EX-10.3






EXHIBIT 10.3




LIMITED PARTNERSHIP AGREEMENT



OF


MOODY NATIONAL OPERATING PARTNERSHIP I, L.P.


A DELAWARE LIMITED PARTNERSHIP



March 26, 2009




 









 







TABLE OF CONTENTS




	 	 	 	 	 	 	 
	ARTICLE 1 DEFINED TERMS	 	 	2	 
	 
	 	 	 	 	 	 
	ARTICLE 2 PARTNERSHIP FORMATION AND IDENTIFICATION	 	 	10	 
	2.1
	 	Formation	 	 	10	 
	2.2
	 	Name, Office and Registered Agent	 	 	10	 
	2.3
	 	Partners	 	 	11	 
	2.4
	 	Term and Dissolution	 	 	11	 
	2.5
	 	Filing of Certificate and Perfection of Limited Partnership	 	 	11	 
	2.6
	 	Certificates Describing Partnership Units and Special Partnership Units	 	 	12	 
	 
	 	 	 	 	 	 
	ARTICLE 3 BUSINESS OF THE PARTNERSHIP	 	 	12	 
	 
	 	 	 	 	 	 
	ARTICLE 4 CAPITAL CONTRIBUTIONS AND ACCOUNTS	 	 	12	 
	4.1
	 	Capital Contributions	 	 	12	 
	4.2
	 	Additional Capital Contributions and Issuances of Additional Partnership Interests	 	 	12	 
	4.3
	 	Additional Funding	 	 	14	 
	4.4
	 	Capital Accounts	 	 	14	 
	4.5
	 	Percentage Interests	 	 	15	 
	4.6
	 	No Interest On Contributions	 	 	15	 
	4.7
	 	Return Of Capital Contributions	 	 	15	 
	4.8
	 	No Third Party Beneficiary	 	 	15	 
	 
	 	 	 	 	 	 
	ARTICLE 5 PROFITS AND LOSSES; DISTRIBUTIONS	 	 	16	 
	5.1
	 	Allocation of Profit and Loss	 	 	16	 
	5.2
	 	Distribution of Cash	 	 	17	 
	5.3
	 	REIT Distribution Requirements	 	 	19	 
	5.4
	 	No Right to Distributions in Kind	 	 	19	 
	5.5
	 	Limitations on Return of Capital Contributions	 	 	19	 
	5.6
	 	Distributions Upon Liquidation	 	 	19	 
	5.7
	 	Substantial Economic Effect	 	 	19	 
	 
	 	 	 	 	 	 
	ARTICLE 6 RIGHTS, OBLIGATIONS AND POWERS OF THE GENERAL PARTNER	 	 	20	 
	6.1
	 	Management of the Partnership	 	 	20	 
	6.2
	 	Delegation of Authority	 	 	22	 
	6.3
	 	Indemnification and Exculpation of Indemnitees	 	 	22	 
	6.4
	 	Liability of the General Partner	 	 	24	 
	6.5
	 	Reimbursement of General Partner	 	 	24	 
	6.6
	 	Outside Activities	 	 	25	 
	6.7
	 	Employment or Retention of Affiliates	 	 	25	 
	6.8
	 	General Partner Participation	 	 	25	 
	6.9
	 	Title to Partnership Assets	 	 	26	 
	6.10
	 	Miscellaneous	 	 	26	 
	6.11
	 	No Duplication of Fees or Expenses	 	 	26	 
	 
	 	 	 	 	 	 
	ARTICLE 7 CHANGES IN GENERAL PARTNER	 	 	26	 
	7.1
	 	Transfer of the General Partner’s Partnership Interest	 	 	26	 






 









 






	 	 	 	 	 	 	 
	7.2
	 	Admission of a Substitute or Additional General Partner	 	 	28	 
	7.3
	 	Effect of Bankruptcy, Withdrawal, Death or Dissolution of a General Partner	 	 	29	 
	7.4
	 	Removal of a General Partner	 	 	29	 
	 
	 	 	 	 	 	 
	ARTICLE 8 RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS	 	 	30	 
	8.1
	 	Management of the Partnership	 	 	30	 
	8.2
	 	Power of Attorney	 	 	30	 
	8.3
	 	Limitation on Liability of Limited Partners	 	 	30	 
	8.4
	 	Ownership by Limited Partner of Corporate General Partner or Affiliate	 	 	30	 
	8.5
	 	Redemption Right	 	 	31	 
	8.6
	 	Redemption of Special Partnership Units	 	 	32	 
	8.7
	 	Distribution Reinvestment Plan	 	 	33	 
	 
	 	 	 	 	 	 
	ARTICLE 9 TRANSFERS OF LIMITED PARTNERSHIP INTERESTS	 	 	34	 
	9.1
	 	Purchase for Investment	 	 	34	 
	9.2
	 	Restrictions on Transfer of Limited Partnership Interests	 	 	34	 
	9.3
	 	Admission of Substitute Limited Partner	 	 	35	 
	9.4
	 	Rights of Assignees of Partnership Interests	 	 	36	 
	9.5
	 	Effect of Bankruptcy, Death, Incompetence or Termination of a Limited Partner	 	 	36	 
	9.6
	 	Joint Ownership of Interests	 	 	37	 
	 
	 	 	 	 	 	 
	ARTICLE 10 BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS	 	 	37	 
	10.1
	 	Books and Records	 	 	37	 
	10.2
	 	Custody of Partnership Funds; Bank Accounts	 	 	37	 
	10.3
	 	Fiscal and Taxable Year	 	 	37	 
	10.4
	 	Annual Tax Information and Report	 	 	38	 
	10.5
	 	Tax Matters Partner; Tax Elections; Special Basis Adjustments	 	 	38	 
	10.6
	 	Reports to Limited Partners	 	 	38	 
	 
	 	 	 	 	 	 
	ARTICLE 11 AMENDMENT OF AGREEMENT; MERGER	 	 	39	 
	 
	 	 	 	 	 	 
	ARTICLE 12 GENERAL PROVISIONS	 	 	39	 
	12.1
	 	Notices	 	 	39	 
	12.2
	 	Survival of Rights	 	 	39	 
	12.3
	 	Additional Documents	 	 	39	 
	12.4
	 	Severability	 	 	40	 
	12.5
	 	Entire Agreement	 	 	40	 
	12.6
	 	Pronouns and Plurals	 	 	40	 
	12.7
	 	Headings	 	 	40	 
	12.8
	 	Counterparts	 	 	40	 
	12.9
	 	Governing Law	 	 	40	 
	 
	 	 	 	 	 	 
	EXHIBIT A  CONTRIBUTIONS AND INTEREST	 	 	A-1	 
	 
	 	 	 	 	 	 
	EXHIBIT B  NOTICE OF EXERCISE OF REDEMPTION RIGHT	 	 	B-1	 











ii











 





LIMITED PARTNERSHIP AGREEMENT




OF




MOODY NATIONAL OPERATING PARTNERSHIP I, L.P.




RECITALS




     This
Limited Partnership Agreement (this “Agreement”) is
entered into this 26th day of March,
2009, between Moody National REIT I, Inc., a Maryland corporation (the “General
Partner”), and the Limited Partners set forth on Exhibit A attached hereto. Capitalized
terms used herein but not otherwise defined shall have the meanings given them in Article 1.



AGREEMENT




     WHEREAS, the General Partner intends to qualify as a real estate investment trust under the
Internal Revenue Code of 1986, as amended;



     WHEREAS, Moody National Operating Partnership I., L.P. (the “Partnership”), was formed
on January 18, 2008 as a limited partnership under the laws of the State of Delaware, pursuant to a
Certificate of Limited Partnership filed with the Office of the Secretary of State of the State of
Delaware on January 18, 2008;



     WHEREAS, the General Partner desires to conduct its current and future business through the
Partnership;



     WHEREAS, in furtherance of the foregoing, the General Partner desires to contribute cash or
assets to the Partnership from time to time;



     WHEREAS, in exchange for the General Partner’s contribution of cash or assets, the parties
desire that the Partnership issue Partnership Units to the General Partner in accordance with the
terms of this Agreement;



     WHEREAS, the Limited Partners will contribute cash or certain of their property to the
Partnership in exchange for Partnership Units or Special Partnership Units in accordance with the
terms of this Agreement;



     WHEREAS, in furtherance of the Partnership’s business, the Partnership will acquire Properties
and other assets from time to time by means of the purchase or contribution of such Properties or
other assets to the Partnership by the owners thereof in exchange for Partnership Units; and



     WHEREAS, the parties hereto wish to establish herein their respective rights and obligations
in connection with all of the foregoing and certain other matters.



     NOW, THEREFORE, in consideration of the foregoing, of mutual covenants between the parties
hereto, and of other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:



 









 





ARTICLE 1

DEFINED TERMS




     The following defined terms used in this Agreement shall have the meanings specified below:



     “Act” means the Delaware Revised Uniform Limited Partnership Act, as it may be amended
from time to time.



     “Additional Funds” has the meaning set forth in Section 4.3 hereof.



     “Additional Securities” means any additional REIT Shares (other than REIT Shares
issued in connection with a redemption pursuant to Section 8.5 hereof or REIT Shares issued
pursuant to a dividend reinvestment plan of the General Partner) or rights, options, warrants or
convertible or exchangeable securities containing the right to subscribe for or purchase REIT
Shares, as set forth in Section 4.2(a)(ii).



     “Administrative Expenses” means (i) all administrative and operating costs and
expenses incurred by the Partnership, (ii) those administrative costs and expenses of the General
Partner, including any salaries or other payments to directors, officers or employees of the
General Partner, and any accounting and legal expenses of the General Partner, which expenses, the
Partners have agreed, are expenses of the Partnership and not the General Partner, and (iii) to the
extent not included in clause (ii) above, REIT Expenses; provided, however, that
Administrative Expenses shall not include any administrative costs and expenses incurred by the
General Partner that are attributable to Properties or partnership interests in a Subsidiary
Partnership that are owned by the General Partner directly.



     “Advisor or Advisors” means the Person or Persons, if any, appointed, employed or
contracted with by the General Partner and responsible for directing or performing the day-to-day
business affairs of the General Partner, including any Person to whom such Advisor subcontracts
substantially all of such functions.



     “Advisory
Agreement” means the agreement between the General Partner, the Advisor and
the other parties named therein pursuant to which the Advisor will direct or perform the day-to-day
business affairs of the General Partner.



     “Affiliate” means, with respect to any Person, (i) any Person directly or indirectly,
owning, controlling or holding with the power to vote 10% of more of the outstanding voting
securities of such other Person; (ii) any Person 10% or more of whose outstanding voting securities
are directly or indirectly owned, controlled or held, with the power to vote, by such other Person;
(iii) any Person directly or indirectly controlling, controlled by or under common control with
such other Person; (iv) any executive officer, director, trustee or general partner of such other
Person; and (v) any legal entity for which such Person acts as an executive officer, director, trustee
or general partner.



     “Aggregate Share Ownership Limit” means not more than 9.8% in value of the aggregate
of the outstanding shares of stock of the General Partner of any class or series, including common
shares or preferred shares.



     “Agreed Value” means the fair market value of a Partner’s non-cash Capital
Contribution as of the date of contribution as agreed to by such Partner and the General Partner.
The names and addresses of the Partners, number of Partnership Units or Special Partnership Units
issued to each Partner, and the Agreed Value of non-cash Capital Contributions as of the date of
contribution are set forth on Exhibit A.



2









 





     “Agreement” means this Limited Partnership Agreement, as amended, modified
supplemented or restated from time to time, as the context requires.



     “Applicable Percentage” has the meaning provided in Section 8.5(b) hereof.



     “Articles of Incorporation” means the Articles of Incorporation of the General
Partner, as amended or restated from time to time, filed with the Maryland State Department of
Assessments and Taxation.



     “Capital Account” has the meaning provided in Section 4.4 hereof.



     “Capital Contribution” means the total amount of cash, cash equivalents, and the
Agreed Value of any Property or other asset (other than cash) contributed or agreed to be
contributed, as the context requires, to the Partnership by each Partner pursuant to the terms of
this Agreement. Any reference to the Capital Contribution of a Partner shall include the Capital
Contribution made by a predecessor holder of the Partnership Interest of such Partner.



     “Carrying Value” means, with respect to any asset of the Partnership, the asset’s
adjusted net basis for federal income tax purposes or, in the case of any asset contributed to the
Partnership, the fair market value of such asset at the time of contribution, reduced by any
amounts attributable to the inclusion of liabilities in basis pursuant to Section 752 of the Code,
except that the Carrying Values of all assets may, at the discretion of the General Partner, be
adjusted to equal their respective fair market values (as determined by the General Partner), in
accordance with the rules set forth in Regulations Section 1.704-1(b)(2)(iv)(f), as provided for in
Section 4.4. In the case of any asset of the Partnership that has a Carrying Value that differs
from its adjusted tax basis, the Carrying Value shall be adjusted by the amount of depreciation,
depletion and amortization calculated for purposes of the definition of Profit and Loss rather than
the amount of depreciation, depletion and amortization determined for federal income tax purposes.



     “Cash Amount” means an amount of cash per Partnership Unit equal to the lesser of (i)
the Value of the REIT Shares Amount on the date of receipt by the General Partner of a Notice of
Redemption or (ii) the applicable Redemption Price determined by the General Partner.



     “Certificate” means any instrument or document that is required under the laws of the
State of Delaware, or any other jurisdiction in which the Partnership conducts business, to be
signed and sworn to by the Partners of the Partnership (either by themselves or pursuant to the
power-of-attorney granted to the General Partner in Section 8.2 hereof) and filed for recording in
the appropriate public offices within the State of Delaware or such other jurisdiction to perfect
or maintain the Partnership as a limited partnership, to effect the admission, withdrawal, or
substitution of any Partner of the Partnership, or to protect the limited liability of the Limited
Partners as limited partners under the laws of the State of Delaware or such other jurisdiction.



     “Code” means the Internal Revenue Code of 1986, as amended, and as hereafter amended
from time to time. Reference to any particular provision of the Code shall mean that provision in
the Code at the date hereof and any successor provision of the Code.



     “Commission” means the U.S. Securities and Exchange Commission.



     “Common Share Ownership Limit” means not more than 9.8% (in value or in number of the
aggregate of the outstanding shares of stock of the General Partner of any class or series,
including common shares or preferred shares, whichever is more restrictive) of the aggregate of the
REIT Shares.



3









 





     “Conversion Factor” means 1.0, provided that in the event that the General Partner (i)
declares or pays a dividend on its outstanding REIT Shares in REIT Shares or makes a distribution
to all holders of its outstanding REIT Shares in REIT Shares, (ii) subdivides its outstanding REIT
Shares, or (iii) combines its outstanding REIT Shares into a smaller number of REIT Shares, the
Conversion Factor shall be adjusted by multiplying the Conversion Factor by a fraction, the
numerator of which shall be the number of REIT Shares issued and outstanding on the record date for
such dividend, distribution, subdivision or combination (assuming for such purposes that such
dividend, distribution, subdivision or combination has occurred as of such time), and the
denominator of which shall be the actual number of REIT Shares (determined without the above
assumption) issued and outstanding on such date and, provided further, that in the event that an
entity other than an Affiliate of the General Partner shall become General Partner pursuant to any
merger, consolidation or combination of the General Partner with or into another entity (the
“Successor Entity”), the Conversion Factor shall be adjusted by multiplying the Conversion
Factor by the number of shares of the Successor Entity into which one REIT Share is converted
pursuant to such merger, consolidation or combination, determined as of the date of such merger,
consolidation or combination. Any adjustment to the Conversion Factor shall become effective
immediately after the effective date of such event retroactive to the record date, if any, for such
event; provided, however, that if the General Partner receives a Notice of Redemption after the
record date, but prior to the effective date of such dividend, distribution, subdivision or
combination, the Conversion Factor shall be determined as if the General Partner had received the
Notice of Redemption immediately prior to the record date for such dividend, distribution,
subdivision or combination.



