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EXHIBIT 4.1
AGREEMENT OF LIMITED PARTNERSHIP
OF INLAND RETAIL REAL ESTATE LIMITED PARTNERSHIP
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TABLE OF CONTENTS
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Article 1. Definitions and Exhibits........................................................................1
1.1 Definitions.....................................................................................1
1.2 Exhibits, etc..................................................................................10
1.3 Organization...................................................................................10
Article 2. Formation of Operating Partnership.............................................................10
2.1 Operating Partnership Name.....................................................................10
Article 3. Capital........................................................................................11
3.1 Issuance of Units..............................................................................11
3.2 Redemption Right...............................................................................12
3.3 Conversion Right...............................................................................13
3.4 Additional Capital.............................................................................15
3.5 No Third Party Beneficiary.....................................................................15
3.6 Capital Accounts...............................................................................16
3.7 No Interest on or Return of Capital............................................................17
3.8 Negative Capital Accounts......................................................................17
3.9 Limit on Contributions and Obligations of Partner..............................................17
Article 4. Purpose and Powers of Operating Partnership....................................................17
4.1 Purposes.......................................................................................17
4.2 Compliance with REIT Requirements..............................................................18
4.3 Maintenance of Partnership Status Requirements.................................................18
Article 5. Term...........................................................................................18
Article 6. Allocations....................................................................................19
6.1 Profits or Losses..............................................................................19
6.2 Special Allocations............................................................................19
6.3 Other Allocation Rules.........................................................................21
6.4 Tax Allocations; Code Section 704(c) / Section 1245 and 1250 Recapture.........................21
6.5 Nonrecourse Liabilities........................................................................22
Article 7. Cash Available For Distribution................................................................22
7.1 Distributions to Partners......................................................................22
7.2 REIT Distributions.............................................................................23
7.3 Consent to Distributions.......................................................................23
7.4 Liquidating Distributions......................................................................23
Article 8. Management of Operating Partnership............................................................23
8.1 General Partner................................................................................23
8.2 Limitations on Powers and Authorities of Partners..............................................26
8.3 Title Holder...................................................................................26
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8.4 Compensation of the General Partner............................................................26
8.5 Standard of Conduct............................................................................26
8.6 Indemnification................................................................................27
8.7 Other Activities of Partners and Agreements with Related Parties...............................29
8.8 Other Matters Concerning the General Partner...................................................29
Article 9. Banking........................................................................................30
Article 10. Accounting.....................................................................................30
10.1 Fiscal Year....................................................................................30
10.2 Books of Account...............................................................................30
10.3 Reports........................................................................................30
10.4 Audits.........................................................................................31
10.5 Method of Accounting...........................................................................31
10.6 Tax Election...................................................................................31
10.7 Tax Matters Partner............................................................................31
10.8 Administrative Adjustments.....................................................................31
Article 11. Transfers of Operating Partnership Interests...................................................31
11.1 General Partner................................................................................31
11.2 Limited Partners...............................................................................33
11.3 Admission Adjustments..........................................................................34
Article 12. Rights and Obligations of the Limited Partners.................................................35
12.1 No Participation in Management.................................................................35
12.2 Meetings of Partners...........................................................................35
12.3 Death, Legal Incompetency, Etc. of a Limited Partner...........................................36
12.4 No Withdrawal..................................................................................37
12.5 Duties and Conflicts...........................................................................37
Article 13. Liquidation and Dissolution of Operating Partnership...........................................37
13.1 Termination Events.............................................................................37
13.2 Method of Liquidation..........................................................................37
13.3 Distribution in Kind...........................................................................38
13.4 Documentation of Liquidation...................................................................38
13.5 Liability of the Liquidating Trustee...........................................................38
Article 14. Power of Attorney..............................................................................39
Article 15. Amendment of Operating Partnership Agreement...................................................39
15.1 General........................................................................................39
15.2 Merger, Etc. of General Partner................................................................40
Article 16. Arbitration....................................................................................40
16.1 General........................................................................................40
16.2 Procedures.....................................................................................40
16.3 Binding Character..............................................................................41
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16.4 Exclusivity....................................................................................41
16.5 No Alteration of Operating Partnership Agreement...............................................41
Article 17. Miscellaneous..................................................................................41
17.1 Notices........................................................................................41
17.2 Successors and Assigns.........................................................................42
17.3 Duplicate Originals............................................................................42
17.4 Construction...................................................................................42
17.5 Governing Law..................................................................................42
17.6 Other Instruments..............................................................................42
17.7 General Partner with Interest as Limited Partner...............................................42
17.8 Gender.........................................................................................42
17.9 Prior Agreements Superseded....................................................................43
17.10 Purchase for Investment........................................................................43
17.11 Waiver.........................................................................................43
17.12 Severability...................................................................................43
17.13 Notice for Certain Transactions................................................................43
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EXHIBIT A: Name of Partners and Number of Units Held by Each Partner
under this Operating Partnership Agreement
EXHIBIT B: Form of Notice of Redemption
EXHIBIT C: Form of Notice of Conversion
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 "Operating Partnership
Agreement") has been executed and delivered as of February 11, 1999, by and
among Inland Retail Real Estate Trust, Inc., a Maryland corporation (the
"Company"), 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 Operating 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 23, 1998.
WHEREAS, the Company 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. The Company 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 Operating Partnership Agreement sets forth certain rights
and obligations of the Partners and the terms and conditions pursuant to which
the Operating Partnership shall be governed.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Operating Partnership 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 Operating Partnership
Agreement (including in the definitions of other terms in this Section 1.1), 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 Operating
Partnership to audit the books and records of the Operating 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.
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"Administrative Expenses" shall mean (i) all administrative and
operating costs and expenses incurred by the Operating 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 Operating Partnership.
"Affected Gain" shall have the meaning provided in Section 6.4.E
hereof.
