of substitution, its true and lawful attorney, for him and in his name, place
and xxxxx and for his use and benefit, to sign, swear to, acknowledge, file and
record:
39
(i) this Agreement, and amendments to this Agreement;
(ii) any certificates, instruments and documents (including assumed
and fictitious name certificates) as may be required by, or may be
appropriate under, the laws of the State of Illinois or any other State or
jurisdiction in which the Partnership is doing or intends to do business,
in order to discharge the purposes of the Partnership or otherwise in
connection with the use of the name or names used by the Partnership;
(iii) any other instrument which may be required to be filed or
recorded by the Partnership on behalf of the Partners under the laws of any
State or by any governmental agency in order for the Partnership to conduct
its business;
(iv) any documents which may be required to effect the continuation
of the Partnership, the admission of a substitute or additional Partner, or
the dissolution and termination of the Partnership, provided such
continuation, admission or dissolution and termination is not in violation
of any provision of this Agreement; and
(v) any documents which may be required or desirable to have the
General Partner appointed, and act as, the "Tax Matters Partner" as
described in the Code.
The foregoing grant of authority is a special power of attorney coupled with an
interest, is irrevocable and shall survive the death or incapacity of any
individual Limited Partner, and shall survive the delivery of any assignment by
a Limited Partner of the whole or any portion holding more than 50% of the
voting power in the Partnership of such affecting Limited Partners of his
interest in the Partnership.
ARTICLE 15. AMENDMENT OF AGREEMENT.
15.1 GENERAL. The General Partner, without the consent of the Limited
Partners, may amend this Agreement in any respect by executing a written
instrument setting forth the terms of such amendment; provided, however, that,
except as provided in Section 15.2 hereof, any amendment which (i) except as
provided in Section 7.1, alters or changes the distribution rights of any
Limited Partner under Article 7 hereof; (ii) alters or changes a Limited
Partner's Redemption Rights under Section 3.2 hereof or Conversion Rights under
Section 3.3 hereof; (iii) imposes on the Limited Partners any obligation to make
additional Capital Contributions; (iv) amends Section 8.5, 8.6 or 11.1 of this
Agreement shall require the approval of the affected Limited Partners holding
more than 50% of the voting power in the Partnership held by such affected
Limited Partners.
15.2 MERGER, ETC. OF GENERAL PARTNER.
Notwithstanding Section 15.1, in the event that the General Partner engages
in a Business Combination, the General Partner (or its successor or transferee)
may amend the provisions of this Agreement (including, without limitation, the
definition of Conversion Factor) in any respect in connection with such Business
Combination (regardless of whether the amendment alters or changes the
distributions to a Limited Partner or a Limited Partner's
40
Redemption Rights) without obtaining the consent of any Limited Partner;
provided that the Business Combination and the effects of such amendments
satisfy the requirements set forth in Section 11.1.
ARTICLE 16. ARBITRATION.
16.1 GENERAL. Notwithstanding anything to the contrary contained in
this Agreement, all claims, disputes and controversies between the parties
hereto (including, without limitation, any claims, disputes and controversies
between the Partnership and any one or more of the Partners) arising out of or
in connection with this Agreement or the Partnership created hereby, or any act
or failure to act by the General Partner or any other Partner hereunder, shall
be resolved by binding arbitration in Chicago, Illinois by the American
Arbitration Association, in accordance with this Article 16.
16.2 PROCEDURES. Any arbitration called for by this Article 16 shall
be conducted in accordance with the following procedures:
A. The Partnership or any Partner (the "Requesting Party") may
demand arbitration pursuant to Section 16.1 hereof at any time by giving
written notice of such demand (the "Demand Notice") to all other Partners
and (if the Requesting Party is not the Partnership) to the Partnership
which Demand Notice shall describe in reasonable detail the nature of the
claim, dispute or controversy.
B. Within fifteen (15) days after the giving of a Demand Notice, the
American Arbitration Association shall select and designate in writing
three reputable, disinterested individuals willing to act as an arbitrator
of the claim, dispute or controversy in question.
