Exhibit 10.120

CONFIDENTIAL
 
 
NIP JV, LLC
 
 
A Delaware Limited Liability Company
 
LIMITED LIABILITY COMPANY AGREEMENT
Dated as of December 23, 2011
MEMBERSHIP INTERESTS IN NIP JV, LLC, A DELAWARE LIMITED LIABILITY COMPANY, HAVE
NOT BEEN REGISTERED WITH OR QUALIFIED BY THE SECURITIES AND EXCHANGE COMMISSION
OR ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE. THE INTERESTS ARE BEING
SOLD IN RELIANCE UPON EXEMPTIONS FROM SUCH REGISTRATION OR QUALIFICATION
REQUIREMENTS. THE INTERESTS CANNOT BE SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE
DISPOSED OF EXCEPT IN COMPLIANCE WITH THE RESTRICTIONS ON TRANSFERABILITY
CONTAINED IN THE COMPANY’S LIMITED LIABILITY COMPANY AGREEMENT AND APPLICABLE
FEDERAL AND STATE SECURITIES LAWS.
 
 

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TABLE OF CONTENTS
 
 
Page
 
 
ARTICLE I DEFINITIONS AND USAGE
1

 
 
 
Section 1.1
Definitions
1

Section 1.2
Terms and Usage Generally
17

 
 
ARTICLE II THE COMPANY
17

 
 
 
Section 2.1
Formation
17

Section 2.2
Name
17

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Section 2.3
Term
17

Section 2.4
Registered Office; Registered Agent; Principal Office; Other Offices
18

Section 2.5
Purposes
18

Section 2.6
Powers of the Company
18

Section 2.7
Partnership Status
18

Section 2.8
Ownership of Property
18

 
 
ARTICLE III MEMBERS; REPORTS
19

 
 
 
Section 3.1
Admission of Members
19

Section 3.2
Substitute Members and Additional Members
19

Section 3.3
Tax and Accounting Information
20

Section 3.4
Certification of Membership Interests
21

 
 
ARTICLE IV CAPITAL CONTRIBUTIONS AND REFINANCING
21

 
 
 
Section 4.1
General
21

Section 4.2
Initial Oaktree Contribution
21

Section 4.3
Capital Contributions through HC-KBS Funding Date
22

Section 4.4
Refinancing
22

Section 4.5
Additional HC-KBS Contribution
23

Section 4.6
Additional Contributions
23

Section 4.7
Failures to Make Additional Contributions
23

Section 4.8
No Additional Rights
24

 
 
ARTICLE V CAPITAL ACCOUNTS; DISTRIBUTIONS; ALLOCATIONS
24

 
 
 
Section 5.1
Capital Accounts
24

Section 5.2
Amounts and Priority of Distributions
25

Section 5.3
Allocations
28

Section 5.4
Other Allocation Rules
30

Section 5.5
Tax Withholding; Withholding Advances
31

 
 

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ARTICLE VI CERTAIN TAX MATTERS
32

 
 
 
Section 6.1
Tax Matters Partner
32

 
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Section 6.2    
Section 754 Election
33

 
 
ARTICLE VII VOTING RIGHTS AND MANAGEMENT OF THE COMPANY
33

 
 
 
Section 7.1    
Management by the Board of Representatives
33

Section 7.2    
Board of Representatives
34

Section 7.3    
Participation in Management by Members; Major Decisions
36

Section 7.4    
Day-to-Day Management; Asset Management
39

 
 
ARTICLE VIII TRANSFERS OF INTERESTS
40

 
 
 
Section 8.1    
Restrictions on Transfers
40

Section 8.2    
Right of First Refusal
42

Section 8.3    
Tag-Along Right
43

Section 8.4    
Drag-Along Right
45

Section 8.5    
Effect of Repurchase; Transfers and Replacement Certificates
46

 
 
ARTICLE IX UNWINDING
46

 
 
 
Section 9.1    
Unwinding
46

 
 
ARTICLE X LIMITATION ON LIABILITY; EXCULPATION AND INDEMNIFICATION;
REPRESENTATIONS AND WARRANTIES
47

 
 
 
Section 10.1  
Limitation on Liability
47

Section 10.2  
Exculpation and Indemnification
47

Section 10.3  
Representations and Warranties
48

 
 
ARTICLE XI DISSOLUTION AND TERMINATION
51

 
 
 
Section 11.1  
Dissolution
51

Section 11.2  
Winding Up of the Company
52

Section 11.3  
Distribution of Property
53

Section 11.4  
Termination
53

Section 11.5  
Survival
53

 
 
ARTICLE XII MISCELLANEOUS
53

 
 
 
Section 12.1  
Expenses
53

Section 12.2  
Further Assurances
53

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Section 12.3  
Notices
53

Section 12.4  
No Third Party Beneficiaries
54

Section 12.5  
Waiver
54

Section 12.6  
Consent to Jurisdiction
54

Section 12.7  
Integration
55

Section 12.8  
Rules of Construction
55

Section 12.9  
Membership Interests Legend
55

Section 12.10
Headings
55

Section 12.11
Sale Transaction
56

 
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Section 12.12
Confidentiality
56

Section 12.13
Severability
57

Section 12.14
Governing Law
57

Section 12.15
Amendment
57

Section 12.16
Counterparts
57

 
 
 
 
 
 
 
 
 
 
 
SCHEDULE A    
 
 
  
Members and Capital Contributions
  
 
SCHEDULE B    
 
 
  
NIP Properties
  
 
SCHEDULE C    
 
 
  
Board Representatives
  
 
SCHEDULE D    
 
 
  
REIT Prohibited Transactions
  
 
SCHEDULE E    
 
 
  
Exempt Properties
  
 
SCHEDULE F    
 
 
  
Board Decisions
  
 
SCHEDULE G    
 
 
  
Lawsuits against Borrowers or NIP Properties
  
 
SCHEDULE H    
 
 
  
Structure Chart
  
 

 
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LIMITED LIABILITY COMPANY AGREEMENT of NIP JV, LLC, a Delaware limited liability
company (the “Company”), dated as of December 23, 2011 (the “Effective Date”),
by and between HC KBS NIP JV, LLC, a Delaware limited liability company
(“HC-KBS”), and OCM NIP JV HOLDINGS, L.P., a Delaware limited partnership
(“Oaktree”). Capitalized terms used but not elsewhere defined herein shall have
the respective meanings ascribed to such terms in Section 1.1(a).
Preliminary Statement
WHEREAS, the Company (i) was formed as a limited partnership under the Delaware
Revised Uniform Partnership Act, 6 Del. C. §§ 15-101 et seq., under the name OCM
Industrial Holdings, L.P., pursuant to a certificate of partnership which was
executed and filed with the Secretary of State of the State of Delaware on
June 25, 2010, and (ii) was converted to, and reorganized under the name of the
Company as, a limited liability company under the Delaware Limited Liability
Company Act, 6 Del. C. §§ 18-101 et seq. (the “Act”) pursuant to a certificate
of conversion and a certificate of formation (the “Certificate”), both of which
were executed and filed with the Secretary of State of the State of Delaware on
December 15, 2011;
WHEREAS, the original members of the Company (within the meaning of
Section 18-101(7) of the Act), certain affiliates of Oaktee, assigned their
membership interests in the Company to Oaktree prior to the Effective Date;

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WHEREAS, HC-KBS is being admitted to the Company as a member (within the meaning
of Section 18-101(7) of the Act) as of the Effective Date; and
WHEREAS, the HC-KBS Member and the Oaktree Member wish to adopt this Agreement
as the Company’s limited liability company agreement (within the meaning of
Section 18-101(7) of the Act) and to set forth herein, among other things, their
respective rights, duties and obligations with respect to the Company and each
other.
NOW, THEREFORE, in consideration of the mutual covenants and promises contained
herein, and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the Members hereby agree as follows:
ARTICLE I
DEFINITIONS AND USAGE
Section 1.1    Definitions.
(a) The following terms shall have the following meanings for the purposes of
this Agreement:

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“Additional Member” means any Person admitted as a member of the Company
pursuant to Section 3.2 in connection with the new issuance of Membership
Interests to such Person.
“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 Allocation Year, after giving effect to the following adjustments:
(i)    Credit to such Capital Account any amounts that such Member is deemed to
be obligated to restore pursuant to the penultimate sentence in Treasury
Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
(ii)    Debit to such Capital Account the items described in Treasury
Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and
1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d)
and shall be interpreted consistently therewith.
“Affiliate” of any specified Person means (i) with respect to any Person that is
not a natural Person, any other Person that, directly or indirectly, Controls,
is Controlled by or is under common Control with such specified Person and
(ii) with respect to any Person that is a natural Person, (A) the spouse,
siblings, ancestors or lineal descendants (including by adoption) of such
Person, (B) the estate or legal representative of, or any trust established for
the benefit of, such Person or any of the Persons described in clause (A) above,
(C) any entity which such Person and/or one or more of the Persons described in
clause (A) and/or (B) Controls or in which any one or more of such Persons hold
a majority interest. For purposes of this Agreement, none of the Company or its
Subsidiaries shall be deemed an Affiliate of any of the Members or any of their
Affiliates.
“Affiliate Contract” means any agreement or transaction between the Company or
any of its Subsidiaries, on the one hand, and any Member, Hackman Capital
Partners, LLC, Calare Properties, Inc., a KBS REIT, or any of their respective
Affiliates, or any directors, officers, managers or general partners of, or
Persons holding similar positions in, any of the foregoing, or any Affiliates of
any such directors, officers, managers, general partners or other Persons, on
the other hand. No issuance, purchase or sale of Membership Interests by the
Company shall constitute an Affiliate Contract.
“Agreement” means this Limited Liability Company Agreement.
“Allocation Year” means (i) the period commencing on the Effective Date and
ending on December 31, 2011, (ii) any subsequent twelve (12) month period
commencing on January 1 and ending on December 31 or (iii) any portion of the
period described in clauses (i) or (ii) for which the Company is required to
allocate Net Income, Net Loss, and other items of Company income, gain, loss, or
deduction pursuant to ARTICLE V.
 
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“Borrower” means the borrower under any of the Loans.

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“Business” means, collectively, the acquisition, ownership, operation, holding,
development, leasing, management, maintenance, sale, transfer, servicing,
conveyance, disposition, pledge, assignment, financing and refinancing of, and
otherwise dealing with, either directly or indirectly through one or more
Persons, the NIP Properties and other properties acquired in accordance with the
provisions hereof and used or to be used primarily for industrial and/or
warehouse and related purposes (and any Property relating thereto), and any
other businesses ancillary or complementary thereto.
“Business Day” means any day excluding Saturday, Sunday or any day which is a
legal holiday under the laws of the State of California or is a day on which
banking institutions in the State of California are authorized or required by
law or other governmental action to close.
“Capital Account” means the capital account established and maintained for each
Member pursuant to Section 5.1.
“Capital Contribution” means, (i) with respect to the Oaktree Member, the
Initial Oaktree Contribution, any Subsequent Oaktree Contributions, and any
other capital contribution made by the Oaktree Member to the Company in
accordance with Section 4.6, and (ii) with respect to the HC-KBS Member, the
HC-KBS Contribution (if any), the Additional HC-KBS Contribution (if any) and
any other capital contribution made by the HC-KBS Member to the Company in
accordance with Section 4.6.
“Carrying Value” means, with respect to any Property (other than money), such
Property’s adjusted basis for Federal income tax purposes, except as follows:
(i)    The initial Carrying Value of any such Property contributed by a Member
to the Company shall be the gross fair market value of such Property, as
specified herein or as determined by the Board;
(ii)    The Carrying Values of all such Properties shall be adjusted to equal
their respective gross fair market values (taking Section 7701(g) of the Code
into account), as determined by the Board, at the time of any Revaluation
pursuant to Section 5.1(c);
(iii)    The Carrying Value of any item of such Properties distributed to any
Member shall be adjusted to equal the gross fair market value (taking
Section 7701(g) of the Code into account) of such Property on the date of
distribution as determined by the Board; and
(iv)    The Carrying Values of such Properties shall be increased (or decreased)
to reflect any adjustments to the adjusted basis of such Properties 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
Treasury Regulations Section 1.704-1(b)(2)(iv)(m) and subparagraph (vi) of the
definition of “Net
 
3

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Income” and “Net Loss” or Section 5.3(b)(vi); provided, however, that Carrying
Values shall not be adjusted pursuant to this subparagraph (iv) to the extent
that an adjustment pursuant to subparagraph (ii) is required in connection with
a transaction that would otherwise result in an adjustment pursuant to this
subparagraph (iv). If the Carrying Value of such Property has been determined or
adjusted pursuant to subparagraph (i), (ii), or (iv), such Carrying Value shall
thereafter be adjusted by the Depreciation taken into account with respect to
such Property, for purposes of computing Net Income and Net Loss.
The respective Carrying Values of the NIP Properties as of the Effective Date
shall be determined by the Oaktree Member, after reasonable consultation with
the HC-KBS Member, as soon as practicable following the Effective Date but in no
event later than June 30, 2012.
“Code” means the Internal Revenue Code of 1986.
“Company Liabilities” any and all liabilities of the Company (including (i) all
bills and accounts payable, (ii) all accrued and unpaid expenses, (iii) all
contractual obligations for the payment of money or Property, (iv) funds set
aside or amounts allocated to reserves, including reserves for operating costs
and expenses and working capital reserves, in amounts determined by the Board,
and (v) all other liabilities owed by the Company of whatsoever kind and nature)
other than any Additional Equity Loans.
“Company Minimum Gain” means “partnership minimum gain,” as defined in Treasury
Regulations Sections 1.704-2(b)(2) and 1.704-2(d).

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“Confidential Information” means any confidential, proprietary or non-public
information with regard to the Company or any of its Subsidiaries disclosed or
communicated by the Company or any of its Subsidiaries to any Member, whether
oral or written, and regardless of the manner or form in which it is furnished
and including, for the avoidance of doubt, the existence and terms of this
Agreement and any information provided pursuant to Section 3.3.
“Control” (including the terms “Controls” and “Controlled”), with respect to the
relationship between or among two or more Persons, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
affairs or management of the Person or Persons subject to such “Control”,
whether through the ownership of voting securities, as trustee or executor, by
contract or otherwise.
“Covered Person” means (i) each Member or any Affiliate of a Member (including
any such Member in its capacity as the Tax Matters Partner), (ii) each officer,
director, shareholder, member, partner, employee, representative, agent or
trustee, or spouse, of a Member or an Affiliate thereof, (iii) each officer or
authorized agent of the Company or of any of its Subsidiaries, and (iv) each
Representative on the Board.
“Depreciation” means, for each Allocation Year, an amount equal to the
depreciation, amortization, or other cost recovery deduction allowable for
Federal income
 
4

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tax purposes with respect to an asset for such Allocation Year, except that if
the Carrying Value of an asset differs from its adjusted basis for Federal
income tax purposes at the beginning of such Allocation Year, Depreciation shall
be an amount that bears the same ratio to such beginning Carrying Value as the
Federal income tax depreciation, amortization, or other cost recovery deduction
for such Allocation Year bears to such beginning adjusted tax basis; provided,
however, that, if the adjusted basis for Federal income tax purposes of an asset
at the beginning of such Allocation Year is zero, Depreciation shall be
determined with reference to such beginning Carrying Value using any reasonable
method selected by the Board.
“Distributable Cash” means, as of the time of determination, the excess of
(i) the balance of cash (including cash equivalents) then held by the Company at
such time, including from distributions by the Company’s Subsidiaries with
respect to the Equity Securities in such Subsidiaries held by the Company, over
(ii) all Company Liabilities as of such time, in each case, as determined by the
Board.
“Equity Security” means (i) with respect to any corporation, shares, interests,
participations or other equivalents in the capital stock of such corporation,
however designated, and (ii) with respect to any partnership or limited
liability company, partnership or limited liability company interests, or units,
participations or equivalents of partnership or limited liability company
interests, in such partnership or limited liability company, however designated.
“Fair Market Value” means, as to any Property, the price at which a willing
seller would sell, and a willing buyer would buy, such Property having full
knowledge of the relevant facts, in an arm’s-length transaction without either
party having time constraints, and without either party being under any
compulsion to buy or sell, as determined by the Board.
“Final Determination” means the final resolution of any tax matter contested by
the IRS or any state, local or foreign taxing authority, including a closing
agreement with the IRS or the relevant state, local or foreign taxing authority,
a claim for refund that has been allowed, a deficiency notice with respect to
which the period for filing a petition with the United States Tax Court or the
relevant state, local or foreign tribunal has expired, or a decision of
competent jurisdiction that is not subject to appeal or as to which the time for
appeal has expired.
“Fiscal Year” means the fiscal year and taxable year of the Company. The initial
Fiscal Year shall commence on the Effective Date and end on December 31, 2011,
and each Fiscal Year thereafter shall commence on January 1 and end on
December 31 of the next succeeding calendar year; provided that, subject to the
requirements of Section 706 of the Code, the Fiscal Year of the Company may
(without the consent of any Member) be changed by the Board.
“HC Entity” means an entity Controlled by either or both of Michael Hackman and
William Manley.
 
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“HC-KBS Funding Date” means March 15, 2012 or, if the Equity Member shall have
made the First HC-KBS Contribution in the amount set forth in clause (ii) or
(iii) of the first sentence of Section 4.3(a) in accordance with the

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provisions thereof, May 15, 2012.
“HC-KBS Member” means HC-KBS and/or any direct or indirect Permitted Transferee
thereof to whom Membership Interests are Transferred in accordance with
Section 8.1(a) of this Agreement.
“HC-KBS Party” means HC-KBS and any Person that owns a direct or indirect
interest in HC-KBS and has the right to approve any of the transactions,
activities or matters contemplated in this Agreement.
“IRR” means an internal rate of return, compounded monthly, as determined using
the Microsoft Excel Function XIRR (or, if such software is no longer available,
any comparable software selected by the Board), and shall include a return of,
as well as a return on, the relevant capital.
“IRS” means the Internal Revenue Service of the United States.
“JV Member Transfer” means any transfer of an equity interest in the HC-KBS
Member (whether pursuant to the exercise of a buy-sell right under the operating
agreement of the HC-KBS Member or otherwise) between the KBS JV Member and any
member of the HC-KBS Member which is an HC Entity.
“KBS JV Member” has the meaning set forth in the definition of “Qualified HC-KBS
Entity”.
“KBS REIT” means any real estate investment trust or institutional investor for
which KBS Capital Advisors LLC, a Delaware limited liability company, acts as
the investment advisor from time to time, in which capacity KBS Capital Advisors
LLC is responsible for conducting or overseeing the day-to-day operation of the
business of such trust or the investments of such investor which are the subject
of such advisory arrangement (including such investor’s investment in the HC-KBS
Member) and for making recommendations to the independent board Controlling such
trust, or to such investor, regarding material actions and decisions. The term
“KBS REIT” includes, as of the Effective Date, KBS Real Estate Investment Trust,
Inc., a Maryland corporation, KBS Real Estate Investment Trust II, Inc., a
Maryland corporation, KBS Real Estate Investment Trust III, Inc., a Maryland
corporation, and KBS Strategic Opportunity REIT, Inc., a Maryland corporation.
“Leveraged Equity” has the meaning set forth in the definition of “Pro Rata”.
“Lien” means any pledge, encumbrance, security interest, purchase option, call
or similar right.
 