     “Director” means a director of the General Partner.



     “Event of Bankruptcy” as to any Person means the filing of a petition for relief as to
such Person as debtor or bankrupt under the Bankruptcy Code of 1978 or similar provision of law of
any jurisdiction (except if such petition is contested by such Person and has been dismissed within
90 days); insolvency or bankruptcy of such Person as finally determined by a court proceeding;
filing by such Person of a petition or application to accomplish the same or for the appointment of
a receiver or a trustee for such Person or a substantial part of his assets; commencement of any
proceedings relating to such Person as a debtor under any other reorganization, arrangement,
insolvency, adjustment of debt or liquidation law of any jurisdiction, whether now in existence or
hereinafter in effect, either by such Person or by another, provided that if such proceeding is
commenced by another, such Person indicates his approval of such proceeding, consents thereto or
acquiesces therein, or such proceeding is contested by such Person and has not been finally
dismissed within 90 days.



     “Excepted Holder Limit” means the percentage limit of the outstanding shares of stock
of the General Partner of any class or series, including common shares or preferred shares,
established by the board of directors of the General Partner for a Person that is exempt from the
Aggregate Share Ownership Limit and the Common Share Ownership Limit.



     “General Partner” means Moody National REIT I, Inc., a Maryland corporation, and any
Person who becomes a substitute or additional General Partner as provided herein, and any of their
successors as General Partner.



     “General Partnership Interest” means a Partnership Interest held by the General
Partner that is a general partnership interest.



     “Indemnitee” means (i) any Person made a party to a proceeding by reason of its status
as the General Partner or a director, officer or employee of the General Partner or the
Partnership, and (ii) such other Persons (including Affiliates of the General Partner or the
Partnership) as the General Partner may designate from time to time, in its sole and absolute
discretion.



4









 





     “Independent Directors” means a Director who is not on the date of determination, and
within the last two years from the date of determination has not been, directly or indirectly
associated with the sponsor of the General Partner or the Advisor by virtue of (i) ownership of an
interest in the sponsor, the Advisor or any of their Affiliates, other than the General Partner,
(ii) employment by the sponsor, the Advisor or any of their Affiliates, (iii) service as an officer
or director of the sponsor, the Advisor or any of their Affiliates, other than as a Director, (iv)
performance of services, other than as a Director, for the General Partner, (v) service as a
director or trustee of more than three real estate investment trusts organized by the sponsor or
advised by the Advisor or (vi) maintenance of a material business or professional relationship with
the sponsor, the Advisor or any of their Affiliates. A business or professional relationship is
considered “material” if the aggregate gross revenue derived by the Director from the sponsor, the
Advisor and their Affiliates exceeds five percent of either the Director’s annual gross revenue
during either of the last two years or the Director’s net worth on a fair market value basis. An
indirect association with the sponsor or the Advisor shall include circumstances in which a
Director’s spouse, parent, child, sibling, mother- or father-in-law, son- or daughter-in-law or
brother- or sister-in-law is or has been associated with the sponsor, the Advisor, any of their
Affiliates or the General Partner.



     “Joint Venture” means any joint venture or general partnership arrangement in which
the Partnership is a co-venturer or general partner which are established to acquire one or more
Real Estate Assets.



     “Limited Partner” means any Person named as a Limited Partner on Exhibit A
attached hereto, and any Person who becomes a Substitute Limited Partner, in such Person’s capacity
as a Limited Partner in the Partnership.



     “Limited Partnership Interest” means the ownership interest of a Limited Partner in
the Partnership at any particular time, including the right of such Limited Partner to any and all
benefits to which such Limited Partner may be entitled as provided in this Agreement and in the
Act, together with the obligations of such Limited Partner to comply with all the provisions of
this Agreement and of such Act.



     “Listing” means the listing of the shares of the General Partner’s stock, previously
issued by the General Partner pursuant to an effective registration statement and such shares
currently registered with the Commission pursuant to an effective registration statement, on a
national securities exchange or the receipt by holders of shares of the General Partner’s stock of
securities that are listed on a national securities exchange in exchange for shares of the General
Partner’s stock. Upon such Listing, the shares shall be deemed “Listed”.



     “Loss” has the meaning provided in Section 5.1(i) hereof.



     “Minimum Limited Partnership Interest” means the lesser of (i) 1% or (ii) if the total
Capital Contributions to the Partnership exceeds $50 million, 1% divided by the ratio of the total
Capital Contributions to the Partnership to $50 million; provided, however, that the Minimum
Limited Partnership Interest shall not be less than 0.2% at any time.



     “Mortgages” means, in connection with any mortgage financing provided, invested in,
participated in or purchased by the Partnership, all of the notes, deeds of trust, mortgages,
security interests or other evidences of indebtedness or obligations, which are secured by or,
collateralized by, or applicable to any Real Estate Assets owned by the borrowers under such notes,
deeds of trust, mortgages, security interests or other evidences of indebtedness or obligations.



5









 





     “Net Sales Proceeds” means (i) in the case of a transaction described in clause (A)(i)
of the definition of Sale, the proceeds of any such transaction less the amount of selling expenses
incurred by or on behalf of the Partnership, including all real estate commissions, closings costs
and legal fees and expenses; (ii) in the case of a transaction described in clause (A)(ii) of the
definition of Sale, the proceeds of any such transaction less the amount of selling expenses
incurred by or on behalf of the Partnership, including any legal fees and expenses and other
selling expenses incurred in connection with such transaction; (iii) in the case of a transaction
described in clause (A)(iii) of the definition of Sale, the proceeds of any such transaction
actually distributed to the Partnership from the Joint Venture less the amount of any selling
expenses incurred by or on behalf of the Partnership (other than those paid by the Joint Venture);
(iv) in the case of a transaction described in clause (A)(iv) of the definition of Sale, the
proceeds of any such transaction (including the aggregate of all payment under a Mortgage on or in
satisfaction thereof other than regularly schedule interest payments) less the amount of selling
expenses incurred by or on behalf of the Partnership, including all commissions, closing costs and
legal fees and expenses; (v) in the case of a transaction described in clause (A)(v) of the
definition of Sale, the proceeds of any such transaction less the amount of selling expenses
incurred by or on behalf of the Partnership, including any legal fees and expenses and other
selling expenses incurred in connection with such transaction; and (vi) in the case of a
transaction described in clause (B) of the definition of Sale, the proceeds of such transaction or
series of transactions less all amounts generated thereby which are reinvested in one or more
assets as described in clause (B) of the definition of Sale within 180 days thereafter and less the
amount of any real estate commissions, closing costs, and legal fees and expenses and other selling
expenses incurred by or allocated to the Partnership in connection with such transaction or series
of transactions. Net Sale Proceeds shall also include any amounts that the General Partner
determines, in its discretion, to be economically equivalent to the proceeds of a Sale. Net Sales
Proceeds shall not include any reserves established by the Partnership in its sole discretion.



     “Nonrecourse Liability” shall have the meaning set forth in Regulations Sections
1.704-2(b)(3) and 1.752-1(a)(2).



     “Notice of Redemption” means the Notice of Exercise of Redemption Right substantially
in the form attached as Exhibit B hereto.



     “Offer” has the meaning set forth in Section 7.1(c)(ii) hereof.



     “Offering” means the initial offer and sale of REIT Shares to the public.



     “OP Unitholders” means all holders of Partnership Interests other than the Special OP
Unitholders.



     “Original Limited Partner” means the Limited Partners designated as “Original Limited
Partners” on Exhibit A hereto.



     “Partner” means any General Partner or Limited Partner.



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



     “Partner Nonrecourse Debt Minimum Gain” shall have the meaning set forth in
Regulations Section 1.704-2(i)(2).



     “Partner Nonrecourse Deductions” shall have the meaning set forth in Regulations
Sections 1.704-2(i)(1) and 1.704-2(i)(2).



6









 





     “Partnership”
means Moody National Operating Partnership I, L.P., a Delaware limited
partnership.



     “Partnership Interest” means an ownership interest in the Partnership held by either a
Limited Partner or the General Partner and includes any and all benefits to which the holder of
such a Partnership Interest may be entitled as provided in this Agreement, together with all
obligations of such Person to comply with the terms and provisions of this Agreement.



     “Partnership Minimum Gain” shall have the meaning set forth in Regulations Sections
1.704-2(b)(2) and 1.704-2(d).



     “Partnership Record Date” means the record date established by the General Partner for
the distribution of cash pursuant to Section 5.2 hereof, which record date shall be the same as the
record date established by the General Partner for a distribution to its stockholders of some or
all of its portion of such distribution.



     “Partnership Unit” means a fractional, undivided share of the Partnership Interests of
all Partners issued hereunder excluding the Partnership Interests represented by Special
Partnership Units. The allocation of Partnership Units among the Partners shall be as set forth on
Exhibit A, as such Exhibit may be amended from time to time.



     “Percentage Interest” means the percentage ownership interest in the Partnership of
each Partner, as determined by dividing the Partnership Units owned by a Partner by the total
number of Partnership Units then outstanding. The Percentage Interest of each Partner shall be as
set forth on Exhibit A, as such Exhibit may be amended from time to time.



     “Person” means any individual, partnership, limited liability company, corporation,
joint venture, trust or other entity.



     “Profit” has the meaning provided in Section 5.1(i) hereof.



     “Property” means any Real Estate Asset or other investment in which the Partnership
holds an ownership interest.



     “Real Estate Assets” means unimproved and improved real property, real estate —
related assets and any direct or indirect interest therein, including, without limitation, fee or
leasehold interests, options, leases, partnership and joint venture interests, equity and debt
securities of entities that own real estate, first or second mortgages on real property, mezzanine
loans secured by junior liens on real property, preferred equity interests secured by a property
owner’s interest in real property and other contractual rights in real estate.



     “Redemption Price” means the Value of the REIT Shares Amount on the date of receipt by
the General Partner of a Notice of Redemption multiplied by any discount determined by the General
Partner, including but not limited to, any discount based upon the combined number of years that
the applicable Partner has held the Partnership Units offered for redemption.



     “Redemption Right” has the meaning provided in Section 8.5(a) hereof.



     “Regulations” means the Federal income tax regulations promulgated under the Code, as
amended and as hereafter amended from time to time. Reference to any particular provision of the



7









 







Regulations shall mean that provision of the Regulations on the date hereof and any successor
provision of the Regulations.



     “REIT” means a real estate investment trust under Sections 856 through 860 of the
Code.



     “REIT Expenses” means (i) costs and expenses relating to the formation and continuity
of existence and operation of the General Partner and any Subsidiaries thereof (which Subsidiaries
shall, for purposes hereof, be included within the definition of General Partner), including taxes,
fees and assessments associated therewith, any and all costs, expenses or fees payable to any
director, officer, or employee of the General Partner, (ii) costs and expenses relating to any
public offering and registration of securities by the General Partner and all statements, reports,
fees and expenses incidental thereto, including, without limitation, underwriting discounts and
selling commissions applicable to any such offering of securities, and any costs and expenses
associated with any claims made by any holders of such securities or any underwriters or placement
agents thereof, (iii) costs and expenses associated with any repurchase of any securities by the
General Partner, (iv) costs and expenses associated with the preparation and filing of any periodic
or other reports and communications by the General Partner under federal, state or local laws or
regulations, including filings with the Commission, (v) costs and expenses associated with
compliance by the General Partner with laws, rules and regulations promulgated by any regulatory
body, including the Commission and any securities exchange, (vi) costs and expenses associated with
any 401(k) plan, incentive plan, bonus plan or other plan providing for compensation for the
employees of the General Partner, (vii) costs and expenses incurred by the General Partner relating
to any issuing or redemption of Partnership Interests, and (viii) all other operating or
administrative costs of the General Partner incurred in the ordinary course of its business on
behalf of or in connection with the Partnership.



     “REIT Share” means a common share of beneficial interest in the General Partner (or
successor entity, as the case may be).



     “REIT Shares Amount” means a number of REIT Shares equal to the product of the number
of Partnership Units offered for exchange by a Tendering Party, multiplied by the Conversion Factor
as adjusted to and including the Specified Redemption Date; provided that in the event the General
Partner issues to all holders of REIT Shares rights, options, warrants or convertible or
exchangeable securities entitling the stockholders to subscribe for or purchase REIT Shares, or any
other securities or property (collectively, the “rights”), and the rights have not expired
at the Specified Redemption Date, then the REIT Shares Amount shall also include the rights
issuable to a holder of the REIT Shares Amount of REIT Shares on the record date fixed for purposes
of determining the holders of REIT Shares entitled to rights.



     “Related Party” means, with respect to any Person, any other Person whose ownership of
shares of the General Partner’s capital stock would be attributed to the first such Person under
Code Section 544 (as modified by Code Section 856(h)(1)(B)).



     “Sale” means (A) any transaction or series of transactions whereby: (i) the
Partnership directly or indirectly (except as described in other subsections of this definition)
sells, grants, transfers, conveys, or relinquishes its ownership of any Real Estate Asset or
portion thereof, including the lease of any Real Estate Asset consisting of the building only, and
including any event with respect to any Real Estate Asset which gives rise to a significant amount
of insurance proceeds or condemnation awards; (ii) the Partnership directly or indirectly (except
as described in other subsections of this definition) sells, grants, transfers, conveys, or
relinquishes its ownership of all or substantially all of the interest of the Partnership in any
Joint Venture; (iii) any Joint Venture directly or indirectly (except as described in other
subsections of this definition) in which the Partnership as a co-venturer or partner sells, grants,
transfers, conveys, or



8









 







relinquishes its ownership of any Real Estate Asset or portion thereof, including any event
with respect to any Real Estate Asset which gives rise to insurance claims or condemnation awards;
(iv) the Partnership directly or indirectly (except as described in other subsections of this
definition) sells, grants, conveys or relinquishes its interest in any Securities and Debt-related
Investment or portion thereof (including with respect to any Mortgage, all payments thereunder or
in satisfaction thereof other than regularly scheduled interest payments) of amounts owed pursuant
to such Mortgage and any event which gives rise to a significant among of insurance proceeds or
similar awards; or (v) the Partnership directly or indirectly (except as described in any other
subsections of this definition) sells, grants, transfers, conveys, or relinquishes its ownership of
any other Real Estate Asset, Mortgage or other investment owner by the Partnership, directly or
indirectly through one or more of its Affiliates, and any other investment made, directly or
indirectly through one of more of its Affiliates, not previously described in this definition of
any portion thereof, but (B) not including any transaction or series of transactions specified in
clause (A) (i) through (v) above in which the proceeds of such transaction or series of
transactions are reinvested by the Partnership in one or more such assets within 180 days
thereafter.



     “Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.



     “Securities and Debt-related Investments” means any investments by the General Partner
or the Partnership in (i) real estate securities such as common stock, preferred stock and options
to acquire stock in REITs and other real estate companies and (ii) debt-related investments such as
(a) mortgage, mezzanine, bridge and other loans and (b) debt and derivative securities related to
real estate assets including mortgage-backed securities, collateralized debt obligations, debt
securities issued by real estate companies and credit default swaps



     “Service” means the United States Internal Revenue Service.



     “Special OP Unitholders” means the holders of Special Partnership Units.



