Exhibit 10.17

 

SECOND AMENDED AND RESTATED

 

AGREEMENT OF LIMITED PARTNERSHIP

 

OF

 

CIM URBAN PARTNERS, L.P.

 

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Table of Contents

 

 

 

Page

 

 

 

ARTICLE I

 

 

 

DEFINITIONS AND RULES OF CONSTRUCTION

 

 

 

1.01.

Definitions

1

 

 

 

1.02.

Rules of Construction

15

 

 

 

ARTICLE II

 

 

 

FORMATION

 

 

 

2.01.

Formation

15

 

 

 

2.02.

Name

15

 

 

 

2.03.

Mailing Address and Place of Business

15

 

 

 

2.04.

Registered Office

16

 

 

 

2.05.

Term

16

 

 

 

2.06.

Withdrawal of Original Limited Partner

16

 

 

 

ARTICLE III

 

 

 

PURPOSE AND BUSINESS

 

 

 

3.01.

Business

16

 

 

 

3.02.

Authorized Activities

17

 

 

 

3.03.

Prohibited Activities

19

 

 

 

3.04.

Title to Fund Property

20

 

 

 

3.05.

Investment Policies

20

 

i

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Table of Contents

 

(continued)

 

 

 

Page

 

 

 

ARTICLE IV

 

 

 

THE FUND INTERESTS AND CAPITAL

 

 

 

4.01.

General Partner

20

 

 

 

4.02.

Limited Partners

20

 

 

 

4.03.

Capital Contributions

21

 

 

 

4.04.

Intentionally Omitted

21

 

 

 

4.05.

Interest

21

 

 

 

4.06.

Capital Account

22

 

 

 

4.07.

Withdrawal of Capital Contributions

22

 

 

 

4.08.

Restoration of Negative Capital Accounts

22

 

 

 

4.09.

Subsequent Closings

22

 

 

 

ARTICLE V

 

 

 

ALLOCATIONS OF PROFITS AND LOSSES AND DISTRIBUTIONS TO PARTNERS

 

 

 

5.01.

Allocation of Profits and Losses

23

 

 

 

5.02.

Distributions

24

 

 

 

5.03.

Form of Distributions

26

 

 

 

ARTICLE VI

 

 

 

RIGHTS AND OBLIGATIONS OF THE GENERAL PARTNER

 

 

 

6.01.

Management

26

 

ii

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Table of Contents

 

(continued)

 

 

 

Page

 

 

 

6.02.

Authority

27

 

 

 

6.03.

Limitations on the General Partner

28

 

 

 

6.04.

Business with Affiliates

29

 

 

 

6.05.

Liability for Acts and Omissions

31

 

 

 

6.06.

Expenses

34

 

 

 

6.07.

Organizational Expenses and Investment Management Fees

35

 

 

 

6.08.

Breakup Fees

36

 

 

 

6.09.

Directors’ Fees

36

 

 

 

6.10.

Key Persons

36

 

 

 

6.11.

Other Activities

37

 

 

 

ARTICLE VII

 

 

 

ASSIGNMENTS, WITHDRAWAL AND REMOVAL OF THE GENERAL PARTNER

 

 

 

7.01.

Assignment or Withdrawal by the General Partner

37

 

 

 

7.02.

Voluntary Assignment or Withdrawal of the General Partner; Acquisition of the
General Partner

37

 

 

 

7.03.

Bankruptcy of the General Partner

37

 

 

 

7.04.

Removal of the General Partner

39

 

 

 

7.05.

Obligations of a Prior General Partner

39

 

 

 

7.06.

Successor General Partner

40

 

iii

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Table of Contents

 

(continued)

 

 

 

Page

 

 

 

ARTICLE VIII

 

 

 

RIGHTS AND OBLIGATIONS OF THE REIT

 

 

 

8.01.

Management of the Fund

40

 

 

 

8.02.

Limitation on Liability

41

 

 

 

8.03.

Power of Attorney

41

 

 

 

8.04.

Waiver of Action for Partition

42

 

 

 

8.05.

Confidentiality

42

 

 

 

ARTICLE IX

 

 

 

VOLUNTARY TRANSFER OF THE REIT’S INTEREST

 

 

 

9.01.

Transfers

44

 

 

 

9.02.

Substitute Limited Partner

44

 

 

 

9.03.

Involuntary Withdrawal by the REIT

44

 

 

 

9.04.

Partial Redemption of the REIT’s Interest

45

 

 

 

ARTICLE X

 

 

 

DISSOLUTION AND LIQUIDATION; CONTINUATION

 

 

 

10.01.

Dissolution

45

 

 

 

10.02.

Liquidation

45

 

iv

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Table of Contents

 

(continued)

 

 

 

Page

 

 

 

ARTICLE XI

 

 

 

REPRESENTATIONS AND WARRANTIES OF THE GENERAL PARTNER

 

 

 

ARTICLE XII

 

 

 

ACCOUNTING AND REPORTS

 

 

 

12.01.

Books and Records

47

 

 

 

12.02.

Tax Matters Partner

48

 

 

 

12.03.

Reports to Partners

49

 

 

 

12.04.

Safekeeping of Funds

50

 

 

 

ARTICLE XIII

 

 

 

AMENDMENTS AND MEETINGS

 

 

 

13.01.

Amendment Procedure

50

 

 

 

13.02.

Exceptions

51

 

 

 

13.03.

Meetings and Voting

52

 

 

 

ARTICLE XIV

 

 

 

ADVISORY COMMITTEE

 

 

 

14.01.

Selection of the Advisory Committee

52

 

 

 

14.02.

Meetings of and Action by the Advisory Committee

53

 

 

 

14.03.

Annual Meeting of Advisory Committee

54

 

 

 

14.04.

Functions of the Advisory Committee

54

 

v

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Table of Contents

 

(continued)

 

 

 

Page

 

 

 

14.05.

Valuations

56

 

 

 

ARTICLE XV

 

 

 

CERTAIN ERISA MATTERS

 

 

 

15.01.

Operating Company

58

 

 

 

ARTICLE XVI

 

 

 

MISCELLANEOUS

 

 

 

16.01.

Applicable Law

58

 

 

 

16.02.

Binding Agreement; Severability

59

 

 

 

16.03.

Entire Agreement

59

 

 

 

16.04.

Record of Limited Partners

59

 

 

 

16.05.

No Bill for Partnership Accounting

59

 

 

 

16.06.

Counterparts

59

 

 

 

16.07.

No Third Party Rights

59

 

 

 

16.08.

Services to the Fund

59

 

 

 

16.09.

Notices

60

 

 

SCHEDULE A

PARTNERS AND CAPITAL COMMITMENTS

A-1

 

 

 

SCHEDULE B

MAXIMUM PROPERTY MANAGEMENT, DEVELOPMENT MANAGEMENT AND LEASING BROKERAGE FEES

B-1

 

 

 

SCHEDULE C

INITIAL INVESTMENTS

C-1

 

vi

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Table of Contents

 

(continued)

 

 

 

Page

 

 

 

SCHEDULE D

CALCULATION OF INCENTIVE DISTRIBUTION

D-1

 

 

 

EXHIBIT A

FORM OF INVESTMENT MANAGEMENT AGREEMENT

Exh. A-1

 

 

 

EXHIBIT B

FORM OF GP ACQUISITION AGREEMENT

Exh. B-1

 

vii

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SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF

 

CIM URBAN PARTNERS, L.P.

 

THIS SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP is made as of
the 22nd day of December, 2005 by and among CIM Urban Partners GP, Inc., a
California corporation, as the General Partner and CIM Urban REIT, LLC, a
Delaware limited liability company, as the Limited Partner.  Each capitalized
term utilized herein shall have the meaning ascribed to such term in Article I
hereof.

 

RECITALS

 

WHEREAS, the General Partner and Avraham Shemesh, as the original limited
partner (the “Original Limited Partner”), formed this limited partnership
pursuant to an Agreement of Limited Partnership dated as of February 4, 2005
(the “Original Agreement”) and  a Certificate of Limited Partnership in respect
thereof was filed in the Office of the Secretary of State of Delaware on
February 4, 2005 (the “Certificate of Limited Partnership”);

 

WHEREAS, the Partners amended and restated the terms and provisions of the
Original Agreement pursuant to the Amended and Restated Agreement of Limited
Partnership of the Fund dated as of May 20, 2005 (the “First Amended and
Restated Agreement”); and

 

WHEREAS, the Partners desire to amend and restate the terms and provisions of
the First Amended and Restated Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto, intending to be legally bound hereby, agree to amend and restate
the First Amended and Restated Agreement in its entirety as follows:

 

ARTICLE I

 

DEFINITIONS AND RULES OF CONSTRUCTION

 

1.01.       Definitions.  The following terms have the definitions hereinafter
indicated whenever used in this Agreement with initial capital letters:

 

“AAA” shall have the meaning set forth in Section 14.05(d) hereof.

 

“Act” shall mean the Delaware Revised Uniform Limited Partnership Act, as it may
be amended from time to time or any successor statute.

 

“Adjustment Date” shall have the meaning specified in Section 14.04(b) hereof.

 

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“Adjusted Fair Value” shall mean (x) with respect to each Fund Investment that
is (I) a direct or indirect equity interest in one or more real estate assets or
(II) a direct or indirect interest in a mezzanine loan made to an entity that
holds directly or indirectly interests in one or more real estate assets, the
fair market value of the interest represented by such Fund Investment, on an
unleveraged basis (i.e., assuming that such Fund Investment and its underlying
real estate asset(s) are unencumbered by any debt)  (as determined in accordance
with Section 14.05 hereof); (y) with respect to any Permitted Investment, the
Cost of such Permitted Investment; and (z) with respect to any other Fund
Investment (that is not described in either clause (x) or clause (y) of this
definition), the Fair Value of such Fund Investment (as determined in accordance
with Section 14.05 hereof).

 

“Advisory Committee” shall have the meaning specified in Section 14.01 hereof.

 

“Affiliate” shall mean when used with reference to a specified Person at a
specified time, (a) any Person that, at such specified time, directly or
indirectly through one or more intermediaries controls or is controlled by or is
under common control with the specified Person, (b) any Person who, at such
specified time, is (i) an officer or director of the specified Person, or
(ii) an Immediate Family Relative of, or a trust created by or established
primarily for the benefit of, the specified Person, or (c) any Person which, at
such specified time, directly or indirectly, is the beneficial owner of a
majority of the voting ownership interests of the specified Person, which
definition shall, as applied to the General Partner, specifically include the
Investment Manager and the constituent members of the General Partner, and any
manager, member, shareholder, officer or director of the General Partner or the
Investment Manager.  Notwithstanding the foregoing, the REIT shall not be
considered an Affiliate of the General Partner.

 

“Aggregate Tax Liability” shall have the meaning specified in
Section 5.02(d) hereof.

 

“Agreement” shall mean this Second Amended and Restated Agreement of Limited
Partnership, as it may be amended from time to time.

 

“Bankruptcy” shall mean for purposes of this Agreement, the institution by a
referenced Person of a voluntary case in bankruptcy, or the voluntary taking
advantage by a referenced Person of any bankruptcy or insolvency law, or the
entry of an order, judgment or decree by a court of competent jurisdiction which
continues in effect and unstayed for sixty (60) days of such Person as bankrupt
or insolvent, or the filing by such Person of any petition or answer seeking for
itself any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, or the filing by such Person of any answer admitting (or the failure
by such Person to make a required responsive pleading to) the material
allegations of a petition filed against such Person in any such proceeding or
the seeking or consenting to or acquiescence in the judicial appointment of any
trustee, fiscal agent, receiver or liquidator of such Person or of all or any
substantial part of its properties or, if within ninety (90) days after the
commencement of an involuntary case or action against such Person seeking any
bankruptcy, reorganization, arrangement, composition,

 

2

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readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation, the failure of such case or action to have
been dismissed or all orders in proceedings thereunder affecting the operations
or the business of such Person stayed, or if the stay of any such order or
proceeding thereafter shall be set aside, or, if within ninety (90) days after
the judicial appointment without the consent or acquiescence of such Person of
any trustee, fiscal agent, receiver or liquidator of such Person or of all or
any substantial part of its properties or the insolvency of such Person, such
appointment shall not have been vacated, or the making by such Person of a
general assignment for the benefit of creditors or the admission in writing by
such Person that its assets are insufficient to pay its liabilities as they come
due.

 

“Benefit Plan Investor” shall have the meaning specified in 29 C.F.R.
Section 2510.3-101.

 

“Business Day” shall mean any day on which banks located in New York, New York
and Los Angeles, California are not required or authorized to close.

 

“Capital Account” shall mean the account maintained by the Fund for each Partner
as provided in Section 4.06 of this Agreement.

 

“Capital Commitment” shall mean, with respect to each Partner, the amount set
forth on Schedule A hereto opposite its name, as such schedule may be amended
from time to time pursuant to the terms hereof.

 

“Capital Contribution” shall mean, with respect to each Partner, the total
amount of cash contributed (or deemed contributed pursuant to Section 4.03
hereof) by such Partner to the Fund pursuant to the terms of this Agreement. 
Notwithstanding the foregoing, any amounts returned by a Partner pursuant to
Section 8.02(b) or contributed by a Partner pursuant to Section 5.02(g) or
Section 5.02(h) shall not, except for purposes of Section 4.06(a) hereof, be
considered a Capital Contribution.

 

“Cause” shall mean the commission by the General Partner of an action, or the
omission by the General Partner to take an action, if such Commission or
omission constitutes willful misconduct, fraud, willful disregard for the
General Partner’s duties to the Fund or the REIT, gross negligence (determined
in the context of the Standard of Care), or the conviction of the General
Partner or any Principal, who is still Affiliated with the General Partner, of a
felony or a securities law violation, or a material breach of this Agreement by
the General Partner that has not been cured within ten (10) Business Days after
notice to the General Partner, with respect to a monetary breach, or thirty (30)
days after notice to the General Partner, with respect to a non-monetary breach
and, in the case of a commission or omission that constitutes a non-monetary
breach of this Agreement that cannot be cured, that (i) results in a material
detriment to the Fund or the REIT (i.e., causing damages in excess of $500,000)
or (ii) is part of a course of conduct which is more than negligibly injurious
to the Fund or the REIT; provided, however, that in the event that a
non-monetary breach cannot reasonably be cured within thirty (30) days despite
the General Partner’s diligent efforts to do so, the cure period for such breach
will be extended for up to an additional ninety (90) days, but only for so long
as the General Partner’s

 

3

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efforts to cure such breach remain diligent and continuous.  Notwithstanding the
fact that a commission or omission that constitutes a material breach of this
Agreement that cannot be cured, may not constitute Cause hereunder, such
determination shall have no effect on any liability which the General Partner
may have with respect to such act or omission pursuant to Section 6.05.

 

“Certificate of Limited Partnership” shall have the meaning specified in the
Recitals hereof.

 

“Class A Capital Contributions” shall mean the total amount of cash contributed
by the Class A Members to the REIT pursuant to the terms of the REIT LLC
Agreement.  Notwithstanding the foregoing, any amounts contributed by a Class A
Member pursuant to the last paragraph of  Section 5.01 of the REIT LLC Agreement
or returned by a Class A Member pursuant to Section 8.02(b) of the REIT LLC
Agreement shall not be included in the Class A Capital Contributions.

 

“Class A Member” shall mean any member of the REIT that holds Class A Membership
Units.

 

“Class A Membership Unit” shall mean a Class A Membership Unit (as defined in
the REIT LLC Agreement) of the REIT.

 

“Class A Percentage Interest” shall have the meaning specified in the REIT LLC
Agreement.

 

“Closing” shall mean the First Closing or a Subsequent Closing, as the case may
be.

 

“Code” shall mean the Internal Revenue Code of 1986, as amended, and any
successor statutory provisions.

 

“Consent” shall mean either the written consent of a Person, or the affirmative
vote of such Person at a meeting duly called and held pursuant to this
Agreement, as the case may be, to do the act or thing for which the Consent is
solicited, or the act of granting such Consent, as the context may require. 
Reference to the Consent of a stated percentage of the Class A Percentage
Interests of the Class A Members means the Consent of a number of the Class A
Members not then in default under the REIT LLC Agreement whose combined Class A
Percentage Interests represent at least such stated percentage of the total
Class A Percentage Interests of the Class A Members not then in default under
the REIT LLC Agreement.

 

“Cost” shall mean the overall cost of a Fund Investment, which shall include,
without limitation, the gross purchase price thereof (including any purchase
money debt, debt assumed, or debt taken subject to) and all costs and expenses
(including legal fees, transfer taxes, title insurance premiums and brokerage
commissions) incurred in the acquisition thereof.

 

4

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

 

“Derivatives” shall mean a financial instrument, product or index which is not a
direct investment, but instead derives its economic characteristics from the
economic characteristics (or changes in the value) of one or more direct or
derivative financial instruments, products or indexes.  By way of example,
Derivatives include interest rate, currency or exchange rate hedges as well as
total return swaps.

 

“Directors’ Fees” shall have the meaning specified in Section 6.09 hereof.

 

“Disposition Period” means the period commencing on the earlier of (x) the tenth
anniversary of the Final Closing Date and (y) the effective date of the
conversion of the Interest of the General Partner to that of a Special Limited
Partner pursuant to Section 7.03(b) or Section 7.04(b) hereof (or such earlier
date as the General Partner may elect in its sole discretion), provided that a
Public Transaction has not occurred prior to such tenth anniversary or such
earlier date elected by the General Partner, and ending on the date on which the
aggregate Cost of the remaining Fund Investments ceases to equal or exceed 10%
of the aggregate Capital Commitments of the Partners.

 

“Distributable Proceeds” shall mean (x) until the commencement of the
Disposition Period, the excess of (i) the sum of Net Disposition Profits plus
Operating Income plus any amounts recontributed by the General Partner to the
Fund in repayment of Tax Distributions plus any other amounts which the General
Partner determines, in its discretion, to distribute to the Partners over
(ii) the sum of any amounts determined by the General Partner, in its
discretion, to be necessary (a) to pay or establish reserves for, or otherwise
accrue for, Fund Expenses, amounts payable in respect of Indebtedness of the
Fund and its subsidiaries and/or any other liabilities of the Fund and its
subsidiaries or (b) to establish reserves on account of distributions that may
be required for the REIT to satisfy the requirements to qualify as a “real
estate investment trust” under the Code in future periods and (y) from and after
the commencement of the Disposition Period (including during the Final
Liquidation Period), the excess of (i) the sum of all amounts received by the
Fund in cash (including any amounts recontributed by the General Partner to the
Fund in repayment of Tax Distributions) plus all amounts released by the General
Partner, in its discretion, from reserves established in accordance with clause
(x)(ii) or clause (y)(ii) of this definition, other than amounts determined by
the General Partner, in its discretion, to be necessary for reinvestments to
enhance, improve, preserve or protect interests or assets directly or indirectly
owned by the Fund over (ii) any

 

5

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amounts determined by the General Partner, in its discretion to be necessary
(a) to pay or establish reserves for, or otherwise accrue for, Fund Expenses,
amounts payable in respect of Indebtedness of the Fund and its subsidiaries
and/or any other liabilities of the Fund and its subsidiaries or (b) to
establish reserves on account of distributions that may be required for the REIT
to satisfy the requirements to qualify as a “real estate investment trust” under
the Code in future periods.

 

“Employees” shall have the meaning specified in Section 7.02(a) hereof.

 

“ERISA” shall mean the U.S. Employee Retirement Income Security Act of 1974, as
amended.

 

“Expert” shall mean an independent MAI firm or MAI individual with experience in
appraising commercial real property interests of a type similar to the
asset(s) to be appraised or the asset for which the market rate for services is
being determined, which Expert, in either such case, shall be selected in
accordance with the procedures described in the appropriate sections of this
Agreement.

 

“Fair Value” shall mean (i) for any Fund Investment other than a Permitted
Investment, the fair market value thereof as determined in accordance with
Section 14.05 hereof, (ii) for any Permitted Investment, the Cost of such
Permitted Investment, and (iii) for any other asset or the Class A Membership
Units, the fair market value thereof as determined by the General Partner.

