Document:

EX-10.42

PLATO Learning, Inc.

Fiscal 2005 Executive Annual Incentive Plan

Objectives: The Fiscal 2005 Executive Annual Incentive Plan is a reward program that directly
supports the achievement of financial goals and key strategic operational goals.

Eligibility: Employees in the named jobs are eligible to be considered for participation in the
Plan: President & CEO; Chief Financial Officer; Chief Technology Officer; Sr. Vice President
Operations; Vice President, Human Resources; Vice President, School Market and Evaluation; and Vice
President, Instructional Design and Research. The Company reserves the right to determine whether
an executive will actually participate in the Plan. Eligible employees will receive a notification
letter indicating they are eligible to participate in the Plan.

Performance Measures: Payment will be based on the level of achievement of the financial goals and
operational goals shown in this table.

	 	 	 	 	 
	 	 	Weighting
	Financial Goals	 	 	 	 
	1. Pre-tax earnings – Target[x] 1
	 	 	70	%
	 
	 	 	 	 
	Sub total
	 	 	70	%
	 
	 	 	 	 
	Operational Goals2:
	 	 	 	 
	1. Restructure the business to reduce SG&A costs [x]3
	 	 	10	%
	2. Complete the 3 year growth plan [x]
	 	 	5	%
	3. Increase the growth rate of the elementary market [x]4
	 	 	5	%
	4. Improve cost/development scheduling and market acceptance of
products and services[x]
	 	 	5	%
	5. Improve leadership effectiveness as measured by increased
diversity representation, quality of new hires and retention of key
talent
	 	 	5	%
	 
	 	 	 	 
	Sub total
	 	 	30	%
	 
	 	 	 	 

1The amount excludes restructuring and executive termination changes.

2Achievement of the operational goals can generally be substantiated. The level of
achievement is somewhat subjective in the case of near achievement or over achievement of
operational goals therefore it is to be determined by the Board in consultation with the CEO.

3Represents a [x] reduction from 2004 expenses [x] and excludes the impact of
restructuring and executive termination changes, as well as the impact of revenue changes on
commission and bad debt expense.

4Measured on the increase in elementary courseware orders (rather than revenue).

Target Incentive: Each executive’s payment will be based on their Annual Base Salary in
effect (on October 31, 2005), their Target Incentive percent, and the level of achievement of the
performance measures. Each executive’s Target Incentive is expressed as a percent of their Annual
Base Salary and shown in this table.

	 	 	 	 	 
	Executive	 	Target Incentive
	President & CEO
	 		75	%
	Chief Financial Officer
	 		40	%
	Chief Technology Officer
	 		35	%
	Sr. Vice President, Operations
	 		35	%
	Vice President, Human Resources
	 		30	%
	Vice President, School Market and Evaluation
	 		25	%
	Vice President, Instructional Design and Research
	 		25	%

Actual Payment: The plan rewards executives for achievement of goals and also encourages
performance that substantially exceeds goals. This chart shows how the actual payment will
increase (as a percent of the Target Incentive) as performance is increased. A threshold or
minimum level of performance has been established. Straight-line interpolation will be used to
determine the payment for any level of achievement falling between the stated levels of
performance. This is illustrated in the chart below.

	 	 	 
	Performance	 	Actual Payment
	% Of Goal Achievement	 	% Of Target Incentive
	 70%

85%

100%

115%

130%

145%

160%

	 	50%

75%

100%

125%

150%

175%

200%

General Provisions:

The obligations of the Company, as set forth in this document shall be subject to modification
in such manner and to such extent as the CEO and the Board of Directors deems necessary by
agreement, or as may be necessary to comply with any law, regulation or governmental order
pertaining to compensation. The Compensation Committee will receive the recommendations of the CEO
for the cash payment amount, and any actions related to termination of employment and/or change in
control, and after due deliberation determine the payment amount.

This Plan shall be cancelled in the event of termination of employment with the company. To remain
eligible for a cash payment amount from the Plan, a participant must be continuously employed by
the Company from date of hire or November 1, 2004, which ever is later, through the date of the
Plan payout (no later than December 31, 2005), except for the following circumstances:

Death or Disability. If a Participant dies or becomes disabled before October 31, 2005,
his/her cash payment amount will be prorated for the number of days the Participant was an active
PLATO employee. For the purposes of this Plan “Disability” means that as a result of physical or
mental incapacity Executive is unable for a period of 120 consecutive days during any consecutive
180-day period to perform his duties hereunder on a full-time basis. In the case of death, the
payment amount will be given to the Participant’s estate according to current law and established
guidelines and practices.

Unpaid Leave of Absence. If a Participant is on an unpaid leave of absence anytime between
November 1 2004 and October 31, 2005 his/her cash payment amount will be prorated on a daily basis
to exclude the time he/she was on such leave.

Termination with Cause or without Good Reason. In the event a Participant’s employment
with the Company is terminated with Cause or without Good Reason (as defined in Section 6 of their
employment agreement) after November 1, 2004 and before October 31, 2005 his/her cash payment
amount will be prorated for the number of days the Participant was an active PLATO employee.

Termination without Cause or with Good Reason. In the event a Participant’s employment
with the Company is terminated without Cause or with Good Reason (as defined in Section 6 of their
employment agreement) after November 1, 2004 and before October 31, 2005 his/her cash payment
amount will be prorated for the number of days the Participant was an active PLATO employee.

Change in Control. If at any time during fiscal year 2005 there is a Change in Control
event the incentive payment will be pro-rated through the end date of the Change in Control. The
payment amount will be based on 100% of the Target Incentive.EX-10.43

PLATO LEARNING, INC.

BOARD OF DIRECTORS

DIRECTORS COMPENSATION PLAN

At the January 18, 2005 Board of Directors Meeting, the Board approved compensation for
outside Directors as follows.

Stock Option Grant and Cash Payment — New Directors Initiation:

	 	•	 	15,000 Stock Options Grant @ FMV as of close of business on the date of election to the
Board of Directors to vest immediately.

	 	•	 	Prorated Cash payment ($20,000/12 X number of months remaining until the next Annual
Meeting).

Restricted Stock Award, Stock Option Grant & Cash Payment — Continuing Directors Annual
Retainer & Meeting Preparations:

	 	•	 	1,000 shares Restricted Stock Award @ FMV as of close of business on the date of the Annual
Meeting to vest immediately with restrictions to lapse the earlier of five years, retirement
or resignation from the Board of Directors [relates to director year going forward].

	 	•	 	10,000 Stock Options Grant @ FMV as of close of business on the date of the Annual Meeting
to vest immediately [relates to director year going forward].

	 	•	 	$20,000 to be paid as soon as possible after the date of the Annual Meeting (except to
Non-Employee Chairman of the Board, see below) [relates to director year going forward].

Cash and Stock Option Grant — for Non-Employee Chairman of the Board:

	 	•	 	5,000 Stock Options Grant (in addition to the 10,000 grant as listed above) @ FMV as of
close of business on the date of the Annual Meeting to vest immediately [relates to director
year going forward].

	 	•	 	$30,000 to be paid as soon as possible after the date of the Annual Meeting (in place of
the $20,000 as listed above) [relates to director year going forward].

Stock Option Grant — for Committee Chairs:

	 	•	 	1,500 Stock Options Grant @ FMV as of close of business on the date of the Annual Meeting
to vest immediately [relates to director year going forward].

	 	 	 
	Cash Payment — for Board and Committee Meeting Attendance:

	 
	 	 
	 

	 	•	 	$1,500 fee for each Board Meeting attended [relates to director year going forward].

	 	•	 	$1,250 fee to the Committee Chairs (except Audit Committee Chair meeting fee is $2,000),
and $750 fee to Committee Members, for each Committee Meeting attended by each.
	 
	 	 	 	Other
—

	 	•	 	Chairman of the Board has the option to recommend an additional stock option grant based on
the Company’s performance and achievement of goals.

	 	•	 	Chairman of the Board has the option to request a prorated refund of stock options granted
or cash payments made to a Board Member who elects to resign at a time other than at the
Annual Meeting.

	 	•	 	All travel and business expenses relating to meeting attendance or to conduct business on
behalf of PLATO Learning are reimbursed.EX-10.1

The following table sets forth the cash bonuses paid to each officer for 2004:

	 	 	 	 	 
	Name and Principal Position	 	Cash Bonus
	Russell A. Doll
	 	$	60,000	 
	Acting President and
	 	 	 	 
	Chief Executive Officer
	 	 	 	 
	Mitchell I. Rosen
	 	$	25,500	 
	Vice President and
	 	 	 	 
	Chief Financial Officer
	 	 	 	 
	Charles S. Troy
	 	$	80,000	 
	Vice PresidentExhibit 10.9 - Agreement of Limited Partnership of PSLT OP, L.P.

Exhibit
10.9

 

 

AMENDED
AND RESTATED

 

AGREEMENT
OF LIMITED PARTNERSHIP

 

OF

 

PSLT OP,
L.P.

 

 

 

 

 

 

 

 

 

 

 

 

	
       TABLE OF CONTENTS

 

	
       
	
       
	
      Page

	 
	
       ARTICLE
      1. 

	
       DEFINED TERMS

	 
	 

 

	
       ARTICLE
      2.

	
       ORGANIZATIONAL
      MATTERS

	
      Section 2.1.
	
      Continuation
	
      13

	
      Section 2.2.
	
      Name
	
      13

	
      Section 2.3.
	
      Registered
      Office and Agent: Principal Office
	
      13

	
      Section 2.4.
	
      Power
      of Attorney
	
      13

	
      Section 2.5.
	
      Term
	
      14

 

	
      ARTICLE
      3.

	
      PURPOSE

	
      Section 3.1.
	
      Purpose
      and Business
	
      15

	
      Section 3.2.
	
      Powers
	
      15

 

	
      ARTICLE
      4.

	
      CAPITAL
      CONTRIBUTIONS

	
      Section 4.1.
	
      Capital
      Contributions of the Partners
	
      17

	
      Section 4.2.
	
      Issuances
      of Additional Partnership Interests
	
      17

	
      Section 4.3.
	
      Contribution
      of Proceeds of Issuance of REIT Shares
	
      20

	
      Section 4.4.
	
      Preemptive
      Rights
	
      21

 

	
      ARTICLE
      5.

	
      DISTRIBUTIONS

	
      Section 5.1.
	
      Requirement
      and Characterization of Distributions
	
      21

	
      Section 5.2.
	
      Amounts
      Withheld
	
      21

	
      Section 5.3.
	
      Distributions
      Upon Liquidation
	
      21

	
      Section 5.4.
	
      Restricted
      Distributions
	
      22

 

 

	
      ARTICLE
      6.

	
      ALLOCATIONS

	
      Section 6.1.
	
      Allocations
      For Capital Account Purposes
	
      22

 

	
      ARTICLE
      7.

	
      MANAGEMENT
      AND OPERATIONS OF BUSINESS

	
      Section 7.1.
	
      Management
	
      23

	
      Section 7.2.
	
      Certificate
      of Limited Partnership
	
      26

	
      Section 7.3.
	
      Restrictions
      on General Partner Authority
	
      27

	
      Section 7.4.
	
      Reimbursement
      of the General Partner and the Company
	
      27

	
      Section 7.5.
	
      Outside
      Activities of the General Partner
	
      28

	
      Section 7.6.
	
      Contracts
      with Affiliates
	
      28

	
      Section 7.7.
	
      Indemnification
	
      29

	
      Section 7.8.
	
      Liability
      of the General Partner
	
      30

	
      Section 7.9.
	
      Other
      Matters Concerning the General Partner
	
      31

	
      Section 7.10.
	
      Title
      to Partnership Assets
	
      32

	
      Section 7.11.
	
      Reliance
      by Third Parties
	
      32

 

	
      ARTICLE
      8.

	
      RIGHTS
      AND OBLIGATIONS OF LIMITED PARTNERS

	
      Section 8.1.
	
      Limitation
      of Liability
	
      33

	
      Section 8.2.
	
      Management
      of Business
	
      33

	
      Section 8.3.
	
      Outside
      Activities of Limited Partners
	
      33

	
      Section 8.4.
	
      Return
      of Capital
	
      34

	
      Section 8.5.
	
      Rights
      of Limited Partners Relating to the Partnership
	
      34

	
      Section 8.6.
	
      Redemption
      Right
	
      35

 

	
      ARTICLE
      9.

	
      BOOKS,
      RECORDS, ACCOUNTING AND REPORTS

	
      Section 9.1.
	
      Records
      and Accounting
	
      39

	
      Section 9.2.
	
      Fiscal
      Year
	
      40

	
      Section 9.3.
	
      Reports
	
      40

 

 

	
      ARTICLE
      10.

	
      TAX
      MATTERS

	
      Section 10.1.
	
      Preparation
      of Tax Returns
	
      40

	
      Section 10.2.
	
      Tax
      Elections
	
      40

	
      Section 10.3.
	
      Tax
      Matters Partner
	
      41

	
      Section 10.4.
	
      Organizational
      Expenses
	
      42

	
      Section 10.5.
	
      Withholding
	
      42

 

	
      ARTICLE
      11.

	
      TRANSFERS
      AND WITHDRAWALS

	
      Section 11.1.
	
      Transfer
	
      43

	
      Section 11.2.
	
      Transfer
      of the Company’s General Partner Interest and Limited Partner
      Interest
	
      44

	
      Section 11.3.
	
      Limited
      Partners’ Rights to Transfer
	
      44

	
      Section 11.4.
	
      Substituted
      Limited Partners
	
      45

	
      Section 11.5.
	
      Assignees
	
      45

	
      Section 11.6.
	
      General
      Provisions
	
      46

 

	
      ARTICLE
      12.

	
      ADMISSION
      OF PARTNERS

	
      Section 12.1.
	
      Admission
      of Successor General Partner
	
      47

	
      Section 12.2.
	
      Admission
      of Additional Limited Partners
	
      47

	
      Section 12.3.
	
      Amendment
      of Agreement and Certificate of Limited Partnership
	
      48

 

	
      ARTICLE
      13.

	
      DISSOLUTION,
      LIQUIDATION AND TERMINATION

	
      Section 13.1.
	
      Dissolution
	
      48

	
      Section 13.2.
	
      Winding
      Up
	
      49

	
      Section 13.3.
	
      Compliance
      with Timing Requirements of Regulations
	
      50

	
      Section 13.4.
	
      Deemed
      Distribution and Recontribution
	
      51

	
      Section 13.5.
	
      Rights
      of Limited Partners
	
      51

	
      Section 13.6.
	
      Notice
      of Dissolution
	
      51

	
      Section 13.7.
	
      Termination
      of Partnership and Cancellation of Certificate of Limited
      Partnership
	
      51

	
      Section 13.8.
	
      Reasonable
      Time for Winding Up
	
      51

	
      Section 13.9.
	
      Waiver
      of Partition
	
      51

 

 

	
      ARTICLE
      14.

	
      AMENDMENT
      OF PARTNERSHIP AGREEMENT; MEETINGS

	
      Section 14.1.
	
      Amendment
      of Partnership Agreement
	
      52

	
      Section 14.2.
	
      Meetings
      of the Partners
	
      53

 

	
      ARTICLE
      15.

	
      GENERAL
      PROVISIONS

	
      Section 15.1.
	
      Addresses
      and Notice
	
      54

	
      Section 15.2.
	
      Titles
      and Captions
	
      54

	
      Section 15.3.
	
      Pronouns
      and Plurals
	
      54

	
      Section 15.4.
	
      Further
      Action
	
      54

	
      Section 15.5.
	
      Binding
      Effect
	
      54

	
      Section 15.6.
	
      Creditors
	
      55

	
      Section 15.7.
	
      Waiver
	
      55

	
      Section 15.8.
	
      Counterparts
	
      55

	
      Section 15.9.
	
      Applicable
      Law
	
      55

	
      Section 15.10.
	
      Invalidity
      of Provisions
	
      55

	
      Section 15.11.
	