     “Special Partnership Unit” means a unit of a series of Partnership Interests
designated as Special Partnership Units issued pursuant to Section 4.1. The number of Special
Partnership Units outstanding and the Special Percentage Interests in the Partnership represented
by such Special Partnership Units are set forth on Exhibit A, as such Exhibit may be
amended from time to time. A holder of a Special Partnership Unit shall have the same rights and
preferences as a holder of a Partnership Unit under this Agreement that is a Limited Partner except
as set forth in Sections 5.2(b), 7.1(c), 8.5 and 8.6.



     “Special Percentage Interest” shall mean the percentage ownership interest in the
Partnership of each Special OP Unitholder, as determined by dividing the Special Partnership Units
owned by each Special OP Unitholder by the total number of Special Partnership Units then
outstanding. The Special Percentage Interest of each Partner shall be as set forth on Exhibit
A, as such Exhibit may be amended from time to time.



     “Specified Redemption Date” means the first business day of the month that is at least
sixty (60) business days after the receipt by the General Partner of the Notice of Redemption.



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



     “Subsidiary Partnership” means any partnership of which the partnership interests
therein are owned by the General Partner or a direct or indirect subsidiary of the General Partner.



9









 





     “Substitute Limited Partner” means any Person admitted to the Partnership as a Limited
Partner pursuant to Section 9.3 hereof.



     “Successor Entity” has the meaning provided in the definition of “Conversion Factor”
contained herein.



     “Survivor” has the meaning set forth in Section 7.1(d) hereof.



     “Target Final Balances” shall have the meaning set forth in Section 5.1(j) hereof.



     “Tax Matters Partner” has the meaning described in Section 10.5(a) hereof.



     “Termination Event” means the termination or nonrenewal of the Advisory Agreement (i)
in connection with a merger, sale of assets or transaction involving the General Partner pursuant
to which a majority of the directors of the General Partner then in office are replaced or removed,
(ii) by the Advisor for “good reason” (as defined in the Advisory Agreement) or (iii) by the
General Partner other than for “cause” (as defined in the Advisory Agreement).



     “Tendered Units” has the meaning provided in Section 8.5(a) hereof.



     “Tendering Party” has the meaning provided in Section 8.5(a) hereof.



     “Transaction” has the meaning set forth in Section 7.1(c) hereof.



     “Transfer” has the meaning set forth in Section 9.2(a) hereof.



     “Value” means the fair market value per share of REIT Shares which will equal: (i) if
REIT Shares are Listed, the average closing price per share for the previous thirty (30) business
days, (ii) if REIT Shares are not Listed, the most recent offering price per share or share
equivalent of REIT Shares, until December 31st of the year following the year in which the most
recently completed offering of REIT Shares has expired, and (iii) thereafter, such price per REIT
Share as the management of the General Partner determines in good faith.



ARTICLE 2

PARTNERSHIP FORMATION AND IDENTIFICATION




     2.1 Formation.



     The Partnership was formed as a limited partnership pursuant to the Act, and all other
pertinent laws of the State of Delaware, for the purposes and upon the terms and conditions set
forth in this Agreement.



     2.2 Name, Office and Registered Agent.



     The name of the Partnership is Moody National Operating Partnership I, L.P. The specified
office and place of business of the Partnership shall be 6363 Woodway, Suite 110, Houston, Texas
77057. The General Partner may at any time change the location of such office, provided the General
Partner gives notice to the Partners of any such change. The name and address of the Partnership’s
registered agent is Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington, New
Castle County, Delaware 19808. The sole duty of the registered agent as such is to forward to the
Partnership any notice that is served on him as registered agent.



10









 





     2.3 Partners.



          (a) The General Partner of the Partnership is Moody National REIT I, Inc., a Maryland
corporation. Its principal place of business is the same as that of the Partnership.




          (b) The Limited Partners are those Persons identified as Limited Partners on Exhibit A
hereto, as amended from time to time.




     2.4 Term and Dissolution.



          (a) The term of the Partnership shall continue in full force and effect until December 31,
2038, except that the Partnership shall be dissolved upon the first to occur of any of the
following events:




               (i) the occurrence of an Event of Bankruptcy as to a General Partner or the dissolution,
death, removal or withdrawal of a General Partner unless the business of the Partnership is
continued pursuant to Section 7.3(b) hereof; provided that if a General Partner is on the date of
such occurrence a partnership, the dissolution of such General Partner as a result of the
dissolution, death, withdrawal, removal or Event of Bankruptcy of a partner in such partnership
shall not be an event of dissolution of the Partnership if the business of such General Partner is
continued by the remaining partner or partners, either alone or with additional partners, and such
General Partner and such partners comply with any other applicable requirements of this Agreement;



               (ii) the passage of ninety (90) days after the sale or other disposition of all or
substantially all of the assets of the Partnership (provided that if the Partnership receives an
installment obligation as consideration for such sale or other disposition, the Partnership shall
continue, unless sooner dissolved under the provisions of this Agreement, until such time as such
note or notes are paid in full);



               (iii) the exchange of all Limited Partnership Interests (other than any of such interests held
by the General Partner or Affiliates of the General Partner) for REIT Shares or the securities of
any other entity; or



               (iv) the election by the General Partner that the Partnership should be dissolved.



          (b) Upon dissolution of the Partnership (unless the business of the Partnership is continued
pursuant to Section 7.3(b) hereof), the General Partner (or its trustee, receiver, successor or
legal representative) shall amend or cancel any Certificate(s) and liquidate the Partnership’s
assets and apply and distribute the proceeds thereof in accordance with Section 5.6 hereof.
Notwithstanding the foregoing, the liquidating General Partner may either (i) defer liquidation of,
or withhold from distribution for a reasonable time, any assets of the Partnership (including those
necessary to satisfy the Partnership’s debts and obligations), or (ii) distribute the assets to the
Partners in kind.




     2.5 Filing of Certificate and Perfection of Limited Partnership.



     The General Partner shall execute, acknowledge, record and file at the expense of the
Partnership, any and all amendments to the Certificate(s) and all requisite fictitious name
statements and notices in such places and jurisdictions as may be necessary to cause the
Partnership to be treated as a limited partnership under, and otherwise to comply with, the laws of
each state or other jurisdiction in which the Partnership conducts business.



11









 





     2.6 Certificates Describing Partnership Units and Special Partnership Units.



     At the request of a Limited Partner, the General Partner, at its option, may issue (but in no
way is obligated to issue) a certificate summarizing the terms of such Limited Partner’s interest
in the Partnership, including the number of Partnership Units and Special Partnership Units owned
and the Percentage Interest and Special Percentage Interest represented by such Partnership Units
and Special Partnership Units as of the date of such certificate. Any such certificate (i) shall be
in form and substance as approved by the General Partner, (ii) shall not be negotiable and (iii)
shall bear a legend to the following effect:




     This certificate is not negotiable. The Partnership Units and Special
Partnership Units represented by this certificate are governed by and transferable
only in accordance with the provisions of the Limited Partnership Agreement of Moody
National Operating Partnership I, L.P., as amended from time to time.



ARTICLE 3

BUSINESS OF THE PARTNERSHIP




     The purpose and nature of the business to be conducted by the Partnership is (i) to conduct
any business that may be lawfully conducted by a limited partnership organized pursuant to the Act,
provided, however, that such business shall be limited to and conducted in such a manner as to
permit the General Partner at all times to qualify as a REIT, unless the General Partner otherwise
ceases to qualify as a REIT, and in a manner such that the General Partner will not be subject to
any taxes under Section 857 or 4981 of the Code, (ii) to enter into any partnership, joint venture
or other similar arrangement to engage in any of the foregoing or the ownership of interests in any
entity engaged in any of the foregoing and (iii) to do anything necessary or incidental to the
foregoing. In connection with the foregoing, and without limiting the General Partner’s right in
its sole and absolute discretion to qualify or cease qualifying as a REIT, the Partners acknowledge
that the General Partner intends to qualify as a REIT for federal income tax purposes and that,
upon such qualification, the avoidance of income and excise taxes on the General Partner inures to
the benefit of all the Partners and not solely to the General Partner. Notwithstanding the
foregoing, the Limited Partners agree that the General Partner may terminate its status as a REIT
under the Code at any time to the full extent permitted under the Articles of Incorporation. The
General Partner on behalf of the Partnership shall also be empowered to do any and all acts and
things necessary or prudent to ensure that the Partnership will not be classified as a “publicly
traded partnership” for purposes of Section 7704 of the Code.



ARTICLE 4

CAPITAL CONTRIBUTIONS AND ACCOUNTS




     4.1 Capital Contributions.



     The General Partner and the initial Limited Partners have made capital contributions to the
Partnership in exchange for the Partnership Interests set forth opposite their names on Exhibit
A, as such Exhibit may be amended from time to time.



     4.2 Additional Capital Contributions and Issuances of Additional Partnership
Interests.



     Except as provided in this Section 4.2 or in Section 4.3, the Partners shall have no right or
obligation to make any additional Capital Contributions or loans to the Partnership. The General
Partner may contribute additional capital to the Partnership, from time to time, and receive
additional Partnership Interests in respect thereof, in the manner contemplated in this Section
4.2.



12









 





          (a) Issuances of Additional Partnership Interests.




               (i)
General. The General Partner is hereby authorized to cause the Partnership to issue
such additional Partnership Interests in the form of Partnership Units for any Partnership purpose
at any time or from time to time, including but not limited to Partnership Units issued in
connection with acquisitions of properties, to the Partners (including the General Partner) or to
other Persons for such consideration and on such terms and conditions as shall be established by
the General Partner in its sole and absolute discretion, all without the approval of any Limited
Partners. Any additional Partnership Interests issued thereby may be issued in one or more classes,
or one or more series of any of such classes, with such designations, preferences and relative,
participating, optional or other special rights, powers and duties, including rights, powers and
duties senior to Limited Partnership Interests, all as shall be determined by the General Partner
in its sole and absolute discretion and without the approval of any Limited Partner, subject to
Delaware law, including, without limitation, (i) the allocations of items of Partnership income,
gain, loss, deduction and credit to each such class or series of Partnership Interests; (ii) the
right of each such class or series of Partnership Interests to share in Partnership distributions;
and (iii) the rights of each such class or series of Partnership Interests upon dissolution and
liquidation of the Partnership; provided, however, that no additional Partnership Interests shall
be issued to the General Partner unless:



                    (1)(A) the additional Partnership Interests are issued in connection with an issuance of REIT
Shares of or other interests in the General Partner, which shares or interests have designations,
preferences and other rights, all such that the economic interests are substantially similar to the
designations, preferences and other rights of the additional Partnership Interests issued to the
General Partner by the Partnership in accordance with this Section 4.2 and (B) the General Partner
shall make a Capital Contribution to the Partnership in an amount equal to the proceeds raised in
connection with the issuance of such shares of stock of or other interests in the General Partner;



                    (2) the additional Partnership Interests are issued in exchange for property owned by the
General Partner with a fair market value, as determined by the General Partner, in good faith,
equal to the value of the Partnership Interests; or



                    (3) the additional Partnership Interests are issued to all Partners holding Partnership Units
in proportion to their respective Percentage Interests.



               Without limiting the foregoing, the General Partner is expressly authorized to cause the
Partnership to issue Partnership Units for less than fair market value, so long as the General
Partner concludes in good faith that such issuance is in the best interests of the General Partner
and the Partnership.




               (ii) Upon Issuance of Additional Securities. The General Partner shall not issue any
Additional Securities other than to all holders of REIT Shares, unless (A) the General Partner
shall cause the Partnership to issue to the General Partner, as the General Partner may designate,
Partnership Interests or rights, options, warrants or convertible or exchangeable securities of the
Partnership having designations, preferences and other rights, all such that the economic interests
are substantially similar to those of the Additional Securities, and (B) the General Partner
contributes the proceeds from the issuance of such Additional Securities and from any exercise of
rights contained in such Additional Securities, directly and through the General Partner, to the
Partnership; provided, however, that the General Partner is allowed to issue Additional Securities
in connection with an acquisition of a Property to be held directly by the General Partner, but if
and only if, such direct acquisition and issuance of Additional Securities have been approved and
determined to be in the best interests of the General Partner and the Partnership by a majority of
the Independent Directors. Without



13









 







limiting the foregoing, the General Partner is expressly authorized to issue Additional
Securities for less than fair market value, and to cause the Partnership to issue to the General
Partner corresponding Partnership Interests, so long as (x) the General Partner concludes in good
faith that such issuance is in the best interests of the General Partner and the Partnership,
including without limitation, the issuance of REIT Shares and corresponding Partnership Units
pursuant to an employee share purchase plan providing for employee purchases of REIT Shares at a
discount from fair market value or employee stock options that have an exercise price that is less
than the fair market value of the REIT Shares, either at the time of issuance or at the time of
exercise, and (y) the General Partner contributes all proceeds from such issuance to the
Partnership. For example, in the event the General Partner issues REIT Shares for a cash purchase
price and contributes all of the proceeds of such issuance to the Partnership as required
hereunder, the General Partner shall be issued a number of additional Partnership Units equal to
the product of (A) the number of such REIT Shares issued by the General Partner, the proceeds of
which were so contributed, multiplied by (B) a fraction, the numerator of which is 100%, and the
denominator of which is the Conversion Factor in effect on the date of such contribution.



          (b) Certain Deemed Contributions of Proceeds of Issuance of REIT Shares. In connection with any
and all issuances of REIT Shares, the General Partner shall make Capital Contributions to the
Partnership of the proceeds therefrom, provided that if the proceeds actually received and
contributed by the General Partner are less than the gross proceeds of such issuance as a result of
any underwriter’s discount or other expenses paid or incurred in connection with such issuance,
then the General Partner shall be deemed to have made Capital Contributions to the Partnership in
the aggregate amount of the gross proceeds of such issuance and the Partnership shall be deemed
simultaneously to have paid such offering expenses in accordance with Section 6.5 hereof and in
connection with the required issuance of additional Partnership Units to the General Partner for
such Capital Contributions pursuant to Section 4.2(a) hereof.



          (c) Minimum Limited Partnership Interest. In the event that either a redemption pursuant to
Section 8.5 hereof or additional Capital Contributions by the General Partner would result in the
Limited Partners, in the aggregate, owning less than the Minimum Limited Partnership Interest, the
General Partner and the Limited Partners (other than the Limited Partners that own only Special
Partnership Units) shall form another partnership and contribute sufficient Limited Partnership
Interests (other than Special Partnership Units) together with such other Limited Partners so that
the limited partners of such partnership own at least the Minimum Limited Partnership Interest.



     4.3 Additional Funding.



     If the General Partner determines that it is in the best interests of the Partnership to
provide for additional Partnership funds (“Additional Funds”) for any Partnership purpose,
the General Partner may (i) cause the Partnership to obtain such funds from outside borrowings or
(ii) elect to have the General Partner or any of its Affiliates provide such Additional Funds to
the Partnership through loans or otherwise, provided, however, that the Partnership may not borrow
money from its Affiliates, unless a majority of the Directors of the General Partner (including a
majority of Independent Directors) not otherwise interested in such transaction approve the
transaction as being fair, competitive, and commercially reasonable and no less favorable to the
Partnership than loans between unaffiliated parties under the same circumstances.



