Exhibit
3.1





CORNERSTONE
REALTY FUND, LLC






A
CALIFORNIA LIMITED LIABILITY COMPANY







OPERATING
AGREEMENT




(AMENDED
AND RESTATED)









TABLE
OF CONTENTS




1.
            ORGANIZATION1.1.
            Formation1.2.
            Name1.3.
            Purpose1.4.
            Duration1.5.
            Principal Place of Business, Registered Office and
      Resident Agent1.6.
            Title to Fund Property1.7.
            Intention for Fund1.8.
            Definitions2.
            BOOKS, RECORDS AND
    ACCOUNTING2.1.
            Books and Records2.2.
            Fiscal Year; Accounting2.3.
            Bank Accounts2.4.
            Reports to Members2.5.
            Tax Returns2.6.
            Appraisals2.7.
            List of Members2.8.
            Valuation of Units3.
            MEMBERS, UNITHOLDERS AND MEETINGS OF
      MEMBERS3.1.
            Units of Membership
  Interest3.2.
            Book-Entry Evidence of
      Ownership3.3.
            Place of Meetings3.4.
            Meetings of Members3.5.
            Notice of Meetings3.6.
            Record Dates3.7.
            List of Members3.8.
            Quorum3.9.
            Proxies3.10.
            Inspectors of Election3.11.
            Manner of Voting3.12.
            Actions Without a
Meeting4.
            CAPITAL CONTRIBUTIONS4.1.
            Contributions, Members and
      Unitholders4.2.
            Capital Accounts4.3.
            Capital Accounts and Capital Contributions in
      General5.
            ALLOCATIONS OF NET INCOME AND NET
      LOSS5.1.
            Timing and Effect5.2.
            Allocation of Net Income and Net
      Loss5.3.
            Reallocations to Avoid Excess Deficit
      Balances5.4.
            Allocations Among
    Unitholders5.5.
            Allocation in the Event of Section 754
      Election5.6.
            Recapture of Deductions and
      Credits5.7.
            Regulatory and Curative
      Allocations6.
            DISTRIBUTIONS6.1.
            Distributions To Members6.2.
            Distributions of Uninvested
      Assets6.3.
            Limitations on
  Distributions6.4.
            Return of Distribution6.5.
            Withholding on
  Distributions7.
            DISPOSITION OF UNITS7.1.
            General7.2.
            Prohibited Dispositions7.3.
            Permitted
  Dispositions




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7.4.
            Admission of Assignee as a
      Member8.
            MANAGEMENT8.1.
            Management of Business8.2.
            General Powers of the Managing
      Member8.3.
            Limitations; Voting Rights of
      Members8.4.
            Compensation and Expense
      Reimbursement8.5.
            Contracts with the Managing Member and its
      Affiliates8.6.
            Authority8.7.
            Fiduciary Duty; Standard of
      Care8.8.
            Liability8.9.
            Other Interests8.10.
            Prohibited Acts9.
            INVESTMENT OBJECTIVES AND
      POLICIES9.1.
            Duties and Responsibilities; Investment
      Allocation9.2.
            Prohibited Investments and
      Activities9.3.
            Borrowing Policies9.4.
            Conflicts of Interest9.5.
            Conflict Resolution
    Procedures10.
            INDEMNIFICATION10.1.
            Indemnification10.2.
            Certain Actions10.3.
            Expenses of Successful
    Defense10.4.
            Determination that Indemnification is
      Proper10.5.
            Indemnification for Portion of
      Expenses10.6.
            Expense Advances10.7.
            Indemnification of Employees and Agents of the
      Fund10.8.
            Former Managing Members, Officers, Employees and
      Agents10.9.
            Insurance10.10.
            Contract Right to
  Indemnity10.11.
            Exclusivity; Other
      Indemnification10.12.
            Amendment or Deletion11.
            DISSOLUTION, WINDING UP AND
      REDEMPTION11.1.
            Dissolution11.2.
            Winding Up12.
            MISCELLANEOUS PROVISIONS12.1.
            Counsel to the Fund12.2.
            Counterparts12.3.
            Entire Agreement12.4.
            Severability12.5.
            Pronouns; Statutory
    Reference12.6.
            Power of Attorney12.7.
            Notices12.8.
            Binding Effect12.9.
            Governing Law12.10.
            Attorneys’ Fees13.
            DEFINITIONS




3




OPERATING
AGREEMENT


(AMENDED
and RESTATED)


FOR




CORNERSTONE
REALTY FUND, LLC




A
CALIFORNIA LIMITED LIABILITY COMPANY




THIS OPERATING AGREEMENT,madeeffective July 19, 2001
and amended and restated effective as of June 30, 2003, is among Cornerstone
Industrial Properties, LLC, a California limited liability company, Terry G.
Roussel, and the Persons executing this Agreement as members of the Fund and
those Persons who will hereafter be admitted as members upon acceptance by the
Managing Member of an executed Subscription Agreement pursuant to which such
parties accept and adopt the provisions of this Operating Agreement (the
“Members”), who agree as follows:




1.            
ORGANIZATION




1.1.         
Formation. 
Cornerstone Realty Fund, LLC (the “Fund”) has been organized as a California
limited liability company pursuant to the laws of the State of California,
including the Beverly-Killea Limited Liability Company Act, all as the same may
be amended from time to time (all of such applicable laws being hereinafter
referred to as the “Limited Liability Company Law”), by the filing of Articles
of Organization (“Articles”) with the Office of the Secretary of State of the
State of California as required by the Limited Liability Company Law.  The
Managing Member shall cause the execution, filing, and recording of all such
other certificates and documents, including amendments to the Articles of the
Fund, and shall do or cause to be done such other acts as may be appropriate to
comply with all requirements for the formation, continuation, and operation of a
limited liability company, the ownership of property, and the conduct of
business under the laws of the State of California and any other jurisdiction in
which the Fund may own property or conduct business.




1.2.         
Name.  The name
of the Fund will be Cornerstone Realty Fund, LLC.  The Fund may also
conduct its business under one or more assumed names.




1.3.         
Purpose.  The
purpose of the Fund is to engage for a competitive profit in any activity within
the purposes for which limited liability companies may be organized under the
Limited Liability Company Law.  Notwithstanding the foregoing, without the
consent of Unitholders owning a majority of the outstanding Units and the
Managing Member, the Fund shall not engage in any business other than the
following:




1.3.1.      
The business of acquiring, operating and selling multi-tenant industrial
properties; and




1.3.2.      
Such other activities directly related to the foregoing business as may be
necessary, advisable, or appropriate in the reasonable discretion of the
Managing Member to further the foregoing business.




The Fund
will have all the powers necessary or convenient to effect that purpose,
including all powers granted by the Limited Liability Company Law.




1.4.         
Duration.  The
Fund will continue in existence for the period fixed in the Articles for the
duration of the Fund or until the Fund is sooner dissolved and its affairs wound
up in accordance with the Limited Liability Company Law or this
Agreement.




1.5.         
Principal Place of Business,
Registered Office and Resident Agent.  The principal office of the
Fund shall be located at 4590 MacArthur Blvd., Suite 610, Newport Beach, CA
92660, or such other address as may be designated from time to time by the
Managing Member.  The Fund shall have an office at such other address(es)
as may be designated from time to time by the Managing Member.  The name
and address of the registered agent for service of process on the Fund in the
State of California is Terry G. Roussel, 4590 MacArthur Blvd., Suite 610,
Newport Beach, CA 92660, or such other agent and address as may be designated
from time to time by the Managing Member.




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1.6.         
Title to Fund
Property.  All Properties owned by the Fund, whether real or
personal, tangible or intangible, shall be deemed to be owned by the Fund as an
entity, and no Member, individually, shall have any ownership of such
Properties.  The Fund may hold any of its assets in its own name or in the
name of a nominee.




1.7.         
Intention for Fund.
 The Members have formed the Fund as a limited liability company under the
Limited Liability Company Law.  The Members specifically agree that, except
for purposes of federal income tax classification, the Fund will not be a
partnership (including a limited partnership) or any other venture, but the Fund
will be a limited liability company under the Limited Liability Company
Law.  Except for purposes of federal income tax classification, no Member
will be construed to be a partner in the Fund or a partner of any other Member
or Person; and the Articles, and this Agreement and the relationships it
creates, will not be construed to suggest otherwise.  Except as required
under the Limited Liability Company Law or as expressly set forth in this
Agreement, no Member shall be personally liable for any debt, obligation, or
liability of the Fund, whether that liability or obligation arises in contract,
tort, or otherwise.  A Member’s liability shall be limited to such Member’s
Capital Contribution and its share of undistributed Net Income of the
Fund.




1.8.         
Definitions. 
Certain capitalized terms used in this Agreement are defined in Section
14.




2.            
BOOKS, RECORDS AND ACCOUNTING




2.1.         
Books and
Records.  The Fund will maintain at its principal office complete
and accurate books of account and records of the Fund’s business and affairs as
required by the Limited Liability Company Law, and showing the assets,
liabilities, costs, expenditures, receipts, profits and losses of the Fund, and
which books of account and records shall include provision for separate Capital
Accounts for each Member, and shall provide for such other matters and
information as a Member shall reasonably request, together with copies of all
documents executed on behalf of the Fund.  Each Member and its
representatives, duly authorized in writing, shall have the right to inspect and
examine, at all reasonable times, at the Fund’s principal office, all such books
of account, records, and documents.  The Managing Member shall appoint a
firm of certified public accountants to audit the Fund’s annual financial
statements.




2.2.         
Fiscal Year;
Accounting.  The Fund’s fiscal year will be the calendar year. 
The Fund shall follow generally accepted accounting principles and use the
accrual method of accounting in preparation of its financial statements and the
appropriate tax method in preparation of its tax returns.




2.3.         
Bank Accounts. 
One or more accounts in the name of the Fund shall be maintained in such bank or
banks as the Managing Member may from time to time select.  Any checks of
the Fund may be signed by any Person(s) designated, from time to time, by the
Managing Member.




2.4.         
Reports to Members.
 At the expense of the Fund, the Managing Member shall cause to be prepared
and made available to the Members during each year the following:




2.4.1.      
If and for as long as the Fund is required to file quarterly reports on Form
10-Q with the Securities and Exchange Commission, the information contained in
each such report for a quarter shall be sent upon request to the Members within
sixty (60) days after the end of such quarter.  Such reports shall contain
at least an unaudited balance sheet, an unaudited statement of income for the
quarter then ended, an unaudited cash flow statement for the quarter then ended
(in the form set forth in quarterly reports required from time to time under the
Securities Exchange Act of 1934), and other pertinent information concerning the
Fund and its activities during the quarter covered by such reports.  If and
when such reports are not required to be filed, each Member will be furnished
within sixty (60) days after the end of the first six (6) month period of Fund
operations an unaudited financial report for that period containing the same
information required in the quarterly reports described above.





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2.4.2.      
Within seventy-five (75) days after the end of the Fund’s fiscal year, all
information necessary for the preparation of the Members’ federal income tax
returns and state income and other tax returns with regard to the jurisdictions
where the Properties are located shall be sent to each Member.




2.4.3.      
Within one hundred twenty (120) days after the end of the Fund’s fiscal year, an
annual report containing (i) a balance sheet as of the end of its fiscal year
and statements of income, Member’s equity, and statement of cash flows, for the
year then ended, shall be prepared in accordance with generally accepted
accounting principles and accompanied by an auditor’s report containing an
opinion of an independent certified public accountant, and (ii) a report of the
activities of the Fund during the period covered by the report shall be sent to
each member upon request.  Such report shall include a schedule of all
compensation paid and distributions made to the Managing Member, including a
description of the services performed and identifying the source of each
distribution.  Such report shall also set forth Distributions to the
Members for the period covered thereby and shall separately identify
Distributions from (1) Net Cash Flow from Operations during such period, (2) Net
Cash Flow from Operations during a prior period which had been held as reserves,
(3) Net Sales Proceeds from the disposition of Property and investments, and (4)
reserves from the Gross Proceeds of the offering originally contributed by the
Members.  Such report shall set forth the valuation of a Unit in accordance
with Section 2.8 of this Agreement.




2.4.4.      
The Managing Member shall, within sixty (60) days of the end of each quarter
wherein fees were received, send upon request to each Member a detailed
statement setting forth the services rendered, or to be rendered, by the
Managing Member and the amount of the fees received.  In addition, an
annual report shall be prepared summarizing such fees and other remuneration and
such report shall include a breakdown of costs reimbursed to the Managing Member
with verification of the allocation of costs confirmed by the Fund’s certified
public accountants.  Such annual report shall be furnished at the same time
as the report in Section 2.4.3 above.




