EXHIBIT 10.28

 

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AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

 

OF

 

HCPI/TENNESSEE, LLC

 

a Delaware limited liability company

 

Dated as of October 2, 2003

 

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EXHIBIT 10.28

 

TABLE OF CONTENTS

 

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Article 1. DEFINED TERMS

   1

Article 2. ORGANIZATIONAL MATTERS

   18     Section 2.1   Formation    18     Section 2.2   Name    18    
Section 2.3   Registered Office and Agent; Principal Place of Business; Other
Places of Business    19     Section 2.4   Power of Attorney    19    
Section 2.5   Term    20

Article 3. PURPOSE

   20     Section 3.1   Purpose and Business    20     Section 3.2   Powers   
20     Section 3.3   Specified Purposes    21     Section 3.4   Representations
and Warranties by the Members; Disclaimer of Certain Representations    21

Article 4. CAPITAL CONTRIBUTIONS

   23     Section 4.1   Capital Contributions of the Initial Members    23    
Section 4.2   Additional Members    23     Section 4.3   Loans    23    
Section 4.4   Additional Funding and Capital Contributions    23     Section 4.5
  No Interest; No Return    24

Article 5. DISTRIBUTIONS

   24     Section 5.1   Requirement and Characterization of Distributions    24
    Section 5.2   Distributions in Kind    25     Section 5.3   Amounts Withheld
   25     Section 5.4   Distributions Upon Liquidation    26     Section 5.5  
Restricted Distributions    26     Section 5.6   Distributions of Proceeds from
Sale of Real Properties and the Incurrence of Debt    26

Article 6. ALLOCATIONS

   27     Section 6.1   Timing and Amount of Allocations of Net Income and Net
Loss    27     Section 6.2   General Allocations    27     Section 6.3  
Additional Allocation Provisions    29     Section 6.4   Tax Allocations    31  
  Section 6.5   Other Provisions    31

Article 7. MANAGEMENT AND OPERATION OF BUSINESS

   32     Section 7.1   Management    32     Section 7.2   Certificate of
Formation    35

 

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    Section 7.3   Restrictions on Managing Member’s Authority    35    
Section 7.4   Compensation of the Managing Member    41     Section 7.5   Other
Business of Managing Member    42     Section 7.6   Contracts with Affiliates   
42     Section 7.7   Indemnification    43     Section 7.8   Liability of the
Managing Member    44     Section 7.9   Other Matters Concerning the Managing
Member    45     Section 7.10   Title to Company Assets    46     Section 7.11  
Reliance by Third Parties    46     Section 7.12   Exculpation    47

Article 8. RIGHTS AND OBLIGATIONS OF MEMBERS

   47     Section 8.1   Limitation of Liability    47     Section 8.2   Managing
of Business    47     Section 8.3   Outside Activities of Members    47    
Section 8.4   Return of Capital    48     Section 8.5   Rights of Non-Managing
Members Relating to the Company    48     Section 8.6   Redemption Rights    49
    Section 8.7   Confidentiality    52

Article 9. BOOKS, RECORDS, ACCOUNTING AND REPORTS

   52     Section 9.1   Records and Accounting    52     Section 9.2   Fiscal
Year    53     Section 9.3   Reports    53

Article 10. TAX MATTERS

   53     Section 10.1   Preparation of Tax Returns    53     Section 10.2   Tax
Elections    53     Section 10.3   Tax Matters Partner    53     Section 10.4  
Organizational Expenses    54

Article 11. TRANSFERS AND WITHDRAWALS

   54     Section 11.1   Transfer    54     Section 11.2   Transfer of Managing
Member’s Membership Interest    54     Section 11.3   Non-Managing Members’
Rights to Transfer    55     Section 11.4   Substituted Members    56    
Section 11.5   Assignees    57     Section 11.6   General Provisions    57

Article 12. ADMISSION OF MEMBERS

   59     Section 12.1   Admission of Successor Managing Member    59    
Section 12.2   Admission of Additional Members    59     Section 12.3  
Amendment of Agreement and Certificate    60     Section 12.4   Limitation on
Admission of Members    60

 

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Article 13. DISSOLUTION, LIQUIDATION AND TERMINATION

   61     Section 13.1   Dissolution    61     Section 13.2   Exchange of
Non-Managing Member Units    61     Section 13.3   Winding Up    62    
Section 13.4   Deemed Distribution and Recontribution    63     Section 13.5  
Rights of Members    63     Section 13.6   Cancellation of Certificate    63    
Section 13.7   Reasonable Time for Winding-Up    64     Section 13.8   Liability
of Liquidator    64

Article 14. PROCEDURES FOR ACTIONS AND CONSENTS OF MEMBERS; AMENDMENTS; MEETINGS

   64     Section 14.1   Procedures for Actions and Consents of Members    64  
  Section 14.2   Amendments    64     Section 14.3   Meetings of the Members   
65

Article 15. GENERAL PROVISIONS

   65     Section 15.1   Registration    65     Section 15.2   Addresses and
Notice    66     Section 15.3   Titles and Captions    66     Section 15.4  
Pronouns and Plurals    66     Section 15.5   Further Action    66    
Section 15.6   Binding Effect    67     Section 15.7   Creditors    67    
Section 15.8   Waiver    67     Section 15.9   Counterparts    67    
Section 15.10   Applicable Law    67     Section 15.11   Entire Agreement    67
    Section 15.12   Invalidity of Provisions    67     Section 15.13  
Limitation to Preserve REIT Status    68     Section 15.14   No Partition    68
    Section 15.15   Non-Managing Member Representative    69     Section 15.16  
Venue    69 Exhibit A   Member Information    A-1 Exhibit B   Notice of
Redemption    B-1 Exhibit C   Initial Values    C-1

 

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AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

OF

HCPI/TENNESSEE, LLC

 

This AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT is made and
entered into as of October 2, 2003, by and among Health Care Property Investors,
Inc., a Maryland corporation, and the Persons whose names are set forth on
Exhibit A as attached hereto, for the purpose of setting forth and confirming
certain terms, conditions and provisions regarding the management and business
of HCPI/Tennessee, LLC, a Delaware limited liability company, the regulation and
governance of its affairs, and the rights and privileges of its Members.

 

WHEREAS, pursuant to that certain Contribution Agreement, MedCap Properties,
LLC, a Delaware limited liability company (hereinafter the “Initial Member”)
transferred the Transferred Properties, directly or indirectly through the
transfer or limited liability company interests in limited liability companies
owning one or more Transferred Properties, to the Company in exchange for all of
the Company’s Non-Managing Member Units;

 

WHEREAS, subsequent to such contribution, the Initial Member transferred all of
the Non-Managing Member Units to the Persons other than the Managing Member
whose names are set forth on Exhibit A as attached hereto; and

 

WHEREAS, pursuant to the Contribution Agreement, the Managing Member contributed
the Cash Contribution and the HCPI Property to the Company in exchange for all
of the Company’s Managing Member Units;

 

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

 

ARTICLE 1.

DEFINED TERMS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Adjustment Factor” means 1.0; provided, however, that in the event that: the
Managing Member (i) declares or pays a dividend on its outstanding REIT Shares
in REIT Shares or makes a distribution to all Members of its outstanding REIT
Shares in REIT Shares, (ii) splits or subdivides its outstanding REIT Shares or
(iii) effects a reverse stock split or otherwise combines its outstanding REIT
Shares into a smaller number of REIT Shares, the Adjustment Factor shall be
adjusted by multiplying the Adjustment Factor in effect immediately prior to
such adjustment by a fraction, (1) the numerator of which shall be the number of
REIT Shares issued and outstanding on the record date for such dividend,
distribution, split, subdivision, reverse split or combination (assuming for
such purposes that such dividend, distribution, split, subdivision, reverse
split or combination has occurred as of such time) and (2) the denominator of
which shall be the actual number of REIT Shares issued and outstanding on the
record date for such dividend, distribution, split, subdivision, reverse split
or combination (assuming for such purposes that such dividend, distribution,
split, subdivision, reverse split or combination has not occurred as of such
time). Any adjustments to the Adjustment Factor shall become effective
immediately after the effective date of such event, retroactive to the record
date, if any, for such event.

 

“Affiliate” means any Person which, directly or indirectly (including through
one or more intermediaries), controls or is controlled by or is under common
control with any other Person, including any Subsidiary of a Person. For
purposes of this definition, the term “control” (including the correlative
meanings of the terms “controlled by” and “under common control with”), as used
with respect to any Person, shall mean the possession, directly or indirectly
(including through one or more intermediaries), of the power to direct or cause
the direction of the management and policies of such Person, through the
ownership or control of voting securities, partnership interests or other equity
interests, by contract or otherwise. Without limiting the generality of the
foregoing, with respect to any legal or business entity, the term “Affiliate”
shall also include (a) any Person which owns, directly or indirectly (including
through

 

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one or more intermediaries), fifty percent (50%) or more of any class of voting
securities entitled to vote in the election of directors of such Person, (b) any
Subsidiary of such legal or business entity and (c) any Subsidiary of a Person
described in clause (a). A Person will not be an affiliate of any other Person
solely as a result of being a director, governor, officer or similar fiduciary
of such other Person.

 

“Agreement” means this Amended and Restated Limited Liability Company Agreement
of HCPI/Tennessee, LLC, as it may be amended, supplemented or restated from time
to time.

 

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

 

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

 

“Available Cash” means, as of any Distribution Date:

 

(a) the sum, without duplication, of:

 

(i) the Company’s net income or net loss (as the case may be) for the period
beginning on the date hereof and ending on such LLC Distribution Date, as
determined in accordance with GAAP,

 

(ii) depreciation and all other noncash charges to the extent deducted in
determining net income or net loss for such period pursuant to the foregoing
clause (a)(i), and

 

(iii) all other cash received (including, but not limited to Capital
Contributions and amounts previously accrued as net income and amounts of
deferred income) that was not included in determining net income or net loss for
such period pursuant to the foregoing clause (a)(i);

 

provided, however, that such amount calculated pursuant to this clause (a) shall
exclude all Disposition Proceeds;

 

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

 

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

 

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

 

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(iii) all other expenditures and payments not deducted in determining net income
or net loss for such period pursuant to the foregoing clause (a)(i) (including
amounts paid in respect of expenses previously accrued),

 

(iv) all amounts (other than Disposition Proceeds) expended by the Company in
connection with the Properties and the purchase, lease or other acquisition of
assets and properties;

 

(v) any amount included in determining net income or net loss for such period
pursuant to the foregoing clause (a)(i) that was not received by the Company
during such period,

 

(vi) the amount of any reserves (including, without limitation, working capital
reserves) established as of the end of such period;

 

(vii) the amount of all cash distributions made to the Members pursuant to the
terms of this Agreement; and

 

(viii) the amount of all cash Redemptions made by the Company.

 

provided, however, that such amount calculated pursuant to this clause (b) shall
exclude all distributions or other payments of Disposition Proceeds.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Capital Contribution” means, with respect to any Member, the amount of money
and the initial Gross Asset Value of any Property that such Member contributes
to the Company pursuant to Section 4.1, Section 4.2 or Section 4.4 hereof.

 

“Cash Amount” means with respect to any Non-Managing Member, an amount of cash
per unit equal to the sum of (i) the average closing share price of the common
stock of Health Care Property Investors, Inc., a Maryland corporation, for the
ten (10) trading days ending on the second trading day immediately prior to the
day on which such Non-Managing

 

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Member delivers a Notice of Redemption or the Managing Member delivers a Call
Notice to such Non-Managing Member, as applicable, (ii) the Preferred Return
Shortfall Per Unit and (iii) the cash dividend per REIT Share declared or
accrued by the Managing Member for holders of REIT Shares on any date between
the Notice of Redemption or Call Notice, as applicable, and the Redemption Date
or the purchase pursuant to Section 13.2, as applicable, to the extent not taken
into account in the computation of Preferred Return Per Unit.

 

“Cash Contribution” means $168,973.

 

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

 

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

 

“Closing Date” has the meaning set forth in the Contribution Agreement.

 

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

 

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

 

“Company” means the limited liability company formed by filing the Certificate
under the Act and pursuant to this Agreement under the name “HCPI/Tennessee,
LLC”, and any successor thereto.

 

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

 

“Consent” means the consent to, approval of, or vote on a proposed action by a
Member given in accordance with Article 14 hereof.

 

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

 

“Constructive Ownership” means ownership of REIT Shares, or any other interest
in an entity by a Person who is or would be treated as an owner thereof either
actually or constructively through the application of Section 318 of the Code,
as modified by Section

 

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856(d)(5) of the Code. The terms “Constructively Own,” “Constructively Owned,”
“Constructively Owns” and “Constructive Owner” shall have the correlative
meanings.

 

“Contribution Agreement” means the Contribution and Purchase Agreement of even
date herewith, by and between the Managing Member, the Company and the parties
identified on the signature pages thereto.

 

“Contribution Indemnity” means the rights and remedies of the Company contained
in Section 9.2(c) of the Contribution Agreement.

 

“Debt” means, as to any Person, as of any date of determination, (i) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services; (ii) all amounts owed by such Person to banks or
other Persons in respect of reimbursement obligations under letters of credit,
surety bonds and other similar instruments guaranteeing payment or other
performance of obligations by such Person; (iii) all indebtedness for borrowed
money or for the deferred purchase price of property or services secured by any
lien on any property owned by such Person, to the extent attributable to such
Person’s interest in such property, even though such Person has not assumed or
become liable for the payment thereof; (iv) all indebtedness guaranteed by such
Person directly or indirectly; (v) lease obligations of such Person that, in
accordance with GAAP, are required to be capitalized and (vi) all amounts
required to be paid by such Person under Sections 5.1.A, 5.4, 7.3.G and 8.6.A
hereunder.

 

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

 

“Disposition Proceeds” means with respect to any real property, the net proceeds
(including a reduction for any amount used for the repayment of any Debt of the
Company and the payment of any costs related thereto) received by the Company
upon the taxable disposition (other that a Terminating Capital Transaction) of
such real property.

 

“Distribution Date” has the meaning set forth in Section 5.1.A hereof.

 

“Effective Date” means the date on which the transactions contemplated by the
Contribution Agreement to be consummated on the Closing Date are consummated at
which time the contributions set forth on Exhibit A that are to be effective on
the Effective Date shall become effective. With respect to any future
contributions, the Effective Date shall be the date that such contributions are
completed.

 

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“Equity Coverage” means an amount equal to the then current fair market value of
the Company’s assets as determined in good faith by the Managing Member
consistently with the method of valuing the Transferred Properties contributed
to the Company by the Initial Member minus all of the Company’s Debt and
liabilities.

 

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

 

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

 

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

 

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

 

“Flip-Over Event” means the occurrence of a merger of the Managing Member with
and into another Person or the consolidation of the Managing Member with another
Person, or the merger of another Person with and into the Managing Member or the
sale or transfer of assets of the Managing Member to another Person if, as a
result of such merger, consolidation or transfer of assets the holder of Rights
issued under the Rights Agreement would be entitled under Section 13 of the
Rights Agreement (or a comparable provision in the event the Rights Agreement is
amended) to purchase shares of common stock of such other Person (including the
Managing Member as the successor to such other Person or as the surviving
corporation) (the “Successor Person”).

 

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

 

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

 

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

 

(a) The initial Gross Asset Value of each Property contributed to the Company
pursuant to Section 4.1 hereof shall be such Property’s Initial Value as agreed
to by the Initial Member and the Managing Member. Any other Property contributed
by a Member to the Company shall be its fair market value, as agreed to by such
Member and the Managing Member, and set forth on Exhibit A with respect to that
Member; provided, however, the initial Gross Asset Value of any asset
contributed by the

 

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Managing Member to the Company shall be its fair market value, as determined by
by the Managing Member with the Consent of the Non-Managing Members.

