Exhibit 10.2

AVALONBAY VALUE ADDED FUND, L.P.

AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT

      

      

      

      

      

      

      

      

      

      

      

THE PARTNERSHIP INTERESTS OF THE LIMITED PARTNERS ISSUED PURSUANT TO THIS
AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES OR “BLUE
SKY” LAWS OF ANY STATE OR OTHER JURISDICTION, AND MAY NOT BE SOLD OR TRANSFERRED
UNLESS THEY ARE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY
OTHER APPLICABLE SECURITIES OR “BLUE SKY” LAWS, OR UNLESS AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. SUCH PARTNERSHIP INTERESTS ARE SUBJECT TO THE
RESTRICTIONS ON TRANSFER SET FORTH IN THIS AGREEMENT.

 

 
 

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AvalonBay Value Added Fund, L.P.

Amended and Restated Limited Partnership Agreement

Table of Contents

                 
1.
 
Recitals and Definitions
   
1
     
1.1
 
Recitals
   
1
     
1.2
 
Definitions
   
1
                   
2.
 
Formation of Limited Partnership
   
11
     
2.1
 
Organization
   
11
     
2.2
 
Partnership Name
   
11
     
2.3
 
Purposes and Business
   
11
     
2.4
 
Principal Business Office, Registered Office and Registered Agent
   
12
     
2.5
 
Qualification in Other Jurisdictions
   
12
     
2.6
 
Powers
   
12
                   
3.
 
Authority of the General Partner
   
12
     
3.1
 
General Authority
   
12
     
3.2
 
Authority for Specific Actions
   
13
     
3.3
 
Investment Restrictions
   
15
     
3.4
 
ERISA Matters
   
16
     
3.5
 
Company Actions and Voting
   
16
     
3.6
 
Stockholder Rights; REIT Matters
   
17
     
3.7
 
Expense Reimbursement
   
17
     
3.8
 
Management Fees
   
19
     
3.9
 
Other Permitted Business
   
20
     
3.10
 
Exculpation
   
21
     
3.11
 
Indemnification
   
22
     
3.12
 
Payment of Indemnification Expenses
   
22
     
3.13
 
Partnership Classification
   
23
     
3.14
 
Reliance by Third Parties
   
23
     
3.15
 
Co-Investment Entities
   
23
     
3.16
 
Warehoused Properties
   
23
                   
4.
 
Capital Commitments and Contributions
   
24
     
4.1
 
Payment of Capital Contributions
   
24
     
4.2
 
Defaulting Partners
   
26
     
4.3
 
Requirements for Admission as Limited Partner
   
29
     
4.4
 
Admission of Limited Partners
   
29
     
4.5
 
Interest
   
30
     
4.6
 
Assignees
   
30
                   
5.
 
Capital Accounts; Profits and Losses; Distributions
   
30
     
5.1
 
Capital Accounts
   
30
 

 
 
 
 
(i)

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5.2
 
Allocation of Net Income and Net Loss
   
32
     
5.3
 
Minimum Gain Chargebacks and Non-Recourse Deductions
   
32
     
5.4
 
Code Section 704(b) Compliance
   
33
     
5.5
 
Elections
   
33
     
5.6
 
Distributions
   
33
     
5.7
 
No Deficit Restoration by General Partner
   
36
     
5.8
 
No Deficit Restoration by Limited Partners
   
36
     
5.9
 
Right of Set-Off
   
36
     
5.10
 
Withholding
   
36
                   
6.
 
Advisory Committee and Investment Committee
   
37
     
6.1
 
Advisory Committee Membership
   
37
     
6.2
 
Advisory Committee Meetings and Expense Reimbursement
   
37
     
6.3
 
Advisory Committee Authority
   
37
     
6.4
 
Quorum and Voting of Members of Advisory Committee
   
38
     
6.5
 
Investment Committee
   
38
     
6.6
 
Partnership Meetings
   
38
                   
7.
 
Transfers of Limited Partnership Interests
   
39
     
7.1
 
Assignability of Interests
   
39
     
7.2
 
Substitute Limited Partners
   
40
     
7.3
 
Obligations of Assignee
   
40
     
7.4
 
Allocation of Distributions Between Assignor and Assignee
   
40
     
7.5
 
Assignment by Removed or Withdrawn General Partner
   
40
                   
8.
 
Transfer of Partnership Interest by General Partner; Withdrawal
   
41
     
8.1
 
Assignability of Interest
   
41
     
8.2
 
Voluntary Withdrawal
   
41
     
8.3
 
Involuntary Withdrawal
   
42
     
8.4
 
Removal of General Partner
   
42
     
8.5
 
Payment of Expenses to General Partner Upon Withdrawal
   
43
     
8.6
 
General Partner’s Interest upon Removal or Withdrawal
   
43
     
8.7
 
Further Consequences of Removal or Withdrawal
   
44
     
8.8
 
Continuation of Partnership Business
   
45
                   
9.
 
Rights and Obligations of the Limited Partners
   
45
     
9.1
 
Limited Liability
   
45
     
9.2
 
Authority of Limited Partners
   
46
     
9.3
 
Confidentiality
   
46
     
9.4
 
Preservation of REIT Status
   
46
     
9.5
 
Special Rights of the Company
   
47
                   
10.
 
Duration and Termination of the Partnership
   
47
     
10.1
 
Duration
   
47
     
10.2
 
Bankruptcy of Limited Partner
   
47
     
10.3
 
Termination
   
48
 

 
 
 
(ii)

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11.
 
Liquidation of the Partnership
   
48
     
11.1
 
General
   
48
     
11.2
 
Priority on Liquidation; Distributions
   
49
     
11.3
 
Orderly Liquidation
   
49
     
11.4
 
Source of Distributions
   
49
     
11.5
 
Statements on Termination
   
49
     
11.6
 
Return of Incentive Distributions
   
49
                   
12.
 
Books; Accounting; Tax Elections; Reports
   
50
     
12.1
 
Books and Accounts
   
50
     
12.2
 
Records Available
   
50
     
12.3
 
Annual Financial Statements and Valuation
   
51
     
12.4
 
Quarterly Financial Statements
   
51
     
12.5
 
Reliance on Accountants
   
51
     
12.6
 
Tax Matters Partner; Filing of Returns
   
51
     
12.7
 
Fiscal Year
   
52
                   
13.
 
Power of Attorney
   
52
     
13.1
 
General
   
52
     
13.2
 
Survival of Power of Attorney
   
52
     
13.3
 
Written Confirmation of Power of Attorney
   
52
                   
14.
 
Miscellaneous
   
52
     
14.1
 
Further Assurances
   
52
     
14.2
 
Successors and Assigns
   
53
     
14.3
 
Applicable Law
   
53
     
14.4
 
Severability
   
53
     
14.5
 
Counterparts
   
53
     
14.6
 
Entire Agreement
   
53
     
14.7
 
Amendment
   
53
     
14.8
 
Construction
   
54
     
14.9
 
Force Majeure
   
54
     
14.10
 
Notices
   
54
     
14.11
 
No Right of Partition for Redemption
   
55
     
14.12
 
Third-Party Beneficiaries
   
55
     
14.13
 
General Partner as Limited Partner or Stockholder
   
55
     
14.14
 
UCC Article 8 Election
   
55
 

     
Schedules and Exhibits:
         
Schedule A
 
List of Partners and Capital Commitments
     
Exhibit A
 
Form of Guaranty
     
Exhibit B
 
Form of Power of Attorney

 

 
 
(iii)

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AvalonBay Value Added Fund, L.P.

Amended and Restated Limited Partnership Agreement

1.     Recitals and Definitions
 
1.1 Recitals. This Amended and Restated Limited Partnership Agreement (this
“Agreement”) by and among AvalonBay Capital Management, Inc., as the sole
general partner, AvalonBay Value Added Fund, Inc., a Maryland corporation (the “
Company ”), as a limited partner, and those persons and entities, if any, that
are listed from time to time on Schedule A  hereto as limited partners (together
with the Company and those limited partners subsequently admitted pursuant to
the terms of this Agreement, the “ Limited Partners ”) is entered into to amend
and restate in its entirety that certain Limited Partnership Agreement entered
into as of May 17, 2004 pursuant to the laws of the State of Delaware.

     1.2 Definitions. Capitalized terms used in this Agreement shall have the
meanings set forth or referred to below.

     “Acquisition Cost” shall mean (i) the total out-of-pocket costs incurred by
the Partnership or reimbursable by the Partnership to the General Partner or any
AVB Affiliate in connection with the acquisition of any Strategic Investment,
including, without limitation, the full purchase price therefor, all costs
incurred in connection with diligence investigations of the Strategic Investment
and closing costs, including, without limitation, the fees of attorneys,
consultants, appraisers and other advisers, and commissions, plus (ii) the total
amount of costs (including incentive compensation) incurred or funded by the
Partnership in connection with the leasing of a Strategic Investment (including
leasing commissions and any other costs related to leasing) and any development,
redevelopment, renovation, tenant fit-out or other property improvement of such
Strategic Investment (collectively, “ Development Costs ”), plus (iii) the total
amount of reserves determined at the time of acquisition to be necessary to
cover contemplated capital improvements to the extent not included in
Development Costs; provided, however, that, except as otherwise provided in this
Agreement, Acquisition Costs shall not include any of the foregoing costs paid
with indebtedness incurred or assumed by the Partnership.

     “Act” shall have the meaning set forth in Section 2.1.

     “Advisory Committee” shall have the meaning set forth in Section 6.1.

     “Affiliate” of any Person means any Person that directly or indirectly
through one or more intermediaries, controls, is controlled by or is under
common control with, the Person specified.

     “Agreement” shall have the meaning set forth in Section 1.1.
 
 
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     “Appraisal” means with respect to any Strategic Investment or other assets
of the Partnership, the opinion of an Independent Appraiser as to the fair
market value of such Strategic Investment or other assets. Such opinion may be
in the form of an opinion by such Independent Appraiser that the fair market
value of such Strategic Investment or other asset as set by the General Partner
is fair, from a financial point of view, to the Partnership.

     “AVB” means AvalonBay Communities, Inc., a Maryland corporation.

     “AVB Affiliate” means AVB or any Person controlling, controlled by or under
common control with AVB but shall exclude Persons in which the Partnership makes
an Investment; provided, however, that in no event shall the Company be deemed
to be an AVB Affiliate.

     “AVB Stockholder” means AVB or any AVB Affiliate that is a Stockholder.

     “Board of Directors” means the Board of Directors of the Company.

     “Capital Account” shall have the meaning set forth in Section 5.1(a).

     “Capital Commitment” shall mean the total amount of cash agreed to be paid
to the Partnership (whether or not yet paid) by each Partner pursuant to
Section 4.1, as set forth on Schedule A  hereto, subject to Section 4.1(e) with
respect to PSERS’ Capital Commitment.

     “Capital Contribution” shall mean, as to each Partner (excluding the
General Partner), the amount of cash actually contributed to the Partnership by
such Partner as of the time the determination is made, and, as to the General
Partner, the amount of cash and/or Warehoused Properties contributed to the
Partnership by the General Partner at the time the contribution is made.

     “Carried Interest” shall have the meaning set forth in Section 8.6(c).

     “Catch-up Interest” shall mean an amount equivalent to interest on Catch-up
Payments at the rate of 10% per annum, or such higher rate as is determined by
the General Partner in its sole discretion, plus any other amount determined by
the General Partner in its sole discretion, calculated as provided in
Section 4.4(b).

     “Catch-up Payment” shall mean, with respect to a newly admitted Limited
Partner or an existing Limited Partner that is increasing its Capital
Commitment, an amount determined by multiplying (x) the aggregate amount of
Capital Contributions made by all Partners prior to the date of the relevant
Subsequent Closing by (y) in the case of a newly admitted Limited Partner, such
Limited Partner’s Equity Interest Percentage, or in the case of a Limited
Partner increasing its Capital Commitment, the additional Equity Interest
Percentage purchased at the Subsequent Closing, each calculated after taking
into account the adjustment, if any, to the Equity Interest Percentage of the
General Partner.

     “Certificate” shall have the meaning set forth in Section 2.1.

 
 
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     “Change of Control of AVB” shall mean the occurrence of any one or more of
the following events:

     (i) Any individual, entity or group (for the purposes of this definition, a
“Person”) within the meaning of Sections 13(d) and 14(d) of the Securities Act
(other than AVB, any AVB Affiliate, or any trustee, fiduciary or other person or
entity holding securities under any employee benefit plan or trust of AVB or any
AVB Affiliate), together with all “affiliates” and “associates” (as such terms
are defined in Rule 12b-2 under the Securities Act) of such Person, becomes the
“beneficial owner” (as such term is defined in Rule 13d-3 under the Securities
Act) of securities of AVB representing thirty percent (30%) or more of the
combined voting power of AVB’s then outstanding securities having the right to
vote generally in an election of AVB’s Board of Directors (“ Voting Securities
”), other than as a result of (A) an acquisition of securities directly from AVB
or any AVB Affiliate approved by the Incumbent Directors (as defined below) or
(B) an acquisition by any corporation pursuant to a reorganization,
consolidation or merger if, following such reorganization, consolidation or
merger the conditions described in clauses (A), (B) and (C) of subparagraph
(iii) of this definition are satisfied;

     (ii) Individuals who constitute AVB’s Board of Directors (the “Incumbent
Directors”) cease for any reason to constitute at least a majority of AVB’s
Board of Directors, provided, however, that any individual becoming a director
of AVB (excluding, for this purpose, (A) any such individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of members of AVB’s Board of Directors or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than AVB’s Board of Directors, including by reason of agreement
intended to avoid or settle any such actual or threatened contest or
solicitation, and (B) any individual whose initial assumption of office is in
connection with a reorganization, merger or consolidation, involving an
unrelated entity), whose election or nomination for election by AVB’s
stockholders was approved by a vote of at least a majority of the persons then
comprising Incumbent Directors shall for purposes of this Agreement be
considered an Incumbent Director;

     (iii) Approval by the shareholders of AVB of a reorganization, merger or
consolidation of AVB, or, if consummation of such reorganization, merger or
consolidation is subject, at the time of such approval by shareholders, to the
consent of any government or governmental agency, obtaining such consent (either
explicitly or implicitly by consummation), unless, following such
reorganization, merger or consolidation, (A) more than fifty percent (50%) of,
respectively, the then outstanding shares of common stock of the entity
resulting from such reorganization, merger or consolidation (the “ Surviving
Entity ”) and the combined voting power of the then outstanding voting
securities of such Surviving Entity entitled to vote generally in the election
of directors will be beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the outstanding Voting Securities immediately prior to
such reorganization, merger or consolidation, (B) no Person (excluding AVB, any
employee benefit plan (or related trust) of AVB, an AVB Affiliate or the
Surviving Entity or any subsidiary thereof, and any Person beneficially owning,
immediately prior to such reorganization, merger or consolidation, directly or
indirectly, thirty percent (30%) or more of the outstanding Voting Securities)
will beneficially own, directly or indirectly, thirty percent (30%) or more of,
respectively, the then outstanding shares of common stock of the Surviving
Corporation or the combined voting power of the then outstanding voting
securities of such Surviving Entity entitled to vote generally in the election
of directors, and (C) at least a majority of the members of the board of
directors of the Surviving Entity will have been members of the Incumbent Board
at the time of the execution of the initial agreement providing for such
reorganization, merger or consolidation;

 
 
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     (iv) Approval by the shareholders of AVB of a complete liquidation or
dissolution of AVB; or

     (v) Approval by the shareholders of AVB of the sale, lease, exchange or
other disposition of all or substantially all of the assets of AVB, or, if
consummation of such sale, lease, exchange or other disposition is subject, at
the time of such approval by shareholders, to the consent of any government or
governmental agency, obtaining such consent (either explicitly or implicitly by
consummation), other than to an entity, with respect to which following such
sale, lease, exchange or other disposition (A) more than fifty percent (50%) of,
respectively, the then outstanding shares of common stock of the of such entity
and the combined voting power of the then outstanding voting securities of such
entity entitled to vote generally in the election of directors will be
beneficially owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners of the outstanding
Voting Securities immediately prior to such sale, lease, exchange or other
disposition, (B) no Person (excluding AVB and any employee benefit plan (or
related trust) of AVB or an AVB Affiliate or such entity or a subsidiary thereof
and any Person beneficially owning, immediately prior to such sale, lease,
exchange or other disposition, directly or indirectly, thirty percent (30%) or
more of the outstanding Voting Securities) will beneficially own, directly or
indirectly, thirty percent (30%) or more of, respectively, the then outstanding
shares of common stock of such entity and the combined voting power of the then
outstanding voting securities of such entity entitled to vote generally in the
election of directors and (C) at least a majority of the members of the board of
directors of such entity will have been members of the Incumbent Board at the
time of the execution of the initial agreement or action of the AVB Board of
Directors providing for such sale, lease, exchange or other disposition of
assets of AVB.

     Notwithstanding the foregoing, a “Change of Control of AVB” shall not be
deemed to have occurred for purposes of this Agreement solely as the result of
an acquisition of securities by AVB which, by reducing the number of shares of
Voting Securities outstanding, increases the proportionate voting power
represented by the Voting Securities beneficially owned by any Person to thirty
percent (30%) or more of the combined voting power of all then outstanding
Voting Securities; provided, however, that if any Person referred to in this
sentence shall thereafter become the beneficial owner of any additional shares
of Stock or other Voting Securities (other than pursuant to a stock split, stock
dividend or similar transaction), then a “Change of Control of AVB” shall be
deemed to have occurred for purposes of this Agreement.

     “Charter” shall mean the Articles of Incorporation of the Company, as
amended from time to time.

 
 
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     “Closing” shall mean the Initial Closing or any Subsequent Closing.

     “Code” shall have the meaning set forth under “Internal Revenue Code” in
this Section 1.2.

     “Co-Investment Entity” shall have the meaning set forth in Section 3.15.

     “Company” shall have the meaning set forth in Section 1.1.

     “Confidential Information” shall have the meaning set forth in Section 9.3.

     “Contribution Call” shall have the meaning set forth in Section 4.1(a).

     “Default Date” shall have the meaning set forth in Section 4.2(a).

     “Default Portion” shall have the meaning set forth in Section 4.2(h).

     “Defaulted Interest” shall have the meaning set forth in Section 4.2(b).

     “Defaulting Partner” shall mean any Partner that fails to pay when due any
installment of its Capital Commitment under Section 4.1 hereof.

     “Defaulting Stockholder” shall have the meaning set forth in
Section 4.2(h).

     “Development Fees” shall have the meaning set forth in Section 3.8(b).

     “Disposition” shall mean, with respect to all or a portion of any Strategic
Investment, any complete or partial repayment, syndication of interests, sale
and/or other disposition, including sale upon liquidation of the Partnership, of
such Strategic Investment in each case such that the Partnership ceases to have
an ownership interest in such Strategic Investment or such portion thereof.

     “Disposition Proceeds” shall mean the proceeds to the Partnership from the
Disposition of any of its Strategic Investments, net of all related expenses,
taxes and liabilities (including expenditures and fees paid directly or
indirectly by the Partnership to the General Partner or any Affiliate of the
General Partner or to third parties in connection with such Disposition in
accordance with the terms of this Agreement), and in the case of any purchase
money obligation or other interest (other than marketable securities) received
on the disposition of a Strategic Investment shall mean both the principal
thereof and interest thereon or other payments or distributions with respect to
such interest at the time when either is received.

     “Economic Capital Account” means, with respect to any Partner, such
Partner’s Capital Account as of the date of determination, after crediting to
such Capital Account any amounts that the Partner is deemed obligated to restore
under Treasury Regulations Section 1.704-2.

     “Election Date” shall have the meaning set forth in Section 4.1(e).

     “Electing Limited Partner” shall have the meaning set forth in
Section 5.6(b).
 
 
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     “Equity Interest” with respect to any Partner shall mean the entire right,
title and interest of such Partner in the Partnership and any appurtenant
rights, including, without limitation, any voting rights and any right or
obligation to contribute capital to the Partnership.

     “Equity Interest Percentage” with respect to any Partner shall mean the
ratio that the Capital Commitment of such Partner bears to the aggregate Capital
Commitments of all Partners.

     “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor thereto.

     “ERISA Partner” shall mean each Limited Partner the assets of which
constitute “plan assets” under ERISA.

     “Estimated Value Capital Account” shall mean, with respect to any Partner,
the amount such Partner would receive in a hypothetical liquidation of the
Partnership following a hypothetical sale of all of the assets of the
Partnership at prices equal to their most recent valuations, and the
distribution of the proceeds thereof to the Partners pursuant to this Agreement
(after the hypothetical payment of all actual Partnership indebtedness, and any
other liabilities related to the Partnership’s assets, limited, in the case of
non-recourse liabilities, to the collateral securing or otherwise available to
the lender to satisfy such liabilities).

     “Excepted Event” shall have the meaning set forth in Section 4.1(e).

     “Final Closing Date” means the date of the last Subsequent Closing.

     “Fiscal Year” shall have the meaning set forth in Section 12.7.

     “For Cause Removal Notice” shall have the meaning set forth in
Section 8.4(a).

     “Formation Expenses” shall mean all fees and out of pocket expenses
incurred in connection with the formation of the Company, the Partnership and
the General Partner and the consummation of the Initial Closing and any
Subsequent Closings, including, without limitation, all expenses incurred in
connection with the offer and sale of Limited Partnership interests and REIT
Shares, but excluding any Placement Agent Fees.

     “General Partner” shall mean AvalonBay Capital Management, Inc. or any
successor thereto.

     “Incentive Distributions” shall have the meaning set forth in
Section 5.6(a).