 

“Final Closing Date” shall mean June 30, 2006.

 

“Final Contribution Date” shall mean the first anniversary of the Final Closing
Date.

 

“Final Liquidation Period” shall mean any time after the expiration of the
Disposition Period.

 

“First Amended and Restated Agreement” shall have the meaning specified in the
Recitals hereof.

 

“First Closing” shall mean the first date that any Person’s subscription for
Class A Membership Units is accepted by the director of the REIT.

 

“Fiscal Year” shall mean the taxable year of the Fund which, except in the case
of a short taxable year, shall be the calendar year.

 

“Fund” shall mean the limited partnership formed pursuant to the Original
Agreement (as the same may be amended and/or restated from time to time) and the
Certificate of Limited Partnership.

 

6

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“Fund Expenses” shall mean the sum of (i) Organizational Expenses (but only to
the extent that the Fund is obligated to reimburse the General Partner and its
Affiliates for such expenses) and (ii) Operating Expenses; it being understood
that any expenses incurred by the Fund will be classified as one of the
foregoing types of expenses.

 

“Fund Investment” shall mean any Investment held by the Fund from time to time.

 

“Fund’s Percentage” shall have the meaning specified in Section 14.05(b) hereof.

 

“General Partner” shall mean CIM Urban Partners GP, Inc., or any other Person
who becomes a successor general partner pursuant to the terms hereof.

 

“GP Acquisition Agreement” shall mean the GP Acquisition Agreement between the
REIT and CIM Urban Partners GP, Inc., substantially in the form attached as
Exhibit B, as the same may be amended in accordance with the terms thereof.

 

“Gross Asset Value” shall mean, with respect to any asset of the Fund, such
asset’s adjusted basis for U.S. federal income tax purposes, except that in the
discretion of the General Partner, the Gross Asset Value of each of the Fund
assets shall be adjusted to equal their respective gross fair market value, as
reasonably determined by the General Partner, immediately prior to the following
events:

 

(i)            a Capital Contribution (other than a de minimis Capital
Contribution) to the Fund by a new or existing Partner as consideration for an
Interest or an increased Interest;

 

(ii)           the distribution by the Fund to a Partner of more than a de
minimis amount of the Fund property as consideration for the redemption of an
Interest; and

 

(iii)          the liquidation of the Fund within the meaning of Regulations
§ 1 .704-1 (b)(2)(ii)(g) (including, for this purpose, the commencement of the
Final Liquidation Period).

 

The Gross Asset Value of each of the Fund assets distributed to any Partner
shall be the gross fair market value of such asset as reasonably determined by
the General Partner as of the date of distribution.

 

At all times, Gross Asset Values shall be adjusted by any Depreciation taken
into account with respect to the Fund’s assets for purposes of computing Profits
and Losses.  Gross Asset Values shall be further adjusted to reflect adjustments
to Capital Accounts pursuant to Section 1.704-1 (b)(2)(iv)(m) of the Regulations
to the extent not otherwise reflected in adjustments to Gross Asset Values. Any
adjustment to the Gross Asset Values of the Fund property shall require an
adjustment to the Partners’ Capital Accounts as described in the definition of
“Capital Account.”

 

7

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“Gross Contract Price” shall mean, with respect to any project, all costs to
develop the project, including all hard costs and soft costs (including payments
to general contractors, any other payments to contractors and/or professionals
retained separately from general contractors, and costs and fees for legal
services incurred to develop the project).  Gross Contract Price shall not
include any land costs, building acquisition costs or finance costs.

 

“Immediate Family Relative” shall mean an individual’s issue (including by
adoption), siblings, parents, first cousins, aunts, uncles, grandparents,
current household partners and current or former spouses.

 

“Incentive Distribution” shall have the meaning set forth in Schedule D attached
hereto.

 

“Indebtedness” shall mean with respect to any Person (i)  all indebtedness
(whether secured or unsecured) of such Person for borrowed money or for the
deferred purchase price of property, goods or services, including reimbursement,
and all other obligations contingent or otherwise of such Person with respect to
surety bonds, letters of credit and bankers’ acceptances, whether or not
matured, and hedges and other derivative contracts and financial instruments,
(ii) all obligations of such Person evidenced by notes, bonds, debentures, loan
agreements, reimbursement agreements or similar instruments (including senior,
mezzanine and junior borrowings, which may provide the lender with a
participation in profits), (iii) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (iv) all capital lease obligations of such Person,
(v) all indebtedness referred to in clause (i), (ii), (iii), or (iv) above
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any lien upon or in property
(including accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness,
and (vi) all Indebtedness of others guarantied by such Person or for which such
Person has otherwise assumed responsibility on, before or after the date such
Indebtedness is incurred.

 

“Indemnified Liabilities” shall have the meaning specified in
Section 6.05(a) hereof.

 

“Indemnified Parties” shall have the meaning specified in
Section 6.05(a) hereof.

 

“Initial Period” shall have the meaning specified in Section 5.01 hereof.

 

“Interest” shall mean the ownership interest of a Partner in the Fund at any
particular time, including the right of such Partner to any and all benefits to
which such Partner may be entitled as provided in this Agreement and in the Act,
together with the obligations of such Partner to comply with all the terms and
provisions of this Agreement and of the Act.

 

8

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“Investment” shall mean any investment, whether in the form of debt, equity or
otherwise, in a corporation, partnership, trust, limited liability company or
other entity, or in any other asset or a group of assets, including Permitted
Investments.

 

“Investment Company Act” shall mean the U.S. Investment Company Act of 1940, as
amended.

 

“Investment Management Agreement” shall mean the Investment Management Agreement
between the Fund and the Investment Manager, substantially in the form attached
as Exhibit A.

 

“Investment Management Fee” shall have the meaning specified in Section 6.07(b)
hereof.

 

“Investment Manager” shall mean CIM Urban REIT Management, Inc. or such other
entity affiliated with the General Partner which is acting as Investment Manager
pursuant to the Investment Management Agreement entered into pursuant to
Section 6.01(b) hereof.

 

“IRS” shall mean the U.S. Internal Revenue Service, a branch of the U.S.
Treasury Department or any successor thereto.

 

“Liens” shall mean, collectively, any mortgages, pledges, security interests,
hypothecations, encumbrances or other liens.

 

“Limited Partner” shall mean the REIT and any Substitute Limited Partner(s)
admitted to the Fund in accordance with the terms of this Agreement and any
Special Limited Partner.

 

“Liquidator” shall mean the General Partner, or if (i) the General Partner’s
withdrawal or Bankruptcy caused the dissolution of the Fund or (ii) the Fund is
dissolved pursuant to Section 6.08 hereof, such other Person who may be
appointed by the REIT (provided that no such appointment shall be effective
unless it is Consented to by a majority of the Class A Percentage Interests of
the Class A Members), who shall be responsible for taking all action necessary
or appropriate to wind up the affairs and distribute the assets of the Fund
following its dissolution.

 

“Majority-owned Subsidiary” shall mean an entity in which the Fund owns,
directly or indirectly, more than fifty percent (50%) of the equity interests.

 

“Marketable Securities” shall mean securities that are traded on a national
securities exchange, market quotation system or electronic trading system in the
United States or otherwise actively traded over-the-counter in the United States
and are not subject to restrictions on transfer as a result of applicable
contract provisions, or the provisions of the Securities Act or the provisions
of any other applicable securities laws or regulations (other than restrictions
reasonably required by the underwriters or financial advisors in connection with
a Public

 

9

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Transaction and the volume and method-of-sale restrictions set forth, or
comparable to those, in Rule 144 promulgated under the Securities Act or any
successor thereto).

 

“Minimum Distribution” shall have the meaning specified in Section 5.02(b)
hereof.

 

“MSA” shall mean a metropolitan statistical area as defined by the United States
Office of Management and Budget.

 

“Net Disposition Profits” shall mean the excess, if any, of (x) the proceeds
received by the Fund from the disposition or refinancing of a Fund Investment
other than a Permitted Investment over (y) (i) the aggregate amount invested by
the Fund in such Fund Investment and (ii) all losses incurred by the Fund upon
the disposition or refinancing of any Fund Investment other than a Permitted
Investment that have not previously reduced Net Disposition Profits.  In the
case of a partial disposition of a Fund Investment, Net Disposition Profits
shall be calculated assuming that the portion of the Fund Investment so disposed
was a separate Fund Investment from that retained and that the amount invested
by the Fund in such Fund Investment is allocated between the disposed portion of
such Fund Investment and the retained portion of such Fund Investment based on
the relative cost basis of each portion of such Fund Investment (as determined
by the General Partner, in its discretion).

 

“Operating Expenses” shall mean, except as otherwise specifically provided in
this Agreement, including Section 6.06 hereof, all costs and expenses of
maintaining the operations of the Fund, the REIT and/or the Fund Investments,
determined, for this purpose, on a cash basis, including (i) taxes, fees and
other governmental charges levied against the Fund Investments, the Fund and/or
the REIT, (ii) insurance costs, litigation costs and indemnification
obligations, (iii) administrative fees and expenses associated with the
distribution of notices and reports to the REIT and the Class A Members, (iv) 
fees and costs for outside services, audits, custodians, outside counsel and
accountants, (v) costs incurred in connection with meetings of the Class A
Members and meetings of the Advisory Committee, the out-of-pocket expenses
incurred by Advisory Committee members in the performance of their
responsibilities in their capacities as members of the Advisory Committee that
are reimbursable by the Fund pursuant to Section 14.01 hereof, (vi) costs and
expenses incurred in developing, negotiating, structuring, acquiring, financing,
monitoring, disposing of, or otherwise dealing with, Fund Investments, including
any travel, legal and accounting expenses, brokerage commissions and other fees
and out-of-pockets costs related thereto, (vii) Unconsummated Deal Costs and
(viii) the Investment Management Fee, but specifically excluding Organizational
Expenses and any obligations of the REIT under a promissory note delivered by
the REIT pursuant to Section 14.02(b) of the REIT LLC Agreement.

 

“Operating Income” shall mean all amounts received by the Fund in cash in
respect of interest, dividends, operating cash flow, fee income and from any
other source other than (i) those amounts described in clause (x) of the
definition of “Net Disposition Profits” herein and (ii) the proceeds received by
the Fund from the disposition of a Permitted Investment.  For the avoidance of
doubt, all cash receipts of the Fund shall be classified as (x) Operating

 

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Income, (y) proceeds from the disposition, or refinancing of a Fund Investment
other than a Permitted Investment or (z) proceeds from the disposition of a
Permitted Investment.

 

“Opportunity Fund” shall mean CIM Urban Real Estate Fund, L.P., a Delaware
limited partnership.

 

“Organizational Expenses” shall mean out-of-pocket expenses incurred by the
General Partner or its Affiliates in connection with the organization and
formation of the Fund and the REIT and the offering of the Class A Membership
Units and the class B membership units therein, including legal and accounting
fees and expenses, printing costs, filing fees and the transportation, meal and
lodging expenses of the personnel of the General Partner, excluding, however,
all fees and costs due any Placement Agent, provided that the amount of
Organizational Expenses for which the Fund is obligated to reimburse the General
Partner is subject to the limitation set forth in Section 6.07(a) hereof.

 

“Original Agreement” shall have the meaning specified in the Recitals hereof.

 

“Original Limited Partner” shall have the meaning specified in the Recitals
hereof.

 

“Partners” shall mean the General Partner and the Limited Partners, and
“Partner” shall mean either one of them individually.

 

“Permitted Investments” shall mean cash or cash equivalents, investments in U.S.
government obligations, insured obligations which are rated not lower than AA by
Standard & Poor’s or have a comparable rating from a nationally recognized
rating agency, collateralized bank time deposits, repurchase agreements, money
market funds, commercial paper which is rated not lower than P-1, certificates
of deposit which are rated not lower than AA by Standard & Poor’s or have a
comparable rating from a nationally recognized rating agency and banker’s
acceptances eligible for purchase by the U.S. Federal Reserve.

 

“Permitted Transferee” shall have the meaning specified in Section 7.02 hereof.

 

“Person” shall mean any individual, partnership, corporation, limited liability
company, trust or other entity.

 

“Placement Agent” shall mean any placement agent, financial consultant or finder
retained by the General Partner in connection with the sale and offering of the
Class A Membership Units.

 

“Plan Asset Regulations” shall mean the regulations promulgated under ERISA at
29 C.F.R. Section 2510.3-101.

 

“Portfolio Nominal Hurdle Rate” shall have the meaning specified in Schedule D
attached hereto.

 

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“Portfolio Nominal Internal Rate of Return” shall have the meaning specified in
Schedule D attached hereto

 

“Prime Rate” shall mean the rate of interest publicly announced from time to
time by JPMorgan Chase & Co., New York, New York, or its successor, as its
“prime rate.”

 

“Principal” shall mean each of Shaul Kuba, Richard Ressler and Avraham Shemesh.

 

“Prior Investments” shall mean all investments in Qualified Investments made
prior to the date of the First Amended and Restated Agreement by the Principals
or any Affiliate of the General Partner or the Principals, including real estate
development projects that may not have been completed as of the date of the
First Amended and Restated Agreement.

 

“Profits and Losses” shall mean, respectively, for each Fiscal Year or other
period, the Fund’s income or loss for such Fiscal Year or other period,
determined in accordance with Code § 703(a) (for this purpose, all items of
income, gain, loss, deduction or credit required to be stated separately
pursuant to Code § 703(a)(1) shall be included in the Fund’s income or loss),
adjusted as follows:

 

(1)           any income of the Fund that is exempt from U.S. federal income tax
and not otherwise taken into account in computing Profits or Losses shall be
taken into account;

 

(2)           in lieu of the depreciation, amortization and other cost recovery
deductions taken into account in computing the Fund’s Profit or Loss, there
shall be taken into account the amount of Depreciation for such Fiscal Year or
other period;

 

(3)           any expenditures of the Fund described in Code § 705(a)(2)(B) (or
treated as such under Regulations § 1.704-1(b)(2)(iv)(i)) and not otherwise
taken into account in computing Profits or Losses shall be deducted from the
Fund’s Profit or Loss;

 

(4)           in the event the Gross Asset Value of any Fund asset is adjusted,
the amount of such adjustment shall be taken into account as gain or loss from
the disposition of such Fund asset for purposes of computing Profits or Losses;
and

 

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

 

Profits and Losses shall be further determined and adjusted in accordance with
the Regulations issued under Section 704 of the Code.  An allocation of Fund
Profits or Losses to a Partner shall be treated as an allocation to such Partner
of the same share of each item of income, gain, loss and deduction that has been
taken into account in computing such Profits or Losses.

 

12

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“Property Related Contract” shall mean any property management agreement,
leasing brokerage agreement or development management agreement.

 

“Project Costs” shall mean (a) with respect to any Fund Investment that is a
Qualified Investment in an asset in which the Fund owns, directly or indirectly,
all of the equity interests, all costs expended by the Fund and/or any of its
subsidiaries in the acquisition and/or redevelopment of such Fund Investment
(including any Capital Contributions and the principal amount of any acquisition
or construction financing obtained by the Fund and/or any of its subsidiaries
and used to acquire and/or redevelop such Fund Investment, but specifically
excluding construction period and other interest, debt service, and any loan
fees, commissions, points or other financing costs (including legal fees)) and
(b) with respect to any other Fund Investment that is a Qualified Investment,
all amounts invested by the Fund in such Fund Investment.

 

“Public Transaction” shall mean (i) an initial public offering (whether a
primary offering, a secondary offering or both) of membership units or other
equity interests of the REIT pursuant to a registration statement under the
Securities Act or any similar law then in effect pursuant to which the Class A
Membership Units become Marketable Securities or the Class A Members have the
right to convert their Class A Membership Units for Marketable Securities of the
REIT or (ii) a merger of the REIT or the Fund with and into, or other
acquisition of the REIT or the Fund by, a Person in exchange for cash,
Marketable Securities of such Person and/or securities of such Person
immediately and without restriction convertible into Marketable Securities of
such Person.

 

“Qualified Investment” shall mean any (i) individual real estate asset or real
estate portfolio, (ii) mortgage or other real estate related loan or extension
of credit, including mezzanine debt instruments or (iii) equity, debt or other
interests in, secured by or related to real estate, including interests in real
estate companies or real estate operating or service companies, or similar
assets or interests.  Qualified Investments may relate to real estate assets of
all product types, including retail, industrial, residential, signage, office
and parking properties.

 

“Regulations” shall mean the regulations of the U.S. Treasury Department
promulgated under the Code.

 

“REIT” shall mean CIM Urban REIT, LLC, a Delaware limited liability company, as
such limited liability company may from time to time be constituted.

 

“REIT LLC Agreement” shall mean the limited liability company agreement of the
REIT, as the same may be amended and/or restated from time to time.

 

“Removal Notice” shall have the meaning specified in Section 7.04(a) hereof.

 

“REOC” shall mean a “real estate operating company” as such term is defined in
the Plan Asset Regulations.

 

“Review Notice” shall have the meaning set forth in 14.05(c) hereof.

 

13

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“Securities Act” shall mean the U.S. Securities Act of 1933, as amended, and all
rules, rulings and regulations thereunder.

 

“Special Limited Partner” shall have the meaning set forth in Section 7.03(b)
hereof.

 

“Standard of Care” shall have the meaning specified in Section 6.01(c) hereof.

 

“Subsequent Closing” shall mean a closing with respect to the REIT which occurs
after the First Closing and on or before the Final Closing Date at which any
existing Class A Member increases its capital commitment with respect to the
REIT, or any other Person’s subscription for Class A Membership Units is
accepted by the director of the REIT other than in connection with a Public
Transaction or pursuant to Section 7.03 of the REIT LLC Agreement.

 

“Substitute Limited Partner” shall mean any Person admitted to the Fund as a
Limited Partner pursuant to Section 9.02 hereof.

 

“Targeted Capital Account” shall mean, with respect to any Partner, an amount
equal to the distribution that such Partner would receive if at the end of the
relevant year (i) all Fund Investments were sold for cash equal to their Fair
Values, (ii) all liabilities of the Fund were satisfied for cash according to
their terms, and (iii) the net proceeds of such transactions and all other
available cash were distributed in full pursuant to the provisions of Section
5.02(e) hereof.

 

“Tax Distribution” shall have the meaning specified in Section 5.02(d) hereof.

 

“Tax Rate” shall mean, with respect to any item of income, gain, loss or
deduction allocated to the General Partner, the highest combined marginal
federal, state and local personal income tax rate for an individual resident in
the State of California (as such rates were in effect at the time such items
were allocated to the General Partner and taking into account (i) the
deductibility of state and local income taxes, (ii) the character of the items
of income, gain, loss or deduction at the time of allocation and the
non-deductibility of all or any portion of any allocated loss or deduction and
(iii) the allocation by the Fund to the General Partner of tax credits in
respect of the items of income, gain, loss or deduction).

 

“Terminal Value” shall mean, (a) as of any date and with respect to any Fund
Investment in an asset in which the Fund owns, directly or indirectly, all of
the equity interests, the aggregate Adjusted Fair Value of such Fund Investment
as of such date and (b) as of any date and with respect to any other Fund
Investment, the aggregate Fair Value of such Fund Investment as of such date.

 

“TMP” shall have the meaning specified in Section 12.02(a) hereof.

 

“Transfer” shall mean a sale, assignment, transfer or other disposition, or
pledge, hypothecation or other encumbrance, of an Interest, whether voluntary or
involuntary.

 

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“Unconsummated Deal Costs” shall mean fees and expenses (including travel
expenses) paid to third parties in connection with an unconsummated transaction.

 

“Underlying Asset Value” shall have the meaning specified in Section 14.05(b)
hereof.

 

“Valuation Report” shall have the meaning specified in Section 14.05(b) hereof.

 

“VCOC” shall mean a “venture capital operating company” as such term is defined
in the Plan Asset Regulations.