 

(b) The Gross Asset Values of all Company assets immediately prior to the
occurrence of any event described in clause (1), clause (2) or clause (3) hereof
shall be adjusted to equal their respective gross fair market values, as
determined by the Managing Member with the Consent of the Non-Managing Members,
using such reasonable method of valuation as the Managing Member may adopt, as
of the following times:

 

(1) the acquisition of an additional interest in the Company (other than in
connection with the execution of this Agreement but including, without
limitation, acquisitions pursuant to Section 4.2 hereof or contributions or
deemed contributions by the Managing Member pursuant to Section 4.4 hereof) by a
new or existing Member in exchange for more than a de minimis Capital
Contribution;

 

(2) the distribution by the Company to a Member of more than a de minimis amount
of Company property as consideration for an interest in the Company; and

 

(3) the liquidation of the Company within the meaning of Regulations Section
1.704-1(b) (2)(ii)(g).

 

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

 

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

 

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

 

“HCPI Property” means the “HCPI Property” as such term is defined in the
Contribution Agreement.

 

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

 

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

 

“Initial Member” shall have the meaning set forth in the Recitals of this
Agreement.

 

“Initial Value” of (i) each Real Property contributed to the Company as of the
date hereof shall mean the amount set forth with respect to such Real Property
on Exhibit C attached hereto and made a part hereof for all purposes and (ii)
each other real property contributed to or purchased by the Company, the Gross
Asset Value of such real property on such date of contribution or purchase.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Managing Member” means Health Care Property Investors, Inc., a Maryland
corporation, in its capacity as a managing member, or any successor Managing
Member designated pursuant to the terms of this Agreement.

 

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

 

“Managing Member Unit” means a single unit of Membership Interest of the
Managing Member issued pursuant to Article 4 hereof or deemed to be a Managing
Member Unit in accordance with the definition of “Non-Managing Member Unit,” as
the same may be modified from time to time as provided in this Agreement. The
ownership of Managing Member Units may (but need not in the sole and absolute
discretion of the Managing Member) be evidenced in the form of a certificate for
Managing Member Units.

 

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

 

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

 

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

 

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

 

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

 

“Membership Interest” means an ownership interest in the Company representing a
Capital Contribution by a Member and includes any and all benefits to which the
holder of such a Membership Interest may be entitled as provided in this
Agreement, together with all obligations of such Person to comply with the terms
and provisions of this Agreement. A Membership Interest may be expressed as a
number of Managing Member Units or Non-Managing Member Units, as applicable.

 

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

 

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

 

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

 

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

 

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

 

To the extent that an adjustment to the adjusted tax basis of any Company asset
pursuant to Code Section 734(b) is required pursuant to Regulations Section
1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining Capital Accounts
as a result of a distribution other than in liquidation of a Member’s interest
in the Company, the amount of such adjustment shall be treated as an item of
gain (if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases the basis of the asset) from the

 

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disposition of the asset and shall be taken into account for purposes of
computing Net Income or Net Loss; and

 

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

 

“Non-Managing Member” means any Member other than the Managing Member.

 

“Non-Managing Member Representative” means Charles A. Elcan until a successor
Non-Managing Member Representative shall have been appointed pursuant to Section
15.15 hereof and, thereafter, shall mean the person appointed and then acting as
the Non-Managing Member Representative hereunder.

 

“Non-Managing Member Unit” means a single unit of Membership Interest issued to
a Non-Managing Member pursuant to Section 4.1 hereof, as the same may be
modified from time to time as provided in this Agreement; provided, however,
that any Non-Managing Member Unit held by the Managing Member shall be deemed to
be a Managing Member Unit for all purposes of this Agreement. The ownership of
Non-Managing Member Units shall, except at the option of such Member, be
uncertificated and shall not be evidenced in the form of a certificate for
Non-Managing Member Units.

 

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

 

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

 

“Notice of Registration” has the meaning set forth in Section 15.1.

 

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

 

“Ownership Limit” means 9.8% of the number or value (whichever is more
restrictive) of outstanding REIT Shares. The number of REIT Shares shall be
determined by the Board of Directors of the Managing Member, in good faith,
which determination shall be conclusive for all purposes hereof.

 

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

 

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

 

“Preferred Return Per Unit” means with respect to each Non-Managing Member Unit
outstanding on a LLC Record Date an amount initially equal to zero, and
increased cumulatively on each LLC Record Date by an amount equal to the product
of (i) the cash dividend per REIT Share declared by the Managing Member for
holders of REIT Shares on that LLC Record Date, multiplied by (ii) the
Adjustment Factor in effect on that LLC Record Date; provided, however, that the
increase that shall occur in accordance with the foregoing on the first LLC
Record Date shall be the foregoing product of (i) and (ii) above multiplied by a
fraction, the numerator of which shall be the number of days in the period
commencing on the date hereof and ending on the first LLC Record Date, and the
denominator of which shall be the number of days in the period commencing on
August 4, 2003 and ending on the first LLC Record Date.

 

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

 

“Preferred Return Shortfall Per Unit” means, for any holder of Non-Managing
Member Units, an amount equal to the quotient of (a) such Non-Managing Member’s
Preferred Return Shortfall divided by (b) the number of Non-Managing Member
Units held by such Non-Managing Member immediately prior to the day on which
such Non-Managing Member delivers a Notice of Redemption.

 

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

 

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

 

“Property Appreciation” means that portion of Disposition Proceeds which is in
excess of the Initial Value of the real property that is the subject of the
disposition.

 

“Real Properties” has the meaning set forth in Section 7.3.E(2) hereof.

 

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“Reasonable” with respect to any judgment of the Managing Member means the
reasonable judgment of the Managing Member; provided, however, that any judgment
of the Managing Member made after the Managing Member’s consultation with
nationally recognized outside legal counsel to the Managing Member specializing
in the area of law under consideration that is consistent with advice given by
such outside counsel shall be deemed to be reasonable for all purposes of this
Agreement except in cases in which an opinion of counsel is expressly required
by this Agreement.

 

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

 

“Redemption Date” means, in the case of a Redemption pursuant to Section 8.6.A
hereof (i) if the related Notice of Redemption was delivered on or prior to
December 5th in any calendar year, the fifteenth (15th) calendar day (or, if
such day is not a Business Day, the next following Business Day) after the
receipt by the Managing Member of a Notice of Redemption, and (ii) otherwise,
the thirtieth (30th) calendar day (or, if such day is not a Business Day, the
next following Business Day) after the receipt by the Managing Member of a
Notice of Redemption; provided, however, that, notwithstanding any other
provisions set forth herein, in no event shall a Redemption Date as to any LLC
Unit occur prior to the first anniversary of the issuance of such LLC Unit by
the Company; provided, further, that the Redemption Date, as well as the closing
of an Redemption on any Redemption Date, may be deferred for such time (but in
any event not more than 90 days in the aggregate) as may reasonably be required
to effect, as applicable, compliance with the Securities Act or other law
(including, but not limited to, (a) state “blue sky” or other securities laws
and (b) the expiration or termination of the applicable waiting period, if any,
under the Hart Scott Rodino Antitrust Improvements Act of 1976, as amended).

 

“Reduction Distribution” has the meaning set forth in Section 8.6.D hereof.

 

“Reduction Date” has the meaning set forth in Section 8.6.D hereof.

 

“Reduction Units” has the meaning set forth in Section 8.6.D hereof.

 

“Registration” has the meaning set forth in Section 15.1.

 

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

 

“Regulatory Allocations” has the meaning set forth in Section 6.3.A(7) hereof.

 

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

 

“REIT Payment” has the meaning set forth in Section 15.13 hereof.

 

“REIT Requirements” means the requirements for qualifying as a REIT under the
Code and Regulations.

 

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

 

“REIT Shares Amount” means a number of REIT Shares equal to the sum of (i) the
product of (a) the number of Tendered Units and (b) the Adjustment Factor, (ii)
the quotient of (x) the product of (a) the number of Tendered Units and (b)
Preferred Return Shortfall Per Unit divided by (y) the average closing share
price of the common stock of Health Care Property Investors, Inc., a Maryland
corporation, for the ten (10) trading days ending on the second trading day
immediately prior to the day on which a Non-Managing Member delivers a Notice of
Redemption with respect to such Tendered Units and (iii) an amount equal to the
product of (a) the Tendered Units and (b) the cash dividend per REIT Share
declared by the Managing Member for holders of REIT Shares on any date between
the Notice of Redemption and the Redemption Date (without duplication or
omission as a result of any such dividend paid after the issuance of the REIT
Shares to the Tendering Party) to the extent not taken into account in the
computation of Preferred Return Per Unit above; provided, however, that, in the
event that the Managing Member issues Rights to all holders of REIT Shares as of
a certain record date, with the record date for such Rights issuance falling
within the period starting on the date of the Notice of Redemption and ending on
the day immediately preceding the Redemption Date, which Rights will not be
distributed before the relevant Redemption Date, then the REIT Shares Amount
shall also include such Rights that a holder of that number of REIT Shares would
be entitled to receive, expressed, where relevant hereunder, in a number of REIT
Shares determined by the Managing Member in good faith. So long as the holder of
Tendered Units is not an Acquiring Person or an Affiliate or Associate of an
Acquiring Person (as those terms are defined in the Rights Agreement), the
number of REIT Shares referenced in the preceding sentence shall be adjusted for
the issuance, distribution and triggering of exercisability of the Rights
governed by the Rights Agreement (so long as the Rights shall not previously
have been redeemed or expired pursuant to the Rights Agreement) which adjustment
shall be satisfied by issuing, together with the REIT Shares Amount, either (i)
if Rights may be issued under the Rights Agreement, the aggregate number of
Rights issuable under the Rights Agreement with respect to a number of REIT
Shares equal to the REIT Shares Amount, or (ii) in the event Rights may no
longer be issued under the Rights Agreement, a number of REIT Shares necessary
to reflect equitably the dilution in REIT Shares resulting from the exercise of
Rights (but only if the REIT Shares Amount is issued subsequent to the
occurrence of an event that results in a reduction in the purchase price
attributable to the Rights in the manner provided in Section 11(a)(ii) of the
Rights Agreement (or any comparable provision in the event the Rights Agreement
is amended), and prior to a Flip-Over Event), or (iii) if the REIT Shares Amount
is issued concurrently with or subsequent to a Flip-Over Event, the number of
shares of common stock of the Successor Person necessary to reflect equitably
the dilution in REIT Shares resulting from the exercise of Rights.

 

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

 

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

 

“Rights Agreement” means the Rights Agreement, dated as of July 27, 2000, by and
between the Managing Member and The Bank of New York, as the same may be
supplemented or amended from time to time.

 

“SEC” means the Securities and Exchange Commission.

 

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

 

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

 

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

 

“Successor Person” has the meaning set forth in the definition of Flip-Over
Event.

 

“Successor Properties” means real properties acquired by the Company in
connection with a Tax-Free Disposition of any Real Property or Successor
Property.

 

“Tax-Free Disposition” means the disposition of property in a transaction that
is not subject to tax under the Code, including by virtue of the provisions of
Section 1031 of the Code.

 

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

 

“Tax Protection Period” means the period of time beginning on the Effective Date
and ending on the tenth (10th) anniversary of the Effective Date.

 

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

 

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

 

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

 

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

 

“Threshold Date” means the date on which less than twenty percent (20%) of the
LLC Units issued by the Company to the Non-Managing Members on the Effective
Date remain outstanding.

 

“Transfer,” when used with respect to an LLC Unit or all or any portion of a
Membership Interest, means any sale, assignment, bequest, conveyance, devise,
gift (outright or in trust), pledge, encumbrance, hypothecation, mortgage,
exchange, transfer or other disposition or act of alienation, whether voluntary
or involuntary or by operation of law. The terms “Transferred” and
“Transferring” have correlative meanings.

 

“Transferred Properties” means the “DownREIT Properties” as that term is defined
in the Contribution Agreement which were contributed to the Company, directly or
indirectly through the transfer or limited liability company interests in
limited liability companies owning one or more DownREIT Properties.

 

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

 

ARTICLE 2.

ORGANIZATIONAL MATTERS

 

Section 2.1 Formation

 

The Company is a limited liability company formed pursuant to the provisions of
the Act for the purposes stated in Section 3.1 and upon the terms and subject to
the conditions set forth in this Agreement. Except as expressly provided herein,
the rights and obligations of the Company and the Members and the administration
and termination of the Company shall be governed by the Act.

 

Section 2.2 Name

 

The name of the Company is HCPI/Tennessee, LLC. The Company’s business may be
conducted under any other name or names deemed advisable by the Managing Member,
including combinations of the name of the Managing Member or any Affiliate
thereof with other words, but excluding the name “Health Care Property
Investors.” The Managing Member in its sole and absolute discretion may change
the name of the Company at any time and from time to time in accordance with
applicable law and shall notify the Members of such change in the next regular
communication to the Members.

 

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

 

The address of the registered office of the Company in the State of Delaware is
located at c/o National Registered Agents, Inc., 9 East Lockerman Street, Dover,
Delaware 19901, and the registered agent for service of process on the Company
in the State of Delaware at such registered office is National Registered
Agents, Inc., 9 East Lockerman Street, Dover, Delaware 19901. The principal
office of the Company is located at 4675 MacArthur Court, Suite 900, Newport
Beach, California 92660, or such other place as the Managing Member may from
time to time designate by notice to the Members. The Company may maintain
offices at such other place or places within or outside the State of Delaware as
the Managing Member deems advisable.

 

Section 2.4 Power of Attorney

 

A. Each Member (other than the Managing Member) and each Assignee hereby
irrevocably constitutes and appoints the Managing Member, any Liquidator, and
authorized officers and attorneys in fact of each, and each of those acting
singly, in each case with full power of substitution, as its true and lawful
agent and attorney-in-fact, with full power and authority in its name, place and
stead to execute, swear to, acknowledge, deliver, file and record in the
appropriate public offices (a) all certificates, documents and other instruments
(including, without limitation, this Agreement and the Certificate and all
amendments or restatements thereof) that are appropriate or necessary to form,
qualify or continue the existence or qualification of the Company as a limited
liability company in the State of Delaware and in all other jurisdictions in
which the Company may conduct business or own property; (b) all instruments that
are appropriate or necessary to reflect any amendment, change, modification or
restatement of this Agreement in accordance with its terms; (c) all conveyances
and other instruments or documents that are appropriate or necessary to reflect
the dissolution and liquidation of the Company pursuant to the terms of this
Agreement, including, without limitation, a certificate of cancellation; (d) all
instruments relating to the admission, withdrawal, removal or substitution of
any Member pursuant to, or other events described in, Articles 11, 12 or 13
hereof or the Capital Contribution of any Member; and (e) all certificates,
documents and other instruments relating to the determination of the rights,
preferences and privileges of Membership Interests in accordance with the terms
of this Agreement. Nothing contained in this Section 2.4 shall be construed as
(i) authorizing the Managing Member or any Liquidator to amend this Agreement
except in accordance with Article 14 hereof or as may be otherwise expressly
provided for in this Agreement or (ii) authorizing the Managing Member or any
Liquidator to take any action in contravention of this Agreement or which is
outside the scope of the powers specified in Sections 3.2 and 13.3.

 

B. The foregoing power of attorney is hereby declared to be irrevocable and a
special power coupled with an interest, in recognition of the fact that each of
the Members and Assignees will be relying upon the power of the Managing Member
to act as contemplated by this Agreement, and it shall survive and not be
affected by the subsequent Incapacity of any Member or Assignee and the Transfer
of all or any portion of such Member’s or Assignee’s LLC Units or Membership
Interest and shall extend to such Member’s or Assignee’s heirs, successors,
assigns and personal representatives. Each Member or Assignee shall execute and
deliver to the

 

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Managing Member or any Liquidator, within 15 days after receipt of the Managing
Member’s or Liquidator’s request therefor, such further designation, powers of
attorney and other instruments as the Managing Member or the Liquidator, as the
case may be, reasonably deems necessary to effectuate this Agreement and the
purposes of the Company.

 

Section 2.5 Term

 

The term of the Company commenced on September 24, 2003, the date that the
original Certificate was filed in the office of the Secretary of State of
Delaware in accordance with the Act, and shall continue until terminated
pursuant the provisions of Article 13 hereof or as otherwise provided by law.

 

ARTICLE 3.

