Document:

Exhibit 10.8 

        GUARANTEE

        New York, New York Dated: July 10, 2009

                  In order to induce ROSENTHAL & ROSENTHAL, INC. (herein called “Rosenthal”) to make loans, advances or other commitments or grant other financial accommodations to or for the account of (or in reliance on the credit of) Steven Madden, Ltd., Daniel M. Friedman Associates, Inc., Diva Acquisition Corp., Steven Madden Retail, Inc., Stevies, Inc. and SML Acquisition Corp. (each, an
        “Obligor”) and for other good and valuable considerations received, the undersigned irrevocably, absolutely and unconditionally guarantees to Rosenthal payment when due, whether by acceleration or otherwise, of any and all Obligations of each Obligor to Rosenthal. The term “Obligations” shall mean all Obligations as defined in each of the Collection Agency Agreements, dated on or about the date hereof, between Rosenthal and each of the Obligors, as the same may
        have been or may in the future be supplemented and/or amended (the “Collection Agency Agreements”). In addition, the undersigned agrees to indemnify Rosenthal against any loss, damage or liability because of any wrongful acts or fraud of each Obligor.

                  The undersigned waives notice of acceptance of this guarantee and notice of any liability to which it may apply, and waives presentment, demand for payment, protest, notice of dishonor or nonpayment of any Obligations, or suit or taking other action by Rosenthal against, and any other notice to, any party liable thereon (including the undersigned) and waives any defense, offset or counterclaim to any liability
        hereunder (other than indefeasible payment in full of the Obligations). Rosenthal may at any time and from time to time (whether or not after revocation or termination of this guarantee) without the consent of, or notice to, the undersigned, without incurring responsibility to the undersigned, without impairing or releasing the obligations of the undersigned hereunder, upon or without any terms or conditions and in whole or in part: (1) change the manner, place or terms of payment,
        and/or change or extend the time of payment of, renew or alter, any Obligation, any security therefor, or any liability incurred directly or indirectly in respect thereof, and the guarantee herein made shall apply to the Obligations as so changed, extended, renewed or altered; (2) sell, exchange, release, surrender, realize upon or otherwise deal with in any manner and in any order any property by whomsoever at any time pledged or mortgaged to secure, or howsoever securing, the
        liabilities hereby guaranteed or any liabilities (including any of those hereunder or under any other guarantee of the Obligations) incurred directly or indirectly in respect thereof or hereof, and/or offset thereagainst; (3) exercise or refrain from exercising any rights against each Obligor or others (including the undersigned or under any other guarantee of the Obligations) or otherwise act or refrain from acting; (4) settle or compromise any Obligation, any security therefor or any
        liability (including any of those hereunder or under any other guarantor of the Obligations) incurred directly or indirectly in respect thereof or hereof, and may subordinate the payment of all or any part thereof to the payment of any liability (whether due or not) of each Obligor to creditors of each Obligor other than Rosenthal and the undersigned: and (5) apply any sums by whomsoever paid or howsoever realized to any Obligation to Rosenthal regardless of what liability or
        liabilities of any Obligor remain unpaid.

                  No invalidity, irregularity or unenforceability of all or any part of the liabilities hereby guaranteed or of any security therefor or of any other guarantee of the Obligations shall affect, impair or be a defense to this guarantee. The liability of the undersigned hereunder is primary, absolute and unconditional and shall not be subject to any offset, defense or counterclaim of each Obligor (other than
        indefeasible payment in full of the Obligations). This guarantee is a continuing one and all liabilities to which it applies or may apply under the terms hereof shall be conclusively presumed to have been created in reliance hereon. The books and records of Rosenthal shall be admissible as prima facie evidence of the Obligations. As to each of the undersigned, this guarantee shall continue until written notice of revocation signed by such undersigned, or until written notice of the
        death of such undersigned shall in each case have been actually received by Rosenthal, notwithstanding a revocation by, or the death of, or complete or partial release for any cause of any one or more of the remainder of the undersigned or of each Obligor, or of any one liable in any manner for the liabilities hereby guaranteed, or for the liabilities (including those herein) incurred directly or indirectly in respect thereof or hereof, and notwithstanding the dissolution, termination
        or increase, decrease or change in personnel of any one or more of the undersigned which may be partnerships or corporations.

        1

        

        

                  No revocation or termination hereof shall affect in any manner rights arising under this guarantee with respect to (a) Obligations which shall have been created, contracted, assumed or incurred prior to receipt by Rosenthal of written notice of such revocation or termination or (b) Obligations which shall have been created, contracted, assumed or incurred after receipt of such written notice pursuant to any
        contract entered into by any Obligor or by Rosenthal for the benefit of any Obligor prior to receipt by Rosenthal of such notice, or to protect, preserve or realize upon any security for any Obligations; and the sole effect of revocation or termination hereof shall be to exclude from this guarantee liabilities thereafter arising which are unconnected with liabilities theretofore arising or with transactions theretofore entered into.

                  Upon the occurrence and continuation of any event of default under any Collection Agency Agreement beyond any applicable notice or cure period, then and in any such event, and at any time thereafter, Rosenthal may, without notice to any of the Obligors or of any other guarantor of the Obligations, make the Obligations with respect to such Collection Agency Agreement, whether or not then due, immediately due
        and payable hereunder as to any of the undersigned or of any other guarantor of the Obligations, and Rosenthal shall be entitled to enforce the obligations of the undersigned hereunder. All sums of money at any time to the credit of the undersigned with Rosenthal and any of the property of the undersigned at any time in the possession of Rosenthal may be held by Rosenthal as security for any and all obligations of the undersigned hereunder, notwithstanding that any of said money or
        property may have been deposited, pledged or delivered by the undersigned for any other, different or specific purpose. Any and all claims of any nature which any of the undersigned may now or hereafter have against each Obligor are hereby subordinated to the full payment to Rosenthal of the Obligations and are hereby assigned to Rosenthal as additional collateral security therefor.

                  In the event Rosenthal takes any action, including retaining attorneys, for the purpose of effecting collection of the Obligations or of any liabilities of the undersigned hereunder, or protecting any of Rosenthal’s rights hereunder, the undersigned shall pay all costs and expenses of every kind for protection of the rights of Rosenthal or for collection of the Obligations or such liabilities, including
        reasonable attorneys’ fees.

                  If claim is ever made upon Rosenthal for repayment or recovery of any amount or amounts received by Rosenthal in payment or on account of any of the Obligations and Rosenthal repays all or part of said amount by reason of (a) any judgment, decree or order of any Court or administrative body having jurisdiction over Rosenthal or any of its property, or (b) any settlement or compromise of any such claim effected
        by Rosenthal with any such claimant (including each Obligor), then and in such event the undersigned agrees that any such judgment, decree, order, settlement or compromise shall be binding upon the undersigned, notwithstanding any revocation or release hereof or the cancellation of any note or other instrument evidencing any of the Obligations, or any release of any such liability of each Obligor, and the undersigned shall be and remain liable to Rosenthal hereunder for the amount so
        repaid or recovered to the same extent as if such amount had never originally been received by Rosenthal. The provisions of this paragraph shall survive, and continue in effect, notwithstanding any revocation or release hereof, unless such revocation or release shall specifically refer to this paragraph.

                  No delay on the part of Rosenthal in exercising any of its options, powers or rights, or partial or single exercise thereof, shall constitute a waiver thereof. No waiver of any of its rights hereunder, and no modification or amendment of this guarantee, shall be deemed to be made by Rosenthal unless the same shall be in writing, duly signed on behalf of Rosenthal, and each such waiver, if any, shall apply only
        with respect to the specific instance involved, and shall in no way impair the rights of Rosenthal or the obligations of the undersigned to Rosenthal in any other respect or at any other time. The undersigned shall have no right (whether by contract or by operation of law) of subrogation, restitution, indemnification, reimbursement or any other or similar rights of a surety against each Obligor or any of its assets or property or any security held for any liabilities of each Obligor,
        and all such rights are hereby expressly waived until indefeasible payment in full of the Obligations.

        2

        

        

        This guarantee and the rights and obligations of Rosenthal and of the undersigned hereunder shall be governed and construed in accordance with the laws (other than the conflict of law rules) of the State of New York; and this guarantee is binding upon the undersigned, his, her, their or its executors, administrators, successors or assigns, and shall inure to the benefit of Rosenthal, its successors or assigns. 

        THE UNDERSIGNED AGREES AND DOES HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT AGAINST THE UNDERSIGNED ON ANY MATTERS WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS GUARANTEE, AND THE UNDERSIGNED HEREBY CONSENTS TO THE JURISDICTION OF THE SUPREME COURT OF THE STATE OF NEW YORK FOR A DETERMINATION OF ANY DISPUTE AS TO ANY SUCH MATTERS AND AUTHORIZES THE SERVICE OF PROCESS ON THE UNDERSIGNED BY REGISTERED MAIL SENT TO THE
        UNDERSIGNED AT THE ADDRESS OF THE UNDERSIGNED HEREINBELOW SET FORTH.

                  Any acknowledgement, new promise, payment of principal or interest or other act by any Obligor and others, with respect to the Obligations, shall be deemed to be made as agent of the undersigned for the purposes hereof, and shall, if the statute of limitations in favor of the undersigned against Rosenthal shall have commenced to run, toll the running of such statute of limitations, and if such statute of
        limitations shall have expired, prevent the operation of such statute.

                  The undersigned, shall be jointly and severally liable with each Obligor and any other guarantor of the Obligations and the term “undersigned” wherever used herein shall mean the undersigned or any one or more of them. Notwithstanding that this guarantee may indicate that more than one Person (as defined in the Collection Agency Agreements) is to execute this guarantee, any Person signing this
        guarantee agrees to be bound hereby, whether or not any other Person signs this guarantee or any other guarantee of the Obligations at any time. The term “Rosenthal” includes any agent of Rosenthal acting for it.

        	
                     

                	
                     

                	
                     

                	
                     

                
	
                    ATTEST:

                	
                     

                	
                    STEVEN MADDEN, LTD.

                
	
                     

                	
                     

                	
                     

                	
                     

                
	
                    /s/ Awadhesh Sinha

                	
                     

                	
                    By:

                	
                    /s/ Arvind Dharia

                
	 	
                     

                	
                     

                	 
	
                     

                	
                     

                	
                    Name: Arvind Dharia

                
	
                     

                	
                     

                	
                    Title: C.F.O.

                
	
                     

                	
                     

                	
                     

                	
                     

                
	
                    ATTEST:

                	
                     

                	
                    STEVEN MADDEN RETAIL, INC.

                
	
                     

                	
                     

                	
                     

                
	
                    /s/ Awadhesh Sinha

                	
                     

                	
                    By:

                	
                    /s/ Arvind Dharia

                
	 	
                     

                	
                     

                	 
	
                     

                	
                     

                	
                    Name: Arvind Dharia

                
	
                     

                	
                     

                	
                    Title: C.F.O.

                
	
                     

                	
                     

                	
                     

                	
                     

                
	
                    ATTEST:

                	
                     

                	
                    STEVIES, INC.

                
	
                     

                	
                     

                	
                     

                	
                     

                
	
                    /s/ Awadhesh Sinha

                	
                     

                	
                    By:

                	
                    /s/ Arvind Dharia

                
	 	
                     

                	
                     

                	 
	
                     

                	
                     

                	
                    Name: Arvind Dharia

                
	
                     

                	
                     

                	
                    Title: C.F.O.

                
	
                     

                	
                     

                	
                     

                	
                     

                
	
                    ATTEST:

                	
                     

                	
                    DIVA ACQUISITION CORP.

                
	
                     

                	
                     

                	
                     

                	
                     

                
	
                    /s/ Awadhesh Sinha

                	
                     

                	
                    By:

                	
                    /s/ Arvind Dharia

                
	 	
                     

                	
                     

                	 
	
                     

                	
                     

                	
                    Name: Arvind Dharia

                
	
                     

                	
                     

                	
                    Title: C.F.O.

                

        3

        

        

        	
                     

                	
                     

                	
                     

                	
                     

                
	
                    ATTEST:

                	
                     

                	
                    DANIEL M. FRIEDMAN ASSOCIATES, INC.

                
	
                     

                	
                     

                	
                     

                	
                     

                
	
                    /s/ Awadhesh Sinha

                	
                     

                	
                    By:

                	
                    /s/ Arvind Dharia

                
	 	
                     

                	
                     

                	 
	
                     

                	
                     

                	
                     

                	
                    Name: Arvind Dharia

                
	
                     

                	
                     

                	
                     

                	
                    Title: C.F.O.

                
	
                     

                	
                     

                	
                     

                	
                     

                
	
                    ATTEST:

                	
                     

                	
                    SML ACQUISITION CORP.

                
	
                     

                	
                     

                	
                     

                	
                     

                
	
                    /s/ Awadhesh Sinha

                	
                     

                	
                    By:

                	
                    /s/ Arvind Dharia

                
	 	
                     

                	
                     

                	 
	
                     

                	
                     

                	
                     

                	
                    Name: Arvind Dharia

                
	
                     

                	
                     

                	
                     

                	
                    Title: C.F.O.

                

        STATE OF New York COUNTY OF New York

        On the 10th day of July in the year 2009 before me, the undersigned, personally appeared Arvind Dharia, personally known to me or proved to me on the basis of satisfactory evidence to the individual whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her capacity on behalf of STEVEN MADDEN, LTD., STEVEN MADDEN RETAIL, INC., STEVIES, INC., DIVA ACQUISITION CORP., DANIEL M. FRIEDMAN ASSOCIATES, INC. and
        SML ACQUISITION CORP. and that by his/her signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument.

        	
                     

                	
                     

                
	
                    /s/ Carolyn A. Camacho

                	
                     

                
	 	
                     

                
	
                    Notary Public

                	
                     

                

        4Exhibit
10.2

 

AMENDED AND RESTATED

 

LIMITED PARTNERSHIP AGREEMENT

 

OF

 

PENNYMAC OPERATING PARTNERSHIP, L.P.

 

a Delaware limited partnership

 

THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION, UNLESS THE
TRANSFEROR DELIVERS TO THE PARTNERSHIP AN OPINION OF COUNSEL, IN FORM AND
SUBSTANCE SATISFACTORY TO THE PARTNERSHIP, TO THE EFFECT THAT THE PROPOSED
SALE, TRANSFER OR OTHER DISPOSITION MAY BE EFFECTED WITHOUT REGISTRATION
UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES OR “BLUE SKY”
LAWS. AMENDED AND RESTATED AS OF                                         , 2009

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE 1. DEFINED
  TERMS

  	
  1

  
	
   

  	
   

  
	
  ARTICLE 2.
  ORGANIZATIONAL MATTERS

  	
  14

  
	
   

  	
   

  	
   

  
	
  Section 2.1.

  	
  Continuation

  	
  14

  
	
  Section 2.2.

  	
  Name

  	
  14

  
	
  Section 2.3.

  	
  Registered Office and
  Agent; Principal Office

  	
  14

  
	
  Section 2.4.

  	
  Power of Attorney

  	
  14

  
	
  Section 2.5.

  	
  Term

  	
  15

  
	
  Section 2.6.

  	
  Admission of Limited
  Partners

  	
  16

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3. PURPOSE

  	
  16

  
	
   

  	
   

  	
   

  
	
  Section 3.1.

  	
  Purpose and Business

  	
  16

  
	
  Section 3.2.

  	
  Powers

  	
  16

  
	
  Section 3.3.

  	
  Representations and
  Warranties by the Parties

  	
  17

  
	
  Section 3.4.

  	
  Not Publicly Traded

  	
  18

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4. CAPITAL
  CONTRIBUTIONS

  	
  18

  
	
   

  	
   

  	
   

  
	
  Section 4.1.

  	
  Capital Contributions
  of the Partners

  	
  18

  
	
  Section 4.2.

  	
  Issuances of Additional
  Partnership Interests

  	
  19

  
	
  Section 4.3.

  	
  Contribution of
  Proceeds of Issuance of Securities by the Company

  	
  22

  
	
  Section 4.4.

  	
  Additional Funds

  	
  22

  
	
  Section 4.5.

  	
  Preemptive Rights

  	
  23

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5.
  DISTRIBUTIONS

  	
  23

  
	
   

  	
   

  	
   

  
	
  Section 5.1.

  	
  Requirement and
  Characterization of Distributions

  	
  23

  
	
  Section 5.2.

  	
  Amounts Withheld

  	
  24

  
	
  Section 5.3.

  	
  Distributions Upon
  Liquidation

  	
  24

  
	
  Section 5.4.

  	
  Restricted
  Distributions

  	
  24

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6. ALLOCATIONS

  	
  25

  
	
   

  	
   

  	
   

  
	
  Section 6.1.

  	
  Allocations For Capital
  Account Purposes

  	
  25

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7. MANAGEMENT
  AND OPERATIONS OF BUSINESS

  	
  26

  
	
   

  	
   

  	
   

  
	
  Section 7.1.

  	
  Management

  	
  26

  
	
  Section 7.2.

  	
  Certificate of Limited
  Partnership

  	
  29

  

 

 

	
  Section 7.3.

  	
  Restrictions on General
  Partner Authority

  	
  30

  
	
  Section 7.4.

  	
  Reimbursement of the
  General Partner and the Company

  	
  30

  
	
  Section 7.5.

  	
  Outside Activities of
  the General Partner

  	
  31

  
	
  Section 7.6.

  	
  Contracts with
  Affiliates

  	
  31

  
	
  Section 7.7.

  	
  Indemnification

  	
  32

  
	
  Section 7.8.

  	
  Liability of the
  General Partner

  	
  33

  
	
  Section 7.9.

  	
  Other Matters
  Concerning the General Partner

  	
  34

  
	
  Section 7.10.

  	
  Title to Partnership
  Assets

  	
  35

  
	
  Section 7.11.

  	
  Reliance by Third
  Parties

  	
  35

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8. RIGHTS AND
  OBLIGATIONS OF LIMITED PARTNERS

  	
  36

  
	
   

  	
   

  	
   

  
	
  Section 8.1.

  	
  Limitation of Liability

  	
  36

  
	
  Section 8.2.

  	
  Management of Business

  	
  36

  
	
  Section 8.3.

  	
  Outside Activities of
  Limited Partners

  	
  36

  
	
  Section 8.4.

  	
  Return of Capital

  	
  36

  
	
  Section 8.5.

  	
  Rights of Limited
  Partners Relating to the Partnership

  	
  37

  
	
  Section 8.6.

  	
  Redemption Right

  	
  37

  
	
  Section 8.7.

  	
  Conversion of LTIP
  Units

  	
  39

  
	
  Section 8.8.

  	
  Voting Rights of LTIP
  Units

  	
  42

  
	
   

  	
   

  	
   

  
	
  ARTICLE 9. BOOKS,
  RECORDS, ACCOUNTING AND REPORTS

  	
  42

  
	
   

  	
   

  	
   

  
	
  Section 9.1.

  	
  Records and Accounting

  	
  42

  
	
  Section 9.2.

  	
  Fiscal Year

  	
  43

  
	
  Section 9.3.

  	
  Reports

  	
  43

  
	
   

  	
   

  	
   

  
	
  ARTICLE 10. TAX MATTERS

  	
  43

  
	
   

  	
   

  	
   

  
	
  Section 10.1.

  	
  Preparation of Tax
  Returns

  	
  43

  
	
  Section 10.2.

  	
  Tax Elections

  	
  43

  
	
  Section 10.3.

  	
  Tax Matters Partner

  	
  44

  
	
  Section 10.4.

  	
  Organizational Expenses

  	
  45

  
	
  Section 10.5.

  	
  Withholding

  	
  45

  
	
   

  	
   

  	
   

  
	
  ARTICLE 11. TRANSFERS
  AND WITHDRAWALS

  	
  46

  
	
   

  	
   

  	
   

  
	
  Section 11.1.

  	
  Transfer

  	
  46

  
	
  Section 11.2.

  	
  Transfer of General
  Partner Interest and Limited Partner Interest

  	
  47

  
	
  Section 11.3.

  	
  Limited Partners’
  Rights to Transfer

  	
  47

  
	
  Section 11.4.

  	
  Substituted Limited
  Partners

  	
  49

  
	
  Section 11.5.

  	
  Assignees

  	
  49

  
	
  Section 11.6.

  	
  General Provisions

  	
  50

  

 

 

	
  ARTICLE 12. ADMISSION
  OF PARTNERS

  	
  50

  
	
   

  	
   

  	
   

  
	
  Section 12.1.

  	
  Admission of Successor
  General Partner

  	
  50

  
	
  Section 12.2.

  	
  Admission of Additional
  Limited Partners

  	
  51

  
	
  Section 12.3.

  	
  Amendment of Agreement
  and Certificate of Limited Partnership

  	
  51

  
	
   

  	
   

  	
   

  
	
  ARTICLE 13.
  DISSOLUTION, LIQUIDATION AND TERMINATION

  	
  52

  
	
   

  	
   

  	
   

  
	
  Section 13.1.

  	
  Dissolution

  	
  52

  
	
  Section 13.2.

  	
  Winding Up

  	
  53

  
	
  Section 13.3.

  	
  Compliance with Timing Requirements
  of Regulations

  	
  54

  
	
  Section 13.4.

  	
  Deemed Contribution and
  Distribution

  	
  54

  
	
  Section 13.5.

  	
  Rights of Limited
  Partners

  	
  54

  
	
  Section 13.6.

  	
  Notice of Dissolution

  	
  55

  
	
  Section 13.7.

  	
  Termination of
  Partnership and Cancellation of Certificate of Limited Partnership

  	
  55

  
	
  Section 13.8.

  	
  Reasonable Time for
  Winding Up

  	
  55

  
	
  Section 13.9.

  	
  Waiver of Partition

  	
  55

  
	
   

  	
   

  	
   

  
	
  ARTICLE 14. AMENDMENT
  OF PARTNERSHIP AGREEMENT; MEETINGS

  	
  55

  
	
   

  	
   

  	
   

  
	
  Section 14.1.

  	
  Amendment of
  Partnership Agreement

  	
  55

  
	
  Section 14.2.

  	
  Meetings of the Partners

  	
  57

  
	
   

  	
   

  	
   

  
	
  ARTICLE 15. GENERAL
  PROVISIONS 

  	
  58 

  
	
   

  	
   

  	
   

  
	
  Section 15.1.

  	
  Addresses and Notice

  	
  58

  
	
  Section 15.2.

  	
  Titles and Captions

  	
  58

  
	
  Section 15.3.

  	
  Pronouns and Plurals

  	
  58

  
	
  Section 15.4.

  	
  Further Action

  	
  58

  
	
  Section 15.5.

  	
  Binding Effect

  	
  58

  
	
  Section 15.6.

  	
  Creditors

  	
  58

  
	
  Section 15.7.

  	
  Waiver

  	
  58

  
	
  Section 15.8.

  	
  Counterparts

  	
  59

  
	
  Section 15.9.

  	
  Applicable Law

  	
  59

  
	
  Section 15.10.

  	
  Invalidity of
  Provisions

  	
  59

  
	
  Section 15.11.

  	
  Entire Agreement

  	
  59

  

 

 

EXHIBITS

 

Exhibit A – Partners’
Contributions and Partnership Interests

Exhibit B - Capital
Account Maintenance

Exhibit C - Special
Allocation Rules

Exhibit D - Notice
of Redemption

Exhibit E –
Constructive Ownership Definition

Exhibit F –
Conversion Notice

Exhibit G – Forced
Conversion Notice

Exhibit H – Schedule
of Partner’s Ownership with Respect to Tenants

 

 

AMENDED AND RESTATED

LIMITED
PARTNERSHIP AGREEMENT

OF

PENNYMAC OPERATING
PARTNERSHIP, L.P.

