Document:

Exhibit 10.1

 

PARTNERSHIP
AGREEMENT

 

OF

 

TRT-DCT
INDUSTRIAL JV III GENERAL PARTNERSHIP

 

(a
Delaware General Partnership)

 

 

Dated as of September 9, 2008

 

 

 

PARTNERSHIP
AGREEMENT

 

THIS PARTNERSHIP AGREEMENT, made and entered into and effective as of September 9,
2008, by and between TRT INDUSTRIAL FUND III LLC,
a Delaware limited liability company (“TRT LLC”),
and DCT INDUSTRIAL FUND III LLC, a Delaware limited liability company (“DCT LLC”).

 

RECITALS

 

WHEREAS,
Affiliates of TRT LLC and DCT LLC previously formed that certain general
partnership named TRT-DCT INDUSTRIAL JV II GENERAL PARTNERSHIP (“JV II”) on March 27, 2007 and
entered into that certain Partnership Agreement dated as of March 27, 2007
(the “JV II Partnership Agreement”);

 

WHEREAS, Article 15
of the JV II Partnership Agreement provides for certain exclusivity covenants
between the parties hereto and their respective Affiliates provided that
threshold triggers are satisfied (the “JV II Exclusivity Triggers”);

 

WHEREAS, the
parties to this Agreement hereby confirm the satisfaction of the JV II
Exclusivity Triggers with respect to the Second Exclusivity Period (as defined
in the JV II Partnership Agreement);

 

WHEREAS, TRT
LLC and DCT LLC confirm the formation of TRT-DCT INDUSTRIAL JV III GENERAL
PARTNERSHIP (the “Partnership”)
pursuant to the provisions of the Delaware Revised Uniform Partnership Act,
Delaware Code, Title 6 Sections 15-101, et seq., as amended from time to time
(the “Act”), as evidenced by the filing
of the Statement of Partnership Existence in the office of the Secretary of
State of Delaware (the “Secretary of State”)
on September 9, 2008 (the “Partnership Statement of
Existence”) which is the Third Joint Venture as contemplated by
the JV II Partnership Agreement; and

 

WHEREAS, TRT
LLC and DCT LLC desire to enter into this Agreement in order to set forth the
respective rights and obligations of the Partners, effective as of the date
hereof and on the terms and conditions set forth herein.

 

NOW,
THEREFORE, in consideration of the mutual covenants and the promises contained
herein (the receipt and sufficiency of which being hereby acknowledged), the
parties hereto, intending to be legally bound, do hereby agree as follows:

 

ARTICLE
1

 

DEFINITIONS
AND TERMS

 

1.1           Definitions.  Unless the context otherwise requires, the
following terms shall have the following meanings for the purposes of this
Agreement:

 

 

“Acquisition” has the meaning
ascribed thereto in Section 9.1.1 of this Agreement.

 

“Act”  has
the meaning ascribed thereto in the Recitals to this Agreement.

 

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

 

(a)           Credit to such Capital Account any amounts
which such Partner is obligated to contribute to the Partnership (pursuant to
the terms of this Agreement or otherwise) or is deemed to be obligated to
contribute to the Partnership pursuant to the penultimate sentences of Regulations
Sections 1.704-2(g)(1) and 1.704-2(i)(5); and

 

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

 

(c)           The foregoing definition of Adjusted Capital
Account is intended to comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of
the Regulations and shall be interpreted consistently therewith.

 

“Affiliate” means, with respect to a
specified Person, (a) a Person that, directly or indirectly through one or
more intermediaries, controls, is controlled by or is under common control
with, the specified Person, (b) any Person that is an officer, director,
partner, manager or trustee of, or serves in a similar capacity with respect
to, the specified Person or of which the specified Person is an officer,
partner, manager or trustee, or with respect to which the specified Person
serves in a similar capacity, (c) any Person that, directly or indirectly,
is the beneficial owner of ten percent (10%) or more of any class of equity
securities of, or otherwise has a substantial beneficial interest in, the
specified Person or of which the specified Person has a substantial beneficial
interest and (d) the spouse, issue or parent of the specified Person.  Notwithstanding the foregoing, an Affiliate does
not include a Person that is a partner, member or shareholder in a partnership,
joint venture, limited liability company or corporation with the Partnership or
any Partner if such Person is not otherwise an Affiliate of the Partnership or
such Partner.

 

“Agreement” means this Partnership
Agreement and all Exhibits referred to herein and attached hereto, each of
which is made a part hereof, as amended and in effect from time to time with
the prior written consent of Senior Lender (if so required hereunder or under
the Senior Loan Documents), as the context requires.  Words such as “herein,” “hereinafter,”
“hereto,” “hereby” and “hereunder”, when used with reference to this Agreement,
refer to this Agreement as a whole, unless the context otherwise requires.

 

“Annual Budget” has the meaning
ascribed thereto in Section 6.13.1 of this Agreement.

 

“Annual Business Plan” has the
meaning ascribed to such term in Section 6.13.2 of this Agreement.

 

2

 

“Appraiser”
means an appraiser who is not an Affiliate of any Partner and has not been an
employee of any Partner or any Affiliate of the Partner at any time, who is
qualified to appraise the Property and is a member of the Appraisal Institute
(or any successor association or body of comparable standing if the Appraisal
Institute is not then in existence) and who has held his or her certificate as
an M.A.I. or its equivalent for a period of not fewer than five (5) years
(or such lesser time if such requirement would result in no qualified
appraisers), and has been actively engaged in the appraisal of real property
similar to the Property in regional proximity of the Property prior to his or
her appointment under this Agreement. Attached hereto as Exhibit E
is a list of acceptable Appraisers, annually, the Partners shall agree on a
substitute list of acceptable Appraisers and if the Partners can not agree on a
substitute list the attached list (or any substitute list that has more
recently been approved by the Partners) shall control.

 

“Approved Annual Budget” means the
Annual Budget of the Partnership approved pursuant to Section 6.13.3
of this Agreement.

 

“Approved Annual Business Plan” has
the meaning ascribed to such term in Section 6.13.3 of this
Agreement.

 

“Asset Management Agreement” means
that certain Product Specialist Agreement to be entered into between Dividend
Capital Total Advisors LLC and the Asset Manager, or any subsequent asset
management agreement entered into by Dividend Capital Total Advisors LLC in accordance
with this Agreement.

 

“Asset Manager” means DCT LLC or an
Affiliate of DCT LLC that executes the Asset Management Agreement as “Asset
Manager”, or any successor asset manager selected by TRT LLC from time to time
in accordance with this Agreement.

 

“Authorized Representatives”  means, with respect to DCT LLC, Thomas Wattles, Phil
Hawkins, James Cochran and Teresa Corral and with respect to TRT LLC, Guy
Arnold, Greg Moran, and John Biallas in their capacities as authorized
signatories, or such other individuals as such Partner shall identify in a
notice given to the other Partner in accordance with Section 13.4.

 

“Available Cash”  means,
for the applicable period, the amount, if any, by which (a) Revenues for
such period from whatever source (including reductions in Reserves recommended
by Managing Partner and approved by TRT LLC) exceeds (b) (i) all cash
expenditures made by the Partnership for Expenses in accordance with the
Approved Annual Budget or as otherwise permitted under Section 6.4.2,
and (ii) any additions to Reserves required under the Senior Loan, set
forth in the Approved Annual Budget and/or determined by Managing Partner (with
TRT LLC’s approval) or by TRT LLC.

 

“Bankruptcy Act” means the United
States Bankruptcy Reform Act of 1978, as amended, or any successor Act, and the
rules promulgated thereunder.

 

“Bankruptcy” or “Bankruptcy Action” means, with
respect to any Person, if such Person (i) makes a general assignment for
the benefit of creditors, (ii) files a voluntary petition in bankruptcy, (iii) is
adjudged a bankrupt or insolvent, or has entered against it an order for
relief, in any bankruptcy or insolvency proceedings, which order is not, within
ninety (90) days, stayed pending an appeal, or within ninety (90) days after
such stay, is not set aside, (iv) files a petition 

 

3

 

or answer seeking for itself
any reorganization, arrangement, composition, readjustment, liquidation or
similar relief under any statute, law or regulation, (v) files an answer
or other pleading admitting or failing to contest the material allegations of a
petition filed against it in any proceeding of this nature, (vi) seeks,
consents to or acquiesces in the appointment of a trustee, receiver or
liquidator of the Person or of all or any substantial part of its properties, (vii) if
within one hundred twenty (120) days after the commencement of any proceeding
against the Person seeking reorganization, arrangement, composition,
readjustment, liquidation or similar relief under any statute, law or
regulation, the proceeding has not been dismissed, or if, within ninety (90)
days after the appointment without such Person’s consent or acquiescence of a
trustee, receiver or liquidator of such Person or of all or any substantial
part of its properties, the appointment is not vacated or stayed, or within
ninety (90) days after the expiration of any such stay, the appointment is not
vacated, or (viii) takes any action in furtherance of any of the
foregoing.  The foregoing definition of
“Bankruptcy” is intended to replace and shall supersede and replace the
definition of “Bankruptcy” set forth in Sections 18-101(1) and 18-304 of
the Bankruptcy Act.

 

“Business Day”  means
any day other than a Saturday, Sunday or other day on which national banks in
New York, New York are not open for business.

 

“Business of the Partnership”  means the purpose of the Partnership as described in Section 2.6
of this Agreement.

 

“Buy/Sell Deposit” has the meaning
ascribed thereto in Section 16.5 of this Agreement.

 

“Buy/Sell Election Date” has the
meaning ascribed thereto in Section 16.3 of this Agreement.

 

“Buy/Sell Initiating Partner”  has the meaning ascribed thereto in Section 16.1
of this Agreement.

 

“Buy/Sell Offering Notice”  has the meaning ascribed thereto in Section 16.1
of this Agreement.

 

“Buy/Sell Responding Partner”  has the meaning ascribed thereto in Section 16.1
of this Agreement.

 

“Buy/Sell Response Deadline Date”
has the meaning ascribed thereto in Section 16.2 of this Agreement.

 

“Capital Account” of a Partner has
the meaning ascribed thereto in Section 3.4.3 of this Agreement.

 

“Capital Contribution”  has the meaning ascribed thereto in Section 3.6.1
of this Agreement.

 

“Catch-Up Distributions” has the
meaning ascribed thereto in Section 5.3.2 of this Agreement.

 

4

 

“Certificate of Formation” has the
meaning ascribed thereto in the recitals to this Agreement, as the same may be
amended from time to time with the prior written consent of Senior Lender (if
so required hereunder or under the Senior Loan Documents).

 

“Change of Control Event” means any
Transfer or series of Transfers the result of which is that (a) on or
before December 31, 2008, the DCT Principals, or any two of them, no
longer possess day-to-day management authority and control over all major
decisions of DCT LLC or (b) DCT LLC no longer owns the sole right to
receive the Promotional Distributions.

 

“Closing Date” has the meaning
ascribed thereto in Section 16.6 of this Agreement.

 

“Code”  means
the Internal Revenue Code of 1986, as amended (or any corresponding provision
or provisions of any succeeding law).

 

“Common Decision” has the meaning
ascribed thereto in Section 6.5 of this Agreement.

 

“Confidential Information” has the
meaning ascribed thereto in Section 13.22 of this Agreement.

 

“Contribution
Cap” means the maximum amount of Required Capital
required to be contributed by the Partners pursuant to Section 3.2.  The Contribution Cap for TRT LLC shall
initially be $198 million and the Contribution Cap for DCT LLC shall be $20
million.  The Contribution Caps shall be
subject to increase from time to time as approved by all of the Partners.

 

“Control” (and the
correlative terms “controlled by”, “controlling” and “under common control with”)
of a Person means the possession, direct or indirect, of the power to direct or
cause the direction of the business and affairs of such Person, whether through
the ownership of Voting Stock, by contract or otherwise.

 

“Cost Basis” has the meaning
ascribed thereto in Exhibit I
to this Agreement.

 

“DCOP” means DCT Industrial
Operating Partnership LP, a Delaware limited partnership.

 

“DCT” means DCT Industrial Trust
Inc., a Maryland corporation, its successors and assigns.

 

“DCT Event of Default” means:

 

(a)           (i) the gross negligence, fraud,
defalcation (that is, an act of embezzlement, theft or similar act) or willful
misconduct (y) by DCT LLC or at the direction of DCT LLC or the DCT
Principals, or any of them, or any
Affiliate controlled by DCT LLC or any of the DCT Principals or (z) any
employee of DCT LLC or any Affiliate of DCT LLC, in connection with the
performance of DCT LLC’s duties and obligations hereunder or (ii) a
material breach by DCT LLC or any Affiliate of DCT LLC of or under, this Agreement
(excluding a Change of Control Event or the failure to make a Capital
Contribution to the 

 

5

 

Partnership)
or by Asset Manager or Property Manager (to the extent such Property Manager is
DCT LLC or an Affiliate of DCT LLC) under the Asset Management Agreement or
Property Management Agreement, as applicable;

 

(b)           if within sixty (60) days after, any plea of
no contest or conviction of any felony of any of the DCT Principals, which
felony conviction or plea relates to the misappropriation or misapplication of
funds, any accounting irregularities or any other crimes relating to financial
matters, any such DCT Principal is not removed as a principal and officer of
DCT LLC and all of its Affiliates and replaced with a principal reasonably
satisfactory to TRT LLC;

 

(c)           causing Fee Owner to take any action in
contravention of any organizational documents which would make it impossible to
carry on the Business of the Partnership or of Fee Owner; and/or

 

(d)           the taking of any Bankruptcy Action with
respect to DCT LLCs.

 

For purposes
solely of (y) any of the events or acts described in clause (a)(i) of
this definition, an “DCT Event of Default”
shall not exist unless and until such acts or events have been determined to
have occurred pursuant to an arbitration conducted pursuant to Section 13.21
and (z) any of the acts or events described in clause (a)(i)(y) or
(z) or a breach pursuant to clause (a)(ii) of this
definition, such event or circumstance shall not constitute a “DCT Event of Default” unless and
until notice of such event or circumstance shall have been delivered to DCT LLC
and such event or circumstance shall be unremedied on the date that is (1) sixty
(60) days after delivery of such notice to DCT LLC in respect of any
non-monetary default (or if such remedy, notwithstanding the exercise of
diligent efforts by DCT LLC, cannot reasonably be effected within such sixty
(60) day period, such longer period as may be required to effect the same with
the exercise of diligent, good faith efforts, but in no event, longer than the
end of the cure period provided pursuant to the terms of any applicable Senior
Loan Document) and (2) five (5) business days after delivery of such
notice to DCT LLC in respect of any monetary default.  Notwithstanding the foregoing, the failure of
DCT LLC to perform an obligation resulting from the Partnership’s failure to
provide sufficient funds to DCT LLC to perform such obligation shall not be deemed
a DCT Event of Default.  If such event or
circumstance is also a breach of the Asset Management Agreement or Property
Management Agreement, the cure periods specified above shall run concurrently
with the cure periods specified in the Asset Management Agreement or Property
Management Agreement, as applicable, and a DCT Event of Default shall occur
immediately upon the expiration of any notice or cure periods specified in the
Asset Management Agreement or Property Management Agreement without further
notice or cure periods.

 

“DCT LLC” has the meaning ascribed
thereto in the introductory paragraph to this Agreement.

 

“DCT Principals” means Thomas
Wattles as chairman of DCT, Inc., James Cochran as President of DCT, and
Phil Hawkins as chief executive officer of DCT, and reasonable replacements of
such individuals (or their replacements).

 

6

 

“DCTROP”  has the meaning ascribed thereto in Section 8.1.2
of this Agreement.

 

“DCX Asset” means, individually,
each of the DCX Assets.

 

“DCX Assets” means, collectively,
those real properties owned, directly or indirectly, by TRT LLC or an Affiliate
which were acquired by TRT LLC or an Affiliate from DCT LLC (or an Affiliate of
DCT LLC), which real properties TRT LLC shall have the obligation, to the
extent it has acquired the DCX Asset after the exercise of a DCX Call Right, to
convey to the Partnership (via a transfer to a Special Purpose Entity wholly
owned by the Partnership) subject to the reasonable consent of DCT LLC, which
DCT shall provide or notify TRT LLC that it shall  not provide after five (5) business days
notice to DCT LLC and in any event prior to the time that  that TRT LLC must exercise a DCX Call Right.

 

“DCX Call Right” means the call
right that TRT LLC (or its Affiliate) has, subsequent to its purchase of a
specific DCX Asset from DCT LLC or an Affiliate thereof, to purchase that DCX
Asset from the owners thereof.

 

“DCX Contribution Percentages” means
the respective shares of the Capital Contributions to be made by the Partners
with respect to the DCX Assets which shall be 99% with respect to TRT LLC and
1% with respect to DCT LLC.

 

“Default Amount” has the meaning
ascribed thereto in Section 3.2.6 of this Agreement.

 

“Defaulting Partner” has the meaning
ascribed thereto in Section 3.2.6 of this Agreement.

 

“Defaulting Purchaser” has the
meaning ascribed thereto in Section 16.8 of this Agreement.

 

“Default Loan” has the meaning
ascribed thereto in Section 3.2.6(a) of this Agreement.

 

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

 

“Disclosure Information” has the
meaning ascribed thereto in Section 10.2.2 of this Agreement.

 

“Dissolution” means (a) when
used with reference to the Partnership, the earlier to occur of the date upon
which the Partnership (i) is terminated under the Act or any similar
statute 

 

7

 

enacted in lieu thereof or (ii) ceases
to be a going concern and (b) when used with reference to any Partner, the
earlier to occur of the date upon which (i) there is a Dissolution of the
Partnership or (ii) such Partner’s entire interest in the Partnership is
terminated by means of a distribution or series of distributions by the
Partnership to such Partner.

 

“Distribution(s)” means each
distribution, or collectively more than one distribution, as may be applicable,
of Available Cash and Net Liquidation Proceeds received by the applicable
Partner from the Partnership.

 

“Dividend Capital Total Realty Trust”
means Dividend Capital Total Realty Trust Inc., a Maryland Corporation, its
successor and assigns.

 

“Effective Date”  has
the meaning ascribed thereto in Section 3.9 of this Agreement.

 

“Emergency Expenditures”  means  payments
required to be made by the Partnership or a Fee Owner to (a) avoid or
minimize the imminent threat of either (i) loss or impairment of life or
of personal injury, (ii) damage to a Property or (iii) impairment of
the security given for the Senior Loan or (b) without limiting the
generality of the provisions of the preceding clause (a) make any repairs
or capital improvements or take other action required to effect compliance with
all laws, orders, rules regulations and other requirements enacted,
imposed or enforced by any Governmental Authority.

 

“Entity”
means any Person other than an Individual.

 

“Fee Owner(s)” means, individually,
an entity which owns a particular Property and collectively, the owners of all
of the Properties.

 

“Fee Owner Interest(s)” means,
individually or collectively, as may be applicable, the membership interests or
partnership interests in each Fee Owner owned by the Partnership.

 

“Final Promote True-Up Amount” has
the meaning ascribed thereto in Section 5.3.2 of this Agreement.

 

“First Offer Invitation” has the
meaning ascribed thereto in Section 16.10.1 of this Agreement.

 

“First Offer Response Period” has
the meaning ascribed thereto in Section 16.10.1 of this Agreement.

 

“Fiscal Year”  means
the taxable year of the Partnership, which shall begin on January 1 and
end on December 31, or such other taxable year as required by Section 706(b) of
the Code.

 

“FMV”  means the value of the asset or interest in
question determined by an Appraiser on the basis of an arm’s length transaction
for cash between an informed and willing seller (under no compulsion to sell)
and an informed and willing purchaser (under no compulsion to purchase), taking
into account, among other things, the anticipated cash flow of the asset or
interest in question.

 

8

 

“Funding Notice” has the meaning
ascribed thereto in Section 3.2.2(b) of this Agreement.

 

“Future Assets” means, collectively,
any and all Properties, acquired by the Partnership through single purpose
entities pursuant to the terms of this Agreement, which Properties may be DCX
Assets or Non-DCX Assets.

 

“GAAP”  means
United States generally accepted accounting principles, consistently applied.

 

“Governmental Authority”  means any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government.

 

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

 

(a)           the initial Gross Asset Value of any
Partnership Property contributed by a Partner to the Partnership shall be the
fair market value of such Partnership Property as reasonably determined by the
TMP and the contributing Partner;

 

(b)           the Gross Asset Values of all Partnership
Property shall be adjusted to equal their respective fair market values, as
reasonably determined by the TMP, as of the following times:  (i) the acquisition of any additional
interests in the Partnership by any new or existing Partner in exchange for
more than a de minimis Capital Contribution, (ii) the
distribution by the Partnership to a Partner of more than a de minimis amount of Partnership Property as consideration
for an interest in the Partnership, (iii) the liquidation of the
Partnership within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g) and
(iv) the grant of an interest in the Partnership as consideration for the
provision of services to or for the benefit of the Partnership by an existing
Partner acting in a Partner capacity or in anticipation of being a Partner; provided, however,
that the adjustments pursuant to clauses (i) and (ii) above shall be
made only if the TMP determines, in its reasonable discretion, that such
adjustments are necessary or appropriate to reflect the relative economic
interests of the Partners in the Partnership;

 

(c)           the Gross Asset Value of any Partnership
Property distributed to any Partner shall be adjusted to equal the fair market
value, as reasonably determined by the TMP, of such Partnership Property on the
date of distribution; and

 

(d)           the Gross Asset Value of each Partnership
Property shall be increased (or decreased) to reflect any adjustments to the
adjusted basis of such Partnership Property pursuant to Code Section 734(b) or
Code Section 743(b), but only to the extent that such adjustments are
taken into account in determining Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m); provided, however, that Gross Asset Value shall not be
adjusted pursuant to this clause (d) to the extent the TMP determines, in
its reasonable discretion, that an adjustment pursuant to clause (b) is
necessary or appropriate in connection with a transaction that would otherwise
result in an adjustment pursuant to this clause (d).

 

9

 

If the Gross Asset Value of any Partnership Property has been
determined or adjusted pursuant to clauses (a), (b) or (d) of this
definition, such Gross Asset Value shall thereafter be adjusted by the
Depreciation taken into account with respect to such Partnership Property for
purposes of computing Net Profit and Net Losses.

 

“Impasse” has
the meaning set forth in Section 6.5 of this Agreement.

 

“Indemnitee”
has the meaning ascribed thereto in Section 12.1 of this Agreement.

 

“Initial Annual Business Plan”
has the meaning ascribed to such term in Section 6.13.2 of this
Agreement.

 

“Initial Annual Property Budget”
has the meaning ascribed thereto in Section 6.13.1 of this
Agreement.

 

“Initial Annual Riverport Budget”
has the meaning ascribed to such term in Section 6.13.1 of this
Agreement, a copy of which budget is attached to this Agreement as Exhibit C.

 

“Initial Required Equity”
means all costs and expenses incurred as of the date hereof (less debt
financing proceeds, if any) in connection with the acquisition of the
Properties and approved by TRT LLC, including, without limitation, attorneys
fees and disbursements and due diligence costs and expenses as well as costs
incurred by DCT LLC and TRT LLC in connection with the formation of the
Partnership and the preparation of this Agreement, but excluding costs incurred
by DCT LLC or TRT LLC in connection with the formation of their respective
entities and the preparation of organizational documents therefor, which shall
be separately paid by DCT LLC and TRT LLC, respectively.

 

“Initiating Partner”
has the meaning ascribed thereto in Section 16.12 of this
Agreement.

 

“Interest”
means an ownership interest of a Partner in the Partnership and includes all
the rights of such Partner under this Agreement.

 

“Internal Rate of Return” or “IRR” means, as to TRT LLC, the
annual discount rate equivalent to a compounded monthly rate which establishes
the present value, as of the date that the first Capital Contribution was made
to the Partnership by TRT LLC, of the aggregate of all Distributions to TRT LLC
pursuant to this Agreement as being equal to the present value, as of the date the
first Capital Contribution was made to the Partnership by TRT LLC, of the
aggregate of all Capital Contributions made by TRT LLC. In determining the
Internal Rate of Return all computations of “Internal Rate of Return” shall be
made utilizing the “xIRR” function in Excel, except that all Fees payable under
the Asset Management Agreement (with the exception of acquisition fees, which
are assumed to be added to TRT LLC’s Capital Contributions) shall be deducted
from Distributions for purposes of calculating the Internal Rate of Return.

 

TRT LLC shall be deemed to have received a specified Internal Rate of
Return, with respect to any Capital Contributions, when TRT LLC has received a return of such Capital Contributions made
by it plus a cumulative, monthly compounded, return
on such Capital Contributions at the specified rate per annum.  Notwithstanding anything in this Agreement to

 

10

 

the contrary, for purposes of
calculating TRT LLC’s share of distributions from DCX Assets under Section 5.1
of this Agreement (and for such purposes only) the calculation of TRT LLC’s IRR
shall exclude any portion of TRT LLC’s Capital Contributions in excess of the
agreed upon contribution value of such DCX Asset (i.e. increases above the
agreed upon contribution value to make the contribution of any such asset
economically neutral to DCT LLC or its applicable Affiliate on an after tax
basis).

 

Notwithstanding
anything to the contrary contained herein, it is the parties intention that
with respect to DCX Assets, both the Partnership’s period of ownership as well
as the period of time prior to the exercise date of the DCX Call Right relating
to such assets shall be included in all computations of Internal Rate of
Return.  Accordingly, each initial
Capital Contribution made by TRT LLC with respect to each DCX Asset shall be
deemed, for purposes of calculating the Internal Rate of Return under this
Agreement, made as of the date that TRT LLC first acquires such DCX Asset,
shall take into account any distributions of cash to TRT LLC or an Affiliate
thereof from the DCX Asset prior to the DCX Call Right exercise date and shall
no longer be included in the calculation of IRR under this Agreement (both
forward looking and retroactively) at such time as TRT LLC or an Affiliate
thereof elects not to exercise its DCX Call Right with respect to a DCX Asset,
provided further that in the event that TRT LLC or an Affiliate thereof elects
to convey the DCX Asset back to the Partnership and DCT LLC fails to approve
such conveyance, such rejected DCX Asset shall also be excluded from the
calculation of IRR under this Agreement regardless who owns the DCX Asset.

 

“Interests Acquisition” has the
meaning ascribed thereto in Section 9.1.1 of this Agreement.

 

“Investment Criteria” has the
meaning ascribed thereto in Section 15.1 of this Agreement.

