Exhibit 10.12

 

 

AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT

 

OF

 

HCP DR CALIFORNIA II, LLC,

 

a Delaware limited liability company

 

Dated as of June 1, 2014

 

 

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TABLE OF CONTENTS

 

 

Page

 

 

ARTICLE I DEFINED TERMS

1

 

 

 

ARTICLE II ORGANIZATIONAL MATTERS

20

 

 

 

2.1

Formation

20

2.2

Name

21

2.3

Registered Office and Agent; Principal Place of Business; Other Places of
Business

21

2.4

Power of Attorney

21

2.5

Term

22

 

 

 

ARTICLE III PURPOSE

22

 

 

 

3.1

Purpose and Business

22

3.2

Powers

23

3.3

Specified Purposes

23

3.4

Representations and Warranties by the Members; Disclaimer of Certain
Representations

24

 

 

 

ARTICLE IV CAPITAL CONTRIBUTIONS

25

 

 

 

4.1

Capital Contributions of the Initial Members

25

4.2

Additional Members

25

4.3

Loans and Incurrence and Payment of Debt

26

4.4

Additional Funding and Capital Contributions

26

4.5

No Interest; No Return

27

 

 

 

ARTICLE V DISTRIBUTIONS

27

 

 

 

5.1

Requirement and Characterization of Distributions

27

5.2

Distributions in Kind

28

5.3

Amounts Withheld

28

5.4

Distributions Upon Liquidation

29

5.5

Restricted Distributions

29

5.6

Distributions of Proceeds from Sale of Properties and Refinancing Debt

29

5.7

Distributions Following Redemption

31

5.8

Offsets

31

5.9

Special Managing Member Distribution Calculation

31

 

 

 

ARTICLE VI ALLOCATIONS

32

 

 

 

6.1

Timing and Amount of Allocations of Net Income and Net Loss

32

6.2

General Allocations

32

6.3

Additional Allocation Provisions

34

6.4

Tax Allocations

36

6.5

Other Provisions

36

 

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6.6

Amendments to Allocation to Reflect Issuance of Additional Membership Interests

36

 

 

 

ARTICLE VII MANAGEMENT AND OPERATION OF BUSINESS

37

 

 

 

7.1

Management

37

7.2

Certificate of Formation

41

7.3

Restrictions on Managing Member’s Authority

41

7.4

Compensation of the Managing Member

47

7.5

Other Business of Managing Member

48

7.6

Contracts with Affiliates

48

7.7

Indemnification

49

7.8

Liability of the Managing Member

50

7.9

Other Matters Concerning the Managing Member

51

7.10

Title to Company Assets

52

7.11

Reliance by Third Parties

52

 

 

 

ARTICLE VIII RIGHTS AND OBLIGATIONS OF MEMBERS

53

 

 

 

8.1

Limitation of Liability

53

8.2

Managing of Business

53

8.3

Outside Activities of Members

53

8.4

Return of Capital

54

8.5

Rights of Non-Managing Members Relating to the Company

54

8.6

Redemption Rights

55

 

 

 

ARTICLE IX BOOKS, RECORDS, ACCOUNTING AND REPORTS

57

 

 

 

9.1

Records and Accounting

57

9.2

Fiscal Year

58

9.3

Reports

58

9.4

Cooperation Regarding Tax Matters Relating to the Contributed Property

58

 

 

 

ARTICLE X TAX MATTERS

59

 

 

 

10.1

Preparation of Tax Returns

59

10.2

Tax Elections

59

10.3

Tax Matters Partner

60

10.4

Organizational Expenses

60

 

 

 

ARTICLE XI TRANSFERS AND WITHDRAWALS

60

 

 

 

11.1

Transfer

60

11.2

Transfer of Managing Member’s Membership Interest

61

11.3

Non-Managing Members’ Rights to Transfer

62

11.4

Substituted Members

63

11.5

Assignees

64

11.6

General Provisions

64

 

 

 

ARTICLE XII ADMISSION OF MEMBERS

66

 

 

 

12.1

Admission of Initial Non-Managing Members

66

12.2

Admission of Successor Managing Member

66

 

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12.3

Admission of Additional Members

67

12.4

Amendment of Agreement and Certificate

67

12.5

Limitation on Admission of Members

68

 

 

 

ARTICLE XIII DISSOLUTION, LIQUIDATION AND TERMINATION

68

 

 

 

13.1

Dissolution

68

13.2

Redemption of Non-Managing Member Units

69

13.3

Winding Up

69

13.4

Deemed Contribution and Distribution

70

13.5

Rights of Members

71

13.6

Notice of Dissolution

71

13.7

Cancellation of Certificate

71

13.8

Reasonable Time for Winding-Up

71

13.9

Liability of Liquidator

71

 

 

 

ARTICLE XIV PROCEDURES FOR ACTIONS AND CONSENTS OF MEMBERS; AMENDMENTS; MEETINGS

72

 

 

 

14.1

Procedures for Actions and Consents of Members

72

14.2

Amendments

72

14.3

Meetings of the Members

72

 

 

 

ARTICLE XV GENERAL PROVISIONS

73

 

 

 

15.1

Addresses and Notice

73

15.2

Titles and Captions

73

15.3

Pronouns and Plurals

73

15.4

Further Action

74

15.5

Binding Effect

74

15.6

Creditors

74

15.7

Waiver

74

15.8

Counterparts

74

15.9

Applicable Law

74

15.10

Entire Agreement

74

15.11

Invalidity of Provisions

75

15.12

No Partition

75

15.13

Non-Managing Member Representative

75

15.14

Uniform Commercial Code Article 8 (Opt-In)

75

 

Exhibit A

Member Information

A-1

Exhibit B

Notice of Redemption

B-1

Exhibit C

Form of Joinder Agreement

C-1

Exhibit D

Example of Certain Calculations Pursuant to Section 5.6.C

D-1

Exhibit E

Form of Bottom Dollar Guarantee

E-1

Exhibit F

Managing Member Note

F-1

Exhibit G

Registration Rights Agreement

G-1

 

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AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
HCP DR CALIFORNIA II, LLC

 

THIS LIMITED LIABILITY COMPANY AGREEMENT is made and entered into as of June 1,
2014, by and among HCP, Inc., a Maryland corporation (the “HCP”), and OakmontSL
of Chino Hills L.P., a California limited partnership (the “Contributor”), and
the Persons whose names are set forth on Exhibit A attached hereto as
“Non-Managing Members,” for the purpose of forming HCP DR California II, LLC, a
Delaware limited liability company (the “Company”).

 

RECITALS

 

A.                                    Managing Member, the Company, Oakmont
Senior Living LLC, a California limited liability company (“Oakmont”), and the
Contributor, among others, entered into that certain Contribution and Purchase
Agreement and Escrow Instructions dated as of June 1, 2014 (as amended, the
“Contribution Agreement”), providing, among other things, for the contribution
of certain assets to, and the acquisition of certain interests in, the Company;

 

B.                                    Contributor may, in accordance with the
terms of the limited partnership agreement of Contributor, and subject to the
terms of the Contribution Agreement, concurrent with the Effective Date (as
defined herein) distribute and assign to its constituent partners or certain
affiliates thereof, its right to receive Non-Managing Member Units pursuant to
the terms of Section 4 hereof;

 

C.                                    It is a condition to the closing of the
transactions contemplated by the Contribution Agreement that the parties hereto
enter into this Agreement (as defined herein) and the parties desire to enter
into this Agreement in accordance with the Act (as defined herein);

 

AGREEMENT

 

NOW THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements contained herein and for other good and valuable consideration, the
receipt and adequacy 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.

 

“Accounting Firm” has the meaning set forth in Section 7.3.H hereof.

 

“Act” means the Delaware Limited Liability Company Act, as it may be amended
from time to time, and any successor to such statute.

 

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

 

“actual cost of administrative services” has the meaning set forth in
Section 7.4(C) hereof.

 

“actual cost of goods and materials” has the meaning set forth in
Section 7.4(C) hereof.

 

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

 

“Additional Member” means a Person admitted to the Company as a Member pursuant
to Section 4.2 hereof.

 

“Adjusted Capital Account Deficit” means, with respect to any Member, the
deficit balance, if any, in such Member’s Capital Account as of the end of the
relevant Fiscal Year, after giving effect to the following adjustments:

 

(a)                                 decrease such deficit by any amounts that
such Member is obligated to restore pursuant to this Agreement or by operation
of law upon liquidation of such Member’s Membership Interest or is deemed to be
obligated to restore pursuant to the penultimate sentence of each of Regulations
Sections 1.704-2(g)(1) and 1.704-2(i)(5); and

 

(b)                                 increase such deficit by the items described
in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6).

 

The foregoing definition of “Adjusted Capital Account Deficit” is intended to
comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall
be interpreted consistently therewith.

 

“Adjustment Factor” means 1.0; provided, however, that in the event that:
(a) the Managing Member (i) declares or pays a dividend on its outstanding REIT
Shares in REIT Shares or makes a distribution to all holders of its outstanding
REIT Shares in REIT Shares, (ii) splits or subdivides its outstanding REIT
Shares or (iii) effects a reverse stock 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 in effect
immediately prior to such adjustment by a fraction, (1) 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
(2) the denominator of which shall be the actual 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 not
occurred as of such time); (b) the Managing Member 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

 

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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 plus the maximum
number of REIT Shares purchasable under such Distributed Rights and (ii) 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 before exercise thereof, 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 fractions; or (c) the
Managing Member 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 (a) or
(b) above), which evidences of indebtedness or assets relate to assets not
received by the Managing Member pursuant to a pro rata distribution by the
Company, 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 shareholders
entitled to receive such distribution by a fraction, (i) the numerator shall be
such Value of a REIT Share on the date fixed for such determination and (ii) the
denominator shall be the Value of a REIT Share on the dated fixed for such
determination less the then fair market value (as reasonably determined by the
Managing Member) 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.

 

“Affiliate” means, with respect to any Person, any Person directly or indirectly
Controlling or Controlled by or under common Control with such Person.

 

“Aggregate Sharing Amount” means, with respect to any taxable disposition of the
Contributed Property or Successor Properties, if any, an amount equal to the
excess, if any, of (i) the Property Appreciation with respect to all Contributed
Property or Successor Property being sold or previously sold by the Company,
over (ii) the Unit Appreciation with respect to all Contributed Property or
Successor Properties being sold or previously sold by the Company.

 

“Agreement” means this Amended and Restated Limited Liability Company Agreement
of HCP DR California II, LLC, as it may be amended, supplemented or restated
from time to time.

 

“Appraisal” means, with respect to any assets, the written opinion of an
independent third party experienced in the valuation of similar assets in the
general location of the property being appraised, selected by the Managing
Member in good faith. Such opinion may be in the form of an opinion by such
independent third party that the value for such property or asset as set by the
Managing Member is fair, from a financial point of view, to the Company.

 

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“Assignee” means a Person to whom one or more LLC Units have been Transferred in
a manner permitted under this Agreement, but who has not become a Substituted
Member, 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:

 

(a)                                 the sum, without duplication, of:

 

(i)                                     the Company’s Net Income or Net Loss (as
the case may be) for such period,

 

(ii)                                  Depreciation and all other noncash charges
to the extent deducted in determining Net Income or Net Loss for such period,

 

(iii)                               the amount of any reduction in reserves of
the Company (including, without limitation, reductions resulting because the
Managing Member determines such amounts are no longer necessary), and

 

(iv)                              all other cash received (including, but not
limited to amounts previously accrued as Net Income and amounts of deferred
income but excluding any net amounts borrowed by the Company for such period)
that was not included in determining Net Income or Net Loss for such period;

 

(b)                                 less the sum, without duplication, of:

 

(i)                                     all principal debt payments made during
such period by the Company,

 

(ii)                                  capital expenditures made by the Company
during such period,

 

(iii)                               all other expenditures and payments
(including any loans made by the Company pursuant to the terms of this
Agreement) not deducted in determining Net Income or Net Loss for such period
pursuant to the foregoing clause (a)(i) (including amounts paid in respect of
expenses previously accrued),

 

(iv)                              any amount included in determining Net Income
or Net Loss for such period pursuant to the foregoing clause (a)(i) that was not
received by the Company during such period, and

 

(v)                                 the amount of any increase in reserves
(including, without limitation, working capital reserves) established during
such period that the Managing Member determines are necessary or appropriate in
its sole and absolute discretion.

 

Notwithstanding the foregoing, Available Cash shall not include (i) any cash
received or reductions in reserves, or take into account any disbursements made,
or reserves established, after dissolution and the commencement of the
liquidation and winding up of the Company, (ii) any Capital Contributions,
whenever received, (iii) any Disposition Proceeds or (iii) any Refinancing Debt
Proceeds.

 

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“Bankruptcy Law” means Title 11, U.S. Code or any similar federal or state law
for the relief of debtors.

 

“Beneficial Ownership” means ownership of REIT Shares by a Person who is or
would be treated as an owner of such REIT Shares either actually or
constructively through the application of Code Section 544, as modified by Code
Section 856(h)(1)(B). The terms “Beneficially Own,” “Beneficially Owned,”
“Beneficially Owns” and “Beneficial Owner” shall have the correlative meanings.

 

“Bottom Dollar Guarantee” has the meaning set forth in Section 7.3.E.(4).

 

“Built-in Gain” means the excess of (i) the gross fair market value of the
Contributed Property or Successor Properties) over (ii) the adjusted tax basis
of the Contributed Property or Successor Property (as the case may be) for
federal income tax purposes, as determined as of the Effective Date and as
reduced from time to time in accordance with applicable provisions of the Code
and Regulations.

 

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

 

“Calendar Quarter” means each of the following periods of each year: January 1
through and including March 31; April 1 through and including June 30; July 1
through and including September 30; and October 1 through and including
December 31.

 

“Call Notice” means a written notice to the Non-Managing Members informing them
of the Managing Member’s election to call their Non-Managing Member Units
pursuant to Section 13.2 hereof.

 

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

 

(a)                                 To each Member’s Capital Account, there
shall be added such Member’s Capital Contributions, such Member’s allocable
share of Net Income and any items of income or gain specially allocated pursuant
to Section 6.3 hereof, and the amount of any Company liabilities assumed by such
Member or that are secured by any property distributed to such Member.

 

(b)                                 From each Member’s Capital Account, there
shall be subtracted the amount of cash and the Gross Asset Value of any property
distributed to such Member pursuant to any provision of this Agreement, such
Member’s allocable share of Net Loss and any items of loss or deductions
specially allocated pursuant to Section 6.3 hereof, and the amount of any
liabilities of such Member assumed by the Company or that are secured by any
property contributed by such Member to the Company.

 

(c)                                  In the event any interest in the Company 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.

 

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

 

(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 Managing Member 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 Managing Member may
make such modification provided that such modification will not have a material
effect on the amounts distributable to any Member without such Member’s Consent.
The Managing Member also shall (i) make any adjustments that are necessary or
appropriate to maintain equality between the Capital Accounts of the Members and
the amount of Company capital reflected on the Company’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 Sections 1.704-1(b) or 1.704-2 provided that such
modification will not have a material effect on the amounts distributable to any
Member without such Member’s Consent.

 

“Capital Contribution” means, with respect to any Member, the amount of money
and the initial Gross Asset Value of any property or other assets (including,
without limitation, the Contributed Property) that such Member contributes to
the Company pursuant to Sections 4.1, 4.2 or 4.4 hereof and, with respect to the
Initial Non-Managing Members, the Contribution Agreement.

 

“Cash Amount” means an amount of cash per LLC Unit equal to the product of
(i) the Value of a REIT Share and (ii) the REIT Shares Amount determined as of
the applicable Valuation Date.

 

“Certificate” means the Certificate of Formation of the Company filed in the
office of the Secretary of State of the State of Delaware, as amended from time
to time in accordance with the terms hereof and the Act.

 

“Charter” means the Articles of Incorporation of the Managing Member, as
amended, supplemented or restated from time to time.

 

“Closing Price” means the closing price of a REIT Share on the New York Stock
Exchange.

 

“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.

 

“Company” has the meaning set forth in the introductory paragraph of this
Agreement, and any successor thereto.

 

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

 

“Consent” means the consent to, approval of, or vote on a proposed action by a
Member given in accordance with Article XIV hereof or otherwise as provided in
this Agreement.

 

“Consent of the Non-Managing Members” means the Consent of a Majority in
Interest of the Non-Managing Members, which Consent shall be obtained prior to
the taking of any action for which it is required by this Agreement and, except
as otherwise provided in this Agreement, may be given or withheld by a Majority
in Interest of the Non-Managing Members, in their reasonable discretion.

 

“Constructive Ownership” means ownership of REIT Shares, or any other interest
in an entity, by a Person who is or would be treated as an owner thereof either
actually or constructively through the application of Section 318 of the Code,
as modified by Section 856(d)(5) of the Code. The terms “Constructively Own,”
“Constructively Owned,” “Constructively Owns” and “Constructive Owner” shall
have the correlative meanings.

 

“Contributed Property” means the “Chino Hills Property,” as that term is defined
in the Contribution Agreement. In no event shall Contributed Property include
any properties contributed by the Managing Member.

 

“Contribution Agreement” shall have the meaning given to such term in Recital A
above.

 

“Contributor” shall have the meaning set forth in the introductory paragraph
hereof.

 

“Contributor’s Contribution Liability” means with respect to the Contributor,
any amounts owing or otherwise alleged to be owing by the Contributor to the
Company or the Managing Member pursuant to the Contribution Agreement, including
any such amounts for which the Contributor or Oakmont is otherwise liable
pursuant and subject to the provisions of Article XII (Indemnification) thereof.

 

“Contributor’s Partners” means the constituent partners of Contributor (or any
Affiliate of Contributor or the constituent partners or members of such
Affiliate) who received Non-Managing Member Units pursuant to the Contribution
Agreement and the terms of Section 4.1 and Section 12.1 hereof.

 

“Control” means, when used with respect to any Person, the possession directly
or indirectly, of the power to direct or cause the direction of the management
and policies of that Person, whether through the ownership of voting securities,
by contract or otherwise, and the terms “controlling” and “controlled” have
correlative meanings.

 

“Custodian” means any receiver, trustee, assignee, liquidator or other similar
official under any Bankruptcy Law.

 

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“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 GAAP, should be capitalized.

 

“Depreciation” means, for each Fiscal 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 Managing
Member.

 

“Disposition Proceeds” means (i) the net proceeds (i.e., after the repayment of
any Debt and the payment of all costs related to the disposition) received by
the Company upon the taxable disposition of the Contributed Property or
Successor Property by the Company, or (ii) the net proceeds (i.e., after the
repayment of any Debt and the payment of all costs related to the disposition)
received by a Welfare Structure and distributed to the Company upon the taxable
disposition of the Contributed Property or Successor Property by such Welfare
Structure.

 

“Distributed Right” shall have the meaning set forth within the definition of
“Adjustment Factor.”

 

“Effective Date” means June 1, 2014.

 

“Effective Price” means $42.11.

 

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

 

“Excess LLC Units” means any LLC Units held by a Non-Managing Member to the
extent that, if such LLC Units were exchanged for the REIT Shares Amount
pursuant to Section 8.6 hereof, such Non-Managing Member would Beneficially Own
or Constructively Own REIT Shares in excess of the Ownership Limit or otherwise
in violation of the Charter.

 

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

 

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

 

“flow through entity” has the meaning set forth in Section 11.6.E(9) hereof.

 

“GAAP” means generally accepted accounting principles set forth in the opinions
and pronouncements of the Accounting Principles Board and the American Institute
of Certified Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the accounting profession), or in such
other statements by such entity as may be in general use by significant segments
of the United States accounting profession, which are applicable to the facts
and circumstances on the date of determination.

 

“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 Member
to the Company shall be its gross fair market value, as agreed to by such Member
and the Managing Member, and set forth on Exhibit A with respect to that Member
or as otherwise set forth in the books and records of the Company; provided,
however, that the initial Gross Asset Value of any asset contributed by the
Managing Member or an Affiliate of the Managing Member to the Company shall be
its gross fair market value as reasonably and in good faith determined by the
Managing Member.

 

(b)           The Gross Asset Values of all Company 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 Managing Member using such
reasonable and good faith method of valuation as it may adopt, as of the
following times:

 

(i)            the acquisition of an additional interest in the Company (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 Managing Member pursuant to Section 4.4 hereof) by a
new or existing Member in exchange for more than a de minimis Capital
Contribution, if the Managing Member reasonably determines that such adjustment
is necessary or appropriate to reflect the relative economic interests of the
Members in the Company;

 

(ii)           the distribution by the Company to a Member of more than a de
minimis amount of Company property, if the Managing Member reasonably determines
that such adjustment is necessary or appropriate to reflect the relative
economic interests of the Members in the Company;

 

(iii)          in connection with the grant of an interest in the Company (other
than a de minimus interest) as consideration for the performance of services to
or for the benefit of the Company by an existing Member acting in a capacity as
a Member of the Company or by a new Member acting in a capacity as a Member of
the Company or in anticipation of becoming a Member of the Company if the
Managing Member reasonably determines that such

 

9

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adjustment is necessary or appropriate to reflect the relative economic
interests of the Members in the Company;

 

(iv)          the liquidation of the Company within the meaning of Regulations
Section 1.704-1(b)(2)(ii)(g); and

 

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

 

(c)           The Gross Asset Value of any Company asset distributed to a Member
shall be the gross fair market value of such asset on the date of distribution
as determined by the distributee and the Managing Member, provided that, if the
distributee is the Managing Member or if the distributee and the Managing Member
cannot agree on such a determination, such gross fair market value shall be
determined by Appraisal.

 

(d)           At the election of the Managing Member, the Gross Asset Values of
Company 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 Managing
Member 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 Company 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 Loss.

 

“HCP” shall have the meaning set forth in the introductory paragraph hereof.

 

“Incapacity” or “Incapacitated” means, (i) as to any Member who is an
individual, death, total physical disability or entry by a court of competent
jurisdiction adjudicating such Member incompetent to manage his or her person or
his or her estate; (ii) as to any Member that is a corporation or limited
liability company, the filing of a certificate of dissolution, or its
equivalent, for the corporation or limited liability company or the revocation
of its charter; (iii) as to any Member that is a partnership, the dissolution
and commencement of winding up of the partnership; (iv) as to any Member that is
an estate, the distribution by the fiduciary of the estate’s entire interest in
the Company; (v) as to any trustee of a trust that is a Member, the termination
of the trust (but not the substitution of a new trustee); or (vi) as to any
Member, the bankruptcy of such Member. For purposes of this definition,
bankruptcy of a Member shall be deemed to have occurred when (a) the Member
commences a voluntary proceeding seeking liquidation, reorganization or other
relief of or against such Member under any bankruptcy, insolvency or other
similar law now or hereafter in effect, (b) the Member is adjudged as bankrupt
or insolvent, or a final and non-appealable order for relief under any
bankruptcy, insolvency or similar law now or hereafter in effect has been
entered against the Member, (c) the Member executes and delivers a general
assignment for the benefit of the Member’s

 

10

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creditors, (d) the Member files an answer or other pleading admitting or failing
to contest the material allegations of a petition filed against the Member in
any proceeding of the nature described in clause (b) above, (e) the Member
seeks, consents to or acquiesces in the appointment of a trustee, receiver or
liquidator for the Member or for all or any substantial part of the Member’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 Member’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.

 

“Indemnitee” means (i) any Person made a party to a proceeding by reason of its
status as (a) a Non-Managing Member or a Non-Managing Member Representative,
(b) the Managing Member or (c) a director of the Managing Member or an officer
or employee of the Company or the Managing Member and (ii) such other Persons
(including Affiliates of the Managing Member or the Company) as the Managing
Member may designate from time to time (whether before or after the event giving
rise to potential liability), in its sole and absolute discretion.

 

“Initial Managing Member Loan Amount” means with respect to the Managing Member
Loan pursuant to Section 4.3.B, the initial principal amount set forth in
Section 4.3.B.

 

“Initial Non-Managing Members” means the Non-Managing Members (or successors in
interest thereof) who acquired their Non-Managing Member Units in exchange for
the Contributed Property on the Effective Date.

 

“IRS” means the Internal Revenue Service.

 

“Joinder Agreement” means a Joinder Agreement in substantially the form attached
hereto as Exhibit C.

 

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

 

“Liquidator” has the meaning set forth in Section 13.3.A hereof.

 

“LLC Distribution Date” means the date established by the Managing Member for
the payment of actual distributions declared by the Managing Member pursuant to
Sections 5.1 and 5.2, which date shall be the same as the date established by
the Managing Member for the payment of dividends to holders of REIT Shares.

 

“LLC Record Date” means the record date established by the Managing Member for
the distribution of Available Cash pursuant to Section 5.1 hereof, which record
date shall be the same as the record date established by the Managing Member for
a dividend to holders of REIT Shares.

 

“LLC Units” means the Managing Member Units and the Non-Managing Member Units,
collectively.

 

11

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“Loan-to-Value Ratio” shall mean the ratio, as of the date of incurrence of any
Debt incurred by the Company, in which the numerator is equal to the outstanding
principal balance of all Debt of the Company and the denominator is equal to the
fair market value of the Contributed Property or Successor Property, as
reasonably and in good faith determined by the Managing Member.

 

“Majority in Interest of the Non-Managing Members” means at any time those
Non-Managing Members (other than the Managing Member or any of its Affiliates in
their capacity as a holder of Non-Managing Member Units) holding in the
aggregate more than 50% of the then aggregate outstanding Non-Managing Member
Units (other than those held by the Managing Member or any of its Affiliates).

 

“Majority of Remaining Members” means Non-Managing Members owning a majority of
the Non-Managing Member Units held by Non-Managing Members.

 

“Make-Whole Payment” has the meaning set forth in Section 7.3.G.

 

“Managing Member” means the managing member of the Company, which shall be
initially HCP.

 

“Managing Member Guarantee” has the meaning set forth in Section 11.2.A.

 

“Managing Member Loan” has the meaning set forth in Section 4.3.B.

 

“Managing Member Loan Amount” means, with respect to the Managing Member Loan,
or any permitted Replacement Indebtedness pursuant to Section 7.3.E(3), the
Initial Managing Member Loan Amount.

 

“Managing Member Note” has the meaning set forth in Section 4.3.B.

 

“Managing Member Shortfall” has the meaning set forth in Section 5.1.A(2).

 

“Managing Member Unit” means a single unit of Membership Interest of the
Managing Member issued pursuant to Article IV hereof, as the same may be
modified from time to time as provided in this Agreement. The ownership of
Managing Member Units may (but need not, in the sole and absolute discretion of
the Managing Member) be evidenced in the form of a certificate for such Managing
Member Units.

 

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

 

“Member Nonrecourse Debt” has the meaning set forth in Regulations
Section 1.704-2(b)(4) for the phrase “partner nonrecourse debt.”

 

“Member Nonrecourse Deductions” has the meaning set forth in Regulations
Section 1.704-2(i)(2) for the phrase “partner nonrecourse deductions,” and the
amount of Member

 

12

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Nonrecourse Deductions with respect to a Member Nonrecourse Debt for a Fiscal
Year shall be determined in accordance with the rules of Regulations Sections
1.704-2(i)(1) and 1.704-2(i)(2).

 

“Members” means the Persons owning Membership Interests, including the Managing
Member, Non-Managing Members and any Additional and Substitute Members, named as
Members in Exhibit A attached hereto, which Exhibit A may be amended from time
to time pursuant to the terms and conditions of this Agreement.

 

“Membership Interest” means an ownership interest in the Company, and includes
any and all benefits to which the holder of such Membership 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 Membership
Interest may be expressed as a number of Managing Member Units or Non-Managing
Member Units, as applicable.

 

“Net Income” or “Net Loss” means, for each Fiscal Year of the Company, an amount
equal to the Company’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 Company 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 Company 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 that the Gross Asset Value of any Company 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 Fiscal
Year;

 

(f)            To the extent that an adjustment to the adjusted tax basis of any
Company asset pursuant to Code Section 734(b) or Code Section 743(b) is required
pursuant to Regulations

 

13

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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 Member’s
interest in the Company, the 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 allocated pursuant to Section 6.3.A hereof shall
not be taken into account in computing Net Income or Net Loss. The amounts of
the items of Company income, gain, loss or deduction available to be allocated
pursuant to Section 6.3.A hereof shall be determined by applying rules analogous
to those set forth in this definition of “Net Income” or “Net Loss.”

 

“NMM Sharing Amount” means, with respect to any taxable disposition of a
Contributed Property or Successor Property, the product equal to (a) the Sharing
Amount multiplied by (b) the NMM Sharing Percentage.

 

“NMM Sharing Percentage” means a percentage equal to 1% multiplied by a fraction
with the numerator equal to the number of Non-Managing Member Units then
outstanding and the denominator equal to the number of Non-Managing Member Units
issued by the Company to all Non-Managing Members; provided, however, any NMM
Units reduced pursuant to Section 5.6.C hereof shall be subtracted from the
denominator of such fraction.

 

“Non-Managing Member” means any Member other than the Managing Member (except to
the extent the Managing Member holds Non-Managing Member Units).

 

“Non-Managing Member Reduction Units” has the meaning set forth in
Section 5.6.C(1).

 

“Non-Managing Member Representative” means William P. Gallaher until a successor
Non-Managing Member Representative shall have been appointed pursuant to
Section 15.13 hereof and, thereafter, shall mean the person appointed and then
acting as the Non-Managing Member Representative hereunder.

 

“Non-Managing Member Unit” or “NMM Unit” means a single unit of Membership
Interest issued to a Non-Managing Member pursuant to Section 4.1 hereof, as the
same may be modified from time to time as provided in this Agreement. The
ownership of Non-Managing Member Units shall be evidenced in the form of a
certificate for Non-Managing Member Units.

 

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

 

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

 

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

 

14

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“Oakmont” has the meaning set forth in Recital A hereof.

 

“One Hundred Member Limit” has the meaning set forth in
Section 11.6.E(9) hereof.

 

“Ownership Limit” means the restrictions on ownership and transfer provided for
in Section 6 of the Charter, which prohibit persons from Beneficially Owning or
Constructively Owning in excess of 9.8% of the number or value (whichever is
more restrictive) of outstanding REIT Shares. The number and value of REIT
Shares shall be determined by the Board of Directors of the Managing Member, in
good faith, which determination shall be conclusive for all purposes hereof.

