Document:

exhibit41

Exhibit 4.1         THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP      OF      ARC PROPERTIES OPERATING PARTNERSHIP, L.P.   (a Delaware limited partnership)     

 

   i      TABLE OF CONTENTS   Page   ARTICLE I DEFINED TERMS ......................................................................................................2   ARTICLE II FORMATION OF PARTNERSHIP ........................................................................23   2.01 Formation of the Partnership .................................................................................23   2.02 Name ......................................................................................................................23   2.03 Registered Office and Agent; Principal Office ......................................................23   2.04 Term and Dissolution .............................................................................................23   2.05 Filing of Certificate and Perfection of Limited Partnership ..................................24   2.06 Certificates Describing Partnership Units ..............................................................25   ARTICLE III BUSINESS OF THE PARTNERSHIP ...................................................................25   ARTICLE IV CAPITAL CONTRIBUTIONS AND ACCOUNTS ..............................................26   4.01 Capital Contributions .............................................................................................26   4.02 Additional Capital Contributions and Issuances of Additional Partnership   Units .......................................................................................................................26   4.03 Additional Funding ................................................................................................30   4.04 Capital Accounts ....................................................................................................30   4.05 Percentage Interests ...............................................................................................30   4.06 No Interest on Contributions ..................................................................................30   4.07 Return of Capital Contributions .............................................................................30   4.08 No Third-Party Beneficiary ...................................................................................30   ARTICLE V NET INCOME AND NET LOSS; DISTRIBUTIONS ............................................31   5.01 Allocations .............................................................................................................31   5.02 Distribution of Cash ...............................................................................................38   5.03 REIT Distribution Requirements ...........................................................................41   5.04 No Right to Distributions in Kind ..........................................................................41   5.05 Limitations on Distributions ..................................................................................41   5.06 Distributions Upon Liquidation .............................................................................41   5.07 Substantial Economic Effect  / Savings Clause .....................................................42   ARTICLE VI RIGHTS, OBLIGATIONS AND POWERS OF THE GENERAL PARTNER ....43   6.01 Management of the Partnership .............................................................................43   6.02 Delegation of Authority .........................................................................................46   6.03 Indemnification and Exculpation of Indemnitees ..................................................46   6.04 Liability of the General Partner .............................................................................47   6.05 Partnership Obligations ..........................................................................................48   6.06 Outside Activities ...................................................................................................49   6.07 Employment or Retention of Affiliates..................................................................49   6.08 General Partner Activities ......................................................................................50   6.09 Title to Partnership Assets .....................................................................................50   6.10 Redemption of General Partner’s Partnership Units ..............................................50     

 

   ii      ARTICLE VII CHANGES IN GENERAL PARTNER ................................................................50   7.01 Transfer of the General Partner’s Partnership Interest ..........................................50   7.02 Merger of General Partner .....................................................................................51   7.03 Admission of a Substitute or Additional General Partner .....................................52   7.04 Effect of Bankruptcy, Withdrawal, Death or Dissolution of General   Partner ....................................................................................................................53   7.05 Removal of General Partner ...................................................................................53   ARTICLE VIII RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS ....................55   8.01 Management of the Partnership .............................................................................55   8.02 Power of Attorney ..................................................................................................55   8.03 Limitation on Liability of Limited Partners ...........................................................55   8.04 OP Unit Redemption Right ....................................................................................55   8.05 Registration ............................................................................................................58   ARTICLE IX TRANSFERS OF PARTNERSHIP INTERESTS ..................................................62   9.01 Purchase for Investment .........................................................................................62   9.02 Restrictions on Transfer of Partnership Units ........................................................63   9.03 Admission of Substitute Limited Partner ...............................................................64   9.04 Rights of Assignees of Partnership Units ..............................................................65   9.05 Effect of Bankruptcy, Death, Incompetence or Termination of a Limited   Partner ....................................................................................................................65   9.06 Joint Ownership of Partnership Units ....................................................................66   ARTICLE X BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS .............................66   10.01 Books and Records ................................................................................................66   10.02 Custody of Partnership Funds; Bank Accounts .....................................................66   10.03 Fiscal and Taxable Year .........................................................................................67   10.04 Annual Tax Information and Report ......................................................................67   10.05 Tax Matters Partner; Tax Elections; Special Basis Adjustments ...........................67   10.06 Reports to Limited Partners ...................................................................................68   ARTICLE XI AMENDMENT OF AGREEMENT; MERGER ....................................................68   11.01 Amendment of Agreement .....................................................................................68   11.02 Merger of Partnership ............................................................................................69   ARTICLE XII CLASS B UNITS ..................................................................................................69   12.01 Designation and Number .......................................................................................69   12.02 Special Provisions ..................................................................................................70   12.03 Voting ....................................................................................................................70   12.04 Conversion of Class B Units ..................................................................................71   12.05 Profits Interests ......................................................................................................72   ARTICLE XIII LTIP UNITS .........................................................................................................74   13.01 LTIP Units .............................................................................................................74   13.02 Conversion of LTIP Units ......................................................................................79     

 

   iii      ARTICLE XIV SERIES C PREFERRED UNITS ........................................................................81   14.01 Number of Preferred Units and Designation .........................................................81   14.02 Ranking ..................................................................................................................82   14.03 Distributions ...........................................................................................................82   14.04 Conversion .............................................................................................................82   14.05 Redemption ............................................................................................................82   14.06 Voting ....................................................................................................................82   14.07 Transfers ................................................................................................................83   14.08 Miscellaneous ........................................................................................................83   ARTICLE XV SERIES D PREFERRED UNITS .........................................................................83   15.01 Number of Preferred Units and Designation .........................................................83   15.02 Ranking ..................................................................................................................83   15.03 Distributions ...........................................................................................................83   15.04 Conversion .............................................................................................................84   15.05 Redemption ............................................................................................................84   15.06 Voting ....................................................................................................................84   15.07 Transfers ................................................................................................................85   15.08 Miscellaneous ........................................................................................................85   ARTICLE XVI SERIES E PREFERRED UNITS ........................................................................85   ARTICLE XVII SERIES F PREFERRED UNITS .......................................................................85   17.01 Number of Preferred Units and Designation .........................................................85   17.02 Ranking ..................................................................................................................85   17.03 Distributions ...........................................................................................................86   17.04 Conversion .............................................................................................................86   17.05 Redemption ............................................................................................................86   17.06 Voting ....................................................................................................................87   17.07 Transfers ................................................................................................................87   17.08 Miscellaneous ........................................................................................................87   ARTICLE XVIII GENERAL PROVISIONS ................................................................................88   18.01 Notices ...................................................................................................................88   18.02 Survival of Rights ..................................................................................................88   18.03 Additional Documents ...........................................................................................88   18.04 Severability ............................................................................................................88   18.05 Entire Agreement ...................................................................................................88   18.06 Pronouns and Plurals..............................................................................................88   18.07 Headings ................................................................................................................89   18.08 Counterparts ...........................................................................................................89   18.09 Governing Law ......................................................................................................89   EXHIBITS   EXHIBIT A — Partners, Capital Contributions and Percentage Interests   EXHIBIT B — Notice of Exercise of OP Unit Redemption Right     

 

   iv      EXHIBIT C-1 — Certification of Non-Foreign Status (For Redeeming Limited Partners That   Are Entities)   EXHIBIT C-2 — Certification of Non-Foreign Status (For Redeeming Limited Partners That   Are Individuals)   EXHIBIT D — Notice of Election by Partner to Convert LTIP Units into OP Units   EXHIBIT E — Notice of Election by Partnership to Force Conversion of LTIP Units into OP   Units        

 

         THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP   OF   ARC PROPERTIES OPERATING PARTNERSHIP, L.P.      RECITALS   THIS THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED   PARTNERSHIP (this “Agreement”) of ARC PROPERTIES OPERATING PARTNERSHIP,   L.P. (the “Partnership”), effective as of January 3, 2014, is entered into among American   Realty Capital Properties, Inc., a Maryland corporation (in its capacity as general partner of the   Partnership, together with its successors and permitted assigns that are admitted to the   Partnership as a general partner of the Partnership in accordance with the terms hereof, the   “General Partner”), the Limited Partners listed on Exhibit A and any other limited partner or   general partner that is admitted from time to time to the Partnership and listed on Exhibit A   attached hereto, on February 26, 2014.   WHEREAS, the General Partner formed the Partnership as a limited partnership on   January 13, 2011 pursuant to the Revised Uniform Limited Partnership Act of the State of   Delaware and filed a Certificate of Limited Partnership of the Partnership with the Secretary of   State of the State of Delaware.   WHEREAS, the General Partner and AR Capital, LLC (formerly known as American   Realty Capital II, LLC), a Delaware limited liability company (the “Initial Limited Partner”)   entered into the Agreement of Limited Partnership on January 13, 2011 (the “Original   Agreement”).   WHEREAS, the General Partner, the Initial Limited Partner and ARC Real Estate   Partners, LLC, a Delaware limited liability company, entered into the Amended and Restated   Agreement of Limited Partnership, dated as of September 6, 2011, as amended by that certain   First Amendment to the Amended and Restated Agreement of Limited Partnership, dated as of   May 11, 2012, as further amended by that certain Second Amendment to the Amended and   Restated Agreement of Limited Partnership, dated as of May 31, 2012, as further amended by   that certain Third Amendment to the Amended and Restated Agreement of Limited Partnership,   dated as of July 24, 2012, and as further amended by that certain Fourth Amendment to the   Amended and Restated Agreement of Limited Partnership, dated as of December 28, 2012 (as   amended, the “Amended Agreement”).   WHEREAS, the Second Amended and Restated Agreement of Limited Partnership was   entered into, dated as of February 28, 2013, as amended by that certain First Amendment to the   Second Amended and Restated Agreement of Limited Partnership, dated as of October 14, 2013,   and that certain Second Amendment to the Second Amended and Restated Agreement of Limited   Partnership, made as of December 31, 2013 (as amended, the “Second Amended Agreement”).   WHEREAS, the General Partner desires to amend and restate the Second Amended   Agreement in its entirety with this Agreement.     

 

   2      AGREEMENT   NOW, THEREFORE, in consideration of the foregoing, of mutual covenants between the   parties hereto, and of other good and valuable consideration, the receipt and sufficiency of which   are hereby acknowledged, the Amended Agreement is hereby amended, restated, superseded and   replaced in its entirety and the parties hereto agree as follows:   ARTICLE I   DEFINED TERMS   The following defined terms used in this Agreement shall have the meanings specified   below:   “Act” means the Delaware Revised Uniform Limited Partnership Act, as it may be   amended from time to time.   “Additional Funds” has the meaning set forth in Section 4.03.   “Additional Securities” has the meaning set forth in Section 4.02(a)(ii).   “Adjusted Capital Account Deficit” means, with respect to any Partner, the negative   balance, if any, in such Partner’s Capital Account as of the end of any relevant fiscal year,   determined after giving effect to the following adjustments:   (a) credit to such Capital Account any portion of such negative balance which   such Partner (i) is treated as obligated to restore to the Partnership pursuant to the provisions of   Section 1.704-1(b)(2)(ii)(c) of the Regulations, or (ii) is deemed to be obligated to restore to the   Partnership pursuant to the penultimate sentences of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of   the Regulations; and   (b) debit to such Capital Account the items described in Sections   1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Regulations.   “Adjustment Events” means the following events: (a) the Partnership makes a   distribution on all outstanding OP Units in Partnership Units, (b) the Partnership subdivides the   outstanding OP Units into a greater number of units or combines the outstanding OP Units into a   smaller number of units, or (c) the Partnership issues any Partnership Units in exchange for its   outstanding OP Units by way of a reclassification or recapitalization of its OP Units. For the   avoidance of doubt, the following events shall not be Adjustment Events: (x) the issuance of   Partnership Units in a financing, reorganization, acquisition or other similar business transaction,   (y) the issuance of Partnership Units pursuant to any employee benefit or compensation plan or   distribution reinvestment plan, or (z) the issuance of any Partnership Units to the General Partner   in respect of a capital contribution to the Partnership of proceeds from the sale of securities by   the General Partner.   “Administrative Expenses” means (a) all administrative and operating costs and   expenses incurred by the Partnership, (b) administrative costs and expenses of the General   Partner, including any salaries or other payments to directors, officers or employees of the     

 

   3      General Partner, and any accounting and legal expenses of the General Partner, which expenses,   the Partners have agreed, shall be treated as expenses of the Partnership and not the General   Partner, and (c) to the extent not included in clauses (a) or (b) above, REIT Expenses; provided,   however, that Administrative Expenses shall not include any administrative costs and expenses   incurred by the General Partner that are attributable to Properties or interests in a Subsidiary that   are owned by the General Partner other than through its ownership interest in the Partnership.   “Affected Gain” has the meaning set forth in Section 5.01(f)(ii).   “Affiliate” means, (a) any Person that, directly or indirectly, controls or is controlled by   or is under common control with such Person, (b) any other Person that owns, beneficially,   directly or indirectly, 10% or more of the outstanding capital stock, shares or equity interests of   such Person, or (c) any officer, director, employee, partner, member, manager or trustee of such   Person or any Person controlling, controlled by or under common control with such Person   (excluding trustees and Persons serving in similar capacities who are not otherwise an Affiliate   of such Person).  For the purposes of this definition, “control” (including the correlative   meanings of the terms “controlled by” and “under common control with”), as used with respect   to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause   the direction of the management and policies of such Person, through the ownership of voting   securities or partnership interests or otherwise.   “Aggregate Share Ownership Limit” has the meaning set forth in the Charter.   “Agreed Value” means the fair market value of a Partner’s non-cash Capital   Contribution as of the date of contribution as agreed to by such Partner and the General Partner.    The names and addresses of the Partners, number of Partnership Units issued to each Partner,   and the Agreed Value of non-cash Capital Contributions as of the date of contribution are set   forth on Exhibit A, as it may be amended or restated from time to time.   “Agreement” means this Second Amended and Restated Agreement of Limited   Partnership, as it may be amended, supplemented or restated from time to time.   “ARCA III Limited Partner” means American Realty Capital Advisors III, LLC, its   successors and assigns.    “ARCA IV Limited Partner” means American Realty Capital Advisors IV, LLC, its   successors and assigns.     “AREP Limited Partner” means ARC Real Estate Partners, LLC, its successors and   assigns.   “Available Cash” means, with respect to the applicable period of measurement (i.e., any   period (other than the first period in which this calculation of Available Cash is being made)   beginning on the first day of the fiscal year, quarter or other period commencing immediately   after the last day of the fiscal year, quarter or other applicable period for purposes of the prior   calculation of Available Cash for or with respect to which a distribution has been made, and   ending on the last day of the fiscal year, quarter or other applicable period immediately   preceding the date of the calculation), the excess, if any, as of such date, of     

 

   4      (a) the gross cash receipts of the Partnership for such period from all sources   whatsoever, including the following:   (i) all rents, revenues, income and proceeds derived by the Partnership   from its operations, including distributions received by the Partnership from any   Entity in which the Partnership has an interest;   (ii) all proceeds and revenues received by the Partnership on account   of any sales of any Property or as a refinancing of or payment of principal,   interest, costs, fees, penalties or otherwise on account of any borrowings or loans   made by the Partnership or financings or refinancings of any property of the   Partnership;   (iii) the amount of any insurance proceeds and condemnation awards   received by the Partnership;   (iv) all Capital Contributions and loans received by the Partnership   from its Partners;   (v) all cash amounts previously reserved by the Partnership, to the   extent such amounts are no longer needed for the specific purposes for which   such amounts were reserved; and   (vi) the proceeds of liquidation of the Property in accordance with this   Agreement;   over   (b) the sum of the following:   (i) all operating costs and expenses, including taxes and other   expenses of the Properties and capital expenditures made during such period   (without deduction, however, for any capital expenditures, charges for   Depreciation or other expenses not paid in cash or expenditures from reserves   described in clause (viii) below);   (ii) all costs and expenses expended or paid during such period in   connection with the sale or other disposition, or financing or refinancing, of   Property or the recovery of insurance or condemnation proceeds;   (iii) all fees provided for under this Agreement;   (iv) all debt service, including principal and interest, paid during such   period on all indebtedness (including under any line of credit) of the Partnership;   (v) all capital contributions, advances, reimbursements, loans or   similar payments made to any Person in which the Partnership has an interest;     

 

   5      (vi) all loans made by the Partnership in accordance with the terms of   this Agreement;   (vii) all reimbursements to the General Partner or its Affiliates during   such period; and   (viii) the amount of any new reserve or reserves or increase in reserves   established during such period which the General Partner determines is necessary   or appropriate in its sole and absolute discretion.   Notwithstanding the foregoing, Available Cash shall not include any cash received or reductions   in reserves, or take into account any disbursements made or reserves established, after   commencement of the dissolution and liquidation of the Partnership.   “Average Class B Economic Capital Account Balance” means, with respect to a   Limited Partner owning Class B Units, an amount equal to the quotient of (a) the Class B   Economic Capital Account Balance of such Limited Partner divided by (b) the number of Class   B Units owned by such Limited Partner.   “Average LTIP Economic Capital Account Balance” means, with respect to a Limited   Partner owning LTIP Units, an amount equal to the quotient of (a) the LTIP Economic Capital   Account Balance of such Limited Partner divided by (b) the number of LTIP Units owned by   such Limited Partner.   “Board of Directors” means the Board of Directors of the General Partner.   “Business Day” means any day other than Saturday, Sunday or a day on which state or   federally chartered banking institutions in New York, New York are not required to be open.   “Capital Account” means with respect to any Partner, the Capital Account maintained   for such Partner in accordance with the following provisions:   (a) to each Partner’s Capital Account there shall be credited:   (i) such Partner’s Capital Contributions;   (ii) such Partner’s distributive share of Net Income, Net Property Gain   and any items in the nature of income or gain which are specially allocated to   such Partner pursuant to Sections 5.01(c) and 5.01(d); and   (iii) the amount of any Partnership liabilities assumed by such Partner   or which are secured by any asset distributed to such Partner;   (b) to each Partner’s Capital Account there shall be debited:   (i) the amount of cash and the Gross Asset Value of any property   distributed to such Partner pursuant to any provision of this Agreement;     

 

   6      (ii) such Partner’s distributive share of Net Loss, Net Property Loss   and any items in the nature of expenses or losses which are specially allocated to   such Partner pursuant to Sections 5.01(c), 5.01(d) and 15.05(d); and   (iii) the amount of any liabilities of such Partner assumed by the   Partnership or which are secured by any asset contributed by such Partner to the   Partnership; and   (c) if all or a portion of a Partnership Interest is transferred in accordance with   the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor   to the extent it relates to the transferred Partnership Interest.   The foregoing provisions and the other provisions of this Agreement relating to the maintenance   of Capital Accounts are intended to comply with Sections 1.704-1(b) and 1.704-2 of the   Regulations, and shall be interpreted and applied in a manner consistent with such Regulations.   If the General Partner shall reasonably determine that it is prudent to modify the manner in   which the Capital Accounts, or any debits or credits thereto (including debits or credits relating   to liabilities which are secured by contributed or distributed assets or which are assumed by the   Partnership, the General Partner or any Limited Partner) are computed in order to comply with   such Regulations, the General Partner may make such modification; provided, however, that all   allocations of Partnership income, gain, loss and deduction continue to have “substantial   economic effect” within the meaning of Section 704(b) of the Code and that no Limited Partner   is materially adversely affected by any such modification.   “Capital Account Limitation” has the meaning set forth in Section 13.02(b) hereof.   “Capital Contribution” means the total amount of cash, cash equivalents, and the   Agreed Value of any Property (less any liabilities assumed with respect to such Property) or   other asset contributed or agreed to be contributed, as the context requires, to the Partnership by   each Partner pursuant to the terms of the Agreement.  Any reference to the Capital Contribution   of a Partner shall include the Capital Contribution made by a predecessor holder of the   Partnership Interest of such Partner.   “Cash Amount” means an amount of cash per OP Unit equal to the Value of the REIT   Shares Amount on the date of receipt by the Partnership and the General Partner of a Notice of   Redemption.   “Cash Available for Distribution” means the Available Cash other than Net Sales   Proceeds.   “Certificate” means any instrument or document that is required under the laws of the   State of Delaware, or any other jurisdiction in which the Partnership conducts business, to be   signed and sworn to by the Partners (either by themselves or pursuant to the power-of-attorney   granted to the General Partner in Section 8.02 hereof) and filed for recording in the appropriate   public offices within the State of Delaware or such other jurisdiction to perfect or maintain the   Partnership as a limited partnership, to effect the admission, withdrawal or substitution of any   Partner of the Partnership, or to protect the limited liability of the Limited Partners as limited   partners under the laws of the State of Delaware or such other jurisdiction.     

 

   7      “Change of Control” means, as to the General Partner, the occurrence of any of the   following:   (a) any “person” as such term is used in Section 3(a)(9) of the Exchange Act,   as modified and used in Sections 13(d) and 14(d) thereof except that such term shall not include   (A) the General Partner or any Subsidiaries of the General Partner, (B) any trustee or other   fiduciary holding securities under an employee benefit plan of the General Partner or any   Affiliate of the General Partner, (C) an underwriter temporarily holding securities pursuant to an   offering of such securities, (D) any corporation owned, directly or indirectly, by the stockholders   of the General Partner in substantially the same proportions as their ownership of common shares   of the General Partner, or (E) any person or group as used in Rule 13d-1(b) under the Exchange   Act, is or becomes the Beneficial Owner, as such term is defined in Rule 13d-3 under the   Exchange Act, directly or indirectly, of securities of the General Partner representing at least   35% of the combined voting power or common shares of the General Partner;   (b) during any period of two consecutive years, individuals who at the   beginning of such period constitute the Board of Directors or whose election by the Board of   Directors or nomination for election by the General Partner’s stockholders was approved by a   vote of at least two thirds (2/3) of the Board of Directors then still in office cease for any reason   to constitute at least a majority thereof;   (c) there is consummated a merger or consolidation of the General Partner or   any Subsidiary of the General Partner with any other corporation, other than a merger or   consolidation which would result in the voting securities of the General Partner outstanding   immediately prior thereto continuing to represent (either by remaining outstanding or by being   converted into voting securities of the surviving entity or any parent thereof) in combination with   the ownership of any trustee or other fiduciary holding securities under an employee benefit plan   of the General Partner or any Subsidiary of the General Partner, more than 50% of the combined   voting power and common shares of the General Partner or such surviving entity or any parent   thereof outstanding immediately after such merger or consolidation; or   (d) there is consummated an agreement for the sale or disposition by the   General Partner of all or substantially all of the General Partner’s assets (or any transaction   having a similar effect, including a liquidation) other than a sale or disposition by the General   Partner of all or substantially all of the General Partner’s assets to an entity, more than fifty   percent (50%) of the combined voting power and common shares of which is owned by   stockholders of the General Partner in substantially the same proportions as their ownership of   the common shares of the General Partner immediately prior to such sale.   “Charter” means the charter of the General Partner, as in effect from time to time.   “Class B Conversion Date” has the meaning set forth in Section 15.04(a).   “Class B Economic Capital Account Balances” mean the Capital Account balances of   the Class B Units holders to the extent attributable to their ownership of Class B Units reduced   by any forfeiture allocations in accordance with Section 15.05(d) due to the forfeiture of any   Class B Units.     

 

   8      “Class B Unit” means a Partnership Unit which is designated as a Class B Unit of the   Partnership.   “Code” means the Internal Revenue Code of 1986, as amended, and as hereafter   amended from time to time.  Reference to any particular provision of the Code shall mean that   provision in the Code at the date hereof and any successor provision of the Code.   “Commission” means the U.S. Securities and Exchange Commission.   “Common Units” means any class or series of Partnership Interest that does not have a   priority or preference in the payment of distributions in the distribution of assets upon any   Liquidation, including OP Units, Class B Units and LTIP Units.   “Concurrent LTIP Distribution” has the meaning provided in Section 5.02(a)(ii).   “Concurrent Manager Distribution” has the meaning provided in Section 5.02(a)(ii).   “Constituent Person” has the meaning set forth in Section 15.04(d).   “Contributed Property” means each property, partnership interest, contract right or   other asset, in such form as may be permitted by the Act, contributed or deemed contributed to   the Partnership by any Partner, including any interest in any successor partnership occurring as a   result of a termination of the Partnership pursuant to Section 708 of Code.    “Contribution Agreement” means that certain contribution agreement, dated February   4, 2011, between the Partnership and ARC Real Estate Partners, LLC.   “Conversion Factor” means 1.0, provided, that in the event that the General Partner (a)   declares or pays a dividend on its outstanding REIT Shares in REIT Shares or makes a   distribution to all holders of its outstanding REIT Shares in REIT Shares, (b) subdivides its   outstanding REIT Shares or (c) combines its outstanding REIT Shares into a smaller number of   REIT Shares, the Conversion Factor shall be adjusted by multiplying the Conversion Factor by a   fraction, the numerator of which shall be the number of REIT Shares issued and outstanding on   the record date for such dividend, distribution, subdivision or combination (assuming for such   purposes that such dividend, distribution, subdivision or combination has occurred as of such   time), and the denominator of which shall be the actual number of REIT Shares (determined   without the above assumption) issued and outstanding on such date and, provided further, that in   the event that an entity other than an Affiliate of the General Partner shall become General   Partner pursuant to any merger, consolidation or combination of the General Partner with or into   another entity (the “Successor Entity”), the Conversion Factor shall be adjusted by multiplying   the Conversion Factor by the number of shares of the Successor Entity into which one REIT   Share is converted pursuant to such merger, consolidation or combination, determined as of the   date of such merger, consolidation or combination.  Any adjustment to the Conversion Factor   shall become effective immediately after the effective date of such event retroactive to the record   date, if any, for such event; provided, however, that if the General Partner receives a Notice of   Redemption after the record date, but prior to the effective date of such dividend, distribution,   subdivision or combination, the Conversion Factor shall be determined as if the General Partner     

 

   9      had received the Notice of Redemption immediately prior to the record date for such dividend,   distribution, subdivision or combination.   “Defaulting Limited Partner” means a Limited Partner that has failed to pay any   amount owed to the Partnership under a Partnership Loan within 15 days after demand for   payment thereof is made by the Partnership.   “Depreciation” means, for each fiscal year or other period, an amount equal to the   depreciation, amortization, or other cost recovery deduction allowable for federal income tax   purposes with respect to an asset for such fiscal year or other period, except that (a) with respect   to any asset the Gross Asset Value of which differs from its adjusted tax basis for federal income   tax purposes at the beginning of such fiscal year or other period and which difference is being   eliminated by use of the “remedial method” as defined by Section 1.704-3(d) of the Regulations,   Depreciation for such fiscal year or other period shall be the amount of book basis recovered for   such fiscal year or other period under the rules prescribed by Section 1.704-3(d)(2) of the   Regulations, and (b) with respect to any other asset the Gross Asset Value of which differs from   its adjusted tax basis for federal income tax purposes at the beginning of such fiscal year or other   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 other period bears to such beginning adjusted tax basis;   provided, however, that in the case of clause (b) above, if the adjusted tax basis for federal   income tax purposes of an asset at the beginning of such fiscal year or other period is zero,   Depreciation shall be determined with reference to such beginning Gross Asset Value using any   reasonable method selected by the General Partner.   “Distributable Amount” has the meaning set forth in Section 5.02(d).   “Distribution Triggering Event” means the time at which the Partnership covers the   payment of distributions on OP Units, that correspond with the General Partner’s cash dividends   declared in respect of the REIT Shares, for the six immediately preceding months from the funds   from operations (as defined by the National Association of Real Estate Investment Trusts from   time to time), as determined in good faith for the General Partner, adjusted to exclude   acquisition-related fees and expenses.   “Entity” means any general partnership, limited partnership, corporation, joint venture,   trust, business trust, real estate investment trust, limited liability company, limited liability   partnership, cooperative or association.   “Event of Bankruptcy” as to any Person means (a) the filing of a petition for relief as to   such Person as debtor or bankrupt under the Bankruptcy Code of 1978, as amended, or similar   provision of law of any jurisdiction (except if such petition is contested by such Person and has   been dismissed within 90 days); (b) the insolvency or bankruptcy of such Person as finally   determined by a court proceeding; (c) the filing by such Person of a petition or application to   accomplish the same or for the appointment of a receiver or a trustee for such Person or a   substantial part of his assets; or (d) the commencement of any proceedings relating to such   Person as a debtor under any other reorganization, arrangement, insolvency, adjustment of debt   or liquidation law of any jurisdiction, whether now in existence or hereinafter in effect, either by     

 

   10      such Person or by another, provided, that if such proceeding is commenced by another, such   Person indicates his approval of such proceeding, consents thereto or acquiesces therein, or such   proceeding is contested by such Person and has not been finally dismissed within 90 days.   “Excepted Holder Limit” has the meaning set forth in the Charter.   “Exchange Act” means the Securities Exchange Act of 1934, as amended.   “Forced Conversion” has the meaning set forth in Section 13.02(c) hereof.   “Forced Conversion Notice” has the meaning set forth in Section 13.02(c) hereof.    “General Partner” has the meaning set forth in the first paragraph of this Agreement.   “General Partner Loan” means a loan extended by the General Partner to a Defaulting   Limited Partner in the form of a payment on a Partnership Loan by the General Partner to the   Partnership on behalf of the Defaulting Limited Partner.   “General Partner Interest” means the Partnership Interests held by the General Partner   in its capacity as the general partner of the Partnership, which Partnership Interest is an interest   as a general partner under the Act.  The General Partner Interest may be expressed as a number   of Partnership Units.  A number of OP Units held by the General Partner equal to one-tenth of   one percent (0.1%) of all outstanding Partnership Units shall be deemed to be the General   Partner Interest.  All other Partnership Units owned by the General Partner and any Partnership   Units owned by any Affiliate or Subsidiary of the General Partner shall be considered to   constitute a Limited Partnership Interest.   “Gross Asset Value” means, with respect to any asset of the Partnership, such asset’s   adjusted basis for federal income tax purposes, except as follows:   (a) the initial Gross Asset Value of any asset contributed by a Partner to the   Partnership shall be the gross fair market value of such asset, without reduction for liabilities, as   determined by the contributing Partner and the Partnership on the date of contribution thereof;   (b) if the General Partner determines that an adjustment is necessary or   appropriate to reflect the relative economic interests of the Partners, the Gross Asset Values of   all Partnership assets shall be adjusted in accordance with Sections 1.704-1(b)(2)(iv)(f) and (g)   of the Regulations to equal their respective gross fair market values, without reduction for   liabilities, as reasonably determined by the General Partner, as of the following times:   (i) Capital Contribution (other than a de minimis Capital Contribution)   to the Partnership by a new or existing Partner as consideration for a Partnership   Interest;   (ii) the distribution by the Partnership to a Partner of more than a de   minimis amount of Partnership assets as consideration for the repurchase or   redemption of a Partnership Interest;     

 

   11      (iii) the liquidation of the Partnership within the meaning of Section   1.704-1(b)(2)(ii)(g) of the Regulations; and   (iv) the grant of an interest in the Partnership (other than a de minimis   interest) as consideration for the provision of services to or for the benefit of the   Partnership by an existing Partner acting in a partner capacity, or by a new Partner   acting in a partner capacity or in anticipation of becoming a Partner by such   Partner;   (c) the Gross Asset Values of Partnership assets distributed to any Partner   shall be the gross fair market values of such assets (taking Section 7701(g) of the Code into   account) without reduction for liabilities, as determined by the General Partner as of the date of   distribution; and   (d) the Gross Asset Values of Partnership assets shall be increased (or   decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Sections   734(b) or 743(b) of the Code, but only to the extent that such adjustments are taken into account   in determining Capital Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of the Regulations (as   set forth in Section 5.01(d)(vi)); provided, however, that Gross Asset Values shall not be   adjusted pursuant to this paragraph (d) to the extent that the General Partner determines that an   adjustment pursuant to paragraph (b) above is necessary or appropriate in connection with a   transaction that would otherwise result in an adjustment pursuant to this paragraph (d).   At all times, Gross Asset Values shall be adjusted by any Depreciation taken into account with   respect to the Partnership’s assets for purposes of computing Net Income and Net Loss.    “Indemnified Party” has the meaning set forth in Section 8.05(f).   “Indemnifying Party” has the meaning set forth in Section 8.05(f).   “Indemnitee” means (i) any Person made a party to a proceeding by reason of its status   as (A) the General Partner or (B) a director, manager or member of the General Partner or an   officer or employee of the Partnership or the General Partner, and (ii) such other Persons   (including Affiliates of the General Partner or the Partnership) as the General Partner may   designate from time to time (whether before or after the event giving rise to potential liability), in   its sole and absolute discretion.   “Independent Director” means a director of the General Partner who meets the   NASDAQ requirements for an independent director as set forth from time to time.   “Initial Limited Partner” has the meaning set forth in the preamble.   “Liability Shortfall” has the meaning set forth in Section 5.01(f)(iv).   “Limited Partner” means any Person named as a Limited Partner on Exhibit A attached   hereto, as it may be amended or restated from time to time, and any Person who becomes a   Substitute Limited Partner or any additional Limited Partner, in such Person’s capacity as a   limited partner in the Partnership.     