     “Indebtedness” of any Person shall mean, without duplication, (A) as shown
on such Person’s balance sheet (i) all indebtedness of such Person for borrowed
money or for the deferred purchase price of property, and (ii) all other
obligations of such Person evidenced by a note, bond, debenture or similar
instrument (but only to the extent disbursed with respect to construction loans
or other lines of credit), (B) the face amount of all letters of credit issued
for the account of such Person and, without duplication, all unreimbursed
amounts drawn thereunder, (C) all capitalized leases, and (D) all net payment
obligations of such Person under any rate hedging agreements which were not
entered into specifically in connection with Indebtedness set forth in clauses
(A) or (B) hereof.

 
 
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     “Indemnified Party” shall have the meaning set forth in Section 3.10.

     “Independent Appraiser” means a Person who is not an AVB Affiliate and who
is experienced in the valuation of properties similar to the Partnership’s
Strategic Investments for institutional clients.

     “Initial Closing” shall mean the initial admission of Limited Partners into
the Partnership.

     “Initial Closing Date” shall mean the date when the Initial Closing occurs.

     “Interim Investments” shall mean cash, cash equivalent securities and other
short-term investments of Partnership funds held for future investment in
Strategic Investments or other Partnership purposes.

     “Internal Revenue Code” or “Code” shall mean the United States Internal
Revenue Code of 1986, as from time to time amended, and any successor thereto.

     “Investment” shall mean an asset constituting an Interim Investment or a
Strategic Investment.

     “Investment Committee” shall have the meaning set forth in Section 6.5.

     “Investment Company Act” shall mean the Investment Company Act of 1940, as
amended.

     “Investment Period” shall mean the period commencing on the Initial Closing
Date and ending on the third anniversary of the Initial Closing Date.

     “Involuntary Withdrawal” shall have the meaning set forth in Section 8.3.

     “IRS” shall mean the Internal Revenue Service of the United States
Department of the Treasury.

     “Limited Partners” shall have the meaning set forth in Section 1.1.

     “Liquidating Agent” shall have the meaning set forth in Section 11.1.

     “Managed Assets” shall have the meaning set forth in Section 5.6(b)(iii).

     “Management Fee” shall have the meaning set forth in Section 3.8(a).
 
 
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     “Management/Oversight Group” shall mean Bryce Blair, Thomas J. Sargeant,
Lili Dunn and Kevin O’Shea, and any successor to any such individual in
accordance with the following sentence. In the event that any one of Bryce
Blair, Thomas J. Sargeant, Lili Dunn or Kevin O’Shea shall cease to be involved
in the management or oversight of the Partnership at a level substantially
consistent with such person’s prior involvement, then the General Partner shall
be entitled to appoint a successor to such person to serve as a member of the
Management/Oversight Group, subject to PSERS’ right to approve such successor
(which approval will not be unreasonably withheld); provided, however, that the
General Partner shall be entitled to appoint Timothy J. Naughton to fill the
first vacancy on the Management/Oversight Group without obtaining PSERS’ consent
to such appointment for so long as Mr. Naughton is employed by AVB.

     “Net Loss from Writedowns” as of any date shall be calculated on an
aggregate basis with respect to all Unrealized Investments that have previously
been written down or written off on the Partnership’s books (other than the
books required to comply with Section 5.1 and the definition of “Capital
Account”) and shall mean the excess, if any, of the aggregate cost of such
Unrealized Investments over the aggregate fair market value of such Unrealized
Investments as of such date; provided, however, that the Net Loss from
Writedowns for any Investment shall not exceed the aggregate Acquisition Costs
for such Investment.

     “No-Fault Removal Notice” shall have the meaning set forth in
Section 8.4(b).

     “Non-Default Portion” shall have the meaning set forth in Section 4.2(h).

     “Partner Nonrecourse Debt” shall have the meaning set forth in
Section 5.3(c).

     “Partners” shall mean the General Partner and the Limited Partners.

     “Partnership” shall mean AvalonBay Value Added Fund, L.P.

     “Partnership Minimum Gain” shall have the meaning set forth in
Section 5.3(a).

     “Person” shall mean a corporation, association, retirement system,
international organization, joint venture, partnership, limited liability
company, trust or individual.

     “Placement Agent Fees” shall have the meaning set forth in Section 3.7.

     “Plan Asset Regulations” shall mean the regulations promulgated under ERISA
by the United States Department of Labor in 29 C.F. R. Part 2510.3-101, and any
successor regulations thereto.

     “Predecessor In Interest,” as to the Equity Interest of any Partner, shall
mean any Partner which was the prior holder of all or any portion of such Equity
Interest.

     “Preferred Return” shall mean an amount equal to ten percent (10%) per
annum, cumulative and compounded annually, of a Partner’s Unreturned Capital
Contributions, calculated as if all Partners were admitted on the Initial
Closing Date.

     “PSERS” shall mean the Commonwealth of Pennsylvania Public School
Employees’ Retirement System, in its capacity as a Limited Partner of the
Partnership.

     “Purchase Option” shall have the meaning set forth in Section 8.6(d).
 
 
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     “Redevelopment Fees” shall have the meaning set forth in Section 3.8(b).

     “Reimbursement Amount” shall mean AVB’s, or the applicable AVB Affiliate’s,
costs associated with the Warehoused Properties, including the cost of acquiring
such Warehoused Properties and other out-of-pocket costs associated with
acquiring, financing and carrying such Warehoused Properties and any expenses
advanced by AVB or such AVB Affiliate with respect to such Warehoused
Properties.

     “REIT” shall mean a real estate investment trust under Code Section 856.

     “REIT Share” shall mean a share of common stock, par value $.01 per share,
of the Company.

     “Removal” (or “Removed”) shall have the meaning set forth in
Section 8.4(a).

     “REOC Opinion” shall have the meaning set forth in Section 3.4.

     “Residual Value” shall have the meaning set forth in Section 5.1(c).

     “Return Account” for the Partners shall mean the sum of:

     (i) the aggregate Capital Contributions used to fund the Acquisition Costs
of all Investments that have been disposed of or otherwise subject to a
Disposition;

     (ii) the aggregate Capital Contributions used to pay expenses of the
Partnership, including, without limitation, expenses incurred under Sections 3.7
and 3.8 hereof; and

     (iii) any Net Loss from Writedowns.

     “Second Preferred Return” with respect to a Partner shall mean an amount
equal to fourteen percent (14%) per annum, cumulative and compounded annually,
of a Partner’s Second Unreturned Capital Contributions, calculated as if all
Partners were admitted on the Initial Closing Date.

     “Second Unreturned Capital Contributions” for any Partner shall mean, as of
any date, the aggregate amount of Capital Contributions less all distributions
received other than distributions of Preferred Return and Second Preferred
Return.

     “Securities Act” shall mean the Securities Act of 1933, as amended.

     “Stockholders” shall mean the stockholders of the Company.
 
 
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     “Strategic Investment” shall mean any direct or indirect, current or
contingent interest, option or commitment to acquire interests in
(i) multifamily apartment communities (located primarily in markets where AVB
owns and operates properties from time to time) through fee simple title or
otherwise; (ii) non-apartment community properties as part of a portfolio of
multifamily apartment communities; (iii) ancillary development opportunities
related to or in connection with multifamily apartment communities;
(iv) ancillary retail or office space related to or in connection with
multifamily apartment communities; (v) joint ventures or other entities that own
or operate any of the real property described in the preceding clauses
(i) through (iv); or (vi) indebtedness secured by any of the real property
described in the preceding clauses (i) through (iv), including, without
limitation, first mortgage debt, participating mortgages, mezzanine debt and
convertible debt.

     “Subject Insurance Payment” shall have the meaning set forth in
Section 3.2(d).

     “Subject Insurance Policy” shall have the meaning set forth in
Section 3.2(d).

     “Subsequent Closing” shall have the meaning set forth in Section 4.4(b).

     “Subscription Agreement” shall have the meaning set forth in Section 4.3.

     “Target Balance” shall mean, with respect to any Partner as of the close of
any period for which allocations are made under Section 5.2, the net amount such
Partner would receive (or be required to contribute or pay) in a hypothetical
liquidation of the Partnership as of the close of such period, assuming for
purposes of such hypothetical liquidation:

     (i) a sale of all of the assets of the Partnership at prices equal to their
then book values (as maintained by the Partnership for purposes of, and as
maintained pursuant to, the capital account maintenance provisions of Treasury
Regulations Sections 1.704-1(b)(2)(iv));

     (ii) the distribution of the net proceeds thereof to the Partners pursuant
to Section 5.6(a) and Section 5.6(e)(ii) after the payment of all actual
Partnership indebtedness, and any other liabilities related to the Partnership’s
assets, limited, in the case of non-recourse liabilities, to the collateral
securing or otherwise available to satisfy such liabilities (assuming for this
purpose that the General Partner exercises its discretion under
Section 5.6(e)(ii) to recover any Incentive Distributions paid to the Partners
under Section 5.6(e)(i));

     (iii) the return of Incentive Distributions by the General Partner to the
Partnership in accordance with Section 11.6; and

     (iv) the distribution of the amounts returned to the Partnership under
clause (iii) above to the Partners in accordance with Section 11.6.

     The net payment a Partner would receive (or have to make) shall also
reflect any payment it (or any of its affiliates) would have to make (or
receive) following such hypothetical liquidation under any agreement that is
treated as part of this Agreement for purposes of Treasury Regulations
Section 1.704-1(b)(2)(ii)(h).

     “Treasury Regulations” shall mean the regulations promulgated under the
Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
 
 
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     “Unrealized Investments” shall mean Investments (or portions thereof) that
have not been subject to a Disposition.

     “Unreturned Capital Contributions” for any Partner shall mean, as of any
date, the aggregate amount of Capital Contributions less all distributions
received other than distributions of Preferred Return.

     “VCOC Opinion” shall have the meaning set forth in Section 3.4.

     “Voluntary Withdrawal” shall have the meaning set forth in Section 8.2.

     “Voting Interest” shall mean, with respect to any Partner(s) entitled to
vote or otherwise participate with respect to a matter, the ratio which the
Capital Commitment(s) of such Partner(s) voting in favor of the matter with
respect to which such vote is being taken bears to the aggregate Capital
Commitments of all Partners entitled to vote or otherwise participate with
respect to such matter, expressed as a percentage. Notwithstanding any other
provision of this Agreement to the contrary, whenever the Company has the right
to vote on or approve any matter in its capacity as a Limited Partner, the
Company’s vote or approval shall be cast in accordance with Section 3.5 hereof.

     “Warehoused Properties” shall mean properties acquired by AVB or an AVB
Affiliate subsequent to January 1, 2004 and held directly or indirectly by the
Partnership immediately prior to the Initial Closing Date (excluding any
properties with respect to which AVB or an AVB Affiliate had, prior to
January 1, 2004, an option to purchase or had entered into a binding agreement
giving it the right to acquire such properties).

     “Withdrawal” (or “Withdrawn” or “Withdraws”) shall have the meaning set
forth in Section 8.5.

2.      Formation of Limited Partnership

     2.1 Organization. The Partnership has been formed by the filing of the
certificate of limited partnership (as it may be amended or restated from time
to time, the “ Certificate ”) for the Partnership required under the Delaware
Revised Uniform Limited Partnership Act (as in effect from time to time, the “
Act ”), with the Delaware Secretary of State pursuant to the Act. Without the
consent or approval of any Limited Partner, the Certificate may be restated by
the General Partner as provided in the Act or amended by the General Partner to
change the address of the office of the Partnership in Delaware or the name and
address of its resident agent in Delaware or to make corrections required by the
Act. The General Partner shall deliver a copy of the Certificate and any
amendment thereto to any Partner who so requests.

     2.2 Partnership Name. The name of the Partnership shall be “AvalonBay Value
Added Fund, L.P.” All business of the Partnership shall be conducted under the
Partnership name.
 
 
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     2.3 Purposes and Business. Subject to any limitations contained herein, the
purpose of the Partnership is to acquire, improve, develop, lease, maintain,
own, operate, manage, mortgage, hold, sell, exchange and otherwise deal in and
with Strategic Investments, to acquire, hold and dispose of Interim Investments,
and to engage in any other activities necessary or related or incidental
thereto; provided, however, that such business shall be conducted in such a
manner as the General Partner reasonably believes will permit the Company to be
classified as a REIT beginning with its taxable year ending December 31, 2005,
unless the Board of Directors and the Stockholders determine pursuant to the
Charter that it is no longer in the best interests of the Company to continue to
qualify as a REIT. In connection with the foregoing, and without limiting the
Company’s right, in its sole discretion, to cease to qualify as a REIT, the
Partners acknowledge that the Company’s status as a REIT inures to the benefit
of all of the Partners and not solely the Company.

     2.4 Principal Business Office, Registered Office and Registered Agent. The
principal business office of the Partnership shall be located at 2900 Eisenhower
Avenue, Suite 300, Alexandria, Virginia 22314-5223. The principal business
office of the Partnership may be changed from time to time by the General
Partner. The General Partner shall promptly notify the Limited Partners of any
change in such principal business office. The registered office of the
Partnership in the State of Delaware shall be c/o The Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801. The
agent for service of process on the Partnership pursuant to the Act shall be The
Corporation Trust Company, Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware 19801. The registered agent and registered office of the
Partnership may be changed by the General Partner from time to time. The General
Partner shall promptly notify the Limited Partners of any such change.

     2.5 Qualification in Other Jurisdictions. The General Partner shall cause
the Partnership to be qualified or registered under applicable laws in such
states as may be appropriate to avoid any material adverse effect on the
business of the Partnership and shall be authorized to execute, deliver and file
any certificates and documents necessary to effect such qualification or
registration, including without limitation the appointment of agents for service
of process in such jurisdictions.

     2.6 Powers. In furtherance of its purposes, but subject to all of the
provisions of this Agreement, the Partnership shall have and may exercise all of
the powers and rights which can be conferred upon limited partnerships formed
pursuant to the Act; provided, however, that the Partnership shall not take any
action which, in the judgment of the General Partner could reasonably be
anticipated to adversely affect the ability of the Company to continue to
qualify as a REIT beginning with its taxable year ending December 31, 2005
(including by reason of the Partnership being taxable as a corporation pursuant
to Code Section 7701 or Section 7704), unless the Board of Directors and the
Stockholders determine pursuant to the Charter that it is no longer in the best
interests of the Company to continue to qualify as a REIT.
 
 
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3.      Authority of the General Partner

     3.1 General Authority. Except as expressly limited by the provisions of
this Agreement, the General Partner shall have complete and exclusive discretion
in the management and control of the affairs and business of the Partnership and
shall have all powers necessary, convenient or appropriate to carry out the
purposes, conduct the business and exercise the powers of the Partnership.
Except as so expressly limited, the General Partner shall possess and enjoy with
respect to the Partnership all of the rights and powers of a partner of a
partnership without limited partners to the extent permitted by Delaware law.
The Partnership hereby irrevocably delegates to the General Partner, without
limitation, the power and authority to act on behalf of and in the name of the
Partnership, without obtaining the consent of or consulting with any other
Person, to take any and all actions on behalf of the Partnership set forth in
this Agreement, including, without limitation, in Section 2.6 hereof. The
General Partner, to the extent of its powers set forth herein, is an agent of
the Partnership for the purpose of the Partnership’s business and the actions of
the General Partner taken in accordance with such powers shall bind the
Partnership.

     3.2 Authority for Specific Actions. Subject to Section 3.3 and such other
limitations expressly provided by this Agreement, the General Partner is
authorized to take the actions listed below in this Section 3.2 on behalf of the
Partnership. This Section 3.2 is intended as an amplification of and not a
limitation of the authority granted to the General Partner under Section 3.1.

     (a) To borrow money from sellers of property or from banks or other lending
institutions or the commercial paper market or otherwise to procure extensions
of credit for the Partnership, including at the discretion of the General
Partner, to issue instruments evidencing indebtedness or other debt obligations
(including, without limitation, mortgages) and, if security is required
therefore, to pledge, hypothecate, mortgage, assign, transfer and grant a
security interest in the Strategic Investments, Capital Commitments and other
assets of the Partnership, including, without limitation, the Partners’
Subscription Agreements (provided, however, that in no event shall any such
pledge obligate any Partner to make any payments in excess of the sum of such
Partner’s uncontributed Capital Commitment); and in connection with any of the
foregoing to execute, seal, acknowledge and deliver promissory notes,
guarantees, mortgages, security and other agreements, assignments and any other
written documents, to request any AVB Affiliate to guaranty or otherwise provide
security for any Partnership Indebtedness, and to prepay in whole or in part,
refinance, recast, increase, modify or extend any such debt affecting any of the
assets of the Partnership and in connection therewith to execute any extensions
or renewals of any such debt and/or any other loans;

     (b) To borrow funds to make Strategic Investments or to obtain working
capital or to otherwise leverage the Partnership’s assets through the issuance
of mortgage-backed securities or preferred equity interests;

     (c) To hold assets of the Partnership in the name of one or more trustees,
nominees, other agents or directly or indirectly through one or more entities
owned in whole or in part directly or indirectly by the Partnership;
 
 
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     (d) To maintain such insurance as the General Partner may deem appropriate
to protect the assets and interests of the Partnership and Indemnified Parties
and to satisfy any contractual undertakings of the Partnership; provided, that,
in the event that an Indemnified Party receives an insurance payment (the “
Subject Insurance Payment ”) under any insurance policy (the “ Subject Insurance
Policy ”) maintained by the Partnership with respect to any losses, liabilities,
damages and/or expenses incurred by such Indemnified Party for any act or
omission related to the performance of such Indemnified Party’s duties under the
Partnership Agreement for which the Indemnified Party is not entitled to
indemnification from the Partnership pursuant to Section 3.11 of the Partnership
Agreement, the General Partner shall reimburse the Partnership for an amount
equal to the product of (i) the ratio of (x) the Subject Insurance Payment to
(y) all insurance payments made under the Subject Insurance Policy in the year
in which the Subject Insurance Payment is made and (ii) the premium of the
Subject Insurance Policy for the year in which the Subject Insurance Payment is
made.

     (e) To establish reserves for any Partnership purposes and to fund such
reserves with any Partnership assets or borrowed funds;

     (f) To enter into property management, servicing and special servicing or
other service provider arrangements with respect to any asset of the
Partnership, including, without limitation, agreements that provide for
incentive compensation;

     (g) To enter into transactions with AVB or one or more AVB Affiliates for
the purchase or sale of assets, provided that all such purchases or sales
(excluding the sale or contribution of Warehoused Properties pursuant to
Sections 3.16 and 5.1(c) and the acquisition of Strategic Investments by the
General Partner pursuant to Section 8.6(d)) have been approved by the Limited
Partners representing one-hundred percent (100%) of the Voting Interest of the
Limited Partners, excluding from the vote any Limited Partner that is an AVB
Affiliate so long as the General Partner is an AVB Affiliate;

     (h) To create one or more entities to hold any assets of the Partnership,
acquire Equity Interests in the Partnership or for any other Partnership
purpose, and to hold or distribute to the Partners any interest in such
entities, provided that any such entity preserves the limited liability of the
Limited Partners. The General Partner may have management rights in any such
entities, but may not have financial interests in any such entities other than
in its capacity as a Partner in the Partnership. The purpose of this provision
is to allow the General Partner to invest capital contributed by the Partnership
through parallel partnerships or other arrangements when the General Partner
deems such arrangements to be appropriate to minimize taxes, comply with
regulatory requirements, structure transactions so as to avoid the application
of taxes or regulatory requirements or otherwise as the General Partner deems
appropriate; and

     (i) Subject to Section 6.2, to determine and establish the procedures to be
utilized in the preparation of the current value financial statements of the
Partnership described in Sections 12.3 and 12.4 of this Agreement.

     (j) At anytime during the term of the Partnership after the earlier of
(i) the date on which the Partnership has made Contribution Calls with respect
to all of the Capital Commitments of the Partners as set forth on
Schedule A  hereto or (ii) the expiration or termination of the Investment
Period, to borrow funds (on a secured or unsecured basis) from AVB or an AVB
Affiliate at an interest rate equal to the then current prime rate as published
by the Wall Street Journal plus one percent (1%) per annum in order to (x) fund
capital improvements and other expenditures and investments with respect to
existing Strategic Investments or (y) pay property-level expenses.
 
 
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     3.3 Investment Restrictions.

     (a) The following restrictions shall be applicable to the Partnership
unless waived, with respect to a particular Investment by either (i) two-thirds
of the members of the Advisory Committee, or (ii) the Limited Partners
representing a Voting Interest of the Limited Partners in excess of fifty
percent (50%), excluding from such vote any Limited Partner that is an AVB
Affiliate so long as the General Partner is an AVB Affiliate:

     (i) The Partnership shall not make any Strategic Investment in any publicly
traded security of an issuer in connection with any merger, tender or exchange
offer, business combination, restructuring, recapitalization or similar
transaction to or with such issuer if a majority of the board of directors of
such issuer is opposed to such transaction.

     (ii) Following the Final Closing Date and prior to the expiration of the
Investment Period, the Partnership shall not incur, directly or indirectly,
Indebtedness if, immediately after giving effect to the incurrence of such
Indebtedness, the aggregate Indebtedness of the Partnership would exceed
sixty-five percent (65%) of the aggregate Acquisition Costs at such time
(including for purposes of this Section 3.3(ii) any Acquisition Costs paid with
indebtedness incurred or assumed by the Partnership). Following the expiration
of the Investment Period, the Partnership shall not incur, directly or
indirectly, Indebtedness if, immediately after giving effect to the incurrence
of such Indebtedness, the aggregate Indebtedness of the Partnership would exceed
sixty-five percent (65%) of the aggregate fair value market of the Strategic
Investments as determined in accordance with Section 12.3. For purposes of this
Section 3.3(a)(ii), Indebtedness shall not include (x) any amount outstanding
under any line of credit established for the benefit of the Partnership and/or
the Company or (y) any amount borrowed from AVB or an AVB Affiliate pursuant to
Section 3.2(j).

