Document:

EXHIBIT
10.3

LIMITED PARTNERSHIP AGREEMENT

OF

CORNERSTONE
GROWTH AND INCOME OPERATING PARTNERSHIP, L.P.

TABLE OF CONTENTS

	
  

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE 1 DEFINED TERMS

  	
   

  	
  1

  
	
  ARTICLE 2 PARTNERSHIP FORMATION AND
  IDENTIFICATION

  	
   

  	
  8

  
	
  2.1 Formation

  	
   

  	
  8

  
	
  2.2 Name, Office
  and Registered Agent

  	
   

  	
  8

  
	
  2.3 Partners

  	
   

  	
  8

  
	
  2.4 Term and
  Dissolution

  	
   

  	
  9

  
	
  2.5 Filing of
  Certificate and Perfection of Limited Partnership

  	
   

  	
  9

  
	
  2.6 Certificates
  Describing Partnership Units

  	
   

  	
  9

  
	
  ARTICLE 3 BUSINESS OF THE PARTNERSHIP

  	
   

  	
  10

  
	
  ARTICLE 4 CAPITAL CONTRIBUTIONS AND ACCOUNTS

  	
   

  	
  10

  
	
  4.1 Capital
  Contributions

  	
   

  	
  10

  
	
  4.2 Additional
  Capital Contributions and Issuances of Additional Partnership Interests

  	
   

  	
  10

  
	
  4.3 Additional
  Funding

  	
   

  	
  12

  
	
  4.4 Capital
  Accounts

  	
   

  	
  13

  
	
  4.5 Percentage
  Interests

  	
   

  	
  13

  
	
  4.6 No Interest
  on Contributions

  	
   

  	
  13

  
	
  4.7 Return of
  Capital Contributions

  	
   

  	
  13

  
	
  4.8 No Third
  Party Beneficiary

  	
   

  	
  14

  
	
  ARTICLE 5 PROFITS AND LOSSES; DISTRIBUTIONS

  	
   

  	
  14

  
	
  5.1 Allocation
  of Profit and Loss

  	
   

  	
  14

  
	
  5.2 Distribution
  of Cash

  	
   

  	
  16

  
	
  5.3 REIT
  Distribution Requirements

  	
   

  	
  17

  
	
  5.4 No Right to
  Distributions In Kind

  	
   

  	
  17

  
	
  5.5 Limitations
  on Return of Capital Contributions

  	
   

  	
  17

  
	
  5.6
  Distributions Upon Liquidation

  	
   

  	
  17

  
	
  5.7 Substantial
  Economic Effect

  	
   

  	
  18

  

 

 i
 

 

	
  

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6 RIGHTS, OBLIGATIONS AND POWERS OF THE GENERAL PARTNER

  	
   

  	
  18

  	 

	
  6.1 Management
  of the Partnership

  	
   

  	
  18

  	 

	
  6.2 Delegation
  of Authority

  	
   

  	
  21

  	 

	
  6.3
  Indemnification and Exculpation of Indemnitees

  	
   

  	
  21

  	 

	
  6.4 Liability of
  the General Partner

  	
   

  	
  23

  	 

	
  6.5 Reimbursement
  of General Partner

  	
   

  	
  24

  	 

	
  6.6 Outside
  Activities

  	
   

  	
  24

  	 

	
  6.7 Employment
  or Retention of Affiliates

  	
   

  	
  24

  	 

	
  6.8 General
  Partner Participation

  	
   

  	
  25

  	 

	
  6.9 Title to
  Partnership Assets

  	
   

  	
  25

  	 

	
  6.10
  Miscellaneous

  	
   

  	
  25

  	 

	
  ARTICLE
  7 CHANGES IN GENERAL PARTNER

  	
   

  	
  26

  	 

	
  7.1 Transfer of
  the General Partner’s Partnership Interest

  	
   

  	
  26

  	 

	
  7.2 Admission of
  a Substitute or Additional General Partner

  	
   

  	
  27

  	 

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

  	
   

  	
  28

  	 

	
  7.4 Removal of a
  General Partner

  	
   

  	
  29

  	 

	
  ARTICLE 8 RIGHTS AND OBLIGATIONS OF THE LIMITED
  PARTNERS

  	
   

  	
  30

  	 

	
  8.1 Management
  of the Partnership

  	
   

  	
  30

  	 

	
  8.2 Power of
  Attorney

  	
   

  	
  30

  	 

	
  8.3 Limitation on
  Liability of Limited Partners

  	
   

  	
  30

  	 

	
  8.4 [reserved]

  	
   

  	
  30

  	 

	
  8.5 Exchange
  Right

  	
   

  	
  30

  	 

	
  ARTICLE 9 TRANSFERS OF LIMITED PARTNERSHIP
  INTERESTS

  	
   

  	
  32

  	 

	
  9.1 Purchase for
  Investment

  	
   

  	
  32

  	 

	
  9.2 Restrictions
  on Transfer of Limited Partnership Interests

  	
   

  	
  33

  	 

	
  9.3 Admission of
  Substitute Limited Partner

  	
   

  	
  34

  	 

	
  9.4 Rights of
  Assignees of Partnership Interests

  	
   

  	
  35

  	 

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

  	
   

  	
  35

  	 

	
  9.6 Joint
  Ownership of Interests

  	
   

  	
  35

  	 

						

 

 ii
 

 

	
  

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  9.7 Redemption of
  Partnership Units

  	
   

  	
  36

  
	
  ARTICLE 10 BOOKS AND RECORDS; ACCOUNTING; TAX
  MATTERS

  	
   

  	
  36

  
	
  10.1 Books and
  Records

  	
   

  	
  36

  
	
  10.2 Custody of
  Partnership Funds; Bank Accounts

  	
   

  	
  37

  
	
  10.3 Fiscal and
  Taxable Year

  	
   

  	
  37

  
	
  10.4 Annual Tax
  Information and Report

  	
   

  	
  37

  
	
  10.5 Tax Matters
  Partner; Tax Elections; Special Basis Adjustments

  	
   

  	
  37

  
	
  10.6 Reports Made
  Available to Limited Partners

  	
   

  	
  38

  
	
  ARTICLE 11 AMENDMENT OF AGREEMENT; MERGER

  	
   

  	
  38

  
	
  ARTICLE 12 GENERAL PROVISIONS

  	
   

  	
  39

  
	
  12.1 Notices

  	
   

  	
  39

  
	
  12.2 Survival of
  Rights

  	
   

  	
  39

  
	
  12.3 Additional
  Documents

  	
   

  	
  39

  
	
  12.5 Entire
  Agreement

  	
   

  	
  39

  
	
  12.6 Pronouns
  and Plurals

  	
   

  	
  39

  
	
  12.7 Headings

  	
   

  	
  39

  
	
  12.8
  Counterparts

  	
   

  	
  39

  
	
  12.9 Governing
  Law

  	
   

  	
  40

  
	
  EXHIBIT
  A -  General
  Partner And Original Limited Partner, Capital Contributions And Percentage
  Interests

  	
   

  	
  42

  
	
  EXHIBIT B - Notice Of Exercise Of Exchange Right

  	
   

  	
  43

  
	
  EXHIBIT C- Indemnification Guideline

  	
   

  	
  44

  

 

 iii

LIMITED PARTNERSHIP AGREEMENT

OF

CORNERSTONE
GROWTH AND INCOME OPERATING PARTNERSHIP, L.P.

Cornerstone Growth
and Income Operating Partnership, L.P. (the “Partnership”), was formed as a
limited partnership under the law of the State of Delaware, pursuant to a
Certificate of Limited Partnership filed with the Office of the Secretary of
State of the State of Delaware on October 17, 2006. This Agreement of Limited
Partnership (“Agreement”) is entered into effective as of                                     
between Cornerstone Growth and Income REIT, Inc., a Maryland corporation (the “General
Partner”) and the Limited Partners set forth on Exhibit A hereto.
Capitalized terms used herein but not otherwise defined shall have the meanings
given them in Article 1.

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

ARTICLE 1

DEFINED
TERMS

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

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

Additional Funds has the meaning
set forth in Section 4.3.

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

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

 1
 

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

Advisory
Agreement means the agreement between the General Partner and
the Advisor pursuant to which the Advisor will direct or perform the day-to-day
business affairs of the General Partner.

Affiliate
or Affiliated means, as to any individual, corporation,
partnership, trust, limited liability company or other legal entity (other than
this Partnership), (i) any Person, directly or indirectly through one or more
intermediaries controlling, controlled by, or under common control with another
person; (ii) any Person, directly or indirectly owning, controlling, or holding
with power to vote ten percent (10%) or more of the outstanding voting
securities of another Person; (iii) any officer, director, general partner or
trustee of such Person; (iv) any Person ten percent (10%) or more of whose
outstanding voting securities are directly or indirectly owned, controlled or
held, with power to vote, by such other Person; and (v) if such other Person is
an officer, director, general partner, or trustee of a Person, the Person for
which such Person acts in any such capacity. 
For purposes of this definition, “under common control” shall mean that
one Person or group (within the meaning of Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended) owns 10% or more of the outstanding voting
securities of two or more Persons, in which case the Person so owned would be
affiliates of each other.

Agreed
Value means the fair market value of a Partner’s non-cash
Capital Contribution as of the date of contribution as agreed to by such
Partner and the General Partner. The names and addresses of the General Partner
and Original Limited Partner, number of Partnership Units issued to each of
them, and their respective Capital Contributions as of the date of contribution
is set forth on Exhibit A.

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

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

Capital
Account has the meaning provided in Section 4.4 hereof.

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

Cash
Amount means an amount of cash per Partnership Unit equal to
the Value of the REIT Shares Amount on the date of receipt by the General
Partner of a Notice of Exchange.

 2
 

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

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

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

Event of
Bankruptcy as to any Person means the filing of a petition
for relief as to such Person as debtor or bankrupt under the Bankruptcy Code of
1978 or similar provision of law of any jurisdiction (except if such petition
is contested by such Person and has been dismissed within 90 days); insolvency
or bankruptcy of such Person as finally determined by a court proceeding;
filing by such Person of a petition or application to accomplish the same or
for the appointment of a receiver or a trustee for such Person or a substantial
part of his assets; commencement of any proceedings relating to such Person as
a debtor under any other reorganization, arrangement, insolvency, adjustment of
debt or liquidation law of any jurisdiction, whether now in existence or hereinafter
in effect, either by such Person or by 

 3
 

another, provided that if
such proceeding is commenced by another, such Person indicates his approval of
such proceeding, consents thereto or acquiesces therein, or such proceeding is
contested by such Person and has not been finally dismissed within 90 days.

Exchange
Amount means either the Cash Amount or the REIT Shares
Amount, as selected by the General Partner in its sole and absolute discretion
pursuant to Section 8.5(b) hereof.

Exchange
Right has the meaning provided in Section 8.5(a) hereof.

Exchanging
Partner has the meaning provided in Section 8.5(a) hereof.

General
Partner means Cornerstone Growth and Income REIT, Inc., a
Maryland corporation, and any Person who becomes a substitute or additional General
Partner as provided herein, and any of their successors as General Partner.

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

Indemnitee
means (i) the General Partner or a director, officer or
employee of the General Partner or Partnership, (ii) the Advisor or a director,
officer, employee of the Advisor or another agent of the Advisor if such agent
is an Affiliate of the Advisor and (iii) such other Persons (including Affiliates
of the General Partner, the Advisor or the Partnership) as the General Partner
may designate from time to time, in its sole and absolute discretion.

“Independent Director” means a director of
the General Partner who is not an officer or employee of the General
Partner and meets the requirements for independence as defined by the
General Partner’s Articles of Incorporation.

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

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

Listing
means the approval of the REIT Shares, issued by the General Partner pursuant
to an effective registration statement, on a national securities exchange or
over-the-counter market.  Upon Listing,
the shares shall be deemed Listed.

Loss
has the meaning provided in Section 5.1(f) hereof.

 4
 

National
Securities Exchange means any securities exchange registered
with SEC pursuant to Section 6 of the Securities Exchange Act of 1934, as
amended.

Notice of
Exchange means the Notice of Exercise of Exchange Right
substantially in the form attached as Exhibit B hereto.

Offer
has the meaning set forth in Section 7.1(b)(ii) hereof.

Offering
means the initial offer and sale by the General Partner through the Dealer
Manager (as defined in the Prospectus) of REIT Shares for sale to the public.

OP
Unitholders means all holders of Partnership Interests.

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

Partner
means any General Partner or Limited Partner.

Partner
Nonrecourse Debt Minimum Gain has the meaning set forth in
Regulations Section 1.704-2(i). A Partner’s share of Partner Nonrecourse Debt
Minimum Gain shall be determined in accordance with Regulations Section
1.704-2(i)(5).

Partnership
means Cornerstone Growth and Income Operating Partnership, L.P., a Delaware
limited partnership.