 

   12      “Limited Partnership Interest” means a Partnership Interest held by a Limited Partner   at any particular time representing a fractional part of the Partnership Interest of all Limited   Partners, and includes any and all benefits to which the holder of such a Limited Partnership   Interest may be entitled as provided in this Agreement and in the Act, together with the   obligations of such Limited Partner to comply with all the provisions of this Agreement and of   the Act.  Limited Partnership Interests may be expressed as a number of OP Units or other   Partnership Units.   “Liquidation” means (a) a dissolution or winding up of the General Partner or the   Partnership, whether voluntary or involuntary, (b) a consolidation or merger of the General   Partner or the Partnership with and into one or more entities which are not affiliates of the   General Partner or the Partnership which results in a Change in Control, or (c) a sale, transfer or   other disposition (other than a deemed disposition pursuant to Section 708(b)(1)(B) of the Code   and the Regulations thereunder) of all or substantially all of the General Partner’s or the   Partnership’s assets or a related series of transactions that, taken together, result in the sale,   transfer or other disposition of all or substantially all of the General Partner’s or the Partnership’s   assets other than to an affiliate of the General Partner or the Partnership.   “LTIP Award” means each or any, as the context requires, LTIP Award issued under the   OPP Agreement or otherwise having the economic rights and entitlements and such other rights   and entitlements, and subject to the vesting, forfeiture and additional restrictions on transfer, as   set forth in the applicable LTIP Award, including any amendments thereto.   “LTIP Conversion Date” has the meaning set forth in Section 13.02(b).   “LTIP Conversion Notice” has the meaning set forth in Section 13.02(b) hereof.   “LTIP Conversion Right” has the meaning set forth in Section 13.02(a) hereof.   “LTIP Economic Capital Account Balances” mean the Capital Account balances of the   LTIP Units holders to the extent attributable to their ownership of LTIP Units reduced by any   forfeiture allocations in accordance with Sections 13.01(c)(ii) and 13.01(e)(iv) due to the   forfeiture of any LTIP Units.   “LTIP Unit” means a Partnership Unit which is designated as an LTIP Unit and which   has the rights, preferences and other privileges designated in Section 5.01(c)(iv) and Article XVI   hereof and elsewhere in this Agreement in respect of holders of LTIP Units. The allocation of   LTIP Units among the Partners shall be set forth on Exhibit A, as the same may be amended   from time to time.   “LTIP Unit Distribution Participation Date” means the date as of which an LTIP Unit   is earned pursuant to the terms of an OPP Agreement.   “LTIP Unitholder” means a Partner that holds LTIP Units.   “Majority in Interest” means the Limited Partners holding more than fifty   percent (50%) of the Percentage Interests of the Limited Partners.     

 

   13      “NASDAQ” means The NASDAQ Stock Market.   “Net Income” or “Net Loss” means, for each fiscal year or other applicable period, an   amount equal to the Partnership’s taxable income or loss for such year or period as determined   for federal income tax purposes by the General Partner, determined in accordance with Section   703(a) of the Code (for this purpose, all items of income, gain, loss or deduction required to be   stated separately pursuant to Section 703(a) of the Code shall be included in taxable income or   loss), adjusted as follows:   (a) by including as an item of gross income any tax-exempt income received   by the Partnership and not otherwise taken into account in computing Net Income or Net Loss;   (b) by treating as a deductible expense any expenditure of the Partnership   described in Section 705(a)(2)(B) of the Code (or which is treated as a Section 705(a)(2)(B)   expenditure pursuant to Section 1.704-1(b)(2)(iv)(i) of the Regulations) and not otherwise taken   into account in computing Net Income or Net Loss, including amounts paid or incurred to   organize the Partnership (unless an election is made pursuant to Section 709(b) of the Code) or to   promote the sale of interests in the Partnership and by treating deductions for any losses incurred   in connection with the sale or exchange of Partnership property disallowed pursuant to Section   267(a)(1) or 707(b) of the Code as expenditures described in Section 705(a)(2)(B) of the Code;   (c) by taking into account Depreciation in lieu of depreciation, depletion,   amortization and other cost recovery deductions taken into account in computing taxable income   or loss;   (d) by computing gain or loss resulting from any disposition of Partnership   property with respect to which gain or loss is recognized for federal income tax purposes by   reference to the Gross Asset Value of such property rather than its adjusted tax basis;   (e) if an adjustment of the Gross Asset Value of any Partnership asset which   requires that the Capital Accounts of the Partnership be adjusted pursuant to Sections 1.704-   1(b)(2)(iv)(e), (f) and (g) of the Regulations, by taking into account the amount of such   adjustment as if such adjustment represented additional Net Income or Net Loss pursuant to   Section 5.01;   (f) by excluding Net Property Gain and Net Property Loss; and   (g) by not taking into account in computing Net Income or Net Loss items   specially allocated to the Partners pursuant to Sections 5.01(c), 5.01(d), 15.05(d) and   13.01(e)(iv).   “Net Investment” means the excess, if any, of the total amount of Capital Contributions   over any proceeds or property used to redeem Partnership Interests.   “Net Property Gain” or “Net Property Loss” means, for each fiscal year or other   applicable period, an amount equal to the Partnership’s net taxable gain or loss for such year or   period from the disposition of Property, including the net capital gain realized in connection with   the actual or hypothetical sale of all or substantially all of the assets of the Partnership, including     

 

   14      but not limited to net capital gain realized in connection with an adjustment of the Gross Asset   Value of any Property which requires that the Capital Accounts of the Partners be adjusted   pursuant to Sections 1.704-1(b)(2)(iv)(e), (f) and (g) of the Regulations.  For these purposes, the   Gross Asset Value of the Property shall reflect the market capitalization of the General Partner   (increased by the amount of any Partnership liabilities).   “Net Sales Proceeds” means the net proceeds from the sale or other disposition of   Property, as determined by the General Partner.    “Nonrecourse Deductions” has the meaning set forth in Sections 1.704-2(b)(1) and   1.704-2(c) of the Regulations.   “Nonrecourse Liabilities” has the meaning set forth in Section 1.704-2(b)(3) of the   Regulations.    “Notice of Redemption” means the Notice of Exercise of OP Unit Redemption Right   substantially in the form attached as Exhibit B hereto.   “Offer” has the meaning set forth in Section 7.02(a) hereof.   “OP Unit” means a Partnership Unit which is designated by the General Partner as an OP   Unit of the Partnership.   “OP Unit Economic Balance” means the quotient of (a) the aggregate Capital Account   balance attributable to the OP Units outstanding, plus the amount of any Partner Minimum Gain   or Partnership Minimum Gain, in either case to the extent attributable to the ownership of OP   Units and computed on a hypothetical basis after taking into account all allocations through the   date on which any allocation is made under Section 5.01(c), divided by (b) the number of OP   Units outstanding.   “OP Unit Redemption Amount” means either the Cash Amount or the REIT Shares   Amount, as selected by the Partnership pursuant to Section 8.04(a) or the General Partner   pursuant to Section 8.04(b) hereof.   “OP Unit Redemption Right” has the meaning provided in Section 8.04(a) hereof.   “OP Unit Transaction” shall mean a transaction to which the Partnership or the General   Partner shall be a party, including, without limitation a merger, consolidation, unit exchange, self   tender offer for all or substantially all OP Units or other business combination or reorganization,   or sale of all or substantially all of the Partnership’s assets (but excluding any transaction which   constitutes an Adjustment Event) in each case as a result of which OP Units shall be exchanged   for or converted into the right, or the holders of such Units shall otherwise be entitled, to receive   cash, securities or other property or any combination thereof.   “OPP Agreement” means any outperformance award agreement adopted by and among the   General Partner, the Partnership and any grantee thereunder, including the American Realty Capital   Properties, Inc. 2013 Advisor Multi-Year Outperformance Agreement.     

 

   15      “Partner” means the General Partner or any Limited Partner, and “Partners” means the   General Partner and the Limited Partners.   “Partner Nonrecourse Debt” has the meaning set forth in Section 1.704-2(b)(4) of the   Regulations.   “Partner Nonrecourse Debt Minimum Gain” has the meaning set forth in Regulations   Section 1.704-2(i).  A Partner’s share of Partner Nonrecourse Debt Minimum Gain shall be   determined in accordance with Regulations Section 1.704-2(i)(5).   “Partner Nonrecourse Deductions” has the meaning set forth in Sections 1.704-2(i)(1)   and (2) of the Regulations, and the amount of Partner Nonrecourse Deductions with respect to a   Partner Nonrecourse Debt for a Partnership taxable year shall be determined in accordance with   the rules of Section 1.704-2(i)(2) of the Regulations.   “Partnership” means ARC Properties Operating Partnership, L.P., a limited partnership   formed under the Act and pursuant to this Agreement, and any successor thereto.   “Partnership Interest” means an ownership interest in the Partnership held by either a   Limited Partner or the General Partner, and includes any and all benefits to which the holder of   such a Partnership Interest may be entitled as provided in this Agreement and in the Act, together   with all obligations of such Person to comply with the terms and provisions of this Agreement   and of the Act.  A Partnership Interest may be expressed as a number of Preferred Units, OP   Units, Class B Units, LTIP Units or other Partnership Units.   “Partnership Loan” means a loan from the Partnership to the Partner on the day the   Partnership pays over the excess of the Withheld Amount over the Distributable Amount to a   taxing authority.   “Partnership Minimum Gain” has the meaning set forth in Regulations   Section 1.704-2(d).  In accordance with Regulations Section 1.704-2(d), the amount of   Partnership Minimum Gain is determined by first computing, for each Partnership nonrecourse   liability, any gain the Partnership would realize if it disposed of the property subject to that   liability for no consideration other than full satisfaction of the liability, and then aggregating the   separately computed gains.  A Partner’s share of Partnership Minimum Gain shall be determined   in accordance with Regulations Section 1.704-2(g)(1).   “Partnership Record Date” means the record date established by the General Partner for   the distribution of cash pursuant to Section 5.02 hereof, which record date shall be the same as   the record date established by the General Partner for a distribution to its stockholders of some or   all of its portion of such distribution.   “Partnership Unit” means a fractional, undivided share of the Partnership Interests of all   Partners issued hereunder, and includes Series C Preferred Units, Series D Preferred Units,   Series F Preferred Units OP Units, Class B Units, LTIP Units and any other class or series of   Partnership Units that may be established after the date hereof.  The number of Partnership Units   outstanding and the Percentage Interests represented by such Partnership Units, if any, are set     

 

   16      forth on Exhibit A hereto, as it may be amended or restated from time to time.  The ownership of   Partnership Units may be evidenced by a certificate in a form approved by the General Partner.   “Percentage Interest” means the percentage determined by dividing the number of   Partnership Units of a Partner by the sum of the number of Partnership Units of all Partners   (other than the Preferred Units).   “Person” means any individual or Entity.   “Precontribution Gain” has the meaning set forth in Section 5.01(f)(iii).   “Preferred Units” means the Series C Preferred Units, Series D Preferred Units, Series E   Preferred Units, Series F Preferred Units and any other series of Preferred Units that may be   established after the date hereof.   “Property” means any property or other investment in which the Partnership, directly or   indirectly, holds an ownership interest.   “Redemption Shares” has the meaning set forth in Section 8.05(a) hereof.   “Redeeming Limited Partner” has the meaning provided in Section 8.04(a).   “Registration Statement” has the meaning set forth in Section 8.05(a).   “Regulations” means the Federal Income Tax Regulations issued under the Code, as   amended and as hereafter amended from time to time.  Reference to any particular provision of   the Regulations shall mean that provision of the Regulations on the date hereof and any   successor provision of the Regulations.   “REIT” means a real estate investment trust under Sections 856 through 860 of the Code.   “REIT Expenses” means (a) costs and expenses relating to the formation and continuity   of existence and operation of the General Partner and any Subsidiaries thereof (which   Subsidiaries shall, for purposes hereof, be included within the definition of the General Partner),   including taxes, fees and assessments associated therewith, any and all costs, expenses or fees   payable to any director, officer or employee of the General Partner, and reasonable expenses   incurred to maintain the General Partner’s qualification as a REIT, (b) costs and expenses   relating to any public offering and registration, or private offering, of securities by the General   Partner, and all statements, reports, fees and expenses incidental thereto, including, without   limitation, underwriting discounts and selling commissions applicable to any such offering of   securities, and any costs and expenses associated with any claims made by any holders of such   securities or any underwriters or placement agents thereof, (c) costs and expenses associated with   any repurchase of any securities by the General Partner, (d) costs and expenses associated with   the preparation and filing of any periodic or other reports and communications by the General   Partner under federal, state or local laws or regulations, including filings with the Commission,   (e) costs and expenses associated with compliance by the General Partner with laws, rules and   regulations promulgated by any regulatory body, including the Commission and any securities   exchange, (f) costs and expenses associated with compensation of the employees of the General     

 

   17      Partner (including, without limitation, health, vision, dental, disability and life insurance   benefits), (g) costs and expenses associated with any 401(k) plan, incentive plan, bonus plan or   other plan providing for compensation for the employees of the General Partner, (h) costs and   expenses incurred by the General Partner relating to any issuing or redemption of Partnership   Interests and (i) all other operating or administrative costs of the General Partner incurred in the   ordinary course of its business on behalf of or in connection with the Partnership.   “REIT Requirements” has the meaning set forth in Section 6.01(a)(xxiv).   “REIT Share” means one share of common stock, par value $0.01 per share, of the   General Partner (or Successor Entity, as the case may be).   “REIT Shares Amount” means the number of REIT Shares equal to the product of   (X) the number of OP Units offered for redemption by a Redeeming Limited Partner, multiplied   by (Y) the Conversion Factor as adjusted to and including the Specified Redemption Date;   provided, that in the event the General Partner issues to all holders of REIT Shares rights,   options, warrants or convertible or exchangeable securities entitling the holders of REIT Shares   to subscribe for or purchase additional REIT Shares, or any other securities or property   (collectively, the “Rights”), and such Rights have not expired at the Specified Redemption Date,   then the REIT Shares Amount shall also include such Rights issuable to a holder of the REIT   Shares Amount on the record date fixed for purposes of determining the holders of REIT Shares   entitled to Rights.   “Restriction Notice” has the meaning set forth in Section 8.04(f).   “Rights” has the meaning set forth in the definition of “REIT Shares Amount” contained   herein.   “S-3 Eligible Date” has the meaning set forth in Section 8.05(a).   “Safe Harbor” has the meaning set forth in Section 10.05(e).   “Safe Harbor Election” has the meaning set forth in Section 10.05(e).   “Safe Harbor Interest” has the meaning set forth in Section 10.05(e).   “Securities Act” means the Securities Act of 1933, as amended.   “Separate Registration Rights Agreement” has the meaning set forth in Section 8.05.   “Series C Articles Supplementary” means the Articles Supplementary classifying and   designating the Series C Preferred Stock and fixing distribution and other preferences and rights   of the Series C Preferred Stock as filed with the State Department of Assessments and Taxation   of Maryland on June 6, 2013.   “Series C Distribution Payment Date” means the fifteenth day of each month;   provided, however, that if any Series C Distribution Payment Date falls on any day other than a     

 

   18      Business Day, the distribution payment due on such Series C Distribution Payment Date shall be   paid on the first Business Day immediately following such Series C Distribution Payment Date.   “Series C Distribution Period” means monthly distribution periods commencing on the   first day of each month and ending on and including the day preceding the first day of the next   succeeding Series C Distribution Period.   “Series C Junior Units” means Common Units and any class or series of Partnership   Units hereafter issued and outstanding that are not Series C Senior Units, Series C Preferred   Units or Series C Parity Units.   “Series C Liquidation Amount” means the greater of (a) the aggregate Series C   Liquidation Preference plus the aggregate Series C Redemption Premium or (b) an amount per   Series C Preferred Unit equal to the amount which would have been payable to a Series C   Preferred Unit holder had each Series C Preferred Unit been converted into OP Units   immediately prior to such Liquidation.   “Series C Liquidation Preference” means fifteen dollars and sixty-seven cents ($15.67)   per Series C Preferred Unit.   “Series C Parity Units” means the Series D Preferred Units, Series F Preferred Units   and any class or series of Partnership Units hereafter issued and outstanding, whether or not the   distribution rates thereof shall be different from those of the Series C Preferred Units, if the   holders of such class or series and the Series C Preferred Units shall be entitled to (i) the receipt   of distributions in proportion to their respective amounts of accrued and unpaid distributions per   unit and (ii) amounts distributable upon Liquidation in proportion to their respective liquidation   preferences, in each case without preference or priority one over the other.   “Series C Preferred Return” means, for each Series C Preferred Unit, a cumulative,   non-compounded rate per annum equal to 5.81% of the Series C Liquidation Preference;   provided, that the amount payable for any Series C Distribution Period shall be computed by   dividing the Series C Preferred Return by twelve, and the amount of distributions payable for any   period shorter or longer than a full Series C Distribution Period shall be computed on the basis of   twelve 30-day months and a 360-day year.   “Series C Preferred Stock” means the Series C Convertible Preferred Stock, par value   $.01 per share, of the General Partner.   “Series C Preferred Unit” means a Partnership Unit which is designated by the General   Partner as a Series C Preferred Unit of the Partnership.   “Series C Redemption Date” has the meaning set forth in Section 14.05.   “Series C Redemption Premium” equals twenty percent (20%) of the Series C   Liquidation Preference.   “Series C Senior Units” means any class or series of Partnership Units hereafter issued   and outstanding, if the holders of such class or series shall be entitled to the receipt of     

 

   19      distributions prior to a Liquidation or of amounts distributable upon any event of Liquidation, in   preference or priority to the holders of Series C Preferred Units.   “Series D Articles Supplementary” means the Articles Supplementary classifying and   designating the Series D Preferred Stock and fixing distribution and other preferences and rights   of the Series D Preferred Stock as filed with the State Department of Assessments and Taxation   of Maryland on November 8, 2013.   “Series D Distribution Payment Date” shall mean the fifteenth day of each month;   provided, however, that if any Series D Distribution Payment Date falls on any day other than a   Business Day, the distribution payment due on such Series D Distribution Payment Date shall be   paid on the first Business Day immediately following such Series D Distribution Payment Date.   “Series D Distribution Period” means monthly distribution periods commencing on the   first day of each month and ending on and including the day preceding the first day of the next   succeeding Series D Distribution Period.   “Series D Junior Units” means Common Units and any class or series of Partnership   Units hereafter issued and outstanding that are not Series D Senior Units, Series D Preferred   Units or Series D Parity Units.   “Series D Liquidation Amount” means the greater of (a) the aggregate Series D   Liquidation Preference plus the aggregate Series D Redemption Premium or (b) an amount per   Series D Preferred Unit equal to the amount which would have been payable to a Series D   Preferred Unit holder had each Series D Preferred Unit been converted into OP Units   immediately prior to such Liquidation.   “Series D Liquidation Preference” means thirteen dollars and fifty-nine cents ($13.59)   per Series D Preferred Unit.   “Series D Parity Units” means the Series C Preferred Units, Series F Preferred Units and   any class or series of Partnership Units hereafter issued and outstanding, whether or not the   distribution rates thereof shall be different from those of the Series D Preferred Units, if the   holders of such class or series and the Series D Preferred Units shall be entitled to (i) the receipt   of distributions in proportion to their respective amounts of accrued and unpaid distributions per   unit and (ii) amounts distributable upon Liquidation in proportion to their respective liquidation   preferences, in each case without preference or priority one over the other.   “Series D Preferred Return” means, for each Series D Preferred Unit, a cumulative,   non-compounded rate per annum equal to 5.81% of the Series D Liquidation Preference;   provided, that the amount payable for any Series D Distribution Period shall be computed by   dividing the Series D Preferred Return by twelve, and the amount of distributions payable for   any period shorter or longer than a full Series D Distribution Period shall be computed on the   basis of twelve 30-day months and a 360-day year.   “Series D Preferred Stock” means the Series D Cumulative Convertible Preferred   Stock, par value $.01 per share, of the General Partner.     

 

   20      “Series D Preferred Unit” means a Partnership Unit which is designated by the General   Partner as a Series D Preferred Unit of the Partnership.   “Series D Redemption Date” has the meaning set forth in Section 15.05.   “Series D Redemption Premium” equals twenty percent (20%) of the Series D   Liquidation Preference.   “Series D Senior Units” means any class or series of Partnership Units hereafter issued   and outstanding, if the holders of such class or series shall be entitled to the receipt of   distributions prior to a Liquidation or of amounts distributable upon any event of Liquidation, in   preference or priority to the holders of Series D Preferred Units.   “Series E Preferred Stock” means the Series E Convertible Preferred Stock, par value   $.01 per share, of the General Partner.    “Series E Preferred Unit” means a Partnership Unit which is designated by the General   Partner as a Series E Preferred Unit of the Partnership.   “Series F Articles Supplementary” means the Articles Supplementary classifying and   designating the Series F Preferred Stock and fixing distribution and other preferences and rights   of the Series F Preferred Stock as filed with the State Department of Assessments and Taxation   of Maryland on January 2, 2014.   “Series F Distribution Payment Date” shall mean the fifteenth day of each month;   provided, however, that if any Series F Distribution Payment Date falls on any day other than a   Business Day, the distribution payment due on such Series F Distribution Payment Date shall be   paid on the first Business Day immediately following such Series F Distribution Payment Date.   “Series F Distribution Period” means monthly distribution periods commencing on the   first day of each month and ending on and including the day preceding the first day of the next   succeeding Series F Distribution Period.   “Series F Junior Units” means Common Units and any class or series of Partnership   Units hereafter issued and outstanding that are not Series F Senior Units, Series F Preferred Units   or Series F Parity Units.   “Series F Liquidation Amount” means the aggregate Series F Liquidation Preference.   “Series F Liquidation Preference” means twenty-five dollars ($25.00) per Series F   Preferred Unit.   “Series F Parity Units” means the Series C Preferred Units, Series D Preferred Units   and any class or series of Partnership Units hereafter issued and outstanding, whether or not the   distribution rates thereof shall be different from those of the Series F Preferred Units, if the   holders of such class or series and the Series F Preferred Units shall be entitled to (i) the receipt   of distributions in proportion to their respective amounts of accrued and unpaid distributions per     

 

   21      unit and (ii) amounts distributable upon Liquidation in proportion to their respective liquidation   preferences, in each case without preference or priority one over the other.   “Series F Preferred Return” means, for each Series F Preferred Unit, a cumulative,   non-compounded rate per annum equal to 6.70% of the Series F Liquidation Preference;   provided, that the amount payable for any Series F Distribution Period shall be computed by   dividing the Series F Preferred Return by twelve, and the amount of distributions payable for any   period shorter or longer than a full Series F Distribution Period shall be computed on the basis of   twelve 30-day months and a 360-day year.   “Series F Preferred Stock” means the 6.70% Series F Cumulative Redeemable   Preferred Stock, par value $.01 per share, of the General Partner.   “Series F Preferred Unit” means a Partnership Unit which is designated by the General   Partner as a Series F Preferred Unit of the Partnership.   “Series F Redemption Date” has the meaning set forth in Section 17.05.   “Series F Senior Units” means any class or series of Partnership Units hereafter issued   and outstanding, if the holders of such class or series shall be entitled to the receipt of   distributions prior to a Liquidation or of amounts distributable upon any event of Liquidation, in   preference or priority to the holders of Series F Preferred Units.   “Service” means the Internal Revenue Service.   “Specified Redemption Date” means the first business day of the month that is at least   60 calendar days after the receipt by the General Partner of a Notice of Redemption.   “Subsidiary” means, with respect to any Person, any corporation or other entity of which   a majority of (i) the voting power of the voting equity securities or (ii) the outstanding equity   interests is owned, directly or indirectly, by such Person.   “Subsidiary Partnership” means any partnership or limited liability company in which   the General Partner, the Partnership or a wholly owned subsidiary of the General Partner or the   Partnership owns a partnership or limited liability company interest.   “Substitute Limited Partner” means any Person admitted to the Partnership as a   Limited Partner pursuant to Section 9.03 hereof.   “Successor Entity” has the meaning set forth in the definition of “Conversion Factor”   contained herein.   “Survivor” has the meaning set forth in Section 7.02(b).   “Tax Items” has the meaning set forth in Section 5.01(f)(i).   “Tax Matters Partner” has the meaning set forth within Section 6231(a)(7) of the Code.     

 

   22      “Tax Protection Agreement” means that tax protection agreement, dated September 6,   2011, by and among the Partnership, the General Partner and ARC Real Estate Partners, LLC.   “Trading Day” means a day on which the principal national securities exchange on   which a security is listed or admitted to trading is open for the transaction of business or, if a   security is not listed or admitted to trading on any national securities exchange, shall mean any   day other than a Saturday, a Sunday or a day on which banking institutions in the State of New   York are authorized or obligated by law or executive order to close.   “Transaction” has the meaning set forth in Section 7.02(a).   “Transfer” has the meaning set forth in Section 9.02(a).   “TRS” means a taxable REIT subsidiary (as defined in Section 856(l) of the Code) of the   General Partner.   “Unvested LTIP Units” has the meaning set forth in Section 13.01(c)(i) hereof.   “Value” means, with respect to any security, the average of the daily market price of   such security for the ten consecutive Trading Days immediately preceding the date of such   valuation.  The market price for each such Trading Day shall be:  (i) if the security is listed or   admitted to trading on the NASDAQ or any national securities exchange, the last reported sale   price, regular way, on such day, or if no such sale takes place on such day, the average of the   closing bid and asked prices, regular way, on such day, (ii) if the security is not listed or admitted   to trading on the NASDAQ or any national securities exchange, the last reported sale price on   such day or, if no sale takes place on such day, the average of the closing bid and asked prices on   such day, as reported by a reliable quotation source designated by the General Partner, or (iii) if   the security is not listed or admitted to trading on the NASDAQ or any national securities   exchange and no such last reported sale price or closing bid and asked prices are available, the   average of the reported high bid and low asked prices on such day, as reported by a reliable   quotation source designated by the General Partner, or if there shall be no bid and asked prices   on such day, the average of the high bid and low asked prices, as so reported, on the most recent   day (not more than ten days prior to the date in question) for which prices have been so reported;   provided, that if there are no bid and asked prices reported during the ten days prior to the date in   question, the value of the security shall be determined by the General Partner acting in good faith   on the basis of such quotations and other information as it considers, in its reasonable judgment,   appropriate.  In the event the security includes any additional rights, then the value of such rights   shall be determined by the General Partner acting in good faith on the basis of such quotations   and other information as it considers, in its reasonable judgment, appropriate.   “Vested LTIP Units” has the meaning set forth in Section 13.01(c)(i) hereof.   “Withheld Amount” means any amount required to be withheld by the Partnership with   respect to a Partner and paid over to any taxing authority as a result of any allocation or   distribution of income to a Partner or any other transaction.     