 

“Investor REIT” has the meaning
ascribed thereto in Section 3.2.3 of this Agreement.

 

“Lease” means any lease for any
portion of any Property.

 

“Lender Account” means, individually
or collectively, as applicable, any cash management account(s) established
pursuant to the Senior Loan for the collection of all Revenue and the
disbursement thereof pursuant to the Senior Loan Documents.

 

“Lien”  means
any mortgage, pledge, hypothecation, assignment, deposit arrangement,
encumbrance, lien (statutory or other), or preference, priority or other pledge
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing and the filing of any financing statement under the
Uniform Commercial Code or comparable law of any jurisdiction in respect of any
of the foregoing) excluding, however, liens for real estate taxes not yet
delinquent.

 

“Liquidation Event”  means any (a) sale, transfer or other disposition or
liquidation of a Property (including a foreclosure sale of a Property to an
unaffiliated third party), (b) casualty to a Property or any portion
thereof (which, for the purposes of the notice requirement of Section 5.2
hereof, shall not include any immaterial damage), (c) condemnation of a
Property or 

 

11

 

any portion thereof or (d) refinancing
of the Senior Loan or other financing of Partnership Property.

 

“Liquidation Proceeds”  means, with respect to any Liquidation Event, all amounts
paid to or received by or on behalf of the Partnership in connection with such
Liquidation Event.

 

“Loan Guaranties” or “Loan Guaranty” have the meanings
ascribed thereto in Section 3.3 of this Agreement.

 

“Loan Guaranty Indemnification Obligation”
has the meaning ascribed thereto in Section 3.3 of this Agreement.

 

“Loan Guaranty Losses” has the
meaning ascribed thereto in Section 3.3 of this Agreement.

 

“Major Decision”  has
the meaning ascribed thereto in Section 6.4 of this Agreement.

 

“Managing Partner” means DCT LLC or
its replacement selected to manage the Partnership pursuant to Section 6.15
of this Agreement, each in such Person’s capacity as a manager of the
Partnership.

 

“Marketing Notice” has the meaning
ascribed thereto in Section 16.10.1 of this Agreement.

 

“Net Liquidation Proceeds”  means, with respect to any Liquidation Event, all
Liquidation Proceeds, less (a) amounts paid in respect of the Senior Loan,
and (b) reasonable and customary costs and expenses incurred in connection
with such Liquidation Event.

 

“Net Profits” and “Net Losses” mean, for each Fiscal Year or other period,
an amount equal to the Partnership’s taxable income or loss for such year or
period, determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in
taxable income or loss), with the following adjustments:

 

(a)           any income of the Partnership that is exempt
from federal income tax and not otherwise taken into account in computing Net
Profits or Net Losses shall be added to such taxable income or loss;

 

(b)           any expenditures of the Partnership described
in Code Section 705(b)(2)(B) or treated as Code Section 705(b)(2)(B) expenditures
pursuant to Regulations Section 1.704-1(b)(2)(iv)(i) and not otherwise
taken into account in computing Net Profits or Net Losses shall be subtracted
from such taxable income or loss;

 

(c)           gain or loss resulting from any disposition
of Property with respect to which gain or loss is recognized for federal income
tax purposes shall be computed by reference to the Gross Asset Value of the
Partnership Property disposed of, notwithstanding that the adjusted tax basis
of such Partnership Property differs from its Gross Asset Value;

 

12

 

(d)           in lieu of 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 or other period; and

 

(e)           notwithstanding any other provision of this
subsection, any items of income, gain, loss or deduction which are specially
allocated pursuant to Sections 4.3 through 4.6 hereof shall not
be taken into account in computing Net Profits or Net Losses.

 

“Non-DCX Asset” means, individually,
each of the Non-DCX Assets.

 

“Non-DCX Assets” means,
collectively, all Properties other than the DCX Assets.

 

“Non-DCX Contribution Percentages”
means the respective shares of the Capital Contributions to be made by the
Partners with respect to the Non-DCX Assets which shall be 90% with respect to
TRT LLC and 10% with respect to DCT LLC.

 

“Non-Defaulting Partner” has the
meaning ascribed thereto in Section 3.2.6(a) of this
Agreement.

 

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

 

“Notices”  has
the meaning ascribed thereto in Section 13.4 of this Agreement.

 

“Offered Price” has the meaning
ascribed thereto in Section 16.10.1 of this Agreement.

 

“Partially Adjusted Capital Account”
means, with respect to any Partner for any Fiscal Year, the Capital Account of
such Partner at the beginning of such Fiscal Year, (a) adjusted as set
forth in Section 3.5 for all contributions and distributions during
such year, (b) adjusted as set forth in Section 3.5 for all
special allocations pursuant to  Sections
4.2, 4.3, 4.4, 4.5, 4.6 and 4.7 with
respect to such Fiscal Year, but before giving effect to any allocations of Net
Profits or Net Losses for such Fiscal Year pursuant to Section 4.1
and (c) increased by the Partner’s share of Partnership Minimum Gain
determined pursuant to Regulations Section 1.704-2(g) and the Partner’s
share of Partner Nonrecourse Debt Minimum Gain determined in accordance with
Regulations Section 1.704-2(i)(5), all computed immediately prior to the
hypothetical sale described in the definition of “Target Capital Account.”

 

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

 

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

 

“Partner Nonrecourse Deductions” has
the meaning ascribed thereto in Regulations Section 1.704-2(i)(2). The amount
of Partner Nonrecourse Deductions with respect to a Partner 

 

13

 

Nonrecourse Debt for a Fiscal
Year of the Partnership equals the excess (if any) of the net increase (if any)
in the amount of Partner Nonrecourse Debt Minimum Gain attributable to such
Partner Nonrecourse Debt during that Fiscal Year over the aggregate amount of
any distributions during that Fiscal Year to the Partner that bears (or is
deemed to bear) the economic loss for such Partner Nonrecourse Debt to the
extent such distributions are from the proceeds of such Partner Nonrecourse
Debt and are allocable to an increase in Partner Nonrecourse Debt Minimum Gain
attributable to such Partner Nonrecourse Debt, determined in accordance with Regulations
Section 1.704-2(i)(2).

 

“Partners”  means,
collectively, all Persons who hold Interests, each in such Person’s capacity as
a partner of the Partnership.  Reference
to a “Partner” shall be to any one of the
Partners.

 

“Partnership” has the meaning ascribed
thereto in the Recitals to this Agreement.

 

“Partnership Loan” has the meaning
ascribed thereto in Section 3.2.3 of this Agreement.

 

“Partnership Minimum Gain” means the
amount determined by computing, with respect to each nonrecourse liability of
the Partnership, the amount of gain (of whatever character), if any, that would
be realized by the Partnership if it disposed (in a taxable transaction) of the
Partnership Property subject to such liability in full satisfaction thereof,
and by then aggregating the amounts so computed as set forth in Regulations Section 1.704-2(d).

 

“Partnership Property” means any
assets of the Partnership, whether tangible or intangible, or any portion
thereof.

 

“Percentage Interest” means, for any
Partner, the aggregate Interest, expressed as a percentage, of each Partner in
the Partnership, based upon the ratio of all of the Capital Contributions made
by such Partner to the Partnership to the aggregate sum of all Capital
Contributions made by the Partners to the Partnership, as the same may
thereafter be adjusted from time to time pursuant to the terms of this
Agreement.

 

“Period of Duration” has the meaning
ascribed thereto in Section 2.5 of this Agreement.

 

“Person” means any individual,
corporation, partnership, limited liability company, joint venture,
association, joint-stock company, unincorporated organization, governmental or
regulatory body or other entity.

 

“Preservation Costs” has the meaning
ascribed thereto in Section 3.2.3 of this Agreement.

 

“Prohibited
Person” means any Person identified on the OFAC
List or any other Person or foreign country or agency thereof with whom a U.S.
Person may not conduct business or transactions by prohibition of Federal law
or Executive Order of the President of the United States of America.

 

14

 

“Promotional Distributions” means
the distributions made to DCT LLC pursuant to Sections 5.1.2(b) and
5.1.3(b) of this Agreement.

 

“Promotional Interest” means the
right of DCT LLC to receive Promotional Distributions pursuant to this
Agreement.

 

“Property(ies)”  means
a property owned by a Fee Owner and collectively, the properties owned by the
Fee Owners.

 

“Property Acquisition” has the
meaning ascribed thereto in Section 9.1.1 of this Agreement.

 

“Property  Expenses”
means with respect to each Property the sum of the following:  (a) all sums expended in respect of the
Property to pay for the costs of owning, operating and maintaining the
Property, (b) all payments required to be made under the Senior Loan,
including without limitation, in respect of interest, principal, servicing
fees, real estate tax and insurance impounds, but excluding all other escrows
and other reserves required to be paid in accordance with the Senior Loan
Documents, (c) all  fees payable
to Asset Manager pursuant to the Asset Management Agreement including, without
limitation, any asset management fees and acquisition fees, (d) all fees
payable to the Property Manager pursuant to the Property Management Agreement
including, without limitation, any property management fees, leasing fees and
construction management fees, (e) to the extent not paid pursuant to
clause (a) above, (i) costs incurred in connection with the renewal
or extension of existing Leases of portions of the Property or in connection
with new Leases, including, without limitation, brokerage fees and tenant
improvements and (ii) expenditures for improvements and capital repairs to
the Property, as all such costs and expenditures are set forth in the Approved
Annual Budget, (f) all other sums expended by the Partnership pursuant to
the Approved Annual Budget, and (h) Emergency Expenditures.

 

“Property Management Agreement” means
that certain Property Management Agreement, dated as of the date hereof, by and
between Fee Owner and the Property Manager, or any subsequent property
management agreement entered into by Fee Owner in accordance with this
Agreement.

 

“Property
Manager” means an Affiliate of DCT LLC or a third
party property manager selected, from time to time, by DCT LLC and reasonably
approved by TRT LLC.

 

“Property
Related Representations” means the following
customary representation to be set forth in the contribution agreement relating
to the Properties covered by Section 9.1.4.

 

(a)           A true and accurate rent roll listing all
leases or tenancies or agreements with tenants presently in effect with respect
to the Property.

 

(b)           To
Managing Partner’s knowledge there is no litigation or proceedings pending
against or relating to the Property before any court or administrative body or
agency.

 

15

 

(c)           To Managing Partner’s knowledge no notice of
any pending or threatened condemnation or eminent domain proceedings which
would affect the Property has been received.

 

(d)           To Managing Partner’s knowledge no changes or
alterations have been made to the Property or any improvements thereon which
render the same in violation of any applicable zoning ordinances.

 

(e)           To Managing Partner’s knowledge the  Property is not in violation of any existing
and applicable law or regulation pertaining to hazardous materials and are not
subject to any existing, pending or threatened investigation or inquiry by any
governmental or quasi-governmental authority and is not subject to any remedial
action or obligations under any law or regulation pertaining to hazardous materials.

 

“Proposed Asset” has the meaning
ascribed thereto in Section 9.1.1 of this Agreement.

 

“Purchase Price” has the meaning
ascribed thereto in Section 16.2 of this Agreement.

 

“Purchaser” has the meaning ascribed
thereto in Section 16.5 of this Agreement.

 

“Regulations” means the federal
income tax regulations promulgated by the Treasury Department under the Code,
as such regulations may be amended from time to time.  All references herein to a specific section
of the Regulations shall be deemed also to refer to any corresponding
provisions of succeeding Regulations.

 

“REIT” means an entity subject to
tax as a real estate investment trust under Code Sections 856 through and
including 860.

 

“Required
Capital” has the meaning ascribed thereto in Section 3.2.2
of this Agreement.

 

“Reserves” means funds set aside by
the Partnership pursuant to an Approved Annual Budget, from Capital
Contributions or Revenues or Liquidation Proceeds as reserves in amounts
reasonably necessary or prudent for payment of Property Expenses not likely to
be covered out of any other account of the Partnership, including, without
limitation, possible (a) capital expenditures and tenant improvements and
allowances in respect of the Property, (b) debt service under any Senior
Loan, and (c) Emergency Expenditures, excluding, however, the amount of
any reserves held and maintained by Senior Lender pursuant to the Senior Loan
Documents.

 

“Responding Partner” has the meaning
ascribed thereto in Section 16.12 of this Agreement.

 

“Return of Capital Distributions”
means, for any Partner, distributions made to such Partner under Section 5.1.1
of this Agreement that exceed the amount necessary to provide such Partner with
a return on (but not of) its Unreturned Capital Contributions equal to eight
and one half percent (8.5%), compounded monthly.

 

16

 

“Revenues”  means
all actual cash receipts of the Partnership in respect of the Property,
excluding Liquidation Proceeds.

 

“Sales Period” has the meaning
ascribed thereto in Section 16.11.1 of this Agreement.

 

“Secretary of State”  has the meaning ascribed thereto in the Recitals of this
Agreement.

 

“Seller” has the meaning ascribed
thereto in Section 16.5 of this Agreement.

 

“Senior Lender” means a lender under
a Senior Loan.

 

“Senior Loan” means a mortgage loan
in connection with the acquisition of a Property provided by a Senior Lender to
a Fee Owner and any replacement, renewal, extension, substitution, addition,
supplement, modification, amendment or refinancing thereof, each as approved by
the Partners hereunder.

 

“Senior Loan Default” means any
default, beyond applicable notice and cure periods, if any, by the Partnership
of any term, covenant or condition arising under any Senior Loan Documents.

 

“Senior Loan Documents” means any
promissory note or other evidence of indebtedness and all mortgages and
security agreements, assignments, financing statements, pledges and collateral
security agreements delivered in connection with a Senior Loan, and any replacement,
renewal, extension, substitution, addition, supplement, amendment or
modification of any of the foregoing.

 

“Special Purpose Entity” means an
entity (a) the sole purpose of which is to own the Property and (b) that
fulfills the Senior Lender’s requirements for a “bankruptcy remote” entity.

 

“Subsidiary” means any Entity that
with respect to another Entity, would be treated as a consolidated subsidiary
of such other Entity according to GAAP.

 

“Target Capital Account” means, with
respect to any Partner for any Fiscal Year, an amount equal to the hypothetical
distribution such Partner would receive if all Partnership assets were sold for
cash equal to their Gross Asset Values, all Partnership liabilities were
satisfied to the extent required by their terms (limited, with respect to each
nonrecourse liability, to the Gross Asset Value of the assets securing each
such liability), and the net assets of the Partnership were distributed in full
to the Partners pursuant to Sections 5.1 and 5.3.2, all as of the last
day of such year.

 

“Threshold Price” has the meaning
ascribed thereto in Section 16.11.1 of this Agreement.

 

“TMP”  has
the meaning ascribed thereto in Section 10.5 of this Agreement.

 

“Transfer”  has
the meaning ascribed thereto in Section 8.1.1 of this Agreement.

 

17

 

“TRT LLC” has the meaning ascribed
thereto in the introductory paragraph to this Agreement.

 

“True-Up Date” means the date upon
which the final distribution to the Partners upon the Dissolution of the
Partnership and the liquidation of all Partnership Property has occurred or is
to be made pursuant to Sections 5.1 and 11.2.

 

“Unreturned Capital Contributions”
means, for any Partner, the excess of such Partner’s Capital Contributions over
such Partner’s Return of Capital Distributions.

 

“Vote of the Partners”  means the unanimous approval of all of the Partners of the
Partnership.

 

“Voting Stock”  means
capital stock issued by a corporation, partnership interests issued by a
partnership, membership interests issued by a limited liability company, or
equivalent interests in any other Person, the holders of which are ordinarily,
in the absence of contingencies, entitled to vote for the election of directors
(or persons performing similar functions) of such Person, even if the right so
to vote has been suspended by the happening of such a contingency.

 

ARTICLE
2

 

THE
PARTNERSHIP AND ITS BUSINESS

 

2.1           Formation of Partnership.  The Partnership was formed pursuant to the
provisions of the Act and evidenced by the execution and delivery of the
Partnership Statement of Existence to the Secretary of State in accordance with
and pursuant to the Act.  Each Partner
was admitted to the Partnership as a general partner of the Partnership upon
its execution of a counterpart page to this Agreement.    The rights and liabilities of the Partners,
the management of the affairs of the Partnership and the conduct of its
business shall be as provided in the Act, except as herein otherwise expressly
provided.

 

2.2           Name.  The name of the Partnership is “TRT-DCT INDUSTRIAL JV III GENERAL
PARTNERSHIP.”  The Partners shall operate
the business of the Partnership under such name or use such other or additional
names as Managing Partner may deem necessary or desirable provided that: (a) no
such name shall contain the individual name of any principal of any Partner, or
any similar name or variation thereof, (b) Managing Partner shall have
reasonably determined, before use of any such name, that the Partnership is
entitled to use such name and will not by reason of such use infringe upon any
rights of any other Person, or violate any applicable laws or governmental
regulations, and (c) Managing Partner shall register such name under
assumed or fictitious name Acts or similar laws of the states in which the
Partnership operates.

 

2.3           Principal Office.  The Partnership shall maintain its principal place of business at 518
17th Street, Suite 800, Denver, Colorado 80202, or at such
other place as the Partners may determine from time to time.

 

2.4           Registered Office and Registered Agent. 
The Partnership’s
initial registered offices shall be at the offices of its registered agent,
Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington,
Delaware 19808.  The registered office
and registered agent may 

 

18

 

be
changed from time to time by filing the address of the new registered office
and/or the name of the new registered agent with the Secretary of State
pursuant to the Act.

 

2.5           Period of Duration.  The period of duration of the Partnership (“Period of
Duration”) commenced on the date of the filing of the
Partnership Statement of Existence with the Secretary of State, and shall
continue until December 31, 2058, unless the Partnership is terminated or
dissolved sooner, in accordance with the provisions of this Agreement.  The existence of the Partnership as a
separate legal entity shall continue until cancellation of the Statement of
Partnership Existence as provided in the Act.

 

2.6           Business and Purpose of the Partnership. 
Subject to the
applicable terms and conditions of the Senior Loan Documents, the business
purpose of the Partnership (“Business of the
Partnership”) is limited solely to the following:

 

2.6.1        acquiring, holding, selling, financing,
transferring and exchanging the Fee Owner Interests;

 

2.6.2        acting as 
the sole member of each Fee Owner;

 

2.6.3        causing each Fee Owner to acquire, own,
operate, develop, improve, manage, lease, sell, finance and transfer a Property
or any portion thereof;

 

2.6.4        obtaining financing or causing each Fee Owner
to obtain a Senior Loan, execute and deliver the Senior Loan Documents and to
perform the obligations of the borrower and mortgagor thereunder;

 

2.6.5        causing each Fee Owner to enter into a
Property Management Agreement; and

 

2.6.6        transacting any and all lawful business for
which a general partnership may be organized under the Act that is incident,
necessary or appropriate to accomplish the foregoing, including, without limitation,
contracting for necessary or desirable services of professionals and others.

 

2.7           Representations by Partners.

 

2.7.1        Representations and Warranties of DCT LLC.  To
induce TRT LLC to execute, deliver and perform this Agreement, DCT LLC hereby
represents and warrants to TRT LLC, its successors and assigns, as follows:

 

(a)           DCT LLC is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the full right, power and authority to enter into this
Agreement, and to perform all of its obligations hereunder;

 

(b)           This Agreement has been duly and validly
executed and delivered by and on behalf of DCT LLC and constitutes a valid,
binding and enforceable obligation of DCT LLC enforceable in accordance with
its terms, except to the extent such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium, reorganization or other similar
laws of general application affecting the rights of creditors in general;

 

19

 

(c)           The execution and delivery hereof will not
conflict with or result in a breach of any of the provisions of, or constitute
a default, event of default or event creating a right of acceleration,
termination or cancellation or any obligation under any instrument, note,
mortgage, contract, judgment, order, award, decree or other agreement or
restriction to which DCT LLC is a party, or by which DCT LLC is otherwise
bound;

 

(d)           There is no claim, cause of action or other
litigation or any judicial, administrative or investigative proceedings pending
or, to the best of DCT LLC’s knowledge, threatened against DCT LLC or that
might have a material adverse effect on any Property or the use thereof or the
performance of DCT LLC’s obligations hereunder;

 

(e)           None of DCT LLC or any Affiliate thereof has
dealt with any Person acting as a broker, finder or like agent in connection
with this Agreement or the transactions contemplated thereby;

 

(f)            Each has been advised to and has engaged its
own counsel (whether in-house or external) and any other advisers it deems
necessary and appropriate.  By reason of
its business or financial experience, or by reason of the business or financial
experience of its own attorneys, accountants and financial advisors (which
advisors, attorneys and accountants are not Affiliates of the Partnership or
any Partner), it is capable of evaluating the risks and merits of an investment
in the Interest and of protecting its own interests in connection with this
investment.  Nothing in this Agreement
should or may be construed to allow any Partner to rely upon the advice of
counsel acting for another Partner or to create an attorney-client relationship
between a Partner and counsel for another Partner as a result of the
representation described above;

 

(g)           Each acknowledges and agrees that Morrison &
Foerster LLP serves as counsel to TRT LLC, and that Morrison &
Foerster LLP does not serve as counsel to any other Partner.  Every Partner that is not TRT LLC acknowledges
and agrees that it does not have an attorney-client relationship with Morrison &
Foerster LLP, and that no such relationship will arise in the course of the
Partnership’s existence or dissolution by any means.  Every Partner of the Partnership that is not
TRT LLC represents and warrants that, in the event of litigation or arbitration
between TRT LLC and any other Partner of the Partnership, such Partner will not
seek the removal of Morrison & Foerster LLP as counsel to TRT LLC for
any purported conflict of interest or attorney-client relationship allegedly
existing between Morrison & Foerster LLP and such Partner.

 

(h)           To the best of Managing Partner’s knowledge,
none of them nor any of their direct members, shareholders, partners or
Affiliates currently is (1) identified on the OFAC List or otherwise
qualifies as a Prohibited Person or (ii) in violation of any legal
requirements relating to anti-money laundering or anti-terrorism, including,
without limitation, those related to transacting business with Prohibited
Persons or the requirements of the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of
2001, U.S. Public Law 107-56, and the related regulations issued thereunder,
including temporary regulations, all as amended from time to time;

 

(i)            None of them 
is  a “foreign person” within the
meaning of § 1445(f)(3) of the Code; and

 

20

 

(j)            All decision-making of DCT LLC (i.e.,
day-to-day and major decisions) are controlled, directly or indirectly, by DCT
Principals subject to board approval in the ordinary course.

 

2.7.2        Representations and Warranties of
TRT LLC.  To
induce DCT LLC to execute, deliver and perform this Agreement, TRT LLC hereby
represents and warrants to DCT LLC, its permitted successors and assigns, as
follows:

 

(a)           TRT LLC is a Delaware limited liability
company, validly existing and in good standing under the laws of the State of
Delaware, with full right, power and authority to enter into this Agreement and
to perform its obligations hereunder;

 

(b)           This Agreement has been duly and validly
executed and delivered by and on behalf of TRT LLC and constitutes a valid,
binding and enforceable obligation of TRT LLC enforceable in accordance with
its terms, except to the extent such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium, reorganization or other similar
laws of general application affecting the rights of creditors in general;

 

(c)           The execution and delivery hereof will not
conflict with or result in a breach of any of the provisions of, or constitute
a default, event of default or event creating a right of acceleration,
termination or cancellation of any obligation under, any instrument, note,
mortgage, contract, judgment, order, award, decree or other agreement or
restriction to which TRT LLC is a party, or by which TRT LLC is otherwise
bound;

 

(d)           There is no claim, cause of action or other
litigation or any judicial, administrative or investigative proceedings pending
or, to the best of TRT LLC’s knowledge, threatened against TRT LLC that might
have a material adverse effect on the performance of TRT LLC’s obligations
hereunder;

 

(e)           None of TRT LLC or any Affiliate thereof has
dealt with any Person acting as a broker, finder or like agent in connection
with this Agreement or the transactions contemplated hereby;

 

(f)            To TRT’s knowledge, neither TRT LLC nor any
of its members, shareholders, partners or Affiliates currently is (1) identified
on the OFAC List or otherwise qualifies as a Prohibited Person or (ii) in
violation of any legal requirements relating to anti-money laundering or
anti-terrorism, including, without limitation, those related to transacting
business with Prohibited Persons or the requirements of the Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism Act of 2001, U.S. Public Law 107-56, and the related
regulations issued thereunder, including temporary regulations, all as amended
from time to time; and

 

(g)           TRT LLC is not a “foreign person” within the
meaning of § 1445(f)(3) of the Code.

 

2.7.3        Indemnification.  DCT
LLC shall indemnify the Partnership, TRT LLC, TRT LLC’s Affiliates, and their
respective shareholders, members, partners, directors, officers, 

 

21

 

managers,
successors and assigns from and against all claims, demands, damages,
liabilities, expenses (including reasonable attorney fees), costs, lawsuits, or
other proceedings (whether or not initiated by any governmental entity) arising
from or in connection with the breach by DCT LLC of any of its representations
and warranties set forth herein.  TRT LLC
shall indemnify the Partnership, DCT LLC, DCT LLC’s Affiliates and their
respective shareholders, members, partners, directors, officers, managers,
successors and assigns from and against all claims, demands, damages,
liabilities, expenses (including reasonable attorney fees), costs, lawsuits, or
other proceedings (whether or not initiated by any governmental entity) arising
from or in connection with the breach by TRT LLC of any of its representations
and warranties set forth herein.  The
Partners acknowledge and agree that to the extent of any indemnification obligations
under this Section 2.7.3 that are not satisfied by the Partner
required to do so hereunder, such Partner’s Distributions hereunder may be
offset by the indemnified party to the extent of such unsatisfied obligations; provided,
however, that same shall not eliminate the obligations of such Partner
to satisfy such obligations directly.

 

ARTICLE
3

 

PARTNERS
AND CAPITAL CONTRIBUTIONS

 

3.1           Names and Addresses of Partners.  The addresses of the Partners are:

 

3.1.1        DCT LLC: DCT Industrial Fund III LLC c/o DCT
Industrial Operating Partnership LP, 518 17th Street, Suite 800,
Denver, Colorado 80202, Facsimile No. (303) 228-2201, Attention: James
Cochran, President.

 

3.1.2        TRT LLC:  TRT
Industrial Fund III LLC, c/o Dividend Capital Total Realty Trust, 518 17th
Street, Suite 1700, Denver, Colorado 80202, Facsimile No. 303-996-8486,
Attention: Guy Arnold.

