Exhibit 10.3
 
 
 
 
 
 
 
AMENDED AND RESTATED
LIMITED LIABILITY
COMPANY AGREEMENT
 
of
 
ROYAL CORNERSTONE SOUTH CAROLINA TENANT PORTFOLIO, LLC,
a Delaware limited liability company,
 
by and between
 
CORNERSTONE OAKLEAF VILLAGE TRS, LLC,
a Delaware limited liability company,
as a member
 
and
 
RSC SOUTH CAROLINA INTERESTS, LLC,
a Florida limited liability company,
as a member
 
Dated as of April 30, 2010
 
 
 
 
 
 
 
 
 

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TABLE OF CONTENTS
 
 
 

 
Page
   
Article I FORMATION AND OTHER ORGANIZATION MATTERS
2
Section 1.1
Formation; Changes
2
Section 1.2
Name
2
Section 1.3
Term
2
Section 1.4
Business
2
Section 1.5
Names and Addresses of Members
2
Section 1.6
Registered Office and Principal Place of Business
3
Section 1.7
Certain Definitions
3
Article II CERTAIN TAX AND ACCOUNTING MATTERS
3
Article III CONTRIBUTIONS BY MEMBERS; FINANCING
3
Section 3.1
Capital Contributions
3
Section 3.2
Additional Capital Contributions
4
Section 3.3
Recoupment for Contributions
4
Section 3.4
Execution and Compliance with Senior Loan Documents
5
Article IV DISTRIBUTIONS TO MEMBERS
5
Section 4.1
Distributions of Available Cash from Operations
5
Section 4.2
Distributions of Net Capital Transaction Proceeds
6
Section 4.3
Distributions shall be Aggregated with those of Owner Portfolio
7
Section 4.4
Shortfall in Managing Member Preferred Return
7
Section 4.5
Allocation of Purchase Price
7
Section 4.6
Withholding Taxes with Respect to Members
8
Section 4.7
Violation of Law
8
Section 4.8
Deemed Distribution/Re-contribution of Excess Expenses and Non-Recurring Capital
Expenditures
8
Section 4.9
Performance Termination of RSC Manager under RSC Management Agreement
9
Article V MANAGEMENT OF THE COMPANY
9
Section 5.1
Authority of Managing Member
9
Section 5.2
Management Agreements
13
Section 5.3
Selection of Auditors
14
Section 5.4
Limited Reimbursement of Expenses
14

 
 
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Article VI BUY-SELL PROCEDURES
15
Section 6.1
Buy-Sell Procedures
15
Article VII STATUS OF MEMBERS; indemnification
16
Section 7.1
Role of Non-Managing Members
16
Section 7.2
Liability of Members
16
Section 7.3
Bankruptcy of Member
16
Section 7.4
Relationship of Members
16
Section 7.5
Other Activities; Affiliates
17
Section 7.6
Indemnification
17
Article VIII TRANSFER OF MEMBERSHIP INTERESTS
20
Section 8.1
General
20
Section 8.2
Permitted Transferees
20
Section 8.3
Right of First Refusal
20
Section 8.4
Tag-Along Rights
22
Section 8.5
Effect of Assignment
22
Section 8.6
Substitute Member
23
Section 8.7
Further Requirements
23
Section 8.8
Transfer Taxes
23
Article IX CERTAIN REMEDIES
23
Section 9.1
No Partition.
23
Section 9.2
Litigation Without Termination
23
Section 9.3
Attorneys’ Fees
24
Section 9.4
Cumulative Remedies
24
Section 9.5
No Waiver
24
Article X DISSOLUTION OF COMPANY
24
Section 10.1
Events Giving Rise to Dissolution
24
Section 10.2
Procedure
25
Article XI MISCELLANEOUS
26
Section 11.1
Notices
26
Section 11.2
Entire Agreement
28
Section 11.3
Amendments
28
Section 11.4
Governing Law
28
Section 11.5
Successors and Assigns
28

 
 
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Section 11.6
Interpretation
28
Section 11.7
Severability
29
Section 11.8
Legal Counsel
29
Section 11.9
Advice from Independent Counsel/Voluntary Agreement
29
Section 11.10
Counterparts
29
Section 11.11
Benefits of Agreement; No Third-Party Rights
29
Section 11.12
WAIVER OF JURY TRIAL
30
Section 11.13
Special Purpose Provisions
30
Section 11.14
Patriot Act Representation
31
Section 11.15
OFAC Compliance and Source of Funds
31
Article XII BOOKS AND RECORDS
32
Section 12.1
Books and Records; Periodic Reporting
32
Section 12.2
Right to Inspection; Delivery of Information
33
Section 12.3
Notices of Default or Litigation
33
Article XIII OBLIGATIONs OF MANAGING MEMBER
34
Section 13.1
Duties and Obligations of Managing Member
34
Section 13.2
Non-Managing Member’s Right to Perform Obligations of Managing Member
36

 
 
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AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
ROYAL CORNERSTONE SOUTH CAROLINA TENANT PORTFOLIO, LLC
 
THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (the “Agreement”)
of ROYAL CORNERSTONE SOUTH CAROLINA TENANT PORTFOLIO, LLC, a Delaware limited
liability company, dated as of April 30, 2010 (the “Effective Date”) by and
among CORNERSTONE OAKLEAF VILLAGE, LLC, a Delaware limited liability company
(“Managing Member”), as the Managing Member, and RSC SOUTH CAROLINA INTERESTS,
LLC, a Florida limited liability company (“Non-Managing Member”), as the
Non-Managing Member.
 
WITNESSETH:
 
WHEREAS, Royal Senior Care, LLC, a Florida limited liability company (“RSC” or
“Royal”) formed Royal Cornerstone South Carolina Portfolio, LLC (the “Company”)
as a limited liability company under the provisions of the Delaware Limited
Liability Company Act, as amended from time to time (the “Delaware Act”);
 
WHEREAS, RSC executed that certain Limited Liability Company Agreement for the
Company, effective as of March 26, 2010 (the “Original Agreement”);
 
WHEREAS, RSC and Managing Member have entered into that certain Membership
Interests Sale and Purchase Agreement dated as of March 5, 2010 (the “Purchase
Agreement”), pursuant to which, among other things, the Managing Member has
purchased from RSC, and RSC has sold and assigned to Managing Member an eighty
percent (80%) membership interest in the Company;
 
WHEREAS, RSC has contributed to Non-Managing Member its twenty percent (20%)
membership interest in the Company;
 
WHEREAS, Managing Member and Non-Managing Member desire to amend and restate the
Original Agreement in its entirety to set forth their respective rights and
obligations with respect to the Company.
 
NOW, THEREFORE, in consideration of the foregoing premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:

 
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ARTICLE I
FORMATION AND OTHER ORGANIZATION MATTERS
 
Section 1.1    Formation; Changes.
 
The Company was formed under the Delaware Act on March 26, 2010 (the “Formation
Date”) by the execution, delivery and filing with the Secretary of the State of
Delaware, of the Certificate of Formation of the Company, by Roger S. Goldman,
as an “authorized person” within the meaning of the Delaware Act. Upon the
filing of the Certificate of Formation with the Delaware Secretary of State his
powers as an “authorized person” ceased, and RSC thereupon became the sole
“authorized person”. Upon execution and delivery of this Agreement,  Managing
Member became the sole “authorized person” and shall continue as the designated
“authorized person” within the meaning of the Delaware Act, but subject to the
provisions hereof.   The Members hereby amend and restate the Original Agreement
of the Company in its entirety as set forth herein.  This Agreement replaces the
Original Agreement of the Company and sets forth the ongoing rights and
obligations of the Members and certain matters related thereto. Except as
expressly stated herein to the contrary, the rights and obligations of the
Members and the administration and termination of the Company shall be governed
by the Delaware Act.
 
Section 1.2    Name.
 
The business of the Company shall be conducted under the name “Royal Cornerstone
South Carolina Tenant Portfolio, LLC.”
 
Section 1.3    Term.
 
The term (“Term”) of the Company shall be from the Formation Date until December
31, 2069, inclusive, unless sooner terminated as hereinafter provided. The
existence of the Company as a separate legal entity shall continue until
cancellation of the Company as provided in the Delaware Act.
 
Section 1.4    Business.
 
The business of the Company is solely to (a) own, hold, finance, pledge and
manage the sole equity interest in each of the Operating Companies  and (b) take
any and all actions and make any and all decisions (i) in its capacity as the
sole member of each of the Operating Companies  which owns or leases the
Property, including, without limitation, in connection with the acquisition,
management, financing, refinancing, ownership, vacating, renovating, leasing,
insuring, selling, assigning, transferring and prosecuting or defending any and
all legal proceedings relating to the Property and (ii) in connection with the
ownership, financing, refinancing, selling, assigning, transferring and
prosecuting or defending any and all legal proceedings relating to the interests
of the Company in each of the Operating Companies; and do any and all other acts
or things that may be necessary or incidental to carry on the business of the
Company as described in clauses (a) and (b) above. The Company is not authorized
to, and shall not, engage in any business other than as described in this
Section 1.4.
 
Section 1.5    Names and Addresses of Members.
 
The names and addresses of the Members are as follows:
 
Cornerstone Oakleaf Village TRS, LLC
c/o Cornerstone Healthcare Plus REIT, Inc.
Attn:  Sharon C. Kaiser, Chief Financial Officer
1920 Main Street, Suite 400
Irvine, California 92614

 
 
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RSC South Carolina Interests, LLC
c/o Gazit Senior Care, Inc.
1696 N.E. Miami Gardens Drive
North Miami Beach, Florida 33179
Attn:  Sean Kanov

 
Section 1.6    Registered Office and Principal Place of Business.
 
The registered office of the Company in the State of Delaware shall be 2711
Centerville Road, Suite 400, Wilmington, Delaware and its registered agent for
service of process on the Company at such office shall be Corporation Service
Company.  The principal place of business of the Company shall be 1920 Main
Street, Suite 400, Irvine, California 92614, or such other location hereafter
determined by the Managing Member.
 
Section 1.7    Certain Definitions.
 
Certain capitalized words and phrases used in this Agreement and not otherwise
defined in the body hereof are defined in Exhibit A and shall have the meanings
set forth therein.
 
ARTICLE II
CERTAIN TAX AND ACCOUNTING MATTERS
 
The Members intend that the Company shall be taxed as a partnership for federal
and state income tax purposes and shall not take any action that may result in
the Company being taxed as other than a partnership for such purposes. Each and
all of the provisions of Exhibit B annexed hereto and made a part hereof are
incorporated herein and shall constitute part of this Agreement. Exhibit B
provides for, among other matters, the maintenance of Capital Accounts, the
allocation of profits and losses, and the maintenance of books and records.
 
ARTICLE III
CONTRIBUTIONS BY MEMBERS; FINANCING
 
Section 3.1    Capital Contributions.
 
(a)           Non-Managing Member has contributed to the Company (i) a one
hundred percent (100%) membership interest in RSC Lexington LLC, a Florida
limited liability company, and (ii) a one hundred percent (100%) membership
interest in RSC Greenville LLC, a Florida limited liability company.
 
(b)           Pursuant to the Purchase Agreement, Managing Member has purchased
from RSC, among other things, an eighty percent (80%) Membership Interest in the
Company.
 
 
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Section 3.2    Additional Capital Contributions.
 
(a)           Except as otherwise provided herein, no Member or Affiliate of any
Member shall have the right or obligation to make any loan to the Company
without the prior written consent of all Members. No Member shall have the right
or be required to make any additional Capital Contribution to the Company unless
such Capital Contribution has been approved as a Major Decision; provided,
however, that Managing Member or Non-Managing Member, each in its sole and
absolute discretion, may elect to make additional Capital Contributions to pay
Necessary Expenses if Available Cash from Operations is not sufficient to pay
for any such Necessary Expenses. If any additional Capital Contributions are
approved or permitted as set forth above, then, prior to making any such
contribution, one of the Members shall request in writing that the other Member
fund its Membership Percentage of such additional Capital Contribution. In such
event, Managing Member or Non-Managing Member shall have the right, but not the
obligation, to contribute their Membership Percentage of the specified amount
within thirty (30) days (or such shorter time period as may be appropriate under
the circumstances, but in no event less than five (5) Business Days) after the
date of receipt of notice of the request for such additional Capital
Contributions.  Any amounts contributed pursuant to this Subsection 3.2(a) by
any Member shall be added to the Capital Account of that Member.
 
(b)           If Managing Member or Non-Managing Member (in such instance, a
“Non-Contributing Member”) does not contribute all of an additional Capital
Contribution that is requested under Section 3.2(a) within the time period
described in Section 3.2(a), then the contributing Member (the “Contributing
Member”) shall elect either: (i) to cancel the request for the additional
Capital Contribution made pursuant to Section 3.2(a) or (ii) (x) if the
Non-Contributing Member does not contribute any portion of the requested
additional Capital Contribution, to fund all amounts requested pursuant to
Section 3.2(a) as a loan to the Company (a “Member Loan”) or (y) if the
Non-Contributing Member shall have funded a portion, but not all, of the
additional Capital Contribution requested from the Non-Contributing Member, to
fund as an additional Capital Contribution such portion of the Capital
Contribution requested from the Contributing Member the amount necessary to keep
the additional Capital Contributions so made by the Members in proportion to
their Membership Percentages and to fund the balance as a Member Loan to the
Company. A Member Loan shall not be deemed to be a Capital Contribution for
purposes of this Agreement. Each Member Loan shall bear interest at a rate equal
to the lower of twelve percent (12%) per annum, compounded monthly, or the
maximum rate of interest permitted by applicable law, and shall be recourse only
to the assets of the Company. If a Member makes a Member Loan pursuant to this
Section 3.2(b), then such Member shall receive payments with respect to such
Member Loan as described in Sections 4.1 and 4.2 before any distributions are
made with respect to Capital Contributions made by the Members pursuant to
Sections 3.1 and 3.2(a).  The remedies provided in this Section 3.2(b) for the
failure of a Member to fund its share of a requested Capital Contribution shall
be the sole remedies available with respect thereto.  Nothing in this Section
3.2 shall be deemed to obligate any Member to cause any of its Affiliates to
incur any Recourse Liabilities.
 
Section 3.3    Recoupment for Contributions.
 
Except as expressly provided herein, (a) no Member shall receive any recoupment
or payment on account of or with respect to the Capital Contributions made by it
pursuant to this Agreement, (b) no Member shall be entitled to interest on or
with respect to any Capital Contributions, (c) no Member shall be entitled to
withdraw any part of such Member’s Capital Contributions, and (d) no Member
shall be entitled to receive any distributions from the Company except as
otherwise set forth herein.

 
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Section 3.4    Execution and Compliance with Senior Loan Documents.
 
The Members hereby approve and ratify (i) the Senior Loan, as obtained by the
Owners from the Senior Lender pursuant to the Senior Loan Documents, as modified
by that certain term sheet dated March 17, 2010, from the Senior Lender (as it
may now or hereafter be amended from time to time, the “Term Sheet”) and (ii)
execution and delivery of all documents and instruments necessary and
appropriate to modify the Senior Loan Documents substantially in accordance with
the provisions of the Term Sheet.  No Member shall be required to make
additional Capital Contributions or loans to the Company so that the Company and
the Operating Company can comply with those terms and conditions.
 
ARTICLE IV
DISTRIBUTIONS TO MEMBERS
 
Section 4.1    Distributions of Available Cash from Operations.
 
Subject to the provisions of the Senior Loan Documents (or any other loan
documents entered into in accordance with the provisions of Section 5.1(b)(ii)),
the Annual Budget, the Company shall make distributions of Available Cash from
Operations quarterly; provided, notwithstanding any provision to the contrary
contained in this Agreement, the Company shall not be required to make a
distribution to the Members if such distribution would violate Section 18-607 of
the Delaware Act or any other applicable law.  Except as provided in Section
4.2, the Company, in any given quarter, may not make any distributions which
would cause the amount of working capital to be less than the Threshold Working
Capital Amount. If such distribution shall inadvertently be made, the Members
agree to immediately return such excess amount distributed to the Company (and
such returned excess amount shall not be treated as a Capital Contribution).
Distributions of Available Cash From Operations shall be made in the following
order of priority:
 
(a)           First, to the Members who have made Member Loans in accordance
with Section 3.2(b) on a pro rata basis in accordance with the amounts of their
respective unpaid Member Loans until each of them has received cumulative
payments pursuant to this Section 4.1(a) equal to all interest due in respect of
such Member Loans.
 
(b)           Second, to the Members who have made Member Loans pursuant to
Section 3.2(b) on a pro rata basis in accordance with the amounts of their
respective Member Loans until each of them has received cumulative payments
pursuant to this Section 4.1(b) equal to the outstanding principal amounts of
its respective Member Loans.
 
(c)           Third, to the Managing Member, until the Managing Member has
achieved a 9% cumulative, non-compounding annual return upon and in respect to
the amount of the Unreturned Capital Contribution (as hereinafter defined) of
the Managing Member (the “Managing Member Preferred Return”).
 
(d)           Fourth, to the Non-Managing Member, until the Non-Managing Member
has achieved a 9% cumulative, non-compounding annual return upon and in respect
to the amount of the Unreturned Capital Contribution of the Non-Managing Member
(the “Non-Managing Member Preferred Return”).

 
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(e)           Fifth, until the Managing Member and Non-Managing Members have
each achieved a 12% cumulative, non-compounding annual return upon and in
respect to the amount of their respective Unreturned Capital Contribution, to
the Members on a pro rata basis in accordance with their respective Membership
Percentages.
 
(f)           Sixth, until the Managing Member and Managing Members have each
achieved a 15% cumulative, non-compounding annual return upon and in respect to
the amount of their respective Unreturned Capital Contribution, (i) 40.00% to
Non-Managing Member, and (ii) 60.00% to Managing Member.
 
(g)           Seventh, thereafter:  (i) 45.00% to Non-Managing Member, and (ii)
55.00% to Managing Member.
 
Section 4.2    Distributions of Net Capital Transaction Proceeds.
 
Distributions of Net Capital Transaction Proceeds shall be made promptly
following the Company’s receipt thereof.  All such distributions shall be made
in the following order of priority:
 
(a)           First, to the Members who have made Member Loans in accordance
with Section 3.2(b) on a pro rata basis in accordance with the amounts of their
respective unpaid Member Loans until each of them has received cumulative
distributions pursuant to Section 4.1(a) and this Section 4.2(a) equal to all
interest due in respect of such Member Loans.
 
(b)           Second, to the Members who have made Member Loans pursuant to
Section 3.2(b) on a pro rata basis in accordance with the amounts of their
respective Member Loans until each of them has received cumulative distributions
pursuant to Section 4.2(b) and this Section 4.2(b) equal to the outstanding
principal amounts of its respective Member Loans.
 
(c)           Third, to the Managing Member, until the Managing Member has
received and achieved the Managing Member Preferred Return, that is, a 9%
cumulative, non-compounding annual return upon and in respect to the amount of
the Unreturned Capital Contribution of Managing Member.
 
