Exhibit 10

 

AGREEMENT OF LIMITED PARTNERSHIP
OF
FIRST UNION REIT, L.P.

 

THIS AGREEMENT OF LIMITED PARTNERSHIP OF First Union REIT, L.P., dated as of
January 1, 2005, is entered into by and among First Union Real Estate Equity and
Mortgage Investments, an Ohio business trust, and FT-TRS Loan Corp., a Delaware
corporation, together with any other Persons who become Partners in the
Partnership as provided herein.

 

WHEREAS, First Union Real Estate Equity and Mortgage Investments desires to form
the Partnership to hold all of its existing assets and liabilities other than
those listed on Schedule 1 hereto (the “Excluded Assets”);

 

NOW, THEREFORE, in consideration of the mutual covenants set forth herein, and
for other good and valuable consideration, the parties hereby agreed as follows:

 

ARTICLE I

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 from time to time, and any successor to such statute.

 

“Additional Limited Partner” means a Person admitted to the Partnership as a
Limited Partner pursuant to Sections 4.2 and 12.2 hereof and who is shown as
such on the books and records of the Partnership.

 

“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.

 

“Adjusted Capital Account Deficit” means, with respect to any Partner, the
deficit balance, if any, in such Partner’s Adjusted Capital Account as of the
end of the relevant Partnership taxable year.

 

“Adjusted Property” means any property, the Carrying Value of which has been
adjusted pursuant to Exhibit B hereof.

 

“Advisor” means FUR Advisors, LLC.

 

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“Advisory Agreement” means the Advisory Agreement among First Union and the
Advisor dated the date of this Agreement.

 

“Affiliate” means, with respect to any Person, (i) any Person directly or
indirectly controlling, controlled by or under common control with such Person;
(ii) any Person owning or controlling ten percent (10%) or more of the
outstanding voting interests of such Person; (iii) any Person of which such
Person owns or controls ten percent (10%) or more of the voting interests; or
(iv) any officer, director, general partner or trustee of such Person or of any
Person referred to in clauses (i), (ii), and (iii) above.  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.

 

“Agreed Value” means (i) in the case of any Contributed Property as of the time
of its contribution to the Partnership, the 704(c) Value of such property,
reduced by any liabilities either assumed by the Partnership upon such
contribution or to which such property is subject when contributed, (ii) in the
case of any Adjusted Property, its fair market value (as determined under
Exhibit B hereto) on the date of adjustment and (iii) in the case of any
property distributed to a Partner by the Partnership, the Partnership’s Carrying
Value of such property at the time such property is distributed, reduced by any
indebtedness either assumed by such Partner upon such distribution or to which
such property is subject at the time of distribution as determined under Section
752 of the Code and the Regulations thereunder.

 

“Agreement” means this Agreement of Limited Partnership, as it may be amended,
supplemented or restated from time to time.

 

“Assignee” means a Person to whom one or more OP 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-Tax Disparities” means, with respect to any item of Contributed Property
or Adjusted Property, as of the date of any determination, the difference
between the Carrying Value of such Contributed Property or Adjusted Property and
the adjusted basis thereof for federal income tax purposes as of such date.  A
Partner’s share of the Partnership’s Book-Tax Disparities in all of its
Contributed Property and Adjusted Property will be reflected by the difference
between such Partner’s Capital Account balance as maintained pursuant to Exhibit
B and the hypothetical balance of such Partner’s Capital Account computed as if
it had been maintained strictly in accordance with federal income tax accounting
principles.

 

“Business Day” means any day except a Saturday, Sunday or other day on which
commercial banks in Boston, Massachusetts are authorized or required by law to
close.

 

“Capital Account” means the Capital Account maintained for a Partner pursuant to
Exhibit B hereof.

 

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“Capital Contribution” means, with respect to any Partner, any cash, cash
equivalents or the Agreed Value of Contributed Property which such Partner
contributes to the Partnership pursuant to Section 4.1, 4.2, or 4.3 hereof.

 

“Carrying Value” means (i) with respect to a Contributed Property, the 704(c)
Value of such property, and with respect to an Adjusted Property, the Agreed
Value of such property, reduced in either case (but not below zero) by all
Depreciation with respect to such Contributed Property or Adjusted Property, as
the case may be, charged to the Partners’ Capital Accounts following the
contribution of or adjustment with respect to such property, and (ii) with
respect to any other Partnership property, the adjusted basis of such property
for federal income tax purposes, all as of the time of determination.  The
Carrying Value of any property shall be adjusted from time to time in accordance
with Exhibit B hereof, and to reflect changes, additions or other adjustments to
the Carrying Value for dispositions and acquisitions of Partnership properties,
as deemed appropriate by the General Partner.

 

“Cash Amount” means an amount of cash per OP Unit equal to the Value of the
Shares Amount on the Specific Redemption Date.

 

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

 

“Code” means the Internal Revenue Code of 1986, as amended and in effect from
time to time, 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 future law.

 

“Common Shares” means the common shares of beneficial interest, par value $1.00
per share, of the General Partner.

 

“Common Unit” means, with respect to any class of Partnership Interest, a
fractional, undivided share of such class of Partnership Interest issued
pursuant to Sections 4.1 and 4.3 hereof.

 

“Consent” means the consent or approval of a proposed action by a Partner given
in accordance with Section 14.2 hereof.

 

“Contributed Property” means each property or other asset, in such form as may
be permitted by the Act (but excluding cash), contributed to the Partnership. 
Once the Carrying Value of a Contributed Property is adjusted pursuant to
Exhibit B hereof, such property shall no longer constitute a Contributed
Property for purposes of Exhibit B hereof, but shall be deemed an Adjusted
Property for such purposes.

 

“Conversion Factor” means, for any class, 1.0, provided that in the event that
the General Partner (i) declares or pays a dividend on its outstanding Shares of
any class in Shares or makes a distribution to all holders of its outstanding
Shares of any class in Shares; (ii) subdivides its outstanding Shares of any
class; or (iii) combines its outstanding Shares of any class into a smaller
number of Shares, the Conversion Factor for the corresponding class of OP Units
shall

 

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be adjusted by multiplying the Conversion Factor by a fraction, the numerator of
which shall be the number of Shares issued and outstanding on the record date
for such dividend, distribution, subdivision or combination (assuming for such
purpose that such dividend, distribution, subdivision or combination has
occurred as of such time), and the denominator of which shall be the actual
number of Shares (determined without the above assumption) of that class issued
and outstanding on the record date for such dividend, distribution, subdivision
or combination. Any adjustment to the Conversion Factor shall become effective
immediately after the effective date of such event retroactive to the record
date, if any, for such event (provided, however, if a Notice of Redemption is
given prior to such a record date and the Specified Redemption Date is after
such a record date, then the adjustment to the Conversion Factor shall, with
respect to such redeeming Partner, be retroactive to the date of such Notice of
Redemption). It is intended that adjustments to the Conversion Factor are to be
made in order to avoid unintended dilution or anti-dilution as a result of
transactions in which Shares are issued, redeemed or exchanged without a
corresponding issuance, redemption or exchange of OP Units.  If, prior to a
Specified Redemption Date, Rights (other than Rights issued pursuant to an
employee benefit plan or other compensation arrangement) were issued and have
expired, and such Rights were issued with an exercise price that, together with
the purchase price for such Rights, was below fair market value in relation to
the security or other property to be acquired upon the exercise of such Rights,
and such Rights were issued to all holders of outstanding Shares of a class or
the General Partner cannot in good faith represent that the issuance of such
Rights benefited the Limited Partners, then the Conversion Factor applicable
upon a Notice of Redemption of OP Units of the corresponding class shall be
equitably adjusted in a manner consistent with antidilution provisions in
warrants and other instruments in the case of such a below market issuance or
exercise price.  A similar equitable adjustment to protect the value of OP Units
shall be made in all events if any Rights issued under a “Shareholder Rights
Plan” became exercisable and expired prior to a Specified Redemption Date.

 

“Declaration of Trust” means the Declaration of Trust or other similar
organizational document governing the General Partner, as amended, supplemented
or restated from time to time.

 

“Depreciation” means, for each taxable year, an amount equal to the federal
income tax depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such year, except that if the Carrying
Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such year or other period, Depreciation shall be an
amount which bears the same ratio to such beginning Carrying Value as the
federal income tax depreciation, amortization, or other cost recovery deduction
for such year bears to such beginning adjusted tax basis; provided, however,
that if the federal income tax depreciation, amortization, or other cost
recovery deduction for such year is zero, Depreciation shall be determined with
reference to such beginning Carrying Value using any reasonable method selected
by the General Partner.

 

“Disregarded Entity” means a limited liability company or other unincorporated
entity which is, directly or indirectly, wholly owned by the General Partner or
the Partnership and whose existence is disregarded for federal income tax
purposes under Treasury Regulation Section 1.7701-3.

 

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“Extraordinary Transaction” shall mean, with respect to the General Partner, the
occurrence of one or more of the following events: (i) a merger (including a
triangular merger), consolidation or other combination with or into another
Person; (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; or (iii) any reclassification, recapitalization or change of its
outstanding equity interests (other than a change in par value, or from par
value to no par value, or as a result of a split, dividend or similar
subdivision).

 

“General Partner” means First Union Real Estate Equity and Mortgage Investments,
an Ohio business trust, in its capacity as the general partner of the
Partnership, or its successors as 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
expressed as a number of OP Units.

 

“Governing Documents” means the Declaration of Trust, the By-laws of the General
Partner and such other documents effecting the General Partner’s ability to take
(or not take) certain actions.

 

“Immediate Family” means, with respect to any natural Person, such natural
Person’s estate or heirs or current spouse, parents, parents-in-law, children,
siblings and grandchildren (in each case whether by adoption or not) and any
trust or estate, all of the beneficiaries of which consist of such Person or
such Person’s spouse, parents, parents-in-law, children, siblings or
grandchildren.

 

“Incapacity” or “Incapacitated” means, (i) as to any individual Partner, death,
total physical disability or entry by a court of competent jurisdiction
adjudicating him incompetent to manage his or her Person or estate; (ii) as to
any corporation which is a Partner, the filing of a certificate of dissolution,
or its equivalent, for the corporation 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 limited
liability company; (iv) as to any estate which is a Partner, 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

 

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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) which has been
stayed is not vacated within ninety (90) days after the expiration of any such
stay.

 

“Indemnitee” means (i) any Person made a party to a proceeding by reason of (A)
his or its status as the General Partner, or as a director, officer, shareholder
or member of the Partnership or the General Partner, or (B) his or its
liabilities, pursuant to a loan guarantee 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 assets subject to); and (ii) such other Persons
(including Affiliates of the General Partner or the Partnership) 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.

 

“IRS” means the Internal Revenue Service, which administers the internal revenue
laws of the United States.

 

“Limited Partner” means any Person (including the General Partner) named as a
Limited Partner in Exhibit A attached hereto, as such Exhibit may be amended
from time to time, or any Substituted Limited Partner or Additional Limited
Partner, in such Person’s capacity as a Limited Partner of the Partnership.

 

“Limited Partnership 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 expressed as a number of OP
Units.

 

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

 

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

 

“Net Income” means, for any taxable period, the excess, if any, of the
Partnership’s items of income and gain for such taxable period over the
Partnership’s items of loss and deduction for such taxable period.  The items
included in the calculation of Net Income shall be determined in accordance with
federal income tax accounting principles, subject to the specific adjustments
provided for in Exhibit B.

 

“Net Loss” means, for any taxable period, the excess, if any, of the
Partnership’s items of loss and deduction for such taxable period over the
Partnership’s items of income and gain for such taxable period.  The items
included in the calculation of Net Loss shall be determined in accordance with
federal income tax accounting principles, subject to the specific adjustments
provided for in Exhibit B.

 

“New Securities” has the meaning set forth in Section 4.3.

 

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“Nonrecourse Built-in Gain” means, with respect to any Contributed Properties or
Adjusted Properties that are subject to a mortgage or negative pledge securing a
Nonrecourse Liability, the amount of any taxable gain that would be allocated to
the Partners pursuant to Section 2.B of Exhibit C if such properties were
disposed of in a taxable transaction in full satisfaction of such liabilities
and for no other consideration.

 

“Nonrecourse Deductions” has the meaning set forth in Regulations Section
1.704-2(b)(1), and the amount of Nonrecourse Deductions for a Partnership
taxable year shall be determined in accordance with the rules of Regulations
Section 1.704-2(c).

 

“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 D to this Agreement.

 

“OP Unit” or “Unit” means a fractional, undivided share of the Partnership
Interests of all Partners issued pursuant to Sections 4.1, 4.2 and 4.3 and
includes the Common Units and the Preferred Units.  The number of OP Units of
each class outstanding and the Percentage Interest in the Partnership
represented by such Units are set forth in Exhibit A attached hereto, as such
Exhibit may be amended from time to time.  The ownership of OP Units shall be
evidenced by such form of certificate for units as the General Partner adopts
from time to time unless the General Partner determines that the OP Units shall
be uncertificated securities.

 

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

 

“Partner Minimum Gain” means an amount, with respect to each Partner Nonrecourse
Debt, equal to the Partnership Minimum Gain that would result if such Partner
Nonrecourse Debt were treated as a Nonrecourse Liability, determined in
accordance with Regulations Section 1.704-2(i)(3).

 

“Partner Nonrecourse Debt” has the meaning set forth in Regulations Section
1.704-2(b)(4).

 

“Partner Nonrecourse Deductions” has the meaning set forth in Regulations
Section 1.704-2(i)(2), and the amount of Partner Nonrecourse Deductions with
respect to a Partner Nonrecourse Debt for a Partnership taxable year shall be
determined in accordance with the rules of Regulations Section 1.704-2(i)(2).

 

“Partnership” means the limited partnership formed under the Act and pursuant to
this Agreement, as it may be amended and/or restated, and any successor thereto.

 

“Partnership Interest” means an ownership interest in the Partnership
representing a Capital Contribution 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.  A Partnership Interest may be expressed as a number of OP
Units.

 

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“Partnership Minimum Gain” has the meaning set forth in Regulations Section
1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as any net
increase or decrease in a Partnership Minimum Gain, for a Partnership taxable
year shall be determined in accordance with the rules of Regulations Section
1.704-2(d).