"Affiliate" shall mean, with respect to any other Person: (i) any
Person directly or indirectly owning, controlling or holding, with the power to
vote 10% or more of the outstanding voting securities of such other Person; (ii)
any Person 10% or more of whose outstanding voting securities are directly or
indirectly owned, controlled or held, with the power to vote, by such other
Person; (iii) any Person directly or indirectly controlling, controlled by or
under common control with such other Person; (iv) any executive officer,
director, trustee or general partner of such other Person; and (v) any legal
entity for which such Person acts as an executive officer, director, trustee or
general partner.
"Articles" shall mean the Articles of Incorporation of the General
Partner, as they may be amended or restated from time to time.
"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.
"Board" shall mean the Board of Directors of the Company.
"Business Combination" shall mean any merger, consolidation or other
combination with or into another person or sale of all or substantially all of
its assets, or any liquidation or any reclassification, recapitalization or
change in the terms of Equity Stock into which an issued and outstanding Unit
may be converted. For this purpose, a reclassification, recapitalization or
change in the terms of Equity Stock does not include any of the following
transactions: (i) the issuance of
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additional Equity Stock by the General Partner in exchange for a capital
contribution other than the surrender of outstanding Equity Stock into which a
Unit may be converted; (ii) the reclassification and issuance of authorized but
unissued Equity Stock by the General Partner in one or more classes with rights
different from and/or superior to the rights of Shares in exchange for a capital
contribution other than the surrender of outstanding Equity Stock into which a
Unit may be converted; or (iii) a stock split or stock dividend by the General
Partner.
"Capital Account" shall mean the capital account maintained by the
Operating Partnership for each Partner as described in Section 3.6 hereof.
"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 Operating
Partnership pursuant to the terms of this Operating Partnership 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 Operating 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.
"Code" shall mean the Internal Revenue Code of 1986, as the same may be
amended from time to time, and any successor statute.
"Company" shall mean Inland Retail Real Estate Trust, Inc., a Maryland
corporation.
"Contributing Partner" shall have the meaning set forth in
Section 3.1.B hereof.
"Conversion Factor" shall mean 1.0, provided that in the event the
General Partner (i) declares or pays a dividend on its outstanding Shares in
shares of Equity Stock or makes a stock distribution to all holders of its
outstanding Shares; (ii) subdivides its outstanding Shares; or (iii) combines
its outstanding Shares into a smaller number of Shares, 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
immediately after such dividend, distribution, subdivision or combination, and
the denominator of which will be the actual number of Shares 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.
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"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 Operating
Partnership, which deficit such Partner is obligated to restore within the
meaning of Regulations Section 1.7041(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 1.7041(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 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.
"Equity Stock" means stock that is either Shares, preferred stock, or
any other class of stock of the Company.
"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 the Company, 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 property of the
Operating Partnership, the property's adjusted basis for federal income tax
purposes, except as follows:
(i) The initial Gross Asset Value of any property contributed
to the Operating Partnership shall be the gross fair market value of
such property, as determined by the General Partner;
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(ii) The Gross Asset Value of all Operating 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 Operating Partnership to a Partner of more than
a de minimis amount of Partnership property as consideration for a
Partnership Interest; and (c) the liquidation of the Operating
Partnership within the meaning of Regulations Section
1.7041(b)(2)(ii)(g); provided, however, that adjustments pursuant to
clauses (a) and (b) above may be made only if the General Partner
reasonably determines, in its sole and absolute discretion, 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
Operating Partnership.
(iii) The Gross Asset Value of any Operating 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
(iv) The Gross Asset Values of Operating 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 1.7041(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 Operating Partnership property if so
required or permitted under Regulations Section 1.7041(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.
"Independent Director" shall have the meaning given such term in the
Articles.
"Inland Group" shall mean the Company, the Operating 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 in a public
offering pursuant to its first effective registration statement for such Shares
filed under the Securities Act of 1933, as amended.
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"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 Operating Partnership
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.
"Market Price" on any date shall mean the average of the Closing Price
(as defined below) per Share for the five consecutive Trading Days (as defined
below) ending on such date. The "Closing Price" on any date shall mean the last
sale price, regular way (as defined below), 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 Shares are listed or admitted to
trading or, if the Shares are 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 Shares
are 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
Shares selected by the Board or, if there is no professional market maker making
a market in the Shares, 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 to the public if the General Partner is then engaged in
a public offering of Shares, or if the General Partner is not then offering
Shares to the public, the price per Share at which a Stockholder may purchase
Shares 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 a Share as determined by the General Partner, in its
sole discretion. "Trading Day" shall mean a day on which the principal national
securities exchange or national automated quotation system on which the Shares
are listed or admitted to trading is open for the transaction of business or, if
the Shares are not listed or admitted to trading on any national securities
exchange or national automated quotation system, 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. The
term "regular way" means a trade that is effected in a recognized securities
market for clearance and settlement pursuant to the rules and procedures of the
National Securities Clearing Corporation, as opposed to a trade effected
"ex-clearing" for same-day or next-day settlement.
"Net Equity Value" of a property as of the date of contribution of the
property to the Operating Partnership, generally, will be the purchase price of
the property to the Operating 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 Operating Partnership in connection with such contribution.
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"Nonrecourse Deductions" shall have the meaning set forth in
Regulations Section 1.7042(b) and (c).
"Nonrecourse Liability" shall have the meaning set forth in Regulations
Section 1.7042(b)(3).
"Notice of Conversion" shall mean the Notice of Conversion
substantially in the form of Exhibit C to this Operating Partnership Agreement.
"Notice of Redemption" shall mean the Notice of Redemption
substantially in the form of Exhibit B to this Operating Partnership Agreement.
"Operating Partnership" shall mean the limited partnership governed by
this Operating Partnership Agreement, as amended and/or restated from time to
time.
"Operating Partnership 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.
"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
the General Partner, as set forth in the Articles of Incorporation of the
Company, as they may be amended or restated from time to time.
"Partner Nonrecourse Debt" shall have the meaning set forth in
Regulations Section 1.7042(b)(4).
"Partner Nonrecourse Debt Minimum Gain" shall have the meaning set
forth in Regulations Section 1.7042(i)(3).