      Entire
      Agreement
	
      55

 

Table of Contents

EXHIBITS

 

Exhibit A - Partners Contributions and Partnership
Interests

Exhibit B - Capital Account Maintenance 

Exhibit C - Special Allocation Rules 

Exhibit D - Notice of Redemption

Exhibit E - Schedule of Partners’ Ownership with respect to
Tenants

Exhibit F - Constructive Ownership Definition

Exhibit G - Conversion Notice

Exhibit H - Forced Conversion Notice

Table of Contents

AMENDED
AND RESTATED

AGREEMENT
OF LIMITED PARTNERSHIP

OF

PSLT OP,
L.P.

 

THIS
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF PSLT OP, L.P.
(this “Agreement”), dated as of August 3, 2004, is entered into by and among
PSLT GP, LLC, a Delaware limited liability company (the “General Partner”),
and the Persons (as defined below) whose names are set forth on Exhibit A as
attached hereto (as it may be amended from time to time).

 

WHEREAS,
the limited partnership was formed on March 2, 2004 and an original agreement of
limited partnership, dated as of March 2, 2004, was entered into between the
Company, as general partner and Provident Senior Living Trust (the “Company”),
as limited partner; 

 

WHEREAS,
the General Partner and the Company desire to enter into this Amended and
Restated Agreement of Limited Partnership of PSLT OP, L.P. (the
“Partnership”); and

 

WHEREAS,
the General Partner has and the Company will make certain capital contributions
to the Partnership as set forth on Exhibit A attached hereto;

 

NOW
THEREFORE, in consideration of the mutual covenants herein contained, and other
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:

 

ARTICLE
1.  

 

DEFINED TERMS

 

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

 

“Act” means
the Delaware Revised Uniform Limited Partnership Act, 6 Del. C.
§17-101, et seq., as it
may be amended from time to time, and any successor to such
statute.

 

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

 

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

 

Table of Contents

 

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

 

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

 

“Adjustment
Event” means
any of the following events: (A) the Partnership makes a distribution on all
outstanding Partnership Units in Partnership Units, (B) the Partnership
subdivides the outstanding Partnership Units into a greater number of Units or
combines the outstanding Partnership Units into a smaller number of Units, or
(C) the Partnership issues any Partnership Units in exchange for its outstanding
Partnership Units by way of a reclassification or recapitalization of its
Partnership Units. If more than one Adjustment Event occurs, the adjustment to
the LTIP Units under Section 4.2.C 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 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 distribution reinvestment plan, or (z) the issuance of any Partnership
Units to the Company in respect of a capital contribution to the Partnership of
proceeds from the sale of securities by the Company.

 

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

 

“Agreed
Value” means
(i) in the case of any Contributed Property as of the time of its contribution
to the Partnership, the 704(c) Value of such property, reduced by any
liabilities either assumed by the Partnership upon such contribution or to which
such property is subject when contributed, and (ii) in the case of any property
distributed to a Partner by the Partnership, the Partnership’s Carrying Value of
such property at the time such property is distributed, reduced by any
indebtedness either assumed by such Partner upon such distribution or to which
such property is subject at the time of distribution as determined under Section
752 of the Code and the Regulations thereunder. The aggregate Agreed Value of
the Contributed Property contributed or deemed contributed by each Partner as of
the date hereof is as set forth in Exhibit A.

 

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

 

2

Table of Contents

 

“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 any period for which such calculation is being
made,

 

(i)  the sum
of:

 

(a)  the
Partnership’s Net Income or Net Loss (as the case may be) for such period
(without regard to adjustments resulting from allocations described in Sections
1.A through 1.E of Exhibit C);

 

(b)  Depreciation
and all other noncash charges deducted in determining Net Income or Net Loss for
such period;

 

(c)  the
amount of any reduction in the reserves of the Partnership referred to in clause
(ii)(f) below (including, without limitation, reductions resulting because the
General Partner determines such amounts are no longer necessary);

 

(d)  the
excess of proceeds from the sale, exchange, disposition, or refinancing of
Partnership property for such period over the gain recognized from such sale,
exchange, disposition, or refinancing during such period (excluding Terminating
Capital Transactions); and

 

(e)  all other
cash received by the Partnership for such period that was not included in
determining Net Income or Net Loss for such period;

 

(ii)  less
the sum
of:

 

(a)  all
principal debt payments made by the Partnership during such period;

 

(b)  capital
expenditures made by the Partnership during such period;

 

(c)  investments
made by the Partnership during such period in any entity (including loans made
thereto) to the extent that such investments are not otherwise described in
clause (ii)(a) or (ii)(b);

 

(d)  all other
expenditures and payments not deducted in determining Net Income or Net Loss for
such period;

 

(e)  any
amount included in determining Net Income or Net Loss for such period that was
not received by the Partnership during such period;

 

(f)  the
amount of any increase in reserves during such period which the General Partner
determines to be necessary or appropriate in its sole and absolute discretion;
and

 

3

Table of Contents

 

(g)  the
amount of any working capital accounts and other cash or similar balances which
the General Partner determines to be 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.

 

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

 

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

 

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

 

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

 

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

 

“Cash
Amount” means
an amount of cash per Partnership Unit equal to the Value on the Valuation Date
of the REIT Shares Amount.

 

“Certificate” means
the Certificate of Limited Partnership of the Partnership as filed in the office
of the Delaware Secretary of State on March 2, 2004, as amended from time
to time in accordance with the terms hereof and the Act.

 

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

 

4

Table of Contents

      “Common
Units” means
the Partnership Units other than any series of units of limited partnership
interest issued in the future and designated as preferred or otherwise different
from the Common Units, including, but not limited to, with respect to the
payment of distributions, including distributions upon liquidation.

“Company” means
Provident Senior Living Trust, a Maryland real estate investment trust.

 

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

 

“Constituent
Person” has the
meaning given in Section 8.7.G.

 

“Constructively
Own” means
ownership under the constructive ownership rules described in Exhibit
F.

 

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

 

“Conversion
Date” has the
meaning given in Section 8.7.B.

 

“Conversion
Factor” means
1.0, subject to adjustment as follows: (i) in case the Company shall (A) pay or
make a dividend or other distribution on the outstanding REIT Shares in REIT
Shares, (B) subdivide or reclassify the outstanding REIT Shares into a greater
number of REIT Shares, or (C) combine or reclassify the outstanding REIT Shares
into a smaller number of REIT Shares, the Conversion Factor in effect at the
opening of business on the day following the date fixed for the determination of
shareholders entitled to receive such dividend or other distribution or subject
to such subdivision, combination or reclassification shall be proportionately
adjusted so that a holder of Partnership Units shall be entitled to receive,
upon exchange thereof, the number of REIT Shares which the holder would have
owned at the opening of business on the day following the date fixed for such
determination had such Units been exchanged immediately prior to such
determination; (ii) in case the Partnership shall subdivide or reclassify the
outstanding Partnership Units into a greater number of Partnership Units, the
Conversion Factor in effect at the opening of business on the day following the
date fixed for the determination of Partnership Unit holders subject to such
subdivision or reclassification shall be proportionately adjusted so that a
holder of Partnership Units shall be entitled to receive, upon exchange thereof,
the number of REIT Shares which the holder would have owned at the opening of
business on the day following the date fixed for such determination had such
Partnership Units been exchanged immediately prior to such determination; (iii)
in case the Company (A) shall issue rights or warrants to all holders of REIT
Shares entitling them to subscribe for or purchase REIT Shares at a price per
share less than the daily market price per REIT Share (determined as specified
under the definition of “Value” set forth in this Article 1 on the date fixed
for the determination of shareholders entitled to receive such rights or
warrants, (B) shall not issue similar rights or warrants to all holders of
Partnership Units entitling them to subscribe for or purchase REIT Shares or
Partnership Units at a comparable price (determined, in the case of Partnership
Units, by reference to the Conversion Factor), and (C) cannot issue such rights
or warrants to a Redeeming Partner as otherwise required by the definition of
“REIT Shares Amount” set forth in this Article I, then the Conversion Factor in
effect at the opening of business on the day following the date fixed for such
determination shall be increased by multiplying such Conversion Factor by a
fraction of which the numerator shall be the number of REIT Shares outstanding
at the close of business on the date fixed for such determination plus the
number of REIT Shares so offered for subscription or purchase, and of which the
denominator shall be the number of REIT Shares outstanding at the close of
business on the date fixed for such determination plus the number of REIT Shares
which the aggregate offering price of the total number of REIT Shares so offered
for subscription would purchase at such daily market price per share, such
increase of the Conversion Factor to become effective immediately after the
opening of business on the day following the date fixed for such determination;
and (iv) in case the Company shall, by dividend or otherwise, distribute to all
holders of its common shares, (A) shares of capital stock of any class other
than its common shares, (B) evidence of its indebtedness or (C) assets
(excluding any rights or warrants referred to in clause (iii) above, any cash
dividend or distribution lawfully paid under the laws of the state of
organization of the Company, and any dividend or distribution referred to in
clause (i) above) and shall not cause a corresponding distribution to be made to
all holders of Partnership Units, the Conversion Factor shall be adjusted so
that the same shall equal the ratio determined by multiplying the Conversion
Factor in effect immediately prior to the close of business on the date fixed
for the determination of shareholders entitled to receive such distribution by a
fraction of which the numerator shall be the daily market price per REIT Share
on the date fixed for such determination, and of which the denominator shall be
such daily market price per REIT Share less the fair market value (as determined
by the Board of Trustees of the Company, whose determination shall be conclusive
and described in a Board resolution certified by the Secretary of the Company
and delivered to the holders of the Partnership Units) of the portion of the
shares of capital stock or evidences of indebtedness or assets so distributed
applicable to one REIT Share, such adjustment to become effective immediately
prior to the opening of business on the day following the date fixed for the
determination of shareholders entitled to receive such
distribution.

 

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“Conversion
Notice” has the
meaning given in Section 8.7.B.

 

“Conversion
Right” has the
meaning given in Section 8.7.B.

 

“Declaration
of Trust” means
the Declaration of Trust of the Company filed with the State Department of
Assessments and Taxation of the State of Maryland on March 1, 2004, as
amended and restated from time to time.

 

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

 

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“Distribution
Payment Date” means
the dates upon which the General Partner makes distributions in accordance with
Section 5.1 of the Partnership Agreement.

 

“Economic
Capital Account Balance” has the
meaning given in Section 6.1.C.

 

“ERISA” means
the Employee Retirement Income Security Act of 1974, as amended and in effect
from time to time, as interpreted by the applicable regulations thereunder. Any
reference herein to a specific section or Title of ERISA shall be deemed to
include a reference to any corresponding provision of future law.

 

“Forced
Conversion” has the
meaning given in Section 8.7.C.

 

“Forced
Conversion Notice” has the
meaning given in Section 8.7.D.

 

“General
Partner” means
PSLT GP, LLC or any Person who becomes an additional or a successor general
partner of the Partnership.

 

“General
Partner Interest” means a
Partnership Interest held by the General Partner, in its capacity as general
partner of the Partnership. A General Partner Interest may be expressed as a
number of Partnership Units.

 

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

 

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

 

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

 

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“Indemnitee” means
(i) any Person made a party to a proceeding by reason of (A) his status as the
General Partner, or as a director, trustee, officer, stockholder, partner,
member, employee, representative or agent of the General Partner or as an
officer, employee, representative or agent of the Partnership, or (B) his or its
liabilities, pursuant to a loan guarantee or otherwise, for any indebtedness of
the Partnership or any Subsidiary of the Partnership (including, without
limitation, any indebtedness which the Partnership or any Subsidiary of the
Partnership has assumed or taken assets subject to); and (ii) such other Persons
(including Affiliates of the General Partner or the Partnership) as the General
Partner may designate from time to time (whether before or after the event
giving rise to potential liability), in its sole and absolute
discretion.

 

“Limited
Partner” means
the Company and any other Person named as a limited partner of the Partnership
in Exhibit A attached hereto, as such Exhibit may be amended from time to time,
or any Substituted Limited Partner or Additional Limited Partner, in such
Person’s capacity as a limited partner of the Partnership. For purposes of this
Agreement and the Act, the Limited Partners shall constitute a single class or
group of limited partners.

 

“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.

 

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

 

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

 

“LTIP
Unit” means a
Partnership Unit which is designated as an LTIP Unit and which has the rights,
preferences and other privileges designated in Section 4.2.C hereof and in the
Plan in respect of LTIP Unitholders. The allocation of LTIP Units among the
Partners shall be set forth on Exhibit A, as may be amended from time to
time.

 

“LTIP
Unit Agreement” means
each or any, as the context implies, LTIP Unit Agreement entered into by an LTIP
Unitholder upon acceptance of an award of LTIP Units under the Plan (as such
agreement may be amended, modified or supplemented from time to
time).

 

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

 

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“Net
Income” means,
for any taxable period, the excess, if any, of the Partnership’s items of income
and gain for such taxable period over the Partnership’s items of loss and
deduction for such taxable period. The items included in the calculation of Net
Income shall be determined in accordance with federal income tax accounting
principles, subject to the specific adjustments provided for in Section 1.B of
Exhibit B.

 

“Net
Loss” means,
for any taxable period, the excess, if any, of the Partnership’s items of loss
and deduction for such taxable period over the Partnership’s items of income and
gain for such taxable period. The items included in the calculation of Net Loss
shall be determined in accordance with federal income tax accounting principles,
subject to the specific adjustments provided for in Section 1.B of Exhibit
B.

 

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

 

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

 

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

 

“Offering” means
the offering of REIT Shares pursuant to that certain purchase/placement
agreement, dated August 2, 2004 between the Company and the initial
purchaser/placement agent named therein.

 

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

 

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

 

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

 

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

 

“Partnership” means
the limited partnership heretofore formed and continued 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 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.

 

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

 

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

 

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

 

“Partnership
Unit Economic Balance” has the
meaning given in Section 6.1.C.

 

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

 

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

 

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

 

“Plan” means
the Provident Senior Living Trust Long Term Incentive Plan, as such plan may be
amended from time to time.

 

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

 

“Redeeming
Partner” has the
meaning set forth in Section 8.6 hereof.

 

“Redemption
Right” shall
have the meaning set forth in Section 8.6 hereof.

 

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

 

“REIT” means a
real estate investment trust under Section 856 of the Code.

 

“REIT
Share” means a
common share of beneficial interest, par value $.001 per share, of the
Company.

 

“REIT
Shares Amount” means a
number of REIT Shares equal to the product of the number of Partnership Units
offered for redemption by a Redeeming Partner, multiplied by the Conversion
Factor, provided that in the event the Company issues to all holders of REIT
Shares rights, options, warrants or convertible or exchangeable securities
entitling the shareholders to subscribe for or purchase REIT Shares, or any
other securities or property (collectively, the “rights”), and the Company can
issue such rights to the Redeeming Partner, then the REIT Shares Amount shall
also include such rights that a holder of that number of REIT Shares would be
entitled to receive.

 

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

 

“704(c)
Value” of any
Contributed Property means the fair market value of such property or other
consideration at the time of contribution, as determined by the General Partner
using such reasonable method of valuation as it may adopt. Subject to Exhibit B
hereof, the General Partner shall, in its sole and absolute discretion, use such
method as it deems reasonable and appropriate to allocate the aggregate of the
704(c) Values of Contributed Properties in a single or integrated transaction
among the separate properties on a basis proportional to their respective fair
market values.

 

“Specified
Redemption Date” means
the tenth (10th) Business Day after receipt by the Partnership of a Notice of
Redemption; provided that no Specified Redemption Date shall occur
before one (1) year from the date of this Agreement, provided further that
if the Company combines its outstanding REIT Shares, no Specified Redemption
Date shall occur after the record date of such combination of REIT Shares and
prior to the effective date of such combination.

 

“Subsidiary” means,
with respect to any Person, any corporation, partnership, limited liability
company or other entity of which a majority of (i) the voting power of the
voting equity securities; or (ii) the outstanding equity interests, is owed,
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.

 

“Tenant” means
any tenant from which the Company derives rent either directly or indirectly
through partnerships or limited liability companies, including the
Partnership.

 

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

 

“Transaction” has the
meaning given in Section 8.7.G.

