Document:

Exhibit 4.1

 

AMENDMENT TO RIGHTS AGREEMENT

 

Amendment,
dated as of August 10, 2009 (this “Amendment”), to the Amended and Restated Rights
Agreement, dated as of December 5, 2000 (the “Rights Agreement”),
by and between Georgia Gulf Corporation, a Delaware corporation (the “Company”), and
Computershare Trust Company, N.A, as successor rights agent (the “Rights Agent”).

 

WHEREAS,
the Board of Directors of the Company has determined that it is in the best
interests of the Company and its stockholders to amend the Rights Agreement as
set forth in this Amendment; and

 

WHEREAS,
pursuant to the terms of the Rights Agreement and in, the Company has directed
that the Rights Agreement be amended as set forth in this Amendment, and by its
execution and delivery hereof, directs the Rights Agent to execute this
Amendment.

 

NOW
THEREFORE, in consideration of the foregoing and the mutual agreements set
forth in the Rights Agreement and in this Amendment, the parties hereto hereby
amend the Rights Agreement as follows:

 

1.             Section 1
of the Rights Agreement is hereby amended and restated in its entirety as
follows:

 

“(a)         “Acquiring Person” shall mean any Person (as
such term is hereinafter defined) that or which, together with all Affiliates
and Associates as such terms are hereinafter defined) of such Person, is the
Beneficial Owner (as such term is hereinafter defined) of 15% or more of the
Common Shares of the Company then outstanding, but shall not include the
Company, any Subsidiary (as such term is hereinafter defined) of the Company,
any employee benefit plan of the Company or any wholly owned Subsidiary of the
Company, or any entity holding Common Shares for or pursuant to the terms of
any such plan, provided, however, that a Person will not be
deemed to have become an “Acquiring
Person” solely as the result of (i) a reduction in the
number of Common Shares outstanding, (ii) the consummation of the
transactions contemplated by the Plan of Recapitalization, dated as of January 15,
1990, as amended (the “Plan
of  Recapitalization”),
or (iii) the consummation of the transactions contemplated by the 2009
Recapitalization; provided, however, that if a Person shall
become the Beneficial Owner of 15% or more of the Common Shares of the Company
then outstanding solely by reason of a reduction in the number of Common Shares
outstanding, the consummation of the Plan of Recapitalization or the 2009
Recapitalization and shall, after such reduction in the number of Common Shares
outstanding or such consummation of the Plan of Recapitalization or the 2009
Recapitalization, (i) become the Beneficial Owner of any additional Common
Shares of the Company other than as a result of stock split, stock dividend or
similar transaction effected by the Company in which all holders of Common
Stock are treated equally or (ii) any other Person that is the Beneficial
Owner of Common Shares representing 1% or more of the then-outstanding Common
Shares thereafter becomes an Affiliate or Associate of such Person, then such
Person shall be deemed to become an “Acquiring Person.”  Notwithstanding the foregoing, if the Board
of the Company determines in good faith that a Person that would otherwise be
an 

 

 

“Acquiring Person” as
defined pursuant to the foregoing provisions of this paragraph (a), has become
such inadvertently, and such Person divests as promptly as practicable a
sufficient number of Common Shares so that such Person would no longer be an “Acquiring Person” as
defined pursuant to the foregoing provisions of this paragraph (a), then such
Person shall not be deemed to be an “Acquiring
Person” for any purposes of this Agreement.”

 

2.             Section 1
of the Rights Agreement is hereby further amended by adding the following
subsection at the end thereof:

 

“(m)        “2009 Recapitalization”
means the offers to exchange the Company’s then-outstanding 7.125% Senior Notes
due 2013, 9.5% Senior Notes due 2014, and 10.75% Senior Subordinated Notes due
2016, for an aggregate of up to 32,050,000 shares of the Company’s convertible
preferred stock, par value $0.01 per share (the “Convertible Preferred Stock”) and an
aggregate of 1,430,000 shares of Common Stock, consummated on or about July 29,
2009, and related transactions, including the issuance of the Convertible
Preferred Stock and the shares of Common Stock issuable upon conversion of the
Convertible Preferred Stock.”

 

3.             Exhibits
B and C to the Rights Agreement are hereby deemed amended in a manner
consistent with this Amendment.

 

4.             This
Amendment shall be shall be deemed to be a contract made under the laws of the
State of Delaware and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts to be made and
performed entirely within such State.

 

5.             Capitalized
terms used without other definition in this Amendment will be used as defined
in the Rights Agreement.

 

6.             The
Rights Agreement will not otherwise be supplemented or amended by virtue of
this Amendment, but will remain in full force and effect.

 

7.             This
Amendment will be deemed to be effective as of July 28, 2009, and all
references to the Rights Agreement will, from and after such time, be deemed to
be references to the Rights Agreement as amended hereby.

 

8.             The
undersigned officer of the Company, being duly authorized on behalf of the
Company, hereby certifies in his or her capacity as an officer on behalf of the
Company to the Rights Agent that this Amendment is in compliance with the terms
of Section 26 of the Rights Agreement.

 

9.             By
its execution and delivery of this Amendment, the Company directs the Rights
Agent to execute this Amendment.

 

10.           This
Amendment may be executed in any number of counterparts and each of such
counterparts shall for all purposes be deemed to be an original, and all such
counterparts shall together constitute but one and the same instrument.

 

2

 

IN
WITNESS WHEREOF,  this Amendment
has been duly executed by the Company and the Rights Agent as of the effective
time stated above.

 

 

	
   

  	
  GEORGIA
  GULF CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joel Beerman

  
	
   

  	
   

  	
  Name:

  	
  Joel I. Beerman

  
	
   

  	
   

  	
  Title:

  	
  Vice President, General
  Counsel and Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  COMPUTERSHARE
  TRUST COMPANY, N.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Dennis V. Moccia

  
	
   

  	
   

  	
  Name:

  	
  Dennis V. Moccia

  
	
   

  	
   

  	
  Title:

  	
  Manager, Contract
  Adminstration

  

 

3Exhibit 10.1

 

EXECUTION COPY

 

AMENDED AND RESTATED

 

LIMITED PARTNERSHIP
AGREEMENT

 

OF

 

YSI - HART LIMITED PARTNERSHIP

 

(a Delaware Limited
Partnership)

 

August 13, 2009

 

THE
PARTNERSHIP INTERESTS IN YSI - HART LIMITED PARTNERSHIP (THE “INTERESTS”) ARE
SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH IN THIS AGREEMENT.  THE INTERESTS HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY OTHER
APPLICABLE SECURITIES LAWS, IN EACH CASE IN RELIANCE UPON EXEMPTIONS FROM THE
REQUIREMENTS OF SUCH LAWS.  NEITHER THE
INTERESTS NOR ANY PART THEREOF MAY BE OFFERED FOR SALE, PLEDGED,
HYPOTHECATED, SOLD, ASSIGNED OR TRANSFERRED AT ANY TIME EXCEPT IN COMPLIANCE
WITH THE TERMS AND CONDITIONS OF THIS AGREEMENT AND ALL APPLICABLE SECURITIES
LAWS.

 

 

TABLE
OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I DEFINITIONS

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 1.1.

  	
   

  	
  Capitalized Terms

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 1.2.

  	
   

  	
  Rules of Interpretation

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II FORMATION OF LIMITED PARTNERSHIP

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 2.1.

  	
   

  	
  Formation

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 2.2.

  	
   

  	
  Name and Offices

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 2.3.

  	
   

  	
  Business of the Partnership

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 2.4.

  	
   

  	
  Subsidiaries

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 2.5.

  	
   

  	
  Term

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 2.6.

  	
   

  	
  Admission of Partners

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III NON-COMPETITION

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 3.1.

  	
   

  	
  Restrictive Covenants

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 3.2.

  	
   

  	
  Remedies

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV CAPITAL CONTRIBUTIONS; FINANCING

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 4.1.

  	
   

  	
  Capital Contributions

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 4.2.

  	
   

  	
  No Additional Capital Contributions

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 4.3.

  	
   

  	
  Partnership Capital

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 4.4.

  	
   

  	
  Defaulting Partners

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 4.5.

  	
   

  	
  Loans by Partners or Affiliates

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 4.6.

  	
   

  	
  Financing

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 4.7.

  	
   

  	
  Operator Contributions to Pay Investor Accrual

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V DISTRIBUTIONS

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.1.

  	
   

  	
  Distributions in General

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.2.

  	
   

  	
  Distributions of Operating Cash

  	
   

  	
  25

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.3.

  	
   

  	
  Distributions of Capital Proceeds

  	
   

  	
  26

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.4.

  	
   

  	
  Clawback Against Payments of Operator Accrual

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.5.

  	
   

  	
  Distributions in Kind

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.6.

  	
   

  	
  Distributions upon Dissolution and Termination

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.7.

  	
   

  	
  Limitation on Distributions

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.8.

  	
   

  	
  Distributions
  in the Case of Transfers

  	
   

  	
  27

  

 

i

 

TABLE
OF CONTENTS

(continued)

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.9.

  	
   

  	
  Setoff Right

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI PARTNERS

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 6.1.

  	
   

  	
  Registered Partners

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 6.2.

  	
   

  	
  Limited Liability of Partners

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 6.3.

  	
   

  	
  Limitation on Partner Actions

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 6.4.

  	
   

  	
  Actions of the Partners

  	
   

  	
  29

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII MANAGEMENT OF THE PARTNERSHIP

  	
   

  	
  29

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 7.1.

  	
   

  	
  Powers and Responsibilities

  	
   

  	
  29

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 7.2.

  	
   

  	
  Major Decisions

  	
   

  	
  31

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 7.3.

  	
   

  	
  Major Dispute

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 7.4.

  	
   

  	
  Standard of Care

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 7.5.

  	
   

  	
  Resignation and Removal

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 7.6.

  	
   

  	
  Compensation and Expenses

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 7.7.

  	
   

  	
  Delegation of Authority

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 7.8.

  	
   

  	
  Notification of YSI Change in Control

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII OPERATION AND EXPENSES

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 8.1.

  	
   

  	
  Annual Business Plan and Operating Budget

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 8.2.

  	
   

  	
  Management Fees

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 8.3.

  	
   

  	
  Special Expense Reimbursement

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 8.4.

  	
   

  	
  Contracts With Affiliates

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 8.5.

  	
   

  	
  Third Party Contracts

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 8.6.

  	
   

  	
  Property Management Agreement

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 8.7.

  	
   

  	
  Ancillary Services Agreement

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 8.8.

  	
   

  	
  Employees and Contractors

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 8.9.

  	
   

  	
  ERISA Matters

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 8.10.

  	
   

  	
  REIT Matters

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 8.11.

  	
   

  	
  Insurance Matters

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 8.12.

  	
   

  	
  YSI Creditor Action; Loss of Assets

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX MEETINGS OF PARTNERS

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 9.1.

  	
   

  	
  Place of Meetings

  	
   

  	
  43

  

 

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  Section 9.2.

  	
   

  	
  Meetings of Partners

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 9.3.

  	
   

  	
  Notice of Meetings of Partners

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 9.4.

  	
   

  	
  Actions With or Without a Meeting and Telephone
  Meetings

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 9.5.

  	
   

  	
  Authorized Representatives of General Partners

  	
   

  	
  44

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X BOOKS AND RECORDS

  	
   

  	
  44

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 10.1.

  	
   

  	
  Books and Records

  	
   

  	
  44

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 10.2.

  	
   

  	
  Accounting Basis for Tax Reporting Purposes; Fiscal
  Year

  	
   

  	
  45

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 10.3.

  	
   

  	
  Reports

  	
   

  	
  45

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 10.4.

  	
   

  	
  Returns and Other Elections

  	
   

  	
  45

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 10.5.

  	
   

  	
  Tax Matters Partner

  	
   

  	
  46

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 10.6.

  	
   

  	
  Accountants

  	
   

  	
  46

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 10.7.

  	
   

  	
  Environmental Investigations

  	
   

  	
  47

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XI ALLOCATIONS AND TAX MATTERS

  	
   

  	
  47

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 11.1.

  	
   

  	
  Capital Accounts

  	
   

  	
  47

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 11.2.

  	
   

  	
  Allocation of Operating Profits
  and Operating Losses

  	
   

  	
  48

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 11.3.

  	
   

  	
  Allocation of Capital Transaction Profits and
  Capital Transaction Losses

  	
   

  	
  48

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 11.4.

  	
   

  	
  Special Regulatory Allocations

  	
   

  	
  48

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 11.5.

  	
   

  	
  Tax Allocations; Code
  Section 704(c)

  	
   

  	
  49

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 11.6.

  	
   

  	
  Reporting

  	
   

  	
  49

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 11.7.

  	
   

  	
  Tax Elections

  	
   

  	
  49

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 11.8.

  	
   

  	
  Allocations on Transfer of Interests

  	
   

  	
  50

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 11.9.

  	
   

  	
  No Deficit Restoration by Partners

  	
   

  	
  50

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 11.10.

  	
   

  	
  Withholding

  	
   

  	
  50

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XII COMPLIANCE WITH LAW

  	
   

  	
  50

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 12.1.

  	
   

  	
  Warranties and Representations— Operator Partners

  	
   

  	
  50

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 12.2.

  	
   

  	
  Warranties and Representations — Investor Partners

  	
   

  	
  51

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 12.3.

  	
   

  	
  Transfers and Compliance

  	
   

  	
  52

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 12.4.

  	
   

  	
  Compliance

  	
   

  	
  52

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XIII TRANSFER OF PARTNERSHIP INTERESTS

  	
   

  	
  53

  

 

iii

 

TABLE
OF CONTENTS

(continued)

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 13.1.

  	
   

  	
  Restrictions on Transfer of Interest of and in a
  Partner

  	
   

  	
  53

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 13.2.

  	
   

  	
  Intentionally Omitted

  	
   

  	
  54

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 13.3.

  	
   

  	
  Marketing Right

  	
   

  	
  55

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 13.4.

  	
   

  	
  Investor Unilateral Marketing Right

  	
   

  	
  59

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 13.5.

  	
   

  	
  Additional Operator Redemption Right

  	
   

  	
  59

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 13.6.

  	
   

  	
  Miscellaneous Purchase and Sale Provisions

  	
   

  	
  60

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 13.7.

  	
   

  	
  Insolvency of a Partner

  	
   

  	
  60

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 13.8.

  	
   

  	
  Management Pending Sale Closing

  	
   

  	
  61

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 13.9.

  	
   

  	
  Assignees

  	
   

  	
  61

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 13.10.

  	
   

  	
  Substituted Partners

  	
   

  	
  62

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XIV REPRESENTATIONS AND WARRANTIES OF THE
  PARTNERS

  	
   

  	
  62

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 14.1.

  	
   

  	
  Acquisition of Interest for Investment

  	
   

  	
  62

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 14.2.

  	
   

  	
  No Registration

  	
   

  	
  62

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 14.3.

  	
   

  	
  No Obligation to Register

  	
   

  	
  63

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 14.4.

  	
   

  	
  Suitability of Investment

  	
   

  	
  63

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 14.5.

  	
   

  	
  Accreditation

  	
   

  	
  63

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 14.6.

  	
   

  	
  Representations and Warranties Regarding Partners

  	
   

  	
  63

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 14.7.

  	
   

  	
  No Brokers

  	
   

  	
  63

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 14.8.

  	
   

  	
  No Further Representations or Warranties

  	
   

  	
  64

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XV INDEMNIFICATION

  	
   

  	
  64

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 15.1.

  	
   

  	
  Indemnification

  	
   

  	
  64

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XVI EVENTS OF DEFAULT

  	
   

  	
  65

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 16.1.

  	
   

  	
  Events of Default

  	
   

  	
  65

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 16.2.

  	
   

  	
  Remedies

  	
   

  	
  66

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XVII DISSOLUTION

  	
   

  	
  68

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.1.

  	
   

  	
  Events of Dissolution

  	
   

  	
  68

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.2.

  	
   

  	
  Liquidation; Sale of Substantially all of the Assets

  	
   

  	
  69

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.3.

  	
   

  	
  Waiver of Partition

  	
   

  	
  70

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 17.4.

  	
   

  	
  Articles of Termination

  	
   

  	
  70

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XVIII MISCELLANEOUS

  	
   

  	
  70

  

 

iv

 

TABLE
OF CONTENTS

(continued)

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 18.1.

  	
   

  	
  Notice

  	
   

  	
  70

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 18.2.

  	
   

  	
  Application of Delaware Law

  	
   

  	
  70

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 18.3.

  	
   

  	
  Jurisdiction and Venue; Waiver of Jury Trial

  	
   

  	
  70

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 18.4.

  	
   

  	
  Intentionally Omitted

  	
   

  	
  71

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 18.5.

  	
   

  	
  Effect of Agreement

  	
   

  	
  71

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 18.6.

  	
   

  	
  Entire Agreement

  	
   

  	
  71

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 18.7.

  	
   

  	
  Amendment

  	
   

  	
  71

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 18.8.

  	
   

  	
  Counterparts

  	
   

  	
  71

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 18.9.

  	
   

  	
  Severability

  	
   

  	
  71

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 18.10.

  	
   

  	
  Captions

  	
   

  	
  72

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 18.11.

  	
   

  	
  Interpretation

  	
   

  	
  72

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 18.12.

  	
   

  	
  Additional Documents and Acts

  	
   

  	
  72

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 18.13.

  	
   

  	
  Confidentiality

  	
   

  	
  72

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 18.14.

  	
   

  	
  No Third-Party Beneficiaries

  	
   

  	
  73

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 18.15.

  	
   

  	
  Involvement of the Partnership in Certain
  Proceedings

  	
   

  	
  74

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 18.16.

  	
   

  	
  No Waiver

  	
   

  	
  74

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 18.17.

  	
   

  	
  Additional Remedies

  	
   

  	
  74

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 18.18.

  	
   

  	
  Approvals

  	
   

  	
  74

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 18.19.

  	
   

  	
  Use of Names

  	
   

  	
  74

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 18.20.

  	
   

  	
  Time is of the Essence; Computation of Time

  	
   

  	
  74

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 18.21.

  	
   

  	
  Expenses

  	
   

  	
  75

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 18.22.

  	
   

  	
  Costs
  Incurred in Disputes

  	
   

  	
  75

  

 

v

 

AMENDED AND RESTATED

 

LIMITED PARTNERSHIP AGREEMENT

OF

YSI - HART LIMITED PARTNERSHIP

 

THIS
AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT of YSI - HART LIMITED PARTNERSHIP, a Delaware limited
partnership (the “Partnership”), is entered into as of August 13,
2009 (the “Effective Date”), by and between YSI VENTURE
GP LLC, a Delaware limited liability company, as a general partner
of the Partnership (“Operator GP”), YSI VENTURE LP LLC,
a Delaware limited liability company, as a limited partner of the Partnership (“Operator
LP”, and together with Operator GP, the “Operator Partners”), HART — YSI INVESTOR GP LLC, a Delaware limited liability
company, as a general partner of the Partnership (“Investor GP”), and HART — YSI INVESTOR LP LLC, a Delaware limited liability
company, as a limited partner of the Partnership (“Investor LP,” and
together with Investor GP, the “Investor Partners”).

 

W I T N E S S E T H:

 

WHEREAS, the Operator Partners previously
formed the Partnership pursuant to the laws of the State of Delaware by the
filing of a certificate of limited partnership (the “Certificate of Limited
Partnership”) with the Secretary of State of the State of Delaware on August 11,
2009, and pursuant to a Limited Partnership Agreement dated August 11,
2009 (the “Prior Agreement”), with Operator LP owning all of the
Financial Rights and Operator GP holding all of the Management Rights; provided,
however, that the Partnership has not yet commenced any business
operations or activities and has incurred no liabilities or obligations;

 

WHEREAS, the Partnership acquired the
Properties and certain related assets in connection with the formation of the
Partnership;

 

WHEREAS, following such acquisition, and
concurrently herewith: (a) Investor LP has agreed to make a Capital
Contribution to the Partnership in exchange for the issuance to it of
Partnership Interests, including a 50% Capital Ratio and the right to certain
preferred returns and other Financial Rights, (b) Operator Partners and
Investor LP have agreed to admit Investor GP, as an additional general partner
of the Partnership, with various Management Rights but no Financial Rights, and
(c) the Partners have agreed to amend and restate the Prior Agreement in
its entirety to govern the Partnership in all respects from this point forward
so that the Prior Agreement shall be completely superseded and of no further
force or effect;

 

WHEREAS, the Partners desire to continue the
Partnership for the purpose of acquiring self storage assets, and to manage,
maintain, operate and lease the same, in each case in accordance with the terms
set forth herein; and

 

WHEREAS, the Partners desire to set forth the
manner in which the business and affairs of the Partnership shall be managed,
and their respective rights, duties and obligations with respect to the
Partnership, from this time forward.

 

 

NOW, THEREFORE, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto, intending to be legally bound, agree that the Prior Agreement
is hereby amended and restated in its entirety, as follows (and that this
Amended and Restated Limited Partnership Agreement shall supersede the Prior
Agreement and shall govern the Partnership in all respects from this time
forward):

 

ARTICLE I

DEFINITIONS

 

Section 1.1.            Capitalized
Terms.  Except where otherwise
specified or if the context otherwise requires, the following terms shall have
the meanings set forth below for all purposes of this Agreement:

 

“Act” shall have the meaning given in Section 2.1.

 

“Additional Capital Contribution”
shall have the meaning given in Section 4.1(c).

 

“Additional Capital Call
Notice” shall have the meaning given in Section 4.1(c).

 

“Affiliate” shall mean, with respect
to any Partner, any Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by or is under common control with such
Partner.  The term “control” as used
herein (including the terms “controlling,” “controlled by,” and “under common
control with”) shall mean the possession, directly or indirectly, of the
ability (a) to vote fifty percent (50%) or more of the outstanding voting
securities of or voting interests in a Person, or (b) otherwise to direct
the management policies of such Person, by contract or otherwise.

 

“Agreement” shall mean this Amended
and Restated Limited Partnership Agreement, including the exhibits and
schedules hereto.

 

“Ancillary Services Agreement” shall
have the meaning given in Section 8.7.

 

“Ancillary Activities” shall have the
meaning given in Section 8.7.

 

“Annual Business Plan” shall have the
meaning given in Section 8.1(a).

 

“Applicable REIT” shall have the
meaning given in Section 8.10.

 

“Authorized Representatives” shall
have the meaning given in Section 9.5.

 

“Bad REIT Asset” shall have the
meaning given in Section 8.10.

 

“Bad REIT Income” shall have the
meaning given in Section 8.10.

 

“Bank Secrecy Act” shall mean the
Currency and Foreign Transaction Reporting Act, 31 USC §§5311-5330 and 12 USC
§§1818(s), 1829(b) and 1951-1959.

 

2

 

“Business Day” shall mean any day
other than a Saturday, Sunday or a holiday on which national banking
associations in Wayne, Pennsylvania  or Chicago,
Illinois, are closed or are authorized or required to close.

 

“Capital Account” shall have the
meaning given in Section 11.1.

 

“Capital
Contributions” shall mean the amount of money and the agreed fair
market value of other property (net of any liabilities secured by such property
that the Partnership is deemed to assume, or to which the property remains
subject, pursuant to Section 752 of the Code) contributed by a Partner to
the Partnership, including initial Capital Contributions and Additional Capital
Contributions (but excluding Default Loans).

 

“Capital Proceeds” shall mean funds of
the Partnership or a Subsidiary arising from a Capital Transaction, net of (a) the
actual costs incurred by the Partnership or such Subsidiary in consummating the
Capital Transaction, (b) any condemnation, insurance or financing proceeds
used by the Partnership or any Subsidiary to acquire, repair, replace or
redevelop a Property or Properties pursuant to this Agreement or the Annual
Business Plan and (c) any indebtedness of such Subsidiary or Property paid
and satisfied with the proceeds of such Capital Transaction.

 

“Capital Ratio” shall mean, with respect to each Property, the
percentages in which the Partners participate in, and bear, certain Partnership
items.  The Capital Ratios of the
Partners are:

 

	
  Operator GP

  	
   

  	
  0.0

  	
  %

  
	
  Operator LP

  	
   

  	
  50

  	
  %

  
	
  Investor GP

  	
   

  	
  0.0

  	
  %

  
	
  Investor LP

  	
   

  	
  50

  	
  %

  

 

As noted throughout this
Agreement, the General Partners will have no Capital Ratio, nor a Capital
Account or any other Financial Rights in or to the Partnership.

 

“Capital Transaction” shall mean (a) any
sale, exchange, taking by eminent domain, damage, destruction or other
disposition of all or any part of the assets of the Partnership or any
Subsidiary, other than tangible personal property disposed of in the ordinary
course of business; or (b) any financing or refinancing of any Property or
Properties (provided that the Partners hereto acknowledge that no such
financing or refinancing transactions are contemplated and any such transaction
shall constitute a Major Decision).

 

“Capital Transaction Profits” and “Capital
Transaction Losses” mean for each Fiscal Year, an amount equal to the
Partnership’s Profits or Losses for such Fiscal Year as determined pursuant to
the definition of Net Profits and Net Losses except that such amounts shall be
calculated only with respect to items of Partnership income, gain, loss,
expense or deduction associated with a Capital Transaction.  Notwithstanding the foregoing, Capital
Transaction Profits and Capital Transaction Losses shall be deemed to include
any allocable items attributable to paragraph (iii) of the definition of
Profits and Loss.

 

“Certificate of Limited Partnership”
shall have the meaning given in the recitals to this Agreement.

 

3

 

“Code” shall mean the Internal Revenue
Code of 1986.

 

“Competing Partner” shall have the
meaning given in Section 3.2.

 

“Compliance Certificate” shall mean a
certificate issued in favor of the Partnership and the Partners wherein the
certifying Person:

 

(a)           certifies
that, as of the date of the certificate, the representations and warranties
contained in (i) Section 12.1, with respect to a transferee of
a direct or indirect interest in Operator Partners’ interests in the
Partnership, or (ii) Section 12.2, with respect to a
transferee of a direct or indirect interest in Investor Partners’ interests in
the Partnership, are true, correct and complete,

 

(b)           agrees
to be bound by the provisions of this Agreement; and

 

(c)           certifies
as to other information reasonably requested by the Partners to the extent
necessary to verify compliance with, as applicable, OFAC Laws and Regulations,
the Patriot Act, the Bank Secrecy Act, any other law of similar import, and any
regulations promulgated under any of them, including whether the transferee is
a Financial Institution or an entity majority-owned by a Financial Institution,
and if so whether an appropriate anti-money laundering policy and procedure and
customer identification program has been adopted.

 

“Contributing Partner” shall have the
meaning given in Section 4.4.

 

“Contribution Agreement” shall mean
that certain Contribution Agreement dated August 6, 2009, as amended by
that certain Contribution Agreement dated August 13, 2009, among the
Partnership and the Partners pertaining to, among other things, the
contribution of the Properties to the Partnership and the admission of the
Partners to the Partnership.

 

“Debt” shall mean all indebtedness for
borrowed money, whether secured or unsecured, incurred by the Partnership or
any Subsidiary.

 

“Default Loan” shall have the meaning
given in Section 4.4(b).

 

“Default Rate” shall mean the greater
of (a) eighteen percent (18%) per annum, compounded monthly, or (b) a
per annum rate equal to the sum of five percent (5%) plus the Prime Rate, as it
may change from time to time; provided that in no event shall the
Default Rate exceed the highest rate permitted by Governmental Requirements.

 

“Defaulting Partner” shall mean a
Partner the acts or omissions of which result in an Event of Default in
accordance with Section 16.1.

 

“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 if the
Gross Asset Value of an asset differs from its adjusted 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, 

 

4

 

amortization, or other cost
recovery deduction for such Fiscal Year or other period bears to such beginning
adjusted tax basis. In the event that the federal income tax depreciation,
amortization, or other cost recovery deduction is zero, Depreciation shall be
determined with reference to such beginning Gross Asset Value using any
reasonable method selected by the General Partners or required by the applicable
tax laws.

 

“Dispose,” “Disposing” or “Disposition”
shall mean, with respect to any asset (including a Partnership Interest or any
portion thereof), a sale, assignment, transfer, lease, conveyance, gift,
pledge, granting of an easement or other encumbrance, exchange or other
disposition of such asset; provided such term does not refer to the
lease by the Partnership or a Subsidiary to a tenant of space at a Property in
the ordinary course of business and in accordance with the Annual Business
Plan.

 

“Effective Date” shall have the
meaning given in the prelude to this Agreement.

 

“Emergency Situation Responses” shall
mean reasonable actions, in light of the circumstances, taken in direct
response to unanticipated emergency
situations that create an imminent threat of property damage or personal injury
or death in order to maintain value of the Properties or mitigate the threat of
such injury or death.

 

“Encumbrances”
shall have the meaning given in Section 13.1(a).

 

“Entity” shall mean any Person other than
a natural person.

 

“ERISA” shall mean the Employee
Retirement Income Security Act of 1974.

 

“Event of Default” shall have the
meaning given in Section 16.1.

 

“Excepted YSI Persons” shall mean each
“Excepted Holder,” as such term is defined in Section 7.1 of the current
Articles of Amendment and Restatement of Declaration of Trust of YSI, a copy of
which is attached hereto as Schedule I, regardless of any
subsequent amendment to said Section.

 

“Financial Institution” shall mean a “financial
institution” as defined in the Patriot Act, the Bank Secrecy Act, any other law
of similar import, or any regulations promulgated under any of them.

 

“Financial
Rights” shall mean the right to receive distributions of funds and allocations
of income, gain, loss, deduction and credit.

 

“Financing Documents” shall mean
documents executed by the Partnership or a Subsidiary in connection with any
financing or loan transaction.

 

“Fiscal Year” shall mean each fiscal
year of the Partnership as provided in Section 10.2 or any portion
of such period, but solely to the extent such shorter period is necessary to
allocate Profits, Losses, and other items of Partnership income, gain, loss, or
deduction pursuant to Article XI consistent with Sections 706 and
704(b) of the Code.