 

“Payment Quarter” has the meaning set forth in Section 5.1.A hereof.

 

“Percentage Interest” means, as to a Member holding a Membership Interest, its
interest in the Company, as determined by dividing the LLC Units owned by such
Member by the total number of LLC Units then outstanding as specified in
Exhibit A attached hereto, as it may be modified or supplemented from time to
time, or otherwise as set forth in the books and records of the Company.

 

“Permitted Non-Managing Member Assignment” has the meaning set forth in
Section 11.3.A hereof.

 

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

 

“Preferred Return Per Unit” means, with respect to each Non-Managing Member Unit
outstanding on an LLC Record Date, an amount initially equal to zero, and
increased cumulatively on each LLC Record Date by an amount equal to the product
of (i) the cash dividend per REIT Share declared by the Managing Member for
holders of REIT Shares on that LLC Record Date, multiplied by (ii) the
Adjustment Factor in effect on that LLC Record Date; provided, however, that the
increase that shall occur in accordance with the foregoing on the first LLC
Record Date subsequent to the Effective Date shall be the foregoing product of
(i) and (ii) above multiplied by a fraction, the numerator of which shall be the
number of days in the period commencing on the Effective Date and ending on the
first LLC Record Date following the Effective Date, and the denominator of which
shall be the number of days in the period commencing on May 12, 2014 and ending
on the first LLC Record Date following the Effective Date.

 

“Preferred Return Shortfall” means, for any holder of Non-Managing Member Units
and as of any date, the amount (if any) by which (i) the Preferred Return Per
Unit with respect to all Non-Managing Member Units held by such holder exceeds
(ii) the aggregate amount previously distributed with respect to such
Non-Managing Member Units pursuant to Section 5.1.A(1), Section 5.6.A(1) or
Section 5.6.B(1) hereof, together with cumulative simple interest accruing
thereon at the Prime Rate from the applicable LLC Distribution Date to the date
of distribution.

 

“Preferred Return Shortfall Per Unit” means, for any holder of Non-Managing
Member Units and as of any date, an amount equal to the quotient of (a) such
Non-Managing

 

15

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Member’s Preferred Return Shortfall, divided by (b) the number of Non-Managing
Member Units then held by such Non-Managing Member (with Non-Managing Member
Units no longer deemed outstanding on and after a Specified Redemption Date that
occurs with respect to such Non-Managing Member Units).

 

“Prime Rate” means on any date, a rate equal to the annual rate on such date
announced by Bank of America to be its prime, base or reference rate for 90-day
unsecured loans to its corporate borrowers of the highest credit standing but in
no event greater than the maximum rate then permitted under applicable law. If
Bank of America discontinues its use of such prime, base or reference rate or
ceases to exist, the Managing Member shall designate the prime, base or
reference rate of another state or federally chartered bank based in New York,
New York or Los Angeles, California to be used for the purpose of calculating
the Prime Rate hereunder.

 

“Profit Participation Amount” means with respect to any Member the sum of
(a) cumulative distributions to such Member (including its predecessors, if any)
pursuant to Section 5.6.A(2) to the extent such distributions did not result in
a reduction in LLC Units pursuant to Section 5.6.C; and (b) the remaining amount
of the cumulative distributions to such Member (including its predecessors, if
any) pursuant to Section 5.6.A(2) multiplied by a fraction, the numerator of
which is the excess (if any) of (i) the weighted average of the Values on each
of the Reduction Dates over (ii) the Effective Price, and the denominator of
which is the weighted average of the Values on each of the Reduction Dates.
Exhibit D sets forth an example of the calculation of Profit Participation
Amount.

 

“Properties” means any assets and property of the Company or a Welfare Structure
such as, but not limited to, interests in real property (including the
Contributed Property and Successor Properties, if any) and personal property,
including, without limitation, fee interests, interests in ground leases,
interests in limited liability companies, joint ventures or partnerships,
interests in mortgages, and Debt instruments as the Company or a Welfare
Structure may hold from time to time.

 

“Property Appreciation” means, with respect to a taxable disposition of the
Contributed Property or any Successor Properties, the excess of the sales price
paid in such disposition (including amounts paid through the assumption of debt)
over the initial Gross Asset Value of the Contributed Property (or if the
disposition was of a Successor Property, the initial Gross Asset Value of the
related Contributed Property to the extent it relates to such Successor
Property) (or applicable portion thereof).

 

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

 

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

 

“Reduction” has the meaning set forth in Section 5.6.C hereof.

 

“Reduction Date” has the meaning set forth in Section 5.6.C hereof.

 

“Reduction Units” has the meaning set forth in Section 5.6.C hereof.

 

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“Refinancing Debt” means any Debt (including indebtedness to the Managing Member
or any Affiliate of the Managing Member), the repayment of which is secured by
all or any portion of the Properties or which is incurred to repay a Managing
Member Loan, subject to the provisions of Sections 7.3.E(3) and 7.3.E(4) hereof.

 

“Refinancing Debt Proceeds” means (i) the net proceeds from any Refinancing Debt
incurred by the Company which remain after the repayment of any Debt with
proceeds of the Refinancing Debt and the payment of all costs related to the
Refinancing Debt, or (ii) the net proceeds from any Refinancing Debt incurred by
a Welfare Structure which remain after the repayment of any Debt with proceeds
of the Refinancing Debt and the payment of all costs related to the Refinancing
Debt, and which are distributed to the Company.

 

“Registration Rights Agreement” with respect to each Initial Non-Managing
Member, a Registration Rights Agreement in substantially the form of Exhibit G
to the Contribution Agreement to be entered into between such Initial Managing
Member and Managing Member concurrent with the Effective Date.

 

“Regulations” means one or more Treasury regulations promulgated 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(8) hereof.

 

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

 

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

 

“REIT Share” means a share of the Common Stock of HCP, par value $1.00 per
share.

 

“REIT Shares Amount” means a number of REIT Shares equal to the sum of (a) the
product of (i) the number of Tendered Units and (ii) the Adjustment Factor plus
(b) the quotient of (i) the product of (x) the number of Tendered Units and
(y) Preferred Return Shortfall Per Unit divided by (ii) the Value of a REIT
Share as of the applicable Valuation Date.

 

“Related Party” means, with respect to any Person, any other Person whose actual
ownership, Beneficial Ownership or Constructive Ownership of shares of the
Managing Member’s capital stock would be attributed to the first such Person
under either (i) Code Section 544 (as modified by Code Section 856(h)(1)(b)) or
(ii) Code Section 318 (as modified by Code Section 856(d)(5)).

 

“Replacement Indebtedness” has the meaning set forth in Section 7.3.E(3) hereof.

 

“Rights” means rights, options, warrants or convertible or exchangeable
securities entitling the Managing Member’s shareholders to subscribe for or
purchase REIT Shares, or any other securities or property.

 

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

 

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

 

“Sharing Amount” means, with respect to any taxable disposition of the
Contributed Property or any Successor Properties, the excess, if any, of the
Aggregate Sharing Amount over the Sharing Amounts, if any, previously used for
purposes of calculating Reduction Units pursuant to Section 5.6.C.

 

“Sharing Percentage” means, with respect to a Non-Managing Member (including the
Managing Member with respect to any Non-Managing Member Units held by the
Managing Member) or Assignee, its share of the NMM Sharing Percentage based on
its share of the Non-Managing Member Units and, with respect to the Managing
Member (in its capacity as the Managing Member), one hundred percent (100%)
minus the NMM Sharing Percentage.

 

“Specified Redemption Date” means (A) in the case of a Redemption pursuant to
Section 8.6.A hereof and subject to the terms thereof, the twentieth (20th)
calendar day (or, if such day is not a Business Day, the next following Business
Day) after the receipt by the Managing Member of a Notice of Redemption, or such
earlier date as the Managing Member may agree, in its sole and absolute
discretion; provided, however, that notwithstanding any provisions set forth
herein to the contrary, in no event shall the Specified Redemption Date with
respect to any LLC Unit occur prior to the first (1st) anniversary of the
Effective Date; provided, further, that the Specified Redemption Date, as well
as the closing of a Redemption on any Specified Redemption Date, may be
deferred, in the Managing Member’s sole and absolute discretion, for such time
(but in any event not more than 90 days in the aggregate) as may reasonably be
required to effect, as applicable, (i) necessary funding arrangements,
(ii) compliance with the Securities Act or other law (including, but not limited
to, (a) state “blue sky” or other securities laws and (b) the expiration or
termination of the applicable waiting period, if any, under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended), and
(iii) satisfaction or waiver of other commercially reasonable and customary
closing conditions and requirements for a transaction of such nature, and (B) in
the case of the delivery of a Call Notice pursuant to Section 13.2, the tenth
(10th) calendar day (or, if such day is not a Business Day, the next following
Business Day) after the mailing to the applicable Non-Managing Members of a Call
Notice.

 

“Subsequent Threshold Date” means the date upon which the Subsequent Threshold
Test has been satisfied.

 

“Subsequent Threshold Test” means a test which will be satisfied on the date on
which eighty percent (80%) of the LLC Units issued by the Company to the Initial
Non-Managing Members have been disposed of pursuant to a Taxable Disposition or
Series of Taxable Dispositions.

 

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

 

18

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Person; provided, however, that, with respect to the Company, “Subsidiary” means
solely a partnership or limited liability company (taxed, for federal income tax
purposes, as a partnership or disregarded entity and not as an association or
publicly traded partnership taxable as a corporation) of which the Company is a
partner or member unless the Managing Member has received an unqualified opinion
from independent counsel of recognized standing, or a ruling from the IRS, that
the ownership of shares of stock of a corporation or other entity will not
jeopardize the Managing Member’s status as a REIT, in which event the term
“Subsidiary” shall include the corporation or other entity which is the subject
of such opinion or ruling.

 

“Substituted Member” means an Assignee who is admitted as a Member to the
Company pursuant to Section 11.4 hereof. The term “Substituted Member” shall not
include any Additional Member.

 

“Successor Properties” means real properties acquired by the Company or a
Welfare Structure in connection with a Tax-Free Disposition of the Contributed
Property or any Successor Properties (each, a “Successor Property”) (or, where
applicable, the ownership interests in a Subsidiary(ies) holding title to such
real properties).

 

“Taxable Disposition” means a transaction in which an LLC Unit has either
(a) been disposed of to the extent such disposition is a taxable transaction
(including, without limitation, a Redemption or exchange pursuant to
Section 8.6.A hereof) or (b) otherwise received a “step-up” in tax basis to its
fair market value at the time of such “step-up” (e.g., as a result of the death
of a holder of LLC Units who is an individual).

 

“Tax-Free Disposition” means the disposition of property in a transaction that
is not subject to tax under the Code, including, without limitation, by virtue
of the provisions of Code Section 1031.

 

“Tax Items” has the meaning set forth in Section 6.1 hereof.

 

“Tax Matters Partner” has the meaning set forth in Section 10.3.A hereof.

 

“Tax Protection Period” means the period of time beginning on the Effective Date
and ending on the first to occur of (i) the tenth (10th) anniversary of the
Effective Date or (ii) the Subsequent Threshold Date.

 

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

 

“Tendering Party” has the meaning set forth in Section 8.6.B hereof.

 

“Terminating Capital Transaction” means any sale or other disposition of all or
substantially all of the assets of the Company (whether held directly or
indirectly through a Welfare Structure) 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 Company (whether held directly or
indirectly through a Welfare Structure).

 

“Termination Transaction” has the meaning set forth in Section 11.2.B hereof.

 

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“Transfer,” when used with respect to an LLC Unit or all or any portion of a
Membership 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. The terms “Transferred” and
“Transferring” have correlative meanings.

 

“Triggering Event” has the meaning set forth in Section 7.3.G hereof.

 

“Unit Amount” means, with respect to a taxable disposition of a Contributed
Property or Successor Property, a number of LLC Units equal to the product of
(i) the number of LLC Units outstanding at the time of such disposition, and
(ii) the Unit Portion.

 

“Unit Appreciation” means, with respect to any taxable disposition of the
Contributed Property or any Successor Properties, the product of the (i) Unit
Amount and (ii) excess of the Value at the time of such disposition over the
Effective Price.

 

“Unit Portion” means, with respect to a taxable disposition of the Contributed
Property or any Successor Property, a number determined by dividing (i) the net
cash flow (ignoring payments made by the Company under any Debt related to such
Property) produced by such Property (or applicable portion thereof) for the
twelve month period immediately prior to such disposition, by (ii) the net cash
flow (ignoring payments made by the Company under any Debt related to the
Contributed Property and all Successor Properties) produced by the Contributed
Property and all Successor Properties held by the Company for the twelve month
period immediately prior to such disposition.

 

“Valuation Date” means (a) in the case of a tender of LLC Units for Redemption,
the date of receipt by the Managing Member of the Notice of Redemption with
respect to those LLC Units, or if such date is not a Business Day, the
immediately preceding Business Day, (b) for purposes of Section 5.6.C hereof,
the Reduction Date or, if the Reduction Date is not a Business Day, the
immediately preceding Business day, (c) for purposes of Section 13.2, the date
the Call Notice is delivered or, if such day is not a Business Day, the
immediately preceding Business Day, and (d) in any other case, the date
specified in this Agreement or, if such date is not a Business Day, the
immediately preceding Business Day.

 

“Value” means, on any Valuation Date, the average of the Closing Prices for the
twenty (20) consecutive trading days ending on the second trading day
immediately prior to the Valuation Date.

 

“Welfare Structure” has the meaning set forth in Section 7.1.A(25) hereof.

 

ARTICLE II
ORGANIZATIONAL MATTERS

 

2.1                               Formation

 

The Company is a limited liability company formed pursuant to the provisions of
the Act for the purposes stated in Section 3.1 and upon the terms and subject to
the conditions set

 

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forth in this Agreement. Except as expressly provided herein, the rights and
obligations of the Members and the administration and termination of the Company
shall be governed by the Act.

 

2.2                               Name

 

The name of the Company is HCP DR California II, LLC. The Company’s business may
be conducted under any other name or names deemed advisable by the Managing
Member, in its reasonable discretion, including the name of the Managing Member
or any Affiliate thereof. The Managing Member in its sole and absolute
discretion may change the name of the Company at any time and from time to time
in accordance with applicable law and shall notify the Members of such change in
the next regular communication to the Members.

 

2.3                               Registered Office and Agent; Principal Place
of Business; Other Places of Business

 

The address of the registered office of the Company in the State of Delaware is
located at c/o Corporation Service Company, 2711 Centerville, Suite 400,
Newcastle County, Wilmington, Delaware 19808, and the registered agent for
service of process on the Company in the State of Delaware at such registered
office is Corporation Service Company, 2711 Centerville, Suite 400, Newcastle
County, Wilmington, Delaware 19808. The principal office of the Company is
located at 3760 Kilroy Airport Way, Suite 300, Long Beach, California 90806, or
such other place as the Managing Member may from time to time designate by
notice to the Members. The Company may maintain offices at such other place or
places within or outside the State of Delaware as the Managing Member deems
advisable.

 

2.4                               Power of Attorney

 

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

 

(1)                   execute, swear to, acknowledge, deliver, file and record
in the appropriate public offices (a) all certificates, documents and other
instruments (including, without limitation, this Agreement and the Certificate
and all amendments or restatements thereof) that the Managing Member or any
Liquidator deems appropriate or necessary to form, qualify or continue the
existence or qualification of the Company as a limited liability company in the
State of Delaware and in all other jurisdictions in which the Company may
conduct business or own property; (b) all instruments that the Managing Member
or any 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 Managing
Member or any Liquidator deems appropriate or necessary to reflect the
dissolution and liquidation of the Company pursuant to the terms of this
Agreement, including, without limitation, a certificate of cancellation; (d) all
instruments relating to the admission, withdrawal, removal or substitution of
any

 

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Member pursuant to, or other events described in, Articles XI, XII or XIII
hereof or the Capital Contribution of any Member; and (e) all certificates,
documents and other instruments relating to the determination of the rights,
preferences and privileges of Membership Interests; and

 

(2)                   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 Managing Member or any
Liquidator, to make, evidence, give, confirm or ratify any vote, consent,
approval, agreement or other action which is made or given by the Members
hereunder or is consistent with the terms of this Agreement or appropriate or
necessary, in the sole discretion of the Managing Member or any Liquidator, to
effectuate the terms or intent of this Agreement.

 

Nothing contained in this Section 2.4 shall be construed as authorizing the
Managing Member or any 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 Members and Assignees will be relying upon the
power of the Managing Member to act as contemplated by this Agreement, and it
shall survive and not be affected by the subsequent Incapacity of any Member or
Assignee and the Transfer of all or any portion of such Member’s or Assignee’s
LLC Units or Membership Interest and shall extend to such Member’s or Assignee’s
heirs, successors, assigns and personal representatives. Each such Member or
Assignee hereby agrees to be bound by any representation made by the Managing
Member or any Liquidator, acting in good faith pursuant to such power of
attorney; and each such Member or Assignee hereby waives any and all defenses
which may be available to contest, negate or disaffirm the action of the
Managing Member or any Liquidator, taken in good faith under such power of
attorney.  Each Member or Assignee shall execute and deliver to the Managing
Member or any Liquidator, within 15 days after receipt of the Managing Member’s
or Liquidator’s request therefor, such further designation, powers of attorney
and other instruments as the Managing Member or the Liquidator, as the case may
be, reasonably deems necessary to effectuate this Agreement and the purposes of
the Company.

 

2.5                               Term

 

The term of the Company commenced on May 7, 2014, the date that the original
Certificate was filed in the office of the Secretary of State of Delaware in
accordance with the Act, and shall continue until terminated pursuant the
provisions of Article 13 hereof or as otherwise provided by law.

 

ARTICLE III
PURPOSE

 

3.1                               Purpose and Business

 

The sole purposes of the Company are (i) to acquire, own, manage, operate,
repair, renovate, maintain, improve, expand, redevelop, encumber, sell, lease,
hold for appreciation, or

 

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otherwise dispose of, in accordance with the terms of this Agreement, the
Properties and any other Properties acquired by the Company or by Subsidiaries
of the Company engaged in the foregoing, and to invest and ultimately distribute
funds, including, without limitation, funds obtained from owning or otherwise
operating the Properties and any other Properties acquired by the Company or by
Subsidiaries of the Company engaged in the foregoing and the proceeds from the
sale or other disposition of the Properties and any other Properties acquired by
the Company, all in the manner permitted by this Agreement, and (ii) subject to
and in accordance with the terms of this Agreement, to do anything necessary or
incidental to the foregoing.

 

3.2                               Powers

 

The Company is empowered to do any and all acts and things necessary,
appropriate, proper, advisable, incidental to or convenient for the furtherance
and accomplishment of the purposes and business described herein and for the
protection and benefit of the Company including, without limitation, full power
and authority, directly or through its ownership interest in other entities, to
enter into, perform and carry out contracts of any kind, borrow money and issue
evidences of indebtedness, whether or not secured by mortgage, deed of trust,
pledge or other lien, acquire, own, manage, improve and develop real property,
and lease, sell, transfer and dispose of real property; provided, however, that
notwithstanding any other provision in this Agreement, but subject to Sections
7.3.E, 7.3.F, and 7.3.G, the Managing Member may cause the Company to take any
action to avoid a result that, or refrain from taking any action that, in the
reasonable judgment of the Managing Member, (i) could adversely affect the
ability of the Managing Member to continue to qualify as a REIT, (ii) could
subject the Managing Member to any additional taxes under Code Section 857 or
Code Section 4981, or (iii) could violate any law or regulation of any
governmental body or agency having jurisdiction over the Managing Member, its
securities or the Company, unless such action (or inaction) under clause (i),
clause (ii) or clause (iii) above shall have been specifically Consented to by
the Managing Member in writing.

 

3.3                               Specified Purposes

 

The Company shall be a limited liability company only for the purposes specified
in Section 3.1 hereof, and this Agreement shall not be deemed to create a
company, venture or partnership between or among the Members with respect to any
activities whatsoever other than the activities within the purposes of the
Company as specified in Section 3.1 hereof. Except as otherwise provided in this
Agreement, no Member shall have any authority to act for, bind, commit or assume
any obligation or responsibility on behalf of the Company, its properties or any
other Member. No Member, in its capacity as a Member under this Agreement, shall
be responsible or liable for any indebtedness or obligation of another Member,
nor shall the Company be responsible or liable for any indebtedness or
obligation of any Member, incurred either before or after the execution and
delivery of this Agreement by such Member, except as to those responsibilities,
liabilities, indebtedness or obligations incurred pursuant to and as limited by
the terms of this Agreement and the Act.

 

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3.4                               Representations and Warranties by the Members;
Disclaimer of Certain Representations

 

A.                          Each Member that is an individual (including,
without limitation, each Additional Member or Substituted Member as a condition
to becoming an Additional Member or a Substituted Member) represents and
warrants to the Company, the Managing Member and each other Member that (i) such
Member has the legal capacity to enter into this Agreement and perform such
Member’s obligations hereunder, (ii) the consummation of the transactions
contemplated by this Agreement to be performed by such Member will not result in
a breach or violation of, or a default under, any material agreement by which
such Member or any of such Member’s property is bound, or any statute,
regulation, order or other law to which such Member is subject, (iii) such
Member 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), and (iv) this Agreement is binding upon, and enforceable
against, such Member in accordance with its terms.

 

B.                          Each Member that is not an individual (including,
without limitation, each Additional Member or Substituted Member as a condition
to becoming an Additional Member or a Substituted Member) represents and
warrants to the Company, the Managing Member and each other Member that (i) all
transactions contemplated by this Agreement to be performed by it have been duly
authorized by all necessary action, including, without limitation, that of its
managing member(s) (or, if there is no managing member, a majority in interest
of all members), committee(s), trustee(s), general partner(s), beneficiaries,
directors and shareholder(s), as the case may be, as required, (ii) the
consummation of such transactions will not result in a breach or violation of,
or a default under, its partnership or operating agreement, trust agreement,
charter or bylaws, as the case may be, any material agreement by which such
Member or any of such Member’s properties or any of its partners, members,
beneficiaries, trustees or shareholders, as the case may be, is or are bound, or
any statute, regulation, order or other law to which such Member or any of its
partners, members, trustees, beneficiaries or shareholders, as the case may be,
is or are subject, (iii) such Member 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), and (iv) this Agreement is binding upon, and enforceable
against, such Member in accordance with its terms.

 

C.                          Each Member (including, without limitation, each
Additional Member or Substituted Member as a condition to becoming an Additional
Member or a Substituted Member) represents, warrants and agrees that it has
acquired and continues to hold its interest in the Company for its own account
for investment only and not for the purpose of, or with a view toward, the
resale or distribution of all or any part thereof, nor with a view toward
selling or otherwise distributing such interest or any part thereof at any
particular time or under any predetermined circumstances. Each Member further
represents and warrants that it is an “accredited investor” as defined in
Rule 501(a) promulgated under the Securities Act and is a sophisticated
investor, able and accustomed to handling sophisticated financial 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 Company in what it understands to be a highly speculative and
illiquid investment.

 

D.                          The representations and warranties contained in
Sections 3.4.A, 3.4.B and 3.4.C hereof shall survive the execution and delivery
of this Agreement by each Member (and, in the case of an Additional Member or a
Substituted Member, the admission of

 

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such Additional Member or Substituted Member as a Member in the Company) and the
dissolution, liquidation and termination of the Company.

 

E.                           Each Member (including, without limitation, each
Additional Member or Substituted Member as a condition to becoming an Additional
Member or a Substituted Member) hereby represents that it has consulted and been
advised by its legal counsel and tax advisor in connection with, and
acknowledges that no representations as to potential profit, tax consequences of
any sort (including, without limitation, the tax consequences resulting from
forming or operating the Company, conducting the business of the Company,
executing this Agreement, consummating the transaction provided for in or
contemplated by the Contribution Agreement, making a Capital Contribution, being
admitted to the Company, receiving or not receiving distributions from the
Company, exchanging LLC Units or being allocated Tax Items), cash flows, funds
from operations or yield, if any, in respect of the Company or the Managing
Member have been made by the Company, any Member or any employee or
representative or Affiliate of the Company or any Member, 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 Member shall not constitute any representation or warranty of
any kind or nature, express or implied.

 

ARTICLE IV
CAPITAL CONTRIBUTIONS

 

4.1                               Capital Contributions of the Initial Members

 

At the time of their respective execution of this Agreement, the Members (or, in
the event a Member shall be one of a Contributor’s Partners, the Contributor)
shall make initial Capital Contributions as set forth in Exhibit A to this
Agreement and pursuant to the Contribution Agreement. The Members (including,
without limitation, each of Contributor’s Partners, if applicable) shall own
Managing Member Units and Non-Managing Member Units, as applicable, in the
amounts set forth on Exhibit A. Except as required by law or as otherwise
provided in Sections 4.1, 4.2, 4.3(B) and 4.4, no Member shall be required or
permitted to make any additional Capital Contributions or loans to the Company.

 

4.2                               Additional Members

 

The Managing Member is authorized to admit one or more Additional Members to the
Company from time to time, subject to and in accordance with the provisions of
Section 12.3 hereof, on terms and conditions and for such Capital Contributions
as may be established by the Managing Member in its reasonable discretion,
subject to the provisions of Section 12.3. The provisions of Sections 7.3 and
12.3 shall govern the acquisition by the Company in the future of Properties in
addition to the Contributed Property and any Successor Properties thereof, by
means of Capital Contributions by other Persons, which Capital Contributions
shall be set forth in Exhibit A or the books and records of the Company. As a
condition to being admitted to the Company, each Additional Member shall execute
a Joinder Agreement.

 

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4.3                               Loans and Incurrence and Payment of Debt

 

A.                          Subject to the provisions of Sections 7.3.E(3) and
7.3.E.(4) hereof, the Company may incur or assume Debt, or enter into other
similar credit, guarantee, financing (including, without limitation, the
encumbrance of the Properties for the debt of Affiliates of the Managing Member
pursuant to so-called cross-collateralized loans, or otherwise) or refinancing
arrangements, repay or prepay Debt, for any purpose (including, without
limitation, in connection with any further acquisition of Properties from any
Person), upon such terms as the Managing Member determines appropriate;
provided, however, that any Debt shall be nonrecourse to the Managing Member
unless the Managing Member otherwise agrees; provided, further, that except as
otherwise required for the Managing Member in order to avoid an obligation to
make a Make-Whole Payment pursuant to Sections 7.3.E(3) or 7.3.E(4), at the time
of incurrence by the Company of any such Debt, (i) the Loan-to-Value Ratio shall
not exceed Sixty-Five Percent (65%) and (ii) the Managing Member shall have
determined in good faith that the Debt service payment obligations of such Debt
will not adversely affect the rights of the Non-Managing Members to receive
distributions pursuant to the provisions of Section 5.1.A(1) and 5.1.A(3).”

 

B.                          In connection with the consummation of the
transactions contemplated by the Contribution Agreement and in addition to the
initial Capital Contribution made by the Managing Member as set forth in
Exhibit A, the Managing Member has made a loan to the Company (the “Managing
Member Loan”) in the original principal amount of $16,710,000 (the “Initial
Managing Member Loan Amount”), which loan is evidenced by a promissory note in
the Initial Managing Member Loan Amount made by the Company in favor of the
Managing Member (as may be amended, renewed, supplemented, modified or otherwise
supplemented from time to time, the “Managing Member Note”).  Notwithstanding
anything to the contrary herein, the Members hereby approve the Managing Member
Loan and the terms of the Managing Member Note as evidence thereof in
substantially the form attached hereto as Exhibit F.

 

C.                          Without limiting the foregoing, subject to the
provisions of Section 7.3.E, the Managing Member is authorized, in its sole and
absolute discretion, to cause the Company to repay or prepay any Debt.

 

4.4                               Additional Funding and Capital Contributions

 

A.                          General. The Managing Member may, at any time and
from time to time, determine that the Company requires additional funds
(“Additional Funds”) for the operation of the Company. Additional Funds may be
raised by the Company in accordance with the terms of Sections 4.2 or 4.3 hereof
or pursuant to the terms of this Section 4.4; provided, however, that in no
event shall any Non-Managing Member be required to make additional Capital
Contributions. No Person, including, without limitation, any Member or Assignee,
shall have any preemptive, preferential, participation or similar right or
rights to subscribe for or acquire any Membership Interest.

 

B.                          Additional Contributions. The Managing Member on
behalf of the Company may raise all or any portion of the Additional Funds by
making additional Capital Contributions, subject to the provisions of
Section 7.3. Subject to the definition of “Gross Asset Value,” the Managing
Member shall determine in good faith the amount, terms

 

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and conditions of such additional Capital Contributions. The Managing Member
shall receive that number of additional Managing Member Units in consideration
for additional Capital Contributions made by the Managing Member equal to the
initial Gross Asset Value of the additional Capital Contribution (net of the
amount of liabilities of the Managing Member assumed by the Company or that are
secured by the property contributed to the Company) (or, in the event of a
contribution of cash, the amount of cash so contributed), divided by the product
of (1) the Value as of the date of such Capital Contribution and (2) the
Adjustment Factor.  In addition to the foregoing, the Managing Member shall also
be permitted to make additional Capital Contributions of cash or other property
to the Company in accordance with the terms and restrictions set forth herein
for any lawful purpose.

 

C.                          Timing of Additional Capital Contributions. If
additional Capital Contributions are made by a Member on any day other than the
first (1st) day of a Fiscal Year, then Net Income, Net Loss, each item thereof
and all other items of income, gain, loss, deduction and credit allocable among
Members for such Fiscal Year, if necessary, shall be allocated among such
Members by taking into account their varying interests during the Fiscal Year in
accordance with Code Section 706(d), using the “interim closing of the books” or
“daily proration” method or another permissible method selected by the Managing
Member.

 

4.5                               No Interest; No Return

 

Except as provided herein, no Member shall be entitled to interest on its
Capital Contribution or on such Member’s Capital Account. Except as provided
herein or by law, no Member shall have any right to demand or receive the return
of its Capital Contribution from the Company.