     4.4 Capital Accounts.



     A separate capital account (a “Capital Account”) shall be established and maintained
for each Partner in accordance with Regulations Section 1.704-1(b)(2)(iv). If (i) a new or existing
Partner acquires an additional Partnership Interest in exchange for more than a de minimis Capital
Contribution, (ii) the



14









 







Partnership distributes to a Partner more than a de minimis amount of Partnership property or
money as consideration for a Partnership Interest, or (iii) the Partnership is liquidated within
the meaning of Regulation Section 1.704-1(b)(2)(ii)(g), the General Partner shall revalue the
Property of the Partnership to its fair market value (as determined by the General Partner, in its
sole and absolute discretion, and taking into account Section 7701(g) of the Code) in accordance
with Regulations Section 1.704-1(b)(2)(iv)(f). When the Partnership’s Property is revalued by the
General Partner, the Capital Accounts of the Partners shall be adjusted in accordance with
Regulations Sections 1.704-1(b)(2)(iv)(f) and (g), which generally require such Capital Accounts to
be adjusted to reflect the manner in which the unrealized gain or loss inherent in such Property
(that has not been reflected in the Capital Accounts previously) would be allocated among the
Partners pursuant to Section 5.1 if there were a taxable disposition of such Property for its fair
market value (as determined by the General Partner, in its sole and absolute discretion, and taking
into account Section 7701(g) of the Code) on the date of the revaluation.



     4.5 Percentage Interests.



     If the number of outstanding Partnership Units increases or decreases during a taxable year,
each Partner’s Percentage Interest shall be adjusted by the General Partner effective as of the
effective date of each such increase or decrease to a percentage equal to the number of Partnership
Units held by such Partner divided by the aggregate number of Partnership Units outstanding after
giving effect to such increase or decrease. If the Partners’ Percentage Interests are adjusted
pursuant to this Section 4.5, the Profits and Losses for the taxable year in which the adjustment
occurs shall be allocated between the part of the year ending on the day when the Partnership’s
Property is revalued by the General Partner and the part of the year beginning on the following day
either (i) as if the taxable year had ended on the date of the adjustment or (ii) based on the
number of days in each part. The General Partner, in its sole and absolute discretion, shall
determine which method shall be used to allocate Profits and Losses for the taxable year in which
the adjustment occurs. The allocation of Profits and Losses for the earlier part of the year shall
be based on the Percentage Interests before adjustment, and the allocation of Profits and Losses
for the later part shall be based on the adjusted Percentage Interests.



     4.6 No Interest on Contributions.



     No Partner shall be entitled to interest on its Capital Contribution.



     4.7 Return of Capital Contributions.



     No Partner shall be entitled to withdraw any part of its Capital Contribution or its Capital
Account or to receive any distribution from the Partnership, except as specifically provided in
this Agreement. Except as otherwise provided herein, there shall be no obligation to return to any
Partner or withdrawn Partner any part of such Partner’s Capital Contribution for so long as the
Partnership continues in existence.



     4.8 No Third Party Beneficiary.



     No creditor or other third party having dealings with the Partnership shall have the right to
enforce the right or obligation of any Partner to make Capital Contributions or loans or to pursue
any other right or remedy hereunder or at law or in equity, it being understood and agreed that the
provisions of this Agreement shall be solely for the benefit of, and may be enforced solely by, the
parties hereto 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



15









 







obligation of the Partnership or of any of the Partners. In addition, it is the intent of the
parties hereto that no distribution to any Limited Partner shall be deemed a return of money or
other Property in violation of the Act. However, if any court of competent jurisdiction holds that,
notwithstanding the provisions of this Agreement, any Limited Partner is obligated to return such
money or Property, such obligation shall be the obligation of such Limited Partner and not of the
General Partner. Without limiting the generality of the foregoing, a deficit Capital Account of a
Partner shall not be deemed to be a liability of such Partner nor an asset or Property of the
Partnership.



ARTICLE 5

PROFITS AND LOSSES; DISTRIBUTIONS




     5.1 Allocation of Profit and Loss.



          (a) General. Subject to any special allocations made pursuant to this Section 5.1, Profit and
Loss (or items thereof) of the Partnership for each fiscal year or other applicable period of the
Partnership shall be allocated to the Partners in accordance with their Percentage Interests.




          (b) Special Allocation with Respect to Sales. The items of Profit and Loss of the Partnership for
each fiscal year or other applicable period from Sales shall be allocated among the Partners in a
manner that will, as nearly as possible (after giving effect to the allocations under Section
5.1(a), 5.1(c) and 5.1(d), cause the Capital Account balance of each Partner at the end of such
fiscal year or other applicable period to equal (i) the amount of the hypothetical distribution
that such Partner would receive if the Partnership were liquidated on the last day of such period
and all assets of the Partnership, including cash, were sold for cash equal to their Carrying
Value, taking into account any adjustments thereto for such period, all liabilities of the
Partnership were satisfied in full in cash according to their terms (limited with respect to each
Nonrecourse Liability to the Carrying Value of the assets securing such liability) and Net Sales
Proceeds (after satisfaction of such liabilities) were distributed in full pursuant to Section
5.2(b)(i), minus (ii) the sum of such Partner’s share of Partnership Minimum Gain and Partner
Nonrecourse Debt Minimum Gain and the amount, if any and without duplication, that the Partner
would be obligated to contribute to the capital of the Partnership, all computed as of the date of
the hypothetical sale of assets.




          (c) Nonrecourse Deductions; Minimum Gain Chargeback. In the event there is a net decrease in
Partnership Minimum Gain during any fiscal year, the “minimum gain chargeback” described in
Regulations Section 1.704-2(f) and Regulations Section 1.704-2(g) shall apply. In the event there
is a net decrease in Partner Nonrecourse Debt Minimum Gain during any fiscal year, the “partner
minimum gain chargeback” described in Regulations Section 1.704-2(i)(4) shall apply.




          (d) Qualified Income Offset. This Section 5.1(d) incorporates the “qualified income offset” set
forth in Regulations Section 1.704-1(b)(2)(ii)(d) as if those provisions were fully set forth in
this Section 5.1(d).




          (e) Capital Account Deficits. Loss (or items of Loss) shall not be allocated to a Limited Partner
to the extent that such allocation would cause or increase a deficit in such Partner’s Capital
Account at the end of any fiscal year (after reduction to reflect the items described in
Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6)) to exceed the sum of such Partner’s
shares of Partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain, as determined in
accordance with Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5). Any Loss in excess of that
limitation shall be allocated to the General Partner. After the occurrence of an allocation of Loss
to the General Partner in




16









 







accordance with this Section 5.1(e), to the extent permitted by Regulations Section
1.704-1(b), Profit shall be allocated to such Partner in an amount necessary to offset the Loss
previously allocated to such Partner under this Section 5.1(e).




          (f) Nonrecourse Deductions. Nonrecourse Deductions for any fiscal year shall be allocated to
Partners pro rata in proportion to their Percentage Interests.




          (g) Partner Nonrecourse Deductions. The Partner Nonrecourse Deductions of the Partnership
(as determined under Regulations Section 1.704-2(i)(2)) shall be allocated each year to the Partner
that bears the economic risk of loss (within the meaning of Regulations Section 1.752-2) with
respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are
attributable.




          (h) Allocations Between Transferor and Transferee. If a Partner transfers any part or all of its
Partnership Interest, the distributive shares of the various items of Profit and Loss allocable
among the Partners during such fiscal year of the Partnership shall be allocated between the
transferor and the transferee Partner either (i) as if the Partnership’s fiscal year had ended on
the date of the transfer, or (ii) based on the number of days of such fiscal year that each was a
Partner without regard to the results of Partnership activities in the respective portions of such
fiscal year in which the transferor and the transferee were Partners. The General Partner, in its
sole and absolute discretion, shall determine which method shall be used to allocate the
distributive shares of the various items of Profit and Loss between the transferor and the
transferee Partner.




          (i) Definition of Profit and Loss. “Profit” and “Loss” and any items of income, gain, expense, or
loss referred to in this Agreement shall be determined in accordance with federal income tax
accounting principles, as modified by Regulations Section 1.704-1(b)(2)(iv), except that Profit and
Loss shall not include items of income, gain and expense that are specially allocated pursuant to
Sections 5.1(b), 5.1(c), 5.1(d) or 5.1(e). All allocations of Profit and Loss (and all items
contained therein) for federal income tax purposes shall be identical to all allocations of such
items set forth in this Section 5.1, except as otherwise required by Section 704(c) of the Code and
Regulations Section 1.704-1(b)(4). The General Partner shall have the authority to elect the method
to be used by the Partnership for allocating items of income, gain, and expense as required by
Section 704(c) of the Code including a method that may result in a Partner receiving a
disproportionately larger share of the Partnership tax depreciation deductions, and such election
shall be binding on all Partners.




          (j) Target Final Balances. The allocation provisions of this Agreement are intended to produce
final Capital Account balances that are at levels (“Target Final Balances”) that permit
liquidating distributions that are made in accordance with such final Capital Account balances to
be equal to the distributions that would occur under Section 5.2 hereof if liquidation proceeds
were distributed pursuant to Section 5.2. To the extent the allocation provisions of this Agreement
would not produce the Target Final Balances, the Partners agree to take such actions as are
necessary to amend such allocation provisions to produce such Target Final Balances. In furtherance
of the foregoing, the General Partner is expressly authorized and directed to make such allocations
of income, gain, loss and deduction (including items of gross income, gain, loss and deduction) in
the year of liquidation of the Partnership so as to cause the Capital Accounts of the Partners that
determine the amounts that are distributed to the Partners under Section 5.6 to be equal to the
Target Final Balances.




     5.2 Distribution of Cash.



          (a) The Partnership shall distribute cash on a quarterly (or, at the election of the General
Partner, more frequent) basis, in an amount determined by the General Partner in its sole and
absolute discretion, to the Partners who are Partners on the Partnership Record Date with
respect to such




17









 







quarter (or other distribution period) in accordance with Section 5.2(b); provided,
however, that if a new or existing Partner acquires an additional Partnership Interest in exchange
for a Capital Contribution on any date other than a Partnership Record Date, the cash distribution
attributable to such additional Partnership Interest relating to the Partnership Record Date next
following the issuance of such additional Partnership Interest shall be reduced in the proportion
equal to one minus (i) the number of days that such additional Partnership Interest is held by such
Partner bears to (ii) the number of days between such Partnership Record Date and the immediately
preceding Partnership Record Date.




          (b) Except for distributions pursuant to Section 5.6 of this Agreement in connection with the
dissolution and liquidation of the Partnership and subject to the provisions of Section 5.2(c),
5.2(d), 5.3 and 5.5 of this Agreement, distributions shall be made in accordance with the following
provisions:




               (i) all distributions of Net Sales Proceeds shall be made: (A) first, 100% to the OP
Unitholders in accordance with their respective Percentage Interests on the Partnership Record Date
until the OP Unitholders have received cumulative distributions under this Section 5.2(b) equal to
the aggregate Capital Contributions made by the OP Unitholders to the Partnership plus a
cumulative, noncompounded pre-tax rate of return thereon of 8.0% per annum, determined by taking
into account the dates on which all such Capital Contributions and distributions were made and (B)
second, (1) 85% to the OP Unitholders, in accordance with their respective Percentage Interests on
the Partnership Record Date and (2) 15% to the Special OP Unitholders in accordance with their
respective Special Percentage Interests on the Partnership Record Date; and



               (ii) all distributions of cash other than Net Sales Proceeds shall be made to the OP
Unitholders in accordance with their respective Percentage Interests on the Partnership Record
Date.



          (c) Notwithstanding any other provision of this Agreement, the General Partner is authorized
to take any action that it determines to be necessary or appropriate to cause the Partnership to
comply with any withholding requirements established under the Code or any other federal, state or
local law including, without limitation, pursuant to Sections 1441, 1442, 1445 and 1446 of the
Code. To the extent that the Partnership is required to withhold and pay over to any taxing
authority any amount resulting from the allocation or distribution of income to any Partner or
assignee (including by reason of Section 1446 of the Code), either (i) if the actual amount to be
distributed to the Partner equals or exceeds the amount required to be withheld by the Partnership,
the amount withheld shall be treated as a distribution of cash in the amount of such withholding to
such Partner, or (ii) if the actual amount to be distributed to the Partner is less than the amount
required to be withheld by the Partnership, the actual amount shall be treated as a distribution of
cash in the amount of such withholding and the additional amount required to be withheld shall be
treated as a loan (a “Partnership Loan”) from the Partnership to the Partner on the day the
Partnership pays over such amount to a taxing authority. A Partnership Loan shall be repaid through
withholding by the Partnership with respect to subsequent distributions to the applicable Partner
or assignee. In the event that a Limited Partner (a “Defaulting Limited Partner”) fails to
pay any amount owed to the Partnership with respect to the Partnership Loan within fifteen (15)
days after demand for payment thereof is made by the Partnership on the Limited Partner, the
General Partner, in its sole and absolute discretion, may elect to make the payment to the
Partnership on behalf of such Defaulting Limited Partner. In such event, on the date of payment,
the General Partner shall be deemed to have extended a loan (a “General Partner Loan”) to
the Defaulting Limited Partner in the amount of the payment made by the General Partner and shall
succeed to all rights and remedies of the Partnership against the Defaulting Limited Partner as to
that amount. Without limitation, the General Partner shall have the right to receive any
distributions that otherwise would be made by the Partnership to the
Defaulting Limited Partner until such time as the General Partner Loan has been paid in full,
and any such




18









 







distributions so received by the General Partner shall be treated as having been
received by the Defaulting Limited Partner and immediately paid to the General Partner.




          Any amounts treated as a Partnership Loan or a General Partner Loan pursuant to this Section
5.2(c) shall bear interest at the lesser of (i) the base rate on corporate loans at large United
States money center commercial banks, as published from time to time in The Wall Street Journal, or
(ii) the maximum lawful rate of interest on such obligation, such interest to accrue from the date
the Partnership or the General Partner, as applicable, is deemed to extend the loan until such loan
is repaid in full.




          (d) In no event may a Partner receive a distribution of cash with respect to a Partnership
Unit if such Partner is entitled to receive a cash distribution as the holder of record of a REIT
Share for which all or part of such Partnership Unit has been or will be exchanged.




     5.3 REIT Distribution Requirements.



     The General Partner shall use its commercially reasonable efforts to cause the Partnership to
distribute amounts sufficient to enable the General Partner to make stockholder distributions that
will allow the General Partner to (i) meet its distribution requirement for qualification as a REIT
as set forth in Section 857 of the Code and (ii) avoid any federal income or excise tax liability
imposed by the Code.



     5.4 No Right to Distributions in Kind.



     No Partner shall be entitled to demand Property other than cash in connection with any
distributions by the Partnership.



     5.5 Limitations on Return of Capital Contributions.



     Notwithstanding any of the provisions of this Article 5, no Partner shall have the right to
receive, and the General Partner shall not have the right to make, a distribution that includes a
return of all or part of a Partner’s Capital Contributions, unless after giving effect to the
return of a Capital Contribution, the sum of all Partnership liabilities, other than the
liabilities to a Partner for the return of his Capital Contribution, does not exceed the fair
market value of the Partnership’s assets.



     5.6 Distributions Upon Liquidation.



     Upon liquidation of the Partnership, after payment of, or adequate provision for, debts and
obligations of the Partnership, including any Partner loans, any remaining assets of the
Partnership shall be distributed to all Partners in accordance with Section 5.2(b). To the extent
deemed advisable by the General Partner, appropriate arrangements (including the use of a
liquidating trust) may be made to assure that adequate funds are available to pay any contingent
debts or obligations.



     5.7 Substantial Economic Effect.



     It is the intent of the Partners that the allocations of Profit and Loss under this Agreement
have substantial economic effect (or be consistent with the Partners’ interests in the Partnership
in the case of the allocation of losses attributable to nonrecourse debt) within the meaning of
Section 704(b) of the Code as interpreted by the Regulations promulgated pursuant thereto. Article
5 and other relevant provisions of this Agreement shall be interpreted in a manner consistent with
such intent.