 

5

 

“General Partners” shall mean,
collectively, at any time, the Persons who are general partners in the
Partnership as provided in this Agreement and under the Act, such Persons
being, on the date of this Agreement, Operator GP and Investor GP, as more
fully described in Schedule II (or such Persons’ respective
successors), and at any time thereafter those Persons admitted as a general
partner in the Partnership in accordance with this Agreement in substitution of
such Persons and any other Person admitted as an additional general partner in
the Partnership, in each case in accordance with this Agreement and the Act,
each in its capacity as a general partner in the Partnership.

 

“Governmental Authority” shall mean the
United States of America, any of the several states, any county or municipality
in which a Property is located, and any agency, authority, court, department,
commission, board, bureau or instrumentality of any of them.

 

“Government Lists” shall mean (a) the
SDN List, (b) the Denied Persons List and the Entity List maintained by
the United States Department of Commerce, (c) the List of Terrorists and
List of Disbarred Parties maintained by the United States Department of State, (d) any
other list of terrorists, terrorist organizations or narcotics traffickers
maintained pursuant to any of the OFAC Laws and Regulations, (e) any other
similar list maintained by the United States Department of State, the United
States Department of Commerce or any other Governmental Authority or pursuant
to any Executive Order of the President of the United States of America, and (f) any
list or qualification of “Designated Nationals” as defined in the Cuban Assets
Control Regulations, 31 C.F.R. Part 515, as all such Government Lists may
be updated from time to time.

 

“Governmental Requirements” shall
mean, collectively, all applicable laws, statutes, ordinances, regulations,
tariffs, judicial or administrative orders, and procedural requirements imposed
by any Governmental Authority regulating or affecting the applicable Person or
Property.

 

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

 

(i)            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, as determined
by agreement of the General Partners except as otherwise provided in Section 4.1(b) with
respect to the Operator Initial Contribution;

 

(ii)           The
Gross Asset Values of all Partnership assets shall be adjusted, in the
discretion of the General Partners, to equal their respective gross fair market
values (taking Code Section 7701(g) into account), as determined by
agreement of the General Partners as of the following times:  (A) the acquisition of, or increase in,
the Partnership Interest of any new or existing Partner; (B) the
distribution by the Partnership to a Partner of more than a de minimis amount
of Partnership property with respect to a Partnership Interest; (C) the
liquidation of the Partnership within the meaning of Regulations
§1.704-1(b)(2)(ii)(g);

 

(iii)          The
Gross Asset Value of any item of Partnership assets distributed to any Partner
shall be adjusted to equal the gross fair market value (taking Code Section 7701(g) into
account) of such asset on the date of distribution as determined by agreement
of the General Partners;

 

6

 

(iv)          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 Code Section 734(b) or
Code Section 743(b), but only to the extent that such adjustments are
taken into account in determining Capital Accounts pursuant to Regulations §1.704-1(b)(2)(iv)(m);
and

 

(v)           If
the Gross Asset Value of an asset has been determined or adjusted pursuant to
subparagraph (ii) or (iv), such Gross Asset Value shall thereafter be
adjusted by the Depreciation taken into account with respect to such asset, for
purposes of computing Profits and Losses.

 

“Heitman” shall mean Heitman Capital
Management LLC, an Iowa limited liability company.

 

“Indemnified Parties” shall mean (a) the
Partners, their respective Affiliates and any officer, partner, member, shareholder,
director, manager, or other agent of or advisor to any of them, (b) any
Person who serves at the request of the Partnership or any Partner as an
officer, director, trustee, manager or agent of the Partnership, any Subsidiary
or any Entity in which the Partnership has an interest as an owner, security
holder, creditor or otherwise, and (c) each Authorized Representative, and
“Indemnified Party” shall mean any one of them.

 

“Information” shall have the meaning
given in Section 18.13.

 

“Insolvent Partner” shall mean any
Partner (a) who has voluntarily initiated proceedings of any nature under
the Federal Bankruptcy Code, or any similar state or federal law for the relief
of debtors; (b) who has made a general assignment for the benefit of
creditors, (c) against whom an involuntary proceeding under the Federal
Bankruptcy Code, or any similar federal or state law for the relief of debtors,
has been initiated, and (i) with respect to such proceeding an order for
relief has been entered under the Bankruptcy Code (or comparable order under
any similar federal or state law), or (ii) which proceeding is not
dismissed or discharged within sixty (60) days after the filing thereof; (d) who
has admitted in writing its inability to pay its debts as they mature; or (e) all
or any substantial part of whose assets, or whose interest in the Partnership
or any part thereof, has been the subject of attachment or other judicial
seizure.

 

“Insolvent GP” shall have the meaning
given in Section 13.7.

 

“Investor Accrual” shall have the
meaning given in Section 5.2(b).

 

“Investor GP” shall have the meaning
given in the prelude to this Agreement.

 

“Investor LP” shall have the meaning
given in the prelude to this Agreement.

 

“Investor Partners” shall have the
meaning given in the prelude to this Agreement.

 

“Investor Preferred Return” shall have
the meaning given in Section 5.2(b).

 

“Investor 12% Return” shall mean a
nominal return to Investor LP of 12.0% per year, on a cumulative basis,
compounded monthly, on all of Investor LP’s Unreturned Capital Contributions,
and on the cumulative unpaid Investor Accrual, from time to time outstanding,
based on all distributions made to such Partner from the Partnership (except to
the extent certain 

 

7

 

distributions are expressly
excluded in calculating such return, as otherwise provided in  Section 13.4). 
For the purpose of further certainty, Operator Partners acknowledge
that, in order to achieve the Investor 12% Return at any time, Investor LP also
must have received, by such time, the payment of the outstanding principal
balance of, and all accrued and unpaid interest on, any outstanding Default
Loans made by Investor LP (the Partners acknowledging that Default Loans are
not Capital Contributions and must be repaid in full before further payments of
or returns on Capital Contributions).

 

“Investor 13% Return” shall mean a
nominal return to Investor LP of 13.0% per year, on a cumulative basis,
compounded monthly, on all of Investor LP’s Unreturned Capital Contributions,
and on the cumulative unpaid Investor Accrual, from time to time outstanding,
based on all distributions made to such Partner from the Partnership.  For the purpose of further certainty, Operator
Partners acknowledge that, in order to achieve the Investor 13% Return at any
time, Investor LP also must have received, by such time, the payment of the
outstanding principal balance of, and all accrued and unpaid interest on, any
outstanding Default Loans made by Investor LP (the Partners acknowledging that
Default Loans are not Capital Contributions and must be repaid in full before
further payments of or returns on Capital Contributions).

 

“Investor 14% Return” shall mean a
nominal return to Investor LP of 14.0% per year, on a cumulative basis,
compounded monthly, on all of Investor LP’s Unreturned Capital Contributions,
and on the cumulative unpaid Investor Accrual, from time to time outstanding,
based on all distributions made to such Partner from the Partnership.  For the purpose of further certainty,
Operator Partners acknowledge that, in order to achieve the Investor 14% Return
at any time, Investor LP also must have received, by such time, the payment of
the outstanding principal balance of, and all accrued and unpaid interest on,
any outstanding Default Loans made by Investor LP (the Partners acknowledging
that Default Loans are not Capital Contributions and must be repaid in full
before further payments of or returns on Capital Contributions).

 

“Investor Unilateral Marketing Notice”
shall have the meaning given in Section 13.4.

 

“Investor Unilateral Marketing Right”
shall have the meaning given in Section 13.4.

 

“Key Persons” shall mean,
collectively, both Dean Jernigan and Chris Marr.

 

“Limited Partners” shall mean,
collectively, at any time, the Persons who are limited partners in the
Partnership as provided in this Agreement and under the Act, such Persons
being, on the date of this Agreement, Operator LP and Investor LP, as more
fully described in Schedule II (or such Persons’ respective
successors), and at any time thereafter those Persons admitted as a limited
partner in the Partnership in accordance with this Agreement in substitution of
such Persons and any other Person admitted as an additional limited partner in
the Partnership, in each case in accordance with this Agreement and the Act,
each in its capacity as a limited partner in the Partnership.

 

“Lockout Period” shall mean the period
beginning on the Effective Date and ending on the date that is the third
anniversary of the Effective Date.

 

“Loss” or “Losses” shall mean
any and all losses, liabilities, costs, claims, damages, judgments, fines,
penalties or expenses (including expenses of investigation and attorneys’ fees 

 

8

 

and expenses in connection
with any action, suit or proceeding, whether involving a third party claim or a
claim solely between the Partners).

 

“Major Decisions”
shall mean the matters set forth in Section 7.2(a).

 

“Major Dispute” shall have the meaning
given in Section 7.3(a).

 

“Management
Rights” shall mean the right of a Partner to participate in the management of
the Partnership to the extent herein expressly provided.

 

“Marketing Notice” shall have the
meaning given in Section 13.3(a).

 

“Marketing Right” shall have the
meaning given in Section 13.3(a).

 

“Marketing Right Offer” shall have the
meaning given in Section 13.3(a).

 

“Marketing Right Offer Price” shall
have the meaning given in Section 13.3(a).

 

“Non-Compete Period 1” shall mean the
period beginning on the Effective Date and ending on the earlier of (i) the
date that is ninety (90) days after the date Investor Partners cease to be
Partners of the Partnership or (ii) the date that is ninety (90) days
after the date Operator Partners cease to be Partners of the Partnership. “Non-Compete
Period 2” shall mean the period beginning on the Effective Date and ending
on the earlier of (i) the date that Investor Partners cease to be Partners
of the Partnership or (ii) the date that Operator Partners cease to be
Partners of the Partnership.

 

“Non-Compete Restrictive Area” shall
mean the areas within certain distances from each Property (as measured by a
radius around each Property), as more fully provided for in Schedule III.

 

“Non-Controllable Items” shall mean
costs that are outside of the reasonable control of Operator GP, including
insurance, taxes, assessments, utility costs and snow removal costs.

 

“Non-Triggering Partner” shall have
the meaning given in Section 13.3(b).

 

“Notice of Major Dispute” shall have
the meaning given in Section 7.3(a).

 

“OFAC” shall mean the Office of
Foreign Assets Control, United States Department of the Treasury, or any other
office, agency or department that succeeds to the duties of OFAC.

 

“OFAC Laws And Regulations” shall mean
(a) any lists, laws, rules, sanctions and regulations maintained by OFAC
pursuant to any authorizing statute, Executive Order or regulation, including
the Trading with the Enemy Act, 50 U.S.C. App. § 1 et
seq., the International Emergency
Economic Powers Act, 50 U.S.C. § 1701 et  seq., the Iraq Sanctions Act, Pub. L. 101-513, Title V, §§
586 to 586J, 104 Stat. 2047, the National Emergencies Act, 50 U.S.C. §§ 1601 et seq., the Antiterrorism and Effective Death Penalty Act
of 1996, Pub. L. 104-132, 110 Stat. 1214-1319, the United Nations Participation
Act, 22 U.S.C. § 287c, the International Security and Development Cooperation
Act, 22 U.S.C. § 2349aa-9, the Nuclear 

 

9

 

Proliferation Prevention Act
of 1994, Pub. L. 103-236, 108 Stat. 507, the Foreign Narcotics Kingpin
Designation Act, 21 U.S.C. §§ 1901 et seq., the
Iran and Libya Sanctions Act of 1996, Pub. L. 104-172, 110 Stat. 1541, the
Cuban Democracy Act, 22 U.S.C. §§ 6001 et seq., the
Cuban Liberty and Democratic Solidarity Act, 22 U.S.C. §§ 6021-91, and the
Foreign Operations, Export Financing and Related Programs Appropriations Act,
1997, Pub. L. 104-208, 110 Stat. 3009-172 and all amendments thereto; (b) all
regulations, executive orders, or administrative orders of any kind issued
under these statutes; (c) any
other applicable civil or criminal federal or state laws, regulations,
or orders that (i) limit the use of and/or seek the forfeiture of proceeds
from illegal transactions; (ii) limit commercial transactions with
designated countries or individuals believed to be terrorists, narcotics
dealers or otherwise engaged in activities contrary to the interests of the
United States; or (iii) are designed to disrupt the flow of funds to
terrorist organizations; and (d) any other civil or criminal federal or
state laws, regulations, or orders of similar import.

 

“Operating Budget” shall have the
meaning given in Section 8.1(a).

 

“Operating Cash” shall mean, with
respect to any period for which such calculation is being made, the positive
difference of: (a) Operating Revenues; minus (b) the sum of the
following (without duplication): (i) all cash expenditures made or to be
made by the Partnership or any Subsidiary during such period (including all
operating and capital expenditures), excluding any amounts paid out of
Reserves, as provided in the Operating Budget or otherwise approved by the
General Partners, (ii) all interest, scheduled or required principal
payments (including loan amortization or satisfaction, if applicable) and other
debt and escrow and reserve account payments and deposits (including prepayment
of any debt) made during such period by the Partnership on account of or with
respect to the Partnership’s or any Subsidiary’s indebtedness for money borrowed
(other than Default Loans), if  any, and (iii) the amount of
any Reserves (including Reserves for working capital, operating deficits and
capital) established or increased during such period, as provided in the
Operating Budget or otherwise approved by the General Partners.

 

“Operating Profits” and “Operating
Losses” means all Net Profits and Net Losses, respectively, of the
Partnership but calculated by excluding any amount included in the calculation
of Capital Transaction Profits and Capital Transaction Losses.

 

“Operating Revenues” shall mean, with
respect to the Partnership or any Subsidiary, as applicable, and for any
period, the operating revenues of the Partnership or such Subsidiary arising
from the ownership and operation of the Properties during such period,
including rental income under space leases and income derived from Ancillary
Activities, but specifically excluding, without limitation, (a) Capital
Proceeds, (b) Capital Contributions made by the Partners, (c) loans, advances or contributions
of capital made by the Partnership to a Subsidiary, and (d) tenant
security deposits until the Partnership or any Subsidiary becomes entitled to
such deposit in accordance with the applicable tenant lease.

 

“Operator Accrual” shall have the
meaning given in Section 5.2(e).

 

“Operator Contributions to Pay Investor
Accrual” shall have the meaning given in Section 5.2(d).

 

10

 

“Operator GP” shall
have the meaning given in the prelude to this Agreement.

 

“Operator LP” shall
have the meaning given in the prelude to this Agreement.

 

“Operator Initial
Contribution” shall have the meaning given in Section 4.1(b).

 

“Operator Partners”
shall have the meaning given in the prelude to this Agreement.

 

“Operator Preferred
Return” shall have the meaning given in Section 5.2(e).

 

“Operator Take Out Notice”
shall have the meaning given in Section 13.5.

 

“Operator Take Out Right”
shall have the meaning given in Section 13.5.

 

“Partner” shall mean
any one of the Partners.

 

“Partners” shall
mean, collectively, at any time, the Persons who are partners in the
Partnership as provided in this Agreement and under the Act, such Persons
being, on the date of this Agreement, the Operator GP, Operator LP, Investor
GP, and Investor LP, as more fully described in Schedule II (or
such Persons’ respective successors), and at any time thereafter those Persons
admitted as a partner in the Partnership in accordance with this Agreement in
substitution of such Persons and any other Person admitted as an additional
partner in the Partnership, in each case in accordance with this Agreement and
the Act, each in its capacity as a partner in the Partnership.

 

“Partnership” shall
have the meaning given in the prelude of this Agreement.

 

“Partnership
Interests” shall mean all of the rights and interests of
whatsoever nature of the Partners in the Partnership, including each Partner’s
respective Management Rights and Financial Rights, provided that the
General Partners shall not have any Financial Rights and the Limited Partners
shall have only the very limited Management Rights, if any, expressly set forth
in this Agreement or mandated by the Act.

 

“Passive Interest Holders”
shall mean, collectively with respect to any Person, any other Person who holds
a direct or indirect ownership interest in such Person, only through an
interest in a U.S. Publicly Traded or Pension Entity or only through a
non-controlling limited partnership, limited liability or corporate equity
interest, as applicable.

 

“Patriot Act” shall
mean the Uniting and Strengthening America
by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism
(USA PATRIOT ACT) Act of 2001, Public Law 107-56 (October 26, 2001), as
the same may be amended from time to time, and corresponding provisions of
future similar laws.

 

“Payment Default”
shall have the meaning given in Section 4.4.

 

“Payments of Operator
Accrual” shall have the meaning given in Section 5.2(g).

 

11

 

“Person” (whether the
initial letter of the word is capitalized or in lower case type) shall mean any
individual, corporation, sole proprietorship, partnership, limited liability
company, association, trust, joint venture, or other organization, including a
government or political subdivision or an agency or instrumentality thereof.

 

“Personal Representative”
shall have the meaning given in Section 13.7(a).

 

“Prime Rate” shall
mean the highest prime rate (or base rate) reported in the Money Rates column
or section of The Wall Street Journal published
on the second Business Day of each month as having been the rate in effect for
corporate loans at large United States money center commercial banks (whether
or not such rate has actually been charged by any such bank) as of the first
Business Day of such month for which such rate is published.  The Prime Rate shall change monthly and shall
be effective for the entire calendar month. 
If The Wall Street Journal ceases
publication of the Prime Rate, the “Prime Rate” shall mean the prime rate (or
base rate) announced by JPMorgan Chase & Co., New York, New York, or
its successors or another money center bank selected by Investor GP, in its
reasonable discretion (whether or not such rate has actually been charged by
such bank).  If such bank discontinues
the practice of announcing the Prime Rate, the “Prime Rate” shall mean the
highest rate charged by such bank on short-term, unsecured loans to its most creditworthy
large corporate borrowers.

 

“Prior Agreement”
shall have the meaning given in the recitals to this Agreement.

 

“Profits” and “Losses” mean, for each Fiscal
Year, an amount equal to the Partnership’s taxable income or loss for such
Fiscal Year, determined in accordance with Code Section 703(a) (for
this purpose, all items of income, gain, loss, or deduction required to be
stated separately pursuant to Code Section 703(a)(1) shall be
included in taxable income or loss), with the following adjustments (without
duplication):

 

(i)            Any income of the
Partnership that is exempt from federal income tax and not otherwise taken into
account in computing Profits or Losses pursuant to this definition of “Profits”
and “Losses” shall be added to such taxable income or loss;

 

(ii)           Any expenditures of the
Partnership described in Code Section 705(a)(2)(B) or treated as Code
Section 705(a)(2)(B) expenditures pursuant to Regulation
§1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing
Profits or Losses pursuant to this definition of “Profits” and “Losses” shall
be subtracted from such taxable income or loss;

 

(iii)          In the event the Gross Asset
Value of any Partnership asset is adjusted pursuant to subparagraphs (ii),
(iii), or (iv) of the definition of Gross Asset Value, the amount of such
adjustment shall be treated as an item of gain (if the adjustment increases the
Gross Asset Value of the asset) or an item of loss (if the adjustment decreases
the Gross Asset Value of the asset) from the disposition of such asset and
shall be taken into account for purposes of computing Profits or Losses;

 

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

 

12

 

(v)           In lieu of the depreciation,
amortization, and other cost recovery deductions taken into account in
computing such taxable income or loss, there shall be taken into account
Depreciation for such Fiscal Year, computed in accordance with the definition
of Depreciation; and

 

(vi)          To the extent an adjustment
to the adjusted tax basis of any Partnership asset pursuant to Code Section 734(b) is
required, pursuant to Regulations §1.704-(b)(2)(iv)(m)(4), to be taken into
account in determining Capital Accounts as a result of a distribution other than
in liquidation of a Partner’s interest in the Partnership, the amount of such
adjustment 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) from the
disposition of such asset and shall be taken into account for purposes of
computing Profits or Losses.

 

Notwithstanding any other
provision of this definition, any items which are specially allocated pursuant
to Section 11.4 shall not be taken into account in computing Profits
or Losses.

 

The amounts of the items of
Partnership income, gain, loss or deduction available to be specially allocated
pursuant to Section 11.4 shall be determined by applying rules analogous
to those set forth in subparagraphs (i) through (vi) above.

 

“Prohibited Person” shall mean (a) a person who (i) has
been determined by competent authority to be subject to the prohibitions in any
of the OFAC Laws and Regulations or (ii) is on any of the Government
Lists, (b) a person who is a “designated national,” “specially designated
national,” “specially designated terrorist,” “specially designated global
terrorist,” “foreign terrorist organization,” “specially designated narcotics
trafficker,” or “blocked person” within the definitions set forth in the Foreign
Assets Control Regulations contained in 31 C.F.R., Subtitle B, Chapter V (the “OFAC
Regulations”) or who otherwise appears on the list of Specially Designated
Nationals and Blocked Persons, Appendix A to the OFAC Regulations; (c) the
government, including any political subdivision, agency, instrumentality, or
national thereof, of any country against which the United States maintains
economic sanctions or embargos; (d) a person who is described in section 1
of Executive Order 13224 - Blocking Property and Prohibiting Transactions with
Persons who Commit, Threaten to Commit, or Support Terrorism, effective September 24,
2001; (e) a Person owned or controlled by any of the Person listed in
clauses (a) through (d) above; or (f) a Person who has been (i) convicted
of an offense or (ii) determined by a Governmental Authority to be subject
to criminal or civil penalties, under any other civil or criminal federal or
state law, regulation, or order of similar import to those set forth in clauses
(a) through (d) above, as each such law, regulation, or order has
been or may be amended, adjusted, or modified or revised from time to time.

 

“Property” shall mean
any one of the Properties of the Partnership.

 

“Properties” shall
mean the Partnership’s direct and
indirect interests in real property listed in Schedule IV and
legally described in the Contribution Agreement, together with all buildings,
structures and improvements located thereon, fixtures contained therein,
appurtenances attached thereto and all personal property related thereto.

 

“Property Management
Agreement” shall have the meaning given in Section 8.6.

 

13

 

“Redemption Notice”
shall have the meaning given in Section 13.3(a).

 

“Redemption Price”
shall have the meaning given in Section 13.3(h).

 

“Redemption Right”
shall have the meaning given in Section 13.3(a).

 

“Removal Remedies”
shall have the meaning given in Section 7.5(a).

 

“Removal Remedies Charge”
shall have the meaning given in Section 7.5(b).

 

“Reserves” shall
mean, at any time, the total amount of the reasonable reserves established and
maintained by the Partnership or its Subsidiaries, as applicable, at that time,
in amounts reasonably determined in the annual Operating Budget or otherwise
approved by the General Partners to be adequate and appropriate for current and
future operating and working capital and for capital expenditures and other
costs and expenses incident to the Partnership’s business.

 

“Response Period”
shall have the meaning given in Section 13.3(a).

 

“Sale Period” shall
have the meaning given in Section 13.3(c).

 

“Securities Act”
shall mean the U.S. Securities Act of 1933.

 

“SDN List” shall mean
the Specially Designated Nationals and Blocked Persons Lists maintained by
OFAC, as such list is amended from time to time.

 

“Solvent GP” shall
have the meaning given in Section 13.7.

 

“Subsidiary” shall
mean an Entity that is wholly owned, directly or indirectly, by the
Partnership.

 

“Subsidiary Agreement”
shall have the meaning given in Section 2.4(b).

 

“Target Account”
shall mean, with respect to any Partner for any Fiscal Year or other period, an
amount equal to the hypothetical distribution such Partner would receive if all
assets of the Partnership, including cash at the end of such period: (a) were
sold for cash equal to their Gross Asset Value (taking into account any
adjustments to Gross Asset Value for such period); (b) all liabilities
allocable to such assets were then due and were satisfied according to their
terms; (c) all minimum gain chargebacks required by this Agreement and the
Treasury Regulations were made; (d) and all obligations of Partners to
contribute additional capital to the Partnership pursuant to this Agreement
were satisfied; and (e) all remaining proceeds from such sale were
distributed to the Partners pursuant to Section 5.3.

 

“Tax Returns” shall
have the meaning given in Section 10.4.

 

“Terrorism Law Offense”
shall mean any violation of the applicable civil and criminal laws of any
Governmental Authority, or that would be a civil or criminal violation if
committed within the jurisdiction of the United States of America or any of the
several states, and relating to 

 

14

 

terrorism
or the laundering of monetary instruments, including any offense under (a) the
criminal laws against terrorism; (b) the criminal laws against money
laundering, (c) the Bank Secrecy Act, (d) the Money Laundering
Control Act of 1986, (e) the Patriot Act, or (f) a civil violation of
the International Emergency Economic Powers Act.  “Terrorism Law Offense” also includes the
crimes of conspiracy to commit, or aiding and abetting another to commit, a
Terrorism Law Offense.

 

“Transfer” shall have
the meaning given in Section 13.1(a)

 

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

 

“Triggering Partner”
shall have the meaning given in Section 13.3(a).

 

“TRS” shall have the
meaning given in Section 2.4(d).

 

“Unpermitted Transfer”
shall mean a Transfer or Encumbrance by or with respect to a Partner that is
not permitted by the terms of this Agreement and to which the non-transferring
General Partners have not otherwise consented. 
For purposes of greater certainty, the Partners agree that any YSI
Change in Control shall be an Unpermitted Transfer in all cases.

 

“Unreturned Capital
Contributions” shall mean, with respect to any Partner, at any particular
time, the total amount of Capital Contributions made by such Partner, pursuant
to and in accordance with the provisions of this Agreement, less the amount of
such Capital Contributions repaid to such Partner with distributions made
pursuant to and in accordance with the provisions of this Agreement.

 

“U.S. GAAP” shall
mean generally accepted accounting principles in the United States of America,
as in effect from time to time, or International Financial Reporting Standards,
if adopted by Heitman or YSI and approved by the General Partners.

 

“U.S. Publicly-Traded or
Pension Entity” shall mean either (i) a Person (other than an
individual) whose securities are listed on a national securities exchange in
the United States of America or quoted on an automated quotation system in the
United States of America or a wholly-owned subsidiary of any such Person, or (ii) an
“employee pension benefit plan” or “pension plan”, as such terms are defined in
Section 3(2) of ERISA.

 

“Written Purchase Offer”
shall have the meaning given in Section 13.3(a).

 

“YSI” shall mean
U-Store-It Trust, a Maryland real estate investment trust, which is the general
partner of YSI LP.

 

“YSI LP” shall mean
U-Store-It, L.P., a Delaware limited partnership, which is the parent Entity of
both Operator Partners.

 

“YSI Change in Control”
shall mean the occurrence of any one or more of the following events at any
time:

 

15

 

(a)           Any Person (as defined in Section 3(a)(9) of
the 1934 Act, which shall include a “group” as defined in Section 13(d)(3) of
the 1934 Act) acquires more than fifty percent (50% ) of the outstanding voting
shares of YSI;

 

(b)           Persons who, at the date of measurement, either (i) have
not been on the Board of Trustees of YSI for the then prior twelve (12) months
or (ii) joined such Board within the then prior twelve (12) months but
were not nominated by such Board, then constitute a majority of the Trustees on
such Board;

 

(c)           If, during any 16-month period, both of the Key
Persons either (i) leave YSI or (ii) are not actively involved in the
day-to-day operations and management of YSI. 
For purposes of greater certainty, the provisions of this clause (f) shall
be deemed to apply if one Key Person leaves and the other ceases his active
involvement during any 16-month period, and regardless of whether such events
occur at the same or different times during such period;

 

(d)           If (i) Excepted YSI Persons own, collectively,
more than thirty-five percent (35%) of the outstanding voting shares of YSI, or
(ii) any Excepted YSI Person joins the Board of Trustees of YSI, or (iii) any
Excepted Person becomes part of the senior management team at YSI (i.e. holds
the office of senior vice president or an equivalent or higher office on the
corporate structure chart of YSI (including the Chief Executive Officer, Chief
Financial Officer, Chief Operating Officer, Chief Investment Officer, all other
Senior Vice Presidents and Executive Vice Presidents and the President of YSI);

 

(e)           YSI loses its REIT status;

 

(f)            YSI is delisted from a major stock exchange; or

 

(g)           YSI’s stock price falls below $1 per share for any 20
consecutive day trading period.

 

Section 1.2.            Rules of Interpretation.

 

(a)           The use of the masculine, feminine or neuter gender or
the singular or plural form of words herein shall not limit any provision of
this Agreement.  The use of the term “including”
or “include” shall in all cases herein mean “including, without limitation” or “include,
without limitation,” respectively. 
Underscored references to Articles, Sections, clauses or Exhibits shall
refer to those portions of this Agreement, and any underscored reference to a
clause shall, unless otherwise identified, refer to the appropriate clause
within the same Section in which such reference occurs.  The use of the terms “hereunder,” “hereof,” “hereto”
and words of similar import shall refer to this Agreement as a whole and not to
any particular Article, Section or clause of, or Exhibit to, this
Agreement.  All references in this
Agreement to dollar amounts shall refer to United States currency.

 

(b)           Unless otherwise expressly provided herein, (i) references
to agreements (including this Agreement), other contractual instruments and
organizational documents shall mean such agreements, instruments and documents
as the same may be amended and/or modified from time to time in accordance with
the terms thereof, and (ii) references to any 

 

16

 

statute or regulation shall include all statutory and
regulatory provisions consolidating, amending, replacing, supplementing or
interpreting such statute or regulation.

 

(c)           Except where the provision specifically provides
otherwise: (i) whenever in this Agreement there is a reference to the term
“Partners,” “General Partners,” or “Limited Partners,” in the plural form, then
all of such partners shall be required to act together, unanimously, and not
alone; provided, however, that at any time when there is just one
General Partner or just one Limited Partner, such plural form shall refer to
just that one Partner acting alone; and (ii) whenever the term “Partner,” “General
Partner,” or “Limited Partner,” in the singular form, is used in this
Agreement, then only one, or the specific one, Partner shall be required to
act.

 

ARTICLE II

FORMATION OF LIMITED PARTNERSHIP

 

Section 2.1.            Formation.  The Partnership was formed by the filing of
the Certificate of Limited Partnership pursuant to the provisions of the
Delaware Revised Uniform Limited Partnership Act (the “Act”).  To the extent permitted by the Act, the
provisions of this Agreement shall override the provisions of the Act in the
event of any inconsistency between them. 
The Partners hereby adopt and ratify the Certificate of Limited
Partnership and all acts taken in connection with such formation and filing.

 

Section 2.2.            Name and Offices.