2.4.5.      
Within sixty (60) days of the end of each quarter in which the Fund acquires
Properties, the Managing Member shall send quarterly reports setting forth the
details of the acquisition of Properties to each Member upon request.  The
report may be in the form of a supplement to the Prospectus and may be prepared
more frequently than quarterly.  The report shall contain the following
information:  (a) the location and a description of the general character
of all materially important real properties acquired or
presently intended to be acquired by the Fund during the quarter, (b) the
present or proposed use of such properties and their suitability and adequacy
for such use, (c) the terms of any material lease affecting the property, (d) a
statement that title insurance has been or will be obtained on all properties
acquired, and (e) a statement of the amount of proceeds in the Fund which remain
uncommitted or unexpended, stated as both a dollar amount and percentage of the
total amount of the offering proceeds of the Fund.




The Fund
shall post all of the foregoing reports on its website.




The
Managing Member shall also make such reports available upon request of the
administrator of the securities agency in any state in which Units were
registered for sale.




2.5.         
Tax Returns.  As
soon as practicable after the end of each fiscal year, the Fund shall cause to
be prepared and transmitted to the Members federal and appropriate state and
local Income Tax Schedules “K-1,” or any substitute therefor, with respect to
such fiscal year on appropriate forms prescribed.  The Fund, in the
discretion of the Managing Member, shall be entitled to utilize any special
reporting opportunities available under the Code to programs with a large number
of Members.




2.6.         
Appraisals.  All
Property acquisitions made by the Fund shall be supported by an appraisal
prepared by a competent, independent appraiser.  The appraisals shall be
maintained by the Managing Member for at least five years, and shall be
available for inspection and duplication by any Unitholder.




2.7.         
List of Members.
 An alphabetical list of names, addresses and business telephone numbers of
Unitholders and the number of Units held by each of them shall be maintained as
part of the books and records of the Fund and shall be made available for
inspection by Unitholder or its designated agent at the principal office of the
Fund upon request by a Unitholder.  A copy of such list in readily readable
type size shall be mailed to any Unitholder requesting the list within 10 days
of the request.  The Fund may make a reasonable charge for copy
work.




6


2.8.         
Valuation of
Units.  For the first two (2) full fiscal years following the
termination of the offering, the value of a Unit will be deemed to be $500, and
no valuations will be performed.  Thereafter the estimated value of each
Unit will be determined annually based upon the estimated amount a Unitholder
would receive if all of the Fund’s assets were sold as of the close of the
Fund’s fiscal year for their estimated values and if such proceeds, without
reduction for selling expenses, together with the other assets of the Fund, were
distributed in liquidation of the Fund.  Such estimated values will be
based upon annual valuations of Fund properties performed by the Managing
Member, but no independent appraisals will be obtained.




3.            
MEMBERS, UNITHOLDERS AND MEETINGS OF
MEMBERS




3.1.         
Units of Membership
Interest.  Units shall be issued to Members pursuant to the Fund’s
offering of interests as described in one or more Form S-11 registration
statements and prospectuses included therein (a “Prospectus”) filed by the Fund
under the Securities Act of 1933, as amended (the “Offering”).  Except as
otherwise provided in this Section 3.1, no additional Units shall thereafter be
issued by the Fund.  Notwithstanding any contrary provision of this
Agreement, the Fund shall do or cause to be done whatever is required so that
the Units shall be “Publicly-Offered Securities” within the meaning of Section
2510.3-101 of the Department of Labor Regulations, 29 CFR § 2510.3-101, as
amended, or any successor provision.  The Managing Member may, in its
discretion, in order to comply with the foregoing requirement, issue for such
consideration as it may determine (including by gift) Units to such Persons and
in such Percentage Interests as it may determine.  The Managing Member will
receive its interest in the Fund for a contribution of $1,000, and such interest
of the Managing Member will not be considered an interest in Units for purposes
hereof.  Notwithstanding the preceding sentence, the Managing Member may
acquire Units and be treated in the same manner as other Unitholders with
respect thereto.




3.2.        Book-Entry Evidence of
Ownership




3.2.1.      
The Units will be issued only in fully registered book-entry form. 
Ownership of Units in the Fund will be shown on and transfer thereof will be
effected only through book-entry in records maintained by the Fund. 
Certificates evidencing ownership of Units will not be issued.




3.2.2.      
Units of the Fund shall be transferable in the manner prescribed by law and in
this Agreement, subject to restrictions set forth in Article 7 hereof. 
Assuming all restrictions on transfers have been met, transfers of Units shall
be made on the books of the Fund.




3.3.         
Place of
Meetings.  All meetings of Members shall be held at the principal
office of the Fund or at such other place as shall be determined by the Managing
Member and stated in the notice of meeting.




3.4.         
Meetings of
Members.  Meetings of all Members may be called by the Managing
Member and shall be called upon the written request to the Managing Member of
Members holding in the aggregate at least ten percent (10%) of the Percentage
Interests owned by all Members.  The request shall state the purpose or
purposes for which the meeting is to be called.




3.5.         
Notice of
Meetings.  In the case of a meeting requested by Members holding at
least ten percent (10%) in the aggregate of the Percentage Interests owned by
all Members, the notice shall be delivered to the Members of the Fund within 10
business days of receipt of such request.  Except as otherwise provided by
statute, written notice of the time, place and purposes of a meeting of Members
shall be given not less than 10 nor more than 60 days before the date of the
meeting to each Member, either personally or by mailing such notice to its last
address as it appears on the books and records of the Fund.  The notice
must include a detailed statement of the action proposed, including a verbatim
statement of the wording of any resolution proposed for adoption by the Members
and of any proposed amendment to the Agreement. The Fund will provide for
proxies or written consents which specify a choice between approval and
disapproval of each matter to be acted upon at the meeting.  No notice need
be given of an adjourned meeting provided the time and place to which such
meeting is adjourned are announced at the meeting at which the adjournment is
taken and at the adjourned meeting only such business is transacted as might
have been transacted at the original meeting.  However, if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each Member of record on the new record
date entitled to notice as provided in this Agreement.




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3.6.         
Record Dates. 
The Managing Member may fix in advance a date as the record date for the purpose
of determining Members entitled to notice of and to vote at a meeting of Members
or an adjournment thereof, or to express consent or to dissent from a proposal
without a meeting, or for the purpose of determining Members entitled to receive
payment of a Distribution or allotment of a right, or for the purpose of any
other action.  The date fixed shall not be more than 60 nor less than 20
days before the date of the meeting, nor more than 60 days before any other
action.  In such case only such Members as shall be Members of record on
the date so fixed shall be entitled to notice of and to vote at such meeting or
adjournment thereof, or to express consent or to dissent from such proposal, or
to receive payment of such Distribution or to receive such allotment of rights,
or to participate in any other action, as the case may be, notwithstanding any
transfer of any Units on the books of the Fund, or otherwise, after any such
record date.  Nothing in this Agreement shall affect the rights of a Member
and its transferee or transferor as between themselves.




3.7.         
List
ofMembers.  The agent of the Fund having charge of the transfer
records for Units of the Fund shall make and certify a complete list of the
Members entitled to vote at a Members’ meeting or any adjournment thereof. 
The list (i) shall be arranged alphabetically, with the address of, and the
Percentage Interest of, each Member; (ii) shall be produced at the time and
place of the meeting; (iii) shall be subject to inspection by any Member
during the whole time of the meeting; and (iv) shall be prima facie
evidence as to who are the Members entitled to examine the list or vote at the
meeting.




3.8.         
Quorum.  Unless
a greater or lesser quorum is required in the Articles or by the Limited
Liability Company Law, the Members present at a meeting in person or by proxy
who, as of the record date for such meeting, were holders of a majority of the
Percentage Interests held by all Members shall constitute a quorum at the
meeting.  Whether or not a quorum is present, a meeting of Members may be
adjourned by a vote of the Members present in person or by proxy.




3.9.         
Proxies.  A
Member entitled to vote at a meeting of Members or to express consent or dissent
without a meeting may authorize other Persons to act for such Member by
proxy.  A proxy shall be signed by the Member or its authorized agent or
representative and shall not be valid after the expiration of one year from its
date unless otherwise provided in the proxy.  A proxy is revocable at the
pleasure of the Member executing it except as otherwise provided by the Limited
Liability Company Law.




3.10.       
Inspectors of
Election.  The Managing Member, in advance of a Members’ meeting,
may, and on request of a Member entitled to vote thereat shall, appoint one or
more inspectors.  In case a Person appointed fails to appear or act, the
vacancy may be filled by appointment made by the Managing Member in advance of
the meeting or at the meeting by the Person presiding thereat.  If
appointed, the inspectors shall determine the Percentage Interests of all
Members represented at the meeting, the existence of a quorum and the validity
and effect of proxies, and shall receive votes, ballots or consents, hear and
determine challenges or consents, determine the result, and do such acts as are
proper to conduct the election or vote with fairness to all Members.  On
request of the person presiding at the meeting or a Member entitled to vote
thereat, the inspectors shall make and execute a written report to the Person
presiding at the meeting of any of the facts found by them and matters
determined by them.  The report shall be prima facie evidence of the facts
stated and of the vote as certified by the inspectors.




3.11.       
Manner of
Voting.  Votes shall be cast in writing, signed by the Member or its
proxy.  When an action is to be taken by a vote of the Members, and a
quorum is present, it shall be authorized by the affirmative vote of the holders
of a majority of the Percentage Interests owned by all of the Members, unless a
greater plurality is required by the Articles, this Agreement or by the Limited
Liability Company Law.




3.12.       
Actions Without a
Meeting.  Any action required or permitted to be taken at a meeting
of the Members may be taken without a meeting, without prior notice, and without
a vote, if consents in writing, setting forth the action so taken, are signed by
the number of Members required to approve such action, but in no event less than
a majority in Percentage Interest of the Members.  Each written consent
will bear the date and signature of each Member who signs the
consent.




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4.            
CAPITAL CONTRIBUTIONS




4.1.         
Contributions, Members and
Unitholders.




4.1.1.      
The Fund intends to issue and sell in public offerings pursuant to one or more
Form S-11 registration statements under the Securities Act of 1933 as amended,
not less than $3,000,000 nor more than $50,000,000 in Units, in the aggregate,
and to admit as Members the Unitholders who contribute cash to the capital of
the Fund for such Units.  Each purchaser of Units must purchase a minimum
of five (5) Units, except that for Qualified Plans the minimum purchase shall be
two (2) Units.  Units shall be issued in Units of $500 each.  A
minimum of 6,000 Units and a maximum of 100,000 Units shall be issued pursuant
to said registration statement.




4.1.2.      
Upon receipt by the Escrow Agent of Three Million Dollars ($3,000,000) in cash,
representing the subscription payments for 6,000 Units, the Fund will direct the
Escrow Agent to transfer such funds to the Fund’s general account and will
commence admitting the purchasers of the Units to the Fund as Members and
Unitholders not later than fifteen (15) days after escrow funds are
released.  Interest from the date funds were deposited in escrow until the
release from escrow (net of escrow expenses) will be distributed to purchasers
pro rata based on the number of days such purchaser’s funds were held in escrow
as soon as practicable after the date the minimum number of Units is sold. 
No interest in an amount less than $25.00 will be paid to purchasers.  The
Managing Member or its Affiliates may purchase up to $450,000 of Units to permit
the release of funds from escrow.  Units so purchased will be acquired for
investment and on the same terms as offered to other purchasers.  If
subscriptions for at least 6,000 Units have not been received by one year
following the effective date of the Offering, all funds received from purchasers
as of such time will be promptly refunded to each purchaser along with any
interest earned thereon (after escrow expenses) on a pro rata basis, based on
the number of days such purchaser’s funds were held in escrow.  Following
release of funds from escrow, Unitholders will be admitted not later than the
last day of the calendar month following the date their subscription is accepted
by the Fund.




4.2.         
Capital
Accounts.  The Fund shall establish and maintain a separate capital
account for each Member (“Capital Account”).  The Fund shall determine and
maintain each Capital Account in accordance with Regulations Section
1.704-1(b)(2)(iv).  Each Capital Account shall reflect, among other items
(i) all Capital Contributions made to the Fund, (ii) all allocations
of Net Income and Net Loss, and (iii) all Distributions made by the
Fund.  Any and all amounts distributed by the Fund to a Member as a fee
and/or as compensation or reimbursement for services shall not reduce such
Member’s Capital Account.




4.2.1.      
The Capital Accounts and the other provisions in this Agreement relating to the
maintenance of Capital Accounts are intended to comply with Regulation Sections
1.704-1(b) and 1.704-2 and shall be interpreted and applied in a manner
consistent with those Regulations and in the event of any conflict, those
Regulations shall prevail.




