Document:

exv10w2

EXHIBIT 10.2

FIRST AMENDMENT AND COMPLETE RESTATEMENT OF

AGREEMENT OF LIMITED LIABILITY LIMITED PARTNERSHIP

OF

INREIT PROPERTIES, LLLP

216 SOUTH BROADWAY, SUITE 202

MINOT, NORTH DAKOTA 58701

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 

	ARTICLE I DEFINITIONS	 	 	3	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE II PARTNERSHIP CONTINUATION AND IDENTIFICATION	 	 	9	 
	 	2.01	 	 	Name, Office and Registered Agent
	 	 	9	 
	 	2.02	 	 	Partners
	 	 	9	 
	 	2.03	 	 	Terms and Dissolution
	 	 	9	 
	 	2.04	 	 	Filing of Certificate and Perfection of Limited Partnership
	 	 	10	 
	 	2.05	 	 	Certificates Describing Partnership Units
	 	 	10	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE III BUSINESS OF THE PARTNERSHIP	 	 	10	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE IV CAPITAL CONTRIBUTIONS AND ACCOUNTS	 	 	11	 
	 	4.01	 	 	Capital Contributions
	 	 	11	 
	 	4.02	 	 	Additional Capital Contributions and Issuances of Additional
Partnership Interest
	 	 	11	 
	 	4.03	 	 	Additional Funding
	 	 	12	 
	 	4.04	 	 	Capital Accounts
	 	 	12	 
	 	4.05	 	 	Percentage Interests
	 	 	13	 
	 	4.06	 	 	No Interest on Contributions
	 	 	13	 
	 	4.07	 	 	Return of Capital Contributions
	 	 	13	 
	 	4.08	 	 	No Third Party Beneficiary
	 	 	13	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE V PROFITS AND LOSSES; DISTRIBUTIONS	 	 	14	 
	 	5.01	 	 	Allocation of Profit and Loss
	 	 	14	 
	 	5.02	 	 	Distribution of Cash
	 	 	15	 
	 	5.03	 	 	INREIT Distribution Requirements
	 	 	16	 
	 	5.04	 	 	No Right to Distributions in Kind
	 	 	16	 
	 	5.05	 	 	Limitations on Return of Capital Contributions
	 	 	16	 
	 	5.06	 	 	Distributions Upon Liquidation
	 	 	16	 
	 	5.07	 	 	Substantial Economic Effect
	 	 	17	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE VI RIGHTS, OBLIGATIONS AND POWERS OF THE GENERAL PARTNER	 	 	17	 
	 	6.01	 	 	Management of the Partnership
	 	 	17	 
	 	6.02	 	 	Delegation of Authority
	 	 	20	 
	 	6.03	 	 	Indemnification and Exculpation of Indemnitees
	 	 	20	 
	 	6.04	 	 	Liability of the General Partner
	 	 	21	 
	 	6.05	 	 	Reimbursement
	 	 	22	 
	 	6.06	 	 	Outside Activities
	 	 	22	 
	 	6.07	 	 	Conflicts of Interest and Investment Restrictions
	 	 	23	 
	 	6.08	 	 	General Partner Participation
	 	 	23	 
	 	6.09	 	 	Title to Partner Participation
	 	 	23	 
	 	6.10	 	 	Miscellaneous
	 	 	23	 

-i-

 

	 	 	 	 	 	 	 	 	 

	 	 	 	 	 
	 	 	 	 
	ARTICLE VII CHANGES IN GENERAL PARTNER	 	 	24	 
	 	7.01	 	 	Transfer of the General Partner’s Partnership Interest
	 	 	24	 
	 	7.02	 	 	Admission of a Substitute or Additional General Partner
	 	 	25	 
	 	7.03	 	 	Effect of Bankruptcy, Withdrawal, Death or Dissolution of a General Partner
	 	 	26	 
	 	7.04	 	 	Removal of a General Partner
	 	 	26	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE VIII RIGHT AND OBLIGATIONS OF THE LIMITED PARTNERS	 	 	27	 
	 	8.01	 	 	Management of the Partnership
	 	 	27	 
	 	8.02	 	 	Power of Attorney
	 	 	27	 
	 	8.03	 	 	Limitation on Liability of Limited Partners
	 	 	28	 
	 	8.04	 	 	Ownership by Limited Partner of Corporate General Partner or Affiliate
	 	 	28	 
	 	8.05	 	 	Exchange Right
	 	 	28	 
	 	8.06	 	 	Registration
	 	 	30	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE IX TRANSFERS OF LIMITED
PARTNERSHIP INTERESTS	 	 	31	 
	 	9.01	 	 	Purchase for Investment
	 	 	31	 
	 	9.02	 	 	Restrictions on Transfer of Limited Partnership Interests
	 	 	31	 
	 	9.03	 	 	Admission of Substitute Limited Partner
	 	 	32	 
	 	9.04	 	 	Rights of Assignees of Partnership Interests
	 	 	33	 
	 	9.05	 	 	Effect of Bankruptcy, Death, Incompetence or Termination of a Limited
Partner
	 	 	34	 
	 	9.06	 	 	Joint Ownership of Interests
	 	 	34	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE X BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS	 	 	34	 
	 	10.01	 	 	Books and Records
	 	 	34	 
	 	10.02	 	 	Custody of Partnership Funds; Bank Accounts
	 	 	35	 
	 	10.03	 	 	Fiscal and Taxable Year
	 	 	35	 
	 	10.04	 	 	Annual Tax Information and Report
	 	 	35	 
	 	10.05	 	 	Tax Matters Partner; Tax Elections; Special Basis Adjustments
	 	 	35	 
	 	10.06	 	 	Reports to Limited Partners
	 	 	36	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XI AMENDMENT OF AGREEMENT	 	 	36	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XII GENERAL PROVISIONS	 	 	37	 
	 	12.01	 	 	Notices
	 	 	37	 
	 	12.02	 	 	Survival of Rights
	 	 	37	 
	 	12.03	 	 	Additional Documents
	 	 	37	 
	 	12.04	 	 	Severability
	 	 	37	 
	 	12.05	 	 	Entire Agreement
	 	 	37	 
	 	12.06	 	 	Pronouns and Plurals
	 	 	37	 
	 	12.07	 	 	Headings
	 	 	37	 
	 	12.08	 	 	Counterparts
	 	 	37	 
	 	12.09	 	 	Governing Law
	 	 	38	 

-ii-

 

FIRST AMENDMENT AND COMPLETE RESTATEMENT OF

AGREEMENT OF LIMITED LIABILITY LIMITED PARTNERSHIP

OF

INREIT PROPERTIES, LLLP

     This Amendment is effective as of 25th day of April, 2003.

     The parties to this Amendment do hereby restate the terms and conditions in their previously
formed Limited Liability Limited Partnership. The following terms used in this Agreement shall
have the meanings specified below:

ARTICLE I

DEFINITIONS

     1.1 Act: means the North Dakota Limited Liability Limited Partnership Act (Chapter
45-23 of the North Dakota Century Code) as it may be amended from time to time.

     1.2 Additional Funds: has the meaning set forth in Section 4.03 hereof.

     1.3 Additional Limited Partner: means a Person admitted to this Partnership as a
Limited Partner pursuant to Section 4.02 hereof.

     1.4 Additional Securities: means any additional INREIT shares (other than INREIT
shares issued in connection with an exchange pursuant to Section 8.05 hereof) or rights, warrants
or convertible or exchangeable securities containing the right to subscribe for or purchase INREIT
shares, as set forth in Section 4.02.

     1.5 Administrative Expenses: means (i) all administrative and operating costs and
expenses incurred by the Partnership, (ii) those administrative costs and expenses of the General
Partner, including the advisory fees and trustee fees of the General Partner, and any accounting
and legal expenses of the General Partner, which expenses, the Partners have agreed, are expenses
of the Partnership and are not the General Partner, and (iii) to the extent not included in clause
(ii) above, all other INREIT expenses.

     1.6 Affiliate: means (i) any Person that, directly or indirectly, controls or is
controlled by or is under common control with such Person, (ii) any other person that owns,
beneficially, directly or indirectly, 10% or more of the outstanding capital stock, shares or
equity interest of such Person, or (iii) any officer, director, employee, partner or trustee of
such Person or any Person controlling, controlled by or under common control with such Person
(excluding trustees and persons serving in similar capacities who are not otherwise an Affiliate of
such Person). For the purposes of this definition, “control” (including the correlative meanings
of the terms “controlled by” and “under common control with”), as used with respect to any Person,
shall mean the possession, directly or indirectly, of the power to direct or cause the direction of
the management and policies of such Person, through ownership of voting securities or partnership
interests or otherwise.

     1.7 Agreed Value: means the fair market value of Partner’s non-cash Capital
Contribution as of the date of contribution determined by the General Partner. For purposes of

 

 

this Partnership Agreement, the Agreed Value of a Partner’s non-cash capital contribution
shall be equal to the number of Partnership Units received by such Partner in exchange for Property
or an interest therein or in connection with the merger of a partnership of which such person is a
partner with and into the Partnership, or for any other non-cash assets so contributed, multiplied
by the “Market Price”, calculated in accordance with the second and third sentences of the
definition of “Cash Account”. The names and addresses of the Partners, number of Partnership Units
issued to each Partner, and the Agreed Value of the non-cash contributions as of the date of
contribution is set forth on Exhibit A.

     1.8 Agreement: means this Agreement of Limited Partnership.

     1.9 Capital Account: has the meaning provided in Section 4.04 hereof.

     1.10 Capital Contribution: means the total amount of cash, cash equivalents, and the
Agreed Value of any Property or other asset contributed or agreed to be contributed, as the context
requires, to the Partnership by each Partner pursuant to the terms of the Agreement. Any reference
to the Capital Contribution of a Partner shall include the Capital Contribution made by a
predecessor holder of the Partnership Interest of such Partner.

     1.11 Capital Transaction: means the refinancing, sale, exchange, condemnation,
recovery of a damage award, or insurance proceeds (other than business or rental interruption
insurance proceeds not reinvested in the repair or reconstruction of Properties), or other
disposition of any Property (or the Partnership’s interest therein).

     1.12 Cash Amount: means an amount of cash per Partnership unit equal to the value of
the INREIT Shares Amount on the date of receipt by INREIT of a Notice of Exchange. The value of
the INREIT Shares Amount shall be based on the average of the daily market price of INREIT Shares
for the ten consecutive trading days immediately preceding the date of such valuation. The market
price for each such trading day shall be: (i) if the INREIT Shares are listed or admitted to
trading on any securities exchange, the sale price, regular way, on such day; (ii) if the INREIT
shares are not listed or admitted to trading on any securities exchange, the last reported sale
price on such day or, if no sale takes place on such day, the average of the closing bid and asked
prices on such day, as reported by a reliable quotation source designated by INREIT, or (iii) if
the INREIT Shares are not listed or admitted to trading on any securities exchange and no such last
reported sale price or closing bid and asked prices are available, the average of the reported high
bid and low asked prices on such day, as so reported, on the most recent day (not more than ten
days prior to the date in question) for which prices have been so reported; provided that if there
are no bid and asked prices reported during the ten days prior to the date in question, the value
of the INREIT Shares shall be determined by INREIT acting in good faith on the basis of such
quotations and other information as it considers, in its reasonable judgment, appropriate. In the
event the INREIT Share Amount includes rights that a holder of INREIT Shares would be entitled to
receive, then the value of such rights shall be determined by INREIT acting in good faith on the
basis of such quotations and other information as it considers, in its reasonable judgment,
appropriate.

     1.13 Certificate: means any instrument or document that is required under the laws
of the State of North Dakota, or any other jurisdiction in which the Partnership conducts business,

 

 

to be signed and sworn to by the Partners of the Partnership (either by themselves or pursuant
to the power-of-attorney, granted to the General Partners in Section 8.02 hereof) and filed for
recording in the appropriate public offices within the State of North Dakota or such other
jurisdiction to perfect or maintain the Partnership as a limited liability limited Partnership, to
effect the admission, withdrawal, or substitution of any Partner of the Partnership, or to protect
the limited liability of the Limited Partners as limited Partners under the laws of the State of
North Dakota or such other jurisdiction.

     1.14 Code: means the Internal Revenue Code of 1986, as amended, and as hereafter
amended from time to time. Reference to any particular provision of the Code shall mean that
provision in the Code at the date hereof and any successor provision of the Code.

