Document:

Exhibit
10.1

 

AMENDED
AND RESTATED

ADVISORY AGREEMENT

 

THIS AMENDED
AND RESTATED ADVISORY AGREEMENT is
entered into as of January 1, 2006, by and between Senior Housing
Properties Trust, a Maryland real estate investment trust (the “Company”), Reit
Management & Research LLC, a Delaware limited liability company,
successor in interest to Reit Management & Research, Inc. (the “Advisor”),
and, solely with respect to certain non-competition covenants in Section 14
of this Agreement, Barry M. Portnoy, Gerard M. Martin and Adam D. Portnoy.

 

WHEREAS, the
Company and the Advisor are parties to an Advisory Agreement, dated as of October 12,
1999 (as amended, the “Original Agreement”), and Barry M. Portnoy and Gerard M.
Martin are parties to the Original Agreement solely with respect to certain
covenants in Section 14 thereof;

 

WHEREAS, the
Company, through its Independent Trustees (as hereinafter defined), has
requested that the Original Agreement be amended to add Adam D. Portnoy as a
party thereto solely with respect to Section 14 of the Original Agreement
with respect to certain non-competition covenants, and the Company and Adam D.
Portnoy have agreed to that amendment; and

 

WHEREAS, in
connection with that amendment, the parties hereto desire to restate the Original
Agreement, as so amended;

 

NOW,
THEREFORE, in consideration of the mutual agreements herein set forth, the
parties hereto agree that the Original Agreement is hereby amended and restated
to read in its entirety as follows:

 

1.             General
Duties of the Advisor. The Advisor shall use its best efforts to present to
the Company a continuing and suitable investment program consistent with the
investment policies and objectives of the Company. Subject to the supervision
of the Company’s Board of Trustees (the “Trustees”) and under their direction,
and consistent with the provisions of the Company’s Declaration of Trust, the
Advisor shall:

 

(a)           serve as the Company’s
investment advisor, with its obligations to include providing research and
economic and statistical data in connection with the Company’s investments and
recommending changes in the Company’s investment policies, when appropriate;

 

(b)           investigate and
evaluate investment, financing and refinancing opportunities and make
recommendations concerning these opportunities to the Trustees;

 

(c)           manage the Company’s
short-term investments, including the acquisition and sale of money market
instruments in accordance with the Company’s policies;

 

(d)           administer the
day-to-day operations of the Company;

 

 

(e)           investigate, negotiate
and enter into appropriate contracts on behalf of the Company with individuals,
corporations and other entities (i) for the purchase, lease or servicing
of real estate and related interests and otherwise in furtherance of the
investment activities of the Company and (ii) for the financing and
refinancing of investments and otherwise in furtherance of the financing
activities of the Company;

 

(f)            upon request of the
Trustees, act as attorney-in-fact or agent in acquiring and disposing of investments
and funds of the Company and in handling, prosecuting and settling any claims
of the Company;

 

(g)           obtain for the Company,
when appropriate, the services of property managers or management firms to perform customary
property management services with regard to the real estate properties owned by
or in the possession of the Company, and perform such supervisory or
monitoring services on behalf of the Company with respect to the activities of
those property managers or management firms as would be performed by a prudent
owner, including but not limited to supervising the activities of property
managers or management firms, visiting the properties, participating in
property management budgeting, reviewing the accounting of property income and
expenses, reporting on the financial status of the properties and reviewing and
approving marketing plans, but excluding the actual on-site property management
functions performed by said property managers or management firms;

 

(h)           obtain for the Company
other services as may be required for other activities relating to the
investment portfolio of the Company;

 

(i)            administer the
day-to-day bookkeeping and accounting functions as are required for the proper
management of the assets of the Company, contract for audits and prepare or
cause to be prepared reports as may be required by any governmental
authority in connection with the ordinary conduct of the Company’s business,
including without limitation, periodic reports, returns or statements required
under the Securities Exchange Act of 1934, as amended, the Internal Revenue
Code of 1986, as amended (as in effect from time to time, the “Internal Revenue
Code”), the securities and tax statutes of any jurisdiction in which the
Company is obligated to file such reports, or the rules and regulations
promulgated under any of the foregoing;

 

(j)            provide office space,
office equipment and the use of accounting or computing equipment when
required, and provide personnel necessary for the performance of the foregoing
services; and

 

(k)           from time to time, or
at any time requested by the Trustees, make reports to the Trustees of its
performance of the foregoing services to the Company.

 

In performing
its services under this Agreement, the Advisor may utilize facilities,
personnel and support services of various of its Affiliates (as defined below).
The Advisor shall be responsible for paying such Affiliates for their personnel
and support services and facilities out of its own funds. Notwithstanding the
above, the Company may request, and will pay for the direct costs of,
services provided by Affiliates of the Advisor provided that such request is

 

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approved by a
majority vote of the Trustees who are not Affiliates of the Advisor (the “Independent
Trustees”).

 

As used in
this Agreement, the term “Affiliate” means, as to the Advisor, (i) any
other Person (as defined below) directly or indirectly controlling, controlled
by or under common control with the Advisor, (ii) any other Person that
owns beneficially, directly or indirectly, five percent (5%) or more of the
outstanding capital stock, shares or equity interests of the Advisor, or (iii) any
officer, director, trustee, employee or general partner of the Advisor or of
any Person controlling, controlled by or under common control with the Advisor.
The term “Person” means and includes individuals, corporations, limited
partnerships, general partnerships, limited liability companies, joint stock
companies or associations, joint ventures, associations, companies, trusts,
banks, trust companies, land trusts, business trusts and other entities.

 

In performing
its services hereunder with respect to the Company, the Advisor shall adhere
to, and shall require its officers and employees in the course of providing
such services to the Company to adhere to, the Company’s Code of Business
Conduct and Ethics, as in effect from time to time. In addition, the Advisor
shall make available to its officers and employees providing such services to
the Company the procedures for the receipt, retention and treatment of
complaints regarding accounting, internal accounting controls or auditing
matters relating to the Company and for the confidential, anonymous submission
by such officers and employees of concerns regarding questionable accounting or
auditing matters relating to the Company, as set forth in the Company’s
Procedures Regarding Concerns or Complaints about Accounting, Internal
Accounting Controls or Auditing Matters, as in effect from time to time.

 

2.             Bank
Accounts. The Advisor shall establish and maintain one or more bank
accounts in its own name or in the name of the Company, and shall collect and
deposit into the account or accounts and disburse therefrom any monies on
behalf of the Company; provided that no funds in any account shall be
commingled with any funds of the Advisor or any other Person. The Advisor shall
from time to time render an appropriate accounting of collections and payments
to the Trustees and to the auditors of the Company.

 

3.             Records.
The Advisor shall maintain appropriate books of account and records relating to
services performed pursuant to this Agreement, which books of account and
records shall be available for inspection by representatives of the Company
upon reasonable notice during ordinary business hours.

 

4.             Information
Furnished Advisor. The Trustees shall at all times keep the Advisor fully
informed with regard to the investment policies of the Company, the
capitalization policy of the Company, and generally the Trustees’ then-current
intentions as to the future of the Company. In particular, the Company shall
notify the Advisor promptly of its intention to sell or otherwise dispose of
any of the Company’s investments or to make any new investment. The Company
shall furnish the Advisor with a certified copy of all financial statements, a
signed copy of each report prepared by independent certified public accountants
and other information with regard to its affairs as the Advisor may from
time to time reasonably request. The Company shall retain legal counsel and
accountants to provide legal and accounting advice and services as the Advisor
or the Trustees shall deem necessary or appropriate to adequately

 

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perform the
functions of the Company, and shall have legal or accounting opinions and
advice as the Advisor shall reasonably request.

 

5.             REIT
Qualification. Anything else in this Agreement to the contrary
notwithstanding, the Advisor shall refrain from any action (including, without
limitation, the furnishing or rendering of services to tenants of property or
managing real property) which, in its judgment made in good faith, or in the
judgment of the Trustees as transmitted to the Advisor in writing, would (a) adversely
affect the status of the Company as a real estate investment trust as defined
and limited in the Internal Revenue Code or the regulations and rulings
thereunder or which would make the Company subject to the Investment Company
Act of 1940, as amended, or (b) violate any law, rule, regulation or
statement of policy or any governmental body or agency having jurisdiction over
the Company or over its securities, or (c) otherwise not be permitted by
the Declaration of Trust or Bylaws of the Company, as in effect from time to
time, except if the action shall be ordered by the Trustees, in which event the
Advisor shall promptly notify the Trustees of the Advisor’s judgment that the
action would adversely affect the Company’s status or violate any law, rule or
regulation or the Declaration of Trust or Bylaws of the Company and shall
refrain from taking the action pending further clarification or instructions
from the Trustees. In addition, the Advisor shall take affirmative steps which,
in its judgment made in good faith, or in the judgment of the Trustees as
transmitted to the Advisor in writing, would prevent or cure any action
described in (a), (b) or (c) above.

 

6.             Self-Dealing.
Neither the Advisor nor any Affiliate of the Advisor shall, directly or indirectly,
sell any property or assets to the Company or purchase any property or assets
from the Company, lease any property from the Company or borrow any money from
the Company, except as approved by a majority of the Independent Trustees. In
addition, except as otherwise provided in Sections 1, 9 or 10 hereof, or except
as approved by a majority of the Independent Trustees, neither the Advisor nor
any Affiliate of the Advisor shall receive any commission or other
remuneration, directly or indirectly, in connection with the activities of the
Company or any joint venture or partnership in which the Company is a party. The
foregoing prohibitions shall not apply to the leases affecting three nursing
homes between the Company and an Affiliate of the Advisor, which leases were
entered into by the Company’s predecessor in interest prior to the date of this
Agreement.

 

7.             No
Partnership or Joint Venture. The Company and the Advisor are not partners
or joint venturers with each other and neither the terms of this Agreement nor
the fact that the Company and the Advisor have joint interests in any one or
more investments shall be construed so as to make them such partners or joint
venturers or impose any liability on either of them.

 

8.             Fidelity
Bond. The Advisor shall not be required to obtain or maintain a fidelity
bond in connection with the performance of its services hereunder.

 

9.             Compensation.
The Advisor shall be paid an advisory fee (the “Advisory Fee”) for the services
rendered by it to the Company pursuant to this Agreement. The Advisory Fee for
each full fiscal year of the Company shall equal the sum of one-half of one
percent (0.5%) of the Annual Average Transferred Assets (as defined below),
plus seven-tenths of one percent (0.7%) of the Annual Average Invested Capital
(as defined below) up to $250,000,000, plus one-half of one percent (0.5%) of
the Annual Average Invested Capital equal to or exceeding

 

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$250,000,000. The
Advisory Fee shall be prorated for any partial fiscal year of the Company
during the term of this Agreement. In addition, the Advisor shall be paid an
annual incentive fee (the “Incentive Fee”) for each fiscal year of the Company,
commencing with the Company’s fiscal year ending December 31, 2000,
consisting of a number of shares of the Company’s common shares of beneficial
interest (“Common Shares”) with an aggregate value (determined as provided
below) equal to fifteen percent (15%) of the product of (i) the weighted
average Common Shares of the Company outstanding on a diluted basis during such
fiscal year and (ii) the excess if any of FFO Per Share (as defined below)
for such fiscal year over the FFO Per Share for the preceding fiscal year;
provided however, in no event shall the Incentive Fee payable in respect of any
fiscal year exceed $.02 multiplied by the weighted average number of Common
Shares outstanding on a diluted basis during such fiscal year. (The Advisory
Fee and Incentive Fee are hereinafter collectively referred to as the “Fees”). No
Incentive Fee shall be payable for the Company’s fiscal year ending December 31,
1999.

 

For purposes
of this Agreement: “Annual Average Transferred Assets” of the Company, for any
fiscal year, means the daily weighted average during such fiscal year (or, in
the case of the Company’s fiscal year ending December 31, 1999, during the
period commencing with the date hereof and ending on December 31, 1999) of
the aggregate book value of the Transferred Assets (including capitalized
closing costs and costs which may be allocated to intangibles or are
unallocated), before depreciation, reserves for bad debts and other similar
noncash items. “Annual Average Invested Capital” of the Company, for any fiscal
year, means the daily weighted average during such fiscal year (or, in the case
of the Company’s fiscal year ending December 31, 1999, during the period
commencing with the date hereof and ending on December 31, 1999) of the
aggregate historical cost of the consolidated assets of the Company, excluding
the Transferred Assets, invested, directly or indirectly, in equity interests
in and loans secured by real estate and personal property owned in connection
with such real estate (including capitalized closing costs and costs which may be
allocated to intangibles or are unallocated), before depreciation, reserves for
bad debts and other similar noncash items. “FFO Per Share,” for any fiscal
year, means (i) the Company’s consolidated net income, computed in
accordance with generally accepted accounting principles, before gain or loss
on sale of properties and extraordinary items, depreciation and other non-cash
items, including the Company’s pro rata share of the funds from operations
(determined in accordance with this clause) for such fiscal year of (A) any
unconsolidated subsidiary and (B) any entity for which the Company
accounts by the equity method of accounting, divided by (ii) the weighted
average number of Common Shares outstanding on a diluted basis during such
fiscal year; and “Transferred Assets” means the assets owned by the Company and
its subsidiaries on the date hereof. FFO Per Share for the Company’s fiscal
year ending December 31, 1999 shall be calculated on a pro forma basis
adjusted as if the transactions described in the notes to the unaudited pro
forma consolidated financial statements of the Company contained in the Company’s
Registration Statement No. 333- 69703 filed with the Securities and
Exchange Commission (as amended through the date hereof) had occurred as of January 1,
1999.

 

The Advisory
Fee shall be computed and payable by the Company on a year to date basis within
thirty (30) days following the end of each fiscal month. These computations
shall be based upon the Company’s monthly or quarterly financial statements, as
the case may be, and shall be in reasonable detail. The Incentive Fee
shall be computed and payable by the Company within thirty (30) days following
the public availability of the Company’s annual audited

 

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financial
statements for each fiscal year. A copy of the computations shall promptly be
delivered to the Advisor accompanied by payment of the Fees shown thereon to be
due and payable.

 

The aggregate
Fees payable for each fiscal year shall be subject to adjustment as of the end
of each that year. On or before the 30th day after public availability of the
Company’s annual audited financial statements for each fiscal year, the Company
shall deliver to the Advisor an Officer’s Certificate (a “Certificate”)
reasonably acceptable to the Advisor and certified by an authorized officer of
the Company setting forth (i) the Annual Average Transferred Assets, the
Annual Average Invested Capital and FFO Per Share for the Company’s fiscal year
ended upon the immediately preceding December 31, and (ii) the
Company’s computation of the Fees payable for the fiscal year. The Certificate
shall be accompanied by an examination of the calculation of Annual Average
Invested Capital and FFO Per Share by the Company’s independent certified
public accountants.

 

If the
aggregate Fees payable for any fiscal year as shown in the Certificate exceed
the aggregate amounts previously paid by the Company, the Company shall pay the
deficit to the Advisor at the time of delivery of the Certificate.

 

If the aggregate
Fees payable for any fiscal year as shown in the Certificate are less than the
aggregate amounts previously paid by the Company, the Company shall specify in
the Certificate whether the Advisor should (i) refund to the Company an
amount equal to the difference or (ii) grant the Company a credit against
the Fees next coming due in the amount of the difference until that amount has
been fully paid or otherwise discharged.

 

Payment of the
Incentive Fee shall be made by issuance of Common Shares. The number of shares
to be issued in payment of the Incentive Fee shall be the whole number of
shares (disregarding any fraction) equal to the value of the Incentive Fee, as
provided above, divided by the average closing price of the Common Shares on
the New York Stock Exchange during the month before the end of the fiscal year
for which the computation is made.

 

10.           Additional
Services.

 

(a)           The Advisor shall
provide to the Company an internal audit function meeting applicable
requirements of the New York Stock Exchange and the Securities and Exchange
Commission and otherwise in scope approved by the Company’s Audit Committee
commencing as of October 1, 2003. As additional compensation payable
pursuant to Section 10 to the Advisor for such additional services, the
Company agrees to reimburse the Advisor, within 30 days of the receipt of the
invoice therefor, for a pro rata share (as agreed to by the Independent
Trustees from time to time) of the following costs of the Advisor:

 

(i)            employment
expenses of the Advisor’s internal audit manager and other employees of the
Advisor actively engaged in providing internal audit services, including but
not limited to salary, wages, payroll taxes and the cost of employee benefit
plans; and

 

(ii)           the
reasonable travel and other out-of-pocket expenses of the Advisor relating to
the activities of the Advisor’s internal audit manager and other of the Advisor’s
employees actively engaged in providing internal audit services and the

 

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reasonable third party expenses which the Advisor incurs in connection
with its provision of internal audit services.

 

(b)           If, and to the extent
that, the Company shall request the Advisor to render services on behalf of the
Company other than those required to be rendered by the Advisor in accordance
with the terms of this Agreement, those additional services shall be
compensated separately on terms to be agreed upon between the Advisor and the
Company from time to time. In addition, the Company may make awards to the
employees of the Advisor and others under the Company’s 1999 Incentive Share
Award Plan or any plan adopted by the Company from time to time in replacement
thereof.

 

11.           Expenses
of the Advisor. Without regard to the compensation received by the Advisor
from the Company pursuant to this Agreement, the Advisor shall bear the
following expenses incurred in connection with the performance of its duties
under this Agreement:

 

(a)           employment expenses of
the personnel employed by the Advisor, including but not limited to, salaries,
wages, payroll taxes and the cost of employee benefit plans;

 

(b)           fees and travel and
other expenses paid to directors, officers and employees of the Advisor, except
fees and travel and other expenses of persons who are Trustees or officers of
the Company incurred in their capacities as Trustees or officers of the
Company;

 

(c)           rent, telephone,
utilities, office furniture, equipment and machinery (including computers, to
the extent utilized) and other office expenses of the Advisor, except to the
extent those expenses may relate solely to an office maintained by the
Company separate from the office of the Advisor, if any; and

 

(d)           miscellaneous
administrative expenses incurred in supervising,  monitoring and inspecting real property and
other investments of the Company or relating to performance by the Advisor of
its obligations hereunder.

 

12.           Expenses
of the Company. Except as expressly otherwise provided in this Agreement,
the Company shall pay all its expenses not payable by the Advisor, and, without
limiting the generality of the foregoing, it is specifically agreed that the
following expenses of the Company shall be paid by the Company and shall not be
paid by the Advisor:

 

(a)           the cost of borrowed
money;

 

(b)           taxes on income and
taxes and assessments on real property, if any, and all other taxes applicable
to the Company;

 

(c)           legal, auditing,
accounting, underwriting, brokerage, listing, 
reporting,  registration and other
fees, and printing, engraving and other expenses and taxes incurred in
connection with the issuance, distribution, transfer, trading, registration and
stock exchange listing of the Company’s securities, including transfer agent’s,
registrar’s and indenture trustee’s fees and charges;

 

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(d)           expenses of organizing,
restructuring, reorganizing or terminating the Company, or of revising,
amending, converting or modifying the Company’s organizational documents;

 

(e)           fees and travel and
other expenses paid to Trustees and officers of the Company in their capacities
as such (but not in their capacities as officers or employees of the Advisor)
and fees and travel and other expenses paid to advisors, contractors, mortgage
servicers, consultants, and other agents and independent contractors employed
by or on behalf of the Company;

 

(f)            expenses directly
connected with the acquisition, disposition or ownership of real estate
interests or other property (including the costs of foreclosure,  insurance premiums,  legal services, brokerage and sales
commissions,  maintenance,  repair, improvement and local management of
property), other than expenses with respect thereto of employees of the Advisor,
to the extent that those expenses are to be borne by the Advisor pursuant to Section 11
above;

 

(g)           all insurance costs
incurred in connection with the Company (including officer and trustee
liability insurance) or in connection with any officer and trustee indemnity
agreement to which the Company is a party;

 

(h)           expenses connected with
payments of dividends or interest or contributions in cash or any other form made
or caused to be made by the Trustees to holders of securities of the Company;

 

(i)            all expenses connected
with communications to holders of securities of the Company and other
bookkeeping and clerical work necessary to maintaining relations with holders
of securities, including the cost of printing and mailing certificates for
securities and proxy solicitation materials and reports to holders of the
Company’s securities;

 

(j)            legal, accounting and
auditing fees and expenses; and

 

(k)           expenses relating to
any office or office facilities maintained by the Company separate from the
office of the Advisor.

 

13.           Limits
of Advisor Responsibility. The Advisor assumes no responsibility other than
to render the services described herein in good faith and shall not be
responsible for any action of the Trustees in following or declining to follow
any advice or recommendation of the Advisor. The Advisor, its shareholders,
directors, officers, employees, agents and Affiliates will not be liable to the
Company, its shareholders, or others, except by reason of acts constituting bad
faith, willful or wanton misconduct or gross negligence. The Company shall
reimburse, indemnify and hold harmless the Advisor, its shareholders,
directors, officers and employees, agents and Affiliates for and from any and
all expenses, losses, damages, liabilities, demands, charges and claims of any
nature whatsoever in respect of or arising from any acts or omissions of the
Advisor undertaken in good faith and in accordance with the standard set forth
above pursuant to the authority granted to it by this Agreement.

 

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14.           Other
Activities of the Advisor and its Stockholders. Nothing herein shall
prevent the Advisor from engaging in other activities or businesses or from
acting as advisor to any other Person (including other real estate investment
trusts) even though that Person has investment policies and objectives similar
to those of the Company; provided, however, that none of the Advisor, Barry M.
Portnoy, Gerard M. Martin nor Adam D. Portnoy shall provide advisory services
to, make competitive direct investment in or, in the case of Barry M. Portnoy,
Gerard M. Martin and Adam D. Portnoy, serve as a director or officer of, any
other real estate investment trust which is principally engaged in the business
of ownership of senior apartments, congregate communities, assisted living or
nursing home properties without the consent of a majority of the Independent
Trustees. The Advisor shall be free from any obligation to present to the
Company any particular investment opportunity which comes to the Advisor. In
addition, except as expressly provided herein, nothing herein shall prevent any
stockholder or Affiliate of the Advisor from engaging in any other business or
from rendering services of any kind to any other corporation, partnership or
other entity (including competitive business activities). Without limiting the
foregoing provisions, the Advisor agrees, upon the request of any Trustee of
the Company, to disclose certain investment information concerning the Advisor
or certain of its Affiliates, provided, however, that the disclosure shall be
required only if it does not constitute a breach of any fiduciary duty or
obligation of Advisor.

 

Directors,
officers, employees and agents of the Advisor or of its Affiliates may serve
as Trustees, officers, employees, agents, nominees or signatories of the
Company. When executing documents or otherwise acting in capacities for the
Company, these persons shall use their respective titles in the Company.

 

15.           Term,
Termination. The initial term of the Original Agreement is now scheduled to
expire December 31, 2006. The term of this Agreement is renewable
periodically thereafter by the Company, if a majority of the Independent
Trustees determine that the Advisor’s performance has been satisfactory.