PURPOSE

 

Section 3.1 Purpose and Business

 

The sole purposes of the Company are (i) to acquire, own, manage, operate,
repair, renovate, maintain, improve, expand, redevelop, encumber, lease, hold
for appreciation, sell or otherwise dispose of, in accordance with the terms of
this Agreement, the HCPI Property, the Transferred Properties and any other
Properties acquired by the Company and to invest and ultimately distribute
funds, including without limitation funds obtained from owning or otherwise
operating the HCPI Property, the Transferred Properties and any other Properties
acquired by the Company and the proceeds from the sale or other disposition of
the HCPI Property, the Transferred Properties and any other Properties acquired
by the Company, all in the manner permitted by this Agreement, and (ii) subject
to and in accordance with the terms of this Agreement, to do anything necessary
or incidental to the foregoing.

 

Section 3.2 Powers

 

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

 

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clauses (i), (ii) or (iii) of the preceding proviso would have a detrimental
effect on the distributions and allocations to the Non-Managing Member pursuant
to Articles 5, 6 or 13 or would impair the obligation of the Company to make
Make-Whole Payments pursuant to Section 7.3.E, 7.3.F or 7.3.G, the obligation of
the Managing Member to make the Make-Whole Payment as provided in the last
sentence of Section 7.3G, the obligation of the Company to comply with Section
7.3.J, the obligation of the Managing Member to make contributions as provided
in Section 4.4.B, or alter or modify the restrictions on the Transfer of a
Managing Member’s interest in the Company under Section 11.2, the Managing
Member shall not take such action unless (a) such action (or inaction) was
consented to by the Non-Managing Member Representative in a writing specifically
mentioning this Section 3.2 or (b) it has received an opinion of a nationally
recognized law firm specializing in the area of law under consideration selected
by the Managing Member, addressed to the Non-Managing Members that the failure
to take such action (or inaction) poses a material risk of the occurrence of the
consequences referred to in clauses (i), (ii) or (iii) of the preceding proviso.

 

Section 3.3 Specified Purposes

 

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

 

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

 

A. Each Member that is an individual (including, without limitation, each
Additional Member or Substituted Member as a condition to becoming an Additional
Member or a Substituted Member) represents and warrants to the Company, the
Managing Member and each other Member that (i) such Member has the legal
capacity to enter into this Agreement and perform such Member’s obligations
hereunder, (ii) the consummation of the transactions contemplated by this
Agreement to be performed by such Member will not result in a breach or
violation of, or a default under, any material agreement by which such Member or
any of such Member’s property is bound, or any statute, regulation, order or
other law to which such Member is subject, (iii) such Member is neither a
“foreign person” within the meaning of Code Section 1445(f) nor a “foreign
partner” within the meaning of Code Section 1446(e), and (iv) this Agreement is
binding upon, and enforceable against, such Member in accordance with its terms.

 

B. Each Member that is not an individual (including, without limitation, each
Additional Member or Substituted Member as a condition to becoming an Additional
Member or a Substituted Member) represents and warrants to the Company, the
Managing Member and each

 

21

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other Member that (i) all transactions contemplated by this Agreement to be
performed by it have been duly authorized by all necessary action, including,
without limitation, that of its managing member(s) (or, if there is no managing
member, a majority in interest of all members), committee(s), trustee(s),
general partner(s), beneficiaries, directors and shareholder(s), as the case may
be, as required, (ii) the consummation of such transactions will not result in a
breach or violation of, or a default under, its partnership or operating
agreement, trust agreement, charter or bylaws, as the case may be, any material
agreement by which such Member or any of such Member’s properties or any of its
partners, members, beneficiaries, trustees or shareholders, as the case may be,
is or are bound, or any statute, regulation, order or other law to which such
Member or any of its partners, members, trustees, beneficiaries or shareholders,
as the case may be, is or are subject, (iii) such Member is neither a “foreign
person” within the meaning of Code Section 1445(f) nor a “foreign partner”
within the meaning of Code Section 1446(e), and (iv) this Agreement is binding
upon, and enforceable against, such Member in accordance with its terms.

 

C. Each Member (including, without limitation, each Additional Member or
Substituted Member as a condition to becoming an Additional Member or a
Substituted Member) represents, warrants and agrees that it has acquired and
continues to hold its interest in the Company for its own account for investment
only and not for the purpose of, or with a view toward, the resale or
distribution of all or any part thereof, nor with a view toward selling or
otherwise distributing such interest or any part thereof at any particular time
or under any predetermined circumstances.

 

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

 

E. Each Member (including, without limitation, each Additional Member or
Substituted Member as a condition to becoming an Additional Member or a
Substituted Member) hereby represents that it has had the opportunity to consult
with its legal counsel and tax advisor in connection with, and acknowledges that
no representations as to potential profit, tax consequences of any sort
(including, without limitation, the tax consequences resulting from forming or
operating the Company, conducting the business of the Company, executing this
Agreement, consummating the transaction provided for in or contemplated by the
Contribution Agreement, making a Capital Contribution, being admitted to the
Company, receiving or not receiving distributions from the Company, redeeming
LLC Units or being allocated Tax Items), cash flows, funds from operations or
yield, if any, in respect of the Company, such Member or the Managing Member
have been made by the Company, any Member or any employee or representative or
Affiliate of the Company or any Member, and that projections and any other
information, including, without limitation, financial and descriptive
information and documentation, that may have been in any manner submitted to
such Member shall not constitute any representation or warranty of any kind or
nature, express or implied; provided that the foregoing shall not qualify, limit
or otherwise affect any express representation or warranty given by any Member
in any agreement executed by such Member.

 

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F. The Members acknowledge and agree that each Non-Managing Member Unit is a
security governed by Article 8 of the uniform commercial code as enacted in the
State of New York.

 

ARTICLE 4.

CAPITAL CONTRIBUTIONS

 

Section 4.1 Capital Contributions of the Initial Members

 

The Members acknowledge the Capital Contribution of the Initial Member and that
such Capital Contribution is, as of the receipt of their Non-Managing Member
Units, attributed to the Non-Managing Members as set forth on Exhibit A. At the
time of its execution of this Agreement, the Managing Member shall make Capital
Contributions of the Cash Contribution and the HCPI Property as set forth in
Exhibit A to this Agreement. The Members shall own Managing Member Units and
Non-Managing Member Units, as applicable, in the amounts set forth on Exhibit A.
Except as required by the Act, as provided by the Contribution Agreement or as
otherwise provided in Sections 4.2 and 4.4 hereof, no Member shall be required
or permitted to make any additional Capital Contributions or loans to the
Company.

 

Section 4.2 Additional Members

 

With the Consent of the Non-Managing Members, the Managing Member is authorized
to admit one or more Additional Members to the Company from time to time, in
accordance with the provisions of Section 12.2 hereof, on terms and conditions
and for such Capital Contributions as may be established by the Managing Member.
Consent of the Non-Managing Members shall be required in connection with the
admission of any Additional Members as set forth in Section 12.2. The provisions
of Section 12.2 shall govern the acquisition by the Company in the future of
additional Properties by means of Capital Contributions by other Persons, which
Capital Contributions shall be set forth in Exhibit A. As a condition to being
admitted to the Company, each Additional Member shall execute an agreement to be
bound by the terms and conditions of this Agreement.

 

Section 4.3 Loans

 

The Company may incur or assume Debt, enter into other similar credit,
guarantee, financing (including, without limitation, the encumbrance of the
Properties for the debt of the Managing Member and/or Affiliates of the Managing
Member pursuant to so-called cross-collateralized loans, or otherwise) or
refinancing arrangements, repay or prepay Debt, for any purpose (including,
without limitation, in connection with any further acquisition of Properties
from any Person), upon such terms as the Managing Member determines appropriate.

 

Section 4.4 Additional Funding and Capital Contributions

 

A. General. The Managing Member may, at any time and from time to time,
determine that the Company requires additional funds (“Additional Funds”) for
the operation of the Company or in connection with the purchase, lease or other
acquisition of assets or properties. Additional Funds may be raised by the
Company in accordance with the terms of this Section 4.4 or the terms of Section
4.3 hereof. No Person, including, without limitation, any

 

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Member or Assignee, shall have any preemptive, preferential, participation or
similar right or rights to subscribe for or acquire any Membership Interest.

 

B. Additional Contributions. The Managing Member on behalf of the Company may
raise all or any portion of the Additional Funds by making additional Capital
Contributions. Subject to the terms of this Section 4.4 and to the definition of
“Gross Asset Value,” the Managing Member shall determine in good faith the
amount of such additional Capital Contributions. Notwithstanding anything in
this Agreement to the contrary, the Managing Member shall make additional
Capital Contributions in an amount sufficient to cure any breach of Section
7.3.J. The Managing Member shall receive that number of additional Managing
Member Units in consideration for additional Capital Contributions made by the
Managing Member that represent the same percentage of the total outstanding LLC
Units (including the newly issued LLC Units) as the initial Gross Asset Value of
the additional Capital Contribution (net of the amount of liabilities of the
Managing Member assumed by the Company or that are secured by the property
contributed to the Company) (or, in the event of a contribution of cash, the
amount of cash so contributed) represents of the Gross Asset Value of the assets
of the Company (including the additional Capital Contributions) as of the date
of such contribution.

 

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

 

Section 4.5 No Interest; No Return

 

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

 

ARTICLE 5.

DISTRIBUTIONS

 

Section 5.1 Requirement and Characterization of Distributions

 

A. The Managing Member shall, subject to Section 5.3, cause the Company to
distribute on each LLC Distribution Date and may, in its sole and absolute
discretion, cause the Company to distribute on any other date (any such date of
distribution pursuant to this Section 5.1.A a “Distribution Date”), Available
Cash and any Property Appreciation as of such Distribution Date as follows:

 

(1) First, to the holders of the Non-Managing Member Units in accordance with
their relative Preferred Return Shortfalls as of such Distribution Date until
the Preferred Return Shortfall is zero;

 

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(2) Second, to the holders of Managing Member Units until the holders of
Managing Member Units have received cumulative distributions in an aggregate
amount per unit equal to the excess (the “Managing Member Shortfall”) of (x) the
amounts previously distributed with respect to each Non-Managing Member Unit
pursuant to Section 5.1.A(1), 5.6.A(1), and 5.6.B(1) over (y) all amounts
previously distributed with respect to each Managing Member Unit pursuant to
this Section 5.1.A.(2) and 5.6.A(2) and 5.6.B(2);

 

provided, however, that in the event a Reduction Date occurs during period
beginning after the immediately preceding Distribution Date (or if there is no
prior Distribution Date, the date hereof) and ending on such Distribution Date,
a distribution shall be made under this Section 5.1.A to the holder or holders
of the Reduction Units in an amount determined by multiplying the amount that
would have been distributed on the Distribution Date under Section 5.1.A in
respect of the Reduction Units had they been outstanding on the last day of such
Distribution Date by a fraction, the numerator of which shall be the number of
days beginning on the first day of such period and ending on the Reduction Date
and the denominator of which shall be the number of days in such period.

 

B. The Managing Member may, in its sole and absolute discretion, cause the
Company to distribute on any date on which the Preferred Return Shortfall is
zero all Available Cash remaining after making any distributions required
pursuant to Section 5.1.A as follows: (x) one percent (1%) to the Non-Managing
Member Unit holders in proportion to the number of Non-Managing Member Units
held by such holders and (y) ninety-nine percent (99%) to the Managing Member
Unit holders in proportion to the number of Managing Member Units held by such
holders.

 

Section 5.2 Distributions in Kind

 

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

 

Section 5.3 Amounts Withheld

 

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

 

25

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Managing Member that such payment must be made unless (i) the Company withholds
such payment from a distribution that would otherwise be made to the Member or
(ii) the Managing Member determines that such payment may be satisfied out of
the Available Cash of the Company that would, but for such payment, be
distributed to the Member. Any amounts withheld pursuant to the foregoing
clauses (i) or (ii) shall be treated as having been distributed to such Member.
Each Member hereby unconditionally and irrevocably grants to the Company a
security interest in such Member’s Membership Interest solely to secure such
Member’s obligation to pay to the Company any amounts required to be paid
pursuant to this Section 5.3. In the event that a Member fails to pay any
amounts owed to the Company pursuant to this Section 5.3 when due, the Managing
Member may, in its sole and absolute discretion, elect to make the payment to
the Company on behalf of such defaulting Member, and in such event shall be
deemed to have loaned such amount to such defaulting Member and shall succeed to
all rights and remedies of the Company as against such defaulting Member
(including, without limitation, the right to receive distributions). Any amounts
payable by a Member hereunder shall bear interest at the Prime Rate (but not
higher than the maximum lawful rate) from the date such amount is due (i.e., 15
days after demand) until such amount is paid in full. Each Member shall take
such actions as the Company or the Managing Member shall request in order to
perfect or enforce the security interest created hereunder.

 

Section 5.4 Distributions Upon Liquidation

 

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

 

Section 5.5 Restricted Distributions

 

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

 

Section 5.6 Distributions of Proceeds from Sale of Real Properties and the
Incurrence of Debt

 

A. In the event of a taxable disposition of any Real Property (other than as
part of a Terminating Capital Transaction), the Managing Member shall cause the
Company to (i) reinvest the Disposition Proceeds to the extent the Managing
Member elects to do so and in the amount determined by the Managing Member to be
appropriate (and to hold the Disposition Proceeds in an interest bearing account
pending such reinvestment) or (ii) if the Managing Member so elects in its sole
and absolute discretion, to distribute all or any portion of the Disposition
Proceeds in an amount no greater than an amount equal to the Disposition
Proceeds less the Property Appreciation with respect to such Real Property as
follows:

 

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

 

26

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(2) Second, to the holders of Managing Member Units in accordance with its
Managing Member Shortfalls until the Managing Member Shortfall is zero; and

 

(3) Third, to the holders of LLC Units pro rata in proportion to their
Percentage Interests until the amount of cash distributed under this Section
5.6.A(3) with respect to the disposition in question is equal to the Initial
Value of the Real Property that was the subject of such disposition. The
distribution pursuant to this Section 5.6.A(3) shall reduce the number of LLC
Units as provided in Section 8.6.D.

 

B. Upon the incurrence of Debt, the Managing Member shall cause the Company to
(i) reinvest the proceeds therefrom to the extent the Managing Member elects to
do so and in the amount determined by the Managing Member to be appropriate (and
to hold the proceeds therefrom in an interest bearing account pending such
reinvestment) and (ii) if the Managing Member elects to distribute all or any
portion of such proceeds in its sole and absolute discretion, distribute such
portion of such proceeds, to the extent thereof, as follows:

 

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

 

(2) Second, to the holders of Managing Member Units in accordance with its
Managing Member Shortfalls until the Managing Member Shortfall is zero; and

 

(3) Thereafter, to the Managing Member.

 

C. The Managing Member shall have no obligation to incur Debt for the purpose of
making distributions pursuant to this Section 5.6 or for any other purpose.

 

ARTICLE 6.

ALLOCATIONS

 

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

 

Net Income and Net Loss of the Company shall be determined and allocated with
respect to each Fiscal Year of the Company as of the end of each such year.
Except as otherwise provided in this Article 6, an allocation to a Member of a
share of Net Income or Net Loss shall be treated as an allocation of the same
share of each item of income, gain, loss or deduction that is taken into account
in computing Net Income or Net Loss.

 

Section 6.2 General Allocations

 

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

 

(1) Net Loss with respect to any Fiscal Year of the Company, other than Net Loss
referred to in Section 6.2.B, shall be allocated to the Members and Assignees in
proportion to their Percentage Interests.