 

(a)           The name of the Partnership shall be “YSI - HART  Limited Partnership.” 
The Partnership shall do business under such name, or under any other
name or names which the General Partners shall agree upon from time to
time.  If the Partnership does business
under a name other than YSI - HART Limited Partnership, Operator GP shall file
or cause to be filed an assumed name or fictitious name certificate or any
other document as required by Governmental Requirements in appropriate
jurisdictions and the Partners shall execute such certificates, documents or
other writings as may be reasonably requested by Operator GP in connection
therewith.

 

(b)           The address of the registered office of the Partnership
in the State of Delaware is 1209 Orange Street, Wilmington, Delaware
19801.  The name of its registered agent
at that address is The Corporation Trust Company.  The General Partners, may, from time to time,
and without amending this Agreement, change the Partnership’s registered agent
and the address of its registered office.

 

(c)           The Partnership’s principal office shall be located at
460 East Swedesford Road, Suite 3000, Wayne, PA 19087, or such other
address as may be designated from time to time by the General Partners.

 

(d)           Operator GP shall cause the Partnership and each
Subsidiary to register to do business as a foreign Entity in any jurisdiction
where the Partnership or such Subsidiary will conduct its business and where
such registration is required.

 

17

 

Section 2.3.            Business of the Partnership.  The purpose
of the Partnership shall be to own, operate, manage, maintain, repair and
otherwise deal with, directly or through its Subsidiaries, the Properties and
any other property owned by the Partnership and to carry on any other business
which may be favorable to an owner of such Properties.  Without limiting the generality of the
foregoing, subject to the terms and conditions of this Agreement, including the
approval of the General Partners, if and to the extent required under this
Agreement, the Partnership is hereby authorized, directly or through its
Subsidiaries, to engage in the following activities:

 

(a)           to negotiate, execute, deliver and perform the
Property Management Agreement and the Ancillary Services Agreement, and all
documents, agreements, certificates and financing statements contemplated
thereby or related thereto;

 

(b)           to acquire, hold, use, operate, lease, own, develop,
redevelop, improve, manage and otherwise deal with all or any portion of the
Properties;

 

(c)           to sell, lease, assign, transfer, exchange or
otherwise encumber or dispose of all of the Properties of the Partnership, or
any portion thereof or interest therein;

 

(d)           to obtain temporary or permanent financing in the form
of acquisition loans, construction loans, participating loans, working capital
loans, and intermediate and long-term debt for the purposes recited in this Section 2.3;

 

(e)           to make any investment and expenditure, to borrow
money and to take any and all other actions which are incidental or reasonably
related to any of the purposes recited in this Section 2.3;

 

(f)            to pay, collect, compromise, litigate, arbitrate or
otherwise adjust or settle any and all other claims or demands of or against
the Partnership or hold such proceeds against the payment of contingent
liabilities;

 

(g)           to do any other act or activity, and carry on any
business, related directly or indirectly to ownership in real property or interests
therein; and

 

(h)           to engage in any lawful act or activity and to
exercise any powers permitted to limited liability companies under the Act that
are incidental to and necessary, suitable or desirable for the accomplishment
of the purposes specified in this Section 2.3.

 

Section 2.4.            Subsidiaries.

 

(a)           Upon approval by the General Partners, title to any
Property may be held by a Subsidiary.  It
shall be Operator GP’s duty and responsibility to duly form and maintain each
Subsidiary, to cause each Subsidiary to be and remain in good standing in its
state of organization and qualified to do business in each jurisdiction in
which it owns property, and to obtain appropriate employer and/or tax
identification numbers (to the extent required) for the Subsidiary.

 

(b)           The type of Entity chosen for each Subsidiary will be
approved by the General Partners.  The
governing document or agreement (the “Subsidiary Agreement”) for each 

 

18

 

Subsidiary shall be in a form approved by the General
Partners.  The business, affairs,
administration and termination of each Subsidiary shall be governed by this
Agreement and by the applicable Subsidiary Agreement and, in the event of any
conflict between the terms and conditions of this Agreement and the terms and
conditions of any Subsidiary Agreement, the terms and conditions of this
Agreement shall govern and control, except to the extent (a) a term or
condition in a Subsidiary Agreement is required by the applicable governing law
of the Subsidiary or Subsidiary Agreement or (b) it is expressly provided
in the Subsidiary Agreement that a conflicting term or condition in such
Subsidiary Agreement shall govern and control over this Agreement.

 

(c)           Each Subsidiary Agreement shall limit the liability of
the Partnership and each Partner to the extent permitted by the governing law
of the Subsidiary Agreement.  The debts,
obligations and liabilities of each Subsidiary, whether arising in contract,
tort or otherwise, shall be solely the debts, obligations and liabilities of
the Subsidiary, and neither the Partnership nor any Partner shall be obligated
personally for any such debt, obligation or liability solely by reason of its
beneficial ownership interest such Subsidiary.

 

(d)           Without limiting the generality of the foregoing, the
Partners agree that the Partnership shall form and maintain a corporate
Subsidiary that qualifies as a so-called “taxable REIT subsidiary” under Section 856(l) of
the Code (a “TRS”), the sole purpose and business of which Subsidiary
shall be to conduct the Ancillary Activities pursuant to and in accordance with
the Ancillary Services Agreement. 
Although Persons that are affiliated with Operator Partners will serve
as the officers and directors of the TRS, the activities of the TRS shall be
managed, approved and directed in accordance with Article VII and any
other applicable provisions of this Agreement (and Operator GP shall be
responsible for directing such officers and directors to act in accordance with
such requirements of this Agreement). 
All revenue, expenses, profits, losses and other economic attributes of
the TRS shall accrue to the benefit of the Partnership, as the sole shareholder
of the TRS, subject to the provisions of the Ancillary Services Agreement

 

Section 2.5.            Term.  The term of the Partnership commenced on the
date of the filing of the Certificate of Limited Partnership in the office of
the Secretary of State of the State of Delaware and shall continue until the
Partnership is dissolved and liquidated in accordance with Section 17.2
and a Cancellation of the Certificate of Limited Partnership has been filed
pursuant to Section 17.4.

 

Section 2.6.            Admission of Partners.

 

(a)           Operator GP, Operator LP, Investor GP and Investor LP
have been admitted as Partners in the Partnership.  As of the Effective Date, Operator GP,
Operator LP, Investor GP and Investor LP are the only Partners in the
Partnership.  Operator GP shall notify
the Partners of changes in Schedule II, which shall constitute the
record list of the Partners for all purposes of this Agreement.

 

(b)           Additional Partners may be admitted at such time and
upon such terms and conditions as may be determined subject to and in
accordance with the provisions of Article XIII.

 

19

 

ARTICLE III

NON-COMPETITION

 

Section 3.1.            Restrictive Covenants.

 

(a)           Each Operator Partner covenants and agrees that,
during Non-Compete Period 1, neither Operator Partner will, itself, nor will it
permit YSI, YSI LP or any other Affiliate of any of them, directly or
indirectly, to (i) develop or otherwise start up any new self-storage
facility or self-storage business anywhere within a Non-Compete Restrictive
Area, (ii) provide advice or financial assistance to any Person who is
developing or otherwise starting up any new self-storage facility or
self-storage business anywhere within a Non-Compete Restrictive Area, or (iii) otherwise
participate in the development or start up of any new self-storage facility or
self-storage business, anywhere within a Non-Compete Restrictive Area.

 

(b)           In addition to the provisions of subsection (a) above,
each Operator Partner covenants and agrees that, during Non-Compete Period
2,  if Operator LP, Operator GP, YSI, YSI
LP or any other Affiliate of any of them intends to (i) acquire, directly
or indirectly, an existing self-storage facility or self-storage business
anywhere within a Non-Compete Restrictive Area, (ii) provide debt or
equity financing to any Person who is acquiring any existing self-storage
facility or self-storage business anywhere within a Non-Compete Restrictive
Area, or (iii) otherwise participate in the acquisition or financing of
any existing self-storage facility or self-storage business, anywhere within a
Non-Compete Restrictive Area, then, in any such case, prior to entering into a
binding agreement with respect to such existing facility or business, Operator
Partners shall (A) offer, or cause such participating Affiliate(s) to
offer, to Investor Partners the right to participate in such transaction on
such terms and conditions as the parties may agree on, and, in connection
therewith, to furnish to Investor Partners all of the material documents and
information concerning the subject property and transaction, and (B) proceed
diligently and in good faith, for a period of not less than fifteen (15)
business days following the making of such offer and delivery of such documents
and information, to negotiate with, and attempt to enter into a letter of
intent to invest along with, Investor Partners (or their designated
Affiliate(s)) in such transaction.  If,
for any reason, other than the failure of Operator Partners to make such offer
or otherwise comply with the provisions of clause (A) above, the Partners
(or their Affiliates) have not entered into a letter of intent for such
transaction within such 15-day period, then Operator Partners (and/or their
Affiliates) shall be entitled to proceed with such transaction without the
investment or other participation of Investor Partners (or their Affiliates)
and free from any rights that Investor Partners (or their Affiliates) might
have with respect thereto.

 

(c)           Each Investor Partner covenants and agrees that,
during Non-Compete Period 2, neither Investor Partner will, itself, nor will it
permit Heitman America Real Estate Trust, L.P., directly or indirectly, to (i) develop
or otherwise start up any new self-storage facility or self-storage business
anywhere within a Non-Compete Restrictive Area, (ii) provide advice or
financial assistance to any Person who is developing or otherwise starting up
any new self-storage facility or self-storage business anywhere within a
Non-Compete Restrictive Area, or (iii) otherwise participate in the
development or start up of any new self-storage facility or self-storage
business, anywhere within a Non-Compete Restrictive Area.

 

20

 

Section 3.2.            Remedies.

 

(a)           Each Partner agrees that the scope and time periods
contained in this Article have been carefully considered and specifically
agreed to as being reasonable and necessary. 
If any of the Partners shall at any time breach, violate or fail to
comply fully with any of the terms, provisions or conditions of this Article (the
“Competing Partner”), the Partnership and/or any other Partners that are
not Competing Partners, shall be entitled to equitable relief by way of
injunction (in addition to, but not in substitution for, any and all other
relief to which the Partnership, or such other Partners, may be entitled either
in law or in equity) to restrain such breach or violation or to require
compliance fully with the terms, provisions or conditions of this Article.  In any such proceedings, the Competing
Partners agree not to contest the validity of the provisions of Section 3.1.  Each Competing Partner further agrees to
reimburse the Partnership for any cost of enforcing the provisions of this
Article, including reasonable attorney’s fee and court costs.

 

(b)           If a court or other body of authority and competent
jurisdiction determines that the covenants contained in this Article are
unenforceable, in whole or in part, due to the duration or scope of the
restrictions or limitations imposed therein or for any other reason, then the
court is hereby authorized and directed to make such modifications thereto as
are necessary to render said covenants enforceable to the maximum extent
permitted under applicable law, that being the intention of the Partners.

 

ARTICLE IV

CAPITAL CONTRIBUTIONS; FINANCING

 

Section 4.1.            Capital Contributions.

 

(a)           Each Partner shall make Capital Contributions from
time to time in accordance with this Section 4.1.  All Capital Contributions shall be made in
cash unless otherwise expressly provided in this Agreement or approved by the
General Partners.

 

(b)           On or prior to the date of this Agreement: (i) Operator
LP previously made an initial Capital Contribution to the Partnership of
$101,898,637.90, consisting of  (A) an
in-kind Capital Contribution of fee simple title to all of the Properties, free
and clear of all liens, subject to the terms and conditions of the Contribution
Agreement, at a value of $102,245,714.00, which has been agreed on among the
Partners, less (B) net proration credits of $1,232,872.98 in accordance
with the Contribution Agreement,  plus (C) a
cash contribution of $885,796.88 constituting 100% of the initial closing costs
pertaining to the transfer of the Properties to the Partnership, as more fully
provided in Section 18.21 
(collectively, the “Operator Initial Contribution”); the Gross
Asset Value of each such asset comprising the Operator Initial Contribution and
the liabilities of the Operator LP assumed by the Partnership are as set forth
in the Contribution Agreement, and such Gross Asset Values are reproduced in Schedule IV
attached hereto; (ii) (A) Investor LP will make a cash contribution
of $50,949,318.95  to the Partnership in
exchange for its Partnership Interests (which amount is equal to fifty percent
(50%) of the amount of Operator LP’s prior net contribution, as described in
clause (i) above), and (B) the Partnership will distribute such
amount to Operator LP; and, based on such 

 

21

 

contribution and distribution, each Limited Partner
shall be deemed to have made a net Capital Contribution of $50,949,318.95; and (iii) each
Limited Partner shall contribute an additional $49,617.67 to pay certain
additional formation and closing costs, so that, after such contributions, each
Limited Partner shall have made an aggregate net initial Capital Contribution
of  $50,998,936.62.    In the event that a second closing occurs
pertaining to the Tranche II Locations (as such term is defined in the
Contribution Agreement): (A) Operator LP will make an in-kind Capital
Contribution of fee simple title to the Tranche II Locations, free and clear of
all liens, subject to the terms and condition of the Contribution Agreement,
and the General Partners shall amend Schedule IV of this Agreement
accordingly; (B) the Gross Asset Value of each such asset comprising the
Tranche II Locations and the liabilities of Operator LP to be assumed by the
Partnership will be as set forth in the Contribution Agreement, and such Gross
Asset Values will be reflected in the amended Schedule IV of this
Agreement; (C) Investor LP will contribute an amount equal to fifty
percent (50%) of the agreed Gross Asset Value of the contributed Tranche II
Locations (less net prorations required under the Contribution Agreement), and
such amount will be distributed to Operator LP; (D) the Limited Partners
will also each contribute to the Partnership fifty percent (50%) of all
Partnership expenses incurred in connection with the second closing with
respect to the Tranche II Locations, as described in Section 18.21
(provided that Operator LP’s share of same will be deducted from the
funds otherwise to be distributed to it pursuant to clause (C) above).  The obligation of the Limited Partners to
make Capital Contributions is not a “revolving” commitment, and the repayment
or return of Capital Contributions to the Partners shall not create any
obligation or commitment to readvance or recontribute such Capital
Contributions so repaid or returned, except to the extent expressly provided
herein.  The General Partners shall not
be required to make any Capital Contributions and will have no Financial Rights
in the Partnership.

 

(c)           If (i) clearly specified as
such in the approved Annual Business Plan and Operating Budget then in effect
(and not just inferred from a possible or actual shortfall in projected
income), or (ii) the General Partners, in their sole discretion, otherwise
determine (which determination shall constitute a Major Decision), that
additional capital shall be required by the Partnership to fund its business
operations or for any other Partnership purpose, whether or not in the ordinary
course of business, then, in either such case, the General Partners may request
that each Limited Partner make such additional Capital Contributions (each, an “Additional
Capital Contribution”) to fund the amount required, by delivering written
notice to all Limited Partners (an “Additional Capital Call Notice”),
identifying such amount and providing a reasonably detailed explanation of the
reason that the Additional Capital Contributions are needed.  Each Limited Partner shall, within eleven
(11) Business Days after receipt of an Additional Capital Call Notice,
contribute its pro rata share (based upon its Capital Ratio) of the amount of
the applicable Additional Capital Contribution specified in the Additional
Capital Call Notice.  For purposes of
further certainty, the Partners agree that any Capital Contribution approved as
part of the approval of an Annual Business Plan shall require the delivery of a
further notice to the Limited Partners, prior to the actual required funding of
such Capital Contribution, and shall provide for the right of the Limited Partners
to have eleven (11) Business Days to fund such Capital Contribution, as more
fully provided in the prior sentence.  In
lieu of requesting Additional Capital Contributions for any amount required by
the Partnership, the General Partners may obtain, or cause a Subsidiary to
obtain, financing to cover any shortfall on terms approved by the General
Partners.

 

22

 

Section 4.2.            No Additional Capital Contributions.  Other than
pursuant to this Article IV, no Partner shall be required to lend
any funds to the Partnership or to make any Capital Contributions to the
Partnership.

 

Section 4.3.            Partnership Capital.  Operator GP
shall cause the Partnership’s books and records to contain entries indicating
the type and amount of Capital Contributions made to the Partnership by each
Partner and, if applicable, the return thereon. 
No Partner shall have the right to withdraw all or any part of its
Capital Contribution or to receive any return on or of any portion of its Capital
Contribution except as specifically provided in this Agreement.

 

Section 4.4.            Defaulting Partners.  If at any
time any Limited Partner fails to make
all or any portion of any required Capital Contribution on the date specified
therefor in accordance with Section 4.1 and such failure shall
continue beyond ten (10) Business Days from the date such Capital
Contribution is due (each, a “Payment Default”), the Limited Partner failing to pay such amounts
shall be deemed to be a Defaulting Partner under
Article XVI.  In addition,
without limiting any other remedies that may be available pursuant to Article XVI,
upon the occurrence of any Payment Default, the non-defaulting Limited Partner
(the “Contributing Partner”) may, upon written notice to the Defaulting
Partner and the Partnership, exercise one of the following rights or remedies:

 

(a)           Request a refund of its share of the applicable
Capital Contribution within ten (10) days after the Payment Default by the
Defaulting Partner, in which case the Partnership shall immediately refund such
amount to the Contributing Partner; or

 

(b)           Cause the Partnership to retain the Contributing
Partner’s share of such requested Capital Contribution and, at its option,
elect to contribute to the Partnership the Defaulting Partner’s share of such
requested  Capital Contribution, in which case
all amounts contributed by the Contributing Partner (including both the
Contributing Partner’s and, if it elects to contribute such amount, the
Defaulting Partner’s portion thereof) shall be deemed to be a loan by the
Contributing Partner to the Partnership (a “Default Loan”).  The making of a Default Loan by a
Contributing Partner shall not constitute a cure of the breach by the
Defaulting Partner of its obligations pursuant to this Article IV.  Each Default Loan (i) shall be a loan by
the Contributing Partner to the Partnership, (ii) shall accrue interest at
the Default Rate, and (iii) shall be repaid, along with all accrued and
unpaid interest, on a priority basis from Operating Cash and Capital Proceeds
(with all costs associated with the Default Loan being the responsibility of
the Defaulting Partner except that the repayment of principal and interest
shall be a Partnership obligation).  The
Capital Account of the Contributing Partner shall not be credited with the
amount of any Capital Contribution designated as a Default Loan.  The repayment of a Default Loan and payment
or reimbursement of any interest or expenses thereunder shall not constitute a
return of Capital Contributions, shall not reduce the Contributing Partner’s
Capital Account, and shall not be considered for purposes of determining the
rate of return hereunder; provided, however, that all such
Default Loans made by Investor LP, if any, must be repaid to Investor LP,
together with all accrued and unpaid interest thereon, in order for Investor LP
to receive its Investor 12% Return, 
Investor 13% Return, or Investor 14% Return, as applicable, and as more
fully provided in the definitions of such returns set forth in Section 1.1.

 

23

 

In the event that the Contributing Partner does not
exercise either of the foregoing within ten (10) days after the Payment
Default by the Defaulting Partner, the Contributing Partner will be deemed to
have elected to exercise its right (A) to treat the amount contributed by
it as a Default Loan, and (B) not to contribute the Defaulting Partner’s
share of the requested Capital Contributions.

 

Section 4.5.            Loans by Partners or Affiliates.  Any Partner or
Affiliate may (but shall not be obligated to) at any time lend money or
guarantee a loan to the Partnership to finance Partnership operations, to
finance or refinance any assets of the Partnership, to pay the debts and
obligations of the Partnership, or for any other Partnership purpose; provided
that, unless a loan or guarantee is specifically permitted pursuant to this
Agreement, such Partner or Affiliate must first obtain the prior written
approval of the General Partners for such loan or guarantee.  Except as otherwise provided herein or in any
other agreement approved by the General Partners, if any Partner or its
Affiliate lends funds to the Partnership, such Partner or Affiliate shall be
entitled to receive interest on such loan at an interest rate to be agreed upon
by such Partner or Affiliate and the General Partners, on behalf of the
Partnership.

 

Section 4.6.            Financing.  The Partners anticipate and have agreed that
the Partnership shall remain free from mortgage debt or other loan facilities,
and any financing of the Partnership’s activities or encumbering of its assets
shall be and require a Major Decision.

 

Section 4.7.            Operator Contributions to Pay Investor Accrual. 
Operator LP shall have the right to make Operator Contributions to Pay
Investor Accrual pursuant to Section 5.2(d), and such Capital
Contributions shall be afforded the same treatment as any other Capital
Contributions, except for certain restricted and/or subordinate rights to
distributions set forth in Section 5.2.

 

ARTICLE V

DISTRIBUTIONS

 

Section 5.1.            Distributions in General.  To the
maximum extent permitted by the Act and except as otherwise provided in this Article V,
the Partnership shall distribute all Operating Cash to the Limited Partners by the tenth (10th) day of each month and shall distribute Capital
Proceeds to the Limited Partners as soon
as reasonably practicable after its receipt of such amounts unless reinvestment
of such Capital Proceeds has been approved by the General Partners.  The Partners acknowledge that the
distribution of Operating Cash by the tenth (10th) day of each month may not
include all accounting adjustments required to accurately or finally reflect
Operating Cash available for distribution at such time.  Accordingly, (a) Operator GP shall and,
at its option, Investor GP may, review the calculation of the Operating Cash
distributed each calendar month against the monthly financial statements for
the prior month on which such distribution was based, and the distribution for
the following month shall take into account any accounting adjustment in the
original distribution, and (b) Operator GP shall not be in breach of this
Agreement if it makes an inaccurate monthly distribution, so long as such
inaccuracy is not the result of the bad faith of Operator GP (or its Affiliate)
and is remedied by Operator GP by adjusting such distribution as part of, or
before, the payment of the following monthly distribution.  To the maximum extent permitted by the Act,
the Partnership may make additional 

 

24

 

distributions to Limited
Partners at any time.  The General
Partners shall not be entitled to receive any distributions, and will have no
Financial Rights in the Partnership.

 

Section 5.2.            Distributions of Operating Cash.  Distributions of Operating Cash
shall be made in the following order and priority:

 

(a)           First, to the Limited Partners, pro rata and pari
passu, in repayment of all outstanding principal and accrued interest on the
Partners’ Default Loans, until each Default Loan has been repaid in full, and
without regard to when such Default Loans were made or mature.

 

(b)           Second, to Investor LP, until Investor LP has received
a nominal preferred return of 9.0% per year, on a cumulative basis, compounded
monthly on the last day of each calendar month, on all such Partner’s
Unreturned Capital Contributions (the “Investor Preferred Return”).  To the extent that Investor LP does not
receive the full amount of its accrued Investor Preferred Return as of the last
day of any calendar month, then the amount of the unpaid Investor Preferred
Return (the “Investor Accrual”) will accrue and be entitled to a return
thereon equal to the Investor Preferred Return.

 

(c)           Third, to Investor LP, until Investor LP has received
a nominal preferred return of 9.0% per year, on a cumulative basis, compounded
monthly on the last day of each calendar month, on all such Partner’s Investor
Accrual.

 

(d)           Fourth, to Investor LP, until Investor LP has received
any then outstanding Investor Accrual.  For purposes of further certainty, Operator
Partners confirm that, in addition to the Investor Preferred Return payable
pursuant to subsection (b) and the compounded return on the
Investor Accrual payable pursuant to subsection (c), the Investor
Accrual will be fully paid pursuant to this subsection (d) before
any amounts are paid to Operator LP in accordance with the provisions of subsections
(e), (f) and (g) below. 
Notwithstanding the foregoing, Operator LP shall have the right, but not
the obligation, on not less than three (3) Business Days’ prior written
notice to the other Partners, to make additional Capital Contributions to the
Partnership, at any time, to pay all (or any part) of the then outstanding
Investor Accrual (“Operator Contributions to Pay Investor Accrual”), in
which event, promptly following the funding of such contributions to the
Partnership, the amount so contributed shall be distributed by the Partnership
to Investor LP as a payment of the Investor Accrual.

 

(e)           Fifth, to Operator LP, until Operator LP has received
a nominal preferred return of 9.0% per year, on a cumulative basis, compounded
monthly on the last day of each calendar month, on all such Partner’s
Unreturned Capital Contributions (“Operator Preferred Return”), but not
on the portion of such Partner’s Unreturned Capital Contributions that
constitutes Operator Contributions to Pay Investor Accrual, except to the
extent and at the time permitted under subsection (k) below.  To the extent that Operator LP does not
receive the full amount of its accrued Operator Preferred Return as of the last
day of any calendar month, then the amount of the unpaid Operator Preferred
Return (the “Operator Accrual”) will accrue and be entitled to a return
thereon equal to the Operator Preferred Return; provided, however,
that the Operator Accrual (as compounded under subsection (f) below)
shall not exceed Five Million Dollars ($5,000,000), in the aggregate, over the
life of the Partnership (and any amount in excess of 

 

25

 

$5,000,000 shall not be considered Operator Accrual
for any purpose under this Agreement, and Operator LP shall have no rights to
receive any portion thereof or return thereon). 
The amount of Operator Accrual shall be reviewed and calculated annually
promptly following the delivery of the annual financial statements pursuant to Section 10.3
hereof and shall be calculated by the General Partners based on such annual
financial statements of the Partnership. 
The amount of Operator Accrual so determined will be the amount that is
applied against the $5,000,000.00 cap for the purpose of the limitations
provided in this Section 5.2(e); provided, however, that
such annual calculation shall not affect the maximum amount of Operator Accrual
(as compounded under subsection (f) below) that may be actually
paid to Operator LP.

 

(f)            Sixth, to Operator LP, until Operator LP has received
a nominal preferred return of 9.0% per year, on a cumulative basis, compounded
monthly on the last day of each calendar month, on all such Partner’s Operator
Accrual.

 

(g)           Seventh, to Operator LP, until Operator LP has
received any then outstanding Operator Accrual. 
For purposes of further certainty, Investor Partners confirm that the
Operator Accrual will be fully paid pursuant to this subsection (g) (all
such payments being referred to as the “Payments of Operator Accrual”)
before any further amounts are paid to Investor LP in accordance with the
provisions of subsection (j) below.

 

(h)           Eighth, to Operator LP, until Operator LP has received
a nominal preferred return of 9.0% per year, on a cumulative basis, compounded
monthly on the last day of each calendar month, on all such Partner’s Operator
Contributions to Pay Investor Accrual, subject, however, to the provisions of subsection
(k) below.

 

(i)            Ninth, to Operator LP, until Operator LP has received
any then outstanding Operator Contributions to Pay Investor Accrual, subject,
however, to the provisions of subsection (k) below.

 

(j)            Finally, 50% to Investor LP and 50% to Operator LP.

 

(k)           Notwithstanding anything set forth in this Section 5.2
to the contrary, no distributions shall be made to pay any return of or return
on any Operator Contributions to Pay Investor Accrual unless and until, and
shall only be paid for so long as (i) Investor LP has no Unreturned
Capital Contributions, (ii) there are no outstanding Default Loans owned
to Investor LP and (iii) Investor LP has received its Investor 12% Return
(whether due to distributions of Operating Cash, Capital Proceeds, or both).

 

Section 5.3.            Distributions of Capital Proceeds.  Distributions of Capital Proceeds
shall be made in the following order and priority:

 

(a)           First, to the Limited Partners, pro rata and pari
passu, in repayment of all outstanding principal and accrued interest on the
Partners’ Default Loans, until each Default Loan has been repaid in full, and
without regard to when such Default Loans were made or mature.

 

(b)           Second, to Investor LP, until Investor LP has received
cumulative distributions, whether from Capital Proceeds or Operating Cash, of (A) all
of its Unreturned Capital 

 

26

 

Contributions, plus (B) the Investor 12%
Return.  For purposes of calculating the
Investor 12% Return under this subsection (b), Investor LP shall be
deemed to have received any payment of the Removal Remedies Charge (to the
extent actually received by Investor LP) as a distribution from the
Partnership, subject, however, to the provisions of Section 13.4 to
the contrary.

 

(c)           Third, 100% to Operator LP.

 

Section 5.4.            Clawback Against Payments of Operator Accrual.

 

(a)           In the event that upon the sale of, or other Capital
Transaction pertaining to, the last Property or Properties owned by the
Partnership, there are insufficient Capital Proceeds to distribute to Investor
LP to achieve the Investor 12% Return, then Operator LP shall immediately
contribute to the Partnership for concurrent distribution to Investor LP an
amount equal to the lesser of: (i) the amount that when distributed to
Investor LP will cause Investor LP to achieve the Investor 12% Return or (ii) the
aggregate amount of the Payments of Operator Accrual, if any, received by
Operator LP.  For the purposes of further
certainty, Investor Partners confirm that any payment required under clause (ii) of
the preceding sentence cannot in any event exceed $5,000,000 due to the cap
established in Section 5.2(e).

 

(b)           Operator LP’s obligation to make the payment(s) described
in subsection (a) above shall be fully guaranteed by YSI and YSI
LP, by their execution of the guaranty attached hereto after the signature page (which
guaranty shall also cover Operator LP’s liability under Section 7.4 of the
Contribution Agreement).

 

Section 5.5.            Distributions in Kind.  No distributions
of assets other than cash shall be made without the consent of the General
Partners.  If assets other than cash are
distributed, such assets shall be deemed to be equal to their fair market value
as reasonably determined by the General Partners (net of any liabilities
securing such distributed assets that the recipient Partners are considered to
assume or take subject to under Section 752 of the Code).  Any gain or loss associated with such assets
shall be allocated to the Partners’ Capital Accounts in accordance with Article XI
and adjustments to Capital Accounts in respect of distributions of such assets
shall reflect its fair market value in accordance with Section 1.704-1(b)(2)(iv)(e) of
the Treasury Regulations.

 

Section 5.6.            Distributions upon Dissolution and Termination. 
Upon dissolution and termination of the Partnership, the final
distribution of the Partnership’s assets shall be made pursuant to the
provisions of Section 17.2.

 

Section 5.7.            Limitation on Distributions. 
Notwithstanding any provision to the contrary in this Agreement, the
Partnership shall not knowingly make any distribution that would violate Section 17-607
of the Act or other Governmental Requirements.