 

Paragraph 18
hereof shall govern the rights, liabilities and obligations of the parties upon
termination of this Agreement; and, except as provided in paragraph 18, a
termination shall be without further liability of either party to the other
than for breach or violation of this Agreement prior to termination.

 

16.           Assignment.
The Company may terminate this Agreement at any time in the event of its
assignment by the Advisor except an assignment to a corporation, partnership,
trust or other successor entity which may take over the property and carry
on the affairs of the Advisor; provided that, following a permitted assignment,
the persons who controlled the operations of the Advisor immediately prior to
the assignment shall control the operation of the successor, including the
performance of its duties under this Agreement, and this successor shall be
bound by the same restrictions by which the Advisor was bound prior to such
assignment. A permitted assignment or any other assignment of this Agreement by
the Advisor shall bind the assignee hereunder in the same manner as the Advisor
is bound hereunder. This Agreement shall not be assignable by the Company
without the prior written consent of the Advisor, except in the case of any
assignment by the Company to a trust, corporation, partnership or other entity
which is the successor to the Company, in which case the successor shall be
bound hereby and by the

 

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terms of said
assignment in the same manner and to the same extent as the Company is bound
hereby.

 

17.           Default,
Bankruptcy, Etc. of the Advisor. At the sole option of the Company, this
Agreement may be terminated immediately by written notice from the
Trustees to the Advisor if any of the following events shall have occurred:

 

(a)           the Advisor shall have
violated any provision of this Agreement and, after written notice from the
Trustees of the violation, shall have failed to cure the default within thirty
(30) days;

 

(b)           a petition shall have
been filed against the Advisor for an involuntary proceeding under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, and that petition shall not have been dismissed within ninety (90) days
of filing; or a court having jurisdiction shall have appointed a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official of
the Advisor for any substantial portion of its property, or ordered the winding
up or liquidation of its affairs, and that appointment or order shall not have
been rescinded or vacated within ninety (90) days of the appointment or order;
or

 

(c)           the Advisor shall have
commenced a voluntary proceeding under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, or shall have made any general
assignment for the benefit of creditors, or shall have failed generally to pay
its debts as they became due.

 

The Advisor
agrees that, if any of the events specified in paragraphs (b) or (c) of
this Section 17 occur, it will give written notice thereof to the Trustees
within seven (7) days following the occurrence of the event.

 

18.           Action
Upon Termination. From and after the effective date of any termination of
this Agreement pursuant to Sections 15, 16 or 17 hereof, the Advisor shall be
entitled to no compensation for services rendered hereunder for the remainder
of the then-current term of this Agreement but shall be paid, on a pro rata
basis, all compensation due for services performed prior to termination,
including, without limitation, a pro rata portion of the then current year’s
Incentive Fee. Upon termination, the Advisor immediately shall:

 

(a)           pay over to the Company
all monies collected and held for the account of the Company by it pursuant to
this Agreement, after deducting therefrom any accrued and unpaid Fees
(including, without limitation, a pro rata portion of the then current year’s
Incentive Fee, and reimbursements for its expenses to which it is then
entitled);

 

(b)           deliver to the Trustees
a full and complete accounting, including a statement showing all sums
collected by it and a statement of all sums held by it for the period
commencing with the date following the date of its last accounting to the
Trustees; and

 

(c)           deliver to the Trustees
all property and documents of the Company then in its custody or possession.

 

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The amount of
Fees paid to the Advisor upon termination shall be subject to adjustment
pursuant to the following mechanism. On or before the 30th day after public
availability of the Company’s annual audited financial statements for the
fiscal year in which termination occurs, the Company shall deliver to the
Advisor a Certificate reasonably acceptable to the Advisor and certified by an
authorized officer of the Company setting forth (i) the Annual Average
Transferred Assets, the Annual Average Invested Capital and FFO Per Share for
the Company’s fiscal year ended upon the immediately preceding December 31,
and (ii) the Company’s computation of the Fees (including, without
limitation, a pro rata portion of the then current year’s Incentive Fee)
payable upon the date of termination. The Certificate shall be accompanied by a
review of the calculation of the Annual Average Transferred Assets, the Annual
Average Invested Capital and FFO Per Share by the Company’s independent
certified public accountants.

 

If the annual
Fees owed upon termination as shown in the Certificate exceed the Fees paid by
the Company upon termination, the Company shall include its check for the
deficit and deliver the same to the Advisor with the Certificate.

 

The Incentive
Fee for any partial fiscal year will be determined by multiplying the Incentive
Fee for such year (assuming this Agreement were in effect for the entire year)
by a fraction, the numerator of which is the number of days in the portion of
such year during which this Agreement was in effect, and the denominator of
which shall be 365.

 

If the annual
Fees owed upon termination as shown in the Certificate are less than the Fees
paid by the Company upon termination, the Advisor shall remit to the Company its
check in an amount equal to the difference.

 

19.           Trustee
Action. Wherever action on the part of the Trustees is contemplated by
this Agreement, action by a majority of the Trustees, including a majority of
the Independent Trustees, shall constitute the action provided for herein.

 

20.           Arbitration.
The Company and the Advisor agree that any and all disputes and disagreements
arising out of or relating to this Agreement, other than actions or claims for
injunctive relief or claims raised in actions or proceedings brought by third
parties, shall be resolved through negotiations or, if the dispute is not so
resolved, through binding arbitration conducted in Boston, Massachusetts under
the J.A.M.S./Endispute Comprehensive Arbitration Rules and Procedures, with
the following amendments to those rules. First, the parties agree that in no
event shall the arbitration from commencement to issuance of an award take
longer than 180 days. Second, the parties agree that the arbitration tribunal
shall consist of three arbitrators and that the parties elect not to have the
optional appeal procedure provided for in Rule 23. Third, in lieu of the
depositions permitted in Rule 15(E) and (F), the parties agree that
the only depositions shall be a single deposition to last no longer than one
six-hour day that each party may take of the opposing party or an
individual under the control of the opposing party. Judgment on the award
rendered by the arbitrators may be entered in any court having
jurisdiction thereof.

 

21.           TRUSTEES
AND SHAREHOLDERS NOT LIABLE. THE DECLARATION OF TRUST OF THE COMPANY, A
COPY OF WHICH, TOGETHER WITH ALL

 

11

 

AMENDMENTS, IS
DULY FILED IN THE OFFICE OF THE STATE DEPARTMENT OF ASSESSMENTS AND TAXATION OF
MARYLAND PROVIDES THAT THE NAME SENIOR HOUSING PROPERTIES TRUST REFERS TO THE
TRUSTEES COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY. NO
TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF THE COMPANY SHALL BE HELD
TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR
CLAIM AGAINST, THE COMPANY. ALL PERSONS DEALING WITH THE COMPANY, IN ANY WAY,
SHALL LOOK ONLY TO THE ASSETS OF THE COMPANY FOR THE PAYMENT OF ANY SUM OR THE
PERFORMANCE OF ANY OBLIGATION.

 

22.           Notices.
Any notice, report or other communication required or permitted to be given
hereunder shall be in writing unless some other method of giving the notice,
report or other communication is accepted by the party to whom it is given, and
shall be given by being delivered at the following addresses to the parties
hereto:

 

If to the Company:

 

Senior Housing Properties Trust

400 Centre Street

Newton, Massachusetts 02458

Attention: President

 

If to the Advisor:

 

Reit Management &
Research LLC

400 Centre Street

Newton, Massachusetts 02458

Attention: President

 

Such notice
shall be effective upon its receipt by the party to whom it is directed. Either
party hereto may at any time give notice to the other party in writing of
a change of its address for purposes of this paragraph 22.

 

23.           Amendments.
The Agreement shall not be amended, changed, modified, terminated, or
discharged in whole or in part except by an instrument in writing signed
by each of the parties hereto, or by their respective successors or assigns, or
otherwise as provided herein.

 

24.           Successors
and Assigns. This Agreement shall be binding upon any successors or
permitted assigns of the parties hereto as provided herein.

 

25.           Governing
Law. The provisions of this Agreement shall be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts.

 

26.           Captions.
The captions included herein have been inserted for ease of reference only and
shall not be construed to affect the meaning, construction or effect of this
Agreement.

 

12

 

27.           Entire
Agreement. This Agreement constitutes the entire agreement of the parties
hereto with respect to the subject matter hereof and supersedes and cancels any
pre-existing agreements with respect to its subject matter.

 

28.           Attorneys’
Fees. If any legal action is brought for the enforcement of this Agreement,
or because of an alleged dispute, breach, default or misrepresentation in
connection with any of the provisions of this Agreement, the successful or
prevailing party or parties shall be entitled to recover reasonable attorneys’
fees and other costs incurred in that action in addition to any other relief to
which it or they may be entitled.

 

29.           Survival.
The provisions of Sections 13, 14, 18, 20, 21, 22 and 28 of this Agreement
shall survive the termination hereof.

 

 

[Remainder of page intentionally
left blank.]

 

13

 

IN WITNESS
WHEREOF, the parties hereto have caused this Agreement to be executed as an
instrument under seal by their duly authorized officers, as of the day and year
first above written.

 

	
   

  	
  SENIOR HOUSING PROPERTIES TRUST

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/
  David J. Hegarty

  	
   

  
	
   

  	
   

  	
  Name: David J. Hegarty

  
	
   

  	
   

  	
  Title: President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  REIT MANAGEMENT & RESEARCH LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/
  Jennifer B. Clark

  	
   

  
	
   

  	
   

  	
  Name: Jennifer B. Clark

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  	
   

  
	
  SOLELY AS TO SECTION 14 HEREOF:

  
	
   

  	
   

  
	
   

  	
   

  
	
   /s/ Barry
  M. Portnoy

  	
   

  
	
  Barry M. Portnoy

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   /s/ Gerard
  M. Martin

  	
   

  
	
  Gerard M. Martin

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   /s/ Adam
  D. Portnoy

  	
   

  
	
  Adam D. Portnoy

  	
   

  
					

 

14Exhibit
10.1

 

 

SECOND AMENDED AND RESTATED

AGREEMENT OF LIMITED PARTNERSHIP

OF

GKK CAPITAL LP

Dated as of December 14, 2005

 

TABLE OF CONTENTS

 

 

	
   

  	
  Page

  
	
  ARTICLE I DEFINED TERMS

  	
  1

  
	
  ARTICLE II ORGANIZATIONAL MATTERS

  	
  11

  
	
  Section
  2.01. Organization

  	
  11

  
	
  Section
  2.02. Name

  	
  12

  
	
  Section
  2.03. Registered Office and Agent; Principal Office

  	
  12

  
	
  Section
  2.04. Term

  	
  12

  
	
  ARTICLE III PURPOSE

  	
  12

  
	
  Section
  3.01. Purpose and Business

  	
  12

  
	
  Section
  3.02. Powers

  	
  12

  
	
  Section
  3.03. Partnership Only for Purposes Specified

  	
  13

  
	
  ARTICLE IV CAPITAL CONTRIBUTIONS AND ISSUANCES OF
  PARTNERSHIP INTERESTS

  	
  13

  
	
  Section
  4.01. Capital Contributions of the Partners

  	
  13

  
	
  Section
  4.02. Issuances of Partnership Interests

  	
  14

  
	
  Section
  4.03. No Preemptive Rights

  	
  15

  
	
  Section
  4.04. Other Contribution Provisions

  	
  15

  
	
  Section
  4.05. No Interest on Capital

  	
  15

  
	
  ARTICLE V DISTRIBUTIONS

  	
  16

  
	
  Section
  5.01. Requirement and Characterization of Distributions

  	
  16

  
	
  Section
  5.02. Amounts Withheld

  	
  17

  
	
  Section
  5.03. Distributions Upon Liquidation

  	
  17

  
	
  Section
  5.04. Revisions to Reflect Issuance of Additional Partnership Interests

  	
  17

  
	
  ARTICLE VI ALLOCATIONS

  	
  17

  
	
  Section
  6.01. Allocations For Capital Account Purposes

  	
  17

  
	
  Section
  6.02. Revisions to Allocations to Reflect Issuance of Additional Partnership Interests

  	
  19

  
	
  ARTICLE VII MANAGEMENT AND OPERATIONS OF BUSINESS

  	
  19

  
	
  Section
  7.01. Management

  	
  19

  
	
  Section
  7.02. Certificate of Limited Partnership

  	
  22

  
	
  Section
  7.03. Title to Partnership Assets

  	
  23

  
	
  Section
  7.04. Reimbursement of the General Partner

  	
  23

  
	
  Section
  7.05. Outside Activities of the General Partner

  	
  24

  
	
  Section
  7.06. Transactions with Affiliates

  	
  26

  

 

 

 

i

 

	
   

  	
  Page

  
	
  Section
  7.07. Indemnification

  	
  26

  
	
  Section
  7.08. Liability of the General Partner 

  	
  28

  
	
  Section
  7.09. Other Matters Concerning the General Partner 

  	
  29

  
	
  Section
  7.10. Reliance by Third Parties 

  	
  29

  
	
  Section
  7.11. Restrictions on General Partner’s Authority 

  	
  30

  
	
  Section
  7.12. Loans by Third Parties 

  	
  30

  
	
  ARTICLE VIII RIGHTS AND OBLIGATIONS OF LIMITED
  PARTNERS

  	
  30

  
	
  Section 8.01.
  Limitation of Liability 

  	
  30

  
	
  Section
  8.02. Management of Business 

  	
  30

  
	
  Section
  8.03. Outside Activities of Limited Partners

  	
  31

  
	
  Section
  8.04. Return of Capital

  	
  31

  
	
  Section
  8.05. Rights of Limited Partners Relating to the Partnership

  	
  31

  
	
  Section
  8.06. Class A Redemption Right

  	
  32

  
	
  Section
  8.07. Redemption of Class B Units 

  	
  34

  
	
  ARTICLE IX BOOKS, RECORDS, ACCOUNTING AND REPORTS

  	
  34

  
	
  Section
  9.01. Records and Accounting 

  	
  34

  
	
  Section
  9.02. Fiscal Year

  	
  35

  
	
  Section
  9.03. Reports 

  	
  35

  
	
  ARTICLE X TAX MATTERS

  	
  35

  
	
  Section
  10.01. Preparation of Tax Returns 

  	
  35

  
	
  Section
  10.02. Tax Elections

  	
  35

  
	
  Section
  10.03. Tax Matters Partner

  	
  36

  
	
  Section
  10.04. Organizational Expenses

  	
  37

  
	
  Section
  10.05. Withholding 

  	
  37

  
	
  ARTICLE XI TRANSFERS AND WITHDRAWALS

  	
  38

  
	
  Section
  11.01. Transfer

  	
  38

  
	
  Section
  11.02. Transfers of Partnership Interests of General Partner

  	
  38

  
	
  Section
  11.03. Limited Partners’ Rights to Transfer

  	
  39

  
	
  Section
  11.04. Substituted Limited Partners

  	
  40

  
	
  Section
  11.05. Assignees

  	
  40

  
	
  Section
  11.06. General Provisions

  	
  41

  
	
  ARTICLE XII ADMISSION OF PARTNERS

  	
  42

  

 

ii

 

 

	
   

  	
  Page

  
	
  Section
  12.01. Admission of Successor General Partner

  	
  42

  
	
  Section
  12.02. Admission of Additional Limited Partners

  	
  42

  
	
  Section
  12.03. Amendment of Agreement and Certificate of Limited Partnership

  	
  43

  
	
  ARTICLE XIII DISSOLUTION AND LIQUIDATION

  	
  43

  
	
  Section
  13.01. Dissolution

  	
  43

  
	
  Section
  13.02. Winding Up

  	
  44

  
	
  Section
  13.03. Compliance with Timing Requirements of Regulations

  	
  45

  
	
  Section
  13.04. Deemed Distribution and Recontribution

  	
  45

  
	
  Section
  13.05. Rights of Limited Partners

  	
  45

  
	
  Section
  13.06. Notice of Dissolution

  	
  45

  
	
  Section
  13.07. Cancellation of Certificate of Limited Partnership

  	
  46

  
	
  Section
  13.08. Reasonable Time for Winding Up

  	
  46

  
	
  Section
  13.09. Waiver of Partition

  	
  46

  
	
  Section
  13.10. Liability of Liquidator

  	
  46

  
	
  ARTICLE XIV AMENDMENT OF PARTNERSHIP AGREEMENT;
  MEETINGS

  	
  46

  
	
  Section
  14.01. Amendments

  	
  46

  
	
  Section
  14.02. Meetings of the Partners

  	
  48

  
	
  ARTICLE XV GENERAL PROVISIONS

  	
  48

  
	
  Section
  15.01. Addresses and Notice

  	
  48

  
	
  Section
  15.02. Titles and Captions

  	
  49

  
	
  Section
  15.03. Pronouns and Plurals

  	
  49

  
	
  Section
  15.04. Further Action

  	
  49

  
	
  Section
  15.05. Binding Effect

  	
  49

  
	
  Section
  15.06. Creditors

  	
  49

  
	
  Section
  15.07. Waiver

  	
  49

  
	
  Section
  15.08. Counterparts

  	
  49

  
	
  Section
  15.09. Applicable Law

  	
  49

  
	
  Section
  15.10. Invalidity of Provisions

  	
  50

  
	
  Section
  15.11. Power of Attorney

  	
  50

  
	
  Section
  15.12. Entire Agreement

  	
  51

  
	
  Section
  15.13. No Rights as Stockholders

  	
  51

  
	
  Section
  15.14. Limitation to Preserve REIT Status

  	
  51

  

 

iii

 

 

SECOND
AMENDED AND RESTATED

AGREEMENT
OF LIMITED PARTNERSHIP

OF

GKK CAPITAL LP

THIS SECOND AMENDED AND
RESTATED AGREEMENT OF LIMITED PARTNERSHIP, dated as of December 14, 2005, is
made by Gramercy Capital Corp., a Maryland corporation, as the General Partner
of and a Limited Partner in the Partnership and each of the other persons
listed on the signature pages hereto, for the purpose of amending and restating
the First Amended and Restated Agreement of Limited Partnership of the Partnership
dated as of August 2, 2004 by and among the General Partner, SL Green Operating
Partnership, L.P., GKK Manager LLC, and certain other Persons (as defined
below) (the “First Amended and Restated Partnership Agreement”).

WHEREAS,
the Partnership desires to modify the distribution provisions of the First
Amended and Restated Partnership Agreement applicable to the Class B Units to
reflect that certain Class B Units are unvested and, as such, are not entitled
to distributions.

WHEREAS,
the Partnership desires to provide for equity incentives to certain persons who
provide services for the benefit of the Partnership (“Grantees”) in the
form of Partnership Units which shall be designated “LTIP Units.”

WHEREAS,
pursuant to Section 4.02.A of this Agreement, the Partnership is issuing LTIP
Units to the Grantees.

WHEREAS, pursuant to
Sections 4.02.A, 5.04, 6.02, 8.06.E and 14.01.B the General Partner is hereby
amending and restating the First Amended and Restated Partnership Agreement to
facilitate the issuance of the LTIP Units.

AGREEMENT

NOW, THEREFORE, in
consideration of the mutual covenants set forth herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby amend and restate the First Amended and
Restated Partnership Agreement as follows:

 

ARTICLE I

DEFINED TERMS

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

“Act” means the Delaware
Revised Uniform Limited Partnership Act, 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 12.02 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 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 Sections1.704-l(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5) and 1.704-l(b)(2)(ii)

 

 

(d)(6).The
foregoing definition of Adjusted Capital Account is intended to comply with the
provisions of Regulations Section 1.704-l(b)(2)(ii)(d) and shall be interpreted
consistently therewith.

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

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

“Adjustment Date” has the
meaning set forth in Section 4.02.B hereof.

“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 any Person referred to in clauses (i),
(ii), and (iii) above.  For purposes of
this definition, “control,” when used with respect to any Person, means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise, and the terms “controlling” and “controlled” have meanings
correlative to the foregoing.

“Agreed Value” means (i)
in the case of any Contributed Property, the 704(c) Value of such property as
of the time of its contribution to the Partnership, 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.

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

“Articles of
Incorporation” means the Articles of Incorporation or other organizational
document governing the General Partner, as amended or restated from time to
time.

“Assignee” means a Person
to whom one or more Partnership Units have been transferred in a manner
permitted under this Agreement, but who has not become a Substituted Limited
Partner, and who has the rights set forth in Section 11.05 hereof.

“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 hereto and the hypothetical balance
of such Partner’s Capital Account computed as if it had been maintained, with
respect to each such Contributed Property or Adjusted Property, 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.

 

 

2

 

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

“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 4.01 or 4.02 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 Contributed Property or Adjusted Property, as the case may be,
charged to the Partners’ Capital Accounts 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 hereto, 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 equal to the Value on the Valuation Date of the Shares Amount.

“Certificate” means the
Certificate of Limited Partnership relating to the Partnership filed in the
office of the Delaware Secretary of State on April 21, 2004, as amended from
time to time in accordance with the terms hereof and the Act.

“Class A Unit” means
Class A Units of the Partnership.

“Class A Unit Economic
Balance” has the meaning set forth in Section 6.01.D.

“Class B Distribution
Percentage” means, as of a particular date, with respect to SL Green, the SLG
Class B Distribution Percentage and, with respect to all other Persons, the
Standard Class B Distribution Percentage.

“Class B Unit” means a
profits interest issued pursuant to Section 4.02.D.

“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.

“Consent” means the
consent or approval of a proposed action by a Partner given in accordance with
Section 14.02 hereof.

“Contributed Property”
means each property or other asset contributed to the Partnership, 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
hereto, such property shall no longer constitute a Contributed Property for
purposes of Exhibit B hereto, but shall be deemed an Adjusted Property for such
purposes.

“Conversion Factor” means
1.0; provided that in the event that the General Partner Entity (i)
declares or pays a dividend on its outstanding Shares in Shares or makes a
distribution to all holders of its outstanding Shares in Shares, (ii)
subdivides its outstanding Shares or (iii) combines its outstanding Shares into
a smaller number of Shares, the Conversion Factor shall be adjusted by
multiplying the Conversion Factor by a fraction, the numerator of which shall
be the number of Shares issued and 

 

3

 

outstanding on the
record date for such dividend, distribution, subdivision or combination
(assuming for such purposes that such dividend, distribution, subdivision or
combination has occurred as of such time) and the denominator of which shall be
the actual number of Shares(determined without the above assumption) issued and
outstanding on the record date for such dividend, distribution, subdivision or
combination; and provided, further that in the event that an
entity shall cease to be the General Partner Entity (the “Predecessor Entity”)
and another entity shall become the General Partner Entity (the “Successor
Entity”), the Conversion Factor shall be adjusted by multiplying the Conversion
Factor by a fraction, the numerator of which is the Value of one share of the
Predecessor Entity, determined as of the time immediately prior to when the
Successor Entity becomes the General Partner Entity, and the denominator of
which is the Value of one Share of the Successor Entity determined as of that
same date.  For purposes of the second
proviso in the preceding sentence, in the event that any stockholders of the
Predecessor Entity will receive consideration in connection with the
transaction in which the Successor Entity becomes the General Partner Entity,
the numerator in the fraction described above for determining the adjustment to
the Conversion Factor(that is, the Value of one Share of the Predecessor
Entity) shall be the sum of the greatest amount of cash and the fair market
value of any securities and other consideration that the holder of one Share in
the Predecessor Entity could have received in such transaction (determined
without regard to any provisions governing fractional shares). Any adjustment
to the Conversion Factor shall become effective immediately after the effective
date of such event retroactive to the record date, if any, for the event giving
rise thereto; it being intended that (x) adjustments to the Conversion Factor
are to be made in order to avoid unintended dilution or anti-dilution as a
result of transactions in which Shares are issued, redeemed or exchanged
without a corresponding issuance, redemption or exchange of Partnership Units
and (y) if a Specified Redemption Date shall fall between the record date and
the effective date of any event of the type described above, that the
Conversion Factor applicable to such redemption shall be adjusted to take into
account such event.