C. The presentations of the parties hereto in the arbitration
proceeding shall be commenced and completed within sixty (60) days after
the selection of the arbitration panel pursuant to subsection B above, and
the arbitration panel shall render its decision (and specify in reasonable
detail its reasons therefor) in writing within thirty (30) days after the
completion of such presentations. Any decision concurred in by any two (2)
of the arbitrators shall constitute the decision of the arbitration panel,
and unanimity shall not be required.
D. The arbitration panel shall include in its decision a direction
that all of the attorneys' fees and costs of any party or parties and the
costs of such arbitration be paid by the losing party or parties in the
arbitration. On the application of a party before or after the initial
decision of the arbitration panel, and proof of its attorneys' fees and
costs, the arbitration panel shall order the other party to make any
payments directed pursuant to the preceding sentence.
16.3 BINDING CHARACTER. Any decision rendered by the arbitration
panel pursuant to this Section 16.3 shall be final and binding on the parties
hereto, and judgment thereon may be entered by any state or federal court of
competent jurisdiction.
41
16.4 EXCLUSIVITY. Arbitration shall be the exclusive method available
for resolution of claims, disputes and controversies described in Section 16.1
hereof, and the Partnership and its Partners stipulate that the provisions
hereof shall be a complete defense to any suit, action or proceeding in any
court or before any administrative or arbitration tribunal with respect to any
such claim, controversy or dispute. The provisions of this Section 16.4 shall
survive the dissolution of the Partnership.
16.5 NO ALTERATION OF AGREEMENT. Nothing contained herein shall be
deemed to give the arbitrators any authority, power or right to alter, change,
amend, modify, add to, or subtract from any of the provisions of this Agreement.
ARTICLE 17. MISCELLANEOUS.
17.1 NOTICES. Any notice, election or other communication provided
for or required by this Agreement shall be in writing and shall be deemed to
have been given when delivered by telecopy or other facsimile transmission
(confirmed by any of the methods that follow) or by hand, the first business day
after sent by overnight courier (such as Federal Express), or on the second
business day after deposit in the United States Postal Service, certified or
registered, return receipt requested, postage prepaid, properly addressed to the
Partner to whom such notice is intended to be given at the address for the
Partner set forth on the signature pages of this Agreement, or at such other
address as such person may have previously furnished in writing to the
Partnership and each Partner. A copy of all such notices also should be sent to
the General Partner and addressed as follows:
General Partner: Inland Retail Real Estate Trust, Inc.
0000 Xxxxxxxxxxx Xxxx
Xxx Xxxxx, XX 00000
Attn: President
Fax No. (000) 000-0000
With a copy to: Wildman, Harrold, Xxxxx & Xxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxxxx X. Xxxx, Esq.
Fax No. (000) 000-0000
17.2 SUCCESSORS AND ASSIGNS. Any person acquiring or claiming an
interest in the Partnership, in any manner whatsoever, shall be subject to and
bound by all of the
42
terms, conditions and obligations of this Agreement to which his
predecessor-in-interest was subject or bound, without regard to whether such
a person has executed a counterpart hereof or any other document contemplated
hereby. No person, including the legal representative, heir or legatee of a
deceased Partner, shall have any rights or obligations greater than those set
forth in this Agreement, and no person shall acquire an interest in the
Partnership or become a Partner thereof except as expressly permitted by and
pursuant to the terms of this Agreement. Subject to the foregoing, and the
provisions of Article 11 above, this Agreement shall be binding upon and
inure to the benefit of the Partners and their respective successors,
assigns, heirs, legal representatives, executors and administrators.
17.3 DUPLICATE ORIGINALS. For the convenience of the Partners,
any number of counterparts hereof may be executed, and each such counterpart
shall be deemed to be an original instrument, and all of which taken together
shall constitute one agreement.
17.4 CONSTRUCTION. The titles of the Sections and subsections
herein have been inserted as a matter of convenience of reference only and
shall not control or affect the meaning or construction of any of the terms
or provisions herein.
17.5 GOVERNING LAW. This Agreement shall be governed by the laws
of the State of Illinois. Except to the extent the Act is inconsistent with
the provisions of this Agreement, the provisions of such Act shall apply to
the Partnership.
17.6 OTHER INSTRUMENTS. The parties hereto covenant and agree
that they will execute such other and further instruments and documents as,
in the opinion of the General Partner, are or may become necessary or
desirable to effectuate and carry out the Partnership as provided for by this
Agreement.
