Exhibit 10.2

Execution Copy

AMENDED AND RESTATED

AGREEMENT OF LIMITED PARTNERSHIP

OF

EASTERLY GOVERNMENT PROPERTIES LP

Dated as of February 11, 2015

THE PARTNERSHIP INTERESTS ISSUED PURSUANT TO THIS AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP 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.

--------------------------------------------------------------------------------

TABLE OF CONTENTS

 

 

     Page   ARTICLE 1 - DEFINED TERMS      1    ARTICLE 2 - ORGANIZATIONAL
MATTERS      13   

Section 2.1

   Formation and Continuation      13   

Section 2.2

   Name      14   

Section 2.3

   Registered Office and Agent; Principal Office      14   

Section 2.4

   Power of Attorney      14   

Section 2.5

   Term      15   

Section 2.6

   Partnership Interests are Securities      15    ARTICLE 3 - PURPOSE      16
  

Section 3.1

   Purpose and Business      16   

Section 3.2

   Powers      16   

Section 3.3

   Partnership Only for Purposes Specified      16   

Section 3.4

   Representations and Warranties by the Partners      17    ARTICLE 4 - CAPITAL
CONTRIBUTIONS      18   

Section 4.1

   Capital Contributions of the Partners      18   

Section 4.2

   Issuance of Additional Partnership Interests and Additional Funding      19
  

Section 4.3

   Other Contribution Provisions      22   

Section 4.4

   No Preemptive Rights      22   

Section 4.5

   No Interest on Capital      23    ARTICLE 5 - DISTRIBUTIONS      23   

Section 5.1

   Distribution of Cash      23   

Section 5.2

   REIT Distribution Requirements      24   

Section 5.3

   No Right to Distributions in Kind      24   

Section 5.4

   Distributions Upon Liquidation      24   

Section 5.5

   Distributions to Reflect Issuance of Additional Partnership Units      24   

Section 5.6

   Special Distribution Following Formation Transactions      25    ARTICLE 6 -
ALLOCATIONS      25   

Section 6.1

   Capital Account Allocations of Profit and Loss      25   

Section 6.2

   Capital Accounts      29   

Section 6.3

   Tax Allocations      30   

Section 6.4

   Substantial Economic Effect      30    ARTICLE 7 - MANAGEMENT AND OPERATIONS
OF BUSINESS      31   

Section 7.1

   Management      31   

Section 7.2

   Certificate of Limited Partnership      36   

Section 7.3

   Restrictions on General Partner Authority      36   

Section 7.4

   Reimbursement of the General Partner and the Company      37   

 

i

--------------------------------------------------------------------------------

Section 7.5    

   Outside Activities of the General Partner and the Company      38   

Section 7.6

   Contracts with Affiliates      38   

Section 7.7

   Indemnification      38   

Section 7.8

   Liability of the General Partner and the Company      41   

Section 7.9

   Other Matters Concerning the General Partner and the Company      43   

Section 7.10

   Title to Partnership Assets      43   

Section 7.11

   Reliance by Third Parties      44    ARTICLE 8 - RIGHTS AND OBLIGATIONS OF
LIMITED PARTNERS      44   

Section 8.1

   Limitation of Liability      44   

Section 8.2

   Management of Business      44   

Section 8.3

   Outside Activities of Limited Partners      44   

Section 8.4

   Rights of Limited Partners Relating to the Partnership      45   

Section 8.5

   Redemption Right      46    ARTICLE 9 - BOOKS, RECORDS, ACCOUNTING AND
REPORTS      48   

Section 9.1

   Records and Accounting      48   

Section 9.2

   Taxable Year and Fiscal Year      49   

Section 9.3

   Reports      49    ARTICLE 10 - TAX MATTERS      49   

Section 10.1

   Preparation of Tax Returns      49   

Section 10.2

   Tax Elections      50   

Section 10.3

   Tax Matters Partner      50   

Section 10.4

   Organizational Expenses      51    ARTICLE 11 - TRANSFERS AND WITHDRAWALS   
  52   

Section 11.1

   Transfer      52   

Section 11.2

   Transfer of the Company’s and General Partner’s Partnership Interest and
Limited Partner Interest; Extraordinary Transactions      52   

Section 11.3

   Limited Partners’ Rights to Transfer      54   

Section 11.4

   Substituted Limited Partners      55   

Section 11.5

   Assignees      56   

Section 11.6

   General Provisions      56    ARTICLE 12 - ADMISSION OF PARTNERS      58   

Section 12.1

   Admission of Successor General Partner      58   

Section 12.2

   Admission of Additional Limited Partners      58   

Section 12.3

   Amendment of Agreement and Certificate of Limited Partnership      59   
ARTICLE 13 - DISSOLUTION, LIQUIDATION AND TERMINATION      59   

Section 13.1

   Dissolution      59   

Section 13.2

   Winding Up      60   

Section 13.3

   Deficit Capital Account Restoration Obligation      61   

Section 13.4

   Compliance with Timing Requirements of Regulations      61   

Section 13.5

   Deemed Distribution and Recontribution      62   

Section 13.6

   Rights of Limited Partners      62   

 

ii

--------------------------------------------------------------------------------

Section 13.7    

   Notice of Dissolution      62   

Section 13.8

   Cancellation of Certificate of Limited Partnership      62   

Section 13.9

   Reasonable Time for Winding-Up      63   

Section 13.10

   Waiver of Partition      63   

Section 13.11

   Liability of Liquidator      63    ARTICLE 14 - AMENDMENT OF PARTNERSHIP
AGREEMENT; MEETINGS      63   

Section 14.1

   Procedures for Actions and Consents of Partners      63   

Section 14.2

   Amendments      63   

Section 14.3

   Meetings of the Partners      65    ARTICLE 15 - GENERAL PROVISIONS      67
  

Section 15.1

   Addresses and Notice      67   

Section 15.2

   Titles and Captions      67   

Section 15.3

   Pronouns and Plurals      67   

Section 15.4

   Further Action      67   

Section 15.5

   Binding Effect      67   

Section 15.6

   No Third-Party Rights Created Hereby      68   

Section 15.7

   Waiver      68   

Section 15.8

   Counterparts      68   

Section 15.9

   Applicable Law; Waiver of Jury Trial      69   

Section 15.10

   Invalidity of Provisions      69   

Section 15.11

   No Rights as Stockholders      69   

Section 15.12

   Entire Agreement      70   

 

iii

--------------------------------------------------------------------------------

EXHIBITS

 

Exhibit A    –    Partners Contributions and Partnership Interests Exhibit B   
–    Notice of Redemption Exhibit C    –    LTIP Units Exhibit D    –    Notice
of Election to Convert LTIP Units Exhibit E    –    Notice of Election to Force
Conversion of LTIP Units

 

iv

--------------------------------------------------------------------------------

AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP

OF

EASTERLY GOVERNMENT PROPERTIES LP

THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF EASTERLY
GOVERNMENT PROPERTIES LP, dated as of February 11, 2015, is entered into by and
among Easterly Government Properties, Inc., a Maryland corporation (the
“Company”), as the General Partner, and the Persons whose names are set forth on
Exhibit A attached hereto, as the Limited Partners, together with any other
Persons who become Partners in the Partnership as provided herein.

WHEREAS, the Partnership was formed as a limited partnership under the laws of
the State of Delaware pursuant to a Certificate of Limited Partnership filed on
October 10, 2014;

WHEREAS, an original agreement of limited partnership (the “Original
Agreement”), dated as of October 10, 2014, was entered into by the Company, as
general partner, and Darrell W. Crate, as limited partner (the “Initial Limited
Partner”);

WHEREAS, the Company proposes to effect an Initial Public Offering (as defined
below), to contribute the net proceeds from the Initial Public Offering to the
Partnership and to cause the Partnership to repay certain indebtedness and
related costs and fees; and

WHEREAS, the Partnership will issue Partnership Interests (as defined below) to
the Company and other persons and make certain special distributions as
contemplated in Section 5.6 hereof in connection with the formation transactions
to occur prior to or concurrently with the completion of the Initial Public
Offering (the “Formation Transactions”); and

WHEREAS, the Company and the Initial Limited Partner hereby consent to the
amendment and restatement of the Original Agreement in its entirety;

NOW, THEREFORE, in consideration of the mutual covenants set forth herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged and intending to be legally bound hereby, the parties
hereto hereby agree as follows:

ARTICLE 1 - DEFINED TERMS

The following definitions shall be for all purposes, unless otherwise clearly
indicated to the contrary, applied to the terms used in this Agreement.

“Act” means the Delaware Revised Uniform Limited Partnership Act, as it may be
amended, supplemented or restated from time to time, and any successor to such
statute.

“Additional Funds” has the meaning set forth in Section 4.2B hereof.

“Additional Limited Partner” means a Person admitted to the Partnership as a
Limited Partner pursuant to Section 4.2 and Section 12.2 hereof.

 

1

--------------------------------------------------------------------------------

“Adjusted Capital Account” means the Capital Account maintained for each Partner
as of the end of each Partnership taxable year (i) increased by any amounts
which such Partner is obligated to restore pursuant to any provision of this
Agreement or is deemed to be obligated to restore pursuant to the penultimate
sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5) and
(ii) decreased by the items described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account is intended to comply with
the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.

“Administrative Expenses” means (i) all administrative and operating costs and
expenses incurred by the Partnership, (ii) those administrative costs and
expenses of the General Partner or the Company, including any salaries or other
payments to directors, officers or employees of the General Partner, the
Company, or any Subsidiary of the Company and any accounting and legal expenses
of the General Partner, the Company, or any Subsidiary of the Company, which
expenses, the Partners have agreed, are expenses of the Partnership and not the
General Partner or the Company or any Subsidiary of the Company, and (iii) to
the extent not included in clauses (i) or (ii) above, REIT Expenses; provided,
however, that Administrative Expenses shall not include any administrative costs
and expenses incurred by the General Partner or the Company that are
attributable to Properties or interests in a Subsidiary of the Company that are
owned by the General Partner or the Company other than through its ownership
interest in the Partnership.

“Affiliate” means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by or under common control with such Person.
For purposes of this definition, “control,” when used with respect to any
Person, means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise, and the terms “controlling” and “controlled” have
meanings correlative to the foregoing. No officer, director or stockholder of
the Company shall be considered an Affiliate of the Company solely as a result
of serving in such capacity or being a stockholder of the Company.

“Agreed Value” means the fair market value of a Partner’s non-cash Capital
Contribution (net of assumed liabilities) as of the date of contribution as
agreed to by such Partner and the General Partner.

“Agreement” means this Amended and Restated Agreement of Limited Partnership, as
it may be amended, supplemented and/or restated from time to time, including by
way of adoption of a Certificate of Designations, including any exhibits
attached hereto.

“Assignee” means a Person to whom one or more Partnership Units have been
transferred in a manner permitted under this Agreement, but who has not become a
Substituted Limited Partner, and who has the rights set forth in Section 11.5.

“Book-Up Target” for an LTIP Unit means (i) initially, the Common Unit Economic
Balance as determined on the date such LTIP Unit was granted and
(ii) thereafter, the remaining amount, if any, required to be allocated to such
LTIP Unit for the Economic Capital Account Balance of the holder of such LTIP
Unit, to the extent attributable to such LTIP Unit, to be equal to the Common
Unit Economic Balance.

 

2

--------------------------------------------------------------------------------

“Business Day” means any day except a Saturday, Sunday or other day on which
commercial banks in New York, New York are authorized or required by law to be
closed.

“Bylaws” means the Amended and Restated Bylaws of the Company, as may be
amended, supplemented and/or restated from time to time.

“Capital Account” has the meaning set forth in Section 6.2 hereof.

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

“Cash Amount” means, with respect to Tendered Units, an amount in cash equal to
the Value of the REIT Shares Amount as of the Valuation Date with respect to
such Tendered Units; provided that the Cash Amount will be reduced by the amount
of any distributions payable with respect to such REIT Shares Amount that have
an ex-dividend date after the Valuation Date and a record date before the
Specified Redemption Date.

“Certificate of Designations” means an amendment to this Agreement that sets
forth the designations, rights, powers, duties and preferences of Holders of any
Partnership Interests issued pursuant to Section 4.2, which amendment is in the
form of a certificate signed by the General Partner and appended to this
Agreement. A Certificate of Designations is not the exclusive manner in which
such an amendment may be effected. The General Partner may adopt a Certificate
of Designations without the Consent of the Limited Partners to the extent
permitted pursuant to Section 14.2 hereof.

“Certificate of Limited Partnership” means the Certificate of Limited
Partnership of the Partnership filed with the office of the Secretary of State
of the State of Delaware on October 10, 2014, as amended from time to time in
accordance with the terms hereof and the Act.

“Charter” means the charter of the Company as filed with the Maryland State
Department of Assessments and Taxation, from time to time.

“Code” means the Internal Revenue Code of 1986, as amended and in effect from
time to time or any successor statute thereto, as interpreted by the applicable
regulations thereunder. Any reference herein to a specific section or sections
of the Code shall be deemed to include a reference to any corresponding
provision of any succeeding law.

“Commission” means the Securities and Exchange Commission.

“Common Unit” means a Partnership Unit other than a LTIP Unit or Preferred Unit.

“Common Unit Economic Balance” means (i) the Economic Capital Account Balance of
the Company but only to the extent attributable to the Company’s ownership of
Common Units and computed on a hypothetical basis after taking into account all
allocations through the date on which any allocation is made under Section 6.1I,
divided by (ii) the number of the Company’s

 

3

--------------------------------------------------------------------------------

Common Units. If the Company’s Economic Capital Account Balance at the time of
determination reflects a net reduction as a result of Section 6.1L, for purposes
of this definition the Company’s Economic Capital Account Balance shall be the
Economic Capital Account Balance it would have been if Section 6.1L had not
applied.

“Common Unitholder” means a Partner that holds Common Units.

“Company” has the meaning set forth in the introductory paragraph.

“Consent” means the consent to, approval of or vote in favor of a proposed
action by a Partner given in accordance with Article 14 hereof.

“Constituent Person” has the meaning set forth in Section 1.12(b) of Exhibit C
hereto.

“Conversion Factor” means 1.0; provided that in the event that:

(i) the Company (a) declares or pays a dividend on its outstanding REIT Shares
wholly or partly in REIT Shares or makes a distribution to all holders of its
outstanding REIT Shares wholly or partly in REIT Shares; (b) splits or
subdivides its outstanding REIT Shares or (c) effects a reverse stock split or
otherwise combines or reclassifies its outstanding REIT Shares into a smaller
number of REIT Shares, then the Conversion Factor shall be adjusted by
multiplying the Conversion Factor by a fraction, (i) the numerator of which
shall be the number of REIT Shares issued and outstanding on the record date for
such dividend, distribution, split, subdivision, reverse split or combination
(assuming for such purpose that such dividend, distribution, split, subdivision,
reverse split or combination has occurred as of such time), and (ii) the
denominator of which shall be the actual number of REIT Shares (determined
without the above assumption) issued and outstanding on the record date for such
dividend, distribution, split, subdivision, reverse split or combination;

(ii) the Company distributes any rights, options or warrants to all holders of
its REIT Shares to subscribe for or to purchase or to otherwise acquire REIT
Shares (or other securities or rights convertible into, exchangeable for or
exercisable for REIT Shares) (other than REIT Shares issuable pursuant to a
Qualified DRIP/COPP) at a price per share less than the Value of a REIT Share on
the record date for such distribution (each a “Distributed Right”), then, as of
the distribution date of such Distributed Rights or, if later, the time such
Distributed Rights become exercisable, the Conversion Factor shall be adjusted
by multiplying the Conversion Factor by a fraction (a) the numerator of which
shall be the number of REIT Shares issued and outstanding on the record date
(or, if later, the date such Distributed Rights become exercisable) plus the
maximum number of REIT Shares purchasable under such Distributed Rights and
(b) the denominator of which shall be the number of REIT Shares issued and
outstanding on the record date (or, if later, the date such Distributed Rights
become exercisable) plus a fraction (x) the numerator of which is the minimum
aggregate purchase price under such Distributed Rights of the maximum number of
REIT Shares purchasable under such Distributed Rights and (y) the denominator of
which is the Value of a REIT Share as of the record date (or, if later, the date
such Distributed Rights become exercisable); provided, however, that, if any
such Distributed Rights expire or become no longer exercisable, then the
Conversion Factor shall be adjusted, effective retroactive to the date of
distribution (or, if later, the date such Distributed Rights become exercisable)
of the Distributed Rights, to reflect a reduced maximum number of REIT Shares or
any change in the minimum aggregate purchase price for the purposes of the above
fraction; and

 

4

--------------------------------------------------------------------------------

(iii) the Company shall, by dividend or otherwise, distribute to all holders of
its REIT Shares evidences of its indebtedness or assets (including securities,
but excluding any dividend or distribution referred to in subsection (i) or
(ii) above), which evidences of indebtedness or assets relate to assets not
received by the Company or its Subsidiaries pursuant to a pro rata distribution
by the Partnership, then the Conversion Factor shall be adjusted to equal the
amount determined by multiplying the Conversion Factor in effect immediately
prior to the close of business on the date fixed for determination of
stockholders entitled to receive such distribution by a fraction the numerator
of which shall be such Value of a REIT Share on the date fixed for such
determination and the denominator of which shall be the Value of a REIT Share on
the date fixed for such determination less the then fair market value (as
determined by the General Partner, whose determination shall be conclusive) of
the portion of the evidences of indebtedness or assets so distributed applicable
to one REIT Share.

Any adjustment to the Conversion Factor shall become effective immediately after
the effective date of such event retroactive to the record date, if any, for
such event (or, if later, the date such Distributed Rights become exercisable).
If, however, the General Partner received a Notice of Redemption after the
record date, if any, but prior to the effective date of such event, the
Conversion Factor shall be determined as if the General Partner had received the
Notice of Redemption immediately prior to the record date for such event.

Notwithstanding the foregoing, the Conversion Factor shall not be adjusted in
connection with an event described in clauses (i) or (ii) above if, in
connection with such event, the Partnership makes a distribution of cash,
Partnership Units, REIT Shares and/or rights, options or warrants to acquire
Partnership Units and/or REIT Shares with respect to all applicable Common Units
or effects a reverse split of, or otherwise combines, the Common Units, as
applicable, that is comparable as a whole in all material respects with such
event.

“Debt” means, as to any Person, as of any date of determination, (i) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services; (ii) all amounts owed by such Person to banks or
other Persons in respect of reimbursement obligations under letters of credit,
surety bonds, guarantees and other similar instruments guaranteeing payment or
other performance of obligations by such Person; (iii) all indebtedness for
borrowed money or for the deferred purchase price of property or services
secured by any lien on any property owned by such Person, to the extent
attributable to such Person’s interest in such property, even though such Person
has not assumed or become liable for the payment thereof; and (iv) lease
obligations of such Person which, in accordance with U.S. GAAP, should be
capitalized.

“Delaware Courts” has the meaning set forth in Section 15.9.B hereof.

“Distributed Right” has the meaning set forth in the definition of “Conversion
Factor.”

 

5

--------------------------------------------------------------------------------

“Economic Capital Account Balance”, with respect to a Partner, means an amount
equal to its Capital Account balance, plus the amount of its share of any
Partner Minimum Gain or Partnership Minimum Gain.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder, as such rules and regulations may
be amended from time to time.

“Extraordinary Transaction” means, with respect to the Company, the occurrence
of one or more of the following events: (i) a merger (including a triangular
merger), consolidation or other combination of it with or into another Person
(other than in connection with a change in the Company’s state of incorporation
or organizational form or any holding company reorganization where the Company
does not seek to obtain, and is not required to obtain, the approval of the
Company’s common stockholders); (ii) the direct or indirect sale, lease,
exchange or other transfer of all or substantially all of its assets in one
transaction or a series of related transactions; (iii) any reclassification,
recapitalization or change of its outstanding equity interests where the Company
seeks to obtain, or is required to obtain, the approval of the Company’s common
stockholders; or (iv) the adoption of any plan of liquidation or dissolution of
the Company (whether or not in compliance with the provisions of this
Agreement).

“Flow-Through Entity” has the meaning set forth in Section 3.4C hereof.

“Flow-Through Partner” has the meaning set forth in Section 3.4C hereof.

“Formation Transactions” has the meaning set forth in the Recitals hereto.

“Founder Common Units” shall mean Common Units issued to any participant in the
Formation Transactions (excluding Common Units issued to the Company and its
Subsidiaries); provided that a Common Unit shall cease to be a Founder Common
Unit at such time that it is (i) transferred, sold, assigned or otherwise
disposed of other than to an Affiliate of the prior Holder or a Person having
one of the relationships described in clauses (i) through (iv) of Section 11.3C
to the prior Holder or (ii) redeemed pursuant to Section 8.5.

“Funding Debt” mean the incurrence of any Debt for the purpose of providing
funds to the Partnership by or on behalf of the Company or any wholly owned
Subsidiary of the Company.

“General Partner” means the Company in its capacity as general partner of the
Partnership, or any Person who becomes a successor general partner of the
Partnership.

“General Partner Interest” means a Partnership Interest held by the General
Partner, in its capacity as general partner. A General Partner Interest may be
(but is not required to be) expressed as a number of Partnership Units.

“Holder” means each of a Partner and an Assignee owning a Partnership Unit.

 

6

--------------------------------------------------------------------------------

“Immediate Family” means with respect to any natural Person, such natural
person’s spouse and such natural Person’s natural or adoptive parents,
descendants, nephews, nieces, brother and sisters.

“Incapacity” or “Incapacitated” means, (i) as to any Partner who is an
individual, death, total physical disability or entry by a court of competent
jurisdiction of an order adjudicating him or her incompetent to manage his or
her Person or estate; (ii) as to any Partner that is a corporation, the filing
of a certificate of dissolution, or its equivalent, or the revocation of its
charter; (iii) as to any partnership or limited liability company which is a
Partner, the dissolution and commencement of winding up of the partnership or
the limited liability company; (iv) as to any Partner that is an estate, the
distribution by the fiduciary of the estate’s entire interest in the
Partnership; (v) as to any trustee of a trust which is a Partner, the
termination of the trust (but not the substitution of a new trustee); or (vi) as
to any Partner, the bankruptcy of such Partner. For purposes of this definition,
bankruptcy of a Partner shall be deemed to have occurred when (a) the Partner
commences a voluntary proceeding seeking liquidation, reorganization or other
relief under any bankruptcy, insolvency or other similar law now or hereafter in
effect; (b) the Partner is adjudged as bankrupt or insolvent, or a final and
nonappealable order for relief under any bankruptcy, insolvency or similar law
now or hereafter in effect has been entered against the Partner; (c) the Partner
executes and delivers a general assignment for the benefit of the Partner’s
creditors; (d) the Partner files an answer or other pleading admitting or
failing to contest the material allegations of a petition filed against the
Partner in any proceeding of the nature described in clause (b) above; (e) the
Partner seeks, consents to or acquiesces in the appointment of a trustee,
receiver or liquidator for the Partner or for all or any substantial part of the
Partner’s properties; (f) any proceeding seeking liquidation, reorganization or
other relief of or against such Partner under any bankruptcy, insolvency or
other similar law now or hereafter in effect has not been dismissed within one
hundred twenty (120) days after the commencement thereof; (g) the appointment
without the Partner’s consent or acquiescence of a trustee, receiver or
liquidator has not been vacated or stayed within ninety (90) days of such
appointment; or (h) an appointment referred to in clause (g) above is not
vacated within ninety (90) days after the expiration of any such stay.

“Indemnitee” means (i) any Person made a party, or threatened to be made a
party, to, or a witness or other participant in, a proceeding by reason of his,
her or its status as (a) the Company (b) the General Partner or (c) a director,
officer, employee, limited partner, Affiliate or agent of the Company, the
General Partner or the Partnership or any of their respective Subsidiaries and
(ii) such other Persons as the General Partner may designate from time to time
(whether before or after the event giving rise to potential liability), in its
sole and absolute discretion.

“Initial Public Offering” means the initial public offering of REIT Shares under
the Securities Act.

“IRS” means the U.S. Internal Revenue Service.

“Limited Partner” means any Person named as a Limited Partner in the books and
records of the Partnership or any Substituted Limited Partner or Additional
Limited Partner, in such Person’s capacity as a Limited Partner of the
Partnership.

 

7

--------------------------------------------------------------------------------

“Limited Partner Interest” means a Partnership Interest of a Limited Partner in
the Partnership representing a fractional part of the Partnership Interests of
all Partners and includes any and all benefits to which the Holder of such a
Partnership Interest may be entitled, as provided in this Agreement, together
with all obligations of such Person to comply with the terms and provisions of
this Agreement. A Limited Partner Interest may be (but is not required to be)
expressed as a number of Partnership Units.

“Liquidating Event” has the meaning set forth in Section 13.1A hereof.

“Liquidating Gains” means any net gain realized in connection with the actual or
hypothetical sale of all or substantially all of the assets of the Partnership
(including upon the occurrence of any event of liquidation of the Partnership),
including but not limited to net gain realized in connection with an adjustment
to the book value of Partnership assets under Section 6.2 hereof.

“Liquidating Losses” means any net loss realized in connection with the actual
or hypothetical sale of all or substantially all of the assets of the
Partnership (including upon the occurrence of any event of liquidation of the
Partnership), including but not limited to net loss realized in connection with
an adjustment to the book value of Partnership assets under Section 6.2 hereof.

“Liquidator” has the meaning set forth in Section 13.2A hereof.

“Loss” has the meaning set forth in Section 6.1F hereof.

“LTIP Unit” means a Partnership Unit which is designated as an LTIP Unit having
the rights, powers, privileges, restrictions, qualifications and limitations set
forth in Exhibit C hereof and elsewhere in this Agreement.

“LTIP Unit Adjustment Events” has the meaning set forth in Section 1.7 of
Exhibit C hereto.

“LTIP Unit Conversion Date” has the meaning set forth in Section 1.8(c) of
Exhibit C hereto.

“LTIP Unit Conversion Notice” has the meaning set forth in Section 1.8(c) of
Exhibit C hereto.

“LTIP Unit Conversion Right” has the meaning set forth in Section 1.8(a) of
Exhibit C hereto.

“LTIP Unit Forced Conversion” has the meaning set forth in Section 1.9 of
Exhibit C hereto.

“LTIP Unit Forced Conversion Notice” has the meaning set forth in Section 1.9 of
Exhibit C hereto.

 

8

--------------------------------------------------------------------------------

“LTIP Unit Limited Partner” means any Person that holds LTIP Units and is named
as a LTIP Unit Limited Partner in the books and records of the Partnership.

“Majority in Interest of the Outside Limited Partners” means, with respect to
the Consent of such Limited Partners to any action, Limited Partners (excluding
for this purpose any Limited Partnership Interests held by the Company or its
Subsidiaries) holding in the aggregate more than 50% of the outstanding
Partnership Units that entitle the holder thereof to Consent thereto held by all
Limited Partners who are not excluded for the purposes hereof.

“National Securities Exchange” means an exchange registered with the Commission
under Section 6(a) of the Exchange Act or any other exchange (domestic or
foreign, and whether or not so registered) designated by the Company as a
National Securities Exchange.