19









 





ARTICLE 6

RIGHTS, OBLIGATIONS AND

POWERS OF THE GENERAL PARTNER




     6.1 Management of the Partnership.



          (a) Except as otherwise expressly provided in this Agreement, the General Partner shall have
full, complete and exclusive discretion to manage and control the business of the Partnership for
the purposes herein stated, and shall make all decisions affecting the business and assets of the
Partnership. Subject to the restrictions specifically contained in this Agreement, the powers of
the General Partner shall include, without limitation, the authority to take the following actions
on behalf of the Partnership:




               (i) to acquire, purchase, own, operate, lease and dispose of any real property and any other
property or assets including, but not limited to notes and mortgages and other real estate related
investments, that the General Partner determines are necessary or appropriate or in the best
interests of the business of the Partnership;



               (ii) to construct buildings and make other improvements on the properties owned or leased by
the Partnership;



               (iii) to authorize, issue, sell, redeem or otherwise purchase any Partnership Interests or any
securities (including secured and unsecured debt obligations of the Partnership, debt obligations
of the Partnership convertible into any class or series of Partnership Interests, or options,
rights, warrants or appreciation rights relating to any Partnership Interests) of the Partnership;



               (iv) to borrow or lend money for the Partnership, issue or receive evidences of indebtedness
in connection therewith, refinance, increase the amount of, modify, amend or change the terms of,
or extend the time for the payment of, any such indebtedness, and secure such indebtedness by
mortgage, deed of trust, pledge or other lien on the Partnership’s assets;



               (v) to pay, either directly or by reimbursement, for all operating costs and general
administrative expenses of the Partnership to third parties or to the General Partner or its
Affiliates as set forth in this Agreement;



               (vi) to guarantee or become a co-maker of indebtedness of the General Partner or any
Subsidiary thereof, refinance, increase the amount of, modify, amend or change the terms of, or
extend the time for the payment of, any such guarantee or indebtedness, and secure such guarantee
or indebtedness by mortgage, deed of trust, pledge or other lien on the Partnership’s assets;



               (vii) to use assets of the Partnership (including, without limitation, cash on hand) for any
purpose consistent with this Agreement, including, without limitation, payment, either directly or
by reimbursement, of all operating costs and general administrative expenses of the General
Partner, the Partnership or any Subsidiary of either, to third parties or to the General Partner as
set forth in this Agreement;



               (viii) to lease all or any portion of any of the Partnership’s assets, whether or not the
terms of such leases extend beyond the termination date of the Partnership and whether or not any
portion of the Partnership’s assets so leased are to be occupied by the lessee, or, in turn,
subleased in



20









 







whole or in part to others, for such consideration and on such terms as the General Partner
may determine;



               (ix) to prosecute, defend, arbitrate, or compromise any and all claims or liabilities in favor
of or against the Partnership, on such terms and in such manner as the General Partner may
reasonably determine, and similarly to prosecute, settle or defend litigation with respect to the
Partners, the Partnership, or the Partnership’s assets;



               (x) to file applications, communicate, and otherwise deal with any and all governmental
agencies having jurisdiction over, or in any way affecting, the Partnership’s assets or any other
aspect of the Partnership business;



               (xi) to make or revoke any election permitted or required of the Partnership by any taxing
authority;



               (xii) to maintain such insurance coverage for public liability, fire and casualty, and any and
all other insurance for the protection of the Partnership, for the conservation of Partnership
assets, or for any other purpose convenient or beneficial to the Partnership, in such amounts and
such types, as it shall determine from time to time;



               (xiii) to determine whether or not to apply any insurance proceeds for any Property to the
restoration of such Property or to distribute the same;



               (xiv) to establish one or more divisions of the Partnership, to hire and dismiss employees of
the Partnership or any division of the Partnership, and to retain legal counsel, accountants,
consultants, real estate brokers, and such other persons, as the General Partner may deem necessary
or appropriate in connection with the Partnership business and to pay therefor such remuneration as
the General Partner may deem reasonable and proper;



               (xv) to retain other services of any kind or nature in connection with the Partnership
business, and to pay therefor such remuneration as the General Partner may deem reasonable and
proper;



               (xvi) to negotiate and conclude agreements on behalf of the Partnership with respect to any of
the rights, powers and authority conferred upon the General Partner;



               (xvii) to maintain accurate accounting records and to file promptly all federal, state and
local income tax returns on behalf of the Partnership;



               (xviii) to distribute Partnership cash or other Partnership assets in accordance with this
Agreement;



               (xix) to form or acquire an interest in, and contribute Property to, any further limited or
general partnerships, joint ventures or other relationships that it deems desirable (including,
without limitation, the acquisition of interests in, and the contributions of Property to, its
Subsidiaries and any other Person in which it has an equity interest from time to time);



               (xx) to establish Partnership reserves for working capital, capital expenditures, contingent
liabilities, or any other valid Partnership purpose;



21









 





               (xxi) to merge, consolidate or combine the Partnership with or into another Person;



               (xxii) to do any and all acts and things necessary or prudent to ensure that the Partnership
will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Code;
and



               (xxiii) to take such other action, execute, acknowledge, swear to or deliver such other
documents and instruments, and perform any and all other acts that the General Partner deems
necessary or appropriate for the formation, continuation and conduct of the business and affairs of
the Partnership (including, without limitation, all actions consistent with allowing the General
Partner at all times to qualify as a REIT unless the General Partner voluntarily terminates its
REIT status) and to possess and enjoy all of the rights and powers of a general partner as provided
by the Act.



          (b) Except as otherwise provided herein, to the extent the duties of the General Partner
require expenditures of funds to be paid to third parties, the General Partner shall not have any
obligations hereunder except to the extent that Partnership funds are reasonably available to it
for the performance of such duties, and nothing herein contained shall be deemed to authorize or
require the General Partner, in its capacity as such, to expend its individual funds for payment to
third parties or to undertake any individual liability or obligation on behalf of the Partnership.




     6.2 Delegation of Authority.



     The General Partner may delegate any or all of its powers, rights and obligations hereunder,
and may appoint, employ, contract or otherwise deal with any Person for the transaction of the
business of the Partnership, which Person may, under supervision of the General Partner, perform
any acts or services for the Partnership as the General Partner may approve.



     6.3 Indemnification and Exculpation of Indemnitees.



          (a) The Partnership shall indemnify an Indemnitee from and against any and all losses, claims,
damages, liabilities, joint or several, expenses (including reasonable legal fees and expenses),
judgments, fines, settlements, and other amounts arising from any and all claims, demands, actions,
suits or proceedings, civil, criminal, administrative or investigative, that relate to the
operations of the Partnership as set forth in this Agreement in which any Indemnitee may be
involved, or is threatened to be involved, as a party or otherwise, unless it is established that:
(i) the act or omission of the Indemnitee was material to the matter giving rise to the proceeding
and either was committed in bad faith or was the result of active and deliberate dishonesty; (ii)
the Indemnitee actually received an improper personal benefit in money, Property or services; or
(iii) in the case of any criminal proceeding, the Indemnitee had reasonable cause to believe that
the act or omission was unlawful. Any indemnification pursuant to this Section 6.3 shall be made
only out of the assets of the Partnership.




          (b) The Partnership shall reimburse an Indemnitee for reasonable expenses incurred by an
Indemnitee who is a party to a proceeding in advance of the final disposition of the proceeding
upon receipt by the Partnership of (i) a written affirmation by the Indemnitee of the Indemnitee’s
good faith belief that the standard of conduct necessary for indemnification by the Partnership as
authorized in this Section 6.3 has been met, and (ii) a written undertaking by or on behalf of the
Indemnitee to repay the amount if it shall ultimately be determined that the standard of conduct
has not been met.




          (c) The indemnification provided by this Section 6.3 shall be in addition to any other rights
to which an Indemnitee or any other Person may be entitled under any agreement, pursuant to any




22









 







vote of the Partners, as a matter of law or otherwise, and shall continue as to an Indemnitee who
has ceased to serve in such capacity.




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




          (e) For purposes of this Section 6.3, the Partnership shall be deemed to have requested an
Indemnitee to serve as fiduciary of an employee benefit plan whenever the performance by it of its
duties to the Partnership also imposes duties on, or otherwise involves services by, it to the plan
or participants or beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect
to an employee benefit plan pursuant to applicable law shall constitute fines within the meaning of
this Section 6.3; and actions taken or omitted by the Indemnitee with respect to an employee
benefit plan in the performance of its duties for a purpose reasonably believed by it to be in the
interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose
which is not opposed to the best interests of the Partnership.




          (f) In no event may an Indemnitee subject the Limited Partners to personal liability by reason
of the indemnification provisions set forth in this Agreement.




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




          (h) The provisions of this Section 6.3 are for the benefit of the Indemnitees, their heirs,
successors, assigns and administrators and shall not be deemed to create any rights for the benefit
of any other Persons.




          (i) Notwithstanding the foregoing, the Partnership may not indemnify or hold harmless an
Indemnitee for any liability or loss unless all of the following conditions are met: (i) the
Indemnitee has determined, in good faith, that the course of conduct that caused the loss or
liability was in the best interests of the Partnership; (ii) the Indemnitee was acting on behalf of
or performing services for the Partnership; (iii) the liability or loss was not the result of (A)
negligence or misconduct, in the case that the Indemnitee is a director of the General Partner
(other than an Independent Director), the Advisor or an Affiliate of the Advisor or (B) gross
negligence or willful misconduct, in the case that the Indemnitee is an Independent Director; and
(iv) the indemnification or agreement to hold harmless is recoverable only out of net assets of the
Partnership. In addition, the Partnership shall not provide indemnification for any loss, liability
or expense arising from or out of an alleged violation of federal or state securities laws by such
party unless one or more of the following conditions are met: (i) there has been a successful
adjudication on the merits of each count involving alleged material securities law violations as to
the Indemnitee; (ii) such claims have been dismissed with prejudice on the merits by a court of
competent jurisdiction as to the Indemnitee; or (iii) a court of competent jurisdiction approves a
settlement of the claims against the Indemnitee and finds that indemnification of the settlement
and the related costs should be made, and the court considering the request for indemnification has
been advised of the position of the Commission and of the published position of any state
securities regulatory authority in which Securities were offered or sold as to indemnification for
violations of securities laws.




23









 








     6.4 Liability of the General Partner.



          (a) Notwithstanding anything to the contrary set forth in this Agreement, the General Partner
shall not be liable for monetary damages to the Partnership or any Partners for losses sustained or
liabilities incurred as a result of errors in judgment or of any act or omission if the General
Partner acted in good faith. The General Partner shall not be in breach of any duty that the
General Partner may owe to the Limited Partners or the Partnership or any other Persons under this
Agreement or of any duty stated or implied by law or equity provided the General Partner, acting in
good faith, abides by the terms of this Agreement.




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




          (c) Subject to its obligations and duties as General Partner set forth in Section 6.1 hereof,
the General Partner may exercise any of the powers granted to it under this Agreement and perform
any of the duties imposed upon it hereunder either directly or by or through its agents. The
General Partner shall not be responsible for any misconduct or negligence on the part of any such
agent appointed by it in good faith.




          (d) Notwithstanding any other provisions of this Agreement or the Act, any action of the
General Partner on behalf of the Partnership or any decision of the General Partner to refrain from
acting on behalf of the Partnership, undertaken in the good faith belief that such action or
omission is necessary or advisable in order (i) to protect the ability of the General Partner to
continue to qualify as a REIT or (ii) to prevent the General Partner from incurring any taxes under
Section 857, Section 4981, or any other provision of the Code, is expressly authorized under this
Agreement and is deemed approved by all of the Limited Partners.




          (e) Any amendment, modification or repeal of this Section 6.4 or any provision hereof shall be
prospective only and shall not in any way affect the limitations on the General Partner’s liability
to the Partnership and the Limited Partners under this Section 6.4 as in effect immediately prior
to such amendment, modification or repeal with respect to matters occurring, in whole or in part,
prior to such amendment, modification or repeal, regardless of when claims relating to such matters
may arise or be asserted.




     6.5 Reimbursement of General Partner.



          (a) Except as provided in this Section 6.5 and elsewhere in this Agreement (including the
provisions of Articles 5 and 6 regarding distributions, payments, and allocations to which it




24









 







may be entitled), the General Partner shall not be compensated for its services as general
partner of the Partnership.




          (b) The General Partner shall be reimbursed on a monthly basis, or such other basis as the
General Partner may determine in its sole and absolute discretion, for all Administrative Expenses
incurred by the General Partner. Reimbursement of Administrative Expenses shall be treated as an
expense of the Partnership and not as allocations of Partnership income or gain.




     6.6 Outside Activities.



     Subject to Section 6.8 hereof, the Articles of Incorporation and any agreements entered into
by the General Partner or its Affiliates with the Partnership or a Subsidiary, any officer,
director, employee, agent, trustee, Affiliate or stockholder of the General Partner, the General
Partner shall be entitled to and may have business interests and engage in business activities in
addition to those relating to the Partnership, including business interests and activities
substantially similar or identical to those of the Partnership. Neither the Partnership nor any of
the Limited Partners shall have any rights by virtue of this Agreement in any such business
ventures, interests or activities. None of the Limited Partners nor any other Person shall have any
rights by virtue of this Agreement or the partnership relationship established hereby in any such
business ventures, interests or activities, and the General Partner shall have no obligation
pursuant to this Agreement to offer any interest in any such business ventures, interests and
activities to the Partnership or any Limited Partner, even if such opportunity is of a character
which, if presented to the Partnership or any Limited Partner, could be taken by such Person.



     6.7 Employment or Retention of Affiliates.



          (a) Any Affiliate of the General Partner may be employed or retained by the Partnership and
may otherwise deal with the Partnership (whether as a buyer, lessor, lessee, manager, furnisher of
goods or services, broker, agent, lender or otherwise) and may receive from the Partnership any
compensation, price, or other payment therefor which the General Partner determines to be fair and
reasonable.




          (b) The Partnership may lend or contribute to its Subsidiaries or other Persons in which it
has an equity investment, and such Persons may borrow funds from the Partnership, on terms and
conditions established in the sole and absolute discretion of the General Partner. The foregoing
authority shall not create any right or benefit in favor of any Subsidiary or any other Person.




          (c) The Partnership may transfer assets to joint ventures, other partnerships, corporations or
other business entities in which it is or thereby becomes a participant upon such terms and subject
to such conditions as the General Partner deems are consistent with this Agreement, applicable law
and the REIT status of the General Partner.




          (d) Except as expressly permitted by this Agreement, neither the General Partner nor any of
its Affiliates shall sell, transfer or convey any Property to, or purchase any Property from, the
Partnership, directly or indirectly, except pursuant to transactions that are, in the General
Partner’s sole discretion, on terms that are fair and reasonable to the Partnership.




     6.8 General Partner Participation.



     The General Partner agrees that all business activities of the General Partner, including
activities pertaining to the acquisition, development or ownership of any Real Estate Asset or
other Property shall be conducted through the Partnership, a Subsidiary, a Subsidiary Partnership
or a taxable REIT subsidiary



25









 




(within the meaning of Section 856(1) of the Code); provided, however, that the General
Partner is allowed to make a direct acquisition, but if and only if, such acquisition is made in
connection with the issuance of Additional Securities, which direct acquisition and issuance have
been approved and determined to be in the best interests of the General Partner and the Partnership
by a majority of the Independent Directors.