 

3.2           Capital  Contributions.

 

3.2.1        Costs to Acquire the Properties.  The
Partners have agreed to contribute Capital Contributions, in order to fund the
Initial Required Equity as provided in this Section 3.2.  DCT LLC and TRT LLC shall contribute their
pro rata share, based on their respective Non-DCX Contribution Percentages with
respect to Non-DCX Assets and DCX Contribution Percentages with respect to DCX
Assets (at the time that the Partnership acquires the DCX Assets), as may be
applicable, of all costs to acquire the Properties, all costs in connection
with establishing the Partnership and any reserves for Partnership purposes
which the Partners determine are appropriate to fund at that time.

 

3.2.2        Required Capital.  Each
Partner shall be obligated to make Contributions to the Partnership up to its
Contribution Cap, as follows (the “Required Capital”):

 

(a)           Reserved.

 

(b)           TRT LLC and DCT LLC shall be obligated to
make additional contributions of their pro rata shares of Required Capital to
the Partnership, based on their 

 

22

 

respective
DCX Contribution Percentages with respect to DCX Assets and based on their
respective Non-DCX Contribution Percentages with respect to Non-DCX Assets and
based on their respective Percentage Interests with respect to Partnership
capital needs not otherwise solely related to either DCX Assets or Non-DCX
Assets, as needed to acquire Future Assets and otherwise consistent with the
Approved Annual Budget and the Approved Annual Business Plan and all costs of
operating each Property and the Partnership consistent with the Approved Annual
Budget and the Approved Annual Business Plan, up to an aggregate amount equal
to their respective Contribution Caps. 
If Capital Contributions are required pursuant to the terms of this Section 3.2.2,
Managing Partner shall have the right to issue a funding notice substantially
in the form attached hereto as Exhibit D
(the “Funding Notice”)  setting forth the amount of the required Capital
Contribution being requested. Within five (5) days after receipt of a duly
issued Funding Notice or such longer period as the Funding Notice may permit,
TRT LLC and DCT LLC shall each advance to the Partnership as a Capital
Contribution the amount requested in the Funding Notice, until each Partner has
made aggregate Capital Contributions under Section 3.2.2(a) and
this Section 3.2.2(b) equal to its respective Contribution
Cap.

 

(c)           If at any time the Partners have contributed
all capital required under Section 3.2.2(a) and Section
3.2.2(b) above and the Partners unanimously approve the contribution of
additional capital to the Partnership, the Partners shall make such Capital
Contributions in proportion to their DCX Contribution Percentages or Non-DCX
Contribution Percentages, as may be applicable, or as the Partners may
otherwise mutually agree, and at such times as the Partners may agree.  Such additional unanimously approved
additional Capital Contributions shall be deemed required Capital Contributions
for purposes of this Agreement.

 

3.2.3        Preservation Capital.  If,
at any time after the Partners have contributed all of the Capital
Contributions required pursuant to Section 3.2.2 hereof, either DCT
LLC or any Partner reasonably and in good faith determines (after taking into
account any existing cash reserves of the Partnership) that the Partnership
requires additional capital to fund the payment of debt service obligations (if
approved as set forth below), real estate taxes, utility costs, insurance
premiums, and/or other costs and expenses reasonably necessary to protect and
preserve the value of the Property or the safekeeping, health and welfare of
occupants or invitees thereof (all such costs, collectively “Preservation Costs”), such Partner
shall have the right to issue a Funding Notice to the Partners setting forth
the amount needed to pay such Preservation Costs and each Partner’s respective
share of such Preservation Costs to be funded. 
Within five (5) Business Days after receipt of such notice or such
longer time as the Funding Notice may permit, each such Partner shall have the
option, but not the obligation, of 
advancing to the Partnership such Partner’s respective share of the
Preservation Costs on the terms set forth in the Funding Notice.  If all Partners elect to make such Capital
Contributions, such Capital Contributions shall constitute additional Capital
Contributions to the Partnership by such Partners.  If any Partner fails to make such Capital
Contribution under this Section, then the non-failing Partner shall elect
either (a) to receive the return of any unmatched funds paid to the
Partnership under this Section with interest computed at a rate equal to
the lower of 12% per annum or the highest rate per annum as may be permitted
pursuant to applicable law, and/or (b) to convert any unmatched funds paid
to the Partnership under this Section to a loan to the Partnership and in
addition, such Partner shall have the right to make an additional loan to the
Partnership in the amount that the failing Partner failed to contribute and/or (c) the
non-failing Partner may structure a loan or contribution with such terms as may
be required to ensure that no direct or indirect investor in 

 

23

 

such
Partner that is a real estate investment trust under the Code (the “Investor REIT”) will be treated as
holding a security described in Code Section 856(c)(4)(B)(iii)(III),
including by structuring any such loan so that it complies with the
requirements of Revenue Procedure 2003-65, I.R.B. 2003-32, and/or may transfer
any such loan or equity interest to an Affiliate of such Partner (e.g., a
taxable REIT subsidiary of the Investor REIT) and the Partners hereby agrees to
execute any documents that non-failing Partner determines, in its discretion,
may be reasonably required to give effect to the foregoing.  Any such loan or loans made by a Partner
shall be deemed a “Partnership Loan.”
All Partnership Loans shall bear interest on the original principal amount
thereof at a rate equal to the lower of 12% per annum or the highest rate per
annum as may be permitted pursuant to applicable law.  All Partnership Loans shall be repaid in full
prior to any distributions to the Partners. If more than one Partner has made a
Partnership Loan, then repayment of all Partnership Loans shall be made to the
Partners in proportion to the outstanding amount due each Partner under all
Partnership Loans.

 

3.2.4        No Third Party Rights.  Any
obligations or rights of the Partnership or the Partners to make or require any
contribution under this Article 3 shall not result in the grant of any
rights to or confer any benefits upon any Person who is not a Partner.

 

3.2.5        Limitations. 
Except as set forth in this Article 3, no Partner shall be entitled
or required to make any Capital Contribution to the Partnership.  No Partner shall have any liability for the
repayment of the Capital Contribution of any other Partner (other than as set
forth in this Article 3), and each Partner shall look only to the assets
of the Partnership for return of its Capital Contributions.

 

3.2.6        Failure to Contribute Capital.  If
any Partner fails to make a Capital Contribution that is required pursuant to Section 3.2.2
hereof by the date such contribution is due and such failure continues for ten (10) days
after written notice from any other Partner who has not failed to make its
Capital Contribution (any such failing Partner shall be a “Defaulting
Partner” and the amount of the failed contribution shall be the
“Default Amount”), then, such
failure shall be deemed a default hereunder and in addition to its other rights
and remedies set forth herein, the non-defaulting Partners shall have one or
more of the following remedies:

 

(a)           to advance to the Partnership on behalf of,
and as a loan to the Defaulting Partner, an amount equal to the Default Amount,
to be evidenced by a promissory note in 
form satisfactory to the Non-Defaulting Partner (each such loan, a “Default Loan”) and the payee of
such note shall be the “Non-Defaulting Partner.”  The Capital Account of the Defaulting Partner
shall be credited with the amount of such Capital Contribution and such amount
shall constitute a debt owed by the Defaulting Partner to the Non-Defaulting
Partner.  Any Default Loan shall bear
interest on the original principal amount thereof at a rate equal to the lower
of 12% per annum or the highest rate per annum as may be permitted pursuant to
applicable law and shall be payable from any Distributions due the Defaulting
Partner hereunder, but shall in all events be payable in full by the Defaulting
Partner on or before the date six (6) months after the date the Default
Loan is advanced.  A Default Loan shall
be prepayable, in whole or in part, at any time or from time to time without
penalty.  Any such Default Loans shall be
secured solely by the Defaulting Partner’s Partnership Interest.  Except as expressly provided herein, Default
Loans, with interest as aforesaid, shall otherwise be without recourse to any
other assets of the Defaulting Partner. 
The Defaulting Partner hereby grants a security interest in its
Partnership 

 

24

 

Interest
to the Non-Defaulting Partner and the Defaulting Partner hereby irrevocably
appoints the Non-Defaulting Partner, and any of its respective officers, as its
attorney-in-fact coupled with an interest with full power to prepare and
execute any documents, instruments and agreements, including, but not limited
to, any note evidencing the Default Loan and such Uniform Commercial Code
Financing Statements, continuation statements, and other security instruments
as may be appropriate to perfect and continue its security interest in favor of
the Non-Defaulting Partner.  If the
Defaulting Partner fails to pay the amount of the Default Loan when due, the
Non-Defaulting Partner may exercise all rights and remedies available to a
secured party under the Uniform Commercial Code.  The Defaulting Partner agrees that the
requirement of the Uniform Commercial Code that the Non-Defaulting Partner give
the Defaulting Partner reasonable notice of any proposed sale or disposition of
the Defaulting Partner’s Partnership Interest shall be met if such notice is
given to the Defaulting Partner at least five (5) days before the time of
such sale or disposition.  All
distributions to the Defaulting Partner hereunder shall be applied first to
payment of any interest due under any Default Loan and then to principal until
all amounts due thereunder are paid in full. 
While any Default Loan is outstanding, the Partnership shall be
obligated to pay directly to the Non-Defaulting Partner, until all Default
Loans have been paid in full, the amount of (x) any distributions payable
to the Defaulting Partner(s), and (y) any proceeds of a sale that would
otherwise be payable to the Defaulting Partner(s) resulting from the sale
of the Property or from the sale of the Defaulting Partner’s interest in the
Partnership as contemplated under this Agreement, as the case may be.  In addition, the Partnership shall pay to the
Non-Defaulting Partner, until all Default Loans have been paid in full, all
fees or other amounts due the Defaulting Partner or any Affiliate of a Defaulting
Partner under this Agreement or any other agreement between the Partnership or
any Subsidiary on the one hand and Defaulting Partner or any Affiliate of a
Defaulting Partner on the other hand; or

 

(b)           to advance to the Partnership as an
additional Capital Contribution the Default Amount whereupon the Percentage
Interests of the Partners shall be recalculated as provided in this
subparagraph (b), provided that Non-Defaulting Partner determines, in its sole
discretion, that any additional contribution and/or adjustment to the
Percentage Interests of the Partners does not violate the requirements of Code Section 514(c)(9)(E),
and the Treasury Regulations thereunder or waives such requirement.  After the exercise of the Non-Defaulting
Partner’s rights under this subparagraph (b), and provided that Non-Defaulting
Partner makes the determination or waiver described in the preceding sentence,
the (i) Percentage Interest of the Non-Defaulting Partner shall equal a
fraction (expressed as a percentage), the numerator of which shall equal the
aggregate sum of (x) all Capital Contributions made by the Non-Defaulting
Partner other than the Default Amount plus (y) an amount equal to 150% of
the Default Amount; and the denominator of which shall equal the aggregate sum
of all contributions made by all Partners under this Agreement, including the
Default Amount and (ii) the Percentage Interest of the Defaulting Partner
shall equal 100% minus the Percentage Interest of the Non-Defaulting Partner
after the application of this formula. 
As an example, if TRT LLC has made Capital Contributions of $900,000 and
DCT LLC has made Capital Contributions of $100,000 and there is a Funding
Notice for $200,000 and TRT LLC funds $180,000 and DCT LLC fails to fund
$20,000, then if TRT LLC elects under this subparagraph to advance the Default
Amount of $20,000 as an additional Capital Contribution, the Percentage
Interest of TRT LLC shall equal 92.5% ($900,000+$180,000+ ($20,000x150% or
$30,000)/ $1,200,000) and the Percentage Interest of DCT LLC shall equal
7.5%.  For purposes of this subparagraph,
if there is more than one instance of the application of the formula set forth
in this subparagraph, the Default Amount 

 

25

 

shall be the aggregate amount of additional Capital Contributions made
to the Partnership by the Non-Defaulting Partner pursuant to this subparagraph;
or

 

(c)           in lieu of the remedies
set forth in subparagraph (a) or (b) above, to revoke the Funding
Notice for the Partners, whereupon any unmatched contributions paid by the
Non-Defaulting Partner pursuant to such Funding Notice shall be returned, with
interest computed at a rate equal to the lower of 12% per annum and the highest
interest rate per annum as may be permitted pursuant to applicable law, in
which event the Partners shall reconsider the needs of the Partnership for
additional capital and may issue a new Funding Notice following such
reconsideration.

 

(d)           the Non-Defaulting
Partner may structure a loan or contribution with such terms as may be required
to ensure that the Investor REIT will not be treated as holding a security
described in Code Section 856(c)(4)(B)(iii)(III), including by structuring
any such loan or Default Loan so that it complies with the requirements of
Revenue Procedure 2003-65, I.R.B. 2003-32, and/or may transfer any such loan,
Default Loan or equity interest to an Affiliate of Non-Defaulting Partner
(e.g., a taxable REIT subsidiary of the Investor REIT) and the Partners hereby
agree to execute any documents that the Non-Defaulting Partner determines, in
its discretion, may be reasonably required to give effect to the foregoing.

 

3.2.7        Variance
of Contribution Percentage.

 

(a)           Notwithstanding
anything in this Agreement to the contrary, DCT LLC shall not be obligated to
contribute any particular asset to the Partnership, or to any subsequent
partnership that the Partners may enter into pursuant to the Partnership
Agreement, if DCT determines, in its reasonable discretion, that there is a
material risk that such transaction would be treated, in whole or in part, as a
sale to the Partnership by DCT LLC. 
Subject to TRT LLC’s agreement in connection with any particular asset,
DCT LLC may increase its Non-DCX Contribution Percentage or its DCX
Contribution Percentage, as applicable, under Section 3.2.2(b) with
respect to the contribution by DCT LLC or its Affiliates of any particular
asset contributed by DCT LLC or any of its Affiliates to that percentage that
will avoid having any portion of such transaction being treated as a sale of
such DCX Asset or Non-DCX Asset to the Partnership.  In connection with any such increase, the
Non-DCX Contribution Percentage or DCX Contribution Percentage, as applicable,
of TRT LLC with respect to its corresponding capital contribution under Section 3.2.2(b) to
acquire any such asset shall be decreased by the same percentage.  After any such adjustment of percentages in
connection with the contribution of an asset, DCT LLC’s and TRT LLC’s
contribution percentages with respect to subsequent capital contributions under
Section 3.2.2 shall be adjusted to decrease DCT LLC’s contribution
percentage, and to increase TRT LLC’s contribution percentage to cause as
quickly as possible the Percentage Interests of the Partners to be in the ratio
of 90% (TRT LCC) and 10% (DCT LLC).

 

(b)           To the extent that any
distribution made by the Partnership to DCT-LLC in connection with the
contribution of a DCX Asset or a Non-DCX Asset will not be treated as a
distribution with respect to a sale to the Partnership, upon the contribution
of any such asset that requires an adjustment of contribution percentages as
provided in Section 3.2.7, TRT LLC shall contribute to the Partnership and
DCT-LLC shall be distributed an amount with respect to

 

26

 

reimbursement
to DCT-LLC of pre-formation costs related to previously contributed assets to
the extent necessary to cause the Percentage Interests of DCT-LLC and TRT-LLC
to 10% and 90% respectively.  In that
regard, the Percentage Interest of DCT-LLC shall take into account
distributions to DCT-LLC pursuant to the preceding sentence as a reduction of
DCT-LLC’s contributed capital.

 

3.3           Credit Enhancement.  If in connection with any Senior Loan, any
Senior Lender requires a customary guaranty of non-recourse carve outs to
facilitate the closing and funding of any Senior Loan (each, a “Loan Guaranty” and, collectively,
the “Loan Guaranties”) the Partnership
shall cause DCT or such other party as is acceptable to the applicable Senior
Lender (each a “Loan Guarantor”)
to provide such Loan Guaranties and shall furnish such representations or other
documentation as TRT LLC may require in order to determine whether such Loan
Guaranty gives rise to partner nonrecourse debt that could reasonably be
expected to result in a violation of Code Section 514(c)(9)(E) and
the Treasury Regulations thereunder. 
Subject to the limitation below in this sentence, the Partnership hereby
agrees to indemnify, defend and hold harmless each Loan Guarantor providing
such Loan Guaranty from and against all losses, costs and expenses, including,
without limitation, reasonable attorney fees arising from the enforcement by
the holder of such Loan Guaranty of amounts due or claimed due under the Loan Guaranty
(collectively, “Loan Guaranty Losses”);
provided that in no event shall the Partnership have any obligation to
indemnify or hold harmless any such party (or shall such party have any rights
of subrogation against the Partnership) on account of Loan Guaranty Losses if
such Loan Guaranty Losses arise from or are related to, directly or indirectly,
the fraud, willful misconduct or gross negligence of a Loan Guarantor or any of
its Affiliates, except to the extent that the Partnership has benefited from
such wrongful action.  Notwithstanding
the foregoing, to the extent that (A) TRT LLC or any Affiliate of TRT
is the Loan Guarantor, DCT LLC, and not the Partnership, shall indemnify,
defend and hold harmless the Loan Guarantor from and against all Loan Guaranty
Losses to the extent such Loan Guaranty Losses arise from or are related to,
directly or indirectly, the fraud, willful misconduct or gross negligence of
DCT LLC or any of its Affiliates, or (B) DCT LLC or any
Affiliate of DCT is the Loan Guarantor, TRT LLC, and not the Partnership,
shall indemnify, defend and hold harmless the Loan Guarantor from and against
all Loan Guaranty Losses to the extent such Loan Guaranty Losses arise from or
are related to, directly or indirectly, the fraud, willful misconduct or gross
negligence of TRT LLC or any of its Affiliates.  Any indemnification obligation of the
Partnership arising under this Section shall be referred to herein as a “Loan Guaranty Indemnification Obligation”.

 

3.4           Rights with Respect to Capital.

 

3.4.1        Partnership Capital. 
Except as specifically provided herein, (a) no Partner shall have
the right to withdraw, or receive any return of, its Capital Contribution and (b) no
Capital Contribution may be contributed or returned in the form of property other
than cash.

 

3.4.2        No Interest on Capital
Contributions.  Except as expressly provided in this
Agreement, no Capital Contribution of any Partner shall bear interest or
otherwise entitle the contributing Partner to any compensation for use of its
Capital Contribution.

 

27

 

3.4.3        Establishment of Capital Accounts.  A
separate capital account (“Capital Account”)
shall be maintained for each Partner. 
For book purposes, each Partner’s Capital Account will be separated into
a contribution account and an income (loss) account and will be maintained in
accordance with GAAP.  Sections 3.5
and 3.6 below describe the appropriate accounting treatment for tax
purposes of the Capital Accounts.

 

3.5           General Rules for Adjustment of Capital Accounts.  The
Capital Account of each Partner shall be adjusted as follows:

 

3.5.1        Increases.  The
Capital Account of each Partner shall be increased by:

 

(a)           such Partner’s Capital Contributions in cash;

 

(b)           the agreed fair market value of property
contributed by such Partner (net of liabilities secured by such contributed
property that the Partnership is considered to assume or take subject to under
Code Section 752); and

 

(c)           all Net Profits and all items of Partnership
income and gain not included in Net Profits or Net Losses allocated to such
Partner pursuant to Article 4 or other provisions of the Agreement.

 

3.5.2        Decreases.  The
Capital Account of each Partner shall be decreased by:

 

(a)           the amount of Available Cash and Net Liquidation
Proceeds distributed to such Partner;

 

(b)           the agreed fair market value of all actual
and deemed distributions of property made to such Partner pursuant to this
Agreement (net of liabilities secured by such distributed property that the
Partner is considered to assume or take subject to under Code Section 752);
and

 

(c)           all Net Losses and all items of Partnership
deduction and loss not included in Net Profits or Net Losses and allocated to
such Partner pursuant to Article 4 or other provisions of the
Agreement.

 

3.6           Special Rules with Respect to Capital Accounts.

 

3.6.1        Time of Adjustment for Capital
Contributions.  For
purposes of computing the balance in a Partner’s Capital Account, no credit
shall be given for any Capital Contribution which such Partner is to make until
such contribution is actually made.  The
term “Capital Contribution” means the
amount of cash and the agreed fair market value (net of liabilities) of any
non-cash property initially contributed to the Partnership by that Partner (which
with respect to DCX Assets shall be the purchase price that TRT LLC (or its
Affiliate) paid immediately prior to contributing/selling the Property to the
Partnership) and any subsequent contributions of cash and the agreed fair
market value (net of liabilities) of any other property subsequently
contributed to the Partnership by that Partner as permitted by this Agreement
or as required under the terms and conditions of this Agreement.

 

28

 

3.6.2        Intent to Comply with Treasury
Regulations.  The
foregoing provisions of Sections 3.5 and 3.6 and the provisions
of Article 4 of this Agreement relating to the maintenance of
Capital Accounts and the allocation of Net Profits and Net Losses of the
Partnership are intended to comply with Section 704(b) of the Code
and the Regulations thereunder, and shall be interpreted and applied in a
manner consistent therewith.  To the
extent such provisions are inconsistent with such Section 704(b) of
the Code and the Regulations thereunder  Managing
Partner may, upon the advice of tax counsel and approval by TRT LLC, alter the
manner in which Capital Accounts are maintained or allocations are made in
order to comply with Section 704(b) and the Regulations thereunder.

 

3.7           Transferee’s Capital Account.  In the event that any Partner
Transfers any Interest in accordance with the terms of this Agreement, the
transferee shall succeed to the Capital Account of the transferor to the extent
it relates to the transferred Interest, adjusted for distributions of Available
Cash and Net Liquidation Proceeds made pursuant to this Agreement and
allocations of Net Profits or Net Losses as of the end of the month that
includes the date of such transfer (the “Effective Date”).  The books of the Partnership shall be closed
in accordance with Section 706(d) of the Code and consistent
therewith (a) Net Profits and Net Losses of the Partnership recognized as
of the Effective Date shall be allocated among the Persons who or which were
Partners prior to the Effective Date in accordance with their respective
Percentage Interests prior to the Effective Date and (b) Net Profits and
Net Losses recognized after the Effective Date shall be allocated among the
Persons who or which were Partners after the Effective Date in accordance with
their respective Percentage Interests after the Effective Date.

 

ARTICLE 4

 

ALLOCATION
OF PROFITS AND LOSSES

 

4.1           Allocation of Net Profits and Net Losses. 
Except as otherwise provided in this Article 4, after giving effect
to the special allocations in Section 4.2, Section 4.3,
Section 4.4, Section 4.5, Section 4.6 and Section 4.7
hereof, Net Profits and Net Losses for any Fiscal Year shall be allocated among
the Partners so as to reduce, proportionately, the differences between their
respective Partially Adjusted Capital Accounts and Target Capital Accounts for
such Fiscal Year.  No portion of the Net
Profits for any Fiscal Year shall be allocated to a Partner whose Partially
Adjusted Capital Account is greater than or equal to his Target Capital Account
for such Fiscal Year.  No portion of the
Net Losses for any Fiscal Year shall be allocated to a Partner whose Partially
Adjusted Capital Account is less than or equal to his Target Capital Account
for such Fiscal Year.

 

4.2           Residual Allocations.  Except as otherwise provided
in this Agreement, all items of Partnership income, gain, loss, deduction and
any other allocations not otherwise provided for shall be allocated among the
Partners in the same proportions as they share Net Profits or Net Losses, as
the case may be for the Fiscal Year.

 

4.3           Qualified Income Offset.  If any Partner unexpectedly
receives any adjustments, allocation or distributions described in clauses (4),
(5) or (6) of Regulations Section 1.704-1(b)(2)(ii)(d), items of
Partnership income shall be specially allocated to such Partner in an amount
and manner sufficient to eliminate the deficit balance in its Adjusted Capital
Account 

 

29

 

created
by such adjustments, allocations or distributions as quickly as possible; provided,
however, that an allocation pursuant to this Section 4.3
shall be made only if, and to the extent that, such Partner would have a
deficit balance in its Adjusted Capital Account after all other allocations
provided for in Article 4 tentatively have been made as if this Section 4.3
were not in this Agreement.  This Section 4.3
is intended to constitute a “qualified income offset” within the meaning of
Regulations Section 1.704-l(b)(2)(ii)(d)(3) and shall be interpreted
consistently therewith.

 

4.4           Minimum Gain Chargeback.  If there is a net decrease in
Partnership Minimum Gain during a Fiscal Year, so that an allocation is
required by Regulation Section 1.704-2(f), each Partner will be allocated,
before any other allocation under this Article 4, items of income and gain
for such Fiscal Year (and if necessary, subsequent years) in proportion to and
to the extent of an amount equal to such Partner’s share of the net decrease in
Partnership Minimum Gain determined in accordance with Regulations Section 1.704-2(g)(2).  This Section 4.4 is intended to
comply with, and shall be interpreted consistently with, the “minimum gain
chargeback” provisions of Regulations Section 1.704-2(f).

 

4.5           Partner Nonrecourse Debt Gain Chargeback.  If
there is a net decrease in Partner Nonrecourse Debt Minimum Gain attributable
to a Partner Nonrecourse Debt during any Fiscal Year, each Partner who has a
share of the Partner Nonrecourse Debt Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Treasury Regulations Section 1.704-2(i)(5),
shall be specially allocated items of Partnership income and gain for such year
(and, if necessary, subsequent years) in an amount equal to such Partner’s share
of the net decrease in Partner Nonrecourse Debt Minimum Gain attributable to
such Partner Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(4).  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 4.5 is intended to
comply with the “minimum gain chargeback” requirement of that Section of
the Regulations and shall be interpreted consistently therewith.

 

4.6           Partner Nonrecourse Deductions.

 

4.6.1        Nonrecourse Deductions. 
Nonrecourse Deductions for any Fiscal Year shall be specially allocated
to the Partners, pro rata, in accordance with their Percentage Interests.

 

4.6.2        Partner Nonrecourse Deductions.  Any
Partner Nonrecourse Deductions for any Fiscal Year or other period shall be
specially allocated to the Partner who bears (or is deemed to bear) the economic
risk of loss with respect to the Partner Nonrecourse Debt to which such Partner
Nonrecourse Deductions are attributable in accordance with Regulations Section 1.704-2(i)(2).

 

4.6.3        Excess Nonrecourse Debt. 
Excess nonrecourse liabilities of the Partnership, as defined in
Regulations Section 1.752-3(a)(3), shall be allocated to the Partners, pro
rata, in accordance with their Percentage Interests.