“New Securities” means (i) any rights, options, warrants or convertible or
exchangeable securities having the right to subscribe for or purchase REIT
Shares or other shares of capital stock of the Company, or (ii) any Debt issued
by the Company that provides any of the rights described in clause (i).

“Nonrecourse Liability” has the meaning set forth in Regulations
Section 1.752-1(a)(2).

“Notice of Redemption” means the Notice of Redemption substantially in the form
of Exhibit B to this Agreement.

“Ownership Limit” means the restriction or restrictions on the ownership and
transfer of stock of the Company imposed under the Charter, subject to any
waiver thereof that may be granted by the board of directors of the Company.

“Partner” means a General Partner or a Limited Partner, and “Partners” means the
General Partner and the Limited Partners collectively.

“Partner Minimum Gains” means “partner nonrecourse debt minimum gain” within the
meaning of Regulations Section 1.704-2(i). A Partner’s share of Partner Minimum
Gain shall be determined in accordance with Regulations Section 1.704-2(i)(5).

“Partnership” means the limited partnership formed under the Act and pursuant to
this Agreement and any successor thereto.

“Partnership Approval” means approval obtained when the sum of (i) the number of
Founder Common Units held by Limited Partners (excluding for this purpose Common
Units held by the Company or its Subsidiaries) consenting to any Extraordinary
Transaction, transfer or withdrawal under Section 11.2C(i), plus (ii) the
product of (a) the number of Common Units held by the Company and its
Subsidiaries multiplied by (b) the percentage of the votes that were cast in
favor of the Extraordinary Transaction, transfer or withdrawal by the holders of
the REIT Shares, exceeds 50% of the aggregate number of Founder Common Units and
Common Units held by the Company and its Subsidiaries outstanding at such time.
For the avoidance of doubt, (x) only Founder Common Units shall be entitled to
consent to any Extraordinary Transaction, transfer or withdrawal under
Section 11.2C(i) and be taken into account for purposes of clause (i) above and
(y) only Founder Common Units and Common Units held by the Company and its
Subsidiaries shall be taken into account in any respect in determining if
Partnership Approval has been obtained.

 

9

--------------------------------------------------------------------------------

“Partnership Interest” means an ownership interest in the Partnership held by
either a Limited Partner or the General Partner and includes any and all
benefits to which the Holder of such a Partnership Interest may be entitled as
provided in this Agreement, together with all obligations of such Person to
comply with the terms and provisions of this Agreement. There may be one or more
classes or series or Partnership Interests as provided in Section 4.2. A
Partnership Interest may be expressed as a number of Partnership Units. Unless
otherwise expressly provided for by the General Partner at the time of the
original issuance of any Partnership Interests, all Partnership Interests
(whether of a Limited Partner or a General Partner) shall be of the same class
or series. The Partnership Interests represented by the Common Units and the
LTIP Units are, initially, the only Partnership Interests and each such type of
unit is a separate class of Partnership Interest for all purposes of this
Agreement.

“Partnership Minimum Gain” has the meaning set forth in Regulations
Section 1.704-2(b)(2). A Partner’s share of Partnership Minimum Gain shall be
determined in accordance with Regulations Section 1.704-2(g)(1).

“Partnership Record Date” means the record date established by the General
Partner for the purpose of determining the Partners entitled to notice of or to
vote at any meeting of Partners or to Consent to any matter or to receive any
distribution or the allotment of any other rights, or in order to make any
determination of Partners for any other purpose, which, in the case of a
distribution pursuant to Section 5.1 hereof, shall generally be the same as the
record date established by the Company for a distribution to its stockholders of
some or all of its portion of such distribution.

“Partnership Unit” or “Unit” means a fractional, undivided share of the
Partnership Interests of all Partners issued pursuant to Article 4 (and includes
Common Units, LTIP Units and any class or series of Preferred Units established
after the date hereof). The number of Partnership Units outstanding and (in the
case of Common Units and LTIP Units) the Percentage Interest in the Partnership
represented by such Partnership Units are set forth on Exhibit A attached
hereto, as such Exhibit A may be amended or restated from time to time. The
Partnership Units shall be uncertificated securities unless the General Partner
determines otherwise.

“Partnership Year” means the fiscal year of the Partnership, which shall be the
calendar year.

“Percentage Interest” means, with respect to any Partner, the percentage
represented by a fraction (expressed as a percentage), the numerator of which is
the total number of Common Units and LTIP Units then owned by such Partner, and
the denominator of which is the total number of Common Units and LTIP Units then
owned by all of the Partners.

“Person” means an individual, corporation, partnership (whether general or
limited), limited liability company, trust, estate, unincorporated organization,
association, custodian, nominee or any other individual or entity in its own or
any representative capacity.

 

10

--------------------------------------------------------------------------------

“Preferred Unit” means a Limited Partnership Interest (of any series), other
than a Common Unit or LTIP Unit, represented by a fractional, undivided share of
the Partnership Interests of all Partners issued hereunder and which is
designated as a “Preferred Unit” (or as a particular class or series of
Preferred Units) herein and which has the rights, preferences and other
privileges designated herein (including by way of a Certificate of
Designations). The allocation of Preferred Units among the Partners shall be set
forth on Exhibit A, as may be amended or restated from time to time.

“Profit” has the meaning set forth in Section 6.1F hereof.

“Property” means any property, asset or other investment in which the
Partnership holds a direct or indirect interest.

“Qualified DRIP/COPP” means a dividend reinvestment plan or a cash option
purchase plan of the Company that permits participants to acquire REIT Shares
using the proceeds of dividends paid by the Company or cash of the participant,
respectively.

“Qualified REIT Subsidiary” means any Subsidiary of the Company that is a
“qualified REIT subsidiary” within the meaning of Section 856(i) of the Code.

“Redemption Right” has the meaning set forth in Section 8.5A hereof.

“Regulations” means the Federal Income Tax Regulations promulgated under the
Code, as such regulations may be amended from time to time (including any
corresponding provisions of succeeding regulations).

“Regulatory Allocations” has the meaning set forth in Section 6.1G hereof.

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

“REIT Expenses” means (i) costs and expenses relating to the formation and
continuity of existence and operation of the Company and any Subsidiaries (other
than the Partnership) thereof (which Subsidiaries shall, for purposes hereof, be
included within the definition of the Company), including taxes, fees and
assessments associated therewith, any and all costs, expenses or fees payable to
any director, officer or employee of the Company, (ii) costs and expenses
relating to any public offering and registration, or private offering, of
securities by the Company and all statements, reports, fees and expenses
incidental thereto, including, without limitation, underwriting discounts and
selling commissions applicable to any such offering of securities, and any costs
and expenses associated with any claims made by any holders of such securities
or any underwriters or placement agents thereof, (iii) costs and expenses
associated with any repurchase of any securities by the Company, (iv) costs and
expenses associated with the preparation and filing of any periodic or other
reports and communications by the Company under U.S. federal, state or local
laws or regulations, including filings with the Commission, (v) costs and
expenses associated with compliance by the Company with laws, rules and
regulations promulgated by any regulatory body, including the Commission and any
securities exchange, (vi) costs and expenses associated with any 401(k) plan,
incentive plan, bonus plan or other plan providing for compensation for the
employees of the Company, (vii) costs and expenses incurred by the Company
relating to any issuing or redemption of Partnership Interests and (viii) all
other

 

11

--------------------------------------------------------------------------------

operating or administrative costs of the Company or any Subsidiary, including
the General Partner, incurred in the ordinary course of its business on behalf
of or in connection with the Partnership, including the costs and expenses of
any Limited Partner that the Company has agreed in writing to pay on behalf of
such Limited Partner.

“REIT Share” means a share of common stock of the Company, $0.01 par value per
share.

“REIT Shares Amount” means, with respect to Tendered Units as of a particular
date, a number of REIT Shares equal to the product of (x) the number of Tendered
Units multiplied by (y) the Conversion Factor in effect on such date with
respect to such Tendered Units.

“Safe Harbors” has the meaning set forth in Section 11.6F hereof.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder, as such rules and regulations may be amended
from time to time.

“Specified Redemption Date” means the tenth (10th) Business Day after receipt by
the General Partner of a Notice of Redemption; provided that if the Company
combines its outstanding REIT Shares, no Specified Redemption Date shall occur
after the record date of such combination of REIT Shares and prior to the
effective date of such combination.

“Stock Plan” means any stock incentive, stock option, stock ownership or
employee benefits plan now or hereafter adopted by the Company or the
Partnership or any Subsidiary of the Partnership.

“Subsidiary” means, with respect to any Person, any corporation, partnership,
limited liability company, joint venture or other entity of which a majority of
(i) the voting power of the voting equity securities or (ii) the outstanding
equity interests is owned, directly or indirectly, by such Person.

“Substituted Limited Partner” means a Person who is admitted as a Limited
Partner to the Partnership pursuant to Section 11.4 hereof.

“Surviving Partnership” has the meaning set forth in Section 11.2B(2) hereof.

“Target Balance” has the meaning set forth in Section 6.1I(1) hereof.

“Tendered Units” has the meaning set forth in Section 8.5A hereof.

“Tendering Partner” has the meaning set forth in Section 8.5A hereof.

“Terminating Capital Transaction” means any sale or other disposition of all or
substantially all of the assets of the Partnership or a related series of
transactions that, taken together, result in the sale or other disposition of
all or substantially all of the assets of the Partnership.

 

12

--------------------------------------------------------------------------------

“Transaction” has the meaning set forth in Section 1.12(a) of Exhibit C hereto.

“Unvested LTIP Units” has the meaning set forth in Section 1.2 of Exhibit C
hereto.

“U.S. GAAP” means U.S. generally accepted accounting principles consistently
applied.

“Valuation Date” means the date of receipt by the Partnership of a Notice of
Redemption or, if such date is not a Business Day, the first Business Day
thereafter.

“Value” means, with respect to a REIT Share on a particular date, the market
price of a REIT Share on such date. The market price for each such trading day
shall be: (i) if the REIT Shares are listed or admitted to trading on any
National Securities Exchange, the closing price, regular way, on such day as
reported by such National Securities Exchange, or if no such sale takes place on
such day, the average of the closing bid and asked prices on such day; (ii) if
the REIT Shares are not listed or admitted to trading on any National Securities
Exchange, the last reported sale price on such day or, if no sale takes place on
such day, the average of the closing bid and asked prices on such day, as
reported by a reliable quotation source designated by the General Partner;
(iii) if the REIT Shares are not listed or admitted to trading on any National
Securities Exchange and no such last reported sale price or closing bid and
asked prices are available, the average of the reported high bid and low asked
prices on such day, as reported by a reliable quotation source designated by the
General Partner, or if there shall be no bid and asked prices on such day, the
average of the high bid and low asked prices, as so reported, on the most recent
day (not more than ten (10) days prior to the date in question) for which prices
have been so reported; or (iv) if none of the conditions set forth in clauses
(i), (ii), or (iii) is met then, unless the holder of the REIT Shares or Common
Units and the General Partner otherwise agree, with respect to a REIT Share per
Common Unit offered for redemption, the amount that a Holder of one Common Unit
would receive if each of the assets of the Partnership were sold for its fair
market value on the Specified Redemption Date, the Partnership were to pay all
of its outstanding liabilities (limited, in the case of nonrecourse liabilities,
by the fair market value of any assets securing such liabilities) and the
remaining proceeds were to be distributed to the Partners in accordance with the
terms of this Agreement.

“Vested LTIP Units” has the meaning set forth in Section 1.2 of Exhibit C
hereto.

“Vesting Agreement” has the meaning set forth in Section 1.2 of Exhibit C
hereto.

ARTICLE 2 - ORGANIZATIONAL MATTERS

Section 2.1 Formation and Continuation

The Partnership is a limited partnership heretofore formed and continued
pursuant to the provisions of the Act and upon the terms and subject to the
conditions set forth in this Agreement. Except as expressly provided herein to
the contrary, the rights and obligations of the Partners and the administration
and termination of the Partnership shall be governed by the Act. The Partnership
Interest of each Partner shall be personal property for all purposes.

 

13

--------------------------------------------------------------------------------

Section 2.2 Name

The name of the Partnership shall be “Easterly Government Properties LP”. The
Partnership’s business may be conducted under any other name or names deemed
advisable by the General Partner, including the name of the General Partner or
any Affiliate thereof. The words “Limited Partnership,” “L.P.,” “Ltd.” or
similar words or letters shall be included in the Partnership’s name where
necessary for the purposes of complying with the laws of any jurisdiction that
so requires. The General Partner in its sole and absolute discretion may change
the name of the Partnership at any time and from time to time and shall notify
the Limited Partners of such change in the next regular communication to the
Limited Partners; provided, however, that failure to notify the Limited Partners
shall not invalidate such change or the authority granted hereunder.

Section 2.3 Registered Office and Agent; Principal Office

The address of the registered office of the Partnership in the State of Delaware
and the name and address of the registered agent for service of process on the
Partnership in the State of Delaware is The Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801. The
principal business office of the Partnership shall be 2101 L Street NW, Suite
750, Washington, DC 20037. The General Partner may from time to time designate
in its sole and absolute discretion another registered agent or another location
for the registered office or principal place of business, and shall provide the
Limited Partners with notice of such change in the next regular communication to
the Limited Partners; provided, however, that failure to so notify the Limited
Partners shall not invalidate such change or the authority granted hereunder.
The Partnership may maintain offices at such other place or places within or
outside the State of Delaware as the General Partner deems advisable.

Section 2.4 Power of Attorney

A. Each Limited Partner and each Assignee hereby constitutes and appoints the
General Partner, any Liquidator, and authorized officers and attorneys-in-fact
of each, and each of those acting singly, in each case with full power of
substitution, as its true and lawful agent and attorney-in-fact, with full power
and authority in its name, place and stead to:

(1) execute, swear to, seal, acknowledge, deliver, file and record in the
appropriate public offices (a) all certificates, documents and other instruments
(including, without limitation, this Agreement and the Certificate of Limited
Partnership and all amendments or restatements thereof) that the General Partner
or any Liquidator deems appropriate or necessary to form, qualify or continue
the existence or qualification of the Partnership as a limited partnership (or a
partnership in which the Limited Partners have limited liability) in the State
of Delaware and in all other jurisdictions in which the Partnership may or plans
to conduct business or own property; (b) all instruments that the General
Partner or any Liquidator deems appropriate or necessary to reflect any
amendment, change, modification or restatement of this Agreement duly adopted in
accordance with its terms; (c) all conveyances and other instruments or
documents that the General Partner or any Liquidator deems appropriate or
necessary to reflect the dissolution and liquidation of the Partnership pursuant
to the terms of this Agreement,

 

14

--------------------------------------------------------------------------------

including, without limitation, a certificate of cancellation; (d) all
conveyances and other instruments or documents that the General Partner or any
Liquidator deems appropriate or necessary to reflect the distribution or
exchange of assets of the Partnership pursuant to the terms of this Agreement;
(e) all instruments relating to the admission, withdrawal, removal or
substitution of any Partner or other events described in, Article 11 or
Article 12 hereof or the capital contribution of any Partner and (f) all
certificates, documents and other instruments relating to the determination of
the rights, preferences and privileges of Partnership Interests; and

(2) execute, swear to, seal, acknowledge and file all ballots, consents,
approvals, waivers, certificates and other instruments appropriate or necessary,
in the sole and absolute discretion of the General Partner or any Liquidator, to
make, evidence, give, confirm or ratify any vote, Consent, approval, agreement
or other action which is made or given by the Partners hereunder or is
consistent with the terms of this Agreement or appropriate or necessary, in the
sole discretion of the General Partner or any Liquidator, to effectuate the
terms or intent of this Agreement.

Nothing contained herein shall be construed as authorizing the General Partner
or any Liquidator to amend this Agreement except in accordance with Article 14
hereof or as may be otherwise expressly provided for in this Agreement.

B. The foregoing power of attorney is hereby declared to be irrevocable and a
power coupled with an interest, in recognition of the fact that each of the
Partners will be relying upon the power of the General Partner and any
Liquidator to act as contemplated by this Agreement in any filing or other
action by it on behalf of the Partnership, and it shall survive and not be
affected by the subsequent Incapacity of any Limited Partner or Assignee or the
transfer of all or any portion of such Limited Partner’s or Assignee’s
Partnership Units and shall extend to such Limited Partner’s or Assignee’s
heirs, successors, assigns and personal representatives. Each such Limited
Partner or Assignee hereby agrees to be bound by any representation made by the
General Partner or any Liquidator, acting in good faith pursuant to such power
of attorney, and each such Limited Partner or Assignee hereby waives any and all
defenses which may be available to contest, negate or disaffirm the action of
the General Partner or any Liquidator, taken in good faith under such power of
attorney. Each Limited Partner or Assignee shall execute and deliver to the
General Partner or any Liquidator, within fifteen (15) days after receipt of the
General Partner’s or such Liquidator’s request therefor, such further
designation, powers of attorney and other instruments as the General Partner or
any Liquidator, as the case may be, deems necessary to effectuate this Agreement
and the purposes of the Partnership.

Section 2.5 Term

The term of the Partnership shall be perpetual unless the Partnership is
dissolved sooner pursuant to the provisions of Article 13 or as otherwise
provided by law.

Section 2.6 Partnership Interests are Securities

All Partnership Interests shall be securities within the meaning of, and
governed by, (i) Article 8 of the Delaware Uniform Commercial Code as in effect
from time to time in the State of Delaware and (ii) Article 8 of the Uniform
Commercial Code of any other applicable jurisdiction.

 

15

--------------------------------------------------------------------------------

ARTICLE 3 - PURPOSE

Section 3.1 Purpose and Business

The purpose and nature of the business to be conducted by the Partnership is
(i) to conduct any business that may be lawfully conducted by a limited
partnership organized pursuant to the Act; provided, however, that such business
shall be limited to and conducted in such a manner as to permit the Company at
all times to be qualified as a REIT, unless the Company is not qualified or
ceases to qualify as a REIT for any reason or reasons other than the conduct of
the business of the Partnership, (ii) to enter into any partnership, joint
venture, limited liability company or other similar arrangement to engage in any
of the foregoing or to own interests in any entity engaged, directly or
indirectly, in any of the foregoing; and (iii) to do anything necessary or
incidental to the foregoing. In connection with the foregoing, and without
limiting the Company’s right, in its sole discretion, to cease qualifying 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 to the Company or its Affiliates.

Section 3.2 Powers

The Partnership is empowered to do any and all acts and things necessary,
appropriate, proper, advisable, incidental to or convenient for the furtherance
and accomplishment of the purposes and business described herein and for the
protection and benefit of the Partnership, including, without limitation, full
power and authority, directly or through its ownership interest in other
entities, to enter into, perform and carry out contracts of any kind, borrow
money and issue evidences of indebtedness whether or not secured by mortgage,
deed of trust, pledge or other lien, acquire, own, manage, improve and develop
real property, and lease, sell, transfer and dispose of real property; provided,
however, that the Partnership shall not take, or omit to take, any action which,
in the judgment of the General Partner, in its sole and absolute discretion,
(i) could adversely affect the ability of the Company to achieve or maintain
qualification as a REIT; (ii) could subject the Company to any additional taxes
under Section 857 or Section 4981 of the Code or (iii) could violate any law or
regulation of any governmental body or agency having jurisdiction over the
Company, its securities or the Partnership or any of its Subsidiaries, unless
any such action (or inaction) under the foregoing clauses (i), (ii) or
(iii) shall have been specifically consented to by the Company in writing.

Section 3.3 Partnership Only for Purposes Specified

This Agreement shall not be deemed to create a company, venture or partnership
between or among the Partners with respect to any activities whatsoever other
than the activities within the purposes of this Partnership as specified in
Section 3.1. Except as otherwise provided in this Agreement, no Partner shall
have any authority to act for, bind, commit or assume any obligations or
responsibility on behalf of the Partnership, its properties or any other
Partner. No Partner, in its capacity as a Partner under this Agreement, shall be
responsible for any indebtedness or obligation of another Partner, and the
Partnership shall not be responsible or

 

16

--------------------------------------------------------------------------------

liable for any indebtedness or obligation of any Partner, incurred either before
or after the execution or delivery of this Agreement by such Partner, except as
to those responsibilities, liabilities, indebtedness or obligations incurred
pursuant to and as limited by the terms of this Agreement and the Act.

Section 3.4 Representations and Warranties by the Partners

A. Each Partner that is an individual (including, without limitation, each
Additional Limited Partner or Substituted Limited Partner as a condition to
becoming an Additional Limited Partner or a Substituted Limited Partner,
respectively) represents and warrants to each other Partner that (i) such
Partner has the legal capacity to enter into this Agreement and perform such
Partner’s obligations hereunder; (ii) the consummation of the transactions
contemplated by this Agreement to be performed by such Partner will not result
in a breach or violation of, or a default under, any agreement by which such
Partner or any of such Partner’s property is or are bound, or any statute,
regulation, order or other law to which such Partner is subject; and (iii) this
Agreement is binding upon, and enforceable against, such Partner in accordance
with its terms, as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or similar laws
affecting creditors’ rights generally, as from time to time in effect, or the
application of equitable principles.

B. Each Partner that is not an individual (including, without limitation, each
Additional Limited Partner or Substituted Limited Partner as a condition to
becoming an Additional Limited Partner or a Substituted Limited Partner,
respectively) represents and warrants to each other Partner that (i) its
execution and delivery of this Agreement and all transactions contemplated by
this Agreement to be performed by it have been duly authorized by all necessary
action, including without limitation, that of its general partner(s),
committee(s), trustee(s), beneficiaries, director(s), member(s) and/or
stockholder(s), as the case may be, as required; (ii) the consummation of such
transactions shall not result in a breach or violation of, or a default under,
its certificate of limited partnership, partnership agreement, trust agreement,
limited liability company operating agreement, charter or bylaws, as the case
may be, any agreement by which such Partner or any of such Partner’s properties
or any of its partners, beneficiaries, trustees, directors, members or
stockholders, as the case may be, is or are bound, or any statute, regulation,
order or other law to which such Partner or any of its partners, trustees,
beneficiaries, directors, members or stockholders, as the case may be, is or are
subject; and (iii) this Agreement is binding upon, and enforceable against, such
Partner in accordance with its terms, as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or similar laws affecting creditors’ rights generally, as from time
to time in effect, or the application of equitable principles.

C. Except as set forth in a separate agreement entered into between the
Partnership and a Limited Partner, each Partner (including, without limitation,
each Additional Limited Partner or Substituted Limited Partner as a condition to
becoming an Additional Limited Partner or Substituted Limited Partner)
represents, warrants and agrees that (i) it is an “accredited investor” as
defined in Rule 501 promulgated under the Securities Act, (ii) it has acquired
and continues to hold its interest in the Partnership for its own account for
investment purposes only and not for the purpose of, or with a view toward, the
resale or distribution of all

 

17

--------------------------------------------------------------------------------

or any part thereof in violation of applicable laws, and not with a view toward
selling or otherwise distributing such interest or any part thereof at any
particular time or under any predetermined circumstances in violation of
applicable laws, (iii) it is a sophisticated investor, able and accustomed to
handling sophisticated financial matters for itself, particularly real estate
investments, and that it has a sufficiently high net worth that it does not
anticipate a need for the funds that it has invested in the Partnership in what
it understands to be a highly speculative and illiquid investment, and
(iv) without the Consent of the General Partner, it shall not take any action
that would cause the Partnership at any time to have more than 100 partners,
including as partners those persons (each such person, a “Flow-Through Partner”)
indirectly owning an interest in the Partnership through an entity treated as a
partnership, disregarded entity, S corporation or grantor trust for U.S. federal
income tax purposes (each such entity, a “Flow-Through Entity”), but only if
substantially all of the value of such person’s interest in the Flow-Through
Entity is attributable to the Flow-Through Entity’s interest (direct or
indirect) in the Partnership.

D. The representations and warranties contained in this Section 3.4 shall
survive the execution and delivery of this Agreement by each Partner (and, in
the case of an Additional Limited Partner or a Substituted Limited Partner, the
admission of such Additional Limited Partner or Substituted Limited Partner as a
Limited Partner in the Partnership) and the dissolution, liquidation,
termination and winding up of the Partnership.

E. Each Partner (including, without limitation, each Additional Limited Partner
or Substituted Limited Partner as a condition to becoming an Additional Limited
Partner or Substituted Limited Partner, respectively) hereby acknowledges that
no representations as to potential profit, cash flows, funds from operations or
yield, if any, in respect of the Partnership, or the Company have been made by
any Partner or any employee or representative or Affiliate of any Partner, and
that projections and any other information, including, without limitation,
financial and descriptive information and documentation, that may have been in
any manner submitted to such Partner shall not constitute any representation or
warranty of any kind or nature, express or implied.

F. Notwithstanding the foregoing, the General Partner may, in its sole and
absolute discretion, permit the modification of any of the representations and
warranties contained in Sections 3.4.A, 3.4.B and 3.4.C above as applicable to
any Partner (including, without limitation any Additional Limited Partner or
Substituted Limited Partner or any transferee of either), provided that such
representations and warranties, as modified, shall be set forth in either (i) a
Certificate of Designation applicable to the Partnership Units held by such
Partner or (ii) a separate writing addressed to the Partnership and the General
Partner.

ARTICLE 4 - CAPITAL CONTRIBUTIONS

Section 4.1 Capital Contributions of the Partners

A. On the date hereof, the Partners have made or shall be deemed to have made
capital contributions to the Partnership and/or have surrendered their existing
interests in the Partnership in exchange for the Partnership Units set forth
opposite such Partner’s name on Exhibit A hereto and have Percentage Interests
as set forth on Exhibit A. The Partners, number

 

18

--------------------------------------------------------------------------------

of Partnership Units and Percentage Interests shall be adjusted from time to
time in the books and records of the Partnership by the General Partner to the
extent necessary to accurately reflect sales, exchanges or other transfers of
Partnership Units, the issuance of additional Partnership Units, the admittance
of additional Limited Partners, the redemption of Partnership Units, additional
capital contributions and similar events having an effect on a Partner’s
Percentage Interest.

B. The General Partner holds a General Partner Interest which shall have no
economic interest and is not represented by any Partnership Units. All
Partnership Units held by the Company shall be deemed to be Limited Partner
Interests and shall be held by the Company in its capacity as a Limited Partner
in the Partnership.

C. To the extent the Partnership acquires any property (or an indirect interest
therein) by the merger of any other Person into the Partnership or with or into
a Subsidiary of the Partnership in a triangular merger, Persons who receive
Partnership Interests in exchange for their interests in the Person merging into
the Partnership or with or into a Subsidiary of the Partnership shall become
Partners and shall be deemed to have made capital contributions as provided in
the applicable merger agreement (or if not so provided, as determined by the
General Partner in its sole and absolute discretion) and as set forth in the
books and records of the Partnership, as amended to reflect such deemed Capital
Contributions.

D. Except as provided in Section 4.2, Section 4.3, Section 5.1 and Section 13.3,
the Partners shall have no obligation to make any additional capital
contributions or loans to the Partnership.