 

“Partnership Record Date” means the record date established by the General
Partner for a distribution pursuant to Section 5.1 hereof, which record date
shall be the same as the record date established by the General Partner for a
distribution to its shareholders of some or all of its portion of such
distribution.

 

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

 

“Percentage Interest” means, as to a Partner holding a Partnership Interest of
any class issued hereunder, its interest in such class, determined by dividing
the OP Units of such class owned by such Partner by the total number of OP Units
of such class then outstanding as specified in Exhibit A attached hereto, as
such exhibit may be amended and restated from time to time.

 

“Person” means an individual or a corporation, partnership, trust,
unincorporated organization, association or other entity.

 

“Preferred Shares” means the preferred shares of beneficial interest of the
General Partner.

 

“Preferred Unit” means, with respect to any preferred class of Partnership
Interest, a fractional, undivided share of such class of Partnership Interest
issued pursuant to Section 4.1 and 4.3 hereof.

 

“Preferred Unit Redemption Amount” means, with respect to any Preferred Unit,
the amount payable by the General Partner on account of the redemption of one
Preferred Share pursuant to the applicable provisions of the Declaration of
Trust.

 

“Publicly Traded” means listed or admitted to trading on the New York Stock
Exchange, the American Stock Exchange or another national securities exchange or
designated for quotation on the NASDAQ National Market, or any successor to any
of the foregoing.

 

“Qualified REIT Subsidiary” means an entity which is wholly owned by a real
estate investment trust and whose existence is disregarded for federal income
tax purposes under Section 856(i) of the Code.

 

“Recapture Income” means any gain recognized by the Partnership upon the
disposition of any property or asset of the Partnership, which gain is
characterized as ordinary income because it represents the recapture of
deductions previously taken with respect to such property or asset.

 

“Redeeming Partner” has the meaning set forth in Section 8.7 hereof.

 

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“Redemption Right” has the meaning set forth in Section 8.7 hereof.

 

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

 

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

 

“REIT Expenses” shall mean (i) costs and expenses relating to the continuity of
existence of the General Partner and any Person in which the General Partner
owns an equity interest, to the extent not prohibited in this Agreement, other
than the Partnership (which Persons shall, for purposes of this definition, be
included within the definition of “General Partner”), including taxes, fees and
assessments associated therewith (other than federal, state or local income
taxes imposed upon the General Partner as a result of the General Partner’s
failure to distribute to its shareholders an amount equal to its taxable
income), any and all costs, expenses or fees payable to any trustee or director
of the General Partner or such Persons, (ii) costs and expenses relating to any
offer or registration of securities by the General Partner (the proceeds of
which will be contributed or advanced to the Partnership) and all statements,
reports, fees and expenses incidental thereto, including underwriting discounts
and selling commissions applicable to any such offer of securities, (iii) costs
and expenses associated with the preparation and filing of any periodic reports
by the General Partner under federal, state or local laws or regulations,
including filings with the Securities and Exchange Commission, (iv) costs and
expenses associated with compliance by the General Partner with laws, rules and
regulations promulgated by any regulatory body, including the Securities and
Exchange Commission, and (v) all other operating or administrative costs of the
General Partner incurred in the ordinary course of its business; provided,
however, that any of the foregoing expenses that are determined by the General
Partner to be expenses relating to the ownership and operation of, or for the
benefit of, the Partnership shall be treated, subject to Section 7.4 hereof, as
reimbursable expenses under Section 7.4 hereof rather than as “REIT Expenses”.

 

“Residual Gain” or “Residual Loss” means any item of gain or loss, as the case
may be, of the Partnership recognized for federal income tax purposes resulting
from a sale, exchange or other disposition of Contributed Property or Adjusted
Property, to the extent such item of gain or loss is not allocated pursuant to
Section 2.B.1(a) or 2.B.2(a) of Exhibit C to eliminate Book-Tax Disparities.

 

“Rights” shall have the meaning set forth in the definition of “Shares Amount.”

 

“Sale or Disposition” means any of the following Partnership transactions:
sales, exchanges, or other dispositions of real or personal property,
condemnations or any recovery or damage awards, and insurance proceeds (other
than business or rental interruption insurance proceeds).

 

“704(c) Value” of any Contributed Property means the fair market value of such
property or other consideration at the time of contribution, as determined by
the General Partner using such reasonable method of valuation as it may adopt. 
Subject to Exhibit B hereof, the

 

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General Partner shall, in its sole and absolute discretion, use such method as
it deems reasonable and appropriate to allocate the aggregate of the 704(c)
Values of Contributed Properties in a single or integrated transaction among the
separate properties on a basis proportional to their respective fair market
values.

 

“Share” means a share of beneficial interest (or other comparable equity
interest) of the General Partner.  Shares may be issued in one or more classes
or series in accordance with the terms of the Declaration of Trust.  In the
event that there is more than one class or series of Shares, the term “Shares”
shall, as the context requires, be deemed to refer to the class or series of
Shares that correspond to the class or series of Partnership Interests for which
the reference to Shares is made.

 

“Shares Amount” means a number of Shares of the applicable class equal to the
product of the number of Partnership Units of the corresponding class offered
for redemption by a Redeeming Partner times the applicable Conversion Factor;
provided, that in the event the General Partner issues to all holders of Shares
of that class rights, options, warrants or convertible or exchangeable
securities entitling such holders to subscribe for or purchase Shares or any
other securities or property (collectively, the “Rights”), then the Shares
Amount shall also include such rights that a holder of that number of Shares of
that class would be entitled to receive; and provided, further, that the Shares
Amount shall be adjusted pursuant to Section 7.5 hereof in the event that the
General Partner acquires material assets other than on behalf of the
Partnership.

 

“Specified Redemption Date” means the sixty-first (61st) day after receipt by
the General Partner of a Notice of Redemption or, if such date is not a Business
Day, the first Business Day thereafter; provided that no Specified Redemption
Date shall occur before that date that is 12 months after the issuance of the
applicable OP Units, and provided further that if the General Partner combines
its outstanding Shares of a class into a smaller number of Shares, no Specified
Redemption Date for the corresponding class of OP Units shall occur after the
record date of such combination of Shares and prior to the effective date of
such combination.

 

“Stock Option Plan” means any share or stock incentive plan or similar
compensation arrangement (including, without limitation, any arrangement whereby
the Partnership or the General Partner delivers Units or shares of capital stock
of the General Partner into a “rabbi trust”) of the General Partner, the
Partnership or any Affiliate of the Partnership or General Partner, as the
context may require.

 

“Subsidiary” means, with respect to any Person, any corporation, partnership 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.

 

“Taxable REIT Subsidiary” means an entity in which the REIT owns stock and which
elects to be treated as such under Section 856(l) of the Code.

 

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“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.

 

“Transfer” has the meaning set forth in Section 11.1.

 

“Unrealized Gain” attributable to any item of Partnership property means, as of
any date of determination, the excess, if any, of (i) the fair market value of
such property (as determined under Exhibit B hereof) as of such date over (ii)
the Carrying Value of such property (prior to any adjustment to be made pursuant
to Exhibit B hereof) as of such date.

 

“Unrealized Loss” attributable to any item of Partnership property means, as of
any date of determination, the excess, if any, of (i) the Carrying Value of such
property (prior to any adjustment to be made pursuant to Exhibit B hereof) as of
such date over (ii) the fair market value of such property (as determined under
Exhibit B hereof) as of such date.

 

“Value” means, with respect to a Share, the average of the daily market price
for the ten (10) consecutive trading days immediately preceding the Specified
Redemption Date for such Shares.  The market price for each such trading day
shall be: (i) if the applicable class of Shares are listed or admitted to
trading on any securities exchange or the Nasdaq National Market System, the
closing price on such day, 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 applicable
class of Shares are not listed or admitted to trading on any securities exchange
or the Nasdaq National Market System, 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; or (iii) if the applicable class of Shares are not listed or
admitted to trading on any securities exchange or the Nasdaq National Market
System 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; provided that if there are no bid and asked prices
reported during the ten (10) days prior to the date in question, the Value of
the applicable class of Shares shall be determined by the General Partner acting
in good faith on the basis of such quotations and other information as it
considers, in its reasonable judgment, appropriate.  In the event the Shares
Amount of the applicable class includes Rights, then the Value of such Rights
shall be determined by the General Partner acting in good faith on the basis of
such quotations and other information as it considers, in its reasonable
judgment, appropriate, provided that the Value of any rights issued pursuant to
a “Shareholder Rights Plan” shall be deemed to have no value unless a
“triggering event” shall have occurred (i.e., if the Rights issued pursuant
thereto are no longer “attached” to the applicable class of Shares and are able
to trade independently).

 

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ARTICLE II
ORGANIZATIONAL MATTERS

 

Section 2.1             Organization

 

The Partnership is a limited partnership organized pursuant to the provisions of
the Act.  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.

 

Section 2.2             Name

 

The name of the Partnership is First Union REIT, L.P.  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 its Affiliates. 
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.

 

Section 2.3             Registered Office and Agent; Principal Office

 

The address of the registered office of the Partnership in the State of Delaware
shall be located at Corporation Service Company, 2711 Centerville Road, Suite
400, Wilmington, County of New Castle, Delaware 19808, and the registered agent
for service of process on the Partnership in the State of Delaware at such
registered office shall be Corporation Service Company.  The principal office of
the Partnership shall be 7 Bulfinch Place, Suite 500, P.O. Box 9507, Boston,
Massachusetts 02114 or such other place as the General Partner may from time to
time designate by notice to the Limited Partners.  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             Term

 

The term of the Partnership commenced on August 5, 2004, the date on which the
Certificate was filed in the office of the Secretary of State of the State of
Delaware in accordance with the Act, and shall continue in perpetuity, unless it
is dissolved pursuant to the provisions of Article XIII hereof or as otherwise
provided by law.

 

Section 2.5             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:

 

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i.              execute, swear to, 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 the 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 deems appropriate or necessary to reflect any amendment, change,
modification or restatement of this Agreement in accordance with its terms; (c)
all conveyances and other instruments or documents that the General Partner or
the Liquidator deems appropriate or necessary to reflect the dissolution and
liquidation of the Partnership pursuant to the terms of this Agreement,
including, without limitation, a certificate of cancellation; (d) all
instruments relating to the admission, withdrawal, removal or substitution of
any Partner pursuant to, or other events described in, Article XI, XII or XIII
hereof or relating to the Capital Contribution of any Partner; and (e) all
certificates, documents and other instruments relating to the determination of
the rights, preferences and privileges of Partnership Interests; and

 

ii.             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 XIV
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 and the
transfer of all or any portion of such Limited Partner’s or Assignee’s OP 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 the Liquidator, within fifteen (15) days after receipt of the General
Partner’s or Liquidator’s request therefor, such further designation, powers of
attorney and other instruments as the General Partner or the Liquidator, as the
case may be, deems necessary to effectuate this Agreement and the purposes of
the Partnership.

 

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ARTICLE III

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 General Partner at
all times to be classified as a REIT, unless the General Partner ceases to
qualify as a REIT for 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. 
The General Partner also shall be empowered to do any and all acts and things
necessary or prudent to ensure that the Partnership will not be classified as a
“publicly traded partnership” for purposes of Section 7704 of the Code,
including but not limited to imposing restrictions on transfers and restrictions
on redemptions.

 

Section 3.2             Powers

 

The Partnership shall have full power and authority 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, 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 other real estate-related assets, and lease, sell, transfer and dispose of
real property and other real estate-related assets; provided, however, that the
Partnership shall not take, or refrain from taking, any action which, in the
judgment of the General Partner, in its sole and absolute discretion, (i) could
adversely affect the ability of the General Partner to continue to qualify as a
REIT, (ii) could subject the General Partner 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
General Partner or its securities, unless such action (or inaction) shall have
been specifically consented to by the General Partner in writing.

 

Section 3.3             Partnership Only for Purposes Specified

 

The Partnership shall be a partnership only for the purposes specified in
Section 3.1 above, and this Agreement shall not be deemed to create a
partnership among the Partners with respect to any activities whatsoever other
than the activities within the purposes of the Partnership as specified in
Section 3.1 above.

 

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ARTICLE IV
CAPITAL CONTRIBUTIONS AND ISSUANCES
OF PARTNERSHIP INTERESTS

 

Section 4.1             Capital Accounts and Capital Contributions of the
Partners

 

A.            Capital Contributions; Capital Accounts.  Capital Accounts shall
be maintained for each Partner pursuant to Exhibit B hereof.  At the time of
their respective execution of this Agreement, the Partners shall make Capital
Contributions as set forth in Exhibit A hereof.  The Partners shall own Units of
the class and in the amounts set forth in Exhibit A hereof, which shall be
adjusted from time to time by the General Partner as provided for herein to the
extent necessary to accurately reflect exchanges, Capital Contributions, the
issuance of additional Units or similar events having an effect on a Partner’s
number of Units.

 

B.            [INTENTIONALLY OMITTED]

 

C.            Capital Contributions By Merger.  To the extent the Partnership
acquires any property by the merger of any other Person into the Partnership,
Persons who receive Partnership Interests in exchange for their interests in the
Person merging into the Partnership shall become Partners and shall be deemed to
have made Capital Contributions as provided in the applicable merger agreement
and as set forth in Exhibit A hereto.

 

D.            No Obligation to Make Additional Capital Contributions. Except as
provided in Sections 4.2 and 10.4 hereof or elsewhere in this Agreement, the
Partners shall have no obligation to make any additional Capital Contributions
or provide any additional funding to the Partnership (whether in the form of
loans, repayments of loans or otherwise).  No Partner shall have any obligation
to restore any deficit that may exist in its Capital Account, either upon a
liquidation of the Partnership or otherwise.  Each Partner shall own the number
of OP Units set forth for such Partner in Exhibit A and shall have a Percentage
Interest in the Partnership as set forth in Exhibit A, which Percentage Interest
shall be adjusted in Exhibit A from time to time by the General Partner to the
extent necessary to reflect accurately redemptions, additional Capital
Contributions, the issuance of additional OP Units (pursuant to any merger or
otherwise), or similar events having an effect on any Partner’s Percentage
Interest.