 

   23      ARTICLE II   FORMATION OF PARTNERSHIP   2.01 Formation of the Partnership.  The Partnership was formed as a limited   partnership pursuant to the provisions of the Act and the Original Agreement and continued upon   the terms and subject to the conditions set forth in this Agreement.  Except as expressly provided   herein to the contrary, the rights and obligations of the Partners and administration and   termination of the Partnership shall be governed by the Act.  The Partnership Interest of each   Partner shall be personal property for all purposes.   2.02 Name.  The Name of the Partnership shall be “ARC Properties Operating   Partnership, L.P.” and the Partnership’s business may be conducted under any other name or   names deemed advisable by the General Partner, including the name of the General Partner or   any Affiliate thereof.  The words “Limited Partnership,” “LP,” “L.P.” or “Ltd.” or similar words   or letters shall be included in the Partnership’s name where necessary for the purposes of   complying with the laws of any jurisdiction that so requires.  The General Partner in its sole and   absolute discretion may change the name of the Partnership at any time and from time to time   and shall notify the Partners of such change in the next regular communication by the   Partnership to the Partners.  Notwithstanding any provision in this Agreement and without the   consent of any Limited Partner or other Person, the General Partner may amend this Agreement   and the Certificate of Limited Partnership of the Partnership to reflect any change in the name of   the Partnership.   2.03 Registered Office and Agent; Principal Office.  The address of the registered   office of the Partnership in the State of Delaware is located at Corporation Service Company,   2711 Centerville Road, Suite 400, Wilmington, DE 19808, and the registered agent for service of   process on the Partnership in the State of Delaware at such address is the Corporation Service   Company, a Delaware corporation.  The General Partner may, from time to time, designate a   new registered agent and/or registered office for the Partnership and, notwithstanding any   provision in this Agreement, may amend this Agreement and the Certificate of Limited   Partnership of the Partnership to reflect such designation without the consent of the Limited   Partners or any other Person.  The principal office of the Partnership is located at:  c/o American   Realty Capital Properties, Inc., 405 Park Avenue, New York, New York, 10022 or such other   place as the General Partner may from time to time designate by notice to the Limited Partners.    The Partnership may maintain offices at such other place or places as the General Partner deems   necessary or desirable.   2.04 Term and Dissolution.   (a) The term of the Partnership shall continue in full force and effect until the   Partnership is dissolved and its affairs are wound up upon the first to occur of any of the   following events:   (i) the occurrence of an Event of Bankruptcy as to a General Partner   or the dissolution, death, removal or withdrawal of a General Partner or any other   event that results in the General Partner ceasing to be a general partner of the   Partnership under the Act unless (A) the business of the Partnership is continued     

 

   24      pursuant to Section 7.04(b) hereof, or (B) at the time of the occurrence of such   event there is at least one remaining general partner of the Partnership who is   hereby authorized to and does carry on the business of the Partnership;   (ii) the passage of 90 days after the sale or other disposition of all or   substantially all of the assets of the Partnership (provided, that if the Partnership   receives an installment obligation as consideration for such sale or other   disposition, the Partnership shall continue, unless sooner dissolved under the   provisions of this Agreement, until such time as such installment obligations are   paid in full);   (iii) the redemption of all Limited Partnership Interests, unless the   General Partner determines to continue the Partnership by the admission of one or   more additional Limited Partners effective as of such redemption;   (iv) the election in writing by the General Partner that the Partnership   should be dissolved;   (v) at any time there are no limited partners of the Partnership, unless   the business of the Partnership is continued in accordance with the Act; or   (vi) the entry of a decree of judicial dissolution of the Partnership   under Section 17-802 of the Act.   (b) Upon dissolution of the Partnership (unless the business of the Partnership   is continued pursuant to Section 7.04(b) hereof), the General Partner (or, if dissolution of the   Partnership should occur by reason of Section 2.04(a)(i) or the General Partner is unable to act as   liquidator, a liquidating trustee of the Partnership or other representative designated by a   Majority in Interest) shall proceed to wind up the affairs of the Partnership, liquidate the   Partnership’s assets and apply and distribute the proceeds thereof in accordance with   Section 5.06 hereof.  Notwithstanding the foregoing, the General Partner or the liquidating   trustee, as the case may be, may, subject to the Act, either (i) defer liquidation of, or withhold   from distribution for a reasonable time, any assets of the Partnership (including those necessary   to satisfy the Partnership’s debts and obligations), or (ii) distribute the assets to the Partners in   kind.   (c) 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 to the Partners in the manner provided for in this   Agreement and (ii) the Certificate of Limited Partnership of the Partnership shall have been   canceled in the manner required by the Act.   2.05 Filing of Certificate and Perfection of Limited Partnership.  The General   Partner shall execute, acknowledge, record and file at the expense of the Partnership any   Certificate (including the Certificate of Limited Partnership of the Partnership) and any and all   amendments thereto and all requisite fictitious name statements and notices in such places and   jurisdictions as may be necessary to cause the Partnership to be treated as a limited partnership     

 

   25      under, and otherwise to comply with, the laws of each state or other jurisdiction in which the   Partnership conducts business.   2.06 Certificates Describing Partnership Units.  The Partnership Interests shall not   be evidenced by certificates unless requested by a Partner.  At the request of a Partner, the   General Partner, at its option, may issue a certificate evidencing such Partner’s Partnership   Interests, including the class or series and number of Partnership Units owned and the Percentage   Interest represented by such Partnership Units as of the date of such certificate.  Any such   certificate (i) shall be in form and substance as determined by the General Partner, (ii) shall not   be negotiable and (iii) shall bear a legend to the following effect:   THIS CERTIFICATE IS NOT NEGOTIABLE.  THE PARTNERSHIP UNITS REPRESENTED   BY THIS CERTIFICATE ARE GOVERNED BY AND TRANSFERABLE ONLY IN   ACCORDANCE WITH THE PROVISIONS OF THE AGREEMENT OF LIMITED   PARTNERSHIP OF ARC PROPERTIES OPERATING PARTNERSHIP, L.P., AS   AMENDED, SUPPLEMENTED OR RESTATED FROM TIME TO TIME.   Each certificate evidencing Partnership Interests shall be executed by manual or facsimile   signature of the General Partner on behalf of the Partnership.  The Partnership shall maintain   books for the purpose of registering the transfer of Partnership Interests.  In connection with a   Partner’s transfer in accordance with this Agreement of any Partnership Interests, the   certificate(s) evidencing the Partnership Interests, if any, shall be delivered to the Partnership for   cancellation, and the Partnership shall thereupon issue a new certificate to the transferee   evidencing the Partnership Interests that were transferred and, if applicable, the Partnership shall   issue a new certificate to the transferor evidencing any Partnership Interests registered in the   name of the transferor that were not transferred.   Each Partnership Interest shall constitute a “security” within the meaning of, and   governed by, (i) Article 8 of the Uniform Commercial Code (including Section 8-102(a)(15)   thereof) as in effect from time to time in the State of Delaware, and (ii) the corresponding   provisions of the Uniform Commercial Code of any other applicable jurisdiction that now or   hereafter substantially includes the 1994 revisions to Article 8 thereof as adopted by the   American Law Institute and the National Conference of Commissioners on Uniform State Laws   and approved by the American Bar Association on February 14, 1995.   ARTICLE III   BUSINESS OF THE PARTNERSHIP   The purpose and nature of the business to be conducted by the Partnership is (i) to   conduct any business that may be lawfully conducted by a limited partnership organized   pursuant to the Act, (ii) to enter into any partnership, joint venture or other similar arrangement   for the purpose of engaging in any of the foregoing or the ownership and disposition of interests   in any entity engaged in any of the foregoing and (iii) to do anything necessary or incidental to   the foregoing; provided, however, that any business to be conducted by the Partnership shall be   limited to and conducted in such a manner as to permit the General Partner at all times to qualify   as a REIT, unless the General Partner otherwise ceases to, or the Board of Directors determines   that the General Partner shall no longer, qualify as a REIT.  In connection with the foregoing,     

 

   26      and without limiting the General Partner’s right in its sole and absolute discretion to cease   qualifying as a REIT, the Partners acknowledge that the General Partner has elected REIT status   and the General Partner’s continued qualification as a REIT and the avoidance of income and   excise taxes on the General Partner inure to the benefit of all the Partners and not solely to the   General Partner.  Notwithstanding the foregoing, the Partners agree that the General Partner may   terminate or revoke its status as a REIT under the Code at any time.  The General Partner shall   also be empowered to do any and all acts and things necessary or prudent to ensure that the   Partnership will not be classified as a “publicly traded partnership” taxable as a corporation for   purposes of Section 7704 of the Code.   ARTICLE IV   CAPITAL CONTRIBUTIONS AND ACCOUNTS   4.01 Capital Contributions.  The General Partner and each Limited Partner has made   (or shall be deemed to have made) a Capital Contribution to the Partnership in exchange for the   Partnership Units set forth opposite such Partner’s name on Exhibit A hereto, as it may be   amended or restated from time to time by the General Partner to the extent necessary to reflect   accurately sales, exchanges or other Transfers, redemptions, Capital Contributions, the issuance   of additional Partnership Units or similar events having an effect on a Partner’s ownership of   Partnership Units.   4.02 Additional Capital Contributions and Issuances of Additional Partnership   Units.  Except as provided in this Section 4.02 or in Section 4.03 hereof, the Partners shall have   no right or obligation to make any additional Capital Contributions or loans to the Partnership.    The General Partner may contribute additional capital to the Partnership, from time to time, and   receive additional Partnership Interests, in the form of Partnership Units, in respect thereof, in   the manner contemplated in this Section 4.02.   (a) Issuances of Additional Partnership Units.   (i) General.  As of the effective date of this Agreement, the   Partnership shall have six classes of Partnership Units, entitled “Series C   Preferred Units,” “Series D Preferred Units,” “Series F Preferred Units,” “OP   Units,” “Class B Units” and “LTIP Units” respectively.  The Series C Preferred   Units, Series D Preferred Units, Series F Preferred Units, Class B Units and LTIP   Units shall have the same rights, privileges and preferences as the OP Units,   except as set forth in Articles XII, XIII, XIV, XV, XVI and XVII hereof.    Notwithstanding any provision of this Agreement, the General Partner is hereby   authorized to cause the Partnership to issue such additional Partnership Interests,   in the form of Partnership Units, for any Partnership purpose at any time or from   time to time to the Partners (including the General Partner and/or the Limited   Partner) or to other Persons, and admit such Persons as additional general partners   of the Partnership pursuant to Section 7.03 or additional Limited Partners   pursuant to this Section 4.02, for such consideration, or in connection with the   performance of past, present or future services to the Partnership, and on such   terms and conditions as shall be established by the General Partner in its sole and   absolute discretion, all without the approval of any Limited Partners or any other     

 

   27      Person.  Notwithstanding any provision of this Agreement, a Person shall be   deemed admitted to the Partnership as an additional Limited Partner upon the   written consent of the General Partner and the execution of a counterpart to this   Agreement by such Person.  The General Partner’s determination that   consideration is adequate shall be conclusive insofar as the adequacy of   consideration relates to whether the Partnership Units are validly issued and fully   paid.  Notwithstanding any provision of this Agreement, any additional   Partnership Units issued thereby may be issued in one or more classes, or one or   more series of any of such classes, with such designations, preferences and   relative, participating, optional or other special rights, powers, preferences and   duties, including rights, powers, preferences and duties senior and superior to the   then-outstanding Partnership Units held by the Limited Partners, all as shall be   determined by the General Partner in its sole and absolute discretion and without   the approval of any Limited Partner or other Person, including, without limitation,   (i) the allocations of items of Partnership income, gain, loss, deduction and credit   to each such class or series of Partnership Units; (ii) the right of each such class or   series of Partnership Units to share in Partnership distributions; (iii) the rights of   each such class or series of Partnership Units upon dissolution and liquidation of   the Partnership; and (iv) the right, if any, of the holder of each such class or series   of Partnership Units to vote on Partnership matters; provided, however, that no   additional Partnership Units shall be issued to the General Partner (or any direct   or indirect wholly owned Subsidiary of the General Partner) unless:   (1) (A) the additional Partnership Units are issued in   connection with an issuance of REIT Shares of or other interests in the   General Partner, which shares or interests have designations, preferences   and other rights, all such that the economic interests are substantially   similar to the designations, preferences and other rights of the additional   Partnership Units issued to the General Partner (or any direct or indirect   wholly owned Subsidiary of the General Partner) by the Partnership in   accordance with this Section 4.02 and (B) the General Partner (or any   direct or indirect wholly owned Subsidiary of the General Partner) shall   make a Capital Contribution to the Partnership in an amount equal to the   consideration received by the General Partner from the issuance of such   REIT Shares or other interests in the General Partner;   (2) (A) the additional Partnership Units are issued in   connection with an issuance of REIT Shares of or other interests in the   General Partner pursuant to a taxable share dividend declared by the   General Partner, which shares or interests have designations, preferences   and other rights, all such that the economic interests are substantially   similar to the designations, preferences and other rights of the additional   Partnership Units issued to the General Partner (or any direct or indirect   wholly owned Subsidiary of the General Partner) by the Partnership in   accordance with this Section 4.02, (B) if the General Partner allows the   holders of its REIT Shares to elect whether to receive such dividend in   REIT Shares, other interests of the General Partner or cash, the     

 

   28      Partnership will give the Limited Partners (excluding the General Partner   or any direct or indirect Subsidiary of the General Partner) the same   election to elect to receive (I) Partnership Units or cash or, (II) at the   election of the General Partner, REIT Shares or cash, and (C) if the   Partnership issues additional Partnership Units pursuant to this   Section 4.02(a)(i)(2), then an amount of income equal to the value of the   Partnership Units received will be allocated to those holders of OP Units   that elect to receive additional Partnership Units;   (3) the additional Partnership Units are issued in exchange for   property owned by the General Partner (or any direct or indirect wholly   owned Subsidiary of the General Partner) with a fair market value, as   determined by the General Partner, in good faith, equal to the value of the   Partnership Units; or   (4) the additional Partnership Units are issued to all Partners in   proportion to their respective Percentage Interests.   Without limiting the foregoing, the General Partner is expressly authorized to cause the   Partnership to issue Partnership Units for less than fair market value, so long as the General   Partner concludes in good faith that such issuance is in the best interests of the General Partner   and the Partnership.   Notwithstanding any provision in this Agreement, the General Partner may amend this   Agreement in any manner in connection with the creation, authorization and/or issuance of any   additional Partnership Interests, all without the approval of the Limited Partners or any other   Person.   (ii) Upon Issuance of Additional Securities.  The General Partner shall   not issue any additional REIT Shares (other than REIT Shares issued in   connection with an exchange pursuant to Section 8.04 hereof or a taxable share   dividend as described in Section 4.02(a)(i)(2) hereof) or Rights (collectively,   “Additional Securities”) other than to all holders of REIT Shares, unless (A) the   General Partner shall cause the Partnership to issue to the General Partner (or any   direct or indirect wholly owned Subsidiary of the General Partner) Partnership   Units or Rights having designations, preferences and other rights, all such that the   economic interests are substantially similar to those of the Additional Securities,   and (B) the General Partner (or any direct or indirect wholly owned Subsidiary of   the General Partner) contributes the proceeds from the issuance of such   Additional Securities and from any exercise of Rights contained in such   Additional Securities to the Partnership; provided, however, that the General   Partner is allowed to issue Additional Securities in connection with an acquisition   of Property to be held directly by the General Partner (or any direct or indirect   wholly owned Subsidiary of the General Partner), but if and only if, such direct   acquisition and issuance of Additional Securities have been approved by a   majority of the Independent Directors.  Without limiting the foregoing, the   General Partner is expressly authorized to issue Additional Securities for less than     

 

   29      fair market value, and the General Partner is authorized to cause the Partnership to   issue to the General Partner (or any direct or indirect wholly owned Subsidiary of   the General Partner) corresponding Partnership Units, so long as (x) the General   Partner concludes in good faith that such issuance is in the best interests of the   Partnership and (y) the General Partner (or any direct or indirect wholly owned   Subsidiary of the General Partner) contributes all proceeds from such issuance to   the Partnership, including without limitation, the issuance of REIT Shares and   corresponding Partnership Units pursuant to a share purchase plan providing for   purchases of REIT Shares at a discount from fair market value or pursuant to   share awards, including share options that have an exercise price that is less than   the fair market value of the REIT Shares, either at the time of issuance or at the   time of exercise, and restricted or other share awards approved by the Board of   Directors.  For example, in the event the General Partner issues REIT Shares for a   cash purchase price and the General Partner (or any direct or indirect wholly   owned Subsidiary of the General Partner) contributes all of the proceeds of such   issuance to the Partnership as required hereunder, the General Partner (or any   direct or indirect wholly owned Subsidiary of the General Partner) shall be issued   a number of additional Partnership Units equal to the product of (A) the number   of such REIT Shares issued by the General Partner, the proceeds of which were so   contributed, multiplied by (B) a fraction, the numerator of which is 100%, and the   denominator of which is the Conversion Factor in effect on the date of such   contribution.   (b) Certain Contributions of Proceeds of Issuance of REIT Shares.  In   connection with any and all issuances of REIT Shares, the General Partner (or any direct or   indirect wholly owned Subsidiary of the General Partner) shall make Capital Contributions to the   Partnership of the proceeds therefrom, provided, that if the proceeds actually received and   contributed by the General Partner (or any direct or indirect wholly owned Subsidiary of the   General Partner) are less than the gross proceeds of such issuance as a result of any underwriter’s   discount, commissions, placement fees or other expenses paid or incurred in connection with   such issuance, then the General Partner (or any direct or indirect wholly owned Subsidiary of the   General Partner) shall make a Capital Contribution to the Partnership constituting the sum of (i)   such net proceeds and (ii) an intangible asset in an amount equal to the capitalized costs of the   General Partner relating to such issuance of REIT Shares or other interests in the General   Partner.  Upon any such Capital Contribution by the General Partner (or any direct or indirect   wholly owned Subsidiary of the General Partner), the Capital Account of the General Partner (or   any direct or indirect wholly owned Subsidiary of the General Partner) shall be increased by the   amount of its Capital Contribution as described in the previous sentence.   (c) Repurchases of Shares.  If the General Partner shall repurchase shares of   any class of its shares of common stock, the purchase price thereof and all costs incurred in   connection with such repurchase shall be reimbursed to the General Partner by the Partnership   pursuant to Section 6.05 hereof and the General Partner shall cause the Partnership to redeem an   equivalent number of Partnership Units of the appropriate class or series held by the General   Partner (which, in the case of REIT Shares, shall be a number equal to the quotient of the number   of such REIT Shares divided by the Conversion Factor) in the manner provided in Section 6.10   hereof.     

 

   30      4.03 Additional Funding.  If the General Partner determines that it is in the best   interests of the Partnership to provide for additional Partnership funds (“Additional Funds”) for   any Partnership purpose, the General Partner may (a) cause the Partnership to obtain such funds   from outside borrowings, or (b) elect to have the General Partner or any of its Affiliates provide   such Additional Funds to the Partnership through loans or otherwise.   4.04 Capital Accounts.  A separate Capital Account shall be established and   maintained for each Partner.   4.05 Percentage Interests.  If the number of outstanding OP Units, Class B Units,   LTIP Units or other class or series of Partnership Units increases or decreases during a taxable   year, each Partner’s Percentage Interest shall be adjusted by the General Partner effective as of   the effective date of each such increase or decrease to a percentage equal to the number of OP   Units, Class B Units, LTIP Units or other class or series of Partnership Units held by such   Partner divided by the aggregate number of OP Units, Class B Units, LTIP Units or other class   or series of Partnership Units, as applicable, outstanding after giving effect to such increase or   decrease.  If the Partners’ Percentage Interests are adjusted pursuant to this Section 4.05, the Net   Income and Net Loss for the taxable year in which the adjustment occurs shall be allocated   between the part of the year ending on the effective date of such adjustment and the part of the   year beginning on the following day either (i) as if the taxable year had ended on the date of the   adjustment or (ii) based on the number of days in each part.  The General Partner, in its sole and   absolute discretion, shall determine which method shall be used to allocate Net Income and Net   Loss for the taxable year in which the adjustment occurs.  The allocation of Net Income and Net   Loss for the earlier part of the year shall be based on the Percentage Interests before adjustment,   and the allocation of Net Income and Net Loss for the later part shall be based on the adjusted   Percentage Interests.   4.06 No Interest on Contributions.  No Partner shall be entitled to interest on its   Capital Contribution.   4.07 Return of Capital Contributions.  No Partner shall be entitled to withdraw any   part of its Capital Contribution or its Capital Account or to receive any distribution from the   Partnership, except as specifically provided in this Agreement.  Except as otherwise provided   herein, there shall be no obligation to return to any Partner or withdrawn Partner any part of such   Partner’s Capital Contribution for so long as the Partnership continues in existence.   4.08 No Third-Party Beneficiary.  No creditor or other third party (other than an   Indemnitee) having dealings with the Partnership shall have the right to enforce the right or   obligation of any Partner to make Capital Contributions or loans or to pursue any other right or   remedy hereunder or at law or in equity, it being understood and agreed that the provisions of   this Agreement shall be solely for the benefit of, and may be enforced solely by, the parties   hereto, Indemnitees and their respective successors and assigns.  To the fullest extent permitted   by law, none of the rights or obligations of the Partners herein set forth to make Capital   Contributions or loans to the Partnership shall be deemed an asset of the Partnership for any   purpose by any creditor or other third party, nor may such rights or obligations be sold,   transferred or assigned by the Partnership or pledged or encumbered by the Partnership to secure   any debt or other obligation of the Partnership or of any of the Partners.  In addition, it is the     

 

   31      intent of the parties hereto that no distribution to any Limited Partner shall be deemed a return of   money or other property in violation of the Act.  However, if any court of competent jurisdiction   holds that, notwithstanding the provisions of this Agreement, any Limited Partner is obligated to   return such money or property, such obligation shall, to the fullest extent permitted by law, be   the obligation of such Limited Partner and not of the General Partner.  Without limiting the   generality of the foregoing, a deficit Capital Account of a Partner shall not be deemed to be a   liability of such Partner nor an asset or property of the Partnership.   ARTICLE V   NET INCOME AND NET LOSS; DISTRIBUTIONS   5.01 Allocations.     (a) Allocations of Net Income and Net Loss. Except as otherwise provided in   this Agreement and subject to Sections 12.02(b) and 13.01(c)(iii), after giving effect to the   special allocations in Sections 5.01(c) and 5.01(d), Net Income, Net Loss and, to the extent   necessary, individual items of income, gain, loss or deduction, of the Partnership, without   duplication, shall be allocated among the Partners as follows:   (i) first, if the Partnership has Net Income for any taxable year or   portion thereof, such Net Income shall be allocated to the Partners holding Series   C Preferred Units, Series D Preferred Units and/or Series F Preferred Units pro   rata and pari passu in proportion to their relative accrued and unpaid Series C   Preferred Return, Series D Preferred Return and/or Series F Preferred Return to   the extent of and until such Partners have received allocations of Net Income   equal to the aggregate amount of distributions made to such Partners pursuant to   Section 5.02(a)(i);    (ii) second, to the Partners holding OP Units, Class B Units and/or   LTIP Units pro rata and pari passu to the extent of and in proportion to the   distribution of Cash Available for Distribution to such Partners with respect to   their OP Units, Class B Units and/or LTIP Units in accordance with Sections   5.02(a)(ii) and 13.01(a)(ii); and   (iii) thereafter, to the Partners holding OP Units, Class B Units and/or   LTIP Units pro rata and pari passu in accordance with each such Partner’s   respective Percentage Interest with respect to such OP Units, Class B Units and/or   LTIP Units; provided, that for the avoidance of doubt, Net Loss, and to the extent   necessary, individual items of loss or deductions shall be allocated (A) first to the   Partners holding OP Units, Class B Units and/or LTIP Units pro rata and pari   passu in accordance with each such Partner’s respective Percentage Interest with   respect to such OP Units, Class B Units and/or LTIP Units until such Partners   have received cumulative allocations of Net Loss equal to the cumulative amount   of Net Income allocated to them pursuant to this Section 5.01(a)(iii), (B) then to   the Partners holding OP Units, Class B Units and/or LTIP Units to the extent of   and in a manner that has the effect of reversing the allocations of Net Income to   such Partners pursuant to Section 5.10(a)(ii), (C) then to the Partners holding OP     

 

   32      Units, Class B Units and/or LTIP Units pro rata and pari passu in accordance with   each such Partner’s respective Percentage Interest with respect to such OP Units,   Class B Units and/or LTIP Units until each such Partner’s Capital Account with   respect to their OP Units, Class B Units and/or LTIP Units has been reduced to   zero, but not below zero (provided, further, that if the Capital Account of one or   more such Partners, but not all such Partners, has been reduced to zero, any   remaining Net Loss, and to the extent necessary, individual item of loss or   deduction shall be allocated to the remaining Partners holding OP Units, Class B   Units and/or LTIP Units in the same manner as in this Section 5.01(a)(ii)(A) until   the Capital Account of all such Partners with respect to such OP Units, Class B   Units and/or LTIP Units has been reduced to zero), (D) then to the Partners   holding Series C Preferred Units, Series D Preferred Units and/or Series F   Preferred Units pro rata and pari passu in proportion to their relative aggregate   unpaid Series C Liquidation Preference, Series D Liquidation Preference and/or    Series F Liquidation Preference until the Capital Accounts of such Partners with   respect to their Series C Preferred Units, Series D Preferred Units and/or Series F   Preferred Units has been reduced to zero, and (E) thereafter to the General   Partner.   (b) Allocations of Net Property Gain and Net Property Loss.  Except as   otherwise provided in this Agreement, after giving effect to the special allocations in Sections   5.01(c) and 5.01(d), Net Property Gain, Net Property Loss and, to the extent necessary,   individual items of gain or loss comprising Net Property Gain and Net Property Loss of the   Partnership, without duplication, shall be allocated among the Partners as follows:   (i) first, if the Partnership has Net Property Gain for any taxable year   or portion thereof, such Net Property Gain shall be allocated to the Partners   holding Series C Preferred Units and/or Series D Preferred Units pro rata and   pari passu in proportion to their relative aggregate Series C Liquidation   Preference and/or Series D Liquidation Preference until each such Partners’   Capital Accounts is equal to such Partner’s aggregate Series C Liquidation   Amount and/or Series D Liquidation Amount;   (ii) second, the Partners holding Series C Preferred Units, Series D   Preferred Units and/or Series F Preferred Units pro rata and pari passu in   proportion to their relative accrued and unpaid Series C Preferred Return, Series   D Preferred Return and/or Series F Preferred Return to the extent of and until   such Partners have received allocations of Net Property Gain equal to the   aggregate amount of distributions made to such Partners pursuant to Section   5.02(b)(i); and   (iii) thereafter, in a manner such that the Capital Account of each   Partner immediately after making such allocation, is, as nearly as possible, equal   proportionately to (i) the distributions that would be made to such Partner   pursuant to Section 5.02(b) if the Partnership were dissolved, its affairs wound up   and its assets sold for cash equal to their Gross Asset Value, as determined in the   reasonable discretion of the General Partner, all Partnership liabilities were     

 

   33      satisfied (limited with respect to each nonrecourse liability to the Gross Asset   Value of the assets securing such liability), and the net assets of the Partnership   were distributed in accordance with Section 5.02(b) to the Partners immediately   after making such allocation, minus (ii) such Partner’s share of Partnership   Minimum Gain and Partner Nonrecourse Debt Minimum Gain and the amount, if   any and without duplication, that the Partner would be obligated to contribute to   the capital of the Partnership, all computed immediately prior to the hypothetical   sale of assets.   (c) Special Allocations   (i) Special Allocations of Depreciation.  Notwithstanding any other   provisions of this Sections 5.01, after giving effect to the regulatory allocations in   Section 5.01(d), but prior to any allocations under Sections 5.01(a)(ii) and   5.01(b)(iii), Depreciation shall be allocated to the AREP Limited Partner, until the   cumulative amount of Depreciation allocated to the AREP Limited Partner   pursuant to this Section 5.01(c)(i) for all years equals $10,000,000, to the ARCA   III Limited Partner, until the cumulative amount of Depreciation allocated to the   ARCA III Limited Partner pursuant to this subparagraph 5.01(c)(i) for all years   equals $50,000,000, and to the ARCA IV Limited Partner, until the cumulative   amount of Depreciation allocated to the ARCA IV Limited Partner pursuant to   this subparagraph 5.01(c)(i) for all years equals $10,000,000, pro rata and pari   passu in proportion to the amount of Depreciation that each such Partner is   entitled to be allocated that has not yet been allocated to such Partner.   (ii) Special Allocations of Net Property Gain.  Notwithstanding any   other provisions of this Sections 5.01, after giving effect to the regulatory   allocations in Section 5.01(d) and to the extent not previously allocated pursuant   to Section 5.01(d)(ii), but prior to any allocations under Section 5.01(b)(iii), Net   Property Gain and, to the extent necessary, individual items of income and gain   comprising Net Property Gain of the Partnership, shall be allocated to the AREP   Limited Partner, the ARCA III Limited Partner and the ARCA IV Limited   Partner, pro rata and pari passu in proportion to, and to the extent of, the   cumulative amount of Depreciation allocated to each such Partner pursuant to   Section 5.01(c)(i).   (iii) Special Allocations Regarding Class B Units. Notwithstanding any   other provisions of this Sections 5.01, after giving effect to the regulatory   allocations in Section 5.01(d) and the special allocations in Section 5.01(c)(ii), but   prior to any allocations under Section 5.01(b)(iii), Net Property Gain and, to the   extent necessary, individual items of income and gain comprising Net Property   Gain of the Partnership, shall be allocated to the Partners holding Class B Units   until their Class B Economic Capital Account Balances are equal to (A) the OP   Unit Economic Balance, multiplied by (B) the number of their Class B Units;   provided, that no such Net Property Gain and, to the extent necessary, individual   items of income and gain comprising Net Property Gain of the Partnership, will   be allocated with respect to any particular Class B Unit unless and to the extent     

 

   34      that the OP Unit Economic Balance exceeds the OP Unit Economic Balance in   existence at the time such Class B Unit was issued. Any allocations made   pursuant to the first sentence of this Section 5.01(c)(iii) shall be made among the   holders of Class B Units in proportion to the amounts required to be allocated to   each under this Section 5.01(c)(iii). The parties agree that the intent of this   Section 5.01(c)(iii) is to make the Capital Account balance associated with each   Class B Unit to be economically equivalent to the Capital Account balance   associated with the OP Units outstanding (on a per-unit basis), but only if and to   the extent that the Capital Account balance associated with the OP Units   outstanding, without regard to the allocations under this Section 5.01(c)(iii), has   increased on a per-unit basis since the issuance of the relevant Class B Unit.  To   the extent Net Property Loss is allocated to Partners holding Class B Units   pursuant to Section 5.01(b)(iii), such Net Property Loss shall be allocated among   the Partners holding Class B Units in a manner that reverses the allocation of Net   Property Gain to such Partner pursuant to this Section 5.01(c)(iii).   (iv) Special Allocations Regarding LTIP Units. Notwithstanding any   other provisions of this Sections 5.01, after giving effect to the regulatory   allocations in Section 5.01(d) and the special allocations in Sections 5.01(c)(ii)   and 5.01(c)(iii), but prior to any allocations under Section 5.01(b)(iii), Net   Property Gain and, to the extent necessary, individual items of income and gain   comprising Net Property Gain of the Partnership, shall be allocated to the LTIP   Unitholders until their LTIP Economic Capital Account Balances are equal to   (i) the OP Unit Economic Balance, multiplied by (ii) the number of their LTIP   Units; provided that no such Net Property Gain and, to the extent necessary,   individual items of income and gain comprising Net Property Gain of the   Partnership, will be allocated with respect to any particular LTIP Unit unless and   to the extent that the OP Unit Economic Balance exceeds the OP Unit Economic   Balance in existence at the time such LTIP Unit was issued. Any allocations made   pursuant to the first sentence of this Section 5.01(c)(iv) shall be made among the   LTIP Unitholders in proportion to the amounts required to be allocated to each   under this Section 5.01(c)(iv). The parties agree that the intent of this   Section 5.01(c)(iv) is to make the Capital Account balance associated with each   LTIP Unit to be economically equivalent to the Capital Account balance   associated with the OP Units outstanding (on a per-unit basis), but only if and to   the extent that the Capital Account balance associated with the OP Units   outstanding, without regard to the allocations under this Section 5.01(c)(iv), has   increased on a per-unit basis since the issuance of the relevant LTIP Unit.  To the   extent Net Property Loss is allocated to LTIP Unitholders pursuant to Section   5.01(b)(iii), such Net Property Loss shall be allocated among the LTIP   Unitholders in a manner that reverses the allocation of Net Property Gain to the   LTIP Unitholders pursuant to this Section 5.01(c)(iv).   (d) Regulatory Allocations.   (i) Minimum Gain Chargeback (Nonrecourse Liabilities). Except as   otherwise provided in Section 1.704-2(f) of the Regulations, if there is a net     

 

   35      decrease in Partnership Minimum Gain for any Partnership fiscal year, each   Partner shall be specially allocated items of Partnership income and gain for such   year (and, if necessary, subsequent years) in an amount equal to such Partner’s   share of the net decrease in Partnership Minimum Gain to the extent required by   Section 1.704-2(f) of the Regulations. The items to be so allocated shall be   determined in accordance with Sections 1.704-2(f) and (i) of the Regulations.   This Section 5.01(d)(i) is intended to comply with the minimum gain chargeback   requirement in said section of the Regulations and shall be interpreted   consistently therewith. Allocations pursuant to this Section 5.01(d)(i) shall be   made in proportion to the respective amounts required to be allocated to each   Partner pursuant hereto.   (ii) Partner Minimum Gain Chargeback. Except as otherwise provided   in Section 1.704-2(i)(4) of the Regulations, if there is a net decrease in Partner   Nonrecourse Debt Minimum Gain during any fiscal year, each Partner who has a   share of the Partner Nonrecourse Debt Minimum Gain, determined in accordance   with Section 1.704-2(i)(5) of the Regulations, shall be specially allocated items of   Partnership income and gain for such year (and, if necessary, subsequent years) in   an amount equal to that Partner’s share of the net decrease in the Partner   Nonrecourse Debt Minimum Gain to the extent and in the manner required by   Section 1.704-2(i) of the Regulations. The items to be so allocated shall be   determined in accordance with Sections 1.704-2(i)(4) and (j)(2) of the   Regulations. This Section 5.01(d)(ii) is intended to comply with the minimum   gain chargeback requirement with respect to Partner Nonrecourse Debt contained   in said section of the Regulations and shall be interpreted consistently therewith.   Allocations pursuant to this Section 5.01(d)(ii) shall be made in proportion to the   respective amounts required to be allocated to each Partner pursuant hereto.   (iii) Qualified Income Offset. If a Partner unexpectedly receives any   adjustments, allocations or distributions described in Sections 1.704-   1(b)(2)(ii)(d)(4), (5) or (6) of the Regulations, and such Partner has an Adjusted   Capital Account Deficit, items of Partnership income (including gross income)   and gain shall be specially allocated to such Partner in an amount and manner   sufficient to eliminate the Adjusted Capital Account Deficit as quickly as possible   as required by the Regulations. This Section 5.01(d)(iii) is intended to constitute a   “qualified income offset” under Section 1.704-1(b)(2)(ii)(d) of the Regulations   and shall be interpreted consistently therewith.   (iv) Nonrecourse Deductions. Nonrecourse Deductions for any fiscal   year or other applicable period shall be allocated to the Partners in accordance   with their respective Percentage Interests.   (v) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions   for any fiscal year or other applicable period with respect to a Partner   Nonrecourse Debt shall be specially allocated to the Partner that bears the   economic risk of loss for such Partner Nonrecourse Debt (as determined under   Sections 1.704-2(b)(4) and 1.704-2(i)(1) of the Regulations)     