     (iii) The Partnership shall not invest in any new development at existing
apartment communities that have ancillary ground-up development opportunities if
the total capital invested in such development opportunities is, at the time of
such investment, projected to represent more than fifteen percent (15%) of the
Partnership’s projected aggregate capitalization, consisting of the aggregate
Capital Commitments (whether or not contributed) and the aggregate Indebtedness
available to the Partnership under any debt instruments (whether or not such
Indebtedness has been drawn).

     (iv) The Partnership shall not invest in a portfolio of properties if more
than fifteen percent (15%) of such portfolio’s aggregate net operating income
is, at the time of such investment, projected to be attributable to
non-apartment community properties that are a part of such portfolio.

     (v) Immediately following the termination of the Investment Period, the
aggregate capital invested by the Partnership in Strategic Investments located
in any one of AVB’s sixteen (16) markets as of the date of this Agreement (or
any other markets in which the Partnership owns and operates properties from
time to time) shall not exceed thirty-five percent (35%) of the amount obtained
by dividing the aggregate Capital Commitments by 0.35.
 
 
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     (vi) The Partnership and the General Partner shall not invest in any real
estate properties located outside of the United States.

     (vii) In the event that the Partnership borrows under any credit facility
secured by the Capital Commitments of the Partners, as described in
Section 4.1(d) below, no individual borrowing under such credit facility shall
be outstanding for a period exceeding twelve (12) months. The foregoing however
is not intended to prohibit the term of any such credit facility as a whole from
exceeding twelve (12) months.

     (b) The Partnership shall use its best efforts to ensure that the Company
will qualify for taxation as a REIT for each taxable year commencing with its
taxable year ending December 31, 2005, in accordance with Section 3.6 of this
Agreement.

     (c) The Partnership shall not take any action that the General Partner
reasonably believes would be likely to prevent the Company from maintaining its
status as a “venture capital operating company” (as defined in the Plan Asset
Regulations).

     (d) No Capital Commitments may be drawn, and no Partnership capital may be
invested in any Strategic Investment, prior to the first date on which the
Partnership will qualify as a “real estate operating company,” as such terms are
defined in the Plan Asset Regulations; provided, however that the foregoing
restriction shall not preclude the Partnership from making refundable deposits
or other short-term investments prior to such date.

     3.4 ERISA Matters. The Partnership shall use its best efforts to conduct
its affairs so as to qualify as a “real estate operating company” as defined in
the Plan Asset Regulations. For purposes of determining that the Partnership so
qualifies, the annual valuation period of the Partnership for purposes of the
Plan Asset Regulations shall be the ninety (90) day period commencing on each
anniversary of the date on which the Partnership makes its first Investment
(other than a short-term investment pending long-term commitment).
Simultaneously with the date of the closing of such first Investment by the
Partnership and, thereafter, prior to the expiration of each annual valuation
period, the Partnership shall obtain an opinion from counsel to the Partnership
as to whether the Partnership qualifies as a “real estate operating company” (a
“ REOC Opinion ”), and the Company shall obtain an opinion from counsel to the
Company as to whether the Company qualifies as a “venture capital operating
company” as defined in the Plan Asset Regulations (a “ VCOC Opinion ”). Within
ten (10) days after obtaining a REOC Opinion or a VCOC Opinion, the General
Partner shall mail a copy of such REOC Opinion or VCOC Opinion to each Limited
Partner and Stockholder that is subject to ERISA.
 
 
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     3.5 Company Actions and Voting. In the event that any matter is submitted
to the Company for its consideration as a Limited Partner of the Partnership
pursuant to the terms of this Agreement, the Company shall deliver a request in
writing to each Stockholder of the Company, at least ten (10) business days
prior to the date on which such matter shall be considered, asking each
Stockholder of the Company to provide written direction with respect to the
Company’s vote in such matter, and the Board of Directors of the Company will
cause the Company, in its capacity as a Limited Partner of the Partnership, to
grant or withhold the consent or approval of the Company as such Limited
Partner, and with respect to such matter, as follows: (i) if a Stockholder of
the Company directs the Company to vote in favor of such matter, the Company
shall vote its percentage interest as a Limited Partner that corresponds to such
stockholder’s percentage interest of the Company in favor of such matter;
(ii) if a Stockholder of the Company directs the Company to vote against such
matter, the Company shall vote its percentage interest as a Limited Partner that
corresponds to such Stockholder’s percentage interest of the Company against
such matter; and (iii) if a Stockholder abstains with respect to such matter or
the Company does not receive written direction from a Stockholder with respect
to such matter at the location specified in the foregoing request at least one
(1) business day prior to date on which such matter shall be considered, the
Company shall vote its percentage interest as a Limited Partner that corresponds
to such Stockholder’s percentage interest of the Company in accordance with the
direction provided by the Company’s Board of Directors in its sole and absolute
discretion. Notwithstanding any other provision of this Agreement, for purposes
of calculating the Voting Interest of the Partners that is required or that has
been obtained for any matter, if the vote of AVB Affiliates is excluded from
voting on such matter pursuant to this Agreement, then the REIT Shares held by
any AVB Affiliate will be voted in the same proportion as the votes of the other
Stockholders with respect to such matter. For purposes of this Section 3.5, a
written consent in lieu of meeting of the Stockholders or a vote of the
Stockholders taken at a meeting of the Stockholders duly called and held in
accordance with the Company’s Bylaws and Charter shall each be deemed to
constitute a written direction with respect to the Company’s vote on a matter in
its capacity as a Limited Partner.

     3.6 Stockholder Rights; REIT Matters. The Partnership and the General
Partner shall use their best efforts to ensure that no action taken by the
Partnership shall cause the rights of Stockholders to differ in a materially
adverse manner from the rights which may be given to Limited Partners under this
Agreement. The Partnership and the General Partner shall use their best efforts
to maintain the status of the Company as a REIT commencing with its taxable year
ending December 31, 2005, except and to the extent that the requirements of this
Section 3.6 with respect to a particular Investment or other activity of the
Partnership are specifically waived by the Board of Directors and Stockholders
that hold in the aggregate REIT Shares representing at least seventy-five
percent (75%) of all the outstanding REIT Shares at the time of such waiver. The
General Partner may cause the Partnership to take such action (or refrain from
taking such action) as may be reasonably necessary to preserve AVB’s status as a
REIT. The preceding two sentences shall not, however, have the effect of
overriding any provision of Article 5 hereof and shall not otherwise adversely
affect the allocations and distributions provided for in this Agreement. Any
action of the General Partner to enforce or otherwise cause the Partnership to
comply with the provisions of this Section shall not be deemed to be a breach of
any fiduciary duty otherwise owed to the Partners and shall not require the
approval of any Limited Partner or the Advisory Committee.

     3.7 Expense Reimbursement. The Partnership shall reimburse the General
Partner or any AVB Affiliate for the following (to the extent not directly paid
by the Partnership):

     (a) all Formation Expenses incurred on behalf of the Partnership and the
Company, up to an aggregate maximum reimbursement equal to one million dollars
($1,000,000);
 
 
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     (b) the charges and expenses of maintaining the Partnership’s and the
Company’s bank accounts or of any banks, custodians or depositories appointed
for the safekeeping of the Interim Investments or other property of the
Partnership, including the costs of bookkeeping and accounting services;

     (c) all costs incurred by the General Partner or any AVB Affiliate in
connection with providing the services of development, construction,
reconstruction, accounting and budgeting professionals for the Partnership’s
projects (which professionals may include employees of the General Partner or
any AVB Affiliate, provided that the terms of such services are no less
favorable than those that would be obtained from an unaffiliated third party)
including, without limitation, the compensation expenses and overhead for such
professionals corresponding to the portion of their business time spent on such
projects for the Partnership;

     (d) the Reimbursement Amount with respect to the Warehoused Properties as
provided in Sections 3.16 and 5.1(c); and

     (e) all other expenses not specifically provided for in this Section 3.7
which are reasonably incurred by the General Partner or any AVB Affiliate in
connection with operating the Partnership, any entity organized pursuant to
Section 3.2(h) for the purpose of holding Partnership assets or the Company, or
performing the duties of the General Partner under this Agreement, including,
without limitation, (i) travel costs, fees and other out-of-pocket expenses
related to a specific investment or proposed investment, (ii) auditor and
counsel fees, (iii) taxes, (iv) insurance, (v) litigation expenses, and
(vi) expenses associated with preparing and distributing reports to investors
pursuant to Section 12 of this Agreement (but specifically excluding (x) office
overhead of the General Partner, (y) compensation of the General Partner’s
employees except as provided in clause (c) above, or (z) travel expenses of the
General Partner’s employees that are not related to a specific Investment or
proposed Investment).

In addition to the foregoing, if any AVB Affiliate guaranties or otherwise
provides security for any Indebtedness of the Partnership (including, without
limitation, acting as a guarantor with respect to environmental liabilities and
other customary “bad boy” recourse carveouts), then (i) the Partnership shall
reimburse such AVB Affiliate for all expenses or other amounts incurred or paid
by such AVB Affiliate in connection with any such guaranty or security, provided
that no AVB Affiliate shall be reimbursed for any liabilities, obligations or
other amounts paid by it pursuant hereto that are finally adjudicated by a court
of competent jurisdiction to have resulted from such AVB Affiliate’s gross
negligence, fraud or willful misconduct, and (ii) the General Partner shall
cause the Partnership to make any such reimbursement payment in preference to
any other obligation of the Partnership.

All Formation Expenses in excess of one million dollars ($1,000,000) shall be
paid by the General Partner and shall not be reimbursed by the Partnership. All
fees and expenses of placement agents incurred by the Partnership in connection
with the offering or sale of interests in the Partnership on or before the Final
Closing Date (the “ Placement Agent Fees ”), including, without limitation, the
Placement Agent Fees due to Morgan Stanley & Co. Incorporated shall be paid by
the General Partner and shall not be reimbursed pursuant to this Section 3.7.
The Partnership shall reimburse the Company for all costs, expenses and
liabilities paid by the Company.
 
 
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     3.8 Management Fees.

     (a) Commencing with the Initial Closing Date, the General Partner shall be
paid a quarterly asset management fee (the “ Management Fee ”) by the
Partnership. The Management Fee shall be paid by the Partnership quarterly in
arrears from the Initial Closing Date as follows:

     (i) During the period from Initial Closing Date to the Final Closing Date,
and after the termination of the Investment Period, the Management Fee for each
calendar quarter shall equal one-fourth (1/4) of one and one-quarter percent
(1.25%) of the difference between (x) the aggregate Capital Contributions of all
of the Partners and (y) the aggregate Capital Contributions of all of the
Partners used to fund Strategic Investments which have been disposed of (or have
been written off such that the General Partner is not providing any, or is
providing an insignificant amount of, management activities with respect to such
Strategic Investments ) as of such date.

     (ii) From the Final Closing until and including the termination of the
Investment Period, the Management Fee for each calendar quarter shall equal
one-fourth (1/4) of one and one-quarter percent (1.25%) of the aggregate Capital
Commitments of all of the Partners.

     (iii) The Management Fee shall be pro rated for any period less than a
calendar quarter based on the number of days during such period.

     (b) At the election of the General Partner, the Partnership may retain the
General Partner or an AVB Affiliate to provide property management and
redevelopment services on behalf of the Partnership in the ordinary course of
business for the following fees, payable on a monthly basis:

     (i) Property Management: 3.75% of gross revenues of the managed properties
plus reimbursement of all reasonable direct costs, including any leasing
commissions to third parties and tenant improvements, incurred by the General
Partner or the AVB Affiliate providing such services; and

     (ii) Redevelopment: 10% of total project costs (including allocated general
conditions) plus reimbursement of all reasonable direct costs incurred by the
General Partner or the AVB Affiliate providing such services (the “
Redevelopment Fees ”).

The Partnership may also retain the General Partner or an AVB Affiliate to
provide development services on behalf of the Partnership with respect to any
ancillary ground-up development at Strategic Investments, subject to
Section 3.3(a)(iii), on terms consistent with those which could be obtained from
an unaffiliated third party service provider and which are approved by the
Advisory Committee, which approval shall not be unreasonably withheld (the “
Development Fees ”). The General Partner or the AVB Affiliate providing any of
the foregoing services shall be entitled to indemnification and exculpation with
respect to any losses, liabilities, damages or expenses incurred by such entity
in connection with such property management, development and redevelopment
services to the same extent that indemnification and exculpation are provided to
Indemnified Parties pursuant to Sections 3.10 and 3.11 hereof. The rights of the
General Partner or an AVB Affiliate to provide the services set forth in this
Section 3.8(b) will terminate upon a Removal of the General Partner.
 
 
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     3.9 Other Permitted Business.

     (a) Except as otherwise limited by this Agreement, the General Partner and
any AVB Affiliate may engage independently or with others in other business
ventures of every nature and description, including, without limitation, the
rendering of advice or services of any kind to other investors and the making or
management of other investments and serving as a general partner of or otherwise
operating any public or private real estate partnerships. Nothing in this
Agreement, except as provided in Section 3.9(b), shall be deemed to prohibit the
General Partner or any AVB Affiliate from dealing or otherwise engaging in
business with Persons transacting business with the Partnership or from
providing services relating to the purchase, sale, financing, management,
development or operation of real property or other assets of the type included
within the definition of Strategic Investments and receiving compensation
therefor. Neither the Partnership nor any Partner shall have any right by virtue
of this Agreement or the partnership relationship created hereby in or to such
other ventures or activities or to the income or proceeds derived therefrom, and
the pursuit of such ventures shall not be deemed wrongful or improper. The
Limited Partners hereby acknowledge that AVB is a publicly traded corporation
and, as such, AVB and its directors and officers owe a fiduciary duty to the
holders of shares of capital stock of AVB.

     (b) Following the Initial Closing, no AVB Affiliate or the Company (other
than on behalf of the Partnership and any other Co-Investment Entity) will form
an investment fund with investment objectives substantially similar to the
Partnership, until the earlier of:

     (i) the first date on which an amount equal to eighty percent (80%) of the
Partnership’s Capital Commitments has been invested, committed for investment or
used to pay expenses by the Partnership; or

    (ii) the expiration of the Investment Period.

In the event that AVB or an AVB Affiliate forms such an investment fund prior to
the expiration of the Investment Period, the Partnership will have first
priority to any investment which qualifies as a Strategic Investment, to the
extent that the Partnership has the financial capacity to make such investment.
Notwithstanding the foregoing, AVB Affiliates will be permitted at any time to
manage and make any existing or future investments managed or made by any AVB
Affiliate in connection with or on behalf of other funds and accounts managed,
ventures entered into and assets acquired (or committed to be acquired) by any
AVB Affiliate prior to the Initial Closing Date, or in connection with any
additional investments managed or made by any AVB Affiliate during any period of
time that the exclusivity provisions described above are not in effect.

     (c) Subject to Section 3.9(d), following the Initial Closing, no AVB
Affiliate will make any investment which would be a Strategic Investment that
the Partnership would otherwise be permitted to make pursuant to the terms of
this Agreement, until the earlier of:
 
 
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     (i) the first date on which an amount equal to eighty percent (80%) of the
Partnership’s Capital Commitments have been invested, committed for investment
or used to pay expenses by the Partnership; or

    (ii) the expiration of the Investment Period.

     (d) Section 3.9(c) notwithstanding, an AVB Affiliate may invest in the
following at any time:

     (i) properties that, at the time a commitment to acquire the property is
made, have not yet started construction or construction is not expected to be
completed for at least six (6) months thereafter;

     (ii) properties acquired in tax-deferred transactions, including, without
limitation, properties acquired in exchange for “down REIT units” and
transactions intended to qualify for non-recognition under Section 1031 of the
Code;

    (iii) an individual property with an aggregate purchase price in excess of
one hundred million dollars ($100,000,000) or a portfolio of properties in a
single state, the District of Columbia or a geographic region with an aggregate
purchase price in excess of two hundred fifty million dollars ($250,000,000);

    (iv) properties with respect to which AVB or an AVB Affiliate had prior to
January 1, 2004, an option to purchase or had entered into a binding agreement
giving it the right to acquire such properties; and

     (v) any investment which the General Partner has decided not to make or
pursue for the Partnership based on the reasonable good faith determination
(which determination shall be binding on the Partnership) that such investment
is inappropriate or inadvisable for the Partnership, whether due to capacity,
diversification, rate of return objectives, seller’s tax objectives or other
considerations; provided that to the extent the General Partner reasonably
determines in good faith that it is desirable for the Partnership to make some
but not all of a particular investment, then the Partnership may make such
investment to such extent and the General Partner or another AVB affiliate
(alone or with other investors) may co-invest with the Partnership in such
investment on a side-by-side basis on terms no more favorable than those
applicable to the Partnership in respect of the investment.

     3.10 Exculpation. Neither the General Partner, the members of the Advisory
Committee, the members of the Investment Committee, the Company, AVB, any AVB
Affiliate, nor any principal, heir, executor, administrator, member,
stockholder, manager, partner, director, officer, agent, employer, employee,
successor or assign of any of the foregoing (including any person who serves at
the request of the General Partner as a director, officer, manager, partner,
employee or agent of another entity in which the Partnership has an interest as
a security holder, creditor or otherwise) (each an “ Indemnified Party ”) shall
have any liability to the Company, the Partnership, any Stockholder or any
Partner for any loss suffered by the Company, the Partnership, any Stockholder
or any Partner which arises out of any action or inaction of an Indemnified
Party, provided that for any Indemnified Party other than a member of the
Advisory Committee, such exculpation shall not apply to any action or inaction
of such Indemnified Party that constitutes fraud, gross negligence or willful
misconduct of such Indemnified Party in connection with the performance of its
duties under this Agreement.
 
 
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     3.11 Indemnification. Subject to the limitations contained in this
Section 3.11, the Partnership shall indemnify each Indemnified Party against all
losses, liabilities, damages and expenses incurred by such Indemnified Party for
any act or omission related to the performance of its duties under this
Agreement or otherwise taken on behalf of the Partnership or in furtherance of
its business. Such indemnity shall cover, without implied limitation, judgments,
settlements, fines, penalties, counsel fees and all other expenses reasonably
incurred in connection with the defense or disposition of any action, suit or
other proceeding, whether civil or criminal, before or threatened to be brought
before any court or administrative body, in which an Indemnified Party may be or
may have been involved as a party or otherwise, or with which it may have been
threatened, by reason of being or having been an Indemnified Party, or by reason
of any act or omission on behalf of the Partnership or in furtherance of its
business; provided, however, that an Indemnified Party shall not be entitled to
indemnification pursuant to this Section 3.11 with respect to any matter as to
which such Indemnified Party shall have been finally adjudicated in any such
action, suit or other proceeding, or otherwise by a court of competent
jurisdiction, to have committed an act or omission that constitutes fraud or
willful misconduct on the part of such Indemnified Party (or gross negligence in
the case of all Indemnified Parties other than members of the Advisory
Committee) in connection with the performance of its duties under this
Agreement. The right of indemnification provided hereby shall not be exclusive
of, and shall not affect, any other rights to which any Indemnified Party may be
entitled and nothing contained in this Section 3.11 shall limit any lawful
rights to indemnification existing independently of this Section 3.11.
Notwithstanding anything to the contrary in this Agreement, to the extent that,
at law or in equity, a Partner or Advisory Committee member has duties
(including fiduciary duties) and liabilities relating thereto to the
Partnership, any Partner or any other Person, such Partner or Advisory Committee
member acting under this Agreement shall not be liable to the Partnership, any
Partner or any other Person for breach of fiduciary duty for its good faith
reliance on the provisions of this Agreement, and the provisions of this
Agreement, to the extent that they restrict the duties (including fiduciary
duties) and liability of a Partner or Advisory Committee member otherwise
existing at law or in equity, are agreed by each Partner to replace such other
duties and liabilities of such Partner or Advisory Committee member.

     3.12 Payment of Indemnification Expenses. Prior to any final disposition of
any claim or proceeding with respect to which any Indemnified Party may be
entitled to indemnification hereunder, at the discretion of the General Partner
the Partnership may pay to the Indemnified Party, in advance of such final
disposition, an amount equal to all expenses of said Indemnified Party
reasonably incurred in the defense of said claim or proceeding so long as the
Partnership has received a written undertaking of said Indemnified Party to
repay to the Partnership the amount so advanced if it shall be finally
determined that said Indemnified Party was not entitled to indemnification
hereunder. Any Person entitled to indemnification hereunder shall first seek
recovery under any insurance policies of the Partnership by which such Person is
covered prior to such Person receiving any indemnification payment from the
Partnership. To the extent that the Partnership makes any payments to an
Indemnified Party for any indemnification claim (including advances) hereunder,
if the Indemnified Party has no continuing liability with respect to any claim
or proceeding with respect to which such Indemnified Party may be entitled to
indemnification hereunder, the Partnership shall be subrogated to the extent of
such payment to any rights which the Indemnified Party may have to receive
indemnification payments (including payments under any insurance policies of the
Partnership) from other Persons with respect to the subject matter underlying
such indemnification claim.
 
 
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     3.13 Partnership Classification. The Partnership and the General Partner
shall use their best efforts to assure that the Partnership will be treated for
federal income tax purposes as a partnership and not as an association or
publicly traded partnership taxable as a corporation. The Partnership shall not
elect to be treated other than as a partnership for federal income tax purposes.

     3.14 Reliance by Third Parties. Any contract, instrument or act of the
General Partner on behalf of the Partnership shall be conclusive evidence in
favor of any third party dealing with the Partnership that the General Partner
has the authority, power, and right to execute and deliver such contract or
instrument and to take such action on behalf of the Partnership. This Section
3.14 shall not be deemed to limit the liabilities and obligations of the General
Partner as set forth in this Agreement.