 

Section 4.2             Issuances of Partnership Interests

 

The General Partner is hereby authorized to cause the Partnership from time to
time to issue to the Partners (including the General Partner and its Affiliates)
or other Persons (including, without limitation, in connection with the
contribution of property to the Partnership) additional OP Units or other
Partnership Interests in one or more classes, or one or more series of any of
such classes, with such designations, preferences and relative, participating,
optional or other special rights, powers and duties, including rights, powers
and duties senior to the Limited Partner Interests issued on the Effective Date,
all as shall be determined by the General Partner in its sole and absolute
discretion subject to Delaware law, including, without limitation, (i) the
allocations of items of Partnership income, gain, loss, deduction and credit to
each such class or series of Partnership Interests; (ii) the right of each such
class or series of Partnership Interests to share in Partnership distributions;
and (iii) the rights of each such class or series of Partnership

 

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Interests upon dissolution and liquidation of the Partnership; provided that no
such additional OP Units or other Partnership Interests shall be issued to the
General Partner, unless either (a)(1) the additional Partnership Interests are
issued in connection with the grant, award or issuance of Shares or other equity
interests by the General Partner, which Shares or other equity interests have
designations, preferences and other rights such that the economic interests
attributable to such Shares or other equity interests are substantially similar
to the designations, preferences and other rights of the additional Partnership
Interests issued to the General Partner in accordance with this Section 4.2 and
(2) the General Partner shall make a Capital Contribution to the Partnership in
an amount equal to the proceeds raised in connection with such issuance, or (b)
the additional Partnership Interests are issued to all Partners in proportion to
their respective Percentage Interests.  In addition, the General Partner may
acquire OP Units from other Partners pursuant to this Agreement.  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 5.4, Section 6.2 and Section
8.7.E. hereof, as it deems necessary to reflect the issuance of such additional
Partnership Interests and the special rights, powers and duties associated
therewith.  Unless specifically set forth otherwise by the General Partner, any
Partnership Interest issued after the Effective Date shall have the same rights,
powers and duties as the Partnership Interests issued on the Effective Date.

 

Section 4.3             Contributions of Proceeds of Issuances of Shares.

 

From and after the date hereof, the General Partner shall not issue any
additional Shares of any class (other than Shares issued pursuant to Section
8.7), or rights, options, warrants or convertible or exchangeable securities
containing the right to subscribe for or purchase Shares (collectively “New
Securities”) other than to all holders of Shares of that class unless (i) the
General Partner shall cause the Partnership to issue to the General Partner,
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 are substantially similar to
those of the New Securities; and (ii) the General Partner contributes to the
Partnership the proceeds from the issuance of such New Securities and from the
exercise of rights contained in such New Securities, provided that if the
proceeds received by the General Partner are less than the gross proceeds of
such issuance as a result of any underwriter’s discount or other expenses paid
or incurred in connection with such issuance, then the General Partner shall be
deemed to have made 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 General Partner (which
discount and expense shall be treated as an expense for the benefit of the
Partnership for purposes of Section 7.4).  Without limiting the foregoing,
General Partner is expressly authorized to issue 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 General Partner
corresponding Partnership Interests, so long as (x) the General Partner
concludes in good faith that such issuance is in the interests of the General
Partner and the Partnership (for example, and not by way of limitation, the
issuance of Shares and corresponding OP Units pursuant to an employee stock
purchase plan providing for employee grants or purchases of Shares or employee
stock options that have an exercise price that is less than the fair market
value of the Shares, either at the time of issuance or at the time of exercise);
and (y) the General Partner contributes all proceeds, if any, from such issuance
and exercise to

 

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the Partnership.  In the case of employee acquisitions of New Securities at a
discount from fair market value or for no value in connection with a grant of
New Securities, the amount of such discount representing compensation to the
employee, as determined by the General Partner, shall be treated as an expense
of the issuance of such New Securities.

 

Section 4.4             No Preemptive Rights

 

Except to the extent expressly granted by the General Partner (on behalf of the
Partnership) pursuant to another agreement, no Person shall have any preemptive,
preferential or other similar right with respect to (i) additional Capital
Contributions or loans to the Partnership or (ii) issuance or sale of any OP
Units or other Partnership Interests.

 

Section 4.5             Other Contribution Provisions

 

In the event that any Partner is admitted to the Partnership and is given a
Capital Account 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 for the fair market value
of such services, and the Partner had contributed such cash to the capital of
the Partnership.

 

Section 4.6             No Interest on Capital

 

No Partner shall be entitled to interest on its Capital Contributions or its
Capital Account.

 

Section 4.7             Conversion of Convertible Preferred Units.

 

A.            If at any time holders of the Preferred Shares shall exercise
their rights, if any, under the Declaration of Trust to convert any Preferred
Shares to Common Shares, in whole or in part (including any fractions thereof),
then, simultaneously with such conversion, an equal number of Preferred Units
shall be automatically converted into the number of Common Units equal to the
product of (x) the number of Common Shares into which the Preferred Shares are
converted, multiplied by (y) a fraction the numerator of which is one and the
denominator of which is the Common Unit Conversion Factor in effect on such
date.

 

B.            If at any time Preferred Shares are to be redeemed pursuant to the
Declaration of Trust or purchased by the General Partner, the Partnership shall
redeem an equal number of Preferred Units by payment of the Preferred Unit
Redemption Amount therefor or purchase price paid by the General Partner
immediately prior to or concurrently with such redemption or purchase.

 

C.            The General Partner shall amend Exhibit A as applicable to reflect
each conversion of Preferred Units, and the issuance of additional Common Units
in connection therewith and each redemption of Preferred Units.

 

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ARTICLE V
DISTRIBUTIONS

 

Section 5.1             Requirement and Characterization of Distributions

 

A.            General.  The General Partner shall have the exclusive right and
authority to declare and cause the Partnership to make distributions as and when
the General Partner deems appropriate or desirable in its sole discretion. 
Notwithstanding anything to the contrary contained herein, in no event may a
Partner receive a distribution with respect to a Partnership Unit for a quarter
or shorter period if such Partner is entitled to receive a distribution for such
quarter or shorter period with respect to a Share for which such Partnership
Unit has been redeemed or exchanged.  Unless otherwise expressly provided for
herein or in an agreement at the time a new class of Partnership Interests is
created in accordance with Article IV hereof, no Partnership Interest shall be
entitled to a distribution in preference to any other Partnership Interest.  For
so long as the General Partner elects to qualify as a REIT, the General Partner
shall make such reasonable efforts, as determined by it in its sole and absolute
discretion and consistent with the qualification of the General Partner as a
REIT, to make distributions to the Partners in amounts such that the General
Partner will receive amounts sufficient to enable it to pay shareholder
dividends that will (1) satisfy the requirements for qualification as a REIT
under the Code and the Regulations (the “REIT Requirements”) and (2) avoid any
federal income or excise tax liability for the General Partner.

 

B.            Method.  When, as and if declared by the General Partner, the
Partnership will make distributions to the General Partner in any amount
necessary to enable the General Partner to pay REIT Expenses, and thereafter:

 

(i)            first, to holders of Preferred Units in an amount equal to
preferential distributions accumulated and unpaid on such Preferred Units in
accordance with their respective terms;

 

(ii)           second, to holders of Common Units, pro rata in accordance with
their respective Common Units;

 

Each holder of Partnership Interests that are entitled to any preference in
distribution shall be entitled to a distribution in accordance with the rights
of any such class of Partnership Interests (and, within such class, pro rata in
proportion to the respective Percentage Interests on such Partnership Record
Date).  Notwithstanding anything to the contrary contained herein, in no event
shall any partner receive a distribution with respect to any Common Unit with
respect to any quarter until such time as the Partnership has distributed to the
holders of the Preferred Units all distributions payable with respect to such
Preferred Units through the last day of such quarter, in accordance with the
instruments designating such Preferred Units.

 

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Section 5.2             Amounts Withheld

 

All amounts withheld pursuant to the Code or any provisions of any state or
local tax law and Section 10.4 hereof with respect to any allocation, payment or
distribution to the General Partner, the Limited Partners or Assignees shall be
treated as amounts distributed to the General Partner, Limited Partners or
Assignees pursuant to Section 5.1 above for all purposes under this Agreement.

 

Section 5.3             Distributions Upon Liquidation

 

Proceeds from a Terminating Capital Transaction and any other cash received or
reductions in reserves made after commencement of the liquidation of the
Partnership shall be distributed to the Partners in accordance with Section
13.2.

 

Section 5.4             Revisions to Reflect Issuance of Additional Partnership
Interests

 

In the event that the Partnership issues additional Partnership Interests to the
General Partner or any Additional Limited Partner pursuant to Article IV hereof,
the General Partner shall make such revisions to this Article V as it deems
necessary to reflect the issuance of such additional Partnership Interests.

 

ARTICLE VI
ALLOCATIONS

 

Section 6.1             Allocations For Capital Account Purposes

 

For purposes of maintaining the Capital Accounts and in determining the rights
of the Partners among themselves, the Partnership’s items of income, gain, loss
and deduction (computed in accordance with Exhibit B hereto) shall be allocated
among the Partners in each taxable year (or portion thereof) as provided herein
below.

 

A.            Net Income.  After giving effect to the special allocations set
forth in Section 1 of Exhibit C hereto, Net Income shall be allocated (i) first,
to the General Partner to the extent that Net Losses previously allocated to the
General Partner pursuant to the last sentence of Section 6.1.B below exceed Net
Income previously allocated to the General Partner pursuant to this clause (i)
of Section 6.1.A; (ii) second, to holders of Preferred Units until their
aggregate allocations of Net Income under this clause (ii) equal the sum of all
distributions made or being made for the applicable period pursuant to clause
(i) of Section 5.1.B (provided that the allocation provided for in this clause
(ii) shall not apply to the extent that such distributions are treated as or
determined to be guaranteed payments under Section 707(c) of the Code); and
(iii) third, to holders of Common Units in proportion to their respective
Percentage Interests.

 

B.            Net Losses.  After giving effect to the special allocations set
forth in Section 1 of Exhibit C hereto, Net Losses shall be allocated (i) first,
to holders of Common Units in proportion to their respective Percentage
Interests until the aggregate allocations of Net Losses pursuant to this clause
(i) equal the aggregate allocations of Net Income to them pursuant to clause
(iii) of Section 6.1.A; and (ii) thereafter, to holders of Common Units in
proportion to

 

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their Percentage Interests; provided that, Net Losses shall not be allocated to
any Limited Partner pursuant to this Section 6.1.B to the extent that such
allocation would cause such Limited Partner to have an Adjusted Capital Account
Deficit (or increase any existing Adjusted Capital Account Deficit) at the end
of such taxable year (or portion thereof).  All Net Losses in excess of the
limitations set forth in this Section 6.1.B shall be allocated to the General
Partner.

 

C.            Allocation of Nonrecourse Debt.  For purposes of Regulations
Section 1.752-3(a), the Partners agree that Nonrecourse Liabilities of the
Partnership in excess of the sum of (i) the amount of Partnership Minimum Gain
and (ii) the total amount of Nonrecourse Built-in Gain shall be allocated among
the holders of Common Units in accordance with their respective Percentage
Interests.

 

D.            Recapture Income.  Any gain allocated to the Partners upon the
sale or other taxable disposition of any Partnership asset shall, to the extent
possible after taking into account other required allocations of gain pursuant
to Exhibit C hereto, be characterized as Recapture Income in the same
proportions and to the same extent as such Partners have been allocated any
deductions directly or indirectly giving rise to the treatment of such gains as
Recapture Income.

 

Section 6.2             Revisions to Allocations to Reflect Issuance of
Additional Partnership Interests

 

In the event that the Partnership issues additional Partnership Interests to the
General Partner or any Additional Limited Partner pursuant to Article IV hereof,
the General Partner shall make such revisions to this Article VI as it deems
necessary to reflect the terms of the issuance of such additional Partnership
Interests.

 

ARTICLE VII
MANAGEMENT AND OPERATIONS OF BUSINESS

 

Section 7.1             Management

 

A.            Powers of General Partner.  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 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.  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 shall have full
power and authority to do all things deemed necessary or desirable by it on such
terms and conditions as the General Partner in its sole discretion deems
appropriate, to conduct the business of the Partnership, to exercise all powers
set forth in Section 3.2 hereof and to effectuate the purposes set forth in
Section 3.1 hereof, including, without limitation:

 

i.              the making of any expenditures, the lending or borrowing of
money, including, without limitation, making prepayments on loans and borrowing

 

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money to permit the Partnership to make distributions to its Partners in such
amounts as will permit the General Partner (as long as the General Partner
qualifies as a REIT) to avoid the payment of any federal income tax (including,
for this purpose, any excise tax pursuant to Section 4981 of the Code) and to
make distributions to its shareholders sufficient to permit the General Partner
to maintain REIT status, 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 mortgage, deed of trust or other
lien or encumbrance on the Partnership’s assets) and the incurring of any
obligations it deems necessary or desirable for the conduct of the activities of
the Partnership;

 

ii.             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 Securities Exchange Act of 1934, as
amended, and the listing of any debt securities of the Partnership on any
exchange;

 

iii.            the acquisition, disposition, sale, 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 or other combination
of the Partnership with or into another entity, on such terms as the General
Partner deems proper in its sole and absolute discretion;

 

iv.            the use of the assets of the Partnership (including, without
limitation, cash on hand) for any purpose consistent with the terms of this
Agreement, including, without limitation, the financing of the conduct of the
operations of the General Partner, the Partnership or any of the Partnership’s
Subsidiaries, the lending of funds to other Persons (including, without
limitation, the General Partner and/or the Subsidiaries of the Partnership) and
the repayment of obligations of the Partnership and its Subsidiaries and any
other Person in which the Partnership has an equity investment and the making of
capital contributions to its Subsidiaries;

 

v.             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 or any other Person in
which the Partnership has made a direct or indirect equity investment;

 

vi.            the negotiation, execution, and performance of any contracts,
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 (including the Advisor) and the payment
of their expenses and compensation out of the Partnership’s assets;

 

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vii.           the distribution of Partnership cash or other Partnership assets
in accordance with this Agreement;

 

viii.          the holding, managing, investing and reinvesting of cash and
other assets of the Partnership and, in connection therewith, the opening,
maintaining and closing of bank and brokerage accounts and the drawing of checks
or other orders for the payment of moneys;