 

   36      (vi) Section 754 Adjustment. To the extent an adjustment to the   adjusted tax basis of any asset of the Partnership pursuant to Section 734(b) of the   Code or Section 743(b) of the Code is required, pursuant to Section 1.704-   1(b)(2)(iv)(m) of the Regulations, to be taken into account in determining Capital   Accounts, the amount of such adjustment to the Capital Accounts shall be treated   as an item of gain (if the adjustment increases the basis of the asset) or loss (if the   adjustment decreases such basis) and such gain or loss shall be specially allocated   among the Partners in a manner consistent with the manner in which each of their   respective Capital Accounts are required to be adjusted pursuant to such section   of the Regulations.   (vii) Capital Account Deficits. If any Partner has an Adjusted Capital   Account Deficit at the end of any fiscal year or other applicable period which is in   excess of the amount such Partner is obligated to restore pursuant to the   penultimate sentences of Treasury Regulations Sections 1.704-2(g)(1) and 1.704-   2(i)(5), such Partner shall be specially allocated items of Partnership income and   gain in the amount of such excess as quickly as possible, provided, that an   allocation pursuant to this Section 5.01(d)(vii) shall be made only if and to the   extent that such Partner would have an Adjusted Capital Account Deficit in   excess of such amount after all other allocations provided for under this   Agreement have been made as if Section 5.01(d)(iii) and this Section 5.01(d)(vii)   were not in this Agreement.   (e) Allocations Between Transferor and Transferee.  If a Partner transfers any   part or all of its Partnership Interest, the distributive shares of the various items of Net Income   and Net Loss allocable among the Partners during such fiscal year of the Partnership shall be   allocated between the transferor and the transferee Partner either (i) as if the Partnership’s fiscal   year had ended on the date of the transfer or (ii) based on the number of days of such fiscal year   that each was a Partner without regard to the results of Partnership activities in the respective   portions of such fiscal year in which the transferor and the transferee were Partners.  The General   Partner, in its sole and absolute discretion, shall determine which method shall be used to   allocate the distributive shares of the various items of Net Income and Net Loss between the   transferor and the transferee Partner.   (f) Tax Allocations.   (i) Items of Income or Loss. Except as is otherwise provided in this   Section 5.01, an allocation of Net Income, Net Loss, Net Property Gain or Net   Property Loss to a Partner shall be treated as an allocation to such Partner of the   same share of each item of income, gain, loss, deduction and item of tax-exempt   income or Section 705(a)(2)(B) expenditure (or item treated as such expenditure   pursuant to Section 1.704-1(b)(2)(iv)(i) of the Regulations) (“Tax Items”) that is   taken into account in computing Net Income, Net Loss, Net Property Gain or Net   Property Loss.   (ii) Section 1245/1250 Recapture. Subject to Section 5.01(f)(iii)   below, if any portion of gain from the sale of Partnership assets is treated as gain     

 

   37      which is ordinary income by virtue of the application of Sections 1245 or 1250 of   the Code (“Affected Gain”), then such Affected Gain shall be allocated among   the Partners in the same proportion that the depreciation and amortization   deductions giving rise to the Affected Gain were allocated. This Section   5.01(f)(ii) shall not alter the amount of Net Income or Net Property Gain (or items   thereof) allocated among the Partners, but merely the character of such Net   Income or Net Property Gain (or items thereof). For purposes hereof, in order to   determine the proportionate allocations of depreciation and amortization   deductions for each fiscal year or other applicable period, such deductions shall   be deemed allocated on the same basis as Net Income, Net Loss, Net Property   Gain and Net Property Loss for such respective period.   (iii) Precontribution Gain, Revaluations. With respect to any   Contributed Property, the Partnership shall use any permissible method contained   in the Regulations promulgated under Section 704(c) of the Code selected by the   General Partner, in its sole discretion, to take into account any variation between   the adjusted basis of such asset and the fair market value of such asset as of the   time of the contribution (“Precontribution Gain”). Each Partner hereby agrees to   report income, gain, loss and deduction on such Partner’s federal income tax   return in a manner consistent with the method used by the Partnership. If any   asset has a Gross Asset Value which is different from the Partnership’s adjusted   basis for such asset for federal income tax purposes because the Partnership has   revalued such asset pursuant to Section 1.704-1(b)(2)(iv)(f) of the Regulations,   the allocations of Tax Items shall be made in accordance with the principles of   Section 704(c) of the Code and the Regulations and the methods of allocation   promulgated thereunder. The intent of this Section 5.01(f)(iii) is that each Partner   who contributed to the capital of the Partnership a Contributed Property will bear,   through reduced allocations of depreciation, increased allocations of gain or other   items, the tax detriments associated with any Precontribution Gain. This Section   5.01(f)(iii) is to be interpreted consistently with such intent.   (iv) Excess Nonrecourse Liability Safe Harbor. Pursuant to Section   1.752-3(a)(3) of the Regulations, solely for purposes of determining each   Partner’s proportionate share of the “excess nonrecourse liabilities” of the   Partnership (as defined in Section 1.752-3(a)(3) of the Regulations), the Partners’   respective interests in Partnership profits shall be determined under any   permissible method reasonably determined by the General Partner; provided,   however, that each Partner who has contributed an asset to the Partnership shall   be allocated, to the extent possible, a share of “excess nonrecourse liabilities” of   the Partnership which results in such Partner being allocated nonrecourse   liabilities in an amount which is at least equal to the amount of income required to   be allocated to such Partner pursuant to Section 704(c) of the Code and the   Regulations promulgated thereunder (the “Liability Shortfall”). If there is an   insufficient amount of nonrecourse liabilities to be able to allocate to each Partner   nonrecourse liabilities equal to the Liability Shortfall, nonrecourse liabilities shall   be allocated to each Partner in pro rata in accordance with each such Partner’s   Liability Shortfall.     

 

   38      5.02 Distribution of Cash.   (a) Cash Available for Distribution.  Subject to the other provisions of this   Article V and to the provisions of Sections 14.03, 15.03 and 17.03, the General Partner shall   cause the Partnership to distribute Cash Available for Distribution, at such times and in such   amounts as are, subject to the terms and conditions of this Agreement, determined by the General   Partner in its sole and absolute discretion, to the Partners who are Partners on the Partnership   Record Date with respect to such quarter (or other distribution period), as follows:   (i) first, 100% to the Partners holding Series C Preferred Units, Series   D Preferred Units and/or Series F Preferred Units pro rata and pari passu in proportion   to their relative accrued and unpaid Series C Preferred Return, Series D Preferred Return   and/or Series F Preferred Return until such Partners have received in the aggregate,   pursuant to this Section 5.02(a)(i) and Section 5.02(b)(i), an amount such that the accrued   but unpaid Series C Preferred Return has been paid with respect to each such Series C   Preferred Unit, the accrued but unpaid Series D Preferred Return has been paid with   respect to each such Series D Preferred Unit and the accrued but unpaid Series F   Preferred Return has been paid with respect to each such Series F Preferred Unit; and   (ii) second, if such Partnership Record Date is prior to the LTIP Unit   Distribution Participation Date, 100% to the Partners holding OP Units, Class B Units   and/or LTIP Units, pro rata and pari passu in proportion to each such Partner’s   respective Percentage Interest with respect to such OP Units, Class B Units and/or LTIP   Units; provided, however, that distributions to the LTIP Unitholders with respect to an   LTIP Unit shall be in an amount equal to the product of (A) the distributions per OP Unit   to be paid to the holders of OP Units pursuant to this Section 5.02(a)(ii) multiplied by (B)   ten (10%) percent  (the “Concurrent LTIP Distribution”) with the balance of the   distribution that would have otherwise been payable to the LTIP Unitholders but for the   effect of this proviso being distributed to the Partners holding OP Units and/or Class B   Units in proportion to each such Partner’s respective Percentage Interest;   (iii) third, following the LTIP Unit Distribution Participation Date,   100% to the LTIP Unitholders pro rata until such time as the LTIP Unitholders have   received distributions per LTIP Unit pursuant to this Section 5.02(a)(iii) equal to the   difference of (A) the cumulative distributions paid on each OP Unit prior to the LTIP   Unit Distribution Participation Date and during the period the LTIP Unitholder held such   LTIP Unit, minus (B) the Concurrent LTIP Distribution paid on such LTIP Units; and   (iv) thereafter, 100% to the Partners holding OP Units, Class B Units   and/or LTIP Units pro rata and pari passu in proportion to each such Partner’s respective   Percentage Interest with respect to such OP Units, Class B Units and/or LTIP Units.   (b) Net Sales Proceeds.  Subject to the other provisions of this Article V and   to the provisions of Sections 14.03, 15.03 and 17.03, the General Partner shall cause the   Partnership to distribute Net Sales Proceeds, at such times and in such amounts as are, subject to   the terms and conditions of this Agreement, determined by the General Partner in its sole and     

 

   39      absolute discretion, to the Partners who are Partners on the Partnership Record Date with respect   to such quarter (or other distribution period), as follows:   (i) first, 100% to the Partners holding Series C Preferred Units, Series   D Preferred Units and/or Series F Preferred Units pro rata and pari passu in   proportion to their relative accrued and unpaid Series C Preferred Return, Series   D Preferred Return and/or Series F Preferred Return until such Partners have   received in the aggregate, pursuant to this Section 5.02(b)(i) and Section   5.02(a)(i), an amount such that the accrued but unpaid Series C Preferred Return   has been paid with respect to each such Series C Preferred Unit, the accrued but   unpaid Series D Preferred Return has been paid with respect to each such Series D   Preferred Unit and the accrued but unpaid Series F Preferred Return has been paid   with respect to each such Series F Preferred Unit; provided, that if there is both   Cash Available for Distribution and Net Sales Proceeds to be distributed, the   Partners holding Series C Preferred Units, Series D Preferred Units and/or Series   F Preferred Units first shall receive distributions of Cash Available for   Distribution pursuant to Section 5.02(a)(i) in order to satisfy the Series C   Preferred Return, Series D Preferred Return and/or Series F Preferred Return, and   then distributions of Net Sales Proceeds pursuant to this Section 5.01(b)(i); and   (ii) thereafter, 100% to the Partners holding OP Units, Class B Units   and/or LTIP Units pro rata and pari passu in proportion to each such Partner’s   respective Percentage Interest with respect to such OP Units, Class B Units and/or   LTIP Units; provided, that:   (1) to the extent the Average Class B Economic Capital   Account Balance of a holder of Class B Units is less than the OP Unit   Economic Balance, the Percentage Interest of such Partner holding Class   B Units with respect to such Class B Units shall be reduced for purposes   of determining its proportionate share of distributions pursuant to this   Section 5.02(b)(iii) to equal such Partner’s Percentage Interest with   respect to its Class B Units multiplied by a fraction, the numerator of   which is such Partner’s Average Class B Economic Capital Account   Balance, and the denominator of which is the OP Unit Economic Balance;   and    (2) to the extent the Average LTIP Economic Capital Account   Balance of a holder of LTIP Units is less than the OP Unit Economic   Balance, the Percentage Interest of such Partner holding LTIP Units with   respect to such LTIP Units shall be reduced for purposes of determining   its proportionate share of distributions pursuant to this Section 5.02(b)(iii)   to equal such Partner’s Percentage Interest with respect to its LTIP Units   multiplied by a fraction, the numerator of which is such Partner’s Average   LTIP Economic Capital Account Balance, and the denominator of which   is the OP Unit Economic Balance.     

 

   40      For the avoidance of doubt, any decrease in the Percentage Interest of a Partner   with respect to its Class B Units or LTIP Units shall result in a corresponding   increase in the Percentage Interests of Partners with respect to their OP Units (and   LTIP Units to the extent such LTIP Units are eligible for conversion pursuant to   Section 13.02(b) but have not been converted).   (c) If a new or existing Partner acquires additional Partnership Units in   exchange for a Capital Contribution on any date other than a Partnership Record Date, the cash   distribution attributable to such additional Partnership Units relating to the Partnership Record   Date next following the issuance of such additional Partnership Units shall be reduced in the   proportion to (i) the number of days that such additional Partnership Units are held by such   Partner bears to (ii) the number of days between such Partnership Record Date and the   immediately preceding Partnership Record Date.   (d) Notwithstanding any other provision of this Agreement, the General   Partner is authorized to take any action that it determines to be necessary or appropriate to cause   the Partnership to comply with any withholding requirements established under the Code or any   other federal, state or local law including, without limitation, pursuant to Sections 1441, 1442,   1445 and 1446 of the Code.  To the extent that the Partnership is required to withhold and pay   over to any taxing authority any amount with respect to a Partner, either (i) if the actual amount   to be distributed to the Partner (the “Distributable Amount”) equals or exceeds the Withheld   Amount, the entire Distributable Amount shall be treated as a distribution of cash to such   Partner, or (ii) if the Distributable Amount is less than the Withheld Amount, the Distributable   Amount shall be treated as a distribution of cash to such Partner and the excess of the Withheld   Amount over the Distributable Amount shall be treated as a Partnership Loan from the   Partnership to the Partner on the day the Partnership pays over such amount to a taxing authority.    A Partner shall repay a Partnership Loan upon the demand of the Partnership or, alternatively,   through withholding by the Partnership with respect to subsequent distributions to the applicable   Partner or assignee.  In the event that a Limited Partner fails to pay any amount owed to the   Partnership with respect to the Partnership Loan within 15 days after demand for payment   thereof is made by the Partnership on the Limited Partner, the General Partner, in its sole and   absolute discretion, may elect to make the payment to the Partnership on behalf of such   Defaulting Limited Partner.  In such event, on the date of payment, the General Partner shall be   deemed to have extended a General Partner Loan to the Defaulting Limited Partner in the   amount of the payment made by the General Partner and the General Partner shall succeed to all   rights and remedies of the Partnership against the Defaulting Limited Partner as to that amount.    Without limitation, the General Partner shall have the right to receive any distributions that   otherwise would be made by the Partnership to the Defaulting Limited Partner until such time as   the General Partner Loan has been paid in full, and any such distributions so received by the   General Partner shall be treated as having been received by the Defaulting Limited Partner and   immediately paid to the General Partner.   Any amounts treated as a Partnership Loan or a General Partner Loan pursuant to this   Section 5.02(d) shall bear interest at the lesser of (i) 300 basis points above the base rate on   corporate loans at large United States money center commercial banks, as published from time to   time in The Wall Street Journal, or (ii) the maximum lawful rate of interest on such obligation,     

 

   41      such interest to accrue from the date the Partnership or the General Partner, as applicable, is   deemed to extend the loan until such loan is repaid in full.   (e) In no event may a Partner receive a distribution of cash with respect to a   Partnership Unit if such Partner is entitled to receive a cash dividend as the holder of record of a   REIT Share for which all or part of such Partnership Unit has been or is being redeemed.   5.03 REIT Distribution Requirements.  The General Partner shall use commercially   reasonable efforts to cause the Partnership to distribute amounts sufficient to enable the General   Partner to pay distributions to its stockholders that will allow the General Partner to (i) meet its   distribution requirement for qualification as a REIT as set forth in Section 857 of the Code and   (ii) avoid any federal income or excise tax liability imposed by the Code, other than to the extent   the General Partner elects to retain and pay income tax on its net capital gain.   5.04 No Right to Distributions in Kind.  No Partner shall be entitled to demand   property other than cash in connection with any distributions by the Partnership.   5.05 Limitations on Distributions.  Notwithstanding any of the provisions of this   Agreement, no Partner shall have the right to receive, and the Partnership and the General   Partner shall not have the right to make, a distribution that violates the Act or other applicable   law.   5.06 Distributions Upon Liquidation.   (a) Upon liquidation of the Partnership, after the satisfaction of all the debts   and obligations of the Partnership, to the extent permitted by law, whether by payment or the   making of reasonable provision for payment thereof, any remaining assets of the Partnership   shall be distributed, subject to Section 5.07(b), first to the Partners holding Series C Preferred   Units, Series D Preferred Units and/or Series F Preferred Units pro rata in proportion to their   respective positive Capital Accounts and then to all Partners with positive Capital Accounts in   accordance with their respective positive Capital Accounts.   (b) For purposes of Section 5.06(a), the Capital Account of each Partner shall   be determined after making all adjustments in accordance with Sections 5.01, 5.02 and 5.07(b)   resulting from Partnership operations and from all sales and dispositions of all or any part of the   Partnership’s assets.   (c) Any distributions pursuant to this Section 5.06 shall be made within a   reasonable time as determined by the General Partner in its sole discretion.  To the extent   deemed advisable by the General Partner, appropriate arrangements (including the use of a   liquidating trust) may be made to assure that adequate funds are available to satisfy any   contingent debts or obligations of the Partnership.   (d) If any Partner (other than the AREP Limited Partner, the ARCA III   Limited Partner and the ARCA IV Limited Partner) has a deficit balance in its Capital Account   (after giving effect to all contributions, distributions and allocations for all taxable years,   including the year during which such liquidation occurs), such Partner shall have no obligation to   make any contribution to the capital of the Partnership with respect to such deficit, and such     

 

   42      deficit shall not be considered a debt owed to the Partnership or to any other Person for any   purpose whatsoever.  If the AREP Limited Partner, the ARCA III Limited Partner or the ARCA   IV Limited Partner has a deficit balance in its Capital Account attributable to and to the extent of   the special allocation of Depreciation to such Partner provided for in Section 5.01(c)(i) (after   giving effect to all contributions, distributions and allocations for all taxable years, including the   year liquidation occurs), such Limited Partner shall restore and contribute to the capital of the   Partnership the amount necessary to restore such deficit balance to zero, but not to exceed the   excess of the cumulative amount of Depreciation that has been specially allocated to the such   Limited Partner pursuant to Section 5.01(c)(i) over the cumulative amount of Net Property Gain   that has been allocated to such Limited Partner in accordance with Section 5.01(c)(ii). These   deficit restoration obligations are intended to comply with Section 1.704-1(b)(2)(ii)(b)(3) of the   Regulations and shall be satisfied before the later to occur of (x) the end of the taxable year in   which the Partnership (or the interest of AREP Limited Partner, the ARCA III Limited Partner or   the ARCA IV Limited Partner, as the case may be) is liquidated, or (y) ninety (90) days after the   date of the liquidation of the Partnership (or the interest of the AREP Limited Partner, the ARCA   III Limited Partner or the ARCA IV Limited Partner), which amount shall be paid to creditors of   the Partnership or, if the amount contributed exceeds the amount due creditors, shall be   distributed to the Partners with positive Capital Account balances.   5.07 Substantial Economic Effect  / Savings Clause.     (a) It is the intent of the Partners that the allocations of Net Income, Net Loss,   Net Property Gain and Net Property Loss under the Agreement have “substantial economic   effect” (or be consistent with the Partners’ interests in the Partnership in the case of the   allocation of losses attributable to nonrecourse debt) within the meaning of Section 704(b) of the   Code as interpreted by the Regulations promulgated pursuant thereto.  Article V and other   relevant provisions of this Agreement shall be interpreted in a manner consistent with such   intent.   (b) Notwithstanding anything to the contrary in this Agreement, it is the intent   of the Partners that the allocation provisions of Section 5.01 produce (a) final Capital Account   balances of the Partners holding Series C Preferred Units, Series D Preferred Units and/or Series   F Preferred Units with respect to such Series C Preferred Units, Series D Preferred Units and/or    Series F Preferred Units equal to the aggregate Series C Liquidation Amount, Series D   Liquidation Amount and/or Series F Liquidation Amount, plus any accrued but unpaid Series C   Preferred Return, Series D Preferred Return and/or Series F Preferred Return, for each such   Series C Preferred Unit, Series D Preferred Unit and/or Series F Preferred Unit and (b) final   Capital Account balances of the Partners holding OP Units, Class B Units and/or LTIP Units   with respect to such OP Units, Class B Units and/or LTIP Units equal to the amount such   Partners would receive with respect to their OP Units, Class B Units and/or LTIP Units pursuant   to Section 5.02(b).  To the extent the allocation provisions of Section 5.01 would fail to produce   such final Capital Account balances, (y) such provisions shall be amended by the General   Partner if and to the extent necessary to produce such result and (z) Net Income, Net Loss, Net   Property Gain, Net Property Loss and, to the extent necessary, individual items of income, gain,   loss and deduction, of the Partnership for prior open years shall be reallocated by the General   Partner, in its sole and absolute discretion, among the Partners to the extent it is not possible to   achieve such result with allocations of Net Income, Net Loss, Net Property Gain, Net Property     

 

   43      Loss and, to the extent necessary, individual items of income, gain, loss and deduction, of the   Partnership for the current year and future years.  This Section 5.07(b) shall control   notwithstanding any reallocation or adjustment of taxable Net Income, Net Loss, Net Property   Gain, Net Property Loss and, to the extent necessary, individual items of income, gain, loss and   deduction, of the Partnership by the Internal Revenue Service or any other taxing authority.  The   General Partner shall have the authority to amend this Agreement without the consent of the   Limited Partners, as it reasonably considers advisable, to make the allocations and adjustments   described in this Section 5.07(b).   ARTICLE VI   RIGHTS, OBLIGATIONS AND POWERS OF THE GENERAL PARTNER   6.01 Management of the Partnership.   (a) Except as otherwise expressly provided in this Agreement, the General   Partner shall have full, complete and exclusive discretion to manage and control the business of   the Partnership for the purposes herein stated, and shall make all decisions affecting the business   and assets of the Partnership.  Subject to the restrictions specifically contained in this Agreement,   the powers of the General Partner shall include, without limitation, the authority to take the   following actions on behalf of the Partnership:   (i) to acquire, purchase, own, operate, lease and dispose of any real   property and any other property or assets including, but not limited to, notes and   mortgages that the General Partner determines are necessary or appropriate in the   business of the Partnership;   (ii) to construct buildings and make other improvements on the   properties owned or leased by the Partnership;   (iii) to authorize, issue, sell, redeem or otherwise purchase any   Partnership Units or any securities (including secured and unsecured debt   obligations of the Partnership, debt obligations of the Partnership convertible into   any class or series of Partnership Units, or Rights relating to any class or series of   Partnership Units) of the Partnership;   (iv) to borrow or lend money for the Partnership, issue or receive   evidences of indebtedness in connection therewith, refinance, increase the amount   of, modify, amend or change the terms of, or extend the time for the payment of,   any such indebtedness, and secure indebtedness by mortgage, deed of trust,   pledge or other lien on the Partnership’s assets;   (v) to pay, either directly or by reimbursement, for all operating costs   and general administrative expenses of the Partnership to third parties or to the   General Partner or its Affiliates as set forth in this Agreement;   (vi) to guarantee or become a co-maker of indebtedness of any   Subsidiary of the General Partner or the Partnership, refinance, increase the   amount of, modify, amend or change the terms of, or extend the time for the     

 

   44      payment of, any such guarantee or indebtedness, and secure such guarantee or   indebtedness by mortgage, deed of trust, pledge or other lien on the Partnership’s   assets;   (vii) to use assets of the Partnership (including, without limitation, cash   on hand) for any purpose consistent with this Agreement, including, without   limitation, payment, either directly or by reimbursement, of all operating costs   and general and administrative expenses of the General Partner, the Partnership or   any Subsidiary of either, to third parties or to the General Partner as set forth in   this Agreement;   (viii) to lease all or any portion of any of the Partnership’s assets,   whether or not the terms of such leases extend beyond the termination date of the   Partnership and whether or not any portion of the Partnership’s assets so leased   are to be occupied by the lessee, or, in turn, subleased in whole or in part to   others, for such consideration and on such terms as the General Partner may   determine;   (ix) to prosecute, defend, arbitrate or compromise any and all claims or   liabilities in favor of or against the Partnership, on such terms and in such manner   as the General Partner may reasonably determine, and similarly to prosecute,   settle or defend litigation with respect to the Partners, the Partnership or the   Partnership’s assets;   (x) to file applications, communicate and otherwise deal with any and   all governmental agencies having jurisdiction over, or in any way affecting, the   Partnership’s assets or any other aspect of the Partnership’s business;   (xi) to make or revoke any election permitted or required of the   Partnership by any taxing authority;   (xii) to maintain such insurance coverage for public liability, fire and   casualty, and any and all other insurance for the protection of the Partnership, for   the conservation of Partnership assets, or for any other purpose convenient or   beneficial to the Partnership, in such amounts and such types, as it shall determine   from time to time;   (xiii) to determine whether or not to apply any insurance proceeds for   any property to the restoration of such property or to distribute the same;   (xiv) to establish one or more divisions of the Partnership, to hire and   dismiss employees of the Partnership or any division of the Partnership, and to   retain legal counsel, accountants, consultants, real estate brokers and such other   persons as the General Partner may deem necessary or appropriate in connection   with the Partnership business and to pay therefor such reasonable remuneration as   the General Partner may deem reasonable and proper;     

 

   45      (xv) to retain other services of any kind or nature in connection with the   Partnership business, and to pay therefor such remuneration as the General   Partner may deem reasonable and proper;   (xvi) to negotiate and conclude agreements on behalf of the Partnership   with respect to any of the rights, powers and authority conferred upon the General   Partner;   (xvii) to maintain accurate accounting records and to file promptly all   federal, state and local income tax returns on behalf of the Partnership;   (xviii) to distribute Partnership cash or other Partnership assets in   accordance with this Agreement;   (xix) to form or acquire an interest in, and contribute property to, any   further limited or general partnerships, joint ventures or other relationships that it   deems desirable (including, without limitation, the acquisition of interests in, and   the contributions of property to, its Subsidiaries and any other Person in which it   has an equity interest from time to time);   (xx) to establish Partnership reserves for working capital, capital   expenditures, contingent liabilities or any other valid Partnership purpose;   (xxi) subject to Section 11.02, to merge, consolidate or combine the   Partnership with or into another Person;   (xxii) to do any and all acts and things necessary or prudent to ensure   that the Partnership will not be classified as a “publicly traded partnership”   taxable as a corporation under Section 7704 of the Code;   (xxiii) to take such other action, execute, acknowledge, swear to or   deliver such other documents and instruments, and perform any and all other acts   that the General Partner deems necessary or appropriate for the formation,   continuation and conduct of the business and affairs of the Partnership and to   possess and enjoy all of the rights and powers of a general partner as provided by   the Act; and   (xxiv) to take such other action, execute, acknowledge, swear to or   deliver such other documents and instruments, and perform any and all other acts   that the General Partner deems necessary or appropriate such that the General   Partner shall continue to satisfy the requirements for qualification as a REIT   under the Code and Regulations (“REIT Requirements”) and avoid any federal   income or excise tax liability; provided, however, the General Partner shall not be   bound to comply with this covenant to the extent any distributions required to be   made in order to satisfy the REIT Requirements would violate the Act or other   applicable law or contravene the terms of any notes, mortgages or other types of   debt obligations to which the Partnership may be subject in conjunction with   borrowed funds.     

 

   46      (b) Except as otherwise provided herein or in the Act, to the extent the duties   of the General Partner require expenditures of funds to be paid to third parties, the General   Partner shall not have any obligations hereunder except to the extent that Partnership funds are   reasonably available to it for the performance of such duties, and nothing herein contained shall   be deemed to authorize or require the General Partner, in its capacity as such, to expend its   individual funds for payment to third parties or to undertake any individual liability or obligation   on behalf of the Partnership.   6.02 Delegation of Authority.  The General Partner may delegate any or all of its   powers, rights and obligations hereunder, and may appoint, employ, contract or otherwise deal   with any Person for the transaction of the business of the Partnership, which Person may, under   supervision of the General Partner, perform any acts or services for the Partnership as the   General Partner may approve.   6.03 Indemnification and Exculpation of Indemnitees.   (a) To the fullest extent permitted by law, the Partnership shall indemnify an   Indemnitee from and against any and all losses, claims, damages, liabilities, joint or several,   expenses (including reasonable legal fees and expenses), judgments, fines, settlements, and other   amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal,   administrative or investigative, that relate to the operations of the Partnership as set forth in this   Agreement in which any Indemnitee may be involved, or is threatened to be involved, as a party   or otherwise, unless it is established that:  (i) the act or omission of the Indemnitee was material   to the matter giving rise to the proceeding and either was committed in bad faith or was the result   of active and deliberate dishonesty; (ii) the Indemnitee actually received an improper personal   benefit in money, property or services; or (iii) in the case of any criminal proceeding, the   Indemnitee had reasonable cause to believe that the act or omission was unlawful.  The parties   hereto agree, that the termination of any proceeding by judgment, order or settlement does not   create a presumption that the Indemnitee did not meet the requisite standard of conduct set forth   in this Section 6.03(a).  The parties hereto agree, that the termination of any proceeding by   conviction or upon a plea of nolo contendere or its equivalent, or an entry of an order of   probation prior to judgment, creates a rebuttable presumption that the Indemnitee acted in a   manner contrary to that specified in this Section 6.03(a).  Any indemnification pursuant to this   Section 6.03 shall be made only out of the assets of the Partnership.   (b) The Partnership shall reimburse an Indemnitee for reasonable expenses   incurred by an Indemnitee who is a party to a proceeding in advance of the final disposition of   the proceeding upon receipt by the Partnership of (i) a written affirmation by the Indemnitee of   the Indemnitee’s good faith belief that the standard of conduct necessary for indemnification by   the Partnership as authorized in this Section 6.03 has been met, and (ii) a written undertaking by   or on behalf of the Indemnitee to repay the amount if it shall ultimately be determined that the   standard of conduct has not been met.   (c) The indemnification provided by this Section 6.03 shall be in addition to   any other rights to which an Indemnitee or any other Person may be entitled under any   agreement, pursuant to any vote of the Partners, as a matter of law or otherwise, and shall   continue as to an Indemnitee who has ceased to serve in such capacity.     

 

   47      (d) The Partnership may purchase and maintain insurance, as an expense of   the Partnership, on behalf of the Indemnitees and such other Persons as the General Partner shall   determine, against any liability that may be asserted against or expenses that may be incurred by   such Person in connection with the Partnership’s activities, regardless of whether the Partnership   would have the power to indemnify such Person against such liability under the provisions of   this Agreement.   (e) For purposes of this Section 6.03, the Partnership shall be deemed to have   requested an Indemnitee to serve as fiduciary of an employee benefit plan whenever the   performance by it of its duties to the Partnership also imposes duties on, or otherwise involves   services by, it to the plan or participants or beneficiaries of the plan; excise taxes assessed on an   Indemnitee with respect to an employee benefit plan pursuant to applicable law shall constitute   fines within the meaning of this Section 6.03; and actions taken or omitted by the Indemnitee   with respect to an employee benefit plan in the performance of its duties for a purpose   reasonably believed by it to be in the interest of the participants and beneficiaries of the plan   shall be deemed to be for a purpose that is not opposed to the best interests of the Partnership.   (f) In no event may an Indemnitee subject the Limited Partners to personal   liability by reason of the indemnification provisions set forth in this Agreement.   (g) An Indemnitee shall not be denied indemnification in whole or in part   under this Section 6.03 because the Indemnitee had an interest in the transaction with respect to   which the indemnification applies if the transaction was otherwise permitted by the terms of this   Agreement.   (h) The provisions of this Section 6.03 are for the benefit of the Indemnitees,   their heirs, successors, assigns and administrators and shall not be deemed to create any rights   for the benefit of any other Persons.   (i) Any amendment, modification or repeal of this Section 6.03 or any   provision hereof shall be prospective only and shall not in any way affect the indemnification of   an Indemnitee by the Partnership under this Section 6.03 as in effect immediately prior to such   amendment, modification or repeal with respect to matters occurring, in whole or in part, prior to   such amendment, modification or repeal, regardless of when claims relating to such matters may   arise or be asserted.   6.04 Liability of the General Partner.   (a) Notwithstanding anything to the contrary set forth in this Agreement, no   Indemnitee shall be liable for monetary damages to the Partnership or any Partners for losses   sustained or liabilities incurred as a result of errors in judgment or mistakes of fact or law or of   any act or omission if any such party acted in good faith.  Notwithstanding any provision of this   Agreement or otherwise applicable provision of law or equity, the General Partner shall not be in   breach of any duty (fiduciary or otherwise) that the General Partner may owe to the Limited   Partners or the Partnership or any other Persons bound by this Agreement provided the General   Partner, acting in good faith, abides by the terms of this Agreement.     