 

Section 5.8.            Distributions in the Case of Transfers.  In the event
that either the Operator LP or Investor LP transfers all or a portion of its
Partnership Interest in accordance with the terms of this Agreement, the
Partner’s transferee shall succeed to the distribution rights associated with
the transferred Partnership Interest or portion thereof and references in this
Agreement to distributions to the Operator LP or Investor LP shall be construed
as references to distributions 

 

27

 

with respect to the transferred Partnership Interest
or portion thereof of the Operator LP or Investor LP, as the case may be.

 

Section 5.9.            Setoff Right.  To the extent that any Limited Partner would
otherwise be entitled to a distribution of funds from the Partnership at any
time (whether a distribution of Operating Cash or Capital Proceeds, or a
payment on a Default Loan), but such Limited Partner also then has a debt or
other monetary obligation of any kind due and owing to the Partnership,
including as a result of any indemnity or other similar obligation of such
Limited Partner, then, in such case, the Partnership shall have the right to
set off against such distribution the amount of such debt or other monetary
obligation, thereby reducing such distribution by such amount.

 

ARTICLE VI

PARTNERS

 

Section 6.1.            Registered Partners.  The
Partnership may treat the holder of record of any Partnership Interest as the
holder in fact of the Partnership Interest for all purposes and, accordingly,
is not bound to recognize any equitable or other claim to or interest in the
Partnership Interest on the part of any other Person, whether or not it has
express or other notice of the claim or interest, except as expressly provided
by this Agreement or the laws of the State of Delaware.

 

Section 6.2.            Limited Liability of Partners.

 

(a)           The General Partners shall only be liable for the
debts and other obligations of the Partnership to the extent mandated by the
Act.  No Limited Partner shall (i) be
liable for the debts, liabilities, contracts or any other obligation of the
Partnership, except to the extent expressly provided herein or mandated by the
Act, (ii) be liable for the debts or liabilities of any other Partner, (iii) be
required to contribute to the capital of, or loan, the Partnership any funds
other than as expressly required in this Agreement, (iv) be liable, except
as mandated by the Act, for the return of all or any portion of the Capital
Contributions of any Partner, or (v) except as otherwise expressly
provided herein, have any priority over any other Partner as to the return of
its contributions to capital or as to compensation by way of income.  Except as expressly mandated by the Act or
this Agreement, all debts, obligations and liabilities of the Partnership, whether
arising in contract, tort or otherwise, shall be solely the debts, obligations
and liabilities of the Partnership, and no Partner shall be obligated
personally for any such debt, obligation or liability of the Partnership solely
by reason of being a Partner.

 

(b)           Except as expressly mandated by the
Act, a Limited Partner shall not have any liability in excess of (i) the
amount it has contributed to the Partnership and (ii) the amount of any
distributions wrongfully distributed to it.

 

Section 6.3.            Limitation on Partner Actions.  Except as expressly
authorized by this Agreement, no Partner shall, directly or indirectly, do any
of the following without the written consent or approval of the General
Partners: (a) withdraw from the Partnership, (b) voluntarily
dissolve, terminate or liquidate the Partnership, (c) petition a court for
the dissolution, termination or liquidation of the Partnership, or (d) cause
any property of the Partnership to be subject to the 

 

28

 

authority of any court, trustee or receiver (including
suits for partition and bankruptcy, insolvency and similar proceedings).  Except as otherwise expressly provided in
this Agreement or mandated by the Act, no Limited Partner, in any capacity, may
(i) act for or on behalf of the Partnership or take part in the operation,
management or control of the Partnership’s business, (ii) transact any
business in the name of the Partnership, or (iii) have the authority or
power to sign documents for or otherwise bind the Partnership; provided
that such restrictions shall not apply to any action taken by a General Partner
just because it is an Affiliate of a Limited Partner.

 

Section 6.4.            Actions of the Partners.  Any action,
vote, consent, determination or other decision required to be made by the
General Partners pursuant to this Agreement shall require the approval of all
the General Partners, except as otherwise set forth or authorized herein; if
required, such approval shall be obtained in accordance with the procedures set
forth in Section 9.5.  Any
action, vote, consent, determination or other decision to be made by the
Partners pursuant to the Act (notwithstanding any provision hereof to the
contrary) shall require the approval of the General Partners.

 

ARTICLE VII

MANAGEMENT OF THE PARTNERSHIP

 

Section 7.1.            Powers and Responsibilities.  Operator GP
shall have the duty, responsibility, power and authority to manage and
administer the day-to-day business and affairs of the Partnership and the
Properties in accordance with the Annual Business Plans and Operating Budgets
and in order to implement the Major Decisions of the General Partners.  Operator GP shall regularly report to the
other Partners as to the status of and compliance with the Annual Business Plan
and Major Decisions as well as the other business affairs of the
Partnership.  Operator GP shall conduct
the ordinary and usual business affairs of the Partnership as provided in this
Agreement (including Section 7.4). 
Without limiting the foregoing (but subject to and limited by the provisions
of this Agreement, including Section 7.2), Operator GP shall have
full power and authority to conduct the Partnership’s day-to-day business in
the ordinary course, including to take actions that are not Major Decisions or
prohibited under Section 6.3 or otherwise hereunder, and to do each
of the following to the extent necessary for the conduct of the Partnership’s
business:

 

(a)           to supervise or arrange for the supervision of
day-to-day operations of the Partnership and its Subsidiaries;

 

(b)           to institute, prosecute, defend or settle any legal,
arbitration or administrative actions or proceedings on behalf of or against
the Partnership or a Subsidiary, subject to the provisions of Section 7.2(a)(x) and
Section 7.2(a)(xiv); provided that with respect to any such
action or proceeding involving a claim or series of related claims against the
Partnership or its Subsidiaries totaling more than $50,000 and not covered by
insurance, Operator GP shall give the other Partners prompt written notice of
such lawsuit or proceeding, and Investor GP shall have the opportunity to
consult with Operator GP regarding the Partnership’s or such Subsidiary’s
defense of the action;

 

29

 

(c)           retain attorneys, consultants and other independent
contractors to the extent such professional services are required to carry on
the business of the Partnership and its Subsidiaries, and provided that
retention of attorneys shall require the approval of Investor GP, which
approval shall not be unreasonably withheld or delayed and shall be deemed
given if not expressly denied in writing by Investor GP within five (5) business
days after Investor GP’s receipt of a request for such approval from Operator
GP;

 

(d)           to enter into or renew lease agreements for the lease
of space to tenants in each of the Properties substantially in a form of lease
agreements that are entered into in the ordinary course of business;

 

(e)           to collect all rents and other payments due and owing
to the Partnership and the Subsidiaries, including the institution of
enforcement and collection activities and related auction proceedings
undertaken in the ordinary course of business;

 

(f)            to modify and terminate leases in the ordinary course
of business and generally consistent with the Annual Business Plan;

 

(g)           to incur normal operating expenses of, and to pay the
obligations of, the Partnership and its Subsidiaries, and to enter into,
perform and carry out contracts and agreements on behalf of the Partnership or
its Subsidiaries for the conduct of the Partnership’s business;

 

(h)           to obtain and maintain insurance coverage for the
Properties and other assets of the Partnership and its Subsidiaries, in such
amounts and with such coverages as set forth in the Annual Business Plan;

 

(i)            Subject to Investor GP’s rights under Section 8.4,
to perform, or cause to be performed, all of the obligations of the Partnership
and the Subsidiaries, and to exercise or cause to be exercised all rights of
the Partnership or the Subsidiaries, under any agreement (including the
Financing Documents and any limited liability company agreement, partnership
agreement, joint venture agreement, shareholder’s agreement or other similar
agreement) to which the Partnership, any Subsidiary or any nominee of the Partnership
or a Subsidiary is a party;

 

(j)            to cause the Partnership and the Subsidiaries to pay
all taxes, assessments, rents and other impositions applicable to assets of the
Partnership and the Subsidiaries and undertake when appropriate any action or proceeding
seeking to reduce such taxes, assessments, rents or other imposition;

 

(k)           to open and maintain bank accounts for the
Partnership, provided that transfers, withdrawals or drafts from any
such bank accounts shall require Operator GP’s signature or instructions or any
other signature that the General Partners designate;

 

(l)            to coordinate the preparation and filing of tax
returns on behalf of the Partnership and the Subsidiaries in each federal,
state, local or foreign tax jurisdiction in which such filings are required;

 

30

 

(m)          to
do any and all acts which may be necessary or desirable for the proper
management and maintenance of the Properties, including any matters provided
for in the Property Management Agreement or the Ancillary Services Agreement,
subject to the restrictions and limitations set forth therein;

 

(n)           to
apply for, renew and maintain licenses, permits and any documents necessary to
maintain the good standing of the Partnership (excluding any new or modified
licenses or permits that would materially change the use or operation of any
Property);

 

(o)           to
execute and deliver such documents on behalf of the Partnership or a Subsidiary
as it reasonably deems necessary or desirable in connection with the foregoing
provisions; and

 

(p)           to
do any act which is necessary or desirable to carry out any of the foregoing.

 

No Partner shall be required
to devote a particular amount of time to the Partnership’s business, but the
Operator GP shall devote sufficient time and effort to the Partnership’s
business and operation as is necessary to perform its duties hereunder.  All costs and expenses incurred by the
Partners that are directly related to the conduct of the Partnership’s and the
Subsidiaries’ business shall be borne by the Partnership and the Subsidiaries
to the extent provided in the Operating Budget and this Agreement.  While the Partners may incur costs and
expenses in connection with the conduct of the Partnership’s and Subsidiaries’
business, none of them shall be obligated to do so using its own funds, it
being understood specifically that the obligations of Operator GP to expend
money on behalf of the Partnership is subject to the availability of
Partnership funds therefor.

 

Section 7.2.            Major
Decisions.

 

(a)           Notwithstanding
any contrary provision contained herein, no Partner shall cause the Partnership
or permit a Subsidiary to take any of the following actions (each, a “Major
Decision”) without the approval of the General Partners, and the General
Partners may direct Operator GP to cause the Partnership or any Subsidiary to
take any of the following actions:

 

(i)            adopt or amend any approved Annual
Business Plan or Operating Budget (or any update thereto);

 

(ii)           purchase or acquire, or contract or
commit to purchase or acquire, any property or asset other than customary
inventory and other similar equipment or assets used in the ordinary course of
business;

 

(iii)          borrow any money or enter into any
financing, refinancing or loan transaction, including any Financing Document,
or grant a security interest in any Subsidiary or in all or any portion of the
Properties or amend the terms and conditions of any financing or make elections
with respect to interest periods, interest rates, prepayment or other material
provisions under any financing (and the Partners hereby reaffirm their intent
under Section 4.6);

 

31

 

(iv)          lease any space in any Property, other
than leases made in the ordinary course of business and in a manner generally
consistent with the Annual Business Plan;

 

(v)           enter into any listing/leasing
agreement not substantially in a form approved by the General Partners;

 

(vi)          enter into any property management
agreement or ancillary services agreement not substantially in a form approved
by the General Partners (but, for the avoidance of doubt, the form of the
Property Management Agreement and Ancillary Services Agreement entered into on
or about the Effective Date is hereby approved by the General Partners);

 

(vii)         enter into any construction management
agreement not substantially in a form approved by the General Partners;

 

(viii)        make any change order that requires the
approval of an owner to the terms of a construction management agreement;

 

(ix)           enter into, or amend, any contract
between the Partnership or a Subsidiary, on the one hand, and an Operator
Partner, or an Affiliate of an Operator Partner, on the other hand, except as
provided in Section 8.4;

 

(x)            file, defend or settle any lawsuits
or other legal, arbitration or administrative claim or proceeding asserted or
brought by or against or otherwise involving the Partnership or a Subsidiary,
or confess a judgment against the Partnership or a Subsidiary, unless same is (i) for
collection of tenant receivables or other amounts payable to the Partnership or
a Subsidiary under leases or other occupancy agreements, or by vendors or
suppliers, or to enforce a right or remedy for a non-monetary breach or default
under such leases, occupancy agreements or the agreements with such suppliers
and vendors, all to the extent incurred in the ordinary course of business, (ii) at
a cost to the Partnership or a Subsidiary equal to or less than the amount
expressly provided in the Operating Budget as a separate line item specifically
identifying the particular claim or proceeding, or (iii) if no amount is
provided therefor in the Operating Budget, equal to or less than
$10,000.00.  For purposes of clause (iii) above,
the amount of a claim shall be considered the largest loss that may be incurred
by the Partnership or a Subsidiary, net of costs that will be paid by
insurance, as reasonably determined by the General Partners;

 

(xi)           obtain and maintain insurance
coverage for the Properties and other assets of the Partnership and its
Subsidiaries, including any insurance to protect the Partners against liability
from third parties, in addition to or different from those set forth in the
Annual Business Plan;

 

(xii)          commit the Partnership or a Subsidiary
to any capital or operating expenditures in excess of the Operating Budget or
in any other manner not contemplated by the Annual Business Plan, except as set
forth in Sections 8.1(c) and (d);

 

(xiii)         rebuild or reconstruct the improvements
on any Property if they are substantially (i.e. more than 25% of the gross
leasable area of the buildings located on a Property or 

 

32

 

more than 25% of
the value of such Property) damaged by a fire or other casualty; provided,
however, that even if the decision to rebuild or reconstruct is not a
Major Decision, the manner of rebuilding and reconstruction of any Property
always shall be a Major Decision in any case;

 

(xiv)        obtain any new, or modify any existing,
licenses, permits or other public or private entitlements that would materially
change the use or operation of any Property;

 

(xv)         enter into any construction or
renovation contract (unless the economic terms of such contract are
specifically covered in an Annual Business Plan and Operating Budget);

 

(xvi)        make any change of the Partnership’s auditor;

 

(xvii)       change the name of the Partnership;

 

(xviii)      require or permit any Partner to make any
Additional Capital Contribution;

 

(xix)         consolidate or merge with or into any
other Entity, or purchase or otherwise acquire all or substantially all of the
assets or any stock or shares of any class of any Entity, or otherwise engage
in any recapitalization, joint venture or other business combination;

 

(xx)          except in accordance with the
provisions of Section 13.3, Dispose of all or any portion of, or
any estate or interest in, any Property or Properties or any other asset
(including goodwill) of the Partnership or any Subsidiary;

 

(xxi)         remove or replace a General Partner
(except as permitted pursuant to Section 13.1(f),  13.7(b) or 16.2, and as more
fully provided in Section 7.5); or

 

(xxii)        dissolve
or liquidate, in whole or in part, make an assignment for the benefit of any
creditor, file or otherwise initiate on behalf of the Partnership or any
Subsidiary a petition in bankruptcy, petition or apply to any tribunal for the
appointment of a custodian, receiver or any trustee for the Partnership or for
a substantial part of its property, commence any proceeding under any
bankruptcy, insolvency, reorganization, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, whether now or
hereinafter in effect, consent or acquiesce in the filing of (or invoke or
cause any person to file) any such petition, application or proceeding, or
taking possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of the Partnership or any Subsidiary
or any substantial part of its property, or admit the Partnership’s inability
to pay its debts generally as they become due or authorize any of the foregoing
to be done or taken on behalf of the Partnership or any Subsidiary, or consent
to or acquiesce in (i) the filing or other initiation of an involuntary
petition for relief against the Partnership or any Subsidiary under any Chapter
of the Bankruptcy Code, or (ii) the appointment of any trustee, receiver,
conservator, assignee, sequestrator, custodian, liquidator (or other similar
official) for the Partnership or any Subsidiary of all or substantially all of
its respective assets.

 

33

 

(b)           Except
as otherwise provided in this Agreement, no action shall be taken, sum
expended, decision made or obligation incurred by the Partnership or any
Subsidiary with respect to a matter that is a Major Decision, unless such
matter has been approved in writing by the General Partners.  The General Partners shall be deemed to have
approved, and no additional approval shall be required hereunder with respect
to, any action or expenditure specifically set forth in the Annual Business
Plan and Operating Budget approved by the General Partners.

 

(c)           Approval
of the General Partners may be obtained by written approval at a meeting of the
General Partners’ Authorized Representatives duly called pursuant to Section 9.5,
or by written consent of such Authorized Representatives, without a
meeting.  Each General Partner shall use
reasonable efforts to cause its Authorized Representatives to respond to any
written request for written consent to a Major Decision within five (5) Business
Days after the date of such request.  If
all of a General Partner’s Authorized Representatives fail to respond to such
written request within such five (5) Business Day period (or such other
period agreed to in writing by the General Partners), such failure shall be
deemed a disapproval of the requested Major Decision by such General Partner
and its Authorized Representatives.

 

Section 7.3.            Major
Dispute.

 

(a)           In
the event that the General Partners cannot agree upon a proposed Major Decision
during the Lockout Period, then either General Partner may, within fifteen (15)
days of the failure to agree upon the proposed Major Decision, provide written
notice (the “Notice of Major Dispute”) to the other General Partner that
specifies such proposed Major Decision (such disagreement, a “Major Dispute”).  Within fifteen (15) days following delivery
of such Notice of Major Dispute, the General Partners shall promptly meet and
make a good faith effort to come to an agreement regarding the resolution of
the Major Dispute.  If the General
Partners are unable to resolve a Major Dispute during the Lockout Period, then
neither the General Partners nor the Partnership shall take any action with
regard to the subject matter of the Major Dispute until after the end of the
Lockout Period (at which time, Section 7.3(b) shall govern).

 

(b)           If,
at any time after the end of the Lockout Period, any Major Decision cannot be
reached by the General Partners and, in the reasonable belief of either General
Partner, the resolution of such Major Decision has a material impact as to the
overall business or strategy of the Partnership, then Operator GP or Investor
GP, as the case may be, may provide a Notice of Major Dispute as contemplated
in the paragraph above to the other General Partner.  Within fifteen (15) days following delivery
of such Notice of Major Dispute, the General Partners shall promptly meet and
make a good faith effort to come to an agreement regarding the resolution of
the Major Dispute within fifteen (15) days after their meeting.  If the General Partners are unable to resolve
the Major Dispute within such 15-day period, then either General Partner may
exercise the Marketing Right pursuant to Section 13.3.  If any Major Dispute arises and a Notice of
Major Dispute is given at least thirty (30) days before the end of the Lockout
Period, and such Major Dispute is not resolved by the end of the Lockout
Period, then either General Partner may exercise the Marketing Right at any
time after the end of the Lockout Period (and before the Major Dispute is
resolved) without the requirement for further notice or a waiting period under
this subsection (b).

 

34

 

(c)           In
order to be effective, any Notice of Major Dispute delivered pursuant to this Section 7.3
must contain a description of the Major Decision on which the Partners have
been unable to agree and must contain the following language in BOLD PRINT on the face of the Notice of Major Dispute:

 

THIS NOTICE IS GIVEN PURSUANT TO
THE TERMS OF THE AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT OF YSI -
HART LIMITED PARTNERSHIP IN ORDER TO ADVISE A PARTNER THAT A MAJOR DISPUTE
EXISTS UNDER SUCH AGREEMENT.

 

Section 7.4.            Standard
of Care.

 

(a)           Each
General Partner, in managing the business or affairs of the Partnership, will
discharge its duties provided in this Agreement:

 

(i)            in a manner it believes in good
faith to represent the care an ordinarily prudent person in a like position
would exercise under similar circumstances;

 

(ii)           in good faith reliance on the
provisions of this Agreement;

 

(iii)          without intentional misconduct or a
knowing violation of law; and

 

(iv)          without engaging in any transaction
for which it receives a personal benefit in violation or breach of any
provision of this Agreement.

 

Notwithstanding the foregoing, but subject to the
provisions of clause (C) below: (A) a General Partner does not
violate a duty or obligation under this Agreement or under Governmental
Requirements merely because the General Partner’s conduct furthers the interest
of a Limited Partner that is an Affiliate of such General Partner, (B) without
limiting the foregoing clause (A), a General Partner has no duty or obligation
to consider any interest of or affecting the Partnership, any Partner or any
other Person (including in connection with the making or approval of, or
consent to, any Major Decisions), except as may be otherwise provided herein,
and (C) Operator GP recognizes its duties to the Partnership (because of
its responsibility for overseeing the day-to-day activities of the Partnership
and carrying out Major Decisions) and, accordingly, agrees that (i) it
shall devote such time and attention to the business and affairs of the
Partnership as is necessary to reasonably conduct such business and affairs and
(ii) shall act in a manner it believes in good faith to be in the best
interest of the Partnership (subject to the constraints established in the
approved Annual Business Plans and Operating Budgets) except regarding the
making or approval of, or consent to, Major Decisions, regarding which Operator
GP may act in its sole discretion.

 

(b)           Except for any implied contractual covenant of good
faith and fair dealing under applicable Delaware law, no Limited Partner has
any other duty to the Partnership, any Partner, or any other Person.

 

35

 

Section 7.5.            Resignation
and Removal.

 

(a)           No
General Partner may resign as a general partner of the Partnership without the
prior written consent of the other General Partner.  However, on thirty (30) days prior written
notice from a General Partner (which 30-day period may run concurrently with
any other notice or grace period), the other General Partner may be removed
pursuant to Sections 13.1(f), 13.7(b) or 16.2.  Upon any resignation by or removal of a
General Partner, and without limiting its other rights and remedies for a
breach of this Agreement, the remaining General Partner may: (i) appoint a
replacement General Partner or assume the role of sole General Partner of the
Partnership (with all authority of both the Operator GP and Investor GP); (ii) terminate
all or any of the Property Management Agreement, Ancillary Services Agreement,
and/or other agreements between the Partnership and the Affiliates of the
removed or resigned General Partner, and appoint a new property manager or
Ancillary Activity service provider (or other Person to replace the removed
Affiliate), in which case the remaining General Partner may allocate any future
amounts payable under such agreements, including property management fees or
and amounts payable under the Ancillary Services Agreement for Ancillary
Activities to the new property manager and/or service provider (or other Person
to replace the removed Affiliate), as the case may be (or the remaining General
Partner may pay other compensation to such replacements as reasonably
determined to be appropriate by the remaining General Partner); (iii) where
Investor GP is the remaining General Partner, exercise the Investor Unilateral
Marketing Right in accordance with Section 13.4; and/or (iv) where
Operator GP is the remaining General Partner, exercise the Redemption Right
provided to Operator Partners under and in accordance with Section 13.5
(the rights and remedies of Investor GP set forth in this Section 7.5(a) being
collectively referred to as the “Removal Remedies”).

 

(b)           In
addition to the foregoing rights and remedies, in the event Investor Partner
exercises any of its Removal Remedies as a result of an Event of Default by the
Operator Partners under Section 16.1(c) (i.e., upon a YSI
Change in Control), then Operator LP shall pay to Investor LP an amount (the “Removal
Remedies Charge”) equal to:

 

	
  If
  one or more of the Removal Remedies is 

  exercised and the Removal Remedies Charge is 

  due and payable during the following period:

  	
   

  	
  then the Removal Remedies 

  Charge shall be

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  From the Effective Date to the day prior to the
  first annual anniversary of this Agreement

  	
   

  	
  $

  	
  2,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  From the first annual anniversary of this
  Agreement to the day prior to the second annual anniversary of this Agreement

  	
   

  	
  $

  	
  3,500,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  From the second annual anniversary of this
  Agreement to the day prior to the third annual anniversary of this Agreement

  	
   

  	
  $

  	
  6,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  From the third annual anniversary of this
  Agreement to the day prior to the fourth annual anniversary of this Agreement

  	
   

  	
  $

  	
  4,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  On or after the fourth annual anniversary of this
  Agreement.

  	
   

  	
  -0-

  	
   

  

 

36

 

The Removal Remedies Charge
shall be due and payable either (i) concurrently with the closing of the
sale of Properties pursuant to the Investor Unilateral Marketing Right or (ii) within
ten (10) days after Investor GP exercises its other Removal Remedies as a
result of a YSI Change in Control.

 

Section 7.6.            Compensation
and Expenses.  The General Partners
shall not receive any compensation for serving as general partners of the
Partnership.

 

Section 7.7.            Delegation
of Authority.  The General Partners
may from time to time delegate in writing to one or more other Persons such
authority as the General Partners may deem advisable.

 

Section 7.8.            Notification
of YSI Change in Control.  Operator
GP shall deliver prompt written notice to Investor GP of the occurrence of any
event that constitutes a YSI Change in Control (provided that the failure to
deliver such notice shall not affect Investor Partners’ remedies arising from a
YSI Change in Control).

 

ARTICLE VIII

OPERATION AND EXPENSES

 

Section 8.1.            Annual
Business Plan and Operating Budget. 
Operator GP shall operate the Partnership in accordance with the Annual
Business Plan, in each case as approved in accordance with this Section 8.1.

 

(a)           The
strategic business plan that is in effect with respect to any Fiscal Year, as
it may be amended, is called the “Annual Business Plan.”  The Annual Business Plan shall include an
executive summary outlining the business strategy and budgeted and forecasted
financial information for the upcoming period and shall contain a comprehensive
statement setting forth the overall plan for the business of the Partnership to
the extent known at that point in time, including proposed repairs or
renovations to a Property (in all cases, to the extent then known or reasonably
anticipated), and shall set forth the following criteria for the operation of
the Partnership during the Fiscal Year to which it relates based on information
that is known: (i) an annual operating budget for the Partnership and each
Property (the “Operating Budget”) and (ii) for forecasting purposes
only, an estimated schedule of calls for Capital Contributions for the Fiscal
Year, if any are being recommended by the Operator GP (provided that Capital
Contributions shall only be retained in an Annual Business Plan to the extent approved
by both General Partners, in which case the Partners shall be obligated to fund
such Capital Contributions in accordance with Section 4.1(c)).  In preparing and approving each Annual
Business Plan and any revisions or amendments thereto, Operator GP shall
consider, among other things, the previous year’s experience, current and
projected market conditions and anticipated future needs in light of such
projections.  The Operating Budget shall
reflect all items on a Property-by-Property basis and shall include anticipated
revenues, occupancies, rate 

 

37

 

increases, capital improvements, financing needs,
insurance coverage (including coverage types and policy limits), call center
costs, and all other operating expenditures of the Partnership and any
Subsidiaries (including property management fees and amounts payable under the
Ancillary Services Agreement), and shall separately set forth all capital
expenditures and any costs and expenses, if any, that would need to be funded
with Additional Capital Contributions. 
The form of the Annual Business Plan and Operating Budget shall be
substantially the same as the initial Annual Business Plan and Operating Budget
attached as Schedule 8.1(a), as such form may be modified by the
General Partners.

 

(b)           The
initial Operating Budget for the period beginning on the Effective Date and
ending December 31, 2009 and an Annual Business Plan for the same initial
period (in a modified, less detailed format for such period only) have been
prepared by Operator GP and approved by Investor GP and are attached hereto in Schedule 8.1(a).  No later than November 1 of each
calendar year, Operator GP shall present a draft proposed Annual Business Plan,
including the Operating Budget, for the following year to Investor GP for its
consideration and comments.  Investor GP
shall provide any comments it may have by November 15 of each calendar
year, and no later than December 1 of each calendar year Operator GP shall
present a final proposed Annual Business Plan, including the Operating Budget,
for the following year to Investor GP for its approval.  Following delivery of such final proposed
Annual Business Plan, including the Operating Budget, Investor GP shall approve
or disapprove the Annual Business Plan and the Operating Budget no later than
fifteen (15) days after the date on which Operator GP has met with, or
attempted in good faith to meet with, Investor GP to discuss the final proposed
Annual Business Plan and the final proposed Operating Budget.  Investor GP may review the Operating Budget
on a line-by-line basis.  Unless
otherwise mutually agreed:

 

(i)            Any Investor GP disapproval shall be
in writing to Operator GP and shall contain a detailed explanation of its
objections to the final proposed Operating Budget or any amendments thereto,
and the undisputed portions of the proposed Operating Budget shall be deemed to
be adopted and approved.

 

(ii)           Failure of the General Partners to
agree or disagree in writing to the disputed items of the final proposed
Operating Budget within such fifteen (15) day period shall be deemed a
disapproval, and any such disputed item(s) of the Operating Budget, other
than capital expenditures and Non-Controllable Items, shall be set at 105% of
the amount shown for such line item(s) in the Operating Budget for the
preceding year; for Non-Controllable Items any such disputed line item(s) shall
be set at the amount shown for such line item(s) in the final proposed
Operating Budget (even though it has not yet been approved, provided that
expenditures therefor shall not exceed actual amounts, as more fully provided
below); and for capital expenditures, no expenditures shall be made for capital
items until approval is received, unless such expenditures were specifically
approved in the Operating Budget for the current year but not yet incurred in
which case such expenditures, as previously approved, may be incurred.  In the event that the applicable Property was
not owned for the entire preceding year, the amounts described in this clause
(ii) for such preceding year shall be annualized.

 

38

 

(c)           Notwithstanding
the foregoing, with respect to each Property and without the consent of
Investor GP, Operator GP shall have the right, in its reasonable discretion, to
expend any amounts necessary or appropriate for Emergency Situation Responses,
in which case, however, Operator GP shall promptly notify Investor GP of such
expenditure, including the reason same required an Emergency Situation
Response.

 

(d)           Operator
GP shall exercise reasonable efforts to cause the Partnership to be operated in
compliance with the Operating Budget. 
Operator GP shall secure Investor GP’s prior approval for any
expenditure that will cause any expense item for the Partnership or any
Property to exceed 105% of such annual expense item set forth in the Operating
Budget; provided that the approval of Investor GP shall not be required
if such expenditure is for the payment of Non-Controllable Items or Emergency
Situation Responses, in which case, however, (i) Operator GP shall
promptly notify Investor GP of such expenditure, including, if applicable, the
reason same required an Emergency Situation Response and (ii) the
expenditure shall be the actual amount incurred, and the Operating Budget shall
be modified accordingly.  Operator GP
shall promptly inform the other Partners of any major increases or decreases in
costs, expenses or revenue that are not reflected in the then-current Operating
Budget.

 

(e)           Operator
GP shall have the right, from time to time during each Fiscal Year, to submit a
proposed amendment to the Operating Budget to Investor GP for approval.  Investor GP shall review all proposed
amendments to the Operating Budget in the same manner as the Operating
Budget.  Following delivery of any
proposed amendment to an Operating Budget, Investor GP shall be required to
approve or disapprove such proposed amendment to the Operating Budget no later
than ten (10) Business Days after the date on which Operator GP has met
with Investor GP regarding the proposed amendment.  If Investor GP disapproves or fails to
approve a proposed amendment to the Operating Budget, Operator GP shall
continue to use all reasonable efforts to comply with the Operating Budget in
accordance with the foregoing provisions until a proposed amendment has been
approved (subject to the availability of Partnership funds therefor).

