Exhibit 10.4

TAX PROTECTION AGREEMENT

THIS TAX PROTECTION AGREEMENT (this “Agreement”) is made and entered into as of
June 4, 2010 by and among THE GC NET LEASE REIT, INC. (the “REIT”), THE GC NET
LEASE REIT OPERATING PARTNERSHIP, L.P. (the “Partnership”), Will Partners, LLC,
Will Partners Investor 1, LLC, Will Partners Investor 2, LLC, Will Partners
Investor 3, LLC (each of Will Partners Investor 1, LLC, Will Partners Investor
2, LLC and Will Partners Investor 3, LLC shall be referred to herein as a
“Contributor” and, collectively with Will Partners, LLC, as the “Contributors”)
Will Partners Member 1, LLC, PLM&B, Inc. and Westridge Partners (each of Will
Partners Member 1, LLC, PLM&B, Inc. and Westridge Partners shall be referred to
herein as a “Protected Partner” and, collectively with Will Partners, LLC, as
the “Protected Partners”) (Will Partners, LLC shall be referred to herein as
both a “Contributor” and a “Protected Partner” and, collectively with the other
such entities, as the “Contributors” and the “Protected Partners”).

WHEREAS, pursuant to that certain Contribution Agreement – World Kitchen
Property, dated as of June 4, 2010 (the “Contribution Agreement”), the
Contributors transferred to a wholly-owned subsidiary of the Partnership all of
the Contributors’ percentage undivided co-tenancy interests in the World Kitchen
Property, as identified in such Contribution Agreement, in exchange for the
Protected Partners’ receipt of an aggregate of 813,044 units of limited
partnership interest (“Units”) in the Partnership (the “Transaction”);

WHEREAS, it is intended for federal income tax purposes that the Transaction be
treated as a contribution by the Protected Partners of all of the contributed
assets to the Partnership in exchange for partnership interests under
Section 721 of the Internal Revenue Code of 1986, as amended (the “Code”);

WHEREAS, in accordance with Section 3.2(b) of the Contribution Agreement and in
consideration for the agreement of the Contributors and the Protected Partners
to consummate the Transaction, the parties desire to enter into this Agreement
regarding certain tax matters associated with the Transaction; and

WHEREAS, the REIT and the Partnership desire to evidence their agreement
regarding amounts that may be payable as a result of certain actions being taken
by the Partnership regarding the disposition of certain of the contributed
assets and certain debt obligations of the Partnership and its subsidiaries.

NOW, THEREFORE, in consideration of the premises and the mutual representations,
warranties, covenants and agreements contained herein and in the Contribution
Agreement, the parties hereto hereby agree as follows:

ARTICLE 1

DEFINITIONS

To the extent not otherwise defined herein, capitalized terms used in this
Agreement have the meanings ascribed to them in the Partnership Agreement (as
defined below).

“Closing Date” means the closing date of the Transaction.

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

“Consent” means the prior written consent to do the act or thing for which the
consent is required or solicited, which consent may be executed by a duly
authorized officer or agent of the party granting such consent.

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“Guaranteed Amount” means the aggregate amount of each Guaranteed Debt that is
guaranteed at any time by Partner Guarantors.

“Guaranteed Debt” means any loans incurred (or assumed) by the Partnership or
any of its subsidiaries that are guaranteed by Partner Guarantors at any time
after the Closing Date pursuant to Article 3 hereof.

“Minimum Liability Amount” means, for each Protected Partner, the amount set
forth on Schedule 3.1 hereto next to such Protected Partner’s name.

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

“Partner Guarantors” means those Protected Partners who have guaranteed any
portion of the Guaranteed Debt. The Partner Guarantors and each Partner
Guarantor’s dollar amount share of the Guaranteed Amount with respect to the
Guaranteed Debt is zero as of the Closing Date and will be set forth on Exhibit
B to Schedule 3.7 hereto, as may be amended from time to time.

“Partnership” means The GC Net Lease REIT Operating Partnership, L.P., a
Delaware limited partnership.

“Partnership Agreement” means the Amended and Restated Agreement of Limited
Partnership of The GC Net Lease REIT Operating Partnership, L.P., dated as of
June 18, 2009, as the same may be amended in accordance with the terms thereof.

“Protected Gain” shall mean the gain that would be allocable to and recognized
by a Protected Partner under Section 704(c) of the Code in the event of the sale
of a Protected Property in a fully taxable transaction (excluding its
corresponding share of “book gain,” if any). The initial amount of Protected
Gain with respect to each Protected Partner shall be determined as if the
Partnership sold a Protected Property in a fully taxable transaction on the
Closing Date for consideration equal to the Section 704(c) Value of such
Protected Property on the Closing Date, and is set forth on Schedule 2.1(b)
hereto. Gain that would be allocated to a Protected Partner upon a sale of a
Protected Property that is “book gain” (for example, gain attributable to
appreciation in the actual value of the Protected Property following the Closing
Date or gain resulting from reductions in the “book value” of the Protected
Property following the Closing Date) would not be considered Protected Gain. (As
used in this definition, “book gain” is any gain that would not be required
under Section 704 (c) of the Code and the applicable regulations to be specially
allocated to the Protected Partners, but rather would be allocated to all
partners in the Partnership, including the REIT, in accordance with their
respective economic interests in the Partnership.)

“Protected Partner” means those persons set forth on Schedule 2.1(a) hereto as
“Protected Partners,” any person who acquires Units from a Protected Partner in
a transaction in which gain or loss is not recognized in whole or in part and in
which such transferee’s adjusted basis, as determined for federal income tax
purposes, is determined in whole or in part by reference to the adjusted basis
of a Protected Partner in such Units.

“Protected Property” means (i) the property identified as a Protected Property
on Schedule 2.1(b) hereto; (ii) any other properties or assets hereafter
acquired by the Partnership or direct or indirect interest owned by the
Partnership in any Subsidiary that owns an interest in a Protected Property, if
the disposition of such properties, assets or interest would result in the
recognition of Protected Gain with respect to the Protected Property by a
Protected Partner; and (iii) any other property that the Partnership

 

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directly or indirectly receives that is in whole or in part a “substituted basis
property” as defined in Section 7701(a)(42) of the Code with respect to the
Protected Property.