 

ARTICLE V
DISTRIBUTIONS

 

5.1                               Requirement and Characterization of
Distributions

 

A.                          Subject to the provisions of Sections 5.7 and 5.8
hereof, the Managing Member shall cause the Company to distribute quarterly on
the LLC Distribution Date all Available Cash generated by the Company during the
calendar quarter most recently ended prior to the LLC Distribution Date (the
“Payment Quarter”) as follows:

 

(1)                   First, to the holders of the Non-Managing Member Units, in
accordance with their relative Preferred Return Shortfalls at the end of the
Payment Quarter, until the Preferred Return Shortfall for each holder of
Non-Managing Member Units at the end of the Payment Quarter is zero, provided,
however, that in the event a Reduction Date occurs during any Payment Quarter, a
distribution shall be made under this Section 5.1.A(1) on the LLC Distribution
Date associated with such Payment Quarter to the holder or holders of the
Reduction Units in an amount determined by multiplying the amount that would
have been distributed on the LLC Distribution Date under this
Section 5.1.A(1) in respect of the Reduction Units had they been outstanding on
the last day of such Payment Quarter by a fraction, the numerator of which shall
be the number of days beginning on the first day of the Payment Quarter relating
to the

 

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LLC Distribution Date and ending on the Reduction Date and the denominator of
which shall be the number of days in the Payment Quarter in which the Reduction
Date occurs.

 

(2)                   Second, to the Managing Member until the Managing Member
has received an amount equal to the excess (the “Managing Member Shortfall”), if
any, of (A) the amount of cash that must be distributed to the Managing Member
such that aggregate distributions of cash pursuant to Sections 5.1.A(1),
5.1.A(2), 5.6.A(1) and 5.6.B(1) shall have been made to all Members pro rata to
the Members’ Percentage Interests, over (B) the sum of all prior distributions
to the Managing Member pursuant to this Section 5.1.A(2) and Sections
5.6.A(1) and 5.6.B(1).

 

(3)                   Thereafter, the Managing Member may, in its sole
discretion, cause the Company to distribute all Available Cash remaining after
the distributions provided for in Section 5.1.A(1) and 5.1.A.(2) above to the
Members in proportion to their Sharing Percentages.

 

B.                          The Managing Member may take such reasonable
efforts, as determined by it in its sole and absolute discretion and consistent
with its qualification as a REIT, to cause the Company to distribute sufficient
amounts to enable the Managing Member to pay stockholder dividends that will
(a) satisfy the requirements for qualifying as a REIT under the Code and
Regulations (“REIT Requirements”), and (b) except to the extent the Managing
Member elects, in its sole discretion, not to make such distributions, avoid any
federal income or excise tax liability of the Managing Member.

 

5.2                               Distributions in Kind

 

No right is given to any Member to demand and receive property other than cash.
The Managing Member may determine, with the Consent of the Non-Managing Members,
to make a distribution in kind to the Members of Company assets, 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 5 and 6 hereof. The
fair market value of any Property distributed in kind shall be determined
(i) prior to the Subsequent Threshold Date, by the Managing Member with the
Consent of the Non-Managing Members, and (ii) thereafter, by the Managing Member
in its good faith determination.

 

5.3                               Amounts Withheld

 

Each Member hereby authorizes the Company to withhold from or pay on behalf of
or with respect to such Member any amount of federal, state, local or foreign
taxes that the Managing Member determines that the Company is required to
withhold or pay with respect to any amount distributable or allocable to such
Member pursuant to this Agreement, including, without limitation, any taxes
required to be withheld or paid by the Company pursuant to Code Section 1441,
Code Section 1442, Code Section 1445 or Code Section 1446. Any amount paid on
behalf of or with respect to a Member shall constitute a loan by the Company to
such Member, which loan shall be repaid by such Member within 15 days after
notice from the

 

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Managing Member that such payment must be made unless (i) the Company withholds
such payment from a distribution that would otherwise be made to the Member or
(ii) the Managing Member determines that such payment may be satisfied out of
the Available Cash of the Company that would, but for such payment, be
distributed to the Member. Any amounts withheld pursuant to the foregoing
clauses (i) or (ii) shall be treated as having been distributed to such Member.
Each Member hereby unconditionally and irrevocably grants to the Company a
security interest in such Member’s Membership Interest to secure such Member’s
obligation to pay to the Company any amounts required to be paid pursuant to
this Section 5.3. In the event that a Member fails to pay any amounts owed to
the Company pursuant to this Section 5.3 when due, the Managing Member may, in
its sole and absolute discretion, elect to make the payment to the Company,
either directly or through an Affiliate, on behalf of such defaulting Member,
and in such event shall be deemed to have loaned such amount to such defaulting
Member and shall succeed to all rights and remedies of the Company as against
such defaulting Member (including, without limitation, the right to receive
distributions). Any amounts payable by a Member 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
(4) 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 Member shall take such actions as the Company or the Managing
Member shall request in order to perfect or enforce the security interest
created hereunder.

 

5.4                               Distributions Upon Liquidation

 

Notwithstanding the other provisions of this Article 5, net proceeds from a
Terminating Capital Transaction and any other cash received or reductions in
reserves made after commencement of the liquidation of the Company shall be
distributed to the Members in accordance with Section 13.3 hereof.

 

5.5                               Restricted Distributions

 

Notwithstanding any provision to the contrary contained in this Agreement,
neither the Company nor the Managing Member, on behalf of the Company, shall
make a distribution to any Member on account of its Membership Interest or
interest in LLC Units if such distribution would violate Section 18-607 of the
Act or other applicable law.

 

5.6                               Distributions of Proceeds from Sale of
Properties and Refinancing Debt

 

A.                          Subject to the provisions of Sections 5.7 and 5.8
below, in the event of a taxable disposition of some, but not all, of the
Properties, the Managing Member shall cause the Company to (i) reinvest
(including by making loans pursuant to the terms of this Agreement) the
Disposition Proceeds to the extent the Managing Member elects to do so and in
the amount determined by the Managing Member to be appropriate (and to hold the
Disposition Proceeds in an interest bearing account pending such reinvestment),
in its sole discretion, and (ii) if the Managing Member elects, in its sole
discretion, distribute all or any portion of the Disposition Proceeds, as
follows:

 

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(1)                   First, to the holders of LLC Units in accordance with
their Preferred Return Shortfalls until the Preferred Return Shortfall for each
holder of Non-Managing Member Units is zero, and then to the Managing Member to
the extent of its Managing Member Shortfall;

 

(2)                   Second, to the holders of LLC Units pro rata to their
holdings of LLC Units but only to the extent that such distribution would not
cause the number of LLC Units held by the Non-Managing Members to be reduced
below zero pursuant to the provisions of Section 5.6.C hereof; and

 

(3)                   Third, the remaining balance of the Disposition Proceeds,
if any, to the Managing Member.

 

B.                          Subject to the provisions of Section 5.7, upon the
incurrence of Refinancing Debt, the Managing Member shall cause the Company to
(i) reinvest (including by making loans pursuant to the terms of this Agreement)
the Refinancing Debt Proceeds to the extent the Managing Member elects to do so
and in the amount determined by the Managing Member to be appropriate (and to
hold the Refinancing Debt Proceeds in an interest bearing account pending such
reinvestment), in its sole discretion, and (ii) if the Managing Member elects,
in its sole discretion, distribute all or any portion of the Refinancing Debt
Proceeds, as follows:

 

(1)                   First, to the holders of the Non-Managing Member Units in
accordance with their Preferred Return Shortfalls until the Preferred Return
Shortfall for each holder of Non-Managing Member Units is zero, and then to the
Managing Member to the extent of its Managing Member Shortfall; and

 

(2)                   Second, the remaining balance of the Refinancing Debt
Proceeds, if any, to the Members in proportion to their Sharing Percentages.

 

C.                          The number of LLC Units outstanding on the date of a
distribution pursuant to Section 5.6.A(2) hereof will be reduced (each such
reduction a “Reduction”) by a number of LLC Units (rounded down to the nearest
whole unit) (the “Reduction Units”) on the date of the distribution (the
“Reduction Date”) by the aggregate number of LLC Units (the “Total Units”) as
follows:

 

(1)                   The Non-Managing Member Units shall be reduced by a number
of LLC Units (rounded down to the nearest whole unit) (the “Non-Managing Member
Reduction Units”) determined by dividing (i) the excess of (a) the aggregate
amount of distributions made on the Reduction Date to Non-Managing Members and
Assignees pursuant to Sections 5.6.A(2) and 5.6.B(2), over (b) the NMM Sharing
Amount by (ii) the product obtained by multiplying (a) Value on the Reduction
Date by (b) the Adjustment Factor. The Non-Managing Member Reduction Units shall
be allocated (as closely as practicable in whole units) among the holders of
Non-Managing Member Units in accordance with their respective holdings of
Non-Managing Member Units.

 

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(2)                   The Managing Member Units shall be reduced by a number of
Managing Member Units (by a number of LLC Units (rounded down to the nearest
whole unit) (the “Managing Member Reduction Units”) equal to the product of
(i) the Reduction Units with respect to the Non-Managing Members divided by the
aggregate Percentage Interest of the Non-Managing Members immediately prior to
the Reduction Date, times (ii) the Percentage Interest of the Managing Member
immediately prior to such Reduction Date, provided the Managing Member Units
shall not be reduced to less than 1 LLC Unit.

 

To reflect the foregoing reduction, each Member shall return to the Managing
Member the certificate evidencing the Reduction Units allocated to him or it or
the Managing Member Units so reduced which will be canceled and a new
certificate evidencing the reduced number of Managing Member Units or
Non-Managing Member Units shall be immediately issued to such Member by the
Managing Member on behalf of the Company. In the event the number of outstanding
Non-Managing Member Units held by a Non-Managing Member or Assignee is reduced
(pursuant to this Section 5.6.C or otherwise) to zero, such Non-Managing Member
or Assignee shall cease to have an interest in the Company (other than the right
to receive final distributions and allocations resulting from the liquidation of
their interest). Exhibit D sets forth an example of a Reduction in Non-Managing
Member Units and Managing Member Units pursuant to this Section 5.6.C.

 

D.                          The Managing Member shall have no obligation to
incur Refinancing Debt for the purpose of making distributions pursuant to this
Section 5.6 or for any other purpose, except as provided in Sections
7.3.E(3) and 7.3.E(4).

 

5.7                               Distributions Following Redemption

 

Notwithstanding anything to the contrary contained herein, a Non-Managing Member
shall not be entitled to any distribution pursuant to this Article V with
respect to any Tendered Units if the next LLC Record Date is on or after the
Specified Redemption Date for such Tendered Unit(s).

 

5.8                               Offsets

 

Without in any way limiting any other right or remedy at law or otherwise,
Managing Member shall be entitled to offset against any distribution payable to
a Non-Managing Member pursuant to this Article V and Article XIII hereof any
amounts owing or otherwise alleged to be owing to the Company or the Managing
Member by (i) such Non-Managing Member, including, without limitation, pursuant
to any applicable Registration Rights Agreement or (ii) by the Contributor on
account of such Contributor’s Contribution Liability. Any amounts so offset
pursuant to the foregoing shall be deemed for all purposes to have been
distributed or paid to such Non-Managing Member as required by this Agreement.

 

5.9                               Special Managing Member Distribution
Calculation

 

Notwithstanding anything to the contrary in this Agreement, for purposes of
determining the Managing Member Shortfall distributions payable to the Managing
Member pursuant to Sections 5.1A(2), 5.6A(1) and 5.6B(1) as of any LLC
Distribution Date pursuant to

 

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Section 5.1 or as of the date of distribution of any Disposition Proceeds or
Refinancing Proceeds pursuant to Section 5.6, the Managing Member shall be
treated as holding that number of Managing Member Units equal to the product of
(x) the total number of Managing Member Units held by the Managing Member as of
such date, times (y) 1.20.

 

ARTICLE VI
ALLOCATIONS

 

6.1                               Timing and Amount of Allocations of Net Income
and Net Loss

 

Net Income and Net Loss of the Company shall be determined and allocated with
respect to each Fiscal Year of the Company as of the end of each such year.
Except as otherwise provided in this Article 6, an allocation to a Member 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 (collectively, “Tax
Items”) that is taken into account in computing Net Income or Net Loss.

 

6.2                               General Allocations

 

A.                          Operating Net Income and Net Loss. Except as
otherwise provided in Sections 6.2.B, 6.2.C or 6.3 hereof:

 

(1)                   Net Loss with respect to any Fiscal Year of the Company,
other than Net Loss attributable to a disposition of any or all of the Real
Properties, and other than Net Loss attributable to a Liquidating Event, shall
be allocated to the Members and Assignees in proportion to their Sharing
Percentages.

 

(2)                   Net Income with respect to any Fiscal Year of the Company,
other than Net Income attributable to a disposition of any or all of the Real
Properties, and other than Net Income attributable to a Liquidating Event, shall
be allocated as follows:

 

(a)                    First, to each Member or Assignee in proportion to, and
to the extent of, the amount that cumulative Net Loss previously allocated to
such Member or Assignee pursuant to Section 6.2.A(1) exceeds the cumulative
amount of Net Income previously allocated to such Member or Assignee pursuant to
this Section 6.2.A(2)(a); and

 

(b)                    Second, to each Member or Assignee in an amount that will
cause such allocation, together with the amount of all previous allocations of
Net Income under this Section 6.2.A(2)(b) and Section 6.2.B(2)(b) to be in
proportion to and to the extent of the cumulative distributions received by such
Member or Assignee pursuant to Sections 5.1.A, 5.6.A(1), 5.6(A)(2) (but only to
the extent of the Profit Participation Amount) and 5.6.B(1) for the current and
all prior Fiscal Years; and

 

(c)                     Thereafter, to each Member or Assignee pro rata to such
Member’s or Assignee’s Sharing Percentage.

 

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B.                          Net Income and Net Loss from the Disposition of
Properties. Except as otherwise provided in Sections 6.2.C or 6.3:

 

(1)                   Net Loss attributable to a disposition of any or all of
the Properties shall be allocated to the Members and Assignees in proportion to
their Sharing Percentages.

 

(2)                   Net Income attributable to a disposition of any or all of
the Properties shall be allocated as follows:

 

(a)                    First, to each Member or Assignee in proportion to, and
to the extent of, the amount that cumulative Net Loss previously allocated to
such Member or Assignee pursuant to Section 6.2.B(1) exceeds the cumulative
amount of Net Income previously allocated to such Member or Assignee pursuant to
this Section 6.2.B(2)(a);

 

(b)                    Second, to each Member or Assignee in an amount that will
cause such allocation, together with the amount of all previous allocations of
Net Income under this Section 6.2.B(2)(b) and Section 6.2.A(2)(b) to be in
proportion to and to the extent of the cumulative distributions received by such
Member or Assignee pursuant to Sections 5.1.A, 5.6.A(1), 5.6(A)(2) (but only to
the extent of the Profit Participation Amount) and 5.6.B(1) for the current and
all prior Fiscal Years; and

 

(c)                     Thereafter, to each Member or Assignee pro rata to such
Member’s or Assignee’s Sharing Percentage.

 

C.                          Net Income and Net Loss Upon Liquidation. If a
Liquidating Event occurs in a Fiscal Year, or if the number of LLC Units held by
the Non-Managing Members have been reduced (pursuant to Section 5.6.C or
otherwise) to zero, Net Income or Net Loss (or, if necessary, separate items of
income, gain, loss and deduction) for such Fiscal Year and any Fiscal Years
thereafter shall, subject to Section 6.3, be allocated among the Members, as
follows:

 

(1)                   First, to holders of Non-Managing Member Units, pro rata
to their Percentage Interests, in such amounts as will cause, to the greatest
extent possible, each such holder’s Capital Account per Non-Managing Member Unit
(if any) to be equal to the sum of (a) such holder’s Preferred Return Shortfall
per unit, (b) the product of (i) the Value of a REIT Share (with the date of the
liquidating distribution being the Valuation Date), and (ii) the Adjustment
Factor (with the product set forth in (b) being equal to zero if the number of
outstanding Non-Managing Member Units has been reduced (pursuant to
Section 5.6.C, or otherwise) to zero), and (c) an amount equal to (x) the NMM
Sharing Amount, calculated as if all of the Properties then owned by the Company
were sold in a taxable transaction at their fair market values, divided by
(y) the total number of Non-Managing Member Units then outstanding; and

 

(2)                   Thereafter, to the Managing Member.

 

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6.3                               Additional Allocation Provisions

 

A.                          Regulatory Allocations.

 

(1)                   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 6, if there is a net decrease in
Company Minimum Gain during any Fiscal Year, each Member shall be specially
allocated items of Company income and gain for such year (and, if necessary,
subsequent years) in an amount equal to such Member’s share of the net decrease
in Company 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 Member 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(1) 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.

 

(2)                   Member Minimum Gain Chargeback. Except as otherwise
provided in Regulations Section 1.704-2(i)(4), if there is a net decrease in
Member Minimum Gain attributable to a Member Nonrecourse Debt during any Fiscal
Year, each Member who has a share of the Member Minimum Gain attributable to
such Member Nonrecourse Debt, determined in accordance with Regulations
Section 1.704-2(i)(5), shall be specially allocated items of Company income and
gain for such year (and, if necessary, subsequent years) in an amount equal to
such Member’s share of the net decrease in Member Minimum Gain attributable to
such Member 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
Member 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(2) is intended to qualify as a “chargeback of partner nonrecourse
debt minimum gain” within the meaning of Regulations Section 1.704-2(i)(4) and
shall be interpreted consistently therewith.

 

(3)                   Member Nonrecourse Deductions. Any Member Nonrecourse
Deductions for any Fiscal Year shall be specially allocated to the Member(s) who
bears the economic risk of loss with respect to the Member Nonrecourse Debt to
which such Member Nonrecourse Deductions are attributable, in accordance with
Regulations Section 1.704-2(i)(1).

 

(4)                   Nonrecourse Deductions. Any Nonrecourse Deductions for any
Fiscal Year shall be shall be allocated among the Members in proportion to their
respective Percentage Interests.

 

(5)                   Qualified Income Offset. If any Member unexpectedly
receives an adjustment, allocation or distribution described in Regulations
Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Company income and gain
shall be

 

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allocated, in accordance with Regulations Section 1.704-1(b)(2)(ii)(d), to such
Member in an amount and manner sufficient to eliminate, to the extent required
by such Regulations, the Adjusted Capital Account Deficit of such Member as
quickly as possible, provided that an allocation pursuant to this
Section 6.3.A(5) shall be made if and only to the extent that such Member would
have an Adjusted Capital Account Deficit after all other allocations provided in
this Article 6 have been tentatively made as if this Section 6.3.A(5) were not
in the Agreement. It is intended that this Section 6.3.A(5) 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.

 

(6)                   Limitation on Allocation of Net Loss. To the extent that
any allocation of Net Loss would cause or increase an Adjusted Capital Account
Deficit as to any Member, such allocation of Net Loss shall be reallocated among
the other Members in accordance with the positive balances in such Members’
Capital Accounts so as to allocate the maximum permissible Net Losses to each
member under Regulations Section 1.704-1(b)(2)(ii)(d).

 

(7)                   Section 754 Adjustment. To the extent that an adjustment
to the adjusted tax basis of any Company 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 Member in complete liquidation of its interest in the Company,
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 Members in accordance with their LLC Units in the event that
Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Members to whom
such distribution was made in the event that Regulations
Section 1.704-1(b)(2)(iv)(m)(4) applies.

 

(8)                   Curative Allocations. The allocations set forth in
Sections 6.3.A(1) through (7) 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
Sections 6.1 and 6.2 hereof, the Regulatory Allocations shall be taken into
account in allocating other items of income, gain, loss and deduction among the
Members 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 Member shall be equal to the
net amount that would have been allocated to each such Member if the Regulatory
Allocations had not occurred.

 

B.                          Allocation of Excess Nonrecourse Liabilities. For
purposes of determining a Member’s proportional share of the “excess nonrecourse
liabilities” of the Company within the meaning of Regulations
Section 1.752-3(a)(3), each Member’s interest in Company profits shall be such
Member’s Percentage Interest.

 

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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 of
the Company’s Tax Items shall be allocated among the Members 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 Company with a Gross Asset Value that varies from its basis
in the hands of the contributing Member immediately preceding the date of
contribution shall be allocated among the Members for income tax purposes
pursuant to the “traditional method” as described in Regulations
Section 1.704-3(b). In the event that the Gross Asset Value of any Company asset
is adjusted pursuant to subsection (b) of the definition of “Gross Asset Value”
(provided in Article 1 hereof), subsequent allocations of Tax Items with respect
to such asset (other than Tax Items governed by the previous sentence) 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 and this Section 6.4.B, pursuant to any method
permitted under Regulations Section 1.704-3 as selected by the Managing Member.

 

6.5                               Other Provisions

 

A.                          Other Allocations. In the event that (i) any
modifications are made to the Code or any Regulations, (ii) any changes occur in
any case law applying or interpreting the Code or any Regulations, (iii) the IRS
changes or clarifies the manner in which it applies or interprets the Code or
any Regulations or any case law applying or interpreting the Code or any
Regulations or (iv) the IRS adjusts the reporting of any of the transactions
contemplated by this Agreement which, in each case as reasonably and in good
faith determined by the Managing Member, either (a) requires allocations of
items of income, gain, loss, deduction or credit or (b) requires reporting of
any of the transactions contemplated by this Agreement in a manner different
from that set forth in this Article 6, the Managing Member is hereby authorized
to make new allocations or report any such transactions (as the case may be) in
reliance of the foregoing, and such new allocations and reporting shall be
deemed to be made pursuant to the fiduciary duty of the Managing Member to the
Company and the other Members, and no such new allocation or reporting shall
give rise to any claim or cause of action by any Member.

 

B.                          Consistent Tax Reporting. The Members acknowledge
and are aware of the income tax consequences of the allocations made by this
Article 6 and hereby agree to be bound by the provisions of this Article 6 in
reporting their shares of Net Income, Net Loss and other items of income, gain,
loss, deduction and credit for federal, state and local income tax purposes.

 

6.6                               Amendments to Allocation to Reflect Issuance
of Additional Membership Interests

 

In the event that the Company issues additional Membership Interests to the
Managing Member or any Additional Member pursuant to Article 4 hereof, the
Managing Member shall make such revisions to this Article 6 as it determines are
necessary to reflect the terms of the

 

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issuance of such additional Membership Interests, including making preferential
allocations to certain classes of Membership Interests, subject to
Section 7.3.D.

 

ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS

 

7.1                               Management

 

A.                          Except as otherwise expressly provided in this
Agreement, the Managing Member, in its capacity as a Managing Member of the
Company under the Act, shall have sole and complete charge and management over
the business and affairs of the Company, in all respects and in all matters. The
Managing Member shall at all times act in good faith in exercising its powers
hereunder. The Managing Member shall be an agent of the Company’s business, and
the actions of the Managing Member taken in such capacity and in accordance with
this Agreement shall bind the Company. The Managing Member shall at all times be
a Member of the Company. Except as otherwise expressly provided in this
Agreement or required by any non-waivable provisions of applicable law, the
Non-Managing Members shall not participate in the control of the Company, shall
have no right, power or authority to act for or on behalf of, or otherwise bind,
the Company and shall have no right to vote on or consent to any other matter,
act, decision or document involving the Company or its business. The Managing
Member may not be removed by the Members with or without cause, except with the
Consent of the Managing Member. In addition to the powers now or hereafter
granted a manager of a limited liability company under applicable law or that
are granted to the Managing Member under this Agreement, the Managing Member,
subject to the other provisions hereof including the limitations on the
authority of the Managing Member set forth in Sections 4.3.A and 7.3 hereof,
shall have full power and authority to do all things deemed necessary or
desirable by it to conduct the business of the Company, to exercise all powers
set forth in Section 3.2 hereof and to effectuate the purposes set forth in
Section 3.1 hereof, including, without limitation:

 

(1)                   except as restricted in this Agreement, the making of any
expenditures, the lending or borrowing of money (including loans to the Managing
Member), the assumption or guarantee of, or other contracting for, indebtedness
and other liabilities, the issuance of evidences of indebtedness (including the
securing of the same by deed to secure debt, mortgage, deed of trust or other
lien or encumbrance on the Company’s assets) and the incurring of any
obligations that it deems necessary for the conduct of the activities of the
Company;

 

(2)                   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 Company;

 

(3)                   except as restricted in this Agreement, the acquisition,
sale, transfer, exchange or other disposition of any assets of the Company
(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 Company);

 

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(4)                   except as restricted in this Agreement, the mortgage,
pledge, encumbrance or hypothecation of any assets of the Company (including,
without limitation, any Property), the use of the assets of the Company
(including, without limitation, cash on hand) for any purpose consistent with
the terms of this Agreement which the Managing Member believes will directly
benefit the Company and on any terms that the Managing Member sees fit,
including, without limitation, the financing of the conduct or the operations of
the Company, the lending of funds to other Persons (including, without
limitation, the Managing Member (if necessary to permit the financing or
capitalization of a Subsidiary of the Managing Member or the Company)) and the
repayment of obligations of the Company;

 

(5)                   the management, operation, leasing, landscaping, repair,
alteration, demolition, replacement or improvement of any Property, including,
without limitation, any Property, or other asset of the Company or any
Subsidiary of the Company;

 

(6)                   the negotiation, execution and performance of any
contracts, leases, conveyances or other instruments that the Managing Member
considers useful or necessary to the conduct of the Company’s operations or the
implementation of the Managing Member’s powers under this Agreement, including,
without limitation, (i) contracting with property managers (including, without
limitation, as to any Property, contracting with the contributing or any other
Member or its Affiliates for property management services), contractors,
developers, consultants, accountants, legal counsel, other professional advisors
and other agents and the payment of their expenses and compensation out of the
Company’s assets, and (ii) the execution, delivery and performance of the
Contribution Agreement and the agreements and instruments referred to therein or
contemplated thereby, including the Registration Rights Agreement (as defined on
the Contribution Agreement);

 

(7)                   the distribution of Company cash or other Company assets
in accordance with this Agreement, the holding, management, investment and
reinvestment of cash and other assets of the Company consistent with established
investment policies of the Managing Member, and the collection and receipt of
revenues, rents and income of the Company;

 

(8)                   the selection and dismissal of employees of the Company or
the Managing Member (including, without limitation, employees having titles or
offices such as “president,” “vice president,” “secretary” and “treasurer”), and
agents, outside attorneys, accountants, consultants and contractors of the
Company or the Managing Member and the determination of their compensation and
other terms of employment or hiring;

 

(9)                   the maintenance of such insurance including (i) liability
insurance for the Indemnitees hereunder and (ii) casualty, liability, earthquake
and other insurance on the Properties of the Company for the benefit of the
Company and the Members comparable in coverage to that maintained by the
Managing Member with respect to the properties it owns and otherwise as it deems
necessary or appropriate;

 

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(10)            the control of any matters affecting the rights and obligations
of the Company, 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 Company, the
commencement or defense of suits, legal proceedings, administrative proceedings,
arbitrations or other forms of dispute resolution, and the representation of the
Company 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;

 

(11)            subject to the provisions of Section 5.2 hereof, the
determination of the fair market value of any Company 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;

 

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

 

(13)            holding, managing, investing and reinvesting cash and other
assets of the Company;

 

(14)            the collection and receipt of revenues and income of the
Company;

 

(15)            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 Company;

 

(16)            the exercise of any of the powers of the Managing Member
enumerated in this Agreement on behalf of or in connection with any Subsidiary
of the Company or any other Person in which the Company has a direct or indirect
interest, or jointly with any such Subsidiary or other Person;

 

(17)            the exercise of any of the powers of the Managing Member
enumerated in this Agreement on behalf of any Person in which the Company does
not have an interest pursuant to contractual or other arrangements with such
Person;

 

(18)            the maintenance of working capital and other reserves in such
amounts as the Managing Member deems appropriate and reasonable from time to
time;

 

(19)            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 Managing Member for the accomplishment of any of the powers of
the Managing Member enumerated in this Agreement;

 

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(20)            the distribution of cash to acquire LLC Units held by a Member
in connection with a Member’s exercise of its Redemption Right under Section 8.6
hereof;

 

(21)            the amendment and restatement of Exhibit A hereto to reflect
accurately at all times the Capital Accounts and LLC Units of the Members as the
same are adjusted from time to time to the extent necessary to reflect
redemptions, Capital Contributions, the issuance of or reduction in the number
of LLC Units, the admission of any Additional Member or any Substituted Member
or otherwise, as long as the matter or event being reflected in Exhibit A hereto
is authorized by this Agreement; provided, that, in lieu of amending or
restating Exhibit A hereto, the Managing Member may elect to reflect such
matters in the books and records of the Company and not Exhibit A;

 

(22)            admit into the Company any Additional or Substituted Managing
Member in accordance with Section 12.2 hereof;

 

(23)            admit into the Company any Additional Member in accordance with
Section 12.3 hereof;

 

(24)            the transfer of any Property to any wholly-owned Subsidiary of
Company for financing or other purposes deemed appropriate by the Managing
Member; and

 

(25)            without in any way limiting the generality of Section 7.1A(24),
the transfer of any Property to a limited partnership, limited liability company
or other form of business entity (a “Welfare Structure”), other than an
association taxable as a corporation for federal income tax purposes, for the
purpose of owning title to a Property in order to attempt to establish or
maintain the right to receive a welfare property tax exemption. In connection
with such Welfare Structure, it is acknowledged that the managing general
partner, managing member or other Person controlling of the Welfare Structure
shall be a 501(c)(3) corporation or other permitted entity formed under
applicable law and will hold no more than 0.1% managing general partner,
managing member or other equity interest in and to such Welfare Structure, and
the co-managing general partner, co-managing member or co-controlling Person
shall be the Company (or a Subsidiary of the Company) and will own at least a
0.9% co-managing general partner, managing member interest or controlling
interest and a 99% limited partner, non-managing member or non-controlling
interest in and to such Welfare Structure. All organizational documents for such
Welfare Structure shall be satisfactory to the Managing Member.