     1.15 Commission: means the US Securities and Exchange Commission.

     1.16 Conversion Factor: means on a one-for-one basis provided that in the event
INREIT (i) declares or pays a dividend on its outstanding INREIT Shares in INREIT Shares or makes a
distribution to all holders of its outstanding INREIT Shares in INREIT Shares, (ii) subdivides its
outstanding INREIT Shares, or (iii) combines its outstanding INREIT Shares into a smaller number of
INREIT Shares, the Conversion Factor shall be adjusted by multiplying the Conversion Factor by a
fraction, the numerator of which shall be the number of INREIT Shares issued and outstanding on the
record date for such dividend, distribution, subdivision or combination that has occurred as of
such time), and the denominator of which shall be the actual number of INREIT Shares (determined
without the above assumption) issued and outstanding on such date. Any adjustment to the
Conversion Factor shall become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event; provided, however, that if INREIT receives
a Notice of Exchange after the record date, but prior to the effective date of such dividend,
distribution, subdivision or combination, the Conversion Factor shall be determined as if INREIT
had received the Notice of Exchange immediately prior to the record date for such dividend,
distribution, subdivision, or combination.

     1.17 Declaration of Trust: means that Declaration of Trust of INREIT, as amended or
restated from time to time.

     1.18 Event of Bankruptcy: as to any person means the filing for relief as to such
Person under Federal Bankruptcy statutes or appointment of a receiver under the law of any
jurisdiction (except if such petition is/has been dismissed within 90 days); insolvency as finally
determined by the court proceeding; commencement of any proceedings relating to such Person as a
debtor under any other reorganization, arrangement, insolvency, adjustment of debt or law of any
jurisdiction, whether now in existence or hereinafter in effect, either by such Person or by
another, provided that if such proceeding is commenced by another, such Person indicates his
approval of such proceeding, consents thereto or acquiesces therein, or such proceeding is
contested by such Person and has not been finally dismissed within 90 days.

     1.19 Exchange Amount: means either the Cash Amount or the INREIT Shares amount, as
selected by the General Partner at its sole discretion pursuant to Section 8.05(b) hereof.

 

 

     1.20 Exchange Right: has the meaning provided in Section 8.05(a) hereof.

     1.21 Exchange Partner: has the meaning provided in Section 8.05(a) hereof.

     1.22 General Partner: means INREIT Real Estate Investment Trust, a North Dakota
unincorporated, but registered trust, and any Person who becomes a substitute or additional General
Partner as provided herein, and any of their successors as General Partner.

     1.23 General Partnership Interest: means a Partnership Interest held by the General
Partner that is a general partnership interest.

     1.24 Indemnitee: means: (i) any Person made a party to a proceeding by reason of its
status as INREIT, as the General Partner, or a trustee, director, officer or employee of INREIT, or
the Partnership, and (ii) such other Persons (including Affiliates of INREIT or the Partnership) as
the General Partner may designate from time to time, in its sole and absolute discretion.

     1.25 Independent Trustee: means a trustee of INREIT who is not an officer, member,
affiliate or employee of INREIT Management, LLC, the advisor to INREIT.

     1.26 Initial Properties: means those properties listed in Exhibit B hereto.

     1.27 INREIT: means INREIT Real Estate Investment Trust, a North Dakota
unincorporated but registered business trust whose address is 216 South Broadway, Suite 201, Minot,
North Dakota 58701.

     1.28 INREIT PROPERTIES, LLLP: means a North Dakota limited liability limited
partnership, whose mailing address is 216 South Broadway, Suite 201, Minot, ND 58701.

     1.29 INREIT Expenses: means: (i) costs and expenses relating to the formation and
continuity of existence and operation of INREIT and any Subsidiaries thereof, which subsidiaries
shall for purposes hereof, be included within the definition of INREIT; including taxes, fees and
assessments associated therewith, any and all costs, expenses or fees payable to any trustee,
officer, or employee of INREIT; (ii) costs relating to the public offering and registration of
securities by INREIT, and all statements, reports, fees and expenses incidental thereto, including
underwriting discounts and selling commissions applicable to any such offering of securities; (iii)
costs and expenses associated with the preparation and filing of any periodic reports by INREIT
under federal, state or local laws or regulations, including filings with the Commission; (iv)
costs and expenses associated with compliance by INREIT with laws, rules and regulations
promulgated by any regulatory body, including the Commission; and (v) all other operating or
administrative costs of INREIT incurred in the ordinary course of its business on behalf of or in
connection with the Partnership.

     1.30 INREIT Share: means a unit of beneficial interest of INREIT.

     1.31 INREIT Shares Amount: means a number of INREIT Shares equal to the product of
the number of Partnership Units offered for exchange by an Exchanging Partner, multiplied by the
Conversion Factor as adjusted to and including the Specified Exchange Date; provided that in the
event INREIT issues to all holders of INREIT Shares rights, options, warrants or convertible

 

 

or exchangeable securities entitling the shareholders to subscribe for or purchase INREIT
Shares, or any other securities or property (collectively “the rights”), and the rights have not
expired at the Specified Exchange Date, then the INREIT Shares Amount shall also include the rights
issuable to a holder of the INREIT Shares.

     1.32 Limited Partner: means any Person named as a Limited Partner on Exhibit
A attached hereto, and any Person who becomes a Substitute or Additional Limited Partner, in
such Person’s capacity as a Limited Partner in the Partnership.

     1.33 Limited Partnership Interest: means the ownership interest of a Limited Partner
in the Partnership at any particular time, including the right of such Limited Partner to any and
all benefits to which such Limited Partner may be entitled as provided in this Agreement and in the
Act, together with the obligations of such Limited Partner to comply with all the provisions of
this Agreement and of such Act.

     1.34 Loss: has the meaning provided in Section 5.01(f) hereof.

     1.35 Notice of Exchange: means the Notice of Exercise of Exchange Rights
substantially in the form attached as Exhibit C hereto.

     1.36 Offer: has the meaning set forth in Section 7.01(c) hereof

     1.37 Partner: means any General Partner or Limited Partner.

     1.38 Partner Nonrecourse Debt Minimum Gain: has the meaning set forth in Regulations
Section 1.704-2(i). A Partner’s share of Partner Nonrecourse Debt Minimum Gain shall be determined
in accordance with Regulations Section 1.704-2(i)(5).

     1.39 Partnership: means INREIT Properties, LLLP, whose mailing address is 216 South
Broadway, Suite 201, Minot, ND 58701.

     1.40 Partnership Interest: means an ownership interest in the Partnership held by
either a Limited Partner or the General Partner and includes any and all benefits to which the
holder of such a Partnership Interest may be entitled as provided in this Agreement, together with
all obligations of such Person to comply with the terms and provisions of this Agreement.

     1.41 Partnership Minimum Gain: has the meaning set forth in Regulations Section
1.704-2(d). In accordance with Regulations Section 1.704-2(d), the amount of Partnership Minimum
Gain is determined by first computing, for each Partnership nonrecourse liability, any gain the
Partnership would realize if it disposed of the property subject to the liability for no
consideration other than full satisfaction of the liability, and then aggregating the separately
computed gains. A Partner’s share of Partnership Minimum Gain shall be determined in accordance
with Regulations Section 1.704-2(g)(1).

     1.42 Partnership Record Date: means the record date established by the General
Partner for the distribution of cash pursuant to Section 5.02 hereof, which record date shall be
the same as the record date established by INREIT for a distribution to its shareholders of some or
all of its portion of such distribution.

 

 

     1.43 Partnership Unit: means a fractional, undivided share of the Partnership
Interests of all Partners, issued hereunder. The allocation of Partnership Units among the
partners shall be as set forth in Exhibit A, as may be amended from time to time.

     1.44 Percentage Interest: means the percentage ownership interest in the Partnership
of each Partner, as determined by dividing the Partnership Units owned by a Partner by the total
number of Partnership units then outstanding. The Percentage Interest of each Partner shall be as
set forth on Exhibit A, as may be amended from time to time.

     1.45 Person: means any individual, partnership, corporation, joint venture, trust or
other entity.

     1.46 Profit: has the meaning provided in Section 5.01(f) hereof.

     1.47 Property: means any residential, office or industrial property or other
investment in which the Partnership holds an ownership interest.

     1.48 Regulations: means the Federal Income Tax Regulations issued under the Code, as
amended and as hereafter amended from time to time. Reference to any particular provision of the
Regulations shall mean that provision of the Regulations on the date hereof and any successor
provision of the Regulations.

     1.49 REIT: means a real estate investment trust under Sections 856 through 860 of the
Code.

     1.50 Service: means the Internal Revenue Service.

     1.51 Specified Exchange Date: means the first business day of the month that is at
least 60 business days after the receipt by INREIT of the Notice of Exchange.

     1.52 Subsidiary: means with respect to any Person, any corporation or other entity of
which a majority of: (i) the voting power of the voting equity securities or (ii) the outstanding
equity interests is owned, directly or indirectly, by such Person.

     1.53 Subsidiary Partnership: means any partnership of which the majority of the
limited or general partnership interests are owned, directly or indirectly, by the Partnership.

     1.54 Substitute Limited Partner: means any Person admitted to the Partnership as a
Limited Partner pursuant to Section 9.03 hereof.

     1.55
Surviving General Partner: has the meaning set forth in Section 7.01(d) hereof.

     1.56
Term: has the meaning set forth in Section 2.03.

     1.57
Transaction: has the meaning set forth in Section 7.01(c) hereof.

     1.58
Transfer: has the meaning set forth in Section 9.02(a) hereof.

 

 

ARTICLE II

PARTNERSHIP CONTINUATION AND IDENTIFICATION

	2.01	 	Name, Office and Registered Agent.
The name of the partnership is
INREIT PROPERTIES, LLLP. The
specified office and place of
business of the Partnership shall
be 216 South Broadway, Suite 202,
Minot, North Dakota 58701. The
General Partner may at any time
change the location of such
office, provided the General
Partner gives notice to the
partners of any such change. The
name and address of the
Partnership’s registered agent is
Randy Westby, INREIT Management,
LLC, 216 South Broadway, Suite
202, Minot, North Dakota 58701.
	 
	2.02	 	Partners.

	 	(a)	 	The General Partner of the Partnership is INREIT. Its principal place of
business shall be the same as that of the Partnership.
	 
	 	(b)	 	Attached as Exhibit A is the name and addresses of the Limited Partners
as of the date hereof. The Limited Partners shall be those Persons identified as
Limited Partners on Exhibit A hereto, as amended from time to time.

	2.03	 	Terms and Dissolution.

	 	(a)	 	The Term of the Partnership shall be perpetual. Except that the Partnership
shall be dissolved upon the first to occur of any of the following events:

	 	(i)	 	dissolution, death, removal or withdrawal of the General
Partner unless the business of the Partnership is continued pursuant to Section
7.03(b) hereof; provided that if a General Partner is on the date of such
occurrence a partnership, the dissolution of such General Partner as a result
of the dissolution, death, withdrawal, removal or Event of Bankruptcy of a
partner in such partnership shall not be an event of dissolution of the
Partnership if the business of such General Partner is continued by the
remaining partner or partners, either alone or with additional partners, and
such General Partner and such partners comply with any other applicable
requirements of the Agreement;
	 
	 	(ii)	 	The passage of 90 days after the sale or other disposition of
all or substantially all of the assets of the Partnership (provided that if the
Partnership receives an installment obligation as consideration for such sale
or other disposition, the Partnership shall continue, unless sooner dissolved
under the provisions of this Agreement, until such time as such note or notes
are paid in full);
	 
	 	(iii)	 	The exchange of all Limited Partnership Interests; or
	 
	 	(iv)	 	The election by the General Partner that the Partnership should
be dissolved.

 

 

	 	(b)	 	Upon dissolution of the Partnership (unless the business of the Partnership is
continued pursuant to Section 7.03(b) hereof), the General Partner (or its trustee,
receiver, successor or legal representative) shall amend or cancel the Certificate and
liquidate the Partnership’s assets and apply and distribute the proceeds thereof in
accordance with Section 5.06 hereof. Notwithstanding the foregoing, the liquidating
General Partner may either: (i) defer liquidation of, or withhold from distribution
for a reasonable time, any assets of the Partnership (including those necessary to
satisfy the Partnership’s debts and obligations) or (ii) distribute the assets to the
Partners in kind.