     6.9 Title to Partnership Assets.



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



     6.10 Miscellaneous.



     In the event the General Partner redeems any REIT Shares (other than REIT Shares redeemed in
accordance with the share redemption program of the General Partner through proceeds received from
the General Partner’s dividend reinvestment plan), then the General Partner shall cause the
Partnership to purchase from the General Partner a number of Partnership Units as determined based
on the application of the Conversion Factor on the same terms that the General Partner redeemed
such REIT Shares. Moreover, if the General Partner makes a cash tender offer or other offer to
acquire REIT Shares, then the General Partner shall cause the Partnership to make a corresponding
offer to the General Partner to acquire an equal number of Partnership Units held by the General
Partner. In the event any REIT Shares are redeemed by the General Partner pursuant to such offer,
the Partnership shall redeem an equivalent number of the General Partner’s Partnership Units for an
equivalent purchase price based on the application of the Conversion Factor.



     6.11 No Duplication of Fees or Expenses.



     The Partnership may not incur or be responsible for any fee or expense (in connection with the
Offering or otherwise) that would be duplicative of fees and expenses paid by the General Partner.



ARTICLE 7

CHANGES IN GENERAL PARTNER




     7.1 Transfer of the General Partner’s Partnership Interest.



          (a) The General Partner shall not transfer all or any portion of its General Partnership
Interest or withdraw as General Partner except as provided in, or in connection with a transaction
contemplated by, Section 7.1(c), (d) or (e).




          (b) The General Partner agrees that its Percentage Interest will at all times be, in the
aggregate, at least 0.1%.




26









 








          (c) Except as otherwise provided in Section 6.4(b) or Section 7.1(d) or (e) hereof, the
General Partner shall not engage in any merger, consolidation or other combination with or into
another Person or the sale of all or substantially all of its assets, (other than in connection
with a change in the General Partner’s state of incorporation or organizational form) in each case
which results in a change of control of the General Partner (a “Transaction”), unless:




               (i) the consent of Limited Partners holding more than 50% of the Percentage Interests and more
than 50% of the Special Percentage Interests of the Limited Partners is obtained;



               (ii) as a result of such Transaction all Limited Partners will receive (A) for each
Partnership Unit an amount of cash, securities, or other Property equal to the product of the
Conversion Factor and the greatest amount of cash, securities or other Property paid in the
Transaction to a holder of one REIT Share in consideration of one REIT Share, provided that if, in
connection with the Transaction, a purchase, tender or exchange offer (“Offer”) shall have
been made to and accepted by the holders of more than 50% of the outstanding REIT Shares, each
holder of Partnership Units shall be given the option to exchange its Partnership Units for the
greatest amount of cash, securities, or other Property which a Limited Partner holding Partnership
Units would have received had it (1) exercised its Redemption Right and (2) sold, tendered or
exchanged pursuant to the Offer the REIT Shares received upon exercise of the Redemption Right
immediately prior to the expiration of the Offer and (B) for each Special Partnership Unit an
amount of cash, securities or other Property (as applicable based upon the type of consideration
and the proportions thereof paid to holders of REIT Shares in the Transaction) equal to the fair
market value of such Special Partnership Unit at such time as determined in good faith by the
General Partner by reference to the value paid for the REIT Shares; or



               (iii) the General Partner is the surviving entity in the Transaction and either (A) the
holders of REIT Shares do not receive cash, securities, or other Property in the Transaction or (B)
all Limited Partners (other than the General Partner or any Subsidiary) receive (1) in exchange for
their Partnership Units, an amount of cash, securities, or other Property (expressed as an amount
per REIT Share) that is no less than the product of the Conversion Factor and the greatest amount
of cash, securities, or other Property (expressed as an amount per REIT Share) received in the
Transaction by any holder of REIT Shares and (2) in exchange for their Special Partnership Units,
an amount of cash, securities or other Property (as applicable based upon the type of consideration
and the proportions thereof paid to holders of REIT Shares in the Transaction) equal to the fair
market value of such Special Partnership Units at such time as determined in good faith by the
General Partner by reference to the value paid for the REIT Shares.



          (d) Notwithstanding Section 7.1(c), the General Partner may merge with or into or consolidate
with another entity if immediately after such merger or consolidation (i) substantially all of the
assets of the successor or surviving entity (the “Survivor”), other than Partnership Units
held by the General Partner, are contributed, directly or indirectly, to the Partnership as a
Capital Contribution in exchange for Partnership Units with a fair market value equal to the value
of the assets so contributed as determined by the Survivor in good faith and (ii) the Survivor
expressly agrees to assume all obligations of the General Partner, as appropriate, hereunder. Upon
such contribution and assumption, the Survivor shall have the right and duty to amend this
Agreement as set forth in this Section 7.1(d). The Survivor shall in good faith arrive at a new
method for the calculation of the Cash Amount, the REIT Shares Amount and Conversion Factor for a
Partnership Unit after any such merger or consolidation so as to approximate the existing method
for such calculation as closely as reasonably possible. Such calculation shall take into account,
among other things, the kind and amount of securities, cash and other Property that was receivable
upon such merger or consolidation by a holder of REIT Shares or options, warrants or other rights
relating thereto, and which a holder of Partnership Units could have acquired had such
Partnership Units been exchanged immediately prior to such merger or consolidation. Such
amendment to




27









 







this Agreement shall provide for adjustment to such method of calculation, which shall
be as nearly equivalent as may be practicable to the adjustments provided for with respect to the
Conversion Factor. The Survivor also shall in good faith modify the definition of REIT Shares and
make such amendments to Sections 8.5 and 8.6 hereof so as to approximate the existing rights and
obligations set forth in Sections 8.5 and 8.6 as closely as reasonably possible. The above
provisions of this Section 7.1(d) shall similarly apply to successive mergers or consolidations
permitted hereunder.




          In respect of any transaction described in the preceding paragraph, the General Partner is
required to use its commercially reasonable efforts to structure such transaction to avoid causing
the Limited Partners to recognize a gain for Federal income tax purposes by virtue of the
occurrence of or their participation in such transaction, provided such efforts are consistent with
the exercise of the Board of Directors’ fiduciary duties to the stockholders of the General Partner
under applicable law.




          (e) Notwithstanding Section 7.1(c),




               (i) a General Partner may transfer all or any portion of its General Partnership Interest to
(A) a wholly-owned Subsidiary of such General Partner or (B) the owner of all of the ownership
interests of such General Partner, and following a transfer of all of its General Partnership
Interest, may withdraw as General Partner; and



               (ii) the General Partner may engage in a transaction not required by law or by the rules of
any national securities exchange on which the REIT Shares are listed to be submitted to the vote of
the holders of the REIT Shares.



     7.2 Admission of a Substitute or Additional General Partner.



     A Person shall be admitted as a substitute or additional General Partner of the Partnership
only if the following terms and conditions are satisfied:



          (a) the Person to be admitted as a substitute or additional General Partner shall have
accepted and agreed to be bound by all the terms and provisions of this Agreement by executing a
counterpart thereof and such other documents or instruments as may be required or appropriate in
order to effect the admission of such Person as a General Partner, and a certificate evidencing the
admission of such Person as a General Partner shall have been filed for recordation and all other
actions required by Section 2.5 hereof in connection with such admission shall have been performed;




          (b) if the Person to be admitted as a substitute or additional General Partner is a
corporation or a partnership it shall have provided the Partnership with evidence satisfactory to
counsel for the Partnership of such Person’s authority to become a General Partner and to be bound
by the terms and provisions of this Agreement; and




          (c) counsel for the Partnership shall have rendered an opinion (relying on such opinions from
other counsel as may be necessary) that (x) the admission of the Person to be admitted as a
substitute or additional General Partner is in conformity with the Act and (y) none of the actions
taken in connection with the admission of such Person as a substitute or additional General Partner
will cause (i) the Partnership to be classified other than as a partnership for federal tax
purposes, or (ii) the loss of any Limited Partner’s limited liability.




28









 








     7.3 Effect of Bankruptcy, Withdrawal, Death or Dissolution of a General Partner.



          (a) Upon the occurrence of an Event of Bankruptcy as to a General Partner (and its removal
pursuant to Section 7.4(a) hereof) or the death, withdrawal, removal or dissolution of a General
Partner (except that, if a General Partner is on the date of such occurrence a partnership, the
withdrawal, death, dissolution, Event of Bankruptcy as to, or removal of a partner in, such
partnership shall be deemed not to be a dissolution of such General Partner if the business of such
General Partner is continued by the remaining partner or partners), the Partnership shall be
dissolved and terminated unless the Partnership is continued pursuant to Section 7.3(b) hereof. The
merger of the General Partner with or into any entity that is admitted as a substitute or successor
General Partner pursuant to Section 7.2 hereof shall not be deemed to be the withdrawal,
dissolution or removal of the General Partner.




          (b) Following the occurrence of an Event of Bankruptcy as to a General Partner (and its
removal pursuant to Section 7.4(a) hereof) or the death, withdrawal, removal or dissolution of a
General Partner (except that, if a General Partner is, on the date of such occurrence, a
partnership, the withdrawal of, death, dissolution, Event of Bankruptcy as to, or removal of a
partner in, such partnership shall be deemed not to be a dissolution of such General Partner if the
business of such General Partner is continued by the remaining partner or partners), the Limited
Partners, within ninety (90) days after such occurrence, may elect to continue the business of the
Partnership for the balance of the term specified in Section 2.4 hereof by selecting, subject to
Section 7.2 hereof and any other provisions of this Agreement, a substitute General Partner by
consent of a majority in interest of the Limited Partners. If the Limited Partners elect to
continue the business of the Partnership and admit a substitute General Partner, the relationship
with the Partners and of any Person who has acquired an interest of a Partner in the Partnership
shall be governed by this Agreement.




     7.4 Removal of a General Partner.



          (a) Upon the occurrence of an Event of Bankruptcy as to, or the dissolution of, a General
Partner, such General Partner shall be deemed to be removed automatically; provided, however, that
if a General Partner is on the date of such occurrence a partnership, the withdrawal, death or
dissolution of, Event of Bankruptcy as to, or removal of, a partner in, such partnership shall be
deemed not to be a dissolution of the General Partner if the business of such General Partner is
continued by the remaining partner or partners. The Limited Partners may not remove the General
Partner, with or without cause.




          (b) If a General Partner has been removed pursuant to this Section 7.4 and the Partnership is
continued pursuant to Section 7.3 hereof, such General Partner shall promptly transfer and assign
its General Partnership Interest in the Partnership to the substitute General Partner approved by a
majority in interest of the Limited Partners in accordance with Section 7.3(b) hereof and otherwise
be admitted to the Partnership in accordance with Section 7.2 hereof. At the time of assignment,
the removed General Partner shall be entitled to receive from the substitute General Partner the
fair market value of the General Partnership Interest of such removed General Partner as reduced by
any damages caused to the Partnership by such General Partner. Such fair market value shall be
determined by an appraiser mutually agreed upon by the General Partner and a majority in interest
of the Limited Partners within ten (10) days following the removal of the General Partner. In the
event that the parties are unable to agree upon an appraiser, the removed General Partner and a
majority in interest of the Limited Partners each shall select an appraiser. Each such appraiser
shall complete an appraisal of the fair market value of the removed General Partner’s General
Partnership Interest within thirty (30) days of the General Partner’s removal, and the fair market
value of the removed General Partner’s General Partnership Interest shall be the average of the two
appraisals; provided, however, that if the higher appraisal exceeds the lower appraisal
by more than 20% of the amount of the lower appraisal, the two appraisers, no later than forty
(40) days




29









 







after the removal of the General Partner, shall select a third appraiser who shall
complete an appraisal of the fair market value of the removed General Partner’s General Partnership
Interest no later than sixty (60) days after the removal of the General Partner. In such case, the
fair market value of the removed General Partner’s General Partnership Interest shall be the
average of the two appraisals closest in value.




          (c) The General Partnership Interest of a removed General Partner, during the time after
default until transfer under Section 7.4(b), shall be converted to that of a special Limited
Partner; provided, however, such removed General Partner shall not have any rights to participate
in the management and affairs of the Partnership, and shall not be entitled to any portion of the
income, expense, profit, gain or loss allocations or cash distributions allocable or payable, as
the case may be, to the Limited Partners. Instead, such removed General Partner shall receive and
be entitled only to retain distributions or allocations of such items that it would have been
entitled to receive in its capacity as General Partner, until the transfer is effective pursuant to
Section 7.4(b).




          (d) All Partners shall have given and hereby do give such consents, shall take such actions
and shall execute such documents as shall be legally necessary, desirable and sufficient to effect
all the foregoing provisions of this Section.




ARTICLE 8

RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS




     8.1 Management of the Partnership.



     The Limited Partners shall not participate in the management or control of Partnership
business nor shall they transact any business for the Partnership, nor shall they have the power to
sign for or bind the Partnership, such powers being vested solely and exclusively in the General
Partner.



     8.2 Power of Attorney.



     Each Limited Partner hereby irrevocably appoints the General Partner its true and lawful
attorney-in-fact, who may act for each Limited Partner and in its name, place and stead, and for
its use and benefit, to sign, acknowledge, swear to, deliver, file or record, at the appropriate
public offices, any and all documents, certificates, and instruments as may be deemed necessary or
desirable by the General Partner to carry out fully the provisions of this Agreement and the Act in
accordance with their terms, which power of attorney is coupled with an interest and shall survive
the death, dissolution or legal incapacity of the Limited Partner, or the transfer by the Limited
Partner of any part or all of its Partnership Interest.



     8.3 Limitation on Liability of Limited Partners.



     No Limited Partner shall be liable for any debts, liabilities, contracts or obligations of the
Partnership. A Limited Partner shall be liable to the Partnership only to make payments of its
Capital Contribution, if any, as and when due hereunder. After its Capital Contribution is fully
paid, no Limited Partner shall, except as otherwise required by the Act, be required to make any
further Capital Contributions or other payments or lend any funds to the Partnership.



     8.4 Ownership by Limited Partner of Corporate General Partner or Affiliate.



     No Limited Partner shall at any time, either directly or indirectly, own any stock or other
interest in the General Partner or in any Affiliate thereof, if such ownership by itself or in
conjunction with other
stock or other interests owned by other Limited Partners would, in the opinion of counsel for the



30









 







Partnership, jeopardize the classification of the Partnership as a partnership for federal tax
purposes. The General Partner shall be entitled to make such reasonable inquiry of the Limited
Partners as is required to establish compliance by the Limited Partners with the provisions of this
Section.



     8.5 Redemption Right.



          (a) Subject to Sections 8.5(b), 8.5(c), 8.5(d), 8.5(e) and 8.5(f) and the provisions of any
agreements between the Partnership and one or more Limited Partners with respect to Partnership
Units held by them, each Limited Partner, other than the General Partner, shall, after holding
their Partnership Units for at least one year, have the right (subject to the terms and conditions
set forth herein) to require the Partnership to redeem (a “Redemption”) all or a portion of
the Partnership Units held by such Limited Partner in exchange (a “Redemption Right”) for
REIT Shares issuable on, or the Cash Amount payable on, or a combination thereof having an
equivalent value to the REIT Shares issuable on, or the Cash Amount payable on, the Specified
Redemption Date, as determined by the General Partner in its sole discretion, provided that such
Partnership Units (the “Tendered Units”) shall have been outstanding for at least one year.
Any Redemption Right shall be exercised pursuant to a Notice of Redemption delivered to the
Partnership (with a copy to the General Partner) by the Limited Partner exercising the Redemption
Right (the “Tendering Party”). No Limited Partner may deliver more than two Notices of
Redemption during each calendar year. A Limited Partner may not exercise the Redemption Right for
less than 1,000 Partnership Units or, if such Limited Partner holds less than 1,000 Partnership
Units, all of the Partnership Units held by such Partner. The Tendering Party shall have no right,
with respect to any Partnership Units so redeemed, to receive any distribution paid with respect to
Partnership Units if the record date for such distribution is on or after the Specified Redemption
Date.