Section 4.2 Issuance of Additional Partnership Interests and Additional Funding

Subject to the rights of any Holder of Partnership Interests set forth in a
Certificate of Designations:

A. Issuance of Additional Partnership Interests. The General Partner, in its
sole and absolute discretion, is hereby authorized without the approval of the
Limited Partners or any other Person to cause the Partnership from time to time
to issue to the Partners (including the General Partner, the Company and its
Affiliates) or other Persons (including, without limitation, in connection with
the contribution of tangible or intangible property, services or other
consideration permitted by the Act to the Partnership) additional Partnership
Units or other Partnership Interests in one or more classes or series, with such
designations, preferences, and relative, participating, optional or other
special rights, powers and duties all as shall be determined by the General
Partner in its sole and absolute discretion subject to Delaware law, including,
without limitation, (i) rights, powers, and duties senior to Common Units, LTIP
Units or one or more other classes or series of Partnership Interests
outstanding or thereafter issued; (ii) the rights to an allocation of items of
Partnership income, gain, loss, deduction, and credit to each such class or
series of Partnership Interests; (iii) the rights to an allocation of certain
indebtedness of the Partnership pursuant to Code Section 752; (iv) the rights of
each such class or series of Partnership Interests to share in Partnership
distributions; (v) the rights of each such class or series of Partnership
Interests upon dissolution and liquidation of the Partnership; (vi) the right to
vote, if any, of each such class or series of Partnership Interests; and
(vii) the rights

 

19

--------------------------------------------------------------------------------

of any class or series of Partnership Interests issued in connection with any
tax protection agreement or any other similar arrangement; provided that no such
additional Partnership Units or other Partnership Interests shall be issued to
the General Partner or the Company or any direct or indirect wholly owned
Subsidiary of the Company, unless (a)(1) the additional Partnership Interests
are issued in connection with the grant, award or issuance of REIT Shares, other
shares of stock or New Securities of the Company pursuant to Section 4.2E that
have designations, preferences and other rights such that the economic rights
are substantially similar to the economic rights of the additional Partnership
Interests issued to the General Partner or the Company or any direct or indirect
wholly owned Subsidiary of the Company (as appropriate) in accordance with this
Section 4.2A, and (2) the Company shall, directly or indirectly, make a capital
contribution to the Partnership in an amount equal to any net proceeds raised in
connection with such issuance, (b) the additional Partnership Interests are
issued to all Partners in proportion to their respective Percentage Interests,
(c) the additional Partnership Interests are issued upon the conversion,
redemption, or exchange of Debt, Units or other securities issued by the
Partnership or (d) the issuance of such additional Partnership Interests is
otherwise expressly contemplated by this Agreement. The General Partner’s
determination that the consideration is adequate shall be conclusive insofar as
the adequacy of consideration related to whether the Partnership Interests are
validly issued and paid.

B. Additional Funds. The General Partner may, at any time and from time to time,
determine that the Partnership requires additional funds (“Additional Funds”)
for the acquisition or development of additional Properties, for the redemption
of Partnership Units or for such other Partnership purposes as the General
Partner may determine in its sole and absolute discretion. Additional Funds may
be raised by the Partnership, at the election of the General Partner, in any
manner provided in, and in accordance with, the terms of this Section 4.2
without the approval of any Limited Partner or any other Person.

C. Loans by Third Parties. The General Partner, on behalf of the Partnership,
may obtain any Additional Funds by causing the Partnership to incur Debt, or
enter into other similar credit, guarantee, financing or refinancing
arrangements for any purpose (including, without limitation, in connection with
any further acquisition of Properties) upon such terms as the General Partner
determines appropriate; provided that the Partnership shall not incur any Debt
that is recourse to any Partner, except to the extent otherwise agreed to by the
applicable Partner.

D. General Partner and Company Loans. The General Partner, on behalf of the
Partnership, may obtain any Additional Funds by causing the Partnership to incur
Debt (or issue Preferred Units) to the General Partner and/or the Company, if
(i) such Debt (or Preferred Units) is, to the extent permitted by law, on
substantially the same terms and conditions (including interest rate, repayment
schedule, and conversion, redemption, repurchase and exchange rights, but not
including collateral) as Funding Debt incurred by the General Partner or the
Company, as applicable, the net proceeds of which are loaned (or contributed) to
the Partnership to provide such Additional Funds or (ii) such Debt (or Preferred
Units) is on terms and conditions no less favorable to the Partnership than
would be available to the Partnership from any third party; provided, however,
that the Partnership shall not incur any such Debt (or issue Preferred Units) if
(a) a breach, violation or default of such Debt would be deemed to occur by
virtue of the transfer by any Limited Partner of any Partnership Interest (or if
the Preferred Units would limit the transfer by any Limited Partner of any
Partnership Interest) or (b) such Debt is recourse to any Partner (unless the
Partner otherwise agrees).

 

20

--------------------------------------------------------------------------------

E. Issuance of Securities by the Company. The Company shall not issue any
additional REIT Shares, other shares of capital stock or New Securities (other
than REIT Shares issued pursuant to Section 8.5 or such shares, stock or
securities pursuant to a dividend or distribution (including any stock split) to
all of its stockholders who hold a particular class of stock of the Company)
unless (i) the General Partner shall cause the Partnership to issue to the
Company, Partnership Interests or rights, options, warrants or convertible or
exchangeable securities of the Partnership having designations, preferences and
other rights, all such that the economic interests thereof are substantially
similar to those of the REIT Shares, other shares of capital stock or New
Securities issued by the Company and (ii) the Company directly or indirectly
contributes to the Partnership the proceeds, if any, received from the issuance
of such additional REIT Shares, other shares of capital stock or New Securities,
as the case may be, and from any exercise of the rights contained in such
additional New Securities, as the case may be; provided that the Company may use
a portion of the proceeds received from such issuance to acquire other assets
(provided such other assets are contributed to the Partnership pursuant to the
terms of this Agreement). Without limiting the foregoing, the Company is
expressly authorized to issue REIT Shares, other shares of capital stock or New
Securities for no tangible value or for less than fair market value, and the
General Partner is expressly authorized to cause the Partnership to issue to the
Company corresponding Partnership Interests, so long as (x) the General Partner
concludes in good faith that such issuance of Partnership Interests is in the
interests of the Partnership, and (y) the Company contributes all proceeds, if
any, from such issuance and exercise to the Partnership.

F. In the event that the actual proceeds received by the Company in connection
with any issuance of additional REIT Shares, other shares of capital stock or
New Securities are less than the gross proceeds of such issuance as a result of
any underwriter’s discount or other expenses paid in connection with such
issuance, then, except as provided in Section 6.1L, the Company shall be deemed
to have made, through the General Partner, a capital contribution to the
Partnership in the amount equal to the sum of the net proceeds of such issuance
plus the amount of such underwriter’s discount and other expenses paid by the
Company (which discount and expense shall be treated as an expense for the
benefit of the Partnership for purposes of Section 7.4). In the case of the
issuance of REIT Shares by the Company in any offering, whether registered under
the Securities Act or exempt from such registration, underwritten, offered and
sold directly to investors or through agents or other intermediaries, or
otherwise distributed, for purposes of determining the number of additional
Common Units issuable upon a capital contribution funded by the net proceeds
thereof consistently with the immediately preceding sentence, any discount from
the then current market price of REIT Shares shall be disregarded such that an
equal number of Common Units can be issued to the Company as the number of REIT
Shares sold by the Company in such offering. In the case of issuances of REIT
Shares, other capital stock of the Company or New Securities pursuant to any
Stock Plan (but, for the avoidance of doubt, excluding any LTIP Units or other
Partnership Interests issued pursuant to any Stock Plan) at a discount from fair
market value or for no value, the amount of such discount representing
compensation to the employee, as determined by the General Partner, shall be
treated as an expense for the benefit of the Partnership for purposes of
Section 7.4 and, as a result, the Company shall be deemed to have made a capital
contribution to the Partnership in an amount equal to the sum of any net
proceeds of such issuance plus the amount of such expense.

 

21

--------------------------------------------------------------------------------

G. In the event that the Partnership issues Partnership Interests pursuant to
this Section 4.2, the General Partner shall make such revisions to this
Agreement (without any requirement of receiving approval of the Limited
Partners) including, but not limited to, the revisions described in Section 6.1M
and Section 8.5 hereof, as it deems necessary to reflect the issuance of such
additional Partnership Interests and the special rights, powers, and duties
associated therewith.

H. Notwithstanding anything to the contrary, from and after the date hereof the
Partnership shall be authorized to issue LTIP Units. From time to time the
General Partner may issue LTIP Units to Persons providing services to or for the
benefit of the Partnership.

I. Nothing in this Agreement shall be construed or applied to preclude or
restrain the General Partner or the Company from adopting, modifying or
terminating Stock Plans for the benefit of employees, directors or other
business associates of the General Partner, the Company, the Partnership or any
of their Affiliates. The Partners acknowledge and agree that, in the event that
any such Stock Plan is adopted, modified or terminated by the General Partner or
the Company, amendments to this Agreement (including amendments to Section 4.2A
and Section 4.2E) may become necessary or advisable and that any such amendments
requested by the General Partner or the Company shall not require any Consent or
approval by the Limited Partners.

Section 4.3 Other Contribution Provisions

In the event that any Partner is admitted to the Partnership or any existing
Partner is issued additional Partnership Interests and any such Partner is given
(or is treated as having received) a Capital Account credit at the time of such
admission or issuance, as applicable, in exchange for services rendered to the
Partnership, such transaction shall be treated by the Partnership and the
affected Partner as if the Partnership had compensated such Partner in cash in
an amount equal to the Capital Account credit such Partner received, and the
Partner had contributed such cash to the capital of the Partnership. In
addition, with the consent of the General Partner, in its sole and absolute
discretion, one or more Limited Partners (or direct or indirect equity owners
thereof) may enter into agreements with the Partnership, in the form of a
guarantee or contribution agreement, which have the effect of providing a
guarantee of certain obligations of the Partnership.

Section 4.4 No Preemptive Rights

Except to the extent expressly granted by the Partnership pursuant to another
agreement, no Person including, without limitation, any Partner or Assignee,
shall have any preemptive, preferential or other similar right with respect to
(i) capital contributions or loans to the Partnership or (ii) the issuance or
sale of any Partnership Units or other Partnership Interests.

 

22

--------------------------------------------------------------------------------

Section 4.5 No Interest on Capital

No Partner shall be entitled to interest on its Capital Contributions or its
Capital Account. Except as provided herein or by law, no Partner shall have any
right to withdraw any part of its Capital Account or to demand or receive the
return of its Capital Contributions.

ARTICLE 5 - DISTRIBUTIONS

Section 5.1 Distribution of Cash

A. Subject to Article 13, the other provisions of this Article 5 and the rights
and preferences of any Preferred Units or additional class or series of
Partnership Units established pursuant to Section 4.2, the Partnership shall use
reasonable efforts to distribute cash at least quarterly in such amounts as are
determined by the General Partner, in its sole and absolute discretion, to the
Partners who are Partners on the Partnership Record Date in accordance with
their respective Percentage Interests on the Partnership Record Date.

B. Notwithstanding any other provision of this Agreement, the General Partner is
authorized to take any action that it determines to be necessary or appropriate
to cause the Partnership to comply with any withholding requirements established
under the Code or any other U.S. federal, state or local law or foreign law
including, without limitation, pursuant to Sections 1441, 1442, 1445, 1446, 1471
and 1472 of the Code. Any amount paid on behalf of or with respect to a Limited
Partner shall constitute a loan by the Partnership to such Limited Partner,
which loan shall be repaid by such Limited Partner within fifteen (15) days
after notice from the General Partner that such payment must be made unless
(i) the Partnership withholds such payment from a distribution which would
otherwise be made to the Limited Partner, (ii) the General Partner determines,
in its sole and absolute discretion, that such payment may be satisfied out of
the available funds of the Partnership which would, but for such payment, be
distributed to the Limited Partner or (iii) treatment as a loan would jeopardize
the Company’s status as a REIT or otherwise be prohibited by law, including,
without limitation, Section 402 of the Sarbanes-Oxley Act of 2002 (in which case
such Limited Partner shall pay such amount to the Partnership on or before the
date the Partnership pays such amount on behalf of such Limited Partner). Any
amounts withheld pursuant to the foregoing clauses (i), (ii) or (iii) shall be
treated as having been distributed to such Limited Partner (unless, in the case
of amounts governed by clause (iii), the Limited Partner timely pays the amount
to be withheld to the Partnership). Each Limited Partner hereby unconditionally
and irrevocably grants to the Partnership a security interest in such Limited
Partner’s Partnership Interest to secure such Limited Partner’s obligation to
pay to the Partnership any amounts required to be paid pursuant to this
Section 5.1B. Any amounts payable by a Limited Partner hereunder shall bear
interest at the lesser of (1) the base rate on corporate loans at large United
States money center commercial banks, as published from time to time in The Wall
Street Journal, plus four (4) percentage points, or (2) the maximum lawful rate
of interest on such obligation, such interest to accrue from the date such
amount is due (i.e., fifteen (15) days after demand) until such amount is paid
in full. Each Limited Partner shall take such actions as the Partnership shall
request in order to (i) perfect or enforce the security interest created
hereunder and (ii) cause any loan arising hereunder to be treated as a real
estate asset for purposes of Section 856(c)(4)(A) of the Code and to generate
income described in Section 856(c)(3) of the Code. In addition to all other
remedies that the Partnership may be

 

23

--------------------------------------------------------------------------------

entitled to pursue, in the event that a Limited Partner fails to pay any amount
when due pursuant to this Section 5.1B, the Partnership may thereafter, at any
time prior to the Limited Partner’s payment in full of such amount (plus any
accrued interest), elect to redeem Common Units held by such Limited Partner, in
accordance with the procedures set forth in Section 8.5 with the Valuation Date
being the date the Partnership elects to redeem such Common Units, in an amount
sufficient to pay any or all of such amount. In the event that proceeds to the
Partnership are reduced on account of taxes withheld at the source or the
Partnership incurs a tax liability and such taxes (or a portion thereof) are
imposed on or with respect to one or more, but not all, of the Partners in the
Partnership or if the rate of tax varies depending on the attributes of specific
Partners or to whom the corresponding income is allocated, 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.

C. In no event may a Partner receive a distribution of cash with respect to a
Partnership Unit if such Partner is entitled to receive a cash dividend as the
holder of record with respect to the Partnership Record Date for such
distribution of a REIT Share for which all or part of such Partnership Unit has
been or will be exchanged.

Section 5.2 REIT Distribution Requirements. The General Partner shall use its
reasonable efforts to cause the Partnership to make distributions pursuant to
this Article 5 sufficient to enable the Company to pay stockholder dividends
that will allow the Company to (i) meet its distribution requirement for
qualification as a REIT as set forth in Section 857 of the Code and (ii) other
than to the extent the Company elects to retain and pay income tax on its net
capital gain, avoid or reduce any U.S. federal income or excise tax liability
imposed by the Code.

Section 5.3 No Right to Distributions in Kind. No Partner shall be entitled to
demand property other than cash in connection with any distributions by the
Partnership. The General Partner may determine, in its sole and absolute
discretion, to make a distribution in-kind of Partnership assets to the Holders,
and such assets shall be distributed in the manner to ensure that the fair
market value is distributed and allocated in accordance with Articles 5 and 6
hereof.

Section 5.4 Distributions Upon Liquidation. Notwithstanding the other provisions
of this Article 5, net proceeds from a Terminating Capital Transaction, and any
other cash received or reductions in reserves made after commencement of a
Liquidating Event shall be distributed to Holders in accordance with
Section 13.2.

Section 5.5 Distributions to Reflect Issuance of Additional Partnership Units.
In addition to any amendment permitted under Section 14.2, the General Partner
is authorized to modify the distributions in this Article 5 and amend such
provisions (including the defined terms used therein) in such manner as the
General Partner determines is necessary or appropriate to reflect the issuances
of additional series or classes of Partnership Interests without the consent of
any Partner or any other Person. Any such modification may be made pursuant to a
Certificate of Designations or similar instrument establishing such new class or
series.

 

24

--------------------------------------------------------------------------------

Section 5.6 Special Distribution Following Formation Transactions. Immediately
following the contribution of properties by, and the issuance of Common Units
to, USGP II Investor, LP in connection with the Formation Transactions, the
Partnership shall distribute 3,308,000 REIT Shares to USGP II Investor, LP. To
the extent permitted by Regulations Section 1.707-4, the distribution of REIT
Shares pursuant to this Section 5.6 shall not be treated as part of a sale of
property by USGP II Investor, LP for U.S. federal income tax purposes.

ARTICLE 6 – ALLOCATIONS

Section 6.1 Capital Account Allocations of Profit and Loss

A. Profit. After giving effect to the special allocations, if any, required
under this Article 6 for the applicable period, and subject to the other
provisions of this Section 6.1 and to the allocations to be made with respect to
any Preferred Units or additional class or series of Partnership Units
established pursuant to Section 4.2, Profits in each taxable year or other
allocation period shall be allocated to the Partners’ Capital Accounts in the
following order of priority:

(1) First to the General Partner until the cumulative Profits allocated to the
General Partner under this Section 6.1A equal the cumulative Losses allocated to
such Partner under Section 6.1B(2); and

(2) Thereafter, to the holders of Common Units and LTIP Units in accordance with
their respective Percentage Interests.

B. Losses. After giving effect to the special allocations, if any, required
under this Article 6 for the applicable period, and subject to the allocations
to be made with respect to any Preferred Units or additional class or series of
Partnership Units established pursuant to Section 4.2, and further subject to
the other provisions of this Section 6.1, Loss in each taxable year or other
period shall be allocated in the following order of priority:

(1) First, to the holders of Common Units and LTIP Units with positive Economic
Capital Account Balances in accordance with their respective Percentage
Interests until any such holder has an Economic Capital Account Balance of zero,
after which this Section 6.1B(1) shall be reapplied to any remaining holders of
Common Units and LTIP Units with positive Economic Capital Account Balances, as
many times as needed, until every holder of Common Units and/or LTIP Units has
an Economic Capital Account Balance of zero; and

(2) Thereafter, to the General Partner.

For purposes of determining allocations of Losses pursuant to Section 6.1B(1),
an LTIP Unit Limited Partner shall be treated as having a separate Economic
Capital Account Balance, and for this purpose a separate Capital Account with an
appropriate share of Partnership Minimum Gain and Partner Minimum Gain shall be
maintained, for each tranche of LTIP Units with a different issuance date that
it holds and a separate Capital Account for its Common Units, if applicable, and
the Economic Capital Account Balance of each holder of Common Units shall not
include any Economic Capital Account Balance attributable to other series or
classes of Partnership Units. LTIP Units are intended to qualify as “profits
interests” in the Partnership pursuant to Revenue Procedures 93-27 and 2001-43.

 

25

--------------------------------------------------------------------------------

C. Nonrecourse Deductions and Minimum Gain Chargeback. Notwithstanding any
provision to the contrary, (i) any expense of the Partnership that is a
“nonrecourse deduction” within the meaning of Regulations Section 1.704-2(b)(1)
shall be allocated in accordance with the Partners’ respective Percentage
Interests, (ii) any expense of the Partnership that is a “partner nonrecourse
deduction” within the meaning of Regulations Section 1.704-2(i)(2) shall be
allocated to the Partner that bears the “economic risk of loss” of such
deduction in accordance with Regulations Section 1.704-2(i)(1), (iii) if there
is a net decrease in Partnership Minimum Gain within the meaning of Regulations
Section 1.704-2(f)(1) for any Partnership taxable year, then, subject to the
exceptions set forth in Regulations Section 1.704-2(f)(2),(3), (4) and (5),
items of gain and income shall be allocated among the Partners in accordance
with Regulations Section 1.704-2(f) and the ordering rules contained in
Regulations Section 1.704-2(j), and (iv) if there is a net decrease in “partner
nonrecourse debt minimum gain” within the meaning of Regulations
Section 1.704-2(i)(4) for any Partnership taxable year, then items of gain and
income shall be allocated among the Partners in accordance with Regulations
Section 1.704-2(i)(4) and the ordering rules contained in Regulations
Section 1.704-2(j).

D. Qualified Income Offset. If a Partner receives in any taxable year an
adjustment, allocation or distribution described in subparagraphs (4), (5) or
(6) of Regulations Section 1.704-1(b)(2)(ii)(d) that causes or increases a
deficit balance in such Partner’s Capital Account that exceeds the sum of such
Partner’s shares of Partnership Minimum Gain and Partner Minimum Gain, as
determined in accordance with Regulations Sections 1.704-2(g) and 1.704-2(i),
such Partner shall be specially allocated for such taxable year (and, if
necessary, later taxable years) items of income and gain in an amount and manner
sufficient to eliminate such deficit Capital Account balance as quickly as
possible as provided in Regulations Section 1.704-1(b)(2)(ii)(d).

E. Capital Account Deficits. Loss or items thereof shall not be allocated to a
Limited Partner to the extent that such allocation would cause or increase a
deficit in such Partner’s Adjusted Capital Account.

F. Definition of Profit and Loss. “Profit” and “Loss” and any items of income,
gain, expense or loss referred to in this Agreement means the net income, net
loss or items thereof for the applicable period as determined for maintaining
Capital Accounts, and shall be determined in accordance with U.S. federal income
tax accounting principles, as modified by Regulations Section 1.704-1(b)(2)(iv),
except that Profit and Loss shall not include items of income, gain, loss and
expense that are specially allocated pursuant to this Article 6 (other than
Section 6.1A or Section 6.1B).

G. Curative Allocations. The allocations set forth in Section 6.1C, Section 6.1D
and Section 6.1E hereof (the “Regulatory Allocations”) are intended to comply
with certain regulatory requirements, including the requirements of Regulations
Sections 1.704-1(b) and 1.704-2. Notwithstanding the provisions of this
Section 6.1 and Section 6.2 hereof, the

 

26

--------------------------------------------------------------------------------

Regulatory Allocations shall be taken into account in allocating other items of
income, gain, loss and expense among the Holders so that to the extent possible
without violating the requirements giving rise to the Regulatory Allocations,
the net amount of such allocations of other items and the Regulatory Allocations
to each Holder shall be equal to the net amount that would have been allocated
to each such Holder if the Regulatory Allocations had not occurred.

H. Forfeitures. Subject to Section 6.1J with respect to a forfeiture of certain
LTIP Units, upon a forfeiture of any unvested Partnership Interest by any
Partner, gross items of income, gain, loss or deduction shall be allocated to
such Partner if and to the extent required by final Regulations to ensure that
allocations made with respect to all unvested Partnership Interests are
recognized under Code Section 704(b).

I. LTIP Allocations. After giving effect to the special allocations set forth in
Section 6.1C and Section 6.1D hereof, and the allocations of Profit under
Section 6.1A(1) (including, for the avoidance of doubt Liquidating Gains that
are a component of Profit), and subject to the other provisions of this
Section 6.1, but before allocations of Profit are made under Section 6.1A(2):

(1) any remaining Liquidating Gains or Liquidating Losses shall first be
allocated among the Partners so as to cause, as nearly as possible, the Economic
Capital Account Balances of the LTIP Unit Limited Partners, to the extent
attributable to their ownership of LTIP Units, to be equal to (i) the Common
Unit Economic Balance, multiplied by (ii) the number of their LTIP Units (with
respect to each LTIP Unit Limited Partner, the “Target Balance”). Any such
allocations shall be made among the Partners in proportion to the aggregate
amounts required to be allocated to each Partner under this Section 6.1I.

(2) Liquidating Gain allocated to an LTIP Unit Limited Partner under this
Section 6.1I will be attributed to specific LTIP Units of such LTIP Unit Limited
Partner for purposes of determining (i) allocations under this Section 6.1I,
(ii) the effect of the forfeiture or conversion of specific LTIP Units on such
LTIP Unit Limited Partner’s Capital Account and (iii) the ability of such LTIP
Unit Limited Partner to convert specific LTIP Units into Common Units. Such
Liquidating Gain allocated to such LTIP Unit Limited Partner will generally be
attributed in the following order: (i) first, to Vested LTIP Units held for more
than two years, (ii) second, to Vested LTIP Units held for two years or less,
(iii) third, to Unvested LTIP Units that have remaining vesting conditions that
only require continued employment or service to the Company, the Partnership or
an Affiliate of either for a certain period of time (with such Liquidating Gains
being attributed in order of vesting from soonest vesting to latest vesting),
and (iv) fourth, to other Unvested LTIP Units (with such Liquidating Gains being
attributed in order of issuance from earliest issued to latest issued). Within
each category, Liquidating Gain will be allocated seriatim (i.e., entirely to
the first unit in a set, then entirely to the next unit in the set, and so on,
until a full allocation is made to the last unit in the set) in the order of
smallest Book-Up Target to largest Book-Up Target.

 

27

--------------------------------------------------------------------------------

(3) After giving effect to the special allocations set forth above, if, due to
distributions with respect to Common Units in which the LTIP Units do not
participate, forfeitures or otherwise, the Economic Capital Account Balance of
any present or former LTIP Unit Limited Partner attributable to such LTIP Unit
Limited Partner’s LTIP Units, exceeds the Target Balance, then Liquidating
Losses shall be allocated to such LTIP Unit Limited Partner, or Liquidating
Gains shall be allocated to the other Partners, to reduce or eliminate the
disparity; provided, however, that if Liquidating Losses or Liquidating Gains
are insufficient to completely eliminate all such disparities, such losses or
gains shall be allocated among Partners in a manner reasonably determined by the
General Partner.

(4) The parties agree that the intent of this Section 6.1I is (i) to the extent
possible to make the Economic Capital Account Balance associated with each LTIP
Unit economically equivalent to the Common Unit Economic Balance and (ii) to
allow conversion of an LTIP Unit (assuming prior vesting) into a Common Unit
when sufficient Liquidating Gains have been allocated to such LTIP Unit pursuant
to Section 6.1I(1) so that either its initial Book-Up Target has been reduced to
zero or the parity described in the definition of Target Balance has been
achieved. The General Partner shall be permitted to interpret this Section 6.1I
or to amend this Agreement to the extent necessary and consistent with this
intention.

(5) In the event that Liquidating Gains or Liquidating Losses are allocated
under this Section 6.1I, Profits allocable under clause 6.1A(2) and any Losses
shall be recomputed without regard to the Liquidating Gains or Liquidating
Losses so allocated.

J. LTIP Forfeitures. If an LTIP Unit Limited Partner forfeits any LTIP Units to
which Liquidating Gain has previously been allocated under Section 6.1I, (i) the
portion of such LTIP Unit Limited Partner’s Capital Account attributable to such
Liquidating Gain allocated to such forfeited LTIP Units will be re-allocated to
that LTIP Unit Limited Partner’s remaining LTIP Units that were outstanding on
the date of the initial allocation of such Liquidating Gain, using a methodology
similar to that described in Section 6.1I(2) above as reasonably determined by
the General Partner, to the extent necessary to cause such LTIP Unit Limited
Partner’s Economic Capital Account Balance attributable to each such LTIP Unit
to equal the Common Unit Economic Balance and (ii) such LTIP Unit Limited
Partner’s Capital Account will be reduced by the amount of any such Liquidating
Gain not re-allocated pursuant to clause (i) above.