	2.04	 	Filing of Certificate and Perfection of Limited Partnership. The General Partner shall
execute, acknowledge, record and file at the expense of the Partnership, the Certificate and
any and all amendments thereto and all requisite fictitious name statements and notices in
such places and jurisdictions as may be necessary to cause the partnership to be treated as a
limited partnership under, and otherwise to comply with, the laws of each state or other
jurisdiction in which the Partnership conducts business.
	 
	2.05	 	Certificates Describing Partnership Units. At the request of a Limited Partner, the
General Partner, at its option, may issue a certificate summarizing the terms of such Limited
Partner’s interests in the Partnership, including the number of Partnership Units owned and
the Percentage Interest represented by such Partnership Units, as of the date of such
Certificate. Any such Certificate: (i) shall be in form and substance as approved by the
General Partner, (ii) shall not be negotiable and (iii) shall bear a legend to the following
effect:
	 
	 	 	“This certificate is not negotiable. The Partnership Units represented by this
certificate are governed by and transferable only in accordance with the provisions
of the Partnership Agreement of INREIT Properties, LLLP, as from time to time
amended and restated.”

ARTICLE III

BUSINESS OF THE PARTNERSHIP

     The purpose and nature of the business to be conducted by the Partnership shall be: (i) to
conduct any business that may be lawfully conducted by a limited liability limited partnership
organized pursuant to the Act, provided, however, that such business shall be limited to and
conducted in such a manner as to permit INREIT at all times to qualify as a REIT, unless INREIT
otherwise ceases to qualify as a REIT; (ii) to enter into any partnership, joint venture or other
similar arrangement to engage in any of the foregoing or the ownership of interests in any entity
engaged in any of the foregoing; and (iii) to do anything necessary or incidental to the foregoing:
In connection with the foregoing, and without limiting INREIT’s right in its sole discretion to
cease qualifying as a REIT, the Partners acknowledge that INREIT’s current status as a REIT inures
to the benefit of all the Partners and not solely to INREIT. The General Partner shall also be
empowered to do any and all acts and things necessary or prudent to ensure that the Partnership
will not be classified as a “Publicly traded partnership” for purposes of Section 7704 of the Code.

 

 

ARTICLE IV

CAPITAL CONTRIBUTIONS AND ACCOUNTS

	4.01	 	Capital Contributions. INREIT shall contribute to the capital of the Partnership all of
its assets subject to all of its liabilities as specified on Exhibit A hereof. The
Limited Partners shall contribute to the capital of the Partnership interests in one or more
of the Properties or the partnerships owning such Properties, each with values as set forth
opposite their names on Exhibit A. The Agreed Values of such Limited Partners’
ownership interests in the Properties that are contributed to the Partnership are as set forth
opposite their names on Exhibit A.
	 
	4.02	 	Additional Capital Contributions and Issuances of Additional Partnership Interest. Except
as provided in this Section 4.02 or in Section 4.03, the Partners shall have no right or
obligation to make any additional Capital Contributions or loans to the Partnership. The
General Partner may contribute additional capital to the Partnership, from time to time, and
receive additional Partnership Interests in respect thereof, in the manner contemplated in
this Section 4.02.

	 	(a)	 	Issuance of Additional Partnership Interests.
	 
	 	 	 	General. The General Partner is hereby authorized to cause the Partnership
to issue such additional Partnership Interests in the form of Partnership Units for
any Partnership purpose at any time or from time to time, to the Partners (including
INREIT) or to other Persons for such consideration and on such terms and conditions
as shall be established by the General Partner in its sole and absolute discretion,
all without the approval of any Limited Partners. Any additional Partnership
Interests issued thereby may be issued in one or more classes, or one or more series
of any of such classes, with such designations, preferences and relative,
participating, optional or other special rights, powers and duties, including
rights, powers and duties senior to Limited Partnership Interests, all as shall be
determined by the General Partner in its sole and absolute discretion and without
the approval of any Limited Partner, subject to North Dakota law, including, without
limitation, (i) the allocations of items of Partnership income, gain, loss,
deduction and credit to each such class or series of Partnership Interests; (ii) the
right of each such class or series of Partnership Interests to share in Partnership
distributions; and (iii) the rights of each such class or series of Partnership
Interests upon dissolution and liquidation of Partnership; provided, however, that
no additional Partnership Interests shall be issued to the General Partner unless
either:

	 	(1)	 	the additional Partnership Interests are issued in connection
with an issuance of INREIT Shares of or other interests in INREIT, which shares
or interests have designations, preferences and other rights, all such that the
economic interests are substantially similar to the designations, preferences
and other rights of the additional Partnership Interests issued to the General
Partner by the Partnership in accordance with this Section 4.02 and the General
Partner shall make a Capital Contribution to the

 

 

	 	 	 	Partnership in an amount equal to the proceeds raised in connection with the
issuance of such shares of stock of or other interests in INREIT, or
	 
	 	(2)	 	the additional Partnership Interests are issued to all Partners
in proportion to their respective Percentage Interests. Without limiting the
foregoing, the General Partner is expressly authorized to cause the Partnership
to issue Partnership Units for less than fair market value, so long as the
General Partner concludes in good faith that such issuance is in the best
interests of the General Partner and the Partnership.

	 	(b)	 	In connection with any and all issuances of INREIT Shares, General Partner
shall make Capital Contributions to the Partnership of the proceeds therefrom, provided
that if the proceeds actually received and contributed by INREIT are less than the
gross proceeds of such issuance as a result of any underwriter’s discount or other
expenses paid or incurred in connection with such issuance, then the General Partner
shall be deemed to have made Capital Contributions to the Partnership in the aggregate
amount of the proceeds of such issuance and the Partnership shall be deemed
simultaneously to have paid such offering expenses in accordance with Section 6.05
hereof and in connection with the required issuance of additional Partnership Units to
the General Partner for such Capital Contributions pursuant to Section 4.02(a) hereof.

	4.03	 	Additional Funding. If the General Partner determines that it is in the best interests of
the Partnership to provide for additional Partnership funds (“Additional Funds”) for any
Partnership purpose, the General Partner may (i) cause the Partnership to obtain such funds
from outside borrowings, or (ii) elect to have the General Partner provide such Additional
Funds to the Partnership through loans or otherwise.
	 
	4.04	 	Capital Accounts. A separate capital account (a “Capital Account”) shall be established
and maintained for each Partner in accordance with Regulation Section 1.704-1(b)(2)(iv). If
(i) a new or existing Partner acquires an additional Partnership Interest in exchange for more
than a de minimus Capital Contribution, (ii) the Partnership distributes to a Partner more
than a de minimus amount of Partnership property as consideration for a Partnership Interest,
or (iii) the Partnership is liquidated within the meaning of Regulation Section
1.704-1(b)(2)(ii)(g), the General Partner shall revalue the property of the Partnership to its
fair market value (as determined by the General Partner, in its sole discretion, taking into
account Section 7701(g) of the Code) in accordance with Regulation Section
1.704-1(b)(2)(iv)(f). When the Partnership’s property is revalued by the General Partner, the
Capital Accounts of the Partners shall be adjusted in accordance with Regulations Sections
1.704-1(b)(2)(iv)(f) and (g), which generally require such Capital Accounts to be adjusted to
reflect the manner in which the unrealized gain or loss inherent in such property (that has
not been reflected in the Capital Accounts previously) would be allocated among the Partners
pursuant to Section 5.01 if there were a taxable disposition of such property for its fair
market value (as determined by the General Partner, in its sole discretion, and taking into
account Section 7701(g) of the Code) on the date of the revaluation.

 

 

	4.05	 	Percentage Interests. If the number of outstanding Partnership Units increases or
decreases during a taxable year, each Partner’s Percentage Interest shall be adjusted by the
General Partner effective as of the effective date of each such increase or decrease to a
percentage equal to the number of Partnership Units held by such Partner divided by the
aggregate number of Partnership Units outstanding after giving effect to such increase or
decrease. If the Partners’ Percentage Interest are adjusted pursuant to this Section 4.05,
the Profits and Losses for the taxable year in which the adjustment occurs shall be allocated
between the part of the year ending on the day when the Partnership’s property is revalued by
the General Partner and the part of the year beginning on the following day either: (i) as if
the taxable year had ended on the date of the adjustment or (ii) based on the number of days
in each part. The General Partner, in its sole discretion, shall determine which method shall
be used to allocate Profits and Losses for the taxable year in which the adjustment occurs.
The allocation of Profits and Losses for the earlier part of the year shall be based on the
Percentage Interests before adjustment, and the allocation of Profits and Losses for the later
part shall be based on the adjusted Percentage Interests.
	 
	4.06	 	No Interest on Contributions. No Partner shall be entitled to interest on its Capital
Contribution.
	 
	4.07	 	Return of Capital Contributions. No Partner shall be entitled to withdraw any part of its
Capital Contribution or its Capital Account or to receive any distribution from the
Partnership, except as specifically provided in this Agreement. Except as otherwise provided
herein, there shall be no obligation to return to any Partner or withdrawn Partner any part of
such Partner’s Capital Contribution for so long as the Partnership continues in existence.
	 
	4.08	 	No Third Party Beneficiary. No creditor or other third party having dealings with the
Partnership shall have the right to enforce the right or obligation of any Partner to make
Capital Contributions or loans or to pursue any other right or remedy hereunder or at law or
in equity, it being understood and agreed that the provisions of this Agreement shall be
solely for the benefit of, and may be enforced solely by, the parties hereto and their
respective successors and assigns. None of the rights or obligations of the Partners herein
set forth to make Capital Contributions or loans to the Partnership shall be deemed an asset
of the Partnership for any purpose by any creditor or other third party, nor may such rights
or obligations be sold, transferred or assigned by the Partnership or pledged or encumbered by
the Partnership to secure any debt or other obligation of the Partnership or of any of the
Partners. In addition, it is the intent of the parties hereto that no distribution to any
Limited Partner shall be deemed a return of money or other property in violation of the Act.
However, if any court of competent Jurisdiction holds that, notwithstanding the provisions of
this Agreement, any Limited Partner is obligated to return such money or property, such
obligation shall be the obligation of such Limited Partner and not of the General Partner,
without limiting the generality of the foregoing, a deficit Capital Account of a Partner shall
not be deemed to be a liability of such Partner nor an asset or property of the Partnership.

 

 

ARTICLE V

PROFITS AND LOSSES; DISTRIBUTIONS

	5.01	 	Allocation of Profit and Loss.

	 	(a)	 	General. Profit and Loss of the Partnership for each fiscal year of
the Partnership shall be allocated among the Partners in accordance with their
respective Percentage Interests.
	 
	 	(b)	 	Minimum Gain Chargeback. Notwithstanding any provision to the
contrary: (i) any expense of the Partnership that is a “nonrecourse deduction” within
the meaning of Regulations Section 1.704-2(b)(1) shall be allocated in accordance with
the Partners’ respective Percentage Interests, (ii) any expense of the Partnership that
is a “partner nonrecourse deduction” within the meaning Regulations Section
1.704-2(i)(2) shall be allocated to the Partner that bears the “economic risk of loss”
of such deduction in accordance with Regulations Section 1.704-2(i)(1), (iii) if there
is a net decrease in Partnership Minimum Gain within the meaning of Regulations Section
1.704-2(f)(1) for any Partnership taxable year, then, subject to the exceptions set
forth in Regulations Section 1.704-2(f)(2), (3), (4) and (5), items of gain and income
shall be allocated among the Partners in accordance with Regulations Section 1.704-2(f)
and the ordering rules contained in Regulations Section 1.704-2(j), and (iv) if there
is a net decrease in Partner Nonrecourse Debt Minimum Gain within the meaning of
Regulations Section 1.704-2(i)(4) for any Partnership taxable year, then, subject to
the exceptions set forth in Regulations Section 1.704-2(g), items of gain and income
shall be allocated among the Partners in accordance with Regulations Section
1.704-2(i)(4) and the ordering rules contained in Regulations Section 1.704-2(j). A
Partners’ “interest in partnership profits” for purposes of determining its share of
the nonrecourse liabilities the Partnership within the meaning of Regulations Section
1.752-3(a)(3) shall be such Partner’s Percentage Interest.
	 