 

(f)            Operator
GP shall not be deemed to have made any guarantee or warranty of the fiscal
estimations set forth in the Annual Business Plan or Operating Budget.  The parties acknowledge that the Annual
Business Plan and Operating Budget is intended to set forth objectives and
goals based on Operator GP’s best judgment of the facts and circumstances known
by Operator GP at the time of preparation.

 

Section 8.2.            Management
Fees.  The Partnership shall pay the
property manager and the Ancillary Activities services provider under the
Property Management Agreement and Ancillary Services Agreement, respectively,
the fees and expenses set forth therein. 
The General Partners hereby approve the property management fees and
fees for administering the Ancillary Activities shall be equal to six percent
(6%) of Operating Revenues of such Property, apportioned between property
management activities and administering Ancillary Activities.  At Operator GP’s request, in the event that
the payment of such fees create Bad REIT Income for YSI, then Investor Partners
agree to make any modifications to the Property Management Agreement, Ancillary
Services Agreement and/or this Agreement reasonably requested by Operator GP,
provided that, in all cases, any such modifications will have no adverse
consequences to either Investor Partner, as determined by Investor Partners, in
their sole discretion.  Operator GP (or
an 

 

39

 

Affiliate of Operator GP) shall serve as the property
manager under the Property Management Agreement and as the service provider
under the Ancillary Services Agreement, unless and until removed as provided
herein or otherwise agreed by the General Partners.

 

Section 8.3.            Special
Expense Reimbursement.  In addition
to the reimbursement for costs and expenses incurred by the property manager
and Ancillary Activities service provider on behalf of the Partnership, the
Partnership (or its Subsidiaries) shall reimburse Operator GP (or its Affiliate
actually providing services) not more than an aggregate of $100,000 per year
(prorated for any partial years) for all services provided to the Partnership
(and/or all or any of its Subsidiaries) for all Properties, pertaining to call
center expenses and corporate level accounting, and personnel costs for the
preparation of the Partnership’s tax returns, audits and other accounting functions.  Such reimbursement shall be the only payment
to the Operator Partners or their Affiliates in providing such services.  Operator GP (or its Affiliate actually
providing services) shall handle all Partnership accounting functions using its
internal personnel, except for the year-end audits and tax returns for the
Partnership, which shall be prepared by the Partnership’s outside accountants,
and the Partnership shall pay directly such outside accountants’ fees and costs
(which shall not be included in calculating the $100,000.00 cap above) in
performing such work upon presentation of proper invoices and supporting
detail.

 

Section 8.4.            Contracts
With Affiliates.

 

(a)           The
Partnership (or its Subsidiaries, if any) expects to enter into agreements with
Operator GP or its Affiliates from time to time, including the Property
Management Agreement, Ancillary Services Agreement and Contribution
Agreement.  Investor GP shall have the
sole and exclusive right to direct, in good faith, the Partnership’s (or its Subsidiaries’)
actions with regard to administering and enforcing each such agreement and any
and all other contracts or arrangements between the Partnership or any
Subsidiary, on one hand, and Operator GP or any Affiliate of Operator GP, on
the other hand.  Except as otherwise
expressly provided herein, neither the Partnership nor any Subsidiary shall
enter into any other agreements, contracts or arrangements with Operator GP or
any Affiliate of Operator GP or modify, amend or terminate the Property Management
Agreement or any other contract, agreement or arrangement between the
Partnership or its Subsidiaries and Operator GP or any Affiliate of Operator GP
without the specific prior written approval of Investor GP.

 

(b)           The
Partnership (or its Subsidiaries, if any) may also enter into agreements with
Investor GP or its Affiliates from time to time, including the Contribution
Agreement.  Operator GP shall have the
sole and exclusive right to direct, in good faith, the Partnership’s (or its
Subsidiaries’) actions with regard to administering and enforcing each such
agreement and any and all other contracts or arrangements between the
Partnership or any Subsidiary, on one hand, and Investor GP or any Affiliate of
Investor GP, on the other hand.  Except
as otherwise expressly provided herein, neither the Partnership nor any
Subsidiary shall enter into any agreements, contracts or arrangements with
Investor GP or any Affiliate of Investor GP, or modify, amend or terminate any
contract, agreement or arrangement between the Partnership or its Subsidiaries
and Investor GP or any Affiliate of Investor GP without the specific prior
written approval of Operator GP.

 

40

 

Section 8.5.            Third
Party Contracts.

 

(a)           The
Partnership shall not enter into any agreement or other arrangement with any
third party requiring the continued ownership, control, employment, or other
involvement of Operator GP with the Partnership or the Properties or any
Affiliate of Operator GP without the specific prior written consent of Investor
GP.

 

(b)           The
Partnership shall not enter into any agreement or other arrangement with any
third party requiring the continued ownership, control, employment, or other
involvement of either General Partner with the Partnership or the Properties or
any Affiliate of a General Partner without the specific prior written consent
of the other General Partner.

 

Section 8.6.            Property
Management Agreement.  In connection with
each Property, the Partnership or its Subsidiaries shall enter into a property
management agreement (which is hereby approved by the General Partners) (the “Property
Management Agreement”) with YSI Management LLC, a Delaware limited
liability company, pursuant to which such property manager will provide
property management and leasing services to the Partnership and its
Subsidiaries.

 

Section 8.7.            Ancillary
Services Agreement.  In connection
with each Property, the Partnership or its Subsidiaries shall enter into a
services agreement (which is hereby approved by the General Partners) (the “Ancillary
Services Agreement”) with the TRS, pursuant to which the TRS will handle
the sale of materials and supplies to tenants, the use of Partnership vehicles
by tenants and other similar activities ancillary to the lease of space to a
tenant (collectively, the “Ancillary Activities”).

 

Section 8.8.            Employees
and Contractors.  The Partnership and
all Subsidiaries shall conduct their business exclusively through the property
manager, ancillary services provider and other independent contractors, and
shall not hire or retain any employees at any time.  Operator GP shall supervise and administer
all services rendered to the Partnership or a Subsidiary by independent contractors.  Except as otherwise provided in this
Agreement, if the Property Management Agreement or Ancillary Services Agreement
shall be terminated, Operator GP shall select qualified contractors approved by
Investor GP, in its sole discretion, which are unaffiliated with any Partner to
perform the management, leasing and other services required by the Partnership
or a Subsidiary pursuant to the Property Management Agreement or Ancillary
Services Agreement, as the case may be.

 

Section 8.9.            ERISA
Matters.

 

(a)           The
Partners shall use their reasonable commercial efforts to ensure that the
Partnership qualifies as a “real estate operating Partnership” as defined in 29
CFR § 2510.3-101(c).

 

(b)           No
Partner shall make any Capital Contributions with the “plan assets” of any “employee
benefit plan,” within the meaning of Section 3(3) of ERISA, or any “plan”
within the meaning of Section 4975 of the Code.

 

41

 

Section 8.10.          REIT
Matters.  Each Partner acknowledges
that it has been advised that a direct or indirect member (or other equity
holder) of each Partner has elected to be characterized as a “real estate
investment trust” (each, the “Applicable REIT” ) pursuant to Section 856
of the Code and agrees that the business and affairs of the Partnership shall
be managed with a view to minimizing (i) the amount of gross income
received by the Partnership (directly or indirectly) that would not constitute (A) “rents
from real property” as defined in Section 856 of the Code or (B) interest,
dividends, gain from sales or other types of income, in each case, described in
Section 856(c)(3) of the Code, (ii) the amount of any income
received by the Partnership (directly or indirectly) from any “prohibited
transactions” as defined in Section 857(b)(6)(B) of the Code
(together with the income described in clause (i) of this sentence, “Bad
REIT Income”) and (iii) the amount of assets held by the Partnership
(directly or indirectly) that are not “real estate assets” or other types of
assets described in  Section 856(c)(4)(A) of
the Code (“Bad REIT Assets”).  The
Partners agree that any Partner, to the extent applicable, shall be entitled to
exercise any vote, consent, election or other right under this Agreement with a
view to avoiding (or minimizing) the amount of Bad REIT Income or Bad REIT
Assets of the Partnership or any material risk that the Applicable REIT could
be disqualified as a real estate investment trust under the Code or could be
subject to any additional taxes under Section 857 of the Code or Section 4981
of the Code, in each case, without regard to whether conducting the business of
the Partnership in such manner would maximize either pre-tax or after-tax
profit of the Partnership to a Partner which is not a real estate investment
trust under the Code.  Without the prior
written consent of the General Partners, the Partnership shall not knowingly (i) enter
into any lease pursuant to which the determination of any rent to be received
(directly or indirectly) by the Partnership depends in whole or in part on the
income or profits of any person (other than amounts based upon a fixed
percentage or percentages of receipts or sales); (ii) enter into any lease
pursuant to which the Partnership shall receive (directly or indirectly) rents
attributable to personal property except for a lease pursuant to which the
personal property is leased in connection with the lease of real property and
the rent attributable to the personal property for any taxable year does not
exceed 15% of the total rent for such year; (iii) enter into any
arrangement pursuant to which the Partnership would receive (directly or
indirectly) any “impermissible tenant service income” within the meaning of Section 856(d)(7) of
the Code; (iv) undertake any sales or dispositions of property as a dealer
for federal income tax purposes which sales would be treated as “prohibited
transactions” pursuant to Section 857(b)(6)(B)(iii) of the Code; (v) otherwise
engage in any transaction which would, or likely would, result in the
Partnership receiving more than a de  minimis amount of Bad REIT
Income or owning more than a de  minimis amount of Bad REIT
Assets.  In structuring Partnership
transactions, both General Partners shall consider the use of taxable REIT
subsidiaries to own portions of the Properties to minimize the impact of Bad
REIT Income.

 

Section 8.11.          Insurance
Matters.  Operator GP shall cause the
Partnership to obtain and maintain insurance coverage for the Properties and
other assets of the Partnership and its Subsidiaries, in such amounts and with
such types of insurance coverage as set forth in the Annual Business Plan, or
as otherwise approved by Investor GP. 
Investor Partners acknowledge that Operator GP may be able to procure
such insurance coverage as part of a broader policy procured by an Affiliate of
the Operator Partners.  As long as the
coverages and other terms and conditions of such insurance are consistent with
the Annual Business Plan or otherwise approved by Investor GP, Investor
Partners agree that such insurance may be provided as part of such broader
policies.  Investor GP hereby approves
the coverage existing as of the date hereof and 

 

42

 

procured by an Affiliate of the Operator Partners as
satisfactory to meet Operator GP’s requirements under this Section 8.11,
during the term of such coverage, provided that such approval is only
with respect to the current coverage and is not intended to imply an approval
of any renewal or an approval of any insurance requirements in subsequent
Annual Business Plans.

 

Section 8.12.          YSI
Creditor Action; Loss of Assets.  In
the event of a claim or proceeding against the Partnership and/or either of the
Investor Partners by a bankruptcy trustee or other third party in, or in
connection with, a bankruptcy, insolvency or other creditors’ rights
action or proceeding in which YSI, YSI LP, Operator LP, Operator GP or any of
their Affiliates is a debtor, the result of which causes the Partnership to
lose any right, title or interest in all or any of the Properties, or any of
its other assets, then, in such case, any funds paid in exchange for such
Properties or assets shall be immediately paid to the Partnership (and the
Partners acknowledge that the same shall constitute Capital Proceeds).

 

ARTICLE IX

MEETINGS OF PARTNERS

 

Section 9.1.            Place
of Meetings.  All meetings of the
Partners shall be held at the principal office of the Partnership or, if the
General Partners agree otherwise, at such other place within or without the
State of Delaware as may be selected by the General Partners and set forth in
the respective notice or waivers of notice of such meeting.

 

Section 9.2.            Meetings
of Partners.  Meetings of the
Partners shall be held at least annually and may be called by Operator GP or
any other Partner.  Operator GP shall
hold meetings with the other Partners through the Authorized Representatives to
review and discuss the Partnership and Property performance from time to time
to time as reasonably requested by any Partner. 
So long as Operator GP is a General Partner of the Partnership, any
Authorized Representative designated by Operator GP shall serve as chairperson
of the meetings unless the General Partners determine otherwise.

 

Section 9.3.            Notice
of Meetings of Partners.  Written
notice stating the place, day and hour of the meeting shall be delivered not
later than ten (10) nor earlier than sixty (60) days before the date of
the meeting, either personally or by mail, by or at the direction of Operator
GP or other Partners, through the Authorized Representatives, to each Partner
of record.  Notice of any meeting may be
waived by the Partners.  If any Partner
attends a meeting and participates in any business conducted at such meeting,
such Partner will be deemed to have waived any objection such Partner may have
had regarding the notice of such meeting.

 

Section 9.4.            Actions
With or Without a Meeting and Telephone Meetings.  Notwithstanding any provision contained in
this Article IX, all actions of the General Partners provided for
herein shall be taken either at a meeting of the General Partners (and
evidenced by written minutes thereof countersigned by an Authorized
Representative of each General Partner) or by written consent without a
meeting.  Any meeting of the General
Partners may be held by means of a telephone conference.  Any action which may be taken by the General
Partners without a meeting shall be effective only if a written consent (or
consents) sets forth the action so taken, and is signed by the General Partners
(which may take the form of confirmation by e-mail, 

 

43

 

except for Major Decisions which may not be confirmed
by e-mail, but only by a formal written document, which document, however, may
be delivered by e-mail).

 

Section 9.5.            Authorized
Representatives of General Partners. 
Each General Partner shall designate and appoint two (2) individuals
to act as their authorized agents and representatives for purposes of this
Agreement (the “Authorized Representatives”).  Each approval, consent and decision of a
General Partner pursuant to this Agreement shall be made by at least one of its
Authorized Representatives.  The approval
of (i) each Annual Business Plan (including the Operating Budget), and (ii) each
Major Decision shall be approved by the Authorized Representatives of each
General Partner.  Investor GP or Operator
GP, as the case may be, may replace one or both of its Authorized
Representatives designated by such Partner by delivering written notice to the
Partnership and the other Partners of the removal of such Authorized
Representative and designating a new Authorized Representative. The Partners,
Partnership and the Authorized Representatives may rely absolutely on the vote,
consent, approval, disapproval or execution and delivery of any instrument by
an Authorized Representative as having been fully authorized and approved by
the General Partner so designating such individual as its Authorized
Representative.  The initial Authorized
Representatives are: (a) Operator GP - Dean Jernigan and Chris Marr; and (b) Investor
GP - Brian Pieracci and David Perisho.

 

ARTICLE X

BOOKS AND RECORDS

 

Section 10.1.          Books
and Records.  At all times during the
existence of the Partnership, Operator GP shall cause the Partnership to keep
at the Partnership’s principal office true and complete books of account,
prepared on a consistent basis from year to year, including:  (a) a current list of the full name and
business address of each Partner, (b) a copy of the Certificate of Limited
Partnership and all certificates of amendment thereto, (c) copies of the
Partnership’s federal, state and local income tax returns and reports for the
most recent five (5) years, (d) copies of this Agreement, all
amendments to this Agreement and any financial statements of the Partnership
for the five most recent years, and (e) all documents and information
required under the Act.  The books and
records of the Partnership shall be kept on the accrual method of accounting in
accordance with U.S. GAAP consistently applied; provided that the
Capital Accounts shall be maintained in accordance with Article XI.  Such books and records shall be available for
examination and copying (and the Partnership shall, at its expense, make such
copies and deliver them to any Partner who requests them at reasonable
intervals) at such office by any Partner and its duly authorized
representatives.  Such documents may also
be examined at the Partnership’s office by any potential permitted transferee
of a Partnership Interest or any portion thereof where a Partner authorizes
such proposed transferee to examine the same in a writing addressed to Operator
GP and copies of which are sent to all other Partners and such proposed
transferee has executed and delivered to the Partnership a confidentiality
agreement with provisions substantially identical to the provisions set forth
in Section 18.13.  Any
Partner, at its own expense, may cause an audit of the books and records of the
Partnership during regular business hours and shall furnish a written report
thereof to the other Partners.  Operator
GP shall cause the Partnership to furnish promptly to the Partners such other
information bearing on the financial condition and operations of the
Partnership or the status of the Properties as any Partner from time to time
may reasonably request.

 

44

 

Section 10.2.          Accounting
Basis for Tax Reporting Purposes; Fiscal Year.  The books and records of the Partnership
shall be kept on the accrual method of reporting on a basis consistent with
U.S. federal tax accounting rules.  The
Fiscal Year (“Fiscal Year”) of the Partnership shall end on December 31.  Any change to the Fiscal Year shall be agreed
upon by the General Partners.

 

Section 10.3.          Reports.

 

(a)           Not
later than thirty-five (35) days after the end of each Fiscal Year, Operator GP
shall cause the Partnership (or the Partnership’s accountants) to prepare and
send to each Partner an unaudited statement of operations, balance sheet,
statement of cash flows, statement of changes in Partners’ equity for that
Fiscal Year, schedule of capital expenditures and calculation of capital
expenditures per rentable square foot of each Property for that Fiscal
Year.    Not later than fifty (50) days
after the end of each Fiscal Year, Operator GP shall cause the Partnership (or
the Partnership’s accountants) to prepare and send to each Partner a statement
of operations, a balance sheet, a statement of cash flows and a statement of
changes in Partners’ equity (which financial statements shall be audited and
certified by the Partnership’s auditors).

 

(b)           In
no event later than the fifteenth (15th)
day of each calendar month, Operator GP shall cause the Partnership to prepare
and send to each Partner the reports identified in Schedule 10.3(b)(i),
along with electronic data downloads established by Investor GP to facilitate
the automatic and electronic transmission of financial data; provided, however,
that in the months that follow the end of each fiscal quarter (i.e. January,
April, July and October) the Operator GP shall cause the Partnership to
prepare and send to each Partner the operating statement, balance sheet, and
leasing data of the Partnership by the tenth (10th)
day of the calendar month.  The procedure
for data transmission as of the Effective Date is set forth in Schedule 10.3(b)(ii).  Investor GP may request reasonable
modifications to such procedures and parameters at any time and, provided such
modifications can be made without material cost to Operator GP, then Operator
GP shall promptly comply with any such requests.

 

(c)           Operator
GP shall certify that all such financial statements are accurate in all
material respects. Operator GP shall cause the Partnership to provide promptly
any additional information that any Partner may reasonably request so that it
may fully understand the financial performance of the Partnership and the
Properties.

 

(d)           Operator
GP shall report to the Partners, with each monthly report provided pursuant to Section 10.3(b),
both the outstanding principal amount and any accrued, but unpaid, interest
with respect to any indebtedness of the Partnership (by creditor), if any, all
calculated as of the last day of the previous calendar month.

 

Section 10.4.          Returns
and Other Elections.  Operator GP
(together with the Partnership’s accountants) shall cause the preparation and
timely filing of all tax returns required to be filed by the Partnership and
each Subsidiary pursuant to the Code and all other tax returns deemed necessary
and required in each jurisdiction in which the Partnership or any Subsidiary
does business.  The Partners agree that
the Partnership shall be taxed as a partnership.  Within seventy-five (75) days after the end
of each Fiscal Year, and in any event, at least fifteen (15) days prior to the
filing thereof, Operator GP shall cause (or cause the Partnership’s accountants

 

45

 

to cause) a draft of each federal, state and local tax
return of the Partnership and each of its Subsidiaries (collectively, the “Tax
Returns”) to be delivered to the Partners for their approval, together with
such other tax information as shall be reasonably necessary for the preparation
by each Partner of its federal, state and local income tax returns.  The Partners shall approve or disapprove of
the Tax Returns no later than ten (10) days after the date on which the
draft Tax Returns are delivered to the Partners by providing written notice to
Operator GP.  To be effective, any notice
which disapproves a draft tax return must contain specific line item objections
thereto in reasonable detail.  Any
Partner who fails to provide any such written notice within the ten-day period
shall be deemed to have approved the Tax Returns as submitted.  Operator GP shall have the right to cause the
Partnership to withhold and pay to any applicable governmental tax collecting
authority or agency any federal or state income or other tax required or
permitted to be withheld by the Partnership pursuant to any Governmental
Requirements, and shall promptly request an appropriate extension if the
Partners do not approve (or are deemed to have approved) a draft tax return
prior to its due date.  Any withheld
amount shall be deemed to have been distributed or paid to the Partner with
respect to whom such amounts have been withheld.  Operator GP shall provide to each Partner,
upon request, information with respect to each Property in such a manner that
each Partner requesting such information would be able to calculate the Profits
and Losses of the Partnership on a Property by Property basis.

 

Section 10.5.          Tax
Matters Partner.  Operator GP shall
be the “tax matters partner” of the Partnership pursuant to Section 6231(a)(7) of
the Code.  Operator GP shall take such
action as may be necessary to cause each Partner to become a “notice partner”
within the meaning of Section 6231(a)(8) of the Code.  Operator GP shall inform each Partner of all
significant matters that it receives written notice of (or of which it otherwise
becomes aware) in its capacity as “tax matters partner” by giving notice
thereof within five (5) Business Days after Operator GP received such
written notice (or becomes aware) and, within that time, shall forward to each
Partner copies of all significant written communications it may receive in that
capacity.  The tax matters partner shall
keep the Partners fully apprised of any action required to be taken or which
may be taken by the tax matters partner for the Partnership and shall not take
any such action in contravention of Section 8.10.  The expenses, if any, that Operator GP incurs
in fulfilling its covenants pursuant to this Section 10.5 shall be
the expenses of the Partnership, subject, however, to the provisions of Section 8.3.

 

Section 10.6.          Accountants.  The General Partners have agreed that the
Partnership shall retain KPMG, LLP (or such other firm of independent certified
public accountants as the General Partners shall designate) to perform the
financial and tax reporting functions specified in this Agreement, including
the preparation of Tax Returns.  Operator
GP shall cause the Partnership’s accountants to cooperate with each Partner’s
accountants, including answering queries and providing copies of invoices,
contracts and other Partnership-related materials.  Notwithstanding anything to the contrary
hereunder, Operator GP shall not be in breach of any of its obligations under Section 10.3(a) or
Section 10.4 if Operator GP timely delivers to the Partnership’s
accountants all information required or reasonably requested by the Partnership’s
accountants to comply with the Partnership’s obligations hereunder and uses all
commercially reasonable efforts to cause the Partnership’s accountants to
produce the reports required by Section 10.3(a) and prepare
and timely file the Tax Returns required by Section 10.4.

 

46

 

Section 10.7.          Environmental
Investigations.  Operator GP shall
promptly notify Investor GP if Operator GP receives written notice or otherwise
becomes aware of any discharge of contaminants at any Property or any other
circumstances or condition which indicates that any Property is not in
compliance with all applicable environmental laws and regulations.  If any General Partner reasonably determines,
on the basis of such notice, that it is appropriate to undertake investigations
regarding the compliance of any Property and the activities at the Property
with applicable environmental laws, or the existence of and potential for
contamination, such Partner may require that the Partnership conduct such
investigation (and the Operating Budget shall be deemed to be amended to
include the reasonable costs thereof). 
The results of any such investigation shall be provided to the General
Partners promptly after receipt by the Partnership or a Subsidiary.

 

ARTICLE XI

ALLOCATIONS AND TAX MATTERS

 

Section 11.1.          Capital
Accounts.  A separate capital account
(each a “Capital Account”) shall be maintained for each Limited Partner
in accordance with Section 704(b) of the Code and the following
principles:

 

(a)           To
each Partner’s Capital Account there shall be credited the amount of cash and
the Gross Asset Value of any asset transfer by the Partner to the Partnership
as a Capital Contribution, such Partner’s allocated share of Profits, any items
in the nature of income or gain which are specially allocated pursuant to this
Agreement and which would otherwise be included in the computation of Profits
and Losses, and the amount of any Partnership liabilities assumed by such
Partner or which are secured by any property of the Partnership distributed to
such Partner.

 

(b)           From
each Partner’s Capital Account there shall be debited the amount of cash and
the Gross Asset Value of any property of the Partnership distributed to such
Partner pursuant to any provision of this Agreement, such Partner’s allocated
share of Losses, any items in the nature of expenses or losses which are
specially allocated pursuant to this Agreement and which would otherwise be
included in the computation of Profits and Losses, and the amount of any
liabilities of such Partner assumed by the Partnership or which are secured by
any property contributed by such Partner to the Partnership.

 

(c)           In
determining the amount of any liability for purposes of this Section 11.1,
there shall be taken into account Code Section 752(c) and any other
applicable provisions of the Code and Regulations.

 

(d)           The
Capital Accounts of the Partners shall be adjusted to reflect a revaluation of
Partnership property made pursuant to the definition of Gross Asset Value;
provided that any adjustments hereunder shall be made in accordance with and to
the extent provided in Treasury Regulation Section 1.704-1(b)(2)(iv)(e),
(f), and (g).

 

47

 

(e)           Upon
a transfer of any Partnership Interest or portion thereof 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 or portion thereof.

 

(f)            The
foregoing provisions of this Section 11.1 and the other provisions
of this Agreement relating to the maintenance of Capital Accounts are intended
to comply with Regulation Section 1.704-1(b), and shall be interpreted and
applied in a manner consistent with such Regulations.  The General Partners shall (i) make any
adjustments that are necessary or appropriate to maintain equality between the
aggregate Capital Accounts of the Partners and the amount of capital reflected
on the Partnership’s balance sheet, as computed for book purposes, in
accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(q), and (ii) make
any appropriate modifications in the event unanticipated events might otherwise
cause this Agreement not to comply with Treasury Regulation Section 1.704-1(b).

 

Section 11.2.          Allocation of Operating Profits and
Operating Losses.  After giving
effect to the special allocations set forth in Section 11.4,
Operating Profits and Operating Losses for any Fiscal Year shall be allocated
to the Partners in the following manner.

 

(a)           Operating Profits shall be allocated to the Partners as
follows:

 

(i)            First, to the
Partners to the extent of, and in proportion to, all distributions previously
made to the Partners pursuant to Section 5.2(b) through Section 5.2(j) and
not yet matched to an allocation of Operating Profit pursuant to this Section 11.2(a.)(i);
and

 

(ii)           Thereafter, 50% to
Investor LP and 50% to Operator LP.

 

(b)           Operating Losses shall be allocated 50% to Investor LP and
50% to Operator LP.

 

Section 11.3.          Allocation
of Capital Transaction Profits and Capital Transaction Losses.  After
giving effect to the special allocations set forth in Section 11.4,
Capital Transaction Profits and Capital Losses shall be allocated to the Partners
such that each Partner’s Capital Account equals (to the fullest extent
possible) that Partner’s Target Account.

 

Section 11.4.          Special
Regulatory Allocations.  The
allocations set forth in Section 11.2 and 11.3 are intended to allocate
Profits and Losses to the Partners in compliance with the requirements of
section 704(b) of the Code and the Regulations promulgated
thereunder.  If the General Partners
reasonably determines that the allocation of Profits or Losses for any period
pursuant to the provisions of Section 11.2 and 11.3 does not
satisfy either the “substantial economic effect safe harbor” test or “partners
interest in a partnership” test of Section 704(b) of the Code or the
Regulations promulgated thereunder (including the minimum gain and partner
minimum gain chargeback requirements of Section 1.704-2 of the Treasury
Regulations and the qualified income offset requirement of Section 1.704-1(b)(2)(ii)(d) of
the Treasury Regulations), then notwithstanding anything to the contrary
contained in this Agreement, items otherwise included in the computation of
Profits and Losses shall be specially allocated in such manner as the General
Partners shall reasonably determine to be required by Section 704(b) of
the Code and the Treasury Regulations promulgated thereunder; provided,
however, that, if the General Partners exercise its authority to make such
allocations, then, notwithstanding the other provisions of this 

 

48

 

Article XI, but subject to Section 704(b) of the Code
and the Regulations promulgated thereunder, the General Partners shall
reallocate other items of income, gain, deduction, loss, or other items
otherwise included in the computation of Profit or Loss among the Partners so
as to cause the Partners’ respective separate Capital Accounts to have balances
(or as close thereto as possible) they would have if Profit and Loss and all
other items of income, gain, deduction or loss were allocated without reference
to the allocations permitted by this Section 11.4.

 

Section 11.5.          Tax Allocations; Code Section 704(c). 
For U.S. federal, state and local income tax purposes, items of taxable
income, deduction, gain, loss or credit shall be allocated among the Partners
in the same manner as their corresponding book items were allocated pursuant to
Partnership income, gain, loss, deduction or expense (or any item thereof) for
each Fiscal Year except as otherwise required by §704(c) of the Code and
the Regulations promulgated thereunder (which generally require that in the
event that the value of any item of Partnership property as reflected on its
books differs from its adjusted tax basis upon contribution or revaluation,
that tax allocations of income, gain, loss and deduction relating thereto be
shared among the Partners in a manner that takes into account the variation
between such book value and adjusted tax basis).  Any elections or other decisions relating to
§704(c) allocations shall be made by mutual agreement of the General
Partners provided, however, that the Partnership shall use the “traditional
method” as described in the Regulations promulgated under Section 704(c) of
the Code in applying Section 704(c) to the tax allocations
attributable to the Operator Initial Contribution.

 

Section 11.6.          Reporting.  The Partners shall be bound by the provisions
of this Article XI in reporting their shares of Partnership income and
loss for income tax purposes.

 

Section 11.7.          Tax
Elections.  The following elections
shall be made on the appropriate returns of the Partnership:

 

(a)           to
adopt the calendar year as the Fiscal Year;

 

(b)           if
there is a distribution of Partnership property as described in Section 734
of the Code or if there is a transfer of a Partnership Interest as described in
Section 743 of the Code (including in the case of the transfer of
Partnership Interests from Operator LP to Investor LP occurring concurrently
herewith, as more fully described in the recitals to this Agreement), upon
written request of any Limited Partner, to elect, pursuant to Section 754
of the Code, to adjust the basis of Partnership properties;

 

(c)           to
amortize the organizational expenses of the Partnership ratably over a period
of 15 years or as otherwise permitted by Section 709(b) of the Code;
and

 

(d)           if necessary
to cause Sections 6221 through 6234 of the Code to apply to the Partnership,
the election pursuant to Section 6231(a)(1)(B)(ii) of the Code to
have Section 6231(a)(1)(B)(i) of the Code not to apply.