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

Partnership
Minimum Gain has the meaning set forth in Regulations Section
1.704-2(d). In accordance with Regulations Section 1.704-2(d), the amount of
Partnership Minimum Gain is determined by first computing, for each Partnership
nonrecourse liability, any gain the Partnership would realize if it disposed of
the property subject to that liability for no consideration other than full
satisfaction of the liability, and then aggregating the separately computed
gains. A Partner’s share of Partnership Minimum Gain shall be determined in
accordance with Regulations Section 1.704-2(g)(1).

Partnership
Record Date means the record date established by the General
Partner for the distribution of cash pursuant to Section 5.2 hereof, which
record date shall be the same as the record date established by the General
Partner 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 hereunder. The allocation of Partnership Units
among the Partners shall be as set forth on Exhibit A, as such Exhibit
may be amended from time to time.

 5
 

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

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

Profit
has the meaning provided in Section 5.1(f) hereof.

Property
means any office or industrial property or other investment in which the
Partnership holds an ownership interest.

Prospectus
means the final prospectus delivered to purchasers of REIT Shares in the
Offering.

Regulations
means the Federal income tax regulations promulgated under the Code, as amended
and as hereafter amended from time to time. Reference to any particular
provision of the Regulations shall mean that provision of the Regulations on
the date hereof and any successor provision of the Regulations.

Regulatory
Allocations has the meaning set forth in Section 5.1(i)
hereof.

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

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

 6
 

operating or
administrative costs of the General Partner incurred in the ordinary course of
its business on behalf of or in connection with the Partnership.

REIT
Share means a share of common stock, par value $0.01 per
share, in the General Partner (or successor entity, as the case may be).

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

SEC
means the U.S. Securities and Exchange Commission.

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

Service
means the United States Internal Revenue Service.

Specified
Exchange Date means the first business day of the month that
is at least 60 business days after the receipt by the General Partner of the
Notice of Exchange.

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

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

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

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

Surviving
General Partner has the meaning set forth in Section 7.1(c)
hereof.

Transaction
has the meaning set forth in Section 7.1(b) hereof.

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

Value
means, with respect to REIT Shares, the average of the daily market price of
such REIT Share for the ten (10) consecutive trading days immediately preceding
the date of such 

 7
 

valuation. The market
price for each such trading day shall be: (i) if the REIT Shares are Listed,
the sale price, regular way, on such day, or if no such sale takes place on
such day, the average of the closing bid and asked prices, regular way, on such
day; (ii) if the REIT Shares are not listed, 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
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.

ARTICLE 2

PARTNERSHIP
FORMATION AND IDENTIFICATION

2.1           Formation. The
Partnership was formed as a limited partnership pursuant to the Act for the
purposes and upon the terms and conditions set forth in this Agreement.

2.2           Name, Office and
Registered Agent. The name of the Partnership is Cornerstone Growth and Income
Operating Partnership, L.P.. The specified office and place of business of the
Partnership shall be 1920 Main Street, Suite 400, Irvine, California 92614. The
General Partner may at any time change the location of such office, provided
the General Partner gives notice to the Partners of any such change. The name
and address of the Partnership’s registered agent is The Corporation Trust
Company, Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware
19801. The sole duty of the registered agent as such is to forward to the
Partnership any notice that is served on him as registered agent.

2.3           Partners.

(a)           The General Partner of
the Partnership is Cornerstone Growth and Income REIT, Inc., a Maryland
corporation. Its principal place of business is the same as that of the
Partnership.

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

 8
 

2.4           Term and Dissolution.

(a)           The Partnership shall
have perpetual duration, except that the Partnership shall be dissolved upon
the first to occur of any of the following events:

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

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

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

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

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

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

2.6           Certificates Describing
Partnership Units. At the request of a Limited Partner, the General Partner, at
its option, may issue a certificate summarizing the terms of such Limited
Partner’s interest in the Partnership, including the number of Partnership
Units owned and the Percentage Interest represented by such Partnership Units
as of the date of such certificate. Any 

 9
 

such certificate (i)
shall be in form and substance as approved by the General Partner, (ii) shall
not be negotiable and (iii) shall bear a legend to the following effect:

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

ARTICLE 3

BUSINESS
OF THE PARTNERSHIP

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

ARTICLE 4

CAPITAL
CONTRIBUTIONS AND ACCOUNTS

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

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

(a)           Issuances of Additional
Partnership Interests.

 10
 

(i)            General. The General
Partner is hereby authorized to cause the Partnership to issue such additional
Partnership Interests in the form of Partnership Units for any Partnership
purpose at any time or from time to time, to the Partners (including the
General Partner) or to other Persons for such consideration and on such terms
and conditions as shall be established by the General Partner in its sole and
absolute discretion, all without the approval of any Limited Partners. Any
additional Partnership Interests issued thereby may be issued in one or more
classes, or one or more series of any of such classes, with such designations,
preferences and relative, participating, optional or other special rights,
powers and duties, including rights, powers and duties senior to Limited
Partnership Interests, all as shall be determined by the General Partner in its
sole and absolute discretion and without the approval of any Limited Partner,
subject to Delaware law, including, without limitation, (i) the allocations of
items of Partnership income, gain, loss, deduction and credit to each such
class or series of Partnership Interests; (ii) the right of each such class or
series of Partnership Interests to share in Partnership distributions; and
(iii) the rights of each such class or series of Partnership Interests upon
dissolution and liquidation of the Partnership; provided, however, that no
additional Partnership Interests shall be issued to the General Partner unless:

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

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

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

In addition, the
General Partner may acquire Partnership Interests from other Partners pursuant
to this Agreement. In the event that the Partnership issues Partnership
Interests pursuant to this Section 4.2(a), the General Partner shall make such
revisions to this Agreement (without any requirement of receiving approval of
the Limited Partners) as it deems necessary to reflect the issuance of such
additional Partnership Interests and any special rights, powers, and duties
associated therewith.

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

 11
 

(ii)           Upon Issuance of
Additional Securities. The General Partner shall not issue any additional REIT
Shares (other than REIT Shares issued in connection with an exchange pursuant
to Section 8.5 hereof) or rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe for or purchase REIT
Shares (collectively, “Additional Securities” other than to all holders of REIT
Shares, unless (A) the General Partner shall cause the Partnership to issue to
the General Partner, as the General Partner may designate, Partnership
Interests or rights, options, warrants or convertible or exchangeable
securities of the Partnership having designations, preferences and other
rights, all such that the economic interests are substantially similar to those
of the Additional Securities, and (B) the General Partner contributes the net
proceeds from the issuance of such Additional Securities and from any exercise
of rights contained in such Additional Securities, directly and through the
General Partner, to the Partnership; provided, however, that the General
Partner is allowed to issue Additional Securities in connection with an
acquisition of a property to be held directly by the General Partner, but if
and only if, such direct acquisition and issuance of Additional Securities have
been approved and determined to be in the best interests of the General Partner
and the Partnership by a majority of the Independent Directors (as defined in
the General Partner’s Articles of Incorporation). Without limiting the
foregoing, the General Partner is expressly authorized to issue Additional
Securities for less than fair market value, and to cause the Partnership to
issue to the General Partner corresponding Partnership Interests, so long as
(x) the General Partner concludes in good faith that such issuance is in the
best interests of the General Partner and the Partnership, including without
limitation, the issuance of REIT Shares and corresponding Partnership Units
pursuant to an employee share purchase plan providing for employee purchases of
REIT Shares at a discount from fair market value or employee stock options that
have an exercise price that is less than the fair market value of the REIT
Shares, either at the time of issuance or at the time of exercise, and (y) the
General Partner contributes all proceeds from such issuance to the Partnership.
For example, in the event the General Partner issues REIT Shares for a cash
purchase price and contributes all of the proceeds of such issuance to the
Partnership as required hereunder, the General Partner shall be issued a number
of additional Partnership Units equal to the product of (A) the number of such
REIT Shares issued by the General Partner, the proceeds of which were so
contributed, multiplied by (B) a fraction, the numerator of which is 100%, and
the denominator of which is the Conversion Factor in effect on the date of such
contribution.

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

4.3           Additional Funding. If
the General Partner determines that it is in the best interests of the
Partnership to provide for additional Partnership funds (“Additional Funds”)
for 

 12
 

any Partnership purpose,
the General Partner may (i) cause the Partnership to obtain such funds from
outside borrowings, or (ii) elect to have the General Partner or any of its
Affiliates provide such Additional Funds to the Partnership through loans or
otherwise.

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

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

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

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

 13
 

4.8           No Third Party
Beneficiary. No creditor or other third party having dealings with the
Partnership shall have the right to enforce the right or obligation of any
Partner to make Capital Contributions or loans or to pursue any other right or
remedy hereunder or at law or in equity, it being understood and agreed that
the provisions of this Agreement shall be solely for the benefit of, and may be
enforced solely by, the parties hereto and their respective successors and
assigns. None of the rights or obligations of the Partners herein set forth to
make Capital Contributions or loans to the Partnership shall be deemed an asset
of the Partnership for any purpose by any creditor or other third party, nor
may such rights or obligations be sold, transferred or assigned by the
Partnership or pledged or encumbered by the Partnership to secure any debt or
other obligation of the Partnership or of any of the Partners. In addition, it
is the intent of the parties hereto that no distribution to any Limited Partner
shall be deemed a return of money or other property in violation of the Act.
However, if any court of competent jurisdiction holds that, notwithstanding the
provisions of this Agreement, any Limited Partner is obligated to return such
money or property, such obligation shall be the obligation of such Limited
Partner and not of the General Partner. Without limiting the generality of the
foregoing, a deficit Capital Account of a Partner shall not be deemed to be a
liability of such Partner nor an asset or property of the Partnership.

ARTICLE 5

PROFITS AND
LOSSES; DISTRIBUTIONS

5.1           Allocation of Profit
and Loss.

(a)           General. Profit and
Loss of the Partnership for each fiscal year or other applicable period of the
Partnership shall be allocated among the Partners in accordance with their
respective Percentage Interests.

(b)           Minimum Gain
Chargeback. Notwithstanding any provision to the contrary, (i) any expense of
the Partnership that is a “nonrecourse deduction” within the meaning of
Regulations Section 1.704-2(b)(1) shall be allocated in accordance with the
Partners’ respective Percentage Interests, (ii) any expense of the Partnership
that is a “partner nonrecourse deduction” within the meaning of Regulations
Section 1.704-2(i)(2) shall be allocated to the Partner that bears the “economic
risk of loss” of such deduction in accordance with Regulations Section
1.704-2(i)(1), (iii) if there is a net decrease in Partnership Minimum Gain
within the meaning of Regulations Section 1.704-2(f)(1) for any Partnership
taxable year, then, subject to the exceptions set forth in Regulations Section
1.704-2(f)(2),(3), (4) and (5), items of gain and income shall be allocated
among the Partners in accordance with Regulations Section 1.704-2(f) and the
ordering rules contained in Regulations Section 1.704-2(j), and (iv) if there
is a net decrease in Partner Nonrecourse Debt Minimum Gain within the meaning
of Regulations Section 1.704-2(i)(4) for any Partnership taxable year, then,
subject to the exceptions set forth in Regulations Section 1.704-(2)(g), items
of gain and income shall be allocated among the Partners in accordance with
Regulations Section 1.704-2(i)(4) and the ordering rules contained in
Regulations Section 1.704-2(j). A Partner’s “interest in partnership profits”
for purposes of determining its share of the nonrecourse liabilities of the
Partnership within the meaning of Regulations Section 1.752-3(a)(3) shall be
such Partner’s Percentage Interest.

 14
 

(c)           Qualified Income
Offset. If a Partner unexpectedly receives in any taxable year an adjustment,
allocation, or distribution described in subparagraphs (4), (5), or (6) of
Regulations Section 1.704-1(b)(2)(ii)(d) that causes or increases a deficit
balance in such Partner’s Capital Account that exceeds the sum of such Partner’s
shares of Partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain,
as determined in accordance with Regulations Sections 1.704-2(g) and
1.704-2(i), such Partner shall be allocated specially for such taxable year
(and, if necessary, later taxable years) items of income and gain in an amount
and manner sufficient to eliminate such deficit Capital Account balance as
quickly as possible as provided in Regulations Section 1.704-1(b)(2)(ii)(d).
This Section 5.1(c) is intended to constitute a “qualified income offset” under
Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted
consistently therewith. After the occurrence of an allocation of income or gain
to a Partner in accordance with this Section 5.1(c), to the extent permitted by
Regulations Section 1.704-1(b), items of expense or loss shall be allocated to
such Partner in an amount necessary to offset the income or gain previously
allocated to such Partner under this Section 5.1(c).

(d)           Capital Account
Deficits. Loss shall not be allocated to a Limited Partner to the extent that
such allocation would cause or increase a deficit in such Partner’s Capital
Account at the end of any fiscal year (after reduction to reflect the items
described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6)) to
exceed the sum of such Partner’s shares of Partnership Minimum Gain and Partner
Nonrecourse Debt Minimum Gain, as determined in accordance with Regulations
Sections 1.704-2(g) and 1.704-2(i).  Any
Loss in excess of that limitation shall be allocated to the General
Partner.  After the occurrence of an
allocation of Loss to the General Partner in accordance with this Section
5.1(d), to the extent permitted by Regulations Section 1.704-1(b), Profit shall
be allocated to such Partner in an amount necessary to offset the Loss previously
allocated to each Partner under this Section 5.1(d).