 

THIS AMENDED AND RESTATED LIMITED PARTNERSHIP
AGREEMENT OF PENNYMAC OPERATING PARTNERSHIP, L.P. (this “Agreement”),
dated as of July [     ], 2009, is
entered into by and among PennyMac GP OP, Inc., a Delaware corporation
(the “General Partner”), and the Persons (as defined below) that are
party hereto from time to time and whose names are set forth on Exhibit A
as attached hereto (as it may be amended from time to time).

 

WHEREAS, the limited partnership was formed on May 20,
2009 and an original limited partnership agreement, dated as of May 20,
2009 (the “Prior Agreement”), was entered into between the General
Partner, as general partner, and PennyMac Mortgage Investment Trust, a Maryland
real estate investment trust (the “Company”), as the initial limited
partner;

 

WHEREAS, the General Partner and the Company desire to
enter into this Amended and Restated Limited Partnership Agreement of PennyMac
Operating Partnership, L.P. (the “Partnership”); and

 

WHEREAS, the General Partner and the Company have
made, and the Company will make certain additional, capital contributions to
the Partnership as set forth on Exhibit A attached hereto;

 

NOW THEREFORE, in consideration of the mutual
covenants herein contained, and other valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:

 

ARTICLE 1.

 

DEFINED
TERMS

 

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

 

“704(c) Value” of any Contributed Property means
the fair market value of such property or other consideration at the time of
contribution, as determined by the General Partner using such reasonable method
of valuation as it may adopt. Subject to Exhibit B hereof, the General
Partner shall, in its sole and absolute discretion, use such method as it deems
reasonable and appropriate to allocate the aggregate of the 704(c) Values
of Contributed Properties in a single or integrated transaction among the
separate properties on a basis proportional to their respective fair market
values.

 

“Act” means the Delaware Revised Uniform
Limited Partnership Act, 6 Del. C. §17-101, et seq.,
as it may be amended from time to time, and any successor to such statute.

 

 

“Additional Funds” has the meaning set forth in
Section 4.4.A hereof.

 

“Additional Limited Partner” means a Person
admitted to the Partnership as a Limited Partner pursuant to Section 12.2
hereof and who is shown as such on the books and records of the Partnership.

 

“Adjusted Capital Account” means the Capital
Account maintained for each Partner as of the end of each Partnership taxable
year (i) increased by any amounts which such Partner is obligated to
restore pursuant to any provision of this Agreement or is deemed to be
obligated to restore pursuant to the penultimate sentences of Regulations
Sections 1.704-2(g)(1) and 1.704-2(i)(5) and (ii) decreased by
the items described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5),
and 1.704-1(b)(2)(ii)(d)(6). The foregoing definition of Adjusted Capital
Account is intended to comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and
shall be interpreted consistently therewith.

 

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

 

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

 

“Adjustment Event” means any of the following
events: (A) the Partnership makes a distribution on all outstanding
Partnership Units in Partnership Units, (B) the Partnership subdivides the
outstanding Partnership Units into a greater number of Partnership Units or
combines the outstanding Partnership Units into a smaller number of Partnership
Units, or (C) the Partnership issues any Partnership Units in exchange for
its outstanding Partnership Units by way of a reclassification or
recapitalization of its Partnership Units. 
If more than one Adjustment Event occurs, the adjustment to the LTIP
Units under Section 4.2.C need be made only once using a single formula
that takes into account each and every Adjustment Event as if all Adjustment
Events occurred simultaneously.  For the
avoidance of doubt, the following shall not be Adjustment Events:  (x) the issuance of Partnership Units in
a financing, reorganization, acquisition or other similar business transaction,
(y) the issuance of Partnership Units pursuant to the Plan, or any other
long-term incentive plan, any employee benefit or compensation plan or distribution
reinvestment plan, or (z) the issuance of any Partnership Units to the
Company in respect of a capital contribution to the Partnership of proceeds
from the sale of securities by the Company.

 

“Affiliate” means, with respect to any Person, (i) any
Person directly or indirectly controlling, controlled by or under common
control with such Person; (ii) any Person owning or controlling ten
percent (10%) or more of the outstanding voting interests of such Person; (iii) any
Person of which such Person owns or controls ten percent (10%) or more of the
voting interests; or (iv) any officer, director, general partner or
trustee of such Person or of any Person referred to in clauses (i), (ii), or (iii) above.

 

“Agreed Value” means (i) in the case of
any Contributed Property as of the time of its contribution to the Partnership,
the 704(c) Value of such property, reduced by any liabilities either
assumed by the Partnership upon such contribution or to which such property is
subject 

 

2

 

when
contributed, and (ii) in the case of any property distributed to a Partner
by the Partnership, the Partnership’s Carrying Value of such property at the
time such property is distributed, reduced by any indebtedness either assumed
by such Partner upon such distribution or to which such property is subject at
the time of distribution as determined under Section 752 of the Code and
the Regulations thereunder.

 

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

 

“Assignee” means a Person to whom all or a
portion of a Partnership Interest has been transferred in a manner permitted
under this Agreement, but who has not become a Substituted Limited Partner, and
who has the rights set forth in Section 11.5.

 

“Available Cash” means, with respect to any
period for which such calculation is being made,

 

(i)            the sum of:

 

(a)           the Partnership’s Net Income or Net Loss
(as the case may be) for such period (without regard to adjustments resulting
from allocations described in Sections 1.A through 1.E of Exhibit C);

 

(b)           Depreciation and all other noncash
charges deducted in determining Net Income or Net Loss for such period;

 

(c)           the amount of any reduction in the
reserves of the Partnership referred to in clause (ii)(f) below
(including, without limitation, reductions resulting because the General
Partner determines such amounts are no longer necessary);

 

(d)           the excess of proceeds from the sale,
exchange, disposition, or refinancing of Partnership property for such period
over the gain recognized from such sale, exchange, disposition, or refinancing
during such period (excluding Terminating Capital Transactions); and

 

(e)           all other cash received by the
Partnership for such period that was not included in determining Net Income or
Net Loss for such period;

 

(ii)           less the sum of:

 

(a)           all principal debt payments made by the
Partnership during such period;

 

(b)           capital expenditures made by the Partnership
during such period;

 

(c)           investments made by the Partnership
during such period in any entity (including loans made thereto) to the extent
that such investments are not otherwise described in clause (ii)(a) or
(ii)(b);

 

(d)           all other expenditures and payments not
deducted in determining Net Income or Net Loss for such period;

 

3

 

(e)           any amount included in determining Net
Income or Net Loss for such period that was not received by the Partnership during
such period;

 

(f)            the amount of any increase in reserves
during such period which the General Partner determines to be necessary or
appropriate in its sole and absolute discretion; and

 

(g)           the amount of any working capital
accounts and other cash or similar balances which the General Partner
determines to be necessary or appropriate, in its sole and absolute discretion.

 

Notwithstanding the foregoing, Available Cash shall
not include any cash received or reductions in reserves, or take into account
any disbursements made or reserves established, after commencement of the
dissolution and liquidation of the Partnership.

 

“Board of Trustees” means the Board of Trustees
of the Company.

 

“Book-Tax Disparities” means, with respect to
any item of Contributed Property or Adjusted Property, as of the date of any
determination, the difference between the Carrying Value of such Contributed
Property or Adjusted Property and the adjusted basis thereof for federal income
tax purposes as of such date. A Partner’s share of the Partnership’s Book-Tax
Disparities in all of its Contributed Property and Adjusted Property will be
reflected by the difference between such Partner’s Capital Account balance as
maintained pursuant to Exhibit B and the hypothetical balance of such
Partner’s Capital Account computed as if it had been maintained strictly in
accordance with federal income tax accounting principles.

 

“Business Day” means any day except a Saturday,
Sunday or other day on which commercial banks in New York, New York are authorized
or required by law to close.

 

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

 

“Capital Account Limitation” has the meaning
set forth in Section 8.7.B.

 

“Capital Contribution” means, with respect to
any Partner, any cash, cash equivalents or the Agreed Value of Contributed
Property which such Partner contributes or is deemed to contribute to the
Partnership pursuant to Section 4.1, 4.2, or 4.3 hereof.

 

“Carrying Value” means (i) with respect to
a Contributed Property or Adjusted Property, the 704(c) Value of such
property, reduced (but not below zero) by all Depreciation with respect to such
property charged to the Partners’ Capital Accounts following the contribution
of or adjustment with respect to such property; and (ii) with respect to
any other Partnership property, the adjusted basis of such property for federal
income tax purposes, all as of the time of determination. The Carrying Value of
any property shall be adjusted from time to time in accordance with Exhibit B
hereof, and to reflect changes, additions or other adjustments to the Carrying
Value for dispositions and acquisitions of Partnership properties, as deemed
appropriate by the General Partner.

 

4

 

“Cash Amount” means an amount of cash per
Partnership Unit equal to the Value on the Valuation Date of the REIT Shares
Amount.

 

“Certificate” means the Certificate of Limited
Partnership of the Partnership as filed in the office of the Delaware Secretary
of State on May 20, 2009, as amended and/or restated from time to time in
accordance with the terms hereof and the Act.

 

“Code” means the Internal Revenue Code of 1986,
as amended and in effect from time to time, as interpreted by the applicable
regulations thereunder. Any reference herein to a specific section or sections
of the Code shall be deemed to include a reference to any corresponding
provision of future law.

 

“Common Units”
means the Partnership Units other than any series of units of limited
partnership interest issued in the future and designated as preferred or
otherwise different from the Common Units, including, but not limited to, with
respect to the payment of distributions, including distributions upon
liquidation.

 

“Company” means PennyMac Mortgage Investment
Trust, a Maryland real estate investment trust.

 

“Compensation Committee” means the Compensation
Committee of the Company, or if no such committee exists, the Board of
Trustees.

 

“Concurrent Offering” means the private placement
of REIT Shares pursuant to that certain Share Purchase Agreement among the
Company and the other parties named therein.

 

“Consent” means the consent or approval of a
proposed action by a Partner given in accordance with Section 14.2 hereof.

 

“Constituent Person” has the meaning set forth
in Section 8.7.G.

 

“Constructively Own” means ownership under the
constructive ownership rules described in Exhibit E.

 

“Contributed Property” means each property or
other asset, in such form as may be permitted by the Act (but excluding cash),
contributed or deemed contributed to the Partnership. Once the Carrying Value
of a Contributed Property is adjusted pursuant to Exhibit B hereof, such
property shall no longer constitute a Contributed Property for purposes of Exhibit B
hereof, but shall be deemed an Adjusted Property for such purposes.

 

“Conversion Date” has the meaning set forth in Section 8.7.B.

 

“Conversion Factor” means 1.0, subject to
adjustment as follows: (i) in case the Company shall (A) make a
distribution on the outstanding REIT Shares in REIT Shares, (B) subdivide
or reclassify the outstanding REIT Shares into a greater number of REIT Shares,
or (C) combine or reclassify the outstanding REIT Shares into a smaller
number of REIT Shares, the Conversion Factor in effect at the opening of
business on the day following the date fixed for the determination of
shareholders entitled to receive such distribution or subject to such 

 

5

 

subdivision,
combination or reclassification shall be proportionately adjusted so that a
holder of Partnership Units shall be entitled to receive, upon exchange
thereof, the number of REIT Shares which the holder would have owned at the
opening of business on the day following the date fixed for such determination
had such Partnership Units been exchanged immediately prior to such
determination; (ii) in case the Partnership shall subdivide or reclassify
the outstanding Partnership Units into a greater number of Partnership Units,
the Conversion Factor in effect at the opening of business on the day following
the date fixed for the determination of Partnership Unit holders subject to
such subdivision or reclassification shall be proportionately adjusted so that
a holder of Partnership Units shall be entitled to receive, upon exchange
thereof, the number of REIT Shares which the holder would have owned at the
opening of business on the day following the date fixed for such determination
had such Partnership Units been exchanged immediately prior to such
determination; (iii) in case the Company (A) shall issue rights or
warrants to all holders of REIT Shares entitling them to subscribe for or
purchase REIT Shares at a price per share less than the daily market price per
REIT Share on the date fixed for the determination of shareholders entitled to
receive such rights or warrants, (B) shall not issue similar rights or
warrants to all holders of Partnership Units entitling them to subscribe for or
purchase REIT Shares or Partnership Units at a comparable price (determined, in
the case of Partnership Units, by reference to the Conversion Factor), and (C) cannot
issue such rights or warrants to a Redeeming Partner as otherwise required by
the definition of “REIT Shares Amount” set forth in this Article 1, then
the Conversion Factor in effect at the opening of business on the day following
the date fixed for such determination shall be increased by multiplying such
Conversion Factor by a fraction of which the numerator shall be the number of
REIT Shares outstanding at the close of business on the date fixed for such
determination plus the number of REIT Shares so offered for subscription or
purchase, and of which the denominator shall be the number of REIT Shares
outstanding at the close of business on the date fixed for such determination
plus the number of REIT Shares which the aggregate offering price of the total
number of REIT Shares so offered for subscription would purchase at such daily
market price per share, such increase of the Conversion Factor to become
effective immediately after the opening of business on the day following the
date fixed for such determination; and (iv) in case the Company shall, by
distribution or otherwise, distribute to all holders of its REIT Shares, (A) capital
shares of any class other than its REIT Shares, (B) evidence of its
indebtedness or (C) assets (excluding any rights or warrants referred to
in clause (iii) above, any cash distribution lawfully paid under the laws
of the state of organization of the Company, and any distribution referred to
in clause (i) above) and shall not cause a corresponding distribution to
be made to all holders of Partnership Units, the Conversion Factor shall be
adjusted so that the same shall equal the ratio determined by multiplying the
Conversion Factor in effect immediately prior to the close of business on the
date fixed for the determination of shareholders entitled to receive such
distribution by a fraction of which the numerator shall be the daily market
price per REIT Share on the date fixed for such determination, and of which the
denominator shall be such daily market price per REIT Share less the fair
market value (as determined by the Board of Trustees, whose determination shall
be conclusive and described in a Board resolution certified by the Secretary of
the Company and delivered to the holders of the Partnership Units) of the
portion of the capital shares or evidences of indebtedness or assets so
distributed applicable to one REIT Share, such adjustment to become effective
immediately prior to the opening of business on the day following the date
fixed for the determination of shareholders entitled to receive such
distribution.

 

6

 

“Conversion Notice” has the meaning set forth
in Section 8.7.B.

 

“Conversion Right” has the meaning set forth in
Section 8.7.B.

 

“Covered Person” has the meaning set forth in Section 7.8.A.

 

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

 

“Declaration of Trust” means the Declaration of
Trust of the Company filed with the State Department of Assessments and
Taxation of the State of Maryland on May 18, 2009, as amended and/or
restated from time to time.

 

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

 

“Direct Offering” means the offering of REIT
Shares under the Securities Act directly by the Company pursuant to those
certain subscription agreements between the Company and each of the purchasers
named therein.

 

“Distribution Payment Date” means the dates
upon which the General Partner makes distributions in accordance with Section 5.1
of this Agreement.

 

“Economic Capital Account Balances” has the
meaning set forth in Section 6.1.C.

 

“ERISA” means the Employee Retirement Income
Security Act of 1974, as amended and in effect from time to time, as
interpreted by the applicable regulations thereunder. Any reference herein to a
specific section or Title of ERISA shall be deemed to include a reference to
any corresponding provision of future law.

 

“Event of Bankruptcy” has the meaning set forth
in Section 13.1.G.

 

7

 

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

 

“final adjustment” has the meaning set forth in
Section 10.3.B.

 

“Forced Conversion” has the meaning set forth
in Section 8.7.C.

 

“Forced Conversion Notice” has the meaning set
forth in Section 8.7.D.

 

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

 

“GAAP” means U.S. generally accepted accounting
principles.

 

“General Partner” means PennyMac GP OP, Inc.,
a wholly-owned subsidiary of the Company, or any Person who becomes an
additional or a successor general partner of the Partnership.

 

“General Partner Interest” means a Partnership
Interest held by the General Partner, in its capacity as general partner of the
Partnership. A General Partner Interest may be (but is not required to be)
expressed as a number of Partnership Units.

 

“Initial Capitalization” means the issuance of
1,000 REIT Shares by the Company on May 19, 2009, constituting the initial
capitalization of the Company.

 

“IRS” means the Internal Revenue Service, which
administers the internal revenue laws of the United States.

 

“Incapacity” or “Incapacitated” means, (i) as
to any individual Partner, death, total physical disability or entry by a court
of competent jurisdiction adjudicating him incompetent to manage his Person or
his estate; (ii) as to any corporation which is a Partner, the filing of a
certificate of dissolution, or its equivalent, for the corporation or the
revocation of its charter; (iii) as to any partnership or limited
liability company which is a Partner, the dissolution and commencement of
winding up of the partnership; (iv) as to any estate which is a Partner,
the distribution by the fiduciary of the estate’s entire interest in the
Partnership; (v) as to any trustee of a trust which is a Partner, the
termination of the trust (but not the substitution of a new trustee); or (vi) as
to any Partner, the bankruptcy of such Partner. For purposes of this
definition, bankruptcy of a Partner shall be deemed to have occurred when (a) the
Partner commences a voluntary proceeding seeking liquidation, reorganization or
other relief under any bankruptcy, insolvency or other similar law now or
hereafter in effect; (b) the Partner is adjudged as bankrupt or insolvent,
or a final and non-appealable order for relief under any bankruptcy, insolvency
or similar law now or hereafter in effect has been entered against the Partner;
(c) the Partner executes and delivers a general assignment for the benefit
of the Partner’s creditors; (d) the Partner files an answer or other
pleading admitting or failing to contest the material allegations of a petition
filed against the Partner in any proceeding of the nature described in clause (b) above;
(e) the Partner seeks, consents to or acquiesces in the appointment of a
trustee, receiver or liquidator for the Partner or for all or any substantial
part of the Partner’s properties; (f) any proceeding seeking liquidation,
reorganization or other relief of or against such Partner under any bankruptcy,
insolvency or other similar law now or hereafter in effect has not been
dismissed 

 

8

 

within
one hundred twenty (120) days after the commencement thereof; (g) the
appointment without the Partner’s consent or acquiescence of a trustee,
receiver or liquidator has not been vacated or stayed within ninety (90) days
of such appointment; or (h) an appointment referred to in clause (g) which
has been stayed is not vacated within ninety (90) days after the expiration of
any such stay.

 

“Indemnitee” means (i) any Person made a
party to a proceeding by reason of (A) his or its status as the General
Partner, or as a trustee, director, officer, shareholder, partner, member,
employee, representative or agent of the General Partner or as an officer,
employee, representative or agent of the Partnership, or (B) his or its
liabilities, pursuant to a loan guarantee or otherwise, for any indebtedness of
the Partnership or any Subsidiary of the Partnership (including, without limitation,
any indebtedness which the Partnership or any Subsidiary of the Partnership has
assumed or taken assets subject to); and (ii) such other Persons
(including Affiliates of the General Partner or the Partnership) as the General
Partner may designate from time to time (whether before or after the event
giving rise to potential liability), in its sole and absolute discretion.

 

“Initial Public Offering” means the initial
public offering of REIT Shares under the Securities Act pursuant to that
certain underwriting agreement, dated July [       ], 2009 among the Company, the
Partnership, PNMAC Capital Management, LLC and Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Credit Suisse Securities (USA) LLC, and Deutsche Bank
Securities Inc., as representatives of the underwriters named therein.

 

“Limited Partner” means the Company and any
other Person named as a limited partner of the Partnership in Exhibit A
attached hereto, as such Exhibit may be amended from time to time, or any
Substituted Limited Partner or Additional Limited Partner, in such Person’s
capacity as a limited partner of the Partnership.  For purposes of this Agreement and the Act,
the Limited Partners shall constitute a single class or group of limited
partners.

 

“Limited Partner Interest” means a Partnership
Interest of a Limited Partner in the Partnership representing a fractional part
of the Partnership Interests of all Partners and includes any and all benefits
to which the holder of such a Partnership Interest may be entitled, as provided
in this Agreement, together with all obligations of such Person to comply with
the terms and provisions of this Agreement. A Limited Partner Interest may be
(but is not required to be) expressed as a number of Partnership Units.

 

“Liquidating Event” has the meaning set forth
in Section 13.1.

 

“Liquidator” has the meaning set forth in Section 13.2.

 

“LTIP Unit” means a Partnership Unit which is
designated as an LTIP Unit and which has the rights, preferences and other
privileges designated in Section 4.2.C hereof and in the Plan in respect
of LTIP Unitholders.  The allocation of
LTIP Units among the Partners shall be set forth on Exhibit A, as may be
amended from time to time.

 

“LTIP Unit Agreement” means each or any, as the
context implies, LTIP Unit Agreement entered into by an LTIP Unitholder upon
acceptance of an award of LTIP Units under the Plan (as such agreement may be
amended, modified or supplemented from time to time).

 

9

 

“LTIP Unitholder” means a Partner that holds
LTIP Units.

 

“Net Income” means, for any taxable period, the
excess, if any, of the Partnership’s items of income and gain for such taxable
period over the Partnership’s items of loss and deduction for such taxable
period. The items included in the calculation of Net Income shall be determined
in accordance with federal income tax accounting principles, subject to the
specific adjustments provided for in Section 1.B of Exhibit B.

 

“Net Loss” means, for any taxable period, the
excess, if any, of the Partnership’s items of loss and deduction for such
taxable period over the Partnership’s items of income and gain for such taxable
period. The items included in the calculation of Net Loss shall be determined
in accordance with federal income tax accounting principles, subject to the
specific adjustments provided for in Section 1.B of Exhibit B.

 

“New Securities” has the meaning set forth in Section 4.2.B
hereof.

 

“Nonrecourse Deductions” has the meaning set
forth in Regulations Section 1.704-2(b)(1), and the amount of Nonrecourse
Deductions for a Partnership taxable year shall be determined in accordance
with the rules of Regulations Section 1.704-2(c).

 

“Nonrecourse Liability” has the meaning set
forth in Regulations Section 1.752-1(a)(2).

 

“Notice of Redemption” means the Notice of
Redemption substantially in the form of Exhibit D to this Agreement.

 

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

 

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

 

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

 

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

 

“Partnership” means the limited partnership
heretofore formed and continued under the Act and pursuant to this Agreement,
and any successor thereto.

 

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

 

10

 

Partnership
Interest may be (but is not required to be) expressed as a number of
Partnership Units.

 

“Partnership Minimum Gain” has the meaning set
forth in Regulations Section 1.704-2(b)(2), and the amount of Partnership
Minimum Gain, as well as any net increase or decrease in a Partnership Minimum
Gain, for a Partnership taxable year shall be determined in accordance with the
rules of Regulations Section 1.704-2(d).

 

“Partnership Record Date” means the record date
established by the General Partner for the distribution of Available Cash
pursuant to Section 5.1 hereof, which record date shall be the same as the
record date established by the Company for a distribution to its shareholders
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 pursuant to
Sections 4.1, 4.2 and 4.3. The number of Partnership Units outstanding and the
Percentage Interest in the Partnership represented by such Units are set forth
in Exhibit A attached hereto, as such Exhibit may be amended from
time to time. The ownership of Partnership Units shall be evidenced by such
form of certificate for units as the General Partner adopts from time to time
unless the General Partner determines that the Partnership Units shall be uncertificated
securities.

 

“Partnership Unit Economic Balance” has the
meaning set forth in Section 6.1.C.