 

B.                          Each of the Non-Managing Members agrees that, except
as otherwise provided in this Agreement, the Managing Member is authorized to
execute, deliver and perform the above-mentioned agreements and transactions on
behalf of the Company without any further act, approval or vote of the
Non-Managing Members, notwithstanding any other provision the Act or any
applicable law, rule or regulation. The execution, delivery or performance by
the Managing Member or the Company of any agreement authorized or

 

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permitted under this Agreement shall not constitute a breach by the Managing
Member of any duty that the Managing Member may owe the Company or the Members
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
Managing Member may cause the Company to establish and maintain working capital
reserves in such amounts as the Managing Member, in its sole and absolute
discretion, deems appropriate and reasonable from time to time.

 

D.                          Except as otherwise expressly provided in this
Agreement, the Managing Member may, but shall be under no obligation to, take
into account the tax consequences to any Member (including the Managing Member)
of any action taken by it. Except as otherwise expressly provided in this
Agreement, the Managing Member and the Company shall not have liability to a
Member under any circumstances as a result of an income tax liability incurred
by such Member as a result of an action (or inaction) by the Managing Member
pursuant to its authority under this Agreement so long as the action or inaction
is taken in good faith and does not otherwise violate this Agreement.

 

7.2                               Certificate of Formation

 

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

 

7.3                               Restrictions on Managing Member’s Authority

 

A.                          The Managing Member may not take any action in
contravention of an express prohibition or limitation of this Agreement,
including, without limitation:

 

(1)                   take any action that would make it impossible to carry on
the ordinary business of the Company, except as otherwise provided in this
Agreement;

 

(2)                   possess Company property, or assign any rights in specific
Company property, for other than a Company purpose except as otherwise provided
in this Agreement;

 

(3)                  perform any act that would subject a Member to liability as
a Managing Member in any jurisdiction or any other liability except as provided
herein or under the Act; or

 

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(4)                   enter into any contract, mortgage, loan or other agreement
that expressly prohibits or restricts, or has the effect of prohibiting or
restricting, the ability of (a) the Managing Member or the Company from
satisfying its obligations under Article V and Section 8.6 hereof in full or
(b) a Member from exercising its rights to a Redemption in full, except, in
either case, with the written Consent of such Member affected by the
prohibition.

 

B.                          Subject to the provisions of Section 11.2 hereof,
the Managing Member shall not, without the prior Consent of the Non-Managing
Members undertake or have the authority to do or undertake, on behalf of the
Company, any of the following actions or enter into any transaction which would
have the effect of such transactions:

 

(1)                   except as provided in Section 7.3.C and except in
connection with a dissolution or termination of the Company permitted by
Section 7.3.E, amend, modify or terminate this Agreement other than to reflect
the admission, substitution, termination or withdrawal of Members pursuant to
Article XI or Article XII hereof;

 

(2)                   except as provided in Section 11.2 hereof, approve or
acquiesce to the Transfer of the Membership Interest of the Managing Member to
any Person other than the Company;

 

(3)                   except as provided in Section 12.3 hereof, admit into the
Company any Additional Member;

 

(4)                   make a general assignment for the benefit of creditors or
appoint or acquiesce in the appointment of a Custodian for all or any part of
the assets of the Company;

 

(5)                   institute any proceeding for bankruptcy on behalf of the
Company;

 

(6)                   acquire any properties other than the Contributed Property
and any Successor Properties and any assets or other property subsequently
acquired that are directly related to the Contributed Property or any Successor
Properties; or

 

(7)                   incur any Debt in violation of the provisions of
Section 4.3A hereof.

 

C.                          Notwithstanding Section 7.3.B but subject to
Section 7.3.D, the Managing Member shall have the exclusive power to amend this
Agreement as may be required to facilitate or implement any of the following
purposes:

 

(1)                   to reflect the issuance of additional Membership Interests
pursuant to Sections 4.2, 4.4 and Article XII, to reflect the admission,
substitution, termination, or withdrawal of Members in accordance with this
Agreement and to amend Exhibit A in connection therewith and to reflect the
redemption or other reduction in the number of LLC Units outstanding pursuant to
Section 5.6 hereof and as otherwise permitted by this Agreement;

 

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(2)                   to reflect a change that is of an inconsequential nature
and does not adversely affect the Non-Managing Members 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;

 

(3)                   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;

 

(4)                   to reflect such changes as are reasonably necessary for
the Managing Member to maintain its status as a REIT or to satisfy the REIT
Requirements;

 

(5)                   to modify, as set forth in and subject to the provisions
of the definition of “Capital Account,” the manner in which Capital Accounts are
computed; and

 

(6)                   to add to the obligations of the Managing Member or
surrender any right or power granted to the Managing Member or any Affiliate of
the Managing Member for the benefit of the Non-Managing Member.

 

D.                          Notwithstanding Section 7.3.B and 7.3.C hereof, this
Agreement shall not be amended with respect to any Member adversely affected,
and no action may be taken by the Managing Member, without the Consent of such
Member adversely affected if such amendment or action would (i) convert a
Non-Managing Member’s interest in the Company into a Managing Member’s interest,
(ii) modify the limited liability of a Non-Managing Member, (iii) alter rights
of the Member to receive distributions pursuant to Article V or
Section 13.3.A(4), or the allocations specified in Article VI (except as
permitted pursuant to Sections 4.2, 4.3 and 4.4 and Section 7.3.C(1) hereof),
(iv) materially alter or modify the rights to a Redemption as set forth in
Section 8.6, or the rights to a Make-Whole Payment as set forth in Sections
7.3.E, 7.3.F, 7.3.G and 7.3.H hereof, and related definitions hereof, (v) amend
this Section 7.3.D or (vi) alter or modify Section 11.2A. Further, no amendment
may alter the restrictions on the Managing Member’s authority set forth
elsewhere in this Section 7.3 without the Consent specified in such section. Any
such amendment or action Consented to by any Member shall be effective as to
that Member, notwithstanding the absence of such Consent by any other Member.

 

E.                           The Company shall pay to each Non-Managing Member
the Make-Whole Payment, if any, as provided below if the Company takes any of
the following actions during the Tax Protection Period without the prior Consent
of the Non-Managing Members, which Consent expressly states that the Make-Whole
Payment is being waived:

 

(1)                   cause or permit the Company (w) to merge, consolidate or
combine with or into any other Person (other than with a Subsidiary of the
Company), (x) to engage in any Terminating Capital Transaction (other than to a
Subsidiary of the

 

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Company), (y) to reclassify or change its outstanding equity interests or
(z) engage in any Termination Transaction or otherwise dissolve or terminate its
existence;

 

(2)                   sell, dispose, convey or otherwise transfer the
Contributed Property or any Successor Properties, in a transaction that causes
holders of Non-Managing Member Units to recognize taxable income under the Code
on account of a Built-in Gain, other than (i) a casualty loss, (ii) taking by
eminent domain (other than a disposition resulting from the mere threat of
eminent domain); or (iii) pursuant to the exercise of a purchase right by any
other Person pursuant to which such Person has the right to purchase all or any
portion of the Contributed Property or one more Successor Properties, which
purchase right was granted pursuant to any document or instrument executed in
accordance with the Contribution Agreement or in effect at the time such
Contributed Property or any Successor Property was contributed to, or acquired
by, the Company, as applicable; provided that the Company has first used
commercially reasonable efforts to structure such disposition as either a
tax-free like-kind exchange under Code Section 1031 or as a tax-free investment
under Code Section 1033; or

 

(3)                   fails to keep in place a Managing Member Loan for which a
Bottom Guarantee has been executed and delivered by an Initial Non-Managing
Member as of the Effective Date in an amount not less than the applicable
Managing Member Loan Amount, unless such Managing Member Loan is replaced or
refinanced with other Debt satisfying the requirements set for below
(“Replacement Indebtedness”). Any Replacement Indebtedness shall:

 

(a)                    not be less than the applicable Managing Member Loan
Amount therefor;

 

(b)                    not require principal repayments during such period that
would cause the principal balance of such Replacement Indebtedness to be less
than the applicable Managing Member Loan Amount therefor at any time during the
Tax Protection Period;

 

(c)                     be full recourse to the Company; and

 

(d)                    provide each Initial Non-Managing Member that executed
and delivered a Bottom Guarantee therefor as of the Effective Date with the
opportunity to execute and deliver to the lender thereunder (including Managing
Member, if applicable) a Bottom Guarantee for such Replacement Indebtedness;

 

The Managing Member shall provide each Initial Non-Managing Member who has
executed and delivered a Bottom Guarantee with respect to a Managing Member Loan
as of the Effective Date or any permitted Replacement Indebtedness thereafter
with not less than thirty (30) days’ prior written notice of its desire to
refinance such Managing Member Loan or any permitted Replacement Indebtedness
with Replacement Indebtedness; or

 

(4)                   fails to continue to provide the opportunity to each
Initial Non-Managing Member who elected as of the Effective Date to execute and
deliver a

 

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Bottom Guarantee with respect to a Managing Member Loan, to execute a Bottom
Guarantee therefor or for any Replacement Indebtedness therefor in an amount up
to the applicable Managing Member Loan Amount. If any Initial Non-Managing
Member who elected to execute and deliver a Bottom Guarantee as of the Effective
Date with respect to a Managing Member Loan, elected to deliver the same for
less than the applicable Managing Member Loan Amount, then upon written notice
to the Company and the Managing Member (and, if applicable, the lender under any
Replacement Indebtedness), not more frequently than one time per year during the
Tax Protection Period, such Initial Non-Managing Member may elect to increase
such Non-Managing Member’s Bottom Guarantee in an amount up to the applicable
Managing Member Loan Amount. As used herein, “Bottom Guarantee” means an
agreement in substantially the form attached hereto as Exhibit E or in such
other form as may be reasonably acceptable to the lender and such Initial
Non-Managing Member and providing substantively the same benefits to such
Initial Non-Managing Member as the form attached hereto as Exhibit E. By their
execution and delivery hereof, each Initial Non-Managing Member acknowledges
that it has been provided the opportunity to execute a Bottom Guarantee for a
Managing Member Loan as of the Effective Date, and if such Initial Non-Member
has exercised such opportunity, it has executed and delivered such Bottom
Guarantee to Managing Member as of the Effective Date. Notwithstanding anything
to the contrary contained herein, any Initial Managing Member that fails to
execute and deliver a Bottom Guarantee with respect to a Managing Member Loan as
of the Effective Date, shall be deemed to have elected not to exercise its
opportunity to execute a Bottom Guarantee with respect thereto and the Managing
Member shall have no further obligation to provide such opportunity to execute
and deliver a Bottom Guarantee or to maintain a Managing Member Loan or any
Replacement Indebtedness for the benefit of such Initial Non-Managing Member.

 

In the event that the prior Consent of the Non-Managing Members is not required
for the Managing Member, on behalf of the Company, to take or engage or fail to
take, as the case may be, in any of the actions described in the foregoing
subparagraphs (1), (2) and (3) or fails to provide the rights in the foregoing
subparagraph (4), the Managing Member may take such action only after providing
the Non-Managing Members with not less than fifteen (15) days’ notice of its
intention to do so.

 

F.                            The Company shall pay to the Non-Managing Members
the Make-Whole Payment as provided in Section 7.3.G. below if the Company takes
any action to dissolve or otherwise terminate the Company during the Tax
Protection Period. In addition, a Non-Managing Member shall be entitled to the
Make-Whole Payment in the event of the exercise of such Non-Managing Member’s
right to a Redemption under Section 8.6.A after receipt by such Non-Managing
Member of a written notice of a Liquidating Event provided by the Company to the
same extent such Non-Managing Member would have been entitled to such Make-Whole
Payment had such Non-Managing Member not have been redeemed pursuant to such
Redemption. In the event the Managing Member intends to dissolve or otherwise
terminate the Company following the Tax Protection Period, it shall give not
less than fifteen (15) calendar days’ prior written notice of such intent to the
Non-Managing Members prior to taking any action in furtherance of such intent.

 

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G.                          Any event in Sections 7.3.E and 7.3.F that triggers
the obligation of the Company to make a Make-Whole Payment (as defined below) is
called a “Triggering Event.” The Company shall pay to each Non-Managing Member
an amount (the “Make-Whole Payment”) equal to the aggregate federal, state and
local income taxes, if any, incurred by such Non-Managing Member as a result of
a Triggering Event. Any such federal, state and local income taxes shall be
deemed to be the amount of Built-in Gain recognized by the Non-Managing Members
multiplied by the then highest rate or rates applicable to such Built-in Gain
for the year in which such Built-in Gain is recognized grossed up to include any
federal, state and local income taxes incurred by the Non-Managing Member by
reason of the receipt of the payment from the Company. No effect shall be given
in determining the amount of the Make-Whole Payment, to a Non-Managing Member’s
taxable income, tax deductions, tax credits, tax carry forwards nor to any other
of their tax benefits or tax attributes (except that state and local taxes paid
on account of the Make-Whole Payment shall be deducted in determining federal
income taxes for purposes of determining the Make-Whole Payment). The Make-Whole
Payment shall be made within a reasonable period of time after the Triggering
Event, but in no event later than five business days prior to the date by which
such Non-Managing Member would be required to make the applicable tax payment.
In addition to any other rights available under law or equity, in the event that
the Company fails to pay any amounts owed pursuant to this Section 7.3 when due,
the Non-Managing Member to whom such payment is owed shall be deemed to have
loaned such amount to the Company. Any amounts payable to a Non-Managing Member
shall be increased by an amount equal to the greater of (x) interest accrued on
such amount at the Prime Rate from the date such amount is due until such amount
is paid in full and (y) actual interest and penalties accrued by the relevant
taxing authorities with respect to such amounts plus any penalties actually
imposed thereon by the relevant taxing authorities. In the event that any Member
becomes entitled to a Make-Whole Payment and the Company, for any reason, fails
to satisfy such obligation, then the Managing Member shall make the Make-Whole
Payment promptly following such failure by the Company to make such Make-Whole
Payment. The Make-Whole Payment shall be in addition to, and shall not in any
manner reduce, the amounts distributable or payable to the Non-Managing Members
pursuant to the other provisions of this Agreement (calculated as if there had
been no Make-Whole Payment). In the event that any Non-Managing Member becomes
entitled to a Make-Whole Payment, then, on or before the date on which such
Make-Whole Payment is due and payable to the Non-Managing Member, the Managing
Member shall make a Capital Contribution to the Company of cash in an amount
equal to said Make-Whole Payment.

 

H.                         The parties agree that the sole and exclusive rights
and remedies to which the Non-Managing Members may be entitled at law or in
equity in connection with any Triggering Event shall be for payment of the
Make-Whole Payment pursuant to Section 7.3.G, and no Non-Managing Member shall
be entitled to enjoin or otherwise object to any transactions that would result
in a taxable event or pursue any other claim with respect to a Triggering Event.
If any Non-Managing Member notifies the Company of a claim that the Company owes
a Make-Whole Payment, the Managing Member, on behalf of the Company, and the
Non-Managing Member shall negotiate in good faith to resolve any disagreements
regarding any such Triggering Event. If any such disagreement cannot be resolved
by the parties within thirty (30) calendar days after the receipt by the Company
of the notice in accordance with the preceding sentence, the Managing Member, on
behalf of the Company,

 

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and the Non-Managing Member shall jointly retain one of Deloitte, LLP,
PricewaterhouseCoopers LLP, or KPMG LLP (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 Triggering Event has
occurred and, if so, the amount of the applicable Make-Whole Payment that the
Non-Managing Member is entitled to as a result thereof, determined as set forth
in Section 7.3.G). If the parties cannot agree on an Accounting Firm, each of
the Managing Member, on behalf of the Company, and the Non-Managing Member shall
retain an Accounting Firm, and the Accounting Firms selected shall jointly
retain a third Accounting Firm. If the two Accounting Firms cannot agree upon a
third Accounting Firm within thirty (30) calendar days, such matter shall be
referred to a court of competent jurisdiction to select the third Accounting
Firm. The Accounting Firms shall be instructed to resolve as expeditiously as
possible all points of any such disagreement (including, without limitation,
whether a Triggering Event has occurred and, if so, the amount of the applicable
Make-Whole Payment that the Non-Managing Member is entitled to as a result
thereof, determined as set forth in Section 7.3.G). All determinations made by
the Accounting Firm or the Accounting Firms, as the case may be, with respect to
the resolution of whether a Triggering Event has occurred shall be final,
conclusive and binding on the Company and the Non-Managing Member. The fees and
expenses of any Accounting Firms incurred in connection with any such
determination shall be allocated as determined by such Accounting Firm acting as
arbitrator.

 

7.4                               Compensation of the Managing Member

 

A.                          The Managing Member shall not be compensated for its
services as the manager of the Company. Distributions, payments and allocations
to which the Managing Member may be entitled in its capacity as the Managing
Member shall not constitute compensation for services rendered by the Managing
Member as provided in this Agreement (including the provisions of Articles V and
VI hereof).

 

B.                          Subject to Section 7.4.C hereof, the Company shall
be liable, and shall reimburse the Managing Member on a monthly basis (or such
other basis as the Managing Member may determine in its sole and absolute
discretion), for all sums expended in connection with the Company’s business.
Any such reimbursements shall be in addition to any reimbursement of the
Managing Member as a result of indemnification pursuant to Section 7.7 hereof.

 

C.                          To the extent practicable, Company expenses shall be
billed directly to and paid by the Company. Reimbursements to the Managing
Member or any of its Affiliates by the Company shall be allowed, however, for
the actual cost to the Managing Member or any of its Affiliates of operating and
other expenses of the Company, including, without limitation, the actual cost of
goods and materials and actual cost of administrative services related to
(i) Company operations, (ii) company accounting, (iii) communications with
Members, (iv) legal services, (v) tax services, (vi) computer services,
(vii) risk management, (viii) mileage and travel expenses and (ix) such other
related operational and administrative expenses as are necessary for the prudent
organization and operation of the Company. “Actual cost of goods and materials”
means the actual cost to the Managing Member or any of its Affiliates of goods
and materials used for or by the Company obtained from entities not

 

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affiliated with the Managing Member, and “actual cost of administrative
services” means the pro rata cost of personnel (as if such persons were
employees to the Company) providing administrative services to the Company. The
cost for such services to be reimbursed to the Managing Member or any Affiliate
thereof shall be the lesser of the Managing Member’s or Affiliate’s actual cost,
or the amount the Company would be required to pay to independent parties for
comparable administrative services in the same geographic location.

 

D.                          In addition to any reimbursements to which Managing
Member is entitled pursuant to Sections 8.6 and 11.3 hereof and Section 3.4 or
elsewhere in each Registration Rights Agreement, the Managing Member shall also
be reimbursed for all expenses it incurs relating to any issuance of additional
Membership Interests, Debt of the Company, or rights, options, warrants or
convertible or exchangeable securities of the Company pursuant to Article VIII
hereof (including, without limitation, all costs, expenses, damages and other
payments resulting from or arising in connection with litigation related to any
of the foregoing), all of such expenses are considered by the Members to
constitute expenses of, and for the benefit of, the Company.

 

To the extent that reimbursements to the Managing Member or any of its
Affiliates by the Company pursuant to this Section 7.4 would constitute gross
income to the Managing Member for purposes of Code Section 856(c)(2) or
856(c)(3), then such amounts shall be treated as “guaranteed payments” within
the meaning of Code Section 707(c).

 

7.5                               Other Business of Managing Member

 

The Managing Member shall devote to the Company such time as may be necessary
for the performance of its duties as Managing Member, but the Managing Member is
not required, and is not expected, to devote its full time to the performance of
such duties. The Managing Member may engage independently or with others in
other business ventures of every nature and description, including, without
limitation, the ownership of other properties and the making or management of
other investments. Nothing in this Agreement shall be deemed to prohibit the
Managing Member or any Affiliate of the Managing Member from dealing, or
otherwise engaging in business with, Persons transacting business with the
Company, or from providing services related to the purchase, sale, financing,
management, development or operation of real or personal property and receiving
compensation therefor, not involving any rebate or reciprocal arrangement that
would have the effect of circumventing any restriction set forth herein upon
dealings with the Managing Member or any Affiliate of the Managing Member.
Neither the Company nor any Member shall have any right by virtue of this
Agreement or the relationship created hereby in or to such other ventures or
activities or to the income or proceeds derived therefrom, and the pursuit of
such ventures, even if competitive with the business of the Company, shall not
be deemed wrongful or improper.

 

7.6                               Contracts with Affiliates

 

A.                          Subject to Section 7.6.B below, the Company may lend
or contribute to Persons in which it has an equity investment, and such Persons
may borrow funds from the Company, on terms and conditions established in the
sole and absolute discretion of

 

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the Managing Member. The foregoing authority shall not create any right or
benefit in favor of any Person.

 

B.                          The Managing Member or any of its Affiliates,
directly or indirectly, shall be permitted to sell, transfer or convey any
property to, or purchase any property from, or borrow funds from, or lend funds
to, the Company or engage in any other transaction with the Company, but only
upon terms determined by the Managing Member in good faith to be fair and
reasonable and comparable to terms that could be obtained from an unaffiliated
party in an arm’s length transaction, except as otherwise expressly permitted by
this Agreement.

 

7.7                               Indemnification

 

A.                          To the fullest extent permitted by applicable law,
the Company shall indemnify each Indemnitee from and against any and all losses,
claims, damages, liabilities, 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 Company (“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 unless it is established that: (i) the act or
omission of the Indemnitee was material to the matter giving rise to the
proceeding and either was committed in bad faith or was the result of active and
deliberate dishonesty; (ii) the Indemnitee actually received an improper
personal benefit in money, property or services; or (iii) in the case of any
criminal proceeding, the Indemnitee had reasonable cause to believe that the act
or omission was unlawful. 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 Company or any Subsidiary of the Company
(including, without limitation, any indebtedness which the Company or any
Subsidiary of the Company has assumed or taken subject to), and the Managing
Member is hereby authorized and empowered, on behalf of the Company, 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 Action by judgment, order or
settlement does not create a presumption that the Indemnitee did not meet the
requisite standard of conduct set forth in this Section 7.7.A. The termination
of any Action by conviction or upon a plea of nolo contendre or its equivalent,
or an entry of an order of probation prior to judgment against an Indemnitee,
creates a rebuttable presumption that the Indemnitee acted in a manner contrary
to that specified in this Section 7.7.A with respect to the subject matter of
such Action. Any indemnification pursuant to this Section 7.7 shall be made only
out of the assets of the Company, and any insurance proceeds from the liability
policy covering the Managing Member and any Indemnitees, and neither the
Managing Member nor any Non-Managing Member shall have any obligation to
contribute to the capital of the Company or otherwise provide funds to enable
the Company to fund its obligations under this Section 7.7.

 

B.                          Reasonable 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 shall be paid or reimbursed by the Company as incurred by the
Indemnitee in advance of the final

 

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disposition of the Action upon receipt by the Company of (i) a written
affirmation by the Indemnitee of the Indemnitee’s good faith belief that the
standard of conduct necessary for indemnification by the Company as authorized
in Section 7.7.A has been met, and (ii) a written undertaking by or on behalf of
the Indemnitee to repay the amount if it shall ultimately be determined that the
standard of conduct has not been met.

 

C.                          The indemnification provided by this Section 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 Members,
as a matter of law or otherwise, and shall continue as to an Indemnitee who has
ceased to serve in such capacity unless otherwise provided in a written
agreement with such Indemnitee or in the writing pursuant to which such
Indemnitee is indemnified.

 

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

 

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

 

F.                            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.

 

G.                          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
limitations on the Company’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.

 

H.                         If and to the extent any reimbursements to the
Managing Member pursuant to this Section 7.7 constitute gross income to the
Managing Member (as opposed to the repayment of advances made by the Managing
Member on behalf of the Company) such amounts shall constitute guaranteed
payments within the meaning of Code Section 707(c), shall be treated
consistently therewith by the Company and all Members, and shall not be treated
as distributions for purposes of computing the Members’ Capital Accounts.

 

7.8                               Liability of the Managing Member

 

A.                          Notwithstanding anything to the contrary set forth
in this Agreement, neither the Managing Member nor any of its directors or
officers shall be liable or

 

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accountable in damages or otherwise to the Company, any Members 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 Managing Member or such director or officer acted in good faith.

 

B.                          The Non-Managing Members expressly acknowledge that
the Managing Member is acting for the benefit of the Company, the Members and
the Managing Member’s shareholders collectively, that the Managing Member is
under no obligation to give priority to the separate interests of the Members or
the Managing Member’s shareholders (including, without limitation, the tax
consequences to Members, Assignees or the Managing Member’s shareholders) in
deciding whether to cause the Company to take (or decline to take) any actions
and that the Managing Member shall not be liable to the Company or to any Member
for monetary damages for losses sustained, liabilities incurred, or benefits not
derived by Non-Managing Members in connection with such decisions, provided that
the Managing Member has acted in good faith and has not breached its express
covenants set forth in this Agreement.

 

C.                          Subject to its obligations and duties as Managing
Member set forth in Section 7.1.A hereof, the Managing Member 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 or
agents. The Managing Member shall not be responsible for any misconduct or
negligence on the part of any such agent appointed by it in good faith.

 

D.                          Any amendment, modification or repeal of this
Section 7.8 or any provision hereof shall be prospective only and shall not in
any way affect the limitations on the Managing Member’s, and its officers’ and
directors’, liability to the Company and the Non-Managing Members 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.

 

7.9                               Other Matters Concerning the Managing Member

 

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

 

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C.                          The Managing Member 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 Managing Member 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 Managing Member
hereunder.

 

D.                          Notwithstanding any other provisions of this
Agreement or the Act, any action of the Managing Member on behalf of the Company
or any decision of the Managing Member to refrain from acting on behalf of the
Company undertaken in the good faith belief that such action or omission is
necessary or advisable in order (i) to protect the ability of the Managing
Member to continue to qualify as a REIT, (ii) for the Managing Member otherwise
to satisfy the REIT Requirements or (iii) to allow the Managing Member to avoid
incurring any liability for taxes under Code Section 857 or Code Section 4981,
is expressly authorized under this Agreement and is deemed approved by all of
the Non-Managing Members. If in the opinion of the Managing Member any such
action or omission shall adversely affect the rights of a Non-Managing Member
hereunder, the Managing Member shall give the Non-Managing Member Representative
prior written notice of such intended action or omission.

 

7.10                        Title to Company Assets

 

Title to Company assets, whether real, personal or mixed and whether tangible or
intangible, shall be deemed to be owned by the Company as an entity, and no
Member, individually or collectively with other Members or Persons, shall have
any ownership interest in such Company assets or any portion thereof. All
Company assets shall be recorded as the property of the Company in its books and
records, irrespective of the name in which legal title to such Company assets is
held.

 

7.11                        Reliance by Third Parties

 

Notwithstanding anything to the contrary in this Agreement, any Person dealing
with the Company shall be entitled to assume that the Managing Member has full
power and authority, without the consent or approval of any other Member or
Person, to encumber, sell or otherwise use in any manner any and all assets of
the Company and to enter into any contracts on behalf of the Company, and take
any and all actions on behalf of the Company, and such Person shall be entitled
to deal with the Managing Member as if it were the Company’s sole party in
interest, both legally and beneficially. Each Non-Managing Member 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 Managing Member in connection
with any such dealing. In no event shall any Person dealing with the Managing
Member 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 Managing Member or its representatives. Each and
every certificate, document or other instrument executed on behalf of the
Company by the Managing Member or its representatives shall be conclusive
evidence in favor of any and every Person relying thereon or claiming thereunder
that (i) at the time of the execution and delivery of such certificate, document
or instrument, this Agreement was in full

 

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force and effect, (ii) the Person executing and delivering such certificate,
document or instrument was duly authorized and empowered to do so for and on
behalf of the Company and (iii) such certificate, document or instrument was
duly executed and delivered in accordance with the terms and provisions of this
Agreement and is binding upon the Company.

 

ARTICLE VIII
RIGHTS AND OBLIGATIONS OF MEMBERS

 

8.1                               Limitation of Liability

 

The Non-Managing Members shall have no liability under this Agreement except as
expressly provided in this Agreement or under the Act.

 

8.2                               Managing of Business

 

No Non-Managing Member or Assignee (other than the Managing Member, any of its
Affiliates or any officer, director, employee, partner, agent or trustee of the
Managing Member, the Company 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 Company’s business transact any business in the
Company’s name or have the power to sign documents for or otherwise bind the
Company. The transaction of any such business by the Managing Member, any of its
Affiliates or any officer, director, employee, partner, agent or trustee of the
Managing Member, the Company or any of their Affiliates, in their capacity as
such, shall not affect, impair or eliminate the limitations on the liability of
the Non-Managing Members or Assignees under this Agreement.

 

8.3                               Outside Activities of Members

 

Subject to any agreements entered into by a Member or its Affiliates with the
Managing Member, the Company or a Subsidiary (including, without limitation, any
employment agreement), any Member and any Assignee, officer, director, employee,
agent, trustee, Affiliate or shareholder of any Member shall be entitled to and
may have business interests and engage in business activities in addition to
those relating to the Company, including business interests and activities that
are in direct or indirect competition with the Company or that are enhanced by
the activities of the Company. Neither the Company nor any Member shall have any
rights by virtue of this Agreement in any business ventures of any Member or
Assignee. Subject to such agreements, none of the Members nor any other Person
shall have any rights by virtue of this Agreement or the relationship
established hereby in any business ventures of any other Person (other than the
Managing Member, to the extent expressly provided herein), and such Person shall
have no obligation pursuant to this Agreement, subject to any agreements entered
into by a Member or its Affiliates with the Managing Member, the Company or a
Subsidiary, to offer any interest in any such business ventures to the Company,
any Member or any such other Person, even if such opportunity is of a character
that, if presented to the Company, any Member or such other Person, could be
taken by such Person. No Non-Managing Member shall owe any fiduciary duty to the
Company or any Members by virtue of such Non-Managing Member’s ownership of
Non-Managing Member Units.

 

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8.4                               Return of Capital

 

Except pursuant to the rights of Redemption set forth in Section 8.6 hereof, no
Member shall be entitled to the withdrawal or return of its Capital
Contribution, except to the extent of distributions made pursuant to this
Agreement or upon termination of the Company as provided herein. Except to the
extent provided in Article V, Article VI and Article XIII hereof or otherwise
expressly provided in this Agreement, no Member or Assignee shall have priority
over any other Member or Assignee either as to the return of Capital
Contributions or as to profits, losses, distributions or credits.