(d)           Fourth, to the Non-Managing Member, until the Non-Managing Member
has received and achieved the Non-Managing Member Preferred Return, that is, a
9% cumulative, non-compounding annual return upon and in respect to the amount
of the Unreturned Capital Contribution of Non-Managing Member.
 
(e)           Fifth, to the Managing Member, until the Managing Member has been
repaid its entire Unreturned Capital Contribution.
 
(f)           Sixth, to the Non-Managing Member, until the Non-Managing Member
has been repaid its entire Unreturned Capital Contribution, to the Non-Managing
Member.
 
(g)           Seventh, until the Managing Member and Non-Managing Members have
each achieved a 12% cumulative, non-compounding annual return upon and in
respect to the amount of their respective Unreturned Capital Contribution, to
the Members on a pro rata basis in accordance with their respective Membership
Percentages.

 
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(h)           Eighth, until the Managing Member and Managing Members have each
achieved a 15% cumulative, non-compounding annual return upon and in respect to
the amount of their respective Unreturned Capital Contribution, (i) 40.00% to
Non-Managing Member, and (ii) 60.00% to Managing Member.
 
(i)           Ninth, thereafter:  (i) 45.00% to Non-Managing Member, and (ii)
55.00% to Managing Member.
 
Notwithstanding the foregoing, any distributions of Net Capital Transaction
Proceeds occurring as a result of the Loan refinancing or restructuring with
GECC as generally contemplated by the Term Sheet shall be distributed (i) 20.00%
to Non-Managing Member, and (ii) 80.00% to Managing Member.
 
Section 4.3    Distributions shall be Aggregated with those of Owner Portfolio
 
In determining and calculating the cumulative, non-compounding annual returns at
any given point of time in connection with Section 4.1 and Section 4.2 herein,
the Distributions of Available Cash from Operations and Distributions of Net
Capital Transaction Proceeds (as each such term is defined in the Owner
Portfolio Agreement) at such given point of time, to (i) Managing Member under
the provisions of this Agreement shall be aggregated with such distributions to
Cornerstone Oakleaf Village under the provisions of the Owner Portfolio
Agreement and (ii) to Non-Managing Member under the provisions of the this
Agreement shall be aggregated with such distributions to RSC South Carolina
Interests, LLC under the provisions of the Owner Portfolio Agreement.  For
purposes hereof, distributions hereunder shall be made in accordance with the
order of priority contained in Section 4.1 and Section 4.2 hereof, as
applicable, as if such distributions were distributions of additional Available
Cash from Operations and Net Capital Transaction Proceeds, as applicable, for
the same measurement period pursuant to the Owner Portfolio Agreement after all
distributions of actual Available Cash from Operations and Net Capital
Transaction Proceeds have been made for such measurement period.
 
Section 4.4    Shortfall in Managing Member Preferred Return.
 
For purposes of Sections 4.1 and 4.2 of this Agreement, and Section 1.3 of
Exhibit B hereto, if the Company shall fail to achieve the Managing Member
Preferred Return and/or the Non-Managing Member Preferred Return in any given
year, such shortfall must be made up in future years if and to the extent that
the Company then has sufficient Available Cash From Operations or Net Income, as
the case may be. However, if, in any given year, the Company achieves a return
in excess of the Managing Member Preferred Return and/or the Non-Managing Member
Preferred Return, such excess shall not be taken into account for purposes of
determining whether or not the Company achieved the  Managing Member Preferred
Return and the Non-Managing Member Preferred Return in any subsequent year.
 
Section 4.5    Allocation of Purchase Price.
 
For purposes of Section 4.2 of this Agreement, and Section 1.3 of Exhibit B
hereto, in the case of a sale of all of the Membership Interests of the Company
or substantially all of its assets, and the sale of all of the membership
interests of Owner Portfolio or substantially all of its assets, the parties
agree the portion of the purchase price allocable to the Company or its assets
shall not exceed the aggregate of the Capital Accounts of all of the Members and
that the Company can take whatever actions may be necessary to support that
position, including the termination of the Master Leases.

 
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Section 4.6    Withholding Taxes with Respect to Members.
 
The Company shall comply with any withholding requirements under federal, state
and local law that the Managing Member determines is required, and shall remit
any amounts withheld to, and file required forms with, the applicable
jurisdictions. All amounts withheld from Company revenues or distributions by or
for the Company pursuant to the Code or any provision of any federal, state or
local law, and any taxes, fees or assessments levied upon the Company, shall be
treated for purposes of this Article 4 as having been distributed (as an
advance) to those Members who received a credit for tax or other benefit with
respect to the withheld amounts, or whose identity or status caused the
withholding obligations, taxes, fees or assessments to be incurred. If the
amount withheld exceeded the affected Member’s actual share of cash available
for distribution, such Member shall reimburse the Company for such excess
withholding or other amounts paid (as described above). Each Member agrees to
furnish the Company with such representations, forms, or other information as
the Managing Member shall reasonably request to assist it in determining the
extent of, and in fulfilling, the Company’s withholding obligations, if any. As
soon as practicable after becoming aware that any withholding requirement may
apply to a Member, the Managing Member shall advise such Member of such
requirement and the anticipated effect thereof. Such Member shall pay or
reimburse to the Company all identifiable costs or expenses of the
Company caused by or resulting from withholding taxes (including expenses
incurred to reduce withholding taxes) with respect to such Member.
 
Section 4.7    Violation of Law.
 
Notwithstanding any other provision contained in this Agreement, the Company
shall not make a distribution to a Member in respect of its interest in the
Company if such distribution would violate the Delaware Act or other applicable
law.
 
Section 4.8    Deemed Distribution/Re-contribution of Excess Expenses and
Non-Recurring Capital Expenditures.
 
Notwithstanding any other provision contained in this Agreement, the Company
shall upon actual payment thereof be deemed to have made distributions of:
 
(a)           Excess Expenses; and
 
(b)           Non-Recurring Capital Expenditures funded from Available Cash From
Operations.
 
These distributions shall be deemed to have been made from Available Cash From
Operations to the Members in accordance with, and in the order of priority of,
Section 4.1 and immediately re-contributed by the respective members as
additional Capital Contributions.
 

 
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Section 4.9    Performance Termination of RSC Manager under RSC Management
Agreement.
 
If any RSC Management Agreement shall terminate by reason of the exercise by
Lexington Operator or Greenville Operator, as the case may be, of their right to
terminate for financial non-performance by the applicable RSC Manager pursuant
to Section 1301.8 of the Management Agreement attached hereto as Exhibit C, or
any substantially similar provisions in any subsequent RSC Management Agreement,
then the distributions to Non-Managing Member hereunder in Sections 4.1(f) and
(g) and Sections 4.2 (h) and (i) shall be automatically redetermined and
adjusted to reduce the proportion of such distributions to Non-Managing Member
in Sections 4.1 (f) and Section 4.2 (h) from 40.00% to 20.00% and in Sections
4.1 (g) and Section 4.2 (i) from 45.00% to 20.00% and increase the proportion of
such distributions to Managing Member in Sections 4.1 (f) and Section 4.2 (h)
from 60.00% to 80.00% and in Sections 4.1 (g) and Section 4.2 (i) from 55.00% to
80.00%.
 
ARTICLE V
MANAGEMENT OF THE COMPANY
 
Section 5.1    Authority of Managing Member.
 
(a)           The Managing Member shall have the sole and exclusive authority to
manage and implement the policies, operations and affairs of the Company and to
make all decisions regarding the major policy decisions and over-all direction
of the Company and the Operating Company and their respective businesses,
including, without limitation causing the Operating Company to take any action
in furtherance thereof; provided, however, that the Managing Member shall not
have the authority to make any Major Decisions with respect to the Company or
the Operating Company without the prior written consent of Non-Managing Member.
 
(b)           Each of the following matters (each a “Major Decision” and
collectively, the “Major Decisions”) shall require the prior written approval of
the Managing Member and Non-Managing Member:
 
(i)           acquisition by the Company or the Operating Company of any
additional property, assets, business or project, either directly or indirectly,
other than the acquisition or replacement of personal property in the ordinary
course of business;
 
(ii)           causing or permitting the Company or any of the Operating
Companies to incur any indebtedness whatsoever other than trade payables and
other indebtedness in an amount less than $100,000.00, whether recourse or
non-recourse, and securing the same with mortgages, deeds of trust and/or other
assignments of assets of the Company; except that the Members acknowledge and
agree that the Company is authorized and directed, on behalf of the Company and
each of the Operating Companies, if and to the extent applicable, to comply with
the provisions of the documents securing or governing the indebtedness which has
been defined herein as, and constitutes, the Senior Loan from General Electric
Credit Corporation, Agent for itself and one or more lenders (together with its
successors and/or assigns, the “Senior Lender”), as the same may be modified
substantially in accordance with the Term Sheet (to avoid all doubt, if and to
the extent applicable to the Operating Companies, any additional amendments,
modifications or extensions of the Senior Loan or any other loan is a Major
Decision);

 
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(iii)           the sale or other disposition of all or any material portion of
the Company Property or the Property other than the sale or disposition of
personal property being replaced in the ordinary course of business (the parties
confirm that this Major Decision shall always be deemed to be above the Major
Decision Materiality Threshold, regardless of the amount in dispute);
 
(iv)           the merger or consolidation of the Company or Operating Company
with or into any other Person, any reorganization of the Company, the
liquidation or dissolution of the Company or Operating Company, or the change or
organization of the Company or Operating Company into any other legal form;
 
(v)            causing or permitting the Company or Operating Company to make
any loan to any Person (for the purpose of this clause, accounts receivable from
tenants or other occupants of the Property shall not be deemed to be a
loan),  or to act as guarantor or surety to, for or on behalf of any other
Person;
 
(vi)            issuance or sale of additional Membership Interests or admission
of a new member in the Company or Operating Company other than in accordance
with Article 8;
 
(vii)           filing or commencement of any Bankruptcy proceeding by or on
behalf of the Company or Operating Company; consenting to the institution or
continuation of any involuntary Bankruptcy proceeding against the Company or
Operating Company or the conversion of an involuntary proceeding into a
voluntary proceeding; the admission in writing by the Company or the Operating
Company of its inability to pay its debts generally as they become due; or the
making by the Company or Operating Company of a general assignment for the
benefit of its creditors;
 
(viii)          the making of any additional Capital Contributions other than
for Necessary Expenses in accordance with Section 3.2;
 
(ix)            entering into, modifying or exercising any rights or remedies
under any contract (an “Affiliate Contract”) between the Company or Operating
Company, on the one hand, and any Person in which any Member, Affiliate of any
Member or any Family Member thereof,  or in which any partner, shareholder,
member, director or officer, manager, or employee of any Member, Affiliate of
any Member, or any Family Member thereof, directly or indirectly, owns or
Controls more than five percent (5%) of the beneficial interest, on the other
hand;
 
(x)             renewing, extending or modifying an Affiliate Contract or
terminating an Affiliate Contract, provided however, that an RSC Management
Agreement may be terminated in accordance with its terms without the consent of
the Non-Managing Member;

 
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(xi)           any amendment or modification of this Agreement, the Certificate
of Formation of the Company, the Limited Liability Company Agreement, the
Operating Company Limited Liability Company Agreement or Certificate of
Formation of each of the Operating Companies ;
 
(xii)          commencing or threatening any legal proceeding or litigation of
any type on behalf of the Company or Operating Company or settling, compromising
or taking any other material action with respect to any litigation or legal
proceeding of any type by, against or involving the Company if the amount in
controversy shall exceed Fifty Thousand Dollars ($50,000.00);
 
(xiii)         causing or permitting the Company or Operating Company to
distribute any Company Property or Operating Company Property in kind to any
Member;
 
(xiv)         causing or permitting the Company or Operating Company to
refinance, amend, modify or extend any loan obligation of the Company or
Operating Company;
 
(xv)          the engagement of, or otherwise entering into any agreement with,
any real estate broker or investment banker to market or list the Property for
sale and the terms and conditions of any such brokerage, listing or similar
agreement;
 
(xvi)         subject to the provisions of Section 5.3, the engagement of, or
otherwise entering into any agreement with, an accountant or accounting firm to
provide auditing services to the Company, except that the Members agree that
Moore Stephens Lovelace, P.A. shall be the Company’s initial auditors (the
“Auditors”) provided that Managing Member shall have the right to engage any
reputable  accounting firm for auditing services at its sole cost and expense
(and expressly not a Company cost or expense);
 
(xvii)        any action outside the purposes specified in Section 1.4;
 
(xviii)       the engagement of, or otherwise entering into any agreement with,
any real estate broker with respect to leasing the Property and the terms and
conditions of any such brokerage, listing or similar agreement;
 
(xix)          the hiring of any employees by the Company and the setting and
increasing of their compensation, whether by salary, bonus, or otherwise;
 
(xx)           the hiring of any employees by the Operating Company for an
annual salary or other compensation in excess of an aggregate of $50,000.00 and
the setting and increasing of their compensation, whether by salary, bonus, or
otherwise;
 
(xxi)          entering into or causing or permitting the Operating Company to
enter into any lease for (Y) an potential aggregate term in excess of three (3)
years (including all renewal and extension terms), (Z) or more than 2,000
rentable square feet, whether a commercial or residential lease.

 
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(xxii)         the amendment, modification or termination of the Lexington
Master Lease or the Greenville Master Lease.
 
(xxiii)        without limiting the generality of the foregoing, indirectly or
directly causing the Operating Company to take any of the foregoing actions;
 
(xxiv)        the adoption of the Annual Budget or any amendment or revision
thereto;
 
(xxv)         the amendment, modification or revocation of any Major Decision
previously approved in accordance with this Agreement; and
 
(xxvi)        entering into, terminating or causing or permitting the
termination of a Management Agreement, except if the same is a RSC Management
Agreement, (to avoid all doubt, the Members acknowledge and agree that, if
applicable, subject to its terms or as otherwise provided herein, Managing
Member may terminate or cause or permit an RSC Management Agreement to be
terminated without the consent of the Non-Managing Member and the engagement of
the initial replacement manager in such event is not a Major Decision, all
pursuant to the provisions of Section 5.2 hereof).
 
(c)           Each of the Managing Member and Non-Managing Member may propose to
adopt, modify or revoke a Major Decision at any time.  Whenever a Member
proposes to adopt, modify or revoke a Major Decision, it shall deliver a written
notice (a “Major Decision Notice”) to the other Member (i) describing the
proposal in sufficient detail and (ii) containing sufficient information to
permit the other Member to make an informed decision on the proposal and shall
subsequently provide to the other Member such additional information as the
other Member may reasonably request.
 
(d)           A “Deadlock” shall be deemed to exist if, after receiving a Major
Decision Notice:  (i) the Managing Member and Non-Managing Member have failed
for any reason to mutually agree on accepting or rejecting the Major Decision
for at least thirty (30) days after the Major Decision Notice was given and (ii)
one such Member has delivered a notice (a “Deadlock Notice”) to the other Member
in writing, given at any time before or after the end of such 30-day period that
continuing failure to agree on the proposed Major Decision will constitute a
Deadlock for purposes of this Agreement unless the Major Decision is agreed upon
by the later of (A) five (5) days after the other Member’s receipt of the
Deadlock Notice or (B) the end of the 30-day period described above.  As
provided herein, if a Deadlock shall exist, then Managing Member or Non-Managing
Member may initiate the Buy/Sell Procedures as provided in Article 6.
 
(e)           The Managing Member shall cause the Operating Company to make
quarterly distributions of Operating Company Available Cash to the
Company.  Notwithstanding the foregoing, the Managing Member shall not be
required to cause the Operating Company to make a distribution to the Company if
such distribution would violate Section 18-607 of the Delaware Act or any other
applicable law.

 
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(f)           During the period of time ending two (2) years after the Effective
Date (the “Major Decision Threshold Period”), the Members shall only have the
right to initiate the Buy/Sell Procedures as provided in Article 6 if the Major
Decision which is the subject of the Deadlock Notice shall involve a sum or
value equal to, or in excess of, the Major Decision Materiality Threshold.  If
during the period of time ending two years after the Effective Date, the Major
Decision which is the subject of the Deadlock Notice shall involve a sum or
value which is equal to or less than the Major Decision Materiality Threshold,
then either Member shall have the right to submit the same to arbitration
pursuant to the provisions of Section 5.1 (g) hereof.  After the Major Decision
Threshold Period, such Major Decision Materiality Threshold shall not apply and
the Buy/Sell Procedures may be initiated with respect to any Deadlock or for any
or no reason.
 
(g)           During the period of time ending two (2) years after the Effective
Date, each Member, as its sole recourse with respect to the resolution of any
dispute or controversy arising out of a Deadlock with respect to a Major
Decision involving a sum or value which is equal to or less than the Major
Decision Materiality Threshold, may submit the same to settlement by binding
arbitration administered by the American Arbitration Association under its then
current Commercial Arbitration Rules. The judgment or award rendered by the
arbitrator(s) shall be final and judgment may be entered upon it in accordance
with applicable law in any court having jurisdiction thereof. Notice of demand
for arbitration shall be filed by either Member in writing with the other Member
and the American Arbitration Association.  The demand for arbitration shall be
made within sixty (60) days after the Deadlock Notice. After the Major Decision
Threshold Period, the arbitration requirements provided in this Section 5.1(g)
shall not apply.
 
Section 5.2    Management Agreements.
 
(a)           The Members acknowledge and agree that from time to time,
Lexington Operator and Greenville Operator shall enter into management
agreements with property managers with respect to the applicable Property (each,
a “Management Agreement”). The Members do not object to and hereby authorize,
RSC-LSC Management, LLC, a Florida limited liability company (“RSC-LSC”) being
engaged as property manager of the Lexington Property and RSC-GSC Management,
LLC, a Florida limited liability company (“RSC-GSC”) being engaged as property
manager of the Greenville Property pursuant to Management Agreements
substantially in the from attached hereto and incorporated by reference as
Exhibit C.  RSC-LSC and RSC-GSC, and any other Affiliate of RSC or a Royal
Principal (each an “RSC Manager”), may serve as the property manager for the
Property; subject to the applicable termination provisions of the Management
Agreement, as long as the Non-Managing Member is Controlled by one or more Royal
Principals, Royal or an entity Controlled by one or more Royal Principals. Each
of the Management Agreements attached hereto as Exhibit C and any other
Management Agreement with RSC-LSC, RSC-GSC, or any other Affiliate of RSC or a
Royal Principal is referred to a “RSC Management Agreement”).   In the event
that RSC-LSC and RSC-GSC, or any other Affiliate of RSC or a Royal Principal is
removed or otherwise ceases to serve as the property manager for the Property
(other than by reason of an event of default by the applicable RSC Manager, in
which case the Managing Member shall choose the initial replacement property
manager in its sole discretion), the Managing Member shall choose the initial
replacement property manager, subject to the consent of the Non-Managing Member,
which consent shall not be unreasonably withheld.