4.3.         
Capital Accounts and Capital
Contributions in General.




4.3.1.      
In the event that a Member’s Units or a portion thereof are transferred in
accordance with the provisions of this Agreement, the transferee shall succeed
to the Capital Account of the transferor to the extent that it relates to the
Units or portion thereof so transferred.




4.3.2.      
Except as otherwise provided in this Agreement (i) no interest will accrue on
any Capital Contribution or on the positive balance, if any, in any Capital
Account, (ii) no Member will have any right to withdraw any part of its Capital
Account or to demand or receive the return of its Capital Contribution, or
to receive any Distributions from the Fund, (iii) no Member shall be required to
make any additional contribution to the capital of, or any loan to, the Fund,
and (iv) no Member shall have any liability for the return of any other Member’s
Capital Account or Capital Contributions.




9


5.            
ALLOCATIONS OF NET INCOME AND NET LOSS




5.1.         
Timing and
Effect.  Except as otherwise provided in this Article 5, Net Income
and Net Loss shall be allocated to the Members for any fiscal year in a manner
so as to comply with the requirements of Regulation Section
1.704-1(b)(2)(iv).




5.2.         
Allocation of Net Income and
Net Loss.




5.2.1.      
Subject to Sections 5.3 and 5.7, Net Income shall be allocated to the Members as
follows:




(a)          
First, ten percent (10%) to the Managing Member and ninety percent (90%) to the
Unitholders, until the Net Income allocated pursuant to this Section 5.2.1(a)
for the current year and all prior fiscal years equals the cumulative Net Loss
allocated to the Members pursuant to Section 5.2.2(b) for all prior fiscal years
(pro rata among the Members in proportion to their share of the Net Loss being
offset); and




(b)          
Next, to the Members in the same proportion as Net Cash Flow from Operations or
Net Sales Proceeds were distributed to the Members pursuant to Sections 6.1.1
and 6.1.2 for the current year and all prior fiscal years, exclusive of any
Distributions representing a return of Invested Capital Contributions pursuant
to Section 6.1.2(i), until such time as the allocations of Net Income pursuant
to this Section 5.2.1(b) for the current year and all prior fiscal years equal
such Distributions for the current year and all prior fiscal years (pro rata
among the Members in proportion to their share of such Distributions);
and




(c)          
The balance, if any, fifty percent (50%) to the Managing Member and fifty
percent (50%) to the Unitholders.




5.2.2.      
Subject to Sections 5.3 and 5.7, Net Loss shall be allocated as
follows:




(a)          
First, fifty percent (50%) to Managing Member and fifty percent (50%) to the
Unitholders until the Net Loss allocated pursuant to this Section 5.2.2(a) for
the current year and all prior fiscal years equals the cumulative Net Income
allocated to the Members pursuant to Section 5.2.1(c) for all prior fiscal
years (pro rata among the Members in proportion to their share of the Net Income
being offset); and




(b)          
The balance, if any, ten percent (10%) to the Managing Member and ninety percent
(90%) to the Unitholders.




5.3.         
Reallocations to Avoid
Excess Deficit Balances.  Notwithstanding any other provisions of
this Agreement to the contrary, no Net Loss shall be allocated to any Member to
the extent that such allocation would cause such Member to have an Adjusted
Capital Account Deficit.  Such Net Loss or deduction shall be reallocated
away from such Member and to the other Members, on a pro rata basis, but only to
the extent that such reallocation would not cause or increase any such other
Member’s Adjusted Capital Account Deficit.  Any Net Loss reallocated
hereunder shall be subject to an immediate chargeback of Net Income prior to any
other allocations of Net Income pursuant to Section 5.2.1 in any subsequent
period.




5.4.         
Allocations Among
Unitholders.  Except as otherwise provided in this Article V,
including, without limitation, Section 5.7.7 with respect to transferred Units,
allocations of Net Income or Net Loss to Unitholders as a class shall be
allocated among the Unitholders in accordance with their respective Percentage
Interests, including, without limitation, Section 5.7.7 with respect to
transferred Units.




5.5.         
Allocation in the Event of
Section 754 Election.  To the extent an adjustment to the adjusted
tax basis of any Fund asset pursuant to Code Section 734(b) or Code Section
743(b) is required pursuant to Regulation Section 1.704-1(b)(2)(iv)(m) to be
taken into account in determining Capital Accounts, the amount of that
adjustment to the Capital Accounts shall be treated as an item of Net Income (if
the adjustment increases the basis of the asset) or Net Loss (if the adjustment
decreases the basis of the asset), and that Net Income or Net Loss shall be
specially allocated to the Members in a manner consistent with the manner in
which their Capital Accounts are required to be adjusted pursuant to that
Regulation.




10


5.6.         
Recapture of Deductions and
Credits.  If any “recapture” of deductions or credits previously
claimed by the Fund is required under the Code upon the sale or other taxable
disposition of any Property, those recaptured deductions or credits shall, to
the extent possible, be allocated to the Members pro rata in the same manner
that the deductions and credits giving rise to the recapture items were
originally allocated, using the “first-in, first-out” method of accounting;
provided, however, that this Section 5.6 shall only affect the characterization,
but not amount of Net Income allocated among the Members for tax
purposes.




5.7.         
Regulatory and Curative
Allocations.




5.7.1.      
Qualified Income
Offset.  In the event that any Member unexpectedly receives any
adjustment, allocation or distribution described in Regulation Sections
1.704-1(b)(2)(ii)(d) (4), (5) or (6), items of Net Income shall be specially
allocated to such Member in an amount and manner sufficient to eliminate, to the
extent required by the Regulations, the Adjusted Capital Account Deficit of that
Member as quickly as possible.




5.7.2.      
Gross Income
Allocation.  In the event that, despite Section 5.3, any Member has
an Adjusted Capital Account Deficit at the end of any fiscal year, that Member
shall be specially allocated items of Net Income (or gross income) to eliminate
such deficit as quickly as possible, provided that an allocation pursuant to
this Section 5.7.2 shall be made only if and to the extent that such Member
would have an Adjusted Capital Account Deficit after all other allocations
provided for in this Article 5 have been made as if Section 5.7.1 and this
Section 5.7.2 were not in the Agreement.




5.7.3.      
Minimum Gain
Chargeback.  To the extent required under Regulation Section
1.704-2(f), if there is a net decrease in Fund Minimum Gain during any fiscal
year, each Member shall be allocated, before any other allocation of Fund items
for such taxable year, items of Net Income for such year (and, if necessary,
subsequent years), in proportion to, and to the extent of, an amount equal to
the portion of such Member’s share of such net decrease in Minimum Gain as
determined under Regulation Section 1.704-2(g).  The items so allocated
shall be determined in accordance with Regulation Section
1.704-2(j)(2)(i).  This Section 5.7.3 is intended to comply with the
“minimum gain chargeback” requirements of the Regulations and shall be
interpreted consistently therewith.





5.7.4.      
Member Minimum Gain
Chargeback.  To the extent required under Regulation Section
1.704-2(i), if there is a net decrease in minimum gain attributable to Member
non-recourse debt during a Fund taxable year, any Member with a share of that
Member non-recourse debt minimum gain (determined under Regulation Section
1.704-2(i)(5)) as of the beginning of the year must be allocated items of Net
Income for such year (and if necessary, subsequent years) equal to that Member’s
share of the net decrease in the Member non-recourse debt minimum gain.  A
Member’s share of the net decrease in Member non-recourse debt minimum gain is
determined in a manner consistent with the provisions of Regulation Section
1.704-2(i)(5).  The items so allocated shall be determined in accordance
with Regulation Section 1.704-2(j)(2)(ii).  This Section 5.7.4 is intended
to comply with the “partner minimum gain chargeback” requirements of the
Regulations and shall be interpreted consistently therewith.




5.7.5.      
Curative
Allocations.  The allocations set forth in Sections 5.3, 5.5, 5.7.1,
5.7.2, 5.7.3 and 5.7.4 (the “Regulatory Allocations”) are intended to comply
with certain requirements of Regulation Sections 1.704-1(b) and 1.704-2. 
Notwithstanding any other provision of this Article 5 (other than the Regulatory
Allocations), the Regulatory Allocations shall be taken into account in
allocating other items of income, gain, loss and deduction among the Members so
that, to the extent possible, the net amount of such allocation of other items
and the Regulatory Allocations to each Member should be equal to the net amount
that would have been allocated to each such Member if the Regulatory Allocations
had not occurred.




5.7.6.      
Adjustment to
Allocations.  It is the intention of the Members that the Net Income
and Net Loss for each fiscal year will be allocated to the Members in such a
manner that would cause each Member’s Adjusted Capital Account Balance to equal
the amount that would be distributed to such Member pursuant to Section 11.2
upon a hypothetical liquidation of the Fund if distributions were not limited to
Capital Accounts.  For purposes of this Section 5.7.6, the “Adjusted
Capital Account Balance” of a Member equals the balance of such Member’s Capital
Account at the end of the fiscal year increased by any amount which the Member
is deemed to be obligated to restore pursuant to the penultimate sentences of
Regulation Sections 1.704-2(g)(1) and (i)(5).  In determining the amounts
distributable to the Members under Section 11.2 upon a hypothetical liquidation,
it shall be presumed that (i) all of the Fund’s assets would be sold for an
amount equal to the values used in calculating the Capital Accounts of the
Members, (ii) payments to any holder of a non-recourse debt would be limited to
the fair market value of the assets secured by repayment of such debt, and (iii)
the proceeds of such hypothetical sale would be applied and distributed in
accordance with Section 11.2.  If, upon the advice of the public accounting
firm retained to prepare the income tax returns of the Fund, it is determined
that the intentions set forth in this Section 5.7.6 are not being met by the
allocations in Article V, the Managing Member shall make such allocations
of Net Income or Net Loss, or items of income, gain, loss, or deduction
comprising such Net Income or Net Loss as necessary to achieve the intentions
set forth in this Agreement.




11


5.7.7.      
Allocation of Net
Income and Net Loss and Distributions in Respect of Transferred Interest and
Newly Issued Units.  To the extent allowed by Section 706(d) of
the Code, and except as otherwise expressly provided in this Article V, if
any Units are transferred or newly issued during any tax year of the Fund, each
item of income, gain, loss, deduction, or credit of the Fund for such tax year
shall be divided and allocated among the Unitholders by taking into account
their varying interests during such tax year by assigning each such item pro
rata to each day in the tax year to which such item is attributable and
allocating the amount of each such item so assigned to any such day to the
Unitholder based upon its respective Percentage Interest at the close of such
day; provided, however, that with respect to items of income, gain, loss,
deduction or credit attributable to any extraordinary nonrecurring items of the
Fund, the Managing Member shall have the discretion to allocate each such item
among the Unitholders so as to properly take into account the varying interests
of the Unitholders; further provided, that for the purpose of accounting
convenience and simplicity, the Fund shall treat a transfer of, or an increase
or decrease in, Units which occurs at any time during a month as having been
consummated on the last day of such month, regardless of when during such month
such transfer, increase, or decrease actually occurs except that in the case of
transfers or new issuances in the month of December, the actual date the
transfer or issuance occurred shall be used.




6.            
DISTRIBUTIONS




6.1.         
Distributions To
Members.




6.1.1.      
Net Cash Flow from
Operations.  Subject to Section 6.3, distributions of Net Cash Flow
from Operations of the Fund for any fiscal year will be made ninety percent
(90%) to the Unitholders and ten percent (10%) to the Managing Member until the
“Unitholders’ 8% Preferred Return” is attained (pro rata among the Unitholders
in proportion to their share of the Unitholders’ 8% Preferred Return). 
Thereafter, distributions of Net Cash Flow from Operations shall be made one
hundred percent (100%) to the Early Investors until the Early Investors’ 12%
Incentive Return is attained (pro rata among the Early Investors in proportion
to their Early Investors’ Units).  Thereafter, Distributions of Net Cash
Flow from Operations shall be made fifty percent (50%) to the Unitholders (pro
rata among the Unitholders in proportion to their Percentage Interests) and
fifty percent (50%) to the Managing Member.




6.1.2.      
Net Sales
Proceeds.  Subject to Section 6.3, Net Sales Proceeds, after
replenishment of any reserves, will be distributed in the following order of
priority:  (i) first, one hundred percent (100%) to the Unitholders in an
amount equal to their Invested Capital Contributions, calculated at the time of
such Distribution (pro rata among the Unitholders in proportion to their
Invested Capital Contributions); (ii) ninety percent (90%) to the
Unitholders and ten percent (10%) to the Managing Member until the Unitholders
have received distributions in an amount equal to the unpaid balance of their
aggregate Unitholders’ 8% Preferred Return (pro rata among the Unitholders in
proportion to their share of the Unitholders’ 8% Preferred Return); and (iii)
thereafter, fifty percent (50%) to the Unitholders (pro rata among the
Unitholders in proportion to their Percentage Interests) and fifty percent (50%)
to the Managing Member.