"Partner Nonrecourse Deductions" shall have the meaning set forth in
Regulations Section 1.7042(i)(2).
"Partners" shall mean, collectively, the General Partner and the
Limited Partners, or any additional or successor partners of the Operating
Partnership. Reference to a Partner shall be to any one of the Partners.
"Partnership Interest" shall mean the ownership interest of a Partner
in the Operating 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 Operating Partnership Agreement, and to the extent not
inconsistent with this Operating Partnership Agreement, under the Act, together
with the obligations of such Partner to comply with all of the terms and
provisions of this Operating Partnership Agreement and of the Act.
"Partnership Minimum Gain" shall have the meaning set forth in
Regulations Sections 1.7042(h)(2) and 1.7042(d).
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"Percentage Interest" of a Partner in the Operating 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 Operating 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 Operating 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 Operating Partnership described
in Code Section 705(a)(2)(B) or treated as Section 705(a)(2)(B)
expenditures under Regulations Section 1.7041(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 Operating
Partnership property 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 property for purposes of computing Profits and Losses;
(iv) gain or loss resulting from any disposition of Operating
Partnership properties 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 Operating Partnership's property pursuant to Code Section 734(b) or
Code Section 743(b) is required pursuant to Regulations
Section 1.7041(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 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 property) or loss (if the adjustment
decreases the basis
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of the property) from the disposition of the property 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 Operating 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 (including fractional shares) having a Market 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.
"Shares" shall mean the shares of voting common stock, par value $0.01
per share, of the Company. "Share" means one of those shares.
"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.
"Tax Matters Partner" shall have the meaning set forth in Section 10.7
hereof.
"TMP" means the Tax Matters Partner.
"Trading Day" shall mean a day on which the principal national
securities exchange on which the Shares are listed or admitted to trading is
open for the transaction of business or, if the Shares are 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.
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"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 Operating
Partnership Agreement, and references to a "Section" or "Article" are, unless
otherwise specified, to one of the Sections or Articles of this Operating
Partnership Agreement. Each Exhibit attached hereto and referred to herein is
hereby incorporated herein by such reference.
1.3 ORGANIZATION.
ARTICLE 2. FORMATION OF OPERATING PARTNERSHIP. Upon the initial filing
of the Certificate with the Secretary of State of the State of Illinois on
September 23, 1998, the Operating 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 Operating 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.
2.1 OPERATING PARTNERSHIP NAME. The business of the
Operating 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 Operating Partnership or may adopt
such trade or fictitious names as it may determine in its sole and absolute
discretion.
2.2 LOCATION OF THE PRINCIPAL PLACE OF BUSINESS. The
location of the principal place of business of the Operating Partnership shall
be at 2901 Butterfield Road, Oak Brook, IL 60523, or such other location as
shall be selected from time to time by the General Partner in its sole and
absolute discretion.
2.3 REGISTERED AGENT AND REGISTERED OFFICE. The
Registered Agent of the Operating Partnership shall be Robert H. Baum or such
other Person as the General Partner may select in its sole and absolute
discretion. The Registered Office of the Operating Partnership shall be 2901
Butterfield Road, Oak Brook, IL 60523, or such other location as the General
Partner may select in its sole and absolute discretion.
ARTICLE 3. CAPITAL.
3.1 ISSUANCE OF UNITS.
A. The Partnership Interest of a Partner in the
Operating 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 Operating Partnership 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.
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B. From time to time, the General Partner, subject to
the provisions of this Section 3.1.B, may cause the Operating
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 Operating 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 Market Price of
the Shares 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
Operating 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 Operating
Partnership distributions and (ii) the rights which each such class or
series of Partnership Interests shall have upon dissolution or
liquidation of the Operating 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.
F. In the event the Company issues shares of Equity
Stock, the Company shall be required to contribute to the Operating
Partnership any money or other property received upon the issuance of
such Equity Stock in exchange for additional Units. If the Company
issues Shares, it shall receive GP Common Units in exchange for the
contribution to the Operating Partnership of any money or other
property received upon the issuance of such Shares. If the Company
issues any other type of Equity Stock it shall receive Units with
allocation and distribution rights corresponding to the shares of
Equity Stock so issued.
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 Operating
Partnership to redeem on a Specified Redemption Date such LP Common
Unit (the "Redemption Right"). The redemption price for such Unit shall
be the Cash Amount, which shall be paid by the Operating Partnership.
The Redemption Right shall be exercised pursuant to a Notice of
Redemption delivered to the Operating 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 Operating
Partnership shall not be obligated to
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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
Operating 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 Operating Partnership 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 Operating Partnership with respect to the
Redeeming Partner's exercise of the Redemption Right, and the Operating
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 Operating
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 Operating
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 Partner may reasonably require in
connection with the issuance of Shares upon exercise of the Redemption
Right. The decision to exercise the General Partner's rights under this
Section 3.2.B will be made on a case by case basis by the General
Partner in its sole and absolute discretion.
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 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
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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 Operating 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 Shares by
such Limited Partner to be "integrated" with any other distribution of
Shares 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, 3.3.C, and 11.1.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 (the
"Conversion Right"). The Conversion Right shall be exercised
pursuant to a Notice of Conversion delivered to the Operating
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 (including fractional shares) having a Market
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 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 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 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 Operating 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 upon exercise of the Conversion Right.
B. Notwithstanding the provisions of Section 3.3.A
hereof, but subject to Sections 3.3.D and 11.1.C 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
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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, 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
Operating Partnership 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. The decision to exercise the Company's rights under this
Section will be made on a case by case basis by the Company in its sole
and absolute discretion.
C. Notwithstanding the provisions of Section 3.3.A
hereof, but subject to Section 11.1.C 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 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 Operating 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, in the opinion of counsel to the
General Partner, a material risk that the General Partner would no
longer qualify) as a REIT; or (E) cause the acquisition of Shares by
such Limited Partner to be "integrated" with any other distribution of
Shares for purposes of complying with the registration provisions of
the Securities Act of 1933, as amended.