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

(f)            Definition of Profit
and Loss. “Profit” and “Loss” and any items of income, gain, expense, or loss
referred to in this Agreement shall be determined in accordance with federal
income tax accounting principles, as modified by Regulations Section
1.704-1(b)(2)(iv), except that Profit and Loss shall not include items of
income, gain and expense that are specially allocated pursuant to Sections
5.1(b), 5.1(c) or 5.1(d). All allocations of income, Profit, gain, Loss and
expense (and all items contained therein) for federal income tax purposes shall
be identical to all allocations of such items set forth in this Section 5.1,
except as otherwise required by Section 704(c) of the Code and Regulations
Section 1.704-1(b)(4). The General 

 15
 

Partner shall have the
authority to elect the method to be used by the Partnership for allocating
items of income, gain, and expense as required by Section 704(c) of the Code
including a method that may result in a Partner receiving a disproportionately
larger share of the Partnership tax depreciation deductions, and such election
shall be binding on all Partners.

(g)           Curative Allocations.
The allocations set forth in Section 5.1(c), (d) and (e) of this Agreement (the
“Regulatory Allocations”) are intended to comply with certain requirements of
the Regulations. The General Partner is authorized to offset all Regulatory
Allocations either with other Regulatory Allocations or with special
allocations of other items of Partnership income, gain, loss or deduction
pursuant to this Section 5.1(g). Therefore, notwithstanding any other provision
of this Section 5.1 (other than the Regulatory Allocations), the General
Partner shall make such offsetting special allocations of Partnership income,
gain, loss or deduction in whatever manner it deems appropriate so that, after
such offsetting allocations are made, each Partner’s Capital Account is, to the
extent possible, equal to the Capital Account balance such Partner would have
had if the Regulatory Allocations were not part of this Agreement and all
Partnership items were allocated pursuant to Section 5.1(a) and (e).

5.2           Distribution of Cash.

(a)           The Partnership shall
distribute cash on a quarterly (or, at the election of the General Partner,
more frequent) basis, in an amount determined by the General Partner in its
sole and absolute discretion, to the Partners who are Partners on the
Partnership Record Date with respect to such quarter (or other distribution
period) in accordance with their respective Percentage Interests on the
Partnership Record Date; provided, however, that if a new or existing Partner
acquires an additional Partnership Interest in exchange for a Capital
Contribution on any date other than the next day after a Partnership Record
Date, the cash distribution attributable to such additional Partnership
Interest relating to the Partnership Record Date next following the issuance of
such additional Partnership Interest (or relating to the Partnership Record
Date if such Partnership Interest was acquired on a Partnership Record Date)
shall be reduced in the proportion to (i) the number of days that such
additional Partnership Interest is held by such Partner bears to (ii) the
number of days between such Partnership Record Date (including such Partnership
Record Date) and the immediately preceding Partnership Record Date.

(b)           Notwithstanding any
other provision of this Agreement, the General Partner is authorized to take
any action that it determines to be necessary or appropriate to cause the
Partnership to comply with any withholding requirements established under the
Code or any other federal, state or local law including, without limitation,
pursuant to Sections 1441, 1442, 1445 and 1446 of the Code. To the extent that
the Partnership is required to withhold and pay over to any taxing authority
any amount resulting from the allocation or distribution of income to any Partner
or assignee (including by reason of Section 1446 of the Code), either (i) if
the actual amount to be distributed to the Partner equals or exceeds the amount
required to be withheld by the Partnership, the amount withheld shall be
treated as a distribution of cash in the amount of such withholding to such
Partner, or (ii) if the actual amount to be distributed to the Partner is less
than the amount required to be withheld by the Partnership, the amount required
to be withheld shall be treated as a loan (a “Partnership Loan”) from the
Partnership to the Partner on 

 16
 

the day the Partnership
pays over such amount to a taxing authority. A Partnership Loan shall be repaid
through withholding by the Partnership with respect to subsequent distributions
to the applicable Partner or assignee. In the event that a Limited Partner (a “Defaulting
Limited Partner”) fails to pay any amount owed to the Partnership with respect
to the Partnership Loan within 15 days after demand for payment thereof is made
by the Partnership on the Limited Partner, the General Partner, in its sole and
absolute discretion, may elect to make the payment to the Partnership on behalf
of such Defaulting Limited Partner. In such event, on the date of payment, the
General Partner shall be deemed to have extended a loan (a “General Partner
Loan”) to the Defaulting Limited Partner in the amount of the payment made by
the General Partner and shall succeed to all rights and remedies of the
Partnership against the Defaulting Limited Partner as to that amount. Without
limitation, the General Partner shall have the right to receive any
distributions that otherwise would be made by the Partnership to the Defaulting
Limited Partner until such time as the General Partner Loan has been paid in
full, and any such distributions so received by the General Partner shall be
treated as having been received by the Defaulting Limited Partner and
immediately paid to the General Partner.

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

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

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

5.4           No Right to
Distributions In Kind. No Partner shall be entitled to demand property other
than cash in connection with any distributions by the Partnership.

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

5.6           Distributions Upon
Liquidation. Upon liquidation of the Partnership, after payment of, or adequate
provision for, debts and obligations of the Partnership, including any Partner
loans, any remaining assets of the Partnership shall be distributed to all
Partners with 

 17
 

positive Capital Accounts
in accordance with their respective positive Capital Account balances. For
purposes of the preceding sentence, the Capital Account of each Partner shall
be determined after all adjustments have been made in accordance with Sections
4.4, 5.1 and 5.2 resulting from Partnership operations and from all sales and
dispositions of all or any part of the Partnership’s assets.. To the extent
deemed advisable by the General Partner, appropriate arrangements (including
the use of a liquidating trust) may be made to assure that adequate funds are
available to pay any contingent debts or obligations.

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

ARTICLE 6

RIGHTS, OBLIGATIONS AND

POWERS OF
THE GENERAL PARTNER

6.1           Management of the
Partnership.

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

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

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

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

(iv)          to borrow or lend money
for the Partnership, issue or receive evidences of indebtedness in connection
therewith, refinance, increase the amount of, modify, amend or change the terms
of, or extend the time for the payment of, any such indebtedness, and 

 18
 

secure such indebtedness
by mortgage, deed of trust, pledge or other lien on the Partnership’s assets;

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

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

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

(viii)        to lease all or any
portion of any of the Partnership’s assets, whether or not the terms of such
leases extend beyond the termination date of the Partnership and whether or not
any portion of the Partnership’s assets so leased are to be occupied by the
lessee, or, in turn, subleased in whole or in part to others, for such
consideration and on such terms as the General Partner may determine;

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

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

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

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

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

 19
 

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

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

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

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

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

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

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

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

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

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

 (b)          Except as otherwise provided herein, to the
extent the duties of the General Partner require expenditures of funds to be
paid to third parties, the General Partner shall 

 20
 

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

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

6.3           Indemnification and
Exculpation of Indemnitees.

(a)           The Partnership shall
indemnify an Indemnitee from and against any and all losses, claims, damages,
liabilities, joint or several, expenses (including reasonable legal fees and
expenses), judgments, fines, settlements, and other amounts arising from any
and all claims, demands, actions, suits or proceedings, civil, criminal,
administrative or investigative, that relate to the operations of the
Partnership as set forth in this Agreement in which any Indemnitee may be
involved, or is threatened to be involved, as a party or otherwise.

Notwithstanding
the foregoing, the Partnership shall not provide for indemnification for an
Indemnitee for any liability or loss suffered by any of them in contravention
of Delaware law and unless all of the following conditions are met:

(i)            The Indemnitee
determined, in good faith, that the course of conduct that caused the loss or
liability was in the best interests of the Partnership.

(ii)           The Indemnitee was
acting on behalf of or performing services for the Partnership.

(iii)          Such liability or loss
was not the result of:

(A)          negligence or misconduct
by the Indemnitee (excluding the Independent Directors); or

(B)           gross negligence or
willful misconduct by the Independent Directors.

Any
indemnification pursuant to this Section 6.3 shall be made only out of the
assets of the Partnership.

(b)           Notwithstanding the
foregoing, the Partnership shall not indemnify an Indemnitee or any Person
acting as a broker-dealer for any loss, liability or expense arising from or
out of an alleged violation of federal or state securities laws by such party
unless one or more of the following conditions are met: (i) there has been a
successful adjudication on the merits of 

 21
 

each count involving
alleged material securities law violations as to the particular Indemnitee;
(ii) such claims have been dismissed with prejudice on the merits by a court of
competent jurisdiction as to the particular Indemnitee; or (iii) a court of
competent jurisdiction approves a settlement of the claims against a particular
Indemnitee and finds that indemnification of the settlement and the related
costs should be made, and the court considering the request for indemnification
has been advised of the position of the Securities and Exchange Commission and
of the published position of any state securities regulatory authority in which
securities were offered or sold as to indemnification for violations of
securities laws.

(c)           The Partnership shall
pay or reimburse reasonable legal expenses and other costs incurred by the
Indemnitee in advance of the final disposition of a proceeding only if (in
addition to the procedures required by the Act) all of the following are
satisfied: (a) the proceeding relates to acts or omissions with respect to the
performance of duties or services on behalf of the Partnership, (b) the legal
proceeding was initiated by a third party who is not a Limited Partner or, if
by a Limited Partner acting in his or her capacity as such, a court of
competent jurisdiction approves such advancement and (c) the Indemnitee
undertakes to repay the amount paid or reimbursed by the Partnership, together
with the applicable legal rate of interest thereon, if it is ultimately
determined that the Indemnitee is not entitled to indemnification.

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

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

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

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

(h)           An Indemnitee shall not
be denied indemnification in whole or in part under this Section 6.3 because
the Indemnitee had an interest in the transaction with respect to

 22

which the
indemnification applies if the transaction was otherwise permitted by the terms
of this Agreement.

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

(j)            Neither the amendment
nor repeal of this Section 6.3, nor the adoption or amendment of any other
provision of the Agreement inconsistent with Section 6.3, shall apply to or
affect in any respect the applicability with respect to any act or failure to
act which occurred prior to such amendment, repeal or adoption.

6.4           Liability of the
General Partner.

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

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

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

(d)           Notwithstanding any
other provisions of this Agreement or the Act, any action of the General
Partner on behalf of the Partnership or any decision of the General Partner

 23
 

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

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

6.5           Reimbursement of
General Partner.

(a)           Except as provided in
this Section 6.5 and elsewhere in this Agreement (including the provisions of
Articles 5 and 6 regarding distributions, payments, and allocations to which it
may be entitled), the General Partner shall not be compensated for its services
as general partner of the Partnership.

(b)           The General Partner
shall be reimbursed on a monthly basis, or such other basis as the General
Partner may determine in its sole and absolute discretion, for all
Administrative Expenses.

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

6.7           Employment or Retention
of Affiliates.

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

 24
 

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

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

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

6.8           General Partner
Participation. The General Partner agrees that all business activities of the
General Partner, including activities pertaining to the acquisition,
development or ownership of office or industrial property or other property,
shall be conducted through the Partnership or one or more Subsidiary
Partnerships; provided, however, that the General Partner is allowed to make a
direct acquisition, but if and only if, such acquisition is made in connection
with the issuance of Additional Securities, which direct acquisition and
issuance have been approved and determined to be in the best interests of the
General Partner and the Partnership by a majority of the Independent Directors.

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

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

 25
 

cause the Partnership to
make a corresponding offer to the General Partner to acquire an equal number of
Partnership Units held by the General Partner. In the event any REIT Shares are
exchanged by the General Partner pursuant to such offer, the Partnership shall
redeem an equivalent number of the General Partner’s Partnership Units for an
equivalent purchase price based on the application of the Conversion Factor.

ARTICLE 7

CHANGES
IN GENERAL PARTNER

7.1           Transfer of the General
Partner’s Partnership Interest.

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

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

(i)            the approval of the
holders of a majority of the Partnership Units (including the Partnership Units
held by the General Partner or an Affiliate thereof) is obtained;

(ii)           as a result of such
Transaction all Limited Partners will receive for each Partnership Unit an
amount of cash, securities, or other property equal to the product of the
Conversion Factor and the greatest amount of cash, securities or other property
paid in the Transaction to a holder of one REIT Share in consideration of one
REIT Share, provided that if, in connection with the Transaction, a purchase,
tender or exchange offer (“Offer”) shall have been made to and accepted by the
holders of more than 50% of the outstanding REIT Shares, each holder of
Partnership Units shall be given the option to exchange its Partnership Units
for the greatest amount of cash, securities, or other property which a Limited
Partner would have received had it (A) exercised its Exchange Right and (B)
sold, tendered or exchanged pursuant to the Offer the REIT Shares received upon
exercise of the Exchange Right immediately prior to the expiration of the
Offer; or

(iii)          the General Partner is
the surviving entity in the Transaction and either (A) the holders of REIT
Shares do not receive cash, securities, or other property in the Transaction or
(B) all Limited Partners (other than the General Partner or any Subsidiary)
receive an amount of cash, securities, or other property (expressed as an
amount per REIT Share) that is no less than the product of the Conversion
Factor and the greatest amount of cash, securities, or other property
(expressed as an amount per REIT Share) received in the Transaction by any
holder of REIT Shares.