 

27

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(2) Net Income with respect to any Fiscal Year of the Company, other than Net
Income referred to in Section 6.2.B, shall be allocated as follows:

 

(a) First, to the Non-Managing Members or their Assignees in an amount that will
cause such allocation, together with the amount of all previous allocations of
Net Income under this Section 6.2.A(2)(a) and Section 6.2.B(2)(a), to equal to
the cumulative distributions received by such Member or Assignee pursuant to
Sections 5.1.A(1), 5.6.A(1) and 5.6.B(1) for the current and all prior Fiscal
Years;

 

(b) Second, to the Managing Member or its Assignees in an amount that will cause
such allocation, together with the amount of all previous allocations of Net
Income under this Section 6.2.A(2)(b) and Section 6.2.B(2)(b), to equal the
cumulative distributions received by the Managing Member and such Assignees
pursuant to Sections 5.1.A(2), 5.6.A(2) and 5.6.B(2) for the current and all
prior Fiscal Years; and

 

(c) Thereafter, (x) ninety-nine percent (99%) to the Managing Member or its
Assignees and (y) one percent (1%) to the Non-Managing Members or their
Assignees in proportion to the number of Non-Managing Member Units held by each
such Non-Managing Member.

 

B. Net Income and Net Loss Upon Terminating Capital Transaction or from the
Disposition of Real Properties. Except as otherwise provided in Section 6.3:

 

(1) Net Loss attributable to a disposition of any of the Real Properties,
including upon a Terminating Capital Transaction, shall be allocated to the
Members and Assignees in proportion to their Percentage Interests.

 

(2) Net Income attributable to a disposition of any of the Real Properties,
including upon a Terminating Capital Transaction, shall be allocated as follows:

 

(a) First, to each Non-Managing Member or their Assignees in an amount that will
cause such allocation, together with the amount of all previous allocations of
Net Income under this Section 6.2.B(2)(a) and Section 6.2.A(2)(a), to equal to
the cumulative distributions received by such Member or Assignee pursuant to
Sections 5.1.A(1), 5.6.A(1) and 5.6.B(1) for the current and all prior Fiscal
Years;

 

(b) Second, to the Managing Member or its Assignees in an amount that will cause
such allocation, together with the amount of all previous allocations of Net
Income under this Section 6.2.B(2)(b) and Section 6.2.A(2)(b), to equal the
cumulative distributions received by the Managing Member and such Assignees
pursuant to Sections 5.1.A(2), 5.6.A(2) and 5.6.B(2) for the current and all
prior Fiscal Years; and

 

28

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(c) Thereafter, (x) ninety-nine percent (99%) to the Managing Member or its
Assignees and (y) one percent (1%) to the Non-Managing Members or their
Assignees in proportion to the number of Non-Managing Member Units held by each
such Non-Managing Member.

 

Section 6.3 Additional Allocation Provisions

 

A. Regulatory Allocations.

 

(1) Minimum Gain Chargeback.

 

Except as otherwise provided in Regulations Section 1.704-2(f), notwithstanding
the provisions of Section 6.2 hereof, or any other provision of this Article 6,
if there is a net decrease in Company Minimum Gain during any Fiscal Year, each
Member shall be specially allocated items of Company income and gain for such
year (and, if necessary, subsequent years) in an amount equal to such Member’s
share of the net decrease in Company Minimum Gain, as determined under
Regulations Section 1.704-2(g). Allocations pursuant to the previous sentence
shall be made in proportion to the respective amounts required to be allocated
to each Member pursuant thereto. The items to be allocated shall be determined
in accordance with Regulations Sections 1.704-2(f)(6) and 1.704-2(j)(2). This
Section 6.3.A(1) is intended to qualify as a “minimum gain chargeback” within
the meaning of Regulations Section 1.704-2(f) and shall be interpreted
consistently therewith.

 

(2) Member Minimum Gain Chargeback.

 

Except as otherwise provided in Regulations Section 1.704-2(i)(4) or in Section
6.3.A(1) hereof, if there is a net decrease in Member Minimum Gain attributable
to a Member Nonrecourse Debt during any Fiscal Year, each Member who has a share
of the Member Minimum Gain attributable to such Member Nonrecourse Debt,
determined in accordance with Regulations Section 1.704-2(i)(5), shall be
specially allocated items of Company income and gain for such year (and, if
necessary, subsequent years) in an amount equal to such Member’s share of the
net decrease in Member Minimum Gain attributable to such Member Nonrecourse
Debt, determined in accordance with Regulations Section 1.704-2(i)(4).
Allocations pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Member pursuant thereto. The
items to be so allocated shall be determined in accordance with Regulations
Sections 1.704-2(i)(4) and 1.704-2(j)(2). This Section 6.3.A(2) is intended to
qualify as a “chargeback of partner nonrecourse debt minimum gain” within the
meaning of Regulations Section 1.704-2(i) and shall be interpreted consistently
therewith.

 

(3) Member Nonrecourse Deductions.

 

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

 

29

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(4) Qualified Income Offset.

 

If any Member unexpectedly receives an adjustment, allocation or distribution
described in Regulations Section 1.704-1(b) (2)(ii)(d)(4), (5) or (6), items of
Company income and gain shall be allocated, in accordance with Regulations
Section 1.704-1(b) (2)(ii)(d), to such Member in an amount and manner sufficient
to eliminate, to the extent required by such Regulations, the Adjusted Capital
Account Deficit of such Member as quickly as possible, provided that an
allocation pursuant to this Section 6.3.A(4) shall be made if and only to the
extent that such Member would have an Adjusted Capital Account Deficit after all
other allocations provided in this Article 6 have been tentatively made as if
this Section 6.3.A(4) were not in the Agreement. It is intended that this
Section 6.3.A(4) qualify and be construed as a “qualified income offset” within
the meaning of Regulations Section 1.704-1(b) (2)(ii)(d) and shall be
interpreted consistently therewith.

 

(5) Limitation on Allocation of Net Loss.

 

To the extent that any allocation of Net Loss would cause or increase an
Adjusted Capital Account Deficit as to any Member, such allocation of Net Loss
shall be reallocated among the other Members in accordance with their respective
LLC Units, subject to the limitations of this Section 6.3.A(5).

 

(6) Section 754 Adjustment.

 

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

 

(7) Curative Allocations.

 

The allocations set forth in Sections 6.3.A(1) through (6) hereof (the
“Regulatory Allocations”) are intended to comply with certain regulatory
requirements, including the requirements of Regulations Sections 1.704-1(b) and
1.704-2. Notwithstanding the provisions of Sections 6.1 and 6.2 hereof, the
Regulatory Allocations shall be taken into account in allocating other items of
income, gain, loss and deduction among the Members so that, to the extent
possible without violating the requirements giving rise to the Regulatory
Allocations, the net amount of such allocations of other items and the
Regulatory Allocations to each Member shall be equal to the net amount that
would have been allocated to each such Member if the Regulatory Allocations had
not occurred.

 

B. Allocation of Excess Nonrecourse Liabilities. For purposes of determining a
Member’s proportional share of the “excess nonrecourse liabilities” of the
Company within

 

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the meaning of Regulations Section 1.752-3(a)(3), each Member’s interest in
Company profits shall be such Member’s Percentage Interest.

 

Section 6.4 Tax Allocations

 

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

 

B. Allocations Respecting Section 704(c) Revaluations. Notwithstanding Section
6.4.A hereof, Tax Items with respect to Property that is contributed to the
Company with a Gross Asset Value that varies from its basis in the hands of the
contributing Member immediately preceding the date of contribution shall be
allocated among the Members for income tax purposes pursuant to the “traditional
method” as described in Regulations Section 1.704-3(b). In the event that the
Gross Asset Value of any Company asset is adjusted pursuant to subsection (b) of
the definition of “Gross Asset Value” (provided in Article 1 hereof), subsequent
allocations of Tax Items with respect to such asset shall take account of the
variation, if any, between the adjusted basis of such asset and its Gross Asset
Value in the same manner as under Code Section 704(c) and the applicable
Regulations and this Section 6.4.B, pursuant to any method permitted under
Regulations Section 1.704-3 as selected by the Managing Member which selection,
at any time prior to the Threshold Date, shall be made only with the Consent of
the Non-Managing Members.

 

Section 6.5 Other Provisions

 

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

 

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

 

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ARTICLE 7.

MANAGEMENT AND OPERATION OF BUSINESS

 

Section 7.1 Management

 

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

 

(1) the making of any expenditures, the lending or borrowing of money making
prepayments on loans, the assumption or guarantee of, or other contracting for,
indebtedness and other liabilities (including, but not limited to indebtedness
of Managing Member or any of its Affiliates), the issuance of evidences of
indebtedness (including the securing of same by deed to secure debt, mortgage,
deed of trust or other lien or encumbrance on the Company’s assets) and the
incurring of any obligations that it deems necessary for the conduct of the
activities of the Company;

 

(2) the making of tax, regulatory and other filings, or rendering of periodic or
other reports to governmental or other agencies having jurisdiction over the
business or assets of the Company;

 

(3) the acquisition, sale, transfer, exchange or other disposition of any assets
of the Company on commercially reasonable terms as determined in the good faith
judgment of the Managing Member (including, but not limited to, the exercise or
grant of any conversion, option, privilege or subscription right or any other
right available in connection with any assets at any time held by the Company);

 

(4) the mortgage, pledge, encumbrance or hypothecation of any assets of the
Company (including, without limitation, any Transferred Property) and the use of
the assets of the Company (including, without limitation, cash on hand) for any
purpose

 

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consistent with the terms of this Agreement which the Managing Member believes
will directly benefit the Company and on any terms that the Managing Member sees
fit, including, without limitation, the financing of the conduct or the
operations of the Company, the lending of funds to other Persons (including,
without limitation, the Managing Member (if necessary to permit the financing or
capitalization of a Subsidiary of the Managing Member or the Company)), the
repayment of obligations of the Company and the securing of obligations of the
Managing Member or any of its Affiliates;

 

(5) the management, operation, leasing, landscaping, repair, alteration,
demolition, replacement or improvement of any Property, including, without
limitation, any Transferred Property, or other asset of the Company or any
Subsidiary, subject to any management agreements to which the Company is a
party;

 

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

 

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

 

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

 

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

 

(10) the control of any matters affecting the rights and obligations of the
Company, including the settlement, compromise, submission to arbitration or any

 

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other form of dispute resolution, or abandonment, of any claim, cause of action,
liability, debt or damages, due or owing to or from the Company, the
commencement or defense of suits, legal proceedings, administrative proceedings,
arbitrations or other forms of dispute resolution, and the representation of the
Company in all suits or legal proceedings, administrative proceedings,
arbitrations or other forms of dispute resolution, the incurring of legal
expense, and the indemnification of any Person against liabilities and
contingencies to the extent permitted by law;

 

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

 

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

 

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

 

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

 

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

 

(16) subject to Section 7.3.A(4), the maintenance of working capital and other
reserves in such amounts as the Managing Member deems appropriate and reasonable
from time to time;

 

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

 

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

 

(19) the amendment and restatement of Exhibit A hereto to reflect accurately at
all times the Capital Accounts, LLC Units, and Percentage Interests of the
Members as the same are adjusted from time to time to the extent necessary to
reflect redemptions, Capital Contributions, the issuance of or reduction in the
number of LLC Units, the admission of any Substituted Member or otherwise, as
long as the matter or event being reflected in Exhibit A hereto otherwise is
authorized by this Agreement; and

 

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(20) the formation of corporations, trusts, limited liability companies or other
entities as wholly-owned subsidiaries of the Company for purposes of holding
title to all or a portion of the Properties.

 

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

 

C. At all times from and after the date hereof, the Managing Member may cause
the Company to establish (subject to Section 7.3.A(4)) and maintain working
capital reserves in such amounts as the Managing Member, in its sole and
absolute discretion, deems appropriate and reasonable from time to time.

 

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

 

Section 7.2 Certificate of Formation

 

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

 

Section 7.3 Restrictions on Managing Member’s Authority

 

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

 

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

 

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(2) possess Company property, or assign any rights in specific Company property,
for other than a Company purpose except for purposes of securing any obligation
of Managing Member or any of its Affiliates or as otherwise provided in this
Agreement;

 

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

 

(4) establish or increase reserves in amounts such that the Company will not be
able to make distributions pursuant to Article 5, or enter into any contract,
mortgage, loan or other agreement that expressly prohibits or restricts, or has
the effect of prohibiting or restricting, the ability of the Company to make
distributions of Available Cash as required by Article 5, except, in any such
case, with the written consent of any Member affected by the prohibition or
restriction; or

 

(5) except pursuant to Section 4.2, issue any class of equity security (other
than additional Managing Member Units pursuant to Section 4.4 or otherwise in
accordance with the terms of this Agreement) or any other security convertible
into or exchangeable for an equity security of the Company that would not be
subordinate to the rights of the Non-Managing Members.

 

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

 

(1) except as provided in Section 7.3.C, amending, modifying or terminating this
Agreement other than to reflect the permitted admission, substitution,
termination or withdrawal of Members pursuant to Article 11 or Article 12
hereof;

 

(2) approving or acquiescing to the Transfer of the Membership Interest of the
Managing Member to any Person other than the Company or an Affiliate of the
Managing Member except pursuant to Section 11.2;

 

(3) admitting into the Company any Additional Managing Member or Substitute
Managing Member;

 

(4) instituting or acquiescing in or otherwise permitting any proceeding for
bankruptcy on behalf of, against or involving the Company whether voluntary or
involuntary;

 

(5) prior to the first anniversary of the Effective Date, make any distribution
of Disposition Proceeds or cause the Company to have a Liquidating Event;

 

(6) prior to the Threshold Date, confessing a judgment against the Company in an
amount in excess of $2,000,000;

 

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(7) making a general assignment for the benefit of creditors or appoint or
acquiesce in the appointment of any receiver, trustee, assignee, liquidator or
other similar official under any Bankruptcy Law;

 

(8) cause the Company to have a Liquidating Event at any time on or after the
first anniversary of the Effective Date unless the Managing Member shall have
provided not less than sixty (60) days prior written notice to the Members of
such Liquidating Event, provided, however, if the Managing Member extends or
delays the time for a Redemption Date pursuant to the last proviso of the
definition of Redemption Date or otherwise in accordance with the terms hereof,
the Managing Member shall not permit a Liquidating Event on or prior to such
Redemption Date, as so extended or delayed; or

 

(9) make any distribution of Disposition Proceeds under Section 5.6.A(3) at any
time the Cash Amount determined as of the date of such distribution is less than
a fraction, the numerator of which is the amount that would be distributed to
the Members pursuant to Section 5.6.A(3) and the denominator of which is the
number of Reduction Units resulting from such distribution.

 

C. Notwithstanding Section 7.3.B or Section 14.2, the Managing Member shall have
the exclusive power to amend this Agreement as may be required to facilitate or
implement any of the following purposes:

 

(1) to reflect the issuance of additional Membership Interests pursuant to
Section 4.2 or Section 4.4, to reflect the admission, substitution, termination,
or withdrawal of Members in accordance with this Agreement and to amend Exhibit
A in connection therewith and to reflect the redemption or other reduction in
the number of LLC Units outstanding pursuant to Sections 8.6.A or 8.6.D hereof
and as otherwise permitted by this Agreement;

 

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

 

(3) subject to second the proviso to Section 3.2, to reflect such changes that
the Managing Member determines are necessary in its Reasonable judgment, after
consultation with outside counsel to the Managing Member, for the Managing
Member to maintain its status as a REIT or to satisfy the REIT Requirements; and

 

(4) to modify, as set forth in the definition of “Capital Account,” the manner
in which Capital Accounts are computed.

 

D. Notwithstanding Section 7.3.B and 7.3.C hereof, this Agreement shall not be
amended with respect to any Member adversely affected, and no action may be
taken by the Managing Member, without the consent of such Member adversely
affected if such amendment or action would (i) convert a Non-Managing Member’s
interest in the Company into a Managing Member’s interest, (ii) modify the
limited liability of a Non-Managing Member, (iii) alter rights of the Member to
receive distributions pursuant to Article 5 or Section 13.3.A, or the
allocations

 

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specified in Article 6 (except as permitted pursuant to Section 4.4 and Section
7.3.C(1) hereof), (iv) materially alter or modify the rights to a Redemption as
set forth in Section 8.6 or the rights to a Make-Whole Payment as set forth in
Sections 7.3.E, 7.3.F and 7.3.G, and related definitions hereof, (v) amend this
Section 7.3.D, (vi) alter or modify the Company’s obligations under 7.3.J, (vii)
alter or modify Section 11.2.A or (vii) alter or modify the Managing Member’s
obligation to make Additional Capital Contribution pursuant to Section 4.4.B.
Further, no amendment may alter the restrictions on the Managing Member’s
authority set forth elsewhere in this Section 7.3 without the Consent specified
in such section. Any such amendment or action consented to by any Member shall
be effective as to that Member, notwithstanding the absence of such consent by
any other Member.