     3.15 Co-Investment Entities. To address specific tax issues or other
regulatory concerns, the General Partner may form one or more co-investment
entities (together with the Partnership, the “ Co-Investment Entities ”). It is
the intent of the Partners that each Co-Investment Entity participate in the
same Strategic Investments on the same terms as if all of the Co-Investment
Entities were investing through a single partnership, subject to any specific
investment limitations applicable to any such fund. Whenever the General Partner
determines that a particular Strategic Investment opportunity is appropriate for
the Co-Investment Entities, all of the Co-Investment Entities shall invest in
such Strategic Investment opportunity on a pro rata basis in accordance with the
ratio of the respective capital commitments of such funds that are available for
that Strategic Investment at that time, subject to the maximum investment amount
deemed appropriate by the general partner or manager of each Co-Investment
Entity and subject to any specific investment limitations applicable to any such
Co-Investment Entity. Whenever the General Partner determines that a particular
Strategic Investment should be disposed of by the Co-Investment Entities, all of
the Co-Investment Entities will dispose of such Strategic Investment at the same
time and on the same terms, subject to any specific structuring requirements
that are necessary to achieve tax or regulatory objectives.

     3.16 Warehoused Properties. In connection with the first Contribution Call
following the Initial Closing, and in any event prior to the earlier of the end
of the first calendar quarter in which the Initial Closing occurs and the date
of the first Subsequent Closing, the Partnership shall pay the Reimbursement
Amount to the General Partner. The General Partner’s obligation to fund its
share of such Contribution Call and the AVB Stockholder’s obligation to purchase
REIT Shares in connection with such Contribution Call shall be deemed satisfied
by offset against such Reimbursement Amount (i.e., so that the net cash received
by the General Partner is the Reimbursement Amount net of such contribution
obligations). The portion of the Company’s obligation as a Limited Partner to
fund such Contribution Call which corresponds to the AVB Stockholder’s interest
in the Company shall be deemed satisfied by the in-kind Capital Contribution of
a portion of the Warehoused Properties as described in Section 5.1(c). For
purposes of determining the Partners’ Capital Accounts, Capital Contributions
and distributions, the General Partner’s right to the Reimbursement Amount, the
payment thereof and the offset thereof against the General Partner and the
Company’s direct or indirect share of such Contribution Call shall be treated as
provided in Section 5.1(c). Following the Initial Closing Date, the General
Partner, in its discretion, may cause the Partnership to replace AVB as the
guarantor under any Indebtedness on the Warehoused Properties.
 
 
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4.     Capital Commitments and Contributions

     4.1 Payment of Capital Contributions.

     (a) Each Partner agrees to pay to the Partnership an aggregate amount in
cash equal to its Capital Commitment, as set forth in Schedule A  hereto;
provided that the General Partner shall be entitled to pay the Capital
Commitment with respect to its Partnership interest in cash and/or Warehoused
Properties pursuant to Sections 3.16 and 5.1(c) hereof. The total aggregate
Capital Commitments of all Partners shall not exceed three hundred and thirty
million dollars ($330,000,000). All or any portion of each Partner’s Capital
Commitment shall be payable upon not less than ten (10) business days prior
written notice from the General Partner (each, a “ Contribution Call ”) in
accordance with Section 4.1(b) below. Except as otherwise provided below in this
Section 4.1, no Contribution Calls shall be made after the expiration of the
Investment Period. Contribution Calls may be made at any time after the
expiration of the Investment Period for the purpose of (w) paying amounts owing
or that come due under any credit facility obtained by the Partnership, to the
extent secured by such Capital Commitment, regardless of whether such borrowing
occurred before or after the expiration of the Investment Period, provided that
no such borrowing shall occur after the expiration of the Investment Period for
the purpose of making Strategic Investments after the end of the Investment
Period unless prior to the expiration of the Investment Period the Partnership
has entered into a written letter of intent, written agreement in principal or
written definitive agreement to make such Strategic Investment, (x) paying
amounts to satisfy obligations of the Company or the Partnership under any
guarantees, indemnities, covenants or other obligations existing prior to the
expiration of the Investment Period, (y) funding investments in Strategic
Investments with respect to which the Partnership has entered into a written
letter of intent, written agreement in principle or written definitive agreement
to invest prior to the expiration of the Investment Period or (z) enabling the
Partnership to acquire a Defaulting Partner’s Defaulted Interest pursuant to
Section 4.2(b) below. Contribution Calls also may be made at any time after the
expiration of the Investment Period for the purpose of paying operating and
other expenses of the Partnership and the Company or establishing reserves for
the payment of such expenses. Except as provided in Sections 3.16 and 5.1(c), no
Partner shall have any right to make any Capital Contribution that has not been
called by the General Partner pursuant to this Section 4.1.

     (b) A Contribution Call shall be in the form of a written notice to all
Partners, specifying the general purpose of such Contribution Call, an aggregate
dollar amount and a date on which payment shall be due, which date shall be no
less than ten (10) business days after the date of receipt of notice of such
Contribution Call. Each Partner shall be required to contribute such Partner’s
Equity Interest Percentage of the Contribution Call. The General Partner may,
subject to compliance with the requirement of ten (10) business days’ advance
notice, for any increase in any Contribution Call, amend, delay or rescind
Contribution Calls at any time prior to the payment due date thereof. The
amendment, delay or rescission of a Contribution Call shall not affect or
abridge the right of the General Partner to make any subsequent Contribution
Call. As provided in Sections 3.16 and 5.1(c), the General Partner may make
certain Capital Contributions by offset against the Reimbursement Amount payable
to it.
 
 
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     (c) Each Limited Partner and the General Partner shall grant to the
Partnership a security interest in its Equity Interest securing payment of its
Capital Commitment. Each Limited Partner agrees to execute such security
agreements and UCC financing statements as the General Partner may reasonably
request to perfect such security interest, and the General Partner shall execute
and file an agreement and statement in a form substantially similar to that
required of the Limited Partners. Neither the Partnership nor the General
Partner, nor any other party, may assign, re-pledge or re-grant a security
interest in any Limited Partner’s Equity Interest in the Partnership to any
third party without the consent of such Limited Partner, and any assignment,
re-pledge or re-grant in violation of this Section 4.1(c) shall be null and void
and have no force or effect. Except as provided above, no Limited Partner shall
pledge or grant a security interest in its Equity Interest without the prior
approval of the General Partner, such approval to be granted or withheld at the
sole discretion of the General Partner.

     (d) In connection with any Partnership borrowings, the General Partner
shall be authorized to pledge, mortgage, assign, transfer and grant security
interests in the right to initiate Contribution Calls and collect the Capital
Commitments of the Partners hereunder. Each Partner shall promptly execute and
deliver appropriate estoppel certificates and parent entity guarantees (to the
extent required by lenders to the Partnership) and deliver required opinions of
counsel regarding the due formation, valid existence and good standing of such
Partner and the due authorization, valid execution and delivery of its
Subscription Agreement and this Agreement and any documents executed in
connection with any such borrowing, and such other opinion issues as may be
requested by such lenders, and shall execute such other instruments and take
such other action as the General Partner or such lender may require in order to
effectuate any such borrowings by the Partnership. To the extent that the
Partnership has outstanding obligations under a credit facility secured by the
Capital Commitments of the Partners hereunder, each Partner shall be obligated
to fund any remaining portion of its Capital Commitment without defense,
counterclaim or offset of any kind, including any defense arising under Section
365(c) of the U.S. Bankruptcy Code, if applicable, provided that such agreement
to fund shall not act as a waiver by the Partner of its right to assert
independently any claim that the Partner may have against any other Partner, the
Partnership or the Company. Nothing in this Section 4.1(d) shall require any
Partner to take any action that would cause such Partner to assume personal
liability to the Partnership in an amount which exceeds such Partner’s
uncontributed Capital Commitment. In the event that, as a result of any such
pledge, mortgage, assignment, transfer or grant of security interest a Partner
makes a payment directly to a lender as required pursuant thereto, such payment
shall be deemed to be a Capital Contribution of such Partner to the Partnership.
 
 
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     (e) Notwithstanding any provision herein to the contrary, but subject to
the following sentence, PSERS shall be entitled to not make any additional
Capital Contributions beginning on a certain date selected by PSERS (the “
Election Date ”) by providing the Partnership written notice thereof at least
five (5) business days prior to the Election Date, in the following
circumstances (each, an “ Excepted Event ”): (i) there are two (2) or more
vacancies on the Management/Oversight Group at the same time for which
successors have not been appointed in accordance with the definition of the
Management/Oversight Group set forth herein; or (ii) the Partnership makes two
or more indemnification payments pursuant to Section 3.11 of this Agreement
where each such indemnification payment (a) relates to separate and distinct
indemnification claims pertaining to unrelated acts, omissions or events; (b) is
equal to or exceeds $500,000 and (c) is the direct result of any action or
inaction of the General Partner in connection with making decisions to
(1) purchase or sell real estate assets or (2) invest significant capital to
redevelop real estate assets on behalf of the Partnership that, in either such
case, constitutes a failure to exercise the care and skill under the
circumstances then prevailing that a prudent person acting in a like capacity
and familiar with such matters would use in the conduct of real estate
investment enterprises that operate with investment objectives substantially
similar to the investment objectives of the Partnership as described in its
private placement memorandum. Notwithstanding the foregoing sentence, PSERS
shall be required to make Capital Contributions after the Election Date for the
limited purpose of paying its pro rata share of any borrowings that occurred
prior to the Election Date under any credit facility obtained by the Partnership
to the extent that such borrowings were secured in whole or in part by PSERS’
Capital Commitment. In the event that PSERS elects to not make any Additional
Capital Contributions pursuant to this Section 4.1(e), for all purposes of this
Agreement, PSERS’ Capital Commitment shall be reduced to the amount of its
aggregate Capital Contributions at the Election Date (as increased from time to
time by any subsequent Capital Contributions made by PSERS pursuant to the
preceding sentence).

     4.2 Defaulting Partners.

     (a) If a Partner fails to pay any installment of its Capital Commitment
when due, a notice of default shall be given to such Partner by the General
Partner by facsimile transmission, hand delivery or by certified or registered
mail. If the installment is not received by the Partnership within ten
(10) business days after the receipt of such notice of default, such amount
shall bear interest payable to the Partnership at a rate of 18% per annum or, if
lower, the highest rate of interest permitted under applicable law, from and
after the original due date of such installment (the “ Default Date ”) until the
earliest of either (i) the payment of such installment, including any interest
accruing under this Section 4.2(a), (ii) the purchase of such Defaulting
Partner’s Defaulted Interest (as defined below) under Section 4.2(b), or
(iii) the conclusion of foreclosure proceedings under Section 4.2(d). Any
interest paid by a Defaulting Partner pursuant to this Section 4.2(a) shall not
be treated as a Capital Contribution but shall be treated as income of the
Partnership.

     (b) In addition to, and not in limitation of the foregoing, upon ten
(10) days’ written notice to any Partner that becomes a Defaulting Partner (and
provided that such default has not been cured by the Defaulting Partner within
such 10-day period), the General Partner, in its sole discretion, may:

     (i) offer to all non-defaulting Partners the right to acquire (subject to
the terms of Articles 7 and 8 hereof) all or any portion of the Equity Interest
of the Defaulting Partner in the Partnership (a “ Defaulted Interest ”);
 
 
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     (ii) in the event that the Defaulting Partner’s entire Defaulted Interest
is not acquired by the Partners pursuant to clause (i) above, cause the
Partnership to acquire all or a portion of the portion of such Defaulting
Partner’s Defaulted Interest in the Partnership not so acquired; provided,
however, that the aggregate amount of the Defaulting Partner’s Defaulted
Interest purchased by the Partners pursuant to clause (i) and by the Partnership
pursuant to this clause (ii) must be equal to the entire Defaulted Interest of
the Defaulting Partner, unless the remainder of such Defaulted Interest is
acquired pursuant to clause (iii) below; and/or

     (iii) in the event that the entire Defaulted Interest of the Defaulting
Partner is not acquired by the Partners pursuant to clause (i) above and/or by
the Partnership pursuant to clause (ii) above, designate one or more third
parties, which parties may be Partners, to acquire (subject to the terms of
Articles 7 and 8 hereof) all, but not less than all, of the Defaulting Partner’s
Defaulted Interest not so acquired by the Partners or the Partnership.

A copy of any notice provided to a Defaulting Partner pursuant to this
Section 4.2(b) shall be transmitted promptly to all other Partners. In the event
that a Defaulting Partner shall pay any overdue installment of its Capital
Commitment, plus interest in accordance with paragraph (a), prior to the
expiration of the above-referenced 10-day notice period, such Partner shall
cease to be a Defaulting Partner and the remedies provided in this paragraph
(b) and in paragraph (d) shall not be available with respect thereto. In the
event that the Defaulting Partner is an AVB Affiliate, and at the time of such
default the General Partner is an AVB Affiliate, the General Partner shall be
required to pursue the remedy set forth in this Section 4.2(b) against such
Defaulting Partner.

     (c) With respect to any acquisition made pursuant to subsection (b) above,
the aggregate consideration payable to the Defaulting Partner shall be a cash
payment in an amount equal to seventy percent (70%) of such Defaulting Partner’s
Estimated Value Capital Account; and each acquiring party shall be obligated,
severally and not jointly, to pay its  pro rata portion of such consideration
based on the percentage of the Defaulting Partner’s Defaulted Interest acquired
by such party. In the event that the General Partner exercises its right to
cause the Partnership to acquire all or a portion of a Defaulting Partner’s
Defaulted Interest pursuant to subsection (b)(ii) above, for purposes of
determining each Partner’s liability for any resulting Contribution Calls made
in connection therewith, the Equity Interest Percentages of the Partners shall
be calculated assuming that the Partnership’s proposed purchase of all or a
portion of the Defaulted Interest has been completed. Any non-defaulting Partner
that acquires all or a portion of a Defaulting Partner’s Defaulted Interest
shall also assume the portion of the Defaulting Partner’s Capital Commitment
corresponding to the acquired portion of the Defaulted Interest and shall pay to
the Partnership, concurrently with the payment of the purchase price to the
Defaulting Partner, an amount representing the portion of the Defaulting
Partner’s Contribution Call that is then due and unpaid that corresponds to the
acquired portion of the Defaulted Interest. In the event that the Partnership
acquires any portion of a Defaulting Partner’s Defaulted Interest, the portion
of the Defaulting Partner’s Capital Commitment that corresponds to the portion
of the Defaulted Interest acquired by the Partnership shall be cancelled. Any
interest that accrues under Section 4.2(a) with respect to a Defaulting
Partner’s Defaulted Interest prior to the acquisition of such Defaulted Interest
pursuant to Section 4.2(b), shall remain an obligation of the Defaulting Partner
and shall not be assumed by any Person acquiring the Defaulted Interest unless
otherwise agreed in writing by such Person and the Defaulting Partner.
 
 
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     (d) In addition to, or in lieu of, and not in limitation of any of the
foregoing, upon termination of the 10-day period provided in paragraph
(b) above, the General Partner, in its sole discretion, may commence proceedings
to collect any due and unpaid installment of the Defaulting Partner’s Capital
Commitment (plus interest in accordance with paragraph (a) above) and the
expenses of collection, including court costs and attorneys’ fees and
disbursements.

     (e) Any actions taken by the General Partner or the Partnership pursuant to
paragraphs (a) through (d), inclusive, of this Section 4.2 shall be in addition
to and not in limitation of any other rights or remedies that the Partnership
may have against the Defaulting Partner, including, but not limited to, the
right to hold the Defaulting Partner responsible for any damages or liabilities
(including attorneys’ fees) to which the Partnership may be subjected (in whole
or in part) as a result of the default by the Defaulting Partner.

     (f) Each Partner hereby agrees that, in the event that such Partner shall
fail to pay when due any installment of its Capital Commitment required pursuant
to Section 4.1 and the General Partner elects to pursue any remedy set forth in
paragraph (b) above, such Partner shall sell, assign, transfer and convey to the
Partnership, any designee of the General Partner, any and all Partners making
the election contemplated by subparagraph (b) or any third party, its entire
Equity Interest in the Partnership in consideration of the amount determined in
accordance with the provisions of paragraph (c) of this Section 4.2.

     (g) So long as a Defaulting Partner remains a Defaulting Partner, such
Partner shall not be entitled to exercise any voting rights otherwise granted to
such Partner under this Agreement.

     (h) In the event that the Company is a Defaulting Partner because of a
default by a Stockholder (a “Defaulting Stockholder ”) in the payment of amounts
that the Defaulting Stockholder is obligated to pay to the Company, then the
Company’s Equity Interest shall be separated into two parts for purposes of
exercising all default remedies under this Section 4.2. One part will consist of
the Defaulted Interest and will represent an amount of the Company’s Equity
Interest that corresponds to the interest of the Defaulting Stockholder in the
Company (the “ Default Portion ”). The second part will consist of the balance
of the Company’s Equity Interest (the “ Non-Default Portion ”). Only the Default
Portion of the Company’s Equity Interest will be treated as a Defaulted Interest
for purposes of this Agreement and the Company will continue to have the same
rights as all other non-defaulting Partners to the extent of the Non-Default
Portion of the Company’s Equity Interest. In the event that the Partnership or
any non-defaulting Partner (other than the Company) elects to purchase part or
all of the Default Portion, such purchase shall occur by the Partnership or the
non-defaulting Partner, as the case may be, acquiring part or all of the Default
Portion and the Company using the proceeds received from such purchase to then
acquire from the Defaulting Stockholder the corresponding portion of the
Defaulting Stockholder’s interest in the Company. In the event that the Company
is a Defaulting Partner as a result of a default by one of its Stockholders, the
General Partner may make such modifications to this Section 4.2 and Article 5 as
are necessary or appropriate so that a REIT Share is the economic equivalent
(other than with respect to tax attributes) of an Equity Interest of the same
subscription amount.
 
 
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     4.3 Requirements for Admission as Limited Partner. Each Person desiring to
become a Limited Partner upon the Initial Closing Date or the date of any
Subsequent Closing shall execute and deliver to the General Partner a
subscription agreement (a “ Subscription Agreement ”) and such other documents
as shall be deemed appropriate by the General Partner. Under such Subscription
Agreement and other documents, such subscriber shall, subject to acceptance of
its subscription by the General Partner, execute and agree to be bound by this
Agreement.

     4.4 Admission of Limited Partners.

     (a) Each Limited Partner admitted to the Partnership pursuant to this
Article 4 shall become a Limited Partner on the Initial Closing Date or on the
date of any Subsequent Closing, as applicable. To the extent any AVB Affiliate
acquires an interest in the Partnership as a Limited Partner, such interest
shall be treated as a Limited Partner interest in all respects, except as
otherwise specified in this Agreement.

     (b) Additional Limited Partners may be admitted to the Partnership after
the Initial Closing Date as follows:

     (i) After the Initial Closing Date, the General Partner may admit
additional Limited Partners, or accept additional Capital Commitments from
existing Limited Partners, at one or more additional closings (each a “
Subsequent Closing ”) to be held on or prior to the ninth month anniversary of
the Initial Closing Date (or, if such date is not a business day, the next
business day). In connection with any Subsequent Closing, newly admitted Limited
Partners, and existing Limited Partners that increase their Capital Commitments,
will each be required to make payments equal to the Catch-up Payment plus
Catch-up Interest (calculated from each date on which the existing Limited
Partners made any prior Capital Contributions), which amounts will be paid to
the existing Limited Partners,  pro rata , in proportion to each such Partner’s
Equity Interest Percentage immediately prior to such Subsequent Closing. Any
Catch-up Payment and Catch-up Interest paid to the Predecessor(s) In Interest,
pursuant to this Section 4.4(b), shall be treated as a payment to such
Predecessor(s) In Interest with respect to a sale of a portion of their Equity
Interests in the Partnership. The portion of the Equity Interest in the
Partnership sold by each Predecessor In Interest shall be a portion equal to the
percentage obtained by dividing the amount of the Catch-up Payment made to such
Predecessor In Interest by the aggregate amount of the Capital Contributions
made by such Predecessor In Interest immediately prior to such Subsequent
Closing. The General Partner may, in its discretion, make an election pursuant
to Code Section 754.
 
 
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     (ii) In connection with each Subsequent Closing, the General Partner shall
modify Schedule A and the books and records of the Partnership to accurately
reflect the Capital Contributions, Capital Commitments subject to call and
Capital Account balances of all Partners, determined as of the time of such
Subsequent Closing. The Capital Commitment of each existing Partner shall not be
increased, or decreased, by any Catch-Up Payment or Catch-Up Interest received.
The Capital Contributions of each existing Partner shall be reduced by the
amount of any Catch-Up Payment received ( i.e. , such Capital Contributions that
are attributable to the interest in the Partnership that was sold). In computing
the Capital Commitments subject to call set forth on Schedule A , Catch-up
Payments made by a Partner shall be treated as Capital Contributions by such
Partner.

    (iii) For purposes of Article 5 hereof, any item of income, gain, loss, or
deduction previously allocated pursuant to Article 5 hereof, as well as any
amounts credited or debited to the Return Account, in each case with respect to
any portion of an Equity Interest sold for a Catch-Up Payment pursuant to
Section 4.4(b)(i) shall be deemed attributable to such transferred interests.

     (c) After the date which is nine months following the Initial Closing Date
(or, if such date is not a business day, the next business day), no new Limited
Partner shall be admitted to the Partnership except (A) pursuant to Section 4.2
hereof, (B) as a substitute Limited Partner in accordance with Article 7 hereof,
or (C) on such terms and conditions as have received the prior written consent
of the Limited Partners representing a Voting Interest of the Limited Partners
in excess of fifty percent (50%), excluding from such vote any Limited Partner
that is an AVB Affiliate so long as the General Partner is an AVB Affiliate, and
the approval of the General Partner.