 26
 

(c)           Notwithstanding Section
7.1(b), the General Partner may merge with or into or consolidate with another
entity if immediately after such merger or consolidation (i) substantially all
of the assets of the successor or surviving entity (the “Surviving General
Partner”), other than Partnership Units held by the General Partner, are
contributed, directly or indirectly, to the Partnership as a Capital
Contribution in exchange for Partnership Units with a fair market value equal
to the value of the assets so contributed as determined by the Surviving
General Partner in good faith and (ii) the Surviving General Partner expressly agrees
to assume all obligations of the General Partner, as appropriate, hereunder.
Upon such contribution and assumption, the Surviving General Partner shall have
the right and duty to amend this Agreement as set forth in this Section 7.1(c).
The Surviving General Partner shall in good faith arrive at a new method for
the calculation of the Cash Amount, the REIT Shares Amount and Conversion
Factor for a Partnership Unit after any such merger or consolidation so as to
approximate the existing method for such calculation as closely as reasonably
possible. Such calculation shall take into account, among other things, the
kind and amount of securities, cash and other property that was receivable upon
such merger or consolidation by a holder of REIT Shares or options, warrants or
other rights relating thereto, and to which a holder of Partnership Units could
have acquired had such Partnership Units been exchanged immediately prior to
such merger or consolidation. Such amendment to this Agreement shall provide for
adjustment to such method of calculation, which shall be as nearly equivalent
as may be practicable to the adjustments provided for with respect to the
Conversion Factor. The Surviving General Partner also shall in good faith
modify the definition of REIT Shares and make such amendments to Sections 8.5
and 8.7 hereof so as to approximate the existing rights and obligations set
forth in Sections 8.5 and 8.7 as closely as reasonably possible. The above
provisions of this Section 7.1(c) shall similarly apply to successive mergers
or consolidations permitted hereunder.

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

(d)           Notwithstanding Section
7.1(b),

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

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

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

 27
 

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

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

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

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

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

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

 28
 

Partners and of any
Person who has acquired an interest of a Partner in the Partnership shall be
governed by this Agreement.

7.4           Removal of a General
Partner.

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

(b)           If a General Partner
has been removed pursuant to this Section 7.4 and the Partnership is continued
pursuant to Section 7.3 hereof, such General Partner shall promptly transfer
and assign its General Partnership Interest in the Partnership to the
substitute General Partner approved by a majority in interest of the Limited
Partners in accordance with Section 7.3(b) hereof and otherwise admitted to the
Partnership in accordance with Section 7.2 hereof. At the time of assignment,
the removed General Partner shall be entitled to receive from the substitute
General Partner the fair market value of the General Partnership Interest of
such removed General Partner as reduced by any damages caused to the
Partnership by such General Partner. Such fair market value shall be determined
by an appraiser mutually agreed upon by the General Partner and a majority in
interest of the Limited Partners within 10 days following the removal of the
General Partner. In the event that the parties are unable to agree upon an
appraiser, the removed General Partner and a majority in interest of the
Limited Partners each shall select an appraiser. Each such appraiser shall
complete an appraisal of the fair market value of the removed General Partner’s
General Partnership Interest within 30 days of the General Partner’s removal,
and the fair market value of the removed General Partner’s General Partnership
Interest shall be the average of the two appraisals; provided, however, that if
the higher appraisal exceeds the lower appraisal by more than 20% of the amount
of the lower appraisal, the two appraisers, no later than 40 days after the
removal of the General Partner, shall select a third appraiser who shall
complete an appraisal of the fair market value of the removed General Partner’s
General Partnership Interest no later than 60 days after the removal of the
General Partner. In such case, the fair market value of the removed General
Partner’s General Partnership Interest shall be the average of the two
appraisals closest in value.

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

 29
 

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

ARTICLE 8

RIGHTS
AND OBLIGATIONS OF THE LIMITED PARTNERS

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

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

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

8.4           [reserved]

8.5           Exchange Right.

(a)           Subject to Sections
8.5(b), 8.5(c), 8.5(d), 8.5(e) and 8.5(f) and the provisions of any agreements
between the Partnership and one or more Limited Partners with respect to
Partnership Units held by them, each Limited Partner shall have the right (the “Exchange
Right”) to require the Partnership to redeem on a Specified Exchange Date all
or a portion of the Partnership Units held by such Limited Partner at an
exchange price equal to and in the form of the Cash Amount to be paid by the
Partnership, provided that such Partnership Units shall have been outstanding
for at least one year. The Exchange Right shall be exercised pursuant to a
Notice of Exchange delivered to the Partnership (with a copy to the General
Partner) by the Limited Partner who is exercising the Exchange Right (the “Exchanging
Partner”); provided, however, that the Partnership shall not be obligated to
satisfy such Exchange Right if the General Partner elects to purchase the
Partnership Units subject to the Notice of Exchange pursuant to Section 8.5(b);
and provided, further, that no Limited Partner may deliver more than two Notices
of Exchange during each calendar year. A Limited Partner may not exercise the
Exchange Right for less than 1,000 Partnership Units or, if such Limited
Partner

 30
 

holds less than 1,000
Partnership Units, all of the Partnership Units held by such Partner. The
Exchanging Partner shall have no right, with respect to any Partnership Units
so exchanged, to receive any distribution paid with respect to Partnership
Units if the record date for such distribution is on or after the Specified
Exchange Date.

(b)           Notwithstanding the
provisions of Section 8.5(a), a Limited Partner that exercises the Exchange
Right shall be deemed to have offered to sell the Partnership Units described
in the Notice of Exchange to the General Partner, and the General Partner may,
in its sole and absolute discretion, elect to purchase directly and acquire
such Partnership Units by paying to the Exchanging Partner either the Cash
Amount or the REIT Shares Amount, as elected by the General Partner (in its
sole and absolute discretion), on the Specified Exchange Date, whereupon the
General Partner shall acquire the Partnership Units offered for exchange by the
Exchanging Partner and shall be treated for all purposes of this Agreement as
the owner of such Partnership Units. If the General Partner shall elect to
exercise its right to purchase Partnership Units under this Section 8.5(b) with
respect to a Notice of Exchange, it shall so notify the Exchanging Partner
within five Business Days after the receipt by the General Partner of such
Notice of Exchange. Unless the General Partner (in its sole and absolute
discretion) shall exercise its right to purchase Partnership Units from the
Exchanging Partner pursuant to this Section 8.5(b), the General Partner shall
have no obligation to the Exchanging Partner or the Partnership with respect to
the Exchanging Partner’s exercise of the Exchange Right. In the event the
General Partner shall exercise its right to purchase Partnership Units with
respect to the exercise of a Exchange Right in the manner described in the
first sentence of this Section 8.5(b), the Partnership shall have no obligation
to pay any amount to the Exchanging Partner with respect to such Exchanging
Partner’s exercise of such Exchange Right, and each of the Exchanging Partner,
the Partnership, and the General Partner, as the case may be, shall treat the
transaction between the General Partner, as the case may be, and the Exchanging
Partner for federal income tax purposes as a sale of the Exchanging Partner’s
Partnership Units to the General Partner, as the case may be. Each Exchanging
Partner agrees to execute such documents as the General Partner may reasonably
require in connection with the issuance of REIT Shares upon exercise of the
Exchange Right.

(c)           Notwithstanding the
provisions of Section 8.5(a) and 8.5(b), a Limited Partner shall not be
entitled to exercise the Exchange Right if the delivery of REIT Shares to such
Partner on the Specified Exchange Date by the General Partner pursuant to
Section 8.5(b) (regardless of whether or not the General Partner would in fact
exercise its rights under Section 8.5(b)) would (i) result in such Partner or
any other person owning, directly or indirectly, REIT Shares in excess of the
Ownership Limit (as defined in the Articles of Incorporation and calculated in
accordance therewith), except as provided in the Articles of Incorporation,
(ii) result in REIT Shares being owned by fewer than 100 persons (determined
without reference to any rules of attribution), except as provided in the
Articles of Incorporation, (iii) result in the General Partner being “closely
held” within the meaning of Section 856(h) of the Code, or (iv) cause the
General Partner to own, directly or constructively, 10% or more of the
ownership interests in a tenant within the meaning of Section 856(d)(2)(B) of
the Code. The General Partner, in its sole and absolute discretion, may waive
the restriction on exchange set forth in this Section 8.5(c).

 31
 

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

(e)           Notwithstanding any
other provision of this Agreement, the General Partner shall place appropriate
restrictions on the ability of the Limited Partners to exercise their Exchange
Rights as and if deemed necessary to ensure that the Partnership does not
constitute a “publicly traded partnership” under section 7704 of the Code. If
and when the General Partner determines that imposing such restrictions is
necessary, the General Partner shall give prompt written notice thereof (a “Restriction
Notice”) to each of the Limited Partners, which notice shall be accompanied by
a copy of an opinion of counsel to the Partnership which states that, in the
opinion of such counsel, restrictions are necessary in order to avoid the
Partnership being treated as a “publicly traded partnership” under section 7704
of the Code.

(f)            Notwithstanding
anything else in this Agreement to the contrary, Cornerstone Leveraged Realty
Advisors, LLC is prohibited from exchanging the Partnership Units purchased by
it on November 9, 2006 for $200,000 cash at any time prior to November 9, 2008
and the General Partner hereby agrees that it will not permit the amendment of
this Agreement to permit the exchange of the Partnership Units owned by
Cornerstone Leveraged Realty Advisors, LLC prior to November 9, 2008.

ARTICLE 9

TRANSFERS
OF LIMITED PARTNERSHIP INTERESTS

9.1           Purchase for
Investment.

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

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

 32
 

9.2           Restrictions on
Transfer of Limited Partnership Interests.

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

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

(c)           Subject to 9.2(d), (e)
and (f) below, a Limited Partner may Transfer, with the consent of the General
Partner, all or a portion of its Partnership Units to (i) a parent or parent’s
spouse, natural or adopted descendant or descendants, spouse of such
descendant, or brother or sister, or a trust created by such Limited Partner
for the benefit of such Limited Partner and/or any such person(s), of which
trust such Limited Partner or any such person(s) is a trustee, (ii) a
corporation controlled by a Person or Persons named in (i) above, or (iii) if
the Limited Partner is an entity, its beneficial owners.

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

(e)           No Transfer by a
Limited Partner of its Partnership Units, in whole or in part, may be made to
any Person if (i) in the opinion of legal counsel for the Partnership, the
transfer would result in the Partnership’s being treated as an association
taxable as a corporation (other than a qualified REIT subsidiary within the
meaning of Section 856(i) of the Code), (ii) in the opinion of legal counsel
for the Partnership, it would adversely affect the ability of the General
Partner to continue to qualify as a REIT or subject the General Partner to any
additional taxes under Section 857 or Section 4981 of the Code, or (iii) such
transfer is effectuated through an “established securities market” or a “secondary
market (or the substantial equivalent thereof)” within the meaning of Section
7704 of the Code.

(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 Regulations Section 1.752-4(b)) to any lender
to the Partnership whose loan constitutes a nonrecourse liability (within the
meaning of Regulations Section 1.752-1(a)(2)), without the consent of the
General Partner, which may be withheld in its sole and absolute discretion,
provided that as a condition to such consent the lender will be required to
enter into an arrangement with the Partnership and the

 33
 

General Partner to
exchange or redeem for the Cash Amount any Partnership Units in which a
security interest is held simultaneously with the time at which such lender
would be deemed to be a partner in the Partnership for purposes of allocating
liabilities to such lender under Section 752 of the Code.

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

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

9.3           Admission of Substitute
Limited Partner.

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

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

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

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

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

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

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

 34
 

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

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

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

9.4           Rights of Assignees of
Partnership Interests.

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

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

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

9.6           Joint Ownership of
Interests. A Partnership Interest may be acquired by two individuals as joint
tenants with right of survivorship, provided that such individuals either are
married or are related and share the same home as tenants in common. The
written consent or vote of both owners of any such jointly held Partnership
Interest shall be required to constitute

 35
 

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

9.7           Redemption of
Partnership Units. The General Partner will cause the Partnership to redeem
Partnership Units, to the extent it shall have legally available funds
therefor, at any time the General Partner redeems shares of beneficial interest
in itself. The number and class or series of Partnership Units redeemed and the
redemption price shall equal the number (multiplied by the Conversion Factor)
of shares of beneficial interest the General Partner redeems and the redemption
price at which the General Partner redeems such shares, respectively.

ARTICLE 10

BOOKS AND
RECORDS; ACCOUNTING; TAX MATTERS

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

 36
 

10.2         Custody of Partnership
Funds; Bank Accounts.

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

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

10.3         Fiscal and Taxable Year.
The fiscal and taxable year of the Partnership shall be the calendar year.

10.4         Annual Tax Information
and Report. Within 75 days after the end of each fiscal year of the
Partnership, the General Partner shall furnish to each person who was a Limited
Partner at any time during such year the tax information necessary to file such
Limited Partner’s individual tax returns as shall be reasonably required by
law.