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

“Depreciation” means, for
each fiscal 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.

“Economic Capital Account
Balance” has the meaning set forth in Section 6.01.D.

“Effective Date” means
the date of the closing of the General Partner’s initial public offering.

 

4

 

“Equity
Award Agreement” means an equity award agreement entered into between SL Green
and/or SL Green Realty Corp. and a director, officer or employee of the General
Partner, the Manager, SL Green or SL Green Realty Corp. or other Person
pursuant to the SL Green Realty Corp. 2005 Stock Option and Incentive Plan
pursuant to which SL Green or SL Green Realty Corp. transfers Class B Units to
such Person subject to forfeiture to, or repurchase at less than fair market
value by, SL Green or any other Person upon the occurrence of certain events.

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

“Exchange Act” means the
Securities Exchange Act of 1934, as amended.

“Funding Debt” means the
incurrence of any Debt by or on behalf of the General Partner for the purpose
of providing funds to the Partnership.

“Funds From Operations”
means net income computed in accordance with GAAP, excluding gains (or losses)
from sales of property, plus depreciation and amortization on real estate
assets, and after adjustments for unconsolidated partnerships and joint
ventures.

“General Partner” means
Gramercy Capital Corp., a Maryland corporation, or its successors as general
partner of the Partnership.

“General Partner Entity”
means the General Partner; provided, however, that if (i) the
shares of common stock (or other comparable equity interests) of the General
Partner are at any time not Publicly Traded and (ii) the shares of common stock
(or other comparable equity interests) of an entity that owns, directly or
indirectly, fifty percent (50%) or more of the shares of common stock (or other
comparable equity interests) of the General Partner are Publicly Traded, the
term “General Partner Entity” shall refer to such entity whose shares of common
stock (or other comparable equity securities) are Publicly Traded.  If both requirements set forth in clauses (i)
and (ii) above are not satisfied, then the term “General Partner Entity” shall
mean the General Partner.

“General Partner Payment”
has the meaning set forth in Section 15.14 hereof.

“General Partnership
Interest” means a Partnership Interest held by the General Partner that is a
general partnership interest.  A General
Partnership 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, 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 such Partner
incompetent to manage his or her Person or estate,(ii) as to any corporation
which is a Partner, the filing of a certificate of dissolution, or its
equivalent, for the corporation or the revocation of its charter, (iii) as to
any partnership 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 

 

5

 

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

“Indemnitee” means (i)
any Person made a party to a proceeding or threatened with being made a party
to a proceeding by reason of its status as (A) the General Partner, (B) a
Limited Partner or (C) a director or officer of the Partnership or the General
Partner and (ii) such other Persons (including Affiliates of the General
Partner, a Limited Partner or the Partnership) as the General Partner may
designate from time to time (whether before or after the event giving rise to
potential liability), in its sole and absolute discretion.

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

“Limited Partner Interest”
means a Partner Interest of a Limited Partner in the Partner representing a fractional
part of the Partner Interests of all Limited Partners and includes any and all
benefits to which the holder of such a Partner 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 13.01 hereof.

“Liquidator” has the
meaning set forth in Section 13.02.A hereof.

“LTIP Units” means the
Partnership Units designated as such having the rights, powers, privileges,
restrictions, qualifications and limitations set forth in Exhibit E hereto.

“Manager” means GKK
Manager LLC, a Delaware limited liability company.

“Management Agreement”
means the agreement entered into by and between Gramercy Capital Corp., a
Maryland corporation, GKK Capital LP, a Maryland limited partnership (the “Operating
Partnership”), and GKK Manager LLC, a Delaware limited liability company.

“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 Exhibit B hereto.  If an
item of income, gain, loss or deduction that has been included in the initial
computation of Net Income is subjected to the special allocation rules in Exhibit
C hereto, Net Income or the resulting Net Loss, whichever the case may be,
shall be recomputed without regard to such item.

 

6

 

“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
Exhibit B.  If an item of income, gain,
loss or deduction that has been included in the initial computation of Net Loss
is subjected to the special allocation rules in Exhibit C hereto, Net Loss or
the resulting Net Income, whichever the case may be, shall be recomputed
without regard to such item.

“New Securities” means
(i) any rights, options, warrants or convertible or exchangeable securities
having the right to subscribe for or purchase shares of capital stock (or other
comparable equity interest) of the General Partner, excluding grants under any
Stock Option Plan, or (ii) any Debt issued by the General Partner that provides
any of the rights described in clause (i).

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

“Nonrecourse Deductions”
has the meaning set forth in Regulations Section 1.704-2(b)(1), and the amount
of Nonrecourse Deductions for a Partnership 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 Section1.752-1(a)(2).

“Notice of Redemption”
means a Notice of Redemption substantially in the form of Exhibit B attached
hereto.

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

“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 Year shall be determined in accordance with
the rules of Regulations Section1.704-2(i)(2).

“Partnership” means the
limited partnership formed under the Act and continued upon the terms and
conditions set forth in this Agreement, and any successor thereto.

“Partnership Interest”
means a Limited Partner Interest or the General Partnership Interest and
includes any and all benefits to which the holder of such a Partnership
Interest may be entitled as provided in this Agreement, together with all
obligations of such Person to comply with the terms and provisions of this
Agreement.  A Partnership Interest may be
expressed as a number of Partnership Units.

“Partnership Minimum Gain”
has the meaning set forth in Regulations Section 1.704-2(b)(2), and the amount
of Partnership Minimum Gain, as well as any net increase or decrease in
Partnership 

 

7

 

Minimum Gain, for
a Partnership Year shall be determined in accordance with the rules of
Regulations Section1.704-2(d).

“Partnership Record Date”
means the record date established by the General Partner either (i) for
distributions pursuant to Section 5.01 hereof, which record date shall be the
same as the record date established by the General Partner Entity for a
distribution to its stockholders of some or all of its portion of such
distribution received by the General Partner if the shares of common stock (or
comparable equity interests) of the General Partner Entity are Publicly Traded,
or (ii) if applicable, for determining the Partners entitled to vote on or
consent to any proposed action for which the consent or approval of the
Partners is sought pursuant to Section14.02 hereof.

“Partnership Unit” means
a fractional, undivided share of the Partnership Interests of all Partners
issued pursuant to Sections 4.01 and 4.02 hereof, and includes Class A Units,
Class B Units, LTIP Units and any other classes or series of Partnership Units
established after the date hereof.  The
number of Partnership Units outstanding and the Percentage Interests
represented by such Partnership Units are set forth in Exhibit A hereto, as
such Exhibit may be amended and restated from time to time.  The ownership of Partnership Units may be
evidenced by a certificate in a form approved by the General Partner.

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

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

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

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

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

“Recapture Income” means
any gain recognized by the Partnership (computed without regard to any
adjustment required by Section 743 of the Code) 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 8.06.A hereof.

“Redemption Amount” means
either the Cash Amount or the Shares Amount, as determined by the General
Partner in its sole and absolute discretion; provided that in the event
that the Shares are not Publicly Traded at the time a Redeeming Partner
exercises its Redemption Right the Redemption Amount shall be paid only in the
form of the Cash Amount unless the Redeeming Partner, in its sole and absolute
discretion, consents to payment of the Redemption Amount in the form of the Shares
Amount.  A 

 

8

 

Redeeming Partner
shall have no right, without the General Partner’s consent, in its sole and
absolute discretion, to receive the Redemption Amount in the form of the Shares
Amount.

“Redemption Right” has
the meaning set forth in Section 8.06.A hereof.

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

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

“REIT Requirements” has
the meaning set forth in Section 5.01.A hereof.

“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 hereto to eliminate Book-Tax Disparities.

“Safe Harbor” has the
meaning set forth in Section 11.06.F hereof.

“Securities Act” means
the Securities Act of 1933, as amended.

“704(c) Value” of any
Contributed Property means the fair market value of such property 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 hereto, 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 each separate property on a basis
proportional to their fair market values.

“Share” means a share of
capital stock (or other comparable equity interest) of the General Partner
Entity.  Shares may be issued in one or
more classes or series in accordance with the terms of the Articles of
Incorporation (or, if the General Partner is not the General Partner Entity,
the organizational documents of the General Partner Entity).  In the event that there is more than one
class or series of Shares, the term “Shares” shall, as the context requires, be
deemed to refer to the class or series of Shares that correspond to the class
or series of Partnership Interests for which the reference to Shares is
made.  When used with reference to Class
A Units, the term “Shares” refers to shares of common stock (or other
comparable equity interest) of the General Partner Entity.

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

“SL Green” means SL Green
Operating Partnership, L.P., a Delaware limited partnership.

“SLG Class B Distribution
Percentage” means, as of a particular date, the percentage obtained by dividing
(i) 81.58 minus the number of Class B Units transferred by SL Green to other
Persons after December 14, 2005 and on or before such date (other than Unvested
Award Class B Units) and the 

 

9

 

number of Vested
Award Class B Units plus the number of Class B Units acquired by SL Green from
other Persons after December 14, 2005 and on or before such date (other than
Unvested Award Class B Units forfeited to, or repurchased at less than fair
market value by, SL Green pursuant to an Equity Award Agreement) by (ii) the
aggregate number of Class B Units outstanding as of such date.

“Specially Distributed
Assets” has the meaning set forth in Section 7.05.A hereof.

“Specified Redemption
Date” means the tenth Business Day after receipt by the General Partner of a
Notice of Redemption; provided that, if the Shares are not Publicly
Traded, the Specified Redemption Date means the thirtieth Business Day after
receipt by the General Partner of a Notice of Redemption.

“Standard Class B
Distribution Percentage” means, with respect to a Person as of a particular
date, the percentage obtained by dividing the number of Class B Units held by
such Person (other than Unvested Award Class B Units) by the aggregate number
of Class B Units outstanding as of such date.

“Stock Option Plan” means
any stock incentive plan of the General Partner, the Partnership or any
Affiliate of the Partnership or the General Partner.

“Stockholders Equity” means
the aggregate gross proceeds from all sales of Partnership Units.

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

“Substituted Limited
Partner” means a Person who is admitted as a Limited Partner to the Partnership
pursuant to Section 11.04 hereof.

“Successor Entity” has
the meaning set forth in the definition of “Conversion Factor” herein.

“Terminating Capital
Transaction” means any sale or other disposition of all or substantially all of
the assets of the Partnership for cash 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 for cash.

“Termination Transaction”
has the meaning set forth in Section 11.02.B hereof.

“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 hereto) as of such date, over (ii) the
Carrying Value of such property (prior to any adjustment to be made pursuant to
Exhibit B hereto) 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 hereto) as of such
date, over (ii) the fair market value of such property (as determined under
Exhibit B hereto) as of such date.

“Unvested
Award Class B Unit” means any Class B Unit that has been transferred by SL Green
or SL Green Realty Corp. to another Person pursuant to an Equity Award
Agreement and remains subject to forfeiture to, or repurchase at less than fair
market value by, SL Green or any other Person pursuant to such Equity Award
Agreement.

 

 

10

 

“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 any outstanding Shares of the General Partner Entity that are
Publicly Traded, the average of the daily market price for the ten (10)
consecutive trading days immediately preceding the date with respect to which
value must be determined or, if such date is not a Business Day, the
immediately preceding Business Day.  The
market price for each such trading day shall be the closing price, regular way,
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. 
In the event that the outstanding Shares of the General Partner Entity
are Publicly Traded and the Shares Amount includes rights that a holder of
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.  In the event that the
Shares of the General Partner Entity are not Publicly Traded, the Value of the
Shares Amount per Partnership Unit offered for redemption (which will be the
Cash Amount per Partnership Unit offered for redemption payable pursuant to
Sections 8.06 and 8.07 hereof) means the amount that a holder of one
Partnership Unit would receive if each of the assets of the Partnership were to
be sold for its fair market value on the Specified Redemption Date, the
Partnership were to pay all of its outstanding liabilities, and the remaining
proceeds were to be distributed to the Partners in accordance with the terms of
this Agreement.  Such Value shall be
determined by the General Partner, acting in good faith and based upon a
commercially reasonable estimate of the amount that would be realized by the
Partnership if each asset of the Partnership (and each asset of each Partnership,
limited liability company, joint venture or other entity in which the
Partnership owns a direct or indirect interest) were sold to an unrelated
purchaser in an arms’ length transaction where neither the purchaser nor the
seller were under economic compulsion to enter into the transaction (without
regard to any discount in value as a result of the Partnership’s minority
interest in any property or any illiquidity of the Partnership’s interest in
any property).  In connection with
determining the value of the Partnership Interest for purposes of determining
the number of additional Partnership Units issuable upon a Capital Contribution
funded by an underwritten public offering of shares of capital stock (or other
comparable equity interest) of the General Partner, the Value of such shares
shall be the public offering price per share of such class of the capital stock
(or other comparable equity interest) sold.

“Vested Award Class B
Unit” means any Class B Unit that has been transferred by SL Green or SL Green
Realty Corp. to another Person pursuant to an Equity Award Agreement and is no
longer subject to forfeiture to, or repurchase at less than fair market value
by, SL Green or any other Person pursuant to such Equity Award Agreement
(except for a Class B Unit that was forfeited to, or repurchased at less than
fair market value by, SL Green or another Person pursuant to an Equity Award
Agreement).

ARTICLE II

 

ORGANIZATIONAL MATTERS

 

                Section 2.01.          Organization

 

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

 

11

 

Section 2.02.          Name

The name of the
Partnership is GKK Capital LP.  The
Partnership’s business may be conducted under any other name or names deemed
advisable by the General Partner, including the name of the General Partner or
any Affiliate thereof.  The words “Limited
Partnership,” “L.P.,” “Ltd.” Or similar words or letters shall be included in
the Partnership’s name where necessary for the purposes of complying with the
laws of any jurisdiction that so requires. 
The General Partner in its sole and absolute discretion may change the
name of the Partnership at any time and from time to time and shall notify the
Limited Partners of such change in the next regular communication to the
Limited Partners.

Section 2.03.          Registered Office and Agent;
Principal Office

The address of the
registered office of the Partnership in the State of Delaware shall be located
at 9 East Loockerman Street, Suite #1B in the City of Dover, County of Kent,
Delaware 19901 and the registered agent for service of process on the
Partnership in the State of Delaware at such registered office shall be
National Registered Agents, Inc.  The
principal office of the Partnership shall be 420 Lexington Avenue, New York,
New York,  10170 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 2.04.          Term

 

The term of the
Partnership commenced on April 21, 2004, the date on which the Certificate was
filed in the office of the Secretary of State of the State of Delaware in
accordance with the Act, and shall continue until December 31, 2103, unless it
is dissolved sooner pursuant to the provisions of Article XIII hereof or as
otherwise provided by law.

 

ARTICLE III

 

PURPOSE

                Section 3.01.          Purpose and Business

 

The purpose and nature of
the business to be conducted by the Partnership is (i) to conduct any business
that may be lawfully conducted by a limited partnership organized pursuant to
the Act; provided, however, that such business shall be limited
to and conducted in such a manner as to permit the General Partner Entity at
all times to be classified as a REIT, unless the General Partner ceases to
qualify or is not qualified as a REIT for any reason or reasons not related to
the business conducted by the Partnership; (ii) to enter into any
partnership, joint venture, limited liability company or other similar
arrangement to engage in any of the foregoing or the ownership of interests in
any entity engaged, directly or indirectly, in any of the foregoing; and (iii)
to do anything necessary or incidental to the foregoing.  In connection with the foregoing, the
Partners acknowledge that the status of the General Partner Entity as a REIT
inures to the benefit of all the Partners and not solely the General Partner or
its Affiliates.

            Section 3.02.          Powers

 

The Partnership is
empowered to do any and all acts and things necessary, appropriate, proper,
advisable, incidental to or convenient for the furtherance and accomplishment
of the purposes and business described herein and for the protection and
benefit of the Partnership, including, without limitation, full power and
authority, directly or through its ownership interest in other entities, to
enter into, perform and carry out contracts of any kind, borrow money and issue
evidences of indebtedness 

 

12

 

whether or not
secured by mortgage, deed of trust, pledge or other lien, acquire, own, manage,
improve and develop real property, and lease, sell, transfer and dispose of
real property; provided, however, that the Partnership shall not
take, or refrain from taking, any action which, in the judgment of the General
Partner, in its sole and absolute discretion, (i) could adversely affect the ability
of the General Partner Entity to continue to qualify as a REIT, (ii) could
subject the General Partner Entity to any additional taxes under Section 857 or
Section 4981 of the Code or (iii) could violate any law or regulation of any
governmental body or agency having jurisdiction over the General Partner Entity
or its securities, unless such action (or inaction) shall have been
specifically consented to by the General Partner in writing.

                Section 3.03.          Partnership Only for Purposes
Specified

 

The Partnership shall be
a partnership only for the purposes specified in Section 3.01 above, and this
Agreement shall not be deemed to create a partnership among the Partners with
respect to any activities whatsoever other than the activities within the
purposes of the Partnership as specified in Section 3.01 above.

 

ARTICLE IV

CAPITAL CONTRIBUTIONS AND
ISSUANCES

OF PARTNERSHIP INTERESTS

Section 4.01.          Capital Contributions of the
Partners

A.    Capital Contributions.  Prior to the date hereof, certain Partners
made Capital Contributions to the Partnership. 
Exhibit A hereto reflects the Capital Contributions made by each
Partner, the Partnership Units assigned to each Partner and the Percentage
Interest in the Partnership represented by such Partnership Units.  The Capital Accounts of the Partners and the
Carrying Values of the Partnership’s Assets have been and will continue to be
determined pursuant to Section I.D of Exhibit B hereto to reflect the Capital
Contributions made.

B.    General Partnership
Interest.  A number of Partnership
Units held by the General Partner equal to one percent (1%) of all outstanding
Partnership Units shall be deemed to be the General Partnership Interest.  All other Partnership Units held by the General
Partner shall be deemed to be Limited Partner Interests and shall be held by
the General Partner in its capacity as a Limited Partner in the Partnership.

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

D.    No Obligation to Make
Additional Capital Contributions. 
Except as provided in Sections 7.05 and 10.05 hereof, the Partners shall
have no obligation to make any additional Capital Contributions or provide any
additional funding to the Partnership (whether in the form of loans, repayments
of loans or otherwise).  No Partner shall
have any obligation to restore any deficit that may exist in its Capital
Account, either upon a liquidation of the Partnership or otherwise.

 

13

 

Section 4.02.          Issuances
of Partnership Interests

 

A.    General.  The General Partner is hereby authorized to
cause the Partnership from time to time to issue to Partners (including the
General Partner and its Affiliates) or other Persons (including, without
limitation, in connection with the contribution of property to the Partnership)
Partnership Units or other Partnership Interests in one or more classes, or in
one or more series of any of such classes, with such designations, preferences
and relative, participating, optional or other special rights, powers and
duties, including rights, powers and duties senior to Limited Partner
Interests, all as shall be determined, subject to applicable Delaware law, by
the General Partner in its sole and absolute discretion, 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 Partnership Units or other Partnership Interests shall be issued
to the General Partner unless either (a) the Partnership Interests are issued
in connection with the grant, award or issuance of Shares or other equity
interests in the General Partner having designations, preferences and other
rights such that the economic interests attributable to such Shares or other
equity interests are substantially similar to the designations, preferences and
other rights (except voting rights) of the additional Partnership Interests
issued to the General Partner in accordance with this Section 4.02.A or (b) the
Partnership Interests are issued to all Partners holding Partnership Interests
in the same class in proportion to their respective Percentage Interests in
such class.  In the event that the Partnership
issues Partnership Interests pursuant to this Section 4.02.A, the General
Partner shall make such revisions to this Agreement (including but not limited
to the revisions described in Section 5.04, Section 6.02 and Section 8.06
hereof) as it deems necessary to reflect the issuance of such additional
Partnership Interests.

B.    Percentage Interest
Adjustments in the Case of Capital Contributions for Class A Units.  Upon the acceptance of additional Capital
Contributions in exchange for Class A Units, the Percentage Interest related
thereto shall be equal to a fraction, the numerator of which is equal to the
amount of cash, if any, plus the Agreed Value of Contributed Property, if any,
contributed with respect to such additional Partnership Units and the denominator
of which is equal to the sum of (i) value of the Partnership Interests for all
outstanding Class A Units (computed as of the Business Day immediately
preceding the date on which the additional Capital Contributions are made (an “Adjustment
Date”)) plus (ii) the aggregate amount of additional Capital Contributions
contributed to the Partnership on such Adjustment Date in respect of such
additional Class A Units.  The Percentage
Interest of each other Partner holding Class A Units not making a full pro rata
Capital Contribution shall be adjusted to a fraction the numerator of which is
equal to the sum of (i) the value of such Limited Partner (computed as of the
Business Day immediately preceding the Adjustment Date) plus (ii) the amount of
additional Capital Contributions (such amount being equal to the amount of
cash, if any, plus the Agreed Value of Contributed Property, if any, so
contributed), if any, made by such Partner to the Partnership in respect of
such Class A Units as of such Adjustment Date and the denominator of which is
equal to the sum of (i) the value of the outstanding Class A Units (computed as
of the Business Day immediately preceding such Adjustment Date) plus (ii) the
aggregate amount of the additional Capital Contributions contributed to the
Partnership on such Adjustment Date in respect of such additional Class A
Units.  For purposes of calculating a
Partner’s Percentage Interest of Class A Units pursuant to this Section 4.02.B,
cash Capital Contributions by the General Partner will be deemed to equal the
cash contributed by the General Partner plus (a) in the case of cash
contributions funded by an offering of any equity interests in or other
securities of the General Partner, the offering costs attributable to the cash
contributed to the Partnership, and (b) in the case of Class A Units issued
pursuant to Section 7.05.E hereof, an amount equal to the difference between
the Value of the Shares sold pursuant to any Stock Option Plan and the net
proceeds of such sale.