 

8.5                               Rights of Non-Managing Members Relating to the
Company

 

A.                          In addition to other rights provided by this
Agreement or by the Act, and except as limited by Section 8.5.C hereof, each
Non-Managing Member shall have the right, for a purpose reasonably related to
such Non-Managing Member’s Membership Interest in the Company, upon written
demand with a statement of the purpose of such demand and at such Non-Managing
Member’s own expense:

 

(1)                   to obtain a copy of (i) the most recent annual and
quarterly reports filed with the SEC by the Managing Member pursuant to the
Exchange Act and (ii) each report or other written communication sent to the
shareholders of the Managing Member;

 

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

 

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

 

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

 

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

 

B.                          The Company shall notify any Non-Managing Member of
the then current Adjustment Factor or any change made to the Adjustment Factor
or to the REIT Shares Amount within 30 days following such change or adjustment.

 

C.                          Notwithstanding any other provision of this
Section 8.5, the Managing Member may keep confidential from the Non-Managing
Members, for such period of time as the Managing Member determines in its sole
and absolute discretion to be reasonable, any information that (i) the Managing
Member believes to be in the nature of trade secrets or other information the
disclosure of which the Managing Member in good faith believes is not in the
best interests of the Company or could damage the Company or its business or
(ii) the Company or the Managing Member is required by law or by agreements with
unaffiliated third parties to keep confidential.

 

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8.6                               Redemption Rights

 

A.                          Commencing on the one (1) year anniversary of the
Effective Date, each Non-Managing Member shall have the right (the “Redemption
Right”) (subject to the terms and conditions set forth herein) to require the
Company to redeem all or a portion of the Non-Managing Member Units held by such
Non-Managing Member (all such Non-Managing Member Units being hereafter called
“Tendered Unit”) for the Cash Amount payable on the Specified Redemption Date
(the “Redemption”); provided, however, that at the election of and in the sole
and absolute discretion of the Managing Member, the Managing Member may elect to
assume the Company’s obligation with respect to the Redemption (though such
assumption shall not relieve the Company from such obligation in the event the
Managing Member fails to fulfill such obligation) and, at the election of and in
the sole and absolute discretion of the Managing Member, to satisfy the
Redemption by (i) paying either the Cash Amount payable on the Specified
Redemption Date or (ii) delivering a number of REIT Shares equal to the REIT
Shares Amount payable on the Specified Redemption Date.

 

B.                          Any Redemption shall be exercised pursuant to a
Notice of Redemption delivered to the Company by a Non-Managing Member (or any
Substituted Member of a Non-Managing Member or an Assignee of either) exercising
the Redemption Right (the “Tendering Party”). On the Specified Redemption Date,
the Tendering Party shall sell the Tendered Units to the Company or the Managing
Member, as the case may be, in accordance with this Section 8.6. Any Tendered
Units acquired by the Managing Member pursuant to this Section 8.6 shall be held
by the Managing Member as Non-Managing Member Units with all the rights and
preferences relating thereto as provided in this Agreement. The Tendering Party
shall submit (i) such information, certification or affidavit as the Company may
reasonably require in connection with the Ownership Limit and (ii) if the
issuance of the REIT Shares upon such Redemption is not registered under the
Securities Act, such written representations, investment letters, legal opinions
or other instruments necessary, in the Company’s view, to effect compliance with
the Securities Act. If a Cash Amount is to be delivered upon the Redemption, the
Cash Amount shall be delivered as a certified check payable to the Tendering
Party or, in the Company’s or Managing Member’s sole discretion, as the case may
be, in immediately available funds via wire transfer to an account or
account(s) specified by the Tendering Party. If REIT Shares are to be delivered
upon the Redemption, the REIT Shares Amount shall be delivered by the Managing
Member as duly authorized, validly issued, fully paid and nonassessable REIT
Shares (and, if applicable, Rights), free of any pledge, lien, encumbrance or
restriction, other than the Ownership Limit, and other restrictions provided in
the Charter or the Bylaws of the Managing Member, and if the issuance of the
REIT Shares upon such Redemption is not registered under the Securities Act, the
Securities Act, and relevant state securities or “blue sky” laws. The Tendering
Party shall be deemed the owner of such REIT Shares and Rights for all purposes,
including, without limitation, rights to vote or consent, receive dividends, and
exercise rights, as of the Specified Redemption Date. REIT Shares issued upon an
acquisition of the Tendered Units by the Managing Member pursuant to this
Section 8.6 may contain such legends regarding restrictions on Transfer or
ownership to protect the Managing Member’s tax status as a REIT and in the event
the REIT Shares issuable upon such Redemption are not registered for resale
under the Securities Act, restrictions under the Securities Act and applicable
state securities laws as the Managing

 

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Member in good faith determines to be necessary or advisable in order to ensure
compliance with such laws.

 

C.                          Notwithstanding the provisions of Sections 8.6.A and
B hereof, the following shall apply:

 

(1)                   no Tendering Party shall have any right to tender for
Redemption (whether for the REIT Shares Amount or the Cash Amount) any Excess
LLC Units held by such Tendering Party. The Managing Member shall have no
obligation to acquire Excess LLC Units, whether for the REIT Shares Amount or
the Cash Amount;

 

(2)                   No Tendering Party may exercise the Redemption Rights
pursuant to Section 8.6.A and B hereof more than one (1) time during any
Calendar Quarter. In determining whether such limit has been reached during any
Calendar Quarter with respect to any Non-Managing Member or Substituted Member,
it is understood and agreed that the exercise of the Redemption Rights by any
Assignee of such Non-Managing Member or Substituted Member of a Non-Managing
Member shall be counted for all purposes as the exercise of such Redemption
Rights by the Non-Managing Member or Substituted Member assignor.
Notwithstanding the foregoing, Tendering Party may exercise the Redemption
Rights after the receipt of a notice of a Liquidating Event;

 

(3)                   No Tendering Party may exercise the Redemption Rights
pursuant to Sections 8.6.A and B as to fewer than 500 Non-Managing Member Units
(unless they constitute all of the Non-Managing Member Units held by such
Tendering Party);

 

(4)                   No Tendering Party may deliver a Notice of Redemption
during the period from December 1 of any year through January 1 of the following
year, nor shall any Specified Redemption Date occur during the period from
December 21 of any year through January 22 of the following year; and

 

(5)                   Each Tendering Party shall pay to the Managing Member the
sum of $1,500 as the stipulated and agreed upon reimbursement cost for the
Managing Member’s administrative overhead and out-of-pocket costs in connection
with such Redemption pursuant to Sections 8.6.A and B.; provided, however, that
no such reimbursement shall be due with respect to the first such Redemption by
any Non-Managing Member or Substituted Member in any calendar year; provided,
further, however, that the exercise by any Assignee of a Non-Managing Member or
Substituted Member shall be deemed a Redemption by such Non-Managing Member or
Substituted Member of such Assignee (and vice versa) for purposes of determining
whether such reimbursement is due and owing to the Managing Member.

 

D.                          Notwithstanding anything herein to the contrary,
with respect to any Redemption pursuant to this Section 8.6:

 

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(1)                   each Tendering Party shall continue to own all LLC Units
subject to any Redemption, and be treated as a Member with respect to such LLC
Units for all purposes of this Agreement, until such LLC Units are Transferred
to the Company or the Managing Member, as the case may be, and paid for or
exchanged on the Specified Redemption Date; subject, however, to the provisions
of Section 5.7. Until a Specified Redemption Date and an acquisition of the
Tendered Units by the Managing Member, if it so elects, pursuant to Sections
8.6.A and B hereof, the Tendering Party shall have no rights as a shareholder of
the Managing Member with respect to the REIT Shares issuable in connection with
such Redemption; and

 

(2)                   the consummation of any Redemption 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.

 

E.                           In connection with an exercise of Redemption Rights
pursuant to this Section 8.6, the Tendering Party shall submit the following to
the Managing Member, in addition to the Notice of Redemption:

 

(1)                   Any information reasonably required by the Managing Member
in order to allow it to determine (a) the actual ownership, Beneficial
Ownership, and Constructive Ownership of REIT Shares by (i) such Tendering Party
and (ii) any Related Party and (b) that, after giving effect to the Redemption,
neither the Tendering Party nor any Related Party will have actual ownership,
Beneficial Ownership, or Constructive Ownership of a number of REIT Shares that
is in violation of the Ownership Limit;

 

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

 

(3)                   An undertaking to certify, at and as a condition to the
closing of the Redemption that either (a) the actual ownership, Beneficial
Ownership, and Constructive Ownership of REIT Shares by the Tendering Party and
any Related Party remain unchanged from that disclosed pursuant to
Section 8.6.E(1) or (b) after giving effect to the Redemption, neither the
Tendering Party nor any Related Party shall have actual ownership, Beneficial
Ownership, or Constructive Ownership of a number of REIT Shares that is in
violation of the Ownership Limit.

 

ARTICLE IX
BOOKS, RECORDS, ACCOUNTING AND REPORTS

 

9.1                               Records and Accounting

 

A.                          The Managing Member shall keep or cause to be kept
at the principal office of the Company those records and documents required to
be maintained by the Act and other books and records deemed by the Managing
Member to be appropriate with respect to the Company’s business, including,
without limitation, all books and records necessary to provide to the Members
any information, lists and copies of documents required

 

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to be provided pursuant to Section 9.3 hereof. Any records maintained by or on
behalf of the Company in the regular course of its business may be kept on, or
be in the form of, punch cards, magnetic tape, photographs, micrographics or any
other information storage device, provided that the records so maintained are
convertible into clearly legible written form within a reasonable period of
time.

 

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

 

9.2                               Fiscal Year

 

The Fiscal Year of the Company shall be the calendar year.

 

9.3                               Reports

 

Upon written request after any Calendar Quarter, the Managing Member shall as
promptly as practicable deliver to each requesting Member a profit and loss
statement and balance sheet of the Company dated as of the last day of such
Calendar Quarter.”

 

9.4                               Cooperation Regarding Tax Matters Relating to
the Contributed Property

 

A.                          In connection with the issuance of Non-Managing
Member Units to the Contributor or any of such Contributor’s Partners, including
the issuance of Non-Managing Member Units to the Initial Non-Managing Members
upon the contribution of the Contributed Property to the Company pursuant to the
Contribution Agreement, the Non-Managing Member Representative shall deliver, or
cause the Contributor to deliver, to the Company at or prior to the effective
date of such issuance, at the Initial Non-Managing Member’s or the Contributor’s
sole cost and expense, the following information prepared as of the date of such
anticipated contribution.

 

(1)                   depreciation and amortization schedules for the assets
constituting the Contributed Property, as kept for both book and tax purposes,
showing original basis and accumulated depreciation or amortization;

 

(2)                   basis information (computed for both book and tax
purposes, if different) for the Contributed Property and all assets that are
components of such Contributed Property;

 

(3)                   the adjusted basis of the Contributor and any constituent
Partners in its interest in the Company; and

 

(4)                  calculations of the estimated amounts of gain to be
realized and recognized (if any) by the Contributor, as a result of the
transactions involving the

 

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Contributed Property in accordance with this Agreement and showing the method by
which such amounts are calculated.

 

B.                          The Company shall be permitted to rely on the
information provided or to be provided to it under this Section 9.4 as to the
adjusted tax basis of the Contributed Property and the relevant depreciation
schedules thereto in determining the amount of Built-in Gain on a going forward
basis.

 

C.                          The Non-Managing Member Representative shall provide
or cause the Contributor and each of the Contributor’s Partners to provide
reasonable assistance to the Company to enable the Company and the Managing
Member to determine the Built-in Gain or to prepare their tax returns. The
Non-Managing Member Representative shall deliver as promptly as practicable to
the Company copies of each Contributor’s final federal, state and local tax
returns (including information returns), including associated Schedules K-1, for
the tax year in which the contribution of the Contributed Property occurs,
including any amendments thereto, and to notify the Company, in writing, of any
audits of such return, or of any audits for other tax years that could affect
the amounts shown on the returns for the tax year in which the Closing occurs.
Copies of such returns shall be provided to the Company in draft form at least
ten (10) days before they are filed, and in final form upon filing. The
Non-Managing Member Representative shall also provide, or cause the Contributor
to provide, to the Company, promptly upon receipt, any notice that it receives
from any of its direct or indirect constituent Partners that such Partner
intends to prepare its tax returns in a manner inconsistent with the returns
filed by the Contributor. The Non-Managing Member Representative understands and
agrees that he shall cause the tax returns filed by the Contributor and each of
the Contributor’s Partners to be substantially consistent with the information
provided to the Company pursuant to this Section 9.4.

 

ARTICLE X
TAX MATTERS

 

10.1                        Preparation of Tax Returns

 

The Managing Member shall arrange for the preparation and timely filing of all
returns with respect to Company income, gains, deductions, losses and other
items required of the Company for federal and state income tax purposes and
shall use all commercially reasonable efforts to furnish, within 90 days of the
close of each taxable year, the tax information reasonably required by Members
for federal and state income tax reporting purposes.

 

10.2                        Tax Elections

 

Except as otherwise provided herein, the Managing Member shall (i) determine
whether to make any available election pursuant to the Code, including, without
limitation, the election under Code Section 754 and (ii) also determine whether
to revoke any such election (including, without limitation, any election under
Code Section 754); provided, however, that any such determination by the
Managing Member pursuant to this Section 10.2 made prior to the Subsequent
Threshold Date shall be made in good faith based upon the best interests of the

 

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Members in the aggregate and after the Subsequent Threshold Date in the Managing
Member’s sole and absolute discretion.

 

10.3                        Tax Matters Partner

 

A.                          The Managing Member shall be designated and shall
operate as “Tax Matters Partner” (as defined in Code Section 6231), to oversee
or handle matters relating to the taxation of the Company; provided, however,
that prior to the Subsequent Threshold Date, the Consent of the Non-Managing
Member Representative (which approval or disapproval shall not be unreasonably
withheld or delayed) shall be shall be required to settle any administrative
proceeding or institute or settle any litigation with respect to tax issues if
such action (a) is reasonably likely to materially and adversely affect the
Non-Managing Members in the aggregate, and (b) does not relate to the Managing
Member’s tax status as a REIT.

 

B.                          Income tax returns of the Company shall be prepared
by such certified public accountant(s) as the Managing Member shall retain at
the expense of the Company.

 

10.4                        Organizational Expenses

 

The Company shall elect to deduct expenses, if any, incurred by it in organizing
the Company ratably as provided in Code Section 709.

 

10.5                        Tax Partnership Treatment

 

The Members intend that the Company be treated as a partnership, and not as an
association taxable as a corporation, for federal and all applicable state
income tax purposes.

 

ARTICLE XI
TRANSFERS AND WITHDRAWALS

 

11.1                        Transfer

 

A.                          No part of the interest of a Member 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 Membership 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 Membership Interest
not made in accordance with this Article XI shall be null and void ab initio.

 

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11.2                        Transfer of Managing Member’s Membership Interest

 

A.                          Except in connection with a transaction described in
Section 11.2.B, the Managing Member shall not withdraw from the Company and
shall not Transfer all or any portion of its interest in the Company without the
Consent of the Non-Managing Members, which Consent shall not be unreasonably
withheld; provided, however, that the Managing Member may Transfer all or any
portion of its interest in the Company without such Consent to any Affiliate of
the Managing Member, provided that the Managing Member guarantees the
obligations of such Affiliate under this Agreement (the “Managing Member
Guarantee”). Upon any Transfer of the Membership Interest of the Managing Member
in accordance with the provisions of this Section 11.2, the transferee shall
become a Substitute Managing Member for all purposes herein, and shall be vested
with the powers and rights of the transferor Managing Member, and shall be
liable for all obligations and responsible for all duties of the Managing
Member, 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
Membership 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 Managing Member under this
Agreement with respect to such Transferred Membership Interest, and such
Transfer shall relieve the transferor Managing Member of its obligations under
this Agreement accruing subsequent to the date of such Transfer except for the
Managing Member Guarantee. In the event the Managing Member withdraws from the
Company, in violation of this Agreement or otherwise, or otherwise dissolves or
terminates, or upon the Incapacity of the Managing Member, all of the remaining
Members may elect to continue the Company business by selecting a Substitute
Managing Member in accordance with the Act.

 

B.                          The Managing Member shall not engage in any merger,
consolidation or other combination with or into another Person, sale of all or
substantially all of its assets or any reclassification, or change of its
outstanding equity interests through a restructuring, recapitalization,
reclassification or otherwise (a “Termination Transaction”), unless either
(i) the Termination Transaction has been approved by the Consent of the
Non-Managing Members or (ii) in connection with the Termination Transaction, all
holders of LLC Units (other than the Managing Member) either will receive for
each LLC Unit, or will be entitled to receive, for each LLC Unit (in lieu of the
REIT Shares Amount) upon a Redemption of the LLC Unit pursuant to Section 8.6
hereof, an amount of cash, securities, or other property equal to the amount
that would have been paid to the holder had the LLC Unit been redeemed for REIT
Shares pursuant to Section 8.6 hereof immediately prior to the consummation of
the Termination Transaction subject, in the event of a Redemption of the LLC
Unit pursuant to Section 8.6 hereof subsequent to the consummation of the
Termination Transaction, to further adjustment to the extent provided in this
Agreement to compensate for the dilutive effect of certain transactions
described herein; provided, however, that, if, in connection with the
Termination Transaction, a purchase, tender or exchange offer shall have been
made to and accepted by the holders of more than fifty percent (50%) of the
outstanding REIT Shares, each Member shall receive, or shall have the right to
elect to receive, the greatest amount of cash, securities, or other property
which such Member would have received had it redeemed its LLC Units for REIT
Shares pursuant to Section 8.6 immediately prior to the expiration of such
purchase, tender or exchange offer and had thereupon accepted such purchase,
tender or exchange offer. No provision of this Agreement, including, without
limitation, the provisions

 

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of Section 7.3.B hereof, shall prohibit the consummation of any Termination
Transaction permitted by the provisions of this Section 11.2.B.

 

11.3                        Non-Managing Members’ Rights to Transfer

 

A.                          General. No Non-Managing Member shall Transfer all
or any portion of its Membership Interest, or any of such Non-Managing Member’s
economic rights as a Non-Managing Member, to any transferee without first
offering such Membership Interest to the Managing Member or otherwise obtaining
the Consent of the Managing Member, which Consent may be withheld in its sole
and absolute discretion; provided, however, that notwithstanding the foregoing
or any other provisions of this Agreement, any Non-Managing Member may, without
the Consent of the Managing Member, (x) pledge all or any portion of its
Membership Interest to a lender to such Member to secure indebtedness to such
lender and Transfer such Membership Interest to such lender upon foreclosure of
the debt secured by such Membership Interest, so long as any such pledge or
other Transfer would not otherwise violate the provisions of this Agreement or
(y) transfer all or any portion of its Membership Interest or economic rights as
a Non-Managing Member to a partner or member of such Non-Managing Member in as a
distribution or in liquidation of such partner or member’s interest in such
Non-Managing Member, to a family member of such Non-Managing Member, a trust all
of the beneficiaries of which are such Non-Managing Member and family members of
such Non-Managing Member, a corporation, general or limited partnership or
limited liability company all of the owners of which are such Non-Managing
Member and family members of such Non-Managing Member or to an organization
described in Code Sections 170(b)(1)(A), 170(c)(2) or 501(c)(3), so long as any
such Transfer would not otherwise violate the provisions of this Agreement
(herein, a “Permitted Non-Managing Member Assignment”), and in connection with
any Permitted Non-Managing Member Assignment, such Non-Managing shall reimburse
to the Managing Member all actual out-of-pocket costs and expenses in connection
with such Permitted Non-Managing Member Assignment, including, without
limitation, attorneys’ fees and costs and any other expenses incurred by the
Managing Member, including the costs of filing any amendment or prospectus
supplement to any registration statement or prospectus as necessary to reflect
such Transfer. In addition, it is understood and agreed that the transferee
pursuant to any Permitted Non-Managing Member Assignment shall only become an
Assignee and not a Substituted Member, unless otherwise Consented to by the
Managing Member in its sole and absolute discretion.

 

B.                          Conditions to Transfer. It is a condition to any
Transfer otherwise permitted hereunder that the transferee assume by operation
of law or express agreement all of the obligations of the transferor Member
under this Agreement with respect to such Transferred Membership Interest, and
that the Managing Member be reimbursed for all actual out-of-pocket costs and
expenses incurred by the Managing Member in connection with such Transfer,
including, without limitation, attorneys’ fees and costs and any other expenses
incurred by Managing Member, including the costs of filing any amendment or
prospectus supplement to any registration statement or prospectus as necessary
to reflect such Transfer. Notwithstanding the foregoing, any transferee of any
Transferred Membership Interest shall be subject to the Ownership Limits and any
and all ownership limitations contained in the Charter. Any transferee, whether
or not admitted as a Substituted Member, shall take subject to the obligations
of the transferor hereunder. Unless admitted as a Substituted Member, no

 

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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.

 

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

 

D.                          Opinion of Counsel. In connection with any Transfer
of a Membership Interest other than a Redemption, the Managing Member 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 Company or the Membership Interests
Transferred. If, in the opinion of such counsel, such Transfer would require the
filing of a registration statement under the Securities Act or would otherwise
violate any federal or state securities laws or regulations applicable to the
Company or the LLC Units, the Managing Member may prohibit any Transfer by a
Member of Membership Interests otherwise permitted under this Section 11.3.

 

E.                           Transfers to Lenders. No Transfer of any LLC Units
may be made to a lender to the Company or any Person who is related (within the
meaning of Regulations Section 1.752-4(b)) to any lender to the Company whose
loan constitutes a Nonrecourse Liability, without the Consent of the Managing
Member, 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
Company and the Managing Member to redeem or exchange for the REIT Shares Amount
any LLC Units in which a security interest is held simultaneously with the time
at which such lender would be deemed to be a member in the Company for purposes
of allocating liabilities to such lender under Code Section 752.

 

11.4                        Substituted Members

 

A.                          No Member shall have the right to substitute a
transferee (including any transferees pursuant to Transfers permitted by
Section 11.3 hereof) as a Member in its place. The Managing Member shall,
however, have the right to Consent to the admission of a transferee of the
interest of a Member pursuant to this Section 11.4 as a Substituted Member,
which Consent may be given or withheld by the Managing Member in its sole and
absolute discretion. The Managing Member’s failure or refusal to permit a
transferee of any such interests to become a Substituted Member shall not give
rise to any cause of action against the Company or any Member.

 

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

 

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Company an acceptance of all of the terms and conditions of this Agreement
(including without limitation, the provisions of Section 2.4 and such other
documents or instruments as may be required to effect the admission) from and
after the effective date of such Transfer.

 

C.                          Upon the admission of a Substituted Member, the
Managing Member shall amend Exhibit A to reflect the name, address, Capital
Account and number of LLC Units of such Substituted Member and to eliminate or
adjust, if necessary, the name, address, Capital Account and number of LLC Units
of the predecessor of such Substituted Member (and any other Member, as
necessary); provided that, in lieu of amending or restating Exhibit A hereto,
the Managing Member may elect to reflect such matters in the books and records
of the Company and not Exhibit A;

 

11.5                        Assignees

 

If the Managing Member, in its sole and absolute discretion, does not Consent to
the admission of any permitted transferee under Section 11.3 hereof as a
Substituted Member, as described in Section 11.4 hereof, 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 liability company
interest under the Act, including the right to receive distributions from the
Company and the share of Net Income, Net Loss and other items of income, gain,
loss, deduction and credit of the Company attributable to the LLC Units assigned
to such transferee, the rights to Transfer the LLC Units provided in this
Article XI, and the right of Redemption provided in Section 8.6, but shall not
be deemed to be a Member of LLC Units for any other purpose under this
Agreement, and shall not be entitled to effect a Consent or vote with respect to
such LLC Units on any matter presented to the Members for approval (such right
to Consent or vote, to the extent provided in this Agreement or under the Act,
fully remaining with the transferor Member). In the event that any such
transferee desires to make a further assignment of any such LLC 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 Members desiring to make an assignment of
LLC Units. The Managing Member shall have no liability under any circumstance
with respect to any Assignee as to which it does not have notice.

 

11.6                        General Provisions

 

A.                          No Non-Managing Member may withdraw from the Company
other than (i) as a result of a permitted Transfer of all of such Non-Managing
Member’s LLC Units in accordance with this Article XI and the transferee(s) of
such LLC Units being admitting to the Company as a Substituted Member or
(ii) pursuant to a Redemption by the Non-Managing Member of all of its LLC Units
under Section 8.6 hereof.

 

B.                          Any Non-Managing Member who shall Transfer all of
its LLC Units in a Transfer (i) permitted pursuant to this Article XI where such
transferee was admitted as a Substituted Member; (ii) pursuant to the exercise
of its rights to effect a Redemption of all of its LLC Units under Section 8.6
hereof; (iii) pursuant to a Reduction; or (iv) pursuant to a combination of
Transfers of the types specified in the foregoing (i) - (iii), shall cease to be
a Member.

 

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C.                          Transfers pursuant to this Article XI (but not
pursuant to a Redemption) may only be made on the first day of a Calendar
Quarter of the Company, unless the Managing Member otherwise agrees.

 

D.                          All distributions of Available Cash attributable to
an LLC Unit with respect to which the LLC Record Date is before the date of a
Transfer or a Redemption of the LLC Unit shall be made to the transferor Member
and all distributions of Available Cash thereafter attributable to such LLC Unit
shall be made to the transferee Member.

 

E.                           Notwithstanding anything to the contrary set forth
herein, in addition to any other restrictions on Transfer herein contained, in
no event may any Transfer or assignment of a Membership Interest by any Member
(including any redemption or any Redemption or any other acquisition of LLC
Units by the Company) be made:

 

(1)                   to any person or entity who lacks the legal right, power
or capacity to own a Membership Interest;

 

(2)                   in violation of applicable law;

 

(3)                   without the Consent of the Managing Member, if such
Transfer would, in the opinion of counsel to the Company or the Managing Member,
cause an increased tax liability to any other Member or Assignee as a result of
the termination of the Company, in either case for federal or state income or
franchise tax purposes (except in the case of a Terminating Capital Transaction
or as a result of the Redemption of all LLC Units pursuant to Section 8.6);

 

(4)                   without the Consent of the Managing Member, if such
Transfer could, as reasonably determined by the Managing Member, (i) result in
the Company being treated as an association taxable as a corporation for federal
income tax or for state income or franchise tax purposes, (ii) adversely affect
the ability of the Managing Member to continue to qualify as a REIT or subject
the Managing Member to any additional taxes under Code Section 857 or Code
Section 4981 or (iii) be treated as having been effectuated through an
“established securities market” or a “secondary market (or the substantial
equivalent thereof)” within the meaning of Code Section 7704, or such Transfer
fails to satisfy a “safe-harbor” preventing such treatment (as set forth in
Treasury Regulations under Code Section 7704 or any successor provision);

 

(5)                   if such Transfer could cause the Company 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));

 

(6)                   if such Transfer could, in the opinion of legal counsel to
the Company, cause any portion of the assets of the Company to constitute assets
of any employee benefit plan pursuant to Department of Labor Regulations
Section 2510.2-101;

 

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(7)                   if such Transfer could cause the Company (as opposed to
the Managing Member) to become a reporting company under the Exchange Act;

 

(8)                   if such Transfer could subject the Company to regulation
under the Investment Company Act of 1940, the Investment Advisors Act of 1940 or
ERISA, each as amended; or

 

(9)                   without the Consent of the Managing Member, which may be
granted or withheld in its sole and absolute discretion, if such Transfer could
result in the Company having more than 100 Members (including as Members those
persons indirectly owning an interest in the Company through a partnership,
limited liability company, S corporation or grantor trust (such entity, a “flow
through entity”), but only if substantially all of the value of such person’s
interest in the flow through entity is attributable to the flow through entity’s
interest (direct or indirect) in the Company) (the “One Hundred Member Limit”).

 

F.                            No Non-Managing Member will take or allow any
Affiliate to take any action that would cause a violation of the One Hundred
Member Limit.

 

ARTICLE XII
ADMISSION OF MEMBERS

 

12.1                        Admission of Initial Non-Managing Members

 

Upon the contribution of the Contributed Property to the Company, the
Contributor, to the extent it receives Non-Managing Member Units, shall be
admitted to the Company as an Initial Non-Managing Member. The Contributor, in
lieu of receiving the number of Non-Managing Member Units otherwise issuable to
it pursuant to the Contribution Agreement, may instruct the Managing Member to
issue the Non-Managing Member Units to Contributor’s Partners so long as
(i) Contributor certifies to the Managing Member that the Contributor’s right to
receive the Non-Managing Member Units has been distributed to the Contributor’s
Partners in accordance with the partnership agreement of the Contributor,
(ii) each of the Contributor’s Partners executes (A) a Joinder Agreement as a
Non-Managing Member, (B) an Accredited Investor Certificate in form and
substance reasonably acceptable to the Managing Member or as otherwise required
by the Contribution Agreement; and (C) a Registration Rights Agreement.

 

12.2                        Admission of Successor Managing Member

 

A successor to all of the Managing Member’s Membership Interest pursuant to
Section 11.2 hereof who is proposed to be admitted as a successor Managing
Member shall be admitted to the Company as the Managing Member, effective
immediately upon such Transfer. Any such successor shall carry on the business
of the Company without dissolution. In each case, the admission shall be subject
to the successor Managing Member executing and delivering to the Company an
acceptance of all of the terms, conditions and applicable obligations of this
Agreement and such other documents or instruments as may be required to effect
the admission pursuant to Section 11.2 hereof.

 

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12.3                        Admission of Additional Members

 

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

 

B.                          Notwithstanding anything to the contrary in this
Agreement, no Person shall be admitted as an Additional Member without the
Consent of the Non-Managing Members and the consent of the Managing Member and
the Consent of the Non-Managing Members, which Consent may be given or withheld
by each Member in its sole and absolute discretion. The admission of any Person
as an Additional Member shall become effective on the date upon which the name
of such Person is recorded on the books and records of the Company, following
the Consent of the Managing Member and the Consent of the Non-Managing Members
to such admission.