 

1.02.       Rules of Construction.  All other defined terms used in this
Agreement shall have the respective meanings assigned to them in the Sections in
which they appear.  For all purposes of this Agreement, except as expressly
provided or unless the context otherwise requires, the words “including,”
“includes,” “include,” and other words of similar import shall be deemed to be
followed by the phrase “without limitation.”  Except as expressly provided, in
any case where the General Partner is authorized or required to take an action
or give an approval in its discretion or its judgment, it may do so in its sole
discretion or sole judgment; provided that the foregoing shall not negate (i)
the General Partner’s fiduciary duty to the Limited Partner or (ii) any
obligation of the General Partner to act in good faith.  For all purposes of
this Agreement, a “creditor of the Fund” shall include any Person extending
credit to the Fund and any Person who is entitled to the benefit of a guaranty,
indemnity or other assurance of payment from the Fund.  All terms defined in
this Agreement in the singular shall have comparable meanings when used in the
plural, and vice versa, unless otherwise specified herein.  It is intended that
the terms of this Agreement be construed in accordance with their fair meanings
and not against any particular Person, including the General Partner.  All
section headings in this Agreement are for convenience of reference only and are
not intended to qualify the meaning of any section.

 

ARTICLE II

 

FORMATION

 

2.01.       Formation.  The Fund has been formed as a limited partnership under
the laws of the State of Delaware.  The General Partner shall, and shall be
authorized to, take all necessary action required by law to maintain the Fund as
a limited partnership under the Act and in all other jurisdictions in which the
Fund may elect to conduct business.

 

2.02.       Name.  The name of the Fund is “CIM Urban Partners, L.P.,” which
name may be changed by the General Partner upon at least ten (10) Business Days’
notice to the REIT and the Class A Members.

 

2.03.       Mailing Address and Place of Business.  The mailing address of the
Fund shall be 6922 Hollywood Boulevard, Suite 900, Hollywood, California 90028,
or such other address as the General Partner may determine.  The principal place
of business of the Fund shall be such place within the United States as the
General Partner may determine.  Upon at least ten

 

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(10) Business Days’ notice to the REIT and the Class A Members, the General
Partner may change the location of the Fund’s principal office and/or the Fund’s
mailing address and may establish such additional offices of the Fund as it may
from time to time determine.

 

2.04.       Registered Office.  The address of the registered office of the Fund
in the State of Delaware is c/o Corporation Service Company, 2711 Centerville
Road, Suite 400, Wilmington, DE 19808, and the registered agent for service of
process on the Fund in the State of Delaware at such registered office is the
Corporation Service Company.

 

2.05.       Term.  The Fund shall continue in full force and effect from the
date the Certificate of Limited Partnership was filed through the date of
dissolution and termination of the Fund as provided in Article X hereof.  At
such time as the Fund is terminated, a statement of cancellation shall be filed
with the appropriate governmental office of the State of Delaware, as required
by law.

 

2.06.       Withdrawal of Original Limited Partner.  The REIT was admitted to
the Fund as a limited partner thereof, effective as of the date of the First
Amended and Restated Agreement, and upon such admission, the Original Limited
Partner a) received a return of his original capital contribution, if any, (b)
withdrew as the Original Limited Partner of the Fund and (c) has no further
right, interest or obligation of any kind whatsoever as a partner in the Fund by
reason of having been the Original Limited Partner.

 

ARTICLE III

 

PURPOSE AND BUSINESS

 

3.01.       Business.

 

(a)           The primary purpose of the Fund, prior to the occurrence of a
Public Transaction, is the acquisition, management, improvement, holding,
maintenance, operation, leasing, financing, foreclosing upon, restructuring,
sale, transfer and other disposition of and otherwise dealing with Qualified
Investments that are located, or that are, directly or indirectly, comprised of
assets or businesses that are located in North America.  In this regard, the
Fund may engage in open market purchases, privately-negotiated transactions or
other means of pursuing a Qualified Investment, and may acquire and hold
Qualified Investments directly or indirectly, through subsidiaries,
partnerships, joint ventures, joint investment entities or otherwise.

 

(b)           The Fund may engage in any other activities permitted by law and
related or incidental to those referred to in this Section 3.01, including
making temporary investments pursuant to Section 3.02(k) hereof.

 

(c)           The Fund shall operate (and shall structure its investment
activities and operations) in a manner that will permit the REIT to comply with
all of the requirements necessary to enable the REIT to qualify as a “real
estate investment trust” for U.S. federal income tax purposes.

 

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3.02.       Authorized Activities.  In carrying out the purposes of this
Agreement, but subject to all other provisions of this Agreement and applicable
law, the Fund is and shall be permitted, empowered and authorized to engage in,
take and carry out any and all of the following activities as the General
Partner shall determine in its discretion:

 

(a)           to acquire, invest in, manage, improve, hold, maintain, operate,
lease, finance, mortgage, pledge, hypothecate, foreclose upon, restructure and
otherwise deal in or with the Fund Investments and any real or personal property
which may be necessary, convenient or incidental to the accomplishment of the
purposes of the Fund, whether directly or indirectly, through subsidiaries or
any other entity or any interest therein or otherwise, and to sell, transfer or
otherwise dispose of the Fund Investments, including a transfer of all or any
portion of the Fund Investments to an existing or newly formed publicly traded
company;

 

(b)           to construct, operate, develop, maintain, finance, refinance,
improve, own, sell, convey, assign, mortgage, lease, foreclose upon, take
control of or realize upon any real or personal property necessary, convenient
or incidental to the accomplishment of the purposes of the Fund;

 

(c)           (i)  to incur Indebtedness (whether secured or unsecured)
including to finance or refinance one or more of the Fund Investments, (ii) to
secure any such evidences of Indebtedness by Liens and (iii) to give guaranties
or indemnities of other Persons’ obligations, including for the purpose of
acquiring, disposing of, refinancing, operating and otherwise dealing with the
assets of the Fund, its subsidiaries or investment vehicles;

 

(d)           to enter into, perform and carry out contracts of any kind
necessary or incidental to the accomplishment of the purposes of the Fund,
including contracts with Affiliates of the General Partner entered into in
compliance with the terms of this Agreement;

 

(e)           to bring, sue, prosecute, defend, settle or compromise actions at
law or in equity related to the purposes of the Fund;

 

(f)            to purchase, redeem, cancel or otherwise retire or dispose of the
Interest of any Partner pursuant to the express provisions of this Agreement;

 

(g)           to lease, sublease or otherwise grant rights of occupancy with
respect to those Fund Investments in the form of real properties and collect all
rents, profits, expense reimbursements and other income and to pay therefrom
expenses of the Fund, including expenses relating to such Fund Investments;

 

(h)           to prepay in whole or in part, refinance, recast, assume,
increase, reduce, modify, extend, foreclose, realize upon, transfer and
otherwise deal in or with any mortgage loans or other loans constituting or
affecting any of the Fund Investments, and in connection therewith to execute
any extensions, renewals, assumptions or modifications of any mortgage, deed of
trust, security agreement or other document evidencing, securing, relating to,
constituting or affecting any of the Fund Investments;

 

17

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(i)            to open, maintain and close bank accounts and/or accounts with
brokers and draw checks and other orders for the payment of money;

 

(j)            to incur and pay fees, costs and expenses of any type or nature
necessary, convenient or incidental to the accomplishment of the purposes of the
Fund, including those expenditures and fees more particularly described in
Sections 6.06 and 6.07 hereof;

 

(k)           to make, hold and sell or otherwise dispose of Permitted
Investments;

 

(l)            to purchase and sell Derivatives for the purpose of managing,
hedging or minimizing the risk to the Fund or its subsidiaries associated with
movements in interest rates, stock prices or other fluctuations in the price or
value of financial instruments or markets affecting the Fund or Fund
Investments; provided, however, that, other than for the purposes described in
this Section 3.02(1), the Fund shall not utilize Derivatives for the purpose of
speculating or trading in the foregoing;

 

(m)          to make debt, equity or hybrid investments, including the
acquisition of Marketable Securities, in real estate companies or  real estate
operating or service companies, whether public or private;

 

(n)           either by itself or by cont

 

(o)           ract with others, including corporations, limited liability
companies or partnerships whose stockholders, members, partners, officers or
employees include partners, members, officers or employees of the General
Partner or any Affiliate of the General Partner, to maintain for the conduct of
Fund affairs one or more offices and in connection therewith to rent or acquire
office space, engage personnel, whether part-time or full-time, and to do, or
cause to be done, such other acts as the General Partner may deem necessary or
desirable in connection with the maintenance and administration of the affairs
of the Fund;

 

(p)           to register or qualify the Fund under any applicable U.S. federal
or state or foreign laws, or to obtain exemptions under such laws, if such
registration, qualification, or exemption is deemed necessary or desirable by
the General Partner;

 

(q)           to form one or more subsidiary corporations, partnerships, real
estate investment trusts, limited liability companies, or other domestic
entities for the purpose of making, holding, financing or disposing of any
Investment or Investments (including with other investors), and to register or
qualify such corporations, partnerships, real estate investment trusts, limited
liability companies, or other entities as provided in clause (o) above, or to
obtain the listing, trading or quotation thereof on one or more securities
exchanges, trading or quotation systems;

 

(r)            to engage attorneys, accountants, consultants, appraisers, and
such other Persons as the General Partner may deem necessary or desirable; and

 

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(s)            to engage in any kind of lawful activity and perform and carry
out contracts of any kind as the General Partner deems necessary or advisable in
connection with the accomplishment of the purposes of the Fund.

 

3.03.       Prohibited Activities.  Notwithstanding any other provision of this
Agreement, the Fund and the General Partner shall not be empowered or authorized
as follows:

 

(a)           from and after the Final Closing Date, except with the approval of
the Advisory Committee, to invest more than the lesser of (x) twenty-five
percent (25%) of the aggregate Capital Commitments of all Partners and (y) $500
million of Capital Contributions in any one asset or company; provided, however,
that the foregoing limitation shall not apply to an investment consisting of a
portfolio of, or a company or other entity owning, multiple assets (it being
understood that the foregoing limitation shall apply to each individual asset in
any such portfolio or entity);

 

(b)           from and after the Final Closing Date, except with the approval of
the Advisory Committee, to (i) invest more than twenty-five percent (25%) of the
aggregate Capital Commitments of all Partners in any MSA with a population of
one million (1,000,000) or less or in any recognized real estate submarket of an
MSA with a population of more than one million (1,000,000) or (ii) invest more
than fifty percent (50%) of the aggregate Capital Commitments of all Partners in
any MSA with a population of more than one million (1,000,000);

 

(c)           except with the approval of the Advisory Committee, to invest in
the securities of a publicly traded company, except as part of a transaction or
series of transactions designed for the purpose of acquiring control of the
company and/or its underlying assets;

 

(d)           to take any actions in violation of applicable laws;

 

(e)           to enter into any transaction with an Affiliate in violation of
Section 6.04;

 

(f)            to take any actions, or make any investments, that the General
Partner reasonably believes is likely to cause the REIT not to qualify as a
“real estate investment trust” for U.S. federal income tax purposes;

 

(g)           at any time prior to the occurrence of a Public Transaction, to
incur (or cause a Majority-owned Subsidiary thereof to incur) additional
Indebtedness that will be treated as debt by the Fund’s auditors, or to acquire
any entity as a Majority-owned Subsidiary that has Indebtedness that will remain
outstanding immediately following such acquisition and that will be treated as
debt by the Fund’s auditors, if the incurrence of such Indebtedness or the
acquisition of such entity would cause the total outstanding amount of
Indebtedness of the Fund that is treated as debt by the Fund’s auditors (i.e.,
such Indebtedness incurred by the Fund directly plus, without duplication, the
portion of any such Indebtedness of Majority-owned Subsidiaries allocable to the
Fund (as determined by the General Partner in its discretion)) to exceed thirty
percent (30%) (or such greater percentage up to fifty percent (50%) as the
Advisory Committee may approve) of the sum of the aggregate Adjusted Fair Value
of all Fund Investments, other than Permitted Investments, plus any property
level reserves with respect to

 

19

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Qualified Investments (to the extent such property level reserves have not been
included by the applicable Expert(s) as part of the Adjusted Fair Value of any
such Qualified Investment); provided, however, that prior to the Final
Contribution Date, the foregoing debt restriction shall not prohibit the Fund
from making any Investment if the Indebtedness assumed by the Fund in connection
with the  acquisition of such Investment either is not prepayable or is
prepayable on terms that the General Partner determines are detrimental to the
Fund; or

 

(h)           except with the approval of the Advisory Committee, to acquire or
originate any senior debt (i.e., first mortgage loans) if the acquisition or
origination by the Fund of such senior debt would cause the aggregate Adjusted
Fair Value of all Fund Investments that are senior debt to equal or exceed
twenty-five percent (25%) of the aggregate Adjusted Fair Value of all Fund
Investments (including, without duplication, any property level reserves with
respect to Qualified Investments).

 

3.04.       Title to Fund Property.  All property owned by the Fund, whether
real or personal, tangible or intangible, shall be deemed to be owned by the
Fund as an entity, and no Partner, individually, shall have any ownership of
such property.  The Fund may hold any of its assets in its own name or in the
name of a Person acting as nominee for the Fund as long as such nominee shall be
at the direction of the Fund.

 

3.05.       Investment Policies.

 

(a)           The General Partner intends to conduct the business of the Fund in
a manner such that the Fund will not be required to register as an investment
company under the Investment Company Act.

 

(b)           The General Partner will not cause the Fund to focus as its
primary investment objective on the acquisition or the origination of senior
debt (i.e., first mortgage loans) other than for the purpose of acquiring the
underlying real estate.

 

ARTICLE IV

 

THE FUND INTERESTS AND CAPITAL

 

4.01.       General Partner.

 

(a)           The name of the General Partner is CIM Urban Partners GP, Inc., a
California corporation, having a mailing address at 6922 Hollywood Boulevard,
Suite 900, Hollywood, California 90028.

 

(b)           The Capital Commitment of the General Partner shall be $1,000.

 

4.02.       Limited Partners.  The name, address and Capital Commitment of the
Limited Partner are set forth on Schedule A hereto, as amended from time to time
in accordance with the terms hereof.  A transferee acquiring a Limited Partner’s
Interest through a Transfer shall become a Substitute Limited Partner when the
provisions of Article IX of this Agreement

 

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have been complied with.  For purposes of the Act, the Limited Partners shall
constitute one (1) class or group of limited partners.

 

4.03.       Capital Contributions.

 

(a)           The General Partner contributed its entire Capital Commitment to
the Fund on the date of the First Amended and Restated Agreement.

 

(b)           Except as provided in Section 4.03(g) of the REIT LLC Agreement,
on each date that the REIT receives capital contributions from its Class A
Members, the REIT shall contribute to the Fund an amount equal to the total
amount of capital contributions received by the REIT from its Class A Members on
such date; provided, however, that (i) the REIT shall not make any contribution
to the Fund until the date that the Fund acquires its first long term qualifying
investment for purposes of the REOC provisions of the Plan Asset Regulations
and (ii) on the date that the Fund acquires its first long term qualifying
investment for purposes of the REOC provisions of the Plan Asset Regulations,
the REIT shall contribute to the Fund all of the capital contributions that it
has received from the Class A Members prior to such date less the amount of any
Organizational Expenses (subject to the limitation set forth in
Section 6.07(a) hereof) reimbursed by the REIT.  The parties hereto acknowledge
and agree that (x) prior to the date that the Fund acquires its first long term
qualifying investment for purposes of the REOC provisions of the Plan Asset
Regulations, the REIT shall be permitted to reimburse the General Partner and
its Affiliates for Organizational Expenses subject to the limitation set forth
in Section 6.07(a) hereof and (y) any such amounts so reimbursed by the REIT
shall be treated for all purposes hereof and the REIT LLC Agreement as if they
had been contributed by the REIT to the Fund on the date that the Fund acquires
its first long term qualifying investment for purposes of the REOC provisions of
the Plan Asset Regulations and reimbursed by the Fund.

 

(c)           On the day immediately preceding the date that any capital
contributions are due to the REIT as set forth in a “Capital Call Notice” (as
defined in the REIT LLC Agreement), to the extent such due date is on or prior
to the Final Closing Date, the Fund shall distribute to the REIT an amount equal
to the greater of (x) the accrued and unpaid Minimum Distribution through such
date and (y) the excess of the accrued and unpaid Operating Income through such
date over amounts determined by the General Partner, in its discretion, to be
necessary (i) to pay or establish reserves for, or otherwise accrue for, Fund
Expenses, amounts payable in respect of Indebtedness of the Fund and its
subsidiaries and/or any other liabilities of the Fund and its subsidiaries or
(ii) to establish reserves on account of distributions that may be required for
the REIT to satisfy the requirements to qualify as a “real estate investment
trust” under the Code in future periods.

 

4.04.       Intentionally Omitted.

 

4.05.       Interest.  Interest earned on the Fund’s funds shall inure to the
benefit of the Fund.  The Partners shall not receive interest on their Capital
Contributions or Capital Accounts.

 

21

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4.06.       Capital Account.  The Fund shall maintain a book account in
accordance with the following provisions for each Partner (and any other person
who acquires an Interest):

 

(a)           To each Partner’s Capital Account there shall be credited (i) the
Capital Contributions of such Partner, (ii) such Partner’s distributive share of
Profits and (iii) the amount of any Fund liabilities assumed by the Partner or
secured by distributed assets that such Partner assumes or takes subject to; and

 

(b)           To each Partner’s Capital Account there shall be debited (i) the
amount of cash distributed to the Partner, (ii) the Gross Asset Value of any
Fund asset distributed to such Partner pursuant to any provision of this
Agreement (net of liabilities secured by such distributed property that such
Partner assumes or takes subject to) and (iii) such Partner’s distributive share
of Losses.

 

In the event that a Partner’s Interest or portion thereof is transferred within
the meaning of Regulations § 1.704-1(b)(2)(iv)(f), the transferee shall succeed
to the Capital Account of the transferor to the extent that it relates to the
Interest or portion thereof so transferred.

 

The foregoing provisions and the other provisions of this Agreement relating to
the maintenance of Capital Accounts are intended to comply with Regulations
§ 1.704-1(b) and shall be interpreted and applied in a manner consistent
therewith.

 

4.07.       Withdrawal of Capital Contributions.  Except as otherwise provided
in this Agreement or required by law, (i) no Partner shall have the right to
withdraw or reduce its Capital Contributions or its Capital Commitment, or to
demand and receive property other than property distributed by the Fund in
accordance with the terms hereof in return for its Capital Contributions, and
(ii) any return of Capital Contributions to the Limited Partner shall be solely
from the Fund assets, and the General Partner shall not be personally liable for
any such return.

 

4.08.       Restoration of Negative Capital Accounts.  Neither the General
Partner nor the Limited Partner shall be obligated to restore any deficit
balance in its Capital Account or shall be personally liable for the return of
the Capital Contributions of any Partner, or any portion thereof, it being
expressly understood that (x) any such return shall be made solely from the Fund
assets and (y) a deficit in a Partner’s Capital Account shall not constitute a
Fund asset.

 

4.09.       Subsequent Closings.  (a)  In connection with each Subsequent
Closing, the REIT shall increase its Capital Commitment such that, after giving
effect to such increase, its Capital Commitment is equal to the aggregate
capital commitments of all of the Class A Members to the REIT (after giving
effect to such Subsequent Closing).

 

(b)           Schedule A shall be amended by the General Partner after any
Subsequent Closing to reflect the revised Capital Commitment of the REIT.

 

22

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ARTICLE V

 

ALLOCATIONS OF PROFITS AND LOSSES AND DISTRIBUTIONS TO PARTNERS

 

5.01.       Allocation of Profits and Losses.  During the period commencing on
the First Closing and ending on the day immediately prior to the Final Closing
Date (the “Initial Period”), 100% of the Profits and Losses shall be allocated
to the REIT.  For purposes of determining Profits and Losses for this period,
the Fund shall use a closing-of-the-books method.