D. 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 create, in the opinion of counsel to the General
Partner, a material risk that the General Partner would no longer
qualify) as a REIT.
E. 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. Except as provided in Section
3.1.F hereof, no Partner shall be assessed or required to contribute
additional funds or other property to the Operating Partnership. Any
additional funds or other property required by the Operating 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 Operating 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 Operating
Partnership by causing the Operating Partnership to borrow the necessary
funds from
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third parties on such terms and conditions as the General Partner shall
deem appropriate. If the General Partner elects to cause the Operating
Partnership to borrow funds, it may cause one or more of the Operating
Partnership's properties to be encumbered to secure the loan. No
Limited Partner shall have the right to make additional Capital
Contributions or loans to the Operating 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 Operating 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
Operating Partnership 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 Operating Partnership shall be
deemed an asset of the Operating Partnership for any purpose by any creditor
or other third party, nor may such rights or obligations be sold, transferred
or assigned by the Operating Partnership or pledged or encumbered by the
Operating Partnership to secure any debt or other obligation of the Operating
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 Operating Partnership
liabilities assumed by such Partner or which are secured by any of
the Operating Partnership's 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
Operating Partnership property distributed to such Partner
pursuant to any provision of this Operating Partnership
Agreement, such Partner's distributive share of Losses 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
Operating Partnership or which are secured by any property
contributed by such Partner to the Operating Partnership.
C. In the event that all or a portion of a Partnership
Interest is transferred in accordance with the terms of this
Operating Partnership 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
Operating Partnership Agreement relating to the maintenance of
Capital Accounts (and the determination of credits
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and debits thereto) are intended to comply with Section 704(b)
of the Code and Regulations Sections 1.7041(b) and 1.7042, 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 Operating Partnership or the Partners) are
computed in order to comply with such Regulations or more
accurately reflect the Partners' interests in the Operating
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 Operating Partnership capital reflected on
the Operating Partnership's balance sheet, as computed for
book purposes, in accordance with Regulations
Section 1.7041(b)(2)(iv)(g), (ii) make any appropriate
modifications in the event unanticipated events might
otherwise cause this Operating Partnership Agreement not to
comply with Regulations Sections 1.7041(b) and 1.7042, 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 Operating Partnership.
B. Except as provided by non-waivable provisions of
law, by the terms of this Operating Partnership 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 Operating 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 Operating 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 Operating 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 Operating Partnership or to endorse or to guaranty any obligations of
the Operating Partnership.
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ARTICLE 4. PURPOSE AND POWERS OF OPERATING PARTNERSHIP.
4.1 PURPOSES. The purposes of the Operating
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 Operating 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 Operating Partnership, and to engage in such other
ancillary activities as shall be necessary or desirable to effectuate the
foregoing purposes. The Operating 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 Operating Partnership Agreement
and in any other agreement entered into by the Operating Partnership, the
Operating 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 Operating 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 Operating 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.
4.3 MAINTENANCE OF PARTNERSHIP STATUS REQUIREMENTS.
The Partners acknowledge and agree that the Operating Partnership shall be
operated in a manner that will ensure that the Operating Partnership will be
classified as a partnership and not as an association taxable as a
corporation or as a "publicly traded partnership" (within the meaning of
Section 7704 of the Code) for federal income tax purposes.
ARTICLE 5. TERM. The Operating Partnership shall continue
until the Operating 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 Operating 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
Operating Partnership and to appoint, effective as of the date of such
Bankruptcy, dissolution or termination, a substitute General Partner;
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D. Dissolution required by operation of law; or
E. The sale or other disposition of all or
substantially all of the assets of the Operating Partnership unless the
General Partner elects to continue the Operating Partnership's 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 Operating Partnership (which activities shall be
deemed to be part of the winding up of the affairs of the Operating
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, if
any, 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.
(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 owed 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 Partner in accordance with such
Partner's 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).
Thereafter, any remaining items of loss or deduction will be allocated
to the General Partner.
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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 1.7042(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 1.7042(g). The items to be so allocated shall be determined in
accordance with Regulations Sections 1.7042(f)(6) and 1.7042(j)(2)
(assuming for this purpose that this Operating Partnership Agreement
complies with the requirements of Regulations Section 1.7041(e)). This
Section 6.2.A is intended to comply with the minimum gain chargeback
requirement in Regulations Section 1.7042(f) and shall be interpreted
and applied consistently therewith.
B. PARTNER MINIMUM GAIN CHARGEBACK. Except as
otherwise provided in Regulations Section 1.7042(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 Operating 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 1.7042(i)(5), shall be specially allocated items of
Operating 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 1.7042(i)(4)
(assuming for this purpose that this Operating Partnership
Agreement complies with the requirements of Regulations Section
1.7041(e)). The items to be so allocated shall be determined in
accordance with Regulations Sections 1.7042(i)(4) and 1.7042(j)(2).
This Section 6.2.B is intended to comply with the minimum gain
chargeback requirement in Regulations Section 1.7042(i)(4) and
shall be interpreted and applied consistently therewith.
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 1.7042(i)(1).
E. QUALIFIED INCOME OFFSET. If any Partner who
unexpectedly receives an adjustment, allocation, or distribution
described in subparagraphs (4), (5) or (6) of Regulations
Section 1.704-1(b)(2)(ii)(d), which has not otherwise been taken into
account in determining such Partner's Deficit Limitation, and which
causes a deficit balance in such Partner's Capital Account in excess of
such Partner's Deficit Limitation, shall be allocated items of book
income and gain in an amount and manner sufficient to eliminate or to
reduce,
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as quickly as possible, the excess deficit so created or increased.
This provision is intended to constitute a "qualified income offset" as
described in Regulations Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted in a manner consistent therewith. Such section of the
Regulations shall control in the case of any conflict between that
section of the Regulations and this Section.
F. GROSS INCOME ALLOCATION. In the event that any
Partner would have a deficit balance in such Partner's Capital Account
in excess of such Partner's Deficit Limitation, such Partner shall be
allocated items of income and gain in an amount and manner sufficient
to eliminate or to reduce, as quickly as possible, the excess deficit
so created or increased.