 

   48      (b) Notwithstanding any provision of this Agreement or otherwise applicable   provision of law or equity, the Limited Partners expressly acknowledge that the General Partner   is acting for the benefit of the Partnership, the Limited Partners and the General Partner’s   stockholders collectively, and that, to the fullest extent permitted by law, the General Partner has   no duty (fiduciary or otherwise) and is under no obligation to consider the separate interests of   the Limited Partners (including, without limitation, the tax consequences to Limited Partners or   the tax consequences of some, but not all, of the Limited Partners) in deciding whether to cause   the Partnership to take (or decline to take) any actions.  In the event of a conflict between the   interests of the stockholders of the General Partner on the one hand and the Limited Partners on   the other, the General Partner shall endeavor in good faith to resolve the conflict in a manner not   adverse to either the stockholders of the General Partner or the Limited Partners; provided,   however, that for so long as the General Partner owns a controlling interest in the Partnership,   any such conflict that the General Partner, in its sole and absolute discretion, determines cannot   be resolved in a manner not adverse to either the stockholders of the General Partner or the   Limited Partners shall be resolved in favor of the stockholders of the General Partner.  The   General Partner shall not be liable to the Partners or the Partnership for monetary damages for   losses sustained, liabilities incurred or benefits not derived by the Limited Partners or the   Partnership in connection with such decisions.   (c) Subject to its obligations and duties as General Partner set forth in   Section 6.01 hereof, the General Partner may exercise any of the powers granted to it under this   Agreement and perform any of the duties imposed upon it hereunder either directly or by or   through its agents.  The General Partner shall not be responsible or liable to the Limited Partners   or the Partnership for any misconduct or negligence on the part of any such agent appointed by it   in good faith.   (d) Notwithstanding any other provisions of this Agreement or the Act, any   action of the General Partner on behalf of the Partnership or any decision of the General Partner   to refrain from acting on behalf of the Partnership, undertaken in the good faith belief that such   action or omission is necessary or advisable in order (i) to protect the ability of the General   Partner to continue to qualify as a REIT or (ii) to prevent the General Partner from incurring any   taxes under Section 857, Section 4981 or any other provision of the Code, is expressly   authorized under this Agreement and is deemed approved by all of the Limited Partners.   (e) Any amendment, modification or repeal of this Section 6.04 or any   provision hereof shall be prospective only and shall not in any way affect the limitations on the   General Partner’s or any of its officer’s, director’s, agent’s or employee’s liability to the   Partnership and the Limited Partners under this Section 6.04 as in effect immediately prior to   such amendment, modification or repeal with respect to matters occurring, in whole or in part,   prior to such amendment, modification or repeal, regardless of when claims relating to such   matters may arise or be asserted.   6.05 Partnership Obligations.   (a) Except as provided in this Section 6.05 and elsewhere in this Agreement   (including the provisions of Articles V and VI hereof regarding distributions, payments and     

 

   49      allocations to which it may be entitled), the General Partner shall not be compensated for its   services as general partner of the Partnership.   (b) All Administrative Expenses shall be obligations of the Partnership, and   the General Partner shall be entitled to reimbursement by the Partnership for any expenditure   (including Administrative Expenses) incurred on behalf of the Partnership that shall be made   other than out of the funds of the Partnership.   6.06 Outside Activities.  Subject to Section 6.08 hereof, the Charter and any   agreements entered into by the General Partner or its Affiliates with the Partnership or a   Subsidiary, any officer, director, employee, agent, trustee, Affiliate or stockholders of the   General Partner and the General Partner shall be entitled to and may have business interests and   engage in business activities in addition to those relating to the Partnership, including business   interests and activities substantially similar or identical to those of the Partnership, and the   doctrine of corporate opportunity or any analogous doctrine shall not apply to such business   interest or activities.  Neither the Partnership nor any of the Limited Partners shall have any   rights by virtue of this Agreement in any such business ventures, interest or activities.  None of   the Limited Partners nor any other Person bound by this Agreement shall have any rights by   virtue of this Agreement or the partnership relationship established hereby in any such business   ventures, interests or activities, and the General Partner, (i) shall have no duty or obligation   (fiduciary or otherwise) pursuant to this Agreement to offer any interest in any such business   ventures, interests and activities to the Partnership or any Limited Partner, even if such   opportunity is of a character that, if presented to the Partnership or any Limited Partner, could be   taken by such Person, and (ii) shall not be liable to the Partnership or to the Limited Partners for   breach of any fiduciary or other duty existing at law, in equity or otherwise by reason of the fact   that the General Partner pursues or acquires for, or directs such business ventures, interests or   activities to another Person or does not communicate such opportunity or information to the   Partnership.   6.07 Employment or Retention of Affiliates.   (a) Any Affiliate of the General Partner may be employed or retained by the   Partnership and may otherwise deal with the Partnership (whether as a buyer, lessor, lessee,   manager, furnisher of goods or services, broker, agent, lender or otherwise) and may receive   from the Partnership any compensation, price or other payment therefor that the General Partner   determines to be fair and reasonable.   (b) The Partnership may lend or contribute to its Subsidiaries or other Persons   in which it has an equity investment, and such Persons may borrow funds from the Partnership,   on terms and conditions established in the sole and absolute discretion of the General Partner.    The foregoing authority shall not create any right or benefit in favor of any Subsidiary or any   other Person.   (c) The Partnership may transfer assets to joint ventures, other partnerships,   corporations or other business entities in which it is or thereby becomes a participant upon such   terms and subject to such conditions as the General Partner deems are consistent with this   Agreement and applicable law.     

 

   50      6.08 General Partner Activities.  The General Partner agrees that, generally, all   business activities of the General Partner, including activities pertaining to the acquisition,   development, ownership of or investment in single tenant freestanding commercial real estate   and related assets, shall be conducted through the Partnership or one or more Subsidiary   Partnerships; provided, however, that, subject to Section 4.02(a)(ii), the General Partner may   make direct acquisitions or undertake business activities if such acquisitions or activities are   made in connection with the issuance of Additional Securities by the General Partner or the   business activity has been approved by a majority of the Independent Directors.   6.09 Title to Partnership Assets.  Title to Partnership assets, whether real, personal or   mixed and whether tangible or intangible, shall be deemed to be owned by the Partnership as an   entity, and no Partner, individually or collectively, shall have any ownership interest in such   Partnership assets or any portion thereof.  Title to any or all of the Partnership assets may be held   in the name of the Partnership, the General Partner or one or more nominees, as the General   Partner may determine, including Affiliates of the General Partner.  The General Partner hereby   declares and warrants that any Partnership assets for which legal title is held in the name of the   General Partner or any nominee or Affiliate of the General Partner shall be held by the General   Partner for the use and benefit of the Partnership in accordance with the provisions of this   Agreement; provided, however, that the General Partner shall use its best efforts to cause   beneficial and record title to such assets to be vested in the Partnership as soon as reasonably   practicable.  All Partnership assets shall be recorded as the property of the Partnership in its   books and records, irrespective of the name in which legal title to such Partnership assets is held.   6.10 Redemption of General Partner’s Partnership Units.  In the event the General   Partner redeems or repurchases any REIT Shares, then the General Partner shall cause the   Partnership to purchase from the General Partner a number of Partnership Units as determined   based on the application of the Conversion Factor on the same terms that the General Partner   redeemed such REIT Shares.  Moreover, if the General Partner makes a cash tender offer or   other offer to acquire REIT Shares, then the General Partner shall cause the Partnership to make   a corresponding offer to the General Partner to acquire an equal number of Partnership Units   held by the General Partner.  In the event any REIT Shares are redeemed or repurchased by the   General Partner pursuant to such offer, the Partnership shall redeem or repurchase an equivalent   number of the General Partner’s Partnership Units for an equivalent purchase price based on the   application of the Conversion Factor.   ARTICLE VII   CHANGES IN GENERAL PARTNER   7.01 Transfer of the General Partner’s Partnership Interest.   (a) The General Partner shall not transfer all or any portion of its General   Partner Interests, and the General Partner shall not withdraw as General Partner, except as   provided in or in connection with a transaction contemplated by Section 7.01(c) hereof.   (b) The General Partner agrees that its General Partner Interest will at all   times be in the aggregate at least 0.1% of the Partnership Interests.     

 

   51      (c) Notwithstanding anything in this Section 7.01, the General Partner may   transfer all or any portion of its General Partner Interest to any wholly owned Subsidiary of the   General Partner that is (i) a state law corporation or is eligible to make, and has validly made, an   election pursuant to Treas. Regs. Sec. 301.7701-3 to be treated as an association taxable as a   corporation for U.S. federal income tax purposes (ii) a TRS, or (iii) an entity that is wholly   owned by the General Partner and treated as disregarded for federal income tax purposes, and   following a transfer of all of its General Partner Interest, may withdraw as General Partner.  In   the event that the General Partner transfers its entire General Partner Interest and the transferee is   admitted to the Partnership as a substitute General Partner in accordance with this Agreement,   such transferee shall be deemed admitted to the Partnership as a General Partner immediately   prior to the transfer and such transferee shall continue the business of the Partnership without   dissolution.   7.02 Merger of General Partner.   (a) Except as otherwise provided in Section 7.02(b) or (c) hereof, the General   Partner shall not engage in any merger, consolidation or other combination with or into another   Person or sale of all or substantially all of its assets (other than in connection with a change in   the General Partner’s state of incorporation or organizational form), in each case which results in   a Change of Control of the General Partner (a “Transaction”), unless at least one of the   following conditions is met:   (i) the consent of a Majority in Interest (other than the Percentage   Interest held by the General Partner or any Subsidiary of the General Partner) is   obtained;   (ii) as a result of such Transaction, all Limited Partners will receive, or   have the right to receive, for each Partnership Unit held by such Limited Partners   an amount of cash, securities or other property equal in value to the product of the   Conversion Factor and the greatest amount of cash, securities or other property   paid in the Transaction to a holder of one REIT Share in consideration of one   REIT Share, provided, that if, in connection with such Transaction, a purchase,   tender or exchange offer (“Offer”) shall have been made to and accepted by the   holders of more than 50% of the outstanding REIT Shares, each holder of   Partnership Units (other than the General Partner and any Subsidiary of the   General Partner) shall be given the option to exchange its Partnership Units for   the greatest amount of cash, securities or other property that such Limited Partner   would have received had it (A) exercised its OP Unit Redemption Right pursuant   to Section 8.04 hereof and (B) sold, tendered or exchanged pursuant to the Offer   the REIT Shares received upon exercise of the OP Unit Redemption Right   immediately prior to the expiration of the Offer; or   (iii) the General Partner is the surviving entity in the Transaction and   either (A) the holders of REIT Shares do not receive cash, securities or other   property in the Transaction or (B) all Limited Partners receive for each   Partnership Unit held by such Limited Partners an amount of cash, securities or   other property (expressed as an amount per REIT Share) that is no less in value     

 

   52      than the product of the Conversion Factor and the greatest amount of cash,   securities or other property (expressed as an amount per REIT Share) received in   the Transaction by any holder of REIT Shares.   (b) Notwithstanding Section 7.02(a) hereof, the General Partner may merge   with or into or consolidate with another entity if immediately after such merger or consolidation   (i) substantially all of the assets of the successor or surviving entity (the “Survivor”), other than   Partnership Units held by the General Partner, are contributed, directly or indirectly, to the   Partnership as a Capital Contribution in exchange for Partnership Units with a fair market value   equal to the value of the assets so contributed as determined by the Survivor in good faith and (ii)   the Survivor expressly agrees to assume all obligations of the General Partner hereunder.    Notwithstanding any provision of this Agreement and without the consent of any other person,   upon such contribution and assumption, (i) for all purposes of this Agreement, if the General   Partner is not the Survivor, the Survivor, shall be deemed to be the “General Partner” hereunder   and shall be deemed to be admitted as the general partner of the Partnership, upon its execution   of a counterpart to this Agreement, effective simultaneously with the merger or consolidation,   (ii) the Survivor shall continue the business of the Partnership without dissolution, and (iii) the   Survivor shall have the right and duty to amend this Agreement as set forth in this Section   7.02(b) or in any other manner, if applicable, to reflect the change in the general partner of the   Partnership.  The Survivor shall in good faith arrive at a new method for the calculation of the   Cash Amount, the REIT Shares Amount and Conversion Factor for a Partnership Unit after any   such merger or consolidation so as to approximate the existing method for such calculation as   closely as reasonably possible.  Such calculation shall take into account, among other things, the   kind and amount of securities, cash and other property that was receivable upon such merger or   consolidation by a holder of REIT Shares or options, warrants or other rights relating thereto,   and which a holder of Partnership Units could have acquired had such Partnership Units been   exchanged immediately prior to such merger or consolidation.  Such amendment to this   Agreement shall provide for adjustment to such method of calculation, which shall be as nearly   equivalent as may be practicable to the adjustments provided for with respect to the Conversion   Factor.  The Survivor also shall in good faith modify the definition of REIT Shares and make   such amendments to Section 8.04 hereof so as to approximate the existing rights and obligations   set forth in Section 8.04 hereof as closely as reasonably possible.  The above provisions of this   Section 7.02(b) shall similarly apply to successive mergers or consolidations permitted   hereunder.   Notwithstanding anything in this Section 7.02, the General Partner may engage in a   transaction required by law or by the rules of any national securities exchange or   over-the-counter interdealer quotation system on which the REIT Shares are listed or traded.   7.03 Admission of a Substitute or Additional General Partner.  A Person shall be   admitted as a substitute or additional General Partner of the Partnership only if the following   terms and conditions are satisfied:   (a) the Person to be admitted as a substitute or additional General Partner   shall have accepted and agreed to be bound by all the terms and provisions of this Agreement by   executing a counterpart hereof, and an amendment to the Certificate of Limited Partnership of     

 

   53      the Partnership evidencing the admission of such Person as a General Partner shall have been   filed with the office of the Secretary of State of the State of Delaware;   (b) if the Person to be admitted as a substitute or additional General Partner is   a corporation or a partnership, it shall have provided the Partnership with evidence satisfactory to   counsel for the Partnership of such Person’s authority to become a General Partner and to be   bound by the terms and provisions of this Agreement; and   (c) counsel for the Partnership shall have rendered an opinion (relying on   such opinions from other counsel as may be necessary) that the admission of the Person to be   admitted as a substitute or additional General Partner is in conformity with the Act, that none of   the actions taken in connection with the admission of such Person as a substitute or additional   General Partner will cause (i) the Partnership to be classified other than as a partnership for   federal income tax purposes, or (ii) the loss of any Limited Partner’s limited liability.   7.04 Effect of Bankruptcy, Withdrawal, Death or Dissolution of General Partner.   (a) Upon the occurrence of an Event of Bankruptcy as to the General Partner   (and its removal pursuant to Section 7.05(a) hereof) or the withdrawal, removal or dissolution of   the General Partner or any other event that results in the General Partner ceasing to be a general   partner of the Partnership under the Act, the Partnership shall be dissolved and its affairs wound   up unless the business of the Partnership is continued pursuant to Section 7.04(b) hereof.    Notwithstanding anything in this Agreement to the contrary, any successor to the General Partner   by merger or consolidation in compliance with Section 7.02(b) shall, without further act of any   Person, be the General Partner hereunder, and such merger or consolidation shall not constitute a   transfer for purposes of this Agreement and the Partnership shall continue without dissolution.   (b) Following the occurrence of an Event of Bankruptcy as to the General   Partner (and its removal pursuant to Section 7.05(a) hereof) or the withdrawal, removal or   dissolution of the General Partner or any other event that resulting the General Partner ceasing to   be a general partner of the Partnership under the Act, the Partnership shall not be dissolved or   wound up if the Limited Partners, within 90 days after such occurrence, elect to continue the   business of the Partnership for the balance of the term specified in Section 2.04 hereof by   selecting effective as of such occurrence, subject to Section 7.03 hereof in writing or vote, a   substitute General Partner by consent of a Majority in Interest.  Any substitute General Partner   selected by the Limited Partners in accordance with this Section 7.05(b) and admitted to the   Partnership in accordance with Section 7.03, shall be deemed admitted to the Partnership   effective simultaneously with the occurrence of the event that caused the General Partner to   cease to be a general partner of the Partnership.  If the Limited Partners elect to continue the   business of the Partnership and admit a substitute General Partner, the relationship with the   Partners and of any Person who has acquired an interest of a Partner in the Partnership shall be   governed by this Agreement.   7.05 Removal of General Partner.   (a) Upon the occurrence of an Event of Bankruptcy as to, or the dissolution   of, the General Partner, the General Partner shall be deemed to be removed automatically.  To     

 

   54      the fullest extent permitted by law, the Limited Partners may not remove the General Partner,   with or without cause.   (b) If the General Partner has been removed pursuant to this Section 7.05 and   the Partnership is continued pursuant to Section 7.04 hereof, the General Partner shall promptly   transfer and assign its General Partner Interest in the Partnership to the substitute General Partner   approved by a Majority in Interest in accordance with Section 7.04(b) hereof and otherwise be   admitted to the Partnership in accordance with Section 7.03 hereof.  At the time of assignment,   the removed General Partner shall be entitled to receive from the substitute General Partner the   fair market value of the General Partner Interest of such removed General Partner as reduced by   any damages caused to the Partnership by such General Partner.  Such fair market value shall be   determined by an appraiser mutually agreed upon by the General Partner and a Majority in   Interest within ten days following the removal of the General Partner.  In the event that the   parties are unable to agree upon an appraiser, the removed General Partner and a Majority in   Interest each shall select an appraiser.  Each such appraiser shall complete an appraisal of the fair   market value of the removed General Partner’s General Partner Interest within 30 days of the   General Partner’s removal, and the fair market value of the removed General Partner’s General   Partner Interest shall be the average of the two appraisals; provided, however, that if the higher   appraisal exceeds the lower appraisal by more than 20% of the amount of the lower appraisal, the   two appraisers, no later than 40 days after the removal of the General Partner, shall select a third   appraiser who shall complete an appraisal of the fair market value of the removed General   Partner’s General Partner Interest no later than 60 days after the removal of the General Partner.    In such case, the fair market value of the removed General Partner’s General Partner Interest   shall be the average of the two appraisals closest in value.   (c) The General Partner Interest of a removed General Partner, during the   time after default until transfer under Section 7.05(b) hereof, shall be converted to that of a   special Limited Partner; provided, however, such removed General Partner shall not have any   rights to participate in the management and affairs of the Partnership, and shall not be entitled to   any portion of the income, expense, profit, gain or loss allocations or cash distributions allocable   or payable, as the case may be, to the Limited Partners.  Instead, such removed General Partner   shall receive and be entitled only to retain distributions or allocations of such items that it would   have been entitled to receive in its capacity as General Partner, until the transfer is effective   pursuant to Section 7.05(b) hereof.   (d) Notwithstanding any other provision of this Agreement, for so long as the   General Partner is treated as a REIT for U.S. federal income tax purposes, to the fullest extent   permitted by law, the General Partner shall not be removed unless (a) the General Partner’s   economic interest in the Partnership shall be simultaneously transferred to another entity that is   either (i) not an Affiliate of the General Partner or (ii) a TRS or (b) such removal would not   otherwise result in the Partnership having only one partner for U.S. federal income tax purposes.   (e) All Partners shall have given and hereby do give such consents, shall take   such actions and shall execute such documents as shall be legally necessary and sufficient to   effect all the foregoing provisions of this Section 7.05.     

 

   55      ARTICLE VIII   RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS   8.01 Management of the Partnership.  The Limited Partners shall not participate in   the management or control of Partnership business nor shall they transact any business for the   Partnership, nor shall they have the power to sign for or bind the Partnership, such powers being   vested solely and exclusively in the General Partner.  Notwithstanding anything to the contrary   contained in this Agreement, none of the actions taken by any of the Limited Partners hereunder   shall constitute participation in the control of the business of the Partnership within the meaning   of the Act.   8.02 Power of Attorney.  Each Limited Partner hereby irrevocably appoints the   General Partner its true and lawful attorney-in-fact, who may act for each Limited Partner and in   its name, place and stead, and for its use and benefit, to sign, acknowledge, swear to, deliver, file   or record, at the appropriate public offices, any and all documents, certificates and instruments as   may be deemed necessary or desirable by the General Partner to carry out fully the provisions of   this Agreement and the Act in accordance with their terms, including duly adapted amendments   hereto, which power of attorney is coupled with an interest and shall survive and not be affected   by the subsequent death, dissolution or legal incapacity of the Limited Partner, or the transfer by   the Limited Partner of any part or all of its Partnership Interest.  This power of attorney may be   exercised by such attorney-in-fact for all Limited Partners (or any of them) by a single signature   of the General Partner acting as attorney-in-fact with or without listing all of the Limited   Partners executing an instrument.   8.03 Limitation on Liability of Limited Partners.  No Limited Partner, in its   capacity as such, shall be liable for any debts, liabilities, contracts or obligations of the   Partnership.  Except as otherwise provided in this Agreement or under the Act, a Limited Partner   shall be liable to the Partnership only to make payments of its Capital Contribution, if any, as   and when due hereunder.  After its Capital Contribution is fully paid, no Limited Partner shall,   except as otherwise required by the Act or as otherwise provided for herein, be required to make   any further Capital Contributions or other payments or lend any funds to the Partnership.   8.04 OP Unit Redemption Right.   (a) Subject to Sections 8.04(b), (c), (d), (e), (f) and (g) hereof, the penultimate   sentence of this Section 8.04(a), and the provisions of any agreements between the Partnership   and one or more Limited Partners with respect to OP Units held by them, each Limited Partner   shall have the right (the “OP Unit Redemption Right”) to require the Partnership to redeem on   a Specified Redemption Date all or a portion of the OP Units held by such Limited Partner at a   redemption price equal to and in the form of the OP Unit Redemption Amount to be paid by the   Partnership, provided, that such OP Units (including, for the avoidance of doubt, any OP Units   issued to such Limited Partners as a result of any merger, consolidation or other business   combination or reorganization to which the Partnership and/or the General Partner is a party)   shall have been outstanding for at least one year (or such lesser time as determined by the   General Partner in its sole and absolute discretion), which period shall include the period that   Partnership Units that were converted into such OP Units were held, and subject to any   restriction agreed to in writing between the Redeeming Limited Partner and the General Partner.      

 

   56      The OP Unit Redemption Right shall be exercised pursuant to a Notice of Exercise of   Redemption Right in substantially the form attached hereto as Exhibit B delivered to the   Partnership (with a copy to the General Partner) by the Limited Partner who is exercising the OP   Unit Redemption Right (the “Redeeming Limited Partner”); provided, however, that the   Partnership shall, in its sole and absolute discretion, have the option to deliver either the Cash   Amount or the REIT Shares Amount; provided, further, that the Partnership shall not be   obligated to satisfy such OP Unit Redemption Right if the General Partner elects to purchase the   OP Units subject to the Notice of Redemption; and provided, further, that no Limited Partner   may deliver more than two Notices of Redemption during each calendar year.  A Limited Partner   may not exercise the OP Unit Redemption Right for less than one thousand (1,000) OP Units or,   if such Limited Partner holds less than one thousand (1,000) OP Units, all of the OP Units held   by such Limited Partner.  Each of the AREP Limited Partner, the ARCA III Limited Partner and   the ARCA IV Limited Partner shall not be permitted to exercise the OP Unit Redemption Right   unless and until such Partner does not have a deficit balance in its Capital Account.  The   Redeeming Limited Partner shall have no right, with respect to any OP Units so redeemed, to   receive any distribution paid with respect to OP Units if the record date for such distribution is   on or after the Specified Redemption Date.   (b) Notwithstanding the provisions of Section 8.04(a) hereof, a Limited   Partner that exercises the OP Unit Redemption Right shall be deemed to have offered to sell the   OP Units described in the Notice of Redemption to the General Partner, and the General Partner   may, in its sole and absolute discretion, elect to purchase directly and acquire such OP Units by   paying to the Redeeming Limited Partner either the Cash Amount or the REIT Shares Amount,   as elected by the General Partner (in its sole and absolute discretion), on the Specified   Redemption Date, whereupon the General Partner shall acquire the OP Units offered for   redemption by the Redeeming Limited Partner and shall be treated for all purposes of this   Agreement as the owner of such OP Units.  If the General Partner shall elect to exercise its right   to purchase OP Units under this Section 8.04(b) with respect to a Notice of Redemption, it shall   so notify the Redeeming Limited Partner within five business days after the receipt by the   General Partner of such Notice of Redemption.   In the event the General Partner shall exercise its right to purchase OP Units with respect   to the exercise of a OP Unit Redemption Right, the Partnership shall have no obligation to pay   any amount to the Redeeming Limited Partner with respect to such Redeeming Limited Partner’s   exercise of such OP Unit Redemption Right, and each of the Redeeming Limited Partner, the   Partnership and the General Partner shall treat the transaction between the General Partner and   the Redeeming Limited Partner for federal income tax purposes as a sale of the Redeeming   Limited Partner’s OP Units to the General Partner.  Each Redeeming Limited Partner agrees to   execute such documents as the General Partner may reasonably require in connection with the   issuance of REIT Shares upon exercise of the OP Unit Redemption Right.   (c) Notwithstanding the provisions of Section 8.04(a) and 8.04(b) hereof, a   Limited Partner shall not be entitled to exercise the OP Unit Redemption Right if the delivery of   REIT Shares to such Limited Partner on the Specified Redemption Date by the General Partner   pursuant to Section 8.04(b) hereof (regardless of whether or not the General Partner would in   fact exercise its rights under Section 8.04(b) hereof) would (i) result in such Limited Partner or   any other Person owning, directly or indirectly, REIT Shares in excess of the Aggregate Share     

 

   57      Ownership Limit or any Excepted Holder Limit (each as defined in Charter) and calculated in   accordance therewith, except as provided in the Charter, (ii) result in REIT Shares being owned   by fewer than 100 persons (determined without reference to any rules of attribution), (iii) result   in the General Partner being “closely held” within the meaning of Section 856(h) of the Code,   (iv) cause the General Partner to own, actually or constructively, 10% or more of the ownership   interests in a tenant (other than a TRS) of the General Partner’s, the Partnership’s or a Subsidiary   Partnership’s real property, within the meaning of Section 856(d)(2)(B) of the Code, (v)   otherwise cause the General Partner to fail to qualify as a REIT under the Code, or (vi) cause the   acquisition of REIT Shares by such Limited Partner to be “integrated” with any other distribution   of REIT Shares or OP Units for purposes of complying with the registration provisions of the   Securities Act.  The General Partner, in its sole and absolute discretion and without the consent   of any other Partner or Person, may waive the restriction on redemption set forth in this Section   8.04(c).   (d) Any Cash Amount to be paid to a Redeeming Limited Partner pursuant to   this Section 8.04 shall be paid on the Specified Redemption Date; provided, however, that the   General Partner may elect to cause the Specified Redemption Date to be delayed for up to an   additional 90 days to the extent required for the General Partner to cause additional REIT Shares   to be issued to provide financing to be used to make such payment of the Cash Amount.  Any   REIT Share Amount to be paid to a Redeeming Limited Partner pursuant to this Section 8.04   shall be paid on the Specified Redemption Date; provided, however, that the General Partner   may elect to cause the Specified Redemption Date to be delayed for up to an additional 60 days   to the extent required for the General Partner to cause additional REIT Shares to be issued.    Notwithstanding the foregoing, the General Partner agrees to use its reasonable best efforts to   cause the closing of the acquisition of redeemed OP Units hereunder to occur as quickly as   reasonably possible.   (e) Notwithstanding any other provision of this Agreement, the General   Partner is authorized to take any action that it determines to be necessary or appropriate to cause   the Partnership to comply with any withholding requirements established under the Code or any   other federal, state or local law that apply upon a Redeeming Limited Partner’s exercise of the   OP Unit Redemption Right.  If a Redeeming Limited Partner believes that it is exempt from such   withholding upon the exercise of the OP Unit Redemption Right, such Partner must furnish the   General Partner with a FIRPTA Certificate in substantially the form attached hereto as   Exhibit C-1 or Exhibit C-2 and any other documentation reasonably requested by the General   Partner.  If the Partnership or the General Partner is required to withhold and pay over to any   taxing authority any amount upon a Redeeming Limited Partner’s exercise of the OP Unit   Redemption Right and if the OP Unit Redemption Amount equals or exceeds the Withheld   Amount, the Withheld Amount shall be treated as an amount received by such Partner in   redemption of its OP Units.  If, however, the OP Unit Redemption Amount is less than the   Withheld Amount, the Redeeming Limited Partner shall not receive any portion of the OP Unit   Redemption Amount, the OP Unit Redemption Amount shall be treated as an amount received   by such Partner in redemption of its OP Units, and the Partner shall contribute the excess of the   Withheld Amount over the OP Unit Redemption Amount to the Partnership before the   Partnership is required to pay over such excess to a taxing authority.     

 

   58      (f) Notwithstanding any other provision of this Agreement, the General   Partner shall place appropriate restrictions on the ability of the Limited Partners to exercise their   OP Unit Redemption Rights as and if deemed necessary to ensure that the Partnership does not   constitute a “publicly traded partnership” under Section 7704 of the Code.  If and when the   General Partner determines that imposing such restrictions is necessary, the General Partner shall   give prompt written notice thereof (a “Restriction Notice”) to each of the Limited Partners,   which notice shall be accompanied by a copy of an opinion of counsel to the Partnership that   states that, in the opinion of such counsel, restrictions are desirable in order to avoid the   Partnership being treated as a “publicly traded partnership” under Section 7704 of the Code.   8.05 Registration.  Subject to the terms of any agreement between the General Partner   and a Limited Partner with respect to OP Units held by such Limited Partner that includes   provisions relating to registration rights (each a “Separate Registration Rights Agreement”):   (a) Shelf Registration of the REIT Shares.  Following the date on which the   General Partner becomes eligible to use a registration statement on Form S-3 for the registration   of securities under the Securities Act (the “S-3 Eligible Date”) and within the time period that   may be agreed by the General Partner and a Limited Partner, the General Partner shall file with   the Commission a shelf registration statement under Rule 415 of the Securities Act (a   “Registration Statement”), or any similar rule that may be adopted by the Commission,   covering (i) the issuance of REIT Shares issuable upon redemption of the OP Units held by such   Limited Partner (“Redemption Shares”) and/or (ii) the resale by the holder of the Redemption   Shares, with respect to OP Units issued prior to the S-3 Eligible Date; provided, however, that   the General Partner shall be required to file only two such registrations in any 12-month period.    In connection therewith, the General Partner will:   (1) use its reasonable best efforts to have such Registration   Statement declared effective;   (2) furnish to each holder of Redemption Shares such number   of copies of prospectuses, and supplements or amendments thereto, and   such other documents as such holder reasonably requests;   (3) register or qualify the Redemption Shares covered by the   Registration Statement under the securities or blue sky laws of such   jurisdictions within the United States as any holder of Redemption Shares   shall reasonably request, and do such other reasonable acts and things as   may be required of it to enable such holders to consummate the sale or   other disposition in such jurisdictions of the Redemption Shares; provided,   however, that the General Partner shall not be required to (i) qualify as a   foreign corporation or consent to a general or unlimited service or process   in any jurisdictions in which it would not otherwise be required to be   qualified or so consent or (ii) qualify as a dealer in securities; and   (4) otherwise use its reasonable best efforts to comply with all   applicable rules and regulations of the Commission.     