     (d) The admission of a Person to the Partnership that would cause the
Partnership to be an investment company within the meaning of Section 3 of the
Investment Company Act shall be void  ab initio  and shall not bind or be
recognized by the Partnership.

     (e) The admission of a new Limited Partner or Limited Partners or the
acceptance by the Partnership of an additional Capital Commitment with respect
to one or more existing Partners, shall not cause the dissolution or termination
of the Partnership.

     4.5 Interest. Except as provided in Section 4.4(b) with respect to Catch-up
Interest, no Partner shall be entitled to receive any interest on any Capital
Contributions to the Partnership.

     4.6 Assignees. Subject to Section 4.4(b), any reference in this Agreement
to the Capital Commitment or Capital Contribution of a Partner who is an
assignee of all or a portion of an Equity Interest shall include the Capital
Commitment and Capital Contribution of the assignor (or a  pro rata  portion
thereof in the case of an assignment of less than the entire Equity Interest of
the assignor).
 
 
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5.     Capital Accounts; Profits and Losses; Distributions

     5.1 Capital Accounts.

     (a) A separate capital account (each a “Capital Account”) shall be
maintained for each Partner in accordance with the rules of Treasury Regulations
Section 1.704-1(b)(2)(iv), and this Section 5.1 shall be interpreted and applied
in a manner consistent therewith. Whenever the Partnership would be permitted to
adjust the Capital Accounts of the Partners pursuant to Treasury Regulations
Section 1.704-1(b)(2)(iv)( f ) to reflect revaluations of Partnership property,
the Partnership may so adjust the Capital Accounts of the Partners. In the event
that the Capital Accounts of the Partners are adjusted pursuant to Treasury
Regulations Section 1.704-1(b)(2)(iv)( f ) to reflect revaluations of
Partnership property, (i) the Capital Accounts of the Partners shall be adjusted
in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)( g ) for
allocations of depreciation, depletion, amortization and gain or loss, as
computed for book purposes, with respect to such property, (ii) the Partners’
distributive shares of depreciation, depletion, amortization and gain or loss,
as computed for tax purposes, with respect to such property shall be determined
so as to take account of the variation between the adjusted tax basis and book
value of such property in the same manner as under Code Section 704(c), and
(iii) the amount of upward and/or downward adjustments to the book value of the
Partnership property shall be treated as income, gain, deduction and/or loss for
purposes of applying the allocation provisions of this Article 5. In the event
that Code Section 704(c) applies to Partnership property, the Capital Accounts
of the Partners shall be adjusted in accordance with Treasury Regulations
Section 1.704-1(b)(2)(iv)( g ) for allocations of depreciation, depletion,
amortization and gain and loss, as computed for book purposes, with respect to
such property.

     (b) In furtherance and not in limitation of the provisions of
Section 5.1(a), the following adjustments shall be made to the Capital Accounts
of the Partners if and to the extent required by the Treasury Regulations
promulgated under Code Section 704(b):

     (i) Any Partner that is a disregarded entity for federal income tax
purposes and is treated as the same taxpayer (or part of the same taxpayer) as
any other Partner shall be treated as a single Partner. Except as otherwise
required to comply with the requirements of Code Section 704(b), such Partners
shall be treated as distinct and separate Partners for all other purposes of
this Agreement.

    (ii) Any fees, expenses or other costs of the Partnership that are paid by
the General Partner and that are required to be treated as capital contributions
to the Partnership for purposes of Code Section 704(b) and the Treasury
Regulations thereunder shall be added to the balance of the General Partner’s
Capital Account. Any fees, costs or other expenses of a Partner (including the
Company) that are paid by the Partnership and that are required to be treated as
distributions for purposes of Code Section 704(b) and the Treasury Regulation
thereunder, or where failure to treat such payment as a distribution would cause
the Company to fail the REIT income tests of Code Section 856(c), shall be
treated as a distribution to the appropriate Partner and the Partnership’s
payment thereof shall not be treated as an item of deduction or loss. In cases
where failure to treat payment of a Company expense as a distribution would
cause the Company to fail the REIT income tests, the Company shall be obligated
to refund the aggregate amount of such payments to the Partnership to the extent
that such amount exceeds the cumulative net income of the Partnership. This
Section 5.1(b)(ii), in conjunction with Section 5.2, is intended to prevent any
payments by the General Partner or the Partnership from giving rise to a
violation of Code Section 704(b) or, in the case of the Company, Code Section
856(c) while at the same time preserving to the extent possible the parties’
intended economic arrangement and shall be applied consistent with such intent.
 
 
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     (c) The payment of the Reimbursement Amount shall not be treated as a
distribution to the General Partner. The General Partner shall be deemed to have
made an in-kind Capital Contribution of a portion of the equity interests in the
Warehoused Properties in an agreed upon value equal to the product of the
Reimbursement Amount and the General Partner’s Equity Interest Percentage
(including its Equity Percentage Interest as a Partner). The remaining portion
of the equity interests in the Warehoused Properties (with an agreed upon value
equal to the product of the Reimbursement Amount and the Company’s Equity
Interest Percentage (the “ Residual Value ”)) shall be deemed to have been
(i) contributed by the AVB Stockholder to the Company as payment for REIT Shares
in an amount equal to the product of the Residual Value and the AVB
Stockholder’s percentage interest of the Company and (ii) purchased by the
Company for cash in an amount equal to the difference between the Residual Value
and the amount under clause (i). The Company shall then be deemed to have made
an in-kind Capital Contribution to the Partnership in an amount equal to the sum
of the amounts in (i) and (ii) of the preceding sentence.

     5.2 Allocation of Net Income and Net Loss. After application of
Section 5.3, and subject to the other provisions of this Article 5, any
remaining net income or net loss for the taxable year (or items of income or
loss) shall be allocated among the Partners in such ratio or ratios as may be
required to cause the balances of the Partners’ Economic Capital Accounts to be
as nearly equal to their Target Balances as possible.

     5.3 Minimum Gain Chargebacks and Non-Recourse Deductions.

     (a) Notwithstanding any other provisions of this Agreement, in the event
there is a net decrease in Partnership Minimum Gain during a taxable year, the
Partners shall be allocated items of income and gain in accordance with Treasury
Regulations Section 1.704-2(f). For purposes of this Agreement, the term “
Partnership Minimum Gain ” shall have the meaning set forth in Treasury
Regulations Section 1.704-2(b)(2), and any Partner’s share of Partnership
Minimum Gain shall be determined in accordance with Treasury Regulations
Section 1.704-2(g)(1). This Section 5.3(a) is intended to comply with the
minimum gain charge-back requirement of Treasury Regulations Section 1.704-2(f)
and shall be interpreted and applied in a manner consistent therewith.

     (b) Notwithstanding any other provision of this Agreement, non-recourse
deductions shall be allocated to the Partners, pro rata , in proportion to their
Equity Interest Percentages. “ Non-recourse deductions ” shall have the meaning
set forth in Treasury Regulations Section 1.704-2(b)(1).

     (c) Notwithstanding any other provisions of this Agreement, to the extent
required by Treasury Regulations Section 1.704-2(i), any items of income, gain,
loss or deduction of the Partnership that are attributable to a nonrecourse debt
of the Partnership that constitutes “partner nonrecourse debt” as defined in
Treasury Regulations Section 1.704-2(b)(4) (including chargebacks of partner
nonrecourse debt minimum gain, “ Partner Nonrecourse Debt ”) shall be allocated
in accordance with the provisions of Treasury Regulations Section 1.704-2(i).
This Section 5.3(c) is intended to satisfy the requirements of Treasury
Regulations Section 1.704-2(i) (including the partner nonrecourse debt minimum
gain chargeback requirements) and shall be interpreted and applied in a manner
consistent therewith.
 
 
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     (d) Notwithstanding any other provision of this Agreement, creditable
foreign taxes shall be allocated to the Partners in accordance with the
provisions of Treasury Regulations Section 1.704-1T(b)(4)(xi)( a ). “ Creditable
foreign taxes ” shall have the meaning set forth in Treasury Regulations
Section 1.704-1T(b)(4)(xi)( b ).

     5.4 Code Section 704(b) Compliance. The allocation provisions contained in
this Article 5 are intended to comply with Code Section 704(b) and the Treasury
Regulations promulgated thereunder, and shall be interpreted and applied in a
manner consistent therewith.

     5.5 Elections. Any elections or other decisions relating to the allocations
of Partnership items of income, gain, loss, deduction or credit shall be made by
the General Partner in any manner that reasonably reflects the purpose and
intent of this Agreement.

     5.6 Distributions.

     (a) Distributions of Net Cash Flow from Operations and Proceeds from
Capital Transactions. Net cash flow from operations and all net proceeds from
capital transactions, in each case in excess of working capital requirements
(including reserves and any amounts used to repay indebtedness of the
Partnership), shall be distributed to the Partners quarterly, or more frequently
in the General Partner’s sole discretion. All such distributions and any other
distribution by the Partnership shall be made in the following manner:

     (i)  First, subject to Section 5.6(c), to the Partners, pro rata, in
proportion to their respective Equity Interest Percentages, until the aggregate
amount distributed to the Partners pursuant to this Section 5.6(a)(i) equals the
lesser of (x) Partners’ Return Account and (y) the Partners’ aggregate Capital
Contributions;

     (ii) Second, to the Partners, pro rata, in proportion to their respective
Equity Interest Percentages, until the aggregate amount distributed to the
Partners pursuant to this Section 5.6(a)(ii) is equal to the Preferred Return of
all Partners;

 (iii) Third, (A) eighty percent (80%) to the Partners, pro rata, in proportion
to their respective Equity Interest Percentages, and (B) twenty percent (20%) to
the General Partner until the aggregate amount distributed to the Limited
Partners pursuant to Sections 5.6(a)(ii) and (iii) is equal to the Second
Preferred Return of the Limited Partners;

 (iv) Fourth, (A) sixty percent (60%) to the Partners, pro rata, in proportion
to their respective Equity Interest Percentages, and (B) forty percent (40%) to
the General Partner until the aggregate amount distributed to the General
Partner pursuant to Section 5.6(a)(iii)(B) and this Section 5.6(a)(iv)(B) for
all periods is equal to twenty percent (20%) of the aggregate amount of
distributions made to all Partners pursuant to Sections 5.6(a)(ii), (iii) and
(iv); and

 (v) Thereafter, (A) eighty percent (80%) to the Partners, pro rata, in
proportion to their respective Equity Interest Percentages, and (B) twenty
percent (20%) to the General Partner.
 
 
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Distributions to the General Partner under Section 5.6(a)(iii)(B),
Section 5.6(a)(iv)(B) and Section 5.6(a)(v)(B) are referred to herein as “
Incentive Distributions .”

     (b) Distributions in Kind. Except as permitted by this Section 5.6(b) and
Section 3.2(h), the Partnership shall not make in-kind distributions.

     (i) Except as provided in Sections 5.6(b)(ii) and (iii), the Partnership
may elect to make any distribution to a Partner hereunder, either wholly or
partially, in securities for which a public market (National Exchange or Nasdaq
National Market) exists and which may be traded by the Partners without
restrictions. Securities distributed pursuant to this Section 5.6(b) shall be
valued based on the average of the closing prices for such securities during the
twenty (20) trading days prior to the date of distribution and adjusted, if
appropriate, taking into account the amount of securities relative to the
trading volume of securities of the same class, the existence or absence of a
control position on the part of the Partnership with respect to the issuer of
such securities, and any other factors that are customarily taken into account
in determining whether the fair market value of securities of the same type is
greater or less than market quotation. The Partnership may make other types of
distributions in kind to Partners, including Incentive Distributions, only  with
the approval of Limited Partners holding a majority of the outstanding Equity
Interest Percentages (excluding any AVB Affiliate for so long as the General
Partner is an AVB Affiliate), except as provided in Section 5.6(b)(ii) and
(iii).

     (ii) Notwithstanding the provisions of Section 5.6(b)(i), no in-kind
distribution shall be made to an ERISA Partner unless: (A) notice is given to
such ERISA Partner at least ten (10) business days prior to the in-kind
distribution date; and (B) the ERISA Partner does not deliver to the General
Partner, at least five (5) business days prior to such distribution date, an
opinion of counsel, in form and substance reasonably satisfactory to the General
Partner and signed by counsel reasonably satisfactory to the General Partner
(which may include an opinion of a nationally recognized counsel or in-house
counsel regularly employed by a Limited Partner with expertise in the subject
matter of such opinion), stating that receiving or holding such property by the
ERISA Partner would be materially likely to result in a violation of ERISA. In
the event that such ERISA Partner provides the General Partner with such an
opinion of counsel in a timely manner, such ERISA Partner (such Limited Partner
to be referred to as the “ Electing Limited Partner ”) shall be entitled to
receive instead such other securities, property or cash of the Partnership as
the General Partner may determine in accordance with paragraph (iii) below.

     (iii) In the case of (ii) above, the Partnership may (1) retain the
securities or other assets on behalf of the ERISA Partner, or (2) transfer the
securities or other assets that would have been distributed to the ERISA Partner
to a subsidiary of the Partnership and distribute the interests in such
subsidiary to the ERISA Partner and the General Partner. In either case, the
General Partner will act as temporary manager of the securities or other assets
(the “ Managed Assets ”) for the exclusive benefit of the Electing Limited
Partner without collecting a fee for such management services. In the case of
(1) or (2) above, the following provisions shall apply:
 
 
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     (A) The Partnership or subsidiary of the Partnership shall hold the Managed
Assets as nominee for the benefit of, and on behalf of, the Electing Limited
Partner. Subject to the following sentence, the General Partner shall use
commercially reasonable efforts to effect the disposition of the Managed Assets.
The General Partner shall have sole discretion with respect to the sale,
exchange or disposition of the Managed Assets and shall have no fiduciary or
other duty to the Partnership or the other Limited Partners in the exercise of
such discretion. The Electing Limited Partner shall be liable for all taxes and
other charges levied upon the Managed Assets and on any income or distributions
thereon, and shall be liable for any and all costs incurred by the Partnership
for the benefit of the Electing Limited Partner pursuant to this Section. The
Electing Limited Partner shall have the benefit, and bear the risk, of all
distributions of income, dividends, cash or other property on or relating to the
Managed Assets , all losses with respect to the Managed Assets or any change in
the character of the Managed Assets. The provisions of Sections 3.10, 3.11 and
3.12 shall be available with respect to the Managed Assets; provided, that any
indemnification obligation arising under Section 3.12 with respect to the
Managed Assets shall be borne solely by the Electing Limited Partner to the
extent of the fair market value of all Managed Assets held by the Partnership or
its subsidiary on behalf of the Electing Limited Partner and determined at the
time that securities corresponding to such Managed Assets were originally
distributed in-kind to the other Partners.

 (B) Upon any disposition of the Managed Assets for cash, the Partnership shall
transfer to the Electing Limited Partner the proceeds of such disposition, less
the amount of any expenses related to such disposition.

     (C) For all purposes under this Agreement, including for purposes of
determining the Electing Limited Partner’s Capital Account, the Electing Limited
Partner shall be treated as if it received the Managed Assets at the time that
assets corresponding to such Managed Assets were originally distributed in-kind
to the other Partners.

     (iv) To the extent that distributions under Section 5.6(b)(i) or (ii) would
violate any law or regulation and such violation cannot be cured after
commercially reasonable efforts are taken by the Electing Limited Partner, upon
the determination of a manner in which such distributions would be permissible
to the ERISA Partner, the General Partner shall have sole discretion to
determine in which manner such distributions may be made.

     (c) Distributions in Proportion to Partner Contributions. With respect to
any distributions occurring subsequent to the Election Date, distributions to
Partners pursuant to Section 5.6(a)(i) shall be made in proportion to the
Partners’ respective Capital Contributions and not in proportion to the
Partners’ respective Equity Interest Percentages, provided that in no event
shall the aggregate distributions to a Partner pursuant to Section 5.6(a)(i)
exceed that Partner’s aggregate Capital Contributions.
 
 
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     (d) Direction of Distribution Proceeds. All distributions made to a Partner
pursuant to this Agreement shall, at the election of such Partner, be made via
wire transfer pursuant to instructions provided by such Partner to the General
Partner from time to time in writing, such instructions to be as initially set
forth in such Partner’s Subscription Agreement.

     (e) Special Distribution to Limited Partners.

     (i) In the event that the General Partner would be entitled to receive an
Incentive Distribution, the General Partner, in its sole discretion, may elect
to distribute under Section 5.6(a) to the Limited Partners all or a portion of
the Incentive Distributions.

     (ii) To the extent that an election under Section 5.6(e)(i) reduces the
amount of an Incentive Distribution that the General Partner would otherwise
receive, the General Partner in its discretion may cause one or more
distributions otherwise payable to the Limited Partners under Section 5.6(a) to
be distributed to the General Partner until the aggregate amount distributed to
the General Partner in accordance with this Section 5.6(e)(ii) equals the
aggregate amount of the reduction in distributions to the General Partner as a
result of one or more elections under Section 5.6(e)(i).

     (iii) To the extent not recovered pursuant to Section 5.6(e)(ii),
distributions pursuant to this Section 5.6(e) shall be treated for purposes of
subsequently applying Section 5.6(a) first as distributions under
Section 5.6(a)(i) to the extent of the amounts in Section 5.6(a)(i) to the date
of determination and then as distributions under Section 5.6(a)(ii).

     5.7 No Deficit Restoration by General Partner. Except as otherwise provided
in Section 11.6, the General Partner shall have no obligation to restore a
deficit balance in its Capital Account upon liquidation of its interest in the
Partnership or otherwise.

     5.8 No Deficit Restoration by Limited Partners. No Limited Partner shall
have any obligation to restore a deficit balance in its Capital Account upon
liquidation of its interest in the Partnership or otherwise.

     5.9 Right of Set-Off. No part of any distribution shall be paid pursuant
this Article 5 to any Partner from which there is due and owing to the
Partnership, at the time of such distribution, any amount required to be paid to
the Partnership pursuant to Article 4. Any such withheld distribution shall be
deemed to have been distributed to such Partner, shall be set off against such
Partner’s obligation to the Partnership and shall reduce such Partner’s
obligation to the Partnership accordingly.

     5.10 Withholding.

     (a) If the Partnership is required by law or regulation to withhold and pay
to any taxing or other governmental authority any amount otherwise distributable
to a Partner, the Partnership shall be entitled to withhold such amount and the
amount so withheld shall for all purposes of this Agreement be treated as if
distributed to such Partner.
 
 
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     (b) In the event that the proceeds to the Partnership from an investment
are reduced on account of taxes withheld at the source, and such taxes (or a
portion thereof) are imposed on one or more, but not all, of the Partners in the
Partnership, the amount of the reduction in the Partnership’s net proceeds shall
be borne by and apportioned among the relevant Partners and treated as if it
were paid by the Partnership as a withholding obligation with respect to such
Partners in accordance with such apportionment.

6.      Advisory Committee and Investment Committee

     6.1 Advisory Committee Membership. The Partnership shall have an advisory
committee (the “Advisory Committee ”) composed of members appointed pursuant to
this Section 6.1. The number of members of the Advisory Committee and the
designation of such members shall be determined by the General Partner, in its
sole discretion, provided that such members shall be associated with Limited
Partners or Stockholders, other than officers, directors, shareholders,
employees or partners of the General Partner or an AVB Affiliate, that
collectively represent (either directly through ownership of Equity Interests in
the Partnership or indirectly through ownership of REIT Shares) a majority of
the aggregate Capital Commitments (excluding the Capital Commitments of any AVB
Affiliate so long as the General Partner is an AVB Affiliate). In the event of
the resignation or death of a member of the Advisory Committee, the General
Partner shall promptly designate a successor to such member in accordance with
foregoing criteria.

     6.2 Advisory Committee Meetings and Expense Reimbursement. The General
Partner shall convene meetings of the Advisory Committee in person or by
telephonic meeting at such times as the General Partner determines, but in no
event less than semi-annually. Written notice of the time and place of each such
meeting of the Advisory Committee shall be given to the members of the Advisory
Committee, if such meeting is to be held in person, at least two (2) weeks prior
to the date of the meeting or, if such meeting is to be held by a telephonic
meeting, at least twenty-four (24) hours prior to the time of the meeting.
Notice of meetings may be waived, either before or after the meeting, by the
unanimous consent of all of the members of the Advisory Committee. Advisory
Committee members shall be entitled to reimbursement from the Partnership for
their reasonable travel expenses and other reasonable out-of-pocket expenses
incurred in connection with their attendance at meetings of the Advisory
Committee and any annual or special meetings of the Partnership, but shall not
be entitled to any fees, remuneration or other reimbursements from the
Partnership or any of the Partners. The Advisory Committee, upon the approval of
at least seventy-five percent (75%) in number of its members, may retain
independent legal counsel, accountants and such other advisors and consultants
as it deems necessary in order to adequately perform its duties under this
Agreement. The reasonable expenses and fees of such legal counsel, accountants,
advisors and consultants shall be paid by the Partnership.
 