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“Loans” means (i) a mortgage loan in the original principal amount of
$300,000,000 made pursuant to that certain Second Amended and Restated Loan
Agreement dated as of May 8, 2008, effective as of April 15, 2008, by and
between OCM Investment Holdings, LLC (“OCMIH”), as successor (by assignment) to
Citigroup Global Markets Realty Corp. (“CGMRC”), as lender (in such capacity,
“Mortgage Lender”), and National Industrial Portfolio, LLC (f/k/a National
Industrial Portfolio Borrower, LLC), as borrower (“Mortgage Borrower”), as
amended by that certain First Amendment to Second Amended and Restated Loan
Agreement dated as of November 19, 2008, by and between Mortgage Lender and
Mortgage Borrower, that certain Second Amendment to Second Amended and Restated
Loan Agreement dated as of July 9, 2010, by and between Mortgage Lender and
Mortgage Borrower, and that certain Omnibus Amendment to Loan Documents, dated
as of August 9, 2011, by and between Mezzanine A Lender and Mezzanine A
Borrower, Mezzanine B Lender and Mezzanine B Borrower, Mezzanine C Lender and
Mezzanine C Borrower, Mezzanine D Lender and Mezzanine D Borrower, Mezzanine E
Lender and Mezzanine E Borrower (as such terms are hereinafter defined), and
Mortgage Borrower and Mortgage Lender, and acknowledged and consented and agreed
to by Guarantors (as defined therein) (the “Omnibus Amendment”), (ii) a
mezzanine loan in the original principal amount of $40,200,000 made pursuant to
that certain Second Amended and Restated Mezzanine A Loan Agreement dated as of
May 8, 2008, effective as of April 15, 2008, between OCMIH, as successor (by
assignment) to CGMRC, as lender (in such capacity, “Mezzanine A Lender”), and
National Industrial Mezz A, LLC, as borrower (“Mezzanine A Borrower”), as
amended by that certain First Amendment to Second Amended and Restated Mezzanine
A Loan Agreement dated as of November 19, 2008, by and between Mezzanine A
Lender and Mezzanine A Borrower, that certain Second Amendment to Second Amended
and Restated Mezzanine A Loan Agreement dated as of July 9, 2010, by and between
Mezzanine A Lender and Mezzanine A Borrower, and the Omnibus Amendment to Loan
Documents, (iii) a mezzanine loan in the original principal amount of
$32,300,000 made pursuant to that certain Mezzanine B Loan Agreement dated as of
May 8, 2008, effective as of April 15, 2008, by and between OCMIH, as successor
(by assignment) to Normandy NIP Holdings, LLC, as lender (in such capacity,
“Mezzanine B Lender”), and NIPB Mezz B, LLC, as borrower (“Mezzanine B
Borrower”), as amended by that certain First Amendment to Mezzanine B Loan
Agreement dated as of November 19, 2008, by and between Mezzanine B Lender and
Mezzanine B Borrower, that certain Second Amendment to Mezzanine B Loan
Agreement dated as of

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July 9, 2010, by and between Mezzanine B Lender and Mezzanine B Borrower, and
the Omnibus Amendment to Loan Documents, (iv) a mezzanine loan in the original
principal amount of $32,300,000 made pursuant to that certain Mezzanine C Loan
Agreement dated as of May 8, 2008, effective as of April 15, 2008, by and
between OCMIH, as successor (by assignment) to CGMRC, as lender (in such
capacity, “Mezzanine C Lender”), and NIPB Mezz C, LLC, as borrower (“Mezzanine C
Borrower”), as amended by that certain First Amendment to Mezzanine C Loan
Agreement dated as of November 19, 2008, by and between Mezzanine C Lender and
Mezzanine C Borrower, that certain Second Amendment to Mezzanine C Loan
Agreement dated as of July 9, 2010, by and between Mezzanine C Lender and
Mezzanine C Borrower, and the Omnibus Amendment to Loan Documents, (v) a
mezzanine loan in the original principal amount of $26,200,000 made pursuant to
that certain Mezzanine D Loan Agreement dated as of May 8, 2008, effective as of
April 15, 2008, by and between OCMIH, as successor (by assignment) to CGMRC, as
 
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lender (in such capacity, “Mezzanine D Lender”), and NIPB Mezz D, LLC, as
borrower (“Mezzanine D Borrower”), as amended by that certain First Amendment to
Mezzanine D Loan Agreement dated as of November 19, 2008, by and between
Mezzanine D Lender and Mezzanine D Borrower, that certain Second Amendment to
Mezzanine D Loan Agreement dated as of July 9, 2010, by and between Mezzanine D
Lender and Mezzanine D Borrower, and the Omnibus Amendment to Loan Documents,
and (vi) a mezzanine loan in the original maximum principal amount of
$20,000,000 made pursuant to that certain Mezzanine E Loan Agreement dated as of
May 8, 2008, effective as of April 15, 2008, by and between OCM Industrial
E-Investments, L.P., as successor (by assignment) to CGMRC, as lender (in such
capacity, “Mezzanine E Lender”), and NIPB Mezz E, LLC, as borrower (“Mezzanine E
Borrower”), as amended by that certain First Amendment to Mezzanine E Loan
Agreement dated as of November 19, 2008, by and between Mezzanine E Lender and
Mezzanine E Borrower, that certain Second Amendment to Mezzanine E Loan
Agreement dated as of July 9, 2010, by and between Mezzanine E Lender and
Mezzanine E Borrower, and the Omnibus Amendment to Loan Documents. All of the
Loans have, prior to the Effective Date, been assigned to the Company.
“Member” means any Person named as a member of the Company on Schedule A and on
the books and records of the Company as the same may be amended from time to
time to reflect any Person admitted as an Additional Member or a Substitute
Member, for so long as such Person continues to be a member of the Company.
“Member Nonrecourse Debt” has the same meaning as the term “partner nonrecourse
debt” in Treasury Regulations Section 1.704-2(b)(4).
“Member Nonrecourse Debt Minimum Gain” means an amount with respect to each
“partner nonrecourse debt” (as defined in Treasury Regulation
Section 1.704-2(b)(4)) equal to the Company Minimum Gain that would result if
such partner nonrecourse debt were treated as a nonrecourse liability (as
defined in Treasury Regulations Section 1.752-1(a)(2)) determined in accordance
with Treasury Regulations Section 1.704-2(i)(3).
“Member Nonrecourse Deductions” has the same meaning as the term “partner
nonrecourse deductions” in Treasury Regulations Sections 1.704-2(i)(1) and
1.704-2(i)(2).
“Membership Interest” means the interest of a Member in the Company, including
such Member’s right (i) to a distributive share of the Net Income, Net Losses,
and other items of income, gain, loss, deduction and credits of the Company,
(ii) to a distributive share of the assets of the Company and (iii) to vote on,
consent to or otherwise participate in any decision of the Members to the extent
provided in this Agreement.
“Net Income” and “Net Loss” mean, for each Allocation Year, an amount equal to
the Company’s taxable income or loss for such Allocation Year, determined in
accordance with Section 703(a) of the Code (for this purpose, all items of
income, gain, loss, or deduction required to be stated separately pursuant to
Section 703(a)(1) of the
 
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Code shall be included in taxable income or loss), with the following
adjustments (without duplication):
(i)    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” and “Net Loss” shall be added to such taxable
income or loss;

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(ii)    Any expenditures of the Company described in Section 705(a)(2)(B) of the
Code or treated as Section 705(a)(2)(B) of the Code expenditures pursuant to
Treasury Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into
account in computing Net Income and Net Loss pursuant to this definition of “Net
Income” and “Net Loss,” shall be subtracted from such taxable income or loss;
(iii)    In the event the Carrying Value of any Company asset is adjusted
pursuant to subparagraphs (ii) or (iii) of the definition of “Carrying Value,”
the amount of such adjustment shall be treated as an item of gain (if the
adjustment increases the Carrying Value of the asset) or an item of loss (if the
adjustment decreases the Carrying Value of the asset) from the disposition of
such asset and shall be taken into account for purposes of computing Net Income
and Net Loss;
(iv)    Gain or loss resulting from any disposition of Property with respect to
which gain or loss is recognized for Federal income tax purposes shall be
computed by reference to the Carrying Value of the Property disposed of,
notwithstanding that the adjusted tax basis of such Property differs from its
Carrying Value;
(v)    In lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account Depreciation for such Allocation Year, computed in
accordance with the definition of Depreciation;
(vi)    To the extent an adjustment to the adjusted tax basis of any Company
asset pursuant to Section 734(b) of the Code is required, pursuant to Treasury
Regulations Section 1.704-(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 such basis) from the disposition
of such asset and shall be taken into account for purposes of computing Net
Income or Net Loss; and
(vii)    Notwithstanding any other provision of this definition, any items that
are specially allocated pursuant to Section 5.3(b) or Section 5.3(c) shall not
be taken into account in computing Net Income and Net Loss.
 
9

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The amounts of the items of Company income, gain, loss, or deduction available
to be specially allocated pursuant to Section 5.3(b) or Section 5.3(c) shall be
determined by applying rules analogous to those set forth in subparagraphs
(i) through (vi) above.
“NIP Properties” means the properties described on Schedule B.
“Nonrecourse Deductions” has the meaning set forth in Treasury Regulations
Sections 1.704-2(b)(1) and 1.704-2(c).
“Oaktree Affiliate” means Oaktree Capital Management, L.P. or one or more funds,
separate accounts or other Persons directly or indirectly managed or Controlled
by Oaktree Capital Management, L.P.
“Oaktree Member” means Oaktree and/or any direct or indirect Permitted
Transferee thereof to whom Membership Interests are Transferred in accordance
with Section 8.1(b).
“Oaktree Party” means Oaktree and any Person that owns a direct or indirect
interest in Oaktree and has the right to approve any of the transactions,
activities or matters contemplated in this Agreement.
“Oaktree Pro Forma Equity” means, as of any date, the sum of (i) the Initial
Oaktree Contribution plus a twelve percent (12%) annual return thereon,
compounded monthly from the Effective Date, and (ii) the aggregate amount of the
Subsequent Capital Contributions made by Oaktree in accordance with
Section 4.3(c), if any, plus, in the case of each Subsequent Capital
Contribution, a twelve percent (12%) annual return thereon, compounded monthly
from the date on which such Subsequent Capital Contribution was made.
“Permitted Transferee” means (i) with respect to the HC-KBS Member, any
Qualified HC-KBS Entity and (ii) with respect to the Oaktree Member, any of its
Affiliates and any of the Oaktree Affiliates.
“Person” means any natural person or any corporation, partnership (whether
general or limited), limited liability company, association, custodian, nominee,
trust, estate, joint venture, governmental authority or other entity.

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“Portfolio Property” means, as of any date, any NIP Property or other industrial
and/or warehouse property acquired in accordance with the provisions hereof, in
each case in which the Company then owns (directly or indirectly through a
Subsidiary) an interest.
“Pre-Leveraged Equity” means the sum described in subclause (A)(y) of clause
(ii) of the definition of the term “Pro Rata” or, if the HC-KBS Member makes the
Second HC-KBS Contribution in accordance with Section 4.3(b), the sum described
in subclause (A)(y) of clause (iii) of the definition of the term “Pro Rata”.
 
10

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“Prime Rate” means the rate of interest from time to time identified by JPMorgan
Chase Bank, N.A. as being its “prime” or “reference” rate.
“Pro Rata” means:
(i)    if the HC-KBS Member does not make the HC-KBS Contribution in accordance
with Section 4.3, (A) in the case of the Oaktree Member, one hundred percent
(100%), and (B) in the case of the HC-KBS Member, zero percent (0%);
(ii)    if the HC-KBS Member makes the First HC-KBS Contribution in accordance
with Section 4.3(a), then, upon the making of the First HC-KBS Contribution and
at all times prior to the making of the Second HC-KBS Contribution in accordance
with Section 4.3(b) or (if the Second HC-KBS Contribution is not made in
accordance therewith) the Refinancing, (A) in the case of the Oaktree Member, a
fraction (expressed as a percentage), (x) the numerator of which is the Oaktree
Pro Forma Equity on the date of the First HC-KBS Contribution and (y) the
denominator of which is the sum of such Oaktree Pro Forma Equity and the First
HC-KBS Contribution, and (B) in the case of the HC-KBS Member, a fraction
(expressed as a percentage), the numerator of which is the First HC-KBS
Contribution and the denominator of which is the sum described in subclause
(A)(y) of this clause (ii);
(iii)    if the HC-KBS Member makes the Second HC-KBS Contribution in accordance
with Section 4.3(b), then, upon the making of the Second HC-KBS Contribution and
at all times prior to the Refinancing, (A) in the case of the Oaktree Member, a
fraction (expressed as a percentage), (x) the numerator of which is the Oaktree
Pro Forma Equity on the date of the Second HC-KBS Contribution and (y) the
denominator of which is the sum of such Oaktree Pro Forma Equity and the HC-KBS
Contribution, and (B) in the case of the HC-KBS Member, a fraction (expressed as
a percentage), the numerator of which is the HC-KBS Contribution and the
denominator of which is the sum described in subclause (A)(y) of this clause
(iii);
(iv)    if the HC-KBS Member makes the HC-KBS Contribution in accordance with
Section 4.3, then, upon the Refinancing and at all times thereafter, (A) in the
case of the Oaktree Member, a fraction (expressed as a percentage), the
numerator of which is the Oaktree Pro Forma Equity at the time of the
Refinancing less the amount of Leveraged Equity Distributions distributed to the
Oaktree Member, and the denominator of which is the sum of (x) the Pre-Leveraged
Equity plus any Additional HC-KBS Contribution less the aggregate Leveraged
Equity Distributions made to the Oaktree Member and the Equity Member (the
amount of this subclause (x), the “Leveraged Equity”), (y) the 12% annual return
described in subclause (B)(x)(I)(1) of this clause (iv), and (z) if applicable,
the 12% annual return described in subclause (B)(x)(I)(2) of this clause (iv),
and (B) in the case of the HC-KBS Member, a fraction (expressed as a
percentage), (x) the numerator of which is (I) the sum of (1) the First HC-KBS
Contribution, plus a 12% annual return thereon, compounded monthly, from the
date the First HC-KBS Contribution was made through the date of the Refinancing,
(2) the Second HC-KBS Contribution, if any, plus a 12% annual return thereon,
compounded monthly, from the date the Second HC-KBS Contribution was made
through the date of
 
11

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the Refinancing, and (3) the Additional HC-KBS Contribution, if any, less (II)
the amount the amount of Leveraged Equity Distributions distributed to the
Equity Member and (y) the denominator of which is the sum of (I) the Leveraged
Equity, (II) the 12% annual return described in subclause (B)(x)(I)(1) of this
clause (iv) and (III) if applicable, the 12% annual return described in
subclause (B)(x)(I)(2) of this clause (iv).
“Profits Interest” means an interest in the future profits of the Company
satisfying the requirements for a partnership profits interest transferred in
connection with the performance of services, as set forth in IRS Revenue
Procedures

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

93-27 and 2001-43, or any future IRS guidance or other authority that
supplements or supersedes the foregoing Revenue Procedures, provided that all
Members, whether parties hereto as of the Effective Date or admitted after the
Effective Date, consent that the Company may take all actions, including
amending this Agreement, necessary or appropriate to cause the interests of the
Promote Member to be treated as a Profits Interest for all Federal income tax
purposes.
“Property” means an interest of any kind in any real or personal (or mixed)
property, including cash, and shall include both tangible and intangible
property.
“Qualified HC-KBS Entity” means an entity meeting each of the following
requirements: (i) such entity is Controlled by a KBS REIT (or an entity
comprised exclusively of one or more KBS REITs (a “KBS Entity”)) and/or an HC
Entity, (ii) at least 20% of the equity interests in such entity are owned by an
HC Entity, provided that, if such HC Entity then owns less than 20% of the
equity interests in the HC-KBS Member as a result of a JV Member Transfer, the
foregoing requirement in this clause (ii) shall be deemed to be satisfied if
such HC Entity owns a percentage interest in such entity which is not less than
the percentage interest owned by such HC Entity in the HC-KBS Member immediately
following such JV Member Transfer, (iii) so long as a KBS REIT or a KBS Entity
indirectly owns an interest in the HC-KBS Member, such KBS REIT or KBS Entity
Controls, and owns, directly or indirectly, at least 50% of the equity interests
in, the member of the HC-KBS Member through which such KBS REIT or KBS Entity
owns such interest (the “KBS JV Member”), except to the extent that any failure
of such KBS REIT or KBS Entity to Control, or to own, directly or indirectly, at
least 50% of the equity interests in, such Person shall have been caused by a
pledge, assignment or conveyance described in the last sentence of
Section 8.1(a), and (iv) more than 50% of the equity interests in such entity
are owned, directly or indirectly, by (x) a KBS REIT or KBS Entity and/or (y) an
HC Entity.
“Qualified Transferee” means (i) a savings bank, savings and loan association,
investment bank, insurance company, real estate investment trust, commercial
bank or trust company, commercial credit corporation, pension plan, pension fund
or pension advisory firm, mutual fund or governmental authority that satisfies
the Eligibility Requirements (as hereinafter defined), (ii) an investment
company, money management firm or “qualified institutional buyer” within the
meaning of Rule 144A under the Securities Act that satisfies the Eligibility
Requirements, (iii) an institution substantially similar to any of the entities
described in clauses (i) and (ii) of this
 
12

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definition that satisfies the Eligibility Requirements, or (iv) a Qualified
Trustee (as hereinafter defined) in connection with a securitization of, the
creation of collateralized debt obligations (“CDO”) secured by, or a financing
through an “owner trust” of, any interest of a KBS REIT in the HC-KBS Member
(any of the foregoing, a “Securitization Vehicle”), provided that (a) one or
more classes of Securities issued by such Securitization Vehicle is initially
rated at least investment grade by Standard & Poor’s Ratings Services (“S&P”),
Moody’s Investors Service, Inc. (“Moody’s”) or Fitch, Inc. (“Fitch”), (b) the
special servicer or manager of such Securitization Vehicle at the time of the
Transfer has (and the operative documents for such Securitization Vehicle
require that any successor has) the Required Special Servicer Rating (as
hereinafter defined), and (c) the owners of the “equity interest” in any
Securitization Vehicle that is a CDO, and the owners of the “controlling class”
of Securities issued by any Securitization Vehicle that is not a CDO, are (and
are required by the operative documents for the applicable Securitization
Vehicle to be) entities which are Qualified Transferees described in any of
clauses (i), (ii) or (iii) of this definition. For purposes of this definition,
(x) “Eligibility Requirements” means, with respect to any Person, that such
Person (I) has total assets (in name or under management) in excess of
$600,000,000 and (except with respect to a pension advisory firm or similar
fiduciary) capital/statutory surplus or shareholder’s equity of $250,000,000 and
(II) is regularly engaged in the business of (A) making, owning or acquiring for
investment, directly or indirectly, commercial real estate loans or (B) owning
and/or operating commercial real estate, (y) “Qualified Trustee” means (I) a
corporation, national bank, national banking association or trust company, in
each case organized and doing business under the laws of any state or the United
States of America, authorized under such laws to exercise corporate trust powers
and to accept the trust conferred, having a combined capital and surplus of at
least $100,000,000 and subject to supervision or examination by federal or state
authority, (II) an institution insured by the Federal Deposit Insurance
Corporation or (III) an institution whose long-term senior unsecured debt is
rated in either of the top two rating categories then in use by S&P, Moody’s or
Fitch, and (z) “Required Special Servicer Rating” means (I) in the case of
Fitch, a rating of “CSSI”, (II) in the case of S&P, being on the list of
approved special servicers and (III) in the case of Moody’s, acting as special
servicer in a commercial mortgage loan securitization that was rated within the
12-month period prior to the date of determination, provided that Moody’s has
not downgraded or withdrawn the then-current rating on any class of commercial
mortgage securities or placed any class of commercial mortgage securities on
watch citing the continuation of such special servicer as special servicer of
such commercial mortgage securities.
“Sale Transaction” means the sale of all of the Membership Interests or the sale
of all or substantially all of the

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Company’s assets (including by means of merger, consolidation, reorganization,
capitalization, sale of stock, sale of assets, or any combination thereof) to
one or more third parties.
“SEC” means the United States Securities and Exchange Commission.
“Securities” means any stock, shares, partnership interests, voting trust
certificates, certificates of interest or participation in any profit-sharing
agreement or
 
13

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arrangement, options, warrants, bonds, debentures, notes, or other evidences of
indebtedness, secured or unsecured, convertible, subordinated or otherwise, or
in general any instruments commonly known as “securities” or any certificates of
interest, shares or participations in temporary or interim certificates for
purchase or acquisition of, or any right to subscribe to, purchase or acquire,
any of the foregoing.
“Securities Act” means the United States Securities Act of 1933.
“Special Promote Base” means the amount of $21,039,000.
“Subsidiary” means, with respect to any Person, any corporation, partnership,
limited liability company, association, joint venture or other business entity
of which more than 50% of the total voting power of shares of stock or other
ownership interests entitled (without regard to the occurrence of any
contingency) to vote in the election of the Person or Persons (whether
directors, managers, trustees or other Persons performing similar functions)
having the power to direct or cause the direction of the management and policies
thereof (or, in the case of a partnership, limited liability company or other
similar entity managed by its general partner, managing member or like Person,
the general partnership, managing member or like interests) is at the time owned
or Controlled, directly or indirectly, by that Person or one or more of the
other Subsidiaries of that Person or a combination thereof.
“Substitute Member” means any Person admitted as a member of the Company
pursuant to Section 3.2 in connection with the Transfer of Membership Interests
to such Person.
“Transaction Documents” means this Agreement and any agreements or documents
ancillary hereto, including for this purpose that certain Agreement in Lieu of
Foreclosure dated as of the Effective Date by and between the Company, the
Borrowers and the Guarantors (as defined therein) (pursuant to which the NIP
Properties were conveyed to Subsidiaries of the Company), and all agreements and
instruments executed pursuant thereto or in connection therewith.
“Transfer” means any sale, assignment, transfer, exchange, gift, bequest,
pledge, hypothecation or other disposition or encumbrance, direct or indirect,
in whole or in part, by operation of law or otherwise, and shall include all
matters deemed to constitute a Transfer under ARTICLE VIII. An Upper Tier
Transfer shall be deemed a Transfer for the purposes hereof. The terms
“Transferred”, “Transferring”, “Transferor”, “Transferee” and “Transferable”
have meanings correlative to the foregoing.
“Treasury Regulations” mean the regulations promulgated under the Code.
“Unreturned Capital Percentage” means (i) with respect to the Oaktree Member, a
fraction (expressed as a percentage), the numerator of which is the Unreturned
Oaktree Capital and the denominator of which is the sum of the Unreturned
Oaktree Capital and the Unreturned HC-KBS Capital, and (ii) with respect to the
HC-KBS Member, a fraction (expressed as a percentage), the numerator of which is
the Unreturned
 
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HC-KBS Capital and the denominator of which is the sum of the Unreturned Oaktree
Capital and the Unreturned HC-KBS Capital.
“Unreturned Oaktree Capital” means, with respect to the Oaktree Member at any
time, the Initial Oaktree Contribution plus the aggregate amount of any
Subsequent Oaktree Contributions theretofore made by the Oaktree Member plus the
aggregate amount of any additional Capital Contributions theretofore made by the
Oaktree Member less the cumulative distributions (including distributions of
Refinancing Proceeds) theretofore made by the Company to the Oaktree Member
pursuant to Section 5.2(a)(iii).