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 Operating 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 Operating
Partnership Agreement, for federal, state and local income tax
purposes, all items of Operating 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 Operating 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 Operating 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 Operating Partnership shall use the
traditional method provided for under the Regulations, but, to the
extent permitted by law, the Operating 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 purposes and its Gross Asset Value in accordance with any
permissible method or methods permitted under Code Section 704(c) and
the Regulations thereunder.
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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 Operating 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 Operating Partnership's "excess nonrecourse liabilities" within the
meaning of Regulations Section 1.7523(a)(3) shall be allocated among the
Partners in accordance with their respective interests in the Operating
Partnership's Profits which, solely for purposes of Regulations Section
1.7523(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 Operating Partnership beyond, or in
lieu of, the receipt of a Preferred Return) in proportion to the number
of Units owned by each such holder.
Notwithstanding any other provision of this Operating Partnership
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.
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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 Operating
Partnership Agreement.
7.4 LIQUIDATING DISTRIBUTIONS. Distributions upon
liquidation of the Operating Partnership shall be made in accordance with
Section 13.2 hereof.
ARTICLE 8. MANAGEMENT OF OPERATING PARTNERSHIP.
8.1 GENERAL PARTNER. The General Partner shall be the
sole manager of the business of the Operating 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 Operating 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 Operating 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 Operating Partnership. Except as otherwise expressly provided herein, the
powers of the General Partner to manage the Operating Partnership's 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
Operating 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; 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
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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 Operating
Partnership's 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 Operating
Partnership;
E. borrow money, procure loans and advances from any
Person for Operating 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 of the Operating Partnership's 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 Operating Partnership, for the conservation of the
Operating Partnership's assets or for any purpose convenient or
beneficial to the Operating Partnership;
H. conduct any and all banking transactions on behalf
of the Operating Partnership; to adjust and settle checking, savings
and other accounts with such institutions as the 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 Operating 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;
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I. demand, sue 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 Operating Partnership may be entitled or which are or may
become due the Operating Partnership from any Person; to commence,
prosecute or enforce, or to defend, answer or oppose, contest and
abandon all legal proceedings in which the Operating 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 Operating 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 Operating Partnership with applicable arrangements,
and other contractual obligations and arrangements entered into by the
Operating Partnership from time to time in accordance with the
provisions of this Operating Partnership Agreement, including periodic
reports as required to lenders and using all due diligence to insure
that the Operating Partnership is in compliance with its contractual
obligations;
L. maintain the Operating Partnership's books and
records;
M. prepare and deliver, or cause to be prepared and
delivered by the Operating Partnership's Accountants, all financial and
other reports with respect to the operations of the Operating
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 Operating
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 Operating
Partnership Agreement, amend this Operating Partnership Agreement;
P. file a voluntary petition seeking liquidation,
reorganization, arrangement or readjustment, in any form, of the
Operating 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 Operating Partnership or admit in writing that the Operating
Partnership cannot pay its debts as they mature; and
Q. subject to Section 5.1, elect to dissolve or
terminate the Operating 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:
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A. do any act in contravention of this Operating
Partnership Agreement;
B. do any act which would make it impossible to carry
on the ordinary business of the Operating Partnership, except to the
extent that such act is specifically permitted by the terms hereof;
C. possess Operating Partnership property or assign
rights in specific Operating Partnership property for other than
Operating Partnership purposes, except as otherwise provided in this
Operating Partnership 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 Operating
Partnership may be held in the name of the Operating 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 Operating 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 Operating Partnership 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 Operating 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 Operating
Partnership.
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 Operating 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,
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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 Operating
Partnership 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 Operating
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 Operating 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
Operating 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 of the General Partner and to any Partner, employee
or agent of the Operating Partnership (each an "Indemnified Party").
B. As long as the Company qualifies as a REIT, the
Operating 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 Operating 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
Operating Partnership or the Company; (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 the Company, 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 Operating
Partnership and not from the Partners.
C. As long as the Company qualifies as a REIT and
notwithstanding anything to the contrary in 8.6.B hereof, the Operating
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:
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(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 Operating Partnership were offered or sold as
to indemnification for violations of securities laws.
D. The Operating 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 the Company 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 Operating 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 Operating 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 Operating Partnership shall have the power to
purchase and maintain insurance or provide similar protection on behalf
of an Indemnified Party against any liability asserted which was
incurred in any such capacity with the Operating Partnership or arising
out of such status; provided, however, that the Operating 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 Operating Partnership 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 Operating 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 Operating
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
Operating 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
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exploitation of real and personal property (other than property of the
Operating Partnership), without any accountability, liability or obligation
whatsoever to the Operating Partnership or to any other Partner, even if such
business or activity competes with or is enhanced by the business of the
Operating Partnership. The General Partner, in the exercise of its power and
authority under this Operating Partnership Agreement, may contract and
otherwise deal with, or otherwise obligate the Operating 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 Operating
Partnership 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 Operating 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 shall not be responsible for the misconduct,
negligence, acts or omissions of any consultant or contractor of the
Operating 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 Operating 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 Operating Partnership's 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
Operating Partnership. The General Partner shall be entitled to
reimbursement from the Operating 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
the Operating Partnership's business. Such expenses shall be deemed to
include those expenses required in connection with the administration
of the Operating Partnership such as the maintenance of Operating
Partnership books and records, management of the Operating
Partnership's property and assets and preparation of information
respecting the Operating Partnership needed by the Partners in the
preparation of their individual tax returns.
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ARTICLE 9. BANKING. The funds of the Operating 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
Operating 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 Operating 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 Operating 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 Operating Partnership and, in addition, at its expense, shall
have the right to copy such books. The General Partner, at the expense of the
Operating Partnership, shall cause to be prepared and distributed to the
Partners annual financial data sufficient to reflect the status and
operations of the Operating 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 Operating 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 Operating 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 Operating 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 Operating
Partnership.