 

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

 

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

 

“Person” means an individual or a real estate
investment trust, corporation, partnership, limited liability company, trust,
unincorporated organization, association or other entity.

 

“Plan” means the PennyMac Mortgage Investment
Trust 2009 Equity Incentive Plan, as such plan may be amended from time to
time.

 

“Prior Agreement” has the meaning set forth in
the recitals hereto.

 

“Qualified REIT Subsidiary” means a qualified
REIT subsidiary of the Company within the meaning of Code Section 856(i)(2).

 

“Recapture Income” means any gain recognized by
the Partnership upon the disposition of any property or asset of the
Partnership, which gain is characterized as ordinary income because it
represents the recapture of deductions previously taken with respect to such property
or asset.

 

“Redeeming Partner” has the meaning set forth
in Section 8.6.A hereof.

 

11

 

“Redemption Right” shall have the meaning set
forth in Section 8.6.A hereof.

 

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

 

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

 

“REIT Share” means a common share of beneficial
interest, par value $0.01 per share, of the Company.

 

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

 

“REIT Share Offering” means a primary offering
by the Company of its REIT Shares, including, without limitation, the Initial
Public Offering, the Concurrent Offering, the Direct Offering and any other
offerings.

 

“Residual Gain” or “Residual Loss” means
any item of gain or loss, as the case may be, of the Partnership recognized for
federal income tax purposes resulting from a sale, exchange or other
disposition of Contributed Property or Adjusted Property, to the extent such
item of gain or loss is not allocated pursuant to Section 2.B.(1)(a) or
2.B.(2)(a) of Exhibit C to eliminate Book-Tax Disparities.

 

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

 

“Specified Redemption Date” means the tenth
(10th) Business Day after receipt by the Partnership of a Notice of Redemption;
provided, that if the Company combines its outstanding REIT Shares, no
Specified Redemption Date shall occur after the record date of such combination
of REIT Shares and prior to the effective date of such combination.

 

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

 

“Substituted Limited Partner” means a Person
who is admitted as a Limited Partner to the Partnership pursuant to Section 11.4.

 

“Tenant” means any tenant from which the
Company derives rent either directly or indirectly through partnerships or
limited liability companies, including the Partnership.

 

12

 

“Terminating Capital Transaction” means any
sale or other disposition of all or substantially all of the assets of the Partnership
or a related series of transactions that, taken together, result in the sale or
other disposition of all or substantially all of the assets of the Partnership.

 

“Transaction” has the meaning set forth in Section 8.7.G.

 

“Trading Days” means days on which the primary
trading market for REIT Shares, if any, is open for trading.

 

“Unrealized Gain” attributable to any item of
Partnership property means, as of any date of determination, the excess, if
any, of (i) the fair market value of such property (as determined under Exhibit B
hereof) as of such date; over (ii) the Carrying Value of such property
(prior to any adjustment to be made pursuant to Exhibit B hereof) as of
such date.

 

“Unrealized Loss” attributable to any item of
Partnership property means, as of any date of determination, the excess, if
any, of (i) the Carrying Value of such property (prior to any adjustment
to be made pursuant to Exhibit B hereof) as of such date; over (ii) the
fair market value of such property (as determined under Exhibit B hereof)
as of such date.

 

“Unvested LTIP Units” has the meaning set forth
in Section 4.2.C.

 

“Valuation Date” means the date of receipt by
the General Partner of a Notice of Redemption or, if such date is not a
Business Day, the first Business Day thereafter.

 

“Value” means, with respect to a REIT Share,
the average of the daily market price for the ten (10) consecutive Trading
Days immediately preceding the Valuation Date. 
The daily market price for each such Trading Day shall be: (i) if
the REIT Shares are listed or admitted to trading on any national securities
exchange or the NASDAQ National Market, the closing price on such day, or if no
such sale takes place on such day, the average of the closing bid and asked
prices on such day; (ii) if the REIT Shares are not listed or admitted to
trading on any national securities exchange or the NASDAQ National Market, the
last reported sale price on such day or, if no sale takes place on such day,
the average of the closing bid and asked prices on such day, as reported by a
reliable quotation source designated by the General Partner; or (iii) if
the REIT Shares are not listed or admitted to trading on any national
securities exchange or the NASDAQ National Market and no such last reported
sale price or closing bid and asked prices are available, the average of the
reported high bid and low asked prices on such day, as reported by a reliable
quotation source designated by the General Partner, or if there shall be no bid
and asked prices on such day, the average of the high bid and low asked prices,
as so reported, on the most recent day (not more than ten (10) days prior
to the date in question) for which prices have been so reported; provided,
that if there are no bid and asked prices reported during the ten (10) days
prior to the date in question, the Value of the REIT Shares shall be determined
by the General Partner acting in good faith on the basis of such quotations and
other information as it considers, in its reasonable judgment, appropriate.  In the event the REIT Shares Amount includes
rights that a holder of REIT Shares would be entitled to receive, then the
Value of such rights shall be determined by the General Partner acting in good
faith on the basis of such quotations and other information as it considers, in
its reasonable judgment, appropriate.

 

13

 

“Vested LTIP Units” has the meaning set forth
in Section 4.2.C.

 

ARTICLE
2.

 

ORGANIZATIONAL MATTERS

 

Section 2.1.                                   Continuation

 

The Partners hereby continue the Partnership as a
limited partnership under and pursuant to the Act. Except as expressly provided
herein to the contrary, the rights and obligations of the Partners and the
administration and termination of the Partnership shall be governed by the Act.
The Partnership Interest of each Partner shall be personal property for all
purposes.

 

Section 2.2.                                   Name

 

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

 

Section 2.3.                                   Registered Office and Agent; Principal Office

 

The address of the registered office of the
Partnership in the State of Delaware and the name and address of the registered
agent for service of process on the Partnership in the State of Delaware is
Corporation Trust Company, Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware 19801.  The principal
office of the Partnership shall be c/o PennyMac Mortgage Investment Trust,
27001 Agoura Road, Third Floor, Calabasas, California 91301, or such other
place as the General Partner may from time to time designate by notice to the
Limited Partners. The Partnership may maintain offices at such other place or
places within or outside the State of Delaware as the General Partner deems
advisable.

 

Section 2.4.                                   Power of Attorney

 

A.                                   Each Limited Partner and each Assignee
hereby constitutes and appoints the General Partner, any Liquidator, and authorized
officers and attorneys-in-fact of each, and each of those acting singly, in
each case with full power of substitution, as its true and lawful agent and
attorney-in-fact, with full power and authority in its name, place and stead
to:

 

(1)                                  execute, swear to, acknowledge, deliver,
file and record in the appropriate public offices (a) all certificates,
documents and other instruments (including, without limitation, this Agreement
and the Certificate and all amendments or restatements thereof) that the General
Partner or the Liquidator deems appropriate or necessary to 

 

14

 

form, qualify or continue
the existence or qualification of the Partnership as a limited partnership (or
a partnership in which the Limited Partners have limited liability) in the
State of Delaware and in all other jurisdictions in which the Partnership may
or plans to conduct business or own property; (b) all instruments that the
General Partner deems appropriate or necessary to reflect any amendment,
change, modification or restatement of this Agreement in accordance with its
terms; (c) all conveyances and other instruments or documents that the
General Partner or the Liquidator deems appropriate or necessary to reflect the
dissolution and liquidation of the Partnership pursuant to the terms of this
Agreement, including, without limitation, a certificate of cancellation; (d) all
instruments relating to the admission, withdrawal, removal or substitution of
any Partner pursuant to, or other events described in, Article 11, 12 or
13 hereof or the Capital Contribution of any Partner; and (e) all
certificates, documents and other instruments relating to the determination of
the rights, preferences and privileges of Partnership Interest; and

 

(2)                                  execute, swear to, seal, acknowledge and
file all ballots, consents, approvals, waivers, certificates and other
instruments appropriate or necessary, in the sole and absolute discretion of
the General Partner or any Liquidator, to make, evidence, give, confirm or
ratify any vote, consent, approval, agreement or other action which is made or
given by the Partners hereunder or is consistent with the terms of this
Agreement or appropriate or necessary, in the sole discretion of the General
Partner or any Liquidator, to effectuate the terms or intent of this Agreement.

 

Nothing
contained herein shall be construed as authorizing the General Partner or any
Liquidator to amend this Agreement except in accordance with Article 14
hereof or as may be otherwise expressly provided for in this Agreement.

 

B.                                     The foregoing power of attorney is hereby
declared to be irrevocable and a power coupled with an interest, in recognition
of the fact that each of the Partners will be relying upon the power of the
General Partner and any Liquidator to act as contemplated by this Agreement in
any filing or other action by it on behalf of the Partnership, and it shall
survive and not be affected by the subsequent Incapacity of any Limited Partner
or Assignee and the transfer of all or any portion of such Limited Partner’s or
Assignee’s Partnership Units and shall extend to such Limited Partner’s or
Assignee’s heirs, successors, assigns and personal representatives. Each such
Limited Partner or Assignee hereby agrees to be bound by any representation
made by the General Partner or any Liquidator, acting in good faith pursuant to
such power of attorney, and each such Limited Partner or Assignee hereby waives
any and all defenses which may be available to contest, negate or disaffirm the
action of the General Partner or any Liquidator, taken in good faith under such
power of attorney. Each Limited Partner or Assignee shall execute and deliver
to the General Partner or the Liquidator, within fifteen (15) days after
receipt of the General Partner’s or Liquidator’s request therefor, such further
designation, powers of attorney and other instruments as the General Partner or
the Liquidator, as the case may be, deems necessary to effectuate this
Agreement and the purposes of the Partnership.

 

Section 2.5.                                   Term

 

The term of the Partnership commenced on the date that
the Certificate was filed with the Secretary of State of the State of Delaware
and shall continue until December 31, 2109, unless 

 

15

 

the
Partnership is dissolved sooner pursuant to the provisions of Article 13
or as otherwise provided by law.

 

Section 2.6.                                   Admission of Limited Partners

 

On the date hereof, and upon the execution of this
Agreement or a counterpart of this Agreement, each of the Persons identified as
a limited partner of the Partnership on Exhibit A to this Agreement (other
than the Company which has already been admitted as a limited partner of the
Partnership) is hereby admitted to the Partnership as a limited partner of the
Partnership.

 

ARTICLE
3.

 

PURPOSE

 

Section 3.1.                                   Purpose and Business

 

The purpose and nature of the business to be conducted
by the Partnership is (i) to conduct any business that may be lawfully
conducted by a limited partnership formed pursuant to the Act; provided, however,
that such business shall be limited to and conducted in such a manner as to
permit the Company at all times to qualify as a REIT, unless the Company ceases
to qualify as a REIT for reasons other than the conduct of the business of the
Partnership or voluntarily revokes its election to be a REIT; (ii) to
enter into any partnership, joint venture or other similar arrangement to
engage in any of the foregoing or to own interests in any entity engaged in any
of the foregoing; and (iii) to do anything necessary, convenient or
incidental to the foregoing. In connection with the foregoing, and without
limiting the Company’s right, in its sole discretion, to cease qualifying as a
REIT, the Partners acknowledge that the Company’s current status as a REIT
inures to the benefit of all of the Partners and not solely to the General
Partner, the Company or their Affiliates.

 

Section 3.2.                                   Powers

 

The Partnership is empowered to do any and all acts
and things necessary, appropriate, proper, advisable, incidental to or
convenient for the furtherance and accomplishment of the purposes and business
described herein and for the protection and benefit of the Partnership, and
shall have, without limitation, any and all of the powers that may be exercised
on behalf of the Partnership by the General Partner pursuant to this Agreement;
provided, however, that the Partnership shall not take, or
refrain from taking, any action which, in the judgment of the General Partner,
in its sole and absolute discretion, (i) could adversely affect the
ability of the Company to qualify and to continue to qualify as a REIT; (ii) could
subject the Company to any additional taxes under Code Section 857 or Code
Section 4981 or any other related or successor provision of the Code; or (iii) could
violate any law or regulation of any governmental body or agency having
jurisdiction over the Company, its securities or the Partnership, unless such
action (or inaction) under clause (i), clause (ii) or clause (iii) above
shall have been specifically consented to by the Company in writing.

 

16

 

Section 3.3.            Representations
and Warranties by the Parties

 

A.                                   Each Partner that is an individual
represents and warrants to each other Partner that (i) such Partner has
the legal capacity to enter into this Agreement and perform such Partner’s
obligations hereunder, (ii) the consummation of the transactions
contemplated by this Agreement to be performed by such Partner will not result
in a breach or violation of, or a default under, any agreement by which such
Partner or any of such Partner’s property is or are bound, or any statute,
regulation, order or other law to which such Partner is subject, (iii) such
Partner is a “United States person” within the meaning of Section 7701(a)(30)
of the Code, and (iv) this Agreement is binding upon, and enforceable against,
such Partner in accordance with its terms.

 

B.                                     Each Partner that is not an individual
represents and warrants to each other Partner that (i) its execution and
delivery of this Agreement and all transactions contemplated by this Agreement
to be performed by it have been duly authorized by all necessary action,
including without limitation, that of its general partner(s), committee(s),
trustee(s), beneficiaries, director(s) and/or shareholder(s), as the case
may be, as required, (ii) the consummation of such transactions shall not
result in a breach or violation of, or a default under, its certificate of
limited partnership, partnership agreement, trust agreement, limited liability
company operating agreement, declaration of trust, charter or bylaws, as the
case may be, any agreement by which such Partner or any of such Partner’s
properties or any of its partners, beneficiaries, trustees or shareholders, as
the case may be, is or are bound, or any statute, regulation, order or other
law to which such Partner or any of its partners, trustees, beneficiaries or
shareholders, as the case may be, is or are subject, (iii) such Partner is
a “United States person” within the meaning of Section 7701(a)(30) of the
Code and (iv) this Agreement is binding upon, and enforceable against,
such Partner in accordance with its terms.

 

C.                                     Each Partner further represents,
warrants, covenants and agrees as follows:

 

(1)           Except as provided in Exhibit H
hereto, at any time such Partner actually or Constructively Owns a 25% or greater
capital interest or profits interest in the Partnership, it does not and will
not, without the prior written consent of the General Partner, actually own or
Constructively Own (a) with respect to any Tenant that is a corporation,
any stock of such Tenant, and (b) with respect to any Tenant that is not a
corporation, any interest in either the assets or net profits of such Tenant.

 

(2)           Upon request of the General Partner,
it will promptly disclose to the General Partner the amount of REIT Shares or
other capital shares of the Company that it actually owns or Constructively
Owns.

 

Each Partner understands
that if, for any reason, (a) the representations, warranties or agreements
set forth above are violated, or (b) the Partnership’s actual or
Constructive Ownership of REIT Shares or other capital shares of the Company
violates the limitations set forth in the Declaration of Trust, then (x) some
or all of the Redemption Rights of the Partners may become non-exercisable, and
(y) some or all of the REIT Shares owned by the Partners may be
automatically transferred to a trust for the benefit of a charitable
beneficiary, as provided in the Declaration of Trust.

 

17

 

(3)           Without the consent of the General
Partner, which may be given or withheld in its sole discretion, no Partner
shall take any action that would cause the Partnership at any time to have more
than 100 partners (including as partners those Persons indirectly owning an
interest in the Partnership through a partnership, limited liability company, S
corporation or grantor trust (such entity, a “flow through entity”), but
only if substantially all of the value of such person’s interest in the flow
through entity is attributable to the flow through entity’s interest (direct or
indirect) in the Partnership).

 

D.                                    The representations and warranties
contained in this Section 3.3 shall survive the execution and delivery of
this Agreement by each Partner and the dissolution and winding up of the
Partnership.

 

E.                                      Each Partner hereby acknowledges that no
representations as to potential profit, cash flows, funds from operations or
yield, if any, in respect of the Partnership or the Company have been made by
any Partner or any employee or representative or Affiliate of any Partner, and
that projections and any other information, including, without limitation,
financial and descriptive information and documentation, which may have been in
any manner submitted to such Partner shall not constitute any representation or
warranty of any kind or nature, express or implied.

 

Section 3.4.            Not
Publicly Traded

 

The General Partner, on behalf of the Partnership,
shall use its best efforts not to take any action which would result in the
Partnership being a publicly traded partnership within the meaning of either
Code Section 469(k)(2) or 7704(b). 
Subject to this Section 3.4, it is expressly acknowledged and
agreed by the Partners that the General Partner may, in its sole and absolute
discretion, waive or otherwise modify the application with respect to any
Partner(s) or Assignee(s) of any provision herein restricting,
prohibiting or otherwise relating to (i) the transfer of a Limited Partner
Interest or the Partnership Units evidencing the same, (ii) the admission
of any Limited Partners and (iii) the Redemption Rights of such Partners,
and that such waivers or modifications may be made by the General Partner at
any time or from time to time, including, without limitation, concurrently with
the issuance of any Partnership Units pursuant to the terms of this Agreement.

 

ARTICLE
4.

 

CAPITAL CONTRIBUTIONS

 

Section 4.1.            Capital
Contributions of the Partners

 

At the time of their respective execution of this
Agreement, the Partners shall make or shall have made Capital Contributions as set
forth in Exhibit A to this Agreement. 
The Partners shall own Partnership Units of the class or series and in
the amounts set forth in Exhibit A and shall have a Percentage Interest in
the Partnership as set forth in Exhibit A, which Percentage Interest shall
be adjusted in Exhibit A from time to time by the General Partner to the
extent necessary to reflect accurately exchanges, redemptions, additional
Capital Contributions, the issuance of additional Partnership Units (pursuant
to any merger or otherwise), or similar events 

 

18

 

having
an effect on any Partner’s Percentage Interest. 
Except as provided in Sections 4.2, 4.3 and 10.5, the Partners shall
have no obligation to make any additional Capital Contributions or loans to the
Partnership.

 

Section 4.2.            Issuances
of Additional Partnership Interests

 

A.            The General Partner is hereby
authorized, without the need for any vote or approval of any Partner or any
other Person who may hold Partnership Units or Partnership Interests, to cause
the Partnership from time to time to issue to any existing Partner (including
the General Partner and the Company) or to any other Person, and to admit such
Person as a limited partner in the Partnership, Partnership Units (including,
without limitation, Common Units and preferred Partnership Units) or other
Partnership Interests, in each case in exchange for the contribution by such
Person of property or other assets, in one or more classes, or one or more
series of any of such classes, or otherwise with such designations,
preferences, redemption and conversion rights and relative, participating,
optional or other special rights, powers and duties, including rights, powers
and duties senior to Limited Partner Interests, all as shall be determined by
the General Partner in its sole and absolute discretion 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, that no such additional
Partnership Units or other Partnership Interests shall be issued to the Company
unless either (a)(1) the additional Partnership Interests are issued in
connection with an issuance of REIT Shares or other securities by the Company,
which securities have designations, preferences and other rights such that the
economic interests attributable to such securities are substantially similar to
the designations, preferences and other rights of the additional Partnership
Interests issued to the Company in accordance with this Section 4.2.A, and
(2) the Company shall make a Capital Contribution to the Partnership in an
amount equal to the proceeds, if any, raised in connection with such issuance, (b) the
additional Partnership Interests are issued to all Partners in proportion to
their respective Percentage Interests, or (c) the additional Partnership
Interests are issued in connection with a contribution of property to the
Partnership by the Company.  In addition,
the Company may acquire Units from other Partners pursuant to this Agreement.

 

B.            In accordance with, and subject to
the terms of Section 4.3 hereof, the Company shall not issue any REIT
Shares (other than REIT Shares issued pursuant to Section 8.6) or other
securities, or rights, options, warrants or convertible or exchangeable
securities containing the right to subscribe for or purchase REIT Shares or
other securities of the Company (or any Debt issued by the
Company that provides any of the foregoing rights) (collectively, “New Securities”) other than to
all holders of REIT Shares unless (i) the General Partner shall cause the
Partnership to issue to the Company 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 REIT Shares or other
securities or New Securities; and (ii) the Company contributes to the
Partnership the proceeds, if any, from the issuance of such REIT Shares, other
securities or New Securities and, if applicable, from the exercise of rights
contained in such New Securities. 
Without limiting the foregoing, the Company is expressly authorized to
issue REIT Shares, other securities or 

 

19

 

New Securities for
less than fair market value, and the General Partner is expressly authorized to
cause the Partnership to issue to the Company corresponding Partnership
Interests, so long as (x) the General Partner concludes in good faith that
such issuance is in the interests of the Company and the Partnership (for
example, and not by way of limitation, the issuance of REIT Shares and
corresponding Partnership Units in connection with an issuance of REIT Shares
under the Plan or another long-term incentive plan of the Company or pursuant
to an employee share purchase plan providing for employee purchases of REIT
Shares at a discount from fair market value or employee share options that have
an exercise price that is less than the fair market value of the REIT Shares,
either at the time of issuance or at the time of exercise, or in order to
comply with the REIT share ownership requirements set forth in Section 856(a)(5) of
the Code); and (y) the Company contributes all proceeds from such issuance
and exercise to the Partnership.

 

C.                                     The General Partner may from time to time
issue LTIP Units to Persons who provide services to the Partnership, for such
consideration as the General Partner may determine to be appropriate, and admit
such Persons as Limited Partners. 
Subject to the following provisions of this Section 4.2.C and the
special provisions of Sections 6.1.C, 8.7 and 8.8, LTIP Units shall be treated
as Partnership Units, with all of the rights, privileges and obligations
attendant thereto.  For purposes of
computing the Partners’ Percentage Interests, holders of LTIP Units shall be
treated as Partnership Unitholders and LTIP Units shall be treated as
Partnership Units.  In particular, except
as otherwise specifically provided in this Agreement, the Partnership shall
maintain at all times a one-to-one correspondence between LTIP Units and
Partnership Units for conversion, distribution and other purposes, including
without limitation complying with the following procedures:

 

(i)            If an Adjustment
Event occurs, the General Partner shall make a corresponding adjustment to the
LTIP Units to maintain a one-for-one conversion and economic equivalence ratio
between Partnership Units and LTIP Units. 
If the Partnership takes an action affecting the Partnership Units other
than actions specifically defined herein as “Adjustment Events” and in the
opinion of the General Partner such action would require an adjustment to the
LTIP Units to maintain the one-to-one correspondence described above, the
General Partner shall have the right to make such adjustment to the LTIP Units,
to the extent permitted by law and by the Plan, in such manner and at such time
as the General Partner, in its sole discretion, may determine to be appropriate
under the circumstances.  If an
adjustment is made to the LTIP Units as herein provided, the Partnership shall
promptly file in the books and records of the Partnership an officer’s
certificate setting forth such adjustment and a brief statement of the facts
requiring such adjustment, which certificate shall be conclusive evidence of
the correctness of such adjustment absent manifest error.  Promptly after filing of such certificate, (i) the
Partnership shall mail a notice to each LTIP Unitholder setting forth the
adjustment to his or her LTIP Units and the effective date of such adjustment;
and

 

(ii)           The LTIP
Unitholders shall, in respect of each Distribution Payment Date, when, as and
if authorized and declared by the General Partner out of assets legally
available for that purpose, be entitled to receive distributions in an amount
per LTIP Unit equal to the distributions per Partnership Unit paid to holders
of record on the same record date established by the General Partner with respect
to such Distribution Payment Date; provided, however, that no distributions
shall be made in respect of any LTIP Unit that would cause the Economic Capital
Account of the holder of such LTIP Unit to have a negative balance that is
greater than

 

20

 

the negative
balance of the Economic Capital Account of each Partnership Unit
generally.  During any distribution
period, so long as any LTIP Units are outstanding, no distributions (whether in
cash or in kind) shall be authorized, declared or paid on Partnership Units,
unless equal distributions have been or contemporaneously are authorized,
declared and paid on the LTIP Units for such distribution period, except in the
circumstances described in the proviso to the preceding sentence.  Except to the extent required by the
aforementioned proviso, the LTIP Units shall rank pari passu
with the Partnership Units as to the payment of regular and special periodic or
other distributions and distribution of assets upon liquidation, dissolution or
winding up.  As to the payment of
distributions and as to distribution of assets upon liquidation, dissolution or
winding up, any class or series of Partnership Units or Partnership Interests
which by its terms specifies that it shall rank junior to, on a parity with, or
senior to the Partnership Units shall also rank junior to, or pari passu with, or senior to, as the case may be, the
entitlement of the LTIP Units to such distribution.  Subject to the terms of any LTIP Unit Agreement,
an LTIP Unitholder shall be entitled to transfer his or her LTIP Units to the
same extent, and subject to the same restrictions as holders of Partnership
Units are entitled to transfer their Partnership Units pursuant to Article 11.