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“Unreturned HC-KBS Capital” means, with respect to the HC-KBS Member at any
time, the HC-KBS Contribution, if any, plus the Additional HC-KBS Contribution,
if any, plus the aggregate amount of any additional Capital Contributions
theretofore made by the HC-KBS Member less the cumulative distributions
(including distributions of Refinancing Proceeds) theretofore made by the
Company to the Equity Member pursuant to Section 5.2(a)(iii).
“Upper Tier Transfer” means any event (including a Transfer of Securities, an
issuance of Securities or the amendment of the organizational documents of any
Person) which results in the HC-KBS Member no longer being a Qualified HC-KBS
Entity.
(b) The following additional terms shall have the meanings specified in the
indicated Section of this Agreement:
 
 
 
 
Term
  
Section
Accounting Firm
  
Section 3.3(b)
Act
  
Recitals
Additional Equity Loan
  
Section 4.7
Additional HC-KBS Contribution
  
Section 4.5
Board
  
Section 7.1
Call Amounts
  
Section 4.6
Call Notice
  
Section 4.6
Certificate
  
Recitals
Company
  
Preamble
Damages
  
Section 10.2(c)
Dissolution Event
  
Section 11.1(c)
Drag-Along Closing Date
  
Section 8.4(b)
Drag-Along Notice
  
Section 8.4(b)
Drag-Along Price
  
Section 8.4(b)
Drag-Along Purchaser
  
Section 8.4(a)
Drag-Along Right
  
Section 8.4(a)
Drag-Along Sale
  
Section 8.4(a)
Drag-Along Terms
  
Section 8.4(b)
Effective Date
  
Preamble
Equity Member
  
Section 5.2(a)
Exempt Properties
  
Section 7.3(b)(viii)(1)

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

 
 
 
Term
  
Section
Exercise Notice
  
Section 8.2(b)
Final Distribution
  
Section 11.2(b)
First HC-KBS Contribution
  
Section 4.3(a)
Funding Dates
  
Section 4.6
HC-KBS
  
Preamble
HC-KBS Contribution
  
Section 4.3(b)
HC-KBS Representatives
  
Section 7.2(a)
Initial Oaktree Contribution
  
Section 4.2
KBS REIT Entity
  
Section 7.3(b)(vii)
Leveraged Equity Distributions
  
Section 4.4
Liquidator
  
Section 11.2(a)
Noncontributing Member
  
Section 4.7
Notice
  
Section 12.3
Oaktree
  
Preamble
Oaktree Representatives
  
Section 7.2(a)
Promote Member
  
Section 5.2(a)
Proposed Purchaser
  
Section 8.3(a)
Refinancing
  
Section 4.4
Refinancing Proceeds
  
Section 4.4
Regulatory Allocations
  
Section 5.3(c)
REIT
  
Schedule D
Representatives
  
Section 7.2(a)
Required Contributions
  
Section 4.6
Revaluation
  
Section 5.1(c)
ROFR Interest
  
Section 8.2(a)
ROFR Notice
  
Section 8.2(a)
ROFR Option Period
  
Section 8.2(b)
ROFR Price
  
Section 8.2(a)
ROFR Terms
  
Section 8.2(a)
Sale Distribution Amount
  
Section 7.3(b)(viii)(1)
Second HC-KBS Contribution
  
Section 4.3(b)
Section 754 Election
  
Section 6.2
Subsequent Oaktree Contribution
  
Section 4.3(c)
Tag-Along Closing Date
  
Section 8.3(b)
Tag-Along Exercise Notice
  
Section 8.3(c)
Tag-Along Notice
  
Section 8.3(b)
Tag-Along Price
  
Section 8.3(b)
Tag-Along Right
  
Section 8.3(a)
Tag-Along Sale
  
Section 8.3(a)
Tag-Along Terms
  
Section 8.3(b)
Tax Matters Partner
  
Section 6.1
Third Party Purchaser
  
Section 8.2(a)
Threshold Amount
  
Section 4.4
Uncontributed Amount
  
Section 4.7
Withholding Advances
  
Section 5.5(b)

 
16

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Section 1.2    Terms and Usage Generally. The definitions in Section 1.1 shall
apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. All references herein to Articles,
Sections and Schedules shall be deemed to be references to Articles and Sections
of, and Schedules to, this Agreement unless the context shall otherwise require.
All Schedules attached hereto shall be deemed incorporated herein as if set
forth in full herein. The words “include”, “includes” and “including” shall be
deemed to be followed by the phrase “without limitation”. All accounting terms
not defined in this Agreement shall have the meanings determined by United
States generally accepted accounting principles as in effect from time to time.
The words “hereof”, “herein” and “hereunder” and words of similar import when
used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. Unless otherwise expressly provided
herein, any agreement, instrument or statute defined or referred to herein or in
any agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified, supplemented or
restated, including (in the case of agreements or instruments) by waiver or
consent and (in the case of statutes) by succession of comparable successor
statutes, and all attachments thereto and instruments incorporated therein and
(in the case of statutes) also any rules and regulations promulgated thereunder.
ARTICLE II
THE COMPANY
Section 2.1    Formation. The Company was initially formed as a Delaware limited
partnership, and has been reorganized as a Delaware limited liability company by
the execution and filing of the Certificate by an authorized person (within the
meaning of the Act) under and pursuant to the Act. The Board may cause to be
executed and filed any duly authorized amendments to the Certificate from time
to time in a form prescribed by the Act. The rights, powers, duties, obligations
and liabilities of the Members shall be determined pursuant to the Act and this
Agreement. To the extent that the rights, powers, duties, obligations and
liabilities of any Member are different by reason of any provision of this
Agreement than they would be in the absence of such provision, this Agreement
shall, to the extent permitted by the Act, control.
Section 2.2    Name. The name of the Company shall be NIP JV, LLC. The Board in
its sole discretion may change the name of the Company at any time and from time
to time. Written notification of any such change shall be given to all Members.
The Company’s business may be conducted under its name and/or any other name or
names deemed advisable by the Board.
Section 2.3    Term. The term of the Company, as reorganized as described in
Section 2.1, began on December 15, 2011, the date the Certificate was filed with
the Secretary of State of the State of Delaware, and the Company shall have
 
17

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perpetual existence unless sooner dissolved and its affairs wound up as provided
in ARTICLE XI.
Section 2.4    Registered Office; Registered Agent; Principal Office; Other
Offices. The registered office of the Company required by the Act to be
maintained in the State of Delaware shall be the office of the initial
registered agent named in the Certificate or such other office (which need not
be a place of business of the Company) as the Board may designate from time to
time in the manner provided by law. The registered agent of the Company in the
State of Delaware shall be the initial registered agent named in the Certificate
or such other Person or Persons as the Board may designate from time to time in
the manner provided by law. The principal office of the Company shall be at
11111 Santa Monica Blvd., Suite 750, Los Angeles, California 90025, or at such
other place as the Board may designate from time to time, which need not be in
the State of Delaware, and the Company shall maintain records there. The Company
may have such other offices as the Board may designate from time to time.
Section 2.5    Purposes. The Company has been reorganized (as described in
Section 2.1) for the object and purpose of, and the nature of the business to be
conducted and promoted by the Company is, engaging in the Business and
activities incident thereto, as determined by the Board. The Company shall have
the power to do and perform all things necessary for, connected with or arising
out of such purposes and shall have the power to take such actions as may be
necessary or appropriate to accomplish such purposes and conduct such purposes,
including forming one or more Subsidiaries to accomplish such purposes and
conduct such purposes. Nothing set forth herein shall be construed as
authorizing the Company to possess any purpose or power, or to do any act or
thing, forbidden by the Act to a limited liability company organized under the
laws of the State of Delaware.

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Section 2.6    Powers of the Company. The Company shall have the power and
authority to take any and all actions necessary, appropriate or advisable to or
for the furtherance of the purposes set forth in Section 2.5.
Section 2.7    Partnership Status. The Members intend that the Company shall be
treated as a partnership for Federal, state and local tax purposes to the extent
such treatment is available and as a continuation of OCM Industrial Holdings,
L.P. for such purposes, and agree to take (or refrain from taking) such actions
as may be necessary to receive and maintain such treatment and refrain from
taking any actions inconsistent therewith.
Section 2.8    Ownership of Property. Legal title to all Property conveyed to or
held by the Company or its Subsidiaries shall reside in the Company or its
Subsidiaries and shall be conveyed only in the name of the Company or its
Subsidiaries, and no Member or any other Person, individually, shall have any
ownership of such Property.
 
18

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ARTICLE III
MEMBERS; REPORTS
Section 3.1    Admission of Members.
(a) Generally. The name and address of each Member and its Capital Contribution
as of the Effective Date are set forth on Schedule A. When any Capital
Contribution is made or any Membership Interests are Transferred in accordance
with this Agreement, Schedule A shall be amended to reflect such Capital
Contribution or such Transfer (and the admission of any Substitute Member), as
the case may be.
(b) Additional Members. Additional Members may be admitted to the Company only
with the approval of the Board and subject to the provisions of Section 3.2(a).
Section 3.2    Substitute Members and Additional Members.
(a) No Transferee of any Membership Interests or Person to whom any Membership
Interests are issued pursuant to this Agreement shall be admitted as a Member
hereunder or acquire any rights hereunder, including the right to receive
distributions and allocations in respect of the Transferred or issued Membership
Interests, as applicable, unless (i) such Membership Interests are Transferred
or issued in compliance with the provisions of this Agreement (including ARTICLE
VIII), (ii) such Transferee or recipient shall have executed and delivered to
the Company such instruments as the Board deems necessary or desirable, in its
sole discretion, to effectuate the admission of such Transferee or recipient as
a Member and to confirm the agreement of such Transferee or recipient to be
bound by all the terms and provisions of this Agreement, and (iii) in the case
of the issuance of new Membership Interests, the Members shall have executed and
delivered an amendment to this Agreement reflecting the admission of such
Additional Member. If the immediately preceding sentence is complied with, the
applicable Transferee or recipient shall, without the need for any further
action of any Person, be deemed admitted to the Company as a Member. Unless
otherwise expressly set forth in this Agreement, a Substitute Member shall enjoy
the same rights, and be subject to the same obligations, as the Transferor;
provided that such Transferor shall not be relieved of any obligation or
liability hereunder arising prior to the consummation of such Transfer but shall
be relieved of all future obligations with respect to the Membership Interests
so Transferred. In the event of any admission of a Substitute Member pursuant to
this Section 3.2(a), this Agreement shall be deemed amended to reflect such
admission, and any formal amendment of this Agreement (including Schedule A) in
connection therewith shall only require execution by the Company and such
Substitute Member to be effective. As promptly as practicable after the
admission of any Person as a Member, the books and records of the Company shall
be changed to reflect such admission of a Substitute Member or Additional
Member.
 
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(b) If a Member shall Transfer all (but not less than all) of its Membership
Interests, such Member shall (subject to the proviso in the third sentence of
Section 3.2(a)) thereupon cease to be a Member of the Company.
Section 3.3    Tax and Accounting Information.
(a) Accounting Method. For financial reporting purposes, the books and records
of the Company shall be kept on the accrual method of accounting applied in a
consistent manner and shall reflect all Company transactions.

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(b) Financial Reports. The books and records of the Company shall be audited as
of the end of each Fiscal Year by Ernst &Young or such other accounting firm as
may be selected by the Board (in either case, the “Accounting Firm”). The
Company will use its reasonable efforts to provide to each Member:
(i)    on an annual basis, within 120 days after the end of each Fiscal Year,
(A) an audited balance sheet, statement of operations and statement of cash flow
of the Company and its Subsidiaries, audited by the Accounting Firm, and (B) a
statement of such Member’s Capital Account, including such Member’s allocation
and share of Net Income and Net Loss and special allocations pursuant to
Section 5.3, for such Fiscal Year;
(ii)    on a quarterly basis, within 30 days after the end of each calendar
quarter (provided that the period beginning on the Effective Date and ending on
March 31, 2012, shall be deemed to constitute the first calendar quarter for
purposes of this Section 3.3(b)(ii)), (A) an unaudited balance sheet and related
statement of operations and statement of cash flow of the Company and its
Subsidiaries and (B) a statement of such Member’s Capital Account, including
such Member’s allocation of and share of Net Income and Net Loss and special
allocations pursuant to Section 5.3, for such quarter;
(iii)    within 30 days after each calendar month (provided that the period
beginning on the Effective Date and ending on January 31, 2012, shall be deemed
to constitute the first calendar month for purposes of this
Section 3.3(b)(iii)), (A) a monthly report of net income for the Company and its
Subsidiaries (derived from an unaudited income statement) and (B) a monthly
unaudited balance sheet of the Company and its Subsidiaries.
Such annual, quarterly and monthly financial information referred to in clauses
(i), (ii) and (iii) above will be prepared in all material respects in
accordance with United States generally accepted accounting principles as in
effect from time to time, subject to year-end audit adjustments and the absence
of notes in the case of such quarterly and monthly financial information. The
Company shall also provide to the Members (x) such supporting schedules, reports
and backup information with respect to such financial information as may be
reasonably requested by the Members and (y) copies of such additional reports
and statements as may be received by the Company or any of its
 
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Subsidiaries from any asset manager or property manager with respect to any of
the Portfolio Properties or otherwise in connection with the Business.
(c) Tax Returns.
(i)    The Company shall timely cause to be prepared all Federal, state, local
and foreign tax returns (including information returns) of the Company and its
Subsidiaries, which may be required by a jurisdiction in which the Company and
its Subsidiaries operate or conduct business for each year or period for which
such returns are required to be filed and shall cause such returns to be timely
filed. The Company shall (x) upon a timely request by a Member, provide a draft
of any such tax return to such Member and consult with such Member prior to
finalizing and filing such tax return and (y) upon a request by a Member at any
time, furnish to such Member a copy of any such tax return.
(ii)    Within 90 days after the end of each Fiscal Year, the Company shall
furnish to each Member all information required to be reported in the tax
returns of the Members for tax jurisdictions in which the Company is doing
business, including a report (including Schedule K-1) indicating each Member’s
share in the Company’s taxable income, gain, credits, losses and deductions for
such year, in sufficient detail to enable such Member to prepare its Federal,
state and other tax returns.
(d) Inconsistent Positions. No Member shall take a position on its income tax
return with respect to any item of Company income, gain, deduction, loss or
credit that is different from the position taken on the Company’s income tax
return with respect to such item.
Section 3.4    Certification of Membership Interests. The Board may in its
discretion cause the Company to issue certificates to the Members representing
their respective Membership Interests.
ARTICLE IV
CAPITAL CONTRIBUTIONS AND REFINANCING
Section 4.1    General. Except as provided in this ARTICLE IV, no Member shall
be required or, without the approval of the Board, permitted to make or commit
to make a Capital Contribution, loan or advance to the Company or any of

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its Subsidiaries or guarantee or make any other financial commitment with
respect to any debt or other obligation of the Company or its Subsidiaries,
including to fund operations of the Company or its Subsidiaries.
Section 4.2    Initial Oaktree Contribution. The Oaktree Member shall be deemed
to have made Capital Contributions as of the Effective Date in the aggregate
amount set forth opposite its name on Schedule A under the column “Initial
Capital Contribution” (the “Initial Oaktree Contribution”).
 
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Section 4.3    Capital Contributions until HC-KBS Funding Date.
(a) The Equity Member shall have the right, without the approval of the Board,
to contribute capital to the Company (the “First HC-KBS Contribution”) at any
time prior to March 15, 2012, in an amount of up to (i) the lesser of (x) 15% of
the Pre-Leveraged Equity after giving effect to the First HC-KBS Contribution
and (y) $20,000,000, (ii) the portion of the amount described in clause
(i) above required or permitted under the operating agreement of the HC-KBS
Member to be funded by the KBS Member (out of cash so funded) or (iii) the
portion of the amount described in clause (i) above required or permitted under
the operating agreement of the HC-KBS Member to be funded by the member of the
HC-KBS Member which is an HC Entity (out of cash so funded). The Equity Member
shall give the Oaktree Member and the Company written notice of the First HC-KBS
Contribution (specifying the amount thereof) not less than 15 days prior to the
making of the First HC-KBS Contribution.
(b) In the event that the Equity Member makes the First HC-KBS Contribution in
the amount set forth in clause (ii) or (iii) of the first sentence of
Section 4.3(a) in accordance with the provisions of Section 4.3(a), then the
Equity Member shall have the further right, without the approval of the Board,
to contribute (out of cash funded by the same member of the HC-KBS Member which
funded the First HC-KBS Contribution) capital to the Company (the “Second HC-KBS
Contribution” and, together with the First HC-KBS Contribution, the “HC-KBS
Contribution”) at any time prior to May 15, 2012, in an amount of up to (i) the
lesser of (x) 15% of the Pre-Leveraged Equity after giving effect to the Second
HC-KBS Contribution and (y) $20,000,000, minus (ii) the amount of the First
HC-KBS Contribution. The Equity Member shall give the Oaktree Member and the
Company written notice of the Second HC-KBS Contribution (specifying the amount
thereof) not less than 15 days prior to the making of the Second HC-KBS
Contribution.
(c) The Oaktree Member shall have the right, without the approval of the Board,
to contribute capital to the Company (any such contribution, a “Subsequent
Oaktree Contribution”) from time to time during the period commencing on the
Effective Date and ending on the HC-KBS Funding Date, if the Oaktree Member
believes, at the time such contribution is made, that such contribution will
need to be deployed by the Company for Company purposes within 30 days after
such contribution is made.
Section 4.4    Refinancing. The Members shall use commercially reasonable
efforts to obtain refinancing for all of the Portfolio Properties within 180
days after the Effective Date. Upon the initial refinancing of all or any
material portion of the Property (the “Refinancing”), the proceeds of the
Refinancing (the “Refinancing Proceeds”) shall be distributed to the Equity
Member and the Oaktree Member as provided in Section 5.2 (any such distributions
made to the Equity Member or the Oaktree Member pursuant to Section 5.2(a)(iii),
the “Leveraged Equity Distributions”), provided that, if the Equity Member made
the HC-KBS Contribution in accordance with Section 4.3 and the HC-KBS
Contribution was less than 15% of the Pre-Leveraged Equity (after giving effect
to the HC-KBS Contribution), then, notwithstanding anything
 
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to the contrary in Section 5.2, distributions (if any) of the Refinancing
Proceeds to the Equity Member shall be limited to the extent necessary to have
the Unreturned HC-KBS Capital be equal to the product of (a) a percentage
expressed as a fraction whose numerator is the amount of the HC-KBS Contribution
and whose denominator is $20,000,000 and (b) 15% of the sum of the Unreturned
HC-KBS Capital and the Unreturned Oaktree Capital after giving effect to such
distributions (such product, the “Threshold Amount”).
Section 4.5    Additional HC-KBS Contribution. If (a) the Equity Member made the
HC-KBS Contribution in accordance with Section 4.3 and (b) following the
Refinancing and the distribution of the Refinancing Proceeds pursuant to
Section 4.4, the Unreturned HC-KBS Capital would constitute less than the
Threshold Amount, then the Equity Member shall have the right to contribute,
concurrently with the distribution of the Refinancing Proceeds, additional
capital to the Company

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(the “Additional HC-KBS Contribution”) in an amount that will cause the
Unreturned HC-KBS Capital to be equal to the product of (i) a percentage
expressed as a fraction whose numerator is the amount of the HC-KBS Contribution
and whose denominator is $20,000,000 and (ii) 15% of the sum of the Unreturned
Oaktree Capital and the Unreturned HC-KBS Capital after giving effect to the
Additional HC-KBS Contribution.
Section 4.6    Additional Contributions. After the HC-KBS Funding Date, each
Member shall contribute to the Company the amounts required by the Company (the
“Required Contributions”) from time to time, in such amounts (the “Call
Amounts”) and on such dates (“Funding Dates”) as shall be specified by the
Company upon not less than 21 days’ written notice (the “Call Notice”) by the
Company. No Member shall be permitted to contribute less than the full amount of
any Required Contribution which it is obligated under this Section 4.6 to make.
Section 4.7    Failures to Make Additional Contributions. If either Member shall
fail to contribute the applicable Call Amount set forth in a Call Notice on or
before the Funding Date therefor (such Member being herein referred to as a
“Noncontributing Member”, and the applicable Call Amount, the “Uncontributed
Amount”), then (i) the Company shall give notice to the other Member of such
failure and the Uncontributed Amount in respect thereof, (ii) the other Member
shall have the right, but not the obligation, to contribute to the Company all
or any portion of the Uncontributed Amount and (iii) the total amount funded by
such other Member with respect to such Call Notice both pursuant to Section 4.6
and this Section 4.7 shall, notwithstanding anything the contrary contained in
Section 4.6 and this Section 4.7, be treated as a loan (and not as a Capital
Contribution) to the Company by such other Member (an “Additional Equity Loan”)
which shall accrue interest at a rate equal to 18% per annum, compounded
monthly. Additional Equity Loans shall be repaid by the Company out of
Distributable Cash as provided in Section 5.2. Notwithstanding anything to the
contrary contained in this Agreement, no failure by a Member to make a Required
Contribution shall constitute a default under this Agreement.
 
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Section 4.8    No Additional Rights. No Member, in its capacity as a Member,
shall have the right to receive any cash or any other Property of the Company,
and no Member shall be entitled to withdraw any part of its (or its
predecessor’s) Capital Contribution or Capital Account or to receive any
distribution from the Company, except as provided in Section 5.2 and ARTICLE XI.
No interest shall be paid by the Company on Capital Contributions or on balances
in Member’s Capital Accounts.
ARTICLE V
CAPITAL ACCOUNTS;
DISTRIBUTIONS; ALLOCATIONS
Section 5.1    Capital Accounts.
(a) Maintenance of Capital Accounts. The Company shall maintain a Capital
Account for each Member on the books of the Company in accordance with the
following provisions:
(i)    As of the Effective Date, the Capital Account of each Member is as set
forth on Schedule A.
(ii)    To each Member’s Capital Account there shall be credited: (A) the amount
of money and the Carrying Value of any Property contributed by such Member in
accordance with this Agreement; (B) such Member’s distributive share of Net
Income and any item in the nature of income or gain that is allocated to such
Member pursuant to Section 5.3(a), Section 5.3(b) or Section 5.3(c); and (C) the
amount of any Company liabilities assumed by such Member or that are secured by
any Property distributed to such Member.
(iii)    To each Member’s Capital Account there shall be debited: (A) the amount
of money and the Carrying Value of any Property distributed to such Member
pursuant to any provision of this Agreement; (B) such Member’s distributive
share of Net Loss and any items in the nature of expenses or losses that are
allocated to such Member pursuant to Section 5.3(a), Section 5.3(b) and
Section 5.3(c) and (C) 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.
(iv)    In determining the amount of any liability for purposes of subparagraphs
(ii) and (iii) above there shall be taken into account Section 752(c) of the
Code and any other applicable provisions of the Code and the Treasury
Regulations.
The foregoing provisions and the other provisions of this Agreement relating to
the maintenance of Capital Accounts are

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intended to comply with Treasury Regulations Section 1.704-1(b) and shall be
interpreted and applied in a manner consistent with such Treasury Regulations.
In the event that the Board shall determine that it is prudent to
 
24

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modify the manner in which the Capital Accounts or any debits or credits thereto
are maintained (including debits or credits relating to liabilities that are
secured by contributed or distributed Property or that are assumed by the
Company or the Members), the Board may make such modification so long as such
modification is not likely to have a material effect on the amounts distributed
to any Person pursuant to ARTICLE XI upon the dissolution of the Company. In
addition, the Board shall (i) make any adjustments that are necessary or
appropriate to maintain equality between Capital Accounts of the Members and the
amount of capital reflected on the Company’s balance sheet, as computed for book
purposes, in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(g),
and (ii) make any appropriate modifications in the event unanticipated events
might otherwise cause this Agreement not to comply with Treasury Regulations
Section 1.704-1(b).
(b) Succession to Capital Accounts. In the event any Person becomes a Substitute
Member in accordance with the provisions of this Agreement, such Substitute
Member shall succeed to the Capital Account of the Transferor to the extent such
Capital Account relates to the Membership Interests Transferred to such
Substitute Member.
(c) Adjustments of Capital Accounts. The Company shall revalue the Capital
Accounts of the Members in accordance with Treasury Regulations
Section 1.704-1(b)(2)(iv)(f) (a “Revaluation”) at the following times:
immediately prior to (i) the contribution of more than a de minimis amount of
money or other Property to the Company by a new or existing Member as
consideration for or in respect of Membership Interests in the Company; (ii) the
distribution by the Company to a Member of more than a de minimis amount of
Property (other than cash) in redemption of Membership Interests in the Company;
(iii) the issuance by the Company of more than a de minimis Profits Interest (as
described in Treasury Regulations Section 1.704-1(b)(2)(iv)(f)(5)(iii)); and
(iv) the liquidation of the Company within the meaning of Treasury Regulations
Section 1.704-1(b)(2)(ii)(g); provided, however, that adjustments pursuant to
clauses (i), (ii) and (iii) above shall be made only if the Board reasonably
determines that such adjustments are necessary or appropriate to reflect the
relative economic interest of the Members (it being hereby acknowledged that
such adjustments may not ordinarily be necessary or appropriate in the case of
the issuance of a Profits Interest or in the case of a contribution for
Membership Interests that do not represent a material Membership Interest in the
Company).
(d) No Withdrawal of Capital or Obligation to Restore Deficit Capital Account.
No Member shall be entitled to withdraw capital or receive distributions except
as specifically provided herein. A Member shall have no obligation to the
Company, to any other Member or to any creditor of the Company to restore any
negative balance in the Capital Account of such Member.
Section 5.2    Amounts and Priority of Distributions.
(a) Distributions. For purposes of this Agreement, (i) the HC-KBS Member, in its
capacity as the party making Capital Contributions and Additional Equity
 
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Loans, in each case if any, to the Company and receiving distributions from the
Company in respect thereof, is sometimes referred to herein as the “Equity
Member”; (ii) the HC-KBS Member, in its capacity as the party receiving
distributions from the Company other than on account of the HC-KBS Member’s
Capital Contributions and Additional Equity Loans, is sometimes referred to
herein as the “Promote Member”; (iii) any distributions made to the Equity
Member shall not be included in any calculation of distributions made to the
Promote Member, and (iv) any distributions made to the Promote Member shall not
be included in any calculation of distributions made to the Equity Member.
Except as otherwise provided in this Section 5.2 or in Section 11.2, and subject
to the provisions of Section 4.4 and Section 9.1, distributions of Distributable
Cash shall be made to the Members at such times and in such amounts as may from
time to time be determined by the Board in its sole discretion as follows:
(i)    First, to the Equity Member and the Oaktree Member, in payment of accrued
and unpaid interest on, and then in payment of the outstanding principal balance
of, any outstanding Additional Equity Loans made by such Members, in proportion
to the amount of such interest and principal owing to each Member.