	 	(c)	 	Qualified Income Offset. If a Limited Partner receives in any taxable
year an adjustment, allocation, or distribution described in subparagraphs (4), (5), or
(6) of Regulations Section 1.704-1(b)(2)(ii)(d) that causes or increases a deficit
balance in such Partner’s Capital Account that exceeds the sum of such Partner’s shares
of Partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain, as determined in
accordance with Regulations Sections 1.704-2(g) and 1.704-2(i), such Partner shall be
allocated specially for such taxable year (and, if necessary, later taxable years)
items of income and gain in an amount and manner sufficient to eliminate such deficit
Capital Account balance as quickly as possible as provided in Regulations Section
1.704-1(b)(2)(ii)(d). After the occurrence of an allocation of income or gain to a
Limited Partner in accordance with this Section 5.01(c), to the extent permitted by
Regulations Section 1.704-1(b), items of expense or loss shall be allocated to such
Partner in an amount necessary to offset the income or gain previously allocated to
such Partner under this Section 5.01(c).

 

 

	 	(d)	 	Capital Account Deficits. Loss shall not be allocated to a Limited
Partner to the extent that such allocation would cause a deficit in such Partner’s
Capital Account (after reduction to reflect the items described in Regulations Section
1.704-1(b)(2)(ii)(d)(4), (5) and (6)) to exceed the sum of such Partner’s shares of
Partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain. Any Loss in excess
of that limitation shall be allocated to the General Partner. After the occurrence of
an allocation of Loss to the General Partner in accordance with this Section 5.01(d),
to the extent permitted by Regulations Section 1.704-1(b), Profit shall be allocated to
such Partner in an amount necessary to offset the Loss previously allocated to such
Partner under this Section 5.01(d).
	 
	 	(e)	 	Allocations Between Transferor and Transferee. If a Partner transfers
any part or all of its Partnership Interest, the distributive shares of the various
items of Profit and Loss allocable among the Partners during such fiscal year of the
Partnership shall be allocated between the transferor and the transferee Partner
either: (i) as if the Partnership’s fiscal year had ended on the date of the transfer,
or (ii) based on the number of days of such fiscal year that each was a Partner without
regard to the results of Partnership activities in the respective portions of such
fiscal year in which the transferor and the transferee were Partners. The General
Partner, in its sole discretion, shall determine which method shall be used to allocate
the distributive shares of the various items of Profit and Loss between the transferor
and the transferee Partner.
	 
	 	(f)	 	Definition of Profit and Loss. “Profit” and “Loss” and any items of
income, gain, expense, or loss referred to in this Agreement shall be determined in
accordance with federal income tax accounting principles, as modified by Regulations
Section 1.704-1(b)(2)(iv), except that Profit and Loss shall not include items of
income, gain and expense that are specially allocated pursuant to Section 5.01(b),
5.01(c), or 5.01(a). All allocations of income, Profit, gain, Loss, and expense (and
all items contained therein) for federal income tax purposes shall be identical to all
allocations of such items set forth in this Section 5.01, except as otherwise required
by Section 704(c) of the Code and Regulations Section 1.704-1(b)(4). The General
Partner shall have the authority to elect the method to be used by the Partnership for
allocating items of income, gain, and expense as required by Section 704(c) of the Code
and such election shall be binding on all Partners.

	5.02	 	Distribution of Cash.

	 	(a)	 	The Partnership shall distribute cash on a quarterly (or, at the election of
the General Partner, more frequent) basis, in an amount determined by the General
Partner in its sole discretion, to the Partners who are Partners on the Partnership
Record Date with respect to such quarter (or other distribution period) in accordance
with their respective Percentage Interests on the Partnership Record Date; provided,
however, that if a new or existing Partner acquires an additional Partnership Interest
in exchange for a Capital Contribution on any date other than a Partnership Record
Date, the cash distribution attributable to such additional Partnership Interest
relating to the Partnership Record Date next following the

 

 

	 	 	 	issuance of such additional Partnership Interest shall be reduced in the proportion
that the number of days that such additional Partnership Interest is held by such
Partner bears to the number of days between such Partnership Record Date and the
immediately preceding Partnership Record Date.
	 
	 	(b)	 	Notwithstanding any other provision of this Agreement, the General Partner is
authorized to take any action that it determines to be necessary or appropriate to
cause the Partnership to comply with any withholding requirements established under the
Code or any other federal, state or local law including, without limitation, pursuant
to Sections 1441, 1442, 1445 and 1446 of the Code. To the extent that the Partnership
is required to withhold and pay over to any taxing authority any amount resulting from
the allocation or distribution of income to the Partner or assignee (including by
reason of Section 1446 of the Code), the amount withheld shall be treated as a
distribution of cash in the amount of such withholding to such Partner.
	 
	 	(c)	 	In no event may a Partner receive a distribution of cash with respect to a
Partnership Unit if such Partner is entitled to receive a cash dividend as the holder
of record of an INREIT Share for which all or part of such Partnership Unit has been or
will be exchanged.

	5.03	 	INREIT Distribution Requirements. The General Partner
shall use its reasonable efforts to cause the
Partnership to distribute amounts sufficient to enable
INREIT to pay shareholder dividends that will allow
INREIT to: (i) meet its distribution for qualification
as a REIT as set forth in Section 857(a)(1) of one Code
and (ii) avoid any federal income or excise tax
liability imposed by the Code.
	 
	5.04	 	No Right to Distributions in Kind. No Partner shall be
entitled to demand property other than cash in
connection with any distributions by the Partnership.
	 
	5.05	 	Limitations on Return of Capital Contributions.
Notwithstanding any of the provisions of this Article V,
no Partner shall have the right to receive and the
General Partner shall not have the right to make, a
distribution that includes a return of all or part of a
Partner’s Capital Contributions, unless after giving
effect to the return of a Capital Contribution, the sum
of all Partnership liabilities, other than the
liabilities to a Partner for the return of his Capital
Contribution, does not exceed the fair market value of
the Partnership’s assets.
	 
	5.06	 	Distributions Upon Liquidation.

	 	(a)	 	Upon liquidation of the Partnership, after payment of, or adequate provision
for, debts and obligations of the Partnership, including any Partner loans, any
remaining assets of the Partnership shall be distributed to all Partners with positive
Capital Accounts in accordance with their respective positive Capital Account balances.
For purposes of the preceding sentence, the Capital Account of each Partner shall be
determined after all adjustments made in accordance with Sections 5.01 and 5.02
resulting from Partnership operations and from all sales

 

 

	 	 	 	and dispositions of all or any part of the Partnership’s assets. To the extent
deemed advisable by the General Partner, appropriate arrangements (including the use
of a liquidating trust) may be made to assure that adequate funds are available to
pay any contingent debts or obligations.
	 
	 	(b)	 	If the General Partner has a negative balance in its Capital Account following
a liquidation of the Partnership, as determined after taking into account all Capital
Account adjustments in accordance with Sections 5.01 and 5.02 resulting from
Partnership operations and from all sales and dispositions of all or any part of the
Partnership’s assets, the General Partner shall contribute to the Partnership an amount
of cash equal to the negative balance in its Capital Account and such cash shall be
paid or distributed by the Partnership to creditors, if any, and then to the Limited
Partners in accordance with Section 5.06(a). Such contribution by the General Partner
shall be made by the end of the Partnership’s taxable year in which liquidation occurs
(or, if later, within 90 days after the date of the liquidation).

	5.07	 	Substantial Economic Effect. It is the intent of the Partners that the allocations of
Profit and Loss under the Agreement have substantial economic effect (or be consistent with
the Partners’ interests in the Partnership in the case of the allocation of losses
attributable to nonrecourse debt) within the meaning of Section 704(b) of the Code as
interpreted by the Regulations promulgated pursuant thereto. Article V and other relevant
provisions of this Agreement shall be interpreted in a manner consistent with such intent.

ARTICLE VI

RIGHTS, OBLIGATIONS AND POWERS OF THE GENERAL PARTNER

	6.01	 	Management of the Partnership.

	 	(a)	 	Except as otherwise expressly provided in this Agreement, the General Partner
shall have full, complete and exclusive discretion to manage and control the business
of the Partnership for the purposes herein stated, and shall make all decisions
affecting the business and assets of the Partnership. Subject to the restrictions
specifically contained in this Agreement, the powers of the General Partner shall
include, without limitation, the authority to take the following actions on behalf of
the Partnership:

	 	(i)	 	to acquire, purchase, own, operate, lease and dispose of any
real property and any other property or assets that the General Partner
determines are necessary or appropriate or in the best interests of the
business of the Partnership;
	 
	 	(ii)	 	to construct buildings and make other improvements on the
properties owned or leased by the Partnership;
	 
	 	(iii)	 	to authorize, issue, sell, redeem or otherwise purchase any
Partnership Interests or any securities (including secured and unsecured debt
obligations of the Partnership, debt obligations of the Partnership

 

 

	 	 	 	convertible into any class or series of Partnership Interests, or options,
rights, warrants or appreciation rights relating to any Partnership
Interests) of the Partnership;
	 
	 	(iv)	 	to borrow or lend money for the Partnership, issue or receive
evidences of indebtedness in connection therewith, refinance, increase the
amount of, modify, amend or change the terms of, or extend the time for the
payment of, any such indebtedness, and secure such indebtedness by mortgage,
deed of trust, pledge or other lien on the Partnership’s assets;
	 
	 	(v)	 	to guarantee or become a comaker of indebtedness of INREIT or
any Subsidiary thereof, refinance, increase the amount, modify or change the
terms of, or extend the time for the payment of, any such guarantee or
indebtedness, and secure such guarantee or indebtedness by mortgage, deed of
trust, pledge or other lien on the Partnership’s assets;
	 
	 	(vi)	 	to use assets of the Partnership (including, without
limitation, cash on hand) for any purpose consistent with this Agreement,
including, without limitation, payment, either directly or by reimbursement, of
all operating costs and general administrative expenses of INREIT, the General
Partner, the Partnership or any Subsidiary of either, to third parties or to
the General Partner as set forth in this Agreement;
	 
	 	(vii)	 	to lease all or any portion of any of the Partnership’s
assets, whether or not the terms of such leases extend beyond the termination
date of the Partnership and whether or not any portion of the Partnership’s
assets so leased are to be occupied by the lessee, or, in turn, subleased in
whole or in part to others, for such consideration and on such terms as the
General Partner may determine;
	 
	 	(viii)	 	to prosecute, defend, arbitrate, or compromise any and all claims or
liabilities in favor of or against the Partnership, on such terms and in such
manner as the General Partner may reasonably determine, and similarly to
prosecute, settle or defend litigation with respect to the Partners, the
Partnership, or the Partnership’s assets; provided, however, that the General
Partner may not, without the consent of all of the Partners, confess a judgment
against the Partnership;
	 
	 	(ix)	 	to file applications, communicate, and otherwise deal with any
and all governmental agencies having jurisdiction over, or in any way
affecting, the Partnership’s assets or any other aspect of the Partnership
business;
	 
	 	(x)	 	to make or revoke any election permitted or required of the
Partnership by any taxing authority;
	 
	 	(xi)	 	to maintain such insurance coverage for public liability, fire
and casualty, and any and all other insurance for the protection of the
Partnership, for the conservation of Partnership assets, or for any other
purpose convenient

 

 

	 	 	 	or beneficial to the Partnership, in such amounts and such types, as it
shall determine from time to time;
	 
	 	(xii)	 	to determine whether or not to apply any insurance proceeds
for any property to the restoration of such property or to distribute the same;
	 
	 	(xiii)	 	to establish one or more divisions of the Partnership, to hire and dismiss
employees of the Partnership or any division of the Partnership, and to retain
legal counsel, accountants, consultants, real estate brokers, and such other
persons, as the General Partner may deem necessary or appropriate in connection
with the Partnership business and to pay therefore such reasonable remuneration
as the General Partner may deem reasonable and proper;
	 
	 	(xiv)	 	to retain other services of any kind or nature in connection
with the Partnership business, and to pay therefore such remuneration as the
General Partner may deem reasonable and proper;
	 
	 	(xv)	 	to negotiate and conclude agreements on behalf of the
Partnership with respect to any of the rights, powers and authority conferred
upon the General Partner;
	 
	 	(xvi)	 	to maintain accurate accounting records and to file promptly
all federal, state and local income tax returns on behalf of the Partnership;
	 
	 	(xvii)	 	to distribute Partnership cash or other Partnership assets in accordance with
this Agreement;
	 
	 	(xviii)	 	to form or acquire an interest in, and contribute property to, any further
limited or general partnerships, joint ventures or other relationships that it
deems desirable (including, without limitation, the acquisition of interests
in, and the contributions of property to INREIT, its Subsidiaries and any other
Person in which it has an equity interest from time to time);
	 
	 	(xix)	 	to establish Partnership reserves for working capital, capital
expenditures, contingent liabilities, or any other valid Partnership purpose;
and
	 
	 	(xx)	 	to take such other action, execute, acknowledge, swear to or
deliver such other documents and instruments, and perform any and all other
acts that the General Partner deems necessary or appropriate for the formation,
continuation and conduct of the business and affairs of the Partnership
(including, without limitation, all actions consistent with allowing INREIT at
all times to qualify as an INREIT unless INREIT voluntarily terminates its REIT
status) and to possess and enjoy all of the rights and powers of a general
partner as provided by the Act.