 
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(b)           In the event that any of the RSC Management Agreements shall be
terminated or expire for any reason other than by reason of an event  of default
thereunder by the RSC Manager or termination for convenience by the applicable
RSC Manager under the applicable RSC Management Agreement by RSC-LSC, RSC-GSC,
and any other Affiliate of RSC or a Royal Principal that is then currently
serving as the property manager for the Lexington Property or Greenville
Property, then the Non-Managing Member shall at any time thereafter have the
right to initiate the Buy-Sell Procedures hereunder (except as limited by
subclauses 6.1(a)(A) and (B)).
 
Section 5.3    Selection of Auditors.
 
At any time after December 31, 2011, either Member (the “Member Electing Removal
of Auditor”) may elect to change the Auditors by providing written notice of
such election (an “Auditor Removal Notice”) to the other Member (the “Member
Responding to Auditor Removal Notice”).  In the Auditor Removal Notice, the
Member Electing Removal of Auditor shall propose to the Member Responding to
Auditor Removal Notice a list of three (3) possible accounting firms acceptable
to the Member Electing Removal of Auditor. The Member Responding to Auditor
Removal Notice shall select one (1) accounting firm from the list, and shall
give the Member Electing Removal of Auditor written notice of the selected
accounting firm within ten (10) days after receipt of the Auditor Removal
Notice.
 
Section 5.4    Limited Reimbursement of Expenses.
 
The Company shall, or shall cause the Operating Company to reimburse the Members
and their respective agents or representatives for all direct, actual,
reasonable, verifiable, out-of-pocket incidental costs and expenses incurred by
them with Third Parties which are incurred by the Members in connection with the
acquisition and financing of the Property and the preparation and negotiation of
this Agreement and the documents required hereunder (which costs and expenses
shall expressly not include, the structuring of the investment by the Members
and their respective Affiliates), which shall not exceed _________ for Managing
Member and _____________ for Non-Managing Member, or (b) are directly
attributable to the business of the Company and/or the Operating Company and are
incurred for and on behalf of the Company and/or the Operating Company, in
accordance with an Approved Budget.  It is expressly understood that the Company
shall not be responsible for, or reimburse any of, the salaries or other
compensation of such Member’s employees, or any general or administrative
overhead of any Member, including, but not limited to, rent.  Without waiving
the effect of the foregoing provisions, the Members hereby authorize and direct
the Company to cause the following to be paid or reimbursed, as costs and
expenses of the Company:  (i) the fees and costs of the law firms of Foley &
Lardner LLP, and DLA Piper and the accounting firm of Deloitte and Touche LLP,
which represented the interest of Managing Member in connection with this
transaction; (ii) the fees and costs of the law firms of Carlton Fields, P.A.
and Womble Carlyle Sandridge & Rice, PLLC, which represented the interests of
the Non-Managing Member in connection with this transaction.

 
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ARTICLE VI
BUY-SELL PROCEDURES
 
Section 6.1    Buy-Sell Procedures.
 
(a)           Managing Member or Non-Managing Member shall each have the right
to initiate and complete the buy-sell procedures described in this Article
(collectively, the “Buy-Sell Procedures”) at any time: (i) during the
continuance of a Deadlock with respect to a Major Decision, but during the
period of time expiring two (2) years after the Effective Date, only if such
continuing Deadlock shall pertain to a Major Decision involving a sum or value
which shall exceed the “Major Decision Materiality Threshold”, (ii) in any
event, for any or no reason, after two (2) years from the Effective Date, or
(iii) if any RSC Management Agreement shall (1) terminate, (2) expire or (3) the
applicable Operator shall reenter or retake possession of any portion of any
Property, in respect to any of subclauses (1), (2) or (3) of this Section
6.1(a)(iii), for any reason other than a termination by the applicable RSC
Manager by convenience pursuant to Section 1301.6 of the Management Agreement
attached hereto as Exhibit C, or any substantially similar provisions in any
subsequent RSC Management Agreement, or a termination or retaking of possession
of any portion of any Property by the applicable Operator by reason of an event
of default by the applicable RSC Manager pursuant to Section 1301.3, of the
Management Agreement attached hereto as Exhibit C, or any substantially similar
provisions in any subsequent RSC Management Agreement, provided however that the
termination of any RSC Management Agreement or retaking of possession of any
portion of any Property by the applicable Operator by reason of an event of
default by the applicable RSC Manager shall be deemed to be a termination by the
applicable Operator for convenience (to avoid all doubt, there shall be no
termination or other fee payable in such event) and permit the initiation of the
Buy-Sell Procedures by Non-Managing Member unless the applicable RSC Manager
failed to use reasonable commercial efforts to prevent such event of default.
 
(b)           The Buy-Sell Procedures under this Agreement shall be governed by
Article 6 of the Owner Portfolio Agreement. The Members acknowledge and agree
that this Agreement does not contain comparable and comprehensive buy-sell
provisions as does the Owner Portfolio Agreement. The Members agree that the
initiating of the Buy-Sell Procedures under this Agreement shall thereafter
require that the Buy-Sell Procedures be governed and controlled in each
instance, by the Buy-Sell Procedures under the Owner Portfolio Agreement. Each
Member agrees that its and its successor’s and assign’s Membership Interests in
the Company shall be subject to, included within, and governed by, the Buy-Sell
Procedures in the Owner Portfolio Agreement.  Without limiting the generality of
the foregoing, in the event of any inconsistency or conflict between this
Article 6 and Article 6 of the Owner Portfolio Agreement, the provisions of
Article 6 of the Owner Portfolio Agreement shall govern and control.
 
(c)           Notwithstanding anything to the contrary, nothing contained in the
Senior Loan Documents, or any other document or instrument now or hereafter
executed, shall in any way supersede, modify, amend or rescind (i) the right,
without obligation or liability except as set forth herein, of Non-Managing
Member to initiate the Buy-Sell Procedures and (ii) the right of Non-Managing
Member to sell, and the obligation of Managing Member to purchase, the
Membership Interest of Non-Managing Member, pursuant to the provisions this
Agreement.

 
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ARTICLE VII
STATUS OF MEMBERS; INDEMNIFICATION
 
Section 7.1    Role of Non-Managing Members.
 
Except as expressly provided herein, the Non-Managing Member shall not
participate in the management or control of the Company’s business, nor shall it
transact any business for the Company, but such Member’s consent shall be
required whenever this Agreement provides for the consent or approval of all
Members or such Member.
 
Section 7.2    Liability of Members.
 
Except as otherwise expressly required by law, each Member shall have no
personal liability whatsoever, whether to the Company, to the other Members or
to the creditors of the Company, for the debts of the Company or any of its
losses. The foregoing shall not, however, limit the personal liability of a
Member for its obligations to the Company or any Indemnitee under this Agreement
or to the Company or any other Person under any other agreement to which such
Member may be a party. In no event shall any partner, member, manager, officer,
director, stockholder, shareholder or owner of either Member or any affiliate
thereof be liable for the obligations of the Members hereunder.
 
Section 7.3    Bankruptcy of Member.
 
Notwithstanding any other provision of this Agreement, the Bankruptcy of any
Member shall not cause such Member to cease to be a member of the Company and
upon the occurrence of such an event, the Company shall continue without
dissolution.  In the event of the Bankruptcy of Managing Member, Non-Managing
Member shall have the right, but not the obligation, to be Managing Member upon
written notice of such election.  If Non-Managing Member does not so elect to
become Managing Member within ninety (90) days after the Bankruptcy of Managing
Member, or if Non-Managing Member does elect to become Managing Member and in
the event of a Bankruptcy of Non-Managing Member, then the Company may only act
with the joint consent of Managing Member and Non-Managing Member.
 
Section 7.4    Relationship of Members.
 
Each Member agrees that, to the fullest extent permitted by Section 18-1101 and
other provisions of the Delaware Act and except to the extent expressly stated
in this Agreement or in any other agreement to which a Member is a party:
 
(a)           Except as expressly provided in this Agreement, no Member shall
have any authority to bind or act for, or assume any obligation or
responsibility on behalf of, any other Member, the Company or to act as the
agent, representative or attorney-in-fact for any other Member.

 
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(b)           Except as expressly provided herein, any consent, approval,
determination or other action by a Member shall be given or taken in the sole
and absolute discretion of that Member in its own best interests and without
regard to the best interests of another Member, the Company or the financial,
tax or other effect on another Member or the Company. Each Member acknowledges
and agrees that (i) to the extent a Member is acting or proposing to act on
behalf of the Company, such Member shall be acting in the capacity as a
fiduciary of the Company and the other Members (subject to the provisions of
Section 7.5) and (ii) to the extent a Member is determining whether to initiate
or approve a Major Decision or in connection with a Buy-Sell under Article 6
hereof, such Member is entitled to act in a manner deemed by such Member to be
in its own best interest.
 
Section 7.5    Other Activities; Affiliates.
 
The Company and each Member expressly acknowledge and agree that Non-Managing
Member and Affiliates of Non-Managing Member and other Persons related to
Non-Managing Member or Affiliates of Non-Managing Member, on the one hand
(collectively “Non-Managing Member Related Persons”) and Managing Member and
Affiliates of Managing Member and other Persons related to Managing Member and
Affiliates of Managing Member (collectively the “Managing Member Related
Persons”), on the other hand (the Non-Managing Member Related Persons and the
Managing Member Related Persons being hereinafter collectively referred to as
“Related Persons”) have direct and/or indirect interests in investing in,
owning, operating, transferring, managing, leasing and otherwise using, real
property and interests therein for profit, and engaging in any and all
activities related or incidental thereto and/or that such Related Persons will
make other investments consistent with such interests. Except to the extent
expressly provided herein or in other agreements among one or more of the
parties hereto: (i) neither the Company nor any Member shall have any right by
virtue of this Agreement or the Company relationship created hereby in or to any
other ventures or activities in which any Related Person is involved or to the
income or proceeds derived therefrom; (ii) the pursuit of other ventures and
activities by any Related Person, even if competitive with the business of the
Company, is hereby consented to by the Company and all Members and shall not be
deemed wrongful or improper under this Agreement; and (iii) no Related Person
shall be obligated to present any particular investment opportunity to the
Company or to any Member, even if such opportunity is of a character which, if
presented to the Company, could be taken by the Company.
 
Section 7.6    Indemnification.
 
(a)           The Company shall indemnify and hold each Member and its
Affiliates, and each of the direct and indirect members, partners, principals,
officers, directors, managers and employees of each of the Members and each of
their Affiliates (each, an “Indemnitee”), harmless from and against any Losses
(including without limitation Losses arising from Recourse Liabilities) suffered
or sustained by it by reason of the Recourse Liabilities or by reason of any
acts, omissions or alleged acts or omissions by such Indemnitee on behalf of the
Company within the scope of authority conferred on it by this Agreement,
including, any judgment, award, settlement, reasonable attorneys’ fees and other
costs and expenses incurred in connection with the defense of any actual or
threatened action, proceeding or claim; provided that no Person shall be
entitled to indemnification hereunder to the extent that the Losses incurred by
such Person arose out of or were the result of such Person’s fraud, gross
negligence or willful misconduct, the failure of such Person to comply with the
provisions of this Agreement (other than the failure to make any additional
Capital Contribution pursuant to Section 3.2), or such Person’s obligations to
indemnify any other Person pursuant to the provisions of the Purchase Agreement.

 
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(b)           No Indemnitee shall be liable, responsible or accountable in
damages or otherwise to the Company or any Member for any action taken or
failure to act on behalf of the Company unless such action or omission
constituted fraud, gross negligence or willful misconduct or the failure of such
Indemnitee to comply with the provisions of this Agreement (other than the
failure to make any additional Capital Contribution pursuant to Section
3.2).  Each Member shall indemnify, protect, defend and hold the Company, each
other Member and each such other Member’s related Indemnitees harmless from and
against any and all Losses suffered or sustained by it by reason of any act or
omission constituting fraud, gross negligence or willful misconduct by such
Member or any related Indemnitee of such Member or failure of such Member to
comply with the provisions of this Agreement (other than the failure to make any
additional Capital Contribution pursuant to Section 3.2); provided, however,
that no Person shall be entitled to indemnification hereunder to the extent that
the Losses incurred by such Person arose out of or were the result of such
Person’s fraud, gross negligence or willful misconduct or the failure of such
Person to comply with the provisions of this Agreement (other than the failure
to make any additional Capital Contribution pursuant to Section 3.2).
 
(c)           If a claim or assertion of liability is made or asserted by a
third party against an Indemnitee that, if prevailed upon by any such third
party, would result in such Indemnitee being entitled to indemnification
pursuant to this Section 7.6, such Indemnitee will forthwith give to the
applicable indemnitor written notice of the claims or assertion of liability and
request the indemnitor to defend the same.  Failure to so notify the indemnitor
will not relieve the indemnitor of any liability that the indemnitor might have
to such Indemnitee except to the extent that such failure actually prejudices
the indemnitor’s legal position.  The indemnitor will have the obligation to
defend the Indemnitee against such claim or assertion (if such Indemnitee is
entitled to indemnification pursuant to this Section) and the indemnitor will
give written notice to the Indemnitee of acceptance of the defense of such claim
and the name of the counsel (who shall be reasonably acceptable to the
Indemnitee) selected by the indemnitor to defend such claim.  The Indemnitee
will be entitled to participate with the indemnitor at the expense of the
indemnitor in such defense and also will be entitled at its option (and at the
expense of the Company) to employ separate counsel for such defense; provided,
however, that if and to the proportionate extent the Indemnitee is found (by a
final judgment of a court of competent jurisdiction) not to be entitled to
indemnification hereunder, the Indemnitee shall reimburse the indemnitor for
such expense). The indemnitor and the Indemnitee will cooperate with each other
in the defense of any such action and the relevant records of each will be made
available to the other with respect to such defense.
 
(d)           No Indemnitee will be entitled to indemnification under this
Section if it has entered into any settlement or compromise of any claim giving
rise to any indemnifiable loss without the written consent of the indemnitor. If
a bona fide settlement offer is made with respect to a claim and the indemnitor
desires to accept and agree to such offer, the indemnitor will give written
notice to the Indemnitee to that effect (the “Settlement Notice”). If the
settlement offer includes a full release of the Indemnitee and the Indemnitee
fails to consent to the settlement offer within ten calendar days after receipt
of the Settlement Notice, then the Indemnitee will be deemed to have rejected
such settlement offer and will be responsible for continuing the defense of such
claim and, in such event, the maximum liability of the indemnitor as to such
claim will not exceed the amount of such settlement offer plus any and all
reasonable costs and expenses paid or incurred by the Indemnitee up to the date
of the Settlement Notice and which are otherwise the responsibility of the
indemnitor pursuant to this Section. If the settlement offer does not include a
full release of the Indemnitee and the Indemnitee fails to consent to the
settlement offer, the indemnitor shall continue to remain liable to the
Indemnitee to the full extent set forth in this Section.

 
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(e)           Any indemnification permitted under subsection (a) shall be made
only out of the assets of the Company, and no Member shall be obligated to
contribute to the capital of, or loan funds to, the Company to enable the
Company to provide such indemnification.
 
(f)           The indemnification provided by this Section shall be in addition
to any other rights to which each Indemnitee may be entitled as a matter of law
or otherwise, as to action in the Indemnitee’s capacity as a Managing Member,
Member, as a director, officer, employee, constituent partner, shareholder or
other Affiliate of a Member and shall continue as to an Indemnitee who has
ceased to serve in such capacity and shall inure to the benefit of the heirs,
successors, assigns, administrators and personal representatives of the
Indemnitee.
 
(g)           To the extent provided in the Annual Budget, the Company may
purchase and maintain insurance on behalf of any one or more Indemnitees. If
insurance is obtained for any Indemnitee, it shall be obtained on the same basis
for all other Indemnitees who have comparable risks.
 
(h)           In no event may an Indemnitee subject an Affiliate or other
related Indemnitee of a Member to personal liability by reason of the
indemnification provisions of this Agreement.
 
(i)           The provisions of this Section are for the benefit of the
Indemnitees and the heirs, successors, assigns, administrators and personal
representatives of the Indemnitees and shall not be deemed to create any rights
for the benefit of any other Persons. The indemnification obligations under this
Section shall survive the sale of the Membership Interests by any Member, the
sale of the Property by the Company or the dissolution of the Company.
 
(j)           Notwithstanding anything to the contrary contained herein, all
indemnification obligations of the Company are fully subordinated to any
obligations relative to the Senior Loan or respecting the Property and such
indemnification obligations shall in no event constitute a claim against the
Company if cash flow in excess of amounts necessary to pay obligations under the
Senior Loan is insufficient to pay such indemnification obligations.

 
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ARTICLE VIII
TRANSFER OF MEMBERSHIP INTERESTS
 
Section 8.1    General.
 
No Member may Transfer or permit the Transfer of all or any portion of its
Membership Interest or any direct or indirect interest in such Member without
the prior written consent of the other Member, which consent may be withheld at
the sole and absolute discretion of such other Member, unless the Transfer is to
either a Permitted Managing Member Transferee or a Permitted Non-Managing Member
Transferee and unless and until all requirements and conditions stated in this
Article, which shall be read and construed as a whole, have been satisfied in
full or have been waived by the non-transferring Member.  Any Transfer in
violation of this Article shall be invalid, ineffective and not enforceable for
any purpose.  No authorization, consent or waiver applicable to one Transfer
shall apply or be deemed to apply to any other Transfer or requested Transfer.
In addition to the foregoing, and notwithstanding anything to the contrary, no
Member may Transfer or permit the Transfer of all or any portion of its
Membership Interest or any direct or indirect interest in such Member unless it
is also Transferring the equivalent percentage of its membership interest in
Owner Portfolio, or if an indirect interest in such Member is being Transferred,
it is also simultaneously Transferring a equivalent interest in its Affiliate
which owns the membership interest in Owner Portfolio, as the case may be.
 
Section 8.2    Permitted Transferees.
 
(a)           A “Permitted Managing Member Transferee” means any Person
Controlling, Controlled by or under common Control with Managing Member.
 
(b)           A “Permitted Non-Managing Member Transferee” means any Person
Controlling, Controlled by or under common Control with Non-Managing Member.
 
Section 8.3    Right of First Refusal.
 