 

No election shall be made by
the Partnership or any Limited Partner to be excluded from the application of
the provisions of subchapter K of chapter 1 of subtitle A of the Code or any
similar provisions of applicable state laws.

 

49

 

Section 11.8.          Allocations
on Transfer of Interests.  All items
of income, gain, loss, deduction, and credit allocable to any interest in the
Partnership that may have been transferred shall be allocated between the
transferor and the transferee as based upon that portion of the calendar year
during which each was recognized as owning such interest in accordance with a
method permissible under Section 706 of the Code and the Treasury
Regulations thereunder and elected by mutual agreement of the General Partners.

 

Section 11.9.          No
Deficit Restoration by Partners. 
Notwithstanding anything to the contrary in this Agreement, no Partner
shall be required to contribute capital to the Partnership to restore a deficit
balance in its Capital Account upon liquidation or otherwise.

 

Section 11.10.        Withholding.  Each
General Partner is authorized and directed to withhold from payments,
distributions or allocations to any other Partner and to pay over to any
Governmental Authority any amount required to be withheld pursuant to the Code
or any other Governmental Requirements, including Governmental Requirements
relating to money laundering and terrorism, with respect to any payment,
distribution or allocation to the Partnership or such other Partner and shall
allocate any such amounts to such other Partner with respect to which such
amount was withheld.  All amounts so
withheld shall be treated as amounts paid or distributed to such other Partner
and shall reduce the amount otherwise payable or distributable to such other
Partner for all purposes of this Agreement.

 

ARTICLE XII

COMPLIANCE WITH LAW

 

Section 12.1.          Warranties
and Representations— Operator Partners. 
As a material inducement to Investor Partners’ execution and delivery of
this Agreement, Operator Partners represent, warrant, covenant and agree to and
with the Partnership and Investor Partners that:

 

(a)           Each
Operator Partner and YSI (x) are in compliance with and shall comply with
all OFAC Laws and Regulations, and (y) have not knowingly done, and shall
not knowingly do, business or engage in any financial transaction with a
Prohibited Person (it being acknowledged that any breach of this clause (y) shall
constitute a material breach of this Agreement by the Operator Partners that is
subject to cure within ninety (90) days).

 

(b)           Neither
Operator Partner nor YSI nor any of their respective (i) officers, (ii) directors
or trustees, or (iii) managers, any of which control (as determined under
OFAC Laws and Regulations) the operations of either Operator Partner, YSI,  the Partnership, or a Property, is now or
shall at any time be a Prohibited Person or a Person with whom a Financial
Institution or any other Person of the United States of America or any of the
several states is prohibited from transacting business of the type contemplated
by this Agreement under OFAC Laws and Regulations (it being acknowledged that
any breach of this Section 12.1(b) shall constitute a material
breach of this Agreement by the Operator Partners that is subject to cure
within ninety (90) days).

 

(c)           Each
Operator Partner and YSI (a) are in compliance with the Patriot Act, the
Bank Secrecy Act, any other law of similar import applicable to Financial
Institutions, and any

 

50

 

regulations promulgated under any of them, and (b) meet
the minimum requirements for anti-money laundering programs established by any
other applicable Governmental Requirements.

 

(d)           Each
Operator Partner and YSI have taken and shall continue to take all reasonable
steps to implement all policies and procedures that are reasonably necessary to
ensure that it is in compliance with all Governmental Requirements applicable
to the Operator Partners or YSI, including those Governmental Requirements
relating to the prevention of money laundering and anti-terrorism.

 

(e)           As
of the Effective Date and immediately prior to the execution of this Agreement:

 

(i)            There are no outstanding options,
warrants, rights, calls, commitments, conversion rights, rights of exchange,
rights of redemption, subscriptions, claims, agreements, obligations,
convertible or exchangeable securities or other plans or commitments,
contingent or otherwise, relating to the Partnership Interests or other equity
interests of the Partnership.

 

(ii)           No Partnership Interests or other
equity interests in the Partnership have been issued except to the Partners
pursuant to the Prior Agreement, as amended by this Agreement.

 

(iii)          Except as expressly described in this
Agreement, the Partnership is not party to or bound by any agreement or
contract, has not conducted any business and has no liabilities or obligations
of any kind whatsoever.

 

Section 12.2.          Warranties
and Representations — Investor Partners. 
As a material inducement to Operator Partners’ execution and delivery of
this Agreement, Investor Partners represent, warrant, covenant and agree to and
with Operator Partners and the Partnership as follows:

 

(a)           Each
Investor Partner (x) is in compliance with and shall comply with all OFAC
Laws and Regulations, and (y) has not knowingly done, and shall not
knowingly do, business or engage in any financial transaction with a Prohibited
Person (it being acknowledged that any breach of this clause (y) shall
constitute a material breach of this Agreement by Investor Partners that is
subject to cure within ninety (90)
days).

 

(b)           Neither
Investor Partner nor any of their respective (i) officers, (ii) directors
or trustees, or (iii) managers, any of which control (as determined under
OFAC Laws and Regulations) the operations of either Investor Partner, the
Partnership or a Property is now or shall at any time be a Prohibited Person or
a Person with whom a Financial Institution or any other Person of the United
States of America or any of the several states is prohibited from transacting
business of the type contemplated by this Agreement under OFAC Laws and
Regulations (it being acknowledged that any breach of this Section 12.2(b) shall
constitute a material breach of this Agreement by Investor that is subject to
cure within ninety (90) days).

 

(c)           Each
Investor Partner (or their controlling principals or investment advisors) has
established an anti-money laundering and customer identification program
reasonably designed to (x) prevent Investor Partners from being used to
launder money or finance terrorist activities, 

 

51

 

(y) achieve compliance with the Patriot Act, the
Bank Secrecy Act, any other law of similar import applicable to Financial
Institutions, and any regulations promulgated under any of them, and (z) meet
the minimum requirements for anti-money laundering programs established by any
other applicable Governmental Requirements.

 

(d)           Each
Investor Partner has taken and shall continue to take all reasonable steps to
implement all policies and procedures that are reasonably necessary to ensure
that such Investor Partner is in compliance with all Governmental Requirements
applicable to such Investor Partner, including those Governmental Requirements
relating to the prevention of money laundering and anti-terrorism.

 

Section 12.3.          Transfers
and Compliance.  If, upon or after
any Transfer, the Partner to which the Transfer relates is, as a result of such
Transfer, not ultimately controlled by Heitman or YSI, as a condition precedent to such Transfer, the Partner to which
the Transfer relates shall execute and deliver a Compliance Certificate.  No such Transfer shall be effective unless
and until a Compliance Certificate is so delivered, and any such purported
Transfer where a Compliance Certificate is required but is not so delivered
shall be deemed an Unpermitted Transfer hereunder.  In
connection with any such Transfer or Encumbrance of any direct or
indirect ownership interest in any Partner (excluding any Transfer or
Encumbrance by or in a Passive Interest Holder), the Partner to which the Transfer or Encumbrance relates shall
make such reasonable investigations to confirm that any such transferee and
each owner of a direct or indirect interest in such transferee (other than
Passive Interest Holders) is not (i) a Prohibited Person, (ii) included
on any Government Lists, (iii) a Person who has been determined by
competent authority to be subject to the prohibitions contained in any of the
OFAC Laws and Regulations, (iv) to such transferring Partner’s knowledge,
a Person who has been previously indicted for or convicted of any felony for a
crime of moral turpitude or dishonesty or for any Terrorism Law Offenses, and (v) if
such Person is a Financial Institution, whether the transferee complies with
the requirements of a Financial Institution under the Patriot Act, the Bank
Secrecy Act, any other law of similar import applicable to Financial
Institutions, and any regulations promulgated under any of them.

 

Section 12.4.          Compliance.

 

(a)           Operator
GP shall use its good faith and commercially reasonable efforts to cause the
Partnership, each of the Subsidiaries and, as it relates to the Partnership or
its Subsidiaries, each Property Manager to conduct their respective businesses
in accordance with OFAC Laws and Regulations and all applicable Governmental
Requirements, including those relating to money laundering and terrorism.  Operator GP shall not knowingly allow the
Partnership or its Subsidiaries to do business or engage in a financial
transaction with any Prohibited Person (it being acknowledged that any breach
of the previous sentence shall constitute a material breach of this Agreement
by Operator GP that is subject to cure within ninety (90) days);

 

(b)           Investor
GP shall have the right to audit the Partnership’s and its Subsidiaries’ and,
as it relates to the Partnership or its Subsidiaries, each Property Manager’s
compliance with the OFAC Laws and Regulations and all applicable Governmental
Requirements having jurisdiction over the Partnership and the Subsidiaries and
their respective properties and assets, including those relating to money
laundering and terrorism.  In the event
that the Partnership or 

 

52

 

any Property Manager fails to comply with the OFAC
Laws and Regulations or any such Governmental Requirements, then Investor GP
may, at its option and after notice to Operator GP, cause the Partnership to
comply therewith and any and all reasonable costs and expenses incurred by
Investor Partners in connection therewith shall be deemed Additional Capital
Contributions by Investor LP to the Partnership and shall be credited to
Investor LP’s Capital Account as of the date any such costs or expenses were so
incurred.

 

(c)           In
connection with any purchase of any property or the sale, other transfer or
lease of all or any portion of the properties or assets of the Partnership or
its Subsidiaries, the Partnership shall comply, in all material respects, with
all Governmental Requirements, including the OFAC Laws and Regulations.

 

ARTICLE XIII

TRANSFER OF PARTNERSHIP INTERESTS

 

Section 13.1.          Restrictions
on Transfer of Interest of and in a Partner.

 

(a)           Except
as otherwise set forth in this Article XIII, unless the General
Partners consent (which consent shall be in the sole discretion of each General
Partner), a Partner shall not (i) withdraw or retire from the Partnership,
(ii) substitute any Person in its stead or make an assignment, transfer,
exchange, or other disposition, voluntarily, involuntarily or by operation of
law (collectively, a “Transfer”) of all or any portion of or any
interest (direct or indirect) in its Partnership Interest, or (iii) pledge,
mortgage, hypothecate, grant a security interest in, or otherwise encumber (an “Encumbrance”)
all or any portion of or any interest (direct or indirect) in its Partnership
Interest, including a transfer, assignment, hypothecation or pledge of its
Financial Rights, including any right to receive distributions from the Partnership,
or Management Rights.  Any attempted
Transfer or Encumbrance of all or any portion of a Partnership Interest, other
than strictly in accordance with the applicable provisions of this Article XIII,
shall be void ab initio and of no force or effect
whatsoever.  In addition, any Transfer or
Encumbrance of a direct or indirect ownership or beneficial interest in a
Partner shall be included within the meaning of, and shall be deemed to be a
Transfer or Encumbrance by such Partner and prohibited by the first sentence of
this Section 13.1(a).

 

(b)           Notwithstanding
anything to the contrary contained herein, but subject always to Section 12.3,
the following Transfers or Encumbrances shall be permitted without any consent
of the General Partners being required:

 

(i)            The Transfer or Encumbrance of
direct or indirect interests in either Investor Partner, provided that: (A) Heitman
remains at all times in control, directly or indirectly of Investor Partners,
except to the extent that Heitman’s control is eliminated by (1) the
involuntary removal of Heitman (or any successor Affiliate of Heitman) as
manager/managing member of Heitman American Real Estate Trust, LLC or (2) the
involuntary removal of Heitman American Real Estate Trust, LLC (or any
successor Affiliate of Heitman) as the general partner of Heitman American Real
Estate Trust, L.P., in either of which cases such control requirement of this
clause (A) shall be deemed eliminated; and (B) Investor GP delivers
prompt written 

 

53

 

notice to Operator
GP of any such Transfer or Encumbrance (excluding any such Transfer or
Encumbrance by a Passive Interest Holder in an Investor Partner), together with
any supporting documentation or information reasonably requested by Operator
GP; and

 

(ii)           The Transfer or Encumbrance of direct
or indirect interests in either Operator Partner, provided that (A) YSI
remains at all times the direct or indirect majority owner of, and in direct or
indirect control of, YSI LP, (B) YSI LP remains at all times the direct or
indirect sole owner of, and in direct or indirect control of, such Operator
Partner, (C) no YSI Change in Control occurs as a result of such Transfer
or Encumbrance (or could occur if the holder of the Encumbrance exercises its
rights with respect thereto to take over the collateral securing such
Encumbrance), and (D) Operator GP delivers to Investor GP prompt written
notice of such Transfer (excluding any such Transfer or Encumbrance by a
Passive Interest Holder in an Operator Partner), together with any supporting
documentation or information reasonably requested by Investor GP.

 

(c)           Notwithstanding
anything to the contrary contained herein, unless the General Partners consent
(which consent shall be in the sole discretion of each General Partner), no
Partner may Transfer or grant an Encumbrance on all or any portion of its
Partnership Interest if such Transfer or Encumbrance would:

 

(i)            cause the Partnership or any
Subsidiary to lose its status as a partnership for U.S. federal income tax
purposes;

 

(ii)           violate any federal securities laws
or any applicable state securities laws (including suitability standards);

 

(iii)          cause the Partnership to qualify as a “publicly
traded partnership,” as that term is defined in the Code; or

 

(iv)          cause the status of either Applicable
REIT as a “real estate investment trust” pursuant to Section 856 of the
Code to be materially adversely affected.

 

(d)           Intentionally
Omitted.

 

(e)           Notwithstanding
anything to the contrary contained in this Agreement, in the event of an
Unpermitted Transfer to which the General Partner does not consent, then any
such Unpermitted Transfer shall be void ab initio and
of no force and effect whatsoever, subject, however to the provisions of
subsection (f) below to the contrary.

 

(f)            If
the Unpermitted Transfer is the result of a YSI Change in Control, such
Unpermitted Transfer shall not be void but, in lieu thereof, for a period of
twelve (12) months after Investor GP has received written notice of such YSI
Change in Control, Investor GP may exercise any or all of the Removal Remedies.

 

Section 13.2.          Intentionally
Omitted.

 

54

 

Section 13.3.          Marketing
Right.

 

(a)           In
the event of (i) the existence of a Major Dispute after the end of the
Lockout Period, or after the expiration of the Lockout Period for any other
reason (or no reason), or (ii) the occurrence of an Event of Default by a
Partner under this Agreement during or after the end of the Lockout Period,
including pursuant to this Section 13.3 or pursuant to Section 13.4
or 13.5 regarding a Partner’s failure to consummate the transaction
described herein or therein, then (A) in the case of an occurrence
described in clause (i) above, any General Partner may exercise the rights
to initiate the provisions of this Section 13.3 (the “Marketing
Right”) to market itself, or require Operator GP to market, all of the
Properties for sale, and (B) in the case of an occurrence described in
clause (ii) above, if the Defaulting Partner is an Operator Partner then
only the Investor GP may exercise the Marketing Right, and if the Defaulting
Partner is an Investor Partner then only the Operator GP may exercise the
Marketing Right.  A General Partner may
exercise its Marketing Right by sending the other General Partner a written
notice (the “Marketing Notice”) which states that the first General
Partner (the “Triggering Partner”) is exercising the Marketing
Right.  The other General Partner shall
be referred to as the “Non-Triggering Partner”.  If the Triggering Partner is Investor GP,
then (1) the Marketing Notice shall specify whether Investor GP will be
marketing the Properties itself or requiring the Operator GP to market the
Properties; (2) the marketing efforts by Investor GP may begin promptly
after delivery of the Marketing Notice (and if Operator GP is to conduct such
marketing, then such marketing efforts shall begin promptly after delivery of
the Marketing Notice), and (3) any time prior to the time that Investor GP
(or Operator GP), on behalf of the Partnership, enters into a letter of intent
or other written offer or agreement with a prospective purchaser that contains
at least the purchase price, contingencies, diligence and title review periods
and requirements, if any, and the closing date of the proposed purchase of the
Properties (a “Written Purchase Offer”), Operator Partners may, by
written notice from Operator GP to Investor GP (the “Redemption Notice”),
exercise the right (the “Redemption Right”) to cause the Partnership to
redeem the Investor Partners’ Partnership Interests in accordance with the
provisions of subsection (g) of this Section 13.3.  If the Triggering Partner is Operator GP,
then: (A) within ninety (90) days after the delivery of the Marketing
Notice, the General Partners shall begin the marketing of the Properties by
jointly procuring, on or before the end of such 90-day period, from an
independent broker reasonably acceptable to the General Partners, a statement
setting forth an estimated range of the sale price for the Properties, sold
together as an entire portfolio, and (B) within thirty (30) days
after receipt of such independent broker statement (the “Response Period”),
the Investor Partners may, by notice from the Investor GP to the Operator GP
(the “Marketing Right Offer”), offer to acquire the Properties at an
all-cash price determined by the Investor GP, in its sole discretion, which
price may be outside the range set forth in the independent broker statement
(the “Marketing Right Offer Price”).  If the General Partners cannot agree upon an
independent broker to provide a statement setting forth an estimated range of
the sale price for the Properties, Investor GP shall designate such broker.  Any Marketing Right Offer shall be reviewed
by Operator GP in accordance with Section 13.3(b) below.

 

(b)           Within
thirty (30) days after the Operator GP’s receipt of a Marketing Right Offer,
Operator GP, by written notice to Investor GP, may either (i) accept
Investor GP’s Marketing Right Offer, in which case the Partnership shall sell
and transfer, or cause to be sold and transferred, the Properties to Investor
Partners (or an Entity or Entities designated by Investor GP) at the Marketing
Right Offer Price in accordance with Section 13.3(h) and (j) or

 

55

 

(ii) reject the Investor Partners’ Marketing
Right Offer.  If Operator GP fails to
deliver either such notice within such time, then it shall be deemed to have
elected to accept the Marketing Right Offer in accordance with clause (i) above.

 

(c)           If (i) Operator
GP rejects Investor GP’s Marketing Right Offer or (ii) Investor GP has not
made a Marketing Right Offer prior to the expiration of the Response Period,
then Operator GP may offer the Properties for sale to bona fide third parties
on behalf of the Partnership on such terms and conditions as Operator GP
determines to be reasonable for a period of up to one hundred and eighty (180)
days after the expiration of the Response Period (the “Sale Period”).

 

(d)           If
Operator GP offers the Properties for sale pursuant to Section 13.3(c) and,
prior to the end of the Sale Period, (i) obtains a bona fide offer to
purchase the Properties from a third-party purchaser not affiliated with
Operator GP, pursuant to a Written Purchase Offer, (ii) such offer is at a
price above the Market Right Offer Price and (iii) such offer is from the
bidder presenting the highest offer, then, in such case, Operator GP shall have
an additional period of ninety (90) days after the Sale Period in which to
cause the Partnership to consummate such sale of the Properties on the terms
set forth in such Written Purchase Offer and such other terms and conditions
determined to be customary and reasonable by the General Partners.  If, on the other hand, the third-party offer
price, as set forth in such Written Purchase Offer for the Properties is less
than or equal to the Marketing Right Offer Price, Investor Partners may, at
their option, by written notice from Investor GP to Operator GP, elect either (A) to
purchase the Properties at such third-party offer price, as set forth in such
Written Purchase Offer and such other terms and conditions determined by the
General Partners to be customary and reasonable, or (B) consent to the
sale by the Partnership of the Properties at such third-party offer price and
on such other terms and conditions determined to be customary and reasonable by
the General Partners, such election to be made within fifteen (15) Business
Days after Operator GP notifies Investor GP of the price and other terms and
conditions of such third party offer (and supplies to Investor GP such Written
Purchase Offer and any other related information or documentation reasonably
requested by Investor GP).  If Investor
Partners fail to make an election within such 15-Business Day period, they will
be deemed to have elected to consent to the sale by the Partnership in
accordance with clause (B) above.

 

(e)           If,
within the Sale Period, Operator GP is unable to obtain a bona fide offer from
a third party not affiliated with the Operator GP to purchase the Properties,
or if after having obtained such an offer, such sale is not consummated within
ninety (90) days after the expiration of the Sale Period, then the Marketing
Right shall lapse, and a Triggering Partner must exercise the Marketing Right
again, if desired and then permitted to do so, by sending the Marketing Right
Notice pursuant to Section 13.3(a).

 

(f)            Except
as otherwise provided in Section 13.3(k), in the event of an actual
sale of the Properties (and not a redemption or sale of Partnership Interests)
pursuant to this Section 13.3, whether to the Non-Triggering
Partner or otherwise, the sale will be treated as a sale by the Partnership,
and the Capital Proceeds resulting therefrom shall be distributed accordingly.

 

56

 

(g)           If
Operator GP exercises the Redemption Right pursuant to subsection (a) above,
Operator Partners, at Operator Partners’ sole cost and expense, shall cause the
Partnership to redeem the Investor Partners Partnership Interests in exchange
for a payment to Investor LP of an amount (the “Redemption Price”), that
when added to all prior distributions to Investor LP will result in Investor LP
having received a return of all of its Unreturned Capital Contributions, plus
the Investor 12% Return.  Such redemption
(including the payment of the Redemption Price) shall be completed by Operator
Partners no later than thirty (30) days after the delivery of the applicable
Redemption Notice.

 

(h)           If
either (i) Investor GP makes a Marketing Right Offer that is accepted by
Operator GP, or (ii) Investor GP elects to purchase the Properties at the
third-party offer price after it is determined such price is less than or equal
to the Marketing Right Offer Price (or the alternative structure to purchase
the interest in the Properties is utilized, as described in subsection (k) below),
then, in either such case, Investor Partners shall be irrevocably obligated to
purchase, and the Partnership shall be irrevocably obligated to sell, the
Properties at the Marketing Right Offer Price or third party price, as the case
may be (subject to the provisions of subsection (k)), within forty-five
(45) days after Operator GP’s acceptance or deemed acceptance of the Marketing
Right Offer or Investor GP’s election to purchase the Properties, as the case
may be.  Investor Partners, within five (5) Business
Days after Operator GP accepts the Marketing Right Offer or Investor GP elects
to purchase the Properties, shall, using Investor Partners’ own funds, deposit
into escrow, with an escrow agent selected by Investor GP, but not an Affiliate
of Investor GP, and reasonably acceptable to Operator GP, an earnest money
deposit in an amount equal to two percent (2%) of the Marketing Right Offer
Price, or third party offer price, whichever is applicable.  If Operator GP exercises the Redemption Right
pursuant to subsection (a) above, then Operator Partners shall be
irrevocably obligated to cause the Partnership to redeem Investor Partners’
Partnership Interest and Investor Partners shall be irrevocably obligated to
transfer their Partnership Interests to the Partnership, all within thirty (30)
days after Operator GP exercises the Redemption Right.  Operator Partners, within five (5) Business
Days after Operator GP exercises the Redemption Right, shall, using Operator
Partners’ own funds, deposit into escrow, with an escrow agent selected by
Operator GP, but not an Affiliate of Operator GP, and reasonably acceptable to
Investor GP, an earnest money deposit in an amount equal to two percent (2%) of
the Redemption Price.

 

(i)            During
the period that the Properties are being marketed, the Triggering Partner or
Operator GP, as the case may be, agrees to exercise reasonable efforts to keep
the Non-Triggering Partner informed of the status of the marketing process, and
each party agrees to cooperate reasonably with the other in bringing about a
sale of the Properties as provided herein (to the extent that the Properties
are required to be marketed).  All costs
associated with the marketing and sale of Properties pursuant to this Section 13.3
shall be an expense of the Partnership. 
The Triggering Partner, or Operator GP if so directed, shall, in a
commercially reasonable and reasonably effective manner, market all of the
Properties in a single portfolio sale, and shall, in all cases, secure the
services of a full-service, third-party national brokerage company (or broker
specializing in self-storage, with national experience) to assist the Triggering
Partner, and/or Operator GP, as the case may be, with the marketing of the
Properties.

 

(j)            Any
purchase or redemption price payable by Investor Partners or Operator Partners
(or their designated Entity or Entities), or the Partnership, under this Section 13.3
shall 

 

57

 

be payable in cash, by wire transfer of immediately
available funds, at the closing of the applicable purchase or redemption.  At any closing of the sale of the Properties
or other interests in the Properties pursuant to this Section 13.3,
the Partners shall (i) execute and deliver, and shall cause the
Partnership to execute and deliver, any and all deeds, assignments, and other
closing documents as may be reasonably necessary to consummate any such sale
and (ii) shall prorate revenue and expenses in a manner consistent with
custom and practice for typical sales of such properties (and in the event of
any dispute between the Partners over the proper method of, or custom and
practice for, such prorations, then such prorations shall be computed using
accrual method accounting).  Any transfer
or similar taxes and other expenses related to the sale of the Properties (or
other interests) that are not paid by the purchaser (pursuant to contract or
local custom) shall be an expense of the Partnership.  The Partners shall provide each other with
such evidence of their respective authority to consummate the transactions
described in this Section 13.3 and such tax lien waivers and
similar instruments as the other Partners may reasonably request.

 

(k)           If
either (i) Investor GP makes a Marketing Right Offer for the Properties
and such offer is accepted by Operator GP, or (ii) Investor GP elects to
purchase the Properties at the third-party offer price after its determined
such price is less than or equal to the Marketing Right Offer Price, then, in
either such case, the transaction may, at the option of either the Operator GP
or Investor GP, be effected by the transfer and assignment of Operator Partners’
entire Partnership Interests in the Partnership (in lieu of the transfer of the
Properties) and, in such case, Operator Partners shall transfer their entire
Partnership Interests to Investor Partners (or one or more Entities designated
by Investor Partners) free and clear of any and all liens, pledges and security
interests, and the purchase price paid in such case shall be the amount that
would have been distributed to the transferring Partners if all of the
Properties and other assets of the Partnership had been sold for the Marketing
Right Offer Price or the third-party offer price, as applicable, the
Partnership had paid all Partnership and Subsidiary liabilities, customary
prorations but not any applicable transfer taxes, document stamps, brokerage fees,
and other closing costs that would be incurred if the Partnership and its
Subsidiaries sold all of the Properties and distributed the net proceeds to the
Partners pursuant to Section 5.3.

 

(l)            If
Investor Partners’ default in their obligation, if any, pursuant to this Section 13.3,
to (i) purchase any Properties (or Operator Partners’ Partnership
Interests) or (ii) have their Partnership Interests redeemed pursuant to
the Redemption Right, then Operator Partners shall be entitled, as their sole
remedy, to damages equal to the earnest money deposit (if any) or two percent
(2%) of the Redemption Price, whichever is applicable, and Operator GP shall be
entitled to market and cause the Partnership to sell the Properties at such
price and on such other terms and conditions as it determines in its sole
discretion without any restrictions or limitations imposed by this Section 13.3
or the other provisions of this Agreement; provided that any such sale
may not be to itself or an Affiliate; alternatively, in the case of a default
by Investor Partners in connection with the Redemption Right, Operator Partners
may seek specific performance of Investor Partners’ obligations under this Section 13.3.  If Operator Partners default in their
obligation, if any, pursuant to this Section 13.3, to (x) sell,
or cause the Partnership to sell, the Properties (or Operator Partners’
Partnership Interests) to Investor Partners or (y) cause the Partnership
to redeem Investor Partners’ Partnership Interests pursuant to the Redemption
Right, then Investor Partners shall be entitled as their sole remedy to damages
equal to the earnest money deposit (if any) or two percent (2%) of the
Marketing Right Offer 

 

58

 

Price or the third party offer price, whichever is
applicable, and Investor GP shall be entitled to market, and cause the
Partnership to sell, the Properties at such price and on such other terms and
conditions as its determines in its sole discretion without any restrictions or
limitations imposed by this Section 13.3 or the other provisions of
this Agreement (provided any such sale may not be to itself or an
Affiliate); alternatively, in the case of Operator Partners’ default to sell,
or cause the Partnership to sell, the Properties (or Operator Partners’
Partnership Interests) to Investor Partners, then Investor Partners may seek
specific performance of Operator Partners’ and/or the Partnership’s obligations
under this Section 13.3.  The
Partners agree that the amount of damages incurred by any of them as a result
of a default pursuant to this Section 13.3 would be impracticable
to calculate and that the remedies provided in this Section 13.3
are a reasonable approximation of such damages.

 

Section 13.4.          Investor
Unilateral Marketing Right.  In the
event that Investor Partners are entitled to exercise their Removal Remedies
pursuant to Section 7.5 as a result of a YSI Change in Control,
then, in addition to the right to exercise any other Removal Remedies, Investor
Partners, at their option, exercised by delivery of a written notice from
Investor GP to Operator GP (the “Investor Unilateral Marketing Notice”)
at any time within twelve (12) months after Investor GP is notified in writing
by Operator GP of the YSI Change in Control, may market and sell the Properties
on behalf of the Partnership on such terms and conditions as Investor GP deems
appropriate, in its sole discretion; provided that any such sale may not
be to itself or an Affiliate (the “Investor Unilateral Marketing Right”).  Furthermore, in the event that Investor
Partners exercise the Investor Unilateral Marketing Right pursuant to this Section 13.4,
then, in addition to the payment of the amount that Investor LP will receive
from the Partnership under this Agreement upon the consummation of such sale
and the distribution of the net sales proceeds and other assets of the
Partnership, Operator LP shall concurrently therewith pay or cause to be paid
to Investor LP the Removal Remedies Charge; the intent being that the amount
payable to Investor LP pursuant to Section 5.3(b) shall be
calculated to provide the Investor with the Investor 12% Return, without regard
to such Removal Remedies Charge (if any) paid to Investor LP (i.e., as if such
charge had not been paid).  The costs and
expenses incurred in connection with Investor GP exercising the Investor
Unilateral Marketing Right shall be expenses of, and paid directly by, the
Partnership, regardless of whether such marketing efforts are ultimately
successful in selling the Properties.