	 	(b)	 	Except as otherwise provided herein, to the extent the duties of the General
Partner require expenditures of funds to be paid to third parties, the General

 

 

	 	 	 	Partner shall not have any obligations hereunder except to the extent that
partnership funds are reasonably available to it for the performance of such duties,
and nothing herein contained shall be deemed to authorize or require the General
Partner, in its capacity as such, to expend its individual funds for payment to
third parties or to undertake any individual liability or obligation on behalf of
the Partnership.

	6.02	 	Delegation of Authority. The General Partner may delegate any or all of
its powers, rights and obligations hereunder, and may appoint, employ,
contract or otherwise deal with any Person for the transaction of the
business of the Partnership, which Person may, under supervision of the
General Partner, perform any acts or services for the Partnership as the
General Partner may approve.
	 
	6.03	 	Indemnification and Exculpation of Indemnitees.

	 	(a)	 	The Partnership shall indemnify an Indemnitee from and against any and all
losses, claims, damages, liabilities, joint or several, expenses (including reasonable
legal fees and expenses), judgments, fines, settlements, and other amounts arising from
any and all claims, demands, actions, suits or proceedings, civil, criminal,
administrative or investigative, that relate to the operations of the Partnership as
set forth in this Agreement in which any Indemnitee may be involved, or is threatened
to be involved, as a party or otherwise, unless it is established that: (i) the act or
omission of the Indemnitee was material to the matter giving rise to the proceeding and
either was committed in bad faith or was the result of active and deliberate
dishonesty; (ii) the Indemnitee actually received an improper personal benefit in
money, property or services; or (iii) in the case of any criminal proceeding, the
Indemnitee had reasonable cause to believe that the act or omission was unlawful. The
termination of any proceeding by judgment, order or settlement does not create a
presumption that the Indemnitee did not meet the requisite standard of conduct set
forth in this Section 6.03(a). The termination of any proceeding by conviction or upon
a plea of nolo contendere or its equivalent, or an entry of an order of probation prior
to judgment, creates a rebuttable presumption that the Indemnitee acted in a manner
contrary to that specified in this Section 6.03(a). Any Indemnification pursuant to
this Section 6.03 shall be made only out of the assets of the Partnership.
	 
	 	(b)	 	The Partnership shall reimburse an Indemnitee for reasonable expenses incurred
by an Indemnitee who is a party to a proceeding in advance of the final disposition of
the proceeding upon receipt by the Partnership of: (i) a written affirmation by the
Indemnitee of the Indemnitee’s good faith belief that the standard of conduct necessary
for indemnification by the Partnership as authorized in this Section 6.03 has been met,
and (ii) a written undertaking by or on behalf of the Indemnitee to repay the amount if
it shall ultimately be determined that the standard of conduct has not been met.
	 
	 	(c)	 	The indemnification provided by this Section 6.03 shall be in addition to any
other rights to which an Indemnitee or any other Person may be entitled under any

 

 

	 	 	 	agreement, pursuant to any vote of the Partners, as a matter of law or otherwise,
and shall continue as to an Indemnitee who has ceased to serve in such capacity.
	 
	 	(d)	 	The Partnership may purchase and maintain insurance, on behalf of the
Indemnities and such other Persons as the General Partner shall determine, against any
liability that may be asserted against or expenses that may be incurred by such Person
in connection with the Partnership’s activities, regardless of whether the Partnership
would have the power to indemnify such Person against such liability under the
provisions of this Agreement.
	 
	 	(e)	 	For purposes of this Section 6.03, the Partnership shall be deemed to have
requested an Indemnitee to serve as fiduciary of an employee benefit plan whenever the
performance by it of its duties to the Partnership also imposes duties on, or otherwise
involves services by, it to the plan or participants or beneficiaries of the plan;
excise taxes assessed on an Indemnitee with respect to an employee benefit plan
pursuant to applicable law shall constitute fines within the meaning of this Section
6.03; and actions taken or omitted by the Indemnitee with respect to an employee
benefit plan in the performance of its duties for a purpose reasonably believed by it
to be in the interest of the participants and beneficiaries of the plan shall be deemed
to be for a purpose which is not opposed to the best interests of the Partnership.
	 
	 	(f)	 	In no event may an Indemnitee subject the Limited Partners to personal
liability by reason of the indemnification provisions set forth in this Agreement.
	 
	 	(g)	 	An Indemnitee shall not be denied Indemnification in whole or in part under
this Section 6.03 because the Indemnitee had an interest in the transaction with
respect to which the indemnification applies if the transaction was otherwise permitted
by the terms of this Agreement.
	 
	 	(h)	 	The provisions of this Section 6.03 are for the benefit of the Indemnities,
their heirs, successors, assigns and administrators and shall not be deemed to create
any rights for the benefit of any other Persons.

	6.04	 	Liability of the General Partner.

	 	(a)	 	Notwithstanding anything to the contrary set forth in this Agreement, the
General Partner shall not be liable for monetary damages to the Partnership or any
Partners for losses sustained or liabilities incurred as a result of errors in judgment
or of any act or omission if the General Partner acted in good faith. The General
Partner shall not be in breach of any duty that the General Partner may owe to the
Limited Partners or the Partnership or any other Persons under this Agreement or if any
duty stated or implied by law or equity provided the General Partner, acting in good
faith, abides by the terms of this Agreement.
	 
	 	(b)	 	The Limited Partners expressly acknowledge that the General Partner is acting
on behalf of the Partnership and the Limited Partners collectively, that the General
Partner is under no obligation to consider the separate interests of the Limited

 

 

	 	 	 	Partners (including, without limitation, the tax consequences to Limited Partners or
the tax consequences of same, but not all, of the Limited Partners) in deciding
whether to cause the Partnership to take (or decline to take) any actions. The
General Partner shall not be liable for monetary damages for losses sustained,
liabilities incurred, or benefits not derived by Limited Partners in connection with
such decisions, provided that the General Partner has acted in good faith.
	 
	 	(c)	 	Subject to its obligations and duties as General Partner set forth in Section
6.01 hereof, the General Partner may exercise any of the powers granted to it under
this Agreement and perform any of the duties imposed upon it hereunder either directly
or by or through its agents. The General Partner shall not be responsible for any
misconduct or negligence on the part of any such agent appointed by it in good faith.
	 
	 	(d)	 	Notwithstanding any other provisions of this Agreement or the Act, any action
of the General Partner on behalf of the Partnership or any decision of the General
Partner to refrain from acting on behalf of the Partnership, undertaken in good faith
belief that such action or omission is necessary or advisable in order: (i) to protect
the ability of INREIT to continue to qualify as a REIT or (ii) to prevent INREIT from
incurring any taxes under Section 857, Section 4981, or any other provision of the
Code, is expressly authorized under this Agreement and is deemed approved by all of the
Limited Partners.
	 
	 	(e)	 	Any amendment, modification or repeal of this Section 6.04 or any provision
hereof shall be prospective only and shall not in any way affect the limitations on the
General Partner’s liability to the Partnership and the Limited Partners under this
Section 6.04 as in effect immediately prior to such amendment, modification or repeal
with respect to matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when claims relating to such matters may arise or
be asserted.

	6.05	 	Reimbursement. The General Partner is hereby authorized to pay compensation for
accounting, administrative, legal, technical, management and other services rendered to the
Partnership. All of the aforesaid expenditures (including Administrative Expenses) shall be
obligations of the Partnership, and the General Partner shall be entitled to reimbursement by
the Partnership for any expenditure (including Administrative Expenses) incurred by it on
behalf of the Partnership which shall be made other than out of the funds of the Partnership.
	 
	6.06	 	Outside Activities. Subject to Section 6.08 hereof, any agreements entered into by the
General Partner or its Affiliates with the Partnership or a Subsidiary, any officer, director,
employee, agent, trustee, Affiliate or shareholder of the General Partner, the General Partner
shall be entitled to and may have business interests and engage in business activities in
addition to those relating to the Partnership, including business interests and activities
substantially similar or identical to those of the Partnership. None of the Limited Partners
nor any other Person shall have any rights by virtue of this Agreement or the partnership
relationship established hereby in any such business ventures, interests

 

 

	 	 	or activities, and the General Partner shall have no obligation pursuant to this Agreement
to offer any interest in any such business ventures, interests and activities to the
Partnership or any Limited Partner, even if such opportunity is of a character which, if
presented to the Partnership or any Limited Partner, could be taken by such Person.
	 
	6.07	 	Conflicts of Interest and Investment Restrictions. The Partnership shall not purchase any
property, sell or lease any property, borrow or loan any money nor invest in any joint
ventures with any Trustee, Director, employee or any affiliate (including the Advisor) of
INREIT, except in connection with a transaction approved by a majority of the Independent
Trustees of INREIT who are not themselves in any way involved in the transaction as being a
fair, competitive and commercially reasonable transaction which is no less favorable to the
Partnership than a similar transaction between unaffiliated parties under the same
circumstances.
	 
	6.08	 	General Partner Participation. The General Partner agrees that all business activities of
the General Partner, including activities pertaining to the acquisition, development or
ownership of office or industrial property or other property, shall be conducted through the
Partnership or one or more Subsidiary Partnerships.
	 
	6.09	 	Title to Partner Participation. Title to Partnership assets, whether real, personal or
mixed and whether tangible or intangible, shall be deemed to be owned by the Partnership as an
entity, and no Partner, individually or collectively, shall have any ownership interest in
such Partnership assets or any portion thereof. Title to any or all of the Partnership assets
may be held in the name of the Partnership, the General Partner, as the General Partner may
determine, including Affiliates of the General Partner. The General Partner hereby declares
and warrants that any Partnership assets for which legal title is held in the name of the
General Partner or any nominee or Affiliate of the General Partner shall be held by the
General Partner for the use and benefit of the Partnership in accordance with the provisions
of this Agreement; provided, however, that the General Partner shall use its best efforts to
cause beneficial and record title to such assets to be vested in the Partnership as soon as
reasonably practicable. All Partnership assets shall be recorded as the property of the
Partnership in its books and records, irrespective of the name in which legal title to such
Partnership assets is held.
	 
	6.10	 	Miscellaneous. In the event INREIT redeems any INREIT Shares, then as the General Partner,
it shall cause the Partnership to purchase from the General Partner a number of Partnership
Units as determined based on the application of the Conversion Factor on the same terms that
INREIT exchanged such INREIT shares. Moreover, if INREIT makes a cash tender offer or other
offer to acquire INREIT Shares, then as the General Partner, it shall cause the Partnership to
make a corresponding offer to the General Partner and INREIT to acquire an equal number of
Partnership Units held by the General Partner and INREIT. In the event any INREIT Shares are
exchanged by INREIT pursuant to such offer, the Partnership shall redeem an equivalent number
of the General Partner’s and INREIT Partnership Units for an equivalent purchase price based
on the application of the Conversion Factor.

 

 

ARTICLE VII

CHANGES IN GENERAL PARTNER

	7.01	 	Transfer of the General Partner’s Partnership Interest.

	 	(a)	 	The General Partner shall not transfer all or any portion of its General
Partnership Interest or withdraw as General Partner except as provided in Section
7.01(c) or in connection with a transaction described in Section 7.01(d).
	 
	 	(b)	 	The General Partner agrees that it will at all times own in the aggregate at
least 20% of the Partnership.
	 