“Qualified Guarantee” has the meaning set forth in Section 3.2.

“Qualified Guarantee Indebtedness” has the meaning set forth in Section 3.2.

“Section 704(c) Value” means the fair market value of the Protected Property as
agreed to by the Partnership and the Protected Partners and as set forth next to
the Protected Property on Schedule 2.1(b) hereto, as applicable. For purposes of
this Agreement, the aggregate Section 704(c) Value for the Protected Property
contributed to the Partnership by the Protected Partners in the Transaction will
be the agreed value of the Units to be issued in the Transaction plus the
mortgage debt secured by or allocable to the Protected Property outstanding on
the Closing Date. The Section 704(c) Value for the Protected Property shall be
as determined by agreement between the Protected Partners and the Partnership
pursuant to this Agreement. The Partnership shall initially carry the Protected
Property on its books at a value equal to the Section 704(c) Value as set forth
above.

“Subsidiary” means any entity in which the Partnership owns a direct or indirect
interest that owns the Protected Property on the Closing Date, after giving
effect to the Transaction, or that thereafter is a successor to the
Partnership’s direct or indirect interests in the Protected Property.

“Tax Protection Period” means the period commencing on the Closing Date and
ending at 12:01 AM on the tenth (10th) anniversary of the Closing Date;
provided, however, that with respect to a Protected Partner, the Tax Protection
Period shall terminate at such time as such Protected Partner disposes of 50% or
more of the Units received, directly or indirectly, in the Transaction by such
Protected Partner and gain or loss is fully recognized as a result of such
disposition.

“Units” means units of limited partnership interest of the Partnership, as
described in the Partnership Agreement.

ARTICLE 2

RESTRICTIONS ON DISPOSITIONS OF

THE PROTECTED PROPERTY

2.1 General Prohibition on Disposition of Protected Property. The Partnership
agrees for the benefit of each Protected Partner, for the term of the Tax
Protection Period, not to directly or indirectly sell, exchange, transfer, or
otherwise dispose of the Protected Property or any interest therein (without
regard to whether such disposition is voluntary or involuntary) in a transaction
that would cause any of the Protected Partners to recognize any Protected Gain.
Without limiting the foregoing, the term “sale, exchange, transfer or
disposition” by the Partnership shall be deemed to include, and the prohibition
shall extend to:

(a) any direct or indirect disposition by any direct or indirect Subsidiary of
the Protected Property or any interest therein;

(b) any direct or indirect disposition by the Partnership of the Protected
Property (or any direct or indirect interest therein) that is subject to
Section 704(c)(1)(B) of the Code and the Treasury Regulations thereunder; and

(c) any distribution by the Partnership to a Protected Partner that is subject
to Section 737 of the Code and the Treasury Regulations thereunder;

 

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Without limiting the foregoing, a disposition shall include any transfer,
voluntary or involuntary, by the Partnership or any Subsidiary in a foreclosure
proceeding, pursuant to a deed in lieu of foreclosure, or in a bankruptcy
proceeding.

Notwithstanding the foregoing, this Section 2.1 shall not apply to a voluntary,
actual disposition by a Protected Partner of Units in connection with a merger
or consolidation of the Partnership pursuant to which (1) the Protected Partner
is offered either cash or property treated as cash pursuant to Section 731 of
the Code (“Cash Consideration”) or partnership interests in a partnership that
would be treated as the continuing partnership under the principles of
Section 708 of the Code and the receipt of such partnership interests would not
result in the recognition of gain for federal income tax purposes by the
Protected Partner (“Partnership Interest Consideration”); (2) the Protected
Partner has the ability to elect to receive solely Partnership Interest
Consideration in exchange for his Units and the continuing partnership has
agreed in writing to assume the obligations of the Partnership under this
Agreement; (3) no Protected Gain is recognized by the Partnership as a result of
any partner of the Partnership receiving Cash Consideration; and (4) the
Protected Partner elects to receive Cash Consideration.

2.2 Exceptions Where No Gain Recognized. Notwithstanding the restriction set
forth in Section 2.1, the Partnership or any Subsidiary may dispose of any
Protected Property (or any interest therein) if such disposition qualifies as a
like-kind exchange under Section 1031 of the Code, or an involuntary conversion
under Section 1033 of the Code, or other transaction (including, but not limited
to, a contribution of property to any entity that qualifies for the
non-recognition of gain under Section 721 or Section 351 of the Code, or a
merger or consolidation of the Partnership with or into another entity that
qualifies for taxation as a “partnership” for federal income tax purposes (a
“Successor Partnership”)) that, as to each of the foregoing, does not result in
the recognition of any taxable income or gain to any Protected Partner with
respect to any of the Units; provided, however, that:

(a) in the case of a Section 1031 like-kind exchange, if such exchange is with a
“related party” within the meaning of Section 1031(f)(3) of the Code, any direct
or indirect disposition by such related party of the Protected Property or any
other transaction prior to the expiration of the two (2) year period following
such exchange that would cause Section 1031(f)(1) to apply with respect to such
Protected Property (including by reason of the application of
Section 1031(f)(4)) shall be considered a violation of Section 2.1 by the
Partnership; and

(b) in the event that at the time of the exchange or other disposition the
Protected Property is secured, directly or indirectly, by indebtedness that is
guaranteed by a Protected Partner (or for which a Protected Partner otherwise
has personal liability) and that is not then in default and the transferee is
not a Subsidiary of the Partnership that both is more than 50% owned, directly
or indirectly, by the Partnership and is and will continue to be under the legal
control of the Partnership (which shall include a partnership or limited
liability company in which the Partnership or a wholly owned subsidiary of the
Partnership is the sole managing general partner or sole managing member, as
applicable), (i) either (A) such indebtedness shall be repaid in full or (B) the
Partnership shall obtain from the lenders with respect to such indebtedness a
full and complete release of liability for each of the Protected Partners that
has guaranteed, or otherwise has liability for, such indebtedness, and (ii) if
such indebtedness is a Guaranteed Debt and the Tax Protection Period shall not
have expired, the Partnership shall comply with its covenants set forth in
Article 3 below with respect to such Guaranteed Debt and the Partner Guarantors
that are considered to have liability for such Guaranteed Debt (determined under
Section 3.4 treating such events as a repayment of the Guaranteed Debt).