 

   59      The General Partner further agrees to supplement or make amendments to each   Registration Statement, if required by the rules, regulations or instructions applicable to the   registration form utilized by the General Partner or by the Securities Act or rules and regulations   thereunder for such Registration Statement.  Each Limited Partner agrees to furnish to the   General Partner, upon request, such information with respect to the Limited Partner as may be   required to complete and file the Registration Statement.   In connection with and as a condition to the General Partner’s obligations with respect to   the filing of a Registration Statement pursuant to this Section 8.05, each Limited Partner agrees   with the General Partner that:   (x) it will not offer or sell its Redemption Shares until (A) such Redemption Shares   have been included in a Registration Statement and (B) it has received copies of a prospectus,   and any supplement or amendment thereto, as contemplated by Section 8.05(a) hereof, and   receives notice that the Registration Statement covering such Redemption Shares, or any   post-effective amendment thereto, has been declared effective by the Commission;   (y) if the General Partner determines in its good faith judgment, after consultation   with counsel, that the use of the Registration Statement, including any post effective amendment   thereto, or the use of any prospectus contained in such Registration Statement would require the   disclosure of important information that the General Partner has a bona fide business purpose for   preserving as confidential or the disclosure of which would impede the General Partner’s ability   to consummate a significant transaction, upon written notice of such determination by the   General Partner, the rights of each Limited Partner to offer, sell or distribute its Redemption   Shares pursuant to such Registration Statement or prospectus or to require the General Partner to   take action with respect to the registration or sale of any Redemption Shares pursuant to a   Registration Statement (including any action contemplated by this Section 8.05) will be   suspended until the date upon which the General Partner notifies such Limited Partner in writing   (which notice shall be deemed sufficient if given through the issuance of a press release) that   suspension of such rights for the grounds set forth in this paragraph is no longer necessary;   provided, however, that the General Partner may not suspend such rights for an aggregate period   of more than 90 days in any 12-month period; and   (z) in the case of the registration of any underwritten equity offering proposed by the   General Partner (other than any registration by the General Partner on Form S-8, or a successor   or substantially similar form, of (A) an employee share option, share purchase or compensation   plan or of securities issued or issuable pursuant to any such plan or (B) a dividend reinvestment   plan), each Limited Partner will agree, if requested in writing by the managing underwriter or   underwriters administering such offering, not to effect any offer, sale or distribution of any REIT   Shares or Redemption Shares (or any option or right to acquire REIT Shares or Redemption   Shares) during the period commencing on the tenth day prior to the expected effective date   (which date shall be stated in such notice) of the registration statement covering such   underwritten primary equity offering or, if such offering shall be a “take-down” from an   effective shelf registration statement, the tenth day prior to the expected commencement date   (which date shall be stated in such notice) of such offering, and ending on the date specified by   such managing underwriter in such written request to the Limited Partners; provided, however,   that no Limited Partner shall be required to agree not to effect any offer, sale or distribution of its     

 

   60      Redemption Shares for a period of time that is longer than the greater of 90 days or the period of   time for which any senior executive of the General Partner is required so to agree in connection   with such offering.  Nothing in this paragraph shall be read to limit the ability of any Limited   Partner to redeem its OP Units in accordance with the terms of this Agreement.   (b) Listing on Securities Exchange.  If the General Partner lists or maintains   the listing of REIT Shares on any securities exchange or national market system, it shall, at its   expense and as necessary to permit the registration and sale of the Redemption Shares hereunder,   list thereon, maintain and, when necessary, increase such listing to include such Redemption   Shares.   (c) Registration Not Required.  Notwithstanding the foregoing, the General   Partner shall not be required to file or maintain the effectiveness of a registration statement   relating to Redemption Shares after the first date upon which, in the opinion of counsel to the   General Partner, all of the Redemption Shares covered thereby could be sold by the holders   thereof pursuant to Rule 144 under the Securities Act, or any successor rule thereto.   (d) Allocation of Expenses.  The Partnership shall pay all expenses in   connection with the Registration Statement, including without limitation (i) all expenses incident   to filing with the Financial Industry Regulatory Authority, Inc., (ii) registration fees, (iii) printing   expenses, (iv) accounting and legal fees and expenses, except to the extent holders of   Redemption Shares elect to engage accountants or attorneys in addition to the accountants and   attorneys engaged by the General Partner or the Partnership, which fees and expenses for such   accountants or attorneys shall be for the account of the holders of the Redemption Shares, (v)   accounting expenses incident to or required by any such registration or qualification and   (vi) expenses of complying with the securities or blue sky laws of any jurisdictions in connection   with such registration or qualification; provided, however, neither the Partnership nor the   General Partner shall be liable for (A) any discounts or commissions to any underwriter or   broker attributable to the sale of Redemption Shares, or (B) any fees or expenses incurred by   holders of Redemption Shares in connection with such registration that, according to the written   instructions of any regulatory authority, the Partnership or the General Partner is not permitted to   pay.   (e) Indemnification.   (i) In connection with the Registration Statement, to the fullest extent   permitted by law, the General Partner and the Partnership agree to indemnify   holders of Redemption Shares within the meaning of Section 15 of the Securities   Act, against all losses, claims, damages, liabilities and expenses (including   reasonable costs of investigation) caused by any untrue, or alleged untrue,   statement of a material fact contained in the Registration Statement, preliminary   prospectus or prospectus (as amended or supplemented if the General Partner   shall have furnished any amendments or supplements thereto) or caused by any   omission or alleged omission, to state therein a material fact required to be stated   therein or necessary to make the statements therein not misleading, except insofar   as such losses, claims, damages, liabilities or expenses are caused by any untrue   statement, alleged untrue statement, omission, or alleged omission based upon     

 

   61      information furnished to the General Partner by the Limited Partner or the holder   of Redemption Shares for use therein.  The General Partner and each officer,   director and controlling Person of the General Partner and the Partnership shall be   indemnified by each Limited Partner or holder of Redemption Shares covered by   the Registration Statement for all such losses, claims, damages, liabilities and   expenses (including reasonable costs of investigation) caused by any untrue, or   alleged untrue, statement or any omission, or alleged omission, based upon   information furnished to the General Partner or the Partnership by the Limited   Partner or the holder for use therein.   (ii) Promptly upon receipt by a party indemnified under this   Section 8.05(e) of notice of the commencement of any action against such   indemnified party in respect of which indemnity or reimbursement may be sought   against any indemnifying party under this Section 8.05(e), such indemnified party   shall notify the indemnifying party in writing of the commencement of such   action, but the failure to so notify the indemnifying party shall not relieve it of any   liability that it may have to any indemnified party otherwise than under this   Section 8.05(e) unless such failure shall materially adversely affect the defense of   such action.  In case notice of commencement of any such action shall be given to   the indemnifying party as above provided, the indemnifying party shall be entitled   to participate in and, to the extent it may wish, jointly with any other   indemnifying party similarly notified, to assume the defense of such action at its   own expense, with counsel chosen by it and reasonably satisfactory to such   indemnified party.  The indemnified party shall have the right to employ separate   counsel in any such action and participate in the defense thereof, but the   reasonable fees and expenses of such counsel (other than reasonable costs of   investigation) shall be paid by the indemnified party unless (i) the indemnifying   party agrees to pay the same, (ii) the indemnifying party fails to assume the   defense of such action with counsel reasonably satisfactory to the indemnified   party or (iii) the named parties to any such action (including any impleaded   parties) have been advised by such counsel that representation of such   indemnified party and the indemnifying party by the same counsel would be   inappropriate under applicable standards of professional conduct (in which case   the indemnified party shall have the right to separate counsel and the   indemnifying party shall pay the reasonable fees and expenses of such separate   counsel, provided, that the indemnifying party shall not be liable for more than   one separate counsel).  No indemnifying party shall be liable to any indemnified   party for any settlement entered into without its consent.   (f) Contribution.   (i) If for any reason the indemnification provisions contemplated by   Section 8.05(e) hereof are either unavailable or insufficient to hold harmless an   indemnified party in respect of any losses, claims, damages or liabilities referred   to therein, then the party that would otherwise be required to provide   indemnification or the indemnifying party (in either case, for purposes of this   Section 8.05(f), the “Indemnifying Party”) in respect of such losses, claims,     

 

   62      damages or liabilities, shall contribute to the amount paid or payable by the party   that would otherwise be entitled to indemnification or the indemnified party (in   either case, for purposes of this Section 8.05(f), the “Indemnified Party”) as a   result of such losses, claims, damages, liabilities or expense, in such proportion as   is appropriate to reflect the relative fault of the Indemnifying Party and the   Indemnified Party, as well as any other relevant equitable considerations.  The   relative fault of the Indemnifying Party and Indemnified Party shall be determined   by reference to, among other things, whether the untrue or alleged untrue   statement of a material fact or omission or alleged omission to state a material fact   related to information supplied by the Indemnifying Party or Indemnified Party,   and the parties’ relative intent, knowledge, access to information and opportunity   to correct or prevent such statement or omission.  The amount paid or payable by   a party as a result of the losses, claims, damages, liabilities and expenses referred   to above shall be deemed to include any legal or other fees or expenses reasonably   incurred by such party.   (ii) The parties hereto agree that it would not be just and equitable if   contribution pursuant to this Section 8.05(f) were determined by pro rata   allocation (even if the holders were treated as one entity for such purpose) or by   any other method of allocation that does not take account of the equitable   considerations referred to in the immediately preceding paragraph.  No Person   determined to have committed a fraudulent misrepresentation (within the meaning   of Section 11(f) of the Securities Act) shall be entitled to contribution from any   Person who was not guilty of such fraudulent misrepresentation.   (iii) The contribution provided for in this Section 8.05(f) shall survive   the termination of this Agreement and shall remain in full force and effect   regardless of any investigation made by or on behalf of any Indemnified Party.   (g) Conflict.  With respect to any Limited Partner, in the event of a conflict   between the provisions of this Section 8.05 and any Separate Registration Rights Agreement, the   provisions of the Separate Registration Rights Agreement shall control.   ARTICLE IX   TRANSFERS OF PARTNERSHIP INTERESTS   9.01 Purchase for Investment.   (a) Each Limited Partner, by its signature below or by its subsequent   admission to the Partnership, hereby represents and warrants to the General Partner and to the   Partnership that the acquisition of such Limited Partner’s Partnership Units is made for   investment purposes only and not with a view to the resale or distribution of such Partnership   Units.   (b) Subject to the provisions of Section 9.02 hereof, each Limited Partner   agrees that such Limited Partner will not Transfer such Limited Partner’s Partnership Units or   any fraction thereof, whether voluntarily or by operation of law or at judicial sale or otherwise, to     

 

   63      any Person who does not make the representations and warranties to the General Partner set forth   in Section 9.01(a) hereof.   9.02 Restrictions on Transfer of Partnership Units.   (a) Subject to the provisions of Sections 9.02(b), (c) and (d) hereof, to the   fullest extent permitted by law, no Limited Partner may offer, sell, assign, hypothecate, pledge or   otherwise transfer all or any portion of such Limited Partner’s Partnership Units, or any of such   Limited Partner’s economic rights as a Limited Partner, whether voluntarily or by operation of   law or at judicial sale or otherwise (collectively, a “Transfer”) without the consent of the   General Partner, which consent may be granted or withheld in its sole and absolute discretion.    The General Partner may require, as a condition of any Transfer to which it consents, that the   transferor assume all costs incurred by the Partnership in connection therewith.   (b) No Limited Partner may withdraw from the Partnership other than as a   result of a permitted Transfer (i.e., a Transfer consented to as contemplated by clause (a) above   or clause (c) below or a Transfer pursuant to Section 9.05 hereof) of all of such Limited Partner’s   Partnership Units pursuant to this Article IX or pursuant to a redemption of all of such Limited   Partner’s OP Units pursuant to Section 8.04 hereof.  Upon the permitted Transfer or redemption   of all of a Limited Partner’s OP Units, such Limited Partner shall cease to be a Limited Partner.   (c) Subject to Sections 9.02(d), (e) and (f) hereof, a Limited Partner may   Transfer, with the consent of the General Partner, all or a portion of such Limited Partner’s   Partnership Units to (i) such Limited Partner’s parent or parent’s spouse, (ii) such Limited   Partner’s spouse, (iii) such Limited Partner’s natural or adopted descendant or descendants, (iv)   such Limited Partner’s spouse of such Limited Partner’s descendant, (v) such Limited Partner’s   brother or sister, (vi) a trust created by such Limited Partner for the primary benefit of such   Limited Partner and/or any such Person(s) described in (i) through (v) above, of which trust such   Limited Partner or any such Person(s) or bank or other commercial entity in the business of   acting as a fiduciary in its ordinary course of business and having an equity capitalization of at   least $100,000,000 is a trustee, (vii) a corporation, partnership or limited liability company   controlled by a Person or Persons named in (i) through (v) above, or (viii) if the Limited Partner   is an entity, its beneficial owners.   (d) No Limited Partner may effect a Transfer of its Partnership Units, in   whole or in part, if, in the opinion of legal counsel for the Partnership, such proposed Transfer   would require the registration of the Partnership Units under the Securities Act or would   otherwise violate any applicable federal or state securities or blue sky law (including investment   suitability standards).   (e) No Transfer by a Limited Partner of its Partnership Units, in whole or in   part, may be made to any Person if the General Partner determines, in its commercially   reasonable discretion, that (i) such Transfer would result in the Partnership being treated as an   association taxable as a corporation (other than a qualified REIT subsidiary within the meaning   of Section 856(i) of the Code), (ii) it would adversely affect the ability of the General Partner to   continue to qualify as a REIT or subject the General Partner to any additional taxes under   Section 857, Section 4981 or any other provision of the Code or (iii) such Transfer is effectuated     

 

   64      through an “established securities market” or a “secondary market (or the substantial equivalent   thereof)” within the meaning of Section 7704 of the Code; provided, that if the General Partner   secures an opinion of qualified United States tax counsel that the Partnership would, if such   Transfer were completed, satisfy one or more provisions under Section 7704 of the Code and the   Regulations promulgated thereunder such that the Partnership would not be treated as a “publicly   traded partnership” for U.S. federal income tax purposes, then such Transfer shall not be   prohibited by this Section 9.02(e).   (f) To the fullest extent permitted by law, any purported Transfer in   contravention of any of the provisions of this Article IX shall be void ab initio and ineffectual   and shall not be binding upon, or recognized by, the General Partner or the Partnership.   (g) Prior to the consummation of any Transfer under this Article IX, the   transferor and/or the transferee shall deliver to the General Partner such opinions, certificates and   other documents as the General Partner shall request in connection with such Transfer.   (h) Notwithstanding anything to the contrary contained in this Section 9.02,   ARC Real Estate Partners, LLC may Transfer any of its OP Units to its Members (as defined in   the limited liability company agreement of ARC Real Estate Partners, LLC, dated July 26, 2010,   by and among the signatories thereto, as amended from time to time), without the consent of the   General Partner.   (i) The Partners hereby acknowledge and agree that a Partner who holds   Class B Units or LTIP Units shall not Transfer such Class B Units or LTIP Units other than, and   subject to any restriction on the transfer of Class B Units contained in Article XV or any   restriction on the transfer of LTIP Units contained in Article XVI or the terms of an applicable   OPP Agreement, (i) pursuant to Section 9.02(c) hereof, (ii) by operation of law to the estate of a   Partner who held such LTIP Units immediately prior to his or her death or (iii) to the Partnership   or the General Partner.   9.03 Admission of Substitute Limited Partner.   (a) Subject to the other provisions of this Article IX, an assignee of the   Partnership Units of a Limited Partner (which shall be understood to include any purchaser,   transferee, donee or other recipient of any disposition of such Partnership Units) shall be deemed   admitted as a Limited Partner of the Partnership only with the consent of the General Partner,   which consent may be given or withheld by the General Partner in its sole and absolute   discretion, and upon the satisfactory completion of the following:   (i) The assignee shall have accepted and agreed to be bound by the   terms and provisions of this Agreement by executing a counterpart or an   amendment thereof, including a revised Exhibit A, and such other documents or   instruments as the General Partner may require in order to effect the admission of   such Person as a Limited Partner.   (ii) The assignee shall have delivered a letter containing the   representation set forth in Section 9.01(a) hereof and the representations and   warranties set forth in Section 9.01(b) hereof.     

 

   65      (iii) If the assignee is a corporation, partnership or trust, the assignee   shall have provided the General Partner with evidence satisfactory to counsel for   the Partnership of the assignee’s authority to become a Limited Partner under the   terms and provisions of this Agreement.   (iv) The assignee shall have executed a power of attorney containing   the terms and provisions set forth in Section 8.02 hereof.   (v) The assignee shall have paid or reimbursed, and shall hold   harmless the General Partner and the Partnership for, all legal fees and other   expenses of the Partnership and the General Partner and filing and publication   costs in connection with its substitution as a Limited Partner, including any   applicable transfer taxes or withholding taxes.   (vi) The assignee shall have obtained the prior written consent of the   General Partner to its admission as a Substitute Limited Partner, which consent   may be given or denied in the exercise of the General Partner’s sole and absolute   discretion.   (b) For the purpose of allocating Net Income and Net Loss and distributing   cash received by the Partnership, a Substitute Limited Partner shall be treated as having become,   and appearing in the records of the Partnership as, a Limited Partner on the later of the date   specified in the transfer documents or the date on which the General Partner has received all   necessary instruments of transfer and substitution.   (c) The General Partner and the Substitute Limited Partner shall cooperate   with each other by preparing the documentation required by this Section 9.03 and making all   official filings and publications.  The Partnership shall take all such action as promptly as   practicable after the satisfaction of the conditions in this Article IX to the admission of such   Person as a Limited Partner of the Partnership.   9.04 Rights of Assignees of Partnership Units.   (a) Subject to the provisions of Sections 9.01 and 9.02 hereof, except as   required by operation of law, the Partnership shall not be obligated for any purposes whatsoever   to recognize the assignment by any Limited Partner of its Partnership Units until the Partnership   has received notice thereof.   (b) Any Person who is the assignee of all or any portion of a Limited Partner’s   Partnership Units, but does not become a Substitute Limited Partner and desires to make a   further assignment of such Partnership Units, shall be subject to all the provisions of this Article   IX to the same extent and in the same manner as any Limited Partner desiring to make an   assignment of its Partnership Units.   9.05 Effect of Bankruptcy, Death, Incompetence or Termination of a Limited   Partner.  To the fullest extent permitted by law, the occurrence of an Event of Bankruptcy as to   a Limited Partner, the death of a Limited Partner or a final adjudication that a Limited Partner is   incompetent (which term shall include, but not be limited to, insanity) shall not, in and of itself,     

 

   66      cause the termination or dissolution of the Partnership, and the business of the Partnership shall   continue, and such Limited Partner’s personal representative (as defined in the Act) shall have   the rights of such Limited Partner for the purpose of settling or managing such Limited Partner’s   estate property and such power as the bankrupt, deceased or incompetent Limited Partner   possessed to assign all or any part of such Limited Partner’s Partnership Units and to join with   the assignee in satisfying conditions precedent to the admission of the assignee as a Substitute   Limited Partner.   9.06 Joint Ownership of Partnership Units.  A Partnership Unit may be acquired by   two individuals as joint tenants with right of survivorship, provided, that such individuals either   are married or are related and share the same home as tenants in common.  The written consent   or vote of both owners of any such jointly held Partnership Unit shall be required to constitute   the action of the owners of such Partnership Unit; provided, however, that the written consent of   only one joint owner will be required if the Partnership has been provided with evidence   satisfactory to the counsel for the Partnership that the actions of a single joint owner can bind   both owners under the applicable laws of the state of residence of such joint owners.  Upon the   death of one owner of a Partnership Unit held in a joint tenancy with a right of survivorship, the   Partnership Unit shall become owned solely by the survivor as a Limited Partner and not as an   assignee.  The Partnership need not recognize the death of one of the owners of a jointly-held   Partnership Unit until it shall have received notice of such death.  Upon notice to the General   Partner from either owner, the General Partner shall cause the Partnership Unit to be divided into   two equal Partnership Units, which shall thereafter be owned separately by each of the former   owners.   ARTICLE X   BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS   10.01 Books and Records.  At all times during the continuance of the Partnership, the   General Partner shall keep or cause to be kept at the Partnership’s specified office true and   complete books of account in accordance with generally accepted accounting principles,   including:  (a) a current list of the full name and last known business address of each Partner,   (b) a copy of the Certificate of Limited Partnership of the Partnership and all certificates of   amendment thereto, (c) copies of the Partnership’s federal, state and local income tax returns and   reports, (d) copies of this Agreement and any financial statements of the Partnership for the three   most recent years and (e) all documents and information required under the Act.  Any Limited   Partner or its duly authorized representative, for any purpose reasonably related to such Limited   Partner’s interest as a limited partner in the Partnership, upon paying the costs of collection,   duplication and mailing, shall be entitled to inspect or copy such records during ordinary   business hours.   10.02 Custody of Partnership Funds; Bank Accounts.   (a) All funds of the Partnership not otherwise invested shall be deposited in   one or more accounts maintained in such banking or brokerage institutions as the General Partner   shall determine, and withdrawals shall be made only on such signature or signatures as the   General Partner may, from time to time, determine.     

 

   67      (b) All deposits and other funds not needed in the operation of the business of   the Partnership may be invested by the General Partner.  The funds of the Partnership shall not   be commingled with the funds of any other Person except for such commingling as may   necessarily result from an investment in those investment companies permitted by this   Section 10.02(b).   10.03 Fiscal and Taxable Year.  The fiscal and taxable year of the Partnership shall be   the calendar year unless otherwise required by the Code.   10.04 Annual Tax Information and Report.  Within 75 days after the end of each   fiscal year of the Partnership, the General Partner shall furnish to each Person who was a Limited   Partner at any time during such year the tax information necessary to file such Limited Partner’s   individual tax returns as shall be reasonably required by law.   10.05 Tax Matters Partner; Tax Elections; Special Basis Adjustments.   (a) The General Partner shall be the Tax Matters Partner of the Partnership.    As Tax Matters Partner, the General Partner shall have the right and obligation to take all actions   authorized and required, respectively, by the Code for the Tax Matters Partner.  The General   Partner shall have the right to retain professional assistance in respect of any audit of the   Partnership by the Service and all out-of-pocket expenses and fees incurred by the General   Partner on behalf of the Partnership as Tax Matters Partner shall constitute Partnership expenses.    In the event the General Partner receives notice of a final Partnership adjustment under   Section 6223(a)(2) of the Code, the General Partner shall either (i) file a court petition for   judicial review of such final adjustment within the period provided under Section 6226(a) of the   Code, a copy of which petition shall be mailed to all Limited Partners on the date such petition is   filed, or (ii) mail a written notice to all Limited Partners, within such period, that describes the   General Partner’s reasons for determining not to file such a petition.   (b) All elections and determinations required or permitted to be made by the   Partnership under the Code or any applicable state or local tax law shall be made by the General   Partner in its sole and absolute discretion.   (c) In the event of a transfer of all or any part of the Partnership Interest of   any Partner, the Partnership, at the option of the General Partner, may elect pursuant to   Section 754 of the Code to adjust the basis of the Properties.  Notwithstanding anything   contained in Article V of this Agreement, any adjustments made pursuant to Section 754 shall   affect only the successor in interest to the transferring Partner and in no event shall be taken into   account in establishing, maintaining or computing Capital Accounts for the other Partners for   any purpose under this Agreement unless an adjustment to Capital Accounts is permitted under   the Regulations promulgated under Section 704 of the Code.  Each Partner will furnish the   Partnership with all information necessary to give effect to such election.   (d) In the event that the General Partner shall be removed or replaced pursuant   to any provision of this Agreement, the successor to the General Partner shall assume the   obligations of this Section 10.05.     

 

   68      (e) The Partners, intending to be legally bound, hereby authorize the   Partnership to make an election (the “Safe Harbor Election”) to have the “liquidation value”   safe harbor provided in Proposed Treasury Regulation § 1.83-3(1) and the Proposed Revenue   Procedure set forth in Internal Revenue Service Notice 2005-43, as such safe harbor may be   modified when such proposed guidance is issued in final form or as amended by subsequently   issued guidance (the “Safe Harbor”), apply to any interest in the Partnership transferred to a   service provider while the Safe Harbor Election remains effective, to the extent such interest   meets the Safe Harbor requirements (collectively, such interests are referred to as “Safe Harbor   Interests”).  The Tax Matters Partner is authorized and directed to execute and file the Safe   Harbor Election on behalf of the Partnership and the Partners.  The Partnership and the Partners   (including any Person to whom an interest in the Partnership is transferred in connection with the   performance of services) hereby agree to comply with all requirements of the Safe Harbor   (including forfeiture allocations) with respect to all Safe Harbor Interests and to prepare and file   all U.S. federal income tax returns reporting the tax consequences of the issuance and vesting of   Safe Harbor Interests consistent with such final Safe Harbor guidance.  The Partnership is also   authorized to take such actions as are necessary to achieve, under the Safe Harbor, the effect that   the election and compliance with all requirements of the Safe Harbor referred to above would be   intended to achieve under Proposed Treasury Regulation § 1.83-3, including amending this   Agreement.   10.06 Reports to Limited Partners.   (a) If the General Partner is required to furnish an annual report to its   stockholders containing financial statements of the General Partner, the General Partner will, at   the same time and in the same manner, furnish such annual report to each Limited Partner.   (b) Any Partner shall further have the right to a private audit of the books and   records of the Partnership, provided, that such audit is made for Partnership purposes, at the sole   expense of the Partner desiring it and is made during normal business hours.   ARTICLE XI   AMENDMENT OF AGREEMENT; MERGER   11.01 Amendment of Agreement.   Except as otherwise provided herein, the General Partner’s written consent shall be   required for any amendment to this Agreement.  Except as otherwise provided herein, the   General Partner, without the consent of the Limited Partners or any other Person, may amend   this Agreement in any respect; provided, however, that the following amendments shall require   the written consent of a Majority in Interest:   (a) any amendment affecting the operation of the Conversion Factor or the OP   Unit Redemption Right (except as otherwise provided herein) in a manner that adversely affects   the Limited Partners in any material respect;   (b) any amendment that would adversely affect the rights of the Limited   Partners in any material respect to receive the distributions payable to them hereunder, other than   with respect to the issuance of additional Partnership Units pursuant to Section 4.02 hereof;     

 

   69      (c) any amendment that would alter the Partnership’s allocations of Net   Income and Net Loss to the Limited Partners, other than with respect to the issuance of   additional Partnership Units pursuant to Section 4.02 hereof;   (d) any amendment that would impose on the Limited Partners any obligation   to make additional Capital Contributions to the Partnership; or   (e) any amendment to this Article XI.   11.02 Merger of Partnership.   Notwithstanding any provision of this Agreement, the General Partner, without the   consent of the Limited Partners or any other Person, may (i) merge or consolidate the Partnership   with or into any other domestic or foreign partnership, limited partnership, limited liability   company, corporation or other Person or (ii) sell all or substantially all of the assets of the   Partnership in a transaction pursuant to Section 7.02(a) or (b) hereof and may amend this   Agreement in any manner or adopt a new limited partnership agreement for the Partnership in   connection with any such transaction consistent with the provisions of this Article XI.   ARTICLE XII   CLASS B UNITS   12.01 Designation and Number.   (a) A series of Partnership Units in the Partnership, designated as the “Class B   Units,” is hereby established.  Except as set forth in this Article XII, Class B Units shall have the   same rights, privileges and preferences as the OP Units.  Subject to the provisions of this Article   XII and the special provisions of Section 5.01(c)(iii), Class B Units shall be treated as   Partnership Units, with all of the rights, privileges and obligations attendant thereto.   (b) It is intended that the Partnership shall maintain at all times a one-to-one   correspondence between Class B Units and OP Units for conversion and other purposes.  If an   Adjustment Event occurs, then the General Partner shall make a corresponding adjustment to the   Class B Units to maintain a one-for-one conversion and economic equivalence ratio between OP   Units and Class B Units. If more than one Adjustment Event occurs, the adjustment to the Class   B Units need be made only once using a single formula that takes into account each and every   Adjustment Event as if all Adjustment Events occurred simultaneously. If the Partnership takes   an action affecting the OP Units other than actions specifically described in the definition of   Adjustment Events and, in the opinion of the General Partner such action would require an   adjustment to the Class B Units to maintain the one-to-one correspondence described above, the   General Partner shall have the right to make such adjustment to the Class B Units, to the extent   permitted by law, in such manner and at such time as the General Partner, in its sole discretion,   may determine to be appropriate under the circumstances. If an adjustment is made to the Class   B Units as herein provided, the Partnership shall promptly file in the books and records of the   Partnership an officer’s certificate setting forth such adjustment and a brief statement of the facts   requiring such adjustment, which certificate shall be conclusive evidence of the correctness of   such adjustment absent manifest error. Promptly after the filing of such certificate, the     

 

   70      Partnership shall mail a notice to each holder of Class B Units setting forth the adjustment to his,   her or its Class B Units and the effective date of such adjustment.   12.02 Special Provisions.  Class B Units shall be subject to the following special   provisions:    (a) Distributions.  The holders of Class B Units shall be entitled to (i) current   distributions of Cash Available for Distribution pursuant to Section 5.02(a)(ii), (ii) distributions,   if any, of Net Sales Proceeds pursuant to Section 5.02(b)(iii), and (iii) distributions in liquidation   of the Partnership pursuant to Section 5.06.    (b) Allocations. Holders of Class B Units shall be entitled to certain special   allocations of Net Property Gain under Section 5.01(c)(iii).  Except in connection with Net   Property Gain, holders of Class B Units shall be allocated Net Income no greater than the   amount of distributions made pursuant to Section 5.02(a)(ii).   (c) Redemption. The OP Unit Redemption Right provided to Limited Partners   under Section 8.04 hereof shall not apply with respect to Class B Units unless and until the Class   B Units are converted to OP Units as provided in Section 12.04.   12.03 Voting.   (a) Holders of Class B Units shall (x) have the same voting rights as the   Limited Partners, with the Class B Units voting as a single class with the OP Units and having   one vote per Class B Unit; and (y) have the additional voting rights that are expressly set forth   below. So long as any Class B Units remain outstanding, the Partnership shall not, without the   affirmative vote of the holders of at least a majority of the Class B Units outstanding at the time,   given in person or by proxy, either in writing or at a meeting (voting separately as a class),   amend, alter or repeal, whether by merger, consolidation or otherwise, the provisions of this   Agreement applicable to Class B Units so as to materially and adversely affect any right,   privilege or voting power of the Class B Units or the holders of Class B Units as such, unless   such amendment, alteration, or repeal affects equally, ratably and proportionately the rights,   privileges and voting powers of the Limited Partners; but subject, in any event, to the following   provisions:    (i) With respect to any OP Unit Transaction, so long as the Class B   Units are treated in accordance with Section 12.04(d) hereof, the consummation   of such OP Unit Transaction shall not be deemed to materially and adversely   affect such rights, preferences, privileges or voting powers of the Class B Units or   the holders of Class B Units as such; and    (ii) Any creation or issuance of any Partnership Units or of any class   or series of Partnership Interest including additional OP Units or Class B Units   whether ranking senior to, junior to, or on a parity with the Class B Units with   respect to distributions and the distribution of assets upon liquidation, dissolution   or winding up, shall not be deemed to materially and adversely affect such rights,   preferences, privileges or voting powers of the Class B Units or the holders of   Class B Units as such.      