6.2.         
Distributions of Uninvested
Assets.  Subject to the provisions of Section 6.4, all cash or cash
equivalents which constitute part of the assets of the Fund which have not been
invested in Properties within one year following the termination of the Offering
shall be distributed pursuant to Section 6.1.2(i) to the Unitholders
promptly after and as of the end of such year.




12


6.3.         
Limitations on
Distributions.  The Distributions to be made pursuant to this
Article 6 are subject to the limitations of this Section 6.3. 
Distributions may be made only if the Managing Member determines in its
reasonable judgment that the Fund has sufficient cash on hand exceeding the
current and the anticipated needs of the Fund to fulfill its business purposes
(including its needs for operating expenses, acquisitions and reserves). 
Distributions will be made in cash.  No Distribution will be declared or
made if, after giving it effect, the Fund would not be able to pay its debts as
they become due in the usual course of business or the fair market value of the
Fund’s assets would be less than the sum of its liabilities.  All such
Distributions to Unitholders shall be made only to the Persons who, according to
the books and records of the Fund, are the holders of record of the Units in
respect of which such Distributions are made on the actual date of
Distribution.  Neither the Fund nor the Managing Member shall incur any
liability for making Distributions in accordance with this Article
6.




6.4.Return of
Distribution.  Except
for Distributions made in violation of the Limited Liability Company Law or this
Agreement, no Unitholder shall be obligated to return any Distribution to the
Fund or pay the amount of any Distribution for the account of the Fund or to any
creditor of the Fund.  The amount of any Distribution returned
to the Fund by a Unitholder or paid by a Unitholder for the account of the Fund
or to a creditor of the Fund shall be added to the account or accounts from
which it was subtracted when it was distributed to the
Unitholder.




6.5.         
Withholding on
Distributions.  To the extent that any Distribution is subject to
Federal or state withholding, the portion of any such Distribution withheld and
paid over to Federal or state authorities shall be treated for all purposes
hereunder as if such amount was actually distributed to the particular Member
otherwise entitled to receive such amount.




7.            
DISPOSITION OF UNITS




7.1.          General.  Every
sale, assignment, transfer, exchange, mortgage, pledge, grant, hypothecation, or
other disposition of any Units will be made only in compliance with this Article
7.  No Units will be disposed of unless and until:




7.1.1.      
such instruments as may be required by the Limited Liability Company Law or
other applicable law or to effect the continuation of the Fund and the Fund’s
ownership of its Properties are executed and delivered and/or
filed;




7.1.2.      
the instrument of assignment binds the assignee to all of the terms and
conditions of this Agreement, and all amendments thereto, as if the assignee
were a signatory party hereto; and




7.1.3.      
the instrument of assignment is manually signed by the assignee and assignor and
transfer fee of $250 is paid and the proposed disposition is consented to by the
Managing Member, in its reasonable discretion, after determining that such
disposition will not be a prohibited disposition pursuant to
Section 7.2.




7.2.         
Prohibited
Dispositions.  Any attempted sale, assignment, transfer, exchange,
mortgage, pledge, grant, hypothecation, or other disposition of any Units will
be null and void if it is not made in compliance with this Article 7
or:




7.2.1.      
subject to waiver by the Managing Member upon advice of counsel, if the
disposition (in conjunction with prior dispositions) would cause a termination
of the Fund under the Code;




7.2.2.      
if the disposition would, in the opinion of tax counsel to the Fund, jeopardize
the status of the Fund as a partnership for federal income tax purposes or cause
the Fund to be treated as a publicly-traded partnership;




7.2.3.      
if the disposition would not be in compliance with any and all state and federal
securities laws and regulations; or




13


7.2.4.      
if the disposition would cause the assets of the Fund to be characterized as
“plan assets” under ERISA.




7.3.Permitted
Dispositions.Subject to applicable law, and
the provisions of this Article 7, a Member may assign all or part of its
Units in the Fund.  Unless authorized by the Managing Member, a Member may
not assign fractional Units or less than the minimum number of Units purchasers
were initially required to purchase pursuant to the Form S-11 registration
statement.  No partial interest (i.e., an interest in only Distributions and
allocations of the Fund) in any Unit or Units may be assigned by a
Unitholder.  Only an entire interest in any Unit or Units may be assigned
pursuant to this Article 7.




7.4.         
Admission of Assignee as a
Member.




7.4.1.      
An assignee of a Unit pursuant to an assignment permitted in this Agreement
shall, subject to the provisions of this Article 7, and with the consent of
the Managing Member pursuant to Section 7.1.3, be admitted as a Member and
Unitholder in the Fund in the place and stead of the assignor Unitholder in
respect of the Units acquired from the assignor Unitholder and shall have all of
the rights, powers, obligations, and liabilities, and be subject to all of the
restrictions, of the assignor Unitholder, including, without limitation, but
without release of the assignor Unitholder, the liability of the assignor for
any existing unperformed obligations of the assignor Unitholder.  The Fund
shall admit substitute members on the first day of each fiscal quarter or more
frequently in the discretion of the Managing Member.




7.4.2.      
The substitute Unitholder will be considered a Member of the Fund, will have all
of the rights and powers and is subject to all of the restrictions and
liabilities of an initial Unitholder.




8.            
MANAGEMENT




8.1.         
Management of
Business.  The business and affairs of the Fund shall be managed by
its Managing Member.  The initial Managing Member of the Fund shall be
Cornerstone Industrial Properties, LLC, a California limited liability
company.  No Member, in its individual capacity, shall have the power or
authority to legally bind the Fund, except as otherwise provided
herein.




8.2.         
General Powers of the
Managing Member.  Except as may otherwise be provided in this
Agreement, the ordinary and usual decisions concerning the business and affairs
of the Fund will be made by the Managing Member.  The Managing Member has
the power, on behalf of the Fund, to do all things necessary or convenient to
carry out the business and affairs of the Fund, including, without limitation,
the power to: (a) purchase, lease or otherwise acquire any real or personal
property; (b) sell, convey, lease, exchange, or otherwise dispose any real or
personal property; (c) open one or more depository accounts and make deposits
into and checks and withdrawals against such accounts; (d) incur
liabilities, and other obligations; (e) enter into agreements and execute
contracts, documents, and instruments; (f) engage employees and agents, define
their duties, and establish their compensation or remuneration; (g) obtain
insurance covering the business and affairs of the Fund and its property and its
employees and agents; (h) prosecute or defend any proceeding in the Fund’s name;
and (i) take all steps reasonably available to prevent the trading of Units
by third parties on an established securities market or a secondary market (or
the substantial equivalent thereof) within the meaning of Code Section 7704 or
to allow any transfers of Units which could cause the Fund to violate the safe
harbors set forth in the Regulations promulgated under Section 7704 of the
Code.




8.3.         
Limitations; Voting Rights
of Members.  Notwithstanding the foregoing Section 8.2, or any other
provision contained in this Agreement to the contrary, no act will be taken, sum
expended, decision made, obligation incurred, or power exercised by the Managing
Member or any officer on behalf of the Fund except by the affirmative vote of
the Managing Member and Unitholders holding a majority of the Percentage
Interests with respect to (a) amendment of the Articles or this Agreement
except amendments which do not adversely affect the right of Unitholders, (b)
voluntarily withdraw as the Managing Member, (c) appointment of a new
managing member, (d) sale of all or substantially all of the Fund’s assets
other than in the ordinary course of business, (e) causing the merger or
other reorganization of the Fund; (f) any change in the character of the
business and affairs of the Fund; (g) the commission of any act that would
make it impossible for the Fund to carry on its ordinary business and affairs;
(h) any act that would contravene any provision of the Articles, this
Agreement, or the Limited Liability Company Law; or (i) dissolving the
Fund.  Unitholders holding a majority of the Percentage Interests may,
without the concurrence of the Managing Member: (i) amend or restate the
Articles or this Agreement provided an amendment which modifies the compensation
or Distributions to which the Managing Member is entitled, or affects its
duties, requires the consent of the Managing Member and provided that an
amendment is required, in the opinion of tax counsel to the Fund, to permit the
Fund to be taxed as a partnership for federal income tax purposes, shall not
require the approval of the Unitholders; (ii) remove the Managing Member
(including, without limitation, upon the Managing Member’s bankruptcy);
(iii) elect a new Managing Member; (iv) approve or disapprove the Sale
of all or substantially all of the assets of the Fund other than in the ordinary
course of its business; or (v) dissolve the Fund.  In any such vote,
the Managing Member may not vote any Units owned by it.




14


Upon the
removal or termination of the Managing Member, the Fund is required to pay the
terminated Managing Member all amounts then accrued and owing to the Managing
Member.  The Fund may terminate the terminated Managing Member’s interest
in Fund income, losses, distributions and capital by payment of an amount equal
to the then present fair market value of the terminated Managing Member’s
interest determined by agreement of the terminated Managing Member and the Fund,
or, if they cannot agree, by arbitration in accordance with the then current
rules of the American Arbitration Association.  The expense of arbitration
shall be borne equally by the terminated Managing Member and the Fund.  The
fair market value of the terminated Managing Member’s interest shall be the
amount of the terminated Managing Member would receive upon dissolution and
termination of the Fund assuming that such dissolution or termination occurred
on the date of the terminating event and the assets of the Fund were sold for
their then fair market value without any compulsion on the part of the Fund to
sell such assets.  Where the termination is voluntary, the payment to the
terminated Managing Member will be made by a non-interest bearing unsecured
promissory note with principal payments payable, if at all, from distributions
which the terminated Managing Member would have received under this Agreement
had the Managing Member not terminated.  Where the termination is
involuntary, the payment will be made by an interest bearing promissory note
coming due in no less than 5 years with equal installments each
year.




Without
the concurrence of Unitholders owning a majority of the Percentage Interests,
the Managing Member may not voluntarily withdraw as the Managing Member unless
such withdrawal would not affect the tax status of the Fund and would not
materially adversely affect the Unitholders.




8.4.         
Compensation and Expense
Reimbursement.  The Managing Member and/or its Affiliates which may
include the Dealer Manager shall be entitled to receive the following
compensation and expense reimbursements:




8.4.1.      
Selling commissions of nine percent (9%) per Unit on the first $3,000,000 of
Units issued by the Fund and seven percent (7%) per Unit on all Units issued by
the Fund thereafter, payable to the Dealer Manager;




8.4.2.      
Marketing Support Fee of two percent (2%) per Unit on all Units issued by the
Fund less $60,000 payable to the Dealer Manager;




8.4.3.      
Non-Accountable Expense Allowance of one percent (1%) per Unit on all Units
issued by the Fund payable to the Dealer Manager;




8.4.4.      
Due Diligence Expense Allowance Fee of up to one-half percent (0.5%) per Unit on
all Units issued by the Fund, payable to the Dealer Manager;




8.4.5.      
Reimbursement of actual expenses incurred in connection with the offer and sale
of the Units by the Fund including but not limited to legal and accounting fees,
registration and filing fees, printing costs, travel, escrow and other expenses
in connection with Fund formation, qualification and registration and in
marketing and distributing the Units under applicable federal and state
law.  This includes any expenses directly related to the offering and sale
of Units including the salary and benefits of two employees of Cornerstone
Ventures, Inc. who were solely dedicated to working with members of the National
Association of Securities Dealers, Inc. to evaluate products available and
attractive to their customers and to structure the Fund and in developing
advertising materials for the Fund;




15


8.4.6.      
Reimbursement of actual expenses incurred in connection with the acquisition of
Properties whether or not acquired, including non-refundable option payments on
property not acquired, surveys, appraisals, title insurance and escrow fees,
legal and accounting fees, architectural and engineering reports, environmental
and asbestos audits, travel and communication expenses and other related
expenses;




8.4.7.      
Reimbursement of actual cost of goods and materials and services necessary to
the prudent operation of the Fund which are supplied to the Fund by the Managing
Member but not in excess of the cost that the Fund would pay an unaffiliated
third party for such goods, materials or services, provided, however, that the
Fund will not reimburse the Managing Member or its Affiliates for the general
overhead of the Managing Member or its Affiliates;




8.4.8.      
Property management fees of no more than six percent (6%) of the gross income
generated by the Fund from gross rental income generated by each
Property;




8.4.9.      
Leasing commissions paid upon execution of new and renewal leases equal to six
percent (6%) of rent scheduled to be paid during the first and second year of
the lease, five percent (5%) during the third and fourth years and four percent
(4%) during the fifth and later years;




8.4.10.    
Construction supervision fee equal to ten percent (10%) of the cost of tenant
improvements and capital improvements to the Properties;




8.4.11.    
Distribution of ten percent (10%) of Net Cash Flow from Operations until
Unitholders have received Distributions equal to the Unitholders’ 8% Preferred
Return (and Early Investors’ 12% Incentive Return, as applicable) and thereafter
fifty percent (50%) of Net Cash Flow from Operations;




8.4.12.    
Property disposition fees equal to six percent (6%) of the contract sales price
of the Properties sold by  the Managing Member and/or its Affiliates
pursuant to a non-exclusive arrangement; and




8.4.13.    
Ten percent (10%) of the Net Sales Proceeds after Unitholders have received an
amount equal to one hundred percent (100%) of their Invested Capital
Contributions and their Unitholders’ 8% Preferred Return and thereafter, fifty
percent (50%) of Net Sales Proceeds after Unitholders have received an amount
equal to their Unitholders’ 8% Preferred Return.




