AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP


OF


PHILLIPS EDISON – ARC SHOPPING CENTER OPERATING
PARTNERSHIP, L.P.


 


Dated as of February 4, 2013












 










 








 








 


TABLE OF CONTENTS




	
   

  	
   

  	
  Page

  
	
  Article 1

  	
  DEFINED TERMS

  	
    1

  
	
  Article 2

  	
  ORGANIZATIONAL MATTERS

  	
  20

  
	
  2.1

  	
  Formation

  	
  20

  
	
  2.2

  	
  Name

  	
  20

  
	
  2.3

  	
  Registered Office and Agent; Principal Office

  	
  20

  
	
  2.4

  	
  Power of Attorney

  	
  21

  
	
  2.5

  	
  Term

  	
  22

  
	
  Article 3

  	
  PURPOSE

  	
  22

  
	
  3.1

  	
  Purpose and Business

  	
  22

  
	
  3.2

  	
  Powers

  	
  23

  
	
  Article 4

  	
  CAPITAL CONTRIBUTIONS

  	
  24

  
	
  4.1

  	
  Capital Contributions of the Partners

  	
  24

  
	
  4.2

  	
  Additional Funds; Restrictions on the General
  Partner

  	
  24

  
	
  4.3

  	
  Issuance of Additional Partnership Interests;
  Admission of Additional Limited Partners

  	
  26

  
	
  4.4

  	
  Contribution of Proceeds of Issuance of Common Stock

  	
  27

  
	
  4.5

  	
  Repurchase of Common Stock

  	
  27

  
	
  4.6

  	
  No Third-Party Beneficiary

  	
  28

  
	
  4.7

  	
  No Interest; No Return

  	
  28

  
	
  4.8

  	
  No Preemptive Rights. 

  	
  28

  
	
  Article 5

  	
  DISTRIBUTIONS

  	
  29

  
	
  5.1

  	
  Distributions

  	
  29

  
	
  5.2

  	
  Qualification as a REIT

  	
  33

  




 


	
  5.3

  	
  Withholding

  	
  34

  
	
  5.4

  	
  Additional Partnership Interests

  	
  34

  
	
  Article 6

  	
  ALLOCATIONS

  	
  34

  
	
  6.1

  	
  Allocations

  	
  34

  
	
  6.2

  	
  Revisions to Allocations to Reflect Issuance of
  Partnership Interests

  	
  34

  
	
  Article 7

  	
  MANAGEMENT AND OPERATIONS OF
  BUSINESS

  	
  35

  
	
  7.1

  	
  Management

  	
  35

  
	
  7.2

  	
  Certificate of Limited Partnership

  	
  39

  
	
  7.3

  	
  Reimbursement of the General Partner

  	
  40

  
	
  7.4

  	
  Outside Activities of the General Partner

  	
  41

  
	
  7.5

  	
  Contracts with Affiliates

  	
  41

  
	
  7.6

  	
  Indemnification

  	
  42

  
	
  7.7

  	
  Liability of the General Partner and the Initial
  Limited Partner

  	
  44

  
	
  7.8

  	
  Other Matters Concerning the General Partner

  	
  45

  
	
  7.9

  	
  Title to Partnership Assets

  	
  46

  
	
  7.10

  	
  Reliance by Third Parties

  	
  46

  
	
  7.11

  	
  Loans By Third Parties

  	
  47

  
	
  Article 8

  	
  RIGHTS AND OBLIGATIONS OF LIMITED
  PARTNERS

  	
  47

  
	
  8.1

  	
  Limitation of Liability

  	
  47

  
	
  8.2

  	
  Management of Business

  	
  47

  
	
  8.3

  	
  Outside Activities of Limited Partners

  	
  48

  
	
  8.4

  	
  Return of Capital

  	
  48

  
	
  8.5

  	
  Rights of Limited Partners Relating to the
  Partnership

  	
  48

  
	
  8.6

  	
  Exchange Rights Agreements

  	
  49

  











 










 








 








 


	
  8.7

  	
  Conversion and Exchange of Special Limited Partner
  Interests. 

  	
  49

  
	
  Article 9

  	
  BOOKS, RECORDS, ACCOUNTING AND
  REPORTS

  	
  51

  
	
  9.1

  	
  Records and Accounting

  	
  51

  
	
  9.2

  	
  Fiscal Year

  	
  51

  
	
  9.3

  	
  Reports

  	
  51

  
	
  Article 10

  	
  TAX MATTERS

  	
  52

  
	
  10.1

  	
  Preparation of Tax Returns

  	
  52

  
	
  10.2

  	
  Tax Elections

  	
  52

  
	
  10.3

  	
  Tax Matters Partner

  	
  53

  
	
  10.4

  	
  Organizational Expenses

  	
  55

  
	
  10.5

  	
  Withholding

  	
  55

  
	
  Article 11

  	
  TRANSFERS AND WITHDRAWALS

  	
  56

  
	
  11.1

  	
  Transfer

  	
  56

  
	
  11.2

  	
  Transfer of the General Partner’s General Partner
  Interest

  	
  56

  
	
  11.3

  	
  Limited Partners’ Rights to Transfer

  	
  58

  
	
  11.4

  	
  Substituted Limited Partners

  	
  60

  
	
  11.5

  	
  Assignees

  	
  60

  
	
  11.6

  	
  General Provisions

  	
  61

  
	
  Article 12

  	
  ADMISSION OF PARTNERS

  	
  63

  
	
  12.1

  	
  Admission of Successor General Partner

  	
  63

  
	
  12.2

  	
  Admission of Additional Limited Partners

  	
  64

  
	
  12.3

  	
  Amendment of Agreement and Certificate of Limited Partnership

  	
  65

  











 










 

 


 


	
  Article 13

  	
  DISSOLUTION, LIQUIDATION AND
  TERMINATION

  	
  65

  
	
  13.1

  	
  Dissolution

  	
  65

  
	
  13.2

  	
  Winding Up

  	
  66

  
	
  13.3

  	
  Obligation to Contribute Deficit

  	
  67

  
	
  13.4

  	
  Rights of Limited Partners

  	
  68

  
	
  13.5

  	
  Notice of Dissolution

  	
  68

  
	
  13.6

  	
  Termination of Partnership and Cancellation of
  Certificate of Limited Partnership

  	
  68

  
	
  13.7

  	
  Reasonable Time for Winding-Up

  	
  68

  
	
  13.8

  	
  Waiver of Partition

  	
  69

  
	
  Article 14

  	
  AMENDMENT OF PARTNERSHIP AGREEMENT;
  MEETINGS

  	
  69

  
	
  14.1

  	
  Amendments

  	
  69

  
	
  14.2

  	
  Meetings of the Partners

  	
  70

  
	
  Article 15

  	
  GENERAL PROVISIONS

  	
  71

  
	
  15.1

  	
  Addresses and Notice

  	
  71

  
	
  15.2

  	
  Titles and Captions

  	
  71

  
	
  15.3

  	
  Pronouns and Plurals

  	
  71

  
	
  15.4

  	
  Further Action

  	
  72

  
	
  15.5

  	
  Binding Effect

  	
  72

  
	
  15.6

  	
  Creditors

  	
  72

  
	
  15.7

  	
  Waiver

  	
  72

  
	
  15.8

  	
  Counterparts

  	
  72

  
	
  15.9

  	
  Applicable Law

  	
  72

  
	
  15.10

  	
  Invalidity of Provisions

  	
  72

  
	
  15.11

  	
  Entire Agreement

  	
  72

  
	
  15.12

  	
  Merger

  	
  73

  






 








 








 


	
  15.13

  	
  No Rights as Stockholders

  	
  73

  
	
  Article 16

  	
  CLASS B UNITS

  	
  73

  
	
  16.1

  	
  Designation and Number

  	
  73

  
	
  16.2

  	
  Special Provisions. 

  	
  74

  
	
  16.3

  	
  Voting

  	
  75

  
	
  16.4

  	
  Conversion of Class B Units

  	
  76

  
	
  16.5

  	
  Profits Interests

  	
  78

  






 

 


EXHIBITS


Exhibit A   
–   Partners’ Contributions and Partnership Interests

Exhibit B    –   Allocations

Exhibit C    –   Certificate of Limited Partnership
















 










 








 








AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP

OF

PHILLIPS EDISON – ARC SHOPPING CENTER OPERATING PARTNERSHIP, L.P.


 


THIS AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF PHILLIPS EDISON – ARC SHOPPING CENTER OPERATING PARTNERSHIP,
L.P. (this “Agreement”) dated as of February 4, 2013, is entered into
among PHILLIPS EDISON SHOPPING CENTER OP GP, LLC, a Delaware limited liability
company, as general partner (the “General Partner”), PHILLIPS EDISON –
ARC SHOPPING CENTER REIT, INC., a Maryland corporation, as Limited Partner (the
“Initial Limited Partner”), and AMERICAN REALTY CAPITAL II ADVISORS,
LLC, a Delaware limited liability company, as Limited Partner (the “New
Limited Partner”), PE – ARC Special Limited Partner LLC, a Delaware limited
liability company (the “Special Limited Partner”), and the Limited
Partners party hereto from time to time.


RECITALS


WHEREAS, the General Partner and the Initial Limited
Partner formed Phillips Edison – ARC Shopping Center Operating Partnership,
L.P. as a limited partnership on December 3, 2009 pursuant to the Revised
Uniform Limited Partnership Act of the State of Delaware and filed a
certificate of limited partnership with the Secretary of State of the State of
Delaware (the “Certificate”). 


WHEREAS, the General Partner and the Initial Limited
Partner entered into the Agreement of Limited Partnership of the Partnership,
dated as of December 3, 2009, including any amendments thereto through the date
hereof (the “Original Agreement”). 


WHEREAS, the General Partner, the Initial Limited
Partner and the New Limited Partner wish to redesignate the Partnership
Interests and Partnership Units issued pursuant to the Original Agreement.


WHEREAS, the
General Partner and the Initial Limited Partner desire to amend and restate the
Original Agreement, which among other things adds the New Limited Partner and
the Special Limited Partner as parties to this Agreement.


NOW THEREFORE, in consideration of the mutual
covenants herein contained, and other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties do hereby agree that
the Original Agreement hereby is amended and restated in its entirety to read
as follows:


Article 1

DEFINED TERMS


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












1 




 










 








 








“Acquisition Expenses” 
means any and all expenses, exclusive of Acquisition Fees, incurred by the
General Partner, the Initial Limited Partner, the Operating Partnership, the
Advisor or any of their Affiliates (as such term is defined in the Advisory
Agreement) in connection with the selection, evaluation, acquisition,
origination, making or development of any Real Estate Assets, whether or not
acquired, including legal fees and expenses, travel and communications
expenses, brokerage fees, costs of appraisals, nonrefundable option payments on
property not acquired, accounting fees and expenses, title insurance premiums
and the costs of performing due diligence.


“Acquisition Fee” means the fee payable
to the Advisor or its assignees pursuant to Section 8.1 of the Advisory
Agreement. 


            “Act” means the Delaware
Revised Uniform Limited Partnership Act, as amended from time to time, and any
successor to such statute.


            “Additional Limited Partner”
means a Person that has executed and delivered an additional limited partner
signature page in the form attached hereto, has been admitted to the
Partnership as a Limited Partner pursuant to Section 4.3 hereof and that is
shown as such on the books and records of the Partnership.


            “Adjusted Capital Account Deficit”
means with respect to any Partner, the negative balance, if any, in such
Partner’s Capital Account as of the end of any relevant fiscal year, determined
after giving effect to the following adjustments:


(a)               
credit to such Capital Account any
portion of such negative balance which such Partner (i) is treated as obligated
to restore to the Partnership pursuant to the provisions of Section
1.704-1(b)(2)(ii)(c) of the Regulations, or (ii) is deemed to be obligated to
restore to the Partnership pursuant to the penultimate sentences of Sections
1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations; and


(b)              
debit to such Capital Account the
items described in Sections 1.704‐1(b)(2)(ii)(d)(4), (5) and (6) of the
Regulations.


“Adjustment
Event” has the meaning set forth in Section 16.1.


“Advisor”
means the New Limited Partner, its successors and assignees.


“Advisory Agreement” means the Amended
and Restated Advisory Agreement dated as of February 4, 2013, among the
Partnership and the Initial Limited Partner, as advisees, and the New Limited
Partner, as advisor, as the same may be amended, supplemented or restated from
time to time.


“Affected Gain” has the meaning set
forth in subparagraph 4(b) of Exhibit B.  


 “Affiliate” means,


                     (a)         with respect to
any individual Person, any member of the Immediate Family of such Person or a
trust established for the benefit of such member, or


 







2 




 










 








 








(b)              
with respect to any Entity, any Person which, directly or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, any such Entity. 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.


“Agreement” means this Amended and Restated
Agreement of Limited Partnership, as originally executed and as amended,
supplemented or restated from time to time, as the context requires.


“Articles of Incorporation” means the
Initial Limited Partner’s Articles of Incorporation, filed with the Maryland
State Department of Assessments and Taxation, or other organizational document
governing the Initial Limited Partner, as amended, supplemented or restated
from time to time.


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


“Available
Cash” means, with respect to the applicable period of measurement
(i.e., any period (other than the first period in which this calculation of
Available Cash is being made) beginning on the first day of the fiscal year,
quarter or other period commencing immediately after the last day of the fiscal
year, quarter or other applicable period for purposes of the prior calculation
of Available Cash for or with respect to which a distribution has been made,
and ending on the last day of the fiscal year, quarter or other applicable
period immediately preceding the date of the calculation), the excess, if any,
as of such date, of


(a)               
the gross cash receipts of the
Partnership for such period from all sources whatsoever, including the
following:


(i)                
all rents, revenues, income and
proceeds derived by the Partnership from its operations, including
distributions received by the Partnership from any Entity in which the
Partnership has an interest;


(ii)              
all proceeds and revenues received
by the Partnership on account of any sales of any Partnership property or as a
refinancing of or payment of principal, interest, costs, fees, penalties or
otherwise on account of any borrowings or loans made by the Partnership or
financings or refinancings of any property of the Partnership;


(iii)            
the amount of any insurance
proceeds and condemnation awards received by the Partnership;


(iv)            
all capital contributions and
loans received by the Partnership from its Partners;












3 




 










 

 


(v)              
all cash amounts previously reserved by the Partnership, to the extent
such amounts are no longer needed for the specific purposes for which such
amounts were reserved; and


(vi)            
the proceeds of liquidation of the
Partnership’s property in accordance with this Agreement;


over


(b)              
the sum of the following:


(v)              
all operating costs and expenses,
including taxes and other expenses of the properties directly and indirectly
held by the Partnership and capital expenditures made during such period
(without deduction, however, for any capital expenditures, charges for
Depreciation or other expenses not paid in cash or expenditures from reserves
described in clause (viii) below);


(vi)            
all costs and expenses expended or
paid during such period in connection with the sale or other disposition, or
financing or refinancing, of the property directly or indirectly held by the
Partnership or the recovery of insurance or condemnation proceeds;


(vii)          
all fees provided for under this
Agreement;


(viii)        
all debt service, including
principal and interest, paid during such period on all indebtedness (including
under any line of credit) of the Partnership;


(ix)            
all capital contributions,
advances, reimbursements, loans or similar payments made to any Person in which
the Partnership has an interest;


(x)              
all loans made by the Partnership
in accordance with the terms of this Agreement;


(xi)            
all reimbursements to the General
Partner or its Affiliates during such period; and


(xii)          
the amount of any new reserve or
reserves or increase in reserves established during such period which the
General Partner determines is necessary or appropriate in its sole and absolute
discretion.


Notwithstanding the foregoing, Available Cash shall
not include any cash received or reductions in reserves, or take into account
any disbursements made or reserves established, after commencement of the
dissolution and liquidation of the Partnership.


“Business
Combination” has the meaning set forth in Section 7.1(a)(iii)(D).


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









4 




 










 








 








“Capital Account” means with respect to
any Partner, the Capital Account maintained for such Partner in accordance with
the following provisions:


(a)       
to each Partner’s Capital Account there shall be credited;


(xiii)        
such Partner’s Capital
Contributions;


(xiv)        
such Partner’s distributive share
of Net Income, Net Property Gain and any items in the nature of income or gain
which are specially allocated to such Partner pursuant to paragraphs 1 and 2 of
Exhibit B; and


(xv)          
the amount of any Partnership
liabilities assumed by such Partner or which are secured by any asset
distributed to such Partner;


(c)               
to each Partner’s Capital Account
there shall be debited;


(v)              
the amount of cash and the Gross
Asset Value of any property distributed to such Partner pursuant to any
provision of this Agreement;


(vi)            
such Partner’s distributive share
of Net Losses, Net Property Loss and any items in the nature of expenses or
losses which are specially allocated to such Partner pursuant to paragraphs 1
and 2 of Exhibit B; and


(vii)          
the amount of any liabilities of
such Partner assumed by the Partnership or which are secured by any asset
contributed by such Partner to the Partnership; and


(d)              
if all or a portion of a
Partnership Interest is transferred in accordance with the terms of this
Agreement, the transferee shall succeed to the Capital Account of the
transferor to the extent it relates to the transferred Partnership Interest.


The foregoing provisions and the other provisions of
this Agreement relating to the maintenance of Capital Accounts are intended to
comply with Sections 1.704-1(b) and 1.704-2 of the Regulations, and shall be
interpreted and applied in a manner consistent with such Regulations. If the
General Partner shall reasonably determine that it is prudent to modify the
manner in which the Capital Accounts, or any debits or credits thereto
(including debits or credits relating to liabilities which are secured by
contributed or distributed assets or which are assumed by the Partnership, the
General Partner or any Limited Partner) are computed in order to comply with
such Regulations, the General Partner may make such modification; provided,
that, all allocations of Partnership income, gain, loss and deduction continue
to have 

“substantial economic effect” within the meaning of Section 704(b) of the Code
and that no Limited Partner is materially adversely affected by any such
modification.


“Capital
Contribution” means, with respect to any Partner, any cash, cash
equivalents or the Gross Asset Value of property (net of any liabilities
secured by contributed property that the Partnership is considered to assume or
take subject to under Section 752 of the Code) which such Partner contributes
or is deemed to contribute to the Partnership pursuant to Article 4 hereof.









5 




 










 








 








            “Capital
Transaction” means any sale, or other disposition (other than a deemed
disposition pursuant to Section 708(b)(1)(B) of the Code and the Regulations
thereunder) of all or substantially all of the assets and properties 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 and properties
of the Partnership.


“Cash
Amount” means an amount of cash per Partnership Unit equal to the value
of one share of Common Stock as determined under the applicable Exchange Rights
Agreement on the Valuation Date of the Common Stock Amount.


            “Cash Available for Distribution”
means the Available Cash other than Net Sales Proceeds.


“Certificate”
has the meaning set forth in the Recitals.


“Claims”
has the meaning set forth in Section 7.6(a)(i).


            “Class B Unit” means a
Partnership Unit which is designated as a Class B Unit of the Partnership.


“Class B Priority Return” means a 6%
cumulative, non-compounded, pre-tax annual return (based on a 365-day year).


“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 Stock” means the common
stock of the Initial Limited Partner, $.01 par value per share. Common Stock
may be issued in one or more classes or series in accordance with the terms of
the Articles of Incorporation. If, at any time, there is more than one class or
series of Common Stock, the term “Common Stock” shall, as the context requires,
be deemed to refer to the class or series of Common Stock that correspond to
the class or series of Partnership Interests for which the reference to Common
Stock is made.


            “Common Stock Amount” means
that number of shares of Common Stock equal to the product of (a) the number of
OP Units offered for exchange by an exchanging Partner, multiplied by
(b) the Exchange Factor as of the Valuation Date, provided, however,
that if the Initial Limited Partner or the Partnership issues to all holders of
Common Stock rights, options, warrants or convertible, exercisable or
exchangeable securities entitling the stockholders to subscribe for or purchase
Common Stock, or any other securities or property (collectively, the “rights”),
then the Common Stock Amount shall also include the rights that a holder of
that number of shares of Common Stock would be entitled to receive.


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









6 




 










 








 








           “Consent
of the Limited Partners” means the Consent of Limited Partners
(excluding for this purpose any Partnership Interests held by the General
Partner, any other Person of which the General Partner owns or controls more
than fifty percent (50%) of the voting interests and any Person directly or
indirectly owning or controlling more than fifty percent (50%) of the
outstanding voting interests of the General Partner) holding Percentage Interests
that are greater than fifty percent (50%) of the aggregate Percentage Interests
of all Limited Partners who are not excluded for the purposes hereof.


“Constituent Person” has the meaning set
forth in Section 16.4(d) hereof.


            “Contributed Property” means
each property, partnership interest, contract right or other asset, in such
form as may be permitted by the Act, contributed or deemed contributed to the
Partnership by any Partner, including any interest in any successor partnership
occurring as a result of a termination of the Partnership pursuant to Section
708 of Code.


“Conversion
Date” has the meaning set forth in Section 16.4(a) hereof.


            “Cost of Assets” means, with
respect to a Real Estate Asset, the purchase price, Acquisition Expenses,
capital expenditures and other customarily capitalized costs, but shall exclude
Acquisition Fees associated with such Real Estate Asset.


            “Debt” means, as to any
Person, as of any date of determination and without duplication, (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services; (b) all amounts owed by such Person to
banks or other Persons in respect of reimbursement obligations under letters of
credit, surety bonds and other similar instruments guaranteeing payment or
other performance of obligations by such Person; (c) all indebtedness for
borrowed money or for the deferred purchase price of property or services
secured by any lien on any property owned by such Person, to the extent
attributable to such Person’s interest in such property, even though such
Person has not assumed or become liable for the payment thereof; and (d)
obligations of such Person incurred in connection with entering into a lease
which, in accordance with generally accepted accounting principles, should be
capitalized.


           “Depreciation” means, with
respect to any asset of the Partnership for any fiscal year or other period,
the depreciation, depletion, amortization or other cost recovery deduction, as
the case may be, allowed or allowable for federal income tax purposes in
respect of such asset for such fiscal year or other period; provided, however,
that except as otherwise provided in Section 1.704-2 of the Regulations, if
there is a difference between the Gross Asset Value (including the Gross Asset
Value, as increased pursuant to paragraph (d) of the definition of Gross Asset
Value) and the adjusted tax basis of such asset at the beginning of such fiscal
year or other period, Depreciation for such asset shall be an amount that bears
the same ratio to the beginning Gross Asset Value of such asset as the federal
income tax depreciation, depletion, amortization or other cost recovery
deduction for such fiscal year or other period bears to the beginning adjusted
tax basis of such asset; provided  further, however, that if the
federal income tax depreciation, depletion, amortization or other cost recovery
deduction for such asset for such fiscal year or other period is zero,
Depreciation of such asset shall be determined with reference to the beginning
Gross Asset Value of such asset using any reasonable method selected by the
General Partner.









7 




 










 








 








“Distribution Date” has the meaning set
forth in Section 5.1(a).


“Economic
Hurdle” has the meaning set forth in Section 16.2(a)(ii)(A).


            “Effective Date” means the
date upon which the Registration Statement relating to the Initial Limited
Partner’s public offering of Common Stock has been declared effective by the
Securities and Exchange Commission.


            “Entity” means any general
partnership, limited partnership, corporation, joint venture, trust, business
trust, real estate investment trust, limited liability company, limited
liability partnership, cooperative or association.


“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended from time
to time (or any corresponding provisions of succeeding laws).


           “Exchange Factor” means 1.0; provided,
however, that if the Initial Limited Partner: (a) declares or pays a dividend
on its outstanding Common Stock in Common Stock or makes a distribution to all
holders of its outstanding Common Stock in Common Stock; (b) subdivides its
outstanding Common Stock; or (c) combines its outstanding Common Stock into a
smaller number of shares of Common Stock, the Exchange Factor shall be adjusted
by multiplying the Exchange Factor by a fraction, the numerator of which shall
be the number of shares of Common Stock issued and outstanding on the record
date for such dividend, contribution, 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 of Common Stock (determined without the above assumption)
issued and outstanding on the record date for such dividend, distribution,
subdivision or combination. Any adjustment to the Exchange Factor shall become
effective immediately after the effective date of such event retroactive to the
record date, if any, for such event.