 

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

 

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

 

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

 

“Value” means,
with respect to a REIT Share, the average of the daily market price (the “daily
market price”) for the ten (10) consecutive trading days immediately preceding
the Valuation Date. The daily market price for each such trading day shall be:
(i) if the REIT Shares are listed or admitted to trading on any securities
exchange or the NASDAQ National Market, the closing price on such day, or if no
such sale takes place on such day, the average of the closing bid and asked
prices on such day; (ii) if the REIT Shares are not listed or admitted to
trading on any securities exchange or the NASDAQ National Market, the last
reported sale price on such day or, if no sale takes place on such day, the
average of the closing bid and asked prices on such day, as reported by a
reliable quotation source designated by the General Partner; or (iii) if the
REIT Shares are not listed or admitted to trading on any securities exchange or
the NASDAQ National Market and no such last reported sale price or closing bid
and asked prices are available, the average of the reported high bid and low
asked prices on such day, as reported by a reliable quotation source designated
by the General Partner, or if there shall be no bid and asked prices on such
day, the average of the high bid and low asked prices, as so reported, on the
most recent day (not more than ten (10) days prior to the date in question) for
which prices have been so reported; provided that if there are no bid and asked
prices reported during the ten (10) days prior to the date in question, the
Value of the REIT Shares shall be determined by the General Partner acting in
good faith on the basis of such quotations and other information as it
considers, in its reasonable judgment, appropriate. In the event the REIT Shares
Amount includes rights that a holder of REIT Shares would be entitled to
receive, then the Value of such rights shall be determined by the General
Partner acting in good faith on the basis of such quotations and other
information as it considers, in its reasonable judgment,
appropriate.

 

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ARTICLE
2.  

 

ORGANIZATIONAL
MATTERS

 

Section 2.1.  Continuation

 

The
Partners hereby continue the Partnership as a limited partnership under and
pursuant to the Act. Except as expressly provided herein to the contrary, the
rights and obligations of the Partners and the administration and termination of
the Partnership shall be governed by the Act. The Partnership Interest of each
Partner shall be personal property for all purposes.

 

Section
2.2.  Name

 

The name
of the Partnership heretofore formed and continued hereby shall be PSLT OP,
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,” “L.P.,”
“Ltd.” or similar words or letters shall be included in the Partnership’s name
where necessary for the purposes of complying with the laws of any jurisdiction
that so requires. The General Partner in its sole and absolute discretion may
change the name of the Partnership at any time and from time to time and shall
notify the Limited Partners of such change in the next regular communication to
the Limited Partners.

 

Section
2.3.  Registered
Office and Agent; Principal Office

 

The
address of the registered office of the Partnership in the State of Delaware and
the name and address of the registered agent for service of process on the
Partnership in the State of Delaware is The Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801. The
principal office of the Partnership shall be c/o Fortress Investment Group LLC,
1251 Avenue of the Americas, 16th Floor,
New York, New York 10020, or such other place as the General Partner may from
time to time designate by notice to the Limited Partners. The Partnership may
maintain offices at such other place or places within or outside the State of
Delaware as the General Partner deems advisable.

 

Section
2.4.  Power
of Attorney

 

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

 

(1)  execute,
swear to, acknowledge, deliver, file and record in the appropriate public
offices (a) all certificates, documents and other instruments (including,
without limitation, this Agreement and the Certificate and all amendments or
restatements thereof) that the General Partner or the Liquidator deems
appropriate or necessary to form, qualify or continue the existence or
qualification of the Partnership as a limited partnership (or a partnership in
which the Limited Partners have limited liability) in the State of Delaware and
in all other jurisdictions in which the Partnership may or plans to conduct
business or own property; (b) all instruments that the General Partner deems
appropriate or necessary to reflect any amendment, change, modification or
restatement of this Agreement in accordance with its terms; (c) all conveyances
and other instruments or documents that the General Partner or the Liquidator
deems appropriate or necessary to reflect the dissolution and liquidation of the
Partnership pursuant to the terms of this Agreement, including, without
limitation, a certificate of cancellation; (d) all instruments relating to the
admission, withdrawal, removal or substitution of any Partner pursuant to, or
other events described in, Article 11, 12 or 13 hereof or the Capital
Contribution of any Partner; and (e) all certificates, documents and other
instruments relating to the determination of the rights, preferences and
privileges of Partnership Interest; and

 

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

 

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

 

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

 

Section
2.5.  Term

 

The term
of the Partnership commenced on the date that the Certificate was filed with the
Secretary of State of the State of Delaware and shall continue until December
31, 2104, unless the Partnership is dissolved sooner pursuant to the provisions
of Article 13 or as otherwise provided by law.

 

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Section
2.6.  Admission
of Limited Partners

 

On the
date hereof, and upon the execution of this Agreement or a counterpart of this
Agreement, each of the Persons identified as a limited partner of the
Partnership on Exhibit A to this Agreement (other than Provident Senior Living
Trust which has already been admitted as a limited partner of the Partnership)
is hereby admitted to the Partnership as a limited partner of the
Partnership.

 

ARTICLE
3. 

 

PURPOSE

 

Section
3.1.  Purpose
and Business

 

The
purpose and nature of the business to be conducted by the Partnership is (i) to
conduct any business that may be lawfully conducted by a limited partnership
formed pursuant to the Act; provided,
however, that
such business shall be limited to and conducted in such a manner as to permit
the Company at all times to qualify as a REIT, unless the Company ceases to
qualify as a REIT for reasons other than the conduct of the business of the
Partnership or voluntarily revokes its election to be a REIT; (ii) to enter into
any partnership, joint venture or other similar arrangement to engage in any of
the foregoing or to own interests in any entity engaged in any of the foregoing;
and (iii) to do anything necessary, convenient or incidental to the foregoing.
In connection with the foregoing, and without limiting the Company’s right, in
its sole discretion, to cease qualifying as a REIT, the Partners acknowledge
that the Company’s current status as a REIT inures to the benefit of all of the
Partners and not solely the General Partner or its Affiliates.

 

Section
3.2.  Powers

 

The
Partnership is empowered to do any and all acts and things necessary,
appropriate, proper, advisable, incidental to or convenient for the furtherance
and accomplishment of the purposes and business described herein and for the
protection and benefit of the Partnership, and shall have, without limitation,
any and all of the powers that may be exercised on behalf of the Partnership by
the General Partner pursuant to this Agreement; 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 Company to qualify and to continue to
qualify as a REIT; or (ii) could violate any law or regulation of any
governmental body or agency having jurisdiction over the Company or its
securities, unless such action (or inaction) shall have been specifically
consented to by the General Partner in writing.

 

Section
3.3 Representations
and Warranties by the Parties

 

A.
 Each
Partner that is an individual represents and warrants to each other Partner that
(i) such Partner has the legal capacity to enter into this Agreement and perform
such Partner’s obligations hereunder, (ii) the consummation of the transactions
contemplated by this Agreement to be performed by such Partner will not result
in a breach or violation of, or a default under, any agreement by which such
Partner or any of such Partner’s property is or are bound, or any statute,
regulation, order or other law to which such Partner is subject, (iii) such
Partner is a “United States person” within the meaning of Section 7701(a)(30) of
the Code, and (iv) this Agreement is binding upon, and enforceable against, such
Partner in accordance with its terms. 

 

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B.
 Each
Partner that is not an individual represents and warrants to each other Partner
that (i) its execution and delivery of this Agreement and all transactions
contemplated by this Agreement to be performed by it have been duly authorized
by all necessary action, including without limitation, that of its general
partner(s), committee(s), trustee(s), beneficiaries, directors and/or
stockholder(s), as the case may be, as required, (ii) the consummation of such
transactions shall not result in a breach or violation of, or a default under,
its certificate of limited partnership, partnership agreement, trust agreement,
limited liability company operating agreement, charter or bylaws, as the case
may be, any agreement by which such Partner or any of such Partner’s properties
or any of its partners, beneficiaries, trustees or stockholders, as the case may
be, is or are bound, or any statute, regulation, order or other law to which
such Partner or any of its partners, trustees, beneficiaries or stockholders, as
the case may be, is or are subject, (iii) such Partner is a “United States
person” within the meaning of Section 7701(a)(30) of the Code and (iv) this
Agreement is binding upon, and enforceable against, such Partner in accordance
with its terms.

 

C.
 Each
Partner further represents, warrants, covenants and agrees as
follows:

 

(1)
 Except as
provided in Exhibit E hereto, at any time such Partner actually or
Constructively Owns a 25% or greater capital interest or profits interest in the
Partnership, it does not and will not, without the prior written consent of the
General Partner, actually own or Constructively Own (a) with respect to any
Tenant that is a corporation, any stock of such Tenant, and (b) with respect to
any Tenant that is not a corporation, any interests in either the assets or net
profits of such Tenant.

 

(2)
 Upon
request of the General Partner, it will promptly disclose to the General Partner
the amount of REIT Shares or other shares of capital stock of the Company that
it actually owns or Constructively Owns. 

 

Each
Partner understands that if, for any reason, (a) the representations, warranties
or agreements set forth above are violated, or (b) the Partnership’s actual or
Constructive Ownership of REIT Shares or other shares of capital stock of the
Company violates the limitations set forth in the Declaration of Trust, then (x)
some or all of the Redemption Rights of the Partners may become non-exercisable,
and (y) some or all of the REIT Shares owned by the Partners may be
automatically transferred to a trust for the benefit of a charitable
beneficiary, as provided in the Declaration of Trust.

 

(3)
 Without
the consent of the General Partner, which may be given or withheld in its sole
discretion, no Partner shall take any action that would cause the Partnership at
any time to have more than 100 partners (including as partners those persons
indirectly owning an interest in the Partnership through a partnership, limited
liability company, S corporation or grantor trust (such entity, a “flow through
entity”), but only if substantially all of the value of such person’s interest
in the flow through entity is attributable to the flow through entity’s interest
(direct or indirect) in the Partnership). 

 

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D.
 The
representations and warranties contained in Section 3.4 shall survive the
execution and delivery of this Agreement by each Partner and the dissolution and
winding up of the Partnership.

 

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

 

ARTICLE
4.

 

CAPITAL
CONTRIBUTIONS

 

Section
4.1.  Capital
Contributions of the Partners

 

At the
time of their respective execution of this Agreement, the Partners shall make or
shall have made Capital Contributions as set forth in Exhibit A to this
Agreement. The Partners shall own Partnership Units of the class or series and
in the amounts set forth 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, redemptions, additional Capital
Contributions, the issuance of additional Partnership Units (pursuant to any
merger or otherwise), or similar events having an effect on any Partner’s
Percentage Interest. Except as provided in Sections 4.2 and 10.5, the Partners
shall have no obligation to make any additional Capital Contributions or loans
to the Partnership.

 

Section
4.2.  Issuances
of Additional Partnership Interests

 

A.  The
General Partner is hereby authorized, without the need for any vote or approval
of any Partner or any other Person who may hold Partnership Units or Partnership
Interests, to cause the Partnership from time to time to issue to any existing
Partner (including the General Partner or the Company) or to any other Person,
and to admit such Person as a limited partner in the Partnership, Partnership
Units or other Partnership Interests (in each case in exchange for the
contribution by such Person of property or other assets) in one or more classes,
or one or more series of any of such classes, or otherwise with such
designations, preferences, redemption and conversion rights and relative,
participating, optional or other special rights, powers and duties, including
rights, powers and duties senior to Limited Partner Interests, all as shall be
determined by the General Partner in its sole and absolute discretion subject to
Delaware law, including, without limitation, (i) the allocations of items of
Partnership income, gain, loss, deduction and credit to each such class or
series of Partnership Interests; (ii) the right of each such class or series of
Partnership Interests to share in Partnership distributions; and (iii) the
rights of each such class or series of Partnership Interests upon dissolution
and liquidation of the Partnership; provided that no such additional Partnership
Units or other Partnership Interests shall be issued to the Company, unless
either (a)(1) the additional Partnership Interests are issued in connection with
an issuance of REIT Shares or other shares by the Company, which shares have
designations, preferences and other rights such that the economic interests
attributable to such shares are substantially similar to the designations,
preferences and other rights of the additional Partnership Interests issued to
the Company in accordance with this Section 4.2.A, and (2) the Company shall
make a Capital Contribution to the Partnership in an amount equal to the
proceeds raised in connection with such issuance, (b) the additional
Partnership Interests are issued to all Partners in proportion to their
respective Percentage Interests, or (c) the additional Partnership Interests are
issued in connection with a contribution of property to the Partnership by the
Company. In addition, the Company may acquire Units from other Partners pursuant
to this Agreement.

 

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B.  Upon
completion of any public offering of the Company’s REIT Shares under the
Securities Act or private equity placement of securities of the Company that
occurs on or after the date hereof (an “Offering”), the Company may, but shall
not be required to, contribute the proceeds of the Offering to the Partnership,
which proceeds will be net of the underwriter’s discount and other expenses,
and, if the Company does contribute such net proceeds to the Partnership, the
Company shall be credited with having made a Capital Contribution to the
Partnership in the amount of such net proceeds. If the Company does contribute
such net proceeds to the Partnership, the Partners hereby acknowledge and agree
that the aggregate number of additional Partnership Units to be issued to the
Company upon completion of the Offering shall be equal to the number of shares
of Shares issued in the Offering. Nothing in this Agreement shall require that
the Company contribute to the Partnership the net proceeds from any Offering,
and the Company shall be permitted to retain and/or use such net proceeds as
determined by the Company in its sole discretion, in all cases, unless any
distribution required to be paid to the Limited Partners under this Agreement
shall be due and not paid in full, in which case, the Company shall contribute
to the Partnership an amount of such net proceeds sufficient to pay such
distribution.

 

C.  The
General Partner may from time to time issue LTIP Units to Persons who provide
services to the Partnership, for such consideration as the General Partner may
determine to be appropriate, and admit such Persons as Limited Partners. Subject
to the following provisions of this Section 4.2.C and the special provisions of
Sections 6.1.C, 8.7 and 8.8, LTIP Units shall be treated as Partnership Units,
with all of the rights, privileges and obligations attendant thereto. For
purposes of computing the Partners’ Percentage Interests, holders of LTIP Units
shall be treated as Partnership Unitholders and LTIP Units shall be treated as
Partnership Units. In particular, the Partnership shall maintain at all times a
one-to-one correspondence between LTIP Units and Partnership Units for
conversion, distribution and other purposes, including without limitation
complying with the following procedures: 

 

 

(i)
 If an
Adjustment Event occurs, the General Partner shall make a corresponding
adjustment to the LTIP Units to maintain a one-for-one conversion and economic
equivalence ratio between Partnership Units and LTIP Units. If the Partnership
takes an action affecting the Partnership Units other than actions specifically
defined herein as “Adjustment Events” and in the opinion of the General Partner
such action would require an adjustment to the LTIP Units to maintain the
one-to-one correspondence described above, the General Partner shall have the
right to make such adjustment to the LTIP Units, to the extent permitted by law
and by the Plan, 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 LTIP Units as herein provided, the Partnership shall
promptly file in the books and records of the Partnership an officer's
certificate setting forth such adjustment and a brief statement of the facts
requiring such adjustment, which certificate shall be conclusive evidence of the
correctness of such adjustment absent manifest error. Promptly after filing of
such certificate, (i) the Partnership shall mail a notice to each LTIP
Unitholder setting forth the adjustment to his or her LTIP Units and the
effective date of such adjustment; and 

 

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(ii)
 The LTIP
Unitholders shall, in respect of each Distribution Payment Date, when, as and if
authorized and declared by the General Partner out of assets legally available
for that purpose, be entitled to receive distributions in an amount per LTIP
Unit equal to the distributions per Partnership Unit, paid to holders of record
on the same record date established by the General Partner with respect to such
Distribution Payment Date. During any Distribution Period, so long as any LTIP
Units are outstanding, no distributions (whether in cash or in kind) shall be
authorized, declared or paid on Partnership Units, unless equal distributions
have been or contemporaneously are authorized, declared and paid on the LTIP
Units for such Distribution Period. The LTIP Units shall rank pari
passu with the
Partnership Units as to the payment of regular and special periodic or other
distributions and distribution of assets upon liquidation, dissolution or
winding up. As to the payment of distributions and as to distribution of assets
upon liquidation, dissolution or winding up, any class or series of Partnership
Units or Partnership Interests which by its terms specifies that it shall rank
junior to, on a parity with, or senior to the Partnership Units shall also rank
junior to, or pari
passu with, or
senior to, as the case may be, the LTIP Units. Subject to the terms of any LTIP
Unit Agreement, an LTIP Unitholder shall be entitled to transfer his or her LTIP
Units to the same extent, and subject to the same restrictions as holders of
Partnership Units are entitled to transfer their Partnership Units pursuant to
Article 11.