17.7 GENERAL PARTNER WITH INTEREST AS LIMITED PARTNER. Except as
set forth to the contrary in this Agreement, if the General Partner has an
interest as a Limited Partner in the Partnership, the General Partner shall,
with respect to such interest, enjoy all of the rights and be subject to all
of the obligations and duties of a Limited Partner.
17.8 GENDER. Whenever the context shall so require, all words
herein in any gender shall be deemed to include the masculine, feminine or
neuter gender, all singular words shall include the plural, and all plural
words shall include the singular.
17.9 PRIOR AGREEMENTS SUPERSEDED. This Agreement supersedes any
prior understandings or written or oral agreements amongst the Partners, or
any of them, respecting the within subject matter and contains the entire
understanding amongst the Partners with respect thereto.
17.10 PURCHASE FOR INVESTMENT. Each Partner represents, warrants
and agrees that it has acquired and continues to hold its interest in the
Partnership for its own account for investment only and not for the purpose of,
or with a view toward, the resale or distribution of all or any part thereof,
nor with a view toward selling or otherwise distributing such interest or any
part thereof at any particular time or under any predetermined circumstances.
Each
43
Partner further represents and warrants that it is a sophisticated investor,
able and accustomed to handling sophisticated financial matters for itself,
particularly real estate investments, and that it has a sufficiently high net
worth that it does not anticipate a need for the funds it has invested in the
Partnership in what it understands to be a highly speculative and illiquid
investment.
17.11 WAIVER. No consent or waiver, express or implied, by any
Partner to or of any breach or default by any other Partner in the performance
by such other Partner of its obligations hereunder shall be deemed or construed
to be a consent to or waiver of any other breach or default in the performance
by such other Partner of the same or any other obligations of such Partner
hereunder. Failure on the part of any Partner to complain of any act or failure
to act on the part of any other Partner or to declare any other Partner in
default, irrespective of how long such failure continues, shall not constitute a
waiver by such Partner of its rights hereunder.
17.12 SEVERABILITY. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be held
invalid by a court of competent jurisdiction, the remainder of this Agreement,
or the application of such provision to persons or circumstances other than
those to which it is held invalid by such court, shall not be affected thereby.
17.13 NOTICE FOR CERTAIN TRANSACTIONS. In the event of (a) a
dissolution or liquidation of the Partnership or the General Partner, (b) a
merger, consolidation or combination of the Partnership or the General Partner
with or into another Person (including the events set forth in Section 15.2
hereof), (c) the sale of all or substantially all of the assets of the
Partnership or the General Partner, or (d) the transfer by the General Partner
of all or any part of its interest in the Partnership, the General Partner shall
give written notice thereof to each Limited Partner at least twenty (20) Trading
Days prior to the effective date or, to the extent applicable, record date of
such transaction, whichever comes first.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
44
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
GENERAL PARTNER:
INLAND RETAIL REAL ESTATE TRUST, INC.
By:
--------------------------------------
Its:
-------------------------------------
LIMITED PARTNERS:
INLAND RETAIL REAL ESTATE ADVISORY SERVICES, INC.
0000 XXXXXXXXXXX XXXX
XXX XXXXX, XXXXXXXX 00000
ATTN: PRESIDENT
By:
--------------------------------------
Its:
-------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
45
EXHIBIT A
NAME OF PARTNERS AND NUMBER OF UNITS HELD BY EACH PARTNER UNDER THIS AGREEMENT
GENERAL PARTNER
---------------
Inland Retail Real Estate Trust, Inc. 20,000 GP Common Units
LIMITED PARTNERS
---------------
Inland Retail Real Estate Advisory 200 LP Common Units
Services, Inc.
EXHIBIT B
FORM OF NOTICE OF REDEMPTION
I, ____________________________________________, HEREBY
CERTIFY THAT I AM THE OWNER OF A TOTAL OF ________________________________
UNITS OF LIMITED PARTNERSHIP INTEREST (THE "UNITS") IN INLAND RETAIL REAL
ESTATE LIMITED PARTNERSHIP, AN ILLINOIS LIMITED PARTNERSHIP (THE
"PARTNERSHIP").