 

14

 

C.    Classes of Partnership
Units.  From and after the Effective
Date, subject to Section 4.02.A above, the Partnership shall have two classes
of Partnership Units, entitled “Class A Units” and “Class B Units.” From and
after December 14, 2005, the Partnership shall have an additional class of
Partnership Units, entitled “LTIP Units.” 
Class A Units may be issued to newly admitted Partners in exchange for
the contribution by such Partners of cash, real estate partnership interests,
stock, notes or other assets or consideration.

D.            Issuance of Class B Units.  On the Effective Date, the General Partner
issued 100 Class B Units to the Manager. 
The Manager immediately assigned 85 of such Units to SL Green, which
assignment was reflected on Exhibit A. 
There was no obligation to contribute any capital in connection until
issuance of the Class B Units.  The
initial Capital Accounts of the Holders of the Class B Units in respect of such
Units was zero.  All Class B Units issued
under this Agreement are intended to qualify as “profits interests” under
Revenue Procedure 93-27, 1993-2 C.B. 343 (June 9, 1993) and Revenue Procedure
2001-43, 2001-2 C.B. 191 (August 3, 2001), and this Section 4.02.D shall be
interpreted and applied consistently therewith. 
The General Partner at its discretion may amend this Section 4.02.D to
ensure that any Class B Units granted after the date of this Agreement will
qualify as “profits interests” under Revenue Procedure 93-27, 1993-2 C.B. 343
(June 9, 1993) and Revenue Procedure 2001-43, 2001-2 C.B. 191 (August 3, 2001)
(and any other similar rulings or regulations that may be in effect at such
time).

E.             Issuance of LTIP Units.  From time to time the General Partner may
issue LTIP Units to Persons providing services to or for the benefit of the
Partnership.  LTIP Units shall have the
rights, powers, privileges, restrictions, qualifications and limitations
specified in Exhibit E hereto.  LTIP
Units are intended to qualify as profits interests in the Partnership and for
the avoidance of doubt, the provisions of Section 4.04 shall not apply to the
issuance of LTIP Units.

 

Section 4.03.          No Preemptive Rights

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

Section 4.04.          Other Contribution Provisions

In the event that any
Partner is admitted to the Partnership and is given a Capital Account in
exchange for services rendered to the Partnership, such transaction shall be
treated by the Partnership and the affected Partner as if the Partnership had
compensated such Partner in cash, and the Partner had contributed such cash to
the capital of the Partnership.

Section 4.05.          No Interest on Capital

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

 

15

 

ARTICLE V

DISTRIBUTIONS

Section 5.01.          Requirement and Characterization of
Distributions

A.    General.  Except as otherwise provided herein, the
General Partner shall make distributions at such times and in such amounts as
it may determine.  Such distributions
shall be made to the Partners who are Partners on the Partnership Record Date
for such distribution.  Notwithstanding
anything to the contrary contained herein, in no event may a Partner receive a
distribution with respect to a Partnership Unit for a quarter or shorter period
if such Partner is entitled to receive a distribution relating to such period
with respect to a Share for which such Partnership Unit has been redeemed or
exchanged.  Unless otherwise expressly
provided for herein or in an agreement at the time a new class of Partnership
Interests is created in accordance with Article IV hereof, no Partnership
Interest shall be entitled to a distribution in preference to any other
Partnership Interest.  The General
Partner shall make such reasonable efforts, as determined by it in its sole and
absolute discretion and consistent with the qualification of the General
Partner Entity as a REIT, to make distributions (a) to Limited Partners so as
to preclude any such distribution or portion thereof from being treated as part
of a sale of property by a Limited Partner under Section 707 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, and (b) to the General Partner in an amount sufficient to enable the
General Partner Entity to pay stockholder dividends that will (1) satisfy the
requirements for qualification as a REIT under the Code and the Regulations
(the “REIT Requirements”) and (2) avoid any federal income or excise tax
liability for the General Partner Entity.

B.    Method. Distributions
shall be made (i) first, to the holders of Class B Units as provided in Section
5.01.C hereof, and to each other holder of a Partnership Interest that is
entitled to any preference in distribution, in accordance with the rights of
any such class of Partnership Interests, and (ii) thereafter, to the holders of
Class A Units and each other class of Partnership Interests ranking in parity
to the Class A Units (including, without limitation, the LTIP Units if and to
the extent they are then entitled to participate in such distributions pursuant
to Section 2 of Exhibit E hereto), in proportion to the relative Percentage
Interests of each such class of Partnership Interests.  All distributions within a class of
Partnership Units shall be pro rata in proportion to the respective Percentage
Interests on the applicable Partnership Record Date.

C.    Distributions When Class
B Units Are Outstanding.  Holders of
Class B Units shall receive quarterly distributions for each calendar quarter
(or portion thereof) in an aggregate amount equal to 25% of the amount, if any,
by which (i) the sum of Funds From Operations plus any gains (or losses) from
debt restructuring or property sales exceeds (ii) the product of the
Partnership’s weighted average Stockholders Equity multiplied by 2.375% (such
percentage to be prorated for any partial quarter).  These distributions shall be paid to Holders
of Class B Units within 45 days after the end of each quarter.  These distributions shall be recalculated at
the end of each calendar year beginning with 2004, as 25% of the amount by
which (A) annual Funds From Operations plus any gains (or losses) from debt
restructuring and gains (or losses) or property sales for such calendar year
(or part thereof) exceeds (B) the Partnership’s weighted average Stockholders
Equity for such year multiplied by 9.5% (such percentage to be prorated for any
partial year).  To the extent quarterly
distributions exceed the annual recalculated amount, the Holders of Class B
Units shall refund the excess to the Partnership, and to the extent the annual
recalculated amount exceeds the quarterly distributions made for such year,
such excess shall be paid by the Partnership to such Holders within 90 days
after the end of such calendar year. Distributions (and any refunds of
distributions) made pursuant to this Section 5.01.C shall be apportioned,
subject to Section 5.01.D, among the holders of Class B Units pro rata in
accordance with their Class B Distribution Percentages, 

 

16

 

determined as of
the date of such distribution (or, in the case of any refund, as of the date of
the distribution(s) with respect to which such refund is attributable).

 

D.            Class B Units Intended to Qualify
as Profits Interests.  Distributions
made pursuant to this Section 5.01 shall be adjusted as necessary to ensure
that the amount apportioned to each Class B Unit does not exceed the amount
attributable to items of Partnership income or gain realized after the date
such Class B Unit was issued by the Partnership.  The intent of this Section 5.01.D is to
ensure that any Class B Units issued after the date of this Agreement qualify
as “profits interests” under Revenue Procedure 93-27, 1993-2 C.B. 343 (June 9,
1993) and Revenue Procedure 2001-43, 2001-2 C.B. 191 (August 3, 2001), and
Section 5.01 shall be interpreted and applied consistently therewith.  The General Partner at its discretion may
amend this Section 5.01.D to ensure that any Class B Units granted after the
date of this Agreement will qualify as “profits interests” under Revenue
Procedure 93-27, 1993-2 C.B. 343 (June 9, 1993) and Revenue Procedure 2001-43,
2001-2 C.B. 191 (August 3, 2001) (and any other similar rulings or regulations
that may be in effect at such time).

Section 5.02.          Amounts Withheld

All amounts withheld
pursuant to the Code or any provisions of any state or local tax law and
Section 10.05 hereof with respect to any allocation, payment or distribution to
the General Partner, the Limited Partners or Assignees shall be treated as
amounts distributed to the General Partner, Limited Partners or Assignees
pursuant to Section 5.01 above for all purposes under this Agreement.

Section 5.03.          Distributions Upon Liquidation

Proceeds from a
Terminating Capital Transaction shall be distributed to the Partners in
accordance with Section 13.02 hereof.

Section 5.04.          Revisions to Reflect Issuance of
Additional Partnership Interests

In the event that the
Partnership issues additional Partnership Interests to the General Partner or
any Additional Limited Partner pursuant to Article IV hereof, the General
Partner shall make such revisions to this Article V as it deems necessary to
reflect the issuance of such additional Partnership Interests.  Such revisions shall not require the consent
or approval of any other Partner.

ARTICLE VI

ALLOCATIONS

Section 6.01.          Allocations For Capital Account
Purposes

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

A.    Net Income.  After giving effect to the special
allocations set forth in Section 1 of Exhibit C hereto, Net Income shall be
allocated (i) first, to the General Partner to the extent that Net Losses
previously allocated to the General Partner, on a cumulative basis, pursuant to
the last sentence of  Section 6.01.B
below exceed Net Income previously allocated to the General Partner, on a cumulative
basis, pursuant to this clause (i) of Section 6.01.A, (ii) second, to Holders
of Class B Units and to the 

 

17

 

holders of any
other Partnership Interests that are entitled to any preference in distribution
in accordance with the rights of any such class of Partnership Interests until
each such Partnership Interest has been allocated, on a cumulative basis
pursuant to this clause (ii), Net Income equal to the sum of the amount of
distributions theretofore received (or to be received with respect to the
fiscal year of the Partnership in which such Net Income accrues) with respect
to such Partnership Interests pursuant to clause (i) of Section 5.01.B hereof
and the amount of any prior allocations of Net Losses to such class of
Partnership Interests pursuant to Section 6.01.B.(i) below (and, within such
class, pro rata in proportion to the respective interests in such class as of
the last day of the period for which such allocation is being made) and (iii)
third, with respect to Partnership Interests that are not entitled to any
preference in the allocation of Net Income, pro rata to each such class in
accordance with the terms of such class (and, within such class, pro rata in
proportion to the respective interests in such class as of the last day of the
period for which such allocation is being made).

B.    Net Losses.  After giving effect to the special
allocations set forth in Section 1 of Exhibit C hereto, Net Losses shall be
allocated (i) first, to the Holders of Class B Units and to holders of any
other Partnership Interests that are entitled to any preference in distribution
in accordance with the rights of any such class of Partnership Interests to the
extent that any prior allocations of Net Income to such class of Partnership
Interests pursuant to Section 6.01.A(1)(ii) above exceed, on a cumulative
basis, distributions theretofore received (or to be received with respect to
the fiscal year of the Partnership in which such Net Income accrues) with respect
to such Partnership Interests pursuant to clause (i) of Section 5.01.B hereof
(and, within such class, pro rata in proportion to the respective interests in
such class as of the last day of the period for which such allocation is being
made) and (ii) second, with respect to classes of Partnership Interests that
are not entitled to any preference in distribution, pro rata to each such class
in accordance with the terms of such class (and, within such class, pro rata in
proportion to the respective interests in such class as of the last day of the
period for which such allocation is being made); provided that, Net
Losses shall not be allocated to any Limited Partner pursuant to this Section
6.01.B to the extent that such allocation would cause such Limited Partner to
have an Adjusted Capital Account Deficit (or increase any existing Adjusted
Capital Account Deficit) at the end of such taxable year (or portion
thereof).  All Net Losses in excess of
the limitations set forth in this Section 6.01.B shall be allocated to the
General Partner.

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

D.    Special Allocations.
With Respect to LTIP Units.  After giving
effect to the special allocations set forth in Section 1 of Exhibit C hereto,
and notwithstanding the provisions of Sections 6.01.A and 6.01.B above, but
subject to the prior allocation of income and gain under clauses 6.01.A(i) and
(ii) above, any Liquidating Gains shall first be allocated to the holders of
LTIP Units until the Economic Capital Account Balances of such holders, to the
extent attributable to their ownership of LTIP Units, are equal to (i) the
Class A Unit Economic Balance, multiplied by (ii) the number of their LTIP
Units; provided that no such Liquidating Gains will be allocated with respect
to any particular LTIP Unit unless and to the extent that such Liquidating
Gains, when aggregated with other Liquidating Gains realized since the issuance
of such LTIP Unit, exceed Liquidating Losses realized since the issuance of
such LTIP Unit.  After giving effect to
the special allocations set forth in Section 1 of Exhibit C hereto, and
notwithstanding the provisions of Sections 6.01.A and 6.01.B above, in the
event that, due to distributions with respect to Class A Units in which the
LTIP Units do not participate or otherwise, the Economic Capital Account
Balance of any present or former holder of LTIP Units, to the extent
attributable to the holder’s ownership of LTIP Units, exceeds the target
balance specified above, then 

 

18

 

Liquidating Losses
shall be allocated to such holder to the extent necessary to reduce or
eliminate the disparity.  In the event
that Liquidating Gains or Liquidating Losses are allocated under this Section
6.01.D, Net Income allocable under clause 6.01.A(iii) and any Net Losses shall
be recomputed without regard to the Liquidating Gains or Liquidating Losses so
allocated.  For this purpose, “Liquidating
Gains” means any net capital gain 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 1.D of
Exhibit B to this Agreement.  Similarly, “Liquidating
Losses” means any net capital loss realized in connection with any such
event.  The “Economic Capital Account
Balances” of the holders of LTIP Units 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 “Class
A Unit Economic Balance” shall mean (i) the Capital Account balance of the
General Partner, plus the amount of the General Partner’s share of any Partner
Minimum Gain or Partnership Minimum Gain, in either case to the extent
attributable to the General Partner’s ownership of Class A 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 6.01.D, divided by (ii)
the number of the General Partner’s Class A Units.  Any such allocations shall be made among the
holders of LTIP Units in proportion to the amounts required to be allocated to
each under this Section 6.01.D.  The
parties agree that the intent of this Section 6.01.D is to make the Capital
Account balance associated with each LTIP Unit economically equivalent to the
Capital Account balance associated with the General Partner’s Class A Units (on
a per-unit basis), but only if the Partnership has recognized cumulative net
gains with respect to its assets since the issuance of the relevant LTIP Unit.

 

Section 6.02.          Revisions to Allocations to Reflect
Issuance of Additional Partnership Interests

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

ARTICLE VII

MANAGEMENT AND OPERATIONS
OF BUSINESS

Section 7.01.          Management

A.    Powers of General Partner.  Except as otherwise expressly provided in
this Agreement, all management powers over the business and affairs of the
Partnership are and shall be exclusively vested in the General Partner, and no
Limited Partner shall have any right to participate in or exercise control or
management power over the business and affairs of the Partnership.  The General Partner may not be removed by the
Limited Partners with or without cause; provided, however, that
if the Shares (or comparable equity securities)of the General Partner Entity
are not Publicly Traded, the General Partner maybe removed with cause with the
Consent of the Limited Partners.  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
Sections 7.06 and 7.11 below, shall have full power and authority to do all
things deemed necessary or desirable by 

 

19

 

it to conduct the
business of the Partnership, to exercise all powers set forth in Section 3.02
hereof and to effectuate the purposes set forth in Section 3.01 hereof, including,
without limitation:

(1)           the making of any expenditures, the
lending or borrowing of money or will permit the General Partner Entity (as
long as the General Partner Entity qualifies as a REIT) to avoid the payment of
any federal income tax (including, for this purpose, any excise tax pursuant to
Section 4981 of the Code) and to make distributions to its stockholders
sufficient to permit the General Partner Entity to maintain REIT status, the
assumption or guarantee of, or other contracting for, indebtedness and other
liabilities, the issuance of evidences of indebtedness (including the securing
of same by mortgage, deed of trust or other lien or encumbrance on the
Partnership’s assets) and the incurring of any obligations the General Partner
deems necessary for the conduct of the activities of the Partnership;

(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 or all of the
assets of the Partnership (including the exercise or grant of any conversion,
option, privilege or subscription right or other right available in connection
with any assets at any time held by the Partnership) or the merger or other
combination of the Partnership with or into another entity, on such terms as
the General Partner deems proper;

(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 Partnership or any of the Partnership’s Subsidiaries, the lending of
funds to other Persons (including, without limitation, the Partnership’s
Subsidiaries) and the repayment of obligations of the Partnership and its
Subsidiaries and any other Person in which the Partnership has an equity
investment and the making of capital contributions to its Subsidiaries;

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

 

(6)           the mortgage, pledge, encumbrance or
hypothecation of any assets of the Partnership, and the use of the assets of
the Partnership (including, without limitation, cash on hand) for any purpose
consistent with the terms of this Agreement and on any terms it sees fit,
including, without limitation, the financing of the conduct or the operations
of the General Partners or the Partnership, the lending of funds to other
Persons (including, without limitation, any Subsidiaries of the Partnership)
and the repayment of obligations of the Partnership, any of its Subsidiaries
and any other Person in which it has an equity investment;

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

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

 

20

 

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

(10)         the selection, designation of powers,
authority and duties and dismissal of employees of the Partnership (including,
without limitation, employees having titles such as “president,” “vice
president,” “secretary” and “treasurer”) and agents, outside attorneys,
accountants, consultants and contractors of the Partnership, and the
determination of their compensation and other terms of employment or hiring;

(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 (including non-voting interests in entities controlled by Affiliates
of the Partnership or third parties) in, and the contribution of property to,
any further limited or general partnerships, joint ventures, limited liability
companies or other relationships that it deems desirable (including, without
limitation, the acquisition of interests in, and the contributions of funds or
property, or the making of loans, to its Subsidiaries and any other Person in
which it has an equity investment from time to time or the incurrence of
indebtedness on behalf of such Persons or the guarantee of obligations of such
Persons); provided that, as long as the General Partner has determined
to qualify as a REIT, the Partnership may not engage in any such formation,
acquisition or contribution that would cause the General Partner to fail to
qualify as a REIT);

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

(14)         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;

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

(16)         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, individually or jointly with any
such Subsidiary or other Person;

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

(18)         the making, executing and delivering of
any and all deeds, leases, notes, deeds to secure debt, mortgages, deeds of
trust, security agreements, conveyances, contracts, guarantees, warranties,
indemnities, waivers, releases or other legal instruments or agreements in
writing 

 

21

 

necessary or appropriate in the judgment of the
General Partner for the accomplishment of any of the powers of the General Partner
under this Agreement;

(19)         the distribution of cash to acquire
Partnership Units held by a Limited Partner in connection with a Limited
Partner’s exercise of its Redemption Right under Section 8.06 hereof; and

(20)         the amendment and restatement of Exhibit
A hereto to reflect accurately at all times the Capital Contributions and
Percentage Interests of the Partners as the same are adjusted from time to time
to the extent necessary to reflect redemptions, Capital Contributions, the
issuance of Partnership Units, the admission of any Additional Limited Partner
or any Substituted Limited Partner or otherwise, which amendment and
restatement, notwithstanding anything in this Agreement to the contrary, shall
not be deemed an amendment of this Agreement, as long as the matter or event
being reflected in Exhibit A hereto otherwise is authorized by this Agreement.

B.    No Approval by Limited
Partners.  Except as provided in
Section 7.11 below, each of the Limited Partners agrees that the General
Partner is authorized to execute, deliver and perform the above-mentioned
agreements and transactions on behalf of the Partnership without any further
act, approval or vote of the Partners, notwithstanding any other provision of
this Agreement, the Act or any applicable law, rule or regulation, to the full
extent permitted under the Act or other applicable law.  The execution, delivery or performance by the
General Partner or the Partnership of any agreement authorized or permitted under
this Agreement shall not constitute a breach by the General Partner of any duty
that the General Partner may owe the Partnership or the Limited Partners or any
other Persons under this Agreement or of any duty stated or implied by law or
equity.

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

D.    Working Capital and Other
Reserves.  At all times from and
after the date hereof, the General Partner may cause the Partnership to
establish and maintain working capital reserves in such amounts as the General
Partner, in its sole and absolute discretion, deems appropriate and reasonable
from time to time, including upon liquidation of the Partnership pursuant to
Section 13.02 hereof.

E.     No Obligations to
Consider Tax Consequences of Limited Partners.

In exercising its
authority under this Agreement, the General Partner may, but shall be under no
obligation to, take into account the tax consequences to any Partner (including
the General Partner) of any action taken (or not taken) by it.  The General Partner and the Partnership shall
not have liability to a Limited Partner for monetary damages or otherwise for
losses sustained, liabilities incurred or benefits not derived by such Limited
Partner in connection with such decisions, provided that the General Partner
has acted in good faith and pursuant to its authority under this Agreement.

Section 7.02.          Certificate of Limited Partnership

The General Partner has
previously filed the Certificate with the Secretary of State of Delaware.  To the extent that such action is determined
by the General Partner to be reasonable and necessary or appropriate, the
General Partner shall file amendments to and restatements of the Certificate
and do all the things to maintain the Partnership as a limited partnership (or
a partnership in which the limited partners have limited liability) under the
laws of the State of Delaware and each other state, the District of 

 

22

 

Columbia or other
jurisdiction in which the Partnership may elect to do business or own
property.  Subject to the terms of
Section 8.05.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 to any Limited Partner.  The
General Partner shall use all reasonable efforts to cause to be filed such
other certificates or documents as may be reasonable and necessary or
appropriate for the formation, continuation, qualification and operation of a
limited partnership (or a partnership in which the limited partners have
limited liability) in the State of Delaware and any other state, the District
of Columbia or other jurisdiction in which the Partnership may elect to do
business or own property.

Section 7.03.          Title to Partnership Assets

Title to Partnership
assets, whether real, personal or mixed and whether tangible or intangible,
shall be deemed to be owned by the Partnership as an entity, and no Partners,
individually or collectively, shall have any ownership interest in such
Partnership assets or any portion thereof. 
Title to any or all of the Partnership assets may be held in the name of
the Partnership, the General Partner or one or more nominees, as the General
Partner may determine, 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 7.04.          Reimbursement of the General
Partner

A.    No Compensation.  Except as provided in this Section 7.04 and
elsewhere in this Agreement (including the provisions of Articles V and VI
hereof regarding distributions, payments and allocations to which it may be
entitled), the General Partner shall not be compensated for its services as
general partner of the Partnership.

B.    Responsibility for
Partnership Expenses.  The
Partnership shall be responsible for and shall pay all expenses relating to the
Partnership’s organization, the ownership of its assets and its
operations.  The General Partner shall be
reimbursed on a monthly basis, or such other basis as the General Partner may
determine in its sole and absolute discretion, for all expenses it incurs
relating to the ownership and operation of, or for the benefit of, the
Partnership (including, without limitation, expenses related to the management
and administration of any Subsidiaries of the General Partner or the
Partnership or Affiliates of the Partnership such as auditing expenses and
filing fees); provided that, the amount of any such reimbursement shall
be reduced by (i) any interest earned by the General Partner with respect to
bank accounts or other instruments or accounts held by it as permitted in
Section 7.05.A below and (ii) any amount derived by the General Partner from
any investments permitted in Section 7.05.A below; and, provided  further,
that the General Partner shall not be reimbursed for (i) income tax liabilities
or (ii) filing or similar fees in connection with maintaining the General
Partner’s continued corporate existence that are incurred by the General
Partner.  The General Partner shall
determine in good faith the amount of expenses incurred by it related to the
ownership and operation of, or for the benefit of, the Partnership.  In the event that certain expenses are
incurred for the benefit of the Partnership and other entities (including the
General Partner), such expenses will be allocated to the Partnership and such
other entities in such a manner as the General Partner in its sole and absolute
discretion deems fair and reasonable. 
Such reimbursements shall be in addition to any reimbursement to the
General Partner pursuant to Section 10.03.C hereof and as a result of indemnification
pursuant to Section 7.07 below.  All
payments and 

 

23

 

reimbursements
hereunder shall be characterized for federal income tax purposes as expenses of
the Partnership incurred on its behalf, and not as expenses of the General
Partner.