 
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     6.3 Advisory Committee Authority. Except as otherwise specifically provided
in this Agreement, the Advisory Committee shall have no control over management
of the Partnership or its activities, shall not take part in the management of
the Partnership, and shall not have any authority to bind the Partnership or the
General Partner or to act for or on behalf of the Partnership. The Advisory
Committee shall (i) select the Independent Appraiser pursuant to Section 8.6(d);
(ii) approve any material contracts or agreements between the Partnership and
AVB or any AVB Affiliate, except as expressly provided for in this Agreement,
including, without limitation, pursuant to Sections 3.2(g), 3.2(j), 3.7(c),
3.8(b), 3.16 and 5.1(c); (iii) approve any change in the valuation policies of
the Partnership after the date of this Agreement; (iv) approve any proposed
settlements of litigation or disputes involving the Partnership or the Company
where the amount of any such settlement exceeds $500,000; and (v) approve any
amendments to this Agreement pursuant to the last sentence of Section 14.7. The
Advisory Committee shall act as promptly as possible with respect to any request
to approve any material contract or agreement, any change in the Partnership’s
valuation policies or any proposed settlements pursuant to clauses (ii), (iii)
and (iv) of the preceding sentence, respectively. The General Partner shall also
notify the Advisory Committee of any Strategic Investments made by the General
Partner or an AVB Affiliate and not involving the Partnership pursuant to
Section 3.9(d). In its discretion, the General Partner may discuss such other
matters with the Advisory Committee as the General Partner deems appropriate. No
member of the Advisory Committee shall be deemed to have any fiduciary or other
duties to any other Partner or to the Partnership in respect of the activities
of the Advisory Committee.

     6.4 Quorum and Voting of Members of Advisory Committee. Each member of the
Advisory Committee shall be entitled to one vote. A majority in number of the
members of the Advisory Committee shall constitute a quorum for a meeting.
Members of the Advisory Committee may attend meetings in person, by proxy
approved by the General Partner, or by telephone conference call pursuant to
which all meeting attendees can speak with all other meeting attendees. Unless
otherwise provided in this Agreement, any approval or consent required to be
given by the Advisory Committee shall be deemed to have been given upon the
written consent of a majority of the total number of the members of the Advisory
Committee or upon the approval of a majority of a quorum of the members of the
Advisory Committee at a duly held meeting of the Advisory Committee.

 6.5 Investment Committee. The Partnership shall have an investment committee
(the “Investment Committee”), composed of up to five (5) voting members and two
(2) non-voting members appointed pursuant to this Section 6.5. The initial
voting members of the Investment Committee shall be composed of the members of
AVB’s senior management team, as follows: (i) Bryce Blair; (ii) Timothy J.
Naughton; (iii) Thomas J. Sargeant; (iv) Samuel G. Fuller and (v) Leo S. Horey.
The initial non-voting members of the Investment Committee shall be Kevin O’Shea
and Lili Dunn. The approval of a majority of the voting members of the
Investment Committee shall be required for all Strategic Investments and Interim
Investments made by the Partnership. The non-voting members will review and, if
appropriate, present, acquisition, disposition and redevelopment opportunities
to the Investment Committee for its consideration. Each member of the Investment
Committee shall serve until he or she resigns or is removed by the General
Partner and any vacancy on the Investment Committee for any reason shall be
filled by the General Partner or a designee of the General Partner. The members
of the Investment Committee may adopt such procedures as they may deem
appropriate to make decisions regarding investment of the Partnership’s capital,
financings, ongoing management of the Partnership’s portfolio of Strategic
Investments, dispositions of the Partnership’s assets and other Partnership
business.
 
 
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     6.6 Partnership Meetings. The Partnership shall hold an annual meeting (in
the continental U.S.) of the Partners during each full Fiscal Year of the
Partnership’s existence at which the General Partner will review and discuss the
Partnership’s investment activities. The Partnership shall hold special meetings
of the Partners upon the call of (a) the General Partner, or (b) (i) Limited
Partners representing at least a majority of the aggregate Capital Commitments
or (ii) Stockholders that hold in the aggregate REIT Shares representing an
indirect economic interest in at least a majority of the aggregate Capital
Commitments or (iii) a combination of Limited Partners and Stockholders
collectively representing, either directly in the case of Limited Partners or
indirectly through their holdings of REIT Shares in the case of Stockholders, at
least a majority of the aggregate Capital Commitments, if such Limited Partners
and/or such Stockholders give written notice to the General Partner that they
wish to call a special meeting of the Partners for the purpose of exercising any
right of the Limited Partners provided for in this Agreement. The General
Partner shall notify each Limited Partner and each Stockholder of the time and
place of each such annual or special meeting at least thirty (30) days prior to
the date thereof. Each Stockholder shall be entitled to attend Partnership
meetings.

7.     Transfers of Limited Partnership Interests

     7.1 Assignability of Interests. Subject to the limitations set forth in
this Section 7.1, except as specifically provided by this Agreement, the Equity
Interest in the Partnership of a Limited Partner may not be directly or
indirectly assigned without the written consent of the General Partner, which
consent may be withheld in its sole and absolute discretion; provided that the
consent of the General Partner shall not be required to effect any assignment to
the successor trustee or successor investment manager of an ERISA Partner. No
Limited Partner shall be entitled to assign its Equity Interest in the
Partnership without providing to the General Partner such evidence as it may
reasonably require, including an opinion of a nationally recognized counsel or
in-house counsel regularly employed by a Limited Partner, such counsel having
expertise in the subject matter of such opinion, if so required, that the
assignment or transfer will not:

     (a) violate the registration provisions of the Securities Act, or the
securities laws of any applicable jurisdiction;

     (b) cause the Partnership not to be entitled to any exemption from the
definition of an “investment company” pursuant to Section 3 of the Investment
Company Act, and the rules and regulations of the Securities and Exchange
Commission thereunder;

     (c) result in the termination of the Partnership under the Internal Revenue
Code (unless such requirement is waived by the General Partner);

     (d) cause the Partnership to fail to satisfy the requirements of any
otherwise applicable safe harbor from treatment as a publicly traded partnership
under Treasury Regulations Section 1.7704-1;

     (e) result in the assets of the Partnership or the actions of the General
Partner being subject to Part 4 of Subtitle B of Title I of ERISA;

     (f) cause the Partnership or any Partner to be in violation of any law,
contract or other obligation legally binding upon any of them or otherwise
suffer any material adverse consequence; or
 
 
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     (g) cause the Company to receive or accrue any amounts described in Code
Section 856(d)(2)(B) or otherwise jeopardize the Company’s status as a REIT.

In addition, no assignment of a Partner’s Equity Interest, other than pursuant
to Section 4.2, shall be permitted if at the time of such assignment, the
assigning Limited Partner is in default in its obligations under this Agreement.
No assignment of a Partner’s Equity Interest shall be binding upon the
Partnership until the General Partner receives an executed copy of all documents
effecting such assignment, which shall be in form and substance satisfactory to
the General Partner, and until such assignment is approved by the General
Partner pursuant to this Section 7.1. Notwithstanding the assignment of all or
any portion of a Partner’s Equity Interest in the Partnership, (i), unless
otherwise agreed by the General Partner, in its sole discretion, the assignor
shall continue to be liable with respect to its Capital Commitment relating to
the interest assigned, and (ii) the assignment of an Equity Interest in the
Partnership shall not entitle the assignee to be admitted as a substitute
Limited Partner other than pursuant to Section 7.2.

     7.2 Substitute Limited Partners. A person that acquires an Equity Interest
in the Partnership by assignment from a Limited Partner in accordance with the
provisions of Section 7.1 may only be admitted to the Partnership as a
substitute Limited Partner with the consent of the General Partner, which may be
withheld in its sole and absolute discretion; provided that the consent of the
General Partner shall not be required to effect the substitution of an assignee
that is a successor trustee or successor investment manager of an ERISA Partner.
The admission of an assignee as a substitute Limited Partner shall in all events
be conditioned upon the assignee’s written assumption, in form and substance
satisfactory to the General Partner, of all obligations of the assigning Limited
Partner and execution of an instrument satisfactory to the General Partner
whereby such assignee becomes a party to this Agreement as a Limited Partner.
Upon the admission of an assignee as a substitute Limited Partner, the assignor
shall cease to be liable with respect to its Capital Commitment relating to the
Equity Interest in the Partnership assigned.

     7.3 Obligations of Assignee. Any assignee of the Equity Interest of a
Limited Partner in the Partnership, irrespective of whether such assignee has
accepted and adopted in writing the terms and provisions of this Agreement or
been admitted as a substituted Limited Partner, shall be deemed by the
acceptance of such assignment to have agreed to be subject to the terms and
provisions of this Agreement in the same manner as its assignor, and to have
assumed the assignor’s Capital Commitment obligation pursuant to Section 4.1
with respect to the Equity Interest in the Partnership assigned.

     7.4 Allocation of Distributions Between Assignor and Assignee. Upon the
assignment of an Equity Interest in the Partnership pursuant to this Article 7,
distributions pursuant to Article 5 shall be made to the Person owning the
Equity Interest in the Partnership at the date of distribution, unless the
assignor and assignee otherwise agree and direct the General Partner in a
written statement signed by both.

     7.5 Assignment by Removed or Withdrawn General Partner. Notwithstanding any
provision herein to the contrary, in the event that the General Partner shall be
Removed or Withdraws as a general partner in accordance with Article 8 of this
Agreement and the General Partner retains an Equity Interest as a Limited
Partner subsequent to such Removal or Withdrawal pursuant to Section 8.7, then
the Removed or Withdrawn General Partner shall be entitled to assign its Equity
Interest without obtaining the prior consent or approval of the then serving
General Partner or any of the Limited Partners.
 
 
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8.     Transfer of Partnership Interest by General Partner; Withdrawal

     8.1 Assignability of Interest. Without the consent of the Limited Partners
representing a Voting Interest of the Limited Partners of at least sixty-six and
two-thirds percent (66-2/3%), excluding from the vote any Limited Partner that
is an AVB Affiliate so long as the General Partner is an AVB Affiliate, except
to the extent provided in Section 4.1(d), and as described below in this
Section 8.1, neither the General Partner nor any AVB Affiliate may transfer its
interest in the Partnership to any Person other than an AVB Affiliate if such
transfer could result in AVB and the AVB Affiliates having aggregate Capital
Commitments less than the lesser of (i) twenty percent (20%) of the aggregate
Capital Commitments (including, for this purpose, any commitments to acquire
REIT Shares) and (ii) fifty million dollars ($50,000,000). Any assignment of the
General Partner’s or the AVB Affiliate’s interest which requires consent
pursuant to this Section 8.1 shall only become effective upon (i) the execution
by the General Partner or the AVB Affiliate of a written assignment, the
execution by the successor of this Agreement, and the written assumption by the
successor of the obligations of the General Partner hereunder (in the case of an
assignment of the interest of the General Partner hereunder), (ii) the receipt
by the Partnership of an opinion of counsel that such assignment and assumption
will not violate the registration provisions of the Securities Act, or the
securities laws of any applicable jurisdiction, or cause the Partnership not to
be entitled to any exemption from the definition of an “investment company”
pursuant to Section 3 of the Investment Company Act, and (iii) delivery of
notice of such assignment to the Limited Partners. In the event of an assignment
of the interest of the General Partner, the successor shall become the General
Partner hereunder, and the predecessor and successor General Partner shall cause
the execution of any necessary papers including, without limitation, an
amendment to the Certificate to record the substitution of the successor as
General Partner. In addition to the foregoing, and subject to the following
sentence below, without the consent of the Limited Partners representing a
Voting Interest of the Limited Partners in excess of fifty percent (50%)
(excluding from the vote any Limited Partner that is an AVB Affiliate so long as
the General Partner is an AVB Affiliate), AVB, or any successor to all or
substantially all of its assets, shall continue to control the General Partner
and to own, together with the other AVB Affiliates, at least fifty percent (50%)
of the equity interests of the General Partner. Notwithstanding the foregoing,
(x) the General Partner or any AVB Affiliate may transfer its interests in the
Partnership and (y) AVB, or its successor, may cease to control the General
Partner and to own, together with other AVB Affiliates, at least fifty percent
(50%) of the equity interests in the General Partner, in either case without the
prior consent of the Limited Partners, as a result of or in connection with a
Change of Control of AVB.

     8.2 Voluntary Withdrawal. Except as a result of or in connection with a
Change of Control of AVB, the General Partner shall not effect a voluntary
withdrawal (a “ Voluntary Withdrawal ”) as a General Partner from the
Partnership until such time as a new General Partner shall have been selected
who, (i) shall have stated a willingness to be admitted, and (ii) shall have
received the specific written consent of Limited Partners representing a Voting
Interest of the Limited Partners of at least sixty-six and two-thirds percent
(66-2/3%), excluding from such vote, any Limited Partner that is an AVB
Affiliate so long as the General Partner is an AVB Affiliate.
 
 
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     8.3 Involuntary Withdrawal. The General Partner shall be deemed to have
involuntarily withdrawn (an “Involuntarily Withdrawal ”) as a General Partner
from the Partnership upon the occurrence of any of the following events: (i) in
the case of a corporate General Partner, the revocation of its charter, other
than by voluntary act of its stockholders, (ii) in the case of a General Partner
which is a partnership, the death, dissolution (other than by voluntary act of
its partners) or bankruptcy of all the general partners of such partnership,
(iii) the making of an assignment for the benefit of creditors, the filing of a
voluntary petition in bankruptcy, or an adjudication of bankruptcy, or (iv) any
other event which constitutes an event of withdrawal under the Act.

     8.4 Removal of General Partner.

     (a) For Cause Removal. The General Partner may be removed (a “Removal”) by
the Limited Partners representing a Voting Interest of the Limited Partners in
excess of fifty percent (50%), excluding from the vote any Limited Partner that
is an AVB Affiliate so long as the General Partner is an AVB Affiliate, in the
event of any actions or omissions by it or any AVB Affiliate in connection with
performing their duties under this Agreement that have a material adverse effect
on the Partnership and constitute fraud, willful misconduct or gross negligence.
At least ninety (90) days prior to the date of any such written consent or vote
to remove, the Limited Partners or Stockholders (who directly or indirectly
control the Voting Interest that is required to remove the General Partner in
accordance with the preceding sentence) seeking to remove the General Partner
shall give the General Partner written notice of their intention to seek such
Removal (a “ For Cause Removal Notice ”). Such notice shall specify the alleged
fraud, willful misconduct or gross negligence constituting the basis for such
Removal. Within said 90-day period, the General Partner shall have the right to
call a meeting of the Partners in accordance with Section 6.6. At such meeting,
the General Partner shall have the opportunity to rebut any allegations against
it. In addition to the foregoing, the General Partner may challenge the basis
for its Removal by any other means. Notwithstanding any other provision of this
Agreement, in the event that the General Partner elects to initiate legal
proceedings to challenge the basis for its Removal, the party who is successful
on the merits of the disputed matter shall be entitled to reimbursement from the
other parties of all reasonable attorneys’ fees and expenses incurred by it in
connection with such dispute. In the event that the General Partner has received
a For Cause Removal Notice, the restrictions on Contribution Calls set forth in
Section 4.1(a) applicable to the period after the Investment Period shall apply
until the earlier of (x) ninety (90) days after the date of the For Cause
Removal Notice and (y) the date on which the Limited Partners vote on whether to
Remove the General Partner as set forth in the For Cause Removal Notice,
provided that if the requisite percentage of the Limited Partners vote in favor
of Removing the General Partner in accordance with the provisions of this
Section 8.4(a), such restrictions on Contribution Calls shall continue to apply
until such Removal is effected.
 
 
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     (b) No-Fault Removal. The General Partner also may be Removed at any time
without cause by the Limited Partners representing a Voting Interest of the
Limited Partners in excess of fifty percent (50%), excluding from the vote any
Limited Partner that is an AVB Affiliate so long as the General Partner is an
AVB Affiliate. At least sixty (60) days prior to the date of any such written
consent or vote to remove, the Limited Partners or Stockholders seeking to
remove the General Partner shall give the General Partner written notice of
their intention to effect such Removal (a “ No-Fault Removal Notice ”). Such
notice shall provide an explanation of the reasons for such Removal. Within said
sixty (60) day period, the General Partner shall have the right to call a
meeting of the Partners in accordance with Section 6.6, or otherwise contact
some or all of the Partners to discuss such Removal and the reasons therefor.
The Removal of the General Partner pursuant to this Section 8.4(b) shall be
effective sixty (60) days after the date on which the required percentage vote
of the Limited Partners has been obtained.

     8.5 Payment of Expenses to General Partner Upon Withdrawal. Without in any
way limiting the provisions of Section 8.6 below, upon the assignment of all of
the General Partner’s interest, a Voluntary Withdrawal or an Involuntary
Withdrawal (collectively, a “ Withdrawal ”) or Removal of the General Partner,
the Withdrawn or Removed General Partner or its estate or legal representatives
shall be entitled to receive from the Partnership any reimbursements of expenses
due and owing to it by the Partnership. The right of the General Partner, its
estate or legal representatives to payment of said amounts shall be subject to
any claim for damages which the Partnership or any Partner may have against such
General Partner, its estate or legal representatives if such Withdrawal is in
contravention of this Agreement.

     8.6 General Partner’s Interest upon Removal or Withdrawal.

     (a) In the event that the General Partner shall be Removed in accordance
with Section 8.4(a) hereof or Withdraws as a general partner of the Partnership
in accordance with Section 8.3 hereof, in addition to the reimbursement of
expense pursuant to Section 8.5, the General Partner shall be entitled to
payment of the Management Fees, the Redevelopment Fees and the Development Fees,
in each case computed through the date on which the General Partner is Removed
or Withdraws, provided, however, that the General Partner’s entitlement to the
Carried Interest (as defined below) provided hereby shall terminate on the date
on which the General Partner is Removed.

     (b) In the event that the General Partner shall be Removed in accordance
with Section 8.4(b) hereof or shall Withdraw in accordance with Section 8.2
hereof, in addition to the reimbursement of expenses pursuant to Section 8.5,
and the rights pursuant to Section 8.6(d), the Partnership shall distribute to
such Removed General Partner or Withdrawn General Partner an amount equal to the
sum of (i) the General Partner’s Estimated Value Capital Account as of the date
of such Removal or Withdrawal (including that portion representing the Equity
Interest held by the General Partner) plus (ii) the amount of the Management
Fees, the Redevelopment Fees and the Development Fees, in each case computed
through the date on which the General Partner is Removed or Withdraws plus (iii)
an amount equal to nine (9) months of Management Fees calculated at the rate
applicable to the Management Fees in effect immediately prior to the date of
such Removal, provided , however , that the amount described in clause (iii) of
this sentence shall not be paid in the event that the General Partner Withdraws
pursuant to Section 8.2. The amount described in clause (iii) of the preceding
sentence shall be treated as a guaranteed payment within the meaning of Code
Section 707(c). If, at the time of such Removal, the Partnership does not have
sufficient cash available to pay in full the distribution required under this
Section 8.6(b), such distribution shall be made as soon as cash becomes
available thereafter (and, in any event, prior to any distributions to other
Partners), and any unpaid balance shall be evidenced by a promissory note and
shall accrue interest, from the date of such Removal until paid, at the
then-current prime rate as published in the Wall Street Journal plus one percent
(1%), per annum. Any such interest shall be treated as a guaranteed payment
within the meaning of Code Section 707(c).

 
 
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     (c) For purposes of this Section 8.6, the General Partner’s “Carried
Interest” shall be its entitlement to the Incentive Distributions.

     (d) In the event that the General Partner shall be Removed in accordance
with Section 8.4(b) hereof, the General Partner shall have the right, but not
the obligation, (the “ Purchase Option ”) to purchase, either directly or
indirectly through an AVB Affiliate, any one of the multi-family apartment
communities or other real estate assets held by the Partnership at the time of
such Removal. The price for such Strategic Investment to be acquired by the
General Partner shall be determined by an Appraisal of the applicable Strategic
Investment conducted by an Independent Appraiser selected by the Advisory
Committee. The General Partner shall notify the Partnership within a reasonable
period of time of such Removal whether it intends to exercise the Purchase
Option, and if so, the identity of the real estate asset selected by the General
Partner and the anticipated date of acquisition, which date shall be promptly
after delivering such notice. Prior to the receipt of such notice by the
Partnership, the Purchase Option shall not be deemed to impair the Partnership’s
rights or title with respect to any of its real estate assets. Upon the receipt
of such notice by the Partnership, (i) the Purchase Option shall not be deemed
to impair the Partnership’s rights or title with respect to any of its real
estate assets other than the real estate asset selected by the General Partner,
and (ii) the Partnership shall not sell, offer to sell, borrow against, pledge
or otherwise encumber the real estate asset selected by the General Partner.

     (e) In the event that the General Partner shall be Removed pursuant to
Section 8.4(a), the General Partner shall return Incentive Distributions to the
Partnership as calculated in accordance with Section 11.6 at the time of such
Removal based on a hypothetical liquidation of the Partnership following a
hypothetical sale of all of the assets of the Partnership at prices equal to
their most recent valuations and the distribution of the proceeds thereof to the
Partners pursuant to this Agreement (after the hypothetical payment of all
actual Partnership indebtedness, and any other liabilities related to the
Partnership’s assets, limited, in the case of non-recourse liabilities, to the
collateral securing or otherwise available to the lender to satisfy such
liabilities). In the event that the General Partner shall be Removed in
accordance with Section 8.4(b), the General Partner shall not be required to
return any Incentive Distributions to the Partnership and all obligations of the
General Partner under Section 11.6 shall be discharged at the time of such
Removal.

     8.7 Further Consequences of Removal or Withdrawal.

     (a) If the Partnership does not terminate as provided in Section 8.8
hereof, then in the event of the Removal or Withdrawal of the General Partner as
a general partner of the Partnership, the former General Partner shall, to the
extent of any remaining interest in the Partnership, become a Limited Partner of
the Partnership as of the effective date of its Withdrawal or Removal.
Thereafter, except as otherwise provided in this Article 8, the former General
Partner shall be treated as a Limited Partner for all purposes of this
Agreement. Upon becoming a Limited Partner, the former General Partner’s Capital
Account and Commitment shall initially be the same as they were on the effective
date of its Withdrawal or Removal (after giving effect to any adjustment
required under or as a result of Section 8.6). The General Partner shall also
retain any interest as a Stockholder of the Company as of the effective date of
any Removal or Withdrawal.
 