 

30

 

4.7           Special Allocations.  Any special allocations of items of Net
Profits pursuant to Sections 4.3, 4.4, 4.5 and 4.6
shall be taken into account in computing subsequent allocations of Net Profits
and Net Losses pursuant to Section 4.1, so that the net amount of
any items so allocated and the gain, loss and any other item allocated to each
Partner pursuant to Section 4.1 shall, to the extent possible, be
equal to the net amount that would have been allocated to each such Partner
pursuant to the provisions of this Article if such special allocations had
not occurred.

 

4.8           Fees To Partners Or Affiliates.  Notwithstanding the provisions of Section 4.1,
in the event that any fees, interest, or other amounts paid to any Partner or
any Affiliate thereof pursuant to this Agreement or any other agreement between
the Partnership and any Partner or Affiliate thereof providing for the payment
of such amount, and deducted by the Partnership in reliance on Section 707(a) and/or
707(c) of the Code, are disallowed as deductions to the Partnership on its
federal income tax return and are treated as Partnership distributions, then:

 

4.8.1        the Net Profits
or Net Losses, as the case may be, for the Fiscal Year in which such fees,
interest, or other amounts were paid shall be increased or decreased, as the
case may be, by the amount of such fees, interest, or other amounts that are
treated as Partnership distributions; and

 

4.8.2        there shall be
allocated to the Partner to which (or to whose Affiliate) such fees, interest,
or other amounts were paid, prior to the allocations pursuant to Section 4.1,
an amount of ordinary gross income for the Fiscal Year equal to the amount of
such fees, interest, or other amounts that are treated as Partnership
distributions.

 

4.9           Allocations for Tax Purposes.

 

4.9.1        Except as
otherwise provided in this Section 4.9, 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 this Article 4.

 

4.9.2        Any item of
income, gain, loss, and deduction with respect to any property (other than
cash) that has been contributed by a Partner to the capital of the Partnership
and which is required or permitted to be allocated to such Partner for income
tax purposes under Section 704(c) of the Code so as to take into
account the variation between the tax basis of such property and its fair
market value at the time of its contribution shall be allocated solely for
income tax purposes as the Partners may mutually agree in accordance with the
Regulations promulgated under Section 704(c).

 

4.10         Recapture.  To the extent any gain resulting from the
sale or other taxable disposition of Partnership Property is “recaptured” by
reason of Sections 1245 and 1250 of the Code, the amount of income so
recognized shall be allocated among the Partners in the same manner as the
deductions giving rise to such “recapture” income were allocated among the
Partners or their predecessors in interest (but not to exceed the amount of
gain to be allocated to each Partner).

 

31

 

4.11         Allocations Upon Transfer.  Upon the sale, transfer or assignment of a
Partnership Interest, allocations of Net Profits and Net Losses between the
transferor and the transferee shall be made in accordance with Section 3.7
hereof.

 

ARTICLE 5

 

DISTRIBUTIONS

 

5.1           Distributions to Partners.  Available Cash shall first be used to repay
any and all Partnership Loans and then shall be distributed to the Partners as
follows:

 

5.1.1        First, to the
Partners, pari  passu, in accordance with their Percentage
Interests, until TRT LLC shall have received an 8.5% Internal Rate of Return;

 

5.1.2        Second, from
and after such time as TRT LLC shall have received an 8.5% Internal Rate of
Return, (a) eighty percent (80%) to the Partners, pari  passu,
in accordance with their Percentage Interests and (b) twenty (20%) to DCT
LLC, until such time as TRT LLC shall have received a thirteen percent (13%)
Internal Rate of Return; and

 

5.1.3        Third, from and
after such time as TRT LLC shall have received a thirteen percent (13%)
Internal Rate of Return, (a) seventy 
percent (70%) to the Partners, pari  passu, in accordance
with their Percentage Interests and (b) thirty percent (30%) to DCT LLC.

 

Notwithstanding anything to the
contrary contained in this Section 5.1, there shall be distributed
to any Non-Defaulting Partner the amount of any Available Cash otherwise
distributable to any Defaulting Partner, to the extent and in repayment of any
Default Loans made by such Non-Defaulting Partner to such Defaulting Partner,
together with interest thereon as provided in this Agreement, to be applied
first to accrued and unpaid interest thereon and then to the principal balance
thereof, in the order in which such Default Loans were made, so that the
Default Loan longest outstanding is fully repaid prior to the payment of
interest or principal on any Default Loan made after the date on which the
longest outstanding Default Loan was made (it being understood and agreed that (x) if
more than one Non-Defaulting Partner makes a Default Loan contemporaneously in
connection with an Funding Notice, such distributions under this Section 5.1
in respect of Default Loans shall be made to all Non-Defaulting Partners so
making such Default Loans, pro  rata, in proportion to the
outstanding principal balance of such contemporaneous Default Loans and (y) any
such payment that would otherwise be distributed hereunder to a Defaulting
Partner that is made to any Non-Defaulting Partner(s) making a Default
Loan shall be treated for all purposes of this Agreement as distributed to the
Defaulting Partner and paid to such Non-Defaulting Partner(s).

 

5.2           Liquidation Event Distributions.  Managing Partner shall notify the other
Partners of any Liquidation Event not later than two (2) Business Days
following the date on which Managing Partner has knowledge of such event.  All Net Liquidation Proceeds shall be
distributed among the Partners, on the later to occur of (i) two (2) Business
Days following any Liquidation Event or (ii) the Business Day immediately
following disbursement of such proceeds from any Lender Account, if applicable,
in accordance with Section 5.1, subject to Section 5.3.

 

32

 

5.3           Effect of Termination Upon Event
of Default; True-Up.

 

5.3.1        Termination of Promotional
Interest.  Notwithstanding
anything to the contrary contained in Section 5.1, if DCT LLC’s
Promotional Interest is terminated by TRT LLC pursuant to Section 6.15
upon the occurrence of a DCT Event of Default, the Partnership shall, from and
after the date on which such termination of DCT LLC’s Promotional Interest
becomes effective, distribute all Available Cash to the Partners pursuant to Sections
5.1.2 and 5.1.3 without regard to DCT LLC’s Promotional Interest, and appropriate
adjustments shall be made in the allocations to be made pursuant to Article 4;
provided, however, that TRT LLC shall have the right, in its sole
and absolute discretion, to provide for the payment to one or more successor
Asset Managers or non-partner managers (regardless whether such managers are
Partners) of all or a portion of DCT LLC’s Promotional Distributions pursuant
to Sections 5.1.2 and 5.1.3 which are not to be so distributed by
reason hereof.  Upon any such termination
of the Promotional Interest, DCT LLC may elect to trigger the buy-sell
provision with respect to all the Properties in Section 16.1.2 by
issuing a Buy-Sell Offering Notice within 30 days of such termination.  If DCT LLC does not exercise the buy-sell
procedure, then TRT LLC may issue a Buy-Sell Offering Notice within 30 days
thereafter.

 

5.3.2        True-Up.  If DCT LLC shall receive Promotional
Distributions and any subsequent calculation of Internal Rate of Return shall
result in the determination that a lesser amount of (or zero) Promotional
Distributions should have been paid to DCT LLC, then the Partnership shall,
from and after the date of such subsequent calculation of Internal Rate of
Return, make distributions exclusively to TRT LLC until all Available Cash Flow
shall have been distributed in accordance with Section 5.1, as
determined over the term of this Agreement through any such subsequent date of
determination of Internal Rate of Return (any such distributions of Available
Cash to TRT LLC exclusively as required by this sentence shall be referred to
hereinafter as “Catch-Up Distributions”).  If, notwithstanding the distribution by the
Partnership of Catch-Up Distributions to TRT LLC in accordance with the
preceding sentence, DCT LLC shall have received cumulative distributions of
Available Cash Flow through the True-Up Date in excess of the amount of
Promotional Distributions to which DCT LLC would have been entitled, as of the
True-Up Date, pursuant to the terms of Section 5.1 (such excess
being referred to hereinafter as the “Final Promote True-Up
Amount”), then DCT LLC shall make a special capital contribution
to the Partnership in an amount equal to the Final Promote True-Up Amount,
whereupon the Partnership shall make a special distribution in the same amount
to TRT LLC.  DCT, by its execution below,
hereby guarantees to TRT LLC payment by DCT LLC on the True-Up Date of the
Final Promote True-Up Amount, as provided in the preceding sentence.

 

5.4           Limitation on Distributions.  Notwithstanding any provision to the contrary
contained in this Agreement, the Partnership shall not be required to make a
distribution to a Partner on account of its interest in the Partnership if such
distribution would violate Section 15-309 of the Act or any other
applicable law.

 

33

 

ARTICLE
6

 

RIGHTS, DUTIES, OBLIGATIONS AND COMPENSATION OF MANAGING
PARTNER

 

6.1           Sole Managing Partner.  The Business of the Partnership shall be
managed by the Managing Partner of the Partnership, until and unless replaced
by TRT LLC in accordance with Section 6.15.  Managing Partner shall have such rights,
duties and powers as are specified in this Agreement or, unless expressly
provided to the contrary in this Agreement, are conferred upon Managing Partner
pursuant to the Act.

 

6.1.1        Managing
Partner as Agent of the Partnership.  Managing Partner is an agent of the
Partnership for the purpose of its business, for purposes of the execution in
name of the Partnership of any instrument for carrying on in the usual way the
Business of the Partnership, and Managing Partner’s acts shall bind the
Partnership, unless such act is in contravention of this Agreement or any
Senior Loan Document.

 

6.1.2        Acts
of Managing Partner as Conclusive Evidence of Authority.  Subject to Section 6.4, every
contract, deed, mortgage, deed of trust, pledge, lease and other credit
agreement or instrument executed by Managing Partner, including, without
limitation, any Senior Loan Document, shall be conclusive evidence in favor of
every Person relying thereon or claiming thereunder that at the time of the
delivery thereof: (a) the Partnership was in existence, (b) neither
this Agreement nor the Certificate of Formation had been amended in any manner
so as to restrict the delegation of authority among the Partners to Managing
Partner and (c) the execution and delivery of such instrument was duly
authorized by the Partnership; provided, however, that Managing
Partner shall not (and shall not have authority to), without the prior consent
of TRT LLC, bind or take any action on behalf of or in the name of the
Partnership, or enter into any commitment or obligation binding upon the
Partnership, except for actions authorized under this Agreement and actions
authorized by TRT LLC in the manner set forth herein.  Any Person may always rely on a certificate
addressed to such Person and signed by Managing Partner hereunder: (i) setting
forth the names of the Partners or Managing Partner hereunder, (ii) as to
the existence or non-existence of any fact which constitutes a condition
precedent to acts by the Partners or Managing Partner or in any other manner
germane to the affairs of the Partnership, (iii) setting forth the Persons
who are authorized to execute and deliver any instrument or document on behalf
of the Partnership, (iv) certifying as to the authenticity of any copy of
this Agreement, any amendments thereto and hereto and any other document relating
to the conduct of the affairs of the Partnership or (v) as to any action
taken or not taken by the Partnership or as to any other matter whatsoever
involving the Partnership, Managing Partner or any Partner in the capacity as a
Partner or Managing Partner.  Nothing
contained in this Section 6.1.2 shall be deemed to expand the
rights or authority of Managing Partner as expressly provided in this Agreement
or to limit the approval rights of the Partners as expressly provided in this
Agreement.  For so long as any
indebtedness remains outstanding under a Senior Loan, Managing Partner, and any
additional or substitute member which serves as the manager of the Partnership,
shall not be an individual and shall at all times have as its sole purpose to
act as the manager of the Partnership and to own its partnership interest in
the Partnership, and shall be engaged in no other business and have no other
purpose.  Managing Partner shall have no
authority to perform any act in respect of the Partnership in violation of any
provisions of this Agreement, applicable laws or regulations or any Senior Loan
Document.

 

6.2           Intentionally Deleted.

 

34

 

6.3           Management Duties, Authority and
Powers.  Except as
expressly limited by or otherwise provided in the provisions of this Agreement
(including, without limitation, Section 6.4), Managing Partner
shall have the right and duty to manage the day-to-day Business of the
Partnership and to implement all decisions made on behalf of the Partnership,
Fee Owner or affecting the Properties by the Partners (as applicable), all in
accordance with the terms hereof and such other rights and powers as are
granted to Managing Partner hereunder. 
In connection therewith, Managing Partner shall have the sole right,
power, and authority, at such times as Managing Partner shall determine,
without additional consultation, authorization, consent, or ratification of any
Partner, to do all such lawful acts and things as are not, by the Act or this Agreement,
directed or required to be exercised or done with the consent and approval of
the Partners, or which are not herein or hereafter expressly reserved to all of
the Partners including, without limitation, the right, power and authority,
subject to Section 6.4, to permit or cause the Partnership to do
any of the following:

 

6.3.1        incur all
reasonable expenditures, pay from or fund any reserve expressly permitted to be
incurred, paid or funded by Managing Partner under this Agreement pursuant to
the Approved Annual Budget;

 

6.3.2        prosecute,
protect, and defend or cause to be prosecuted, protected, and defended all
Partnership rights, including, without limitation, rights and title to
Partnership Property;

 

6.3.3        enter into,
execute, amend, modify, supplement, acknowledge and deliver any and all
contracts (excluding the Asset Management Agreement and the Property Management
Agreement), agreements, licenses, leases, listing agreements, or other
instruments necessary, proper, or desirable to carry out the Business of the
Partnership which are in accordance with the Approved Annual Budget, or waive
any immaterial right thereunder;

 

6.3.4        purchase such
insurance as may be required under the Senior Loan Documents or as Managing
Partner may otherwise reasonably determine to be necessary or desirable;

 

6.3.5        cause each Fee
Owner to enter into the Property Management Agreement after approval thereof by
TRT LLC; (provided, however, that TRT LLC alone shall have the
sole right on behalf of the Partnership to enforce or cause Fee Owner to
enforce the provisions of the Asset Management Agreement and the Property
Management Agreement, as applicable, for the benefit of the Partnership and Fee
Owner and to exercise any remedy available to the Partnership or Fee Owner following
a default by the Property Manager under the Property Management Agreement, or
cause the Asset Manager to exercise any remedy under the Asset Management
Agreement following a default by the Asset Manager under the Asset Management
Agreement, as applicable, in accordance with the terms thereof); and

 

6.3.6        cause the
Partnership or any Fee Owner to take any action contemplated by the then
effective Approved Annual Business Plan and Approved Annual Budget.

 

6.4           Restrictions on Managing Partner’s
Authority. 
Notwithstanding anything to the contrary contained in this Agreement,
unless set forth in an Approved Annual Business Plan and covered by the then
applicable Approved Annual Budget, the prior written consent of all of the
Partners shall be necessary for all Major Decisions affecting the Partnership,
it being understood 

 

35

 

that
Managing Partner shall not cause the Partnership to take any action in
furtherance of a Major Decision without the vote of the Partners.  As used herein, a “Major
Decision” shall mean any of the following actions:

 

6.4.1        except in
connection with or as a consequence of a transaction of the nature described in
Section 6.4.3, the voluntary merger, consolidation, dissolution,
liquidation, winding up, termination or liquidation of the Partnership:

 

6.4.2        to the extent
that (a) the Approved Annual Budget is not yet in effect for the current
Fiscal Year, incurring any operating or other expenditures (other than capital
expenditures and general administrative costs) on behalf of the Partnership
that exceed the most recent Approved Annual Budget by more than 5% or have not
been previously approved in writing by all of the Partners; provided, however,
that Managing Partner may incur such operating expenditures upon one (1) day
prior notice to TRT LLC in case of Emergency Expenditures required in the
reasonable judgment of Managing Partner, or with such shorter or no prior
notice (but with subsequent notice as soon as possible) to the extent that one (1) day
prior notice would jeopardize the viability of the Property or the health,
safety or welfare of persons and (b) TRT LLC has approved an Approved
Annual Budget (or relevant portion thereof), incurring any operating
expenditures on behalf of the Partnership that would, in the aggregate, cause
such expenditures to be greater than 105% of the amount set forth in the
appropriate line item relating to such expenditures (other than capital
expenditures and general administrative costs) in such Approved Annual Budget; provided,
however, that the Managing Partner may incur such excess operating
expenditures upon one (1) day prior notice to TRT LLC in case of Emergency
Expenditures required in the reasonable judgment of Managing Partner, or with
such shorter or no prior notice (but with subsequent notice as soon as
possible) to the extent that one (1) day prior notice would jeopardize the
viability of the Property or the health, safety or welfare of persons;

 

6.4.3        selling,
transferring, assigning or otherwise disposing of any portion or all of the Fee
Owners’ Interests, the Properties or any of them or any interest therein
(except immaterial items of personal property in the ordinary course of
business) or entering into a binding agreement to sell, transfer, assign or
otherwise dispose of any portion or all of the Fee Owners’ Interests, the
Properties or any of them or any interest therein (except immaterial items of
personal property in the ordinary course of business) or entering into any
amendment, renegotiation, modification, supplement or extension of a binding
agreement to sell, transfer, assign or otherwise dispose of any portion or all
of the Fee Owners’ Interest, the Properties or any of them or any interest
therein;

 

6.4.4        (a) instituting,
prosecuting, defending or settling any material legal, arbitration, or
administrative actions or proceedings on behalf of either the Partnership or
Fee Owner (including, without limitation, in connection with the Senior Loan
and the Senior Loan Documents or any binding agreement of sale for all or any
part of the Fee Owner Interests or the Properties or any of them) and (b) taking
any action in order to enforce the rights of the Partnership or Fee Owner as (i) borrower
under the Senior Loan (including, without limitation, delivering any material
notice to any Senior Lender under the Senior Loan, filing any pleading, motion
or brief in defense of any enforcement or foreclosure proceeding brought under
the Senior Loan, settling, compromising, reinstating or restructuring the
Senior Loan or entering into 

 

36

 

any
binding agreement therefor or exercising any rights or remedies, sending any
material notices, granting any material consents or waivers, or making any
other material strategic decisions under, in connection with, or relating to,
the Senior Loan, any of the Senior Loan Documents or the Properties or any of
them or amending or otherwise modifying the Senior Loan or any of the Senior
Loan Documents) or (ii) seller under any binding agreement of sale for all
or any portion of the Properties or any interest therein, except for the
commencement of landlord/tenant proceedings in respect of tenants of the
Property which are in default under leases;

 

6.4.5        causing or
permitting a Fee Owner or the Partnership to enter into, modify or amend any
Lease or consent to the cancellation or surrender of or termination of any
Lease, whether now existing or hereafter entered into;

 

6.4.6        incurring,
replacing, renewing, extending, substituting, adding to, supplementing,
amending, modifying, increasing, restructuring or refinancing of any Senior
Loan or causing or permitting any Fee Owner to do any of the foregoing, it
being understood that any Senior Loan shall have a targeted loan to value of
approximately 60% to 65%, but in no event less than 55% or more than 75%;

 

6.4.7        approving or
disapproving any proposed business plan or budget and any material
modifications to the Approved Annual Budget and Approved Annual Business Plan
then in effect;

 

6.4.8        except as
permitted in Article 8, admitting or causing a Fee Owner to admit
new or substitute members or causing the Partnership or any Fee Owner to redeem
or repurchase all or any Interest of a Partner or any Partnership Property;

 

6.4.9        causing or
consenting to the taking of any Bankruptcy Action in respect of the Partnership
or any Fee Owner;

 

6.4.10      intentionally
deleted;

 

6.4.11      taking or
causing or permitting Fee Owner to take any action which would cause the
Partnership or Fee Owner to become an entity other than a Delaware general
partnership; 

 

6.4.12      to the extent
with an Affiliate, amending, modifying, extending or terminating the Asset
Management Agreement or causing a Fee Owner to terminate, modify or amend any
Property Management Agreement, or grant any material waiver thereunder or
designating a successor thereunder, or retaining or entering into any binding
agreement with any property manager or developer (provided however, that TRT
LLC shall have these exclusive rights in accordance with Sections 6.3.5
and 6.16);

 

6.4.13      establishing
Reserves for the Partnership or Fee Owner that deviates by more than 5% of the
amounts provided in the Approved Annual Budget then in effect;

 

6.4.14      taking or
causing a Fee Owner to take any action that would constitute a default under
any Senior Loan Document;

 

37

 

6.4.15      modifying or
amending this Agreement or any organizational document of  a Fee Owner, or changing the Business of the
Partnership or a Fee Owner;

 

6.4.16      settling or
adjusting or causing or permitting a Fee Owner to settle or adjust any
insurance claim or condemnation action involving a claim in excess of an amount
equal to ten percent (10%) of the non-land value of the asset;

 

6.4.17      confessing or
causing a Fee Owner to a judgment against the Partnership or Fee Owner in any
lawsuit or proceeding or settling any lawsuit or proceeding which settlement
requires a payment by the Partnership or a Fee Owner in excess of $100,000 or
requires an admission of liability on the part of the Partnership or a Fee
Owner;

 

6.4.18      making
distributions to the Partners other than in strict accordance with Article 5
hereof;

 

6.4.19      amending,
modifying, replacing, renewing or terminating any insurance coverages, provided
that the Partners shall not unreasonably withhold, condition or delay their
approval, (a) amending, modifying, replacing, renewing or terminating any
insurance coverages with respect to the Partnership, a Fee Owner or a Property
which pertain to (i) environmental matters, conditions, losses or
occurrences at the Property or (ii) any acts of terrorism or similar
matters regarding the Property or (b) renewing any existing insurance
policy, if the terms of such renewal policy set forth any exclusions from
coverage which are not expressly excluded from the insurance policies in effect
on the date of this Agreement;

 

6.4.20      commingling
funds of the Partnership with those of any Partner or Affiliate of any Partner;

 

6.4.21      making a
determination regarding any material environmental matter;

 

6.4.22      entering into
material agreements not in the ordinary course of business;

 

6.4.23      directly or
indirectly acquiring any Property (it being understood that acquisitions of
Properties are governed by the terms of Article 9 hereof); and

 

6.4.24      engaging and
dismissing any attorneys or accountants (other than attorneys engaged in
routine property-level transactional work).

 

6.5           Common Decisions.

 

6.5.1        In the event that the Partners can not reach agreement
as to any Major Decisions (other than Common Decisions), the Managing Partner
will continue to operate the Partnership in accordance with the then existing
Approved Annual Business Plan and will not do or undertake any affirmative act
which would constitute a Major Decision without the approval of the Partners.

 

For purposes of this Section 6.5
“Common Decision” means, on or after four (4) years from the applicable
date the Property (on a Property by Property basis) was first acquired by 

 

38

 

the Partnership (or by TRT LLC with respect to a DCX
Asset), selling, transferring, assigning or otherwise disposing of any portion
or all of the Fee Owners’ Interest in such Property, such Property or any
interest therein (except immaterial items of personal property in the ordinary
course of business) or entering into a binding agreement to sell, transfer,
assign or otherwise dispose of any portion or all of the Fee Owners’ Interest,
such Property or any of them or any interest therein (except immaterial items
of personal property in the ordinary course of business) or entering into any
amendment, renegotiation, modification, supplement or extension of a binding
agreement to sell, transfer, assign or otherwise dispose of any portion or all
of the Fee Owners’ Interest, such Property or any of them or any interest
therein.

 

6.5.2        For all Common Decisions, either Partner may initiate
the taking of a Common Decision and if the other Partner does not agree with
the proposed initiative, the Partners shall confer for sixty (60) days in good
faith and if the Partners continue to disagree on the initiative it shall
constitute an “Impasse”. Thereafter, either
Partner may invoke their rights under the provisions of Section 16.1,
but only with respect to the Property or Properties in question.

 

6.6           Intentionally Deleted.

 

6.7           Limitations on Liability of
Managing Partner to Partners.  Anything in this Agreement to the contrary
notwithstanding, neither Managing Partner nor its Affiliates nor any other
Partner shall be liable for the return of Capital Contributions of the Partners
or for any portion thereof, it being expressly understood that any return of
capital shall be made solely from the assets of the Partnership, nor shall
Managing Partner or any other Partner be required to pay to the Partnership or
to any Partners any capital deficits of any Partner upon Dissolution of the
Partnership or otherwise.

 

6.8           Other Business Ventures.  Subject to the restrictions set forth in Article 15
of this Agreement, the Partners and/or their respective Affiliates (including,
without limitation, any member and any manager thereof) may engage in or
possess an interest in other business ventures of every nature and description,
independently or with others, whether such ventures are competitive with the
Partnership or otherwise, and shall have no obligation to offer to any Partner
not affiliated any interest in such business or ventures, even if such
opportunity is of a character which if presented, could be taken by such
Partner or its Affiliate; and except as expressly provided in an independent
written and duly executed instrument, neither the Partnership nor the other
Partners shall have any right by virtue of this Agreement in or to such
independent ventures or to the income or profits derived therefrom.

 

6.9           Duty of Care.  Managing Partner shall, at the expense of the
Partnership, use its diligent, good faith efforts to cause each Fee Owner to
operate the Property in accordance with the Approved Annual Budget and to carry
out the Business of the Partnership substantially in accordance with the
prevailing standards of the real estate industry. Managing Partner shall at the
expense of the Partnership take such actions as may be necessary to cause the
Partnership and each Fee Owner to comply with all laws, rules, and regulations
and any and all orders or requirements of any Governmental Authority having
jurisdiction over the Partnership or the 

 

39

 

Property,
including, without limitation, all laws, rules, regulations, orders, and
requirements relating to the use, generation, storage and disposal of hazardous
wastes and materials.  Managing Partner
shall use good faith efforts to provide for the safekeeping and use of all
funds, property and assets of the Partnership and each Fee Owner, whether or
not in its immediate possession or control, and shall not employ, or permit
another to employ, such funds, property or assets in any manner, except for the
benefit of the Partnership and each Fee Owner. 
Managing Partner shall at the expense of the Partnership take such
actions as may be necessary or proper to comply with the terms and provisions
of all Senior Loan Documents. 
Notwithstanding anything to the contrary contained herein, Managing
Partner shall not be liable for any good faith error in judgment or for any
action taken or omitted to be taken by it hereunder, except for its gross
negligence, knowingly unlawful actions or willful misconduct.

 

6.10         Compensation of Managing Partner;
Reimbursement.  No salaries
or other benefits shall be paid to Managing Partner or any successor manager in
its capacity as manager.  The Partnership
shall reimburse Managing Partner or any successor manager in its capacity as
manager for any expense of the Partnership paid by Managing Partner or any
successor manager as contemplated hereunder.

 

6.11         Intentionally Deleted.

 

6.12         Contracts with Affiliates of
Managing Partner.  Except for
the Asset Management Agreement and the Property Management Agreement, no
Partner shall, on behalf of the Partnership, enter into contracts with itself
or any Affiliate without a prior Vote of the Partners.