 

(a)           Allocation of Profits.  After the Initial Period, Profits shall be
allocated as follows:

 

(i)            First, 100% to the REIT until the amount allocated and previously
allocated pursuant to this Section 5.01(a)(i) equals the amounts allocated and
previously allocated pursuant to Section 5.01(b)(iii) hereof;

 

(ii)           Second, to the REIT and the General Partner pro rata in a manner
to reduce proportionately the respective difference between each Partner’s
Capital Account and such Partner’s Targeted Capital Account as of the end of the
relevant year; and

 

(iii)          Thereafter, 100% to the REIT.

 

(b)           Allocation of Losses.  After the Initial Period, Losses shall be
allocated as follows:

 

(i)            First, 100% to the REIT until the amount allocated and previously
allocated pursuant to this Section 5.01(b)(i) equals the amounts allocated and
previously allocated pursuant to Section 5.01(a)(iii) hereof;

 

(ii)           Second, to the REIT and the General Partner pro rata in
accordance with the allocations made pursuant to Section 5.01(a)(ii) hereof
until the amount allocated and previously allocated pursuant to this
Section 5.01(b)(ii) equals the amounts allocated and previously allocated
pursuant to Section 5.01(a)(ii) hereof; and

 

(iii)          Thereafter, 100% to the REIT.

 

(c)           Sections 5.01(a) and 5.01(b) hereof are intended to comply with
Sections 514(c)(9) and 704(b) of the Code and Regulations promulgated thereunder
as in effect on the date hereof, and shall be considered to include a “Qualified
Income Offset” and “Minimum Gain Chargeback,” as defined in such Regulations,
and if any Profits or Losses are allocated pursuant to such a “Qualified Income
Offset” or “Minimum Gain Chargeback,” then, subsequently, Profits and Losses
shall, to the extent permitted by Sections 514(c)(9) and 704(b) of the Code and
Regulations promulgated thereunder, be allocated among the Partners in the
manner and to the extent necessary to effectuate the intent of the Partners as
indicated in Section 10.02(c)(iii) hereof, and the provisions of this
Section 5.01 and Section 5.02 hereof shall

 

23

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be adjusted accordingly.  If and to the extent a modification of the allocations
under Sections 5.01(a) and 5.01(b) hereof is necessary to comply with such
Sections of the Code and Regulations to reduce or minimize “unrelated business
taxable income” as defined in Section 512 of the Code and Regulations
promulgated thereunder, to further implement the provisions of
Section 10.02(c)(iii) hereof or to reflect a recontribution or deemed
recontribution by the General Partner to the Fund pursuant to
Section 5.02(g) hereof, the General Partner is authorized to perform such a
modification in a manner consistent to achieve an allocation consistent with the
distribution provisions of Section 5.02 hereof, subject to Section 13.01 hereof.

 

5.02.       Distributions.

 

(a)           Subject to Section 5.02(b) hereof, the amount and timing of
distributions from the Fund to the Partners shall be at the discretion of the
General Partner, but generally shall be made quarterly.

 

(b)           During the period commencing on the First Closing and ending on
the day immediately prior to the Final Closing Date, (i) all Distributable
Proceeds shall be distributed to the REIT and (ii) the Fund shall make
distributions to the REIT such that the Class A Members receive pursuant to the
REIT LLC Agreement minimum quarterly distributions equal to 2.1309% of their
unreturned Class A Capital Contributions during such quarter (each such
mandatory distribution is referred to herein as the “Minimum Distribution”).  To
the extent necessary, the Fund will use Capital Contributions (in addition to
Distributable Proceeds) to make Minimum Distributions and any Capital
Contributions so distributed will not be subject to recall and will not be
treated as returned capital.

 

(c)           Subject to Sections 5.02(d) and 10.02(c) hereof, from and after
the Final Closing Date but prior to the commencement of the Disposition Period,
all Distributable Proceeds shall be distributed to the REIT.

 

(d)           If, as of any date, the Aggregate Tax Liability of the General
Partner exceeds the aggregate amounts previously distributed to the General
Partner pursuant to this Section 5.02(d) or Section 5.02(e) hereof through such
date, such excess shall be distributed to the General Partner from the next
amounts otherwise distributable under Section 5.02 (each such distributions a
“Tax Distribution”).  Each Tax Distribution shall be treated as an advance of
distributions that otherwise would be made to the General Partner during the
Disposition Period.  For this purpose, the “Aggregate Tax Liability,” as of any
date, shall mean the product of (x) the sum of all Profits allocated to the
General Partner pursuant to Section 5.01 hereof on or prior to such date less
the sum of all Losses allocated to the General Partner pursuant to Section 5.01
hereof on or prior to such date multiplied by (y) the Tax Rate.  Prior to any
date on which the General Partner is required to make payments of estimated
federal, state or local income tax, the General Partner may timely submit an
estimate made in good faith of any such excess of the Aggregate Tax Liability
over the aggregate distributions and be entitled promptly to receive the
distribution to which the General Partner is entitled pursuant to this
Section 5.02(d).  Each year, within thirty (30) days following the date on which
the General Partner files its annual tax

 

24

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returns, the General Partner shall calculate its Aggregate Tax Liability for all
periods ending on or before the period covered by such tax returns.  In the
event that the sum of (I) all Tax Distributions received by the General Partner
on or prior to the last day of the period covered by such tax returns that have
not previously been repaid by the General Partner or offset against amounts that
would otherwise have been distributed to the General Partner plus (II) all other
distributions received by the General Partner pursuant to the terms hereof on or
prior to the last day of the period covered by such tax returns exceeds the
amount of the General Partner’s Aggregate Tax Liability for all such prior
periods, the General Partner shall promptly recontribute to the Fund, in
repayment of Tax Distributions, the amount of such excess.

 

(e)           During the Disposition Period, Distributable Proceeds shall be
distributed to the Partners as follows:

 

(1)           First, 100% to the REIT until the Portfolio Nominal Internal Rate
of Return is equal to the Portfolio Nominal Hurdle Rate;

 

(2)           Second, 100% to the General Partner until it has received, after
taking into account the amount of all prior distributions pursuant to this
clause (2), $1,000;

 

(3)           Third, 100% to the REIT until it has received on the applicable
distribution date, pursuant to this clause (3), an amount equal to the excess,
if any, of (x) the portion of the aggregate Distributable Proceeds to be
distributed on the applicable distribution date remaining after the distribution
on such date of amounts, if any, required to be distributed pursuant to clauses
(1) and (2) of this Section 5.02(e) over (y) the Incentive Distribution as of
such date; and

 

(4)           Thereafter, with respect to the balance to be distributed on the
applicable distribution date (i.e., an amount equal to the Incentive
Distribution as of such date), 100% to the General Partner; provided that such
amounts shall be subject to offset to the extent that the General Partner has
received Tax Distributions that have not been previously repaid by the General
Partner or offset against other amounts that would otherwise have been
distributed to the General Partner.

 

(f)            During the Final Liquidation Period, Distributable Proceeds shall
be distributed to the Partners in accordance with Section 10.02(c)(iii) hereof.

 

(g)           Prior to the commencement of the Final Liquidation Period, the
General Partner shall recontribute to the Fund for the benefit of the Partners
an amount equal to the sum of all Tax Distributions received by the General
Partner that have not been previously recontributed by the General Partner or
offset against amounts which would otherwise have been distributed to the
General Partner.  All such amounts recontributed by the General Partner shall be
treated as Distributable Proceeds and distributed to the Partners pursuant to
the distribution provisions hereof in effect at the time of such recontribution.

 

25

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(h)           The General Partner may withhold from any amounts distributable to
any Partner any amounts of any tax required to be withheld by the Fund under the
Code or the Regulations or the tax laws of any jurisdiction.  Such amounts
withheld by the General Partner shall, except for purposes of
Section 5.02(e) hereof, be treated as distributed to such Partner and paid by
such Partner to the relevant tax authority.  If the Fund is required to withhold
taxes with respect to any amounts that are not currently distributed to a
Partner, the Partner shall pay to the Fund an amount equal to the amount
required to be withheld by the General Partner.  The payment of this amount by
the Partner to the Fund shall not be considered a Capital Contribution.

 

5.03.       Form of Distributions.  The General Partner shall use commercially
reasonable efforts to convert the assets of the Fund to cash prior to the
distribution thereof, unless the General Partner believes, in its judgment, that
such conversion could have a materially adverse effect on the value of such
assets.  Notwithstanding the foregoing, distributions may take only the form of
cash or, with the approval of the Advisory Committee, Marketable Securities or
securities immediately and without restriction convertible into Marketable
Securities; provided however, that Advisory Committee approval shall not be
required for the distribution of Marketable Securities or securities immediately
and without restriction convertible into Marketable Securities in connection
with a Public Transaction. Distributions of assets in kind shall be allocated in
accordance with Section 5.02 as if such assets were Distributable Proceeds.

 

ARTICLE VI

 

RIGHTS AND OBLIGATIONS OF THE GENERAL PARTNER

 

6.01.       Management.  (a)  Subject to the provisions of this Agreement, the
General Partner has the full, exclusive and complete right, power, authority,
discretion and responsibility vested in or assumed by a general partner of a
limited partnership under the Act and as otherwise provided by law, including
those necessary to make, affirmatively or negatively, all decisions affecting
the business of the Fund and to take and cause the Fund to take those actions
specified in Section 3.02 hereof.  Subject to the other provisions of this
Agreement, the General Partner is hereby vested with the full, exclusive and
complete right, power and discretion to operate, manage and control the affairs
of the Fund to the best of its ability and shall carry out the business of the
Fund.

 

(b)           The General Partner shall have the power on behalf of and in the
name of the Fund to engage CIM Urban REIT Management, Inc. (or another Affiliate
of the General Partner) as the Investment Manager for the Fund and to execute
and deliver the Investment Management Agreement with the Investment Manager and
any other documents contemplated thereby, all without further act, vote or
approval of the REIT or any Class A Member.  The Investment Management Agreement
shall provide that such agreement shall automatically terminate upon the removal
of the director of the REIT pursuant to Section 7.02 of the REIT LLC Agreement. 
The Fund and the General Partner may not amend the Investment Management
Agreement without the Consent of the REIT (with the Consent of at least
sixty-six and two thirds percent (66-2/3%) of the Class A Percentage Interests
of the Class A Members (excluding for

 

26

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this purpose the Class A Percentage Interest of any Affiliate of the General
Partner)).  Advisory Committee approval shall be required for an assignment of
the Investment Manager’s duties under the Investment Management Agreement to an
entity that is not (i) an Affiliate of the General Partner or owned by
Employees, Immediate Family Relatives of the Principals or Employees, trusts for
the benefit of any such Persons or family charitable foundations over which any
such Person has direction and (ii) controlled by the Principals.

 

(c)           In managing the affairs of the Fund, and in its dealings with the
Limited Partner, except as expressly provided otherwise in this Agreement, the
General Partner shall owe the same fiduciary duty to the Limited Partner as a
general partner owes each other partner in a general partnership under the laws
of the State of Delaware, including: a duty of loyalty, which requires the
General Partner to carry out its responsibilities hereunder with loyalty,
honesty, good faith, and fairness  toward the Fund and the Limited Partner. 
Furthermore, the General Partner shall invest the Fund’s assets and exercise all
of its powers and duties hereunder in accordance with a degree of diligence,
prudence and care that a prudent person exercises with respect to his or her own
assets.  (The standards set forth in this Section 6.01(c) are referred to herein
as the “Standard of Care”.)

 

6.02.       Authority.  (a)  The General Partner has authority to bind the Fund,
by execution of agreements, instruments or other documents or otherwise, to any
obligation not inconsistent with the provisions of this Agreement and shall have
the full, exclusive and complete right, power, authority and discretion to
execute and deliver on behalf of the Fund and to cause the Fund to perform its
obligations under any such agreements, instruments and documents.  Subject to,
and except as otherwise provided in Sections 6.03 and 6.04, the General Partner
may contract or otherwise deal with any Person for the transaction of the
business of the Fund, which Person may, under the supervision of the General
Partner, perform any acts or services for the Fund as the General Partner may
approve.

 

(b)           Except as limited by Section 6.03(a)(vi) hereof, the General
Partner shall have the authority to make or not to make any elections for tax
purposes in its discretion.

 

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

 

(d)           The General Partner may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers and other consultants and
advisers selected by it, and any act or omission suffered or taken by the
General Partner on behalf of the Fund believed by the General Partner to be in
furtherance of the interests of the Fund in good faith and in reliance upon and
in accordance with the advice of such Persons shall be deemed to be reasonable
and proper, and the General Partner shall be fully protected in so acting or
omitting; provided, however, that (x) such Persons were selected and retained
with reasonable care and (y) such Persons were relied upon only with respect to
matters believed by the General Partner in good faith to be within the scope of
their expertise.

 

27

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(e)           Persons dealing with the Fund are entitled to rely conclusively
upon the power and authority of the General Partner as herein set forth.

 

(f)            The General Partner shall endeavor to cause the Fund to maintain
cash reserves for operating expenses, capital expenditures, repairs,
replacements, contingencies and related items in such amount as the General
Partner in its discretion deems necessary or advisable.

 

(g)           From and after the commencement of the Disposition Period, the
General Partner shall endeavor to dispose of the Fund Investments promptly and
in an orderly fashion consistent with the Standard of Care.

 

6.03.       Limitations on the General Partner.

 

(a)           Anything contained in any other Section of this Agreement
notwithstanding, the General Partner and its Affiliates shall not have any
authority or be entitled:

 

(i)            to perform any act in violation of any applicable law or
regulation thereunder, including applicable securities laws;

 

(ii)           to perform any act in violation of the Act or this Agreement;

 

(iii)          to perform any other act expressly requiring the Consent of the
REIT or the Advisory Committee under this Agreement without first obtaining such
Consent;

 

(iv)          to avoid its ultimate obligations under this Agreement by
delegation of authority or responsibility;

 

(v)           to commingle funds of the Fund with funds of any other Person,
except in connection with Fund Investments made with other parties; or

 

(vi)          to cause the Fund to make an election to be treated as other than
a partnership for tax purposes.

 

(b)           Notwithstanding anything to the contrary herein, for so long as
the Fund is required to operate as a REOC in accordance with Section 15.01
hereof and the REIT or a subsidiary thereof is not the general partner of the
Fund, the Fund shall not undertake any of the following actions without the
approval of the REIT, acting through its director; provided, however that (x) if
the taking of any such actions requires the Consent of a specified percentage of
the Class A Members pursuant to any other provision of this Agreement, such
Consent shall be required for the taking of such action in addition to the
Consent of the director of the REIT and (y) if at any time the General Partner
and the director of the REIT are the same Person, the taking of an action at
such time by the General Partner, on behalf of the Fund, shall be deemed to be
an approval by the director of the REIT to the taking of such action by the Fund
and no

 

28

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additional action on the part of the director of the REIT shall be necessary to
evidence such deemed approval:

 

(i)            the dissolution and winding up of the Fund or an election to
continue the Fund or the business thereof;

 

(ii)           the sale, exchange, lease, mortgage, assignment, pledge or other
transfer of, or granting of a security interest in, any asset or assets of the
Fund or any subsidiary thereof in a transaction having a dollar value in excess
of $50,000;

 

(iii)          the incurrence, renewal, refinancing or payment or other
discharge of Indebtedness by the Fund or any subsidiary thereof in an amount in
excess of $50,000;

 

(iv)          the execution of any contract for the provision of goods or
services to the Fund or any subsidiary thereof requiring aggregate payments by
the Fund in excess of $10,000 per annum.

 

(v)           a change in the nature of the business of the Fund;

 

(vi)          a transaction or other matter involving an actual or potential
conflict of interest;

 

(vii)         an amendment to this Agreement or the Certificate of Limited
Partnership of the Fund; and

 

(viii)        the merger or consolidation of the Fund with or into any Person.

 

6.04.       Business with Affiliates.

 

(a)           Except as otherwise provided in Section 6.04(b) below, the General
Partner shall not permit the Fund or any of its subsidiaries to enter into any
transaction with the General Partner or its Affiliates, acquire any assets from
the General Partner or its Affiliates or engage the General Partner or its
Affiliates to provide goods or services for additional compensation unless all
of the following criteria are complied with:

 

(i)            The fees and other terms and conditions under which the goods or
services are to be rendered or the transaction is to be entered into are
embodied in a written contract executed and delivered before such goods and
services are rendered and describing the transaction or the goods or services to
be rendered and the compensation, price or fee therefor;

 

(ii)           The terms and conditions of the contract are at least as
favorable to the Fund as the terms generally available in arm’s-length
transactions with qualified independent third parties;

 

29

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(iii)          The compensation, price, fees and other benefits, including
expense recoveries, to the General Partner and its Affiliates and the formula or
method by which they are to be calculated, and the goods, services or other
benefits to be provided therefor, are fully disclosed to the Advisory Committee
and Consented to in writing by the Advisory Committee (which Consent shall not
be unreasonably withheld or delayed) in advance of execution of the written
contract; and

 

(iv)          Such transaction or contract for services is entered into
principally for the benefit of the Fund and in the ordinary course of its
business.

 

Notwithstanding the foregoing, the provisions of this Section 6.04(a) shall not
apply from and after the occurrence of a Public Transaction.

 

(b)           Notwithstanding Section 6.04(a) above, the General Partner or an
Affiliate thereof shall have the right:

 

(i)            to cause the Fund or one or more of its subsidiaries or other
entities in which the Fund has made an investment to enter into one or
more Property Related Contracts with an Affiliate of the General Partner, in
connection with Fund Investments, pursuant to which such Affiliate will provide
services to the Fund, any subsidiary thereof or any other entity in which the
Fund has made an investment, and any such agreement shall be deemed approved by
the Advisory Committee and to satisfy the requirements of Sections
6.04(a)(ii) and 6.04(a)(iii) hereof (but Sections 6.04(a)(i) and
6.04(a)(iv) hereof shall still apply) provided that (x) any compensation payable
thereunder does not exceed the limit set forth on Schedule B hereto (as the same
may be amended from time to time pursuant to Section 14.04(b) hereof), subject
to the Advisory Committee’s rights to adjust such amounts to the extent
permitted pursuant to Section 14.04(b) hereof and (y) the other terms and
conditions of the contract are at least as favorable to the Fund as the terms
generally available in arm’s-length transactions with qualified independent
third parties;

 

(ii)           to cause the Fund, a subsidiary thereof or any other entity in
which the Fund has made an investment to purchase from the General Partner and
its Affiliates the interests of the General Partner and its Affiliates in the
Investments identified on Schedule C hereto, if any, for the purchase price set
forth on such Schedule without any  approval by the Advisory Committee and
without the satisfaction of any other conditions to conflict of interest
transactions set forth herein; and

 

(iii)          to receive the amounts described in Sections 6.06 and 6.07
hereof, subject to the limitations set forth therein, without Advisory Committee
approval and without the satisfaction of any other conditions to conflict of
interest transactions set forth herein.

 

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6.05.       Liability for Acts and Omissions.