The taxes payable by any such Protected Partner shall equal the sum of the
highest federal income tax rate applicable to such Protected Gain based upon its
characterization in the year of disposition plus

 

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the highest income rates, if any, which such Protected Gain is subject to in the
hands of such Protected Partner, times such Protected Partner’s share of such
Protected Gain.

ARTICLE 3

ALLOCATION OF LIABILITIES;

GUARANTEE OPPORTUNITY

3.1 Minimum Liability Allocation. During the Tax Protection Period, the
Partnership will offer to each Protected Partner the opportunity to enter into
Qualified Guarantees of Qualified Guarantee Indebtedness in such amount or
amounts so as to cause the amount of partnership liabilities allocated to such
Protected Partner for purposes of Section 752 of the Code to be not less than
such Protected Partner’s Minimum Liability Amount, as provided in this
Article 3. In order to minimize the need for Protected Partners to enter into
Qualified Guarantees, the Partnership will use the optional method under
Treasury Regulations Section 1.752-3(a)(3) to allocate Nonrecourse Liabilities
considered secured by a Protected Property to the Protected Partners to the
extent that the “built-in gain” with respect to those properties exceeds the
amount of the Nonrecourse Liabilities considered secured by such Protected
Property allocated to the Protected Partners under Treasury Regulations
Section 1.752-3(a)(2).

3.2 Qualified Guarantee Indebtedness and Qualified Guarantee; Treatment of
Qualified Guarantee Indebtedness as Guaranteed Debt. In order for an offer by
the Partnership of an opportunity to guarantee indebtedness to satisfy the
requirements of this Article 3, (i) the indebtedness to be guaranteed must
satisfy all of the conditions set forth in this Section 3.2 (indebtedness
satisfying all such conditions is referred to as “Qualified Guarantee
Indebtedness”); (ii) the guarantee by the Partner Guarantors must be pursuant to
a Guarantee Agreement substantially in the form attached hereto as Schedule 3.7
that satisfies the conditions set forth in Sections 3.2(a) and (c) (a “Qualified
Guarantee”); (iii) the amount of debt required to be guaranteed by the Partner
Guarantor must not exceed the portion of the Guaranteed Amount for which a
replacement guarantee is being offered; and (iv) the debt to be guaranteed must
be considered indebtedness of the Partnership for purposes of determining the
adjusted tax basis of the interests of partners in the Partnership in their
partnership interests. If, and to the extent that, a Partner Guarantor elects to
guarantee Qualified Guarantee Indebtedness pursuant to an offer made in
accordance with this Article 3, such indebtedness thereafter shall be considered
a Guaranteed Debt and subject to all of this Article 3. The conditions that must
be satisfied at all times with respect to any additional or replacement
Guaranteed Debt offered pursuant to this Article 3 hereof and the guarantees
with respect thereto are as follows:

(a) each such guarantee shall be a “bottom dollar guarantee” in that the lender
for the Guaranteed Debt is required to pursue all other collateral and security
for the Guaranteed Debt (other than any “bottom dollar guarantees” permitted
pursuant to this clause (i) and/or Section 3.3 below) prior to seeking to
collect on such a guarantee, and the lender shall have recourse against the
guarantee only if, and solely to the extent that, the total amount recovered by
the lender with respect to the Guaranteed Debt after the lender has exhausted
its remedies as set forth above is less than the aggregate of the Guaranteed
Amounts with respect to such Guaranteed Debt (plus the aggregate amounts of any
other guarantees (x) that are in effect with respect to such Guaranteed Debt at
the time the guarantees pursuant to this Article 3 are entered into, or (y) that
are entered into after the date the guarantees pursuant to this Article 3 are
entered into with respect to such Guaranteed Debt and that comply with
Section 3.5 below, but only to the extent that, in either case, such guarantees
are “bottom dollar guarantees” with respect to the Guaranteed Debt), and the
maximum aggregate liability of each Partner Guarantor for all Guaranteed Debt
shall be limited to the amount actually guaranteed by such Partner Guarantor;

 

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(b) the fair market value of the collateral against which the lender has
recourse pursuant to the Guaranteed Debt, determined as of the time the
guarantee is entered into (an independent appraisal relied upon by the lender in
making the loan shall be conclusive evidence of such fair market value when the
guarantee is being entered into in connection with the closing of such loan),
shall not be less than 150% of the sum of (1) the aggregate of the Guaranteed
Amounts with respect to such Guaranteed Debt, plus (2) the dollar amount of any
other indebtedness that is senior to or pari passu with the Guaranteed Debt and
as to which the lender thereunder has recourse against property that is
collateral of the Guaranteed Debt, plus (3) the aggregate amounts of any other
guarantees that are in effect with respect to such Guaranteed Debt at the time
the guarantees pursuant to this Article 3 are entered into with respect to such
Guaranteed Debt and that comply with Section 3.2(e) below, but only to the
extent that such guarantees are “bottom dollar guarantees” with respect to the
Guaranteed Debt);

(c) (1) the executed guarantee must be delivered to the lender and (2) the
execution of the guarantee by the Partner Guarantors must be acknowledged by the
lender as an inducement to it to make a new loan, to continue an existing loan
(which continuation is not otherwise required), or to grant a material consent
under an existing loan (which consent is not otherwise required to be granted)
or, alternatively, the guarantee otherwise must be enforceable under the laws of
the state governing the loan and in which the property securing the loan is
located or in which the lender has a significant place of business (with any
bona fide branch or office of the lender through which the loan is made,
negotiated, or administered being deemed a “significant place of business” for
the purposes hereof);

(d) as to each Partner Guarantor that is executing a guarantee pursuant to this
Agreement, there must be no other Person that would be considered to “bear the
economic risk of loss,” within the meaning of Treasury Regulation § 1.752-2, or
would be considered to be “at risk” for purposes of Section 465(b) with respect
to that portion of such debt for which such Partner Guarantor is being made
liable for purposes of satisfying the Partnership’s obligations to such Partner
Guarantor under this Article 3;

(e) the aggregate Guaranteed Amounts with respect to the Guaranteed Debt will
not exceed 25% of the amount of the Guaranteed Debt outstanding at the time the
guarantee is executed. Except for guarantees already in place at the time a
guarantee opportunity is presented to the Protected Partners, at no time can
there be guarantees with respect to the Guaranteed Debt that are provided by
other persons that are “pari passu” with or at a lower level of risk than the
guarantees provided by the Protected Partners. If there are guarantees already
in place at the time a guarantee opportunity is presented to the Protected
Partners that are “pari passu” with or at a lower level of risk than the
guarantees provided by the Protected Partners, then the amount of Guaranteed
Debt subject to such existing guarantees shall be added to the Guaranteed Amount
for purposes of calculating the 25% limitation set forth in this Section 3.2(e);
and

(f) the obligor with respect to the Guaranteed Debt is the Partnership or an
entity which is and will continue to be under the legal control of the
Partnership (which shall include a partnership or limited liability company in
which the Partnership or a wholly-owned subsidiary of the Partnership is the
sole managing general partner or sole managing member, as applicable).