K. Reimbursements Treated as Guaranteed Payments. Subject to Section 6.1L, if
and to the extent any payment or reimbursement to the General Partner or the
Company made pursuant to Section 7.7 or otherwise is determined for U.S. federal
income tax purposes not to constitute a payment of expenses of the Partnership,
the amount so determined shall constitute a guaranteed payment with respect to
capital within the meaning of Section 707(c) of the Code, shall be treated
consistently therewith by the Partnership and all Partners and shall not be
treated as a distribution for purposes of computing the Partners’ Capital
Accounts.

L. Adjustments to Preserve REIT Status and Avoid Gain. Notwithstanding any
provision in this Agreement to the contrary, if the Partnership pays or
reimburses (directly or indirectly, including by reason of giving the General
Partner or the Company or any direct or

 

28

--------------------------------------------------------------------------------

indirect Subsidiary of the Company Capital Account credit in excess of actual
Capital Contributions made by the General Partner or the Company or any direct
or indirect Subsidiary of the Company) fees, expenses or other costs pursuant to
Section 4.2, Section 7.4 and/or Section 7.7, or otherwise, and if failure to
treat all or part of such payment or reimbursement as a distribution to the
General Partner, the Company or any Subsidiary of the Company (as appropriate),
or the receipt of Capital Account credit in excess of actual Capital
Contributions, would cause the Company to recognize income that would cause the
Company to fail to qualify as a REIT, then such payment or reimbursement (or
portion thereof) shall be treated as a distribution to the General Partner, the
Company or direct or indirect Subsidiary of the Company (as appropriate) for
purposes of this Agreement, or the Capital Account credit in excess of actual
Capital Contributions shall be reduced, in each case to the extent necessary to
preserve the Company’s status as a REIT. The Capital Account of the General
Partner, the Company or any direct or indirect Subsidiary of the Company (as
appropriate) shall be reduced by such direct or indirect payment or
reimbursement (or a portion thereof) in the same manner as an actual
distribution to the General Partner, the Company, or any direct or indirect
Subsidiary of the Company (as appropriate). To the extent treated as
distributions, such fees, expenses or other costs shall not be taken into
account as Partnership fees, expenses or costs for the purposes of this
Agreement. In the event that amounts are recharacterized as distributions or
Capital Accounts are reduced pursuant to this Section 6.1L, allocations under
Section 6.1A, Section 6.1B and Section 6.1I for the current and subsequent
periods shall be adjusted as reasonably determined by the General Partner so
that to the extent possible the Partners have the same Capital Account balances
they would have if this Section 6.1L had not applied. This Section 6.1L is
intended to prevent direct or indirect reimbursements or payments under this
Agreement from giving rise to a violation of the Company’s REIT requirements
while at the same time preserving to the extent possible the parties’ intended
economic arrangement and shall be interpreted and applied consistent with such
intent.

M. Modifications to Reflect New Series or Classes. The General Partner is
authorized to modify the allocations in this Section 6.1 and amend such
provisions (including the defined terms used therein) in such manner as the
General Partner determines is necessary or appropriate to reflect the issues of
additional series or classes of Partnership Interests. Any such modification may
be made pursuant to the Certificate of Designations or similar instrument
establishing such new class or series.

N. Agreement to Bear Disproportionate Losses. At the request and with the
consent of the applicable Limited Partner, the General Partner may modify these
allocations to provide for disproportionate allocations of Loss (or items of
loss or deduction) and chargebacks thereof to a Limited Partner that agrees to
restore all or part of any deficit in its Capital Account in accordance with
Section 13.3 (in all cases subject to Section 6.1E).

Section 6.2 Capital Accounts. A separate capital account (a “Capital Account”)
shall be established and maintained for each Partner in accordance with
Regulations Section 1.704-1(b)(2)(iv). Consistent with the provisions of
Regulations Section 1.704-1(b)(2)(iv)(f), (i) immediately prior to the
acquisition of an additional Partnership Interest by any new or existing Partner
in connection with the contribution of money or other property (other than a de
minimis amount) to the Partnership, (ii) immediately prior to the distribution
by the Partnership to a Partner of Partnership property (other than a de minimis
amount) as

 

29

--------------------------------------------------------------------------------

consideration for a Partnership Interest, (iii) upon the acquisition of a more
than de minimis additional interest in the Partnership by any new or existing
Partner as consideration for the provision of services to or for the benefit of
the Partnership in a partner capacity or in anticipation of becoming a Partner,
(iv) upon the grant of any LTIP Unit, and (v) immediately prior to the
liquidation of the Partnership as defined in Regulations
Section 1.704-1(b)(2)(ii)(g), the book value of all Partnership Assets shall be
revalued upward or downward to reflect the fair market value (as determined by
the General Partner, in its sole and absolute discretion, and taking into
account Section 7701(g) of the Code) of each such Partnership asset unless the
General Partner shall determine that such revaluation is not necessary to
maintain the Partner’s intended economic arrangements. If the Capital Accounts
of the Partners are adjusted pursuant to 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
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 6. If Code Section 704(c)
applies to Partnership property, the Capital Accounts of the Partners shall be
adjusted in accordance with 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.

Section 6.3 Tax Allocations. All allocations of income, gain, loss and deduction
(and all items contained therein) for U.S. federal income tax purposes shall be
identical to all allocations of such items set forth in Section 6.1, except as
otherwise required by Section 6.2 or Section 704(c) of the Code and Regulations
Section 1.704-1(b)(4). The General Partner shall have the authority to elect the
methods to be used by the Partnership for allocating items of income, gain and
expense as required by Section 704(c) of the Code and Regulations
Section 1.704-1(b)(4), including the use of different methods for different
items and different properties, except as otherwise agreed upon by the General
Partner and one or more Limited Partners (or direct or indirect owners thereof),
and such election shall be binding on all Partners.

Section 6.4 Substantial Economic Effect. It is the intent of the Partners that
the allocations of Profit and Loss under this Agreement have substantial
economic effect (or be consistent with the Partners’ interests in the
Partnership in the case of the allocation of losses attributable to nonrecourse
debt or any other allocations that cannot have substantial economic effect under
the Code) within the meaning of Section 704(b) of the Code as interpreted by the
Regulations promulgated pursuant thereto. Article 6 and other relevant
provisions of this Agreement shall be interpreted in a manner consistent with
such intent. The provisions of this Agreement relating to the maintenance of
Capital Accounts are intended to comply with Regulations Section 1.704-1(b), and
shall be interpreted and applied in a manner consistent with such Regulations.
In the event the General Partner shall determine that it is prudent to modify
(i) the manner in which the Capital Accounts, or any debits, or credits thereto
(including, without limitation, debits or credits relating to liabilities which
are secured by contributed or distributed property or which are assumed by the
Partnership, the General Partner, or the

 

30

--------------------------------------------------------------------------------

Limited Partners) are computed; or (ii) the manner in which items are allocated
among the Partners for U.S. federal income tax purposes in order to comply with
such Regulations or to comply with Section 704(c) of the Code, the General
Partner may make such modification without regard to Article 14 of this
Agreement, provided that it is not likely to have a material effect on the
amounts distributable to any Person pursuant to Article 13 of this Agreement
upon the dissolution of the Partnership. The General Partner also shall (i) make
any adjustments that are necessary or appropriate to maintain equality between
the aggregate Capital Accounts of the Partners and the amount of Partnership
capital reflected on the Partnership’s balance sheet, as computed for book
purposes, in accordance with Regulations Section 1.704-1(b)(2)(iv)(q); and
(ii) make any appropriate modifications in the event unanticipated events might
otherwise cause this Agreement not to comply with Regulations
Section 1.704-1(b). In addition, the General Partner may adopt and employ such
methods and procedures for (i) the maintenance of book and tax capital accounts;
(ii) the determination and allocation of adjustments under Sections 704(c), 734,
and 743 of the Code; (iii) the determination of Profit, Loss, taxable income and
loss and items thereof under this Agreement and pursuant to the Code; (iv) the
adoption of reasonable conventions and methods for the valuation of assets and
the determination of tax basis; (v) the allocation of asset value and tax basis;
and (vi) conventions for the determination of cost recovery, depreciation and
amortization deductions, as it determines in its sole discretion are necessary
or appropriate to execute the provisions of this Agreement, to comply with
federal and state tax laws, and/or are in the best interest of the Partners.

ARTICLE 7 - MANAGEMENT AND OPERATIONS OF BUSINESS

Section 7.1 Management

A. Except as otherwise expressly provided in this Agreement, all management
powers over the business and affairs of the Partnership are and shall be
exclusively vested in the General Partner, and no Limited Partner, in its
capacity as such, shall have any right to participate in or exercise control or
management power over the business and affairs of the Partnership. The General
Partner may not be removed by the Limited Partners with or without cause, except
with the consent of the General Partner, which consent may be withheld in its
sole and absolute discretion. In addition to the powers now or hereafter granted
a general partner of a limited partnership under applicable law or which are
granted to the General Partner under any other provision of this Agreement, the
General Partner, subject to the other provisions hereof including Section 7.3
and Section 11.2, shall have full and exclusive power and authority to do all
things deemed necessary or desirable by it to conduct the business of the
Partnership, to exercise all powers set forth in Section 3.2 and to effectuate
the purposes set forth in Section 3.1 (subject to the proviso in Section 3.2),
including, without limitation:

(1) the making of any expenditures, the lending or borrowing of money
(including, without limitation, making prepayments on loans and borrowing money
to permit the Partnership to make distributions to its Partners in such amounts
as will allow the Company to (i) meet its distribution requirement for
qualification as a REIT as set forth in Section 857 of the Code and (ii) other
than to the extent the Company elects to retain and pay income tax on its net
capital gain, avoid or reduce any U.S. federal income or excise tax liability
imposed by the Code), the assumption or guarantee of, or other contracting for,
indebtedness and other liabilities, the issuance of evidences of indebtedness
(including the securing of same by deed, mortgage, deed of trust or other lien
or encumbrance on the Partnership’s assets) and the incurring of any obligations
it deems necessary for the conduct of the activities of the Partnership;

 

31

--------------------------------------------------------------------------------

(2) the making of tax, regulatory and other filings, or rendering of periodic or
other reports to governmental or other agencies having jurisdiction over the
business or assets of the Partnership, the registration of any class of
securities of the Partnership under the Exchange Act and the listing of any debt
securities of the Partnership on any securities exchange;

(3) subject to Section 11.2, the acquisition, disposition, mortgage, pledge,
encumbrance, hypothecation or exchange of any or all of the assets of the
Partnership (including the exercise or grant of any conversion, option,
privilege, or subscription right or other right available in connection with any
assets at any time held by the Partnership) or the merger, consolidation,
reorganization or other combination of the Partnership with or into another
entity on such terms as the General Partner deems proper (all of the foregoing
subject to any prior approval only to the extent required by Section 7.3);

(4) the acquisition, disposition, mortgage, pledge, encumbrance or hypothecation
of any or all of the assets of the Partnership, and the use of the assets of the
Partnership (including, without limitation, cash on hand) for any purpose
consistent with the terms of this Agreement and on any terms the General Partner
deems proper, including, without limitation, the financing of the conduct of the
operations of the Company, the Partnership or any Subsidiary of the Company
and/or the Partnership, the lending of funds to other Persons (including,
without limitation, the Company or any Subsidiary of the Company and/or the
Partnership) and the repayment of obligations of the Partnership and its
Subsidiaries and any other Person in which it has an equity investment, and the
making of capital contributions to, and equity investments in, its Subsidiaries;

(5) the management, operation, leasing, landscaping, repair, alteration,
demolition or improvement of any real property or improvements owned by the
Partnership or any Subsidiary of the Partnership, any other asset of the
Partnership or any Subsidiary of the Partnership, or any Person in which the
Partnership has made a direct or indirect equity investment;

(6) the negotiation, execution, and performance of any contracts, leases,
conveyances or other instruments that the General Partner considers useful or
necessary to the conduct of the Partnership’s operations or the implementation
of the General Partner’s powers under this Agreement, including contracting with
contractors, developers, consultants, accountants, legal counsel, other
professional advisors and other agents and the payment of their expenses and
compensation out of the Partnership’s assets;

(7) the distribution of Partnership cash or other Partnership assets in
accordance with this Agreement;

 

32

--------------------------------------------------------------------------------

(8) the holding, managing, investing and reinvesting of cash and other assets of
the Partnership;

(9) the collection and receipt of revenues, rents and income of the Partnership;

(10) the establishment of one or more divisions of the Partnership, the
selection and dismissal of employees (if any) of the Partnership or any
Subsidiary of the Partnership (including, without limitation, employees having
titles such as “president,” “vice president,” “secretary” and “treasurer” ), and
agents, outside attorneys, accountants, consultants and contractors of the
Partnership, and the determination of their compensation and other terms of
employment or hiring including waivers of conflicts of interest and the payment
of their expenses and compensation out of the Partnership’s assets;

(11) the maintenance of such insurance (including, without limitation, directors
and officers insurance) for the benefit of the Partnership, the Partners
(including, without limitation, the Company) and the directors and officers
thereof as the General Partner deems necessary or appropriate;

(12) the formation of, or acquisition of an interest in, and the contribution of
property to, any further limited or general partnerships, joint ventures,
corporations or other relationships that it deems desirable (including, without
limitation, the acquisition of interests in, and the contributions of property
to, any Subsidiary and any other Person in which it has an equity investment
from time to time);

(13) the control of any matters affecting the rights and obligations of the
Partnership and any Subsidiary of the Partnership, including the settlement,
compromise, submission to arbitration or any other form of dispute resolution,
or abandonment of, any claim, cause of action, liability, debt or damages, due
or owing to or from the Partnership or any Subsidiary of the Partnership, the
commencement or defense of suits, legal proceedings, administrative proceedings,
arbitration or other forms of dispute resolution, and the representation of the
Partnership or any Subsidiary of the Partnership in all suits or legal
proceedings, administrative proceedings, arbitrations or other forms of dispute
resolution, the incurring of legal expense, and the indemnification of any
Person against liabilities and contingencies to the extent permitted by law;

(14) the undertaking of any action in connection with the Partnership’s direct
or indirect investment in any Subsidiary or any other Person (including, without
limitation, the contribution or loan of funds by the Partnership to such
Persons, incurring indebtedness on behalf of, or guarantying the obligations of,
any such Persons);

(15) the determination of the fair market value of any Partnership property
distributed in kind using such reasonable method of valuation as the General
Partner may adopt;

(16) the exercise, directly or indirectly, through any attorney-in-fact acting
under a general or limited power of attorney, of any right, including the right
to vote, appurtenant to any asset or investment held by the Partnership or any
Subsidiary of the Partnership;

 

33

--------------------------------------------------------------------------------

(17) the exercise of any of the powers of the General Partner enumerated in this
Agreement on behalf of or in connection with any Subsidiary of the Partnership
or any other Person in which the Partnership has a direct or indirect interest,
or jointly with any such Subsidiary or other Person;

(18) the exercise of any of the powers of the General Partner enumerated in this
Agreement on behalf of any Person in which the Partnership does not have an
interest pursuant to contractual or other arrangements with such Person;

(19) the making, execution and delivery of any and all deeds, leases, notes,
mortgages, deeds of trust, security agreements, conveyances, contracts,
guarantees, warranties, indemnities, waivers, releases or legal instruments or
agreements in writing necessary or appropriate, in the judgment of the General
Partner, for the accomplishment of any of the powers of the General Partner
enumerated in this Agreement;

(20) the maintenance of the Partnership’s books and records, including, without
limitation, to reflect accurately at all times the capital contributions and
Percentage Interests of the Partners as the same are adjusted from time to time
to the extent necessary to reflect redemptions, Capital Contributions, the
issuance and transfer of Partnership Units, the admission of any Additional
Limited Partner or Substituted Limited Partner or otherwise;

(21) the issuance of additional Partnership Units, as appropriate and in the
General Partner’s sole and absolute discretion, in connection with capital
contributions by Additional Limited Partners and additional capital
contributions by Partners pursuant to Article 4 hereof;

(22) the payment of cash to acquire Partnership Units held by a Limited Partner
in connection with a Limited Partner’s exercise of its Redemption Right under
Section 8.5 hereof;

(23) any election to dissolve the Partnership pursuant to Section 13.1(A)(2);

(24) the registration of any class of securities under the Securities Act or the
Exchange Act, and the listing of any debt securities of the Partnership on any
exchange;

(25) the taking of any and all acts and things necessary or prudent to ensure
that the Partnership will not be classified as an association taxable as a
corporation for U.S. federal income tax purposes or a “publicly traded
partnership” for purposes of Section 7704 of the Code, including but not limited
to imposing restrictions on transfers, restrictions on the number of Partners
and restrictions on redemptions;

 

34

--------------------------------------------------------------------------------

(26) the filing of applications, communicating and otherwise dealing with any
and all governmental agencies having jurisdiction over, or in any way affecting,
the Partnership’s assets or any other aspect of the Partnership business;

(27) taking of any action necessary or appropriate to comply with all regulatory
requirements applicable to the Partnership in respect of its business, including
preparing or causing to be prepared all financial statements required under
applicable regulations and contractual undertakings and all reports, filings and
documents, if any, required under the Exchange Act, the Securities Act, or by
any National Securities Exchange requirements;

(28) the enforcement of any rights against any Partner pursuant to
representations, warranties, covenants and indemnities relating to such
Partner’s contribution of property or assets to the Partnership;

(29) the selection and dismissal of General Partner employees (including,
without limitation, employees having titles or offices such as president, vice
president, secretary and treasurer), and agents, outside attorneys, accountants,
consultants and contractors of the Partnership or the General Partner, the
determination of their compensation and other terms of employment or hiring and
the delegation to any such General Partner employee the authority to conduct the
business of the Partnership in accordance with the terms of this Agreement;

(30) the collection and receipt of revenues and income of the Partnership;

(31) the entering into of listing agreements with any National Securities
Exchange and the listing of any securities of the Partnership on such exchange;

(32) the delisting of some or all of the Partnership Units from, or the
requesting that trading be suspended on, any National Securities Exchange; and

(33) to take such other action, execute, acknowledge, swear to or deliver such
other documents and instruments, and perform any and all other acts that the
General Partner deems necessary or appropriate for the formation, continuation
and conduct of the business and affairs of the Partnership (including, without
limitation, all actions consistent with allowing the Company at all times to
qualify as a REIT unless the Company voluntarily terminates its REIT status) and
to possess and enjoy all the rights and powers of a general partner as provided
by the Act.

B. Each of the Limited Partners agrees that the General Partner is authorized to
execute, deliver and perform the above-mentioned agreements and transactions on
behalf of the Partnership without any further act, approval or vote of the
Partners, notwithstanding any other provision of this Agreement (except as
provided in Section 7.3), the Act or any applicable law, rule or regulation, to
the fullest extent permitted under the Act or other applicable law, rule or
regulation. The execution, delivery or performance by the General Partner or the
Partnership of any agreement authorized or permitted under this Agreement shall
not constitute a breach by the General Partner of any duty that the General
Partner may owe the Partnership or the Limited Partners or any other Persons
under this Agreement or of any duty stated or implied by law or equity.

 

35

--------------------------------------------------------------------------------

C. At all times from and after the date hereof, the General Partner may cause
the Partnership to establish and maintain working capital and other reserves in
such amounts as the General Partner, in its sole and absolute discretion, deems
appropriate and reasonable from time to time.

D. At all times from and after the date hereof, the General Partner may cause
the Partnership to obtain and maintain (i) casualty, liability and other
insurance on the Properties, (ii) liability insurance for the Indemnities
hereunder and (iii) such other insurance as the General Partner, in its sole and
absolute discretion, determines to be necessary.

E. Except as provided in this Agreement with respect to the qualification of the
Company as a REIT and as may be provided in a separate written agreement between
the Partnership and a Limited Partner (or a direct or indirect owner thereof),
in exercising its authority under this Agreement, the General Partner may, but
shall be under no obligation to, take into account the tax consequences to any
Partner (including the Company) of any action taken (or not taken) by it. Except
as provided in this Agreement with respect to the qualification of the Company
as a REIT and as may be provided in a separate written agreement between the
Partnership and a Limited Partner, the General Partner and the Partnership shall
not have liability to a Limited Partner under any circumstances as a result of
an income tax liability incurred by such Limited Partner as a result of an
action (or inaction) by the General Partner pursuant to its authority under this
Agreement.

Section 7.2 Certificate of Limited Partnership

To the extent that such action is determined by the General Partner to be
reasonable and necessary or appropriate, the General Partner shall file
amendments to and restatements of the Certificate of Limited Partnership and do
all of the things to maintain the Partnership as a limited partnership (or a
partnership in which the limited partners have limited liability) under the laws
of the State of Delaware and each other state, or the District of Columbia or
other jurisdiction, in which the Partnership may elect to do business or own
property. Subject to the terms of Section 8.4A(4) hereof, the General Partner
shall not be required, before or after filing, to deliver or mail a copy of the
Certificate of Limited Partnership or any amendment thereto to any Limited
Partner. The General Partner shall use all reasonable efforts to cause to be
filed such other certificates or documents as may be reasonable and necessary or
appropriate for the formation, continuation, qualification and operation of a
limited partnership (or a partnership in which the limited partners have limited
liability) in the State of Delaware and any other state, or the District of
Columbia or other jurisdiction, in which the Partnership may elect to do
business or own property.

Section 7.3 Restrictions on General Partner Authority

The General Partner may not take any action in contravention of an express
prohibition or limitation of this Agreement without the written Consent of a
Majority in Interest of the Outside Limited Partners or such other percentage of
the Limited Partners as may be specifically

 

36

--------------------------------------------------------------------------------

provided for under a provision of this Agreement and may not perform any act
that would subject a Limited Partner to liability as a general partner in any
jurisdiction or any other liability except as provided herein or under the Act
without the prior written Consent of such Limited Partner.

Section 7.4 Reimbursement of the General Partner and the Company

A. Except as provided in this Section 7.4 and elsewhere in this Agreement
(including the provisions of Article 5 and Article 6 regarding distributions,
payments, and allocations to which it may be entitled), the General Partner
shall not be compensated for its services as the General Partner of the
Partnership.

B. The Partnership shall be responsible for and shall pay all expenses relating
to the Formation Transactions, the Partnership’s, the General Partner’s and the
Company’s organization, the ownership of their assets and their operations,
including, without limitation, the Administrative Expenses. Except to the extent
provided in this Agreement, the General Partner, the Company and their
Affiliates shall be reimbursed on a monthly basis, or such other basis as the
General Partner may determine in its sole and absolute discretion, for all such
expenses. The Partners acknowledge that all such expenses of the General Partner
and/or the Company are deemed to be for the benefit of the Partnership. Such
reimbursement shall be in addition to any reimbursement made as a result of
indemnification pursuant to Section 7.7. In the event that certain expenses are
incurred for the benefit of the Partnership and other entities (including the
General Partner), such expenses will be allocated to the Partnership and such
other entities in such a manner as the General Partner in its sole and absolute
discretion deems fair and reasonable. To the extent permitted by law and subject
to Section 6.1K and Section 6.1L, all payments and reimbursements hereunder
shall be characterized for U.S. federal income tax purposes as expenses of the
Partnership incurred on its behalf, and not as expenses of the General Partner.

C. If the Company shall elect to purchase from its stockholders REIT Shares
(i) for the purpose of delivering such REIT Shares to satisfy an obligation
under any dividend reinvestment program adopted by the Company, any employee
stock purchase plan adopted by the Company or any of its Subsidiaries, or any
similar obligation or arrangement undertaken by the Company in the future or for
the purpose of retiring such REIT Shares or (ii) for any other reason, the
purchase price paid by the Company for such REIT Shares and any other expenses
incurred by the Company in connection with such purchase shall be considered
expenses of the Partnership and shall be advanced to the Company or reimbursed
to the Company, subject to the conditions that the Company shall cause the
Partnership to redeem a number of Common Units held by the Company equal to the
number of such REIT Shares divided by the Conversion Factor.

D. As set forth in Section 4.2, but subject to Section 6.1, the Company shall be
treated as having made a capital contribution in the amount of all expenses that
the Company incurs relating to the Company’s offering of REIT Shares, other
shares of capital stock of the Company or New Securities.

 

37

--------------------------------------------------------------------------------

Section 7.5 Outside Activities of the General Partner and the Company

A. The General Partner, the Company and any Affiliates of the General Partner or
the Company may acquire Limited Partner Interests and shall be entitled to
exercise all rights of a Limited Partner relating to such Limited Partner
Interests.

B. The Company may, in its sole and absolute discretion, from time to time hold
or acquire assets in its own name or otherwise other than through the
Partnership so long as the Company takes commercially reasonable measures to
ensure that the economic benefits and burdens of such Property are otherwise
vested in the Partnership, through assignment, mortgage loan or otherwise or, if
it is not commercially reasonable to vest such economic interests in the
Partnership, the General Partner shall make such amendments to this Agreement as
the General Partner determines are necessary or desirable, including, the
definition of “Conversion Factor,” to reflect such activities and the direct
ownership of assets by the Company. Nothing contained herein shall be deemed to
prohibit the Company from executing guarantees of Partnership debt.

Section 7.6 Contracts with Affiliates

A. The Partnership may lend or contribute funds or other assets to any
Subsidiary or other Persons in which it has an equity investment and such
Persons may borrow funds from the Partnership, on terms and conditions
established in the sole and absolute discretion of the General Partner. The
foregoing authority shall not create any right or benefit in favor of any
Subsidiary or any other Person.

B. Except as provided in Section 7.5, the Partnership may transfer assets to
joint ventures, other partnerships, limited liability companies, business
trusts, statutory trusts, corporations or other business entities in which it is
or thereby becomes a participant upon such terms and subject to such conditions
consistent with this Agreement and applicable law as the General Partner, in its
sole and absolute discretion, believes are advisable.

C. Except as expressly permitted by this Agreement, neither the General Partner
nor any of its Affiliates shall sell, transfer or convey any property to, or
purchase any property from, the Partnership, directly or indirectly, except
pursuant to transactions that are determined by the General Partner in good
faith to be fair and reasonable.

D. The General Partner, in its sole and absolute discretion and without the
approval of the Limited Partners, may propose and adopt, on behalf of the
Partnership, employee benefit plans, stock option plans, and similar plans
(including without limitation plans that contemplate the issuance of LTIP Units)
funded by the Partnership for the benefit of employees of the General Partner,
the Partnership, any Subsidiary of the Partnership or any Affiliate of any of
them in respect of services performed, directly or indirectly, for the benefit
of the Partnership, the General Partner or any Subsidiary of the Partnership.