 

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

 

12.4                        Amendment of Agreement and Certificate

 

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

 

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12.5                        Limitation on Admission of Members

 

No Person shall be admitted to the Company as a Substituted Member or an
Additional Member if, in the opinion of legal counsel for the Company, it would
result in the Company being treated as a corporation for federal income tax
purposes or otherwise cause the Company to become a reporting company under the
Exchange Act.

 

ARTICLE XIII
DISSOLUTION, LIQUIDATION AND TERMINATION

 

13.1                        Dissolution

 

The Company shall not be dissolved by the admission of Substituted Members or
Additional Members or by the admission of a successor Managing Member in
accordance with the terms of this Agreement. Upon the withdrawal of the Managing
Member, any successor Managing Member shall continue the business of the Company
without dissolution. However, the Company shall dissolve, and its affairs shall
be wound up, upon the first to occur of any of the following (each a
“Liquidating Event”):

 

A.                          an event of withdrawal of the Managing Member, as
defined in the Act (other than an event of bankruptcy), unless, within 90 days
after the withdrawal, a Majority of Remaining Members agree in writing to
continue the business of the Company and to the appointment, effective as of the
date of withdrawal, of a substitute Managing Member;

 

B.                          subject to the provisions of Sections 7.3.E and 7.3H
hereof, an election to dissolve the Company made by the Managing Member;

 

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

 

D.                          subject to the provisions of Sections 7.3.E and 7.3H
hereof, the sale of all or substantially all of the assets and properties of the
Company;

 

E.                           subject to the provisions of Sections 7.3.E and
7.3H hereof, a final and non-appealable judgment is entered by a court of
competent jurisdiction ruling that the Managing Member is bankrupt or insolvent,
or a final and non-appealable order for relief is entered by a court with
appropriate jurisdiction against the Managing Member, in each case under any
Bankruptcy Law as now or hereafter in effect, unless prior to or within 90 days
after the entry of such order or judgment a Majority of Remaining Members
Consent in writing to continue the business of the Company and to the
appointment, effective as of a date prior to the date of such order or judgment,
of a substitute Managing Member;

 

F.                            the Incapacity of the Managing Member, unless
prior to or within 90 days after such Incapacity a Majority of Remaining Members
agree in writing to continue the business of the Company and to the appointment,
effective as of a date prior to the date of such Incapacity, of a substitute
Managing Member; or

 

G.                          the Redemption of all LLC Units (other than those
held by the Managing Member).

 

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13.2                        Redemption of Non-Managing Member Units

 

Notwithstanding anything in this Agreement to the contrary, on or after such
time as the Managing Member has the right to dissolve the Company or at any time
with respect to Members that are an organization described in Code Sections
170(b)(1)(A), 170(c)(2) or 501(c)(3), the Managing Member may, in its sole and
absolute discretion, require each Non-Managing Member (by delivering a Call
Notice to such Non-Managing Member) to tender all of its Non-Managing Member
Units to the Managing Member in exchange for, at the election of and in the sole
and absolute discretion of the Managing Member, either (i) an amount of cash
equal to the sum of (a) the Cash Amount and (b) the NMM Sharing Amount,
calculated as if all of the Contributed Property then owned by the Company were
sold in a taxable transaction at their fair market values, or (ii) a number of
REIT Shares equal to the sum of (a) the REIT Shares Amount payable on the
Specified Redemption Date and otherwise in accordance with the procedures and
provisions set forth in Sections 8.6.A and B, and (b) a number of REIT Shares
with a value equal to the amount set forth in Section 13.2(i)(b).

 

13.3                        Winding Up

 

A.                          Upon the occurrence of a Liquidating Event, the
Company 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 Members. After the occurrence of a Liquidating Event, no Member
shall take any action that is inconsistent with, or not necessary to or
appropriate for, the winding up of the Company’s business and affairs. The
Managing Member (or, in the event that there is no remaining Managing Member,
any Person elected by a Majority in Interest of the Non-Managing Members (the
Managing Member or such other Person being referred to herein as the
“Liquidator”)) shall be responsible for overseeing the winding up and
dissolution of the Company and shall take full account of the Company’s
liabilities and property, and the Company 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 Managing Member,
include shares of stock in the Managing Member) shall be applied and distributed
in the following order:

 

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

 

(2)                   Second, to the satisfaction of all of the Company’s debts
and liabilities to the Members, including, but not limited to, any loan made to
the Company by a Member in accordance with the terms of this Agreement
(including the Managing Member Loan) (whether by payment or the making of
reasonable provision for payment thereof); and

 

(3)                   The balance, if any, to the Members and any Assignees in
accordance with their respective positive Capital Account balances, after giving
effect to all contributions, distributions and allocations for all periods.

 

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The Managing Member shall not receive any compensation for any services
performed pursuant to this Article XIII.

 

B.                          Notwithstanding the provisions of Section 13.3.A
hereof that require liquidation of the assets of the Company, but subject to the
order of priorities set forth therein, if prior to or upon dissolution of the
Company the Liquidator determines that an immediate sale of part or all of the
Company’s assets would be impractical or would cause undue loss to the Members,
the Liquidator may defer for a reasonable time the liquidation of any assets
except those necessary to satisfy liabilities of the Company (including to those
Members as creditors) and/or distribute to the Members, in lieu of cash, as
tenants in common and in accordance with the provisions of Section 13.3.A
hereof, undivided interests in such Company assets as the Liquidator deems not
suitable for liquidation. Notwithstanding the foregoing, 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 Members, 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 Company 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 Members 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, their
positive Capital Account balances. If any Member 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 Member shall have no obligation to make any
contribution to the capital of the Company with respect to such deficit, and
such deficit shall not be considered a debt owed to the Company or to any other
Person for any purpose whatsoever. A pro rata portion of the distributions that
would otherwise be made to the Members pursuant to this Article XIII may be
withheld or escrowed to provide a reasonable reserve for Company liabilities
(contingent or otherwise) and to reflect the unrealized portion of any
installment obligations owed to the Company, provided that such withheld or
escrowed amounts shall be distributed to the Members in the manner and order of
priority set forth in Section 13.3.A hereof as soon as practicable.

 

13.4                        Deemed Contribution and Distribution

 

Notwithstanding any other provision of this Article XIII, in the event that the
Company is liquidated within the meaning of Regulations
Section 1.704-1(b)(2)(ii)(g), but no Liquidating Event has occurred, the
Company’s Property shall not be liquidated, the Company’s liabilities shall not
be paid or discharged and the Company’s affairs shall not be wound up. Instead,
for federal and state income tax purposes, the Company shall be deemed to have
contributed its assets and liabilities to a new limited liability company in
exchange for an interest in such new limited liability company and, immediately
thereafter, the Company will be deemed to liquidate by distributing interests in
the new limited liability company to the Members.

 

70

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13.5                        Rights of Members

 

Except as otherwise provided in this Agreement, (a) each Member shall look
solely to the assets of the Company for the return of its Capital Contribution,
(b) no Member shall have the right or power to demand or receive property other
than cash from the Company and (c) except as provided in this Agreement, no
Member shall have priority over any other Member as to the return of its Capital
Contributions, distributions or allocations.

 

13.6                        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 Members pursuant to Section 13.1
hereof, result in a dissolution of the Company, the Managing Member shall,
within 30 days thereafter, provide written notice thereof to each of the Members
and, in the Managing Member’s sole and absolute discretion or as required by the
Act, to all other parties with whom the Company regularly conducts business (as
determined in the sole and absolute discretion of the Managing Member), and the
Managing Member may, or, if required by the Act, shall, publish notice thereof
in a newspaper of general circulation in each place in which the Company
regularly conduct business (as determined in the sole and absolute discretion of
the Managing Member).

 

13.7                        Cancellation of Certificate

 

Upon the completion of the liquidation of the Company’s cash and property as
provided in Section 13.3 hereof, the Company shall be terminated and the
Certificate and all qualifications of the Company as a foreign limited liability
company in jurisdictions other than the State of Delaware shall be canceled and
such other actions as may be necessary to terminate the Company shall be taken.

 

13.8                        Reasonable Time for Winding-Up

 

A reasonable time shall be allowed for the orderly winding-up of the business
and affairs of the Company and the liquidation of its assets pursuant to
Section 13.3 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 Members during the period of liquidation.

 

13.9                        Liability of Liquidator

 

The Liquidator shall be indemnified and held harmless by the Company from and
against any and all claims, liabilities, costs, damages, and causes of action of
any nature whatsoever arising out of or incidental to the Liquidator’s taking of
any action authorized under or within the scope of this Agreement; provided,
however, that the Liquidator shall not be entitled to indemnification, and shall
not be held harmless, where the claim, demand, liability, cost, damage or cause
of action at issue arises out of (i) a matter entirely unrelated to the
Liquidator’s action or conduct pursuant to the provisions of this Agreement or
(ii) the proven willful misconduct or gross negligence of the Liquidator.

 

71

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ARTICLE XIV
PROCEDURES FOR ACTIONS AND CONSENTS
OF MEMBERS; AMENDMENTS; MEETINGS

 

14.1                        Procedures for Actions and Consents of Members

 

The actions requiring Consent or approval of Non-Managing Members 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 14 and
shall require the Consent of the Non-Managing Members unless a different
standard or percentage is expressly required by this Agreement for the action in
question.

 

14.2                        Amendments

 

Except for amendments to Exhibit A as provided in Sections 7.3.C, 11.4.C and
12.3 hereof, amendments to this Agreement may be proposed by the Managing Member
or by a Majority in Interest of the Non-Managing Members. Following such
proposal, the Managing Member shall submit any proposed amendment to the
Members. The Managing Member shall seek the written Consent of the Members on
the proposed amendment or shall call a meeting to vote thereon and to transact
any other business that the Managing Member may deem appropriate. The
affirmative vote or Consent, as applicable, of a Majority in Interest of the
Non-Managing Members and the Managing Member is required for the approval of a
proposed amendment.

 

14.3                        Meetings of the Members

 

A.                          Meetings of the Members may be called by the
Managing Member and shall be called upon the receipt by the Managing Member of a
written request by a Majority in Interest of the Non-Managing Members. The call
shall state the nature of the business to be transacted. Notice of any such
meeting shall be given to all Members not less than seven (7) days nor more than
thirty (30) days prior to the date of such meeting. The meeting shall be held at
the headquarters office of the Managing Member or at such other location as may
be designated by the Managing Member. Members may vote in person or by proxy at
such meeting. Whenever the vote or Consent of Members is permitted or required
under this Agreement, such vote or Consent may be given at a meeting of Members
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 Members may be taken without a meeting if a prior, written notice
thereof is sent to each Member in accordance with Section 15.1 and Consent
setting forth the action so taken is signed by Members holding a majority of the
LLC Units (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 Members
holding a majority of the LLC Units (or such other percentage as is expressly
required by this Agreement). Such Consent shall be filed with the Managing
Member. An action so taken shall be deemed to have been taken at a meeting held
on the effective date so certified. For purposes of obtaining a written Consent,
the Managing Member may require a

 

72

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response within a reasonable specified time, but not less than fifteen (15)
days, and failure to respond in such time period shall constitute a Consent that
is consistent with the Managing Member’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.

 

C.                          Each Member may authorize any Person or Persons to
act for it by proxy on all matters in which a Member is entitled to participate,
including waiving notice of any meeting, or voting or participating at a
meeting. Every proxy must be signed by the Member 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
Member executing it, such revocation to be effective upon the Company’s receipt
of written notice of such revocation from the Member executing such proxy.

 

D.                          Each meeting of Members shall be conducted by the
Managing Member or such other Person as the Managing Member may appoint pursuant
to such rules for the conduct of the meeting as the Managing Member or such
other Person deems appropriate in its reasonable discretion. Without limitation,
meetings of Members may be conducted in the same manner as meetings of the
Managing Member’s shareholders and may be held at the same time as, and as part
of, the meetings of the Managing Member’s shareholders.

 

ARTICLE XV
GENERAL PROVISIONS

 

15.1                        Addresses and Notice

 

Any notice, demand, request or report required or permitted to be given or made
to a Member 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) (i) in the case of a Member, to that
Member at the address set forth in Exhibit A or such other address of which the
Member shall notify the Managing Member in writing and (ii) in the case of an
Assignee, to the address of which such Assignee shall notify the Managing Member
in writing.

 

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.

 

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.

 

73

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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.

 

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.

 

15.6                        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 Company.

 

15.7                        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.

 

15.8                        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 parties are not signatories to the original or the same counterpart.

 

15.9                        Applicable Law

 

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

 

15.10                 Entire Agreement

 

This Agreement, the Contribution Agreement and the other agreements executed on
the Effective Date as provided in the Contribution Agreement contain all of the
understandings and agreements between and among the Members with respect to the
subject matter of this Agreement and the rights, interests and obligations of
the Members with respect to the Company.

 

74

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15.11                 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.

 

15.12                 No Partition

 

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

 

15.13                 Non-Managing Member Representative

 

A.                          All actions taken by the Non-Managing Member
Representative pursuant to those provisions of this Agreement which authorize
the Non-Managing Member Representative to so act shall be binding upon all
Non-Managing Members as if they had individually taken such action and each
Non-Managing Member, by entering into or agreeing to be bound by the provisions
of this Agreement, authorize the Non-Managing Member Representative to take such
actions on his, her or its behalf and agree that the actions so taken shall be
binding upon him, her or it to the same extent as if he, she or it had taken the
action directly.

 

B.                          The holders of a majority of the outstanding
Non-Managing Members Units shall be entitled to replace the Non-Managing Member
Representative by delivering to the Managing Member a written notice signed by
the holders of a majority of the outstanding Non-Managing Members Units stating
(i) that the notice is being provided to the Managing Member pursuant to this
Section 15.13.B, (ii) that the Members signing the notice own of record on the
books of the Company a majority of the outstanding Non-Managing Members Units,
(iii) that the Members signing the notice desire to replace the person then
serving as the Non-Managing Member Representative with the person named in the
notice, and (iv) specifying the date on which the appointment of the named
individual to replace the then serving Non-Managing Member Representative shall
be effective (which shall be a date not earlier than the fourteenth day after
the date on which the notice shall have been delivered to the Managing Member).
The appointment of the new Non-Managing Member Representative specified in the
notice shall be effective on the date specified in the notice and upon
effectiveness, the individual previously serving as the Non-Managing Member
Representative shall cease to be entitled to act in that capacity under this
Agreement.

 

15.14                 Uniform Commercial Code Article 8 (Opt-In)

 

The Company hereby irrevocably elects that all LLC Units shall be securities
governed by Article 8 of the Uniform Commercial Code as in effect in the State
of Delaware and each

 

75

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other applicable jurisdiction. Each certificate evidencing LLC Units in the
Company shall bear the following legend: “This certificate evidences an interest
in HCP DR California II, LLC and shall be a security governed by Article 8 of
the Uniform Commercial Code as in effect in the State of Delaware and, to the
extent permitted by applicable law, each other applicable jurisdiction.” This
provision shall not be amended, and any purported amendment to this provision
shall be null and void.

 

[Signatures appear on following page]

 

76

--------------------------------------------------------------------------------

 

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

 

 

 

MANAGING MEMBER:

 

 

 

 

 

HCP, INC.,

 

a Maryland corporation

 

 

 

 

 

By:

/s/ Kendall Young

 

Name:

Kendall Young

 

Title

Executive Vice President-

 

 

Senior Housing

 

 

 

 

 

NON-MANAGING MEMBERS:

 

 

 

 

 

OAKMONTSL OF CHINO HILLS L.P.,

 

a California limited partnership

 

 

 

By:

OSL of Chino Hills LLC

 

Its:

Co-Managing Partner

 

 

 

 

 

By:

The William P. and Cynthia J.

 

 

Gallaher Trust Dated April 5, 1989

 

 

 

 

 

By:

/s/ William P. Gallaher

 

Name:

William P. Gallaher

 

Title

Trustee

 

[See Additional Signature Pages of
Non-Managing Members Attached hereto]

 

S-1

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the undersigned has executed this Amended and Restated
Limited Liability Company Agreement as of the date first written above.

 

 

 

NON-MANAGING MEMBER:

 

 

 

 

 

THE WILLIAM P. & CYNTHIA J. GALLAHER

 

TRUST DATED APRIL 5, 1989

 

 

 

 

 

By:

/s/ William P. Gallaher

 

 

William P. Gallaher, Trustee

 

S-2

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the undersigned has executed this Amended and Restated
Limited Liability Company Agreement as of the date first written above.

 

 

 

NON-MANAGING MEMBER:

 

 

 

 

 

WILLIAM R. MABRY III AND CATHY L.

 

MABRY TRUST AGREEMENT DATED

 

JULY 30, 2009

 

 

 

 

 

By:

/s/ William R. Mabry III

 

 

William R. Mabry III, Trustee

 

S-3

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the undersigned has executed this Amended and Restated
Limited Liability Company Agreement as of the date first written above.

 

 

 

NON-MANAGING MEMBER:

 

 

 

 

 

THE LIN REVOCABLE LIVING TRUST

 

DATED MAY 7, 1999

 

 

 

 

 

By:

/s/ Joseph G. Lin

 

 

Joseph G. Lin, Trustee

 

S-4

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the undersigned has executed this Amended and Restated
Limited Liability Company Agreement as of the date first written above.

 

 

 

NON-MANAGING MEMBER:

 

 

 

 

 

By:

/s/ James A. Meyer

 

 

James A. Meyer

 

S-5

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the undersigned has executed this Amended and Restated
Limited Liability Company Agreement as of the date first written above.

 

 

 

NON-MANAGING MEMBER:

 

 

 

 

 

By:

/s/ Marjorie I. Meyer

 

 

Marjorie I. Meyer

 

S-6

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the undersigned has executed this Amended and Restated
Limited Liability Company Agreement as of the date first written above.

 

 

 

NON-MANAGING MEMBER:

 

 

 

 

 

By:

/s/ Ned B. Stein

 

 

Ned B. Stein

 

S-7

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the undersigned has executed this Amended and Restated
Limited Liability Company Agreement as of the date first written above.

 

 

 

NON-MANAGING MEMBER:

 

 

 

 

 

THE JOHN AND ANDREA GLADSTEIN

 

FAMILY TRUST DATED 11 FEBRUARY 2003

 

 

 

 

 

By:

/s/ John Berle Gladstein

 

 

John Berle Gladstein, Trustee

 

 

 

 

 

By:

/s/ Andrea Bialek Gladstein

 

 

Andrea Bialek Gladstein, Trustee

 

S-8

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the undersigned has executed this Amended and Restated
Limited Liability Company Agreement as of the date first written above.

 

 

 

NON-MANAGING MEMBER:

 

 

 

 

 

THE JEFF & JUDY MEYER FAMILY TRUST

 

DATED 8/29/02

 

 

 

 

 

By:

/s/ Jeff Meyer

 

 

Jeff Meyer, Trustee

 

 

 

 

 

 

By:

/s/ Judy Meyer

 

 

Judy Meyer, Trustee

 

S-9

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the undersigned has executed this Amended and Restated
Limited Liability Company Agreement as of the date first written above.

 

 

 

NON-MANAGING MEMBER:

 

 

 

 

 

THE RICHARD T. SOUTHERN AND

 

THANH T. VO FAMILY TRUST

 

 

 

 

 

By:

/s/ Richard T. Southern

 

 

Richard T. Southern, Trustee

 

 

 

 

 

By:

/s/ Thanh T. Vo

 

 

Thanh T. Vo, Trustee

 

S-10

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the undersigned has executed this Amended and Restated
Limited Liability Company Agreement as of the date first written above.

 

 

 

NON-MANAGING MEMBER:

 

 

 

 

 

THE STEVEN L. AND JOAN A. GALLAHER

 

TRUST DATED 7/10/00

 

 

 

 

 

By:

/s/ Steven L. Gallaher

 

 

Steven L. Gallaher, Trustee

 

S-11

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the undersigned has executed this Amended and Restated
Limited Liability Company Agreement as of the date first written above.

 

 

 

NON-MANAGING MEMBER:

 

 

 

 

 

THE FRANCIS J. AND SHANNON A.

 

CONNELLY LIVING TRUST

 

 

 

 

 

By:

/s/ Francis J. Connelly

 

 

Francis J. Connelly, Trustee

 

 

 

 

 

 

 

By:

/s/ Shannon A. Connelly

 

 

Shannon A. Connelly, Trustee

 

S-12

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the undersigned has executed this Amended and Restated
Limited Liability Company Agreement as of the date first written above.

 

 

 

NON-MANAGING MEMBER:

 

 

 

 

 

THE 1988 AL COPPIN LIVING TRUST

 

 

 

 

 

By:

/s/ Al Coppin

 

 

Al Coppin, Trustee

 

S-13

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the undersigned has executed this Amended and Restated
Limited Liability Company Agreement as of the date first written above.

 

 

 

NON-MANAGING MEMBER:

 

 

 

 

 

THE VARGAS FAMILY TRUST

 

 

 

 

 

By:

/s/ Honesto Vargas

 

 

Honesto Vargas, Trustee

 

 

 

 

 

 

 

By:

/s/ Carole Vargas

 

 

Carole Vargas, Trustee

 

S-14

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the undersigned has executed this Amended and Restated
Limited Liability Company Agreement as of the date first written above.

 

 

 

NON-MANAGING MEMBER:

 

 

 

 

 

IVY M. PETERSEN TRUST

 

 

 

 

 

By:

/s/ Ivy M. Petersen

 

 

Ivy M. Petersen, Trustee

 

S-15

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the undersigned has executed this Amended and Restated
Limited Liability Company Agreement as of the date first written above.

 

 

 

NON-MANAGING MEMBER:

 

 

 

 

 

CHRISTINE J. CANADY TRUST

 

 

 

 

 

By:

/s/ Ivy M. Petersen

 

 

Ivy M. Petersen, Trustee

 

S-16

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the undersigned has executed this Amended and Restated
Limited Liability Company Agreement as of the date first written above.

 

 

 

NON-MANAGING MEMBER:

 

 

 

 

 

By:

/s/ Elaine de Man

 

 

Elaine de Man

 

S-17

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the undersigned has executed this Amended and Restated
Limited Liability Company Agreement as of the date first written above.

 

 

 

NON-MANAGING MEMBER:

 

 

 

 

 

By:

/s/ Cinda Connelly

 

 

Cinda Connelly

 

S-18

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the undersigned has executed this Amended and Restated
Limited Liability Company Agreement as of the date first written above.

 

 

 

NON-MANAGING MEMBER:

 

 

 

 

 

By:

/s/ William Connelly

 

 

William Connelly

 

S-19

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the undersigned has executed this Amended and Restated
Limited Liability Company Agreement as of the date first written above.

 

 

 

NON-MANAGING MEMBER:

 

 

 

 

 

By:

/s/ Paul Bialek

 

 

Paul Bialek

 

S-20

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the undersigned has executed this Amended and Restated
Limited Liability Company Agreement as of the date first written above.

 

 

 

NON-MANAGING MEMBER:

 

 

 

 

 

MOORE-BONE 2012 REVOCABLE FAMILY

 

TRUST DATED 2/28/12

 

 

 

 

 

By:

/s/ Donald W. Moore

 

 

Donald W. Moore, Trustee

 

 

 

 

 

 

 

By:

/s/ Kathleen A. Bone

 

 

Kathleen A. Bone, Trustee

 

S-21

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the undersigned has executed this Amended and Restated
Limited Liability Company Agreement as of the date first written above.

 

 

 

NON-MANAGING MEMBER:

 

 

 

 

 

THE GULATI LIVING TRUST

 

 

 

 

 

By:

/s/ Mohinder Gulati

 

 

Mohinder Gulati, Trustee

 

 

 

 

 

 

 

By:

/s/ Manjit Gulati

 

 

Manjit Gulati, Trustee

 

S-22

--------------------------------------------------------------------------------

 

EXHIBIT A

 

PART I - MEMBERS AND CAPITAL CONTRIBUTIONS

 

Non-Managing Members
(1)

 

Contribution

 

Gross Asset Value
of Contribution (2)

 

Net Asset Value of
Contribution (2)

 

OakmontSL of Chino Hills L.P.

 

Chino Hills Property

 

$

32,783,520

 

$

5,040,111.97

 

 

--------------------------------------------------------------------------------

(1) Part II lists individual Non-Managing Members and their respective LLC
Units.

(2) Represents portion allocable to Non-Managing Members.

 

Managing Member

 

Contribution

 

Gross Asset Value
of Contribution

 

Net Asset Value of
Contribution

 

HCP, Inc.

 

Cash

 

$

26,274,700.78

 

$

26,274,700.78

 

 

A-1

--------------------------------------------------------------------------------

 

EXHIBIT A

 

PART II - MEMBERS AND LLC UNITS

 

Non-Managing Member Units

 

Name

 

Address

 

Non-Managing Member Units

 

William P. & Cynthia J. Gallaher Trust dated April 5, 1989

 

 

 

15,046

 

The Lin Revocable Living Trust dated May 7, 1999

 

 

 

1,428

 

The William R. Mabry III and Cathy L. Mabry Trust Agreement dated July 30, 2009

 

 

 

726

 

Francis J. & Shannon A. Connelly Living Trust

 

 

 

4,584

 

Ned B. Stein

 

 

 

16,715

 

John & Andrea Gladstein Family Trust dated 11 February 2003

 

 

 

4,975

 

The 1988 Al Coppin Living Trust

 

 

 

3,340

 

Richard T. Southern & Thanh T. Vo Trust

 

 

 

5,652

 

James A. Meyer & Marjorie I. Meyer

 

 

 

3,317

 

The Jeff & Judy Meyer Family Trust dated 8/29/02

 

 

 

9,952

 

William Connelly & Cinda Connelly

 

 

 

3,317

 

The Steven L. & Joan A. Gallaher Trust dated 7/10/00

 

 

 

3,244

 

Christine J. Canady Trust

 

 

 

3,317

 

Ivy M. Petersen Trust

 

 

 

3,317

 

Moore-Bone 2012 Revocable Family Trust dated 2/28/12

 

 

 

3,317

 

Elaine de Man

 

 

 

3,317

 

Gulati Living Trust

 

 

 

21,038

 

The Vargas Family Trust 

 

 

 

3,976

 

Paul Bialek

 

 

 

9,109

 

 

 

TOTAL:

 

119,687

 

 

Managing Member Units

 

Name

 

Address

 

Managing Member Units

 

HCP, Inc.

 

1920 Main Street, Suite 1200

Irvine, California 92614

 

623,954

 

 

A-2-1

--------------------------------------------------------------------------------

 

EXHIBIT B

NOTICE OF REDEMPTION

 

To:

HCP DR California II, LLC

 

c/o HCP, Inc.

 

[                                    ]

 

[                                    ]

 

The undersigned Member or Assignee hereby irrevocably tenders for Redemption LLC
Units in HCP DR California II, LLC (the “Company”) in accordance with the terms
of the Amended and Restated Limited Liability Company Agreement of HCP DR
California II, LLC, dated as of June     , 2014 (the “Agreement”), and the
Redemption Rights referred to therein. The undersigned Member or Assignee:

 

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

 

(b)           directs that, at the sole discretion of the Managing Member,
either (i) a certified check representing the Cash Amount deliverable upon
closing of the Redemption be delivered to the address specified below, after
deducting therefrom any costs or expenses to which the undersigned Member or
Assignee is responsible pursuant to the Agreement, or (ii) a certificate(s)
representing the REIT Shares deliverable upon the closing of such Redemption be
delivered to the address specified below;

 

(c)           represents, warrants, certifies and agrees that: (1) the
undersigned Member or Assignee has, and at the closing of the Redemption will
have good, marketable and unencumbered title to such LLC Units, free and clear
of the rights or interests of any other person or entity other than the rights
of the Managing Member thereto or the Company in respect thereof, (2) the
undersigned Member or Assignee has, and at the closing of the Redemption will
have, the full right, power and authority to tender and surrender such LLC Units
as provided herein, (3) the undersigned Member 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, (4) such Redemption is in
compliance with the provisions of Section 8.6 of the Agreement, and (5) except
to the extent deducted from the Cash Amount pursuant to clause (b)(i) above, the
undersigned Member or Assignee shall, as a condition to receipt of the REIT
Shares, reimburse to the Managing Member all costs and expenses for which such
undersigned Member or Assignee is responsible pursuant to the Agreement; and

 

(d)           acknowledges that it will continue to own such LLC Units until and
unless such Redemption transaction closes, subject to the provisions of Section
5.7 of the Agreement.

 

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

 

Dated:

 

B-1

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Name of Member or Assignee:

 

 

 

 

 

(Signature of Member or Assignee)

 

 

 

 

 

(Street Address)

 

 

 

 

 

(City) (State) (Zip)

 

 

 

 

 

Signature Guaranteed by:

 

 

 

 

 

Issue REIT Shares in the name of:

 

 

 

 

 

Please insert social security or identifying

 

number:

 

 

B-2

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EXHIBIT C

FORM OF JOINDER AGREEMENT

 

JOINDER TO OPERATING AGREEMENT

 

THIS JOINDER TO OPERATING AGREEMENT (the “Joinder”) effecting a joinder to the
Amended and Restated Limited Liability Company Operating Agreement of HCP DR
California II, LLC dated as of June     , 2014 (the “Operating Agreement”) is
entered into as of [                  ], 2014, by and between HCP DR California
II, LLC, a Delaware limited liability company (the “Company”), and , a (the “New
Member”). Capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the Operating Agreement.

 

1.             New Member agrees to be bound by, the terms and conditions of the
Operating Agreement, a copy of which is attached hereto as Exhibit A.

 

2.             New Member represents to the Company and the Managing Member that
the representations and warranties set forth in Section 3.4 of the Operating
Agreement are true and correct as of the date hereof.

 

3.             The Company agrees to admit New Member as a Non-Managing Member
of the Company and, in connection therewith, to update and amend Exhibit A to
the Operating Agreement, or the books and records of the Company, to reflect the
information set forth on Exhibit B attached hereto.

 

4.             This Joinder may be executed in separate counterparts each of
which shall be an original and all of which taken together shall constitute one
and the same agreement.