	 	(c)	 	Except as otherwise provided in Section 6.06(b) or Section 7.01(d) hereof,
INREIT shall not engage in any merger, consolidation or other combination with or into
another Person or sale of all or substantially all of its assets, or any
reclassification, or any recapitalization or change of outstanding INREIT Shares (a
“Transaction”), unless: (i) the Transaction also includes a merger of the Partnership
or sale of substantially all of the assets of the Partnership as a result of which all
Limited Partners will receive for each Partnership Unit an amount of cash, securities,
or other property equal to the product of the Conversion Factor and the greatest amount
of cash, securities or other property paid in the Transaction to a holder of one INREIT
Share in consideration of one INREIT Share, provided that if, in connection with the
Transaction, a purchase, tender or exchange offer (“Offer”) shall have been made to and
accepted by the holders of more than 50% of the outstanding INREIT Shares, each holder
of Partnership Units shall be given the option to exchange its Partnership Units for
the greatest amount of cash, securities, or other property which a Limited Partner
would have received had it (A) exercised its Exchange Right and (B) sold, tendered or
exchanged pursuant to the Offer the INREIT Shares received upon exercise of the
Exchange Right immediately prior to the expiration of the Offer; and (ii) no more than
75% of the equity securities of the acquiring Person in such Transaction is owned,
after consummation of such Transaction, by INREIT, the General Partner, or Persons who
were Affiliates of the Company, the Partnership or the General Partner immediately
prior to the date on which the Transaction is consummated.
	 
	 	(d)	 	Notwithstanding Section 7.01(c), may merge with or into or consolidation with
another entity if immediately after such merger or consolidation: (i) substantially
all of the assets of the successor or surviving entity (the “Survivor”), other than
Partnership Units held by INREIT are contributed, directly or indirectly, to the
Partnership as a Capital Contribution in exchange for Partnership Units with a fair
market value equal to the value of the assets so contributed as determined by the
Survivor in good faith and (ii) the Survivor expressly agrees to assume all obligations
of the General Partner, as appropriate, hereunder. Upon such contribution and
assumption, the Survivor shall have the right and duty to amend this Agreement as set
forth in this Section 7.01(d). The Survivor shall in good faith arrive at a new method
for the calculation of the Cash Amount, the INREIT Shares Amount and Conversion Factor
for a Partnership Unit after any such

 

 

	 	 	 	merger or consolidation so as to approximate the existing method for such
calculation as closely as reasonably possible. Such calculation shall take into
account, among other things, the kind and amount of securities, cash and other
property that was receivable upon such merger or consolidation by a holder of INREIT
Shares or options, warrants or other rights relating thereto, and to which a holder
of Partnership Units could have acquired had such Partnership Units been exchanged
immediately prior to such merger or consolidation. Such amendment to this Agreement
shall provide for adjustment to such method of calculation, which shall be as nearly
equivalent as may be practicable to the adjustments provided for with respect to the
Conversion Factor. The Survivor also shall in good faith modify the definition of
INREIT Shares and make such amendments to Section 8.05 hereof so as to approximate
the existing rights and obligations set forth in Section 8.05 as closely as
reasonably possible. The above provisions of this Section 7.01(d) shall similarly
apply to successive mergers or consolidations permitted hereunder.

	7.02	 	Admission of a Substitute or Additional General Partner. A Person shall be admitted as a
substitute or additional General Partner of the Partnership only if the following terms and
conditions are satisfied:

	 	(a)	 	a majority of interest of the Limited Partners shall have consented in writing
to the admission of the substitute or additional General Partner, which consent may be
withheld in the sole discretion of such Limited Partners;
	 
	 	(b)	 	the Person to be admitted as a substitute or additional General Partner shall
have accepted and agreed to be bound by all the terms and provisions of this Agreement
by executing a counterpart thereof and such other documents or instruments as may be
required or appropriate in order to effect the admission of such Person as a General
Partner, and a certificate evidencing the admission of such Person as a General Partner
shall have been filed for recordation and all other actions required by Section 2.05
hereof in connection with such admission shall have been performed;
	 
	 	(c)	 	if the Person to be admitted as a substitute or additional General Partner is a
corporation or a partnership it shall have provided the Partnership with evidence
satisfactory to counsel for the Partnership of such Person’s authority to become a
General Partner and to be bound by the terms and provisions of this Agreement; and
	 
	 	(d)	 	counsel for the Partnership shall have rendered an opinion (relying on such
opinions from other counsel and the state or any other jurisdiction as may be
necessary) that the admission of the person to be admitted as a substitute or
additional General Partner is in conformity with the Act, that none of the actions
taken in connection with the admission of such Person as a substitute or additional
General Partner will cause: (i) the Partnership to be classified other than as a
partnership for federal income tax purposes, or (ii) the loss of any Limited Partner’s
limited liability.

 

 

	7.03	 	Effect of Bankruptcy, Withdrawal, Death or Dissolution of a General Partner.

	 	(a)	 	Upon the occurrence of an Event of Bankruptcy as to a General Partner (and its
removal pursuant to Section 7.04(a) hereof or the death, withdrawal, removal or
dissolution of a General Partner (except that, if a General Partner is on the date of
such occurrence a partnership, the withdrawal, death, dissolution, Event of Bankruptcy
as to, or removal of a partner in, such partnership shall be deemed not to be a
dissolution of such General Partner if the business of such General Partner is
continued by the remaining partner or partners), the Partnership shall be dissolved and
terminated unless the Partnership is continued pursuant to Section 7.03(b) hereof.
	 
	 	(b)	 	Following the occurrence of an Event of Bankruptcy as to a General Partner (and
its removal pursuant to Section 7.04(a) hereof or the death, withdrawal, removal or
dissolution of a General Partner (except that, if a General Partner is on the date of
such occurrence a partnership, the withdrawal, death, dissolution, Event of Bankruptcy
as to, or removal of a partner in, such partnership shall be deemed not to be a
dissolution of such General Partner if the business of such General Partner is
continued by the remaining partner or partners)), the Limited Partners, within 90 days
after such occurrence, may elect to reconstitute the Partnership and continue the
business of the Partnership for the balance of the term specified in Section 2.04
hereof by selecting, subject to Section 7.02 hereof and any other provisions of this
Agreement, a substitute General Partner by unanimous consent of the Limited Partners.
If the Limited Partners elect to reconstitute the Partnership and admit a substitute
General Partner, the relationship with the Partners and of any Person who has acquired
an interest of a Partner in the Partnership shall be governed by this Agreement.

	7.04	 	Removal of a General Partner.

	 	(a)	 	Upon the occurrence of an Event of Bankruptcy as to, or the dissolution of, a
General Partner, such General Partner shall be deemed to be removed automatically;
provided, however, that if a General Partner is on the date of such occurrence a
partnership, the withdrawal, death, dissolution, Event of Bankruptcy as to or removal
of a partner in such partnership shall be deemed not to be a dissolution of the General
Partner if the business of such General Partner is continued by the remaining partner
or partners.
	 
	 	(b)	 	If a General Partner has been removed pursuant to this Section 7.04 and the
Partnership is continued pursuant to Section 7.03 hereof, such General Partner shall
promptly transfer and assign its General Partnership Interest in the Partnership to the
substitute General Partner approved by a majority in interest of the Limited Partners
in accordance with Section 7.03(b) hereof and otherwise admitted to the Partnership in
accordance with Section 7.02 hereof. At the time of assignment, the removed General
Partner shall be entitled to receive from the substitute General Partner the fair
market value of the General Partnership Interest of such removed General Partner as
reduced by any damages caused to the

 

 

	 	 	 	Partnership by such General Partner. Such fair market value shall be determined by
an appraiser mutually agreed upon by the General Partner and a majority in interest
of the Limited Partners within 10 days following the removal of the General Partner.
In the event that the parties are unable to agree upon an appraiser, the removed
General Partner and a majority in interest of the Limited Partners each shall select
an appraiser. Each such appraiser shall complete an appraisal of the fair market
value of the removed General Partner’s General Partnership Interest within 30 days
of the General Partner’s removal, and the fair market value of the removed General
Partner’s General Partnership Interest shall be the average of the two appraisals;
provided, however, that if the higher appraisal exceeds the lower appraisal by more
than 20% of the amount of the lower appraisal, the two appraisers, no later than 40
days after the removal of the General Partner, shall select a third appraiser who
shall complete an appraisal of the fair market value of the removed General
Partner’s General Partnership Interest no later than 60 days after the removal of
the General Partner. In such case, the fair market value of the removed General
Partner’s General Partnership Interest shall be the average of the two appraisals
closest in value.
	 
	 	(c)	 	The General Partnership Interest of a removed General Partner, during the time
after default until transfer under Section 7.04(b), shall be converted to that of a
special Limited Partner; provided, however, such removed General Partner shall not have
any rights to participate in the management and affairs of the Partnership, and shall
not be entitled to a portion of the income, expense, profit, gain or loss allocations
or cash distributions allocable or payable, as the case may be, to the Limited
Partners. Instead, such removed General Partner shall receive and be entitled only to
retain distributions or allocations of such items that it would have been entitled to
receive in its capacity as General Partner, until the transfer is effective pursuant to
Section 7.04(b).
	 
	 	(d)	 	All Partners shall have given and hereby do give such consents, shall take such
actions and shall execute such documents as shall be legally necessary and sufficient
to effect all the foregoing provisions of this Section.

ARTICLE VIII

RIGHT AND OBLIGATIONS OF THE LIMITED PARTNERS

	8.01	 	Management of the Partnership. The
Limited Partners shall not participate
in the management or control of
Partnership business nor shall they
transact any business for the
Partnership, nor shall they have the
power to sign for or bind the
Partnership, such powers being vested
solely and exclusively in the General
Partner.
	 
	8.02	 	Power of Attorney. Each Limited Partner
hereby irrevocably appoints the General
Partner its true and lawful
attorney-in-fact, who may act for each
Limited Partner and in its name, place
and stead, and for its use and benefit
to sign, acknowledge, swear to, deliver,
file and record, at the appropriate
public offices, any and all documents,
certificates, and instruments as may be
deemed necessary or desirable by the
General Partner to carry out fully the
provisions of this Agreement and the Act
in accordance with

 

 

	 	 	their terms, which power of attorney is
coupled with an interest and shall
survive the death, dissolution or legal
incapacity or the Limited Partner, or
the transfer by the Limited Partner of
any part or all of its Partnership
Interest.
	 
	8.03	 	Limitation on Liability of Limited Partners. No Limited Partner shall be
liable for any debts, liabilities,
contracts or obligations of the
Partnership. A Limited Partner shall be
liable to the Partnership only to make
payments of its Capital Contribution, if
any, as and when due hereunder. After
its Capital Contribution is fully paid,
no Limited Partner shall, except as
otherwise required by the Act, be
required to make any further Capital
Contributions or other payments or lend
any funds to the Partnership.
	 
	8.04	 	Ownership by Limited Partner of Corporate General Partner or Affiliate.
No Limited Partner shall at any time,
either directly or indirectly, own any
stock or other interest in the General
Partner or in any Affiliate thereof if
such ownership by itself or in
conjunction with other stock or other
interests owned by other Limited
Partners would, in the opinion of
counsel for the Partnership, jeopardize
the classification of the Partnership as
a partnership for federal income tax
purposes. The General Partner shall be
entitled to make such reasonable inquiry
of the Limited Partners as is required
to establish compliance by the Limited
Partners with the provisions of this
Section.
	 
	8.05	 	Exchange Right.

	 	(a)	 	Subject to Sections 8.05(b), 8.05(c), 8.05(d), 8.05(e), on or after the date
which is one year after the acquisition of such units, each Limited Partner, shall have
the right (the “Exchange Right”) to require the Partnership to redeem on a Specified
Exchange Date all or a portion of the Partnership Units held by such Limited Partner at
an exchange price equal to and in the form of the Cash Amount, or at the option of the
Partnership in the form of INREIT Shares based on the Conversion Factor, to be paid by
the Partnership. The Exchange Right shall be exercised pursuant to a Notice of
Exchange delivered to the Partnership (with a copy to the General Partner) by the
Limited Partner who is exercising the Exchange Right (the “Exchanging Partner”);
provided, however, that the Partnership shall not be obligated to satisfy such Exchange
Right if the General Partner elects to purchase the Partnership Units subject to the
Notice of Exchange pursuant to Section 8.05(b); and provided, further, that no Limited
Partner may deliver more than two Notices of Exchange during each calendar year. A
Limited Partner may not exercise the Exchange Right for less than 1,000 Partnership
Units or, if such Limited Partner holds less than 1,000 Partnership Units, all of the
Partnership Units held by such Partner. The Exchanging Partner shall have no right,
with respect to any Partnership Units so exchanged, to receive any distribution paid
with respect to Partnership Units if the record date for such distribution is on or
after the Specified Exchange Date.
	 