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(ii)    Second, to the Oaktree Member and the Equity Member until (i) the
Oaktree Member has received a 12% preferred annual return, compounded monthly,
on the Unreturned Oaktree Capital and (ii) the Equity Member has received a 12%
preferred annual return, compounded monthly, on the Unreturned HC-KBS Capital
(if any), in each case accruing from the date contributed to the Company. If the
Equity Member has made the HC-KBS Contribution, then distributions pursuant to
this clause (ii) shall be made in such a manner that, at any point in time, the
Oaktree Member and the Equity Member shall have received, out of distributions
made pursuant to this clause (ii), the same rate of return, compounded monthly,
on the Unreturned Oaktree Capital and the Unreturned HC-KBS Capital,
respectively.
(iii)    Third, to the Oaktree Member and the Equity Member, in proportion to
their respective Unreturned Capital Percentages, until the Unreturned Oaktree
Capital and the Unreturned HC-KBS Capital (if any) have been reduced to zero.
(iv)    Fourth, 80% to the Promote Member, on the one hand, and 20% to the
Equity Member and the Oaktree Member Pro Rata, on the other hand, until the
Promote Member has received, taking into account all of the distributions made
to the Promote Member pursuant to this clause (iv), first, a 12% annual return
on the unpaid Special Promote Base from time to time (compounded monthly and
accruing from the Effective Date) and, then, the Special Promote Base.
(v)    Fifth, 80% to the Oaktree Member and the Equity Member in the manner
hereinafter described in this clause (v) and 20% to the Promote Member until
(A) the Oaktree Member has received a 20% IRR on its Capital Contributions
(other than any Subsequent Capital Contributions) and any Additional
 
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Equity Loans, taking into account all distributions theretofore made to the
Oaktree Member pursuant to this Section 5.2, and (B) the Equity Member has
received a 20% IRR on its Capital Contributions and Additional Equity Loans, in
each case if any, taking into account all distributions theretofore made to the
Equity Member pursuant to this Section 5.2. If the HC-KBS Member has made the
HC-KBS Contribution, then distributions made to the Oaktree Member and the
Equity Member pursuant to this clause (v) shall be made in such a manner that,
at any point in time, the Oaktree Member and the Equity Member shall have
received, out of distributions made under this clause (v), the same IRR with
respect to their respective Capital Contributions (other than, in the case of
the Oaktree Member, any Subsequent Capital Contributions) and Additional Equity
Loans, if any.
(vi)    Sixth, 100% to the Promote Member until it has received an amount equal
to the distributions received by the Oaktree Member and the Equity Member
pursuant to clause (iv) of this Section 5.2.
(vii)    Thereafter, 70% to the Oaktree Member and the Equity Member Pro Rata
and 30% to the Promote Member.
(b)    Limitations on Distributions. Notwithstanding anything to the contrary in
Section 5.2(a):
(i)    Except as otherwise determined by the Board, distributions hereunder
shall be made only to the extent of Distributable Cash.
(ii)    Notwithstanding any provision of this Agreement to the contrary, neither
the Company nor the Board, on behalf of the Company, shall make a distribution
to any Person in violation of the Act or other applicable law. Any distribution
hereunder that is made in error or in violation of the Act or any other
applicable law shall be returned to the Company.
(iii)    It is the intention of the parties to this Agreement that allocations
to and distributions in respect of the Membership Interests issued to the
Promote Member be limited to the extent necessary so that such Membership
Interests constitute Profits Interests. In furtherance of the foregoing, and
notwithstanding anything to the contrary in this Agreement, the Board shall, if
necessary, limit allocations to and/or distributions in respect of any such
Membership Interest so that such allocations or distributions do not exceed the
available profits in respect of the Promote Member’s related Profits Interest.
In the event that allocations or distributions to the Promote Member are reduced
pursuant to the preceding sentence, the Board shall make adjustments to future
allocations or distributions, as the case may be, to the Members as promptly as
practicable so that the Members are allocated and distributed on a cumulative
basis the amount to which they would have been entitled had this
Section 5.2(b)(iii) not been in effect; provided, that any allocations or
distributions pursuant to this sentence shall be further subject to the
provisions of this Section 5.2(b)(iii).

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(c) Distributions in Kind. Any distributions in kind shall be distributed based
on the Fair Market Value of the Property distributed in the same proportions as
if cash were distributed. If cash and Property are to be distributed in kind
simultaneously, the Company shall distribute such cash and Property in kind in
the same proportion to each Member, unless otherwise agreed by the Members.
Section 5.3    Allocations.
(a) Net Income and Net Loss. Except as otherwise provided in this Agreement, Net
Income and Net Loss (and, to the extent necessary, individual items of income,
gain, loss, deduction or credit) of the Company shall be allocated among the
Members in a manner such that, after giving effect to the special allocations
set forth in Section 5.4(b) and Section 5.4(c), the Capital Account of each
Member, immediately after making such allocation, is, as nearly as possible,
equal (proportionately) to (i) the distributions that would be made to such
Members pursuant to Section 5.2, if the Company were dissolved, its affairs
wound up and its assets sold for cash equal to their Carrying Value, all Company
liabilities were satisfied (limited with respect to each nonrecourse liability
to the Carrying Value of the assets securing such liability), and the net assets
of the Company were distributed in accordance with Section 5.2 to the Members
immediately after making such allocation, minus (ii) such Member’s share of
Company Minimum Gain and Member Nonrecourse Debt Minimum Gain, computed
immediately prior to the hypothetical sale of assets. The Board shall be
entitled to adjust the allocations of Net Income and Net Loss to take into
account any of the economic provisions of this Agreement, including the timing
and amount of actual distributions to the Members; provided that any such
adjustment shall not affect the amount distributable to a Member pursuant to
this Agreement.
(b) Special Allocations. The following special allocations shall be made in the
following order:
(i)    Minimum Gain Chargeback. Except as otherwise provided in Treasury
Regulations Section 1.704-2(f), notwithstanding any other provision of
Section 5.3(a), if there is a net decrease in Company Minimum Gain during any
Allocation Year, each Member shall be specially allocated items of Company
income and gain for such Allocation Year (and, if necessary, subsequent
Allocation Years) in an amount equal to such Member’s share of the net decrease
in Company Minimum Gain, determined in accordance with Treasury Regulations
Section 1.704-2(g). Allocations pursuant to the immediately preceding 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 Treasury Regulations Sections 1.704-2(f)(6) and
1.704-2(j)(2). This Section 5.3(b)(i) is intended to comply with the minimum
gain chargeback requirement in Treasury Regulations Section 1.704-2(f) and shall
be interpreted consistently therewith.
(ii)    Member Minimum Gain Chargeback. Except as otherwise provided in Treasury
Regulations Section 1.704-2(i)(4), notwithstanding
 
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any other provision of Section 5.3(a), if there is a net decrease in Member
Nonrecourse Debt Minimum Gain attributable to a Member Nonrecourse Debt during
any Allocation Year, each Member who has a share of the Member Nonrecourse Debt
Minimum Gain attributable to such Member Nonrecourse Debt, determined in
accordance with Treasury Regulations Section 1.704-2(i)(5), shall be specially
allocated items of Company income and gain for such Allocation Year (and, if
necessary, subsequent Allocation Years) in an amount equal to such Member’s
share of the net decrease in Member Nonrecourse Debt Minimum Gain attributable
to such Member Nonrecourse Debt, determined in accordance with Treasury
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 Treasury Regulations Sections 1.704-2(i)(4) and
1.704-2(j)(2). This Section 5.3(b)(ii) is intended to comply with the minimum
gain chargeback requirement in Treasury Regulations Section 1.704-2(i)(4) and
shall be interpreted consistently therewith.
(iii)    Qualified Income Offset. In the event any Member unexpectedly receives
any adjustments, allocations or distributions described in Treasury Regulations
Section 1.704-1(b)(2)(ii)(d)(4), Section 1.704-1(b)(2)(ii)(d)(5) or
Section 1.704-1(b)(2)(ii)(d)(6), items of Company income and gain shall be
specially allocated to such Member in an amount and manner sufficient to
eliminate, to the extent required by the Treasury Regulations, the Adjusted
Capital Account Deficit of the Member as promptly as possible; provided that an
allocation pursuant to this Section 5.3(b)(iii) shall be made only if and to

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the extent that the Member would have an Adjusted Capital Account Deficit after
all other allocations provided for in this ARTICLE V have been tentatively made
as if this Section 5.3(b)(iii) were not in the Agreement.
(iv)    Nonrecourse Deductions. Nonrecourse Deductions for any Allocation Year
shall be specially allocated to the Members in the same proportions as Net
Income for such Allocation Year is allocated to the Members under Section 5.3(a)
or, if no Net Income for such Allocation Year is allocated to the Members
pursuant to Section 5.3(a), Pro Rata.
(v)    Member Nonrecourse Deductions. Any Member Nonrecourse Deductions for any
Allocation Year shall be specially allocated to the Member 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 Treasury
Regulations Section 1.704-2(i)(1).
(vi)    Section 754 Adjustments. To the extent an adjustment to the adjusted tax
basis of any Company asset pursuant to Section 734(b) or Section 743(b) of the
Code is required, pursuant to Treasury Regulations
Section 1.704-1(b)(2)(iv)(m)(2) or 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 such Member’s interest in the Company, the
amount of such adjustment to Capital Accounts shall be treated as an item of
gain (if the adjustment
 
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increases the basis of the asset) or loss (if the adjustment decreases such
basis) and such gain or loss shall be specially allocated to such Members in
accordance with their interests in the Company in the event Treasury Regulations
Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Member to whom such
distribution was made in the event Treasury Regulations
Section 1.704-1(b)(2)(iv)(m)(4) applies.
(c) Curative Allocations. The allocations set forth in Section 5.3(b)(i) through
(vi) (the “Regulatory Allocations”) are intended to comply with certain
requirements of the Treasury Regulations. It is the intent of the Members that,
to the extent possible, all Regulatory Allocations shall be offset either with
other Regulatory Allocations or with special allocations of other items of
Company income, gain, loss, or deduction pursuant to this Section 5.3(c).
Therefore, notwithstanding any other provision of this ARTICLE V (other than the
Regulatory Allocations), the Board shall make such offsetting special
allocations of Company income, gain, loss, or deduction in whatever manner it
determines appropriate so that, after such offsetting allocations are made, each
Member’s Capital Account balance is, to the extent possible, equal to the
Capital Account balance such Member would have had if the Regulatory Allocations
were not part of the Agreement and all Company items were allocated pursuant to
Section 5.3(a).
(d)    Loss Limitation. Net Loss allocated pursuant to Section 5.3(a) shall not
exceed the maximum amount of Net Loss that can be allocated without causing any
Member to have an Adjusted Capital Account Deficit at the end of any Allocation
Year. In the event some but not all of the Members would have Adjusted Capital
Account Deficits as a consequence of an allocation of Net Loss pursuant to
Section 5.3(a), the limitation set forth in this Section 5.3(d) shall be applied
on a Member-by-Member basis and Net Loss not allocable to any Member as a result
of such limitation shall be allocated to the other Members in accordance with
the positive balances in such Member’s Capital Accounts so as to allocate the
maximum permissible Net Loss to each Member under Treasury Regulations
Section 1.704-1(b)(2)(ii)(d).
Section 5.4    Other Allocation Rules.
(a) Interim Allocations Due to Membership Interest Adjustment. If all or any
part of a Member’s Membership Interest is the subject of a Transfer or the
Membership Interests of the Members are changed pursuant to the terms of the
Agreement during any Allocation Year, the amount of Net Income and Net Loss (and
other items of income and loss) to be allocated to the Members for such entire
Allocation Year in accordance with their Membership Interests shall be allocated
to the portion of such Allocation Year which precedes the date of such Transfer
or change (and if there shall have been a prior Transfer or change in such
Allocation Year, which commences on the date of such prior Transfer or change)
and to the portion of such Allocation Year which occurs on and after the date of
such Transfer or change (and if there shall be a subsequent Transfer or change
in such Allocation Year, which precedes the date of such subsequent Transfer or
change), in accordance with an interim closing of the books, and the amounts of
the items so allocated to each such portion shall be credited or charged to the
Members in proportion to their Membership Interests during each such portion of
the
 
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Allocation Year in question. Such allocation shall be made without regard to the
date, amount or receipt of any distributions that may have been made with
respect to the transferred Membership Interest; provided, however, that solely
for purposes of this Section 5.4(a) such date of Transfer or change shall be
deemed to have occurred on the date of the nearest month end occurring either
before or after the actual date of such Transfer or change. As of the date of
such Transfer, the Substitute Member shall succeed to the Capital Account of the
Transferor with respect to the Membership Interests Transferred by the
Transferor to such Substitute Member.
(b) Tax Allocations: Code Section 704(c). In accordance with Section 704(c) of
the Code and the Treasury Regulations thereunder, items of taxable income, gain,
loss, and deduction with respect to any Property contributed to the capital of
the Company and with respect to reverse Code Section 704(c) allocations
described in Treasury Regulations Section 1.704-3(a)(6) shall, solely for tax
purposes, be allocated among the Members so as to take account of any variation
between the adjusted tax basis of such Property to the Company for Federal
income tax purposes and its initial Carrying Value or its Carrying Value
determined pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(f)
(computed in accordance with the definition of Carrying Value) in accordance
with the method selected by the unanimous approval of the Board. Any elections
or other decisions relating to such allocations shall be made by the unanimous
approval of the Board in any manner that reasonably reflects the purpose and
intention of this Agreement. Allocations pursuant to this Section 5.4(b) and
Treasury Regulations Section 1.704-1(b)(4)(i) are solely for purposes of
Federal, state, and local taxes and shall not affect, or in any way be taken
into account in computing, any Member’s Capital Account or share of Net Income,
Net Loss, other items, or distributions pursuant to any provision of this
Agreement. Tax Withholding; Withholding Advances.
(a) Tax Withholding.
(i)    If requested by the Company, each Member shall, if able to do so, deliver
to the Company: (A) an affidavit in form satisfactory to the Company that the
applicable Member (or its partners, as the case may be) is not subject to
withholding under the provisions of any Federal, state, local, foreign or other
law; (B) any certificate that the Company may reasonably request with respect to
any such laws; and/or (C) any other form or instrument reasonably requested by
the Company relating to any Member’s status under such law. In the event that a
Member fails or is unable to deliver to the Company an affidavit described in
subclause (A) of this clause (i), the Company may withhold amounts from such
Member in accordance with Section 5.5(b).
(ii)    After receipt of a written request of any Member, the Company shall
provide such information to such Member and take such other action as may be
reasonably necessary to assist such Member in making any necessary filings,
applications or elections to obtain any available exemption from, or any
available refund of, any withholding imposed by any foreign taxing authority
with respect to amounts distributable or items of income allocable to such
Member hereunder to the extent not adverse to the Company or any Member. In
addition, the
 
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Company shall, at the request of any Member, make or cause to be made (or cause
the Company to make) any such filings, applications or elections; provided that
any such requesting Member shall cooperate with the Company with respect to any
such filing, application or election to the extent reasonably determined by the
Company and that any filing fees, taxes or other out-of-pocket expenses
reasonably incurred and related thereto shall be paid and borne by such
requesting Member or, if there is more than one requesting Member, by such
requesting Members in accordance with their Membership Interests.
(b) Withholding Advances. To the extent the Company is required by law to
withhold or to make tax payments on behalf of or with respect to any Member
(e.g., backup withholding) (“Withholding Advances”), the Company may withhold
such amounts and make such tax payments as so required.
(c) Repayment of Withholding Advances. All Withholding Advances made on behalf
of a Member, plus interest thereon at a rate equal to the Prime Rate as of the
date of such Withholding Advances plus 2% per annum, shall (i) be paid on demand
by the Member on whose behalf such Withholding Advances were made (it being
understood that no such payment shall increase such Member’s Capital Account),
or (ii) with the consent of the Board, in its discretion, be repaid by reducing
the amount of the current or next succeeding distribution or distributions which
would otherwise have been made to such Member or, if such distributions are not
sufficient for that purpose, by so reducing the proceeds of liquidation
otherwise payable to such Member. Whenever repayment of a Withholding Advance by
a Member is made as described in clause (ii) above, for all other purposes of
this Agreement such Member shall be treated as having received all distributions
(whether before or upon Dissolution) unreduced by the amount of such Withholding
Advance and interest thereon.
(d) Withholding Advances — Reimbursement of Liabilities. Each Member hereby
agrees to reimburse the Company

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for any liability with respect to Withholding Advances (including interest
thereon) required or made on behalf of or with respect to such Member (including
penalties imposed with respect thereto).
ARTICLE VI
CERTAIN TAX MATTERS
Section 6.1    Tax Matters Partner. The “Tax Matters Partner” (as such term is
defined in Section 6231(a)(7) of the Code) of the Company shall be selected by
the Board, with the initial Tax Matters Partner being the Oaktree Member. The
Tax Matters Partner shall use its reasonable efforts to comply with the
responsibilities outlined in Sections 6221 through 6233 of the Code (including
the Treasury Regulations promulgated thereunder) and, subject to the terms of
this Agreement, shall have any powers necessary to perform fully in such
capacity. The Tax Matters Partner is authorized to (i) make such elections under
the Code and other relevant tax laws as to the treatment of items of Company
income, gain, loss and deduction as the Tax Matters Partner determines in its
sole discretion to be necessary or appropriate, (ii) determine
 
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which items of cash outlay are to be capitalized or treated as current expenses,
(iii) except as otherwise specified herein, select the method of accounting and
bookkeeping procedures to be used by the Company, and (iv) except as provided
below, represent the Company before taxing authorities and courts in tax matters
affecting the Company and the Members in their capacity as such. The Tax Matters
Partner shall keep the Members promptly informed of any such administrative and
judicial proceedings described in clause (iv) of the preceding sentence. The Tax
Matters Partner shall be entitled to be reimbursed by the Company for all
reasonable costs and expenses incurred by it in connection with any
administrative or judicial proceeding affecting tax matters of the Company and
the Members in their capacity as such and to be indemnified by the Company
(solely out of Company assets) with respect to any action brought against it in
connection with any judgment in or settlement of any such proceeding in
accordance with Section 10.2. The Tax Matters Partner shall not bind any Member
to any settlement agreement or closing agreement or enter into any settlement
agreement or closing agreement that disproportionately adversely affects any
Member without such Member’s prior written consent. Any Member who enters into a
settlement agreement with any tax authority with respect to any Company item
shall notify the Tax Matters Partner of such settlement agreement and its terms
within 30 days after the date of settlement. Each Member shall reasonably
cooperate with the Tax Matters Partner in connection with any tax audit of the
Company. This provision shall survive any termination of this Agreement.
Section 6.2    Section 754 Election. In the event of a Transfer of an interest
in the Company as permitted hereunder, upon the written request of the
Transferor or Transferee of such interest in the Company, the Tax Matters
Partner shall cause the Company to make a timely election (a “Section 754
Election”) under Section 754 of the Code (and a corresponding election under
state and local law). In addition, in the event of a distribution of Property to
a Member, the Tax Matters Partner shall, if requested by any Member, cause the
Company to make a Section 754 Election. Each member agrees to provide the Tax
Matters Partner with any information reasonably necessary for the Company to
comply with Section 734, Section 743 or Section 754 of the Code.
ARTICLE VII
VOTING RIGHTS AND MANAGEMENT OF THE COMPANY
Section 7.1    Management by the Board of Representatives. The business and
affairs of the Company shall be exercised by or under the authority of, and
shall be managed under the direction of, a single board of representatives (the
“Board”), and the Members hereby expressly waive (except as otherwise expressly
provided in this Agreement) any management, approval or consent rights granted
to members of limited liability companies organized in the State of Delaware
under the Act. In managing the business and affairs of the Company and
exercising its powers, the Board may act through meetings and written consents
pursuant to Section 7.2.
 