 

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

 

(1) cause or permit the Company to merge, consolidate or combine with or into
any other partnership, limited partnership, limited liability company,
corporation or other person, to sell or otherwise dispose of all or
substantially all of its assets, or to reclassify or change its outstanding
equity interests or to enter into any Termination Transaction; or

 

(2) sell, dispose, convey or otherwise transfer any of the real properties the
Company acquired in connection with the transactions consummated pursuant to the
Contribution Agreement (collectively, the “Real Properties”) or any Successor
Properties, in a transaction that causes holders of Non-Managing Member Units to
recognize taxable income under the Code on account of a Built-in Gain, other
than a (i) casualty loss, (ii) taking by eminent domain, (iii) pursuant to the
exercise of a put right by the Company (or any Subsidiary of the Company)
pursuant to which the Company (or such Subsidiary) may require another Person to
purchase one or more Real Properties, which put right was granted pursuant to
any document or instrument executed in accordance with the Contribution
Agreement or (iv) pursuant to the exercise of a call or other purchase right by
any other Person pursuant to which such Person has the right to purchase one or
more Real Properties, which call or other purchase right was granted pursuant to
any document or instrument executed in accordance with the Contribution
Agreement or in effect at the time such Properties were contributed to the
Company; provided that the Company shall use commercially reasonable efforts to
apply the proceeds of any such casualty or taking to the restoration or
replacement of such Real Properties or Successor Properties in a transaction
qualifying under Code Section 1033;

 

In the event that the prior Consent of the Non-Managing Members is not required
for the Managing Member, on behalf of the Company, to take or engage in any of
the actions described in the foregoing subparagraphs (1) and (2), the Managing
Member may take such action only after providing the Non-Managing Members with
not less than if prior to November 5 or after December 1 of any calendar year,
forty-five (45) days, and otherwise, sixty (60) days notice of its intention to
do so.

 

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F. The Company shall pay to the Non-Managing Members the Make Whole Payment as
provided in Section 7.3.G if the Company takes any action to dissolve or
otherwise terminate the Company during the Tax Protection Period. In addition, a
Non-Managing Member shall be entitled to the Make Whole Payment in the event of
the exercise of such Non-Managing Member’s right to a Redemption under 8.6.A
after receipt by such Non-Managing Member of a written notice of a Liquidating
Event provided by the Company to the same extent such Non-Managing Member would
have been entitled to such Make Whole Payment had such Non-Managing Member not
have been redeemed pursuant to such Redemption. In the event the Managing Member
intends to dissolve or otherwise terminate the Company following the Tax
Protection Period, it shall give not less than forty-five (45) days notice of
such intent to the Non-Managing Members prior to taking any action in
furtherance of such intent.

 

G. Any event in Sections 7.3.E and 7.3.F that triggers the obligation of the
Company to make a Make-Whole Payment (as defined below) is called a “Triggering
Event.” The Company shall pay to each Non-Managing Member an amount (the
“Make-Whole Payment”) equal to the aggregate federal, state and local income
taxes, if any, incurred by the Non-Managing Member as a result of a Triggering
Event. Any such federal, state and local income taxes shall be deemed to be the
amount of gain or income recognized by the Non-Managing Members multiplied by
the then highest rate or rates applicable to such gain or income for the year in
which such gain or income is recognized grossed up to include any federal, state
and local income taxes incurred by the Non-Managing Member by reason of the
receipt of the payment from the Company. No effect shall be given in determining
the amount of the Make-Whole Payment of a Non-Managing Member’s taxable income,
tax deductions, tax credits, tax carry forwards nor to any other of their tax
benefits or tax attributes. The Make-Whole Payment shall be made within a
reasonable period of time after the Triggering Event, but in no event later than
the date by which the Non-Managing Member would be required to make the
applicable tax payment. In addition to any other rights available under law or
equity, in the event that the Company fails to pay any amounts owed pursuant to
this Section 7.3 when due, the Non-Managing Member to whom such payment is owed
shall be deemed to have loaned such amount to the Company. Any amounts payable
to a Non-Managing Member shall be increased by an amount equal to the greater of
(x) interest accrued on such amount at the Prime Rate from the date such amount
is due until such amount is paid in full and (y) actual interest and penalties
accrued by the relevant taxing authorities with respect to such amounts plus any
penalties actually imposed thereon by the relevant taxing authorities. In the
event that any Member becomes entitled to a Make Whole Payment and the Company,
for any reason, fails to satisfy such obligation, then the Managing Member shall
make the Make Whole Payment promptly following such failure by the Company to
make such Make Whole Payment.

 

H. The parties agree that the sole and exclusive rights and remedies to which
the Non-Managing Members may be entitled at law or in equity in connection with
any Triggering Event shall be for payment of the Make-Whole Payment pursuant to
Section 7.3.G, and no Non-Managing Member shall be entitled to enjoin or
otherwise object to any transaction that would result in a taxable event or
pursue any other claim with respect to a Triggering Event unless, independent of
the tax consequences, such transaction is or would be in violation of this
Agreement or applicable law. If any Non-Managing Member notifies the Company of
a claim that the Company owes a Make-Whole Payment, the Managing Member, on
behalf of the Company, and the Non-Managing Member shall negotiate in good faith
to resolve any

 

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disagreements regarding any such Triggering Event. If any such disagreement
cannot be resolved by the parties within thirty (30) days after the receipt by
the Company of the notice in accordance with the preceding sentence, the
Managing Member, on behalf of the Company, and the Non-Managing Member shall
jointly retain a nationally recognized independent public accounting firm that
is not the Managing Member’s accounting firm (an “Accounting Firm”) to act as an
arbitrator to resolve as expeditiously as possible all points of any such
disagreement (including, without limitation, whether a Triggering Event has
occurred and, if so, the amount of the applicable Make-Whole Payment that the
Non-Managing Member is entitled to as a result thereof, determined as set forth
in Section 7.3.G). If the parties cannot agree on an Accounting Firm, each of
the Managing Member, on behalf of the Company, and the Non-Managing Member shall
retain an Accounting Firm, and the Accounting Firms selected shall jointly
retain a third Accounting Firm. If the two Accounting Firms cannot agree upon a
third Accounting Firm within thirty (30) days, such matter shall be referred to
a court of competent jurisdiction to select the third Accounting Firm. The
Accounting Firms shall be instructed to resolve as expeditiously as possible all
points of any such disagreement (including, without limitation, whether a
Triggering Event has occurred and, if so, the amount of the applicable
Make-Whole Payment that the Non-Managing Member is entitled to as a result
thereof, determined as set forth in Section 7.3.G). All determinations made by
the Accounting Firm or the Accounting Firms, as the case may be, with respect to
the resolution of whether a Triggering Event has occurred shall be final,
conclusive and binding on the Company and the Non-Managing Member. The fees and
expenses of any Accounting Firms incurred in connection with any such
determination shall be shared equally by the Company and the Non-Managing
Member.

 

I. The Managing Member agrees that it will operate and maintain the Company’s
Properties in substantially the same manner as it would if such Properties were
owned directly by the Managing Member.

 

J. If the Company or, after assumption by the Managing Member in accordance with
Section 8.6.A, the Managing Member fails to satisfy its Redemption obligation
under Section 8.6.A as of any Redemption Date and such failure continues for a
period of thirty days or more after such Redemption Date then, at all times
thereafter, the Company shall maintain Equity Coverage of no less than one
hundred and twenty percent (120%) of the product of (a) the Cash Amount
determined as if a Notice of Redemption had been delivered to the Company with
respect to all Non-Managing Member Units as of the end of the immediately
preceding calendar quarter, multiplied by (b) the number of Non-Managing Member
Units outstanding at the end of that quarter.

 

K. The Managing Member shall provide the Non-Managing Member Representative
written notice, in reasonable detail in light of the then available information,
of any breach of any representation or warranty of the Managing Member made in
Section 7.8 of the Contribution Agreement and any breach of a covenant or
agreement of Managing Member or Operating Company in Section 2.1(c), 4.1(b) or
Article X of the Contribution Agreement promptly upon Managing Member becoming
aware of such breach. Such notice shall include a description of the actions
Managing Member proposes to take to remedy the breach and the anticipated time
frame for taking such actions and resolving such breach. In the event a Majority
in Interest of the Non-Managing Members do not approve the remedy proposed by
the Managing Member or, if such remedy is approved and the Managing member fails
to promptly complete or

 

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perform such remedy, then a Majority in Interest of the Non-Managing Members
shall be entitled and authorized to enforce on behalf of the Company or cause
the Company to enforce the Contribution Indemnity. Such right shall include the
right, on behalf of the Company, to commence, prosecute, control and resolve
litigation or other enforcement action against the Managing Member.

 

Section 7.4 Compensation of the Managing Member

 

A. The Managing Member shall not be compensated for its services as the manager
of the Company. Distributions, payments and allocations to which the Managing
Member may be entitled in its capacity as the Managing Member shall not
constitute compensation for services rendered by the Managing Member as provided
in this Agreement (including the provisions of Articles 5 and 6 hereof).

 

B. Subject to Sections 7.4.C and 15.13 hereof, the Company shall be liable, and
shall reimburse the Managing Member on a monthly basis (or such other basis as
the Managing Member may determine in its reasonable discretion), for all sums
expended in connection with the Company’s business. Any such reimbursements
shall be in addition to any reimbursement of the Managing Member as a result of
indemnification pursuant to Section 7.7 hereof.

 

C. To the extent practicable, Company expenses shall be billed directly to and
paid by the Company. Subject to Section 15.13 hereof, reimbursements to the
Managing Member or any of its Affiliates by the Company shall be allowed,
however, for the actual cost to the Managing Member or any of its Affiliates of
operating and other expenses of the Company, including, without limitation, the
actual cost of goods, materials and administrative services related to (i)
Company operations, (ii) company accounting, (iii) communications with Members,
(iv) legal services, (v) tax services, (vi) computer services, (vii) risk
management, (viii) mileage and travel expenses and (ix) such other related
operational and administrative expenses as are necessary for the prudent
organization and operation of the Company. “Actual cost of goods and materials”
means the actual cost to the Managing Member or any of its Affiliates of goods
and materials used for or by the Company obtained from entities not affiliated
with the Managing Member, and “actual cost of administrative services” means the
pro rata cost of personnel (as if such persons were employees to the Company)
providing administrative services to the Company. The cost for such services to
be reimbursed to the Managing Member or any Affiliate thereof shall be the
lesser of the Managing Member’s or Affiliate’s actual cost, or the amount the
Company would be required to pay to independent parties for comparable
administrative services in the same geographic location.

 

D. The Managing Member shall also be reimbursed by the Company for all expenses
it incurs relating to any issuance of additional Membership Interests, Debt of
the Company, or rights, options, warrants or convertible or exchangeable
securities of the Company pursuant to Article 8 hereof (including, without
limitation, all costs, expenses, damages and other payments resulting from or
arising in connection with litigation related to any of the foregoing), all of
such expenses are considered by the Members to constitute expenses of, and for
the benefit of, the Company.

 

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

 

Section 7.5 Other Business of Managing Member

 

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

 

Section 7.6 Contracts with Affiliates

 

A. Subject to Section 7.6.B below, the Company may lend or contribute to
Affiliates in which it has an equity investment, and such Affiliates may borrow
funds from the Company, on terms and conditions established in the sole and
absolute discretion of the Managing Member. The foregoing authority shall not
create any right or benefit in favor of any Person.

 

B. The Company shall not enter into or modify transactions with any of its
Affiliates or Affiliates of the Managing Member except for transactions
evidenced by written agreements that are at arm’s-length and fair market value
and otherwise on terms and conditions that are fair and reasonable to the
Company; provided, however, that, subject to Section 7.3.J, the Managing Member
shall at all times be entitled to cause the Company to mortgage, pledge,
encumber or hypothecate the Properties, any property owned by a Subsidiary of
the Company or any portion thereof as security for the debt of the Managing
Member or any of its Affiliates.

 

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Section 7.7 Indemnification

 

A. To the fullest extent permitted by applicable law, the Company shall
indemnify each Indemnitee from and against any and all losses, claims, damages,
liabilities, joint or several, expenses (including, without limitation,
attorney’s fees and other legal fees and expenses), judgments, fines,
settlements and other amounts arising from any and all claims, demands, actions,
suits or proceedings, civil, criminal, administrative or investigative, that
relate to the operations of the Company (“Actions”) as set forth in this
Agreement in which such Indemnitee may be involved, or is threatened to be
involved, as a party or otherwise unless it is established that: (i) the act or
omission of the Indemnitee was material to the matter giving rise to the
proceeding and either was committed in bad faith or was the result of active and
deliberate dishonesty; (ii) the Indemnitee actually received an improper
personal benefit in money, property or services; or (iii) in the case of any
criminal proceeding, the Indemnitee had reasonable cause to believe that the act
or omission was unlawful. Without limitation the foregoing indemnity shall
extend to any liability of any Indemnitee, pursuant to a loan guaranty or
otherwise, for any indebtedness of the Company or any Subsidiary of the Company
(including, without limitation, any indebtedness which the Company or any
Subsidiary of the Company has assumed or taken subject to), and the Managing
Member is hereby authorized and empowered, on behalf of the Company, to enter
into one or more indemnity agreements consistent with the provisions of this
Section 7.7 in favor of any Indemnitee having or potentially having liability
for any such indebtedness. The termination of any proceeding by judgment, order
or settlement does not create a presumption that the Indemnitee did not meet the
requisite standard of conduct set forth in this Section 7.7.A. The termination
of any proceeding by conviction or upon a plea of nolo contendere or its
equivalent, or an entry of an order of probation prior to judgment, creates a
rebuttable presumption that the Indemnitee acted in a manner contrary to that
specified in this Section 7.7.A with respect to the subject matter of such
proceeding. Any indemnification pursuant to this Section 7.7 shall be made only
out of the assets of the Company, and any insurance proceeds from the liability
policy covering the Managing Member and any Indemnitees, and neither the
Managing Member nor any Non-Managing Member shall have any obligation to
contribute to the capital of the Company or otherwise provide funds to enable
the Company to fund its obligations under this Section 7.7.

 

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

 

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

 

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

 

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

 

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

 

G. The provisions of this Section 7.7 are for the benefit of the Indemnitees,
their heirs, successors, assigns and administrators and shall not be deemed to
create any rights for the benefit of any other Persons. Any amendment,
modification or repeal of this Section 7.7 or any provision hereof shall be
prospective only and shall not in any way affect the limitations on the
Company’s liability to any Indemnitee under this Section 7.7 as in effect
immediately prior to such amendment, modification or repeal with respect to
claims arising from or relating to matters occurring, in whole or in part, prior
to such amendment, modification or repeal, regardless of when such claims may
arise or be asserted.

 

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

 

Section 7.8 Liability of the Managing Member and the Non-Managing Member
Representative

 

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

 

B. The Non-Managing Members expressly acknowledge that the Managing Member is
acting for the benefit of the Company, the Members and the Managing Member’s
shareholders collectively, that the Managing Member is under no obligation to
give priority to the separate interests of the Members or the Managing Member’s
shareholders (including,

 

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without limitation, the tax consequences to Members, Assignees or the Managing
Member’s shareholders) in deciding whether to cause the Company to take (or
decline to take) any actions.

 

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

 

D. Any amendment, modification or repeal of this Section 7.8 or any provision
hereof shall be prospective only and shall not in any way affect the limitations
on the Managing Member’s, and its officers’ and directors’, and the Non-Managing
Member Representative’s liability to the Company and the Non-Managing Members
under this Section 7.8 as in effect immediately prior to such amendment,
modification or repeal with respect to claims arising from or relating to
matters occurring, in whole or in part, prior to such amendment, modification or
repeal, regardless of when such claims may arise or be asserted.