 

LTIP
Units shall be subject to the following special provisions:

 

(i)  LTIP Unit
Agreements. LTIP Units may, in the sole discretion of the Compensation Committee
of the Company as sole member of the General Partner, be issued subject to
vesting, forfeiture and additional restrictions on transfer pursuant to the
terms of an LTIP Unit Agreement. The terms of any LTIP Unit Agreement may be
modified by the Compensation Committee of the Company as sole member of the
General Partner from time to time in its sole discretion, subject to any
restrictions on amendment imposed by the relevant LTIP Unit Agreement or by the
Plan, if applicable. LTIP Units that have become vested under the terms of an
LTIP Unit Agreement are referred to herein as “Vested LTIP Units”; all other
LTIP Units shall be treated as “Unvested LTIP Units.”

 

(ii)  Forfeiture.
Unless otherwise specified in the LTIP Unit Agreement, upon the occurrence of
any event specified in an LTIP Unit Agreement as resulting in either the right
of the Partnership or the General Partner to repurchase LTIP Units at a
specified purchase price or some other forfeiture of any LTIP Units, if the
Partnership or the General Partner exercises such right to repurchase or
forfeiture in accordance with the applicable LTIP Unit Agreement, then the
relevant LTIP Units shall immediately, and without any further action, be
treated as cancelled and no longer outstanding for any purpose. Unless otherwise
specified in the LTIP Unit Agreement, no consideration or other payment shall be
due with respect to any LTIP Units that have been forfeited, other than any
distributions declared with respect to a Partnership Record Date prior to the
effective date of the forfeiture. In connection with any repurchase or
forfeiture of LTIP Units, the balance of the portion of the Capital Account of
the LTIP Unitholder that is attributable to all of his or her LTIP Units shall
be reduced by the amount, if any, by which it exceeds the target balance
contemplated by Section 6.1.C, calculated with respect to the LTIP Unitholder's
remaining LTIP Units, if any.

 

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(iii)  Allocations.
LTIP Unitholders shall be entitled to certain special allocations of gain under
Section 6.1.C.

 

(iv)  Redemption.
The Redemption Right provided to Limited Partners under Section 8.6 shall not
apply with respect to LTIP Units unless and until they are converted to
Partnership Units as provided in clause (vi) below and Section 8.7.

 

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

 

(vi)  Conversion
to Partnership Units. Vested LTIP Units are eligible to be converted into
Partnership Units under Section 8.7.

 

(vii)  Voting.
LTIP Units shall have the voting rights provided in Section 8.8.

 

Section
4.3.  Contribution
of Proceeds of Issuance of REIT Shares

 

In
connection with the Offering of REIT Shares by the Company and any other
issuance of REIT Shares or New Securities pursuant to Section 4.2, the Company
shall contribute to the Partnership any proceeds (or a portion thereof) raised
in connection with such issuance; provided that if the
proceeds actually received by the Company are less than the gross proceeds of
such issuance as a result of any underwriter’s discount or other expenses paid
or incurred in connection with such issuance, then the Company shall be deemed
to have made a Capital Contribution to the Partnership in the amount equal to
the sum of the net proceeds of such issuance plus the amount of such
underwriter’s discount and other expenses paid by the Company (which discount
and expense shall be treated as an expense for the benefit of the Partnership in
accordance with Section 7.4). In the case of employee purchases of New
Securities at a discount from fair market value, the amount of such discount
representing compensation to the employee, as determined by the General Partner,
shall be treated as an expense of the issuance of such New
Securities.

 

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Section
4.4.  Preemptive
Rights

 

No Person
shall have any preemptive, preferential or other similar right with respect to
(i) additional Capital Contributions or loans to the Partnership; or (ii)
issuance or sale of any Partnership Units or other Partnership Interests.

 

ARTICLE
5.

 

DISTRIBUTIONS

 

Section
5.1.  Requirement
and Characterization of Distributions

 

The
General Partner shall distribute at least quarterly an amount equal to 100% of
Available Cash generated by the Partnership during such quarter or shorter
period to the Partners who are Partners on the Partnership Record Date with
respect to such quarter or shorter period in accordance with their respective
Percentage Interests on such Partnership Record Date; provided that in no event
may a Partner receive a distribution of Available Cash with respect to a
Partnership Unit if such Partner is entitled to receive a distribution out of
such Available Cash with respect to a REIT Share for which such Partnership Unit
has been exchanged and such distribution shall be made to the Company; and
provided further, that no LTIP Unitholder shall receive any distribution of
Available Cash if and to
the extent the
balance of such LTIP Unitholder's Adjusted Capital Account would be equal to or
less than zero after such distribution is made unless the balances of the
Adjusted Capital Accounts of all Partners in the Partnership would also be equal
to or less than zero after such distribution is made. The General Partner shall
take such reasonable efforts, as determined by it in its sole and absolute
discretion and consistent with the Company’s qualification as a REIT, to
distribute Available Cash to the Limited Partners so as to preclude any such
distribution or portion thereof from being treated as part of a sale of property
to the Partnership by a Limited Partner under Section 707 of the Code or the
Regulations thereunder; provided that the General Partner and the Partnership
shall not have liability to a Limited Partner under any circumstances as a
result of any distribution to a Limited Partner being so treated.

 

Section
5.2.  Amounts
Withheld

 

All
amounts withheld pursuant to the Code or any provisions of any state or local
tax law and Section 10.5 hereof with respect to any allocation, payment or
distribution to the Partners or Assignees shall be treated as amounts
distributed to the Partners or Assignees pursuant to Section 5.1 for all
purposes under this Agreement.

 

Section
5.3.  Distributions
Upon Liquidation

 

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

 

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Section
5.4.  Restricted
Distributions

 

Notwithstanding
any provision to the contrary contained in this Agreement, the Partnership, and
the General Partner on behalf of the Partnership, shall not make a distribution
to any Partner on account of its interest in the Partnership if such
distribution would violate Section 17-607 of the Act or other applicable
law.

 

ARTICLE
6.

 

ALLOCATIONS

 

Section
6.1.  Allocations
For Capital Account Purposes

 

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

 

A.  After
giving effect to the special allocations set forth in Section 1 of Exhibit C
attached hereto, Net Income shall be allocated (i) first, to the General Partner
to the extent that Net Losses previously allocated to the General Partner
pursuant to the last sentence of Section 6.1.B exceed Net Income previously
allocated to the General Partner pursuant to this clause (i) of Section 6.1.A;
and (ii) thereafter, Net Income shall be allocated to the Partners in accordance
with their respective Percentage Interests.

 

B.  After
giving effect to the special allocations set forth in Section 1 of Exhibit C
attached hereto, Net Losses shall be allocated to the Partners in accordance
with their respective Percentage Interests.

 

C.  Notwithstanding
the provisions of Section 6.1.A above, any net capital gains realized in
connection with the actual or hypothetical sale of all or substantially all of
the assets of the Partnership, including but not limited to net capital gain
realized in connection with an adjustment to the Carrying Value of Partnership
assets under Section 704(b) of the Code, shall first be allocated to the LTIP
Unitholders until the aggregate Economic Capital Account Balances of such LTIP
Unitholders, to the extent attributable to their ownership of LTIP Units, are
equal to the product of (i) the Partnership Unit Economic Balance, multiplied by
(ii) the number of such LTIP Unitholders’ LTIP Units. 

 

        For this purpose, the
“Economic Capital Account Balances” of the LTIP Unitholders will be equal to
their Capital Account balances, plus the amount of their shares of any Partner
Minimum Gain or Partnership Minimum Gain, in either case to the extent
attributable to their ownership of LTIP Units. Similarly, the “Partnership Unit
Economic Balance” shall mean (i) the Capital Account balance of the Company,
plus the amount of the Company's share of any Partner Minimum Gain or
Partnership Minimum Gain, in either case to the extent attributable to the
Company's ownership of Partnership Units and computed on a hypothetical basis
after taking into account all allocations through the date on which any
allocation is made under this Section 6.1.C, divided by (ii) the number of the
Company's Partnership Units. Any such allocations shall be made among the LTIP
Unitholders in proportion to the amounts required to be allocated to each under
this Section 6.1.C. The parties agree that the intent of this Section 6.1.C is
to make the Capital Account balances of the LTIP Unitholders with respect to
each of their LTIP Units economically equivalent to the Capital Account balance
of the Company with respect to each of its Partnership Units.

 

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D.  The
Partners agree that excess Nonrecourse Liabilities of the Partnership within the
meaning of Regulations Section 1.752-3(a)(3) shall be allocated among the
Partners in accordance with their respective Percentage Interests.

 

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

 

ARTICLE
7.

 

MANAGEMENT
AND OPERATIONS OF BUSINESS

 

Section
7.1.  Management

 

A.  Except as
otherwise expressly provided in this Agreement, all management powers over the
business and affairs of the Partnership are and shall be exclusively vested in
the General Partner, and no Limited Partner shall have any right to participate
in or exercise control or management power over the business and affairs of the
Partnership. The General Partner may not be removed by the Limited Partners with
or without cause. In addition to the powers now or hereafter granted a general
partner of a limited partnership under applicable law or which are granted to
the General Partner under any other provision of this Agreement, the General
Partner, subject to Section 7.3 hereof, shall have full power and authority to
do all things deemed necessary, desirable or convenient 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, without limitation:

 

(1)  the
making of any expenditures, the lending or borrowing of money (including,
without limitation, making prepayments on loans and borrowing money to permit
the Partnership to make distributions to its Partners in such amounts as will
permit the Company (so long as the Company qualifies as a REIT) to avoid the
payment of any federal income tax (including, for this purpose, any excise tax
pursuant to Section 4981 of the Code) and to make distributions to its
shareholders in amounts sufficient to permit the Company to maintain REIT
status), the assumption or guarantee of, or other contracting for, indebtedness
and other liabilities, 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 the incurring of any obligations it
deems necessary for the conduct of the activities of the
Partnership;

 

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(2)  the
making of tax, regulatory and other filings, or rendering of periodic or other
reports to governmental or other agencies having jurisdiction over the business
or assets of the Partnership;

 

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

 

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

 

(5)  the
management, operation, leasing, landscaping, repair, alteration, demolition,
disposition or improvement of any real property or improvements owed by the
Partnership or any Subsidiary of the Partnership;

 

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

 

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

 

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

 

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

 

(10)  the
establishment of one or more divisions of the Partnership, the selection and
dismissal of employees of the Partnership (including, without limitation,
employees who may be designated as officers with 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
hiring;

 

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(11)  the
maintenance of such insurance for the benefit of the Partnership and the
Partners as it deems necessary or appropriate;

 

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

 

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

 

(14)  the
undertaking of any action in connection with the Partnership’s direct or
indirect investment in its Subsidiaries or any other Person (including, without
limitation, the contribution or loan of funds by the Partnership to such
Persons);

 

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

 

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

 

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

 

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

 

(19)  the
making, execution, delivery and performance 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, appropriate or convenient, in the judgment of
the General Partner, for the accomplishment of any of the powers of the General
Partner enumerated in this Agreement; and

 

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(20)  the
issuance of additional Partnership Units and other partnership interests, as
appropriate, in connection with Capital Contributions by Additional Limited
Partners and additional Capital Contributions by Partners pursuant to Article 4
hereof.

 

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

 

C.  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 amounts as the General
Partner, in its sole and absolute discretion, deems appropriate and reasonable
from time to time.

 

D.  In
exercising its authority under this Agreement, the General Partner may, but
shall be under no obligation to, take into account the tax consequences to any
Partner of any action taken by it. The General Partner and the Partnership shall
not be liable to a Limited Partner under any circumstances as a result of an
income tax liability incurred by such Limited Partner as a result of an action
(or inaction) by the General Partner taken pursuant to its authority under this
Agreement and in accordance with the terms of Section 7.3.

 

Section
7.2.  Certificate
of Limited Partnership

 

The
General Partner has filed the Certificate with the Secretary of State of
Delaware as required by the Act. 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. To the extent that such action is determined by the
General Partner to be reasonable and necessary or appropriate or convenient, the
General Partner shall file amendments to and 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. Subject to the
terms of Section 8.5.A(4) hereof, the General Partner shall not be required,
before or after filing, to deliver or mail a copy of the Certificate or any
amendment thereto or restatement thereof to any Limited Partner.

 

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Section
7.3.  Restrictions
on General Partner Authority

 

A.  The
General Partner may not take any action in contravention of an express
prohibition or limitation of this Agreement without the written Consent of
Limited Partners holding a majority of the Percentage Interests of the Limited
Partners (including Limited Partner Interests held by the Company), or such
other percentage of the Limited Partners as may be specifically provided for
under a provision of this Agreement.

 

B.  Except as
provided in Article 13 hereof, the General Partner may not cause the Partnership
to engage in a Terminating Capital Transaction (including by way of merger,
consolidation or other combination with any other Person), without the Consent
of Limited Partners holding 50% or more of the Percentage Interests of the
Limited Partners (including Limited Partnership Interests held by the
Company).

 

Section
7.4.  Reimbursement
of the General Partner and the
Company

 

A.  Except as
provided in this Section 7.4 and elsewhere in this Agreement (including the
provisions of 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.  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 expenditures that
it incurs relating to the ownership and operation of, or for the benefit of, the
Partnership; provided that the amount of any such reimbursement shall be reduced
by any interest earned by the General Partner with respect to bank accounts or
other instruments or accounts held by it on behalf of the Partnership, and
provided further that the General Partner shall not be reimbursed for any (i)
directors fees, (ii) income tax liabilities or (iii) filing or similar fees in
connection with maintaining the General Partner’s continued corporate existence
that are incurred by the General Partner, but the Partners acknowledge that all
other expenses of the General Partner are deemed to be for the benefit of the
Partnership. Such reimbursement shall be in addition to any reimbursement made
as a result of indemnification pursuant to Section 7.7 hereof. Included among
the expenditures for which the General Partner shall be entitled to
reimbursement hereunder shall be any payments of debt service made by the
General Partner, in its capacity as General Partner, as guarantor or otherwise,
with respect to indebtedness encumbering any property held by the
Partnership.

 

C.  As set
forth in Section 4.3, the Company shall be treated as having made a Capital
Contribution in the amount of all expenses that it incurs and pays relating to
the Company’s Offering and any other issuance of REIT Shares or New Securities
pursuant to Section 4.2 the proceeds from the issuance of which are contributed
to the Partnership.

 

D.  In the
event that the Company shall elect to purchase from its shareholders REIT Shares
for the purpose of delivering such REIT Shares to satisfy an obligation under
any dividend reinvestment program adopted by the Company, any employee stock
purchase plan adopted by the Company, or any similar obligation or arrangement
undertaken by the Company in the future, the purchase price paid by the Company
for such REIT Shares and any other expenses incurred by the Company in
connection with such purchase shall be considered expenses of the Partnership
and shall be reimbursed to the Company, subject to the condition that: (i) if
such REIT Shares subsequently are sold by the Company, the Company shall pay to
the Partnership any proceeds received by the Company for such REIT Shares (which
sales proceeds shall include the amount of dividends reinvested under any
dividend reinvestment or similar program provided that a transfer of REIT Shares
for Units pursuant to Section 8.6 would not be considered a sale for such
purposes); and (ii) if such REIT Shares are not retransferred by the Company
within 30 days after the purchase thereof, the General Partner shall cause the
Partnership to cancel a number of Partnership Units held by the Company equal to
the product obtained by multiplying the Conversion Factor by the number of such
REIT Shares (in which case such reimbursement shall be treated as a distribution
in redemption of Units held by the Company).

 

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Section
7.5.  Outside
Activities of the General Partner

 

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 the business of the
Partnership, and such activities as are incidental thereto. 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.

 

Section
7.6.  Contracts
with Affiliates

 

A.  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 Persons may borrow
funds from the Partnership, on terms and conditions established in the sole and
absolute discretion of the General Partner. The foregoing authority shall not
create any right or benefit in favor of any Subsidiary or any other
Person.