          (b) If the General Partner elects to redeem Tendered Units for REIT Shares rather than cash,
then the Partnership shall direct the General Partner to issue and deliver such REIT Shares to the
Tendering Party pursuant to the terms set forth in this Section 8.5(b), in which case, (i) the
General Partner, acting as a distinct legal entity, shall assume directly the obligation with
respect thereto and shall satisfy the Tendering Party’s exercise of its Redemption Right, and (ii)
such transaction shall be treated, for federal income tax purposes, as a transfer by the Tendering
Party of such Tendered Units to the General Partner in exchange for REIT Shares. The percentage of
the Tendered Units tendered for Redemption by the Tendering Party for which the General Partner
elects to issue REIT Shares (rather than cash) is referred to as the “Applicable
Percentage.” In making such election to acquire Tendered Units, the Partnership shall act in a
fair, equitable and reasonable manner that neither prefers one group or class of Limited Partners
over another nor discriminates against a group or class of Limited Partners. If the Partnership
elects to redeem any number of Tendered Units for REIT Shares, rather than cash, on the Specified
Redemption Date, the Tendering Party shall sell such number of the Tendered Units to the General
Partner in exchange for a number of REIT Shares equal to the product of the REIT Shares Amount and
the Applicable Percentage. The product of the Applicable Percentage and the REIT Shares Amount, if
applicable, shall be delivered by the General Partner as duly authorized, validly issued, fully
paid and accessible REIT Shares free of any pledge, lien, encumbrance or restriction, other than
the Aggregate Share Ownership Limit and other restrictions provided in the Article of
Incorporation, the bylaws of the General Partner, the Securities Act and relevant state securities
or “blue sky” laws. Notwithstanding the provisions of Section 8.5(a) and this Section 8.5(b), the
Tendering Parties shall have no rights under this Agreement that would otherwise be prohibited
under the Articles of Incorporation.




          (c) In connection with an exercise of Redemption Rights pursuant to this Section 8.5, the
Tendering Party shall submit the following to the General Partner, in addition to the Notice of
Redemption:




31









 








               (1) A written affidavit, dated the same date as the Notice of Redemption, (a) disclosing the
actual and constructive ownership, as determined for purposes of Code Sections 856(a)(6) and
856(h), of REIT Shares by (i) such Tendering Party and (ii) any Related Party and (b) representing
that, after giving effect to the Redemption, neither the Tendering Party nor any Related Party will
own REIT Shares in excess of the Aggregate Share Ownership Limit (or, if applicable the Excepted
Holder Limit);



               (2) A written representation that neither the Tendering Party nor any Related Party has any
intention to acquire any additional REIT Shares prior to the closing of the Redemption on the
Specified Redemption Date;



               (3) An undertaking to certify, at and as a condition to the closing of the Redemption on the
Specified Redemption Date, that either (a) the actual and constructive ownership of REIT Shares by
the Tendering Party and any Related Party remain unchanged from that disclosed in the affidavit
required by Section 8.5(c)(1) or (b) after giving effect to the Redemption, neither the Tendering
Party nor any Related Party shall own REIT Shares in violation of the Aggregate Share Ownership
Limit (or, if applicable, the Excepted Holder Limit); and



               (4) Any other documents as the General Partner may reasonably require in connection with the
issuance of REIT Shares upon the exercise of the Redemption Right.



          (d) Any Cash Amount to be paid to a Tendering Party pursuant to this Section 8.5 shall be paid
on the Specified Redemption Date; provided, however, that the General Partner may elect to cause
the Specified Redemption Date to be delayed for up to an additional 180 days to the extent required
for the General Partner to cause additional REIT Shares to be issued to provide financing to be
used to make such payment of the Cash Amount. Notwithstanding the foregoing, the General Partner
agrees to use its best efforts to cause the closing of the acquisition of Tendered Units hereunder
to occur as quickly as reasonably possible.




          (e) Notwithstanding any other provision of this Agreement, the General Partner shall place
appropriate restrictions on the ability of the Limited Partners to exercise their Redemption Rights
to prevent, among other things, (a) any person from owning shares in excess of the Common Share
Ownership Limit, the Aggregate Share Ownership Limit and the Excepted Holder Limit, (b) the General
Partner’s common stock from being owned by less than 100 persons, (c) the General Partner from
being “closely held” within the meaning of section 856(h) of the Code, and (d) to ensure that the
Partnership does not constitute a “publicly traded partnership” under section 7704 of the Code. If
and when the General Partner determines that imposing such restrictions is necessary, the General
Partner shall give prompt written notice thereof (a “Restriction Notice”) to each of the
Limited Partners holding Partnership Units, which notice shall be accompanied by a copy of an
opinion of counsel to the Partnership which states that, in the opinion of such counsel,
restrictions are necessary in order to avoid having the Partnership be treated as a “publicly
traded partnership” under section 7704 of the Code.




          (f) A redemption fee may be charged in connection with an exercise of Redemption Rights
pursuant to this Section 8.5.




     8.6 Redemption of Special Partnership Units.



     Upon the earliest to occur of (a) the termination or nonrenewal of the Advisory Agreement for
“cause” (as defined in the Advisory Agreement), (b) a Termination Event, or (c) the Listing, the
Special Partnership Units will be redeemed.



32









 






          (a) Redemption of Special Partnership Units Upon Termination or Nonrenewal of the Advisory
Agreement for Cause. If the Advisory Agreement is terminated or not renewed by the General Partner
for “cause” (as defined in the Advisory Agreement), all of the Special Partnership Units shall be
redeemed by the Partnership for $1 within thirty (30) days after the termination or nonrenewal of
the Advisory Agreement.




          (b) Redemption of Special Partnership Units upon a Termination Event or the Listing. Upon the
occurrence of a Termination Event or the Listing, the Special Partnership Units shall be redeemed
for an aggregate amount equal to the Net Sales Proceeds that would have been distributed to the
Special OP Unitholders under Section 5.2(b)(i)(B)(2) if all assets of the Partnership had been sold
for their fair market value and all liabilities of the Partnership had been satisfied in full
according to their terms. Such redemption shall occur no later than thirty (30) days after the date
of a Termination Event and no later than 240 days after the Listing. In determining the fair market
value of the assets of the Partnership, (i) in connection with a Termination Event, the General
Partner shall obtain an appraisal of the assets of the Partnership (excluding any assets which may
be readily marked to market) and (ii) in connection with the Listing, the General Partner shall
make such determination (a) taking into account, in the event of a Listing on a national securities
exchange only, the market value of the General Partner’s listed shares based upon the average
closing price, or average of bid and asked prices, as the case may be, during a period of thirty
(30) days during which such shares are traded beginning one hundred and twenty (120) days after the
Listing or (b) taking into account the value of the General Partner’s shares based upon the initial
public offering price in the event of an underwritten public offering. Payment to Special OP
Unitholders upon a Termination Event or a Listing shall be paid, at the Advisor’s discretion,
in the form of (a) shares of the General Partner’s common stock; (b) a non-interest bearing promissory note, payable solely from the proceeds of asset sales, due and payable no later than
three years from the date of issuance of such note; or (c) any combination thereof.  In the
event the promissory note has not been paid out of the proceeds of the General Partner’s sale of
assets following the three year term of the promissory note, the outstanding balance of such
note may, at the Advisor’s option, be convertible into shares of the General Partner’s common
stock.  In the event the Advisor elects to receive shares of the General Partner’s common stock
or the promissory note converts into shares of the General Partner’s common stock and the General
Partner’s shares are not listed on a national securities exchange, at the option of the Advisor,
the Advisor and the General Partner shall enter into an agreement whereby the General Partner
shall register such shares of common stock with the Securities and
Exchange Commission. However, any such
payments, whether in the form of shares or under a promissory note, may not be made in
connection with a Termination Event until either (a) the closing of asset sales that result in
aggregate, cumulative distributions to the OP Unitholders of the Partnership from operating income,
sales proceeds and other sources in an amount equal to their Capital Contributions to the
Partnership plus an 8.0% cumulative non-compounded annual pre-tax return thereon, or (b) a Listing
(each a “Subsequent Liquidity Event.”). In addition, the amount of shares or the
promissory note issued in connection with a Termination Event will be subject to reduction as of
the date of the Subsequent Liquidity Event by an amount that will ensure that, in connection with
the Subsequent Liquidity Event, the Special OP Unit Holder does not receive in excess of 15% of the
distributions that are made or are deemed to be made by the Partnership after the OP Unitholders
have received or are deemed to have received aggregate, cumulative distributions equal to their
Capital Contributions to the Partnership plus a 8.0% cumulative non-compounded annual pre-tax
return thereon.




     8.7 Distribution Reinvestment Plan.



     OP Unitholders may have the opportunity to join the General Partner’s distribution
reinvestment plan by completing an enrollment form which is available upon request. A copy of the
General Partner’s distribution reinvestment plan is also available upon request. The shares of the
General Partner’s common stock which may be issued under the General Partner’s distribution
reinvestment plan are offered only by a prospectus.



33









 





ARTICLE 9

TRANSFERS OF LIMITED PARTNERSHIP INTERESTS




     9.1 Purchase for Investment.



          (a) Each Limited Partner hereby represents and warrants to the General Partner and to the
Partnership that the acquisition of his Partnership Interest is made as a principal for his account
for investment purposes only and not with a view to the resale or distribution of such Partnership
Interest.




          (b) Each Limited Partner agrees that he will not sell, assign or otherwise transfer his
Partnership Interest or any fraction thereof, whether voluntarily or by operation of law or at
judicial sale or otherwise, to any Person who does not make the representations and warranties to
the General Partner set forth in Section 9.1(a) above and similarly agree not to sell, assign or
transfer such Partnership Interest or fraction thereof to any Person who does not similarly
represent, warrant and agree.




     9.2 Restrictions on Transfer of Limited Partnership Interests.



          (a) Subject to the provisions of 9.2(b) and (c), no Limited Partner may offer, sell, assign,
hypothecate, pledge or otherwise transfer all or any portion of his Limited Partnership Interest,
or any of such Limited Partner’s economic rights as a Limited Partner, whether voluntarily or by
operation of law or at judicial sale or otherwise (collectively, a “Transfer”) without the
consent of the General Partner, which consent may be granted or withheld in its sole and absolute
discretion. Any such purported transfer undertaken without such consent shall be considered to be
null and void ab initio and shall not be given effect. The General Partner may require, as a
condition of any Transfer to which it consents, that the transferor assume all costs incurred by
the Partnership in connection therewith.




          (b) No Limited Partner may withdraw from the Partnership other than as a result of a permitted
Transfer (i.e., a Transfer consented to as contemplated by clause (a) above or clause (c) below or
a Transfer pursuant to Section 9.5 below) of all of its Partnership Interest pursuant to this
Article 9 or pursuant to a redemption of all of its Partnership Units pursuant to Section 8.5 or
pursuant to the redemption of the Limited Partner’s Special Partnership Units pursuant to Section
8.6. Upon the permitted Transfer or redemption of all of a Limited Partner’s Partnership Interest,
such Limited Partner shall cease to be a Limited Partner.




          (c) Notwithstanding Section 9.2(a) and subject to Sections 9.2(d), (e) and (f) below, a
Limited Partner may Transfer, without the consent of the General Partner, all or a portion of its
Partnership Interest to (i) a parent or parent’s spouse, natural or adopted descendant or
descendants, spouse of such descendant, or brother or sister, or a trust created by such Limited
Partner for the benefit of such Limited Partner and/or any such person(s), of which trust such
Limited Partner or any such person(s) is a trustee, (ii) a corporation controlled by a Person or
Persons named in (i) above, or (iii) if the Limited Partner is an entity, its beneficial owners.




          (d) No Limited Partner may effect a Transfer of its Limited Partnership Interest, in whole or
in part, if, in the opinion of legal counsel for the Partnership, such proposed Transfer would
require the registration of the Limited Partnership Interest under the Securities Act or would
otherwise violate any applicable federal or state securities or blue sky law (including investment
suitability standards).




          (e) No Transfer by a Limited Partner of its Partnership Interest, in whole or in part, may be
made to any Person if (i) in the opinion of the General Partner based on the advice of legal




34









 







counsel for the Partnership, if appropriate, the transfer would result in the Partnership’s
being treated as an association taxable as a corporation (other than a qualified REIT subsidiary
within the meaning of Section 856(i) of the Code), (ii) in the opinion of the General Partner based
on the advice of legal counsel for the Partnership, if appropriate, it would adversely affect the
ability of the General Partner to continue to qualify as a REIT or subject the General Partner to
any additional taxes under Section 857 or Section 4981 of the Code, (iii) such transfer is
effectuated through an “established securities market” or a “secondary market (or the substantial
equivalent thereof)” within the meaning of Section 7704 of the Code, (iv) such Transfer would cause
the General Partner to own 10% or more of the ownership interests of any tenant of a Property held
by the partnership within the meaning of Section 856(d)(2)(B) of the Code, or (v) such Transfer
would result in the General Partner being “closely held” within the meaning of Section 856(h) of
the Code.




          (f) No transfer by a Limited Partner of any Partnership Interest may be made to a lender to
the Partnership or any Person who is related (within the meaning of Regulations Section 1.752-4(b))
to any lender to the Partnership whose loan constitutes a Nonrecourse Liability, without the
consent of the General Partner, which may be withheld in its sole and absolute discretion, provided
that as a condition to such consent the lender will be required to enter into an arrangement with
the Partnership and the General Partner to exchange or redeem for the Cash Amount any Partnership
Units in which a security interest is held simultaneously with the time at which such lender would
be deemed to be a Partner in the Partnership for purposes of allocating liabilities to such lender
under Section 752 of the Code.




          (g) Any Transfer in contravention of any of the provisions of this Article 9 shall be void and
ineffectual and shall not be binding upon, or recognized by, the Partnership.




          (h) Prior to the consummation of any Transfer under this Article 9, the transferor and/or the
transferee shall deliver to the General Partner such opinions, certificates and other documents as
the General Partner shall request in connection with such Transfer.




     9.3 Admission of Substitute Limited Partner.



          (a) Subject to the other provisions of this Article 9, an assignee of the Limited Partnership
Interest of a Limited Partner (which shall be understood to include any purchaser, transferee,
donee, or other recipient of any disposition of such Limited Partnership Interest) shall be deemed
admitted as a Limited Partner of the Partnership only with the consent of the General Partner and
upon the satisfactory completion of the following:




               (i) The assignee shall have accepted and agreed to be bound by the terms and provisions of
this Agreement by executing a counterpart or an amendment thereof, including a revised Exhibit
A, and such other documents or instruments as the General Partner may require in order to
effect the admission of such Person as a Limited Partner.



               (ii) To the extent required, an amended Certificate evidencing the admission of such Person as
a Limited Partner shall have been signed, acknowledged and filed for record in accordance with the
Act.



               (iii) The assignee shall have delivered a letter containing the representation set forth in
Section 9.1(a) hereof and the agreement set forth in Section 9.1(b) hereof.



               (iv) If the assignee is a corporation, partnership or trust, the assignee shall have provided
the General Partner with evidence satisfactory to counsel for the Partnership of the assignee’s
authority to become a Limited Partner under the terms and provisions of this Agreement.