 

6.13         Approved Budget and Business Plan.

 

6.13.1      TRT LLC has
approved the initial annual budget for the proposed Riverport transaction for
the period commencing on the date hereof through December 31, 2008 (the “Initial Annual Riverport Budget”),
a copy of which is attached hereto as Exhibit C.  With respect to each subsequent acquisition
of Property by the Partnership, the Partners shall agree upon an annual budget
for such Property (and once approved, each an “Initial
Annual Property Budget”) in a form similar to the Initial Annual
Riverport Budget which Initial Annual Property Budget shall be operative until
the next Annual Budget is prepared and approved in accordance with the terms
below (the foregoing approved Initial Annual Property Budgets, while operative
are collectively referred to as the “Initial Annual Property
Budgets”).  For each
calendar year commencing on January 1, 2009 and for each calendar year
thereafter, Managing Partner shall submit to TRT LLC for its written approval,
an annual budget (an “Annual Budget”)
for the Partnership not later than November 15th of the year preceding
such calendar year, or at such time to enable the Annual Budget to be approved
in accordance with Section 6.13.2 below and delivered to the Senior
Lender within the time periods required pursuant to the Senior Loan Documents,
if applicable, setting forth in reasonable detail budgeted monthly operating,
capital and other expenses for the Partnership and the Property (owned directly
or indirectly by the Partnership on January 1 of the applicable year), in
such form as shall be prepared by the Asset Manager under the Asset Management
Agreement and the Property Manager under the Property Management Agreement, as
applicable.

 

40

 

6.13.2      The Annual
Business Plan for the period commencing on the date hereof through December 31,
2008 (the “Initial Annual Business Plan”)
a copy of which is attached hereto as Exhibit B.  For each calendar year commencing on January 1,
2009 and for each calendar year thereafter, Managing Partner shall submit to
TRT LLC for its written approval, an annual business plan (an “Annual Business Plan”) for the
Partnership not later than November 15th of the year preceding such
calendar year, setting forth in reasonable detail, an itemized cash flow
projection in respect of the Property, proposed terms upon which the Property
may be sold or refinanced, working capital requirements and leasing plan and
capital and operational plans with respect to the Property, in such form as
shall be prepared by the Asset Manager under the Asset Management Agreement and
the Property Manager under the Property Management Agreement, as applicable.

 

6.13.3      If TRT LLC
objects to a proposed Annual Budget or proposed Annual Business Plan, it shall
advise Managing Partner of its objections within ten (10) Business Days
after receipt thereof and Managing Partner shall promptly revise such Annual
Budget or Annual Business Plan and resubmit the same, together with all
additional information with respect thereto that TRT LLC may reasonably
request.  TRT LLC shall advise Managing
Partner of any objections to such revised Annual Budget or Annual Business Plan
within ten (10) days after receipt thereof and Managing Partner shall
promptly revise the same in accordance with the process described in this
sentence until such Partner approves an Annual Budget or an Annual Business
Plan.  Each Annual Budget approved by TRT
LLC in accordance with the terms and provisions hereof, together with all
subsequently adopted Initial Annual Property Budgets, shall hereinafter
collectively be referred to as an “Approved Annual Budget”
and each Annual Business Plan approved by TRT LLC in accordance with the terms
and provisions hereof shall hereinafter be referred to as an “Approved Annual Business Plan”.  Until such time as TRT LLC approves a
proposed Annual Budget or Annual Business Plan, the most recently Approved
Annual Budget or Annual Business Plan shall apply; provided, however,
that such Approved Annual Budget shall automatically be adjusted to reflect (a) actual
increases in all real estate taxes and other governmental impositions, utility
costs, and insurance premiums and (b) the actual amount of the debt
service under any Senior Loan.

 

6.14         Intentionally Deleted.

 

6.15         Overriding Provisions Regarding
Managing Partner Position and Promotional Interest.  Notwithstanding anything contained in this
Agreement to the contrary, as between the Partners, the provisions of this Section 6.15
shall govern with respect to the position of DCT LLC as Managing Partner of the
Partnership and the right of DCT LLC to receive Promotional Distributions.  DCT LLC shall serve as the Managing Partner
of the Partnership until the earlier occur of (a) an DCT Event of Default (b) the
resignation of DCT LLC as Managing Partner, upon either of which TRT LLC shall
have the right to remove DCT LLC as Managing Partner (if DCT LLC has not
theretofore resigned).  Upon the
occurrence of an DCT Event of Default, TRT LLC shall, in addition to the
foregoing and to all rights and remedies available at law or in equity, have
the right to terminate the Promotional Interest effective upon the giving of
written notice thereof to DCT LLC, in which event DCT LLC shall no longer have
any management authority in respect of the Partnership, but shall continue to
be entitled to distributions of Available Cash in respect of its Percentage
Interest only, and be allocated Net Profits and Net Losses in respect of such
Percentage Interest, as provided in Articles 4 and 5 hereof and there 

 

41

 

shall
be no further Acquisitions made or proposed to be made hereunder.  In the event of the exercise by TRT LLC of
its rights under this Section 6.15 and the removal of DCT LLC as
Managing Partner, TRT LLC shall be appointed as substitute Managing Partner.

 

6.16         Termination
of Asset Management Agreement and Property Management Agreement.  TRT LLC shall
have the sole and exclusive power and authority to cause Dividend Capital Total
Advisors LLC to deal with the Asset Manager under the Asset Management
Agreement and, in the event that the Property Manager is DCT LLC or an
Affiliate of DCT LLC, Fee Owner to deal with the Property Manager under the
Property Management Agreement, to cause Fee Owner to give or to approve the
giving by the Managing Partner of any consent, approval or direction required
of or permitted by Fee Owner thereunder, to exercise on behalf of the
Partnership any termination provisions contained in the Asset Management
Agreement or Property Management Agreement and to appoint on behalf of the
Partnership any substitute or property manager that is acceptable to TRT LLC in
its sole discretion, it being understood and agreed, however, that the Managing
Partner shall have the right to cause Dividend Capital Total Advisors LLC and
Fee Owner to cause the Asset Manager and the Property Manager, respectively, to
carry out such acts on behalf of Fee Owner which do not, at the time such act
is to be performed, require the consent or approval of TRT LLC pursuant to this
Agreement or such acts for which the Managing Partner has received such consent
or approval and are in accordance with the Approved Annual Business Plan and
Approved Annual Budget then in effect. 
TRT LLC may at any time cause the Partnership to engage an independent
consultant to oversee the performance by the Asset Manager and/or, in the event
that the Property Manager is DCT LLC or an Affiliate of DCT LLC, Property
Manager of their obligations under the Asset Management Agreement and Property
Management Agreement, respectively, and to coordinate and interface with such
parties and contractors, professionals and vendors engaged by Asset Manager
and/or Property Manager, respectively. 
The cost of any such consultant shall be a TRT LLC expense.

 

ARTICLE 7

 

PARTNERS’ MEETINGS, RIGHTS, OBLIGATIONS AND LIABILITIES

 

7.1           Limitation of Liability.  The Partners will not be bound by, or be
personally liable for, the expenses, liabilities or obligations of the
Partnership except as otherwise provided in the Act.  The Partners will not be obligated to make
any Capital Contributions other than as provided in this Agreement.

 

7.2           No Participation in Management.  The Partners, in their capacity as such, may
not transact any business for the Partnership, and will have no power to
execute agreements on behalf of or otherwise bind or commit the Partnership,
but they may exercise the rights and powers granted to them in this Agreement,
including without limitation, the right to give consents and approvals to the
extent provided in this Agreement.  The
exercise of any such rights and powers will be deemed to relate to the basic
structure of the Partnership and not the exercise of control over the Business
of the Partnership.

 

7.3           Return of Capital Contributions.  Except as otherwise provided in this
Agreement, no Partner will have the right: (a) to demand a withdrawal,
reduction, or return of its Capital Contributions, or to receive interest
thereon, (b) to demand property other than cash in return of 

 

42

 

its
Capital Contributions or to bring an action for partition against the
Partnership or (c) to receive any priority over any other Partner with
respect to the return of its Capital Contributions.

 

ARTICLE
8

 

RESTRICTIONS ON TRANSFER OR CONVERSION OF PARTNERSHIP
INTERESTS

 

8.1           Transfer or Assignment of Partner’s
Interest.

 

8.1.1        In
General.  The Interest of each Partner is personal
property, and may be transferred or assigned only as provided in this Agreement
and, so long as the Senior Loan remains outstanding, the Senior Loan Documents.  Except as otherwise provided in this Article 8,
no transfer, hypothecation, pledge, encumbrance or assignment of a Partner’s
Interest, or any part thereof or any right to receive distributions thereof,
direct or indirect, at any level or tier of ownership, in the Partnership (a “Transfer”) will be valid without a Vote
of the Partners.  No transferee which has
obtained an Interest without a Vote of the Partners as required by this Section 8.1
or as provided in Sections 8.1.2, or which has failed to comply with
Section 8.4, shall have any right to become a Partner of the
Partnership and shall not be an assignee, and such Transfer without the Vote of
the Partners shall be null and void and of no effect.

 

8.1.2        Certain
Transfers Permitted.  Notwithstanding Section 8.1.1 and
subject in all events to compliance with Sections 8.2, 8.3, 8.4, 8.7, and
8.8, a Partner may Transfer all of its Interest as or allow the Transfer of
ownership interests in such Partner, as follows, subject in each case to the
provisions of the Senior Loan Documents that are applicable from time to time:

 

(a)           the Interest of
TRT LLC may be sold, assigned or transferred in its entirety, directly or
indirectly, (i) to Dividend Capital Total Realty Trust, (ii) to any
Entity which may result from a reorganization, merger, consolidation or
business combination by or with Dividend Capital Total Realty Trust or Dividend
Capital Total Realty Operating Partnership LP (“DCTROP”),
regardless of whether Dividend Capital Total Realty Trust or DCTROP is the
surviving Entity, or to any Entity to which Dividend Capital Total Realty Trust
or DCTROP is selling all or substantially all of its assets or (iii) to
any Subsidiary of any permitted transferee under clause (i) or (ii) above;

 

(b)           the Interest of
DCT LLC may be sold, assigned or transferred in its entirety, directly or
indirectly, (i) to DCT, (ii) to any Entity which may result from a
reorganization, merger, consolidation or business combination by or with DCT or
DCOP, regardless of whether DCOP or DCT is the surviving Entity, or to any
Entity to which DCOP or DCT and its Affiliates are selling all or substantially
all of their assets (iii) to any Subsidiary of any permitted transferee
under clause (i) or (ii) above;

 

(c)           shares of DCT
or Dividend Capital Total Realty Trust may be issued or sold to any investor
and may be transferred and assigned, directly or indirectly, from one investor
to another investor; and

 

(d)           limited
partnership interests in DCOP or DCTROP may be issued or sold to any investor
and may be transferred and assigned, directly or indirectly, from one investor
to 

 

43

 

another
investor so long as DCOP or DCTROP continues to be controlled by DCT or
Dividend Capital Total Realty Trust;

 

In addition, DCT LLC agrees to
reasonably consider and grant approval to any TRT LLC request to effect a
Transfer of TRT LLC’s Interest to one or more funds primarily for accredited
investors sponsored by Dividend Capital Total Realty Trust or an Entity
controlled by Dividend Capital Total Realty Trust or by senior management of
Dividend Capital Total Realty Trust or principals or senior management of its
advisor.

 

8.2           Subtransfers in DCT LLC.  The identity of the DCT Principals is of
material importance to TRT LLC. 
Therefore, without the prior consent of TRT LLC in its sole discretion
and subject to the applicable terms and conditions of the Senior Loan Documents
for so long as the Senior Loan remains outstanding, DCT LLC, to the fullest
extent permitted by law, shall not permit a Change of Control Event to occur.

 

8.3           TRT LLC Transfers.  Notwithstanding any other provision of this
Agreement, TRT LLC shall not transfer any direct or indirect or beneficial
interest in the Partnership to any Entity or controlled Affiliate of any Entity
that is a real estate investment trust primarily engaged in owning and
operating industrial warehouse/distribution assets and is one of the top five
measured by equity market capitalization of such companies whose shares are
listed on a recognized exchange.

 

8.4           Admission of New Partners.  Notwithstanding anything to the contrary set
forth in this Article 8, no Transfer shall be permitted or
effective for any purpose unless all required consents, if any, of the Senior
Lender shall have been obtained in writing. 
In addition, no such Transfer shall be binding on the Partnership unless
(a) the transferee shall execute and acknowledge an instrument, in form
and substance reasonably satisfactory to the remaining Partners, whereby it
agrees to assume and be bound by all of the covenants, terms and conditions of
this Agreement, as the same may have been amended, from and after the effective
date of such Transfer, (b) a duplicate original of such instrument duly
executed and acknowledged by the parties thereto is delivered to the
Partnership, (c) the transferee shall pay all reasonable expenses in
connection with its admission as a Partner (including, without limitation, all
transfer taxes payable in connection therewith), and the transferee delivers to
the Partnership and the other Partner at least five (5) days advance
written notice of any such transfer and the identity of the transferee together
with such assurances as the other Partner may reasonably request to ensure that
such transfer is in compliance with (i) the Securities Act, and any
regulations promulgated thereunder, (ii) all applicable State Acts and any
regulations relating thereto and (iii) this Article 8.  Except as otherwise provided in this Article 8,
no Person shall be admitted into the Partnership as a new Partner.

 

8.5           Partnership Loans.  In the event of any Transfer of an Interest,
if the transferor shall have made any Partnership Loan(s), the transferor shall
transfer to the transferee of such Interest a proportional share of its
interest in such Partnership Loan(s).

 

8.6           Void Transfers.  Any Transfer made in violation of this Article 8
shall be of no force or effect and shall not bind or be recognized by the
Partnership, and the transferring Partner shall 

 

44

 

continue
to be treated as a partner for all purposes, and remain obligated under each
and every provision, of this Agreement.

 

8.7           Transfers Resulting in Tax
Termination; Corporation Status; Registered Offerings.  Notwithstanding anything to the contrary in
this Agreement, no transfer by a Partner of its Interest (or any economic or
other interest, right or attribute therein) may be made to any Entity if, in
the opinion of legal counsel for the Partnership, (i) it would result in a
termination of the Partnership for U.S. federal tax purposes, (ii) it
would result in the Partnership being treated as an association taxable as a
corporation for federal income tax purposes, 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 and the Regulations thereunder. 
Notwithstanding anything to the contrary in this Agreement, no interests
in the Partnership shall be issued in a transaction that is (or transactions
that are) registered or required to be registered under the Securities Act, and
to the extent such interests were not required to be registered under the
Securities Act by reason of Regulation S (17 CFR 230.901 through 230.904) or
any successor thereto, such issuances would not have been required to be
registered under the Securities Act if the interests so offered or sold had
been offered and sold within the United States.

 

8.8           Prohibited Person.  Each of the Partners hereby covenants and
agrees that such Partner will not at any time sell, assign, transfer, convey,
mortgage, pledge, encumber, hypothecate or otherwise dispose of all or any part
of such Partner’s Interest in the Partnership to, or register, or permit the
registration of, the transfer of any direct or indirect ownership or beneficial
interests in such Partner (excluding indirect ownership or beneficial interests
that constitute publicly-listed or traded shares or interests) to a Prohibited
Person.

 

ARTICLE
9

 

PROPERTY ACQUISITIONS

 

9.1           Approval of Property
Acquisitions.

 

9.1.1        The procedure
for approval of acquisitions of assets (each a “Proposed
Asset”) which meet the Investment Criteria set forth in Exhibit F attached hereto (each,
a “Property Acquisition”) and
membership or partnership interests in the entity that owns the applicable
Proposed Asset (each an “Interests Acquisition,”
and together with Property Acquisition, each an “Acquisition”)
shall be as set forth in this Article 9.1.

 

For Acquisitions that will close directly into the Partnership, the
following process will be put in place:

 

(a)           Managing
Partner will apprise TRT LLC of potential properties for the Partnership that
are coming on the market.  Basic
marketing information including but not limited to location maps, site plan,
description of improvements, and rent roll will be provided to TRT LLC.  In addition, a range of potential pricing
will be provided.  TRT LLC shall have
five (5) business days to review the offering and provide preliminary
approval of the proposed

 

45

 

Acquisition.  If the potential Acquisition opportunity is
approved, Managing Partner shall further pursue the Acquisition opportunity but
have no obligation to acquire the asset.

 

(b)           If Managing
Partner is able to reach agreement to purchase an approved asset as described
above then the Partnership (or if TRT LLC determines that the Proposed Asset
should be acquired as a DCX Asset, then TRT LLC) will acquire the asset subject
to due diligence findings and any formal approval process required by TRT LLC.

 

9.1.2        In furtherance
of each proposed Acquisition, the Managing Partner shall deliver to TRT LLC for
its review and approval copies of the following documents:

 

(a)           the proposed
contract of sale and purchase for such Proposed Asset or offer for such
Partnership Interests, as the case may be, together with the proposed purchase
price for the acquisition which shall be calculated as follows (x) if the
Proposed Asset has been owned by DCT LLC or an Affiliate for four (4) months
or less from the date the Proposed Asset is identified as such, the purchase
price shall equal DCT LLC’s or an Affiliate’s total gross cost basis, further
described in Exhibit I (the “Cost Basis”) of  DCT LLC or its Affiliate and (y) if the
Proposed Asset has been owned by DCT LLC or an Affiliate for more than four (4) months
from the date the Proposed Asset is identified as such or Managing Partner or
TRT LLC certify that, as the case may be, there has been significant leasing,
development, or repositioning of the Proposed Asset (or alternatively,
significant vacancy, casualty loss or credit deterioration of the Proposed
Asset) the purchase price shall equal the FMV of the Proposed Asset as
determined by an Appraiser retained by Managing Partner and the Partnership
shall pay for all incremental third party costs including legal, due diligence
and debt financing expenses (provided, however that if the FMV is less than the
Cost Basis, DCT LLC shall have no further obligation to sell the Proposed Asset
to the Partnership or its designated Fee Owner);

 

(b)           a capital
improvement budget for all proposed buildings on the Proposed Asset to be
acquired or which is the subject of the Interests Acquisition, as the case may
be;

 

(c)           an operating
budget for the applicable Proposed Asset, setting forth the projected revenues
and expenses for the operation of the Proposed Asset, all in such reasonable
detail as TRT LLC may request;’

 

(d)           a current rent
roll for the applicable Proposed Asset;

 

(e)           An eleven year
financial projection and proposed operating budget for the applicable Proposed
Asset setting forth the projected revenues and expenses of the applicable
Proposed Asset and the other assumptions and factors upon which such financial
projections are based;

 

(f)            An
environmental report detailing the environmental condition at the applicable
Proposed Asset prepared by an environmental consultant selected by the Managing
Partner and approved by TRT LLC, the attached Exhibit J
lists pre-approved third party environmental consultants;

 

46

 

(g)                                 An
engineering report detailing the conditions of any existing structures and a
list of all permits and licenses required to acquire or operate the applicable
Proposed Asset prepared by a licensed engineer/architect selected by the
Managing Partner and approved by TRT LLC the attached Exhibit J
lists pre-approved third party consultants; and

 

(h)                                 To
the extent requested by TRT LLC, all other agreements, reports, documents,
reviews and reports, including, without limitations, title reports or
commitments, surveys, easements, zoning letters and materials, site maps and
aerial photographs, engineering reports, seismic reports and tax bills with
respect to such Proposed Asset that are in the possession of, or reasonably
available to, the Managing Partner or any Affiliate of the Managing Partner.

 

9.1.3                        TRT
LLC will seek to approve or disapprove each proposed Acquisition pursuant to
this Section 9.1 within five (5) Business Days of receipt of
all of the items required by Section 9.1.2.  An Acquisition shall not be deemed approved
or disapproved, for the purposes of this Section 9.1, without
affirmative action of TRT LLC.  TRT LLC shall have no obligation to review any
proposed Acquisition and no Capital Contribution may be called or requested at
any time after December 31, 2008, unless agreed to by the parties.

 

9.1.4                        In connection with any purchase of a Proposed
Asset from DCT LLC or a Subsidiary of DCT the Property Related
Representations shall be true, correct and complete with respect to each such
Proposed Asset acquired by a Fee Owner at the time of the acquisition of the
Proposed Asset.

 

9.2                                 Acquisition of DCX Assets. The Partners acknowledge and agree that TRT LLC
may, at its option and upon five (5) days’ written notice to DCT LLC,
designate any asset that is the subject of an Acquisition to be a DCX Asset or
a Non-DCX Asset. In the event that TRT LLC has a DCX Call Right and chooses to
exercise said DCX Call Right (which DCT LLC acknowledges TRT LLC may choose to
exercise in its sole and absolute discretion), at any time upon five
(5) days’ written notice to DCT LLC, TRT LLC shall transfer any DCX Asset,
which is the subject of an exercised DCX Call Right, to the Partnership subject
to first obtaining the consent of DCT LLC (which DCT shall provide or notify
TRT LLC that it shall  not provide after
five (5) business days notice to DCT LLC and in any event prior to the
time that  that TRT LLC must exercise a
DCX Call Right) and provide to DCT LLC TRT LLC’s UPREIT recommendation, with
each such transfer to be made to a Special Purpose Entity wholly owned by the
Partnership.  Each such DCX Asset shall
be acquired by such Special Purpose Entity for a purchase price equal to the
purchase price paid by TRT LLC or any Affiliate thereof pursuant to the DCX
Call Right.  If DCT LLC rejects a DCX
Asset, then TRT LLC or its Affiliate may retain such asset and such asset shall
not be an asset of the Partnership or otherwise subject to this Agreement.

 

ARTICLE
10

 

BOOKS,  RECORDS, REPORTS AND BANK ACCOUNTS

 

10.1                           Fiscal Year; Maintenance of Books and Records.  The fiscal year of the Partnership shall be
the calendar year.  The Managing Partner
shall cause the Partnership to keep, at the 

 

47

 

principal office of the
Partnership, accurate, full and complete books, records and accounts in
accordance with GAAP, determined on an accrual basis.  Such books and records shall show the assets,
liabilities, costs, expenditures, receipts, profits and losses of the
Partnership, and shall include provision for separate Capital Accounts for each
Partner.

 

10.2                           Financial
Reports.

 

10.2.1                  For each
calendar month, the Managing Partner shall deliver to TRT LLC a copy of the
reports listed on Exhibit G
between the 10th and 20th day of the following month.

 

10.2.2                  The Managing
Partner shall provide, or cause to be provided, to each Partner copies of and
shall grant each Partner access to, such factual information (the “Disclosure Information”) as may be
reasonably requested by any Partner and is in the Managing Partner’s or its
Affiliates’ possession or control to enable any Partner or its Affiliates to
make the necessary filings as and when such filings with the Securities and
Exchange Commission are required and to otherwise permit any Partner to comply
with laws applicable to public companies, generally.  The Managing Partner shall allow, or cause
its Affiliates to allow, any Partner’s auditor to conduct such audits of the
Partnership and the Properties and shall cooperate (at no cost to the Managing
Partner, its Affiliates or the Partnership) with such Partner’s auditor in the
conduct of such audit. Neither the Managing Partner, the Property Manager, nor
any of their respective Affiliates shall have any obligation to assume any
liability as a result of such cooperation. TRT LLC acknowledges and agrees that
all Disclosure Information delivered by the Managing Partner, the Property
Manager or their respective Affiliates to TRT LLC or its auditor are as a
convenience only and that any reliance on or use of such Disclosure Information
shall be at the sole risk of TRT LLC. TRT LLC acknowledges and agrees that none
of DCT LLC, the Property Manager, any Affiliate of DCT LLC nor the person or
entity which prepared such Disclosure Information delivered to TRT LLC or its
auditor shall have any liability to TRT LLC for any inaccuracy in or omission
from any Disclosure Information.  The
Managing Partner (or the Property Manager, as applicable) shall be reimbursed,
at cost, by the Partnership for any time spent on preparing and delivering such
Disclosure Information to the extent the same has not otherwise been furnished
by the applicable seller or is not part of DCT LLC’s standard financial
reporting package as more specifically described in Exhibit G
to this Agreement and the Property Management Agreement and has been requested
by TRT LLC or its auditors. All costs and expenses applicable to the matters
described in this clause (b) shall be borne by the requesting Partner and
shall not be expense of the Partnership.

 

10.2.3                  The Managing
Partner shall timely deliver or make available such information as shall be
reasonably required by TRT LLC and/or its accountants in order to prepare 1099
forms and the other reports described in Exhibit G
and this Section 10.2.3 within ninety (90) days after the close of
each fiscal year of the Partnership.  The
Managing Partner shall furnish to each of the Partners a profit and loss
statement and balance sheet of the Partnership dated as of the end of the
fiscal year of the Partnership.  In
addition, on or about ninety (90) days after the end of each fiscal year of the
Partnership, the Managing Partner shall prepare and deliver to each Partner a
report setting forth in sufficient detail all such information respecting the
Partnership reasonably required for each Partner to prepare any tax return that
it is required to file in accordance with the laws, rules and regulations
then prevailing.  The Managing Partner
shall also prepare (or cause to 

 

48

 

be prepared) federal,
state, and local tax returns required of the Partnership and, once approved by
the TMP, shall file the same.

 

10.2.4                  Failure of the
Managing Partner to timely provide the reports, information or access required
under this Section 10.2 will be a breach of this Agreement and the
other Partner shall be entitled to injunctive relief as its sole remedy for
such breach (it being acknowledged and agreed by the parties that neither
monetary damages nor removal shall be an adequate remedy for failure of the
Managing Partner to timely provide any such reports, information or access and
TRT LLC hereby waives any right to such monetary relief).

 

10.3                           Inspection and Audit Rights.  Each Partner may, at its own expense, review
and/or audit the books, records and reports of the Partnership, and in
furtherance thereof, may inspect and copy during normal business hours any of
the Partnership books and records required to be maintained in accordance with
this Agreement.  Such right may be
exercised through any agent, representative or employee of a Partner or by an
independent certified public accountant designated by such Partner.  The Managing Partner shall cooperate with TRT
LLC or its auditor in the conduct of any such audit requested by TRT LLC at no
cost to the Managing Partner or the Partnership.