(a)                      Third Party Offer.  Any Member ("Selling Member") who
has received a Bona Fide Offer from a Third Party prospective purchaser
("Qualified Purchaser"), to purchase all (but not less than all) of the Selling
Member's Membership Interest, before selling any of its Membership Interest,
shall first offer the sale thereof to the other Member (the “Remaining Member”)
upon the same terms and conditions stated in such Bona Fide Offer ("Right of
First Refusal"). To avoid all doubt, any sale of less than all of the Membership
Interest of a Member is subject to the prior written consent of the other Member
(which may be withheld at the sole and absolute discretion of such other
Member), except to the extent any exception contained in Section 8.2 applies,
that is, the Transfer is to either a Permitted Managing Member Transferee or a
Permitted Non-Managing Member Transferee. Notwithstanding the foregoing or
anything else in this Agreement to the contrary: (A) to the extent the Company
has agreed, in accordance with the terms of this Agreement, to sell the Property
to a Third Party pursuant to a legally binding agreement that has not been
terminated, no Member may Transfer or permit the Transfer of all or any portion
of its Membership Interest or any direct or indirect interest in such Member
while the Buy-Sell Procedures specified in Article 6 previously initiated by a
Member are continuing and have not yet been completed or terminated in
accordance with the applicable provisions of this Agreement; (B) no Member may
Transfer or permit the Transfer of all or any portion of its Membership Interest
or any direct or indirect interest in such Member while any such Transfer
previously initiated by another Member is continuing and have not yet been
completed or terminated in accordance with the applicable provisions of this
Agreement. In the event that a Member or an Affiliate thereof shall exercise its
right of first refusal under the provisions of Section 8.3 of the Owner
Portfolio Agreement or any substantially similar provisions in any amendment,
modification or restatement hereof, with respect to a transaction or any series
of substantially similar transactions, such Member or an Affiliate thereof,
shall also exercise its Right of First Refusal hereunder in like manner in such
transaction or series of similar transactions. In the event that a Member or an
Affiliate thereof shall not exercise its right of first refusal under the
provisions of Section 8.3 of the Owner Portfolio Agreement or any substantially
similar provisions in any amendment, modification or restatement hereof, with
respect to a transaction or any series of substantially similar transactions,
such Member or an Affiliate thereof, shall also not exercise its Right of First
Refusal hereunder in like manner in such transaction or series of similar
transactions.

 
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(b)           Remaining Member’s Right to Purchase.  The Remaining Member shall
have the right to purchase all, but not part, of the Membership Interest of the
Selling Member. If the Remaining Member does not exercise its right by written
notice forwarded no later than thirty (30) days after receipt of such offer,
then: a) the Selling Member may sell all (but not less than all) or its
Membership Interest to the Qualified Purchaser under the same terms and
conditions as are set forth in the original Bona Fide Offer and b) the Qualified
Purchaser’s  Unreturned Capital Contribution shall be the same as the Unreturned
Capital Contribution of the Selling Member immediately before the sale.  The
sale to the Qualified Purchaser must be consummated within thirty (30) days from
the last date on which the Remaining Member had the right to accept the offer to
purchase, subject to reasonable extensions (not to exceed ninety (90) days) to
(i) obtain an agreement with the holder(s) of any mortgage encumbering the
Property and/or any mezzanine loan encumbering the Membership Interest to permit
the Qualified Purchaser (and its designees, if applicable) to assume such
loan(s), and release the Selling Member (and its designees, if applicable) from
all liability with respect to such loan(s) arising from and after the closing
with the Qualified Purchaser, and (ii) if applicable, transfer the community
residential care licenses issued by South Carolina Department of Health and
Environmental Control with respect to the community residential care facilities
operated pursuant to the Master Leases. Evidence that the sale has been so
consummated shall be supplied in writing by the Selling Member and the Qualified
Purchaser to the Company and the Remaining Member.  If the sale has not been
consummated within said thirty (30) day period, as it may be extended, the
rights of the Remaining Members to purchase shall again attach to the Membership
Interest of the Selling Member and no sale may be made to any purchaser without
again complying with the provisions of this Section 8.3 and the remainder of
Article 8.
 
(c)           Closing.  The purchase referred to in Section 8.3 shall be closed
(the "ROFR Closing") within forty-five (45) days following acceptance by the
Remaining Member (the "ROFR Closing Date"), subject to reasonable extensions
(not to exceed ninety (90) days) to (i) obtain an agreement with the holder(s)
of any mortgage encumbering the Property and/or any mezzanine loan encumbering
the Membership Interest to if applicable, to permit the Remaining Member (and
its designees, if applicable) to assume such loan(s), release the Selling Member
(and its designees, if applicable) from all liability with respect to such
loan(s) arising from and after the ROFR Closing Date, and (iii) if applicable,
transfer the community residential care licenses issued by South Carolina
Department of Health and Environmental Control with respect to the company
residential care facilities operated pursuant to the Master Leases.  The ROFR
Closing shall be held at the offices of Carlton Fields, P.A., 100 S.E. Second
Street, 42nd Floor, Miami, Florida 33131, at 10:00 a.m. on the ROFR Closing
Date, or at such other time or place as parties may agree.  At the ROFR Closing:
(i) the Selling Member shall deliver (A) an assignment of Membership Interest
representing the Membership Interest sold by the Selling Member, subject to no
pledge, lien or other encumbrance and (B) any and all other documents that may
be reasonably required by the purchaser thereof, and (ii) the Remaining Member
shall pay the agreed upon consideration.

 
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Section 8.4    Tag-Along Rights.
 
If Managing Member desires to sell all or any portion of its Membership
Interests to a Qualified Purchaser, upon the notice of the Non-Managing Member
declining to exercise its Right of First Refusal under Section 8.3, the
Non-Managing Member shall have the right to require the Managing Member to cause
the Qualified Purchaser to purchase all of the Membership Interest of the
Non-Managing Member owned by the Non-Managing Member in accordance with the
terms and conditions of the Bona Fide Offer and this Section 8.4 (the "Tag-Along
Right").  The Tag-Along Right shall be exercisable only by written notice
provided to the Managing Member prior to the expiration of the thirty (30) day
period governing the exercise of the Right of First Refusal.  If exercised as
provided herein, the Tag-Along Right shall require the Managing Member to
require the Qualified Purchaser to purchase from Non-Managing Member all of the
Membership Interest of the Non-Managing Member, and if that not be the case,
Managing Member shall not be permitted to sell any of its Membership Interest to
the  Qualified Purchaser.  Without limiting the generality of other provisions
of this Agreement, the proceeds from such sale shall be and constitute Net
Capital Transaction Proceeds, which shall be distributed to the Members in
accordance with the provisions of Section 4.2 hereof.    In the event that
Non-Managing Member shall exercise its tag-along right under the provisions of
Section 8.4 of the Owner Portfolio Agreement or any substantially similar
provisions in any amendment, modification or restatement hereof, with respect to
a transaction or any series of substantially similar transactions, Non-Managing
Member, shall also exercise its Tag-Along Right hereunder in like manner in such
transaction or series of similar transactions. In the event that Non-Managing
Member shall not exercise its Tag-Along Right under the provisions of Section
8.4 of the Owner Portfolio Agreement or any substantially similar provisions in
any amendment, modification or restatement hereof, with respect to a transaction
or any series of substantially similar transactions, Non-Managing shall also not
exercise its Tag-Along Right hereunder in like manner in such transaction or
series of similar transactions.
 
Section 8.5    Effect of Assignment.
 
(a)           In the event of any sale, assignment or transfer permitted
hereunder, the Company shall not be dissolved or wound up, but shall continue.
No such sale, assignment or transfer shall relieve the assignor from any of its
obligations under this Agreement accruing prior to such sale, assignment or
transfer. Notwithstanding the foregoing, as a condition to any sale, transfer or
assignment by a Member, the transferee or assignee must execute this Agreement
(as amended) and agree to be bound by all of its terms and provisions.
 
(b)           Upon the Transfer of its entire Membership Interest in the Company
and the admission of such Member’s transferee(s) as a substitute Member pursuant
to this Article, a Member shall be deemed to have withdrawn from the Company.
 
(c)           If a Member Transfers less than all of its Membership Interest in
the Company or if all or part of the direct or indirect ownership or other
interests in a Member are Transferred such Member shall continue to have the
sole and exclusive right to approve Major Decisions and to take other actions
required or permitted under this Agreement, to the extent such Member had such
right prior to the Transfer.

 
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Section 8.6    Substitute Member.
 
The transferee of a Membership Interest shall be automatically admitted to the
Company as a substitute Member, upon its compliance with this Article. Unless a
transferee of a Membership Interest is admitted as a substitute Member under
this Section 8.6, it shall have none of the powers of a Member hereunder and
shall have only such rights of an assignee under the Delaware Act as are
consistent with the other terms and provisions of this Agreement.
 
Section 8.7    Further Requirements.
 
In addition to the other requirements of this Article, and unless waived or
modified in whole or in part by Non-Managing Member (if the transfer is by
Managing Member or one of its transferees) or Managing Member (if the transfer
is by Non-Managing Member or one of its transferees), no transfer of all or any
portion of a Membership Interest may be made unless the following conditions are
met:
 
(a)           The delivery to the Company of a fully executed copy of all
transfer documents relating to the transfer, including (but without limitation)
this Agreement, an instrument of transfer and the agreement in writing of the
transferee to (i) be bound by the terms of this Agreement and (ii) pay all costs
and expenses of the Company incident to the transfer.
 
(b)           The representation of the transferring Member and the transferee,
and the delivery of an opinion of counsel reasonably acceptable to the
non-transferring Members, that (i) the transfer will not cause the Company to be
treated as an association taxable as a corporation for Federal income tax
purposes, (ii) the transfer will not cause the Company to be treated as a
“publicly traded Company” within the meaning of Section 7704 of the Code and
(iii) the transfer will not violate the Securities Act of 1933, as amended, or
any other applicable Federal or state securities laws, rules or regulations.
 
Section 8.8    Transfer Taxes.
 
The transferor of any Membership Interest shall be responsible for the payment
of any transfer taxes payable in connection therewith unless the transferee
shall otherwise agree.
 
ARTICLE IX
CERTAIN REMEDIES
 
Section 9.1    No Partition.
 
Each Member hereby irrevocably waives any and all rights that it may have to
maintain any action for partition of the Company Property.
 
Section 9.2    Litigation Without Termination.
 
Each Member shall be entitled to maintain, on its own behalf or on behalf of the
Company, any action or proceeding against any other Member or the Company
(including, without limitation, any action for damages, specific performance or
declaratory relief) for or by reason of the breach by such party of this
Agreement or any other agreement entered into in connection with this Agreement,
notwithstanding the fact that any or all of the parties to such proceeding may
then be Members in the Company.

 
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Section 9.3    Attorneys’ Fees.
 
In the event of any dispute hereunder, or in connection with the execution of
this Agreement, or otherwise relating to the relationship of the Members
contemplated hereby, the prevailing party in any legal proceeding brought to
resolve such dispute shall be entitled to recover from the non-prevailing party
in any such proceeding, all of such prevailing party’s reasonable attorneys’
fees and disbursements, at both trial and appellate levels and in any
administrative proceeding or bankruptcy proceeding.  The provisions of this
Section shall survive the sale of the Membership Interests by any Member, the
sale of the Property by the Company or the dissolution of the Company.
 
Section 9.4    Cumulative Remedies.
 
No remedy conferred upon the Company or any Member pursuant to this Agreement is
intended to be exclusive of any other remedy herein or by law provided or
permitted, but each shall be cumulative and shall be in addition to every other
remedy given hereunder or now or hereafter existing at law, in equity or by
statute (subject, however, to the limitations expressly herein set forth).
 
Section 9.5    No Waiver.
 
No waiver by a Member or the Company of any breach of this Agreement shall be
deemed to be a waiver of any other breach of any kind or nature, and no
acceptance of payment or performance by a Member or the Company after any such
breach shall be deemed to be a waiver of any breach of this Agreement, whether
or not such Member or the Company knows of such breach at the time it accepts
such payment or performance. Subject to any applicable statutes of limitation
and any provisions in this Agreement to the contrary, no failure or delay on the
part of a Member or the Company to exercise any right it may have under this
Agreement shall prevent the exercise thereof by such Member or the Company, and
no such failure or delay shall operate as a waiver of any breach of, or default
under, this Agreement.
 
ARTICLE X
DISSOLUTION OF COMPANY
 
Section 10.1   Events Giving Rise to Dissolution.
 
No act, thing, occurrence, event or circumstance shall cause or result in the
dissolution of the Company, except that the happening of any one of the
following events shall work an immediate dissolution of the Company:
 
(a)           The sale of all or substantially all of the Company Property;
 
(b)           The unanimous agreement in writing by the Members to dissolve the
Company;
 
(c)           The expiration of the Term of the Company;

 
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(d)           The termination of the legal existence of the last remaining
Member of the Company or the occurrence of any other event which terminates the
continued membership of the last remaining Member of the Company in the Company
unless the Company is continued without dissolution in a manner permitted by
this Agreement or the Delaware Act; or
 
(e)           The entry of a decree of judicial dissolution under Section 18-802
of the Delaware Act, provided, however, that to the fullest extent permitted by
law, the Members waive the right to seek and shall not seek or acquiesce in the
entry of a decree of judicial dissolution.
 
Upon the occurrence of any event that causes the last remaining Member of the
Company to cease to be a member of the Company, to the fullest extent permitted
by law, the personal representative of such Member is hereby authorized to, and
shall, within ninety (90) days after the occurrence of the event that terminated
the continued membership of such Member in the Company, agree in writing (i) to
continue the Company and (ii) to the admission of the personal representative or
its nominee or designee, as the case may be, as a substitute Member of the
Company, effective as of the occurrence of the event that terminated the
continued membership of the last remaining Member in the Company.
 
Without limitation on the other provisions hereof, neither the assignment of all
or any part of a Membership Interest permitted hereunder nor the admission of a
substitute member nor the bankruptcy, insolvency or dissolution of a Member
shall, in and of itself, work the dissolution of the Company. Except as
otherwise provided in this Agreement, each Member agrees that a Member may not
withdraw or resign from or, to the fullest extent permitted by law, cause a
voluntary dissolution of the Company.
 
Notwithstanding any other provision of this Agreement, the Bankruptcy of a
Member shall not cause the Member to cease to be a member of the Company and
upon the occurrence of such an event, the Company shall continue without
dissolution.
 
Notwithstanding any other provision of this Agreement, each of the Members
waives any right it might have to dissolve the Company upon the Bankruptcy of a
Member or the occurrence of an event that causes a Member to cease to be a
member of the Company.
 
Section 10.2   Procedure.
 
(a)           Upon the dissolution of the Company, the Managing Member or, if
Managing Member or its Affiliate is not the Managing Member, then such Person as
the remaining Members or if there are no remaining Members, their personal
representatives or other successors, shall select to wind up the Company’s
affairs (the Managing Member or such other Person being referred to herein as
the “Liquidating Trustee”) shall wind up the affairs of the Company. The Members
shall continue to receive allocation of Net Income and Net Losses and
distributions of Available Cash from Operations during the period of liquidation
of the Company in the same manner and proportion as though the Company had not
dissolved.  The Liquidating Trustee shall, exercising due and prudent business
judgment, determine the time, manner and terms of any sale or sales of Company
Property pursuant to such liquidation, having due regard to the activity and
condition of the relevant market and general financial and economic conditions.
 
(b)           Following the satisfaction of all debts and liabilities of the
Company and all expenses of liquidation (whether by payment or reasonable
provision for payment thereof), the proceeds of the liquidation and any other
funds of the Company shall be distributed in accordance with Article 4.

 
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(c)           Each Member shall look solely to the assets of the Company for all
distributions that such Member may be entitled to under this Agreement and shall
have no recourse therefor (in the event of any deficit in an Member’s Capital
Account or otherwise) against any other Member; provided that nothing herein
contained shall relieve any Member of such Member’s obligation to pay any
liability or indebtedness owing the Company by such Member and any
reimbursements required to be made to the Company (including, without
limitation, pursuant to Section 4.2) and the Company and the Members shall be
entitled at all times to enforce such obligations of such Member. No Member
shall have any right to demand or receive property other than cash upon
dissolution and termination of the Company.
 
(d)           Notwithstanding any other provision of this Agreement to the
contrary, upon liquidation of a Membership Interest (whether or not in
connection with a liquidation of the Company), no Member shall have any
liability to restore any deficit in its Capital Account. In addition, no
allocation to any Member of any loss, whether attributable to depreciation or
otherwise, shall create any asset of or obligation to the Company, even if such
allocation reduces a Member’s Capital Account or creates or increases a deficit
in such Member’s Capital Account; it is also the intent of the Members that no
Member shall be obligated to pay any such amount to or for the account of the
Company or any creditor of the Company. The obligations of the Members to make
contributions pursuant to Article 3 are for the exclusive benefit of the Company
and not of any creditor of the Company; and no such creditor is intended as a
third party beneficiary of this Agreement nor shall any such creditor have any
rights hereunder, including, but without limitation, the right to enforce any
Capital Contribution obligations of the Members.
 
(e)           Upon the completion of the liquidation of the Company and the
distribution of all Company assets and if the Certificate of Formation of the
Company shall have been cancelled in the manner required by the Delaware Act,
the Company shall terminate.
 
ARTICLE XI
MISCELLANEOUS
 
Section 11.1    Notices.
 
All notices, consents or waivers shall be in writing and shall be deemed to have
been duly given:
 
(a)           when delivered personally; or
 
(b)           seventy-two (72) hours after being mailed, registered or certified
mail, return receipt requested, postage prepaid, to the respective addresses set
forth below; or
 
(c)           one (1) Business Day after being delivered to a
nationally-recognized overnight courier service, prepaid, marked for next day
delivery, addressed to the addressee at its address set forth below; or

 
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(d)           on the Business Day of receipt if received during normal business
hours and, if received after the close of business, the first Business Day after
receipt, if delivered by facsimile transmission to the fax number (if any) of
the receiving party listed below, if receipt is confirmed in writing by the
sending facsimile machine.
 
(e)           The addresses for notice are:
 
if to the Company, to its address set forth in Section 1.6 hereof:
 
If to Managing
   
Member:
 
Cornerstone Oakleaf Village TRS, LLC
   
c/o Cornerstone Healthcare Plus REIT, Inc.
   
Attn:  Sharon C. Kaiser, Chief Financial Officer
   
1920 Main Street, Suite 400
   
Irvine, California 92614
   
Telephone No.:  949.263.4326
   
Telecopy No.:    949.250.0592
     
With a copy to:
 
Servant Healthcare Investments, LLC
   
Attn: Kevin Maddron
   
1000 Legion Place, Ste. 1650
   
Orlando, Florida 32801
   
Telephone No.:   407.999.7772
   
Telecopy No.:     407.999.7759
     
With a copy to:
 
Foley & Lardner LLP.
   
111 North Orange Avenue
   
Suite 1800
   
Orlando, Florida 32801
   
Attention:            Michael A. Okaty, Esq.
   
Telephone:          407.244.3229
   
Facsimile:            407.648.1743
     
If to Non-Managing
   
Member:
 
RSC South Carolina Interests, LLC
   
c/o Gazit Senior Care, Inc.
   
1696 N.E. Miami Gardens Drive
   
North Miami Beach, Florida 33179
   
Attention:  Sean Kanov
   
Telephone:          305.947.8800
   
Facsimile:            305.947.4200
     
With copies to:
 
Carlton Fields, P.A.
   
100 SE 2nd Street, Suite 4000
   
Miami, Florida  33131
   
Attention:            Roger S. Goldman, Esq.
   
Telephone:          305.530.0050
   
Facsimile:            305.530.0055

 
 
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Section 11.2   Entire Agreement.
 
This Agreement constitutes the entire agreement between the parties pertaining
to the subject matter hereof, except for the Tenant Portfolio Agreement. This
Agreement supersedes any prior agreement or understandings between the parties
and/or their Affiliates with respect to the subject matter hereof and shall not
amend or modify or in any way affect any other agreement or understanding
between the parties hereto that are not related to the subject matter hereof.
 