Section 7.7 Indemnification

A. To the fullest extent permitted by applicable law, the Partnership shall
indemnify each Indemnitee from and against any and all losses, claims, damages,
liabilities, joint or several, expenses (including, without limitation,
attorneys’ fees and other legal fees and

 

38

--------------------------------------------------------------------------------

expenses), judgments, fines, settlements and other amounts arising from any and
all claims, demands, subpoenas, requests for information, formal or informal
investigations, actions, suits or proceedings, civil, criminal, administrative
or investigative, that relate to the operations of the Partnership or the
Company or any of their Subsidiaries as set forth in this Agreement, in which
such Indemnitee may be involved, or is threatened to be involved, as a party or
otherwise, unless it is established that: (i) the act or omission of the
Indemnitee was material to the matter giving rise to the proceeding and either
was committed in bad faith or constituted fraud or was the result of active and
deliberate dishonesty; (ii) the Indemnitee actually received an improper
personal benefit in money, property or services; or (iii) in the case of any
criminal proceeding, the Indemnitee had reasonable cause to believe that the act
or omission was unlawful; and provided, further, that no payments pursuant to
this Agreement shall be made by the Partnership to indemnify or advance funds to
any Indemnitee (x) with respect to any Action initiated or brought voluntarily
by such indemnitee (and not by way of defense) unless (I) approved or authorized
by the General Partner or (II) incurred to establish or enforce such
Indemnitee’s right to indemnification under this Agreement, or (y) in connection
with one or more claims or proceedings brought by the Partnership, the Company
or any of their Subsidiaries or involving such Indemnitee if such Indemnitee is
found liable to the Partnership, the Company or any of their Subsidiaries with
respect to such claim or proceeding. Without limitation, the foregoing indemnity
shall extend to any liability of any Indemnitee, pursuant to a loan guaranty
(except a guaranty by a Limited Partner of nonrecourse indebtedness of the
Partnership or as otherwise provided in any such loan guaranty) or otherwise for
any indebtedness of the Partnership or any Subsidiary of the Partnership
(including, without limitation, any indebtedness which the Partnership or any
Subsidiary of the Partnership has assumed or taken subject to), and the General
Partner is hereby authorized and empowered, on behalf of the Partnership, to
enter into one or more indemnity agreements consistent with the provisions of
this Section 7.7 in favor of any Indemnitee having or potentially having
liability for any such indebtedness. The termination of any proceeding by
judgment, order or settlement does not create a presumption that the Indemnitee
did not meet the requisite standard of conduct set forth in this Section 7.7A.
The termination of any proceeding by conviction of an Indemnitee or upon a plea
of nolo contendere or its equivalent by an Indemnitee, or an entry of an order
of probation against an Indemnitee prior to judgment does not create a
presumption that such Indemnitee acted in a manner contrary to that specified in
this Section 7.7A. Any indemnification pursuant to this Section 7.7 or pursuant
to any indemnity agreement permitted by this Section 7.7 shall be made only out
of the assets of the Partnership and any insurance proceeds from the liability
policy covering the General Partner and any Indemnitees, and neither the General
Partner, the Company nor any Limited Partner shall have any obligation to
contribute to the capital of the Partnership, or otherwise provide funds, to
enable the Partnership to fund its obligations under this Section 7.7 or under
such indemnity agreements.

B. To the fullest extent permitted by law, expenses incurred by an Indemnitee
who is a party to a proceeding or the recipient of a subpoena or request for
information with respect to a proceeding to which such Indemnitee is not a party
shall be paid or reimbursed by the Partnership in advance of the final
disposition of the proceeding upon receipt by the Partnership of (i) a written
affirmation by the Indemnitee of the Indemnitee’s good faith belief that the
standard of conduct necessary for indemnification by the Partnership as
authorized in this Section 7.7 has been met and (ii) a written undertaking by or
on behalf of the Indemnitee to repay the amount if it shall ultimately be
determined that the standard of conduct has not been met.

 

39

--------------------------------------------------------------------------------

C. The indemnification provided by this Section 7.7 shall be in addition to any
other rights to which an Indemnitee or any other Person may be entitled under
any agreement, pursuant to any vote of the Partners, as a matter of law or
otherwise, and shall continue as to an Indemnitee who has ceased to serve in
such capacity unless otherwise provided in a written agreement pursuant to which
such Indemnitee is indemnified.

D. The Partnership may, but shall not be obligated to, purchase and maintain
insurance, on behalf of the Indemnitees and such other Persons as the General
Partner shall determine, against any liability that may be asserted against or
expenses that may be incurred by such Person in connection with the
Partnership’s activities, regardless of whether the Partnership would have the
power to indemnify such Person against such liability under the provisions of
this Agreement.

E. For purposes of this Section 7.7, the Partnership shall be deemed to have
requested an Indemnitee to serve as fiduciary of an employee benefit plan
whenever the performance by an Indemnitee of his, her or its duties to the
Partnership also imposes duties on, or otherwise involves services by, an
Indemnitee to the plan or participants or beneficiaries of the plan; excise
taxes assessed on an Indemnitee with respect to an employee benefit plan
pursuant to applicable law shall constitute fines within the meaning of
Section 7.7; and actions taken or omitted by the Indemnitee with respect to an
employee benefit plan in the performance of its duties for a purpose reasonably
believed by it to be in the interest of the participants and beneficiaries of
the plan shall be deemed to be for a purpose which is not opposed to the best
interests of the Partnership.

F. In no event may an Indemnitee subject any of the Partners to personal
liability by reason of the indemnification provisions set forth in this
Agreement.

G. An Indemnitee shall not be denied indemnification in whole or in part under
this Section 7.7 because the Indemnitee had an interest in the transaction with
respect to which the indemnification applies if the transaction was otherwise
permitted by the terms of this Agreement.

H. The provisions of this Section 7.7 are for the benefit of the Indemnitees,
their employees, officers, directors, trustees, heirs, successors, assigns and
administrators and shall not be deemed to create any rights for the benefit of
any other Persons. Any amendment, modification or repeal of this Section 7.7 or
any provision hereof shall be prospective only and shall not in any way affect
the limitations on the Partnership’s liability to any Indemnitee under this
Section 7.7, as in effect immediately prior to such amendment, modification, or
repeal with respect to claims arising from or relating to matters occurring, in
whole or in part, prior to such amendment, modification or repeal, regardless of
when such claims may arise or be asserted.

I. It is the intent of the parties that any amounts paid by the Partnership to
the General Partner or the Company pursuant to this Section 7.7 shall be treated
as “guaranteed payments” within the meaning of Code Section 707(c) and shall not
be treated as distributions for purposes of computing the Partners’ Capital
Accounts.

 

40

--------------------------------------------------------------------------------

Section 7.8 Liability of the General Partner and the Company

A. Notwithstanding anything to the contrary set forth in this Agreement, to the
maximum extent permitted by applicable law, none of the General Partner, the
Company, nor any of their directors, officers, agents or employees shall be
liable or accountable in monetary damages or otherwise to the Partnership, any
Partners or any Assignees for losses sustained, liabilities incurred or benefits
not derived as a result of errors in judgment or mistakes of fact or law or any
act or omission unless the General Partner (i) acted (or omitted to act) in bad
faith or with active and deliberate dishonesty as established by a final
nonappealable judgment, and the act or omission was material to the matter
giving rise to the loss, liability or benefit not derived, (ii) actually
received an improper benefit or profit in money, property or services, or
(iii) in the case of a criminal proceeding, had reasonable cause to believe that
the act or omission was unlawful. For the avoidance of doubt, the General
Partner, the Company or any of their directors, officers, agents or employees
owe no duties, fiduciary or otherwise, to the Partnership, any Partners, any
Assignee or any creditor of the Partnership except the General Partner’s duty to
fulfill its obligations expressly set forth in this Agreement in good faith.

B. The Limited Partners expressly acknowledge that the General Partner is acting
for the benefit of the Partnership, the Limited Partners and the Company’s
stockholders collectively, and that the General Partner is under no obligation
to consider or give priority to the separate interests of the Limited Partners
or the Company’s stockholders (including, without limitation, the tax
consequences to the Limited Partners, Assignees or the Company’s stockholders)
in deciding whether to cause the Partnership to take (or decline to take) any
actions. Unless otherwise provided in a separate written agreement between the
Partnership and a Limited Partner, if there is a conflict between the interests
of the stockholders of the Company on one hand and the Limited Partners on the
other hand, the General Partner shall endeavor in good faith to resolve the
conflict in a manner not adverse to either the stockholders of the Company or
the Limited Partners; provided, however, that for so long as the Company owns a
controlling interest in the Partnership, any such conflict that cannot be
resolved in a manner not adverse to either the stockholders of the Company or
the Limited Partners shall be resolved in favor of the stockholders of the
Company. Neither the General Partner nor the Company shall be liable under this
Agreement to the Partnership or to any Partner for monetary damages for losses
sustained, liabilities incurred, or benefits not derived by Limited Partners in
connection with such decisions; provided that the General Partner has acted in
good faith.

C. Subject to its obligations and duties as General Partner set forth in
Section 7.1A, the General Partner may exercise any of the powers granted to it
by this Agreement and perform any of the duties imposed upon it hereunder either
directly or by or through its agents. The General Partner shall not be liable to
the Partnership or any Partner for any misconduct or negligence on the part of
any such agent appointed by the General Partner in good faith.

 

41

--------------------------------------------------------------------------------

D. Any amendment, modification or repeal of this Section 7.8 or any provision
hereof shall be prospective only and shall not in any way affect the limitations
on the liability of the General Partner or the directors, officers, employees or
agents of the General Partner, the Company, or of the directors, officers,
stockholders, employees or agents of the Company, or the Indemnitees, to the
Partnership, the Partners or any other Person bound by this Agreement under this
Section 7.8 as in effect immediately prior to such amendment, modification or
repeal with respect to claims arising from or relating to matters occurring, in
whole or in part, prior to such amendment, modification or repeal, regardless of
when such claims may arise or be asserted.

E. To the extent that, at law or in equity, the General Partner or the Company
in its capacity as a Limited Partner, has duties (including fiduciary duties)
and liabilities relating thereto to the Partnership or the Limited Partners,
neither the General Partner nor the Company shall be liable to the Partnership
or to any other Partner for its good faith reliance on the provisions of this
Agreement. The provisions of this Agreement, to the extent that they restrict or
eliminate the duties and liabilities of the General Partner, the Company or any
other Person under the Act or otherwise existing at law or in equity, are agreed
by the Partners to replace such other duties and liabilities of the General
Partner and the Company.

F. Notwithstanding anything herein to the contrary, except for fraud, willful
misconduct or gross negligence, or pursuant to any express indemnities given to
the Partnership by any Partner pursuant to any other written instrument, no
Partner shall have any personal liability whatsoever, to the Partnership or to
the other Partner(s), for the debts or liabilities of the Partnership or the
Partnership’s obligations hereunder, and the full recourse of the other
Partner(s) shall be limited to the interest of that Partner in the Partnership.
Without limitation of the foregoing, and except for fraud, willful misconduct or
gross negligence, or pursuant to any such express indemnity, no property or
assets of any Partner, other than its interest in the Partnership, shall be
subject to levy, execution or other enforcement procedures for the satisfaction
of any judgment (or other judicial process) in favor of any other Partner(s) and
arising out of, or in connection with, this Agreement. This Agreement is
executed by the officers of the General Partner solely as officers of the same
and not in their own individual capacities.

G. Whenever in this Agreement the General Partner is permitted or required to
make a decision (i) in its “sole and absolute discretion,” “sole discretion” or
“discretion” or under a grant of similar authority or latitude, the General
Partner shall be entitled to consider only such interests and factors as it
desires, including its own interests, and shall have no duty or obligation to
give any consideration to any interest or factors affecting the Partnership or
the Partners or any of them, or (ii) in its “good faith” or under another
expressed standard, the General Partner shall act under such express standard
and shall not be subject to any other or different standards imposed by this
Agreement or any other agreement contemplated herein or by relevant provisions
of law or in equity or otherwise. If any question should arise with respect to
the operation of the Partnership, which is not otherwise specifically provided
for in this Agreement or the Act, or with respect to the interpretation of this
Agreement, the General Partner is hereby authorized to make a final
determination with respect to any such question and to interpret this Agreement
in such a manner as it shall deem, in its sole discretion, to be fair and
equitable, and its determination and interpretations so made shall be final and
binding on all parties. The General Partner’s “sole and absolute discretion,”
“sole discretion” and “discretion” under this Agreement shall be exercised
consistently with the General Partner’s duties hereunder and obligation of good
faith and fair dealing under the Act.

 

42

--------------------------------------------------------------------------------

Section 7.9 Other Matters Concerning the General Partner and the Company

A. The General Partner and the Company may rely and shall be protected in acting
or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, bond, debenture or
other paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties.

B. The General Partner and the Company may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers, architects,
engineers, environmental consultants and other consultants and advisers selected
by it, and any act taken or omitted to be taken in reliance upon the opinion of
such Persons as to matters which such General Partner and the Company reasonably
believe to be within such Person’s professional or expert competence shall be
conclusively presumed to have been done or omitted in good faith and in
accordance with such opinion.

C. The General Partner shall have the right, in respect of any of its powers or
obligations hereunder, to act through any of its duly authorized officers and
duly appointed attorney or attorneys-in-fact. Each such attorney shall, to the
extent provided by the General Partner in the power of attorney, have full power
and authority to do and perform all and every act and duty which is permitted or
required to be done by the General Partner hereunder.

D. Notwithstanding any other provisions of this Agreement or the Act, any action
of the General Partner or the Company on behalf of the Partnership or any
decision of the General Partner or the Company to refrain from acting on behalf
of the Partnership, undertaken in the good faith belief that such action or
omission is necessary or advisable in order (i) to protect the ability of the
Company to continue to qualify as a REIT, or (ii) to avoid the Company from
incurring any taxes under Section 857 or Section 4981 of the Code, is expressly
authorized under this Agreement and is deemed approved by all of the Limited
Partners.

Section 7.10 Title to Partnership Assets

Title to Partnership assets, whether real, personal or mixed and whether
tangible or intangible, shall be deemed to be owned by the Partnership as an
entity, and no Partner, individually or collectively, shall have any ownership
interest in such Partnership assets or any portion thereof. Title to any or all
of the Partnership assets may be held in the name of the Partnership, the
General Partner or one or more nominees, as the General Partner may determine,
including Affiliates of the General Partner. Subject to Section 7.5, the General
Partner hereby declares and warrants that any Partnership assets for which legal
title is held in the name of the General Partner or any nominee or Affiliate of
the General Partner shall be held by the General Partner or such nominee or
Affiliate for the use and benefit of the Partnership in accordance with the
provisions of this Agreement; provided, however, that the General Partner shall
use its best efforts to cause beneficial and record title to such assets to be
vested in the Partnership as soon as reasonably practicable if failure to so
vest such title would have a material adverse effect on the Partnership. All
Partnership assets shall be recorded as the property of the Partnership in its
books and records, irrespective of the name in which legal title to such
Partnership assets is held.

 

43

--------------------------------------------------------------------------------

Section 7.11 Reliance by Third Parties

Notwithstanding anything to the contrary in this Agreement, any Person dealing
with the Partnership shall be entitled to assume that the General Partner has
full power and authority, without the consent or approval of any other Partner
or Person, to encumber, sell or otherwise use in any manner any and all assets
of the Partnership and to enter into any contracts on behalf of the Partnership,
and take any and all actions on behalf of the Partnership, and such Person shall
be entitled to deal with the General Partner as if the General Partner were the
Partnership’s sole party in interest, both legally and beneficially. Each
Limited Partner hereby waives any and all defenses or other remedies which may
be available against such Person to contest, negate or disaffirm any action of
the General Partner in connection with any such dealing. In no event shall any
Person dealing with the General Partner or its representatives be obligated to
ascertain that the terms of this Agreement have been complied with or to inquire
into the necessity or expedience of any act or action of the General Partner or
its representatives. Each and every certificate, document or other instrument
executed on behalf of the Partnership by the General Partner or its
representatives shall be conclusive evidence in favor of any and every Person
relying in good faith thereon or claiming thereunder that (i) at the time of the
execution and delivery of such certificate, document or instrument, this
Agreement was in full force and effect; (ii) the Person executing and delivering
such certificate, document or instrument was duly authorized and empowered to do
so for and on behalf of the Partnership and (iii) such certificate, document or
instrument was duly executed and delivered in accordance with the terms and
provisions of this Agreement and is binding upon the Partnership.

ARTICLE 8 - RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS

Section 8.1 Limitation of Liability

No Limited Partner, including the Company, acting in its capacity as such, shall
have any liability under this Agreement (other than for breach thereof) except
as expressly provided in this Agreement or under the Act.

Section 8.2 Management of Business

No Limited Partner or Assignee (other than the General Partner, any of its
Affiliates or any officer, director, employee, partner, agent or trustee of the
General Partner, the Partnership or any of their Affiliates, in their capacity
as such) shall take part in the operations, management or control (within the
meaning of the Act) of the Partnership’s business, transact any business in the
Partnership’s name or have the power to sign documents for or otherwise bind the
Partnership. The transaction of any such business by the General Partner, any of
its Affiliates or any officer, director, employee, partner, agent or trustee of
the General Partner, the Partnership or any of their Affiliates, in their
capacity as such, shall not affect, impair or eliminate the limitations on the
liability of the Limited Partners or Assignees under this Agreement.

Section 8.3 Outside Activities of Limited Partners

Subject to any other agreements with the Partnership, the Company, the General
Partner or their respective Subsidiaries to the contrary, any Limited Partner
(including, subject to Section 7.5 hereof, the Company) and any officer,
director, employee, agent, trustee, Affiliate or

 

44

--------------------------------------------------------------------------------

stockholder of any Limited Partner shall be entitled to and may have business
interests and engage in business activities in addition to those relating to the
Partnership, including business interests and activities that are in direct
competition with the Partnership or that are enhanced by the activities of the
Partnership. Neither the Partnership nor any Partners shall have any rights by
virtue of this Agreement in any business ventures of any Limited Partner or
Assignee. Subject to such agreements, none of the Limited Partners (other than
the Company) nor any other Person shall have any rights by virtue of this
Agreement or the partnership relationship established hereby in any business
ventures of any other Person (other than the Limited Partners benefiting from
the business conducted by the General Partner) and such Person shall have no
obligation pursuant to this Agreement to offer any interest in any such business
ventures to the Partnership, any Limited Partner, the Company or any such other
Person, even if such opportunity is of a character which, if presented to the
Partnership, any Limited Partner, the Company or such other Person, could be
taken by such Person.

Section 8.4 Rights of Limited Partners Relating to the Partnership

A. In addition to the other rights provided by this Agreement or by the Act, and
except as limited by Section 8.4C, each Limited Partner shall have the right,
for a business purpose reasonably related to such Limited Partner’s interest as
a limited partner in the Partnership, upon written demand with a statement of
the purpose of such demand and at such Limited Partner’s own expense (including
such copying and administrative charges as the General Partner may establish
from time to time):

(1) to obtain a copy of the most recent annual and quarterly reports filed with
the Commission by the Company pursuant to the Exchange Act;

(2) to obtain a copy of the Partnership’s federal, state and local income tax
returns for each Partnership Year;

(3) to obtain a current list of the name and last known business, residence or
mailing address of each Partner; and

(4) to obtain a copy of this Agreement and the Certificate of Limited
Partnership and all amendments thereto, together with executed copies of all
powers of attorney pursuant to which this Agreement and the Certificate of
Limited Partnership and all amendments thereto have been executed.

B. The Partnership shall notify each Limited Partner, upon request, of the then
current Conversion Factor and the REIT Shares Amount per Common Unit.

C. Notwithstanding any other provision of this Section 8.4, the General Partner
may keep confidential from the Limited Partners, for such period of time as the
General Partner determines in its sole and absolute discretion to be reasonable,
any information that (i) the General Partner believes to be in the nature of
trade secrets or other information, the disclosure of which the General Partner
in good faith believes is not in the best interests of the Partnership or could
damage the Partnership or its business or (ii) the Partnership or the General
Partner is required by law or by agreements with unaffiliated third parties to
keep confidential.

 

45

--------------------------------------------------------------------------------

Section 8.5 Redemption Right

A. Except as otherwise set forth in any separate agreement entered into between
the Partnership and a Limited Partner and subject to the terms and conditions
set forth herein or therein, on or after the date that is 15 months from the
date of issuance of a Common Unit to a Limited Partner, such Limited Partner
(other than the Company or any Subsidiary of the Company) shall have the right
(the “Redemption Right”) to require the Partnership to redeem on a Specified
Redemption Date all or a portion of the Common Units held by such Limited
Partner (such Common Units being hereafter referred to as “Tendered Units”) in
exchange for the Cash Amount; unless the terms of this Agreement or a separate
agreement entered into between the Partnership and the Holder of such Common
Units expressly provide that such Common Units are not entitled to the
Redemption Right. The Partnership may, in the General Partner’s sole and
absolute discretion, redeem Tendered Units at the request of the Holder of such
Common Units prior to the end of the applicable 15 month period (or such other
period as may be specified in any separate agreement entered into between the
Partnership and a Limited Partner). Unless otherwise expressly provided in this
Agreement or in a separate agreement entered into between the Partnership and
the Holders of such Common Units, all Common Units shall be entitled to the
Redemption Right. The Tendering Partner (as defined below) shall have no right,
with respect to any Common Units so redeemed, to receive any distributions with
a Partnership Record Date on or after the Specified Redemption Date. Any
Redemption Right shall be exercised pursuant to a Notice of Redemption delivered
to the General Partner by the Limited Partner who is exercising the right (the
“Tendering Partner”). The Cash Amount shall be payable in accordance with
instructions set forth in the Notice of Redemption to the Tendering Partner on
the Specified Redemption Date. Any Common Units redeemed by the Partnership
pursuant to this Section 8.5A shall be cancelled upon such redemption.

B. Notwithstanding the provisions of Section 8.5A above, if a Limited Partner
has delivered to the General Partner a Notice of Redemption then the Company
may, in its sole and absolute discretion (subject to Section 8.5D), elect to
assume and satisfy the Partnership’s Redemption Right obligation and acquire
some or all of the Tendered Units from the Tendering Partner in exchange for the
REIT Shares Amount (as of the Specified Redemption Date) and, if the Company so
elects, the Tendering Partner shall sell the Tendered Units to the Company in
exchange for the REIT Shares Amount. In such event, the Tendering Partner shall
have no right to cause the Partnership to redeem such Tendered Units. The
Company shall give such Tendering Partner written notice of its election on or
before the close of business on the fifth Business Day after its receipt of the
Notice of Redemption. The Tendering Partner shall submit (i) such information,
certification or affidavit as the Company may reasonably require in connection
with the application of the Ownership Limit to any such acquisition and
(ii) such written representations, investment letters, legal opinions or other
instruments necessary, in the Company’ view, to effect compliance with the
Securities Act. The REIT Shares Amount, if applicable, shall be delivered as
duly authorized, validly issued, fully paid and nonassessable REIT Shares and,
if applicable, free of any pledge, lien, encumbrance or restriction, other than
those provided in the Charter or the Bylaws of the Company, the Securities Act,
relevant state securities or blue sky laws and any applicable agreements with
respect to such REIT Shares entered into by the Tendering Partner.
Notwithstanding any delay in such delivery (but subject to Section 8.5D), the
Tendering Partner shall be deemed the owner of such REIT Shares for all
purposes, including without limitation, rights to vote or consent, and receive
dividends, as of the

 

46

--------------------------------------------------------------------------------

Specified Redemption Date. In addition, the REIT Shares for which the Common
Units might be exchanged shall also bear all legends deemed necessary or
appropriate by the Company. Neither any Tendering Partner whose Tendered Units
are acquired by the Company pursuant to this Section 8.5B, any Partner, any
Assignee nor any other interested Person shall have any right to require or
cause the Company to register, qualify or list any REIT Shares owned or held by
such Person, whether or not such REIT Shares are issued pursuant to this
Section 8.5B, with the Commission, with any state securities commissioner,
department or agency, under the Securities Act or the Exchange Act or with any
stock exchange; unless subject to a separate written agreement pursuant to which
the Company has granted registration or similar rights to any such Person.

C. Each Tendering Partner covenants and agrees with the General Partner that all
Tendered Units shall be delivered to the General Partner free and clear of all
liens, claims and encumbrances whatsoever and should any such liens, claims
and/or encumbrances exist or arise with respect to such Tendered Units, the
General Partner shall be under no obligation to acquire the same. Each Tendering
Partner further agrees that, in the event any state or local property transfer
tax is payable as a result of the transfer of its Tendered Units, such Tendering
Partner shall assume and pay such transfer tax. Each Tendering Partner further
agrees to pay to the Partnership the amount of any tax withholding due upon the
redemption of Tendered Units and authorizes the Partnership to retain such
portion of the Cash Amount as the Partnership reasonably determines is necessary
to satisfy its tax withholding obligations. In the event the Company elects to
acquire some or all of the Tendered Units from the Tendering Partner in exchange
for the REIT Shares Amount, the Tendering Partner agrees to pay to the Company
the amount of any tax withholding due upon the redemption of Tendered Units and,
in the event the Tendering Partner has not paid or made arrangements
satisfactory to the Company, in its sole discretion, to pay the amount of any
such tax withholding prior to the Specified Redemption Date, the Company may
elect to either cancel such exchange (in which case the Tendering Partner’s
exercise of the Redemption Right will be null and void ab initio), satisfy such
tax withholding obligation by retaining REIT Shares with a fair market value, as
determined by the Company in its sole discretion, equal to the amount of such
obligation or satisfy such tax withholding obligation using amounts paid by the
Partnership, which amounts shall be treated as a loan by the Partnership to the
Tendering Partner in the manner set forth in Section 5.1B.

D. Notwithstanding the provisions of Section 8.5A, Section 8.5B, Section 8.5C or
any other provision of this Agreement, a Limited Partner (i) shall not be
entitled to effect the Redemption Right for cash or an exchange for REIT Shares
to the extent that (if the Company were to elect to acquire the Tendered Units
for REIT Shares in accordance with Section 8.5B) the ownership or right to
acquire REIT Shares pursuant to such exchange by such Partner on the Specified
Redemption Date could cause such Partner or any other Person to violate the
Ownership Limit and (ii) shall have no rights under this Agreement to acquire
REIT Shares which would otherwise be prohibited under the Charter. To the extent
any attempted redemption or exchange for REIT Shares would be in violation of
this Section 8.5D, it shall be null and void ab initio and such Limited Partner
shall not acquire any rights or economic interest in the cash otherwise payable
upon such redemption or the REIT Shares otherwise issuable upon such exchange.

 

47

--------------------------------------------------------------------------------

E. Notwithstanding anything herein to the contrary (but subject to
Section 8.5D), with respect to any redemption or exchange for REIT Shares
pursuant to this Section 8.5: (i) without the consent of the General Partner,
each Limited Partner may not effect the Redemption Right for less than 1,000
Common Units or, if the Limited Partner holds less than 1,000 Common Units, all
of the Common Units held by such Limited Partner; (ii) without the consent of
the General Partner, each Limited Partner may not effect the Redemption Right
during the period after the Partnership Record Date with respect to a
distribution and before the record date established by the Company for a
distribution to its common stockholders of some or all of its portion of such
distribution; (iii) the consummation of any redemption or exchange for REIT
Shares shall be subject to the expiration or termination of the applicable
waiting period, if any, under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended; and (iv) each Tendering Partner shall continue to own all
Common Units subject to any redemption or exchange for REIT Shares, and be
treated as a Limited Partner with respect to such Common Units for all purposes
of this Agreement, until such Common Units are either paid for by the
Partnership pursuant to Section 8.5A hereof or transferred to the Company and
paid for by the issuance of the REIT Shares, pursuant to Section 8.5B hereof on
the Specified Redemption Date. Until a Specified Redemption Date, the Tendering
Partner shall have no rights as a stockholder of the Company with respect to
such Tendering Partner’s Common Units.