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Section 7.2    Board of Representatives.
(a) Number. The number of representatives on the Board (the “Representatives”)
shall be determined by the Board from time to time; provided, that (i) a
majority of the Representatives shall be Representatives appointed by the
Oaktree

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Member (the “Oaktree Representatives”) and (ii) not fewer than two of the
Representatives shall be Representatives appointed by the HC-KBS Member (the
“HC-KBS Representatives”). The Representatives as of the Effective Date are set
forth on Schedule C.
(b) Meetings. The Board will meet at least quarterly at such time and place as
determined by the Board (or by telephone or other communications facility that
permits all persons participating to hear and speak to each other) and may be
called to a special meeting by the Chairman of the Company upon the request of
any two Representatives. Notice shall be required for any meeting of the Board,
which notice shall include a brief description of the action or actions to be
considered by the Board. Unless (i) waived by all Representatives in writing
(before or after a meeting) or (ii) the giving of such notice would make it
impracticable to address an emergency in a timely manner, prior notice shall be
given to each Representative (x) 10 Business Days before the date of any
regularly scheduled meeting of the Board and (y) two Business Days before the
date of any special meeting.
(c) Chairman of the Board. An Oaktree Representative designated by the Oaktree
Member from time to time shall be the Chairman of the Board.
(d) Removal. The Member that appointed a Representative will have the sole right
to remove such Representative and may appoint a replacement therefor at any time
or from time to time for any reason or no reason.
(e) Resignations. Any Representative may resign at any time by giving written
notice of his or her resignation to the Board. A resignation shall take effect
at the time specified therein or, if the time when it shall become effective
shall not be specified therein, immediately upon its receipt, and, unless
otherwise specified therein, the acceptance of a resignation shall not be
necessary to make it effective.
(f) Vacancies. Once appointed, Representatives will serve on the Board until
they resign or are removed pursuant to the terms of this Agreement, or their
earlier death, disability or incapacity. Any vacancies on the Board resulting
from a Representative’s death, disability, incapacity, resignation or removal or
from an increase in the size of the Board shall (i) in the case of vacancies due
to an increase in the size of the Board, be filled (subject to Section 7.2(a))
as determined by the Board, and (ii) in all other cases, be filled by the Member
that appointed the Representative whose seat on the Board is vacant.
(g) Quorum; Vote Required. Each Representative will have one vote, and, except
as expressly provided in this Agreement, the affirmative vote of a majority of
the Representatives present at a meeting at which a quorum is present will
constitute
 
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an action of the Board. Any Representative may be represented at a meeting of
the Board by another Representative designated by proxy, of which the Board is
notified by letter or facsimile, signed by the Representative giving the proxy,
addressed to each Representative of the Company and delivered prior to the
commencement of the meeting. A quorum will consist of a majority of the
Representatives then in office, provided that the number of Oaktree
Representatives present at any meeting shall be greater than the number of
HC-KBS Representatives present at such meeting. Any action required or permitted
to be taken at any meeting of the Board may be taken without a meeting, if a
written consent, setting forth the actions so taken, shall be signed by all of
the Representatives; provided, that any Representative who fails to sign such
consent or notify the other Representatives that it will not consent to such
actions, in either case within five Business Days after receiving a copy of the
proposed consent, shall be deemed to have signed such consent. The Board shall
cause to be kept a book of minutes of all its actions by written consent and its
meetings, in which there shall be recorded the time and place of each meeting,
whether it is a regular meeting or a special meeting, the notice thereof given,
the names of those present and the proceedings thereof. Upon reasonable notice,
any Member shall have the right, during business hours, to inspect for any
proper purpose, such book of minutes, and to make copies thereof or extracts
therefrom.
(h) Compensation/Expense Reimbursement. No Representative shall be entitled to
receive compensation for his or her service as a Representative. The Company
will reimburse Representatives for all reasonable, out-of-pocket costs
associated with their attendance at Board meetings. The Company will maintain
liability insurance for Representatives in amounts satisfactory to the Board.
(i) Duties. Notwithstanding anything to the contrary in this Agreement or the
Act, the Company and the Members hereby eliminate any and all fiduciary duties
stated or implied by applicable law or equity that any Member or Representative
may have (in such capacity) to any other Member or the Company (including in
connection with the exercise of rights hereunder). The Members expressly
acknowledge and agree that no Representative or Member is under any obligation
to

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consider the separate interests of the Members (including the tax consequences
to the Members) in deciding whether to cause the Company to take (or decline to
take) any actions, and that no Representative or Member shall be liable, at law
or in equity, for losses sustained, liabilities incurred or benefits not derived
by the Members in connection with such decisions. The limitations on the
liability and obligations of a Representative or Member and other provisions set
forth in this ARTICLE VII shall extend to the Affiliates of such Representative
or Member and the shareholders, partners, members, directors, officers, agents,
employees, representatives, advisors, consultants and other independent
contractors of such Representative or Member and its Affiliates to the same
extent that such limitations and other provisions apply to a Representative or
Member. Without limiting the foregoing, to the fullest extent permitted by law,
but subject to the other provisions of this Agreement, neither the Members nor
the Representatives shall be subject to any corporate opportunity or similar
doctrines.
 
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(j) Committees; Subsidiary Boards. The Company shall establish and maintain such
committees of the Board, and such board of directors (or equivalent governing
body) of each of the Company’s Subsidiaries, as the Board deems appropriate from
time to time. The number of representatives on any such committees or boards
shall be determined, and such representatives shall be appointed, in accordance
with Section 7.2(a) as if such committees or boards were the Board. Any such
committees shall have such duties and responsibilities as may be determined by
the Board.
(k) Officers. The Board may appoint such officers of the Company, and authorize
the Company to appoint (in its capacity as the managing member of the
Subsidiaries) such officers of the Subsidiaries, with such duties and
responsibilities as the Board shall from time to time determine in its
discretion; provided, that (i) the Board shall not, without the affirmative vote
of the Representatives appointed by the HC-KBS Member, delegate to any officer
the authority to make on behalf of the Company or any Subsidiary decisions
required to be made by the Board hereunder and (ii) for as long as the HC-KBS
Member is responsible under Section 7.4(a) for the day-to-day business,
operations and affairs of the Company, the Board shall appoint, and shall
authorize the Company (in its capacity as the managing member of the
Subsidiaries) to appoint, one or more individuals nominated by the HC-KBS Member
and approved by the Board as officers of the Company and each of the
Subsidiaries, respectively, with the authority to execute and deliver contracts
on behalf of the Company and each Subsidiary, respectively, subject to any
approval or consent rights of the Board or Members hereunder and the other
provisions of this Agreement. Each such officer shall hold office until the
expiration of the term for which such officer was appointed, if any, or until
such officer’s earlier death, resignation, disqualification or removal. Any
officer may resign at any time upon written notice to the Company. Such
resignation shall take effect upon receipt of such notice by the Company or at
any later time therein specified and shall only require an acceptance to be made
effective if such notice so provides. The resignation of an officer shall be
without prejudice to the contract rights of the Company or applicable
Subsidiary, if any. Any officer may be removed at any time, with or without
cause, by the Board. The removal of an officer with or without cause shall be
without prejudice to the officer’s contract rights as a Covered Person, if any.
Any vacancy occurring in any office of the Company or a Subsidiary may (and, to
the extent provided in clause (ii) of the first sentence of this Section 7.2(k),
shall) be filled by the Board or by the Company (at the direction of the Board)
in its capacity as the managing member of such Subsidiary, as applicable. The
election or appointment of an officer shall not in itself create contract
rights.
Section 7.3     Participation in Management by Members; Major Decisions.
(a) No Participation in Management. Except as otherwise expressly provided in
this ARTICLE VII, the management of the business and affairs of the Company
shall be vested in whole in the Board. No Member, acting solely in its capacity
as a Member, shall be an agent of the Company or have any authority to act for
or bind the Company.
 
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(b) Major Decisions. Unless the Oaktree Member otherwise elects, by delivering
written notice thereof to the Company at any time after the occurrence of (x) a
violation by the HC-KBS Member of the provisions of Section 7.4(a) and a failure
by the HC-KBS Member to cure such violation within 15 days after receiving
written notice of such violation from the Oaktree Member (or, if such violation
cannot reasonably be cured within such 15-day period, to commence such cure
within such 15-day period and diligently prosecute such cure to completion
within 90 days after receiving such notice) or (y) a Transfer by the HC-KBS
Member in violation of the provisions of this Agreement, the following actions
and only the following actions shall require the unanimous approval of the
Board:
(i)    Amending this Agreement or changing the authorized capitalization of the
Company if such

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amendment or change affects the HC-KBS Member in any manner other than in a de
minimis respect;
(ii)    Removing any Member as a member of the Company;
(iii)    Admitting any Member to the Company (other than any permitted
Transferee of a Membership Interest previously held by a Member) or issuing to
any third party any Membership Interest (including interests convertible into,
or exchangeable for, Membership Interests);
(iv)    Calling for any Required Contribution unless (x) such Required
Contribution is being called for Company purposes and (y) at the time of such
call, the Oaktree Representatives believe that such Required Contribution will
need to be deployed by the Company within 90 days after such Required
Contribution is required to be made;
(v)    Entering into, or modifying or waiving, any Affiliate Contract (it being
agreed that the Oaktree Member (in the case of an Affiliate Contract to which
the Oaktree Member or any of its Affiliates, or any director, officer, manager
or general partner of, or Person holding a similar position in, any of the
foregoing, or any Affiliate of any such director, officer, manager, general
partner or other Person, is a party) or the HC-KBS Member (in the case of an
Affiliate Contract to which the HC-KBS Member, Hackman Capital Partners, LLC,
Calare Properties, Inc., a KBS REIT or any of their respective Affiliates, or
any director, officer, manager or general partner of, or Person holding a
similar position in, any of the foregoing, or any Affiliate of any such
director, officer, manager, general partner or other Person, is a party) shall
give not less than 10 Business Days’ written notice to the other Member of any
proposed Affiliate Contract or modification thereof (setting forth the principal
terms of such Affiliate Contract or modification), together with a copy of the
same);
(vi)    Acquiring any real property other than the NIP Properties (or any
strips, gores or other minor parcels of real property adjacent to any of the NIP
Properties);
 
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(vii)    (A) At all times prior to the HC-KBS Funding Date and (B) so long as
(x) an amount not less than $5,000,000 has been contributed by the KBS JV Member
to the HC-KBS Member and used by the HC-KBS Member to make the HC-KBS
Contribution and (y) not less than 50% of the equity interests in the KBS JV
Member is owned, directly or indirectly, by a REIT (any such REIT, a “KBS REIT
Entity”), then at all times thereafter, entering into any REIT Prohibited
Transaction (as defined on Schedule D); and
(viii)    (A)At all times prior to the HC-KBS Funding Date and (B) so long as
(x) an amount not less than $5,000,000 has been contributed by the KBS JV Member
to the HC-KBS Member and used by the HC-KBS Member to make the HC-KBS
Contribution and (y) not less than 50% of the equity interests in the KBS JV
Member is owned, directly or indirectly, by a KBS REIT Entity, thereafter,
taking any of the following actions at any time during the first two years after
the making of the First HC-KBS Contribution:
(1)    the marketing of any of the NIP Properties, unless (A) such property is
identified on the list of properties attached as Schedule E (the “Exempt
Properties”) (it being understood that any Exempt Property may be replaced from
time to time with another NIP Property as long as the replacement property is
selected on the basis of the same principles used in selecting the initial list
of Exempt Properties), provided that the number of transactions (and buyers of
such transactions) involving the sale of Exempt Properties shall not exceed
four), (B) an opinion is obtained from DLA Piper or Paul, Weiss, Rifkind,
Wharton & Garrison LLP or any other tax counsel reasonably acceptable to the
HC-KBS Member or a nationally recognized accounting firm that the sale of such
property should not be treated as a “prohibited transaction” with respect to the
KBS REIT Entity under Section 857(b)(6) of the Code, (C) the sale of such
property is not reasonably likely to result in material income or gain (it being
understood that $100,000 of income or gain is material for this purpose) being
received or accrued by the Company and directly or indirectly allocated to the
KBS REIT Entity, (D) the Oaktree Member agrees to indemnify the KBS REIT Entity
against any tax imposed on the KBS REIT Entity under Section 857(b)(6)(A) of the
Code arising from any income or gain which may be received or accrued by the
Company and directly or indirectly allocated to the KBS REIT Entity as a result
of the sale of such property, including by causing the Company to allocate
indirectly to the KBS REIT Entity, in the year of such sale or in a subsequent
year in which there is a final determination that such tax is payable, an
additional amount of gross rental income for such year with a corresponding
distribution right, (E) an undivided interest in such property, or an equity
interest in the entity that owns such property, in either case representing the
(direct or indirect) economic interest of the KBS REIT Entity in such property,
is distributed to the KBS REIT Entity or a designee selected by the KBS REIT
Entity, in which event HC-KBS shall cause such interest to be sold, at the same
time that the other interests in such property are sold, to a purchaser
designated by the Oaktree Member, provided that the aggregate amount of the
income or gain received or accrued by the Company and directly or indirectly
allocated to the KBS REIT Entity as result of

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taxable sales effected by any “taxable REIT subsidiary” (as defined in the Code)
in accordance with
 
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this subclause (E) shall not exceed $5,000,000), or (F) the common equity
interests in the pass-through entity (for tax purposes) that owns such property
are sold to a purchaser approved by the KBS REIT Entity, which approval shall
not be unreasonably withheld, conditioned or delayed, and preferred equity
interests in such entity representing the (direct or indirect) economic interest
of the KBS REIT Entity in such property are distributed to the KBS REIT Entity,
it being agreed that (I) the arrangements between the KBS REIT Entity and such
purchaser shall be structured such that (W) the KBS REIT Entity will have the
option to sell such preferred equity interests to such purchaser at any time,
but in no event will the KBS REIT Entity be compelled to sell prior to the
second anniversary of the sale of the common equity interests for a price equal
to the amount that would have been distributed to the KBS REIT Entity if such
property had been sold to such purchaser in lieu of the common equity interests
(such amount, the “Sale Distribution Amount”), (X) such purchaser will have the
right to cause the redemption of such preferred equity interests from and after
the second anniversary of the sale of the common equity interests for a price
equal to the Sale Distribution Amount, and (Y) the KBS REIT Entity will have no
management, approval, consent or voting rights in or with respect to such entity
and (II) the HC-KBS Member shall cooperate, and shall cause the KBS REIT Entity
and the other owners of direct or indirect interests in the HC-KBS Member to
cooperate, with the Company in effecting any transaction described in subclause
(E) or (F), including by executing and delivering such agreements, instruments,
certificates and other documents, and taking such other actions, as may be
reasonably requested by the Oaktree Member in connection therewith; provided
that the unanimous approval of the Board shall not be required for any sale of
Membership Interests or Sale Transaction;
(2)    the dissolution and winding up of the Company, except after a Sale
Transaction; and
(3)    making any voluntary petition in bankruptcy or reorganization, or
instituting any other type of bankruptcy, reorganization or insolvency
proceeding, with respect to the Company or any Subsidiary; consenting to the
institution of involuntary bankruptcy, reorganization or insolvency proceedings
with respect to the Company or any Subsidiary; causing the Company or any
Subsidiary to admit in writing its inability to pay its debts generally as they
become due; or causing the Company or any Subsidiary to make a general
assignment for the benefit of its creditors.
Section 7.4    Day-to-Day Management; Asset Management.
(a) Day-to-Day Management of the Company. None of the HC-KBS Member, the Oaktree
Member, the Company, any Subsidiary of the Company, nor any officer of the
Company or any of its Subsidiaries, shall take (or permit or cause to be taken)
any action requiring the unanimous approval of the Board under Section 7.3(b) or
any action set forth on Schedule F, in each case without the prior approval of
the Board. For as long as the agreement described in Section 7.4(b) remains in
effect, the HC-KBS Member shall be responsible for the day-to-day business,
operations and affairs of the Company in the ordinary course of its business,
shall devote such time and render such
 
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services to the Company as shall be necessary to conduct such business,
operations and affairs in an efficient manner, and shall have, in carrying out
the day-to-day business, operations and affairs of the Company as aforesaid, the
right to take or agree to take on behalf of the Company all actions other than
those described in the immediately preceding sentence. For the avoidance of
doubt, the HC-KBS Member shall not have any of the responsibilities or rights
described in the immediately preceding sentence following the termination of the
agreement described in Section 7.4(b).
(b) Asset Management. The Members hereby acknowledge that the Company has
entered into that certain Asset Management Agreement, dated as of the Effective
Date, by and between the Company and the HC-KBS Member, pursuant to which the
HC-KBS Member (or any sub-asset manager engaged by the HC-KBS Member in
accordance with such agreement) will perform the asset management services
described therein for the Company, subject to and in accordance with the terms
and conditions set forth therein, and that such agreement shall be deemed to
have been approved by the Board for purposes of this ARTICLE VII.
ARTICLE VIII
TRANSFERS OF INTERESTS

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Section 8.1    Restrictions on Transfers.
(a) The HC-KBS Member shall not cause, suffer or permit a Transfer of all or any
part of its Membership Interest or any right, title or interest pertaining
thereto (including the right to vote or consent on any matter or to receive
distributions or advances from the Company), in each case without the prior
written consent of the Oaktree Member; provided, that the HC-KBS Member shall
have the right, subject to the provisions of Section 8.1(c), to Transfer its
entire Membership Interest (which shall include its Profits Interest and all of
its right, title and interest in and to any Additional Equity Loans theretofore
made by it), without any consent of the Oaktree Member (except as required in
clause (A) of the first sentence of Section 8.2(d), if applicable), (i) to any
Permitted Transferee of the HC-KBS Member (it being acknowledged and agreed that
any transaction or series of transactions which causes the Transferee to cease
to be a Permitted Transferee of the HC-KBS Member shall, for purposes of this
Agreement, constitute a Transfer requiring the prior written consent of the
Oaktree Member), (ii) to Oaktree in accordance with Section 9.1 or (iii) to any
Transferee pursuant to and in accordance with Section 8.2, Section 8.3 or
Section 8.4. In addition, the HC-KBS Member shall not cause, suffer or permit,
without the prior written consent of the Oaktree Member, any Upper Tier
Transfer. Notwithstanding anything to the contrary contained in this
Section 8.1(a) or elsewhere in this Agreement, subject to the provisions of
Section 8.1(c), (1) any JV Member Transfer shall not be prohibited (and shall be
expressly permitted) and (2) any Transfer (including any pledge) of equity or
other interests (x) of the KBS JV Member in the HC-KBS Member or (y) in any of
the direct or indirect owners of the KBS JV Member (including any KBS REIT),
shall not be prohibited (and shall be expressly permitted) so long as a KBS REIT
or KBS Entity continues (A) to Control the KBS JV Member and (B) to own, either
directly or
 
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indirectly, at least 50% of the ownership interests in the KBS JV Member;
provided, that the requirements described in clauses (A) and (B) of this
sentence shall not be applicable, and shall not be required to be satisfied, to
the extent that the failure to satisfy such requirements arises from a Transfer
effectuated through a foreclosure or an assignment in lieu of foreclosure under
a pledge of all of the direct or indirect interests of such KBS REIT or KBS
Entity in the HC-KBS Member, so long as the transferee of any such interests
through such foreclosure or assignment in lieu of foreclosure is a Qualified
Transferee or a wholly-owned subsidiary of a Qualified Transferee. No transferee
of any direct or indirect interests of a KBS REIT or KBS Entity in the HC-KBS
Member through any such foreclosure or assignment in lieu of foreclosure shall
have any management, approval, consent or voting rights in or with respect to
the Company, and by accepting such pledge, assignment or conveyance such
transferee irrevocably waives any and all such rights as are granted to such
transferee in the organizational documents of the HC-KBS Member or any other
entity, in any other document or instrument or under any applicable law. The
HC-KBS Member shall not permit, and shall cause its organizational documents at
all times to prohibit, the exercise of any such rights by any such transferee.
(b) Subject to the provisions of Section 8.1(c) and Section 8.3, the Oaktree
Member shall have the right to Transfer all or any part of its Membership
Interest to any Person without any consent of the HC-KBS Member.
(c) It shall be a condition precedent to any Transfer otherwise permitted or
approved pursuant to this ARTICLE VIII (other than a Transfer of all of the
Membership Interests in the Company) that:
(i)    the Transferor shall have provided to other Members not less than 10
Business Days’ prior written notice of such Transfer;
(ii)    the Transferee shall have duly executed and delivered the instruments
described in clause (ii) of the first sentence of Section 3.2(a);
(iii)    the Transfer shall comply with all applicable Federal, state or foreign
laws, including securities laws;
(iv)    the Transfer shall not subject the Company to the registration or
reporting requirements of the United States Investment Company Act of 1940;
(v)    the Transfer shall not impose any liability or additional reporting
obligations on the Company in any jurisdiction, whether domestic or foreign, or
result in the Company or any such Member becoming subject to the jurisdiction of
any court or governmental entity other than those to whose jurisdiction the
Company or such Member is then subject;
(vi)    the Transfer shall satisfy at least one of the safe harbor provisions of
Treasury Regulations

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Section 1.7704-1, including Sections 1.7704-1(e), (f), (g), (h) and (j),
relating to “publicly traded partnerships”;
 
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(vii)    the Transfer shall not cause a Dissolution Event or a termination of
the Company pursuant to Section 708 of the Code which the Board determines to be
material;
(viii)    the Transfer shall not cause all or any portion of the assets of the
Company to constitute “plan assets” under the United States Employee Retirement
Income Security Act of 1974 or the Code; and
(ix)    the Transferor shall have delivered an opinion of counsel, and officer’s
certificates and representations and warranties from the Transferee and
Transferor, in each case if requested by the Board (in its sole discretion) and
in form and substance reasonably satisfactory to the Board, that such Transfer
complies with the conditions set forth in clauses (ii) through (ix) of this
Section 8.1(c) and with respect to such other matters as the Board may
reasonably request.
(d)    Any purported Transfer by a Member which is not in compliance with the
provisions of this Agreement shall be deemed a Transfer by such Member of
Membership Interests in violation of this Agreement (and a breach of this
Agreement by such Member) and shall be null and void ab initio.
Section 8.2    Right of First Refusal.
(a) If at any time the HC-KBS Member desires to Transfer its entire Membership
Interest (which shall include its Profits Interest and all of its right, title
and interest in and to any Additional Equity Loans theretofore made by it) (the
“ROFR Interest”) to any Person other than a Permitted Transferee (any such
Person, a “Third Party Purchaser”) and shall have received a bona fide written
offer to purchase the ROFR Interest, the HC-KBS Member shall deliver a written
notice (the “ROFR Notice”) to the Oaktree Member, which notice shall (i) specify
in reasonable detail the identity of the Third Party Purchaser (and, if such
Third Party Purchaser is a corporation, partnership, limited liability company
or other legal entity, the ultimate equity owners thereof), the price at which
the Third-Party Purchaser has offered to purchase the ROFR Interest, which price
(the “ROFR Price”) must be payable in cash, and any other material terms and
conditions of the proposed Transfer (the “ROFR Terms”), (ii) include a copy of
the written offer and (iii) offer to sell the ROFR Interest to the Oaktree
Member at the ROFR Price and on the ROFR Terms.
(b) For a period of 30 days after the ROFR Notice has been delivered to the
Oaktree Member (the “ROFR Option Period”), the Oaktree Member shall have the
right, by giving a written notice (an “Exercise Notice”) to the HC-KBS Member
prior to the expiration of the ROFR Option Period, to elect to purchase the ROFR
Interest for the ROFR Price on the ROFR Terms.
(c) If the Oaktree Member delivers an Exercise Notice in accordance with
Section 8.2(b), then the HC-KBS Member shall proceed with the sale of the ROFR
Interest to the Oaktree Member. The closing of such sale shall be held within 30
days
 