 

(a)           None of the General Partner, the Investment Manager, or any member
of the Advisory Committee nor any of their respective Affiliates, members,
shareholders, partners, managers, officers, directors, employees, agents and
representatives shall have any liability, responsibility or accountability in
damages or otherwise to any other Partner, any Class A Member or the Fund for,
and the Fund agrees, to the fullest extent permitted by law, to indemnify, pay,
protect and hold harmless the General Partner, the Investment Manager, each
member of the Advisory Committee and their respective Affiliates, members,
shareholders, partners, managers, officers, directors, employees, agents and
representatives (collectively, the “Indemnified Parties”) from and against, any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, proceedings, costs, expenses and disbursements of any kind or
nature whatsoever (including all costs and expenses of attorneys, defense,
appeal and settlement of any and all suits, actions or proceedings instituted or
threatened against the Indemnified Parties or the Fund) and all costs of
investigation in connection therewith which may be imposed on, incurred by, or
asserted against the Indemnified Parties or the Fund in any way relating to or
arising out of, or alleged to relate to or arise out of, any action or inaction
on the part of the Fund, on the part of the Indemnified Parties when acting on
behalf of the Fund (or any of the Fund Investments) or on the part of any
brokers or agents when acting on behalf of the Fund (or any of the Fund
Investments) (collectively, the “Indemnified Liabilities”); provided, however,
that (x) the Fund shall not be liable to any Indemnified Party for any portion
of any Indemnified Liabilities that results from such Indemnified Party’s fraud,
gross negligence (determined in the context of the Standard of Care), willful
misconduct or breach of the terms of this Agreement or any other agreement
between such Indemnified Party and the Fund or its Affiliates and (y) the
General Partner shall be liable, responsible and accountable for and shall
indemnify, pay, protect and hold harmless the Fund from and against any
Indemnified Liabilities which result from the General Partner’s, the Investment
Manager’s or their respective Affiliates’ fraud, gross negligence (determined in
the context of the Standard of Care), willful misconduct or breach of the terms
of this Agreement or any other agreement between such Indemnified Party and the
Fund or its Affiliates; provided, further, however, nothing in this provision
shall create personal liability on the part of any of the General Partner’s
Affiliates or its or their respective members, shareholders, partners, managers,
officers, directors, employees, agents or representatives nor shall this
provision relieve any of them of liability arising under any other agreement or
document to which they are parties.  In any action, suit or proceeding against
the Fund or any Indemnified Party relating to or arising, or alleged to relate
to or arise, out of any such action or non-action, the Indemnified Parties shall
have the right to jointly employ, at the expense of the Fund, counsel of the
Indemnified Parties’ choice (reasonably satisfactory to the Fund) in such
action, suit or proceeding, which counsel shall be reputable and qualified in
matters of the type that are the subject of such action, suit or proceeding,
provided that if retention of joint counsel by the Indemnified Parties would
create a conflict of interest, each group of Indemnified Parties which would not
cause such a conflict shall have the right to employ, at the expense of the
Fund, separate counsel of such group of Indemnified Parties’ choice in such
action, suit or proceeding, which counsel shall be reputable and qualified in
matters of the type that are the subject of such action, suit or proceeding;
provided, however, that if any indemnitor shall acknowledge in writing its
liability to the relevant Indemnified Party for

 

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any action, suit or proceeding brought by a third party in connection with which
such Indemnified Party is seeking indemnification, then such indemnitor shall be
entitled to select counsel to defend such action, suit or proceeding, subject to
the approval of such Indemnified Party, which approval shall not be unreasonably
withheld.  The satisfaction of the obligations of the Fund under this
Section 6.05(a) shall be from and limited to the assets of the Fund and no
Limited Partner shall have any personal liability on account thereof.

 

(b)           The provision of advances from Fund funds to an Indemnified Party
for legal expenses and other costs incurred as a result of any legal action or
proceeding is permissible if (i) such suit, action or proceeding relates to or
arises out of, or is alleged to relate to or arise out of, any action or
inaction on the part of the Indemnified Party in the performance of its duties
or provision of its services on behalf of the Fund or any of the Fund
Investments or the Fund’s subsidiaries or in its capacity as a member of the
Advisory Committee; and (ii) the Indemnified Party undertakes to repay any funds
advanced pursuant to this Section 6.05(b) in cases in which it is ultimately
determined that such Indemnified Party is not entitled to indemnification under
Section 6.05(a).  If advances are made under this Section 6.05(b), the
Indemnified Party shall furnish the Fund with an undertaking as set forth in
clause (ii) of this paragraph and shall thereafter have the right to bill the
Fund for, or otherwise request the Fund to pay, at any time and from time to
time after such Indemnified Party shall become obligated to make payment
therefor, any and all reasonable amounts for costs and expenses of the types
described in Section 6.05(a) for which such Indemnified Party believes in good
faith that such Indemnified Party is entitled to indemnification under
Section 6.05(a) with the approval of the General Partner, or if the General
Partner or its Affiliate is the Indemnified Party, the Advisory Committee, which
approval shall not be unreasonably withheld.  The Fund shall pay any and all
such bills and honor any and all such requests for payment within sixty
(60) days after such bill or request (together with supporting information
reasonably satisfactory to the General Partner) is received by the General
Partner, and the Fund’s rights to repayment of such amounts shall be secured by
the Indemnified Party’s Interest, if any, or by such other adequate security as
the General Partner, or if the General Partner or its Affiliate is the
Indemnified Party, the Advisory Committee may determine.  In the event that a
final determination is made that the Fund is not so obligated in respect of any
amount paid by it to a particular Indemnified Party, such Indemnified Party
shall refund such amount within sixty (60) days of such final determination.  In
the event that a final determination is made that the Fund is so obligated in
respect of any amount not paid by the Fund to a particular Indemnified Party,
the Fund shall pay such amount to such Indemnified Party within sixty (60) days
of such final determination.  In either of the foregoing cases, the party
obligated to pay shall include with such payment interest at the greater of
(i) nine percent (9%) or (ii) the Prime Rate plus two percent (2%) from the date
paid by the Fund until repaid by the Indemnified Party or the date it was
obligated to be paid by the Fund until the date actually paid by the Fund to the
Indemnified Party.

 

(c)           All judgments against the Fund or any Indemnified Party wherein an
Indemnified Party is entitled to indemnification must first be satisfied from
the Fund assets before the General Partner or such other Indemnified Party is
responsible for these obligations.

 

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(d)           With respect to the liabilities of the Fund for which the General
Partner is not obligated to indemnify the Fund, whether for the consummation of
Investments, professional and other services rendered to it, loans made to it by
Partners or others, injuries to persons or property, indemnity to the
Indemnified Parties, contractual obligations, guaranties, endorsements or for
other reasons similar or dissimilar to any of the foregoing, and without regard
to the manner in which any liability of any nature may be incurred by the person
to whom it may be owed, all such liabilities:

 

(i)            shall be liabilities of the Fund as an entity, and shall be paid
or otherwise satisfied from Fund assets (and the Fund shall sell or liquidate
all assets as necessary to satisfy such liabilities);

 

(ii)           to the extent and only to the extent Fund assets are insufficient
to satisfy any liability, shall be payable by the General Partner, but, to the
fullest extent permitted by law, only to the extent it may be required to make
additional contributions to the Fund pursuant to the other terms of this
Agreement; and

 

(iii)          shall not in any event be payable in whole or in part by the
REIT, or by any director, officer, trustee, employee, agent, shareholder,
beneficiary or partner of any Partner.

 

Nothing in this Section 6.05(d) shall be construed to impose upon the General
Partner, its members, partners, directors, officers, employees, agents or
shareholders any liability in circumstances in which the liability arises from a
written document which the General Partner has properly entered into or caused
the Fund to enter into if the written document expressly limits liability
thereon to the Fund or expressly disclaims any liability thereunder on the part
of any such Person but this exculpation shall not relieve the General Partner
from liability to the Fund pursuant to clause (y) of Section 6.05(a) hereof.

 

(e)           The General Partner may cause the Fund, at the Fund’s expense, to
purchase insurance to insure the General Partner and the other Indemnified
Parties against liability hereunder (including liability arising in connection
with the operation of the Fund), including for a breach or an alleged breach of
their responsibilities hereunder.  However, the Fund shall not incur the costs
of that portion of any insurance, other than public liability insurance, which
insures any Indemnified Party for any liability as to which such person is
prohibited from being indemnified under Section 6.05(a).

 

(f)            If the Indemnified Party is entitled to indemnification hereunder
and is entitled to indemnification from another source or to recovery by
insurance policies, such Indemnified Party shall diligently and continuously
pursue such other source, provided that (i) such obligation shall not in any
manner limit such Indemnified Party’s right to seek indemnification or advances
under this Agreement and (ii) such Indemnified Party shall remit to the Fund any
funds it recovers from another source to the extent that the sum of the amounts
recovered from such other source plus the amounts recovered from the Fund
exceeds the aggregate losses it incurred for which it is entitled to
indemnification hereunder.

 

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(g)           The reimbursement, indemnity and contribution obligations of the
Fund under this Section 6.05 shall (i) be in addition to any liability which the
Fund may otherwise have, (ii) not be deemed to be exclusive of any other rights
to which any Indemnified Party may be entitled to under any agreement, as a
matter of law or otherwise, both as to action in an Indemnified Party’s official
capacity and to action in another capacity, (iii) continue as to an Indemnified
Party who shall have ceased to have an official capacity for acts or omissions
during such official capacity and (iv) be binding upon and inure to the benefit
of any successors, assigns, heirs and personal representatives of the Fund, the
General Partner and any such other Indemnified Party.

 

(h)           The indemnification rights provided for in this Section 6.05 shall
survive the termination of the Fund or this Agreement, except that no claim may
be asserted by any Indemnified Party against any indemnitor under this
Section 6.05 after the third anniversary of the termination of the Fund unless
written notice of such claim (describing such claim in reasonable detail) shall
have been provided by the Indemnified Party to the indemnitor prior to such
third anniversary and such claim shall be prosecuted promptly thereafter and
pursued diligently to completion.

 

6.06.       Expenses.  (a)  The Fund shall pay all Operating Expenses incurred
by or for the account of the Fund or the REIT.  The Fund shall also reimburse
the General Partner for Operating Expenses paid by the General Partner if such
Operating Expenses are out-of-pocket expenses; provided, however, that Operating
Expenses payable to Affiliates of the General Partner for services rendered or
goods provided by such Affiliates to the Fund or the REIT shall be reimbursable
only to the extent they are permitted by Section 6.04(a) or Section 6.04(b)(i).

 

(b)           The General Partner shall not be reimbursed for any costs and
expenses relating to the general operation of the General Partner’s business,
including administrative expenses, employment expenses (including employment
costs of the General Partner with respect to the preparation of the reports
deliverable pursuant to Article XII hereof (it being understood and agreed,
however, that the General Partner may engage, at the expense of the Fund,
accountants to prepare, or assist in the preparation of, those reports and any
financial statements contained therein)), office expenses, subject to
Section 6.05(e) hereof insurance of the General Partner and its employees, rent,
and all or any part of the General Partner’s travel expenses and legal expenses
that are not incurred in the course of the business, and for the benefit, of the
Fund or the REIT.

 

(c)           It is the intention of the parties hereto that all expenses and
obligations of the REIT (including any indemnification obligations but excluding
any obligations under a promissory note delivered by the REIT pursuant to
Section 14.02(b) of the REIT LLC Agreement) be paid by the Fund and to the
extent that the REIT pays or is obligated to pay any such expenses or
obligations all such amounts shall be paid or reimbursed by the Fund.  Any such
payment of, or reimbursement for, the expenses or obligations of the REIT, shall
be treated as a distribution to the REIT for all purposes of this Agreement
other than for the purposes of Section 5.02 hereof and the definition of
“Operating Expenses” herein (i.e., any such payment or reimbursement shall be
treated as an Operating Expense of the Fund).

 

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(d)           In no event shall any payments to the General Partner under this
Section 6.06 or Section 6.07 be deemed a distribution to the General Partner.

 

6.07.       Organizational Expenses and Investment Management Fees.

 

(a)           The General Partner and its Affiliates shall be reimbursed by the
Fund for all Organizational Expenses incurred by the General Partner and its
Affiliates up to a maximum of $1,750,000; provided, however, that if, after
giving effect to the final Closing, the amount of Organizational Expenses paid
by the Fund exceeds 0.2% of the aggregate capital commitments of the Class A
Members to the REIT, the General Partner shall return the excess amount to the
Fund, which refund may be effected by offsetting the Investment Management Fee
otherwise payable to the Investment Manager.  The General Partner shall bear the
fees of any Placement Agent.

 

(b)           Pursuant to the Investment Management Agreement, the Fund shall
pay to the Investment Manager an annual investment management fee (the
“Investment Management Fee”) for the services rendered by the Investment Manager
in managing the assets of the Fund.  The Investment Management Fee shall be
payable quarterly in arrears on the tenth day (or, if such day is not a Business
Day, on the next succeeding Business Day) following the close of each fiscal
quarter of the Fund.  Each quarterly installment of the Investment Management
Fee shall be an amount equal to (i) if the daily average Adjusted Fair Value of
the Fund Investments during such quarter is less than or equal to $500 million,
0.25% of such daily average Adjusted Fair Value, (ii) if the daily average
Adjusted Fair Value of the Fund Investments during such quarter is greater than
$500 million but less than or equal to $1 billion, the sum of $1.25 million plus
0.2375% of such daily average Adjusted Fair Value in excess of $500 million,
(iii) if the daily average Adjusted Fair Value of the Fund Investments during
such quarter is greater than $1 billion but less than or equal to $1.5 billion,
the sum of $2.4375 million plus 0.225% of such daily average Adjusted Fair Value
in excess of $1 billion, (iv) if the daily average Adjusted Fair Value of the
Fund Investments during such quarter is greater than $1.5 billion but less than
or equal to $4.0 billion, the sum of $3.5625 million plus 0.2125% of such daily
average Adjusted Fair Value in excess of $1.5 billion and (v) if the daily
average Adjusted Fair Value of the Fund Investments during such quarter is
greater than $4.0 billion, the sum of $8.875 million plus 0.100% of such daily
average Adjusted Fair Value in excess of $4.0 billion; provided, however, that
(I) if any Permitted Investment (but specifically excluding (x) any property
level reserves with respect to Qualified Investments that have been included by
the applicable Expert(s) as part of the Adjusted Fair Value of any such
Qualified Investment and (y) any receipts representing Distributable Proceeds)
has been held by the Fund as a Permitted Investment for six (6) months or more
(determined on a first-in-first-out basis) then the portion thereof on any day
thereafter that exceeds one percent (1%) of the aggregate Adjusted Fair Value of
all of the Fund Investments on such day shall be excluded from the calculation
of the Adjusted Fair Value on that day used to determine the daily average
Adjusted Fair Value for purposes of clauses (i) through (v) of this sentence;
and (II) for the avoidance of doubt, any property level reserves with respect to
Qualified Investments that have been included by the applicable Expert(s) as
part of the Adjusted Fair Value of any such Qualified Investment shall not also
be separately valued as stand-alone Permitted Investments (i.e., so as to ensure
that there is no double counting of such

 

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reserves for purposes of calculating the aggregate Adjusted Fair Value of all of
the Fund Investments and the Investment Management Fee).  Installments of the
Investment Management Fee for any period of less than a full three months shall
be prorated on the basis of the actual number of days in such period.

 

6.08.       Breakup Fees.  Any breakup fees received by the General Partner or
any Affiliate thereof in connection with an Investment intended to be made by
the Fund that is not consummated shall be paid to the Fund (and shall be deemed
to have been received by the General Partner or its Affiliate as nominee for the
Fund); provided, however, if the General Partner determines that any such fees
would not constitute income described in  Section 856(c)(2) of the Code, the
General Partner shall retain and, notwithstanding anything in Article V hereof
to the contrary, be specially allocated an amount thereof such that income not
described in Section 856(c)(2) of the Code equals no more than 4.9% of the total
income allocated to the REIT hereunder.

 

6.09.       Directors’ Fees.  The Fund’s individual representatives on any board
of directors of any entity related to a Fund Investment shall not be entitled to
retain any directors’ fees or similar compensation received by such Persons from
such entity as consideration for their service on such board of directors or
other governing body (such fees or other similar compensation being hereinafter
referred to as “Directors’ Fees”).  All such Directors’ Fees shall be paid to
the Fund.

 

6.10.       Key Persons.  Prior to the acquisition of the General Partner by the
REIT (or a subsidiary thereof) pursuant to the GP Acquisition Agreement, each
Principal, for so long as he remains Affiliated with the General Partner, shall
devote a substantial portion of his business time and attention to (i) the
affairs of the Fund, (ii) the affairs of the Opportunity Fund, (iii) Prior
Investments, (iv) co-investment opportunities with respect to the Opportunity
Fund, (v) fundraising and marketing activities with respect to, and the affairs
of, any subsequent opportunity fund and (vi) from and after the date when at
least 95% of the aggregate Capital Commitments of the Partners (excluding the
portion thereof attributable to “Defaulting Members” (as defined in the REIT LLC
Agreement) of the REIT) have been invested by the Fund in Qualified Investments,
the affairs of any subsequent fund having an investment objective that is
similar to the Fund’s investment objective.  Further, if the Principals raise
another fund having an investment objective that is similar to the Fund’s
investment objective, then the new fund shall reimburse the Fund for such new
fund’s pro rata share (based upon relative time commitments) of the salaries of
all employees of CIM Group, Inc. hired after the First Closing to work
exclusively on the Fund’s business.  In addition, prior to the acquisition of
the General Partner by the REIT (or a subsidiary thereof) pursuant to the GP
Acquisition Agreement, the Principals (for so long as they remain Affiliated
with the General Partner) shall spend at all times such time on Fund affairs as
is reasonable in order to perform the obligations of the General Partner,
consistent with the Standard of Care.  Prior to the acquisition of the General
Partner by the REIT (or a subsidiary thereof) pursuant to the GP Acquisition
Agreement, in the event that any of the Principals ceases to be Affiliated with
the General Partner, the General Partner shall provide prompt notice of such
cessation to each Class A Member.

 

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6.11.       Other Activities.  Subject to Sections 6.01 and 6.09 above, the
Partners, the members of the REIT and their Affiliates may engage in or possess
an interest in other business ventures of every nature and description for their
own account, independently or with others, including real estate business
ventures, whether or not such other enterprises shall be in competition with any
activities of the Fund; and neither the Fund nor the other Partners shall have
any right by virtue of this Agreement in and to such independent ventures or to
the income or profits derived therefrom.

 

ARTICLE VII

 

ASSIGNMENTS, WITHDRAWAL AND REMOVAL OF THE GENERAL PARTNER

 

7.01.       Assignment or Withdrawal by the General Partner.  The General
Partner may not Transfer its Interest, in whole or in part, or withdraw from the
Fund, except as permitted by this Article VII.

 

7.02.       Voluntary Assignment or Withdrawal of the General Partner;
Acquisition of the General Partner.  (a)  Except as provided below or in
Section 7.03 hereof or Section 7.04 hereof, the General Partner may not Transfer
its Interest or voluntarily withdraw from the Fund, without the Consent of the
Advisory Committee.  Notwithstanding the foregoing or any other provision herein
to the contrary, the following shall not be considered violations of this
Section 7.02 or any other provision of this Agreement, shall not require the
Consent of the Advisory Committee and are expressly permitted:  (i) a Transfer
pursuant to Section 7.02(b), (ii) any Transfer by the General Partner to one or
more Affiliates of the General Partner, employees of the General Partner or its
Affiliates (“Employees”), Immediate Family Relatives of the Principals or
Employees, trusts for the benefit of any such Persons or family charitable
foundations over which any such Person has direction (any such Person, a
“Permitted Transferee”) and (iii) a pledge by the General Partner of the
distributions receivable by it hereunder that does not give the pledgee the
right to be admitted as a successor General Partner or other Partner; provided,
however, that the foreclosure of any such pledge shall be treated as a material
breach by the General Partner of this Agreement.  In the event that the General
Partner intends to Transfer its Interest to a Permitted Transferee in accordance
with clause (ii) above, such Permitted Transferee shall be admitted as a
successor General Partner immediately prior to the effective time of the
Transfer and such successor General Partner shall continue the business of the
Fund without dissolution.  Such Permitted Transferee shall be subject to the
provisions of this Section 7.02 and all other provisions of this Agreement
applicable to the General Partner.

 

(b)           At any time in connection with a Public Transaction, the General
Partner may Transfer its Interest pursuant to the terms of the GP Acquisition
Agreement.  Immediately prior to the effective time of such Transfer, a
wholly-owned subsidiary of the REIT shall be admitted as a successor General
Partner and such successor General Partner shall continue the business of the
Fund.