3.3 Covenant With Respect to Guaranteed Debt Collateral. The Partnership
covenants with the Partner Guarantors with respect to the Guaranteed Debt that
(i) it will comply with the requirements set forth in Section 2.2(b) upon any
disposition of any collateral for a Guaranteed Debt, whether during or following
the Guarantee Protection Period, and (ii) it will not at any time, whether
during or following the Guarantee Protection Period, pledge the collateral with
respect to a Guaranteed Debt to secure any other indebtedness (unless such other
indebtedness is, by its terms, subordinate in all

 

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respects to the Guaranteed Debt for which such collateral is security) or
otherwise voluntarily dispose of or reduce the amount of such collateral unless
either (A) after giving effect thereto the conditions in Section 3.2(b) would
continue to be satisfied with respect to the Guaranteed Debt and the Guaranteed
Debt otherwise would continue to be Qualified Guarantee Indebtedness, or (B) the
Partnership (x) obtains from the lender with respect to the original Guaranteed
Debt a full and complete release of any Partner Guarantor unless the Partner
Guarantor expressly requests that it not be released, and (y) if the Tax
Protection Period has not expired, offers to each Partner Guarantor with respect
to such original Guaranteed Debt, not less than 30 days prior to such pledge or
disposition, the opportunity to enter into a Qualified Guarantee of other the
Partnership indebtedness that constitutes Qualified Guarantee Indebtedness (with
such replacement indebtedness thereafter being considered a Guaranteed Debt and
subject to this Article 3) in an amount equal to the amount of such original
Guaranteed Debt that was guaranteed by such Partner Guarantor.

3.4 Repayment or Refinancing of Guaranteed Debt. The Partnership shall not, at
any time during the Tax Protection Period applicable to a Partner Guarantor,
repay or refinance all or any portion of any Guaranteed Debt unless (i) after
taking into account such repayment, each Partner Guarantor would be entitled to
include in its basis for its Units an amount of Guaranteed Debt equal to its
Minimum Liability Amount, or (ii) alternatively, the Partnership, not less than
30 days prior to such repayment or refinancing, offers to the applicable Partner
Guarantors the opportunity to enter into a Qualified Guarantee with respect to
other Qualified Guarantee Indebtedness in an amount the Partner would be
entitled to include in its adjusted tax basis of its Units equal to the Minimum
Liability Amount for such Partner Guarantor.

3.5 Limitation on Additional Guarantees With Respect to Debt Secured by
Collateral for Guaranteed Debt. The Partnership shall not offer the opportunity
or make available to any person or entity other than a Protected Partner a
guarantee of any Guaranteed Debt or other debt that is secured, directly or
indirectly, by any collateral for Guaranteed Debt unless (i) such debt by its
terms is subordinate in all respects to the Guaranteed Debt or, if such other
guarantees are of the Guaranteed Debt itself, such guarantees by their terms
must be paid in full before the lender can have recourse to the Partner
Guarantors (i.e., the first dollar amount of recovery by the applicable lenders
must be applied to the Guaranteed Amount); provided that the foregoing shall not
apply with respect to additional guarantees of Guaranteed Debt so long as the
conditions set forth in Sections 3.2(b) and (e) would be satisfied immediately
after the implementation of such additional guarantee (determined in the case of
Section 3.2(b), based upon the fair market value of the collateral for such
Guaranteed Debt at the time the additional guarantee is entered into and adding
the amount of such additional guarantee(s) to the sum of the applicable
Guaranteed Amounts plus any other preexisting “bottom dollar guarantee”
previously permitted pursuant to this Section 3.5 or Sections 3.2(a) and
(b) above, for purposes of making the computation provided for in
Section 3.2(b)), and (ii) such other guarantees do not have the effect of
reducing the amount of the Guaranteed Debt that is includible by any Partner
Guarantor in its adjusted tax basis for its Units pursuant to Treasury
Regulation § 1.752-2.

3.6 Process. Whenever the Partnership is required under this Article 3 to offer
to one or more of the Partner Guarantors an opportunity to guarantee Qualified
Guarantee Indebtedness, the Partnership shall be considered to have satisfied
its obligation if the other conditions in this Article 3 are satisfied and, not
less than thirty (30) days prior to the date that such guarantee would be
required to be executed in order to satisfy this Article 3, the Partnership
sends by first class mail, return receipt requested, to the last known address
of each such Partner Guarantor (as reflected in the records of the Partnership)
the Guarantee Agreement to be executed (which in the case of Guarantee Agreement
shall be substantially in the form of Schedule 3.7 hereto, with such changes
thereto as are necessary to reflect the relevant facts) and a brief letter
explaining the relevant circumstances (including, as applicable, that the

 

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offer is being made pursuant to this Article 3, the circumstances giving rise to
the offer, a brief summary of the terms of the Qualified Guarantee Indebtedness
to be guaranteed, a brief description of the collateral for the Qualified
Guarantee Indebtedness, a statement of the amount to be guaranteed, the address
to which the executed Guarantee Agreement must be sent and the date by which it
must be received, and a statement to the effect that, if the Protected Partner
fails to execute and return such Agreement within the time period specified, the
Partner Guarantor thereafter would lose its rights under this Article 3 with
respect to the amount of debt that the Partnership is required to offer to be
guaranteed, and depending upon the Partner Guarantor’s circumstances and other
circumstances related to the Partnership, the Partner Guarantor could be
required to recognize taxable gain as a result thereof, either currently or
prior to the expiration of the Tax Protection Period, that otherwise would have
been deferred). If a notice is properly sent in accordance with this procedure,
the Partnership shall have not responsibility as a result of the failure of a
Partner Guarantor either to receive such notice or to respond thereto within the
specified time period.