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

D.    Reimbursement not a
Distribution.  If and to the extent
any reimbursement made pursuant to this Section 7.04 is determined for federal
income tax purposes not to constitute a payment of expenses of the Partnership,
the amount so determined shall be treated as a distribution to the General
Partner and there shall be a corresponding special allocation of gross income
to the General Partner, for purposes of computing the Partners’ Capital
Accounts.

Section 7.05.          Outside Activities of the General
Partner

A.    General.  Notwithstanding anything in this Agreement to
the contrary, it is expressly understood and agreed that the General Partner
may, if it determines such action to be in the best interests of the REIT or
the Partnership, elect to cause some or all of the assets of the Partnership
(including cash expected to be utilized to purchase assets that will be so
held) to be distributed to and held directly by the General Partner (the “Specially
Distributed Assets”).  Concurrently with
any such distribution, the General Partner shall (i) amend Section 5.01 of this
Agreement so as to provide that, from and after the date of such distribution,
each Partner other than the General Partner will receive the same distributions
that it would have received had the Specially Distributed Assets been held by
the Partnership rather than directly by the General Partner (and a corresponding
adjustment shall be made to the distributions to be made to the General
Partner); and (ii) make such further amendments to this Agreement (including,
without limitation, to the income and loss allocation provisions of Section
6.01 hereof) as may be necessary or appropriate to effect the intention of the
parties that the Partners be placed, as nearly as possible, in the same
position they would have been in had such Specially Distributed Assets been
held by the Partnership rather than directly by the General Partner; provided,
however, that the General Partner shall in no event be required to make
contributions to the Partnership to fund distributions to the other Partners.

B.    Repurchase of Shares.  In the event the General Partner exercises
its rights under the Articles of Incorporation to purchase Shares or otherwise
elects to purchase from its stockholders Shares in connection with a stock
repurchase or similar program or for the purpose of delivering such shares to
satisfy an obligation under any dividend reinvestment or stock purchase program
adopted by the General Partner, any employee stock purchase plan adopted by the
General Partner or any similar obligation or arrangement undertaken by the
General Partner in the future, then the General Partner shall cause the
Partnership to purchase from the General Partner that number of Partnership
Units of the appropriate class equal to the product obtained by multiplying the
number of Shares purchased by the General Partner times a fraction, the numerator
of which is one and the denominator of which is the Conversion Factor, on the
same terms and for the same aggregate price that the General Partner purchased
such Shares.

C.    Forfeiture of Shares.  In the event the Partnership or the General
Partner acquires Shares as a result of the forfeiture of such Shares under a
restricted or similar share plan, then the General Partner shall cause the
Partnership to cancel that number of Partnership Units of the appropriate class
equal to the 

 

24

 

number of Shares
so acquired divided by the Conversion Factor, and, if the Partnership acquired
such Shares, it shall transfer such Shares to the General Partner for
cancellation.

D.    Issuances of Shares.  After the Effective Date, the General Partner
shall not grant, award, or issue any additional Shares (other than Shares
issued pursuant to Section 8.06 hereof or pursuant to a dividend or
distribution (including any stock split) of Shares to all of its
stockholders),other equity securities of the General Partner or New Securities
unless (i) the General Partner shall cause, pursuant to Section 4.02.A hereof,
the Partnership to issue to the General Partner Partnership Interests or
rights, options, warrants or securities of the Partnership having designations,
preferences and other rights, all such that the economic interests are
substantially the same as those of such additional Shares, other equity
securities or New Securities, as the case may be, and (ii) the General Partner transfers
to the Partnership, as an additional Capital Contribution, the proceeds from
the grant, award, or issuance of such additional Shares, other equity
securities or New Securities, as the case may be, or from the exercise of
rights contained in such additional Shares, other equity securities or New
Securities, as the case may be.  Without
limiting the foregoing, the General Partner is expressly authorized to issue
additional Shares, other equity securities or New Securities, as the case
maybe, for less than fair market value, and the General Partner is expressly
authorized, pursuant to Section 4.02.A hereof, to cause the Partnership to
issue to the General Partner corresponding Partnership Interests, as long as
(a) the General Partner concludes in good faith that such issuance is in the
interests of the General Partner and the Partnership (for example, and not by
way of limitation, the issuance of Shares and corresponding Partnership Units
pursuant to a stock purchase plan providing for purchases of Shares, either by
employees or stockholders, at a discount from fair market value or pursuant to
employee stock options that have an exercise price that is less than the fair
market value of the Shares, either at the time of issuance or at the time of
exercise) and (b) the General Partner transfers all proceeds from any such
issuance or exercise to the Partnership as an additional Capital Contribution.

E.     Stock Option Plan.  If at any time or from time to time, the
General Partner sells Shares pursuant to any Stock Option Plan, the General
Partner shall transfer the net proceeds of the sale of such Shares to the
Partnership as an additional Capital Contribution in exchange for an amount of
additional Partnership Units equal to the number of Shares so sold divided by
the Conversion Factor.

F.   Funding
Debt.  The General Partner may incur a Funding Debt,
including, without limitation, a Funding Debt that is convertible into Shares
or otherwise constitutes a class of New Securities, subject to the condition
that the General Partner lends to the Partnership the net proceeds of such
Funding Debt; provided, that the General Partner shall not be obligated
to lend the net proceeds of any Funding Debt to the Partnership in a manner
that would be inconsistent with the General Partner’s ability to remain
qualified as a REIT.  If the General
Partner enters into any Funding Debt, the loan to the Partnership shall be on
comparable terms and conditions, including interest rate, repayment schedule
and costs and expenses, as are applicable with respect to or incurred in
connection with such Funding Debt.

 

25

 

                                                Section 7.06.                             Transactions with Affiliates

 

A.           Transactions with
Certain Affiliates.  Except (i) as
expressly permitted by this Agreement (other than Section 7.01.A hereof which
shall not be considered authority for a transaction that otherwise would be prohibited
by this Section 7.06.A) and (ii) all transactions with SL Green or its
Affiliates contemplated by the General Partner’s initial public offering, the
Partnership shall not, directly or indirectly, sell, transfer or convey any
property to, or purchase any property from, or borrow funds from, or lend funds
to, any Partner or any Affiliate of the Partnership or the General Partner or
the General Partner Entity that is not also a Subsidiary of the Partnership,
except pursuant to transactions that are on terms that are fair and reasonable
and no less favorable to the Partnership than would be obtained from an
unaffiliated third party.

B.             Benefit Plans.  The General Partner, in its sole and absolute
discretion and without the approval of the Limited Partners, may propose and
adopt on behalf of the Partnership employee benefit plans funded by the
Partnership for the benefit of employees of the General Partner, the
Partnership, Subsidiaries of the Partnership, SL Green, the Manager or any
Affiliate of any of them in respect of services performed, directly or
indirectly, for the benefit of the Partnership, the General Partner, or any of
the Partnership’s Subsidiaries.

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

                                                Section 7.07.                             Indemnification

 

A.           General.  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 or in connection with any and all claims, demands, actions, suits
or proceedings, civil, criminal, administrative or investigative incurred by
the Indemnitee and relating to the Partnership or the General Partner or the
formation or operations of, or the ownership of property by, either of them as
set forth in this Agreement in which any such Indemnitee may be involved, or is
threatened to be involved, as a party or otherwise, unless it is established by
a final determination of a court of competent jurisdiction that: (i) the act or
omission of the Indemnitee was material to the matter giving rise to the
proceeding and either was committed in bad faith or was the result of active
and deliberate dishonesty, (ii) the Indemnitee actually received an improper
personal benefit in money, property or services or (iii) in the case of any
criminal proceeding, the Indemnitee had reasonable cause to believe that the
act or omission was unlawful.  Without
limitation, the foregoing indemnity shall extend to any liability of any
Indemnitee, pursuant to a loan guarantee, contractual obligations for any
indebtedness or other obligations 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 7.07
in favor of any Indemnitee having or potentially having liability for any such
indebtedness.  The termination of any
proceeding by judgment, order or settlement does not create a presumption that
the Indemnitee did not meet the requisite standard of conduct set forth in this
Section 7.07.A.  The termination of any
proceeding by conviction or upon a plea of nolo contendere or its equivalent,
or an entry of an order of probation prior to judgment, creates a rebuttable
presumption that the Indemnitee acted in a manner contrary to that specified in
this Section 7.07.A with respect to the subject matter of such proceeding.  Any indemnification pursuant to this Section
7.07 shall be made only out of the assets of the Partnership, and

 

26

 

any insurance proceeds
from the liability policy covering the General Partner and any Indemnitees, 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 7.07.

 

B.             Advancement of
Expenses.  Reasonable expenses expected
to be incurred by an Indemnitee shall be paid or reimbursed by the Partnership
in advance of the final disposition of any and all claims, demands, actions,
suits or proceedings, civil, criminal, administrative or investigative made or
threatened against an Indemnitee upon receipt by the Partnership of (i) a
written affirmation by the Indemnitee of the Indemnitee’s good faith belief
that the standard of conduct necessary for indemnification by the Partnership
as authorized in this Section 7.07.B has been met and (ii) a written
undertaking by or on behalf of the Indemnitee to repay the amount if it shall
ultimately be determined that the standard of conduct has not been met.

C.             No Limitation of
Rights.  The indemnification provided
by this Section 7.07 shall be in addition to any other rights to which an
Indemnitee or any other Person may be entitled under any agreement, pursuant to
any vote of the Partners, as a matter of law or otherwise, and shall continue
as to an Indemnitee who has ceased to serve in such capacity unless otherwise
provided in a written agreement pursuant to which such Indemnitee is
indemnified.

D.            Insurance.  The Partnership may purchase and maintain
insurance on behalf of the Indemnitees and such other Persons as the General
Partner shall determine against any liability that may be asserted against or
expenses that may be incurred by such Person in connection with the Partnership’s
activities, regardless of whether the Partnership would have the power to
indemnify such Person against such liability under the provisions of this
Agreement.

E.              Benefit Plan
Fiduciary.  For purposes of this
Section 7.07, (i) the Partnership shall be deemed to have requested an
Indemnitee to serve as fiduciary of an employee benefit plan whenever the
performance by it of its duties to the Partnership also imposes duties on, or
otherwise involves services by, it to the plan or participants or beneficiaries
of the plan, (ii) excise taxes assessed on an Indemnitee with respect to an
employee benefit plan pursuant to applicable law shall constitute fines within
the meaning of this Section 7.07 and (iii) actions taken or omitted by the
Indemnitee with respect to an employee benefit plan in the performance of its
duties for a purpose reasonably believed by it to be i n 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.              No Personal
Liability for Limited Partners.  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.             Interested
Transactions.  An Indemnitee shall
not be denied indemnification in whole or in part under this Section 7.07
because the Indemnitee had an interest in the transaction with respect to which
the indemnification applies if the transaction was otherwise permitted by the
terms of this Agreement.

H.            Benefit.  The provisions of this Section 7.07 are for
the benefit of the Indemnitees, their heirs, successors, assigns and
administrators and shall not be deemed to create any rights for the benefit of
any other Persons.  Any amendment,
modification or repeal of this Section 7.07, or any provision hereof, shall be
prospective only and shall not in any way affect the limitation on the
Partnership’s liability to any Indemnitee under this Section 7.07 as in effect
immediately prior to such amendment, modification or repeal with respect to
claims arising from or related to matters occurring, in whole or in part, prior
to such amendment, modification or repeal, regardless of when such claims may
arise or be asserted.

 

27

 

I.                 Indemnification
Payments Not Distributions.  If and
to the extent any payments to the General Partner pursuant to this Section 7.07
constitute gross income to the General Partner (as opposed to the repayment of
advances made on behalf of the Partnership), such amounts shall constitute
guaranteed payments within the meaning of Section 707(c) of the Code, shall be
treated consistently therewith by the Partnership and all Partners, and shall
not be treated as distributions for purposes of computing the Partners’ Capital
Accounts.

                                                Section 7.08.                             Liability of the General Partner

 

A.           General.  Notwithstanding anything to the contrary set
forth in this Agreement, the General Partner and its directors and officers
shall not be liable for monetary damages to the Partnership, any Partners or
any Assignees for losses sustained, liabilities incurred or benefits not
derived as a result of errors in judgment or mistakes of fact or law or of any
act or omission if the General Partner or its directors and officers acted in
good faith.

B.             No Obligation to
Consider Separate Interests of Limited Partners or Stockholders.  The Limited Partners expressly acknowledge
that the General Partner is acting on behalf of the Partnership and the General
Partner’s stockholders collectively, that the General Partner is under no
obligation to consider the separate interests of the Limited Partners
(including, without limitation, the tax consequences to Limited Partners or
Assignees or to such stockholders) in deciding whether to cause the Partnership
to take (or decline to take) any actions. 
In the event of a conflict between the interests of the stockholders of
the General Partner Entity on one hand and the Limited Partners on the other,
the General Partner shall endeavor in good faith to resolve the conflict in
manner not adverse to either the stockholders of the General Partner Entity or
the Limited Partners; provided, however, that for so long as the
General Partner Entity, directly, or the General Partner, owns a controlling
interest in the Partnership, any such conflict that cannot be resolved in a
manner not adverse to either the stockholders of the General Partner Entity or
the Limited Partners shall be resolved in favor of the stockholders.  The General Partner shall not be liable for
monetary damages or otherwise for losses sustained, liabilities incurred or
benefits not derived by Limited Partners in connection with such decisions, provided
that the General Partner has acted in good faith.

C.             Actions of Agents.  Subject to its obligations and duties as
General Partner set forth in Section 7.01.A above, the General Partner may
exercise any of the powers granted to it by this Agreement and perform any of
the duties imposed upon it hereunder either directly or by or through its
employees or 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.            Effect of Amendment.  Any amendment, modification or repeal of this
Section 7.08 or any provision hereof shall be prospective only and shall not in
any way affect the limitations on the General Partner’s liability to the
Partnership and the Limited Partners under this Section 7.08 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.              Certain
Definitions.  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

 

28

 

other
or different standards imposed by this Agreement or by law or any other
agreement contemplated herein.

 

                                                Section 7.09.                             Other Matters Concerning the General
Partner

 

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

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

C.             Action Through Agents. 
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 a duly appointed attorney or attorneys-in-fact.  Each such attorney shall, to the extent
provided by the General Partner in the power of attorney, have full power and
authority to do and perform all and every act and duty which is permitted or
required to be done by the General Partner hereunder.

D.            Actions to Maintain
REIT Status or Avoid Taxation of the General Partner Entity.  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
General Partner Entity to continue to qualify as a REIT or (ii) to allow the
General Partner Entity to avoid incurring any liability for taxes under Section
857 or 4981 of the Code, is expressly authorized under this Agreement and is
deemed approved by all of the Limited Partners.

                                                Section 7.10.                             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, to enter into any contracts on behalf of the Partnership and to
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

 

29

 

delivered
in accordance with the terms and provisions of this Agreement and is binding
upon the Partnership.

 

                                                Section 7.11.                             Restrictions on General Partner’s
Authority

 

A.           Consent Required.  The General Partner may not take any action
in contravention of an express prohibition or limitation of this Agreement
without the written Consent of (i) all Partners adversely affected or (ii) such
lower percentage of the Limited Partner Interests as may be specifically
provided for under a provision of this Agreement or the Act.

B.             Sale of All Assets
of the Partnership.  Except as provided
in Article XIII hereof, the General Partner may not, directly or indirectly,
cause the Partnership to sell, exchange, transfer or otherwise dispose of all
or substantially all of the Partnership’s assets in a single transaction or a
series of related transactions(including by way of merger (including a
triangular merger), consolidation or other combination with any other Persons)
(i) if such merger, sale or other transaction is in connection with a
Termination Transaction permitted under Section 11.02.B hereof, without the
Consent of the Partners holding a majority of Percentage Interests (including
the effect of any Partnership Units held by the General Partner) or (ii)
otherwise, without the Consent of the Limited Partners.

                                                Section 7.12.                             Loans by Third Parties

 

The Partnership may incur Debt, or enter into similar
credit, guarantee, financing or refinancing arrangements for any purpose
(including, without limitation, in connection with any acquisition of property
or other assets) with any Person that is not the General Partner upon such
terms as the General Partner determines appropriate; provided that, the
Partnership shall not incur any Debt that is recourse to the General Partner,
except to the extent otherwise agreed to by the General Partner in its sole
discretion.

ARTICLE VIII

RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS

                                                Section 8.01.                             Limitation of Liability

 

The Limited Partners
shall have no liability under this Agreement except as expressly provided in
this Agreement, including Section 10.05 hereof, or under the Act.

                                                Section 8.02.                             Management of Business

                

No Limited Partner or
Assignee (other than the General Partner, any of its Affiliates or any officer,
director, employee, partner, agent or trustee of the General Partner, the
Partnership or any of their Affiliates, in their capacity as such) shall take
part in the operation, management or control (within the meaning of the Act) of
the Partnership’s business, transact any business in the Partnership’s name or
have the power to sign documents for or otherwise bind the Partnership.  The transaction of any such business by the
General Partner, any of its Affiliates or any officer, director, employee,
partner, 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.

 

30

 

                                                Section 8.03.                             Outside Activities of Limited Partners

 

Subject to Section 7.05
hereof, and subject to any agreements entered into pursuant to Section 7.06.C
hereof and to any other agreements entered into by a Limited Partner or its
Affiliates with the Partnership or a Subsidiary, any Limited Partner (other
than the General Partner) and any officer, director, employee, agent, trustee,
Affiliate or stockholder of any Limited Partner shall be entitled to and may
have business interests and engage in business activities in addition to those
relating to the Partnership, including business interests and activities in
direct or indirect competition with the Partnership.  Neither the Partnership nor any Partners
shall have any rights by virtue of this Agreement in any business ventures of
any Limited Partner or Assignee.  None of
the Limited Partners (other than the General Partner) nor any other Person
shall have any rights by virtue of this Agreement or the partnership
relationship established hereby in any business ventures of any other Person
(other than the General Partner to the extent expressly provided herein), and
such Person shall have no obligation pursuant to this Agreement to offer any
interest in any such business ventures to the Partnership, any Limited Partner
or any such other Person, even if such opportunity is of a character which, if
presented to the Partnership, any Limited Partner or such other Person, could
be taken by such Person.

                                                Section 8.04.                             Return of Capital

 

Except pursuant to the
right of redemption set forth in Section 8.06 below, no Limited Partner shall
be entitled to the withdrawal or return of its Capital Contribution, except to
the extent of distributions made pursuant to this Agreement or upon termination
of the Partnership as provided herein. 
No Limited Partner or Assignee shall have priority over any other
Limited Partner or Assignee either as to the return of Capital Contributions
(except as permitted by Section 4.02.A hereof) or, except to the extent
provided by Exhibit C hereto or as permitted by Sections 4.02.A, 5.01.B, 6.01.A(ii) and 6.01.B(i)hereof or otherwise expressly
provided in this Agreement, as to profits, losses, distributions or credits.

                                                Section 8.05.                             Rights of Limited Partners Relating to
the Partnership

 

A.           General.  In addition to other rights provided by this
Agreement or by the Act, and except as limited by 8.05.D below, each Limited
Partner shall have the right, for a purpose reasonably related to such Limited
Partner’s interest as a limited partner in the Partnership, upon written demand
with a statement of the purpose of such demand and at such Limited Partner’s
own expense:

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

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

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

(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.

 

31

 

B.             Notice of
Conversion Factor.  The Partnership
shall notify each Limited Partner upon request of the then current Conversion
Factor and any changes that have been made thereto.

C.             Notice of
Extraordinary Transaction of the General Partner Entity.  The General Partner Entity shall not make any
extraordinary distributions of cash or property to its stockholders or effect a
merger (including without limitation, a triangular merger), a sale of all or
substantially all of its assets or any other similar extraordinary transaction
without notifying the Limited Partners of its intention to make such
distribution or effect such merger, sale or other extraordinary transaction at
least twenty (20) Business Days prior to the record date to determine
stockholders eligible to receive such distribution or to vote upon the approval
of such merger, sale or other extraordinary transaction (or, if no such record
date is applicable, at least twenty (20) Business Days before consummation of
such merger, sale or other extraordinary transaction).  This provision for such notice shall not be
deemed (i) to permit any transaction that otherwise is prohibited by this
Agreement or requires a Consent of the Partners or (ii) to require a Consent of
the Limited Partners to a transaction that does not otherwise require Consent
under this Agreement.  Each Limited
Partner agrees, as a condition to the receipt of the notice pursuant hereto, to
keep confidential the information set forth therein until such time as the
General Partner Entity has made public disclosure thereof and to use such
information during such period of confidentiality solely for purposes of
determining whether or not to exercise the Redemption Right; provided, however,
that a Limited Partner may disclose such information to its attorney,
accountant and/or financial advisor for purposes of obtaining advice with
respect to such exercise so long as such attorney, accountant and/or financial
advisor agrees to receive and hold such information subject to this
confidentiality requirement.

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

                                                Section 8.06.                             Class A
Redemption Right

 

A.           General.  (i) 
Subject to Section 8.06.C below, on or after the date two (2) years
after the issuance of a Class A Unit to a Limited Partner pursuant to Article
IV hereof, the holder of a Class A Unit (if other than the General Partner or
the General Partner Entity) shall have the right (the “Redemption Right”) to
require the Partnership to redeem such Class A Unit on a Specified Redemption
Date and at a redemption price equal to and in the form of the Cash Amount to
be paid by the Partnership.  Any such
Redemption Right shall be exercised pursuant to a Notice of Redemption
delivered to the Partnership (with a copy to the General Partner) by the
Limited Partner who is exercising the Redemption Right (the “Redeeming Partner”).  A Limited Partner may not exercise the
Redemption Right for less than one thousand (1,000) Class A
Units or, if such Redeeming Partner holds less than one thousand (1,000) Class
A Units, for less than all of the Class A Units held by such Redeeming Partner.

(ii)                                  The
Redeeming Partner shall have no right with respect to any Class A Units so redeemed to receive any distributions paid after
the Specified Redemption Date.

(iii)                               The
Assignee of any Limited Partner may exercise the rights of such Limited Partner
pursuant to this Section 8.06 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 Limited Partner’s Assignee. 
In connection with any exercise of the such
rights by such Assignee on behalf of such Limited Partner, the Cash Amount
shall be paid by the Partnership directly to such Assignee and not to such
Limited Partner.