 

Section 13.5.          Additional
Operator Redemption Right.  In the
event that Operator Partners are entitled to exercise their Removal Remedies
pursuant to Section 7.5, and the other provisions of this Agreement
referred to in Section 7.5 (i.e. Sections 13.7(b) or 16.2),
and also at any time after the end of the Lockout Period, Operator Partners, at
their option, exercised by delivery of a written notice from Operator GP to
Investor GP (the “Operator Take Out Notice”), may cause the Partnership
to redeem the Investor Partners’ Partnership Interests in accordance with the
same terms and conditions as are provided in clauses (a), (g), (h), (j) and
other applicable subsections of Section 13.3 (the “Operator Take
Out Right”); provided, however, that: (a) the Redemption
Price shall be calculated using the Investor 12% Return only if the redemption
occurs during the Lockout Period or after the fifth annual anniversary of the
Effective Date (i.e. after the end of month 60 after the Effective Date); and
otherwise, shall be calculated using (i) the Investor 14% Return if the
redemption occurs during the first twelve (12) months after the end of the
Lockout Period (i.e. months 37-48 after the Effective Date), or (ii) the
Investor 13% Return if the redemption occurs during the second twelve (12)
months after the end of the 

 

59

 

Lockout Period (i.e. months 49-60 after the Effective
Date); and (b) the closing of the redemption transaction consummated
pursuant to the Operator Take-Out Right, shall occur no later than ninety (90)
days after the delivery of the Operator Take-Out Notice.

 

Section 13.6.          Miscellaneous
Purchase and Sale Provisions.

 

(a)           Notwithstanding
anything that may appear to be to the contrary, neither the Redemption Price
nor any other purchase price described in the foregoing provisions of this Article XIII
is intended to be paid using undisbursed Operating Cash, Capital Proceeds or
other funds of the Partnership, but shall be paid solely by the purchasing (or
non-redeemed) Partners (including, in the case of a redemption, if necessary,
by any necessary Capital Contribution to the Partnership of the Redemption
Price by the Partners not being redeemed and the concurrent payment of such
price to the Partners being redeemed). 
Concurrently with, or as soon as possible following the closing of the
applicable transaction (excluding, however, a redemption), the Partnership
shall distribute to the Limited Partners all Operating Cash, Capital Proceeds
or other funds of the Partnership that are undisbursed as of such closing in
accordance with the provisions of Sections 5.2 and 5.3 as if the closing
had not yet occurred.

 

(b)           Notwithstanding
anything to the contrary contained in this Agreement, if at any time one of the
rights or options described in Section 13.3, 13.4 or 13.5 has been
exercised, then no other such right may be initiated unless and until the
previously exercised right or option has fully run its course and none of the
Partners has any further rights to pursue the purchase or sale of the
Properties, or interests therein, pursuant to such previously exercised right.

 

Section 13.7.          Insolvency
of a Partner.

 

(a)           If
a Limited Partner becomes an Insolvent Partner, the personal representative,
trustee or receiver of its estate (the “Personal Representative”) shall
have only such rights of that Limited Partner as are necessary for the purpose
of settling or managing its estate and such power as the Limited Partner
expressly possessed, if any, to assign all or any part of its interest and to
join with such assignee in satisfying conditions precedent to such assignee’s
becoming a substituted Limited Partner. 
It shall not have any rights of a General Partner to grant or withhold
consents, or any other Management Rights.

 

(b)           If
a General Partner (an “Insolvent GP”) is the Insolvent Partner (or
becomes insolvent as provided in clauses (A), (B), (C), (D) or (E) of
the definition of “Insolvent Partner”), in addition to its other remedies
pursuant to this Section 13.7, the other General Partner (the “Solvent
GP”) may elect:

 

(i)            to assume the duties of the
Insolvent GP, as the sole General Partner of the Partnership, or may appoint
another Person as a replacement General Partner (with the duties of the
Insolvent GP).  If Solvent GP exercises
such right, Insolvent GP shall automatically, without need for the execution
and delivery of any instrument other than notice by Solvent GP to Insolvent GP
that it has exercised such right, cease to be a General Partner and Solvent GP
(and the replacement General Partner appointed by Solvent GP, if applicable)
shall become the sole General Partner(s) of the Partnership, with all
Management Rights set forth in this Agreement. 
Solvent

 

60

 

GP may execute,
deliver and file such amendments to this Agreement and execute and file such
amendments to the Certificate of Limited Partnership as may be required to
effect such appointment of the 
replacement General Partner, as a general partner of the Partnership,
and each of the other Partners hereby appoints Solvent GP as its
attorney-in-fact, with full power of substitution, to execute, deliver and file
any such amendments or other instruments; and/or

 

(ii)           to exercise one or more of the other
Removal Remedies.

 

In
addition to the foregoing, if YSI: (A) voluntarily initiates proceedings
of any nature under the Federal Bankruptcy Code, or any similar state or
federal law for the relief of debtors; (B) makes a general assignment for
the benefit of creditors, (C) has an involuntary proceeding under the
Federal Bankruptcy Code, or any similar federal or state law for the relief of
debtors, initiated against it, and (1) with respect to such proceeding an
order for relief has been entered under the Bankruptcy Code (or comparable
order under any similar federal or state law), or (2) which proceeding is
not dismissed or discharged within sixty (60) days after the filing thereof; (D) has
admitted in writing its inability to pay its debts as they mature; or (E) has
all or any substantial part of its assets made the subject of attachment or
other judicial seizure, then, in any such case, Investor GP shall have all of
the same rights and remedies under this Section 13.7 as it would if
Operator GP becomes an Insolvent GP.

 

Section 13.8.          Management
Pending Sale Closing.  From and after
the date of delivery of a Marketing Notice pursuant to Section 13.3,
a Investor Unilateral Marketing Notice pursuant to Section 13.4 or
a Operator Take-Out Notice pursuant to Section 13.5, and continuing
through the sooner to occur of the applicable closing date or the termination
of such sale right, each General Partner shall exercise reasonable efforts,
consistent with past practice, to ensure that the Partnership is operated in
the ordinary course of business and that no actions are taken by or on behalf
of the Partnership which are likely to impede the ability of the Partners to
consummate the transactions contemplated herein.

 

Section 13.9.          Assignees.

 

(a)           Without
intending to limit the other restrictions set forth in this Article XIII,
but in addition thereto, the Partnership shall not recognize for any purpose
any purported sale, assignment or Transfer of all or any fraction of the
interest of a Partner unless all provisions of this Agreement relating thereto
have been satisfied, all costs of such assignment have been paid by the
assigning Partner, and there is filed with the Partnership a written and dated
notification of such sale, assignment or Transfer, in form reasonably satisfactory
to the General Partner that is not an Affiliate of the Transferring Partner,
executed by both the seller, assignor or transferor and the purchaser, assignee
or transferee and such notification (1) contains the acceptance by the
purchaser, assignee or transferee of and agreement to be bound by all the terms
and provisions of this Agreement and (2) represents that such sale,
assignment or Transfer was made in accordance with all applicable securities
laws and regulations (including suitability standards).  Any sale, assignment or Transfer shall be
recognized by the Partnership as effective on the date of such notification if
the date of such notification is within fifteen (15) days after the date on
which such notification is filed with the Partnership, and otherwise shall be
recognized as effective on the date such notification is filed with the
Partnership.

 

61

 

(b)           Any
Partner who transfers or assigns its entire Partnership Interest in the
Partnership shall cease to be a Partner, except that, unless and until a
substituted Partner has been admitted into the Partnership, such assigning
Partner shall retain the statutory rights of the assignor of a Partner’s
interest under the Act.

 

(c)           A
person who is the assignee of all or any portion of the Partnership Interest of
a Partner but does not become a substituted Partner, and who desires to make a
further assignment of such interest it had acquired, shall be (and its proposed
Transfer shall be) subject to all the provisions of this Agreement relating to
the Disposition of Partnership Interests to the same extent and in the same
manner as any Partner desiring to make an assignment of its Partnership
Interest.

 

Section 13.10.        Substituted
Partners.  Except as set forth in Section 13.1,
only upon the unanimous written consent of the General Partners shall a
purchaser, assignee, transferee, or other recipient of a Partnership Interest
who was not previously admitted to the Partnership as a Partner be admitted as
a substituted Partner to the extent of its acquired interest in the
Partnership.  In the event that any such
Person is admitted to the Partnership as a substituted Partner, the General
Partners shall have the power and authority to amend this Agreement to reflect
the admission of such Person as a substituted Partner and such Person shall
have all the rights, duties and obligations of a Partner under this
Agreement.  In such case, Operator GP
shall promptly deliver to each Partner (in any permissible manner further
described in Section 18.1) a copy of any amendments to this
Agreement made by the General Partners under this Section 13.10.

 

ARTICLE XIV

REPRESENTATIONS AND WARRANTIES OF THE PARTNERS

 

As a material inducement to the other Partner’s
execution and delivery of this agreement, each Partner represents, warrants,
covenants and agrees to and with the other Partners and the Partnership as
follows:

 

Section 14.1.          Acquisition
of Interest for Investment.  Each
Partner hereby represents and warrants to the Partnership and the other Partner(s) that
its acquisition of its Partnership Interest is made for its own account for
investment purposes only and not with a view toward the resale or distribution
of such Partnership Interest.

 

Section 14.2.          No
Registration.  The Partnership
Interests are not intended to constitute “securities” as defined under Section 2(a)(1) of
the Securities Act.  Notwithstanding the
foregoing, each Partner recognizes that (a) the Partnership Interests have
not been registered under the Securities Act, or applicable state securities
laws and are being sold pursuant to the exemptions from registration offered by
Section 4(2) of the Securities Act and by applicable state law
provisions, (b) as a consequence, its Partnership Interest must be held
indefinitely unless it is subsequently registered under the Securities Act, and
applicable state securities laws, or an exemption from such registration is
available and (c) each Partner must bear the economic risk of investment
in its Partnership Interest for an indefinite period of time.

 

62

 

Section 14.3.          No
Obligation to Register.  Each Partner
acknowledges that neither the Partnership nor any Partner is under any
obligation to register the Partnership Interests under any securities laws, and
neither of them has any present intention to do so.  Each Partner understands that there is no
established market for the Partnership Interests, and it is extremely unlikely that
any public or private market will develop.

 

Section 14.4.          Suitability
of Investment.  Each Partner
understands the nature of the investment being made and that it involves a high
degree of risk.  Each Partner recognizes
that the Partnership is a newly organized entity and has no history of operations
or earnings.

 

Section 14.5.          Accreditation.  Each Partner represents that it is a
sophisticated investor, able and accustomed to handling sophisticated financial
matters for itself, particularly real estate investments, and that it has a
sufficiently high net worth that it does not anticipate a need for the funds it
has invested in the Partnership in what it understands to be a highly
speculative and illiquid investment.

 

Section 14.6.          Representations
and Warranties Regarding Partners. 
Each Partner represents and warrants to the other Partners concerning
itself as follows:

 

(a)           Organization.  It is a limited liability company,
partnership, corporation or other entity duly formed, validly existing and in
good standing under the laws of the jurisdiction of its formation.

 

(b)           Authorization.  Its execution and delivery of this Agreement,
the performance by it of its obligations under this Agreement and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all requisite corporate or other action on its part.

 

(c)           No
Conflicting Agreements.  Its
execution and delivery of, and its performance and compliance with the terms
and provisions of, this Agreement do not violate any of the terms, conditions
or provisions of (i) its certificate of formation, certificate of limited
partnership, limited partnership agreement, limited liability company agreement
or other applicable organizational agreements or governing instruments, (ii) any
judgment, order, injunction, decree, regulation or ruling of any court or other
governmental authority to which it is subject or by which any of its assets are
bound, or (iii) any agreement or contract to which the Partner is a party
or to which it or its property is subject.

 

(d)           Approvals.  No authorization, consent, order, approval or
license from filing with, or other act by any Governmental Authority or other
Person is or will be necessary to permit the valid execution and delivery by it
of this Agreement or the performance by it of the obligations to be performed
by it under this Agreement, or if any such authorizations, consents, orders,
approvals or licenses are required, they have been obtained.

 

Section 14.7.          No
Brokers.  Except for the fee due and
payable to Eastdil Secured (“Eastdil”) in connection with the
arrangements Eastdil made to facilitate the transaction contemplated by the
formation of the Partnership, which fee has been or shall be paid pursuant to a
separation written agreement with Easdil by Operator Partners, at their sole
cost and expense, concurrently with the execution and delivery of this
Agreement and the making of the initial Capital Contributions, 

 

63

 

each Partner represents and warrants that it has not
dealt with any agent or broker in connection with the creation of the
Partnership or the negotiation of this Agreement and that no agent, broker or
other Person acting pursuant to express or implied authority of such Partner is
entitled to a commission or finder’s fee, or will be entitled to recover on any
claim against any other Partner or the Partnership for a commission or finder’s
fee, in connection with the creation of the Partnership or the negotiation of
this Agreement.

 

Section 14.8.          No
Further Representations or Warranties. 
The Investor Partners acknowledge and agree that the only
representations and warranties made by any Operator Partner are those
representations and warranties set forth in this Agreement and the Contribution
Agreement, and that neither Investor Partner has relied upon any other
representations, warranties or other information made or supplied by or on
behalf of either Operator Partner or any Affiliate or representative of either
Operator Partner.  The Operator Partners
acknowledge and agree that the only representations and warranties made by any
Investor Partner are those representations and warranties set forth in this
Agreement and the Contribution Agreement, and that neither Operator Partner has
relied upon any other representations, warranties or other information made or
supplied by or on behalf of either Investor Partner or any Affiliate or
representative of such Investor Partner.

 

ARTICLE XV

INDEMNIFICATION

 

Section 15.1.          Indemnification.

 

(a)           No
Indemnified Party shall be liable to the Partnership or any Person holding all
or any portion of a Partnership Interest in the Partnership for any Loss
suffered by the Partnership or such Person which arises out of any action or
inaction of such Indemnified Party, except as otherwise required by
Governmental Requirements or to the extent such Loss results from the gross
negligence, willful misconduct, fraud, or other bad faith act or omission of
such Indemnified Party.

 

(b)           The
Partnership shall indemnify and hold harmless each Indemnified Party from and
against all Losses incurred by any of them in connection with any matter
relating to the Partnership or any Subsidiary, including amounts paid in
satisfaction of judgments, settlements, fines, penalties and expert witness and
counsel fees reasonably incurred in connection with the defense or disposition
of any action, suit or other proceeding, whether civil or criminal or
investigative, pending or threatened, before any court or administrative or
legislative body, in which such Indemnified Party may be or may have been
involved as a party or otherwise or with which such Indemnified Party may be or
may have been threatened, except as otherwise required by Governmental
Requirements or to the extent such Loss results from the gross negligence, willful
misconduct, fraud, or other bad faith act or omission of such Indemnified
Party.

 

(c)           The
Partnership shall pay or reimburse all expenses reasonably incurred by an
Indemnified Party in connection with any such aforementioned action, suit or
proceeding in advance of the final disposition of such action, suit or
proceeding, provided that the Partnership has first received a written
undertaking by such Indemnified Party (and, if such Indemnified 

 

64

 

Party is a wholly-owned Person, such Person’s parent
Entity) to repay such expenses so advanced by the Partnership if it shall
ultimately be determined that the standard for indemnification has not been
met.

 

(d)           The
satisfaction of any indemnification obligation shall be from and limited to
Partnership assets, and no Limited Partner shall have any personal liability on
account thereof; provided, however, that each Limited Partner
shall be obligated to return any or all amounts distributed to it in order to
fund any deficiency in the Partnership’s indemnity obligations hereunder.  Notwithstanding the foregoing, the
limitations of this subsection (d) shall not apply to the liability
of one Partner to another, arising under other provisions of this Agreement.

 

(e)           If
an Indemnified Party is entitled to indemnification from another source or is
entitled to recovery by insurance policies, such Indemnified Party shall
diligently pursue such other source, provided that (i) such
obligation shall not in any manner limit or delay such Indemnified Party’s
right to seek indemnification or advances under this Agreement and (ii) such
Indemnified Party shall remit to the Partnership any funds it recovers from any
such other source to the extent it has been indemnified by the Partnership for
any Losses it incurred.

 

(f)            The
provisions in this Section 15.1 shall survive the termination of
the Partnership and this Agreement, and each Indemnified Party shall be a
third-party beneficiary of this Agreement solely for purposes of this Section 15.1.

 

ARTICLE XVI

EVENTS OF DEFAULT

 

Section 16.1.          Events
of Default.  The occurrence of any of
the events set forth below shall constitute an “Event of Default” on the part
of a Partner; provided, however, that a general default of the
type described in subsection 16.1(a)(i) or 16.1(g)(iii) (and
not specifically described in other provisions of this Section 16.1,
to which other provisions no cure or grace period shall be permitted , except
as expressly provided in other provisions of this Agreement) shall not
constitute an Event if Default unless and until such default remains uncured (A) for
fifteen (15) days after such Partner receives written notice of such default
from a non-defaulting Partner, if such default is a monetary default (i.e., can
be cured by the payment of money), or (B) thirty (30) days after such
Partner receives written notice of such default from a non-defaulting Partner,
if such default is a non-monetary default (i.e., cannot be cured by the payment
of money); provided that if such non-monetary default cannot with
diligent efforts be cured within such thirty (30)-day period, but such Partner
(or an Affiliate of such Partner) commences such cure within such thirty
(30)-day period, thereafter diligently and continuously prosecutes such cure,
and such default is reasonably susceptible to cure within an additional sixty
(60) days, then such thirty (30)-day period shall be extended for the time
reasonably required to effect such cure, but in no event for more than an
additional sixty (60) days (i.e., ninety (90) days total):

 

(a)           (i) the
occurrence of any breach or default of any representation, warranty, covenant,
undertaking, obligation or agreement on the part of such Partner pursuant to
the terms of this Agreement or (ii) the occurrence of any breach or
default of any other agreement between the Partnership or any Subsidiary, on
the one hand, and such Partner or an Affiliate of such 

 

65

 

Partner, on the other hand (including the Property
Management Agreement, the Ancillary Services Agreement or the Contribution
Agreement) that causes a material adverse effect upon the business, operations
or value of  the Partnership, to the
extent such breach or default remains uncured beyond the expiration of any
applicable grace or cure period set forth in such other agreements, or (iii) any
breach or inaccuracy of any statement set forth in a certificate delivered by
such Partner or its Affiliate to any other Partner pursuant to this Agreement
or such other agreement that causes a material adverse effect upon the
business, operations or value of  the
Partnership;

 

(b)           any
knowing or intentional act, gross negligence or bad faith on the part of such
Partner which gives rise to an event or circumstance which would permit any
lender (or ground or master lessor) to the Partnership to exercise its
available remedies as a result of a default of or by the Partnership;

 

(c)           the
occurrence of any YSI Change in Control, which shall be an Event of Default by
the Operator Partners;

 

(d)           the
occurrence of any act committed by such Partner involving fraud or willful
misconduct in connection with any of its obligations hereunder or under any
other agreement referred to in clause (a) above;

 

(e)           the
occurrence of any Unpermitted Transfer by such Partner or its Affiliates; or

 

(f)            the
unpermitted resignation of a General Partner,

 

(g)           (i) the
termination or delivery to the Partnership of a notice of non-renewal by
Operator GP or its Affiliate of the Property Management Agreement or the
Ancillary Services Agreement or (ii) the termination of the Property
Management Agreement or the Ancillary Services Agreement for any reason other
than a default by the Partnership caused by the unpermitted acts of Investor
Partners or (iii) any breach or default under the guaranty executed by YSI
pursuant to Section 5.4 hereof; each of which shall be an Event of Default
by the Operator Partners; or

 

(h)           the
failure of a Partner to make a required Additional Capital Contribution in
accordance with Section 4.4 (except the notice and cure periods set
forth in Section 4.4 shall apply).

 

Any
Event of Default by Operator GP shall also be deemed to be an Event of Default
by Operator LP; any Event of Default by Operator LP shall also be deemed to be
an Event of Default by Operator GP.  Any
Event of Default by Investor GP shall also be deemed to be an Event of Default
by Investor LP; any Event of Default by Investor LP shall also be deemed to be
an Event of Default by Investor GP.

 

Section 16.2.          Remedies.

 

(a)           During
the continuance of any Event of Default by any Operator Partner, Investor GP
shall be entitled to:

 

66

 

(i)            in its sole discretion, assume the
duties of Operator GP hereunder.  If
Investor GP exercises such right, Operator GP shall automatically, without need
for the execution and delivery of any instrument other than notice by Investor
GP to Operator GP that it has exercised such right, cease to be a General
Partner and Investor GP shall become the sole General Partner with all
Management Rights (or Investor GP may appoint another Person as a replacement
General Partner for Operator GP, with all of the authority of Operator
GP).  Investor GP may execute, deliver
and file such amendments to this Agreement and execute and file such amendments
to the Certificate of Limited Partnership as may be required to effect such
appointment of the replacement General Partner, as a general partner of the
Partnership, and each of the other Partners hereby appoints Investor GP as its
attorney-in-fact, with full power of substitution, to execute, deliver and file
any such amendments or other instruments. 
In the event of a dispute by the Operator Partners of the right of Investor
GP pertaining to the removal and/or replacement of Operator GP, then, so long
as such dispute is pending, Investor GP shall be entitled to act as the sole
General Partner with all Management Rights but, if such dispute is resolved in
Operator GP’s favor, Operator GP shall be promptly reinstated as a General
Partner, with its full rights hereunder;

 

(ii)           market or require Operator GP to
market all of the Properties pursuant to Section 13.3;

 

(iii)          exercise the Investor Unilateral
Marketing Right pursuant to Section 13.4; and/or

 

(iv)          exercise any of the other Removal
Remedies.

 

(b)           In
addition to the above remedies, Investor Partners may recover from Operator
Partners any actual damages incurred by Investor Partners as a result of
Operator Partners’ Event of Default.

 

(c)           During
the continuance of any Event of Default by any Investor Partner, Operator GP
shall be entitled to:

 

(i)            in its sole discretion, assume the
duties of Investor GP hereunder.  If
Operator GP exercises such right, Investor GP shall automatically, without need
for the execution and delivery of any instrument other than notice by Operator
GP to Investor GP that it has exercised such right, cease to be a General
Partner and Operator GP shall become the sole General Partner with all
Management Rights (or Operator GP may appoint another Person as a replacement
General Partner for Investor GP, with all of the authority of Investor
GP).  Operator GP may execute, deliver
and file such amendments to this Agreement and execute and file such amendments
to the Certificate of Limited Partnership as may be required to effect such
appointment of the replacement General Partner, as a general partner of the
Partnership, and each of the other Partners hereby appoints Operator GP as its
attorney-in-fact, with full power of substitution, to execute, deliver and file
any such amendments or other instruments. 
In the event of a dispute by the Investor Partners 

 

67

 

of the right of
Operator GP pertaining to the removal and/or replacement of Investor GP, then,
so long as such dispute is pending, Operator GP shall be entitled to act as the
sole General Partner with all Management Rights but, if such dispute is
resolved in Investor GP’s favor, Investor GP shall be promptly reinstated as a
General Partner, with its full rights hereunder;

 

(ii)           market all of the Properties pursuant
to Section 13.3;

 

(iii)          exercise the Operator redemption right
pursuant to Section 13.5; and/or

 

(iv)          exercise any of the Removal Remedies.

 

(d)           In
addition to the above remedies, Operator Partners may recover from Investor
Partners any actual damages incurred by Operator Partners as a result of
Investor Partners’ Event of Default.

 

(e)           Notwithstanding
any provisions of this Agreement to the contrary, in no event may any Partner exercise
the Marketing Right pursuant to Section 13.3, the Investor
Unilateral Marketing Right pursuant to Section 13.4 or the Operator
Take-Out Right pursuant to Section 13.5, at any time an Event of
Default has occurred by or with respect to such Partner (or an event has
occurred by or with respect to such Partner (and remains uncured) that, with
the giving of notice or the passage of time, or both, may become such an Event
of Default).

 

(f)            The
remedies provided in this Section 16.2 shall be the exclusive
remedies of the parties with respect to an Event of Default; provided
that unless otherwise expressly provided herein, this Agreement shall not limit
the rights of any Partner under the Property Management Agreement, Ancillary
Services Agreement, Contribution Agreement, or any agreement referenced in Section 16.1(a).

 

ARTICLE XVII

DISSOLUTION

 

Section 17.1.          Events
of Dissolution.

 

(a)           The
Partnership shall be dissolved upon the earliest to occur of any of the
following events:

 

(i)            the unanimous written agreement of
the General Partners;

 

(ii)           the sale or other disposition of all
or substantially all of the assets of the Partnership, unless such sale or
other disposition involves the acquisition of any additional property or any
deferred payment of the consideration for such sale or other disposition, in
which latter event the Partnership will dissolve on the last day of the
calendar month during which the balance of such deferred payment is received by
the Partnership, provided, in each case, that such dissolution shall not
occur prior to January 1 of the third calendar year subsequent to the sale
of all of the assets of the Partnership and its Subsidiaries;

 

68

 

(iii)          the entry of a judgment, order or
decree of a court of competent jurisdiction adjudicating the Partnership to be
a bankrupt and the expiration without appeal of the period, if any, allowed by
Governmental Requirements in which to appeal therefrom; or

 

(iv)          the entry of a decree of judicial
dissolution under Section 17-802 of the Act or any successor or similar
provision of Governmental Requirements.

 

(b)           The
events set forth in Section 17.1(a) constitute the only
situations or events on which a dissolution of the Partnership shall occur.

 

(c)           Dissolution
of the Partnership shall be effective as of the day on which the event occurs
giving rise to the dissolution, but the Partnership shall not terminate until
there has been a winding up of the Partnership’s business and affairs and the
assets of the Partnership have been distributed as provided in Section 17.2.

 

Section 17.2.          Liquidation;
Sale of Substantially all of the Assets.

 

(a)           Subject
to the restrictions and limitations contained in this Agreement, upon
dissolution of the Partnership Operator GP shall cause any part or the
Partnership assets to be sold in such manner as General Partners shall
determine in an effort to obtain the best prices for such assets (provided
that, with the prior written approval of the General Partners, the Operator GP
may distribute Partnership assets in kind to the Partners on the basis approved
by the Partners).  During the liquidation
period, the General Partners shall have the right to continue to operate and
otherwise to deal with Partnership property to the same extent they had such
right prior to dissolution of the Partnership. 
In the event that Operator GP has dissolved, withdrawn or becomes
bankrupt or legally incapacitated, Investor GP may, within thirty (30) days
after any such occurrence, appoint a Person to perform the functions of
Operator GP in liquidating the assets of the Partnership and winding up its
affairs.

 

(b)           In
settling accounts after dissolution, the assets of the Partnership shall be
paid or distributed in the following order:

 

(i)            first, to creditors other than
Partners and their Affiliates, in the order of priority provided by law;

 

(ii)           then, to the Partners and their
respective Affiliates for any fees or other compensation or any unreimbursed
costs and expenses owing to the Partners or their respective Affiliates in
accordance with the terms of this Agreement, and then to the repayment of any
loans (with interest) made by any Partner to the Partnership in accordance with
the terms of this Agreement;

 

(iii)          then, to Reserves as the Partners deem
reasonably necessary for any contingent or unforeseen liabilities or
obligations of the Partnership.  Such
Reserves may be paid over by Operator GP to a bank, to be held in escrow for
the purpose of paying any contingent or unforeseen liabilities or obligations
and, at the expiration of such period as the General Partners may deem
advisable, such Reserves shall be distributed to the Limited Partners, pursuant
to clause (iv); and

 

69

 

(iv)          then, to the Limited Partners in
accordance with Sections 5.2 and 5.3.

 

Section 17.3.          Waiver
of Partition.  Each Partner hereby
irrevocably waives any right or power it may possess now or hereafter to compel
a partition or sale of any asset of the Partnership or to compel a dissolution
of the Partnership other than as expressly set forth in this Agreement.

 

Section 17.4.          Articles
of Termination.  Upon the dissolution
and the completion and winding up of the Partnership, Operator GP shall cause
to be filed with the Office of the Secretary of State of the State of Delaware,
a Certificate of Cancellation, pursuant to the requirements of the Act,
canceling the Certificate of Limited Partnership; provided that such
Certificate of Cancellation shall not be filed prior to January 1 of the
third calendar year subsequent to the sale of all of the assets of the
Partnership and its Subsidiaries unless otherwise approved by the General
Partners.

 

ARTICLE XVIII

MISCELLANEOUS

 

Section 18.1.          Notice.  All notices required or permitted hereunder
shall be in writing and shall be served on the parties at the addresses set
forth in Schedule II.  Any such
notices shall be either (a) sent by overnight delivery using a nationally
recognized overnight courier, in which case notice shall be deemed delivered
one business day after deposit with such courier, (b) sent by personal
delivery, in which case notice shall be deemed delivered upon receipt or
refusal of delivery or (c) by electronic mail (provided that email
notices that are not ordinary course of business communications are also
promptly delivered by hand, overnight courier or certified mail), in which case
notice shall be deemed delivered at the time of transmission of such electronic
mail provided such is sent by 5:00PM (CST), otherwise such shall be deemed to
have been sent on the next business day. 
In the event of a notice sent by electronic mail, the inability or
failure of the recipient to receive electronic mail at the time of transmission
shall not affect the validity of any notice so given provided that notice is
actually transmitted by the sender in accordance with the terms of this Section 18.1.   A party’s address or electronic mail address
may be changed by written notice to the other party; provided, however, that no
notice of a change of address shall be effective until actual receipt of such
notice.  Copies of notices to a party’s attorney are for informational
purposes only, and a failure to give or receive copies of any notice shall not
be deemed a failure to give notice.  The attorney for a party has the
authority to send notices on behalf of such party.  To be effective, any Notice of Major Dispute
must also comply with the requirements of Section 7.3(c).

 

Section 18.2.          Application
of Delaware Law.  This Agreement and
the application or interpretation hereof shall be governed exclusively by, and
construed exclusively in accordance with, the laws of the State of Delaware,
and specifically the Act, without regard to principles of conflicts of laws.