3.7 Presumption as to Schedule 3.7. The form of the Guarantee Agreement attached
hereto as Schedule 3.7 shall be conclusively presumed to satisfy the conditions
set forth in Section 3.2(a) and to have caused the Guaranteed Debt to be
considered allocable to the Guarantor Partner who enters into such Guarantee
Agreement pursuant to Treasury Regulation § 1.752-2 and Section 465 of the Code
so long as all of the following conditions are met with respect such Guaranteed
Debt:

(a) there are no other guarantees in effect with respect to such Guaranteed Debt
(other than the guarantees contemporaneously being entered into by the Partner
Guarantors pursuant to this Article 3);

(b) the collateral securing such Guaranteed Debt is not, and shall not
thereafter become, collateral for any other indebtedness that is senior to or
pari passu with such Guaranteed Debt;

(c) no additional guarantees with respect to such Guaranteed Debt will be
entered into during the applicable Tax Protection Period pursuant to the proviso
set forth in Section 3.3;

(d) the lender with respect to such Guaranteed Debt is not the Partnership, any
Subsidiary or other entity in which the Partnership owns a direct or indirect
interest, the REIT, any other partner in the Partnership, or any person related
to any partner in the Partnership as determined for purposes of Treasury
Regulation § 1.752-2 or any person that would be considered a “related party” as
determined for purposes of Section 465 of the Code; and

(e) none of the REIT, nor any other partner in the Partnership, nor any person
related to any partner in the Partnership as determined for purposes of Treasury
Regulation § 1.752-2 shall have provided, or shall thereafter provide,
collateral for, or otherwise shall have entered into, or shall thereafter enter
into, a relationship that would cause such person or entity to be considered to
bear the risk of loss with respect to such Guaranteed Debt, as determined for
purposes of Treasury Regulation § 1.752-2 or that would cause such entity to be
considered “at risk” with respect to such Guaranteed Debt, as determined for
purposes of Section 465 of the Code.

ARTICLE 4

REMEDIES FOR BREACH

4.1 Monetary Damages. In the event that the Partnership breaches its obligations
set forth in Article 2, Article 3, or Article 6 with respect to a Protected
Partner, the Protected Partner’s sole right

 

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shall be to receive from the Partnership, and the Partnership shall pay to such
Protected Partner as damages, an amount equal to:

(a) in the case of a violation of Articles 3 or 6, the aggregate federal, state
and local income taxes incurred by the Protected Partner as a result of the
income or gain allocated to, or otherwise recognized by, such Protected Partner
with respect to its Units by reason of such breach; and

(b) in the case of a violation of Article 2, the aggregate federal state, and
local income taxes incurred with respect the Protected Gain incurred with
respect to the Protected Property that is allocable to such Protected Partner
under the Partnership Agreement;

plus in the case of either (a) or (b), an amount equal to the aggregate federal,
state, and local income taxes payable by the Protected Partner as a result of
the receipt of any payment required under this Section 4.1.

For purposes of computing the amount of federal, state, and local income taxes
required to be paid by a Protected Partner, (i) any deduction for state income
taxes payable as a result thereof actually allowed in computing federal income
taxes shall be taken into account, and (ii) a Protected Partner’s tax liability
shall be computed using the highest federal, state and local marginal income tax
rates that would be applicable to such Protected Partner’s taxable income
(taking into account the character and type of such income or gain) for the year
with respect to which the taxes must be paid, without regard to any deductions,
losses or credits that may be available to such Protected Partner that would
reduce or offset its actual taxable income or actual tax liability if such
deductions, losses or credits could be utilized by the Protected Partner to
offset other income, gain or taxes of the Protected Partner, either in the
current year, in earlier years, or in later years.

4.2 Process for Determining Damages. If the Partnership has breached or violated
any of the covenants set forth in Article 2, Article 3 or Article 6 (or a
Protected Partner asserts that the Partnership has breached or violated any of
the covenants set forth in Article 2, Article 3 or Article 6), the Partnership
and the Protected Partner agree to negotiate in good faith to resolve any
disagreements regarding any such breach or violation and the amount of damages,
if any, payable to such Protected Partner under Section 4.1 (and to the extent
applicable, Section 4.4). If any such disagreement cannot be resolved by the
Partnership and such Protected Partner within sixty (60) days after the receipt
of notice from the Partnership of such breach and the amount of income to be
recognized by reason thereof, the Partnership and the Protected Partner shall
jointly retain a nationally recognized independent public accounting firm (an
“Accounting Firm”) to act as an arbitrator to resolve as expeditiously as
possible all points of any such disagreement (including, without limitation,
whether a breach of any of the covenants set forth Article 2, Article 3,
Article 6 or Article 7 has occurred and, if so, the amount of damages to which
the Protected Partner is entitled as a result thereof, determined as set forth
in Section 4.1 (and to the extent applicable, Section 4.4). All determinations
made by the Accounting Firm with respect to the resolution of any breach or
violation of any of the covenants set forth in Article 2, Article 3 or Article 6
and the amount of damages payable to the Protected Partner under Section 4.1
(and to the extent applicable, Section 4.4) shall be final, conclusive and
binding on the Partnership and the Protected Partner. The fees and expenses of
any Accounting Firm incurred in connection with any such determination shall be
shared equally by the Partnership and the Protected Partner; provided, however,
that (i) if the amount determined by the Accounting Firm to be owed by the
Partnership to the Protected Partner is more than ten percent (10%) higher than
the amount proposed by the Partnership to be owed to such Protected Partner
prior to the submission of the matter to the Accounting Firm, then all of the
fees and expenses of any Accounting Firm incurred in connection with any such
determination shall be paid by the Partnership, and (ii) if the amount
determined by the Accounting Firm to be owed by the Partnership to the Protected
Partner is more than ten percent (10%) less than the amount proposed by the

 

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Partnership to be owed to such Protected Partner prior to the submission of the
matter to the Accounting Firm, then all of the fees and expenses of any
Accounting Firm incurred in connection with any such determination shall be paid
by the Protected Partner.