 
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     (b) After Withdrawal or Removal of a General Partner, the Withdrawn or
Removed General Partner or its estate or legal representatives shall remain
liable for all obligations and liabilities incurred by it while a General
Partner and for which it was liable as a General Partner, but shall be free of
any obligation or liability incurred on account of or arising from the
activities of the Partnership from and after the time such Withdrawal or Removal
shall have become effective.

     (c) If a court of competent jurisdiction determines that the Partnership
has suffered any loss, damage or liability in consequence of the conduct that
formed the basis for the General Partner’s Removal under Section 8.4(a), the
amount of any distributions to the former General Partner, in its capacity as
the general partner pursuant to Sections 5.6(a) or Section 8.6 shall be reduced
by the value of such loss, damage or liability (as determined by the court) to
the extent not otherwise paid by the former General Partner.

     8.8 Continuation of Partnership Business. If, following the Withdrawal or
Removal of a General Partner, there is no remaining General Partner, any Limited
Partner may notify the other Limited Partners of such circumstances. Any Limited
Partner may then propose for admission a substitute General Partner. A
substitute General Partner proposed pursuant to this Section 8.8 shall, with the
specific written consent of Limited Partners representing a Voting Interest of
the Limited Partners of at least sixty-six and two-thirds percent (66-2/3%),
excluding from the vote any Limited Partner that is an AVB Affiliate, become a
substitute General Partner as of the date of Withdrawal or Removal of the former
General Partner, upon his or its execution of this Agreement and shall thereupon
continue the Partnership business. If no substitute General Partner has received
such consent of the Limited Partners and executed this Agreement within ninety
(90) days from the date of the General Partner’s Withdrawal or Removal, then the
Partnership shall thereupon terminate and dissolve in accordance with Article 10
hereof.

9.     Rights and Obligations of the Limited Partners

     9.1 Limited Liability. A Limited Partner that receives the return of any
part of its Capital Contribution shall be liable to the Partnership for the
amount of its Capital Contribution so returned to the extent, and only to the
extent, provided by the Act except as may otherwise be provided in
Section 4.4(b)(ii). Except as provided in Sections 4.1 and 4.4 or the Act, the
Limited Partners shall not otherwise be liable to the Partnership for the
repayment, satisfaction, or discharge of the Partnership’s debts, liabilities,
and obligations. Except as provided in Sections 4.2 or 4.4 with respect to the
payment of interest upon failure to pay when due any installment of a Capital
Commitment and the payment of Catch-up Interest, respectively, no Limited
Partner shall have any obligation to contribute money in excess of such Limited
Partner’s Capital Commitment. No Limited Partner shall be personally liable to
any third party for any liability or other obligation of the Partnership.
 
 
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     9.2 Authority of Limited Partners. The Limited Partners shall not
participate in or have any control over the management of the Partnership or its
business and affairs and shall not have any power or authority to act for or
bind the Partnership.

     9.3 Confidentiality.

     (a) All information (including, without limitation, processes, plans, data,
reports, drawings, documents, business secrets, financial information or
information of any other kind) received by any Limited Partner pursuant to the
terms of this Agreement (“ Confidential Information ”) shall be received and
maintained in confidence by such Limited Partner.

     (b) Confidential Information may be used by Limited Partners only for the
purpose of monitoring their investments in the Partnership. The Limited Partners
agree that they will not use any Confidential Information for any other purpose,
including, without limitation, use in conducting or furthering their own
business or that of any affiliates or any competing business.

     (c) The obligations of limited use and nondisclosure contained in this
Section 9.3 will not (i) restrict the disclosure of Confidential Information to
a Limited Partner’s attorneys, tax advisors, accountants or other professional
advisors or consultants (so long as such Persons are under an obligation of
confidentiality consistent with the terms of this Section 9.3), (ii) restrict
the disclosure of Confidential Information to the extent required by law or
legal process or to the extent permitted with the prior written consent of the
General Partner or (iii) apply to information that (w) was publicly known or
otherwise known to a Limited Partner prior to the time of such disclosure,
(x) subsequently becomes publicly known through no act or omission by a Limited
Partner or any person acting on a Limited Partner’s behalf, (y) otherwise
becomes known to a Limited Partner without breach of this Agreement other than
through disclosure by the Partnership or (z) constitutes financial statements
delivered to a Limited Partner under Section 12 that are otherwise publicly
available.

     (d) Stockholders shall have the same rights and obligations as a Limited
Partner with respect to Confidential Information. Therefore, for purposes of
this Section 9.3, the term “Limited Partner” shall be deemed to include
Stockholders.

     (e) The obligations of confidentiality provided for in this Section 9.3
shall not apply to the tax treatment and tax structure of the Partnership, the
Company, a Partner’s interests in the Partnership or a Stockholder’s interests
in the Company, which may be disclosed; provided , however, that this
authorization to disclose the tax treatment and tax structure is limited to the
extent that confidentiality is required to comply with any applicable securities
laws.

     9.4 Preservation of REIT Status. The Limited Partners shall cooperate with
the General Partner to accommodate any requested changes to this Agreement that
are reasonably necessary or desirable for the Company to maintain its status as
a REIT as long as such changes do not have a material adverse economic or tax
impact on the Limited Partners or a material adverse impact on the rights of the
Limited Partners under this Agreement.
 
 
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     9.5 Special Rights of the Company. To facilitate the Company’s input with
respect to the management of the business of the Partnership, at all times the
Company shall have the following management rights:

     (i) the right to discuss, and provide advice with respect to, the business
operations, properties and financial and other conditions of the Partnership
with the Partnership’s officers and employees and the right to consult with and
advise the Partnership’s management on matters affecting the business and
affairs of the Partnership;

     (ii) the right to submit business proposals or suggestions to the
Partnership’s management from time to time with the requirement that one or more
members of the Partnership’s management discuss such proposals or suggestions
with the Company within a reasonable period after such submission and the right
to call a meeting with the Partnership’s management in order to discuss such
proposals or suggestions; and

     (iii) the right (a) upon reasonable notice and accompanied by the General
Partner, to visit the Partnership’s business premises and other properties
during normal business hours, (b) to receive financial statements, operating
reports, budgets or other financial reports of the Partnership on a regular
basis describing the Partnership’s financial performance, material developments
or events, significant proposals and other material aspects of the Partnership’s
business and operations, (c) to examine the books and records of the
Partnership, and (d) to request such other information at reasonable times and
intervals in light of the Partnership’s normal business operations concerning
the general status of the Partnership’s business, financial condition and
operations.

The rights set forth in this Section 9.5 shall be in addition to all other
rights that the Company has under this Agreement. The Company’s exercise of its
rights under this Section 9.5 shall not be deemed to be participation in or
control of the management of the Partnership for purposes of determining whether
the Company is acting as a general partner of the Partnership under the Act.

10.   Duration and Termination of the Partnership

     10.1 Duration. Except as provided in Section 8.8, the duration of the
Partnership shall continue until the eighth anniversary of the Final Closing
Date, provided, however, that the General Partner, after consultation with the
Advisory Committee, may, in its sole discretion, elect to extend the
Partnership’s term for an additional year, and provided, further, that the term
of the Partnership may be subsequently further extended for an additional year
upon the approval of (i) the General Partner and (ii) the Limited Partners
representing a Voting Interest of the Limited Partners in excess of fifty
percent (50%), excluding from the vote any Partner that is an AVB Affiliate so
long as the General Partner is an AVB Affiliate. If so extended, the duration of
the Partnership shall continue until the ninth or tenth anniversary of the Final
Closing Date, as applicable.

     10.2 Bankruptcy of Limited Partner. The bankruptcy, insolvency,
dissolution, or liquidation of, or the making of an assignment for the benefit
of creditors by, or any other act or circumstance with respect to, a Limited
Partner shall not cause the dissolution or termination of the Partnership.
 
 
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     10.3 Termination. The Partnership shall terminate and commence dissolution
ninety (90) days from the earlier of (i) the date of the Withdrawal or Removal
of a General Partner, unless the remaining General Partner or Partners or a
substitute General Partner elect to continue the Partnership in accordance with
Section 8.8, in which event the Partnership shall not terminate or dissolve, but
shall continue as though no such Withdrawal or Removal had occurred; (ii) the
expiration of the duration of the Partnership as provided in Section 10.1;
(iii) upon the vote of the General Partner and Limited Partners representing a
Voting Interest of the Limited Partners of at least sixty-six and two-thirds
percent (66-2/3%), excluding from the vote any Limited Partner that is an AVB
Affiliate so long as the General Partner is an AVB Affiliate; or (iv) at the
election of the General Partner, any time after the first date following the
Investment Period on which the Partnership no longer, directly or indirectly,
owns any Strategic Investments.

11.   Liquidation of the Partnership

     11.1 General. Upon the termination and/or commencement of the dissolution
of the Partnership, the Partnership shall be liquidated in accordance with this
Article and the Act. The termination, dissolution and liquidation shall be
conducted and supervised by the General Partner or, if there is no remaining
General Partner and no substitute General Partner has been appointed following
the Withdrawal or Removal of a General Partner, by a Person who shall be
designated for such purpose by Limited Partners which have made a majority of
the aggregate Capital Contributions made by all of the Limited Partners,
excluding from the vote any Limited Partner that is an AVB Affiliate (the
General Partner or such trustee or other Person, as applicable, being referred
to in this Article 11 as the “ Liquidating Agent ”). The Liquidating Agent shall
have all of the rights, powers, and authority with respect to the assets and
liabilities of the Partnership in connection with the liquidation, dissolution
and termination of the Partnership that the General Partner has with respect to
the assets and liabilities of the Partnership during the term of the
Partnership, and the Liquidating Agent is hereby expressly authorized and
empowered to execute any and all documents necessary or desirable to effectuate
the liquidation of the Partnership and the transfer of any assets or liabilities
of the Partnership. The Liquidating Agent shall have the right from time to
time, by revocable powers of attorney, to delegate to one or more Persons any or
all of such rights and powers and such authority and power to execute documents
and, in connection therewith, to fix the reasonable compensation of each such
Person, which compensation shall be charged as an expense of liquidation.

     The Liquidating Agent shall liquidate the Partnership as promptly as shall
be practicable after termination, consistent with the preservation of capital.
Without limiting the rights, powers, and authority of the Liquidating Agent as
provided in this Section 11.1, any Partnership asset that the Liquidating Agent
may sell shall be sold at such price and on such terms as the Liquidating Agent
may, in its sole discretion, deem appropriate. Subject to Section 5.6(b)(ii),
the Liquidating Agent may, if it so determines, distribute restricted securities
and other assets of the Partnership in-kind to the Partners.

     Notwithstanding any other provision of this Agreement, in the event that
the Company adopts a plan of liquidation pursuant to Section 8.3 of the Charter,
then the Partnership shall commence the liquidation of its assets at the same
time as the Company commences liquidation of its assets pursuant to such plan.
 
 
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     11.2    Priority on Liquidation; Distributions. The proceeds of liquidation
shall be applied in the following order of priority:

     (a) To pay the costs and expenses of the dissolution and liquidation;

     (b) To pay matured debts and liabilities of the Partnership to all
creditors of the Partnership (including, without limitation, any liability to
any Partner);

     (c) To establish any reserves which the Liquidating Agent may deem
necessary or advisable for any contingent or unmatured liability of the
Partnership to all Persons who are not Partners;

     (d) To pay any outstanding balances of promissory notes payable to a
Removed General Partner pursuant to Section 8.6(b);

     (e) To establish any reserves which the Liquidating Agent may deem
necessary or advisable for any contingent or unmatured liability of the
Partnership to Partners; and

     (f) The balance, if any, to the Partners in accordance with Section 5.6(a).

     11.3 Orderly Liquidation. A reasonable time shall be allowed for the
orderly liquidation of the assets of the Partnership and the discharge of
liabilities so as to minimize the losses normally attendant upon a liquidation.
The Liquidating Agent shall, however, if possible consistent with the preceding
sentence, dispose of Partnership assets and effect distributions to the Partners
within one hundred eighty (180) days after the date of termination of the
Partnership.

     11.4 Source of Distributions. Subject to Section 11.6, the General Partner
shall not be liable out of its own assets for the return of the Capital
Contributions of the Limited Partners, it being expressly understood that any
such return shall be made solely from the Partnership’s assets.

     11.5 Statements on Termination. Each Partner shall be furnished with a
statement prepared by the Partnership’s accountant, which shall set forth the
assets and liabilities of the Partnership as at the date of complete
liquidation, and each Partner’s share thereof. Upon consummation of the
liquidation of the Partnership set forth in Article 11 hereof, the Limited
Partners shall cease to be such, and the Liquidating Agent shall execute,
acknowledge, and cause to be filed a certificate of cancellation of the
Partnership.

 
 
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     11.6 Return of Incentive Distributions. If upon liquidation of the
Partnership, the aggregate Incentive Distributions received by the General
Partner (net of any distributions previously returned by the General Partner)
represent more than twenty percent (20%) of the aggregate distributions in
excess of the aggregate Capital Contributions, then the General Partner shall
repay such excess to the Partnership, and the Partnership shall distribute such
amount to the Partners in accordance with their Equity Interest Percentages. If
following such payment the Partners have not received the full Preferred Return
(calculated through the date of liquidation), then the General Partner shall
return such additional Incentive Distributions as necessary so that the Partners
receive the full Preferred Return, and the Partnership shall pay such amount to
the Partners in accordance with their Equity Interest Percentages.
Notwithstanding the foregoing, in no event shall the aggregate amount payable by
the General Partner to the Partnership pursuant to this Section 11.6 exceed the
aggregate Incentive Distributions received by the General Partner. For so long
as the General Partner is an AVB Affiliate, AVB shall guarantee the obligations
of the General Partner to make the payments required by this Section 11.6 as and
to the extent provided in the form of guaranty attached hereto as Exhibit A .

12.   Books; Accounting; Tax Elections; Reports

     12.1 Books and Accounts. Complete and accurate books and accounts shall be
kept and maintained for the Partnership at its principal place of business. Such
books and accounts shall be kept in accordance with generally accepted
accounting principles consistently applied, the provisions of Section 5.1 and on
such other basis, if any, as the General Partner determines is necessary to
properly reflect the operations of the Partnership. Each Partner and each
Stockholder or its duly authorized representative, at its own expense, shall at
all reasonable times have access to, and may inspect and make copies of, such
books and accounts and any other records of the Partnership for reasons
reasonably related to such Partner’s or such Stockholder’s interest in the
Partnership, upon reasonable prior written notice to the General Partner,
subject to the General Partner’s right to keep information confidential pursuant
to and in accordance with Section 17-305(b) of the Act.

     All funds received by the Partnership other than those invested in Interim
or Strategic Investments shall be deposited in the name of the Partnership in
such bank account or accounts, and all securities owned by the Partnership may
be deposited with such custodian, as the General Partner may designate from time
to time and withdrawals therefrom shall be made upon such signature or
signatures on behalf of the Partnership as the General Partner may designate
from time to time.

     12.2 Records Available. The General Partner shall maintain at the
Partnership’s principal office the following documents: (i) a current list of
the full name and last known business address of each Partner, (ii) a copy of
the Certificate of Limited Partnership and all amendments thereto, (iii) copies
of the Partnership’s federal, state and local income tax returns and of any
financial statements and accounting records of the Partnership during the term
of the Partnership, as determined pursuant to Section 10.1 hereof, and for five
(5) years thereafter, and (iv) copies of this Agreement and all amendments
thereto, together with executed copies of any powers of attorney pursuant to
which this Agreement, the Certificate of Limited Partnership, or any such
amendment has been executed. Such documents and all other Partnership documents
are subject to inspection and copying at the reasonable request and at the
expense of any Partner or any Stockholder during ordinary business hours upon
reasonable prior notice to the General Partner. Except to the extent requested
by a Limited Partner, the General Partner shall have no obligation to deliver or
mail a copy of the Partnership’s Certificate of Limited Partnership or any
amendment thereto to the Limited Partners. The General Partner shall have the
right to preserve all records and accounts in original form or on microfilm,
magnetic tape, or any other process or form that the General Partner reasonably
determines is appropriate to preserve such records and accounts.
 
 
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     12.3 Annual Financial Statements and Valuation. The Partnership shall
engage a nationally recognized accounting firm to act as the accountant for the
Partnership. Within ninety (90) days after the end of each Fiscal Year, the
General Partner, at Partnership expense, shall prepare and mail to each Limited
Partner and to each former Partner who withdrew during such Fiscal Year (or to
such former Partner’s legal representative, as applicable) (i) a summary
description of each acquisition or disposition by the Partnership during the
previous Fiscal Year, including any transactions with any AVB Affiliate, and
(ii) a statement of all distributions made to such Partner during the previous
fiscal quarter and the previous Fiscal Year and such Partner’s Capital Account
balance and the Return Account balance as of the end of the immediately
preceding Fiscal Year. The General Partner shall also furnish to the Limited
Partners (x) a balance sheet of the Partnership as of the end of the Fiscal Year
and statements of operations, Partners’ Equity and cash flow for such Fiscal
Year, prepared in accordance with generally accepted accounting principles,
together with the auditors’ report thereon indicating that the audit was
performed in accordance with generally accepted auditing standards and
(y) current value financial statement of the Partnership as of the end of the
Fiscal Year. The financial statements described in clause (y) of the preceding
sentence will be prepared in accordance with procedures established by the
General Partner and shall be certified by the General Partner as having been
prepared in accordance with such procedures.

     12.4 Quarterly Financial Statements. Within sixty (60) days after the end
of each of the first three calendar quarters of each Fiscal Year, the General
Partner shall mail to each Partner unaudited current value financial statements
of the Partnership as at such quarter-end, prepared in accordance with
procedures established by the General Partner. At the same time the General
Partner shall also provide the Partners with a detailed report of the
Partnership’s business and activities during such quarter, including a statement
of Capital Accounts and remaining Capital Commitments, a summary of investments
and dispositions made during such quarter and a summary of any transaction with
any AVB Affiliate during such quarter.

     12.5 Reliance on Accountants. All decisions as to accounting matters,
except as specifically provided to the contrary herein, shall be made by the
General Partner, to the extent consistent with the terms of this Agreement, in
accordance with generally accepted accounting principles and procedures applied
in a consistent manner. The General Partner may rely upon the advice of the
Partnership’s accountants as to whether such decisions are in accordance with
generally accepted accounting principles.

     12.6 Tax Matters Partner; Filing of Returns.

     (a)   The General Partner shall be the “tax matters partner” of the
Partnership and shall, at the Partnership’s expense, use commercially reasonable
efforts to cause to be prepared and timely filed after the end of each Fiscal
Year of the Partnership all Federal and state income tax returns required of the
Partnership for such Fiscal Year. The Partnership shall make such elections
pursuant to the provisions of the Internal Revenue Code as the General Partner,
in its sole discretion, deems appropriate.
 
 
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     (b)  The Partnership shall use commercially reasonable efforts to deliver
to each Partner a Form K-1 by August 1st of each year (or the 1st day of the 8th
month following the close of the Fiscal Year if the Fiscal Year is not the
calendar year).

     12.7 Fiscal Year. The fiscal year (the “Fiscal Year”) of the Partnership
shall be the period ending on December 31 of each year, or such other period as
the General Partner may designate as the Fiscal Year of the Partnership,
consistent with the requirements of the Code.

13.   Power of Attorney

     13.1 General. Each Limited Partner irrevocably constitutes and appoints
each officer and director of the General Partner and each Liquidating Agent the
true and lawful attorney-in-fact of such Limited Partner to execute,
acknowledge, swear to and file (i) any certificate or other instrument which may
be required to be filed by the Partnership under the laws of any jurisdiction in
which the Partnership does business, or which the General Partner shall deem
advisable to file, so long as no such certificate or instrument shall have the
effect of amending this Agreement; (ii) any agreement, document, certificate or
other instrument which any Limited Partner is required to execute in connection
with the termination of such Limited Partner’s interest in the Partnership and
the withdrawal of such Limited Partner pursuant to Section 4.2 hereof and which
such Limited Partner has failed to execute and deliver within ten (10) days
after written request therefor by the General Partner; and (iii) any instrument
which the General Partner deems necessary or appropriate to facilitate the
implementation of the terms of this Agreement, including the pledging of Capital
Commitment obligations as contemplated by Sections 3.2 and 4.1(d), so long as
such instruments do not alter the rights or obligations of the Limited Partners
under the terms of this Agreement.

     13.2 Survival of Power of Attorney. It is expressly acknowledged by each
Limited Partner that the foregoing power of attorney is coupled with an interest
and shall survive death, legal incapacity, bankruptcy, insolvency, assignment
for the benefit of creditors and assignment by a Limited Partner of its Limited
Partner’s interest in the Partnership; provided, however, that if a Limited
Partner shall assign all of its interest in the Partnership and the assignee
shall, in accordance with the provisions of this Agreement, become a substitute
Limited Partner, such power of attorney shall survive such assignment only for
the purpose of enabling the General Partner to execute, acknowledge, swear to
and file any and all instruments necessary to effect such substitution.

     13.3 Written Confirmation of Power of Attorney. Each Limited Partner hereby
agrees to execute a confirmatory or special power of attorney, containing the
substantive provisions of this Section substantially in the form attached hereto
as Exhibit B .

14.   Miscellaneous

 14.1 Further Assurances. The Partners agree to execute such instruments and
documents as may be required by the Act or by law or which the General Partner
reasonably deems necessary or appropriate to carry out the intent of this
Agreement so long as they do not alter the rights and obligations of the Limited
Partners under this Agreement.
 
 
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     14.2 Successors and Assigns. The agreements contained herein shall be
binding upon and inure to the benefit of the permitted successors and assigns of
the respective parties hereto.