	 	(b)	 	Notwithstanding the provisions of Section 8.05(a), a Limited Partner that
exercises the Exchange Right shall be deemed to have offered to sell the Partnership
Units described in the Notice of Exchange to the General Partner and the General
Partner may, in its sole and absolute discretion, elect to purchase

 

 

	 	 	 	directly and acquire such Partnership Units by paying to the Exchanging Partner the
Cash Amount on the Specified Exchange Date, whereupon the General Partner shall
acquire the Partnership Units offered for exchange by the Exchanging Partner and
shall be treated for all purposes of this Agreement as the owner of such Partnership
Units. If the General Partner shall elect to exercise its right to purchase
Partnership Units under this Section 8.05(b) with respect to a Notice of Exchange,
it shall so notify the Exchanging Partner within five Business Days after the
receipt by the General Partner of such Notice of Exchange. Unless the General
Partner (in its sole and absolute discretion) shall exercise its right to purchase
Partnership Units from the Exchanging Partner pursuant to this Section 8.05(b), the
General Partner shall not have any obligation to the Exchanging Partner or the
Partnership with respect to the Exchanging Partner’s exercise of the Exchange Right.
In the event the General Partner shall exercise its right to purchase Partnership
Units with respect to the exercise of an Exchange Right in the manner described in
the first sentence of this Section 8.05(b), the Partnership shall have no obligation
to pay any amount to the Exchanging Partner with respect to such Exchanging
Partner’s exercise of such Exchange Right, and each of the Exchanging Partner, the
Partnership, and the General Partner, as the case may be, shall treat the
transaction between the General Partner and the Exchanging Partner for federal
income tax purposes as a sale of the Exchanging Partner’s Partnership Units to the
General Partner. Each Exchanging Partner agrees to execute such documents as the
General Partner may reasonably require in connection with the issuance of INREIT
Shares upon exercise of the Exchange Right.
	 
	 	(c)	 	Notwithstanding the provisions of Section 8.05(a) and 8.05(b), a Limited
Partner shall not be entitled to exercise the Exchange Right if the delivery of INREIT
Shares to such Partner on the Specified Exchange Date by the General Partner pursuant
to Section 8.05(b) (regardless of whether or not the General Partner would in fact
exercise its rights under Section 8.05(b) would: (i) result in such Partner or any
other person owning, directly or indirectly, INREIT Shares in excess of the ownership
Limitation (as defined in INREIT’s Declaration of Trust) and calculated in accordance
therewith, except as provided in INREIT’s Declaration of Trust, (ii) result in INREIT
Shares being owned by fewer than 100 persons (determined without reference to any rules
of attribution), except as provided in INREIT’s Declaration of Trust, (iii) result in
INREIT being “closely held” within the meaning of Section 856(h) of the Code, (iv)
cause INREIT to own, directly or constructively, 10% or more of the ownership interests
in a tenant of the General Partner’s, the Partnership’s, or a Subsidiary Partnership’s,
real property, within the meaning of Section 856(d)(2)(D) of the Code, or (v) cause the
acquisition of INREIT Shares by such Partner to be “integrated” with any other
distributions of INREIT Shares for purposes of complying with the registration
provisions of the Securities Act of 1933, as amended (the “Securities Act”). The
General Partner, in its sole discretion, may waive the restriction on exchange set
forth in this Section 8.05(c); provided, however, that in the event such restriction is
waived, the Exchanging Partner shall be paid the Cash Amount.

 

 

	 	(d)	 	Any Cash Amount to be paid to an Exchanging Partner pursuant to this Section
8.05 shall be paid on the Specified Exchange Date; provided, however, that the General
Partner may elect to cause the Specified Exchange Date to be delayed for up to an
additional 180 days to the extent required for INREIT to cause additional INREIT Shares
to be issued to provide financing to be used to make such payment of the Cash Amount.
Notwithstanding the foregoing, the General Partner agrees to use its best efforts to
cause the closing of the acquisition of exchanged Partnership Units hereunder to occur
as quickly as reasonably possible.
	 
	 	(e)	 	Notwithstanding any other provision of this Agreement, the General Partner
shall place appropriate restrictions on the ability of the Limited Partners to exercise
their Exchange Rights as and if deemed necessary to ensure that the Partnership does
not constitute a “publicly traded partnership” under section 7704 of the Code. If and
when the General Partner determines that imposing such restrictions is necessary, the
General Partner shall give prompt written notice thereof (a “Restriction Notice”) to
each of the Limited Partners, which notice shall be accompanied by a copy of an opinion
of counsel to the Partnership which states that, in the opinion of such counsel,
restrictions are necessary in order to avoid the Partnership being treated as a
“publicly traded partnership” under section 7704 of the Code.

	8.06	 	Registration.

	 	(a)	 	Shelf Registration of the INREIT Shares. Prior to or on the first date
upon which the Partnership Units owned by any Limited Partner may be exchanged (or such
other date as may be required under applicable provisions of the Securities Act), if
necessary, the Company agrees to file with the Securities and Exchange Commission (the
“Commission”) a shelf registration statement on Form S-3 under Rule 415 of the
Securities Act (a “Registration Statement”), or any similar rule that may be adopted by
the Commission, with respect to all of the INREIT Shares that may be issued upon
exchange of such Partnership Units pursuant to Section 8.05 hereof (“Exchange Shares”).
INREIT will use its best efforts to have the Registration Statement declared effective
under the Securities Act. INREIT need not file a separate Registration Statement, but
may file one Registration Statement covering Exchange Shares issuable to more than one
Limited Partner. INREIT further agrees to supplement or make amendments to each
Registration Statement, if required by the rules, regulations or instructions
applicable to the registration form utilized by INREIT or by the Securities Act or
rules and regulations thereunder for such Registration Statement.
	 
	 	(b)	 	If a Registration Statement under subsection (a) above is not available under
the securities laws or the rules of the Commission, or if required to permit the resale
of Exchange Shares by “Affiliates” (as defined in the Securities Act), INREIT agrees to
file with the Commission a Registration Statement covering the resale of Exchange
Shares by Affiliates or others whose Exchange Shares are not covered by a Registration
Statement filed pursuant to subsection (a) above. INREIT will

 

 

	 	 	 	use its best efforts to have the Registration Statement declared effective under the
Securities Act. INREIT need not file a separate Registration Statement, but may
file one Registration Statement covering Exchange Shares issuable to more than one
Limited Partner. INREIT further agrees to supplement or make amendments to each
Registration Statement, if required by the rules, regulations or instructions
applicable to the registration form utilized by INREIT or by the Securities Act or
rules and regulations thereunder for such Registration Statement.
	 
	 	(c)	 	Listing on Securities Exchange. If INREIT shall list or maintain the
listing of any of its shares of Beneficial Interest on any securities exchange or
national market system, it will, as necessary to permit the registration and sale of
the Exchange Shares hereunder, list thereon, maintain and, when necessary, increase
such listing to include such Exchange Shares.

ARTICLE IX

TRANSFERS OF LIMITED PARTNERSHIP INTERESTS

	9.01	 	Purchase for Investment.

	 	(a)	 	Each Limited Partner hereby represents and warrants to the General Partner and
to the Partnership that the acquisition of his Partnership Interests is made as a
principal for its account for investment purposes only and not with a view to the
resale or distribution of such Partnership Interest.
	 
	 	(b)	 	Each Limited Partner agrees that he will not sell, assign or otherwise transfer
his Partnership Interest or any fraction thereof, whether voluntarily or by operation
of law or at judicial sale or otherwise, to any Person who does not make the
representations and warranties to the General Partner set forth in Section 9.01(a)
above and similarly agree not to sell, assign or transfer such Partnership Interest or
fraction thereof to any Person who does not similarly represent, warrant and agree.

	9.02	 	Restrictions on Transfer of Limited Partnership Interests.

	 	(a)	 	Subject to the provisions of 9.02(b), (c) and (d), a Limited Partner may offer,
sell, assign, hypothecate, pledge or otherwise transfer all or any portion of his
Limited Partnership Interest, or any of such Limited Partner’s economic rights as a
Limited Partner, whether voluntarily or by operation of law or at judicial sale or
otherwise (collectively, a “Transfer”) with or without the consent of the General
Partner. The General Partner may require, as a condition of any Transfer, that the
transferor assume all costs incurred by the Partnership in connection therewith.
	 
	 	(b)	 	No Limited Partner may effect a Transfer of its Limited Partnership Interest,
in whole or in part, if, in the opinion of legal counsel for the Partnership, such
proposed Transfer would require the registration of the Limited Partnership Interest
under the Securities Act of 1933, as amended, or would otherwise violate any applicable
federal or state securities or blue sky law (including investment suitability
standards).

 

 

	 	(c)	 	No transfer by a Limited Partner of its Partnership Units, in whole or in part,
may be made to any Person if: (i) in the opinion of legal counsel for the Partnership,
the transfer would result in the Partnership’s being treated as an association taxable
as a corporation (other than a qualified INREIT subsidiary within the meaning of
Section 856(i) of the Code), (ii) in the opinion of legal counsel for the Partnership,
it would adversely affect the ability of INREIT to continue to qualify as a REIT or
subject INREIT to any additional taxes under Section 857 or section 4981 of the Code,
or (iii) such transfer is effectuated through an “established securities market” or a
“secondary market (or the substantial equivalent thereof)” within the meaning of
Section 7704 of the Code.
	 
	 	(d)	 	No transfer of any Partnership Units may be made to a lender to the Partnership
or any Person who is related (within the meaning of Regulations Section 1.752-4(b)) to
any lender to the Partnership whose loan constitutes a nonrecourse liability (within
the meaning of Regulations Section 1.752-1(a)(2)), without the consent of the General
Partner, which may be withheld in its sole and absolute discretion, provided that as a
condition to such consent the lender will be required to enter into an arrangement with
the Partnership and the General Partner to exchange or redeem for the Cash Amount any
Partnership Units in which a security interest is held simultaneously with the time at
which such lender would be deemed to be a partner in the Partnership for purposes of
allocating liabilities to such lender under Section 752 of the Code.
	 
	 	(e)	 	Any Transfer in contravention of any of the provisions of this Article IX shall
be void and ineffectual and shall not be binding upon or recognized by the Partnership.

	9.03	 	Admission of Substitute Limited Partner.

	 	(a)	 	Subject to the other provisions of this Article IX, an assignee of the Limited
Partnership Interest of a Limited Partner (which shall be understood to include any
purchaser, transferee, donee, or other recipient of any disposition of such Limited
Partnership Interest) shall be deemed admitted as a Limited Partner of the Partnership
only upon the satisfactory completion of the following:
	 
	 	 	 	The assignee shall have accepted and agreed to be bound by the terms and provisions
of this Agreement by executing a counterpart or an amendment thereof, including a
revised Exhibit A, and such other documents or instruments as the General
Partner may require in order to effect the admission of such Person as a Limited
Partner.

	 	(i)	 	To the extent required, an amended Certificate evidencing the
admission of such Person as a Limited Partner shall have been signed,
acknowledged and filed for record in accordance with the Act.

 

 

	 	(ii)	 	The assignee shall have delivered a letter containing the
representation set forth in Section 9.01(a) hereof and the agreement set forth
in Section 9.01(b) hereof.
	 
	 	(iii)	 	If the assignee is a corporation, partnership or trust, the
assignee shall have provided the General Partner with evidence satisfactory to
counsel or the Partnership of the assignee’s authority to become a Limited
Partner under the terms and provisions of this Agreement.
	 
	 	(iv)	 	The assignee shall have executed a power of attorney containing
the terms and provisions set forth in Section 8.02 hereof.
	 
	 	(v)	 	The assignee shall have paid all reasonable legal fees of the
Partnership and the General Partner and filing and publication costs in
connection with its substitution as a Limited Partner.
	 
	 	(vi)	 	The assignee has obtained the prior written consent of the
General Partner to its admission as a Substitute Limited Partner, which consent
may be given or denied in the exercise of the General Partner’s sole and
absolute discretion.