 

ix.            the collection and receipt of revenues and income of the
Partnership;

 

x.             the selection and dismissal of employees 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;

 

xi.            the maintenance of such insurance for the benefit of the
Partnership, the Partners and directors and officers thereof as it deems
necessary and appropriate;

 

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

 

xiii.          the control of any matters affecting the rights and obligations
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, the commencement or defense of suits, legal proceedings,
administrative proceedings, arbitrations or other forms of dispute resolution,
the representation 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;

 

xiv.          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;

 

xv.           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 assets or investment held by the Partnership;

 

xvi.          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

 

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Partnership or any other Person in which the Partnership has a direct or
indirect interest, individually or jointly with any such Subsidiary or other
Person;

 

xvii.         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 any interest pursuant to contractual or other arrangements with
such Person;

 

xviii.        the making, executing and delivering of any and all deeds, leases,
notes, deeds to secure debt, mortgages, deeds of trust, security agreements,
conveyances, contracts, guarantees, warranties, indemnities, waivers, releases
or other 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 under this Agreement;

 

xix.           the distribution of cash to acquire OP Units held by a Limited
Partner in connection with a Limited Partner’s exercise of its Redemption Right
under Section 8.7 hereof;

 

xx.            the amendment and restatement of Exhibit A hereto 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 of OP Units, the
admission of any Additional Limited Partner or any Substituted Limited Partner
or otherwise, which amendment and restatement, notwithstanding anything in this
Agreement to the contrary, shall not be deemed an amendment of this Agreement,
as long as the matter or event being reflected in Exhibit A hereto otherwise is
authorized by this Agreement;

 

xxi.           the approval and/or implementation of any merger (including a
triangular merger), consolidation or other combination between the Partnership
and another person that is not prohibited under this Agreement, whether with or
without Consent, the terms of Section 17-211(g) of the Act shall be applicable
such that the General Partner shall have the right to effect any amendment to
this Agreement or effect the adoption of a new partnership agreement for a
limited partnership if it is the surviving or resulting limited partnership of
the merger or consolidation (except as may be expressly prohibited under Section
14.1.C or Section 14.1.D); and

 

xxii.          the taking of any and all actions necessary or desirable in
furtherance of, in connection with or incidental to the foregoing.

 

B.            No Approval by Limited Partners.  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, the Act or any applicable law, rule or
regulation, to the full extent permitted under the Act or other applicable law. 
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

 

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Partners or any other Persons under this Agreement or of any duty stated or
implied by law or equity.

 

C.            Insurance.  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 of the Partnership, (ii)
liability insurance for the Indemnitees hereunder and (iii) such other insurance
as the General Partner, in its sole and absolute discretion, determines to be
necessary.

 

D.            Working Capital and Other Reserves.  At all times from and after
the date hereof, the General Partner may cause the Partnership to establish and
maintain working capital reserves in such amounts as the General Partner, in its
sole and absolute discretion, deems appropriate and reasonable (both in purpose
and amount) from time to time, including upon liquidation of the Partnership
pursuant to Section 13.2 hereof.

 

E.             No Obligations to Consider Tax Consequences of Limited Partners. 
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 of any action taken (or not taken) by it.  The General Partner and the
Partnership shall not have liability to a Limited Partner for monetary damages
or otherwise for losses sustained, liabilities incurred or benefits not derived
by such Limited Partner in connection with such decisions, provided that the
General Partner has acted in good faith and not beyond its authority under this
Agreement.

 

Section 7.2             Certificate of Limited Partnership

 

The Partnership has previously caused the Certificate to be filed with the
Secretary of State of Delaware.  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 and do all
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, the District of Columbia or other
jurisdiction in which the Partnership may elect to do business or own property. 
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, 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 8.6.A(iv) hereof, the General
Partner shall not be required, before or after filing, to deliver or mail a copy
of the Certificate or any amendment thereto to any Limited Partner.

 

Section 7.3             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 Partners, 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,

 

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including Affiliates of the General Partner.  The General Partner hereby
declares and warrants that any Partnership assets for which legal title is held
in the name of the General Partner or any nominee or Affiliate of the General
Partner shall be held by the General Partner for the use and benefit of the
Partnership in accordance with the provisions of this Agreement.  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.

 

Section 7.4             Reimbursement of the General Partner

 

A.            No Compensation.  Except as provided in this Section 7.4 and
elsewhere in this Agreement (including the provisions of Articles V and VI
hereof regarding distributions, payments and allocations to which it may be
entitled), the General Partner shall not be compensated for its services as
general partner of the Partnership.

 

B.            Responsibility for Partnership Expenses.  The Partnership shall be
responsible for and shall pay all expenses relating to the ownership of its
assets and its management, administration and operations.  The General Partner
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 expenses it
incurs relating to the ownership, management, administration and operation of,
or for the benefit of, the Partnership (including, without limitation, expenses
related to the ownership, management and administration of any Subsidiaries of
the General Partner or the Partnership or Affiliates of the Partnership).  The
General Partner shall determine in good faith the amount of expenses incurred by
it related to the ownership and operation of, or for the benefit of, the
Partnership.  Such reimbursements shall be in addition to any reimbursement to
the General Partner pursuant to Section 10.3.C hereof and as a result of
indemnification pursuant to Section 7.7 below.  All payments and reimbursements
hereunder shall be characterized for federal income tax purposes as expenses of
the Partnership incurred on its behalf, and not as expenses of the General
Partner.

 

C.            Reimbursement of Company Expenses.  The General Partner 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 expenses that the General
Partner incurs relating to the ownership and operation of, or for the benefit
of, the Partnership (including, without limitation, (i) expenses relating to the
ownership of interests in the Partnership, (ii) compensation of the General
Partner’s officers and employees including, without limitation, payments under
any Stock Option Plan that provides for stock units, or other phantom stock,
pursuant to which employees of the General Partner will receive payments based
upon dividends on or the value of Shares, (iii) director fees and expenses and
(iv) all costs and expenses of being a public company, including costs of
filings with the Securities and Exchange Commission, reports and other
distributions to its stockholders); provided that the amount of any such
reimbursement shall be reduced by any interest earned by the General Partner
with respect to bank accounts or other instruments or accounts held by it on
behalf of the Partnership.  The Partners acknowledge that all such expenses of
the General Partner 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 hereof.

 

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D.            Partnership Interest Issuance Expenses.  The General Partner shall
also be reimbursed for all expenses it incurs relating to any issuance of
additional Partnership Interests, debt of the Partnership or rights, options,
warrants or convertible or exchangeable securities pursuant to Article IV hereof
(including, without limitation, all costs, expenses, damages and other payments
resulting from or arising in connection with litigation related to any of the
foregoing), all of which expenses are considered by the Partners to constitute
expenses of, and for the benefit of, the Partnership.

 

E.             Tax Treatment of Certain Reimbursements.  If and to the extent
that any reimbursement made pursuant to this Section 7.4 is determined for
federal income tax purposes not to constitute a payment of expenses of the
Partnership, then such reimbursement shall be treated as a distribution pursuant
to Article V hereof.

 

Section 7.5             Outside Activities of the General Partner

 

Except as set forth in this Section 7.5, the General Partner shall not, directly
or indirectly, enter into or conduct any business other than in connection with
the ownership, acquisition and disposition of Partnership Interests as a General
Partner or Limited Partner and the management of the business of the Partnership
and such activities as are incidental to any of the foregoing.  The assets of
the General Partner shall be limited to Partnership Interests and permitted debt
obligations of the Partnership, so that Shares and OP Units are completely
fungible except as otherwise specifically provided herein; provided, that the
General Partner shall be permitted to hold (i) interests in entities, including
Qualified REIT Subsidiaries, that hold no material assets; (ii) interests in
Qualified REIT Subsidiaries (or other entities that are not taxed as
corporations for federal income tax purposes) that own only interests in the
Partnership and/or interests in other Qualified REIT Subsidiaries (or other
entities that are not taxed as corporations for federal income tax purposes)
that either hold no assets or hold only interests in the Partnership; (iii)
assets and/or interests in entities, including Qualified REIT Subsidiaries, that
hold assets, having an aggregate value not greater than five percent (5%) of the
total market value of the General Partner (determined by reference to the value
of all outstanding equity securities of the General Partner), provided that (X)
the General Partner will apply the net income from such assets (other than net
income derived as a result of a Qualified REIT Subsidiary’s ownership of an
interest in the Partnership) to offset REIT Expenses before utilizing the
distribution provisions of Section 5.1.B, (Y) the General Partner will
contribute all net income generated by such assets and/or interests (other than
net income derived as a result of a Qualified REIT Subsidiary’s ownership of an
interest in the Partnership) to the Partnership (after taking into account REIT
Expenses as described in clause (X) above), and (Z) the General Partner will use
commercially reasonable efforts to transfer such assets and interests (other
than interests in Qualified REIT Subsidiaries and the Partnership) to the
Partnership or an entity controlled by the Partnership as soon as such a
transfer can be made without causing the General Partner or the Partnership to
incur any material taxes or expenses in connection therewith; and (iv) such bank
accounts or similar instruments or account in its own name as it deems necessary
to carry out its responsibilities and purposes as contemplated under this
Agreement and its organizational documents; and, provided, further, that the
General Partner shall be permitted to acquire, directly or through a Qualified
REIT Subsidiary (or entities that are not taxed as corporations for federal
income tax purposes), up to a one percent (1%) interest in any partnership or
limited liability company at least ninety-nine percent (99%) of the equity of
which

 

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is owned directly or indirectly by the Partnership.  The General Partner and any
of its Affiliates may acquire OP Units and shall be entitled to exercise all
rights of a Limited Partner relating to such OP Units.

 

Section 7.6             Transactions with Affiliates

 

A.            Transactions with Certain Affiliates.  Subject to the Governing
Documents, the Partnership may enter into transactions with Affiliates of the
General Partner (including transactions providing for the purchase or sale of
property or other assets) provided that the terms of such transactions are
comparable to those that could be obtained from unaffiliated third parties.

 

B.            Benefit Plans.  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 funded by the
Partnership for the benefit of employees of the General Partner, the
Partnership, Subsidiaries 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 of the Partnership’s Subsidiaries.

 

C.            Conflict Avoidance. The General Partner is expressly authorized to
enter into, in the name and on behalf of the Partnership, a right of first
opportunity arrangement and other conflict avoidance agreements with various
Affiliates of the Partnership and the General Partner, on such terms as the
General Partner, in its sole and absolute discretion, believes are advisable.

 

D.            Transfers of Assets.  The Partnership may transfer assets to joint
ventures, other partnerships, 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.

 

Section 7.7             Indemnification

 

A.            General. To the fullest extent permitted by Delaware 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 expenses), judgments, fines,
settlements, and other amounts arising from any and all claims, demands,
actions, suits or proceedings, civil, criminal, administrative or investigative,
that relate to the operations of the Partnership or the General Partner 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 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.  Without limitation, the
foregoing indemnity shall extend to any liability of any Indemnitee, pursuant to
a 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

 

27

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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 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, creates
a rebuttable presumption that such Indemnitee acted in a manner that would
preclude indemnification under this Section 7.7.  Any indemnification pursuant
to this Section 7.7 shall be made only out of the assets of the Partnership, and
neither the General Partner 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.

 

B.            Advancement of Expenses.  Reasonable expenses expected to be
incurred by an Indemnitee shall be paid or reimbursed by the Partnership in
advance of the final disposition of any and all claims, demands, actions, suits
or proceedings, civil, criminal, administrative or investigative made or
threatened against an Indemnitee, in the case of any director or officer who is
an Indemnitee 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
Section 7.7.A has been met and (ii) a written undertaking by or on behalf of the
Indemnitee to repay the amount if it shall ultimately be determined that the
standard of conduct has not been met.

 

C.            No Limitation of Rights.  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.            Insurance.  The Partnership may 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.             Benefit Plan Fiduciary.  For purposes of this Section 7.7, (i)
the Partnership shall be deemed to have requested an Indemnitee to serve as
fiduciary of an employee benefit plan whenever the performance by it of its
duties to the Partnership also imposes duties on, or otherwise involves services
by, it to the plan or participants or beneficiaries of the plan, (ii) excise
taxes assessed on an Indemnitee with respect to an employee benefit plan
pursuant to applicable law shall constitute fines within the meaning of this
Section 7.7 and (iii) 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 that is not
opposed to the best interests of the Partnership

 

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F.             No Personal Liability for Limited Partner.  In no event may an
Indemnitee subject any of the Partners to liability by reason of the
indemnification provisions set forth in this Agreement.

 

G.            Interested Transactions.  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.            Benefit.  The provisions of this Section 7.7 are for the benefit
of the Indemnitees, their 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 obligation
of the Partnership 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 related 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.              Indemnification Payments Not Distributions.  If and to the
extent any payments to the General Partner pursuant to this Section 7.7
constitute gross income to the General Partner (as opposed to the repayment of
advances made on behalf of the Partnership), such amounts shall constitute
guaranteed payments 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 distributions for purposes of computing the Partners’ Capital
Accounts.

 

Section 7.8             Liability of the General Partner

 

A.            General.  Notwithstanding anything to the contrary set forth in
this Agreement, the General Partner and its directors and officers shall not be
liable for monetary damages 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 of any act or omission if
the General Partner acted in good faith.

 

B.            No Obligation to Consider Separate Interests of Limited Partners
or Shareholders.  The Limited Partners expressly acknowledge that the General
Partner is acting on behalf of the Partnership, that the General Partner is
under no obligation to consider the separate interests of the Limited Partners
(including, without limitation, the tax consequences to Limited Partners or
Assignees) in deciding whether to cause the Partnership to take (or decline to
take) any actions and that the General Partner shall not be liable for monetary
damages or otherwise 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.  In addition, the Limited Partners
expressly acknowledge that the General Partner is acting on behalf of its
shareholders, that the General Partner, in its capacity as the General Partner,
is under no obligation to consider the separate interests of the Limited
Partners (including, without limitation, the tax consequences to Limited
Partners or Assignees) in deciding whether to cause the Partnership to take (or
decline to take) any actions and that the General Partner shall not be liable
for monetary damages or otherwise for losses sustained, liabilities incurred or
benefits not

 

29

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derived by Limited Partners in connection with such decisions, provided that the
General Partner has acted in good faith.