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(or such longer period as may be necessary to satisfy any applicable law) after
the HC-KBS Member receives such Exercise Notice, or at such other time as the
Oaktree Member and the HC-KBS Member shall agree. At such closing, (i) the
HC-KBS Member shall deliver written instruments of transfer in form and
substance reasonably satisfactory to the Oaktree Member, duly executed by the
HC-KBS Member, together with any certificates theretofore issued to evidence the
ROFR Interest, and all requisite transfer taxes, if any, and such ROFR Interest
shall be free and clear of any and all Liens and the HC-KBS Member shall so
represent and warrant, and shall further represent and warrant that it is the
sole beneficial and record owner of such ROFR Interest, and (ii) the Oaktree
Member shall pay the ROFR Price to the HC-KBS Member.
(d)    If the Oaktree Member (i) fails to deliver an Exercise Notice in
accordance with Section 8.2(b) or (ii) fails, after delivering an Exercise
Notice, to purchase the ROFR Interest in accordance with Section 8.2(c), the
HC-KBS Member shall have the right to sell the ROFR Interest to the Third Party
Purchaser at a price not less than 95% of the ROFR Price and on terms and
conditions that, taken as a whole, are no more favorable to the Third Party
Purchaser than the ROFR Terms in any material respect; provided, that (A) the
Third Party Purchaser shall be subject to the prior written approval of the
Oaktree Member, which approval shall not be unreasonably withheld or delayed (it
being acknowledged and agreed that the Oaktree

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Member may condition such approval on, among other things, the Third Party
Purchaser executing an amendment to this Agreement providing for such
modifications to the definition of “Qualified HC-KBS Entity” in Section 1.1(a)
as may be reasonably requested by the Oaktree Member to reflect the ownership of
the Third Party Purchaser), and (B) such sale must be consummated within 180
days after (x) in the case of clause (i) above, the expiration of the ROFR
Option Period and (y) in the case of clause (ii) above, the date on which the
Oaktree Member was required but failed to purchase the ROFR Interest. If such
sale is not consummated within such 180-day period, the HC-KBS Member shall not
be permitted to sell its Membership Interest in accordance with this Section 8.2
without once again complying with the provisions of this Section 8.2.
Section 8.3    Tag-Along Right.
(a) If at any time the Oaktree Member shall propose to Transfer all, but not
less than all, of its Membership Interest in one or a series of related
transactions (a “Tag-Along Sale”) to any Person other than a Permitted
Transferee (such Person, the “Proposed Purchaser”), the HC-KBS Member shall have
the right (“Tag-Along Right”) to participate in such Tag-Along Sale by
Transferring its entire Membership Interest (which shall include its Profits
Interest and all of its right, title and interest in and to any Additional
Equity Loans theretofore made by it) to the Proposed Purchaser as hereinafter
provided.
(b) The Oaktree Member shall give the HC-KBS Member written notice of any
proposed Tag-Along Sale (a “Tag-Along Notice”) at least 25 days prior to the
proposed closing date of such Tag-Along Sale (the “Tag-Along Closing Date”). Any
Tag-Along Notice shall state (i) the identity of the Proposed Purchaser,
(ii) that the Proposed Purchaser has been informed of the Tag-Along Right and
has agreed to purchase the HC-KBS Member’s Membership Interest if such Tag-Along
Right is
 
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exercised, (iii) the price for which the Proposed Purchaser has agreed to
purchase all of the Membership Interests in the Company (the “Tag-Along Price”),
(iv) the other material terms and conditions pursuant to which the Oaktree
Member proposes to Transfer its Membership Interest (the “Tag-Along Terms”),
(v) the terms of the Proposed Purchaser’s financing, if any, and (vi) the
Tag-Along Closing Date.
(c) The HC-KBS Member may exercise its Tag-Along Right by delivering notice
thereof (the “Tag-Along Exercise Notice”) to the Oaktree Member within 25 days
after the date of receipt of the Tag-Along Notice. The right of the HC-KBS
Member with respect to the Tag-Along Sale shall terminate if not exercised
within such 25-day period.
(d) If the HC-KBS Member delivers a Tag-Along Exercise Notice in accordance with
Section 8.3(c), the HC-KBS Member shall be obligated to take all actions
necessary to cause its Membership Interest to be Transferred to the Proposed
Purchaser on terms and conditions that, taken as a whole, are no more favorable
to the Proposed Purchaser than the Tag-Along Terms in any material respect.
Without limiting the generality of the foregoing, in connection with such
Tag-Along Sale, the HC-KBS Member shall execute and deliver such agreements as
may be reasonably requested by the Oaktree Member (which shall be in all
material respects on the same terms as those executed by the Oaktree Member and
may include agreements that (i) contain customary representations, warranties,
covenants and other agreements with respect to, among other things, the HC-KBS
Member’s unencumbered title to its Membership Interest and its power, authority
and legal right to Transfer such Membership Interest and (ii) so long as the
agreements executed by the Oaktree Member also so provide, provide for
contingent or deferred payment of a portion of the aggregate purchase price and
the establishment of an escrow account or other form of holdback in connection
therewith). At the closing of the proposed Tag-Along Sale (the date, time and
location of which shall be confirmed by the Oaktree Member and provided to the
HC-KBS Member in writing at least five days prior thereto), the HC-KBS Member
shall deliver written instruments in form and substance satisfactory to the
Proposed Purchaser, duly executed by the HC-KBS Member, conveying its entire
Membership Interest free and clear of any and all Liens, together with any
certificates theretofore issued to evidence such Membership Interest, and take
such other actions as may be reasonably requested by the Oaktree Member in
connection with such Tag-Along Sale. The Tag-Along Price, after payment of all
of the reasonable out-of-pocket fees and expenses incurred by the Oaktree Member
and the HC-KBS Member in connection with the Tag-Along Sale, shall be allocated
between the Oaktree Member and the HC-KBS Member in the same manner as
distributions would be made to them pursuant to Section 5.2 if the Company were
dissolved, its affairs wound up, its assets sold for an amount equal to the
Tag-Along Price (increased by any liabilities of the Company), all Company
liabilities were then satisfied, and the net assets of the Company were
distributed to the Members in accordance with Section 5.2.
(e) In the event that the Oaktree Member delivers a Tag-Along Notice in
accordance with Section 8.3(b) and the HC-KBS Member fails to deliver a
Tag-Along Exercise Notice in accordance with Section 8.3(c), the Oaktree Member

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shall have the
 
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right to Transfer its Membership Interest to the Proposed Purchaser at a price
which does not exceed the amount of the distributions that would be made to the
Oaktree Member pursuant to Section 5.2 if the Company were dissolved, its
affairs wound up, its assets sold for the Tag-Along Price (increased by any
liabilities of the Company), all Company liabilities were then satisfied, and
the net assets of the Company were distributed to the Members in accordance with
Section 5.2, and otherwise on other terms and conditions that, taken as a whole,
are no less favorable to the Proposed Purchaser than the Tag-Along Terms in any
material respect, so long as such Transfer takes place within 180 days after the
date on which the Tag-Along Notice is delivered. In the event that such Transfer
shall not have taken place within such 180-day period, the Oaktree Member shall
not be permitted to Transfer its Membership Interest in accordance with this
Section 8.3 without once again complying with the provisions of this
Section 8.3.
Section 8.4    Drag-Along Right.
(a) If at any time the Oaktree Member shall propose to Transfer all, but not
less than all, of its Membership Interest in one or a series of related
transactions (a “Drag-Along Sale”) to any Person other than a Permitted
Transferee (such Person, the “Drag-Along Purchaser”), the Oaktree Member shall
have the right (the “Drag-Along Right”) to require the HC-KBS Member to
participate in such Drag-Along Sale by Transferring its entire Membership
Interest (which, for purposes of this Section 8.4, shall include its Profits
Interest and all of its right, title and interest in and to any Additional
Equity Loans theretofore made by it) as hereinafter provided.
(b) The Oaktree Member may exercise the Drag-Along Right in connection with a
Drag-Along Sale by delivering notice thereof (a “Drag-Along Notice”) to the
HC-KBS Member not less than 30 days prior to the proposed closing date of such
Drag-Along Sale (the “Drag-Along Closing Date”). Any Drag-Along Notice shall
state (i) the identity of the Drag-Along Purchaser, (ii) that the Drag-Along
Purchaser has agreed to purchase all of the Membership Interests in the Company,
(iii) the aggregate purchase price proposed to be paid by the Drag-Along
Purchaser (the “Drag-Along Price”), (iv) the other material terms and conditions
of the Drag-Along Sale (the “Drag-Along Terms”), (v) the terms of the Drag-Along
Purchaser’s financing, if any, and (vi) the proposed Drag-Along Closing Date.
(c) If the Oaktree Member delivers a Drag-Along Notice in accordance with
Section 8.4(b), the HC-KBS Member shall take all actions necessary to cause its
Membership Interest to be Transferred to the Drag-Along Purchaser in connection
with the Drag-Along Sale. Without limiting the generality of the foregoing, in
connection with such Drag-Along Sale, the HC-KBS Member shall execute and
deliver such agreements as may be reasonably requested by the Oaktree Member
(which shall be in all material respects on the same terms as those executed by
the Oaktree Member and may include agreements that (i) contain customary
representations, warranties, covenants and other agreements with respect to,
among other things, the HC-KBS Member’s unencumbered title to its Membership
Interest and its power, authority and legal right to Transfer such Membership
Interest and (ii) so long as the agreements executed by the Oaktree Member also
so provide, provide
 
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for contingent or deferred payment of a portion of the aggregate purchase price
and the establishment of an escrow account or other form of holdback in
connection therewith). At the closing of the proposed Drag-Along Sale (the date,
time and location of which shall be confirmed by the Oaktree Member and provided
to the HC-KBS Member in writing at least five days prior thereto), the HC-KBS
Member shall deliver written instruments of transfer in form and substance
satisfactory to the Drag-Along Purchaser, duly executed by the HC-KBS Member,
conveying its entire Membership Interest free and clear of any and all Liens,
together with any certificates theretofore issued to evidence such Membership
Interest, and take such other actions as may be reasonably requested by the
Oaktree Member in connection with such Drag-Along Sale. The Drag-Along Price,
after payment of all of the reasonable out-of-pocket fees and expenses incurred
by the Oaktree Member and the HC-KBS Member in connection with the Drag-Along
Sale, shall be allocated between the Oaktree Member and the HC-KBS Member in the
same manner as distributions would be made to them pursuant to Section 5.2 if
the Company were dissolved, its affairs wound up, its assets sold for an amount
equal to the Drag-Along Price (increased by any liabilities of the Company), all
Company liabilities were then satisfied, and the net assets of the Company were
distributed to the Members in accordance with Section 5.2.
Section 8.5    Effect of Repurchase; Transfers and Replacement Certificates.
When any Membership Interests are Transferred in accordance with this Agreement,
(a) the Company shall cause such Transfer to be registered on the books of the

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Company and (b) if any certificate issued by the Company and representing such
Membership Interests are surrendered in connection with such Transfer, the
Company shall cancel such certificate and issue a replacement certificate in the
name of the Transferee upon its admission as a Substitute Member in accordance
with Section 3.2. If a mutilated certificate evidencing any Membership Interest
is surrendered to the Company, or a Member claims that any certificate
evidencing its Membership Interests has been lost, destroyed or wrongfully
taken, the Company shall issue a replacement certificate upon satisfaction of
the requirements of Section 8-405 of the Uniform Commercial Code (whether or not
such requirements are applicable under law) and there is delivered to the
Company such indemnity as may be reasonably required by the Board to hold the
Company harmless in connection therewith.
ARTICLE IX
UNWINDING
Section 9.1    Unwinding. Notwithstanding anything to the contrary in this
Agreement or any other Transaction Document, if the conveyance of the NIP
Properties (and the Property relating or ancillary thereto) from the Borrowers
to Subsidiaries of the Company is voided, avoided or set aside for any reason
whatsoever, then the Promote Member shall not be entitled to receive any further
distributions from the Company.
 
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ARTICLE X
LIMITATION ON LIABILITY; EXCULPATION
AND INDEMNIFICATION; REPRESENTATIONS AND WARRANTIES
Section 10.1    Limitation on Liability. The debts, obligations and liabilities
of the Company, whether arising in contract, tort or otherwise, shall be solely
the debts, obligations and liabilities of the Company, and no Covered Person
shall be obligated personally for any such debt, obligation or liability of the
Company; provided that the foregoing shall not alter a Member’s obligation to
return funds wrongfully distributed to it.
Section 10.2    Exculpation and Indemnification.
(a) No Covered Person shall be liable, including under any legal or equitable
theory of fiduciary duty or other theory of liability, to the Company or to any
other Covered Person for any losses, claims, damages or liabilities incurred by
reason of any act or omission performed or omitted by such Covered Person in
good faith on behalf of the Company. There shall be, and each Covered Person
shall be entitled to, a rebuttable presumption that such Covered Person acted in
good faith.
(b) A Covered Person shall be fully protected in relying in good faith upon the
records of the Company and upon such information, opinions, reports or
statements presented to the Company by any Person as to matters the Covered
Person reasonably believes are within such Person’s professional or expert
competence.
(c) (i) The Company shall indemnify, defend and hold harmless each Covered
Person against any losses, claims, damages, liabilities, expenses (including all
reasonable fees and expenses of counsel), judgments, fines, settlements and
other amounts (collectively, “Damages”) arising from any and all claims,
demands, actions, suits or proceedings, in which such Covered Person may be
involved or to which such Covered Person may become subject, in connection with
any matter arising out of or in connection with the Company’s business or
affairs, or the Transaction Documents, unless such loss, claim, damage,
liability, expense, judgment, fine, settlement or other amount is as a result of
a Covered Person not acting in good faith on behalf of the Company or arose as a
result of the willful commission by such Covered Person of any act that is
dishonest and materially injurious to the Company. If any Covered Person becomes
involved in or subject to, in any capacity, any action, suit, proceeding or
investigation in connection with any matter arising out of or in connection with
the Company’s business or affairs, or the Transaction Documents, other than by
reason of any act or omission by such Covered Person that was not in good faith
on behalf of the Company or constituted a willful commission by such Covered
Person of an act that is dishonest and materially injurious to the Company, the
Company shall reimburse such Covered Person for its reasonable legal and other
reasonable out-of-pocket expenses (including the cost of any investigation and
preparation) as they are incurred in connection therewith; provided that such
Covered Person shall promptly repay to the Company the amount of any such
reimbursed expenses paid to it if it shall be finally judicially determined that
such Covered Person was not entitled to indemnification by, or contribution
from, the Company in connection with such action, suit, proceeding or
 
47

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investigation. If for any reason (other than the bad faith of a Covered Person
or the willful commission by such Covered Person of an act that is dishonest and
materially injurious to the Company) the foregoing indemnification is
unavailable to such Covered Person, or insufficient to hold it harmless, then
the Company shall contribute to the Damages paid or payable by such Covered
Person in such proportion as is appropriate to reflect any relevant equitable
considerations. There shall be, and each Covered Person shall be entitled to, a
rebuttable presumption that such Covered Person acted in good faith.
(ii)    The obligations of the Company under this Section 10.2(c) shall be
satisfied solely out of and to the extent of the Company’s assets, and no
Covered Person shall have any personal liability on account thereof.
Section 10.3 Representations and Warranties.
(a)    Representations and Warranties of HC-KBS. HC-KBS hereby represents and
warrants to Oaktree as of the Effective Date as follows:
(i)    It is a limited liability company, duly formed, validly existing and in
good standing under the laws of the State of Delaware, and has the power and
authority to execute, deliver and perform its obligations under this Agreement
and the agreements and instruments to be executed by it in connection herewith.
(ii)    The execution and delivery of this Agreement and the agreements and
instruments to be executed and delivered by it in connection herewith and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary action by it, and this Agreement and such agreements
and instruments constitute its legal, valid and binding obligations, enforceable
against it in accordance with their respective terms, except as such terms may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws or by legal or equitable principles relating to or limiting
creditors’ rights generally. All Persons who have executed and delivered this
Agreement and who will execute and deliver the agreements and instruments to be
executed in connection herewith on its behalf have been duly authorized to do so
by all necessary action on its behalf. Neither the execution and delivery of
this Agreement or any of the agreements or instruments to be executed by it in
connection herewith, nor the consummation of the transactions contemplated
hereby or thereby, will violate (x) any provision of the certificate of
formation, operating agreement or other organizational documents or governing
instruments of any HC-KBS Party, (y) any law, regulation, judgment, order,
ruling, injunction, decree or award of any court, administrative agency or
governmental body to which an HC-KBS Party or any of its assets is subject or by
which it is bound, or (z) any agreement or instrument to which an HC-KBS Party
or any of its assets is subject or by which it is bound.
(iii)    There are no actions, suits or proceedings pending or, to HC-KBS’s
knowledge, threatened before or by any court or administrative agency against
any HC-KBS Party which (x) challenge the validity of
 
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this Agreement or any agreement or instrument to be executed in connection
herewith, (y) seek to restrain or prohibit, or to obtain damages or a discovery
order in respect of, this Agreement or any agreement or instrument to be
executed in connection herewith, or the consummation of the transactions
contemplated hereby or thereby, or (z) are likely in any case or in the
aggregate to have an adverse effect on the consummation of the transactions
contemplated hereby or thereby. Nor are there any actions, suits or proceedings
pending or, to HC-KBS’s knowledge, threatened before or by any court or
administrative agency against any of the Borrowers or NIP Properties other than
those actions, suits and proceedings described on Schedule G.
(iv)    The individuals and entities listed above HC-KBS on the structure chart
attached as Schedule H are accurately described and constitute all of the
individuals and entities holding the direct and indirect interests in HC-KBS up
to the level of ownership listed thereon as of the Effective Date, and the
footnotes thereon are true and correct in as of the Effective Date.
(v)    No Borrower has made any dividend or distribution, and no Borrower has
effected any redemption, retirement, purchase or other acquisition of any
interest in such Borrower for consideration, in each case from and after
August 3, 2010, other than (1) distributions by one or more Borrowers in the
aggregate amount of $628,170.98 that were used to pay expenses, fees and other
amounts described in any of clauses (x) and (y) of the first sentence of
Section 1(f)(ii) of the Omnibus Amendment (as defined in the definition of the
term “Loans” in Section 1.1(a)), (2) other distributions by Borrowers in the
aggregate amount of $11,010,000.00 and (3) distributions used to pay amounts
owed to any of the lenders under the loan documents relating to any of the
Loans.

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(vi)    To HC-KBS’s knowledge, HC-KBS has delivered to Oaktree or made available
to Oaktree on https://hackmancapital.sharefile.com (x) all written “Phase I”,
“Phase II” and any other reports relating to investigations of environmental
conditions affecting any of the NIP Properties that have been prepared by third
parties for, or delivered by third parties to, HC-KBS, Hackman Capital Partners,
LLC, Calare Properties, Inc., a KBS REIT or any of their respective Affiliates
in connection with NIP’s acquisition of the NIP Properties or in connection with
NIP’s ownership of the NIP Properties, (y) the most recent rent rolls and
audited financial statements relating to the NIP Properties and (z) all written
notices from governmental authorities received by HC-KBS, Hackman Capital
Partners, LLC, Calare Properties, Inc., a KBS REIT or any of their respective
Affiliates that any of the NIP Properties is not in compliance with applicable
law, which non-compliance has not been remedied. The foregoing representation
shall not be deemed to constitute a, and HC-KBS hereby disclaims making any,
representation or warranty as to the accuracy of any information set forth in
any of the items described in clauses (x), (y) and (z) above.
As used in this Section 10.3(a), the term “HC-KBS’s knowledge” means the actual,
current knowledge of any of Michael Hackman, William Manley, Hong Ho and Keith
Hall, without any duty of investigation or inquiry.
 
49

________________________________________________________________________________________________________________________

(b) Representations and Warranties of Oaktree. Oaktree hereby represents and
warrants to HC-KBS as of the Effective Date as follows:
(i)    It is a limited liability company, duly formed, validly existing and in
good standing under the laws of the State of Delaware, and has the power and
authority to execute, deliver and perform its obligations under this Agreement
and the agreements and instruments to be executed by it in connection herewith.
(ii)    The execution and delivery of this Agreement and the agreements and
instruments to be executed and delivered by it in connection herewith and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary action by it, and this Agreement and such agreements
and instruments constitute its legal, valid and binding obligations, enforceable
against it in accordance with their respective terms, except as such terms may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws or by legal or equitable principles relating to or limiting
creditors’ rights generally. All Persons who have executed and delivered this
Agreement and who will execute and deliver the agreements and instruments to be
executed in connection herewith on its behalf have been duly authorized to do so
by all necessary action on its behalf. Neither the execution and delivery of
this Agreement or any of the agreements or instruments to be executed by it in
connection herewith, nor the consummation of the transactions contemplated
hereby or thereby, will violate (x) any provision of the certificate of
formation, operating agreement or other organizational documents or governing
instruments of any Oaktree Party, (y) any law, regulation, judgment, order,
ruling, injunction, decree or award of any court, administrative agency or
governmental body to which an Oaktree Party or any of its assets is subject or
by which it is bound, or (z) any agreement or instrument to which an Oaktree
Party or any of its assets is subject or by which it is bound.
(iii)    There are no actions, suits or proceedings pending or, to its
knowledge, threatened before or by any court or administrative agency against
any Oaktree Party which (x) challenge the validity of this Agreement or any
agreement or instrument to be executed in connection herewith, (y) seek to
restrain or prohibit, or to obtain damages or a discovery order in respect of,
this Agreement or any agreement or instrument to be executed in connection
herewith, or the consummation of the transactions contemplated hereby or
thereby, or (z) are likely in any case or in the aggregate to have an adverse
effect on the consummation of the transactions contemplated hereby or thereby.
(iv)    The entities listed above Oaktree on the structure chart attached as
Schedule H are accurately described and constitute all of the entities holding
the direct and indirect interests in Oaktree up to the level of ownership set
forth thereon as of the Effective Date.
(v)    The Company owns the Loans free and clear of all liens and encumbrances,
subject to the terms and conditions of the Transaction Documents.
 