8.5.Contracts
with the Managing Member and its Affiliates.Any agreements, contracts and
arrangements with the Managing Member or its Affiliates permitted hereunder
shall be subject to the following conditions:  (i) any such agreements,
contracts or arrangements, other than for Property leasing services, Property
management services, construction supervision services or Property disposition
services provided for in Sections 8.4.8, 8.4.9, 8.4.10 and 8.4.12 of this
Agreement, shall be embodied in a written contract which
describes the services to be rendered and all compensation to be paid; (ii) the
compensation, price or fee must be competitive with the compensation price or
fee of any non-affiliate which could render comparable services or sell or lease
comparable goods on competitive terms to the Fund; (iii) any such agreements,
contracts or arrangements shall be fully and promptly disclosed to all Members
in the reports made available pursuant to Section 2.4; (iv) any such agreements,
contracts or arrangements other than for Property leasing services, Property
management services, construction supervision services or Property disposition
services provided for in Sections 8.4.8, 8.4.9, 8.4.10 and 8.4.12 of this
Agreement shall be terminable by a majority in Percentage Interest of the
Unitholders, without penalty, upon not more than sixty (60) days’ prior 
written notice; (v) the Managing Member or its Affiliate must be previously and
independently engaged in the business of rendering the services or selling or
leasing the goods to be provided, as an ordinary and ongoing business; and
(vi) goods or services other than for Property leasing services, Property
management services, construction supervision services or Property disposition
services provided for in Sections 8.4.8, 8.4.9, 8.4.10 and 8.4.12 of this
Agreement shall be provided by the Managing Member only in extraordinary
circumstances.




8.6.         
Authority.  All
employees and agents of the Fund shall have such authority and perform such
duties in the conduct and management of the business and affairs of the Fund as
may be designated by the Managing Member and this Agreement.




16


8.7.         
Fiduciary Duty; Standard of
Care.  The Managing Member shall have fiduciary responsibility for
the safekeeping and use of all funds and assets of the Fund, whether or not in
the Managing Member’s possession or control.  The Managing Member shall not
employ, or permit another to employ such funds or assets in any manner except
for the exclusive benefit of the Fund.  Each person appointed by the
Managing Member to perform duties for the Fund will discharge his or her duties
in good faith, with the care an ordinarily prudent person in a like position
would exercise under similar circumstances, and in a manner he or she reasonably
believes to be in the best interests of the Fund.




8.8.         
Liability.  To
the extent that, at law or in equity, a Member or other Person has duties
(including fiduciary duties) and liabilities thereto to the Fund or to another
Member or the Managing Member, any such Member or other Person acting under this
Agreement shall not be liable to the Fund or to any such other Member for the
Member’s or other Person’s good faith reliance on the provisions of this
Agreement.  No Member or any other Person shall be liable for any monetary
damages to the Fund for any breach of such duties except for receipt of a
financial benefit to which the Member or other Person is not entitled, voting
for or assenting to a Distribution to Members in violation of this Agreement or
the Limited Liability Company Law, a knowing violation of law, participation in
tortious conduct or pursuant to a written agreement or contractual obligation
other than this Agreement entered into by the Member.




8.9.         
Other Interests.
 Subject to Sections 9.4 and 9.5 and applicable law, each of the Members
may engage in or possess an interest in other business ventures (unconnected
with the Fund) of every kind and description, independently or with others
including, but not limited to, participation in other limited liability
companies and partnerships engaged in the same line of business as the
Fund.  Neither the Fund nor the Members shall have any rights in and to
such independent ventures or the income or profits therefrom by reason of any
position in the Fund.




8.10.       
Prohibited
Acts.




8.10.1.    
Tax
Election.  The Managing Member is prohibited from electing corporate
tax classification status.




8.10.2.    
No Trading Market for
Units.  The Members are prohibited from (i) listing,
facilitating, or recognizing the trading of Units on an established securities
market or (ii) creating for Units or facilitating or recognizing the
trading of Units on a secondary market (or the substantial equivalent thereof)
within the meaning of Code Section 7704 and the Regulations promulgated
thereunder.




8.10.3     
Rebates, Kickbacks and
Reciprocal Arrangements.  No rebates or give-ups may be received by
the Managing Member or its Affiliates nor may the Managing Member or its
Affiliates participate in any reciprocal business arrangements which would
circumvent the restrictions on Managing Member imposed by this
Agreement.




8.10.4     
No Payment for
Investment Advice for Sale of Units.  The Managing Member and its
Affiliates shall not directly or indirectly pay or award any commissions or
other compensation to any person engaged by a potential investor for investment
advice as an inducement to such advisor to advise the purchase of the Units;
provided, however, that this clause shall not prohibit the normal sales
commissions payable to a registered broker-dealer or other properly licensed
person for selling the Units.




8.10.5     
Contracting Away
Fiduciary Duty.  The Managing Member shall not permit the Fund or
its Unitholders to contract away the fiduciary duty owed to the Unitholders by
the Managing Member under common law.




9.            
INVESTMENT OBJECTIVES AND
POLICIES




9.1.         
Duties and Responsibilities;
Investment Allocation.  It shall be the duty of the Managing Member
to ensure that the purchase, sale, retention and disposal of the Fund’s
Properties, and the investment policies of the Fund and the limitations thereon
or amendment thereof are at all times consistent with such policies, limitations
and restrictions as are contained in this Article 9.  Except as
specifically restricted in this Agreement, the investment objectives and
policies of the Fund shall be controlled by the Managing Member, which has the
power to modify or alter such policies without the consent of the
Members.




17


9.2.         
Prohibited Investments and
Activities.  Unless approved by the Members of the Fund in the
manner provided in Section 3.11, the Fund shall commit funds to investment in
Properties and shall further be subject to the following
restrictions:




9.2.1.      
Prior to acquisition of Properties, and with respect to reserves and any other
uninvested funds of the Fund, the Fund may temporarily invest its funds in
short-term, highly liquid investments where there is appropriate safety of
principal, such as (i) government obligations, (ii) bank accounts or
certificates of deposit, (iii) short-term debt obligations and interest-bearing
accounts all of which are insured, guaranteed, or issued by the United States
Government and (iv) money market funds investing solely in government-backed
securities.  No funds shall be commingled with those of other
Persons.




9.2.2.      
No investment shall be made in mortgages, trust deeds and other similar
obligations.




9.2.3.      
The Fund shall not reinvest Net Cash Flow from Operations or Net Sale
Proceeds.




9.2.4.      
Investments by the Fund in Properties other than multi-tenant industrial
properties shall be prohibited.  The Fund may invest in properties through
general partnerships, limited liability companies or joint ventures with
non-Affiliates that own or operate one or more properties if the Fund (i)
acquires a controlling interest in the general partnerships, limited liability
companies or joint ventures, (ii) such entities have similar investment
objectives, (iii) the entities have identical sponsor compensation and no
duplication of fees, (iv) the investment of the Fund and other entity will be on
substantially the same terms and conditions, and (v) the Fund has the right of
first refusal to buy the property if the other entity decides to sell the
property.




9.2.5.      
All Property purchases by the Fund will be supported by an
appraisal.




9.2.6.      
The Fund will not invest more than $10,000,000 in any one Property.




9.2.7.      
The Fund shall not purchase or lease any properties from, or sell or lease
properties to the Managing Member or its Affiliates or any entity affiliated
with or managed by any of them.




9.2.8.      
The Fund shall not make loans to the Managing Member or its Affiliates or to any
other person or entity.




9.2.9.      
The Fund shall not repurchase Units.




9.2.10.    
The Fund shall not pay Acquisition Fees for any Property which exceed 18% of the
Gross Proceeds applicable to such Property or such lesser amount customarily
charged in arms’ length transactions by persons rendering similar services as an
ongoing public activity in the same geographic location and for comparable
property.




9.2.11     
The Fund will not engage in any roll-up transaction.




9.3.         
Borrowing Policies.
 The Members acknowledge that funds may be required in addition to the
Capital Contributions made pursuant to Section 4.1 hereof in order to meet the
operating expenses of the Fund.  All additional funds required for such
purpose will be obtained from the proceeds of unsecured loans pursuant to such
terms, provisions and conditions and in such manner as the Managing Member shall
determine.  The Fund will not borrow funds for any other purpose,
including, without limitation, for the purpose of acquiring or holding any
Properties.  Following completion of the Fund’s public offering, the
aggregate borrowings of the Fund for operating expenses will not exceed the
greater of $100,000 or five percent of the Capital Contributions of all Members
and will be reviewed by the Managing Member at least quarterly.  In the
event the Fund borrows money from the Managing Member or an Affiliate of the
Managing Member, the Managing Member or Affiliate shall make such loan to the
Fund at the Managing Member’s or Affiliate’s cost of borrowing but not in excess
of the cost charged by unrelated lending institutions on comparable loans for
the same purpose.




18


9.4.Conflicts
of Interest.Any Member may engage
independently or with others, in other business ventures of any nature and
description, whether or not in competition, including, without limitation, the
rendering of advice or services of any kind to other investors and the making or
management of other investments.  Nothing in this Agreement shall be deemed
to prohibit the Managing Member or any of its Affiliates from dealing, or
otherwise engaging in business, with Persons transacting business with the Fund
or from providing services relating to the purchase, sale, management,
development or operation of real property and receiving compensation therefor;
provided that such dealings, business, or provisions of services shall not
involve any rebate or reciprocal arrangement that has the effect of
circumventing any restriction set forth herein upon dealing with Affiliates of
the Managing Member. 
Neither the Fund nor any Member shall have any right by virtue of this Agreement
or the relationship created hereby in or to such ventures, even if such ventures
compete with the business of the Fund.




9.5.         
Conflict Resolution
Procedures.  In order to reduce or eliminate certain potential
conflicts of interest, the Managing Member hereby agrees to the following
restrictions relating to (i) transactions between the Fund and the Managing
Member or any of its Affiliates, (ii) certain future offerings, and (iii)
allocation of Properties among certain affiliated ventures:




9.5.1.      
All transactions between the Fund and the Managing Member or any of its
Affiliates for the provision of goods or services to the Fund, other than those
specifically provided for in the Operating Agreement, must be evidenced by
written agreements which may be terminated without penalty, upon 60 days’ prior
written notice, by vote of the Members as provided in Section 3.11.  The
terms of such agreements must be comparable to the terms available from
unrelated parties, and the compensation payable thereunder shall be competitive
with the amount charged by independent parties for comparable goods or
services.




9.5.2.      
In the event that the Fund and a public or private entity with which the
Managing Member or any of its Affiliates are affiliated have the same investment
objectives and structure, and an investment opportunity becomes available which
is suitable for both entities and for which both entities have sufficient funds
available to invest, then the entity which has had the longest period of time
elapse since it was offered an investment opportunity will first be offered the
investment opportunity.  In determining whether or not an investment
opportunity is suitable for more than one investment program, the Managing
Member and its Affiliates will examine such factors, among others, as the cash
requirements of each investment program, the effect of the acquisition both on
diversification of each investment program’s investments by geographic area, the
size of the investment, the amount of funds available to each investment
program, and the length of time such funds have been available for
investment.




9.5.3.      
The Managing Member and its Affiliates have agreed not to attempt to sell any
Property or any interest therein contemporaneously with a property owned by
another investment program managed by the Managing Member or any of its
Affiliates if the two properties are within a five-mile radius of each other,
unless it is believed that a suitable purchaser for each facility can be
located.