 

Section 7.9 Other Matters Concerning the Managing Member

 

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

 

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

 

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

 

D. Notwithstanding any other provisions of this Agreement or the Act, any action
of the Managing Member on behalf of the Company or any decision of the Managing
Member to refrain from acting on behalf of the Company undertaken in the good
faith belief, after consultation with outside counsel to the Managing Member,
that such action or omission is necessary or advisable in order (i) to protect
the ability of the Managing Member to continue to qualify as a REIT, (ii) for
the Managing Member otherwise to satisfy the REIT Requirements or (iii) to allow
the Managing Member to avoid incurring any liability for taxes under Section 857
or Section 4981 of the Code, is expressly authorized under this Agreement and is
deemed

 

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approved by all of the Non-Managing Members; provided, however, if in the
opinion of the Managing Member any such action or omission will adversely affect
the rights of a Non-Managing Member hereunder, the Managing Member shall give
the Non-Managing Member Representative notice of such intended action or
omission; provided, further, however, that if any action or omission proposed to
be taken by the Managing Member to avoid the consequences referred to in clauses
(i), (ii) or (iii) of this Section 7.9.D would have a detrimental effect on the
distributions and allocations to the Non-Managing Member pursuant to Articles 5,
6 or 13 or would impair the obligation of the Company to make Make-Whole
Payments pursuant to Section 7.3.E, 7.3.F or 7.3.G, the obligation of the
Managing Member to make the Make-Whole Payment as provided in the last sentence
of Section 7.3G, the obligation of the Company to comply with Section 7.3.J, the
obligation of the Managing Member to make contributions as provided in Section
4.4.B, or alter or modify the restrictions on the Transfer of a Managing
Member’s interest in the Company under Section 11.2.A, , the Managing Member
shall not take such action or omission unless it has received an opinion of a
nationally recognized law firm specializing in the law regarding taxation of
REITs, selected by the Managing Member, addressed to the Non-Managing Members
that the failure to take such action or omission poses a material risk of the
occurrence of the consequences referred to in clauses (i), (ii) or (iii) of this
Section 7.9.D.

 

Section 7.10 Title to Company Assets

 

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

 

Section 7.11 Reliance by Third Parties

 

Any Person dealing with the Company shall be entitled to assume that the
Managing Member has full power and authority, without the consent or approval of
any other Member or Person, to encumber, sell or otherwise use in any manner any
and all assets of the Company and to enter into any contracts on behalf of the
Company, and take any and all actions on behalf of the Company, and such Person
shall be entitled to deal with the Managing Member as if it were the Company’s
sole party in interest, both legally and beneficially. In no event shall any
Person dealing with the Managing Member or its representatives be obligated to
ascertain that the terms of this Agreement have been complied with or to inquire
into the necessity or expediency of any act or action of the Managing Member or
its representatives. Each and every certificate, document or other instrument
executed on behalf of the Company by the Managing Member or its representatives
shall be conclusive evidence in favor of any and every Person relying thereon or
claiming thereunder that (i) at the time of the execution and delivery of such
certificate, document or instrument, this Agreement was in full force and
effect, (ii) the Person executing and delivering such certificate, document or
instrument was duly authorized and empowered to do so for and on behalf of the
Company and (iii) such certificate, document or instrument was duly executed and
delivered in accordance with the terms and provisions of this Agreement and is
binding upon the Company.

 

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Section 7.12 Exculpation.

 

Neither the Managing Member nor the Non-Managing Member Representative shall be
personally liable for the return of any portion of the Capital Contributions (or
any return thereon) of any Member. The return of such Capital Contributions (or
any return thereon) shall be made solely from the Company’s assets. Neither the
Managing Member nor the Non-Managing Member Representative shall be required to
pay to the Company or to any Member any deficit in the Capital Account of any
Member upon dissolution of the Company or otherwise. No Member shall have the
right to demand or receive property other than cash for its Membership Interest
in the Company. None of the Managing Member, any of its Affiliates, any member,
officer, agent or employee of the Managing Member or any of its Affiliates or
the Non-Managing Member Representative, shall be liable, responsible or
accountable in damages or otherwise to the Company or any Member for any loss
incurred as a result of any act or failure to act by such Person on behalf of
the Company unless such loss is finally determined by a court of competent
jurisdiction to have resulted from such Person’s fraud, willful misconduct,
gross negligence or a willful breach of this Agreement.

 

ARTICLE 8.

RIGHTS AND OBLIGATIONS OF MEMBERS

 

Section 8.1 Limitation of Liability

 

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

 

Section 8.2 Managing of Business

 

Except as provided, in Section 7.3.K, no Non-Managing Members or Assignee (other
than the Managing Member, any of its Affiliates or any officer, director,
employee, partner, agent or trustee of the Managing Member, the Company or any
of their Affiliates, in their capacity as such) shall take part in the
operations, management or control (within the meaning of the Act) of the
Company’s business, transact any business in the Company’s name or have the
power to sign documents for or otherwise bind the Company. The transaction of
any such business by the Managing Member, any of its Affiliates or any officer,
director, employee, partner, agent or trustee of the Managing Member, the
Company or any of their Affiliates, in their capacity as such, shall not affect,
impair or eliminate the limitations on the liability of the Non-Managing Members
or Assignees under this Agreement.

 

Section 8.3 Outside Activities of Members

 

Subject to any agreements entered into by a Member or its Affiliates with the
Managing Member, the Company or a Subsidiary (including, without limitation, any
employment agreement), any Member and any Assignee, officer, director, employee,
agent, trustee, Affiliate or shareholder of any Member shall be entitled to and
may have business interests and engage in business activities in addition to
those relating to the Company, including business interests and activities that
are in direct or indirect competition with the Company or that are enhanced by
the activities of the Company. Neither the Company nor any Member shall have any
rights by virtue of this Agreement in any business ventures of any Member or

 

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Assignee. Subject to such agreements, none of the Members nor any other Person
shall have any rights by virtue of this Agreement or the relationship
established hereby in any business ventures of any other Person (other than the
Managing Member, to the extent expressly provided herein), and such Person shall
have no obligation pursuant to this Agreement, subject to any agreements entered
into by a Member or its Affiliates with the Managing Member, the Company or a
Subsidiary, to offer any interest in any such business ventures to the Company,
any Member or any such other Person, even if such opportunity is of a character
that, if presented to the Company, any Member or such other Person, could be
taken by such Person. The Non-Managing Members shall not, by virtue of their
ownership of Non-Managing Member Units, owe a fiduciary duty to the other
Members or the Company.

 

Section 8.4 Return of Capital

 

Except pursuant to the rights of Redemption set forth in Section 8.6 hereof, no
Member shall be entitled to the withdrawal or return of its Capital
Contribution, except to the extent of distributions made pursuant to this
Agreement or upon termination of the Company as provided herein. Except to the
extent provided in Article 5, Article 6 and Article 13 hereof or otherwise
expressly provided in this Agreement, no Member or Assignee shall have priority
over any other Member or Assignee either as to the return of Capital
Contributions or as to profits, losses, distributions and credits.

 

Section 8.5 Rights of Non-Managing Members Relating to the Company

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Section 8.6 Redemption Rights

 

A. Beginning after the first year anniversary of the Effective Date and ending
on the ninth anniversary of the Effective Date, each Non-Managing Member shall
have the right (the “Redemption Right”) (subject to the terms and conditions set
forth herein) to require the Company to redeem all or a portion of the
Non-Managing Member Units held by such Non-Managing Member (all such
Non-Managing Member Units being hereafter called “Tendered Units”) for the Cash
Amount (the ”Redemption”); provided, however, that at the election of and in the
sole and absolute discretion of the Managing Member, the Managing Member may
elect to assume the Company’s obligation with respect to the Redemption (though
such assumption shall not relieve the Company from such obligation in the event
the Managing Member fails to fulfill such obligation) and, at the election of
and in the sole and absolute discretion of the Managing Member, to satisfy the
Redemption by paying (i) either the Cash Amount or (ii) a number of REIT Shares
equal to the REIT Shares Amount payable on the Redemption Date. Notwithstanding
the foregoing, a third party lender that has acquired a Membership Interest upon
the foreclosure of debt secured by such Membership Interest in accordance with
Section 11.3.A hereof shall have the right to tender such Non-Managing Member
Units for Redemption (subject to the terms and conditions set forth herein) and
require the Company to acquire all of those Non-Managing Member Units which were
acquired by such lender pursuant to such foreclosure and which were issued by
the Company at least one year prior to the related Redemption Date.

 

Any Redemption shall be exercised pursuant to a Notice of Redemption delivered
to the Company by the Non-Managing Member exercising the Redemption Right (the
“Tendering Party”). On the Redemption Date, the Tendering Party shall sell the
Tendered Units to the Company or the Managing Member, as the case may be, in
accordance with this Section 8.6.A. Any Tendered Units assumed by the Managing
Member pursuant to this Section 8.6.A shall be held by the Managing Member as
Managing Member Units with all the rights and preferences relating thereto as
provided in this Agreement. The Tendering Party shall submit (i) such
information, certification or affidavit as the Company may reasonably require in
connection with the Ownership Limit and (ii) in the event the REIT Shares
issuable upon such Redemption are not registered for resale under the Securities
Act, such written representations, investment letters, legal opinions or other
instruments necessary, in the Company’s view, to effect compliance with the
Securities Act. If a Cash Amount is to be delivered upon the Redemption, the
Cash Amount shall be delivered as a certified check payable to the Tendering
Party or, in the Company’s or Managing Member’s sole discretion, as the case may
be, in immediately available funds. If

 

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REIT Shares are to be delivered upon the Redemption, the REIT Shares Amount
shall be delivered by the Managing Member as duly authorized, validly issued,
fully paid and nonassessable REIT Shares (and, if applicable, Rights), free of
any pledge, lien, encumbrance or restriction, other than the Ownership Limit,
and other restrictions provided in the Charter or the Bylaws of the Managing
Member in the event the REIT Shares issuable upon such Redemption are not
registered for resale under the Securities Act, the Securities Act and relevant
state securities or “blue sky” laws. The Tendering Party shall be deemed the
owner of such REIT Shares and Rights for all purposes, including, without
limitation, rights to vote or consent, receive dividends, and exercise rights,
as of the Redemption Date. REIT Shares issued upon an acquisition of the
Tendered Units by the Managing Member pursuant to this Section 8.6.A may contain
such legends regarding restrictions on Transfer or ownership to protect the
Managing Member’s tax status as a REIT and in the event the REIT Shares issuable
upon such Redemption are not registered for resale under the Securities Act,
restrictions under the Securities Act and applicable state securities laws as
the Managing Member in good faith determines to be necessary or advisable in
order to ensure compliance with such laws.

 

B. Notwithstanding the provisions of Section 8.6.A hereof and anything herein to
the contrary, with respect to any Redemption pursuant to this Section 8.6.A:

 

(1) The consummation of any Redemption shall be subject to the expiration or
termination of the applicable waiting period, if any, under the Hart Scott
Rodino Antitrust Improvements Act of 1976, as amended.

 

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

 

(3) No Non-Managing Member or any Substituted Member of a Non-Managing Member
shall have any right to redeem (whether for the REIT Shares Amount or the Cash
Amount) any Excess LLC Units held by such Non-Managing Member and the Managing
Member shall have no obligation to acquire Excess LLC Units, whether for the
REIT Shares Amount or the Cash Amount.

 

(4) Each Non-Managing Member may not exercise the Redemption Rights pursuant to
Section 8.6.A hereof more than one (1) time during any calendar quarter. In
determining whether such limit has been reached during any calendar year, it is
understood and agreed that the exercise of the Redemption Rights by any Assignee
of a Non-Managing Member or Substituted Member shall be counted for all purposes
as the exercise of such Redemption Rights by such Non-Managing Member or
Substituted Member assignor. Notwithstanding the foregoing, each Non-Managing
Member may exercise the Redemption Rights after the receipt of a notice of a
Liquidating Event.

 

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(5) No Tendering Party may exercise the Redemption Rights pursuant to Section
8.6.A as to fewer than five hundred Non-Managing Member Units and all such
exercises shall be in one hundred Non-Managing Member Units increments (in each
case unless such Non-Managing Member Units constitute all of the Non-Managing
Member Units held by such Tendering Party).

 

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

 

(1) Any information reasonably required by the Managing Member in order to allow
it to determine (a) the actual and Constructive Ownership, as determined for
purposes of Code Sections 856(a)(6), 856(h), 856(d)(2)(b) and 856(d)(5), of REIT
Shares by (i) such Tendering Party and (ii) any Related Party and (b) that,
after giving effect to the Redemption, neither the Tendering Party nor any
Related Party will have actual, Beneficial Ownership or Constructive Ownership
of a number of REIT Shares that is in excess of the Ownership Limit;

 

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

 

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

 

D. The number of LLC Units outstanding on the date of a distribution pursuant to
Section 5.6.A(3) (the “Reduction Distribution”) will be reduced on the date of
the distribution (the “Reduction Date”) by a number of LLC Units (the “Reduction
Units”) which is the product of (i) the total number of LLC Units issued and
outstanding as of the Effective Date and (ii) a fraction the numerator of which
is the amount of the Distribution Proceeds with respect to such Real Property
distributed pursuant to the Reduction Distribution and the denominator of which
is the Initial Value of all Property contributed to the Company as of the
Effective Date. The LLC Units of each Member will be reduced by an amount of
Reduction Units equal to the product of the Reduction Units and a fraction, the
numerator of which is the amount of Disposition Proceeds received by such Member
pursuant to Section 5.6.A(3) and the denominator of which is the Distribution
Proceeds distributed pursuant to Section 5.6.A(3) to all Members. With respect
to each Reduction Date, Reduction Units shall be determined on a Real Property
by Real Property basis. To reflect the foregoing reduction, Exhibit A shall be
amended to reflect the reduction and with respect to any Reduction Units
evidenced by a certificate, each Member shall return to the Managing Member such
certificate which will be canceled and a new certificate evidencing the reduced
number of Managing Member Units or Non-Managing Member Units which were
evidenced by such certificate, as applicable, shall be immediately issued to
such

 

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Member by the Managing Member on behalf of the Company. In the event the number
of outstanding Non-Managing Member Units held by a Non-Managing Member or
Assignee is reduced (pursuant to this Section 8.6.D or otherwise) to zero, such
Non-Managing Member or Assignee shall cease to have an interest in the Company
(other than the right to receive final distributions and allocations resulting
from the liquidation of their interest).

 

E. If any Member’s LLC Unit is redeemed or reduced pursuant to this Section 8.6
(whether pursuant to the exercise of Redemption Rights or pursuant to Section
8.6D), then Net Income, Net Loss, each item thereof and all other items of
income, gain, loss, deduction, and credit allocable among Members and Assignees
for such Fiscal Year shall be allocated among the Members by taking into account
the varying interests during the Fiscal Year in accordance with Code Section
706(d) using the “interim closing of the books” method or another permissible
method selected by the Managing Member with the consent of the Non-Managing
Member.

 

Section 8.7 Confidentiality

 

Each Non-Managing Member shall keep confidential the provisions of this
Agreement, all understandings, agreements and other arrangements between and
among the parties, and all other non-public information received from or
otherwise relating to, the Company or its Affiliates, except that a Member shall
be entitled to disclose such confidential information to its lawyers,
accountants and other service providers as reasonably necessary in the
furtherance of such Member’s bona fide interests or as otherwise required by law
or judicial process; provided, however, that any Non-Managing Member may
disclose to any and all Persons the tax treatment and tax structure of the
transaction contemplated by this Agreement and all materials of any kind that
are provided to such party relating to such tax treatment and tax structure.

 

ARTICLE 9.