50

________________________________________________________________________________________________________________________

(vi)    The Company has not heretofore engaged in any business other than
activities relating to the Loans and the NIP Properties (including the
acquisition, ownership and administration of the Loans, the acquisition,
ownership and operation of the NIP Properties and the transactions contemplated
in this Agreement) and activities ancillary thereto.

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

(vii)    The Company has no liabilities other than those contemplated by the
Transaction Documents or assumed by the Oaktree Member.
(c)    Breach of Representation or Warranty. In the event of a breach by HC-KBS
or Oaktree of any representation or warranty made by it in this Section 10.3,
until such time as the other Member shall have received (by payment or offset,
including any payments or setoffs pursuant to this Section 10.3(c)) an aggregate
amount equal to the sum of all damages payable to it on account of such breach,
(i) any dividend, distribution or other amount that would otherwise be payable
to the Member in breach by the Company under this Agreement shall instead be
paid to such other Member (but shall be deemed to have been paid to the Member
in breach for all purposes under this Agreement) and (ii) such other Member
shall have the right to set off the amount of any such damages against any
amounts payable by it to the Member in breach under this Agreement (and the
amount of such setoff shall be deemed to have been paid to the Member in breach
for all purposes under this Agreement). Notwithstanding anything to the contrary
in this Agreement, no Member shall be entitled to receive, or make a claim for,
any damages (whether pursuant to the immediately preceding sentence or
otherwise) on account of any breach of a representation or warranty set forth in
any of clauses (a)(vi), (b)(v), (b)(vi) and (b)(vii), and the second sentence of
clause (a)(iii), of this Section 10.3 (x) unless and until the damages claimed
by such Member exceed $1,000,000 in the aggregate, (y) to the extent that the
damages claimed by such Member in respect of such breach exceed $4,000,000, or
(z) at any time after the one-year anniversary of this Agreement unless such
Member shall have given the other Member notice of such breach on or before the
one-year anniversary of this Agreement.
ARTICLE XI
DISSOLUTION AND TERMINATION
Section 11.1    Dissolution.
(a) The Company shall not be dissolved by the admission of Additional Members or
Substitute Members pursuant to Section 3.2.
(b) No Member shall (i) resign from the Company prior to the dissolution and
winding up of the Company except in connection with a Transfer of Membership
Interests pursuant to the terms of this Agreement or (ii) take any action to
dissolve, terminate or liquidate the Company or to require apportionment,
appraisal or partition of the Company or any of its assets, or file a bill for
an accounting, except as specifically provided in this Agreement, and each
Member, to the fullest extent permitted by applicable law, hereby waives any
rights to take any such actions under applicable law,
 
51

________________________________________________________________________________________________________________________

including any right to petition a court for judicial dissolution under
Section 18-802 of the Act.
(c) The Company shall be dissolved and its business wound up upon the earliest
to occur of any one of the following events (each a “Dissolution Event”):
(i)    The expiration of 45 days after the sale or other disposition of all or
substantially all the assets of the Company;
(ii)    upon the approval of the Board; or
(iii)    the entry of a decree of judicial dissolution under Section 18-802 of
the Act, in contravention of this Agreement.
(d) The death, retirement, resignation, expulsion, bankruptcy, insolvency or
dissolution of a Member or the occurrence of any other event that terminates the
continued membership of a Member of the Company shall not in and of itself cause
a dissolution of the Company.
Section 11.2    Winding Up of the Company.
(a) The Board shall promptly notify the Members of any Dissolution Event. Upon
dissolution, the Company’s business shall be liquidated in an orderly manner.
The Board shall either act as a liquidating agent or appoint a liquidating
trustee (the Board or trustee, as applicable, the “Liquidator”) to wind up the
affairs of the Company pursuant to this Agreement. In performing its duties, the
Liquidator is authorized to sell, distribute, exchange or otherwise dispose of
the assets of the Company in accordance with the Act and in any reasonable
manner that the Liquidator shall determine to be in the best interest

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

of the Members.
(b) The proceeds of the liquidation of the Company shall be distributed in the
following order and priority (the “Final Distribution”):
(i)    first, to the creditors (including any Members or their respective
Affiliates that are creditors) of the Company in satisfaction of all of the
Company’s liabilities (whether by payment or by making reasonable provision for
payment thereof, including the setting up of any reserves which are, in the
judgment of the Board, reasonably necessary therefor); and
(ii)    second, to the Members in accordance with Section 5.2.
Immediately prior to the Final Distribution, the Capital Account balances of the
Members shall be adjusted, taking into account all contributions, distributions
(other than the Final Distribution), and allocable items (including any
allocable items of gross income, gain, loss, and expense includible in the
definition of Net Income and Net Loss) for the Fiscal Year (or other period) of
the Final Distribution to the fullest extent permitted by Section 704(b) of the
Code such that the Capital Account of each Member prior to the Final
 
52

________________________________________________________________________________________________________________________

Distribution equals (to the fullest extent possible) the distribution to be
received by such Member pursuant to the Final Distribution.
Section 11.3    Distribution of Property. In the event it becomes necessary in
connection with the liquidation of the Company to make a distribution of
Property in-kind, subject to the priority set forth in Section 11.2, the
Liquidator shall have the right to compel each Member to accept a distribution
of any Property in-kind, with such distribution being based upon the amount of
cash that would be distributed to such Members if such Property were sold for an
amount of cash equal to the Fair Market Value of such Property, as determined by
the Liquidator in good faith.
Section 11.4    Termination. The Company shall terminate when all of the assets
of the Company, after payment of or reasonable provision for the payment of all
debts and liabilities of the Company, shall have been distributed to the Members
in the manner provided for in this ARTICLE XI, and the certificate of formation
of the Company shall have been cancelled in the manner required by the Act.
Section 11.5    Survival. Termination, dissolution, liquidation or winding up of
the Company for any reason shall not release any party from any liability which
at the time of such termination, dissolution, liquidation or winding up already
had accrued to any other party or which thereafter may accrue in respect to any
act or omission prior to such termination, dissolution, liquidation or winding
up.
ARTICLE XII
MISCELLANEOUS
Section 12.1    Expenses. The Company shall pay or reimburse the Members for the
reasonable out-of-pocket expenses incurred by them in connection with the
negotiation, preparation and execution of the Transaction Documents and the
formation of the Company, including all reasonable fees and expenses of agents,
representatives, counsel and accountants.
Section 12.2    Further Assurances. Each Member agrees to execute, acknowledge,
deliver, file and record such further certificates, amendments, instruments and
documents, and to do all such other acts and things, as may be required by law
or as, in the reasonable judgment of the Board, may be necessary or advisable to
carry out the intent and purposes of this Agreement.
Section 12.3    Notices. Except as otherwise expressly provided in this
Agreement, all notices, requests and other communications (each, a “Notice”) to
any Member, the Company, the Board or any Representative shall be in writing
(including electronic mail) and shall be given (i) if the recipient is a Member,
to such Member at the address specified for such Member on Schedule A or as such
Member shall hereafter specify for this purpose by Notice to the other Members,
(ii) if the recipient is a Representative, to such Representative at the address
to which any Notice to the Member which appointed such Representative would be
sent hereunder, and (iii) if the recipient is
 
53

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

________________________________________________________________________________________________________________________

the Company or the Board, to the Company or the Board, as the case may be, at
the addresses to which any Notice to both of the Members would be sent
hereunder. Each Notice shall be effective (a) if given by electronic mail, at
the time such electronic mail is transmitted and the appropriate confirmation is
received (or, if such time is not during business hours on a Business Day, at
the beginning of the next such Business Day), (b) if given by registered or
certified mail, three Business Days (or, if to an address outside the United
States, seven days) after such communication is deposited in the mails with
first-class postage prepaid, addressed as aforesaid, or (c) if given by personal
delivery or any reputable courier service any other means, when delivered at the
address specified pursuant to this Section 12.3.
Section 12.4    No Third Party Beneficiaries. Except as expressly set forth in
Section 7.2(i) and ARTICLE X, this Agreement is not intended to confer any
rights or remedies upon, and shall not be enforceable by, any Person other than
the parties hereto, their respective successors and permitted assigns, and the
Company.
Section 12.5    Waiver. No failure by any party to insist upon the strict
performance of any covenant, agreement, term or condition of this Agreement or
to exercise any right or remedy consequent upon a breach of such or any other
covenant, agreement, term or condition shall operate as a waiver of such or any
other covenant, agreement, term or condition of this Agreement. Any Member by
notice given in accordance with Section 12.3 may, but shall not be under any
obligation to, waive any of its rights or conditions to its obligations
hereunder, or any duty, obligation or covenant of any other Member. No waiver
shall affect or alter the remainder of this Agreement but each and every
covenant, agreement, term and condition hereof shall continue in full force and
effect with respect to any other then existing or subsequent breach. The rights
and remedies provided by this Agreement are cumulative and the exercise of any
one right or remedy by any party shall not preclude or waive its right to
exercise any or all other rights or remedies.
Section 12.6    Consent to Jurisdiction. EACH OF THE PARTIES HERETO CONSENTS TO
THE JURISDICTION OF THE COURT OF CHANCERY OF THE STATE OF DELAWARE AND, TO THE
FULLEST EXTENT PERMITTED BY LAW, IRREVOCABLY AGREES THAT ALL ACTIONS OR
PROCEEDINGS RELATING TO THIS AGREEMENT OR THE OTHER TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT SHALL BE LITIGATED IN SUCH COURT. EACH OF THE PARTIES HERETO
ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS RESPECTIVE PROPERTIES, GENERALLY
AND UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION OF THE AFORESAID COURT AND TO
THE FULLEST EXTENT PERMITTED BY LAW, WAIVES ANY DEFENSE OF FORUM NON CONVENIENS,
AND IRREVOCABLY AGREES TO BE BOUND BY ANY FINAL AND NONAPPEALABLE JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT OR THE OTHER TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT. TO THE FULLEST EXTENT PERMITTED BY LAW, EACH OF
THE PARTIES HERETO FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF
THE
 
54

________________________________________________________________________________________________________________________

AFOREMENTIONED COURT IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PARTY AT THE
ADDRESS SPECIFIED IN THIS AGREEMENT, SUCH SERVICE TO BECOME EFFECTIVE 15
CALENDAR DAYS AFTER SUCH MAILING.
Section 12.7    Integration. This Agreement, together with the other Transaction
Documents, constitute the entire agreement among the parties hereto pertaining
to the subject matter hereof and thereof and supersede all prior agreements and
understandings of such parties in connection herewith and therewith, and no
covenant, representation or condition not expressed in the Transaction Documents
shall affect, or be effective to interpret, change or restrict, the express
provisions of this Agreement.
Section 12.8    Rules of Construction. The parties to this Agreement have
participated jointly in negotiating and drafting this Agreement. If an ambiguity
or a question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the parties, and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any provision of this Agreement.
Section 12.9    Membership Interests Legend. The certificates representing
Membership Interests, if any, will bear the following legend:
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO NUMEROUS
CONDITIONS AND RESTRICTIONS, INCLUDING RESTRICTIONS ON TRANSFER, AS SPECIFIED IN
THE LIMITED LIABILITY COMPANY AGREEMENT, DATED AS OF DECEMBER 23, 2011 (AS
AMENDED, SUPPLEMENTED OR

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

OTHERWISE MODIFIED FROM TIME TO TIME, THE “LLC AGREEMENT”) OF NIP JV, LLC (THE
“COMPANY”). A COPY OF SUCH LLC AGREEMENT AS IN EFFECT FROM TIME TO TIME SHALL BE
FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN
REQUEST.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
OR AN EXEMPTION FROM REGISTRATION THEREUNDER.”
Section 12.10    Headings. The titles of Articles and Sections of this Agreement
are for convenience only and shall not be interpreted to limit or amplify the
provisions of this Agreement.
 
55

________________________________________________________________________________________________________________________

Section 12.11    Sale Transaction. In the event of a Sale Transaction, all
rights and obligations of the Members under the terms and conditions of this
Agreement shall terminate without any further liability or obligation to the
Company, the other Members or otherwise, except for the rights and obligations
set forth in or provided for under ARTICLE X, ARTICLE XI and ARTICLE XII hereof;
provided, that no Member shall be relieved of liability for any Damages incurred
or suffered by the other parties as a result of any breach or failure of such
Member to perform its covenants, obligations or agreements contained in this
Agreement prior to such termination.
Section 12.12    Confidentiality.
(a) Each Member agrees that Confidential Information is provided for such
Member’s own confidential use only and that none of its existence, nature or
content will be disclosed by such Member to any Person other than its
Affiliates, officers, directors, managers, employees, auditors, attorneys and
other advisers, and then only on a strictly “need to know” basis in connection
only with the transactions contemplated hereby. Each Member agrees, on its own
behalf and on behalf of those that receive Confidential Information from such
Member, (i) to hold such Confidential Information in the strictest confidence,
(ii) not to disclose such Confidential Information to any Person (including its
Affiliates, officers, directors, managers, employees, auditors, attorneys and
other advisers) except on a confidential basis, and (iii) to advise permitted
recipients of the confidential nature of such information and of the obligation
to maintain such confidentiality in accordance with the terms of this
Section 12.12. Notwithstanding anything else herein to the contrary, each Member
shall be responsible for any breach of this Section 12.12 by any of its current
or former Affiliates, officers, directors, managers, employees, auditors,
attorneys and other advisers or other Person that receives Confidential
Information from such Member.
(b) Notwithstanding the foregoing, each Member may disclose Confidential
Information: (i) as such Member is required to disclose by law, rule or
regulation or pursuant to legal process; provided, however, that such Member
shall use all reasonable efforts to notify the Board and the other Members
promptly so that the Board and such other Members are afforded a full and fair
opportunity to seek a protective order or other appropriate remedy, or appeal
from any denial thereof and in the event that no such protective order or other
remedy is obtained, the disclosing Member will furnish only that portion of the
Confidential Information which it is advised by outside counsel is legally
required and will exercise all commercially reasonable efforts to obtain
reliable assurance that confidential treatment will be accorded the Confidential
Information; (ii) that is already in the public domain (other than as a result
of a disclosure by such Member); (iii) to such Member’s actual and prospective
direct and indirect limited partners, members, investors and lenders and their
respective Affiliates, officers, directors, managers, employees and (only on a
strictly “need to know” basis in connection only with the transactions
contemplated hereby) auditors, attorneys and other advisers; (iv) as part of
such Member’s normal reporting, rating or review procedure (including normal
credit rating or pricing process), or in connection with such Member’s or its
Affiliates’ normal fund raising, marketing, informational or reporting
activities; (v) to a prospective purchaser of direct and indirect
 
56

________________________________________________________________________________________________________________________

equity interests in such Member or the Membership Interests held by such Member
(provided, that (x) such Person will be informed by the disclosing Member of the
confidential nature of the Confidential Information and shall agree in writing
to keep such Confidential Information confidential and (y) the disclosing Member
will be liable for any breaches of this Section 12.12 by such Person) and
(vi) so long as such disclosure is made by or on behalf of the KBS REIT Entity,
if any, (x) on a confidential basis to any due diligence representatives and/or
consultants that are engaged by, work for, or are acting on behalf of, any
securities dealers and/or broker dealers evaluating such KBS REIT Entity, to the
extent that it is commercially

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

reasonable to make such disclosure, (y) in connection with any filings
(including any amendment or supplement to any S-11 filing) with governmental
agencies (including the SEC) required to be made by such KBS REIT Entity (which
filing may include such information as such KBS REIT Entity may reasonably deem
it prudent to include) and (iii) on a confidential basis to any broker/dealers
in the broker/dealer network of such KBS REIT Entity or any of its investors, to
the extent that it is commercially reasonable to make such disclosure.
Section 12.13    Severability. Each provision of this Agreement shall be
considered severable and if for any reason any provision or provisions hereof
are determined to be invalid and contrary to any existing or future law, such
invalidity shall not impair the operation of or affect those portions of this
Agreement which are valid. It is the desire and intent of the parties hereto
that the covenants set forth in Section 12.12 be enforced to the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought and if any such covenant shall be adjudicated
finally to be invalid or unenforceable, such covenant shall be deemed amended to
the extent necessary in order that such provision be valid and enforceable, the
remainder of such covenant shall not thereby be affected and shall be given full
effect without regard to invalid portions and such amendment shall apply only
with respect to the operation of such covenant in the particular jurisdiction in
which such adjudication is made.
Section 12.14    Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without giving
effect to the conflicts of law principles thereof.
Section 12.15    Amendment. Subject to Section 7.3(b)(i), the Board shall have
the right to amend, modify, supplement or restate any provision of this
Agreement.
Section 12.16    Counterparts. This Agreement may be executed in counterparts,
each of which shall constitute an original and all of which, when taken
together, shall constitute one and the same agreement.
[signature page follows]
 
57

________________________________________________________________________________________________________________________

IN WITNESS WHEREOF, the parties hereto have caused this Limited Liability
Company Agreement to be duly executed as of the day and year first written
above.
 
 
 
 
MEMBERS:
 
HC KBS NIP JV, LLC,
a Delaware limited liability company
 
 
By:
 
HC NIP JV, LLC,
 
 
a Delaware limited liability company,
Manager
 
By:
/s/ Michael D. Hackman
 
 
Michael D. Hackman
Authorized Signatory

 

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

 
 
 
Signature Page to Limited Liability Company Agreement of NIP JV, LLC

________________________________________________________________________________________________________________________

 
 
 
OCM NIP JV HOLDINGS, L.P.
 
 
By:
 
OCM FIE, LLC
 
 
Its:
 
General Partner
 
 
By:
/s/ Scott L. Graves
 
 
Name:    Scott L. Graves
 
 
Title:      Authorized Signatory

 
 
 
 
By:
 
/s/ Derek Smith
 
 
Name:    Derek Smith
 
 
Title:      Authorized Signatory

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

 
 
 
 
 
 
 
Signature Page to Limited Liability Company Agreement of NIP JV, LLC

________________________________________________________________________________________________________________________

SCHEDULE A
MEMBERS AND CAPITAL CONTRIBUTIONS
 

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

Name
 
Address
 
Initial Capital
Contribution
 
Total Capital
Contributions to Date
OCM NIP
JV
HOLDINGS,
L.P.
 
333 S. Grand Avenue, 28th Floor
Los Angeles, CA 90071
Attention: Brian Laibow
E-mail: blaibow@oaktreecapital.com
 
with a copy to:
 
Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, NY 10019-6064
Attention: Mitchell L. Berg, Esq. and Kenneth M. Schneider, Esq. E-mail:
mberg@paulweiss.com and kschneider@paulweiss.com
 
$265,785,000
 
$265,785,000
HC KBS
NIP JV,
LLC
 
c/o Hackman Capital Partners, LLC
11111 Santa Monica Blvd.
Suite 750
Los Angeles, CA 90025
Attention: Chief Financial Officer and Chief Operating Officer
E-mail: spoland@hackmancapital.com and bberke@hackmancapital.com
 
with a copy to:
 
c/o KBS Capital Advisors
620 Newport Center Drive, Suite 1300 Newport Beach, CA 92660
Attention: Mr. David Snyder, Mr. Brian Ragsdale and Jim Chiboucas, Esq.
E-mail: dsnyder@kbs-ca.com, bragsdale@kbsrealty.com and jchiboucas@kbsrealty.com
 
and to:
Orrick, Herrington & Sutcliffe LLP
 
$
—

 
$
—

 
A-1

________________________________________________________________________________________________________________________

 
 
 
 
 
 
 
 
 
777 South Figueroa Street, Suite 3200
Los Angeles, CA 90017
Attention: Dennis Martin, Esq.
E-mail: dmartin@orrick.com
 
and to:
 
Greenberg Traurig, LLP
3161 Michelson Drive, Suite 1000
Irvine, CA 92612
Attention: Bruce Fischer, Esq.
E-mail: fischerb@gtlaw.com
  
 
  
 

 
A-2

________________________________________________________________________________________________________________________

SCHEDULE B
NIP PROPERTIES
 

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

 
 
 
ADDRESS
 
PROPERTY NAME
9410 Heinz Way, Commerce City, CO
 
Commerce City
170 Highland Park Drive, Bloomfield, CT
 
Bloomfield
85 & 90 Moosup Pond Road, Plainfield (a/k/a Wauregren), CT1
 
Plainfield
All of the following:
555 Taylor Road, Enfield, CT
561 Taylor Road, Enfield, CT
99 Print Shop Road, Enfield,
CT 100 Print Shop Road, Enfield,
CT 300 Shaker Road, Enfield, CT
 
Enfield Business Park
Enfield - Office
Enfield - Dav Care
Enfield - R&D
Enfield - Manufacturing
Enfield - Distribution
15 & 31 Independence Drive, Devens, MA2
 
Devens (15)
Devens (31)
50 Independence Drive, Devens, MA
 
Devens (50)
1040 Sheridan Street, Chicopee, MA
 
Chicopee (1040)
1045 Sheridan Street, Chicopee, MA
 
Chicopee (1045)
151 Suffolk Lane, Gardner, MA
 
Gardner
1111 Southampton Road, Westfield, MA
 
Westfield
100 & 111 Adams Road, Clinton, MA
 
Clinton (100)
Clinton (111)
100 Simplex Drive, Westminster, MA
 
Westminster
495 & 515 Woburn Street, Tewksbury, MA
 
Tewksbury (495)
Tewksbury (515)
480 Sprague Street, Dedham, MA
 
Dedham
625 University Avenue, Norwood, MA
 
Norwood
57 & 59 Daniel Webster Highway, Merrimack, NH
 
Merrimack (57)
Merrimack (59)
133 (a/k/a 101) Jackson Avenue, Ellicott (a/k/a Jamestown), NY
 
Ellicott
1200 State Fair Boulevard, Geddes (Syracuse), NY
 
Geddes
3407 Walters Road, Van Buren (Syracuse), NY
 
Van Buren
851 Beaver Drive, Dubois, PA
 
DuBois (Freezer)
891 Beaver Drive (a/k/a Shaffer Road & Route 255), Dubois, PA
 
DuBois (Dry Warehouse)

 
1 90 Moosup Pond Road is vacant land.
2 31 Independence Drive is vacant land.
 