10.5 METHOD OF ACCOUNTING. Except for purposes of
Article 6 hereof and the maintenance of Capital Accounts, the Operating
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 Operating Partnership for federal or state
income tax purposes shall be taken or rejected by the Operating Partnership
in the sole discretion of the General Partner.
10.6 TAX ELECTION. All elections required or permitted
to be made by the Operating Partnership under any applicable tax law shall be
made by the General Partner in its sole discretion.
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10.7 TAX MATTERS PARTNER. The General Partner is
hereby designated the Tax Matters Partner (hereinafter referred to as the
"TMP") of the Operating 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 Operating 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 Operating 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 Operating 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 required to satisfy the
jurisdictional requirements of the Court, within thirty days after the TMP's
notice to such person.
ARTICLE 11. TRANSFERS OF OPERATING PARTNERSHIP INTERESTS.
11.1 GENERAL PARTNER.
A. Except as otherwise provided in this Operating
Partnership Agreement, the General Partner may not withdraw from the
Operating Partnership or transfer or assign all (but may assign less
than all) of its GP Common Units in the Operating 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 Operating Partnership 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 Operating Partnership 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 Operating Partnership
Agreement without the consent of the Limited Partners, in their
reasonable discretion. In the event the General Partner withdraws from
the Operating Partnership, in
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violation of this Operating Partnership 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 Operating Partnership's 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 Operating
Partnership.
B. Notwithstanding Section 11.1.A, the General Partner
and/or the Operating Partnership may engage in a Business Combination
without the consent of the Limited Partners upon satisfaction of the
conditions set forth in Section 11.1.C.
C. In the event (i) the Board has approved a proposed
Business Combination to which the Company will be a party which does
not require the consent of the Stockholders; (ii) the Board has
approved a Stockholder vote on a proposed Business Combination to
which the Company will be a party; or (iii) the Company, in its
capacity as the General Partner of the Operating Partnership, has
approved a proposed Business Combination to which the Operating
Partnership will be a party; then the Company shall provide to each
Limited Partner holding Units convertible into Equity Stock pursuant
to Section 3.3.A or 3.3.E of this Operating Partnership Agreement
written notice of the proposed Business Combination at least thirty
(30) days prior to the record date for the Stockholder vote on such
Business Combination, if any, and at least ninety (90) days prior to
the effective date of such Business Combination. Such Limited
Partners shall be entitled to exercise their Conversion Rights under
Section 3.3 without regard to whether the Holding Period with
respect to such Units has expired. The Company shall not have the
option of acquiring such Units for the Cash Amount in accordance
with the terms of Section 3.3.B and 3.3.D; provided that, to the
extent that a purported exercise of a Conversion Right pursuant to
this Section 11.1.C by a Limited Partner would be prohibited under
Section 3.3.C, the Company shall have the right (but shall not have
the obligation) to purchase the Units offered for conversion for the
Cash Amount under the terms and conditions set forth in Section
3.3.B provided that purchase of the Units for the Cash Amount would
not be prohibited under Section 3.3.D. A Limited Partner's right to
exercise his or her Conversion Right pursuant to this Section 11.1.C
shall terminate upon the first to occur of the following events: (i)
disapproval of the proposed Business Combination by the Board; (ii)
disapproval of the proposed Business Combination by the Stockholders
of the Company if a Stockholder vote is held; (iii) abandonment of
the proposed Business Combination by the parties thereto other than
the Company and/or the Operating Partnership, if any; or (iv) the
effective date of such Business Combination. In the event that a
proposed Business Combination is revivied after the occurrence of
any of the events described in (i) through (iv) in the preceding
sentence, the Company shall be required to give a new written notice
pursuant to this Section 11.1.C.
11.2 LIMITED PARTNERS.
A. Except as specifically set forth in this Operating
Partnership 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
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sale or disposition) (a "Transfer") all or any part of his interest in
the Operating Partnership, except (i) as otherwise permitted by
Section 12.3 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 12.3 hereof. A Limited Partner shall not be
permitted to retire or withdraw from the Operating Partnership except
as expressly permitted by this Operating Partnership 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 Operating 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 Operating Partnership
Agreement to the contrary notwithstanding, except as provided in
Section 11.2.A or Section 12.3 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 unless the General Partner consents to the
Transferee's admission as a substituted Limited Partner and the
Transferee agrees in writing to be bound by the terms of this Operating
Partnership Agreement, as it may be amended from time to time;
(iii) the Operating 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 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 Shares in accordance with Section 3.2
hereof, would be prohibited by or violate any provision of the Articles
of the General Partner (including those limiting the ownership of
Shares 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
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(unless the General Partner consents to such transfer), (v) if such
Transfer would, in the opinion of counsel to the Operating Partnership,
cause the Operating 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 Operating 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 Operating Partnership, cause
any portion of the assets of the Operating Partnership to constitute
assets of any employee benefit plan pursuant to Department of Labor
Regulations Section 2510.3101.
11.3 ADMISSION ADJUSTMENTS. The General Partner, when
necessary, shall cause this Operating Partnership 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 Operating Partnership's
business, transact any business in the Operating Partnership's name or have
the power to sign documents for or otherwise bind the Operating Partnership.
12.2 MEETINGS OF PARTNERS.
A. The Partners may but shall not be required to hold
any annual, periodic or other formal meetings. However, meetings of the
Partners, may be called by the General Partner or by any Limited
Partner or Limited Partners holding at least 10% of the Units in the
Operating Partnership.
B. The Partner or Partners calling the meeting may
designate any place within the State of Illinois as the place of
meeting for any meeting of the Partners; and Partners holding at least
a majority of the Units in the Operating Partnership may designate any
place outside the State of Illinois as the place of meeting for any
meeting of the Partners. If no designation is made, or if a special
meeting be otherwise called, the place of meeting shall be the
principal place of business of the Operating Partnership.