BOOKS, RECORDS, ACCOUNTING AND REPORTS

 

Section 9.1 Records and Accounting

 

A. The Managing Member shall keep or cause to be kept at the principal office of
the Company those records and documents required to be maintained by the Act and
such other books and records which are appropriate and commercially reasonable
with respect to the Company’s business, including, without limitation, all books
and records necessary to provide to the Members any information, lists and
copies of documents required to be provided pursuant to Section 9.3 hereof. Any
records maintained by or on behalf of the Company in the regular course of its
business may be kept on, or be in the form of, punch cards, magnetic tape,
photographs, micrographics or any other information storage device, provided
that the records so maintained are convertible into clearly legible written form
within a reasonable period of time.

 

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

 

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Section 9.2 Fiscal Year

 

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

 

Section 9.3 Reports

 

As soon as practicable, but in no event later than ninety (90) days after the
close of each calendar quarter, the Managing Member shall cause to be mailed to
each Member of record as of the last day of the calendar year (i) a copy of the
income statement and balance sheet of the Company and any Subsidiary of the
Company, and (ii) beginning with the first calendar quarter in which the
covenant contained in Section 7.3.J becomes effective, a certificate confirming
the Company’s compliance with Section 7.3.J hereof and providing a reasonably
detailed calculation of the Company’s Equity Coverage. Each of the foregoing
shall be accompanied by a certificate of an officer of the Managing Member
certifying the same to be true, complete and correct. The Company will
immediately notify each Member of any breach of Section 7.3.J and of any event
or condition which, with the giving of notice, the passage of time, or both
would constitute a breach of Section 7.3.J, and provide a detailed statement of
the steps being taken to cure such breach or potential breach.

 

ARTICLE 10.

TAX MATTERS

 

Section 10.1 Preparation of Tax Returns

 

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

 

Section 10.2 Tax Elections

 

A. Subject to Section 10.2.B below and except as otherwise provided herein, the
Managing Member shall determine whether to make any available election pursuant
to the Code, including, without limitation, the election under Section 754 of
the Code. Subject to Section 10.2.B below, the Managing Member shall have the
right to seek to revoke any such election (including, without limitation, any
election under Code Sections 754).

 

B. Prior to the Threshold Date, the Consent of the Non-Managing Members shall be
required prior to making or revoking any election under the Code pursuant to
Section 10.2.A.

 

Section 10.3 Tax Matters Partner

 

A. The Managing Member shall be designated and shall operate as “Tax Matters
Partner” (as defined in Code Section 6231), to oversee or handle matters
relating to the taxation of the Company; provided, however, that prior to the
Threshold Date, the Consent of the Non-Managing Members shall be required to
settle any administrative proceeding or institute or settle any litigation with
respect to tax issues if such action (i) is reasonably likely to affect
materially

 

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the Non-Managing Members, and (ii) does not relate to the Managing Member’s tax
status as a REIT.

 

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

 

Section 10.4 Organizational Expenses

 

The Company shall elect to deduct expenses, if any, incurred by it in organizing
the Company ratably over a sixty (60) month period as provided in Code Section
709.

 

ARTICLE 11.

TRANSFERS AND WITHDRAWALS

 

Section 11.1 Transfer

 

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

 

B. No Membership Interest shall be Transferred, in whole or in part, except in
accordance with the terms and conditions set forth in this Article 11. Any
Transfer or purported Transfer of a Membership Interest not made in accordance
with this Article 11 shall be null and void ab initio.

 

Section 11.2 Transfer of Managing Member’s Membership Interest

 

A. Except in connection with a transaction described in Section 11.2.B, the
Managing Member shall not withdraw from the Company and shall not Transfer all
or any portion of its interest in the Company without the Consent of the
Non-Managing Members, which consent shall not be unreasonably withheld;
provided, however, that the Managing Member may Transfer all or any portion of
its interest in the Company without consent to any Affiliate of the Managing
Member, provided that the Managing Member guarantees the obligations of such
Affiliate under this Agreement (the “Guarantee”). Upon any Transfer of the
Membership Interest of the Managing Member in accordance with the provisions of
this Section 11.2, the transferee shall become a Managing Member for all
purposes herein, and shall be vested with the powers and rights of the
transferor Managing Member, and shall be liable for all obligations and
responsible for all duties of the Managing Member, once such transferee has
executed such instruments as may be necessary to effectuate such admission and
to confirm the agreement of such transferee to be bound by all the terms and
provisions of this Agreement with respect to the Membership Interest so
acquired. It is a condition to any Transfer otherwise permitted hereunder that
the transferee assumes, by operation of law or express agreement, all of the
obligations of the transferor Managing Member under this Agreement with respect
to such Transferred Membership Interest, and such Transfer shall relieve the
transferor Managing Member of its obligations under this Agreement accruing
subsequent to the date of such Transfer except for the Guarantee. In the event
the Managing Member withdraws from the Company, in violation of this Agreement
or otherwise, or otherwise dissolves or terminates, or upon the

 

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Incapacity of the Managing Member, all of the remaining Members may elect to
continue the Company business by selecting a Substitute Managing Member in
accordance with the Act.

 

B. The Managing Member shall not engage in any merger, consolidation or other
combination with or into another person, sale of all or substantially all of its
assets or any reclassification, or change of its outstanding equity interests (a
“Termination Transaction”), unless either (i) the Termination Transaction has
been approved by the Consent of the Non-Managing Members or (ii) in connection
with the Termination Transaction, all holders of LLC Units (other than the
Managing Member) either will receive for each LLC Unit, or will be entitled to
receive, for each LLC Unit (in lieu of the REIT Shares Amount) upon a Redemption
of the LLC Unit pursuant to Section 8.6 hereof, an amount of cash, securities,
or other property equal to the amount that would have been paid to the holder
had the LLC Unit been redeemed for REIT Shares pursuant to Section 8.6 hereof
immediately prior to the consummation of the Termination Transaction subject, in
the event of a Redemption of the LLC Unit pursuant to Section 8.6 hereof
subsequent to the consummation of the Termination Transaction, to further
adjustment to the extent provided in this Agreement to compensate for the
dilutive effect of certain transactions described herein; provided, however,
that, if, in connection with the Termination Transaction, a purchase, tender or
exchange offer shall have been made to and accepted by the holders of more than
fifty percent (50%) of the outstanding REIT Shares, each Member shall receive,
or shall have the right to elect to receive, the greatest amount of cash,
securities, or other property which such Member would have received had it
exchanged its LLC Units for REIT Shares pursuant to Section 8.6 immediately
prior to the expiration of such purchase, tender or exchange offer and had
thereupon accepted such purchase, tender or exchange offer.

 

Section 11.3 Non-Managing Members’ Rights to Transfer

 

A. General. No Non-Managing Member shall Transfer all or any portion of its
Membership Interest, or any of such Non-Managing Member’s economic rights as a
Non-Managing Member, to any transferee without first offering such Membership
Interest first to the other Non-Managing Members by written notice delivered to
such other Non-Managing Members and second, to the extent such offer is not
accepted by such other Non-Managing Members within ten (10) Business Days of
such notice, to the Managing Member and otherwise obtaining the consent of the
Managing Member, which consent shall not be unreasonably withheld; provided,
however, that notwithstanding the foregoing or any other provisions of this
Agreement, any Non-Managing Member may, without the consent of the Managing
Member, (x) pledge all or any portion of its Membership Interest to a lender to
such Member to secure indebtedness to such lender and Transfer such Membership
Interest to such lender upon foreclosure of the debt secured by such Membership
Interest, so long as any such pledge or other Transfer would not otherwise
violate the provisions of this Agreement, (y) transfer all or any portion of its
Membership Interest or economic rights as a Non-Managing Member to a partner of
such Non-Managing Member in liquidation of such partner’s interest in such
Non-Managing Member, to a family member of such Non-Managing Member, a trust all
of the beneficiaries of which are such Non-Managing Member and family members of
such Non-Managing Member, a corporation, general or limited partnership or
limited liability company all of the owners of which are such Non-Managing
Member and family members of such Non-Managing Member or to an organization
described in Sections 170(b)(1)(A), 170(c)(2) or 501(c)(3) of the Code, so

 

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long as any such Transfer would not otherwise violate the provisions of this
Agreement and (z) pledge all or any portion of its Non-Managing Members pursuant
to the Security Agreement (as defined in the Contribution Agreement).

 

B. Conditions to Transfer. It is a condition to any Transfer otherwise permitted
hereunder that the transferee assume by operation of law or express agreement
all of the obligations of the transferor Member under this Agreement with
respect to such Transferred Membership Interest and that the Managing Member be
reimbursed by the transferor for all actual out-of-pocket costs and expenses
incurred by the Managing Member in connection with any such Transfer, including,
without limitation, attorneys’ fees and costs and any other expenses incurred by
Managing Member, including the costs of filing any amendment or prospectus
supplement to any registration statement or prospectus as necessary to reflect
such Transfer. Notwithstanding the foregoing, any transferee of any Transferred
Membership Interest shall be subject to the Ownership Limits and any and all
ownership limitations contained in the Charter. Any transferee, whether or not
admitted as a Substituted Member, shall take subject to the obligations of the
transferor hereunder. Unless admitted as a Substituted Member, no transferee,
whether by a voluntary Transfer, by operation of law or otherwise, shall have
any rights hereunder, other than the rights of an Assignee as provided in
Section 11.5 hereof.

 

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

 

D. Opinion of Counsel. In connection with any Transfer of a Membership Interest,
the Managing Member shall have the right to receive an opinion of counsel
reasonably satisfactory to it to the effect that the proposed Transfer may be
effected without registration under the Securities Act and will not otherwise
violate any federal or state securities laws or regulations applicable to the
Company or the Membership Interests Transferred. If, in the opinion of such
counsel, such Transfer would require the filing of a registration statement
under the Securities Act or would otherwise violate any federal or state
securities laws or regulations applicable to the Company or the LLC Units, the
Managing Member may prohibit any Transfer by a Member of Membership Interests
otherwise permitted under this Section 11.3.

 

Section 11.4 Substituted Members

 

A. Each Non-Managing Member shall have the right to substitute a transferee
(including any transferees pursuant to Transfers permitted by Section 11.3
hereof) as a Member in its place so long as the Transfer of such Non-Managing
Member’s LLC Units is otherwise made pursuant to the terms and in satisfaction
of the conditions of this Agreement, specifically including the provisions of
Section 11.3 and Sections 11.4.B and C. hereof.

 

B. A transferee who has been admitted as a Substituted Member in accordance with
this Article 11 shall have all the rights and powers and be subject to all the
restrictions and

 

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liabilities of a Member under this Agreement. The admission of any transferee as
a Substituted Member shall be subject to the transferee executing and delivering
to the Company an acceptance of all of the terms and conditions of this
Agreement (including without limitation, the provisions of Section 2.4 and such
other documents or instruments as may be required to effect the admission).

 

C. Upon receipt of written notice from a Non-Managing Member that the transferee
of its LLC Units is to be admitted by the Company as a Substituted Member, the
Managing Member shall amend Exhibit A to reflect the name, address, Capital
Account, number of LLC Units and Percentage Interest of such Substituted Member
and to eliminate or adjust, if necessary, the name, address, Capital Account,
number of LLC Units and Percentage Interest of the predecessor of such
Substituted Member (and any other Member, as necessary).

 

Section 11.5 Assignees

 

If upon the Transfer of its LLC Units, the transferring Non-Managing Member does
not substitute the transferee as a Member in its place as a Substituted Member
as described in Section 11.4 hereof, such transferee shall be considered an
Assignee for purposes of this Agreement. An Assignee shall be entitled to all
the rights of an assignee of a limited liability company interest under the Act,
including the right to receive distributions from the Company and the share of
Net Income, Net Loss and other items of income, gain, loss, deduction and credit
of the Company attributable to the LLC Units assigned to such transferee, the
rights to Transfer the LLC Units provided in this Article 11, and the right of
Redemption provided in Section 8.6, but shall not be deemed to be a Member of
LLC Units for any other purpose under this Agreement, and shall not be entitled
to effect a Consent or vote with respect to such LLC Units on any matter
presented to the Members for approval (such right to Consent or vote, to the
extent provided in this Agreement or under the Act, fully remaining with the
transferor Member). In the event that any such transferee desires to make a
further assignment of any such LLC Units, such transferee shall be subject to
all the provisions of this Article 11 to the same extent and in the same manner
as any Members desiring to make an assignment of LLC Units. The Managing Member
shall have no liability under any circumstance with respect to any Assignee as
to which it does not have notice.

 

Section 11.6 General Provisions

 

A. No Non-Managing Member may withdraw from the Company other than (i) as a
result of a permitted Transfer of all of such Non-Managing Member’s LLC Units in
accordance with this Article 11 and the transferee(s) of such LLC Units being
admitting to the Company as a Substituted Member, (ii) pursuant to a Redemption
by the Non-Managing Member or a reduction of all of its LLC Units under Section
8.6 hereof or (iii) pursuant to a Call Notice under Section 13.2 hereof.

 

B. Any Non-Managing Member who shall Transfer all of its LLC Units in a Transfer
(i) permitted pursuant to this Article 11 where such transferee was admitted as
a Substituted Member; (ii) pursuant to the exercise of its rights to effect a
Redemption of all of its LLC Units under Section 8.6 hereof; (iii) as a result
of a Reduction; (iv) pursuant to a Call

 

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Notice under Section 13.2 hereof; or (v) pursuant to a combination of Transfers
of the types specified in the foregoing (i) - (iv), shall cease to be a Member.

 

C. Transfers pursuant to this Article 11 may only be made on the first day of a
fiscal quarter of the Company, unless the Managing Member otherwise agrees.

 

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

 

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

 

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

 

  (b) in violation of applicable law;

 

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

 

  (d) without the consent of the Managing Member, if such Transfer could, as
determined in the Reasonable judgment of the Managing Member after consultation
with outside counsel to the Managing Member, (i) result in the Company being
treated as an association taxable as a corporation for federal income tax or for
state income or franchise tax purposes, (ii) adversely affect the ability of the
Managing Member to continue to qualify as a REIT or would subject the Managing
Member to any additional taxes under Code Section 857 or Code Section 4981 or
(iii) such Transfer could be treated as having been effectuated through an
“established securities market” or a “secondary market (or the substantial
equivalent thereof)” within the meaning of Code Section 7704, or such Transfer
fails to satisfy a “safe-harbor” preventing such treatment (as set forth in
Treasury Regulations under Code Section 7704 or any successor provision) subject
to, in the case of a Redemption, the second proviso to Section 3.2;

 

  (e)

if such Transfer would cause the Company to become, with respect to any employee
benefit plan subject to Title I of ERISA, a “party-in-interest”

 

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(as defined in ERISA Section 3(14)) or a “disqualified person” (as defined in
Code Section 4975(c));

 

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

 

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

 

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

 

  (i) without the consent of the Managing Member, if such Transfer would result
in the Company having more than 100 Members (including as Members those persons
indirectly owning an interest in the Company through a partnership, limited
liability company, S corporation or grantor trust (such entity, a “flow through
entity”), but only if substantially all of the value of such person’s interest
in the flow through entity is attributable to the flow through entity’s interest
(direct or indirect) in the Company) (the “One Hundred Member Limit”).

 

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

 

ARTICLE 12.

ADMISSION OF MEMBERS

 

Section 12.1 Admission of Successor Managing Member

 

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

 

Section 12.2 Admission of Additional Members

 

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

 

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discretion of the Managing Member in order to effect such Person’s admission as
an Additional Member.

 

B. Notwithstanding anything to the contrary in this Section 12.2, except
pursuant to the transactions contemplated by the Contribution Agreement, no
Person shall be admitted as an Additional Member without the Consent of the
Non-Managing Members and Managing Member, which may be given or withheld by each
Non-Managing Member and Managing Member in its sole and absolute discretion. The
admission of any Person as an Additional Member shall become effective on the
date upon which the name of such Person is recorded on the books and records of
the Company, following the Consent of the Non-Managing Members and Managing
Member to such admission.

 

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

 

Section 12.3 Amendment of Agreement and Certificate

 

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

 

Section 12.4 Limitation on Admission of Members

 

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

 

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ARTICLE 13.