 

32

 

(iv)                              Notwithstanding
the foregoing, the Redemption Right shall not be exercisable with respect to
any Class A Unit issued upon conversion of an LTIP Unit until on or after the
date that is two years after the date on which the LTIP Unit was issued, provided
however, that the foregoing restriction shall not apply if the Redemption Right
is exercised by a LTIP Unit holder in connection with a transaction that falls
within the definition of a “change of control” under the agreement or
agreements pursuant to which the LTIP Units were issued to him or her and
provided further that the two (2) year requirement set forth in the first
sentence of Section 8.06.A(i) shall not apply with respect to Class A Units
issued upon conversion of LTIP Units.

B.             General
Partner Assumption of Right.  (i)
If a Limited Partner has delivered a Notice of Redemption, the General Partner
may, in its sole and absolute discretion (subject to any limitations on
ownership and transfer of Shares set forth in the Articles of Incorporation),
elect to assume directly and satisfy a Redemption Right by paying to the
Redeeming Partner either the Cash Amount or the Shares Amount, as the General
Partner determines in its sole and absolute discretion (provided that
payment of the Redemption Amount in the form of Shares shall be in Shares
registered under Section 12 of the Exchange Act and listed for trading on the
exchange or national market on which the Shares are Publicly Traded, and provided,
further that, in the event that the Shares are not Publicly Traded at
the time a Redeeming Partner exercises its Redemption Right, the Redemption
Amount shall be paid only in the form of the Cash Amount unless the Redeeming
Partner, in its sole and absolute discretion, consents to payment of the
Redemption Amount in the form of the Shares Amount), on the Specified
Redemption Date, whereupon the General Partner shall acquire the Class A 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.  Unless the General Partner, in its sole and
absolute discretion, shall exercise its right to assume directly and satisfy
the Redemption Right, the General Partner shall not have any obligation to the
Redeeming Partner or to the Partnership with respect to the Redeeming Partner’s
exercise of the Redemption Right.  In the
event the General Partner shall exercise its right to satisfy the Redemption
Right in the manner described in the first sentence of this Section 8.06.B and
shall fully perform its obligations in connection therewith, the Partnership
shall have no right or obligation to pay any amount to the Redeeming Partner
with respect to such Redeeming Partner’s exercise of the Redemption Right, and
each of the Redeeming Partner, the Partnership and the General Partner shall,
for federal income tax purposes, treat the transaction between the General
Partner and the Redeeming Partner as a sale of the Redeeming Partner’s
Partnership Units to the General Partner. 
Nothing contained in this Section 8.06.B shall imply any right of the
General Partner to require any Limited Partner to exercise the Redemption Right
afforded to such Limited Partner pursuant to Section 8.06.A above.

(ii)                                  In
the event that the General Partner determines to pay the Redeeming Partner the
Redemption Amount in the form of Shares, the total number of Shares to be paid
to the Redeeming Partner in exchange for the Redeeming Partner’s Partnership
Units shall be the applicable Shares Amount. 
In the event this amount is not a whole number of Shares, the Redeeming
Partner shall be paid (i) that number of Shares which equals the nearest whole
number less than such amount plus (ii) an amount of cash which the General
Partner determines, in its reasonable discretion, to represent the fair value
of the remaining fractional Share which would otherwise be payable to the
Redeeming Partner.

(iii)                               Each
Redeeming Partner agrees to execute such documents as the General Partner may
reasonably require in connection with the issuance of Shares upon exercise of
the Redemption Right.

C.             Exceptions to
Exercise of Redemption Right. 
Notwithstanding the provisions of Sections 8.06.A and 8.06.B above, a
Partner shall not be entitled to exercise the Redemption Right pursuant to
Section 8.06.A above if (but only as long as) the delivery of Shares to such
Partner on the Specified Redemption Date (i) would be prohibited under the
Articles of Incorporation or (ii) as long as the Shares are Publicly Traded,
would be prohibited under applicable federal or state securities laws or
regulations

 

33

 

(in
each case regardless of whether the General Partner would in fact assume and
satisfy the Redemption Right).

 

D.            No Liens on
Partnership Units Delivered for Redemption. 
Each Limited Partner covenants and agrees with the General Partner that
all Partnership Units delivered for redemption (including Partnership Units
redeemed under Section 8.07) shall be delivered to the Partnership or the
General Partner, as the case may be, free and clear of all liens, and,
notwithstanding anything contained herein to the contrary, neither the General
Partner nor the Partnership shall be under any obligation to acquire
Partnership Units which are or may be subject to any liens.  Each Limited Partner further agrees that, in
the event any state or local property transfer tax is payable as a result of
the transfer of its Partnership Units to the Partnership or the General
Partner, such Limited Partner shall assume and pay such transfer tax.

E.              Additional
Partnership Interests.  In the event
that the Partnership issues Partnership Interests to any Additional Limited
Partner pursuant to Article IV hereof, the General Partner shall make such
amendments to this Section 8.06 as it determines are necessary to reflect the
issuance of such Partnership Interests (including setting forth any
restrictions on the exercise of the Redemption Right with respect to such
Partnership Interests).

                                                Section 8.07.                             Redemption of Class B Units

 

The Class B Units shall
be subject to mandatory redemption if the Management Agreement is
terminated.  The General Partner shall
send notice of Class B Unit redemption within ten days after the General
Partner sends or receives notice of termination of the Management Agreement.  The redemption date shall be the date on
which termination of the Management Agreement is effective.  The redemption amount, to be paid in cash or
by wire transfer on the redemption date, shall be equal to two times the annual
distributions on a Class B Unit relating to either the most recently completed
calendar year or, if higher, the prior calendar year; provided that if on the
redemption date the General Partner is becoming self-managed, the redemption
amount will be equal to 50% of the redemption amount described above; and
provided, further, that if the Management Agreement is terminated by the
General Partner for cause, the aggregate redemption amount shall be $100.   Upon any such redemption, the Class B Units
will also be entitled to receive any distributions payable with respect to
periods through the redemption date.  If such distribution amounts cannot be calculated on or by the
redemption date, they shall be calculated and paid as promptly as possible
thereafter, but in no event later than 30 days after the redemption date.

ARTICLE IX

BOOKS, RECORDS, ACCOUNTING AND REPORTS

                                                Section 9.01.                             Records and Accounting

 

The General Partner shall
keep or cause to be kept at the principal office of the Partnership appropriate
books and records with respect to the Partnership’s business, including,
without limitation, all books and records necessary to provide to the Limited
Partners any information, lists and copies of documents required to be provided
pursuant to Section 9.03 below.  Any
records maintained by or on behalf of the Partnership in the regular course of
its business may be kept on, or be in the form of, punch cards, magnetic tape,
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.

 

34

 

Section 9.02.                             Fiscal
Year

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

Section 9.03.                             Reports

A.           Annual Reports.  As soon as practicable, but in no event later
than the date on which the General Partner Entity mails its annual report to
its stockholders, the General Partner shall cause to be mailed to each Limited
Partner an annual report, as of the close of the most recently ended
Partnership Year, containing financial statements of the Partnership, or of the
General Partner Entity if such statements are prepared solely on a consolidated
basis with the Partnership, 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 Entity.

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

ARTICLE X

TAX MATTERS

                                                Section 10.01.                       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 10.02.                       Tax Elections

 

A.           Except as otherwise
provided herein, the General Partner shall, in its sole and absolute
discretion, determine whether to make any available election pursuant to the
Code.  The General Partner shall have the
right to seek to revoke any such election (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.

B.             To the extent
provided for in Treasury Regulations, revenue rulings, revenue procedures
and/or other IRS guidance issued after the date hereof, the Partnership is
hereby authorized to, and at the direction of the General Partner shall, elect
a safe harbor under which the fair market value of any Partnership Interests
issued after the effective date of such Treasury Regulations (or other
guidance) will be treated as equal to the liquidation value of such Partnership
Interests  (i.e., a value equal to the
total amount that would be distributed with respect to such interests if the
Partnership sold all of its assets for their fair market value immediately
after the issuance of such Partnership Interests, satisfied its liabilities
(excluding any non-recourse liabilities to the extent the balance of such
liabilities exceeds the fair market value of the assets that secure them) and
distributed the net proceeds to the Partners under the terms of

 

35

 

this
Agreement). In the event that the Partnership makes a safe harbor election as
described in the preceding sentence, each Partner hereby agrees to comply with
all safe harbor requirements with respect to transfers of such Partnership
Interests while the safe harbor election remains effective.

 

                                                Section 10.03.                       Tax Matters Partner

 

A.           General.  The General Partner shall be the “tax matters
partner” of the Partnership for federal income tax purposes.  Pursuant to Section 6223(c)(3)
of the Code, upon receipt of notice from the IRS of the beginning of an
administrative proceeding with respect to the Partnership, the tax matters
partner shall furnish the IRS with the name, address, taxpayer identification
number and profit interest of each of the Limited Partners and any Assignees; provided,
however, that such information is provided to the Partnership by the
Limited Partners.

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

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

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

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

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

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

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

The taking of any action
and the incurring of any expense by the tax matters partner in connection with
any such proceeding, except to the extent required by law, is a matter in the
sole and absolute

 

36

 

discretion
of the tax matters partner and the provisions relating to indemnification of
the General Partner set forth in Section 7.07 hereof shall be fully applicable
to the tax matters partner in its capacity as such.

 

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

Section 10.04.                       Organizational
Expenses

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

Section 10.05.                       Withholding

Each Limited Partner
hereby authorizes the Partnership to withhold from or pay on behalf of or with
respect to such Limited Partner any amount of federal, state, local, or foreign
taxes that the General Partner determines that the Partnership is required to
withhold or pay with respect to any amount distributable or allocable to such
Limited Partner pursuant to this Agreement, including, without limitation, any
taxes required to be withheld or paid by the Partnership pursuant to Section
1441, 1442, 1445, or 1446 of the Code. 
Any amount paid on behalf of or with respect to a Limited Partner shall
constitute a recourse loan by the Partnership to such Limited Partner, which
loan shall be repaid by such Limited Partner within fifteen (15) days after
notice from the General Partner that such payment must be made unless (i) the
Partnership withholds such payment from a distribution which would otherwise be
made to the Limited Partner or (ii) the General Partner determines, in its sole
and absolute discretion, that such payment may be satisfied out of the
available funds of the Partnership which would, but for such payment, be
distributed to the Limited Partner.  Any
amounts withheld pursuant to the foregoing clauses (i) or (ii) shall be treated
as having been distributed to such Limited Partner.  Each Limited Partner hereby unconditionally
and irrevocably grants to the Partnership a security interest in such Limited
Partner’s Partnership Interest to secure such Limited Partner’s obligation to
pay to the Partnership any amounts required to be paid pursuant to this Section
10.05.  In the event that a Limited
Partner fails to pay any amounts owed to the Partnership pursuant to this
Section 10.05 when due, the General Partner may, in its sole and absolute
discretion, elect to make the payment to the Partnership on behalf of such
defaulting Limited Partner, and in such event shall be deemed to have loaned
such amount to such defaulting Limited Partner and shall succeed to all rights
and remedies of the Partnership as against such defaulting Limited Partner
(including, without limitation, the right to receive distributions).  Any amounts payable by a Limited Partner
hereunder shall bear interest at the base rate on corporate loans at large
United States money center commercial banks, as published from time to time in
the Wall Street Journal, plus four (4) percentage points (but not higher than
the maximum lawful rate) from the date such amount is due (i.e., fifteen (15)
days after demand) until such amount is paid in full.  Each Limited Partner shall take such actions
as the Partnership or the General Partner shall request in order to perfect or enforce
the security interest created hereunder.

 

37

 

ARTICLE XI

TRANSFERS AND WITHDRAWALS

Section 11.01.                       Transfer

A.           Definition.  The term “transfer,” when used in this
Article XI with respect to a Partnership Interest or a Partnership Unit, shall
be deemed to refer to a transaction by which the General Partner purports to
assign all or any part of its General Partnership 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 XI does not include any redemption or repurchase of
Partnership Units by the Partnership from a Partner (including the General
Partner), acquisition of Partnership Units from a Limited Partner by the
General Partner pursuant to Section 8.06 hereof or otherwise or any conversion
of LTIP Units into Class A Units.  No
part of the interest of a Limited Partner shall be subject to the claims of any
creditor, any spouse for alimony or support, or to legal process, and may not
be voluntarily or involuntarily alienated or encumbered except as may be
specifically provided for in this Agreement.

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

Section 11.02.                       Transfers
of Partnership Interests of General Partner

A.           Except for transfers of
Partnership Units to the Partnership as provided in Section 7.05 or Section
8.06 hereof, the General Partner may not transfer any of its Partnership
Interest except (i) in connection with a transaction described in Section
11.02.B below (ii) to a wholly-owned Subsidiary or (iii) as otherwise expressly
permitted under this Agreement, nor shall the General Partner withdraw as
General Partner except in connection with a transaction described in
Section11.02.B below.

B.             The General Partner
shall not engage in any merger (including a triangular merger), consolidation
or other combination with or into another person, sale of all or substantially
all of its assets or any reclassification, recapitalization or change of
outstanding Shares (other than a change in par value, or from par value to no
par value, or as a result of a subdivision or combination as described in the
definition of “Conversion Factor”) (“Termination Transaction”), unless the
Termination Transaction has been approved by the Consent of the Partners
holding a majority or more of the then outstanding Percentage Interests
(including the effect of any Partnership Units held by the General Partner) and
in connection with which all Limited Partners either will receive, or will have
the right to elect to receive, for each Partnership Unit an amount of cash,
securities, or other property equal to the product of the Conversion Factor and
the greatest amount of cash, securities or other property paid to a holder of
Shares, if any, corresponding to such Partnership Unit that was issued pursuant
to Section 4.02.A hereof in consideration of one such Share at any time during
the period from and after the date on which the Termination Transaction is
consummated; provided that, if, in connection with the Termination
Transaction, a purchase, tender or exchange offer shall have been made to and
accepted by the holders of more than fifty percent (50%) of the outstanding
Shares, each holder of Partnership Units shall receive, or shall have the right
to elect to receive, the greatest amount of cash, securities, or other property
which such holder would have received had it exercised the Redemption Right and
received Shares in exchange for its Partnership Units immediately prior to the
expiration of such purchase, tender or exchange offer and had thereupon
accepted such purchase, tender or exchange offer.

 

38

 

Section 11.03.                       Limited
Partners’ Rights to Transfer

A.           General.  A Limited Partner may not transfer any of
such Limited Partner’s rights as a Limited Partner without the consent of the
General Partner, which consent the General Partner may withhold in its sole
discretion; provided, however, that no consent shall be required
for a transfer or assignment by the Manager or SL Green or its Affiliate of its
Class B Units or the rights to receive distributions pursuant to Class B Units
to an officer, director or employee of the General Partner, the Manager or SL Green.

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

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

D.            No Transfers
Affecting Tax Status of Partnership. 
No transfer of Partnership Units by a Limited Partner (including a
redemption or exchange pursuant to Section 8.06 hereof) 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 for federal income tax purposes or would result in a termination of
the Partnership for federal income tax purposes (except as a result of the
redemption or exchange for Shares of all Partnership Units held by all Limited
Partners other than the General Partner or the General Partner Entity or any
Subsidiary of either the General Partner or the General Partner Entity or
pursuant to a transaction expressly permitted under Section 7.11.B or Section
11.02 hereof), (ii) in the opinion of legal counsel for the Partnership, it
would adversely affect the ability of the General Partner Entity to continue to
qualify as a REIT or would subject the General Partner Entity to any additional
taxes under Section 857 or Section 4981 of the Code or (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.

E.              No Transfers to
Holders of Nonrecourse Liabilities. 
No pledge or transfer of any Partnership Units may be made to a lender
to the Partnership, or to 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; provided that, as a
condition to such consent the lender will be required to enter into an
arrangement with the Partnership and the General Partner to exchange or redeem
for the Redemption Amount any Partnership Units transferred or in which a
security interest is held simultaneously with the time at which such lender
would be deemed to be a partner in the Partnership for purposes of allocating
liabilities to such lender under Section 752 of the Code.

F.              Transfer Register.  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 Sections 8-207,8-313(1) and 8-321
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

 

39

 

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 11.04.                       Substituted
Limited Partners

A.           Consent of General
Partner.  No Limited Partner shall
have the right to substitute a transferee as a Limited Partner in its place
without the consent of the General Partner to the admission of a transferee of
the interest of a Limited Partner pursuant to this Section 11.04 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; provided that a transfer which does not require consent of the
General Partner under Section 11.03A shall not require the General Partner’s
consent under this section.

B.             Rights of
Substituted Limited Partner.  A
transferee who has been admitted as a Substituted Limited Partner in accordance
with this Article XI shall have all the rights and powers and be subject to all
the restrictions and liabilities of a Limited Partner under this
Agreement.  The admission of any
transferee as a Substituted Limited Partner shall be conditioned upon the
transferee executing and delivering to the Partnership an acceptance of all the
terms and conditions of this Agreement (including, without limitation, the
provisions of Section 15.11 hereof and such other documents or instruments as
may be required to effect the admission).

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

Section 11.05.                       Assignees

If the General Partner,
in its sole and absolute discretion, does not consent to the admission of any
permitted transferee under Section 11.03 above as a Substituted Limited
Partner, as described in Section 11.04 above, such transferee shall be
considered an Assignee for purposes of this Agreement.  An Assignee shall be entitled to all the
rights of an assignee of a limited partner interest under the Act, including
the right to receive distributions from the Partnership and the share of Net
Income, Net Losses, gain, loss and Recapture Income attributable to the
Partnership Units assigned to such transferee, and shall have the rights
granted to the Limited Partners under Section 8.06 hereof 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 the provisions of this Article XI to the same extent and in
the same manner as any Limited Partner desiring to make an assignment of
Partnership Units.

 

40

 

Section 11.06.                       General
Provisions

A.           Withdrawal of
Limited Partner.  No Limited Partner
may withdraw from the Partnership other than as a result of a permitted
transfer of all of such Limited Partner’s Partnership Units in accordance with
this Article XI or pursuant to redemption of all of its Partnership Units under
Section 8.06 hereof.

B.             Termination of
Status as Limited Partner.  Any
Limited Partner who shall transfer all of its Partnership Units in a transfer
permitted pursuant to this Article XI or pursuant to redemption of all of its
Partnership Units under Section 8.06 hereof shall cease to be a Limited Partner.

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

D.            Allocations.  If any Partnership Interest is transferred
during any quarterly segment of the Partnership’s fiscal year in compliance
with the provisions of this Article XI or redeemed or transferred pursuant to
Section 8.06 hereof, Net Income, Net Losses, each item thereof and all other
items attributable to such interest for such fiscal year shall be divided and
allocated between the transferor Partner and the transferee Partner by taking
into account their varying interests during the fiscal year in accordance with
Section 706(d) of the Code, using the interim closing of the books method
(unless the General Partner, in its sole and absolute discretion, elects to
adopt a daily, weekly, or a monthly proration period, in which event Net
Income, Net Losses, each item thereof and all other items attributable to such
interest for such fiscal year shall be prorated based upon the applicable
method selected by the General Partner). 
Solely for purposes of making such allocations, each of such items for
the calendar month in which the transfer or redemption occurs shall be allocated
to the Person who is a Partner as of midnight on the last day of said
month.  All distributions attributable to
any 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
thereafter attributable to such Partnership Unit shall be made to the
transferee Partner.

E.              Additional
Restrictions.  In addition to any
other restrictions on transfer herein contained, including without limitation
the provisions of this Article XI, in no event may any transfer or assignment
of a Partnership Interest by any Partner (including pursuant to Section 8.06
hereof) be made without the express consent of the General Partner, in its sole
and absolute discretion, (i) to any person or entity who lacks the legal right,
power or capacity to own a Partnership Interest; (ii) in violation of applicable
law; (iii) of any component portion of a Partnership Interest, such as the
Capital Account, or rights to distributions, separate and apart from all other
components of a Partnership Interest except as permitted by Section 11.03A;
(iv) if in the opinion of legal counsel to the Partnership such transfer would
cause a termination of the Partnership for federal or state income tax purposes
(except as a result of the redemption or exchange for Shares of all Partnership
Units held by all Limited Partners or pursuant to a transaction expressly
permitted under Section 7.11.B or Section 11.02 hereof); (v) if in the opinion
of counsel to the Partnership, such transfer would cause the Partnership to
cease to be classified as a partnership for federal income tax purposes (except
as a result of the redemption or exchange for Shares of all Partnership Units
held by all Limited Partners or pursuant to a transaction expressly permitted
under Section 7.11.B or Section 11.02 hereof); (vi) if such transfer would cause
the Partnership to become, with respect to any employee benefit plan subject to
Title I of ERISA, a “party-in-interest” (as defined in Section 3(14) of ERISA)
or a “disqualified person” (as defined in Section 4975(c) of the Code); (vii)
without the consent of the General Partner, to any “benefit plan investor”
within the meaning of Department of Labor Regulations Section 2510.3-101(f);
(viii) if such transfer would, in the opinion of counsel to the Partnership,
cause any portion of the assets of the Partnership to constitute assets of any

 

41

 

employee benefit plan
pursuant to Department of Labor Regulations Section 2570.3-101; (ix) if such
transfer requires the registration of such Partnership Interest pursuant to any
applicable federal or state securities laws; (x) if such transfer is
effectuated through an “established securities market” or a “secondary market”
(or the substantial equivalent thereof) within the meaning of Section 7704 of
the Code or such transfer causes the Partnership to become a “publicly traded
partnership,” as such term is defined in Section 469(k)(2) or Section 7704(b)
of the Code; (xi) if such transfer subjects the Partnership to regulation under
the Investment Company Act of 1940, the Investment Advisors Act of 1940 or the
Employee Retirement Income Security Act of 1974, each as amended; (xii) if such
transfer could adversely affect the ability of the General Partner Entity to
remain qualified as a REIT; or (xiii) if in the opinion of legal counsel for
the Partnership, such transfer would adversely affect the ability of the
General Partner Entity to continue to qualify as a REIT or subject the General
Partner Entity to any additional taxes under Section 857 or Section 4981 of the
Code.

 

F.              Avoidance of “Publicly
Traded Partnership” Status.  The
General Partner shall monitor the transfers of interests in the Partnership to
determine (i) if such interests are being traded on an “established securities
market” or a “secondary market (or the substantial equivalent thereof)” within
the meaning of Section 7704 of the Code and (ii) whether additional transfers
of interests would result in the Partnership being unable to qualify for at
least one of the “safe harbors” set forth in Regulations Section 1.7704-1 (or
such other guidance subsequently published by the IRS setting forth safe
harbors under which interests will not be treated as “readily tradable” on a
secondary market (or the substantial equivalent thereof) within the meaning of
Section 7704 of the Code (the “Safe Harbors”). 
The General Partner shall take all steps reasonably necessary or
appropriate to prevent any trading of interests or any recognition by the
Partnership of transfers made on such markets and, except as otherwise provided
herein, to insure that at least one of the Safe Harbors is met.