Section 11.3  Amendments.
 
This Agreement may be amended by written agreement of amendment executed by all
Members, but not otherwise.
 
Section 11.4  Governing Law.
 
This Agreement and the rights of the parties hereunder shall be governed by and
interpreted in accordance with the laws of the State of Delaware, without regard
to its conflict of law provisions.
 
Section 11.5  Successors and Assigns.
 
Except as limited by this Agreement, this Agreement shall be binding upon and
inure to the benefit of the parties and their legal representatives, successors
and permitted assigns.
 
Section 11.6  Interpretation.
 
The section headings and captions contained herein are for reference purposes
only and shall not in any way affect the meaning or interpretation of this
Agreement. As used herein, the neuter gender shall include the masculine and
feminine genders, and vice versa, and the singular, the plural, and vice versa,
as the context demands. The word “including” and words of similar import when
used in this Agreement shall mean “including, without limitation,” unless the
context otherwise requires or unless otherwise specified.  The word “or” shall
not be exclusive.  References herein to this Agreement shall be deemed to refer
to this Agreement as of the date of such Agreement and as it may be amended
thereafter, unless otherwise specified.  The parties hereto agree that this
Agreement is the product of negotiation between sophisticated parties, all of
whom were represented by counsel, and each of whom had an opportunity to
participate in and did participate in the drafting of each provision hereof. In
the event any court or other adjudicative body of competent jurisdiction is
called upon to interpret this Agreement, the language of this Agreement shall be
construed as a whole, according to its fair meaning and intent, and not strictly
for or against any party, regardless of which party drafted or was principally
responsible for drafting the Agreement or any specific term or condition
hereof.  The Settlement Agreement has been circulated for editing to all
parties.  As such, the Agreement shall be deemed to have been drafted by all
parties jointly, and no party shall be deemed to have drafted this Agreement, or
any of its individual terms or conditions.  No party may offer in evidence or
otherwise use, for purposes of suggesting any interpretation of this Settlement
Agreement, any prior drafts of this Agreement.

 
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Section 11.7  Severability.
 
If any provision of this Agreement, or the application of such provision to any
Person or circumstance, shall be held invalid, the remainder of this Agreement,
or the application of such provision to other Persons or circumstances, shall
not be affected thereby.
 
Section 11.8  Legal Counsel.
 
Legal counsel for a Member or one of its Affiliates (“Counsel”) may represent
the Company in connection with legal work or issues arising in connection with
the Company and/or the Operating Company (each, a “Matter”).  Each Member
recognizes and acknowledges that any such Counsel will be acting as legal
counsel for the Company and/or the Operating Company with respect to each Matter
and shall not be acting as the legal counsel of any individual Member.  Each
Member further recognizes and accepts that its interest with respect to any
Matter may be adverse to the interests of the other Members and of the Company
and/or the Operating Company.  Each Member nevertheless consents to the
representation of the Company and/or the Operating Company by such Counsel with
respect to each Matter and waives for the benefit of each other Member and of
such Counsel any potential or actual conflict of interest between or among such
Members and between any such Members and the Company and/or the Operating
Company.  Each Member acknowledges that in the event of any future dispute or
litigation between or among the Members and/or between any of the Members and
the Company and/or the Operating Company, the Counsel may continue to represent
its Member client, notwithstanding any such dispute and its prior representation
of the Company and/or the Operating Company.
 
Section 11.9  Advice from Independent Counsel/Voluntary Agreement.
 
Notwithstanding the provisions of Section 11.8, the Members represent and
warrant that (a) each of them is represented by legal and tax counsel of its
choice, (b) each of them has consulted with such counsel regarding this
Agreement, (c) each of them is fully aware of the meaning and the tax and other
consequences of the provisions contained herein, (d) each of them has not relied
in any way on any representation or other statement made by any other Member or
its legal or tax counsel or by any other Person and (e) each of them has entered
into this Agreement voluntarily and without coercion or duress of any kind.
 
Section 11.10  Counterparts.
 
This Agreement may be executed in any number of counterparts, and/or by
facsimile and/or by electronic mail, each of which counterpart shall be deemed
to be an original and all such counterparts taken together shall be deemed to
constitute one and the same instrument.  The signatories hereto confirm that any
facsimile or electronic copy of another signatory’s executed counterpart of
this Agreement (or its signature page) will be deemed to be an executed
original.
 
Section 11.11  Benefits of Agreement; No Third-Party Rights.
 
None of the provisions of this Agreement shall be for the benefit of or
enforceable by any creditor of the Company or by any creditor of a Member, and
nothing in this Agreement shall be deemed to create any right in any Person not
a party hereto, and this Agreement shall not be construed in any respect to be a
contract in whole or in part for the benefit of any third Person, provided,
however, that the Indemnitees and their respective successors and assigns are
intended third-party beneficiaries of this applicable indemnification provisions
set forth in this Agreement.

 
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Section 11.12  WAIVER OF JURY TRIAL.
 
EACH MEMBER AND THE COMPANY HEREBY AGREE NOT TO ELECT A TRIAL BY JURY OF ANY
ISSUE TRIABLE OF RIGHT BY JURY AND WAIVE ANY RIGHT TO TRIAL BY JURY FULLY TO THE
EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THIS
AGREEMENT. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND
VOLUNTARILY BY THE MEMBERS AND THE COMPANY, AND IS INTENDED TO ENCOMPASS
INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO TRIAL BY JURY
WOULD OTHERWISE ACCRUE. THE MEMBERS AND THE COMPANY ARE EACH HEREBY AUTHORIZED
TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF
THIS WAIVER.
 
Section 11.13   Special Purpose Provisions.
 
(a)           Notwithstanding anything to the contrary set forth herein, the
Company and the Members hereby agree that at all times:
 
(i)           The Company shall not own any asset or property other than (A) the
membership interests in each of the Operating Companies and (B) incidental
personal property necessary for the ownership of such interests.  The Company
shall not allow the Operating Company to own any asset or property other than
(x) the Property and (y) incidental personal property (including intangible
personal property) necessary for the ownership or operation of the Property.
 
(ii)           The Company shall not allow the Operating Company to engage in
any business other than as stated in Section 2.3 of each of the Operating
Companies LLC Agreement.  The Company will not engage in any business other than
as stated in Section 1.4.
 
(iii)           The Company will maintain, and the Company shall cause the
Operating Company to maintain, an arms-length relationship with their
Affiliates, constituent parties and any other Persons furnishing services to
them, and the Company will not enter, nor shall the Company allow the Operating
Company to enter, into any contract or agreement or engage in any material
transaction (as transferor or transferee) with any Affiliate of each of the
Operating Companies  or the Company or any constituent party of each of the
Operating Companies  or the Company, except for fair value and upon terms and
conditions that are intrinsically fair, commercially reasonable and
substantially similar to those that would be available on an arms-length basis
with third parties other than any such party.  The Company will not engage, nor
shall the Company allow the Operating Company to engage, in any transaction with
any Affiliate of the Company, the Operating Company, any constituent party of
the Company, any guarantors of the obligations of the Company or the Operating
Company or any Affiliate of any constituent party, owner or guarantor
(individually, a “Related Party” and collectively the “Related Parties”)
involving any intent to hinder, delay or defraud any Person.

 
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(iv)           The Company will be, and the Company shall cause the Operating
Company to be, and at all times hold itself out to the public as, a legal entity
separate and distinct from any other entity (including any Affiliate or any
constituent party thereof) except that the Operating Company shall be treated as
a disregarded entity for federal, and to the extent applicable, state and local
income tax purposes only.  
 
(b)           The Members acknowledge that this Section 11.13 may be modified to
include additional special purpose provisions if such provisions are required by
a third party lender with respect to a transaction involving the Company.
 
Section 11.14   Patriot Act Representation.
 
Each Member hereby represents and warrants that on the date hereof and
throughout the term of this Agreement (a) none of the funds or other assets or
any Member, or any principal of any of them, constitute property of, or are
beneficially owned, directly or indirectly, by any person, entity or government
subject to trade restrictions under U.S. Law, including, but not limited to, the
International Emergency Economic Powers Act, 50 U.S.C. Sections 1701 et seq.,
the Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism (USA Patriot Act) Act of 2001 (Public Law
107-56), the Trading with the Enemy Act, 50 U.S.C. App 1 et seq., and any
Executive Orders or regulation promulgated under any such legislation with the
result that the investment in the Company is prohibited by law or is in
violation of law (any such person, entity or government being referred to herein
as an “Embargoes Person”), and (b) none of the funds of any Member or any such
principal, as applicable have been derived from any unlawfully activity with the
result that the investment in the Company or in any principal, as applicable,
whether directly or indirectly, is prohibited by law or is in violation of law.
 
Section 11.15   OFAC Compliance and Source of Funds.
 
(a)           Compliance with International Trade Control Laws and OFAC
Regulations.  Each Member represents and warrants that such Member is not now
nor shall it be at any time hereafter an individual, corporation, partnership,
joint venture, association, joint stock company, trust, trustee, estate, limited
liability company, unincorporated organization, real estate investment trust,
government or any agency or political subdivision thereof, or any other form of
entity with whom a United States citizen, entity organized under the laws of the
United States or its territories or entity having its principal place of
business within the United States or any of its territories (collectively, a
“U.S. Person”), is prohibited from transacting business of the type contemplated
by this Agreement, whether such prohibition arises under United States law,
regulation, executive orders and lists published by the Office of Foreign Assets
Control, U.S. Department of the Treasury (“OFAC”) (including those executive
orders and lists published by OFAC with respect to Persons that have been
designated by executive order or by the sanction regulations of OFAC as Persons
with whom U.S. Persons may not transact business or must limit their
interactions to types approved by OFAC “Specially Designated Nationals and
Blocked Persons”) or otherwise.  Neither Member nor any Person who owns an
interest in Member (collectively, a “Purchaser Party”) is now nor shall be at
any time hereafter a Person with whom a U.S. Person, including a “financial
institution” as defined in 31 U.S.C. § 5312(a)(2) (“Financial Institution”), is
prohibited from transacting business of the type contemplated by this Agreement,
whether such prohibition arises under United States law, regulation, executive
orders and lists published by the OFAC (including those executive orders and
lists published by OFAC with respect to Specially Designated Nationals and
Blocked Persons) or otherwise.

 
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(b)           Member’s Funds.  Each Member represents and warrants that such
Member has taken, and shall continue to take hereafter, such measures as are
required by law to assure that the funds used to pay to the Company the Capital
Contribution are derived from: (i) transactions that do not violate United
States law nor, to the extent such funds originate outside the United States, do
not violate the laws of the jurisdiction in which they originated; and (ii)
permissible sources under United States law and to the extent such funds
originate outside the United States, under the laws of the jurisdiction in which
they originated.
 
(c)           Anti-Money Laundering Laws.  Each Member represents and warrants
that to the best of such Member’s knowledge after making due inquiry, neither
Member nor any Purchaser Party, nor any Person providing funds to Member:  (i)
is under investigation by any governmental authority for, or has been charged
with, or convicted of, money laundering, drug trafficking, terrorist related
activities, any crimes which in the United States would be predicate crimes to
money laundering, or any violation of any Anti Money Laundering Laws (as
hereinafter defined in this Section); (ii) has been assessed civil or criminal
penalties under any Anti-Money Laundering Laws; or (iii) has had any of its
funds seized or forfeited in any action under any Anti Money Laundering
Laws.  For purposes of this Subsection (i), the term “Anti-Money Laundering
Laws” shall mean laws, regulations and sanctions, state and federal, criminal
and civil, that: (w) limit the use of and/or seek the forfeiture of proceeds
from illegal transactions; (x) limit commercial transactions with designated
countries or individuals believed to be terrorists, narcotics dealers or
otherwise engaged in activities contrary to the interests of the United States;
(y) require identification and documentation of the parties with whom a
Financial Institution conducts business; or (z) are designed to disrupt the flow
of funds to terrorist organizations.  Such laws, regulations and sanctions shall
be deemed to include the USA PATRIOT Act of 2001, Pub. L. No. 107-56 (the
“Patriot Act”), the Bank Secrecy Act, 31 U.S.C. §§ 5311 et seq., the Trading
with the Enemy Act, 50 U.S.C. App. §§ 1 et seq., the International Emergency
Economic Powers Act, 50 U.S.C. §§ 1701 et seq., and the sanction regulations
promulgated pursuant thereto by the OFAC, as well as laws relating to prevention
and detection of money laundering in 18 U.S.C. §§ 1956 and 1957.
 
ARTICLE XII
BOOKS AND RECORDS
 
Section 12.1    Books and Records; Periodic Reporting.
 
(a)           The Managing Member shall maintain at the principal place of
business of the Company separate books of account for the Company that shall
show a true and accurate record of all costs and expenses incurred, all charges
made, all credits made and received, and all income derived in connection with
the conduct of the Company and the operation of its business in accordance with
modified accrual based income tax accounting consistently applied.

 
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(b)           Except as provided in Section 4.2, The Company's federal and state
income and other tax returns shall be prepared at the expense of the
Company.  All tax returns shall be signed on behalf of the Company and filed by
the Managing Member and prepared in accordance with Section 2.1 of Exhibit B. At
least ten (10) days prior to the due date, as the same may be extended, of each
such Company tax return, the Managing Member shall transmit copies thereof to
the Members for their review.  In addition, as soon as reasonably possible each
year, the Managing Member shall furnish each Member with such information as may
be needed to enable such Member to file its federal income tax return and any
required state income tax return.  The cost of all such reporting shall be paid
by the Company as a Company expense.
 
(c)           Within ten (10) business days after the property manager of the
Property has provided the appropriate month-end data and reports, the Managing
Member shall cause to be prepared and provided to each Member the following
monthly reports for the Property and/or the Company: financial summary, variance
report, balance sheet, income statement, cash flow statement and aged
delinquency report.
 
(d)           Each Member may require, the Company to cause auditors selected by
the Company to prepare and furnish to each Member audited financial statements
for any completed  Fiscal Year accompanied by a report thereon of the accounting
firm engaged by the Company (unless the Senior Lender requires another auditor),
including the following: (i) a copy of the balance sheet of the Company as of
the last day of such Fiscal Year; (ii) a statement of income or loss for the
Company for such Fiscal Year; (iii) a statement of the Members’ Capital Accounts
and changes therein for such Fiscal Year; and (iv) a statement of Company cash
flow for such Fiscal Year.  The cost of all such reporting shall be paid by the
Company as a Company expense.
 
Section 12.2    Right to Inspection; Delivery of Information.
 
The Members shall have the right at all reasonable times, during their
respective periods of membership in the Company, upon reasonable notice to
examine and copy at the expense of the Company, the books and records of the
Company. The Managing Member shall promptly forward copies of written
documentation and written correspondence relating to the Company which is
received by the Managing Member and which is reasonably of interest to the
Members, could have a material economic effect on the Company, or is some
indication of the value of the Property, including without limitation, any
offers, letters of intent or expressions of interest with respect to the
possible purchase of all or any substantial portion of the Property or all of
the Member Interests in the Company.
 
Section 12.3    Notices of Default or Litigation.
 
In addition to the foregoing, any Member receiving any of the following notices
or information (a “Receiving Member”) Managing Member shall promptly provide the
other Member:
 
(a)           written notice of any litigation, arbitration, or other proceeding
or governmental investigation (including any survey results or inspection
reports from any governmental authority) pending or, to Receiving Member’s
knowledge, threatened against or relating to the Company, the Operating Company,
the Property or the Receiving Member (other than any litigation, arbitration or
other proceeding concerning any bankruptcy or default by a tenant); provided,
that with respect to any such litigation, arbitration or other proceeding
relating solely to a monetary claim of less than $10,000.00, Receiving Member
shall not be required to provide notice (written or otherwise) of such claim in
accordance with the terms of this clause;

 
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(b)           a copy of all notices of default and violations of laws,
regulations, codes, ordinances and the like received by the Company or Receiving
Member relating to (i) the Company, (ii) the Operating Company, (iii) any
Member, or (iv) the Property;
 
(c)           a copy of all notices of default or any other correspondence sent
by the Company to, or received by the Company from, the (i) Manager under the
Management Agreement or the (ii) Senior Lender.
 
ARTICLE XIII
OBLIGATIONS OF MANAGING MEMBER
 
Section 13.1    Duties and Obligations of Managing Member.
 
The Managing Member shall have full, exclusive, and complete discretion, power,
and authority, subject in all cases to the other provisions of this Agreement
and the requirements of applicable law, to manage, control, administer, and
operate the business and affairs of the Company for the purposes herein stated,
and shall be obligated to use reasonable commercial efforts to perform, or cause
to be performed all of the following:
 
(a)           operate, maintain and manage the Company Property in a manner
necessary and appropriate for the accomplishment of the purposes of the Company;
 
(b)           cause the Operating Company to enter into any necessary and
appropriate agreements and contracts deemed necessary and appropriate in
connection with the management, maintenance and operation of the Property;
 
(c)           as a fiduciary for the Company, hold and distribute funds to the
Members by way of cash, income and return of capital, or otherwise, in
accordance with the provisions of this Agreement (provided, however, that this
duty applies to any Member who may hold and distribute funds to the Members);
 
(d)           in accordance with the Approved Budget (as hereinafter defined),
contract on behalf of the Company and/or the Operating Company for the
engagement of independent contractors and supervise such contractors in
connection with the rendering of services to the Company and/or the Operating
Company;
 
(e)           obtaining insurance policies for that the Property and potential
liabilities and risks of the Company in appropriate amounts (subject to
availability at commercially reasonable rates;
 
(f)           The following provisions shall apply with respect to Approved
Budgets:

 
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(i)           As soon as reasonably practicable after the Effective Date, but in
no event later than thirty (30) days after the Effective Date, the Managing
Member shall furnish to Non-Managing Member for its approval a proposed budget
for the balance of the 2010 Fiscal Year.  With respect to each subsequent Fiscal
Year not less than thirty (30) days prior to the expiration of the then current
Fiscal Year, the Managing Member shall furnish to Non-Managing Member for the
approval of Non-Managing Member, a proposed annual budget of the estimated
expenses and obligation of the Company for the Fiscal Year to follow. The
proposed budget shall be detailed and shall show the amounts budgeted by
accounts and expense classifications. Non-Managing Member shall act reasonably,
diligently and in good faith in reviewing the budget and if appropriate,
suggesting modifications thereto within thirty (30) days after receipt thereof.
If and when the budget shall be approved by Non-Managing Member, the same shall
be referred to herein as an “Approved Budget.”  The Members shall endeavor to
resolve any disagreements with respect to any proposed budget as soon as
reasonably possible.
 
(ii)           In the case of a proposed budget described in Section 13.1(f)(i),
if the Members fail for any reason to approve all or part of such proposed
budget by such effective date, the portions of the proposed budget that have
been approved shall become effective on the effective date.  The portions of the
prior Approved Budget that cover substantially the same matter as the portions
of the proposed budget that were not approved shall remain in effect and shall
be carried over into the period for which the proposed budget is intended to be
effective.  The portions of the proposed budget that have been approved,
together with the portions of the existing budget that are so carried over,
shall constitute the Approved Budget for the period for which the proposed
budget is intended to be effective.
 