 

C.            Actions of Agents.  Subject to its obligations and duties as
General Partner set forth in Section 7.1.A above, 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
(including the Advisor).  The General Partner shall not be responsible for any
misconduct or negligence on the part of any such agent (including the Advisor)
appointed by the General Partner in good faith.

 

D.            Effect of Amendment.  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 General Partner’s liability to the
Partnership and the Limited Partners 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.

 

Section 7.9             Other Matters Concerning the General Partner

 

A.            Reliance on Documents.  The General Partner 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 in good faith to be genuine
and to have been signed or presented by the proper party or parties.

 

B.            Reliance on Advisors.  The General Partner may consult with legal
counsel, accountants, appraisers, management consultants, investment bankers and
other consultants and advisors selected by it, and any act taken or omitted to
be taken in reliance upon the advice of such Persons as to matters which the
General Partner reasonably believes 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 advice.

 

C.            Action Through Agents.  The General Partner shall have the right,
in respect of any of its powers or obligations hereunder, to employ persons in
the operation and management of the business of the Partnership, including but
not limited to, the Advisor, supervisory managing agents, building management
agents, insurance, real estate and loan brokers, agents, employees, managers,
accountants, attorneys, consultants and others, on such terms and for such
compensation as the General Partner shall determine.  In addition, the General
Partner may act through any of its duly authorized officers or a 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.            Actions to Maintain REIT Status or Avoid Taxation. 
Notwithstanding any other provisions of this Agreement or the Act, any action of
the General Partner on behalf of the Partnership or any decision of the General
Partner to refrain from acting on behalf of the Partnership, undertaken in the
good faith belief that such action or omission is necessary or

 

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advisable in order (i) to protect the ability of the General Partner to continue
to qualify as a REIT; or (ii) to avoid the General Partner 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.

 

E.             Actions to Avoid Publicly Traded Partnership Status. 
Notwithstanding any other provision of this Agreement, any action of the General
Partner on behalf of the Partnership or any decision of the General Partner to
refrain from acting on behalf of the Partnership, undertaken in the good faith
belief that such action or omission is necessary or advisable to ensure that the
Partnership will not be classified as a “publicly traded partnership” for
purposes of Sections 351(e), 469(k) or 7704 of the Code, including without
limitation imposing restrictions on transfers and redemptions of OP Units
hereunder and modifying the Specified Redemption Date, is expressly authorized
under this Agreement and is deemed approved by all the Limited Partners;
provided however, that the General Partner shall be under no obligation to avoid
publicly traded partnership status for the Partnership if the General Partner
determines, in its sole and absolute discretion, that the avoidance of such
status is no longer in the best interests of the Partners.

 

Section 7.10           Purchase of Shares by the General Partner

 

In the event that the General Partner shall elect to purchase from its
shareholders Shares for the purpose of delivering such Shares to satisfy an
obligation under any dividend reinvestment program adopted by the General
Partner, any employee stock purchase plan adopted by the General Partner, or any
similar obligation or arrangement undertaken by the General Partner in the
future or for the purpose of retiring such Shares, the purchase price paid by
the General Partner for such Shares and any other expenses incurred by the
General Partner in connection with such purchase shall be considered expenses of
the Partnership and shall be advanced to the General Partner or reimbursed to
the General Partner, subject to the condition that: (i) if such Shares
subsequently are sold by the General Partner, the General Partner shall pay to
the Partnership any proceeds received by the General Partner for such Shares
(which sales proceeds shall include the amount of dividends reinvested under any
dividend reinvestment or similar program, provided that a transfer of Shares for
OP Units pursuant to Section 8.7 would not be considered a sale for such
purposes); and (ii) if such Shares are not retransferred by the General Partner
within thirty (30) days after the purchase thereof, or the General Partner
otherwise determines not to retransfer such Shares, the General Partner shall
cause the Partnership to redeem a number of Common Units held by the General
Partner, as a Limited Partner, equal to the product obtained by dividing the
number of such Shares by the Common Unit Conversion Factor (in which case such
advancement or reimbursement of expenses shall be treated as having been made as
a distribution in redemption of such number of Units held by the General
Partner).

 

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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 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 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 VIII
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS

 

Section 8.1             Limitation of Liability

 

The Limited Partners shall have no liability under this Agreement except as
expressly provided in this Agreement, including Section 10.4 hereof, 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 or agent of the General
Partner, the Partnership or any of their Affiliates, in their capacity as such)
shall take part in the operation, 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 or agent 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             [INTENTIONALLY OMITTED]

 

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Section 8.4             Outside Activities of Limited Partners

 

Subject to any agreements entered into pursuant to Section 7.6.C hereof and any
other agreements entered into by a Limited Partner or its Affiliates with the
Partnership or any of its Subsidiaries, any Limited Partner (other than the
General Partner) and any officer, director, employee, agent, trustee, Affiliate
or shareholder 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.  None of the Limited Partners (other than the General Partner) 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 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 or any such other Person, even if such opportunity is of a
character which, if presented to the Partnership, any Limited Partner or such
other Person, could be taken by such Person.

 

Section 8.5             Return of Capital

 

Except pursuant to the right of redemption set forth in Section 8.7 below, no
Limited Partner shall be entitled to the withdrawal or return of its Capital
Contribution, except to the extent of distributions made pursuant to this
Agreement or upon termination of the Partnership as provided herein.  No Limited
Partner or Assignee shall have priority over any other Limited Partner or
Assignee, either as to the return of Capital Contributions or as to profits,
losses or distributions.

 

Section 8.6             Rights of Limited Partners Relating to the Partnership

 

A.            General.  In addition to other rights provided by this Agreement
or by the Act, and except as limited by Section 8.6.C below, each Limited
Partner shall have the right, for a 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:

 

I.              TO OBTAIN A COPY OF THE MOST RECENT ANNUAL AND QUARTERLY REPORTS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION BY THE GENERAL PARTNER
PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934;

 

II.             TO OBTAIN A COPY OF THE PARTNERSHIP’S FEDERAL, STATE AND LOCAL
INCOME TAX RETURNS FOR EACH PARTNERSHIP YEAR,

 

III.            TO OBTAIN A CURRENT LIST OF THE NAME AND LAST KNOWN BUSINESS,
RESIDENCE OR MAILING ADDRESS OF EACH PARTNER, AND

 

IV.            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

 

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ATTORNEY PURSUANT TO WHICH THIS AGREEMENT, THE CERTIFICATE OF LIMITED
PARTNERSHIP AND ALL AMENDMENTS THERETO HAVE BEEN EXECUTED.

 

B.            Notice of Conversion Factor.  The Partnership shall notify each
Limited Partner, upon request, of the then current Conversion Factor applicable
to their OP Units and, with reasonable detail, how the same was determined.

 

C.            Confidentiality.  Notwithstanding any other provision of this
Section 8.6, 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 reasonably 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 is required by law or by agreements with
unaffiliated third parties to keep confidential.

 

Section 8.7             Redemption Right

 

A.            General.  Subject to Sections 8.7.B and 8.7.C hereof, on or after
that date which is 12 months after the issuance of OP Units to a Limited Partner
other than the General Partner, such Limited Partner shall have the right (the
“Redemption Right”) to require the Partnership to redeem on a Specified
Redemption Date the OP Units held by such Limited Partner (or such lesser amount
as the General Partner may permit) at a redemption price per OP Unit equal to
and in the form of the Cash Amount to be paid by the Partnership.  The
Redemption Right shall be exercised pursuant to a Notice of Redemption delivered
to the Partnership (with a copy to the General Partner) by the Limited Partner
who is exercising the redemption right (the “Redeeming Partner”); provided,
however, that the Partnership shall not be obligated to satisfy such Redemption
Right if the General Partner elects to purchase the OP Units subject to the
Notice of Redemption pursuant to Section 8.7.B.  A Limited Partner may not
exercise the Redemption Right for less than all of the OP Units held by such
Partner unless the General Partner otherwise consents.  The Redeeming Partner
shall have no right, with respect to any OP Units so redeemed, to receive any
distributions paid on or after the Specified Redemption Date.  The Assignee of
any Limited Partner may exercise the rights of such Limited Partner pursuant to
this Section 8.7, and such Limited Partner shall be deemed to have assigned such
rights to such Assignee and shall be bound by the exercise of such rights by
such Assignee.  In connection with any exercise of such rights by an Assignee on
behalf of a Limited Partner, the Cash Amount shall be paid by the Partnership
directly to such Assignee and not to such Limited Partner.

 

B.            Redemption by Company.  Notwithstanding the provisions of Section
8.7.A, a Limited Partner that exercises the Redemption Right shall be deemed to
have offered to sell the OP Units described in the Notice of Redemption to the
General Partner.  The General Partner may, in its sole and absolute discretion
(subject to any limitations on ownership and transfer of Shares set forth in the
Declaration of Trust), elect to assume directly and satisfy a Redemption Right
by paying to the Redeeming Partner either the Cash Amount or the Shares Amount,
as the General Partner determines in its sole and absolute discretion on the
Specified Redemption Date, whereupon the General Partner shall acquire the OP
Units offered for

 

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redemption by the Redeeming Partner and shall be treated for all purposes of
this Agreement as the owner of such OP Units.  If the General Partner shall
elect to exercise its right to purchase OP Units under this Section 8.7.B with
respect to a Notice of Redemption, it shall so notify the Redeeming Partner
within five (5) Business Days after the receipt by it of such Notice of
Redemption.  Unless the General Partner (in its sole and absolute discretion)
shall exercise its right to purchase OP Units from the Redeeming Partner
pursuant to this Section 8.7.B, the General Partner shall not have any
obligation to the Redeeming Partner or the Partnership with respect to the
Redeeming Partner’s exercise of the Redemption Right.  In the event the General
Partner shall exercise its right to purchase OP Units with respect to the
exercise of a Redemption Right in the manner described in the first sentence of
this Section 8.7.B, the Partnership shall have no obligation to pay any amount
to the Redeeming Partner with respect to such Redeeming Partner’s exercise of
such Redemption Right, and each of the Redeeming Partner, the Partnership, and
the General Partner shall treat the transaction between the General Partner and
the Redeeming Partner, for federal income tax purposes, as a sale of the
Redeeming Partner’s OP Units to the General Partner.  Each Redeeming Partner
agrees to execute such documents as the General Partner may reasonably require
in connection with the issuance of Shares upon exercise of the Redemption
Right.  In the event that the General Partner determines to pay the Redeeming
Partner the Redemption Amount in the form of Shares, the total number of Shares
to be paid to the Redeeming Partner in exchange for the Redeeming Partner’s OP
Units shall be the applicable Shares Amount.  In the event this amount is not a
whole number of Shares, the Redeeming Partner shall be paid (i) that number of
Shares that equals the nearest whole number less than such amount plus (ii) an
amount of cash which the General Partner determines, in its reasonable
discretion, to represent the fair value of the remaining fractional Share which
would otherwise be payable to the Redeeming Partner.

 

C.            Exceptions to Exercise of Redemption Right.  Notwithstanding the
provisions of Sections 8.7.A and 8.7.B above, a Partner shall not be entitled to
exercise the Redemption Right pursuant to Section 8.7.A above if (but only as
long as) the delivery of Shares to such Partner on the Specified Redemption Date
(i) would be prohibited under the Governing Documents, or (ii) as long as any
Shares are Publicly Traded, would be prohibited under applicable federal or
state securities laws or regulations (assuming the General Partner would in fact
assume and satisfy the Redemption Right).  Furthermore, the Redemption Right
pursuant to Sections 8.7.A and 8.7.B shall be subject to any restrictions on
redemptions imposed by the General Partner pursuant to Section 7.9.E hereof.

 

D.            No Liens on Partnership Units Delivered for Redemption.  Each
Limited Partner covenants and agrees with the General Partner that all OP Units
delivered for redemption shall be delivered to the Partnership or the General
Partner, as the case may be, free and clear of all liens, and, notwithstanding
anything contained herein to the contrary, neither the General Partner nor the
Partnership shall be under any obligation to acquire OP Units that are or may be
subject to any liens.  Each Limited Partner further agrees that, in the event
the General Partner determines that any state or local real property transfer,
gains, excise or other similar tax is required to be paid in connection with the
transfer of its OP Units to the Partnership or the General Partner, such Limited
Partner shall assume full liability for and shall pay when due such transfer
tax.  Each Limited Partner hereby unconditionally and irrevocably grants to the
Partnership a security interest in such Limited Partner’s OP Units to secure
such Limited Partner’s obligation to pay all amounts required to be paid
pursuant to this Section 8.7D, and

 

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shall take such actions as the General Partner shall request in order to
perfect, maintain or enforce such security interest.

 

E.             Additional Partnership Interests. In the event that the
Partnership issues additional Partnership Interests pursuant to Section 4.2
hereof, the General Partner shall make such revisions to this Section 8.7 as it
determines are necessary to reflect the issuance of such additional Partnership
Interests.

 

ARTICLE IX
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 appropriate books and records 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 below.  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, punch cards, magnetic tape, computer disk,
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 generally accepted accounting principles.

 

Section 9.2             Fiscal Year

 

The fiscal year of the Partnership shall be the calendar year.

 

Section 9.3             Reports

 

A.            Annual Reports.  As soon as practicable, but in no event later
than one hundred five (105) days after the close of each Partnership Year, 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 General Partner if such statements are prepared solely on
a consolidated basis with the General Partner, for such Partnership Year,
presented in accordance with generally accepted accounting principles, such
statements to be audited by a nationally recognized firm of independent public
accountants selected by the General Partner.

 

B.            Quarterly Reports.  As soon as practicable, but in no event later
than one hundred five (105) days after the close of each calendar quarter
(except the last calendar quarter of each year), the General Partner shall cause
to be mailed to each Limited Partner as of the last day of the calendar quarter,
a report containing unaudited financial statements of the Partnership, or of the
General Partner, if such statements are prepared solely on a consolidated basis
with the General Partner, and such other information as may be required by
applicable law or regulation, or as the General Partner determines to be
appropriate.

 

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ARTICLE X
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 all reasonable efforts to furnish, within ninety (90) days of the close of
each taxable year, the tax information reasonably required by Limited Partners
for federal and state income tax reporting purposes.