 

10.4                           Bank Accounts.  The bank accounts of the Partnership shall be
maintained in such banking institutions as the Managing Partner (or TRT LLC if
a DCT Event of Default has occurred) shall determine, provided such
institutions have a net worth in excess of Five Hundred Million Dollars
($500,000,000).

 

10.5                           Tax Matters Handled by TRT LLC.  TRT LLC shall be designated as “tax matters
partner” as defined in Code Section 6231 (the “TMP”),
to represent the Partnership (at the Partnership’s expense) in connection with
all examinations of the Partnership’s affairs by tax authorities, including
resulting judicial and administrative proceedings, and to expend Partnership
funds for professional services and costs associated therewith.  In its capacity as TMP, TRT LLC shall oversee
the Partnership tax affairs in the overall best interests of the Partnership
and shall comply with the requirements of Sections 6221 through 6232 of the
Code and regulations promulgated thereunder, and the Partners further agree as
follows:

 

(a)                                  The
TMP shall have a continuing obligation to provide the Internal Revenue Service
with sufficient information so that proper notice can be mailed to all Partners
as provided in Section 6223 of the Code.

 

(b)                                 The
TMP shall keep the Partners informed of all administrative and/or judicial
proceedings for the adjustment of partnership items (as defined in
Section 6231(a)(3) of the Code and regulations promulgated
thereunder).  Without limiting the
generality of the foregoing sentence, within fifteen (15) days of receiving any
written or oral notice of the time and place of a meeting or other proceeding
from the Internal Revenue Service regarding the Partnership (and in any event,
within a reasonable time prior to such meeting or proceeding), the TMP shall
furnish a copy of such written communication or notice or inform the Partners
in writing of the substance of any such oral communication.

 

49

 

(c)                                  The
TMP may extend the statute of limitations or enter into any settlement
agreement relating to any Partnership item of income, gain, loss, deduction or
credit for any Fiscal Year subject to the prior consent of TRT LLC.

 

10.6                           Federal Income Tax Elections.  DCT LLC, on behalf of the Partnership, may
make all elections for federal income tax purposes subject to the prior consent
of the Partners, including, without limitation, the following:

 

10.6.1                  Use of Accelerated Depreciation Methods.  To the extent permitted by applicable law and
regulations, the Partnership may elect to use an accelerated depreciation
method on any depreciable portion of Partnership Property.

 

10.6.2                  Adjustment of Basis of Assets.  In case of a transfer of all or part of the
Interest of any Partner, the Partnership may elect, pursuant to Code Sections
734, 743 and 754 to adjust the basis of the assets of the Partnership.

 

10.6.3                  Accounting Method.  For financial reporting purposes, the books
and records of the Partnership shall be kept on the accrual method of
accounting applied in a consistent manner and shall reflect all transactions of
the Partnership and be appropriate and adequate for the purposes of the
Partnership.

 

10.7                           Obligations of Partners to Report Allocations.  The Partners are aware of the income tax
consequences of the allocations made by this Agreement and hereby agree to
report their shares of the Partnership income and loss for income tax purposes
in accordance with the tax return information provided by Managing Partner
pursuant to Section 10.2.

 

10.8                           Additional Reporting Requirements.
DCT LLC agrees to provide all reporting required pursuant to and in accordance
with the timeframes as shown on Exhibit G
attached hereto.

 

ARTICLE
11

 

TERMINATION AND DISSOLUTION

 

11.1                           Dissolution.

 

(a)                                  The
Partnership shall be dissolved, and its affairs shall be wound up upon the
first to occur of the following: (i) the termination of the legal
existence of the last remaining partner of the Partnership or the occurrence of
any other event which terminates the continued membership of the last remaining
member of the Partnership in the Partnership unless the Partnership is
continued without dissolution in a manner permitted by this Agreement or the
Act, (ii) the entry of a decree of judicial dissolution under
Section 15-117 of the Act, (iii) the Period of Duration of the
Partnership expires, (iv) the unanimous written agreement of all the
Partners to dissolve the Partnership or (v) the repayment of the Senior
Loan and the sale, exchange or other transfer of all or substantially all
Partnership Property.  Upon the
occurrence of any event that causes the last remaining partner of the
Partnership to cease to be a member of the Partnership, to the fullest extent
permitted by law, the personal representative of such member is hereby
authorized to, and shall, within ninety (90) days after the occurrence of the
event that 

 

50

 

terminated the continued
membership of such partner in the Partnership, agree in writing (y) to
continue the Partnership and (z) to the admission of the personal
representative or its nominee or designee, as the case may be, as a substitute
partner of the Partnership, effective as of the occurrence of the event that
terminated the continued membership of the last remaining partner of the
Partnership.

 

(b)                                 Notwithstanding
any other provision of this Agreement, the Bankruptcy of a Partner shall not
cause such Partner to cease to be a partner of the Partnership and upon the
occurrence of such an event, the Partnership shall continue without
dissolution.

 

(c)                                  Notwithstanding
any other provision of this Agreement, each Partner waives any right it might
have to agree in writing to dissolve the Partnership upon the Bankruptcy of the
Partner, or the occurrence of an event that causes the Partner to cease to be a
partner of the Partnership.

 

(d)                                 The
Partnership shall terminate when (i) all of the assets of the Partnership,
after payment of or due provision for all debts, liabilities and obligations of
the Partnership shall have been distributed in the manner provided in this
Agreement and (ii) the Certificate of Formation shall have been canceled
in the manner required by the Act.

 

11.2                           Distribution of Liquidation Proceeds.  The Partners shall continue to allocate Net
Profits and Net Losses and distribute Available Cash during the winding-up
period in the same manner and the same priorities as provided for in Articles
4 and 5 hereof.  The proceeds
from the liquidation of Partnership Property shall be applied in the following
order:

 

11.2.1                  to the payment
of creditors, in the order of priority as provided by law, except to Partners
on account of any Partnership Loan, and to the establishment of such reserves
that Managing Partner may reasonably deem necessary, appropriate or desirable
for any contingent, conditional, or unmatured liabilities, debts or obligations
of the Partnership arising out of or in connection with the Partnership
operations; and

 

11.2.2                  to the Partners
in accordance with Section 5.2.

 

Where the distribution
pursuant to this Section 11.2 consists both of cash (or cash
equivalents) and non-cash assets, the cash (or cash equivalents) shall first be
distributed, in a descending order, to fully satisfy each category starting with
the most preferred category above.  In
the case of non-cash assets, the distribution values are to be based on the
fair market value thereof as determined in good faith by the liquidator, and
the shortest maturity portion of such non-cash assets (e.g., notes or
other indebtedness) shall, to the extent such non-cash assets are readily
divisible, be distributed, in a descending order, to fully satisfy each
category above, starting with the most preferred category.

 

51

 

ARTICLE
12

 

INDEMNIFICATION
OF THE PARTNERS, MANAGER AND THEIR AFFILIATES

 

12.1                           Indemnification of The Partners.  The Partnership shall indemnify and hold
harmless the Partners and their respective partners and/or their respective
officers, directors, employees, agents, Affiliates (individually, an “Indemnitee”) from and against any
and all losses, claims, demands, costs, damages, liabilities, expenses of any
nature (including reasonable attorneys’ fees and disbursements), judgments,
fines, settlements and other amounts arising from any and all claims, demands,
actions, suits or proceedings in which the Indemnitee may be involved, or
threatened to be involved, as a party or otherwise, arising out of or
incidental to the Business of the Partnership (excluding liabilities to any
Partner), regardless of whether the Indemnitee continues to be a Partner, or an
officer, director, employee, agent or Affiliate of the Partner at the time any
such liability or expense is paid or incurred, if the Indemnitee’s conduct did
not constitute fraud, willful misconduct or gross negligence and if the
Indemnitee acted in a manner it believed to be commercially reasonable and in
good faith and in the best interests of the Partnership.

 

12.2                           Expenses.  Expenses incurred by an Indemnitee in
defending any claim, demand, action, suit or proceeding subject to Section 12.1
shall, from time to time, be advanced by the Partnership prior to the final
disposition of such claim, demand, action, suit or proceeding upon receipt by
the Partnership of an undertaking by or on behalf of the Indemnitee to repay
such amount if it shall be determined that such Person is not entitled to be
indemnified as authorized in Section 12.1.

 

12.3                           Indemnification Rights Non-Exclusive.  The indemnification provided by Section 12.1
shall be in addition to any other rights to which those indemnified may be
entitled under any agreement, as a matter of law or equity or otherwise, both
as to action in the Indemnitee’s capacity as a Partner, as an Affiliate or as
an officer, director, employee, agent or principal of a Partner and as to any
action in another capacity, and shall continue as to an Indemnitee who has
ceased to serve in such capacity and shall inure to the benefit of the heirs,
successors, assigns and administrator of the Indemnitee.

 

12.4                           Errors and Omissions Insurance.  If TRT LLC shall so elect, the Partnership
may purchase and maintain insurance, at the Partnership’s expense, on behalf of
the Partners and such other Persons as the Partners shall determine, against
any liability that may be asserted against, or any expense that may be incurred
by, such Person in connection with the activities of the Partnership and/or the
Partners’ acts or omissions as the Partners of the Partnership regardless of whether
the Partnership would have the power to indemnify such Person against such
liability under the provisions of the Agreement.

 

12.5                           Assets of the Partnership.  Any indemnification under Section 12.1
shall be satisfied solely out of the assets of the Partnership.  No Partner shall be subject to personal
liability or required to fund or to cause to be funded any obligation by reason
of these indemnification provisions.

 

12.6                           Subordination of Indemnification.  Notwithstanding anything to the contrary
contained in this Article 12, the Partnership’s obligation to indemnify
the Partners shall, for so long as there remains outstanding any indebtedness
under any Senior Loan, be fully subordinated to such Senior Loan and shall not
constitute a claim against the Partnership in the event that Available Cash or
Net Liquidation Proceeds is insufficient to pay such obligation.

 

52

 

ARTICLE
13

 

MISCELLANEOUS
PROVISIONS

 

13.1                           Counterparts.  This Agreement may be executed in several
counterparts, and all counterparts so executed shall constitute one Agreement,
binding on all of the parties hereto, notwithstanding that all of the parties
are not signatory to the original or the same counterpart.

 

13.2                           Survival of Rights.  This Agreement shall be binding upon and, as
to permitted or accepted successors, transferees and assigns, inure to the
benefit of the Partners and the Partnership and their respective heirs,
legatees, legal representatives, successors, transferees and assigns, in all
cases whether by the laws of descent and distribution, merger, reverse merger,
consolidation, sale of assets, other sale, operation of law or otherwise.

 

13.3                           Severability.  In the event any Section, or any sentence
within any Section, is declared by a court of competent jurisdiction to be void
or unenforceable, such sentence or Section shall be deemed severed from
the remainder of this Agreement and the balance of this Agreement shall remain
in full force and effect.

 

13.4                           Notification or Notices.  In order to be effective, all notifications
or notices, consents, approvals and disapprovals required or permitted by this
Agreement to be given (“Notices”)
must be in writing and sent by facsimile and (a) delivered by nationally
recognized overnight delivery service with recipient’s signature required,
(b) placed in the United States mail, certified with return receipt
requested, properly addressed and with the full postage prepaid or
(c) personally delivered with recipient’s signature required.  Notices shall be deemed received and
effective on the date and time of transmission, provided that (i) such
facsimile transmission is sent during normal business hours in Denver,
Colorado, (ii) the sender receives a mechanical confirmation of such transmission
and (iii) such Notice is also sent by one of the other means described
above.  Notices must be addressed to
Managing Partner at the address set forth in Section 3.1.1 and to
the Partners at the addresses set forth in Section 3.1, unless the
same shall have been changed by Notice in accordance herewith.

 

13.5                           Construction.  The language in all parts of this Agreement
shall be in all cases construed simply according to its fair meaning and not
strictly for or against any of the Partners.

 

13.6                           Section Headings.  The captions of the Certificate of Formation
or Sections in this Agreement are for convenience only and in no way define,
limit, extend or describe the scope or intent of any of the provisions hereof,
shall not be deemed part of this Agreement and shall not be used in construing
or interpreting the Agreement.

 

13.7                           Governing Law.  This Agreement shall be construed according
to the internal laws, and not the laws pertaining to choice or conflict of
laws, of the State of  Delaware.

 

13.8                           Additional Documents.  Each Partner, upon the request of another
Partner, agrees to perform all further acts and execute, acknowledge and
deliver all documents which may be reasonably necessary, appropriate or
desirable to carry out the provisions of this Agreement, including, without
limitation, acknowledging before a notary public any signature heretofore or
hereafter made by a Partner.

 

53

 

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

 

13.10                     Time of the Essence.  Except as otherwise provided herein, time is
of the essence in connection with each and every provision of this Agreement.

 

13.11                     Further Actions.  Each of the Partners agrees to execute,
acknowledge and deliver such additional documents, and take such further
actions, as may reasonably be required from time to time to carry out each of
the provisions, and the intent, of the Agreement, and every agreement or
document relating hereto, or entered into in connection herewith.

 

13.12                     WAIVER OF RIGHT TO JURY.  WITH RESPECT TO ANY DISPUTE ARISING UNDER OR
IN CONNECTION WITH THIS AGREEMENT OR ANY RELATED AGREEMENT, EACH PARTNER HEREBY
IRREVOCABLY WAIVES ALL RIGHTS IT MAY HAVE TO DEMAND A JURY TRIAL.  THIS WAIVER IS KNOWINGLY, INTENTIONALLY AND
VOLUNTARILY MADE BY THE PARTNERS AND EACH PARTNER ACKNOWLEDGES THAT NONE OF THE
OTHER PARTNERS NOR ANY PERSON ACTING ON BEHALF OF THE OTHER PARTIES HAS MADE
ANY REPRESENTATION OF FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY
TO MODIFY OR NULLIFY ITS EFFECT.  EACH
PARTNER FURTHER ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED (OR HAS HAD THE
OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS AGREEMENT AND IN THE
MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE
WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.  EACH OF THE PARTNERS FURTHER ACKNOWLEDGES
THAT IT HAS READ AND UNDERSTANDS THE MEANING AND RAMIFICATIONS OF THIS WAIVER
PROVISION.

 

13.13                     Time of Essence.  Time is of the essence in this Agreement.

 

13.14                     Third Party Beneficiaries.  There are no third party beneficiaries of
this Agreement.

 

13.15                     Partition.  The Partners agree that the Partnership
Property that the Partnership may own or have an interest in is not suitable
for partition.  Each of the Partners
hereby irrevocably waives any and all rights that it may have to maintain any
action for partition of any Partnership Property in which the Partnership may
at any time have an interest.

 

13.16                     Entire Agreement.  This Agreement and the Certificate of
Formation constitute the entire agreement of the Partners with respect to, and
supersedes all prior written and oral agreements, understandings and
negotiations with respect to the subject matter hereof.

 

13.17                     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 a waiver of any such breach or any other covenant, duty,
agreement or condition.

 

54

 

13.18                     Attorneys’ Fees.  In the event of any litigation, arbitration
or other dispute arising as a result of or by reason of this Agreement, the
prevailing party in any such litigation, arbitration or other dispute shall be
entitled to, in addition to any other damages assessed, its reasonable attorney
fees, and all other costs and expenses incurred in connection with settling or
resolving such dispute.  The attorneys’
fees which the prevailing party is entitled to recover shall include fees for
prosecuting or defending any appeal and shall be awarded for any supplemental
proceedings until the final judgment is satisfied in full.  In addition to the foregoing award of
attorneys’ fees to the prevailing party, the prevailing party in any lawsuit or
arbitration procedure on this Agreement shall be entitled to its reasonable
attorneys’ fees incurred in any post judgment proceedings to collect or enforce
the judgment.  This attorneys’ fees
provision is separate and several and shall survive the merger of the Agreement
into any judgment.

 

13.19                     Authorized Representatives.  Wherever in this Agreement the consent or
approval of a Partner is required with respect to all matters pertaining to the
Partnership, (a) the written statements and representations of an
Authorized Representative of a Partner that is not a natural Person shall be
the only authorized statements and representations of such Partner with respect
to the matters covered by this Agreement and (b) the written statement or
representation of any one Authorized Representative of such Partner shall be
sufficient to bind such partner with respect to all matters pertaining to the
Partnership.  Wherever used in this
Agreement, the terms “approved by” or “approval of” or “consented to” or
“consent of” or “satisfactory to”, or words of similar import, with respect to
a Partner that is not a natural Person, means a decision or action which has
been consented to in writing by the Authorized Representative of such Partner,
and with respect to a Partner who is an individual, means a decision or action
which has been consented to in writing by such individual.

 

13.20                     Intentionally Deleted.

 

13.21                     ARBITRATION REGARDING DCT EVENTS OF DEFAULT.  ANY PARTNER MAY REQUIRE THE ARBITRATION
OF ANY DISPUTE BETWEEN THE PARTNERS ARISING HEREUNDER WITH RESPECT TO THE
EXISTENCE OF A DCT EVENT OF DEFAULT.  ANY
PARTNER MAY INITIATE AND REQUIRE ARBITRATION BY GIVING NOTICE TO THE OTHER
PARTY(S) SPECIFYING THE MATTER TO BE ARBITRATED.  EXCEPT AS PROVIDED TO THE CONTRARY IN THESE
PROVISIONS ON ARBITRATION, THE ARBITRATION SHALL BE HELD IN DENVER, COLORADO IN
CONFORMITY WITH AND SUBJECT TO APPLICABLE RULES AND PROCEDURES OF THE AMERICAN
ARBITRATION ASSOCIATION (OR ANY SUCCESSOR THERETO).  IF THE AMERICAN ARBITRATION ASSOCIATION IS
NOT THEN IN EXISTENCE AND THERE IS NO SUCCESSOR, OR IF FOR ANY REASON THE
AMERICAN ARBITRATION ASSOCIATION FAILS OR REFUSES TO ACT, THE ARBITRATION SHALL
BE IN CONFORMITY WITH AND SUBJECT TO THE PROVISIONS OF APPLICABLE COLORADO
STATUTES (IF ANY) RELATING TO ARBITRATION AT THE TIME OF THE NOTICE.  THE ARBITRATORS SHALL BE BOUND BY THIS
AGREEMENT AND ALL RELATED AGREEMENTS. 
THE PARTNER OR PARTNERS PREVAILING IN SUCH ARBITRATION SHALL BE ENTITLED
TO RECOVER THEIR REASONABLE COSTS AND EXPENSES INCURRED IN SUCH ARBITRATION
FROM THE PARTNER OR PARTNERS WHICH ARE NOT PREVAILING PARTIES IN SUCH
ARBITRATION, AND THE PARTNER OR PARTNERS WHICH ARE NOT PREVAILING PARTIES IN
SUCH 

 

55

 

ARBITRATION SHALL PAY THE
COSTS OF ARBITRATION, INCLUDING ARBITRATOR’S FEES, AS AWARDED BY THE
ARBITRATOR(S).  THE NUMBER AND SELECTION
OF ARBITRATOR(S) SHALL BE IN ACCORDANCE WITH THE RULES PRESCRIBED ABOVE,
EXCEPT THAT (I) EACH ARBITRATOR SELECTED SHALL BE NEUTRAL AND FAMILIAR
WITH THE PRINCIPAL SUBJECT MATTER OF THE ISSUES TO BE ARBITRATED, SUCH AS, BY
WAY OF EXAMPLE, REAL ESTATE DEVELOPMENT, OR REAL ESTATE MANAGEMENT, OR SUCH
OTHER SUBJECT MATTER AS MAY BE AT ISSUE, (II) THE TESTIMONY OF
WITNESSES SHALL BE GIVEN UNDER OATH, AND (III) DEPOSITIONS AND OTHER DISCOVERY
MAY BE ORDERED BY THE ARBITRATOR(S). 
ANY ARBITRATION AWARD MADE PURSUANT TO THE PROVISIONS SET FORTH HEREIN
SHALL BE FINAL AND BINDING IN ALL RESPECTS (ABSENT FRAUD) AND SHALL BE
ENFORCEABLE AGAINST ALL PARTNERS IN ANY STATE OR FEDERAL COURT SITTING IN THE
STATE OF COLORADO, EXCEPT THAT ANY ARBITRATION AWARD IN CONNECTION WITH A
DETERMINATION OF THE EXISTENCE OR NON-EXISTENCE OF A DCT EVENT OF DEFAULT SHALL
BE APPEALABLE BY ANY PARTNER AND SUCH DETERMINATION SHALL NOT BE FINAL AND
BINDING UNTIL SUCH ISSUE HAS BEEN DETERMINED PURSUANT TO A FINAL NONAPPEALABLE
ORDER OF A COURT OF COMPETENT JURISDICTION.

 

13.22                     Confidentiality.  Each Partner agrees not to disclose or permit
the disclosure of any of the terms of this Agreement or of any other confidential,
non-public or proprietary information relating to the Property or Business of
the Partnership (collectively, “Confidential Information”),
provided that such disclosure may be made (a) to any Person who is a
partner, officer, director or employee of such Partner or an Affiliate thereof
or counsel to or accountants such Partner solely for their use and on a
need-to-know basis, provided that such Persons are notified of such Partner’s
confidentiality obligations hereunder, (b) with the prior consent of the
other Partner(s), (c) subject to the following sentence, pursuant to a
subpoena or order issued by a court, arbitrator or governmental body, agency or
official, (d) to any Senior Lender, (e) to credit agencies and
analysts for the purpose of their ongoing evaluation of the Partnership’s
activities; (f) to any potential or prospective investor, lender or
transferee of such Partner, provided such investment or transfer is permitted
under Article 8 or (g) if required under applicable law or the
rules of any securities exchange on which securities of a Partner or its
parent are listed or in order to comply with public reporting requirements of
any of them.  In the event that a Partner
shall receive a request to disclose any Confidential Information under a subpoena
or order, such Partner shall (i) promptly notify the other Partner
thereof, (ii) consult with the other Partner on the advisability of taking
steps to resist or narrow such request and (iii) if disclosure is required
or deemed advisable, cooperate with the other Partner in any attempt it may
make to obtain an order or other assurance that confidential treatment will be
accorded the Confidential Information that is disclosed.

 

13.23                     “Effectiveness”.  Pursuant to Section 15-105 of the Act,
this Agreement shall be effective as of the time of the filing of the
Certificate of Formation with the Secretary of State on September 9, 2008.

 

13.24                     1031 Exchange.  The Partners acknowledge and agree that if
any Partner, in connection with the sale of any Property by the Partnership or
any Special Purpose Entity, wishes for the 

 

56

 

Partnership to convey
such Property as part of an IRC Section 1031 Tax Deferred Exchange, the
Partners shall cooperate in good faith to structure the conveyance in a manner
that will permit such Property to be conveyed by the Partnership as part of IRC
Section 1031 Tax Deferred Exchange.

 

13.25                     Tax Cooperation.    DCT LLC agrees to cooperate and to cause the
Partnership to use its reasonable efforts, to the extent reasonably
practicable, to maximize the tax efficiency and protect the tax deferral of the
sellers of any DCX Asset acquired by TRT LLC or its Affiliate(s)pursuant to any
DCX Call Right.

 

ARTICLE
14

 

REIT
COMPLIANCE

 

14.1                           REIT Compliance.  The Managing Partner acknowledges that it has
been advised that Dividend Capital Total Realty Trust, the indirect owner of
TRT LLC, and DCT, the general partner of DCOP, the owner of DCT LLC, are REITs.

 

14.2                           REIT
Limitations.  During the term of the
Partnership, the following limitations shall apply:

 

14.2.1                  The assets of
the Partnership will consist only of direct ownership interests in
(1) cash or cash items within the meaning of Code
Section 856(c)(4)(A), (2) real estate assets within the meaning of
Code Section 856(c)(5)(B); and (3) the Properties.  At least ninety-five percent (95%) of the
fair market value of the Property will at all times consist of real estate
assets within the meaning of Code Section 856(c)(5)(B).  Specifically, but without limitation, the
Partnership will not during its term:

 

(a)                                  acquire,
form, own or hold any stock of or other ownership interest in a corporation (or
other entity treated for federal income tax purposes as an association taxable
as a corporation) or any ownership interest in a partnership, limited liability
company, trust or other entity other than an entity that is disregarded as an
entity separate from its owner for federal income tax purposes through which
the Partnership holds the Property;

 

(b)                                 merge
with or into (or otherwise transfer all or a portion of its interests to) a
partnership, corporation, trust or other entity;

 

(c)                                  acquire,
own or hold any convertible debt instrument;

 

(d)                                 acquire,
own or hold any security, warrant, option, subscription agreement, or contract
for the acquisition of a security within the meaning of the Investment Company
Act of 1940, as amended, or Code Section 856(c)(4), including without
limitation, any security described in Code
Section 856(c)(4)(B)(iii)(II) or Code Section 856(c)(4)(B)(iii)(III);

 

(e)                                  acquire,
own, sell, hold or create any asset or other property that is stock in trade or
other property of a kind which would properly be included in inventory of the
Partnership if on hand at the close of the taxable year or property held by the
Partnership

 

57

 

primarily for sale to
customers in the ordinary course of its trade or business, within the meaning
of Code Section 1221(a)(1), including interests in residential development
property;

 

(f)                                    acquire,
own or operate a motel, hotel or healthcare facility;

 

(g)                                 conduct
any business other than the business of owning and operating the Property
(directly or indirectly) or as otherwise permitted under Section 2.6; or

 

(h)                                 accept
any capital contribution after the date hereof other than a cash contribution.

 

14.2.2                  Holding Requirement.  Except as expressly provided in this
Agreement, the Partnership will not sell or otherwise dispose of the Property
or any real estate asset, as defined in Code Section 856(c)(5)(B).

 

14.2.3                  Foreclosure Property.  The Partnership will not acquire any real
property by foreclosure, deed in lieu of foreclosure, or otherwise as a result
of a default with respect to a lease of property or a default on indebtedness
that such property secures.