           “Exchange Right” means the
exchange right of a Limited Partner described in Section 8.6 and to be set
forth in one or more Exchange Rights Agreements.


“Exchange
Rights Agreements” has the meaning set forth in Section 8.6(a).


            “General Partner” means
Phillips Edison – ARC Shopping Center OP GP, LLC, a Delaware limited liability
company, and any successor 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 GP
Units.


“GP
Unit” means a Partnership Unit which is designated as a GP Unit of the
Partnership.


          
“Gross Asset Value” means, with respect to any asset of the
Partnership, such asset’s adjusted basis for federal income tax purposes,
except as follows:


        
(a)          the initial Gross Asset Value of any asset contributed by a
Partner to the Partnership shall be the gross fair market value of such asset,
without reduction for 







8 




 










 

liabilities, as determined by
the contributing Partner and the Partnership on the date of contribution
thereof;


       
(b)           if the General Partner determines that an adjustment is necessary
or appropriate to reflect the relative economic interests of the Partners, the
Gross Asset Values of all Partnership assets shall be adjusted in accordance
with Sections 1.704-1(b)(2)(iv)(f) and (g) of the Regulations to equal their
respective gross fair market values, without reduction for liabilities, as
reasonably determined by the General Partner, as of the following times:


(v)              
a Capital Contribution (other than
a de minimis Capital Contribution) to the Partnership by a new or
existing Partner as consideration for a Partnership Interest;


(vi)            
the distribution by the
Partnership to a Partner of more than a de minimis amount of Partnership
assets as consideration for the repurchase or redemption of a Partnership
Interest;


(vii)          
the liquidation of the Partnership
within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Regulations; and


(viii)        
the grant of an interest in the
Partnership (other than a de minimis interest) as consideration for the
provision of services to or for the benefit of the Partnership by an existing
Partner acting in a partner capacity, or by a new Partner acting in a partner
capacity or in anticipation of becoming a Partner;


(e)               
the Gross Asset Values of
Partnership assets distributed to any Partner shall be the gross fair market
values of such assets (taking Section 7701(g) of the Code into account) without
reduction for liabilities, as determined by the General Partner as of the date
of distribution; and


(f)               
the Gross Asset Values of
Partnership assets shall be increased (or decreased) to reflect any adjustments
to the adjusted basis of such assets pursuant to Sections 734(b) or 743(b) of
the Code, but only to the extent that such adjustments are taken into account
in determining Capital Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of the
Regulations (as set forth in Exhibit B); provided, however,
that Gross Asset Values shall not be adjusted pursuant to this paragraph (d) to
the extent that the General Partner determines that an adjustment pursuant to
paragraph (b) above is necessary or appropriate in connection with a
transaction that would otherwise result in an adjustment pursuant to this
paragraph (d).


At all times, Gross Asset Values shall be adjusted by
any Depreciation taken into account with respect to the Partnership’s assets
for purposes of computing Net Income and Net Loss.


“Gross Proceeds”
means the aggregate purchase price of all shares of Common Stock sold for the
account of the Initial Limited Partner through an Offering, without deduction
for Organization and Offering Expenses. For the purpose of computing Gross
Proceeds, the purchase price of any share of Common Stock for which reduced
selling commissions are paid to (i) 







9 




 










 








 








Realty Capital
Securities, LLC or any successor dealer manager to the Initial Limited Partner
or (ii) a broker-dealer (where net proceeds to the Initial Limited Partner are
not reduced) shall be deemed to be the full amount of the offering price per
share of Common Stock pursuant to the Registration Statement for such Offering
without reduction.


“Incapacity” or “Incapacitated”
means,


           
(a)       as to any individual who is a Partner, death, total physical
disability or entry by a court of competent jurisdiction adjudicating him
incompetent to manage his person or his estate;


           
(b)       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;


           
(c)       as to any partnership which is a Partner, the dissolution and
commencement of winding up of the partnership;


           
(d)       as to any limited liability company which is a Partner, the
dissolution and commencement of winding up of the limited liability company; 


           
(e)       as to any estate which is a Partner, the distribution by the
fiduciary of the estate’s entire interest in the Partnership;


           
(f)       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


           
(g)      as to any Partner, the bankruptcy of such Partner, which shall be
deemed to have occurred when:


(v)              
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;


(vi)            
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;


(vii)          
the Partner executes and delivers
a general assignment for the benefit of the Partner’s creditors;


(viii)        
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 (ii) above;


(ix)            
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;









10 




 










 








 








(x)              
any proceeding seeking
liquidation, reorganization or other relief of or against such Partner under
any bankruptcy, insolvency or other similar law now or hereafter in effect has
not been dismissed within one hundred twenty (120) days after the commencement
thereof;


(xi)            
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


(xii)          
an appointment referred to in
clause (vii) which has been stayed is not vacated within ninety (90) days after
the expiration of any such stay.


“Include”, “includes” and
“including” shall be construed as if followed by the phrase
“without limitation”.


“Included Assets” means the Investments
owned as of the Termination Date or the Investment Liquidity Date, as
applicable, and any Investments acquired after the Termination Date or the
Investment Liquidity Date, as applicable, for which a contract to acquire such
Investment had been entered into by the Initial Limited Partner as of the
Termination Date or the Investment Liquidity Date, as applicable.


“Indemnitee” means


(a)     
any Person made a party to a proceeding by reason of:


(i)       
its status as the General Partner,


(ii)      
its status as a Limited Partner,


           
(iii)      its status as an investment advisor to the General Partner or the
Initial Limited Partner,


            
(iv)      its status as a trustee, director or officer of the Partnership, the
General Partner, the Initial Limited Partner, or the investment advisor to the
Initial Limited Partner,


            
(v)       its status as a director, trustee, member or officer of any other
Entity, each Person serving in such capacity at the request of the Partnership,
the General Partner or the Initial Limited Partner, or


           
(vi)       his or its liabilities, pursuant to a loan guarantee or otherwise,
for any indebtedness of the Partnership or any Subsidiary of the Partnership
(including any indebtedness which the Partnership or any Subsidiary of the
Partnership has assumed or taken assets subject to); and


          
(b)       such other Persons (including Affiliates of the General Partner, a
Limited Partner or the Partnership) as the General Partner may designate from
time to time 







11 




 










 








 








(whether before or after the event giving
rise to potential liability), in its sole and absolute discretion.


“Initial Limited Partner” means Phillips
Edison – ARC Shopping Center REIT Inc.


“Investment” or “Investments”
means any investment or investments by the Partnership, directly or indirectly,
in Properties, Loans or other Permitted Investments.


“Investment Liquidity Amount” has the
meaning set forth in Section 5.1(e).


“Investment Liquidity Date” means the
date on which an Investment Liquidity Event is consummated.


“Investment Liquidity Event” means a
liquidation or the sale of all or substantially all the Investments (regardless
of the form in which such sale shall occur, including through a merger or sale
of stock or other interests in an entity, and regardless of whether such
transaction is taxable or tax-free).  For the avoidance of doubt, an Investment
Liquidity Event includes a Business Combination and a Transaction (including a
merger in which the General Partner is the surviving entity).


“Investment Liquidity Value” has the
meaning set forth in Section 5.1(e).


“IRS” means the Internal Revenue Service
of the United States (or any successor organization).


“Liability
Shortfall” has the meaning set forth in subparagraph 4(d) of Exhibit
B. 


            “Lien” means any lien,
security interest, mortgage, deed of trust, charge, claim, encumbrance, pledge,
option, right of first offer or first refusal and any other right or interest
of others of any kind or nature, actual or contingent, or other similar
encumbrance of any nature whatsoever.


            “Limited Partner” means,
prior to the admission of the first Additional Limited Partner to the
Partnership, the Initial Limited Partner, the New Limited Partner, and
thereafter any Person named as a Limited Partner in Exhibit A, as such
Exhibit may be amended from time to time, upon the execution and delivery by
such Person of an additional limited partner signature page, or any Substituted
Limited Partner or Additional Limited Partner, in such Person’s capacity as a
Limited Partner of the Partnership.


           “Limited Partner Interest”
means a Partnership Interest of a Limited Partner in the Partnership
representing a fractional part of the Partnership Interests of all Partners and
includes any and all benefits to which the holder of such a Partnership
Interest may be entitled, as provided in this Agreement, together with all
obligations of such Person to comply with the terms and provisions of this
Agreement. A Limited Partner Interest may be expressed as a number of
Partnership Units (other than GP Units).


“Liquidating
Event” has the meaning set forth in Section 13.1(b) hereof.









12 




 










 








 








            “Liquidating
Gain” means net capital gain realized in connection with an actual or
hypothetical Capital Transaction, including the amount of any adjustment of the
Gross Asset Value of any Real Estate Asset which requires that the Capital
Accounts of the Partners be adjusted pursuant to Sections 1.704-1(b)(2)(iv)(e),
(f) and (g) of the Regulations.


“Liquidator”
has the meaning set forth in Section 13.2(a)(iii) hereof.


“Liquidity Event” means the first to
occur of the following: (i) an OP Unit Transaction, (ii) a Listing, or (iii) a
Termination Without Cause.


“Listing” means the listing of the
shares of Common Stock on a national securities exchange.


“Listing Note” has the meaning set forth
in Section 5.1(c) hereof.


“Loans” means mortgage loans and other
types of debt financing investments made by the Partnership, either directly or
indirectly, including through ownership interests in a joint venture or other
entity and including mezzanine loans, B-notes, bridge loans, convertible
mortgages, wraparound mortgage loans, construction mortgage loans, loans on
leasehold interests, and participations in such loans.


“Market Value” means the value
calculated based on the average market value of the shares of Common Stock
issued and outstanding at Listing over the 30 days beginning 180 days after the
shares of Common Stock are first listed or included for quotation.


            “Net Income” or “Net
Loss” means, for each fiscal year or other applicable period, an amount
equal to the Partnership’s taxable income or loss for such year or period as
determined for federal income tax purposes by the General Partner, 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) of the Code shall be included in taxable income or loss),
adjusted as follows:


           
(a)       by including as an item of gross income any tax-exempt income
received by the Partnership and not otherwise taken into account in computing
Net Income or Net Loss;


           
(b)       by treating as a deductible expense any expenditure of the
Partnership described in Section 705(a)(2)(B) of the Code (or which is treated
as a Section 705(a)(2)(B) expenditure pursuant to Section 1.704-1(b)(2)(iv)(i)
of the Regulations) and not otherwise taken into account in computing Net
Income or Net Loss, including amounts paid or incurred to organize the
Partnership (unless an election is made pursuant to Section 709(b) of the Code)
or to promote the sale of interests in the Partnership and by treating
deductions for any losses incurred in connection with the sale or exchange of
Partnership property disallowed pursuant to Section 267(a)(1) or 707(b) of the
Code as expenditures described in Section 705(a)(2)(B) of the Code;









13 




 










 

            (c)       by taking into account
Depreciation in lieu of depreciation, depletion, amortization and other cost
recovery deductions taken into account in computing taxable income or loss;


            (d)      
by computing gain or loss resulting from any disposition of Partnership
property with respect to which gain or loss is recognized for federal income
tax purposes by reference to the Gross Asset Value of such property rather than
its adjusted tax basis;


           
(e)        if an adjustment of the Gross Asset Value of any Partnership asset
which requires that the Capital Accounts of the Partners be adjusted pursuant
to Sections 1.704-1(b)(2)(iv)(e), (f) and (g) of the Regulations, by taking
into account the amount of such adjustment as if such adjustment represented
additional Net Income or Net Loss pursuant to Exhibit B;  


(f)       
by excluding Net Property Gain and Net Property Loss; and


           
(g)       by not taking into account in computing Net Income or Net Loss items
separately allocated to the Partners pursuant to paragraphs 2 and 3 of Exhibit
B. 


           “Net Investment” means (i) as
it relates to the Stockholders, the total amount of Gross Proceeds raised in
all Offerings; and (ii) as it relates to the Limited Partners (other than the
General Partner in its capacity as a Limited Partner) the total amount of
Capital Contributions.


          “Net Investment Balance” means
the excess, if any, of: (a) the Net Investment, over (b) in each case, without
duplication, (i) as it relates to the Stockholders, all prior distributions to
Stockholders of Net Sales Proceeds and any amounts paid by the Initial Limited
Partner to repurchase shares of Common Stock pursuant to the Initial Limited
Partner’s plan for redemption of Common Stock or otherwise; and (ii) as it
relates to the Limited Partners, all distributions pursuant to Section
5.1(b)(i) (other than distributions to the General Partner in its capacity as a
Limited Partner), and all proceeds or property used to redeem Limited Partner
Interests (except those held directly or indirectly the General Partner). 


“Net Property Gain” or “Net
Property Loss” means, for each fiscal year or other applicable period,
an amount equal to the Partnership’s taxable gain or loss for such year or
period from Sales, including the amount of any adjustment of the Gross Asset
Value of any Real Estate Asset which requires that the Capital Accounts of the
Partners be adjusted pursuant to Sections 1.704-1(b)(2)(iv)(e), (f) and (g) of
the Regulations.  For these purposes, the Gross Asset Value of the Real Estate
Assets shall reflect the market capitalization of the General Partner
(increased by the amount of any Partnership liabilities).


“Net Sales Proceeds” means, in the case
of a transaction described in clause (i)(A) of the definition of Sales, the
proceeds of any such transaction less the amount of selling expenses incurred
by or on behalf of the Partnership or the Initial Limited Partner, including
all real estate commissions, closing costs and legal fees and expenses.  In the
case of a transaction described in clause (i)(B) of the definition of Sales,
Net Sales Proceeds means the proceeds of any such transaction less the amount
of selling expenses incurred by or on behalf of the Partnership or the Initial
Limited Partner, including any legal fees and expenses and other selling
expenses incurred in connection with such transaction.  In the case of a
transaction described in clause (i)(C) of the 







14 




 










 

definition
of Sale, Net Sales Proceeds means the proceeds of any such transaction actually
distributed to the Partnership or the initial limited partner from the joint
venture less the amount of any selling expenses, including legal fees and
expenses incurred by or on behalf of the Partnership or the Initial Limited
Partner (other than those paid by the joint venture).


“New
Limited Partner” means American Realty Capital II Advisors, LLC. 


            “Nonrecourse Deductions” has
the meaning set forth in Sections 1.704-2(b)(1) and 1.704-2(c) of the
Regulations.


          
“Nonrecourse Liabilities” has the meaning set forth in Section
1.704-2(b)(3) of the Regulations.


“Note” means a non-interest bearing
promissory note which shall be repaid from the Net Sales Proceeds of each sale
of an Investment that occurs after the date of Listing or the Termination Date,
as applicable.  The Partnership shall be the sole obligor with respect to any
Note, and may pay at its discretion all or a portion of such Note in shares of
Common Stock, which may or may not be registered under the Securities Act of
1933, as amended, or cash.  Any Note shall not represent an indebtedness of the
Partnership, but rather shall be evidence of a distribution obligation of the
Partnership to the Special Limited Partner pursuant to the terms of Section
5.1.


“Offer” has the meaning set forth in
Section 11.2(c)(i).


“Offering” means any issuance of shares
of Common Stock for consideration.


“OP Unit” means a Partnership Unit which is designated as an
OP Unit of the Partnership.


“OP Unit Economic Balance” has the
meaning set forth in subparagraph 1(c)(ii) of Exhibit B. 


“OP Unit Transaction” means, in
connection with a Class B Unit, a transaction to which the Partnership or the
Initial Limited Partner shall be a party, including a merger, consolidation,
unit exchange, self-tender offer for all or substantially all OP Units or other
business combination or reorganization, or sale of all or substantially all of
the Partnership’s assets (but excluding any transaction which constitutes an
Adjustment Event and any merger in which the General Partner is the surviving
entity) in each case as a result of which OP Units shall be exchanged for or
converted into the right, or the holders of such Units shall otherwise be
entitled, to receive cash, securities or other property or any combination
thereof.


“Organization and Offering Expenses”
means all expenses incurred by or on
behalf of the Initial Limited Partner in connection with or in preparing the
Initial Limited Partner for registration of and subsequently offering and
distributing its shares of Common Stock to the public, whether incurred before,
on or after the date of the Advisory Agreement, which may include total
underwriting and brokerage discounts and commissions (including fees of the
underwriters’ attorneys); any expense allowance granted by the Initial Limited
Partner to the underwriter or any reimbursement of expenses of the underwriter
by the Initial Limited Partner; 







15 




 










 








 








expenses for printing,
engraving and mailing; compensation of employees while engaged in sales
activity; charges of transfer agents, registrars, trustees, escrow holders,
depositaries and experts; and expenses of qualification of the sale of the
securities under federal and state laws, including taxes and fees, accountants’
and attorneys’ fees.


“Original
Agreement” has the meaning set forth in the Recitals.


            “Partner” means the General
Partner or a Limited Partner, and “Partners” means the General Partner and the
Limited Partners collectively.  Solely for purposes of Exhibit B,
“Partner” shall include the Special Limited Partner.


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


          
“Partner Nonrecourse Debt 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 Section 1.704-2(i)(3) of
the Regulations.


          
“Partner Nonrecourse Deductions” has the meaning set forth in
Sections 1.704-2(i)(1) and (2) of the Regulations, 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
Section 1.704-2(i)(2) of the Regulations.


          
“Partnership” means the limited partnership formed under the Act
and pursuant to this Agreement, 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 or the provision of services to
or for the benefit of the Partnership by an existing Partner acting in a
partner capacity, or by a new Partner acting in a partner capacity or in
anticipation of becoming a 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 Partnership Units.


             “Partnership Minimum Gain”
has the meaning set forth in Section 1.704-2(b)(2) of the Regulations, 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 Section 1.704-2(d) of the Regulations.


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


               “Partnership Unit” means
a fractional, undivided share of the Partnership Interests of all Partners
issued hereunder.  Partnership Units consist of GP Units, OP Units, Class B
Units 


 








 








and any classes or series of Partnership Units
established after the date hereof. The number of Partnership Units outstanding
and the Percentage Interests in the Partnership represented by such Partnership
Units are set forth in Exhibit A, as such Exhibit may be amended from
time to time. The ownership of Partnership Units shall be evidenced by such
form of certificate for Partnership Units as the General Partner adopts from
time to time unless the General Partner determines that the Partnership Units
shall be uncertificated securities.


            “Partnership Year” means the
fiscal year of the Partnership, as set forth in Section 9.2 hereof.


            “Percentage Interest” means,
as to a Partner, the fractional part of the Partnership Interests owned by such
Partner and expressed as a percentage as specified in Exhibit A, as such
Exhibit may be amended from time to time. 


“Permitted Investments” means all
investments (other than Properties and Loans) in which the Partnership acquires
an interest, either directly or indirectly, including through ownership
interests in a joint venture or other entity, pursuant to the Certificate, this
Agreement and the investment objectives and policies adopted by the General
Partner from time to time, other than short-term investments acquired for
purposes of cash management, and that allow the General Partner to meet the
REIT Requirements.


“Permitted
Transferee” means any person to whom Partnership Units are Transferred
in accordance with Section 11.3.


“Person”
means an individual or Entity.


“Precontribution
Gain” has the meaning set forth in subparagraph 4(c) of Exhibit B. 


             “Priority Return” means a
7% cumulative, non-compounded, pre-tax annual return (based on a 365-day year).



             “Priority Return Balance”
means, as of any date, the excess, if any, of (a) a Priority Return from the
Effective Date until such Distribution Date on the Net Investment Balance
(calculated like simple interest on a daily basis based on a 365-day year),
over (b) distributions made under Sections 5.1(a) and (b)(ii); provided,
however, that for purposes of calculating the Priority Return Balance, the
Net Investment Balance shall be determined on a daily basis.


 “Property” or “Properties”
means any real property or properties transferred or conveyed to the
Partnership or any subsidiary of the Partnership, either directly or
indirectly, and/or any real property or properties transferred or conveyed to a
joint venture or partnership in which the Partnership is, directly or
indirectly, a co-venturer or partner.  


“PTP
Safe Harbors” has the meaning set forth in Section 11.6(f).


            “Quarter” means each of the
three-month periods ending on March 31, June 30, September 30 and December 31.









17 




 










 








 








           “Real
Estate Assets” means any investment by the Partnership in unimproved
and improved Real Property (including fee or leasehold interests, options and
leases), directly, through one or more subsidiaries or through a Joint Venture
(net of any interest held in such investment by a partner or member of a Joint
Venture unaffiliated with the Partnership).


           “Real Property” means (i)
land, (ii) rights in land (including leasehold interests), and (iii) any
buildings, structures, improvements, furnishings, fixtures and equipment
located on or used in connection with land and rights or interests in land.


            “Registration Statement”
means the Registration Statement on Form S-11 filed by the Initial Limited
Partner with the Securities and Exchange Commission, and any amendments thereof
at any time made, relating to the Common Stock.


            “Regulations” means the
final, temporary or proposed income tax regulations promulgated under the Code,
as such regulations may be amended from time to time (including corresponding
provisions of succeeding regulations).


“Regulatory
Allocations” means the allocations set forth in paragraph 2 of Exhibit
B. 


“REIT”
means a real estate investment trust as defined in Section 856 of the Code.


“REIT
Requirements” has the meaning set forth in Section 5.2.


“Restricted
Class B Units” has the meaning set forth in Section 16.2(a)(i) hereof.


“Safe Harbor” has the meaning set forth
in Section 10.2(d).


“Safe Harbor Election” has the meaning
set forth in Section 10.2(d).


“Safe Harbor Interests” has the meaning
set forth in Section 10.2(d).


“Sales” means (i) any transaction or
series of transactions whereby:  (A) the Initial Limited Partner or the
Partnership sells, grants, transfers, conveys, or relinquishes its direct or
indirect ownership of any Investment or portion thereof, including the transfer
of any Property that is the subject of a ground lease, and including any event
with respect to any Investment that gives rise to a significant amount of
insurance proceeds or condemnation awards; (B) the Initial Limited Partner or
the Partnership sells, grants, transfers, conveys, or relinquishes its
ownership of all or substantially all of the direct or indirect interest of the
Initial Limited Partner or the Partnership in any joint venture or partnership
in which it is, directly or indirectly, a co venturer or partner; or (C) any
joint venture or partnership (in which the Initial Limited Partner or the
Partnership is, directly or indirectly, a co-venturer or partner) sells,
grants, transfers, conveys, or relinquishes its direct or indirect ownership of
any Investment or portion thereof, including any event with respect to any
Investment that gives rise to insurance claims or condemnation awards, but (ii)
not including any transaction or series of transactions specified in clause
(i)(A), (i)(B), or (i)(C) above in which the proceeds of such transaction or
series of transactions are reinvested in one or more Investments within 180
days thereafter.


“Securities”
has the meaning set forth in Section 4.2(b).









18 




 










 








 








            “Special
Limited Partner” means PE – ARC Special Limited Partner LLC, a Delaware
limited liability company, which shall be a limited partner of the Partnership
and recognized as such under applicable Delaware law, but not a “Limited
Partner” within the meaning of this Agreement.


            “Special Limited Partner Interest”
means the interest of the Special Limited Partner in the Partnership
representing its right as the holder of an interest in distributions described
in Sections 5.1(b)(iii)(A), (c), (d), (e) and (f) (and any corresponding
allocations of income, gain, loss and deduction under this Agreement). 


“Stockholder”
means a holder of Common Stock.


“Stockholder Distributions” means any
distributions of money or other property by the Initial Limited Partner to
Stockholders, including distributions that may constitute a return of capital
for U.S. federal income tax purposes, with the exception of distributions paid
on shares of Common Stock repurchased or redeemed by the Initial Limited
Partner.


            “Subsidiary” means, with
respect to any Person, any corporation, partnership, limited liability company
or other entity of which a majority of (a) the voting power of the voting
equity securities; or (b) the outstanding equity interests (whether or not voting),
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.