     14.3 Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the Act and judicial interpretations thereof to the extent
applicable and otherwise in accordance with the laws of the State of Delaware.
Notwithstanding the foregoing, any legal proceeding involving any contract claim
asserted against PSERS arising out of this Agreement may only be brought before
and subject to the exclusive jurisdiction of the Board of Claims of the
Commonwealth of Pennsylvania pursuant to §§1721-1726 of Title 62 Pa. Statutes,
and such proceeding shall be governed by the procedural rules and laws of the
Commonwealth of Pennsylvania, without regard to the principles of conflicts of
law.

     14.4 Severability. If any one or more of the provisions contained in this
Agreement, or any application thereof, shall be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and all other applications thereof shall
not in any way be affected or impaired thereby, unless the absence of the
invalid, illegal or unenforceable provision would materially affect the
respective interests of the Partners, in which case the Partners shall use their
best efforts to make such changes or adjustments in this Agreement as would
restore the respective economic interests of the Partners as originally
contemplated hereby.

     14.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original of this Agreement
binding on the parties hereto.

     14.6 Entire Agreement. This Agreement represents the entire agreement among
the parties hereto with respect to the subject matter hereof. In the event of
any conflict or inconsistency between the terms of the Private Placement
Memorandum of the Partnership, as supplemented or amended from time to time, and
the terms of this Agreement, the Charter, the Bylaws of the Company, and/or any
subscription agreement to acquire interests in the Partnership or REIT Shares,
respectively, as such documents may be amended or restated from time to time,
the terms of this Agreement, the Charter, the Bylaws of the Company, and any
such subscription agreements, respectively, shall govern in all respects.

     14.7 Amendment. Except as provided below in this Section 14.7, the
provisions of this Agreement may be amended or waived at any time and from time
to time only with the consent of the General Partner and of Limited Partners
representing a Voting Interest of the Limited Partners in excess of fifty
percent (50%), excluding from the vote any Limited Partner that is an AVB
Affiliate so long as the General Partner is an AVB Affiliate. The General
Partner may amend Schedule A  hereto at any time and from time to time without
the consent of any other Partner to reflect the admission or withdrawal of any
Partner, or the change in any Partner’s Capital Commitment, as contemplated by
this Agreement. The General Partner may amend this Agreement, without the
consent of the Limited Partners, for the purposes of correcting typographical
errors, eliminating ambiguities or making other immaterial changes which it
determines in good faith not to be materially adverse to the Limited Partners.
No amendment shall become effective without the consent of a Limited Partner if
such amendment would cause an increase in the Capital Commitment or adversely
affect the limited liability of that Limited Partner. No amendment of this
Section 14.7 shall become effective without the unanimous consent of the
Partners. No amendment shall become effective without the unanimous consent of
the Partners adversely affected if such amendment would materially adversely
affect the allocations, distributions or deficit restoration obligations
provided for by this Agreement. No amendment shall be made to Sections 3.3(c),
3.4 or 5.6(b)(ii) without the consent of the General Partner and of Limited
Partners which are ERISA Partners and which made a majority of the aggregate
Capital Contributions made by all ERISA Partners. No amendment shall be made to
cause any provision(s) of this Agreement to comply with Section 514(c)(9) of the
Code or to Sections 3.3(b) or 3.6 without the consent of the Board of Directors
and Stockholders that hold in the aggregate REIT Shares representing at least
seventy-five percent (75%) of all outstanding REIT Shares. Notwithstanding any
provision of this Agreement or this Section 14.7 to the contrary, the General
Partner may amend this Agreement, without the consent of the Limited Partners,
to make such modifications as the General Partner reasonably determines are
appropriate in order to qualify the Company as a REIT or preserve the Company’s
qualification as a REIT, provided that such modifications are approved in
advance by the Advisory Committee.
 
 
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     14.8 Construction. The captions used herein are intended for convenience of
reference only, and shall not modify or affect in any manner the meaning or
interpretation of any of the provisions of this Agreement. As used herein, the
singular shall include the plural, the masculine gender shall include the
feminine and neuter, and the neuter gender shall include the masculine and
feminine, unless the context otherwise requires. The words “hereof”, “herein”,
and “hereunder”, and words of similar import, when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement.

     14.9 Force Majeure. Whenever any act or thing is required of the
Partnership or the General Partner hereunder to be done within any specified
period of time, the Partnership or the General Partner, as the case may be,
shall be entitled to such additional period of time to do such act or thing as
shall equal any period of delay resulting from causes beyond the reasonable
control of the Partnership or the General Partner, as the case may be,
including, without limitation, bank holidays, actions of governmental agencies,
and financial crises of a nature materially affecting the purchase and sale of
securities; provided, that this provision shall not have the effect of relieving
the Partnership or the General Partner from the obligation to perform any such
act or thing.

     14.10 Notices. All notices, demands, solicitations of consent or approval,
and other communications hereunder shall be in writing and shall be sufficiently
given if personally delivered, transmitted by facsimile, or sent postage prepaid
by overnight courier or registered or certified mail, return receipt requested,
addressed as follows: if intended for the Partnership or the General Partner, to
the Partnership’s principal office determined pursuant to Section 2.4 hereof,
and if intended for any Limited Partner to the address of such Limited Partner
set forth on Schedule A  hereto, or to such other address as such Partner may
designate by written notice. Notices shall be deemed to have been given when
personally delivered or when transmitted on a business day by facsimile with a
machine-generated confirmation of transmission or, if mailed or sent by
overnight courier, the date on which received. The provisions of this Section
shall not prohibit the giving of written notice in any other manner; provided
that any such written notice shall be deemed given only when actually received.
 
 
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     14.11 No Right of Partition for Redemption. No Partner and no
successor-in-interest to any Partner shall have the right while this Agreement
remains in effect to have the property of the Partnership partitioned, or to
file a complaint or institute any proceeding at law or in equity to have the
property of the Partnership partitioned or, except on such terms and conditions
as the General Partner may, in its sole discretion, approve, to require the
redemption of its interest in the Partnership.

     14.12 Third-Party Beneficiaries. Except with respect to Section 3.6 hereof
and except with respect to any rights expressly granted to Stockholders in this
Agreement, the provisions of this Agreement are not intended to be for the
benefit of any creditor or other person to whom any debts or obligations are
owed by, or who may have any claim against, the Partnership or any of its
Partners, except for Partners in their capacities as such. Notwithstanding any
contrary provision of this Agreement, no such creditor or person shall obtain
any rights under this Agreement or shall, by reason of this Agreement, be
permitted to make any claim against the Partnership or any Partner.

     14.13 General Partner as Limited Partner or Stockholder. A General Partner
may also be a Limited Partner or may make a Capital Commitment as a General
Partner or as a Stockholder, and in such event its rights, powers, restrictions
and liabilities as a General Partner shall remain unaffected, and in addition it
shall, in respect of its Capital Contributions as a Partner, have all of the
rights and powers and be subject to all of the restrictions and liabilities of a
Partner, except as otherwise expressly provided in this Agreement.

     14.14 UCC Article 8 Election. Partnership interests in the Partnership
shall be securities governed by Article 8 of the Delaware Uniform Commercial
Code.

[Remainder of Page Intentionally Left Blank]
 
 
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     IN WITNESS WHEREOF, this Amended and Restated Limited Partnership Agreement
has been executed by the parties as of this 16 th  day of March, 2005.

                     
GENERAL PARTNER:
 
AVALONBAY CAPITAL
MANAGEMENT, INC.
  
   
By:  
/s/ Thomas J. Sargeant  
     
Name:  
Thomas J. Sargeant 
     
Title:  
Executive Vice President and CFO 
       

LIMITED PARTNERS:
 
See Signature Pages attached hereto
  
                     

[Signature Page to Amended and Restated Limited Partnership Agreement
 of AvalonBay Value Added Fund, L.P.]

 
 

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AVALONBAY VALUE ADDED FUND, L.P.

LIMITED PARTNERSHIP AGREEMENT

LIMITED PARTNER SIGNATURE PAGE

 
     The Subscriber, desiring to become a Limited Partner of AvalonBay Value
Added Fund, L.P., a Delaware limited partnership (the “ Partnership ”), hereby
executes the Amended and Restated Limited Partnership Agreement of the
Partnership to which AvalonBay Capital Management, Inc., a Maryland corporation,
is a party as the General Partner. The Subscriber hereby agrees to all the
provisions of said Limited Partnership Agreement, and agrees that this signature
page may be attached to any counterpart copy of said Limited Partnership
Agreement.

                     
Name of Subscriber:
 
AvalonBay Value Added Fund, Inc.
  
   
By:  
/s/ Thomas J. Sargeant  
     
Hereunto duly authorized 
                 

 

  Print Name: Thomas J. Sargeant               Title:
Executive Vice President and CFO 
            Date:
March 16, 2005
 

 

 
 

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AVALONBAY VALUE ADDED FUND, L.P.

LIMITED PARTNERSHIP AGREEMENT

LIMITED PARTNER SIGNATURE PAGE

     The Subscriber, desiring to become a Limited Partner of AvalonBay Value
Added Fund, L.P., a Delaware limited partnership (the “ Partnership ”), hereby
executes the Amended and Restated Limited Partnership Agreement of the
Partnership to which AvalonBay Capital Management, Inc., a Maryland corporation,
is a party as the General Partner. The Subscriber hereby agrees to all the
provisions of said Limited Partnership Agreement, and agrees that this signature
page may be attached to any counterpart copy of said Limited Partnership
Agreement.

                     
Date: March 16, 2005
 
 
Name of Subscriber:
 
 
COMMONWEALTH OF
PENNSYLVANIA PUBLIC SCHOOL
EMPLOYEES’ RETIREMENT SYSTEM

  
   
By:  
/s/ Alan H. Van Noord  
     
Name:  
Alan H. Van Noord, CFA 
     
Title:  
Chief Investment Officer 
           
By:  
/s/ Jeffrey B. Clay  
     
Name:  
Jeffrey B. Clay 
     
Title:  
Executive Director 
       
Approved for form and legality:
  
   
/s/ David DeVries  
   
Deputy General Counsel 
   
Office of General Counsel 
           
/s/ Robert Mulley  
   
Chief Deputy Attorney General 
   
Office of Attorney General 
           
/s/ Gerald Gornish  
   
Gerald Gornish, Chief Counsel 
   
Public School Employees’ Retirement System 
   

 
 

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AvalonBay Value Added Fund, L.P.

Schedule A

List of Partners and Capital Commitments

                   
General Partner
 
Capital Commitment
         
AvalonBay Capital Management, Inc.
       
c/o AvalonBay Communities, Inc.
 2900 Eisenhower Avenue, Suite 300
 Alexandria, VA 22314-5223
 
5% of the aggregate Capital Commitments
         
Limited Partner
 
Capital Commitment
         
AvalonBay Value Added Fund, Inc.
 c/o AvalonBay Communities, Inc.
 2900 Eisenhower Avenue, Suite 300
 Alexandria, VA 22314-5223
 
$238,500,000
         
Commonwealth of Pennsylvania
 Public School Employees’
 Retirement System
 Five North Fifth Street
 Harrisburg, Pennsylvania 17101
 
25% of the aggregate Capital Commitments up to a maximum of $75,000,000

 
[Note: AvalonBay Communities, Inc. has made a capital commitment of $50,000,000
to AvalonBay Capital Management, Inc. (“ACM”). ACM in turn has made capital
commitments of (i) $16.5 million to AvalonBay Value Added Fund, L.P., for a
general partnership interest, and (ii) $33.5 million to AvalonBay Value Added
Fund, Inc., a Maryland corporation that intends to qualify as a real estate
investment trust (“VAF”). Seven institutional investors have also made capital
commitments to VAF totaling $205 million.]

 
 

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AvalonBay Value Added Fund, L.P.

Exhibit A

FORM OF GUARANTY

     THIS GUARANTY (the “Guaranty”) is entered into as of [___], by and between
AvalonBay Communities, Inc., a Maryland corporation (the “ Guarantor ”), and
AvalonBay Value Added Fund, L.P., a Delaware limited partnership (the “
Partnership ”). Any capitalized terms used herein but not defined shall have the
meanings ascribed to them in the Partnership’s Amended and Restated Limited
Partnership Agreement (the “ Partnership Agreement ”).

     WHEREAS, for the purpose of inducing certain Persons to acquire Equity
Interests in the Partnership, the Guarantor has agreed to guarantee the punctual
payment of certain obligations of AvalonBay Capital Management, Inc., the
General Partner of the Partnership.

     NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Guarantor and the Partnership
hereby agree as follows.

1.      Guarantee.

     1.1 Guarantee of General Partner’s Reimbursement Obligations. The Guarantor
unconditionally, absolutely and irrevocably guarantees the punctual performance
of the General Partner’s obligations under Sections 8.6(e) and 11.6 of the
Partnership Agreement, subject to the limitations on payment contained therein
(the “ Guaranteed Obligation ”).

     1.2 Guarantee Absolute. The liability of the Guarantor under this Guaranty
shall be irrevocable, absolute and unconditional, and the Guarantor hereby
irrevocably waives any defenses it may now or hereafter have in any way relating
to any or all of the following:

          (a) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Guaranteed Obligation, or any other amendment
or waiver of or any consent to departure from the Partnership Agreement
including without limitation, any increase in the Guaranteed Obligation or any
other modification adverse to the Guarantor;

          (b) any other circumstance (including, without limitation, any statute
of limitations) or any existence of or reliance on any representation by the
Partnership that might otherwise constitute a defense available to, or a
discharge of, the Guarantor;

          (c) any merger or consolidation of the Partnership or the General
Partner or any affiliate of any such entity;

          (d) any change in the direct or indirect ownership or right to vote by
the Guarantor or any other person, firm or entity of any partnership or other
ownership interest of the General Partner or any of its affiliates;
 
 

 
 
Exh. A-1

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         (e) any release or discharge, by operation of law, of the Guarantor
from the performance or observance of any obligation, covenant or agreement
contained in this Guaranty;

         (f) any failure by the Partnership, the General Partner or any
Affiliate of any such entity to mitigate its damages;

         (g) the effect of any foreign or domestic laws, rules, regulations or
actions of a court or governmental body;

         (h) or any other amendment or waiver of any consent to departure from
the Partnership Agreement; or

         (i) any other condition, event or circumstance which might otherwise
constitute a legal or equitable discharge, release or defense of a surety or
guarantor or otherwise, or which might otherwise limit recourse against the
Guarantor, it being agreed that the Guaranteed Obligation of the Guarantor
hereunder shall not be discharged except by performance of the Guaranteed
Obligation as herein provided.

     To the maximum extent permitted by applicable law, the Guarantor waives
notice of acceptance of the Guaranty, notice of any Guaranteed Obligation,
notice of protest, notice of dishonor or nonpayment of any Guaranteed
Obligation, and any other notice to the Guarantor, and waives any defense,
offset or counterclaim to any liability hereunder. To the maximum extent
permitted by applicable law, the Guarantor hereby waives and agrees not to
assert or take advantage of any rights or defenses based on any rights or
defenses of the General Partner to the Guaranteed Obligation including, without
limitation, any failure of consideration, any statute of limitations, or any
insolvency or bankruptcy of the General Partner, and no invalidity, irregularity
or unenforceability of all or any part of the Guaranteed Obligation shall
affect, impair or be a defense to this Guaranty nor shall any other circumstance
which might otherwise constitute a defense available to, or legal or equitable
discharge of, the General Partner in respect of the Guaranteed Obligation
affect, impair or be a defense to this Guaranty. One or more successive or
concurrent actions may be brought hereon against the Guarantor either in the
same action in which the General Partner is sued or in separate actions. If any
claim or action, or action on any judgment, based on this Guaranty is brought
against the Guarantor, the Guarantor agrees not to deduct, set-off or seek to
counterclaim, for or recoup any amounts which are or may be owed by the
Partnership to the Guarantor.

     1.3 Continuing Guarantee. This Guaranty is a continuing guarantee and
(a) shall remain in full force and effect until the later of the payment in full
in cash of the Guaranteed Obligation or the date on which the Partnership has
fully liquidated and no Guaranteed Obligation can arise, (b) shall be binding
upon the Guarantor, its successors and assigns and (c) shall inure to the
benefit of and be enforceable by the Partnership and its successors, transferees
and assigns.

     Each Limited Partner is a beneficiary of this Guaranty with the right to
enforce it to the extent provided herein. The failure (by waiver, delay, consent
or otherwise) of any Limited Partner to assert any claim or demand or to enforce
any remedy under this Guaranty or under the
 

 
 
Exh. A-2

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Partnership Agreement will not in any manner or to any extent vary or reduce the
obligations of the Guarantor hereunder.

2.      Entire Agreement. This Guaranty constitutes the entire agreement of the
parties and supersedes any and all previous agreements between the Guarantor and
the Partnership, whether written or oral, respecting the subject matter hereof
and thereof. This Guaranty may not be modified or amended except by an
instrument in writing signed by or on behalf of the parties hereto. No amendment
or waiver of any provision hereof and no consent to any departure by the
Guarantor herefrom, will be effective unless the same is in writing and signed
by the General Partner and all Limited Partners adversely affected thereby,
provided that any Limited Partner may grant such a waiver or consent with
respect to such Limited Partner’s rights hereunder if the same is in writing and
signed by such Limited Partner. The Partnership Agreement may be amended,
modified or supplemented in accordance with its terms without notice to, consent
of or agreement by any Guarantor.

3.      Severability. In the event that any provision or any part of any
provision of this Guaranty is held to be illegal, invalid or unenforceable, such
illegality, invalidity or enforceability shall not affect the validity or
enforceability of any other provision or part thereof.

4.      Governing Law. This Guaranty shall be construed and enforced in
accordance with the laws of the State of Delaware.

5.      Section Headings. The section headings in this Guaranty are included for
convenience only, are not a part of this Guaranty and shall not be used in
construing it.

     This Guaranty is entered into for the sole and exclusive benefit of the
Limited Partners, and their successor and assigns permitted under the
Partnership Agreement, and no other Person shall have any rights with respect
hereto. This Guaranty may not be assigned by the Guarantor without the prior
written consent of the Limited Partners. This Guaranty shall be binding on the
successors, including the heirs, executors, administrators and personal
representatives, of the Guarantor.
 

 
 
Exh. A-3

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     IN WITNESS WHEREOF, the parties have executed this Guaranty as of the date
first written above.

                     
AVALONBAY COMMUNITIES, INC.
 
   
By:  
       
Name:  
       
Title:  
           
AVALONBAY VALUE ADDED FUND, L.P.
  
   
By:  
AvalonBay Capital Management,
 Inc., its General Partner
                         

 

               
By:  
           
Name:  
         
Title:  
   

 

 
 
Exh. A-4

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AvalonBay Value Added Fund, L.P.

Exhibit B

FORM OF POWER OF ATTORNEY
 FOR
 AVALONBAY VALUE ADDED FUND, L.P.

     Know all by these presents, that the undersigned Limited Partner of
AvalonBay Value Added Fund, L.P. (the “ Partnership ”), pursuant to the Amended
and Restated Limited Partnership Agreement of the Partnership (the “ Partnership
Agreement ”), hereby constitutes and appoints each member of AvalonBay Capital
Management, Inc. or its successor (the “ General Partner ”) and each Liquidating
Agent (as defined in the Partnership Agreement), signing singly, the
undersigned’s true and lawful attorney-in-fact to:

     (1) execute, acknowledge, swear to and file any certificate or other
instrument that may be required to be filed by the Partnership in order to
conduct its business under the laws of any jurisdiction in which the Partnership
does business, so long as no such certificate or instrument shall have the
effect of amending the Partnership Agreement;

     (2) execute, acknowledge, swear to and file any agreement, document,
certificate or other instrument that any Limited Partner is required to execute
in connection with the termination of the Limited Partner’s interest in the
Partnership and the withdrawal of such Limited Partner pursuant to Section 4.2
of the Partnership Agreement and if such Limited Partner has failed to execute
and deliver such required agreement, document, certificate or other instrument
within ten days after written request therefor by the General Partner; and

     (3) execute, acknowledge, swear to and file any instrument that the General
Partner deems necessary or appropriate to facilitate the implementation of the
terms of the Partnership Agreement, including the pledging of Capital Commitment
obligations as contemplated by Sections 3.2 and 4.1(d) of the Partnership
Agreement, so long as such instruments do not alter the rights or obligations of
the Limited Partners under the terms of the Partnership Agreement.

     In no instance shall such attorney-in-fact be permitted to create a
partnership, special purpose vehicle or limited liability company without the
prior advice and consent of the undersigned.

     The undersigned hereby grants to each such attorney-in-fact full power and
authority to do and perform any and every act and thing whatsoever requisite,
necessary or proper to be done in the exercise of any of the rights and powers
herein granted, as fully to all intents and purposes as the undersigned might or
could do if personally present, with full power of substitution or revocation,
hereby ratifying and confirming all that such attorney-in-fact, or such
attorney-in-fact’s substitute or substitutes, shall lawfully do or cause to be
done by virtue of this power of attorney and the rights and powers herein
granted.

     This power of attorney is coupled with an interest, is irrevocable and
shall survive death, legal incapacity, bankruptcy, insolvency, assignment for
the benefit of creditors and assignment by a Limited Partner of its limited
partnership interest in the Partnership; provided, however, that
 

 
 
Exh. B-1

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if a Limited Partner shall assign all of its interest in the Partnership and the
assignee shall, in accordance with the provisions of the Partnership Agreement,
become a substitute Limited Partner, this power of attorney shall survive such
assignment only for the purpose of enabling the General Partner to execute,
acknowledge, swear to and file any and all instruments necessary to effect such
substitution.

     IN WITNESS WHEREOF, the undersigned has caused this power of attorney to be
executed as of this ___day of ___, 2005.

                     
Name of Limited Partner:
             
  
               
By:  
       
Hereunto duly authorized 
           

             
Print Name:
                 
Title:
   

 

 
Exh. B-2