 

LTIP Units shall be subject to the following special
provisions:

 

(i)            LTIP Unit Agreements.  LTIP Units may, in the sole discretion of the
Compensation Committee of the Company, as the sole owner of the General
Partner, be issued subject to vesting, forfeiture and additional restrictions
on transfer pursuant to the terms of an LTIP Unit Agreement.  The terms of any LTIP Unit Agreement may be
modified by the Compensation Committee of the Company, as the sole owner of the
General Partner, from time to time in its sole discretion, subject to any
restrictions on amendment imposed by the relevant LTIP Unit Agreement or by the
Plan, if applicable.  LTIP Units that
have become vested under the terms of an LTIP Unit Agreement are referred to
herein as “Vested LTIP Units”; all other LTIP Units shall be treated as “Unvested
LTIP Units.”

 

(ii)           Forfeiture.  Unless otherwise specified in the applicable
LTIP Unit Agreement, upon the occurrence of any event specified in an LTIP Unit
Agreement as resulting in either the right of the Partnership or the General
Partner to repurchase LTIP Units at a specified purchase price or some other
forfeiture of any LTIP Units, if the Partnership or the General Partner
exercises such right to repurchase or forfeiture in accordance with the
applicable LTIP Unit Agreement, then the relevant LTIP Units shall immediately,
and without any further action, be treated as cancelled and no longer
outstanding for any purpose.  Unless
otherwise specified in the applicable LTIP Unit Agreement, no consideration or
other payment shall be due with respect to any LTIP Units that have been
forfeited, other than any distributions declared with respect to a Partnership
Record Date prior to the effective date of the forfeiture.  In connection with any repurchase or forfeiture
of LTIP Units, the balance of the portion of the Capital Account of the LTIP
Unitholder that is attributable to all of his or her LTIP Units shall be
reduced by the amount, if any, by which it exceeds the target balance
contemplated by Section 6.1.C, calculated with respect to the LTIP
Unitholder’s remaining LTIP Units, if any.

 

(iii)          Allocations.  LTIP Unitholders shall receive certain
special allocations of gain under Section 6.1.C.

 

21

 

(iv)          Redemption.  The Redemption Right provided to Limited
Partners under Section 8.6 shall not apply with respect to LTIP Units
unless and until they are converted to Partnership Units as provided in clause (vi) below
and Section 8.7.

 

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

 

(vi)          Conversion to Partnership Units.  Vested LTIP Units are eligible to be
converted into Partnership Units under Section 8.7.

 

(vii)         Voting. 
LTIP Units shall have the voting rights provided in Section 8.8.

 

Section 4.3.            Contribution
of Proceeds of Issuance of Securities by the Company

 

On the date of the completion of the Initial Public
Offering, the Concurrent Offering and the Direct Offering, the Company shall
contribute to the Partnership the proceeds of the Initial Public Offering, the
Concurrent Offering, the Direct Offering and the Initial Capitalization in
exchange for Partnership Units; and in connection with any other REIT Share
Offering and any other issuance of REIT Shares, other securities or New
Securities pursuant to Section 4.2, the Company shall contribute to the
Partnership any proceeds (or a portion thereof) raised in connection with such
issuance in exchange for 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 REIT Shares or other securities or New
Securities contributed to the Partnership; provided, that, in each case,
if the proceeds actually received by the Company 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 Company
shall be deemed to have made a Capital Contribution to the Partnership in the
amount equal to the sum of the net proceeds of such issuance plus the amount of
such underwriter’s discount and other expenses paid by the Company (which
discount and expense shall be treated as an expense for the benefit of the
Partnership in accordance with Section 7.4).  In the case of employee purchases of New
Securities at a discount from fair market value, the amount of such discount
representing compensation to the employee, as determined by the General
Partner, shall be treated as an expense of the issuance of such New Securities.

 

Section 4.4.            Additional
Funds

 

A.            The General Partner may, at any time
and from time to time, determine that the Partnership requires additional funds
(“Additional Funds”) for the acquisition of additional assets, for the
redemption of Partnership Units or for such other purposes as the General
Partner may determine in its sole and absolute discretion.  Additional Funds may be obtained by the
Partnership, at the election of the General Partner, in any manner provided in,
and in accordance with, the terms of this Section 4.4 without the approval
of any Limited Partners.

 

B.            The General Partner, on behalf of
the Partnership, may obtain any Additional Funds by accepting Capital
Contributions from any Partners or other Persons.  In connection with any such Capital
Contribution, the General Partner is hereby authorized to cause the 

 

22

 

Partnership from
time to time to issue additional Partnership Units (as set forth in Section 4.2
above) in consideration therefor, and the Percentage Interests of the Partners
shall be adjusted to reflect the issuance of such additional Partnership Units.

 

C.            The General Partner, on behalf of
the Partnership, may obtain any Additional Funds by causing the Partnership to
incur Debt to any Person upon such terms as the General Partner determines
appropriate, including making such Debt convertible, redeemable or exchangeable
for Partnership Units; provided, however, that the Partnership
shall not incur any such Debt if (i) a breach, violation or default of
such indebtedness would be deemed to occur by virtue of the transfer of any
Partnership Interest, or (ii) such Debt is recourse to any Partner (unless
the Partner otherwise agrees).

 

D.            The General Partner, on behalf of
the Partnership, may obtain any Additional Funds by causing the Partnership to
incur Debt with the Company if (i) such Debt is, to the extent permitted
by law, on substantially the same terms and conditions (including interest
rate, repayment schedule, and conversion, redemption, repurchase and exchange
rights) as Funding Debt incurred by the General Partner, the net proceeds of
which are loaned to the Partnership to provide such Additional Funds, or (ii) such
Debt is on terms and conditions no less favorable to the Partnership than would
be available to the Partnership from any third party; provided, however,
that the Partnership shall not incur any such Debt if (a) a breach,
violation or default of such Debt would be deemed to occur by virtue of the
transfer of any Partnership Interest, or (b) such Debt is recourse to any
Partner (unless the Partner otherwise agrees).

 

Section 4.5.            Preemptive
Rights

 

No Person shall have any preemptive, preferential or
other similar right with respect to (i) additional Capital Contributions
or loans to the Partnership; or (ii) the issuance or sale of any
Partnership Units or other Partnership Interests.

 

ARTICLE
5.

 

DISTRIBUTIONS

 

Section 5.1.            Requirement
and Characterization of Distributions

 

The General Partner shall distribute at least quarterly
all or such portion as the General Partner may in its sole discretion determine
of Available Cash generated by the Partnership during such quarter or shorter
period to the Partners that are Partners on the Partnership Record Date with
respect to such quarter or shorter period in the following priority:

 

A.            First, to the Partners in accordance with their
Percentage Interests in arrears with respect to the immediately preceding
calendar quarter in an amount equal to (1) the sum of (a) the General
Partner’s reasonable estimate of the Net Income allocable to the Partners in
accordance with their Percentage Interests under Section 6.1.A.(ii) with
respect to such immediately preceding calendar quarter and (b) the General
Partner’s determination of the Net Income so allocated in prior calendar
quarters in the same calendar year, reduced by (2) the sum of (a) all
distributions previously made under this 

 

23

 

subsection or under subsection B. with respect to all
calendar quarters during the same calendar year and (b) any Net Loss
allocable to the Partners in accordance with their Percentage Interests in such
calendar quarter or any preceding calendar quarter of the same calendar year
under Section 6.1.B.

 

B.            Second, to the Partners in accordance with their
Percentage Interests; provided, that in no event may a Partner receive a
distribution of Available Cash with respect to a Partnership Unit if such
Partner is entitled to receive a distribution out of such Available Cash with
respect to a REIT Share for which such Partnership Unit has been exchanged, and
any such distribution shall be made to the Company; and provided, further, that
no LTIP Unitholder shall receive any distribution of Available Cash if and to the
extent the balance of such LTIP Unitholder’s Adjusted Capital Account would be
equal to or less than zero after such distribution is made unless the balances
of the Adjusted Capital Accounts of all Partners in the Partnership would also
be equal to or less than zero after such distribution is made.

 

The General Partner shall take such reasonable
efforts, as determined by it in its sole and absolute discretion and consistent
with the Company’s qualification as a REIT, to distribute Available Cash to the
Limited Partners so as to preclude any such distribution or portion thereof
from being treated as part of a sale of property to the Partnership by a
Limited Partner under Section 707 of the Code or the Regulations thereunder; provided,
that the General Partner and the Partnership shall not have liability to a
Limited Partner under any circumstances as a result of any distribution to a
Limited Partner being so treated.

 

Section 5.2.            Amounts
Withheld

 

All amounts withheld pursuant to the Code or any
provisions of any state or local tax law and Section 10.5 hereof with
respect to any allocation, payment or distribution to the Partners or Assignees
shall be treated as amounts distributed to the Partners or Assignees pursuant
to Section 5.1 for all purposes under this Agreement.

 

Section 5.3.            Distributions
Upon Liquidation

 

Proceeds from a Terminating Capital Transaction and
any other cash received or reductions in reserves made after commencement of
the liquidation of the Partnership shall be distributed to the Partners in
accordance with Section 13.2.

 

Section 5.4.            Restricted
Distributions

 

Notwithstanding any provision to the contrary
contained in this Agreement, the Partnership, and the General Partner on behalf
of the Partnership, shall not make a distribution to any Partner on account of
its interest in the Partnership if such distribution would violate Section 17-607
of the Act or other applicable law.

 

24

 

ARTICLE
6.

 

ALLOCATIONS

 

Section 6.1.            Allocations
For Capital Account Purposes

 

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

 

A.                                   After giving effect to the special
allocations set forth in Section 1 of Exhibit C attached hereto, Net
Income shall be allocated to the Partners in accordance with their respective
Percentage Interests.

 

B.                                     After giving effect to the special
allocations set forth in Section 1 of Exhibit C attached hereto, Net
Losses shall be allocated to the Partners in accordance with their respective
Percentage Interests.  In no event shall
Net Losses be allocated to a Limited Partner to the extent such allocation
would result in such partner having an Adjusted Capital Account Deficit (per
Unit) at the end of any taxable year in excess of the Adjusted Capital Account
Deficit (per Unit) of any other Limited Partner.  All such Net Losses shall be allocated to the
other Partners; provided, however, that appropriate adjustments
shall be made to the allocation of future Net Income in order to offset such
specially allocated Net Losses hereunder.

 

C.                                     Notwithstanding the provisions of Section 6.1.A
above, any net capital gains realized in connection with the actual or
hypothetical sale of all or substantially all of the assets of the Partnership,
including but not limited to net capital gain realized in connection with an
adjustment to the Carrying Value of Partnership assets under Section 704(b) of
the Code, shall first be allocated to the LTIP Unitholders until the aggregate
Economic Capital Account Balances of such LTIP Unitholders, to the extent
attributable to their ownership of LTIP Units, are equal to the product of (i) the
Partnership Unit Economic Balance, multiplied by (ii) the number of such
LTIP Unitholders’ LTIP Units.

 

For this purpose, the “Economic Capital Account
Balances” of the LTIP Unitholders will be equal to their Capital Account
balances, plus the amount of their shares of any Partner Minimum Gain or
Partnership Minimum Gain, in either case to the extent attributable to their
ownership of LTIP Units.  Similarly, the “Partnership
Unit Economic Balance” shall mean (i) the Capital Account balance of the
Company, plus the amount of the Company’s share of any Partner Minimum Gain or
Partnership Minimum Gain, in either case to the extent attributable to the
Company’s ownership of Partnership Units and computed on a hypothetical basis
after taking into account all allocations through the date on which any
allocation is made under this Section 6.1.C, divided by (ii) the
number of the Company’s Partnership Units. 
Any such allocations shall be made among the LTIP Unitholders in
proportion to the amounts required to be allocated to each under this Section 6.1.C.  The parties agree that the intent of this Section 6.1.C
is to make the Capital Account balances of the LTIP Unitholders with respect to
each of their LTIP Units economically equivalent to the Capital Account balance
of the Company with respect to each of its Partnership Units if the Carrying

 

25

 

Value of the Partnership’s property has been adjusted
in accordance with Exhibit B in a corresponding amount.

 

ARTICLE
7.

 

MANAGEMENT AND OPERATIONS
OF BUSINESS

 

Section 7.1.            Management

 

A.                                   Except as otherwise expressly provided in
this Agreement, all management powers over the business and affairs of the
Partnership are and shall be exclusively vested in the General Partner, and no
Limited Partner shall have any right to participate in or exercise control or
management power over the business and affairs of the Partnership. The General
Partner may not be removed by the Limited Partners with or without cause.  In addition to the powers now or hereafter
granted to a general partner of a limited partnership under applicable law or
which are granted to the General Partner under any other provision of this
Agreement, the General Partner, subject to Section 7.3 hereof, shall have
full power and authority to do all things deemed necessary, desirable or
convenient by it to conduct the business of the Partnership, to exercise all
powers set forth in Section 3.2 hereof and to effectuate the purposes set
forth in Section 3.1 hereof, including, without limitation:

 

(1)           the making of any expenditures, the
lending or borrowing of money (including, without limitation, making
prepayments on loans and borrowing money to permit the Partnership to make
distributions to its Partners in such amounts as will permit the Company (so
long as the Company desires to maintain its qualification as a REIT) to avoid
the payment of any federal income tax (including, for this purpose, any excise
tax pursuant to Section 4981 of the Code) and to make distributions to its
shareholders in amounts sufficient to permit the Company to maintain its REIT
status), the assumption or guarantee of, or other contracting for, indebtedness
and other liabilities, the issuance of evidence of indebtedness (including the
securing of the same by deed, mortgage, deed of trust or other lien or
encumbrance on the Partnership’s assets) and the incurring of any obligations
it deems necessary for the conduct of the activities of the Partnership;

 

(2)           the making of tax, regulatory and
other filings or elections, or rendering of periodic or other reports to
governmental or other agencies having jurisdiction over the business or assets
of the Partnership;

 

(3)           the acquisition, disposition,
mortgage, pledge, encumbrance, hypothecation or exchange of any assets of the
Partnership (including the exercise or grant of any conversion, option,
privilege, or subscription right or other right available in connection with
any assets at any time held by the Partnership) or the merger or other
combination of the Partnership with or into another entity (all of the
foregoing subject to any prior approval only to the extent required by Section 7.3
hereof);

 

(4)           the mortgage, pledge, encumbrance or
hypothecation of any assets of the Partnership, the use of the assets of the
Partnership (including, without limitation, cash on 

 

26

 

hand) for any purpose
consistent with the terms of this Agreement and on any terms that it sees fit,
including, without limitation, the financing of the conduct of the operations
of the Partnership, the Company or any of the Partnership’s or the Company’s
Subsidiaries, the lending of funds to other Persons (including, without
limitation, the Subsidiaries of the Partnership and/or the Company) and the
repayment of obligations of the Partnership and its Subsidiaries and any other
Person in which it has an equity investment, and the making of capital contributions
to its Subsidiaries;

 

(5)           the management, operation, leasing,
landscaping, repair, alteration, demolition, disposition or improvement of any
real property or improvements owned by the Partnership or any Subsidiary of the
Partnership;

 

(6)           the negotiation, execution, delivery
and performance of any contracts, conveyances or other instruments that the
General Partner considers useful or necessary or convenient to the conduct of
the Partnership’s operations or the implementation of the General Partner’s
powers under this Agreement, including, without limitation, contracting with
consultants, accountants, legal counsel, other professional advisors and other
agents and the payment of their expenses and compensation out of the
Partnership’s assets;

 

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

 

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

 

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

 

(10)         the establishment of one or more
divisions of the Partnership, the selection and dismissal of employees of the
Partnership (including, without limitation, employees who may be designated as
officers with titles such as “president,” “vice president,” “secretary” and “treasurer”
of the Partnership), and agents, outside attorneys, accountants, consultants
and contractors of the Partnership, and the determination of their compensation
and other terms of employment or hiring;

 

(11)         the maintenance of such insurance for
the benefit of the Partnership and the Partners as it deems necessary or
appropriate;

 

(12)         the formation of, or acquisition of an
interest in, and the contribution of property to, any further limited or
general partnerships, limited liability companies, real estate investment
trusts, corporations, entities that are treated as REITs, “taxable REIT
subsidiaries” or as foreign corporations for federal income tax purposes, joint
ventures or other relationships that it deems desirable (including, without
limitation, the acquisition of interests in, and the contributions of property
or the making of loans to, its or the Company’s Subsidiaries and any other
Person in which it has an equity investment from time to time or the
incurrence of indebtedness on behalf of such Persons or the guarantee of
obligations of such Persons and the making of any tax, regulatory or other
filing or election with respect to any of the foregoing Persons); provided, that as long as the 

 

27

 

Company
has determined to continue to qualify as a REIT, the Partnership may not engage
in any such formation, acquisition or contribution that would cause the Company
to fail to qualify as a REIT;

 

(13)         the control of any matters affecting
the rights and obligations of the Partnership, including the settlement,
compromise, submission to arbitration or any other form of dispute resolution,
or abandonment of, any claim, cause of action, liability, debt or damages, due
or owing to or from the Partnership, the commencement or defense of suits,
legal proceedings, administrative proceedings, arbitrations or other forms of
dispute resolution, and the representation of the Partnership in all suits or
legal proceedings, administrative proceedings, arbitrations or other forms of
dispute resolution, the incurrence of legal expense, and the indemnification of
any Person against liabilities and contingencies to the extent permitted by
law;

 

(14)         the undertaking of any action in
connection with the Partnership’s direct or indirect investment in any
Subsidiary or any other Person (including, without limitation, the contribution
or loan of funds by the Partnership to such Persons);

 

(15)         the determination of the fair market
value of any Partnership property distributed in kind using such reasonable
method of valuation as the General Partner may adopt;

 

(16)         the enforcement of any rights against
any Partner pursuant to representations, warranties, covenants and indemnities
relating to such Partner’s contribution of property or assets to the
Partnership;

 

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

 

(18)         the exercise of any of the powers of
the General Partner enumerated in this Agreement on behalf of or in connection
with any Subsidiary of the Partnership or any other Person in which the
Partnership has a direct or indirect interest, or jointly with any such
Subsidiary or other Person;

 

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

 

(20)         the making, execution, delivery and
performance of any and all deeds, leases, notes, mortgages, deeds of trust,
security agreements, conveyances, contracts, guarantees, warranties,
indemnities, waivers, releases or legal instruments or agreements in writing
necessary, appropriate or convenient, in the judgment of the General Partner,
for the accomplishment of any of the powers of the General Partner enumerated
in this Agreement;

 

28

 

(21)                            the issuance of additional Partnership
Units and other partnership interests, as appropriate, in connection with
Capital Contributions by Additional Limited Partners and additional Capital
Contributions by Partners pursuant to Article 4 hereof; and

 

(22)                            the taking of any action necessary or
appropriate to enable the Company to qualify as a REIT.

 

B.                                     Each of the Limited Partners agrees that
the General Partner is authorized to execute, deliver and perform the above-mentioned
agreements and transactions on behalf of the Partnership without any further
act, approval or vote of the Partners, notwithstanding any other provision of
this Agreement (except as provided in Section 7.3), the Act or any
applicable law, rule or regulation, to the fullest extent permitted under
the Act or other applicable law, rule or regulation. The execution,
delivery or performance by the General Partner or the Partnership of any
agreement authorized or permitted under this Agreement shall not constitute a
breach by the General Partner of any duty that the General Partner may owe the
Partnership or the Limited Partners or any other Persons under this Agreement
or of any duty stated or implied by law or equity.

 

C.                                     At all times from and after the date
hereof, the General Partner may cause the Partnership to establish and maintain
at any and all times working capital accounts and other cash or similar
balances in such amounts as the General Partner, in its sole and absolute
discretion, deems appropriate and reasonable from time to time.

 

D.                                    In exercising its authority under this
Agreement, the General Partner may, but shall be under no obligation to, take
into account the tax consequences to any Partner of any action taken by it. The
General Partner and the Partnership shall not be liable to a Limited Partner
under any circumstances as a result of an income tax liability incurred by such
Limited Partner as a result of an action (or inaction) by the General Partner
taken pursuant to its authority under this Agreement and in accordance with the
terms of Section 7.3.

 

Section 7.2.                                   Certificate of Limited Partnership

 

The General Partner has filed the Certificate with the
Secretary of State of the State of Delaware as required by the Act. The General
Partner shall use all reasonable efforts to cause to be filed such other
certificates or documents as may be reasonable and necessary or appropriate for
the formation, continuation, qualification and operation of a limited
partnership (or a partnership in which the limited partners have limited liability)
in the State of Delaware and any other state, or the District of Columbia, in
which the Partnership may elect to do business or own property. To the extent
that such action is determined by the General Partner to be reasonable and
necessary or appropriate or convenient, the General Partner shall file
amendments to and restatements of the Certificate and do all of the things to
maintain the Partnership as a limited partnership (or a partnership in which
the limited partners have limited liability) under the laws of the State of
Delaware and each other state, or the District of Columbia, in which the
Partnership may elect to do business or own property. Subject to the terms of Section 8.5.A(4) hereof,
the General Partner shall not be required, before or after filing, to deliver
or mail a copy of the Certificate or any amendment thereto or restatement
thereof to any Limited Partner.

 

29

 

Section 7.3.                                   Restrictions on General Partner Authority

 

The
General Partner may not take any action in contravention of an express
prohibition or limitation of this Agreement without the written Consent of
Limited Partners holding a majority of the Percentage Interests of the Limited
Partners, or such other percentage of the Limited Partners as may be
specifically provided for under a provision of this Agreement.

 

Section 7.4.                                   Reimbursement of the General Partner and the Company

 

A.                                   Except as provided in this Section 7.4
and elsewhere in this Agreement (including the provisions of Articles 5 and 6
regarding distributions, payments, and allocations to which it may be
entitled), the General Partner shall not be compensated for its services as
general partner of the Partnership.

 

B.                                     The General Partner and its Affiliates 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 expenditures that
each incurs relating to the ownership and operation of, or for the benefit of,
the Partnership; provided, that the amount of any such reimbursement
shall be reduced by any interest earned by the General Partner with respect to
bank accounts or other instruments or accounts held by it on behalf of the
Partnership; and provided, further, that the General Partner and
its Affiliates shall not be reimbursed for any (i) trustees’/directors’
fees, (ii) income tax liabilities or (iii) filing or similar fees in
connection with maintaining the General Partner’s or any such Affiliate’s
continued existence that are incurred by the General Partner or an Affiliate,
but the Partners acknowledge that all other expenses of the General Partner and
its Affiliates are deemed to be for the benefit of the Partnership. Such
reimbursement shall be in addition to any reimbursement made as a result of
indemnification pursuant to Section 7.7 hereof.  Included among the expenditures for which the
General Partner shall be entitled to reimbursement hereunder shall be any
payments of debt service made by the General Partner, in its capacity as
General Partner, as guarantor or otherwise, with respect to indebtedness
encumbering any property held by the Partnership.