 

14.2.4                  Income Requirements.  The Partnership’s business shall be conducted
in such a manner that at least ninety-five percent (95%) of the gross income of
the Partnership for each taxable year during its term of existence will consist
of the following items, in each case as determined for purposes of Code
Section 856(c)(2):  (a) rents
that qualify as rents from real property under Code Section 856(d),
(b) gain from the sale or other disposition of stock, securities, and real
property (including interests in real property and interests in mortgages on
real property) which is not property described in Code Section 1221(a)(1),
(c) interest, other than interest the determination of which depends in
whole or in part on the income or profits of any person, (d) dividends,
(e) abatements and refunds of taxes on real property, (f) income and
gain derived from foreclosure property as defined in Code
Section 856(e) and (g) gain from the sale or other disposition
of a real estate asset which is not a prohibited transaction solely by reason
of Code Section 857(b)(6).  In
addition, at least seventy-five percent (75%) of the gross income of the
Partnership for each taxable year during its term of existence will consist of
the following items, in each case as determined for purposes of Code
Section 856(c)(3):  (i) the
items described in clauses (a), (e), (f) and (g) (ii) gain from
the sale or other disposition of real property (including interests in real
property and interests in mortgages on real property) which is not property
described in Code Section 1221(a)(1), and (iii) interest on
obligations secured by mortgages on real property or on interests in real
property other than interest the determination of which depends in whole or in
part on the income or profits of any person.

 

14.2.5                  Services.  The Partnership shall not receive or accrue
any amount that constitutes “impermissible tenant services income” (as such
term is defined in and for purposes of, Code Section 856(d)(7)(A)) in
respect of any real or personal property of the Partnership that exceeds one
percent (1%) of all amounts received or accrued during a taxable year with
respect to any such property.

 

58

 

14.2.6                  Leases.

 

(a)                                  At
least annually and more frequently as TRT LLC may request, the Managing Partner
shall provide TRT LLC with a list of the Partnership’s and each Fee Owner’s
current and anticipated tenants and subtenants (and any tenant or subtenant of
any direct or indirect subsidiary of the Partnership). The Managing Partner
shall not approve, consent to or execute on behalf of the Partnership or the
Fee Owner any lease, sublease or other arrangement if TRT LLC notifies Managing
Partner that such lease, sublease or other arrangement could cause TRT LLC to
receive or accrue amounts that do not qualify as “rents from real property”
within the meaning of Code Section 856(d).

 

(b)                                 Neither the Partnership nor any Fee Owner shall not
enter into any lease with respect to personal property unless (A) such
personal property is leased under, or in connection with, a lease of real
property and (B) the rent attributable to the personal property for each
taxable year does not exceed fourteen percent (14%) of the total rent for the taxable
year attributable to both the real and personal property leased under or in
connection with such lease, as determined under Code
Section 856(d)(1) and the Regulations thereunder.

 

(c)                                  Neither the Partnership nor any Fee Owner
shall not enter into any lease or consent to any sublease or assignment with
respect to any real or personal property if the determination of any amount
under the lease, sublease or assignment depends in whole or in part on the
income or profits derived by any person from such property; provided, however,
that percentage rent based on gross income of the tenant is acceptable.

 

14.3                           Dispute Resolution Regarding REIT Compliance.
Any dispute over whether an activity of the Partnership or the Fee Owner is in
violation of Section 14.1 shall be determined in the reasonable judgment
of TRT LLC.  The Managing Partner shall
cooperate with any adversely affected Partner in connection with any proposed
transaction and, on behalf of the Partnership, shall take all commercially
reasonable measures to satisfy a Partner’s concerns and alleviate any adverse
consequences to such member resulting therefrom.

 

ARTICLE
15

EXCLUSIVITY

 

15.1                           Exclusivity of TRT LLC. TRT LLC,
and Dividend Capital Total Realty Trust 
hereby covenant that neither they nor their Subsidiaries will enter into
agreements similar to this Agreement or for purposes similar to those
contemplated by this Agreement with other industrial property operating
partners in a similar capacity during any period from the date hereof through
December 31, 2008 provided that no Change of Control Event or DCT Event of
Default has occurred.  Further, TRT LLC,
and Dividend Capital Total Realty Trust hereby covenant that neither they nor
their Subsidiaries shall directly acquire or develop industrial assets during
the period from the date hereof through December 31, 2008.  The foregoing notwithstanding, TRT LLC shall
have the right, at any time, to pursue mixed portfolio acquisitions that
include industrial/warehouse assets or to acquire industrial/warehouse assets
that are not consistent with the investment criteria described on Exhibit F hereto (the “Investment
Criteria”).

 

59

 

15.2                           Exclusivity of DCT LLC.            Subject to DCT LLC’s
obligation to offer TRT LLC the opportunity to invest in the Future Assets, DCT
LLC at its election, may rotate additional investment opportunities to TRT LLC
and up to three (3) other institutional real estate acquisition
funds.  TRT LLC acknowledges that DCT and
its Subsidiaries are engaged in the acquisitions and ownership financing and
other participation in industrial/warehouse assets, and that DCT LLC shall act
in good faith in providing investment opportunities to TRT LLC for investments
meeting the Investment Criteria, but that DCT and its Subsidiaries may also
undertake investment opportunities on their own account without offering them
to TRT LLC hereunder.

 

ARTICLE
16

BUY/SELL AND MARKETING

 

16.1                           Buy/Sell Offering Notice.  Subject to any Buy/Sell Provisions that have
been triggered and are then in effect with respect to a prior Buy/Sell Offering
Notice, the operation of Sections 16.1 through 16.9 (the “Buy/Sell
Provisions”) may be triggered with respect to any or all of the Properties
only upon written notice (the “Buy/Sell Offering Notice”) by the
applicable Partner given under any of the following circumstances:

 

16.1.1                  with respect to
only the affected Property, by either Partner given at any time  after an Impasse under this Agreement;

 

16.1.2                  with respect to
all the Properties, by DCT LLC or TRT LLC pursuant to Section 5.3.1;

 

16.1.3                  with respect to
all the Properties, by the Initiating Partner under Section 16.11 if the
Buy/Sell Responding Partner and the Buy/Sell Initiating Partner are unable to
reach agreement on the gross sales price of the remaining Properties within the
60-day negotiating period under Section 16.11; provided that if the
Buy/Sell Initiating Partner fails to trigger the Buy/Sell Provisions within 10
days after the 60-day negotiating period, then the Buy/Sell Responding Partner
may trigger the Buy/Sell Provisions within the immediately following 10-day
period.

 

16.2                           The
Partner duly triggering such right shall be the “Buy/Sell Initiating Partner”
and the other Partner shall be the “Buy/Sell Responding Partner” for the
purposes of the Buy/Sell Provisions.  The
Buy/Sell Offering Notice shall set forth a all-cash aggregate sales price for
all the Properties to which the Buy/Sell Offering Notice applies (“Purchase
Price”).  No Buy/Sell Offering Notice
or responsive notice under the Buy/Sell Provisions under Section 16.2
may be rescinded without the written consent of all of the Partners.

 

16.3                           Responsive Notice.  Not later than thirty (30) days following the
date of the Buy/Sell Offering Notice (the “Buy/Sell Response Deadline Date”),
the Buy/Sell Responding Partner shall deliver to the Initiating Partner a
responsive notice, without qualification or condition, electing either:

 

60

 

16.3.1                  To require the
Partnership to sell to the Buy/Sell Initiating Partner, such Properties as are
the subject of the Buy/Sell Offering Notice, at the Purchase Price; or

 

16.3.2                  To purchase from
the Partnership, such Properties as are the subject of the Buy/Sell Offering
Notice, at the Purchase Price proposed by the Buy/Sell Initiating Partner.

 

16.3.3                  TRT LLC shall
have the right, which shall be exercised in the offering/responsive notice, to
acquire 100% of the ownership interests in the Fee Owner rather than the fee
simple interest in the Property or remaining Properties which is/are the
subject of the Buy/Sell for a sum equal to the same purchase price as would
have been paid for the fee simple interest in the Property(ties) multiplied by
DCT’s Percentage Interest in such Property(ies).  Notwithstanding anything to the contrary
contained herein, the Partners acknowledge and agree that with respect to any
DCX Asset, DCT LLC may acquire only the fee simple interest in the Properties.

 

16.3.4                  The foregoing
provisions are all subject to Section 13.24 of this Agreement.

 

16.4                           Failure to Respond.  The failure of the Buy/Sell Responding
Partner to give such a responsive notice under Section 16.2
(without qualification or condition) by the Buy/Sell Response Deadline Date
shall be deemed notice of an election to sell the Property or Properties, as
may be applicable, that are the subject of the Buy/Sell Offering Notice under Section 16.1
above on the Buy/Sell Response Deadline Date. 
The date that the Buy/Sell Responding Partner gives notice of its
election (or is be deemed to have made an election) shall be the “Buy/Sell
Election Date.”

 

16.5                           Calculation of Distributions.  In calculating the amount that would be
distributed pursuant to Section 5.1(a) hereof to the
applicable Partner under Section 16.2 above, the Partners shall
assume that the sum of $100,000 (or such lesser amount as is then known to be
sufficient for such purposes) shall be deemed set aside for liquidation costs
and reserves, and there shall be no deduction for transfer taxes or brokerage commissions.

 

16.6                           Buy/Sell Deposit.  The Partner bound to purchase pursuant to the
election referenced in Section 16.2 (is the “Purchaser,” and
the Partnership shall be the “Seller”; provided, however that the
Partner that is not the Purchaser shall have the sole and exclusive right to
make any and all decisions on behalf of the Seller with respect to the sale)
shall be required to make an earnest money deposit (the “Buy/Sell
Deposit”) in an amount equivalent to the lesser of
(a) $250,000 or (b) two and one-half percent (2.5%) of the Purchase
Price.  The Buy/Sell Deposit shall be
delivered, in immediately available funds, to a national title insurance
company reasonably acceptable to the other Partner, that shall perform the
services of escrow agent for the closing under the Buy/Sell Provisions within
five (5) Business Days following the Buy/Sell Election Date.  The Buy/Sell Deposit shall be nonrefundable
to the Purchaser (except in the event of a material default of the Seller in
performing its closing obligations pursuant to this Article 16).

 

16.7                           Closing Process.  The Purchaser shall fix a closing date (the “Closing Date”) not later than
forty-five (45) days following the Buy/Sell Election Date by notifying the
other Partner in writing of the Closing Date not less than ten (10) days
prior thereto.  The closing shall take
place on the Closing Date and shall be completed through a customary closing
escrow or held at the principal office of TRT LLC or such other location as the
parties shall agree upon at least five (5) 

 

61

 

Business Days prior to
the Closing Date.  The purchase price for
the applicable Property that are the subject of the Buy/Sell Offering Notice
shall be paid in immediately available funds and the Seller shall convey good
and marketable fee simple title to the applicable Propert(ies) that are the
subject of the Buy/Sell Offering Notice or its designee free and clear of all
financing liens and encumbrances but subject to all such other encumbrances as
affect such Propert(ies) as encumbered the applicable Propert(ies) on the date
that the Buy/Sell Offering Notice was issued and any other encumbrances
thereafter placed on the applicable Propert(ies) in accordance with the terms
of this Agreement.  Each Partner agrees
to cooperate and to take all actions and execute all documents reasonably
necessary or appropriate to reflect the purchase of the Property that are the
subject of the Buy/Sell Offering Notice and otherwise shall conduct the
transfer in a manner that is customary for the sale of real property the
jurisdiction in which the applicable Propert(ies) are located.  The Managing Partner shall prepare in good
faith a schedule of adjustments to the Purchase Price pursuant to Section 16.7
as of the date of determination of the Closing Date showing all items of
adjustment described below and such adjustments shall be made as of the Closing
Date. At the closing, adjustments to purchase price shall be made in accordance
with Section 16.7 in order to complete the final calculation of the
applicable adjustments to the Purchase Price. 
The cost of any title insurance policy endorsements desired by the
Purchaser shall be paid by the Purchaser. 
All other costs shall be borne by the party who customarily bears such
costs in the area where the applicable Property is located.  Any risk of casualty, condemnation or loss
prior to the Closing Date shall be borne by Purchaser, who shall succeed to all
rights to insurance proceeds (other than loss of rent proceeds allocable to any
period prior to the Closing Date) or condemnation awards (and any such casualty
or condemnation proceeds received by the Partnership prior to the date of the
Buy/Sell Notice shall not be taken into account in the adjustment of the
purchase price).  In no event shall
Purchaser be required to repay or to cause the Partnership to repay any
indebtedness of the Partnership at such closing.  Notwithstanding anything to the contrary
contained in the Buy/Sell Provisions, it shall be a condition precedent to
Purchaser’s and Seller’s obligation to close on the Closing Date that upon
performance by each party of its obligations hereunder, that the holder
releases the Property from any and all financing liens and encumbrances to
which the applicable Property is subject.

 

16.8                           Adjustments to Purchase Price.  At the closing, the purchase price shall be
adjusted by those matters that are customarily adjusted in connection with the
sale of real property in the jurisdiction in with the applicable Property is located.

 

16.9                           Failure to Close.  If the Purchaser fails to perform its
obligations under the Buy/Sell Provisions (following such failure, the “Defaulting
Purchaser”), such failure shall be deemed a default hereunder.  The Seller, in addition to its other rights
hereunder shall be entitled to retain the Buy/Sell Deposit as liquidated
damages, and the non-defaulting Partner shall have the right to acquire the
applicable Property for a purchase price equal to ninety five percent (95%) of
the Purchase Price originally set forth by the Buy/Sell Initiating Partner.

 

16.10                     Effect Upon Transferees.  Following any Transfer of the Interest of any
Partner effective under this Agreement, the Buy/Sell Provisions shall be
binding upon such transferee Partner. 
Any transferee of such interest who is admitted as a substitute Partner
shall enjoy fully the benefits and be subject to the burdens of such
provisions.

 

16.11                     Marketing.

 

62

 

16.11.1            Initiation.  Subject to the completion of any outstanding
transactions under the Buy/Sell Provisions, at any time beginning on the sixth
month before the eighth anniversary date of this Agreement, either Partner may
deliver a written notice (a “Marketing Notice”) to the other Partner
stating that the Initiating Partner intends to cause the Partnership to sell
all of the remaining Properties subject to the provisions of Section 13.24
of this Agreement.

 

16.11.2            Marketing.  If within 30 days after the delivery of the
Marketing Notice, the Partners agree to cause the Partnership to sell all the
remaining Properties, then the Managing Partner shall require the Partnership
(i) to incur reasonable and customary expenses in connection with the
marketing of the remaining Properties, such as the preparation of studies,
sales offerings and brochures and legal fees to prepare and negotiate
agreements and (ii) to retain on a nonexclusive or exclusive basis one or
more brokers proposed by the Managing Partner and approved by TRT LLC on market
terms and conditions as reasonably determined by the Managing Partner.

 

16.11.3            Managing
Partner Consultation.  The
Managing Partner shall reasonably consult with TRT LLC to keep TRT LLC fully
informed during the marketing and sale of the remaining Properties and shall
provide TRT LLC the opportunity to oversee its activities, including without
limitation, meeting with TRT LLC from time to time to review the marketing
process.

 

16.12                     Negotiation Period.  If the Partners do not agree to market the
Properties pursuant to Section 16.10, or if by six months after the
date the Marketing Notice was given under Section 16.10.1 the
Properties have not been sold or are not subject to a binding contract of sale,
then either Partner (the “Initiating Partner”)
may invoke the provisions of this Section 16.12 by delivering
written notice of the other (the “Responding Partner”)
stating its intent to negotiate in good faith during a 60-day negotiating
period beginning on the date such notice is given to agree upon a all-cash
gross sales price for all the Properties for which the Initiating Partner would
purchase the Properties in a manner consistent with Sections 16.4
through 16.9 on or before 30 days after such 60 day period.  If the Partners are unable to agree upon such
all-cash gross sale price within the 60-day negotiating period, then first the
Initiating Partner, and then the Responding Partner, shall have the option to
trigger the Buy/Sell Provisions pursuant to Section 16.1.3.

 

16.13                     Brokerage.  No brokerage fees or commissions shall be
payable by the Partnership in connection with any purchase by any Partner or
its designee pursuant to this Article 16 and each Partner shall indemnify
and hold harmless the Partnership and the other Partner from and against any
such claims made based upon the actions of such Partner, including any fees and
expenses in defending any such claims.

 

[SIGNATURE PAGE TO FOLLOW]

 

63

 

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

 

 

	
   

  	
  TRT
  INDUSTRIAL FUND III LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  DCTRT
  Real Estate Holdco LLC, Its Sole Member

  
	
   

  
	
   

  	
  By:

  	
  Dividend
  Capital Total Realty Operating 

  Partnership LP, Its Sole Member

  
	
   

  
	
   

  	
  By:

  	
  Dividend
  Capital Total Realty Trust 

  Inc., Its General Partner

  
	
   

  
	
   

  	
  By:

  	
  /s/
  Guy Arnold

  
	
   

  	
  Name:

  	
  Guy
  Arnold

  
	
   

  	
  Title:

  	
  President

  
	
   

  
	
   

  
	
   

  	
  DCT
  INDUSTRIAL FUND III LLC

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
  DCT
  Industrial Operating Partnership LP, Its Sole 

  Member

  
	
   

  
	
   

  	
  By:

  	
  DCT
  Industrial Trust Inc., Its General 

  Partner

  
	
   

  
	
   

  
	
   

  	
  By:

  	
  /s/
  Teresa L. Corral

  
	
   

  	
  Name:

  	
  Teresa
  L. Corral

  
	
   

  	
  Title:

  	
  Senior
  Vice President

  
													

 

 

[ADDITIONAL SIGNATURES FOLLOW]

 

64

 

DCT
Industrial Trust Inc., by their execution below, hereby guarantees to TRT LLC
payment by DCT LLC on the True-Up Date of the Final Promote True-Up Amount, as
provided in Section 5.3.2 of this Agreement.

 

DCT INDUSTRIAL TRUST INC.

 

 

	
  By:

  	
  /s/
  Teresa L. Corral

  	
   

  
	
  Name:

  	
  Teresa
  L. Corral

  
	
  Title:
  Senior Vice President

  
				

 

Dividend
Capital Total Realty Trust Inc., by its execution below, joins in this
Agreement solely for the purpose of confirming its covenants in Section 15.1
of this Agreement.

 

DIVIDEND CAPITAL TOTAL REALTY TRUST INC.

 

 

	
  By:

  	
  /s/
  Guy Arnold

  	
   

  
	
  Name:

  	
  Guy
  Arnold

  
	
  Title:
  

  	
  President

  
					

 

65Exhibit
4.10

 

NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. 
THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
SECURED BY SUCH SECURITIES.

 

COMMON STOCK PURCHASE WARRANT

 

LPATH, INC.

 

	
  Warrant Shares: [              ]

  	
   

  	
  Initial Exercise Date:
            
        , 2008

  

 

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies
that, for value received,
                     
(the “Holder”) is entitled, upon the terms and subject to the
limitations on exercise and the conditions hereinafter set forth, at any time
on or after the date hereof (the “Initial Exercise Date”) and on or
prior to the close of business on the fifth year anniversary of the Initial
Exercise Date (the “Termination Date”) but not thereafter, to subscribe
for and purchase from Lpath, Inc., a Nevada corporation (the “Company”),
up to             
shares (the “Warrant Shares”) of Class A common stock, par value
$0.001 per share, of the Company (the “Common Stock”).  The purchase price of one share of Common
Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).

 

Section 1.               Definitions.  Capitalized
terms used and not otherwise defined herein shall have the meanings set forth
in that certain Securities Purchase Agreement (the “Purchase Agreement”),
dated                ,
2008, among the Company and the
purchasers signatory thereto.

 

Section 2.               Exercise.

 

a)             Exercise of
Warrant.  Exercise of the purchase
rights represented by this Warrant may be made, in whole or in part, at any
time or times on or after the Initial Exercise Date and on or before the
Termination Date by delivery to the Company of a duly executed facsimile copy
of the Notice of Exercise Form annexed 
hereto (or such 

 

1

 

other office or agency of the Company as it may designate by notice in
writing to the registered Holder at the address of such Holder appearing on the
books of the Company) and payment to the Company of the aggregate Exercise
Price of the shares thereby purchased and the amount of any transfer tax
required to be paid by Holder, if any, pursuant to Section 2(e)(vii) hereof
by wire transfer or cashier’s check drawn on a United States bank within 3
Trading Days of the date said Notice of Exercise is delivered to the
Company.  Notwithstanding anything herein
to the contrary, the Holder shall not be required to physically surrender this
Warrant to the Company until the Holder has purchased all of the Warrant Shares
available hereunder and the Warrant has been exercised in full, in which case,
the Holder shall surrender this Warrant to the Company for cancellation within
3 Trading Days of the date the final Notice of Exercise is delivered to the
Company.  Partial exercises of this
Warrant resulting in purchases of a portion of the total number of Warrant
Shares available hereunder shall have the effect of lowering the outstanding
number of Warrant Shares purchasable hereunder in an amount equal to the
applicable number of Warrant Shares purchased. 
The Holder and the Company shall maintain records showing the number of
Warrant Shares purchased and the date of such purchases.  The Company shall deliver any objection to
any Notice of Exercise Form within 2 Business Days of receipt of such
notice.  In the event of any dispute or
discrepancy, the records of the Holder shall be controlling and determinative
in the absence of manifest error. The Holder and any assignee, by acceptance of
this Warrant, acknowledge and agree that, by reason of the provisions of this
paragraph, following the purchase of a portion of the Warrant Shares hereunder,
the number of Warrant Shares available for purchase hereunder at any given time
may be less than the amount stated on the face hereof.

 

b)            Exercise Price.  The exercise price per share of the Common
Stock under this Warrant shall be $1.25, subject to adjustment hereunder (the “Exercise
Price”).

 

c)             Cashless
Exercise.  If at any time after one year from the date
of issuance of this Warrant there is no effective Registration Statement
registering the resale of the Warrant Shares by the Holder at a time when such
Registration Statement is otherwise required to be effective pursuant to the
Registration Rights Agreement (and subject to any suspension or blackout
periods provided for therein), this Warrant may also be exercised by
means of a “cashless exercise” in which the Holder shall be entitled to receive
a certificate for the number of Warrant Shares equal to the quotient obtained
by dividing [(A-B) (X)] by (A), where:

 

(A) =
the VWAP (as defined in the Purchase Agreement) on the Trading Day immediately
preceding the date of such election;

 

(B) =
the Exercise Price of this Warrant, as adjusted; and

 

(X) =
the number of Warrant Shares issuable upon exercise of this Warrant in
accordance with the terms of this Warrant by means of a cash exercise rather
than a cashless exercise.

 

2

 

d)            [OPTIONAL
TO EACH PURCHASER] Exercise Limitations.  The Company shall not effect any exercise of
this Warrant, and a  Holder shall not
have the right to exercise any portion of this Warrant, pursuant to Section 2(c) or
otherwise, to the extent that after giving effect to such issuance after
exercise as set forth on the applicable Notice of Exercise, such Holder
(together with such Holder’s Affiliates, and any other person or entity acting
as a group together with such Holder or any of such Holder’s Affiliates), as
set forth on the applicable Notice of Exercise, would beneficially own in
excess of the Beneficial Ownership Limitation (as defined below).  For
purposes of the foregoing sentence, the number of shares of Common Stock
beneficially owned by such Holder and its Affiliates shall include the number
of shares of Common Stock issuable upon exercise of this Warrant with respect
to which such determination is being made, but shall exclude the number of
shares of Common Stock which would be issuable upon (A) exercise of the
remaining, nonexercised portion of this Warrant beneficially owned by such Holder
or any of its Affiliates and (B) exercise or conversion of the unexercised
or nonconverted portion of any other securities of the Company (including,
without limitation, any other Warrants) subject to a limitation on conversion
or exercise analogous to the limitation contained herein beneficially owned by
such Holder or any of its Affiliates.  Except as set forth in the
preceding sentence, for purposes of this Section 2(d), beneficial
ownership shall be calculated in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder, it
being acknowledged by a Holder that the Company is not representing to such
Holder that such calculation is in compliance with Section 13(d) of
the Exchange Act and such Holder is solely responsible for any schedules
required to be filed in accordance therewith.  
To the extent that the limitation contained in this Section 2(d) applies,
the determination of whether this Warrant is exercisable (in relation to other
securities owned by such Holder together with any Affiliates) and of which a
portion of this Warrant is exercisable shall be in the sole discretion of a
Holder, and the submission of a Notice of Exercise shall be deemed to be each
Holder’s determination of whether this Warrant is exercisable (in relation to
other securities owned by such Holder together with any Affiliates) and of
which portion of this Warrant is exercisable, in each case subject to such
aggregate percentage limitation, and the Company shall have no obligation to verify
or confirm the accuracy of such determination.  
In addition, a determination as to any group status as contemplated
above shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder.  For purposes of this Section 2(d), in
determining the number of outstanding shares of Common Stock, a Holder may rely
on the number of outstanding shares of Common Stock as reflected in (x) the
Company’s most recent Form 10-Q or Form 10-K, as the case may be, (y) a
more recent public announcement by the Company or (z) any other notice by
the Company or the Company’s Transfer Agent setting forth the number of shares
of Common Stock outstanding.  Upon the written or oral request of a
Holder, the Company shall within two Trading Days confirm orally and in writing
to such Holder the number of shares of Common Stock then outstanding.  In
any case, the number of outstanding shares of Common Stock shall be determined
after giving effect to the conversion or exercise of securities of the Company,
including this Warrant, by such Holder or its Affiliates since the date as of
which such number of outstanding shares of Common Stock was reported.  The “Beneficial Ownership Limitation”
shall be 4.99% of the number of shares of the 

 

3

 

Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock issuable upon exercise of this Warrant.  The Beneficial Ownership Limitation
provisions of this Section 2(d) may be waived by such Holder, at the
election of such Holder, upon not less than 61 days’ prior notice to the
Company to change the Beneficial Ownership Limitation to 9.99% of the number of
shares of the Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock upon exercise of this Warrant, and the
provisions of this Section 2(d) shall continue to apply.  Upon such a change by a Holder of the
Beneficial Ownership Limitation from such 4.99% limitation to such 9.99%
limitation, the Beneficial Ownership Limitation may not be further waived by
such Holder.  The provisions of this
paragraph shall be construed and implemented in a manner otherwise than in
strict conformity with the terms of this Section 2(d) to correct this
paragraph (or any portion hereof) which may be defective or inconsistent with
the intended Beneficial Ownership Limitation herein contained or to make
changes or supplements necessary or desirable to properly give effect to such
limitation. The limitations contained in this paragraph shall apply to a
successor holder of this Warrant.

 

e)             Mechanics of
Exercise.

 

i.      Authorization
of Warrant Shares.  The Company
covenants that all Warrant Shares which may be issued upon the exercise of the
purchase rights represented by this Warrant will, upon exercise of the purchase
rights represented by this Warrant, be duly authorized, validly issued, fully
paid and nonassessable and free from all taxes, liens and charges created by
the Company in respect of the issue thereof (other than taxes in respect of any
transfer occurring contemporaneously with such issue).