 

Section 10.2           Tax Elections

 

Except as otherwise provided herein, the General Partner shall, in its sole and
absolute discretion, determine whether to make any available election pursuant
to the Code.  The General Partner shall have the right to seek to revoke any
such election upon the General Partner’s determination in its sole and absolute
discretion that such revocation is in the best interests of the Partners.

 

Section 10.3           Tax Matters Partner

 

A.            General.  The General Partner shall be the “tax matters partner”
of the Partnership for federal income tax purposes.  Pursuant to Section
6230(e)(3) 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 any Assignees;
provided, that such information is provided to the Partnership by the Limited
Partners.

 

B.            Powers.  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” (as defined in Section
6223(b)(2) of the Code);

 

(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 filing of a complaint for
refund with the United States Claims Court or the District Court of the United
States for the district in which the Partnership’s principal place of business
is located;

 

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(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 of 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 hereof shall be fully applicable to the tax matters partner in
its capacity as such.

 

C.            Reimbursement. 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 become by the Partnership.  Nothing
herein shall be construed to restrict the Partnership from engaging an
accounting firm or a law firm to assist the tax matters partner in discharging
its duties hereunder, as long as the compensation paid by the Partnership for
such services is reasonable.

 

Section 10.4           Withholding

 

Each Limited Partner hereby authorizes the Partnership to withhold from or pay
on behalf of or with respect to such Limited Partner any amount of federal,
state, local, or foreign taxes that the General Partner determines that the
Partnership is required to withhold or pay with respect to any amount
distributable or allocable to such Limited Partner pursuant to this Agreement,
including, without limitation, any taxes required to be withheld or paid by the
Partnership pursuant to Section 1441, 1442, 1445, or 1446 of the Code.  Any
amount paid on behalf of or with respect to a Limited Partner shall constitute a
recourse 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 or (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.  Any amounts withheld pursuant to the foregoing clauses (i) or (ii)
shall be treated as having been distributed to such Limited Partner.  Each
Limited Partner hereby unconditionally and irrevocably grants to the Partnership
a security interest in such Limited Partner’s OP Units to secure such Limited
Partner’s obligation to pay to the Partnership any amounts required to be paid
pursuant to this Section 10.4.  In the event that a

 

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Limited Partner fails to pay all amounts owed to the Partnership pursuant to
this Section 10.4 when due, the General Partner may, in its sole and absolute
discretion, elect to make the payment to the Partnership on behalf of such
defaulting Limited Partner, and in such event shall be deemed to have loaned
such amount to such defaulting Limited Partner and shall succeed to all rights
and remedies of the Partnership as against such defaulting Limited Partner
(including, without limitation, the right to receive distributions).  Any
amounts payable by a Limited Partner hereunder shall bear interest at 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 (but not higher than the maximum lawful rate) 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 General Partner shall
request in order to perfect, maintain or enforce the security interest created
hereunder.

 

ARTICLE XI
TRANSFERS AND WITHDRAWALS

 

Section 11.1           Transfer

 

A.            Definition.  The term “transfer,” when used in this Article XI
with respect to a Partnership Interest or an OP Unit, shall be deemed to refer
to a transaction by which the General Partner purports to assign all or any part
of its General Partnership Interest to another Person or by which a Limited
Partner purports to assign all or any part of its Limited Partnership Interest
to another Person, and includes a sale, assignment, gift, pledge, encumbrance,
hypothecation, mortgage, exchange or any other disposition by law or otherwise. 
The term “transfer” when used in this Article XI does not include any redemption
or repurchase of OP Units by the Partnership from a Limited Partner or
acquisition of OP Units from a Limited Partner by the General Partner pursuant
to Section 8.7 hereof or otherwise.  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 no part of the interest of a Limited
Partner may be voluntarily or involuntarily alienated or encumbered except as
may be specifically provided for in this Agreement.

 

B.            General.  No Partnership Interest shall be transferred, in whole
or in part, except in accordance with the terms and conditions set forth in this
Article XI.  Any transfer or purported transfer of a Partnership Interest not
made in accordance with this Article XI shall be null and void.

 

Section 11.2           Transfers of Partnership Interests of General Partner

 

A.            Except as provided elsewhere in this Agreement, the General
Partner may not transfer any of its General Partner Interest or withdraw as
General Partner, nor may it transfer any of its Limited Partner Interest or
engage in an Extraordinary Transaction, except, in any such case, (i) if such
Extraordinary Transaction is, or such transfer or withdrawal is pursuant to an
Extraordinary Transaction that is, permitted under Section 11.2(B) or (ii) if
Limited Partners holding at least a majority of the Percentage Interests of the
Limited Partners consent to such transfer or withdrawal or Extraordinary
Transaction, or (iii) if such transfer is to an entity

 

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that is wholly-owned by the General Partner and is either a Disregarded Entity
or a Qualified REIT Subsidiary under Section 856(i) of the Code.

 

B.            The General Partner is permitted to engage in the following
Extraordinary Transactions without the approval or vote of the Limited Partners:

 

(i)            an Extraordinary Transaction in connection with which all Limited
Partners either will receive, or will have the right to elect to receive, for
each OP Unit an amount of cash, securities, or other property equal to the
product of the Shares Amount and the greatest amount of cash, securities or
other property paid to a holder of one Share in consideration of one Share
pursuant to the terms of the Extraordinary Transaction; 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 the outstanding
Shares, each holder of OP Units shall receive, or shall have the right to elect
to receive, the greatest amount of cash, securities, or other property which
such holder would have received had it exercised its right to Redemption (as set
forth in Section 8.7) and received Shares in exchange for its Partnership 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; and

 

(ii)           a merger, or other combination of assets, with another entity if:
(w) immediately after such Extraordinary Transaction, substantially all of the
assets directly or indirectly owned by the Partnership 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”); (x) the Limited Partners own a percentage interest of the
Surviving Partnership based on the relative fair market value of the net assets
of the Partnership (as determined pursuant to Section 11.2.C) and the other net
assets of the Surviving Partnership (as determined pursuant to Section 11.2.C)
immediately prior to the consummation of such transaction; (y) the rights,
preferences and privileges of the Limited Partners 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; and (z) such
rights of the Limited Partners include the right to exchange their interests in
the Surviving Partnership for at least one of: (a) the consideration available
to such Limited Partners pursuant to Section 11.2.B(i) or (b) if the ultimate
controlling person of the Surviving Partnership has publicly traded common
equity securities, such common equity securities, with an exchange ratio based
on the relative fair market value of such securities (as determined pursuant to
Section 11.2.C) and the Shares.

 

C.            In connection with any transaction permitted by Section 11.2.B,
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.

 

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Section 11.3           Limited Partners’ Rights to Transfer

 

A.            General.  Prior to the first anniversary of the issuance of OP
Units to a Limited Partner other than the General Partner, such OP Units may not
be transferred in whole or in part, directly, indirectly or beneficially,
without the prior written consent of the General Partner, which consent the
General Partner may withhold in its sole discretion; provided, however, that it
is expressly understood that subject to the provisions of Sections 7.9.E,
11.3.C, 11.3.D, 11.3.E, 11.4 and 11.6 hereof each Limited Partner will be
permitted to make one or more transfers to any Affiliated Transferee of such
Limited Partner.  Commencing on the first anniversary of the issuance of OP
Units to a Limited Partner other than the General Partner, and subject to the
provisions of Sections 7.9.E, 11.3.C, 11.3.D, 11.3.E, 11.4 and 11.6 hereof, a
Limited Partner (other than the General Partner or any Subsidiary thereof) may
transfer all or any portion of its OP Units to any person, provided such Limited
Partner obtains the prior written consent of the General Partner, which consent
may be withheld only if the General Partner determines in its sole discretion
exercised in good faith that such a transfer would cause the Partnership or any
or all of the Partners other than the Limited Partner seeking to transfer its
rights as a Limited Partner to be subject to tax liability as a result of such
transfer.  Any purported transfer attempted in violation of the foregoing
sentence shall be deemed void ab initio and shall have no force or effect.

 

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 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 its interest in the Partnership.  The Incapacity of a Limited Partner, in and
of itself, shall not dissolve or terminate the Partnership.

 

C.            No Transfers Violating Securities Laws.  The General Partner may
prohibit any transfer of OP Units by a Limited Partner if, in the opinion of
legal counsel to the Partnership, such transfer would require filing of a
registration statement under the Securities Act of 1933, as amended, or would
otherwise violate any federal, or state securities laws or regulations
applicable to the Partnership or the OP Unit.

 

D.            No Transfers Affecting Tax Status of Partnership. The General
Partner may prohibit any transfer of OP Units by a Limited Partner if (i) the
General Partner determines that such transfer would result in the Partnership
being treated as an association taxable as a corporation for federal income tax
purposes; (ii) it would adversely affect the General Partner’s ability to
continue to qualify as a REIT or would subject the General Partner to any
additional taxes under Section 857 or Section 4981 of the Code; (iii) the
General Partner determines that such transfer is being effectuated through an
“established securities market” or a “secondary market” (or the substantial
equivalent thereof) within the meaning of Section 7704 of the Code, or would
otherwise violate any restrictions imposed by the General Partner pursuant to
Section 7.9E hereof; (iv) such transfer would 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(c) of the Code); (v) such transfer would, in
the opinion of legal counsel for the Partnership, cause any portion of the
assets

 

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of the Partnership to constitute assets of any employee benefit plan pursuant to
Department of Labor Regulations Section 2510.2-101; or (vi) such transfer would
subject the Partnership to be regulated under the Investment Company Act of
1940, the Investment Advisors Act of 1940 or the Employee Retirement Income
Security Act of 1974, each as amended.

 

E.             No Transfers to Holders of Nonrecourse Liabilities.  No pledge or
transfer of any OP Units may be 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 without the consent of the General Partner, in its sole
and absolute discretion.

 

Section 11.4           Substituted Limited Partners

 

A.            Consent of General Partner.  No Limited Partner shall have the
right to substitute a transferee as a Limited Partner in its place without the
consent of the General Partner 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.            Rights of Substituted Limited Partner  A transferee who has been
admitted as a Substituted Limited Partner in accordance with this Article XI
shall have all the rights and powers and 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 the
terms and conditions of this Agreement (including, without limitation, the
provisions of Section 2.5 hereof and such other documents or instruments as may
be required to effect the admission)

 

C.            Amendment and Restatement of Exhibit A.  Upon the admission of a
Substituted Limited Partner, the General Partner shall amend and restate Exhibit
A hereto to reflect the name, address, Capital Account, number of OP Units, and
Percentage Interest of such Substituted Limited Partner and to eliminate or
adjust, if necessary, the name, address, Capital Account and Percentage Interest
of the predecessor of such Substituted Limited Partner.

 

Section 11.5           Assignees

 

If the General Partner, in its sole and absolute discretion, does not consent to
the admission of any permitted transferee under Section 11.3 above as a
Substituted Limited Partner, as described in Section 11.4 above, then so long as
the General Partner is not prohibiting the proposed transfer pursuant to
Sections 11.3C, 11.3D or 11.3E (in which event the transfer shall be void ab
initio and shall have no force or effect), such transferee shall be considered
an Assignee for purposes of this Agreement, subject, however, to Section 11.6E
hereof.  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 Net Income, Net Losses,
gain, loss and Recapture Income attributable to the OP Units assigned to

 

42

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such transferee, and shall have the rights granted to the Limited Partners under
Section 8.7 hereof, but shall not be deemed to be a holder of OP Units for any
other purpose under this Agreement, and shall not be entitled to vote such OP
Units in any matter presented to the Limited Partners for a vote (such OP Units
being deemed to have been voted on such matter in the same proportion as all
other OP Units held by Limited Partners are voted).  In the event any such
transferee desires to make a further assignment of any such OP Units, such
transferee shall be subject to all the provisions of this Article XI to the same
extent and in the same manner as any Limited Partner desiring to make an
assignment of OP Units.

 

Section 11.6           General Provisions

 

A.            Withdrawal of Limited Partner.  No Limited Partner may withdraw
from the Partnership other than as a result of a permitted transfer of all of
such Limited Partner’s OP Units in accordance with this Article XI or pursuant
to redemption of all of its OP Units under Section 8.7 hereof.

 

B.            Termination of Status as Limited Partner  Any Limited Partner who
shall transfer all of its OP Units in a transfer permitted pursuant to this
Article XI or pursuant to redemption of all of its OP Units under Section 8.7
hereof shall cease to be a Limited Partner.

 

C.            Timing of Transfers.  Transfers pursuant to this Article XI may
only be made on the first day of a fiscal quarter of the Partnership, unless the
General Partner otherwise agrees.

 

D.            Allocations.  If any Partnership Interest is transferred during
any quarterly segment of the Partnership’s fiscal year in compliance with the
provisions of this Article XI or redeemed or transferred pursuant to Section 8.7
hereof, Net Income, Net Losses, each item thereof and all other items
attributable to such interest for such fiscal year shall be divided and
allocated between the transferor Partner and the transferee Partner by taking
into account their varying interests during the fiscal year in accordance with
Section 706(d) of the Code, using the interim closing of the books method
(unless the General Partner, in its sole and absolute discretion, elects to
adopt a daily, weekly, or a monthly proration period, in which event Net Income,
Net Losses, each item thereof and all other items attributable to such interest
for such fiscal year shall be prorated based upon the applicable method selected
by the General Partner).  All distributions attributable to any OP 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 Redeeming Partner, as the case may be, and, in the case of a transfer or
assignment other than a redemption, all distributions thereafter attributable to
OP Partnership Unit shall be made to the transferee Partner.

 

E.             Additional Restrictions.   In addition to any other restrictions
on transfer herein contained, including without limitation the provisions of
this Article XI, in no event may any transfer or assignment of a Partnership
Interest by any Partner (including pursuant to Section 8.7 hereof) be made
without the express consent of the General Partner, in its sole and absolute
discretion, (i) to any person or entity who lacks the legal right, power or
capacity to own a Partnership Interest; (ii) in violation of applicable law; or
(iii) of any component portion of a

 

43

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Partnership Interest, such as the Capital Account, or rights to distributions,
separate and apart from all other components of a Partnership Interest.