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

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

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

 37
 

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

10.6         Reports Made Available to
Limited Partners.

(a)           As soon as practicable
after the close of each fiscal quarter (other than the last quarter of the
fiscal year), upon written request by a Limited Partner to the General Partner,
the General Partner will make available, without cost, to each Limited Partner
a quarterly report containing financial statements of the Partnership, or of
the General Partner if such statements are prepared solely on a consolidated
basis with the General Partner, for such fiscal quarter, presented in
accordance with generally accepted accounting principles. As soon as
practicable after the close of each fiscal year, upon written request by a
Limited Partner to the General Partner, the General Partner will make
available, without cost, to each Limited Partner an annual report containing
financial statements of the Partnership, or of the General Partner if such
statements are prepared solely on a consolidated basis with the General
Partner, for such fiscal year, presented in accordance with generally accepted
accounting principles.

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

ARTICLE 11

AMENDMENT
OF AGREEMENT; MERGER

The General Partner’s
consent shall be required for any amendment to this Agreement. The General
Partner, without the consent of the Limited Partners, may amend this Agreement
in any respect or merge or consolidate the Partnership with or into any other
partnership or business entity (as defined in Section 17-211 of the Act) in a
transaction pursuant to Section 7.1(b), (c) or (d) hereof; provided, however,
that the following amendments and any other merger or consolidation of the
Partnership shall require the consent of the holders of a majority of the
Partnership Units (excluding the Partnership Units held by the General Partner
or an Affiliate thereof):

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

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

 38
 

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

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

ARTICLE 12

GENERAL
PROVISIONS

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

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

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

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

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

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

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

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

 39
 

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

 40
 

IN WITNESS
WHEREOF, the parties hereto have hereunder affixed their signatures to this
Agreement of Limited Partnership, all as of the     th day
of          , 2007.

	
   

  	
   

  	
  GENERAL PARTNER:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  CORNERSTONE
  GROWTH AND INCOME 

  
	
   

  	
   

  	
  REIT, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Terry G.
  Roussel, President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  LIMITED
  PARTNER(S):

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  CORNERSTONE
  LEVERAGED REALTY 

  
	
   

  	
   

  	
  ADVISORS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: CIP
  LEVERAGED FUND ADVISORS, LLC

  
	
   

  	
   

  	
  its managing member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: CORNERSTONE
  VENTURES, INC.

  
	
   

  	
   

  	
  its managing member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Terry G.
  Roussel, President

  

 

 41
 

EXHIBIT A

	
  Percentage Partner Interest

  	
   

  	
  Cash 

  Contribution

  	
   

  	
  Agreed Value of 

  Capital 

  Contribution

  	
   

  	
  Partnership Units

  	
   

  
	
  GENERAL
  PARTNER: 

  Cornerstone
  Growth and 

  Income REIT,
  Inc. 

  1920 Main
  Street, Suite 400 

  Irvine,
  California 92614

  	
   

  	
  $

  	
  1,000

  	
   

  	
  $

  	
  1,000

  	
   

  	
  100

  	
   

  
	
  ORIGINAL
  LIMITED 

  PARTNER:
  

  Cornerstone
  Leveraged Realty 

  Advisors, LLC 

  1920 Main
  Street, Suite 400 

  Irvine,
  California 92614

  	
   

  	
  $

  	
  200,000

  	
   

  	
  $

  	
  200,000

  	
   

  	
  20,000

  	
   

  
	
  Totals

  	
   

  	
  $

  	
  201,000

  	
   

  	
  $

  	
  201,000

  	
   

  	
  20,100

  	
   

  

 

 42
 

EXHIBIT B

NOTICE OF
EXERCISE OF EXCHANGE RIGHT

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

	
   

  	
   

  	
  Dated: 

  	
   

  	
  ,

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Name of Limited
  Partner)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Signature of
  Limited Partner)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Mailing
  Address)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (City)  (State)
  (Zip Code)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature
  Guaranteed by:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  If REIT Shares
  are to be issued, issue to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Social Security
  or Tax I.D. Number:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
										

 

 43
 

EXHIBIT C

INDEMNIFICATION
GUIDELINE

1. The REIT shall
not provide for indemnification of the TRUSTEES, ADVISORS or AFFILIATES for any
liability or loss suffered by the TRUSTEES, ADVISORS or AFFILIATES, nor shall
it provide that the TRUSTEES, ADVISORS or AFFILIATES be held harmless for any
loss or liability suffered by the REIT, unless all of the following conditions
are met:

(a)           The TRUSTEES, ADVISORS
or AFFILIATES have determined, in good faith, that the course of conduct which
caused the loss or liability was in the best interests of the REIT.

(b)           The TRUSTEES, ADVISORS
or AFFILIATES were acting on behalf of or performing services for the REIT.

(c)           Such liability or loss
was not the result of:

(i)            negligence or
misconduct by the TRUSTEES, excluding the INDEPENDENT TRUSTEES, ADVISORS or
AFFILIATES; OR

(ii)           gross negligence or
willful misconduct by the INDEPENDENT TRUSTEES.

(d)           Such indemnification or
agreement to hold harmless is recoverable only out of REIT net assets and not
from SHAREHOLDERS.

2.             Notwithstanding
anything to the contrary contained in Section II.G.1, the TRUSTEES, ADVISORS or
AFFILIATES and any persons acting as a broker-dealer shall not be indemnified
by the REIT for any losses, liabilities or expenses arising from or out of an
alleged violation of federal or state securities laws by such party unless one
or more of the following conditions are met:

(a)           There has been a
successful adjudication on the merits of each count involving alleged
securities law violations as to the particular indemnitee.

(b)           Such claims have been
dismissed with prejudice on the merits by a court of competent jurisdiction as
to the particular Indemnitee.

(c)           A court of competent
jurisdiction approves a settlement of the claims against a particular
indemnitee and finds that indemnification of the settlement and the related
costs should be made, and the court considering the request for indemnification
has been advised of the position of the Securities and Exchange SEC and of the published
position of any state

 44
 

securities regulatory
authority in which securities of the REIT were offered or sold as to
indemnification for violations of securities laws.

3.             The advancement of
REIT funds to the TRUSTEES, ADVISORS or AFFILIATES for legal expenses and other
costs incurred as a result of any legal action for which indemnification is
being sought is permissible only if all of the following conditions are
satisfied:

(a)           The legal action
relates to acts or omissions with respect to the performance of duties or
services on behalf of the REIT.

(b)           The legal action is
initiated by a third party who is not a SHAREHOLDER or the legal action is
initiated by a SHAREHOLDER acting in his or her capacity as such and a court of
competent jurisdiction specifically approves such advancement.

(c)           The TRUSTEES, ADVISORS
and AFFILIATES undertake to repay the advanced funds to the REIT, together with
the applicable legal rate of interest thereon, in cases in which such TRUSTEES,
ADVISORS or AFFILIATES are found not to be entitled to indemnification.

 45CC Filed by Filing Services Canada Inc. 403-717-3898

MAG SILVER CORP.

STOCK OPTION PLAN (2007)

Effective Date: March 30, 2007

Approved by the Board of

Directors on March 30, 2007.

Approved by the

Shareholders on May 8, 2007.

TABLE OF CONTENTS

Page

SECTION 1 DEFINITIONS AND INTERPRETATION

2

1.1

Definitions

2

1.2

Choice of Law

2

1.3

Headings

2

SECTION 2 GRANT OF OPTIONS

2

2.1

Grant of Options

2

2.2

Record of Option Grants

2

2.3

Effect of Plan

2

SECTION 3 PURPOSE AND PARTICIPATION

2

3.1

Purpose of Plan

2

3.2

Participation in Plan

2

3.3

TSX-VN Limits on Option Grants

2

3.4

Additional Limits on Option Grants

2

3.5

Notification of Grant

2

3.6

Copy of Plan

2

3.7

Limitation on Service

2

3.8

No Obligation to Exercise

2

3.9

Agreement

2

3.10

Notice

2

3.11

Representation to TSX-VN

2

SECTION 4 NUMBER OF SHARES UNDER PLAN

2

4.1

Board to Approve Issuance of Shares

2

4.2

Number of Shares

2

4.3

Fractional Shares

2

SECTION 5 TERMS AND CONDITIONS OF OPTIONS

2

5.1

Exercise Period of Option

2

5.2

Number of Shares Under Option

2

5.3

Exercise Price of Option

2

5.4

Termination of Option

2

5.5

Vesting of Option and Acceleration

2

5.6

Additional Terms

2

SECTION 6 TRANSFERABILITY OF OPTIONS

2

6.1

Non-transferable

2

6.2

Death of Option Holder

2

6.3

Disability of Option Holder

2

6.4

Disability and Death of Option Holder

2

6.5

Vesting

2

6.6

Deemed Non-Interruption of Engagement

2

SECTION 7 EXERCISE OF OPTION

2

7.1

Exercise of Option

2

7.2

Issue of Share Certificates

2

7.3

No Rights as Shareholder

2

SECTION 8 ADMINISTRATION

2

8.1

Board or Committee

2

8.2

Appointment of Committee

2

- ii -

8.3

Quorum and Voting

2

8.4

Powers of Committee

2

8.5

Administration by Committee

2

8.6

Interpretation

2

SECTION 9 APPROVALS AND AMENDMENT

2

9.1

Shareholder Approval of Plan

2

9.2

Amendment of Option or Plan

2

SECTION 10 CONDITIONS PRECEDENT TO ISSUANCE OF OPTIONS AND SHARES

2

10.1

Compliance with Laws

2

10.2

Obligation to Obtain Regulatory Approvals

2

10.3

Inability to Obtain Regulatory Approvals

2

SECTION 11 ADJUSTMENTS AND TERMINATION

2

11.1

Termination of Plan

2

11.2

No Grant During Suspension of Plan

2

11.3

Alteration in Capital Structure

2

11.4

Triggering Events

2

11.5

Notice of Termination by Triggering Event

2

11.6

Determinations to be Made By Committee

2

STOCK OPTION PLAN

SECTION 1 

DEFINITIONS AND INTERPRETATION

1.1

Definitions

As used herein, unless there is something in the subject matter or context inconsistent therewith, the following terms shall have the meanings set forth below:

(a)

“Administrator” means such Executive or Employee of the Company as may be designated as Administrator by the Committee from time to time, if any.

(b)

“Associate” means, where used to indicate a relationship with any person:

(i)

any relative, including the spouse of that person or a relative of that person’s spouse, where the relative has the same home as the person;

(ii)

any partner, other than a limited partner, of that person;

(iii)

any trust or estate in which such person has a substantial beneficial interest or as to which such person serves as trustee or in a similar capacity; and

(iv)

any corporation of which such person beneficially owns or controls, directly or indirectly, voting securities carrying more than 10% of the voting rights attached to all outstanding voting securities of the corporation.

(c)

“Black-Out” means a restriction imposed by the Company on all or any of its directors, officers, employees, insiders or persons in a special relationship whereby they are to refrain from trading in the Company’s securities until the restriction has been lifted by the Company.

(d)

“Board” means the board of directors of the Company.

(e)

“Change of Control” means an occurrence when either:

(i)

a Person or Entity, other than the current “control person” of the Company (as that term is defined in the Securities Act), becomes a “control person” of the Company; or

(ii)

a majority of the directors elected at any annual or extraordinary general meeting of shareholders of the Company are not individuals nominated by the Company’s then-incumbent Board.

(f)

“Committee” means a committee of the Board appointed in accordance with this Plan or if no such committee is appointed, the Board itself.

(g)

“Company” means MAG Silver Corp.

(h)

“Consultant” means an individual who:

(i)

is engaged to provide, on an ongoing bona fide basis, consulting, technical, management or other services to the Company or any Subsidiary other than:

- 2 -

A.

services provided in relation to a “distribution” (as that term is described in the Securities Act); and

B.

unless the Shares are listed on the Toronto Stock Exchange, American Stock Exchange, the New York Stock Exchange or the London Stock  Exchange, or quoted on the Nasdaq National Market or the Nasdaq Small Cap Market, other than:

(1)

the services of a “registrant” (as that term is defined in the Securities Act); or

(2)

services that include investor relations activities;

(ii)

provides the services under a written contract between the Company or any Subsidiary and the individual or a Consultant Entity (as defined in clause (h)(v) below); 

(iii)

in the reasonable opinion of the Company, spends or will spend a significant amount of time and attention on the affairs and business of the Company or any Subsidiary; and

(iv)

has a relationship with the Company or any Subsidiary that enables the individual to be knowledgeable about the business and affairs of the Company,

and includes:

(v)

a corporation of which the individual is an employee or shareholder or a partnership of which the individual is an employee or partner (a “Consultant Entity”); or

(vi)

an RRSP or RRIF established by or for the individual under which he or she is the beneficiary.

(i)

“Disability” means a medically determinable physical or mental impairment expected to result in death or to last for a continuous period of not less than 12 months, and which causes an individual to be unable to engage in any substantial gainful activity, or any other condition of impairment that the Committee, acting reasonably, determines constitutes a disability.

(j)

“Employee” means:

(i)

an individual who works full-time or part-time for the Company or any Subsidiary and such other individuals as may, from time to time, be permitted by applicable Regulatory Rules to be granted Options as employees or as an equivalent thereto; or

(ii)

an individual who works for the Company or any Subsidiary either full-time or on a continuing and regular basis for a minimum amount of time per week providing services normally provided by an employee and who is subject to the same control and direction by the Company or any Subsidiary over the details and methods of work as an employee of the Company or any Subsidiary, but for whom income tax deductions are not made at source,

and includes:

(iii)

a corporation wholly-owned by such individual; and

(iv)

any RRSP or RRIF established by or for such individual under which he or she is the beneficiary.

(k)

“Executive” means an individual who is a director or officer of the Company or a Subsidiary, and includes:

(i)

a corporation wholly-owned by such individual; and

- 3 -

(ii)

any RRSP or RRIF established by or for such individual under which he or she is the beneficiary.

(l)

“Exercise Notice” means the written notice of the exercise of an Option, in the form set out as Schedule “B” hereto, duly executed by the Option Holder.

(m)

“Exercise Period” means the period during which a particular Option may be exercised and is the period from and including the Grant Date through to and including the Expiry Time on the Expiry Date provided, however, that no Option can be exercised unless and until all necessary Regulatory Approvals have been obtained.

(n)

“Exercise Price” means the price at which an Option is exercisable as determined in accordance with section 5.3.

(o)

“Expiry Date” means the date the Option expires as set out in the Option Certificate or as otherwise determined in accordance with sections 5.4, 6.2, 6.3, 6.4 or 11.4.

(p)

“Expiry Time” means the time the Option expires on the Expiry Date, which is 5:00 p.m. local time in Vancouver, British Columbia on the Expiry Date.

(q)

“Grant Date” means the date on which the Committee grants a particular Option, which is the date the Option comes into effect provided however that no Option can be exercised unless and until all necessary Regulatory Approvals have been obtained.

(r)

“Incentive Stock Option” or “ISO” means an Option granted to a U.S. Option Holder in accordance with the terms of Section 422 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”).

(s)

“Insider” means:

(i)

an insider as that term is defined in the Securities Act; and

(ii)

an Associate of any person who is an insider by virtue of clause 1.1(s)(i) above.

(t)

“Nonqualified Stock Option” or “NSO” means an Option that does not meet the requirements of Code Section 422 and is not an Incentive Stock Option or ISO.

(u)

“Market Value” means the market value of the Shares as determined in accordance with section 5.3.

(v)

“Option” means an incentive share purchase option granted pursuant to this Plan entitling the Option Holder to purchase Shares of the Company.

(w)

“Option Certificate” means the certificate, in substantially the form set out as Schedule “A” hereto, evidencing the Option.

(x)

“Option Holder” means a Person or Entity who holds an unexercised and unexpired Option or, where applicable, the Personal Representative of such person.

(y)

“Outstanding Issue” means the number of Shares that are outstanding (on a non-diluted basis) immediately prior to the Share issuance or grant of Option in question.

(z)

“Person or Entity” means an individual, natural person, corporation, government or political subdivision or agency of a government, and where two or more persons act as a partnership, limited partnership, syndicate or other group for the purpose of acquiring, holding or disposing of securities of an issuer, such partnership, limited partnership, syndicate or group shall be deemed to be a Person or Entity.

- 4 -

(aa)

“Personal Representative” means:

(i)

in the case of a deceased Option Holder, the executor or administrator of the deceased duly appointed by a court or public authority having jurisdiction to do so; and

(ii)

in the case of an Option Holder who for any reason is unable to manage his or her affairs, the person entitled by law to act on behalf of such Option Holder.

(bb)

“Plan” means this stock option plan as from time to time amended.

(cc)

“Regulatory Approvals” means any necessary approvals of the Regulatory Authorities as may be required from time to time for the implementation, operation or amendment of this Plan or for the Options granted from time to time hereunder.

(dd)

“Regulatory Authorities” means all organized trading facilities on which the Shares are listed, and all securities commissions or similar securities regulatory bodies having jurisdiction over the Company, this Plan or the Options granted from time to time hereunder.

(ee)

“Regulatory Rules” means all corporate and securities laws, regulations, rules, policies, notices, instruments and other orders of any kind whatsoever which may, from time to time, apply to the implementation, operation or amendment of this Plan or the Options granted from time to time hereunder including, without limitation, those of the applicable Regulatory Authorities.

(ff)

“Securities Act” means the Securities Act (British Columbia), RSBC 1996, c.418 as from time to time amended.

(gg)

“Share” or “Shares” means, as the case may be, one or more common shares without par value in the capital stock of the Company.

(hh)

“Share Compensation Arrangement” means any stock option, stock option plan, employee stock purchase plan or any other compensation or incentive mechanism involving the issuance or potential issuance of Shares, including a share purchase from treasury which is financially assisted by the Company by way of a loan, guarantee or otherwise.

(ii)

“Subsidiary” means a wholly-owned or controlled subsidiary corporation of the Company.

(jj)

“Triggering Event” means:

(i)

the proposed dissolution, liquidation or wind-up of the Company;

(ii)

a proposed merger, amalgamation, arrangement or reorganization of the Company with one or more corporations as a result of which, immediately following such event, the shareholders of the Company as a group, as they were immediately prior to such event, are expected to hold less than a majority of the outstanding capital stock of the surviving corporation;

(iii)

the proposed acquisition of all or substantially all of the issued and outstanding shares of the Company by one or more Persons or Entities;

(iv)

a proposed Change of Control of the Company;

(v)

the proposed sale or other disposition of all or substantially all of the assets of the Company; or

(vi)

a proposed material alteration of the capital structure of the Company which, in the opinion of the Committee, is of such a nature that it is not practical or feasible to make adjustments to this Plan or 

- 5 -

to the Options granted hereunder to permit the Plan and Options granted hereunder to stay in effect.

(kk)

“TSX-VN” means the TSX Venture Exchange.

1.2

Choice of Law

The Plan is established under, and the provisions of the Plan shall be subject to and interpreted and construed in accordance with, the laws of the Province of British Columbia.  The Company and each Option Holder hereby attorn to the jurisdiction of the Courts of British Columbia.

1.3

Headings

The headings used herein are for convenience only and are not to affect the interpretation of the Plan.

SECTION 2 

GRANT OF OPTIONS

2.1

Grant of Options

The Committee shall, from time to time in its sole discretion, grant Options to such Persons or Entities and on such terms and conditions as are permitted under this Plan.

2.2

Record of Option Grants

The Committee shall be responsible to maintain a record of all Options granted under this Plan and such record shall contain, in respect of each Option:

(a)

the name and address of the Option Holder;

(b)

the category (Executive, Employee or Consultant) under which the Option was granted to him, her or it;

(c)

the Grant Date and Expiry Date of the Option;

(d)

the number of Shares which may be acquired on the exercise of the Option and the Exercise Price of the Option;

(e)

the vesting and other additional terms, if any, attached to the Option; and

(f)

the particulars of each and every time the Option is exercised.

2.3

Effect of Plan

All Options granted pursuant to this Plan shall be subject to the terms and conditions of this Plan notwithstanding the fact that the Option Certificates issued in respect thereof do not expressly contain such terms and conditions but instead incorporate them by reference to this Plan.

- 6 -

SECTION 3 

PURPOSE AND PARTICIPATION

3.1

Purpose of Plan

The purpose of the Plan is to provide the Company with a share-related mechanism to attract, retain and motivate qualified Executives, Employees and Consultants, to incent such individuals to contribute toward the long term goals of the Company, and to encourage such individuals to acquire Shares of the Company as long term investments.

3.2

Participation in Plan

The Committee shall, from time to time and in its sole discretion, determine those Executives, Employees and Consultants, if any, to whom Options are to be granted.

3.3

TSX-VN Limits on Option Grants

If the Company is listed on TSX-VN as a Tier 1 issuer, the following limitations shall apply to the Plan and all Options thereunder so long as such limitations are required by the TSX-VN:

(a)

the maximum number of Shares which may be reserved for issuance to Insiders pursuant to Options under the Plan shall be 10% of the Outstanding Issue;

(b)

the maximum number of Options which may be granted to Insiders under the Plan within any 12 month period shall be 10% of the Outstanding Issue; 

(c)

the maximum number of Options which may be granted to any one Option Holder under the Plan within any 12 month period shall be 5% of the Outstanding Issue;

(d)

with respect to section 5.1, the Expiry Date of an Option shall be no later than the tenth anniversary of the Grant Date of such Option;

(e)

the maximum number of Options which may be granted to any one Consultant within any 12 month period must not exceed 2% of the Outstanding Issue; and

(f)

the maximum number of Options which may be granted within any 12 month period to Employees or Consultants engaged in investor relations activities must not exceed 2% of the Outstanding Issue and such options must vest in stages over 12 months with no more than 25% of the Options vesting in any three month period; and

(g)

the maximum number of Options which may be granted as ISOs shall not exceed 700,000,

and such limitation will not be an amendment to this Plan requiring the Option Holders consent under section 9.2 of this Plan.

If the Company is listed on TSX-VN as a Tier 2 issuer, the following limitations shall apply to the Plan and all Options thereunder so long as such limitations are required by the TSX-VN:

(a)

the maximum number of Shares which may be reserved for issuance to Insiders pursuant to Options under the Plan shall be 10% of the Outstanding Issue;

(b)

the maximum number of Options which may be granted to Insiders under the Plan within any 12 month period shall be 10% of the Outstanding Issue; 

- 7 -

(c)

the maximum number of Options which may be granted to any one Option Holder under the Plan within any 12 month period shall be 5% of the Outstanding Issue;

(d)

with respect to section 5.1, the Expiry Date of an Option shall be no later than the fifth anniversary of the Grant Date of such Option;

(e)

the maximum number of Options which may be granted to any one Consultant within any 12 month period must not exceed 2% of the Outstanding Issue; 

(f)

the maximum number of Options which may be granted within any 12 month period to Employees or Consultants engaged in investor relations activities must not exceed 2% of the Outstanding Issue and such options must vest in stages over 12 months with no more than 25% of the Options vesting in any three month period; and

(g)

the maximum number of Options which may be granted as ISOs shall not exceed 700,000,

and such limitation will not be an amendment to this Plan requiring the Option Holders consent under section 9.2 of this Plan.

3.4

Additional Limits on Option Grants

Incentive Stock Options shall be granted only to an individual who is an Employee of the Company or a Subsidiary or related company and shall be subject to the following special limitations required by Section 422 of the Code, and any contrary provisions of this Plan shall be disregarded:

(a)

Limitation on Amount of Grants.  As to all Incentive Stock Options granted under the terms of this Plan, to the extent that the aggregate fair market value of the Shares (determined at the time the Incentive Stock Option is granted) with respect to which Incentive Stock Options are exercisable for the first time by the Option Holder during any calendar year (under this Plan and all other incentive stock option plans of the Company, a related corporation or a predecessor corporation) exceeds $100,000 (U.S.), such options shall be treated as Nonqualified Stock Options.  The previous sentence shall not apply if the Internal Revenue Service issues a public rule, issues a private ruling to the Company, any Option Holder or any legatee, personal representative or distributee of an Option Holder or issues regulations changing or eliminating such annual limit.  No such limitation shall apply to Nonqualified Stock Options.

(b)

Grants to Ten Percent Shareholders.  Incentive Stock Options may be granted to a person owning more than 10% of the total combined voting power of all classes of shares of the Company and any Parent or Subsidiary only if (i) the exercise price is at least 110% of the fair market value of the stock at the time of grant, and (ii) the option is not exercisable after the expiration of five years from the date of grant.

(c)

Notice of Disposition.  The Board of Directors may require an Option Holder  to give the Company prompt notice of any disposition of Shares acquired by exercise of an Incentive Stock Option prior to the expiration of two years after the date of the grant of the option and one year from the date of exercise.

(d)

Shareholder Approval.  No Options granted under this Plan will be considered Incentive Stock Options unless this Plan has been approved by the shareholders of the Company within 12 months before or after the date such Plan has been adopted by the Company’s Board of Directors.

3.5

Notification of Grant

Following the granting of an Option, the Administrator shall, within a reasonable period of time, notify the Option Holder in writing of the grant and shall enclose with such notice the Option Certificate representing the Option so granted.  In no case will the Company be required to deliver an Option Certificate to an Option Holder until such time as the Company has obtained all necessary Regulatory Approvals for the grant of the Option.

- 8 -

3.6

Copy of Plan

Each Option Holder, concurrently with the notice of the grant of the Option, shall be provided with a copy of the Plan.  A copy of any amendment to the Plan shall be promptly provided by the Administrator to each Option Holder.

3.7

Limitation on Service

The Plan does not give any Option Holder that is an Executive the right to serve or continue to serve as an Executive of the Company or any Subsidiary, nor does it give any Option Holder that is an Employee or Consultant the right to be or to continue to be employed or engaged by the Company or any Subsidiary.

3.8

No Obligation to Exercise

Option Holders shall be under no obligation to exercise Options granted under this Plan.

3.9

Agreement

The Company and every Option Holder granted an Option hereunder shall be bound by and subject to the terms and conditions of this Plan.  By accepting an Option granted hereunder, the Option Holder has expressly agreed with the Company to be bound by the terms and conditions of this Plan.  In the event that the Option Holder receives his, her or its Options pursuant to an oral or written agreement with the Company or a Subsidiary, whether such agreement is an employment agreement, consulting agreement or any other kind of agreement of any kind whatsoever, the Option Holder acknowledges that in the event of any inconsistency between the terms relating to the grant of such Options in that agreement and the terms attaching to the Options as provided for in this Plan, the terms provided for in this Plan shall prevail and the other agreement shall be deemed to have been amended accordingly.

3.10

Notice

Any notice, delivery or other correspondence of any kind whatsoever to be provided by the Company to an Option Holder will be deemed to have been provided if provided to the last home address, fax number or email address of the Option Holder in the records of the Company and the Company shall be under no obligation to confirm receipt or delivery.

3.11

Representation to TSX-VN

As a condition precedent to the issuance of an Option, the Company must be able to represent to TSX-VN as of the Grant Date that the Option Holder is a bona fide Executive, Employee or Consultant of the Company or any Subsidiary.

SECTION 4 

NUMBER OF SHARES UNDER PLAN

4.1

Board to Approve Issuance of Shares

The Board shall approve by resolution the issuance of all Shares to be issued to Option Holders upon the exercise of Options, such authorization to be deemed effective as of the Grant Date of such Options regardless of when it is actually done.  The Board shall be entitled to approve the issuance of Shares in advance of the Grant Date, retroactively after the Grant Date, or by a general approval of this Plan.

4.2

Number of Shares

Subject to adjustment as provided for herein, the number of Shares which will be available for purchase pursuant to Options granted pursuant to this Plan will not exceed 10% of the number of common shares of the Company which are issued and outstanding on the particular Grant Date, including the existing 3,486,000 Shares currently subject to 

- 9 -

outstanding Options as of the date of this Plan which were granted prior to implementation of this Plan and, which, by the implementation of this Plan are grandfathered under this Plan; provided, however, that the maximum number of Options that may be granted as ISOs shall not exceed 700,000.  If any Option expires or otherwise terminates for any reason without having been exercised in full, the number of Shares in respect of such expired or terminated Option shall again be available for the purposes of granting Options pursuant to this Plan.

4.3

Fractional Shares

No fractional shares shall be issued upon the exercise of any Option and, if as a result of any adjustment, an Option Holder would become entitled to a fractional share, such Option Holder shall have the right to purchase only the next lowest whole number of Shares and no payment or other adjustment will be made for the fractional interest.

SECTION 5 

TERMS AND CONDITIONS OF OPTIONS

5.1

Exercise Period of Option

Subject to sections 5.4, 6.2, 6.3, 6.4 and 11.4, the Grant Date and the Expiry Date of an Option shall be the dates fixed by the Committee at the time the Option is granted and shall be set out in the Option Certificate issued in respect of such Option.

5.2

Number of Shares Under Option

The number of Shares which may be purchased pursuant to an Option shall be determined by the Committee and shall be set out in the Option Certificate issued in respect of the Option.

5.3

Exercise Price of Option

The Exercise Price at which an Option Holder may purchase a Share upon the exercise of an Option shall be determined by the Committee and shall be set out in the Option Certificate issued in respect of the Option.  The Exercise Price shall not be less than the Market Value of the Shares as of the Grant Date. The Market Value of the Shares for a particular Grant Date shall be determined as follows:

(a)

for each organized trading facility on which the Shares are listed, Market Value will be the closing trading price of the Shares on the day immediately preceding the Grant Date less any discounts permitted by the applicable regulatory authorities;

(b)

if the Company’s Shares are listed on more than one organized trading facility, the Market Value shall be the Market Value as determined in accordance with subparagraph (a) above for the primary organized trading facility on which the Shares are listed, as determined by the Committee, subject to any adjustments as may be required to secure all necessary Regulatory Approvals; 

(c)

if the Company’s Shares are listed on one or more organized trading facilities but have not traded during the ten trading days immediately preceding the Grant Date, then the Market Value will be, subject to any adjustments as may be required to secure all necessary Regulatory Approvals, such value as is determined by the Committee; and

(d)

if the Company’s Shares are not listed for trading on a stock exchange or over the counter market, the value which is determined by the Committee to be the fair value of the Shares, taking into consideration all factors that the Committee deems appropriate, including, without limitation, recent sale and offer prices of the Shares in private transactions negotiated at arms’ length.

Notwithstanding anything else contained herein, in no case will the Market Value be less than the minimum prescribed by each of the organized trading facilities that would apply to the Company on the Grant Date in question.

- 10 -

5.4

Termination of Option

Subject to such other terms or conditions that may be attached to Options granted hereunder, an Option Holder may exercise an Option in whole or in part at any time and from time to time during the Exercise Period.  Any Option or part thereof not exercised within the Exercise Period shall terminate and become null, void and of no effect as of the Expiry Time on the Expiry Date. The Expiry Date of an Option shall be the earlier of the date so fixed by the Committee at the time the Option is granted as set out in the Option Certificate and the date established, if applicable, in paragraphs (a) or (b) below or sections 6.2, 6.3, 6.4, or 11.4 of this Plan:

(a)

Ceasing to Hold Office - In the event that the Option Holder holds his or her Option as an Executive and such Option Holder ceases to hold such position other than by reason of death or Disability, the Expiry Date of the Option shall be, unless otherwise expressly provided for in the Option Certificate, the 90th day following the date the Option Holder ceases to hold such position unless the Option Holder ceases to hold such position as a result of:

(i)

ceasing to meet the qualifications set forth in the corporate legislation applicable to the Company;

(ii)

a special resolution having been passed by the shareholders of the Company removing the Option Holder as a director of the Company or any Subsidiary; or

(iii)

an order made by any Regulatory Authority having jurisdiction to so order;

in which case the Expiry Date shall be the date the Option Holder ceases to hold such position; OR

(b)

Ceasing to be Employed or Engaged - In the event that the Option Holder holds his or her Option as an Employee or Consultant or the Options were granted to an Option Holder who is engaged in investor relations activities, and such Option Holder ceases to hold such position other than by reason of death or Disability, the Expiry Date of the Option shall be, unless otherwise expressly provided for in the Option Certificate, the 30th day following the date the Option Holder ceases to hold such position, unless the Option Holder ceases to hold such position as a result of:

(i)

termination for cause;

(ii)

resigning or terminating his or her position; or

(iii)

an order made by any Regulatory Authority having jurisdiction to so order;

in which case the Expiry Date shall be the date the Option Holder ceases to hold such position.

In the event that the Option Holder ceases to hold the position of Executive, Employee or Consultant for which the Option was originally granted, but comes to hold a different position as an Executive, Employee or Consultant prior to the expiry of the Option, the Committee may, in its sole discretion, choose to permit the Option to stay in place for that Option Holder with such Option then to be treated as being held by that Option Holder in his or her new position and such will not be considered to be an amendment to the Option in question requiring the consent of the Option Holder under section 9.2 of this Plan.  Notwithstanding anything else contained herein, in no case will an Option be exercisable later than the Expiry Date of the Option.

5.5

Vesting of Option and Acceleration

The vesting schedule for an Option, if any, shall be determined by the Committee and shall be set out in the Option Certificate issued in respect of the Option.  Subject to the approval of the TSX-VN, the Committee may elect, at any time, to accelerate the vesting schedule of one or more Options including, without limitation, on a Triggering Event, and such acceleration will not be considered an amendment to the Option in question requiring the consent of the Option Holder under section 9.2 of this Plan.

- 11 -

5.6

Additional Terms

Subject to all applicable Regulatory Rules and all necessary Regulatory Approvals, the Committee may attach additional terms and conditions to the grant of a particular Option, such terms and conditions to be set out in a schedule attached to the Option Certificate.

SECTION 6 

TRANSFERABILITY OF OPTIONS

6.1

Non-transferable

Except as provided otherwise in this Section 6, Options are non-assignable and non-transferable.

6.2

Death of Option Holder

In the event of the Option Holder’s death, any Options held by such Option Holder shall pass to the Personal Representative of the Option Holder and shall be exercisable by the Personal Representative on or before the date which is the earlier of six months following the date of death and the applicable Expiry Date.

6.3

Disability of Option Holder

If the employment or engagement of an Option Holder as an Employee or Consultant or the position of an Option Holder as a director or officer of the Company or a Subsidiary is terminated by the Company by reason of such Option Holder’s Disability, any Options held by such Option Holder shall be exercisable by such Option Holder or by the Personal Representative on or before the date which is the earlier of six months following the termination of employment, engagement or appointment as a director or officer and the applicable Expiry Date.

6.4

Disability and Death of Option Holder

If an Option Holder has ceased to be employed, engaged or appointed as a director or officer of the Company or a Subsidiary by reason of such Option Holder’s Disability and such Option Holder dies within six months after the termination of such engagement, any Options held by such Option Holder that could have been exercised immediately prior to his or her death shall pass to the Personal Representative of such Option Holder and shall be exercisable by the Personal Representative on or before the date which is the earlier of six months following the death of such Option Holder and the applicable Expiry Date.

6.5

Vesting

Unless the Committee determines otherwise, Options held by or exercisable by a Personal Representative shall, during the period prior to their termination, continue to vest in accordance with any vesting schedule to which such Options are subject.

6.6

Deemed Non-Interruption of Engagement

Employment or engagement by the Company shall be deemed to continue intact during any military or sick leave or other bona fide leave of absence if the period of such leave does not exceed 90 days or, if longer, for so long as the Option Holder’s right to re-employment or re-engagement by the Company is guaranteed either by statute or by contract.  If the period of such leave exceeds 90 days and the Option Holder’s re-employment or re-engagement is not so guaranteed, then his or her employment or engagement shall be deemed to have terminated on the ninety-first day of such leave.

- 12 -

SECTION 7 

EXERCISE OF OPTION

7.1

Exercise of Option

An Option may be exercised only by the Option Holder or the Personal Representative of any Option Holder.  An Option Holder or the Personal Representative of any Option Holder may exercise an Option in whole or in part at any time and from time to time during the Exercise Period up to the Expiry Time on the Expiry Date by delivering to the Administrator the required Exercise Notice, the applicable Option Certificate and a certified cheque or bank draft payable to the Company in an amount equal to the aggregate Exercise Price of the Shares then being purchased pursuant to the exercise of the Option.  Notwithstanding anything else contained herein, Options may not be exercised during Black-Out unless the Committee determines otherwise.

7.2

Issue of Share Certificates

As soon as reasonably practicable following the receipt of the Exercise Notice, the Administrator shall cause to be delivered to the Option Holder a certificate for the Shares so purchased.  If the number of Shares so purchased is less than the number of Shares subject to the Option Certificate surrendered, the Administrator shall also provide a new Option Certificate for the balance of Shares available under the Option to the Option Holder concurrent with delivery of the Share Certificate against the return of the original Option Certificate.

7.3

No Rights as Shareholder

Until the date of the issuance of the certificate for the Shares purchased pursuant to the exercise of an Option, no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to such Shares, notwithstanding the exercise of the Option, unless the Committee determines otherwise.  In the event of any dispute over the date of the issuance of the certificates, the decision of the Committee shall be final, conclusive and binding.

SECTION 8 

ADMINISTRATION

8.1

Board or Committee 

The Plan shall be administered by the Board, by a Committee of the Board appointed in accordance with section 8.2 below, or by an Administrator appointed in accordance with subsection 8.4(b).

8.2

Appointment of Committee

The Board may at any time appoint a Committee, consisting of not less than two of its members, to administer the Plan on behalf of the Board in accordance with such terms and conditions as the Board may prescribe, consistent with this Plan. Once appointed, the Committee shall continue to serve until otherwise directed by the Board. From time to time, the Board may increase the size of the Committee and appoint additional members, remove members (with or without cause) and appoint new members in their place, fill vacancies however caused, or remove all members of the Committee and thereafter directly administer the Plan.

8.3

Quorum and Voting

A majority of the members of the Committee shall constitute a quorum and, subject to the limitations in this Section 8, all actions of the Committee shall require the affirmative vote of members who constitute a majority of such quorum.  Members of the Committee may vote on any matters affecting the administration of the Plan or the grant of Options pursuant to the Plan.  The Committee may approve matters by written resolution signed by a majority of the quorum.