“Surviving
General Partner” has the meaning set forth in Section 11.2(d)(i)(A).


“Tax
Allocations” means the allocations set forth in paragraph 4 of Exhibit
B. 


“Tax
Items” has the meaning set forth in subparagraph 4(a) of Exhibit B. 


“Termination”
means the termination of the Advisory Agreement.


            “Termination Amount” means
the Termination Liquidity Amount, the Termination Listing Amount or the amount
distributable pursuant to Section 5.1(d)(i) in the form of a Termination Note.


“Termination Date” means the date of
Termination.


“Termination
Liquidity Amount” has the meaning set forth in Section 5.1(d)(ii)(B).


“Termination
Listing Amount” has the meaning set forth in Section 5.1(d)(ii)(A).


“Termination
Note” has the meaning set forth in Section 5.1(d)(i).


            “Termination Without Cause”
means the termination of the Advisory Agreement as provided in the Advisory
Agreement by the Conflicts Committee (as defined in the Advisory Agreement) of
the Initial Limited Partner without cause .









19 




 










 








 








“Transaction” has the meaning set forth
in Section 11.2(c).


            “Transfer” as a noun, means
any sale, assignment, conveyance, pledge, hypothecation, gift, encumbrance or
other transfer, and as a verb, means to sell, assign, convey, pledge,
hypothecate, give, encumber or otherwise transfer.


“Unrestricted
Class B Units” has the meaning set forth in Section 16.2(a)(ii)
hereof.  


            “Valuation Date” means the
date of receipt by the Partnership and the General Partner of notice from an
exchanging Partner that such Partner is exercising its Exchange Rights or, if
such date is not a Business Day, the first Business Day thereafter.


            “Value” means the most
recent Offering price for a share of Common Stock less any selling commissions
and dealer manager fee that would be payable with respect to the sale of a share
of Common Stock.


Certain additional terms and phrases have the meanings
set forth in Exhibit B. 


Article 2

ORGANIZATIONAL MATTERS


2.1             
Formation 


The General Partner and the Initial Limited Partner
have formed the Partnership by filing the Certificate on December 3, 2009 in
the office of the Delaware Secretary of State.  The Partnership is a limited
partnership organized pursuant to the provision of the Act and upon the terms
and conditions set forth in this Agreement.  Except as expressly provided
herein to the contrary, the rights and obligations of the Partners and the
administration and termination of the Partnership shall be governed by the Act.
The Partnership Interest of each Partner shall be personal property for all
purposes.


2.2             
Name 


The name of the Partnership is Phillips Edison – ARC
Shopping Center Operating Partnership, 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 any Affiliate thereof. The
words “Limited Partnership”, “LP”, “Ltd.” or similar words, phrases 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 and shall notify the Limited Partners of such change in the next
regular communication to the Limited Partners.


2.3             
Registered Office and Agent;
Principal Office


The address of the registered office of the
Partnership in the State of Delaware and the name and address of the registered
agent for service of process on the Partnership in the State of Delaware is the
Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, 







20 




 










 








 








Wilmington, Delaware 19801. The principal office of the
Partnership shall be 11501 Northlake Drive, Cincinnati, Ohio 45249, 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.


2.4             
Power of Attorney


(a)               
Each Limited Partner and each
Assignee who accepts Partnership Units (or any rights, benefits or privileges
associated therewith) is deemed to irrevocably constitute and appoint 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:


(i)             
execute, swear to, acknowledge,
deliver, file and record in the appropriate public offices


(A)            
all certificates, documents and
other instruments (including this Agreement and the Certificate 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, including any documents necessary or advisable to
convey any Contributed Property to the Partnership;


(B)             
all instruments that the General
Partner or any Liquidator deems appropriate or necessary to reflect any
amendment, change, modification or restatement of this Agreement in accordance
with its terms;


(C)             
all conveyances and other instruments
or documents that the General Partner or any Liquidator deems appropriate or
necessary to reflect the dissolution and liquidation of the Partnership
pursuant to the terms of this Agreement, including 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 11, 12 or 13 hereof or the Capital
Contribution of any Partner;


(E)             
all certificates, documents and
other instruments relating to the determination of the rights, preferences and
privileges of Partnership Interest; and


(F)              
amendments to this Agreement as
provided in Article 14 hereof; 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 







21 




 










 








 








hereunder or is
consistent with the terms of this Agreement or appropriate or necessary, in the
sole discretion of the General Partner or any Liquidator, to effectuate the
terms or intent of this Agreement.


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


(b)             
(i)       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 Limited 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 Partnership Units and shall extend to such Limited Partner’s or
Assignee’s heirs, successors, assigns and personal representatives.


(ii)           
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.


(iii)         
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 therefore, 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.


(c)               
For the purposes of this Section
2.4, the term “Limited Partner” shall be deemed to include the Special Limited
Partner, unless the context otherwise requires.


2.5             
Term 


The term of the Partnership shall commence on the date
hereof and shall continue until December 31, 2099, unless the Partnership is
dissolved sooner pursuant to the provisions of Article 13 or as otherwise
provided by law.


Article 3

PURPOSE


3.1             
Purpose and Business


(a)               
The purpose and nature of the
business to be conducted by the Partnership is to conduct any business that may
be lawfully conducted by a limited partnership organized pursuant to the Act
including to engage in the following activities:









22 




 










 








 








(i)             
to acquire, hold, own, develop,
construct, improve, maintain, operate, sell, lease, transfer, encumber, convey,
exchange, and otherwise dispose of or deal with the properties described in the
prospectus contained in the Registration Statement;


(ii)           
to acquire, hold, own, develop,
construct, improve, maintain, operate, sell, lease, transfer, encumber, convey,
exchange, and otherwise dispose of or deal with real and personal property of
all kinds;


(iii)         
to enter into any partnership,
joint venture, corporation, limited liability company, trust or other similar
arrangement to engage in any of the foregoing;


(iv)         
to undertake such other activities
as may be necessary, advisable, desirable or convenient to the business of the
Partnership; and


(v)           
to engage in such other ancillary
activities as shall be necessary or desirable to effectuate the foregoing
purposes;


provided, however,
that such business shall be limited to and conducted in such a manner as to
permit the Initial Limited Partner at all times to be classified as a REIT,
unless the Initial Limited Partner determines not to qualify as a REIT or
ceases to qualify as a REIT for any reason not related to the business
conducted by the Partnership.


(b)              
The Partnership shall have all
powers necessary or desirable to accomplish the purposes enumerated.


3.2             
Powers 


(a)               
The Partnership is empowered to do
any and all acts and things necessary, appropriate, proper, advisable,
incidental to or convenient for the furtherance and accomplishment of the
purposes and business described herein and for the protection and benefit of
the Partnership including full power and authority to enter into, perform, and
carry out contracts of any kind, to borrow money and to issue evidences of
indebtedness, whether or not secured by mortgage, trust deed, pledge or other
Lien, and, directly or indirectly, to acquire, own, improve, develop and
construct real property, and lease, sell, transfer and dispose of real
property; 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 Initial Limited Partner to continue to qualify as a REIT, unless the
Initial Limited Partner otherwise ceases to qualify as a REIT;


(ii)           
could subject the Initial Limited
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
Initial Limited Partner or its securities, unless such action (or inaction)
shall have been specifically consented to by the Initial Limited Partner in
writing.




 








 








(b)              
The General Partner also is
empowered to do any and all acts and things necessary, appropriate or advisable
to ensure that the Partnership will not be classified as a “publicly traded
partnership” for the purposes of Section 7704 of the Code, including but not
limited to imposing restrictions on exchanges of Partnership Units.


Article 4

CAPITAL CONTRIBUTIONS


4.1             
Capital Contributions of the
Partners


(a)               
The Partners have made the Capital
Contributions as set forth in Exhibit A. 


(b)              
To the extent the Partnership
acquires any property by the merger of any other Person into the Partnership or
the contribution of assets by any other Person, Persons who receive Partnership
Interests in exchange for their interests in the Person merging into or
contributing assets to the Partnership shall become Limited Partners and shall
be deemed to have made Capital Contributions as provided in the applicable
merger agreement or contribution agreement and as set forth in Exhibit A,
as amended to reflect such deemed Capital Contributions.


(c)               
As of the effective date of this
Agreement, the Partnership shall have three classes of Partnership Units,
entitled “GP Units”, “OP Units” and “Class B Units”, respectively.  Any
Partnership Units representing Limited Partner Interests previously issued
hereunder are redesignated as OP Units, and any Partnership Units representing
General Partner Interests previously issued hereunder are redesignated as GP
Units.  The Class B Units shall have the same rights, privileges and
preferences as the OP Units, except as set forth in Article 16.  Each
Partner shall own Partnership Units in the amounts 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 exchanges, additional Capital Contributions, the issuance of
additional Partnership Units, transfers of Partnership Units or similar events
having an effect on any Partner’s Percentage Interest.


(d)              
The number of Partnership Units
held by the General Partner, in its capacity as general partner, as evidenced
by GP Units, shall be deemed to be the General Partner Interest.


(e)               
Except as otherwise may be
expressly provided herein, 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)
and 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.


4.2             
Additional Funds; Restrictions
on the General Partner


(a)              
(i)        The sums of money required to finance the business and affairs
of the Partnership shall be derived from the Capital Contributions made to the
Partnership by the Partners as set forth in Section 4.1 and from funds
generated from the operation and business of 







24 




 










 








 








the
Partnership, including rents and distributions directly or indirectly received
by the Partnership from any Subsidiary.


(ii)           
If additional financing is needed from
sources other than as set forth in Section 4.2(a)(i) for any reason, the
General Partner may, in its sole and absolute discretion, in such amounts and
at such times as it solely shall determine to be necessary or appropriate,


(A)            
cause the Partnership to issue
additional Partnership Interests and admit additional Limited Partners to the
Partnership in accordance with Section 4.3;


(B)             
make additional Capital
Contributions to the Partnership (subject to the provisions of Section 4.2(b));


(C)             
cause the Partnership to borrow
money, enter into loan arrangements, issue debt securities, obtain letters of
credit or otherwise borrow money on a secured or unsecured basis;


(D)            
make a loan or loans to the
Partnership (subject to Section 4.2(b)); or


(E)             
sell any assets or properties directly
or indirectly owned by the Partnership.


(iii)         
In no event shall any Limited
Partners be required to make any additional Capital Contributions or any loan
to, or otherwise provide any financial accommodation for the benefit of, the
Partnership.


(b)              
The Initial Limited Partner shall
not issue any debt securities, any preferred stock or any common stock
(including additional Common Stock (other than (i) as payment of the Common
Stock Amount or (ii) in connection with the conversion or exchange of
securities of the Initial Limited Partner solely in conversion or exchange for
other securities of the Initial Limited Partner)) or rights, options, warrants
or convertible, exercisable or exchangeable securities containing the right to
subscribe for or purchase any of the foregoing (collectively, “Securities”),
other than to all holders of Common Stock, unless the Initial Limited Partner
shall:


(i)             
in the case of debt securities,
lend to the Partnership the proceeds of or consideration received for such
Securities on the same terms and conditions, including interest rate and
repayment schedule, as shall be applicable with respect to or incurred in
connection with the issuance of such Securities and the proceeds of, or
consideration received from, any subsequent exercise, exchange or conversion
thereof (if applicable);


(ii)           
in the case of equity Securities
senior or junior to the Common Stock as to dividends and distributions on
liquidation, contribute to the Partnership the proceeds of or consideration
(including any property or other non-cash assets) received for such Securities
and the proceeds of, or consideration received from, any subsequent exercise,
exchange or conversion thereof (if applicable), and receive from the
Partnership, interests in the Partnership 







25 




 










 








 








in
consideration therefor with the same terms and conditions, including dividend,
dividend priority and liquidation preference, as are applicable to such
Securities; and


(iii)         
in the case of Common Stock or
other equity Securities on a parity with the Common Stock as to dividends and
distributions on liquidation (including Common Stock or other Securities
granted as a stock award to directors and officers of the Initial Limited
Partner or directors, officers or employees of its Affiliates in consideration
for services or future services, and Common Stock issued pursuant to a dividend
reinvestment plan or issued to enable the Initial Limited Partner to make
distributions to satisfy the REIT Requirements), contribute to the Partnership
the proceeds of or consideration (including any property or other non-cash
assets, including services) received for such Securities and the proceeds of,
or consideration received from, any subsequent exercise, exchange or conversion
thereof (if applicable), and receive from the Partnership a number of additional
Partnership Units in consideration therefor equal to the product of


(A)            
the number of shares of Common
Stock or other equity Securities issued by the Initial Limited Partner,
multiplied by


(B)             
a fraction the numerator of which
is one and the denominator of which is the Exchange Factor in effect on the
date of such contribution.


4.3             
Issuance of Additional
Partnership Interests; Admission of Additional Limited Partners


(a)               
In addition to any Partnership
Interests issuable by the Partnership pursuant to Section 4.2, the General
Partner is authorized to cause the Partnership to issue additional Partnership
Interests (or options therefore) in the form of Partnership Units or other
Partnership Interests in one or more series or classes, or in one or more
series of any such class senior, on a parity with, or junior to the Partnership
Units to any Persons at any time or from time to time, on such terms and
conditions, as the General Partner shall establish in each case in its sole and
absolute discretion subject to Delaware law, including (i) the allocations of
items of Partnership income, gain, loss, deduction and credit to each class or
series of Partnership Interests, (ii) the right of each class or series of
Partnership Interests to share in Partnership distributions, and (iii) the
rights of each class or series of Partnership Interest upon dissolution and
liquidation of the Partnership; provided, however, that, no such
Partnership Interests shall be issued to the General Partner unless either (A)
the Partnership Interests are issued in connection with the grant, award, or
issuance of Common Stock or other equity interests in the General Partner
having designations, preferences and other rights such that the economic
interests attributable to such Common Stock or other equity interests are
substantially similar to the designations, preferences and other rights (except
voting rights) of the Partnership Interests issued to the General Partner in
accordance with this Section 4.3(a) or (B) the additional Partnership Interests
are issued to all Partners holding Partnership Interests in the same class in
proportion to their respective Percentage Interests in such class, without any
approval being required from any Limited Partner or any other Person; provided
further, however, that:


(i)             
such issuance does not cause the
Partnership to become, with respect to any employee benefit plan subject to
Title I of ERISA or Section 4975 of the Code, a “party in 







26 




 










 








 








interest”
(as defined in Section 3(14) of ERISA) or a “disqualified person” (as defined
in Section 4975(e) of the Code); and


(ii)           
such issuance would not cause any
portion of the assets of the Partnership to constitute assets of any employee
benefit plan pursuant to Section 2510.3-101 of the regulations of the United
States Department of Labor.


(b)              
Subject to the limitations set
forth in Section 4.3(a), the General Partner may take such steps as it, in its
sole and absolute discretion, deems necessary or appropriate to admit any
Person as a Limited Partner of the Partnership or to issue any Partnership
Interests, including amending the Certificate, Exhibit A or any other
provision of this Agreement.


4.4             
Contribution of Proceeds of
Issuance of Common Stock


In connection with any offering, grant, award, or
issuance of Common Stock or securities, rights, options, warrants or
convertible or exchangeable securities pursuant to Section 4.2, the Initial
Limited Partner shall make aggregate Capital Contributions to the Partnership
of the proceeds raised in connection with such offering, grant, award, or
issuance, including any property issued to the Initial Limited Partner pursuant
to a merger or contribution agreement in exchange for Common Stock; provided,
however, that if the proceeds actually received by the Initial Limited Partner
are less than the gross proceeds of such offering, grant, award, or issuance as
a result of any underwriter’s discount, commission, or fee or other expenses
paid or incurred in connection with such offering, grant, award, or issuance,
then the Initial Limited Partner shall make a Capital Contribution to the
Partnership in the amount equal to the sum of (i) the net proceeds of such
issuance plus (ii) an intangible asset in an amount equal to the capitalized
costs of the Initial Limited Partner relating to such issuance of Common Stock. 
Upon any such Capital Contribution by the Initial Limited Partner, the Capital
Account of the Initial Limited Partner shall be increased by the amount of its
Capital Contribution as described in the previous sentence.


4.5             
Repurchase of Common Stock


(a)               
If the Initial Limited Partner
shall elect to purchase from its stockholders Common Stock for the purpose of
delivering such Common Stock to satisfy an obligation under any dividend
reinvestment plan adopted by the Initial Limited Partner, any employee stock
purchase plan adopted by the Initial Limited Partner, or for any other purpose,
the purchase price paid by the Initial Limited Partner for such Common Stock
and any other expenses incurred by the Initial Limited Partner in connection
with such purchase shall be considered expenses of the Partnership and shall be
reimbursed to the Initial Limited Partner, subject to the condition that:


(i)             
if such Common Stock subsequently
is to be sold by the Initial Limited Partner, the Initial Limited Partner shall
pay to the Partnership any proceeds received by the Initial Limited Partner
from the sale of such Common Stock (provided that an exchange of Common Stock
for Partnership Units pursuant to the applicable Exchange Rights Agreement
would not be considered a sale for such purposes); and


(ii)           
if such Common Stock is not
re-transferred by the Initial Limited Partner within 30 days after the purchase
thereof, the Initial Limited Partner shall cause the Partnership to 







27 




 










 








 








cancel a number of Partnership Units held by the Initial
Limited Partner (as applicable) equal to the product of


(A)            
the number of shares of such
Common Stock, multiplied by


(B)             
a fraction, the numerator of which
is one and the denominator of which is the Exchange Factor in effect on the
date of such cancellation.


(b)              
If the Initial Limited Partner
purchases shares of Common Stock from the Trust (as from time to time defined
in the Articles of Incorporation), the Partnership will purchase from the
Initial Limited Partner a number of Partnership Units, at a price per
Partnership Unit equal to the price per share of Common Stock paid by the
Initial Limited Partner, equal to the product of


(i) the number of shares of Common Stock purchased by the
Initial Limited Partner from the Trust, multiplied by


(ii) a fraction, the numerator of which is one and the
denominator of which is the Exchange Factor in effect on the date of such
purchase.


4.6             
No Third-Party Beneficiary


No creditor or other third party having dealings with
the Partnership shall have the right to enforce the right or obligations of any
Partner to make Capital Contributions or loans or to pursue any other right or
remedy hereunder or at law or in equity, it being understood and agreed that
the provisions of this Agreement shall be solely for the benefit of, and may be
enforced solely by, the parties hereto and their respective successors and
assigns.


4.7             
No Interest; No Return


(a)               
No Partner shall be entitled to
interest on its Capital Contribution or on such Partner’s Capital Account.


(b)              
Except as provided herein or by
law, no Partner shall have any right to demand or receive the return of its
Capital Contribution from the Partnership.


4.8             
No Preemptive Rights. 


Subject to any preemptive rights that may be granted
pursuant to Section 4.3 hereof, no Person shall have any preemptive or other
similar right with respect to


(a)               
additional Capital Contributions
or loans to the Partnership; or


(b)              
issuance or sale of any
Partnership Units or other Partnership Interests.









28 




 










 

Article 5

DISTRIBUTIONS


5.1             
Distributions 


(a)               
Cash Available for Distribution.  Subject to the provisions of Sections 5.3, 5.4,
12.2(c) and 13.2, the General Partner shall cause the Partnership to
distribute, at such times as the General Partner shall determine (each a “Distribution
Date”), an amount of Cash Available for Distribution, determined by the
General Partner in its sole discretion to the Partners holding GP Units, OP
Units and/or Class B Units who are Partners on the applicable Partnership
Record Date, in accordance with each such Partner’s respective Percentage
Interest.  


(b)              
Net Sales Proceeds.  Subject to the provisions of Sections 5.1(f), 5.3,
5.4, 12.2(c) and 13.2, Net Sales Proceeds shall be distributed as follows:


(i)             
First, 100% to the Partners holding GP Units and/or OP
Units in proportion to each such Partner’s respective Percentage Interest with
respect to such GP Units and/or OP Units until the Net Investment Balance is
zero;


(ii)           
Second, 100% to the Partners holding GP Units and/or OP
Units in proportion to each such Partner’s respective Percentage Interest with
respect to such GP Units and/or OP Units until such Partners have received in
the aggregate, pursuant to this Section 5.1(b)(ii) and Section 5.1(a), an
amount such that the Priority Return Balance is zero; and


(iii)         
Thereafter, (A) 15% to the Special Limited Partner, and (B) 85%
to be distributed to the Partners holding GP Units, OP Units and/or Class B
Units in proportion to their respective Percentage Interests with respect to
such GP Units, OP Units and/or Class B Units.


(c)               
Listing Amounts.  Upon a Listing (other than a Listing as
contemplated in Section 5.1(d)(ii)(A)) and subject to Section 5.1(f), the
General Partner shall cause the Partnership to distribute an amount to the
Special Limited Partner in redemption of the Special Limited Partner Interest
in the form of a Note (the “Listing Note”) equal to 15% of the amount,
if any, by which (i) the sum of (A) the Market Value of all issued and
outstanding shares of Common Stock plus (B) the sum of all Stockholder
Distributions paid by the Initial Limited Partner prior to Listing, exceeds
(ii) the sum of (Y) the total Gross Proceeds in all Offerings plus (Z) the
total amount of cash that, if distributed to those Stockholders who purchased
shares of Common Stock in an Offering, would have provided such Stockholders a
Priority Return on the Gross Proceeds raised in all such Offerings. 
Notwithstanding anything herein to the contrary, in accordance with Section 736
of the Code, the Listing Note shall be disregarded for applicable income tax
purposes and the Special Limited Partner shall continue to be treated as a partner
of the Partnership in respect of its Special Limited Partner Interest for such
purposes until the Partnership has satisfied all of its obligations under the
Listing Note.  Without limiting the foregoing, the Special Limited Partner
shall not be required to accrue interest on the Listing Note in income and the
Partnership shall not deduct such interest for such purposes; provided, that,
any cash or property paid to the Special Limited Partner with respect to such
interest shall be reported to the Special Limited Partner on Internal Revenue
Service Schedule K-1 to Form 1065 (or such successor schedule or form).  









29 




 










 

(d)              
Termination Amounts. 


(i)             
Upon a Termination and subject to
Sections 5.1(d)(ii) and (f), the General Partner shall cause the Partnership to
distribute an amount to the Special Limited Partner in redemption of the
Special Limited Partner Interest in the form of a Note (the “Termination
Note”) equal to 15% of the amount, if any, by which (A) the sum of (1) the
fair market value (determined by appraisal as of the Termination Date) of the
Investments on the Termination Date, minus (2) any Loans secured by such
Investments, plus (3) the sum of all Stockholder Distributions paid by the
Initial Limited Partner through the Termination Date, minus (4) any amounts
distributable as of the Termination Date to the Limited Partners who received
Partnership Units in connection with the contribution of any Investments
(including cash used to acquire Investments) to the Partnership, upon the
liquidation or sale of such Investments (assuming the liquidation or sale of
such Investments on the Termination Date), exceeds (B) the sum of (1) the Gross
Proceeds raised in all Offerings through the Termination Date (less
amounts paid on or prior to the Termination Date to purchase or redeem any
shares of Common Stock pursuant to the Initial Limited Partner’s share
repurchase program) plus (2) the total amount of cash that, if distributed to
those Stockholders who purchased shares of Common Stock in an Offering on or
prior to the Termination Date, would have provided such Stockholders a Priority
Return on the Gross Proceeds raised in all Offerings through the Termination
Date, measured for the period from inception through the Termination Date. 
Notwithstanding anything herein to the contrary, in accordance with Section 736
of the Code, the Termination Note shall be disregarded for applicable income
tax purposes and the Special Limited Partner shall continue to be treated as a
partner of the Partnership in respect of its Special Limited Partner Interest
for such purposes until the Partnership has satisfied all of its obligations
under the Termination Note.  Without limiting the foregoing, the Special
Limited Partner shall not be required to accrue interest on the Termination
Note in income and the Partnership shall not deduct such interest for such
purposes; provided, that, any cash or property paid to the Special Limited
Partner with respect to such interest shall be reported to the Special Limited
Partner on Internal Revenue Service Schedule K-1 to Form 1065 (or such
successor schedule or form).