 

ARTICLE XII
ADMISSION OF PARTNERS

 

Section 12.1           Admission of Successor General Partner

 

A successor to all of the General Partner Interest pursuant to Section 11.2
hereof 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 Section 11.6.D hereof.

 

Section 12.2           Admission of Additional Limited Partners

 

A.            General.  A Person 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 2.5 hereof 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.  Notwithstanding anything to the contrary in this Section 12.2,
no Person shall be admitted as an Additional Limited Partner without the 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 consent of the General Partner to such admission.

 

B.            Allocations to Additional Limited Partner.  If any Additional
Limited Partner is admitted to the Partnership on any day other than the first
day of a Partnership Year, then Net Income, Net Losses, 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 the
interim closing of the books method (unless the General Partner, in its sole and
absolute discretion, elects to adopt a daily, weekly or monthly proration
method, in which event Net Income, Net Losses and each item thereof shall be
prorated based upon the applicable period selected by the General Partner).  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

 

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Partner, and all distributions thereafter shall be made to all 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 (including an amendment and restatement of Exhibit A hereto)
and, if necessary, to prepare as soon as practical an amendment of this
Agreement and, if required by law, shall prepare and file an amendment to the
Certificate and may for this purpose exercise the power of attorney granted
pursuant to Section 2.5 hereof.

 

ARTICLE XIII
DISSOLUTION AND LIQUIDATION

 

Section 13.1           Dissolution

 

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
(“Liquidating Events”):

 

A.            an event of withdrawal of the General Partner, as defined in the
Act (other than an event of bankruptcy), unless, within ninety (90) days after
such event of withdrawal a majority in interest of the remaining 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;

 

B.            an election to dissolve the Partnership made by the General
Partner with the Consent of Partners holding a majority of the Percentage
Interests of the Limited Partners;

 

C.            entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Act;

 

D.            the sale or exchange of all or substantially all of the assets and
properties of the Partnership for cash or marketable securities; or

 

E.             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 all of the remaining
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 substitute General Partner.

 

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Section 13.2           Winding Up

 

A.            General.  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 a Majority in Interest of
the Limited Partners (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 equity or other securities of the General Partner or any other
entity) 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 to creditors other than the Partners;

 

(2)           Second, to the payment and discharge of all of the Partnership’s
debts and liabilities to the Partners; and

 

(3)           The balance, if any, to the Partners in accordance with their
Capital Accounts, after giving effect to all contributions, distributions, and
allocations for all periods.

 

The General Partner shall not receive any additional compensation for any
services performed pursuant to this Article XIII.

 

B.            Deferred Liquidation.  Notwithstanding the provisions of
Section 13.2.A above 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) or distribute to the Partners, in lieu of cash, as
tenants in common and in accordance with the provisions of Section 13.2.A above,
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.

 

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Section 13.3           Compliance with Timing Requirements of Regulations

 

Subject to Section 13.4 below, in the event the Partnership is “liquidated”
within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), distributions
shall be made pursuant to this Article XIII to the General Partner and Limited
Partners who have positive Capital Accounts in compliance with Regulations
Section 1.704-1(b)(2)(ii)(b)(2).  If any Partner has a deficit balance in its
Capital Account (after giving effect to all contributions, distributions and
allocations for all taxable years, including the year during which such
liquidation occurs), such Partner shall have no obligation to make any
contribution to the capital of the Partnership with respect to such deficit, and
such deficit shall not be considered a debt owed to the Partnership or to any
other Person for any purpose whatsoever.  In the discretion of 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 XIII may be:
(A) 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 (in which case 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 General Partner,
in the same proportions as 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 (B) withheld 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, that such withheld amounts shall be distributed to the General
Partner and Limited Partners as soon as practicable.

 

Section 13.4           Deemed Distribution and Recontribution

 

Notwithstanding any other provision of this Article XIII, in the event the
Partnership is deemed 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, for federal income tax purposes and for purposes of maintaining Capital
Accounts pursuant to Exhibit B hereto, unless otherwise provided in Regulations
Section 1.704-1(b)(2)(iv), the Partnership shall be deemed to have distributed
its assets in kind to the General Partner and Limited Partners, who shall be
deemed to have assumed and taken such assets subject to all Partnership
liabilities, all in accordance with their respective Capital Accounts. 
Immediately thereafter, the General Partner and Limited Partners shall be deemed
to have recontributed the Partnership assets in kind to the Partnership, which
shall be deemed to have assumed and taken such assets subject to all such
liabilities.

 

Section 13.5           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 expressly provided in
this Agreement, no Limited Partner shall have priority over any other Limited
Partner as to the return of its Capital Contributions, distributions, or
allocations.

 

47

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Section 13.6           Notice of Dissolution

 

In the event a Liquidating Event occurs or an event occurs that would, but for
provisions of an election or objection by one or more Partners pursuant to
Section 13.1 above, 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 and to all other parties with whom the
Partnership regularly conducts business (as determined in the discretion of the
General Partner) and shall publish notice thereof in a newspaper of general
circulation in each place in which the Partnership regularly conducts business
(as determined in the discretion of the General Partner).

 

Section 13.7           Cancellation of Certificate of Limited Partnership

 

Upon the completion of the liquidation of the Partnership cash and property as
provided in Section 13.2 above, the Partnership shall be terminated and the
Certificate 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.

 

Section 13.8           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 above, in order to minimize any losses otherwise attendant upon
such winding-up, and the provisions of this Agreement shall remain in effect
among the Partners during the period of liquidation.

 

Section 13.9           Waiver of Partition

 

Each Partner hereby waives any right to partition of the Partnership property.

 

Section 13.10         Liability of Liquidator

 

The 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 7.11 hereof.

 

ARTICLE XIV
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS

 

Section 14.1           Amendments

 

A.            General.  Amendments to this Agreement may be proposed only by the
General Partner. Following such proposal, the General Partner shall submit any
proposed amendment to the Limited Partners.  The General Partner shall seek the
written vote of the Partners on the proposed amendment or shall call a meeting
to vote thereon and to transact any other business that it may deem
appropriate.  For purposes of obtaining a written vote, 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 vote
which is

 

48

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consistent with the General Partner’s recommendation with respect to the
proposal.  Except as provided in Section 14.1.B, 14.1.C or 14.1.D, 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 Partners holding
a majority of the Percentage Interests of the Limited Partners.

 

B.            Amendments Not Requiring Limited Partner Approval. Notwithstanding
Section 14.1.A, the General Partner shall have the power, without the consent of
the Limited Partners, to amend this Agreement as may be required to facilitate
or implement any provision of this Agreement which is within the General
Partner’s discretion hereunder, including without limitation, the following:

 

(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 admission, substitution, termination, or withdrawal
of Partners in accordance with this Agreement;

 

(3)           to set forth and reflect in the Agreement the designations,
rights, powers, duties, and preferences of the holders of any additional
Partnership Interests issued pursuant to Section 4.2 hereof;

 

(4)           to reflect a change that is of an inconsequential nature and does
not adversely affect the Limited Partners 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 of this Agreement; and

 

(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.

 

THE GENERAL PARTNER SHALL PROVIDE NOTICE TO THE LIMITED PARTNERS WHEN ANY ACTION
UNDER THIS SECTION 14.1.B IS TAKEN.

 

C.            Amendments Requiring Limited Partner Approval.  Notwithstanding
Section 14.1.A or Section 14.1.B hereof, the General Partner shall not (except
in connection with amendments made to reflect the issuance of additional
Partnership Interests and the relative rights, powers and duties incident
thereto) amend Sections 4.2, 7.5, and 11.2, this Section 14.1.C or Section 14.2
without the Consent of Limited Partners holding a majority of the Percentage
Interests of the Limited Partners, excluding Limited Partner Interests held by
the General Partner.

 

D.            Other Amendments Requiring Certain Limited Partner Approval.
Notwithstanding Section 14.1.A and 14.1.B hereof, this Agreement shall not be
amended without the Consent of each Partner adversely affected if such amendment
would (i) convert a Limited Partner’s interest in the Partnership into a General
Partner Interest; (ii) modify the limited liability of a Limited Partner in a
manner adverse to such Limited Partner; (iii) alter rights of the

 

49

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Partner (other than as a result of the issuance of Partnership Interests) to
receive distributions pursuant to Article V or Article XIII or alter the
allocations specified in Article VI (except as provided for in Exhibit B or as
permitted pursuant to Section 4.2 and Section 14.1.B(3) hereof); (iv) alter or
modify the Redemption Right and Shares Amount as set forth in Sections 8.7 and
11.2.B, and the related definitions, in a manner adverse to such Partner,
subject (in the case of the Redemption Right) to the General Partner’s
authorization to impose additional restrictions or modify existing restrictions
on the redemption of OP Units; or (v) amend this Section 14.1.D.  In addition,
Section 8.7 may only be amended as provided therein.

 

E.             Amendment and Restatement of Exhibit A Not An Amendment. 
Notwithstanding anything in this Article XIV 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, whether pursuant to Section 7.1.A(xx) hereof or otherwise, 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.

 

Section 14.2           Meetings of the Partners

 

A.            General.  Meetings of the Partners may be called only by the
General Partner.  The call 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 thirty (30) days prior to the date of such
meeting; provided that a Partner’s attendance at any meeting of Partners shall
be deemed a waiver of the foregoing notice requirement with respect to such
Partner.  Partners may vote in person or by proxy at such meeting.  Whenever the
vote or Consent of Partners is permitted or required under this Agreement, such
vote or Consent may be given at a meeting of Partners or may be given in
accordance with the procedure prescribed in Section 14.1.A above.  Except as
otherwise expressly provided in this Agreement, the Consent of holders of a
majority of the Percentage Interests held by Limited Partners shall control.

 

B.            Actions Without a Meeting.  Any action required or permitted to be
taken at a meeting of the Partners may be taken without a meeting if a written
consent setting forth the action so taken is signed by a majority of the
Percentage Interests of the Partners (or such other percentage as is expressly
required by this Agreement).  Such consent may be in one instrument or in
several instruments, and shall have the same force and effect as a vote of a
majority of the Percentage Interests of the Partners (or such other percentage
as is expressly required by this Agreement).  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.

 

C.            Proxy.  Each Limited Partner may authorize any Person or Persons
to act for such Limited Partner 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 its attorney-in-fact.  No proxy shall be valid after the expiration
of eleven (11) 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
notice thereof in writing.

 

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D.            Conduct of Meeting.  Each meeting of 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.

 

ARTICLE XV
GENERAL PROVISIONS

 

Section 15.1           Addresses and Notices

 

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 first class United
States mail or by other means of written communication to the Partner or
Assignee at the address set forth in Exhibit A hereto (which shall be the
address of record as of such date) or such other address as the Partners shall
notify the General Partner in writing.

 

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

 

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.

 

Section 15.6           Creditors; Other Third Parties

 

Other than as expressly set forth herein with regard to any Indemnitee, none of
the provisions of this Agreement shall be for the benefit of, or shall be
enforceable by, any creditor or other third party having dealings with the
Partnership.

 

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Section 15.7           Waiver

 

No failure by any parry 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.

 

Section 15.8           Counterparts

 

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

 

Section 15.9           Applicable Law

 

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.

 

Section 15.10         Invalidity of Provisions

 

If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.

 

Section 15.11         Entire Agreement

 

This Agreement and all Exhibits attached hereto (which Exhibits are incorporated
herein by reference as if fully set forth herein) contains the entire
understanding and agreement among the Partners with respect to the subject
matter hereof and supersedes any prior written oral understandings or agreements
among them with respect thereto.

 

Section 15.12         No Rights as Shareholders

 

Nothing contained in this Agreement shall be construed as conferring upon the
holders of the OP Units any rights whatsoever as shareholders of the General
Partner, including, without limitation. any right to receive dividends or other
distributions made to shareholders of the General Partner.

 

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IN WITNESS WHEREOF, the General Partner and the Limited Partner have executed
this Agreement as of the date first written above.

 

 

 

FIRST UNION REAL ESTATE EQUITY AND
MORTGAGE INVESTMENTS

 

 

 

 

 

By:

/s/ Peter Braverman

 

 

 

Peter Braverman

 

 

President

 

 

 

 

 

FT-TRS LOAN CORP.

 

 

 

 

 

By:

/s/ Peter Braverman

 

 

 

Peter Braverman

 

 

President

 

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EXHIBIT A

 

Partners and Percentage Interest

 

General Partner

 

 

 

OP Units

 

 

 

Name

 

Class

 

Number

 

Percentage Interest

 

 

 

 

 

 

 

 

 

First Union Real Estate Equity and Mortgage Investments

 

Common

 

30,996,795.174

 

99.8

%

 

Limited Partners

 

 

 

OP Units

 

 

 

Name

 

Class

 

Number

 

Percentage Interest

 

 

 

 

 

 

 

 

 

First Union Real Estate Equity and Mortgage Investments

 

Preferred

 

983,082.000

 

100

%

 

 

 

 

 

 

 

 

FT-TRS Loan Corp.

 

Common

 

62,117.826

 

0.2

%

 

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EXHIBIT B

 

CAPITAL ACCOUNT MAINTENANCE

 

A.            The Partnership shall maintain for each Partner a separate Capital
Account in accordance with the rules of Regulations Section 1.704-1(b)(2)(iv). 
The initial Capital Account balance of each Person who is a Partner on the
Execution Date shall be as set forth in Section 4.1.A of the Agreement.  Such
Capital Account shall be increased by (i) the amount of all Capital
Contributions and any deemed contributions made by such Partner to the
Partnership pursuant to this Agreement; and (ii) all items of Partnership income
and gain (including income and gain exempt from tax) computed in accordance with
Section 1.B hereof and allocated to such Partner pursuant to Section 6.1.A of
the Agreement and Exhibit C hereof, and decreased by (x) the amount of cash or
Agreed Value of all actual and deemed distributions of cash or property made to
such Partner pursuant to this Agreement; and (y) all items of Partnership
deduction and loss computed in accordance with Section 1.B hereof and allocated
to such Partner pursuant to Section 6.1.B of the Agreement and Exhibit C hereof.