10.         
INDEMNIFICATION




10.1.Indemnification.Subject to all of the other
provisions of this Article 10, the Fund shall indemnify a Person who was or
is a party or is threatened to be made a party to a threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative and whether formal or informal, other than an action by or in the
right of the Fund, by reason of the fact that he, she or it is or was a Managing
Member of the Fund, or is or was serving at the request of the Fund as a
director, officer, partner, trustee, employee or agent of another foreign or
domestic limited liability company, corporation, partnership, joint venture,
trust or other enterprise, whether for profit or not, against expenses,
including attorneys’ fees, judgments, penalties, fines and amounts paid in
settlement actually and reasonably incurred by him, her or it in connection with
the action, suit or proceeding, if the Person acted in good faith and in a
manner he, she or it reasonably believed to be in or not opposed to the best
interests of the Fund or its Members, did not breach such Person’s fiduciary
duties to the Fund and whose actions did not constitute fraud, willful
misconduct or gross negligence, and with respect to a criminal action or
proceeding, if the Person had no reasonable cause to believe his, her or its
conduct was unlawful.  The termination of an action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, does not, itself, create a presumption that the Person
did not act in good faith
and in a manner which he, she or it reasonably believed to be in or not opposed
to the best interests of the Fund or its Members, and, with respect to a
criminal action or proceeding, had reasonable cause to believe that his, her or
its conduct was not unlawful.




19


10.2.       
Certain
Actions.  Subject to all of the provisions of this Article, the Fund
shall indemnify a Person who was or is a party to or is threatened to be made a
party to a threatened, pending or completed action or suit by or in the right of
the Fund to procure a judgment in its favor by reason of the fact that he, she
or it is or was a Managing Member or officer of the Fund, or is or was serving
at the request of the Fund as a director, officer, partner, trustee, employee or
agent of another foreign or domestic limited liability company, corporation,
partnership, joint venture, trust or other enterprise, whether for profit or
not, against expenses, including actual and reasonable attorneys’ fees, and
amounts paid in settlement incurred by the Person in connection with the action
or suit, if the Person acted in good faith and in a manner the Person reasonably
believed to be in or not opposed to the best interests of the Fund or its
Members, did not breach such Person’s fiduciary duties to the Fund and whose
actions did not constitute fraud, willful misconduct or gross negligence. 
However, indemnification shall not be made for a claim, issue, or matter in
which the Person has been found liable to the Fund unless and only to the extent
that the court in which the action or suit was brought has determined upon
application that, despite the adjudication of liability but in view of all
circumstances of the case, the Person is fairly and reasonably entitled to
indemnification for the expenses which the court considers proper.




10.3.       
Expenses of Successful
Defense.  To the extent that a Person has been successful on the
merits or otherwise in defense of an action, suit, or proceeding referred to in
Section 10.1 or 10.2 of this Agreement, or in defense of a claim, issue or
matter in the action, suit, or proceeding, he, she or it shall be indemnified
against expenses, including actual and reasonable attorneys’ fees, incurred by
him, her or it in connection with the action, suit or proceeding and an action,
suit, or proceeding brought to enforce the mandatory indemnification provided in
this Article 10.




10.4.       
Determination that
Indemnification is Proper.  An indemnification under Section 10.1 or
10.2 of this Agreement, unless ordered by a court, shall be made by the Fund
only as authorized in the specific case upon a determination that
indemnification of the Person is proper in the circumstances because he, she or
it has met the applicable standard of conduct set forth in Section 10.1 or 10.2,
whichever is applicable.  Determination that indemnification is proper
shall be made as follows:




10.4.1.    
Managing
Member.  For the indemnification of the Managing Member of the Fund,
such determination shall be made only if all of the following conditions shall
be satisfied:




10.4.1.1.     
The Managing Member has determined, in good faith, that the course of conduct
which caused the loss or liability was in the best interests of the
Fund.




10.4.1.2      
Such liability or loss was not the result of fraud, gross negligence or willful
misconduct by the Managing Member.




10.4.1.3.     
Such indemnification or agreement to hold harmless is recoverable only out of
the assets of the Fund and not from the Members.




10.4.1.4.     
Such determination shall be made in either of the following ways: (A) by
independent legal counsel in a written opinion; or (B) by the Members pursuant
to Section 3.11.




If and
only to the extent prohibited by applicable law, indemnification will not be
allowed on any liability imposed by judgment, and costs associated therewith,
including attorneys’ fees, arising from or out of a violation of state or
federal securities laws associated with the offer and sale of the Fund’s
Units.  Indemnification will be allowed for settlements and related
expenses of lawsuits alleging securities law violations, and for expenses
incurred in successfully defending such lawsuits if (1) there has been a
successful adjudication of the merits of each count involving alleged securities
law violations as to the indemnitee or (2) the claims have been dismissed with
prejudice on the merits by a court of competent jurisdiction as to the
indemnitee or (3) a court of competent jurisdiction approves the settlement of
the claims against the indemnitee and finds that indemnification of the
settlement and related costs should be made and prior to seeking such approval,
the court has been apprised that the California Commissioner of Corporations and
the Securities and Exchange Commission believes that indemnification for
violations of securities law violates the California Corporate Securities Law of
1968 and the Securities Act of 1933 and is against public policy and therefore
unenforceable.




20


10.4.2.    
Others. 
For the indemnification of all Persons other than the Managing Member of the
Fund, such determination shall be made in any of the following ways: (A) by
the Managing Member provided the Managing Member was not a party to the action,
suit or proceeding; (B) by independent legal counsel in a written opinion;
or (C) by the Members pursuant to Section 3.11.




10.5.       
Indemnification for Portion
of Expenses.  If a Person is entitled to indemnification under
Section 10.1 or Section 10.2 of this Agreement for a portion of expenses
including attorneys’ fees, judgments, penalties, fines and amounts paid in
settlement, but not for the total amount thereof, the Fund may indemnify the
Person for the portion of the expenses, judgments, penalties, fines or amounts
paid in settlement for which the Person is entitled to be
indemnified.




10.6.       
Expense Advances.  Expenses
incurred in defending a civil or criminal action, suit or proceeding described
in Section 10.1 or 10.2 of this Agreement may be paid by the Fund in
advance of the final disposition of the action, suit or proceeding upon receipt
of an undertaking by or on behalf of the Person involved to repay the expenses
if it is ultimately determined that the Person is not entitled to be indemnified
by the Fund and, in the event of an action initiated by a Unitholder or a third
party, provided a court of competent jurisdiction specifically approves such
advance.  The undertaking shall be by unlimited general obligation of the
Person on whose behalf advances are made but need not be secured.




10.7.       
Indemnification of Employees
and Agents of the Fund.  The Fund may, to the extent authorized from
time to time by the Managing Member, grant rights to indemnification and to the
advancement of expenses to any employee or agent of the Fund to the fullest
extent of the provisions of this Article 10 with respect to the indemnification
and advancement of expenses of the Managing Member and officers of the
Fund.




10.8.       
Former Managing Members,
Officers, Employees and Agents.  The indemnification provided in the
foregoing sections of this Article 10 continues as to a Person who has ceased to
be a Managing Member, officer, employee or agent and shall inure to the benefit
of the heirs, executors and administrators of such Person.




10.9.       
Insurance.  The
Fund may purchase and maintain insurance on behalf of any Person who is or was a
Managing Member, officer, employee or agent of the Fund, or who is or was
serving at the request of the Fund as a director, officer, employee or agent of
another limited liability company, corporation, partnership, joint venture,
trust or other enterprise against any liability asserted against such Person and
incurred by such Person in any such capacity or arising out of such Person’s
status as such, whether or not the Fund would have power to indemnify such
Person against such liability under this Agreement or the laws of the State of
California.  The Fund will not incur the cost of that portion of liability
insurance which insures the Managing Member for any liability for which the Fund
is prohibited from indemnifying the Managing Member.




10.10.     
Contract Right to
Indemnity.  The right to indemnification conferred in this Article
10 shall be a contract right, and shall apply to services of a Managing Member
or officer as an employee or agent of the Fund as well as in such Person’s
capacity as a Managing Member or officer.  Except as provided in Section
10.4 of this Agreement, the Fund shall have no obligations under this Article 10
to indemnify any Person in connection with any proceeding, or part thereof,
initiated by such Person without authorization by the Managing
Member.




10.11.     
Exclusivity; Other
Indemnification.  The indemnification or advancement of expenses
provided under this Article 10 is not exclusive of other rights to which a
Person seeking indemnification or advancement of expenses may be entitled under
a contractual arrangement with the Fund.  However, the total amount of
expenses advanced or indemnified from all sources combined shall not exceed the
amount of actual expenses incurred by the Person seeking indemnification or
advancement of expenses.




21


10.12.     
Amendment or
Deletion.  No amendment or deletion of this Article 10 shall apply
to or have any effect on any Managing Member or officer of the Fund for or with
respect to any acts or omissions of any such Person occurring prior to such
amendment or repeal.




11.         
DISSOLUTION, WINDING UP AND
REDEMPTION




11.1.       
Dissolution. 
The Fund will dissolve and its affairs will be wound up on the first to occur of
the following events: (a) December 31, 2010; (b) the entry of a decree
of judicial dissolution, as provided under the Limited Liability Fund Law; or
(c) by the consent of a majority of the Unitholders by Percentage
Interest.  None of the events set forth in Section 17350(d) of the Limited
Liability Company Law will cause or result in a dissolution of the Fund, and the
occurrence of any such events will have no effect on the Fund or its continuing
existence.  All of the Members are hereby deemed to consent to continue the
Fund without interruption upon the occurrence of any such events to the extent
that this Agreement is determined not to control whether a dissolution has
occurred upon the occurrence of any such events.




11.2.       
Winding Up. 
Upon dissolution, the Fund will cease carrying on its business and affairs, will
commence the winding up of the Fund’s business and affairs, and will complete
the winding up as soon as practicable.  The Managing Member will control
such winding-up process.  Upon the winding up of the Fund, the assets of
the Fund will be distributed first to creditors to the extent permitted by law
in satisfaction of the Fund’s debts, liabilities, and obligations, including
contingent liabilities for which reserves may be established in the discretion
of the Managing Member, and then to the Members in accordance with
Article 6 provided that no Member may receive a distribution in excess of
its positive Adjusted Capital Account Balances.  Such proceeds will be
distributed to such Members as soon as practicable after the date of winding
up.




12.         
MISCELLANEOUS PROVISIONS




12.1.       
Counsel to the
Fund.  Counsel to the Fund may also be counsel to the Managing
Member or any Affiliate of the Managing Member.  The Managing Member may
execute on behalf of the Company and the Unitholders any consent to the
representation of the Fund that counsel may request pursuant to the California
Rules of Professional Conduct or similar rules in any other jurisdiction
(“Rules”).  Oppenheimer Wolff & Donnelly LLP previously served, and
Preston Gates & Ellis LLP presently serves, as legal counsel to the Fund
(“Counsel”).  Each Unitholder acknowledges that Counsel does not represent
any Unitholder in the absence of a clear and explicit agreement to such effect
between the Unitholder and Counsel, and that in the absence of any such
agreement, Counsel will owe no duties directly to a Unitholder.  In the
event any dispute or controversy arises between any Members and the Fund, or
between any Unitholders or the Fund, on the one hand, and the Managing Member
(or Affiliate of the Managing Member) that Counsel represents, on the other
hand, then each Member agrees that Counsel may represent either the Fund or such
Managing Member (or its Affiliate), in any such dispute or controversy to the
extent permitted by the Rules, and each Member hereby consents to such
representation.  Each Unitholder further acknowledges that Counsel has not
represented the interests of any Unitholder and hereby waives any conflict of
interest with respect to Counsel’s representation of the Fund.




12.2.       
Counterparts. 
This Agreement may be executed in several counterparts, each of which will be
deemed an original, but all of which will constitute one and the
same.




12.3.       
Entire Agreement.
 This Agreement constitutes the entire agreement among the parties and
contains all of the agreements among the parties with respect to its subject
matter.  This Agreement supersedes all other agreements, either oral or
written, among the parties with respect to its subject matter.




12.4.       
Severability. 
The invalidity or unenforceability of any particular provision of this Agreement
will not affect its other provisions, and this Agreement will be construed in
all respects as if such invalid or unenforceable provisions were
omitted.




12.5.       
Pronouns; Statutory
Reference.  All pronouns
and all variations thereof shall be deemed to refer to the masculine, feminine,
or neuter, singular or plural, as the context in which they are used may
require.  Any reference to the Code, the Regulations, the Limited Liability
Company Law or other statutes or laws will include all amendments,
modifications, or replacements of the specific sections and provisions
concerned.