(iii)           The Managing Member shall secure the prior written approval of
Non-Managing Member before expending, obligating the Company and/or the
Operating Company for or approving any expenditure in connection with the
ownership, operation and management of the Property that would result in an
Approved Budget line item or category being exceeded (“Cost Overrun”) by the
greater of (A) $5,000.00 or (B) ten percent (10%) or more in that line item or
category of the Approved Budget except to the extent such Cost Overrun is caused
by or results from Uncontrollable Expenses or Emergency Costs.  Where emergency
action is necessary to prevent imminent risk to health and safety to Persons on
or about the Property, imminent property damage, imminent imposition of criminal
or civil sanctions against the Company, the Operating Company or any Member or
the foreclosing of a Lien against the Property, then any Member shall have the
right, but not the obligation, to make, or cause to be made, expenditures not
contemplated by the Approved Budget if any expenditure made without the approval
of the Members is, in such Member’s good faith judgment, reasonable and
necessary under the circumstances set forth above (all such costs being
collectively referred to herein as “Emergency Costs”), provided that such Member
endeavors diligently and in good faith (y) to notify the other Members of any
such emergency and (z) obtain verbal approval for any required expenditure.
 
(g)           The Members stipulate and agree that Managing Member has used
reasonable commercial efforts to perform its obligations under this Section 13.1
with respect to the management and operation of the Company if and to the extent
and during the applicable time periods that such management and operational
matters are within the purview of the obligations of an RSC Manager pursuant to
an applicable RSC Management Agreement.

 
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(h)           Managing Member may submit, and the Members may approve, one
budget in lieu of both of the budgets required under this Agreement and the
Owner Portfolio Agreement. If there is one combined Approved Budget under this
Agreement and under the Owner Portfolio Agreement, any Cost Overruns shall be
calculated and determined based on the costs parameters set forth in either this
Agreement or the Owner Portfolio Agreement, without duplication (that is, the
cost parameters for each line items in the one (unified) Approved Budget shall
not be increased by reason of being governed by this Agreement and the Owner
Portfolio Agreement.
 
Section 13.2     Non-Managing Member’s Right to Perform Obligations of Managing
Member.
 
If Managing Member shall fail, refuse or neglect to make any payment or perform
any act required by this Agreement, then upon the expiration of ten (10) days
prior written notice to Managing Member and without waiving or releasing any
other right, remedy or recourse Non-Managing Member may have by reason of such
failure, refusal or neglect, Non-Managing Member may (but shall not be obligated
to) make such payment or perform such act for the account of and at the expense
of the Company, and shall have the right to enter upon the Property for such
purpose and to take all such action thereon and with respect to the Property as
it may deem necessary or appropriate.  If Non-Managing Member shall elect to pay
any sum due with reference to the Property, Non-Managing Member may do so in
reliance on any bill, statement or assessment procured from the appropriate
governmental authority or other issuer thereof without inquiring into the
accuracy or validity thereof.  Similarly, in making any payments to protect the
Property, Non-Managing Member shall not be bound to inquire into the validity of
any apparent or threatened adverse title, lien, encumbrance, claim or charge
before making an advance for the purpose of preventing or removing the
same.   In exercising any rights under this Agreement or taking any actions
provided for therein, Non-Managing Member may act through its employees, agents
or independent contractors as authorized by Non-Managing Member.  All sums paid
by Non-Managing Member pursuant to this Section 13.2 shall be deemed to be a
Member Loan. Notwithstanding the foregoing, if during the ten (10) days notice
period set forth in this Section 13.2, Managing Member shall notify Non-Managing
Member that the such matter is in dispute between the relevant parties and
demands that Non-Managing Member refrain from taking any action with respect to
same, then any payment or performance by Non-Managing Member shall be for its
own account and not an the expense of the Company unless and until the same is
adjudicated or otherwise resolved to be an expense of the Company between
Managing Member and Non-Managing Member.
 
[Signature Pages Follow]

 
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IN WITNESS WHEREOF, the undersigned have executed and delivered this Agreement,
as of the date first set forth above.
 

 
CORNERSTONE OAKLEAF VILLAGE TRS,
LLC, a Delaware limited liability company
       
By: 
Cornerstone Healthcare Plus REIT, Inc., a
   
Maryland corporation, its Manager
         
By: 
   /s/ Terry G. Roussel      
Terry G. Roussel, CEO

[SIGNATURE OF RSC SOUTH CAROLINA INTERESTS, LLC ON THE FOLLOWING PAGE]

 
 

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

 

 IN WITNESS WHEREOF, the undersigned have executed and delivered this Agreement,
as of the date first set forth above.
 

 
RSC SOUTH CAROLINA INTERESTS, LLC,
 
a Florida limited liability company
       
By: 
   /s/ Aharon Soffer    
Aharon Soffer, Manager
       
By: 
   /s/ Avi Bittan    
Avi Bittan, Manager

[JOINDER BY MEMBERS OF OWNER PORTFOLIO ON THE FOLLOWING PAGE]

 
 

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

 
 
JOINDER BY MEMBERS IN
ROYAL CORNERSTONE SOUTH CAROLINA PORTFOLIO, LLC,
a Delaware limited liability company

The undersigned being the sole members in Royal Cornerstone South Carolina
Portfolio, LLC, a Delaware limited liability company, do hereby join in the
execution of this Agreement to confirm their agreement that (i) as to
Cornerstone Oakleaf Village, the entire Membership Interest of Managing Member
in the Company shall be included with the entire membership interest of
Cornerstone Oakleaf Village in Owner Portfolio and (ii) as to RSC South Carolina
Interests, LLC, the entire Membership Interest of Non-Managing Member in the
Company shall be included with the entire membership interest of RSC South
Carolina Interests, LLC, in Owner Portfolio, as to each of subclauses (i) and
(ii), both under the Buy-Sell Procedures (as defined in the Owner Portfolio
Agreement) under the Owner Portfolio Agreement and under the provisions of
Article 8 of the Owner Portfolio Agreement.
 

 
CORNERSTONE OAKLEAF VILLAGE, LLC,
 
a Delaware limited liability company
       
By: 
Cornerstone Healthcare Plus REIT, Inc., a
   
Maryland corporation, its Manager
           
By: 
  /s/ Terry G. Roussel      
Terry G. Roussel, CEO

 
[SIGNATURE PAGE OF RSC SOUTH CAROLINA INTERESTS OF JOINDER BY MEMBERS OF OWNER
PORTFOLIO ON THE FOLLOWING PAGE]

 
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RSC SOUTH CAROLINA INTERESTS, LLC,
 
a Florida limited liability company
       
By: 
   /s/ Aharon Soffer    
Aharon Soffer, Manager
       
By:
   /s/ Avi Bittan    
Avi Bittan, Manager

 
 
 

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EXHIBIT A
 
DEFINITIONS
 
“Affiliate” shall mean, as to any Person, any other Person that, directly or
indirectly, is in control of, is Controlled by or is under common Control with
such Person or of an Affiliate of such Person.
 
“Affiliate Contract” shall have the meaning set forth in Section 5.1(b)(iv).
 
“Agreement” shall mean this limited liability company agreement, as amended,
modified or supplemented from time to time in accordance with its terms together
with the Exhibits attached hereto.
 
“Anti-Money Laundering Laws” shall have the meaning set forth in Section
11.15(c).
 
 “Approved Budget” shall have the meaning set forth in Section 13.1(f)(i).
 
“Auditors” shall have the meaning set forth in Section 5.1(b)(xvi).
 
“Auditor Removal Notice” shall have the meaning set forth in Section 5.3.
 
“Available Cash from Operations” shall mean all cash funds of the Company on
hand from time to time after reduction for (a) all Company Costs and Expenses
(but expressly not reduced by Excess Expenses) that are due and payable as of
such date and (b) the Threshold Working Capital Amount and (c) Recurring Capital
Expenditures (but expressly not reduced by Non-Recurring Capital Expenditures
funded from Available Cash from Operations).
 
“Bankruptcy” shall mean, with respect to any Person, if such Person: (a) makes
an assignment for the benefit of creditors; (b) files a voluntary petition in
bankruptcy, (c) is adjudged a bankrupt or insolvent, or has entered against it
an order for relief, in any bankruptcy or insolvency proceedings; (d) files a
petition or answer seeking for itself any reorganization, arrangement,
composition, readjustment, liquidation or similar relief under any statute, law
or regulation; (e) files an answer or other pleading admitting or failing to
contest the material allegations of a petition filed against it in any
proceeding of this nature; (vi) seeks, consents to or acquiesces in the
appointment of a trustee, receiver or liquidator of the Person or of all or any
substantial part of its properties; or (f) if one hundred twenty (120) days
after the commencement of any proceeding against the Person seeking
reorganization, arrangement, composition, readjustment, liquidation or similar
relief under any statute, law or regulation, if the proceeding has not been
dismissed, or if within 90 days after the appointment without such Person’s
consent or acquiescence of a trustee, receiver or liquidator of such Person or
of all or any substantial part of its properties, the appointment is not vacated
or stayed, or within 90 days after the expiration of any such stay, the
appointment is not vacated.  The foregoing definition of “Bankruptcy” is
intended to replace and shall supersede and replace the definition of
“Bankruptcy” set forth in Sections 18-101(1) and 18-304 of the Delaware Act.
 
“Bona Fide Offer" means a written offer by a Qualified Purchaser to buy the
entire Membership Interest of a Member accompanied by a cash deposit of a sum
not less than five percent (5%) of the total proposed purchase price.
 
“Business Day” shall mean Monday through Friday of each week, except that a
legal holiday recognized as such by the United States or the State of South
Carolina shall not be regarded as a Business Day.

 
A-1

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“Buy-Sell Closing” shall have the meaning set forth in Section 6.2(a)
 
“Buy-Sell Closing Date” shall have the meaning set forth in Section 6.2(a)
 
“Buy-Sell Notice” shall have the meaning set forth in Section 6.1(b).
 
“Buy-Sell Notice Date” shall have the meaning set forth in Section 6.1(b).
 
“Buy-Sell Procedures” shall have the meaning set forth in Section 6.1(a).
 
“Capital Account” shall mean, with respect to each Member, the account
established and maintained for the Member on the books of the Company in
compliance with Treasury Regulation §§1.704-1(b)(2)(iv) and 1.704-2, as
amended.  This definition shall be interpreted and applied in a manner
consistent with such Treasury Regulations.  Subject to the preceding sentence,
each Member’s Capital Account will initially equal the amount of cash and fair
market value of property contributed (as of the date of such contribution, net
of liabilities that the Company is considered to assume or take subject to under
Code Section 752) by such Member to the Company and throughout the term of the
Company will be (a) increased by the amount of (1) income and gains allocated to
such Member and (2) the amount of any cash and the fair market value of any
property subsequently contributed by such Member to the Company (as of the date
of such contribution, net of liabilities that the Company is considered to
assume or take subject to under Code Section 752), and (b) decreased by the
amount of (1) losses and deductions allocated to such Member and (2) the amount
of distributions of cash and the fair market value of distributions of property
(as of the date of such distribution, net of liabilities that the Member is
considered to assume or take subject to under Code Section 752) distributed to
such Member.
 
“Capital Contributions” shall mean the capital contributions of the Members
required or permitted under Section 3.1 or 3.2.
 
“Capital Expenditure” shall mean any expenditure(s) for assets having a useful
life in excess of one (1) year.
 
“Code” means the Internal Revenue Code of 1986, as amended from time to time (or
any succeeding law).
 
“Commissioner” means the Commissioner of the Internal Revenue Service of the
United States of America.
 
“Company” shall mean Royal Cornerstone South Carolina Tenant Portfolio, LLC, a
Delaware limited liability company.
 
“Company Costs and Expenses” shall mean all of the permitted expenditures of any
kind made or to be made with respect to the direct or indirect operations of the
Company and/or the Operating Company, including, without limitation, all
required debt service payments, all amounts payable pursuant to any management,
leasing or other agreement relating to the Property, costs of improvements to be
made with respect to the Property, ad valorem taxes, federal, state and local
taxes, assessment and school fees, insurance premiums, repair and maintenance
costs, engineering fees, advertising and other marketing expenses, professional
fees, utilities costs, overhead, costs, general and administrative costs of each
of the Operating Companies  and the Company and all other types of permitted
costs, expenses, charges, liabilities and obligations of the Company and/or the
Operating Company, as limited herein.
 
“Company Minimum Gain” has the same meaning as “partnership minimum gain” set
forth in Regulations Sections 1.704-2(b)(2) and 1.704-2(d).

 
A-2

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“Company Property” shall mean the Property and all other property of whatever
kind or nature owned by the Company from time to time.
 
“Contributing Member” shall have the meaning set forth in Section 3.2(b).
 
“Control” when used with respect to any specified Person, as such or in any
related meaning, shall mean the power to direct or cause the direction of the
management and policies of such Person, directly or indirectly, whether through
ownership of voting securities, membership or partnership interests, by contract
or otherwise.
 
“Cornerstone Oakleaf Village” shall mean Cornerstone Oakleaf Village, LLC, a
Delaware limited liability company, the owner of an eighty percent (80%)
membership interest in Owner Portfolio, and its successors or assigns under the
provisions of the Owner Portfolio Agreement.
 
“Cornerstone Principal” shall mean Cornerstone Healthcare Plus REIT, Inc., a
Maryland corporation.
 
“Cost Overrun” shall have the meaning set forth in Section 13.1(f)(iii).
 
“Counsel” shall have the meaning set forth in Section 11.8.
 
“Deadlock” shall have the meaning set forth in Section 5.1(d).
 
“Deadlock Notice” shall have the meaning set forth in Section 5.1(d).
 
“Delaware Act” shall have the meaning set forth in the Explanatory Statement.
 
“Deposit” shall have the meaning set forth in Section 6.1(c).
 
“Effective Date” shall have the meaning set forth in the Preamble.
 
“Embargoes Person” shall have the meaning set forth in Section 11.14.
 
“Emergency Costs” shall have the meaning set forth in Section 13.1(f)(iii).
 
“Excess Expenses” shall mean, for the Company and the Operating Companies:
expenses which are required by the Managing Member or Senior Lender, which have
not been incurred or required to be incurred in any of the RSC Manager's,
Operating Companies or Operator’s prior operation of the Property, and which are
generally considered not to be operating expenses in nature, kind or amount of
expenditure in accordance with prevailing industry standards for similarly
situated senior living facilities (by way of example only and without
limitation, expenses relating to the audit of the Company or insurance required
by Managing Member or Senior Lender in excess of the coverages required in
Exhibit B to the RSC Management Agreement attached hereto as Exhibit C).
 
“Family Members” shall mean:  (a) any parent, sibling, spouse or lineal
descendant of a Royal Principal; (b) any trust set up for the benefit of a Royal
Principal and/or any of the individuals described in clause (a) above; (c) any
Person in which an Royal Principal and/or any one or more of the individuals or
trusts described in clause (a) and/or (b) own one hundred percent (100%) of
beneficial interests; and/or (d) the estates or legal representatives of a Royal
Principal.
 
“Financial Institution” shall have the meaning set forth in Section 11.15(a).
 
“Fiscal Year” shall mean the 12-month period ending December 31 of each year;
the first Fiscal Year shall begin on the date of this Agreement and the last
Fiscal Year shall be the period beginning on January 1 of the calendar year in
which the final liquidation and termination of the Company is completed and
ending on the date such final liquidation and termination is completed. To the
extent any computation or other provision hereof provides for action to be taken
on a Fiscal Year basis, an appropriate proration or other adjustment shall be
made in respect of the initial and final Fiscal Years to reflect that such
periods are less than full calendar year periods.

 
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“Formation Date” shall have the meaning set forth in Section 1.1.
 
“Greenville Master Lease” shall mean that certain Amended and Restated Ground
Lease Agreement dated as of even date herewith between Greenville Owner and
Greenville Operator (being an Operating Company) with respect to the Greenville
Property, as the same may be modified, amended, restated or consolidated with
the written consent of the Members from time to time.
 
“Greenville Operator” shall mean that RSC Greenville, LLC, a Florida limited
liability company.
 
“Greenville Owner” shall mean that RSC Oakleaf Greenville, LLC, a Florida
limited liability company.
 
“Group” shall have the meaning set forth in Section 6.1(d).
 
“Gross Price” shall have the meaning set forth in Section 6.1(b).
 
“Indemnitee” shall have the meaning set forth in Section 7.6(a).
 
“Interests” shall mean the interests of the Company in and to the Operating
Company.
 
“Lexington Master Lease” shall mean that certain Amended and Restated Ground
Lease Agreement dated as of even date herewith between Lexington Owner and
Lexington Operator (being an Operating Company) with respect to the Lexington
Property, as all of the same may be modified, amended, restated or consolidated
with the written consent of the Members from time to time.
 
“Lexington Operator” shall mean that RSC Lexington, LLC, a Florida limited
liability company.
 
“Lexington Owner” shall mean that RSC Oakleaf Lexington, LLC, a Florida limited
liability company.
 
“Lien” shall mean any mortgage, deed of trust, pledge, lien, encumbrance, charge
or security interest, other than liens for taxes not yet due and payable or for
taxes that the taxpayer is contesting in good faith through appropriate
proceedings.
 
“Liquidating Trustee” shall have the meaning set forth in Section 10.2(a).
 
“Losses” shall mean the dollar amounts of all costs, claims, suits, actions,
losses, liabilities, obligations, reasonable fees and expenses of any kind or
nature, including costs and expenses of accountants, attorneys and other
professionals, judgments, fines, penalties, settlements and all other costs and
expenses of any nature or type actually paid or incurred by a specified Person;
provided, however, that Losses shall not include lost profits or consequential
or punitive damages.
 
“Major Decision Materiality Threshold” shall mean a Major Decision in which the
event, change or condition which is the subject of the proposed Major Decision
has required or involved, or could reasonably be expected to require or involve,
income or an expenditure or obligation involving a sum or value in excess of
$250,000 for any transaction or other action or of $250,000 for any group of
similar transactions or similar actions.

 
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“Major Decision Notice” shall have the meaning set forth in Section 5.1(c).
 
“Major Decision(s)” shall have the meaning set forth in Section 5.1(b).
 
 “Management Agreement” shall have the meaning set forth in Section 5.2.
 
“Managing Member” shall mean CORNERSTONE OAKLEAF VILLAGE TRS, LLC, a Delaware
limited liability company, and its permitted successors and assigns in its
capacity as the Managing Member of the Company.
 
“Managing Member Related Persons” shall have the meaning set forth in Section
7.5.
 
“Matter” shall have the meaning set forth in Section 11.8.
 
“Member(s)” shall mean Managing Member and Non-Managing Member and their
permitted successors and assigns in its or their capacities as Members in the
Company.
 
“Member Electing Removal of Auditor” shall have the meaning set forth in Section
5.3.
 
“Member Loan” shall have the meaning set forth in Section 3.2(b).
 