ARTICLE XII

ADMISSION OF PARTNERS

Section 12.01.                       Admission
of Successor General Partner

A successor to all of the
General Partner’s General Partnership Interest pursuant to Section 11.02 hereof
who is proposed to be admitted as a successor General Partner shall be admitted
to the Partnership as the General Partner, effective upon such transfer.  Any such transferee shall carry on the
business of the Partnership without dissolution.  In each case, the admission shall be subject
to the successor General Partner’s 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.

Section 12.02.                       Admission
of Additional Limited Partners

A.           General.  No Person shall be admitted as an Additional
Limited Partner without the consent of the General Partner, which consent shall
be given or withheld in the General Partner’s sole and absolute
discretion.  A Person who makes a Capital
Contribution to the Partnership in accordance with this Agreement, including,
without limitation, pursuant to Section 4.01.C hereof, or who exercises an
option to receive Partnership Units shall be admitted to the Partnership as an
Additional Limited Partner only with the consent of the General Partner and
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 15.11 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.  The admission of any Person as an Additional
Limited Partner shall become effective on the date upon which the name of such
Person is

 

42

 

recorded
on the books and records of the Partnership, following the consent of the
General Partner to such admission.

 

B.             Allocations to
Additional Limited Partners.  If any
Additional Limited Partner is admitted to the Partnership on any day other than
the first day of a Partnership Year, then Net Income, Net Losses, each item
thereof and all other items allocable among Partners and Assignees for such
Partnership Year shall be allocated among such Additional Limited Partner and
all other Partners and Assignees by taking into account their varying interests
during the Partnership Year in accordance with Section 706(d) of the Code, using
the interim closing of the books method (unless the General Partner, in its
sole and absolute discretion, elects to adopt a daily, weekly or monthly
proration method, in which event Net Income, Net Losses, and each item thereof
would be prorated based upon the applicable period selected by the General
Partner).Solely for purposes of making such allocations, each of such items for
the calendar month in which an admission of any Additional Limited Partner
occurs shall be allocated among all the Partners and Assignees including such
Additional Limited Partner.  All
distributions with respect to which the Partnership Record Date is before the
date of such admission shall be made solely to Partners and Assignees other than
the Additional Limited Partner, and all distributions thereafter shall be made
to all the Partners and Assignees including such Additional Limited Partner.

Section 12.03.                       Amendment
of Agreement and Certificate of Limited Partnership

For the admission to the
Partnership of any Partner, the General Partner shall take all steps necessary
and appropriate under the Act to amend the records of the Partnership
(including an amendment and restatement of Exhibit A hereto) and, if necessary,
to prepare as soon as practical an amendment of this Agreement and, if required
by law, shall prepare and file an amendment to the Certificate and may for this
purpose exercise the power of attorney granted pursuant to Section 15.11
hereof.

ARTICLE XIII

DISSOLUTION AND LIQUIDATION

Section 13.01.                       Dissolution

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

(i)                                     the expiration of its term as provided in Section 2.04
hereof;

(ii)                                  an
event of withdrawal of the General Partner, as defined in the Act (other than
an event of bankruptcy), unless, within ninety (90) days after the withdrawal a
“majority in interest” (as defined below) of the remaining Partners Consent in
writing to continue the business of the Partnership and to the appointment,
effective as of the date of withdrawal, of a substitute General Partner;

(iii)                               an election to dissolve the Partnership made by the General
Partner, in its sole and absolute discretion, on or after January 1, 2054;

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

 

43

 

(v)                                 a
final and nonappealable judgment is entered by a court of competent
jurisdiction ruling that the General Partner is bankrupt or insolvent, or a
final and nonappealable order for relief is entered by a court with appropriate
jurisdiction against the General Partner, in each case under any federal or
state bankruptcy or insolvency laws as now or hereafter in effect, unless prior
to or within ninety days after of the entry of such order or judgment a “majority
in interest” (as defined below) of the remaining Partners Consent in writing to
continue the business of the Partnership and to the appointment, effective as
of a date prior to the date of such order or judgment, of a substitute General
Partner.

As used herein, a “majority
in interest” shall refer to Partners (excluding the General Partner) who hold
more than fifty percent (50%) of the outstanding Percentage Interests not held
by the General Partner.

Section 13.02.                       Winding
Up

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

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

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

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

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

B.             Deferred
Liquidation.  Notwithstanding the
provisions of Section 13.02.A above which require liquidation of the assets of
the Partnership, but subject to the order of priorities set forth therein, if
prior to or upon dissolution of the Partnership the Liquidator determines that
an immediate sale of part or all of the Partnership’s assets would be
impractical or would cause undue loss to the Partners, the Liquidator may, in
its sole and absolute discretion, defer for a reasonable time the liquidation
of any assets except those necessary to satisfy liabilities of the Partnership
(including to those Partners as creditors) or distribute to the Partners, in
lieu of cash, as tenants in common and in accordance with the provisions of
Section 13.02.A above, undivided interests in such Partnership assets as the
Liquidator deems not suitable for liquidation. 
Any such distributions in kind shall be made only if, in the good faith
judgment of the Liquidator, such distributions in kind are in the best interest
of the Partners, and shall be subject to such conditions relating to the
disposition and management of such properties as the Liquidator deems
reasonable and equitable and to any agreements governing the operation of such
properties at such

 

44

 

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

 

Section 13.03.                       Compliance
with Timing Requirements of Regulations

Subject to Section 13.04
below, in the event the Partnership is “liquidated” within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made pursuant
to this Article XIII to the General Partner and Limited Partners who have
positive Capital Accounts in compliance with Regulations Section
1.704-1(b)(2)(ii)(b)(2).  If any Partner
has a deficit balance in its Capital Account (after giving effect to all
contributions, distributions and allocations for all taxable years, including
the year during which such liquidation occurs), such Partner shall have no
obligation to make any contribution to the capital of the Partnership with
respect to such deficit, and such deficit shall not be considered a debt owed
to the Partnership or to any other Person for any purpose whatsoever.  In the discretion of the General Partner, a
pro rata portion of the distributions that would otherwise be made to the
General Partner and Limited Partners pursuant to this Article XIII may be:  (A) distributed to a trust established for
the benefit of the General Partner and Limited Partners for the purposes of
liquidating Partnership assets, collecting amounts owed to the Partnership and
paying any contingent or unforeseen liabilities or obligations of the
Partnership or of the General Partner arising out of or in connection with the
Partnership (in which case the assets of any such trust shall be distributed to
the General Partner and Limited Partners from time to time, in the reasonable
discretion of the General Partner, in the same proportions as the amount
distributed to such trust by the Partnership would otherwise have been
distributed to the General Partner and Limited Partners pursuant to this
Agreement); or (B) withheld to provide a reasonable reserve for Partnership
liabilities (contingent or otherwise) and to reflect the unrealized portion of
any installment obligations owed to the Partnership, provided that such
withheld amounts shall be distributed to the General Partner and Limited
Partners as soon as practicable.

Section 13.04.                       Deemed
Distribution and Recontribution

Notwithstanding any other
provision of this Article XIII, in the event the Partnership is deemed
liquidated within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g) but
no Liquidating Event has occurred, the Partnership’s property shall not be
liquidated, the Partnership’s liabilities shall not be paid or discharged and
the Partnership’s affairs shall not be wound up.  Instead, for federal income tax purposes and
for purposes of maintaining Capital Accounts pursuant to Exhibit B hereto, the
Partnership shall be deemed to have distributed its assets in kind to the
General Partner and Limited Partners, who shall be deemed to have assumed and
taken such assets subject to all Partnership liabilities, all in accordance
with their respective Capital Accounts. 
Immediately thereafter, the General Partner and Limited Partners shall
be deemed to have recontributed the Partnership assets in kind to the
Partnership, which shall be deemed to have assumed and taken such assets
subject to all such liabilities.

Section 13.05.                       Rights
of Limited Partners

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

Section 13.06.                       Notice
of Dissolution

In the event a
Liquidating Event occurs or an event occurs that would, but for provisions of
an election or objection by one or more Partners pursuant to Section 13.01
above, result in a dissolution of

 

45

 

the Partnership, the
General Partner shall, within thirty (30) days thereafter, provide written notice
thereof to each of the Partners and to all other parties with whom the
Partnership regularly conducts business (as determined in the discretion of the
General Partner) and shall publish notice thereof in a newspaper of general
circulation in each place in which the Partnership regularly conducts business(as determined in the discretion of the General
Partner).

 

Section 13.07.                       Cancellation
of Certificate of Limited Partnership

Upon the completion of
the liquidation of the Partnership cash and property as provided in Section
13.02 above, the Partnership shall be terminated and the Certificate and all
qualifications of the Partnership as a foreign limited partnership in
jurisdictions other than the State of Delaware shall be canceled and such other
actions as may be necessary to terminate the Partnership shall be taken.

Section 13.08.                       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 13.02 above,
in order to minimize any losses otherwise attendant upon such winding-up, and the provisions of this Agreement shall
remain in effect among the Partners during the period of liquidation.

Section 13.09.                       Waiver
of Partition

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

Section 13.10.                       Liability
of Liquidator

The Liquidator shall be
indemnified and held harmless by the Partnership in the same manner and to the
same degree as an Indemnitee may be indemnified pursuant to Section 7.11
hereof.

ARTICLE XIV

AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS

Section 14.01.                       Amendments

A.           General.  Amendments to this Agreement may be proposed
by the General Partner or by any Limited Partners holding twenty-five percent
(25%) or more of the Partnership Interests. 
Following such proposal (except an amendment pursuant to Section 14.01.B
below), 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 Section 14.01.B,
14.01.C or 14.01.D below, 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 General Partner).

B.             Amendments Not
Requiring Limited Partner Approval. 
Notwithstanding Section 14.01.A or Section 14.01.C hereof, the General
Partner shall have the power, without the Consent of the Limited

 

46

 

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 any Partner in accordance with this Agreement;

(3)                                  to
set forth the designations, rights, powers, duties, and preferences of the
holders of any additional Partnership Interests issued pursuant to Article IV
hereof;

(4)                                  to
reflect a change that does not adversely affect any of 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 or
as may be expressly provided by any other provisions of this Agreement;

(5)                                  to adjust the terms hereof to reflect any Specially
Distributed Property, as contemplated in Section 7.05.A hereof; and

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

The General Partner shall
notify the Limited Partners when any action under this Section 14.01.B is taken
in the next regular communication to the Limited Partners.

C.             Amendments
Requiring Limited Partner Approval (Excluding General Partner).  Notwithstanding Section 14.01.A above,
without the Consent of the Limited Partners (not including Limited Partner
Interests held by the General Partner), the General Partner shall not amend
Section 4.02.A, Section 7.01.A (second sentence only), Section 7.05, Section
7.06, Section 7.08, Section 11.02, Section 13.01, this Section 14.01.C or
Section 14.02.

D.            Other Amendments
Requiring Certain Limited Partner Approval. 
Notwithstanding anything in this Section 14.01 to the contrary, this
Agreement shall not be amended with respect to any Partner adversely affected
without the Consent of such Partner adversely affected if such amendment would
(i) convert a Limited Partner’s interest in the Partnership into a general
partner’s interest, (ii) modify the limited liability of a Limited Partner,
(iii) amend Section 7.11.A, (iv) amend Article V, Article VI, or
Section13.02.A(3) (except as permitted pursuant to Sections 4.02, 5.01.D, 5.04,
6.02 and 14.01(B)(3)), (v) amend Section 8.06 or any defined terms set forth in
Article I that relate to the Redemption Right (except as permitted in Section
8.06.E), or (vi) amend this Section 14.01.D. 
Moreover, this Agreement may be amended by the General Partner to
provide that certain Limited Partners have the obligation, upon liquidation of
their interests in the Partnership (within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g)), to restore to the Partnership the amounts of their
negative Capital Account balances, if any, for the benefit of creditors of the
Partnership or Partners with positive Capital Account balances or both,
together with any necessary corresponding amendments (including corresponding amendments
to Sections 6.01.A, 6.01.B and Exhibit C), with the consent of only such
Limited Partners

 

47

 

and
of any other Limited Partners already subject to such a restoration obligation
whose restoration obligation may be affected by such amendment.

 

E.              Amendment and
Restatement of Exhibit A Not An Amendment.  Notwithstanding anything in this Article XIV
or elsewhere in this Agreement to the contrary, any amendment and restatement
of Exhibit A hereto by the General Partner to reflect events or changes otherwise
authorized or permitted by this Agreement, whether pursuant to Section 7.01.A(20) hereof or otherwise, shall not be deemed an
amendment of this Agreement and may be done at any time and from time to time,
as necessary by the General Partner without the Consent of the Limited
Partners.

Section 14.02.                       Meetings
of the Partners

A.           General.  Meetings of the Partners may be called by the
General Partner and shall be called upon the receipt by the General Partner of
a written request by Limited Partners holding twenty-five percent (25%) or more
of the Partnership Interests.  The notice
of meeting 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 Partners is permitted or required under this Agreement, such vote or
Consent may be given at a meeting of Partners or may be given in accordance
with the procedure prescribed in Section 14.01.A above.  Except as otherwise
expressly provided in this Agreement, the Consent of holders of a majority of
the Percentage Interests held by Limited Partners (including Limited Partner
Interests held by the General Partner) shall control.

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

C.             Proxy.  Each Limited Partner may authorize any Person
or Persons to act for 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 its attorney-in-fact.  No proxy shall be valid after the expiration
of eleven (11) months from the date thereof unless otherwise provided in the
proxy.  Every proxy shall be revocable at
the pleasure of the Limited Partner executing it.  Such revocation to be
effective upon the Partnership’s receipt of notice thereof in writing.

D.            Conduct of Meeting.  Each meeting of Partners shall be conducted
by the General Partner or such other Person as the General Partner may appoint
pursuant to such rules for the conduct of the meeting as the General Partner or
such other Person deems appropriate.

ARTICLE XV

 

GENERAL PROVISIONS

Section 15.01.                       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

 

48

 

person or when sent by
first class United States mail or by other means of written communication to
the Partner or Assignee at the address set forth in Exhibit A hereto or such
other address as the Partners shall notify the General Partner in writing.

 

Section 15.02.                       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 15.03.                       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 15.04.                       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 15.05.                       Binding
Effect

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

Section 15.06.                       Creditors

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

Section 15.07.                       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 15.08.                       Counterparts

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

Section 15.09.                       Applicable
Law

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

 

49

 

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.                       Power
of Attorney

A.           General.  Each Limited Partner and each Assignee who
accepts Partnership Units (or any rights, benefits or privileges associated
therewith) is deemed to irrevocably constitute and appoint the General Partner,
any Liquidator and authorized officers and attorneys-in-fact of each, and each
of those acting singly, in each case with full power of substitution, as its
true and lawful agent and attorney-in-fact, with full power and authority in
its name, place and stead to:

(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 any Liquidator deems
appropriate or necessary to form, qualify or continue the existence or
qualification of the Partnership as a limited partnership (or a partnership in
which the limited partners have limited liability) in the State of Delaware and
in all other jurisdictions in which the Partnership may conduct business or own
property, (b) all instruments that the General Partner or any Liquidator deems
appropriate or necessary to reflect any amendment, change, modification or
restatement of this Agreement in accordance with its terms, (c) all
conveyances and other instruments or documents that the General Partner or any
Liquidator deems appropriate or necessary to reflect the dissolution and
liquidation of the Partnership pursuant to the terms of this Agreement,
including, without limitation, a certificate of cancellation, (d) all
instruments relating to the admission, withdrawal, removal or substitution of
any Partner pursuant to, or other events described in, Article XI, XII or XIII
hereof or the Capital Contribution of any Partner and (e) all certificates,
documents and other instruments relating to the determination of the rights,
preferences and privileges of Partnership Interests; and

(2)                                  execute,
swear to, 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 in this
Section 15.11 shall be construed as authorizing the General Partner or any
Liquidator to amend this Agreement except in accordance with Article XIV hereof
or as may be otherwise expressly provided for in this Agreement.

B.             Irrevocable Nature.  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 or 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

 

50

 

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 15.12.                       Entire
Agreement

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

Section 15.13.                       No
Rights as Stockholders

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

Section 15.14.                       Limitation
to Preserve REIT Status

To the extent that any
amount paid or credited to the General Partner or its officers, directors,
employees or agents pursuant to Section 7.04 or Section 7.07 hereof would
constitute gross income to the General Partner Entity for purposes of Section
856(c)(2) or 856(c)(3) of the Code (a “General Partner
Payment”) then, notwithstanding any other provision of this Agreement, the
amount of such General Partner Payments for any fiscal year shall not exceed
the lesser of:

(i)                                     an amount equal to the excess, if any, of
(a) 4.20% of the General Partner Entity’s total gross income (but not including
the amount of any General Partner Payments) for the fiscal year which is
described in subsections (A) though (H) of Section 856(c)(2) of the Code over
(b) the amount of gross income (within the meaning of Section 856(c)(2) of the
Code) derived by the General Partner Entity from sources other than those
described in subsections (A) through (H) of Section 856(c)(2) of the Code (but
not including the amount of any General Partner Payments); or

(ii)                                  an amount equal to the excess, if any of
(a) 25% of the General Partner Entity’s total gross income (but not including
the amount of any General Partner Payments) for the fiscal year which is
described in subsections (A) through (I) of Section 856(c)(3) of the Code over
(b) the amount of gross income (within the meaning of Section 856(c)(3) of the
Code) derived by the General Partner Entity from sources other than those
described in subsections (A) through (I) of Section 856(c)(3) of the Code (but
not including the amount of any General Partner Payments);

provided, however, that General Partner
Payments in excess of the amounts set forth in subparagraphs (i) and (ii) above
may be made if the General Partner Entity, as a condition precedent, obtains an
opinion of tax counsel that the receipt of such excess amounts would not
adversely affect the General Partner Entity’s ability to qualify as a REIT. To
the extent General Partner Payments may not be made in a year due to the foregoing
limitations, such General Partner Payments shall carry over and be treated as
arising in the following year, provided, however, that such
amounts shall not carry over for more than five years, and if not paid within
such five year period, shall expire; provided, further, that (i)
as General Partner

 

51

 

Payments are made, such
payments shall be applied first to carryover amounts outstanding, if any, and
(ii) with respect to carryover amounts for more than one Partnership Year, such
payments shall be applied to the earliest Partnership Year first.

 

52

 

 

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

   written above.

  
	
   

  	
   

  	
   

  
	
   

  	
  GENERAL PARTNER:

  
	
   

  	
   

  	
   

  
	
   

  	
  GRAMERCY CAPITAL CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
   

  
	
   

  	
   

  	
  Name: Marc Holliday

  
	
   

  	
   

  	
  Title: President and Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  LIMITED PARTNERS:

  
	
   

  	
   

  
	
   

  	
  SL GREEN OPERATING
  PARTNERSHIP, L.P.

  
	
   

  	
   

  
	
   

  	
  By: SL Green Realty Corp.,
  its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
   

  
	
   

  	
   

  	
  Name: Andrew S. Levine

  
	
   

  	
   

  	
  Title: Executive Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  GKK MANAGER LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
   

  
	
   

  	
   

  	
  Name: Andrew S. Levine

  
	
   

  	
   

  	
  Title: Executive Vice President

  
				

 

 

CLASS B UNITHOLDER SIGNATURE PAGE

	
  The undersigned holder
  of Class B Units in GKK Capital LP hereby consents to and enters into this
  Second Amended and Restated Agreement of Limited Partnership of GKK Capital
  LP.

  	
   

  
	
   

  	
   

  
	
  Signature Line for Class B Unitholder:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Date: December 14, 2005

  	
   

  

 

 

EXHIBIT
A

PARTNERS AND PARTNERSHIP INTERESTS

[Current version of Exhibit A, which also
reflects issuance of LTIP Units, to be attached]

 

A-1

 

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 6.01 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 6.01 of the Agreement and Exhibit C hereof.

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

(1)           Except as otherwise provided in Regulations Section
1.704-l(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-l(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.

(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.

B-1

 

(6)           Any items specially allocated under Section 2 of Exhibit C
hereof shall not be taken into account.

C.            Generally, a transferee (including any Assignee) of a
Partnership Unit shall succeed to a pro rata portion of the Capital Account of
the transferor, including where the transfer causes a termination of the
Partnership under Section 708(b)(1)(B) of the Code, in which case the Capital
Account of the transferee and the Capital Accounts of the other holders of
Partnership Units in the terminated Partnership shall carry over to the new
Partnership that is formed, for federal income tax purposes, as a result of the
termination. In such event, the Carrying Values of the Partnership properties
in the reconstituted Partnership shall remain the same as they were in the
terminated Partnership and the Capital Accounts of such reconstituted
Partnership shall be maintained in accordance with the principles of this
Exhibit B.

D.            (1)  Consistent
with the provisions of Regulations Section 1.704-1(b)(2)(iv)(f), and as
provided in Section 1.D(2), the Carrying Values of all Partnership assets shall
be adjusted upward or downward to reflect any Unrealized Gain or Unrealized
Loss attributable to such Partnership property, as of the times of the
adjustments provided in Section 1.D(2) hereof, as if such Unrealized Gain or
Unrealized Loss had been recognized on an actual sale of each such property and
allocated pursuant to Section 6.01 of the Agreement.

(2)           Such adjustments shall be made as of the following
times:  (a) immediately prior to the
acquisition of an additional interest in the Partnership by any new or existing
Partner in exchange for more than a de minimis Capital Contribution; (b)
immediately prior to the acquisition of a more than de minimis additional
interest in the Partnership by any new or existing Partner as consideration for
the provision of services to or for the benefit of the Partnership in a partner
capacity or in anticipation of becoming a partner; (c) immediately prior
to the distribution by the Partnership to a Partner of more than a de minimis
amount of property as consideration for an interest in the Partnership; and (d) immediately
prior to the liquidation of the Partnership within the meaning of Regulations
Section 1.704-1(b)(2)(ii)(g) (except for a liquidation resulting from the
termination of the Partnership under Section 708(b)(1)(B) of the Code),
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.

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

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

E.             The provisions of the Agreement (including this Exhibit
B and the other Exhibits to the Agreement) relating to the maintenance of
Capital Accounts are intended to comply with Regulations

B-2

 

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 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 in order to comply with such Regulations, the General Partner may
make such modification without regard to Article XIV of the Agreement, provided
that it is not likely to have a material effect on the amounts distributable to
any Person pursuant to Article XIII of the Agreement upon the dissolution of
the Partnership. The General Partner also shall (i) make any adjustments that
are necessary or appropriate to maintain equality between the Capital Accounts
of the Partners and the amount of Partnership capital reflected on the
Partnership’s balance sheet, as computed for book purposes, in accordance with
Regulations Section 1.704-1(b)(2)(iv)(q), and (ii) make any appropriate
modifications in the event unanticipated events might otherwise cause this
Agreement not to comply with Regulations Section 1.704-1(b).

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 its Capital Contribution or Capital Account or
to receive any distribution from the Partnership, except as provided in
Articles IV, V, VII and XIII of the Agreement.