 

7.03.       Bankruptcy of the General Partner.  (a)  Upon the Bankruptcy or
dissolution of the General Partner, (x) the General Partner or its legal
representative shall give

 

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notice to the REIT and the Class A Members of such event and shall
automatically, with or without delivery of such notice, cease to be the general
partner of the Fund and shall no longer have power, authority or responsibility
to bind the Fund or to make decisions concerning, or manage or control, the
affairs of the Fund or have the obligations or liabilities of a general partner
of the Fund under this Agreement or under applicable law, and the recorded
certificate of the Fund shall be amended to reflect such fact, and (y) at the
election of the REIT (provided that no such election shall be effective unless
it is Consented to by a majority of the Class A Percentage Interests of the
Class A Members, excluding for this purpose any Class A Percentage Interests of
Affiliates of the General Partner), within ninety (90) days of the date of the
event that caused such cessation, a wholly-owned subsidiary of the REIT shall be
admitted to the Fund as a successor General Partner (effective as of the date of
the Bankruptcy or dissolution of the prior General Partner) and such successor
shall continue the business of the Fund without dissolution.  If a successor
General Partner is not admitted to the Fund within such ninety (90) day period,
the Fund shall dissolve in accordance with Article X.  If a successor General
Partner is selected and admitted to the Fund within such ninety (90) day period,
then on the date of such admission the REIT (or a subsidiary thereof) shall
acquire the former General Partner (or, if the former General Partner has been
dissolved, the REIT shall acquire its Interest in the Fund) in accordance with
the terms of the GP Acquisition Agreement.  Thereafter, all distributions
hereunder shall be made to the REIT and the successor General Partner on a pro
rata basis in accordance with their Capital Commitments, Article V hereof shall
automatically, and without any further action, be deemed amended to reflect such
change and this Section 7.03(a) shall automatically, and without any further
action, be deemed amended to delete the penultimate sentence thereof.

 

(b)           Notwithstanding the foregoing, if a successor General Partner is
selected and admitted to the Fund within the ninety (90) day period referred to
in Section 7.03(a) hereof and prior to the date of the admission of such
successor General Partner, the Class A Members have elected to defer the
acquisition by the REIT of the former General Partner or its Interest for two
(2) years and to convert the Interest of the former General Partner to that of a
Limited Partner pursuant to Section 7.02(a) of the REIT LLC Agreement, then on
the date of such admission (i) the Interest of the former General Partner shall
be converted to the Interest of a Limited Partner having the same rights as to
distributions (including the right to receive the Incentive Distribution
pursuant to Section 5.02(e) hereof) and allocations of Profits and Losses
hereunder and the same recontribution obligations hereunder as the former
General Partner (upon such conversion the former General Partner (or if it has
been dissolved, the holders of the interests therein) shall be referred to
herein as a “Special Limited Partner” and such Interest as so converted shall be
referred to herein as the Interest of a Special Limited Partner), (ii) Article V
hereof and Schedule D hereto shall automatically, and without any further
action, be deemed amended to reflect such conversion and (iii) the Disposition
Period shall commence (in the event that it has not previously commenced in
accordance with the terms hereof).  If the Interest of the former General
Partner is converted to that of a Special Limited Partner pursuant to this
Section 7.03(b), then on the second anniversary of the date of the admission of
the successor General Partner the REIT (or a subsidiary thereof) shall acquire
the former General Partner (or if the former General Partner has been dissolved,
the REIT shall acquire its Interest in the Fund) in accordance with the terms of
the GP Acquisition Agreement.

 

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7.04.       Removal of the General Partner.  (a)  Upon a removal of the director
of the REIT pursuant to Section 7.02(b), Section 7.02(c) or Section 7.02(d) of
the REIT LLC Agreement, with the Consent of sixty-six and two-thirds percent
(66-2/3%) of the Class A Percentage Interests of the Class A Members (excluding
for this purpose the Class A Percentage Interests of any Affiliates of the
General Partner), the REIT may send notice (a “Removal Notice”) to the General
Partner that it shall be removed as general partner of the Fund.  Upon delivery
of a Removal Notice to the General Partner in accordance with the immediately
preceding sentence the General Partner shall resign as general partner of the
Fund provided that no such removal shall be effective earlier than (x) fifteen
(15) days after receipt of such notice by the General Partner and (y) the date
that a successor General Partner is admitted pursuant to the provisions of
Section 7.06 hereof.  Any such successor General Partner shall be a wholly-owned
subsidiary of the REIT.

 

(b)           On the effective date of a removal of the General Partner pursuant
to Section 7.04(a) hereof, the REIT (or a subsidiary thereof) shall acquire the
removed General Partner in accordance with the terms of the GP Acquisition
Agreement.  Notwithstanding the foregoing, if the Class A Members have elected
to defer the acquisition by the REIT of the removed General Partner for two
(2) years and to convert the Interest of the removed General Partner to that of
a Limited Partner pursuant to Section 7.02(b), Section 7.02(c) or
Section 7.02(d) of the REIT LLC Agreement, then on the effective date of the
removal (i) the Interest of the removed General Partner shall be converted to
the Interest of a Special Limited Partner having the same rights as to
distributions (including the right to receive the Incentive Distribution
pursuant to Section 5.02(e) hereof) and allocations of Profits and Losses
hereunder and the same recontribution obligations hereunder as the removed
General Partner, (ii) Article V hereof and Schedule D hereto shall
automatically, and without any further action, be deemed amended to reflect such
conversion and (iii) the Disposition Period shall commence (in the event that it
has not previously commenced in accordance with the terms hereof).  If the
Interest of the removed General Partner is converted to that of a Special
Limited Partner pursuant to this Section 7.04(b), then on the second anniversary
of the effective date of the removal the REIT (or a subsidiary thereof) shall
acquire the removed General Partner in accordance with the terms of the GP
Acquisition Agreement.

 

7.05.       Obligations of a Prior General Partner.  In the event that the
General Partner Transfers its entire Interest in accordance with Section 7.02 or
is acquired (or has its Interest acquired) by the REIT pursuant to the GP
Acquisition Agreement, it shall have no further obligation or liability as a
general partner of the Fund pursuant to this Agreement in connection with any
obligations or liabilities arising from and after such Transfer or acquisition,
and all such future obligations and liabilities shall automatically cease and
terminate and be of no further force or effect; provided, however, that nothing
contained herein shall be deemed to relieve the former General Partner of any
obligations or liabilities (i) arising prior to such Transfer or acquisition or
(ii) resulting from a dissolution of the Fund caused by the act of the General
Partner to the extent liability is imposed upon the General Partner by law or by
the provisions of this Agreement.

 

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7.06.       Successor General Partner.  A Person shall be admitted as a General
Partner only if the following terms and conditions are satisfied:

 

(a)           the Person shall have accepted and agreed to be bound by all the
terms and provisions of this Agreement by executing a counterpart hereof and
such other documents or instruments as may be required or appropriate in order
to effect the admission of such Person as a General Partner;

 

(b)           a certificate evidencing the admission of such Person as a General
Partner shall have been filed in accordance with the Act;

 

(c)           if the successor General Partner is a corporation, it shall have
provided counsel for the Fund with a certified copy of a resolution of its Board
of Directors and, if required, the consent of the shareholders, authorizing it
to become a General Partner;

 

(d)           if the successor General Partner is not a corporation but is a
partnership, limited liability company or other entity, it shall provide counsel
for the Fund with a certified copy of its organizational documents, together
with certified copies of any actions authorizing it to become a General Partner;
and

 

(e)           with respect to an admission in connection with a Transfer of the
General Partner’s Interest pursuant to Section 7.02(a) hereof, counsel for the
Fund shall have rendered an opinion that such Transfer will result in a
continuation of the Fund as a non-publicly-traded partnership for U.S. federal
income tax purposes.

 

The former General Partner shall reasonably cooperate to facilitate the
substitution of the successor General Partner, even where the General Partner
was removed for Cause, and shall be reimbursed for its reasonable costs and
expenses relating thereto.

 

ARTICLE VIII

 

RIGHTS AND OBLIGATIONS OF THE REIT

 

8.01.       Management of the Fund.  The REIT may not take part in the
management or control of the business of the Fund or transact any business in
the name of the Fund (it being understood that this restriction is not intended
to limit the ability of a Class A Member that is a member of the Advisory
Committee to participate in its capacity as such in the activities of the
Advisory Committee).  The REIT shall not have the power or authority to bind the
Fund or to sign any agreement or document in the name of the Fund.  The REIT
shall not have any, power or authority with respect to the Fund, except as
provided in the Act and insofar as the Consent or approval of the REIT shall be
expressly required by this Agreement.  The exercise of any of the rights and
powers of the REIT pursuant to the Act or the terms of this Agreement shall not
be deemed taking part in the day-to-day affairs of the Fund or the exercise of
control over Fund affairs.

 

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8.02.       Limitation on Liability.

 

(a)           The REIT shall not have any liability to contribute money to the
Fund, nor shall the REIT be personally liable for any obligations of the Fund,
except to the extent of its Capital Commitment and as otherwise provided in
Sections 5.02(h) and 8.02(b) hereof.  No Partner shall be obligated to make
loans to the Fund and no Partner shall be obligated to repay to the Fund, any
Partner or any creditor of the Fund all or any fraction of any amounts
distributed to such Partner, except as specifically required pursuant to
Section 5.02(g), Section 5.02(h) and/or Section 8.02(b) hereof.

 

(b)           In accordance with state law, a limited partner of a partnership
may, under certain circumstances, be required to return to the partnership for
the benefit of partnership creditors amounts previously distributed to it as a
return of capital.  It is the intent of the Partners that a distribution to any
Partner be deemed a compromise within the meaning of Section 17-502(b) of the
Act and not a return or withdrawal of capital, even if such distribution
represents, for U.S. federal income tax purposes or otherwise (in full or in
part), a distribution of capital, and the REIT shall not be obligated to pay any
such amount to or for the account of the Fund or any creditor of the Fund,
except as provided in this Section 8.02.  However, if any court of competent
jurisdiction holds that, notwithstanding the provisions of this Agreement, the
REIT is obligated to make any such payment, such obligation shall be the
obligation of the REIT and not of the General Partner.

 

8.03.       Power of Attorney.

 

(a)           The REIT hereby makes, constitutes and appoints the General
Partner and/or its authorized officers and agents, successors and assigns, as
its true and lawful attorney-in-fact with full power and authority in its name,
place and stead to make, complete, execute, sign, acknowledge, deliver, file and
record at the appropriate public offices such documents as may be necessary or
appropriate to carry out the provisions of this Agreement, including the
following with respect to the Fund:

 

(i)            all certificates, other agreements and amendments thereto which
the General Partner deems necessary to form, continue or otherwise qualify the
Fund as a limited partnership in each jurisdiction in which the Fund conducts or
may conduct business or in connection with any tax filings of the Fund and any
election to treat the Fund as a partnership for U.S. federal income tax
purposes, and the REIT specifically authorizes the General Partner to execute,
sign, acknowledge, deliver, file and record any amendments to the Certificate of
Limited Partnership of the Fund as required by the Act;

 

(ii)           this Agreement, counterparts hereof and amendments hereto
authorized pursuant to the terms hereof (including any amendments automatically
effected pursuant to Section 7.03 or Section 7.04 hereof);

 

(iii)          all instruments which the General Partner deems necessary to
effect the admission of a General Partner pursuant to Section 7.06, the
redemption or

 

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transfer of the Interest of the REIT (or a portion thereof) pursuant to
Article IX hereof or the dissolution and liquidation of the Fund in accordance
with the provisions hereof;

 

(iv)          all appointments of agents for service of process and attorneys
for service of process which the General Partner deems necessary or appropriate
in connection with the organization and qualification of the Fund and the
conduct of its business; and

 

(v)           all certificates, consents, instruments, agreements and other
documents (and any amendments to any of the foregoing) which the General Partner
deems necessary to effect a Public Transaction, to sell all or substantially all
of the assets of the Fund or to cause the Fund to merge with another Person.

 

(b)           The foregoing power of attorney is hereby declared to be
irrevocable and coupled with an interest, and it shall survive the Bankruptcy,
dissolution or cessation to exist of the REIT to the fullest extent permitted by
law and shall extend to its successors and assigns.

 

(c)           The power of attorney granted to the General Partner shall not
apply to Consents of the REIT or the Advisory Committee provided for in this
Agreement.

 

(d)           The REIT further agrees to execute promptly any and all documents
or instruments referred to in this Section 8.03 if the power of attorney granted
hereunder is rendered ineffective by the provisions of the Act or if the General
Partner in its reasonable discretion so requests execution by the REIT and the
same shall not be inconsistent with the provisions hereof.

 

8.04.       Waiver of Action for Partition.  Each of the parties hereto
irrevocably waives during the term of the Fund any right that it may have to
maintain any action for partition with respect to any assets of the Fund.

 

8.05.       Confidentiality.  (a)  The REIT and its members agree that, except
as permitted in Section 8.05(b) below neither the REIT nor its members shall
disclose without the prior consent of the General Partner (other than to the
REIT’s or any of its members’ employees, auditors, consultants, or counsel
provided that such disclosure is made in confidence and shall be kept in
confidence) (i) the identity of other members of the REIT and their Affiliates,
or (ii) any information with respect to the Fund, the General Partner or the
REIT (including this Agreement, the REIT LLC Agreement, any amendments to either
thereof, the terms hereof and thereof and all exhibits and schedules hereto and
thereto and information regarding any Fund Investment and/or any Person in which
the Fund holds, or contemplates acquiring, any Fund Investment) received by the
REIT or such member pursuant to this Agreement or the REIT LLC Agreement or any
other information disclosed to the REIT or such member about the Fund or the
REIT, in each case to the extent any such information is not generally available
to the public (collectively, “Non-Public Information”), it being agreed that
such Non-Public Information is strictly confidential and proprietary.

 

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(b)           Notwithstanding Section 8.05(a) above, the REIT and any of its
members may disclose Non-Public Information if each of the conditions described
in the following clauses (i), (ii) and (iii) is satisfied:

 

(i)            such Non-Public Information (A) is required for submission to any
municipal, state or national (including foreign) regulatory body having or
claiming to have jurisdiction over the REIT or such member, (B) is required in
response to any summons or subpoena or in connection with any litigation or
other legal process (including pursuant to the United States Freedom of
Information Act, as amended, any similar state “sunshine” law or any other
comparable law or regulation) involving the REIT or such member, or (C) is
otherwise necessary in order to comply with any law, order, regulation, ruling
or other governmental request applicable to the REIT or such member;

 

(ii)           prior to any such disclosure pursuant to clauses (i)(A), (i)(B),
or (i)(C) above, the REIT or such member, as the case may be, shall provide the
General Partner with advance written notice so that the General Partner may seek
a protective order, other appropriate remedy, or other reliable assurance that
confidential treatment will be accorded the requested or required information
(and the REIT or such member will cooperate with the General Partner’s efforts
to obtain an appropriate protective order, other appropriate remedy, or other
reliable assurance that confidential treatment will be accorded the requested or
required information); and

 

(iii)          in the event that the General Partner is unable to obtain such a
protective order or other remedy or assurance, and as a result the REIT or such
member is legally compelled to disclose any Non-Public Information, then the
REIT or such member, as applicable, shall (x) disclose only that portion of the
information (including, without limitation, by way of redaction) which is
legally required to be disclosed, and (y) consult with the General Partner
regarding the extent of the information that is legally required to be
disclosed.

 

(c)           Notwithstanding the foregoing, in the event that, as a result of a
Class A Member’s ownership of Class A Membership Units, and after reasonable
attempts by the Fund to mitigate the circumstances, the Fund is or may be
constrained in any respect in its ability to make any Qualified Investment or
retain any Fund Investment, then, to the fullest extent permitted by applicable
law, such Class A Member shall not be entitled to have access to any information
or documents with respect to the portion of the business of such Qualified
Investment or Fund Investment, as the case may be, that gives rise to such
constraint, to the extent reasonably necessary to remove such constraint, and
such Class A Member and the General Partner shall use their reasonable efforts
in good faith to negotiate an arrangement with the objective of permitting the
Fund to make or retain such Investment.  In addition, to protect the sensitive
nature of the information described in Section 8.05(a), the General Partner and
the director of the REIT may make all or certain confidential information
unavailable to all or certain Class A Members, in some cases based on the status
of those Class A Members.

 

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(d)           Notwithstanding anything in the foregoing or anything else
contained in this Agreement, the REIT LLC Agreement, the Subscription Agreements
(as defined in the REIT LLC Agreement) or the Private Placement Memorandum for
the REIT to the contrary, except as reasonably necessary to comply with
applicable securities laws, each of the parties hereto (and its employees,
representatives or other agents) may disclose to any and all Persons, without
limitation of any kind, the tax treatment and tax structure of the offering and
ownership of the Interests and the membership units of the REIT (including the
tax treatment and tax structure of any Fund transactions) and all materials of
any kind (including opinions and other tax analyses) that are provided to such
party with respect to such tax treatment and tax structure.

 

ARTICLE IX

 

VOLUNTARY TRANSFER OF THE REIT’S INTEREST

 

9.01.       Transfers.  The REIT may not Transfer its Interest in the Fund
without the prior written Consent of the General Partner which Consent the
General Partner may grant or withhold in its discretion.

 

9.02.       Substitute Limited Partner.  A transferee of the whole or any
portion of the REIT’s Interest in the Fund pursuant to Section 9.01 hereof shall
have the right to become a Substitute Limited Partner in place of its transferor
only if all of the following conditions are satisfied:

 

(a)           the fully executed and acknowledged written instrument of
Transfer, in a form reasonably satisfactory to the General Partner, has been
filed with the Fund;

 

(b)           the transferee executes, adopts and acknowledges this Agreement
and a Subscription Agreement without condition or modification;

 

(c)           any reasonable costs of Transfer incurred by the Fund are paid to
the Fund; and

 

(d)           the General Partner shall have Consented in writing to the
substitution, which Consent the General Partner may grant or withhold in its
discretion.

 

9.03.       Involuntary Withdrawal by the REIT.

 

(a)           Upon the Bankruptcy or dissolution or other cessation of existence
of the REIT, the authorized representative of such entity shall have all the
rights of a Limited Partner for the purpose of effecting the orderly winding up
and disposition of the business of such entity and such power as such entity
possessed to designate a successor as a transferee of its Interest and to join
with such transferee in making application to substitute such transferee as a
Substitute Limited Partner.

 

(b)           The Bankruptcy, dissolution or other cessation to exist of the
REIT shall not dissolve or terminate the Fund.

 

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9.04.       Partial Redemption of the REIT’s Interest.  If the REIT is required,
pursuant to Section 14.02(b) of the REIT LLC Agreement, to redeem all or a
portion of the Class A Membership Units of any Class A Member, then, immediately
prior to the effective date of such redemption, the Fund shall redeem the
portion of the REIT’s Interest attributable to the Class A Membership Units to
be redeemed for a price equal to the price required to be paid by the REIT for
such Class A Membership Units, which redemption shall be effected in the manner
in which the redemption of such Class A Membership Units will be effected by the
REIT.

 

ARTICLE X

 

DISSOLUTION AND LIQUIDATION; CONTINUATION

 

10.01.     Dissolution.  The Fund shall be dissolved upon the first to occur of
any one of the following:

 

(a)           an election to dissolve the Fund is made by the General Partner
with the Consent of the REIT (provided that no such Consent shall be effective
unless a majority of the Class A Percentage Interests of the Class A Members
have Consented thereto);

 

(b)           an election to dissolve the Fund is made by the General Partner
after the reduction to cash of all or substantially all of the Fund Investments
of the Fund;

 

(c)           subject to the provisions of Article VII, the Bankruptcy,
dissolution, removal or other withdrawal of the General Partner or the sale,
transfer or assignment by the General Partner of its Interest in the Fund; or

 

(d)           any other event causing dissolution of the Fund under the Act.

 

10.02.     Liquidation.

 

(a)           Upon dissolution of the Fund, the Liquidator shall wind up the
affairs of the Fund as expeditiously as business circumstances allow and proceed
within a reasonable period of time to sell or otherwise liquidate the assets of
the Fund and, after paying or making due provision by the setting up of reserves
for all Indebtedness and other liabilities of the Fund, distribute the assets
among the Partners in accordance with the provisions for the making of
distributions set forth in this Article X.  Notwithstanding the foregoing, in
the event that the Liquidator shall, in its absolute discretion, determine that
a sale or other disposition of part or all of the Fund Investments would cause
undue loss to the Partners or otherwise be impractical, the Liquidator may
either defer liquidation of any such Fund Investments and withhold distributions
relating thereto for a reasonable time, or distribute part or all of such Fund
Investments to the Partners in kind (utilizing the principles of Section 5.03
and the valuation procedures described herein).  If the General Partner is not
the Liquidator, the Fund shall not be obligated to make any further payment of
the Investment Management Fee effective as of the appointment of such
Liquidator.