 

C.                                     As set forth in Section 4.3, the
Company shall be treated as having made a Capital Contribution in the amount of
all expenses that it incurs and pays relating to the Initial Public Offering,
the Concurrent Offering, the Direct Offering, any other REIT Share Offering and
any other issuance of REIT Shares, other securities or New Securities pursuant
to Section 4.2, the proceeds from the issuance of which are contributed to
the Partnership.

 

D.                                    In the event that the Company shall elect
to purchase from its shareholders REIT Shares for the purpose of delivering
such REIT Shares to satisfy an obligation under any distribution reinvestment
program adopted by the Company, any employee share purchase plan adopted by the
Company, or any similar obligation or arrangement undertaken by the Company in
the future, the purchase price paid by the Company for such REIT Shares and any
other expenses incurred by the Company in connection with such purchase shall
be considered expenses of the Partnership and shall be reimbursed to the
Company, subject to the condition that: (i) if such REIT Shares
subsequently are sold by the Company, the Company shall pay to the Partnership
any proceeds received by the Company for such REIT Shares (which sales proceeds
shall include the amount of distributions reinvested under any distribution
reinvestment 

 

30

 

or similar
program; provided, that a transfer of REIT Shares for Partnership Units
pursuant to Section 8.6 would not be considered a sale for such purposes);
and (ii) if such REIT Shares are not retransferred by the Company within
30 days after the purchase thereof, the General Partner shall cause the
Partnership to cancel a number of Partnership Units held by the Company equal
to the product obtained by multiplying the Conversion Factor by the number of
such REIT Shares (in which case such reimbursement shall be treated as a
distribution in redemption of Partnership Units held by the Company).

 

Section 7.5.                                   Outside Activities of the General Partner

 

The General Partner shall not directly or indirectly
enter into or conduct any business other than in connection with the ownership,
acquisition and disposition of Partnership Interests and the management of the
business of the Partnership, and such activities as are incidental
thereto.  The General Partner and any
Affiliates of the General Partner may acquire Limited Partner Interests and
shall be entitled to exercise all rights of a Limited Partner relating to such
Limited Partner Interests.

 

Section 7.6.                                   Contracts with Affiliates

 

A.                                   The Partnership may lend or contribute
funds or other assets to its or the Company’s Subsidiaries or other Persons in
which it or the Company 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.

 

B.                                     Except as provided in Section 7.5,
the Partnership may transfer assets to joint ventures, other partnerships,
limited liability companies, real estate investment trusts, corporations or
other business entities in which it is or thereby becomes a participant upon
such terms and subject to such conditions consistent with this Agreement and
applicable law as the General Partner, in its sole and absolute discretion,
believes are advisable.

 

C.                                     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
determined by the General Partner in good faith to be fair and reasonable.

 

D.                                    The General Partner, in its sole and
absolute discretion and without the approval of the Limited Partners, may
propose and adopt, on behalf of the Partnership, employee benefit plans, share
option plans, and similar plans funded by the Partnership for the benefit of
employees of the General Partner, the Company, the Partnership, Subsidiaries of
the Partnership or any Affiliate of any of them in respect of services
performed, directly or indirectly, for the benefit of the Partnership, the
Company, the General Partner or any Subsidiaries of the Partnership.

 

E.                                      The General Partner is expressly
authorized to enter into, in the name and on behalf of the Partnership, and
without the approval of the Limited Partners, a right of first opportunity
arrangement and other conflict avoidance agreements with various Affiliates of
the 

 

31

 

Partnership, the
Company and the General Partner, on such terms as the General Partner, in its
sole and absolute discretion, believes are advisable.

 

Section 7.7.                                   Indemnification

 

A.                                   To the fullest extent permitted by
Delaware law, the Partnership shall indemnify each Indemnitee from and against
any and all losses, claims, damages, liabilities, joint or several, expenses
(including, without limitation, attorneys’ fees and other legal fees and
expenses), judgments, fines, settlements, and other amounts arising from any
and all claims, demands, actions, suits or proceedings, civil, criminal,
administrative or investigative, that relate to the operations of the
Partnership or the Company as set forth in this Agreement, in which such
Indemnitee may be involved, or is threatened to be involved, as a party or
otherwise, except to the extent such Indemnitee acted in bad faith, or with
gross negligence or willful misconduct. Without limitation, the foregoing
indemnity shall extend to any liability of any Indemnitee, pursuant to a loan guaranty
or otherwise for any indebtedness of the Partnership or any Subsidiary of the
Partnership (including without limitation, any indebtedness which the
Partnership or any Subsidiary of the Partnership has assumed or taken subject
to), and the General Partner is hereby authorized and empowered, on behalf of
the Partnership, to enter into one or more indemnity agreements consistent with
the provisions of this Section 7.7 in favor of any Indemnitee having or
potentially having liability for any such indebtedness. Any indemnification
pursuant to this Section 7.7 shall be made only out of the assets of the
Partnership, and neither the General Partner nor any Limited Partner shall have
any obligation to contribute to the capital of the Partnership, or otherwise
provide funds, to enable the Partnership to fund its obligations under this Section 7.7.

 

B.                                     Reasonable expenses incurred by an
Indemnitee who is a party to a proceeding shall be paid or reimbursed by the
Partnership in advance of the final disposition of the proceeding, upon receipt
by the Partnership of an undertaking by or on behalf of the Indemnitee to repay
such amount if it shall be determined that the Indemnitee is not entitled to be
indemnified as authorized in Section 7.7.A.

 

C.                                     The indemnification provided by this Section 7.7
shall be in addition to any other rights to which an Indemnitee or any other
Person may be entitled under any agreement, pursuant to any vote of the
Partners, as a matter of law or otherwise, and shall continue as to an Indemnitee
who has ceased to serve in such capacity unless otherwise provided in a written
agreement pursuant to which such Indemnities are indemnified.

 

D.                                    The Partnership may, but shall not be
obligated to, purchase and maintain insurance, on behalf of the Indemnities 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 7.7,
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 

 

32

 

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 7.7; 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 any
of the 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 7.7 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 7.7
are for the benefit of the Indemnities, their heirs, successors, assigns and
administrators and shall not be deemed to create any rights for the benefit of
any other Persons. Any amendment, modification or repeal of this Section 7.7
or any provision hereof shall be prospective only and shall not in any way affect
the Partnership’s liability to any Indemnitee under this Section 7.7, as
in effect immediately prior to such amendment, modification, or repeal with
respect to claims arising from or relating to matters occurring, in whole or in
part, prior to such amendment, modification or repeal, regardless of when such
claims may arise or be asserted.

 

Section 7.8.                                   Liability of the General Partner

 

A.                                   Notwithstanding anything to the contrary
set forth in this Agreement, none of the General Partner, its Affiliates, or
any of their respective officers, trustees, directors, shareholders, partners,
members, employees, representatives or agents or any officer, employee,
representative or agent of the Partnership and its Affiliates (individually, a “Covered
Person” and collectively, the “Covered Persons”) shall be liable for
monetary damages to the Partnership, any Partners or any Assignees for losses
sustained or liabilities incurred as a result of errors in judgment or of any
act or omission if the Covered Person’s conduct did not constitute bad faith,
gross negligence or willful misconduct.

 

B.                                     The Limited Partners expressly
acknowledge that the General Partner is acting on behalf of the Partnership and
the shareholders of the Company collectively, that the General Partner is under
no obligation to consider the separate interests of the Limited Partners
(except as otherwise provided herein) in deciding whether to cause the
Partnership to take (or decline to take) any actions, and that 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 7.1.A hereof, the General Partner may
exercise any of the powers granted to it by this Agreement and perform any of
the duties imposed upon it hereunder either directly or by or through its
employees and agents. The General Partner shall not be responsible for any
misconduct or 

 

33

 

negligence on the
part of any such employee or agent appointed by the General Partner in good
faith.

 

D.                                    Any amendment, modification or repeal of
this Section 7.8 or any provision hereof shall be prospective only and
shall not in any way affect the limitations on the Covered Person’s liability
to the Partnership and the Limited Partners under this Section 7.8 as in
effect immediately prior to such amendment, modification or repeal with respect
to claims arising from or relating to matters occurring, in whole or in part,
prior to such amendment, modification or repeal, regardless of when such claims
may arise or be asserted.

 

E.                                      To the extent that, at law or in equity,
a Covered Person has duties (including fiduciary duties) and liabilities
relating thereto to the Partnership or to the Partners, any Covered Person
acting under this Agreement or otherwise shall not be liable to the Partnership
or to any Partner for its good faith reliance on the provisions of this
Agreement.  The provisions of this
Agreement, to the extent that they restrict the duties and liabilities of a
Covered Person otherwise existing at law or in equity, are agreed by the
Partners to replace such other duties and liabilities of such Covered Person.

 

F.                                      Whenever in this Agreement the General
Partner is permitted or required to make a decision (i) in its “sole
discretion” or “discretion,” or under a similar grant of authority or latitude,
the General Partner shall be entitled to consider such interests and factors as
it desires and may consider its own interests, and shall have no duty or
obligation to give any consideration to any interest of or factors affecting
the Partnership or the Limited Partners, or (ii) in its “good faith” or
under another express standard, the General Partner shall act under such
express standard and shall not be subject to any other or different standards
imposed by this Agreement or by law or any other agreement contemplated herein.

 

Section 7.9.                                   Other Matters Concerning the General Partner

 

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

 

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

 

C.                                     The General Partner shall have the right,
in respect of any of its powers or obligations hereunder, to act through any of
its duly authorized officers and duly appointed attorneys-in-fact. Each such
attorney shall, to the extent provided by the General Partner in the power of
attorney, have full power and authority to do and perform each and every act
and duty which is permitted or required to be done by the General Partner
hereunder.

 

34

 

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 Company to continue to qualify as a REIT; or (ii) to avoid the
Company incurring any taxes under Section 337(d), 857, 1374 or 4981 of the
Code, is expressly authorized under this Agreement and is deemed approved by
all of the Limited Partners.

 

Section 7.10.                             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 in its sole and absolute discretion, including Affiliates
of the General Partner. The General Partner hereby declares and warrants that
any Partnership assets for which legal title is held in the name of the General
Partner or any nominee or Affiliate of the General Partner shall be held by the
General Partner for the use and benefit of the Partnership in accordance with
the provisions of this Agreement; provided, however, that the
General Partner shall use its best efforts to cause beneficial and record title
to such assets to be vested in the Partnership as soon as reasonably
practicable. All Partnership assets shall be recorded as the property of the
Partnership in its books and records, irrespective of the name in which legal title
to such Partnership assets is held.

 

Section 7.11.                             Reliance by Third Parties

 

Notwithstanding anything to the contrary in this
Agreement, any Person dealing with the Partnership shall be entitled to assume
that the General Partner has full power and authority, without consent or
approval of any other Partner or Person, to encumber, sell or otherwise use in
any manner any and all assets of the Partnership and to enter into any
contracts on behalf of the Partnership, and take any and all actions on behalf
of the Partnership and such Person shall be entitled to deal with the General
Partner as if the General Partner were the Partnership’s sole party in
interest, both legally and beneficially. Each Limited Partner hereby waives any
and all defenses or other remedies which may be available against such Person
to contest, negate or disaffirm any action of the General Partner in connection
with any such dealing. In no event shall any Person dealing with the General
Partner or its representatives be obligated to ascertain that the terms of this
Agreement have been complied with or to inquire into the necessity or
expedience of any act or action of the General Partner or its representatives.
Each and every certificate, document or other instrument executed on behalf of
the Partnership by the General Partner or its representatives shall be
conclusive evidence in favor of any and every Person relying thereon or
claiming thereunder that (i) at the time of the execution and delivery of
such certificate, document or instrument, this Agreement was in full force and
effect; (ii) the Person executing and delivering such certificate,
document or instrument was duly authorized and empowered to do so for and on
behalf of the Partnership; and (iii) such certificate, document or
instrument was duly executed and delivered in accordance with the terms and
provisions of this Agreement and is binding upon the Partnership.

 

35

 

ARTICLE
8.

 

RIGHTS AND OBLIGATIONS OF
LIMITED PARTNERS

 

Section 8.1.                                   Limitation of Liability

 

The Limited Partners shall have no liability under
this Agreement except as expressly provided in this Agreement, including Section 10.5
hereof, or under the Act.

 

Section 8.2.                                   Management of Business

 

No Limited Partner or Assignee (other than the General
Partner, any of its Affiliates or any officer, trustee, director, member,
employee or agent of the General Partner, the Partnership or any of their
Affiliates, in their capacity as such) shall take part in the operation, management
or control (within the meaning of the Act) of the Partnership’s business,
transact any business in the Partnership’s name or have the power to sign
documents for or otherwise bind the Partnership. The transaction of any such
business by the General Partner, any of its Affiliates or any officer, trustee,
director, member, employee or agent of the General Partner, the Partnership or
any of their Affiliates, in their capacity as such, shall not affect, impair or
eliminate the limitations on the liability of the Limited Partners or Assignees
under this Agreement.

 

Section 8.3.                                   Outside Activities of Limited Partners

 

Subject to any agreements entered into pursuant to Section 7.6.E
hereof and any other agreements entered into by a Limited Partner or its Affiliates
with the Partnership or any of its Subsidiaries, any Limited Partner (other
than the Company) and any officer, trustee, director, member, employee, agent,
trustee, Affiliate or shareholder of any Limited Partner (other than the
Company) 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 that are in direct competition with the
Partnership or that are enhanced by the activities of the Partnership. Neither
the Partnership nor any Partners shall have any rights by virtue of this
Agreement in any business ventures of any Limited Partner or Assignee. None of
the Limited Partners (other than the Company) nor any other Person shall have
any rights by virtue of this Agreement or the Partnership relationship
established hereby in any business ventures of any other Person and such Person
shall have no obligation pursuant to this Agreement to offer any interest in
any such business ventures to the Partnership, any Limited Partner or any such
other Person, even if such opportunity is of a character which, if presented to
the Partnership, any Limited Partner or such other Person, could be taken by
such Person.

 

Section 8.4.                                   Return of Capital

 

Except pursuant to the right of redemption set forth
in Section 8.6, no Limited Partner shall be entitled to the withdrawal or
return of its Capital Contribution, except to the extent of distributions made
pursuant to this Agreement or upon termination of the Partnership as provided
herein. Except to the extent provided by Exhibit C hereof or as otherwise
expressly provided in this Agreement, no Limited Partner or Assignee shall have
priority over any other Limited Partner or Assignee, either as to the return of
Capital Contributions or as to profits, losses or distributions.

 

36

 

Section 8.5.            Rights of Limited Partners Relating to the Partnership

 

A.            In addition to the other rights provided
by this Agreement or by the Act, and except as limited by Section 8.5.C
hereof, each Limited Partner shall have the right, for a purpose reasonably
related to such Limited Partner’s interest as a limited partner in the
Partnership, upon written demand with a statement of the purpose of such demand
and at such Limited Partner’s own expense (including such copying and
administrative charges as the General Partner may establish from time to time):

 

(1)           to obtain a copy of the most recent annual and
quarterly reports prepared by the Company and distributed to its shareholders,
including, annual and quarterly reports filed with the Securities and Exchange
Commission by the Company pursuant to the Exchange Act;

 

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

 

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

 

(4)           to obtain a copy of this Agreement and the Certificate
and all amendments thereto, together with executed copies of all powers of
attorney pursuant to which this Agreement, the Certificate and all amendments
thereto have been executed; and

 

(5)           to obtain true and full information regarding the
amount of cash and a description and statement of any other property or
services contributed by each Partner and which each Partner has agreed to
contribute in the future, and the date on which each became a Partner.

 

B.            The Partnership shall notify each Limited Partner,
upon request, of the then current Conversion Factor.

 

C.            Notwithstanding any other provision of this Section 8.5,
the General Partner may keep confidential from the Limited Partners, for such
period of time as the General Partner determines in its sole and absolute
discretion to be reasonable, any information that (i) the General Partner
reasonably believes to be in the nature of trade secrets or other information,
the disclosure of which the General Partner in good faith believes is not in
the best interests of the Partnership or could damage the Partnership or its
business; or (ii) the Partnership is required by law or by agreements with
an unaffiliated third party to keep confidential.

 

Section 8.6.            Redemption Right

 

A.            Subject to Sections 8.6.B and 8.6.C hereof and on or
after such date, if any, as expressly provided for in any agreement entered
into between the Partnership and any Limited Partner, each Limited Partner
(other than the Company) shall have the right (the “Redemption Right”)
to require the Partnership to redeem on a Specified Redemption Date all or a
portion of the Partnership Units (provided that such Partnership Units
constitute Common Units) held by such Limited Partner at a redemption price per
Unit equal to and in the form of the Cash Amount

 

37

 

to be paid by the
Partnership. The Redemption Right shall be exercised pursuant to a Notice of
Redemption delivered to the Partnership (with a copy to the Company) by the
Limited Partner who is exercising the redemption right (the “Redeeming
Partner”); provided, however, that the Partnership shall not
be obligated to satisfy such Redemption Right if the Company elects to purchase
the Partnership Units subject to the Notice of Redemption pursuant to Section 8.6.B.
A Limited Partner may not exercise the Redemption Right for less than one
thousand (1,000) Partnership Units at any one time or, if such Limited Partner
holds less than one thousand (1,000) Partnership Units, all of the Partnership
Units held by such Partner. The Redeeming Partner shall have no right, with
respect to any Partnership Units so redeemed, to receive any distributions paid
on or after the Specified Redemption Date. The Assignee of any Limited Partner
may exercise the rights of such Limited Partner pursuant to this Section 8.6,
and such Limited Partner shall be deemed to have assigned such rights to such
Assignee and shall be bound by the exercise of such rights by such Assignee. In
connection with any exercise of such rights by an Assignee on behalf of a
Limited Partner, the Cash Amount shall be paid by the Partnership directly to
such Assignee and not to such Limited Partner. 
Any Partnership Units redeemed by the Partnership pursuant to this Section 8.6.A
shall be cancelled upon such redemption.

 

B.            Notwithstanding the provisions of Section 8.6.A,
a Limited Partner that exercises the Redemption Right shall be deemed to have
offered to sell the Partnership Units described in the Notice of Redemption to
the Company, and the Company may, in its sole and absolute discretion, elect to
purchase directly and acquire such Partnership Units by paying to the Redeeming
Partner either the Cash Amount or the REIT Shares Amount, as elected by the
Company (in its sole and absolute discretion), on the Specified Redemption
Date, whereupon the Company shall acquire the Partnership Units offered for
redemption by the Redeeming Partner and shall be treated for all purposes of
this Agreement as the owner of such Partnership Units. If the Company shall
elect to exercise its right to purchase Partnership Units under this Section 8.6.B
with respect to a Notice of Redemption, it shall so notify the Redeeming
Partner within five (5) Business Days after the receipt by it of such
Notice of Redemption. Unless the Company (in its sole and absolute discretion)
shall exercise its right to purchase Partnership Units from the Redeeming
Partner pursuant to this Section 8.6.B, the Company shall not have any
obligation to the Redeeming Partner or the Partnership with respect to the
Redeeming Partner’s exercise of the Redemption Right. In the event the Company
shall exercise its right to purchase Partnership Units with respect to the
exercise of a Redemption Right in the manner described in the first sentence of
this Section 8.6.B, the Partnership shall have no obligation to pay any
amount to the Redeeming Partner with respect to such Redeeming Partner’s
exercise of such Redemption Right, and each of the Redeeming Partner, the
Partnership and the Company shall treat the transaction between the Company and
the Redeeming Partner, for federal income tax purposes, as a sale of the
Redeeming Partner’s Partnership Units to the Company. Each Redeeming Partner
agrees to execute such documents as the Company may reasonably require in
connection with the issuance of REIT Shares upon exercise of the Redemption
Right.  In case of any reclassification
of the REIT Shares (including, but not limited to, any reclassification upon a
consolidation or merger in which the Company is the continuing corporation)
into securities other than REIT Shares, for purposes of this Section 8.6.B,
the Company (or its Successor) may thereafter exercise its right to purchase
Partnership Units for the kind and amount of shares of such securities
receivable upon such reclassification by a holder of the number of REIT Shares

 

38

 

for which such
Units could be purchased pursuant to this Section immediately prior to
such reclassification.

 

C.            Notwithstanding the provisions of Section 8.6.A
and Section 8.6.B, a Partner shall not be entitled to exercise the
Redemption Right pursuant to Section 8.6.A to the extent that the delivery
of REIT Shares to such Partner on the Specified Redemption Date by the Company
pursuant to Section 8.6.B (regardless of whether or not the Company would
in fact exercise its rights under Section 8.6.B) would (i) be
prohibited, as determined in the sole discretion of the Company, under the
Declaration of Trust or (ii) cause the acquisition of REIT Shares by such
Partner to be “integrated” with any other distribution of REIT Shares for
purposes of complying with the Securities Act.

 

Section 8.7.            Conversion of LTIP Units

 

A.            An LTIP Unitholder shall have the right (the “Conversion
Right”), at his or her option, at any time to convert all or a portion of his
or her Vested LTIP Units into Partnership Units; provided, however, that a
holder may not exercise the Conversion Right for less than 100 Vested LTIP
Units or, if such holder holds less than 100 Vested LTIP Units, all of the
Vested LTIP Units held by such holder. 
Notwithstanding the foregoing, in no event may a holder of Vested LTIP
Units convert a number of Vested LTIP Units that exceeds (x) the Economic
Capital Account Balance of such Limited Partner, to the extent attributable to
its ownership of LTIP Units, divided by (y) the Partnership Unit Economic
Balance, in each case as determined as of the effective date of conversion (the
“Capital Account Limitation”).  LTIP
Unitholders shall not have the right to convert Unvested LTIP Units into
Partnership Units until they become Vested LTIP Units; provided, however, that
when an LTIP Unitholder is notified of the expected occurrence of an event that
will cause his or her Unvested LTIP Units to become Vested LTIP Units, such
LTIP Unitholder may give the Partnership a Conversion Notice conditioned upon
and effective as of the time of vesting and such Conversion Notice, unless
subsequently revoked by the LTIP Unitholder, shall be accepted by the
Partnership subject to such condition. 
The General Partner shall have the right at any time to cause a
conversion of Vested LTIP Units into Partnership Units.  In all cases, the conversion of any LTIP
Units into Partnership Units shall be subject to the conditions and procedures
set forth in this Section 8.7.