35









 





               (v) The assignee shall have executed a power of attorney containing the terms and provisions
set forth in Section 8.2 hereof.



               (vi) The assignee shall have paid all legal fees and other expenses of the Partnership and the
General Partner and filing and publication costs in connection with its substitution as a Limited
Partner.



               (vii) The assignee has obtained the prior written consent of the General Partner to its
admission as a Substitute Limited Partner, which consent may be given or denied in the exercise of
the General Partner’s sole and absolute discretion.



          (b) For the purpose of allocating Profits and Losses and distributing cash received by the
Partnership, a Substitute Limited Partner shall be treated as having become, and appearing in the
records of the Partnership as, a Partner upon the filing of the Certificate described in Section
9.3(a)(ii) hereof or, if no such filing is required, the later of the date specified in the
transfer documents or the date on which the General Partner has received all necessary instruments
of transfer and substitution.




          (c) The General Partner shall cooperate with the Person seeking to become a Substitute Limited
Partner by preparing the documentation required by this Section and making all official filings and
publications. The Partnership shall take all such action as promptly as practicable after the
satisfaction of the conditions in this Article 9 to the admission of such Person as a Limited
Partner of the Partnership.




     9.4 Rights of Assignees of Partnership Interests.



          (a) Subject to the provisions of Sections 9.1 and 9.2 hereof, except as required by operation
of law, the Partnership shall not be obligated for any purposes whatsoever to recognize the
assignment by any Limited Partner of its Partnership Interest until the Partnership has received
notice thereof.




          (b) Any Person who is the assignee of all or any portion of a Limited Partner’s Limited
Partnership Interest, but does not become a Substitute Limited Partner and desires to make a
further assignment of such Limited Partnership Interest, shall be subject to all the provisions of
this Article 9 to the same extent and in the same manner as any Limited Partner desiring to make an
assignment of its Limited Partnership Interest.




     9.5 Effect of Bankruptcy, Death, Incompetence or Termination of a Limited Partner.



     The occurrence of an Event of Bankruptcy as to a Limited Partner, the death of a Limited
Partner or a final adjudication that a Limited Partner is incompetent (which term shall include,
but not be limited to, insanity) shall not cause the termination or dissolution of the Partnership,
and the business of the Partnership shall continue if an order for relief in a bankruptcy
proceeding is entered against a Limited Partner, the trustee or receiver of his estate or, if he
dies, his executor, administrator or trustee, or, if he is finally adjudicated incompetent, his
committee, guardian or conservator, shall have the rights of such Limited Partner for the purpose
of settling or managing his estate property and such power as the bankrupt, deceased or incompetent
Limited Partner possessed to assign all or any part of his Partnership
Interest and to join with the assignee in satisfying conditions precedent to the admission of
the assignee as a Substitute Limited Partner.



36









 





     9.6 Joint Ownership of Interests.



     A Partnership Interest may be acquired by two individuals as joint tenants with right of
survivorship, provided that such individuals either are married or are related and share the same
home as tenants in common. The written consent or vote of both owners of any such jointly held
Partnership Interest shall be required to constitute the action of the owners of such Partnership
Interest; provided, however, that the written consent of only one joint owner will be required if
the Partnership has been provided with evidence satisfactory to the counsel for the Partnership
that the actions of a single joint owner can bind both owners under the applicable laws of the
state of residence of such joint owners. Upon the death of one owner of a Partnership Interest held
in a joint tenancy with a right of survivorship, the Partnership Interest shall become owned solely
by the survivor as a Limited Partner and not as an assignee. The Partnership need not recognize the
death of one of the owners of a jointly-held Partnership Interest until it shall have received
notice of such death. Upon notice to the General Partner from either owner, the General Partner
shall cause the Partnership Interest to be divided into two equal Partnership Interests, which
shall thereafter be owned separately by each of the former owners.



ARTICLE 10

BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS




     10.1 Books and Records.



     At all times during the continuance of the Partnership, the Partners shall keep or cause to be
kept at the Partnership’s specified office true and complete books of account in accordance with
generally accepted accounting principles, including: (a) a current list of the full name and last
known business address of each Partner, (b) a copy of the Certificate of Limited Partnership and
all Certificates of amendment thereto, (c) copies of the Partnership’s federal, state and local
income tax returns and reports, (d) copies of this Agreement and amendments thereto and any
financial statements of the Partnership for the three most recent years and (e) all documents and
information required under the Act. Any Partner or its duly authorized representative, upon paying
the costs of collection, duplication and mailing, shall be entitled to inspect or copy such records
during ordinary business hours.



     10.2 Custody of Partnership Funds; Bank Accounts.



          (a) All funds of the Partnership not otherwise invested shall be deposited in one or more
accounts maintained in such banking or brokerage institutions as the General Partner shall
determine, and withdrawals shall be made only on such signature or signatures as the General
Partner may, from time to time, determine.




          (b) All deposits and other funds not needed in the operation of the business of the
Partnership may be invested by the General Partner in investment grade instruments (or investment
companies whose portfolio consists primarily thereof), government obligations, certificates of
deposit, bankers’ acceptances and municipal notes and bonds. The funds of the Partnership shall not
be commingled with the funds of any other Person except for such commingling as may necessarily
result from an investment in those investment companies permitted by this Section 10.2(b).




     10.3 Fiscal and Taxable Year.



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



37









 





     10.4 Annual Tax Information and Report.



     Within seventy-five (75) days after the end of each fiscal year of the Partnership, the
General Partner shall furnish to each person who was a Limited Partner at any time during such year
the tax information necessary to file such Limited Partner’s individual tax returns as shall be
reasonably required by law.



     10.5 Tax Matters Partner; Tax Elections; Special Basis Adjustments.



          (a) The General Partner shall be the Tax Matters Partner of the Partnership within the meaning
of Section 6231(a)(7) of the Code. As Tax Matters Partner, the General Partner shall have the right
and obligation to take all actions authorized and required, respectively, by the Code for the Tax
Matters Partner. The General Partner shall have the right to retain professional assistance in
respect of any audit of the Partnership by the Service and all out-of-pocket expenses and fees
incurred by the General Partner on behalf of the Partnership as Tax Matters Partner shall
constitute Partnership expenses. In the event the General Partner receives notice of a final
Partnership adjustment under Section 6223(a)(2) of the Code, the General Partner shall either (i)
file a court petition for judicial review of such final adjustment within the period provided under
Section 6226(a) of the Code, a copy of which petition shall be mailed to all Limited Partners on
the date such petition is filed, or (ii) mail a written notice to all Limited Partners, within such
period, that describes the General Partner’s reasons for determining not to file such a petition.




          (b) All elections required or permitted to be made by the Partnership under the Code or any
applicable state or local tax law shall be made by the General Partner in its sole and absolute
discretion.




          (c) In the event of a transfer of all or any part of the Partnership Interest of any Partner,
the Partnership, at the option of the General Partner, may elect pursuant to Section 754 of the
Code to adjust the basis of the Partnership’s assets. Notwithstanding anything contained in Article
5 of this Agreement, any adjustments made pursuant to Section 754 of the Code shall affect only the
successor in interest to the transferring Partner and in no event shall be taken into account in
establishing, maintaining or computing Capital Accounts for the other Partners for any purpose
under this Agreement. Each Partner will furnish the Partnership with all information necessary to
give effect to such election.




     10.6 Reports to Limited Partners.



          (a) As soon as practicable after the close of each fiscal quarter (other than the last quarter
of the fiscal year), the General Partner shall cause to be mailed to each Limited Partner a
quarterly report containing financial statements of the Partnership, or of the General Partner if
such statements are prepared solely on a consolidated basis with the General Partner, for such
fiscal quarter, presented in accordance with generally accepted accounting principles. As soon as
practicable after the close of each fiscal year, the General Partner shall cause to be mailed to
each Limited Partner an annual report containing financial statements of the Partnership, or of the
General Partner if such statements are prepared solely on a consolidated basis with the General
Partner, for such fiscal year, presented in accordance with generally accepted accounting
principles. The annual financial statements shall be audited by accountants selected by the General
Partner.




          (b) Any Partner shall further have the right to a private audit of the books and records of
the Partnership at the expense of such Partner, provided such audit is made for Partnership
purposes and is made during normal business hours.




38









 








ARTICLE 11

AMENDMENT OF AGREEMENT; MERGER




     The General Partner’s consent shall be required for any amendment to this Agreement. The
General Partner, without the consent of the Limited Partners, may amend this Agreement in any
respect or merge or consolidate the Partnership with or into any other partnership or business
entity (as defined in Section 17-211 of the Act) in a transaction pursuant to Section 7.1(c), (d)
or (e) hereof; provided, however, that the following amendments and any other merger or
consolidation of the Partnership shall require (i) the consent of Limited Partners holding more
than 50% of the Percentage Interests of the Limited Partners and (ii) in the case of any of the
following (b), (c) or (d), the consent of Limited Partners holding more than 50% of the Special
Percentage Interests of the Limited Partners:



          (a) any amendment affecting the operation of the Conversion Factor or the Redemption Right
(except as provided in Section 8.5(d) or 7.1(d) hereof) in a manner adverse to the Limited
Partners;




          (b) any amendment that would adversely affect the rights of the Limited Partners to receive
the distributions payable to them hereunder, other than with respect to the issuance of additional
Partnership Units pursuant to Section 4.2 hereof;




          (c) any amendment that would alter the Partnership’s allocations of Profit and Loss to the
Limited Partners, other than with respect to the issuance of additional Partnership Units pursuant
to Section 4.2 hereof; or




          (d) any amendment that would impose on the Limited Partners any obligation to make additional
Capital Contributions to the Partnership.




ARTICLE 12

GENERAL PROVISIONS




     12.1 Notices.



     All communications required or permitted under this Agreement shall be in writing and shall be
deemed to have been given when delivered personally or upon deposit in the United States mail,
registered, postage prepaid return receipt requested, to the Partners at the addresses set forth in
Exhibit A attached hereto; provided, however, that any Partner may specify a different
address by notifying the General Partner in writing of such different address. Notices to the
Partnership shall be delivered at or mailed to its specified office.



     12.2 Survival of Rights.



     Subject to the provisions hereof limiting transfers, this Agreement shall be binding upon and
inure to the benefit of the Partners and the Partnership and their respective legal
representatives, successors, transferees and assigns.



     12.3 Additional Documents.



     Each Partner agrees to perform all further acts and execute, swear to, acknowledge and deliver
all further documents which may be reasonable, necessary, appropriate or desirable to carry out the
provisions of this Agreement or the Act.



39









 





     12.4 Severability.



     If any provision of this Agreement shall be declared illegal, invalid, or unenforceable in any
jurisdiction, then such provision shall be deemed to be severable from this Agreement (to the
extent permitted by law) and in any event such illegality, invalidity or unenforceability shall not
affect the remainder hereof.



     12.5 Entire Agreement.



     This Agreement and exhibits attached hereto constitute the entire Agreement of the Partners
and supersede all prior written agreements and prior and contemporaneous oral agreements,
understandings and negotiations with respect to the subject matter hereof.



     12.6 Pronouns and Plurals.



     When the context in which words are used in the Agreement indicates that such is the intent,
words in the singular number shall include the plural and the masculine gender shall include the
neuter or female gender as the context may require.



     12.7 Headings.



     The Article headings or sections in this Agreement are for convenience only and shall not be
used in construing the scope of this Agreement or any particular Article.



     12.8 Counterparts.



     This Agreement may be executed in several counterparts, each of which shall be deemed to be an
original copy and all of which together shall constitute one and the same instrument binding on all
parties hereto, notwithstanding that all parties shall not have signed the same counterpart.



     12.9 Governing Law.



     This Agreement shall be governed by and construed in accordance with the laws of the State of
Delaware; provided, however, that any cause of action for violation of federal or state securities
laws shall not be governed by this Section 12.9.



[Remainder
of Page Intentionally Left Blank]





40












 






     IN WITNESS WHEREOF, the parties hereto have hereunder affixed their signatures to this
Agreement of Limited Partnership, all as of the
26th day
of March,
2009.



	 	 	 	 	 
	 	GENERAL PARTNER:



Moody National REIT I, Inc.

 	 
	                                                       
	 	By:  	/s/ Brett C. Moody	 
	 	 	Brett C. Moody, President 	 
	                                                        



	 	 	 	 	 	 	 	 	 
	 	 	LIMITED PARTNERS:	 	 
	  
	 	 	 	 	 	 	 	 
	 	 	Moody National LPOP I, LLC	 	 
	 
	 	 	 	 	 	 	 	 
	                                                       
	 	 	By:	 	/s/ Brett C. Moody	 	 
	 	 	 	 	Brett C. Moody, Member	 	 
	                                                        
	 
	 	 	 	 	 	 	 	 
	 	 	Moody OP Holdings I, LLC	 	 
	 	 	By:	 	Moody National REIT Sponsor, LLC,	 	 
	 	 	 	 	its Sole Member	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:
	 	Moody National REIT Sponsor SM, LLC	 	 
	 
	 	 	 	 	 	 	 	 
	                                                       
	 

	 	 	 	By:	 	/s/ Brett C. Moody	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Brett C. Moody, Member	 	 
	                                                        






 









 






EXHIBIT A

CONTRIBUTIONS AND INTEREST




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Special	 	 	 	 	 	 	Special	 
	 	 	 	 	Cash	 	 	 	 	 	 	Partnership	 	 	Partnership	 	 	Percentage	 	 	Percentage	 
	Partner	 	Address	 	Contribution	 	 	Contribution	 	 	Units	 	 	Units	 	 	Interest	 	 	Interest	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	GENERAL PARTNER:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Moody
National REIT
I, Inc.
	 	6363 Woodway
Drive, Suite 110

Houston, Texas 77057
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	ORIGINAL LIMITED
PARTNERS::
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Moody National LPOP I, LLC
	 	6363 Woodway
Drive, Suite 110

Houston, Texas 77057
	 	$	1,000	 	 	 	 	 	 	 	100	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Moody OP
Holdings I,
LLC
	 	6363 Woodway
Drive, Suite 110

Houston, Texas 77057
	 	$	1,000	 	 	 	 	 	 	 	 	 	 	 	100	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Totals
	 	 	 	$	2,000	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 





 









 






EXHIBIT B

NOTICE OF EXERCISE OF REDEMPTION RIGHT




     In accordance with Section 8.5 of the Limited Partnership Agreement (the “Agreement”) of Moody
National Operating Partnership I, L.P., the undersigned hereby irrevocably (i) presents for
redemption                      Partnership Units in Moody National Operating Partnership I, L.P.
in accordance with the terms of the Agreement and the Redemption Right referred to in Section 8.5
thereof, (ii) surrenders such Partnership Units and all right, title and interest therein, and
(iii) directs that the Cash Amount or REIT Shares Amount (as defined in the Agreement) as
determined by the General Partner deliverable upon exercise of the Redemption Right be delivered to
the address specified below, and if REIT Shares (as defined in the Agreement) are to be delivered,
such REIT Shares be registered or placed in the name(s) and at the address(es) specified below.



	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dated:
	 	 	 	,	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	,	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	(Name of Limited Partner)	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	(Signature of Limited Partner)	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	(Mailing Address)	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	(City)
	 	 	(State)
	(Zip Code)	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Signature Guaranteed by:	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 





	 	 	 	 	 	 	 
	If REIT Shares are to be issued, issue to:	 
	 
	 	 	 	 	 	 
	Name:
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	Social Security or Tax I.D. Number: