Document:

EX-10.1

Exhibit 10.1

FORM OF MANAGEMENT AGREEMENT

     THIS MANAGEMENT AGREEMENT is made as of                     , 2008 by and among MFRESIDENTIAL
INVESTMENTS, INC., a Maryland corporation (the “Company”), MFR Operating Partnership, LP, a
Delaware limited partnership (the “Operating Partnership”), MFR Asset I, LLC, a Delaware limited liability company (“Asset I”), MFR Asset II, LLC, a Delaware limited liability company (“Asset II”),
MFR Asset (TRS), Inc., a Delaware corporation, and MFA SPARTAN MANAGER, LLC, a
Delaware limited liability company (together with its permitted assignees, the “Manager”).

     WHEREAS, the Company is a newly organized corporation that intends to elect to be taxed as a
REIT for federal income tax purposes; and

     WHEREAS, the Company and each of the Subsidiaries desire to retain the Manager to provide
investment advisory services to them on the terms and conditions hereinafter set forth, and the
Manager wishes to be retained to provide such services.

     NOW THEREFORE, in consideration of the mutual agreements herein set forth, the parties hereto
agree as follows:

     Section 1. Definitions. The following terms have the following meanings assigned to
them:

          (a) “Agreement” means this Management Agreement, as amended from time to time.

          (b) “Bankruptcy” means, with respect to any Person, (a) the filing by such Person of a
voluntary petition seeking liquidation, reorganization, arrangement or readjustment, in any form,
of its debts under Title 11 of the United States Code or any other federal, state or foreign
insolvency law, or such Person’s filing an answer consenting to or acquiescing in any such
petition, (b) the making by such Person of any assignment for the benefit of its creditors, (c) the
expiration of 60 days after the filing of an involuntary petition under Title 11 of the Unites
States Code, an application for the appointment of a receiver for a material portion of the assets
of such Person, or an involuntary petition seeking liquidation, reorganization, arrangement or
readjustment of its debts under any other federal, state or foreign insolvency law, provided that
the same shall not have been vacated, set aside or stayed within such 60-day period or (d) the
entry against it of a final and non-appealable order for relief under any bankruptcy, insolvency or
similar law now or hereinafter in effect.

          (c) “Base Management Fee” means a base management fee equal to 1.0% per annum until
December 31, 2008, 1.5% per annum thereafter, calculated and paid (in cash) quarterly in arrears, of
the Stockholders’ Equity. For purposes of calculating the Base Management Fee, outstanding limited
partner interests in the Operating Partnership (other than the Special Unit and limited partner
interests held by the Company) shall be treated as outstanding shares of capital stock of the
Company. The Base Management Fee will be reduced, but not below zero, by the Company’s
proportionate share of any securitization base management fees that MFA receives in connection with
the securitizations in which the Company invests, based on the percentage of equity the Company
holds in such securitizations.

          (d) “Board of Directors” means the Board of Directors of the Company.

          (e) “Code” means the Internal Revenue Code of 1986, as amended.

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

          (g) “GAAP” means generally accepted accounting principles, as applied in the United
States.

 

 

          (h) “Governing Instruments” means, with regard to any entity, the articles of
incorporation and bylaws in the case of a corporation, certificate of limited partnership (if
applicable) and the partnership agreement in the case of a general or limited partnership, the
articles of formation and the operating agreement in the case of a limited liability company, the
trust instrument in the case of a trust, or similar governing documents, in each case as amended
from time to time.

          (i) “Independent Directors” means the members of the Board of Directors who are not
officers or employees of the Manager or any Person directly or indirectly controlling or controlled
by the Manager, and who are otherwise “independent” in accordance with the Company’s Governing
Instruments and, if applicable, the rules of any national securities exchange on which the
Company’s common stock is listed.

          (j) “Investment Company Act” means the Investment Company Act of 1940, as amended.

          (k) “Investments” means the investments of the Company and the Subsidiaries.

          (l) “LIBOR” means London Interbank Offered Rate.

          (m) “MFA” means MFA Mortgage Investments, Inc., a Maryland corporation.

          (n) “NYSE” means the New York Stock Exchange, Inc.

          (o) “Partnership Agreement” means the agreement of limited partnership of the
Operating Partnership, as amended, restated or supplemented from time to time.

          (p) “Person” means any individual, corporation, partnership, joint venture, limited
liability company, estate, trust, unincorporated association, any federal, state, county or
municipal government or any bureau, department or agency thereof and any fiduciary acting in such
capacity on behalf of any of the foregoing.

          (q) “REIT” means a “real estate investment trust” as defined under the Code.

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

          (s) “Special Unit” shall mean the limited partner interest in the Operating
Partnership entitling MFA Manager (Incentive), LLC, a Delaware limited liability company, to an
incentive allocation and distribution.

          (t) “Stockholders’ Equity” means:

               (i) the sum of the net proceeds from any issuances of the Company’s equity securities since
inception (allocated on a pro rata daily basis for such issuances during the fiscal quarter of any
such issuance), plus

               (ii) the Company’s retained earnings at the end of the most recently completed quarter
(without taking into account any non-cash equity compensation expense incurred in current or prior
periods), less

               (iii) any amount that the Company pays for repurchases of its common stock since inception,
any unrealized gains, losses or other items that do not affect realized net income

- 2 -

 

(regardless of whether such items are included in other comprehensive income or loss, or in
net income), as adjusted to exclude

               (iv) one-time events pursuant to changes in GAAP and certain non-cash charges after
discussions between the Manager and the Company’s Independent Directors and approved by a majority
of the Company’s Independent Directors.

     For purposes of calculating Stockholders’ Equity, outstanding limited partner interests in the Operating Partnership (other than the
Special Unit and limited partner interests held by the Company) shall be treated as outstanding shares of capital stock of the Company.

          (u) “Subsidiary” means any subsidiary of the Company; any partnership, the general
partner of which is the Company or any subsidiary of the Company; any limited liability company,
the managing member of which is the Company or any subsidiary of the Company; and 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 the Company or any
subsidiary of the Company. Intially, the Subsidiaries shall be the Operating Partnership, Asset I, Asset II and TRS.

          (v) “Treasury Regulations” means the regulations promulgated under the Code as amended
from time to time.

     Section 2. Appointment and Duties of the Manager.

          (a) The Company and each of the Subsidiaries hereby appoints the Manager to manage the assets
of the Company and the Subsidiaries subject to the further terms and conditions set forth in this
Agreement and the Manager hereby agrees to use its commercially reasonable efforts to perform each
of the duties set forth herein. The appointment of the Manager shall be exclusive to the Manager
except to the extent that the Manager otherwise agrees, in its sole and absolute discretion, and
except to the extent that the Manager elects, pursuant to the terms of this Agreement, to cause the
duties of the Manager hereunder to be provided by third parties.

          (b) The Manager, in its capacity as manager of the assets and the day-to-day operations of the
Company and the Subsidiaries, at all times will be subject to the supervision of the Company’s
Board of Directors and will have only such functions and authority as the Company may delegate to
it including, without limitation, the functions and authority identified herein and delegated to
the Manager hereby. The Manager will be responsible for the day-to-day operations of the Company
and the Subsidiaries and will perform (or cause to be performed) such services and activities
relating to the assets and operations of the Company and the Subsidiaries as may be appropriate,
including, without limitation:

               (i) serving as the Company’s and the Subsidiaries’ consultant with respect to the periodic
review of the investment guidelines and other parameters for the Investments, financing activities
and operations, any modifications to which shall be approved by a majority of the Independent
Directors (such guidelines as initially approved and attached hereto as Exhibit A, as the same may
be modified with such approval, the “Guidelines”), and other policies for approval by the
Board of Directors;

               (ii) investigating, analyzing and selecting possible investment opportunities and acquiring,
financing, retaining, selling, restructuring or disposing of Investments consistent with the
Guidelines;

               (iii) with respect to prospective purchases, sales or exchanges of Investments, conducting
negotiations on behalf of the Company and the Subsidiaries with sellers, purchasers and brokers
and, if applicable, their respective agents and representatives;

- 3 -

 

               (iv) negotiating and entering into, on behalf of the Company and the Subsidiaries, repurchase
agreements, credit finance agreements, securitizations, commercial papers, interest rate swap
agreements and other hedging instruments, custodial agreements, warehouse facilities and all other agreements and
engagements required for the Company and the Subsidiaries to conduct their business;

               (v) engaging and supervising, on behalf of the Company and the Subsidiaries and at the
Company’s expense, independent contractors which provide investment banking, securities brokerage,
mortgage brokerage, other financial services, due diligence services, underwriting review services,
legal and accounting services, and all other services as may be required relating to Investments;

               (vi) coordinating and managing operations of any joint venture or co-investment interests held
by the Company and the Subsidiaries and conducting all matters with the joint venture or
co-investment partners;

               (vii) providing executive and administrative personnel, office space and office services
required in rendering services to the Company and the Subsidiaries;

               (viii) administering the day-to-day operations and performing and supervising the performance
of such other administrative functions necessary to the management of the Company and the
Subsidiaries as may be agreed upon by the Manager and the Board of Directors, including, without
limitation, the collection of revenues and the payment of the debts and obligations of the Company
and the Subsidiaries and maintenance of appropriate computer and technological services to perform
such administrative functions;

               (ix) communicating on behalf of the Company and the Subsidiaries with the holders of any of
their equity or debt securities as required to satisfy the reporting and other requirements of any
governmental bodies or agencies or trading markets and to maintain effective relations with such
holders;

               (x) counseling the Company in connection with policy decisions to be made by the Board of
Directors;

               (xi) evaluating and recommending to the Board of Directors hedging strategies and engaging in
hedging activities on behalf of the Company and the Subsidiaries, consistent with such strategies
as so modified from time to time, with the Company’s qualification as a REIT and with the
Guidelines;

               (xii) counseling the Company regarding the maintenance of its qualification as a REIT and
monitoring compliance with the various REIT qualification tests and other rules set out in the Code
and Treasury Regulations thereunder and using commercially reasonable efforts to cause the Company
to qualify for taxation as a REIT;

               (xiii) counseling the Company and the Subsidiaries regarding the maintenance of their
exemptions from the status of an investment company required to register under the Investment
Company Act, monitoring compliance with the requirements for maintaining such exemptions and using
commercially reasonable efforts to cause them to maintain such exemptions from such status;

               (xiv) assisting the Company and the Subsidiaries in developing criteria for asset purchase
commitments that are specifically tailored to the Company’s investment objectives and making
available to the Company and the Subsidiaries its knowledge and experience with respect to

- 4 -

 

mortgage-backed securities (“MBS”), mortgage loans, real estate, real estate-related
securities, other real estate-related assets and non-real estate-related assets;

               (xv) furnishing reports and statistical and economic research to the Company and the
Subsidiaries regarding their activities and services performed for the Company and the Subsidiaries
by the Manager;

               (xvi) monitoring the operating performance of Investments and providing periodic reports with
respect thereto to the Board of Directors, including comparative information with respect to such
operating performance and budgeted or projected operating results;

               (xvii) investing and reinvesting any moneys and securities of the Company and the Subsidiaries
(including investing in short-term Investments pending investment in other Investments, payment of
fees, costs and expenses, or payments of dividends or distributions to stockholders and partners of
the Company and the Subsidiaries) and advising the Company and the Subsidiaries as to their capital
structure and capital raising;

               (xviii) causing the Company and the Subsidiaries to retain qualified accountants, auditors and legal
counsel, as applicable, to assist in developing appropriate accounting procedures and systems,
internal controls and other compliance procedures and testing systems with respect to financial
reporting obligations and compliance with the provisions of the Code applicable to REITs and to
conduct quarterly compliance reviews with respect thereto;

               (xix) assisting the Company and the Subsidiaries in qualifying to do business in all
applicable jurisdictions and to obtain and maintain all appropriate licenses;

               (xx) assisting the Company and the Subsidiaries in complying with all regulatory requirements
applicable to them in respect of their business activities, including preparing or causing to be
prepared all financial statements required under applicable regulations and contractual
undertakings and all reports and documents, if any, required under the Exchange Act, the Securities
Act, or by the NYSE;

               (xxi) assisting the Company and the Subsidiaries in taking all necessary action to enable them
to make required tax filings and reports, including soliciting stockholders and partners for
required information to the extent required by the provisions of the Code applicable to REITs;

               (xxii) placing, or arranging for the placement of, all orders pursuant to the Manager’s
investment determinations for the Company and the Subsidiaries, either directly with the issuer or
with a broker or dealer (including any affiliated broker or dealer);

               (xxiii) handling and resolving all claims, disputes or controversies (including all
litigation, arbitration, settlement or other proceedings or negotiations) in which the Company
and/or the Subsidiaries may be involved or to which they may be subject arising out of their
day-to-day operations (other than with the Manager or its affiliates), subject to such limitations
or parameters as may be imposed from time to time by the Board of Directors;

               (xxiv) using commercially reasonable efforts to cause expenses incurred by the Company and the
Subsidiaries or on their behalf to be commercially reasonable or commercially customary and within
any budgeted parameters or expense guidelines set by the Board of Directors from time to time;

- 5 -

 

               (xxv) representing and making recommendations to the Company and the Subsidiaries in
connection with the purchase and financing of, and commitment to purchase and finance, MBS,
mortgage loans (including on a portfolio basis), real estate, real estate-related securities, other
real estate-related assets and non-real estate-related assets, and the sale and commitment to sell
such assets;

               (xxvi) advising the Company and the Subsidiaries with respect to obtaining appropriate
repurchase agreements, warehouse facilities or other secured and unsecured forms of borrowing for
their assets;

               (xxvii) advising the Company and the Subsidiaries with respect to and structuring long term
financing vehicles for their portfolio of assets, and offering and selling securities publicly or
privately in connection with any such structured financing;

               (xxviii) performing such other services as may be required from time to time for management
and other activities relating to the assets and business of the Company and the Subsidiaries as the
Board of Directors shall reasonably request or the Manager shall deem appropriate under the
particular circumstances; and

               (xxix) using commercially reasonable efforts to cause the Company and the Subsidiaries to
comply with all applicable laws.

Without limiting the foregoing, the Manager will perform portfolio management services (the
“Portfolio Management Services”) on behalf of the Company and the Subsidiaries with respect
to the Investments. Such services will include, but not be limited to, consulting with the Company
and the Subsidiaries on the purchase and sale of, and other investment opportunities in connection
with, the Company’s portfolio of assets; the collection of information and the submission of
reports pertaining to the Company’s assets, interest rates and general economic conditions;
periodic review and evaluation of the performance of the Company’s portfolio of assets; acting as
liaison between the Company and the Subsidiaries and banking, mortgage banking, investment banking
and other parties with respect to the purchase, financing and disposition of assets; and other
customary functions related to portfolio management. Additionally, the Manager will perform
monitoring services (the “Monitoring Services”) on behalf of the Company and the
Subsidiaries with respect to any loan servicing activities provided by third parties. Such
Monitoring Services will include, but not be limited to, negotiating servicing agreements; acting
as a liaison between the servicers of the assets and the Company and the Subsidiaries; review of
servicers’ delinquency, foreclosure and other reports on assets; supervising claims filed under any
insurance policies; and enforcing the obligation of any servicer to repurchase assets.

          (c) For the period and on the terms and conditions set forth in this Agreement, the Company
and each of the Subsidiaries hereby constitutes, appoints and authorizes the Manager as its true
and lawful agent and attorney-in-fact, in its name, place and stead, to negotiate, execute, deliver
and enter into such credit finance agreements and arrangements and securities repurchase and
reverse repurchase agreements and arrangements, brokerage agreements, interest rate swap agreements, custodial agreements
and such other agreements, instruments and authorizations on their behalf, on such terms and
conditions as the Manager, acting in its sole and absolute discretion, deems necessary or
appropriate. This power of attorney is deemed to be coupled with an interest.

          (d) The Manager may enter into agreements with other parties, including its affiliates, for
the purpose of engaging one or more parties for and on behalf, and at the sole cost and expense, of
the Company and the Subsidiaries to provide property management, asset management, leasing,
development and/or other services to the Company and the Subsidiaries (including, without
limitation, Portfolio Management Services and Monitoring Services) pursuant to agreement(s) with
terms

- 6 -

 

which are then customary for agreements regarding the provision of services to companies that
have assets similar in type, quality and value to the assets of the Company and the Subsidiaries;
provided that (i) any such agreements entered into with affiliates of the Manager shall be (A) on
terms no more favorable to such affiliate than would be obtained from a third party on an
arm’s-length basis and (B) to the extent the same do not fall within the provisions of the
Guidelines, approved by a majority of the Independent Directors, (ii) with respect to Portfolio
Management Services, (A) any such agreements shall be subject to the Company’s prior written
approval and (B) the Manager shall remain liable for the performance of such Portfolio Management
Services, and (iii) with respect to Monitoring Services, any such agreements shall be subject to
the Company’s prior written approval.

          (e) To the extent that the Manager deems necessary or advisable, the Manager may, from time to
time, propose to retain one or more additional entities for the provision of sub-advisory services
to the Manager in order to enable the Manager to provide the services to the Company and the
Subsidiaries specified by this Agreement; provided that any such agreement (i) shall be on terms
and conditions substantially identical to the terms and conditions of this Agreement or otherwise
not adverse to the Company and the Subsidiaries, and (ii) shall be approved by the Independent
Directors of the Company.

          (f) The Manager may retain, for and on behalf and at the sole cost and expense of the Company
and the Subsidiaries, such services of accountants, legal counsel, appraisers, insurers, brokers,
transfer agents, registrars, developers, investment banks, financial advisors, due diligence firms,
underwriting review firms, banks and other lenders and others as the Manager deems necessary or
advisable in connection with the management and operations of the Company and the Subsidiaries.
Notwithstanding anything contained herein to the contrary, the Manager shall have the right to
cause any such services to be rendered by its employees or affiliates. Except as otherwise
provided herein, the Company and the Subsidiaries shall pay or reimburse the Manager or its
affiliates performing such services for the cost thereof; provided that such costs and
reimbursements are no greater than those which would be payable to outside professionals or
consultants engaged to perform such services pursuant to agreements negotiated on an arm’s-length
basis.

          (g) The Manager may effect transactions by or through the agency of another person with it or
its affiliates which have an arrangement under which that party or its affiliates will from time to
time provide to or procure for the Manager and/or its affiliates goods, services or other benefits
(including, but not limited to, research and advisory services; economic and political analysis,
including valuation and performance measurement; market analysis, data and quotation services;
computer hardware and software incidental to the above goods and services; clearing and custodian
services and investment related publications), the nature of which is such that provision can
reasonably be expected to benefit the Company and the Subsidiaries as a whole and may contribute to
an improvement in the performance of the Company and the Subsidiaries or the Manager or its
affiliates in providing services to the Company and the Subsidiaries on terms that no direct
payment is made but instead the Manager and/or its affiliates undertake to place business with that
party.

          (h) In executing portfolio transactions and selecting brokers or dealers, the Manager will use
its best efforts to seek on behalf of the Company and the Subsidiaries the best overall terms
available. In assessing the best overall terms available for any transaction, the Manager shall
consider all factors that it deems relevant, including, without limitation, the breadth of the
market in the security, the price of the security, the financial condition and execution capability
of the broker or dealer, and the reasonableness of the commission, if any, both for the specific
transaction and on a continuing basis. In evaluating the best overall terms available, and in
selecting the broker or dealer to execute a particular transaction, the Manager may also consider
whether such broker or dealer furnishes research and other information or services to the Manager.

- 7 -

 

          (i) The Manager has no duty or obligation to seek in advance competitive bidding for the most
favorable commission rate applicable to any particular purchase, sale or other transaction, or to
select any broker-dealer on the basis of its purported or “posted” commission rate, but will
endeavor to be aware of the current level of charges of eligible broker-dealers and to minimize the
expense incurred for effecting purchases, sales and other transactions to the extent consistent
with the interests and policies of the Company and the Subsidiaries. Although the Manager will
generally seek competitive commission rates, it is not required to pay the lowest commission or
commission equivalent, provided that such decision is made in good faith to promote the best
interests of the Company and the Subsidiaries.

          (j) As frequently as the Manager may deem necessary or advisable, or at the direction of the
Board of Directors, the Manager shall, at the sole cost and expense of the Company and the
Subsidiaries, prepare, or cause to be prepared, with respect to any Investment, reports and other
information with respect to such Investment as may be reasonably requested by the Company.

          (k) The Manager shall prepare, or cause to be prepared, at the sole cost and expense of the
Company and the Subsidiaries, all reports, financial or otherwise, with respect to the Company and
the Subsidiaries reasonably required by the Board of Directors in order for the Company and the
Subsidiaries to comply with their Governing Instruments or any other materials required to be filed
with any governmental body or agency, and shall prepare, or cause to be prepared, all materials and
data necessary to complete such reports and other materials including, without limitation, an
annual audit of the Company’s and the Subsidiaries’ books of account by a nationally recognized
registered independent public accounting firm.

          (l) The Manager shall prepare regular reports for the Board of Directors to enable the Board
of Directors to review the Company’s and the Subsidiaries’ acquisitions, portfolio composition and
characteristics, credit quality, performance and compliance with the Guidelines and policies
approved by the Board of Directors.

          (m) Notwithstanding anything contained in this Agreement to the contrary, except to the extent
that the payment of additional moneys is proven by the Company to have been required as a direct
result of the Manager’s acts or omissions which result in the right of the Company and the
Subsidiaries to terminate this Agreement pursuant to Section 15 of this Agreement, the Manager
shall not be required to expend money (“Excess Funds”) in connection with any expenses that
are required to be paid for or reimbursed by the Company and the Subsidiaries pursuant to Section 9
in excess of that contained in any applicable Company Account (as herein defined) or otherwise made
available by the Company and the Subsidiaries to be expended by the Manager hereunder. Failure of
the Manager to expend Excess Funds out-of-pocket shall not give rise or be a contributing factor to
the right of the Company and the Subsidiaries under Section 13(a) of this Agreement to terminate
this Agreement due to the Manager’s unsatisfactory performance.

          (n) In performing its duties under this Section 2, the Manager shall be entitled to rely
reasonably on qualified experts and professionals (including, without limitation, accountants,
legal counsel and other service providers) hired by the Manager at the Company’s and the
Subsidiaries’ sole cost and expense.

     Section 3. Devotion of Time; Additional Activities.

          (a) The Manager and its affiliates will provide the Company and the Subsidiaries with a
management team, including a Chief Executive Officer, President, a Principal Financial Officer, a
Chief Investment Officer, and other support personnel, to provide the management services to be
provided by the Manager to the Company and the Subsidiaries hereunder, the members of which team

- 8 -

 

shall devote such portion of their time to the management of the Company and the Subsidiaries as is
to enable the Company and the Subsidiaries to operate their business.

          (b) The Manager agrees to offer the Company and the Subsidiaries the right to participate in
all investment opportunities that the Manager determines are appropriate for the Company and the
Subsidiaries in view of their investment objectives, policies and strategies, and other relevant
factors, subject to the exception that the Company and the Subsidiaries might not participate in
each such opportunity but will on an overall basis equitably participate with the Manager’s other
clients in relevant investment opportunities in accordance with the Manager’s then prevailing
investment allocation policy. Nothing in this Agreement shall (i) prevent the Manager, MFA or any
of their affiliates, officers, directors, employees or personnel, from engaging in other businesses
or from rendering services of any kind to any other Person, including, without limitation,
investing in, or rendering advisory services to others investing in, any type of business
(including, without limitation, investments that meet the principal investment objectives of the
Company), whether or not the investment objectives or policies of any such other Person or entity
are similar to those of the Company or (ii) in any way bind or restrict the Manager, MFA or any of
their affiliates, officers, directors, employees or personnel from buying, selling or trading any
securities or investments for their own accounts or for the account of others for whom the Manager,
MFA or any of their affiliates, officers, directors, employees or personnel may be acting. When
making decisions where a conflict of interest may arise, the Manager will endeavor to allocate
investment and financing opportunities in a fair and equitable manner over time as between the
Company and the Subsidiaries and the Manager’s other clients, in each case in accordance with the
Manager’s then prevailing allocation policy.

          (c) Managers, partners, officers, employees, personnel and agents of the Manager or affiliates
of the Manager may serve as directors, officers, employees, personnel, agents, nominees or
signatories for the Company and/or any Subsidiary, to the extent permitted by their Governing
Instruments or by any resolutions duly adopted by the Board of Directors pursuant to the Company’s
Governing Instruments. When executing documents or otherwise acting in such capacities for the
Company or the Subsidiaries, such persons shall use their respective titles in the Company or the
Subsidiaries.

     Section 4. Agency. The Manager shall act as agent of the Company and the Subsidiaries
in making, acquiring, financing and disposing of Investments, disbursing and collecting the funds
of the Company and the Subsidiaries, paying the debts and fulfilling the obligations of the Company
and the Subsidiaries, supervising the performance of professionals engaged by or on behalf of the
Company and the Subsidiaries and handling, prosecuting and settling any claims of or against the
Company and the Subsidiaries, the Board of Directors, holders of the Company’s securities or
representatives or properties of the Company and the Subsidiaries.

     Section 5. Bank Accounts. At the direction of the Board of Directors, the Manager may
establish and maintain one or more bank accounts in the name of the Company or any Subsidiary (any
such account, a “Company Account”), and may collect and deposit funds into any such Company
Account or Company Accounts, and disburse funds from any such Company Account or Company Accounts,
under such terms and conditions as the Board of Directors may approve; and the Manager shall from
time to time render appropriate accountings of such collections and payments to the Board of
Directors and, upon request, to the auditors of the Company or any Subsidiary.

     Section 6. Records; Confidentiality. The Manager shall maintain appropriate books of
accounts and records relating to services performed under this Agreement, and such books of account
and records shall be accessible for inspection by representatives of the Company or any Subsidiary
at any time

- 9 -

 

during normal business hours upon reasonable advance notice. The Manager shall keep
confidential any and all information obtained in connection with the services rendered under this
Agreement and shall not disclose any such information (or use the same except in furtherance of its
duties under this Agreement) to unaffiliated third parties except (i) with the prior written
consent of the Board of Directors; (ii) to legal counsel, accountants and other professional
advisors; (iii) to appraisers, financing sources and others in the ordinary course of the Company’s
business; (iv) to governmental officials having jurisdiction over the Company or any Subsidiary;
(v) in connection with any governmental or regulatory filings of the Company or any Subsidiary or
disclosure or presentations to Company investors; (vi) as required by law or legal process to
which the Manager or any Person to whom disclosure is permitted hereunder is a party; or (vii) to the extent such information is otherwise publicly available. The
foregoing shall not apply to information which has previously become publicly available through the
actions of a Person other than the Manager not resulting from the Manager’s violation of this
Section 6. The provisions of this Section 6 shall survive the expiration or earlier termination of
this Agreement for a period of one year.

     Section 7. Obligations of Manager; Restrictions.

          (a) The Manager shall require each seller or transferor of investment assets to the Company
and the Subsidiaries to make such representations and warranties regarding such assets as may, in
the judgment of the Manager, be necessary and appropriate. In addition, the Manager shall take
such other action as it deems necessary or appropriate with regard to the protection of the
Investments.

          (b) The Manager shall refrain from any action that, in its sole judgment made in good faith,
(i) is not in compliance with the Guidelines, (ii) would adversely and materially affect the status of the Company
as a REIT under the Code, (iii) would adversely and materially affect the Company’s or any Subsidiary’s status as
an entity intended to be exempted or excluded from investment company status under the Investment
Company Act or (iv) would violate any law, rule or regulation of any governmental body or agency
having jurisdiction over the Company or any Subsidiary or that would otherwise not be permitted by
the Company’s Governing Instruments. If the Manager is ordered to take any such action by the
Board of Directors, the Manager shall promptly notify the Board of Directors of the Manager’s
judgment that such action would adversely and materially affect such status or violate any such law, rule or
regulation or the Governing Instruments. Notwithstanding the foregoing, the Manager, its directors,
members, officers, stockholders, managers, personnel, employees and any Person controlling or
controlled by the Manager and any Person providing sub-advisory services to the Manager shall not
be liable to the Company or any Subsidiary, the Board of Directors, or the Company’s or any
Subsidiary’s stockholders or partners, for any act or omission by the Manager, its directors,
officers, stockholders or employees except as provided in Section 11 of this Agreement.

          (c) The Board of Directors shall periodically review the Guidelines and the Company’s
portfolio of Investments but will not review each proposed investment, except as otherwise provided
herein. If a majority of the Independent Directors determine in their periodic review of
transactions that a particular transaction does not comply with the Guidelines, then a majority of
the Independent Directors will consider what corrective action, if any, can be taken. The Manager
shall be permitted to rely upon the direction of the Secretary of the Company to evidence the
approval of the Board of Directors or the Independent Directors with respect to a proposed
investment.

          (d) Neither the Company nor the Subsidiaries shall invest in any security structured or issued
by an entity managed by the Manager or any affiliate thereof, unless (i) the Investment is made in
accordance with the Guidelines; (ii) such Investment is approved in advance by a majority of the
Independent Directors; and (iii) the Investment is made in accordance with applicable laws.

- 10 -

 

          (e) The Manager shall at all times during the term of this Agreement maintain “errors and
omissions” insurance coverage and other insurance coverage which is customarily carried by
property, asset and investment managers performing functions similar to those of the Manager under
this Agreement with respect to assets similar to the assets of the Company and the Subsidiaries, in
an amount which is comparable to that customarily maintained by other managers or servicers of
similar assets.

     Section 8. Compensation.

          (a) During the Initial Term and any Renewal Term (each as defined below), the Company shall
pay the Manager the Base Management Fee quarterly in arrears commencing with the quarter in which
this Agreement was executed (with such initial payment pro-rated based on the number of days during
such quarter that this Agreement was in effect).

          (b) The Manager shall compute each installment of the Base Management Fee within 30 days after
the end of the fiscal quarter with respect to which such installment is payable. A copy of the
computations made by the Manager to calculate such installment shall thereafter, for informational
purposes only and subject in any event to Section 13(a) of this Agreement, promptly be delivered to
the Board of Directors and, upon such delivery, payment of such installment of the Base Management
Fee shown therein shall be due and payable in cash no later than the date which is five business
days after the date of delivery to the Board of Directors of such computations.

          (c) The Base Management Fee is subject to adjustment pursuant to and in accordance with the
provisions of Section 13(a) of this Agreement.

          (d) The Manager shall compute each installment of the incentive allocation and distribution
payable in respect of the Special Unit within 30 days after the end of each fiscal quarter with
respect to which such installment is payable. A copy of the computations made by the Manager to
calculate such installment shall thereafter, for informational purposes only and subject in any
event to Section 13(a) of this Agreement, promptly be delivered to the Board of Directors.

     Section 9. Expenses of the Company. The Company shall pay all of its expenses and
shall reimburse the Manager for documented expenses of the Manager incurred on its behalf
(collectively, the “Expenses”) excepting those expenses that are specifically the
responsibility of the Manager as set forth herein. Such costs and reimbursements shall be in
amounts which are greater than those which would be payable to outside professionals or consultants
engaged to perform such services pursuant to agreements negotiated on an arm’s-length basis.
Expenses include all costs and expenses which are expressly designated elsewhere in this Agreement
as the Company’s, together with the following:

               (i) expenses in connection with the issuance and transaction costs incident to the
acquisition, disposition and financing of Investments;

               (ii) costs of legal, tax, accounting, consulting, auditing, administrative and other similar
services rendered for the Company and the Subsidiaries by providers retained by the Manager or, if
provided by the Manager’s personnel, in amounts which are no greater than those which would be
payable to outside professionals or consultants engaged to perform such services pursuant to
agreements negotiated on an arm’s-length basis;

               (iii) the compensation and expenses of the Company’s directors and the cost of liability
insurance to indemnify the Company’s directors and officers;

- 11 -

 

               (iv) costs associated with the establishment and maintenance of any of the Company’s
repurchase agreements, warehouse facilities and other secured and unsecured forms of borrowings
(including commitment fees, accounting fees, legal fees, closing and other similar costs) or any of
the Company’s or any Subsidiary’s securities offerings;

               (v) expenses connected with communications to holders of the Company’s or any Subsidiary’s
securities and other bookkeeping and clerical work necessary in maintaining relations with holders
of such securities and in complying with the continuous reporting and other requirements of
governmental bodies or agencies, including, without limitation, all costs of preparing and filing
required reports with the Securities and Exchange Commission, the costs payable by the Company to
any transfer agent and registrar in connection with the listing and/or trading of the Company’s
stock on any exchange, the fees payable by the Company to any such exchange in connection with its
listing, costs of preparing, printing and mailing the Company’s annual report to its stockholders
and proxy materials with respect to any meeting of the Company’s stockholders;

               (vi) costs associated with any computer software or hardware, electronic equipment or
purchased information technology services from third party vendors that is used for the Company and
the Subsidiaries;

               (vii) expenses incurred by managers, officers, personnel and agents of the Manager for travel
on the Company’s behalf and other out-of-pocket expenses incurred by managers, officers, personnel
and agents of the Manager in connection with the purchase, financing, refinancing, sale or other
disposition of an Investment or establishment and maintenance of any repurchase agreements,
warehouse facilities and other secured and unsecured forms of borrowings or any of the Company’s or
any Subsidiary’s securities offerings;

               (viii) costs and expenses incurred with respect to market information systems and
publications, research publications and materials and settlement, clearing and custodial fees and
expenses;

               (ix) compensation and expenses of the Company’s custodian and transfer agent, if any;

               (x) the costs of maintaining compliance with all federal, state and local rules and
regulations or any other regulatory agency;

               (xi) all taxes and license fees;

               (xii) all insurance costs incurred in connection with the operation of the Company’s business,
except for the costs attributable to the insurance that the Manager elects to carry for itself and
its personnel;

               (xiii) costs and expenses incurred in contracting with third parties, including affiliates of
the Manager, for the servicing and special servicing of the assets of the Company and the
Subsidiaries;

               (xiv) all other costs and expenses relating to the business of the Company and the
Subsidiaries and investment operations, including, without limitation, the costs and expenses of
acquiring, owning, protecting, maintaining, developing and disposing of Investments, including
appraisal, reporting, audit and legal fees;

- 12 -

 

               (xv) expenses relating to any office(s) or office facilities, including, but not limited to,
disaster backup recovery sites and facilities, maintained for the Company and the Subsidiaries or
Investments separate from the office or offices of the Manager;

               (xvi) expenses connected with the payments of interest, dividends or distributions in cash or
any other form authorized or caused to be made by the Board of Directors to or on account of
holders of the Company’s or any Subsidiary’s securities, including, without limitation, in
connection with any dividend reinvestment plan;

               (xvii) any judgment or settlement of pending or threatened proceedings (whether civil,
criminal or otherwise) against the Company or any Subsidiary, or against any trustee, director or
officer of the Company or of any Subsidiary in his capacity as such for which the Company or any
Subsidiary is required to indemnify such trustee, director or officer by any court or governmental
agency; and

               (xviii) all other expenses actually incurred by the Manager (except as described below) which
are reasonably necessary for the performance by the Manager of its duties and functions under this
Agreement.

     The Company shall have no obligation to reimburse the Manager for the salary, bonus, benefit
and other compensation costs of the Manager’s personnel who provide services to the Company under
this Agreement, except that, the Company shall reimburse the Manager for the Company’s allocable
share of the compensation paid by the Manager to its personnel serving as the Company’s Principal
Financial Officer and personnel hired by the Manager as in-house accounting, legal and back-office
resources to the Company. The Company’s share of such costs shall be based upon the percentage of
time devoted by such personnel of the Manager to the Company’s affairs. The Manager shall provide
the Company with such written detail as the Company may reasonably request to support the
determination of the Company’s share of such costs. The Manager shall be responsible for the
compensation paid by the Manager to its personnel serving as the Company’s Chief Executive Officer,
Chief Investment Officer and Executive Vice President, Chief Portfolio Manager and Senior Vice
President and the Manager’s investment professionals.

     In addition, the Company will be required to pay the Company’s pro rata portion of rent,
telephone, utilities, office furniture, equipment, machinery and other office, internal and
overhead expenses of the Manager and its affiliates required for the operations of the Company and
the Subsidiaries. These expenses will be allocated between the Manager and the Company based on the
ratio of the Company’s proportion of gross assets compared to all remaining gross assets managed or
held by MFA or managed or held by the Manager as calculated at each quarter end. The Manager and
the Company will modify this allocation methodology, subject to the Independent Directors’ approval
if the allocation becomes inequitable (i.e., if the Company becomes highly leveraged compared to
MFA or the Manager’s or MFA’s other funds and accounts).

     The Manager may, at its option, elect not to seek reimbursement for certain expenses during a
given quarterly period, which determination shall not be deemed to construe a waiver of
reimbursement for similar expenses in future periods. In the event that the Company’s initial
public offering is consummated, the Company will reimburse the Manager for all organizational,
formation and offering costs it has incurred on behalf of the Company.

- 13 -

 

     The provisions of this Section 9 shall survive the expiration or earlier termination of this
Agreement to the extent such expenses have previously been incurred or are incurred in connection
with such expiration or termination.

     Section 10. Calculations of Expenses. The Manager shall prepare a statement
documenting the Expenses of the Company and the Subsidiaries and the Expenses incurred by the
Manager on behalf of the Company and the Subsidiaries during each fiscal quarter, and shall deliver
such statement to the Company within 30 days after the end of each fiscal quarter. Expenses
incurred by the Manager on behalf of the Company and the Subsidiaries shall be reimbursed by the
Company to the Manager on the fifth business day immediately following the date of delivery of such
statement; provided, however, that such reimbursements may be offset by the Manager against amounts
due to the Company and the Subsidiaries. The provisions of this Section 10 shall survive the
expiration or earlier termination of this Agreement.

     Section 11. Limits of Manager Responsibility; Indemnification.

          (a) The Manager assumes no responsibility under this Agreement other than to render the
services called for under this Agreement in good faith and shall not be responsible for any action
of the Board of Directors in following or declining to follow any advice or recommendations of the
Manager, including as set forth in Section 7(b) of this Agreement. The Manager, its officers,
stockholders, members, managers, personnel, directors, any Person controlling or controlled by the
Manager and any Person providing sub-advisory services to the Manager and the officers, directors,
managers and personnel of the Manager, its officers, directors, managers and personnel will not be
liable to the Company or any Subsidiary, to the Board of Directors, or the Company’s or any
Subsidiary’s stockholders, members or partners for any acts or omissions by any such Person
(including, without limitation, trade errors that may result from ordinary negligence, such as
errors in the investment decision making process or in the trade process), pursuant to or in
accordance with this Agreement, except by reason of acts constituting bad faith, willful
misconduct, gross negligence or reckless disregard of the Manager’s duties under this Agreement, as
determined by a final non-appealable order of a court of competent jurisdiction. The Company and
the Operating Partnership shall, to the full extent lawful, reimburse, indemnify and hold the
Manager, its officers, stockholders, directors, members, personnel, any Person controlling or
controlled by the Manager and any Person providing sub-advisory services to the Manager, together
with the managers, officers, directors and personnel of the Manager, its officers, members,
directors, managers and personnel (each a “Manager Indemnified Party”), harmless of and
from any and all expenses, losses, damages, liabilities, demands, charges and claims of any nature
whatsoever (including attorneys’ fees) in respect of or arising from any acts or omissions of such
Manager Indemnified Party made in good faith in the performance of the Manager’s duties under this
Agreement and not constituting such Manager Indemnified Party’s bad faith, willful misconduct,
gross negligence or reckless disregard of the Manager’s duties under this Agreement.

          (b) The Manager shall, to the full extent lawful, reimburse, indemnify and hold the Company
(or any Subsidiary), its stockholders, directors and officers and each other Person, if any,
controlling the Company (each, a “Company Indemnified Party” and together with a Manager
Indemnified Party, the “Indemnitee”), harmless of and from any and all expenses, losses,
damages, liabilities, demands, charges and claims of any nature whatsoever (including attorneys’
fees) in respect of or arising from the Manager’s bad faith, willful misconduct, gross negligence
or reckless disregard of its duties under this Agreement.

          (c) The Indemnitee will promptly notify the party against whom indemnity is claimed (the
“Indemnitor”) of any claim for which it seeks indemnification; provided, however, that the
failure to so notify the Indemnitor will not relieve the Indemnitor from any liability which it may
have hereunder, except to the extent such failure actually prejudices the Indemnitor. The
Indemnitor shall have

- 14 -

 

the right to assume the defense and settlement of such claim; provided, that the Indemnitor
notifies the Indemnitee of its election to assume such defense and settlement within 30 days after
the Indemnitee gives the Indemnitor notice of the claim. In such case, the Indemnitee will not
settle or compromise such claim, and the Indemnitor will not be liable for any such settlement made
without its prior written consent. If the Indemnitor is entitled to, and does, assume such defense
by delivering the aforementioned notice to the Indemnitee, the Indemnitee will (i) have the right
to approve the Indemnitor’s counsel (which approval will not be unreasonably withheld, delayed or
conditioned), (ii) be obligated to cooperate in furnishing evidence and testimony and in any other
manner in which the Indemnitor may reasonably request and (iii) be entitled to participate in (but
not control) the defense of any such action, with its own counsel and at its own expense.

     Section 12. No Joint Venture. Nothing in this Agreement shall be construed to make
the Company and the Manager partners or joint venturers or impose any liability as such on either
of them.

     Section 13. Term; Termination.

          (a) Until this Agreement is terminated in accordance with its terms, this Agreement shall be
in effect until                     , 2011 (the “Initial Term”) and shall be automatically
renewed for a one-year term each anniversary date thereafter (a “Renewal Term”) unless at
least two-thirds of the Independent Directors or the holders of a majority of the outstanding
shares of common stock (other than those shares held by MFA or its affiliates) agree that (i) there
has been unsatisfactory performance by the Manager that is materially detrimental to the Company
and the Subsidiaries or (ii) the compensation payable to the Manager hereunder is unfair; provided
that the Company shall not have the right to terminate this Agreement under clause (ii) above if
the Manager agrees to continue to provide the services under this Agreement at a reduced fee that
at least two-thirds of the Independent Directors determines to be fair pursuant to the procedure
set forth below. If the Company elects not to renew this Agreement at the expiration of the
Initial Term or any Renewal Term as set forth above, the Company shall deliver to the Manager prior
written notice (the “Termination Notice”) of the Company’s intention not to renew this
Agreement based upon the terms set forth in this Section 13(a) not less than 180 days prior to the
expiration of the then existing term. If the Company so elects not to renew this Agreement, the
Company shall designate the date (the “Effective Termination Date”), not less than 180 days
from the date of the notice, on which the Manager shall cease to provide services under this
Agreement, and this Agreement shall terminate on such date; provided, however, that in the event
that such Termination Notice is given in connection with a determination that the compensation
payable to the Manager is unfair, the Manager shall have the right to renegotiate such compensation
by delivering to the Company, no fewer than 45 days prior to the prospective Effective Termination
Date, written notice (any such notice, a “Notice of Proposal to Negotiate”) of its
intention to renegotiate its compensation under this Agreement. Thereupon, the Company (represented
by the Independent Directors) and the Manager shall endeavor to negotiate in good faith the revised
compensation payable to the Manager under this Agreement. Provided that the Manager and at least
two-thirds of the Independent Directors agree to the terms of the revised compensation to be
payable to the Manager within 45 days following the receipt of the Notice of Proposal to Negotiate,
the Termination Notice shall be deemed of no force and effect and this Agreement shall continue in
full force and effect on the terms stated in this Agreement, except that the compensation payable
to the Manager hereunder shall be the revised compensation then agreed upon by the parties to this
Agreement. The Company and the Manager agree to execute and deliver an amendment to this Agreement
setting forth such revised compensation promptly upon reaching an agreement regarding same. In the
event that the Company and the Manager are unable to agree to the terms of the revised compensation
to be payable to the Manager during such 45-day period, this Agreement shall terminate, such
termination to be effective on the date which is the later of (A) 10 days following the end of such
45-day period and (B) the Effective Termination Date originally set forth in the Termination
Notice.

- 15 -

 

          (b) In recognition of the level of the upfront effort required by the Manager to structure and
acquire the assets of the Company and the Subsidiaries and the commitment of resources by the
Manager, in the event that this Agreement is terminated in accordance with the provisions of
Section 13(a) of this Agreement, the Company shall pay to the Manager, on the date on which such
termination is effective, a termination fee (the “Termination Fee”) equal to three times
the sum of the average annual Base Management Fee earned by the Manager during the 24-month period
immediately preceding the date of such termination, calculated as of the end of the most recently
completed fiscal quarter prior to the date of termination. The obligation of the Company to pay
the Termination Fee shall survive the termination of this Agreement.

          (c) No later than 180 days prior to the anniversary date of this Agreement of any year during
the Initial Term or Renewal Term, the Manager may deliver written notice to the Company informing
it of the Manager’s intention to decline to renew this Agreement, whereupon this Agreement shall
not be renewed and extended and this Agreement shall terminate effective on the anniversary date of
this Agreement next following the delivery of such notice. The Company is not required to pay to
the Manager the Termination Fee if the Manager terminates this Agreement pursuant to this
Section 13(c).

          (d) If this Agreement is terminated pursuant to Section 13, such termination shall be without
any further liability or obligation of either party to the other, except as provided in Sections 6,
9, 10, 13(b), 15(b), and 16 of this Agreement. In addition, Sections 11 and 21 of this Agreement
shall survive termination of this Agreement.

     Section 14. Assignment.

          (a)  Except as set forth in Section 14(b) of this Agreement, this Agreement shall terminate
automatically in the event of its assignment, in whole or in part, by the Manager, unless such
assignment is consented to in writing by the Company with the consent of a majority of the
Independent Directors; provided, however, that no such consent shall be required in the case of an
assignment by the Manager to an affiliate of MFA. Any such permitted assignment shall bind the
assignee under this Agreement in the same manner as the Manager is bound, and the Manager shall be
liable to the Company for all errors or omissions of the assignee under any such assignment. In
addition, the assignee shall execute and deliver to the Company a counterpart of this Agreement
naming such assignee as Manager. This Agreement shall not be assigned by the Company without the
prior written consent of the Manager, except in the case of assignment by the Company to another
REIT or other organization which is a successor (by merger, consolidation, purchase of assets, or
similar transaction) to the Company, in which case such successor organization shall be bound under
this Agreement and by the terms of such assignment in the same manner as the Company is bound under
this Agreement.

          (b) Notwithstanding any provision of this Agreement, the Manager may subcontract and assign
any or all of its responsibilities under Sections 2(b), 2(c) and 2(d) of this Agreement to any of
its affiliates in accordance with the terms of this Agreement applicable to any such subcontract or
assignment, and the Company hereby consents to any such assignment and subcontracting. In
addition, provided that the Manager provides prior written notice to the Company for informational
purposes only, nothing contained in this Agreement shall preclude any pledge, hypothecation or
other transfer of any amounts payable to the Manager under this Agreement. In addition, the
Manager may assign this Agreement to any of its affiliates without the approval of the Company’s
independent directors.

     Section 15. Termination for Cause.

          (a) The Company may terminate this Agreement effective upon 30 days’ prior written notice of
termination from the Company to the Manager, without payment of any Termination

- 16 -

 

Fee, if (i) the Manager, its agents or its assignees materially breaches any provision of this
Agreement and such breach shall continue for a period of 30 days after written notice thereof
specifying such breach and requesting that the same be remedied in such 30-day period (or 45 days
after written notice of such breach if the Manager takes steps to cure such breach within 30 days
of the written notice), (ii) the Manager engages in any act of fraud, misappropriation of funds, or
embezzlement against the Company or any Subsidiary, (iii) there is an event of any gross negligence
on the part of the Manager in the performance of its duties under this Agreement, (iv) there is a
commencement of any proceeding relating to the Manager’s Bankruptcy or insolvency, including an
order for relief in an involuntary bankruptcy case or the Manager authorizing or filing a voluntary
bankruptcy petition, (v) there is a dissolution of the Manager or (vi) the Manager is convicted of
(including a plea of nolo contendere) a felony.

          (b) The Manager may terminate this Agreement effective upon 60 days’ prior written notice of
termination to the Company in the event that the Company shall default in the performance or
observance of any material term, condition or covenant contained in this Agreement and such default
shall continue for a period of 30 days after written notice thereof specifying such default and
requesting that the same be remedied in such 30-day period. The Company is required to pay to the
Manager the Termination Fee if the termination of this Agreement is made pursuant to this
Section 15(b).

          (c) The Manager may terminate this Agreement, without payment of any Termination Fee, in the
event the Company becomes regulated as an “investment company” under the Investment Company Act,
with such termination deemed to have occurred immediately prior to such event.

     Section 16. Action Upon Termination. From and after the effective date of termination
of this Agreement, pursuant to Sections 13 or 15 of this Agreement, the Manager shall not be
entitled to compensation for further services under this Agreement, but shall be paid all
compensation accruing to the date of termination and, if terminated pursuant to Section 13(a) or
Section 15(b), the applicable Termination Fee. Upon such termination, the Manager shall forthwith:

               (i) after deducting any accrued compensation and reimbursement for its expenses to which it is
then entitled, pay over to the Company or a Subsidiary all money collected and held for the account
of the Company or a Subsidiary pursuant to this Agreement;

               (ii) deliver to the Board of Directors a full accounting, including a statement showing all
payments collected by it and a statement of all money held by it, covering the period following the
date of the last accounting furnished to the Board of Directors with respect to the Company or a
Subsidiary; and

               (iii) deliver to the Board of Directors all property and documents of the Company or any
Subsidiary then in the custody of the Manager.

     Section 17. Release of Money or Other Property Upon Written Request. The Manager
agrees that any money or other property of the Company or any Subsidiary held by the Manager under
this Agreement shall be held by the Manager as custodian for the Company or Subsidiary, and the
Manager’s records shall be appropriately marked clearly to reflect the ownership of such money or
other property by the Company or such Subsidiary. Upon the receipt by the Manager of a written
request signed by a duly authorized officer of the Company requesting the Manager to release to the
Company or any Subsidiary any money or other property then held by the Manager for the account of
the Company or any Subsidiary under this Agreement, the Manager shall release such money or other
property to the Company or any Subsidiary within a reasonable period of time, but in no event later
than 30 days following such request. The Manager shall not be liable to the Company, any
Subsidiary, the

- 17 -

 

Independent Directors, or the Company’s or a Subsidiary’s stockholders or partners for any
acts performed or omissions to act by the Company or any Subsidiary in connection with the money or
other property released to the Company or any Subsidiary in accordance with the second sentence of
this Section 17. The Company and any Subsidiary shall indemnify the Manager and its officers,
directors, personnel, managers, and officers and against any and all expenses, losses, damages,
liabilities, demands, charges and claims of any nature whatsoever, which arise in connection with
the Manager’s release of such money or other property to the Company or any Subsidiary in
accordance with the terms of this Section 17. Indemnification pursuant to this provision shall be
in addition to any right of the Manager to indemnification under Section 11 of this Agreement.

     Section 18. Notices. Unless expressly provided otherwise in this Agreement, all
notices, requests, demands and other communications required or permitted under this Agreement
shall be in writing and shall be deemed to have been duly given, made and received when delivered
against receipt or upon actual receipt of (i) personal delivery, (ii) delivery by reputable
overnight courier, (iii) delivery by facsimile transmission with telephonic confirmation or
(iv) delivery by registered or certified mail, postage prepaid, return receipt requested, addressed
as set forth below:

	 	(a)	 	If to the Company:

MFResidential Investments, Inc.

350 Park Avenue

21st Floor

New York, New York 10022

Attention: Timothy W. Korth, Esq.

	 	(b)	 	If to the Manager:

MFA Spartan Manager, LLC

350 Park Avenue

21st Floor

New York, New York 10022

Attention: Timothy W. Korth, Esq.

Either party may alter the address to which communications or copies are to be sent by giving
notice of such change of address in conformity with the provisions of this Section 18 for the
giving of notice.

     Section 19. Binding Nature of Agreement; Successors and Assigns. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal
representatives, successors and permitted assigns as provided in this Agreement.

     Section 20. Entire Agreement. This Agreement contains the entire agreement and
understanding among the parties hereto with respect to the subject matter of this Agreement, and
supersedes all prior and contemporaneous agreements, understandings, inducements and conditions,
express or implied, oral or written, of any nature whatsoever with respect to the subject matter of
this Agreement. The express terms of this Agreement control and supersede any course of
performance and/or usage of the trade inconsistent with any of the terms of this Agreement. This
Agreement may not be modified or amended other than by an agreement in writing signed by the
parties hereto.

     Section 21. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND

- 18 -

 

CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD
TO CONFLICTS OF LAW PRINCIPLES TO THE CONTRARY.

     Section 22. No Waiver; Cumulative Remedies. No failure to exercise and no delay in
exercising, on the part of any party hereto, any right, remedy, power or privilege hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power
or privilege hereunder preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. No
waiver of any provision hereunder shall be effective unless it is in writing and is signed by the
party asserted to have granted such waiver.

     Section 23. Headings. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed part of this Agreement.

     Section 24. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original as against any party whose signature
appears thereon, and all of which shall together constitute one and the same instrument. This
Agreement shall become binding when one or more counterparts of this Agreement, individually or
taken together, shall bear the signatures of all of the parties reflected hereon as the
signatories.

     Section 25. Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

     Section 26. Gender. Words used herein regardless of the number and gender
specifically used, shall be deemed and construed to include any other number, singular or plural,
and any other gender, masculine, feminine or neuter, as the context requires.

[SIGNATURE PAGE FOLLOWS]

- 19 -

 

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

	 	 	 	 	 	 	 	 	 
	 	 	MFRESIDENTIAL INVESTMENTS, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 	 	 
	 

	 	 	 	Title:	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	MFR OPERATING PARTNERSHIP, LP	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	MFRESIDENTIAL INVESTMENTS, INC.,	 	 
	 	 	 	 	Its General Partner	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:	 	 
	 

	 	 	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 	 	 
	

	 	 	MFR ASSET I, LLC	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 	 	 
	 

	 	 	 	Title:	 	 	 	 
	

	 
	 	 	 	 	 	 	 	 
	

	 	 	MFR ASSET II, LLC	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 	 	 
	 

	 	 	 	Title:	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	MFR ASSET (TRS), INC.	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 	 	 
	 

	 	 	 	Title:	 	 	 	 
	

	 
	 	 	 	 	 	 	 	 
	 	 	MFA SPARTAN MANAGER, LLC	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 	 	 
	 

	 	 	 	Title:	 	 	 	 

 

 

Exhibit A

	•	 	No investment shall be made that would cause the Company to fail to qualify as a REIT for
U.S. federal income tax purposes;
	 
	•	 	No investment shall be made that would cause the Company to be required to register as an
investment company under the Investment Company Act;
	 
	•	 	With the exception of real estate and housing, no single industry shall represent greater
than 20% of the securities or aggregate risk exposure in the Company’s portfolio; and
	 
	•	 	Investments in unrated or deeply subordinated Asset-Backed Securities or other securities
that are non-qualifying assets for purposes of the 75% REIT asset test will be limited to an
amount not to exceed 50% of the Company’s stockholders’ equity.

Exh. A-1EX-10.2

Exhibit 10.2

 

FORM OF FIRST AMENDED AND RESTATED

AGREEMENT OF LIMITED PARTNERSHIP

OF

MFR OPERATING PARTNERSHIP, LP

a Delaware limited partnership

 

THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED

UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),

OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD,

TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH

REGISTRATION, UNLESS THE TRANSFEROR DELIVERS TO THE PARTNERSHIP

AN OPINION OF COUNSEL SATISFACTORY TO THE PARTNERSHIP, IN FORM

AND SUBSTANCE SATISFACTORY TO THE PARTNERSHIP, TO THE EFFECT

THAT THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION MAY BE

EFFECTED WITHOUT REGISTRATION UNDER THE SECURITIES ACT AND UNDER

APPLICABLE STATE SECURITIES OR “BLUE SKY” LAWS.

AMENDED AND RESTATED AS OF                        
                , 2008

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page
	ARTICLE I DEFINED TERMS
	 	 	1	 
	 
	 	 	 	 
	ARTICLE II ORGANIZATIONAL MATTERS
	 	 	14	 
	 
	 	 	 	 
	Section 2.1. Organization
	 	 	14	 
	 
	 	 	 	 
	Section 2.2. Name
	 	 	14	 
	 
	 	 	 	 
	Section 2.3. Registered Office and Agent; Principal Office
	 	 	15	 
	 
	 	 	 	 
	Section 2.4. Appointment of the General Partner
	 	 	15	 
	 
	 	 	 	 
	Section 2.5. Power of Attorney
	 	 	15	 
	 
	 	 	 	 
	Section 2.6. Term
	 	 	16	 
	 
	 	 	 	 
	ARTICLE III PURPOSE
	 	 	16	 
	 
	 	 	 	 
	Section 3.1. Purpose and Business
	 	 	16	 
	 
	 	 	 	 
	Section 3.2. Powers
	 	 	16	 
	 
	 	 	 	 
	Section 3.3. Partnership Only for Partnership Purposes Specified
	 	 	17	 
	 
	 	 	 	 
	Section 3.4. Representations and Warranties by the Parties
	 	 	17	 
	 
	 	 	 	 
	ARTICLE IV CAPITAL CONTRIBUTIONS
	 	 	18	 
	 
	 	 	 	 
	Section 4.1. Capital Contributions of the Partners
	 	 	18	 
	 
	 	 	 	 
	Section 4.2. Classes of Partnership Units
	 	 	18	 
	 
	 	 	 	 
	Section 4.3. Issuances of Additional Partnership Interests
	 	 	19	 
	 
	 	 	 	 
	Section 4.4. Additional Funds and Capital Contributions
	 	 	20	 
	 
	 	 	 	 
	Section 4.5. Equity Incentive Plan
	 	 	21	 
	 
	 	 	 	 
	Section 4.6. LTIP Units
	 	 	22	 
	 
	 	 	 	 
	Section 4.7. Conversion of LTIP Units
	 	 	25	 
	 
	 	 	 	 
	Section 4.8. Issuance of Special Units
	 	 	27	 
	 
	 	 	 	 
	Section 4.9. Characterization as Profits Interests
	 	 	27	 
	 
	 	 	 	 
	Section 4.10. No Interest; No Return
	 	 	27	 
	 
	 	 	 	 
	Section 4.11. Other Contribution Provisions
	 	 	27	 
	 
	 	 	 	 
	Section 4.12. Not Publicly Traded
	 	 	28	 
	 
	 	 	 	 
	ARTICLE V DISTRIBUTIONS
	 	 	28	 
	 
	 	 	 	 
	Section 5.1. Requirement and Characterization of Distributions
	 	 	28	 
	 
	 	 	 	 
	Section 5.2. Distributions When Special Units Are Outstanding
	 	 	28	 
	 
	 	 	 	 
	Section 5.3. Distributions In-Kind
	 	 	29	 
	 
	 	 	 	 
	Section 5.4. Amounts Withheld
	 	 	29	 
	 
	 	 	 	 
	Section 5.5. Distributions Upon Liquidation
	 	 	29	 

-i-

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 
	 	 	Page
	Section 5.6. Distributions to Reflect Issuance of Additional Partnership Units
	 	 	29	 
	 
	 	 	 	 
	Section 5.7. Restricted Distributions
	 	 	29	 
	 
	 	 	 	 
	ARTICLE VI ALLOCATIONS
	 	 	30	 
	 
	 	 	 	 
	Section 6.1. Timing and Amount of Allocations of Net Income and Net Loss
	 	 	30	 
	 
	 	 	 	 
	Section 6.2. General Allocations
	 	 	30	 
	 
	 	 	 	 
	Section 6.3. Additional Allocation Provisions
	 	 	32	 
	 
	 	 	 	 
	Section 6.4. Tax Allocations
	 	 	34	 
	 
	 	 	 	 
	ARTICLE VII MANAGEMENT AND OPERATIONS OF BUSINESS
	 	 	34	 
	 
	 	 	 	 
	Section 7.1. Management
	 	 	34	 
	 
	 	 	 	 
	Section 7.2. Certificate of Limited Partnership
	 	 	37	 
	 
	 	 	 	 
	Section 7.3. Restrictions on General Partner’s Authority
	 	 	38	 
	 
	 	 	 	 
	Section 7.4. Reimbursement of the General Partner
	 	 	39	 
	 
	 	 	 	 
	Section 7.5. Outside Activities of the General Partner
	 	 	40	 
	 
	 	 	 	 
	Section 7.6. Contracts with Affiliates
	 	 	41	 
	 
	 	 	 	 
	Section 7.7. Indemnification
	 	 	41	 
	 
	 	 	 	 
	Section 7.8. Liability of the General Partner
	 	 	43	 
	 
	 	 	 	 
	Section 7.9. Other Matters Concerning the General Partner
	 	 	44	 
	 
	 	 	 	 
	Section 7.10. Title to Partnership Assets
	 	 	44	 
	 
	 	 	 	 
	Section 7.11. Reliance by Third Parties
	 	 	45	 
	 
	 	 	 	 
	ARTICLE VIII RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
	 	 	45	 
	 
	 	 	 	 
	Section 8.1. Limitation of Liability
	 	 	45	 
	 
	 	 	 	 
	Section 8.2. Management of Business
	 	 	45	 
	 
	 	 	 	 
	Section 8.3. Outside Activities of Limited Partners
	 	 	45	 
	 
	 	 	 	 
	Section 8.4. Return of Capital
	 	 	46	 
	 
	 	 	 	 
	Section 8.5. Adjustment Factor
	 	 	46	 
	 
	 	 	 	 
	Section 8.6. Redemption
	 	 	46	 
	 
	 	 	 	 
	ARTICLE IX BOOKS, RECORDS, ACCOUNTING AND REPORTS
	 	 	49	 
	 
	 	 	 	 
	Section 9.1. Records and Accounting
	 	 	49	 
	 
	 	 	 	 
	Section 9.2. Reports
	 	 	49	 
	 
	 	 	 	 
	ARTICLE X TAX MATTERS
	 	 	50	 
	 
	 	 	 	 
	Section 10.1. Preparation of Tax Returns
	 	 	50	 
	 
	 	 	 	 
	Section 10.2. Tax Elections
	 	 	50	 

-ii-

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 
	 	 	Page
	Section 10.3. Tax Matters Partner
	 	 	50	 
	 
	 	 	 	 
	Section 10.4. Withholding
	 	 	51	 
	 
	 	 	 	 
	Section 10.5. Organizational Expenses
	 	 	51	 
	 
	 	 	 	 
	ARTICLE XI TRANSFERS AND WITHDRAWALS
	 	 	52	 
	 
	 	 	 	 
	Section 11.1. Transfer
	 	 	52	 
	 
	 	 	 	 
	Section 11.2. Transfer of General Partner’s Partnership Interest
	 	 	52	 
	 
	 	 	 	 
	Section 11.3. Transfer of Limited Partners’ Partnership Interests
	 	 	53	 
	 
	 	 	 	 
	Section 11.4. Substituted Limited Partners
	 	 	54	 
	 
	 	 	 	 
	Section 11.5. Assignees
	 	 	55	 
	 
	 	 	 	 
	Section 11.6. General Provisions
	 	 	55	 
	 
	 	 	 	 
	ARTICLE XII ADMISSION OF PARTNERS
	 	 	56	 
	 
	 	 	 	 
	Section 12.1. Admission of Successor General Partner
	 	 	56	 
	 
	 	 	 	 
	Section 12.2. Admission of Additional Limited Partners
	 	 	56	 
	 
	 	 	 	 
	Section 12.3. Amendment of Agreement and Certificate of Limited Partnership
	 	 	57	 
	 
	 	 	 	 
	Section 12.4. Limit on Number of Partners
	 	 	57	 
	 
	 	 	 	 
	ARTICLE XIII DISSOLUTION, LIQUIDATION AND TERMINATION
	 	 	57	 
	 
	 	 	 	 
	Section 13.1. Dissolution
	 	 	57	 
	 
	 	 	 	 
	Section 13.2. Winding Up
	 	 	58	 
	 
	 	 	 	 
	Section 13.3. Deemed Distribution and Recontribution
	 	 	60	 
	 
	 	 	 	 
	Section 13.4. Rights of Limited Partners
	 	 	60	 
	 
	 	 	 	 
	Section 13.5. Notice of Dissolution
	 	 	60	 
	 
	 	 	 	 
	Section 13.6. Cancellation of Certificate of Limited Partnership
	 	 	60	 
	 
	 	 	 	 
	Section 13.7. Reasonable Time for Winding-Up
	 	 	60	 
	 
	 	 	 	 
	ARTICLE XIV PROCEDURES FOR ACTIONS AND CONSENTS OF PARTNERS; AMENDMENTS; MEETINGS
	 	 	60	 
	 
	 	 	 	 
	Section 14.1. Procedures for Actions and Consents of Partners
	 	 	60	 
	 
	 	 	 	 
	Section 14.2. Amendments
	 	 	61	 
	 
	 	 	 	 
	Section 14.3. Meetings of the Partners
	 	 	61	 
	 
	 	 	 	 
	ARTICLE XV GENERAL PROVISIONS
	 	 	62	 
	 
	 	 	 	 
	Section 15.1. Addresses and Notice
	 	 	62	 
	 
	 	 	 	 
	Section 15.2. Titles and Captions
	 	 	62	 
	 
	 	 	 	 
	Section 15.3. Pronouns and Plurals
	 	 	62	 
	 
	 	 	 	 
	Section 15.4. Further Action
	 	 	62	 

-iii-

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 
	 	 	Page
	Section 15.5. Binding Effect
	 	 	62	 
	 
	 	 	 	 
	Section 15.6. Waiver
	 	 	62	 
	 
	 	 	 	 
	Section 15.7. Counterparts
	 	 	62	 
	 
	 	 	 	 
	Section 15.8. Applicable Law
	 	 	63	 
	 
	 	 	 	 
	Section 15.9. Entire Agreement
	 	 	63	 
	 
	 	 	 	 
	Section 15.10. Invalidity of Provisions
	 	 	63	 
	 
	 	 	 	 
	Section 15.11. Limitation to Preserve REIT Qualification
	 	 	63	 
	 
	 	 	 	 
	Section 15.12. No Partition
	 	 	64	 
	 
	 	 	 	 
	Section 15.13. No Third-Party Rights Created Hereby
	 	 	64	 
	 
	 	 	 	 
	Section 15.14. No Rights as Stockholders of General Partner
	 	 	64	 
	 
	 	 	 	 
	Section 15.15. Creditors
	 	 	64	 
	 
	 	 	 	 
	EXHIBIT A PARTNERS AND PARTNERSHIP INTERESTS
	 	 	A-1	 
	 
	 	 	 	 
	EXHIBIT B NOTICE OF REDEMPTION
	 	 	B-1	 
	 
	 	 	 	 
	EXHIBIT C NOTICE OF ELECTION BY PARTNER TO CONVERT LTIP UNITS INTO OP UNITS
	 	 	C-1	 
	 
	 	 	 	 
	EXHIBIT D NOTICE OF ELECTION BY PARTNERSHIP TO FORCE CONVERSION OF LTIP UNITS INTO OP UNITS
	 	 	D-1	 

-iv-

 

FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP

OF

MFR OPERATING PARTNERSHIP, LP

     THIS FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP, dated as of ___,
2008, is entered into by and among MFResidential Investments, Inc., a Maryland corporation (the
“General Partner”), and the limited partners set forth on Exhibit A hereto (as it
may be amended from time to time) (each, a “Limited Partners”).

     WHEREAS, the General Partner and the Initial Limited Partner entered into an Agreement of
Limited Partnership of MFR Operating Partnership, LP dated as of ___, 2008, pursuant to
which the partnership was formed (the “Original Agreement”); and

     WHEREAS, the General Partner and the Initial Limited Partner desire to amend and restate the
Original Agreement in its entirety by entering into this First Amended and Restated Agreement of
Limited Partnership.

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

ARTICLE I

DEFINED TERMS

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

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

     “Actions” has the meaning set forth in Section 7.7 hereof.

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

     “Additional Limited Partner” means a Person who is admitted to the Partnership as a
Limited Partner pursuant to Section 4.3 and Section 12.2 hereof and who is shown as
such on the books and records of the Partnership.

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

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

 

 

     “Adjustment Event” has the meaning set forth in Section 4.6.A hereof.

     “Adjustment Factor” means 1.0; provided, however, that in the event
that:

     (i) the General Partner (a) declares or pays a dividend on its outstanding REIT Shares
in REIT Shares or makes a distribution to all holders of its outstanding REIT Shares in REIT
Shares, (b) splits or subdivides its outstanding REIT Shares or (c) effects a reverse share
split or otherwise combines its outstanding REIT Shares into a smaller number of REIT
Shares, the Adjustment Factor shall be adjusted by multiplying the Adjustment Factor
previously in effect by a fraction, (i) the numerator of which shall be the number of REIT
Shares issued and outstanding on the record date for such dividend, distribution, split,
subdivision, reverse split or combination (assuming for such purposes that such dividend,
distribution, split, subdivision, reverse split or combination has occurred as of such time)
and (ii) the denominator of which shall be the actual number of REIT Shares (determined
without the above assumption) issued and outstanding on the record date for such dividend,
distribution, split, subdivision, reverse split or combination;

     (ii) the General Partner distributes any rights, options or warrants to all holders of
its REIT Shares to subscribe for or to purchase or to otherwise acquire REIT Shares (or
other securities or rights convertible into, exchangeable for or exercisable for REIT
Shares) at a price per share less than the Value of a REIT Share on the record date for such
distribution (each a “Distributed Right”), then the Adjustment Factor shall be
adjusted by multiplying the Adjustment Factor previously in effect by a fraction (a) the
numerator of which shall be the number of REIT Shares issued and outstanding on the record
date plus the maximum number of REIT Shares purchasable under such Distributed Rights and
(b) the denominator of which shall be the number of REIT Shares issued and outstanding on
the record date plus a fraction (1) the numerator of which is the maximum number of REIT
Shares purchasable under such Distributed Rights times the minimum purchase price per REIT
Share under such Distributed Rights and (2) the denominator of which is the Value of a REIT
Share as of the record date; provided, however, that, if any such
Distributed Rights expire or become no longer exercisable, then the Adjustment Factor shall
be adjusted, effective retroactive to the date of distribution of the Distributed Rights, to
reflect a reduced maximum number of REIT Shares or any change in the minimum purchase price
for the purposes of the above fraction; or

     (iii) the General Partner shall, by dividend or otherwise, distribute to all holders of
its REIT Shares evidences of its indebtedness or assets (including securities, but excluding
any dividend or distribution referred to in subsection (i) above), which evidences of
indebtedness or assets relate to assets not received by the General Partner or its
Subsidiaries pursuant to a pro rata distribution by the Partnership, then the Adjustment
Factor shall be adjusted to equal the amount determined by multiplying the Adjustment Factor
in effect immediately prior to the close of business on the date fixed for determination of
stockholders entitled to receive such distribution by a fraction (i) the numerator of which
shall be such Value of a REIT Share on the date fixed for such determination and (ii) the
denominator of which shall be the Value of a REIT Share on the dates fixed for such
determination less the then fair market value (as determined by the General Partner, whose
determination shall be conclusive) of the portion of the evidences of indebtedness or assets
so distributed applicable to one REIT Share.

     Any adjustments to the Adjustment Factor shall become effective immediately after the
effective date of such event, retroactive to the record date, if any, for such event.

 - 2 - 

 

     “Affiliate” means, with respect to any Person, any Person directly or indirectly
controlling or controlled by or under common control with such Person. For the purposes of this
definition, “control” when used with respect to any Person means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by contract or otherwise, and the terms
“controlling” and “controlled” have meanings correlative to the foregoing.

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

     “Annual Incentive Distribution” has the meaning set forth in Section 5.2
hereof

     “Assignee” means a Person to whom one or more Partnership Units have been Transferred
in a manner permitted under this Agreement, but who has not become a Substituted Limited Partner,
and who has the rights set forth in Section 11.5 hereof.

     “Available Cash” means, with respect to any period for which such calculation is being
made, the amount of cash available for distribution by the Partnership as determined by the General
Partner.

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

     “Bylaws” means the Bylaws of the General Partner, as amended, supplemented or restated
from time to time.

     “Capital Account” means, with respect to any Partner, the Capital Account maintained
by the General Partner for such Partner on the Partnership’s books and records in accordance with
the following provisions:

     A. To each Partner’s Capital Account, there shall be added such Partner’s Capital
Contributions, such Partner’s distributive share of Net Income and any items in the nature
of income or gain that are specially allocated pursuant to Section 6.3 hereof, and
the principal amount of any Partnership liabilities assumed by such Partner or that are
secured by any property distributed to such Partner.

     B. From each Partner’s Capital Account, there shall be subtracted the amount of cash
and the Gross Asset Value of any property distributed to such Partner pursuant to any
provision of this Agreement, such Partner’s distributive share of Net Losses and any items
in the nature of expenses or losses that are specially allocated pursuant to
Section 6.3 hereof, and the principal amount of any liabilities of such Partner
assumed by the Partnership or that are secured by any property contributed by such Partner
to the Partnership.

     C. In the event any interest in the Partnership is Transferred in accordance with the
terms of this Agreement, the transferee shall succeed to the Capital Account of the
transferor to the extent that it relates to the Transferred interest.

     D. In determining the principal amount of any liability for purposes of
subsections (a) and (b) hereof, there shall be taken into account Code Section 752(c) and
any other applicable provisions of the Code and Regulations.

 - 3 - 

 

     E. The provisions of this Agreement relating to the maintenance of Capital Accounts are
intended to comply with Regulations Sections 1.704-1(b) and 1.704-2, and shall be
interpreted and applied in a manner consistent with such Regulations. If the General
Partner shall determine that it is prudent to modify the manner in which the Capital
Accounts are maintained in order to comply with such Regulations, the General Partner may
make such modification provided that such modification will not have a material
effect on the amounts distributable to any Partner without such Partner’s Consent. The
General Partner also shall (i) make any adjustments that are necessary or appropriate to
maintain equality between the Capital Accounts of the Partners and the amount of Partnership
capital reflected on the Partnership’s balance sheet, as computed for book purposes, in
accordance with Regulations Section 1.704-1(b)(2)(iv)(q) and (ii) make any appropriate
modifications in the event that unanticipated events might otherwise cause this Agreement
not to comply with Regulations Section 1.704-1(b) or Section 1.704-2.

     “Capital Account Limitation” has the meaning set forth in Section 4.7.B
hereof.

     “Capital Contribution” means, with respect to any Partner, the amount of money and the
initial Gross Asset Value of any Contributed Property that such Partner contributes to the
Partnership or is deemed to contribute pursuant to Section 4.4 hereof.

     “Cash Amount” means, with respect to a Tendering Partner, an amount of cash equal to
the product of (A) the Value of a REIT Share and (B) such Tendering Partner’s REIT Shares Amount
determined as of the date of receipt by the General Partner of such Tendering Partner’s Notice of
Redemption or, if such date is not a Business Day, the immediately preceding Business Day.

     “Certificate” means the Certificate of Limited Partnership of the Partnership filed in
the office of the Secretary of State of the State of Delaware on February 28, 2008, as amended from
time to time in accordance with the terms hereof and the Act.

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

     “Closing Price” has the meaning set forth in the definition of “Value.”

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

     “Consent” means the consent to, approval of, or vote in favor of a proposed action by
a Partner given in accordance with Article XIV hereof.

     “Constituent Person” has the meaning set forth in Section 4.7.F.

     “Conversion Date” has the meaning set forth in Section 4.7.B.

     “Conversion Notice” has the meaning set forth in Section 4.7.B.

     “Conversion Right” has the meaning set forth in Section 4.7.A.

 - 4 - 

 

     “Contributed Property” means each item of Property or other asset, in such form as may
be permitted by the Act, but excluding cash, contributed or deemed contributed to the Partnership
(or deemed contributed by the Partnership to a “new” partnership pursuant to Code Section 708) net
of any liabilities assumed by the Partnership relating to such Contributed Property and any
liability to which such Contributed Property is subject.

     “Core Earnings” means GAAP net income (loss) excluding non-cash equity compensation
expense and any unrealized gains, losses or other items that do not affect realized net income
(regardless of whether such items are included in other comprehensive income or loss, or in net
income) which amount will be adjusted to exclude one-time events pursuant to changes in GAAP and
certain non-cash charges after discussions between the Manager and the General Partner’s
Independent Directors and approved by a majority of the General Partner’s Independent Directors.

     “Current Quarter” has the meaning set forth in Section 5.2 hereof.

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

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

     “Distributed Right” has the meaning set forth in the definition of “Adjustment
Factor.”

     “Economic Capital Account Balances” has the meaning set forth in Section 6.3.C
hereof.

     “Effective Date” means the date of the closing of the General Partner’s initial public
offering.

     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

     “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.

     “Equity Incentive Plan” means any equity incentive plan hereafter adopted by the
Partnership or the General Partner.

     “Forced Conversion” has the meaning set forth in Section 4.7.C.

 - 5 - 

 

     “Forced Conversion Notice” has the meaning set forth in Section 4.7.C.

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

     “GAAP” means generally accepted accounting principles, as applied in the United
States.

     “General Partner” means MFResidential Investments, Inc., a Maryland corporation, and
its successors and assigns, as the general partner of the Partnership.

     “General Partner Interest” means the Partnership Interest held by the General Partner,
which Partnership Interest is an interest as a general partner under the Act. A General Partner
Interest may be expressed as a number of OP Units, Preferred Units, Junior Units or any other
Partnership Units.

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

     (a) The initial Gross Asset Value of any asset contributed by a Partner to the
Partnership shall be the gross fair market value of such asset as determined by the General
Partner.

     (b) The Gross Asset Values of all Partnership assets immediately prior to the
occurrence of any event described in clause (i), clause (ii), clause (iii), clause (iv) or
clause (v) hereof shall be adjusted to equal their respective gross fair market values, as
determined by the General Partner using such reasonable method of valuation as it may adopt,
as of the following times:

     (i) the acquisition of an additional interest in the Partnership (other than in
connection with the execution of this Agreement but including, without limitation,
acquisitions pursuant to Section 4.2 hereof or contributions or deemed
contributions by the General Partner pursuant to Section 4.2 hereof) by a
new or existing Partner in exchange for more than a de minimis Capital Contribution
or provision of services, if the General Partner reasonably determines that such
adjustment is necessary or appropriate to reflect the relative economic interests of
the Partners in the Partnership; provided that the issuance of more than a
de minimis amount of LTIP Units shall be deemed to require a recalculation pursuant
to this subsection;

     (ii) the distribution by the Partnership to a Partner of more than a de minimis
amount of Property as consideration for an interest in the Partnership, if the
General Partner reasonably determines that such adjustment is necessary or
appropriate to reflect the relative economic interests of the Partners in the
Partnership;

     (iii) the liquidation of the Partnership within the meaning of Regulations
Section 1.704-1(b)(2)(ii)(g);

     (iv) upon the admission of a successor General Partner pursuant to
Section 12.1 hereof; and

     (v) at such other times as the General Partner shall reasonably determine
necessary or advisable in order to comply with Regulations Sections 1.704-1(b) and
1.704-2.

 - 6 - 

 

     (c) The Gross Asset Value of any Partnership asset distributed to a Partner shall be
the gross fair market value of such asset on the date of distribution as determined by the
distributee and the General Partner provided that, if the distributee is the General
Partner or if the distributee and the General Partner cannot agree on such a determination,
such gross fair market value shall be determined by an independent third party experienced
in the valuation of similar assets, selected by the General Partner in good faith.

     (d) The Gross Asset Values of Partnership assets shall be increased (or decreased) to
reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b)
or Code Section 743(b), but only to the extent that such adjustments are taken into account
in determining Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m);
provided, however, that Gross Asset Values shall not be adjusted pursuant to
this subsection (d) to the extent that the General Partner reasonably determines that an
adjustment pursuant to subsection (b) above is necessary or appropriate in connection with a
transaction that would otherwise result in an adjustment pursuant to this subsection (d).

     (e) If the Gross Asset Value of a Partnership asset has been determined or adjusted
pursuant to subsection (a), subsection (b) or subsection (d) above, such Gross Asset Value
shall thereafter be adjusted by the Depreciation taken into account with respect to such
asset for purposes of computing Net Income and Net Losses.

     “Highwater Incentive Distribution Amount” has the meaning set forth in
Section 5.2 hereof.

     “Holder” means either (a) a Partner or (b) an Assignee, owning a Partnership Unit,
that is treated as a member of the Partnership for federal income tax purposes.

     “Incapacity” or “Incapacitated” means, (i) as to any Partner who is an
individual, death, total physical disability or entry by a court of competent jurisdiction
adjudicating such Partner incompetent to manage his or her person or his or her estate; (ii) as to
any Partner that is a corporation or limited liability company, the filing of a certificate of
dissolution, or its equivalent, or the revocation of the corporation’s charter; (iii) as to any
Partner that is a partnership, the dissolution and commencement of winding up of the partnership;
(iv) as to any Partner that is an estate, the distribution by the fiduciary of the estate’s entire
interest in the Partnership; (v) as to any Partner that is a trust, the termination of the trust
(but not the substitution of a new trustee); or (vi) as to any Partner, the bankruptcy of such
Partner. For purposes of this definition, bankruptcy of a Partner shall be deemed to have occurred
when (a) the Partner commences a voluntary proceeding seeking liquidation, reorganization or other
relief of or against such Partner under any bankruptcy, insolvency or other similar law now or
hereafter in effect, (b) the Partner is adjudged as bankrupt or insolvent, or a final and
nonappealable order for relief under any bankruptcy, insolvency or similar law now or hereafter in
effect has been entered against the Partner, (c) the Partner executes and delivers a general
assignment for the benefit of the Partner’s creditors, (d) the Partner files an answer or other
pleading admitting or failing to contest the material allegations of a petition filed against the
Partner in any proceeding of the nature described in clause (b) above, (e) the Partner seeks,
consents to or acquiesces in the appointment of a trustee, receiver or liquidator for the Partner
or for all or any substantial part of the Partner’s properties, (f) any proceeding seeking
liquidation, reorganization or other relief under any bankruptcy, insolvency or other similar law
now or hereafter in effect has not been dismissed within 120 days after the commencement thereof,
(g) the appointment without the Partner’s consent or acquiescence of a trustee, receiver or
liquidator has not been vacated or stayed within 90 days of such appointment, or (h) an appointment
referred to in clause (g) above is not vacated within 90 days after the expiration of any such
stay.

 - 7 - 

 

     “Incentive Distribution” means the distribution of Available Cash to be made to the
holders of Special Units pursuant to Section 5.2.

     “Independent Directors” means the independent directors of the Board of Directors of
the General Partner as determined by the rules and regulations of the New York Stock Exchange then
in effect.

     “Indemnitee” means (i) any Person made a party to a proceeding by reason of its status
as (A) the General Partner or any successor thereto, or (B) a director, officer or employee of the
Partnership or the General Partner, and (ii) such other Persons (including Affiliates of the
General Partner or the Partnership) as the General Partner may designate from time to time (whether
before or after the event giving rise to potential liability), in its sole and absolute discretion.

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

     “Junior Stock” means a share of stock of the General Partner now or hereafter
authorized or reclassified that has dividend rights, or rights upon liquidation, winding up and
dissolution, that are junior in rank to the REIT Shares.

     “Junior Unit” means a fractional share of the Partnership Interests that the General
Partner has authorized pursuant to Section 4.1, 4.3 or 4.4 hereof that has
distribution rights, or rights upon liquidation, winding up and dissolution, that are junior in
rank to the OP Units.

     “Limited Partner” means any Person named as a Limited Partner in Exhibit A
attached hereto, as such Exhibit A may be amended from time to time, or any Substituted
Limited Partner or Additional Limited Partner, in such Person’s capacity as a Limited Partner of
the Partnership.

     “LIBOR” means the London Interbank Offered Rate.

     “Limited Partner Interest” means a Partnership Interest of a Limited Partner in the
Partnership representing a fractional part of the Partnership Interests of all Limited Partners and
includes any and all benefits to which the holder of such a Partnership Interest may be entitled as
provided in this Agreement, together with all obligations of such Person to comply with the terms
and provisions of this Agreement. A Limited Partner Interest may be expressed as a number of OP
Units, LTIP Units, Preferred Units or other Partnership Units.

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

     “Liquidating Gains” has the meaning set forth in Section 6.3.C hereof.

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

     “LTIP Award” means each or any, as the context requires, LTIP Award issued under any
Equity Incentive Plan.

     “LTIP Unit” means a Partnership Unit which is designated as an LTIP Unit and which has
the rights, preferences and other privileges designated in Section 4.6 hereof and elsewhere
in this Agreement in respect of Holders of LTIP Units. The allocation of LTIP Units among the
Partners shall be set forth on Exhibit A, as may be amended from time to time.

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

 - 8 - 

 

     “Majority in Interest of the Limited Partners” means Limited Partners holding more
than 50% of the outstanding OP Units held by all Limited Partners.

     “Majority in Interest of the Outside Limited Partners” means Outside Limited Partners
holding more than 50% of the outstanding OP Units held by all Outside Limited Partners.

     “Management Agreement” means the agreement entered into by and between the General
Partner, the Partnership and the Manager.

     “Management Personnel” means any employee or personnel of the Company, the Manager,
the Partnership, the General Partner and any of their respective Subsidiaries or Affiliates.

     “Manager” means MFA Spartan Manager, LLC, a Delaware limited liability company.

     “Market Price” has the meaning set forth in the definition of “Value.”

     “Net Income” or “Net Loss” means, for each Partnership Year of the
Partnership, an amount equal to the Partnership’s taxable income or loss for such year, determined
in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss or
deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in
taxable income or loss), with the following adjustments:

     (a) Any income of the Partnership that is exempt from federal income tax and not
otherwise taken into account in computing Net Income (or Net Loss) pursuant to this
definition of “Net Income” or “Net Loss” shall be added to (or subtracted
from, as the case may be) such taxable income (or loss);

     (b) Any expenditure of the Partnership described in Code Section 705(a)(2)(B) or
treated as a Code Section 705(a)(2)(B) expenditure pursuant to Regulations
Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Net Income
(or Net Loss) pursuant to this definition of “Net Income” or “Net Loss,”
shall be subtracted from (or added to, as the case may be) such taxable income (or loss);

     (c) In the event the Gross Asset Value of any Partnership asset is adjusted pursuant to
subsection (b) or subsection (c) of the definition of “Gross Asset Value,” the
amount of such adjustment shall be taken into account as gain or loss from the disposition
of such asset for purposes of computing Net Income or Net Loss;

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

     (e) In lieu of the depreciation, amortization and other cost recovery deductions that
would otherwise be taken into account in computing such taxable income or loss, there shall
be taken into account Depreciation for such Partnership Year;

     (f) To the extent that an adjustment to the adjusted tax basis of any Partnership asset
pursuant to Code Section 734(b) or Code Section 743(b) is required pursuant to Regulations
Section 1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining Capital Accounts as
a result of a distribution other than in liquidation of a Partner’s interest in the
Partnership, the

 - 9 - 

 

amount of such adjustment shall be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment decreases the basis of the
asset) from the disposition of the asset and shall be taken into account for purposes of
computing Net Income or Net Loss; and

     (g) Notwithstanding any other provision of this definition of “Net Income” or
“Net Loss,” any item that is specially allocated pursuant to Section 6.3
hereof shall not be taken into account in computing Net Income or Net Loss. The amounts of
the items of Partnership income, gain, loss or deduction available to be specially allocated
pursuant to Section 6.3 hereof shall be determined by applying rules analogous to
those set forth in this definition of “Net Income” or “Net Loss.”

     “New Securities” means (i) any rights, options, warrants or convertible or
exchangeable securities having the right to subscribe for or purchase REIT Shares, Preferred Stock
or Junior Stock, except that “New Securities” shall not mean any Preferred Stock, Junior
Stock or grants under any Equity Incentive Plan, or (ii) any Debt issued by the REIT that provides
any of the rights described in clause (i).

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

     “Nonrecourse Liability” has the meaning set forth in Regulations
Section 1.704-2(b)(3).

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

     “OP Unit” means a fractional share of the Partnership Interests of all Partners issued
pursuant to Sections 4.1 and 4.2 hereof, but does not include any LTIP Unit,
Special Unit, Preferred Unit, Junior Unit or any other Partnership Unit specified in a Partnership
Unit Designation as being other than an OP Unit; provided, however, that the
General Partner Interest and the Limited Partner Interests shall have the differences in rights and
privileges as specified in this Agreement.

     “OP Unit Economic Balance” has the meaning set forth in Section 6.3.C hereof.

     “Outside Limited Partners” means Limited Partners, excluding for this purpose (i) any
Limited Partnership Interests held by the General Partner or its Subsidiaries, (ii) any Person of
which the General Partner or its Subsidiaries directly or indirectly owns or controls more than 50%
of the voting interests and (iii) any Person directly or indirectly owning or controlling more than
50% of the outstanding interests of the General Partner; provided, however, that
when the General Partner or its Subsidiaries hold Limited Partnership Interests which are directed
by a third-party who would otherwise qualify under this definition, then the General Partner or
such Subsidiary is deemed to be an Outside Limited Partner for purposes of such Limited Partnership
Interests.

     “Ownership Limit” means the applicable restriction or restrictions on ownership of
shares of the General Partner imposed under the Charter.

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

 - 10 - 

 

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

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

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

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

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

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

     “Partnership Record Date” means a record date established by the General Partner for
the distribution of Available Cash pursuant to Section 5.1 hereof, which record date shall
generally be the same as the record date established by the General Partner for a distribution to
its stockholders of some or all of its portion of such distribution.

     “Partnership Unit” shall mean an OP Unit, an LTIP Unit, a Special Unit, a Preferred
Unit, a Junior Unit or any other fractional share of the Partnership Interests that the General
Partner has authorized pursuant to Section 4.1, 4.2, 4.3, 4.4,
4.6 or 4.8 hereof.

     “Partnership Unit Designation” has the meaning set forth in Section 4.3
hereof.

     “Partnership Unit Distribution” has the meaning set forth in Section 4.6.A
hereof.

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

     “Percentage Interest” means, as to a Partner holding a class or series of Partnership
Interests, its interest in such class or series as determined by dividing the Partnership Units of
such class or series owned by such Partner by the total number of Partnership Units of such class
then outstanding as specified in Exhibit A attached hereto, as such Exhibit may be amended
from time to time. If the Partnership issues additional classes or series of Partnership Interests
other than as contemplated herein, the interest in the Partnership among the classes or series of
Partnership Interests shall be determined as set forth in the amendment to the Partnership
Agreement setting forth the rights and privileges of such additional classes or series of
Partnership Interest, if any, as contemplated by Section 4.3.

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

 - 11 - 

 

     “Preferred Stock” means a share of stock of the General Partner now or hereafter
authorized or reclassified that has dividend rights, or rights upon liquidation, winding up and
dissolution, that are superior or prior to the REIT Shares.

     “Preferred Unit” means a fractional share of the Partnership Interests that the
General Partner has authorized pursuant to Section 4.1, 4.3 or 4.4 hereof
that has distribution rights, or rights upon liquidation, winding up and dissolution, that are
superior or prior to the OP Units.

     “Properties” means any assets and property of the Partnership, and “Property”
shall mean any one such asset or property.

     “Publicly Traded” means listed or admitted to trading on the New York Stock Exchange,
the American Stock Exchange or another national securities exchange or designated for quotation on
The NASDAQ Global Market, or any successor to the foregoing.

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

     “Qualified Transferee” means an “Accredited Investor” as defined in Rule 501
promulgated under the Securities Act.

     “Qualifying Party” means (a) a Limited Partner set forth in Exhibit A hereto,
(b) an Additional Limited Partner or (c) a Substituted Limited Partner succeeding to all or part of
the Limited Partner Interest of (i) a Limited Partner set forth in Exhibit A hereto or
(ii) an Additional Limited Partner.

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

     “Regulations” means the applicable income tax regulations under the Code, whether such
regulations are in proposed, temporary or final form, as such regulations may be amended from time
to time (including corresponding provisions of succeeding regulations).

     “Regulatory Allocations” has the meaning set forth in Section 6.3.A(vii)
hereof.

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

     “REIT Payment” has the meaning set forth in Section 15.11 hereof.

     “REIT Requirements” has the meaning set forth in Section 5.1 hereof.

     “REIT Share” means a share of common stock of the General Partner, par value $0.01 per
share. Where relevant in this Agreement, “REIT Share” includes shares of common stock of
the General Partner, par value $0.01 per share, issued upon conversion of Preferred Stock or Junior
Stock.

     “REIT Shares Amount” means a number of REIT Shares equal to the product of (a) the
number of Tendered Units and (b) the Adjustment Factor in effect on the Specified Redemption Date
with respect to such Tendered Units; provided, however, that, in the event that the
General Partner issues to all holders of REIT Shares as of a certain record date rights, options,
warrants or convertible or exchangeable securities entitling the General Partner’s stockholders to
subscribe for or purchase REIT Shares, or any other securities or property (collectively, the
“Rights”), with the record date for such Rights issuance falling within the period starting
on the date of the Notice of Redemption and ending on the day immediately preceding the Specified
Redemption Date, which Rights will not be distributed before the

 - 12 - 

 

relevant Specified Redemption Date, then the REIT Shares Amount shall also include such Rights
that a holder of that number of REIT Shares would be entitled to receive, expressed, where relevant
hereunder, in a number of REIT Shares determined by the General Partner in good faith.

     “Relevant Quarter” has the meaning set forth in Section 5.2 hereof.

     “Rights” has the meaning set forth in the definition of “REIT Shares Amount.”

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

     “Services Agreement” means any management, portfolio management, monitoring or
advisory agreement for the provision of management, monitoring, advisory and/or similar services
with respect to the Properties and any agreement for the provision of services of accountants,
legal counsel, appraisers, insurers, brokers, transfer agents, registrars, developers, financial
advisors and other professional services.

     “Special Units” mean profit interests issued pursuant to Section 4.8.

     “Specified Redemption Date” means the 10th Business Day following receipt
by the General Partner of a Notice of Redemption; provided that, if the REIT Shares are not
Publicly Traded, the Specified Redemption Date means the 30th Business Day following
receipt by the General Partner of a Notice of Redemption.

     “Subsidiary” means, with respect to any Person, any other Person (which is not an
individual) of which a majority of (i) the voting power of the voting equity securities or (ii) the
outstanding equity interests is owned, directly or indirectly, by such Person.

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

     “Tax Items” has the meaning set forth in Section 6.4.A hereof.

     “Tendered Units” has the meaning set forth in Section 8.6.A hereof.

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

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

     “Transaction” has the meaning set forth in Section 4.7.F.

     “Transfer,” when used with respect to a Partnership Unit, or all or any portion of a
Partnership Interest, means any sale, assignment, bequest, conveyance, devise, gift (outright or in
trust), pledge, encumbrance, hypothecation, mortgage, exchange, transfer or other disposition or
act of alienation, whether voluntary or involuntary or by operation of law; provided,
however, that when the term is used in Article XI hereof, “Transfer” does
not include (a) any Redemption of Partnership Units by the Partnership or the General Partner, or
acquisition of Tendered Units by the General Partner, pursuant to Section 8.6 hereof or
(b) any redemption of Partnership Units pursuant to any Partnership Unit Designation. The terms
“Transferred” and “Transferring” have correlative meanings.

 - 13 - 

 

     “Unvested Incentive Units” has the meaning set forth in Section 4.6.C.

     “Value” means, on any date of determination with respect to a REIT Share, the average
of the daily Market Prices for ten consecutive trading days immediately preceding the date of
determination except that, as provided in Section 4.5.B hereof, the Market Price for the
trading day immediately preceding the date of exercise of a stock option under any Equity Incentive
Plan shall be substituted for such average of daily market prices for purposes of
Section 4.5 hereof; provided, however, that for purposes of
Section 8.6, the “date of determination” shall be the date of receipt by the General
Partner of a Notice of Redemption or, if such date is not a Business Day, the immediately preceding
Business Day. The term “Market Price” on any date shall mean, with respect to any class or
series of outstanding REIT Shares, the Closing Price for such REIT Shares on such date. The
“Closing Price” on any date shall mean the last sale price for such REIT Shares, regular
way, or, in case no such sale takes place on such day, the average of the closing bid and asked
prices, regular way, for such REIT Shares, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to trading on the New
York Stock Exchange or, if such REIT Shares are not listed or admitted to trading on the New York
Stock Exchange, as reported on the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which such REIT Shares are
listed or admitted to trading or, if such REIT Shares are not listed or admitted to trading on any
national securities exchange, the last quoted price, or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by the National Association of
Securities Dealers, Inc. Automated Quotation System or, if such system is no longer in use, the
principal other automated quotation system that may then be in use or, if such REIT Shares are not
quoted by any such organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in such REIT Shares selected by the Board of Directors of
the General Partner or, in the event that no trading price is available for such REIT Shares, the
fair market value of the REIT Shares, as determined in good faith by the Board of Directors of the
General Partner.

     In the event that the REIT Shares Amount includes Rights (as defined in the definition of
“REIT Shares Amount”) 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.

     “Vested LTIP Units” has the meaning set forth in Section 4.6.C.

     “Vesting Agreement” means each or any, as the context implies, agreement entered into
by an LTIP Unitholder upon acceptance of an award of LTIP Units under an Equity Incentive Plan.

ARTICLE II

ORGANIZATIONAL MATTERS

     Section 2.1. Organization. The Partnership is a limited partnership organized
pursuant to the provisions of the Act and upon the terms and subject to the conditions set forth in
this Agreement. Except as expressly provided herein to the contrary, the rights and obligations of
the Partners and the administration and termination of the Partnership shall be governed by the
Act. The Partnership Interest of each Partner shall be personal property for all purposes.

     Section 2.2. Name. The name of the Partnership is “MFR Operating Partnership, LP”
The Partnership’s business may be conducted under any other name or names deemed advisable by the
General Partner, including the name of the General Partner or any Affiliate thereof. The words
“Limited Partnership,” “LP,” “L.P.,” “Ltd.” or similar words or letters shall be included in the
Partnership’s name

 - 14 - 

 

where necessary for the purposes of complying with the laws of any jurisdiction that so
requires. The General Partner in its sole and absolute discretion may change the name of the
Partnership at any time and from time to time and shall notify the Partners of such change in the
next regular communication to the Partners.

     Section 2.3. Registered Office and Agent; Principal Office. The address of the
registered office of the Partnership in the State of Delaware is located at Corporation Service
Company, 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808, and the registered agent for
service of process on the Partnership in the State of Delaware at such registered office is
Corporation Service Company. The principal office of the Partnership is located at c/o
MFResidential Investments, Inc., 350 Park Avenue, 21st Floor, New York, New York 10022 or such
other place as the General Partner may from time to time designate by notice to the Limited
Partners. The Partnership may maintain offices at such other place or places within or outside the
State of Delaware as the General Partner deems advisable.

     Section 2.4. Appointment of the General Partner. MFResidential Investments, Inc.
shall be the general partner of the Partnership.

     Section 2.5. Power of Attorney.

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

          (i) execute, swear to, seal, acknowledge, deliver, file and record in the appropriate
public offices (a) all certificates, documents and other instruments (including, without
limitation, this Agreement and the Certificate and all amendments, supplements or
restatements thereto) that the General Partner or the Liquidator deems appropriate or
necessary to form, qualify or continue the existence or qualification of the Partnership as
a limited partnership (or a partnership in which the limited partners have limited liability
to the extent provided by applicable law) in the State of Delaware and in all other
jurisdictions in which the Partnership may conduct business or own property; (b) all
instruments that the General Partner or the Liquidator deems appropriate or necessary to
reflect any amendment, change, modification or restatement of this Agreement in accordance
with its terms; (c) all conveyances and other instruments or documents that the General
Partner or the Liquidator deems appropriate or necessary to reflect the dissolution and
liquidation of the Partnership pursuant to the terms of this Agreement, including, without
limitation, a certificate of cancellation; (d) all conveyances and other instruments or
documents that the General Partner or the Liquidator deems appropriate or necessary to
reflect the distribution or exchange of assets of the Partnership pursuant to the terms of
this Agreement; (e) all instruments relating to the admission, withdrawal, removal or
substitution of any Partner pursuant to, or other events described in, Article XI,
Article XII or Article XIII hereof or the Capital Contribution of any
Partner; and (f) all certificates, documents and other instruments relating to the
determination of the rights, preferences and privileges relating to Partnership Interests;
and

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

 - 15 - 

 

absolute discretion of the General Partner or the Liquidator, to effectuate the terms or
intent of this Agreement.

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

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

     Section 2.6. Term. Pursuant to Section 17-217(d) of the Act, the term of the
Partnership commenced on February 28, 2008 and shall continue perpetually unless it is dissolved
pursuant to the provisions of Article XIII hereof or as otherwise provided by law.

ARTICLE III

PURPOSE

     Section 3.1. Purpose and Business. The purpose and nature of the Partnership is to
conduct any business, enterprise or activity permitted by or under the Act; provided,
however, such business and arrangements and interests may be limited to and conducted in
such a manner as to permit the General Partner, in its sole and absolute discretion, at all times
to be classified as a REIT unless the General Partner, in accordance with the Charter and Bylaws,
as amended, in its sole discretion has chosen to cease to qualify as a REIT or has chosen not to
attempt to qualify as a REIT for any reason or for reasons whether or not related to the business
conducted by the Partnership. Without limiting the General Partner’s right in its sole discretion
to cease qualifying as a REIT, the Partners acknowledge that the status of the General Partner as a
REIT inures to the benefit of all Partners and not solely to the General Partner or its Affiliates.
In connection with the foregoing, the Partnership shall have full power and authority to enter
into, perform and carry out contracts of any kind, to borrow and lend money and to issue and
guarantee evidence of indebtedness, whether or not secured by mortgage, deed of trust, pledge or
other lien and, directly or indirectly, to acquire additional Properties necessary, useful or
desirable in connection with its business.

     Section 3.2. Powers.

          A. The Partnership shall be empowered to do any and all acts and things necessary,
appropriate, proper, advisable, incidental to or convenient for the furtherance and accomplishment
of the purposes and business described herein and for the protection and benefit of the
Partnership.

- 16 - 

 

          B. The Partnership may contribute from time to time Partnership capital to one or more newly
formed entities solely in exchange for equity interests therein (or in a wholly owned subsidiary
entity thereof).

          C. Notwithstanding any other provision in this Agreement, the General Partner may cause the
Partnership not to take, or to refrain from taking, any action that, in the judgment of the General
Partner, in its sole and absolute discretion, (i) could adversely affect the ability of the General
Partner to continue to qualify as a REIT, (ii) could subject the General Partner to any additional
taxes under Code Section 857 or Code Section 4981 or any other related or successor provision of
the Code or (iii) could violate any law or regulation of any governmental body or agency having
jurisdiction over the General Partner, its securities or the Partnership.

     Section 3.3. Partnership Only for Partnership Purposes Specified. This Agreement
shall not be deemed to create a company, venture or partnership between or among the Partners with
respect to any activities whatsoever other than the activities within the purposes of the
Partnership as specified in Section 3.1 hereof. Except as otherwise provided in this
Agreement, no Partner shall have any authority to act for, bind, commit or assume any obligation or
responsibility on behalf of the Partnership, its properties or any other Partner. No Partner, in
its capacity as a Partner under this Agreement, shall be responsible or liable for any indebtedness
or obligation of another Partner, and the Partnership shall not be responsible or liable for any
indebtedness or obligation of any Partner, incurred either before or after the execution and
delivery of this Agreement by such Partner, except as to those responsibilities, liabilities,
indebtedness or obligations incurred pursuant to and as limited by the terms of this Agreement and
the Act.

     Section 3.4. Representations and Warranties by the Parties.

          A. Each Partner (including, without limitation, each Additional Limited Partner or Substituted
Limited Partner as a condition to becoming an Additional Limited Partner or a Substituted Limited
Partner, respectively) represents and warrants to each other Partner that (i) the consummation of
the transactions contemplated by this Agreement to be performed by such Partner will not result in
a breach or violation of, or a default under, any material agreement by which such Partner or any
of such Partner’s property is bound, or any statute, regulation, order or other law to which such
Partner is subject, (ii) subject to the last sentence of this Section 3.4.A, such Partner
is neither a “foreign person” within the meaning of Code Section 1445(f) nor a “foreign partner”
within the meaning of Code Section 1446(e), (iii) such Partner does not own, directly or
indirectly, (a) 9.8% or more of the total combined voting power of all classes of shares entitled
to vote, or 9.8% or more of the total number of shares of all classes, of any corporation that is a
tenant of (I) the General Partner or any Qualified REIT Subsidiary, (II) the Partnership or (III)
any partnership, venture or limited liability company of which the General Partner, any Qualified
REIT Subsidiary or the Partnership is a partner or member or (b) an interest of 9.9% or more in the
assets or net profits of any tenant of (I) the General Partner or any Qualified REIT Subsidiary,
(II) the Partnership or (III) any partnership, venture, or limited liability company of which the
General Partner, any Qualified REIT Subsidiary or the Partnership is a partner or member and (iv)
this Agreement is binding upon, and enforceable against, such Partner in accordance with its terms.
Notwithstanding anything contained herein to the contrary, in the event that the representation
contained in the foregoing clause (ii) would be inaccurate if given by a Partner, such Partner (w)
shall not be required to make and shall not be deemed to have made such representation, if it
delivers to the General Partner in connection with or prior to its execution of this Agreement
written notice that it may not truthfully make such
representation, (x) hereby agrees that it is subject to, and hereby authorizes the General
Partner to withhold, all withholdings to which such a “foreign person” or “foreign partner,” as
applicable, is subject under the Code and (y) hereby agrees to cooperate fully with the General
Partner with respect to such

- 17 - 

 

withholdings, including by effecting the timely completion and
delivery to the General Partner of all governmental forms required in connection therewith.

          B. Each Partner (including, without limitation, each Substituted Limited Partner as a
condition to becoming a Substituted Limited Partner) represents, warrants and agrees that it has
acquired and continues to hold its interest in the Partnership for its own account for investment
purposes only and not for the purpose of, or with a view toward, the resale or distribution of all
or any part thereof, and not with a view toward selling or otherwise distributing such interest or
any part thereof at any particular time or under any predetermined circumstances. Each Partner
further represents and warrants that it is a sophisticated investor, able and accustomed to
handling sophisticated financial and tax matters for itself, particularly real estate investments,
and that it has a sufficiently high net worth that it does not anticipate a need for the funds that
it has invested in the Partnership in what it understands to be a highly speculative and illiquid
investment.

          C. The representations and warranties contained in Sections 3.4.A and 3.4.B
hereof shall survive the execution and delivery of this Agreement by each Partner (and, in the case
of an Additional Limited Partner or a Substituted Limited Partner, the admission of such Additional
Limited Partner or Substituted Limited Partner as a Limited Partner in the Partnership) and the
dissolution, liquidation and termination of the Partnership.

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

ARTICLE IV

CAPITAL CONTRIBUTIONS

     Section 4.1. Capital Contributions of the Partners. Each Partner’s Capital
Contribution to the Partnership and amount and designation of ownership of Partnership Units is on
Exhibit A, as the same may be amended from time to time by the General Partner to the
extent necessary to reflect accurately sales, exchanges, conversions or other Transfers,
redemptions, Capital Contributions, the issuance of additional Partnership Units, or similar events
having an effect on a Partner’s ownership of Partnership Units. Except as provided by law or in
Section 4.4, 10.4 or 13.2.D hereof, the Partners shall have no obligation
or right to make any additional Capital Contributions or loans to the Partnership.

     Section 4.2. Classes of Partnership Units. Subject to Section 4.3.A below,
the Partnership shall have three classes of Partnership Units, entitled “OP Units,”
“Special Units” and “LTIP Units.” Subject to Section 4.11, OP Units,
Special Units or LTIP Units, at the election of the General Partner, in its sole and absolute
discretion, may be issued to newly admitted Partners or existing Partners in exchange for any
Capital Contributions by such Partners and/or the provision of services by such Partners;
provided that any Partnership Unit that is not specifically designated by the General
Partner as being of a particular class shall be deemed to be an OP Unit.

- 18 - 

 

     Section 4.3. Issuances of Additional Partnership Interests.

          A. General. Notwithstanding Section 7.3.B hereof, the General Partner is
hereby authorized to cause the Partnership to issue 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, as a Limited Partner) or to other Persons, and to admit
such Persons as Additional Limited Partners, 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. Without limiting the foregoing, the General Partner
is expressly authorized to cause the Partnership to issue Partnership Units (i) upon the
conversion, redemption or exchange of any Debt, Partnership Units or other securities issued by the
Partnership, (ii) 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 and
(iii) in connection with any merger of any other Person into the Partnership or any Subsidiary of
the Partnership if the applicable merger agreement provides that Persons are to receive Partnership
Units in exchange for their interests in the Person merging into the Partnership or any Subsidiary
of the Partnership. Subject to Delaware law, any additional Partnership Interests 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 as
shall be determined by the General Partner, in its sole and absolute discretion without the
approval of any Limited Partner, and set forth in a written document thereafter attached to and
made an exhibit to this Agreement (each, a “Partnership Unit Designation”). Without
limiting the generality of the foregoing, the General Partner shall have authority to specify (a)
the allocations of items of Partnership income, gain, loss, deduction and credit to each such class
or series of Partnership Interests; (b) the right of each such class or series of Partnership
Interests to share in Partnership distributions; (c) the rights of each such class or series of
Partnership Interests upon dissolution and liquidation of the Partnership; (d) the voting rights,
if any, of each such class or series of Partnership Interests; and (e) the conversion, redemption
or exchange rights applicable to each such class or series of Partnership Interests. Upon the
issuance of any additional Partnership Interest, the General Partner shall amend Exhibit A
as appropriate to reflect such issuance.

          B. Issuances to the General Partner. No additional Partnership Units shall be issued
to the General Partner unless (i) the additional Partnership Units are issued to all Partners in
proportion to their respective Percentage Interests with respect to the class of Partnership Units
so issued, (ii) (a) the additional Partnership Units are (x) OP Units issued in connection with an
issuance of REIT Shares or (y) Partnership Units (other than OP Units) issued in connection with an
issuance of Preferred Stock, Junior Stock, New Securities or other interests in the General Partner
(other than REIT Shares), which Preferred Stock, Junior Stock, New Securities or other interests
have designations, preferences and other rights, terms and provisions that are substantially the
same as the designations, preferences and other rights, terms and provisions of the additional
Partnership Units issued to the General Partner and (b) the General Partner directly or indirectly
contributes or otherwise causes to be transferred to the Partnership the cash proceeds or other
consideration, if any, received in connection with the issuance of such REIT Shares, Preferred
Stock, Junior Stock, New Securities or other interests in the General Partner or (iii) the
additional Partnership Units are issued upon the conversion, redemption or exchange of Debt,
Partnership Units or other securities issued by the Partnership. Of the total number of additional
Partnership Units issued to the General Partner, a number of additional Partnership Units equal to
1% (or such other amount designated by the General Partner) of the aggregate number of Partnership
Units issued and outstanding shall be deemed the General Partner Partnership Units, and the
remainder shall be deemed the MFR Partnership Units. In the event that the Partnership issues
additional Partnership Units pursuant to this Section 4.3.B, the General Partner shall make
such revisions to this Agreement (including but not limited to the revisions described in
Sections 6.2.B and 8.6) as it determines are necessary to reflect the issuance of
such additional Partnership Interests.

- 19 - 

 

          C. No Preemptive Rights. No Person, including, without limitation, any Partner or
Assignee, shall have any preemptive, preferential, participation or similar right or rights to
subscribe for or acquire any Partnership Interest.

          D. Requirements for All Issuances. In no event may any additional Partnership
Interest be issued pursuant to this Article IV or otherwise (i) to any person or entity who
lacks the legal right, power or capacity to own a Partnership Interest; (ii) in violation of
applicable law; (iii) in the event that such issuance would cause the General Partner to cease to
comply with the REIT Requirements; (iv) if such issuance would, in the opinion of legal counsel to
the Partnership, cause the Partnership to cease to be classified as a partnership for federal
income tax purposes; (v) if such issuance would cause the Partnership to become, with respect to
any employee benefit plan subject to Title I of ERISA, a “party-in-interest” (as defined in ERISA
Section 3(14)) or a “disqualified person” (as defined in Code Section 4975(c)); (vi) without the
consent of the General Partner, to any benefit plan investor within the meaning of Department of
Labor Regulations Section 2510.3-101(f); (vii) if such issuance would, in the opinion of legal
counsel to the Partnership or the General Partner, cause any portion of the assets of the
Partnership to constitute assets of any employee benefit plan pursuant to Department of Labor
Regulations Section 2510.3-101; (viii) if such issuance requires the registration of such
Partnership Interest pursuant to any applicable federal or state securities laws; (ix) if such
issuance would, in the opinion of legal counsel to the Partnership or the General Partner,
adversely affect the ability of the General Partner to continue to qualify as a REIT or would
subject the General Partner to any additional taxes under Code Section 857 or Code Section 4981;
(x) if such issuance causes the Partnership (as opposed to the General Partner ) to become a
reporting company under the Exchange Act; or (xi) if such issuance subjects the Partnership to
regulation under the Investment Company Act of 1940, the Investment Advisors Act of 1940 or ERISA,
each as amended.

     Section 4.4. Additional Funds and Capital Contributions.

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

          B. Additional Capital Contributions. The General Partner, on behalf of the
Partnership, may obtain any Additional Funds by accepting Capital Contributions from any Partners
or other Persons. In connection with any such Capital Contribution (of cash or property), the
General Partner is hereby authorized to cause the Partnership from time to time to issue additional
Partnership Units (as set forth in Section 4.3 above) in consideration therefor and the
Percentage Interests of the General Partner and the Limited Partners shall be adjusted to reflect
the issuance of such additional Partnership Units.

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

- 20 - 

 

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

          E. Issuance of Securities by the General Partner. The General Partner shall not issue
any additional REIT Shares, Preferred Stock, Junior Stock or New Securities unless the General
Partner contributes directly or indirectly the cash proceeds or other consideration, if any,
received from the issuance of such additional REIT Shares, Preferred Stock, Junior Stock or New
Securities, as the case may be, and from the exercise of the rights contained in any such
additional New Securities, to the Partnership in exchange for (x) in the case of an issuance of
REIT Shares, OP Units or (y) in the case of an issuance of Preferred Stock, Junior Stock or New
Securities, Partnership Units with designations, preferences and other rights, terms and provisions
that are substantially the same as the designations, preferences and other rights, terms and
provisions of such Preferred Stock, Junior Stock or New Securities; provided,
however, that notwithstanding the foregoing, the General Partner may issue REIT Shares,
Preferred Stock, Junior Stock or New Securities (a) pursuant to Section 4.5 or
8.6.B hereof, (b) pursuant to a dividend or distribution (including any share split) of
REIT Shares, Preferred Stock, Junior Stock or New Securities to all of the holders of REIT Shares,
Preferred Stock, Junior Stock or New Securities, as the case may be, (c) upon a conversion,
redemption or exchange of Preferred Stock, (d) upon a conversion of Junior Stock into REIT Shares,
(e) upon a conversion, redemption, exchange or exercise of New Securities or, (f) pursuant to share
grants or awards made pursuant to any Equity Incentive Plan of the General Partner. In the event
of any issuance of additional REIT Shares, Preferred Stock, Junior Stock or New Securities by the
General Partner, and the direct or indirect contribution to the Partnership, by the General
Partner, of the cash proceeds or other consideration received from such issuance, the Partnership
shall pay the General Partner’s expenses associated with such issuance, including any underwriting
discounts or commissions (it being understood that if the proceeds actually received 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 by the General Partner in connection with such issuance, then
the General Partner shall be deemed to have made a Capital Contribution to the Partnership in the
amount of the gross proceeds of such issuance and the Partnership shall be deemed simultaneously to
have reimbursed the General Partner pursuant to Section 7.4.B for the amount of such
underwriter’s discount or other expenses). For purposes of Section 5.2, the issue price
per OP Unit shall equal the gross proceeds per OP Unit deemed contributed to the Partnership under
this Section 4.4.E.

     Section 4.5. Equity Incentive Plan.

          A. Options Granted to Management Personnel and Independent Directors. If at any time
or from time to time, in connection with an Equity Incentive Plan, a stock option granted to any
Management Personnel or an Independent Director is duly exercised:

               (i) the General Partner shall, as soon as practicable after such exercise, make or
cause to be made directly or indirectly a Capital Contribution to the Partnership in an
amount equal to the exercise price paid to the General Partner by such exercising party in
connection with the exercise of such stock option.

- 21 - 

 

               (ii) Notwithstanding the amount of the Capital Contribution actually made pursuant to
Section 4.5.A(i) hereof, the General Partner shall be deemed to have contributed
directly or indirectly to the Partnership, as a Capital Contribution, in consideration of an
additional Limited Partner Interest (expressed in and as additional Partnership Units), an
amount equal to the Value of a REIT Share as of the date of exercise multiplied by the
number of REIT Shares then being issued in connection with the exercise of such stock
option.

               (iii) An equitable Percentage Interest adjustment shall be made in which the General
Partner shall be treated as having made a cash contribution equal to the amount described in
Section 4.5.A(ii) hereof.

          B. Special Valuation Rule. For purposes of this Section 4.5, in determining
the Value of a REIT Share, only the trading date immediately preceding the exercise of the relevant
stock option under the Equity Incentive Plan shall be considered.

          C. Future Equity Incentive Plans. Nothing in this Agreement shall be construed or
applied to preclude or restrain the General Partner from adopting, modifying or terminating any
Equity Incentive Plan, for the benefit of employees, directors or other business associates of the
General Partner, the Partnership or any of their Affiliates. The Limited Partners acknowledge and
agree that, in the event that any such plan is adopted, modified or terminated by the General
Partner, amendments to this Section 4.5 may become necessary or advisable and that any
approval or consent of the Limited Partners required pursuant to the terms of this Agreement in
order to effect any such amendments requested by the General Partner shall not be unreasonably
withheld or delayed.

     Section 4.6. LTIP Units.

          A. Issuance of LTIP Units. The General Partner may from time to time issue LTIP Units
to Persons who provide services to the Partnership, for such consideration as the General Partner
may determine to be appropriate, and admit such Persons as Limited Partners. Subject to the
following provisions of this Section 4.6 and the special provisions of Sections
6.3.C and 4.7, LTIP Units shall be treated as OP Units, with all of the rights,
privileges and obligations attendant thereto. For purposes of computing the Partners’ Percentage
Interests, holders of LTIP Units shall be treated as OP Unitholders and LTIP Units shall be treated
as OP Units. In particular, the Partnership shall maintain at all times a one-to-one
correspondence between LTIP Units and OP Units for conversion, distribution and other purposes,
including without limitation complying with the following procedures:

               (i) If an Adjustment Event (as defined below) occurs, then the General Partner shall
make a corresponding adjustment to the LTIP Units to maintain a one-for-one conversion and
economic equivalence ratio between OP Units and LTIP Units. The following shall be
adjustment events (each, an “Adjustment Event”): (A) the Partnership makes a
distribution on all outstanding OP Units in Partnership Units, (B) the Partnership
subdivides the outstanding OP Units into a greater number of units or combines the
outstanding OP Units into a smaller number of units, or (C) the Partnership issues any
Partnership Units in exchange for its outstanding OP Units by way of a reclassification or
recapitalization of its OP Units. If more than one Adjustment Event occurs, the adjustment
to the LTIP Units need be made only once using a single formula that takes into account each
and every Adjustment Event as if all Adjustment Events occurred simultaneously. The
Partners agree that the following shall not be Adjustment Events: (x) the issuance of
Partnership Units in a financing, reorganization, acquisition or other similar business
transaction, (y) the issuance of Partnership Units pursuant to any employee benefit or
compensation plan or distribution reinvestment plan, or (z) the issuance of any Partnership
Units to the General Partner in respect of a Capital Contribution of proceeds from the

- 22 - 

 

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

               (ii) The LTIP Unitholders shall, when, as and if authorized and declared by the General
Partner out of assets legally available for that purpose, be entitled to receive
distributions in an amount per LTIP Unit equal to the distributions per OP Unit (the
“Partnership Unit Distribution”), paid to holders of OP Units on such Partnership
Record Date established by the General Partner with respect to such distribution. So long
as any LTIP Units are outstanding, no distributions (whether in cash or in kind) shall be
authorized, declared or paid on OP Units, unless equal distributions have been or
contemporaneously are authorized, declared and paid on the LTIP Units. Subject to the terms
of any LTIP Award, a LTIP Unitholder shall be entitled to transfer his or her LTIP Units to
the same extent, and subject to the same restrictions as holders of OP Units are entitled to
transfer their OP Units pursuant to Article XI of this Agreement.

          B. Priority. Subject to the provisions of this Section 4.6 and the special
provisions of Sections 6.3.C and 4.11, the LTIP Units shall rank pari passu with
the OP Units as to the payment of regular and special periodic or other distributions and
distribution of assets upon liquidation, dissolution or winding up. As to the payment of
distributions and as to distribution of assets upon liquidation, dissolution or winding up, any
class or series of Partnership Units or Partnership Interests which by its terms specifies that it
shall rank junior to, on a parity with, or senior to the OP Units shall also rank junior to, or
pari passu with, or senior to, as the case may be, the LTIP Units. Subject to the terms of any
Vesting Agreement, an LTIP Unitholder shall be entitled to transfer his or her LTIP Units to the
same extent, and subject to the same restrictions as holders of OP Units are entitled to transfer
their OP Units pursuant to Article XI.

          C. Special Provisions. LTIP Units shall be subject to the following special
provisions:

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

               (ii) Forfeiture. Unless otherwise specified in the Vesting Agreement, upon the
occurrence of any event specified in a Vesting Agreement as resulting in either the right of
the Partnership or the General Partner to repurchase LTIP Units at a specified purchase
price or some other forfeiture of any LTIP Units, then if the Partnership or the General
Partner exercises such

- 23 - 

 

right to repurchase or forfeiture in accordance with the applicable Vesting Agreement,
the relevant LTIP Units shall immediately, and without any further action, be treated as
cancelled and no longer outstanding for any purpose. Unless otherwise specified in the
Vesting Agreement, no consideration or other payment shall be due with respect to any LTIP
Units that have been forfeited, other than any distributions declared with respect to a
Partnership Record Date prior to the effective date of the forfeiture. In connection with
any repurchase or forfeiture of LTIP Units, the balance of the portion of the Capital
Account of the LTIP Unitholder that is attributable to all of his or her LTIP Units shall be
reduced by the amount, if any, by which it exceeds the target balance contemplated by
Section 6.3.C, calculated with respect to the LTIP Unitholder’s remaining LTIP
Units, if any.

               (iii) Allocations. LTIP Unitholders shall be entitled to certain special
allocations of gain under Section 6.3.C.

               (iv) Redemption. The Redemption provided to Limited Partners under Section
8.6 shall not apply with respect to LTIP Units unless and until they are converted to OP
Units as provided in clause (v) below and Section 4.7.

               (v) Conversion To OP Units. Vested LTIP Units are eligible to be converted
into OP Units under Section 4.7.

          D. Voting. LTIP Unitholders shall (a) have the same voting rights as a holder of OP
Units, with the LTIP Units voting as a single class with the OP Units and having one vote per LTIP
Unit; and (b) have the additional voting rights that are expressly set forth below. So long as any
LTIP Units remain outstanding, the Partnership shall not, without the affirmative vote of the
holders of at least a majority of the LTIP Units outstanding at the time, given in person or by
proxy, either in writing or at a meeting (voting separately as a class), amend, alter or repeal,
whether by merger, consolidation or otherwise, the provisions of this Agreement applicable to LTIP
Units so as to materially and adversely affect any right, privilege or voting power of the LTIP
Units or the LTIP Unitholders as such, unless such amendment, alteration, or repeal affects
equally, ratably and proportionately the rights, privileges and voting powers of the holders of OP
Units; but subject, in any event, to the following provisions:

               (i) With respect to any Transaction, so long as the LTIP Units are treated in
accordance with Section 4.7.F hereof, the consummation of such Transaction shall not
be deemed to materially and adversely affect such rights, preferences, privileges or voting
powers of the LTIP Units or the LTIP Unitholders as such; and

               (ii) Any creation or issuance of any Partnership Units or of any class or series of
Partnership Interest, including without limitation additional OP Units, LTIP Units, Special
Units or Preferred Units, whether ranking senior to, junior to, or on a parity with the LTIP
Units with respect to distributions and the distribution of assets upon liquidation,
dissolution or winding up, shall not be deemed to materially and adversely affect such
rights, preferences, privileges or voting powers of the LTIP Units or the LTIP Unitholders
as such.

     The foregoing voting provisions will not apply if, at or prior to the time when the act
with respect to which such vote would otherwise be required will be effected, all
outstanding LTIP Units shall have been converted into OP Units.

- 24 - 

 

     Section 4.7. Conversion of LTIP Units.

          A. An LTIP Unitholder shall have the right (the “Conversion Right”), at his or her
option, at any time to convert all or a portion of his or her Vested LTIP Units into OP Units;
provided, however, that a holder may not exercise the Conversion Right for less
than [100] Vested LTIP Units or, if such holder holds less than [100] Vested LTIP Units, all of the
Vested LTIP Units held by such holder. LTIP Unitholders shall not have the right to convert
Unvested Incentive Units into OP Units until they become Vested LTIP Units; provided,
however, that when an LTIP Unitholder is notified of the expected occurrence of an event
that will cause his or her Unvested Incentive Units to become Vested LTIP Units, such LTIP
Unitholder may give the Partnership a Conversion Notice conditioned upon and effective as of the
time of vesting and such Conversion Notice, unless subsequently revoked by the LTIP Unitholder,
shall be accepted by the Partnership subject to such condition. The Partnership, at any time at
the election of the General Partner, shall have the right at any time to cause a conversion of
Vested LTIP Units into OP Units. In all cases, the conversion of any LTIP Units into OP Units
shall be subject to the conditions and procedures set forth in this Section 4.7.

          B. A holder of Vested LTIP Units may convert such units into an equal number of fully paid and
non-assessable OP Units, giving effect to all adjustments (if any) made pursuant to Section
4.6. Notwithstanding the foregoing, in no event may a holder of Vested LTIP Units convert a
number of Vested LTIP Units that exceeds (x) the Economic Capital Account Balance of such Limited
Partner, to the extent attributable to its ownership of LTIP Units, divided by (y) the OP Unit
Economic Balance, in each case as determined as of the effective date of conversion (the
“Capital Account Limitation”).

     In order to exercise his or her Conversion Right, an LTIP Unitholder shall deliver a notice to
the Partnership (a “Conversion Notice”) in the form attached as Exhibit C to this
Agreement (with a copy to the General Partner) not less than 10 nor more than 60 days prior to a
date specified in such Conversion Notice (the “Conversion Date”); provided,
however, that (i) if the effective date of a Transaction (as defined below in Section
4.7.F) is to occur prior to such date, then the Conversion Date shall be the Business Day
immediately prior to such effective date; and (ii) if the General Partner has not given to the LTIP
Unitholders notice of a proposed or upcoming Transaction at least 30 days prior to the effective
date of such Transaction, then LTIP Unitholders shall have the right to deliver a Conversion Notice
until the earlier of (x) the 10th day after such notice from the General Partner of a Transaction
or (y) the third business day immediately preceding the effective date of such Transaction. A
Conversion Notice shall be provided in the manner provided in Section 15.1. Each LTIP
Unitholder covenants and agrees with the Partnership that all Vested LTIP Units to be converted
pursuant to this Section 4.7.B shall be free and clear of all liens. Notwithstanding
anything herein to the contrary, a holder of LTIP Units may deliver a Notice of Redemption pursuant
to Section 8.6.A relating to those OP Units that will be issued to such holder upon
conversion of such LTIP Units into OP Units in advance of the Conversion Date; provided,
however, that the redemption of such OP Units by the Partnership shall in no event take
place until after the Conversion Date. For clarity, it is noted that the objective of this
paragraph is to put an LTIP Unitholder in a position where, if he or she so wishes, the OP Units
into which his or her Vested LTIP Units will be converted can be redeemed by the Partnership
simultaneously with such conversion, with the further consequence that, if the General Partner
elects to assume the Partnership’s redemption obligation with respect to such OP Units under
Section 8.6.B by delivering to such holder REIT Shares rather than cash, then such holder
can have such REIT Shares issued to him or her simultaneously with the conversion of his or her
Vested LTIP Units into OP Units. The General Partner shall reasonably cooperate with an LTIP
Unitholder to coordinate the timing of the different events described in the foregoing sentence.

          C. The Partnership, at any time at the election of the General Partner, may cause any number
of Vested LTIP Units held by an LTIP Unitholder to be converted (a “Forced Conversion”)
into an equal number of OP Units, giving effect to all adjustments (if any) made pursuant to
Section 4.6;

- 25 - 

 

provided, however, that the Partnership may not cause a Forced
Conversion of any LTIP Units that would
not at the time be eligible for conversion at the option of such LTIP Unitholder pursuant to
Section 4.7.B. In order to exercise its right of Forced Conversion, the Partnership shall
deliver a notice (a “Forced Conversion Notice”) to the applicable LTIP Unitholder in the
form attached as Exhibit D to this Agreement not less than 10 nor more than 60 days prior
to the Conversion Date specified in such Forced Conversion Notice. A Forced Conversion Notice
shall be provided in the manner provided in Section 15.1.

          D. A conversion of Vested LTIP Units for which the holder thereof has given a Conversion
Notice or the Partnership has given a Forced Conversion Notice shall occur automatically after the
close of business on the applicable Conversion Date without any action on the part of such LTIP
Unitholder, as of which time such LTIP Unitholder shall be credited on the books and records of the
Partnership with the issuance as of the opening of business on the next day of the number of OP
Units issuable upon such conversion. After the conversion of LTIP Units as aforesaid, the
Partnership shall deliver to such LTIP Unitholder, upon his or her written request, a certificate
of the General Partner certifying the number of OP Units and remaining LTIP Units, if any, held by
such person immediately after such conversion. The Assignee of any Limited Partner pursuant to
Article XI hereof may exercise the rights of such Limited Partner pursuant to this
Section 4.7 and such Limited Partner shall be bound by the exercise of such rights by the
Assignee.

          E. For purposes of making future allocations under Section 6.3.C and applying the
Capital Account Limitation, the portion of the Economic Capital Account balance of the applicable
LTIP Unitholder that is treated as attributable to his or her LTIP Units shall be reduced, as of
the date of conversion, by the product of the number of LTIP Units converted and the OP Unit
Economic Balance.

          F. If the Partnership or the General Partner shall be a party to any transaction (including
without limitation a merger, consolidation, unit exchange, self tender offer for all or
substantially all OP Units or other business combination or reorganization, or sale of all or
substantially all of the Partnership’s assets, but excluding any transaction which constitutes an
Adjustment Event) in each case as a result of which OP Units shall be exchanged for or converted
into the right, or the holders of such Units shall otherwise be entitled, to receive cash,
securities or other property or any combination thereof (any of the foregoing being referred to
herein as a “Transaction”), then the General Partner shall, immediately prior to the
Transaction, exercise its right to cause a Forced Conversion with respect to the maximum number of
LTIP Units then eligible for conversion, taking into account any allocations that occur in
connection with the Transaction or that would occur in connection with the Transaction if the
assets of the Partnership were sold at the Transaction price or, if applicable, at a value
determined by the General Partner in good faith using the value attributed to the Partnership Units
in the context of the Transaction (in which case the Conversion Date shall be the effective date of
the Transaction).

     In anticipation of such Forced Conversion and the consummation of the Transaction, the
Partnership shall use commercially reasonable efforts to cause each LTIP Unitholder to be afforded
the right to receive in connection with such Transaction in consideration for the OP Units into
which his or her LTIP Units will be converted the same kind and amount of cash, securities and
other property (or any combination thereof) receivable upon the consummation of such Transaction by
a holder of the same number of OP Units, assuming such holder of OP Units is not a Person with
which the Partnership consolidated or into which the Partnership merged or which merged into the
Partnership or to which such sale or transfer was made, as the case may be (a “Constituent
Person”), or an affiliate of a Constituent Person. In the event that holders of OP Units have
the opportunity to elect the form or type of consideration to be received upon consummation of the
Transaction, prior to such Transaction the General Partner shall give prompt written notice to each
LTIP Unitholder of such election, and shall use commercially reasonable efforts to afford the LTIP
Unitholders the right to elect, by written notice to the

- 26 - 

 

General Partner, the form or type of
consideration to be received upon conversion of each LTIP Unit held
by such holder into OP Units in connection with such Transaction. If an LTIP Unitholder fails
to make such an election, such holder (and any of its transferees) shall receive upon conversion of
each LTIP Unit held by him or her (or by any of his or her transferees) the same kind and amount of
consideration that a holder of a OP Unit would receive if such OP Unitholder failed to make such an
election.

     Subject to the rights of the Partnership and the General Partner under any Vesting Agreement
and any Equity Incentive Plan, the Partnership shall use commercially reasonable effort to cause
the terms of any Transaction to be consistent with the provisions of this Section 4.7.F and
to enter into an agreement with the successor or purchasing entity, as the case may be, for the
benefit of any LTIP Unitholders whose LTIP Units will not be converted into OP Units in connection
with the Transaction that will (i) contain provisions enabling the holders of LTIP Units that
remain outstanding after such Transaction to convert their LTIP Units into securities as comparable
as reasonably possible under the circumstances to the OP Units and (ii) preserve as far as
reasonably possible under the circumstances the distribution, special allocation, conversion, and
other rights set forth in this Agreement for the benefit of the LTIP Unitholders.

     Section 4.8. Issuance of Special Units. On the Effective Date, the General Partner
issued                      Special Units to MFA Manager (Incentive) LLC, an Affiliate of the Manager, which
assignment has been reflected in Exhibit A. There was no obligation to contribute any
capital in connection with the issuance of the Special Units, and the Capital Account balance of
the Holder of the Special Units was zero.

     Section 4.9. Characterization as Profits Interests. The Special Units issued under
this Agreement and any LTIP Units to be issued under this Agreement are intended to qualify as
“profits interests” under IRS Revenue Procedures 93-27 and 2001-43, and the sections of this
Agreement relating to such interests shall be interpreted and applied consistently therewith. In
addition, the General Partner is hereby authorized upon publication of final Regulations in the
Federal Register (or other official pronouncement), to amend this Agreement as it determines, in
its sole discretion, to provide for: (A) the election of a safe harbor under Regulation Section
1.83-3(1) (or any similar provision) under which the fair market value of any Special Units or LTIP
Units that are transferred in connection with the performance of services are treated as being
equal to the liquidation value of such Partnership Interests, with (B) an agreement by the
Partnership and all of its Partners to comply with all the requirements set forth in such
regulations and Notice 2005-43 (and any other guidance provided by the IRS with respect to such
election) with respect to all Special Units or LTIP Units transferred in connection with the
performance of services while the election remains effective, (C) the allocation of items of
income, gains, deductions, and losses required by any final Regulations similar to Proposed
Regulation Sections 1.704-1(b)(4)(xii)(b) and (c), and (D) any other related amendments. The
Partners acknowledge and agree that the exercise by the General Partner of any discretion provided
to it hereunder shall not be a modification or amendment to this Agreement.

     Section 4.10. No Interest; No Return. No Partner shall be entitled to interest on its
Capital Contribution or on such Partner’s Capital Account. Except as provided herein or by law, no
Partner shall have any right to demand or receive the return of its Capital Contribution from the
Partnership.

     Section 4.11. Other Contribution Provisions. In the event that any Partner is
admitted to the Partnership and is given a Capital Account in exchange for services rendered to the
Partnership, unless otherwise determined by the General Partner in its sole and absolute
discretion, such transaction shall be treated by the Partnership and the affected Partner as if the
Partnership had compensated such Partner in cash and such Partner had contributed the cash to the
capital of the Partnership. In addition, with the

- 27 - 

 

consent of the General Partner, one or more
Limited Partners may enter into contribution agreements with the Partnership which have the effect
of providing a guarantee of certain obligations of the Partnership.

     Section 4.12. Not Publicly Traded. The General Partner, on behalf of the Partnership,
shall use its best efforts not to take any action which would result in the Partnership being a
“publicly traded partnership” under and as such term is defined in Code Section 7704(b).

ARTICLE V

DISTRIBUTIONS

     Section 5.1. Requirement and Characterization of Distributions. Subject to the terms
of any Partnership Unit Designation, the General Partner shall cause the Partnership to distribute
at least quarterly all Available Cash generated by the Partnership during such quarter to the
Holders of Partnership Units on such Partnership Record Date with respect to such quarter: (1)
first, to holders of Special Units as provided in Section 5.2 hereof, and to each other
holder of any Partnership Interests that are entitled to any preference in distribution, in
accordance with the rights of such class(es) of Partnership Interests (and, within such class(es),
pro rata in proportion to the respective Percentage Interests on such Partnership Record Date) and
(2) second, with respect to any Partnership Interests that are not entitled to any preference in
distribution, in accordance with the rights of such class of Partnership Interests (and, within
such class, pro rata in proportion to the respective Percentage Interests on such Partnership
Record Date). Distributions payable with respect to any Partnership Units that were not
outstanding during the entire quarterly period in respect of which any distribution is made shall
be prorated based on the portion of the period that such units were outstanding. The General
Partner in its sole and absolute discretion may distribute Available Cash on a more frequent basis
and provide for an appropriate Partnership Record Date. Notwithstanding anything herein to the
contrary, the General Partner shall make such reasonable efforts, as determined by it in its sole
and absolute discretion and consistent with its qualification as a REIT, to cause the Partnership
to distribute sufficient amounts to enable the General Partner to pay stockholder dividends that
will (a) satisfy the requirements for its qualification as a REIT under the Code and Regulations
(the “REIT Requirements”) and (b) except to the extent otherwise determined by the General
Partner, in its sole and absolute discretion, avoid any federal income or excise tax liability of
the General Partner.

     Section 5.2. Distributions When Special Units Are Outstanding. Holders of Special
Units shall be entitled to a distribution of Available Cash with respect to the most recently
completed calendar quarter (the “Current Quarter”), in an amount equal to 20% of the dollar
amount by which Core Earnings of the Partnership for the Current Quarter, computed before reduction
for any Incentive Distribution, exceeds the product of (1) the weighted average of the issue price
per OP Unit to the General Partner (calculated as provided in Section 4.4.E hereof)
multiplied by the weighted average number of OP Units outstanding during the Current Quarter and
(2) 3.0% per annum plus the daily average of the one-month LIBOR rate for the Current Quarter,
expressed on a quarterly basis; provided that no Incentive Distribution shall be made to
the Holders of Special Units with respect to such Current Quarter (the “Relevant Quarter”)
unless (I) the sum of (A) the Incentive Distribution to be distributed to the Holders of Special
Units with respect to the Relevant Quarter and (B) the Incentive Distributions distributed to the
Holders of Special Units with respect to the previous three Current Quarters (the “Annual
Incentive Distribution”) exceeds (II) the Incentive Distribution computed using the Core
Earnings of the previous three Current Quarters (the “Highwater Incentive Distribution
Amount”); and provided further that the Partnership shall defer the Incentive
Distributions that would otherwise be distributable to the Holders of Special Units in respect of
the second, third and fourth calendar quarters of 2008, and shall distribute such Incentive
Distributions effective as of December 31, 2008 only if the average daily closing price of OP Units
during the calendar month of December 2008 (determined based on the average daily closing price of

- 28 - 

 

REIT Shares on the New York Stock Exchange during the calendar month of December 2008) plus the
aggregated amount of distributions made or declared to be distributable to an OP Unit in respect of
the second, third and fourth calendar quarters of 2008 equals or exceeds the issue price per OP
Unit to the
General Partner (calculated as provided in Section 4.4.E hereof ) in the General
Partner’s initial public offering (the “2008 distribution condition”). For purposes of determining the Annual Incentive Distribution and the Highwater
Distribution Amount for the Partnership’s first four Relevant Quarters following the Effective
Date, the Core Earnings and LIBOR rate will be calculated for each Relevant Quarter and each
previously completed Current Quarter on an annualized basis. The Incentive Distribution shall be
computed by the Manager within 30 days after the end of the Current Quarter and such computation
shall promptly be delivered to the Partnership. The Partnership shall pay the Incentive
Distribution to the Holders of the Special Units no later than that date which is five Business
Days after the date of delivery of such computation.

     Section 5.3. Distributions In-Kind. No right is given to any Partner to demand and
receive property other than cash as provided in this Agreement. The General Partner may determine,
in its sole and absolute discretion, to make a distribution in-kind of Partnership assets to the
Holders, and such assets shall be distributed in such a fashion as to ensure that the fair market
value is distributed and allocated in accordance with Articles V, VI and X
hereof.

     Section 5.4. Amounts Withheld. All amounts withheld pursuant to the Code or any
provisions of any state or local tax law and Section 10.4 hereof with respect to any
allocation, payment or distribution to any Holder shall be treated as amounts paid or distributed
to such Holder pursuant to Section 5.1 hereof for all purposes under this Agreement.

     Section 5.5. Distributions Upon Liquidation. Notwithstanding the other provisions of
this Article V, net proceeds from a Terminating Capital Transaction, and any other cash
received or reductions in reserves made after commencement of the liquidation of the Partnership,
shall be distributed to the Holders in accordance with Section 13.2 hereof.

     Section 5.6. Distributions to Reflect Issuance of Additional Partnership Units.
Notwithstanding Section 7.3.B hereof, in the event that the Partnership issues additional
Partnership Units pursuant to the provisions of Article IV hereof, subject to Section
7.3.D, the General Partner is hereby authorized to make such revisions to this Article
V as it determines are necessary or desirable to reflect the issuance of such additional
Partnership Units, including, without limitation, making preferential distributions to certain
classes of Partnership Units.

     Section 5.7. Restricted Distributions. Notwithstanding any provision to the contrary
contained in this Agreement, neither the Partnership nor the General Partner, on behalf of the
Partnership, shall make a distribution to any Holder on account of its Partnership Interest or
interest in Partnership Units if such distribution would violate Section 17-607 of the Act or other
applicable law.

- 29 - 

 

ARTICLE VI

ALLOCATIONS

     Section 6.1. Timing and Amount of Allocations of Net Income and Net Loss. Net Income
and Net Loss of the Partnership shall be determined and allocated with respect to each Partnership
Year of the Partnership as of the end of each such year. Except as otherwise provided in this
Article VI, and subject to Section 11.6.C hereof, an allocation to a Holder of a
share of Net Income or Net Loss shall be
treated as an allocation of the same share of each item of income, gain, loss or deduction
that is taken into account in computing Net Income or Net Loss.

     Section 6.2. General Allocations.

          A. Allocations of Net Income and Net Loss.

               (a) Net Income. Except as otherwise provided herein, Net Income for any Partnership
Year or other applicable period shall be allocated in the following order and priority:

               (i) First, to the General Partner to the extent the cumulative Net Loss allocated to
the General Partner pursuant to subparagraph (b)(iv) below exceeds the cumulative Net Income
allocated to the General Partner pursuant to this subparagraph (a)(i);

               (ii) Second, to the Holders of any Partnership Interests that are entitled to any
preference in distribution upon liquidation in the order of the priorities of each such
class (and within each such class pro rata in proportion to the amount of Net Losses
allocated pursuant to subparagraph (b)(iv) below to the Holders in such class that have not
previously been reversed by allocations of Net Income pursuant to this subparagraph (a)(ii))
until the cumulative Net Income allocated under this subparagraph (a)(ii) equals the
cumulative Net Loss allocated to such Partners under subparagraph (b)(iv);

               (iii) Third, to the Holders of any Partnership Units that are entitled to any
preference in distribution in accordance with the rights of any other class of Partnership
Units until each such Partnership Unit has been allocated, on a cumulative basis pursuant to
this subparagraph (a)(iii), Net Income equal to the amount of distributions received which
are attributable to the preference of such class of Partnership Unit (and, within such
class, pro rata in proportion to the respective Percentage Interests as of the last day of
the period for which such allocation is made); and

               (iv) Fourth, to the Holders of Special Units (pro rata based on the Percentage Interest
of Special Units held by each Holder) in an amount equal to the sum of the Incentive
Distributions received or to be received with respect to the Partnership Year in which such
Net Income accrues;

               (v) Thereafter, with respect to Partnership Units that are not entitled to any
preference in distribution or with respect to which distributions are not limited to any
preference in distribution, pro rata to each such class in accordance with the terms of such
class (and, within such class, pro rata in proportion to the respective Percentage Interests
as of the last day of the period for which such allocation is being made).

- 30 - 

 

               (b) Net Loss. Except as otherwise provided herein, Net Loss for any Partnership Year
or other applicable period shall be allocated in the following order and priority:

          (i) First, to the Holders of Special Units in proportion to and to the extent of the
amount by which the cumulative Net Income allocated to such Holders pursuant to subparagraph
(a)(iv) exceeds the sum of (a) distributions with respect to the Special Units pursuant to
Section 5.2 and (b) Net Loss allocated to such Holder pursuant to this subparagraph
(b)(i);

          (ii) Second, to each Holder of Partnership Units in proportion to and to the extent of
the amount by which the cumulative Net Income allocated to such Partner pursuant to
subparagraph (a)(v) above exceeds, on a cumulative basis, the sum of (a) distributions with
respect to such Partnership Units pursuant to clause (2) of Section 5.1 and (b) Net
Loss allocated to such Holder pursuant to this subparagraph (b)(ii);

          (iii) Third, with respect to classes of Partnership Units that are not entitled to any
preference in distribution or with respect to which distributions are not limited to any
preference in distribution, pro rata to each such class in accordance with the terms of such
class (and within such class, pro rata in proportion to the respective Percentage Interests
as of the last day of the period for which such allocation is being made); provided
that Net Loss shall not be allocated to any Partner pursuant to this subparagraph (b)(iii)
to the extent that such allocation would cause such Partner to have an Adjusted Capital
Account Deficit (or increase any existing Adjusted Capital Account Deficit) (determined in
each case with respect to a Partner who also holds classes of Partnership Units that are
entitled to any preferences in distribution upon liquidation, by subtracting from such
Partners’ Adjusted Capital Account the amount of such preferred distribution to be made upon
liquidation), at the end of such Partnership Year or other applicable period;

          (iv) Fourth, with respect to classes of Partnership Units that are entitled to any
preference in distribution upon liquidation, in reverse order of the priorities of each such
class (and within each such class, pro rata in proportion to their respective Percentage
Interests as of the last day of the period for which such allocation is being made;
provided that Net Loss shall not be allocated to any Partner pursuant to this
subparagraph (b)(iv) to the extent that such allocation would cause such Partner to have an
Adjusted Capital Account Deficit (or increase any existing Adjusted Capital Account Deficit)
at the end of such Partnership Year or other applicable period; and

          (v) Thereafter, to the General Partner.

          B. Allocations to Reflect Issuance of Additional Partnership Units. Notwithstanding
Section 7.3.B hereof, in the event that the Partnership issues additional Partnership Units
pursuant to the provisions of Article IV hereof, the General Partner is hereby authorized
to make such revisions to this Section 6.2 as it determines are necessary or desirable to
reflect the terms of the issuance of such additional Partnership Units.

- 31 - 

 

     Section 6.3. Additional Allocation Provisions. Notwithstanding the foregoing
provisions of this Article VI:

          A. Regulatory Allocations.

               (i) Minimum Gain Chargeback. Except as otherwise provided in Regulations
Section 1.704-2(f), notwithstanding the provisions of Section 6.2 hereof, or any
other provision of this Article VI, if there is a net decrease in Partnership
Minimum Gain during any Partnership Year, each Holder shall be specially allocated items of
Partnership income and gain for such year (and, if necessary, subsequent years) in an amount
equal to such Holder’s share of the net decrease in Partnership Minimum Gain, as determined
under Regulations Section 1.704-2(g). Allocations pursuant to the previous sentence shall
be made in proportion to the respective amounts required to be allocated to each Holder
pursuant thereto. The items to be allocated shall be determined in accordance with
Regulations Sections 1.704-2(f)(6) and 1.704-2(j)(2). This Section 6.3.A(i) is
intended to qualify as a “minimum gain chargeback”
within the meaning of Regulations Section 1.704-2(f) and shall be interpreted
consistently therewith.

               (ii) Partner Minimum Gain Chargeback. Except as otherwise provided in
Regulations Section 1.704-2(i)(4) or in Section 6.3.A(i) hereof, if there is a net
decrease in Partner Minimum Gain attributable to a Partner Nonrecourse Debt during any
Partnership Year, each Holder who has a share of the Partner Minimum Gain attributable to
such Partner Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(5), shall be specially allocated items of Partnership income and gain for such
year (and, if necessary, subsequent years) in an amount equal to such Holder’s share of the
net decrease in Partner Minimum Gain attributable to such Partner Nonrecourse Debt,
determined in accordance with Regulations Section 1.704-2(i)(4). Allocations pursuant to
the previous sentence shall be made in proportion to the respective amounts required to be
allocated to each General Partner, Limited Partner and other Holder pursuant thereto. The
items to be so allocated shall be determined in accordance with Regulations Sections
1.704-2(i)(4) and 1.704-2(j)(2). This Section 6.3.A(ii) is intended to qualify as a
“chargeback of partner nonrecourse debt minimum gain” within the meaning of Regulations
Section 1.704-2(i) and shall be interpreted consistently therewith.

               (iii) Nonrecourse Deductions and Partner Nonrecourse Deductions. Any
Nonrecourse Deductions for any Partnership Year shall be specially allocated to the Holders
of Partnership Units in accordance with their Partnership Units. Any Partner Nonrecourse
Deductions for any Partnership Year shall be specially allocated to the Holder(s) who bears
the economic risk of loss with respect to the Partner Nonrecourse Debt to which such Partner
Nonrecourse Deductions are attributable, in accordance with Regulations Section 1.704-2(i).

               (iv) Qualified Income Offset. If any Holder unexpectedly receives an
adjustment, allocation or distribution described in Regulations Section
1.704-1(b)(2)(ii)(d)(4), (5), or (6), items of Partnership income and gain shall be
allocated, in accordance with Regulations Section 1.704-1(b)(2)(ii)(d), to such Holder in an
amount and manner sufficient to eliminate, to the extent required by such Regulations, the
Adjusted Capital Account Deficit of such Holder as quickly as possible. It is intended that
this Section 6.3.A(iv) qualify and be construed as a “qualified income offset”
within the meaning of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted
consistently therewith.

               (v) Gross Income Allocation. In the event that any Holder has an Adjusted
Capital Account Deficit at the end of any Partnership Year, each such Holder shall be specially

- 32 - 

 

allocated items of Partnership income and gain in the amount of such excess to
eliminate such deficit as quickly as possible.

               (vi) Section 754 Adjustment. To the extent that an adjustment to the adjusted
tax basis of any Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is
required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(2) or Regulations Section
1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts as the
result of a distribution to a Holder in complete liquidation of its interest in the
Partnership, the amount of such adjustment to the Capital Accounts shall be treated as an
item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis), and such gain or loss shall be specially allocated to the Holders in
accordance with their Partnership Units in the event that Regulations Section
1.704-1(b)(2)(iv)(m)(2) applies, or to the Holders to whom such distribution was made in the
event that Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.

               (vii) Curative Allocations. The allocations set forth in Sections
6.3.A(i), (ii), (iii), (iv), (v), and (vi)
hereof (the “Regulatory Allocations”) are intended to comply with certain regulatory
requirements, including the requirements of Regulations Sections 1.704-1(b) and 1.704-2.
Notwithstanding the provisions of Section 6.1 hereof, the Regulatory Allocations
shall be taken into account in allocating other items of income, gain, loss and deduction
among the Holders of Partnership Units so that to the extent possible without violating the
requirements giving rise to the Regulatory Allocations, the net amount of such allocations
of other items and the Regulatory Allocations to each Holder of a Partnership Unit shall be
equal to the net amount that would have been allocated to each such Holder if the Regulatory
Allocations had not occurred.

          B. Allocation of Excess Nonrecourse Liabilities. The Partnership shall allocate
“nonrecourse liabilities” (within the meaning of Regulations Section 1.752-1(a)(2)) of the
Partnership that are secured by multiple Properties under any reasonable method chosen by the
General Partner in accordance with Regulations Section 1.752-3(a)(2) and (b). The Partnership
shall allocate “excess nonrecourse liabilities” of the Partnership under any method approved under
Regulations Section 1.752-3(a)(3) as chosen by the General Partner.

          C. Special Allocations Regarding LTIP Units. Notwithstanding the provisions of
Section 6.2 above, Liquidating Gains shall first be allocated to the LTIP Unitholders until
the Economic Capital Account Balances of such Holders, to the extent attributable to their
ownership of LTIP Units, are equal to (i) the OP Unit Economic Balance, multiplied by (ii) the
number of their LTIP Units; provided that no such Liquidating Gains will be allocated with respect
to any particular LTIP Unit unless and to the extent that the OP Unit Economic Balance equals or
exceeds the OP Unit Economic Balance in existence at the time such LTIP Unit was issued. For this
purpose, “Liquidating Gains” means net capital gains realized in connection with the actual
or hypothetical sale of all or substantially all of the assets of the Partnership, including but
not limited to net capital gain realized in connection with an adjustment to the Gross Asset Value
of Partnership assets under Section 704(b) of the Code. The “Economic Capital Account
Balances” of the LTIP Unitholders will be equal to their Capital Account balances to the extent
attributable to their ownership of LTIP Units, plus the amount of their allocable share of any
Partner Minimum Gain or Partnership Minimum Gain attributable to such LTIP Units. Similarly, the
“OP Unit Economic Balance” shall mean (i) the Capital Account balance of the General
Partner, plus the amount of the General Partner’s share of any Partner Minimum Gain or Partnership
Minimum Gain, in either case to the extent attributable to the General Partner’s ownership of OP
Units and computed on a hypothetical basis after taking into account all allocations through the
date on which any allocation is made under this Section 6.3.C (including, without
limitation, any expenses of the Partnership reimbursed to the General

- 33 - 

 

Partner pursuant to
Section 7.4.B), divided by (ii) the number of the General Partner’s OP Units. Any such
allocations shall be made among the LTIP Unitholders in proportion to the amounts required to be
allocated to each under this Section 6.3.C. The parties agree that the intent of this
Section 6.3.C is to make the Capital Account balance associated with each LTIP Unit to be
economically equivalent to the Capital Account balance associated with the General Partner’s OP
Units (on a per-Unit basis), but only if and to the extent that the Capital Account balance
associated with the General Partner’s OP Units has remained the same or increased on a per-Unit
basis since the issuance of the relevant LTIP Unit.

     Section 6.4. Tax Allocations.

          A. In General. Except as otherwise provided in this Section 6.4, for income
tax purposes under the Code and the Regulations each Partnership item of income, gain, loss and
deduction (collectively, “Tax Items”) shall be allocated among the Holders of Partnership
Units in the same manner as its correlative item of “book” income, gain, loss or deduction is
allocated pursuant to Sections 6.2 and 6.3 hereof.

          B. Allocations Respecting Section 704(c) Revaluations. Notwithstanding Section
6.4.A hereof, Tax Items with respect to Property that is contributed to the Partnership with a
Gross Asset Value that varies from its adjusted tax basis in the hands of the contributing Partner
immediately preceding the date of contribution shall be allocated among the Holders of Partnership
Units for income tax purposes pursuant to Regulations promulgated under Code Section 704(c) so as
to take into account such variation. The Partnership shall account for such variation under any
method approved under Code Section 704(c) and the applicable Regulations as chosen by the General
Partner, including, without limitation, the “remedial allocation method” as described in
Regulations Section 1.704-3(d). In the event that the Gross Asset Value of any partnership asset
is adjusted pursuant to subsection (b) of the definition of “Gross Asset Value” (provided
in Article I hereof), subsequent allocations of Tax Items with respect to such asset shall
take account of the variation, if any, between the adjusted basis of such asset and its Gross Asset
Value in the same manner as under Code Section 704(c) and the applicable Regulations.

ARTICLE VII

MANAGEMENT AND OPERATIONS OF BUSINESS

     Section 7.1. Management.

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

               (i) the making of any expenditures, the lending or borrowing of money (including,
without limitation, making prepayments on loans and borrowing money or selling assets to
permit the Partnership to make distributions to its Partners in such amounts as will

- 34 - 

 

permit
the General Partner (so long as the General Partner desires to maintain or restore its
status as a REIT) to avoid the payment of any federal income tax (including, for this
purpose, any excise tax pursuant to Code Section 4981) and to make distributions to its
stockholders sufficient to permit the General Partner to maintain or restore REIT status or
otherwise to satisfy the REIT Requirements), the assumption or guarantee of, or other
contracting for, indebtedness and other liabilities, the issuance of evidences of
indebtedness (including the securing of same by deed to secure debt, mortgage, deed of trust
or other lien or encumbrance on the Partnership’s assets) and the incurring of any
obligations that it deems necessary for the conduct of the activities of the Partnership;

               (ii) the making of tax, regulatory and other filings, or rendering of periodic or other
reports to governmental or other agencies having jurisdiction over the business or assets of
the Partnership, the registration of any class of securities of the Partnership under the
Exchange Act and the listing of any debt securities of the Partnership on any exchange;

               (iii) the acquisition, sale, lease, transfer, exchange or other disposition of any, all
or substantially all of the assets of the Partnership (including, but not limited to, the
exercise or
grant of any conversion, option, privilege or subscription right or any other right
available in connection with any assets at any time held by the Partnership) or the merger,
consolidation, reorganization or other combination of the Partnership with or into another
entity;

               (iv) the mortgage, pledge, encumbrance or hypothecation of any assets of the
Partnership, the use of the assets of the Partnership (including, without limitation, cash
on hand) for any purpose consistent with the terms of this Agreement and on any terms that
it sees fit, including, without limitation, the financing of the operations and activities
of the General Partner, the Partnership or any of the Partnership’s Subsidiaries, the
lending of funds to other Persons (including, without limitation, the Partnership’s
Subsidiaries) and the repayment of obligations of the Partnership, its Subsidiaries and any
other Person in which the Partnership has an equity investment, and the making of capital
contributions to and equity investments in the Partnership’s Subsidiaries;

               (v) the negotiation, execution and performance of any contracts, leases, conveyances or
other instruments that the General Partner considers useful or necessary to the conduct of
the Partnership’s operations or the implementation of the General Partner’s powers under
this Agreement, including contracting with contractors, developers, consultants,
accountants, legal counsel, other professional advisors and other agents and the payment of
their expenses and compensation out of the Partnership’s assets;

               (vi) the distribution of Partnership cash or other Partnership assets in accordance
with this Agreement, the holding, management, investment and reinvestment of cash and other
assets of the Partnership and the collection and receipt of revenues and income of the
Partnership;

               (vii) the maintenance of such insurance for the benefit of the Partnership and the
Partners as it deems necessary or appropriate, including, without limitation, (i) casualty,
liability and other insurance on the Properties and (ii) liability insurance for the
Indemnitees hereunder;

               (viii) the formation of, or acquisition of an interest in, and the contribution of
property to, any further limited or general partnerships, limited liability companies, joint
ventures or other relationships that it deems desirable (including, without limitation, the
acquisition of

- 35 - 

 

interests in, and the contributions of property to, any Subsidiary and any other Person
in which it has an equity investment from time to time); provided, however,
that, as long as the General Partner has determined to continue to qualify as a REIT, the
General Partner may not engage in any such formation, acquisition or contribution that would
cause the General Partner to fail to qualify as a REIT within the meaning of Code
Section 856(a);

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

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

          (xi) except as otherwise specifically set forth in this Agreement, the determination of
the fair market value of any Partnership property distributed in-kind using such reasonable
method of valuation as it may adopt; provided that such methods are otherwise
consistent with the requirements of this Agreement;

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

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

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

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

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

          (xvii) the issuance of additional Partnership Units, as appropriate and in the General
Partner’s sole and absolute discretion, in connection with Capital Contributions by
Additional Limited Partners and additional Capital Contributions by Partners pursuant to
Article IV hereof;

 - 36 - 

 

          (xviii) the selection, designation of powers, authority and duties and dismissal of
employees or personnel of the Partnership (including, without limitation, employees or
personnel having titles such as “president,” “vice president,” “secretary” and “treasurer”)
and agents, outside attorneys, accountants, consultants and contractors of the Partnership,
the General Partner or the Manager the determination of their compensation and other terms
of employment or service or hiring, and the delegation to any such Person the authority to
conduct the business of the Partnership in accordance with the terms of this Agreement;

          (xix) the distribution of cash to acquire Partnership Units held by a Limited Partner
in connection with a Limited Partner’s exercise of its Redemption under Section 8.6
hereof;

          (xx) the amendment and restatement of Exhibit A hereto to reflect accurately at
all times the Capital Contributions and Percentage Interests of the Partners as the same are
adjusted from time to time to the extent necessary to reflect redemptions, Capital
Contributions, the issuance of Partnership Units, the admission of any Additional Limited
Partner or any Substituted Limited Partner or otherwise, which amendment and restatement,
notwithstanding anything in this Agreement to the contrary, shall not be deemed an amendment
to this Agreement, as long as the matter or event being reflected in Exhibit A
hereto otherwise is authorized by this Agreement;

          (xxi) an election to dissolve the Partnership pursuant to Section 13.1.D
hereof; and

          (xxii) the taking of any action necessary or appropriate to enable the General Partner
to qualify as a REIT.

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

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

          D. In exercising its authority under this Agreement, the General Partner may, but shall be
under no obligation to, take into account the tax consequences to any Partner (including the
General Partner) of any action taken (or not taken) by it. The General Partner and the Partnership
shall not have liability to a Limited Partner for monetary damages or otherwise for losses
sustained, liabilities incurred or benefits not derived by such Limited Partner in connection with
such decisions, provided that the General Partner has acted in good faith and pursuant to
its authority under this Agreement.

     Section 7.2. Certificate of Limited Partnership. To the extent that such action is
determined by the General Partner to be reasonable and necessary or appropriate, the General
Partner shall file amendments to and restatements of the Certificate and do all the things to
maintain the Partnership as a

 - 37 - 

 

limited partnership (or a partnership in which the limited partners thereof have limited
liability) under the laws of the State of Delaware and each other state, the District of Columbia
or any other jurisdiction, in which the Partnership may elect to do business or own property.
Except as otherwise required under the Act, the General Partner shall not be required, before or
after filing, to deliver or mail a copy of the Certificate or any amendment thereto to any Limited
Partner. The General Partner shall use all reasonable efforts to cause to be filed such other
certificates or documents as may be reasonable and necessary or appropriate for the formation,
continuation, qualification and operation of a limited partnership (or a partnership in which the
limited partners thereof have limited liability to the extent provided by applicable law) in the
State of Delaware and any other state, or the District of Columbia or other jurisdiction, in which
the Partnership may elect to do business or own property.

     Section 7.3. Restrictions on General Partner’s Authority.

          A. The General Partner may not take any action in contravention of an express prohibition or
limitation of this Agreement without the written consent of a Majority in Interest of the Outside
Limited Partners and may not (1) perform any act that would subject a Limited Partner to liability
as a general partner in any jurisdiction or any other liability except as provided herein or under
the Act; or (2) enter into any contract, mortgage, loan or other agreement that prohibits or
restricts, or has the effect of prohibiting or restricting, the ability of a Limited Partner to
exercise its rights to a Redemption in full, except in each case with the written consent of such
Limited Partner.

          B. The General Partner shall not, without the written consent of a Majority in Interest of the
Limited Partners, except as provided in Sections 4.3.A, 5.6, 6.2.B and
7.3.C hereof, amend, modify or terminate this Agreement.

          C. Notwithstanding Sections 7.3.B and 14.2, the General Partner shall have the
exclusive power, without the prior consent of the Limited Partners, to amend this Agreement as may
be required to facilitate or implement any of the following purposes:

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

          (ii) to reflect the admission, substitution or withdrawal of Partners or the
termination of the Partnership in accordance with this Agreement, and to amend
Exhibit A in connection with such admission, substitution or withdrawal;

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

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

          (v) (a) to reflect such changes as are reasonably necessary for the General Partner to
maintain or restore its status as a REIT or to satisfy the REIT Requirements; or (b) to
reflect the Transfer of all or any part of a Partnership Interest among the General Partner,
the General Partner and any Qualified REIT Subsidiary;

 - 38 - 

 

          (vi) to modify the manner in which Capital Accounts are computed (but only to the
extent set forth in the definition of “Capital Account” or contemplated by the Code or the
Regulations); and

          (vii) to issue additional Partnership Interests in accordance with Section 4.3.

     The General Partner will provide notice to the Limited Partners whenever any action under this
Section 7.3.C is taken.

          D. Notwithstanding Sections 7.3.B and 7.3.C hereof, this Agreement shall not
be amended, and no action may be taken by the General Partner, without the consent of each Partner
adversely affected thereby, if such amendment or action would (i) convert a Limited Partner
Interest in the Partnership into a General Partner Interest (except as a result of the General
Partner acquiring such Partnership Interest), (ii) modify the limited liability of a Limited
Partner or (iii) amend this Section 7.3.D. Further, no amendment may alter the
restrictions on the General Partner’s authority set forth elsewhere in this Section 7.3 or
in Section 11.2.B without the consent specified therein. Any such amendment or action
consented to by any Partner shall be effective as to that Partner, notwithstanding the absence of
such consent by any other Partner.

     Section 7.4. Reimbursement of the General Partner.

          A. Except as provided in this Section 7.4 and elsewhere in this Agreement (including
the provisions of Articles V and VI 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 Partnership shall be responsible for and shall pay all expenses relating to the
Partnership’s and the General Partner’s organization, the ownership of their assets and their
operations including, without limitation, (i) all expenses relating to their formation and
continuity of existence, (ii) all expenses relating to any offerings and registrations of
securities, (iii) all expenses associated with their preparation and filing of any periodic reports
under federal, state or local laws or regulations, (iv) all expenses associated with their
compliance with applicable laws, rules and regulations, and (iv) all other operating or
administrative costs incurred in the ordinary course of their business. The General Partner is
hereby authorized to pay compensation for accounting, administrative, legal, technical, management
and other services rendered to the Partnership. Except to the extent provided in this Agreement,
the General Partner and its Affiliates shall be reimbursed on a monthly basis, or such other basis
as the General Partner may determine in its sole and absolute discretion, for all expenses that the
General Partner and its Affiliates incur relating to the ownership and operation of, or for the
benefit of, the Partnership (including, without limitation, administrative expenses);
provided, that the amount of any such reimbursement shall be reduced by any interest earned
by the General Partner with respect to bank accounts or other instruments or accounts held by it on
behalf of the Partnership. The Partners acknowledge that all such expenses of the General Partner
are deemed to be for the benefit of the Partnership. Such reimbursement shall be in addition to
any reimbursement made as a result of indemnification pursuant to Section 7.7 hereof. In
the event that certain expenses are incurred for the benefit of the Partnership and other entities
(including the General Partner), such expenses will be allocated to the Partnership and such other
entities in such a manner as the General Partner in its sole and absolute discretion deems fair and
reasonable. All payments and reimbursements hereunder shall be characterized for federal income
tax purposes as expenses of the Partnership incurred on its behalf, and not as expenses of the
General Partner.

 - 39 - 

 

          C. If the General Partner shall elect to purchase from its stockholders REIT Shares for the
purpose of delivering such REIT Shares to satisfy an obligation under any dividend reinvestment
program adopted by the General Partner, any employee share purchase plan adopted by the General
Partner or any similar obligation or arrangement undertaken by the General Partner in the future or
for the purpose of retiring such REIT Shares, the purchase price paid by the General Partner for
such REIT Shares and any other expenses incurred by the General Partner in connection with such
purchase shall be considered expenses of the Partnership and shall be advanced to the General
Partner or reimbursed to the General Partner, subject to the condition that: (1) if such REIT
Shares subsequently are sold by the General Partner, the General Partner shall pay or cause to be
paid to the Partnership any proceeds received by the General Partner for such REIT Shares (which
sales proceeds shall include the amount of dividends reinvested under any dividend reinvestment or
similar program; provided, that a transfer of REIT Shares for Partnership Units pursuant to
Section 8.6 would not be considered a sale for such purposes); and (2) if such REIT Shares
are not sold by the General Partner in an arms-length transaction within 30 days after the purchase
thereof, or the General Partner otherwise determines not to sell such REIT Shares, the General
Partner shall cause the Partnership to redeem a number of Partnership Units held by the General
Partner equal to the number of such REIT Shares, as adjusted for share dividends and distributions,
share splits and subdivisions, reverse share splits and combinations, distributions of rights,
warrants or options, and distributions of evidences of indebtedness or assets relating to assets
not received by the General Partner pursuant to a pro rata distribution by the Partnership (in
which case such advancement or reimbursement of expenses shall be treated as having been made as a
distribution in redemption of such number of Partnership Units held by the General Partner).

          D. As set forth in Section 4.3, the General Partner shall be treated as having made a
Capital Contribution in the amount of all expenses that the General Partner incurs relating to the
General Partner’s offering of REIT Shares, Preferred Stock, Junior Stock or New Securities.

          E. If and to the extent any reimbursements to the General Partner pursuant to this
Section 7.4 constitute gross income of the General Partner (as opposed to the repayment of
advances made by the General Partner on behalf of the Partnership), such amounts shall constitute
guaranteed payments with respect to capital within the meaning of Code Section 707(c), shall be
treated consistently therewith by the Partnership and all Partners, and shall not be treated as
distributions for purposes of computing the Partners’ Capital Accounts.

     Section 7.5. Outside Activities of the General Partner. Nothing contained herein
shall be deemed to prohibit the General Partner from executing guarantees of Partnership debt for
which it would otherwise be liable in its capacity as General Partner. In addition, the General
Partner may, to the extent necessary to comply with regulatory requirements of certain Limited
Partners or otherwise provide for tax efficiency, elect to hold directly certain equity interests
of Partnership Subsidiaries. In such case, the General Partner shall (i) amend Section 5.1
of this Agreement so as to provide that while such equity interests are held directly by the
General Partner, each Partner other than the General Partner will receive the same distributions
that it would have received had such equity interest been held by the Partnership rather than
directly by the General Partner (and a corresponding adjustment shall be made to the distributions
to be made to the General Partner); and (ii) make such further amendments to this Agreement
(including, without limitation, to the Net Income and Net Loss allocation provisions of
Section 6.1 hereof) as may be necessary or appropriate to effect the intention of the
Partners that the Partners be placed, as nearly as possible, in the same position they would have
been placed had such equity interests been held by the Partnership rather than directly by the
General Partner; provided, however, that the General Partner shall in no event be
required to make contributions to the Partnership to fund distributions to the other Partners.

 - 40 - 

 

     Section 7.6. Contracts with Affiliates.

          A. The Partnership may lend or contribute funds or other assets 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.

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

          C. Except (i) as expressly permitted by this Agreement and (ii) all transactions with MFA and
its Affiliates contemplated in connection with the General Partner’s initial public offering,
neither the General Partner nor any of its Affiliates shall sell, transfer or convey any property
to the Partnership, directly or indirectly, except pursuant to transactions that are determined by
the General Partner in good faith to be fair and reasonable.

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

          E. The General Partner is expressly authorized to enter into, in the name and on behalf of the
Partnership, any Services Agreement with Affiliates of any of the Partnership, the General Partner
or the Manager, on such terms as the General Partner, in its sole and absolute discretion, believes
are advisable.

     Section 7.7. Indemnification.

          A. To the fullest extent permitted by applicable law, the Partnership shall indemnify each
Indemnitee from and against any and all losses, claims, damages, liabilities (whether joint or
several), expenses (including, without limitation, attorney’s fees and other legal fees and
expenses), judgments, fines, settlements and other amounts arising from any and all claims,
demands, actions, suits or proceedings, civil, criminal, administrative or investigative, that
relate to the operations of the Partnership (“Actions”) as set forth in this Agreement in
which such Indemnitee may be involved, or is threatened to be involved, as a party or otherwise;
provided, however, that the Partnership shall not indemnify an Indemnitee (1) for
grossly negligent acts, willful misconduct or a knowing violation of the law, (2) for any
transaction for which such Indemnitee received an improper personal benefit in violation or breach
of any provision of this Agreement, or (3) in the case of any criminal proceeding, the Indemnitee
had reasonable cause to believe that the act or omission was unlawful. Without limitation, the
foregoing indemnity shall extend to any liability of any Indemnitee, pursuant to a loan guaranty or
otherwise, for any indebtedness of the Partnership or any Subsidiary of the Partnership (including,
without limitation, any indebtedness which the Partnership or any Subsidiary of the Partnership has
assumed or taken subject to), and the General Partner is hereby authorized and empowered, on behalf
of the Partnership, to enter into one or more indemnity agreements consistent with the provisions
of this Section 7.7 in favor of any Indemnitee having or potentially having liability for
any such indebtedness. The termination of any proceeding by judgment, order or settlement does not
create a presumption that

 - 41 - 

 

the Indemnitee did not meet the requisite standard of conduct set forth in this
Section 7.7.A. Any indemnification pursuant to this Section 7.7 shall be made only
out of the assets of the Partnership and any insurance proceeds from the liability policy covering
the General Partner and any Indemnitees, and neither the General Partner nor any Limited Partner
shall have any obligation to contribute to the capital of the Partnership or otherwise provide
funds to enable the Partnership to fund its obligations under this Section 7.7.

          B. To the fullest extent permitted by law, expenses incurred by an Indemnitee who is a party
to a proceeding or otherwise subject to or the focus of or is involved in any Action may be paid or
reimbursed by the Partnership as incurred by the Indemnitee in advance of the final disposition of
the Action upon receipt by the Partnership of (1) a written affirmation by the Indemnitee of the
Indemnitee’s good faith belief that the standard of conduct necessary for indemnification by the
Partnership as authorized in Section 7.7.A has been met and (2) a written undertaking by or
on behalf of the Indemnitee to repay the amount if it shall ultimately be determined that the
standard of conduct has not been met.

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

          D. The Partnership may, but shall not be obligated to, purchase and maintain insurance, on
behalf of any of the Indemnitees and such other Persons as the General Partner shall determine,
against any liability that may be asserted against or expenses that may be incurred by such Person
in connection with the Partnership’s activities, regardless of whether the Partnership would have
the power to indemnify such Person against such liability under the provisions of this Agreement.

          E. Any liabilities which an Indemnitee incurs as a result of acting on behalf of the
Partnership or the General Partner (whether as a fiduciary or otherwise) in connection with the
operation, administration or maintenance of an employee benefit plan or any related trust or
funding mechanism (whether such liabilities are in the form of excise taxes assessed by the IRS,
penalties assessed by the Department of Labor, restitutions to such a plan or trust or other
funding mechanism or to a participant or beneficiary of such plan, trust or other funding
mechanism, or otherwise) shall be treated as liabilities or judgments or fines under this
Section 7.7, unless such liabilities arise as a result of (1) such Indemnitee’s intentional
misconduct or knowing violation of the law, (2) any transaction in which such Indemnitee received a
personal benefit in violation or breach of any provision of this Agreement or applicable law, or
(3) in the case of any criminal proceeding, the Indemnitee had reasonable cause to believe that the
act or omission was unlawful.

          F. In no event may an Indemnitee subject any of the Partners to personal liability by reason
of the indemnification provisions set forth in this Agreement.

          G. An Indemnitee shall not be denied indemnification in whole or in part under this
Section 7.7 because the Indemnitee had an interest in the transaction with respect to which
the indemnification applies if the transaction was otherwise permitted by the terms of this
Agreement.

          H. The provisions of this Section 7.7 are for the benefit of the Indemnitees, their
heirs, successors, assigns and administrators and shall not be deemed to create any rights for the
benefit of any other Persons. Any amendment, modification or repeal of this Section 7.7 or
any provision hereof shall be prospective only and shall not in any way affect the obligations of
the Partnership or the

 - 42 - 

 

limitations on the Partnership’s liability to any Indemnitee under this Section 7.7 as
in effect immediately prior to such amendment, modification or repeal with respect to claims
arising from or relating to matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise or be asserted.

          I. If and to the extent any payments to the General Partner pursuant to this
Section 7.7 constitute gross income to the General Partner (as opposed to the repayment of
advances made on behalf of the Partnership) such amounts shall be treated as “guaranteed payments”
for the use of capital within the meaning of Code Section 707(c), shall be treated consistently
therewith by the Partnership and all Partners, and shall not be treated as distributions for
purposes of computing the Partners’ Capital Accounts.

     Section 7.8. Liability of the General Partner.

          A. Notwithstanding anything to the contrary set forth in this Agreement, neither the General
Partner nor any of its directors or officers shall be liable or accountable in damages or otherwise
to the Partnership, any Partners or any Assignees for losses sustained, liabilities incurred or
benefits not derived as a result of errors in judgment or mistakes of fact or law or of any act or
omission if the General Partner or such director or officer acted in good faith.

          B. The Limited Partners expressly acknowledge that the General Partner is acting for the
benefit of the Partnership and the General Partner’s stockholders collectively, that the General
Partner is under no obligation to give priority to the separate interests of the Limited Partners
or the stockholders of the General Partner (including, without limitation, the tax consequences to
Limited Partners or Assignees or to such stockholders) in deciding whether to cause the Partnership
to take (or decline to take) any actions. In the event of a conflict between the interests of the
stockholders of the General Partner on one hand and the Limited Partners on the other, the General
Partner shall endeavor in good faith to resolve the conflict in a manner not adverse to either the
stockholders of the General Partner or the Limited Partners. The General Partner shall not be
liable for monetary damages or otherwise for losses sustained, liabilities incurred or benefits not
derived by Limited Partners in connection with such decisions, provided that the General
Partner has acted in good faith.

          C. Subject to its obligations and duties as General Partner set forth in Section 7.1.A
hereof, the General Partner may exercise any of the powers granted to it by this Agreement and
perform any of the duties imposed upon it hereunder either directly or by or through its employees,
personnel or agents (subject to the supervision and control of the General Partner). The General
Partner shall not be responsible for any misconduct or negligence on the part of any such employee,
personnel or agent appointed by it in good faith.

          D. To the extent that, at law or in equity, the General Partner has duties (including
fiduciary duties) and liabilities relating thereto to the Partnership or the Limited Partners, the
General Partner shall not be liable to the Partnership or to any other Partner for its good faith
reliance on the provisions of this Agreement.

          E. Notwithstanding anything herein to the contrary, except for fraud, willful misconduct or
gross negligence, or pursuant to any express indemnities given to the Partnership by any Partner
pursuant to any other written instrument, no Partner shall have any personal liability whatsoever,
to the Partnership or to the other Partner(s), for the debts or liabilities of the Partnership or
the Partnership’s obligations hereunder, and the full recourse of the other Partner(s) shall be
limited to the interest of that Partner in the Partnership. To the fullest extent permitted by
law, no officer, director or stockholder of the General Partner shall be liable to the Partnership
for money damages except for

 - 43 - 

 

(1) active and deliberate dishonesty established by a non-appealable final judgment or
(2) actual receipt of an improper benefit or profit in money, property or services. Without
limitation of the foregoing, and except for fraud, willful misconduct or gross negligence, or
pursuant to any such express indemnity, no property or assets of any Partner, other than its
interest in the Partnership, shall be subject to levy, execution or other enforcement procedures
for the satisfaction of any judgment (or other judicial process) in favor of any other Partner(s)
and arising out of, or in connection with, this Agreement. This Agreement is executed by an
authorized officer of the General Partner solely as an authorized officer of the same and not in
his or her own individual capacity.

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

     Section 7.9. Other Matters Concerning the General Partner.

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

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

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

          D. Notwithstanding any other provision of this Agreement or the Act, any action of the General
Partner on behalf of the Partnership or any decision of the General Partner to refrain from acting
on behalf of the Partnership, undertaken in the good faith belief that such action or omission is
necessary or advisable in order (1) to protect the ability of the General Partner to continue to
qualify as a REIT, (2) for the General Partner otherwise to satisfy the REIT Requirements, or
(3) to avoid the General Partner incurring any taxes under Code Section 857 or Code Section 4981,
is expressly authorized under this Agreement and is deemed approved by all of the Limited Partners.

     Section 7.10. Title to Partnership Assets. Title to Partnership assets, whether real,
personal or mixed and whether tangible or intangible, shall be deemed to be owned by the
Partnership as an entity, and no Partner, individually or collectively with other Partners or
Persons, 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

 - 44 - 

 

benefit of the Partnership in accordance with the provisions of this Agreement. All
Partnership assets shall be recorded as the property of the Partnership in its books and records,
irrespective of the name in which legal title to such Partnership assets is held.

     Section 7.11. Reliance by Third Parties. Notwithstanding anything to the contrary in
this Agreement, any Person dealing with the Partnership shall be entitled to assume that the
General Partner has full power and authority, without the consent or approval of any other Partner
or Person, to encumber, sell or otherwise use in any manner any and all assets of the Partnership
and to enter into any contracts on behalf of the Partnership, and take any and all actions on
behalf of the Partnership, and such Person shall be entitled to deal with the General Partner as if
it were the Partnership’s sole party in interest, both legally and beneficially. Each Limited
Partner hereby waives any and all defenses or other remedies that may be available against such
Person to contest, negate or disaffirm any action of the General Partner in connection with any
such dealing. In no event shall any Person dealing with the General Partner or its representatives
be obligated to ascertain that the terms of this Agreement have been complied with or to inquire
into the necessity or expediency of any act or action of the General Partner or its
representatives. Each and every certificate, document or other instrument executed on behalf of
the Partnership by the General Partner or its representatives shall be conclusive evidence in favor
of any and every Person relying in good faith thereon or claiming thereunder that (1) at the time
of the execution and delivery of such certificate, document or instrument, this Agreement was in
full force and effect, (2) the Person executing and delivering such certificate, document or
instrument was duly authorized and empowered to do so for and on behalf of the Partnership, and
(3) such certificate, document or instrument was duly executed and delivered in accordance with the
terms and provisions of this Agreement and is binding upon the Partnership.

ARTICLE VIII

RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS

     Section 8.1. Limitation of Liability. The Limited Partners shall have no liability
under this Agreement (other than for breach thereof) except as expressly provided in
Section 10.4 or under the Act.

     Section 8.2. Management of Business. No Limited Partner or Assignee (other than the
General Partner, any of its Affiliates or any officer, director, member, employee, partner, agent
or trustee of the General Partner, the Partnership or any of their Affiliates, in their capacity as
such) shall take part in the operations, management or control (within the meaning of the Act) of
the Partnership’s business, transact any business in the Partnership’s name or have the power to
sign documents for or otherwise bind the Partnership. The transaction of any such business by the
General Partner, any of its Affiliates or any officer, director, member, employee, partner, agent,
representative, shareholder or trustee of the General Partner, the Partnership or any of their
Affiliates, in their capacity as such, shall not affect, impair or eliminate the limitations on the
liability of the Limited Partners or Assignees under this Agreement.

     Section 8.3. Outside Activities of Limited Partners. Subject to any agreements
entered into pursuant to Section 7.6.E hereof and any other agreements entered into by a
Limited Partner or its Affiliates with the General Partner, the Partnership or any Affiliate
thereof (including, without limitation, any employment agreement), any Limited Partner (other than
the General Partner ) and any Assignee, officer, director, employee, agent, trustee, Affiliate,
member or shareholder of any Limited 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 that are in direct or indirect competition with the Partnership
or that are enhanced by the activities of the Partnership. Neither the Partnership nor any Partner
shall have any rights by virtue of this Agreement in any business ventures of any Limited Partner
or Assignee. Subject to such agreements, none of the Limited Partners nor any other

 - 45 - 

 

Person shall have any rights by virtue of this Agreement or the partnership relationship
established hereby in any business ventures of any other Person (other than the General Partner, to
the extent expressly provided herein), and such Person shall have no obligation pursuant to this
Agreement, subject to Section 7.6.E hereof and any other agreements entered into by a
Limited Partner or its Affiliates with the General Partner, the Partnership, or any Affiliate
thereof, to offer any interest in any such business ventures to the Partnership, any Limited
Partner, the General Partner or any such other Person, even if such opportunity is of a character
that, if presented to the Partnership, any Limited Partner, the General Partner or such other
Person, could be taken by such Person.

     Section 8.4. Return of Capital. Except pursuant to the rights of Redemption set forth
in Section 8.6 hereof, no Limited Partner shall be entitled to the withdrawal or return of
its Capital Contribution, except to the extent of distributions made pursuant to this Agreement,
upon termination of the Partnership as provided herein or upon a merger of the General Partner or a
sale by the General Partner of all or substantially all of its assets pursuant to
Section 7.1.A(iii) hereof. Except to the extent provided in Article VI hereof or
otherwise expressly provided in this Agreement, no Limited Partner or Assignee shall have priority
over any other Limited Partner or Assignee either as to the return of Capital Contributions or as
to profits, losses or distributions.

     Section 8.5. Adjustment Factor. The Partnership shall notify any Limited Partner that
is a Qualifying Party, on request, of the then current Adjustment Factor or any change made to the
Adjustment Factor.

     Section 8.6. Redemption.

          A. On or after the Effective Date, each Limited Partner (other than the General Partner )
shall have the right (subject to the terms and conditions set forth herein and in any other such
agreement, as applicable) to require the Partnership to redeem all or a portion of the OP Units
held by such Limited Partner (such OP Units being hereafter referred to as “Tendered
Units”) in exchange for the Cash Amount (a “Redemption”) unless the terms of such OP
Units or a separate agreement entered into between the Partnership and the holder of such OP Units
provide that such OP Units are not entitled to a right of Redemption. The Tendering Partner shall
have no right, with respect to any OP Units so redeemed, to receive any distributions paid on or
after the Specified Redemption Date. Any Redemption shall be exercised pursuant to a Notice of
Redemption delivered to the General Partner by the Limited Partner who is exercising the right (the
“Tendering Partner”). The Cash Amount shall be payable to the Tendering Partner on the
Specified Redemption Date.

          B. Notwithstanding Section 8.6.A above, if a Limited Partner has delivered to the
General Partner a Notice of Redemption then the General Partner may, in its sole and absolute
discretion, (subject to the limitations on ownership and transfer of REIT Shares set forth in the
Charter) elect to assume and satisfy the General Partner’s Redemption obligation and acquire some
or all of the Tendered Units from the Tendering Partner in exchange for the REIT Shares Amount (as
of the Specified Redemption Date) and, if the General Partner so elects, the Tendering Partner
shall sell the Tendered Units to the General Partner in exchange for the REIT Shares Amount. In
such event, the Tendering Partner shall have no right to cause the Partnership to redeem such
Tendered Units. The General Partner shall give such Tendering Partner written notice of its
election on or before the close of business on the fifth Business Day after the its receipt of the
Notice of Redemption, and the Tendering Partner may elect to withdraw its redemption request at any
time prior to the acceptance of the Cash Amount or REIT Shares Amount by such Tendering Partner.
Assuming the General Partner exercises its option to deliver REIT Shares, the General Partner shall
retain or contribute the Tendered Units to the General Partner.

 - 46 - 

 

          C. The REIT Shares Amount, if applicable, shall be delivered as duly authorized, validly
issued, fully paid and nonassessable REIT Shares and, if applicable, free of any pledge, lien,
encumbrance or restriction, other than those provided in the Charter or the Bylaws, the Securities
Act, relevant state securities or blue sky laws and any applicable registration rights agreement
with respect to such REIT Shares entered into by the Tendering Partner. Notwithstanding any delay
in such delivery (but subject to Section 8.6.E), the Tendering Partner shall be deemed the
owner of such REIT Shares for all purposes, including without limitation, rights to vote or
consent, and receive dividends, as of the Specified Redemption Date. In addition, the REIT Shares
for which the Partnership Units might be exchanged shall also bear a legend which generally
provides the following:

Restriction on Ownership and Transfer

THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
BENEFICIAL AND CONSTRUCTIVE OWNERSHIP AND TRANSFER FOR THE PURPOSE, AMONG OTHERS, OF THE COMPANY’S
MAINTENANCE OF ITS QUALIFICATION AS A REAL ESTATE INVESTMENT TRUST UNDER THE INTERNAL REVENUE CODE
OF 1986, AS AMENDED (THE “CODE”). SUBJECT TO CERTAIN FURTHER RESTRICTIONS AND EXCEPT AS EXPRESSLY
PROVIDED IN THE COMPANY’S CHARTER, (1) NO PERSON (OTHER THAN AN EXCEPTED HOLDER) MAY BENEFICIALLY
OR CONSTRUCTIVELY OWN OR BE DEEMED TO OWN BY VIRTUE OF THE ATTRIBUTION PROVISIONS OF THE CODE
(i) THE COMPANY’S SHARES OF COMMON STOCK IN EXCESS OF 9.8% (BY VALUE OR BY NUMBER OF SHARES,
WHICHEVER IS MORE RESTRICTIVE) OF THE OUTSTANDING SHARES OF COMMON STOCK OF THE COMPANY OR
(ii) SHARES OF THE COMPANY IN EXCESS OF 9.8% (BY VALUE OR BY NUMBER OF SHARES, WHICHEVER IS MORE
RESTRICTIVE) OF THE OUTSTANDING SHARES OF THE COMPANY; (2) NO PERSON MAY BENEFICIALLY OR
CONSTRUCTIVELY OWN SHARES THAT WOULD RESULT IN THE COMPANY BEING “CLOSELY HELD” UNDER SECTION
856(h) OF THE CODE OR OTHERWISE CAUSE THE COMPANY TO FAIL TO QUALIFY AS A REIT; AND (3) NO PERSON
MAY TRANSFER SHARES IF SUCH TRANSFER WOULD RESULT IN THE SHARES OF COMMON STOCK OF THE COMPANY
BEING OWNED BY FEWER THAN 100 PERSONS. AN “EXCEPTED HOLDER” MEANS A PERSON FOR WHOM AN EXCEPTED
HOLDER OWNERSHIP LIMIT HAS BEEN CREATED BY THE COMPANY’S CHARTER OR BY THE BOARD OF DIRECTORS. ANY
PERSON WHO BENEFICIALLY OR CONSTRUCTIVELY OWNS OR ATTEMPTS TO BENEFICIALLY OR CONSTRUCTIVELY OWN
SHARES IN VIOLATION OF THE ABOVE LIMITATIONS MUST IMMEDIATELY NOTIFY THE COMPANY. IF THE
RESTRICTIONS ON TRANSFER OR OWNERSHIP PROVIDED IN (I), (II) OR (III) ABOVE ARE VIOLATED, THE SHARES
REPRESENTED HEREBY WILL BE AUTOMATICALLY TRANSFERRED TO THE TRUSTEE OF A CHARITABLE TRUST FOR THE
BENEFIT OF ONE OR MORE CHARITABLE BENEFICIARIES. IN ADDITION, THE COMPANY MAY REDEEM SHARES UPON
THE TERMS AND CONDITIONS SPECIFIED BY THE BOARD OF DIRECTORS IN ITS SOLE DISCRETION IF THE BOARD OF
DIRECTORS DETERMINES THAT OWNERSHIP OR A TRANSFER OR OTHER EVENT MAY VIOLATE THE RESTRICTIONS
DESCRIBED ABOVE. FURTHERMORE, IF THE OWNERSHIP RESTRICTION PROVIDED IN (IV) ABOVE WOULD BE
VIOLATED OR UPON THE OCCURRENCE OF CERTAIN EVENTS, ATTEMPTED TRANSFERS IN VIOLATION OF THE
RESTRICTIONS DESCRIBED ABOVE MAY BE VOID AB INITIO. ALL TERMS IN THIS LEGEND THAT ARE DEFINED IN
THE CHARTER OF THE COMPANY SHALL HAVE THE MEANINGS ASCRIBED TO THEM IN THE CHARTER OF THE COMPANY,
AS THE SAME MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH, INCLUDING THE RESTRICTIONS ON
TRANSFER AND OWNERSHIP, WILL BE FURNISHED TO EACH HOLDER OF SHARES ON REQUEST AND WITHOUT CHARGE.
REQUESTS FOR

 - 47 - 

 

SUCH A COPY MAY BE DIRECTED TO THE SECRETARY OF THE COMPANY AT ITS PRINCIPAL OFFICE.

          D. Each Limited Partner covenants and agrees with the General Partner that all Tendered Units
shall be delivered to the General Partner free and clear of all liens, claims and encumbrances
whatsoever and should any such liens, claims and/or encumbrances exist or arise with respect to
such Tendered Units, the General Partner shall be under no obligation to acquire the same. Each
Limited Partner further agrees that, in the event any state or local property transfer tax is
payable as a result of the transfer of its Tendered Units to the General Partner (or its designee),
such Limited Partner shall assume and pay such transfer tax.

          E. Notwithstanding the provisions of Section 8.6.A, 8.6.B, 8.6.C or
any other provision of this Agreement, a Limited Partner (i) shall not be entitled to effect a
Redemption for cash or an exchange for REIT Shares to the extent the ownership or right to acquire
REIT Shares pursuant to such exchange by such Partner on the Specified Redemption Date could cause
such Partner or any other Person to violate the restrictions on ownership and transfer of REIT
Shares set forth in the Charter and (ii) shall have no rights under this Agreement to acquire REIT
Shares which would otherwise be prohibited under the Charter. To the extent any attempted
Redemption or exchange for REIT Shares would be in violation of this Section 8.6.E, it
shall be null and void ab initio and such Limited Partner shall not acquire any rights or economic
interest in the cash otherwise payable upon such Redemption or the REIT Shares otherwise issuable
upon such exchange.

          F. Notwithstanding anything herein to the contrary (but subject to Section 8.6.E),
with respect to any Redemption or exchange for REIT Shares pursuant to this Section 8.6:
(i) all OP Units acquired by the General Partner pursuant thereto shall automatically, and without
further action required, be converted into and deemed to be General Partner Interests comprised of
the same number and class of OP Units; (ii) without the consent of the General Partner, each
Limited Partner may effect a Redemption only one time in each fiscal quarter; (iii) without the
consent of the General Partner, each Limited Partner may not effect a Redemption for less than
1,000 OP Units or, if the Limited Partner holds less than 1,000 OP Units, all of the OP Units held
by such Limited Partner; (iv) without the consent of the General Partner, each Limited Partner may
not effect a Redemption during the period after the Partnership Record Date with respect to a
distribution and before the record date established by the General Partner for a distribution to
its stockholders of some or all of its portion of such distribution; (v) the consummation of any
Redemption or exchange for REIT Shares shall be subject to the expiration or termination of the
applicable waiting period, if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended; and (vi) each Tendering Partner shall continue to own all OP Units subject to any
Redemption or exchange for REIT Shares, and be treated as a Limited Partner with respect to such OP
Units for all purposes of this Agreement, until such OP Units are transferred to the General
Partner and paid for or exchanged on the Specified Redemption Date. Until a Specified Redemption
Date, the Tendering Partner shall have no rights as a stockholder of the General Partner with
respect to any REIT Shares to be received in exchange for its Tendered Units.

          G. In the event that the Partnership issues additional Partnership Interests to any Additional
Limited Partner pursuant to Section 4.4, the General Partner shall make such revisions to
this Section 8.6 as it determines are necessary to reflect the issuance of such additional
Partnership Interests.

          H. The Special Units shall be subject to mandatory redemption if the Management Agreement is
terminated. The General Partner shall send notice of a Special Unit redemption within ten days
after the General Partner sends or receives notice of termination of the Management Agreement. The
redemption date shall be the date on which termination of the Management Agreement is effective.
The redemption amount, to be paid in cash or by wire transfer on the redemption date, shall be
equal to

 - 48 - 

 

three times the average annual amount of Incentive Distributions distributed or distributable
in respect of the Special Units during the prior 24-month period preceding the redemption date,
calculated as of the end of the most recently completed Current Quarter prior to the redemption
date; provided, that if the Management Agreement is terminated by the General Partner for
cause, the aggregate redemption amount shall be $100. Upon any such redemption, the Special Units
will also be entitled to receive any Incentive Distributions distributable with respect to periods
through the redemption date. If such distribution amounts cannot be calculated on or by the
redemption date, they shall be calculated and paid as promptly as possible thereafter, but in no
event later than 30 days after the redemption date.

ARTICLE IX

BOOKS, RECORDS, ACCOUNTING AND REPORTS

     Section 9.1. Records and Accounting.

          A. The General Partner shall keep or cause to be kept at the principal office of the
Partnership those records and documents required to be maintained by the Act and other books and
records deemed by the General Partner to be appropriate with respect to the Partnership’s business,
including, without limitation, all books and records necessary to provide to the Limited Partners
any information, lists and copies of documents required to be provided pursuant to
Sections 8.5 or 9.2 hereof. Any records maintained by or on behalf of the
Partnership in the regular course of its business may be kept on, or be in the form for, magnetic
tape, photographs, micrographics or any other information storage device, provided that the
records so maintained are convertible into clearly legible written form within a reasonable period
of time. The books of the Partnership shall be maintained, for financial and tax reporting
purposes, on an accrual basis in accordance with generally accepted accounting principles.

          B. The books of the Partnership shall be maintained, for financial and tax reporting purposes,
on an accrual basis in accordance with generally accepted accounting principles, or on such other
basis as the General Partner determines to be necessary or appropriate. To the extent permitted by
sound accounting practices and principles, the Partnership and the General Partner may operate with
integrated or consolidated accounting records, operations and principles.

     Section 9.2. Reports.

          A. As soon as practicable, but in no event later than the date on which the General Partner
mails its annual report to its stockholders, the General Partner shall cause to be mailed to each
Limited Partner an annual report, as of the close of the most recently ended Fiscal Year,
containing financial statements of the Partnership, or of the General Partner if such statements
are prepared solely on a consolidated basis with the Partnership, for such Partnership Year,
presented in accordance with generally accepted accounting principles, such statements to be
audited by a nationally recognized firm of independent public accountants selected by the General
Partner.

          B. If and to the extent that the General Partner mails quarterly reports to its stockholders,
as soon as practicable, but in no event later than the date on such reports are mailed, the General
Partner shall cause to be mailed to each Limited Partner a report containing unaudited financial
statements, as of the last day of such fiscal quarter, of the Partnership, or of the General
Partner if such statements are prepared solely on a consolidated basis with the Partnership, and
such other information as may be required by applicable law or regulations, or as the General
Partner determines to be appropriate.

 - 49 - 

 

ARTICLE X

TAX MATTERS

     Section 10.1. Preparation of Tax Returns. The General Partner shall arrange for the
preparation and timely filing of all returns with respect to Partnership income, gains, deductions,
losses and other items required of the Partnership for federal and state income tax purposes and
shall use all reasonable effort to furnish, within 90 days of the close of each taxable year, the
tax information reasonably required by Limited Partners for federal and state income tax reporting
purposes. The Limited Partners shall promptly provide the General Partner with such information
relating to the Contributed Properties, including tax basis and other relevant information, as may
be reasonably requested by the General Partner from time to time.

     Section 10.2. Tax Elections. Except as otherwise provided herein, the General Partner
shall, in its sole and absolute discretion, determine whether to make any available election
pursuant to the Code, including, but not limited to, the election under Code Section 754 and the
election to use the “recurring item” method of accounting provided under Code Section 461(h) with
respect to property taxes imposed on the Partnership’s Properties. The General Partner shall have
the right to seek to revoke any such election (including, without limitation, any election under
Code Sections 461(h) and 754) upon the General Partner’s determination in its sole and absolute
discretion that such revocation is in the best interests of the Partners.

     Section 10.3. Tax Matters Partner.

          A. The General Partner shall be the “tax matters partner” of the Partnership for federal
income tax purposes. The tax matters partner shall receive no compensation for its services. All
third-party costs and expenses incurred by the tax matters partner in performing its duties as such
(including legal and accounting fees and expenses) shall be borne by the Partnership in addition to
any reimbursement pursuant to Section 7.4 hereof. Nothing herein shall be construed to
restrict the Partnership from engaging an accounting firm to assist the tax matters partner in
discharging its duties hereunder, so long as the compensation paid by the Partnership for such
services is reasonable.

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

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

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

 - 50 - 

 

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

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

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

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

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

     Section 10.4. Withholding. Each Limited Partner hereby authorizes the Partnership to
withhold from or pay on behalf of or with respect to such Limited Partner any amount of federal,
state, local or foreign taxes that the General Partner determines that the Partnership is required
to withhold or pay with respect to any amount distributable or allocable to such Limited Partner
pursuant to this Agreement, including, without limitation, any taxes required to be withheld or
paid by the Partnership pursuant to Code Sections 1441, 1442, 1445 or 1446. Any amount paid on
behalf of or with respect to a Limited Partner shall constitute a loan by the Partnership to such
Limited Partner, which loan shall be repaid by such Limited Partner within 15 days after notice
from the General Partner that such payment must be made unless (i) the Partnership withholds such
payment from a distribution that would otherwise be made to the Limited Partner or (ii) the General
Partner determines, in its sole and absolute discretion, that such payment may be satisfied out of
the Available Funds of the Partnership that would, but for such payment, be distributed to the
Limited Partner. Each Limited Partner hereby unconditionally and irrevocably grants to the
Partnership a security interest in such Limited Partner’s Partnership Interest to secure such
Limited Partner’s obligation to pay to the Partnership any amounts required to be paid pursuant to
this Section 10.4. In the event that a Limited Partner fails to pay any amounts owed to
the Partnership pursuant to this Section 10.4 when due, the General Partner may, in its
sole and absolute discretion, elect to make the payment to the Partnership on behalf of such
defaulting Limited Partner, and in such event shall be deemed to have loaned such amount to such
defaulting Limited Partner and shall succeed to all rights and remedies of the Partnership as
against such defaulting Limited Partner (including, without limitation, the right to receive
distributions). Any amounts payable by a Limited Partner hereunder shall bear interest at the base
rate on corporate loans at large United States money center commercial banks, as published from
time to time in The Wall Street Journal, plus four percentage points (but not higher than
the maximum lawful rate) from the date such amount is due (i.e., 15 days after demand) until such
amount is paid in full. Each Limited Partner shall take such actions as the Partnership or the
General Partner shall request in order to perfect or enforce the security interest created
hereunder.

     Section 10.5. Organizational Expenses. The Partnership shall elect to amortize
expenses, if any, incurred by it in organizing the Partnership ratably over a 180-month period as
provided in Code Section 709.

- 51 -

 

ARTICLE XI

TRANSFERS AND WITHDRAWALS

     Section 11.1. Transfer.

          A. No part of the interest of a Partner shall be subject to the claims of any creditor, to any
spouse for alimony or support, or to legal process, and may not be voluntarily or involuntarily
alienated or encumbered except as may be specifically provided for in this Agreement.

          B. No Partnership Interest shall be Transferred, in whole or in part, except in accordance
with the terms and conditions set forth in this Article XI. Any Transfer or purported
Transfer of a Partnership Interest not made in accordance with this Article XI shall be
null and void ab initio unless consented to by the General Partner in its sole and absolute
discretion.

          C. Notwithstanding the other provisions of this Article XI (other than Section
11.6.D hereof), the Partnership Interests of the General Partner may be Transferred, at any
time or from time to time, to any Person that is, at the time of such Transfer, a Subsidiary of the
General Partner or to the General Partner or any successor thereto. Any transferee of the entire
General Partner Interest pursuant to this Section 11.1.C shall automatically become,
without further action or Consent of any Limited Partners, the sole general partner of the
Partnership, subject to all the rights, privileges, duties and obligations under this Agreement and
the Act relating to a general partner. Upon any Transfer permitted by this Section 11.1.C,
the transferor Partner shall be relieved of all its obligations under this Agreement. The
provisions of Section 11.2.B (other than the last sentence thereof), 11.3 and
11.4 hereof shall not apply to any Transfer permitted by this Section 11.1.C.

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

     Section 11.2. Transfer of General Partner’s Partnership Interest.

          A. The General Partner may not Transfer any of its General Partner Interest or withdraw from
the Partnership except as provided in Sections 11.1.C or 11.2.B hereof.

          B. Except as set forth in Section 11.1.C, the General Partner shall not withdraw from
the Partnership and shall not Transfer all or any portion of its interest in the Partnership
(whether by sale, disposition, statutory merger or consolidation, liquidation or otherwise);
provided that the General Partner may withdraw from the Partnership or Transfer all or a
part of its General Partner Interest if, as a result of the transaction in which such withdrawal or
transfer occurs, each Limited Partner receives or has the right to receive for each OP Unit an
amount of cash, securities or other property equal in value to the amount such Limited Partner
would have received had such Limited Partner exercised its Redemption right pursuant to Section
8.6 immediately prior to such transaction. Upon any Transfer of such a Partnership Interest in
accordance with the provisions of this Section 11.2.B, the transferee shall become a
successor General Partner for all purposes herein, and shall be vested with the powers and rights
of the transferor General Partner, and shall be liable for all obligations and responsible for all
duties of the

- 52 -

 

General Partner, once such transferee has executed such instruments as may be necessary to
effectuate such admission and to confirm the agreement of such transferee to be bound by all the
terms and provisions of this Agreement with respect to the Partnership Interest so acquired. It is
a condition to any Transfer otherwise permitted hereunder that the transferee assumes, by operation
of law or express agreement, all of the obligations of the transferor General Partner under this
Agreement with respect to such Transferred Partnership Interest, and such Transfer shall relieve
the transferor General Partner of its obligations under this Agreement. In the event that the
General Partner withdraws from the Partnership, in violation of this Agreement or otherwise, or
otherwise dissolves or terminates, or upon the Incapacity of the General Partner, all of the
remaining Partners may elect to continue the Partnership business by selecting a successor General
Partner in accordance with the Act.

     Section 11.3. Transfer of Limited Partners’ Partnership Interests.

          A. No Limited Partner shall Transfer all or any portion of its Partnership Interest to any
transferee without the written consent of the General Partner, which consent may be withheld in its
sole and absolute discretion; provided that if a Limited Partner is subject to Incapacity,
such Incapacitated Limited Partner may Transfer all or any portion of its Partnership Interest.

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

          C. Without limiting the generality of Section 11.3.A hereof, it is expressly
understood and agreed that the General Partner will not consent to any Transfer of all or any
portion of any Partnership Interest pursuant to Section 11.3.A above unless such Transfer
meets each of the following conditions:

          (i) Such Transfer is made only to a single Qualified Transferee; provided,
however, that, for such purposes, all Qualified Transferees that are Affiliates, or
that comprise investment accounts or funds managed by a single Qualified Transferee and its
Affiliates, shall be considered together to be a single Qualified Transferee.

          (ii) The transferee in such Transfer assumes by operation of law or express agreement
all of the obligations of the transferor Limited Partner under this Agreement with respect
to such Transferred Partnership Interest; provided, that no such Transfer (unless
made pursuant to a statutory merger or consolidation wherein all obligations and liabilities
of the transferor Partner are assumed by a successor corporation by operation of law) shall
relieve the transferor Partner of its obligations under this Agreement without the approval
of the General Partner, in its sole and absolute discretion. Notwithstanding the foregoing,
any transferee of any Transferred Partnership Interest shall be subject to any and all
ownership limitations contained in the Charter that may limit or restrict such transferee’s
ability to exercise its Redemption right, including, without limitation, the Ownership
Limit. Any transferee, whether or not admitted as a Substituted Limited Partner, shall take
subject to the obligations of the transferor hereunder. Unless admitted as a Substituted
Limited Partner, no transferee, whether by a voluntary Transfer, by operation of law or
otherwise, shall have any rights hereunder, other than the rights of an Assignee as provided
in Section 11.5 hereof.

          (iii) Such Transfer is effective as of the first day of a fiscal quarter of the
Partnership.

- 53 -

 

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

          E. In connection with any proposed Transfer of a Limited Partner Interest, the General Partner
shall have the right to receive an opinion of counsel reasonably satisfactory to it to the effect
that the proposed Transfer may be effected without registration under the Securities Act and will
not otherwise violate any federal or state securities laws or regulations applicable to the
Partnership or the Partnership Interests Transferred.

          F. No Transfer by a Limited Partner of its Partnership Interests (including any Redemption,
any other acquisition of Partnership Units by the Partnership or the General Partner) may be made
to or by any person if (i) in the opinion of legal counsel for the Partnership, it would result in
the Partnership being treated as an association taxable as a corporation or would result in a
termination of the Partnership under Code Section 708, (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 would subject the General Partner to any additional taxes under Code Section 857 or Code
Section 4981, or (iii) such Transfer would be effectuated through an “established securities
market” or a “secondary market (or the substantial equivalent thereof)” within the meaning of Code
Section 7704 (provided that this clause (iii) shall not be the basis for limiting or
restricting in any manner the exercise of a Redemption unless, and only to the extent that, in the
absence of such limitation or restriction, there is a significant risk that the Partnership will be
treated as a “publicly traded partnership” and, by reason thereof, taxable as a corporation).

     Section 11.4. Substituted Limited Partners.

          A. A transferee of the interest of a Limited Partner pursuant to a Transfer consented to by
the General Partner pursuant to Section 11.3.A may be admitted as a Substituted Limited
Partner only with the consent of the General Partner, which consent may be given or withheld by the
General Partner in its sole and absolute discretion. The failure or refusal by the General Partner
to permit a transferee of any such interests to become a Substituted Limited Partner shall not give
rise to any cause of action against the Partnership or the General Partner. Subject to the
foregoing, an Assignee shall not be admitted as a Substituted Limited Partner until and unless it
furnishes to the General Partner (i) evidence of acceptance, in form and substance satisfactory to
the General Partner, of all the terms, conditions and applicable obligations of this Agreement,
(ii) a counterpart signature page to this Agreement executed by such Assignee, and (iii) such other
documents and instruments as may be required or advisable, in the sole and absolute discretion of
the General Partner, to effect such Assignee’s admission as a Substituted Limited Partner.

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

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

- 54 -

 

     Section 11.5. Assignees. If the General Partner, in its sole and absolute discretion,
does not consent to the admission of any transferee of any Partnership Interest as a Substituted
Limited Partner in connection with a transfer permitted by the General Partner pursuant to
Section 11.3.A, such transferee shall be considered an Assignee for purposes of this
Agreement. An Assignee shall be entitled to all the rights of an assignee of a limited partnership
interest under the Act, including the right to receive distributions from the Partnership and the
share of Net Income, Net Losses and other items of income, gain, loss, deduction and credit of the
Partnership attributable to the Partnership Units assigned to such transferee and the rights to
Transfer the Partnership Units only in accordance with the provisions of this Article XI,
but shall not be deemed to be a holder of Partnership Units for any other purpose under this
Agreement, and shall not be entitled to request a Redemption or effect a Consent or vote or with
respect to such Partnership Units on any matter presented to the Limited Partners for approval
(such right to Consent or vote or effect a Redemption, to the extent provided in this Agreement or
under the Act, fully remaining with the transferor Limited Partner). In the event that any such
transferee desires to make a further assignment of any such Partnership Units, such transferee
shall be subject to all the provisions of this Article XI to the same extent and in the
same manner as any Limited Partner desiring to make an assignment of Partnership Units.

     Section 11.6. General Provisions.

          A. No Limited Partner may withdraw from the Partnership other than as a result of a permitted
Transfer of all of such Limited Partner’s Partnership Units in accordance with this Article
XI, with respect to which the transferee becomes a Substituted Limited Partner, or pursuant to
a redemption (or acquisition by the General Partner) of all of its Partnership Units pursuant to a
Redemption under Section 8.6 hereof and/or pursuant to any Partnership Unit Designation.

          B. Any Limited Partner who shall Transfer all of its Partnership Units in a Transfer (i)
consented to by the General Partner pursuant to this Article XI where such transferee was
admitted as a Substituted Limited Partner, (ii) pursuant to the exercise of its rights to effect a
redemption of all of its Partnership Units pursuant to a Redemption under Section 8.6
hereof and/or pursuant to any Partnership Unit Designation, or (iii) to the General Partner,
whether or not pursuant to Section 8.6.B hereof, shall cease to be a Limited Partner.

          C. If any Partnership Unit is Transferred in compliance with the provisions of this
Article XI, or is redeemed by the Partnership, or acquired by the General Partner pursuant
to Section 8.6 hereof, on any day other than the first day of a Partnership Year, then Net
Income, Net Losses, each item thereof and all other items of income, gain, loss, deduction and
credit attributable to such Partnership Unit for such Partnership Year shall be allocated to the
transferor Partner or the Tendering Partner, as the case may be, and, in the case of a Transfer or
assignment other than a Redemption, to the transferee Partner, by taking into account their varying
interests during the Partnership Year in accordance with Code Section 706(d), using the “interim
closing of the books” method or another permissible method selected by the General Partner. Solely
for purposes of making such allocations, each of such items for the calendar month in which a
Transfer occurs shall be allocated to the transferee Partner and none of such items for the
calendar month in which a Transfer or a Redemption occurs shall be allocated to the transferor
Partner or the Tendering Partner, as the case may be, if such Transfer occurs on or before the 15th
day of the month, otherwise such items shall be allocated to the transferor. All distributions of
Available Cash attributable to such Partnership Unit with respect to which the Partnership Record
Date is before the date of such Transfer, assignment or Redemption shall be made to the transferor
Partner or the Tendering Partner, as the case may be, and, in the case of a Transfer other than a
Redemption, all distributions of Available Cash thereafter attributable to such Partnership Unit
shall be made to the transferee Partner.

- 55 -

 

          D. In no event may any Transfer or assignment of a Partnership Interest by any Partner
(including any Redemption, any acquisition of Partnership Units by the General Partner or any other
acquisition of Partnership Units by the Partnership) be made (i) to any person or entity who lacks
the legal right, power or capacity to own a Partnership Interest; (ii) in violation of applicable
law; (iii) of any component portion of a Partnership Interest, such as the Capital Account, or
rights to distributions, separate and apart from all other components of a Partnership Interest;
(iv) in the event that such Transfer would cause the General Partner to cease to comply with the
REIT Requirements; (v) if such Transfer would, in the opinion of counsel to the Partnership or the
General Partner, cause a termination of the Partnership for federal or state income tax purposes;
(vi) if such Transfer would, in the opinion of legal counsel to the Partnership, cause the
Partnership to cease to be classified as a partnership for federal income tax purposes; (vii) if
such Transfer would cause the Partnership to become, with respect to any employee benefit plan
subject to Title I of ERISA, a “party-in-interest” (as defined in ERISA Section 3(14)) or a
“disqualified person” (as defined in Code Section 4975(c)); (viii) without the consent of the
General Partner, to any benefit plan investor within the meaning of Department of Labor Regulations
Section 2510.3-101(f); (ix) if such Transfer would, in the opinion of legal counsel to the
Partnership or the General Partner, cause any portion of the assets of the Partnership to
constitute assets of any employee benefit plan pursuant to Department of Labor Regulations Section
2510.3-101; (x) if such Transfer requires the registration of such Partnership Interest pursuant to
any applicable federal or state securities laws; (xi) if such Transfer would, in the opinion of
legal counsel to the Partnership or the General Partner, adversely affect the ability of the
General Partner to continue to qualify as a REIT or would subject the General Partner to any
additional taxes under Code Section 857 or Code Section 4981; (xii) if such Transfer would be
effectuated through an “established securities market” or a “secondary market (or the substantial
equivalent thereof)” within the meaning of Code Section 7704 (provided that this clause
(xii) shall not be the basis for limiting or restricting in any manner the exercise of a Redemption
unless, and only to the extent that, in the absence of such limitation or restriction there is a
significant risk that the Partnership will be treated as a “publicly traded partnership” and, by
reason thereof, taxable as a corporation); (xiii) if such Transfer would cause the Partnership to
have more than 100 partners (including as partners those persons indirectly owning an interest in
the Partnership through a partnership, limited liability company, subchapter S corporation or
grantor trust); (xiv) if such Transfer causes the Partnership (as opposed to the General Partner )
to become a reporting company under the Exchange Act; or (xv) if such Transfer subjects the
Partnership to regulation under the Investment Company Act of 1940, the Investment Advisors Act of
1940 or ERISA, each as amended.

ARTICLE XII

ADMISSION OF PARTNERS

     Section 12.1. Admission of Successor General Partner. A successor to all of the
General Partner’s General Partner Interest pursuant to Section 11.2 hereof who is proposed
to be admitted as a successor General Partner shall be admitted to the Partnership as the General
Partner, effective immediately prior to such Transfer. Any such successor shall carry on the
business of the Partnership without dissolution. In each case, the admission shall be subject to
the successor General Partner executing and delivering to the Partnership an acceptance of all of
the terms and conditions of this Agreement and such other documents or instruments as may be
required to effect the admission.

     Section 12.2. Admission of Additional Limited Partners.

          A. After the date hereof, a Person (other than an existing Partner) who makes a Capital
Contribution to the Partnership in accordance with this Agreement shall be admitted to the
Partnership as an Additional Limited Partner only upon furnishing to the General Partner (i)
evidence of acceptance, in form and substance satisfactory to the General Partner, of all of the
terms and conditions of

- 56 -

 

this Agreement, including, without limitation, the power of attorney granted in Section
2.5 hereof, (ii) a counterpart signature page to this Agreement executed by such Person, and
(iii) such other documents or instruments as may be required in the sole and absolute discretion of
the General Partner in order to effect such Person’s admission as an Additional Limited Partner.

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

          C. If any Additional Limited Partner is admitted to the Partnership on any day other than the
first day of a Partnership Year, then Net Income, Net Losses, each item thereof and all other items
of income, gain, loss, deduction and credit allocable among Partners and Assignees for such
Partnership Year shall be allocated pro rata among such Additional Limited Partner and all other
Partners and Assignees by taking into account their varying interests during the Partnership Year
in accordance with Code Section 706(d), using the “interim closing of the books” method or another
permissible method selected by the General Partner. Solely for purposes of making such
allocations, each of such items for the calendar month in which an admission of any Additional
Limited Partner occurs shall be allocated among all the Partners and Assignees including such
Additional Limited Partner, in accordance with the principles described in Section 11.6.C
hereof. All distributions of Available Cash with respect to which the Partnership Record Date is
before the date of such admission shall be made solely to Partners and Assignees other than the
Additional Limited Partner, and all distributions of Available Cash thereafter shall be made to all
the Partners and Assignees including such Additional Limited Partner.

     Section 12.3. Amendment of Agreement and Certificate of Limited Partnership. For the
admission to the Partnership of any Partner, the General Partner shall take all steps necessary and
appropriate under the Act to amend the records of the Partnership and, if necessary, to prepare as
soon as practical an amendment of this Agreement (including an amendment of Exhibit A) and,
if required by law, shall prepare and file an amendment to the Certificate and may for this purpose
exercise the power of attorney granted pursuant to Section 2.5 hereof.

     Section 12.4. Limit on Number of Partners. Unless otherwise permitted by the General
Partner, no Person shall be admitted to the Partnership as an Additional Limited Partner if the
effect of such admission would be to cause the Partnership to have a number of Partners (including
as Partners for this purpose those Persons indirectly owning an interest in the Partnership through
another partnership, a limited liability company, a subchapter S corporation or a grantor trust)
that would cause the Partnership to become a reporting company under the Exchange Act.

ARTICLE XIII

DISSOLUTION, LIQUIDATION AND TERMINATION

     Section 13.1. Dissolution. The Partnership shall not be dissolved by the admission of
Additional Limited Partners or by the admission of a successor General Partner in accordance with
the terms of this Agreement. Upon the withdrawal of the General Partner, any successor General
Partner shall continue the business of the Partnership without dissolution. However, the
Partnership shall dissolve, and its affairs shall be wound up, upon the first to occur of any of
the following (each a “Liquidating Event”):

- 57 -

 

          A. a final and non-appealable judgment is entered by a court of competent jurisdiction ruling
that the General Partner is bankrupt or insolvent, or a final and non-appealable order for relief
is entered by a court with appropriate jurisdiction against the General Partner, in each case under
any federal or state bankruptcy or insolvency laws as now or hereafter in effect, unless, prior to
the entry of such order or judgment, a Majority in Interest of the Limited Partners agree in
writing, in their sole and absolute discretion, to continue the business of the Partnership and to
the appointment, effective as of a date prior to the date of such order or judgment, of a successor
General Partner;

          B. an election to dissolve the Partnership made by the General Partner in its sole and
absolute discretion, with or without the Consent of a Majority in Interest of the Limited Partners;

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

          D. the occurrence of a Terminating Capital Transaction;

          E. the Redemption (or acquisition by the General Partner) of all Partnership Units other than
Partnership Units held by the General Partner; or

          F. the Incapacity or withdrawal of the General Partner, unless all of the remaining Partners
in their sole and absolute discretion agree in writing to continue the business of the Partnership
and to the appointment, effective as of a date prior to the date of such Incapacity, of a
substitute General Partner.

     Section 13.2. Winding Up.

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

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

          (ii) Second, to the satisfaction of all of the Partnership’s debts and liabilities to
the General Partner (whether by payment or the making of reasonable provision for payment
thereof), including, but not limited to, amounts due as reimbursements under Section
7.4 hereof;

          (iii) Third, to the satisfaction of all of the Partnership’s debts and liabilities to
the other Partners and any Assignees (whether by payment or the making of reasonable
provision for payment thereof); and

- 58 -

 

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

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

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

          C. In the event that the Partnership is “liquidated” within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g), distributions shall be made pursuant to this Article XIII to the
Partners and Assignees that have positive Capital Accounts in compliance with Regulations Section
1.704-1(b)(2)(ii)(b)(2) to the extent of, and in proportion to, positive Capital Account balances.
If any Partner has a deficit balance in its Capital Account (after giving effect to all
contributions, distributions and allocations for all taxable years, including the year during which
such liquidation occurs), such Partner shall not be required to make any contribution to the
capital of the Partnership with respect to such deficit, if any, of such Partner, and such deficit
shall not be considered a debt owed to the Partnership or any other person for any purpose
whatsoever.

          D. In the sole and absolute discretion of the General Partner or the Liquidator, a pro rata
portion of the distributions that would otherwise be made to the Partners pursuant to this
Article XIII may be:

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

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

- 59 -

 

     Section 13.3. Deemed Distribution and Recontribution. Notwithstanding any other
provision of this Article XIII, in the event that the Partnership is liquidated within the
meaning of Regulations Section 1.704-1(b)(2)(ii)(g), but no Liquidating Event has occurred, the
Partnership’s Property shall not be liquidated, the Partnership’s liabilities shall not be paid or
discharged and the Partnership’s affairs shall not be wound up. Instead, for federal income tax
purposes the Partnership shall be deemed to have contributed all of its assets and liabilities to a
new partnership in exchange for an interest in the new partnership; and, immediately thereafter,
distributed interests in the new partnership to the Partners in accordance with their respective
Capital Accounts in liquidation of the Partnership, and the new partnership is deemed to continue
the business of the Partnership. Nothing in this Section 13.3 shall be deemed to have
constituted any Assignee as a Substituted Limited Partner without compliance with the provisions of
Section 11.4 hereof.

     Section 13.4. Rights of Limited Partners. Except as otherwise provided in this
Agreement, (a) each Limited Partner shall look solely to the assets of the Partnership for the
return of its Capital Contribution, (b) no Limited Partner shall have the right or power to demand
or receive property other than cash from the Partnership, and (c) no Limited Partner (other than
any Limited Partner who holds Preferred Units, to the extent specifically set forth herein and in
the applicable Partnership Unit Designation) shall have priority over any other Limited Partner as
to the return of its Capital Contributions, distributions or allocations.

     Section 13.5. Notice of Dissolution. In the event that a Liquidating Event occurs or
an event occurs that would, but for an election or objection by one or more Partners pursuant to
Section 13.1 hereof, result in a dissolution of the Partnership, the General Partner shall,
within 30 days thereafter, provide written notice thereof to each of the Partners and, in the
General Partner’s sole and absolute discretion or as required by the Act, to all other parties with
whom the Partnership regularly conducts business (as determined in the sole and absolute discretion
of the General Partner), and the General Partner may, or, if required by the Act, shall, publish
notice thereof in a newspaper of general circulation in each place in which the Partnership
regularly conducts business (as determined in the sole and absolute discretion of the General
Partner).

     Section 13.6. Cancellation of Certificate of Limited Partnership. Upon the completion
of the liquidation of the Partnership cash and property as provided in Section 13.2 hereof,
the Partnership shall be terminated, a certificate of cancellation shall be filed with the State of
Delaware, all qualifications of the Partnership as a foreign limited partnership or association in
jurisdictions other than the State of Delaware shall be cancelled, and such other actions as may be
necessary to terminate the Partnership shall be taken.

     Section 13.7. Reasonable Time for Winding-Up. A reasonable time shall be allowed for
the orderly winding-up of the business and affairs of the Partnership and the liquidation of its
assets pursuant to Section 13.2 hereof, in order to minimize any losses otherwise attendant
upon such winding-up, and the provisions of this Agreement shall remain in effect between the
Partners during the period of liquidation.

ARTICLE XIV

PROCEDURES FOR ACTIONS AND CONSENTS

OF PARTNERS; AMENDMENTS; MEETINGS

     Section 14.1. Procedures for Actions and Consents of Partners. The actions requiring
consent or approval of Limited Partners pursuant to this Agreement, including Section 7.3
hereof, or otherwise pursuant to applicable law, are subject to the procedures set forth in this
Article XIV.

- 60 -

 

     Section 14.2. Amendments. Amendments to this Agreement requiring Consent of the
Limited Partners may be proposed by the General Partner. Following such proposal, the General
Partner shall submit any proposed amendment to the Limited Partners. The General Partner shall
seek the written consent of the Limited Partners on the proposed amendment or shall call a meeting
to vote thereon and to transact any other business that the General Partner may deem appropriate.
For purposes of obtaining a written consent, the General Partner may require a response within a
reasonable specified time, but not less than 10 days, and failure to respond in such time period
shall constitute a consent that is consistent with the General Partner’s recommendation with
respect to the proposal; provided, however, that an action shall become effective
at such time as requisite consents are received even if prior to such specified time.
Notwithstanding anything to the contrary in this Agreement, the General Partner shall have the
power, without the consent of the Limited Partners, to amend this Agreement as may be required to
reflect the admission, substitution, change in Capital Commitments or ownership of Partnership
Units, termination or withdrawal of Partners, or any other information with respect to the Partners
or the Partnership nor or hereafter addressed on Exhibit A, in accordance with this
Agreement (which may be effected through the replacement of Exhibit A with an amended
Exhibit A).

     Section 14.3. Meetings of the Partners.

          A. Meetings of the Partners may be called by the General Partner and shall be called upon the
receipt by the General Partner of a written request by a Majority in Interest of the Limited
Partners. The call shall state the nature of the business to be transacted. Notice of any such
meeting shall be given to all Partners not less than seven days nor more than 30 days prior to the
date of such meeting. Partners may vote in person or by proxy at such meeting. Whenever the vote
or Consent of Partners is permitted or required under this Agreement, such vote or Consent may be
given at a meeting of Partners or may be given in accordance with the procedure prescribed in
Section 14.3.B hereof.

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

          C. Each Limited Partner may authorize any Person or Persons to act for it by proxy on all
matters in which a Limited Partner is entitled to participate, including waiving notice of any
meeting, or voting or participating at a meeting. Every proxy must be signed by the Limited
Partner or its attorney-in-fact. No proxy shall be valid after the expiration of 11 months from
the date thereof unless otherwise provided in the proxy (or there is receipt of a proxy authorizing
a later date). Every proxy shall be revocable at the pleasure of the Limited Partner executing it,
such revocation to be effective upon the Partnership’s receipt of written notice of such revocation
from the Limited Partner executing such proxy. The use of proxies will be governed in the same
manner as in the case of corporations organized under the General Corporation Law of Delaware
(including Section 212 thereof).

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

- 61 -

 

          E. On matters on which Limited Partners are entitled to vote, each Limited Partner holding OP
Units shall have a vote equal to the number of OP Units held.

          F. Except as otherwise expressly provided in this Agreement, the Consent of Holders of
Partnership Interests representing a majority of the Partnership Interests of the Limited Partners
shall control.

ARTICLE XV

GENERAL PROVISIONS

     Section 15.1. Addresses and Notice. Any notice, demand, request or report required or
permitted to be given or made to a Partner or Assignee under this Agreement shall be in writing and
shall be deemed given or made when delivered in person or when sent by first class United States
mail or by other means of written communication (including by telecopy, facsimile, or commercial
courier service) to the Partner or Assignee at the address set forth in Exhibit A or such
other address of which the Partner or Assignee shall notify the General Partner in writing.

     Section 15.2. Titles and Captions. All article or section titles or captions in this
Agreement are for convenience only. They shall not be deemed part of this Agreement and in no way
define, limit, extend or describe the scope or intent of any provisions hereof. Except as
specifically provided otherwise, references to “Articles” or “Sections” are to Articles and
Sections of this Agreement.

     Section 15.3. Pronouns and Plurals. Whenever the context may require, any pronouns
used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns, pronouns and verbs shall include the plural and vice versa.

     Section 15.4. Further Action. The parties shall execute and deliver all documents,
provide all information and take or refrain from taking action as may be necessary or appropriate
to achieve the purposes of this Agreement.

     Section 15.5. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.

     Section 15.6. Waiver.

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

          B. The restrictions, conditions and other limitations on the rights and benefits of the
Limited Partners contained in this Agreement, and the duties, covenants and other requirements of
performance or notice by the Limited Partners, are for the benefit of the Partnership and, except
for an obligation to pay money to the Partnership, may be waived or relinquished by the General
Partner, in its sole and absolute discretion, on behalf of the Partnership in one or more instances
from time to time and at any time.

     Section 15.7. Counterparts. This Agreement may be executed in counterparts, all of
which together shall constitute one agreement binding on all the parties hereto, notwithstanding
that all such

- 62 -

 

parties are not signatories to the original or the same counterpart. Each party shall become
bound by this Agreement immediately upon affixing its signature hereto.

     Section 15.8. Applicable Law. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Delaware, without regard to the principles
of conflicts of law. In the event of a conflict between any provision of this Agreement and any
non-mandatory provision of the Act, the provisions of this Agreement shall control and take
precedence.

     Section 15.9. Entire Agreement. This Agreement contains all of the understandings and
agreements between and among the Partners with respect to the subject matter of this Agreement and
the rights, interests and obligations of the Partners with respect to the Partnership.

     Section 15.10. Invalidity of Provisions. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect, the validity, legality and enforceability
of the remaining provisions contained herein shall not be affected thereby.

     Section 15.11. Limitation to Preserve REIT Qualification. Notwithstanding anything
else in this Agreement, to the extent that the amount paid, credited, distributed or reimbursed by
the Partnership to the General Partner or its officers, directors, employees, personnel or agents,
whether as a reimbursement, fee, expense or indemnity (a “REIT Payment”), would constitute
gross income to the General Partner for purposes of Code Section 856(c)(2) or Code Section
856(c)(3), then, notwithstanding any other provision of this Agreement, the amount of such REIT
Payments, as selected by the General Partner in its discretion from among items of potential
distribution, reimbursement, fees, expenses and indemnities, shall be reduced for any Partnership
Year so that the REIT Payments, as so reduced, for or with respect to the General Partner, shall
not exceed the lesser of:

     (i) an amount equal to the excess, if any, of (a) 4.9% of the General Partner’s total
gross income (but excluding the amount of any REIT Payments) for the Partnership Year that
is described in subsections (A) through (H) of Code Section 856(c)(2) over (b) the amount of
gross income (within the meaning of Code Section 856(c)(2)) derived by the General Partner
from sources other than those described in subsections (A) through (H) of Code Section
856(c)(2) (but not including the amount of any REIT Payments); or

     (ii) an amount equal to the excess, if any, of (a) 24% of the General Partner’s total
gross income (but excluding the amount of any REIT Payments) for the Partnership Year that
is described in subsections (A) through (I) of Code Section 856(c)(3) over (b) the amount of
gross income (within the meaning of Code Section 856(c)(3)) derived by the General Partner
from sources other than those described in subsections (A) through (I) of Code Section
856(c)(3) (but not including the amount of any REIT Payments); provided,
however, that REIT Payments in excess of the amounts set forth in clauses (i) and
(ii) above may be made if the General Partner, as a condition precedent, obtains an opinion
of tax counsel that the receipt of such excess amounts shall not adversely affect the
General Partner’s ability to qualify as a REIT. To the extent that REIT Payments may not be
payable in a Partnership Year as a consequence of the limitations set forth in this
Section 15.11, such REIT Payments shall carry over and shall be treated as arising
in the following Partnership Year. The purpose of the limitations contained in this
Section 15.11 is to prevent the General Partner from failing to qualify as a REIT
under the Code by reason of the General Partner’s share of items, including distributions,
reimbursements, fees, expenses or indemnities, receivable directly or indirectly from the
Partnership, and this Section 15.11 shall be interpreted and applied to effectuate
such purpose.

- 63 -

 

     Section 15.12. No Partition. No Partner nor any successor-in-interest to a Partner
shall have the right while this Agreement remains in effect to have any property of the Partnership
partitioned, or to file a complaint or institute any proceeding at law or in equity to have such
property of the Partnership partitioned, and each Partner, on behalf of itself and its successors
and assigns hereby waives any such right. It is the intention of the Partners that the rights of
the parties hereto and their successors-in-interest to Partnership property, as among themselves,
shall be governed by the terms of this Agreement, and that the rights of the Partners and their
successors-in-interest shall be subject to the limitations and restrictions as set forth in this
Agreement.

     Section 15.13. No Third-Party Rights Created Hereby. The provisions of this Agreement
are solely for the purpose of defining the interests of the Partners, inter se; and no other
person, firm or entity (i.e., a party who is not a signatory hereto or a permitted successor to
such signatory hereto) shall have any right, power, title or interest by way of subrogation or
otherwise, in and to the rights powers, title and provisions of this Agreement. No creditor or
other third party having dealings with the Partnership (other than as expressly set forth herein
with respect to Indemnitees) shall have the right to enforce the right or obligation of any Partner
to make Capital Contributions or loans to the Partnership or to pursue any other right or remedy
hereunder or at law or in equity. 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 any 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 any of the Partners.

     Section 15.14. No Rights as Stockholders of General Partner. Nothing contained in
this Agreement shall be construed as conferring upon the Holders of Partnership Units any rights
whatsoever as stockholders of the General Partner, including without limitation any right to
receive dividends or other distributions made to stockholders of the General Partner or to vote or
to consent or receive notice as stockholders in respect of any meeting of the stockholders of the
General Partner for the election of directors or any other matter.

     Section 15.15. Creditors. Other than as expressly set forth herein with respect to
Indemnitees, none of the provisions of this Agreement shall be for the benefit of, or shall be
enforceable by, any creditor of the Partnership.

[signature page follows]

- 64 -

 

     IN WITNESS WHEREOF, this First Amended and Restated Agreement of Limited Partnership has been
executed as of                     , 2008.

GENERAL PARTNER:

MFRESIDENTIAL INVESTMENTS, INC.

a Maryland corporation

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

Name:
	 	 
	 

	 	Title:	 	 

LIMITED PARTNERS:

[          ]

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

Name:
	 	 
	 

	 	Title:	 	 

- 65 -

 

Exhibit A

PARTNERS AND PARTNERSHIP INTERESTS

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Agreed	 	 
	Name and	 	 	 	Special	 	Initial Capital	 	 
	Address of Partner	 	OP Units	 	Units	 	Account	 	Percentage Interest
	GENERAL PARTNER:
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	MFResidential
Investments, Inc.

	 	[     ]
	 	[      ]
	 	[      ]
	 	[      ]
	 
	 	 	 	 	 	 	 	 
	LIMITED PARTNERS
	 	 	 	 	 	 	 	 
	MFA Mortgage
Investments, Inc.

	 	[      ]
	 	[      ]
	 	[      ]
	 	[      ]
	 
	 	 	 	 	 	 	 	 
	MFA Manager
(Incentive), LLC

	 	[      ]
	 	[      ]
	 	[      ]
	 	[      ]
	 
	 	 	 	 	 	 	 	 
	TOTAL
	 	 	 	 	 	 	 	 
	 

	 	 
	 	 
	 	 
	 	 

Dated as of                     , 2008

A-1

 

Exhibit B

NOTICE OF REDEMPTION

			
	To:	 	MFResidential Investments, Inc.

a Maryland corporation

350 Park Avenue, 21st Floor

New York, New York 10022

          The undersigned Limited Partner or Assignee hereby irrevocably tenders for Redemption                     
OP Units in MFR Operating Partnership, LP in accordance with the terms of the First Amended and
Restated Agreement of Limited Partnership of MFR Operating Partnership, LP, dated as of                     ,
2008 (the “Agreement”), and the Redemption rights referred to therein. The undersigned
Limited Partner or Assignee:

          (a) undertakes (i) to surrender such OP Units and any certificate therefor at the closing of
the Redemption and (ii) to furnish to the General Partner, prior to the Specified Redemption Date,
the documentation, instruments and information required under Section 8.6 of the Agreement;

          (b) directs that the certified check representing the Cash Amount, or the REIT Shares Amount,
as applicable, deliverable upon the closing of such Redemption be delivered to the address
specified below;

          (c) represents, warrants, certifies and agrees that:

          (i) the undersigned Limited Partner or Assignee is a Qualifying Party,

          (ii) the undersigned Limited Partner or Assignee has, and at the closing of the
Redemption will have, good, marketable and unencumbered title to such OP Units, free and
clear of the rights or interests of any other person or entity,

          (iii) the undersigned Limited Partner or Assignee has, and at the closing of the
Redemption will have, the full right, power and authority to tender and surrender such
Partnership Units as provided herein, and

          (iv) the undersigned Limited Partner or Assignee has obtained the consent or approval
of all persons and entities, if any, having the right to consent to or approve such tender
and surrender; and

          (d) acknowledges that he will continue to own such OP Units until and unless either (1) such
OP Units are acquired by the General Partner pursuant to Section 8.6.B of the Agreement or
(2) such redemption transaction closes.

B-1

 

          All capitalized terms used herein and not otherwise defined shall have the same meaning
ascribed to them respectively in the Agreement.

          Dated:                                        

	 	 	 	 	 
	 

	 	Name of Limited Partner or Assignee:
	 	 
	 
	 	 	 	 
	 

	 	 
	 	 
	 
	 	 	 	 
	 

	 	 
	 	 
	 

	 	(Signature of Limited Partner or Assignee)	 	 
	 
	 	 	 	 
	 

	 	 

(Street Address)	 	 
	 

	 	 
	 	 
	 

	 	 
	 	 
	 
	 	 	 	 
	 

	 	 

(City)      (State)      (Zip Code)	 	 
	 
	 	 	 	 
	 

	 	Signature Guaranteed by:	 	 
	 
	 	 	 	 
	 

	 	 
	 	 
	 
	 	 	 	 
	Issue Check Payable/REIT Shares to:

	 	 
	 	 
	 
	 	 	 	 
	Name:

	 	 
	 	 
	 
	 	 	 	 
	Please insert social security or
identifying number:

	 	 
	 	 

B-2

 

Exhibit C

NOTICE OF ELECTION BY PARTNER TO CONVERT LTIP UNITS INTO OP UNITS

     The undersigned Holder of LTIP Units hereby irrevocably (i) elects to convert the number of
LTIP Units in MFR Operating Partnership, LP, a Delaware limited partnership (the
“Partnership”) set forth below into OP Units in accordance with the terms of the First
Amended and Restated Agreement of Limited Partnership of the Partnership, dated as of                     ,
2008 as amended from time to time; and (ii) directs that any cash in lieu of OP Units that may be
deliverable upon such conversion be delivered to the address specified below. The undersigned
hereby represents, warrants, and certifies that the undersigned (a) has title to such LTIP Units,
free and clear of the rights of interests of any other person or entity other than the Partnership;
(b) has the full right, power, and authority to cause the conversion of such LTIP Units as provided
herein; and (c) has obtained the consent or approval of all persons or entitles, if any, having the
right to consent or approve such conversion.

	 	 	 
	Name of Holder:

	 	 

	 

	 	(Please Print: Exact Name as Registered with Partnership)

	 	 	 	 	 
	Number of LTIP Units to be Converted:

	 	 

	 	 

	 	 	 	 	 
	Date of this Notice:

	 	 

	 	 

	 	 	 	 	 
	 

	 	 

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

	 	 

(Street Address)	 	 
	 
	 	 	 	 
	 

	 	 

(City)                     (State)                (Zip Code)	 	 
	 
	 	 	 	 
	 

	 	Signature Guaranteed by:                                                                    
                                      
        
	 	 

C-1

 

Exhibit D

NOTICE OF ELECTION BY PARTNERSHIP TO FORCE CONVERSION OF LTIP UNITS INTO OP UNITS

          MFR Operating Partnership, LP, a Delaware limited partnership (the “Partnership”)
hereby irrevocably elects to cause the number of LTIP Units held by the Holder of LTIP Units set
forth below to be converted into OP Units in accordance with the terms of the Fourth Amended and
Restated Agreement of Limited Partnership of the Partnership, as amended from time to time.

	 	 	 
	Name of Holder:

	 	 

	 

	 	(Please Print: Exact Name as Registered with Partnership)

Number of LTIP Units to be Converted:                                                                                

	 	 	 
	Date of this Notice:

	 	 

	 
	 	 
	 

	 	 

D-1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00142-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00142-of-00352.parquet"}]]