 

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

 

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

 

D.  The
General Partner, in its sole and absolute discretion and without the approval of
the Limited Partners, may propose and adopt, on behalf of the Partnership,
employee benefit plans, stock option plans, and similar plans funded by the
Partnership for the benefit of employees of the General Partner, the
Partnership, Subsidiaries of the Partnership or any Affiliate of any of them in
respect of services performed, directly or indirectly, for the benefit of the
Partnership, the General Partner, or any Subsidiaries of the
Partnership.

 

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E.  The
General Partner is expressly authorized to enter into, in the name and on behalf
of the Partnership, and without the approval of the Limited Partners, a right of
first opportunity arrangement and other conflict avoidance agreements with
various Affiliates of the Partnership and the General Partner, on such terms as
the General Partner, in its sole and absolute discretion, believes are
advisable.

 

Section
7.7.  Indemnification

 

A.  To the
fullest extent permitted by Delaware law, the Partnership shall indemnify each
Indemnitee from and against any and all losses, claims, damages, liabilities,
joint or several, expenses (including, without limitation, attorneys fees and
other legal fees and expenses), judgments, fines, settlements, and other amounts
arising from any and all claims, demands, actions, suits or proceedings, civil,
criminal, administrative or investigative, that relate to the operations of the
Partnership or the Company as set forth in this Agreement, in which such
Indemnitee may be involved, or is threatened to be involved, as a party or
otherwise, except to the extent such Indemnitee acted in bad faith, or with
gross negligence or willful misconduct. Without limitation, the foregoing
indemnity shall extend to any liability of any Indemnitee, pursuant to a loan
guaranty or otherwise for any indebtedness of the Partnership or any Subsidiary
of the Partnership (including without limitation, any indebtedness which the
Partnership or any Subsidiary of the Partnership has assumed or taken subject
to), and the General Partner is hereby authorized and empowered, on behalf of
the Partnership, to enter into one or more indemnity agreements consistent with
the provisions of this Section 7.7 in favor of any Indemnitee having or
potentially having liability for any such indebtedness. Any indemnification
pursuant to this Section 7.7 shall be made only out of the assets of the
Partnership, and neither the General Partner nor any Limited Partner shall have
any obligation to contribute to the capital of the Partnership, or otherwise
provide funds, to enable the Partnership to fund its obligations under this
Section 7.7.

 

B.  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 the
proceeding, upon receipt by the Partnership of an undertaking by or on behalf of
the Indemnitee to repay such amount if it shall be determined that the
Indemnitee is not entitled to be indemnified as authorized in Section
7.7.A.

 

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

 

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

 

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

 

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

 

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

 

Section
7.8.  Liability
of the General Partner

 

A.  Notwithstanding
anything to the contrary set forth in this Agreement, none of the General
Partner, its Affiliates, or any of their respective officers, directors,
trustees, stockholders, partners, members, employees, representatives or agents
or any officer, employee, representative or agent of the Partnership and its
Affiliates (individually, a “Covered Person” and collectively, the “Covered
Persons”) 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 of any act or omission if the Covered Person’s conduct did
not constitute bad faith, gross negligence or willful misconduct.

 

B.  The
Limited Partners expressly acknowledge that the General Partner is acting on
behalf of the Partnership and the shareholders of the Company collectively, that
the General Partner is under no obligation to consider the separate interests of
the Limited Partners (except as otherwise provided herein) 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 in connection
with such decisions, provided that the General Partner has acted in good
faith.

 

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C.  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 employees and agents. The General Partner shall
not be responsible for any misconduct or negligence on the part of any such
employee or agent appointed by the General Partner in good faith.

 

D.  Any
amendment, modification or repeal of this Section 7.8 or any provision hereof
shall be prospective only and shall not in any way affect the limitations on the
Covered Person’s liability to the Partnership and the Limited Partners under
this Section 7.8 as in effect immediately prior to such amendment, modification
or repeal with respect to claims arising from or relating to matters occurring,
in whole or in part, prior to such amendment, modification or repeal, regardless
of when such claims may arise or be asserted.

 

E.  To the
extent that, at law or in equity, a Covered Person has duties (including
fiduciary duties) and liabilities relating thereto to the Partnership or to the
Partners, any Covered Person acting under this Agreement or otherwise shall not
be liable to the Partnership or to any Partner for its good faith reliance on
the provisions of this Agreement. The provisions of this Agreement, to the
extent that they restrict the duties and liabilities of a Covered Person
otherwise existing at law or in equity, are agreed by the Partners to replace
such other duties and liabilities of such Covered Person.

 

F.  Whenever
in this Agreement the General Partner is permitted or required to make a
decision (i) in its “sole discretion” or “discretion,” or under a similar grant
of authority or latitude, the General Partner shall be entitled to consider such
interests and factors as it desires and may consider its own interests, and
shall have no duty or obligation to give any consideration to any interest of or
factors affecting the Partnership or the Limited Partners, or (ii) in its “good
faith” or under another express standard, the General Partner shall act under
such express standard and shall not be subject to any other or different
standards imposed by this Agreement or by law or any other agreement
contemplated herein.

 

Section
7.9.  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.  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. Each such attorney shall, to the extent
provided by the General Partner in the power of attorney, have full power and
authority to do and perform all and every act and duty which is permitted or
required to be done by the General Partner hereunder.

 

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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 Company to continue to qualify as a REIT; or (ii) to
avoid the Company incurring any taxes under Sections 337(d), 857, 1374 or 4981
of the Code, is expressly authorized under this Agreement and is deemed approved
by all of the Limited Partners.

 

Section
7.10.  Title
to Partnership Assets

 

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

 

Section
7.11.  Reliance
by Third Parties

 

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

 

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ARTICLE
8.  

 

RIGHTS
AND OBLIGATIONS OF LIMITED PARTNERS

 

Section
8.1.  Limitation
of Liability

 

The
Limited Partners shall have no liability under this Agreement except as
expressly provided in this Agreement, including Section 10.5 hereof, or under
the Act.

 

Section
8.2.  Management
of Business

 

No
Limited Partner or Assignee (other than the General Partner, any of its
Affiliates or any member, 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. The transaction of any such business by the General Partner, any of
its Affiliates or any member, officer, director, employee, partner, agent or
trustee of the General Partner, the Partnership or any of their Affiliates, in
their capacity as such, shall not affect, impair or eliminate the limitations on
the liability of the Limited Partners or Assignees under this
Agreement.

 

Section
8.3.  Outside
Activities of Limited Partners

 

Subject
to any agreements entered into pursuant to Section 7.6.E hereof and any other
agreements entered into by a Limited Partner or its Affiliates with the
Partnership or any of its Subsidiaries, any Limited Partner (other than the
Company) and any member, officer, director, employee, agent, trustee, Affiliate
or shareholder of any Limited Partner (other than the Company) shall be entitled
to and may have business interests and engage in business activities in addition
to those relating to the Partnership, including business interests and
activities that are in direct competition with the Partnership or that are
enhanced by the activities of the Partnership. Neither the Partnership nor any
Partners shall have any rights by virtue of this Agreement in any business
ventures of any Limited Partner or Assignee. None of the Limited Partners (other
than the Company) nor any other Person shall have any rights by virtue of this
Agreement or the Partnership relationship established hereby in any business
ventures of any other Person 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.

 

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Section
8.4.  Return
of Capital

 

Except
pursuant to the right of redemption set forth in Section 8.6, 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. Except to the extent provided
by Exhibit C hereof or as otherwise expressly provided in this Agreement, no
Limited Partner or Assignee shall have priority over any other Limited Partner
or Assignee, either as to the return of Capital Contributions or as to profits,
losses or distributions.

 

Section
8.5.  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.C hereof, each Limited Partner shall have the
right, for a purpose reasonably related to such Limited Partner’s interest as a
limited partner in the Partnership, upon written demand with a statement of the
purpose of such demand and at such Limited Partner’s own expense (including such
copying and administrative charges as the General Partner may establish from
time to time):

 

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

 

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

 

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

 

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

 

(5)  to obtain
true and full information regarding the amount of cash and a description and
statement of any other property or services contributed by each Partner and
which each Partner has agreed to contribute in the future, and the date on which
each became a Partner.

 

B.  The
Partnership shall notify each Limited Partner, upon request, of the then current
Conversion Factor.

 

C.  Notwithstanding
any other provision of this Section 8.5, the General Partner may keep
confidential from the Limited Partners, for such period of time as the General
Partner determines in its sole and absolute discretion to be reasonable, any
information that (i) the General Partner reasonably believes to be in the nature
of trade secrets or other information, the disclosure of which the General
Partner in good faith believes is not in the best interests of the Partnership
or could damage the Partnership or its business; or (ii) the Partnership is
required by law or by agreements with an unaffiliated third party to keep
confidential.

 

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Section
8.6.  Redemption
Right

 

A.  Subject
to Sections 8.6.B and 8.6.C hereof and on or after such date, if any, as
expressly provided for in any agreement entered into between the Partnership and
any Limited Partner, each Limited Partner (other than the Company) shall have
the right (the “Redemption
Right”) to
require the Partnership to redeem on a Specified Redemption Date all or a
portion of the Partnership Units held by such Limited Partner at a redemption
price per Unit equal to and in the form of the Cash Amount to be paid by the
Partnership. The Redemption Right shall be exercised pursuant to a Notice of
Redemption delivered to the Partnership (with a copy to the Company) by the
Limited Partner who is exercising the redemption right (the “Redeeming
Partner”); provided, however, that the
Partnership shall not be obligated to satisfy such Redemption Right if the
Company elects to purchase the Partnership Units subject to the Notice of
Redemption pursuant to Section 8.6.B. A Limited Partner may not exercise the
Redemption Right for less than one thousand (1,000) Partnership Units at any one
time or, if such Limited Partner holds less than one thousand (1,000)
Partnership Units, all of the Partnership Units held by such Partner. The
Redeeming Partner shall have no right, with respect to any Partnership Units so
redeemed, to receive any distributions paid on or after the Specified Redemption
Date. The Assignee of any Limited Partner may exercise the rights of such
Limited Partner pursuant to this Section 8.6, and such Limited Partner shall be
deemed to have assigned such rights to such Assignee and shall be bound by the
exercise of such rights by such Assignee. In connection with any exercise of
such rights by an Assignee on behalf of a Limited Partner, the Cash Amount shall
be paid by the Partnership directly to such Assignee and not to such Limited
Partner. Any Partnership Units redeemed by the Partnership pursuant to this
Section 8.6.A shall be cancelled upon such redemption.

 

B.  Notwithstanding
the provisions of Section 8.6.A, a Limited Partner that exercises the Redemption
Right shall be deemed to have offered to sell the Partnership Units described in
the Notice of Redemption to the Company, and the Company may, in its sole and
absolute discretion, elect to purchase directly and acquire such Partnership
Units by paying to the Redeeming Partner either the Cash Amount or the REIT
Shares Amount, as elected by the Company (in its sole and absolute discretion),
on the Specified Redemption Date, whereupon the Company shall acquire the
Partnership Units offered for redemption by the Redeeming Partner and shall be
treated for all purposes of this Agreement as the owner of such Partnership
Units. If the Company shall elect to exercise its right to purchase Partnership
Units under this Section 8.6.B with respect to a Notice of Redemption, it shall
so notify the Redeeming Partner within five Business Days after the receipt by
it of such Notice of Redemption. Unless the Company (in its sole and absolute
discretion) shall exercise its right to purchase Partnership Units from the
Redeeming Partner pursuant to this Section 8.6.B, the Company shall not have any
obligation to the Redeeming Partner or the Partnership with respect to the
Redeeming Partner’s exercise of the Redemption Right. In the event the Company
shall exercise its right to purchase Partnership Units with respect to the
exercise of a Redemption Right in the manner described in the first sentence of
this Section 8.6.B, the Partnership shall have no obligation to pay any amount
to the Redeeming Partner with respect to such Redeeming Partner’s exercise of
such Redemption Right, and each of the Redeeming Partner, the Partnership, and
the Company shall treat the transaction between the Company and the Redeeming
Partner, for federal income tax purposes, as a sale of the Redeeming Partner’s
Partnership Units to the Company. Each Redeeming Partner agrees to execute such
documents as the Company may reasonably require in connection with the issuance
of REIT Shares upon exercise of the Redemption Right. In case of any
reclassification of the REIT Shares (including, but not limited to, any
reclassification upon a consolidation or merger in which the Company is the
continuing corporation) into securities other than REIT Shares, for purposes of
this Section 8.6.B, the Company (or its Successor) may thereafter exercise its
right to purchase Partnership Units for the kind and amount of shares of such
securities receivable upon such reclassification by a holder of the number of
REIT Shares for which such Units could be purchased pursuant to this Section
immediately prior to such reclassification.

 

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C.  Notwithstanding
the provisions of Section 8.6.A and Section 8.6.B, a Partner shall not be
entitled to exercise the Redemption Right pursuant to Section 8.6.A to the
extent that the delivery of REIT Shares to such Partner on the Specified
Redemption Date by the Company pursuant to Section 8.6.B (regardless of whether
or not the Company would in fact exercise its rights under Section 8.6.B) would
be prohibited, as determined in the sole discretion of the Company, under the
Declaration of Trust of the Company.

 

Section
8.7.  Conversion
of LTIP Units

 

A.  An LTIP
Unitholder shall have the right (the “Conversion Right”), at his or her option,
at any time to convert all or a portion of his or her Vested LTIP Units into
Partnership Units; provided, however, that a holder may not exercise the
Conversion Right for less than 100 Vested LTIP Units or, if such holder holds
less than 100 Vested LTIP Units, all of the Vested LTIP Units held by such
holder. LTIP Unitholders shall not have the right to convert Unvested LTIP Units
into Partnership Units until they become Vested LTIP Units; provided, however,
that when an LTIP Unitholder is notified of the expected occurrence of an event
that will cause his or her Unvested LTIP Units to become Vested LTIP Units, such
LTIP Unitholder may give the Partnership a Conversion Notice conditioned upon
and effective as of the time of vesting and such Conversion Notice, unless
subsequently revoked by the LTIP Unitholder, shall be accepted by the
Partnership subject to such condition. The General Partner shall have the right
at any time to cause a conversion of Vested LTIP Units into Partnership Units.
In all cases, the conversion of any LTIP Units into Partnership Units shall be
subject to the conditions and procedures set forth in this Section
8.7.

 

B.  A holder
of Vested LTIP Units may convert such Units into an equal number of fully paid
and non-assessable Partnership Units, giving effect to all adjustments (if any)
made pursuant to Section 4.2.C. Notwithstanding the foregoing, in no event may a
holder of Vested LTIP Units convert a number of Vested LTIP Units that exceeds
(x) the Economic Capital Account Balance of such Limited Partner, to the extent
attributable to its ownership of LTIP Units, divided by (y) the Partnership Unit
Economic Balance, in each case as determined as of the effective date of
conversion (the “Capital Account Limitation”). In order to exercise his or her
Conversion Right, an LTIP Unitholder shall deliver a notice (a “Conversion
Notice”) in the form attached as Exhibit G to the Partnership (with a copy to
the General Partner) not less than 10 nor more than 60 days prior to a date (the
“Conversion Date”) specified in such Conversion Notice; provided, however, that
if the General Partner has not given to the LTIP Unitholders notice of a
proposed or upcoming Transaction at least 30 days prior to the effective date of
such Transaction, then LTIP Unitholders shall have the right to deliver a
Conversion Notice until the earlier of (x) the 10th day after such notice from
the General Partner of a Transaction or (y) the third business day immediately
preceding the effective date of such Transaction. A Conversion Notice shall be
provided in the manner provided in Section 15.1. Each LTIP Unitholder covenants
and agrees with the Partnership that all Vested LTIP Units to be converted
pursuant to this Section 8.7.B shall be free and clear of all liens.
Notwithstanding anything herein to the contrary, a holder of LTIP Units may
deliver a Redemption Notice pursuant to Section 8.6A of the Partnership
Agreement relating to those Partnership Units that will be issued to such holder
upon conversion of such LTIP Units into Partnership Units in advance of the
Conversion Date; provided, however, that the redemption of such Partnership
Units by the Partnership shall in no event take place until after the Conversion
Date. For clarity, it is noted that the objective of this paragraph is to put an
LTIP Unitholder in a position where, if he or she so wishes, the Partnership
Units into which his or her Vested LTIP Units will be converted can be redeemed
by the Partnership simultaneously with such conversion, with the further
consequence that, if the Company elects to assume the Partnership's redemption
obligation with respect to such Partnership Units under Section 8.6B of the
Partnership Agreement by delivering to such holder REIT Shares rather than cash,
then such holder can have such REIT Shares issued to him or her simultaneously
with the conversion of his or her Vested LTIP Units into Partnership Units. The
General Partner shall cooperate with an LTIP Unitholder to coordinate the timing
of the different events described in the foregoing sentence.