“Member Responding to Auditor Removal Notice” shall have the meaning set forth
in Section 5.3.
 
“Membership Interest” shall mean the interest of a Member in the Company,
including, without limitation, such Member’s right (a) to allocations of items
of income, gain, loss, deduction, and credit of the Company as set forth in
Exhibit B hereto; (b) to a distributive share of the assets of the Company as
set forth in Articles 4 and 10; and (c) to participate in the management and
operation of the Company in accordance with this Agreement.
 
“Membership Percentage” shall mean, for Non-Managing Member, 20% and for
Managing Member, 80%.
 
“Necessary Expenses” shall mean: (a) Emergency Costs; (b) Uncontrollable
Expenses; and (c) any other costs or expenses (without duplication) provided for
in any budget approved by Managing Member and Non-Managing Member.
 
“Net Capital Transaction Proceeds” shall mean the proceeds from (a) any
financing or refinancing of the Property or any part thereof and (b) any sale,
disposition, taking or loss of any direct or indirect interest in the Property
or any part thereof, or all of the Membership Interests (but not part thereof)
or any other interest therein, less payment of all costs and other expenses
related thereto, any amounts expended to repair or replace any part of the
Property taken or destroyed, all Company Costs and Expenses and all other
obligations of the Company and/or the Operating Company then due. Without
limiting the generality of the foregoing, proceeds shall include but not be
limited to the proceeds from any eminent domain proceeding or conveyance in lieu
thereof or from title insurance or casualty insurance, other than rental income
insurance.
 
“Net Income” and “Net Losses” mean the income or losses of the Company as
determined in accordance with the method of accounting followed by the Company
for federal income tax purposes, including for all purposes: (1) any income
exempt from tax; (2) any expenditures of the Company which are described in Code
Section 705(a)(2)(B) or are treated as Code Section 705(a)(2)(B) expenditures
under Treasury Regulation § 1.704-1(b)(2)(iv)(i); and (3) any adjustments to the
book value of any Company asset pursuant to the Treasury Regulations; provided,
however, if any property is carried on the books of the Company at a value that
differs from that property’s adjusted basis for tax purposes, then any gain,
loss, depreciation and amortization with respect to such property shall be
computed with reference to the book value of such property, consistently with
the requirement of Treasury Regulation § 1.704-1(b)(2)(iv)(g).

 
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“Non-Contributing Member” shall have the meaning set forth in Section 3.2(b).
 
“Non-Managing Member” shall mean RSC SOUTH CAROLINA INTERESTS, LLC, a Florida
limited liability company, and its successors and assigns in its capacity as a
Non-Managing Member of the Company.
 
“Non-Managing Member Related Persons” shall have the meaning set forth in
Section 7.5.
 
“Non-Recurring Capital Expenditures” shall mean Capital Expenditures in excess
of the amount allocated for Recurring Capital Expenditures in the Approved
Budget.
 
 “OFAC” shall have the meaning set forth in Section 11.15(a).
 
“Offeree” shall have the meaning set forth in Section 6.1(b).
 
“Offeree Price” shall have the meaning set forth in Section 6.1(b).
 
“Offeror” shall have the meaning set forth in Section 6.1(b).
 
“Offeror Price” shall have the meaning set forth in Section 6.1(b).
 
“Operating Company” shall mean RSC Oakleaf Lexington, LLC and/or RSC Oakleaf
Greenville, LLC, each a Florida limited company and the lessee of the Property
under the Lexington Master Lease or Greenville Master Lease, as applicable, as
the context may require.
 
“Operating Company Available Cash” shall mean all cash funds of each of the
Operating Companies on hand from time to time after: (a) payment of all Company
Costs and Expenses (relating to the Operating Company) that are due and payable
as of such date; and (b) provision for the payment of all Company Costs and
Expenses that the Operating Company is obligated to pay within ninety (90) days
of such date, but in all instances, the Operating Companies shall not make any
distributions which would cause the amount of working capital for the applicable
Operating Company to be less than the Threshold Working Capital Amount for such
entity.
 
“Operator” shall mean Lexington Operator and/or Greenville Operator, as the
context may require.
 
“Original Agreement” shall have the meaning set forth in the Whereas Clauses.
 
“Other Preferred Return Payments” shall mean all distributions considered
payments of the preferred returns referred to in Sections 4.1(e), 4.1(f),
4.2.(g) and 4.2(h).
 
“Owner” shall mean Lexington Owner and/or Greenville Owner, as the context may
require.
 
“Owner Portfolio” shall mean Royal Cornerstone South Carolina Portfolio, LLC, a
Delaware limited company and the owner of a one hundred percent (100%)
membership interest in each of the Owners.
 
“Owner Portfolio Agreement” shall mean the limited liability company agreement
of Owner Portfolio, as amended, modified or supplemented from time to time in
accordance with its terms, together with the Exhibits attached thereto.
 
 “Patriot Act” shall have the meaning set forth in Section 11.15(c)

 
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“Person” shall mean an individual, corporation, partnership, limited liability
company, trust, estate, unincorporated organization, association or other
legally recognized entity.
 
“Permitted Managing Member Transferee” shall have the meaning set forth in
Section 8.2(a).
 
“Permitted Non-Managing Member Transferee” shall have the meaning set forth in
Section 8.2(b).
 
“Property” shall mean that certain land and improvements (i) located at 800
North Lake Drive, Lexington, South Carolina (sometimes, the “Lexington
Property”) and/or (ii) located at 1560 Thornblade Boulevard, Greenville, South
Carolina (sometimes the “Greenville Property”), as the context may require.
 
“Purchase Price” shall have the meaning set forth in Section 6.1(b).
 
“Purchaser” shall have the meaning set forth in Section 6.1(c).
 
“Purchaser Party” shall have the meaning set forth in Section 11.15(a).
 
“Qualified Purchaser” shall have the meaning set forth in Section 8.3(a) hereof.
 
“Recourse Liabilities” shall have the meaning set forth in Section 3.4.
 
“Recurring Capital Expenditures” shall mean the Capital Expenditures reflected
in (and limited by) the Approved Budget for recurring items.
 
 “Related Party” and “Related Parties” shall have the meaning set forth in
Section 11.13(a)(iii).
 
“Related Persons” shall have the meaning set forth in Section 7.5.
 
“Remaining Member” shall have the meaning set forth in Section 8.3(a).
 
 “Response Notice” shall have the meaning set forth in Section 6.1(c).
 
“Right of First Refusal” shall have the meaning set forth in Section 8.3(a)
hereof.
 
“ROFR Closing” shall have the meaning set forth in Section 8.3(c).
 
“ROFR Closing Date” shall have the meaning set forth in Section 8.3(c).
 
“Royal Principal” shall mean Avi Bittan and/or Gazit Group USA, Inc, a Florida
limited liability company, as the context may require.
 
“RSC-GSC” shall have the meaning set forth in Section 5.2.
 
“RSC-LSC” shall have the meaning set forth in Section 5.2.
 
“RSC Management Agreement” shall have the meaning set forth in Section 5.2.
 
“Seller” shall have the meaning set forth in Section 6.1(c).
 
“Selling Member” shall have the meaning set forth in Section 8.3(a) hereof.
 
“Senior Lender” shall have the meaning set forth in Section 5.1(b)(ii).
 
“Senior Loan” shall mean that certain loan from Senior Lender to Owners in the
principal amount of Thirteen Million Five Hundred Thousand Dollars
($13,500,000.00).

 
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“Senior Loan Documents” shall mean that (i) certain Promissory Note dated
January 10, 2006, executed by Lexington Owner and Greenville Owner to and in
favor of Senior Lender in the original principal amount of $13,500,000.00 (ii)
as to the Lexington Property, that certain Mortgage, Security Agreement,
Assignment of Rents, Security Agreement and Fixture Filing Statement executed by
Lexington Owner to and in favor of Senior Lender dated as of January 10, 2006,
and recorded in Book 10751, Page 107 of the Recorder of Deeds of Lexington
County, South Carolina (iii) as to the Greenville Property, that certain
Mortgage, Security Agreement, Assignment of Rents, Security Agreement and
Fixture Filing Statement  executed by Greenville Owner to and in favor of Senior
Lender dated as of January 10, 2006, and recorded in Book 4498, Page 828 of the
Recorder of Deeds of Greenville County, South Carolina and (iv) any other
agreements, documents or certificates executed by the Owners or other Persons in
connection the foregoing, as all of the same are  modified substantially in
accordance with the provisions of the Term Sheet, and as all of the same may be
further modified, amended, restated or consolidated from time to time.
 
“Settlement Notice” shall have the meaning set forth in Section 7.6(d) hereof.
 
“Specially Designated Nationals and Blocked Persons” shall have the meaning set
forth in Section 11.15(a).
 
“Tag-Along Right” shall have the meaning set forth in Section 8.4 hereof.
 
 “Term” shall have the meaning set forth in Section 1.3.
 
“Term Sheet” shall have the meaning set forth in Section 3.4.
 
“Third Party” shall mean any Person that is not a Member or an Affiliate of a
Member.
 
“Threshold Working Capital Amount” shall mean, at the time any distribution is
contemplated (but not less often than quarterly),  without duplication of any
required minimum working capital requirements as set forth in the Owner
Portfolio Agreement, the aggregate amount of Ten Thousand Dollars ($10,000.00)
for each of RSC Oakleaf Lexington, LLC and/or RSC Oakleaf Greenville, LLC, both
Florida limited companies and Seventy Five Thousand Dollars ($75,000.00) for
each of RSC Lexington, LLC and RSC Greenville, LLC, both Florida limited
companies.
 
“Transfer” and related usages of that term shall mean any sale, transfer,
assignment, pledge, hypothecation or other disposal of all or any part of a
Membership Interest (including economic interests) or any direct or indirect
ownership interest in a Member in any manner, whether directly or indirectly by
Transfer of all or a portion of any type of equity, profits, distribution or
other ownership interest, and shall include the ability to approve or have any
right to vote on, consent to or veto any decision or matter set forth in this
Agreement and a right to receive any share or portion of payments of dividends,
distributions or profits.
 
“Treasury Regulations” or “Regulations” shall mean the regulations promulgated
under the Code, as such regulations are in effect from time to time.
 
“Uncontrollable Expenses” shall mean the following expenditures: (i) taxes, (ii)
utility charges, (iii) costs of insurance, (iv) payments due under any loan to
the Company and/or the Operating Company, including any fees, costs or other
charges and including establishing any required reserves (or payment of any
other scheduled payment under any such loan, including without limitation, the
entire amount of the loan at maturity) and (v) payments under non-Affiliate
Contracts binding on the Company and/or the Operating Company.

 
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“Unreturned Capital Contribution” shall mean, as calculated and determined with
respect to each Member, the initial capital contribution of such Member (which
shall include, but not be limited to, the permitted closing costs incurred by
each such Member, or its respective Affiliates,  with respect to the closing of
the transaction evidenced by that certain Membership Interest Sale and Purchase
Agreement dated March 5, 2010, between RSC, therein designated as Seller, and
Managing Member, therein designated as Purchaser, as amended or modified from
time to time, with the express exception of the brokerage fees incurred by RSC),
increased by additional Capital Contributions and only reduced by any
distributions of capital per Sections 4.2(e) and (f) hereof. As of the date
hereof, the amount of the Unreturned Capital Contribution of Managing Member is
_________ and the amount of the Unreturned Capital Contribution of Non-Managing
Member is _________ .
 
“U.S. Person” shall have the meaning set forth in Section 11.15(a).

 
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EXHIBIT B

CERTAIN TAX AND ACCOUNTING MATTERS
 
ARTICLE I
ALLOCATION OF INCOME AND LOSSES
 
Section 1.1    Capital Account.  Capital Account shall have the meaning set
forth in Exhibit A to this Agreement.
 
Section 1.2    Capital Account Adjustments for Revaluations.  Whenever the
Company would be permitted to adjust the Capital Accounts of the Members
pursuant to Treasury Regulation §1.704-1(b)(2)(iv)(f) to reflect revaluations of
Company Property, the Company may so adjust the Capital Accounts of the
Members.  In the event that the Capital Accounts of the Members are adjusted
pursuant to Treasury Regulation §1.704-1(b)(2)(iv)(f) to reflect revaluations of
Company Property (a) the Capital Accounts of the Members shall be adjusted in
accordance with Treasury Regulation §1.704-1(b)(2)(iv)(g) for allocations of
depreciation, depletion, amortization and gain or loss, as computed for book
purposes, with respect to such property, (b) the Members’ distributive shares of
depreciation, depletion, amortization and gain or loss, as computed for tax
purposes, with respect to such property shall be determined so as to take
account of the variation between the adjusted tax basis and book value of such
property in accordance with Code Section 704(c), and (c) the amount of upward
and/or downward adjustments to the book value of any Company Property shall be
treated as income, gain, deduction and/or loss for purposes of applying the
allocation provisions of this Exhibit.  In the event that Code Section 704(c)
applies to any Company Property, the Capital Accounts of the Members shall be
adjusted in accordance with Treasury Regulation §1.704-1(b)(2)(iv)(g) for
allocations of depreciation, depletion, amortization and gain and loss, as
computed for book purposes, with respect to such Company Property.
 
Section 1.3    Allocations of Net Income and Net Losses.
 
(a)           Allocation of Net Income.
 
After giving effect to Section 1.5 of this Exhibit, for any Fiscal Year, the
items of income, expense, gain and loss of the Company comprising Net Income
shall be allocated as follows:
 
(1)           First, to the Members who have previously been allocated Net
Losses pursuant to Section 1.5(f)(3) of this Exhibit in the reverse order (as to
the periods in which such Net Losses were allocated) and in the same ratio of
such Net Losses so allocated, until the aggregate Net Income allocated to each
such Member pursuant to this Section 1.3(a)(1)  is equal to the aggregate Net
Losses allocated to that Member pursuant to said Section 1.4(f)(3);
 
(2)           Second, to the Members who have previously been allocated Net
Losses pursuant to Section 1.5(f)(2) of this Exhibit in the reverse order (as to
the periods in which such Net Losses were allocated) and in the same ratio of
such Net Losses so allocated, until the aggregate Net Income allocated to each
such Member pursuant to this Section 1.3(a)(2)  is equal to the aggregate Net
Losses allocated to that Member pursuant to said Section 1.5(f)(2);

 
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(3)           Third, to the Members who have previously been allocated Net
Losses pursuant to Section 1.3(b)(3) of this Exhibit in the reverse order (as to
the periods in which such Net Losses were allocated) and in the same ratio of
Net Losses so allocated, until the aggregate Net Income allocated to each such
Member pursuant to this Section 1.3(a)(3) is equal to the aggregate Net  Losses
allocated to that Member pursuant to said Section 1.3(b)(3);
 
(4)           Fourth, to the Managing Member until the aggregate Net Income
allocated to the Managing Member pursuant to this Section 1.3(a)(4) equals the
(i) sum of (A) the amount of distributions for the current and all prior Fiscal
Years to the Managing Member pursuant to Section 4.1(c), (B) the additional
amount that currently would be required to be distributed to the Managing Member
pursuant to Section 4.1(c) of the Agreement to provide the Managing Member with
the 9% Managing Member Preferred Return and (C) the aggregate amount of Net
Losses allocated to the Managing Member pursuant to Section 1.3(b)(5) of this
Exhibit less (ii) the Managing Member's Capital Contributions;
 
(5)           Fifth, to the Non-Managing Member until the aggregate Net Income
allocated to the Non-Managing Member pursuant to this Section 1.3(a)(5) equals
the (i) sum of (A) the amount of distributions for the current and all prior
Fiscal Years to the Non-Managing Member pursuant to Section 4.1(d), (B) the
additional amount that currently would be required to be distributed to the
Non-Managing Member pursuant to Section 4.1(d) of the Agreement to provide the
Non-Managing Member with the 9% Non-Managing Member Preferred Return and (C) the
aggregate amount of Net Losses allocated to the Non-Managing Member pursuant to
Section 1.3(b)(4) of this Exhibit less (ii) the Non-Managing Member's Capital
Contributions;
 
(6)           Sixth, to the Members, in accordance with their respective
Membership Percentages until the aggregate Net Income allocated to each Member
pursuant to this Section 1.3(a)(6) equals (A) the amount of distributions for
the current and all prior Fiscal Years to said Member pursuant to Section
4.1(e), (B) the additional amount that currently would be required to be
distributed to said Member pursuant to Section 4.1(e) of the Agreement to
provide the Members with a 12% cumulative, non-compounding annual return upon
and in respect to the amount of their respective Unreturned Capital Contribution
and (C) the aggregate amount of Net Losses allocated to said Member pursuant to
Sections 1.3(b)(4) and (5) of this Exhibit;
 
(7)           Seventh, (i) 40% to Non-Managing Member, and (ii) 60% to Managing
Member, until the aggregate Net Income allocated to the Non-Managing Member
pursuant to this Section 1.3(a)(7) equals the sum of (i) the amount of
distributions to the Non-Managing Member for the current and all prior Fiscal
Years pursuant to Section 4.1(f) of the Agreement and (ii) the additional amount
which would be required to be distributed to the Non-Managing Member pursuant to
Section 4.1(f) to provide the Non-Managing Member with a 15% cumulative,
non-compounding annual return upon and in respect to the amount of their
respective Unreturned Capital Contribution and (iii) the aggregate amount of Net
Losses allocated pursuant to Sections 1.3(b)(4) and (5) of this Exhibit; and

 
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(8)           Thereafter, (i) 45% to the Non-Managing Member, and (ii) 55% to
the Managing Member.
 
(b)           Allocation of Net Losses.  After giving effect to Section 1.5  of
this Exhibit, for any Fiscal Year, the items of income, expense, gain and loss
of the Company comprising Net Losses shall be allocated as follows:
 
(1)           First, (i) 45% to Non-Managing Member, and (ii) 55% to Managing
Member, until the aggregate amount of Net Losses allocated pursuant to this
Section 1.3(b)(1) equals the aggregate amount of Net Income allocated pursuant
to Section 1.3(a)(8) of this Exhibit;
 
(2)           Second, (i) 40% to the Non-Managing Member, and (ii) 60% to
Managing Member, until the aggregate amount of Net Losses allocated pursuant to
this Section 1.3(b)(2) equals the aggregate amount Net Income allocated pursuant
to Section 1.3(a)(7) of this Exhibit;
 
(3)           Third, to the Members, pro rata in accordance with their
respective Membership Percentages until the aggregate amount of Net Losses
allocated pursuant to this Section 1.3(b)(3) equals the aggregate amount Net
Income allocated pursuant to Section 1.3(a)(6) of this Exhibit; and
 
(4)           Fourth, to the Non-Managing Member until the aggregate amount of
Net Losses allocated to the Non-Managing Member pursuant to this Section
1.3(b)(4) equals the aggregate amount Net Income allocated pursuant to Section
1.3(a)(5) of this Exhibit;
 
(5)           Fifth, to the Managing Member until the aggregate amount of Net
Losses allocated to the Managing Member pursuant to this Section 1.3(b)(5)
equals the aggregate amount Net Income allocated pursuant to Section 1.3(a)(4)
of this Exhibit;
 
(6)           Thereafter, to the Members, pro rata in accordance with their
respective Membership Percentages.
 