(ii)           
Upon a Termination and subject to
Section 5.1(f), the Special Limited Partner may elect to receive, in lieu of
its right to receive the Termination Note, either:


(A)            
If there is a Listing subsequent
to the Termination Date, then the General Partner shall cause the Partnership
to distribute an amount to the Special Limited Partner in redemption of the
Special Limited Partner Interest, payable in one or more payments solely out of
Net Sales Proceeds (the “Termination Listing Amount”), equal to 15% of
the amount, if any, by which (1) the sum of (w) the fair market value
(determined by appraisal as of the date of Listing) of the Included Assets,
minus (x) any Loans secured by the Included Assets, plus (y) the sum of
all Stockholder Distributions paid by the Initial Limited Partner through the
date of Listing on shares of Common Stock issued through the Termination Date,
minus (z) any amounts distributable as of the date of Listing to the Limited
Partners who received Partnership Units in connection with the contribution of
any Included Assets (including cash used to acquire Included Assets) to the
Partnership, upon the liquidation or sale of such Included Assets (assuming the








30 




 










 








 








liquidation or sale of such Included Assets on the
date of Listing), exceeds (2) the sum of (y) the Gross Proceeds raised in all
Offerings through the Termination Date (less amounts paid on or prior to the
date of Listing to purchase or redeem any shares of Common Stock on or prior to
the Termination Date pursuant to the Initial Limited Partner’s share repurchase
program), plus (z) the total amount of cash that, if distributed to those
Stockholders who purchased shares of Common Stock in an Offering on or prior to
the Termination Date, would have provided such Stockholders a Priority Return
on the Gross Proceeds raised in all Offerings through the Termination Date,
measured for the period from inception of the Initial Limited Partner through
the date of Listing. 


(B)             
If there is an Investment
Liquidity Event subsequent to the Termination Date, then the General Partner
shall cause the Partnership to distribute an amount to the Special Limited
Partner in redemption of the Special Limited Partner Interest, payable in one
or more payments solely out of Net Sales Proceeds (the “Termination
Liquidity Amount”), equal to 15% of the amount, if any, by which (1) the
sum of (w) the fair market value (determined by appraisal as of the Investment
Liquidity Date) of the Included Assets, minus (x) any Loans secured by the
Included Assets, plus (y) the sum of all Stockholder Distributions paid by the
Initial Limited Partner through the Investment Liquidity Date on shares of
Common Stock issued through the Termination Date, minus (z) any amounts
distributable as of the Investment Liquidity Date to the Limited Partners who
received Partnership Units in connection with the contribution of any Included
Assets (including cash used to acquire Included Assets) to the Partnership,
upon the liquidation or sale of such Included Assets (assuming the liquidation
or sale of such Included Assets on the Investment Liquidity Date), exceeds (2)
the sum of (y) the Gross Proceeds raised in all Offerings through the
Termination Date (less amounts paid on or prior to the Investment Liquidity
Date to purchase or redeem any shares of Common Stock on or prior to the
Termination Date pursuant to the Initial Limited Partner’s share repurchase
program), plus (z) the total amount of cash that, if distributed to those
Stockholders who purchased shares of Common Stock in an Offering on or prior to
the Termination Date, would have provided such Stockholders Priority Return on
the Gross Proceeds raised in all Offerings through the Termination Date,
measured for the period from inception of the Initial Limited Partner through
the Investment Liquidity Date.


(e)               
Investment Liquidity Amounts.  Upon an Investment Liquidity Event and subject to
Section 5.1(f), the General Partner shall cause the Partnership to distribute
an amount to the Special Limited Partner in redemption of the Special Limited
Partner Interest, payable in one or more payments solely out of Net Sales
Proceeds (the “Investment Liquidity Amount”), equal to 15% of the
amount, if any, by which (A) the sum of (1) the fair market value of the Included
Assets or all issued and outstanding shares of Common Stock as determined by in
good faith by the Initial Limited Partner as of the Investment Liquidity Date
(the “Investment Liquidity Value”), plus (2) the sum of all Stockholder
Distributions paid by the Initial Limited Partner through the Investment
Liquidity Date, exceeds (B) the sum of (1) the Gross Proceeds raised in
all Offerings through the Investment Liquidity Date (less amounts paid on or
prior to the 







31 




 










 








 








Investment Liquidity Date to purchase or
redeem any shares of Common Stock pursuant to the Initial Limited Partner’s
share repurchase program) plus (2) the total amount of cash that, if
distributed to those Stockholders who purchased shares of Common Stock in an
Offering on or prior to the Investment Liquidity Date, would have provided such
Stockholders a Priority Return on the Gross Proceeds raised in all Offerings
through the Investment Liquidity Date, measured for the period from inception
of the Initial Limited Partner through the Investment Liquidity Date.


(f)               
Coordination. 


(i)             
Any Net Sales Proceeds paid to the
Special Limited Partner pursuant to Section 5.1(b)(iii)(A) prior to a Listing
shall reduce dollar for dollar the amount of a Listing Note to be issued and
distributed pursuant to Section 5.1(c).  If the Special Limited Partner
receives a Listing Note pursuant to Section 5.1(c), (A) the Special Limited
Partner would no longer be entitled to receive distributions of Net Sales
Proceeds pursuant to Section 5.1(b)(iii)(A), a Termination Amount pursuant to
Section 5.1(d) or the Investment Liquidity Amount pursuant to Section 5.1(e)
and (B) any Net Sales Proceeds received by the Partnership after the Listing
shall be applied first to satisfy the Partnership’s obligation to make
distributions pursuant to the Listing Note.


(ii)           
Any Net Sales Proceeds paid to the
Special Limited Partner pursuant to Section 5.1(b)(iii)(A) prior to the
Termination Date shall reduce dollar for dollar the Termination Amount to be
distributed pursuant to Section 5.1(d).  If the Special Limited Partner
receives, or is entitled to receive, a Termination Amount pursuant to Section
5.1(d), (A) the Special Limited Partner would no longer be entitled to receive
distributions of Net Sales Proceeds pursuant to Section 5.1(b)(iii)(A), a Listing
Note pursuant to Section 5.1(c) or the Investment Liquidity Amount pursuant to
Section 5.1(e)  and (B) any Net Sales Proceeds received by the Partnership
after the Termination Date, in connection with a Termination Note, the date of
the subsequent Listing, in connection with the Termination Listing Amount, and
the Investment Liquidity Date, in connection with the Termination Liquidity
Amount, shall be applied first to satisfy the Partnership’s obligation to make
distributions pursuant to Section 5.1(d).


(iii)         
Any Net Sales Proceeds paid to the
Special Limited Partner pursuant to Section 5.1(b)(iii)(A) prior to an
Investment Liquidity Date shall reduce dollar for dollar the Investment
Liquidity Amount to be issued and distributed pursuant to Section 5.1(e).  If
the Special Limited Partner is entitled to receive an Investment Liquidation
Amount pursuant to Section 5.1(e), (A) the Special Limited Partner would no
longer be entitled to receive distributions of Net Sales Proceeds pursuant to
Section 5.1(b)(iii)(A), a Listing Note pursuant to Section 5.1(c) or a
Termination Amount pursuant to Section 5.1(d) and (B) any Net Sales Proceeds
received by the Partnership as a result of or after the Investment Liquidity
Event shall be applied first to satisfy the Partnership’s obligation to make
distributions pursuant to Section 5.1(e).


(iv)         
If the General Partner chooses in
its discretion to satisfy all or a portion of the distributions required to be
made to the Special Limited Partner pursuant to a Listing Note or Termination Note
with shares of Common Stock, the amount of the Listing Note or 







32 




 










 

Termination Note due to the Special Limited Partner shall
be reduced by (y) the Market Value, with respect to the Listing Note, and (z)
the fair market value, with respect to the Termination Note, of the Common
Stock on the date such Common Stock is issued to the Special Limited Partner.


(v)           
If the Special Limited Partner
converts all or a portion of its Special Limited Partner Interest into OP Units
pursuant to Section 8.7(a), the amount of the Listing Note or Termination Note
due to the Special Limited Partner shall be reduced by an amount equal to the
product of (i) the number of OP Units issued in the conversion multiplied by
(ii) the product of (A) the Value of one share of Common Stock on the date of
conversion multiplied by (B) the Exchange Factor.  If the Special
Limited Partner contributes its Special Limited Partner Interest to the
Partnership in exchange for OP Units pursuant to Section 8.7(b), the Special
Limited Partner shall no longer be entitled the Listing Note, the Termination
Note, the Termination Listing Amount, the Termination Liquidity Amount or the
Investment Liquidity Amount or distributions of Net Sales Proceeds in respect
of the Listing Note, the Termination Note, the Termination Listing Amount, the
Termination Liquidity Amount or the Investment Liquidity Amount pursuant to
Sections 5.1(f)(ii) or (iii), as the case may be.


(vi)         
If the priority distribution of
Net Sales Proceeds to the Special Limited Partner pursuant to this Section
5.1(f) prevents the Partnership from being able to distribute sufficient
amounts to the Initial Limited Partner pursuant to Section 5.1(b) to enable the
Initial Limited Partner to satisfy the REIT Requirement, the General Partner
may in its sole discretion cause the Partnership to distribute some or all of
the Net Sales Proceeds subject to a priority distribution pursuant to this
Section 5.1(f) to the Initial Limited Partner in an amount sufficient to enable
the Initial Limited Partner to pay dividends to the Stockholders in order to
satisfy the REIT Requirements.


(g)              
In no event may any Partner
receive a distribution pursuant to Sections 5.1(a) or (b) with respect to a
Partnership Unit if such Partner is entitled to receive a distribution with
respect to Common Stock for which such a Partnership Unit has been exchanged.


5.2             
Qualification as a REIT


The General Partner shall use its best efforts to
cause the Partnership to distribute sufficient amounts under this Article 5 to
enable the Initial Limited Partner to pay dividends to the Stockholders that
will enable the Initial Limited Partner to


(a)              
satisfy the requirements for
qualification as a REIT under the Code and Regulations (“REIT Requirements”),
and


(b)             
avoid any federal income or excise
tax liability;


provided, however,
that the General Partner shall not be bound to comply with this covenant to the
extent such distributions would


(i)             
violate applicable Delaware law,
or









33 




 










 








 








(ii)           
contravene the terms of any notes,
mortgages or other types of debt obligations to which the Partnership may be
subject in conjunction with borrowed funds.


5.3             
Withholding 


With respect to any withholding tax or other similar
tax liability or obligation to which the Partnership may be subject as a result
of any act or status of any Partner or the Special Limited Partner or to which
the Partnership becomes subject with respect to any Partnership Unit or the
Special Limited Partner Interest, the Partnership shall have the right to
withhold amounts distributable pursuant to this Article V to such Partner or
the Special Limited Partner or with respect to such Partnership Units or the
Special Limited Partner Interest, to the extent of the amount of such
withholding tax or other similar tax liability or obligation pursuant to the
provisions contained in Section 10.5, and the amount of any withholding shall
reduce the right of such Partner or the Special Limited Partner to future
distribution to the extent provided in Section 10.5.


5.4             
Additional Partnership
Interests


If the Partnership issues Partnership Interests in
accordance with Section 4.2 or 4.3, the distribution priorities set forth in
Section 5.1 shall be amended, as necessary, to reflect the distribution
priority of such Partnership Interests and corresponding amendments shall be
made to the provisions of Exhibit B. 


Article 6

ALLOCATIONS


6.1             
Allocations 


The Net Income, Net Loss, Net Property Gain, Net
Property Loss and other Partnership items shall be allocated pursuant to the
provisions of Exhibit B. 


6.2             
Revisions to Allocations to
Reflect Issuance of Partnership Interests


If the Partnership issues Partnership Interests to the
General Partner or any additional Limited Partner pursuant to Article IV, the
General Partner shall make such revisions to this Article 6 and Exhibit B
as it deems necessary to reflect the terms of the issuance of such Partnership
Interests, including making preferential allocations to classes of Partnership
Interests that are entitled thereto. Such revisions shall not require the
consent or approval of any other Partner.









34 




 










 

Article 7

MANAGEMENT AND OPERATIONS OF BUSINESS


7.1             
Management 


(a)               
(i)        Except as otherwise expressly provided in this Agreement, full,
complete and exclusive discretion to manage and control the business and
affairs of the Partnership are and shall be 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.


(ii)           
The General Partner may not be
removed by the Limited Partners with or without cause.


(iii)         
In addition to the powers now or
hereafter granted a general partner of a limited partnership under applicable
law or which are granted to the General Partner under any other provision of
this Agreement, the General Partner, subject to Section 7.11, shall have full
power and authority to do all things deemed necessary or desirable by it to
conduct the business of the Partnership, to exercise all powers set forth in
Section 3.2 hereof and to effectuate the purposes set forth in Section 3.1
hereof, including:


(A)            
(1)       the making of any expenditures, the lending or borrowing of
money, including making prepayments on loans and borrowing money to permit the
Partnership to make distributions to its Partners in such amounts as will
permit the General Partner (so 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 Stockholders in amounts sufficient to permit the General Partner to
maintain REIT status,


(2)              
the assumption or guarantee of, or
other contracting for, indebtedness and other liabilities,


(3)              
the issuance of evidence of
indebtedness (including the securing of the same by deed, mortgage, deed of
trust or other lien or encumbrance on the Partnership’s assets), and


(4)              
the incurring of any obligations
it deems necessary for the conduct of the activities of the Partnership,
including the payment of all expenses associated with the General Partner;


(B)             
the acquisition, purchase,
ownership, operating, leasing and disposition of any real property and any
other property or assets, including mortgages and real estate-related notes,
whether directly or indirectly;


(C)             
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 or the General Partner;









35 




 










 

(D)            
the acquisition, disposition,
mortgage, pledge, encumbrance, hypothecation or exchange of all or
substantially all of the assets of the Partnership (including the exercise or
grant of any conversion, option, privilege, or subscription right or other
right available in connection with any assets at any time held by the
Partnership) or the merger, consolidation or other combination (each a “Business
Combination”) of the Partnership with or into another Entity on such terms
as the General Partner deems proper, provided, however, that the General
Partner shall be required to send to each Limited Partner a notice of such
proposed Business Combination no less than 15 days prior to the record date for
the vote of the Initial Limited Partner’s Stockholders on such Business
Combination, if any;


(E)             
the use of the assets of the
Partnership (including cash on hand) for any purpose consistent with the terms
of this Agreement and on any terms it sees fit, including,


(1)              
the financing of the conduct of
the operations of the Initial Limited Partner, the Partnership or any of the
Partnership’s Subsidiaries,


(2)              
the lending of funds to other
Persons (including the Subsidiaries of the Partnership and/or the Initial
Limited Partner) and the repayment of obligations of the Partnership and its
Subsidiaries and any other Person in which it has an equity investment, and


(3)              
the making of capital
contributions to its Subsidiaries;


(F)              
the expansion, development,
redevelopment, construction, leasing, repair, rehabilitation, repositioning,
alteration, demolition or improvement of any property in which the Partnership
or any Subsidiary of the Partnership owns an interest;


(G)            
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 and
the payment of their expenses and compensation out of the Partnership’s assets;


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


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


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









36 




 










 

(K)            
the establishment of one or more
divisions of the Partnership, the selection and dismissal of employees of the
Partnership (including employees having titles such as “president”, “vice
president”, “secretary” and “treasurer” of the Partnership), and agents,
outside attorneys, accountants, consultants and contractors of the Partnership,
and the determination of their compensation and other terms of employment or
engagement;


(L)             
the maintenance of such insurance
for the benefit of the Partnership and the Partners and directors and officers
thereof as it deems necessary or appropriate;


(M)           
the formation of, or acquisition
of an interest (including non-voting interests in entities controlled by
Affiliates of the Partnership or third parties) in, and the contribution of
property to, any further Entities or other relationships that it deems
desirable, including the acquisition of interests in, and the contributions of
funds or property to, or making of loans to, its Subsidiaries and any other
Person from time to time, or the incurrence of indebtedness on behalf of such
Persons or the guarantee of the obligations of such Persons; provided,
however, that as long as the Initial Limited Partner has determined to
elect to qualify as a REIT or to continue to qualify as a REIT, the Partnership
may not engage in any such formation, acquisition or contribution that would
cause the Initial Limited Partner to fail to qualify as a REIT;


(N)            
the control of any matters
affecting the rights and obligations of the Partnership, including


(1)              
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,


(2)              
the commencement or defense of
suits, legal proceedings, administrative proceedings, arbitration or other
forms of dispute resolution, and


(3)              
the representation of the
Partnership in all suits or legal proceedings, administrative proceedings,
arbitrations or other forms of dispute resolution, the incurring of legal
expenses, and the indemnification of any Person against liabilities and
contingencies to the extent permitted by law;


(O)            
the undertaking of any action in
connection with the Partnership’s direct or indirect investment in its
Subsidiaries or any other Person (including the contribution or loan of funds
by the Partnership to such Persons);


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









37 




 










 

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


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


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


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


(U)            
the issuance of additional
Partnership Units in connection with Capital Contributions by Additional
Limited Partners and additional Capital Contributions by Partners pursuant to
Article 4 hereof;


(V)            
the authorization, issuance, sale,
redemption or purchase of any Partnership Units or any securities of the
Partnership;


(W)           
the opening of bank accounts on
behalf of, and in the name of, the Partnership and its Subsidiaries; and


(X)            
the amendment and restatement of Exhibit
A 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 Partnership 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 otherwise is authorized by this Agreement.


(b)             
(i)        Each of the Limited Partners agree 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 to
the fullest extent permitted under the Act or other applicable law, rule or
regulation.


(ii)           
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 







38 




 










 

the General Partner of any duty that the General Partner
may owe the Partnership or the Limited Partners or any other Persons under this
Agreement or of any duty stated or implied by law or equity.


(c)               
At all times from and after the
date hereof, the General Partner at the expense of the Partnership, may or may
not, 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
appropriate and reasonable.


(d)              
At all times from and after the
date hereof, the General Partner may cause the Partnership to establish and
maintain at any and all times working capital accounts and other cash or
similar balances in such amount as the General Partner, in its sole and
absolute discretion, deems appropriate and reasonable from time to time.


(e)              
(i)         In exercising its authority under this Agreement, the General
Partner may, but shall be under no obligation to, take into account the tax
consequences to any Partner (including the General Partner) of any action taken
(or not taken) by it. The General Partner and the Partnership shall not have
liability to any 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 pursuant to its authority under this Agreement. The Limited
Partners expressly acknowledge that the General Partner is acting on behalf of
the Partnership, the Initial Limited Partner, and the Initial Limited Partner’s
Stockholders, collectively.


(ii)           
The General Partner and the
Partnership shall not have liability to any Limited Partner or the Special
Limited Partner under any circumstances as a result of an income tax liability
incurred by such Limited Partner or the Special Limited Partner as a result of
an action (or inaction) by the General Partner taken pursuant to its authority
under and in accordance with this Agreement.


7.2             
Certificate of Limited
Partnership


(a)               
The General Partner and the
Initial Limited Partner have previously filed the Certificate with the
Secretary of State of Delaware as required by the Act.


(b)             
(i)        The General Partner shall use all reasonable efforts to cause
to be filed such other certificates or documents as may be reasonable and
necessary or appropriate for the formation, continuation, qualification and
operation of a limited partnership (or a partnership in which the limited
partners have limited liability) in the State of Delaware and any other state,
or the District of Columbia, in which the Partnership may elect to do business
or own property.


(ii)           
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 







39 




 










 








 








restatements of the Certificate and do all of the things
to maintain the Partnership as a limited partnership (or a partnership in which
the limited partners have limited liability) under the laws of the State of
Delaware and each other state, or the District of Columbia, in which the
Partnership may elect to do business or own property.


(iii)         
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.


7.3             
Reimbursement of the General
Partner


(a)               
Except as provided in this Section
7.3 and elsewhere in this Agreement (including the provisions of Articles 5 and
6 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)             
(i)        The Partnership shall be responsible for and shall pay all expenses
relating to the Partnership’s organization, the ownership of its assets and its
operations. The General Partner shall be reimbursed on a monthly basis, or such
other basis as it may determine in its sole and absolute discretion, for all
expenses that it incurs on behalf of the Partnership relating to the ownership
and operation of the Partnership’s assets, or for the benefit of the
Partnership, including all expenses associated with compliance by the General
Partner, the Initial Limited Partner, and the New Limited Partner with laws,
rules and regulations promulgated by any regulatory body, expenses related to
the operations of the General Partner and to the management and administration
of any Subsidiaries of the General Partner or the Partnership or Affiliates of
the Partnership, such as auditing expenses and filing fees and any and all
salaries, compensation and expenses of officers and employees of the General
Partner, but excluding any portion of expenses reasonably attributable to
assets not owned by or for the benefit of, or to operations not for the benefit
of, the Partnership or Affiliates of the Partnership; provided, however,
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 in its name.


(ii)           
Such reimbursement shall be in
addition to any reimbursement made as a result of indemnification pursuant to
Section 7.6 hereof.


(iii)         
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. If certain
expenses are incurred for the benefit of the Partnership and other entities
(including the General Partner), such expenses will be allocated to the
Partnership and such other entities in such a manner as the General Partner in
its reasonable discretion deems fair and reasonable. 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)              
(i)        Expenses incurred by the General Partner relating to the
organization or reorganization of the Partnership and the General Partner, the
issuance of Common Stock in connection with an Offering and any issuance of
additional Partnership Interests, Common Stock or rights, options, warrants, or
convertible or exchangeable securities pursuant to Section 4.2 







40 




 










 








 








hereof and all 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 all costs, expenses,
damages, and other payments resulting from or arising in connection with
litigation related to any of the foregoing) are primarily obligations of the
Partnership.


(ii)           
To the extent the General Partner
pays or incurs such expenses, the General Partner shall be reimbursed for such
expenses.


7.4             
Outside Activities of the
General Partner


(a)               
Without the Consent of the Limited
Partners, 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 and the management of its business and
the business of the Partnership, and such activities as are incidental thereto.


(b)              
The General Partner and any
Affiliates of the General Partner may acquire Limited Partner Interests and
shall be entitled to exercise all rights of a Limited Partner relating to such
Limited Partner Interests.


7.5             
Contracts with Affiliates


(a)              
(i)        The Partnership may lend or contribute funds or other assets to
its Subsidiaries or other Persons in which it has an equity investment and such
Subsidiaries and Persons may borrow funds from the Partnership, on terms and
conditions established in the sole and absolute discretion of the General
Partner.


(ii)           
The foregoing authority shall not
create any right or benefit in favor of any Subsidiary or any other Person.


(b)              
Except as provided in Section 7.4,
the Partnership may Transfer assets to 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, may determine.


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


(d)              
The General Partner, in its sole
and absolute discretion and without the approval of the Limited Partners, may
propose and adopt, on behalf of the Partnership, employee benefit plans, stock
option plans, and similar plans funded by the Partnership for the benefit of
employees of the Partnership, the Initial Limited Partner, any 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
Initial Limited Partner, any Subsidiaries of the Partnership or any Affiliate
of any of them.









41 




 










 

(e)               
The General Partner is expressly
authorized to enter into, in the name and on behalf of the Partnership, a
“right of first opportunity” or “right of first offer” arrangement,
non-competition agreements 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.