PURSUANT TO SECTION 3.2 OF THE AGREEMENT OF LIMITED
PARTNERSHIP OF THE PARTNERSHIP (THE "PARTNERSHIP AGREEMENT"), I HEREBY NOTIFY
THE PARTNERSHIP AND THE GENERAL PARTNER OF THE PARTNERSHIP, INLAND RETAIL
REAL ESTATE TRUST, INC., A MARYLAND CORPORATION (THE "GENERAL PARTNER") THAT
I AM EXERCISING MY ELECTION TO HAVE THE PARTNERSHIP REDEEM A TOTAL OF
__________OF MY UNITS FOR THE CONSIDERATION DESCRIBED IN SECTION 3.2.A OF THE
PARTNERSHIP AGREEMENT.
I HEREBY CERTIFY THAT I AM AWARE THAT UPON DELIVERY OF THIS
NOTICE OF REDEMPTION, THE GENERAL PARTNER SHALL HAVE THE OPTION, EXERCISABLE
IN ITS SOLE DISCRETION, TO ASSUME THE OBLIGATION OF THE PARTNERSHIP TO
ACQUIRE SUCH UNITS AND TO PAY THE CONSIDERATION SET FORTH IN SECTION 3.2.B OF
THE PARTNERSHIP AGREEMENT FOR SUCH UNITS, AND THAT IN THE EVENT THE GENERAL
PARTNER EXERCISES SUCH OPTION, (i) THE PARTNERSHIP SHALL HAVE NO FURTHER
OBLIGATION TO REDEEM SUCH UNITS, AND (ii) I WOULD BE OBLIGATED TO TREAT THE
TRANSACTION AS A SALE OF THE UNITS TO THE COMPANY FOR FEDERAL INCOME TAX
PURPOSES.
DATED ,
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SIGNATURE
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EXHIBIT C
FORM OF NOTICE OF CONVERSION
I, ____________________________________________, HEREBY
CERTIFY THAT I AM THE OWNER OF A TOTAL OF ________________________________
UNITS OF LIMITED PARTNERSHIP INTEREST (THE "UNITS") IN INLAND RETAIL REAL
ESTATE LIMITED PARTNERSHIP, AN ILLINOIS LIMITED PARTNERSHIP (THE
"PARTNERSHIP").
PURSUANT TO SECTION 3.3 OF THE AGREEMENT OF LIMITED
PARTNERSHIP OF THE PARTNERSHIP (THE "PARTNERSHIP AGREEMENT"), I HEREBY NOTIFY
THE GENERAL PARTNER OF THE PARTNERSHIP, INLAND RETAIL REAL ESTATE TRUST, INC.
(THE "GENERAL PARTNER"), THAT I AM EXERCISING MY ELECTION TO HAVE THE GENERAL
PARTNER CONVERT A TOTAL OF __________OF MY UNITS FOR SHARES OF COMMON STOCK
OF THE GENERAL PARTNER, BASED ON THE FORMULA FOR CONVERSION SET FORTH IN
SECTION 3.3.A OF THE PARTNERSHIP AGREEMENT.
I HEREBY CERTIFY THAT I AM AWARE THAT UPON DELIVERY OF THIS
NOTICE OF CONVERSION, (i) THE GENERAL PARTNER SHALL HAVE THE OPTION,
EXERCISABLE IN ITS SOLE DISCRETION, TO ACQUIRE SUCH UNITS FOR AN AMOUNT OF
CASH CALCULATED AS DESCRIBED IN SECTION 3.3.B OF THE PARTNERSHIP AGREEMENT IN
LIEU OF ISSUING SUCH SHARES OF COMMON STOCK, AND (ii) I AM OBLIGATED TO TREAT
THE TRANSACTION AS A SALE OF SUCH UNITS FOR FEDERAL INCOME TAX PURPOSES.
DATED ,
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EXHIBIT D
CAPITAL ACCOUNT OF EACH PARTNER
GENERAL PARTNER
Inland Retail Real Estate Trust, Inc. $200,000.00
LIMITED PARTNERS
Inland Retail Real Estate Advisory $2,000.00
Services, Inc.