 

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C.  The
Partnership, at any time at the election of the General Partner, may cause any
number of Vested LTIP Units held by an LTIP Unitholder to be converted (a
“Forced Conversion”) into an equal number of Partnership Units, giving effect to
all adjustments (if any) made pursuant to Section 4.2.C; provided, however, that
the Partnership may not cause Forced Conversion of any LTIP Units that would not
at the time be eligible for conversion at the option of such LTIP Unitholder
pursuant to Section 8.7.

 

D.  In order
to exercise its right of Forced Conversion, the Partnership shall deliver a
notice (a “Forced Conversion Notice”) in the form attached as Exhibit H to the
applicable LTIP Unitholder not less than 10 nor more than 60 days prior to the
Conversion Date specified in such Forced Conversion Notice. A Forced Conversion
Notice shall be provided in the manner provided in Section 15.1.

 

E.  A
conversion of Vested LTIP Units for which the holder thereof has given a
Conversion Notice or the Partnership has given a Forced Conversion Notice shall
occur automatically after the close of business on the applicable Conversion
Date without any action on the part of such LTIP Unitholder, as of which time
such LTIP Unitholder 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 Partnership Units issuable upon such conversion. After the
conversion of LTIP Units as aforesaid, the Partnership shall deliver to such
LTIP Unitholder, upon his or her written request, a certificate of the General
Partner certifying the number of Partnership Units and remaining LTIP Units, if
any, held by such person immediately after such conversion. The Assignee of any
Limited Partner pursuant to Article 11 hereof may exercise the rights of such
Limited Partner pursuant to this Section 8.7 and such Limited Partner shall be
bound by the exercise of such rights by the Assignee.

 

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F.  For
purposes of making future allocations under Section 6.1.C and applying the
Capital Account Limitation, the portion of the Economic Capital Account balance
of the applicable LTIP Unitholder that is treated as attributable to his or her
LTIP Units shall be reduced, as of the date of conversion, by the product of the
number of LTIP Units converted and the Partnership Unit Economic
Balance.

 

G.  If the
Partnership or the General Partner shall be a party to any transaction
(including without limitation a merger, consolidation, unit exchange, self
tender offer for all or substantially all Partnership 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) in each case as a result of which Partnership 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 (each of the foregoing being referred to herein as a
“Transaction”), then the General Partner shall, immediately prior to the
Transaction, exercise its right to cause a Forced Conversion with respect to the
maximum number of LTIP Units then eligible for conversion, taking into account
any allocations that occur in connection with the Transaction or that would
occur in connection with the Transaction if the assets of the Partnership were
sold at the Transaction price or, if applicable, at a value determined by the
General Partner in good faith using the value attributed to the Partnership
Units in the context of the Transaction (in which case the Conversion Date shall
be the effective date of the Transaction). In anticipation of such Forced
Conversion and the consummation of the Transaction, the Partnership shall use
commercially reasonable efforts to cause each LTIP Unitholder to be afforded the
right to receive in connection with such Transaction in consideration for the
Partnership Units into which his or her LTIP Units will be converted the same
kind and amount of cash, securities and other property (or any combination
thereof) receivable upon the consummation of such Transaction by a holder of the
same number of Partnership Units, assuming such holder of Partnership 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 Partnership Units have the
opportunity to elect the form or type of consideration to be received upon
consummation of the Transaction, prior to such Transaction the General Partner
shall give prompt written notice to each LTIP Unitholder of such election, and
shall use commercially reasonable efforts to afford the LTIP Unitholders the
right to elect, by written notice to the General Partner, the form or type of
consideration to be received upon conversion of each LTIP Unit held by such
holder into Partnership Units in connection with such Transaction. If an LTIP
Unitholder fails to make such an election, such holder (and any of its
transferees) shall receive upon conversion of each LTIP Unit held him or her (or
by any of his or her transferees) the same kind and amount of consideration that
a holder of a Partnership Unit would receive if such Partnership Unit holder
failed to make such an election. Subject to the rights of the Partnership and
the Company under any LTIP Unit Agreement and the Plan, the Partnership shall
use commercially reasonable effort to cause the terms of any Transaction to be
consistent with the provisions of this Section 8.7.G and to enter into an
agreement with the successor or purchasing entity, as the case may be, for the
benefit of any LTIP Unitholders whose LTIP Units will not be converted into
Partnership Units in connection with the Transaction that will (i) contain
provisions enabling the holders of LTIP Units that remain outstanding after such
Transaction to convert their LTIP Units into securities as comparable as
reasonably possible under the circumstances to the Partnership Units and (ii)
preserve as far as reasonably possible under the circumstances the distribution,
special allocation, conversion, and other rights set forth in the Partnership
Agreement for the benefit of the LTIP Unitholders.

 

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Section
8.8.  VOTING
RIGHTS OF LTIP UNITS

 

LTIP
Unitholders shall (a) have those voting rights required from time to time by
applicable law, if any, (b) have the same voting rights as a holder of
Partnership Units, with the LTIP Units voting as a single class with the
Partnership Units and having one vote per LTIP Unit, and (c) have the additional
voting rights that are expressly set forth below. So long as any LTIP Units
remain outstanding, the Partnership shall not, without the affirmative vote of
the holders of at least a majority of the LTIP 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 the Partnership Agreement applicable to LTIP
Units so as to materially and adversely affect any right, privilege or voting
power of the LTIP Units or the LTIP Unitholders as such, unless such amendment,
alteration, or repeal affects equally, ratably and proportionately the rights,
privileges and voting powers of the holders of Partnership Units; but subject,
in any event, to the following provisions: (i) with respect to any Transaction,
so long as the LTIP Units are treated in accordance with Section 8.7.G hereof,
the consummation of such Transaction shall not be deemed to materially and
adversely affect such rights, preferences, privileges or voting powers of the
LTIP Units or the LTIP Unitholders as such; and(ii) any creation or issuance of
any Partnership Units or of any class or series of Partnership Interest
including without limitation additional Partnership Units, LTIP Units or
Preferred Units, whether ranking senior to, junior to, or on a parity with the
LTIP 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
LTIP Units or the LTIP Unitholders as such. 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 will be effected, all outstanding LTIP Units
shall have been converted into Partnership Units.

 

ARTICLE
9.

 

BOOKS,
RECORDS, ACCOUNTING AND REPORTS

 

Section
9.1.  Records
and Accounting

 

The
General Partner shall keep or cause to be kept at the principal office of the
Partnership those records and documents required to be maintained by the Act and
other books and records deemed by the General Partner to be appropriate with
respect to the Partnership’s business, including, without limitation, all books
and records necessary to provide to the Limited Partners any information, lists
and copies of documents required to be provided pursuant to Section 9.3 hereof.
Any records maintained by or on behalf of the Partnership in the regular course
of its business may be kept on, or be in the form of, 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. 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.

 

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Section
9.2.  Fiscal
Year

 

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

 

Section
9.3.  Reports

 

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

 

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

 

C. The
Partnership shall also cause to be prepared such reports and/or information as
are necessary for the General Partner to determine its qualification as a REIT
and its compliance with the requirements for REITs pursuant to the Code and
Regulations. 

 

 

ARTICLE
10.

 

TAX
MATTERS

 

Section
10.1.  Preparation
of Tax Returns

 

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

 

Section
10.2.  Tax
Elections

 

Except as
otherwise provided herein, the General Partner shall, in its sole and absolute
discretion, determine whether to make any available election pursuant to the
Code. Notwithstanding the above, in making any such tax election the General
Partner may, but shall be under no obligation to, take into account the tax
consequences to the Limited Partners resulting from any such
election.

 

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The
General Partner shall make such tax elections on behalf of the Partnership as
the Limited Partners holding a majority of the Percentage Interests of the
Limited Partners (excluding Limited Partner Interests held by the Company)
request, provided that the General Partner believes that such election is not
adverse to the interests of the Company, including its interest in preserving
its qualification as a REIT under the Code. The General Partner can elect to use
any method permitted by Code Section 704(c) and the Regulations thereunder to
take into account any variation between the adjusted basis of any property
contributed to the Partnership by any Partner after the date hereof and such
property’s initial Carrying Value. The General Partner intends to elect the
“traditional method” of making Section 704(c) allocations pursuant to
Regulations Section 1.704-3 with respect to property contributed by the General
Partner as of the date hereof. The General Partner shall have the right to seek
to revoke any tax election it makes (including, without limitation, an 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.

 

Section
10.3.  Tax
Matters Partner

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Section
10.4.  Organizational
Expenses

 

The
Partnership shall elect to deduct expenses, if any, incurred by it in forming
the Partnership ratably over a sixty (60) month period as provided in Section
709 of the Code.

 

Section
10.5.  Withholding

 

Each
Limited Partner hereby authorizes the Partnership to withhold from, or pay on
behalf of or with respect to, such Limited Partner any amount of federal, state,
local, or foreign taxes that the General Partner determines that the Partnership
is required to withhold or pay with respect to any amount distributable or
allocable to such Limited Partner pursuant to this Agreement, including, without
limitation, any taxes required to be withheld or paid by the Partnership
pursuant to Sections 1441, 1442, 1445, or 1446 of the Code. Any amount paid on
behalf of or with respect to a Limited Partner shall constitute a loan by the
Partnership to such Limited Partner, which loan shall be repaid by such Limited
Partner within fifteen (15) days after notice from the General Partner that such
payment must be made unless (i) the Partnership withholds such payment from a
distribution which would otherwise be made to the Limited Partner; or (ii) the
General Partner determines, in its sole and absolute discretion, that such
payment may be satisfied out of the available funds of the Partnership which
would, but for such payment, be distributed to the Limited Partner. Any amounts
withheld pursuant to the foregoing clauses (i) or (ii) shall be treated as
having been distributed to such Limited Partner. In the event that a Limited
Partner fails to pay any amounts owed to the Partnership pursuant to this
Section 10.5 when due, the General Partner may, in its sole and absolute
discretion, elect to make the payment to the Partnership on behalf of such
defaulting Limited Partner, and in such event shall be deemed to have loaned
such amount to such defaulting Limited Partner and shall succeed to all rights
and remedies of the Partnership as against such defaulting Limited Partner.
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 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 and immediately paid by the defaulting Limited Partner to the
General Partner in repayment of such loan. Any amounts payable by a Limited
Partner hereunder shall bear interest at the lesser of (A) the base rate on
corporate loans at large United States money center commercial banks, as
published from time to time in The
Wall Street Journal, plus
four (4) percentage points, or (B) the maximum lawful rate of interest on such
obligation, such interest to accrue from the date such amount is due (i.e.,
fifteen (15) days after demand) until such amount is paid in full. Each Limited
Partner shall take such actions as the Partnership or the General Partner shall
request in order to perfect or enforce the security interest created
hereunder.

 

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ARTICLE
11.

 

TRANSFERS
AND WITHDRAWALS

 

Section
11.1.  Transfer

 

A.  The term
“transfer,” when used in this Article 11 with respect to a Partnership Unit,
shall be deemed to refer to a transaction by which the General Partner purports
to assign all or any part of its General Partner Interest to another Person or
by which a Limited Partner purports to assign all or any part of its Limited
Partner Interest to another Person, and includes a sale, assignment, gift,
pledge, encumbrance, hypothecation, mortgage, exchange or any other disposition
by law or otherwise. The term “transfer” when used in this Article 11 does not
include (i) any redemption of Partnership Interests by the Partnership from a
Limited Partner, (ii) any acquisition of Partnership Units from a Limited
Partner by the Company pursuant to Section 8.6, or (iii) any distribution of
Partnership Units by a Limited Partner to its beneficial owners.

 

B.  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. Any
transfer or purported transfer of a Partnership Interest not made in accordance
with this Article 11 shall be null and void.

 

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Section
11.2.  Transfer
of the General Partner’s Partnership Interest

 

The
General Partner may not transfer any of its Partnership Interest or withdraw as
General Partner, unless Limited Partners holding a majority of the Percentage
Interests of the Limited Partners (other than Limited Partner Interests held by
the Company) consent to such transfer or withdrawal.

 

Section
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 (other than the Company) may transfer, with or without the consent of
the General Partner, all or any portion of its Partnership Interest, or any of
such Limited Partner’s economic rights as a Limited Partner.

 

B.  If a
Limited Partner is subject to Incapacity, the executor, administrator, trustee,
committee, guardian, conservator or receiver of such Limited Partner’s estate
shall have all of the rights of a Limited Partner, but not more rights than
those enjoyed by other Limited Partners, for the purpose of settling or managing
the estate and such power as the Incapacitated Limited Partner possessed to
transfer all or any part of his or its interest in the Partnership. 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, in the opinion of legal counsel to the Partnership, such
transfer would require filing of a registration statement under the Securities
Act of 1933 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) in the opinion of legal counsel for the Partnership, it would result in
the Partnership being treated as an association taxable as a corporation or a
publicly traded partnership within the meaning of either Code Section 469(k)(2)
or 7704(b); (ii) it is made within two years after the consummation of the
initial public offering of the Company without the consent of the General
Partner; (iii) such transfer is effectuated through an “established securities
market” or a “secondary market (or the substantial equivalent thereof)” within
the meaning of Section 7704 of the Code; (iv) such transfer would cause the
Partnership to become, with respect to any employee benefit plan subject to
Title I of ERISA or to Section 4975 of the Code, a “party-in-interest” (as
defined in Section 3(14) of ERISA) or a “disqualified person” (as defined in
Section 4975(c) of the Code); (v) such transfer would, in the opinion of legal
counsel for the Partnership, cause any portion of the assets of the Partnership
to constitute assets of any employee benefit plan pursuant to Department of
Labor Regulations Section 2510.3-101; (vi) such transfer would subject the
Partnership to be regulated under the Investment Company Act of 1940, the
Investment Advisors Act of 1940 or the fiduciary responsibility provisions of
ERISA; or (vii) such transfer would cause the Partnership to be terminated for
federal income tax purposes pursuant to Code Section 708.

 

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, without the consent of the General Partner, in its sole
and absolute discretion.

 

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F.  The
General Partner shall keep a register for the Partnership on which the transfer,
pledge or release of Partnership Units shall be shown and pursuant to which
entries shall be made to effect all transfers, pledges or releases as required
by the applicable sections of Article 8 of the Uniform Commercial Code, as
amended, in effect in the States of New York and Delaware; provided, however,
that if there is any conflict between such requirements, the provisions of the
Delaware Uniform Commercial Code shall govern. The General Partner shall (i)
place proper entries in such register clearly showing each transfer and each
pledge and grant of security interest and the transfer and assignment pursuant
thereto, such entries to be endorsed by the General Partner and (ii) maintain
the register and make the register available for inspection by all of the
Partners and their pledgees at all times during the term of this Agreement.
Nothing herein shall be deemed a consent to any pledge or transfer otherwise
prohibited under this Agreement.

 

Section
11.4.  Substituted
Limited Partners

 

A.  No
Limited Partner shall have the right to substitute a transferee as a Limited
Partner in his place. The General Partner shall, however, have the right to
consent to the admission of a transferee of the interest of a Limited Partner
pursuant to this Section 11.4 as a Substituted Limited Partner, which consent
may be given or withheld by the General Partner in its sole and absolute
discretion. The General Partner’s failure or refusal to permit a transferee of
any such interests to become a Substituted Limited Partner shall not give rise
to any cause of action against the Partnership or any Partner. A Person shall be
admitted to the Partnership as a Substituted Limited Partner only upon the
aforementioned consent of the General Partner and the furnishing to the General
Partner of (i) evidence of acceptance in form satisfactory to the General
Partner of all of the terms and conditions of this Agreement, including, without
limitation, the power of attorney granted in Section 2.4 hereof and (ii) such
other documents of the General Partner in order to effect such Person’s
admission as a Substituted Limited Partner. The admission of any Person as a
Substituted Limited Partner shall become effective on the date upon which the
name of such Person is recorded on the books and records of the Partnership,
following the consent of the General Partner to such admission.