7.6             
Indemnification 


(a)              
(i)          To the fullest extent permitted by Delaware law or as
provided herein, the Partnership shall indemnify each Indemnitee from and
against any and all losses, claims, damages, liabilities, joint or several,
expenses (including reasonable 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 (collectively, “Claims”), that relate to
the operations of the Partnership or the Initial Limited 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, so long as (A) the course of conduct
which gave rise to the Claim was taken, in the reasonable determination of the
Indemnitee made in good faith, in the best interests of the Partnership or the Initial
Limited Partner, (B) such Claim was not the result of negligence or misconduct
by the Indemnitee, (C) the Indemnitee (if other than the General Partner) was
acting on behalf of or performing services for the Partnership and (D) such
indemnification is not satisfied or recoverable from the assets of the
Stockholders of the Initial Limited Partner. Notwithstanding the foregoing, no
Indemnitee (other than the General Partner) shall be indemnified for any Claim
arising from or out of an alleged violation of federal or state securities laws
unless (1) there has been a successful adjudication on the merits of each count
involving alleged securities law violations as to such Indemnitee, (2) such
allegations have been dismissed with prejudice on the merits by a court of
competent jurisdiction as to such Indemnitee, or (3) a court of competent
jurisdiction approves a settlement of such allegations against such Indemnitee
and finds that indemnification of the settlement and the related costs should
be made, and the court considering the request for indemnification has been
advised of the position of the Securities and Exchange Commission and of the
published position of any state securities regulatory authority in which the
Common Stock was offered or sold as to indemnification for violations of
securities law.


(ii)           
Without limitation, the foregoing
indemnity shall extend to any liability of any Indemnitee, pursuant to a loan
guaranty (except a guaranty by a limited partner of nonrecourse indebtedness of
the Partnership or as otherwise provided in any such loan guaranty),
contractual obligation for any indebtedness or other obligation or otherwise
for any indebtedness of the Partnership or any Subsidiary of the Partnership
(including any indebtedness which the Partnership or any Subsidiary of the
Partnership has assumed or taken subject to), and the General Partner is hereby
authorized and empowered, on behalf of the Partnership, to enter into one or
more indemnity agreements consistent with the provisions of this Section 7.6 in
favor of any Indemnitee having or potentially having liability for any such
indebtedness.


(iii)         
Any indemnification pursuant to
this Section 7.6 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 7.6.




 

(b)              
Reasonable expenses incurred by an
Indemnitee who is a party to a proceeding 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 upon receipt by the Partnership of (i)
a written affirmation by the Indemnitee of the Indemnitee’s good faith belief
that the standard of conduct necessary for indemnification by the Partnership
as authorized in this Section 7.6 has been met; and (ii) a written undertaking
by or on behalf of the Indemnitee to repay the amount if it shall ultimately be
determined that the standard of conduct has not been met.


(c)               
The indemnification provided by
this Section 7.6 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 Indemnities are
indemnified.


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


(e)               
For purposes of this Section 7.6,
the Partnership shall be deemed to have requested an Indemnitee to serve as
fiduciary of an employee benefit plan whenever the performance by such
Indemnitee of its duties to the Partnership also imposes duties on, or
otherwise involves services by, such Indemnitee to the plan or participants or
beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect
to an employee benefit plan pursuant to applicable law shall constitute fines
within the meaning of this Section 7.6.  Actions taken or omitted by the
Indemnitee with respect to an employee benefit plan in the performance of its
duties for a purpose reasonably believed by it to be in the interest of the
participants and beneficiaries of the plan shall be deemed to be for a purpose
which is not opposed to the best interests of the Partnership.


(f)               
In no event may an Indemnitee
subject any of the Partners (other than the General Partner) to personal
liability by reason of the indemnification provisions set forth in this
Agreement.


(g)              
An Indemnitee shall not be denied
indemnification in whole or in part under this Section 7.6 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)             
(i)        The provisions of this Section 7.6 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.









43 




 










 








 








(ii)           
Any amendment, modification or
repeal of this Section 7.6 or any provision hereof shall be prospective only
and shall not in any way affect the Partnership’s liability to any Indemnitee
under this Section 7.6, as in effect immediately prior to such amendment,
modification, or repeal with respect to claims arising from or relating to
matters occurring, in whole or in part, prior to such amendment, modification
or repeal, regardless of when such claims may arise or be asserted.


(i)                
If and to the extent any payments
to the Initial Limited Partner pursuant to this Section 7.6 constitute gross
income to the Initial Limited 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.


(j)                
Notwithstanding anything to the
contrary in this Agreement, the General Partner shall not be entitled to
indemnification hereunder for any loss, claim, damage, liability or expense for
which the General Partner is obligated to indemnify the Partnership under any
other agreement between the General Partner and the Partnership.


7.7             
Liability of the General
Partner and the Initial Limited Partner


(a)               
Notwithstanding anything to the
contrary set forth in this Agreement, neither the General Partner, the Initial
Limited Partner nor the investment advisor of the General Partner, the Initial
Limited Partner, nor any of their respective officers and directors, shall be
liable for monetary damages to the Partnership, any Partners or any Assignees
for losses sustained or liabilities incurred as a result of errors in judgment
or mistakes of fact or law or of any act or omission unless the General
Partner, the Initial Limited Partner or its investment advisor, as the case may
be, acted in bad faith and the act or omission was material to the matter
giving rise to the loss, liability or benefit not derived. 


(b)             
(i)         The Limited Partners (other than the Initial Limited Partner)
and the Special Limited Partner expressly acknowledge that the General Partner
is acting on behalf of the Partnership and the Stockholders of the Initial
Limited Partner collectively, that the General Partner, subject to the
provisions of Section 7.1(e) hereof, is under no obligation to consider the
separate interest of the Limited Partners (with the exception of the Initial
Limited Partner) or the Special Limited Partner (including the tax consequences
to any Limited Partner, the Special Limited Partner or any 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
for losses sustained, liabilities incurred, or benefits not derived by Limited
Partners (with the exception of the Initial Limited Partner) or the Special
Limited Partner in connection with such decisions; provided  that 
the General Partner has acted in good faith.


(ii)           
With respect to any indebtedness
of the Partnership which any Limited Partner or the Special Limited Partner may
have guaranteed, the General Partner shall have no duty to keep such
indebtedness outstanding.




 








 








(c)         
(i)        Subject to its obligations and duties as General Partner set
forth in Section 7.1(a) hereof, 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 agent, including its
investment advisor.


(ii)           
The General Partner shall not be
responsible for any misconduct or negligence on the part of any such agent
appointed by the General Partner in good faith.


(d)              
The Limited Partners expressly
acknowledge that if any conflict in the fiduciary duties owed by the Initial
Limited Partner (as the sole member of the General Partner) to its Stockholders
and by the General Partner, in its capacity as a general partner of the
Partnership, to the Limited Partners or the Special Limited Partner, the
General Partner may act in the best interests of the Initial Limited Partner’s
Stockholders without violating its fiduciary duties to the Limited Partners or
the Special Limited Partner, and that the General Partner shall not be liable
for monetary damages for losses sustained, liabilities incurred, or benefits
not derived by the Limited Partners or the Special Limited Partner in
connection with any such violation.


(e)               
Any amendment, modification or
repeal of this Section 7.7 or any provision hereof shall be prospective only
and shall not in any way affect the limitations on the General Partner’s, the
Initial Limited Partner’s or their respective officers’ and directors’ liability
to the Partnership, the Special Limited Partner and the Limited Partners under
this Section 7.7 as in effect immediately prior to such amendment, modification
or repeal with respect to claims arising from or relating to matters occurring,
in whole or in part, prior to such amendment, modification or repeal,
regardless of when such claims may arise or be asserted.


7.8             
Other Matters Concerning the
General Partner


(a)               
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)              
The General Partner may consult
with legal counsel, accountants, appraisers, management consultants, investment
bankers, architects, engineers, environmental consultants and other consultants
and advisers selected by it, and any act taken or omitted to be taken in
reliance upon the opinion of such Persons as to matters which such General
Partner 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 opinion.


(c)              
(i)         The General Partner shall have the right, in respect of any of
its powers or obligations hereunder, to act through any of its duly authorized
officers and duly appointed attorneys-in-fact.


(ii)           
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 each and every act and duty which is
permitted or required to be done by the General Partner hereunder.









45 




 










 








 








(d)              
Notwithstanding any other
provisions of this Agreement or the Act, any action of the General Partner on
behalf of the Partnership or any decision of the General Partner to refrain
from acting on behalf of the Partnership, undertaken in the good faith belief
that such action or omission is necessary or advisable in order


(i)             
to protect the ability of the
Initial Limited Partner to continue to qualify as a REIT; or


(ii)           
to avoid the Initial Limited
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 and the Special Limited Partner.


7.9             
Title to Partnership Assets


(a)               
Title to Partnership assets,
whether real, personal or mixed and whether tangible or intangible, shall be
deemed to be owned by the Partnership as an entity, and no Partner,
individually or collectively, shall have any ownership interest in such
Partnership assets or any portion thereof.


(b)             
(i)         Title to any or all of the Partnership assets may be held in
the name of the Partnership, the General Partner or one or more nominees, as
the General Partner may determine, including Affiliates of the General Partner.


(ii)           
The General Partner hereby
declares and warrants that any Partnership asset for which legal title is held
in the name of the General Partner or any nominee or Affiliate of the General
Partner shall be held by the General Partner for the use and benefit of the
Partnership in accordance with the provisions of this Agreement; provided,
however, that the General Partner shall use its best efforts to cause
beneficial and record title to such assets to be vested in the Partnership as
soon as reasonably practicable.


(iii)         
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.


7.10         
Reliance by Third Parties


(a)               
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.









46 




 










 

(b)              
Each Limited Partner and the
Special Limited Partner hereby waive 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. 


(c)               
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 expediency of any act or action of the General Partner or its
representatives.


(d)              
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.


7.11         
Loans By Third Parties


The Partnership may incur Debt, or enter into similar
credit, guarantee, financing or refinancing arrangements for any purpose
(including in connection with any acquisition of property) with any Person upon
such terms as the General Partner determines appropriate.


Article 8

RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS


8.1             
Limitation of Liability


No Limited Partner shall have any liability under this
Agreement except as expressly provided in this Agreement, including Section
10.5 hereof, or under the Act.


8.2             
Management of Business


(a)               
No Limited Partner or Assignee (other
than the General Partner, any of its Affiliates or any officer, director,
employee, agent or trustee 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.









47 




 










 








 








(b)              
The transaction of any such
business by the General Partner, any of its Affiliates or any officer,
director, employee, partner, agent or trustee of the General Partner, the
Partnership or any of their Affiliates, in their capacity as such, shall not
affect, impair or eliminate the limitations on the liability of the Limited
Partners or Assignees under this Agreement.


8.3             
Outside Activities of Limited
Partners


(a)               
Subject to any agreements entered
into pursuant to Section 7.5 hereof and any other agreements entered into by a
Limited Partner, the Special Limited Partner, or any of their Affiliates with
the Partnership or any of its Subsidiaries, any Limited Partner, the Special
Limited Partner and any officer, director, employee, agent, trustee, Affiliate
or shareholder of any Limited Partner or the Special 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.


(b)              
Neither the Partnership nor any
Partners shall have any rights by virtue of this Agreement in any business
ventures of any Limited Partner, the Special Limited Partner, any Assignee or
any of their Affiliates.


(c)               
No Limited 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.


8.4             
Return of Capital


(a)               
Except pursuant to the Exchange
Rights Agreements, 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.


(b)              
Except as provided in Articles 5,
6 and 13 hereof, 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.


8.5             
Rights of Limited Partners
Relating to the Partnership


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









48 




 










 








 








(i)             
to obtain a copy of the most
recent annual and quarterly reports filed with the Securities and Exchange
Commission by the Initial Limited Partner pursuant to the Securities Exchange Act
of 1934; and


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


(b)              
Notwithstanding any other
provision of this Section 8.5, the General Partner may keep confidential from
the Limited Partners and the Special Limited Partner, 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 an unaffiliated third party to keep confidential.


8.6             
Exchange Rights Agreements


(a)               
The Limited Partners (except for
the Initial Limited Partner) will be granted the right, but not the obligation,
to exchange all or a portion of their Partnership Units for cash or, at the
option of the Partnership, for shares of Common Stock on such terms and subject
to such conditions and restrictions as will be contained in one or more
exchange rights agreements among the General Partner, the Partnership and one
or more Limited Partners (as amended from time to time, the “Exchange Rights
Agreements”); provided, however, that such Partnership Units
shall have been outstanding for at least one year. The form of each Exchange
Rights Agreement governing the exchange of Partnership Units hereafter shall be
determined by the General Partner.


(b)              
The Limited Partners and all
successors, assignees and transferees (whether by operation of law, including
by merger or consolidation, dissolution or liquidation of an entity that is a
Limited Partner, or otherwise) shall be bound by the provisions of the Exchange
Rights Agreement to which they are parties.


8.7             
Conversion and Exchange of
Special Limited Partner Interests. 


(a)               
Conversion of Listing Note or
Termination Note. 


(i)             
If the Special Limited Partner is
entitled to receive distributions of Net Sales Proceeds pursuant to the
Partnership’s obligation under a Listing Note or a Termination Note, at such
time as the Capital Account balance of the Special Limited Partner attributable
to the Special Limited Partner Interest is equal to the remaining amount of Net
Sales Proceeds distributable to the Special Limited Partner pursuant to the
Listing Note or Termination Note, respectively, the Special Limited Partner
shall have the right, but not the obligation, to convert all or a portion of the
Special Limited Partner Interest into OP Units.  The Special Limited Partner
shall provide written notice to the General Partner of its intention to convert
all or a 







49 




 










 








 








portion of its Special Limited Partner
Interest at least ten (10) days prior to the date on which the conversion is to
occur, and such notice shall indicate the amount of the Special Limited Partner
Interest that the Special Limited Partner intends to convert.  The maximum
number of OP Units issuable upon a conversion of the Special Limited Partner
Interest shall be equal to the quotient of (i) the net amount of the
Partnership’s remaining obligation pursuant to the Listing Note or Termination
Note on the date of conversion divided by (ii) the product of (A) the
Value of one share of Common Stock on the date of conversion multiplied by
(B) the Exchange Factor.  Only a whole number of OP Units may be issuable upon
a conversion of the Special Limited Partner Interest.  The Special Limited
Partner covenants and agrees with the Partnership that the Special Limited
Partner Interest shall be free and clear of all liens. The conversion of all or
a portion of the Special Limited Partner Interest shall occur automatically
after the close of business on the applicable date of conversion, as of which
time the Special Limited Partner shall be credited on the books and records of
the Partnership with the issuance as of the opening of business on the next day
of the number of OP Units issuable upon such conversion.


(ii)           
Exchange.  OP Units issuable upon a conversion of the Special
Limited Partner Interest as set forth in this Section 8.7(a) shall be
exchangeable for cash or, at the option of the Partnership, for shares of
Common Stock pursuant to Section 8.6.


(iii)         
Impact of Conversion for
Purposes of Subparagraph 1(c)(iii) of Exhibit B. For purposes of making future allocations under
subparagraph 1(c)(iii) of Exhibit B, the Special Limited Partner’s
Capital Account balance shall be reduced, as of the date of conversion, by an
amount equal to the product of (i) the number of OP Units issued in the
conversion multiplied by (ii) the product of (A) the Value of one share
of Common Stock on the date of conversion multiplied by (B) the Exchange
Factor.


(b)              
Conversion of Termination
Listing Amount, Termination Liquidity Amount or Investment Liquidity Amount.  At such time as the Special Limited Partner is
entitled to the Termination Listing Amount, Termination Liquidity Amount or
Investment Liquidity Amount, the Special Limited Partner shall have the right,
but not the obligation, to contribute the entire Special Limited Partner
Interest to the Partnership in exchange for OP Units in a transaction intended
to qualify as a contribution of property pursuant to Section 721 of the Code. 
The Special Limited Partner shall notify the General Partner of its intention
to exchange its Special Limited Partner Interest as soon as reasonably
practicable after learning of the event that will give rise to its right to
receive the Termination Listing Amount, Termination Liquidity Amount or
Investment Liquidity Amount.  The number of OP Units issuable upon a conversion
of the Special Limited Partner Interest shall be equal to the quotient of (i)
the Termination Listing Amount, Termination Liquidity Amount or Investment
Liquidity Amount, as the case may be, divided by (ii) the product of (A)
in the case of the Termination Listing Amount or the Termination Liquidity
Amount, the Value of one share of Common Stock, and in the case of the
Investment Liquidity Amount, the Investment Liquidity Value per one share of
Common Stock multiplied by (B) the Exchange Factor.  The Special Limited
Partner covenants and agrees with the Partnership that the Special Limited
Partner Interest shall be free and clear of all liens. The conversion of all or
a portion of the Special Limited Partner Interest shall occur automatically
after the close of business on the applicable date of conversion, as of which
time the Special Limited Partner shall be credited on the books and records of
the Partnership with the issuance as 


 








 








of the opening of
business on the next day of the number of OP Units issuable upon such
conversion.


Article 9

BOOKS, RECORDS, ACCOUNTING AND REPORTS


9.1             
Records and Accounting


(a)               
The General Partner shall keep or
cause to be kept at the principal office of the Partnership those records and
documents required to be maintained by the Act and other books and records
deemed by the General Partner to be appropriate with respect to the
Partnership’s business, including all books and records necessary for the
General Partner to comply with applicable REIT Requirements and to provide to
the Limited Partners and the Special Limited Partner any information, lists and
copies of documents required to be provided pursuant to Sections 8.5(a) and 9.3
hereof.


(b)              
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, 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.


(c)               
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, or such other basis
as the General Partner determines to be necessary or appropriate.


9.2             
Fiscal Year


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


9.3             
Reports 


(a)               
As soon as practicable, but in no
event later than the date on which the Initial Limited Partner mails its annual
report to its Stockholders, the General Partner shall cause to be mailed to
each Limited Partner and the Special Limited Partner as of the close of the
Partnership Year, an annual report containing financial statements of the
Partnership, or of the Initial Limited Partner, if such statements are prepared
on a consolidated basis with the Partnership, for such Partnership Year,
presented in accordance with the standards of the Public Accounting Oversight
Board (United States), such statements to be audited by a nationally recognized
firm of independent public accountants selected by the General Partner in its
sole discretion.


(b)              
If and to the extent that the
General Partner mails quarterly reports to its Stockholders, then as soon as
practicable, but in no event later than the date such reports are mailed, the
General Partner shall cause to be mailed to each Limited Partner and the
Special Limited Partner a report containing unaudited financial statements as
of the last day of the calendar quarter of the Partnership, or of the Initial
Limited Partner, if such statements are prepared on a consolidated basis with
the Partnership, and such other information as may be required by applicable
law or regulation, or as the General Partner determines to be appropriate.









51 




 










 

(c)               
Notwithstanding the foregoing, the
General Partner may deliver to the Limited Partners and the Special Limited
Partner each of the reports described above, as well as any other
communications that it may provide hereunder, by e-mail or by any other electronic
means.


Article 10

TAX MATTERS


10.1         
Preparation of Tax Returns


(a)               
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 the Limited Partners and the Special Limited
Partner for federal and state income tax reporting purposes.  The federal
income tax return of the Partnership shall be filed annually on IRS Form 1065
(or such other successor form) or on any other IRS form as may be required.  


(b)              
If required under the Code or
applicable state or local income tax law, the General Partner shall also
arrange for the preparation and timely filing of all returns of income, gains,
deductions, losses and other items required of the Subsidiaries 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 the Limited Partners
and the Special Limited Partner for federal and state income tax reporting
purposes.


10.2         
Tax Elections


(a)               
Except as otherwise provided
herein, the General Partner shall, in its sole and absolute discretion,
determine whether to make any available election pursuant to the Code.


(b)              
The General Partner shall elect a
permissible method (which need not be the same method for each item or
property) of eliminating the disparity between the Gross Asset Value and the
tax basis for each item of property contributed to the Partnership or to a
Subsidiary of the Partnership pursuant to the Regulations promulgated under the
provisions of Section 704(c) of the Code.


(c)               
The General Partner shall have the
right to seek to revoke any tax election it makes, including the election under
Section 754 of the Code, upon the General Partner’s determination, in its sole
and absolute discretion, that such revocation is in the best interests of the
Partners.


(d)              
The Partners, intending to be
legally bound, hereby authorize the Partnership to make an election (the “Safe
Harbor Election”) to have the “liquidation value” safe harbor provided in
Proposed Treasury Regulation Section 1.83-3(1) and the Proposed Revenue
Procedure set forth in Internal Revenue Service Notice 2005-43, as such safe
harbor may be modified when such proposed guidance is issued in final form or
as amended by subsequently issued guidance (the “Safe Harbor”), apply to
any interest in the Partnership transferred to a 







52 




 










 








 








service
provider while the Safe Harbor Election remains effective, to the extent such
interest meets the Safe Harbor requirements (collectively, such interests are
referred to as “Safe Harbor Interests”).  The tax matters partner is
authorized and directed to execute and file the Safe Harbor Election on behalf
of the Partnership and the Partners if and when the Safe Harbor Election
becomes available.  The Partnership and the Partners (including any person to
whom an interest in the Partnership is transferred in connection with the
performance of services) hereby agree to comply with all requirements of the
Safe Harbor (including forfeiture allocations) with respect to all Safe Harbor
Interests and to prepare and file all U.S. federal income tax returns reporting
the tax consequences of the issuance and vesting of Safe Harbor Interests
consistent with such final Safe Harbor guidance.  The General Partner is
authorized to take such actions as are necessary to achieve, under the Safe
Harbor, the effect that the election and compliance with all requirements of
the Safe Harbor referred to above would be intended to achieve under Proposed
Treasury Regulation Section 1.83-3, including amending this Agreement.


10.3         
Tax Matters Partner


(a)              
(i)        The General Partner shall be the “tax matters partner” of the
Partnership for federal income tax purposes.


(ii)           
Pursuant to Section 6230(e) of the
Code, upon receipt of notice from the Internal Revenue Service of the beginning
of an administrative proceeding with respect to the Partnership, the tax
matters partner shall furnish the Internal Revenue Service with the name,
address, taxpayer identification number, and profit interest of each of the
Limited Partners, the Special Limited Partner and the Assignees; provided,
however, that such information is provided to the Partnership by the
Limited Partners, the Special Limited Partner and the Assignees.


(iii)         
The tax matters partner is
authorized, but not required:


(A)            
to enter into any settlement with
the Internal Revenue Service with respect to any administrative or judicial
proceedings for the adjustment of Partnership items required to be taken into
account by a Partner (including the Special Limited 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 (including the Special Limited Partner),
except that such settlement agreement shall not bind any Partner or the Special
Limited Partner


(1)              
who (within the time prescribed
pursuant to the Code and Regulations) files a statement with the Internal
Revenue Service providing that the tax matters partner shall not have the
authority to enter into a settlement agreement on behalf of such Partner or the
Special Limited Partner; or




 








 








(2)              
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);


(B)             
if a notice of a final
administrative adjustment at the Partnership level of any item required to be
taken into account by a Partner or the Special Limited 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;


(C)             
to intervene in any action brought
by any other Partner or the Special Limited Partner for judicial review of a
final adjustment;


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


(E)             
to enter into an agreement with
the Internal Revenue Service to extend the period for assessing any tax which
is attributable to any item required to be taken account of by a Partner or the
Special Limited Partner for tax purposes, or an item affected by such item; and


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


The taking
of any action and the incurring of any expense by the tax matters partner in
connection with any such proceeding, except to the extent required by law, is a
matter in the sole and absolute discretion of the tax matters partner and the
provisions relating to indemnification of the General Partner set forth in
Section 7.6 of this Agreement shall be fully applicable to the tax matters
partner in its capacity as such.


(b)              
(i)         The tax matters partner shall receive no compensation for its
services.


(ii)           
All third party costs and expenses
incurred by the tax matters partner in performing its duties as such (including
legal and accounting fees and expenses) shall be borne by the Partnership.


(iii)         
Nothing herein shall be construed to
restrict the Partnership from engaging an accounting firm to assist the tax
matters partner in discharging its duties hereunder, so long as the
compensation paid by the Partnership for such services is reasonable.










54 




 










 








 








10.4         
Organizational Expenses


The Partnership shall elect to deduct expenses, if
any, incurred by it in organizing the Partnership ratably over a one hundred
eighty (180) month period as provided in Section 709 of the Code.


10.5         
Withholding 


(a)               
Each Limited Partner and the
Special Limited Partner hereby authorizes the Partnership to withhold from, or
pay on behalf of or with respect to, such Limited Partner or the Special
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
or the Special Limited Partner pursuant to this Agreement, including any taxes
required to be withheld or paid by the Partnership pursuant to Sections 1441, 1442,
1445, or 1446 of the Code.