22


12.6.       
Power of
Attorney.  Each Member constitutes and appoints the Managing Member
of the Fund with full power of substitution, its true and lawful attorney to
make, execute, and acknowledge and file in its name, place and
stead:




12.6.1.    
This Agreement;




12.6.2.    
Any certificate or other instrument, including registrations or filings
concerning the use of fictitious names and necessary or appropriate filings
under the federal and state securities laws;




12.6.3.    
Documents required to dissolve and terminate the Fund;




12.6.4.    
Amendments and modifications to the Articles or any of the instruments described
above;




12.6.5.    
Amendments and modifications to this Agreement which have been approved pursuant
to the terms hereof; and




12.6.6.    
All loan and security agreements, notes, instruments and other similar documents
which are necessary or desirable for the Fund to conduct its business as
contemplated by this Agreement. This power of attorney is coupled with an
interest and is irrevocable.




12.7.       
Notices.  Any
notice permitted or required under this Agreement will be conveyed to the party
at the address set forth in the books and records of the Fund and will be deemed
to have been given when deposited in the United States mail, postage paid, or
when delivered in person, by courier, or by facsimile transmission.  In the
event all notices and distributions sent to a Unitholder have been returned for
two consecutive years, the Fund may cease sending notices and distributions to
said Unitholder.




12.8.       
Binding Effect. 
Subject to the provisions of this Agreement relating to disposition of Units,
this Agreement will be binding upon and will inure to the benefit of the parties
and their distributees, heirs, successors, and assigns.




12.9.       
Governing Law. 
This Agreement will be governed by, and construed and enforced in accordance
with, the laws of the State of California.




12.10.     
Attorneys’
Fees.  If any party commences an action, either arbitration or court
proceedings, against any other party arising out of or in connection with this
Agreement, the prevailing party or parties shall be entitled to receive from the
losing party or parties, both attorney’s fees and costs of the arbitration
and/or suit as part of the judgment rendered.




13.         
DEFINITIONS




The
following terms used in this Agreement shall have the meanings described
below:




“Acquisition Fees”
shall mean the total of all fees and commissions paid by any person or entity to
any other person or entity in connection with the selection or acquisition of
any property, including, without limitation, real estate or other commissions,
acquisition fees, finder’s fees, selection fees, non-recurring management fees,
consulting fees, or any other fees or commissions of a similar
nature.




“Adjusted Capital Account
Balance” shall have the meaning given such term in Section
5.7.6.




“Adjusted Capital Account
Deficit” shall mean, with respect to any Member, the deficit balance, if
any, in that Person’s Capital Account as of the end of the relevant fiscal year,
after giving effect to the following adjustments: (a) credit to that Capital
Account the amount by which that Person is obligated to restore or is deemed to
be obligated to restore pursuant to the penultimate sentences of Regulation
Sections 1.704-2(g)(1) and (i)(5) and (b) debit to that Capital Account the
items described in paragraphs (4), (5) and (6) in Section 1.704-1(b)(2)(ii)(d)
of the Regulations.  This definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the
Regulations and shall be interpreted consistently therewith.




23


“Affiliate” of another
Person shall mean (i) any Person or entity directly or indirectly through one or
more intermediaries controlling, controlled by or under common control with
another Person or entity, (ii) any Person or entity owning or controlling ten
percent (10%) or more of the outstanding voting securities of another Person or
entity, (iii) any officer, director, partner or trustee of such Person or
entity, and (iv) if such other Person is an officer, director, partner or
trustee of a Person or entity, the Person or entity for which such other Person
or entity acts in any such capacity.




“Agreement” shall mean
this Operating Agreement, as the same may be amended from time to
time.




“Articles” shall have
the meaning given such term in Section 1.1.




“Bankruptcy” shall
mean, with respect to the Managing Member, the happening of any of the
following:




(a)          
the making of a general assignment for the benefit of creditors;




(b)          
the filing of a voluntary petition in bankruptcy or the filing of a pleading in
any court of record admitting in writing an inability to pay debts as they
become due;




(c)          
the entry of an order, judgment or decree by any court of competent jurisdiction
adjudicating the Person to be bankrupt or insolvent;




(d)          
the filing of a petition or answer seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
statute, law or regulation;




(e)          
the filing of an answer or other pleading admitting the material allegations of,
or consenting to, or defaulting in answering, a bankruptcy petition filed
against the Person in any bankruptcy proceeding;




(f)           
the filing of an application or other pleading or any action otherwise seeking,
consenting to or acquiescing in the appointment of a liquidating trustee,
receiver or other liquidator of all or any substantial part of the Person’s
properties;




(g)          
the commencement of any proceeding seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
statute, law or regulation which has not been quashed or dismissed within 180
days; or




(h)          
the appointment without consent of such Person or acquiescence of a liquidating
trustee, receiver or other liquidator of all or any substantial part of such
person’s properties without such appointment being vacated or stayed within 90
days and, if stayed, without such appointment being vacated within 90 days after
the expiration of any such stay.




“Capital Account”
shall have the meaning given such term in Section 4.2.1.




“Capital Contribution”
as to any Unitholder shall mean $500 multiplied by the number of Units
subscribed for by the Unitholder and, as to the Managing Member and Terry G.
Roussel, shall mean the $1,000 contributed to the Fund by the Managing Member on
or before a specified date.  The Capital Contribution of a substituted
Unitholder shall be that attributable to the interest in the Fund assigned to
such substituted Unitholder.




“Cash Flow” shall mean
for each fiscal year, cash proceeds from operations of the Fund, including
without limitation, interest and other investment income but excluding Capital
Contributions, and after deducting funds used to pay or provide for the payment
of all operating expenses of the Fund and each Fund property, and debt service,
if any, capital improvements and replacements unless otherwise reserved, without
deduction for depreciation, amortization or other noncash
expenditures.




24


“Closing” shall mean
the date or dates on which purchasers of Units are admitted to the Fund as
Members.




“Code” shall mean the
Internal Revenue Code of 1986, as amended.




“Dealer Manager” shall
mean Pacific Cornerstone Capital, Incorporated, or such other Person or entity
selected by the Managing Member to act as the dealer manager for the Offering,
which Person may be an Affiliate of the Managing Member.




“Distributions” shall
mean cash or property distributed to the Members arising from their respective
interests in the Fund.




“Due Diligence Expense
Allowance Fee” shall mean a fee equal to one-half percent (0.5%) of the
Gross Proceeds which is payable to the Dealer Manager to cover its due diligence
expenses.  Such fee may be reallowed in whole or in part to Participating
Brokers which sell Units.




“Early Investors’ 12%
Incentive Return” shall mean distributions of Net Cash Flow from
Operations in an amount equal to a 12% non-cumulative, non-compounded annual
return on a Unitholders’ Invested Capital Contribution with respect to the Early
Investor Units, calculated from the date the purchase price for the Units is
deposited in escrow, and for twelve (12) months thereafter, to the extent that
sufficient cash is available to make such distributions, in each case reduced by
all prior Distributions of Net Cash Flow from Operations (including
distributions of the Unitholders’ 8% Preferred Return) for the current fiscal
year and all prior fiscal years.  For purposes of determining the
Unitholders’ 8% Preferred Return pursuant to clause (ii) of Section 6.1.2, the
Unitholders’ 8% Preferred Return shall include the Early Investors’ 12%
Incentive Return.




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




“Escrow Agent” shall
mean a Southern California bank in Newport Beach, California, which will hold
subscribers’ funds until the minimum number of Units is sold.




“Fund” shall mean
Cornerstone Realty Fund, LLC, a California limited liability
company.




“Gross Proceeds” shall
mean $500 multiplied by the number of Units of the Fund sold through the
Offering.




“Invested Capital
Contribution”, as of any date, shall mean the Capital Contribution to the
Fund of a Unitholder, reduced by all prior Distributions to such Unitholder
pursuant to Section 6.1.2(i).  Invested Capital Contributions may
differ from Capital Accounts, but may not be less than zero.  The Capital
Contributions of Unitholders will be deemed to be $500 per unit whether or not
the Unitholder receives a volume discount or reduction in
commission.




“Limited Liability Company
Law” shall have the meaning given such term in Section 1.1.




“Managing Member”
shall have the meaning given such term in Section 8.1.




“Marketing Support
Fee” shall mean a fee equal to two percent (2%) of the Gross Proceeds
less $60,000 which is payable to the Dealer Manager in consideration for
assisting Participating Brokers in marketing the Units.  Such fee may be
reallowed in whole or in part to Participating Brokers who sell
Units.




“Member” shall mean
the Managing Member and any Unitholder admitted to the Fund as a Member,
including any Person admitted to the Fund as a substituted Member in accordance
with the Operating Agreement.  “Members” shall mean all Members of the
Fund, including the Managing Member and all Unitholders.




“Minimum Gain” shall
have the meaning set forth in Regulation Section 1.704-2(d)(1).




25


“Net Cash Flow From
Operations” shall mean for each fiscal year, Cash Flow, less Net Sales
Proceeds, less cash reserves established by the Managing Member, in its sole
discretion, for other obligations of the Fund for which there is no provision,
less Distributions made to the Members prior to the end of such fiscal
year.




“Net Income” shall
mean the taxable income of the Fund for federal income tax purposes for each
taxable year, if any, determined using the accrual method of
accounting.




“Net Loss” shall mean
the taxable loss of the Fund for federal income tax purposes for each taxable
year, if any, determined using the accrual method of accounting.




“Net Sales Proceeds”
shall mean, in the case of a transaction described in the definition of Sale,
the proceeds of any such transaction less the amount of all real estate and
other brokerage commissions and closing costs paid by the Fund.  In any
case in which a Property is sold and the Fund receives a payment as a result
thereof, such payment also shall constitute Net Sales Proceeds.  Net Sales
Proceeds shall not include any reserves established by the Managing Member in
its sole discretion.




“Non-Accountable Expense
Allowance” shall mean a fee equal to one percent (1%) of the Gross
Proceeds which is payable to the Dealer Manager as reimbursement of its costs
incurred in selling the Units.  Such fee may be reallowed in whole or in
part to Participating Brokers which sell Units.




“Offering” shall have
the meaning given such term in Section 3.1.




“Organizational and Offering
Expenses” shall mean any and all costs and, expenses, exclusive of
Selling Commissions and the Due Diligence and Marketing Support Fee payable to
the Dealer Manager, incurred by the Fund, the Managing Member, or its Affiliates
in connection with the formation, qualification, organization, and registration
of the Fund and the marketing and distribution of Units, including, without
limitation, the following:  legal, accounting, and escrow fees; printing,
amending, supplementing, mailing, and distributing costs; filing, registration,
and qualification fees and taxes; facsimile and telephone costs; and all
advertising and marketing expenses including the costs related to broker-dealer
sales meetings, including the salary and benefits of one employee of Cornerstone
Ventures, Inc. solely dedicated to identifying and communicating with the
Participating Brokers.




“Participating
Brokers” shall mean those broker-dealers that are members of the National
Association of Securities Dealers, Inc., and that enter into participating
broker agreements with the Dealer Manager to sell Units.  The Dealer
Manager will be considered a Participating Broker to the extent it sells Units
directly to investors.




“Percentage Interest”
shall mean the percentage set forth in the books and records of the Fund, and
identified as such Member’s Percentage Interest, as the same may be increased or
decreased from time to time pursuant to the provisions of this Agreement. 
Such Percentage Interest is calculated with respect to any Member by dividing
the Units held by such Member by the total Units issued and outstanding and held
by all the Members.  The total Percentage Interest held by the Members
shall always equal 100%.  The Managing Member shall have no Percentage
Interest with respect to its interest as Managing Member, but it may own Units
and hold a Percentage Interest in the Fund with respect thereto.




“Person” shall mean
any natural person, partnership, corporation, association, trust, limited
liability company or other legal entity.




“Property” or “Properties” shall
mean the land, buildings and improvements, and related personal property, if
any, which the Fund acquires.




“Prospectus” shall
have the meaning given such term in Section 3.1.




“Public Offering
Expenses” shall mean all expenses incurred by the Fund in connection with
the preparation and filing of the Form S-11 registration statement by the Fund
under the Securities Act of 1933, as amended, and the sale of Units pursuant to
said registration statement.




26


“Qualified Plans”
shall mean qualified pension, profit-sharing, and stock bonus plans, including
Keogh plans and individual retirement accounts.




“Regulatory
Allocations” shall have the meaning given such term in Section
5.7.5.