C. Except as provided in Section 12.2.D, written notice
stating the place, day and hour of the meeting and the purpose or
purposes for which the meeting is called shall be delivered not less
than ten (10) nor more than ninety (90) days before the date of the
meeting, either personally or by mail, by or at the direction of the
Partner or Partners calling the meeting, to each Partner entitled to
vote at such meeting and to each Partner not entitled to vote who is
entitled to notice of the meeting.
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D. Anything in this Operating Agreement to the contrary
notwithstanding, with respect to any meeting of the Partners, any
Partner who in person or by proxy shall have waived in writing notice
of the meeting, either before or after such meeting, or who shall
attend the meeting in person or by proxy, shall be deemed to have
waived notice of such meeting unless such Partner attends for the
express purpose of objecting, at the beginning of the meeting, and does
so object to the transaction of any business because the meeting is not
lawfully called or convened.
E. If all of the Partners shall meet at any time and
place, either within or outside of the State of Illinois, and consent
to the holding of a meeting at such time and place, such meeting shall
be valid without call or notice, and at such meeting lawful action may
be taken.
F. For the purpose of determining Partners entitled to
notice of or to vote at any meeting of Partners or any adjournment
thereof, or Partners entitled to receive payment of any distribution,
or in order to make a determination of Partners for any other purpose,
the date on which notice of the meeting is mailed or the date on which
the declaration of such distribution is adopted, as the case may be,
shall be the record date. When a determination of Partners entitled to
vote at any meeting of Partners has been made as provided in this
Section 12.2.F, such determination shall apply to any adjournment
thereof.
G. Partners holding at least a majority of the Units
entitled to vote at a meeting, represented in person or by proxy, shall
constitute a quorum at any meeting of Partners. In the absence of a
quorum at any such meeting, Partners holding at least a majority of
Units so represented may adjourn the meeting to another time and place.
Any business which might have been transacted at the original meeting
may be transacted at any adjourned meeting at which a quorum is
present. No notice of an adjourned meeting need be given if the time
and place are announced at the meeting at which the adjournment is
taken unless the adjournment is for more than 120 days. The Partners
present at a duly organized meeting may continue to transact business
until adjournment, notwithstanding the withdrawal during such meeting
of that number Units whose absence would cause less than a quorum.
H. If a quorum is present, the affirmative vote of
Partners holding a majority of the Units entitled to vote, present in
person or represented by proxy, shall be binding on all Partners,
unless the vote of a greater or lesser proportion or number of Units or
Partners is otherwise required by the Act, by the Articles, or by this
Operating Partnership Agreement, including, without limitation,
Articles 8 and 15 hereof. Unless otherwise expressly provided herein or
required under applicable law or the Articles, Partners who have an
interest (economic or otherwise) in the outcome of any particular
matter upon which the Partners' vote or consent is required may vote or
consent upon any such matter and their Units, vote or consent, as the
case may be, shall be counted in the determination of whether the
requisite matter was approved by the Partners.
I. At all meetings of Partners, a Partner may vote in
person or by proxy executed in writing by the Partner or by the
Partner's duly authorized attorney-in-fact. Such proxy shall be filed
with the General Partner before or at the time of the meeting. No proxy
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shall be valid after eleven months from the date of its execution,
unless otherwise provided in the proxy.
J. Action required or permitted to be taken at a
meeting of Partners may be taken without a meeting if the action is
evidenced by one or more written consents or approvals describing the
action taken and signed by sufficient Partners or Partners holding
sufficient Units, as the case may be, to approve such action had such
action been properly voted on at a duly called meeting of the Partners.
Action taken under this Section 12.2.J is effective when the requisite
Partners or Partners with the requisite Units, as the case may be, have
signed the consent or approval, unless the consent specifies a
different effective date.
12.3 DEATH, LEGAL INCOMPETENCY, ETC. OF A LIMITED
PARTNER. The death, legal incompetency, insolvency, dissolution or Bankruptcy
of a Limited Partner shall not dissolve or terminate the Operating
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 Operating 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 Operating Partnership Agreement, subject to the
General Partner's right to redeem such interest in accordance with the
provisions of Section 3.2 hereof.
12.4 NO WITHDRAWAL. No Limited Partner may withdraw
from the Operating Partnership without the prior written consent of the
General Partner.
12.5 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 Operating 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 Operating
Partnership, without any obligation to offer any interest in such activities
to the Operating Partnership or to any Partner. Neither the Operating
Partnership nor any Partner shall have any right, by virtue of this Operating
Partnership 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 Operating Partnership, shall not be deemed wrongful
or improper.
ARTICLE 13. LIQUIDATION AND DISSOLUTION OF OPERATING PARTNERSHIP.
13.1 TERMINATION EVENTS. The Operating 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
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Operating Partnership's affairs and shall liquidate the assets of the
Operating Partnership as promptly as possible, unless the General Partner, or
the liquidating trustee, shall determine that an immediate sale of Operating
Partnership's assets would cause undue loss to the Operating 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 Operating Partnership, including repayment of any debts of
Partners to the Operating Partnership, shall be applied in the order of
priority as follows:
A. Debts of the Operating Partnership, including
repayment of principal and interest on loans and advances made
by the General Partner; then
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 Operating Partnership
in the event there is no remaining General Partner of the
Operating Partnership, for any contingent or unforeseen
liabilities or obligations of the Operating 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;
provided that, to the extent that a distribution in accordance with this
Section 13.2 would cause a Partner to have a negative balance in his or her
Capital Account, such distribution shall be reallocated to the Partners with
positive Capital Account balances in proportion to such positive balances.
13.3 DISTRIBUTION IN KIND. The General Partner may
make distributions pursuant to this Operating Partnership 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 Operating 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 Operating Partnership, the Operating
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 Operating
Partnership.