B-1

________________________________________________________________________________________________________________________

 
 
 
9700 W. Gulf Bank Road, Houston, TX
 
Houston
1000 E. I-20 (a/k/a 1020 E. Overland Trail), Abilene, TX
 
Abilene
2200 S. Business Route 45, Corsicana, TX
 
Corsicana

 
B-2

________________________________________________________________________________________________________________________

SCHEDULE C
BOARD REPRESENTATIVES
Oaktree Representatives

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John Brady
Brian Laibow
Derek Smith
HC-KBS Representatives
Michael Hackman
Keith Hall
 
C-1

________________________________________________________________________________________________________________________

SCHEDULE D
REIT PROHIBITED TRANSACTIONS
A “REIT Prohibited Transaction” shall mean the taking of any of the following
actions by the Company or any Member, in each case (other than with respect to a
transaction described in clause (viii)(y) below) except to the extent that,
assuming the Company were taxable for federal income tax purposes as a real
estate investment trust (a “REIT”), such action would not reasonably be expected
to cause the Company to (a) fail to qualify as a REIT, (b) fail to satisfy
either of the “income tests” set forth in Sections 856(c)(2) and 856(c)(3) of
the Code and the Treasury Regulations promulgated thereunder or (c) fail to
satisfy any of the asset tests set forth in Section 856(c)(4) of the Code and
the Treasury Regulations promulgated thereunder:
(i)        Entering into any lease or permitting any sublease that provides for
rent based in whole or in part on the income or profits of any Person, excluding
for this purpose a lease that provides for rent (x) based in whole or in part on
a fixed percentage or percentages of gross receipts or gross sales of any Person
without reduction for any sublessor costs or (y) that otherwise qualifies as
“rents from real property” pursuant to Treasury Regulations
Section 1.856-4(b)(3);
(ii)        Leasing personal property, excluding for this purpose a lease of
personal property (x) that is entered into in connection with a lease of real
property where the rent attributable to the personal property is less than 15%
of the total rent provided for under the lease, determined as set forth in
Section 856(d)(1) of the Code or (y) where the rent attributable to the personal
property (taken together with any other income for the relevant taxable year
that would not satisfy the “95% income test” set forth in Section 856(c)(2) of
the Code) would not exceed 5% of the Company’s gross income for any taxable
year;
(iii)        Acquiring or holding debt unless (x) the amount of interest income
received or accrued by the Company under such loan does not, directly or
indirectly, depend in whole or in part on the income or profits of any Person,
and (y) to the extent the value of such debt (taken together with the value of
any other assets of the Company for the relevant testing period that would not
satisfy the “75% asset test” set forth in Section 856(c)(4)(A) of the Code)
would exceed 25% of the value of all the Company’s assets for such period, the
debt is fully secured by mortgages on real property or on interests in real
property (or the debt satisfies the safe harbor of Revenue Procedure 2003-65);
(iv)        Acquiring or holding more than 10% of the outstanding voting
Securities of any one issuer (taking into account the safe harbors set forth in
Section 856(m) of the Code and, in particular, the look-through rule for
partnership Securities) other than a corporation that has properly elected to be
a “taxable REIT subsidiary” of a KBS REIT Entity;
 
D-1

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(v)        Acquiring or holding more than 10% of the total value of the
outstanding Securities (debt or equity) of any one issuer (taking into account
the safe harbors set forth in Section 856(m) of the Code and, in particular, the
look-through rule for partnership Securities);
(vi)        Making an election or taking any action that would cause the Company
to be treated as (x) an entity that is not classified as a partnership for
federal income tax purposes or (y) a publicly traded partnership as defined in
Section 7704 of the Code;
(vii)        Entering into any agreement where the Company receives amounts,
directly or indirectly, for rendering services to the tenants of the individual
properties that are owned, directly or indirectly, by the Company other than
(x) amounts received for services that are customarily furnished or rendered in
connection with the rental of real property of a similar class in the geographic
areas in which the applicable individual properties are located where such
services are either provided by

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(A) an Independent Contractor (as defined in Section 856(d)(3) of the Code) who
is adequately compensated for such services and from which the Company does not,
directly or indirectly, derive revenue or (B) a taxable REIT subsidiary of a KBS
REIT Entity (as defined in Section 856(l) of the Code) which is adequately
compensated for such services or (y) amounts received for services that are
customarily furnished or rendered in connection with the rental of space for
occupancy only (as opposed to being rendered primarily for the convenience of
the Company’s tenants);
(viii)        Entering into any agreement where a material amount of income or
gain, as applicable, received or accrued by the Company under such agreement,
directly or indirectly, and allocated (directly or indirectly) to a KBS REIT
Entity under Treasury Regulations Section 1.856-3 or otherwise (x) does not
qualify as (A) “rents from real property” within the meaning of Section 856 of
the Code, (B) “interest on obligations secured by mortgages on real property or
on interests in real property” within the meaning of Section 856 of the Code, or
(C) gain from the sale or other disposition of real property or interests in, or
mortgages on, real property (excluding income described in clause (y) below) or,
regardless of Treasury Regulations Section 1.856-3, (y) constitutes income from
a sale of “inventory” or “stock in trade” of the Company within the meaning of
Section 1221(a)(1) of the Code (other than any such sales properly described in
Section 857(b)(6)(C) of the Code with respect to a KBS REIT Entity). In no event
will clause (y) of the immediately preceding sentence be subject to any Company
level “testing” pursuant to this Schedule, nor be interpreted to preclude a sale
of Membership Interests under this Agreement or otherwise; and
(ix)        Holding cash of the Company available for operations or distribution
in any manner other than a traditional bank checking or savings accounts.
 
D-2

________________________________________________________________________________________________________________________

SCHEDULE E
EXEMPT PROPERTIES
National Industrial Sale Properties
 
Sale 1: Home Depot Properties
 
 
 
 
Commerce City,
 
 
1,201

 
CO
 
140,630

1,202

 
Bloomfield, CT
 
449,000

1,215

 
Norwood, MA
 
459,455

Sale 2: Stabilized Properties
 
 
1,203

 
Plainfield, CT
 
530,500

1,205

 
Devens, MA
 
370,545

1,217

 
Ellicott, NY
 
287,959

1,219

 
Van Buren, NY
 
273,225

1,222

 
Houston, TX
 
245,319

Sale 3: Dubois Properties
 
 
1,220

 
DuBois, PA (851 Beaver - Freezer)
 
202,800

1,221

 
DuBois, PA (Shaffer Road - Dry)
 
410,000

Sale 4: Chicopee Properties
 
 
1,206

 
Chicopee, MA (1040 Sheridan)
 
74,500

1,207

 
Chicopee, MA (1045 Sheridan)
 
62,000

Grand Total
 
12

 
3,505,933

 
E-1

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SCHEDULE F
BOARD DECISIONS
1.        Obtain any loan on behalf of the Company or any of its Subsidiaries;
renew, refinance, prepay, discharge,

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

amend or modify any existing loan to the Company or any of its Subsidiaries (or
any document or instrument relating thereto); finance, refinance or encumber the
Properties or any of the interests in the Company or any of its Subsidiaries or
any portion of any of the foregoing (or amend or modify the same); make a loan
or extend credit to, make an investment in, or become a guarantor or surety for
any indebtedness of, any other Person, in each case on behalf of the Company or
any of its Subsidiaries;
2.        Make any expenditure relating or allocable to any of the NIP
Properties (or any other parcel of real property acquired in accordance with
Section 7.3(b)(vi)) which, when added to all expenditures already made during
the then current Fiscal Year relating or allocable to such Property, would
result in (a) such aggregate expenditures exceeding by more than five percent
(5%) the expenditures set forth in the annual budget approved by the Board with
respect to such Property for such Fiscal Year, (b) the sum of (i) the aggregate
expenditures incurred to date during such Fiscal Year with respect to such
Property and (ii) the projected amount of all expenditures to be incurred for
the remainder of such Fiscal Year with respect to such Property, exceeding by
more than five percent (5%) the expenditures set forth in such budget, (c) all
of such expenditures with respect to any line item in such budget exceeding the
amount of such line item for such Fiscal Year by more than ten percent (10%),
(d) the sum of (i) all of such expenditures incurred to date during such Fiscal
Year with respect to any line time in such budget and (ii) the projected amount
of all expenditures to be incurred for the remainder of such Fiscal Year with
respect to such line item, exceeding the amount of such line item for such
Fiscal Year by more than ten percent (10%) (it being agreed that (1) all
expenditures relating to more than one Property shall be allocated among all of
the Properties to which the same relate, and all expenditures relating to the
Company or any Subsidiary shall be allocated among all of the Properties in
which such entity owns a direct or indirect interest, (2) the projected amounts
described in clauses (b) and (d) above shall be determined (x) for as long as
the HC-KBS Member is responsible for the day-to-day business, operations and
affairs of the Company in accordance with Section 7.4(a), by the HC-KBS Member,
acting in good faith, and as set forth in the most recent quarterly report
submitted to the Subsidiaries in accordance with the agreement described in
Section 7.4(b), and (y) at all other times, in a manner prescribed by the Board
and (3) the limitations on any such expenditures relating to (A) any tenant
improvements or other capital improvements required to be performed under any
lease at a Property which is approved by the Board (or deemed approved by the
Board because such lease complies with standards for deemed approval of leases
prescribed by the Board) and (B) any other capital improvements at a Property
shall be governed by Paragraph 10 of this Schedule);
3.        Sell, assign, restructure, transfer or otherwise dispose of the
Properties or any portion thereof or any interest in any of the Subsidiaries; or
enter into, amend, restate, supplement, waive or terminate any contracts related
to the sale,
 
F-1

________________________________________________________________________________________________________________________

assignment, restructuring, transfer or disposal of the Properties or any portion
thereof or any interest in any of the Subsidiaries;
4.        Adopt or change any insurance program for the Company or any of its
Subsidiaries or any of the Properties; alter or change the reporting, accounting
and/or auditing systems and/or procedures for the Company or any of its
Subsidiaries; or approve any financial statements prepared by accountants or
auditors of the Company or any of its Subsidiaries;
5.        Make (i) any decision for the Company or any of its Subsidiaries
involving the commencement of a lawsuit or (ii) any material decision for the
strategy for the prosecution or defense of a lawsuit or administrative or
regulatory proceeding; or institute any legal actions on behalf of the Company
or any Subsidiary;
6.        Execute, amend, restate, supplement, waive in any material respect, or
terminate any contract on behalf of the Company or any Subsidiary which (i) is
outside the ordinary course of business, (ii) requires (together with any and
all related contracts with the same counterparty) the payment of more than
$100,000 in the aggregate, (iii) has a term (including any additional terms for
which the counterparty has an option to renew) of not less than one year, or
(iv) is designated by the Board as a contract requiring its approval (it being
agreed that the limitations on any such actions regarding contracts relating to
(A) any tenant improvements or other capital improvements required to be
performed under any lease at a Property which is approved by the Board (or
deemed approved by the Board because such lease complies with standards for
deemed approval of leases prescribed by the Board) and (B) any other capital
improvements at a Property shall be governed by Paragraph 10 of this Schedule);
7.        Retain or dismiss on behalf of the Company, or any of its
Subsidiaries, attorneys, accountants, real estate brokers, mortgage brokers,
property managers or auditors, it being acknowledged that the following firms
are hereby approved as of the Effective Date:
 

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

 
 
 
John A. Rosenfeld, a Professional Corp.
  
Attorney
DarrowEverett LLP
  
Attorneys
Orrick Herrington & Sutcliffe, LLP
  
Attorneys
Greenberg Traurig, LLP
  
Attorneys
Mayo Crowe LLC
  
Attorneys
Craig and Macauley Professional Corporation
  
Attorneys (Penn Traffic Bankruptcy)
Law Offices of Peter A. Zahka, II, P.C.
  
Attorney
Bond Schoeneck & King, PLLC
  
Attorneys
Robinson & Cole LLP
  
Attorneys (Environmental)
Paul, Weiss, Rifkind, Wharton & Garrison LLP
  
Attorneys
 
 
Ernst & Young, LLP
  
Accountants
PM Realty Group, L.P.
  
Accountants

 
F-2

________________________________________________________________________________________________________________________

 
 
 
Cushman & Wakefield
  
Leasing Broker
Stubblebine Group
  
Leasing Broker
CBRE
  
Leasing Broker
NAI Hunneman
  
Leasing Broker
Pyramid Brokerage
  
Leasing Broker
Paul Johnson & Associates
  
Leasing Broker
Binzwanger
  
Leasing Broker
 
 
PM Realty Group, L.P.
  
Property Manager
 
 
Ernst & Young LLP
  
Auditors

8.        Conduct any act which would make it impossible to carry on the
ordinary business of the Company or any of its Subsidiaries (including, without
limitation, any dissolution or winding up thereof); elect to continue the
existence or business, or change the nature of the business, of the Company or
any of its Subsidiaries; merge or consolidate the Company or any of its
Subsidiaries with or into another Person; appoint or remove any officer or
director of a Subsidiary; amend the Certificate or amend any organizational
document of a Subsidiary; settle a legal action on behalf of the Company or any
of its Subsidiaries; enter into any confession of a judgment against the Company
or any of its Subsidiaries; execute or deliver any general assignment of assets
for the benefit of creditors of the Company or any of its Subsidiaries; file,
acquiesce in or consent to the filing of any petition or proceeding under any
state or federal bankruptcy or debtor relief statute (including, without
limitation, with respect to any adjudication as a bankrupt or the appointment of
any receiver, liquidator, trustee or similar officer) with respect to the
Company or any of its Subsidiaries or any of their respective assets; admit in
writing the inability of the Company or any of its Subsidiaries to pay its debts
generally as they become due; issue any securities or interests in the Company
or any of its Subsidiaries or sell, transfer, assign, hypothecate, pledge or
otherwise dispose of any securities or interests in any Subsidiary; invest
Company funds (or the funds of any Subsidiaries) in instruments other than money
market accounts, time deposits, short term governmental obligations or
commercial paper; acquire or lease (or enter into, amend, restate, supplement,
waive, surrender or terminate any agreement to acquire or lease) on behalf of
the Company or any of its Subsidiaries any real property other than the NIP
Properties or any other material asset; organize or form or invest in any Person
on behalf of the Company or any of its Subsidiaries (other than an investment by
the Company in any Subsidiary already in existence); except as otherwise
expressly permitted in this Agreement or as otherwise expressly permitted in the
applicable annual budget or business plan approved by the Board, on behalf of
the Company or any of its Subsidiaries, enter into, amend, restate, supplement,
waive or terminate any Affiliate Contract;

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

9.        Enter into any new leases, or amend, modify, renew, restate,
supplement, waive in any material respect, or terminate any existing leases, to
third parties in respect of any of the Properties, except in accordance with any
leasing guidelines approved by the Board from time to time; or approve or
disapprove of a
 
F-3

________________________________________________________________________________________________________________________

creditors’ plan, the filing of an involuntary petition of bankruptcy or the
dismissal or discharge of a claim of bankruptcy in connection with bankruptcy
proceedings involving any tenant;
10.        On behalf of the Company or any of its Subsidiaries, make any
expenditure (including, without limitation, any capital expenditure), or enter
into, amend, restate, supplement, waive in any material respect, or terminate
any contract, or take any other action, in each case relating to (i) any tenant
improvement or other capital improvement required to be performed under any
lease which is approved by the Board (or deemed approved by the Board because
such lease complies with standards for deemed approval of leases prescribed by
the Board), if doing so would cause the sum of (A) all of the expenditures
incurred to date in connection with such improvement and (B) the projected
amount of all expenditures to be incurred in connection with the ongoing
performance and completion of such improvement (as determined (y) for as long as
the HC-KBS Member is responsible for the day-to-day business, operations and
affairs of the Company in accordance with Section 7.4(a), by the HC-KBS Member,
acting in good faith, and as set forth in the most recent quarterly report
submitted to the Subsidiaries in accordance with the agreement described in
Section 7.4(b), and (z) at all other times, in a manner prescribed by the
Board), to exceed by more than ten percent (10%) the amount of the expenditures
approved by the Board for such improvement in connection with the Board’s
approval of such lease and (ii) any other capital improvement with respect to
any Property which is set forth in the budget approved by the Board if doing so
would cause the sum of (A) all of the expenditures incurred to date in
connection with such capital improvement and (B) the projected amount of all
expenditures to be incurred in connection with the ongoing performance and
completion of such capital improvement (as determined (y) for as long as the
HC-KBS Member is responsible for the day-to-day business, operations and affairs
of the Company in accordance with Section 7.4(a), by the HC-KBS Member, acting
in good faith, and as set forth in the most recent quarterly report submitted to
the Subsidiaries in accordance with the agreement described in Section 7.4(b),
and (z) at all other times, in a manner prescribed by the Board), to exceed by
more than ten percent (10%) the amount of the expenditures for such capital
improvement set forth in the budget approved by the Board for such capital
improvement;
11.        Conduct any act, or permit the Subsidiaries to conduct any act, which
is inconsistent with a budget or business plan for the then current Fiscal Year
approved by the Board (including the variances from the budget permitted in
Paragraph 2 of this Schedule), or adopt, amend or modify any budget or business
plan for the Company or any of its Subsidiaries (it being agreed that any such
actions relating to (i) any tenant improvements or other capital improvements
required to be performed under any lease at a Property which is approved by the
Board (or deemed approved by the Board because such lease complies with
standards for deemed approval of leases prescribed by the Board) and (ii) any
other capital improvements at a Property shall be governed by Paragraph 10 of
this Schedule);
12.        Undertake, or permit any Subsidiary or third party to undertake, any
environmental remediation on any of the Properties or any other action relating
to
 
F-4

________________________________________________________________________________________________________________________

environmental matters in respect of any of the Properties; demolish or cause to
be demolished, or consent to the demolition of, any improvement or structure
situated on the Properties (other than as part of a capital improvement or
pursuant to leasing guidelines approved by the Board); modify the zoning, land
use or any other governmental regulation of any Properties; or execute, amend,
restate, supplement, waive or terminate an easement, restrictive covenant or
similar agreement or instrument affecting any of the Properties (it being agreed
that any such actions relating to any tenant improvements or other capital
improvements required to be performed under any lease at a Property which is
approved by the Board (or deemed approved by the Board because such lease
complies with standards for deemed approval of leases prescribed by the Board)
shall be governed by Paragraph 10 of this Schedule);
13.        Employ or discharge any individual as an employee of the Company or
permit any Subsidiary to do so (it being acknowledged that the Members intend
that neither the Company nor the Subsidiaries shall have any employees);
14.        Dispose of, or permit any of the Subsidiaries to dispose of, any
casualty insurance proceeds or apply any condemnation award; or approve the
settlement of any casualty insurance claim with an insurance company or the
settlement of

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

any condemnation award with any condemning authority;
15.        Execute, or cause to be executed, any guaranty, indemnity or similar
agreement on behalf of the Company or on behalf of any of its Subsidiaries; take
any action, or permit any of the Subsidiaries to take any action, that violates
the provisions of any loan documents; or issue, or permit any of the
Subsidiaries to issue, any press release or other public statement concerning or
pertaining to the Properties, the Company, any Subsidiary or any Member;
16.        Take any action or permit any of the Subsidiaries to take any action
that would reasonably be expected to have substantial or material adverse effect
upon the Company, any of the Subsidiaries, or any of the Properties, which is
not already provided for above;
17.        Any matter described in any of clauses (i) through (vi) of
Section 7.3(b); or
18.        Any matter with respect to which the Company or any of its
Subsidiaries has any approval, consent or consultation right, or the right to
make any determination or exercise its discretion in any respect, under another
Transaction Document or the agreement described in Section 7.4(b).
 
F-5

________________________________________________________________________________________________________________________

SCHEDULE G
LAWSUITS AGAINST BORROWERS OR NIP PROPERTIES
Bloomfield
Case # CV-11-6018497-S filed at Hartford Superior Court in state of Connecticut
titled Lavan Williams vs National Industrial Portfolio, LLC a/k/a National
Industrial Portfolio Borrower, LLC, Home Depot U.S.A. Inc., Town Line Stables,
LLC and Braga Landscaping, Inc. regarding a “slip and fall” incident that
allegedly occurred on January 29, 2009 at 170 Highland Park Drive, Bloomfield,
Connecticut. According to Cindy Jaworski of the Law Offices of Cindy Jaworski, a
staff counsel office of CNA Insurance Companies, who was representing the
landlord, this case was settled in February 2011.
Westfield
Civil Action case number 3:10-cv-30015-JCB filed at the U.S. District Court of
Massachusetts titled Kenneth Malinowski vs National Industrial Portfolio, LLC
and Home Depot U.S.A., Inc regarding negligence in maintaining and managing the
parking lot located at 1111 Southampton Road, Westfield, MA that resulted in
bodily harm to the plaintiff on March 15, 2008. According to Mark Albano of
Dalsey, Ferrara and Albano who was representing the landlord, this case was
settled in Aug of 2011.
 
Clinton (100) Ice Damage
On Feb 3, 2011, a person by the name of Joe Johnson alleges that he was making a
pick up at Scholastic Books (existing tenant) located at 100 Adams Road,
Clinton, MA. The victim alleges that a large sheet of ice fell off the building
and damaged his parked vehicle. His car insurance categorized the damage as a
“total loss” and compensated him for the loss of his vehicle. On February 19,
2011, the victim approached PMRG seeking compensation for his total out of
pocket loss which he claimed was $2,343. Mr. Johnson’s claim (P 103-075971-01)
was forwarded to Liberty Mutual insurance, the landlord’s insurer, for review.
The insurance company responded on April 26, 2011 rejecting Mr. Johnson’s claim.
No further communication was received from Mr. Johnson.
Tewksbury (515) Slip and Fall
According to an incident report filed on September 13, 20011 by PMRG, an
incident allegedly occurred the morning of September 9, 2011, where a student at
Salter School (existing tenant) located at 515 Woburn Street, Tewksbury, MA
tripped and fell over the edge of the carpet in front of the elevator. The
student allegedly had swelling in her face and broke her tooth. The student
approached the landlord seeking compensation for her damages. After reviewing
the facts of the case, the landlord determined it was not liable
 
G-1

________________________________________________________________________________________________________________________

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

for any negligence and communicated that conclusion to the student. No further
communication was received from the student.
Westminster
Justin Marois alleges that he was driving his car onto Simplex Drive the morning
of April 29, 2011 when his car hit some large pot holes which resulted in a
popped tire costing $354 and damage to his alloy 17” rims. He claims there were
no signs to warn of the hazard or road work. He initially contacted the landlord
seeking compensation for his damages. The landlord then referred him to the
vendor performing the pot hole work. No further communication was received from
Justin Marois thereafter.
 
G-2

________________________________________________________________________________________________________________________

SCHEDULE H
STRUCTURE CHART
 
 
H-1

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