DISSOLUTION, LIQUIDATION AND TERMINATION

 

Section 13.1 Dissolution

 

The Company shall not be dissolved by the admission of Substituted Members or
Additional Members or by the admission of a successor Managing Member in
accordance with the terms of this Agreement. Upon the withdrawal of the Managing
Member, any successor Managing Member shall continue the business of the Company
without dissolution. Subject to the notice required under Section 7.3.B(8),
however, the Company shall dissolve, and its affairs shall be wound up, upon the
first to occur of any of the following (each a “Liquidating Event”):

 

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

 

B. subject to the provisions of Section 7.3.F hereof, an election to dissolve
the Company made by the Managing Member;

 

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

 

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

 

E. the Incapacity of the Managing Member that continues following the Managing
Member’s good faith, commercially reasonable efforts to remedy such Incapacity,
unless prior to or within 90 days after such Incapacity a Majority in Interest
of the Non-Managing Members agree in writing to continue the business of the
Company and to the appointment, effective as of a date prior to the date of such
Incapacity, of a substitute Managing Member.

 

Section 13.2 Exchange of Non-Managing Member Units

 

Notwithstanding anything in this Agreement to the contrary, the Managing Member
may, at any time following the ten year anniversary of the Effective Date, in
its sole and absolute discretion, require each Non-Managing Member (by
delivering a Call Notice to such Non-Managing Member) to tender all of its
Non-Managing Member Units to the Managing Member in exchange for, at the
election of and in the sole and absolute discretion of the Managing Member,
either (i) the Cash Amount or (ii) the REIT Shares Amount payable on the

 

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Redemption Date and otherwise in accordance with the procedures and provisions
set forth in Section 8.6.A.

 

Section 13.3 Winding Up

 

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

 

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

 

(2) Second, to the satisfaction of all of the Company’s debts and liabilities to
the Members (whether by payment or the making of reasonable provision for
payment thereof); and

 

(3) The balance, if any, in proportion to the Members’ positive Capital Account
balances after giving effect to all contributions, distributions and allocations
for all periods.

 

The Managing Member shall not receive any compensation for any services
performed pursuant to this Article 13.

 

B. Notwithstanding the provisions of Section 13.3.A hereof that require
liquidation of the assets of the Company, but subject to the order of priorities
set forth therein, if prior to or upon dissolution of the Company the Liquidator
determines that an immediate sale of part or all of the Company’s assets would
be impractical or would cause undue loss to the Members, the Liquidator may
defer for a reasonable time the liquidation of any assets except those necessary
to satisfy liabilities of the Company (including to those Members as creditors)
and/or distribute to the Members, in lieu of cash, as tenants in common and in
accordance with the provisions of Section 13.3.A hereof, undivided interests in
such Company assets as the Liquidator deems not suitable for liquidation. Any
such distributions in kind shall be made only if, in the good faith judgment of
the Liquidator, such distributions in kind are in the best interest of the
Members, and shall be subject to such conditions relating to the disposition and
management of such properties as the Liquidator deems reasonable and equitable
and to any agreements governing the operation of such properties at such time.
The Liquidator shall

 

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determine the fair market value of any property distributed in kind using such
reasonable method of valuation as it may adopt.

 

C. In the event that the Company is “liquidated” within the meaning of
Regulations Section 1.704-1(b) (2)(ii)(g), distributions shall be made pursuant
to this Article 13 to the Members and Assignees that have positive Capital
Accounts in compliance with Regulations Section 1.704-1(b) (2)(ii)(b) (2) to the
extent of, and in proportion to, their positive Capital Account balances. If any
Member has a deficit balance in its Capital Account (after giving effect to all
contributions, distributions and allocations for all taxable years, including
the year during which such liquidation occurs), such Member shall have no
obligation to make any contribution to the capital of the Company with respect
to such deficit, and such deficit shall not be considered a debt owed to the
Company or to any other Person for any purpose whatsoever. A pro rata portion of
the distributions that would otherwise be made to the Members pursuant to this
Article 13 may be withheld or escrowed to provide a reasonable reserve for
Company liabilities (contingent or otherwise) and to reflect the unrealized
portion of any installment obligations owed to the Company, provided that such
withheld or escrowed amounts shall be distributed to the Members in the manner
and order of priority set forth in Section 13.3.A hereof as soon as practicable.

 

Section 13.4 Deemed Distribution and Recontribution

 

Notwithstanding any other provision of this Article 13, in the event that the
Company is liquidated within the meaning of Regulations Section 1.704-1(b)
(2)(ii)(g), but no Liquidating Event has occurred, the Company’s Property shall
not be liquidated, the Company’s liabilities shall not be paid or discharged and
the Company’s affairs shall not be wound up. Instead, for federal and state
income tax purposes, the Company shall be deemed to have distributed its assets
in kind to the Members, who shall be deemed to have assumed and taken such
assets subject to all Company liabilities, all in accordance with their
respective Capital Accounts. Immediately thereafter, the Members shall be deemed
to have recontributed the Company assets in kind to the Company, which shall be
deemed to have assumed and taken such assets subject to all such liabilities.

 

Section 13.5 Rights of Members

 

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

 

Section 13.6 Cancellation of Certificate

 

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

 

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Section 13.7 Reasonable Time for Winding-Up

 

A reasonable time shall be allowed for the orderly winding-up of the business
and affairs of the Company and the liquidation of its assets pursuant to Section
13.3 hereof, in order to minimize any losses otherwise attendant upon such
winding-up, and the provisions of this Agreement shall remain in effect between
the Members during the period of liquidation.

 

Section 13.8 Liability of Liquidator

 

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

 

ARTICLE 14.

PROCEDURES FOR ACTIONS AND CONSENTS

OF MEMBERS; AMENDMENTS; MEETINGS

 

Section 14.1 Procedures for Actions and Consents of Members

 

The actions requiring consent or approval of Non-Managing Members pursuant to
this Agreement, including Section 7.3 hereof, or otherwise pursuant to
applicable law, are subject to the procedures set forth in this Article 14 and
shall require approval of a Majority in Interest of the Non-Managing Members
unless a different percentage is expressly required by this Agreement for the
action in question.

 

Section 14.2 Amendments

 

Except for amendments to Exhibit A as provided in Sections 7.3.C, 11.4.C and
12.3 hereof, amendments to this Agreement may be proposed by the Managing Member
or by a Majority in Interest of the Non-Managing Members. Following such
proposal, the Managing Member shall submit any proposed amendment to the
Members. The Managing Member shall seek the written Consent of the Members on
the proposed amendment or shall call a meeting to vote thereon and to transact
any other business that the Managing Member may deem appropriate. The
affirmative vote or consent, as applicable, of a Majority in Interest of the
Non-Managing Members is required for the approval of a proposed amendment. For
purposes of obtaining a written consent, the Managing Member may require a
response within a reasonable specified time, but not less than 15 days, and
failure to respond in such time period shall constitute a consent that is
consistent with the Managing Member’s recommendation with respect to the
proposal; provided, however, that an action shall become effective at such time
as requisite consents are received even if prior to such specified time.

 

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Section 14.3 Meetings of the Members

 

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

 

B. Any action required or permitted to be taken at a meeting of the Members may
be taken without a meeting if a written consent setting forth the action so
taken is signed by Members holding a majority of the LLC Units (or such other
percentage as is expressly required by this Agreement for the action in
question, including a Majority in Interest of the Non-Managing Members where
required). Such consent may be in one instrument or in several instruments, and
shall have the same force and effect as a vote of Members holding a majority of
the LLC Units (or such other percentage as is expressly required by this
Agreement). Such consent shall be filed with the Managing Member. An action so
taken shall be deemed to have been taken at a meeting held on the effective date
so certified.

 

C. Each Member may authorize any Person or Persons to act for it by proxy on all
matters in which a Member is entitled to participate, including waiving notice
of any meeting, or voting or participating at a meeting. Every proxy must be
signed by the Member or its attorney-in-fact. No proxy shall be valid after the
expiration of eleven (11) months from the date thereof unless otherwise provided
in the proxy (or there is receipt of a proxy authorizing a later date). Every
proxy shall be revocable at the pleasure of the Member executing it, such
revocation to be effective upon the Company’s receipt of written notice of such
revocation from the Member executing such proxy.

 

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

 

ARTICLE 15.

GENERAL PROVISIONS

 

Section 15.1 Registration

 

If the Company, or any successor to the Company at any time proposes to effect a
registration (the “Registration”) of LLC Units (or shares or other interests of
any successor to the Company) under the Securities Act for sale for the account
of the Managing Member, the

 

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Company shall give prior written notice (a “Notice of Registration”) to each
Non-Managing Member of its intention to do so. The Company will use its
commercially reasonable efforts to include in the Registration each Non-Managing
Member Unit (or share or other interest of such successor) which the Company has
been so requested to register, as evidenced by a written election delivered to
the Company by such Non-Managing Member within ten (10) Business Days of receipt
of the Notice of Registration identifying the number of Non-Managing Member
Units (or shares or other interest of such successor) which such non-Managing
Member wishes to include in such Registration; provided, however, that the
Company shall not be obligated to include in the Registration Non-Managing
Member Units of any Non-Managing Member in excess of the product of (x) a
fraction, the numerator of which is the number of LLC Units (or shares or other
interest of such successor) to be included in such Registration by the Managing
Member and the denominator of which is the aggregate number of LLC Units (or
shares or other interest of such successor) held by the Managing Member
multiplied by (y) the aggregate number of LLC Units (or shares or other interest
of such successor) held by such Non-Managing Member.

 

Section 15.2 Addresses and Notice

 

Any notice, demand, request or report required or permitted to be given or made
to a Member or Assignee under this Agreement, including any pursuant to Article
14, shall be in writing and shall be deemed given or made when delivered in
person or when sent by first class United States mail or by commercial courier
service (i) in the case of a Member, to that Member at the address set forth in
Exhibit A or such other address of which the Member shall notify the Managing
Member in writing and (ii) in the case of an Assignee, to the address of which
such Assignee shall notify the Managing Member in writing.

 

Section 15.3 Titles and Captions

 

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

 

Section 15.4 Pronouns and Plurals

 

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

 

Section 15.5 Further Action

 

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

 

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Section 15.6 Binding Effect

 

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

 

Section 15.7 Creditors

 

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

 

Section 15.8 Waiver

 

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

 

Section 15.9 Counterparts

 

This Agreement may be executed in counterparts, all of which together shall
constitute one agreement binding on all the parties hereto, notwithstanding that
all such parties are not signatories to the original or the same counterpart.

 

Section 15.10 Applicable Law

 

Except as provided in Section 3.4.F, this Agreement shall be construed and
enforced in accordance with and governed by the laws of the State of Delaware,
without regard to the principles of conflicts of law. In the event of a conflict
between any provision of this Agreement and any non-mandatory provision of the
Act, the provisions of this Agreement shall control and take precedence.

 

Section 15.11 Entire Agreement

 

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

 

Section 15.12 Invalidity of Provisions

 

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

 

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Section 15.13 Limitation to Preserve REIT Status

 

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

 

(i) an amount equal to the excess, if any, of (a) four and seventeen
one-hundredths percent (4.17%) of the Managing Member’s total gross income (but
not including the amount of any REIT Payments) for the Fiscal Year that is
described in subsections (A) through (H) of Section 856(c)(2) of the Code over
(b) the amount of gross income (within the meaning of Section 856(c)(2) of the
Code) derived by the Managing Member from sources other than those described in
subsections (A) through (H) of Section 856(c)(2) of the Code (but not including
the amount of any REIT Payments); or

 

(ii) an amount equal to the excess, if any, of (a) twenty-five percent (25%) of
the Managing Member’s total gross income (but not including the amount of any
REIT Payments) for the Fiscal Year that is described in subsections (A) through
(I) of Section 856(c)(3) of the Code over (b) the amount of gross income (within
the meaning of Section 856(c)(3)) of the Code derived by the Managing Member
from sources other than those described in subsections (A) through (I) of
Section 856(c)(3) of the Code (but not including the amount of any REIT
Payments);

 

provided, however, that REIT Payments in excess of the amounts set forth in
subparagraphs (i) and (ii) above may be made if the Managing Member, as a
condition precedent, obtains an opinion of tax counsel that the receipt of such
excess amounts would not adversely affect the Managing Member’s ability to
qualify as a REIT. To the extent that REIT Payments may not be made in a Fiscal
Year as a consequence of the limitations set forth in this Section 15.13, such
REIT Payments shall carry over and be treated as arising in the following Fiscal
Year; provided, however, that such amount shall not carry over for more than
five (5) years, and if not paid within such five (5) year period, shall expire;
provided, further, that (a) as REIT Payments are made, such payments shall be
applied first to carry over amounts outstanding, if any, and (b) with respect to
carry over amounts for more than one Fiscal Year, such payment shall be applied
to the earliest Fiscal Year prior to being applied to any other fiscal year.

 

Section 15.14 No Partition

 

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

 

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terms of this Agreement, and that the rights of the Members and their
successors-in-interest shall be subject to the limitations and restrictions as
set forth in this Agreement.

 

Section 15.15 Non-Managing Member Representative

 

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

 

B. The holders of a majority of the outstanding Non-Managing Members Units shall
be entitled to replace the Non-Managing Member Representative by delivering to
the Managing Member and the then current Non-Managing Member Representative a
written notice signed by the holders of a majority of the outstanding
Non-Managing Members Units stating (i) that the notice is being provided to the
Managing Member pursuant to this Section 15.15.B, (ii) that the Members signing
the notice own of record on the books of the Company a majority of the
outstanding Non-Managing Members Units, (iii) that the Members signing the
notice desire to replace the person then serving as the Non-Managing Member
Representative with the person named in the notice, and (iv) specifying the date
on which the appointment of the named individual to replace the then serving
Non-Managing Member Representative shall be effective (which shall be a date not
earlier than the fourteenth day after the date on which the notice shall have
been delivered to the Managing Member). The appointment of the new Non-Managing
Member Representative specified in the notice shall be effective on the date
specified in the notice and upon effectiveness, the individual previously
serving as the Non-Managing Member Representative shall cease to be entitled to
act in that capacity under this Agreement.

 

Section 15.16 Venue

 

Each party hereto agrees that all judicial proceedings brought arising out of or
relating to this Agreement or any Member’s obligations hereunder may only be
brought in any state or federal court of competent jurisdiction in the State of
Delaware, County of New Castle, and each Member accepts generally and
unconditionally the exclusive jurisdiction and venue of such courts.

 

[Signatures appear on following page]

 

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

 

MANAGING MEMBER:

     

HEALTH CARE PROPERTY INVESTORS,

INC., a Maryland corporation

            By:  

/s/ Edward J. Henning

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

            Name:   Edward J. Henning             Title:   Senior Vice
President, General Counsel and Corporate Secretary

 

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NON-MANAGING MEMBERS:

 

 

/s/ Charles Crews

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

Charles Crews  

/s/ Charles A. Elcan

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

Charles A. Elcan  

/s/ Thomas W. Hulme

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

Thomas W. Hulme  

/s/ Thomas M. Klaritch

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

Thomas M. Klaritch  

/s/ R. Wayne Price

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

R. Wayne Price  

/s/ Glenn T. Preston

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

Glenn T. Preston  

/s/ Janet Reynolds-Preston

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

Janet Reynolds-Preston  

/s/ Angela M. Playle

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

Angela M. Playle  

/s/ James A. Croy

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

James A. Croy

 

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JOHN KLARITCH, AS TRUSTEE OF THE

2002 TRUST

F/B/O ERICA ANN KLARITCH

By:   /s/ John Klaritch  

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

   

John Klaritch, Trustee

JOHN KLARITCH, AS TRUSTEE OF THE

2002 TRUST

F/B/O ADAM JOSEPH KLARITCH

By:   /s/ John Klaritch  

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

   

John Klaritch, Trustee

JOHN KLARITCH, AS TRUSTEE OF THE

2002 TRUST

F/B/O THOMAS MICHAEL KLARITCH, JR.

By:   /s/ John Klaritch  

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

   

John Klaritch, Trustee

JOHN KLARITCH, AS TRUSTEE OF THE

2002 TRUST

F/B/O NICHOLAS JAMES KLARITCH

By:   /s/ John Klaritch  

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

   

John Klaritch, Trustee

 

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