4.3 Required Notices; Time for Payment. In the event that there has been a
breach of Article 2, Article 3 or Article 6, the Partnership shall provide to
the Protected Partner notice of the transaction or event giving rise to such
breach not later than at such time as the Partnership provides to the Protected
Partners the Schedule K-1’s to the Partnership’s federal income tax return as
required in accordance with Section 7.4 below. All payments required under this
Article 4 to any Protected Partner shall be made to such Protected Partner on or
before April 15 of the year following the year in which the gain recognition
event giving rise to such payment took place; provided that, if the Protected
Partner is required to make estimated tax payments that would include such gain,
the Partnership shall make a payment to the Protected Partner on or before the
due date for such estimated tax payment and such payment from the partnership
shall be in an amount that corresponds to the amount of the estimated tax being
paid by such Protected Partner at such time. In the event of a payment required
after the date required pursuant to this Section 4.3, interest shall accrue on
the aggregate amount required to be paid from such date to the date of actual
payment at a rate equal to the “prime rate” of interest, as published in the
Wall Street Journal (or if no longer published there, as announced by Citibank)
effective as of the date the payment is required to be made.

4.4 Additional Damages for Breaches of Section 2.2(b) and/or Section 3.3.
Notwithstanding any of the foregoing in this Article 4, in the event that the
Partnership should breach any of its covenants set forth in Section 2.2(b)
and/or Section 3.3 and a Protected Partner is required to make a payment in
respect of such indebtedness that it would not have had to make if such breach
had not occurred (an “Excess Payment”), then, in addition to the damages
provided for in the other Sections of this Article 4, the Partnership shall pay
to such Protected Partner an amount equal to the sum of (i) the Excess Payment
plus (ii) the aggregate federal, state and local income taxes, if any, computed
or set forth in Section 4.1, required to be paid by such Protected Partner by
reason of Section 4.4 becoming operative (for example, because the breach by the
Partnership and this Section 4.4 caused all or any portion of the indebtedness
in question no longer to be considered debt includible in basis by the affected
Protected Partner pursuant to Treasury Regulations § 1.752-2(a)), plus (iii) an
amount equal to the aggregate federal, state and local income taxes required to
be paid by the Protected Partner (computed as set forth in Section 4.1) as a
result of any payment required under this Section 4.4.

ARTICLE 5

SECTION 704(C) METHOD AND ALLOCATIONS

Notwithstanding any provision of the Partnership Agreement, the Partnership
shall use the “traditional method” under Regulations § 1.704-3(b) for purposes
of making all allocations under Section 704(c) of the Code (with no “curative
allocations” to offset the effects of the “ceiling rule,” including upon any
sale of a Protected Property).

ARTICLE 6

ALLOCATIONS OF LIABILITIES

PURSUANT TO REGULATIONS UNDER SECTION 752

6.1 Allocation Methods to be Followed. Except as provided in Section 6.2, all
tax returns prepared by the Partnership with respect to the Protected Period
(and to the extent arrangements have been entered into pursuant to Section 3.9,
for so long thereafter as such arrangements are in effect) that allocate
liabilities of the Partnership for purposes of Section 752 and the Treasury
Regulations thereunder

 

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shall treat each Partner Guarantor as being allocated for federal income tax
purposes an amount of recourse debt (in addition to any nonrecourse debt
otherwise allocable to such Partner Guarantor in accordance with the Partnership
Agreement and Treasury Regulations § 1.752-3 and any other recourse liabilities
allocable to such Partner Guarantor by reason of guarantees of indebtedness
entered into pursuant other agreements with the Partnership) pursuant to
Treasury Regulation § 1.752-2 equal to such Partner Guarantor’s Minimum
Liability Amount, as set forth on Schedule 3.1 hereto and as may be reduced
pursuant to the terms of this Agreement, and the Partnership and the REIT shall
not, during or with respect to the Protected Period, take any contrary or
inconsistent position in any federal or state income tax returns (including,
without limitation, information returns, such as Forms K-1, provided to partners
in the Partnership and returns of Subsidiaries of the Partnership) or any
dealings involving the Internal Revenue Service (including, without limitation,
any audit, administrative appeal or any judicial proceeding involving the income
tax returns of the Partnership or the tax treatment of any holder of partnership
interests the Partnership).

6.2 Exception to Required Allocation Method. Notwithstanding the provisions of
this Agreement, the Partnership shall not be required to make allocations of
Guaranteed Debt or other recourse debt of the Partnership to the Protected
Partners as set forth in this Agreement if and to the extent that the
Partnership determines in good faith that there may not be “substantial
authority” (within the meaning of Section 6662(d)(2)(B)(i)) of the Code for such
allocation; provided that the Partnership shall provide to each Protected
Partner (or in the event of their death or disability, their executor, guardian
or custodian, as applicable), notice of such determination and if, within
forty-five (45) days after the receipt thereof, the Partnership is provided an
opinion of a law firm recognized as expert in such matters or a nationally
recognized public accounting firm to the effect that there is “substantial
authority” (within the meaning of Section 6662(d)(2)(B)(i) of the Code) for such
allocations, the Partnership shall continue to make allocations of Guaranteed
Debt or other recourse debt of the Partnership to the Protected Partners as set
forth in this Agreement; provided further that if there shall have been a
judicial determination in a proceeding to which the Partnership is a party and
as to which the general partner(s) has(ve) been allowed to participate as and to
the extent contemplated in Article 7 to the effect that such allocations are not
correct, Section 6.1 shall not apply unless the matter is being appealed to an
applicable court of appeals, the requirements of Section 9.10 shall have been
satisfied in connection therewith, and the opinion described above from counsel
or accountants engaged by a Protected Partner shall have been provided, except
that such opinion shall be to the effect that it is more likely than not that
such allocations will be respected. In no event shall this Section 6.2 be
construed to relieve the Partnership for liability arising from a failure by the
Partnership to comply with one or more of the provisions of Article 3 of this
Agreement.