	 	(b)	 	For the purpose of allocating Profits and Losses and distributing cash received
by the Partnership, a Substitute Limited Partner shall be treated as having become, and
appearing in the records of the Partnership as, a Partner upon the filing of the
Certificate described in Section 9.03(a)(ii) hereof or, if no such filing is required,
the later of the date specified in the transfer documents or the date on which the
General Partner has received all necessary instruments of transfer and substitution.
	 
	 	(c)	 	The General Partner shall cooperate with the Person seeking to become a
Substitute Limited Partner by preparing the documentation required by this Section and
making all official filings and publications. The Partnership shall take all such
action as promptly as practicable after the satisfaction of the conditions in this
Article IX to the admission of such Person as a Limited Partner of the Partnership.

	9.04	 	Rights of Assignees of Partnership Interests.

	 	(a)	 	Subject to the provisions of Sections 9.01 and 9.02 hereof, except as required
by operation of law, the Partnership shall not be obligated for any purposes whatsoever
to recognize the assignment by any Limited Partner of its Partnership Interest until
the Partnership has received notice thereof.
	 
	 	(b)	 	Any Person who is the assignee of all or any portion of a Limited Partner’s
Limited Partnership Interest, but does not become a Substitute Limited Partner and
desires to make a further assignment of such Limited Partnership Interest, shall be
subject to all the provisions of this Article IX to the same extent and in

 

 

	 	 	 	the same manner as any Limited Partner desiring to make an assignment of its Limited
Partnership Interest.

	9.05	 	Effect of Bankruptcy, Death, Incompetence or Termination of a Limited Partner. The
occurrence of an Event of Bankruptcy as to a Limited Partner, the death of a Limited Partner
or a final adjudication that a Limited Partner is incompetent (which term shall include, but
not be limited to, insanity) shall not cause the termination or dissolution of the
Partnership, and the business of the Partnership shall continue if an order for relief in a
bankruptcy proceeding is entered against a Limited Partner, the trustee or receiver of his
estate or, if he dies, his executor, administrator or trustee, or, if he is finally
adjudicated incompetent, his committee, guardian or conservator, shall have the rights of such
Limited Partner for the purpose of setting or managing his estate property and such power as
the bankrupt, deceased or incompetent Limited Partner possessed to assign all or any part of
his Partnership Interest and to join with the assignee in satisfying conditions precedent to
the admission of the assignee as a Substitute Limited Partner.
	 
	9.06	 	Joint Ownership of Interests. A Partnership Interest may be acquired by two individuals as
joint tenants with right of survivorship, provided that such individuals either are married or
are related as spouse, child, grandchild, parent or grandparent to one another. The written
consent or vote of both owners of a such jointly held Partnership Interest shall be required
to constitute the action of the owners of such Partnership Interest; provided, however, that
the written consent of only one joint owner will be required if the Partnership has been
provided with evidence satisfactory to the counsel for the Partnership that the actions of a
single joint owner can bind both owners under the applicable laws of the state of residence of
such joint owners. Upon the death of one owner of a Partnership Interest held in a joint
tenancy with a right of survivorship, the Partnership Interest shall become owned solely by
the survivor as a Limited Partner and not as an assignee. The Partnership need not recognize
the death of one of the owners of a jointly-held Partnership Interest until it shall have
received notice of such death. Upon notice to the General Partner from either owner, the
General Partner shall cause the Partnership Interest to be divided into two equal Partnership
Interests, which shall thereafter be owned separately by each of the former owners.
Partnership Interests may also be owned as tenants in common.

ARTICLE X

BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS

	10.01	 	Books and Records. At all times during the continuance of the Partnership, the Partners
shall keep or cause to be kept at the Partnership’s specified office true and complete books
of account in accordance with generally accepted accounting principles, including: (a) a
current list of the full name and last known business address of each Partner, (b) a copy of
the Certificate of Limited Partnership and all certificates of amendment thereto, (c) copies
of the Partnership’s federal, state and local income tax returns and reports, (d) copies of
the Agreement and financial statements of the Partnership for the three most recent years and
all documents and information required under the Act. Any Partner or its duly authorized
representative, upon paying the costs of

 

 

	 	 	collection, duplication and mailing, shall be
entitled to inspect or copy such records during ordinary business hours.
	 
	10.02	 	Custody of Partnership Funds; Bank Accounts.

	 	(a)	 	All funds of the Partnership not otherwise invested shall be deposited in one
or more accounts maintained in such banking or brokerage institutions as the General
Partner shall determine, and withdrawals shall be made only on such signature or
signatures as the General Partner may, from time to time, determine.
	 
	 	(b)	 	All deposits and other funds not needed in the operation of the business of the
Partnership may be invested by the General Partner in investment grade instruments (or
investment companies whose portfolio consists primarily thereof), government
obligations, certificates of deposit, bankers’ acceptances and municipal notes and
bonds. The funds of the Partnership shall not be commingled with the funds of any
other Person except for such commingling as may necessarily result from an investment
in those investment companies permitted by this Section 10.02(b).

	10.03	 	Fiscal and Taxable Year. The fiscal and taxable year of the Partnership shall be
established by the General Partner.
	 
	10.04	 	Annual Tax Information and Report. Within 75 days after the end of each fiscal year of
the Partnership, the General Partner shall furnish to each person who was a Limited
Partner at any time during such year the tax information necessary to file such Limited
Partner’s individual tax returns as shall be reasonably required by law.
	 
	10.05	 	Tax Matters Partner; Tax Elections; Special Basis Adjustments.

	 	(a)	 	The General Partner shall be the Tax Matters Partner of the Partnership within
the meaning of Section 6231(a)(7) of the Code. As Tax Matters Partner, the General
Partner shall have the right and obligation to take all actions authorized and
required, respectively, by the Code for the Tax Matters Partner. The General Partner
shall have the Right to retain professional assistance with respect of any audit of the
Partnership by the Service and all out-of-pocket expenses and fees incurred by the
General Partner on behalf of the Partnership as Tax Matters Partner shall constitute
Partnership expenses. In the event the General Partner receives notice of a final
Partnership adjustment under Section 6223(a)(2) of the Code, the General Partner shall
either: (i) file a court petition for judicial review of such final adjustment within
the period provided under Section 6226(a) of the Code, a copy of which petition shall
be mailed to all Limited Partners on the date such petition is filed, or (ii) mail a
written notice to all Limited Partners, within such period, that describes the General
Partner’s reasons for determining not to file such a petition.
	 
	 	(b)	 	All elections required or permitted to be made by the Partnership under the
Code or any applicable state or local tax law shall be made by the General Partner in
its sole discretion.

 

 

	 	(c)	 	In the Event of a transfer of all or any part of the Partnership Interest of
any Partner, the Partnership, at the option of the General Partner, may elect pursuant
to Section 754 of the Code to adjust the basis of the Properties. Notwithstanding
anything contained in Article V of this Agreement, any adjustments made pursuant to
Section 754 shall affect only the successor in interest to the transferring Partner
and in no event shall be taken into account in establishing, maintaining or
computing Capital Accounts for the other Partners for any purpose under this
Agreement. Each Partner will furnish the Partnership with all information necessary
to give effect to such election.

	10.06	 	Reports to Limited Partners.

	 	(a)	 	As soon as practicable after the close of each fiscal quarter (other than the
last quarter of the fiscal year), the General Partner shall cause to be mailed to each
Limited Partner a quarterly report containing financial statements of the Partnership
for such fiscal quarter, presented in accordance with generally accepted accounting
principles. As soon as practicable after the close of each fiscal year, the General
Partner shall cause to be mailed to each Limited Partner an annual report containing
financial statements of the Partnership for such fiscal year, presented in accordance
with generally accepted accounting principles. The annual financial statements shall
be audited by accountants selected by the General Partner.
	 
	 	(b)	 	Any Partner shall further have the right to a private audit of the books and
records of the Partnership, provided such audit is made for Partnership purposes, at
the expense of the Partner desiring it and is made during normal business hours.

ARTICLE XI

AMENDMENT OF AGREEMENT

The General Partner’s consent shall be required for any amendment to this Agreement. The General
Partner, without the consent of the Limited Partners, may amend this Agreement in any respect;
provided, however, that the following amendments shall require the consent of Limited Partners
holding more than 50% of the Percentage Interests of the Limited Partners:

	 	(a)	 	any amendment affecting the operation of the Conversion Factor or the Exchange
Right (except as provided in Section 8.05(d) or 7.01(d) hereof) in a manner adverse to
the Limited Partners;
	 
	 	(b)	 	any amendment that would adversely affect the rights of the Limited Partners to
receive the distributions payable to them hereunder, other than with respect to the
issuance of additional Partnership Units pursuant to Section 4.02 hereof;
	 
	 	(c)	 	Any amendment that would alter the Partnership’s allocations of Profit and Loss
to the Limited Partners, other than with respect to the issuance of additional
Partnership Units pursuant to Section 4.02 hereof; or

 

 

	 	(d)	 	any amendment that would impose on the Limited Partners any obligation to make
additional Capital Contributions to the Partnership.

ARTICLE XII

GENERAL PROVISIONS

	12.01	 	Notices. All communications required or permitted under this Agreement shall be in writing
and shall be deemed to have been given when delivered personally or upon deposit in the United
States mail, registered, postage prepaid return receipt requested, to the Partners at the
addresses set forth in Exhibit A attached hereto; provided, however, that any Partner
may specify a different address by notifying the General Partner in writing of such different
address. Notices to the Partnership shall be delivered at or mailed to its specified office.
	 
	12.02	 	Survival of Rights. Subject to the provisions hereof limiting transfers, this Agreement
shall be binding upon and inure to the benefit of the Partners and the Partnership and their
respective legal representatives, successors, transferees and assigns.
	 
	12.03	 	Additional Documents. Each Partner agrees to perform all further acts and execute, swear
to, acknowledge and deliver all further documents which may be reasonable, necessary,
appropriate or desirable to carry out the provisions of this Agreement or the Act.
	 
	12.04	 	Severability. If any provision of this Agreement shall be declared illegal, invalid, or
unenforceable in any jurisdiction, then such provision shall be deemed to be severable from
this agreement (to the extent permitted by law) and in any event such illegality, invalidity
or unenforceability shall not affect the remainder hereof.
	 
	12.05	 	Entire Agreement. This Agreement and exhibits attached hereto constitute the entire
Agreement of the Partners and supersede all prior written agreements and prior and
contemporaneous oral agreements, understandings and negotiations with respect to the subject
matter hereof.
	 
	12.06	 	Pronouns and Plurals. When the context in which words are used in the Agreement indicates
that such is the intent, words in the singular number shall include the plural and the
masculine gender shall include the neutral or female gender as the context may require.
	 
	12.07	 	Headings. The Article headings or sections in this Agreement are for convenience only and
shall not be used in construing the scope of this Agreement or any particular Article.
	 
	12.08	 	Counterparts. This Agreement may be executed in several counterparts, each of which shall
be deemed to be an original copy and all of which together shall constitute one and the same
instrument binding on all parties hereto, notwithstanding that all parties shall not have
signed the same counterpart.
	 
	12.09	 	Governing Law. This Agreement shall be governed by and construed in accordance with the
laws of the State of North Dakota without giving regard to the choice of law rules.exv10w3

EXHIBIT 10.3

SECOND AMENDMENT

TO

LIMITED LIABILITY LIMITED PARTNERSHIP

OF

INREIT PROPERTIES, LLLP

     This Second Amendment is effective as of 19th day of December, 2008 for the purpose of
amending the First Amendment and Complete Restatement of Agreement of Limited Liability Limited
Partnership of INREIT Properties, LLLP as follows:

     Article VII, Changes in General Partner, 7.01(b), shall be deleted in its entirety and in its
place the following paragraph 7.01 (b) shall be inserted:

ARTICLE VII.

CHANGES IN GENERAL PARTNER

	 	7.01	(b)	 The General Partner agrees that it will at all times own in the aggregate
at least 10% of the Partnership.

     By executing this Second Amendment the General Partners affirm, agree to, ratify, and consent
to the terms, covenants, and agreements contained in the First Amendment and Complete Restatement
of Agreement of Limited Liability Partnership of INREIT Properties, LLLP that was effective April
25, 2003, as modified by this Second Amendment.

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