 

Section 18.3.          Jurisdiction
and Venue; Waiver of Jury Trial.  Any
process against any Partner in, or in connection with, any suit, action or
proceeding arising out of or relating to this Agreement or any Partner’s
performance hereof may be served personally or, to the extent permitted by law,
by certified mail at that Partner’s address for receipt of notices hereunder
with the same effect as though served on such Partner personally.  Each Partner hereby irrevocably submits in
any suit,

 

70

 

action or proceeding arising out of or relating to
this Agreement or any Partner’s performance hereof or rights or obligations
hereunder to the jurisdiction of the federal and state courts of the State of
Delaware (and located in Wilmington, Delaware) and irrevocable and
unconditionally consents to the jurisdiction of those courts, and waives its
rights to bring any action or proceeding against any Partner in any other court
and irrevocably waives any and all objections to the jurisdiction of, or venue
in, such court that such Partner may have under Governmental Requirements.  EACH OF THE PARTNERS WAIVE TRIAL BY JURY IN
ANY LITIGATION, SUIT OR PROCEEDING AMONG THEM IN ANY COURT WITH RESPECT TO, IN
CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT, OR THE VALIDITY,
INTERPRETATION, OR ENFORCEMENT THEREOF.

 

Section 18.4.          Intentionally
Omitted.

 

Section 18.5.          Effect
of Agreement.  This Agreement shall
be binding upon and inure to the benefit of all Partners and their respective
permitted assigns and successors.  The
foregoing does not modify Section 13.1 in any respect.

 

Section 18.6.          Entire
Agreement.  This Agreement and the
schedules and exhibits hereto, if any, together with all other contracts and
agreements which either are referred to herein or bear even date herewith,
contain all of the understandings and agreements of whatsoever kind and nature
existing between the Partners with respect to the subject matter hereof and
thereof and supersede all prior agreements and undertakings with respect
thereto (other than the Contribution Agreement and the documents executed
pursuant to the Contribution Agreement, which shall remain in full force and
effect).

 

Section 18.7.          Amendment.  Except as otherwise expressly set forth in
this Agreement, this Agreement may be amended, supplemented or restated only by
a written agreement executed by each of the Partners.  Notwithstanding anything to the contrary in
this Section 18.7, the Certificate of Limited Partnership and this
Agreement may be amended, supplemented or restated, for the following purposes
only by the General Partners without the necessity of obtaining the written
consent of any of the Limited Partners: the change of the registered agent, the
address of the registered agent or the address of the principal place of business
of the Partnership, and for any other purposes as expressly provided in this
Agreement.  Notwithstanding anything to
the contrary in this Section 18.7, Operator GP may update Schedule II
from time to time without the written consent of any of the Limited Partners in
the event of a permitted change in Partners.

 

Section 18.8.          Counterparts.  This Agreement may be executed in
counterparts (and delivered by means of pdf or other electronic means, provided
that the originally executed counterparts are delivered promptly), each of
which shall be deemed to be an original and shall be binding upon the Partner
who executed the same, but all of such counterparts together shall constitute
one and the same agreement.

 

Section 18.9.          Severability.  Each provision of this Agreement shall be
considered severable and if for any reason any provision that is not essential
to the effectuation of the basic purposes of the Agreement is determined by a
court of competent jurisdiction to be invalid or unenforceable and contrary to
the Act or existing or future Governmental Requirements, such invalidity shall
not 

 

71

 

impair the operation of or affect those provisions of
this Agreement that are valid.  In that
case, this Agreement shall be construed so as to limit any term or provision so
as to make it enforceable or valid within the requirements of any Governmental
Requirements, and in the event such term or provision cannot be so limited,
this Agreement shall be construed to omit such invalid or unenforceable
provisions.

 

Section 18.10.        Captions.  The title and captions contained herein are
for convenience of reference only and shall not be deemed part of the context
of this Agreement.

 

Section 18.11.        Interpretation.  This Agreement is the result of negotiations
among, and have been reviewed by counsel to, each of the parties hereto and is
the products of each of the parties. 
Accordingly, it shall not be construed against any party merely because
of such party’s involvement in its preparation.

 

Section 18.12.        Additional
Documents and Acts.  In connection
with this Agreement, as well as all transactions contemplated by this
Agreement, the Partners agree to: (i) furnish other information; (ii) execute
and deliver such additional documents and papers, and (iii) perform and do
such additional acts, as may be necessary and proper to effectuate and carry
out all of the provisions of this Agreement.

 

Section 18.13.        Confidentiality.

 

(a)           The
provisions of this Agreement and of any other agreement relating to the
Partnership or its Properties to which the Partnership or any Partner is a
party, the identity of any person with whom the Partnership may be holding
discussions with respect to any investment, acquisition, Disposition, or other
transaction or in whom the Partnership may invest directly or indirectly, and
all other business, financial or other information relating directly to the
business or affairs of the Partnership or the relative or absolute rights or
interests of any of the Partners (collectively, the “Information”) that
has not been publicly disclosed with the consent of the General Partners is
confidential and proprietary information of the Partnership, the disclosure of
which could cause irreparable harm to the Partnership and the Partners.  Accordingly, each Partner represents that it
has not, and agrees that it will not and that it will direct its members,
partners, shareholders, directors, trustees, officers, agents, advisors (including
any appraiser selected by or on behalf of it, or by or on behalf of any
appraiser selected by it) and Affiliates not to, disclose to any Person (except
to the extent, if any, it is required by Governmental Requirements or as
required under the Code to make disclosure to a court or governmental authority
or as required under the Code or as required by applicable securities laws or
the regulation of any national securities exchange to which Heitman or YSI is
subject) any Information or confirm any statement made by any other Person
regarding Information unless the General Partners consent thereto or until the
Partnership has publicly disclosed the Information and has notified each
Partner that it has done so.

 

(b)           The
covenants and agreements contained in this Section 18.13 will
survive the termination of the Partnership for three (3) years after its
dissolution and liquidation of all or substantially all of its assets.

 

72

 

(c)           Notwithstanding
any contrary provision in this Section 18.13, any Partner may,
without breach of the covenants set forth in this Section 18.13 and
without notice to or consent of any General Partner, disclose any Information
to any potential transferee of a Partnership Interest or in connection with any
proposed or actual transfer of any interest of the direct or indirect
beneficial owners of any of the Partners, but only to the extent such transfer
would be permitted by this Agreement and only if such transferee agrees (i) to
use such Information solely for the purpose of evaluating the purchase of a
Partnership Interest or beneficial interest in a Partner and (ii) to fully
maintain the confidentiality of such Information, and provided further that the
transferor Partner shall be liable for any breach of such agreements by such
transferee.  The Partners may also
disclose such Information as is reasonably necessary for it (or its Affiliates)
to perform any of its (or any of its Affiliates’) duties or obligations
hereunder or in any property management agreement, leasing, development or
construction agreement relating to a Property,  provided that, in
the case of an Affiliate, such Affiliate has agreed to be bound by the terms
and provisions of this Section 18.13 on the same basis and in the
same manner as would apply it were a Partner of the Partnership who had signed
this Agreement.  The parties agree that
if this Section 18.13 is breached the remedy at law may be
inadequate, and therefore, in addition to any other remedy to which a party may
be entitled, the non-breaching party shall be entitled to an injunction or
injunctions to prevent breaches of this Section 18.13 and/or to
compel specific performance of this Section 18.13.

 

(d)           Notwithstanding
any contrary provision in this Section 18.13, the Partners (and
each employee, representative or other agent of the Partners) may disclose to
any and all persons, without limitation of any kind, the tax treatment and tax
structure of the transactions contemplated herein; provided that no
Partner (and no employee, representative or other agent thereof) shall disclose
any information that is not necessary to understanding the tax treatment and
tax structure of the transactions contemplated herein (including the identity
of the Partners, any information that could reasonably allow a Person to
determine the identity of the Partners, or any other information to the extent
that such disclosure could result in a violation of any federal or state
securities law).

 

(e)           Notwithstanding
any contrary provision in this Section 18.13, each Partner may
disclose to its direct and indirect interest holders such matters as may be
required by its limited partnership agreement subscription documents,
side-letters or other organizational documents or by Governmental Requirements.

 

Section 18.14.        No
Third-Party Beneficiaries.  Except as
expressly provided in Section 15.1, no creditor of the Partnership
or other Person not a Partner shall have any right or benefit under or in
respect of this Agreement (and, without limiting the generality of the
foregoing, no such Person shall have any right to enforce any obligation of any
Partner to make capital contributions or loans or to pursue any other right or
remedy hereunder or in respect hereof 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 Partners and the Partnership
and their respective successors and assigns. 
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 

 

73

 

addition, it is the intent of the parties hereto that
no distribution to any Partner shall be deemed a return of money or other
property in violation of the Act.

 

Section 18.15.        Involvement
of the Partnership in Certain Proceedings. 
If any Partner or any Affiliate of a Partner becomes involved in legal
proceedings unrelated to the business of the Partnership in which the
Partnership is called upon to provide information, the Partner will indemnify,
defend and hold harmless the Partnership against all costs and expenses
(including fees and expenses of attorneys and other advisors) paid or incurred
by the Partnership in preparing or producing the required information or in
resisting any request for production or obtaining a protective order limiting
the availability of the information provided by the Partnership or in otherwise
protecting its interests.

 

Section 18.16.        No
Waiver.  No waiver, express or
implied, by any Partner of any obligation of, or any breach or default by any
other Partner in the performance by the other Partner of its obligations,
hereunder shall be (a) binding or enforceable except to the extent (if
any) set out in a writing signed by the Partner sought to be charged thereby or
(b) deemed or construed to be a waiver of any other breach or default
under this Agreement.  Failure on the
part of any Partner to complain of any act or omission of any other Partner, or
to declare such other Partner in default irrespective of how long such failure
continues, shall not constitute a waiver hereunder.  No notice to or demand on a defaulting
Partner shall entitle such defaulting Partner to any other or further notice or
demand in similar or other circumstances.

 

Section 18.17.        Additional
Remedies.  Unless the context
requires otherwise, the rights and remedies of the Partners hereunder shall not
be mutually exclusive so that the exercise of one or more of the rights or
remedies hereunder shall not preclude the exercise of any other.

 

Section 18.18.        Approvals.  Except where otherwise expressly stated in
this Agreement, all approval, consent and other similar rights of the Partners
pursuant to this Agreement (i) shall be set out in a writing signed by the
Partner whose approval, consent or exercise of any other right is required (or
its Authorized Representative), provided that the foregoing provisions
of this clause (i) is not intended to limit the right of Operator GP to
act on behalf of Operator LP or the right of Investor GP to act on behalf of
Investor LP in the manner set forth in the other provisions of this Agreement,
and (ii) may be exercised by such Partners, and such approvals and
consents may be granted or denied by such Partners, in their sole and absolute
discretion.

 

Section 18.19.        Use
of Names.

 

(a)           In
no event shall the name “Heitman” or other Heitman trade-name or derivative be
used in connection with any Property, the Partnership or any Subsidiary,
without the prior express approval of Investor GP and Heitman.

 

(b)           Except
as expressly permitted in the Property Management Agreement or Ancillary
Services Agreement, in no event shall the name “U-Store-It” or other “U-Store-It”
trade-name or derivative be used in connection with any Property, the
Partnership or any Subsidiary, without the prior express approval of Operator
GP and YSI LP.

 

Section 18.20.        Time
is of the Essence; Computation of Time. 
Time is of the essence of each and every provision of this Agreement.
If the last day for the exercise of any privilege or the 

 

74

 

discharge of any duty under
this Agreement falls on a day that is not a Business Day, then the Person
having such privilege or duty will have until 5:00 p.m. (its local time)
on the next succeeding Business Day to exercise its privilege or to discharge
its duty.

 

Section 18.21.        Expenses.  Each Partner will bear its
own legal fees incurred in connection with the negotiation and drafting of this
Agreement and such expenses shall not be considered Partnership expenses.  All costs of obtaining title insurance, plats
of survey and other due diligence undertaken by or at the request of Investor LP
(or Heitman, as its advisor) in connection with the transaction contemplated by
this Agreement and/or the Contribution Agreement, all transfer taxes and other
closing costs pertaining to the transfer of the Properties from Operator LP to
the Partnership, and all costs of forming the Partnership (and the TRS) and
registering the Partnership (and registering the TRS and General Partners) to
do business in all states in which the Properties are located shall be
Partnership expenses (except as otherwise provided in Section 14.7),
and Investor LP shall contribute one-half of such amount to the Partnership, as
part of Investor LP’s initial Capital Contribution, to reimburse Operator LP
for the payment of all such expenses (to the extent such expenses were paid
from Operator Initial Contribution),.  A more
detailed statement showing all costs and expenses, and the sources of payment
of same is set forth in the Contribution Statements being executed by the
Limited Partners and Partnership concurrently with this Agreement.

 

Section 18.22.        Costs
Incurred in Disputes.  In the event
of any litigation or other legal action between any of the Partners, the
prevailing Partners shall be entitled to recover from the other Partners,
jointly and severally, its legal fees and other costs incurred in pursuing such
litigation or other action.

 

[Signature Pages Follow]

 

75

 

IN WITNESS WHEREOF, this Agreement has been executed as of the date set
forth above.

 

 

	
   

  	
  OPERATOR
  GP:

  
	
   

  	
   

  
	
   

  	
  YSI
  VENTURE GP LLC, a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Jeffrey P. Foster

  
	
   

  	
   

  	
  Jeffrey
  P. Foster

  
	
   

  	
   

  	
  Vice
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  OPERATOR
  LP:

  
	
   

  	
   

  
	
   

  	
  YSI
  VENTURE LP LLC, a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Jeffrey P. Foster

  
	
   

  	
   

  	
  Jeffrey
  P. Foster

  
	
   

  	
   

  	
  Vice
  President

  

 

76

 

	
   

  	
  INVESTOR
  GP:

  
	
   

  	
   

  
	
   

  	
  HART
  — YSI INVESTOR GP LLC, a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
  By

  	
  HEITMAN
  AMERICA REAL ESTATE HOLDING, L.P., a Delaware limited partnership, its sole
  member

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  HEITMAN
  AMERICA REAL ESTATE HOLDING GP, LLC, a Delaware limited liability company,
  its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  HEITMAN
  AMERICA REAL ESTATE REIT LLC, a Delaware limited liability company, its
  managing member

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  HEITMAN
  AMERICA REAL ESTATE TRUST, L.P., a Delaware limited partnership, its managing
  member

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  HEITMAN
  AMERICA REAL ESTATE TRUST, LLC, a Delaware limited liability company, its
  general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  David Perisho

  
	
   

  	
  Name:

  	
  David
  Perisho

  
	
   

  	
  Title:

  	
  Senior
  Vice President

  

 

77

 

	
   

  	
  INVESTOR
  LP:

  
	
   

  	
   

  
	
   

  	
  HART
  — YSI INVESTOR LP LLC,, a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
  By

  	
  HEITMAN
  AMERICA REAL ESTATE HOLDING, L.P., a Delaware limited partnership, its sole
  member

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  HEITMAN
  AMERICA REAL ESTATE HOLDING GP, LLC, a Delaware limited liability company,
  its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  HEITMAN
  AMERICA REAL ESTATE REIT LLC, a Delaware limited liability company, its
  managing member

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  HEITMAN
  AMERICA REAL ESTATE TRUST, L.P., a Delaware limited partnership, its managing
  member

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  HEITMAN
  AMERICA REAL ESTATE TRUST, LLC, a Delaware limited liability company, its
  general partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  David Perisho

  
	
   

  	
  Name:

  	
  David
  Perisho

  
	
   

  	
  Title:

  	
  Senior
  Vice President

  

 

78

 

GUARANTY

 

THIS GUARANTY (this “Guaranty”) is made by the undersigned, U-STORE-IT TRUST, a Maryland real estate
investment trust, and U-STORE-IT, L.P.,
a Delaware limited partnership (collectively, the “Guarantor”), in favor of HART-YSI INVESTOR LP LLC, a Delaware
limited liability company  (“Investor LP”) and YSI-HART LIMITED PARTNERSHIP, a Delaware
limited partnership (the “Partnership”)  concurrently with, and as part of, the
Amended and Restated Limited Partnership Agreement of YSI-HART Limited
Partnership, dated August     , 2009 (the “Agreement”).  All capitalized terms set forth in this
Guaranty and not otherwise defined herein shall have the meanings set forth in
the Agreement.

 

RECITALS

 

WHEREAS, YSI
LP is the sole member of Operator LP, and YSI is the majority owner of YSI VENTURE LP LLC, a Delaware limited
liability company  (“Operator LP”), and, accordingly,
Guarantor will derive significant direct and indirect benefit from the
relationship between the Investor Partners and the Operator Partners set forth
in the Agreement; and

 

WHEREAS,
Guarantor has agreed to execute and deliver this Guaranty in favor of Investor
LP and the Partnership for the limited purposes set forth herein.

 

NOW,
THEREFORE, in consideration of the execution and delivery of both the Agreement
and the Contribution Agreement by Investor LP, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Guarantor agrees as follows:

 

1.             Guaranty. 
Guarantor hereby absolutely, unconditionally and irrevocably guarantees
the full and timely payment of any and all amounts payable by Operator LP
(and/or Operator LP’s successor(s) in interest to its Partnership
Interests) (a) to Investor LP (and/or Investor LP’s successor(s) in
interest to its Partnership Interests) pursuant to Section 5.4(a) of
the Agreement (the “Clawback Payment”)
and (b) to Investor LP (and/or Investor LP’s successor(s) in interest
to its Partnership Interests) and the Partnership pursuant to Section 7.4(a) of
the Contribution Agreement (the “Indemnity Obligations”,
and together with the Clawback Payment, the “Guaranteed
Obligations”). Investor LP and, with respect to obligations
under Section 7.4 of the Contribution Agreement only, the Partnership,
shall be referred to together herein as the “Guaranteed
Parties”.  This is a
guaranty of payment and not of collection. 
Guarantor shall further, on demand, reimburse for all expenses,
collection charges and attorneys’ fees incurred by the Guaranteed Parties in
endeavoring to collect or enforce any of the Guaranteed Parties’ rights and
remedies against Operator LP or Guarantor in connection with (x) the
payment of the Clawback Payment or (y) the payment of any claim arising
from the Indemnity Obligations.  The
liability of Guarantor is present, absolute, unconditional, continuing,
primary, direct and independent of all the obligations of Operator LP.  Nothing shall discharge or satisfy Guarantor’s
liability hereunder except the full and indefeasible performance and payment of
the Guaranteed Obligations.

 

 

2.             Waivers by Guarantor.  Guarantor waives: (a) notice of
acceptance of this Guaranty and all notices or demands of any kind to which
Guarantor may be entitled, including, without limitation, all demands of
payment and notice of default, non-payment, protest and dishonor to Guarantor, (b) any
right to require Guaranteed Parties to (i) proceed against Operator LP or (ii) pursue
any other remedy which Guaranteed Parties may have; (c) ANY AND ALL RIGHT
TO A JURY TRIAL IN ANY ACTUAL PROCEEDING BASED HEREON; (d) to the fullest
extent permitted under applicable law, any and all defenses, counterclaims or
setoffs which Guarantor may now have, or hereafter may have, with respect to
defenses, counterclaims or setoffs relating to or arising out of: (i) the
due execution and delivery of this Guaranty, (ii) any defense,
counterclaim or setoff which Guarantor may now have, or hereafter may have,
against Operator LP (or any entity related to Operator LP), (iii) any
defense, cause of action, counterclaim or setoff which Guarantor may now have,
or hereafter may have against any other party liable to the Guaranteed Parties
in any manner (iv) any and all suretyship or other defenses in the nature
thereof; (e) all rights of contribution and subrogation which it may have
against Operator LP; (f) any rights to approve or consent to any future
amendment, extension, termination or other modification to the Agreement; and (g) any
failure by the Guaranteed Parties to inform Guarantor of any facts the
Guaranteed Parties may now or hereafter know about Operator LP or the
Agreement, it being understood and agreed that Guarantor has and will maintain
knowledge of and is familiar with Operator LP’s financial condition and
business affairs, and that the Guaranteed Parties have no duty so to inform,
and that Guarantor is fully responsible for being and remaining informed by,
Operator LP bearing on this Guaranty.

 

3.             Continuing Nature of Guaranty.  This is a continuing Guaranty.  Guarantor agrees that: (a) this Guaranty
shall inure to the benefit of and may be enforced by Investor LP and any
subsequent permitted assignee of Investor LP’s Partnership Interest in the
Partnership with respect to the Clawback Payment and Guaranteed Parties with
respect to the Indemnity Obligations, and shall be binding upon and enforceable
against Guarantor, its successors, assigns and legal representatives; (b) to
the extent Investor LP’s Partnership Interest is assigned by Investor LP in
accordance with the terms of the Agreement, the assignee shall be entitled to
the full benefit of this Guaranty; (c) this Guaranty may be enforced
against either party or both parties constituting Guarantor without first
resorting to, or exhausting any other remedy which Investor LP (or its
successors and assigns) or the Partnership may have against Operator LP or the
other party constituting Guarantor; (d) the Guaranteed Parties shall not
be required to pursue or exhaust any other remedies before invoking the
benefits of this Guaranty; provided, however, that any pursuit of any such
remedies shall in no manner impair or diminish the rights of the Guaranteed
Parties under this Guaranty; (e) this is a continuing Guaranty, and shall
apply to and cover the Guaranteed Obligations, and shall remain in full force
and effect until the full and indefeasible performance and payment of all
Guaranteed Obligations; (f) this Guaranty shall be binding upon and
enforceable against Guarantor, notwithstanding the occurrence of any assignment
of Operator LP’s Partnership Interest, or any portion thereof; and (g) this
Guaranty shall be enforceable against Guarantor notwithstanding: (i) any
future amendment or modification of the Agreement; or (ii) the
unenforceability of the Agreement.  This
Guaranty shall continue in full force and effect in the event of any bankruptcy
of the Operator LP or the assignment or termination of the Agreement in any
bankruptcy.  In that regard, Guarantor
shall be liable to the Guaranteed Parties to the same extent as if no
bankruptcy of Operator LP had occurred. 
Notwithstanding anything in this Guaranty or the Agreement that may
appear to be to 

 

2

 

the contrary, Guarantor
shall have no right to delegate or otherwise transfer its duties or obligations
under this Guaranty.

 

4.             Subordination. 
Guarantor does hereby consent that, without affecting the liability of
Guarantor under this Guaranty and without notice to Guarantor: (a) time
may be given by Guaranteed Parties to Operator LP to make the Clawback Payment
and any payments required pursuant to a claim under the Indemnity Obligations,
or (b) the Guaranteed Parties may avail themselves of or exercise any or
all of the rights and remedies against Operator LP provided by law or by the
Agreement or the Contribution Agreement, and may proceed either against
Operator LP alone or jointly against Operator LP and Guarantor or against
Guarantor alone.  Guarantor does hereby
further agree that with respect to any payments made by Guarantor hereunder,
Guarantor shall not have any rights based on suretyship, subrogation or
otherwise to stand in the place of the Guaranteed Parties so as to compete with
the Guaranteed Parties as a creditor of Operator LP, and Guarantor hereby
waives all such rights to the fullest extent permitted by law.  Guarantor agrees that any and all debts and
liabilities now or hereafter arising and owing to Guarantor by Operator LP, or
to any other party liable to Investor LP or the Partnership, are hereby subordinated
to the Guaranteed Parties’ claims against Operator LP.

 

5.             Representations and Warranties.  The undersigned represents and warrants that,
as of the date hereof:

 

(a) 
Guarantor has the full right and authority and has obtained any and all
approvals, and all other requisite organizational action has been taken, all as
required for Guarantor to enter into this Guaranty.  This Guaranty has been authorized and
properly executed and constitutes the valid and binding obligations of
Guarantor, enforceable in accordance with their terms.

 

(b) 
The execution, delivery and performance by Guarantor of this Guaranty will not
result in any violation of, be in conflict with, or constitute a default under,
with or without the passage of time or the giving of notice: (i) any
provision of Guarantor’s organizational documents; (ii) any provision of
any judgment, decree or order to which Guarantor is a party or by which it or
any of its property or assets is bound; (iii) any contract to which
Guarantor is a party or by which it or any of its property or assets is bound;
or (iv) any statute, rule or governmental regulation applicable to
Guarantor or any of its property or assets.

 

(c) 
Guarantor is solvent or is otherwise able to pay any and all of its debts and
other obligations as they come due, and the obligations and liabilities
undertaken by Guarantor, as set forth herein, shall not render the Guarantor
insolvent or otherwise unable to pay any or all of its debts and other
obligations as they come due.

 

6.             Default. 
The occurrence of any of the following events shall, at the election of
Guaranteed Parties, be deemed a default by Guarantor (“Default”)
under this Guaranty: (a) if Guarantor fails to pay any of its obligations
hereunder when due and payable or properly declared due and payable; (b) if
a petition under the Federal Bankruptcy Code shall be filed by Guarantor, or if
Guarantor shall make an assignment for the benefit of its creditors or if any
case or proceeding is filed by Guarantor for its dissolution or liquidation; or
(c) if a petition under the 

 

3

 

Federal Bankruptcy Code
shall be filed against Guarantor, or if a case or proceeding is filed against
Guarantor for its dissolution or liquidation, and in either case such petition,
case or proceeding is not dismissed within sixty (60) days.  Upon the occurrence of a Default, Guaranteed
Parties may exercise any one or more of the rights and remedies accruing to
Guaranteed Parties under the Agreement and any other applicable law upon
default all of which are cumulative and non-exclusive.

 

7.             Notices. 
Any notice or other communications required or permitted to be given
under this Guaranty shall be in writing, and shall be effectively given if
delivered pursuant to Article XVIII of the Agreement.  Notice shall be forwarded as set forth in the
Agreement and Guarantor’s address shall be that set forth below:

 

U-Store-It
Trust

U-Store-It
L.P.

460 East Swedesford Road

Suite 3000

Wayne, Pennsylvania 19087

Attn:  Chief Legal Officer

Email:  JFoster@ustoreit.com

 

With
a copy to:

 

Morgan, Lewis & Bockius

1701 Market Street

Philadelphia,
PA 19103

Attn: 
Jeannine Thomson Bishop

Email:  jtbishop@morganlewis.com

 

8.             Acknowledgment and Understanding.  GUARANTOR REPRESENTS AND WARRANTS TO INVESTOR
LP AND THE PARTNERSHIP THAT GUARANTOR HAS READ THIS GUARANTY AND UNDERSTANDS
THE CONTENT HEREOF AND THAT THIS GUARANTY IS ENFORCEABLE AGAINST GUARANTOR IN
ACCORDANCE WITH ITS TERMS.  FURTHER,
GUARANTOR ACKNOWLEDGES THAT IT HAS HAD AN OPPORTUNITY TO CONSULT WITH LEGAL
COUNSEL CONCERNING THIS GUARANTY.

 

9.             Miscellaneous. 
No provision of this Guaranty may be modified or limited, except by
written agreement expressly referring hereto and to the provisions so modified
or limited, and signed by the party or parties intending to be bound by such
modification.   If any one or more
of  the provisions contained in this
Guaranty shall for any reason be held invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision hereof, and this Guaranty shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein.
The liability of YSI, YSI LP and Operator LP for the Guaranteed Obligations
shall be joint and several.  This
Guaranty shall be deemed to have been delivered in and it shall be interpreted,
such that the rights and liabilities of the parties hereto are to be determined
in accordance with the laws of the State of Delaware.  The recitals to this Guaranty are hereby
incorporated herein by reference.

 

4

 

10.           Guarantor Deliveries.  Within 30 days following the end of each
calendar quarter and within 90 days following the end of each calendar year,
Guarantor agrees to deliver to Investor LP audited financial statements in a
form reasonably acceptable to Investor LP and certified as true and accurate in
all material respects by Guarantor. 
Notwithstanding the foregoing, the delivery of the financial statements
required under this Section 10 shall not be required so long as,
and to the extent that, such financial statements are made available to the
public as part of YSI’s required securities laws filings.  For purpose of the prior sentence, YSI LP’s
financial statements shall be deemed available to the public if they are
included as separate publicly filed statements, or the pertinent financial
information is reported, on a consolidated basis, as part of the publically
filed YSI financial statements.

 

 

[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK;

 

SIGNATURE APPEARS ON
FOLLOWING PAGE]

 

5

 

IN
WITNESS WHEREOF, the undersigned Guarantor has duly executed this Guaranty on
and as of the date first set forth above.

 

 

	
  U-STORE-IT
  TRUST,

  	
   

  
	
  a
  Maryland real estate investment trust

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Jeffrey P. Foster

  	
   

  
	
   

  	
  Jeffrey
  P. Foster,

  	
   

  
	
   

  	
  Senior
  Vice President,

  	
   

  
	
   

  	
  Chief
  Legal Officer and Secretary

  	
   

  
	
   

  	
   

  
	
  U-STORE-IT,
  L.P., a Delaware limited partnership,

  	
   

  
	
   

  	
   

  
	
  By:

  	
  U-Store-It
  Trust, a Maryland real estate investment trust,

  	
   

  
	
   

  	
  Its
  General Partner

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/
  Jeffrey P. Foster

  	
   

  
	
   

  	
   

  	
  Jeffrey
  P. Foster,

  	
   

  
	
   

  	
   

  	
  Senior
  Vice President,

  	
   

  
	
   

  	
   

  	
  Chief Legal Officer and Secretary

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  

 

6

 

PARTNERSHIP AGREEMENT

SCHEDULES

 

	
  Schedule
  I

  	
  Copy
  of Section 7.1 from YSI Articles of Amendment and Restatement of
  Declaration of Trust

  
	
   

  	
   

  
	
  Schedule
  II

  	
  Partners’
  Names and Addresses

  
	
   

  	
   

  
	
  Schedule
  III

  	
  Non-Compete
  Restrictive Areas

  
	
   

  	
   

  
	
  Schedule
  IV

  	
  List
  of Properties with Gross Asset Value

  
	
   

  	
   

  
	
  Schedule
  8.1(a)

  	
  Copies
  of Initial (Partial Year) Approved Annual Business Plan and Operating Budget

  
	
   

  	
   

  
	
  Schedule
  10.3(b)(i)

  	
  Monthly
  Reports

  
	
   

  	
   

  
	
  Schedule
  10.3(b)(ii)

  	
  Data
  Transmission

  

 

7

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