“Sale” shall mean any
transaction or series of transactions whereby the Fund sells, grants, transfers,
conveys, or relinquishes its ownership and/or interest in any Property or any
portion thereof, including any event with respect to any Property which gives
rise to a significant amount of insurance proceeds or condemnation
awards.




“Selling Commissions”
shall mean the sales commissions payable to the Dealer Manager in connection
with the sale of Units as described in the Prospectus equal to nine percent (9%)
of the first $3,000,000 of Gross Proceeds and seven percent (7%) of Gross
Proceeds thereafter, subject to reduction under certain
circumstances.




“Treasury Regulations”
or “Regulations” shall
mean those final, temporary and proposed regulations promulgated by the United
States Treasury Department interpreting and implementing various provisions of
the Code, as amended.




“Unit” shall mean the
membership interest of a Unitholder in the Fund which is represented by a
Capital Contribution of $500.  Where applicable, “Units” shall mean
multiple or fractional Units held by a Unitholder.




“Unitholder” shall
mean any Person that owns Units, including the Managing Member with respect to
Units, if any, owned by it.




“Unitholders’ 8% Preferred
Return” shall mean (i) in the case of distributions of Net Cash Flow from
Operations, an amount equal to an 8% non-cumulative, non-compounded annual
return on a Unitholder’s Invested Capital Contribution, and (ii) in all other
cases, an amount equal to an 8% cumulative, non-compounded annual return on a
Unitholder’s Invested Capital Contribution reduced by all prior Distributions of
Net Cash Flow from Operations and of Net Sales Proceeds for the current fiscal
year and all prior fiscal years other than those prior Distributions made as a
return of a Unitholder’s Invested Capital Contribution pursuant to Section
6.1.2(i).  In each case, the amount of the Unitholder’s 8% Preferred Return
shall be calculated from the date a Unitholder acquires the Units and the
Capital Account attributable to such Unitholder is established, and
Distributions for the Unitholders’ 8% Preferred Return shall be limited to the
extent that sufficient cash is available to make such Distributions.  For
purposes of determining the Unitholders’ 8% Preferred Return pursuant to clause
(ii) of Section 6.1.2, the Unitholders’ 8% Preferred Return shall include the
Early Investors’ 12% Incentive Return.




27




IN WITNESS WHEREOF, the
parties have executed this Agreement, to be effective on the date first above
written.




“MANAGING
      MEMBER”CORNERSTONE
      INDUSTRIAL PROPERTIES, LLC,
              a
      California limited liability companyBy:
            Cornerstone
      Ventures, Inc., a California corporation
              Its
      ManagerBy:
            /s/ 
      TERRY G. ROUSSELTerry
      G. Roussel, President“UNITHOLDERS”By:
            Cornerstone
      Industrial Properties, LLC, a California limited
              company,
      the Managing Member, as attorney-in-fact
              for
      the Unitholders set forth in the books and records of the
              Fund,
      pursuant to Section 12.6 and each such Unitholder’s
              Subscription
      AgreementBy:
            Cornerstone
      Ventures, Inc., a California corporation,
              Its
      ManagerBy:
            /s/ 
      TERRY G. ROUSSELTerry
      G. Roussel, President





28




AMENDMENT
NO. 1 TO




AMENDED
AND RESTATED OPERATING AGREEMENT




OF




CORNERSTONE
REALTY FUND, LLC







This
Amendment No. 1 (this “Amendment”) to the Operating Agreement of Cornerstone
Realty Fund, LLC (the “Fund”), made effective as of July 19, 2001 and amended
and restated effective as of June 30, 2003 (the “Operating Agreement”), is made
is effective as of February 22, 2007 among Cornerstone Industrial
Properties, LCC, a California limited liability company, and the Members of
the Fund.




RECITALS




A.           
Subsection 9.2.9 of the Operating Agreement provides that the Fund shall not
repurchase Units unless approved by the Members the Fund in the manner provided
in the Operating Agreement.




B.           
The Members of the Fund holding a majority of the Percentage Interests have
consented to and approved this Amendment in accordance with the Operating
Agreement.




C.           
Certain capitalized terms used in this Amendment shall have the meanings given
them in the Operating Agreement.




AGREEMENT




NOW,
THEREFORE, the parties agree as follows:




1.            
Amendment of Article
9.  Section 9.2 of Article 9 of the Operating Agreement is hereby
amended to delete Subsection 9.2.9 in its entirety.




2.            
Amendment of Article
11.  Article 11 of the Operating Agreement is hereby amended to add
the following paragraph as Section 11.3:




“11.3      
Redemption. 
Subject to Section 17254 of the Limited Liability Company Law, the Managing
Member shall have the authority to cause the Fund to repurchase Units at any
time, and from time to time, on such terms and conditions as the Managing Member
may determine in its sole discretion; provided that such repurchases do not
jeopardize the status of the Fund as a partnership for federal income tax
purposes or cause the Fund to be treated as a publicly-traded
partnership.”




3.            
No Other
Amendments.  Except as set forth in this Amendment, no other
additions, modifications or deletions to or from the Operating Agreement are
intended to made hereby and the Operating Agreement shall remain in full force
and effect in all other respects in accordance with its terms.




29


IN
WITNESS WHEREOF, the parties hereto have caused this Amendment to be made
effective as of the date first written above.


“MANAGING
      MEMBER”CORNERSTONE
      INDUSTRIAL PROPERTIES, LLC,
                a
      California limited liability companyBy:
              CORNERSTONE
      VENTURES, INC.,
                a
      California corporation
                Its
      ManagerBy:
              /s/ 
      TERRY G. ROUSSELTerry
      G. Roussel, President“UNITHOLDERS”By:
              CORNERSTONE
      INDUSTRIAL PROPERTIES, LLC, a California limited liability company, the
      Managing Member, as attorney-in-fact for the Unitholders set forth in the
      books and records of the Fund, pursuant to Section 12.6 and each such
      Unitholder’s Subscription Agreement.By:
              CORNERSTONE
      VENTURES, INC.,
                a
      California corporation,
                It’s
      ManagerBy:
              /s/ 
      TERRY G. ROUSSELTerry
      G. Roussel, President
 
 30




AMENDMENT
NO. 2 TO




AMENDED
AND RESTATED OPERATING AGREEMENT




OF




CORNERSTONE
REALTY FUND, LLC




This Amendment No. 2 (this “Amendment”)
to the Operating Agreement of Cornerstone Realty Fund, LLC (the “Fund”), made
effective as of July 19, 2001 and amended and restated effective as of June 30,
2003 and February 22, 2007 (the “Operating Agreement”), is made is effective as
of June 2, 2009 among Cornerstone Industrial Properties, LCC, a California
limited liability company, and the Members of the Fund.





RECITALS





A.           Subsection
11.1 (a) of the Operating Agreement provides that the Fund shall dissolve and it
affairs be wound up on or before the first to occur of the following events: (a)
December 31, 2010; (b) the entry of a decree of judicial dissolution, as
provided under the Limited Liability Fund Law; or (c) by consent of a majority
of the Unitholders by Percentage Interest.





B.           The
Members of the Fund holding a majority of the Percentage Interests have
consented to and approved this Amendment in accordance with the Operating
Agreement.





C.           Certain
capitalized terms used in this Amendment shall have the meanings given them in
the Operating Agreement.





AGREEMENT





NOW,
THEREFORE, the parties agree as follows:





1.
            Amendment of Article
      11.  Section 11.1 of Article 11 of the Operating
      Agreement is hereby amended in its entirety as
  follows:





“11.1           Dissolution.  The
Fund will dissolve and it affairs be wound up on or before the first to occur of
the following events: (a) December 31, 2012; (b) the entry of a decree of
judicial dissolution, as provided under the Limited Liability Fund Law; or (c)
by consent of a majority of the Unitholders by Percentage Interest. None of the
events set forth in Section 1735(d) of the Limited Liability Company Law will
cause or result in dissolution of the Fund, and the occurrence of any such
events will have no effect on the Fund or its continuing existence. All the
Members are hereby deemed to consent to continue the Fund without interruption
upon the occurrence of any such events to the extent that this Agreement is
determined not to control whether dissolution has occurred upon the occurrence
of any such events.





2.
            No Other
      Amendments.  Except as set forth in this Amendment, no
      other additions, modifications or deletions to or from the Operating
      Agreement are intended to be made hereby and the Operating Agreement shall
      remain in full force and effect in all other respects in accordance with
      its terms.




(Signature
Page Follows)




31





IN
WITNESS WHEREOF, the parties hereto have caused this Amendment to be made
effective as of the date first written above.


“MANAGING
      MEMBER”CORNERSTONE
      INDUSTRIAL PROPERTIES, LLC,
                a
      California limited liability companyBy:
              CORNERSTONE
      VENTURES, INC.,
                a
      California corporation
                Its
      ManagerBy:
              /s/ 
      TERRY G. ROUSSELTerry
      G. Roussel, President“UNITHOLDERS”By:
              CORNERSTONE
      INDUSTRIAL PROPERTIES, LLC, a California limited liability company, the
      Managing Member, as attorney-in-fact for the Unitholders set forth in the
      books and records of the Fund, pursuant to Section 12.6 and each such
      Unitholder’s Subscription Agreement.By:
              CORNERSTONE
      VENTURES, INC.,
                a
      California corporation,
                It’s
      ManagerBy:
              /s/ 
      TERRY G. ROUSSELTerry
      G. Roussel, President
  32





AMENDMENT
NO. 3 TO




AMENDED
AND RESTATED




OPERATING
AGREEMENT




OF




CORNERSTONE
REALTY FUND, LLC




This Amendment No. 3 (this “Amendment”)
to the Operating Agreement of Cornerstone Realty Fund, LLC (the “Fund”) made
effective as of July 19, 2001, amended and restated effective as of June 30,
2003 and further amended as of February 28, 2007 and June 2, 2009 (the
“Operating Agreement”), is made is effective as of April 27, 2010 among
Cornerstone Industrial Properties, LCC, a California limited liability
company, and the Members of the Fund.





RECITALS





A.           The
Members of the Fund holding a majority of the Percentage Interests have
consented to and approved this Amendment in accordance with the Operating
Agreement.





B.           Certain
capitalized terms used in this Amendment shall have the meanings given them in
the Operating Agreement.





AGREEMENT





NOW,
THEREFORE, the parties agree as follows:





2.
            Amendment of Article
      9.  Section 9.3 of Article 9 of the Operating Agreement
      is hereby amended in its entirety as
follows:





“9.3.         
Borrowing
Policies.  The Members acknowledge that funds may be required in
addition to the Capital Contributions made pursuant to Section 4.1 hereof in
order to meet the Operating Expenses of the Fund and to fund Distributions
declared and paid in anticipation of future cash flows (collectively, the
“Permitted Purposes”).  All additional funds required for such Permitted
Purposes will be obtained from the proceeds of secured or unsecured loans
pursuant to such terms, provisions and conditions and in such manner as the
Managing Member shall determine.  The Fund will not borrow funds for any
purpose other than a Permitted Purpose, including, without limitation, for the
purpose of acquiring or holding any Properties.  The aggregate borrowings
of the Fund for Permitted Purposes will not exceed ten percent of the Capital
Contributions of all Members and will be reviewed by the Managing Member at
least quarterly.  In the event the Fund borrows money from the Managing
Member or an Affiliate of the Managing Member, the Managing Member or Affiliate
shall make such loan to the Fund at the Managing Member’s or Affiliate’s cost of
borrowing but not in excess of the cost charged by unrelated lending
institutions on comparable loans for the same purpose.”





2.
            No Other
      Amendments.  Except as set forth in this Amendment, no
      other additions, modifications or deletions to or from the Operating
      Agreement are intended to be made hereby and the Operating Agreement shall
      remain in full force and effect in all other respects in accordance with
      its terms.





(Signature
Page Follows)




33


IN
WITNESS WHEREOF, the parties hereto have caused this Amendment to be made
effective as of the date first written above.


“MANAGING
      MEMBER”CORNERSTONE
      INDUSTRIAL PROPERTIES, LLC,
                a
      California limited liability companyBy:
              Cornerstone
      Ventures, Inc., a California corporation
                Its
      ManagerBy:
              /s/ 
      TERRY G. ROUSSELTerry
      G. Roussel, President“UNITHOLDERS”By:
              Cornerstone
      Industrial Properties, LLC, a California limited
                company,
      the Managing Member, as attorney-in-fact
                for
      the Unitholders set forth in the books and records of the
                Fund,
      pursuant to Section 12.6 and each such Unitholder’s
                Subscription
      AgreementBy:
              Cornerstone
      Ventures, Inc., a California corporation,
                Its
      ManagerBy:
              /s/ 
      TERRY G. ROUSSELTerry
      G. Roussel, President