B-3

 

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
6.01 of the Agreement or any other provisions of this Exhibit C, if there is a
net decrease in Partnership Minimum Gain during any Partnership Year, each
Partner shall be specially allocated items of Partnership income and gain for
such year (and, if necessary, subsequent years) in an amount equal to such
Partner’s share of the net decrease in Partnership Minimum Gain, as determined
under Regulations Section 1.704-2(g). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be
allocated to each Partner pursuant thereto. The items to be so allocated shall
be determined in accordance with Regulations Section 1.704-2(f)(6). This Section
1.A is intended to comply with the minimum gain chargeback requirements in
Regulations Section 1.704-2(f) and, for purposes of this Section 1.A only, each
Partner’s Adjusted Capital Account Deficit shall be determined prior to any
other allocations pursuant to Section 6.01 of this Agreement with respect to
such Partnership Year and without regard to any decrease in Partner Minimum
Gain during such Partnership Year.

B.            Partner Minimum Gain Chargeback.  Notwithstanding any other provision of
Section 6.01 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 Year, each
Partner who has a share of the Partner Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Regulations
Section1.704-2(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 Section1.704-2(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 6.01 of the Agreement or this Exhibit with respect to such
Partnership 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-l(b)(2)(ii)(d)(4), 1.704-l(b)(2)(ii)(d)(5),
or1.704-l(b)(2)(ii)(d)(6), and after giving effect to the allocations required
under Sections 1.A and 1.B hereof with respect to such Partnership Year, 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 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-l(b)(2)(ii)(d) and shall be interpreted
consistently therewith.

D.            Gross Income Allocation.  In the event that any Partner has an Adjusted
Capital Account Deficit at the end of any Partnership Year (after taking into
account allocations to be made under the preceding paragraphs hereof with
respect to such Partnership Year), each such Partner shall be specially

 

C-1

 

allocated items of
Partnership income and gain (consisting of a pro rata portion of each item of
Partnership income, including gross income and gain for the Partnership Year)
in an amount and manner sufficient to eliminate, to the extent required by the
Regulations, its Adjusted Capital Account Deficit.

E.             Nonrecourse Deductions.  Nonrecourse Deductions for any Partnership
Year shall be allocated to the holders of Class A Units 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 for such Partnership Year to the numerically closest ratio which would
satisfy such requirements.

F.             Partner Nonrecourse Deductions.  Any Partner Nonrecourse Deductions for any
Partnership 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 Sections 1.704-2(b)(4) and 1.704-2(i).

G.            Code Section 754 Adjustments.  To the extent an adjustment to the adjusted
tax basis of any Partnership asset pursuant to Section 734(b) or 743(b) of the
Code is required, pursuant to Regulations Section1.704-l(b)(2)(iv)(m), to be
taken into account in determining Capital Accounts, the amount of such
adjustment to the Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis), and such item of gain or loss shall be specially allocated
to the Partners in a manner consistent with the manner in which their Capital
Accounts are required to be adjusted pursuant to such Section of the
Regulations.

H.            Forfeiture Allocations.  Upon a forfeiture of any unvested Partnership
Interest by any Partner, gross items of income, gain, loss or deduction shall
be allocated to such Partner if and to the extent required by final Treasury
Regulations promulgated after the Effective Date to ensure that allocations
made with respect to all unvested Partnership Interests are recognized under
Code Section 704(b).

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
6.01 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:

(a) (1)      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 to take into
account the variation between the 704(c) Value of such property and its
adjusted basis at the time of contribution (taking into account Section 2.C of
this Exhibit C); 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
6.01 of the Agreement and Section 1 of this Exhibit C.

C-2

 

(c) (2)      In the case of an Adjusted Property, such
items shall

(i)            first, be allocated among the Partners in a manner
consistent with the principles of Section 704(c) of the Code to take into
account the Unrealized Gain or Unrealized Loss attributable to such property
and the allocations thereof pursuant to Exhibit B;

(ii)           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

(d)           any item of Residual Gain or Residual Loss attributable to
an 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
6.01 of the Agreement and Section 1 of this Exhibit C.

C.            To the extent Regulations promulgated pursuant to Section
704(c) of the Code permit a 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.

C-3

 

EXHIBIT D

NOTICE OF REDEMPTION

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

	
  Dated: Name of Limited
  Partner:

  
	
  (Signature
  of Limited Partner)

  
	
   

  
	
  (Street
  Address)

  
	
   

  
	
  If Shares are to be issued, issue to:

  
	
   

  
	
  Name:

  
	
   

  
	
  Please insert social security or identifying number:

  

 

D-1

 

EXHIBIT E

 

GKK CAPITAL LP

 

DESIGNATION OF THE RIGHTS,
POWERS, PRIVILEGES,

RESTRICTIONS, QUALIFICATIONS
AND LIMITATIONS

OF THE LTIP UNITS

 

The following are the terms
of the LTIP Units:

1.             Vesting.

A.            Vesting,
Generally.  LTIP Units may, in the
sole discretion of the General Partner, be issued subject to vesting,
forfeiture and additional restrictions on transfer pursuant to the terms of an award,
vesting or other similar agreement (a “Vesting Agreement”).  The terms of any Vesting Agreement may be
modified by the General Partner from time to time in its sole discretion,
subject to any restrictions on amendment imposed by the relevant Vesting
Agreement or by the terms of any plan pursuant to which the LTIP Units are
issued, if applicable.  LTIP Units that
have vested and are no longer subject to forfeiture under the terms of a
Vesting Agreement are referred to as “Vested LTIP Units”; all other LTIP
Units are referred to as “Unvested LTIP Units.”  Subject to the terms of any Vesting
Agreement, a holder of LTIP Units shall be entitled to transfer his or her LTIP
Units to the same extent, and subject to the same restrictions as holders of
Class A Units are entitled to transfer their Class A Units pursuant to
Article XI of the Agreement.

B.            Forfeiture
or Transfer of Unvested LTIP Units. 
Unless otherwise specified in the relevant Vesting Agreement, upon the
occurrence of any event specified in a Vesting Agreement as resulting in either
the forfeiture of any LTIP Units, or the right of the Partnership or the
General Partner to repurchase LTIP Units at a specified purchase price, then
upon the occurrence of the circumstances resulting in such forfeiture or if the
Partnership or the General Partner exercises such right to repurchase, then the
relevant LTIP Units shall immediately, and without any further action, be
treated as cancelled or transferred to the General Partner, as applicable, and
no longer outstanding for any purpose. 
Unless otherwise specified in the Vesting Agreement, no consideration or
other payment shall be due with respect to any LTIP Units that have been
forfeited, other than any distributions declared with a record date prior to
the effective date of the forfeiture.  In
connection with any forfeiture or repurchase of LTIP Units, the balance of the
portion of the Capital Account of the holder 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 6.01.D of the Agreement, calculated with respect to the holder’s remaining LTIP
Units, if any.

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

2.             Distributions.

A.            LTIP
Distribution Amount.  Commencing from
the Distribution Participation Date (as defined below) established for any LTIP
Units, for any quarterly or other period holders of such LTIP Units shall be
entitled to receive, if, when and as authorized by the General Partner out of
funds legally available for the payment of distributions, regular cash distributions
in an amount per unit equal to the distribution payable on each Class A Unit
for the corresponding

 

E-1

 

quarterly or other period (or, if applicable, for
that portion of the quarterly or other period that begins on the Distribution
Participation Date) (the “LTIP Distribution Amount”).  In addition, from and after the Distribution
Participation Date, LTIP Units shall be entitled to receive, if, when and as
authorized by the General Partner out of funds or other property legally
available for the payment of distributions, non-liquidating special,
extraordinary or other distributions in an amount per unit equal to the amount
of any non-liquidating special, extraordinary or other distributions payable on
the Class A Units which may be made from time to time.  LTIP Units shall also be entitled to receive,
if, when and as authorized by the General Partner out of funds or other
property legally available for the payment of distributions, distributions representing
proceeds of a sale or other disposition of all or substantially all of the
assets of the Partnership in an amount per unit equal to the amount of any such
distributions payable on the Class A Units, whether made prior to, on or after
the Distribution Participation Date, provided that the amount of such
distributions shall not exceed the positive balances of the Capital Accounts of
the holders of such LTIP Units to the extent attributable to the ownership of
such LTIP Units.  Distributions on the LTIP
Units, if authorized, shall be payable on such dates and in such manner as may
be authorized by the General Partner (any such date, a “Distribution Payment
Date”); provided that the Distribution Payment Date and the record date for
determining which holders of LTIP Units are entitled to receive a distribution
shall be the same as the corresponding dates relating to the corresponding
distribution on the Class A Units.

B.            Distribution
Participation Date.  The “Distribution
Participation Date” for each LTIP Units will be either (i) with respect to
LTIP Units granted pursuant to the General Partner’s 2005 Long-Term
Outperformance Program (the “2005 Outperformance Program”), the
applicable Valuation Date (as defined in the Vesting Agreement of each Person
granted LTIP Units under the 2005 Outperformance Program) or (ii) with respect
to other LTIP Units, such date as may be specified in the Vesting Agreement or
other documentation pursuant to which such LTIP Units are issued.

3.             Allocations.

Commencing with the portion of the taxable year of
the Partnership that begins on the Distribution Participation Date established
for any LTIP Units, such LTIP Units shall be allocated Net Income and Net Loss
in amounts per LTIP Unit equal to the amounts allocated per Class A Unit.  The allocations provided by the preceding
sentence shall be subject to the proviso to the first sentence of Section
6.01.B of the Agreement.  The General
Partner is authorized in its discretion to delay or accelerate the
participation of the LTIP Units in allocations of Net Income and Net Loss, or
to adjust the allocations made after the Distribution Participation Date, so
that the ratio of (i) the total amount of Net Income or Net Loss allocated
with respect to each LTIP Unit in the taxable year in which that LTIP Unit’s
Distribution Participation Date falls, to (ii) the total amount
distributed to that LTIP Unit with respect to such period, is more nearly equal
to such ratio as computed for the Class A Units held by the General Partner.

4.             Adjustments.

The Partnership shall
maintain at all times a one-to-one correspondence between LTIP Units and Class
A Units for conversion, distribution and other purposes, including without
limitation complying with the following procedures; provided that the foregoing
is not intended to alter the Capital Account Limitation (as defined in Section
7.C of this Exhibit E), the special allocations pursuant to Section 6.01.D of
the Partnership Agreement, differences between non-liquidating distributions to
be made with respect to the LTIP Units and Class A Units prior to the
Distribution Participation Date for such LTIP Units, differences between
liquidating distributions to be made with respect to the LTIP Units and Class A
Units pursuant to Section 13.02 of the

E-2

 

Partnership Agreement or
Section 2.A of this Exhibit E in the event that the Capital Accounts
attributable to the LTIP Units are less than those attributable to the Class A
Units due to insufficient special allocations pursuant to Section 6.01.D of the
Partnership Agreement or related provisions. 
If an Adjustment Event (as defined below) occurs, then the General
Partner shall make a corresponding adjustment to the LTIP Units to maintain
such one-for-one correspondence between Class A Units and LTIP Units.  The following shall be “Adjustment Events”:  (A) the Partnership makes a distribution on
all outstanding Class A Units in Partnership Units, (B) the Partnership
subdivides the outstanding Class A Units into a greater number of units or
combines the outstanding Class A Units into a smaller number of units, or
(C) the Partnership issues any Partnership Units in exchange for its
outstanding Class A Units by way of a reclassification or recapitalization of
its Class A Units.  If more than one
Adjustment Event occurs, the adjustment to the LTIP Units need be made only
once using a single formula that takes into account each and every 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 General Partner in respect of a capital contribution to the
Partnership of proceeds from the sale of securities by the General Partner.  If the Partnership takes an action affecting
the Class A Units other than actions specifically described above as Adjustment
Events and in the opinion of the General Partner such action would require an
adjustment to the 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 terms
of any plan pursuant to which the LTIP Units have been issued, in such manner and at such time as the General
Partner, in its sole discretion, may determine to be appropriate under the
circumstances.  If an adjustment is made
to the LTIP Units as herein provided the Partnership shall promptly file in the
books and records of the Partnership an officer’s certificate setting forth
such adjustment and a brief statement of the facts requiring such adjustment,
which certificate shall be conclusive evidence of the correctness of such
adjustment absent manifest error. 
Promptly after filing of such certificate, the Partnership shall mail a
notice to each holder of LTIP Units setting forth the adjustment to his or her
LTIP Units and the effective date of such adjustment.

5.             Ranking.

The LTIP Units shall rank on parity with the Class A
Units in all respects, subject to the proviso in the first sentence of Section
4 of this Exhibit E.

6.             No Liquidation Preference.

The
LTIP Units shall have no liquidation preference.

7.             Right to Convert LTIP Units into
Class A Units.

A.            Conversion
Right.  A holder of LTIP Units 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 Class A
Units.  Holders of LTIP Units shall not
have the right to convert Unvested LTIP Units into Class A Units until they
become Vested LTIP Units; provided, however, that when a holder
of LTIP Units is notified of the expected occurrence of an event that will
cause his or her Unvested LTIP Units to become Vested LTIP Units, such Person
may give the Partnership a Conversion Notice conditioned upon and effective as
of the time of vesting, and such Conversion Notice, unless subsequently revoked
by the holder of the LTIP Units, shall be accepted by the Partnership subject
to such condition.  The General Partner
shall have the right at

 

E-3

 

any time to cause a conversion of Vested LTIP Units
into Class A Units.  In all cases, the
conversion of any LTIP Units into Class A Units shall be subject to the
conditions and procedures set forth in this Section 7.

B.            Number
of Units Convertible. A holder of Vested LTIP Units may convert such Vested
LTIP Units into an equal number of fully paid and non-assessable Class A Units,
giving effect to all adjustments (if any) made pursuant to Section 4.  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 holder, to the extent
attributable to its ownership of LTIP Units, divided by (y) the Class A Unit
Economic Balance, in each case as determined as of the effective date of
conversion (the “Capital Account Limitation”).

C.            Notice.  In order to exercise his or her Conversion
Right, a holder of LTIP Units shall deliver a notice (a “Conversion Notice”)
in the form attached as Attachment A to this Exhibit E to the Partnership
not less than 10 nor more than 60 days prior to a date (the “Conversion Date”)
specified in such Conversion Notice. 
Each holder of LTIP Units covenants and agrees with the Partnership that
all Vested LTIP Units to be converted pursuant to this Section 7 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 8.06 of the Agreement relating to those
Class A Units that will be issued to such holder upon conversion of such LTIP
Units into Class A Units in advance of the Conversion Date; provided, however,
that the redemption of such Class A Units by the Partnership shall in no event
take place until the Conversion Date. 
For clarity, it is noted that the objective of this paragraph is to put
a holder of LTIP Units in a position where, if he or she so wishes, the Class A
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 General Partner elects to assume the Partnership’s
redemption obligation with respect to such Class A Units under Section 8.06 of
the Agreement by delivering to such holder Shares rather than cash, then such
holder can have such Shares issued to him or her simultaneously with the
conversion of his or her Vested LTIP Units into Class A Units.  The General Partner shall cooperate with a
holder of LTIP Units to coordinate the timing of the different events described
in the foregoing sentence.

D.            Forced
Conversion.  The Partnership, at any
time at the election of the General Partner, may cause any number of Vested
LTIP Units held by a holder of LTIP Units to be converted (a “Forced
Conversion”) into an equal number of Class A Units, giving effect to all
adjustments (if any) made pursuant to Section 4; provided, that the
Partnership may not cause a Forced Conversion of any LTIP Units that would not
at the time be eligible for conversion at the option of the holder of such LTIP
Units pursuant to Section 7.B above.  In
order to exercise its right to cause a Forced Conversion, the Partnership shall
deliver a notice (a “Forced Conversion Notice”) in the form attached as
Attachment B to this Exhibit E to the applicable holder 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 15.01 of the
Agreement.

E.             Conversion
Procedures.  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 holder of LTIP Units, as of which time such holder of LTIP
Units shall be credited on the books and records of the Partnership with the
issuance as of the opening of business on the next day of the number of Class A
Units issuable upon such conversion. 
After the conversion of LTIP Units as aforesaid, the Partnership shall
deliver to such holder of LTIP Units, upon his or her written request, a
certificate of the General Partner certifying the number of

E-4

 

Class A Units and remaining LTIP Units, if any, held
by such Person immediately after such conversion.

F.             Treatment
of Capital Account.  For purposes of
making future allocations under Section 6.01.D of the Agreement and applying
the Capital Account Limitation, the portion of the Economic Capital Account
balance of the applicable holder of LTIP Units that is treated as attributable
to his or her LTIP Units shall be reduced, as of the date of conversion, by the
product of the number of LTIP Units converted multiplied by the Class A Unit
Economic Balance.

G.            Mandatory
Conversion in Connection with a Transaction.  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
Class A 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 Class
A Units shall be exchanged for or converted into the right, or the holders of
Class A 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 and the conversion shall occur
immediately prior to the effectiveness 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 holder of LTIP Units to be afforded the right
to receive in connection with such Transaction in consideration for the Class A
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 Class A Units, assuming such holder of Class A 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 Class A Units have the opportunity to elect the form or type of
consideration to be received upon consummation of the Transaction, prior to
such Transaction the General Partner shall give prompt written notice to each
holder of LTIP Units of such election, and shall use commercially reasonable
efforts to afford such holders the right to elect, by written notice to the
General Partner, the form or type of consideration to be received upon
conversion of each LTIP Unit held by such holder into Class A Units in
connection with such Transaction.  If a
holder of LTIP Units fails to make such an election, such holder (and any of
its transferees) shall receive upon conversion of each LTIP Unit held him or
her (or by any of his or her transferees) the same kind and amount of
consideration that a holder of a Class A Unit would receive if such holder of
Class A Units failed to make such an election.

Subject to the rights of the Partnership and the
General Partner under any Vesting Agreement and the terms of any plan under
which LTIP Units are issued, the Partnership shall use commercially reasonable
effort to cause the terms of any Transaction to be consistent with the
provisions of this Section 7 and to enter into an agreement with the successor
or purchasing entity, as the case may be, for the benefit of any holders of
LTIP Units whose LTIP Units will not be converted into Class A 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

 

E-5

 

LTIP Units into securities as comparable as
reasonably possible under the circumstances to the Class A Units and
(ii) preserve as far as reasonably possible under the circumstances the
distribution, special allocation, conversion, and other rights set forth in the
Agreement for the benefit of the holders of LTIP Units.

8.             Redemption at the Option of the
Partnership.

LTIP Units will not be redeemable at the option of
the Partnership; provided, however, that the foregoing shall not prohibit
the Partnership from repurchasing LTIP Units from the holder thereof if and to
the extent such holder agrees to sell such Units.

9.             Voting Rights.

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

B.            Special
Approval Rights.  In addition to, and
not in limitation of, the provisions of Section 9.A above (and notwithstanding
anything appearing to be contrary in the Agreement), the General Partner and/or
the Partnership shall not, without the affirmative consent of the holders of
sixty-six and two-thirds percent (66 2/3%) of the then outstanding LTIP Units,
given in person or by proxy, either in writing or at a meeting, take any action
that would materially and adversely alter, change, modify or amend the rights,
powers or privileges of the LTIP Units; but subject in any event to the
following provisions: (i) no consent of the holders of LTIP Units will be
required if and to the extent that any such alteration, change, modification or
amendment would similarly alter, change, modify or amend the rights, powers or
privileges of the Class A Units; (ii) with respect to the occurrence of
any merger, consolidation or other business combination or reorganization, so
long as the LTIP Units either (x) are all converted into Class A Units
immediately prior to the effectiveness of the transaction, (y) remain
outstanding with the terms thereof materially unchanged or (z) if the
Partnership is not the surviving entity in such transaction, are exchanged for
a security of the surviving entity with terms that are materially the same with
respect to rights to allocations, distributions, redemption, conversion and
voting as the LTIP Units and without any income, gain or loss expected to be
recognized by the holder upon the exchange for federal income tax purposes (and
with the terms of the Class A Units or such other securities into which the
LTIP Units (or the substitute security therefor) are convertible materially the
same with respect to rights to allocations, distributions, redemption,
conversion and voting), the occurrence of any such event shall not be deemed to
materially and adversely alter, change, modify or amend the rights, powers or
privileges of the LTIP Units, provided further, that if some, but not all, of
the LTIP Units are converted into Class A Units immediately prior to the
effectiveness of the transaction (and neither clause (y) or (z) above is
applicable), then the consent required pursuant to this Section will be the
consent of the holders of sixty-six and two-thirds percent (66 2/3%) of
the LTIP Units to be outstanding following such conversion; (iii) any creation
or issuance of any Class A Units or of any class of series of common or
preferred units of the Partnership (whether ranking junior to, on a parity with
or senior to the LTIP Units with respect to payment of distributions,
redemption rights and the distribution of assets upon liquidation, dissolution
or winding up), which either (x) does not require the consent of the holders of
Class A Units or (y) does require such consent and is authorized by a vote of
the holders of Class A Units; and LTIP Units voting together as a single class,
together with any

 

E-6

 

other class or series of units of limited
partnership interest in the Partnership upon which like voting rights have been
conferred, shall not be deemed to materially and adversely alter, change,
modify or amend the rights, powers or privileges of the LTIP Units; and (iv)
any waiver by the Partnership of restrictions or limitations applicable to any
outstanding LTIP Units with respect to any holder or holders thereof shall not
be deemed to materially and adversely alter, change, modify or amend the
rights, powers or privileges of the LTIP Units with respect to other
holders.  The foregoing voting provisions
will not apply if, as of or prior to the time when the action with respect to
which such vote would otherwise be required will be taken or be effective, all
outstanding LTIP Units shall have been converted and/or redeemed, or provision
is made for such redemption and/or conversion to occur as of or prior to such
time.

 

E-7

 

Attachment A to Exhibit E

 

Notice of Election by Partner to Convert

LTIP Units into Class A Units

The undersigned holder of LTIP Units hereby
irrevocably elects to convert the number of Vested LTIP Units in GKK Capital LP
(the “Partnership”) set forth below into Class A Units in accordance
with the terms of the Second Amended and Restated Agreement of Limited
Partnership of the Partnership, as amended. 
The undersigned hereby represents, warrants, and certifies that the
undersigned: (a) has title to such LTIP Units, free and clear of the rights or
interests of any other person 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 Holder:

  	
   

  
	
   

  	
   

  	
  (Please Print: Exact Name
  as Registered with Partnership)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Number of LTIP Units to be Converted:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Conversion Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

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

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Street Address)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (City)

  	
   

  	
  (State)

  	
   

  	
  (Zip Code)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Signature Guaranteed by:

  	
   

  
											

 

 

Attachment B to Exhibit E

 

Notice of Election by Partnership to Force Conversion

of LTIP Units into Class A Units

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

	
   

  	
  Name of Holder:

  	
   

  
	
   

  	
   

  	
  (Please Print: Exact Name
  as Registered with Partnership)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Number of LTIP Units to be Converted:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Conversion Date:

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