(b)             
(i)       Any amount paid on behalf of or with respect to a Limited
Partner or the Special Limited Partner shall constitute a loan by the
Partnership to such Limited Partner or the Special Limited Partner, which loan
shall be repaid by such Limited Partner or the Special Limited Partner as the
case may be within fifteen (15) days after notice from the General Partner that
such payment must be made unless


(A)            
the Partnership withholds such
payment from a distribution which would otherwise be made to the Limited
Partner or the Special Limited Partner; or


(B)             
the General Partner determines, in
its sole and absolute discretion, that such payment may be satisfied out of the
available funds of the Partnership which would, but for such payment, be
distributed to the Limited Partner or the Special Limited Partner.


(ii)           
Any amounts withheld pursuant to
the foregoing clauses (i)(A) or (B) shall be treated as having been distributed
to the Limited Partner or the Special Limited Partner.


(c)              
(i)        Each Limited Partner and the Special Limited Partner hereby
unconditionally and irrevocably grant to the Partnership a security interest in
such Limited Partner’s Partnership Interest and such Special Limited Partner’s
Special Limited Partner Interest, as the case may be, to secure such Limited
Partner’s or Special Limited Partner’s obligation to pay to the Partnership any
amounts required to be paid pursuant to this Section 10.5.


(ii)            
(A)       If a Limited Partner or the Special Limited Partner fails to pay
when due any amounts owed to the Partnership pursuant to this Section 10.5, 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 or
Special Limited Partner, and in such event shall be deemed to have loaned such
amount to such defaulting Limited Partner or Special Limited Partner and shall
succeed to all rights and remedies of the Partnership as against such
defaulting Limited Partner or Special Limited Partner.









55 




 










 








 








(B)             
Without limitation, in such event,
the General Partner shall have the right to receive distributions that would
otherwise be distributable to such defaulting Limited Partner or Special
Limited Partner until such time as such loan, together with all interest
thereon, has been paid in full, and any such distributions so received by the
General Partner shall be treated as having been distributed to the defaulting
Limited Partner or Special Limited Partner and immediately paid by the
defaulting Limited Partner or Special Limited Partner to the General Partner in
repayment of such loan.


(iii)         
Any amount payable by a Limited
Partner or the Special Limited Partner hereunder shall bear interest at the
highest base or prime rate of interest published from time to time by The Wall
Street Journal, plus four (4) percentage points, but in no event higher than
the maximum lawful rate of interest on such obligation, such interest to accrue
from the date such amount is due (i.e., fifteen (15) days after demand) until
such amount is paid in full.


(iv)         
Each Limited Partner or the
Special Limited Partner shall take such actions as the Partnership or the
General Partner shall request in order to perfect or enforce the security
interest created hereunder.


Article 11

TRANSFERS AND WITHDRAWALS


11.1         
Transfer 


(a)              
(i)       The term “Transfer,” when used in this Article 11 with respect
to a Partnership Interest or a Partnership Unit, shall be deemed to refer to a
transaction by which the General Partner purports to assign all or any part of
its General Partner Interest to another Person, or a Limited Partner purports
to assign all or any part of its Limited Partner Interest to another Person,
and includes a sale, assignment, gift, pledge, encumbrance, hypothecation,
mortgage, exchange or any other disposition by law or otherwise.


(ii)           
The term “Transfer” when used in
this Article 11 does not include any exchange of Partnership Units for cash or
Common Stock pursuant to the Exchange Rights Agreement.


(b)             
(i)         No Partnership Interest shall be Transferred, in whole or in
part, except in accordance with the terms and conditions set forth in this
Article 11.


(ii)           
Any Transfer or purported Transfer
of a Partnership Interest not made in accordance with this Article 11 shall be
null and void.


11.2         
Transfer of the General
Partner’s General Partner Interest


(a)               
The General Partner may not
Transfer any of its General Partner Interest or withdraw as General Partner,
except


(i)             
if holders of at least two-thirds
of the Limited Partner Interests consent to such Transfer or withdrawal;




 

(ii)           
if the General Partner transfers
all of its General Partner Interest to the Initial Limited Partner;


(iii)         
if such Transfer is to an entity
which is wholly owned by the General Partner or the Initial Limited Partner and
is a Qualified REIT Subsidiary as defined in Section 856(i) of the Code; or


(iv)         
in connection with a transaction
described in Section 11.2(c) or 11.2(d) (as applicable)


(b)              
If the General Partner withdraws
as general partner of the Partnership in accordance with Section 11.2(a), the
General Partner’s General Partner Interest shall immediately be converted into
a Limited Partner Interest.


(c)               
Except as otherwise provided in
Section 11.2(d), the General Partner shall not engage in any merger,
consolidation or other combination of the General Partner with or into another
Person (other than a merger in which the General Partner is the surviving
entity) or sale of all or substantially all of its assets, or any
reclassification, or any recapitalization of outstanding Common Stock (other
than a change in par value, or from par value to no par value, or as a result
of a subdivision or combination of Common Stock) (a “Transaction”),
unless


(i)             
in connection with the Transaction
all Limited Partners will either receive, or will have the right to elect to
receive, for each Partnership Unit an amount of cash, securities, or other
property equal to the product of the Exchange Factor and the amount of cash,
securities or other property or value paid in the Transaction to or received by
a holder of one share of Common Stock corresponding to such Partnership Unit in
consideration of one share of Common Stock at any time during the period from
and after the date on which the Transaction is consummated; provided,
however, that if, in connection with the Transaction, a purchase, tender or
exchange offer (“Offer”) shall have been made to and accepted by the
holders of more than 50% of the outstanding Common Stock, each holder of
Partnership Units shall be given the option to exchange its Partnership Units
for the amount of cash, securities, or other property which a Limited Partner
would have received had it


(A)            
exercised its Exchange Right and


(B)             
sold, tendered or exchanged
pursuant to the Offer the Common Stock received upon exercise of the Exchange
Right immediately prior to the expiration of the Offer.


The foregoing is not intended to, and does not, affect the ability of
(i) a Stockholder of the Initial Limited Partner to sell its stock in the
Initial Limited Partner or (ii) the Initial Limited Partner to perform its
obligations (under agreement or otherwise) to such Stockholders (including the
fulfillment of any obligations with respect to registering the sale of stock
under applicable securities laws).


(d)             
(i)        Notwithstanding Section 11.2(c), the General Partner may merge
into or consolidate with another entity if immediately after such merger or
consolidation









57 




 










 








 








(A)            
substantially all of the assets of
the successor or surviving entity (the “Surviving General Partner”),
other than Partnership Units held by the General Partner, are contributed to
the Partnership as a Capital Contribution in exchange for Partnership Units
with a fair market value equal to the value of the assets so contributed as
determined by the Surviving General Partner in good faith and


(B)             
the Surviving General Partner
expressly agrees to assume all obligations of the General Partner hereunder.


(ii)           
(A)       Upon such contribution and assumption, the Surviving General
Partner shall have the right and duty to amend this Agreement and the Exchange
Rights Agreement as set forth in this Section 11.2(d).


(B)             
(1)       The Surviving General Partner shall in good faith arrive at a
new method for the calculation of the Exchange Factor for a Partnership Unit
after any such merger or consolidation so as to approximate the existing method
for such calculation as closely as reasonably possible.


(2)              
Such calculation shall take into
account, among other things, the kind and amount of securities, cash and other
property that was receivable upon such merger or consolidation by a holder of
Common Stock or options, warrants or other rights relating thereto, and which a
holder of Partnership Units could have acquired had such Partnership Units been
redeemed for Common Stock immediately prior to such merger or consolidation.


(C)             
Such amendment to this Agreement
shall provide for adjustment to such method of calculation, which shall be as
nearly equivalent as may be practicable to the adjustments provided for with
respect to the Exchange Factor.


(iii)         
The above provisions of this
Section 11.2(d) shall similarly apply to successive mergers or consolidations
permitted hereunder.


11.3         
Limited Partners’ Rights to
Transfer


(a)               
Subject to the provisions of
Sections 11.3(c), 11.3(d), 11.3(e), 11.4 and 11.6, a Limited Partner may,
without the consent of the General Partner, Transfer all or any portion of its
Limited Partner Interest, or any of such Limited Partner’s economic right as a
Limited Partner. In order to effect such transfer, the Limited Partner must
deliver to the General Partner a duly executed copy of the instrument making
such transfer and such instrument must evidence the written acceptance by the
assignee of all of the terms and conditions of this Agreement and represent
that such assignment was made in accordance with all applicable laws and
regulations.


(b)             
(i)         If a Limited Partner is Incapacitated, the executor,
administrator, trustee, committee, guardian, conservator or receiver of such
Limited Partner’s estate shall have all of the rights of a Limited Partner, but
not more rights than those enjoyed by other Limited Partners, for 







58 




 










 








 








the purpose of settling or managing the estate and such
power as the Incapacitated Limited Partner possessed to Transfer all or any
part of his or its interest in the Partnership.


(ii)           
The Incapacity of a Limited
Partner, in and of itself, shall not dissolve or terminate the Partnership.


(c)               
The General Partner may prohibit
any Transfer by a Limited Partner of its Partnership Units if it reasonably
believes (based on the advice of counsel) 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 Partnership Units.


(d)              
No Transfer by a Limited Partner
of its Partnership Units may be made to any Person if


(i)             
it would adversely affect the
ability of the Initial Limited Partner to continue to qualify as a REIT or
would subject the Initial Limited Partner to any additional taxes under Section
857 or Section 4981 of the Code;


(ii)           
it would result in the Partnership
being treated as an association taxable as a corporation for federal income tax
purposes;


(iii)         
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);


(iv)         
such Transfer would, in the
opinion of legal counsel for the Partnership, cause any portion of the assets
of the Partnership to constitute assets of any employee benefit plan pursuant
to Department of Labor Regulations Section 2510.2-101;


(v)           
such Transfer would subject the
Partnership to regulation 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;


(vi)         
such Transfer is a sale or
exchange, and such sale or exchange would, when aggregated with all other sales
and exchanges during the 12-month period ending on the date of the proposed
Transfer, result in 50% or more of the interests in Partnership capital and
profits being sold or exchanged during such 12-month period without the consent
of the General Partner, which consent may be withheld in its sole and absolute
discretion; or


(vii)       
such Transfer is effectuated
through an “established securities market” or a “secondary market (or the
substantial equivalent thereof)” within the meaning of Section 7704 of the
Code.


(e)               
No transfer of any Partnership
Units may be made to a lender to the Partnership or any Person who is related
(within the meaning of Section 1.752-4(b) of the Regulations) to any lender to
the Partnership whose loan constitutes a nonrecourse liability (within the
meaning of Section 1.752-1(a)(2) of the Regulations), without the consent of
the General Partner, which may 







59 




 










 

be withheld in its sole
and absolute discretion; provided, however, that as a condition to such
consent the lender will be required to enter into an arrangement with the
Partnership and the General Partner to exchange for the Cash Amount any
Partnership Units in which a security interest is held simultaneously with the
time at which such lender would be deemed to be a partner in the Partnership
for purposes of allocating liabilities to such lender under Section 752 of the
Code.


(f)               
Any Transfer in contravention of
any of the provisions of this Section 11.3 shall be void and ineffectual and
shall not be binding upon, or recognized by, the Partnership.


11.4         
Substituted Limited Partners


(a)              
(i)         No Limited Partner shall have the right to substitute a
Permitted Transferee for a Limited Partner in its place.


(ii)           
The General Partner shall,
however, have the right to consent to the admission of a Permitted Transferee
of the Partnership 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.


(iii)         
The General Partner’s failure or
refusal to permit such transferee to become a Substituted Limited Partner shall
not give rise to any cause of action against the Partnership or any Partner.


(b)              
A transferee who has been admitted
as a Substituted Limited Partner in accordance with this Article 11 shall have
all the rights and powers and be subject to all the restrictions and
liabilities of a Limited Partner under this Agreement.


(c)              
(i)        No Permitted Transferee will be admitted as a Substituted
Limited Partner, unless such transferee has furnished to the General Partner
evidence of acceptance in form satisfactory to the General Partner of all of
the terms and conditions of this Agreement and, as it relates to the
Substituted Limited Partners, the Exchange Rights Agreement, including the
power of attorney granted in Section 2.4 hereof.


(ii)           
Upon the admission of a
Substituted Limited Partner, the General Partner shall amend Exhibit A
to reflect the name, address, number of Partnership Units, and Percentage
Interest of such Substituted Limited Partner, and to eliminate or adjust, if
necessary, the name, address and interest of the predecessor of such
Substituted Limited Partner.


11.5         
Assignees 


(a)               
If the General Partner, in its
sole and absolute discretion, does not consent to the admission of any
transferee as a Substituted Limited Partner, as described in Section 11.4(a),
such transferee shall be considered an Assignee for purposes of this Agreement.


(b)              
An Assignee shall be deemed to
have had assigned to it, and shall be entitled to receive distributions from
the Partnership and the share of Net Income, Net Losses, Net Property Gain, Net
Property Loss, and any other items of gain, loss, deduction or credit of the
Partnership 







60 




 










 








 








attributable to the Partnership Units
assigned to such transferee, but shall not be deemed to be a holder of Partnership
Units for any other purpose under this Agreement, and shall not be entitled to
vote such Partnership Units in any matter presented to the Limited Partners,
for a vote (such Partnership Units being deemed to have been voted on such
matter in the same proportion as all other Partnership Units held by Limited
Partners are voted).


(c)               
If any such transferee desires to
make a further assignment of any such Partnership Units, such transferee shall
be subject to all of the provisions of this Article 11 to the same extent and
in the same manner as any Limited Partner desiring to make an assignment of
Partnership Units.


11.6         
General Provisions


(a)               
No Limited Partner may withdraw
from the Partnership other than as a result of a permitted Transfer of all of
such Limited Partner’s Partnership Units in accordance with this Article 11 or,
as it relates to the Limited Partners, pursuant to exchange of all of its
Partnership Units pursuant to the applicable Exchange Rights Agreement.


(b)             
(i)        Any Limited Partner which shall Transfer all of its Partnership
Units in a Transfer permitted pursuant to this Article 11 shall cease to be a
Limited Partner upon the admission of all Assignees of such Partnership Units
as Substituted Limited Partners.


(ii)           
Similarly, any Limited Partner
which shall Transfer all of its Partnership Units pursuant to an exchange of
all of its Partnership Units pursuant to an Exchange Rights Agreement shall
cease to be a Limited Partner.


(c)               
Other than pursuant to the
Exchange Rights Agreement or with the consent of the General Partner, transfers
pursuant to this Article 11 may only be made as of the first day of a fiscal
quarter of the Partnership.


(d)             
(i)         If any Partnership Interest is transferred or assigned during
the Partnership’s fiscal year in compliance with the provisions of this Article
11 or exchanged pursuant to the applicable Exchange Rights Agreement on any day
other than the first day of a Partnership Year, then Net Income, Net Losses,
Net Property Gain, Net Property Loss, each item thereof and all other items
attributable to such interest for such Partnership Year shall be divided and
allocated between the transferor Partner and the transferee Partner by taking
into account their varying interests during the Partnership Year in accordance
with Section 706(d) of the Code, using the interim closing of the books method
or such other method permitted by the Code as the General Partner may select.


(ii)           
Solely for purposes of making such
allocations, each of such items for the calendar month in which the Transfer or
assignment occurs shall be allocated to the transferee Partner, and none of
such items for the calendar month in which an exchange occurs shall be
allocated to the exchanging Partner, provided, however, that the
General Partner may adopt such other conventions relating to allocations in
connection with transfers, assignments, or exchanges as it determines are
necessary or appropriate.









61 




 










 








 








(iii)         
All distributions pursuant to
Section 5.1(a) and Section 5.1(b) attributable to Partnership Units, with
respect to which the Partnership Record Date is before the date of such
Transfer, assignment, or exchange of such Partnership Units, shall be made to
the transferor Partner or the exchanging Partner, as the case may be, and in
the case of a Transfer or assignment other than an exchange, all distributions
pursuant to Section 5.1(a) and Section 5.1(b) thereafter attributable to such
Partnership Units shall be made to the transferee Partner.


(e)               
In addition to any other
restrictions on transfer herein contained, including the provisions of this
Article 11, in no event may any Transfer or assignment of a Partnership
Interest by any Partner (including pursuant to Section 8.6) 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; (iii) of any
component portion of a Partnership Interest, such as the Capital Account, or
rights to distributions, separate and apart from all other components of a
Partnership Interest; (iv) if in the opinion of legal counsel to the
Partnership such transfer would cause a termination of the Partnership for
federal or state income tax purposes (except as a result of the exchange for
Common Stock of all Partnership Units held by all Limited Partners or pursuant
to a transaction expressly permitted under Section 11.2); (v) if in the opinion
of counsel to the Partnership, there would be a significant risk that such
transfer would cause the Partnership to cease to be classified as a partnership
for federal income tax purposes (except as a result of the exchange for Common
Stock of all Partnership Units held by all Limited Partners or pursuant to a
transaction expressly permitted under Section 11.2); (vi) if such transfer
requires the registration of such Partnership Interest pursuant to any
applicable federal or state securities laws; (vii) if such transfer is
effectuated through an “established securities market” or a “secondary market
(or the substantial equivalent thereof)” within the meaning of Section 7704 of
the Code or such transfer causes the Partnership to become a “publicly traded
partnership,” as such term is defined in Section 469(k)(2) or Section 7704(b)
of the Code (provided, however, that this clause (vii) shall not be the
basis for limiting or restricting in any manner the exercise of the Exchange
Right under Section 8.6 unless, and only to the extent that, outside tax
counsel provides to the General Partner an opinion to the effect that, in the
absence of such limitation or restriction, there is a significant risk that the
Partnership will be treated as a “publicly traded partnership” and, by reason
thereof, taxable as a corporation); (viii) such transfer could adversely affect
the ability of the Initial Limited Partner to remain qualified as a REIT; or
(ix) if in the opinion of legal counsel of the transferring Partner (which
opinion and counsel are reasonably satisfactory to the Partnership), or legal
counsel of the Partnership, such transfer would adversely affect the ability of
the Initial Limited Partner to continue to qualify as a REIT or subject the
Initial Limited Partner to any additional taxes under Section 857 or Section
4981 of the Code, if the Initial Limited Partner has elected to be qualified as
a REIT.


(f)               
The General Partner shall monitor
the transfers of interests in the Partnership to determine (i) if such
interests are being traded on an “established securities market” or a
“secondary market (or the substantial equivalent thereof)” within the meaning
of Section 7704 of the Code; and (ii) whether additional transfers of interests
would result in the Partnership being unable to qualify for at least one of the
“safe harbors” set forth in Section 1.7704-1 of the Regulations (or such other
guidance subsequently published by the IRS setting forth safe harbors under
which interests will not be treated as “readily tradable on a secondary market
(or the substantial equivalent thereof)” within the meaning of Section 7704 of
the Code) (the “PTP Safe 







62 




 










 








 








Harbors”). The General
Partner shall take all steps reasonably necessary or appropriate to prevent any
trading of interests or any recognition by the Partnership of transfers made on
such markets and, except as otherwise provided herein, to insure that at least
one of the PTP Safe Harbors is met; provided, however, that the foregoing shall
not authorize the General Partner to limit or restrict in any manner the right
of any holder of a Partnership Unit to exercise the Exchange Right in
accordance with the terms of the applicable Exchange Rights Agreement unless,
and only to the extent that, outside tax counsel provides to the General
Partner an opinion to the effect that, in the absence of such limitation or restriction,
there is a significant risk that the Partnership will be treated as a “publicly
traded partnership” and, by reason thereof, taxable as a corporation.


Article 12

ADMISSION OF PARTNERS


12.1         
Admission of Successor General
Partner


(a)              
(i)       A successor to all of the General Partner Interest pursuant to
Article 11 hereof who is proposed to be admitted as a successor General Partner
shall be admitted to the Partnership as the General Partner, effective
immediately following such transfer and the admission of such successor General
Partner as a general partner of the Partnership upon the satisfaction of the
terms and conditions set forth in Section 12.1(b).


(ii)           
Any such transferee shall carry on
the business of the Partnership without dissolution.


(b)              
A Person shall be admitted as a
substitute or successor General Partner of the Partnership only if the
following terms and conditions are satisfied:


(i)             
the Person to be admitted as a
substitute or additional General Partner shall have accepted and agreed to be
bound by all the terms and provisions of this Agreement by executing a
counterpart thereof and such other documents or instruments as may be required
or appropriate in order to effect the admission of such Person as a General
Partner;


(ii)           
if the Person to be admitted as a
substitute or additional General Partner is a corporation or a partnership it
shall have provided the Partnership with evidence satisfactory to counsel for
the Partnership of such Person’s authority to become a General Partner and to
be bound by the terms and provisions of this Agreement; and


(iii)         
counsel for the Partnership shall
have rendered an opinion (relying on such opinions from other counsel as may be
necessary) that the admission of the person to be admitted as a substitute or
additional General Partner is in conformity with the Act, that none of the
actions taken in connection with the admission of such Person as a substitute
or additional General Partner will cause


(A)            
the Partnership to be classified
other than as a partnership for federal income tax purposes, or









63 




 










 

(B)             
the loss of any Limited Partner’s
limited liability.


(c)               
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.


12.2         
Admission of Additional Limited
Partners


(a)               
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 and the applicable Exchange Rights Agreement, including the power of
attorney granted in Section 2.4 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.


(b)             
(i)        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.


(ii)           
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.


(c)              
(i)         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, Net Property Gain, Net Property Loss, each item thereof and
all other items allocable among Partners and Assignees for such Partnership
Year shall be allocated among such Additional Limited Partner and all other
Partners and Assignees by taking into account their varying interests during
the Partnership Year in accordance with Section 706(d) of the Code, using the
interim closing of the books method or such other method permitted by the Code
as the General Partner may select.


(ii)              
(A)      Solely for purposes of making such allocations, each of such
items for the calendar month in which an admission of any Additional Limited
Partner occurs shall be allocated among all of the Partners and Assignees,
including such Additional Limited Partner.


(B)             
distributions pursuant to Section
5.1(a) and Section 5.1(b) with respect to which the Partnership Record Date is
before the date of such admission shall be made solely to Partners and
Assignees, other than the Additional Limited Partner, and all distributions
pursuant to Section 5.1(a) and Section 5.1(b) thereafter shall be made to all
of the Partners and Assignees, including such Additional Limited Partner.





 








 








12.3         
Amendment of Agreement and
Certificate of Limited Partnership


For the admission to the Partnership of any Partner,
the General Partner shall take all steps necessary and appropriate under the
Act to amend the records of the Partnership and, if necessary, to prepare as
soon as practical an amendment of this Agreement (including an amendment of Exhibit
A) 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 2.4 hereof.


Article 13

DISSOLUTION, LIQUIDATION AND TERMINATION


13.1         
Dissolution 


(a)               
The Partnership shall not be
dissolved by the admission of Substituted Limited Partners, 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.


(b)              
The Partnership shall dissolve,
and its affairs shall be wound up, only upon the first to occur of any of the
following (each, a “Liquidating Event”): 


(i)             
the expiration of its term as
provided in Section 2.5 hereof;


(ii)           
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” (as defined below) of the remaining Partners Consent 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;


(iii)         
an election to dissolve the
Partnership made by the General Partner, with the Consent of the Limited
Partners holding at least a majority of the Percentage Interest of the Limited
Partners (including Limited Partner Interests held by the General Partner);


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


(v)           
a Capital Transaction;


(vi)         
a final and non-appealable
judgment is entered by a court of competent jurisdiction ruling that the
General Partner is bankrupt or insolvent, or a final and non-appealable order
for relief is entered by a court with appropriate jurisdiction against the
General Partner, in each case under any federal or state bankruptcy or
insolvency laws as now or hereafter in effect, unless prior to the entry of
such order or judgment a “majority in interest” (as defined below) of the
remaining Partners Consent 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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As used herein, a
“majority in interest” shall refer to Partners (excluding the General Partner)
who hold more than fifty percent (50%) of the outstanding Percentage Interests
not held by the General Partner.