 

B.            For purposes of computing the amount of any item of income, gain,
deduction or loss to be reflected in the Partners’ Capital Accounts, unless
otherwise specified in this Agreement, the determination, recognition and
classification of any such item shall be the same as its determination,
recognition and classification for federal income tax purposes determined in
accordance with Section 703(a) of the Code (for this purpose all items of
income, gain, loss or deduction required to be stated separately pursuant to
Section 703(a)(1) of the Code shall be included in taxable income or loss), with
the following adjustments:

 

(1)           Except as otherwise provided in Regulations Section
1.704-1(b)(2)(iv)(m), the computation of all items of income, gain, loss and
deduction shall be made without regard to any election under Section 754 of the
Code which may be made by the Partnership, provided that the amounts of any
adjustments to the adjusted bases of the assets of the Partnership made pursuant
to Section 734 of the Code as a result of the distribution of property by the
Partnership to a Partner (to the extent that such adjustments have not
previously been reflected in the Partners’ Capital Accounts) shall be reflected
in the Capital Accounts of the Partners in the manner and subject to the
limitations prescribed in Regulations Section 1.704-1(b)(2)(iv)(m)(4).

 

(2)           The computation of all items of income, gain, and deduction shall
be made without regard to the fact that items described in Sections 705(a)(1)(B)
or 705(a)(2)(B) of the Code are not includable in gross income or are neither
currently deductible nor capitalized for federal income tax purposes.

 

(3)           Any income, gain or loss attributable to the taxable disposition
of any Partnership property shall be determined as if the adjusted basis of such
property as of such date of disposition were equal in amount to the
Partnership’s Carrying Value with respect to such property as of such date.

 

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(4)           In lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account Depreciation for such fiscal year.

 

(5)           In the event the Carrying Value of any Partnership Asset is
adjusted pursuant to Section 1.D hereof, the amount of any such adjustment shall
be taken into account as gain or loss from the disposition of such asset.

 

C.            A transferee (including an Assignee) of a Partnership Unit shall
succeed to a pro rata portion of the Capital Account of the transferor.

 

D.   (1)   Consistent with the provisions of Regulations Section 1.704-
1(b)(2)(iv)(f), and as provided in Section 1.D(2), the Carrying Value of all
Partnership assets shall be adjusted upward or downward to reflect any
Unrealized Gain or Unrealized Loss attributable to such Partnership property, as
of the times of the adjustments provided in Section 1.D(2) hereof, as if such
Unrealized Gain or Unrealized Loss had been recognized on an actual sale of each
such property and allocated pursuant to Section 6.1 of the Agreement.

 

(2)           Such adjustments shall be made as of the following times: (a)
immediately prior to the acquisition of an additional interest in the
Partnership by any new or existing Partner in exchange for more than a de
minimis Capital Contribution; (b) immediately prior to the distribution by the
Partnership to a Partner of more than a de minimis amount of property as
consideration for an interest in the Partnership; and (c) immediately prior to
the liquidation of the Partnership within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g); provided, however, that adjustments pursuant to clauses
(a) and (b) above shall be made only if the General Partner determines that such
adjustments are necessary or appropriate to reflect the relative economic
interests of the Partners in the Partnership.

 

(3)           In accordance with Regulations Section 1.704-1(b)(2)(iv)(e), the
Carrying Value of Partnership assets distributed in kind shall be adjusted
upward or downward to reflect any Unrealized Gain or Unrealized Loss
attributable to such Partnership property, as of the time any such asset is
distributed.

 

(4)           In determining Unrealized Gain or Unrealized Loss for purposes of
this Exhibit B, the aggregate cash amount and fair market value of all
Partnership assets (including cash or cash equivalents) shall be determined by
the General Partner (or the Liquidator, if applicable) using such reasonable
method of valuation as it may adopt. The General Partner (or the Liquidator, if
applicable) shall allocate such aggregate value among the assets of the
Partnership (in such manner as it determines in its sole and absolute
discretion) to arrive at a fair market value for individual properties.

 

E.             The provisions of this Agreement (including this Exhibit B and
other Exhibits to 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

 

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contributed or distributed property or which are assumed by the Partnership, the
General Partner, or the Limited Partners) are computed; or (ii) the manner in
which items are allocated among the Partners for 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
XIV of the Agreement, provided that it is not likely to have a material effect
on the amounts distributable to any Person pursuant to Article XIII of the
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 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 Net Income, Net Loss, taxable 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 are in the best interests of the Partners.

 

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EXHIBIT C

 

SPECIAL ALLOCATION RULES

 

1.             Special Allocation Rules

 

Notwithstanding any other provision of the Agreement or this Exhibit C, the
following special allocations shall be made in the following order:

 

A.            Minimum Gain Chargeback.  Notwithstanding the provisions of
Section 6.1 of the Agreement or any other provisions of this Exhibit C, if there
is a net decrease in Partnership Minimum Gain during any Partnership taxable
year, each Partner shall be specially allocated items of Partnership income and
gain for such year (and, if necessary, subsequent years) in an amount equal to
such Partner’s share of the net decrease in Partnership Minimum Gain, as
determined under Regulations Section 1.704-2(g).  Allocations pursuant to the
previous sentence shall be made in proportion to the respective amounts required
to be allocated to each Partner pursuant thereto.  The items to be so allocated
shall be determined in accordance with Regulations Section 1.704-2(f)(6).  This
Section 1.A is intended to comply with the minimum gain chargeback requirements
in Regulations Section 1.704-2(f) and shall be interpreted consistently
therewith.  Solely for purposes of this Section 1.A, each Partner’s Adjusted
Capital Account Deficit shall be determined prior to any other allocations
pursuant to Section 6.1 of the Agreement or this Exhibit for such Partnership
taxable year and without regard to any decrease in Partner Minimum Gain during
such Partnership taxable year.

 

B.            Partner Minimum Gain Chargeback.  Notwithstanding any other
provision of Section 6.1 of this Agreement or any other provisions of this
Exhibit C (except Section 1.A hereof), if there is a net decrease in Partner
Minimum Gain attributable to a Partner Nonrecourse Debt during any Partnership
taxable year, each Partner who has a share of the Partner Minimum Gain
attributable to such Partner Nonrecourse Debt, determined in accordance with
Regulations Section 1.702-2(i)(5), shall be specially allocated items of
Partnership income and gain for such year (and, if necessary, subsequent years)
in an amount equal to such Partner’s share of the net decrease in Partner
Minimum Gain attributable to such Partner Nonrecourse Debt, determined in
accordance with Regulations Section 1.704-2(i)(5).  Allocations pursuant to the
previous sentence shall be made in proportion to the respective amounts required
to be allocated to each Partner pursuant thereto.  The items to be so allocated
shall be determined in accordance with Regulations Section 1.704-2(i)(4).  This
Section 1.B is intended to comply with the minimum gain chargeback requirement
in such Section of the Regulations and shall be interpreted consistently
therewith.  Solely for purposes of the Section 1.B, each Partner’s Adjusted
Capital Account Deficit shall be determined prior to any other allocations
pursuant to Section 6.1 of the Agreement or this Exhibit with respect to such
Partnership taxable year, other than allocations pursuant to Section 1.A hereof.

 

C.            Qualified Income Offset.  In the event any Partner unexpectedly
receives any adjustments, allocations or distributions described in Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or
1.704-1(b)(2)(ii)(d)(6), and, after giving effect to the

 

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allocations required under Sections 1.A and 1.B hereof, such Partner has an
Adjusted Capital Account Deficit, items of Partnership income and gain
(consisting of a pro rata portion of each item of Partnership income, including
gross income and gain for the Partnership taxable year) shall be specially
allocated to such Partner in an amount and manner sufficient to eliminate, to
the extent required by the Regulations, its Adjusted Capital Account Deficit
created by such adjustments, allocations or distributions as quickly as
possible.

 

D.            Gross Income Allocation.  In the event that any Partner has an
Adjusted Capital Account Deficit at the end of any Partnership taxable year
(after taking into account allocations to be made under the preceding paragraphs
hereof with respect to such Partnership taxable year) each such Partner shall be
specially allocated items of Partnership income and gain (consisting of a pro
rata portion of each item of Partnership income, including gross income and gain
for the Partnership taxable year) in an amount and manner sufficient to
eliminate, to the extent required by Regulations, its Adjusted Capital Account
Deficit.

 

E.             Nonrecourse Deductions.  Nonrecourse Deductions for any
Partnership taxable year shall be allocated to the Partners in accordance with
their respective Percentage Interests.  If the General Partner determines in its
good faith discretion that the Partnership’s Nonrecourse Deductions must be
allocated in a different ratio to satisfy the safe harbor requirements of the
Regulations promulgated under Section 704(b) of the Code, the General Partner is
authorized, upon notice to the Limited Partners, to revise the prescribed ratio
to the numerically closest ratio for such Partnership taxable year which would
satisfy such requirements.

 

F.             Partner Nonrecourse Deductions.  Any Partner Nonrecourse
Deductions for any Partnership taxable year shall be specially allocated to the
Partner who bears the economic risk of loss with respect to the Partner
Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable
in accordance with Regulations Section 1.704-2(i).

 

G.            Code Section 754 Adjustments.  To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Section 734(b) or 743(b)
of the Code is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m),
to be taken into account in determining Capital Accounts, the amount of such
adjustment to the Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis) and such item of gain or loss shall be specially allocated
to the Partners in a manner consistent with the manner in which their Capital
Accounts are required to be adjusted pursuant to such Section of the
Regulations.

 

H.            Curative Allocations.  The allocations set forth in Section 1.A
through 1.F of this Exhibit C (the “Regulatory Allocations”) are intended to
comply with certain requirements of the Regulations under Section 704(b) of the
Code.  The Regulatory Allocations may not be consistent with the manner in which
the Partners intend to divide Partnership distributions.  Accordingly, the
General Partner is hereby authorized to divide other allocations of income,
gain, deduction and loss among the Partners so as to prevent the Regulatory
Allocations from distorting the manner in which Partnership distributions will
be divided among the Partners.  In general, the Partners anticipate that, if
necessary, this will be accomplished by specially allocating other items of
income, gain, loss and deduction among the Partners so that

 

C-2

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the net amount of the Regulatory Allocations and such special allocations to
each person is zero. However, the General Partner will have discretion to
accomplish this result in any reasonable manner; provided, however, that no
allocation pursuant to this Section 1.G shall cause the Partnership to fail to
comply with the requirements of Regulations Sections 1.704-1(b)(2)(ii)(d), -2(e)
or -2(i).

 

2.             Allocations for Tax Purposes

 

A. Except as otherwise provided in this Section 2, for federal income tax
purposes, each item of income, gain, loss and deduction shall be allocated among
the Partners in the same manner as its correlative item of “book” income, gain,
loss or deduction is allocated pursuant to Section 6.1 of the Agreement and
Section 1 of this Exhibit C.

 

B.  In an attempt to eliminate Book-Tax Disparities attributable to a
Contributed Property or Adjusted Property, items of income, gain, loss, and
deduction shall be allocated for federal income tax purposes among the Partners
as follows:

 

(1)(a)       In the case of a Contributed Property, such items attributable
thereto shall be allocated among the Partners, consistent with the principles of
Section 704(c) of the Code and the Regulations thereunder, to take into account
the variation between the 704(c) Value of such property and its adjusted basis
at the time of contribution; and

 

(b)           any item of Residual Gain or Residual Loss attributable to a
Contributed Property shall be allocated among the Partners in the same manner as
its correlative item of “book” gain or loss is allocated pursuant to Section 6.1
of the Agreement and Section 1 of this Exhibit C.

 

(2)(a)       In the case of an Adjusted Property, such items shall first, be
allocated among the Partners in a manner consistent with the principles of
Section 704(c)of the Code and the Regulations thereunder to take into account
the Unrealized Gain or Unrealized Loss attributable to such property and the
allocations thereof pursuant to Exhibit B; and

 

(b)           second, in the event such property was originally a Contributed
Property, be allocated among the Partners in a manner consistent with
Section 2.B(1) of this Exhibit C; and

 

(c)           any item of Residual Gain or Residual Loss attributable to an
Adjusted Property shall be allocated among the Partners in the same manner as
its correlative item of “book” gain or loss is allocated pursuant to Section 6.1
of the Agreement and Section 1 of this Exhibit C.

 

C.            To the extent that the Treasury Regulations promulgated pursuant
to Section 704(c) of the Code permit the Partnership to utilize alternative
methods to eliminate the disparities between the Carrying Value of property and
its adjusted basis, the General Partner shall have the authority to elect the
method to be used by the Partnership and such election shall be binding on all
Partners.

 

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EXHIBIT D

 

NOTICE OF REDEMPTION

 

The undersigned irrevocably (i) elects to redeem                    OP Units in
First Union REIT, L.P. in accordance with the terms of the Agreement of Limited
Partnership of First Union REIT, L.P., as amended (the “Partnership Agreement”),
and the Redemption Right referred to therein, (ii) surrenders such OP Units and
all right, title and interest therein and (iii) directs that promptly after the
Specified Redemption Date the Cash Amount or Shares Amount (as determined by the
General Partner) deliverable upon exercise of the Redemption Right be delivered
to the address specified below, and if Shares are to be delivered, such 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 OP Units, free and clear of
the rights of or interest of any other person or entity, (b) has the full right,
power and authority to redeem and surrender such OP Units as provided herein and
(c) has obtained the consent or approval of all persons or entities, if any,
having the right to consult or approve such redemption or surrender. 
Capitalized terms used herein have the meanings assigned to them in the
Partnership Agreement.

 

 

Dated:

 

 

Name of Limited Partner:

 

 

 

 

 

 

 

 

(Signature of Limited Partner)

 

 

 

 

 

 

 

(Street Address)

 

 

 

 

 

 

 

(City)

(State)

Zip Code)

 

 

 

 

 

Signature Guaranteed by:

 

 

 

If Shares are to be issued, issue to:

 

Name:

 

Please insert social security or identifying number:

 

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Schedule 1

 

EXCLUDED ASSETS

 

1.                                       Shares held by First Union Real Estate
Equity and Mortgage Investments in FT-TRS Loan Corp.

2.                                       Shares held by First Union Real Estate
Equity and Mortgage Investments in FT Manager Corp.

3.                                       100% Membership Interest in Southwest
Shopping Centers Co. II, LLC

4.                                       100% Membership Interest in Park Plaza
III, LLC

5.                                       Shares of common stock in Sizeler
Property Investors, Inc.

 

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