(c)           Interest paid or accrued in connection with Member Loans shall be
deducted in accordance with the appropriate U.S. income tax rules and shall be
deducted as a deductible partnership expense for purposes of calculating taxable
income, taxable loss, Net Profits and Net Losses.
 
Section 1.4    Allocations of Net Capital Gain and Net Capital Loss.
 
(a)           Allocation of Net Capital Gain.  After giving effect to
Section 1.5 and Section 1.3 of this Exhibit, for any Fiscal Year, the items of
income, expense, gain and loss of the Company comprising Net Capital Gain shall
be allocated as follows:
 
(1)           First, to the Members who have previously been allocated Net
Losses or Net Capital Loss pursuant to Section 1.5(f)(3) of this Exhibit in the
reverse order and in the same ratio of such Losses so allocated, until the
aggregate Net Capital Gain and Net Income allocated to each such Member pursuant
to this Section 1.4(a)(1) and Section 1.3(a)(1) is equal to the aggregate Net
Losses and Net Capital Loss allocated to that Member pursuant to said
Section 1.5(f)(3);

 
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(2)           Second, to the Members who have previously been allocated Net
Losses or Net Capital Loss pursuant to Section 1.5(f)(2) of this Exhibit in the
reverse order and in the same ratio of such Losses so allocated, until the
aggregate Net Capital Gain and Net Income allocated to each such Member pursuant
to this Section 1.4(a)(2) and Section 1.3(a)(2) is equal to the aggregate Net
Losses and Net Capital Loss allocated to that Member pursuant to said
Section 1.5(f)(2);
 
(3)           Third, to the Members who have previously been allocated Net
Capital Loss pursuant to Section 1.4(b)(8) of this Exhibit in the reverse order
and in the same ratio of Net Capital Loss so allocated, until the aggregate Net
Capital Gain allocated to each such Member pursuant to this Section 1.4(a)(5) is
equal to the aggregate Net Capital Loss allocated to that Member pursuant to
said Section 1.4(b);
 
(4)           Fourth, to the Managing Member until the aggregate Net Capital
Gain allocated to the Managing Member pursuant to this Section 1.4(a)(4) causes
the Adjusted Capital Account of the Managing Member to equal the amount, which,
if distributed pursuant to Section 4.2(d) of the Agreement on the date on which
such allocation is being made, would cause the Managing Member to achieve a 9%
cumulative, non-compounding annual return upon and in respect to the amount of
the Unreturned Capital Contribution of Managing Member taking into account the
aggregate amount distributed to the Managing Member pursuant to Sections 4.1 and
4.2 of the Agreement from the inception of the Company through the date on which
the allocation under this Section 1.4(a)(4) is being made;
 
(5)           Fifth, to the Non-Managing Member until the aggregate Net Capital
Gain allocated to the Non-Managing Member pursuant to this Section 1.4(a)(5)
causes the Adjusted Capital Account of the Non-Managing Member to equal the
amount, which, if distributed pursuant to Section 4.2(d) of the Agreement on the
date on which such allocation is being made, would cause the Managing Member to
achieve a 9% cumulative, non-compounding annual return upon and in respect to
the amount of the Unreturned Capital Contribution of Non-Managing Member taking
into account the aggregate amount distributed to the Non-Managing Member
pursuant to Sections 4.1 and 4.2 of the Agreement from the inception of the
Company through the date on which the allocation under this Section 1.4(a)(5) is
being made;
 
(6)           Sixth, to the Members, in accordance with their respective
Membership Percentages until the aggregate Net Capital Gain allocated to the
Members pursuant to this Section 1.4(a)(6) causes the Adjusted Capital Account
of each Member to equal the amount, which, if distributed pursuant to Section
4.2(g) of the Agreement on the date on which such allocation is being made,
would cause said Member to achieve a 12% cumulative, non-compounding annual
return upon and in respect to the amount of their respective Unreturned Capital
Contribution taking into account the aggregate amount distributed to said Member
pursuant to Sections 4.1 and 4.2 of the Agreement from the inception of the
Company through the date on which the allocation under this Section 1.4(a)(6) is
being made;

 
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(7)           Seventh, (i) 40% to Non-Managing Member, and (ii) 60% to Managing
Member, until the aggregate Net Capital Gain allocated to the Members pursuant
to this Section 1.4(a)(7) causes the Adjusted Capital Account of each Member to
equal the amount, which, if distributed pursuant to Section 4.2(h) of the
Agreement on the date on which such allocation is being made, would cause said
Member to achieve a 15% cumulative, non-compounding annual return upon and in
respect to the amount of their respective Unreturned Capital Contribution taking
into account the aggregate amount distributed to said Member pursuant to
Sections 4.1 and 4.2 of the Agreement from the inception of the Company through
the date on which the allocation under this Section 1.4(a)(7) is being made; and
 
(8)           Thereafter, (i) 45% to Non-Managing Member, and (ii) 65% to
Managing Member.
 
(b)           Allocation of Net Capital Loss.  After giving effect to
Section 1.5 and Section 1.3 of this Exhibit, for any Fiscal Year, the items of
income, expense, gain and loss of the Company comprising Net Capital Loss shall
be allocated as follows:
 
(1)           First, (x) 45% to Non-Managing Member, and (y) 65% to Managing
Member, in an amount equal to the excess, if any, of (i) the cumulative Net
Capital Gain allocated pursuant to Section 1.4(a)(8) of this Exhibit B for all
prior Fiscal Years over (ii) the cumulative Net Capital Loss allocated pursuant
to this Section 1.4(b)(1) of this Exhibit B for all prior Fiscal Years;
 
(2)           Second, (i) 40% to Non-Managing Member, and (ii) 60% to Managing
Member, in an amount equal to the excess, if any, of (i) the cumulative Net
Capital Gain allocated pursuant to Section 1.4(a)(7) of this Exhibit B for all
prior Fiscal Years over (ii) the cumulative Net Capital Loss allocated pursuant
to this Section 1.4(b)(2) of this Exhibit B for all prior Fiscal Years;
 
(3)           Third, to the Members, pro rata in accordance with their
respective Membership Percentages in an amount equal to the excess, if any, of
(i) the cumulative Net Capital Gain allocated pursuant to Section 1.4(a)(6) of
this Exhibit B for all prior Fiscal Years over (ii) the cumulative Net Capital
Loss allocated pursuant to this Section 1.4(b)(3) of this Exhibit B for all
prior Fiscal Years; and
 
(4)           Thereafter, to the Members, pro rata in accordance with their
respective Membership Percentages.
 
Section 1.5    Other Allocation Provisions.
 
(a)           Minimum Gain Chargeback.  Except as otherwise provided in Treasury
Regulations 1.704-2(f), notwithstanding anything to the contrary in this
Exhibit, if there is a net decrease in “partnership minimum gain” (within the
meaning of Treasury Regulation § 1.704-2(d)) for a Fiscal Year, then there shall
be allocated to each Member items of income and gain for such Fiscal Year equal
to such Member’s share of the net decrease in partnership minimum gain (within
the meaning of Treasury Regulation § 1.704-2(f), provided, that if the Company
has any discretion as to an exception set forth in Treasury Regulation §
1.704-2(f)(5), the Managing Member may exercise such discretion on behalf of the
Company).  In the event that the application of the minimum gain chargeback
requirement would cause a distortion in the economic arrangement among the
Members, the Managing Member may request that the Commissioner waive the minimum
gain chargeback requirement pursuant to Treasury Regulation §
1.704-2(f)(4).  Any Member’s share of Company Minimum Gain shall be determined
in accordance with Treasury Regulation §1.704-2(g)(1).  The foregoing is
intended to be a “minimum gain chargeback” provision as described in Treasury
Regulation § 1.704-2(f) and shall be interpreted and applied in all respects in
accordance with that Treasury Regulation.

 
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(b)           Member Minimum Gain Chargeback.  If during a Fiscal Year there is
a net decrease in partner nonrecourse debt minimum gain (as determined in
accordance with Treasury Regulation § 1.704-2(i)(3)), then, in addition to the
amounts, if any, allocated pursuant to the preceding paragraph, any Member with
a share of that partner nonrecourse debt minimum gain (determined in accordance
with Treasury Regulation §1.704-2(i)(5)) as of the beginning of the Fiscal Year
shall, subject to the exceptions in Treasury Regulation §1.704-2(i)(4)
(including the exceptions analogous to those in Treasury Regulation
§1.704-2(f)(2), (3), (4) and (5), provided, that if the Company has any
discretion as to the exception set forth in Treasury Regulation §1.704-2(f)(5)
as made applicable by Treasury Regulation §1.704-2(i)(4), the Managing Member
may exercise such discretion on behalf of the Company), be allocated items of
income and gain for the year (and, if necessary, for succeeding years) equal to
that Member’s share of the net decrease in the partner nonrecourse debt minimum
gain.  In the event that the application of the partner nonrecourse debt minimum
gain chargeback requirement would cause a distortion in the economic arrangement
among the Members, the Managing Member may request that the Commissioner waive
the minimum gain chargeback requirement pursuant to Treasury Regulation
§§1.704-2(f)(4) and 1.704-2(i)(4).  The foregoing is intended to be the
“chargeback of partner nonrecourse debt minimum gain” required by Treasury
Regulation §1.704-2(i)(4) and shall be interpreted and applied in all respects
in accordance with that Treasury Regulation.
 
(c)           Nonrecourse Deductions.  Notwithstanding anything to the contrary
in this Exhibit, nonrecourse deductions shall be allocated to the Members on a
pro rata basis, in proportion to their Membership Percentages.  Nonrecourse
deductions shall have the meaning set forth in Treasury Regulation
§1.704-2(b)(1).
 
(d)           Qualified Income Offset.  If, during any Fiscal Year, a Member
unexpectedly receives an adjustment, allocation or distribution described in
Treasury Regulation § 1.704-1(b)(2)(ii)(d)(4), (5) or (6), which causes or
increases a deficit balance in such Member’s Adjusted Capital Account, there
shall be allocated to such Member items of income and gain (consisting of a pro
rata portion of each item of Company income (including gross income, and gain
for such year), in an amount and manner sufficient to eliminate such deficit as
quickly as possible.  The foregoing is intended to be a “qualified income
offset” provision as described in Treasury Regulation § 1.704-1(b)(2)(ii)(d) and
shall be interpreted and applied in all respects in accordance with that
Treasury Regulation.  A Member’s “Adjusted Capital Account,” at any time, shall
equal the Member’s Capital Account at such time (i) increased by the sum of (A)
the amount of the Member’s share of partnership minimum gain as defined in
Treasury Regulation §1.704-2(g)(1) and (3), (B) the amount of the Member’s share
of partner nonrecourse debt minimum gain as defined in Treasury Regulation
§1.704-2(i)(5), and (C) any amount of the deficit balance in its Capital Account
the Member is obligated to restore on liquidation of the Company, and (ii)
decreased by reasonably expected adjustments, allocations and distributions
described in Treasury Regulation §§1.704-1(b)(2)(ii)(d)(4), (5) or (6).  The
foregoing is intended to comply with the provisions of Treasury Regulation
Sections 1.704-1(b)(2)(ii)(d) and shall be interpreted and applied in all
respects in accordance with that Treasury Regulation.

 
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(e)           Member Nonrecourse Deductions.  Notwithstanding anything to the
contrary in this Exhibit, to the extent required by Treasury Regulation
§1.704-2(i), any items of income, gain, loss or deduction of the Company that
are attributable to a nonrecourse debt of the Company that constitutes
partner nonrecourse debt as defined in Treasury Regulation §1.704-2(b)(4) shall
be allocated in accordance with the provisions of Treasury Regulation
§1.704-2(i).  This Section 1.5(e) is intended to satisfy the requirements of
Treasury Regulation §1.704-2(i) and shall be interpreted and applied in a manner
consistent therewith.
 
(f)           Loss Limitation.  Notwithstanding anything to the contrary in
Section 1.3(b) of this Exhibit,
 
(1)           The Net Losses allocated pursuant to Section 1.3(b) of this
Exhibit to any Member for any Fiscal Year shall not exceed the maximum amount of
Net Losses that may be allocated to such Member without causing such Member to
have a negative balance in its Adjusted Capital Account at the end of such
Fiscal Year.
 
(2)           If some but not all of the Members would have deficits in their
Adjusted Capital Accounts as a consequence of allocations of Net Losses pursuant
to Section 1.3(b) of this Exhibit, the limitations set forth in this Section
1.5(f)(2) shall be applied by allocating Net Losses pursuant to this Section
1.5(f)(2) only to those Members who would not have a deficit in their Adjusted
Capital Accounts as a consequence of receiving such an allocation of Net Losses
(the allocation of such Net Losses among those Members to be in proportion to
their aggregate Capital Contributions to the Company).
 
(3)           If no other Member may receive an additional allocation of Net
Losses pursuant to Section 1.5(f)(2) of this Exhibit, such additional Net Losses
not allocated pursuant to said Section 1.5(f)(2) shall be allocated solely to
those Members who bear the economic risks for such additional Net Losses within
the meaning of Section 704(b) of the Code and the Treasury Regulations
thereunder.
 
(g)           Reversal of Regulatory Allocations.  To the extent that any item
of income, gain, loss or deduction has been specially allocated pursuant to
paragraphs (a), through (e) of this Section 1.5 and such allocation is
inconsistent with the way in which the same amount otherwise would have been
allocated under Section 1.3 of this Exhibit, subsequent allocations under said
Section 1.3 shall be made, to the extent possible and without duplication in a
manner consistent with the Treasury Regulations under Code Section 704(b), which
negate as rapidly as possible the effect of all such inconsistent allocations
under paragraphs (a) through (e).  This Section 1.5(g) shall be interpreted and
applied in such a manner and to such extent as is reasonably necessary to
eliminate, as quickly as possible, permanent economic distortions that would
otherwise occur as a consequence of the allocations pursuant to paragraphs (a)
through (e) of this Section 1.5, in the absence of this Section 1.5(g).
 
(h)           Distributions of Property.  Solely for the purpose of adjusting
the Capital Accounts of the Members, and not for tax purposes, if any property
is distributed in kind to any Member, the difference between its fair market
value (as determined in the reasonable judgment of the Managing Member) and its
book value at the time of distribution shall be treated as gain or loss
recognized by the Company and allocated pursuant to the provisions of Section
1.3 of this Exhibit.
 
 
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(i)           Transfer of Membership Interest.  Except to the extent otherwise
required by the Code and Treasury Regulations, if a Membership Interest or part
thereof is transferred in any Fiscal Year, the items of income, gain, loss,
deduction and credit allocable to such Membership Interest or part thereof, as
the case may be, for such Fiscal Year shall be allocated to the person who held
the interest on the date such items were realized or incurred by the Company as
if the books of the Company had been closed, and the partnership tax year had
ended, immediately after such transfer.  At the request of the transferee, the
Managing Member may, in its sole discretion, make the election provided for in
Code Section 754.
 
(j)           Order of Allocations.  Any allocations made pursuant to this
Exhibit shall be made in the following order of priority:
 
(i)           Section 1.5(a);
 
(ii)          Section 1.5(b);
 
(iii)         Section 1.5(d);
 
(iv)         Section 1.5(e);
 
(v)          Section 1.5 (c);
 
(vi)         Section 1.5(g); and
 
(vii)        Section 1.3 as modified by Section 1.5(f).
 
(k)           Liquidation of Company.  In the event of a liquidation of the
Company or any Member’s Interest in the Company, as defined in Treasury
Regulation §1.704-1(b)(2)(ii)(g):  (1) Notwithstanding anything to the contrary
that may be expressed or implied in this Exhibit (except paragraphs (a) through
(j) of this Section 1.5), allocations of income, gain, loss, deduction and
credit shall be allocated in a manner so that distributions to be made in
connection with such liquidation shall be made in accordance with the positive
Capital Account balances of the Member(s) entitled to receive such
distributions, as described in Treasury Regulation Section
1.704-(1)(b)(2)(ii)(b), with the Code and other sections of the Treasury
Regulations and, to the extent possible, in an amount equal to the aggregate net
distributions that each such Member would have received pursuant to Article 4 of
this Agreement; and (2) distributions made in accordance with a liquidation
described in provision (1) hereof, shall, to the extent possible, be made within
the time periods specified by Treasury Regulation §1.704-1(b)(2)(ii)(b).
 
Section 1.6    Allocations for Income Tax Purposes.  These provisions shall be
applied as if all distributions and allocations were made at the end of the
Fiscal Year.  Where any provision depends on the Capital Account of any Member,
that Capital Account shall be determined after the operation of all preceding
provisions for the year.  The income, gains, losses, deductions and credits of
the Company for federal, state and local income tax purposes shall be allocated
in the same manner as the corresponding items entering into the computation of
Net Income and Net Losses were allocated pursuant to Sections 1.3 , 1.4 and 1.5
of this Exhibit; provided that solely for federal, local and state income and
franchise tax purposes and not for book or Capital Account purposes, income,
gain, loss and deduction shall be allocated, other than with respect to the tax
basis of property, as follows:  in the case of property contributed in kind and
other property to the extent applicable, in accordance with the principles of
Code Sections 704(b) and 704(c) and the Treasury Regulations promulgated under
such Code Sections.

 
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Section 1.7    Distributions of Nonrecourse Liability Proceeds.  If during a
Fiscal Year the Company makes a distribution to any Member that is allocable to
the proceeds of any nonrecourse liability of the Company that is allocable to an
increase in Company Minimum Gain pursuant to Treasury Regulation §1.704-2(h),
then the Company shall elect, to the extent permitted by Treasury Regulation
§1.704-2(h)(3), to treat such distribution as a distribution that is not
allocable to an increase in Company Minimum Gain.
 
ARTICLE II
MISCELLANEOUS MATTERS
 
Section 2.1    Preparation of Records and Returns; Tax Matters Member. All
federal, state and local income tax returns, and financial and accounting books
and records of the Company shall be prepared under the direction of the Managing
Member in its sole and absolute discretion, and all tax audits and litigation
shall be conducted under the direction of the Managing Member in its sole and
absolute discretion. The determination of whether the Company shall make
available elections for accounting or federal, state or local income tax
purposes shall be made by the Managing Member in its sole and absolute
discretion. The Managing Member is hereby designated as the “tax matters
partner” for the Company (as such term is defined in Section 6231(a)(7) of the
Code). The tax matters partner shall promptly notify Members who do not qualify
as “notice partners” within the meaning of Code Section 6231(a)(8) at the
beginning and completion of an administrative proceeding at the Company level
promptly upon such notice being received by the tax matters partner.
 
Section 2.2    Method of Making Contributions. References to contributions of
property appearing in Article 1 of this Exhibit are included for the purpose of
conforming to the requirements set forth in the Regulations and shall not give
rise to an inference that contributions may be made in a form other than cash
except as set forth in the Operating Agreement or any other written agreement of
the Members.