13.2         
Winding Up


(a)                    
(i)        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.


(ii)           
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.


(iii)         
The General Partner, or, if there
is no remaining General Partner, any Person elected by the Limited Partners
holding at least a “majority in interest” (the General Partner or such other
Person being referred to herein as the “Liquidator”), shall be
responsible for overseeing the winding up and dissolution of the Partnership
and shall take full account of the Partnership’s liabilities and property and
the Partnership property shall be liquidated as promptly as is consistent with
obtaining the fair value thereof, and the proceeds therefrom (which may, to the
extent determined by the General Partner, include shares of common stock or
other securities of the General Partner) shall be applied and distributed in
the following order:


(A)            
First, to the payment and
discharge of all of the Partnership’s debts and liabilities to creditors other
than the Partners;


(B)             
Second, to the payment and
discharge of all of the Partnership’s debts and liabilities to the General
Partner;


(C)             
Third, to the payment and
discharge of all of the Partnership’s debts and liabilities to the other
Partners; and


(D)            
the balance, if any, shall be
distributed to all Partners (including the Special Limited Partner) with
positive Capital Accounts in accordance with their respective positive Capital
Account balances after giving effect to all allocations in Exhibit B and all
prior distributions under Section 5.1.


(iv)         
The General Partner shall not
receive any additional compensation for any services performed pursuant to this
Article 13.


(v)           
Any distributions pursuant to this
Section 13.2(a) shall be made by the end of the Partnership’s taxable year in
which the liquidation occurs (or, if later, within 90 days after the date of
the liquidation).


(b)                    
(i)        Notwithstanding the provisions of Section 13.2(a) hereof 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 







66 




 










 








 








Partners (including the Special Limited Partner), the
Liquidator may, in its sole and absolute discretion, defer for a reasonable
time the liquidation of any asset except those necessary to satisfy liabilities
of the Partnership (including to those Partners, including the Special Limited
Partner, as creditors) or distribute to the Partners (including the Special
Limited Partner), in lieu of cash, as tenants in common and in accordance with
the provisions of Section 13.2(a) hereof, undivided interests in such
Partnership assets as the Liquidator deems not suitable for liquidation.


(ii)           
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 interests of the Partners (including the
Special Limited Partner), 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.


(iii)         
The Liquidator shall determine the
fair market value of any property distributed in kind using such reasonable
method of valuation as it may adopt.


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


(A)            
distributed to a trust established
for the benefit of the General Partner, the Limited Partners and the Special
Limited Partner 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 the General Partner arising
out of or in connection with the Partnership; the assets of any such trust
shall be distributed to the General Partner, the Limited Partners and the
Special Limited Partner from time to time, in the reasonable discretion of the
Liquidator, in the same proportions as the amount distributed to such trust by
the Partnership would otherwise have been distributed to the General Partner,
the Limited Partners and the Special Limited Partner pursuant to this
Agreement; or


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


13.3         
Obligation to Contribute
Deficit


If any Partner (other than a holder of Restricted
Class B Units) has a deficit balance in his 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.  If a holder of Restricted Class B Units has a deficit
balance 







67 




 










 

in its Capital Account attributable to such
Restricted Class B Units (after giving effect to all contributions,
distributions and allocations for all taxable years, including the year during
with such liquidation occurs), such holder of Restricted Class B Units shall
restore and contribute to the capital of the Partnership the amount necessary
to restore such deficit balance to zero, but not to exceed an amount equal to
the excess of the cash distributions of Net Sales Proceeds made (if any) to
such holder of Restricted Class B Units over the amount of Net Property Gain
(including, to the extent necessary, individual items of income and gain
comprising Net Property Gain) and Liquidating Gain allocated to such holder of
Restricted Class B Units in accordance with subparagraph 1(c)(ii) of Exhibit
B, in compliance with Section 1.704-1(b)(2)(ii)(b)(3) of the
Regulations, which restoration and contribution shall be before the later to
occur of (x) the end of the taxable year in which the Partnership is
liquidated, or (y) ninety (90) days after the date of the liquidation of the
Partnership, which amount shall be paid to creditors of the Partnership or, if
the amount contributed exceeds the amount due to creditors, shall be
distributed to the Partners with positive Capital Account balances.


13.4         
Rights of Limited Partners


(a)               
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.


(b)              
Except as otherwise provided in
this Agreement, no Limited Partner shall have priority over any other Partner
as to the return of its Capital Contributions, distributions, or allocations.


13.5         
Notice of Dissolution


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


13.6         
Termination of Partnership and
Cancellation of Certificate of Limited Partnership


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


13.7         
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 hereof 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 (including the Special Limited
Partner) during the period of liquidation.










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13.8         
Waiver of Partition


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


Article 14

AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS


14.1         
Amendments 


(a)               
The General Partner shall have the
power, without the consent of the Limited Partners or the Special Limited
Partner, to amend this Agreement except as set forth in Section 14.1(b)
hereof.  The General Partner shall provide notice to the Limited Partners and
the Special Limited Partner when any action under this Section 14.1(a) is taken
in the next regular communication to the Limited Partners.


(b)              
Notwithstanding Section 14.1(a)
hereof, this Agreement shall not be amended with respect to:


(i)             
any Partner, including the Special
Limited Partner, adversely affected without the Consent of such Partner
adversely affected if such amendment would:


(A)            
convert a Limited Partner’s or the
Special Limited Partner’s interest in the Partnership into a General Partner
Interest;


(B)             
modify the limited liability of a
Limited Partner or the Special Limited Partner in a manner adverse to such Limited
Partner or the Special Limited Partner; or


(C)             
amend this Section 14.1(b)(i);


(ii)           
any Limited Partner adversely
affected without the Consent of Limited Partners holding more than fifty
percent (50%) of the outstanding Percentage Interests of the Limited Partners
adversely affected if such amendment would:


(A)            
alter or change Exchange Rights;


(B)             
create an obligation to make
Capital Contributions not contemplated in this Agreement;


(C)             
alter or change the terms of this
Agreement or the Exchange Rights Agreement regarding the rights of the limited
partners with respect to Business Combinations;


(D)            
alter or change the distribution
and liquidation rights provided in Section 5 and 13 hereto, except as otherwise
permitted under this Agreement; or


(E)             
amend this Section 14.1(b)(ii).




 








 








(c)               
Section 14.1(b)(i) does not
require unanimous consent of all Partners adversely affected unless the
amendment is to be effective against all Partners adversely affected.


(d)              
Notwithstanding Section 14.1(a)
hereof, no provision of this Agreement shall be amended or modified without the
Special Limited Partner’s prior written Consent if such amendment or
modification (i) relates to the distributions, allocations or other rights and
privileges of the Special Limited Partner, or (ii) would amend this Section
14.1(d).


14.2         
Meetings of the Partners


(a)               
(i)        Meetings of the Partners may be called by the General Partner
and shall be called upon the receipt by the General Partner of a written
request by Limited Partners holding 25 percent or more of the Partnership
Interests.


(ii)           
The request shall state the nature
of the business to be transacted.


(iii)         
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.


(iv)         
Partners may vote in person or by
proxy at such meeting.


(v)           
Whenever the vote or Consent of
the Limited Partners is permitted or required under this Agreement, such vote
or Consent may be given at a meeting of the Partners or may be given in
accordance with the procedure prescribed in Section 14.1(a).


(vi)         
Except as otherwise expressly
provided in this Agreement, the Consent of holders of a majority of the
Percentage Interests held by Partners (including the General Partner) shall
control.


(b)              
(i)        Subject to Section 14.2(a)(vi), 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).


(ii)           
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).


(iii)         
Such Consent shall be filed with
the General Partner.


(iv)         
An action so taken shall be deemed
to have been taken at a meeting held on the effective date of the Consent as
certified by the General Partner.


(c)              
(i)        Each Limited Partner may authorize any Person or Persons to act
for him by proxy on all matters in which a Limited Partner is entitled to
participate, including waiving notice of any meeting, or voting or
participating at a meeting.









70 




 










 








 








(ii)           
Every proxy must be signed by the
Partner or an attorney-in-fact and a copy thereof delivered to the Partnership.


(iii)         
No proxy shall be valid after the
expiration of eleven (11) months from the date thereof unless otherwise
provided in the proxy.


(iv)         
Every proxy shall be revocable at
the pleasure of the Partner executing it, such revocation to be effective upon
the General Partner’s receipt of written notice of such revocation from the
Partner executing such proxy.


(d)              
(i)         Each meeting of the Partners shall be conducted by the General
Partner or such other Person as the General Partner may appoint pursuant to
such rules for the conduct of the meeting as the General Partner or such other
Person deems appropriate.


(ii)           
Meetings of Partners may be
conducted in the same manner as meetings of the Stockholders of the General
Partner and may be held at the same time, and as part of, meetings of the
Stockholders of the General Partner.


Article 15

GENERAL PROVISIONS


15.1         
Addresses and Notice


Any notice, demand, request or report required or permitted
to be given or made to a Partner, the Special Limited Partner, Indemnitee or
Assignee under this Agreement shall be in writing and shall be deemed given or
made when delivered in person or five days after being sent by first class
United States mail or by overnight delivery or via facsimile to the Partner or
Assignee at the address set forth in Exhibit A or such other address of
which the Partner shall notify the General Partner in writing. Notwithstanding
the foregoing, the General Partner may elect to deliver any such notice,
demand, request or report by E-mail or by any other electronic means, in which
case such communication shall be deemed given or made one day after being sent.


15.2         
Titles and Captions


All article or section titles or captions in this
Agreement are for convenience of reference only, shall not be deemed part of
this Agreement and shall 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.


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.










71 




 










 








 








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.


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.


15.6         
Creditors 


Other than as expressly set forth herein with respect
to the Indemnities, none of the provisions of this Agreement shall be for the
benefit of, or shall be enforceable by, any creditor of the Partnership.


15.7         
Waiver 


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


15.8         
Counterparts 


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


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 laws thereof.


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.


15.11      Entire Agreement


This Agreement contains the entire understanding and
agreement among the Partners with respect to the subject matter hereof and
supersedes any other prior written or oral understandings or agreements among
them with respect thereto.










72 




 










 








 








15.12      Merger 


Notwithstanding any provision of this Agreement, the
General Partner, without the consent of the Limited Partners or any other
Person, may (i) merge or consolidate the Partnership with or into any other domestic
or foreign partnership, limited partnership, limited liability company,
corporation or other Person or (ii) sell all or substantially all of the assets
of the Partnership and may amend this Agreement in any manner or adopt a new
limited partnership agreement for the Partnership in connection with any such
transaction consistent with the provisions of this Section 15.12.


 


15.13      No Rights as Stockholders


Nothing contained in this Agreement shall be construed
as conferring upon the holders of the Partnership Units any rights whatsoever
as Stockholders of the General Partner, including any right to receive
dividends or other distributions made to Stockholders or to vote or to consent
or receive notice as Stockholders in respect to any meeting of Stockholders for
the election of directors of the General Partner or any other matter.


Article 16

CLASS B UNITS


16.1         
Designation and Number


(a)               
A series of Partnership Units in
the Partnership, designated as the “Class B Units,” is hereby established. 
Except as set forth in this Article 16, Class B Units shall have the same
rights, privileges and preferences as the OP Units.  Subject to the provisions
of this Article 16 and the special provisions of subparagraph 1(c)(ii) of Exhibit
B, Class B Units shall be treated as Partnership Units, with all of the
rights, privileges and obligations attendant thereto. In connection with
services provided by the New Limited Partner under the Advisory Agreement, the
General Partner shall cause the Partnership to issue to the New Limited Partner
within sixty (60) days after the end of each Quarter a number of Class B Units
equal to the quotient of (i) the product of (A) the Cost of Assets multiplied
by (B) 0.25%  divided by (ii) the Value of one share of Common Stock
as of the last day of such Quarter;  provided, that each quarterly
issuance of Class B Units shall be subject to the approval of the Initial
Limited Partner’s board of directors.


(b)              
It is intended that the
Partnership shall maintain at all times a one-to-one correspondence between
Class B Units and OP Units for conversion and other purposes.  If an Adjustment
Event (as defined below) occurs, then the General Partner shall make a
corresponding adjustment to the Class B Units to maintain a one-for-one
conversion and economic equivalence ratio between OP Units and Class B Units.
The following shall be “Adjustment Events:” (A) the Partnership makes a
distribution on all outstanding OP Units in Partnership Units, (B) the
Partnership subdivides the outstanding OP Units into a greater number of units
or combines the outstanding OP Units into a smaller number of units, or (C) the
Partnership issues any Partnership Units in exchange for its outstanding OP
Units by way of a reclassification or recapitalization of its OP Units. If more
than one Adjustment Event occurs, the 







73 




 










 








 








adjustment to
the Class B Units need be made only once using a single formula that takes into
account each and every Adjustment Event as if all Adjustment Events occurred
simultaneously. For the avoidance of doubt, the following events shall not be
Adjustment Events: (x) the issuance of Partnership Units in a financing,
reorganization, acquisition or other similar business transaction, (y) the
issuance of Partnership Units pursuant to any employee benefit or compensation
plan or dividend reinvestment plan, or (z) the issuance of any Partnership
Units in respect of a capital contribution to the Partnership, including a
contribution by the Initial Limited Partner of proceeds from the sale of
securities by the Initial Limited Partner. If the Partnership takes an action
affecting the OP Units other than actions specifically described above as
Adjustment Events and, in the opinion of the General Partner such action would
require an adjustment to the Class B Units to maintain the one-to-one
correspondence described above, the General Partner shall have the right to
make such adjustment to the Class B Units, to the extent permitted by law, in
such manner and at such time as the General Partner, in its sole discretion,
may determine to be appropriate under the circumstances. If an adjustment is
made to the Class B Units as herein provided, the Partnership shall promptly
file in the books and records of the Partnership an officer’s certificate
setting forth such adjustment and a brief statement of the facts requiring such
adjustment, which certificate shall be conclusive evidence of the correctness
of such adjustment absent manifest error. Promptly after the filing of such
certificate, the Partnership shall mail a notice to each holder of Class B
Units setting forth the adjustment to his, her or its Class B Units and the
effective date of such adjustment.


16.2         
Special Provisions. Class B Units shall be subject to the following
special provisions: 


(a)               
Restrictions and Forfeiture.  


(i)             
All Class B Units when issued
shall be subject to forfeiture and shall constitute “Restricted Class B
Units” and shall remain subject to forfeiture as provided in this Section
16.2(a) until the requirements of this Section 16.2(a) have been satisfied.


(ii)           
One hundred percent (100%) of the
outstanding Restricted Class B Units shall no longer be subject to forfeiture
and shall constitute “Unrestricted Class B Units” at such time as:


(A)            
the value of the Partnership’s
assets (as determined by the General Partner) plus all distributions made under
Sections 5.1(a), 5.1(b)(i) and 5.1(b)(ii) equals the cumulative Net Investment
plus the Class B Priority Return on such cumulative Net Investment (the “Economic
Hurdle”); provided, that in the event of an OP Unit Transaction the
determination of the value of the Partnership’s assets shall take into account
the offering price or transaction value of the Common Stock, as appropriate;
and


(B)             
a Liquidity Event occurs
concurrently with or subsequent to the Economic Hurdle being met.


(iii)         
If the Advisory Agreement is
terminated for any reason other than pursuant to a Termination Without Cause,
any outstanding Restricted Class B Units shall be forfeited immediately.  If
the Advisory Agreement is terminated pursuant to a Termination 







74 




 










 








 








Without Cause prior to the date on which the Economic
Hurdle has been met, any outstanding Restricted Class B Units shall be
forfeited immediately.  Upon such forfeiture, such Restricted Class B Units
shall immediately, and without any further action, be treated as cancelled and
no longer outstanding for any purpose. No consideration or other payment shall
be due with respect to any Class B Units that have been forfeited. In
connection with any forfeiture of Class B Units, the balance of the Capital
Account of a holder of Class B Units, if any, shall be reduced by the amount of
the Capital Account attributable to the forfeited Class B Units, and such
reduction shall be reallocated to all holders of OP Units, pro rata in
accordance with their respective Percentage Interests with respect to OP Units.


(iv)         
The General Partner may in its
sole discretion provide for the acceleration, waiver or change of the
forfeiture provisions contained in this Section 16.2(a), in whole or in part,
based on such factors or criteria as the General Partner may determine.


(b)              
Distributions.  The holders of Class B Units shall be entitled to
(i) current distributions of Cash Available for Distribution pursuant to
Section 5.1(a); (ii) distributions, if any, of Net Sales Proceeds pursuant to
Section 5.1(b)(iii); and (iii) distributions in liquidation of the Partnership
pursuant to Section 13.2.


(c)               
Allocations. Holders of Class B Units shall be entitled to
certain special allocations of gain under subparagraph 1(c)(ii) of Exhibit B.
 


(d)              
Exchange Right. The right to exchange all or a portion of Partnership
Units for cash or, at the option of the Partnership, for shares of Common Stock
provided to Limited Partners under Section 8.6 hereof shall not apply
with respect to Class B Units unless and until the Class B Units are converted
to OP Units as provided in clause (e) below and Section 16.4 hereof.  


(e)               
Conversion to OP Units. Unrestricted Class B Units are eligible to be
converted into OP Units in accordance with Section 16.4 hereof. 


16.3         
Voting 


(a)               
Holders of Class B Units shall (a)
have the same voting rights as the Limited Partners, with the Class B Units
voting as a single class with the OP Units and having one vote per Class B
Unit; and (b) have the additional voting rights that are expressly set forth
below. So long as any Class B Units remain outstanding, the Partnership shall
not, without the affirmative vote of the holders of at least a majority of the
Class B Units outstanding at the time, given in person or by proxy, either in
writing or at a meeting (voting separately as a class), amend, alter or repeal,
whether by merger, consolidation or otherwise, the provisions of this Agreement
applicable to Class B Units so as to materially and adversely affect any right,
privilege or voting power of the Class B Units or the holders of Class B Units
as such, unless such amendment, alteration, or repeal affects equally, ratably
and proportionately the rights, privileges and voting powers of the Limited
Partners; but subject, in any event, to the following provisions: 


(i)             
With respect to any OP Unit
Transaction, so long as the Class B Units are treated in accordance with
Section 16.4(c) hereof, the consummation of such OP Unit Transaction shall








75 




 










 








 








not be deemed to materially and adversely affect such
rights, preferences, privileges or voting powers of the Class B Units or the holders
of Class B Units as such; and 


(ii)           
Any creation or issuance of any
Partnership Units or of any class or series of Partnership Interest including
additional OP Units or Class B Units whether ranking senior to, junior to, or
on a parity with the Class B Units with respect to distributions and the
distribution of assets upon liquidation, dissolution or winding up, shall not
be deemed to materially and adversely affect such rights, preferences,
privileges or voting powers of the Class B Units or the holders of Class B
Units as such. 


(b)              
The foregoing voting provisions
will not apply if, at or prior to the time when the act with respect to which
such vote would otherwise be required, all outstanding Class B Units shall have
been converted into OP Units.


16.4         
Conversion of Class B Units


(a)               
Conversion.  Restricted Class B Units shall not be convertible
into OP Units until they become Unrestricted Class B Units.  At such time as
the Economic Capital Account Balance attributable to an Unrestricted Class B
Unit is equal to the OP Unit Economic Balance, each such balance determined on
a per unit basis as of the effective date of conversion (the “Conversion
Date”), such Unrestricted Class B Unit shall automatically convert into one
fully paid and non-assessable OP Unit, giving effect to all adjustments (if
any) made pursuant to Section 16.1 hereof; provided, that an
Unrestricted Class B Unit shall not be convertible into OP Units if the
Economic Capital Account Balance attributable to such Unrestricted Class B Unit
is negative.  Each holder of Class B Units covenants and agrees with the
Partnership that all Unrestricted Class B Units to be converted pursuant to
this Section 16.4 shall be free and clear of all liens. The conversion of
Unrestricted Class B Units shall occur automatically after the close of
business on the applicable Conversion Date without any action on the part of
such holder of Unrestricted Class B Units, as of which time such holder of
Unrestricted Class B Units shall be credited on the books and records of the Partnership
with the issuance as of the opening of business on the next day of the number
of OP Units issuable upon such conversion.  For purposes of determining the
Economic Capital Account Balance attributable to an Unrestricted Class B Unit,
allocations pursuant to subparagraph 1(c)(ii) of Exhibit B shall be made
in such a manner so as to allow the greatest number of Class B Units to convert
pursuant to this Section 16.4 at any time.


(b)              
Adjustment to Gross Asset Value.   


(i)             
The General Partner shall provide
the holders of Class B Units the opportunity but not the obligation to make
Capital Contributions to the Partnership in exchange for OP Units in order to
cause an adjustment to the Gross Asset Value of the Partnership’s assets within
the meaning of paragraph (b)(i) of the definition of Gross Asset Value up to
two (2) times each fiscal year including:


(A)            
if the Partnership or the General
Partner shall be a party to any OP Unit Transaction; provided, that the
General Partner shall give each holder of Class B Units written notice of such
OP Unit Transaction at least thirty (30) days 







76 




 










 

prior to
entering into any definitive agreement pursuant to which the OP Unit
Transaction would be consummated;


(B)             
upon a Listing; provided,
that the General Partner shall give each holder of Class B Units written notice
of such Listing at least thirty (30) days prior to such Listing; or


(C)             
upon a Termination Without Cause; provided,
that the General Partner shall give each holder of Class B Units written notice
of such Termination Without Cause at least thirty (30) days prior to such
Termination Without Cause.


(ii)           
For purposes of clause (i) of this
Section 16.4(b), the value of each OP Unit issued in order to cause an
adjustment to the Gross Asset Value of the Partnership’s assets shall be an
amount equal to the product of (y) the Value of a share of Common Stock as of
the date the holder of Class B Units makes a Capital Contribution to the
Partnership multiplied by (z) the Exchange Factor.


(iii)         
For the avoidance of doubt, the
issuance of Class B Units shall be treated as an event allowing for an
adjustment to the Gross Asset Value of the Partnership’s assets within the
meaning of paragraph (b)(iv) of the definition of Gross Asset Value.


(c)               
Impact of Conversion for
Purposes of Subparagraph 1(c)(ii) of Exhibit B. For purposes of making future allocations under
subparagraph 1(c)(ii) of Exhibit B, the portion of the Economic Capital
Account Balance of the applicable holder of Unrestricted Class B Units that is
treated as attributable to his, her or its Class B Units shall be reduced, as
of the date of conversion, by the product of the number of Unrestricted Class B
Units converted and the OP Unit Economic Balance.