6.3 Cooperation in the Event of a Change. If a change in the Partnership’s
allocations of Guaranteed Debt or other recourse debt of the Partnership to the
Protected Partners is required by reason of circumstances described in
Section 6.2, the Partnership and its professional tax advisors shall cooperate
in good faith with each Protected Partner (or in the event of their death or
disability, their executor, guardian or custodian, as applicable) and their
professional tax advisors to develop alternative allocation arrangements and/or
other mechanisms that protect the federal income tax positions of the Protected
Partners in the manner contemplated by the allocations of Guaranteed Debt or
other recourse debt of the Partnership to the Protected Partners as set forth in
this Agreement.

ARTICLE 7

TAX PROCEEDINGS

7.1 Notice of Tax Audits. If any claim, demand, assessment (including a notice
of proposed assessment) or other assertion is made with respect to taxes against
the Protected Partners or the

 

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Partnership the calculation of which involves a matter covered in this Agreement
that could result in tax liability to a Protected Partner (“Tax Claim”) or if
the REIT or the Partnership receives any notice from any jurisdiction with
respect to any current or future audit, examination, investigation or other
proceeding (“Tax Proceeding”) involving the Protected Partners or the
Partnership or that otherwise could involve a matter covered in this Agreement
and could directly or indirectly affect the Protected Partners (adversely or
otherwise), then the REIT or the Partnership, as applicable shall promptly
notify the Protected Partners of such Tax Claim or Tax Proceeding.

7.2 Control of Tax Proceedings. The REIT, as the general partner of the
Partnership, shall have the right to control the defense, settlement or
compromise of any Proceeding or Tax Claim; provided, however, that the REIT
shall not consent to the entry of any judgment or enter into any settlement with
respect to such Tax Claim or Tax Proceeding that could result in tax liability
to a Protected Partner without the prior written consent of the Protected
Partners (unless, and only to the extent, that any taxes required to be paid by
the Protected Partners as a result thereof would be required to be reimbursed by
the Partnership and the REIT under Article 4 and the Partnership and the REIT
agree in connection with such settlement or consent, to make such required
payments); provided further that the Partnership shall keep the Protected
Partners duly informed of the progress thereof to the extent that such
Proceeding or Tax Claim could directly or indirectly affect (adversely or
otherwise) the Protected Partners and that the Protected Partners shall have the
right to review and comment on any and all submissions made to the to Internal
Revenue Service (“IRS”), a court, or other governmental body with respect to
such Tax Claim or Tax Proceeding and that the Partnership will consider such
comments in good faith.

7.3 Timing of Tax Returns; Periodic Tax Information. The Partnership shall cause
to be delivered to each Protected Partner, as soon as practicable each year, the
Schedules K-1 that the Partnership is required to deliver to such Protected
Partners with respect to the prior taxable year. In addition, the Partnership
agrees to provide to the Protected Partners, upon request, an estimate of the
taxable income expected to be allocable for a specified taxable year from the
Partnership to each Protected Partner and the entities that they control,
provided that such estimates shall not be required to be provided more
frequently than once each calendar quarter.

ARTICLE 8

AMENDMENT OF THIS AGREEMENT; WAIVER OF CERTAIN PROVISIONS;

APPROVAL OF CERTAIN TRANSACTIONS

8.1 Amendment. This Agreement may not be amended, directly or indirectly
(including by reason of a merger between the Partnership and another entity)
except by a written instrument signed by both the REIT, as general partner of
the Partnership, and each of the Protected Partners.

8.2 Waiver. Notwithstanding the foregoing, upon written request by the
Partnership, each Protected Partner, in its sole discretion, may waive the
payment of any damages that is otherwise payable to such Protected Partner
pursuant to Article 4 hereof. Such a waiver shall be effective only if obtained
in writing from the affected Protected Partner.

ARTICLE 9

MISCELLANEOUS

9.1 Additional Actions and Documents. Each of the parties hereto hereby agrees
to take or cause to be taken such further actions, to execute, deliver, and file
or cause to be executed, delivered and filed such further documents, and will
obtain such consents, as may be necessary or as may be reasonably requested in
order to fully effectuate the purposes, terms and conditions of this Agreement.

 

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9.2 Assignment. No party hereto shall assign its or his rights or obligations
under this Agreement, in whole or in part, except by operation of law, without
the prior written consent of the other parties hereto, and any such assignment
contrary to the terms hereof shall be null and void and of no force and effect.

9.3 Successors and Assigns. This Agreement shall be binding upon and shall inure
to the benefit of the Protected Partners and their respective successors and
permitted assigns, whether so expressed or not. This Agreement shall be binding
upon the REIT, the Partnership, and any entity that is a direct or indirect
successor, whether by merger, transfer, spin-off or otherwise, to all or
substantially all of the assets of either the REIT or the Partnership (or any
prior successor thereto as set forth in the preceding portion of this sentence),
provided that none of the foregoing shall result in the release of liability of
the REIT and the Partnership hereunder. The REIT and the Partnership covenant
with and for the benefit of the Protected Partners not to undertake any transfer
of all or substantially all of the assets of either entity (whether by merger,
transfer, spin-off or otherwise) unless the transferee has acknowledged in
writing and agreed in writing to be bound by this Agreement, provided that the
foregoing shall not be deemed to permit any transaction otherwise prohibited by
this Agreement.

9.4 Modification; Waiver. No failure or delay on the part of any party hereto in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the parties hereunder are cumulative
and not exclusive of any rights or remedies which they would otherwise have. No
modification or waiver of any provision of this Agreement, nor consent to any
departure by any party therefrom, shall in any event be effective unless the
same shall be in writing, and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which given. No notice to
or demand on any party in any case shall entitle such party to any other or
further notice or demand in similar or other circumstances.