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13.5 LIABILITY OF THE LIQUIDATING TRUSTEE. The
liquidating trustee shall be indemnified and held harmless by the Operating
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 Operating Partnership 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
Operating Partnership 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 stead and for his use and benefit, to sign, swear to,
acknowledge, file and record:
(i) this Operating Partnership Agreement, and
amendments to this Operating Partnership 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 Operating Partnership is doing or intends to do business,
in order to discharge the purposes of the Operating
Partnership or otherwise in connection with the use of the
name or names used by the Operating Partnership;
(iii) any other instrument which may be required to
be filed or recorded by the Operating Partnership on behalf of
the Partners under the laws of any State or by any
governmental agency in order for the Operating Partnership to
conduct its business;
(iv) any documents which may be required to effect
the continuation of the Operating Partnership, the admission
of a substitute or additional Partner, or the dissolution and
termination of the Operating Partnership, provided such
continuation, admission or dissolution and termination is not
in violation of any provision of this Operating Partnership
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 Operating Partnership of such affecting Limited Partners of
his interest in the Operating Partnership.
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ARTICLE 15. AMENDMENT OF OPERATING PARTNERSHIP AGREEMENT.
15.1 GENERAL. The General Partner, without the consent
of the Limited Partners, may amend this Operating Partnership 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; or (iv) amends Section 8.5, 8.6 or 11.1 of this Operating
Partnership Agreement shall require the approval of the affected Limited
Partners holding more than 50% of the voting power in the Operating
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 Operating Partnership 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
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 Operating Partnership Agreement, all claims, disputes and
controversies between the parties hereto (including, without limitation, any
claims, disputes and controversies between the Operating Partnership and any
one or more of the Partners) arising out of or in connection with this
Operating Partnership Agreement or the Operating 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 Operating 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
Operating Partnership) to the Operating 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.
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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.
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 Operating 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
Operating Partnership.
16.5 NO ALTERATION OF OPERATING PARTNERSHIP 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 Operating Partnership Agreement.
ARTICLE 17. MISCELLANEOUS.
17.1 NOTICES. Any notice, election or other
communication provided for or required by this Operating Partnership
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 Operating Partnership Agreement, or
at such other address as such person may have previously furnished in writing
to the Operating Partnership and each Partner. A copy of all such notices
also should be sent to the General Partner and addressed as follows:
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General Partner: Inland Retail Real Estate Trust, Inc.
2901 Butterfield Road
Oak Brook, IL 60523
Attn: President
Fax No. (630) 218-4900
With a copy to: Wildman, Harrold, Allen & Dixon
Suite 2800
Chicago, IL 60606
Attn: Roger G. Fein, Esq.
Fax No. (312) 201-2555
17.2 SUCCESSORS AND ASSIGNS. Any person acquiring or
claiming an interest in the Operating Partnership, in any manner whatsoever,
shall be subject to and bound by all of the terms, conditions and obligations
of this Operating Partnership 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
Operating Partnership Agreement, and no person shall acquire an interest in
the Operating Partnership or become a Partner thereof except as expressly
permitted by and pursuant to the terms of this Operating Partnership
Agreement. Subject to the foregoing, and the provisions of Article 11 above,
this Operating Partnership 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 Operating Partnership
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 Operating
Partnership Agreement, the provisions of such Act shall apply to the
Operating 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 Operating Partnership
as provided for by this Operating Partnership Agreement.
17.7 GENERAL PARTNER WITH INTEREST AS LIMITED PARTNER.
Except as set forth to the contrary in this Operating Partnership Agreement,
if the General Partner has an interest as a Limited Partner in the Operating
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.
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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 Operating
Partnership 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 Operating 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 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 Operating 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 Operating
Partnership 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 Operating Partnership 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 Operating Partnership or the General
Partner, (b) a merger, consolidation or combination of the Operating
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 Operating Partnership or the General
Partner, or (d) the transfer by the General Partner of all or any part of its
interest in the Operating 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]
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IN WITNESS WHEREOF, the parties hereto have executed this Operating
Partnership Agreement as of the date first written above.
GENERAL PARTNER:
INLAND RETAIL REAL ESTATE TRUST, INC.
By: /s/ Robert D. Parks
-------------------------------------------
Its: Chairman
LIMITED PARTNERS:
INLAND RETAIL REAL ESTATE ADVISORY
SERVICES, INC.
2901 BUTTERFIELD ROAD
OAK BROOK, ILLINOIS 60523
ATTN: PRESIDENT
By: /s/ Patricia A. Challenger
--------------------------------------------
Its: Vice President
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EXHIBIT A
NAME OF PARTNERS AND NUMBER OF UNITS HELD BY EACH PARTNER UNDER THIS OPERATING
PARTNERSHIP AGREEMENT
GENERAL PARTNER
Inland Retail Real Estate Trust, Inc. 20,000 GP Common Units
LIMITED PARTNERS
Inland Retail Real Estate Advisory Services, Inc. 200 LP Common Units
<PAGE>
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 "Operating Partnership").
Pursuant to Section 3.2 of the Agreement of Limited Partnership of the
Operating Partnership (the "Operating Partnership Agreement"), I hereby notify
the Operating Partnership and the general partner of the Operating Partnership,
Inland Retail Real Estate Trust, Inc., a Maryland Corporation (the "General
Partner") that I am exercising my election to have the Operating Partnership
redeem a total of __________of my Units for the consideration described in
Section 3.2.A of the Operating 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 Operating Partnership to acquire
such Units and to pay the consideration set forth in Section 3.2.B of the
Operating Partnership Agreement for such Units, and that in the event the
General Partner exercises such option, (i) the Operating 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 General Partner for federal
income tax purposes.
Dated _______________________________________________
Print Name___________________________________________
Signature ___________________________________________
<PAGE>
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 "Operating Partnership").
Pursuant to Section 3.3 of the Agreement of Limited Partnership of the
Operating Partnership (the "Operating Partnership Agreement"), I hereby notify
the General Partner of the Operating 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 the
General Partner, based on the formula for conversion set forth in Section 3.3.A
of the Operating 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 Operating Partnership Agreement in lieu of
issuing such Shares, and (ii) I am obligated to treat the transaction as a sale
of such Units for federal income tax purposes.
Dated ___________________________________________
Print Name ______________________________________
Signature________________________________________
<PAGE>
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 Services, Inc. $2,000.00