 

5.             This Joinder shall be governed by and construed in accordance
with the internal laws of the State of Delaware, without giving effect to
principles of conflicts of laws or choice of law of the State of Delaware or any
other jurisdiction which would result in the application of the law of any
jurisdiction other than the State of Delaware.

 

6.             The descriptive headings of this Joinder are inserted for
convenience only and do not constitute a part of this Joinder.

 

7.             If any provision of this Joinder is in conflict with or
inconsistent with any provision of the Operating Agreement, the provision of the
Operating Agreement shall control.

 

C-1

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IN WITNESS WHEREOF, this Joinder to Operating Agreement has been duly executed
and delivered by the parties as of the date first above written.

 

COMPANY:

 

NEW MEMBER:

HCP DR California II, LLC,

 

 

a Delaware limited liability company

 

 

 

 

 

 

By:

HCP, Inc.,

 

By:

 

 

 

a Maryland corporation,

 

Name:

 

 

 

its Managing Member

 

Title:

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

 

Title:

 

 

 

 

C-2

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EXHIBIT D

EXAMPLE OF CERTAIN CALCULATIONS PURSUANT TO SECTION 5.6.C

 

Assumptions for example —

 

1.                                      LLC unit ownership:

 

 

 

Units

 

Effective Price

 

Value of
Interest

 

Percentage
Interest

 

Managing Member Units (MMUs)

 

2,400,000

 

$

25.

 

60,000,000

 

75

%

Non-Managing Member Units (NMMUs)

 

800,000

 

$

25.

 

20,000,000

 

25

%

Total

 

3,200,000

 

 

 

80,000,000

 

 

 

 

2.                                      Sale of property to which distribution
pursuant to Sec. 5.6.A(2) relates:
Disposition Proceeds = $30MM
Initial value = $25MM
Property Appreciation = $5MM
Portion of Disposition Proceeds to be distributed = $10MM

 

3.                                      Other assumptions:
Value of REIT stock on Reduction Date = $30
There is no Preferred Return Shortfall or Managing Member Shortfall
Unit Portion (Net Cash Flow of property sold/Net Cash Flow of all contributed
properties) = .20
There have been no previous distributions of Disposition Proceeds or Refinancing
Debt Proceeds
Adjustment Factor = 1.0

 

Calculation of Reduction:

 

Sec. 5.6.C(1) — NMMU Reduction = 82,733 Units ($2,482,000 ÷ 30), computed as
(i) excess of

 

(a)                                 $2.5MM ($10MM distribution * 25% NMM LLC
units), over

(b)                                 NMM Sharing Amount of $18,000

(U)          (.20 Unit Portion * 3.2MM LLC Units Outstanding) = 640,000 = Unit
Amount

(V)          640,000 * ($30 Value - $25 Effective Price) = $3.2MM Unit
Appreciation

 

D-1

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(W)         $5MM Property Appreciation - $3.2MM Unit Appreciation = $1.8MM =
Aggregate Sharing Amount

(X)          $1.8MM Aggregate Sharing Amount - $0 Prior Sharing Amounts = $1.8MM
Sharing Amount

(Y)          $1.8MM * 1% NMM Sharing Percentage = $18,000 NMM Sharing Amount

(Z)           $2.5MM — $18,000 = $2,482,000

 

Divided by

 

(ii) $30 Value on Reduction Date

 

Sec. 5.6.C(2) — MMU Reduction = 248,199 Units, computed as
(i)            82,733 Reduction Units for NMMs divided by 25% Aggregate
Percentage Interests of NMMs before Reduction, times
(ii)           75% Percentage Interest of MM before Reduction

 

Calculation of Profit Participation Amount for NMMs:

 

$431,667, computed as the sum of

 

1.             $18,000 (Cumulative distributions pursuant to Sec. 5.6.A(2) that
did not result in a Reduction), and

2.             $413,667 ($2,482,000 [$2.5MM cumulative distributions pursuant to
sec. 5.6.A(2) —$18,000])

 

--------------------------------------------------------------------------------

* (($30 weighted average Value on each Reduction Date - $25 Effective Price)/$30
weighted average Value on each Reduction Date)

 

D-2

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EXHIBIT E
FORM OF BOTTOM DOLLAR GUARANTEE

 

GUARANTY AGREEMENT

 

THIS GUARANTY AGREEMENT (“Guarantee”), dated as of [                  ], 2014,
is made by each of the persons or entities whose names are set forth on a
counterpart signature page attached hereto (each, a “Guarantor,” and
collectively, the “Guarantors”), in favor of HCP, Inc., a Maryland corporation
(“Guaranteed Party”).

 

WHEREAS, HCP DR California II, LLC, a Delaware limited liability company
(“Borrower”), is indebted to Guaranteed Party pursuant to that certain
promissory note, dated as of [                  ], 2014, in the original
principal amount of $[                  ], made by Borrower in favor of
Guaranteed Party (the “Credit Document”).

 

WHEREAS, each Guarantor desires to guarantee collection of a portion of the
amount owing under the Credit Document (the “Obligations”) not in excess of the
amount set forth on such Guarantor’s counterpart signature page attached hereto
(such amount, as applicable to each individual Guarantor, such Guarantor’s
“Maximum Guaranteed Amount” and all such amounts in the aggregate, the
“Guaranteed Amount”).

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, and intending to be legally bound hereby,
Guarantors agree as follows:

 

1.                                      Guarantee.

 

A.                                    Guarantors hereby irrevocably and
unconditionally guarantee the collection by Guaranteed Party of, and hereby
agree to pay to Guaranteed Party upon demand (following the exhaustion of the
exercise of any and all remedies available to Guaranteed Party against Borrower,
including, without limitation and to the extent applicable, realizing upon the
assets of Borrower), an amount equal to the excess, if any, of the Guaranteed
Amount over the Borrower Proceeds (as hereinafter defined); provided that the
obligation of each Guarantor shall be limited severally, and not jointly, to
such Guarantor’s Maximum Guaranteed Amount, as set forth on such Guarantor’s
counterpart signature page attached hereto. Each Guarantor’s obligations as set
forth in this Paragraph 1.A. are hereinafter referred to as the “Guaranteed
Obligations.”

 

B.                                    For the purposes of this Guarantee, the
term “Borrower Proceeds” shall mean the aggregate of all amounts collected from
Borrower or realized from the sale or other disposition of assets of Borrower
(whether applied to the Guaranteed Obligations or other obligations).

 

E-1

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2.                                      Waivers: Other Agreements. Guaranteed
Party is hereby authorized, without notice or demand upon any Guarantor, which
notice or demand is expressly waived hereby, and without discharging or
otherwise affecting the enforceability of the obligations of any Guarantor
hereunder (which shall remain absolute and unconditional notwithstanding any
such action or omission to act), from time to time to:

 

(i)                                     waive or otherwise consent to
noncompliance with any provision of the Credit Document, or any part thereof, or
any other instrument or agreement in respect of the Guaranteed Obligations now
or hereafter executed by Borrower or any other person and delivered to
Guaranteed Party;

 

(ii)                                  accept partial payments on the Guaranteed
Obligations by Borrower;

 

(iii)                               receive, take and hold additional security
or collateral for the payment of the Guaranteed Obligations or for the payment
of this Guarantee, or for the payment of any other guarantees of the Guaranteed
Obligations, and exchange, enforce, waive, substitute, liquidate, terminate,
abandon, fail to perfect, subordinate, transfer, or otherwise alter or release
any such additional security or collateral;

 

(iv)                              apply any and all such security or collateral
and direct the order or manner of sale thereof as Guaranteed Party may determine
in its sole discretion;

 

(v)                                 settle, release, compromise, collect or
otherwise liquidate the Guaranteed Obligations or accept, substitute, release,
exchange or otherwise alter, affect or impair any mortgage or any other security
or collateral for the Guaranteed Obligations or any other guarantee therefor, in
any manner;

 

(vi)                              add, release or substitute any one or more
other guarantors, borrowers or endorsers of the Guaranteed Obligations and
otherwise deal with Borrower or any other guarantor as Guaranteed Party may
elect in its sole discretion; and

 

(vii)                           apply any and all payments or recoveries from
Borrower, any Guarantor or any other guarantor of the Guaranteed Obligations, to
such of the Guaranteed Obligations as Guaranteed Party in its sole discretion
may determine, whether such Guaranteed Obligations are secured or unsecured or
guaranteed or not guaranteed by others.

 

3.                                      Independent Obligations. Except as
expressly set forth in Paragraph 1, the obligations of each Guarantor hereunder
are independent of the obligations of Borrower, and a separate action or actions
may be brought by Guaranteed Party against any Guarantor, whether

 

E-2

--------------------------------------------------------------------------------

 

or not actions are brought against Borrower. Each Guarantor expressly waives any
and all rights of subrogation, reimbursement, indemnity, exoneration,
contribution or any other claim which such Guarantor may now or hereafter have
against Borrower, or any other person directly or contingently liable for the
payment or performance of the obligations under the Credit Document arising from
the existence or performance of this Guarantee (including, but not limited to,
Guaranteed Party, or any other member of Borrower) (except and only to the
extent that such Guarantor makes a payment to Guaranteed Party in excess of the
amount required to be paid under Paragraph 1 and the limitations set forth
therein).

 

4.                                      Miscellaneous.

 

A.                                    Subject to the provisions of this
Paragraph 4.A, this Guarantee is irrevocable as to any and all of the Guaranteed
Obligations of each Guarantor until such Guarantor has disposed of all of its
equity interests in Borrower (the “Termination Date”), provided that the
obligations of such Guarantor hereunder shall continue after the Termination
Date to the extent of any claims that are attributable fully and solely to an
event or action that occurred on or before the Termination Date.  In the event
that any Guarantor disposes of all or any portion of such Guarantor’s equity
interest in Borrower, the Guaranteed Obligations of such Guarantor shall be
decreased by an amount equal to the portion of the Guaranteed Obligations of
such Guarantor allocable to the disposed of equity interest (a “Reduction
Date”), provided that the obligations of such Guarantor hereunder shall continue
after the Reduction Date with respect to the Guaranteed Obligations undiminished
by such reduction to the extent of any claims that are attributable fully and
solely to an event or action that occurred on or before said Reduction Date.
This Guarantee is binding on each Guarantor and its successors and assigns, and
inures to the benefit of Guaranteed Party.

 

B.                                    No delay on the part of Guaranteed Party
in the exercise of any right or remedy shall operate as a waiver thereof, and no
single or partial exercise or waiver by Guaranteed Party of any right or remedy
shall preclude any further exercise thereof, nor shall any modification or
waiver of any of the provisions of this Guarantee be binding upon Guaranteed
Party, except as expressly set forth in a writing duly signed or delivered by
Guaranteed Party or on Guaranteed Party’s behalf by an authorized officer or
agent of Guaranteed Party. Guaranteed Party’s failure at any time or times
hereafter to require strict performance by Borrower, any Guarantor or any other
person of any of the provisions, warranties, terms and conditions contained in
any security agreement, agreements, guarantee, instrument or document now or at
any time or times hereafter executed by Borrower or any Guarantor or delivered
to Guaranteed Party shall not waive, affect or diminish any right of Guaranteed
Party at any time or times hereafter to demand strict performance thereof and
such right shall not be deemed to have been waived by any act or knowledge of
Guaranteed Party, its agents,

 

E-3

--------------------------------------------------------------------------------

 

officers, or employees, unless such waiver is contained in an instrument in
writing signed by an officer or agent of Guaranteed Party and directed to
Borrower or such Guarantor, or any of them (as the case may be) specifying such
waiver. No waiver by Guaranteed Party of any default shall operate as a waiver
of any other default or the same default on a future occasion, and no action by
Guaranteed Party permitted hereunder shall in any way affect or impair
Guaranteed Party’s rights or the obligations of any Guarantor under this
Guarantee.

 

C.                                    This Guarantee shall be interpreted and
the rights and liabilities of the parties hereto determined in accordance with
the laws of the State of New York, including without limitation, sections 5-1401
and 5-1402 of the New York General Obligations Law.

 

D.                                    This Guarantee contains all the terms and
conditions of the agreement between Guaranteed Party and each Guarantor. The
terms and provisions of this Guarantee may not be waived, altered, modified or
amended except in writing duly executed by the party to be charged thereby.

 

E.                                     This Guarantee may be executed in
separate counterparts, each of which shall be an original and all of which taken
together shall constitute one and the same agreement.

 

F.                                      Guarantor acknowledges that Guaranteed
Party makes no representation or warranty concerning the treatment or effect of
this Guaranty Agreement under federal, state, local, or foreign tax law.

 

G.                                    Any notice shall be directed to the
parties at the following addresses:

 

If to a Guarantor:

 

To the address set forth next to such Guarantor’s name on Schedule 1 attached
hereto

 

If to Guaranteed Party:

HCP, Inc.
1920 Main Street, Suite 1200
Irvine, California 92614
Attention:  General Counsel
Telephone No.:  (949) 407-0700
Facsimile No.:  (949) 407-0800

Email: legaldept@hcpi.com

 

E-4

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With a copy to:

Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071
Attention: Meryl K. Chae
Telephone No.: (213) 687-5035
Facsimile No.: (213) 621-5035

Email: meryl.chae@skadden.com

 

[Remainder of page intentionally blank]

 

E-5

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COUNTERPART SIGNATURE PAGE
ATTACHED TO AND MADE A PART OF
THAT CERTAIN GUARANTY AGREEMENT
DATED AS OF [                        ], 2014

 

IN WITNESS WHEREOF, the undersigned, through its duly authorized representative,
has executed this Guaranty as of the date first above written.

 

The obligation and liability of the undersigned as a Guarantor hereunder, shall
be several, and not joint and shall be limited to the undersigned’s allocable
share of the Guaranteed Amount as follows:

 

$                               

 

 

 

GUARANTOR:

 

 

 

 

 

 

 

By:

 

 

Title:

 

 

E-6

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Schedule 1

 

Notice Addresses

 

Guarantor

 

Address

[                    ]

 

[                    ]

 

 

[                    ]

 

 

[                    ]

 

 

 

[                    ]

 

[                    ]

 

 

[                    ]

 

 

[                    ]

 

 

 

[                    ]

 

[                    ]

 

 

[                    ]

 

 

[                    ]

 

 

 

[                    ]

 

[                    ]

 

 

[                    ]

 

 

[                    ]

 

 

 

[                    ]

 

[                    ]

 

 

[                    ]

 

 

[                    ]

 

 

 

[                    ]

 

[                    ]

 

 

[                    ]

 

 

[                    ]

 

 

 

[                    ]

 

[                    ]

 

 

[                    ]

 

 

[                    ]

 

 

 

[                    ]

 

[                    ]

 

 

[                    ]

 

 

[                    ]

 

E-7

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EXHIBIT F
MANAGING MEMBER NOTE

 

NEGOTIABLE DEMAND PROMISSORY NOTE

 

Principal Amount: $[                    ]

 

Date of this Note: [            ]     , 2014

 

1.                                      Promise to Pay.  For good and valuable
consideration, HCP DR CALIFORNIA II, LLC, a Delaware limited liability company
(“Payor”), promises to pay to HCP, INC., a Maryland corporation (together with
its registered successors and assigns, the “Payee”), on order,
[                    ] Dollars ($[                      ] ) (the “Principal
Amount”), together with interest thereon at the Applicable Interest Rate from
the date of this Note until paid, in accordance with the terms contained herein.
Interest shall be computed on the basis of a 360-day year and the actual number
of days elapsed. As used herein, “Applicable Interest Rate” shall mean the
ten-year U.S. Treasury Note rate published in the Wall Street Journal as of the
date of each payment by Payor, plus One Percent (1.00%)

 

2.                                      Payment Schedule.  From the date of this
Note to and until the Demand Date, Payor shall pay quarterly all accrued and
unpaid interest under this Note. Each such quarterly installment of accrued and
unpaid interest shall be paid on or before the Quarterly Installment Date. For
purposes of this Note, the “Quarterly Installment Date” shall be January 1,
April 1, July 1, and October 1 of each year to and until the Demand Date. The
first installment of accrued and unpaid interest under this Note shall be paid
on or before [                  ]. The entire indebtedness under this Note
(including the Principal Amount and all accrued and unpaid interest) shall be
due and payable on the date (the “Demand Date”) that the Payee of this Note
delivers to Payor at 1920 Main Street, Suite 1200, Irvine, California 92614, a
writing demanding immediate payment of the indebtedness hereunder. All payments
shall be applied first to amounts owing under this Note other than interest and
principal, next to accrued interest and then to the principal balance. All
payments shall be made in lawful money of the United States.

 

3.                                      Purpose of Loan.  The Loan evidenced by
this Note is being made by HCP to Payor pursuant to the provisions of
Section 4.3B of that certain Amended and Restated Limited Liability Company
Agreement for HCP DR CALIFORNIA II, LLC dated [                  ]     , 2014,
as amended (the “LLC Agreement”).

 

4.                                      Register.  Payor will maintain, at its
principal place of business, a register for the recordation of the names and
addresses of the Payee(s) and the principal amount (and stated interest) owing
to each Payee (the “Register”). The entries in the Register shall be conclusive
absent manifest error, and Payor and the Payee(s) shall treat each Person whose
name is recorded in the Register pursuant to the terms hereof as a Payee
hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary. The registered owner of this Note (or any portion hereof) as indicated
on the Register shall be the party with the

 

F-1

--------------------------------------------------------------------------------

 

exclusive right to receive payment of any principal amount and accrued and
unpaid interest thereon under this Note. The Register shall be available for
inspection by Payor and the Payee(s) at any reasonable time and from time to
time upon reasonable prior notice. No assignment, transfer or other disposition
of this Note (or any portion thereof) shall be effective unless it has been
recorded in the Register. It is intended that the Register constitute a “book
entry system” within the meaning of Treasury Regulations
Section 5f.103-1(c)(1)(ii) and shall be interpreted consistently therewith.

 

5.                                      Miscellaneous Provisions.  If the Payee
of this Note refers this Note to an attorney to enforce, construe or defend any
provision hereof, with or without the filing of any legal action or proceeding,
Payor shall pay to the Payee of this Note upon demand the amount of all
attorneys’ fees, costs and other expenses incurred in connection therewith,
together with interest thereon from the date of demand at the rate set forth in
Section 1 above. No provision of this Note may be amended, modified,
supplemented, changed, waived, discharged or terminated unless the Payee of this
Note consents thereto in writing. In case any one or more of the provisions
contained in this Note should be held to be invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby. This Note shall be binding upon and inure to the benefit of Payor and
the Payee. The parties intend for this Note to be negotiable in accordance with
Section 3-104 of the California Uniform Commercial Code. Time is of the essence
of this Note and the performance of each of the covenants and agreements
contained herein. This Note shall be governed by and construed in accordance
with the laws of the State of California.

 

[Signature Page Follows]

 

F-2

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, Payor has executed this Note as of the Date of this Note set
forth above.

 

 

 

HCP DR CALIFORNIA II, LLC, a
Delaware limited liability company

 

 

 

 

 

By:

HCP, INC., a Maryland corporation,

its Managing Member

 

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Its:

 

 

F-3

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EXHIBIT G
REGISTRATION RIGHTS AGREEMENT

 

THIS REGISTRATION RIGHTS AGREEMENT, dated as of June 1, 2014, is entered into by
and between HCP, Inc., a Maryland corporation (the “Company”), and the parties
identified on the signature page hereof as a “Unitholder” (each, a “Unitholder”
and collectively, the “Unitholders”).

 

RECITALS

 

WHEREAS, the Company, the Unitholders, HCP DR California II, LLC, a Delaware
limited liability company (the “Operating LLC”), and certain other parties have
entered into that certain Contribution and Purchase Agreement and Joint Escrow
Instructions dated as of June 1, 2014 (the “Contribution Agreement”) providing,
among other things, for the contribution of certain properties by (the
“Unitholders”) to the Operating LLC and the contribution of cash by the Company
to the Operating LLC; and

 

WHEREAS, it is a condition to the closing of the transactions contemplated by
the Contribution Agreement with respect to the Properties (as defined in the
Contribution Agreement) that the parties hereto enter into this Agreement;

 

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

 

ARTICLE I
DEFINITIONS

 

1.1                                                                              
Definitions.  The following capitalized terms, as used in this Agreement, have
the following meanings:

 

“Affiliate” means, in respect of any Person, any other Person that is directly
or indirectly controlling, controlled by, or under common control with such
Person, and the term “control” means having, directly or indirectly, the power
to direct or cause the direction of the management and policies of a Person,
whether through ownership of voting securities or by contract or otherwise; and
the terms “controlling” and “controlled” should have correlative meanings.

 

“Agreement” means this Registration Rights Agreement, as it may be amended,
supplemented or restated from time to time.

 

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

 

G-1

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“Closing Price” means (i) the closing price of a share of Common Stock on the
principal exchange on which shares of Common Stock are then trading, if any, or
(ii) if the Common Stock is not traded on an exchange but is quoted on the
NASDAQ or a successor quotation system, (1) the last sales price (if the Common
Stock is then listed as a National Market Issue under the NASD National Market
System) or (2) the mean between the closing representative bid and asked prices
(in all other cases) for the Common Stock as reported by NASDAQ or such
successor quotation system or (iii) if the Common Stock is not publicly traded
on an exchange and not quoted on NASDAQ or a successor quotation system, the
mean between the closing bid and asked prices for the Common Stock.

 

“Commission” means the Securities and Exchange Commission.

 

“Common Stock” means the common stock, par value $1.00 per share, of the
Company.

 

“Company” has the meaning set forth in the preamble to this Agreement.

 

“Contribution Agreement” has the meaning set forth in the recitals to this
Agreement.

 

“Demand Registration” has the meaning set forth in Section 3.1(a) hereof.

 

“Demand Registration Statement” has the meaning set forth in
Section 3.1(a) hereof.

 

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

 

“Existing Shelf Registration Statement” means the Company’s Registration
Statement on Form S-3, Commission File No. 182824, or any successor shelf
Registration Statement maintained by the Company, including a shelf Registration
Statement filed to replace such Registration Statement pursuant to
Rule 415(a)(6) under the Securities Act.

 

“Form S-3” means Form S-3 under the Securities Act, as in effect on the date
hereof or any successor or similar registration form under the Securities Act
subsequently adopted by the Commission which permits inclusion or incorporation
of substantial information by reference to other documents filed with the SEC.

 

“Full Conversion Date” has the meaning set forth in Section 2.1 hereof.

 

“Holder” means a Unitholder which is the record or beneficial owner of any
Registrable Security or any assignee or transferee of such Registrable Security
(including assignments or transfers of Registrable Securities to such assignees
or transferees as a result of the foreclosure on any loans secured by such
Registrable Securities) unless such Registrable Security is acquired in a sale
pursuant to a registration statement under the Securities Act or pursuant to a
transaction exempt from registration under the Securities Act, in each such
case, where the security sold in such transaction may be resold without
subsequent registration under the Securities Act.

 

“Inspectors” has the meaning set forth in Section 3.2(h).

 

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“Issuance Registration Statement” has the meaning set forth in Section 2.1.

 

“LLC Agreement” means the Amended and Restated Limited Liability Company
Agreement of the Operating LLC, dated as of the date of this Agreement, as the
same maybe further amended, modified or restated from time to time.

 

“LLC Units” has the meaning set forth in the LLC Agreement.

 

“New Registration Statement” has the meaning set forth in Section 2.1 hereof.

 

“Operating LLC” has the meaning set forth in the recitals to this Agreement.

 

“Person” means an individual or a corporation, partnership, limited liability
company, association, trust, or any other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.

 

“Records” has the meaning set forth in Section 3.2(h).

 

“Redeemable LLC Units” means LLC Units which may be redeemed for Common Stock
pursuant to the LLC Agreement.

 

“Registrable Securities” means shares of Common Stock of the Company issued or
issuable upon exchange of Redeemable LLC Units pursuant to the terms of the LLC
Agreement at any time owned, either of record or beneficially, by any Holder
unless and until (i) a registration statement covering such shares has been
declared effective by the Commission and (A) the shares have been issued by the
Company to a Holder upon exchange of Redeemable LLC Units pursuant to an
effective registration statement or (B) have been sold or transferred by a
Holder to another Person pursuant to an effective registration statement,
(ii) such shares are sold pursuant to the provisions of Rule 144 under the
Securities Act (or any similar provisions then in force) (“Rule 144”),
(iii) such shares are held by a Holder who is not an Affiliate of the Company
within the meaning of Rule 144 (a “Rule 144 Affiliate”) and are eligible for
immediate sale pursuant to Rule 144(b)(1) under the Securities Act, (iv) such
shares are held by a Holder who is a Rule 144 Affiliate and all such shares may
be sold pursuant to Rule 144 within a period of three months in accordance with
the volume limitations set forth in Rule 144(e)(1), or (iv) such shares have
been otherwise transferred in a transaction that would constitute a sale under
the Securities Act and such shares may be resold without subsequent registration
under the Securities Act.

 

“Registration Expenses” has the meaning set forth in Section 3.4.

 

“Registration Statement” means any registration statement of the Company
pursuant to which Registrable Securities held by the Holders may be offered and
sold pursuant to the Securities Act under Rule 415 on a continuous and delayed
basis, including the Existing Shelf Registration Statement.  The Registration
Statement shall include any prospectus or prospectus supplement that is part of
such Registration Statement and any document incorporated by reference therein.

 

“Resale Prospectus” has the meaning set forth in Section 3.5.

 

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“Resale Registration Statement” has the meaning set forth in Section 3.5.

 

“S-3 Expiration Date” means the date on which Form S-3 is not available to the
Company for the registration of Registrable Securities pursuant to the
Securities Act.

 

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

 

“Selling Holder” means a Holder who is selling Registrable Securities pursuant
to a Demand Registration Statement.

 

“Share Issuance” has the meaning set forth in Section 2.1.

 

“Supplemental Rights Period” has the meaning set forth in Section 3.1.

 

“Unitholder” has the meaning set forth in the preamble to this Agreement.

 

ARTICLE II
REGISTRATION

 

2.1                                                                              
Registration Statement Covering Issuance of Common Stock.  The Company will use
commercially reasonable efforts to file with the Commission a prospectus
supplement or such supplemental materials as are then required by the rules and
regulations of the Commission to register under the Existing Shelf Registration
Statement the issuance, from time to time, of shares of Common Stock in exchange
for Redeemable LLC Units tendered for redemption pursuant to the LLC Agreement
(the “Share Issuance”).  In the event the Company is, despite its commercially
reasonable efforts, unable to register the Share Issuance pursuant to the
Existing Shelf Registration Statement before the 30th calendar day prior to the
one year anniversary of this Agreement, the Company shall promptly file a
Registration Statement (the “New Registration Statement”) to register the Share
Issuance, and shall use commercially reasonable efforts to cause such New
Registration Statement to become effective as soon as practicable following the
filing thereof, and in no event later than ninety (90) days after the one year
anniversary of this Agreement (extended to one hundred eighty (180) days if such
New Registration Statement is reviewed by the Commission).  In the event the
Company is unable to cause the New Registration Statement to be declared
effective by the Commission within ninety (90) days after the one year
anniversary of this Agreement (or one hundred eighty (180) days if such New
Registration Statement is reviewed by the Commission), then the rights of the
Holders set forth in Sections 3.1 hereof shall apply to Registrable Securities. 
Notwithstanding the availability of rights under Section 3.1 hereof, the Company
may continue to use its commercially reasonable efforts to cause the New
Registration Statement to be declared effective by the Commission and if it
shall be declared effective by the Commission, the obligations of the Company
under Section 3.1 hereof shall cease.  Subject to the provisions of Section 3.3
hereof, the Company agrees to use its commercially reasonable efforts to
maintain the registration of the Share Issuance under either the Existing Shelf
Registration Statement or the New Registration Statement (each, an “Issuance
Registration Statement”) until the earlier of (i) the S-3 Expiration Date, or
(ii) the first date on which no Redeemable LLC Units (other than those held by
the Company) or Registrable Securities remain outstanding (the “Full Conversion
Date”).