 

ii.     Delivery
of Certificates Upon Exercise.  After
the Effective Date of each Registration Statement covering the Warrant Shares,
Certificates for shares purchased hereunder, to the extent such shares are
covered by such effective Registration Statement, shall be transmitted by the
transfer agent of the Company to the Holder by crediting the account of the
Holder’s prime broker with the Depository Trust Company through its Deposit
Withdrawal Agent Commission (“DWAC”) system if the Company is a
participant in such system, and otherwise by physical delivery to the address
specified by the Holder in the Notice of Exercise within 3 Trading Days from the
date on which all of the following have occurred: the delivery to the Company
of the Notice of Exercise Form, surrender of this Warrant (if required) and
payment of the aggregate Exercise Price and transfer taxes, if any, as set
forth above in Section 2(a) hereof (“Warrant Share Delivery Date”).  This Warrant shall be deemed to have been
exercised on the date the Exercise Price is received by the Company.  The Warrant Shares shall be deemed to have
been issued, and Holder or any other person so designated to be named therein
shall be deemed to have become a holder of record of such shares for all
purposes, as of the date the Warrant has been exercised by payment to the
Company 

 

4

 

of the Exercise Price (or by cashless exercise, if permitted) and all
taxes required to be paid by the Holder, if any, pursuant to Section 2(e)(vii) prior
to the issuance of such shares, have been paid. If the Company fails for any
reason to deliver to the Holder certificates evidencing the Warrant Shares
subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company
shall pay to such Holder, in cash, as liquidated damages and not as a penalty,
for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP
of the Common Stock on the date of the applicable Notice of Exercise), $10 per
Trading Day (increasing to $20 per Trading Day on the fifth Trading Day after
such liquidated damages begin to accrue) for each Trading Day after such
Warrant Share Delivery Date until such certificates are delivered.

 

iii.    Delivery
of New Warrants Upon Exercise.  If
this Warrant shall have been exercised in part, the Company shall, at the
request of a Holder and upon surrender of this Warrant certificate, at the time
of delivery of the certificate or certificates representing Warrant Shares,
deliver to Holder a new Warrant evidencing the rights of Holder to purchase the
unpurchased Warrant Shares called for by this Warrant, which new Warrant shall
in all other respects be identical with this Warrant.

 

iv.    Rescission
Rights.  If the Company fails to
cause its transfer agent to transmit to the Holder a certificate or
certificates representing the Warrant Shares pursuant to this Section 2(e) by
the Warrant Share Delivery Date, then the Holder will have the right to rescind
such exercise which right lapses upon delivery of the Warrant Shares to Holder.

 

v.     Compensation
for Buy-In on Failure to Timely Deliver Certificates Upon Exercise.  In addition to any other rights available to
the Holder, if the Company fails to cause its transfer agent to transmit to the
Holder a certificate or certificates representing the Warrant Shares pursuant
to an exercise on or before the Warrant Share Delivery Date, and if after such
date the Holder is required by its broker to purchase (in an open market
transaction or otherwise) or the Holder’s brokerage firm otherwise purchases,
shares of Common Stock to deliver in satisfaction of a sale by the Holder of
the Warrant Shares which the Holder anticipated receiving upon such exercise (a
“Buy-In”), then the Company, upon presentation of documentation
establishing the loss occasioned by such Buy-in, shall (1) pay in cash to
the Holder the amount by which (x) the Holder’s total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (y) the amount obtained by multiplying (A) the
number of Warrant Shares that the Company was required to deliver to the Holder
in connection with the exercise at issue by (B) the price at which the
sell order giving rise to such purchase obligation was executed, and (2) at the
option of the Holder, either reinstate the portion of the Warrant and
equivalent number of 

 

5

 

Warrant Shares for which such exercise was not honored or deliver to
the Holder the number of shares of Common Stock that would have been issued had
the Company timely complied with its exercise and delivery obligations
hereunder.  For example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to an attempted exercise of shares of Common Stock with an
aggregate sale price giving rise to such purchase obligation of $10,000, under
clause (1) of the immediately preceding sentence the Company shall be
required to pay the Holder $1,000. The Holder shall provide the Company written
notice indicating the amounts payable to the Holder in respect of the Buy-In
and, upon request of the Company, evidence of the amount of such loss.  Nothing herein shall limit a Holder’s right
to pursue any other remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company’s failure to timely deliver
certificates representing shares of Common Stock upon exercise of the Warrant
as required pursuant to the terms hereof.

 

vi.    No
Fractional Shares or Scrip.  No
fractional shares or scrip representing fractional shares shall be issued upon
the exercise of this Warrant.  As to any
fraction of a share which Holder would otherwise be entitled to purchase upon
such exercise, the Company shall at its election, either pay a cash adjustment
in respect of such final fraction in an amount equal to such fraction
multiplied by the Exercise Price or round up to the next whole share.

 

vii.   Charges,
Taxes and Expenses.  Issuance of
certificates for Warrant Shares shall be made without charge to the Holder for
any issue or transfer tax or other incidental expense in respect of the
issuance of such certificate, all of which taxes and expenses shall be paid by
the Company, and such certificates shall be issued in the name of the Holder or
in such name or names as may be directed by the Holder; provided, however,
that in the event certificates for Warrant Shares are to be issued in a name
other than the name of the Holder, this Warrant when surrendered for exercise
shall be accompanied by the Assignment Form attached hereto duly executed
by the Holder; and the Company may require, as a condition thereto, the payment
of a sum sufficient to reimburse it for any transfer tax incidental thereto.

 

viii.  Closing
of Books.  The Company will not close
its stockholder books or records in any manner which prevents the timely
exercise of this Warrant, pursuant to the terms hereof.

 

Section 3.                                            Certain Adjustments.

 

a)                                      Stock
Dividends and Splits. If the Company, at any time while this Warrant is
outstanding: (A) pays a stock dividend or otherwise make a distribution or

 

6

 

distributions on shares of its Common Stock or any other equity or
equity equivalent securities payable in shares of Common Stock (which, for
avoidance of doubt, shall not include any shares of Common Stock issued by the
Company upon exercise of this Warrant), (B) subdivides outstanding shares
of Common Stock into a larger number of shares, (C) combines (including by
way of reverse stock split) outstanding shares of Common Stock into a smaller
number of shares, or (D) issues by reclassification of shares of the
Common Stock any shares of capital stock of the Company, then in each case the
Exercise Price shall be multiplied by a fraction of which the numerator shall
be the number of shares of Common Stock (excluding treasury shares, if any)
outstanding immediately before such event and of which the denominator shall be
the number of shares of Common Stock outstanding immediately after such event
and the number of shares issuable upon exercise of this Warrant shall be
proportionately adjusted.  Any adjustment
made pursuant to this Section 3(a) shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.

 

b)            Subsequent Equity
Sales. If the Company or any Subsidiary thereof, as applicable, at any time
while this Warrant is outstanding, shall sell or grant any option to purchase,
or sell or grant any right to reprice its securities, or otherwise dispose of
or issue (or announce any offer, sale, grant or any option to purchase or other
disposition) any Common Stock or Common Stock Equivalents entitling any Person
to acquire shares of Common Stock, at an effective price per share less than
the then Exercise Price (such lower price, the “Base Share Price” and
such issuances collectively, a “Dilutive Issuance”) (if the holder of
the Common Stock or Common Stock Equivalents so issued shall at any time,
whether by operation of purchase price adjustments, reset provisions, floating
conversion, exercise or exchange prices or otherwise, or due to warrants,
options or rights per share which are issued in connection with such issuance,
be entitled to receive shares of Common Stock at an effective price per share
which is less than the Exercise Price, such issuance shall be deemed to have
occurred for less than the Exercise Price on such date of the Dilutive
Issuance), then (i) the Exercise Price shall be reduced by multiplying the
Exercise Price by a fraction, the numerator of which is the number of shares of
Common Stock issued and outstanding immediately prior to the Dilutive Issuance
plus the number of shares of Common Stock which the aggregate offering price
for such Dilutive Issuance would purchase at the then Exercise Price, and the
denominator of which shall be the sum of the number of shares of Common Stock
issued and outstanding immediately prior to the Dilutive Issuance plus the
number of shares of Common Stock so issued or issuable in connection with the
Dilutive Issuance, and (ii) the number of Warrant Shares issuable
hereunder shall be increased such that the aggregate Exercise Price payable
hereunder, after taking into account the decrease in the Exercise Price, shall
be equal to the aggregate Exercise Price prior to such adjustment.  Such adjustment shall be made whenever such
Common Stock or Common Stock Equivalents are issued.  Notwithstanding the foregoing, no adjustments
shall be made, paid or issued under this Section 3(b) in respect of
an Exempt Issuance (as defined in the Purchase Agreement).  The Company shall notify the Holder in
writing, no later than two Trading Days following the issuance of any Common
Stock or Common Stock Equivalents subject to this Section 3(b), indicating
therein the applicable issuance price, or applicable 

 

7

 

reset price, exchange price, conversion price and other pricing terms
(such notice the “Dilutive Issuance Notice”).  For purposes of clarification, whether or not
the Company provides a Dilutive Issuance Notice pursuant to this Section 3(b),
upon the occurrence of any Dilutive Issuance, after the date of such Dilutive
Issuance the Holder is entitled to receive a number of Warrant Shares based
upon the Base Share Price regardless of whether the Holder accurately refers to
the Base Share Price in the Notice of Exercise.

 

c)             Subsequent
Rights Offerings.  If the Company, at
any time while the Warrant is outstanding, shall issue rights, options or
warrants to all holders of Common Stock (and not to Holders) entitling them to
subscribe for or purchase shares of Common Stock at a price per share less than
the VWAP at the record date mentioned below, then the Exercise Price shall be
multiplied by a fraction, of which the denominator shall be the number of
shares of the Common Stock outstanding on the date of issuance of such rights
or warrants plus the number of additional shares of Common Stock offered for
subscription or purchase, and of which the numerator shall be the number of
shares of the Common Stock outstanding on the date of issuance of such rights
or warrants plus the number of shares which the aggregate offering price of the
total number of shares so offered (assuming receipt by the Company in full of
all consideration payable upon exercise of such rights, options or warrants)
would purchase at such VWAP.  Such
adjustment shall be made whenever such rights or warrants are issued, and shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such rights, options or warrants.

 

d)            Pro Rata
Distributions.  If the Company, at
any time prior to the Termination Date, shall distribute to all holders of
Common Stock (and not to Holders of the Warrants) evidences of its indebtedness
or assets (including cash and cash dividends) or rights or warrants to
subscribe for or purchase any security other than the Common Stock (which shall
be subject to Section 3(b)), then in each such case the Exercise Price
shall be adjusted by multiplying the Exercise Price in effect immediately prior
to the record date fixed for determination of stockholders entitled to receive
such distribution by a fraction of which the denominator shall be the VWAP
determined as of the record date mentioned above, and of which the numerator
shall be such VWAP on such record date less the then per share fair market
value at such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share of the Common
Stock as determined by the Board of Directors in good faith.  In either case the adjustments shall be
described in a statement provided to the Holder of the portion of assets or
evidences of indebtedness so distributed or such subscription rights applicable
to one share of Common Stock.  Such
adjustment shall be made whenever any such distribution is made and shall
become effective immediately after the record date mentioned above.

 

e)             Fundamental
Transaction. If, at any time while this Warrant is outstanding, (A) the
Company effects any merger or consolidation of the Company with or into another
Person, (B) the Company effects any sale of all or substantially all of its
assets in one or a series of related transactions, (C) any tender offer or
exchange offer (whether by the Company or another Person) is completed pursuant
to which holders of Common Stock are permitted to tender or exchange their
shares for other securities, cash 

 

8

 

or property, or (D) the Company effects any reclassification of
the Common Stock or any compulsory share exchange pursuant to which the Common
Stock is effectively converted into or exchanged for other securities, cash or
property (each “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive,
for each Warrant Share that would have been issuable upon such exercise
immediately prior to the occurrence of such Fundamental Transaction, the number of shares of Common Stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and any additional consideration (the “Alternate Consideration”) receivable as a result of such merger, consolidation
or disposition of assets by a Holder of the number of shares of Common Stock
for which this Warrant is exercisable immediately prior to such Fundamental
Transaction. For purposes of any such exercise, the determination of the
Exercise Price shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration issuable in
respect of one share of Common Stock in such Fundamental Transaction, and the
Company shall apportion the Exercise Price among the Alternate Consideration in
a reasonable manner reflecting the relative value of any different components
of the Alternate Consideration.  If
holders of Common Stock are given any choice as to the securities, cash or
property to be received in a Fundamental Transaction, then the Holder shall be
given the same choice as to the Alternate Consideration it receives upon any
exercise of this Warrant following such Fundamental Transaction.  To the extent necessary to effectuate the
foregoing provisions, any successor to the Company or surviving entity in such
Fundamental Transaction shall issue to the Holder a new warrant consistent with
the foregoing provisions and evidencing the Holder’s right to convert such
warrant into Alternate Consideration. The terms of any agreement pursuant to
which a Fundamental Transaction is effected shall include terms requiring any
such successor or surviving entity to comply with the provisions of this Section 3(e) and
insuring that this Warrant (or any such replacement security) will be similarly
adjusted upon any subsequent transaction analogous to a Fundamental Transaction. Notwithstanding anything to the contrary, in
the event of a Fundamental Transaction that is (1) an all cash transaction,
(2) a “Rule 13e-3 transaction” as defined in Rule 13e-3 under
the Securities Exchange Act of 1934, as amended, or (3) a Fundamental
Transaction involving a person or entity not traded on a national securities
exchange, the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq
Capital Market, the Company or any successor entity shall pay at the Holder’s
option, exercisable at any time concurrently with or within 30 days after the
consummation of the Fundamental Transaction, an amount of cash equal to the
value of this Warrant as determined in accordance with the Black-Scholes option
pricing formula using an expected volatility equal to the 100 day historical
price volatility obtained from the HVT function on Bloomberg L.P. as of the
trading day immediately prior to the public announcement of the Fundamental
Transaction.

 

f)             Calculations.
All calculations under this Section 3 shall be made to the nearest cent or
the nearest 1/100th of a share, as the case may be. For purposes of this Section 3,
the number of shares of Common Stock deemed to be issued and outstanding as of
a given date shall be the sum of the number of shares of Common Stock
(excluding treasury shares, if any) issued and outstanding.

 

9

 

g)            Voluntary
Adjustment By Company. The Company may at any time during the term of this
Warrant reduce the then current Exercise Price to any amount and for any period
of time deemed appropriate by the Board of Directors of the Company.

 

h)            Notice to Holder.

 

i.      Adjustment
to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any
provision of this Section 3, the Company shall promptly mail to the Holder
a notice setting forth the Exercise Price after such adjustment and setting
forth a brief statement of the facts requiring such adjustment. If the Company
issues a variable rate security, despite the prohibition thereon in the
Purchase Agreement, the Company shall be deemed to have issued Common Stock or
Common Stock Equivalents at the lowest possible conversion or exercise price at
which such securities may be converted or exercised in the case of a Variable
Rate Transaction (as defined in the Purchase Agreement).

 

ii.     Notice
to Allow Exercise by Holder. If (A) the Company shall declare a dividend
(or any other distribution in whatever form) on the Common Stock; (B) the
Company shall declare a special nonrecurring cash dividend on or a redemption
of the Common Stock; (C) the Company shall authorize the granting to all
holders of the Common Stock rights or warrants to subscribe for or purchase any
shares of capital stock of any class or of any rights; (D) the approval of
any stockholders of the Company shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially all of the
assets of the Company, of any compulsory share exchange whereby the Common
Stock is converted into other securities, cash or property; (E) the
Company shall authorize the voluntary or involuntary dissolution, liquidation
or winding up of the affairs of the Company; then, in each case, the Company
shall cause to be mailed to the Holder at its last address as it shall appear
upon the Warrant Register of the Company, at least 20 calendar days prior to
the applicable record or effective date hereinafter specified, a notice stating
(x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not
to be taken, the date as of which the holders of the Common Stock of record to
be entitled to such dividend, distributions, redemption, rights or warrants are
to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected to become
effective or close, and the date as of which it is expected that holders of the
Common Stock of record shall be entitled to exchange their shares of the Common
Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share exchange;
provided that the failure to mail such notice or any defect therein or in the
mailing thereof shall not affect the validity of the corporate action required
to be specified in such notice.

 

10

 

The Holder is entitled to exercise this Warrant during
the 20-day period commencing on the date of such notice to the effective date
of the event triggering such notice.

 

Section 4.                                            Transfer of Warrant.

 

a)                                      Transferability.  Subject to compliance with any applicable
securities laws and the conditions set forth in Section 4(d) hereof
and to the provisions of Section 4.1 of the Purchase Agreement, this
Warrant and all rights hereunder (including, without limitation, any
registration rights) are transferable, in whole or in part, upon surrender of
this Warrant at the principal office of the Company or its designated agent,
together with a written assignment of this Warrant substantially in the form
attached hereto duly executed by the Holder or its agent or attorney and funds
sufficient to pay any transfer taxes payable upon the making of such
transfer.  Upon such surrender and, if
required, such payment, the Company shall execute and deliver a new Warrant or
Warrants in the name of the assignee or assignees and in the denomination or
denominations specified in such instrument of assignment, and shall issue to
the assignor a new Warrant evidencing the portion of this Warrant not so
assigned, and this Warrant shall promptly be cancelled.  A Warrant, if properly assigned, may be
exercised by a new holder for the purchase of Warrant Shares without having a
new Warrant issued.

 

b)                                     New
Warrants. This Warrant may be divided or combined with other Warrants upon
presentation hereof at the aforesaid office of the Company, together with a
written notice specifying the names and denominations in which new Warrants are
to be issued, signed by the Holder or its agent or attorney.  Subject to compliance with Section 4(a),
as to any transfer which may be involved in such division or combination, the
Company shall execute and deliver a new Warrant or Warrants in exchange for the
Warrant or Warrants to be divided or combined in accordance with such notice.

 

c)                                      Warrant
Register. The Company shall register this Warrant, upon records to be
maintained by the Company for that purpose (the “Warrant Register”), in
the name of the record Holder hereof from time to time.  The Company may deem and treat the registered
Holder of this Warrant as the absolute owner hereof for the purpose of any
exercise hereof or any distribution to the Holder, and for all other purposes,
absent actual notice to the contrary.

 

d)                                     Transfer
Restrictions. If, at the time of the surrender of this Warrant in
connection with any transfer of this Warrant, the transfer of this Warrant
shall not be registered pursuant to an effective registration statement under
the Securities Act and under applicable state securities or blue sky laws, the
Company may require, as a condition of allowing such transfer, that (i) the
Holder or transferee of this Warrant, as the case may be, furnish to the
Company a written opinion of counsel (which opinion shall be in form, substance
and scope customary for opinions of counsel in comparable transactions and
which shall be reasonably satisfactory to the Company’s counsel) to the effect
that such transfer may be made without registration under the Securities Act
and under applicable state securities or blue sky laws, and (ii) the
Holder or transferee execute and deliver to the Company an investment letter in
form and substance

 

11

 

acceptable to the Company, and (iii) the transferee be an “accredited
investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8) promulgated
under the Securities Act or a “qualified institutional buyer” as defined in Rule 144A(a) promulgated
under the Securities Act.

 

Section 5.               Miscellaneous.

 

a)             No Rights as Shareholder
Until Exercise.  This Warrant does
not entitle the Holder to any voting rights or other rights as a shareholder of
the Company prior to the exercise hereof as set forth in Section 2(e)(ii).

 

b)            Loss, Theft,
Destruction or Mutilation of Warrant. The Company covenants that upon
receipt by the Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant or any stock certificate
relating to the Warrant Shares, and in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to it (which, in the case of the
Warrant, shall not include the posting of any bond), and upon surrender and
cancellation of such Warrant or stock certificate, if mutilated, the Company
will make and deliver a new Warrant or stock certificate of like tenor and
dated as of such cancellation, in lieu of such Warrant or stock certificate.

 

c)             Saturdays,
Sundays, Holidays, etc.  If the last
or appointed day for the taking of any action or the expiration of any right
required or granted herein shall not be a Business Day, then such action may be
taken or such right may be exercised on the next succeeding Business Day.

 

d)            Authorized Shares.

 

The
Company covenants that during the period the Warrant is outstanding, it will
reserve from its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of the Warrant Shares upon the exercise of
any purchase rights under this Warrant. 
The Company further covenants that its issuance of this Warrant shall
constitute full authority to its officers who are charged with the duty of
executing stock certificates to execute and issue the necessary certificates
for the Warrant Shares upon the exercise of the purchase rights under this
Warrant.  The Company will take all such
reasonable action as may be necessary to assure that such Warrant Shares may be
issued as provided herein without violation of any applicable law or
regulation, or of any requirements of the Trading Market upon which the Common
Stock may be listed.

 

Except
and to the extent as waived or consented to by the Holder, the Company shall
not by any action, including, without limitation, amending its certificate of
incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of
this Warrant, but will at all times in good faith assist in the carrying

 

12

 

out of all such
terms and in the taking of all such actions as may be necessary or appropriate
to protect the rights of Holder as set forth in this Warrant against
impairment.  Without limiting the
generality of the foregoing, the Company will (a) not increase the par
value of any Warrant Shares above the amount payable therefor upon such
exercise immediately prior to such increase in par value, (b) take all
such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable Warrant Shares upon the
exercise of this Warrant, and (c) use commercially reasonable efforts to
obtain all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction thereof as may be necessary to enable the
Company to perform its obligations under this Warrant.

 

Before
taking any action which would result in an adjustment in the number of Warrant
Shares for which this Warrant is exercisable or in the Exercise Price, the
Company shall obtain all such authorizations or exemptions thereof, or consents
thereto, as may be necessary from any public regulatory body or bodies having
jurisdiction thereof.

 

e)             Jurisdiction.
All questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be determined in accordance with the
provisions of the Purchase Agreement.

 

f)             Restrictions.  The Holder acknowledges that the Warrant
Shares acquired upon the exercise of this Warrant, if not registered, will have
restrictions upon resale imposed by state and federal securities laws.

 

g)            Nonwaiver and
Expenses.  No course of dealing or
any delay or failure to exercise any right hereunder on the part of Holder
shall operate as a waiver of such right or otherwise prejudice Holder’s rights,
powers or remedies, notwithstanding the fact that all rights hereunder
terminate on the Termination Date.  If
either party willfully and knowingly fails to comply with any provision of this
Warrant, which results in any material damages to the other party, such party
shall pay to the other party such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable attorneys’ fees,
including those of appellate proceedings, incurred by the other party in
collecting any amounts due pursuant hereto or in otherwise enforcing any of its
rights, powers or remedies hereunder.

 

h)            Notices.  Any notice, request or other document
required or permitted to be given or delivered to the Holder by the Company
shall be delivered in accordance with the notice provisions of the Purchase
Agreement.

 

i)              Limitation of
Liability.  No provision hereof, in
the absence of any affirmative action by Holder to exercise this Warrant to
purchase Warrant Shares, and no enumeration herein of the rights or privileges
of Holder, shall give rise to any liability of Holder for the purchase price of
any Common Stock or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.

 

13

 

j)              Remedies.  Holder, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Warrant.  The Company agrees that monetary damages
would not be adequate compensation for any loss incurred by reason of a breach
by it of the provisions of this Warrant and hereby agrees to waive and not to assert
the defense in any action for specific performance that a remedy at law would
be adequate.

 

k)             Successors and
Assigns.  Subject to applicable
securities laws, this Warrant and the rights and obligations evidenced hereby
shall inure to the benefit of and be binding upon the successors of the Company
and the successors and permitted assigns of Holder.  The provisions of this Warrant are intended
to be for the benefit of all Holders from time to time of this Warrant and
shall be enforceable by any such Holder or holder of Warrant Shares.

 

l)              Amendment.  This Warrant may be modified or amended or
the provisions hereof waived with the written consent of the Company and the
Holder.

 

m)            Severability.  Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Warrant.

 

n)            Headings.  The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.

 

********************

 

14

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized as of the date first above indicated.

 

 

	
   

  	
  LPATH, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

15

 

NOTICE OF EXERCISE

 

TO:         LPATH, INC.

 

(1)   The undersigned hereby elects to purchase
                
Warrant Shares of the Company pursuant to the terms of the attached Warrant
(only if exercised in full), and tenders herewith payment of the exercise price
in full, together with all applicable transfer taxes, if any.

 

(2)   Payment shall take the form of (check
applicable box):

 

[  ] in lawful money of the United States; or

 

[ ] the
cancellation of such number of Warrant Shares as is necessary, in accordance with
the formula set forth in subsection 2(c), to exercise this Warrant with respect
to the maximum number of Warrant Shares purchasable pursuant to the cashless
exercise procedure set forth in subsection 2(c).

 

(3)   Please issue a certificate or certificates
representing said Warrant Shares in the name of the undersigned or in such
other name as is specified below:

 

	
   

  	
   

  	
   

  

 

The Warrant Shares shall
be delivered to the following DWAC Account Number or by physical delivery of a
certificate to:

 

	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

(4)   Accredited Investor.  The undersigned is an “accredited investor”
as defined in Regulation D promulgated under the Securities Act of 1933, as
amended.

 

[SIGNATURE OF HOLDER]

 

 

	
  Name of
  Investing Entity:

  	
   

  
	
  Signature
  of Authorized Signatory of Investing Entity:

  	
   

  
	
  Name of
  Authorized Signatory:

  	
   

  
	
  Title of
  Authorized Signatory:

  	
   

  
	
  Date:

  	
   

  
						

 

 

ASSIGNMENT FORM

 

(To assign the foregoing warrant, execute

this form and supply required information. 

Do not use this form to exercise the warrant.)

 

FOR VALUE RECEIVED, [        ]
all of or
[              ]
shares of the foregoing Warrant and all rights evidenced thereby are hereby
assigned to

 

	
   

  	
   whose address is

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
                                  

  	
  .

  

 

 

 

	
   

  	
  Dated: 

  	
   

  	
  ,

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Holder’s Signature:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Holder’s Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
									

 

	
  Signature Guaranteed:

  	
   

  	
   

  

 

NOTE:  The signature to this Assignment Form must
correspond with the name as it appears on the face of the Warrant, without
alteration or enlargement or any change whatsoever, and must be guaranteed by a
bank or trust company.  Officers of
corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.

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