F. All Common Units acquired by the Company pursuant to Section 8.5B hereof
shall automatically, and without further action required, be converted into and
deemed to be Limited Partner Interests and held by the Company in its capacity
as a Limited Partner in the Partnership.

G. In the event that the Partnership issues additional Partnership Interests to
any Additional Limited Partner pursuant to Section 4.2, the General Partner
shall make such revisions to this Section 8.5 as it determines are necessary to
reflect the issuance of such additional Partnership Interests; provided, that,
the General Partner may not make any revisions to this Section 8.5 that would
prohibit the exercise of, or alter any of the material terms related to, the
Redemption Right applicable to any existing Limited Partner unless such
revisions are approved by such Limited Partner.

ARTICLE 9 - BOOKS, RECORDS, ACCOUNTING AND REPORTS

Section 9.1 Records and Accounting

The General Partner shall keep or cause to be kept at the principal office of
the Partnership those records and documents required to be maintained by the Act
and other books and records deemed by the General Partner to be appropriate with
respect to the Partnership’s business, including, without limitation, all books
and records necessary to provide to the Limited Partners any information, lists
and copies of documents required to be provided pursuant to Section 9.3 hereof.
Any records maintained by or on behalf of the Partnership in the regular course
of its business may be kept on, or be in the form of magnetic tape, photographs,
micrographics or any other information storage device, provided that the records
so maintained are convertible into clearly legible written form within a
reasonable period of time. The books of the Partnership shall be maintained for
financial and tax reporting purposes, on an accrual basis in accordance with
U.S. GAAP or such other basis as the General Partner determines to be necessary
or appropriate.

 

48

--------------------------------------------------------------------------------

Section 9.2 Taxable Year and Fiscal Year

The taxable year of the Partnership shall be the calendar year unless otherwise
required by the Code. Unless the General Partner otherwise elects, the fiscal
year of the Partnership shall be the same as its taxable year.

Section 9.3 Reports

A. No later than the date on which the Company mails its annual report to its
stockholders, the General Partner shall cause to be mailed to each Limited
Partner, as of the close of the Partnership Year, an annual report containing
financial statements of the Partnership, or of the Company if such statements
are prepared solely on a consolidated basis with the Company, for such
Partnership Year, presented in accordance with U.S. GAAP, such statements to be
audited by a nationally recognized firm of independent public accountants
selected by the General Partner.

B. The General Partner shall cause to be mailed to each Limited Partner such
other information as may be required by applicable law or regulation, or as the
General Partner determines to be appropriate.

C. The General Partner shall have satisfied its obligations under Section 9.3A
and 9.3B by (i) to the extent the General Partner or the Partnership is subject
to periodic reporting requirements under the Exchange Act, filing the quarterly
and annual reports required thereunder within the time periods provided for the
filing of such reports, including any permitted extensions, or (ii) posting or
making available the reports required by this Section 9.3 on the website
maintained from time to time by the Partnership or the Company, provided that
such reports are able to be printed or downloaded from such website.

ARTICLE 10 - TAX MATTERS

Section 10.1 Preparation of Tax Returns

The General Partner shall arrange for the preparation and timely filing of all
returns of Partnership income, gains, deductions, losses and other items
required of the Partnership for federal and state income tax purposes and shall
use reasonable efforts to furnish, within ninety (90) days of the close of each
Partnership Year, the tax information reasonably required by Limited Partners
for federal and state income tax reporting purposes. Each Limited Partner shall
promptly provide the General Partner with any information reasonably requested
by the General Partner from time to time.

 

49

--------------------------------------------------------------------------------

Section 10.2 Tax Elections

A. Except as otherwise provided herein, the General Partner shall, in its sole
and absolute discretion, determine whether to make any available tax election,
including, but not limited to, the election under Section 754 of the Code. The
General Partner shall have the right to seek to revoke any such election it
makes (including, without limitation, any election under Section 754 of the
Code) upon the General Partner’s determination, in its sole and absolute
discretion. Notwithstanding the foregoing, in making any such tax election, the
General Partner, may, but shall be under no obligation (unless pursuant to a
separate written agreement) to take into account the tax consequences to any
Limited Partner resulting from any such election.

B. To the extent provided for in Regulations, revenue rulings, revenue
procedures and/or other IRS guidance, the Partnership is hereby authorized to,
and at the direction of the General Partner shall, elect a safe harbor under
which the fair market value of any Partnership Interests issued in connection
with the performance of services after the effective date of such Regulations
(or other guidance) will be treated as equal to the liquidation value of such
Partnership Interests (i.e., a value equal to the total amount that would be
distributed with respect to such interests if the Partnership sold all of its
assets for their fair market value immediately after the issuance of such
Partnership Interests, satisfied its liabilities (excluding any non-recourse
liabilities to the extent the balance of such liabilities exceed the fair market
value of the assets that secure them) and distributed the net proceeds to the
Partners under the terms of this Agreement). In the event that the Partnership
makes a safe harbor election as described in the preceding sentence, each
Partner hereby agrees to comply with all safe harbor requirements with respect
to transfers of such Partnership Interests while the safe harbor election
remains effective.

C. A Partner’s “interest in partnership profits” for purposes of determining its
share of the excess nonrecourse liabilities of the Partnership within the
meaning of Regulations Section 1.752-3(a)(3) shall be such Partner’s Percentage
Interest except as determined by the General Partner, in its sole discretion,
consistent with Section 752 of the Code.

Section 10.3 Tax Matters Partner

A. The Company shall be the “tax matters partner” of the Partnership for U.S.
federal income tax purposes. Pursuant to Section 6230(e) of the Code, upon
receipt of notice from the IRS of the beginning of an administrative proceeding
with respect to the Partnership, the tax matters partner shall furnish the IRS
with the name, address, taxpayer identification number, and profits interest of
each of the Limited Partners and Assignees; provided, however, that such
information is provided to the Partnership by the Limited Partners and
Assignees.

B. The tax matters partner is authorized, but not required:

(1) to enter into any settlement with the IRS with respect to any administrative
or judicial proceedings for the adjustment of Partnership items required to be
taken into account by a Partner for income tax purposes (such administrative
proceedings being referred to as a “tax audit” and such judicial proceedings
being referred to as “judicial review”), and in the settlement agreement the tax
matters partner may expressly state that such agreement shall bind all Partners,
except that such settlement agreement shall not bind any Partner (i) who (within
the time prescribed pursuant to the Code and Regulations) files a statement with
the IRS providing that the tax matters partner shall not have the authority to
enter into a settlement agreement on behalf of such Partner; or (ii) who is a
“notice partner” (as defined in Section 6231(a)(8) of the Code) or a member of a
“notice group” (within the meaning of Section 6223(b)(2) of the Code);

 

50

--------------------------------------------------------------------------------

(2) in the event that a notice of a final administrative adjustment at the
Partnership level of any item required to be taken into account by a Partner for
tax purposes (a “final adjustment”) is mailed to the tax matters partner, to
seek judicial review of such final adjustment, including the filing of a
petition for readjustment with the Tax Court or the United States Claims Court,
or the filing of a complaint for refund with the District Court of the United
States for the district in which the Partnership’s principal place of business
is located;

(3) to intervene in any action brought by any other Partner for judicial review
of a final adjustment;

(4) to file a request for an administrative adjustment with the IRS at any time
and, if any part of such request is not allowed by the IRS, to file an
appropriate pleading (petition or complaint) for judicial review with respect to
such request;

(5) to enter into an agreement with the IRS to extend the period for assessing
any tax which is attributable to any item required to be taken into account by a
Partner for tax purposes, or an item affected by such item; and

(6) to take any other action on behalf of the Partners or the Partnership in
connection with any tax audit or judicial review proceeding to the extent
permitted by applicable law or regulations.

The taking of any action and the incurring of any expense by the tax matters
partner in connection with any such proceeding, except to the extent required by
law, is a matter in the sole and absolute discretion of the tax matters partner
and the provisions relating to indemnification of the General Partner set forth
in Section 7.7 shall be fully applicable to the tax matters partner in its
capacity as such.

C. The tax matters partner shall receive no compensation for its services. All
third-party costs and expenses incurred by the tax matters partner in performing
its duties as such (including legal and accounting fees and expenses) shall be
borne by the Partnership. Nothing herein shall be construed to restrict the
Partnership from engaging an accounting or law firm to assist the tax matters
partner in discharging its duties hereunder, so long as the compensation paid by
the Partnership for such services is reasonable.

Section 10.4 Organizational Expenses

The Partnership shall elect to deduct expenses, if any, incurred by it in
organizing the Partnership as provided in Section 709 of the Code.

 

51

--------------------------------------------------------------------------------

ARTICLE 11 - TRANSFERS AND WITHDRAWALS

Section 11.1 Transfer

A. The term “transfer,” when used in this Article 11 with respect to a
Partnership Unit or General Partner Interest, shall be deemed to refer to a
transaction by which the General Partner purports to assign all or any part of
its General Partner Interest to another Person or by which a Limited Partner
purports to assign all or any part of its Limited Partner Interest to another
Person, and includes a sale, assignment, gift, pledge, encumbrance,
hypothecation, mortgage, exchange or any other disposition by operation of law
or otherwise. The term “transfer” when used in this Article 11 does not include
any redemption of Partnership Interests by the Partnership from a Limited
Partner or any acquisition of Partnership Units from a Limited Partner by the
Company pursuant to Section 8.5 except as otherwise provided herein. No part of
the interest of a Limited Partner shall be subject to the claims of any
creditor, any spouse for alimony or support, or to legal process, and may not be
voluntarily or involuntarily alienated or encumbered except as may be
specifically provided for in this Agreement or consented to in writing by the
General Partner.

B. Subject to the rights and preferences of any Preferred Units or additional
class or series of Partnership Units established pursuant to Section 4.2, no
Partnership Unit or General Partnership Interest may be transferred, in whole or
in part, except in accordance with the terms and conditions set forth in this
Article 11. Any transfer or purported transfer of a Partnership Unit or General
Partnership Interest not made in accordance with this Article 11 shall be null
and void ab initio unless consented to in writing by the General Partner, in its
sole and absolute discretion.

Section 11.2 Transfer of the Company’s and General Partner’s Partnership
Interest and Limited Partner Interest; Extraordinary Transactions

A. The General Partner may not transfer any of its General Partner Interest or
withdraw as General Partner, and the Company may not, directly or through its
wholly owned Subsidiaries, transfer any of its Limited Partner Interest or
engage in an Extraordinary Transaction, except, in any such case, (i) if such
Extraordinary Transaction, or such withdrawal or transfer, is made in connection
with an Extraordinary Transaction that is permitted under Section 11.2B, (ii) if
Partnership Approval to such Extraordinary Transaction, withdrawal or transfer
is obtained in accordance with Section 11.2C (subject to Section 11.2D) and the
requirements set forth in Section 11.2C(ii) are satisfied or (iii) if such
transfer is to an entity that is wholly owned by the Company (directly or
indirectly), including any Qualified REIT Subsidiary or any other entity
disregarded as an entity separate from the Company for U.S. federal income tax
purposes.

B. Notwithstanding any other provision of this Agreement, but subject to
compliance with the terms and conditions of Section 1.12 of Exhibit C, the
General Partner and the Company are permitted to engage (and cause the
Partnership to participate) in the following transactions without the Consent of
any Limited Partner:

 

52

--------------------------------------------------------------------------------

(1) an Extraordinary Transaction in connection with which the Company is the
surviving entity and the holders of REIT Shares are not entitled to receive any
cash, securities, or other property in connection with such Extraordinary
Transaction; or

(2) an Extraordinary Transaction if: (a) immediately after such Extraordinary
Transaction, substantially all of the assets directly or indirectly owned by the
surviving entity, other than a direct or indirect interest in the Surviving
Partnership (as defined below), are owned directly or indirectly by the
Partnership or another limited partnership or limited liability company which is
the survivor of a merger, consolidation or combination of assets with the
Partnership (in each case, the “Surviving Partnership”); (b) the rights,
preferences and privileges of the Common Unitholders in the Surviving
Partnership are at least as favorable as those in effect immediately prior to
the consummation of such transaction and as those applicable to any other
limited partners or non-managing members of the Surviving Partnership (who have,
in either case, the rights of a “common” equity holder); and (c) such rights of
the Common Unitholders include the right to exchange their Common Unit
equivalent interests in the Surviving Partnership for publicly traded common
equity securities of the ultimate controlling person of the Surviving
Partnership, such common equity securities, with an exchange ratio based on the
determination of relative fair market value of such securities (as determined
pursuant to Section 11.2E) and the REIT Shares.

C. Except as set forth in Section 11.2B, (i) the General Partner may not
transfer any of its General Partner Interest or withdraw as General Partner, and
the Company may not, directly or through its wholly owned Subsidiaries, transfer
any of its Limited Partner Interest or engage in an Extraordinary Transaction
unless it has obtained Partnership Approval and (ii) with respect to any such
Extraordinary Transaction, transfer or withdrawal, unless the Consent of a
Majority in Interest of the Outside Limited Partners is obtained, all Limited
Partners (other than the Company) must either receive, or have the right to
elect to receive, for each Common Unit an amount of cash, securities and other
property equal to the product of (x) the REIT Shares Amount with respect to all
of such Limited Partner’s Common Units multiplied by (y) the greatest amount of
cash, securities and other property paid to a holder of one REIT Share in
consideration of one such REIT Share pursuant to the terms of the Extraordinary
Transaction during the period from and after the date on which the Extraordinary
Transaction is consummated; provided that, if, in connection with the
Extraordinary Transaction, a purchase, tender or exchange offer shall have been
made to and accepted by the holders of more than 50% of the outstanding REIT
Shares, each holder of Common Units shall receive, or shall have the right to
elect to receive, the greatest amount of cash, securities, or other property
which such holder of Common Units would have received had it exercised its
Redemption Right (as set forth in Section 8.5) and received REIT Shares in
exchange for its Common Units immediately prior to the expiration of such
purchase, tender or exchange offer and had thereupon accepted such purchase,
tender or exchange offer and then such Extraordinary Transaction shall have been
consummated.

 

 

53

--------------------------------------------------------------------------------

D. Notwithstanding anything to the contrary contained in this Section 11.2, the
requirement to obtain Partnership Approval contained in Section 11.2C(i) shall
permanently and automatically terminate at such time as the number of Common
Units held by the Company and its Subsidiaries exceeds an amount equal to
(i) eighty-five percent (85%) multiplied by (ii) the aggregate number of
outstanding Founder Common Units and Common Units held by the Company and its
Subsidiaries. For the avoidance of doubt, the termination of the requirement to
obtain Partnership Approval pursuant to Section 11.2C(i) shall in no way impact
the terms of Section 11.2C(ii).

E. In connection with any transaction permitted by Section 11.2C(ii), the
relative fair market values shall be reasonably determined by the General
Partner as of the time of such transaction and, to the extent applicable, shall
be no less favorable to the Limited Partners than the relative values reflected
in the terms of such transaction.

Section 11.3 Limited Partners’ Rights to Transfer

A. General. Subject to the provisions of Sections 11.3 B and 11.3C, a Limited
Partner (other than the Company) may not transfer, without the consent of the
General Partner, in its sole and absolute discretion, all or any portion of its
Partnership Interest, or any of such Limited Partner’s economic rights as a
Limited Partner.

B. Incapacitated Limited Partners. If a Limited Partner is subject to
Incapacity, the executor, administrator, trustee, committee, guardian,
conservator or receiver of such Limited Partner’s estate shall have all of the
rights of a Limited Partner, but not more rights than those enjoyed by other
Limited Partners, for the purpose of settling or managing the estate and such
power as the Incapacitated Limited Partner possessed to transfer all or any part
of his, her or its Partnership Interest. The Incapacity of a Limited Partner, in
and of itself, shall not dissolve or terminate the Partnership.

C. Permitted Transfers. Subject to Sections 11.3D, 11.3E, 11.4 and 11.6, a
Limited Partner may transfer, with or without the consent of the General
Partner, all or a portion of its Partnership Interests (i) in the case of a
Limited Partner who is an individual, to a member of his Immediate Family, any
trust formed for the benefit of himself and/or members of his Immediate Family,
or any partnership, limited liability company, joint venture, corporation or
other business entity comprised only of himself and/or members of his Immediate
Family and entities the ownership interests in which are owned by or for the
benefit of himself and/or members of his Immediate Family, (ii) in the case of a
Limited Partner which is a trust, to the beneficiaries of such trust, (iii) in
the case of a Limited Partner which is a partnership, limited liability company,
joint venture, corporation or other business entity, to its direct or indirect
partners, members, owners or stockholders, as the case may be, and (iv) pursuant
to applicable laws of descent or distribution.

D. It is a condition to any transfer otherwise permitted hereunder that the
transferee assumes by operation of law or express agreement all of the
obligations of the transferor Limited Partner under this Agreement with respect
to such transferred Partnership Interest and no such transfer (other than
pursuant to a statutory merger or consolidation or other event wherein all
obligations and liabilities of the transferor Limited Partner are assumed by a
successor by operation of law) shall relieve the transferor Partner of its
obligations under this Agreement without the approval of the General Partner, in
its sole and absolute discretion. Notwithstanding the foregoing, any transferee
of any transferred Partnership Interest shall be

 

54

--------------------------------------------------------------------------------

subject to any and all Ownership Limit, which may limit or restrict such
transferee’s ability to exercise its Redemption Right. Any transferee, whether
or not admitted as a Substituted Limited Partner, shall take subject to the
obligations of the transferor hereunder. Unless admitted as a Substituted
Limited Partner, no transferee, whether by voluntary transfer, by operation of
law or otherwise, shall have any rights hereunder, other than the rights of an
Assignee as provided in Section 11.5.

E. Notwithstanding any other provision of this Section 11.3, no Limited Partner
may effect a transfer of its Partnership Units, in whole or in part, if, upon
the advice of legal counsel for the Partnership, such proposed transfer would
require the registration of the Partnership Units under the Securities Act or
would otherwise violate any applicable federal or state securities or blue sky
law (including investment suitability standards). The General Partner may
prohibit any transfer of Partnership Units by a Limited Partner unless it
receives a written opinion of legal counsel (which opinion and counsel shall be
reasonably satisfactory to the Partnership) to such Limited Partner to the
effect that such transfer would not require filing of a registration statement
under the Securities Act or would not otherwise violate any federal or state
securities laws or regulations applicable to the Partnership or the Partnership
Unit or, at the option of the Partnership, an opinion of legal counsel to the
Partnership to the same effect.

Section 11.4 Substituted Limited Partners

A. No Limited Partner shall have the right to substitute a transferee as a
Limited Partner in his, her or its place (including any transferees permitted by
Section 11.3). The General Partner shall, however, have the right to consent to
the admission of a transferee of the interest of a Limited Partner pursuant to
this Section 11.4 as a Substituted Limited Partner, which consent may be given
or withheld by the General Partner in its sole and absolute discretion. The
General Partner’s failure or refusal to permit a transferee of any such
interests to become a Substituted Limited Partner shall not give rise to any
cause of action against the Partnership or any Partner.

B. A transferee who has been admitted as a Substituted Limited Partner in
accordance with this Article 11 shall have all the rights and powers and be
subject to all the restrictions and liabilities of a Limited Partner under this
Agreement. The admission of any transferee as a Substituted Limited Partner
shall be conditioned upon the transferee executing and delivering to the
Partnership an acceptance of all of the terms and conditions of this Agreement
(and such other documents or instruments as may be required or advisable, in the
sole and absolute discretion of the General Partner, to effect the admission,
each in form and substance satisfactory to the General Partner).

C. Upon the admission of a Substituted Limited Partner, the General Partner
shall amend the books and records of the Partnership to reflect the name,
address, number of Partnership Units and Percentage Interest, if any, of such
Substituted Limited Partner and to eliminate or adjust, if necessary, the name,
address and interest of the predecessor of such Substituted Limited Partner.

 

55

--------------------------------------------------------------------------------

Section 11.5 Assignees

A. If the General Partner consents to a transfer of Partnership Interests, but,
in its sole and absolute discretion, does not consent to the admission of any
permitted transferee as a Substituted Limited Partner, as described in
Section 11.4, such transferee shall be considered an Assignee for purposes of
this Agreement. An Assignee shall be entitled to all the rights of an assignee
of a limited partnership interest under the Act, including the right to receive
distributions from the Partnership and the share of Profit, Loss and any other
items of income, gain, loss, deduction and credit of the Partnership
attributable to the Partnership Units assigned to such transferee, and also the
rights to transfer the Partnership Units in accordance with the provisions of
this Article 11 and the ability to exercise the Redemption Right Units in
accordance with the provisions of Section 8.5, but shall not be deemed to be a
Holder of Partnership Units for any other purpose under this Agreement, and
shall not be entitled to effect a Consent with respect to such Partnership Units
on any matter presented to the Limited Partners for a vote. In the event any
such transferee desires to make a further assignment of any such Partnership
Units, such transferee shall be subject to all of the provisions of this
Article 11 to the same extent and in the same manner as any Limited Partner
desiring to make an assignment of Partnership Units.

Section 11.6 General Provisions

A. No Limited Partner may withdraw from the Partnership other than as a result
of a permitted transfer of all of such Limited Partner’s Partnership Units in
accordance with this Article 11 and the transferee of such Partnership Units
being admitted to the Partnership as a Substituted Limited Partner or pursuant
to a redemption of all of its Partnership Units under Section 8.5.

B. Any Limited Partner who shall transfer all of its Partnership Units in a
transfer permitted pursuant to this Article 11 where such transferee was
admitted as a Substituted Limited Partner or pursuant to the exercise of its
Redemption Right for all of its Partnership Units under Section 8.5 shall cease
to be a Limited Partner; provided that after such transfer, exchange or
redemption such Limited Partner owns no Partnership Interest.

C. Transfers pursuant to this Article 11 may only be made on the first day of a
fiscal quarter of the Partnership, unless the General Partner in its sole and
absolute discretion otherwise agrees.

D. If any Partnership Interest is transferred, assigned or redeemed during any
quarterly segment of the Partnership’s Partnership Year in compliance with the
provisions of this Article 11 or redeemed by the Partnership pursuant to
Section 8.5 on any day other than the first day of a Partnership Year, then
Profit, Loss, each item thereof and all other items attributable to such
Partnership Interest for such Partnership Year shall be divided and allocated
between the transferor Partner and the transferee Partner by taking into account
their varying interests during the Partnership Year in accordance with
Section 706(d) of the Code, using the “interim closing of the books” method or
such other method (or combination of methods) selected by the General Partner.
Solely for purposes of making such allocations, at the discretion of the General
Partner, each of such items for the calendar month in which the transfer or
assignment occurs shall be

 

56

--------------------------------------------------------------------------------

allocated to the transferee Partner, and none of such items for the calendar
month in which a transfer or redemption occurs shall be allocated to transferor
Partner or the Tendering Partner as the case may be; provided, however, that the
General Partner may adopt such other conventions relating to allocations in
connection with transfers, assignments or redemptions as it determines are
necessary or appropriate. All distributions attributable to such Partnership
Unit with respect to which the Partnership Record Date is before the date of
such transfer, assignment, or redemption shall be made to the transferor Partner
or the Tendering Partner, as the case may be, and in the case of a transfer or
assignment other than a redemption, all distributions thereafter attributable to
such Partnership Unit shall be made to the transferee Partner.

E. In addition to any other restrictions on transfer herein contained, including
without limitation the provisions of this Article 11, in no event may any
transfer or assignment of a Partnership Interest by any Partner (including
pursuant to a redemption or exchange for REIT Shares by the Partnership or the
General Partner) be made (i) to any Person who lacks the legal right, power or
capacity to own a Partnership Interest; (ii) in violation of applicable law;
(iii) except with the consent of the General Partner, which may be given or
withheld in its sole and absolute discretion, of any component portion of a
Partnership Unit, such as the Capital Account, or rights to distributions,
separate and apart from all other components of a Partnership Unit; (iv) except
with the consent of the General Partner, which may be given or withheld in its
sole and absolute discretion, if upon the advice of legal counsel to the
Partnership such transfer could cause a termination of the Partnership for
federal or state income tax purposes (except as a result of the redemption or
exchange for REIT Shares of all Common Units held by all Limited Partners or
pursuant to a transaction expressly permitted under Section 11.2); (v) if upon
the advice of counsel to the Partnership such transfer could cause the
Partnership to be treated as other than a partnership or a disregarded entity
for U.S. federal income tax purposes; (vi) if such transfer could, upon the
advice of counsel to the Partnership, cause the Partnership to become, with
respect to any employee benefit plan subject to Title I of ERISA, a
“party-in-interest” (as defined in Section 3(14) of ERISA) or a “disqualified
person” (as defined in Section 4975(e) of the Code); (vii) if such transfer
could, upon the advice of counsel to the Partnership, cause any portion of the
assets of the Partnership to constitute assets of any employee benefit plan
pursuant to Department of Labor Regulations Section 2510.2-101; (viii) except
with the consent of the General Partner, which may be given or withheld in its
sole and absolute discretion, if such transfer requires the registration of such
Partnership Interest pursuant to any applicable federal or state securities
laws; (ix) except with the consent of the General Partner, which may be given or
withheld in its sole and absolute discretion, if such transfer could cause the
Partnership to fail to qualify for any of the Safe Harbors (as defined below) or
cause the Partnership to derive income that is not “qualifying income” within
the meaning of Section 7704(d) of the Code; (x) except with the consent of the
General Partner, which may be given or withheld in its sole and absolute
discretion, if such transfer subjects the Partnership to be regulated under the
Investment Company Act of 1940, the Investment Advisors Act of 1940 or ERISA,
each as amended; (xi) if such transfer is made to a lender to the Partnership or
any Person who is related (within the meaning of Section 1.752-4(b) of the
Regulations) to any lender to the Partnership whose loan constitutes a
Nonrecourse Liability, except with the consent of the General Partner, which may
be given or withheld in its sole and absolute discretion; and provided that, as
a condition to granting such consent the lender may be required to enter into an
arrangement with the borrower, the Partnership and the General Partner to redeem
or exchange for the REIT Shares Amount any Partnership Units in which a security
interest is held immediately prior to the time at which such

 

57

--------------------------------------------------------------------------------

lender would be deemed to be a partner in the Partnership for purposes of
allocating liabilities to such lender under Section 752 of the Code; or (xii) if
upon the advice of legal counsel for the Partnership such transfer could
adversely affect the ability of the Company to continue to qualify as a REIT or,
except with the consent of the General Partner, which may be given or withheld
in its sole and absolute discretion, subject the Company to any additional taxes
under Section 857 or Section 4981 of the Code.

F. The General Partner shall monitor the transfers of interests in the
Partnership (including any acquisition of Common Units by the Partnership or the
General Partner) to determine (i) if such interests could be treated as being
traded on an “established securities market” or a “secondary market (or the
substantial equivalent thereof)” within the meaning of Section 7704 of the Code
and the regulations thereunder and (ii) whether such transfers of interests
could result in the Partnership being unable to qualify for the “safe harbors”
set forth in Regulations Section 1.7704-1 (or such other guidance subsequently
published by the IRS setting forth safe harbors under which interests will not
be treated as “readily tradable on a secondary market (or the substantial
equivalent thereof)” within the meaning of Section 7704 of the Code) (the “Safe
Harbors”). The General Partner shall have the authority (but shall not be
required) to take any steps it determines are necessary or appropriate in its
sole and absolute discretion (x) to prevent any trading of interests which could
cause the Partnership to become a “publicly traded partnership,” within the
meaning of Code Section 7704, or any recognition by the Partnership of such
transfers, (y) to ensure that one or more of the Safe Harbors is met and/or
(z) to ensure that the Partnership satisfies the “qualifying income” exemption
of Section 7704(c) of the Code from treatment as a publicly traded partnership
taxable as a corporation.