 

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(b)           No Partner shall be liable for the return of the Capital
Contributions of other Partners, provided that this provision shall not relieve
any Partner of any other duty or liability it may have under this Agreement.

 

(c)           Upon liquidation of the Fund, all of the assets of the Fund, or
the proceeds therefrom, shall be distributed or used as follows and in the
following order of priority:

 

(i)            for the payment of the debts and liabilities of the Fund and the
expenses of liquidation;

 

(ii)           to the setting up of any reserves which the Liquidator may deem
reasonably necessary for any contingent or unforeseen liabilities or obligations
of the Fund;

 

(iii)          to the Partners in proportion to the positive balances in their
Capital Accounts (determined after giving effect to adjustments and anticipated
adjustments to Capital Accounts through completion of liquidation of the Fund;
provided that, for the purposes of determining the amounts to be allocated in
accordance with Section 5.01 hereof for the year in which the liquidation
occurs, amounts to be distributed pursuant to this Section 10.02(c)(iii) after
such allocations are properly made shall be treated as if such amounts had been
distributed pursuant to Section 5.02(e) hereof without regard to this Section;
provided, further, that in such circumstances, to the extent consistent with the
requirements of Sections 704(b) and 514(c)(9) of the Code, the provisions of
Section 5.01 hereof shall be interpreted in each year during which the Fund
operates in a manner that will result in Capital Accounts being at levels so
that distributions among the Partners in accordance with this
Section 10.02(c)(iii) will equal as closely as possible the distributions that
would have been made pursuant to Section 5.02(e) hereof if
Section 5.02(e) controlled all liquidating distributions).

 

(d)           When the Liquidator has complied with the foregoing liquidation
plan, the Partners shall execute, acknowledge and cause to be filed an
instrument evidencing the cancellation of the Certificate of Limited Partnership
of the Fund, at which time the Fund shall be terminated.

 

ARTICLE XI

 

REPRESENTATIONS AND WARRANTIES OF THE GENERAL PARTNER

 

The General Partner represents, warrants and covenants to the REIT that as of
the date hereof (or such other date as is set forth below):

 

(a)           The Fund is a duly formed and validly existing corporation under
the laws of the State of California with full power and authority to conduct its
business as contemplated in this Agreement.

 

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(b)           The General Partner is a duly formed and validly existing
corporation under the laws of the State of California, with full power and
authority to perform its obligations hereunder.

 

(c)           The REIT is a duly formed and validly existing limited liability
company under the laws of the State of Delaware, with full power and authority
to perform its obligations hereunder.

 

(d)           All action required to be taken by the General Partner, the Fund
and the REIT, as a condition to the issuance and sale of the Class A Membership
Units being purchased by the Class A Members has been taken and all necessary
consents relating thereto have been obtained; the Interest of the REIT
represents a duly and validly issued limited partnership interest in the Fund;
the REIT is entitled to all the benefits of a Limited Partner under this
Agreement and the Act; the Class A Interest (as defined in the REIT LLC
Agreement) of each Class A Member represents a duly and validly issued limited
liability company interest in the REIT; and each Class A Member is entitled to
all the benefits of a Class A Member under the REIT LLC Agreement and the
Delaware Limited Liability Company Act.

 

(e)           This Agreement has been duly authorized, executed and delivered by
the General Partner and, upon due authorization, execution and delivery by the
REIT, will constitute the valid and legally binding agreement of the General
Partner enforceable in accordance with its terms against the General Partner.

 

(f)            As of the date thereof and as of the date hereof, the Private
Placement Memorandum for the REIT (together with any and all amendments thereto
and restatements thereof), does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made
therein, in light of the circumstances in which they were made, not misleading,
except that the descriptions therein of this Agreement and the REIT LLC
Agreement and the provisions hereof and thereof are superseded in their entirety
by this Agreement and the REIT LLC Agreement.

 

(g)           Assuming the accuracy of the representations made by each Class A
Member pursuant to Section 11.01 of the REIT LLC Agreement and the Subscription
Agreements (as defined in the REIT LLC Agreement) of the Class A Members, the
offer and sale of the Class A Membership Units do not require registration of
such membership units under the Securities Act.

 

ARTICLE XII

 

ACCOUNTING AND REPORTS

 

12.01.     Books and Records.  The General Partner shall maintain at the office
of the Fund (a) full and accurate books of the Fund (which at all times shall
remain the property of the Fund), in the name of the Fund and separate and apart
from the books of the General Partner and its Affiliates, showing all receipts
and expenditures, assets and liabilities, profits and losses, and (b) all other
books, records and information required by the Act or necessary for recording

 

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the Fund’s business and affairs.  The Fund’s books and records shall be
maintained in accordance with generally accepted accounting principles.  The
books of account and records of the Fund shall be audited as of the end of each
Fiscal Year by Deloitte & Touche LLP or another nationally recognized
independent certified public accounting firm selected by the General Partner, in
its discretion.

 

Each Class A Member shall, upon not less than (10) Business Days’ prior written
notice to the General Partner, be afforded full and complete access to all
records and books of account of the Fund during reasonable business hours and,
at such hours, shall have the right of inspection and copying of such records
and books of account, at its expense.  Each Class A Member shall have the right
to audit such records and books of account by an accountant of its choice at its
expense.  The General Partner shall reasonably cooperate with any Class A Member
or its agents in connection with any review or audit of the Fund or its records
and books.  The General Partner shall retain all records and books relating to
the Fund for a period of at least five (5) years after the termination of the
Fund and shall thereafter destroy such records and books as the General Partner
shall determine, in its discretion.

 

12.02.     Tax Matters Partner.  (a)  The General Partner shall be designated
the tax matters partner of the Fund (“TMP”) within the meaning of
Section 6231(a)(7) of the Code.  The REIT agrees that, to the extent permitted
by law, (i) any action taken by the TMP in connection with any administrative or
judicial proceeding in relation to taxes with respect to the income of the Fund
will be binding upon the REIT, (ii) the REIT will not act independently in
connection with any administrative or judicial proceeding in relation to taxes
with respect to the income of the Fund and (iii) the REIT will not treat any
Fund item of income, gain, loss, deduction or credit on any tax return in a
manner that is inconsistent with the treatment of such Fund item on a tax return
filed by the Fund.

 

(b)           The Fund shall indemnify and reimburse the TMP and the Investment
Manager for (i) all expenses, including legal and accounting fees, claims,
liabilities, losses and damages incurred in connection with any administrative
or judicial proceeding with respect to the tax liability of the Partners or in
connection with any audit of the Fund’s income tax returns, except to the extent
such expenses, claims, liabilities, losses and damages are attributable to the
gross negligence or willful misconduct of the TMP, or the breach by the TMP of
its obligations set forth in this Agreement to the extent such breach results in
a material loss to the Fund and (ii) any taxes imposed on the Fund, the General
Partner or the Investment Manager in respect of the Fund’s operations or
activities (other than income taxes payable in respect of Profits properly
allocated to the General Partner or Investment Management Fees payable to the
Investment Manager).  The payment of all such expenses to which the
indemnification applies shall be made before any distributions pursuant to
Section 5.02.  Neither the General Partner, nor any of its Affiliates, nor any
other Person shall have any obligation to provide funds for such purpose.  The
taking of any action and the incurring of any expense by the TMP in connection
with any such proceeding, except to the extent required by law, is a matter in
the reasonable discretion of the TMP and the provisions on limitations of
liability of the General Partner and indemnification set forth in Section 6.05
of this Agreement shall be fully applicable to the TMP in its capacity as such.

 

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12.03.     Reports to Partners.  (a)  The General Partner shall cause to be
prepared and furnished to the REIT and, other than the information described in
clause (i) below, to each Class A Member, at the Fund’s expense but subject to
Section 6.06(b) hereof, with respect to each Fiscal Year of the Fund:

 

(i)            the information necessary for the preparation by the REIT of its
U.S. federal and state and other income tax returns;

 

(ii)           an audited balance sheet, income statement, statements of cash
flows and Partners’ Capital Accounts prepared in accordance with generally
accepted accounting principles and a copy of the auditor’s letter to management;
and

 

(iii)          such other information as the General Partner deems reasonably
necessary for the Class A Members to be advised of the current status of the
Fund and its business.

 

The General Partner shall use reasonable efforts to cause the foregoing to be
furnished to the REIT and the Class A Members within one hundred twenty
(120) days after the close of each Fiscal Year of the Fund.

 

(b)           The General Partner shall cause to be prepared and furnished to
the REIT and each Class A Member, at the Fund’s expense but subject to
Section 6.06(b) hereof, with respect to each fiscal quarter (other than, with
respect to the unaudited financial statements, the Fund’s last fiscal quarter)
of each Fiscal Year an unaudited report prepared in accordance with generally
accepted accounting principles, which includes for the quarter and year to date
a balance sheet, an income statement, a statement of cash flows and:

 

(i)            time-weighted returns for the Fund calculated in a manner
consistent with industry standards;

 

(ii)           summaries of the material terms of, and other participants (if
any) in, the Fund Investments acquired by the Fund during such fiscal quarter
and the identification of any entities formed by the Fund in connection with
such acquisitions;

 

(iii)          a list of Fund Investments disposed of during such fiscal quarter
and a summary of the material terms of the disposition transactions relating
thereto;

 

(iv)          a statement of Investment Management Fees paid during such fiscal
quarter; and

 

(v)           a tracking report stating the Fund’s compliance with the debt
limit set forth in Section 3.03(e) hereof including an explanation of how the
General Partner reached such determination and the General Partner’s estimate as
to the

 

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Fund’s projected debt levels and projected compliance or non-compliance with the
debt limit set forth in Section 3.03(e) hereof as of the close of the fiscal
quarter in which the quarterly report is issued.

 

The General Partner shall use reasonable efforts to cause the foregoing to be
furnished to the REIT and Class A Members within forty-five (45) days after the
close of each of the first three fiscal quarters, and within ninety (90) days
after the close of the final fiscal quarter.

 

(c)           The General Partner shall promptly notify the Class A Members of
(i) any lawsuit or legal proceeding filed against the General Partner or any of
its Affiliates or against any Principal that is Affiliated with the General
Partner at such time, (ii) any Securities and Exchange Commission or other
governmental body’s investigation of the General Partner or its Affiliates or of
any Principal that is Affiliated with the General Partner at such time,
(iii) any bankruptcy filing by or against the General Partner or its Affiliates
or by any Principal that is Affiliated with the General Partner at such time and
(iv) any filings by the General Partner with the Securities and Exchange
Commission or similar governmental bodies (and shall supply to the Class A
Members copies of such filings), in each such case described in clauses
(i) through (iv), only to the extent the General Partner reasonably determines
the same may have or may disclose an actual or likely material adverse effect on
the General Partner’s ability to perform its obligations hereunder.

 

12.04.     Safekeeping of Funds.  The General Partner shall have fiduciary
responsibility for the safekeeping of all funds of the Fund and the General
Partner shall not employ such funds in any manner except for the benefit of the
Fund.  All funds of the Fund not otherwise invested shall be deposited in one or
more accounts maintained in such banking institution as the General Partner
shall determine in the name of the Fund and not in the name of the General
Partner.  All withdrawals from the Fund’s accounts shall be made upon checks or
instructions signed by the General Partner (or by electronic transfer authorized
electronically by an authorized person of the General Partner).  The Fund’s
funds shall not be commingled with the funds of any other Person nor shall such
funds be employed by the General Partner as compensating balances other than in
respect of the Fund’s borrowings.

 

ARTICLE XIII

 

AMENDMENTS AND MEETINGS

 

13.01.     Amendment Procedure.  The amendment procedure is as follows:

 

(a)           Amendments to this Agreement may be proposed by the General
Partner or, with the Consent of thirty-three and one-third percent (33-1/3%) of
the Class A Percentage Interests of the Class A Members (excluding for this
purpose the Class A Percentage Interest of any Affiliate of the General
Partner), by the REIT.

 

(b)           A proposed amendment will be adopted and effective only if it
receives the Consent of the General Partner and the Consent of the REIT
(provided that no such Consent shall be effective unless a majority of the
Class A Percentage Interests of the Class A Members

 

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(excluding for this purpose the Class A Percentage Interest of any Affiliate of
the General Partner) have Consented thereto), except that (i) amendments may be
adopted solely upon the Consent of the General Partner to (A) effect changes of
a ministerial nature which do not increase the authority of the General Partner
or adversely affect the rights of the REIT and (B) delete or add any provision
of this Agreement required to be so deleted or added by a state securities
commission or similar agency, which addition or deletion is deemed by such
commission or agency to be for the benefit or protection of the Limited Partner,
(ii) any provision requiring a specified Consent may only be amended with the
same Consent, (iii) in the event that the General Partner is required pursuant
to Section 15.01 hereof to operate the Fund so that it will be treated as a
REOC, any amendment of this Agreement that would have material adverse
consequences arising under ERISA for ERISA Members (as defined in the REIT LLC
Agreement) shall also require the Consent of at least seventy-five percent (75%)
of the Class A Percentage Interests of the ERISA Members, and (iv) no amendment
shall increase the liability or Capital Commitment of a Partner, or change
(A) the capital contributions required by a Partner, (B) except to the extent
permitted pursuant to Section 13.01(c) hereof, the rights and interests of a
Partner in the Profits, Losses or Distributable Proceeds of the Fund, (C) the
voting rights of a Partner or (D) the rights of a Partner with respect to the
continuation or liquidation of the Fund, in each case, without the Consent of
such affected Partner (and if such Partner is the REIT, without the consent of
each affected Class A Member).

 

(c)           In addition to any amendments otherwise authorized herein, and
notwithstanding anything to the contrary in Section 13.01, the General Partner,
without the consent of the REIT, shall amend the provisions of this Agreement
relating to the allocations of Profits or Losses or items thereof (including
non-taxable receipts or non-deductible expenditures) or credits among the
Partners in a manner having the least possible effect on such provisions if the
Fund is advised at any time by the Fund’s independent certified public
accountants or legal counsel that in their opinion such amendments are necessary
to give such provisions a basis on which such allocations would be respected for
U.S. federal income tax purposes or if necessary so as to cause the Capital
Accounts of the Partners at the time of liquidation of the Fund to be in
proportion to the amounts which would be distributed if liquidating proceeds
available to be distributed to Partners were distributed in accordance with
Section 5.02(e) hereof rather than Section 10.02(c) hereof; provided, however,
that no such amendments shall affect the capital contribution or distribution
provisions of this Agreement or cause the cash distributions to any Partner to
fail to satisfy the intent of Section 10.02(c)(iii) hereof.  Any such amendment
made by the General Partner in reliance upon the advice of the accountants or
legal counsel described above shall be deemed to be made in compliance with the
obligations of the General Partner to the Fund and the REIT, and no such
amendment shall give rise to any claim or cause of action by the REIT.

 

13.02.     Exceptions.  (a)  Notwithstanding the provisions of Section 13.01,
the Consent of all the REIT (with the Consent of all of the Class A Members)
will be required to adopt an amendment if such amendment would:

 

(i)            expand the purposes of the Fund as set forth in
Section 3.01(a) or amend Sections 3.03(a), 13.01 or 13.02 hereof;

 

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(ii)           directly or indirectly affect or jeopardize the status of the
Fund as a partnership for U.S. federal income tax purposes; or

 

(iii)          amend Section 6.05 hereof.

 

(b)           Notwithstanding anything to the contrary in this Agreement, in
connection with a Public Transaction, the General Partner may amend any
provision of this Agreement in a manner that is reasonably necessary or
advisable, as determined by the underwriters or financial advisors with respect
to the Public Transaction, to (x) effect the Public Transaction and the
continuation of the Fund, as a public company or a subsidiary thereof and
(y) achieve the highest value for the Class A Membership Units and/or the
Interests in the Fund, without the Consent of the REIT or any Class A Member;
provided that the material terms of each such amendment have been disclosed in
writing to the Advisory Committee in accordance with Section 14.04(e) hereof.

 

(c)           Notwithstanding anything herein to the contrary, any amendments
that are effected automatically pursuant to Section 7.03 or
Section 7.04(b) hereof shall not require the Consent of any Partner.

 

13.03.     Meetings and Voting.

 

(a)           Meetings of the Class A Members may be called by the General
Partner for any purpose permitted by this Agreement.  The General Partner shall
give all Class A Members notice of the purpose of each proposed meeting and any
votes to be conducted at such meeting not less than thirty (30) days before the
meeting.  Meetings shall be held at a time and place reasonably selected by the
General Partner.  Class Members may participate in meetings by conference call
provided that all parties can hear and speak with each other.

 

(b)           The General Partner shall, where feasible, solicit required
Consents of the Class A Members under this Agreement by written ballot or, if a
written ballot is not feasible, at a meeting held pursuant to Section 13.03(a). 
If Consents are solicited by written ballot, the Class A Members shall return
said ballots to the General Partner within thirty (30) days after receipt.  With
respect to any such Consent, the General Partner may, without holding a meeting
as described in Section 13.03(a), obtain the Consent of the Class A Members
holding the percentage interests required for such Consent, and, upon obtaining
such Consent and delivering notice thereof to the Class A Members, the REIT and
the Class A Members shall be bound thereby.

 

ARTICLE XIV

 

ADVISORY COMMITTEE

 

14.01.     Selection of the Advisory Committee.  The General Partner shall
select a committee consisting of between one (1) and fifteen (15) members
representing certain Class A Members (an “Advisory Committee”); provided,
however, that no member of the Advisory Committee shall be an Affiliate of the
General Partner.  Any member of the Advisory Committee

 

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may resign by giving the General Partner thirty (30) days’ prior written
notice.  Additionally, if any Class A Member whose representative is a member of
the Advisory Committee becomes a “Defaulting Member” under the REIT LLC
Agreement, the General Partner may, in its discretion, remove such Person’s
representative from the Advisory Committee.  Any vacancy in the Advisory
Committee (other than those resulting from a change in a Class A Member’s
representative on the Advisory Committee, which shall be filled by such Class A
Member) shall be promptly filled by the General Partner.  The members of the
Advisory Committee shall not receive any compensation in connection with their
membership on the Advisory Committee; provided, however that the members of the
Advisory Committee shall be entitled to reimbursement by the Fund for their
reasonable out-of-pocket expenses incurred in the performance of their
responsibilities in their capacities as members of the Advisory Committee.  Each
Class A Member selected to the Advisory Committee shall designate an individual
(and a replacement thereof) to sit on the Advisory Committee as such Class A
Member’s representative who shall (and shall be conclusively presumed to) have
authority to act on behalf of such Class A Member.  The Advisory Committee will
be formed within one hundred twenty (120) days after the First Closing and may
be increased in size after each Subsequent Closing.

 

14.02.     Meetings of and Action by the Advisory Committee.  A meeting of the
Advisory Committee shall be held at least once in every Fiscal Year, which will
be referred to as the “Annual Meeting,” and additional meetings may be called by
the General Partner on not less than fifteen (15) days’ notice to all members
(or such lesser time as is provided herein) which notice shall include an agenda
and a summary of all matters to be considered or discussed at that meeting and
shall also be called promptly upon the request of any two members of the
Advisory Committee.  The General Partner shall designate the date, time and
location of each meeting, and shall make reasonable accommodations for conflicts
in schedules of Advisory Committee members, a majority of which shall constitute
a quorum.  Members may participate by conference call provided that all parties
can hear and speak with each other and may waive notice of any meeting before or
after it is held.  Except as provided herein, in all instances where an approval
is required by the Advisory Committee, the Advisory Committee shall act by
affirmative vote of a majority of its members.  The members of the Advisory
Committee shall all vote as a single class.  Notwithstanding the foregoing,
(x) any and all actions and decisions of the Advisory Committee may be taken and
made by written consent in lieu of a meeting (such written consent to be by the
requisite number of members of the Advisory Committee whose consent is required)
and (y) the Advisory Committee may choose to appoint a designated representative
to act on its behalf with respect to any specified issue or decision.  Except
where approval of the Advisory Committee is required by the terms of this
Agreement, the recommendations of the Advisory Committee shall be advisory only
and shall not obligate the General Partner to act in accordance therewith. 
Neither the Advisory Committee nor any member thereof shall have the power to
bind or act for or on behalf of the Fund in any manner and in no event shall a
member of the Advisory Committee be considered a general partner of the Fund by
agreement, estoppel or otherwise, or be deemed to participate in the control of
the business of the Fund as a result of the performance of duties hereunder or
otherwise.  The General Partner or its designated representative shall be
entitled to be present at all meetings of the Advisory Committee although the
General Partner shall not be entitled to vote on matters

 

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requiring the vote of the Advisory Committee and upon request of the Advisory
Committee shall excuse itself from the meeting until recalled.