 

B.  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.  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.

 

Section
11.5.  Assignees

 

If the
General Partner, in its sole and absolute discretion, does not consent to the
admission of any permitted transferee as a Substituted Limited Partner, as
described in Section 11.4, such transferee shall be considered an Assignee for
purposes of this Agreement. An Assignee shall be 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, Recapture Income, and any other items, gain,
loss deduction and credit of the Partnership 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). In the event any such transferee desires to make a
further assignment of any such Partnership Units, such transferee shall be
subject to all of the provisions of this Article 11 to the same extent and in
the same manner as any Limited Partner desiring to make an assignment of
Partnership Units.

 

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Section
11.6.  General
Provisions

 

A.  No
Limited Partner may withdraw from the Partnership other than as a result of a
permitted transfer of all of such Limited Partner’s Partnership Units in
accordance with this Article 11 or pursuant to redemption of all of its
Partnership Units, or the acquisition thereof by the Company, under Section
8.6.

 

B.  Any
Limited Partner who 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 Substitute Limited
Partners. Similarly, any Limited Partner who shall transfer all of its
Partnership Units pursuant to a redemption of all of its Partnership Units, or
the acquisition thereof by the Company, under Section 8.6 shall cease to be a
Limited Partner.

 

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

 

D.  If any
Partnership Interest is transferred or assigned during any quarterly segment of
the Partnership’s fiscal year in compliance with the provisions of this Article
11 or redeemed or transferred pursuant to Section 8.6 on any day other than the
first day of a Partnership Year, then Net Income, Net Losses, 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. All distributions of Available Cash attributable to such
Partnership Unit with respect to which the Partnership Record Date is before the
date of such transfer, assignment, or redemption shall be made to the transferor
Partner or the Redeeming Partner, as the case may be, and in the case of a
transfer or assignment other than a redemption, all distributions of Available
Cash thereafter attributable to such Partnership Unit shall be made to the
transferee Partner.

 

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ARTICLE
12.

 

ADMISSION
OF PARTNERS

 

Section
12.1.  Admission
of Successor General Partner

 

A
successor to all of the General Partner Interest pursuant to Section 11.2 hereof
who is proposed to be admitted as a successor General Partner shall be admitted
to the Partnership as the General Partner, effective immediately prior to such
transfer. Any such transferee shall carry on the business of the Partnership
without dissolution. In each case, the admission shall be subject to the
successor General Partner executing and delivering to the Partnership an
acceptance of all of the terms and conditions of this Agreement and such other
documents or instruments as may be required to effect the admission. In the case
of such admission on any day other than the first day of a Partnership Year, all
items attributable to the General Partner Interest for such Partnership Year
shall be allocated between the transferring General Partner and such successor
as provided in Section 11.6.D hereof.

 

Section
12.2.  Admission
of Additional Limited Partners

 

A.  A Person
who makes a Capital Contribution to the Partnership in accordance with this
Agreement shall be admitted to the Partnership as an Additional Limited Partner
only upon furnishing to the General Partner (i) evidence of acceptance in form
satisfactory to the General Partner of all of the terms and conditions of this
Agreement, including, without limitation, the power of attorney granted in
Section 2.4 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.  Notwithstanding
anything to the contrary in this Section 12.2, no Person shall be admitted as an
Additional Limited Partner without the consent of the General Partner, which
consent may be given or withheld in the General Partner’s sole and absolute
discretion. The admission of any Person as an Additional Limited Partner shall
become effective on the date upon which the name of such Person is recorded on
the books and records of the Partnership, following the consent of the General
Partner to such admission.

 

C.  If any
Additional Limited Partner is admitted to the Partnership on any day other than
the first day of a Partnership Year, then Net Income, Net Losses, each item
thereof and all other items allocable among Partners and Assignees for such
Partnership Year shall be allocated among such Additional Limited Partner and
all other Partners and Assignees by taking into account their varying interests
during the Partnership Year in accordance with Section 706(d) of the Code, using
the interim closing of the books method. All distributions of Available Cash
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 of Available Cash thereafter
shall be made to all of the Partners and Assignees, including such Additional
Limited Partner.

 

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Section
12.3.  Amendment
of Agreement and Certificate of Limited
Partnership

 

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

 

Section
13.1.  Dissolution

 

The
Partnership shall not be dissolved by the admission of Substituted Limited
Partners or Additional Limited Partners or by the admission of a successor
General Partner in accordance with the terms of this Agreement. Upon the
withdrawal of the General Partner, any successor General Partner shall continue
the business of the Partnership without dissolution. The Partnership shall
dissolve, and its affairs shall be wound up, only upon the first to occur of any
of the following (“Liquidating Events”):

 

A.  the
expiration of its term as provided in Section 2.5 hereof;

 

B.  an event
of withdrawal of the General Partner, as defined in the Act, other than an event
of bankruptcy as defined in the Act, unless, (i) at the time of the occurrence
of such event there is at least one remaining general partner of the Partnership
who is hereby authorized to and does carry on the business of the Partnership,
or (ii) within ninety (90) days after such event of withdrawal not less than a
majority in interest of the remaining Partners (or such greater percentage in
interest as may be required by the Act and determined in accordance with the
Act), determined, in case the withdrawing General Partner continues as a Limited
Partner, by both excluding and including Limited Partner Interests continuing to
be held by the withdrawing General Partner, agrees 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; 

 

C.  from and
after the date of this Agreement through December 31, 2064, an election to
dissolve the Partnership made by the General Partner with the Consent of
Partners holding the requisite percentage specified in Section 7.3B hereof of
the Percentage Interests of the Limited Partners (including Limited Partner
Interests held by the Company);

 

D.  on or
after January 1, 2065, an election to dissolve the Partnership made by the
General Partner, in its sole and absolute discretion;

 

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

 

F.  the sale
of all or substantially all of the assets and properties of the Partnership;
or

 

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G.  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 (hereinafter
referred to as an “Event of Bankruptcy,” and such term as used herein is
intended and shall be deemed to supersede and replace the events of withdrawal
described in Section 17-402(a)(4) and (5) of the Act), unless prior to the entry
of such order or judgment all of the remaining Partners agree in writing to
continue the business of the Partnership and to the appointment, effective as of
a date prior to the date of such order or judgment, of a substitute General
Partner.

 

Section
13.2.  Winding
Up 

 

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

 

(1)  First, in
satisfaction of all of the Partnership’s debts and liabilities to creditors
other than the Partners (whether by payment or the making of reasonable
provision for payment thereof);

 

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

 

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

 

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

 

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

 

B.  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 Partners, the Liquidator may, in
its sole and absolute discretion, defer for a reasonable time the liquidation of
any assets except those necessary to satisfy liabilities of the Partnership
(including to those Partners as creditors) and/or distribute to the Partners, in
lieu of cash, as tenants in common and in accordance with the provisions of
Section 13.2.A hereof, undivided interests in such Partnership assets as the
Liquidator deems not suitable for liquidation. Any such distributions in kind
shall be made only if, in the good faith judgment of the Liquidator, such
distributions in kind are in the best interest of the Partners, and shall be
subject to such conditions relating to the disposition and management of such
properties as the Liquidator deems reasonable and equitable and to any
agreements governing the operation of such properties at such time. The
Liquidator shall determine the fair market value of any property distributed in
kind using such reasonable method of valuation as it may adopt.

 

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

 

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

 

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

 

Section
13.3.  Compliance
with Timing Requirements of Regulations

 

In the
event the Partnership is “liquidated” within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g), distributions shall be made pursuant to this Article 13 to
the General Partner and Limited Partners who have positive Capital Accounts in
compliance with Regulations Section 1.704-l(b)(2)(ii)(b)(2). If any Partner 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.

 

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Section
13.4.  Deemed
Contribution and Distribution

 

Notwithstanding
any other provision of this Article 13, in the event the Partnership is
“liquidated” within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), but
no Liquidating Event has occurred, the Partnership’s property shall not be
liquidated, the Partnership’s liabilities shall not be paid or discharged, and
the Partnership’s affairs shall not be wound up. Instead, for federal income tax
purposes and for purposes of maintaining Capital Accounts pursuant to Exhibit B
hereto, the Partnership shall be deemed to have contributed all Partnership
property and liabilities to a new limited partnership in exchange for an
interest in such new limited partnership and, immediately thereafter, the
Partnership will be deemed to liquidate by distributing interests in the new
limited partnership to the Partners. 

 

Section
13.5.  Rights
of Limited Partners

 

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

 

Section
13.6.  Notice
of Dissolution

 

In the
event 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.

 

      Section 13.7.  Termination
of Partnership and Cancellation of Certificate of Limited
Partnership

 

Upon the
completion of the winding up of the Partnership and liquidation of its assets,
as provided in Section 13.2 hereof, the Partnership shall be terminated by
filing a certificate of cancellation with the Secretary of State of the State of
Delaware, canceling all qualifications of the Partnership as a foreign limited
partnership in jurisdictions other than the State of Delaware and taking such
other actions as may be necessary to terminate the Partnership.

 

Section
13.8.  Reasonable
Time for Winding Up

 

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

 

Section
13.9.  Waiver
of Partition

 

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

 

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ARTICLE
14.

 

AMENDMENT
OF PARTNERSHIP AGREEMENT; MEETINGS

 

Section
14.1.  Amendment
of Partnership Agreement

 

A.  Amendments
to this Agreement may be proposed by the General Partner or by any Limited
Partners (other than the Company) holding twenty percent (20%) or more of the
Partnership Interests. Following such proposal, the General Partner shall submit
any proposed amendment to the Limited Partners. The General Partner shall seek
the written vote of the Partners on the proposed amendment or shall call a
meeting to vote thereon and to transact any other business that it may deem
appropriate. For purposes of obtaining a written vote, the General Partner may
require a response within a reasonable specified time, but not less than fifteen
(15) days, and failure to respond in such time period shall constitute a vote
which is consistent with the General Partner’s recommendation with respect to
the proposal. Except as provided in Sections 7.3.A, 7.3.B, 13.1.C, 14.1.B,
14.1.C or 14.1.D, a proposed amendment shall be adopted and be effective as an
amendment hereto if it is approved by the General Partner and it receives the
Consent of Partners holding a majority of the Percentage Interests of the
Limited Partners (including Limited Partner Interests held by the
Company).

 

B.  Notwithstanding
Section 14.1.A, the General Partner shall have the power, without the consent of
the Limited Partners, to amend this Agreement as may be required to facilitate
or implement any of the following purposes:

 

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

 

(2)  to
reflect the admission, substitution, termination, or withdrawal of Partners in
accordance with this Agreement;

 

(3)  to set
forth the designations, rights (including redemption rights that differ from
those specified in Section 8.6), powers, duties, and preferences of Partnership
Units or other Partnership Interests issued pursuant to Section 4.2.A
hereof;

 

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

 

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

 

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The
General Partner shall provide notice to the Limited Partners when any action
under this Section 14.1.B is taken.

 

C.  Notwithstanding
Section 14.1.A and 14.1.B hereof, this Agreement shall not be amended without
the Consent of each Partner adversely affected if such amendment would (i)
convert a Limited Partner’s interest in the Partnership into a General Partner
Interest; (ii) modify the limited liability of a Limited Partner in a manner
adverse to such Limited Partner; (iii) alter rights of the Partner to receive
distributions pursuant to Article 5 or Article 13, or the allocations specified
in Article 6 (except as permitted pursuant to Section 4.2 and Section 14.1.B(3)
hereof); (iv) alter or modify the Redemption Right and REIT Shares Amount as set
forth in Section 8.6, and the related definitions, in a manner adverse to such
Partner; (v) cause the termination of the Partnership prior to the time set
forth in Sections 2.5 or 13.1; or (vi) amend this Section 14.1.C. Further, no
amendment may alter the restrictions on the General Partner’s authority set
forth in Section 7.3.B without the Consent specified in that
section.

 

D.  Notwithstanding
Section 14.1.A or Section 14.1.B hereof, the General Partner shall not amend
Sections 4.2.A, 7.5, 7.6, 11.2 or 14.2 without the Consent of Limited Partners
holding a majority of the Percentage Interests of the Limited Partners,
excluding Limited Partner Interests held by the General Partner.

 

Section
14.2.  Meetings
of the Partners

 

A.  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
(other than the Company) holding twenty percent (20%) or more of the Partnership
Interests. The request shall state the nature of the business to be transacted.
Notice of any such meeting shall be given to all Partners not less than seven
(7) days nor more than thirty (30) days prior to the date of such meeting.
Partners may vote in person or by proxy at such meeting. Whenever the vote or
Consent of the Partners is permitted or required under this Agreement, such vote
or Consent may be given at a meeting of the Partners or may be given in
accordance with the procedure prescribed in Section 14.1.A hereof. Except as
otherwise expressly provided in this Agreement, the Consent of holders of a
majority of the Percentage Interests held by Limited Partners (including Limited
Partnership Interests held by the Company) shall control.

 

B.  Any
action required or permitted to be taken at a meeting of the Partners may be
taken without a meeting if a written consent setting forth the action so taken
is signed by a majority of the Percentage Interests of the Partners (or such
other percentage as is expressly required by this Agreement). Such consent may
be in one instrument or in several instruments, and shall have the same force
and effect as a vote of a majority of the Percentage Interests of the Partners
(or such other percentage as is expressly required by this Agreement). Such
consent shall be filed with the General Partner. An action so taken shall be
deemed to have been taken at a meeting held on the effective date so
certified.

 

C.  Each
Limited Partner may authorize any Person or Persons to act for him by proxy on
all matters in which a Limited Partner is entitled to participate, including
waiving notice of any meeting, or voting or participating at a meeting. Every
proxy must be signed by the Limited Partner or his attorney-in-fact. No proxy
shall be valid after the expiration of eleven (11) months from the date thereof
unless otherwise provided in the proxy. Every proxy shall be revocable at the
pleasure of the Limited Partner executing it, such revocation to be effective
upon the Partnership’s receipt of written notice of such revocation from the
Limited Partner executing such proxy.

 

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

 

ARTICLE
15.

 

GENERAL
PROVISIONS

 

Section
15.1.  Addresses
and Notice

 

Any
notice, demand, request or report required or permitted to be given or made to a
Partner or Assignee under this Agreement shall be in writing and shall be deemed
given or made when delivered in person or when sent by first class United States
mail or by other means of written communication to the Partner or Assignee at
the address set forth in Exhibit A or such other address of which the Partner
shall notify the General Partner in writing.

 

Section
15.2.  Titles
and Captions

 

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

 

Section
15.3.  Pronouns
and Plurals

 

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

 

Section
15.4.  Further
Action

 

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

 

Section
15.5.  Binding
Effect

 

This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their heirs, executors, administrators, successors, legal representatives
and permitted assigns.

 

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Section
15.6.  Creditors

 

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

 

Section
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.

 

Section
15.8.  Counterparts

 

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

 

Section
15.9.  Applicable
Law

 

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

 

Section
15.10.  Invalidity
of Provisions

 

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

 

Section
15.11.  Entire
Agreement

 

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

 

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

 

GENERAL
PARTNER:

 

PSLT GP,
LLC

 

By:
Provident Senior Living Trust, its sole member

 

By:
 /s/
Darryl W. Copeland, Jr.  

Name:
Darryl W. Copeland, Jr.

Title:
CEO and President

 

[SEAL]

 

 

LIMITED
PARTNER:

 

Provident
Senior Living Trust

 

By:
 /s/
Darryl W. Copeland, Jr.  

Name:
Darryl W. Copeland, Jr.