 

B.            Subject to the Capital Account Limitation, a holder of
Vested LTIP Units may convert such Units into an equal number of fully paid and
non-assessable Partnership Units, giving effect to all adjustments (if any)
made pursuant to Section 4.2.C.  In
order to exercise his or her Conversion Right, an LTIP Unitholder shall deliver
a notice (a “Conversion Notice”) in the form attached as Exhibit F to the
Partnership (with a copy to the General Partner) not less than 10 nor more than
60 days prior to a date (the “Conversion Date”) specified in such Conversion
Notice; provided, however, that if the General Partner has not given to the
LTIP Unitholders notice of a proposed or upcoming Transaction at least 30 days
prior to the effective date of such Transaction, then LTIP Unitholders shall
have the right to deliver a Conversion Notice until the earlier of (x) the
10th day after such notice from the General Partner of a Transaction or (y) the
third Business Day immediately preceding the effective date of such
Transaction.  A Conversion Notice shall
be provided in the manner provided in Section 15.1.  Each LTIP Unitholder covenants and agrees
with the Partnership that all Vested LTIP Units to be converted pursuant to
this Section 8.7.B shall be free and clear of all liens.  Notwithstanding

 

39

 

anything herein to
the contrary, a holder of LTIP Units may deliver a Redemption Notice pursuant
to Section 8.6.A hereof relating to those Partnership Units that will be
issued to such holder upon conversion of such LTIP Units into Partnership Units
in advance of the Conversion Date; provided, however, that the redemption of
such Partnership Units by the Partnership shall in no event take place until
after the Conversion Date.  For clarity,
it is noted that the objective of this paragraph is to put an LTIP Unitholder
in a position where, if he or she so wishes, the Partnership Units into which
his or her Vested LTIP Units will be converted can be redeemed by the
Partnership simultaneously with such conversion, with the further consequence
that, if the Company elects to assume the Partnership’s redemption obligation
with respect to such Partnership Units under Section 8.6.B hereof by
delivering to such holder REIT Shares rather than cash, then such holder can
have such REIT Shares issued to him or her simultaneously with the conversion
of his or her Vested LTIP Units into Partnership Units.  The General Partner shall cooperate with an
LTIP Unitholder to coordinate the timing of the different events described in
the foregoing sentence.

 

C.            The Partnership, at any time at the election of the
General Partner, may cause any number of Vested LTIP Units held by an LTIP
Unitholder to be converted (a “Forced Conversion”) into an equal number of
Partnership Units, giving effect to all adjustments (if any) made pursuant to Section 4.2.C;
provided, however, that the Partnership may not cause a Forced Conversion of
any LTIP Units that would not at the time be eligible for conversion at the
option of such LTIP Unitholder pursuant to Section 8.7.

 

D.            In order to exercise its right of Forced Conversion,
the Partnership shall deliver a notice (a “Forced Conversion Notice”) in the
form attached as Exhibit G to the applicable LTIP Unitholder not less than
10 nor more than 60 days prior to the Conversion Date specified in such Forced
Conversion Notice.  A Forced Conversion Notice
shall be provided in the manner provided in Section 15.1.

 

E.             A conversion of Vested LTIP Units for which the holder
thereof has given a Conversion Notice or the Partnership has given a Forced
Conversion Notice shall occur automatically after the close of business on the
applicable Conversion Date without any action on the part of such LTIP
Unitholder, as of which time such LTIP Unitholder shall be credited on the
books and records of the Partnership with the issuance as of the opening of
business on the next day of the number of Partnership Units issuable upon such
conversion.  After the conversion of LTIP
Units as aforesaid, the Partnership shall deliver to such LTIP Unitholder, upon
his or her written request, a certificate of the General Partner certifying the
number of Partnership Units and remaining LTIP Units, if any, held by such
Person immediately after such conversion. 
The Assignee of any Limited Partner pursuant to Article 11 hereof
may exercise the rights of such Limited Partner pursuant to this Section 8.7
and such Limited Partner shall be bound by the exercise of such rights by the
Assignee.

 

F.             For purposes of making future allocations under Section 6.1.C
and applying the Capital Account Limitation, the portion of the Economic
Capital Account Balance of the applicable LTIP Unitholder that is treated as
attributable to his or her LTIP Units shall be reduced, as of the date of
conversion, by the product of the number of LTIP Units converted and the
Partnership Unit Economic Balance.

 

40

 

G.            If the Partnership or the General Partner shall be a
party to any transaction (including without limitation a merger, consolidation,
unit exchange, self tender offer for all or substantially all Partnership Units
or other business combination or reorganization, or sale of all or
substantially all of the Partnership’s assets, but excluding any transaction
which constitutes an Adjustment Event) in each case as a result of which
Partnership Units shall be exchanged for or converted into the right, or the
holders of such Partnership Units shall otherwise be entitled, to receive cash,
securities or other property or any combination thereof (each of the foregoing
being referred to herein as a “Transaction”), then the General Partner shall,
immediately prior to the Transaction, exercise its right to cause a Forced
Conversion with respect to the maximum number of LTIP Units then eligible for
conversion, taking into account any allocations that occur in connection with the
Transaction or that would occur in connection with the Transaction if the
assets of the Partnership were sold at the Transaction price or, if applicable,
at a value determined by the General Partner in good faith using the value
attributed to the Partnership Units in the context of the Transaction (in which
case the Conversion Date shall be the effective date of the Transaction).  In anticipation of such Forced Conversion and
the consummation of the Transaction, the Partnership shall use commercially reasonable
efforts to cause each LTIP Unitholder to be afforded the right to receive in
connection with such Transaction in consideration for the Partnership Units
into which his or her LTIP Units will be converted the same kind and amount of
cash, securities and other property (or any combination thereof) receivable
upon the consummation of such Transaction by a holder of the same number of
Partnership Units, assuming such holder of Partnership Units is not a Person
with which the Partnership consolidated or into which the Partnership merged or
which merged into the Partnership or to which such sale or transfer was made,
as the case may be (a “Constituent Person”), or an Affiliate of a Constituent
Person.  In the event that holders of
Partnership Units have the opportunity to elect the form or type of
consideration to be received upon consummation of a Transaction, prior to such
Transaction the General Partner shall give prompt written notice to each LTIP
Unitholder of such election, and shall use commercially reasonable efforts to
afford the LTIP Unitholders the right to elect, by written notice to the
General Partner, the form or type of consideration to be received upon
conversion of each LTIP Unit held by such holder into Partnership Units in
connection with such Transaction.  If an
LTIP Unitholder fails to make such an election, such holder (and any of its
transferees) shall receive upon conversion of each LTIP Unit held by him or her
(or by any of his or her transferees) the same kind and amount of consideration
that a holder of a Partnership Unit would receive if such Partnership Unit
holder failed to make such an election. 
Subject to the rights of the Partnership and the Company under any LTIP
Unit Agreement and the Plan, the Partnership shall use commercially reasonable
effort to cause the terms of any Transaction to be consistent with the
provisions of this Section 8.7.G and to enter into an agreement with the
successor or purchasing entity, as the case may be, for the benefit of any LTIP
Unitholders whose LTIP Units will not be converted into Partnership Units in
connection with the Transaction that will (i) contain provisions enabling
the holders of LTIP Units that remain outstanding after such Transaction to
convert their LTIP Units into securities as comparable as reasonably possible
under the circumstances to the Partnership Units and (ii) preserve as far
as reasonably possible under the circumstances the distribution, special
allocation, conversion, and other rights set forth in this Agreement for the
benefit of the LTIP Unitholders.

 

41

 

Section 8.8.            Voting Rights of LTIP Units

 

LTIP Unitholders shall have (a) those voting
rights required from time to time by applicable law, if any, (b) the same
voting rights as a holder of Partnership Units, with the LTIP Units voting as a
single class with the Partnership Units and having one vote per LTIP Unit, and (c) the
additional voting rights that are expressly set forth below.  So long as any LTIP Units remain outstanding,
the Partnership shall not, without the affirmative vote of the holders of at
least a majority of the LTIP Units outstanding at the time, given in person or
by proxy, either in writing or at a meeting (voting separately as a class),
amend, alter or repeal, whether by merger, consolidation or otherwise, the
provisions of this Agreement applicable to LTIP Units so as to materially and
adversely affect any right, privilege or voting power of the LTIP Units or the
LTIP Unitholders as such, unless such amendment, alteration, or repeal affects
equally, ratably and proportionately the rights, privileges and voting powers
of the holders of Partnership Units; but subject, in any event, to the
following provisions:  (i) with
respect to any Transaction, so long as the LTIP Units are treated in accordance
with Section 8.7.G hereof, the consummation of such Transaction shall not
be deemed to materially and adversely affect such rights, preferences,
privileges or voting powers of the LTIP Units or the LTIP Unitholders as such;
and (ii) any creation or issuance of any Partnership Units or of any class
or series of Partnership Interest including without limitation additional
Partnership Units, LTIP Units or Preferred Units, whether ranking senior to,
junior to, or on a parity with the LTIP Units with respect to distributions and
the distribution of assets upon liquidation, dissolution or winding up, shall
not be deemed to materially and adversely affect such rights, preferences,
privileges or voting powers of the LTIP Units or the LTIP Unitholders as
such.  The foregoing voting provisions
will not apply if, at or prior to the time when the act with respect to which
such vote would otherwise be required will be effected, all outstanding LTIP
Units shall have been converted into Partnership Units.

 

ARTICLE
9.

 

BOOKS, RECORDS,
ACCOUNTING AND REPORTS

 

Section 9.1.            Records and Accounting

 

The General Partner shall keep or cause to be kept at
the principal office of the Partnership those records and documents required to
be maintained by the Act and other books and records deemed by the General
Partner to be appropriate with respect to the Partnership’s business,
including, without limitation, all books and records necessary to provide to
the Limited Partners any information, lists and copies of documents required to
be provided pursuant to Section 9.3 hereof.  Any records maintained by or on behalf of the
Partnership in the regular course of its business may be kept on, or be in the
form of, punch cards, magnetic tape, photographs, micrographics or any other
information storage device; provided, that the records so maintained are
convertible into clearly legible written form within a reasonable period of
time. The books of the Partnership shall be maintained, for financial and tax
reporting purposes, on an accrual basis in accordance with GAAP, or such other
basis as the General Partner determines to be necessary or appropriate.

 

42

 

Section 9.2.            Fiscal Year

 

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

 

Section 9.3.            Reports

 

A.            As soon as practicable, but in no event later than one
hundred five (105) days after the close of each Partnership Year, the General
Partner shall cause to be mailed to each Limited Partner as of the close of the
Partnership Year, an annual report containing financial statements of the
Partnership, or of the Company if such statements are prepared solely on a
consolidated basis with the Company, for such Partnership Year, presented in accordance
with GAAP, such statements to be audited by a nationally recognized firm of
independent public accountants selected by the General Partner.

 

B.            As soon as practicable, but in no event later than one
hundred five (105) days after the close of each calendar quarter (except the
last calendar quarter of each year), the General Partner shall cause to be
mailed to each Limited Partner as of the last day of the calendar quarter, a
report containing unaudited financial statements of the Partnership, or of the
Company, if such statements are prepared solely on a consolidated basis with
the Company, and such other information as may be required by applicable law or
regulation, or as the General Partner determines to be appropriate.

 

C.            The Partnership shall also cause to be
prepared such reports and/or information as are necessary for the Company to
determine its qualification as a REIT and its compliance with the requirements
for REITs pursuant to the Code and Regulations.

 

ARTICLE
10.

 

TAX MATTERS

 

Section 10.1.          Preparation
of Tax Returns

 

The General Partner shall arrange for the preparation
and timely filing of all returns of Partnership income, gains, deductions,
losses and other items required of the Partnership for federal and state income
tax purposes and shall use all reasonable efforts to furnish, within ninety
(90) days of the close of each taxable year, the tax information reasonably
required by Limited Partners for federal and state income tax reporting
purposes.

 

Section 10.2.          Tax
Elections

 

Except as otherwise provided herein, the General
Partner shall, in its sole and absolute discretion, determine whether to make
any available election pursuant to the Code. Notwithstanding the above, in
making any such tax election the General Partner may, but shall be under no
obligation to, take into account the tax consequences to the Limited Partners
resulting from any such election.

 

43

 

The General Partner shall make such tax elections on
behalf of the Partnership as the Limited Partners holding a majority of the
Percentage Interests of the Limited Partners request; provided, that the
General Partner believes that such election is not adverse to the interests of
the Company, including its interest in preserving its qualification as a REIT
under the Code. The General Partner can elect to use any method permitted by
Code Section 704(c) and the Regulations thereunder to take into
account any variation between the adjusted basis of any property contributed to
the Partnership by any Partner after the date hereof and such property’s
initial Carrying Value.  The General
Partner shall have the right to seek to revoke any tax election it makes (including,
without limitation, an election under Section 754 of the Code) upon the
General Partner’s determination, in its sole and absolute discretion, that such
revocation is in the best interests of the Partners.

 

Section 10.3.          Tax
Matters Partner

 

A.            The General Partner shall be the “tax matters partner”
of the Partnership for federal income tax purposes. Pursuant to Section 6230(e) of
the Code, upon receipt of notice from the IRS of the beginning of an
administrative proceeding with respect to the Partnership, the tax matters
partner shall furnish the IRS with the name, address, taxpayer identification
number, and profit interest of each of the Limited Partners and the Assignees; provided,
however, that such information is provided to the Partnership by the
Limited Partners and the Assignees.

 

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

 

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

 

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

 

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

 

44

 

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

 

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

 

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

 

The taking of any action and the incurring of any
expense by the tax matters partner in connection with any such proceeding,
except to the extent required by law, is a matter in the sole and absolute
discretion of the tax matters partner, and the provisions relating to
indemnification of the General Partner set forth in Section 7.7 of this
Agreement shall be fully applicable to the tax matters partner in its capacity
as such.

 

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

 

Section 10.4.          Organizational
Expenses

 

The Partnership shall elect to deduct expenses, if
any, incurred by it in forming the Partnership ratably over a one-hundred
eighty (180) month period as provided in Section 709 of the Code.

 

Section 10.5.          Withholding

 

Each Limited Partner hereby authorizes the Partnership
to withhold from, or pay on behalf of or with respect to, such Limited Partner
any amount of federal, state, local, or foreign taxes that the General Partner
determines that the Partnership is required to withhold or pay with respect to
any amount distributable or allocable to such Limited Partner pursuant to this
Agreement, including, without limitation, any taxes required to be withheld or
paid by the Partnership pursuant to Section 1441, 1442, 1445, or 1446 of
the Code. Any amount paid on behalf of or with respect to a Limited Partner
shall constitute a loan by the Partnership to such Limited Partner, which loan
shall be repaid by such Limited Partner within fifteen (15) days after notice
from the General Partner that such payment must be made unless (i) the
Partnership withholds such payment from a distribution which would otherwise be
made to the Limited Partner, or (ii) the General Partner determines, in
its sole and absolute discretion, that such payment may be satisfied out of the
available funds of the Partnership which would, but for such payment, be
distributed to the Limited Partner. Any amounts withheld pursuant to the
foregoing clause (i) or (ii) shall be treated as having been
distributed to such Limited Partner. In the event that a Limited Partner fails
to pay any amounts owed to the Partnership pursuant to this Section 

 

45

 

10.5
when due, the General Partner may, in its sole and absolute discretion, elect
to make the payment to the Partnership on behalf of such defaulting Limited
Partner, and in such event shall be deemed to have loaned such amount to such
defaulting Limited Partner and shall succeed to all rights and remedies of the
Partnership as against such defaulting Limited Partner. Without limitation, in
such event the General Partner shall have the right to receive distributions
that would otherwise be distributable to such defaulting Limited Partner until
such time as such loan, together with all interest thereon, has been paid in
full, and any such distributions so received by the General Partner shall be
treated as having been distributed to the defaulting Limited Partner and
immediately paid by the defaulting Limited Partner to the General Partner in
repayment of such loan. Any amounts payable by a Limited Partner hereunder
shall bear interest at the lesser of (A) the base rate on corporate loans
at large United States money center commercial banks, as published from time to
time in The Wall Street Journal, plus four (4) percentage points,
or (B) the maximum lawful rate of interest on such obligation, such
interest to accrue from the date such amount is due (i.e., fifteen (15) days
after demand) until such amount is paid in full. Each Limited Partner shall
take such actions as the Partnership or the General Partner shall request in
order to perfect or enforce the security interest created hereunder.  Upon a Limited Partner’s complete withdrawal from
the Partnership, such Limited Partner shall be required to restore funds to the
Partnership to the extent that the cumulative amount of taxes withheld from or
paid on behalf of, or with respect to, such Limited Partner exceeds the sum of
such amounts (i) repaid to the Partnership by such Limited Partner, (ii) withheld
from distributions to such Limited Partner and (iii) paid by the General
Partner on behalf of such Limited Partner.

 

ARTICLE
11.

 

TRANSFERS AND WITHDRAWALS

 

Section 11.1.          Transfer

 

A.            The term “transfer,” when used in this Article 11
with respect to a Partnership Unit, shall be deemed to refer to a transaction
by which the General Partner purports to assign all or any part of its General
Partner Interest to another Person or by which a Limited Partner purports to
assign all or any part of its Limited Partner Interest to another Person, and
includes a sale, assignment, gift, pledge, encumbrance, hypothecation,
mortgage, exchange or any other disposition by law or otherwise. The term “transfer”
when used in this Article 11 does not include (i) any redemption of
Partnership Interests by the Partnership from a Limited Partner, (ii) any
acquisition of Partnership Units from a Limited Partner by the Company pursuant
to Section 8.6, or (iii) any distribution of Partnership Units by a
Limited Partner to its beneficial owners.

 

B.            No Partnership Interest shall be transferred, in whole
or in part, except in accordance with the terms and conditions set forth in
this Article 11.  Any transfer or
purported transfer of a Partnership Interest not made in accordance with this Article 11
shall be null and void.

 

C.            Notwithstanding the other provisions of this Article 11,
the Partnership Interests of the General Partner or the Company may be
transferred, in whole or in part, at any time or from time to time, to any
Person that is, at the time of such transfer, a Qualified REIT 

 

46

 

Subsidiary.  Any transferee of the entire General Partner
Interest pursuant to this Section 11.1.C shall automatically become,
without further action or Consent of any Limited Partners, the sole general
partner of the Partnership, subject to all the rights, privileges, duties and
obligations under this Agreement and the Act relating to a general
partner.  Upon any transfer permitted by
this Section 11.1.C, the transferor Partner shall be relieved of all its
obligations under this Agreement.  The
provisions of Sections 11.2.B, 11.3, 11.4.A and 11.5 hereof shall not
apply to any transfer permitted by this Section 11.1.C.

 

Section 11.2.          Transfer
of General Partner Interest and Limited Partner Interest

 

A.            The General Partner may not transfer any of its
General Partner Interest or withdraw as General Partner, or transfer any of its
Limited Partner Interest, except as provided in Sections 11.1.C, 11.2.B
and 11.2.C hereof.

 

B.            Except as set forth in Section 11.1.C or 11.2.C,
the General Partner shall not withdraw from the Partnership and shall not
transfer all or any portion of its Limited Partner Interest in the Partnership
(whether by sale, disposition, statutory merger or consolidation, liquidation
or otherwise) unless Limited Partners holding a majority of the Percentage
Interests of the Limited Partners Consent to such transfer or withdrawal.  Upon any transfer of the General Partner’s
Partnership Interest pursuant to the Consent of the Limited Partners and
otherwise in accordance with the provisions of this Section 11.2.B, the
transferee shall become a successor General Partner for all purposes herein,
and shall be vested with the powers and rights of the transferor General
Partner, and shall be liable for all obligations and responsible for all duties
of the General Partner, once such transferee has executed such instruments as
may be necessary to effectuate such admission and to confirm the agreement of
such transferee to be bound by all the terms and provisions of this Agreement
with respect to the Partnership Interest so acquired.  It is a condition to any transfer by the
General Partner otherwise permitted hereunder that the transferee assumes, by
operation of law or express agreement, all of the obligations of the transferor
General Partner under this Agreement with respect to such transferred
Partnership Interest, and such transfer shall relieve the transferor General
Partner of its obligations under this Agreement without the Consent of the
Limited Partners.  In the event that the
General Partner withdraws from the Partnership, in violation of this Agreement
or otherwise, or otherwise dissolves or terminates, or upon an Event of
Bankruptcy of the General Partner, as described in Section 13.2 hereof,
the remaining Partners may agree in writing to continue the business of the
Partnership by selecting a successor General Partner in accordance with the
Act.

 

C.            The General Partner may merge with another entity if
immediately after such merger substantially all of the assets of the surviving
entity, other than the General Partner Interest held by the General Partner,
are contributed to the Partnership as a Capital Contribution in exchange for
Partnership Units.

 

Section 11.3.          Limited
Partners’ Rights to Transfer

 

A.            Except as provided in Section 11.3.B, no Limited
Partner shall Transfer all or any portion of its Partnership Interest to any
transferee without the written consent of the General Partner, which consent
may be withheld in its sole and absolute discretion; provided, however, that
the Company may not transfer any portion of its Limited Partnership Interest
without the 

 

47

 

Consent of
Partners holding a majority of the Percentage Interests of the Limited
Partners; and provided, further, that if a Limited Partner is subject to
Incapacity, such Incapacitated Limited Partner may transfer all or any portion
of its Partnership Interest;.

 

B.            Notwithstanding any other provision of this Article 11,
a Limited Partner may Transfer all or any portion of its Partnership Interest
to any of its Affiliates and such transferee shall be admitted as a Substituted
Limited Partner, all without obtaining the consent of the General Partner.

 

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

 

D.            Without limiting the generality of Section 11.3.A
hereof, the General Partner may prohibit any transfer by a Limited Partner of
its Partnership Interest if, in the opinion of legal counsel to the
Partnership, such transfer would require filing of a registration statement
under the Securities Act or would otherwise violate any federal or state
securities laws or regulations applicable to the Partnership or the Partnership
Units.

 

E.             No transfer by a Limited Partner of its Partnership
Units may be made to any Person if (i) in the opinion of legal counsel for
the Partnership, it would result in the Partnership being treated as an
association taxable as a corporation or a publicly traded partnership within
the meaning of either Code Section 469(k)(2) or 7704(b); (ii) 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; (iii) such transfer would cause the Partnership to become,
with respect to any employee benefit plan subject to Title I of ERISA or to Section 4975
of the Code, a “party-in-interest” (as defined in Section 3(14) of ERISA)
or a “disqualified person” (as defined in Section 4975(c) of the
Code); (iv) such transfer would, in the opinion of legal counsel for the
Partnership, cause any portion of the assets of the Partnership to constitute
assets of any employee benefit plan pursuant to Department of Labor Regulations
Section 2510.3-101; (v) such transfer would subject the Partnership
to be regulated under the Investment Company Act of 1940, as amended, the
Investment Advisers Act of 1940, as amended, or the fiduciary responsibility
provisions of ERISA; or (vi) such transfer would cause the Partnership to
be terminated for federal income tax purposes pursuant to Code Section 708.

 

F.             No transfer of any Partnership Units may be made to a
lender to the Partnership or any Person who is related (within the meaning of Section 1.752-4(b) of
the Regulations) to any lender to the Partnership whose loan constitutes a
Nonrecourse Liability, without the consent of the General Partner, in its sole
and absolute discretion.

 

G.            The General Partner shall keep a register for the
Partnership on which the transfer, pledge or release of Partnership Units shall
be shown and pursuant to which entries shall be made to effect all transfers,
pledges or releases as required by the applicable sections of Article 8 of
the Uniform Commercial Code, as amended, in effect in the States of California
and 

 

48

 

Delaware; provided,
however, that if there is any conflict between such requirements, the
provisions of the Delaware Uniform Commercial Code shall govern.  The General Partner shall (i) place
proper entries in such register clearly showing each transfer and each pledge
and grant of security interest and the transfer and assignment pursuant
thereto, such entries to be endorsed by the General Partner, and (ii) maintain
the register and make the register available for inspection by all of the
Partners and their pledgees at all times during the term of this
Agreement.  Nothing herein shall be
deemed a consent to any pledge or transfer otherwise prohibited under this
Agreement.