- 13 -

8.4

Powers of Committee

The Committee (or the Board if no Committee is in place) shall have the authority to do the following:

(a)

administer the Plan in accordance with its terms;

(b)

appoint or replace the Administrator from time to time;

(c)

determine all questions arising in connection with the administration, interpretation and application of the Plan, including all questions relating to the Market Value of the Shares;

(d)

correct any defect, supply any information or reconcile any inconsistency in the Plan in such manner and to such extent as shall be deemed necessary or advisable to carry out the purposes of the Plan;

(e)

prescribe, amend, and rescind rules and regulations relating to the administration of the Plan;

(f)

determine the duration and purposes of leaves of absence from employment or engagement by the Company which may be granted to Option Holders without constituting a termination of employment or engagement for purposes of the Plan;

(g)

do the following with respect to the granting of Options:

(i)

determine the Executives, Employees or Consultants to whom Options shall be granted, based on the eligibility criteria set out in this Plan; 

(ii)

determine the terms of the Option to be granted to an Option Holder including, without limitation, the Grant Date, Expiry Date, Exercise Price and vesting schedule (which need not be identical with the terms of any other Option); 

(iii)

subject to any necessary Regulatory Approvals and section 9.2, amend the terms of any Options; 

(iv)

determine when Options shall be granted; and

(v)

determine the number of Shares subject to each Option; 

(h)

accelerate the vesting schedule of any Option previously granted; and

(i)

make all other determinations necessary or advisable, in its sole discretion, for the administration of the Plan.

8.5

Administration by Committee 

All determinations made by the Committee in good faith shall be final, conclusive and binding upon all persons.  The Committee shall have all powers necessary or appropriate to accomplish its duties under this Plan. 

8.6

Interpretation

The interpretation by the Committee of any of the provisions of the Plan and any determination by it pursuant thereto shall be final, conclusive and binding and shall not be subject to dispute by any Option Holder.  No member of the Committee or any person acting pursuant to authority delegated by it hereunder shall be personally liable for any action or determination in connection with the Plan made or taken in good faith and each member of the Committee and each such person shall be entitled to indemnification with respect to any such action or determination in the manner provided for by the Company.

- 14 -

SECTION 9 

APPROVALS AND AMENDMENT

9.1

Shareholder Approval of Plan

If required by a Regulatory Authority or by the Committee, this Plan may be made subject to the approval of a majority of the votes cast at a meeting of the shareholders of the Company or by a majority of votes cast by disinterested shareholders at a meeting of shareholders of the Company.  Any Options granted under this Plan prior to such time will not be exercisable or binding on the Company unless and until such shareholder approval is obtained.

9.2

Amendment of Option or Plan

Subject to any required Regulatory Approvals, the Committee may from time to time amend any existing Option or the Plan or the terms and conditions of any Option thereafter to be granted provided that where such amendment relates to an existing Option and it would:

(a)

materially decrease the rights or benefits accruing to an Option Holder; or

(b)

materially increase the obligations of an Option Holder;

then, unless otherwise excepted out by a provision of this Plan, the Committee must also obtain the written consent of the Option Holder in question to such amendment.  If at the time the Exercise Price of an Option is reduced the Option Holder is an Insider of the Company, the Insider must not exercise the option at the reduced Exercise Price until the reduction in Exercise Price has been approved by the disinterested shareholders of the Company.

SECTION 10 

CONDITIONS PRECEDENT TO ISSUANCE OF OPTIONS AND SHARES

10.1

Compliance with Laws

An Option shall not be granted or exercised, and Shares shall not be issued pursuant to the exercise of any Option, unless the grant and exercise of such Option and the issuance and delivery of such Shares comply with all applicable Regulatory Rules, and such Options and Shares will be subject to all applicable trading restrictions in effect pursuant to such Regulatory Rules and the Company shall be entitled to legend the Option Certificates and the certificates representing such Shares accordingly.

10.2

Obligation to Obtain Regulatory Approvals

In administering this Plan, the Committee will seek any Regulatory Approvals which may be required. The Committee will make all filings required with the Regulatory Authorities in respect of the Plan and each grant of Options hereunder.  No Option granted will be exercisable or binding on the Company unless and until all necessary Regulatory Approvals have been obtained.  The Committee shall be entitled to amend this Plan and the Options granted hereunder in order to secure any necessary Regulatory Approvals and such amendments will not require the consent of the Option Holders under section 9.2 of this Plan.

10.3

Inability to Obtain Regulatory Approvals

The Company’s inability to obtain Regulatory Approval from any applicable Regulatory Authority, which Regulatory Approval is deemed by the Committee to be necessary to complete the grant of Options hereunder, the exercise of those Options or the lawful issuance and sale of any Shares pursuant to such Options, shall relieve the Company of any liability with respect to the failure to complete such transaction.

- 15 -

SECTION 11 

ADJUSTMENTS AND TERMINATION

11.1

Termination of Plan

Subject to any necessary Regulatory Approvals, the Committee may terminate or suspend the Plan.  Unless earlier terminated as provided in this Section 11, the Plan shall terminate on, and no more Options shall be granted under the Plan after, the tenth anniversary of the Effective Date of the Plan.

11.2

No Grant During Suspension of Plan

No Option may be granted during any suspension, or after termination, of the Plan.  Suspension or termination of the Plan shall not, without the consent of the Option Holder, alter or impair any rights or obligations under any Option previously granted.

11.3

Alteration in Capital Structure

If there is a material alteration in the capital structure of the Company and the Shares are consolidated, subdivided, converted, exchanged, reclassified or in any way substituted for, the Committee shall make such adjustments to this Plan and to the Options then outstanding under this Plan as the Committee determines to be appropriate and equitable under the circumstances, so that the proportionate interest of each Option Holder shall, to the extent practicable, be maintained as before the occurrence of such event. Such adjustments may include, without limitation:

(a)

a change in the number or kind of shares of the Company covered by such Options; and

(b)

a change in the Exercise Price payable per Share provided, however, that the aggregate Exercise Price applicable to the unexercised portion of existing Options shall not be altered, it being intended that any adjustments made with respect to such Options shall apply only to the Exercise Price per Share and the number of Shares subject thereto.

For purposes of this section 11.3, and without limitation, neither:

(a)

the issuance of additional securities of the Company in exchange for adequate consideration (including services); nor

(b)

the conversion of outstanding securities of the Company into Shares;

 shall be deemed to be material alterations of the capital structure of the Company. 

Any adjustment made to any Options pursuant to this section 11.3 shall not be considered an amendment requiring the Option Holder’s consent for the purposes of Section 9.2 of this Plan.

11.4

Triggering Events

Subject to the Company complying with section 11.5 and any necessary Regulatory Approvals and notwithstanding any other provisions of this Plan or any Option Certificate, the Committee may cause all or a portion of all or any of the Options granted under the Plan to terminate upon the occurrence of a Triggering Event without the consent of the Option Holder or Holders in question.  Such termination shall not be considered an amendment requiring the Option Holder’s consent for the purpose of section 9.2 of this Plan.

11.5

Notice of Termination by Triggering Event

In the event that the Committee wishes to cause all or a portion of any of the Options granted under this Plan to terminate on the occurrence of a Triggering Event, it must give written notice to the Option Holders in question not 

- 16 -

less than 10 days prior to the consummation of a Triggering Event.  Upon the giving of such notice and subject to any necessary Regulatory Approvals, all Options or portions thereof granted under the Plan which the Company proposes to terminate shall become immediately exercisable notwithstanding any contingent vesting provision to which such Options may have otherwise been subject.

11.6

Determinations to be Made By Committee

Adjustments and determinations under this Section 11 shall be made by the Committee, whose decisions as to what adjustments or determination shall be made, and the extent thereof, shall be final, binding, and conclusive.

SCHEDULE “A”

Without prior written approval of the TSX Venture Exchange and compliance with all applicable securities legislation, the securities represented by this certificate may not be sold, transferred, hypothecated or otherwise traded on or through the facilities of the TSX Venture Exchange or otherwise in Canada or to or for the benefit of a Canadian resident until 12:01 a.m. on [date four months and one day after Grant Date].

MAG SILVER CORP.

STOCK OPTION PLAN - OPTION CERTIFICATE

This Option Certificate is issued pursuant to the provisions of the Stock Option Plan (2007) (the “Plan”) of MAG Silver Corp. (the “Company”) and evidences that [Name of Option Holder] is the holder (the “Option Holder”) of an option (the “Option”) to purchase up to  common shares (the “Shares”) in the capital stock of the Company at a purchase price of Cdn.$ per Share (the “Exercise Price”).  This Option may be exercised at any time and from time to time from and including the following Grant Date through to and including up to 5:00 p.m. local time in Vancouver, British Columbia (the “Expiry Time”) on the following Expiry Date:

(a)

the Grant Date of this Option is , 200; and

(b)

subject to sections 5.4, 6.2, 6.3, 6.4 and 11.4 of the Plan, the Expiry Date of this Option is ,200.

To exercise this Option, the Option Holder must deliver to the Administrator of the Plan, prior to the Expiry Time on the Expiry Date, an Exercise Notice, in the form provided in the Plan, which are incorporated by reference herein, together with the original of this Option Certificate and a certified cheque or bank draft payable to the Company in an amount equal to the aggregate of the Exercise Price of the Shares in respect of which this Option is being exercised.

This Option Certificate and the Option evidenced hereby is not assignable, transferable or negotiable and is subject to the detailed terms and conditions contained in the Plan.  This Option Certificate is issued for convenience only and in the case of any dispute with regard to any matter in respect hereof, the provisions of the Plan and the records of the Company shall prevail.  This Option is also subject to the terms and conditions contained in the schedules, if any, attached hereto.

Any share certificates issued pursuant to an exercise of the Option before 12:01 a.m. on [date four months and one day after Grant Date] will contain the following legend:

“Without prior written approval of the TSX Venture Exchange and compliance with all applicable securities legislation, the securities represented by this certificate may not be sold, transferred, hypothecated or otherwise traded on or through the facilities of the TSX Venture Exchange or otherwise in Canada or to or for the benefit of a Canadian resident until 12:01 a.m. on [date four months and one day after Grant Date].”

If the Option Holder is a resident or citizen of the United States of America at the time of the exercise of the Option, the certificate(s) representing the Shares will be endorsed with the following or a similar legend:

“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”).  THESE SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY, (B) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH REGULATION S UNDER THE 1933 ACT, (C) IN COMPLIANCE WITH THE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE 1933 ACT PROVIDED BY RULE 144 THEREUNDER, IF AVAILABLE, AND 

- 2 -

IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, OR (D) IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE 1933 ACT OR ANY APPLICABLE STATE LAWS, AND THE HOLDER HAS, PRIOR TO SUCH SALE, FURNISHED TO THE COMPANY AN OPINION OF COUNSEL OR OTHER EVIDENCE OF EXEMPTION, IN EITHER CASE REASONABLY SATISFACTORY TO THE COMPANY.  DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA.”

This Option was granted to the Option Holder in his or her capacity as a [pick one: Director, Officer, Advisor, Employee, Consultant] of the Company [, and shall continue in effect should his or her status change and he or she continue in a new capacity as a Director, Officer, Advisor, Employee or Consultant of the Company].

MAG Silver Corp.

Per:  

[Full Name of Person], Administrator,

Stock Option Plan

The Option Holder acknowledges receipt of a copy of the Plan and represents to the Company that the Option Holder is familiar with the terms and conditions of the Plan, and hereby accepts this Option subject to all of the terms and conditions of the Plan.  The Option Holder agrees to execute, deliver, file and otherwise assist the Company in filing any report, undertaking or document with respect to the awarding of the Option and exercise of the Option, as may be required by the Regulatory Authorities.  The Option Holder further acknowledges that if the Plan has not been approved by the shareholders of the Company on the Grant Date, this Option is not exercisable until such approval has been obtained.

Signature of Optionee:

Date signed: 

Signature

Print Name

Address

OPTION CERTIFICATE - SCHEDULE

The additional terms and conditions attached to the Option represented by this Option Certificate are as follows:

1.

vest as to:

(a)

 Shares on  [date];

(b)

 Shares on  [date];

(c)

 Shares on  [date]; and

(d)

 Shares on  [date].

2.

3.

4.

5.

SCHEDULE “B”

MAG SILVER CORP.

STOCK OPTION PLAN

NOTICE OF EXERCISE OF OPTION

TO:

The Administrator, Stock Option Plan

MAG Silver Corp.

[ Address]

(or such other address as the Company may advise)

The undersigned hereby irrevocably gives notice, pursuant to the Stock Option Plan  (2007) (the “Plan”) of MAG Silver Corp. (the “Company”), of the exercise of the Option to acquire and hereby subscribes for (cross out inapplicable item):

(a)

all of the Shares; or

(b)

 of the Shares;

which are the subject of the Option Certificate attached hereto (attach your original Option Certificate).

The undersigned tenders herewith a certified cheque or bank draft (circle one) payable to “[Full Name of Company]” in an amount equal to the aggregate Exercise Price of the aforesaid Shares and directs the Company to issue the certificate evidencing said Shares in the name of the undersigned to be mailed to the undersigned at the following address (provide full complete address):

___________________________________

___________________________________

___________________________________

___________________________________

The undersigned acknowledges the Option is not validly exercised unless this Notice is completed in strict compliance with this form and delivered to the required address with the required payment prior to 5:00 p.m. local time in Vancouver, B.C. on the Expiry Date of the Option.

DATED the 

 day of 

, 20

.

Signature of Option Holder

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00125-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00125-of-00352.parquet"}]]