(d)              
OP Unit Transactions. Immediately prior to or concurrent with an OP Unit
Transaction the maximum number of Class B Units then eligible for conversion
(in accordance with the provisions of Section 16.4(a)) shall automatically be
converted into an equal number of OP Units, giving effect to all adjustments
(if any) made pursuant to Section 16.1 hereof, taking into account any
allocations that occur in connection with the OP Unit Transaction or that would
occur in connection with the OP Unit Transaction if the assets of the
Partnership were sold at the OP Unit Transaction price or, if applicable, at a
value determined by the General Partner in good faith using the value
attributed to the Partnership Units in the context of the OP Unit Transaction
(in which case the Conversion Date shall be the effective date of the OP Unit
Transaction). In anticipation of such OP Unit Transaction, the Partnership
shall use commercially reasonable efforts to cause each holder of Class B Units
to be afforded the right to receive in connection with such OP Unit Transaction
in consideration for the OP Units into which his, her or its Class B Units will
be converted the same kind and amount of cash, securities and other property
(or any combination thereof) receivable upon the consummation of such OP Unit
Transaction by a holder of the same number of OP Units, assuming such holder of
OP Units is not a Person with which the Partnership consolidated or into which
the Partnership merged or which merged into the Partnership or to which such
sale or transfer was made, as the case may be (a “Constituent Person”),
or an affiliate of a Constituent Person. In the event that holders of OP Units
have the opportunity to elect the form or type of consideration to be received
upon consummation of the 







77 




 










 








 








OP Unit Transaction, prior to
such OP Unit Transaction the General Partner shall give prompt written notice
to each holder of Class B Units of such election, and shall use commercially
reasonable efforts to afford the holders of Class B Units the right to elect,
by written notice to the General Partner, the form or type of consideration to
be received upon conversion of each Class B Unit held by such holder into OP
Units in connection with such OP Unit Transaction. If a holder of Class B Units
fails to make such an election, such holder (and any of its transferees) shall
receive upon conversion of each Class B Unit held by him, her or it (or by any
of his, her or its transferees) the same kind and amount of consideration that
a holder of an OP Unit would receive if such OP Unit holder failed to make such
an election. The Partnership shall use commercially reasonable effort to cause
the terms of any OP Unit Transaction to be consistent with the provisions of
this Section 16.4(d) and to enter into an agreement with the successor or
purchasing entity, as the case may be, for the benefit of any holders of Class
B Units whose Class B Units will not be converted into OP Units in connection
with the OP Unit Transaction that will (i) contain provisions enabling the
holders of Class B Units that remain outstanding after such OP Unit Transaction
to convert their Class B Units into securities as comparable as reasonably
possible under the circumstances to the OP Units and (ii) preserve as far
as reasonably possible under the circumstances the distribution, special
allocation, conversion, and other rights set forth in this Agreement for the
benefit of the holders of Class B Units.


16.5         
Profits Interests


(a)               
Class B Units are intended to
qualify as a “profits interest” in the Partnership issued to a new or existing
Partner in a partner capacity for services performed or to be performed to or
for the benefit of the Partnership within the meaning of Rev. Proc. 93-27,
1993-2 C.B. 343, and Rev. Proc. 2001-43, 2001-2 C.B. 191, the Code, the
Regulations, and other future guidance provided by the IRS with respect
thereto, and the allocations under subparagraph 1(c)(ii) of Exhibit B
shall be interpreted in a manner that is consistent therewith. 


(b)              
The Partners agree that the
General Partner may make a Safe Harbor Election (if and when the Safe Harbor
Election becomes available), on behalf of itself and of all Partners, to have
the Safe Harbor apply irrevocably with respect to Class B Units transferred in
connection with the performance of services by a Partner in a partner capacity.
The Safe Harbor Election (if available) shall be effective as of the date of
issuance of such Class B Units. If such election is made, (i) the Partnership
and each Partner agree to comply with all requirements of the Safe Harbor with
respect to all interests in the Partnership transferred in connection with the
performance of services by a Partner in a partner capacity, whether such
Partner was admitted as a Partner or as the transferee of a previous Partner,
and (ii) the General Partner shall cause the Partnership to comply with all
record-keeping requirements and other administrative requirements with respect
to the Safe Harbor as shall be required by proposed or final regulations
relating thereto. 


(c)               
The Partners agree that if a Safe
Harbor Election is made by the General Partner, (A) each Class B Unit issued
hereunder with respect to which the Safe Harbor is available is a Safe Harbor
Interest, (B) each Class B Unit represents a profits interest received for
services rendered or to be rendered to or for the benefit of the Partnership by
such holder of Class B Units in his, her or its capacity as a Partner or in
anticipation of becoming a Partner, and (C) the fair market value of each Class
B Unit issued by the Partnership upon receipt by such holder of Class 







78 




 










 








 








B Units as of the date of issuance is zero (plus the
amount, if any, of any Capital Contributions made to the Partnership by such
holder of Class B Units in connection with the issuance of such Class B Unit),
representing the liquidation value of such interest upon receipt (with such
valuation being consented to and hereby approved by all Partners). 


(d)              
Each Partner, by signing this
Agreement or by accepting such transfer, hereby agrees (A) to comply with all
requirements of any Safe Harbor Election made by the General Partner with
respect to each holder of Class B Units’ Safe Harbor Interest, (B) that each
holder of Class B Units shall take into account of all items of income, gain,
loss, deduction and credit associated with its Class B Units as if they were
fully vested in computing its federal income tax liability for the entire
period during which it holds the Class B Units, (C) that neither the
Partnership nor any Partner shall claim a deduction (as wages, compensation or
otherwise) for the fair market value of such Class B Units issued to a holder
of such Class B Units, either at the time of grant of the Class B Units or at
the time the Class B Units becomes substantially vested, and (D) that to the
extent that such profits interest is forfeited after the date hereof, the
Partnership shall make special forfeiture allocations of gross items of income,
deduction or loss (including, as may be permitted by or under Regulations (or
other rules promulgated) to be adopted, notional items of income, deduction or
loss) in accordance with the Regulations to be adopted under Sections 704(b)
and 83 of the Code. 


(e)               
The General Partner shall file or
cause the Partnership to file all returns, reports and other documentation as
may be required, as reasonably determined by the General Partner, to perfect
and maintain any Safe Harbor Election made by the General Partner with respect
to granting of each holder of Class B Units’ Safe Harbor Interest.


(f)               
The General Partner is hereby
authorized and empowered, without further vote or action of the Partners, to
amend this Agreement to the extent necessary or helpful in accordance with the
advice of Partnership tax counsel or accountants to sustain the Partnership’s
position that (A) it has complied with the Safe Harbor requirements in order to
provide for a Safe Harbor Election and it has ability to maintain the same, or
(B) the issuance of the Class B Units is not a taxable event with respect to
the holders of Class B Units, and the General Partner shall have the authority
to execute any such amendment by and on behalf of each Partner pursuant to the
power of attorney granted by this Agreement. Any undertaking by any Partner
necessary or desirable to (A) enable or preserve a Safe Harbor Election or (B)
otherwise to prevent the issuance of Class B Units from being a taxable event
with respect to the holders of Class B Units may be reflected in such
amendments and, to the extent so reflected, shall be binding on each Partner.


(g)              
Each Partner agrees to cooperate
with the General Partner to perfect and maintain any Safe Harbor Election, and
to timely execute and deliver any documentation with respect thereto reasonably
requested by the General Partner, at the expense of the Partnership. 


(h)              
No Transfer of any interest in the
Partnership by a Partner shall be effective unless prior to such Transfer, the
assignee or intended recipient of such interest shall have agreed in writing to
be bound by the provisions of Section 10.2(d) and this Section 16.5, in a form
reasonably satisfactory to the General Partner.









79 




 










 








 








(i)                
The provisions of this Section
16.5 shall apply regardless of whether or not a holder of Class B Units files
an election pursuant to Section 83(b) of the Code.


(j)                
The General Partner may amend this
Section 16.5 as it deems necessary or appropriate to maximize the tax benefit
of the issuance of Class B Units to any holder of Class B Units if there are
changes in the law or Regulations concerning the issuance of partnership
interests for services.


[SIGNATURE
PAGE FOLLOWS]







 








 








Signature Page to Amended and Restated Agreement of
Limited Partnership of Phillips Edison – ARC Shopping Center Operating
Partnership, L.P., among the undersigned and the other parties thereto.


GENERAL
PARTNER:



PHILLIPS EDISON – ARC SHOPPING CENTER OP GP, LLC


By: 
Phillips Edison – ARC Shopping Center REIT Inc., its sole member


By:    /s/
R. Mark Addy_____________________

       Name:   R. Mark Addy

       Title:     Chief Operating Officer


INITIAL
LIMITED PARTNER:


PHILLIPS
EDISON – ARC SHOPPING CENTER REIT INC.





By:    /s/ R. Mark Addy_______________________

       Name:   R. Mark Addy

       Title:     Chief Operating Officer


NEW
LIMITED PARTNER:



AMERICAN REALTY CAPITAL II ADVISORS, LLC






By:   /s/ William Kahane______________________

       Name:  William Kahane

       Title:     President


SPECIAL
LIMITED PARTNER:



PE – ARC SPECIAL LIMITED PARTNER LLC


By: 
American Realty Capital II Advisors, LLC, 

        its member





By:   /s/ William Kahane_____________________

       Name:  William Kahane

       Title:    President









81 




 










 

 


By:
Phillips Edison NTR LLC, 

       its member





By:    /s/ R. Mark Addy_____________________

        Name:  R. Mark Addy

        Title:    President







 








 








Exhibit A

















83 




 










 








 








Exhibit B



Allocations


For purposes of this Exhibit B, the term “Partner”
shall include the Special Limited Partner.


Allocations.
 


(a)               
Allocations of Net Income and
Net Loss.  Except as otherwise
provided in this Agreement, after giving effect to the special allocations in
subparagraph 1(c) and paragraph 2, Net Income, Net Loss and, to the extent
necessary, individual items of income, gain, loss or deduction, of the
Partnership for each fiscal year or other applicable period of the Partnership
shall be allocated among the General Partner and Limited Partners in accordance
with their respective Percentage Interests.


(b)              
Allocations of Net Property
Gain and Net Property Loss.  Except as
otherwise provided in this Agreement, after giving effect to the special
allocations in subparagraphs 1(c) and paragraph 2, Net Property Gain, Net
Property Loss and, to the extent necessary, individual items of income, gain,
credit, loss and deduction comprising Net Property Gain and Net Property Loss
of the Partnership for each fiscal year or other applicable period shall be
allocated among the Partners in a manner determined in the reasonable
discretion of the General Partner that will, as nearly as possible cause the
Capital Account balance of each Partner at the end of such fiscal year or other
applicable period to equal (i) the amount of the distributions that would be
made to such Partner pursuant to Section 5.1(b) of the Agreement if the
Partnership were dissolved, its affairs wound up and its assets were sold for
cash equal to their Gross Asset Value, taking into account any adjustments
thereto for such period, all Partnership liabilities were satisfied in full in
cash according to their terms (limited with respect to each nonrecourse
liability to the Gross Asset Value of the assets securing such liability), and
Net Sales Proceeds (after satisfaction of such liabilities) were distributed in
full in accordance with Section 5.1(b) to the Partners immediately after making
such allocations, minus (ii) the sum of such Partner’s share of Partnership
Minimum Gain and Partner Nonrecourse Debt Minimum Gain and the amount, if any
and without duplication, that the Partner would be obligated to contribute to the
capital of the Partnership, all computed immediately prior to the hypothetical
sale of assets.


(c)               
Special Allocations.  


(i)                
General Partner Gross Income
Allocation. After giving effect to
the special allocations in paragraph 2 but prior to any allocations under subparagraphs
1(a) or 1(b), there shall be specially allocated to the General Partner an
amount of (i) first, items of Partnership income and (ii) second,
items of Partnership gain during each fiscal year or other applicable period in
an amount equal to the excess, if any, of (A) the cumulative distributions
made to the General Partner under Section 7.3(b) of the Agreement, other than
distributions which would properly be treated as “guaranteed payments” or which
are attributable to the reimbursement of expenses which would properly be
either deductible by the Partnership or added to the tax basis of any
Partnership asset, over (B) the cumulative allocations of Partnership
income and gain to the General Partner under this subparagraph 1(c)(i).









84 




 










 








 








(ii)              
Special Allocations Regarding
Class B Units. After giving effect to
the special allocations in subparagraph 1(c)(i) and paragraph 2 but prior to
any allocations under subparagraphs 1(a) or 1(b), Net Property Gain and
Liquidating Gain and, to the extent necessary, individual items of income and
gain comprising Net Property Gain, Net Property Loss or Liquidating Gain of the
Partnership shall be allocated to the holders of Class B Units until their
Economic Capital Account Balances are equal to (A) the OP Unit Economic
Balance, multiplied by (B) the number of their Class B Units; provided,
that no such Net Property Gain or Liquidating Gain or individual items of
income and gain comprising Net Property Gain, Net Property Loss or Liquidating
Gain will be allocated with respect to any particular Class B Unit unless and
to the extent that the OP Unit Economic Balance exceeds the OP Unit Economic
Balance in existence at the time such Class B Unit was issued. The “Economic
Capital Account Balances” of the Class B Unit holders will be equal to
their Capital Account balances to the extent attributable to their ownership of
Class B Units. The “OP Unit Economic Balance” shall mean (Y) the
aggregate Capital Account balance attributable to the OP Units outstanding,
plus the amount of any Partner Minimum Gain or Partnership Minimum Gain, in
either case to the extent attributable to the ownership of OP Units and
computed on a hypothetical basis after taking into account all allocations
through the date on which any allocation is made under this subparagraph
1(c)(ii), divided by (Z) the number of OP Units outstanding. Any
allocations made pursuant to the first sentence of this subparagraph 1(c)(ii)
shall be made among the holders of Class B Units in proportion to the amounts
required to be allocated to each under this subparagraph 1(c)(ii). The parties
agree that the intent of this subparagraph 1(c)(ii) is to make the Capital
Account balance associated with each Class B Unit to be economically equivalent
to the Capital Account balance associated with the OP Units outstanding (on a
per-Unit basis), but only if and to the extent that the Capital Account balance
associated with the OP Units outstanding, without regard to the allocations
under this subparagraph 1(c)(ii), has increased on a per-Unit basis since the
issuance of the relevant Class B Unit. Any remaining Liquidating Gain, Net
Property Gain or Net Property Loss not allocated pursuant to this subparagraph
1(c)(ii) shall be included in the calculation of Net Income, Net Loss, Net
Property Gain and Net Property Loss and will be allocated pursuant to
subparagraphs 1(a) and 1(b).


(iii)            
Special Allocations Regarding
the Special Limited Partner Interest. 
After giving effect to the special allocations in subparagraphs 1(c)(i) and
1(c)(ii) and paragraph 2 but prior to any allocations under subparagraph 1(a)
and 1(b), Net Property Gain and, to the extent necessary, individual items of
income and gain comprising Net Property Gain and Liquidating Gain, shall be
allocated to the Special Limited Partner until the Special Limited Partner has
received aggregate allocations of income for all fiscal years equal to the
aggregate amount of distributions the Special Limited Partner is entitled to
receive or has received with respect to the Special Limited Partner Interest
for such fiscal year and all prior fiscal years.  Notwithstanding the
foregoing, if the Special Limited Partner is entitled to receive distributions
of Net Sales Proceeds pursuant to the Partnership’s obligation under a Listing
Note or a Termination Amount, Liquidating Gain shall be allocated to the
Special Limited Partner until the Special Limited Partner has received
aggregate allocations equal to the aggregate amount of distributions the
Special 







85 




 










 








 








Limited Partner is entitled to receive
pursuant to such Listing Note or Termination Amount.


Regulatory Allocations. Notwithstanding any provisions of paragraph 1 of
this Exhibit B, the following special allocations shall be made.


(d)              
Minimum Gain Chargeback
(Nonrecourse Liabilities). Except as
otherwise provided in Section 1.704-2(f) of the Regulations, if there is a net
decrease in Partnership Minimum Gain for any Partnership fiscal 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 to the extent
required by Section 1.704-2(f) of the Regulations. The items to be so allocated
shall be determined in accordance with Sections 1.704-2(f) and (i) of the
Regulations. This subparagraph 2(a) is intended to comply with the minimum gain
chargeback requirement in said section of the Regulations and shall be
interpreted consistently therewith. Allocations pursuant to this subparagraph
2(a) shall be made in proportion to the respective amounts required to be
allocated to each Partner pursuant hereto.


(e)               
Partner Minimum Gain Chargeback. Except as otherwise provided in Section
1.704-2(i)(4) of the Regulations, if there is a net decrease in Partner
Nonrecourse Debt Minimum Gain during any fiscal year, each Partner who has a
share of the Partner Nonrecourse Debt Minimum Gain, determined in accordance
with Section 1.704-2(i)(5) of the Regulations, shall be specially allocated
items of Partnership income and gain for such year (and, if necessary,
subsequent years) in an amount equal to that Partner’s share of the net
decrease in the Partner Nonrecourse Debt Minimum Gain to the extent and in the
manner required by Section 1.704-2(i) of the Regulations. The items to be so
allocated shall be determined in accordance with Sections 1.704-2(i)(4) and
(j)(2) of the Regulations. This subparagraph 2(b) is intended to comply with
the minimum gain chargeback requirement with respect to Partner Nonrecourse
Debt contained in said section of the Regulations and shall be interpreted
consistently therewith. Allocations pursuant to this subparagraph 2(b) shall be
made in proportion to the respective amounts required to be allocated to each
Partner pursuant hereto.


(f)               
Qualified Income Offset. If a Partner unexpectedly receives any adjustments,
allocations or distributions described in Sections 1.704-1(b)(2)(ii)(d)(4), (5)
or (6) of the Regulations, and such Partner has an Adjusted Capital Account
Deficit, items of Partnership income (including gross income) and gain shall be
specially allocated to such Partner in an amount and manner sufficient to
eliminate the Adjusted Capital Account Deficit as quickly as possible as
required by the Regulations. This subparagraph 2(c) is intended to constitute a
“qualified income offset” under Section 1.704-1(b)(2)(ii)(d) of the Regulations
and shall be interpreted consistently therewith.


(g)              
Nonrecourse Deductions. Nonrecourse Deductions for any fiscal year or other
applicable period shall be allocated to the Partners in accordance with their
respective Percentage Interests.


(h)              
Partner Nonrecourse Deductions. Partner Nonrecourse Deductions for any fiscal year
or other applicable period with respect to a Partner Nonrecourse Debt shall be
specially 







86 




 










 








 








allocated to the Partner that bears the
economic risk of loss for such Partner Nonrecourse Debt (as determined under
Sections 1.704-2(b)(4) and 1.704-2(i)(1) of the Regulations).


(i)                
Section 754 Adjustment. To the extent an adjustment to the adjusted tax
basis of any asset of the Partnership pursuant to Section 734(b) of the Code or
Section 743(b) of the Code is required, pursuant to Section
1.704-1(b)(2)(iv)(m) of the Regulations, 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
gain or loss shall be specially allocated among the Partners in a manner
consistent with the manner in which each of their respective Capital Accounts
are required to be adjusted pursuant to such section of the Regulations.


(j)                
Gross Income Allocation. If any Partner has an Adjusted Capital Account
Deficit at the end of any fiscal year or other applicable period which is in
excess of the amount such Partner is obligated to restore pursuant to the
penultimate sentences of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the
Regulations, such Partner shall be specially allocated items of Partnership
income (including gross income) and gain in the amount of such excess as
quickly as possible, provided that an allocation pursuant to this subparagraph
2(g) shall be made if and only to the extent that such Partner would have an
Adjusted Capital Account Deficit in excess of such amount after all other
allocations provided for under this Agreement have been tentatively made as if
subparagraph 2(c) and this subparagraph 2(g) were not in this Agreement.


Curative Allocations. The General Partner is authorized to offset all
Regulatory Allocations either with other Regulatory Allocations or with special
allocations of other items of Partnership income, gain, loss, or deduction
pursuant to this paragraph 3.  Therefore, notwithstanding any other provision
of this Exhibit B (other than the Regulatory Allocations and Tax
Allocations), the General Partner shall make such offsetting allocations
of Partnership income, gain, loss or deduction in whatever manner the General
Partner determines appropriate so that, after such offsetting allocations are
made, each Partner’s Capital Account balance is, to the extent possible, equal
to the Capital Account balance such Partner would have had if the Regulatory
Allocations were not part of this Agreement.


Tax Allocations. 


(k)              
Items of Income or Loss. Except as is otherwise provided in this Exhibit B,
an allocation of Partnership Net Income, Net Loss, Liquidating Gain, Net
Property Gain or Net Property Loss to a Partner shall be treated as an
allocation to such Partner of the same share of each item of income, gain,
loss, deduction and item of tax-exempt income or Section 705(a)(2)(B)
expenditure (or item treated as such expenditure pursuant to Section
1.704-1(b)(2)(iv)(i) of the Regulations) that is taken into account in
computing Net Income, Net Loss, Liquidating Gain, Net Property Gain or Net
Property Loss.  Except as otherwise provided in this paragraph 4, items of
income, gain, loss and deduction of the Partnership to be allocated for income
tax purposes (“Tax Items”) shall be allocated among the Partners on the
same basis as the corresponding book items are allocated under paragraphs 1
through 3 of this Exhibit B. 


(l)                
Section 1245/1250 Recapture. Subject to subparagraph 4(c) below, if any portion
of gain from the sale of Partnership assets is treated as gain which is
ordinary income by virtue 







87 




 










 








 








of the application of
Sections 1245 or 1250 of the Code or is gain described in Section 1(h)(1)(D) of
the Code (“Affected Gain”), then such Affected Gain shall be allocated
among the Partners in the same proportion that the depreciation and
amortization deductions giving rise to the Affected Gain were allocated. This
subparagraph 4(b) shall not alter the amount of Net Income, Liquidating Gain or
Net Property Gain (or items thereof) allocated among the Partners, but merely
the character of such Net Income, Liquidating Gain or Net Property Gain (or
items thereof). For purposes hereof, in order to determine the proportionate
allocations of depreciation and amortization deductions for each fiscal year or
other applicable period, such deductions shall be deemed allocated on the same
basis as Net Income, Net Loss, Liquidating Gain, Net Property Gain and Net
Property Loss for such respective period.


(m)            
Precontribution Gain,
Revaluations. With respect to any
Contributed Property, the Partnership shall use any permissible method
contained in the Regulations promulgated under Section 704(c) of the Code
selected by the General Partner, in its sole discretion, to take into account
any variation between the adjusted basis of such asset and the fair market
value of such asset as of the time of the contribution (“Precontribution
Gain”). Each Partner hereby agrees to report income, gain, loss and
deduction on such Partner’s federal income tax return in a manner consistent
with the method used by the Partnership. If any asset has a Gross Asset Value
which is different from the Partnership’s adjusted basis for such asset for
federal income tax purposes because the Partnership has revalued such asset
pursuant to Section 1.704-1(b)(2)(iv)(f) of the Regulations, the allocations of
Tax Items shall be made in accordance with the principles of Section 704(c) of
the Code and the Regulations and the methods of allocation promulgated
thereunder. The intent of this subparagraph 4(c) is that each Partner who
contributed to the capital of the Partnership a Contributed Property will bear,
through reduced allocations of depreciation, increased allocations of gain or
other items, the tax detriments associated with any Precontribution Gain. This
subparagraph 4(c) is to be interpreted consistently with such intent.


(n)              
Excess Nonrecourse Liability
Safe Harbor. Pursuant to Section
1.752-3(a)(3) of the Regulations, solely for purposes of determining each
Partner’s proportionate share of the “excess nonrecourse liabilities” of the
Partnership (as defined in Section 1.752-3(a)(3) of the Regulations), the
Partners’ respective interests in Partnership profits shall be determined under
any permissible method reasonably determined by the General Partner; provided,
however, that each Partner who has contributed an asset to the Partnership
shall be allocated, to the extent possible, a share of “excess nonrecourse
liabilities” of the Partnership which results in such Partner being allocated
nonrecourse liabilities in an amount which is at least equal to the amount of
income pursuant to Section 704(c) of the Code and the Regulations promulgated
thereunder (the “Liability Shortfall”). If there is an insufficient
amount of nonrecourse liabilities to allocate to each Partner an amount of
nonrecourse liabilities equal to the Liability Shortfall, then an amount of
nonrecourse liabilities in proportion to, and to the extent of, the Liability
Shortfall shall be allocated to each Partner.


(o)              
References to Regulations. Any reference in this Exhibit B or the
Agreement to a provision of proposed and/or temporary Regulations shall, if
such provision is modified or renumbered, be deemed to refer to the successor
provision as so modified or renumbered, but only to the extent such successor
provision applies to the Partnership under the effective date rules applicable
to such successor provision.)









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(p)              
Successor Partners. For purposes of this Exhibit B, a transferee
of a Partnership Interest shall be deemed to have been allocated the Net
Income, Net Loss, Net Property Gain, Net Property Loss and other items of
Partnership income, gain, loss, deduction and credit allocable to the
transferred Partnership Interest that previously have been allocated to the
transferor Partner pursuant to this Agreement.













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Exhibit C


Certificate
of Limited Partnership