 

Section 11.4.          Substituted
Limited Partners

 

A.            No Limited Partner shall have the right to substitute
a transferee as a Limited Partner in his or its place. The General Partner
shall, however, have the right to consent to the admission of a transferee of
the interest of a Limited Partner pursuant to this Section 11.4 as a
Substituted Limited Partner, which consent may be given or withheld by the
General Partner in its sole and absolute discretion. The General Partner’s
failure or refusal to permit a transferee of any such interests to become a
Substituted Limited Partner shall not give rise to any cause of action against
the Partnership or any Partner.  A Person
shall be admitted to the Partnership as a Substituted Limited Partner only upon
the aforementioned consent of the General Partner and the furnishing to the
General Partner of (i) evidence of acceptance in form satisfactory to the
General Partner of all of the terms and conditions of this Agreement,
including, without limitation, the power of attorney granted in Section 2.4
hereof and (ii) such other documents of the General Partner in order to
effect such Person’s admission as a Substituted Limited Partner.  The admission of any Person as a Substituted
Limited Partner shall become effective on the date upon which the name of such
Person is recorded on the books and records of the Partnership, following the
consent of the General Partner to such admission.

 

B.            A transferee who has been admitted as a Substituted
Limited Partner in accordance with this Article 11 shall have all the
rights and powers and be subject to all the restrictions and liabilities of a
Limited Partner under this Agreement.

 

C.            Upon the admission of a Substituted Limited Partner,
the General Partner shall amend Exhibit A to reflect the name, address,
number of Partnership Units and Percentage Interest (as applicable) of such
Substituted Limited Partner and to eliminate or adjust, if necessary, the name,
address and interest of the predecessor of such Substituted Limited Partner.

 

Section 11.5.          Assignees

 

If the General Partner, in its sole and absolute
discretion, does not consent to the admission of any permitted transferee as a
Substituted Limited Partner, as described in Section 11.4, such transferee
shall be considered an Assignee for purposes of this Agreement. An Assignee
shall be deemed to have had assigned to it, and shall be entitled to receive
distributions from the Partnership and the share of Net Income, Net Losses,
Recapture Income, and any other items, gain, loss, deduction and credit of the
Partnership attributable to the Partnership Interest assigned to such
transferee, but shall not be deemed to be a holder of a Partnership Interest
for any other purpose under this Agreement, and shall not be entitled to vote
such Partnership Interest in any matter presented to the Limited Partners for a
vote (such Partnership Interest 

 

49

 

being
deemed to have been voted on such matter in the same proportion as all other
Partnership Interest held by Limited Partners are voted). In the event any such
transferee desires to make a further assignment of any such Partnership
Interest, such transferee shall be subject to all of the provisions of this Article 11
to the same extent and in the same manner as any Limited Partner desiring to
make an assignment of his or its Partnership Interest.

 

Section 11.6.          General
Provisions

 

A.            No Limited Partner may withdraw from the Partnership
other than as a result of a permitted transfer of all of such Limited Partner’s
Partnership Interest in accordance with this Article 11 or pursuant to
redemption of all of its Partnership Units, or the acquisition thereof by the
Company, under Section 8.6.

 

B.            Any Limited Partner who shall transfer all of its
Partnership Interest in a transfer permitted pursuant to this Article 11
shall cease to be a Limited Partner upon the admission of all Assignees of such
Partnership Interest as Substituted Limited Partners. Similarly, any Limited
Partner who shall transfer all of its Partnership Units pursuant to a
redemption of all of its Partnership Units, or the acquisition thereof by the
Company, under Section 8.6 shall cease to be a Limited Partner.

 

C.            Transfers pursuant to this Article 11 may only be
made on the first day of a fiscal quarter of the Partnership, unless the
General Partner otherwise agrees.

 

D.            If any Partnership Interest is transferred or assigned
during any quarterly segment of the Partnership’s fiscal year in compliance
with the provisions of this Article 11 or redeemed or transferred pursuant
to Section 8.6 on any day other than the first day of a Partnership Year,
then Net Income, Net Losses, each item thereof and all other items attributable
to such interest for such Partnership Year shall be divided and allocated
between the transferor Partner and the transferee Partner by taking into
account their varying interests during the Partnership Year in accordance with Section 706(d) of
the Code, using the interim closing of the books method. All distributions of
Available Cash attributable to such Partnership Interest with respect to which
the Partnership Record Date is before the date of such transfer, assignment, or
redemption shall be made to the transferor Partner or the Redeeming Partner, as
the case may be, and in the case of a transfer or assignment other than a
redemption, all distributions of Available Cash thereafter attributable to such
Partnership Interest shall be made to the transferee Partner.

 

ARTICLE
12.

 

ADMISSION OF PARTNERS

 

Section 12.1.          Admission
of Successor General Partner

 

A successor to all of the General Partner Interest
pursuant to Section 11.1.C or 11.2 hereof who is proposed to be admitted as
a successor General Partner shall be admitted to the Partnership as the General
Partner, effective immediately prior to such transfer. Any such transferee
shall carry on the business of the Partnership without dissolution. In each
case, the admission shall be subject to the successor General Partner executing
and delivering to the 

 

50

 

Partnership
an acceptance of all of the terms and conditions of this Agreement and such
other documents or instruments as may be required to effect the admission. In
the case of such admission on any day other than the first day of a Partnership
Year, all items attributable to the General Partner Interest for such
Partnership Year shall be allocated between the transferring General Partner
and such successor as provided in Section 11.6.D hereof.

 

Section 12.2.          Admission
of Additional Limited Partners

 

A.            A Person who makes a Capital Contribution to the
Partnership in accordance with this Agreement shall be admitted to the Partnership
as an Additional Limited Partner only upon furnishing to the General Partner (i) evidence
of acceptance in form satisfactory to the General Partner of all of the terms
and conditions of this Agreement, including, without limitation, the power of
attorney granted in Section 2.4 hereof and (ii) such other documents
or instruments as may be required in the discretion of the General Partner in
order to effect such Person’s admission as an Additional Limited Partner.

 

B.            Notwithstanding anything to the contrary in this Section 12.2,
no Person shall be admitted as an Additional Limited Partner without the
consent of the General Partner, which consent may be given or withheld in the
General Partner’s sole and absolute discretion. The admission of any Person as
an Additional Limited Partner shall become effective on the date upon which the
name of such Person is recorded on the books and records of the Partnership,
following the consent of the General Partner to such admission.

 

C.            If any Additional Limited Partner is admitted to the
Partnership on any day other than the first day of a Partnership Year, then Net
Income, Net Losses, each item thereof and all other items allocable among
Partners and Assignees for such Partnership Year shall be allocated among such
Additional Limited Partner and all other Partners and Assignees by taking into
account their varying interests during the Partnership Year in accordance with Section 706(d) of
the Code, using the interim closing of the books method.  All distributions of Available Cash with
respect to which the Partnership Record Date is before the date of such
admission shall be made solely to Partners and Assignees, other than such
Additional Limited Partner, and all distributions of Available Cash thereafter
shall be made to all of the Partners and Assignees, including such Additional
Limited Partner.

 

Section 12.3.          Amendment
of Agreement and Certificate of Limited Partnership

 

For the admission to the Partnership of any Partner,
the General Partner shall take all steps necessary and appropriate under the
Act to amend the records of the Partnership and, if necessary, to prepare as
soon as practical an amendment of this Agreement (including an amendment of Exhibit A)
and, if required by law, shall prepare and file an amendment to the Certificate
and may for this purpose exercise the power of attorney granted pursuant to Section 2.4
hereof.

 

51

 

ARTICLE 13.

 

DISSOLUTION, LIQUIDATION AND TERMINATION

 

Section 13.1.          Dissolution

 

The Partnership shall not be dissolved by the
admission of Substituted Limited Partners or Additional Limited Partners or by
the admission of a successor General Partner in accordance with the terms of
this Agreement.  Upon the withdrawal of
the General Partner, any successor General Partner shall continue the business
of the Partnership without dissolution. 
The Partnership shall dissolve, and its affairs shall be wound up, only
upon the first to occur of any of the following (“Liquidating Events”):

 

A.            the
expiration of its term as provided in Section 2.5 hereof;

 

B.            an
event of withdrawal of the General Partner, as defined in the Act, other than
an event of bankruptcy as defined in the Act, unless, (i) at the time of
the occurrence of such event there is at least one remaining general partner of
the Partnership who is hereby authorized to and does carry on the business of
the Partnership, or (ii) within ninety (90) days after such event of
withdrawal not less than a majority of the Percentage Interests of the
remaining Partners (or such greater Percentage Interest as may be required by
the Act and determined in accordance with the Act), determined, in case the
withdrawing General Partner continues as a Limited Partner, by both excluding
and including Limited Partner Interests continuing to be held by the
withdrawing General Partner, agrees in writing to continue the business of the
Partnership and to the appointment, effective as of the date of withdrawal, of
a successor General Partner;

 

C.            from
and after the date of this Agreement through December 31, 2069, an
election to dissolve the Partnership made by the General Partner with the
Consent of Partners holding a majority of the Percentage Interests of the
Limited Partners;

 

D.            on
or after January 1, 2070, an election to dissolve the Partnership made by
the General Partner, in its sole and absolute discretion;

 

E.             entry
of a decree of judicial dissolution of the Partnership pursuant to the
provisions of the Act;

 

F.             the
sale of all or substantially all of the assets and properties of the
Partnership; or

 

G.            a
final and non-appealable judgment is entered by a court of competent
jurisdiction ruling that the General Partner is bankrupt or insolvent, or a
final and non-appealable order for relief is entered by a court with
appropriate jurisdiction against the General Partner, in each case under any
federal or state bankruptcy or insolvency laws as now or hereafter in effect
(hereinafter referred to as an “Event of Bankruptcy,” and such term as
used herein is intended and shall be deemed to supersede and replace the events
of withdrawal described in Section 17-402(a)(4) and (5) of the
Act), unless prior to the entry of such order or judgment all of the remaining
Partners agree in writing to continue the business of the Partnership and to
the appointment, effective as of a date prior to the date of such order or
judgment, of a substitute General Partner.

 

52

 

Section 13.2.          Winding
Up

 

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

 

(1)           First, in
satisfaction of all of the Partnership’s debts and liabilities to creditors
other than the Partners (whether by payment or the making of reasonable
provision for payment thereof);

 

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

 

(3)           Third, to the
payment and discharge of all of the Partnership’s debts and liabilities to the
other Partners; and

 

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

 

The General Partner shall not receive any additional
compensation for any services performed pursuant to this Article 13.

 

B.            Notwithstanding the provisions of Section 13.2.A
hereof which require liquidation of the assets of the Partnership, but subject
to the order of priorities set forth therein, if prior to or upon dissolution
of the Partnership the Liquidator determines that an immediate sale of part or
all of the Partnership’s assets would be impractical or would cause undue loss
to the Partners, the Liquidator may, in its sole and absolute discretion, defer
for a reasonable time the liquidation of any assets except those necessary to
satisfy liabilities of the Partnership (including to those Partners as
creditors) and/or distribute to the Partners, in lieu of cash, as tenants in
common and in accordance with the provisions of Section 13.2.A hereof,
undivided interests in such Partnership assets as the Liquidator deems not
suitable for liquidation.  Any such
distributions in kind shall be made only if, in the good faith judgment of the
Liquidator, such distributions in kind are in the best interest of the
Partners, and shall be subject to such conditions relating to the disposition
and management of such properties as the Liquidator deems reasonable and
equitable and to any agreements governing the operation of such properties at
such time.  The Liquidator shall
determine the fair market value of any property distributed in kind using such
reasonable method of valuation as it may adopt.

 

53

 

C.            In the discretion of the Liquidator, a
pro rata portion of the distributions that would otherwise be made to the
General Partner and Limited Partners pursuant to this Article 13 may be:

 

(1)           distributed to a
trust established for the benefit of the General Partner and Limited Partners
for the purposes of liquidating Partnership assets, collecting amounts owed to
the Partnership, and paying any contingent or unforeseen liabilities or
obligations of the Partnership or the General Partner arising out of or in
connection with the Partnership.  The
assets of any such trust shall be distributed to the General Partner and
Limited Partners from time to time, in the reasonable discretion of the Liquidator,
in the same proportions as the amount distributed to such trust by the
Partnership would otherwise have been distributed to the General Partner and
Limited Partners pursuant to this Agreement; or

 

(2)           withheld or escrowed
to provide a reasonable reserve for Partnership liabilities (contingent or
otherwise) and to reflect the unrealized portion of any installment obligations
owed to the Partnership; provided, that such withheld or escrowed
amounts shall be distributed to the General Partner and Limited Partners in the
manner and order of priority set forth in Section 13.2.A as soon as
practicable.

 

Section 13.3.          Compliance
with Timing Requirements of Regulations

 

In the event the Partnership is “liquidated” within
the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), distributions
shall be made pursuant to this Article 13 to the General Partner and
Limited Partners who have positive Capital Accounts in compliance with
Regulations Section 1.704-l(b)(2)(ii)(b)(2).  If any Partner has a deficit balance in his
or its Capital Account (after giving effect to all contributions, distributions
and allocations for all taxable years, including the year during which such
liquidation occurs), such Partner shall have no obligation to make any
contribution to the capital of the Partnership with respect to such deficit,
and such deficit shall not be considered a debt owed to the Partnership or to
any other Person for any purpose whatsoever.

 

Section 13.4.          Deemed
Contribution and Distribution

 

Notwithstanding any other provision of this Article 13,
in the event the Partnership is “liquidated” within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g),
but no Liquidating Event has occurred, the Partnership’s property shall not be
liquidated, the Partnership’s liabilities shall not be paid or discharged, and
the Partnership’s affairs shall not be wound up.  Instead, for federal income tax purposes and
for purposes of maintaining Capital Accounts pursuant to Exhibit B hereto,
the Partnership shall be deemed to have contributed all Partnership property
and liabilities to a new limited partnership in exchange for an interest in
such new limited partnership and, immediately thereafter, the Partnership will
be deemed to liquidate by distributing interests in the new limited partnership
to the Partners.

 

Section 13.5.          Rights
of Limited Partners

 

Except as otherwise provided in this Agreement, each
Limited Partner shall look solely to the assets of the Partnership for the
return of its Capital Contributions and shall have no right or 

 

54

 

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

 

Section 13.6.          Notice
of Dissolution

 

In the event a Liquidating Event occurs or an event
occurs that would, but for the provisions of an election or objection by one or
more Partners pursuant to Section 13.1, result in a dissolution of the
Partnership, the General Partner shall, within thirty (30) days thereafter,
provide written notice thereof to each of the Partners.

 

Section 13.7.          Termination
of Partnership and Cancellation of Certificate of Limited Partnership

 

Upon the completion of the winding up of the
Partnership and liquidation of its assets, as provided in Section 13.2
hereof, the Partnership shall be terminated by filing a certificate of
cancellation with the Secretary of State of the State of Delaware, canceling
all qualifications of the Partnership as a foreign limited partnership in
jurisdictions other than the State of Delaware and taking such other actions as
may be necessary to terminate the Partnership.

 

Section 13.8.          Reasonable
Time for Winding Up

 

A reasonable time shall be allowed for the orderly
winding-up of the business and affairs of the Partnership and the liquidation
of its assets pursuant to Section 13.2 hereof, in order to minimize any
losses otherwise attendant upon such winding up, and the provisions of this
Agreement shall remain in effect among the Partners during the period of
liquidation.

 

Section 13.9.          Waiver
of Partition

 

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

 

ARTICLE 14.

 

AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS

 

Section 14.1.          Amendment
of Partnership Agreement

 

A.            Amendments
to this Agreement may be proposed by the General Partner or by Limited Partners
holding twenty percent (20%) or more of the Partnership Interests.  Following such proposal, the General Partner
shall submit any proposed amendment to the Limited Partners.  The General Partner shall seek the written
vote of the Partners on the proposed amendment or shall call a meeting to vote
thereon and to transact any other business that it may deem appropriate.  For purposes of obtaining a written vote, the
General Partner may require a response within a reasonable specified time, but
not less than fifteen (15) days, and failure to respond in such time period
shall constitute a vote which is consistent with the General Partner’s
recommendation with respect to the proposal. 
Except as otherwise provided in this Agreement, a proposed amendment
shall be adopted and be effective as an amendment hereto if it is approved 

 

55

 

by the General Partner and it receives the Consent of Partners holding
a majority of the Percentage Interests of the Limited Partners.

 

B.            Notwithstanding Section 14.1.A, the
General Partner shall have the power, without the consent of the Limited
Partners, to amend this Agreement as may be required to facilitate or implement
any of the following purposes:

 

(1)           to add to the
obligations of the General Partner or surrender any right or power granted to
the General Partner or any Affiliate of the General Partner for the benefit of
the Limited Partners;

 

(2)           to reflect the
admission, substitution, termination, or withdrawal of Partners in accordance
with this Agreement;

 

(3)           to set forth the
designations, rights (including redemption rights that differ from those
specified in Section 8.6), powers, duties, and preferences of Partnership
Units or other Partnership Interests issued pursuant to Section 4.2.A
hereof;

 

(4)           to reflect a change
that is of an inconsequential nature and does not adversely affect the Limited
Partners in any material respect, or to cure any ambiguity, correct or
supplement any provision in this Agreement not inconsistent with law or with
other provisions, or make other changes with respect to matters arising under
this Agreement that will not be inconsistent with law or with the provisions of
this Agreement; and

 

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

 

The General Partner shall provide notice to the
Limited Partners when any action under this Section 14.1.B is taken.

 

C.            Notwithstanding Section 14.1.A and
14.1.B hereof, this Agreement shall not be amended without the Consent of each
Partner adversely affected if such amendment would (i) convert a Limited
Partner’s interest in the Partnership into a General Partner Interest; (ii) modify
the limited liability of a Limited Partner in a manner adverse to such Limited
Partner; (iii) alter rights of such Partner to receive distributions
pursuant to Article 5 or Article 13, or the allocations specified in Article 6
(except as permitted pursuant to Section 4.2 and Section 14.1.B(3) hereof)
in a manner adverse to such Partner; (iv) alter or modify the Redemption
Right and REIT Shares Amount as set forth in Section 8.6, and the related
definitions, in a manner adverse to such Partner; (v) cause the
termination of the Partnership prior to the time set forth in Section 2.5
or 13.1; or (vi) amend this Section 14.1.C; provided, however,
that the Consent of each Partner adversely affected shall not be required for
any amendment or action that affects all Partners holding the same class or
series of Partnership Units on a uniform or pro rata
basis.  Any amendment consented to by any
Partner shall be effective as to that Partner, notwithstanding the absence of
such Consent by any other Partner.

 

56

 

D.            Notwithstanding
Section 14.1.A or Section 14.1.B hereof, the General Partner shall
not amend Sections 4.2.A, 7.5, 7.6, 11.2 or 14.2 without the Consent of Limited
Partners holding a majority of the Percentage Interests of the Limited
Partners.

 

Section 14.2.          Meetings
of the Partners

 

A.            Meetings
of the Partners may be called by the General Partner and shall be called upon
the receipt by the General Partner of a written request by Limited Partners
(other than the Company) holding twenty percent (20%) or more of the
Partnership Interests.  The request shall
state the nature of the business to be transacted.  Notice of any such meeting shall be given to
all Partners not less than seven (7) days nor more than thirty (30) days
prior to the date of such meeting. 
Partners may vote in person or by proxy at such meeting.  Whenever the vote or Consent of the Partners
is permitted or required under this Agreement, such vote or Consent may be
given at a meeting of the Partners or may be given in accordance with the
procedure prescribed in Section 14.1.A hereof.  Except as otherwise expressly provided in
this Agreement, the Consent of holders of a majority of the Percentage
Interests held by Limited Partners shall control.

 

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

 

C.            Each
Limited Partner may authorize any Person or Persons to act for him by proxy on
all matters in which a Limited Partner is entitled to participate, including
waiving notice of any meeting, or voting or participating at a meeting.  Every proxy must be signed by the Limited
Partner or his or its attorney-in-fact. 
No proxy shall be valid after the expiration of eleven (11) months from
the date thereof unless otherwise provided in the proxy.  Every proxy shall be revocable at the
pleasure of the Limited Partner executing it, such revocation to be effective
upon the Partnership’s receipt of written notice of such revocation from the
Limited Partner executing such proxy.

 

D.            Each
meeting of the Partners shall be conducted by the General Partner or such other
Person as the General Partner may appoint pursuant to such rules for the
conduct of the meeting as the General Partner or such other Person deems appropriate.  Without limitation, meetings of Partners may
be conducted in the same manner as meetings of the shareholders of the Company
and may be held at the same time, and as part of, meetings of the shareholders
of the Company.

 

57

 

ARTICLE 15.

 

GENERAL PROVISIONS

 

Section 15.1.          Addresses
and Notice

 

Any notice, demand, request or report required or
permitted to be given or made to a Partner or Assignee under this Agreement
shall be in writing and shall be deemed given or made when delivered in person
or when sent by first class United States mail or by other means of written
communication to such Partner or Assignee at the address set forth in Exhibit A
or such other address of which such Partner shall notify the General Partner in
writing.

 

Section 15.2.          Titles
and Captions

 

All article or section titles or captions in this
Agreement are for convenience only.  They
shall not be deemed part of this Agreement and in no way define, limit, extend
or describe the scope or intent of any provisions hereof.  Except as specifically provided otherwise,
references to “Articles” and “Sections” are to Articles and Sections of this
Agreement.

 

Section 15.3.          Pronouns
and Plurals

 

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

 

Section 15.4.          Further
Action

 

The parties shall execute and deliver all documents,
provide all information and take or refrain from taking action as may be
necessary or appropriate to achieve the purposes of this Agreement.

 

Section 15.5.          Binding
Effect

 

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

 

Section 15.6.          Creditors

 

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

 

Section 15.7.          Waiver

 

No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute a waiver of any such breach or any other covenant, duty, agreement
or condition.

 

58

 

Section 15.8.          Counterparts

 

This Agreement may be executed in counterparts, all of
which together shall constitute one agreement binding on all of the parties
hereto, notwithstanding that all such parties are not signatories to the
original or the same counterpart.  Each
party shall become bound by this Agreement immediately upon affixing his or its
signature hereto.

 

Section 15.9.          Applicable
Law

 

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

 

Section 15.10.        Invalidity
of Provisions

 

If any provision of this Agreement is or becomes
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not be
affected thereby.

 

Section 15.11.        Entire
Agreement

 

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

 

59

 

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

 

	
   

  	
  GENERAL
  PARTNER:

  
	
   

  	
   

  
	
   

  	
  PennyMac
  GP OP, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  [SEAL]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LIMITED PARTNER:

  
	
   

  	
   

  	
   

  
	
   

  	
  PennyMac
  Mortgage Investment Trust

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

[SIGNATURE PAGE TO
AMENDED AND RESTATED LIMITED 

PARTNERSHIP AGREEMENT OF PENNYMAC OPERATING PARTNERSHIP, L.P.]

 

 

EXHIBIT A

 

PARTNERS’
CONTRIBUTIONS AND PARTNERSHIP INTERESTS

 

	
  Name and Address

  of Partner

  	
   

  	
  Cash

  Contribution

  	
   

  	
  Agreed
  Value of

  Contributed Property

  	
   

  	
  Total

  Contribution

  	
   

  	
  Partnership

  Units

  	
   

  	
  Percentage

  Interest

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  General Partner:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PennyMac
  GP OP, Inc.