 

14.03.     Annual Meeting of Advisory Committee.  (a)  At the Annual Meeting of
the Advisory Committee and to the extent appropriate at other Advisory Committee
meetings, the General Partner and the Advisory Committee shall discuss:

 

(i)            the performance and operations of the Fund for the preceding
Fiscal Year, including fees paid, services provided by, and transactions with
Affiliates of the General Partner, with all such information provided in
accordance with AIMR standards;

 

(ii)           all matters then requiring the Advisory Committee’s approval;

 

(iii)          new acquisitions and financings of Fund Investments;

 

(iv)          dispositions of Fund Investments;

 

(v)           the financial statements and any appraisals and valuations of the
Fund and/or Fund Investments; and

 

(vi)          any material defaults by the Fund or any subsidiary thereof which
have been declared by any lender to the Fund or a subsidiary thereof under the
relevant loan documents.

 

(b)           The General Partner shall use its best efforts to provide the
members of the Advisory Committee at least fifteen (15) days prior to any
meeting with written reports of all matters to be discussed at such meeting.

 

14.04.     Functions of the Advisory Committee.  The Advisory Committee shall
have the following functions in addition to those set forth elsewhere in this
Agreement:

 

(a)           Except as provided in Section 6.04(b), the Advisory Committee
shall promptly review and approve or disapprove in advance any transactions by
the Fund with the General Partner or its Affiliates.

 

(b)           On March 31, 2006 and annually on each March 31st thereafter (the
“Adjustment Date”), the Advisory Committee will have the right, by providing
written notice to the General Partner no later than 30 days following the
Adjustment Date, to suggest amendments to Schedule B to this Agreement in order
to revise fees that, in the opinion of the Advisory Committee, represent
then-current market rates for the types of services described on Schedule B,
taking into account the nature of the relevant properties and the special
services required.  In any instance in which the General Partner and the
Advisory Committee cannot agree on the then-current market rate for any such
service, taking into account the nature of the relevant properties and the
special services required, such rate shall be determined by Experts in the
procedural manner set forth in Section 14.05 hereof and such rate, as so
determined, shall then be

 

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substituted for the rate set forth on Schedule B and shall be the fee schedule
for all existing Property Related Contracts entered into with Affiliates of the
General Partner effective as of the Adjustment Date, and for all future Property
Related Contracts entered into with Affiliates of the General Partner; provided,
however, that this position shall not alter the right of the Advisory Committee,
as set forth in the first sentence of this subsection, to suggest amendments to
Schedule B following the next annual Adjustment Date.

 

(c)           The Advisory Committee shall resolve issues involving conflicts of
interest to the extent not otherwise provided for under this Agreement.

 

(d)           (i)            The General Partner shall submit to the Advisory
Committee the name of the initial auditors of the Fund.  Within thirty (30) days
following June 1 of each year (other than June 1, 2005), the Advisory Committee
shall have the right to request that the General Partner provide the Advisory
Committee with the names of three (3) audit firms (which may include the Fund’s
existing auditors and any former auditors of the Fund).  Upon its receipt of the
names of three (3) audit firms from the General Partner, the Advisory Committee
shall promptly select one (1) of such firms to be the Fund’s auditors.

 

(ii)           With respect to each Fund Investment that is a Qualified
Investment that has been included in at least one Valuation Report, within
thirty (30) days following June 1 of each year, the Advisory Committee shall
have the right to request that the General Partner provide the Advisory
Committee with the names of three (3) Experts (which may include any Expert that
has previously appraised such Fund Investment for the Fund).  Upon its receipt
of the names of three (3) Experts from the General Partner, the Advisory
Committee shall select one (1) of such Experts to be the Expert whose valuations
will be included in the Valuation Report with respect to such Fund Investment.

 

(e)           In connection with the occurrence of a Public Transaction of the
type described in clause (i) of the definition of this term herein, the Advisory
Committee shall have the right to approve the first chief executive officer of
the REIT if he is not one of the Principals.  In addition, in connection with
the occurrence of any such Public Transaction, the General Partner and the
director of the REIT shall consult with the Advisory Committee with respect to
the terms of such transaction (it being understood that the Advisory Committee
shall have no consent, approval, veto or similar rights with respect to the
occurrence of any such transaction or the terms thereof), and the Advisory
Committee shall have the right to engage advisors, at the expense of the Fund,
to assist it with respect to any such consultation.

 

(f)            The Advisory Committee shall have the right to enforce the
indemnification obligations of the General Partner with respect to the Fund
under Section 6.05(a) hereof on behalf of the Fund and the indemnification
obligations of the director of the REIT with respect to the REIT under
Section 6.04(a) of the REIT LLC Agreement on behalf of the REIT.

 

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14.05.     Valuations.  Prior to the occurrence of a Public Transaction, the
valuation methods set forth in this Section 14.05 shall be used in determining
the Fair Value (which shall represent the Fund’s net value of each Fund
Investment) and the Adjusted Fair Value (which the gross value of each Fund
Investment) of each Fund Investment and for any other purpose in this Agreement
where there is a specific reference to this Section 14.05.  Both shall represent
the Fair Value and the Adjusted Fair Value of any Permitted Investment shall at
all times be equal to the Cost of such Permitted Investment.

 

(a)           The Fair Value of each Fund Investment (other than a Permitted
Investment) will initially (from the acquisition date thereof to but excluding
the first January 1 thereafter or, with respect to any Fund Investment acquired
on or prior to December 31, 2005, the second January 1 thereafter) be such Fund
Investment’s Cost (excluding any purchase money debt, debt assumed, or debt
taken subject to).  For the period from the acquisition date of any Fund
Investment to but excluding the first January 1 thereafter (or, with respect to
any Fund Investment acquired on or prior to December 31, 2005, the second
January 1, thereafter), (w) the Adjusted Fair Value of any Fund Investment that
is (i) a direct or indirect equity interest in one or more real estate assets or
(ii) a direct or indirect interest in a mezzanine loan made to an entity that
holds directly or indirectly interests in one or more real estate assets, will
be the product of the Underlying Asset Value (as hereinafter defined) of such
Fund Investment multiplied by the Fund’s Percentage (as hereinafter defined)
with respect to such Fund Investment, (x) the “Fund’s Percentage” with respect
to any such Fund Investment shall be the Fund’s relative portion of the total
capital (i.e., equity and debt that is subordinate to, or pari passu with, the
Fund’s equity or the Fund’s mezzanine loan, as applicable) invested in such Fund
Investment’s underlying real estate asset(s), (y) the Underlying Asset Value
with respect to any Fund Investment that is (i) a direct or indirect equity
interest of less than 100% in one or more real estate assets or (ii) a direct or
indirect interest in a mezzanine loan made to an entity that holds direct or
indirect interests in one or more real estate assets shall be the sum of (I) the
Cost thereof (but excluding any debt assumed or taken subject to) grossed up by
the Fund’s Percentage with respect thereto plus (II) all debt on the underlying
real estate asset(s) that is senior to the Fund Investment and (z) the
Underlying Asset Value with respect to any Fund Investment that is a direct or
indirect equity interest in one or more real estate assets and that represents
100% of the equity interests in such real estate asset(s) shall be the Cost of
such Fund Investment.

 

(b)           Within forty-five (45) days after each January 1 beginning
January 1, 2007, the General Partner shall deliver a report (a “Valuation
Report”) to the Advisory Committee containing: (i) a list of all Permitted
Investments and the Cost of each such Permitted Investment; (ii) a list of all
Fund Investments other than Permitted Investments; and (iii) an appraisal, as of
the immediately preceding December 31, of (x) the Fair Value of each such Fund
Investment (other than Permitted Investments) as determined in accordance with
the definition of “Fair Value” herein, (y) the Adjusted Fair Value of each Fund
Investment (other than Permitted Investments) as determined in accordance with
the definition of “Adjusted Fair Value” herein, and (z) the value of the
underlying real estate asset(s) determined on a fair market value basis (the
“Underlying Asset Value”), if applicable, of each Fund Investment (other than
Permitted Investments).  Each such appraisal shall be prepared (i) by an Expert
selected by the General Partner or, if the Advisory Committee has exercised its
rights with respect to any Fund

 

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Investment in accordance with Section 14.04(d)(ii) hereof, selected by the
Advisory Committee and (ii) to the extent applicable, in accordance with the
Uniform Standards of Professional Appraisal Practice.

 

The Fair Value and Adjusted Fair Value of each Fund Investment shall be its Fair
Value and Adjusted Fair Value, as applicable, as set forth in such Valuation
Report for the calendar year in question except to the extent that the Advisory
Committee elects to exercise its right to review such Fair Value or Adjusted
Fair Value as described in paragraphs (c) and (d) below.

 

(c)           The Advisory Committee may elect to object to the Fair Value or
Adjusted Fair Value of one or more Fund Investments set forth in any Valuation
Report by giving the General Partner a notice (a “Review Notice”) no later than
thirty (30) days after the Advisory Committee’s receipt of such Valuation
Report.  If it does so, the Advisory Committee and the General Partner shall
attempt to agree on the Fair Value or Adjusted Fair Value, as applicable, of the
Fund Investments specified in the Review Notice.  Any resolution of such Fair
Value or Adjusted Fair Value shall be in writing.  If the Advisory Committee
objects, in a timely delivered Review Notice, to the Fair Value of any Fund
Investment (other than a Permitted Investment) described in clause (z) of the
definition of “Adjusted Fair Value” herein, then the Advisory Committee shall
also be deemed to have objected to the Adjusted Fair Value with respect to such
Fund Investment.

 

(d)           If the Advisory Committee and the General Partner have not agreed
upon the Fair Value or Adjusted Fair Value, as applicable, of any Fund
Investment specified in the Review Notice within ten (10) days after the date
the Review Notice was sent by the Advisory Committee, the Advisory Committee
shall, no later than ten (10) days after the end of such ten (10) day period,
select and engage an Expert who shall independently determine the Fair Value or
Adjusted Fair Value, as applicable (including a determination of the Underlying
Asset Value), of such Fund Investment within twenty (20) days of being
retained.  The Advisory Committee shall deliver a copy of such Expert’s report
to the General Partner.  If the Fair Value or Adjusted Fair Value for a Fund
Investment specified in the Valuation Report is the same as the Fair Value or
Adjusted Fair Value for such Fund Investment contained in the Expert’s report
obtained by the Advisory Committee, then the Fair Value or Adjusted Fair Value,
as applicable, of such Fund Investment shall be as set forth in the Valuation
Report.  If the Fair Values or Adjusted Fair Values for such a Fund Investment
from these two sources are not the same but the higher of the Fair Values or
Adjusted Fair Values, as the case may be, is no more than ten percent (10%)
greater than the lower of such Fair Values or Adjusted Fair Values, as
applicable, then the Fair Value or Adjusted Fair Value of such Fund Investment
shall be the average of such amounts contained in the Valuation Report and in
the Expert’s report obtained by the Advisory Committee.  However, if neither of
the foregoing two sentences applies, then the parties shall attempt to agree on
a new Expert, who shall be promptly retained by the Fund to determine
independently the Fair Value or Adjusted Fair Value, as applicable (including a
determination of the Underlying Asset Value), of the Fund Investment in question
and who will deliver its determination within twenty (20) days of being
retained.  The retention document shall be in a form reasonably acceptable to
both the General Partner and the Advisory Committee.  The Fair Value or Adjusted
Fair Value of each Fund Investment in question shall be the average of the

 

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two (2) such amounts, contained in the Valuation Report, in the Expert’s report
obtained by the Advisory Committee, and in the report prepared by the new
Expert, which are closest to one another.  If for any reason the parties cannot
agree on a new Expert within ten (10) days after first attempting to do so, or
if the parties cannot agree on the form of the retention document, either party
may apply to the local office of the American Arbitration Association or any
organization which is the successor thereof (the “AAA”) for appointment of the
new Expert or determination of the form of the retention document.  Any decision
of the AAA shall be binding upon the General Partner and the Advisory
Committee.  The Fund shall pay the expenses of all of the Experts.  In the event
of any dispute with respect to the Fair Value of any Fund Investment (other than
a Permitted Investment) described in clause (z) of the definition of “Adjusted
Fair Value” herein, the Adjusted Fair Value of such Fund Investment shall be the
Fair Value of such Fund Investment as determined pursuant to this Section 14.05.

 

(e)           If the Fair Value of a Fund Investment (or the Adjusted Fair Value
with respect to a Fund Investment) is being determined in accordance with
paragraph (d) above, all applicable payments to the General Partner and/or the
Investment Manager and applicable tests shall be made or applied based on the
Fair Value and/or Adjusted Fair Value of such Fund Investment as determined with
reference to the prior calendar year (or if such Fund Investment was acquired
during such preceding year, as determined pursuant to Section 14.05(a) hereof). 
Once the Fair Value and Adjusted Fair Value of a Fund Investment is finally
determined in accordance with this Section 14.05, the valuations shall be
applied retroactively to the preceding January 1.  Accordingly, any payments to
the General Partner and/or the Investment Manager made since such January 1
shall be recalculated to reflect the Fair Value and Adjusted Fair Value as so
determined, any underpayment shall be promptly paid to the General Partner
and/or the Investment Manager, as applicable, and any overpayment shall be
promptly returned by the General Partner and/or the Investment Manager, as
applicable, to the Fund.

 

ARTICLE XV

 

CERTAIN ERISA MATTERS

 

15.01.     Operating Company.  The General Partner shall use commercially
reasonable efforts to conduct the affairs and operations of the Fund in such a
manner that the Fund will qualify as a REOC, if the REIT is required to qualify
as a VCOC pursuant to Section 14.01 of the REIT LLC Agreement.

 

ARTICLE XVI

 

MISCELLANEOUS

 

16.01.     Applicable Law.  This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without reference to the
conflicts of law principles thereof.

 

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16.02.     Binding Agreement; Severability.  This Agreement and all terms,
provisions and conditions hereof shall be binding upon the parties hereto, and
shall inure to the benefit of the parties hereto and, except as otherwise
provided herein, to their respective heirs, executors, personal representatives,
successors and lawful assigns.  Each provision of this Agreement shall be
considered separate and, if for any reason, any provision or provisions not
essential to the effectuation of the basic purposes of this Agreement is or are
determined to be invalid, illegal or unenforceable, such invalidity, illegality
or unenforceability shall not impair the operation of or affect those provisions
of this Agreement which are otherwise valid.  To the extent legally permissible,
the parties shall substitute for the invalid, illegal or unenforceable provision
a provision with a substantially similar economic effect and intent.

 

16.03.     Entire Agreement.  This Agreement, the REIT LLC Agreement, the
Subscription Agreements (as defined in the REIT LLC Agreement) and any other
written agreements between the General Partner, the REIT or the Fund and a
Class A Member (it being acknowledged and agreed that the General Partner, the
REIT and the Fund may enter into other written agreements with Class A Members,
executed contemporaneously with the admission of such Class A Members to the
REIT, affecting the terms hereof in order to meet certain requirements of such
Class A Members), contain the entire understanding among the parties hereto and
supersede all prior written or oral agreements among them respecting the within
subject matter, unless otherwise provided herein.

 

16.04.     Record of Limited Partners.  The General Partner shall maintain at
the office of the Fund a record showing the names and addresses of all the
Limited Partners.  All Partners and their duly authorized representatives shall
have the right to inspect such record.

 

16.05.     No Bill for Partnership Accounting.  Subject to mandatory provisions
of law applicable to a Limited Partner and to circumstances involving a breach
of this Agreement, each of the Partners covenants that it will not (except with
the Consent of the General Partner) file a bill for partnership accounting.

 

16.06.     Counterparts.  This Agreement may be executed in several
counterparts, and all so executed shall constitute one Agreement, binding on all
of the parties hereto, notwithstanding that all the parties are not signatories
to the original or the same counterpart.

 

16.07.     No Third Party Rights.  This Agreement is intended to be solely for
the benefit of the parties hereto and, except as expressly provided to the
contrary in this Agreement (including the rights of Indemnified Parties
hereunder), is not intended to confer any benefits upon, or create any rights in
favor of, any Person other than the parties hereto.  The provisions of this
Agreement are not intended for the benefit of any creditor or other Person
(other than a Partner in such Partner’s capacity as such) to whom any debts,
liabilities or obligations are owed by (or who otherwise has any claim
against) the Fund or any of the Partners.

 

16.08.     Services to the Fund.  The parties hereto hereby acknowledge and
recognize that the Fund has retained, and may in the future retain, the services
of various persons, entities and professionals, including legal counsel,
accountants, architects and

 

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engineers, for the purposes of representing and providing services to the Fund
in connection with the investigation, consummation and operation of the Fund
Investments or otherwise.  The parties hereby acknowledge that such persons,
entities and professionals may have in the past represented and performed and
currently and in the future may represent or perform services for the General
Partner or its Affiliates.  Accordingly, each party hereto consents to the
representation or provision of services by such persons, entities and
professionals to the Fund and waives any right to claim a conflict of interest
solely on the grounds of such relationship. Nothing contained herein shall
relieve the General Partner of any duty or liability it would otherwise have to
the Fund, including the duty to monitor and direct such persons, entities and
professionals for the best interests of the Fund.

 

16.09.     Notices.  Any notice, request for consent or report required to be
provided hereunder to a Partner shall be addressed to such Partner at the
address set forth on Schedule A or such other address as such Partner shall have
specified in writing to the Fund, and any notice required to be provided
hereunder to the Fund shall be addressed to the Fund at its mailing address set
forth in Section 2.03 or such other mailing address as determined by the General
Partner upon notice to the REIT.  In addition, any notice, request for consent
or report required to be provided hereunder to the REIT shall also be provided
to each Class A Member at the address set forth on Schedule A of the REIT LLC
Agreement or such other address as such Class A Member shall have specified in
writing to the REIT.  Any such notice, request for consent or report shall be in
writing and shall be sent (i) by certified mail, return receipt requested,
(ii) by a recognized overnight courier service providing confirmation of
delivery, or (iii) by facsimile transmission (with confirmation of receipt). 
All notices, requests for consents and reports shall be deemed to have been
received on the date of delivery as established by the return receipt, courier
service confirmation (or the date on which the return receipt, or courier
service confirms that acceptance of delivery was refused by the addressee), or
facsimile confirmation received by the sender.  Notwithstanding the foregoing,
any report may be sent by electronic mail to the applicable address set forth on
Schedule A or Schedule A of the REIT LLC Agreement or such other address as
shall have been specified in writing to the Fund or the REIT, as applicable, and
any report that is sent by electronic mail shall be deemed to have been received
on the date that it is sent.

 

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

 

 

General Partner:

 

 

 

 

CIM Urban Partners GP, Inc.

 

 

 

 

By:

/s/ Avraham Shemesh

 

 

Name:  Avraham Shemesh

 

 

Title:  President

 

 

 

 

 

Limited Partner:

 

 

 

 

CIM Urban REIT, LLC

 

 

By:

CIM Urban Partners GP, Inc., its manager

 

 

 

 

 

 

By:

/s/ Nicholas V. Morosoff

 

 

 

Name:  Nichloas V. Morsoff

 

 

 

Title:  Secretary

 

61

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