Title:
CEO and President

 

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EXHIBIT A

 

PARTNERS’
CONTRIBUTIONS AND PARTNERSHIP INTERESTS

	
       

      Name
      and Address

        
      of Partner   

       
	
       

      Cash

      Contribution

       
	
       

      Agreed
      Value of

      Contributed
      Property

       
	
       

      Total

      Contribution

       
	
       

      Partnership

        
      Units    

       
	
       

      Percentage

      Interest
      

       

	
      General
      Partner
	 	 	 	 	 
	
      PSLT GP,
      LLC
	 	 	 	 	
      [1%
      general partner]

	
      Limited
      Partners
	 	 	 	 	 
	
      Provident
      Senior Living Trust
	 	 	 	 	 

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EXHIBIT B

 

CAPITAL
ACCOUNT MAINTENANCE

 

1.  Capital
Accounts of the Partners

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(6)  Notwithstanding
any other provision of this Section 1.B hereof, any items that are specially
allocated pursuant to Exhibit C or
Section 6.1.C of the Agreement shall not be taken into account for purposes of
computing Net Income or Net Loss.

 

The
amounts of the items of Partnership income, gain, loss or deduction available to
be specially allocated pursuant to Exhibit C or
Section 6.1.C of the Agreement shall be determined by applying rules analogous
to those set forth in Sections 1.B(1) through 1.B(5) above.

 

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

 

(1)  Such
adjustments shall be made as of the following times: (a) immediately prior to
the acquisition of an additional interest in the Partnership by any new or
existing Partner in exchange for more than a de minimis Capital Contribution;
(b) immediately prior to the distribution by the Partnership to a Partner of
more than a de minimis amount of property as consideration for an interest in
the Partnership; (c) in connection with the grant of an interest (including LTIP
Units) in the Partnership (other than a de minimis interest) on or after May 6,
2004, 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 being a partner; and
(d) immediately prior to the liquidation of the Partnership within the meaning
of Regulations Section 1.704-1(b)(2)(ii)(g), provided, however, that adjustments
pursuant to clauses (a), (b) and (c) above shall be made only if the General
Partner determines that such adjustments are necessary or appropriate to reflect
the relative economic interests of the Partners in the Partnership.

 

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

 

(3)  The
Carrying Value of Partnership assets shall be increased (or decreased) to
reflect any adjustments to the adjusted basis of such assets pursuant to Code
Section 734(b) or Code Section 743(b), but only to the extent that such
adjustments are taken into account in determining Capital Accounts pursuant to
Regulations Section 1.704-1(b)(2)(iv)(m) and Section 1.B(1) hereof or Section
1.F. of Exhibit C;
provided, however, that Carrying Values shall not be adjusted pursuant to this
Section 1.D(4) to the extent that an adjustment pursuant to Section 1.D(2) is
required in connection with a transaction that would otherwise result in an
adjustment pursuant to this Section 1.D(4).

 

 

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(4)  The
Carrying Value of Partnership assets shall be increased (or decreased) to
reflect any adjustments to the adjusted basis of such assets pursuant to Code
Section 734(b) or Code Section 743(b), but only to the extent that such
adjustments are taken into account in determining Capital Accounts pursuant to
Regulations Section 1.704-1(b)(2)(iv)(m) and Section 1.B(1) hereof or Section
1.F. of Exhibit C;
provided, however, that Carrying Values shall not be adjusted pursuant to this
Section 1.D(4) to the extent that an adjustment pursuant to Section 1.D(2) is
required in connection with a transaction that would otherwise result in an
adjustment pursuant to this Section 1.D(4).

 

(5)  In
determining Unrealized Gain or Unrealized Loss for purposes of this Exhibit B, the
aggregate cash amount and fair market value of all Partnership assets (including
cash or cash equivalents) shall be determined by the General Partner using such
reasonable method of valuation as it may adopt, or in the case of a liquidating
distribution pursuant to Article 13 of the Agreement, shall be determined and
allocated by the Liquidator using such reasonable methods of valuation as it may
adopt. The General Partner, or the Liquidator, as the case may be, shall
allocate such aggregate value among the assets of the Partnership (in such
manner as it determines in its sole and absolute discretion to arrive at a fair
market value for individual properties).

 

If the
Carrying Value of an asset has been determined or adjusted pursuant to Section
1.B(2) or Section 1.B(4), such Carrying Value shall thereafter be adjusted by
the Depreciation taken into account with respect to such asset, for purposes of
computing Net Income and Net Loss.

 

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

 

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2.  No
Interest

 

No
interest shall be paid by the Partnership on Capital Contributions or on
balances in Partners’ Capital Accounts.

 

3.  No
Withdrawal

 

No
Partner shall be entitled to withdraw any part of his Capital Contribution or
his Capital Account or to receive any distribution from the Partnership, except
as provided in Articles 4, 5, 7 and 13 of the Agreement.

 

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EXHIBIT C

 

SPECIAL
ALLOCATION RULES

 

1.  Special
Allocation Rules

 

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

 

A.  Minimum
Gain Chargeback.
Notwithstanding the provisions of Section 6.1 of the Agreement or any other
provisions of this Exhibit C, if
there is a net decrease in Partnership Minimum Gain during any Partnership
taxable year, then, subject to the exceptions set forth in Regulations Sections
1.704-2(f)(2)-(5), each Partner shall be specially allocated items of
Partnership income and gain for such year (and, if necessary, subsequent years)
in an amount equal to such Partner’s share of the net decrease in Partnership
Minimum Gain, as determined under Regulations Section 1.704-2(g). Allocations
pursuant to the previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Partner pursuant thereto. The items to
be so allocated shall be determined in accordance with Regulations Section
1.704-2(f)(6). This Section 1.A is intended to comply with the minimum gain
chargeback requirements in Regulations Section 1.704-2(f) and shall be
interpreted consistently therewith. Solely for purposes of this Section 1.A,
each Partner’s Adjusted Capital Account Deficit shall be determined prior to any
other allocations pursuant to Section 6.1 of Partner Minimum Gain during such
Partnership taxable year.

 

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

 

C.  Qualified
Income Offset. In the
event any Partner unexpectedly receives any adjustments, allocations or
distributions described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), and after giving effect to
the allocations required under Sections 1.A and 1.B hereof such Partner has an
Adjusted Capital Account Deficit, items of Partnership income and gain
(consisting of a pro rata portion of each item of Partnership income, including
gross income and gain for the Partnership taxable year) shall be specially
allocated to such Partner in an amount and manner sufficient to eliminate, to
the extent required by the Regulations, its Adjusted Capital Account Deficit
created by such adjustments, allocations or distributions as quickly as
possible. This Section 1.C is intended to constitute a qualified income offset
under Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted
consistently therewith.

 

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

 

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

 

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

 

G.  Curative
Allocations. The
allocations set forth in Section 1.A through 1.F of this Exhibit C (the
“Regulatory Allocations”) are intended to comply with certain requirements of
the Regulations under Section 704(b) of the Code. The Regulatory Allocations may
not be consistent with the manner in which the Partners intend to divide
Partnership distributions. Accordingly, the General Partner is hereby authorized
to divide other allocations of income, gain, deduction and loss among the
Partners so as to prevent the Regulatory Allocations from distorting the manner
in which Partnership distributions will be divided among the Partners. In
general, the Partners anticipate that, if necessary, this will be accomplished
by specially allocating other items of income, gain, loss and deduction among
the Partners so that the net amount of the Regulatory Allocations and such
special allocations to each person is zero. However, the General Partner will
have discretion to accomplish this result in any reasonable manner; provided,
however, that no allocation pursuant to this Section 1.G shall cause the
Partnership to fail to comply with the requirements of Regulations Sections
1.704-1(b)(2)(ii)(d), -2(e) or -2(i).

 

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2.  Allocations
for Tax Purposes

 

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

 

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

 

	 	
       (1)
	
       (a)
	In
      the case of a Contributed Property, such items attributable thereto shall
      be allocated among the Partners, consistent with the principles of Section
      704(c) of the Code and the Regulations thereunder, and with the procedures
      and methods described in Section 10.2 of the Agreement, to take into
      account the variation between the 704(c) Value of such property and its
      adjusted basis at the time of contribution; and
	 	 	 	 
	 	 	 (b)	any
      item of Residual Gain or Residual Loss attributable to a Contributed
      Property shall be allocated among the Partners in the same manner as its
      correlative item of “book” gain or loss is allocated pursuant to Section
      6.1 of the Agreement and Section 1 of this Exhibit C.
	 	 	 	 
	 	 (2)	 (a)	 In the case of an Adjusted Property,
      such items shall
	 	 	 	 
	 	 	 	 (1)    first,
      be allocated among the Partners in a manner consistent with the principles
      of Section 704(c) of the Code and the Regulations thereunder to take into
      account the Unrealized Gain or Unrealized Loss attributable to such
      property and the allocations thereof pursuant to Exhibit
      B; and
	 	 	 	 
	 	 	 	 (2)    second, in the
      event such property was originally a Contributed Property, be allocated
      among the Partners in a manner consistent with Section 2.B(1) of this
      Exhibit C;
      and
	 	 	 	 
	 	 	 (b)	any
      item of Residual Gain or Residual Loss attributable to and Adjusted
      Property shall be allocated among the Partners in the same manner its
      correlative item of “book” gain or loss is allocated pursuant to Section
      6.1 of the Agreement and Section 1 of this Exhibit C.

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

 

 

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3.  No
Withdrawal

 

No
Partner shall be entitled to withdraw any part of his Capital Contribution or
his Capital Account or to receive any distribution from the Partnership, except
as provided in Articles 4, 5, 8 and 13 of the Agreement.

 

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EXHIBIT D

 

NOTICE
OF REDEMPTION

 

The
undersigned Limited Partner hereby irrevocably requests PSLT OP, L.P., a
Delaware limited partnership (the “Partnership”) to redeem ______________
Partnership Units in the Partnership in accordance with the terms of the Amended
and Restated Agreement of Limited Partnership of the Partnership and the
Redemption Right referred to therein; and the undersigned Limited Partnership
irrevocably (i) surrenders such Partnership Units and all right, title and
interest therein; and (ii) directs that the Cash Amount or REIT Shares Amount
(as determined by the Company) deliverable upon exercise of the Redemption Right
be delivered to the address specified below, and if REIT Shares are to be
delivered, such REIT Shares be registered or placed in the name(s) and at the
address(es) specified below. The undersigned hereby, represents, warrants, and
certifies that the undersigned (a) has marketable and unencumbered title to such
Limited Partnership Units, free and clear of the rights or interests of any
other person or entity; (b) has the full right, power, and authority to request
such redemption and surrender such Partnership Units as provided herein; and (c)
has obtained the consent or approval of all person or entities, if any, having
the right to consent or approve such redemption and surrender of Units. The
undersigned Limited Partner further agrees that, in the event that any state or
local property tax is payable as a result of the transfer of its Partnership
Units to the Partnership or the General Partner, the undersigned Limited Partner
shall assume and pay such transfer tax.

 

Dated:
___________________________

 

Name of
Limited Partner: __________________________________

Please
Print

 

__________________________________

(Signature
of Limited Partner)

 

__________________________________

(Street
Address)

 

__________________________________

(City)
(State) (Zip
Code)

 

Signature
Guaranteed by:

 

__________________________________

 

If REIT
Shares are to be issued, issue to:

 

Name:
____________________________

 

Please
insert social security or identifying number: _________________

E-1

Table of Contents

EXHIBIT E

 

SCHEDULE
OF PARTNERS’ OWNERSHIP

 

WITH
RESPECT TO TENANTS

 

NONE

 

 

 

2

Table of Contents

EXHIBIT F

 

CONSTRUCTIVE
OWNERSHIP DEFINITION

 

The term
“Constructively Owns” means ownership determined through the application of the
constructive ownership rules of Section 318 of the Code, as modified by Section
856(d)(5) of the Code. Generally, as of the date first set forth above, these
rules provide the following:

 

a.
an
individual is considered as owning the Ownership Interest that is owned,
actually or constructively, by or for his spouse, his children, his
grandchildren, and his parents;

 

b. an
Ownership Interest that is owned, actually or constructively, by or for a
partnership, limited liability company or estate is considered as owned
proportionately by its partners or beneficiaries;

 

c.
an
Ownership Interest that is owned, actually or constructively, by or for a trust
is considered as owned by its beneficiaries in proportion to the actuarial
interest of such beneficiaries (provided, however, that in the case of a
“grantor trust” the Ownership Interest will be considered as owned by the
grantors);

 

d. if ten
(10) percent or more in value of the stock in a corporation is owned, actually
or constructively, by or for any person, such person shall be considered as
owning the Ownership Interest that is owned, actually or constructively, by or
for such corporation in that proportion which the value of the stock which such
person so owns bears to the value of all the stock in such
corporation;

 

e. an
Ownership Interest that is owned, actually or constructively, by or for a
partner or member which actually or constructively owns a 25% or greater capital
interest or profits interest in a partnership or limited liability company, or
by or to or for a beneficiary of an estate or trust shall be considered as owned
by the partnership, limited liability company, estate, or trust (or, in the case
of a grantor trust, the grantors);

 

f.
if ten
(10) percent or more in value of the stock in a corporation is owned, actually
or constructively, by or for any person, such corporation shall be considered as
owning the Ownership Interest that is owned, actually or constructively, by or
for such person;

 

g.
if any
person has an option to acquire an Ownership Interest (including an option to
acquire an option or any one of a series of such options), such Ownership
Interest shall be considered as owned by such person; 

 

h. an
Ownership Interest that is constructively owned by a person by reason of the
application of the rules described in paragraphs (a) through (g) above shall,
for purposes of applying paragraphs (a) through (g), be considered as actually
owned by such person provided, however, that (i) an Ownership Interest
constructively owned by an individual by reason of paragraph (a) shall not be
considered as owned by him for purposes of again applying paragraph (a) in order
to make another the constructive owner of such Ownership Interest, (ii) an
Ownership Interest constructively owned by a partnership, estate, trust, or
corporation by reason of the application of paragraphs (e) or (f) shall not be
considered as owned by it for purposes of applying paragraphs (b), (c), or (d)
in order to make another the constructive owner of such Ownership Interest,
(iii) if an Ownership Interest may be considered as owned by an individual under
paragraphs (a) or (g), it shall be considered as owned by him under paragraph
(g), and (iv) for purposes of the above described rules, an S corporation shall
be treated as a partnership and any stockholder of the S corporation shall be
treated as a partner of such partnership except that this rule shall not apply
for purposes of determining whether stock in the S corporation is constructively
owned by any person.

 

3

Table of Contents

 

i. For
purposes of the above summary of the constructive ownership rules, the term
“Ownership Interest” means the ownership of stock with respect to a corporation
and, with respect to any other type of entity, the ownership of an interest in
either its assets or net profits.

 

 

4

Table of Contents

EXHIBIT G

 

NOTICE
OF CONVERSION 

The
undersigned LTIP Unitholder hereby irrevocably (i) elects to convert the number
of LTIP Units in PSLT OP, L.P. (the “Partnership”) set forth below into
Partnership Units in accordance with the terms of the Amended and Restated
Agreement of Limited Partnership of the Partnership, as amended; and (ii)
directs that any cash in lieu of Partnership Units that may be deliverable upon
such conversion be delivered to the address specified below. The undersigned
hereby represents, warrants, and certifies that the undersigned (a) has title to
such LTIP Units, free and clear of the rights or interests of any other person
or entity other than the Partnership; (b) has the full right, power, and
authority to cause the conversion of such LTIP Units as provided herein; and (c)
has obtained the consent or approval of all persons or entities, if any, having
the right to consent or approve such conversion. 

Name of
LTIP Unitholder: _____________________________________________ 

            (Please
Print: Exact Name as Registered with Partnership) 

Number of
LTIP Units to be Converted: ___________________________________      

Date of
this Notice: __________________________________________________

 

        

_________________________________________________________

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

_________________________________________________________________

(Street
Address) ---------------------------- (City) (State) (Zip Code) 

 

Signature
Guaranteed by:______________________________________________        

 

 

 

5

Table of Contents

EXHIBIT H

 

NOTICE
OF FORCED CONVERSION 

PSLT OP,
L.P. (the “Partnership”) hereby irrevocably (i) elects to cause the number of
LTIP Units held by the LTIP Unitholder set forth below to be converted into
Partnership Units in accordance with the terms of the Amended and Restated
Agreement of Limited Partnership of the Partnership, as amended. 

Name of
LTIP Unitholder: ________________________________________________

            (Please
Print: Exact Name as Registered with Partnership)

Number of
LTIP Units to be Converted: _____________________________________       

Date of
this Notice: ____________________________________________________          

 

6

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