  27001 Agoura Road, Third Floor

  Calabasas, California 91301

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  1% general partner

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Limited
  Partners:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PennyMac
  Mortgage Investment Trust

  27001 Agoura Road, Third Floor

  Calabasas, California 91301

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

61

 

EXHIBIT B

 

CAPITAL ACCOUNT MAINTENANCE

 

1.             Capital Accounts of the Partners

 

A.            The Partnership shall maintain for each Partner a
separate Capital Account in accordance with the rules of Regulations Section 1.704-l(b)(2)(iv).  Such Capital Account shall be increased by (i) the
amount of all Capital Contributions and any other deemed contributions made by
such Partner to the Partnership pursuant to the Agreement; and (ii) all
items of Partnership income and gain (including income and gain exempt from
tax) computed in accordance with Section 1.B hereof and allocated to such
Partner pursuant to Section 6.1.A of the Agreement and Exhibit C
hereof, and decreased by (x) the amount of cash or Agreed Value of all
actual and deemed distributions of cash or property made to such Partner
pursuant to the Agreement, and (y) all items of Partnership deduction and
loss computed in accordance with Section 1.B hereof and allocated to such
Partner pursuant to Section 6.1.B of the Agreement and Exhibit C
hereof.

 

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

 

(1)           Except as otherwise provided in Regulations Section 1.704-1(b)(2)(iv)(m),
the computation of all items of income, gain, loss and deduction shall be made
without regard to any election under Section 754 of the Code which may be
made by the Partnership; provided, that the amounts of any adjustments
to the adjusted bases of the assets of the Partnership made pursuant to Section 734
of the Code as a result of the distribution of property by the Partnership to a
Partner (to the extent that such adjustments have not previously been reflected
in the Partners’ Capital Accounts) shall be reflected in the Capital Accounts
of the Partners in the manner and subject to the limitations prescribed in
Regulations Section 1.704-1(b)(2)(iv)(m)(4).

 

(2)           The computation of all items of income, gain, and
deduction shall be made without regard to the fact that items described in
Sections 705(a)(1)(B) or 705(a)(2)(B) of the Code are not includable
in gross income or are neither currently deductible nor capitalized for federal
income tax purposes.

 

(3)           Any income, gain or loss attributable to the taxable
disposition of any Partnership property shall be determined as if the adjusted
basis of such property as of such date of disposition were equal in amount to
the Partnership’s Carrying Value with respect to such property as of such date.

 

62

 

(4)           In lieu of the depreciation, amortization, and other
cost recovery deductions taken into account in computing such taxable income or
loss, there shall be taken into account Depreciation for such fiscal year.

 

(5)           In the event the Carrying Value of any Partnership
Asset is adjusted pursuant to Section 1.D hereof, the amount of any such
adjustment shall be taken into account as gain or loss from the disposition of
such asset.

 

(6)           Notwithstanding any other provision of this Section 1.B,
any items that are specially allocated pursuant to Exhibit C or Section 6.1.C.
of the Agreement shall not be taken into account for purposes of computing Net
Income or Net Loss.

 

The amounts of the items of Partnership income, gain,
loss or deduction available to be specially allocated pursuant to Exhibit C
or Section 6.1.C. of the Agreement shall be determined by applying rules analogous
to those set forth in Sections 1.B(1) through 1.B(5) above.

 

C.            Generally, a transferee (including an Assignee) of a
Partnership Unit shall succeed to a pro rata portion of the Capital Account of
the transferor.

 

D.            (1)           Consistent
with the provisions of Regulations Section 1.704-1(b)(2)(iv)(f), and as
provided in Section 1.D(2), the Carrying Value of all Partnership assets
shall be adjusted upward or downward to reflect any Unrealized Gain or
Unrealized Loss attributable to such Partnership property, as of the times of
the adjustments provided in Section 1.D(2) hereof, as if such
Unrealized Gain or Unrealized Loss had been recognized on an actual sale of
each such property and allocated pursuant to Section 6.1 of the Agreement.

 

(2)           Such adjustments shall be made as of the following
times: (a) immediately prior to the acquisition of an additional interest
in the Partnership by any new or existing Partner in exchange for more than a
de minimis Capital Contribution; (b) immediately prior to the distribution
by the Partnership to a Partner of more than a de minimis amount of property as
consideration for an interest in the Partnership; (c) in connection with
the grant of an interest (including LTIP Units) in the Partnership (other than
a de minimis interest), as consideration for the provision of services to or
for the benefit of the Partnership by an existing Partner acting in a partner
capacity or by a new partner acting in a partner capacity or in anticipation of
being a partner; and (d) immediately prior to the liquidation of the
Partnership within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g);
provided, however, that adjustments pursuant to clauses (a),
(b) and (c) above shall be made only if the General Partner
determines that such adjustments are necessary or appropriate to reflect the
relative economic interests of the Partners in the Partnership.

 

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

 

63

 

(4)           The Carrying Value of Partnership assets shall be
increased (or decreased) to reflect any adjustments to the adjusted basis of
such assets pursuant to Code Section 734(b) or Code Section 743(b),
but only to the extent that such adjustments are taken into account in
determining Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m) and
Section 1.B(1) hereof or Section 1.F. of Exhibit C; provided, however,
that Carrying Values shall not be adjusted pursuant to this Section 1.D(4) to
the extent that an adjustment pursuant to Section 1.D(2) is required
in connection with a transaction that would otherwise result in an adjustment
pursuant to this Section 1.D(4).

 

(5)           In determining Unrealized Gain or Unrealized Loss for
purposes of this Exhibit B, the aggregate cash amount and fair
market value of all Partnership assets (including cash or cash equivalents)
shall be determined by the General Partner using such reasonable method of
valuation as it may adopt, or in the case of a liquidating distribution
pursuant to Article 13 of the Agreement, shall be determined and allocated
by the Liquidator using such reasonable method of valuation as it may
adopt.  The General Partner, or the
Liquidator, as the case may be, shall allocate such aggregate value among the
assets of the Partnership (in such manner as it determines in its sole and
absolute discretion to arrive at a fair market value for individual
properties).

 

If the Carrying Value of an
asset has been determined or adjusted pursuant to Section 1.B(2) or Section 1.B(4),
such Carrying Value shall thereafter be adjusted by the Depreciation taken into
account with respect to such asset, for purposes of computing Net Income and
Net Loss.

 

E.             The provisions of the Agreement (including this Exhibit B
and other Exhibits to the Agreement) relating to the maintenance of Capital
Accounts are intended to comply with Regulations Section 1.704-l(b), and
shall be interpreted and applied in a manner consistent with such
Regulations.  In the event the General
Partner shall determine that it is prudent to modify (i) the manner in
which the Capital Accounts, or any debits or credits thereto (including,
without limitation, debits or credits relating to liabilities which are secured
by contributed or distributed property or which are assumed by the Partnership,
the General Partner, or the Limited Partners) are computed; or (ii) the
manner in which items are allocated among the Partners for federal income tax
purposes, in order to comply with such Regulations or to comply with Section 704(c) of
the Code, the General Partner may make such modification without regard to Article 14
of the Agreement; provided, that it is not likely to have a material
effect on the amounts distributable to any Person pursuant to Article 13
of the Agreement upon the dissolution of the Partnership.  The General Partner also shall (i) make any adjustments that are necessary or
appropriate to maintain equality between the Capital Accounts of the Partners
and the amount of Partnership capital reflected on the Partnership’s balance
sheet, as computed for book purposes, in accordance with Regulations Section 1.704-1(b)(2)(iv)(q);
and (ii) make any appropriate modifications in the event unanticipated events
might otherwise cause the Agreement not to comply with Regulations Section 1.704-1(b).  In addition, the General Partner may adopt
and employ such methods and procedures for (i) the maintenance of book and
tax capital accounts; (ii) the determination and allocation of adjustments
under Sections 704(c), 734 and 743 of the Code; (iii) the determination of
Net Income, Net Loss, taxable income, taxable loss and items thereof under the
Agreement and pursuant to the Code; (iv) the adoption of reasonable conventions
and methods for the valuation of assets and the determination of tax basis; (v) the
allocation of asset value and tax

 

64

 

basis; and (vi) conventions
for the determination of cost recovery, depreciation and amortization
deductions, as it determines in its sole discretion are necessary or
appropriate to execute the provisions of the Agreement, to comply with federal
and state tax laws, and are in the best interest of the Partners.

 

2.             No Interest

 

No interest shall be paid by
the Partnership on Capital Contributions or on balances in Partners’ Capital
Accounts.

 

3.             No Withdrawal

 

No Partner shall be entitled
to withdraw any part of his or its Capital Contribution or his or its Capital
Account or to receive any distribution from the Partnership, except as provided
in Articles 4, 5, 7 and 13 of the Agreement.

 

65

 

Exhibit C

 

SPECIAL ALLOCATION RULES

 

1.             Special Allocation Rules

 

Notwithstanding
any other provision of the Agreement or this Exhibit C, the
following special allocations shall be made in the following order:

 

A.            Minimum Gain Chargeback. 
Notwithstanding the provisions of Section 6.1 of the Agreement or
any other provisions of this Exhibit C, if there is a net decrease
in Partnership Minimum Gain during any Partnership taxable year, then, subject
to the exceptions set forth in Regulations Sections 1.704-2(f)(2)-(5), each
Partner shall be specially allocated items of Partnership income and gain for such
year (and, if necessary, subsequent years) in an amount equal to such Partner’s
share of the net decrease in Partnership Minimum Gain, as determined under
Regulations Section 1.704-2(g). 
Allocations pursuant to the previous sentence shall be made in proportion
to the respective amounts required to be allocated to each Partner pursuant
thereto.  The items to be so allocated
shall be determined in accordance with Regulations Section 1.704-2(f)(6).  This Section 1.A is intended to comply
with the minimum gain chargeback requirements in Regulations Section 1.704-2(f) and
shall be interpreted consistently therewith. 
Solely for purposes of this Section 1.A, each Partner’s Adjusted
Capital Account Deficit shall be determined prior to any other allocations pursuant
to Section 6.1 of the Agreement of Partner Minimum Gain during such
Partnership taxable year.

 

B.            Partner Minimum Gain Chargeback. 
Notwithstanding any other provision of Section 6.1 of the Agreement
or any other provisions of this Exhibit C (except Section 1.A
hereof), if there is a net decrease in Partner Minimum Gain attributable to a
Partner Nonrecourse Debt during any Partnership taxable year, then, subject to
the exceptions referred to in Regulations Section 1.704-2(i)(4), each
Partner who has a share of the Partner Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(5),
shall be specially allocated items of Partnership income and gain for such year
(and, if necessary, subsequent years) in an amount equal to such Partner’s
share of the net decrease in Partner Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(5).  Allocations pursuant to the previous sentence
shall be made in proportion to the respective amounts required to be allocated
to each Partner pursuant thereto.  The
items to be so allocated shall be determined in accordance with Regulations Section 1.704-2(i)(4).  This Section 1.B is intended to comply
with the minimum gain chargeback requirement in such Section of the
Regulations and shall be interpreted consistently therewith.  Solely for purposes of this Section 1.B,
each Partner’s Adjusted Capital Account Deficit shall be determined prior to
any other allocations pursuant to Section 6.1 of the Agreement or this Exhibit with
respect to such Partnership taxable year, other than allocations pursuant to Section 1.A
hereof.

 

C.            Qualified Income Offset.  In the event
any Partner unexpectedly receives any adjustments, allocations or distributions
described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), and after giving effect to
the allocations required under Sections 1.A and 1.B hereof such Partner has an
Adjusted Capital Account Deficit, 

 

66

 

items of
Partnership income and gain (consisting of a pro rata portion of each item of
Partnership income, including gross income and gain for the Partnership taxable
year) shall be specially allocated to such Partner in an amount and manner
sufficient to eliminate, to the extent required by the Regulations, its
Adjusted Capital Account Deficit created by such adjustments, allocations or
distributions as quickly as possible. 
This Section 1.C is intended to constitute a qualified income
offset under Regulations Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.

 

D.            Nonrecourse Deductions.  Nonrecourse
Deductions for any Partnership taxable year shall be allocated to the Partners
in accordance with their respective Percentage Interests.  If the General Partner determines in its good
faith discretion that the Partnership’s Nonrecourse Deductions must be
allocated in a different ratio to satisfy the safe harbor requirements of the
Regulations promulgated under Section 704(b) of the Code, the General
Partner is authorized, upon notice to the Limited Partners, to revise the
prescribed ratio to the numerically closest ratio for such Partnership taxable
year which would satisfy such requirements.

 

E.             Partner Nonrecourse Deductions. 
Any Partner Nonrecourse Deductions for any Partnership taxable year
shall be specially allocated to the Partner who bears the economic risk of loss
with respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse
Deductions are attributable in accordance with Regulations Section 1.704-2(i).

 

F.             Code Section 754 Adjustments. 
To the extent an adjustment to the adjusted tax basis of any Partnership
asset pursuant to Section 734(b) or 743(b) of the Code is
required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m), to be
taken into account in determining Capital Accounts, the amount of such
adjustment to the Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis), and such item of gain or loss shall be specially
allocated to the Partners in a manner consistent with the manner in which their
Capital Accounts are required to be adjusted pursuant to such Section of
the Regulations.

 

G.            Curative Allocations.  The
allocations set forth in Section 1.A through 1.F of this Exhibit C
(the “Regulatory Allocations”) are intended to comply with certain
requirements of the Regulations under Section 704(b) of the
Code.  The Regulatory Allocations may not
be consistent with the manner in which the Partners intend to divide
Partnership distributions.  Accordingly,
the General Partner is hereby authorized to divide other allocations of income,
gain, deduction and loss among the Partners so as to prevent the Regulatory
Allocations from distorting the manner in which Partnership distributions will
be divided among the Partners.  In
general, the Partners anticipate that, if necessary, this will be accomplished
by specially allocating other items of income, gain, loss and deduction among
the Partners so that the net amount of the Regulatory Allocations and such
special allocations to each person is zero. 
However, the General Partner will have discretion to accomplish this
result in any reasonable manner; provided, however, that no
allocation pursuant to this Section 1.G shall cause the Partnership to
fail to comply with the requirements of Regulations Sections
1.704-1(b)(2)(ii)(d), -2(e) or -2(i).

 

67

 

2.             Allocations for Tax Purposes

 

A.            Except as otherwise provided in this Section 2,
for federal income tax purposes, each item of income, gain, loss and deduction
shall be allocated among the Partners in the same manner as its correlative
item of “book” income, gain, loss or deduction is allocated pursuant to Section 6.1
of the Agreement and Section 1 of this Exhibit C.

 

B.            In an attempt to eliminate Book-Tax
Disparities attributable to a Contributed Property or Adjusted Property, items
of income, gain, loss, and deduction shall be allocated for federal income tax
purposes among the Partners as follows:

 

(1)                                  (a)           In the case of a Contributed Property,
such items attributable thereto shall be allocated among the Partners,
consistent with the principles of Section 704(c) of the Code and the
Regulations thereunder, and with the procedures and methods described in Section 10.2
of the Agreement, to take into account the variation between the 704(c) Value
of such property and its adjusted basis at the time of contribution; and

 

(b)           any item of
Residual Gain or Residual Loss attributable to a Contributed Property shall be
allocated among the Partners in the same manner as its correlative item of
“book” gain or loss is allocated pursuant to Section 6.1 of the Agreement
and Section 1 of this Exhibit C.

 

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

 

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

 

(2)           second, in the event such
property was originally a Contributed Property, be allocated among the Partners
in a manner consistent with Section 2.B(1) of this Exhibit C;
and

 

(b)                                 any item of
Residual Gain or Residual Loss attributable to an Adjusted Property shall be
allocated among the Partners in the same manner as its correlative item of
“book” gain or loss is allocated pursuant to Section 6.1 of the Agreement
and Section 1 of this Exhibit C.

 

C.            To the extent that the Treasury Regulations
promulgated pursuant to Section 704(c) of the Code permit the Partnership
to utilize alternative methods to eliminate the disparities between the
Carrying Value of property and its adjusted basis, the General Partner 

 

68

 

shall have the
authority to elect the method to be used by the Partnership and such election
shall be binding on all Partners.

 

3.             No Withdrawal

 

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 provided in Articles
4, 5, 8 and 13 of the Agreement.

 

69

 

 

EXHIBIT D

 

NOTICE OF REDEMPTION

 

The undersigned Limited Partner hereby irrevocably
requests PennyMac Operating Partnership, L.P., a Delaware limited partnership
(the “Partnership”), to redeem
                            
Partnership Units in the Partnership in accordance with the terms of the
Amended and Restated Limited Partnership Agreement of the Partnership and the
Redemption Right referred to therein; and the undersigned Limited Partner
irrevocably (i) surrenders such Partnership Units and all right, title and
interest therein; and (ii) directs that the Cash Amount or REIT Shares
Amount (as determined by the Company) deliverable upon exercise of the
Redemption Right be delivered to the address specified below, and if REIT
Shares are to be delivered, such REIT Shares be registered or placed in the
name(s) and at the address(es) specified below.  The undersigned hereby represents, warrants,
and certifies that the undersigned (a) has marketable and unencumbered
title to such Limited Partnership Units, free and clear of the rights or
interests of any other person or entity; (b) has the full right, power,
and authority to request such redemption and surrender such Partnership Units
as provided herein; and (c) has obtained the consent or approval of all
persons or entities, if any, having the right to consent or approve such
redemption and surrender of Units.  The
undersigned Limited Partner further agrees that, in the event that any state or
local property tax is payable as a result of the transfer of its Partnership
Units to the Partnership or the Company, the undersigned Limited Partner shall
assume and pay such transfer tax.

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name
  of Limited Partner:

  	
   

  	
   

  
	
   

  	
   

  	
  Please Print

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Signature
  of Limited Partner)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Street
  Address)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (City)
  (State) (Zip Code)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature
  Guaranteed by:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

If
REIT Shares are to be issued, issue to:

 

	
  Name:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Please
  insert social security or identifying number:

  	
   

  	
   

  
						

 

70

 

EXHIBIT E

 

CONSTRUCTIVE OWNERSHIP DEFINITION

 

The
term “Constructively Owns” means ownership determined through the application
of the constructive ownership rules of Section 318 of the Code, as
modified by Section 856(d)(5) of the Code. Generally, as of the date
first set forth above, these rules provide the following:

 

a.  an
individual is considered as owning the Ownership Interest that is owned,
actually or constructively, by or for his spouse, his children, his
grandchildren, and his parents;

 

b. 
an Ownership Interest that is owned, actually or constructively, by or
for a partnership, limited liability company or estate is considered as owned
proportionately by its partners or beneficiaries;

 

c.  an
Ownership Interest that is owned, actually or constructively, by or for a trust
is considered as owned by its beneficiaries in proportion to the actuarial
interest of such beneficiaries (provided, however, that in the
case of a “grantor trust” the Ownership Interest will be considered as owned by
the grantors);

 

d. 
if ten (10) percent or more in value of the stock in a corporation
is owned, actually or constructively, by or for any person, such person shall
be considered as owning the Ownership Interest that is owned, actually or
constructively, by or for such corporation in that proportion which the value
of the stock which such person so owns bears to the value of all the stock in
such corporation;

 

e. 
an Ownership Interest that is owned, actually or constructively, by or
for a partner or member which actually or constructively owns a 25% or greater
capital interest or profits interest in a partnership or limited liability
company, or by or to or for a beneficiary of an estate or trust shall be
considered as owned by the partnership, limited liability company, estate, or
trust (or, in the case of a grantor trust, the grantors);

 

f.  if
ten (10) percent or more in value of the stock in a corporation is owned,
actually or constructively, by or for any person, such corporation shall be
considered as owning the Ownership Interest that is owned, actually or
constructively, by or for such person;

 

g.  if
any person has an option to acquire an Ownership Interest (including an option
to acquire an option or any one of a series of such options), such Ownership
Interest shall be considered as owned by such person;

 

h. 
an Ownership Interest that is constructively owned by a person by reason
of the application of the rules described in paragraphs (a) through (g) above
shall, for purposes of applying paragraphs (a) through (g), be considered
as actually owned by such person; provided, however, that (i) an
Ownership Interest constructively owned by an individual by reason of paragraph
(a) shall not be considered as owned by him for purposes of again applying
paragraph (a) in order to make another person the constructive owner of
such Ownership Interest, (ii) an Ownership Interest constructively owned
by a partnership, estate, trust, or corporation by reason of the application of
paragraphs (e) or (f) shall not be considered as owned by it for
purposes of

 

71

 

applying
paragraphs (b), (c), or (d) in order to make another person the
constructive owner of such Ownership Interest, (iii) if an Ownership
Interest may be considered as owned by an individual under paragraph (a) or
(g), it shall be considered as owned by him under paragraph (g), and (iv) for
purposes of the above described rules, an S corporation shall be treated as a
partnership and any shareholder of the S corporation shall be treated as a
partner of such partnership except that this rule shall not apply for
purposes of determining whether stock in the S corporation is constructively
owned by any person.

 

i. 
For purposes of the above summary of the constructive ownership rules,
the term “Ownership Interest” means the ownership of stock with respect
to a corporation and, with respect to any other type of entity, the ownership
of an interest in either its assets or net profits.

 

72

 

EXHIBIT F

 

NOTICE OF CONVERSION

 

The undersigned LTIP Unitholder hereby irrevocably (i) elects
to convert the number of LTIP Units in PennyMac Operating Partnership, L.P.
(the “Partnership”) set forth below into Partnership Units in accordance with
the terms of the Amended and Restated Limited Partnership Agreement of the
Partnership, as it may be amended, supplemented or restated from time to time;
and (ii) directs that any cash in lieu of Partnership Units that may be
deliverable upon such conversion be delivered to the address specified
below.  The undersigned hereby
represents, warrants, and certifies that the undersigned (a) has title to
such LTIP Units, free and clear of the rights or interests of any other person
or entity other than the Partnership; (b) has the full right, power, and
authority to cause the conversion of such LTIP Units as provided herein; and (c) has
obtained the consent or approval of all persons or entities, if any, having the
right to consent or approve such conversion.

 

 

	
  Name
  of LTIP Unitholder:

  	
   

  	
   

  
	
   

  	
  (Please
  Print: Exact Name as Registered with Partnership)

  
	
   

  
	
   

  
	
  Number
  of LTIP Units to be Converted:

  	
   

  	
   

  
	
   

  
	
   

  
	
  Date
  of this Notice:

  	
   

  	
   

  
	
   

  
	
   

  
	
   

  	
   

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

  
	
   

  
	
   

  
	
   

  	
   

  
	
  (Street
  Address)                                                        (City)
  (State) (Zip Code)

  
	
   

  
	
   

  
	
  Signature
  Guaranteed by:

  	
   

  	
   

  
						

 

73

 

EXHIBIT G

 

NOTICE OF FORCED CONVERSION

 

PennyMac Operating Partnership, L.P. (the “Partnership”)
hereby irrevocably (i) elects to cause the number of LTIP Units held by
the LTIP Unitholder set forth below to be converted into Partnership Units in
accordance with the terms of the Amended and Restated Limited Partnership
Agreement of the Partnership, as it may be amended, supplemented and restated
from time to time.

 

 

	
  Name
  of LTIP Unitholder:

  	
   

  	
   

  
	
   

  	
     (Please
  Print: Exact Name as Registered with Partnership)

  
	
   

  	
   

  
	
   

  	
   

  
	
  Number
  of LTIP Units to be Converted:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date
  of this Notice:

  	
   

  	
   

  
					

 

74

 

EXHIBIT H

 

SCHEDULE OF PARTNERS’ OWNERSHIP

WITH RESPECT TO TENANTS

 

NONE

 

75

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