 

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ARTICLE III
REGISTRATION RIGHTS

 

3.1                                                                              
Registration Rights.  The following provisions shall apply with respect to
Registrable Securities during the period, if any, beginning on the earlier of
(a) the S-3 Expiration Date (or, if the S-3 Expiration Date shall occur before
the thirtieth (30th) day prior to the first date on which the Redeemable LLC
Units issued pursuant to the Contribution Agreement may be exchanged for shares
of Common Stock, beginning on such thirtieth (30th) prior day), (b) if a New
Registration Statement is required to be filed pursuant to Section 2.1, the
Company’s failure to file the New Registration Statement by the last day on
which the New Registration Statement is required to be filed as provided in
Section 2.1 or (c) if the New Registration Statement has been filed but has not
been declared effective by the Commission within ninety (90) days after such
original filing date (or one hundred eighty (180) days after such filing date if
such New Registration Statement is reviewed by the Commission), the ninetieth
(90th) day (or one hundred eightieth (180th) day, if such New Registration
Statement is reviewed by the Commission) after the original filing date, and
ending on the Full Conversion Date (the “Supplemental Rights Period”); provided,
however, that, except as permitted in Section 3.3 hereof, if the Company is
unable to keep an Issuance Registration Statement effective until the Full
Conversion Date, the Holders shall be entitled to exercise the rights provided
under this Section 3.1.  During the Supplemental Rights Period, the Holders
shall have the following rights:

 

(a)                                 Demand Rights.  Holders may make a written
demand for registration under the Securities Act of resales of all or part of
the Registrable Securities (a “Demand Registration”); provided, however, that
(i) the Company shall not be obligated to effect more than two (2) Demand
Registrations for Holders in any twelve month period, and (ii) the number of
Registrable Securities proposed to be sold by the Holder(s) making such written
demand either (x) shall be all the Registrable Securities owned by, or that may
be issued upon exchange of Redeemable LLC Units to, such Holders, or (y) shall
have an estimated market value at the time of such demand (based upon the then
market price of a share of Common Stock) of at least $2,000,000 or (z) shall not
be less than 50,000 shares of Common Stock.  The Company shall file any
registration statement required by this Section 3.1(a), which registration
statement shall comply as to form in all material respects with applicable
Commission rules providing for the sale by the Holder(s) of such Registrable
Securities (a “Demand Registration Statement”), with the Commission within
thirty (30) days after receipt of the requisite Holder demand and shall use its
commercially reasonable efforts to cause the Demand Registration Statement to be
declared effective by the Commission as soon as practicable thereafter.  The
Company shall give written notice of the proposed filing of the Demand
Registration Statement to all Holders of Registrable Securities and Redeemable
LLC Units as soon as practicable (but in no event less than twenty (20) days
before the anticipated filing date), and such notice shall offer such Holders
the opportunity to participate in such Demand Registration and to register such
number of shares of Registrable Securities as each such Holder may request.  The
Company shall use its commercially reasonable efforts to keep each such Demand
Registration Statement continuously effective for a period of one hundred eighty
(180) days (such period, in each case, to be extended by the number of days, if
any, during which Holders were not permitted to make offers or sales under the
Demand Registration Statement by reason of Section 3.3 hereof); provided that in
no case shall the

 

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Company be obligated to maintain the effectiveness of any Demand Registration
Statement once all the Registrable Securities covered thereby cease to be
Registrable Securities.  The Company may elect to include in any Demand
Registration Statement additional shares of Common Stock to be issued by the
Company; provided, however, that the inclusion of such additional shares will
not adversely affect the marketability of the offering and, subject, in the case
of an underwritten secondary Demand Registration, to cutback by the managing
underwriters.  A registration shall not constitute a Demand Registration under
this Section 3.1(a):  (i) unless and until the Demand Registration Statement has
been declared effective or (ii) if the Demand Registration Statement is
suspended for more than ninety (90) days at any one time.  Notwithstanding any
provision of this Section 3.1(a) to the contrary, the Company shall have the
option, in its sole discretion, to register pursuant to any Demand Registration
Statement, along with Registrable Securities that Holders have requested to be
included in such Demand Registration Statement in accordance with this
Section 3.1(a), any or all additional Registrable Securities that are
outstanding or issuable upon exchange of Redeemable LLC Units (such additional
Registrable Securities, the “Additional Demand Securities”); provided, however,
that if the Company elects to register any Additional Demand Securities in any
Demand Registration Statement, the Company shall use its commercially reasonable
efforts to keep such Demand Registration Statement continuously effective for
the longer of (A) one hundred eighty (180) days (such period, in each case, to
be extended by the number of days, if any, during which Holders were not
permitted to make offers or sales under the Demand Registration Statement by
reason of Section 3.3 hereof) or (B) until all Registrable Securities covered
thereby cease to be Registrable Securities; provided, further, that in no case
shall the Company be obligated to maintain the effectiveness of any such Demand
Registration Statement once all the Registrable Securities covered thereby cease
to be Registrable Securities.

 

(b)                                 Company Repurchase.  Upon receipt by the
Company of a registration demand pursuant to Section 3.1(a), the Company may,
but will not be obligated to, purchase for cash from any Holder so requesting
registration all, but not less than all, of the Registrable Securities which are
the subject of the request at a price per share equal to the average of the
Closing Prices of a share of Common Stock for the ten (10) trading days
immediately preceding the date of receipt by the Company of the registration
request.  In the event the Company elects to purchase the Registrable Securities
which are the subject of a registration request, the Company shall notify the
Holder within five (5) Business Days of the date of receipt of the request by
the Company, which notice shall indicate (i) that the Company will purchase for
cash the Registrable Securities held by the Holder which are the subject of the
request, (ii) the price per share, calculated in accordance with the preceding
sentence, which the Company will pay the Holder and (iii) the date upon which
the Company shall purchase the Registrable Securities, which date shall not be
later than the tenth (10th) Business Day after receipt of the registration
request.  If the Company so elects to purchase the Registrable Securities which
are the subject of a registration request, then upon such purchase the Company
shall be relieved of its obligations under this Section 3.1 with respect to such
Registrable Securities.

 

3.2                                                                              
Additional Registration Procedures.  In connection with any registration
statement filed by the Company pursuant to Section 2.1 or 3.1 hereof:

 

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(a)                                 Each Holder agrees to provide in timely
manner information requested by the Company regarding the proposed distribution
by that Holder of the Registrable Securities and all other information
reasonably requested by the Company in connection with the preparation of such
registration statement covering the Registrable Securities.

 

(b)                                 Subject to Section 3.3 hereof, the Company
will prepare and file with the Commission such amendments, including
post-effective amendments, and supplements as to such registration statement and
the prospectus used in connection therewith, as may be necessary (i) to keep
such registration statement effective and (ii) to comply with the provisions of
the Securities Act with respect to the disposition of the securities covered by
such registration statement in accordance with the intended method of
disposition by the Holders as set forth in such registration statement as may be
amended or in such prospectus as may be supplemented, in each case for such time
as is contemplated in Section 2.1 or 3.1 above.  The Company will respond
promptly to any comments received from the Commission with respect to such
registration statement or any amendments thereto and promptly provide the
Holders true and complete copies of all correspondence from and to the
Commission relating to such registration statement.

 

(c)                                  The Company will, if requested by any of
the Holders, prior to filing such registration statement or prospectus, or any
amendment or supplement thereto in connection with any registration statement,
furnish to each Selling Holder and each underwriter, if any, of the Registrable
Securities covered by such registration statement or prospectus copies of such
registration statement or prospectus or any amendment or supplement thereto as
proposed to be filed, and thereafter will furnish, without charge, to each
Selling Holder and underwriter, if any, such number of conformed copies of such
registration statement, each amendment and supplement thereto (in each case
including all exhibits thereto, all financial statements and schedules and
documents incorporated by reference therein), the prospectus included in such
registration statement (including each preliminary prospectus) and such other
documents as such Selling Holder or underwriter may reasonably request in order
to facilitate the disposition of the Registrable Securities owned by such
Selling Holder.  The Company shall also promptly notify each Selling Holder of
Registrable Securities covered by any registration statement when such
registration statement, or any post-effective amendment thereto, has become
effective.  The Company hereby consents to the use of any such prospectus and
each amendment or supplement thereto by each of the selling Holders in
connection with the offering and sale of the Registrable Securities covered by
such prospectus, as may be amended or supplemented.

 

(d)                                 After the filing of such registration
statement, the Company will promptly notify each holder of securities covered by
such registration statement of any stop order issued or threatened by the
Commission and shall take all commercially reasonable actions required to
prevent the entry of such stop order or to obtain the withdrawal or removal of
it if entered.

 

(e)                                  In connection with any Demand Registration
Statement, the Company will use commercially reasonable efforts to register or
qualify the Registrable Securities under such state securities or blue sky laws
of those jurisdictions in the United States (where an exemption is not
available) as any Selling Holder or managing underwriter or underwriters, if

 

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any, reasonably (in light of the Selling Holder’s intended plan of distribution)
requests, and shall use commercially reasonable efforts to keep each such
registration or qualification effective during the period such registration
statement is required to be kept effective pursuant to this Agreement, and to do
any and all other similar acts and things which may be reasonably necessary or
advisable to enable the Holders to consummate the disposition of the Registrable
Securities owned by the Holders in each such jurisdiction; provided, however,
that the Company will not be required to (i) qualify generally to do business in
any jurisdiction where it would not otherwise be required to qualify but for
this paragraph (e), (ii) subject itself to taxation in any jurisdiction where it
would not otherwise be subject to taxation or (iii) consent to general service
of process in any jurisdiction where it is not then so subject.

 

(f)                                   In connection with any Demand Registration
Statement, the Company will enter into customary agreements (including an
underwriting agreement, if any, in customary form) as are reasonably required in
order to expedite or facilitate the disposition of Registrable Securities
pursuant to such registration statement.  Each Selling Holder participating in
an underwritten offering shall also enter into and perform its or his
obligations under the underwriting agreement.

 

(g)                                  The Company shall cause all such
Registrable Securities to be listed on each securities exchange on which the
Common Stock of the Company is then listed.

 

(h)                                 If the Registrable Securities are of a class
of securities that is listed on a national securities exchange, file copies of
any prospectus covering Registrable Securities with such exchange so that the
Selling Holders shall benefit from the prospectus delivery procedures described
in Rule 153 under the Securities Act.

 

(i)                                     The Company will promptly notify each
Selling Holder of such Registrable Securities, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
existence of any fact of which the Company is aware or the occurrence of an
event requiring the preparation of a supplement or amendment to either the
registration statement or related prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities, such registration statement or
related prospectus, both as then in effect, will not contain an untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statement therein, in light of the
circumstances then existing, not misleading and promptly make available to each
Selling Holder a reasonable number of copies of any such supplement or
amendment.

 

(j)                                    The Company will make available for
inspection by any Selling Holder of such Registrable Securities, any underwriter
participating in any disposition pursuant to such Registrable Securities, any
underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other professional retained by any
such Selling Holder or underwriter (collectively, the “Inspectors”), all
financial and other records, pertinent corporate documents and properties of the
Company (collectively, the “Records”) as shall be reasonably necessary to enable
them to discharge their due diligence responsibility under the Securities Act,
and cause the Company’s officers, directors and employees to supply all
information reasonably requested by any Inspectors in connection with the
discharge of their due diligence responsibility.  Records which the Company
determines, in good faith, to be

 

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confidential and which it notifies the Inspectors are confidential shall not be
disclosed by the Inspectors unless the release of such Records is ordered
pursuant to a subpoena or other order from a court of competent jurisdiction. 
Each Selling Holder of such Registrable Securities agrees that information
obtained by it as a result of such inspections shall be deemed confidential and
shall not be used by it as the basis for any market transactions in the
securities of the Company or its Affiliates or otherwise disclosed by it unless
and until such is made generally available to the public and further agrees, if
the Company so requests, to enter into a confidentiality agreement with the
Company that is reasonably acceptable to the Selling Holder and the Company. 
Each Selling Holder of such Registrable Securities further agrees that it will,
upon learning that disclosure of such Records is sought in a court of competent
jurisdiction, give notice to the Company and allow the Company, at its expense,
to undertake appropriate action to prevent disclosure of the Records deemed
confidential.

 

(k)                                 If requested by any Holder participating in
the offering of Registrable Securities pursuant to a Demand Registration
Statement, incorporate in a prospectus supplement or post-effective amendment
such information concerning the Holder or the intended method of distribution as
the Holder reasonably requests to be included therein and is reasonably
necessary to permit the sale of the Registrable Securities pursuant to the
registration statement, including, without limitation, information with respect
to the number of Registrable Securities being sold, the purchase price being
paid therefor and any other material terms of the offering of the Registrable
Securities to be sold in such offering; provided, however, that the Company
shall not be obligated to include in any such prospectus supplement or
post-effective amendment any requested information that is not required by the
rules of the Commission and is unreasonable in scope compared with the Company’s
most recent prospectus or prospectus supplement used in connection with a
primary or secondary offering of equity securities by the Company; provided,
further, that the Company shall not be required to file more than one
(1) prospectus supplement or post-effective amendment pursuant to this
Section 3.2(k) in any six month period.

 

(l)                                     In connection with a disposition of
Registrable Securities pursuant to a Demand Registration Statement in which
there is a participating underwriter or underwriters, the Company will furnish
to each Selling Holder and to each underwriter, a signed counterpart, addressed
to such Selling Holder or underwriter, of (i) an opinion or opinions of counsel
to the Company and (ii) a comfort letter or comfort letters from the Company’s
independent public accountants (to the extent permitted by the standards of the
American Institute of Certified Public Accountants), each in customary form and
covering such matters of the type customarily covered by opinions or comfort
letters, as the case may be, as the Holders of a majority of the Registrable
Securities included in such offering or the managing underwriter or underwriters
therefor reasonably requests.

 

(m)                             The Company will otherwise use its commercially
reasonable efforts to comply with all applicable rules and regulations of the
Commission, and make available to its security holders, as soon as reasonably
practicable, an earnings statement covering a period of twelve (12) months,
beginning within three (3) months after the effective date of the registration
statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 of the Commission promulgated
thereunder (or any successor rule or regulation hereafter adopted by the
Commission).

 

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(n)                                 Provide and cause to be maintained a
transfer agent for all Registrable Securities covered by the registration
statement from and after a date not later than the effective date of the
registration statement.

 

3.3                                                                              
Material Developments, Suspension of Offering.

 

(a)                                 Notwithstanding the provisions of
Sections 2.1 or 3.1 hereof or any other provisions of this Agreement to the
contrary, the Company shall not be required to file a registration statement or
to keep any registration statement effective if the negotiation or consummation
of a transaction by the Company or any of its subsidiaries is pending or an
event has occurred, which negotiation, consummation or event would require
additional disclosure by the Company in the registration statement of material
information which the Company (in the reasonable judgment of management of the
Company) has a bona fide business purpose for keeping confidential and the
nondisclosure of which in the registration statement would be expected, in the
Company’s reasonable determination, to cause the registration statement to fail
to comply with applicable disclosure requirements; provided, however, that the
Company (i) will promptly notify the Holders of Registrable Securities otherwise
entitled to registration of a delay, suspension or withdrawal pursuant to this
Section 3.3(a) and (ii) may not delay, suspend or withdraw the registration
statement for such reason under this Section 3.3(a) more than twice in any
twelve (12) month period or two times in any twenty-four (24) month period or
for more than ninety (90) days at any time.  Upon receipt of any notice from the
Company of the happening of any event during the period the registration
statement is effective which is of a type specified in the preceding sentence or
as a result of which the registration statement or related prospectus contains
any untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statement therein, in
light of the circumstances under which they were made not misleading, the
Holders agree that they will immediately discontinue offers and sales of the
Registrable Securities under the registration statement (until they receive
copies of a supplemental or amended prospectus that corrects the misstatements
or omissions and receive notice that any post-effective amendment has become
effective or unless notified by the Company that they may resume such offers and
sales).  If so directed by the Company, Holders will deliver to the Company any
copies of the prospectus covering the Registrable Securities in their possession
at the time of receipt of such notice.  Each Holder agrees to keep confidential
the fact that the Company has exercised its rights under this Section 3.3 and
all facts and circumstances relating to such exercise until such information is
made public by the Company.

 

(b)                                 If all reports required to be filed by the
Company pursuant to the Exchange Act have not been filed by the required date
without regard to any extension, or if the consummation of any business
combination by the Company has occurred or is probable for purposes of Rule 3-05
or Article 11 of Regulation S-X under the Securities Act, upon written notice
thereof by the Company to the Holders, the rights of the Holders to acquire
Registrable Securities pursuant to the Issuance Registration Statement or to
offer, sell or distribute any Registrable Securities pursuant to any Demand
Registration Statement or to require the Company to take action with respect to
the registration of any Registrable Securities pursuant to this Agreement shall
be suspended until the date on which the Company has filed such reports or
obtained and filed the financial information required by Rule 3-05 or Article 11
of Regulation S-X to be included or incorporated by reference, as applicable, in
the

 

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Issuance Registration Statement or the Demand Registration Statement and the
Company shall notify the Holders as promptly as practicable when such suspension
is no longer required.  The Company’s rights to suspend its obligations under
this Section 3.3(b) shall be in additional to its rights under Section 3.3(a).

 

3.4                                                                              
Registration Expenses.  In connection with any registration statement required
to be filed hereunder, except as provided below, the Company shall pay all
registration expenses incurred in connection with the registration (the
“Registration Expenses”), including the following:  (i) all registration and
filing fees, including fees and expenses with respect to filings required to be
made with any securities exchange on which the Registrable Securities are
required to be listed, (ii) fees and expenses of compliance with securities or
blue sky laws (including the fees and expenses of counsel to the Company),
(iii) printing and distribution expenses, (iv) internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), (v) the fees and expenses incurred in
connection with the listing of the Registrable Securities on each securities
exchange on which similar securities issued by the Company are then listed,
(vi) fees and disbursements of counsel for the Company and the independent
public accountants of the Company, and (vii) the fees and expenses of any
experts retained by the Company in connection with such registration, including
accounting fees and expenses.  The Holders shall be responsible for the payment
of any and all other expenses incurred by them in connection with the
registration and sale of Registrable Securities, including, without limitation,
brokerage and sales commissions, underwriting and placement agent fees,
discounts and commissions attributable to the Registrable Securities, fees and
disbursements of counsel representing the Holders, all salaries and expenses of
its officers and employees performing legal or accounting duties and any
transfer taxes relating to the sale or disposition of the Registrable
Securities.

 

3.5                                                                              
Indemnification by the Company.  The Company agrees to indemnify and hold
harmless each Selling Holder, its partners, members, officers, directors,
employees, representatives, and agents, and each Person, if any, who controls
such Selling Holder within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act from and against any and all losses, claims,
actions, damages, liabilities, costs and expenses (including, without
limitation, but subject to the provisions of Section 3.7 hereof, reasonable
attorneys’ fees and disbursements) caused by any untrue statement or alleged
untrue statement of a material fact contained in any Demand Registration
Statement (or any amendment thereto) (individually, a “Resale Registration
Statement”), including all documents incorporated therein by reference, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or arising out of any
untrue statement or alleged untrue statement of a material fact contained in any
prospectus (or any amendment thereto) contained in a Resale Registration
Statement at the time it became effective (a “Resale Prospectus”), including all
documents incorporated therein by reference, or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading, except
insofar as such losses, claims, damages or liabilities are caused by any such
untrue statement or omission or alleged untrue statement or omission based upon
information furnished in writing to the Company by such Selling Holder or on
such Selling Holder’s behalf expressly for inclusion

 

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therein; provided, however, that the Company will not be liable in any case to
the extent that any such claim, loss, damage, liability or expense arises out of
or is based upon any untrue statement or omission contained in a Resale
Prospectus which was corrected in a supplement or amendment thereto if such
claim is brought by a purchaser of Registrable Securities from the Selling
Holder and the Selling Holder failed to deliver to such purchaser the supplement
or amendment to the Resale Prospectus in a timely manner.

 

3.6                                                                              
Indemnification by Holders of Registrable Securities.  Each Selling Holder of
Registrable Securities covered by a Resale Registration Statement agrees to
indemnify and hold harmless the Company, its officers, directors and agents and
each Person, if any, who controls the Company within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act to the same
extent as the indemnity set forth in Section 3.5 from the Company to Selling
Holders, but only with respect to information relating to such Selling Holder
furnished in writing by such Selling Holder or on such Selling Holder’s behalf
expressly for use in any Resale Registration Statement or Resale Prospectus or
any amendment or supplement thereto.  Each Holder also agrees to indemnify and
hold harmless underwriters of the Registrable Securities, their officers and
directors and each Person who controls such underwriters within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act on
substantially the same basis as that of the indemnification of the Company
provided in this Section 3.6.

 

3.7                                                                              
Conduct of Indemnification Proceedings.  Each indemnified party shall give
reasonably prompt notice to each indemnifying party of any action or proceeding
commenced against it in respect of which indemnity may be sought hereunder, but
failure to so notify the indemnifying party (i) shall not relieve it from any
liability which it may have under the indemnity agreement provided in
Section 3.5 or 3.6 above, unless and to the extent it did not otherwise learn of
such action and the lack of notice by the indemnified party results in the
forfeiture by the indemnifying party of substantial rights and defenses and
(ii) shall not, in any event, relieve the indemnifying party from any
obligations to the indemnified party other than the indemnification obligation
provided under Section 3.5 or 3.6 above.  If the indemnifying party so elects
within a reasonable time after receipt of notice, the indemnifying party may
assume the defense of the action or proceeding at the indemnifying party’s own
expense with counsel chosen by the indemnifying party and approved by the
indemnified party, which approval shall not be unreasonably withheld; provided,
however, that the indemnifying party will not settle, compromise or consent to
the entry of any judgment with respect to any such action or proceeding without
the written consent of the indemnified party unless such settlement, compromise
or consent secures the unconditional release of the indemnified party; provided,
further, that if the defendants in any such action or proceeding include both
the indemnified party and the indemnifying party and the indemnified party
reasonably determine based upon advice of legal counsel experienced in such
matters, that there may be legal defenses available to it which are different
from or in addition to those available to the indemnifying party, then the
indemnifying party shall not be entitled to assume the defense of the
indemnified party and the indemnified party shall be entitled to separate
counsel at the indemnifying party’s expense, which counsel shall be chosen by
the indemnified party and approved by the indemnifying party, which approval
shall not be unreasonably withheld; and provided, further, that it is understood
that the indemnifying party shall not be liable for the fees, charges and
disbursements of more than one separate firm.  If the indemnifying party is

 

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not entitled to assume the defense of such action or proceeding as a result of
the second proviso to the preceding sentence, the indemnifying party’s counsel
shall be entitled to conduct the indemnifying party’s defense and counsel for
the indemnified party shall be entitled to conduct the defense of the
indemnified party, it being understood that both such counsel will cooperate
with each other, to the extent feasible in light of the conflict of interest or
different available legal defenses, to conduct the defense of such action or
proceeding as efficiently as possible.  If the indemnifying party is not so
entitled to assume the defense of such action or does not assume the defense,
after having received the notice referred to in the first sentence of this
Section 3.7, the indemnifying party will pay the reasonable fees and expenses of
counsel for the indemnified party; in that event, however, the indemnifying
party will not be liable for any settlement effected without the written consent
of the indemnifying party.  If an indemnifying party is entitled to assume, and
assumes, the defense of an action or proceeding in accordance with this Section,
the indemnifying party shall not be liable for any fees and expenses of counsel
for the indemnified party incurred thereafter in connection with that action or
proceeding except as set forth in the proviso in the second sentence of this
Section 3.7.  Unless and until a final judgment is rendered that an indemnified
party is not entitled to the costs of defense under the provisions of this
Section, the indemnifying party shall reimburse, promptly as they are incurred,
the indemnified party’s costs of defense.

 

3.8                                                                              
Contribution.

 

(a)                                 If the indemnification provided for in
Section 3.5 or 3.6 hereof is applicable in accordance with its terms, but if
determined by a court of competent jurisdiction to be legally unenforceable in
respect of any losses, claims, damages or liabilities referred to therein, then
each indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by indemnified party as a result of
such losses, claims, damages or liabilities as between the Company on the one
hand and each Selling Holder on the other, in such proportion as is appropriate
to reflect the relative fault of the Company on the one hand and of each Selling
Holder on the other in connection with such statements or omissions which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations.  The relative fault of the Company on the one
hand and of each Selling Holder on the other shall be determined by reference
to, among other things, whether the action in question, including any untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact, has been made by, or relates to information supplied
by, the Company or such Selling Holder, and the Company’s and the Selling
Holder’s relative intent, knowledge, access to information and opportunity to
correct or prevent such action.

 

(b)                                 The Company and the Selling Holders agree
that it would not be just and equitable if contribution pursuant to this
Section 3.8 were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in Section 3.8(a).  The amount paid or payable by an indemnifying party as a
result of the losses, claims, damages or liabilities referred to in Sections 3.5
and 3.6 hereof shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by the indemnified party
in connection with investigating or defending any such action or claim. 
Notwithstanding the provisions of this Section 3.8, no Selling Holder shall be
required to contribute any amount in excess of the amount of the total proceeds
to such

 

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Selling Holder from sales of the Registrable Securities of the Selling Holder
under the registration statement that is the subject of the claim.  No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.  For purposes of this
Section 3.8, each person, if any, who controls a Selling Holder within the
meaning of Section 15 of the Securities Act shall have the same rights to
contribution as the Selling Holder, and each director of the Company, each
officer of the Company who signed a registration statement and each person, if
any, who controls the Company within the meaning of Section 15 of the Securities
Act shall have the same rights to contribution as the Company.

 

(c)                                  The obligations of the Company and the
Holders under this Section 3.8 shall survive the termination or completion of
any offering of Registrable Securities under a registration statement covered by
this Agreement.

 

3.9                                                                              
Participation in Underwritten Registrations.  No Holder may participate in any
underwritten registration hereunder unless the Holder (a) agrees to sell his or
its Registrable Securities on the basis provided in the applicable underwriting
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents in customary
form as reasonably required under the terms of such underwriting arrangements.

 

3.10                                                                       
Holdback Agreements.  Each Holder whose securities are included in a Demand
Registration Statement agrees not to effect any sale or distribution of the
securities registered or any similar security of the Company, or any securities
convertible into or exchangeable or exercisable for such securities, including a
sale pursuant to Rule 144 under the Securities Act, during the fourteen (14)
days prior to, and during the ninety (90)-day period beginning on, the effective
date of such registration statement (except as part of such registration) if and
to the extent requested in writing by the managing underwriter or underwriters
in the case of an underwritten public offering.

 

ARTICLE IV
MISCELLANEOUS

 

4.1                                                                              
Specific Performance.  The parties hereto acknowledge that there would be no
adequate remedy at law if any party fails to perform any of its obligations
hereunder, and accordingly agree that each party, in addition to any other
remedy to which it may be entitled at law or in equity, shall be entitled to
seek specific performance of the obligations, covenants and agreements of any
other party under this Agreement in accordance with the terms and conditions of
this Agreement in any court of the United States or any State thereof having
jurisdiction.

 

4.2                                                                              
Amendments and Waivers.  The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
without the prior written consent of the Company and the Holders holding at
least a majority of the then outstanding Registrable Securities and Redeemable
LLC Units, taken together as one class assuming all Redeemable LLC Units were
exchanged for Registrable Securities.  No failure or

 

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delay 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 any breach thereof shall constitute a waiver of any such breach
or any other covenant, duty, agreement or condition.

 

4.3                                                                              
Notices.  Any notice required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been given (a) when delivered by
hand or upon transmission by telecopier or similar facsimile transmission
device, (b) on the date delivered by a courier service, or (c) on the third
Business Day after mailing by registered or certified mail, postage prepaid,
return receipt requested, in any case addressed as follows:

 

(a)                                 if to any Holder, to such Holder at the
address set forth under such Holder’s name on the signature page hereto, or to
such other address and to such other Persons as the Holders may hereafter notify
the Company in writing; and

 

(b)                                 if to the Company, to HCP, Inc., 1920 Main
Street, Suite 1200, Irvine, California 92614 (Attention:  Legal Department), or
to such other address as the Company may hereafter specify in writing.

 

4.4                                                                              
Successors and Assigns.  The rights and obligations of the Holders under this
Agreement shall not be assignable by any Holder to any Person that is not a
Holder; provided, however, that a Unitholder may assign its rights and
obligations hereunder, following prior written notice to the Company, to a
permitted transferee in connection with a transfer of some or all of such
Unitholder’s LLC Units in accordance with the terms of the LLC Agreement, if
such transferee agrees in writing to be bound by all of the provisions hereof. 
This Agreement shall be binding upon the parties hereto, the Holders and their
respective successors and assigns (including lenders in foreclosure).

 

4.5                                                                              
Counterparts.  This Agreement may be executed in any number of counterparts and
by the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.

 

4.6                                                                              
Governing Law.  This Agreement shall be governed by and construed in accordance
with the internal laws of the State of California, without regard to the
conflicts of law provisions thereof.

 

4.7                                                                              
Severability.  In the event that any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.

 

4.8                                                                              
Entire Agreement.  This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein.  This Agreement supersedes all prior
agreements and understandings between the parties with respect to the subject
matter of this Agreement.

 

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4.9                                                                              
Headings.  The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning of any provision of this
Agreement.

 

4.10                                                                       
Selling Holders Become Party to this Agreement.  By asserting or participating
in the benefits of registration of Registrable Securities pursuant to this
Agreement, each Holder agrees that it or he will be deemed a party to this
Agreement and be bound by each of its terms.

 

4.11                                                                       
Rule 144.  The Company covenants that it will file any reports required to be
filed by it under the Securities Act and the Exchange Act to the extent required
from time to time to enable Holders to sell Registrable Securities without
registration under the Securities Act within the limitations of the exemptions
provided by (a) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (b) any similar rule or regulation hereafter adopted by
the Commission.  Upon the request of any Holder, the Company will deliver to
such Holder a written statement as to whether it has filed such reports.  In
connection with any sale, transfer or other disposition by a Holder of any
Registrable Securities pursuant to Rule 144 under the Securities Act, the
Company shall cooperate with the Holder to facilitate the timely preparation and
delivery of certificates representing the Registrable Securities to be sold and
not bearing any Securities Act legend, and enable certificates for such
Registrable Securities to be for such number of shares and registered in such
names as Holder may reasonably request; provided, that any such request shall be
made at least five (5) Business Days prior to the any sale of Registrable
Securities hereunder.

 

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

 

 

 

 

COMPANY:

 

 

 

 

 

 

 

 

HCP, INC., a Maryland corporation

 

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

 

 

UNITHOLDERS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See Schedule A for additional Unitholders

 

 

 

 

 

By:

 

 

 

William P. Gallaher, as attorney-in-fact for

 

 

each Unitholder other than those

 

 

Unitholders whose signature appears above

 

 

 

 

 

 

 

 

Address for Notice to Unitholders:

 

 

 

 

 

[See Schedule A attached hereto]

 

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Schedule A to
Registration Rights Agreement

 

Unitholder

 

Address

1.                   William P. & Cynthia J. Gallaher Trust dated April 5, 1989

 

 

2.                   The Lin Revocable Living Trust dated May 7, 1999

 

 

3.                   The William R. Mabry III and Cathy L. Mabry Trust Agreement
dated July 30, 2009

 

 

4.                   Francis J. & Shannon A. Connelly Living Trust

 

 

5.                   Ned B. Stein

 

 

6.                   John & Andrea Gladstein Family Trust dated 11 February 2003

 

 

7.                   The 1988 Al Coppin Living Trust

 

 

8.                   Richard T. Southern & Thanh T. Vo Trust

 

 

9.                   James A. Meyer & Marjorie I. Meyer

 

 

10.            The Jeff & Judy Meyer Family Trust dated 8/29/02

 

 

11.            William Connelly & Cinda Connelly

 

 

12.            The Steven L. & Joan A. Gallaher Trust dated 7/10/00

 

 

13.            Christine J. Canady Trust

 

 

14.            Ivy M. Petersen Trust

 

 

15.            Moore-Bone 2012 Revocable Family Trust dated 2/28/12

 

 

16.            Elaine de Man

 

 

17.            Gulati Living Trust

 

 

18.            The Vargas Family Trust

 

 

19.            Paul Bialek

 

 

 

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