9.5 Representations and Warranties Regarding Authority; Noncontravention.

(a) Representations and Warranties of the REIT and the Partnership. Each of the
REIT and the Partnership has the requisite corporate or other (as the case may
be) power and authority to enter into this Agreement and to perform its
respective obligations hereunder. The execution and delivery of this Agreement
by each of the REIT and the Partnership and the performance of each of its
respective obligations hereunder have been duly authorized by all necessary
trust, partnership, or other (as the case may be) action on the part of each of
the REIT and the Partnership. This Agreement has been duly executed and
delivered by each of the REIT and the Partnership and constitutes a valid and
binding obligation of each of the REIT and the Partnership, enforceable against
each of the REIT and the Partnership in accordance with its terms, except as
such enforcement may be limited by (i) applicable bankruptcy or insolvency laws
(or other laws affecting creditors’ rights generally) or (ii) general principles
of equity. The execution and delivery of this Agreement by each of the REIT and
the Partnership do not, and the performance by each of its respective
obligations hereunder will not, conflict with, or result in any violation of
(x) the Partnership Agreement or (y) any other agreement applicable to the REIT
and/or the Partnership, other than, in the case of clause (y), any such
conflicts or violations that would not materially adversely affect the
performance by the Partnership and the REIT of their obligations hereunder.

(b) Representations and Warranties of the Protected Partners. Each of the
Protected Partners has the requisite corporate or other (as the case may be)
power and authority to enter into this Agreement and to perform its respective
obligations hereunder. The execution and delivery of this

 

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Agreement by each of the Protected Partners and the performance of each of its
respective obligations hereunder have been duly authorized by all necessary
trust, partnership, or other (as the case may be) action on the part of each of
the Protected Partners. This Agreement has been duly executed and delivered by
each of the Protected Partners and constitutes a valid and binding obligation of
each of the Protected Partners.

9.6 Captions. The Article and Section headings contained in this Agreement are
inserted for convenience of reference only, shall not be deemed to be a part of
this Agreement for any purpose, and shall not in any way define or affect the
meaning, construction or scope of any of the provisions hereof.

9.7 Notices. All notices and other communications given or made pursuant hereto
shall be in writing and shall be deemed to have been duly given or made as of
the date delivered, mailed or transmitted, and shall be effective upon receipt,
if delivered personally, mailed by registered or certified mail (postage
prepaid, return receipt requested) to the parties at the following addresses (or
at such other address for a party as shall be specified by like changes of
address) or sent by electronic transmission to the telecopier number specified
below:

 

  (i) if to the Partnership or the REIT, to:

The GC Net Lease REIT, Inc.

Suite 3321

2121 Rosecrans Avenue

El Segundo, California 90245

Attention: Kevin Shields

Facsimile: (310) 606-5910

 

  (ii) if to a Protected Partner, to the address on file with the Partnership.

Each party may designate by notice in writing a new address to which any notice,
demand, request or communication may thereafter be so given, served or sent.
Each notice, demand, request, or communication which shall be hand delivered,
sent, mailed, telecopied or telexed in the manner described above, or which
shall be delivered to a telegraph company, shall be deemed sufficiently given,
served, sent, received or delivered for all purposes at such time as it is
delivered to the addressee (with the return receipt, the delivery receipt, or
(with respect to a telecopy or telex) the answerback being deemed conclusive,
but not exclusive, evidence of such delivery) or at such time as delivery is
refused by the addressee upon presentation.

9.8 Counterparts. This Agreement may be executed in two or more counterparts,
all of which shall be considered one and the same agreement and each of which
shall be deemed an original.

9.9 Governing Law. The interpretation and construction of this Agreement, and
all matters relating thereto, shall be governed by the laws of the State of
California, without regard to the choice of law provisions thereof.

9.10 Consent to Jurisdiction; Enforceability.

(a) This Agreement and the duties and obligations of the parties hereunder shall
be enforceable against any of the parties in the courts of the State of
California. For such purpose, each party hereto hereby irrevocably submits to
the nonexclusive jurisdiction of such courts and agrees that all claims in
respect of this Agreement may be heard and determined in any of such courts.

 

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(b) Each party hereto hereby irrevocably agrees that a final judgment of any of
the courts specified above in any action or proceeding relating to this
Agreement shall be conclusive and may be enforced in other jurisdictions by suit
on the judgment or in any other manner provided by law.

9.11 Severability. If any part of any provision of this Agreement shall be
invalid or unenforceable in any respect, such part shall be ineffective to the
extent of such invalidity or unenforceability only, without in any way affecting
the remaining parts of such provision or the remaining provisions of this
Agreement.

9.12 Costs of Disputes. Except as otherwise expressly set forth in this
Agreement, the nonprevailing party in any dispute arising hereunder shall bear
and pay the costs and expenses (including, without limitation, reasonable
attorneys’ fees and expenses) incurred by the prevailing party or parties in
connection with resolving such dispute.

[signature pages to follow]

 

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IN WITNESS WHEREOF, each of the parties hereto has executed and delivered this
Agreement, or caused the Agreement to be duly executed and delivered on its
behalf, as of the date first set forth above.

 

THE REIT: The GC Net Lease REIT, Inc. By:   /s/ Kevin A. Shields   Kevin A.
Shields, President THE PARTNERSHIP:
The GC Net Lease REIT Operating Partnership, L.P. By:   The GC Net Lease REIT,
Inc., Its General Partner By:   /s/ Kevin A. Shields   Kevin A. Shields,
President THE CONTRIBUTORS: Will Partners, LLC By:   Will Acquisitions, Inc.,
Its Managing Member By:   /s/ Kevin A. Shields   Kevin A. Shields, President
Will Partners Investor 1, LLC By:   Will Partners Member 1, LLC, Its Sole Member
By:   /s/ LaVerne Wilkening   LaVerne Wilkening, Member By:   /s/ Mary Lou
Wilkening   Mary Lou Wilkening, Member Will Partners Investor 2, LLC By:  
PLM&B, Inc., Its Sole Member By:   /s/ LaVerne Wilkening   LaVerne Wilkening,
President

 

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Will Partners Investor 3, LLC By:   Westridge Partners, Its Sole Member By:  
MNK Corp. By:   /s/ David Gellerman   David Gellerman, President THE PROTECTED
PARTNERS: Will Partners, LLC By:   Will Acquisitions, Inc., Its Managing Member
By:   /s/ Kevin A. Shields   Kevin A. Shields, President Will Partners Member 1,
LLC By:   /s/ LaVerne Wilkening   LaVerne Wilkening, Member By:   /s/ Mary Lou
Wilkening   Mary Lou Wilkening, Member PLM&B, Inc. By:   /s/ LaVerne Wilkening  
LaVerne Wilkening, President Westridge Partners By:   MNK Corp. By:   /s/ David
Gellerman   David Gellerman, President

 

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