ARTICLE 12 - ADMISSION OF PARTNERS

Section 12.1 Admission of Successor General Partner

A successor to all of the General Partner’s General Partner Interest pursuant to
Section 11.2 who is proposed to be admitted as a successor General Partner shall
be admitted to the Partnership as the General Partner, effective upon such
transfer. Any such transferee shall carry on the business of the Partnership
without dissolution. In each case, the admission shall be subject to the
successor General Partner executing and delivering to the Partnership an
acceptance of all of the terms and conditions of this Agreement and such other
documents or instruments as may be required to effect the admission. In the case
of such admission on any day other than the first day of a Partnership Year, all
items attributable to the General Partner Interest for such Partnership Year
shall be allocated between the transferring General Partner and such successor
as provided in Article 11.

Section 12.2 Admission of Additional Limited Partners

A. After the date hereof, a Person (other than an existing Partner) who makes a
capital contribution to the Partnership in accordance with this Agreement shall
be admitted to the Partnership as an Additional Limited Partner only upon
furnishing to the General Partner (i) evidence of acceptance in form
satisfactory to the General Partner of all of the terms and conditions of this
Agreement, including, without limitation, the power of attorney granted in
Section 2.4 and (ii) such other documents or instruments as may be required in
the discretion of the General Partner in order to effect such Person’s admission
as an Additional Limited Partner.

 

58

--------------------------------------------------------------------------------

B. Notwithstanding anything to the contrary in this Section 12.2, no Person
shall be admitted as an Additional Limited Partner without the written consent
of the General Partner, which consent may be given or withheld in the General
Partner’s sole and absolute discretion. The admission of any Person as an
Additional Limited Partner shall become effective on the date upon which the
name of such Person is recorded on the books and records of the Partnership,
following the written consent of the General Partner to such admission.

C. If any Additional Limited Partner is admitted to the Partnership on any day
other than the first day of a Partnership Year, then Profit, Loss, each item
thereof and all other items allocable among Partners and Assignees for such
Partnership Year shall be allocated among such Additional Limited Partner and
all other Partners and Assignees by taking into account their varying interests
during the Partnership Year in accordance with Section 706(d) of the Code, using
any method(s) permitted by law and selected by the General Partner consistent
with the provisions of Section 11.6D. All distributions with respect to which
the Partnership Record Date is before the date of such admission shall be made
solely to Partners and Assignees, other than the Additional Limited Partner and
all distributions thereafter shall be made to all of the Partners and Assignees
including such Additional Limited Partner.

Section 12.3 Amendment of Agreement and Certificate of Limited Partnership

For the admission to the Partnership of any Partner, the General Partner shall
take all steps necessary and appropriate under the Act to amend the records of
the Partnership and, if necessary, to prepare as soon as practical an amendment
of this Agreement and amend the books and records of the Partnership and, if
required by law, shall prepare and file an amendment to the Certificate of
Limited Partnership and may for this purpose exercise the power of attorney
granted pursuant to Section 2.4 hereof.

ARTICLE 13 - DISSOLUTION, LIQUIDATION AND TERMINATION

Section 13.1 Dissolution

A. The Partnership shall not be dissolved by the admission of Substituted
Limited Partners or Additional Limited Partners or by the admission of a
successor General Partner in accordance with the terms of this Agreement. Upon
the withdrawal of the General Partner, any successor General Partner shall
continue the business of the Partnership. The Partnership shall dissolve, and
its affairs shall be wound up, only upon the first to occur of any of the
following (each, a “Liquidating Event”):

(1) an event of withdrawal of the General Partner, as defined in the Act (other
than an event of bankruptcy or insolvency pursuant to Section 17-402(a)(4) or
(5) of the Act), unless, within ninety (90) days after such event of withdrawal,
Partners holding a majority of the Percentage Interests then held by Partners
agree in writing to continue the business of the Partnership and to the
appointment, effective as of the date of withdrawal, of a successor General
Partner;

 

59

--------------------------------------------------------------------------------

(2) an election to dissolve the Partnership made by the General Partner, in its
sole and absolute discretion;

(3) entry of a decree of judicial dissolution of the Partnership pursuant to the
provisions of the Act; or

(4) a final and non-appealable judgment is entered by a court of competent
jurisdiction ruling that the General Partner is bankrupt or insolvent, or a
final and non-appealable order for relief is entered by a court with appropriate
jurisdiction against the General Partner, in each case under any federal or
state bankruptcy or insolvency laws as now or hereafter in effect, unless prior
to the entry of such order or judgment a Majority in Interest of the Outside
Limited Partners agree in writing to continue the business of the Partnership
and to the appointment, effective as of a date prior to the date of such order
or judgment, of a successor General Partner.

For the avoidance of doubt, the occurrence of a Liquidating Event shall not
relieve the Partnership of any obligations under any tax protection agreement
among the Company, the Operating Partnership and a Limited Partner.

Section 13.2 Winding Up

A. Upon the occurrence of a Liquidating Event, the Partnership shall continue
solely for the purposes of winding up its affairs in an orderly manner,
liquidating its assets, and satisfying the claims of its creditors and Partners.
No Partner shall take any action that is inconsistent with, or not necessary to
or appropriate for, the winding up of the Partnership’s business and affairs.
The General Partner, or, in the event there is no remaining General Partner, any
Person elected by vote of the Limited Partners (the General Partner or such
other Person being referred to herein as the “Liquidator”), shall be responsible
for overseeing the winding up and dissolution of the Partnership and shall take
full account of the Partnership’s liabilities and property and the Partnership
property shall be liquidated as promptly as is consistent with obtaining the
fair value thereof, and the proceeds therefrom (which may, to the extent
determined by the General Partner, include shares of stock in the Company) shall
be applied and distributed in the following order:

(1) First, to the payment and discharge of all of the Partnership’s debts and
liabilities;

(2) The balance, if any, to all Partners with positive Capital Accounts in
accordance with their respective positive Capital Account balances, determined
after all adjustments made in accordance with Article 6 resulting from
Partnership operations and from all sales and dispositions of all or any part of
the Partnership’s assets.

The General Partner shall not receive any additional compensation for any
services performed pursuant to this Article 13, other than reimbursement of its
expenses as provided in Section 7.4. Any distributions pursuant to this
Section 13.2A shall be made by the end of the Partnership’s taxable year in
which the Liquidating Event occurs (or, if later, within ninety (90) days after
the date of the Liquidating Event). To the extent deemed advisable by the
General Partner, appropriate arrangements (including the use of a liquidating
trust) may be made to assure that adequate funds are available to pay any
contingent debts or obligations.

 

60

--------------------------------------------------------------------------------

B. Notwithstanding the provisions of Section 13.2A which require liquidation of
the assets of the Partnership, but subject to the order of priorities set forth
therein, if prior to or upon dissolution of the Partnership the Liquidator
determines that an immediate sale of part or all of the Partnership’s assets
would be impractical or would cause undue loss to the Partners, the Liquidator
may, in its sole and absolute discretion, defer for a reasonable time the
liquidation of any assets except those necessary to satisfy liabilities of the
Partnership (including to those Partners as creditors) and/or distribute to the
Partners, in lieu of cash, as tenants in common and in accordance with the
provisions of Section 13.2A, undivided interests in such Partnership assets as
the Liquidator deems not suitable for liquidation. Any such distributions in
kind shall be made only if, in the good faith judgment of the Liquidator, such
distributions in kind are in the best interest of the Partners, and shall be
subject to such conditions relating to the disposition and management of such
properties as the Liquidator deems reasonable and equitable and to any
agreements governing the operation of such properties at such time. The
Liquidator shall determine the fair market value of any property distributed in
kind using such reasonable method of valuation as it may adopt.

Section 13.3 Deficit Capital Account Restoration Obligation

If the General Partner has a deficit balance in its Capital Account at such time
as the Partnership (or the General Partner’s interest therein, including its
interest as a Limited Partner) is “liquidated” within the meaning of Regulations
Section 1.704-1(b)(2)(ii)(g) (after giving effect to all contributions,
distributions and allocations for the taxable years, including the year during
which such liquidation occurs), the General Partner shall contribute to the
capital of the Partnership the amount necessary to restore such deficit balance
to zero in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(3). If any
Limited Partner has a deficit balance in its Capital Account (after giving
effect to all contributions, distributions and allocations for the taxable
years, including the year during which such liquidation occurs), such Limited
Partner shall have no obligation to make any contribution to the capital of the
Partnership with respect to such deficit, and such deficit at any time shall not
be considered a Debt owed to the Partnership or to any other Person for any
purpose whatsoever, except to the extent otherwise expressly agreed to by such
Partner and the Partnership.

Section 13.4 Compliance with Timing Requirements of Regulations

A. In the discretion of the Liquidator or the General Partner, a pro rata
portion of the distributions that would otherwise be made to the General Partner
and Limited Partners pursuant to this Article 13 may be:

(1) distributed to a trust established for the benefit of the General Partner
and Limited Partners for the purposes of liquidating Partnership assets,
collecting amounts owed to the Partnership, and paying any contingent or
unforeseen liabilities or obligations of the Partnership or of the General
Partner arising out of or in connection with the Partnership. The assets of any
such trust shall be distributed to the General Partner and Limited Partners from
time to time, in the reasonable discretion of the Liquidator or the General
Partner, in the same proportions and the amount distributed to such trust by the
Partnership would otherwise have been distributed to the General Partner and
Limited Partners pursuant to this Agreement; or

 

 

61

--------------------------------------------------------------------------------

(2) withheld or escrowed to provide a reasonable reserve for Partnership
liabilities (contingent or otherwise) and to reflect the unrealized portion of
any installment obligations owed to the Partnership, provided that such withheld
or escrowed amounts shall be distributed to the General Partner and Limited
Partners in the manner and order of priority set forth in Section 13.2A as soon
as practicable.

Section 13.5 Deemed Distribution and Recontribution

Notwithstanding any other provision of this Article 13, in the event the
Partnership is liquidated within the meaning of Regulations
Section 1.704-1(b)(2)(ii)(g) but no Liquidating Event has occurred, the
Partnership’s property shall not be liquidated, the Partnership’s liabilities
shall not be paid or discharged, and the Partnership’s affairs shall not be
wound up. Instead, the Partnership shall be deemed to have contributed all of
its assets and liabilities to a new partnership in exchange for an interest in
the new partnership. Immediately thereafter, the Partnership shall be deemed to
distribute interests in the new partnership to the General Partner and Limited
Partners in proportion to their respective interests in the Partnership in
liquidation of the Partnership, and the new partnership shall be deemed to
continue the business of the Partnership.

Section 13.6 Rights of Limited Partners

Except as otherwise provided in this Agreement, each Limited Partner shall look
solely to the assets of the Partnership for the return of its Capital
Contributions and shall have no right or power to demand or receive property
other than cash from the Partnership. Except as otherwise provided in this
Agreement, no Limited Partner shall have priority over any other Partner as to
the return of its Capital Contributions, distributions or allocations.

Section 13.7 Notice of Dissolution

In the event a Liquidating Event occurs or an event occurs that would, but for
an election or objection by one or more Partners pursuant to Section 13.1,
result in a dissolution of the Partnership, the General Partner shall, within
thirty (30) days thereafter, provide written notice thereof to each of the
Partners.

Section 13.8 Cancellation of Certificate of Limited Partnership

Upon the completion of the liquidation of the Partnership’s assets, as provided
in Section 13.2 hereof, the Partnership shall be terminated, a certificate of
cancellation shall be filed, and all qualifications of the Partnership as a
foreign limited partnership in jurisdictions other than the State of Delaware
shall be canceled and such other actions as may be necessary to terminate the
Partnership shall be taken.

 

62

--------------------------------------------------------------------------------

Section 13.9 Reasonable Time for Winding-Up

A reasonable time shall be allowed for the orderly winding-up of the business
and affairs of the Partnership and the liquidation of its assets pursuant to
Section 13.2, in order to minimize any losses otherwise attendant upon such
winding-up, and the provisions of this Agreement shall remain in effect between
the Partners during the period of liquidation.

Section 13.10 Waiver of Partition

Each Partner, on behalf of itself and its successors, hereby waives any right to
partition of the Partnership property.

Section 13.11 Liability of Liquidator

Any Liquidator shall be indemnified and held harmless by the Partnership in the
same manner and to the same degree as an Indemnitee may be indemnified pursuant
to Section 7.7 hereof.

ARTICLE 14 - AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS

Section 14.1 Procedures for Actions and Consents of Partners

A. The actions requiring Consent of any Partner or Partners pursuant to this
Agreement, including Section 7.3 and Section 11.2 hereof, or otherwise pursuant
to applicable law, are subject to the procedures set forth in this Article 14.

Section 14.2 Amendments

A. Amendments to this Agreement requiring the Consent of Limited Partners may
only be proposed by the General Partner. Following such proposal, the General
Partner shall submit any proposed amendment to the Limited Partners and shall
seek the Consent of the Limited Partners entitled to vote thereon on any such
proposed amendment in accordance with Section 14.3 hereof. Except as set forth
below in Section 14.2B, Section 14.2C, Section 14.2D and Section 14.2E or as
otherwise expressly provided in this Agreement (including setting forth the
terms of any class or series of Preferred Units or other Partnership Units
created pursuant to Section 4.2), a proposed amendment shall be adopted and be
effective as an amendment hereto if it is approved by the General Partner and it
receives the Consent of Limited Partners holding a majority of the Common Units
and LTIP Units, voting together as a single class, then held by Limited Partners
(including Common Units held by the Company and its Affiliates); provided that
an action shall become effective at such time as the requisite Consents are
received by the General Partner even if prior to such specified time.

 

 

63

--------------------------------------------------------------------------------

B. The General Partner shall have the exclusive power without the prior Consent
of the Limited Partners to amend this Agreement as may be required to facilitate
or implement any of the following purposes:

(1) to add to the obligations of the General Partner or surrender any right or
power granted to the General Partner or any Affiliate of the General Partner for
the benefit of the Limited Partners;

(2) to reflect the issuance of additional Partnership Interests pursuant to
Section 4.2 or the admission, substitution or withdrawal of Partners or the
termination of the Partnership in accordance with this Agreement, and to amend
the books and records of the Partnership (including Exhibit A) in connection
with such admission, substitution or withdrawal;

(3) to set forth or amend the designations, rights, powers, duties and
preferences of the Holders of any additional Partnership Interests issued
pursuant to this Agreement;

(4) to reflect a change that is of an inconsequential nature or does not
adversely affect the rights of the Limited Partners hereunder in any material
respect, or to cure any ambiguity, correct or supplement any provision in this
Agreement not inconsistent with law or with other provisions, or make other
changes with respect to matters arising under this Agreement that will not be
inconsistent with law or with the provisions or this Agreement;

(5) to satisfy any requirements, conditions or guidelines contained in any
order, directive, opinion, ruling or regulation of a federal or state agency or
contained in federal or state law;

(6) to reflect such changes as are reasonably necessary for the Company to
maintain its status as a REIT, including changes which may be necessitated due
to a change in applicable law (or an authoritative interpretation thereof) or a
ruling of the IRS;

(7) to reflect the transfer of all or any part of a Partnership Interest among
the General Partner, and any Qualified REIT Subsidiary or other entity that is
disregarded as an entity separate from the General Partner for U.S. federal
income tax purposes;

(8) to reflect the adoption, modification or termination of a Stock Plan by the
Company, as set forth in Section 4.2I;

(9) to modify, as set forth in Section 6.2, the manner in which Capital Accounts
are computed;

(10) to reflect any modification to this Agreement as is necessary or desirable
(as determined by the General Partner in its sole and absolute discretion,
including, without limitation, to the definition of “Conversion Factor”), to
reflect the direct ownership of assets by the Company in accordance with
Section 7.5B; and

 

64

--------------------------------------------------------------------------------

(11) to reflect any modification to this Agreement that any provision of this
Agreement authorizes the General Partner to make amendments without the Consent
of the Limited Partners or any other Person.

The General Partner will provide notice to the Limited Partners when any action
under this Section 14.2B is taken in the next regular communication to the
Limited Partners.

C. Except as set forth in Section 4.2I or Section 14.2B above, without the
Consent of a Majority in Interest of the Outside Limited Partners, this
Agreement shall not be amended in a manner that disproportionately effects such
Limited Partners, if such amendment would amend Section 4.2, Article 5,
Article 6, Section 7.3, Section 7.4, Section 7.5, Section 8.5 (subject to
Section 14.2D(iii)), Section 11.2 or this Section 14.2C (to reduce the items
requiring the Consent described herein).

D. This Agreement shall not be amended, and no action may be taken by the
General Partner, without the Consent of each Partner whose rights under this
Agreement are adversely affected thereby if such amendment or action would
(i) convert a Limited Partner Interest in the Partnership into a General Partner
Interest (except as a result of the General Partner acquiring such Partnership
Interest), (ii) modify the limited liability of a Limited Partner,
(iii) prohibit the exercise of, or alter any of the material terms related to,
the Redemption Right applicable to any existing Limited Partner as set forth in
Section 8.5G, or (iv) amend this Section 14.2D (to reduce the items requiring
the Consent described herein). Any such amendment or action Consented to by a
Partner shall be effective as to that Partner, notwithstanding the absence of
such Consent by any other Partners.

E. Until such time as the requirement to obtain Partnership Approval contained
in Section 11.2C(i) shall have ceased in accordance with Section 11.2D, without
the Consent of Limited Partners holding in the aggregate more than 50% of the
outstanding Founder Common Units, Section 11.2C, Section 11.2D, this
Section 14.2E and the definitions of “Founder Common Units” and “Partnership
Approval” shall not be amended.

F. Notwithstanding anything in this Article 14 or elsewhere in this Agreement to
the contrary, any amendment and restatement of Exhibit A hereto by the General
Partner to reflect events or changes otherwise authorized or permitted by this
Agreement, shall not be deemed an amendment of this Agreement and may be done at
any time and from time to time, as necessary by the General Partner without the
Consent of the Limited Partners.

G. Notwithstanding anything to the contrary contained in this Agreement, the
General Partner shall not amend or modify this Agreement in any way that would
directly conflict with the provisions of any tax protection agreement among the
Company, the Partnership and a Limited Partner without the consent of such
Limited Partner.

Section 14.3 Meetings of the Partners

A. Meetings of the Partners may only be called by the General Partner. The
request shall state the nature of the business to be transacted. Notice of any
such meeting shall be given to all Partners not less than seven (7) days nor
more than sixty (60) days prior to the date of such meeting. Partners may vote
in person or by proxy at such meeting. Whenever the

 

65

--------------------------------------------------------------------------------

vote or Consent of the Partners is permitted or required under this Agreement,
such vote or Consent may be given at a meeting of the Partners or may be given
in accordance with the procedure prescribed in Section 14.1. Except as otherwise
expressly provided in this Agreement, the Consent of holders of a majority of
the Common Units held by Limited Partners (including Common Units held by the
Company and its Affiliates) shall control.

B. Any action required or permitted to be taken at a meeting of the Partners may
be taken without a meeting if a Consent in writing or by electronic transmission
setting forth the action so taken or consented to is signed by Partners whose
affirmative vote would be sufficient to approve such action or provide such
Consent at a meeting of Partners. Such Consent may be in one instrument or in
several instruments, and shall have the same force and effect as the affirmative
vote of such Partners at a meeting of the Partners. Such Consent shall be filed
with the General Partner. An action so taken shall be deemed to have been taken
at a meeting held on the effective date so certified. For purposes of obtaining
a Consent in writing or by electronic transmission to any matter, the General
Partner may require a response within a reasonable specified time, but not less
than fifteen (15) days, and failure to respond in such time period shall
constitute a Consent that is consistent with the General Partner’s
recommendation with respect to the proposal; provided, however, that an action
shall become effective at such time as requisite Consents are received even if
prior to such specified time.

C. Each Limited Partner may authorize any Person or Persons to act for him by
proxy on all matters in which a Limited Partner is entitled to participate,
including waiving notice of any meeting, or voting or participating at a
meeting. Every proxy must be signed by the Limited Partner or his
attorney-in-fact. A proxy may be granted in writing, by means of electronic
transmission or as otherwise permitted by applicable law. No proxy shall be
valid after the expiration of twelve (12) months from the date thereof unless
otherwise provided in the proxy. Every proxy shall be revocable at the pleasure
of the Limited Partner executing it, such revocation to be effective upon the
Partnership’s receipt of written notice of such revocation from the Limited
Partner executing such proxy, unless otherwise provided in such proxy.

D. The General Partner may set, in advance, a Partnership Record Date for the
purpose of determining the Partners (i) entitled to Consent to any action,
(ii) entitled to receive notice of or vote at any meeting of the Partners or
(iii) in order to make a determination of Partners for any other proper purpose.
Such date, in any case, shall not be prior to the close of business on the day
the record date is fixed and shall be not more than ninety (90) days and, in the
case of a meeting of the Partners, not less than five (5) days, before the date
on which the meeting is to be held or Consent is to be given. If no Partnership
Record Date is fixed, the Partnership Record Date for the determination of
Partners entitled to notice of or to vote at a meeting of the Partners shall be
at the close of business on the day on which the notice of the meeting is sent,
and the Partnership Record Date for any other determination of Partners (other
than a distribution pursuant to Section 5.1 hereof) shall be the effective date
of such Partner action, distribution or other event. When a determination of the
Partners entitled to vote at any meeting of the Partners has been made as
provided in this section, such determination shall apply to any adjournment
thereof.

 

66

--------------------------------------------------------------------------------

E. Each meeting of the Partners shall be conducted by the General Partner or
such other Person as the General Partner may appoint pursuant to such rules for
the conduct of the meeting as the General Partner or such other Person deems
appropriate. Without limitation, meetings of the Partners may be conducted in
the same manner as meetings of the Company’s stockholders and may be held at the
same time, and as part of, meetings of the Company’s stockholders.

ARTICLE 15 - GENERAL PROVISIONS

Section 15.1 Addresses and Notice

Any notice, demand, request or report required or permitted to be given or made
to a Partner or Assignee under this Agreement shall be in writing and shall be
deemed given or made when delivered in person or when sent by certified first
class United States mail, return receipt requested, nationally recognized
overnight delivery service, electronic mail or facsimile transmission (with
receipt confirmed) to the Partner or Assignee at the address set forth on
Exhibit A or such other address of which the Partner shall notify the General
Partner in writing. Notices to the General Partner and the Partnership shall be
delivered at or mailed to its principal office address set forth in Section 2.3.
The General Partner and the Partnership may specify a different address by
notifying the Limited Partners in writing of such different address.

Section 15.2 Titles and Captions

All article or section titles or captions in this Agreement are for convenience
only. They shall not be deemed part of this Agreement and in no way define,
limit, extend or describe the scope or intent of any provisions hereof. Except
as specifically provided otherwise, references to “Articles” and “Sections” are
to Articles and Sections of this Agreement.

Section 15.3 Pronouns and Plurals

Whenever the context may require, any pronoun used in this Agreement shall
include the corresponding masculine, feminine or neuter forms, and the singular
form of nouns, pronouns and verbs shall include the plural and vice versa.

Section 15.4 Further Action

The parties shall execute and deliver all documents, provide all information and
take or refrain from taking action as may be necessary or appropriate to achieve
the purposes of this Agreement.

Section 15.5 Binding Effect

Subject to the terms set forth herein, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their heirs, executors,
administrators, successors, legal representatives and permitted assigns.

 

67

--------------------------------------------------------------------------------

Section 15.6 No Third-Party Rights Created Hereby

Other than as expressly set forth herein with respect to Indemnitees, the
provisions of this Agreement are solely for the purpose of defining the
interests of the Holders, inter se; and no other person, firm or entity (i.e., a
party who is not a signatory hereto or a permitted successor to such signatory
hereto) shall have any right, power, title or interest by way of subrogation or
otherwise, in and to the rights, powers, title and provisions of this Agreement.
No creditor or other third party having dealings with the Partnership shall have
the right to enforce the right or obligation of any Partner to make Capital
Contributions or loans to the Partnership or to pursue any other right or remedy
hereunder or at law or in equity. None of the rights or obligations of the
Partners herein set forth to make Capital Contributions or loans to the
Partnership shall be deemed an asset of the Partnership for any purpose by any
creditor or other third party, nor may any such rights or obligations be sold,
transferred or assigned by the Partnership or pledged or encumbered by the
Partnership to secure any debt or other obligation of the Partnership or any of
the Partners.

Section 15.7 Waiver

A. No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of any
such breach or any other covenant, duty, agreement or condition.

B. The restrictions, conditions and other limitations on the rights and benefits
of the Limited Partners contained in this Agreement, and the duties, covenants
and other requirements of performance or notice by the Limited Partners, are for
the benefit of the Partnership and, except for an obligation to pay money to the
Partnership, may be waived or relinquished by the General Partner, in its sole
and absolute discretion, on behalf of the Partnership in one or more instances
from time to time and at any time; provided, however, that any such waiver or
relinquishment may not be made without the Consent of each Limited Partner
materially and adversely affected thereby if it would have the effect of
(i) creating liability for any other Limited Partner, (ii) causing the
Partnership to cease to qualify as a limited partnership, (iii) reducing the
amount of cash otherwise distributable to the Limited Partners (other than any
such reduction that affects all of the Limited Partners holding the same class
or series of Partnership Units on a uniform or pro rata basis, if approved by a
majority of the Limited Partners holding such class or series of Partnership
Units) or (iv) violating the Securities Act, the Exchange Act or any state “blue
sky” or other securities laws; and provided, further, that any waiver relating
to compliance with the Ownership Limit or other restrictions in the Charter
shall be made and shall be effective only as provided in the Charter.

Section 15.8 Counterparts

This Agreement may be executed in counterparts, all of which together shall
constitute one agreement binding on all of the parties hereto, notwithstanding
that all such parties are not signatories to the original or the same
counterpart. Each party shall become bound by this Agreement immediately upon
affixing its signature hereto.

 

68

--------------------------------------------------------------------------------

Section 15.9 Applicable Law; Waiver of Jury Trial

A. This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Delaware, without regard to the principles
of conflicts of law thereof.

B. Each Partner hereby (i) submits to the non-exclusive jurisdiction of any
state or federal court sitting in the State of Delaware (collectively, the
“Delaware Courts”), with respect to any dispute arising out of this Agreement or
any transaction contemplated hereby to the extent such courts would have subject
matter jurisdiction with respect to such dispute, (ii) to the fullest extent
permitted by law, irrevocably waives, and agrees not to assert by way of motion,
defense, or otherwise, in any such action, any claim that it is not subject
personally to the jurisdiction of any of the Delaware Courts, that its property
is exempt or immune from attachment or execution, that the action is brought in
an inconvenient forum, or that the venue of the action is improper, (iii) to the
fullest extent permitted by law, agrees that notice or the service of process in
any action, suit or proceeding arising out of or relating to this Agreement or
the transactions contemplated hereby shall be properly served or delivered if
delivered to such Partner at such Partner’s last known address as set forth in
the Partnership’s books and records, and (iv) to the fullest extent permitted by
law, irrevocably waives any and all right to trial by jury in any legal
proceeding arising out of or related to this Agreement or the transactions
contemplated hereby.