 

   71      (b) The foregoing voting provisions will not apply if, at or prior to the time   when the act with respect to which such vote would otherwise be required, all outstanding Class   B Units shall have been converted into OP Units.   12.04 Conversion of Class B Units.   (a) Conversion.  At such time as the Class B Economic Capital Account   Balance attributable to a Class B Unit is equal to the OP Unit Economic Balance, each such   balance determined on a per unit basis as of the effective date of conversion (the “Class B   Conversion Date”), such Class B Unit shall automatically convert into one fully paid and non-   assessable OP Unit, giving effect to all adjustments (if any) made pursuant to Section 12.01   hereof; provided, that a Class B Unit shall not be convertible into OP Units if the Class B   Economic Capital Account Balance attributable to such Class B Unit is negative.  Each holder of   Class B Units covenants and agrees with the Partnership that all Class B Units to be converted   pursuant to this Section 12.04 shall be free and clear of all liens. The conversion of Class B Units   shall occur automatically after the close of business on the applicable Conversion Date without   any action on the part of such holder of Class B Units, as of which time such holder of Class B   Units shall be credited on the books and records of the Partnership with the issuance as of the   opening of business on the next day of the number of OP Units issuable upon such conversion.    For purposes of determining the Class B Economic Capital Account Balance attributable to a   Class B Unit, allocations pursuant to Section 5.01(c)(iii) shall be made in such a manner so as to   allow the greatest number of Class B Units to convert pursuant to this Section 12.04 at any time.   (b) Adjustment to Gross Asset Value.   (i) The General Partner shall provide the holders of Class B Units the   opportunity but not the obligation to make Capital Contributions to the   Partnership in exchange for OP Units in order to cause an adjustment to the Gross   Asset Value of the Partnership’s assets within the meaning of paragraph (b)(i) of   the definition of Gross Asset Value up to two (2) times each fiscal year including   if the Partnership or the General Partner shall be a party to any OP Unit   Transaction; provided, that the General Partner shall give each holder of Class B   Units written notice of such OP Unit Transaction at least thirty (30) days prior to   entering into any definitive agreement pursuant to which the OP Unit Transaction   would be consummated;   (ii) For purposes of clause (i) of this Section 12.04(b), the value of   each OP Unit issued in order to cause an adjustment to the Gross Asset Value of   the Partnership’s assets shall be an amount equal to the product of (y) the Value   of one REIT Share as of the date the holder of Class B Units makes a Capital   Contribution to the Partnership multiplied by (z) the Conversion Factor.   (iii) For the avoidance of doubt, the issuance of Class B Units shall be   treated as an event allowing for an adjustment to the Gross Asset Value of the   Partnership’s assets within the meaning of paragraph (b)(iv) of the definition of   Gross Asset Value.     

 

   72      (c) Impact of Conversion for Purposes of Section 5.01(c)(iii). For purposes of   making future allocations under Section 5.01(c)(iii), the portion of the Class B Economic Capital   Account Balance of the applicable holder of Class B Units that is treated as attributable to his,   her or its Class B Units shall be reduced, as of the date of conversion, by the product of the   number of Class B Units converted and the OP Unit Economic Balance.   (d) OP Unit Transactions. Immediately prior to or concurrent with an OP Unit   Transaction the maximum number of Class B Units then eligible for conversion (in accordance   with the provisions of Section 12.04(a)) shall automatically be converted into an equal number of   OP Units, giving effect to all adjustments (if any) made pursuant to Section 12.01 hereof, taking   into account any allocations that occur in connection with the OP Unit Transaction or that would   occur in connection with the OP Unit Transaction if the assets of the Partnership were sold at the   OP Unit Transaction price or, if applicable, at a value determined by the General Partner in good   faith using the value attributed to the Partnership Units in the context of the OP Unit Transaction   (in which case the Conversion Date shall be the effective date of the OP Unit Transaction). In   anticipation of such OP Unit Transaction, the Partnership shall use commercially reasonable   efforts to cause each holder of Class B Units to be afforded the right to receive in connection   with such OP Unit Transaction in consideration for the OP Units into which his, her or its Class   B Units will be converted the same kind and amount of cash, securities and other property (or   any combination thereof) receivable upon the consummation of such OP Unit Transaction by a   holder of the same number of OP Units, assuming such holder of OP Units is not a Person with   which the Partnership consolidated or into which the Partnership merged or which merged into   the Partnership or to which such sale or transfer was made, as the case may be (a “Constituent   Person”), or an affiliate of a Constituent Person. In the event that holders of OP Units have the   opportunity to elect the form or type of consideration to be received upon consummation of the   OP Unit Transaction, prior to such OP Unit Transaction the General Partner shall give prompt   written notice to each holder of Class B Units of such election, and shall use commercially   reasonable efforts to afford the holders of Class B Units the right to elect, by written notice to the   General Partner, the form or type of consideration to be received upon conversion of each Class   B Unit held by such holder into OP Units in connection with such OP Unit Transaction. If a   holder of Class B Units fails to make such an election, such holder (and any of its transferees)   shall receive upon conversion of each Class B Unit held by him, her or it (or by any of his, her or   its transferees) the same kind and amount of consideration that a holder of an OP Unit would   receive if such OP Unit holder failed to make such an election. The Partnership shall use   commercially reasonable effort to cause the terms of any OP Unit Transaction to be consistent   with the provisions of this Section 12.04(d) and to enter into an agreement with the successor or   purchasing entity, as the case may be, for the benefit of any holders of Class B Units whose   Class B Units will not be converted into OP Units in connection with the OP Unit Transaction   that will (i) contain provisions enabling the holders of Class B Units that remain outstanding   after such OP Unit Transaction to convert their Class B Units into securities as comparable as   reasonably possible under the circumstances to the OP Units and (ii) preserve as far as   reasonably possible under the circumstances the distribution, special allocation, conversion, and   other rights set forth in this Agreement for the benefit of the holders of Class B Units.   12.05 Profits Interests.     

 

   73      (a) Class B Units are intended to qualify as a “profits interest” in the   Partnership issued to a new or existing Partner in a partner capacity for services performed or to   be performed to or for the benefit of the Partnership within the meaning of Rev. Proc. 93-27,   1993-2 C.B. 343, and Rev. Proc. 2001-43, 2001-2 C.B. 191, the Code, the Regulations, and other   future guidance provided by the IRS with respect thereto, and the allocations under Section   5.01(c)(iii) shall be interpreted in a manner that is consistent therewith.    (b) The Partners agree that the General Partner may make a Safe Harbor   Election, on behalf of itself and of all Partners, to have the Safe Harbor apply irrevocably with   respect to Class B Units transferred in connection with the performance of services by a Partner   in a partner capacity. The Safe Harbor Election shall be effective as of the date of issuance of   such Class B Units. If such election is made, (i) the Partnership and each Partner agree to comply   with all requirements of the Safe Harbor with respect to all interests in the Partnership   transferred in connection with the performance of services by a Partner in a partner capacity,   whether such Partner was admitted as a Partner or as the transferee of a previous Partner, and (ii)   the General Partner shall cause the Partnership to comply with all record-keeping requirements   and other administrative requirements with respect to the Safe Harbor as shall be required by   proposed or final regulations relating thereto.    (c) The Partners agree that if a Safe Harbor Election is made by the General   Partner, (A) each Class B Unit issued hereunder is a Safe Harbor Interest, (B) each Class B Unit   represents a profits interest received for services rendered or to be rendered to or for the benefit   of the Partnership by such holder of Class B Units in his, her or its capacity as a Partner or in   anticipation of becoming a Partner, and (C) the fair market value of each Class B Unit issued by   the Partnership upon receipt by such holder of Class B Units as of the date of issuance is zero   (plus the amount, if any, of any Capital Contributions made to the Partnership by such holder of   Class B Units in connection with the issuance of such Class B Unit), representing the liquidation   value of such interest upon receipt (with such valuation being consented to and hereby approved   by all Partners).    (d) Each Partner, by signing this Agreement or by accepting such transfer,   hereby agrees (A) to comply with all requirements of any Safe Harbor Election made by the   General Partner with respect to each holder of Class B Units’ Safe Harbor Interest, (B) that each   holder of Class B Units shall take into account of all items of income, gain, loss, deduction and   credit associated with its Class B Units as if they were fully vested in computing its federal   income tax liability for the entire period during which it holds the Class B Units, (C) that neither   the Partnership nor any Partner shall claim a deduction (as wages, compensation or otherwise)   for the fair market value of such Class B Units issued to a holder of such Class B Units, either at   the time of grant of the Class B Units or at the time the Class B Units becomes substantially   vested, and (D) that to the extent that such profits interest is forfeited after the date hereof, the   Partnership shall make special forfeiture allocations of gross items of income, deduction or loss   (including, as may be permitted by or under Regulations (or other rules promulgated) to be   adopted, notional items of income, deduction or loss) in accordance with the Regulations to be   adopted under Sections 704(b) and 83 of the Code.    (e) The General Partner shall file or cause the Partnership to file all returns,   reports and other documentation as may be required, as reasonably determined by the General     

 

   74      Partner, to perfect and maintain any Safe Harbor Election made by the General Partner with   respect to granting of each holder of Class B Units’ Safe Harbor Interest.   (f) The General Partner is hereby authorized and empowered, without further   vote or action of the Partners, to amend this Agreement to the extent necessary or helpful in   accordance with the advice of Partnership tax counsel or accountants to sustain the Partnership’s   position that (A) it has complied with the Safe Harbor requirements in order to provide for a Safe   Harbor Election and it has ability to maintain the same, or (B) the issuance of the Class B Units   is not a taxable event with respect to the holders of Class B Units, and the General Partner shall   have the authority to execute any such amendment by and on behalf of each Partner pursuant to   the power of attorney granted by this Agreement. Any undertaking by any Partner necessary or   desirable to (A) enable or preserve a Safe Harbor Election or (B) otherwise to prevent the   issuance of Class B Units from being a taxable event with respect to the holders of Class B Units   may be reflected in such amendments and, to the extent so reflected, shall be binding on each   Partner.   (g) Each Partner agrees to cooperate with the General Partner to perfect and   maintain any Safe Harbor Election, and to timely execute and deliver any documentation with   respect thereto reasonably requested by the General Partner, at the expense of the Partnership.    (h) No Transfer of any interest in the Partnership by a Partner shall be   effective unless prior to such Transfer, the assignee or intended recipient of such interest shall   have agreed in writing to be bound by the provisions of Section 10.05(e) and this Section 12.05,   in a form reasonably satisfactory to the General Partner.   (i) The provisions of this Section 12.05 shall apply regardless of whether or   not a holder of Class B Units files an election pursuant to Section 83(b) of the Code.   (j) The General Partner may amend this Section 12.05 as it deems necessary   or appropriate to maximize the tax benefit of the issuance of Class B Units to any holder of Class   B Units if there are changes in the law or Regulations concerning the issuance of partnership   interests for services.   ARTICLE XIII   LTIP UNITS   13.01 LTIP Units.   (a) Issuance of LTIP Units. Pursuant to an OPP Agreement or otherwise, the   General Partner may, from time to time, issue LTIP Units to Persons who have provided, or will   provide, services to the Partnership or the General Partner for such consideration (if any) as the   General Partner may determine to be appropriate, and admit such Persons as Limited Partners.   Subject to the following provisions of this Section 13.01 and the special provisions of Sections   13.02 and 5.01(c)(iv) hereof, LTIP Units shall be treated as Partnership Units, with all of the   rights, privileges and obligations attendant thereto. For purposes of computing the Partners’   Percentage Interests, LTIP Unitholders shall be treated as holders of OP Units and LTIP Units   shall be treated as OP Units. It is intended that the Partnership shall maintain at all times a one-    

 

   75      to-one correspondence between LTIP Units and OP Units for conversion, distribution and other   purposes, including without limitation complying with the following procedures:   (i) If an Adjustment Event occurs, then the General Partner shall   make a corresponding adjustment to the LTIP Units to maintain a one-for-one   conversion and economic equivalence ratio between OP Units and LTIP Units. If   more than one Adjustment Event occurs, the adjustment to the LTIP Units need   be made only once using a single formula that takes into account each and every   Adjustment Event as if all Adjustment Events occurred simultaneously.    (ii) If the Partnership takes an action affecting the OP Units other than   actions specifically described in the definition of Adjustment Events and, in the   opinion of the General Partner such action would require an adjustment to the   LTIP Units to maintain the one-to-one correspondence described above, the   General Partner shall have the right to make such adjustment to the LTIP Units, to   the extent permitted by law and by any OPP Agreement, in such manner and at   such time as the General Partner, in its sole discretion, may determine to be   appropriate under the circumstances.    (iii) If an adjustment is made to the LTIP Units as herein provided, the   Partnership shall promptly file in the books and records of the Partnership an   officer’s certificate setting forth such adjustment and a brief statement of the facts   requiring such adjustment, which certificate shall be conclusive evidence of the   correctness of such adjustment absent manifest error. Promptly after the filing of   such certificate, the Partnership shall mail a notice to each LTIP Unitholder   setting forth the adjustment to his or her LTIP Units and the effective date of such   adjustment.   (b) Priority. Subject to the provisions of this Section 13.01 and the special   provisions of Sections 13.02 and 5.01(c)(iv), the LTIP Units shall rank pari passu with the OP   Units as to the payment of regular and special periodic or other distributions and, subject to   Section 5.06 hereof, distribution of assets upon liquidation, dissolution or winding up. As to the   payment of distributions upon liquidation, dissolution or winding up, any class or series of OP   Units or Partnership Interests which by its terms specifies that it shall rank junior to, on a parity   with, or senior to the OP Units shall also rank junior to, or pari passu with, or senior to,   respectively, the LTIP Units.    (c) Special Provisions. LTIP Units shall be subject to the following special   provisions:    (i) LTIP Awards. LTIP Units may, in the sole discretion of the   General Partner, be issued subject to vesting, forfeiture and additional restrictions   on transfers pursuant to the terms of an OPP Agreement. The terms of any OPP   Agreement may be modified by the General Partner from time to time in its sole   discretion, subject to any restrictions on amendment imposed by the relevant OPP   Agreement pursuant to which such LTIP Award was issued. LTIP Units that have     

 

   76      vested under the terms of an OPP Agreement are referred to as “Vested LTIP   Units”; all other LTIP Units shall be treated as “Unvested LTIP Units.”   (ii) Forfeiture. Unless otherwise specified in the OPP Agreement, upon   the occurrence of any event specified in a OPP Agreement as resulting in either   the right of the Partnership or the General Partner to repurchase LTIP Units at a   specified purchase price or some other forfeiture of any LTIP Units, if the   Partnership or the General Partner exercises such right of repurchase or forfeiture   in accordance with the applicable OPP Agreement, the relevant LTIP Units shall   immediately, and without any further action, be treated as cancelled and no longer   outstanding for any purpose. Unless otherwise specified in the OPP Agreement,   no consideration or other payment shall be due with respect to any LTIP Units   that have been forfeited, other than any distributions declared with respect to a   Partnership Record Date prior to the effective date of the forfeiture. In connection   with any repurchase or forfeiture of LTIP Units, the LTIP Economic Capital   Account Balance of the LTIP Unitholder with respect to remaining LTIP Units, if   any, shall be reduced by the amount, if any, by which it exceeds the target balance   contemplated by Section 5.01(c)(iv), with respect to such remaining LTIP Units.    (iii) Allocations. LTIP Unitholders shall be entitled to certain special   allocations of Net Property Gain under Sections 5.01(c)(iv).  Except in connection   with Net Property Gain, LTIP Unitholders shall be allocated Net Income no   greater than the amount of distributions made pursuant to Section 13.01(a)(ii).   (iv) Redemption. The OP Unit Redemption Right provided to Limited   Partners under Section 8.04 hereof shall not apply with respect to LTIP Units   unless and until the LTIP Units are converted to OP Units as provided in clause   (v) below and Section 13.02.   (v) Conversion to OP Units. Vested LTIP Units are eligible to be   converted into OP Units in accordance with Section 13.02.   (vi) Legend. Any certificate evidencing an LTIP Unit shall bear an   appropriate legend indicating that additional terms, conditions and restrictions on   transfer, including without limitation any LTIP Award, apply to the LTIP Unit.    (d) Voting. LTIP Unitholders shall (a) have the same voting rights as the   Limited Partners, with the LTIP Units voting as a single class with the OP Units and having one   vote per LTIP Unit; and (b) have the additional voting rights that are expressly set forth below.   So long as any LTIP Units remain outstanding, the Partnership shall not, without the affirmative   vote of the holders of at least a majority of the LTIP Units outstanding at the time, given in   person or by proxy, either in writing or at a meeting (voting separately as a class), amend, alter   or repeal, whether by merger, consolidation or otherwise, the provisions of this Agreement   applicable to LTIP Units so as to materially and adversely affect any right, privilege or voting   power of the LTIP Units or the LTIP Unitholders as such, unless such amendment, alteration, or   repeal affects equally, ratably and proportionately the rights, privileges and voting powers of the   Limited Partners; but subject, in any event, to the following provisions:      

 

   77      (i) With respect to any OP Unit Transaction, so long as the LTIP   Units are treated in accordance with Section 13.02(f), the consummation of such   OP Unit Transaction shall not be deemed to materially and adversely affect such   rights, preferences, privileges or voting powers of the LTIP Units or the LTIP   Unitholders as such; and    (ii) Any creation or issuance of any Partnership Units or of any class   or series of Partnership Interest including without limitation additional OP Units   or LTIP Units whether ranking senior to, junior to, or on a parity with the LTIP   Units with respect to distributions and the distribution of assets upon liquidation,   dissolution or winding up, shall not be deemed to materially and adversely affect   such rights, preferences, privileges or voting powers of the LTIP Units or the   LTIP Unitholders as such.    The foregoing voting provisions will not apply if, at or prior to the time when the act with respect   to which such vote would otherwise be required, all outstanding LTIP Units shall have been converted   into OP Units.    (e) Liquidation Value of LTIP Units upon Issuance, and Safe Harbor Election.    (i) LTIP Units are intended to qualify as a “profits interest” in the   Partnership issued to a new or existing Partner in a partner capacity for services   performed or to be performed to or for the benefit of the Partnership within the   meaning of Rev. Proc. 93-27, 1993-2 C.B. 343, and Rev. Proc. 2001-43, 2001-2   C.B. 191, the Code, the Regulations, and other future guidance provided by the   IRS with respect thereto, and the allocations under Section 5.01(c)(iv) shall be   interpreted in a manner that is consistent therewith.    (ii) The Partners agree that the General Partner may make a Safe   Harbor Election, on behalf of itself and of all Partners, to have the Safe Harbor   apply irrevocably with respect to LTIP Units transferred in connection with the   performance of services by a Partner in a partner capacity. The Safe Harbor   Election shall be effective as of the date of issuance of such LTIP Units. If such   election is made, (A) the Partnership and each Partner agree to comply with all   requirements of the Safe Harbor with respect to all interests in the Partnership   transferred in connection with the performance of services by a Partner in a   partner capacity, whether such Partner was admitted as a Partner or as the   transferee of a previous Partner, and (B) the General Partner shall cause the   Partnership to comply with all record-keeping requirements and other   administrative requirements with respect to the Safe Harbor as shall be required   by proposed or final regulations relating thereto.    (iii) The Partners agree that if a Safe Harbor Election is made by the   General Partner, (A) each LTIP Unit issued hereunder is a Safe Harbor Interest,   (B) each LTIP Unit represents a profits interest received for services rendered or   to be rendered to or for the benefit of the Partnership by the LTIP Unitholder in   his or her capacity as a Partner or in anticipation of becoming a Partner, and (C)     

 

   78      the fair market value of each LTIP Unit issued by the Partnership upon receipt by   the LTIP Unitholder as of the date of issuance is zero (plus the amount, if any, of   any Capital Contributions made to the Partnership by such LTIP Unitholder in   connection with the issuance of such LTIP Unit), representing the liquidation   value of such interest upon receipt (with such valuation being consented to and   hereby approved by all Partners).    (iv) Each Partner, by signing this Agreement or by accepting such   transfer, hereby agrees (A) to comply with all requirements of any Safe Harbor   Election made by the General Partner with respect to each LTIP Unitholder’s Safe   Harbor Interest, (B) that each LTIP Unitholder shall take into account of all items   of income, gain, loss, deduction and credit associated with its LTIP Units as if   they were fully vested in computing its federal income tax liability for the entire   period during which it holds the LTIP Units, (C) that neither the Partnership nor   any Partner shall claim a deduction (as wages, compensation or otherwise) for the   fair market value of such LTIP Units issued to a holder of such LTIP Units, either   at the time of grant of the LTIP Units or at the time the LTIP Units become   substantially vested, and (D) that to the extent that such profits interest is forfeited   after the date hereof, the Partnership shall make special forfeiture allocations of   gross items of income, deduction or loss (including, as may be permitted by or   under Regulations (or other rules promulgated) to be adopted, notional items of   income, deduction or loss) in accordance with the Regulations to be adopted   under Sections 704(b) and 83 of the Code.    (v) The General Partner shall file or cause the Partnership to file all   returns, reports and other documentation as may be required, as reasonably   determined by the General Partner, to perfect and maintain any Safe Harbor   Election made by the General Partner with respect to granting of each LTIP   Unitholder’s Safe Harbor Interest.   (vi) The General Partner is hereby authorized and empowered, without   further vote or action of the Partners, to amend this Agreement to the extent   necessary or helpful in accordance with the advice of Partnership tax counsel or   accountants to sustain the Partnership’s position that (A) it has complied with the   Safe Harbor requirements in order to provide for a Safe Harbor Election and it has   ability to maintain the same, or (B) the issuance of the LTIP Units is not a taxable   event with respect to the LTIP Unitholders, and the General Partner shall have the   authority to execute any such amendment by and on behalf of each Partner   pursuant to the power of attorney granted by this Agreement. Any undertaking by   any Partner necessary or desirable to (A) enable or preserve a Safe Harbor   Election or (B) otherwise to prevent the issuance of LTIP Units to LTIP   Unitholders from being a taxable event may be reflected in such amendments and,   to the extent so reflected, shall be binding on each Partner.   (vii) Each Partner agrees to cooperate with the General Partner to   perfect and maintain any Safe Harbor Election, and to timely execute and deliver     

 

   79      any documentation with respect thereto reasonably requested by the General   Partner, at the expense of the Partnership.    (viii) No Transfer of any interest in the Partnership by a Partner shall be   effective unless prior to such Transfer, the assignee or intended recipient of such   interest shall have agreed in writing to be bound by the provisions of this Section   13.01(e), in a form reasonably satisfactory to the General Partner.   (ix) The provisions of this Section 13.01(e) shall apply regardless of   whether or not an LTIP Unitholder files an election pursuant to Section 83(b) of   the Code.   (x) The General Partner may amend this Section 13.01(e) as it deems   necessary or appropriate to maximize the tax benefit of the issuance of LTIP   Units to any LTIP Unitholder if there are changes in the law or Regulations   concerning the issuance of partnership interests for services.   13.02 Conversion of LTIP Units.   (a) Conversion Right. Subject to Section 13.02(b), an LTIP Unitholder shall   have the right (the “LTIP Conversion Right”), at his or her option, at any time to convert all or   a portion of his or her Vested LTIP Units into OP Units; provided, however, that a holder may   not exercise the LTIP Conversion Right for less than one thousand (1,000) Vested LTIP Units or,   if such holder holds less than one thousand Vested LTIP Units, all of the Vested LTIP Units held   by such holder. LTIP Unitholders shall not have the right to convert Unvested LTIP Units into   OP Units until they become Vested LTIP Units; provided, however, that when an LTIP   Unitholder is notified of the expected occurrence of an event that will cause his or her Unvested   LTIP Units to become Vested LTIP Units, such LTIP Unitholder may give the Partnership an   LTIP Conversion Notice conditioned upon and effective as of the time of vesting and such LTIP   Conversion Notice, unless subsequently revoked by the LTIP Unitholder, shall be accepted by   the Partnership subject to such condition. The General Partner shall have the right at any time to   cause a conversion of Vested LTIP Units into OP Units. In all cases, the conversion of any LTIP   Units into OP Units shall be subject to the conditions and procedures set forth in this   Section 13.02.    (b) Exercise by an LTIP Unitholder. A holder of Vested LTIP Units may   convert such LTIP Units into an equal number of fully paid and non-assessable OP Units, giving   effect to all adjustments (if any) made pursuant to Section 13.01 hereof. Notwithstanding the   foregoing, in no event may a holder of Vested LTIP Units convert a number of Vested LTIP   Units that exceeds (x) the LTIP Economic Capital Account Balance of such Limited Partner,   divided by (y) the OP Unit Economic Balance, in each case as determined as of the effective date   of conversion (the “Capital Account Limitation”). In order to exercise his or her LTIP   Conversion Right, an LTIP Unitholder shall deliver a notice (an “LTIP Conversion Notice”) in   the form attached as Exhibit D to the Agreement (with a copy to the General Partner) not less   than ten nor more than 60 days prior to a date (the “LTIP Conversion Date”) specified in such   LTIP Conversion Notice; provided, however, that if the General Partner has not given to the   LTIP Unitholders notice of a proposed or upcoming OP Unit Transaction at least 30 days prior to     

 

   80      the effective date of such OP Unit Transaction, then LTIP Unitholders shall have the right to   deliver an LTIP Conversion Notice until the earlier of (x) the tenth day after such notice from the   General Partner of a OP Unit Transaction or (y) the third business day immediately preceding the   effective date of such OP Unit Transaction. An LTIP Conversion Notice shall be provided in the   manner provided in Section 18.01 hereof. Each LTIP Unitholder covenants and agrees with the   Partnership that all Vested LTIP Units to be converted pursuant to this Section 13.02(b) shall be   free and clear of all liens. Notwithstanding anything herein to the contrary, a holder of LTIP   Units may deliver a Notice of Redemption pursuant to Section 8.04(a) hereof relating to those   OP Units that will be issued to such holder upon conversion of such LTIP Units into OP Units in   advance of the LTIP Conversion Date; provided, however, that the redemption of such OP Units   by the Partnership shall in no event take place until after the LTIP Conversion Date. For clarity,   it is noted that the objective of this paragraph is to put an LTIP Unitholder in a position where, if   he or she so wishes, the OP Units into which his or her Vested LTIP Units will be converted can   be redeemed by the Partnership simultaneously with such conversion, with the further   consequence that, if the General Partner elects to assume the Partnership’s redemption obligation   with respect to such OP Units under Section 8.04(b) hereof by delivering to such holder REIT   Shares rather than cash, then such holder can have such REIT Shares issued to him or her   simultaneously with the conversion of his or her Vested LTIP Units into OP Units. The General   Partner and LTIP Unitholder shall reasonably cooperate with each other to coordinate the timing   of the events described in the foregoing sentence.   (c) Forced Conversion. The Partnership, at any time at the election of the   General Partner, may cause any number of Vested LTIP Units held by an LTIP Unitholder to be   converted (a “Forced Conversion”) into an equal number of OP Units, giving effect to all   adjustments (if any) made pursuant to Section 13.01 hereof; provided, however, that the   Partnership may not cause Forced Conversion of any LTIP Units that would not at the time be   eligible for conversion at the option of such LTIP Unitholder pursuant to Section 13.02(b)   hereof. In order to exercise its right of Forced Conversion, the Partnership shall deliver a notice   (a “Forced Conversion Notice”) in the form attached as Exhibit E to the applicable LTIP   Unitholder not less than ten nor more than 60 days prior to the LTIP Conversion Date specified   in such Forced Conversion Notice. A Forced Conversion Notice shall be provided in the manner   provided in Section 18.01 hereof.   (d) Completion of Conversion. A conversion of Vested LTIP Units for which   the holder thereof has given an LTIP Conversion Notice or the Partnership has given a Forced   Conversion Notice shall occur automatically after the close of business on the applicable LTIP   Conversion Date without any action on the part of such LTIP Unitholder, as of which time such   LTIP Unitholder shall be credited on the books and records of the Partnership with the issuance   as of the opening of business on the next day of the number of OP Units issuable upon such   conversion.    (e) Impact of Conversion for Purposes of Section 5.01(c)(iv). For purposes of   making future allocations under Section 5.01(c)(iv) hereof and applying the Capital Account   Limitation, the portion of the LTIP Economic Capital Account Balance of the applicable LTIP   Unitholder shall be reduced, as of the date of conversion, by the product of the number of LTIP   Units converted and the OP Unit Economic Balance.     

 

   81      (f) OP Unit Transactions. If the Partnership or the General Partner shall be a   party to any OP Unit Transaction, then the General Partner shall, immediately prior to the OP   Unit Transaction, exercise its right to cause a Forced Conversion with respect to the maximum   number of LTIP Units then eligible for conversion, taking into account any allocations that occur   in connection with the OP Unit Transaction or that would occur in connection with the OP Unit   Transaction if the assets of the Partnership were sold at the OP Unit Transaction price or, if   applicable, at a value determined by the General Partner in good faith using the value attributed   to the Partnership Units in the context of the OP Unit Transaction (in which case the LTIP   Conversion Date shall be the effective date of the OP Unit Transaction). In anticipation of such   Forced Conversion and the consummation of the OP Unit Transaction, the Partnership shall use   commercially reasonable efforts to cause each LTIP Unitholder to be afforded the right to   receive in connection with such OP Unit Transaction in consideration for the OP Units into   which his or her LTIP Units will be converted the same kind and amount of cash, securities and   other property (or any combination thereof) receivable upon the consummation of such OP Unit   Transaction by a holder of the same number of OP Units, assuming such holder of OP Units is   not a Constituent Person, or an affiliate of a Constituent Person. In the event that holders of OP   Units have the opportunity to elect the form or type of consideration to be received upon   consummation of the OP Unit Transaction, prior to such OP Unit Transaction the General   Partner shall give prompt written notice to each LTIP Unitholder of such election, and shall use   commercially reasonable efforts to afford the LTIP Unitholders the right to elect, by written   notice to the General Partner, the form or type of consideration to be received upon conversion   of each LTIP Unit held by such holder into OP Units in connection with such OP Unit   Transaction. If an LTIP Unitholder fails to make such an election, such holder (and any of its   transferees) shall receive upon conversion of each LTIP Unit held him or her (or by any of his or   her transferees) the same kind and amount of consideration that a holder of a OP Unit would   receive if such OP Unit holder failed to make such an election. Subject to the rights of the   Partnership and the General Partner under any OPP Agreement, the Partnership shall use   commercially reasonable effort to cause the terms of any OP Unit Transaction to be consistent   with the provisions of this Section 13.02(f) and to enter into an agreement with the successor or   purchasing entity, as the case may be, for the benefit of any LTIP Unitholders whose LTIP Units   will not be converted into OP Units in connection with the OP Unit Transaction that will   (i) contain provisions enabling the holders of LTIP Units that remain outstanding after such OP   Unit Transaction to convert their LTIP Units into securities as comparable as reasonably possible   under the circumstances to the OP Units and (ii) preserve as far as reasonably possible under the   circumstances the distribution, special allocation, conversion, and other rights set forth in this   Agreement for the benefit of the LTIP Unitholders.   ARTICLE XIV   SERIES C PREFERRED UNITS   14.01 Number of Preferred Units and Designation.  A series of preferred Partnership   Units in the Partnership, designated as the “Series C Preferred Units,” is hereby established.   Except as set forth in Article V and this Article XIV, and except where the context elsewhere in   this Agreement otherwise requires, Series C Preferred Units shall have the same rights,   privileges and preferences as the OP Units.     

 

   82      14.02 Ranking.  The Series C Preferred Units shall, with respect to the payment of   distributions and the right to receive the Series C Liquidation Preference upon a Liquidation,   rank junior to all Series C Senior Units; rank senior to all Series C Junior Units, and rank in   parity with all Series C Parity Units.   14.03 Distributions.  Distributions with respect to Series C Preferred Units shall be   cumulative from the day of issuance of any such Series C Preferred Units and shall be payable   monthly, when, as and if declared by the General Partner, in arrears, on each Series C   Distribution Payment Date.  Each such distribution shall be payable to the holders of record of   Series C Preferred Units as they appear in the records of the Partnership at the close of business   on such record date, which shall not be more than 30 days preceding such Series C Distribution   Payment Dates thereof, as shall be fixed by the General Partner.   14.04 Conversion.   (a) Unless such Series C Preferred Units have previously been redeemed   pursuant to Section 14.05, at such time as there occurs a conversion of shares of Series C   Preferred Stock for REIT Shares, a corresponding number of Series C Preferred Units shall   automatically convert into a corresponding number of OP Units (subject to appropriate   adjustment in the event of any dividend, split, combination or other similar recapitalization with   respect to the OP Units) on terms substantially similar to the terms for conversion of shares of   Series C Preferred Stock for REIT Shares contained in the Series C Articles Supplementary.   (b) Each automatic conversion of Series C Preferred Units for OP Units shall   be deemed to have been effected at such time as the concurrent conversion of the corresponding   shares of Series C Preferred Stock for REIT Shares shall have been deemed effected in   accordance with the Charter, and Exhibit A shall be amended by the General Partner to reflect   such conversion.    14.05 Redemption.  If the General Partner redeems or otherwise purchases any shares   of Series C Preferred Stock, the Partnership shall redeem a corresponding number of Series C   Preferred Units, on the date of redemption or other purchase of shares of Series C Preferred   Stock by the General Partner (“Series C Redemption Date”), at a redemption price per Series C   Preferred Unit equal to the sum of (a) the Series C Liquidation Preference plus (b) the accrued   but unpaid Series C Preferred Return plus (c) the Series C Redemption Premium, and the   redemption price shall be payable in cash.  Any redemption of Series C Preferred Units shall be   deemed to occur on the Series C Redemption Date immediately prior to the related redemption   or other purchase of Shares of Series C Preferred Stock.   14.06 Voting.    (a) Other than as expressly provided in below in this Section 14.06, the Series   C Preferred Units shall not have any voting rights or powers, and the consent of the holders   thereof, shall not be required for the taking of any Partnership action.   (b) As long as any of the Series C Preferred Units shall remain outstanding,   the Partnership shall not, and the General Partner shall not have the authority to cause the   Partnership to, take any of the following actions without the prior written consent of holders     

 

   83      owning at least sixty-six and two-thirds percent (66 and 2/3%) of the Series C Preferred Units   then issued and outstanding, voting as a single class, in person or by proxy:   (i) Effectuate amendments to this Agreement that would materially   adversely affect the terms and conditions of, or the voting powers, rights,   privileges or preferences of the holders of the Series C Preferred Units; provided,   however, that amendments to the Agreement to authorize or create or to increase   the number of authorized units of any Series C Senior Units, Series C Parity Units   or Series C Junior Units shall not be deemed to materially adversely affect the   voting powers, rights or preferences of the Series C Preferred Units.    14.07 Transfers.  Subject to the provisions of Section 9.02(b), (c) and (d), no Limited   Partner may Transfer such Limited Partner’s Series C Preferred Unit without the prior written   consent of the General Partner, which may be withheld or denied by the General Partner it is sole   and absolute discretion.  Notwithstanding anything in this Agreement to the contrary, any   Transfer in contravention of this Section 14.07 shall be void and ineffectual and shall not be   binding upon, or recognized by the Partnership.   14.08 Miscellaneous.   (a) Series C Preferred Units will not have any designations, preferences,   conversion or other rights, voting powers, restrictions, limitations as to distributions,   qualifications or terms and conditions of redemption, other than those specifically set forth   herein and as may be provided under applicable law.   (b) The preferences, conversion and other rights, voting powers, restrictions,   limitations as to distributions, qualifications and terms and conditions of redemption of the Series   C Preferred Units may be waived, and any of such provisions of the Series C Preferred Units   may be amended, with the approval of holders of at least sixty-six and two-thirds percent (66 and   2/3%) of the issued outstanding Series C Preferred Units, voting as a single class in person or by   proxy.   ARTICLE XV   SERIES D PREFERRED UNITS   15.01 Number of Preferred Units and Designation.  A series of preferred Partnership   Units in the Partnership, designated as the “Series D Preferred Units,” is hereby established.    Except as set forth in Article V and this Article XV, and except where the context elsewhere in   this Agreement otherwise requires, Series D Preferred Units shall have the same rights,   privileges and preferences as the OP Units.   15.02 Ranking.  The Series D Preferred Units shall, with respect to the payment of   distributions and the right to receive the Series D Liquidation Preference upon a Liquidation,   rank junior to all Series D Senior Units; rank senior to all Series D Junior Units, and rank in   parity with all Series D Parity Units.   15.03 Distributions.  Distributions with respect to Series D Preferred Units shall be   cumulative from the day of issuance of any such Series D Preferred Units and shall be payable     

 

   84      monthly, when, as and if declared by the General Partner, in arrears, on each Series D   Distribution Payment Date.  Each such distribution shall be payable to the holders of record of   Series D Preferred Units as they appear in the records of the Partnership at the close of business   on such record date, which shall not be more than 30 days preceding such Series D Distribution   Payment Dates thereof, as shall be fixed by the General Partner.   15.04 Conversion.   (a) Unless such Series D Preferred Units have previously been redeemed   pursuant to Section 15.05, at such time as there occurs a conversion of shares of Series D   Preferred Stock for REIT Shares, Series E Preferred Stock or cash, a corresponding number of   Series D Preferred Units shall automatically convert into a corresponding number of OP Units   (subject to appropriate adjustment in the event of any dividend, split, combination or other   similar recapitalization with respect to the OP Units), a corresponding number of Series E   Preferred Units or cash, respectively, on terms substantially similar to the terms for conversion of   shares of Series D Preferred Stock for REIT Shares, shares Series E Preferred Stock or cash   contained in the Series D Articles Supplementary.    (b) Each automatic conversion of Series D Preferred Units shall be deemed to   have been effected at such time as the concurrent conversion of the corresponding shares of   Series D Preferred Stock shall have been deemed effected in accordance with the Charter, and   Exhibit A shall be amended by the General Partner to reflect such conversion.    15.05 Redemption.  If the General Partner redeems or otherwise purchases any shares   of Series D Preferred Stock, the Partnership shall redeem a corresponding number of Series D   Preferred Units, on the date of redemption or other purchase of shares of Series D Preferred   Stock by the General Partner (“Series D Redemption Date”), at a redemption price per Series D   Preferred Unit equal to the greater of: (a) the product of: (i) the number of Series D Preferred   Units multiplied by (ii) 102% of the Series D Liquidation Preference and (b) the product of: (i)   the number of OP Units to which the Series D Preferred Units would be convertible at the   Conversion Price (as defined in the Series D Articles Supplementary) as of the date of the   Redemption Notice (as defined in the Series D Articles Supplementary) multiplied by (ii) 102%   of the one-day VWAP (as defined in the Series D Articles Supplementary) of the REIT Shares   on the date of the Redemption Notice (as defined in the Series D Articles Supplementary), and   the redemption price shall be payable in cash. Any redemption of Series D Preferred Units shall   be deemed to occur on the Redemption Date immediately prior to the related redemption or other   purchase of Shares of Series D Preferred Stock.   15.06 Voting.    (a) Other than as expressly provided in below in this Section 15.06, the Series   D Preferred Units shall not have any voting rights or powers, and the consent of the holders   thereof, shall not be required for the taking of any Partnership action.   (b) As long as any of the Series D Preferred Units shall remain outstanding,   the Partnership shall not, and the General Partner shall not have the authority to cause the   Partnership to, take any of the following actions without the prior written consent of holders     

 

   85      owning at least sixty-six and two-thirds percent (66 and 2/3%) of the Series D Preferred Units   then issued and outstanding, voting as a single class, in person or by proxy:   (i) Effectuate amendments to this Agreement that would materially   adversely affect the terms and conditions of, or the voting powers, rights, privileges or   preferences of the holders of the Series D Preferred Units; provided, however, that   amendments to the Agreement to authorize or create or to increase the number of   authorized units of any Series D Senior Units, Series D Parity Units or Series D Junior   Units shall not be deemed to materially adversely affect the voting powers, rights or   preferences of the Series D Preferred Units.    15.07 Transfers.  Subject to the provisions of Section 9.02(b), (c) and (d), no Limited   Partner may Transfer such Limited Partner’s Series D Preferred Unit without the prior written   consent of the General Partner, which may be withheld or denied by the General Partner it is sole   and absolute discretion.  Notwithstanding anything in this Agreement to the contrary, any   Transfer in contravention of this Section 15.07 shall be void and ineffectual and shall not be   binding upon, or recognized by the Partnership.   15.08 Miscellaneous.   (a) Series D Preferred Units will not have any designations, preferences,   conversion or other rights, voting powers, restrictions, limitations as to distributions,   qualifications or terms and conditions of redemption, other than those specifically set forth   herein and as may be provided under applicable law.   (b) The preferences, conversion and other rights, voting powers, restrictions,   limitations as to distributions, qualifications and terms and conditions of redemption of the Series   D Preferred Units may be waived, and any of such provisions of the Series D Preferred Units   may be amended, with the approval of holders of at least sixty-six and two-thirds percent (66 and   2/3%) of the issued outstanding Series D Preferred Units, voting as a single class in person or by   proxy.   ARTICLE XVI   SERIES E PREFERRED UNITS   [Reserved]   ARTICLE XVII   SERIES F PREFERRED UNITS   17.01 Number of Preferred Units and Designation.  A series of preferred Partnership   Units in the Partnership, designated as the “Series F Preferred Units,” is hereby established.    Except as set forth in Article V and this Article XVII, and except where the context elsewhere in   this Agreement otherwise requires, Series F Preferred Units shall have the same rights, privileges   and preferences as the OP Units.   17.02 Ranking.  The Series F Preferred Units shall, with respect to, allocations, the   payment of distributions and the right to receive the Series F Liquidation Amount upon a     

 

   86      Liquidation, rank junior to all Series F Senior Units; rank senior to all Series F Junior Units, and   rank in parity with all Series F Parity Units.   17.03 Distributions.  Distributions with respect to Series F Preferred Units shall be   cumulative from the day of issuance of any such Series F Preferred Units and shall be payable   monthly, when, as and if declared by the General Partner, in arrears, on each Series F   Distribution Payment Date.  Each such distribution shall be payable to the holders of record of   Series F Preferred Units as they appear in the records of the Partnership at the close of business   on such record date, which shall not be more than 30 days preceding such Series F Distribution   Payment Dates thereof, as shall be fixed by the General Partner.   17.04 Conversion.   (a) In connection with Series F Preferred Units held by the General Partner,   unless such Series F Preferred Units have previously been redeemed pursuant to Section 17.05(a)   hereof, at such time as there occurs a conversion of shares of Series F Preferred Stock for REIT   Shares, a corresponding number of Series F Preferred Units shall automatically convert into a   corresponding number of OP Units (subject to appropriate adjustment in the event of any   dividend, split, combination or other similar recapitalization with respect to the OP Units) on   terms substantially similar to the terms for conversion of shares of Series F Preferred Stock for   REIT Shares contained in the Articles Supplementary. Each automatic conversion of Series F   Preferred Units for OP Units shall be deemed to have been effected at such time as the   concurrent conversion of the corresponding shares of Series F Preferred Stock for REIT Shares   shall have been deemed effected in accordance with the Charter, and Exhibit A shall be amended   by the General Partner to reflect such conversion.    (b) In connection with Series F Preferred Units held by Limited Partners other   than the General Partner, unless such Series F Preferred Units have previously been redeemed   pursuant to Section 17.05(b) hereof, such Limited Partner shall have the right to convert all or a   portion of its Series F Preferred Units into OP Units upon the occurrence of a Change of Control   (as defined in the Series F Articles Supplementary) on terms substantially similar to the terms for   conversion of Shares of Series F Preferred Stock contained in the Series F Articles   Supplementary.    17.05 Redemption.     (a) In connection with Series F Preferred Units held by the General Partner, if   the General Partner redeems or otherwise purchases any shares of Series F Preferred Stock, the   Partnership shall automatically redeem a corresponding number of Series F Preferred Units, on   the date of redemption or other purchase of shares of Series F Preferred Stock by the General   Partner (“Series F Redemption Date”) on terms substantially similar to the terms for   redemption of Shares of Series F Preferred Stock contained in the Articles Supplementary. Any   automatic redemption of Series F Preferred Units shall be deemed to occur on the Redemption   Date immediately prior to the related redemption or other purchase of shares of Series F   Preferred Stock, and Exhibit A shall be amended by the General Partner to reflect such   redemption.     

 

   87      (b) In connection with Series F Preferred Units held by Limited Partners other   than the General Partner, the Partnership shall not redeem such Series F Preferred Units prior to   the fifth anniversary of the Original Issue Date (as defined in the Series F Articles   Supplementary) except upon the occurrence of a Change of Control (as defined in the Series F   Articles Supplementary).  The redemption of Series F Preferred Units by the Partnership shall be   on terms substantially similar to the terms for redemption of shares of Series F Preferred Stock   contained in the Articles Supplementary.   (c) Limited Partners holding Series F Preferred Units shall have the right to   have the Partnership redeem all or a portion of such Series F Preferred Units on such terms and   conditions as provided for the redemption of OP Units in Section 8.04, which section will apply   to such redemption as if all references to OP Units in such section were to Series F Preferred   Units, including the requirement that such Series F Preferred Units be outstanding for at least one   year prior to being redeemable by a Limited Partner.   17.06 Voting.    (a) Except as otherwise set forth herein, the Series F Preferred Units shall not   have any relative, participating, optional or other special voting rights and powers, and the   consent of the holders thereof shall not be required for the taking of any Partnership action.   (b) As long as any of the Series F Preferred Units shall remain outstanding,   the Partnership shall not, and the General Partner shall not have the authority to cause the   Partnership to, take any of the following actions without the prior written consent of holders   owning at least sixty-six and two-thirds percent (66 and 2/3%) of the Series F Preferred Units   then issued and outstanding, voting as a single class, in person or by proxy:   (i) Effectuate amendments to this Agreement that would materially   adversely affect the terms and conditions of, or the voting powers, rights, privileges or   preferences of the holders of the Series F Preferred Units; provided, however, that   amendments to the Agreement to authorize or create or to increase the number of   authorized units of any Series F Senior Units, Series F Parity Units or Series F Junior   Units shall not be deemed to materially adversely affect the voting powers, rights or   preferences of the Series F Preferred Units.    17.07 Transfers.  Subject to the provisions of Section 9.02(b), (c) and (d), no Series F   Preferred Unit shall be transferred, sold, assigned, conveyed, gifted, pledged, encumbered,   hypothecated, mortgaged, exchanged or otherwise disposed of by law or otherwise without the   prior written consent of the General Partner, which may be withheld or denied by the General   Partner it is sole and absolute discretion.  Notwithstanding anything in this Agreement to the   contrary, any Transfer in contravention of this Section 17.07 shall be void and ineffectual and   shall not be binding upon, or recognized by the Partnership.   17.08 Miscellaneous.   (a) Series F Preferred Units will not have any designations, preferences,   conversion or other rights, voting powers, restrictions, limitations as to distributions,     

 

   88      qualifications or terms and conditions of redemption, other than those specifically set forth   herein and as may be provided under applicable law.   (b) The preferences, conversion and other rights, voting powers, restrictions,   limitations as to distributions, qualifications and terms and conditions of redemption of the Series   F Preferred Units may be waived, and any of such provisions of the Series F Preferred Units may   be amended, with the approval of holders of at least sixty-six and two-thirds percent (66 and   2/3%) of the issued outstanding Series F Preferred Units, voting as a single class in person or by   proxy.   ARTICLE XVIII   GENERAL PROVISIONS   18.01 Notices.  All communications required or permitted under this Agreement shall be   in writing and shall be deemed to have been given when delivered personally or upon deposit in   the United States mail, registered, postage prepaid return receipt requested, to the Partners at the   addresses set forth in Exhibit A attached hereto, as it may be amended or restated from time to   time; provided, however, that any Partner may specify a different address by notifying the   General Partner in writing of such different address.  Notices to the General Partner and the   Partnership shall be delivered at or mailed to the Partnership’s office address set forth in Section   2.03 hereof.  The General Partner and the Partnership may specify a different address by   notifying the Limited Partners in writing of such different address.   18.02 Survival of Rights.  Subject to the provisions hereof limiting transfers, this   Agreement shall be binding upon and inure to the benefit of the Partners and the Partnership and   their respective legal representatives, successors, transferees and assigns.   18.03 Additional Documents.  Each Partner agrees to perform all further acts and   execute, swear to, acknowledge and deliver all further documents that may be reasonable,   necessary, appropriate or desirable to carry out the provisions of this Agreement or the Act.   18.04 Severability.  If any provision of this Agreement shall be declared illegal, invalid   or unenforceable in any jurisdiction, then such provision shall be deemed to be severable from   this Agreement (to the extent permitted by law) and in any event such illegality, invalidity or   unenforceability shall not affect the remainder hereof.   18.05 Entire Agreement.  Except for the Contribution Agreement and the Tax   Protection Agreement, this Agreement and exhibits attached hereto constitute the entire   Agreement of the Partners and supersede all prior written agreements and prior and   contemporaneous oral agreements, understandings and negotiations with respect to the subject   matter hereof.  In furtherance of the foregoing, the Partners acknowledge that the Amended   Agreement is hereby superseded in its entirety and this Agreement amends and restates any prior   agreement of limited partnership of the Partnership.   18.06 Pronouns and Plurals.  When the context in which words are used in the   Agreement indicates that such is the intent, words in the singular number shall include the plural   and the masculine gender shall include the neuter or female gender as the context may require.     

 

   89      18.07 Headings.  The Article headings or sections in this Agreement are for   convenience only and shall not be used in construing the scope of this Agreement or any   particular Article.   18.08 Counterparts.  This Agreement may be executed in several counterparts, each of   which shall be deemed to be an original copy and all of which together shall constitute one and   the same instrument binding on all parties hereto, notwithstanding that all parties shall not have   signed the same counterpart.   18.09 Governing Law.  This Agreement shall be governed by and construed in   accordance with the laws of the State of Delaware.    [SIGNATURE PAGE FOLLOWS]    

 

   [Signature Page to Third Amended and Restated Agreement of Limited Partnership]      IN WITNESS WHEREOF, the parties hereto have hereunder affixed their signatures to   this Amended and Restated Agreement of Limited Partnership, all as of the 26th day of   February, 2014.   GENERAL PARTNER:   American Realty Capital Properties, Inc.   By: /s/ Brian S. Block   Name: Brian S. Block    Title: Chief Financial Officer, Treasurer,   Secretary and Executive Vice President        

 

   Exhibit B-1      EXHIBIT B   NOTICE OF EXERCISE OF OP UNIT REDEMPTION RIGHT   In accordance with Section 8.04 of the Amended and Restated Agreement of Limited   Partnership (as amended, the “Agreement”) of ARC Properties Operating Partnership, L.P., the   undersigned hereby irrevocably (i) presents for redemption ___________ OP Units in ARC   Properties Operating Partnership, L.P. in accordance with the terms of the Agreement and the OP   Unit Redemption Right referred to in Section 8.04 thereof, (ii) surrenders such OP Units and all   right, title and interest therein and (iii) directs that the Cash Amount or REIT Shares Amount (as   defined in the Agreement) as determined by the Partnership deliverable upon exercise of the OP   Unit Redemption Right be delivered to the address specified below, and if REIT Shares (as   defined in the Agreement) are to be delivered, such REIT Shares be registered or placed in the   name(s) and at the address(es) specified below.   Dated:  __________ ___, ___   Name of Limited Partner:   (Signature of Limited Partner)   (Mailing Address)   (City) (State) (Zip Code)   Signature Guaranteed by:   If REIT Shares are to be issued, issue to:   Please insert social security or identifying number:   Name:     

 

   Exhibit C-1-1      EXHIBIT C-1   CERTIFICATION OF NON-FOREIGN STATUS   (FOR REDEEMING LIMITED PARTNERS THAT ARE ENTITIES)   Under Section 1445(e) of the Internal Revenue Code of 1986, as amended (the “Code”),   in the event of a disposition by a non-U.S. person of a partnership interest in a partnership in   which (i) 50% or more of the value of the gross assets consists of United States real property   interests (“USRPIs”), as defined in Section 897(c) of the Code, and (ii) 90% or more of the   value of the gross assets consists of USRPIs, cash, and cash equivalents, the transferee will be   required to withhold 10% of the amount realized by the non-U.S. person upon the disposition.    To inform American Realty Capital Properties, Inc. (the “General Partner”) and ARC   Properties Operating Partnership, L.P. (the “Partnership”) that no withholding is required with   respect to the redemption by ___________ (“Partner”) of its OP Units in the Partnership, the   undersigned hereby certifies the following on behalf of Partner:   1. Partner is not a foreign corporation, foreign partnership, foreign trust, or foreign estate, as   those terms are defined in the Code and the Treasury regulations thereunder.   2. Partner is not a disregarded entity as defined in Treasury Regulation   Section 1.1445-2(b)(2)(iii).   3. The U.S. employer identification number of Partner is ____________.   4. The principal business address of Partner is:  ___________________, ____________ and   Partner’s place of incorporation is ___________.   5. Partner agrees to inform the General Partner if it becomes a foreign person at any time   during the three-year period immediately following the date of this notice.   6. Partner understands that this certification may be disclosed to the Internal Revenue   Service by the General Partner and that any false statement contained herein could be   punished by fine, imprisonment, or both.   PARTNER:       By:     Name:      Title:        

 

   Exhibit C-1-2      Under penalties of perjury, I declare that I have examined this certification and, to the best of my   knowledge and belief, it is true, correct, and complete, and I further declare that I have authority   to sign this document on behalf of Partner.   Date:   Name:   Title:     

 

   Exhibit C-2-1      EXHIBIT C-2   CERTIFICATION OF NON-FOREIGN STATUS   (FOR REDEEMING LIMITED PARTNERS THAT ARE INDIVIDUALS)   Under Section 1445(e) of the Internal Revenue Code of 1986, as amended (the “Code”),   in the event of a disposition by a non-U.S. person of a partnership interest in a partnership in   which (i) 50% or more of the value of the gross assets consists of United States real property   interests (“USRPIs”), as defined in Section 897(c) of the Code, and (ii) 90% or more of the   value of the gross assets consists of USRPIs, cash, and cash equivalents, the transferee will be   required to withhold 10% of the amount realized by the non-U.S. person upon the disposition.    To inform American Realty Capital Properties, Inc. (the “General Partner”) and ARC   Properties Operating Partnership, L.P. (the “Partnership”) that no withholding is required with   respect to my redemption of my OP Units in the Partnership, I, ____________, hereby certify the   following:   1. I am not a nonresident alien for purposes of U.S. income taxation.   2. My U.S. taxpayer identification number (social security number) is _____________.   3. My home address is:  _______________________________________.   4. I agree to inform the General Partner promptly if I become a nonresident alien at any time   during the three-year period immediately following the date of this notice.   5. I understand that this certification may be disclosed to the Internal Revenue Service by   the General Partner and that any false statement contained herein could be punished by   fine, imprisonment, or both.   Name:   Under penalties of perjury, I declare that I have examined this certification and, to the best of my   knowledge and belief, it is true, correct, and complete.   Date:   Name:   Title:    

 

   Exhibit D-1      EXHIBIT D    NOTICE OF ELECTION BY PARTNER TO CONVERT   LTIP UNITS INTO OP UNITS      The undersigned holder of LTIP Units hereby irrevocably (i) elects to convert the number of   LTIP Units in ARC Properties Operating Partnership, L.P. (the “Partnership”) set forth below into OP   Units in accordance with the terms of the Amended and Restated Agreement of Limited Partnership of the   Partnership, as amended; and (ii) directs that any cash in lieu of OP Units that may be deliverable upon   such conversion be delivered to the address specified below. The undersigned hereby represents,   warrants, and certifies that the undersigned (a) has title to such LTIP Units, free and clear of the rights or   interests of any other person or entity other than the Partnership; (b) has the full right, power, and   authority to cause the conversion of such LTIP Units as provided herein; and (c) has obtained the consent   to or approval of all persons or entities, if any, having the right to consent or approve such conversion.          Name of Holder: _____________________________________________________________    (Please Print: Exact Name as Registered with Partnership)         Number of LTIP Units to be Converted:  __________________         Date of this Notice:  __________________         _____________________________________________________________   (Signature of Holder: Sign Exact Name as Registered with Partnership)      _____________________________________________________________   (Street Address)      _____________________________________________________________   (City) (State) (Zip Code)         Signature Guaranteed by:  ________________________________________    

 

   Exhibit E-1      EXHIBIT E    NOTICE OF ELECTION BY PARTNERSHIP TO FORCE CONVERSION OF   LTIP UNITS INTO OP UNITS       ARC Properties Operating Partnership, L.P. (the “Partnership”) hereby irrevocably elects to cause   the number of LTIP Units held by the holder of LTIP Units set forth below to be converted into OP Units   in accordance with the terms of the Amended and Restated Agreement of Limited Partnership of the   Partnership, as amended.          Name of Holder: _____________________________________________________________    (Please Print: Exact Name as Registered with Partnership)         Number of LTIP Units to be Converted:  __________________         Date of this Notice:  __________________ARCP 12.31.2013 - EX 10.1

Exhibit  10.1

AMENDMENT AND ACKNOWLEDGEMENT OF TERMINATION OF
AMENDED AND RESTATED MANAGEMENT AGEEMENT
    
This AMENDMENT AND ACKNOWLEDGEMENT OF TERMINATION OF AMENDED AND RESTATED MANAGEMENT AGREEMENT (this “Amendment”) is entered into as of January 8th, 2014 by and among American Realty Capital Properties, Inc., a Maryland corporation (the “Company”), and ARC Properties Advisors, LLC, a Delaware limited liability company (the “Manager”). 

RECITALS
A.    WHEREAS, the parties hereto are party to that certain Amended and Restated Management Agreement, dated February 28, 2013 (the “Agreement”), pursuant to which the day-to-day business and affairs of the Company are managed by the Manager.
B.    WHEREAS, the Company desires to become self-managed, in connection with which the Company and the Manager desire to terminate the Agreement, as a result of which the Company will become a self-managed real estate investment trust.
C.    WHEREAS, the parties hereto desire to amend the Agreement and to provide for the termination of the Agreement.
AGREEMENT
In consideration of the mutual agreements and covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1.Amendment of the Agreement.  
(a)Section 1 of the Agreement is hereby  amended by adding the following new definitions in appropriate alphabetical order:
““Self-Management Date” shall mean January 8th, 2014.”
““Post-Self-Management Period” shall mean the period following the Self-Management Date through and including the expiration of the Tail Period.”
““Tail Period” shall mean the period of 60 days following the Self-Management Date.”
(b)Section 6 of the Agreement is hereby amended by inserting the following new clause (h):
“On the Self-Management Date, the Company shall pay to the Manager an amount equal to $10,000,000.00 in payment in full for the furniture, fixtures and equipment and certain prepayments set forth in that certain Bill of Sale and General Assignment, dated January 8th, 2014, executed by the Manager pursuant to the Asset Purchase and Sale Agreement 

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dated as of January 8, 2014 by and among ARC Properties Operating Partnership, L.P. and ARC Properties Advisors, LLC.
The parties hereto agree that (i) the amounts payable pursuant to Sections 6(a)- (g) and 7 of the Agreement with respect to the Post-Self-Management Period in an amount equal to $10,000,000 and (ii) the payment pursuant to the preceding paragraph are the only amounts payable by the Company pursuant to this Agreement following the Self-Management Date in connection with, resulting from or arising out of the termination of the Agreement and that neither the Manager nor any of its Affiliates shall be entitled to any other fees or amounts that are otherwise payable by the Company in connection with, resulting from or arising out of the termination of the Agreement. 
Notwithstanding anything to the contrary contained in Section 6(d) of the Agreement, all payments of Incentive Compensation shall be paid in cash.
Nothing herein shall be deemed to prohibit payments from the Company to the Manager or its Affiliates with respect to the period after the Self-Management Date under the Services Agreement dated as of June 10, 2013, by and between AR Capital, LLC and RCS Advisory Services, LLC, which has been assigned to the Company to the extent applicable to services provided to the Company thereunder and the Transition Services Agreement dated as of October 21, 2013, by and between the Company, the ARC Properties Operating Partnership, L.P., ARC Advisory Services, LLC and American Realty Capital Advisors LLC.”
		
	2.
	LTIP Units. Notwithstanding any of the foregoing, upon termination of the Agreement, the Manager’s long-term incentive plan units (“LTIP Units”) of ARC Properties Operating Partnership, L.P. (the “OP”) granted pursuant to the 2013 Advisor Mutli-Year Outperformance Agreement, dated February 28, 2013, between the Company and the Manager, shall be vested in full.

		
	3.
	The American Realty Capital Name. The license granted to the Company by the Manager pursuant to Section 16 of the Agreement shall survive the termination of the Agreement perpetually with respect to use of the names “American Realty Capital Properties” and “ARCP” but shall not survive perpetually with respect to any use of the names “American Realty Capital,” “ARC” or AR Capital” or any derivative thereof.

		
	4.
	Termination of the Agreement.  The parties hereto agree that, effective at 5:00 p.m., Eastern Time, on the Self-Management Date, with no further action necessary by any party, the Agreement shall automatically terminate in its entirety and be of no further force or effect, except that the Manager shall continue to provide services under  the Agreement, to the extent required by the Company, for the Tail Period and shall only be entitled to payments to the extent permitted under Section 6(h) of the Agreement,  and except for any provisions of the Agreement which by their terms survive termination.

		
	5.
	Miscellaneous.

(a)    Limited Effect. Except as otherwise specifically set forth in this Amendment, all other terms and conditions of the Agreement shall remain in full force and effect.

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(b)    Entire Agreement.  The Agreement and this Amendment supersede all prior agreements between the parties with respect to the subject matter thereof and constitute a complete and exclusive statement of the terms of the agreement between the parties with respect to the subject matter thereof.

(c)    Governing Law.  This Agreement will be governed by the internal laws of the State of New York.

(d)    Construction.  The parties have participated jointly in the drafting of this Amendment, and each party was represented by counsel in the negotiation of this Amendment.  In the event an ambiguity or question of intent or interpretation arises, this Amendment shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Amendment.

(e)    Waiver of Legal Conflicts.  Each of the parties hereto acknowledges and agrees that, at their request, Proskauer Rose LLP acted as counsel to all such parties in connection with this Amendment. Accordingly, each of the parties agrees to, and does, waive any conflict of interest which may be deemed to arise as the result of such representation and agrees not to seek to disqualify or otherwise prevent Proskauer Rose LLP from representing the other parties hereto (or any other clients of Proskauer Rose LLP) in any matters by reason of its work on, or representation of, such party in connection with this Amendment or its possession of confidential information relating to such party.  Proskauer Rose LLP shall be entitled to rely upon this Section 5(d) as a third party beneficiary hereof.

(f)    Counterparts; Facsimile.  This Amendment may be executed in one or more counterparts, each of which shall be deemed an original and all of which, taken together, shall constitute one and the same instrument.  Original signatures hereto may be delivered by facsimile which shall be deemed originals.

(g)    Definitions.  Capitalized terms used but not defined herein have the meanings ascribed to them in the Agreement.

*****
IN WITNESS WHEREOF, the parties have executed and delivered this Amendment as of the date first written above.
	
		
	 
	 

	 
	AMERICAN REALTY CAPITAL PROPERTIES, INC.

	 
	 

	 
	By: /s/ Nicholas S. Schorsch

	 
	Name: Nicholas S. Schorsch

	 
	Title:   Chief Executive Officer and Chairman of the Board of Directors

	 
	 

	 
	 

	 
	 

	 
	 

	 
	ARC PROPERTIES ADVISORS LLC

	 
	 

	 
	By: ARC CAPITAL, LLC

	 
	Its sole member

	 
	 

	 
	 

	 
	By: /s/ Nicholas S. Schorsch

	 
	Name: Nicholas S. Schorsch
Title:   Manager

	 
	

	 
	 

	 
	 

	 
	 

	 
	 

	 
	 

	 
	 

	 
	 

	 
	 

	 
	 

	 
	 

	 
	 

	 
	 

	 
	 

	 
	 

	 
	 

 

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