Section 15.10 Invalidity of Provisions

If any provision of this Agreement shall to any extent be held void or
unenforceable (as to duration, scope, activity, subject or otherwise) by a court
of competent jurisdiction, such provision shall be deemed to be modified so as
to constitute a provision conforming as nearly as possible to the original
provision while still remaining valid and enforceable. In such event, the
remainder of this Agreement (or the application of such provision to persons or
circumstances other than those in respect of which it is deemed to be void or
unenforceable) shall not be affected thereby. Each other provision of this
Agreement, unless specifically conditioned upon the voided aspect of such
provision, shall remain valid and enforceable to the fullest extent permitted by
law; any other provisions of this Agreement that are specifically conditioned on
the voided aspect of such invalid provision shall also be deemed to be modified
so as to constitute a provision conforming as nearly as possible to the original
provision while still remaining valid and enforceable to the fullest extent
permitted by law.

Section 15.11 No Rights as Stockholders

Nothing contained in this Agreement shall be construed as conferring upon the
Holders of Partnership Units any rights whatsoever as stockholders of the
Company, including without limitation, any right to receive dividends or other
distributions made to stockholders or to vote or consent or to receive notice as
stockholders in respect of any meeting of stockholders for the election of
directors of the Company or any other matter.

 

69

--------------------------------------------------------------------------------

Section 15.12 Entire Agreement

This Agreement and the exhibits attached hereto contain the entire understanding
and agreement among the Partners with respect to the subject matter hereof and
supersedes any other prior written or oral understandings or agreements among
them with respect thereto. Notwithstanding anything to the contrary in this
Agreement, the Partners hereby acknowledge and agree that the General Partner,
on its own behalf and/or on behalf of the Partnership, without the approval of
any Limited Partner, may enter into side letters or similar written agreements
and tax protection agreements with Limited Partners that are not Affiliates of
the General Partner, executed contemporaneously with the admission of such
Limited Partner to the Partnership, which have the effect of establishing rights
under, or altering or supplementing, the terms hereof, as negotiated with such
Limited Partner and which the General Partner in its sole and absolute
discretion deems necessary, desirable or appropriate. The parties hereto agree
that any terms, conditions or provisions contained in such side letters or
similar written agreements and tax protection agreements with a Limited Partner
shall govern with respect to such Limited Partner notwithstanding the provisions
of this Agreement.

[Signature Page Follows]

 

70

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties hereto have executed this Amended and Restated
Agreement of Limited Partnership as of the date first written above.

 

GENERAL PARTNER: EASTERLY GOVERNMENT PROPERTIES, INC. By:  

/s/ William C. Trimble, III

  Name: William C. Trimble, III   Title:   Chief Executive Officer and President

Signature Page to Amended and Restated Agreement of

Limited Partnership of Easterly Government Properties LP

--------------------------------------------------------------------------------

LIMITED PARTNERS: WESTERN DEVCON, INC. By:  

/s/ Michael P. Ibe

  Name: Michael P. Ibe   Title:   President WEST OP HOLDINGS, LLC By:  

/s/ Michael P. Ibe

  Name: Michael P. Ibe   Title:   Member

Signature Page to Amended and Restated Agreement of

Limited Partnership of Easterly Government Properties LP

--------------------------------------------------------------------------------

LIMITED PARTNERS: EASTERLY CAPITAL, LLC By:  

/s/ Darrell W. Crate

  Name: Darrell W. Crate   Title:   President

Signature Page to Amended and Restated Agreement of

Limited Partnership of Easterly Government Properties LP

--------------------------------------------------------------------------------

LIMITED PARTNERS:

EASTERLY GOVERNMENT

PROPERTIES, INC.

By:  

/s/ William C. Trimble, III

  Name: William C. Trimble, III  

Title: Chief Executive Officer

          and President

U.S. GOVERNMENT PROPERTIES

INCOME & GROWTH FUND, L.P.

By: Federal Properties GP, LLC,

its general partner

By:  

/s/ William C. Trimble, III

 

Name: William C. Trimble, III

Title: President

USGP II INVESTOR, LP

By: USGP II GP, LLC,

its general partner

By:  

/s/ William C. Trimble, III

 

Name: William C. Trimble, III

Title: President

INITIAL LIMITED PARTNER: By:  

/s/ Darrell W. Crate

  Darrell W. Crate

Signature Page to Amended and Restated Agreement of

Limited Partnership of Easterly Government Properties LP

--------------------------------------------------------------------------------

FORM OF LIMITED PARTNER SIGNATURE PAGE

The undersigned, desiring to become one of the named Limited Partners of
Easterly Government Properties LP, hereby becomes a party to the Amended and
Restated Agreement of Limited Partnership of Easterly Government Properties LP
by and among Easterly Government Properties, Inc. and such Limited Partners,
dated as of February 11, 2015 as amended. The undersigned agrees that this
signature page may be attached to any counterpart of said Amended and Restated
Agreement of Limited Partnership.

 

Signature Line for Limited Partner:

  [Name]     By:  

 

    Name:    

Title:

Date:

Address of Limited Partner:

   

 

   

 

--------------------------------------------------------------------------------

Exhibit A

 

Partner    Partnership Units    Percentage Interest GENERAL PARTNER      
Easterly Government Properties, Inc.    N/A    100% General Partner Interest

LIMITED PARTNERS

      Easterly Government Properties, Inc.    22,368,379 Common Units    Western
Devcon, Inc.    70,813 Common Units    West OP Holdings    5,689,006 Common
Units    U.S. Government Properties Income & Growth Fund, LP    7,694,358 Common
Units    USGP II Investor, LP    941,356 Common Units    Easterly Capital, LLC
   1,135,406 Common Units   

TOTALS:

     

 

A-1

--------------------------------------------------------------------------------

Exhibit B

Notice of Redemption

The undersigned Limited Partner or Assignee hereby irrevocably (i) tenders
                    Common Units in Easterly Government Properties LP for
redemption in accordance with the terms of the Amended and Restated Agreement of
Limited Partnership of Easterly Government Properties LP (the “Agreement”) and
the Redemption Right referred to therein; (ii) surrenders such Common Units and
all right, title and interest therein; and (iii) directs that the Cash Amount or
REIT Shares Amount (as determined by the General Partner) deliverable upon
exercise of the Redemption Right be delivered to the address specified below,
and if REIT Shares are to be delivered, such REIT Shares be registered or placed
in the name(s) and at the address(es) specified below. The undersigned hereby,
represents, warrants, and certifies that the undersigned (a) has marketable and
unencumbered title to such Common Units, free and clear of the rights or
interests of any other Person; (b) has the full right, power, and authority to
redeem and surrender such Common Units as provided herein; and (c) has obtained
the consent or approval of all Persons, if any, having the right to consent or
approve such redemption and surrender.

All capitalized terms used herein and not otherwise defined shall have the same
meaning ascribed to them respectively in the Agreement.

Dated:                             

Name of Limited Partner or Assignee:                                       
                                         

                                                                    
                         Please Print

 

 

(Signature of Limited Partner or Assignee)

 

(Street Address)

 

(City)         (State)         (Zip Code) Medallion Guarantee:

 

If REIT Shares are to be issued, issue to:

Name:                             

Please insert social security or identifying number:                            

 

B-1

--------------------------------------------------------------------------------

Exhibit C

LTIP Units

The following are certain additional terms of the LTIP Units:

 

1.1 Designation. A class of Partnership Units in the Partnership designated as
the “LTIP Units” is hereby established. LTIP Units are intended to qualify as
“profits interests” in the Partnership. The number of LTIP Units that may be
issued shall not be limited.

 

1.2 Vesting. LTIP Units may, in the sole discretion of the General Partner, be
issued subject to vesting, forfeiture and additional restrictions on transfer
pursuant to the terms of an award, vesting or other similar agreement between
the Partnership or the General Partner (on behalf of the Partnership) and a
holder of LTIP Units (a “Vesting Agreement”). The terms of any Vesting Agreement
may be modified from time to time in accordance with their terms. LTIP Units
that have vested and are no longer subject to forfeiture under the terms of a
Vesting Agreement are referred to as “Vested LTIP Units”; all other LTIP Units
are referred to as “Unvested LTIP Units.” Subject to the terms of any Vesting
Agreement, a holder of LTIP Units shall be entitled to transfer his or her LTIP
Units to the same extent, and subject to the same restrictions as holders of
Common Units are entitled to transfer their Common Units pursuant to Article 11
of the Agreement.

 

1.3 Forfeiture or Transfer of Unvested LTIP Units. Unless otherwise specified in
the relevant Vesting Agreement, upon the occurrence of any event specified in a
Vesting Agreement as resulting in either the forfeiture of any LTIP Units, or
the repurchase by the Partnership or the General Partner of LTIP Units at a
specified purchase price, then, upon the occurrence of the circumstances
resulting in such forfeiture or repurchase by the Partnership or the General
Partner, the relevant LTIP Units shall immediately, and without any further
action, be treated as cancelled and no longer outstanding for any purpose, or as
transferred to the Partnership or General Partner, as applicable. Unless
otherwise specified in the Vesting Agreement, no consideration or other payment
shall be due with respect to any LTIP Units that have been forfeited, other than
any distributions declared with a record date prior to the effective date of the
forfeiture.

 

1.4 Legend. Any certificate evidencing an LTIP Unit shall bear an appropriate
legend indicating that additional terms, conditions and restrictions on
transfer, including without limitation, any Vesting Agreement, apply to the LTIP
Unit.

 

1.5 Distributions. The distributions to which holders of LTIP Units will be
entitled with respect to their LTIP Units will be determined in accordance with
the terms of the Agreement, including, without limitation, Article 5 and
Article 13 thereof.

 

1.6 Allocations. The allocations to which holders of LTIP Units will be entitled
with respect to their LTIP Units will be determined in accordance with the terms
of the Agreement, including, without limitation, Article 6 thereof.

 

C-1

--------------------------------------------------------------------------------

1.7 Adjustments. If an LTIP Unit Adjustment Event (as defined below) occurs,
then the General Partner shall make a corresponding adjustment to the LTIP Units
to maintain the same correspondence between Common Units and LTIP Units as
existed prior to such LTIP Unit Adjustment Event. The following shall be “LTIP
Unit Adjustment Events”: (A) the Partnership makes a distribution on all
outstanding Common Units in Partnership Units, (B) the Partnership subdivides
the outstanding Common Units into a greater number of units or combines the
outstanding Common Units into a smaller number of units, or (C) the Partnership
issues any Partnership Units in exchange for its outstanding Common Units by way
of a reclassification or recapitalization of its Common Units. If more than one
LTIP Unit Adjustment Event occurs, the adjustment to the LTIP Units need be made
only once using a single formula that takes into account each and every LTIP
Unit Adjustment Event as if all LTIP Unit Adjustment Events occurred
simultaneously. If the Partnership takes an action affecting the Common Units
other than actions specifically described above as LTIP Unit Adjustment Events
and in the opinion of the General Partner such action would require an
adjustment to the LTIP Units to maintain the correspondence between Common Unit
and LTIP Units as existed prior to such action, the General Partner shall make
such adjustment to the LTIP Units, to the extent permitted by law and by the
terms of any plan pursuant to which the LTIP Units have been issued, in such
manner and at such time as the General Partner, in its sole discretion, may
determine to be appropriate under the circumstances to maintain such
correspondence. If an adjustment is made to the LTIP Units as herein provided,
the Partnership shall promptly file in the books and records of the Partnership
an officer’s certificate setting forth such adjustment and a brief statement of
the facts requiring such adjustment, which certificate shall be conclusive
evidence of the correctness of such adjustment absent manifest error. Promptly
after filing of such certificate, the Partnership shall mail a notice to each
holder of LTIP Units setting forth the adjustment to his or her LTIP Units and
the effective date of such adjustment.

 

1.8 Right to Convert LTIP Units into Common Units.

 

  (a) Conversion Right. A holder of LTIP Units shall have the right (the “LTIP
Unit Conversion Right”), at his or her option, at any time to convert all or a
portion of his or her Vested LTIP Units, the Book-Up Target of which is zero,
into Common Units. Holders of LTIP Units shall not have the right to convert
Unvested LTIP Units into Common Units until they become Vested LTIP Units;
provided, however, that when a holder of LTIP Units is notified of the expected
occurrence of an event that will cause his or her Unvested LTIP Units to become
Vested LTIP Units, such Person may give the Partnership an LTIP Unit Conversion
Notice conditioned upon and effective as of the time of vesting, and such LTIP
Unit Conversion Notice, unless subsequently revoked by the holder of the LTIP
Units, shall be accepted by the Partnership subject to such condition; and
provided further that a holder may not exercise the LTIP Unit Conversion Right
for less than one thousand (1,000) Vested LTIP Units or, if such holder holds
less than one thousand Vested LTIP Units, all of the Vested LTIP Units held by
such holder. The General Partner shall have the right at any time to cause a
conversion of Vested LTIP Units into Common Units provided that the Book-Up
Target of each such LTIP Unit is zero. In all cases, the conversion of any LTIP
Units the Book-Up Target of which is zero into Common Units shall be subject to
the conditions and procedures set forth in this Section 1.8.

 

C-2

--------------------------------------------------------------------------------

  (b) Number of Units Convertible. A holder of Vested LTIP Units may convert
such Vested LTIP Units, the Book-Up Target of which is zero, into an equal
number of fully paid and non-assessable Common Units, giving effect to all
adjustments (if any) made pursuant to Section 1.7.

 

  (c) Notice. In order to exercise his or her Conversion Right, a holder of LTIP
Units shall deliver a notice (a “LTIP Unit Conversion Notice”) in the form
attached as Exhibit E to the Agreement not less than 10 nor more than 60 days,
or such shorter period as the General Partner shall agree in its sole and
absolute discretion, prior to a date (the “LTIP Unit Conversion Date”) specified
in such LTIP Unit Conversion Notice. Each holder of LTIP Units covenants and
agrees with the Partnership that all Vested LTIP Units to be converted pursuant
to this Section 1.8 shall be free and clear of all liens. Notwithstanding
anything herein to the contrary (but subject to Article 8 of the Agreement), a
holder of LTIP Units may deliver a Notice of Redemption pursuant to Section 8.5
of the Agreement relating to those Common Units that will be issued to such
holder upon conversion of such LTIP Units into Common Units in advance of the
LTIP Unit Conversion Date; provided, however, that the redemption of such Common
Units by the Partnership shall in no event take place until the LTIP Unit
Conversion Date. For clarity, it is noted that the objective of this paragraph
is to put a holder of LTIP Units in a position where, if he or she so wishes,
the Common Units into which his or her Vested LTIP Units will be converted can
be redeemed by the Partnership simultaneously with such conversion, with the
further consequence that, if the Company elects to assume the Partnership’s
redemption obligation with respect to such Common Units under Article 8 of the
Agreement by delivering to such holder REIT Shares rather than cash, then such
holder can have such REIT Shares issued to him or her simultaneously with the
conversion of his or her Vested LTIP Units into Common Units. The General
Partner shall cooperate with a holder of LTIP Units to coordinate the timing of
the different events described in the foregoing sentence.

 

1.9 Forced Conversion. The Partnership, at any time at the election of the
General Partner, may cause any number of Vested LTIP Units, the Book-Up Target
of which is zero, held by a holder of LTIP Units to be converted (a “LTIP Unit
Forced Conversion”) into an equal number of Common Units, giving effect to all
adjustments (if any) made pursuant to Section 1.7. In order to exercise its
right to cause an LTIP Unit Forced Conversion, the Partnership shall deliver a
notice (a “LTIP Unit Forced Conversion Notice”) in the form attached as
Exhibit E to this Agreement to the applicable holder not less than 10 nor more
than 60 days prior to the LTIP Unit Conversion Date specified in such LTIP Unit
Forced Conversion Notice. A Forced LTIP Unit Conversion Notice shall be provided
in the manner provided in Section 15.1 of this Agreement.

 

1.10

Conversion Procedures. Subject to any redemption of Common Units to be received
upon the conversion of Vested LTIP Units, a conversion of Vested LTIP Units for
which the holder thereof has given an LTIP Unit Conversion Notice or the
Partnership has given a Forced LTIP Unit Conversion Notice shall occur
automatically after the close of business on the applicable LTIP Unit Conversion
Date without any action on the part of

 

C-3

--------------------------------------------------------------------------------

  such holder of LTIP Units, as of which time such holder of LTIP Units shall be
credited on the books and records of the Partnership with the issuance as of the
opening of business on the next day of the number of Common Units issuable upon
such conversion. After the conversion of LTIP Units as aforesaid, the
Partnership shall deliver to such holder of LTIP Units, upon his or her written
request, a certificate of the General Partner certifying the number of Common
Units and remaining LTIP Units, if any, held by such Person immediately after
such conversion.

 

1.11 Treatment of Capital Account. For purposes of making future allocations
under Section 6.1I of this Agreement, the portion of the Economic Capital
Account Balance of the applicable holder of LTIP Units that is treated as
attributable to his or her LTIP Units shall be reduced, as of the date of
conversion, by the product of the number of LTIP Units converted into Common
Units and the Common Unit Economic Balance with respect to such converted LTIP
Unit, provided that for the avoidance of doubt, the amount of such reduction
shall instead be attributable to the Economic Capital Account Balance that is
attributable to the Common Units into which such LTIP Units were converted.

 

1.12 Mandatory Conversion in Connection with a Transaction.

 

  (a) If the Partnership or the General Partner shall be a party to any
transaction (including without limitation a merger, consolidation, unit
exchange, self-tender offer for all or substantially all Common Units or other
business combination or reorganization, or sale of all or substantially all of
the Partnership’s assets, but excluding any transaction which constitutes an
LTIP Unit Adjustment Event), in each case as a result of which Common Units
shall be exchanged for or converted into the right, or the holders of Common
Units shall otherwise be entitled, to receive cash, securities or other property
or any combination thereof (each of the foregoing being referred to herein as a
“Transaction”), then the General Partner shall, immediately prior to the
Transaction, exercise its right to cause a LTIP Unit Forced Conversion with
respect to the maximum number of LTIP Units then eligible for conversion, taking
into account any allocations that occur in connection with the Transaction or
that would occur in connection with the Transaction if the assets of the
Partnership were sold at the Transaction price or, if applicable, at a value
determined by the General Partner in good faith using the value attributed to
the Partnership Units in the context of the Transaction (in which case the LTIP
Unit Conversion Date shall be the effective date of the Transaction and the
conversion shall occur immediately prior to the effectiveness of the
Transaction).

 

  (b)

In anticipation of such LTIP Unit Forced Conversion and the consummation of the
Transaction, the Partnership shall cause each holder of LTIP Units to be
afforded the right to receive in connection with such Transaction in
consideration for the Common Units into which his or her LTIP Units will be
converted the same kind and amount of cash, securities and other property (or
any combination thereof) receivable upon the consummation of such Transaction by
a holder of the same number of Common Units, assuming such holder of Common
Units is not a

 

C-4

--------------------------------------------------------------------------------

  Person with which the Partnership consolidated or into which the Partnership
merged or which merged into the Partnership or to which such sale or transfer
was made, as the case may be (a “Constituent Person”), or an Affiliate of a
Constituent Person. In the event that holders of Common Units have the
opportunity to elect the form or type of consideration to be received upon
consummation of the Transaction, prior to such Transaction the General Partner
shall give prompt written notice to each holder of LTIP Units of such election,
and shall afford such holders the right to elect, by written notice to the
General Partner, the form or type of consideration to be received upon
conversion of each LTIP Unit held by such holder into Common Units in connection
with such Transaction. If a holder of LTIP Units fails to make such an election,
such holder (and any of its transferees) shall receive upon conversion of each
LTIP Unit held by him or her (or by any of his or her transferees) the same kind
and amount of consideration that a holder of a Common Unit would receive if such
holder of Common Units failed to make such an election.

 

  (c) Subject to the rights of the Partnership and the General Partner under any
Vesting Agreement and the terms of any plan under which LTIP Units are issued,
the Partnership shall use commercially reasonable efforts to cause the terms of
any Transaction to be consistent with the provisions of this Section 1.12 and to
enter into an agreement with the successor or purchasing entity, as the case may
be, for the benefit of any holders of LTIP Units whose LTIP Units will not be
converted into Common Units in connection with the Transaction that will
(i) contain provisions enabling the holders of LTIP Units that remain
outstanding after such Transaction to convert their LTIP Units into securities
as comparable as reasonably possible under the circumstances to the Common Units
and (ii) preserve as far as reasonably possible under the circumstances the
distribution, special allocation, conversion, and other rights set forth in the
Agreement for the benefit of the holders of LTIP Units.

 

1.13 Redemption at the Option of the Partnership. LTIP Units will not be
redeemable at the option of the Partnership; provided, however, that the
foregoing shall not prohibit the Partnership from (i) repurchasing LTIP Units
from the holder thereof if and to the extent such holder agrees to sell such
LTIP Units or (ii) from exercising its LTIP Unit Forced Conversion right.

 

1.14 Voting Rights. Holders of LTIP Units shall have the right to vote on all
matters submitted to a vote of the holders of Common Units other than matters
voted on solely by the holders of Founder Common Units; holders of LTIP Units
and Common Units shall vote together as a single class, together with any other
class or series of Partnership Units upon which like voting rights have been
conferred. In any matter in which the LTIP Units are entitled to vote, including
an action by written consent, each LTIP Unit shall be entitled to vote a
Percentage Interest equal on a per unit basis to the Percentage Interest
represented by each Common Unit.

 

C-5

--------------------------------------------------------------------------------

1.15 Special Approval Rights. Except as provided in Section 1.14 above, holders
of LTIP Units shall only (a) have those voting rights required from time to time
by non-waivable provisions of applicable law, if any, and (b) have the
additional voting rights that are expressly set forth in this Section 1.15. The
General Partner and/or the Partnership shall not, without the affirmative vote
of Limited Partners holding more than 50% of the LTIP Units then held by Limited
Partners affected thereby, given in person or by proxy, either in writing or at
a meeting (voting separately as a class), take any action that would materially
and adversely alter, change, modify or amend, whether by merger, consolidation
or otherwise, the rights, powers or privileges of such LTIP Units, subject to
the following exceptions, no separate consent of the holders of LTIP Units will
be required (i) if and to the extent that any such alteration, change,
modification or amendment would equally, ratably and proportionately alter,
change, modify or amend the rights, powers or privileges of the Common Units (in
which event the holders of LTIP Units shall only have such voting rights, if
any, as expressly provided for in the Agreement, in accordance with Section 1.14
above); (ii) with respect to an Extraordinary Transaction or any merger,
consolidation or other business combination or reorganization involving the
Partnership as a party, so long as one of the following occurs (w) the Mandatory
Conversion pursuant to Section 1.12 above applies or the LTIP Units are
converted into Common Units immediately prior to the effectiveness of the
transaction, (x) the holders of LTIP Units either will receive, or will have the
right to elect to receive, for each LTIP Unit an amount of cash, securities, or
other property equal to the greatest amount of cash, securities or other
property paid to a holder of one Common Unit in consideration of one Common Unit
pursuant to the terms of such transaction, (y) the LTIP Units remain outstanding
with the terms thereof materially unchanged (and with the terms of the Common
Units or such other securities into which the LTIP Units are convertible being
materially the same with respect to rights to allocations, distributions,
redemption, conversion and voting, provided that such terms of the Common Units
shall, without limitation, be deemed materially the same if the applicable
transaction did not require the approval of the Common Unitholders pursuant to
Section 11.2.B(2)), or (z) if the Partnership is not the surviving entity in
such transaction, the LTIP Units are exchanged for a security of the surviving
entity with terms that are materially the same with respect to rights to
allocations, distributions, redemption, conversion and voting as the LTIP Units
and without any income, gain or loss expected to be recognized by the holder
upon the exchange for U.S. federal income tax purposes (and with the terms of
the Common Units or such other securities into which the security substituted
for the LTIP Units are convertible being materially the same with respect to
rights to allocations, distributions, redemption, conversion and voting provided
that such terms of the Common Units or such other security shall, without
limitation, be deemed materially the same if the applicable transaction did not
require the approval of the Common Unitholders pursuant to Section 11.2.B(2));
(iii) in connection with any creation or issuance of Partnership Units (whether
ranking junior to, on a parity with or senior to the LTIP Units in any respect),
which either (x) does not require the Consent of the holders of Common Units or
(y) does require such Consent and is authorized by a vote of the holders of
Common Units and LTIP Units voting together as a single class pursuant to
Section 1.14 above, together with any other class or series of Partnership Units
upon which like voting rights have been conferred; and (iv) with respect to any
waiver by the Partnership of restrictions or limitations applicable to any
outstanding LTIP Units or any other Partnership Units with respect to any holder
or holders thereof.

 

C-6

--------------------------------------------------------------------------------

1.16 The foregoing voting provisions will not apply if, as of or prior to the
time when the action with respect to which such vote would otherwise be required
to be taken or be effective, all outstanding LTIP Units shall have been
converted and/or redeemed, or provision is made for such redemption and/or
conversion to occur as of or prior to such time.

[End of text]

 

C-7

--------------------------------------------------------------------------------

Exhibit D

Notice of Election by Partner to Convert LTIP Units into Common Units

The undersigned holder of LTIP Units hereby irrevocably elects to convert the
number of Vested LTIP Units in Easterly Government Properties LP (the
“Partnership”) set forth below into Common Units in accordance with the terms of
the Amended and Restated Agreement of Limited Partnership of the Partnership, as
amended. The undersigned hereby represents, warrants, and certifies that the
undersigned: (a) has title to such LTIP Units, free and clear of the rights or
interests of any other Person other than the Partnership; (b) has the full
right, power, and authority to cause the conversion of such LTIP Units as
provided herein; and (c) has obtained the consent or approval of all persons or
entities, if any, having the right to consent or approve such conversion.

Name of Holder:                                                               
                                         
                                         
                                         
                                        

(Please Print: Exact Name as Registered with Partnership)

Number of LTIP Units to be Converted:                                         

Conversion Date:                                          
                                       

 

 

 

(Signature of Holder: Sign Exact Name as Registered with Partnership)

   

 

(Street Address)

   

 

    (City)   (State)   (Zip Code)    
Medallion Guarantee:                                
                                                                               
 

 

D-1

--------------------------------------------------------------------------------

Exhibit E

Notice of Election by Partnership to Force Conversion

of LTIP Units into Common Units

Easterly Government Properties LP (the “Partnership”) hereby irrevocably elects
to cause the number of LTIP Units held by the holder of LTIP Units set forth
below to be converted into Common Units in accordance with the terms of the
Amended and Restated Agreement of Limited Partnership of the Partnership, as
amended.

Name of Holder:                                                               
                                         
                                         
                                         
                                        

(Please Print: Exact Name as Registered with Partnership)

Number of LTIP Units to be Converted:                                         

Conversion Date: