Document:

Exhibit
10.1

 

CENTERPOINT
VENTURE, LLC

 

a Delaware Limited
Liability Company

 

AMENDED
AND RESTATED

 

LIMITED
LIABILITY COMPANY AGREEMENT

 

Dated as of
September 23, 2004

 

THE MEMBERSHIP INTERESTS
REPRESENTED BY THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER ANY OTHER APPLICABLE FEDERAL OR STATE SECURITIES LAWS. SUCH
INTERESTS MAY NOT BE SOLD, ASSIGNED, PLEDGED OR OTHERWISE DISPOSED OF AT ANY
TIME WITHOUT EFFECTIVE REGISTRATION UNDER SUCH ACT AND LAWS OR EXEMPTION
THEREFROM, AND COMPLIANCE WITH THE OTHER RESTRICTIONS ON TRANSFER SET FORTH
HEREIN.

 

 

TABLE
OF CONTENTS

 

	
  ARTICLE I
  DEFINITIONS

  	
   

  
	
  Section 1.1

  	
  Definitions

  	
   

  
	
  Section 1.2

  	
  Construction

  	
   

  
	
  Section 1.3

  	
  Including

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II
  ORGANIZATION

  	
   

  
	
  Section 2.1

  	
  Formation

  	
   

  
	
  Section 2.2

  	
  Company Name

  	
   

  
	
  Section 2.3

  	
  The Certificate, Etc

  	
   

  
	
  Section 2.4

  	
  Term of the Company

  	
   

  
	
  Section 2.5

  	
  Registered
  Office Registered Agent Principal Office Other Offices

  	
   

  
	
  Section 2.6

  	
  Purposes

  	
   

  
	
  Section 2.7

  	
  Powers of the Company

  	
   

  
	
  Section 2.8

  	
  Board Authority

  	
   

  
	
  Section 2.9

  	
  Foreign Qualification

  	
   

  
	
  Section 2.10

  	
  No State-Law Partnership

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III COMPANY INVESTMENTS;
  MEMBERSHIP; CAPITAL CONTRIBUTIONS

  	
   

  
	
  Section 3.1

  	
  Company Investments

  	
   

  
	
  Section 3.2

  	
  Members

  	
   

  
	
  Section 3.3

  	
  No Liability of Members

  	
   

  
	
  Section 3.4

  	
  Capital Contributions

  	
   

  
	
  Section 3.5

  	
  Certification of
  Membership Interests

  	
   

  
	
  Section 3.6

  	
  Other Activities

  	
   

  
	
  Section 3.7

  	
  Credit Facility

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV CAPITAL
  ACCOUNTS

  	
   

  
	
  Section 4.1

  	
  Establishment
  and Determination of Capital Accounts

  	
   

  
	
  Section 4.2

  	
  Computation of Amounts

  	
   

  
	
  Section 4.3

  	
  Negative Capital Accounts

  	
   

  
	
  Section 4.4

  	
  Company Capital

  	
   

  
	
  Section 4.5

  	
  Adjustments to Book Value

  	
   

  
	
  Section 4.6

  	
  Compliance With
  Section 1. 704-l(b)

  	
   

  
	
  Section 4.7

  	
  Transfer of Capital
  Accounts

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE V
  ARTICLE V DISTRIBUTIONS; ALLOCATIONS OF PROFITS AND LOSSES

  	
   

  
	
  Section 5.1

  	
  Generally

  	
   

  
	
  Section 5.2

  	
  Distributable Cash
  Distributions

  	
   

  
	
  Section 5.3

  	
  Possible Annual Adjustment

  	
   

  
	
  Section 5.4

  	
  Buy-Sell

  	
   

  
	
  Section 5.5

  	
  Allocation of Profits
  and Losses

  	
   

  
	
  Section 5.6

  	
  Regulatory and
  Special Allocations

  	
   

  

 

 

	
  ARTICLE VI
  MANAGEMENT POWER, RIGHTS AND DUTIES

  	
   

  
	
  Section 6.1

  	
  Management by the Board

  	
   

  
	
  Section 6.2

  	
  Officers

  	
   

  
	
  Section 6.3

  	
  Authority
  of Officers; Restrictions on Certain Actions

  	
   

  
	
  Section 6.4

  	
  Limitation on
  Authority of Members

  	
   

  
	
  Section 6.5

  	
  Meetings of and
  Voting by Members

  	
   

  
	
  Section 6.6

  	
  Power of Attorney

  	
   

  
	
  Section 6.7

  	
  Management Agreement

  	
   

  
	
  Section 6.8

  	
  Right of First
  Offer-Company Property

  	
   

  
	
  Section 6.9

  	
  Annual Operating Budget

  	
   

  
	
  Section 6.10

  	
  Reporting
  Requirements

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII
  EXCULPATION AND INDEMNIFICATION

  	
   

  
	
  Section 7.1

  	
  Performance of Duties

  	
   

  
	
  Section 7.2

  	
  [Intentionally Deleted]

  	
   

  
	
  Section 7.3

  	
  Confidential Information

  	
   

  
	
  Section 7.4

  	
  Transactions
  Between the Company and the Members

  	
   

  
	
  Section 7.5

  	
  Right to Indemnification

  	
   

  
	
  Section 7.6

  	
  Advance Payment

  	
   

  
	
  Section 7.7

  	
  Indemnification of Agents

  	
   

  
	
  Section 7.8

  	
  Appearance as a Witness

  	
   

  
	
  Section 7.9

  	
  Nonexclusivity of Rights

  	
   

  
	
  Section 7.10

  	
  Insurance

  	
   

  
	
  Section 7.11

  	
  Savings Clause

  	
   

  
	
  Section 7.12

  	
  Limited Liability

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII TAXES

  	
   

  
	
  Section 8.1

  	
  Tax Returns

  	
   

  
	
  Section 8.2

  	
  Tax Matters Partner

  	
   

  
	
  Section 8.3

  	
  Reserves

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX TRANSFERS AND OTHER
  EVENTS

  	
   

  
	
  Section 9.1

  	
  Transfer of Interest

  	
   

  
	
  Section 9.2

  	
  Permitted Transfer

  	
   

  
	
  Section 9.3

  	
  Right of First
  Offer-Membership Interest

  	
   

  
	
  Section 9.4

  	
  Assignments
  Generally Substituted Member

  	
   

  
	
  Section 9.5

  	
  Rights
  and Obligations of Assignees and Transferring Members

  	
   

  
	
  Section 9.6

  	
  Effect of
  Admission of Member on Transferring

  	
   

  
	
  Section 9.7

  	
  Distributions
  and Allocations Regarding: Transferred Interests

  	
   

  
	
  Section 9.8

  	
  Required Amendments:
  Continuation

  	
   

  
	
  Section 9.9

  	
  Resignation

  	
   

  
	
  Section 9.10

  	
  No Appraisal Rights

  	
   

  
	
  Section 9.11

  	
  Void Assignment

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE X
  DISSOLUTION, LIQUIDATION AND TERMINATION

  	
   

  
	
  Section 10.1

  	
  Dissolution

  	
   

  
	
  Section 10.2

  	
  Liquidation and Termination

  	
   

  

 

3

 

	
  Section 10.3

  	
  Deemed
  Distribution and Recontribution

  	
   

  
	
  Section 10.4

  	
  Deficit Capital Accounts

  	
   

  
	
  Section 10.5

  	
  Cancellation of Certificate

  	
   

  
	
  Section 10.6

  	
  Tax Deferral

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI GENERAL/MISCELLANEOUS
  PRO VISIONS

  	
   

  
	
  Section 11.1

  	
  Offset

  	
   

  
	
  Section 11.2

  	
  Waiver of Certain Rights

  	
   

  
	
  Section 11.3

  	
  Indemnification
  and Reimbursement for Payments on Behalf of a Member

  	
   

  
	
  Section 11.4

  	
  Notices

  	
   

  
	
  Section 11.5

  	
  Public Announcements

  	
   

  
	
  Section 11.6

  	
  Entire Agreement

  	
   

  
	
  Section 11.7

  	
  Effect of Waiver or Consent

  	
   

  
	
  Section 11.8

  	
  Amendment or Modification

  	
   

  
	
  Section 11.9

  	
  Severability

  	
   

  
	
  Section 11.10

  	
  Successors
  and Assigns

  	
   

  
	
  Section 11.11

  	
  Further
  Assurances

  	
   

  
	
  Section 11.12

  	
  Notice
  to Members of Provisions

  	
   

  
	
  Section 11.13

  	
  Remedies

  	
   

  
	
  Section 11.14

  	
  Third Parties

  	
   

  
	
  Section 11.15

  	
  Governing Law

  	
   

  
	
  Section 11.16

  	
  Waiver of
  Jury Trial

  	
   

  
	
  Section 11.17

  	
  Waiver
  of Certain Rights

  	
   

  
	
  Section 11.18

  	
  Counterparts

  	
   

  
	
  Section 11.19

  	
  Descriptive
  Headings

  	
   

  
	
  Section 11.20

  	
  Conflicts

  	
   

  
	
  Section 11.21

  	
  Time of the
  Essence Computation of Time

  	
   

  
	
  Section 11.22

  	
  No Strict
  Construction

  	
   

  
	
  Section 11.23

  	
  Organizational
  Expenses

  	
   

  
	
  Section 11.24

  	
  Discount Rate

  	
   

  
	
  *  *  *  *  *  * 
  *

  	
   

  

 

4

 

AMENDED
AND RESTATED

 

LIMITED
LIABILITY COMPANY AGREEMENT

 

OF

 

CENTERPOINT
VENTURE, LLC

 

A
Delaware Limited Liability Company

 

THIS AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT (the “Agreement”) of CenterPoint Venture,
LLC (the “Company”), dated and effective as of September 27, 2004 (the
“Effective Date”), is adopted, executed and entered into by and between
CenterPoint Realty Services Corporation, an Illinois corporation, and CalEast Industrial
Investors, LLC., a California limited liability company (collectively, the
“Members”).

 

RECITALS:

 

A              On December 22,
1999 (the “Formation Date”), the Company was formed pursuant to the Delaware
Limited Liability Company Act, 6 Del. C. §18-10l et seq. (as from time to time
amended and including any successor statute of similar import, the “Act”) by
the filing of the Certificate with the Secretary of State of the State of
Delaware in accordance with the Act.

 

B                On
December 29, 1999, the Members entered into that certain Limited Liability
Company Agreement of CenterPoint Venture LLC, dated December 29, 1999, as
further amended by that certain First Amendment to the Limited Liability
Company Agreement dated as of June 26, 2001 (the “Original Agreement”).

 

C                The Members and
the Company now desire to amend and restate the Original Agreement in its
entirety pursuant to this Agreement.

 

NOW, THEREFORE, in
consideration of the mutual covenants and agreements herein made and intending
to be legally bound, the Members hereby agree as follows:

 

ARTICLE I

DEFINITIONS

 

Section 1.1                                   Definitions.  As used in
this Agreement, the following terms have the following meanings:

 

“Act” means the
Delaware Limited Liability Company Act, Title 6, §§18-10l et seq., and any
successor statute, as amended from time to time.

 

“Affiliate” of any
particular Person means any other Person controlling, controlled by or under
common control with such particular Person, where “control” means the
possession, 

 

 

directly or indirectly,
of the power to direct the management and policies of a Person whether through
the ownership of voting securities, by contract or otherwise.

 

“Agreement” means
this Amended and Restated Limited Liability Company Agreement, as executed and
as amended, modified, supplemented or restated from time to time, as the
context requires.

 

“Annual Operating
Budget” has the meaning given in Section 6.9.

 

“Approved” or “Approval”
means, with respect to any matter considered or to be considered by the Board,
the affirmative vote of a Majority of the members of the Board.

 

“Assignee” shall
have the meaning set forth in Section 9.4.

 

“Board” has the
meaning set forth in Section 6.1(A).

 

“Book Value”
means, with respect to any Company Property, the Company’s adjusted basis for
federal income tax purposes, adjusted from time to time to reflect the
adjustments required or permitted by Treasury Regulation Section 1.704-1
(b)(2)(iv)(d)-(g) (provided that, in the case of permitted adjustments, the
Company chooses to make such adjustments); provided, that the Book Value of any
asset contributed to the Company shall be equal to the Fair Market Value of the
contributed asset on the date of contribution.

 

“Business Day”
means any day, other than Saturday, Sunday or a day banks are authorized or
required to be closed in Chicago, Illinois.

 

“Buy Sell Deposit”
has the meaning set forth in Section 5.4(D)(ii).

 

“Buy-Sell Notice”
has the meaning set forth in Section 5.4(A).

 

“Buy-Sell Offer”
has the meaning set forth in Section 5.4(A).

 

“Buy-Sell Price”
has the meaning set forth in Section 5.4(A)

 

“Buying Member”
shall have the meaning set forth in Section 5.4(G).

 

“CalEast” means
CalEast Industrial Investors, LLC., a California limited liability company.

 

“CalEast Territory”
means the States of Alabama, Arkansas, Connecticut, Delaware, Florida, Georgia,
Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland,
Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, New
Hampshire, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma,
Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Vermont,
Virginia, West Virginia and Wisconsin, and Washington D.C.

 

“CalPERS” shall
have the meaning set forth in Section 6.1.

 

“CalPERS Observer”
shall have the meaning set forth in Section 6.1.

 

6

 

“Capital Account”
has the meaning set forth in Section 4.1.

 

“Capital Call” has
the meaning set forth in Section 3.4.

 

“Capital Contribution”
means, with respect to any Member, the contributions made by or on behalf of
such Member to the Company pursuant to Article III, which contributions
shall be noted opposite such Member’s name on Schedule 3.2, as the same
may be amended from time to time, in each case net of any liabilities assumed
by the Company from such Member in connection with such contribution and net of
any liabilities to which assets contributed by such Member in respect thereof
are subject.

 

“Cause” means (i)
the commission of a felony or a crime involving moral turpitude or the
commission of any other act or omission involving dishonesty or fraud with
respect to the Company or any of its Subsidiaries or any of their customers or
suppliers or with respect to its Members, (ii) conduct tending to bring the Company,
its Members, or any of its Subsidiaries into public disgrace or disrepute,
(iii) substantial or repeated failure to comply with the terms of this
Agreement or to perform duties of the office held by the Executive as
reasonably directed in writing by the Board, which failure is not cured (if
curable) within five days after the Executive receives written notice thereof
from the board or, if not reasonably curable within such period, then within 45
days so long as the Executive is diligently attempting to cure and so long as
such failure does not constitute an act or conduct falling within clause (i) or
(ii) above, or (iv) negligence or willful misconduct with respect to the
Company or any of its Subsidiaries.

 

“Certificate”
means the Certificate of Formation of the Company as filed with the Secretary
of State of the State of Delaware.

 

“Claim” shall have
the meaning set forth in Section 5.4(G).

 

“CNT” means
CenterPoint Properties Trust, a Maryland real estate investment trust.

 

“CNT Facility Agent”
shall have the meaning set forth in Section 5.4(A).

 

“CNT Loan Default”
means a breach of: (i) any provision of any indebtedness of CNT or its
Affiliates which causes the Credit Facility to discontinue its revolving
feature, or (ii) any covenant applicable to CNT or its Affiliates under the
Credit Facility.

 

“Code” means the
Internal Revenue Code of 1986 and any successor statute, as amended from time
to time, in effect as of the date hereof. The Board may, in its sole
discretion, treat any amendment to the Code as having been in effect as of the
date hereof, provided that such amendment does not result in a material change
in the rights or obligations of any Member under this Agreement.

 

“Commitment Period”
means, with respect to each Member, the period of time ending on June 26,
2010 at 11:59 p.m. Central Time.

 

“Company” means
the Delaware limited liability company formed pursuant to the Certificate and
this Agreement, as such limited liability company may be constituted from time
to time, and including its successors.

 

7

 

“Company Minimum Gain”
has the meaning set forth for “partnership minimum gain” in Treasury Regulation
Section 1. 704-2( d).

 

“Company Property”
means each Proposed Investment acquired by the Company.

 

“Confidential
Information” means information that is not generally known to the public
and that is used, developed or obtained by the Company or any of its Affiliates
or subsidiaries in connection with their respective businesses, including but
not limited to (i) financial information and projections, (ii) business
strategies, (iii) products or services, (iv) fees, costs and pricing
structures, (v) designs, (vi) analysis, (vii) drawings, photographs and
reports, (viii) computer software, including operating systems, applications
and program listings, (ix) flow charts, manuals and documentation, (x) data
bases, (xi) accounting and business methods, (xii) inventions, devices, new
developments, methods and processes, whether patentable or unpatentable and
whether or not reduced to practice, (xiii) customers and clients and customer
or client lists, (xiv) copyrightable works, (xv) all technology and trade
secrets, and (xvi) all similar and related information in whatever form.

 

“Construction Properties”
means those Company Properties that are under construction and not yet part of
the Collateral Pool (as that term is defined in the Credit Facility) at the
time that CalEast makes a Capital Contribution pursuant to Section 3.4(E)
hereof.

 

“Contributing Member”
has the meaning set forth in Section 3.4.

 

“Credit Facility”
means that certain Revolving Secured Credit Facility (Subscription Facility)
evidenced by that certain Second Amended and Restated Credit Agreement
(Subscription Facility) dated September 27, 2004, entered into by and
among the Company, Bank One, N.A. (as Administrative Agent), and the other
Lenders listed therein, together with any amendments thereto or replacement
credit facility approved by the Members and obtained by the Company.

 

“CRS” means
CenterPoint Realty Services Corporation, an Illinois corporation.

 

“CRS Buy-Sell Election
Notice” shall have the meaning set forth in Section 5.4(B).

 

“CRS Funding Assurance”
shall have the meaning set forth in Section 5.4(A).

 

“Default Amount”
shall have the meaning set forth in Section 3.4(D)(i).

 

“Default Contribution”
shall have the meaning set forth in Section 3.4(D)(ii).

 

“Default Election
Notice” shall have the meaning set forth in Section 3.4(D).

 

“Default Election
Period” shall have the meaning set forth in Section 3.4(D)(i).

 

“Default Loan”
shall have the meaning set forth in Section 3.4(D)(i).

 

“Defaulting Member”
shall have the meaning set forth in Section 3.4 (D).

 

8

 

“Default Rate”
means a per annum rate of interest equal to the lesser of (i) eighteen percent
(18%) and (ii) the maximum rate permitted under applicable law.

 

“Distributable Cash”
means, with respect to any period of time, the sum of Net Operating Cash Flow
and Net Capital Proceeds received by the Company during such period of time.

 

“Distribution”
means a distribution made by the Company to a Member, whether in cash, property
or securities and whether by liquidating distribution or otherwise; provided
that none of the following shall be a Distribution: (a) any redemption or
repurchase by the Company or any Member of any Membership Interests, (b) any
recapitalization or exchange of securities of the Company, (c) any subdivision
or any combination of any outstanding Membership Interests, or (d) any
reasonable fees or remuneration paid to any Member in such Member’s capacity as
an Officer, consultant or other provider of services to the Company.

 

“Draw Report”
shall have the meaning set forth in Section 3.4(B).

 

“Due Diligence
Procedures” shall have the meaning set forth in Section 3.1.

 

“Economic Interest”
means a Member’s share of the Company’s net profits, net losses and
distributions pursuant to this Agreement and the Act, but shall not include any
right to participate in the management or affairs of the Company, including the
right to vote on, consent to or otherwise participate in any decision of the
Members, or any right to receive information concerning the business and
affairs of the Company, in each case to the extent provided for herein or
otherwise required by the Act.

 

“Effective Date”
means the date set forth in the first introductory paragraph of this Agreement.

 

“Electing Member”
shall have the meaning set forth in Section 9.3.

 

“Election Notice”
shall have the meaning set forth in Section 9.3.

 

“Election Period”
shall have the meaning set forth in Section 9.3.

 

“Emergency Capital
Requirements” means capital expenditures required in the reasonable
judgment of the Officers or Members to prevent or mitigate imminent danger to
Persons or property, including Company Properties, or to prevent or mitigate a
default under the Credit Facility.

 

“ERISA” shall have
the meaning set forth in Section 3.2.

 

“Escrow Account”
has the meaning set forth in Section 5.2(E)(i).

 

“Executive” means
any person rendering services to the Company or its Subsidiaries, whether as an
Officer, advisor, consultant, member of the Board or otherwise.

 

“Fair Market Value”
means the fair market value of the asset in question, as determined in the good
faith judgment of the Board as the amount which would be distributable to the 

 

9

 

Members if the assets of
the Company were sold in an orderly transaction designed to maximize proceeds
therefrom, and such proceeds were then distributed in accordance with
Section 5.2, as determined in good faith by the Board with due regard to
the value implied by any transaction giving rise to the need for a
determination of Fair Market Value, in each case without discount for minority interest.

 

“First Hurdle Return
Account” means a memorandum account established and maintained by the
Company for each Member which shall be increased on the last day of each
applicable time period by an amount equal to a return in the nature of interest
accruing on such Member’s Weighted Average Invested Capital at the First Hurdle
Return Rate, and reduced by an amount equal to the aggregate amount of
distributions received by such Member pursuant to Section 5.2(A).

 

“First Hurdle Return
Rate” means a cumulative, non-compounded rate of interest equal to ten
percent (10%) per annum.

 

“Fiscal Year”
means the fiscal year of the Company and shall be the same as its taxable year,
which shall be the period beginning on July 1st of a given year
and ending on June 30th of the next year unless otherwise required by the
Code. Each Fiscal Year shall commence on the day immediately following the last
day of the immediately preceding Fiscal Year.

 

“Flow Through Entity”
shall have the meaning set forth in Section 3.2(C)(xii).

 

“Formation Date”
means the date the Certificate was filed with the Secretary of State of the
State of Delaware.

 

“Funding Default”
shall have the meaning set forth in Section 3.4(D).

 

“GAAP” shall have
the meaning set forth in Section 6.9.

 

“Gross Revenues”
means, with respect to a Company Property, the total income produced by such
Company Property.

 

“Indebtedness”
means all indebtedness for borrowed money (including purchase money
obligations), all indebtedness under revolving credit arrangements, all
capitalized lease obligations and all guarantees of any of the foregoing.

 

“Indemnifying Member”
shall have the meaning set forth in Section 11.3.

 

“Invested Capital
Account” means a memorandum account maintained by the Company with respect
to each Member and each Company Property which shall reflect, as of any date,
the excess, if any, of (i) the aggregate Capital Contributions of such Member
made with respect to such Company Property over (ii) the aggregate
distributions to such Members pursuant to Section 5.2(B) and (C) made with
respect to such Company Property. For purposes of calculating the “Invested
Capital Account,” distributions made pursuant to Section 5.2(B) and (C)
shall be allocated to Company Properties (or Liquidated Properties, as applicable)
in the same ratio that each Member’s Invested Capital Account for each Company
Property (or Liquidated Property, as applicable) immediately prior to the
distribution in question bears to the aggregate Invested 

 

10

 

Capital Accounts for all
Company Properties (or Liquidated Properties, as applicable) immediately prior
to such distribution.

 

“Investment” as
applied to any Person means (i) any direct or indirect purchase or other
acquisition by such Person of any notes, obligations, instruments, stock,
securities or ownership interest (including partnership interests, limited
liability company interests and joint venture interests) of any other Person
and (ii) any capital contribution by such Person to any other Person.

 

“Investment Company
Act” shall mean the Investment Company Act of 1940, 15 U.S.C. §§80a-l
through 80a-52, as amended from time to time.

 

“Investment Criteria”
shall have the meaning set forth in Section 2.6.

 

“Investment Report”
shall have the meaning set forth in Section 3.1.

 

“LaSalle US” shall
have the meaning set forth in Section 3.4(F).

 

“Leasing Guidelines”
shall have the meaning set forth in Section 6.9.

 

“Liquidated Company
Property” means a Company Property that has been sold or otherwise disposed
of by the Company.

 

“Loss” shall have
the meaning set forth in Section 7.5.

 

“Losses” means
items of Company loss and deduction determined according to Section 4.2.

 

“Majority” means,
with respect to the Board, a majority of the members of the Board designated by
Members who, at the time in question, are not Defaulting Members; provided,
however, that for so long as CalEast is not a Defaulting Member, (i) the vote
of at least two (2) members of the Board designated by CalEast shall be required
to constitute a Majority and (ii) for purposes of Approval over matters
described in Section 6.3(B)(i)-(iii), anyone of the members of the Board
designated by CalEast shall have the right to cast an additional deciding vote
in the event of a tie; provided further, however, that such right shall not be
exercised in a manner that will cause or result in a dissolution of the Company
pursuant to Article 10 hereof.

 

“Management Agreement”
shall have the meaning set forth in Section 6.7.

 

“Material Lease”
shall mean a lease of a Company Property for which: (i) the net present value
of all rental payments under such lease exceeds $2,000,000, or (ii) the
premises demised thereby exceeds 100,000 square feet in size.

 

“Member” means
each Person identified on Schedule A hereto as of the date hereof who has
executed this Agreement or a counterpart hereof and each Person who is
hereafter admitted as a Member in accordance with the terms of this Agreement
and the Act, in each case so long as such Person is shown on the Company’s
books and records. The Members shall constitute the “members” (as that term is
defined in the Act) of the Company. Except as expressly provided 

 

11

 

herein, the Members shall
constitute a single class or group of members of the Company for all purposes
of the Act and this Agreement.

 

“Member Commitment”
means, with respect to each Member, the amount that is set forth opposite such
Member’s name on Schedule 3.2 attached hereto which represents the amount
of the aggregate capital to be contributed by such Member to the Company as
contemplated by Section 3.4 and such Member’s Subscription Agreement.

 

“Membership Interest”
means a Member’s interest in the Company, and the right, if any, to participate
in the management of the business and affairs of the Company, including the
right, if any, to vote on, consent to, or otherwise participate in, any
decision or action of or by the Members and the right to receive information
concerning the business and affairs of the Company, in each case to the extent
expressly provided in this Agreement or otherwise required by the Act.

 

“Net Capital Proceeds”
means, with respect to any Company Property, the gross proceeds, if any,
realized by the Company from the sale, financing, refinancing or other
disposition of such Company Property or any interest therein, net of the actual
costs and expenses incurred by the Company in connection with the transaction
giving rise to such proceeds, including repayment of any indebtedness secured
by such Company Property.

 

“Net Operating Cash
Flow” means, for any period (i) all cash revenues, interest, rents and
other payments received by the Company during such period (excluding Capital
Contributions and Net Capital Proceeds) less (ii) all debt service payments and
cash expenses paid by the Company during such period, including any fees paid
under the Management Agreement, and all additions to reserves contemplated in
one or more approved Annual Operating Budgets.

 

“Non-Contributing
Member” shall have the meaning set forth in Section 3.4(G).

 

“Non-Defaulting Member”
shall have the meaning given in Section 3.4(D).

 

“Offer Period”
shall have the meaning set forth in Section 6.8.

 

“Offered Property”
shall have the meaning set forth in Section 6.8.

 

“Offeree Value”
has the meaning set forth in Section 5.4(A).

 

“Offeror Value”
has the meaning set forth in Section 5.4(A).

 

“Officer” means
each Person designated as an officer of the Company pursuant to Article VI
for so long as such Person remains an officer pursuant to the provisions of
Article VI.

 

“Person” means a
natural person, partnership (whether general or limited), limited liability
company, trust, estate, association, corporation, custodian, nominee or any
other individual or entity in its own or any representative capacity.

 

“Plan Asset
Regulations” shall have the meaning set forth in Section 3.2(C)(xii).

 

12

 

“Portfolio Marketing
Period” shall have the meaning set forth in Section 5.4(C).

 

“Portfolio Offeror”
shall have the meaning set forth in Section 5.4(C)(ii).

 

“Portfolio Purchase
Offer” shall have the meaning set forth in Section 5.4(C).

 

“Proceeding” shall
have the meaning set forth in Section 7.5.

 

“Profits” means
items of Company income and gain determined according to Section 4.2.

 

“Promote” shall
means any distributions received by CRS under Sections 5.2(D)(x) and/or
5.2(E)(x).

 

“Proposed Investment”
shall have the meaning set forth in Section 3.1.

 

“Qualifying Bank”
means a bank or trust company that is (i) organized as a banking association or
corporation under the laws of the United States or any State thereof, or in the
District of Columbia, (ii) subject to supervision or examination by federal,
state or District of Columbia banking authorities, (iii) with capital and
surplus of not less than $250,000,000, and (iv) the debt securities of which
are rated at least “A” by Moody’s Investors Services, Inc. or “A2” by Standard
& Poor’s Ratings Group.

 

“Rejection Threshold”
shall have the meaning set forth in Section 10.1(B)(iii)(2).

 

“Sale Notice”
shall have the meaning set forth in Section 6.8.

 

“Second Hurdle Return
Account” means a memorandum account established and maintained by the
Company for each Member which shall be increased on the last day of each
applicable time period by an amount equal to a return in the nature of interest
accruing on such Member’s Weighted Average Invested Capital at the Second
Hurdle Return Rate, and reduced by an amount equal to the aggregate amount of distributions
received by such Member pursuant to Sections 5.2 (A) and 5.2(D)(y).

 

“Second Hurdle Return
Rate” means a cumulative, non-compounded rate of interest equal to twelve
and one-half percent (12.5%) per annum.

 

“Securities Act”
means the Securities Act of 1933, as amended from time to time.

 

“Selling Member”
shall have the meaning set forth in Section 5.4(G).

 

“Sharing Percentage”
means, with respect to each Member, as of any date, the fraction, expressed as
a percentage, the numerator of which is the aggregate Capital Contributions
made by such Member and the denominator of which is the aggregate Capital
Contributions made by all of the Members, subject to adjustment as provided in
Section 3.4(D).

 

“Shortfall Amount”
shall have the meaning set forth in Section 5.3.

 

“Short Term
Investments” means US. Dollar denominated, readily available instruments
consisting of one or more of:

 

13

 

A              interest bearing
transaction accounts in a Qualifying Bank (including, without limitation, money
market accounts);

 

B                time deposits, or
certificates of deposit, in a Qualifying Bank, in each case having a maturity
of one year or less;

 

C                securities that,
at the date of investment, are direct obligations of, or obligations fully
guaranteed or insured by, the United States or any agency or instrumentality of
the United States having a maturity of not more than one year from the date of
purchase;

 

D               such other
short-term, liquid investments having a maturity of three months or less rated
at lease “A” by Moody’s Investor’s Services, Inc. or “A2” by Standard &
Poor’s Ratings Group; and

 

E                 money market
mutual funds with assets of at least $500,000,000, substantially all of which
assets consist of obligations of the type included in clauses (i) through (iv)
above.

 

“Subscription
Agreement” shall have the meaning set forth in Section 3.4(A).

 

“Subsidiary”
means, with respect to any Person, any corporation, limited liability company,
partnership, association or other business entity of which (i) if a
corporation, a majority of the total voting power of shares of stock entitled
(without regard to the occurrence of any contingency) to vote in the election
of directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof, or (ii) if a limited liability
company, partnership, association /or other business entity, a majority of the
membership, partnership or other similar ownership interest thereof or the
power to elect a majority of the members or the governing body thereof is at
the time owned or controlled, directly or indirectly, by any Person or one or
more Subsidiaries of that Person or a combination thereof. For purposes hereof,
a Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or control any managing director, general partner or managing member
of such limited liability company, partnership, association or other business
entity.

 

“Tax Matters Partner”
shall have the meaning set forth in Section 8.2.

 

“Taxable Year”
means the Company’s taxable year ending on the last day of each calendar year
(or part thereof, in the case of the Company’s last taxable year), or such
other year as is (i) required by Section 706 of the Code or (ii)
determined by the Board.

 

“Termination Date”
shall mean June 26, 2012.

 

“Termination Event”
shall have the meaning set forth in Section 10.1(B).

 

“Transfer” shall
mean any sale, assignment, pledge, hypothecation or other disposition of a
Membership Interest, Economic Interest or Company Property.

 

14

 

“Transfer Notice”
shall have the meaning set forth in Section 9.3.

 

“Transferred Interest”
shall have the meaning set forth in Section 9.3.

 

“Transferring Member”
shall have the meaning set forth in Section 9.3.

 

“Treasury Regulations”
means the Federal income tax regulations, including any temporary or proposed
regulations, promulgated under the Code, in effect as of the date hereof. The
Board may, in its sole discretion, treat any amendment to such Treasury
Regulations as having been in effect as of the date hereof, provided that such
amendment does not result in a material change in the rights or obligations of
any Member under this Agreement.

 

“Weighted Average
Invested Capital” means, with respect to any Member for any calendar
quarter, the quotient obtained by dividing (i) the sum of (a) the aggregate
Invested Capital of such Member for all Company Properties as of the first day
of such quarter multiplied by the number of days in such quarter, plus (b) the
sum of the products obtained by multiplying (1) the amount of each Capital
Contribution made by such Member during such quarter by (2) the number of days
in the period commencing on the date on which such Capital Contribution was
made and ending on the last day of such quarter (inclusive) minus the sum of
the products obtained by multiplying (x) the amount of each distribution made
to such Member pursuant to Section 5.2(A) during such quarter by (y) the
number of days in the period commencing on the date on which such distribution
was made and ending on the last day of such quarter (inclusive) by (ii) the
number of days in such calendar quarter.

 

Section 1.2                                   Construction.
 Whenever the context requires, the
gender of all words used in this Agreement includes the masculine, feminine and
neuter and the singular number includes the plural number and vice versa. All
references to Articles and Sections refer to articles and sections of this
Agreement, and all references to Schedules are to Schedules attached hereto,
each of which is made a part hereof for all purposes.

 

Section 1.3                                   Including.  Reference in this Agreement to “including,”
“includes” and “include” shall be deemed to be followed by “without
limitation.”

 

ARTICLE II

ORGANIZATION

 

Section 2.1                                   Formation.  The Company has been organized as a Delaware
limited liability company on the Formation Date by the execution and filing of
the Certificate under and pursuant to the Act and shall be continued in
accordance with the terms of this Agreement. The rights, powers, duties,
obligations and liabilities of the Members shall be determined pursuant to the
Act and this Agreement. To the extent that the rights, powers, duties, obligations
and liabilities of the Members are different by any provision of this Agreement
than they would be in the absence of such provision, this Agreement shall, to
the extent permitted by the Act, control.

 

Section 2.2                                   Company Name.  The name of the Company shall be
“CenterPoint Venture, LLC” and all Company business shall be conducted in that
name or such other names that comply with applicable law as the Board may
select from time to time. Notification of any 

 

15

 

change in the name of the
Company shall be given to all Members. The Company’s business may be conducted
under its name and/or any other name or names deemed advisable by the Board.

 

Section 2.3                                   The
Certificate, Etc.  The Certificate
was filed with the Secretary of State of the State of Delaware on the Formation
Date. The Members hereby agree to execute, file and record all such other
certificates and documents, including amendments to the Certificate and to do
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 Delaware and any other jurisdiction in which the Company may own property or
conduct business.

 

Section 2.4                                   Term
of the Company.  The term of the
Company commenced on the Formation Date and shall continue in existence until
termination and dissolution thereof as determined under Section 10.1 of
this Agreement.

 

Section 2.5                                   Registered
Office Registered Agent Principal Office Other Offices.  The registered office of the Company
required by the Act to be maintained in the State of Delaware shall be the
office of the initial registered agent named in the Certificate or such other
office (which need not be a place of business of the Company) as the Board may
designate from time to time in the manner provided by law. The registered agent
of the Company in the State of Delaware shall be the initial registered agent
named in the Certificate or such other Person or Persons as the Board may
designate from time to time in the manner provided by law. The principal office
of the Company shall be at such place as the Board may designate from time to
time, which need not be in the State of Delaware, and the Company shall
maintain records there. The Company may have such other offices as the Board
may designate from time to time.

 

Section 2.6                                   Purposes.  The nature of the business or purposes to be
conducted or promoted by the Company is to acquire, develop, own, operate,
lease and sell industrial properties, either directly or through one or more
Subsidiaries or Affiliates, meeting the criteria set forth on Schedule 2.6
hereto (the “Investment Criteria”). The Company may engage in any and all
activities necessary, desirable or incidental to the accomplishment of the
foregoing. Notwithstanding anything herein to the contrary, nothing set forth
herein shall be construed as authorizing the Company to possess any purpose or
power, or to do any act or thing, forbidden by law to a limited liability
company organized under the laws of the State of Delaware.

 

Section 2.7                                   Powers
of the Company.  Subject to the
provisions of this Agreement, the Company shall have the power and authority to
take any and all actions necessary, appropriate, proper, advisable, convenient
or incidental to or for the furtherance of the purposes set forth in
Section 2.6, including, without limitation, the power either directly or
through one or more Subsidiaries or Affiliates:

 

(i)                                     to
conduct its business, carry on its operations and have and exercise the powers
granted to a limited liability company by the Act in any state or district of
the United States.

 

(ii)                                  to
acquire by purchase, lease, contribution of property or otherwise, develop,
rehabilitate, own, hold, operate, maintain, finance, refinance, improve, lease,
sell, convey, 

 

16

 

mortgage, transfer,
demolish or dispose of any real or personal property that may be necessary,
convenient or incidental to the accomplishment of the purposes of the Company;

 

(iii)                               to
enter into, perform and carry out contracts of any kind, including contracts
with any Member or any Affiliate thereof, or any agent of the Company necessary
to, in connection with, convenient to or incidental to the accomplishment of
the purposes of the Company including agreements for the management of the
affairs of the Company;

 

(iv)                              to
purchase, take, receive, subscribe for or otherwise acquire, own, hold, vote,
use, employ, sell, mortgage, lend, pledge, or otherwise dispose of, and
otherwise use and deal in and with, shares or other interests in or obligations
of domestic corporations, associations, general or limited partnerships
(including the power to be admitted as a partner thereof and to exercise the
rights and perform the duties created thereby), trusts, limited liability
companies (including the power to be admitted as a member or appointed as a
manager thereof and to exercise the rights and to perform the duties created
thereby) or individuals or direct or indirect obligations of the United States
any state, governmental district or municipality or of any instrumentality of
any of them;

 

(v)                                 to
lend money for any proper purpose, to invest and reinvest its funds and to take
and hold real and personal property for the payment of funds so loaned or
invested;

 

(vi)                              to
sue and be sued, complain and defend, and participate in administrative or
other proceedings, in its name;

 

(vii)                           to
appoint agents of the Company and define their duties and fix their
compensation;

 

(viii)                        to
indemnify any Person in accordance with the Act and to obtain any and all types
of insurance;

 

(ix)                                to
cease its activities and cancel its Certificate;

 

(x)                                   to
negotiate, enter into, renegotiate, extend, renew, terminate, modify, amend,
waive, execute, acknowledge or take any other action with respect to any lease,
contract or security agreement in respect of any assets of the Company;

 

(xi)                                to
borrow money and issue evidences of indebtedness and guaranty indebtedness and
to secure the same by a mortgage, pledge or other lien on the assets of the
Company;

 

(xii)                             to
pay, collect, compromise, litigate, arbitrate or otherwise adjust or settle any
and all other claims or demands of or against the Company or to hold such
proceeds against the payment of contingent liabilities; and

 

(xiii)                          to make,
execute, acknowledge and file any and all documents or instruments necessary,
convenient or incidental to the accomplishment of the purpose of the Company.

 

Section 2.8                                   Board
Authority.  Subject to the
provisions of this Agreement, (i) the Company may, upon the direction of the
Board, enter into and perform any and all documents, 

 

17

 

agreements and instruments
contemplated thereby, all without any further act, vote or approval/of any
Member, and (ii) the Board may authorize any Person (including any Member or
Officer) to enter into and perform any and all documents, agreements and
instruments on behalf of the Company. Each person so authorized by the Board,
whether pursuant to this Agreement or subsequent action of the Board, shall be
deemed a “manager” for purposes of the Act.

 

Section 2.9                                   Foreign
Qualification.  Prior to the
Company’s conducting business in any jurisdiction other than Delaware, the
Board shall cause the Company to comply with all requirements necessary to
qualify the Company as a foreign limited liability company in that
jurisdiction. At the request of the Board or any Officer, each Member shall
execute, acknowledge, swear to and deliver any or all certificates and other
instruments conforming with this Agreement that are necessary or appropriate to
qualify, continue and terminate the Company as a foreign limited liability
company in all such jurisdictions in which the Company may conduct business.

 

Section 2.10                            No
State-Law Partnership.  The Members
intend that the Company shall not be a partnership (including a general or
limited partnership) or joint venture, and that no Member shall be a partner or
joint venturer of any other Member by virtue of this Agreement, for any
purposes other than federal and, if applicable, state tax purposes, and neither
this Agreement nor any other document entered into the Company or any Member
shall be construed to suggest otherwise. The Members intend that the Company
shall be treated as a partnership for federal and, if applicable, state income
tax purposes, and each Member and the Company shall file all tax returns and
shall otherwise take all tax and financial reporting positions in a manner
consistent with such treatment.

 

ARTICLE III

COMPANY INVESTMENTS; MEMBERSHIP; CAPITAL CONTRIBUTIONS

 

Section 3.1                                   Company
Investments.  During the Commitment
Period, CRS shall endeavor to identify and cause the Company to acquire
properties generally conforming with the Investment Criteria identified from
time to time by CRS for possible acquisition by the Company (“Proposed
Investments”). With respect to each Proposed Investment, the Company shall
deliver to the Board a report which shall contain the information set forth in
Schedule 3.1(a) attached hereto (an “Investment Report”). The Board shall
have ten (10) Business Days from the date of the delivery of the Investment
Report within which to approve or disapprove the commencement of due diligence
for the possible acquisition of the Proposed Investment by the Company. In the
event that the Board does not take any action within such ten (10) Business Day
period, the Board shall be deemed to have disapproved the Proposed Investment.
Upon the Approval of the Board in accordance with this Section 3.1, the
Company shall perform or cause to be performed the due diligence procedures set
forth on Schedule 3.1(b) (the “Due Diligence Procedures”). Upon completion
of the Due Diligence Procedures, the Company shall report the results of the
due diligence review to the Board for its Approval. The Board shall thereafter
have two (2) Business Days to review the results of the due diligence review,
and, if the information regarding such Proposed Investment obtained through the
Due Diligence Procedures is acceptable to the Board, the Board shall authorize
and direct the Officers to complete the acquisition of such Proposed
Investment. If the Board shall fail to Approve a Proposed Investment within two
(2) Business Days after receiving the results of the due diligence review, then
such Proposed 

 

18

 

Investment shall be
deemed disapproved. In the event the Board disapproves the Proposed Investment,
then the Member or its Affiliates whose Board members voted to approve such
Proposed Investment shall be permitted to acquire such Proposed Investment on
terms not materially more favorable than those offered to the Company.

 

Section 3.2                                   Members.

 

(A)                              Names,
etc. The names, residence, business or mailing addresses, Member
Commitments and Capital Contributions of each Member are set forth on
Schedule 3.2. Any reference in this Agreement to Schedule 3.2 shall
be deemed to be a reference to Schedule 3.2 as amended and in effect from
time to time in accordance with the terms of this Agreement. Each Person listed
on Schedule 3.2 shall, upon his, her or its execution of this Agreement or
counterpart thereto, be admitted to the Company as a Member of the Company.

 

(B)                                Loans
by Members. No Member, as such, shall be required to lend any funds to the
Company or to make any contribution of capital to the Company, except as
otherwise required by applicable law, this Agreement, such Member’s
Subscription Agreement, or any other written agreement between such Member and
the Company explicitly requiring the making of capital contributions. Any
Member may, with the approval of the Board, make loans to the Company, and any
loan by a Member to the Company shall not be considered to be a Capital
Contribution. Such loans shall be on such terms as shall be specified and
agreed to by the Board.

 

(C)                                Representations
and Warranties of Members.  Each
Member hereby represents and warrants to the Company and acknowledges that:

 

(i)                                     such
Member has knowledge and experience in financial and business matters and is
capable of evaluating the merits and risks of an investment in the Company and
making an informed investment decision with respect thereto;

 

(ii)                                  such
Member has reviewed and evaluated all information necessary to assess the
merits and risks of his, her or its investment in the Company and has had
answered to its satisfaction any and all questions regarding such information;

 

(iii)                               such
Member is able to bear the economic and financial risk of an investment in the
Company for an indefinite period of time;

 

(iv)                              such
Member is acquiring Membership Interests in the Company for investment only and
not with a view to, or for resale in connection with, any distribution to the
public or public offering thereof;

 

(v)                                 the
Membership Interests in the Company have not been registered under the
securities laws of any jurisdiction and cannot be disposed of unless they are
subsequently registered and/or qualified under applicable securities laws and
the provisions of this Agreement have been complied with;

 

(vi)                              the
execution, delivery and performance of this Agreement have been duly authorized
by such Member and do not require such Member to obtain any consent or approval
that has not been obtained and do not contravene or result in a default under
any provision of any 

 

19

 

law or regulation
applicable to such Member or other governing documents or any agreement or
instrument to which such Member is a party or by which such Member is bound,
and the Person executing this Agreement on behalf of such Member has been duly
authorized to do so;

 

(vii)                           the
determination of such Member to invest in the Company has been made by such
Member independent of any other Member and independent of any statements or
opinions as to the advisability of such purchase or as to the properties,
business, prospects or condition (financial or otherwise) of the Company and
its subsidiaries which may have been made or given by any other Member or by
any Affiliate or agent of any other Member;

 

(viii)                        this
Agreement is valid, binding and enforceable against such Member in accordance
with its terms;

 

(ix)                                if
a Member is a partnership, limited liability company or other entity classified
as a partnership for federal income tax purposes, or a grantor trust (within
the meaning of Sections 671-679 of the Code) or an S corporation (within the
meaning of Section 1361 of the Code) (each, a “Flow Through Entity”), that
either: (a) no Person will own, directly or indirectly through one or more
flow-through entities, an interest in such Member where more than seventy
percent (70%) of the value of the Person’s interest in such Member is
attributable to such Member’s investment in the Company; or (b) if one or more
Persons will own, directly or indirectly through one or more Flow-Through
Entities, an interest in such Member where more than seventy percent (70%) of
the value of the Person’s interest in such Member is attributable to the Member’s
investment in the Company, neither the Member nor any such Person has or will
have any intent or purpose of having such Person invest in the Company
indirectly through Member in order to enable the Company to satisfy the
100-Member limitation in Treas. Reg. §1.7704-1(h) (the private placement safe
harbor from publicly traded status);

 

(x)                                   unless
such Member has notified the Board to the contrary, that such Member: (a) is a
United States Person within the meaning of Section 7701 of the Code (i.e.,
is not any of the following (as defined in the Code): a non-resident alien
individual, foreign partnership, foreign corporation, foreign estate, foreign
trust, other foreign entity or organization, or grantor trust having a foreign
person as an owner): (b) shall notify the Company within sixty (60) days of the
date such Member ceases to be a United States Person; and (c) may be asked to
recertify its non-foreign status at periodic intervals (and that this
information may be disclosed to the Internal Revenue Service);

 

(xi)                                if
such Member will beneficially own ten percent (10%) or more of the Membership
Interests in the Company, the Member is not an “investment company” as defined
in the Investment Company Act nor is the Member itself relying on
Section 3(c)(1) or Section 3(c )(7) of the Investment Company Act as
an exemption from classification as an “investment company;” and

 

(xii)                             such
Member is not holding and, for the term of the Company, will not hold “plan
assets,” as that term is defined in the Employee Retirement Income Security Act
of 1974, as amended (“ERISA”), or the rules and regulations promulgated
thereunder, including, without limitation, the Department of Labor Regulations
Section 2510.3-101 the “Plan Asset Regulations”), and, consequently, the administration
and management of the Company and the 

 

20

 

investment of the
Company’s assets are not, and will not be, subject to the fiduciary duty
requirements of ERISA.

 

Section 3.3                                   No
Liability of Members.

 

(A)                              No
Liability. Except as otherwise required by applicable law, no Member shall
have any personal liability whatsoever in such Member’s capacity as a Member,
whether to the Company, to any of the other Members, to the creditors of the
Company or to any other third party, for the debts, liabilities, commitments or
any other obligations of the Company or for any losses of the Company. Each
Member shall be liable only to make such Member’s Capital Contributions to the
Company pursuant to its Member Commitment and Subscription Agreement and the
other payments provided expressly herein.

 

(B)                                Distributions.
In accordance with the Act and the laws of the State of Delaware, a member of a
limited liability company may, under certain circumstances, be required to
return amounts previously distributed to such member. It is the intent of the
Members that no distribution to any Member pursuant to Article V hereof
shall be deemed a return of money or other property paid or distributed in
violation of the Act. The payment of any such money or distribution of any such
property to a Member shall be deemed to be a compromise within the meaning of
the Act, and the Member receiving any such money or property shall not be
required to return to any Person any such money or property. However, if any
court of competent jurisdiction holds that, notwithstanding the provisions of
this Agreement, any Member is obligated to make any such payment, such
obligation shall be the obligation of such Member and not of any other Member.

 

Section 3.4                                   Capital
Contributions.

 

(A)                              Each
Member, by execution of this Agreement and the agreement of even date herewith
between such Member and the Company, as the same may be amended from time to
time (a “Subscription Agreement”), pursuant to which such Member agreed to
acquire its Membership Interest in the Company, agrees to make Capital
Contributions up to the amount of its Member Commitment in accordance with the
terms of this Agreement.

 

(B)                                The
Company may through its Officers call Capital Contributions by the Members from
time-to-time (each a “Capital Call”) in accordance with a Draw Report (as
defined below). With respect to each such Capital Call, the Members shall make
Capital Contributions to the Company equal to the aggregate amount of such Capital
Call pro rata based upon their relative Member Commitments. With respect to
each Capital Call, the Officers shall deliver to the Members along with written
notice of such Capital Call a detailed description of the use of the proceeds
thereof and the particular items being funded thereby in substantially the form
of Exhibit 1 (a “Draw Report”), which the Officers shall deliver to the Members
on or before (i) the fifth (5th) Business Day prior to the date upon which the
funding of any Capital Call is due or (ii) with respect to any Capital Call
required to fund Emergency Capital Requirements, as far in advance of the date
upon which the funding of such Capital Call is due as the circumstances
reasonably permit. The Officers shall provide a detailed written report to the
Board regarding any Emergency Capital Requirements as promptly as practicable
following the occurrence of the event or events giving rise thereto specifying
the circumstances of such emergency situation and

 

21

 

the recommendations of
the Officers with respect thereto. The Officers (and, with respect to items
(ii) and (iii) below, each Member) shall be authorized to make Capital Calls
and issue Draw Reports only with respect to: (i) the acquisition of Proposed
Investments previously Approved by the Board; (ii) capital expenditures with
respect to one or more Company Properties to the extent provided for in the
current Annual Operating Budget for such Company Property; (iii) Emergency
Capital Requirements; and (iv) such other matters as may be Approved by the
Board from time to time.

 

(C)                                All
Capital Calls that are consistent with the foregoing provisions of Sections
3.4(A) and (B) shall be paid in US. Dollars within five (5) Business Days
following receipt of the Draw Report therefor. Any and all amounts that are
called by the Board and that are not immediately applied for the purpose called
shall be (i) returned to the funding Members or (ii) invested by the Board in
the name of the Company in Short Term Investments until such time as they are
applied for the purpose called. During the Commitment Period, any amounts
returned to the funding Members pursuant to this Section 3.4(C) together
with all distributions to the Members pursuant to Sections 5.2(B) and (C): (i)
shall reduce each such Member’s Capital Account by the amount returned to each
such Member, (ii) shall restore the Member Commitment of each such Member by
the amount returned to each such Member, and (iii) may be recalled by the Board
in accordance with this Agreement.

 

(D)                               If
a Member fails to make, in a timely fashion, a Capital Contribution to the
Company equal to its pro rata portion of the aggregate amount of the Capital
Call therefore based upon its relative Member Commitment when called by the
Officers or the Board in accordance with this Section 3.4 (a “Funding
Default”), the Officers shall deliver to such Member (a “Defaulting Member”) a
written notice of such Funding Default. If the Member fails to cure such
Funding Default within three (3) Business Days after such written notice, the
Company shall have all rights and remedies as are available at law or in equity
to compel the Defaulting Member to make the required Capital Contribution. In
addition, the Officers shall provide written notice of any Funding Default (the
“Default Election Notice”) to each Member who has timely funded its Member
Commitment (a “Non-Defaulting Member”) as quickly as reasonably practical
pursuant to which such Non-Defaulting Members may elect to exercise any of the
rights and remedies in respect of such Funding Default specified in clauses (i)
and (ii) below:

 

(i)                                     Each
Non-Defaulting Member may elect in writing to make a loan (a “Default Loan”) to
the Defaulting Member to fund all or a portion of the amount of the Defaulting
Member’s required contribution of capital (the principal amount of any such
unsatisfied obligation being the “Default Amount”), and such Default Loan, if
any, shall be paid directly to the Company by the Non-Defaulting Member and treated
by the Company as a Capital Contribution to the Company by the Defaulting
Member. A Default Loan shall earn interest at the Default Rate, and shall be
secured by the Defaulting Member’s interest in the Company and repaid out of
the first distributions made to such Defaulting Member pursuant to this
Agreement. No Non-Defaulting Member shall be obligated to make any Default
Loan. If, at the end of the fifteen (15) calendar day period following delivery
of the Default Election Notice (the “Default Election Period”), the aggregate
amount of the Default Loan(s) committed by the Non-Defaulting Members is equal
to or greater than one hundred percent (100%) of the Default Amount, then each
such Non-Defaulting Member shall make a Default Loan in an amount determined in
accordance with the amount committed to by such Non-Defaulting Members. If, at 

 

22

 

the end of the Default
Election Period, the aggregate amount of the Default Loan(s) committed by the
Non-Defaulting Members is less than one hundred percent (100%) of the Default
Amount, then each such Non-Defaulting Members may make such Default Loan(s) in
the amount committed to by such Non-Defaulting Members, or in such greater
amount as such Non-Defaulting Members may agree to advance up to the Default
Amount. A Default Loan: (A) shall reduce the unfunded portion of the Member
Commitment of a Defaulting Member and shall be deemed to have been contributed
thereby to the Company on behalf of the Defaulting Member; (B) shall not reduce
the unfunded portion of the Member Commitment of the participating
Non-Defaulting Members; and (C) shall not release the Defaulting Member from
its obligations to fund the remaining unfunded portion of its Member
Commitment. The Defaulting Member may cause any such Default Loan to be repaid
at any time by payment to such Non-Defaulting Members of the outstanding
principal balance of and all accrued but unpaid interest on such Default Loan
at the Default Rate in accordance with the amount of the Default Amount loaned
by each Non-Defaulting Member. In the event that any Default Loan (or portion
thereof) remains unpaid following final winding-up and liquidation of the
Company, then the Non-Defaulting Member making such Default Loan shall have all
of its rights and remedies against the Defaulting Member with respect to the
collection of any unpaid balance, including accrued but unpaid interest
thereon, from the Defaulting Member. The Defaulting Member shall execute and
deliver all instruments and documents reasonably requested by the
Non-Defaulting Member(s) to evidence and secure such Default Loan. Upon
repayment of all such Default Loan(s), the Defaulting Member shall no longer be
a Defaulting Member for purposes of this Agreement.

 

(ii)                                  In
the event that any Default Loan (or portion thereof) remains unpaid for a
period of three (3) months after the date of the making of the Default Loan,
each Non-Defaulting Member making such Default Loan may elect in writing to
convert the outstanding amount of such Default Loan to an additional
contribution of capital to the Company (a “Default Contribution”). Upon such
conversion to a Default Contribution by any of the Non-Defaulting Members, the
Board shall recalculate the Members’ Sharing Percentages, effective as of the
date of such conversion to a Default Contribution, so that each Member’s
Sharing Percentage equals the percentage equivalent of the quotient determined
by dividing (x) the sum of (i) 200% of the amount of all Default Contributions
made by such Member plus (ii) 100% of all other Capital Contributions made by
such Member minus (iii) 100% of all Default Contributions made by the other
Member in respect of Funding Defaults by such Member by (y) the sum of all
Capital Contributions made by all Members. In addition, in the event the
Defaulting Member is CRS, the Promote shall be reduced by a percentage which
equals the percentage reduction in the Sharing Percentage resulting from the
formula set forth immediately above. An example of the operation of this
provision is attached hereto as Schedule 3.4(D).

 

(E)                                 If
CalEast assumes CNT’s construction completion guaranty obligations under the
Credit Facility pursuant to the terms of the Credit Facility, then the Company
shall be deemed to have made a Capital Call to CRS in the amount equal to its
pro rata portion of all payments made by CalEast under the construction
completion guaranty. In the event that CRS does not make a Capital Contribution
based upon such deemed Capital Call within the time period set forth in
Section 3.4(C) above, then (i) CRS shall immediately be deemed to be a
Defaulting Member, and (ii) any payments made by CalEast as a result of such
assumption shall be deemed to be a Default Contribution by CalEast up to
CalEast’s pro rata share of such payment as based upon its 

 

23

 

relative Member
Commitment in accordance with Section 3.4(D)(ii) without regard to the
time periods set forth in Section 3.4(D)(ii).

 

(F)                                 If
a Member is required to and makes a payment under the Credit Facility as a
result of its pledge of its Subscription Agreement thereunder (such Member
being a “Contributing Member”), then such payment shall be deemed to be a
Capital Contribution hereunder pursuant to a Capital Call to the Contributing
Member in the amount equal to the Contributing Member’s pro rata share of the
payment made thereby based upon its relative Member Commitment. The Company
shall be deemed to have simultaneously made a Capital Call to the other Member
in an amount equal to such other Member’s pro rata share of such payment based
upon its relative Member Commitment. In the event that the other Member does
not make a Capital Contribution based upon such deemed Capital Call within the
time period set forth in Section 3.4(C) above, then (i) the other Member
shall immediately be deemed to be a Defaulting Member, and (ii) the
Contributing Member shall be deemed to have made a Default Contribution in the
amount of the deemed Capital Call to the other Member in accordance with
Section 3.4(D)(ii) without regard to the time periods set forth in
Section 3.4(D)(ii). For purposes of this Section 3.4(F), any payments
required to be made by either CNT, CalPERS or LaSalle US Holdings, Inc.
(“LaSalle US”) pursuant to their respective guarantees given in connection with
the Credit Facility shall be treated as if (i) CRS (with respect to CNT), or
(ii) CalEast (with respect to CalPERS and LaSalle US) were required to make a
payment under the Credit Facility as a result of their pledge of a Subscription
Agreement thereunder.

 

(G)                                If
a Member is required to but fails to make a payment under the Credit Facility
as a result of its pledge of its Subscription Agreement under the Credit
Facility (a “Non Contributing Member”), such failure shall be a Funding Default
by the Non-Contributing Member in the amount of the payment required to have
been funded, and if the Non-Contributing Member does not fund such amount
within the time period set forth in Section 3.4(C) above, then the other
Member shall have the right to elect to make a Default Loan in accordance with
Section 3.4(D)(i) or to make a Default Contribution in accordance with
Section 3.4(D)(ii) without regard to the time periods set forth in said
Section 3.4(D).

 

Section 3.5                                   Certification
of Membership Interests.  The
Company may in its discretion issue certificates to the Members representing
the Membership Interests held by such Member.

 

Section 3.6                                   Other
Activities.  Subject to the other
express provisions of this Agreement and any other agreements with the Company,
including, without limitation, any services agreements to which a Member or
Affiliate of a Member may be a party, each Member, member of the Board or
Officer of the Company, at any time and from time to time may engage in and own
interests in other business ventures of any type and description, independently
or with others (including business ventures in competition with the Company).
In this regard, CalEast recognizes that CRS and its Affiliates are in the
business of acquiring, developing, owning, leasing, operating and selling real
property and interests therein for profit and engaging in all activities
related or incidental thereto. Neither the Company nor CalEast nor any
Affiliate of CalEast shall have any right by virtue of this Agreement or the
Company relationship created hereby in or to any ventures or activities of CRS
and its Affiliates or to the income or proceeds derived therefrom or the
pursuit of such other ventures or opportunities by CRS and its Affiliates, even
if competitive with the business of the Company, and the same are hereby 

 

24

 

consented to by CalEast.
Similarly, CRS recognizes that CalEast and its Affiliates are in the business
of acquiring, developing, owning, leasing, operating and selling real property
and interests therein for profit and engaging in all activities related or
incidental thereto. Neither the Company nor CRS nor any Affiliate of CRS shall
have any right by virtue of this Agreement or the Company relationship created
hereby in or to any ventures or activities of CalEast and its Affiliates or to
the income or proceeds derived therefrom or the pursuit of such other ventures
or opportunities by CalEast and its Affiliates, even if competitive with the
business of the Company, and the same are hereby consented to by CRS. CRS and
its Affiliates shall not be obligated to present to the Company any particular
investment opportunity, whether or not consistent with the Investment
Guidelines, and CRS and its Affiliates shall have the right to take for its own
account any particular investment opportunity. Notwithstanding the foregoing,
CRS hereby consents and agrees for itself and on behalf of its Affiliates that
CRS shall not, and shall not cause or permit its Affiliates to, form any
investment fund or partnership with one or more pension funds, insurance
companies or other institutional investors, on a “blind pool” or “unspecified”
basis, for the purpose of acquiring and developing industrial properties prior
to the expiration of the Commitment Period, without the prior written consent
of CalEast, which consent shall be given or withheld in CalEast’s sole and
absolute discretion, unless the opportunity to invest in such investment fund
or partnership shall have first been offered to CalEast and CalEast shall have
declined to invest in such fund or partnership.

 

Section 3.7                                   Credit
Facility.  Each Member shall take
all acts and execute and deliver all documents as are reasonably required of
such Member to comply with the terms of Section 7.1.11 of the Credit
Facility.

 

ARTICLE IV CAPITAL ACCOUNTS

 

Section 4.1                                   Establishment
and Determination of Capital Accounts. 
A capital account (“Capital Account”) shall be established for each
Member on the books of the Company. Each Member’s Capital Account shall be (a)
increased by any Capital Contributions made by such Member pursuant to the
terms of this Agreement (including, without limitation, the amount of any
Default Contributions made by such Member) and such Member’s share of Profits,
the amount of any Company liabilities that are assumed by such Member and any
other items of income and gain allocated to such Member pursuant to
Article V, (b) decreased by such Member’s share of Loss, any distributions
to such Member of cash or the Fair Market Value of any other Company property
(net of liabilities assumed by such Member and liabilities to which such
property is subject) distributed to such Member, the amount of any liabilities
of such Member that are assumed by the Company and any other deduction
allocated to such Member pursuant to Article V, and (c) adjusted as
otherwise required by the Code and the regulations thereunder, including but
not limited to, the rules of Treasury Regulation Section 1.704-1 (b)(2)(iv).
Any references in this Agreement to the Capital Account of a Member shall be
deemed to refer to such Capital Account as the same may be increased or
decreased from time to time as set forth above.

 

Section 4.2                                   Computation
of Amounts.  For purposes of
computing the amount of any item of Company income, gain, loss or deduction to
be allocated pursuant-to this Article IV and to be reflected in the
Capital Accounts, the determination, recognition and classification of any such
item shall be the same as its determination, recognition and classification for
federal income 

 

25

 

tax purposes (including
any method of depreciation, cost recovery or amortization used for this
purpose), provided that:

 

(A)                              the
computation of all items of income, gain, loss and deduction shall include
tax-exempt income and those items described in Treasury Regulation
Section 1.704-1 (b )(2)(iv)(i), without regard to the fact that such items
are not includable in gross income or are not deductible for federal income tax
purposes;

 

(B)                                if
the Book Value of any Company property is adjusted pursuant to Treasury
Regulation Section 1.704-1(b)(2)(iv)(e) or (f), the amount of such
adjustment shall be taken into account as gain or loss from the disposition of
such property and the amount of such gain or loss shall be allocated according
to Section 5.5 to the Members immediately prior to the event that causes
the calculation of such gain or loss;

 

(C)                                items
of income, gain, loss or deduction attributable to the disposition of Company
property having a Book Value that differs from its adjusted basis for tax
purposes shall be computed by reference to the Book Value of such property;

 

(D)                               items
of depreciation, amortization and other cost recovery deductions with respect
to Company property having a Book Value that differs from its adjusted basis
for tax purposes shall be computed by reference to the property’s Book Value in
accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(g);

 

(E)                                 to
the extent an adjustment to the adjusted tax basis of any Company asset
pursuant to Code Sections 732(d), 734(b) or 743(b) is required, pursuant to
Treasury Regulation Section 1.704-1 (b)(2)(iv)(m), to be taken into
account in determining Capital Accounts, the amount of such adjustment to the
Capital Accounts shall be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment decreases such
basis); and

 

(F)                                 to
the extent that the Company distributes any asset in kind to the Members, the
Company shall be deemed to have realized Profit or Loss thereon in the same
manner as if the Company had sold such asset for an amount equal to the Fair
Market Value (as determined by all the Members) of such asset or, if greater
and otherwise required by the Code, the amount of debts to which such asset is
subject.

 

Section 4.3                                   Negative
Capital Accounts.  No Member shall
be required to pay to the Company or any other Member any deficit or negative
balance which may exist from time to time in such Member’s Capital Account.

 

Section 4.4                                   Company
Capital.  No Member shall be paid
interest on any Capital Contribution to the Company or on such Member’s Capital
Account, and no Member shall have any right (a) to demand the return of such
Member’s Capital Contribution or any other distribution from the Company
(whether upon resignation, withdrawal or otherwise), except upon dissolution of
the Company pursuant to Article X hereof, or (b) to cause a partition of
the Company’s assets; provided, however, that the interest restrictions in this
paragraph shall not apply to a Default Loan the maker of which shall be
entitled to interest at the Default Rate as provided in Section 3.4.

 

26

 

Section 4.5                                   Adjustments
to Book Value.  The Company shall
adjust the Book Value of its assets to fair market value in accordance with
Treasury Regulation §1.704-1(b)(2)(iv)(f) as of the following times: (i) at the
Board’s discretion in connection with the issuance of Membership Interests in
the Company; (ii) at the Board’s discretion in connection with the distribution
by the Company to a Member of more than a de minimis amount of Company assets,
including money, if as a result of such distribution, such Member’s interest in
the Company is reduced; and (iii) the liquidation of the Company within the
meaning of Treasury Regulation Section 1.704-1 (b)(2)(ii)(g). Any such
increase or decrease in Book Value of an asset shall be allocated as a Profit
or Loss to the Capital Accounts of the Members under Section 5.5
(determined immediately prior to the acceptance of additional capital).

 

Section 4.6                                   Compliance
With Section 1. 704-l(b).  The
provisions of this Agreement relating to the maintenance of Capital Accounts
are intended to comply with Section 1.704-1(b) of the Treasury
Regulations, and shall be interpreted and applied in a manner consistent with
such Treasury Regulations. In the event the Board shall determine that it is
prudent to modify the manner in which the Capital Accounts, or any debits or
credits thereto (including, without limitation, debits or credits relating to
liabilities which are secured by contributed or distributed property or which
are assumed by the Company or any Member), are computed in order to comply with
such regulation, the Board may make such modification, provided that it is not
likely to have a material effect on the amount distributable to any Member
pursuant to Section 5.2 hereof upon the dissolution of the Company. The
Board also shall (i) make any adjustments that are necessary or appropriate to
maintain equality between the Capital Accounts of the Members and the amount of
Company capital reflected on the Company’s balance sheet, as computed for book
purposes, in accordance with Treas. Reg. §1.704-1(b)(iv)(g), and (ii) make any
appropriate modifications in the event unanticipated events might otherwise
cause this Agreement not to comply with Treas. Reg. § 1.704-1 (b).

 

Section 4.7                                   Transfer
of Capital Accounts.  The original
Capital Account established for each substituted Member shall be in the same
amount as the Capital Account of the Member which such substituted Member
succeeds, at the time such substituted Member is admitted to the Company. The
Capital Account of any Member whose interest in the Company shall be increased
or decreased by means of the transfer to it of all or part of the Interest of
another Member shall be appropriately adjusted to reflect such transfer. Any
reference in this Agreement to a Capital Contribution of or distribution to a
Member that has succeeded any other Member shall include any Capital
Contributions or distributions previously made by or to the former Member on
account of the Interest of such former Member transferred to such Member.

 

ARTICLE VARTICLE V

DISTRIBUTIONS; ALLOCATIONS OF PROFITS AND LOSSES

 

Section 5.1                                   Generally.  Subject to the provisions of
Section 18-607 of the Act and to the provisions of this Article V,
the Board shall have sole discretion regarding the amounts and timing of
distributions to Members, in each case subject to the retention and
establishment of or reserves of, or payment to third parties of, such funds as
it deems necessary with respect to the reasonable business needs of the Company
which shall include the payment or the making of provision for the payment when
due of the Company’s obligations, including (i) the payment of any and all fees
and expenses or any other obligations of the Company, and (ii) acquisition of 

 

27

 

Proposed Investments on
behalf of the Company. Notwithstanding the foregoing, the Board, unless a
Majority of the Board disapproves, shall provide for distributions to Members
at least once per calendar quarter. The making of distributions hereunder shall
be subject to the terms and conditions of any indebtedness for borrowed money
incurred by the Company or its Subsidiaries.

 

Section 5.2                                   Distributable
Cash Distributions.   Subject to
Section 5.1, distributions of Distributable Cash pursuant to this
Section 5.2 shall be made, to the extent of Distributable Cash, on a
quarterly basis at the end of each calendar quarter, to each Member in the
following order and priority:

 

(A)                              First,
to the Members, in accordance with their respective Sharing Percentages, until
each Member’s First Hurdle Return Account has been reduced to zero;

 

(B)                                Second,
to the Members, in accordance with their respective Sharing Percentages, until
each Member’s Invested Capital Account, with respect to each Company Property
giving rise to the Net Capital Proceeds then being distributed, has been
reduced to zero;

 

(C)                                Third,
to the Members, in accordance with their respective Sharing Percentages, until
each Member’s Invested Capital Account, with respect to all Liquidated Company
Properties, has been reduced to zero;

 

(D)                               Fourth,
subject to sub-paragraphs 5.2(E)(i)-(iv) below, (x) thirty-three and one-third
percent (33 1/3%) to CRS, and (y) sixty-six and two-thirds percent (66 2/3%) to
the Members in accordance with their respective Sharing Percentages until each
Member’s Second Hurdle Return Account has been reduced to zero; and

 

(E)                                 Fifth,
subject to sub-paragraphs (i) through (iv) below, (x) fifty percent (50%) to
CRS, and (y) fifty percent (50%) to the Members in accordance with their
respective Sharing Percentages.

 

(i)                                     From
and after the occurrence of a CNT Loan Default (a) CRS shall be a Defaulting
Member and (b) the amount of Distributable Cash that would otherwise be
distributed to CRS from Net Capital Proceeds as the Promote shall be paid instead
to a segregated account established by the Company (the “Escrow Account”) in
accordance with Section 5.2(E)(iv) below.

 

(ii)                                  In
the event that CalEast makes a Capital Contribution pursuant to
Section 3.4(E) which results in a Default Contribution made by CalEast on
behalf of CRS, the amount of Distributable Cash that would otherwise be
distributed to CRS as the Promote from and after such date shall be reduced by
the amount of Distributable Cash generated by Construction Properties, after
payment of those amounts required to be distributed to the Members pursuant to
Sections 5.2(A), (B) and (C) from and after such date, and such amount shall be
paid to the Members in accordance with their respective Sharing Percentages.

 

(iii)                               In
the event that CalEast makes a Capital Contribution pursuant to
Section 3.4(F) which results in a Default Contribution made by CalEast on
behalf of CRS, the amount of Distributable Cash that would otherwise be
distributed to CRS as the Promote above from and 

 

28

 

after such date shall be
paid instead to the Members in accordance with their respective Sharing
Percentages.

 

(iv)                              The
Company shall be entitled at any time to withdraw from the Escrow Account: (a)
all interest, fees, contributions and expenses chargeable against the remaining
unfunded commitment of CRS and any other amounts owed by CRS to the Company,
including, without limitation, any Shortfall Amount, except to the extent such
interest, fees, contributions, expenses and other amounts are assumed by any
other Member pursuant to Section 3.4 above; and (b) all amounts that
would, were it not for the Escrow Account, be distributed to the Members in
accordance with clause (ii) or (iii) above, such amounts to be drawn from the
Escrow Account by the Company and distributed to the Members in accordance with
clauses (ii) and (iii) above as from time to time may be necessary. Any amounts
paid to the Company from the Escrow Account on account of any Shortfall Amount
shall be distributed by the Company to the Members in accordance with their
respective Shortfall Amounts. If all indebtedness under the Credit Facility is
repaid at Maturity (as that term is defined in the Credit Facility), then the
assets held in the Escrow Account at that time will be distributed to CNT,
subject to adjustment and payment of any Shortfall Amount as provided in
Section 5.3 below. Otherwise, the assets held in the Escrow Account at
that time will be distributed to each Member in accordance with their respective
Sharing Percentages.

 

Section 5.3                                   Possible
Annual Adjustment.  If, at the end
of the Fiscal Year of the Company, any Member shall have a positive balance in
either its First Hurdle Return Account and/or its Second Hurdle Return Account
or in its Invested Capital Account with respect to any Liquidated Company
Property (collectively, the “Shortfall Amount”), and CRS shall have received
distributions in respect of the Promote, then CRS shall promptly pay to the
Company the lesser of (i) the amount of such distributions received by CRS in
respect of the Promote and (ii) the aggregate Shortfall Amounts for all
Members, and such amount shall be distributed by the Company to the Members in
accordance with their respective Shortfall Amounts; provided, however, that CRS
shall be entitled to offset all amounts then Approved by the Board to be
distributed to CRS against the amount that it is required to pay to the
Company.

 

Section 5.4                                   Buy-Sell.

 

(A)                              Upon
the occurrence of a CNT Loan Default, CRS shall have thirty (30) days from the
date of the receipt by CNT of written notice of such default from the
administrative agent of the loan facility that is then in default (the “CNT
Facility Agent”) to provide to CalEast written assurance from the CNT Facility
Agent that CRS can continue to fund its obligations under its Subscription
Agreement (the “CRS Funding Assurance”). In the event that CRS fails to provide
CalEast with the CRS Funding Assurance within such thirty (30) day period,
CalEast shall thereafter have the right to make a Buy-Sell Offer (a “Buy-Sell
Offer”) to CRS pursuant to the terms of this Section 5.4. To make a
Buy-Sell Offer, CalEast shall provide to CRS written notice (a “Buy-Sell
Notice”) of its offer to purchase CRS’ s Membership Interest, which Buy-Sell
Notice shall specify the amount offered by CalEast for a one hundred percent
(100%) interest in the Company Properties (the “Buy-Sell Price”), and a
statement of the amount that CRS would receive (the “Offeree Value”) and the
amount CalEast would receive (the “Offeror Value”) on account of their
respective Membership Interests if (i) all of the Company Properties were sold
for the Buy-Sell Price, (ii) all liabilities of the Company were paid in full
(including amounts due 

 

29

 

under the Credit
Facility), and (iii) the remaining proceeds of the Company were distributed to
the Members in accordance with Section 5.2.

 

(B)                                Upon
receipt of a Buy-Sell Notice, CRS shall have thirty (30) days thereafter to
elect, by written notice to CalEast signed by or on behalf of CRS (the “CRS
Buy-Sell Election Notice”), either to:

 

(i)                                     sell
its Membership Interest to CalEast for a cash purchase price equal to the
Offeree Value; or

 

(ii)                                  purchase
the Membership Interest of CalEast for a cash purchase price equal to the
Offeror Value; or

 

(iii)                               cause
the Company to market the Company Properties for sale to any Person;

 

provided that failure by
CRS to serve such a written notice on CalEast within such thirty (30) day
period shall be deemed to be an election by CRS to cause the Company to market
the Company Properties for sale pursuant to Section 5.4(B)(iii).

 

(C)                                If
CRS elects to cause the Company to market the Company Properties for sale
pursuant to Section 5.4(B)(iii), then the Company shall use the
seventy-five (75) day period after the date of the CRS Buy-Sell Election Notice
(the “Portfolio Marketing Period”) to market the Company Properties for sale to
any Person. In the event that, on or prior to the expiration of the Portfolio
Marketing Period, the Company receives a bona-fide offer from any Person to
purchase the Company Properties, which offer shall be in writing in the form of
a letter of intent between the Company and such Person and shall set forth the
price and other terms relevant to the sale and purchase of the Company
Properties (a “Portfolio Purchase Offer”), the Company shall promptly provide a
copy thereof to each of the Members, who shall have the following rights in
respect thereof:

 

(i)                                     if
such Portfolio Purchase Offer is in an amount less than the Buy-Sell Price,
then CalEast shall have the right, which may be exercised by written notice to
CRS no later than fifteen (15) days after receipt by CalEast of a copy of the
Portfolio Purchase Offer, to purchase CRS’s Membership Interest for the Offeree
Value resulting from the Portfolio Purchase Offer. If CalEast shall fail to
give the notice of its election required pursuant to this clause (i) within the
period required hereby, then CalEast shall be irrevocably deemed to have
elected to complete the Buy-Sell Offer at the Offeree Value resulting from the
Buy-Sell Price.

 

(ii)                                  if
such Portfolio Purchase Offer is in an amount at least equal to but less than
one hundred five percent (105%) of the Buy-Sell Price, then CalEast shall have
the right, which may be exercised by written notice to CRS no later than
fifteen (15) days after receipt by CalEast of a copy of the Portfolio Purchase
Offer, to purchase CRS’ s Membership Interest for the Offeree Value. If CalEast
shall fail to give the notice of its election required pursuant to this clause
(ii) within the period required hereby, then CalEast shall be irrevocably
deemed to have elected not to purchase CRS’ s Membership Interest, and the
Company may thereafter sell the Company Properties to the Person making the
Portfolio Purchase Offer (the “Portfolio Offeror”) on the terms of the
Portfolio Purchase Offer.

 

30

 

(iii)                               if
such Portfolio Purchase Offer is in an amount that is more than one hundred
five percent (105%) of the Buy-Sell Offer, then the Company may sell the
Company Properties to the Portfolio Offeror pursuant to the terms of the
Portfolio Purchase Offer; provided, however, that CalEast shall have the right,
which may be exercised by written notice to CRS no later than fifteen (15) days
after receipt by CalEast of a copy of the Portfolio Purchase Offer, to purchase
CRS’ s Membership Interest for the Offeree Value resulting from the Portfolio
Purchase Offer. If CalEast shall fail to give the notice of its election
required pursuant to this clause (iii) within the period required hereby, then
CalEast shall be irrevocably deemed to have elected not to purchase CRS’s
Membership Interest, and the Company may thereafter sell the Company Properties
to the Portfolio Offeror on the terms of the Portfolio Purchase Offer.

 

(D)                               Cash
Deposit.

 

(i)                                     If
CRS elects to purchase CalEast’s Membership Interest pursuant to
Section 5.4(B)(i), CRS shall make contemporaneously with such election a cash
deposit in escrow with a bank or other financial institution selected by
CalEast in an amount calculated in accordance with Section 5.4(D)(ii)
below. If CRS elects to sell its Membership Interest pursuant to
Section 5.4(B)(ii), or if CalEast elects or is deemed to have elected to
purchase CRS’s Membership Interest pursuant to Section 5.4(C)(i), (ii) or
(iii), CalEast shall make, within five (5) Business Days of such election, a
cash deposit in escrow with a bank or other financial institution selected by
CRS in an amount calculated in accordance with Section 5.4(D)(ii) below.

 

(ii)                                  The
cash deposit (the “Buy Sell Deposit”) referred to in Section 5.4(D)(i)
above shall be equal to ten percent (10%) of the Offeree Value (including, if
applicable, an Offeree Value that may result from a Portfolio Purchase Offer)
or Offeror Value, as applicable. In the event that: (i) CRS elects to sell its
Membership Interest pursuant to Section 5.4(B)(i) or purchase CalEast’s
Membership Interest pursuant to Section 5.4(B)(ii), or CalEast elects to
purchase CRS’s Membership Interest pursuant to Section 5.4(C)(i),(ii) or
(iii); and (ii) the purchasing Member fails to complete such purchase within
the thirty (30) day period provided in Section 5.4(F), then the selling
Member may retain the Buy Sell Deposit and either:

 

(1)                                  purchase
the purchasing Member’s Membership Interest for a cash purchase price equal to
ninety percent (90%) of the Offeree Value or the Offeror Value, as applicable;
or

 

(2)                                  exercise
any other rights or remedies available at law or in equity.

 

(E)                                 Completion
of Sale of Company Properties. Completion of the sale and purchase of the
Company Properties under this Section 5.4 shall take place at the
Company’s principal place of business no later than the date which is sixty
(60) days after the expiration of the Portfolio Marketing Period. Simultaneous
with the sale and purchase of the Company Properties, CalEast and CRS shall
execute such documents, and shall cause the lender under the Credit Facility to
execute such documents, as reasonably necessary to release the Company
Properties from any and all obligations under the Credit Facility. If the
Portfolio Offeror fails to complete the purchase of the Company Properties in
accordance with the terms of the Portfolio Purchase Offer, then CalEast may
thereafter complete the purchase of CRS’ Membership Interest in 

 

31

 

accordance with CalEast’s
Buy-Sell Offer and the procedures set forth in Sections 5.4(D) and (F).

 

(F)                                 Completion
of Transfer of Membership Interests Between Shareholders. Completion of the
sale and purchase of any Membership Interests under this Section 5.4 shall
take place at the Company’s principal place of business no later than the date
which is thirty (30) days after the expiration of the Portfolio Marketing
Period. All transfer, stamp and other taxes imposed on the transfer shall be
payable by the purchasing Member, and all other associated costs with the
transfer shall be borne equally by the Members. Simultaneously with the sale
and purchase of a Membership Interest, CalEast and CRS shall execute such
documents, and shall cause the lender under the Credit Facility to execute such
documents, as reasonably necessary to release the selling Member from any and
all of its obligations under the Credit Facility. All Membership Interests sold
pursuant to this Section 5.4 shall be sold with full title guarantee free
and clear of any liens or other encumbrances and together with all rights
attached thereto as of the date of transfer.

 

(G)                                Indemnification.
Any Member who shall purchase a Membership Interest (the “Buying Member”) from
another Member (the “Selling Member”) pursuant to this Section 5.4 shall
as of and after the date of the transfer of the Membership Interest indemnify
and hold harmless the Selling Member and its Affiliates from and of any and all
manner of liability, loss, damage, cost, cause of action, lien, indebtedness or
claim (collectively, a “Claim”) arising out of or relating to the Company or the
Selling Member’s Membership Interest that the Selling Member may suffer or
incur as a result of any event that may occur after the date of the transfer of
the Membership Interest, whether or not such Claim arises in connection with
the Selling Member’s obligations under the Completion Guaranty or the Investor
Guaranty, as those documents are defined in the Credit Facility, or otherwise,
except for a Claim arising as a result of the gross negligence, fraud or
intentional misconduct of the Selling Member, in which case such
indemnification shall not cover the Claim to the extent resulting from such
gross negligence, fraud or intentional misconduct.

 

Section 5.5                                   Allocation
of Profits and Losses.

 

(A)                              Allocations.
The items of income, expense, gain and loss of the Company comprising Profit or
Loss for a Fiscal Year shall be allocated among the Members during such Fiscal
Year in a manner that will, as nearly as possible, cause the Capital Account
balance of each Member at the end of such Fiscal Year to equal the excess
(which may be negative) of:

 

(i)                                     the
hypothetical distribution (if any) that such Member would receive if, on the
last day of the Fiscal Year, (x) all Company assets, including cash, were sold
for cash equal to their Book Value, taking into account any adjustments thereto
for such Fiscal Year, (y) all Company liabilities were satisfied in cash
according to their terms (limited, with respect to each nonrecourse liability,
to the Book Value of the assets securing such liability) and (z) the net proceeds
thereof (after satisfaction of such liabilities) were distributed in full
pursuant to Section 5.2., over

 

(ii)                                  the
sum of (x) the amount, if any, which such Member is obligated to contribute to
the capital of the Company, (y) such Member’s share of the minimum gain
determined 

 

32

 

pursuant to Regulations
Section 1.704-2(g), and (z) such Member’s share of partner nonrecourse
debt minimum gain determined pursuant to Regulations
Section 1.704-2(i)(5), all computed immediately prior to the hypothetical
sale described in Section 5.5(A)(i).

 

(B)                                Determination
of Items Comprising Allocations.

 

(i)                                     In
the event that the Company has Profit for a Fiscal Year;

 

(1)                                  for
any Member as to whom the allocation pursuant to Section 5.5(A) is
negative, such allocation shall be comprised of a proportionate share of each
of the Company’s items of expense or loss entering into the computation of
Profits for such Fiscal Year; and

 

(2)                                  the
allocation pursuant to Section 5.5(A) in respect of each Member (other
than a Member referred to in Section 5.5(B)(i)(a)) shall be comprised of a
proportionate share of each Company item of income, gain, expense and loss
entering into the computation of Net Income for such Fiscal Year (other than
the portion of each Company item of expense and loss, if any, that is allocated
pursuant to Section 5.5(B)(i)(a)).

 

(ii)                                  In
the event that the Company has a Loss for a Fiscal Year;

 

(1)                                  for
any Member as to whom the allocation pursuant to Section 5.5(A) is
positive, such allocation shall be comprised of a proportionate share of the
Company’s items of income and gain entering into the computation of Loss for
such Fiscal Year; and

 

(2)                                  the
allocation pursuant to Section 5.5(A) in respect of each Member (other
than a Member referred to in Section .5(B)(ii)(a)) shall be comprised of a
proportionate share of each Company item of income, gain, expense and loss
entering into the computation of Net Loss for such Fiscal Year (other than the
portion of each Company item of income and gain, if any, that is allocated
pursuant to Section 5 .5(B)(ii)( a)).

 

(iii)                               For
purposes of this Section 5.5, a gain recognized by the Company upon the
disposition of an item of Company property shall be considered to be a single
item of gain regardless of whether, for federal income tax purposes, part of
the gain is treated differently from the remainder.

 

Section 5.6                                   Regulatory
and Special Allocations.   Notwithstanding
the provisions of Section 5.5:

 

(A)                              Company
Minimum Gain Chargeback.  If there
is a net decrease in Company Minimum Gain during any Taxable Year, each Member
shall be specially allocated items of taxable income or gain for such Taxable
Year (and, if necessary, subsequent Taxable Years) in an amount equal to such
Member’s share of the net decrease in Company Minimum Gain, determined in
accordance with Treasury Regulation Section 1.704-2(g). The items to be so
allocated shall be determined in accordance with Treasury Regulation Sections
1.704-2(f)(6) and 

 

33

 

1.704-2(j)(2). This
paragraph is intended to comply with the minimum gain chargeback requirement in
Treasury Regulation Section 1.704-2(f) and shall be interpreted
consistently therewith.

 

(B)                                Member
Nonrecourse Debt Minimum Gain Chargeback. Member Nonrecourse Deductions
shall be allocated in the manner required by Treasury Regulation
Section 1.704-2(i). Except as otherwise provided in Treasury Regulation
Section 1.704-2(i)(4), if there is a net decrease in Member Minimum Gain
during any Taxable Year, each Member that has a share of such Member Minimum
Gain shall be specially allocated items of taxable income or gain for such
Taxable Year (and, if necessary, subsequent Taxable Years) in an amount equal
to that Member’s share of the net decrease in Member Minimum Gain. Items to be
allocated pursuant to this paragraph shall be determined in accordance with
Treasury Regulation Sections 1.704-2(i)(4) and 1.704-2(j)(2). This paragraph is
intended to comply with the minimum gain chargeback requirements in Treasury
Regulation Section 1.704-2(i)(4) and shall be interpreted consistently
therewith.

 

(C)                                Qualified
Income Offset. If any Member unexpectedly receives any adjustments,
allocations or distributions described in Treasury Regulation
Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of taxable income and
gain shall be specially allocated to such Member in an amount and manner
sufficient to eliminate the adjusted capital account deficit (determined
according to Treasury Regulation Section 1.704-1(b)(2)(ii)(d)) created by
such adjustments, allocations or distributions as quickly as possible. This
paragraph is intended to comply with the qualified income offset requirement in
Treasury Regulation Section 1.704-1 (b )(2)(ii)( d) and shall be
interpreted consistently therewith.

 

(D)                               Nonrecourse
Deductions. Nonrecourse Deductions (as determined according to Treasury
Regulation Section 1.704-2(b)(1)) for any Fiscal Year shall be allocated
to the Members in accordance with the allocation of Losses hereunder.

 

(E)                                 Ordering
Rules. Anything contained in this Agreement to the contrary
notwithstanding, allocations for any Fiscal Year or other period of nomecourse
deductions (as defined in clause (d) above), or of items required to be
allocated pursuant to the minimum gain chargeback requirements contained in
Section 5.6(A) and Section 5.6(B), shall be made before any other
allocations hereunder.

 

(F)                                 Offsetting
Allocations. If, and to the extent that, any Member is deemed to recognize
any item of income, gain, deduction or loss as a result of any transaction
between such Member and the Company pursuant to Sections 1272-1274, 7872, 483,
482 or 83 of the Code or any similar provision now or hereafter in effect, and
the Board determines that any corresponding Profit or Loss of the Member who
recognizes such item should be allocated to such Member in order to reflect the
Members’ Economic Interest in the Company, then the Board may so allocate such
Profit or Loss.

 

(G)                                In
accordance with Section 704(c) of the Code and the Treasury Regulations
thereunder, income, gain, loss and deduction with respect to any property
contributed to the capital of the Company shall, solely for tax purposes, be
allocated among the Members so as to take account of any variation between the
adjusted basis of such asset for federal income tax 

 

34

 

purposes and its initial
Book Value. Such allocations shall be made using any reasonable method
specified in Treasury Regulations section 1.704-3 as the Board determines.
In the event the Book Value of any Company asset is adjusted pursuant to
paragraph (b) of the definition of “Book Value”, subsequent allocations of
income, gain, loss and deduction with respect to such asset shall take into
account any variation between the adjusted basis of such asset for federal
income tax purposes and its Book Value in the same manner as under
Section 704( c) of the Code and the Treasury Regulations thereunder. Such
allocation shall be made based on any reasonable method specified in Treasury
Regulations section 1.704-3 as the Board determines.

 

(H)                               Except
as provided in Section 5.6(G), for federal, state and local income tax
purposes, each item of income, gain, loss or deduction shall be allocated among
the Members in the same manner and in the same proportion that the
corresponding book items have been allocated among the Members’ respective
Capital Accounts.

 

(I)                                    Section 5.7
Section 754 Election. Upon the request of the Board, the Company shall elect,
pursuant to Section 754 of the Code, to adjust the basis of Company
property as permitted and provided in Sections 734 and 743 of the Code. Such
election shall be effective solely for Federal (and, if applicable, state and
local) income tax purposes and shall not result in any adjustment to the Book
Value of any Company asset or to the Member’s Capital Accounts (except as
provided in Treasury Regulations Section 1.704-1(b)(2)(iv)(m)) or in the
determination or allocation of Profit or Loss for purposes other than such tax
purposes.

 

ARTICLE VI

MANAGEMENT POWER, RIGHTS AND DUTIES

 

Section 6.1                                   Management by
the Board

 

(A)                              Board.
The business and affairs of the Company shall be managed under the direction of
a board of managers (the “Board”). The Board shall initially consist of six (6)
Persons designated as follows: CRS shall designate three (3) Persons and
CalEast shall designate three (3) Persons. CRS hereby designates John S. Gates,
Jr., Michael M. Mullen and Paul S. Fisher as its initial designees on the
Board, one of whom shall serve as Chairman of the Board.  CalEast hereby designates Daniel C. Witte,
Russell L. Blackwell and Dann Thomasson as its initial designees on the Board.
Any Members having the right to designate a member or members of the Board shall
also have the power to remove or replace members of the Board so designated by
such Member; provided, however, that if such Member shall become a Defaulting
Member, then for such time as such Member shall be a Defaulting Member, the
Non-Defaulting Member or Members entitled to designate Board Members shall have
the right to designate an additional Board Member who shall serve until such
time, if any, as such Defaulting Member shall no longer be a Defaulting Member.
In addition, for so long as CalEast shall remain a Member, CalEast shall have
the right to designate one (1) Person on behalf of the California Public
Employees Retirement System (“CalPERS”) who shall have the right to receive
notice of and attend or otherwise observe all meetings of the Board (the
“CalPERS Observer”); provided, however, that the CalPERS Observer shall not
have the right to vote on any matter coming before the Board.

 

35

 

(B)                                General
Powers. All powers of the Company shall be exercised by the Board.
Decisions of the Board within its scope of authority shall be binding upon the
Company and each Member and shall be evidenced by the affirmative vote of a
Majority of the members of the Board. The Board shall have full, exclusive, and
complete discretion, power, and authority, subject to any other provisions of
this Agreement or by non-waivable provisions of applicable law, to manage,
control, administer, and operate the business and affairs of the Company, and
to make all decisions affecting such business and affairs, including, without
limitation, as described in Section 2.7 above.

 

(C)                                Term
of Office. Members of the Board shall serve until their resignation, death
or removal in accordance with Section 6.1 (F) below by any Person or group
of Persons having the right to designate such member of the Board.

 

(D)                               Vacancies.
Any vacancy on the Board shall be filled in accordance with Section 6.1(a)
above.

 

(E)                                 Resignation.
A member of the Board may resign as such by delivering his, her or its written
resignation to the Company at the Company’s principal office addressed to the
Board. Such resignation shall be effective upon receipt unless it is specified
to be effective at some other time or upon the happening of some other event.

 

(F)                                 Removal.
Any member of the Board may be removed as such by the Person having the right
to designate such member of the Board.

 

(G)                                Compensation.
A member of the Board shall not be paid compensation by the Company for his,
her or its services as such. The foregoing shall not be deemed to limit or
restrict the payment of any reasonable compensation or remuneration to any
Person in such Person’s capacity as an Officer, advisor or consultant to the
Company or any agreement or arrangement with the Company which has been
approved by the Board.

 

(H)                               Reimbursement.
The members of the Board shall be entitled to be reimbursed for reasonable
out-of-pocket costs and expenses incurred in the course of their service
hereunder, including, without limitation, attendance at Board and Member
meetings.

 

(I)                                    Reliance
by Third Parties. Any Person dealing with the Company, other than a Member,
may rely on the authority of the Board (or any Officer authorized by the Board)
in taking any action in the name of the Company without inquiry into the
provisions of this Agreement or compliance herewith, regardless of whether that
action actually is taken in accordance with the provisions of this Agreement.
Every agreement, instrument or document executed by the Board (or any Officer
authorized by the Board) in the name of the Company with respect to any
business or property of the Company shall be conclusive evidence in favor of
any Person relying thereon or claiming thereunder that (i) at the time of the
execution or delivery thereof this Agreement was in full force and effect, (ii)
such agreement, instrument or document was duly executed according to this
Agreement and is binding upon the Company, and (iii) the Board or such Officer
was duly authorized and empowered to execute and deliver such agreement,
instrument or document for and on behalf of the Company,

 

36

 

(J)                                   Meetings
of the Board; Actions. Meetings of the Board shall be held at the principal
place of business of the Company or at any other place that a Majority of the
members of the Board determine. At any meeting, any member of the Board and the
CalPERS Observer may participate by telephone or similar communication
equipment, provided each member of the Board and the CalPERS Observer can hear
the others. Persons present by telephone shall be deemed to be present “in
person” for purposes hereof. The presence of at least four (4) members of the
Board, at least two of which shall be the members of the Board designated by
CalEast, shall constitute a quorum for the transaction of business. Meetings
shall be held at least once each quarter, or more often in accordance with a
schedule established by the Board, The Board also may make decisions,
without holding a meeting, by written consent of a Majority of the members of
the Board required for such decision, with prior notice thereof to all other
members of the Board and the CalPERS Observer. Minutes of each meeting and a
record of each decision shall be kept by the secretary.  Decisions of the Board shall require the
approval of at least a Majority of its members. Only members of the Board and
the CalPERS Observer shall be entitled hereunder to attend meetings of the
Board; provided, however, that a Majority of the members of the Board present at
a meeting may approve the presence of any other Person for all or any portion
of such meeting. In addition, any two (2) or more members of the Board may
convene a meeting thereof upon at least five (5) business days’ prior written
notice to the other members of the Board and the CalPERS Observer.
Notwithstanding the foregoing provisions, each member of the Board and the
CalPERS Observer who is entitled to notice waives notice if before or after the
meeting the member of the Board or the CalPERS Observer signs a waiver of
notice or appears at or participates in the meeting.

 

Section 6.2                                   Officers.

 

(A)                              Designation
and Appointment. Subject to Approval by the Board, CRS may, from time to
time, designate employees of CRS as may be necessary or appropriate for the
conduct of the Company’s day-to-day business (subject to the supervision and
control of the Board) as Officers of the Company. Any number of offices may be
held by the same person. In its discretion, CRS may choose not to fill any
office for any period as it may deem advisable. Officers need not be residents
of the State of Delaware or Members. Any Officers so designated shall have such
authority and perform such duties as are herein provided and as the Board may,
from time to time, delegate to them. The Board may assign titles to particular
Officers. Each Officer shall hold office until his or her successor shall be
duly designated and shall qualify or until his or her death or until he shall
resign or shall have been removed in the manner hereinafter provided. The
Officers of the Company shall serve without compensation unless otherwise
Approved by the Board. The initial Officers of the Company, shall be as follows
(in descending rank):

 

	
  Paul S. Fisher

  	
  President

  
	
  Michael M. Mullen

  	
  Vice President

  
	
  James N. Clewlow

  	
  Vice President

  
	
  Paul T. Ahern

  	
  Vice President

  
	
  Daniel J. Hemmer

  	
  Secretary

  
	
  Rockford O. Kottka

  	
  Asst. Secretary

  
	
  Michael A. Tortorici

  	
  Asst. Secretary

  

 

37

 

(B)                                Resignation/Removal.
Any Officer may resign as such at any time. Such resignation shall be made in
writing and shall take effect at the time specified therein, or if no time be
specified, at the time of its receipt by the Board. The acceptance of a
resignation shall not be necessary to make it effective, unless expressly so
provided in the resignation. Any Officer may be removed as such, either with or
without Cause, at any time by the Board or by any Member who is not an
Affiliate of such Officer. Designation of an Officer shall not of itself create
any contractual or employment rights.

 

(C)                                Duties
of Officers Generally. The Officers, in the performance of their duties as
such, shall owe to the Company duties of loyalty and due care of the type owed
by the officers of a corporation to such corporation and its equity holders
under the laws of the State of Delaware.

 

(D)                               President.
The president shall, subject to the powers of the Board, be the chief
administrative officer of the Company and shall have general charge of the
business, affairs and property of the Company, and control over its other
Officers and agents. The president shall see that all orders and resolutions of
the Board are carried into effect and shall have authority to suspend or to
remove any agent or Officer of the Company and, in the case of the suspension
for Cause of any such Officer, to recommend to the Board what further action
should be taken. In the absence of the president the duties of the president
shall be performed and his or her authority may be exercised by any other Officer
of the Company. The president shall have such other powers and perform such
other duties as may be prescribed by the Board, and shall be a “manager” for
purposes of the Act.

 

(E)                                 Vice
President. Each vice president shall perform such duties and have such
other powers as the president or the Board may from time to time prescribe, and
shall be a “manager” for purposes of the Act.

 

(F)                                 Secretary.
The secretary shall have the general duties, powers and responsibilities of a
secretary of a corporation. The secretary shall attend all meetings of the
Board and of the Members and record all of the proceedings of such meetings in
a book to be kept for that purpose. The secretary shall keep all documents as
may be required under this Agreement and the Act. The secretary shall perform
such other duties and have such other authority as may be prescribed elsewhere
in this Agreement or from time to time by the president or the Board, and shall
be a “manager” for purposes of the Act.

 

(G)                                Assistant
Secretary. In the absence, disability or inability of the secretary, the
assistant secretary shall perform the duties and exercise the powers of the
secretary, and shall perform such other duties and have such other powers as
the president or the Board may from time to time prescribe, and shall be a
“manager” for purposes of the Act.

 

(H)                               Documents.
All documents to be entered into by the Company shall be executed by either the
president or a vice president and either the secretary or assistant secretary,
and shall not be effective without both such signatures.

 

Section 6.3                                   Authority of
Officers; Restrictions on Certain Actions.

 

(A)                              Subject
to the provisions of this Agreement, the Officers, without the prior Approval
of the Board, shall have the power and authority to take any and all actions on
behalf 

 

38

 

of the Company as are
necessary, appropriate, proper, advisable, convenient or incidental to or for
the furtherance of the purposes set forth in Section 2.6 as enumerated in
Section 2.7, subject to the restrictions set forth in Section 6.3(B),
including the power and authority to enter into leases of Company Property that
(i) are not Material Leases and (ii) do not violate the Leasing Guidelines.

 

(B)                                Notwithstanding
anything to the contrary contained herein, an Officer may not take any of the
following actions on behalf of the Company without the prior Approval of the
Board:

 

(i)                                     execute
or cause to be executed on behalf of the Company any lease of Company Property
that (a) is a Material Lease, or (b) subject to subsection (iii) below,
violates the Leasing Guidelines;

 

(ii)                                  sell
or otherwise dispose of any Company Property;

 

(iii)                               modify
the Annual Operating Budget or make any capital expenditure except for capital
expenditures which have been authorized in an approved Annual Operating Budget
or are necessary for emergency repairs to a Company Property which, if not
made, would thereafter materially injure the Company Property or the Company;

 

(iv)                              commence
(including the filing of a counterclaim), settle or otherwise dispose of any
claim or litigation, regulatory proceeding or arbitration (other than ordinary
course employer or commercial claims) to which the Company or its Subsidiaries
is, or is to be, a party or by which the Company or its Subsidiaries or any of
its business, assets or properties may be affected;

 

(v)                                 directly
or indirectly declare or make any distributions upon any of the Company’s
equity securities;

 

(vi)                              enter
into or make a material amendment to or terminate any agreement, contract or
commitment except as authorized in an approved Annual Operating Budget;

 

(vii)                           create
any liens or any other encumbrances whatsoever upon any assets or properties of
the Company or its Subsidiaries;

 

(viii)                        enter into
any joint venture or material business alliance or create any Subsidiary, or
acquire any capital stock of or other ownership interest in any Person, other
than the creation of Subsidiaries for the purpose of owning one or more Company
Properties;

 

(ix)                                amend
or terminate any agreement relating to a joint venture or a material business
alliance of the Company or any of its Subsidiaries;

 

(x)                                   make
any political or charitable contribution;

 

(xi)                                enter
into or consummate any transaction of the type contemplated or covered by
Section 7.4;

 

39

 

(xii)                             delegate
authority to any Person to approve the taking of any action set forth above;

 

(xiii)                          pledge
the credit of CalEast;

 

(xiv)                         do any
act which would make it impossible to carry on the ordinary business of the
Company or to alter the tax status of the Company;

 

(xv)                            change
the name of the Company;

 

(xvi)                         change
the Investment Criteria or Leasing Guidelines;

 

(xvii)                      directly or
indirectly redeem, purchase or otherwise acquire, or permit any of its
Subsidiaries to redeem, purchase or otherwise acquire, any of the Company’s or
any Subsidiary’s equity securities (including, in the case of Subsidiaries,
warrants, options and other rights to acquire equity securities);

 

(xviii)                   authorize,
issue, sell or enter into any agreement providing for the issuance (contingent
or otherwise), or permit any of its Subsidiaries to authorize, issue, sell or
enter into any agreement providing for the issuance (contingent or otherwise)
of any equity securities or debt securities with equity features or securities
exercisable or convertible into equity securities or debt securities with
equity features;

 

(xix)                           merge
or consolidate with any Person or permit any of its Subsidiaries to merge or
consolidate with any Person (other than a wholly owned Subsidiary);

 

(xx)                              liquidate,
dissolve or effect, or permit any of its Subsidiaries to liquidate, dissolve or
effect, a recapitalization or reorganization in any form of transaction;

 

(xxi)                           enter
into or modify any term of the Credit Facility; make any draw under the Credit
Facility or any replacement or renewal thereof; or create, incur, assume or
suffer to exist, or permit any of its Subsidiaries to create, incur, assume or
suffer to exist, Indebtedness exceeding the amounts Approved therefor by the
Board in one or more Approved Annual Operating Budgets;

 

(xxii)                        make, or
permit any of its Subsidiaries to make, any loans or advances to, guarantees
for the benefit of, or Investments in, any Person (other than a wholly owned
Subsidiary), except for Short Term Investments

 

(xxiii)                     enter into,
or permit any of its Subsidiaries to enter into, any transaction with any
Person (or any Affiliate thereof) who is an Affiliate of any Officer or member
of the Board or related to any such Person by blood or marriage except as
provided for in this Agreement or one or more current Annual Operating Budgets;

 

(xxiv)                    register any
of the Company’s or its Subsidiaries’ securities under any securities laws;

 

(xxv)                       make any
change in the Company or its Subsidiaries’ Fiscal Year;

 

40

 

(xxvi)                    make any
amendment or terminate any constitutive or governing document of the Company or
its Subsidiaries, including without limitation the Agreement or Certificate;

 

(xxvii)                 enter into any
property management agreement with respect to a Company Property;

 

(xxviii)              do any act in
contravention of this Agreement; or

 

(xxix)                      commit to do
any of the foregoing.

 

(C)                                In
the event that: (i) CalEast and CRS disagree over (x) CalEast’s desire to sell
or otherwise dispose of a Company Property (except in the case of a dissolution
under Section 10.1 (B), in which event this Section shall not apply)
or (y) any modification to an Annual Operating Budget with respect to a Company
Property in an amount having a net present value in excess of five percent (5%)
of the aggregate Invested Capital Account for such Company Property, (ii) the
Board vote with respect to such matter in disagreement results in a tie; and
(iii) CalEast exercises its additional vote over the matter in disagreement,
then, if so elected in writing by CRS within ten (10) Business Days thereafter,
the Company Property shall be sold pursuant to the provisions of
Section 6.8 and CRS shall have a right of first offer with respect to such
Company Property in accordance with Section 6.8.

 

Section 6.4                                   Limitation on
Authority of Members.  No Member is
an agent of the Company solely by virtue of being a Member, and no Member has
authority to act for the Company solely by virtue of being a Member. This
Section 6.4 supersedes any authority granted to the Members pursuant to
the Act. Any Member who takes any action or binds the Company in violation of
this Section 6.4 shall be solely responsible for any loss and expense
incurred by the Company as a result of the unauthorized action and shall
indemnify and hold the Company harmless with respect to the loss or expense.

 

Section 6.5                                   Meetings of
and Voting by Members.

 

(A)                              Notwithstanding
anything to the contrary herein, no Person shall be entitled to vote with
respect to any Membership Interest unless such Person is a Member, the proxy or
an authorized representative of a Member that is not a natural Person.

 

(B)                                A
meeting of the Members may be called at any time by the Board or by any Member.
Meetings of Members shall be held at the Company’s principal place of business
or at any other place designated by the Board. Not less than ten (10) Business
Days nor more than ninety (90) calendar days before each meeting, the Board
shall give written notice of the meeting to each Member entitled to vote at the
meeting and to the CalPERS Observer. The notice shall state the time, place and
purpose of the meeting. Notwithstanding the foregoing provisions, each Member
who is entitled to notice and the CalPERS Observer waives notice if before or
after the meeting the Member signs a waiver of the notice which is filed with
the records of Members’ meetings, or is present at the meeting in person or by
proxy. A Member entitled to vote may vote either in person or by written proxy
signed by the Member or by his, her or its duly authorized attorney in fact.
Persons present by telephone shall be deemed to present “in person” for
purposes hereof.

 

41

 

(C)                                Except
as otherwise provided in this Agreement, the affirmative vote of Members
holding Membership Interests representing more than fifty percent (50%) the
outstanding Membership Interests entitled to vote shall be required to approve
any matter coming before such Members.

 

(D)                               In
lieu of holding a meeting, the Members may vote or otherwise take action by
written consent signed by Members with a copy thereof being provided to the
CalPERS Observer.

 

Section 6.6                                   Power of
Attorney.

 

(A)                              Grant
of Power. Each Member constitutes and appoints the President of the Company as
the Member’s true and lawful attorney-in-fact, and in the Member’s name, place
and stead, to make, execute, sign, acknowledge, and file:

 

(i)                                     one
or more certificates of formation consistent with the terms of this Agreement;

 

(ii)                                  all
documents (including amendments to the Certificates of Formation) which the
attorney-in-fact deems appropriate to reflect any written amendment, change or
modification of this Agreement approved in accordance with Section 11.8
below;

 

(iii)                               upon
the requisite approval, if any, required elsewhere in this Agreement, any and
all other certificates or other instruments required to be filed by the Company
under the laws of the State of Delaware or of any other state or jurisdiction,
including, without limitation, any certificate or other instruments necessary
in order for the Company to continue to qualify as a limited liability company
under the laws of the State of Delaware;

 

(iv)                              one
or more applications to use an assumed name; and

 

(v)                                 all
documents which may be required to dissolve and terminate the Company and to
cancel its Certificate of Formation upon the requisite approval required
elsewhere in this Agreement.

 

(B)                                Irrevocability.
The foregoing power of attorney is irrevocable and is coupled with an interest,
and, to the extent permitted by applicable law, shall survive the death or
disability of a Member. It also shall survive the Transfer of a Membership
Interest, except that if the transferee is approved for admission as a Member,
this power of attorney shall survive the delivery of the assignment for the
sole purpose of enabling the attorney-in-fact to execute, acknowledge and file
any documents needed to effectuate the substitution. Each Member shall be bound
by any representations made by the attorney-in-fact acting in good faith
pursuant to this power of attorney, and each Member hereby waives any and all
defenses which may be available to contest, negate or disaffirm the action of
the attorney-in-fact taken in good faith under this power of attorney.

 

Section 6.7                                   Management
Agreement.  The Board shall cause
the Company to enter into the Management Agreement with CNT, a copy of which is
attached hereto as Exhibit 3 (the “Management Agreement”). Any Member shall
have the right to terminate the Management Agreement for Cause.

 

42

 

Section 6.8                                   Right of
First Offer-Company Property. 
Before the Company sells or otherwise disposes of any Company Property
(an “Offered Property”) to any Person, the Company shall notify (the “Sale
Notice”) the Members in writing of the proposed sale and of the terms and
conditions of such sale (including the price at which the Company is seeking to
sell the Offered Property and such other terms and conditions of such proposed
sale as are reasonably required for a Member to make its election to purchase
the Offered Property). If a Member shall at that time not be in default of the
terms of this Agreement, the Member shall thereafter have thirty (30) days
(such period the “Offer Period”) to notify the Board in writing of its election
to acquire the Company Property on the terms of the Sale Notice; provided,
however, that CRS shall have such right to receive a Sale Notice and acquire the
Offered Property only if the requirements of Section 6.3(C) have been
satisfied and only to the Company Property for which the requirements of
Section 6.3(C) have been satisfied. Should the Member fail to notify the
Board in writing of its election within such thirty (30) day period, it shall
be deemed to have elected not to purchase the Offered Property. Upon notice to
the Board of the Member’s election not to purchase the Offered Property or the
expiration of the Offer Period, the Company shall thereafter use reasonable
efforts to sell the Offered Property on the terms and subject to the conditions
set forth in the Sale Notice; provided, however, that should (i) the price for
the sale of the Offered Property be reduced by more than five percent (5%) below
the price set forth in the Sale Notice, or (ii) a period of six (6) months
after the date of delivery of the Sale Notice expire without a sale of the
Offered Property, the Member shall have its right to purchase the Offered
Property reinstated in accordance with the procedure set forth in this
Section 6.8. Any Member shall have the right to designate an Affiliate of
the Member, or one of its members, as the grantee in any conveyance by the
Company of an Offered Property which the Member has elected to acquire pursuant
to this Section 6.8.

 

Section 6.9                                   Annual
Operating Budget.  Not later than
sixty (60) days after the acquisition of each Company Property with respect to
the balance of the Fiscal Year during which such Company Property is acquired
and thereafter by no later than June 1st of each year in which the Company
continues to hold such Company Property, the Officers shall submit to the
Board, for the Board’s Approval, proposed budgets, operating plans and leasing
plans (the “Annual Operating Budget”) for each Company Property, as well as a
description of major business objectives and challenges (including, but not
limited to, vacancy, lease rollover, relating, sale, refinance, lease option
dates, major renovations, and major capital requirements) for such Company
Property for the forthcoming Fiscal Year. The Annual Operating Budget also
shall set forth the following on a monthly basis with annual totals, together
with an explanation of all material assumptions made in determining the same:
(i) a detailed estimate of the projected Gross Revenues for the Company
Property for the forthcoming Fiscal Year, which estimate shall set forth as
separate line items the projected Gross Revenues from rent, escalations, and
each other type of revenue expected to be received in such year; (ii) a
detailed estimate of the projected operating expenses for the Company Property
for the forthcoming Fiscal Year, which estimate shall set forth as separate
line items the projected operating expenses with respect to each type of
expense expected to be incurred for such year; (iii) a detailed estimate
showing projected debt service payments; (iv) a detailed estimate of the
projected reimbursable expenses with respect to each type of expense expected
to be incurred for such year; (v) a statement as to the projected balances of
any reserves with respect to the Company Property as of the first day of the
forthcoming year; (vi) a statement as to the projected additions to or
disbursements from such reserves for the forthcoming Fiscal Year; (vii) an
estimate of the projected cash flow available 

 

43

 

for distribution from
such Company Property; (viii) a detailed description of the renovations or
other capital improvements, if any, proposed to be undertaken with respect to
the during the forthcoming Fiscal Year; (ix) an estimate of the total costs of
the renovations or other capital improvements, if any, to be undertaken with
respect to the Company Property during the forthcoming Fiscal Year; (x) a list
of each space for which the lease then in effect will expire during the
forthcoming eighteen (18) month period, and a description of the proposed terms
and conditions for leasing each such vacant space for the forthcoming Fiscal
Year, including, without limitation, a calculation of net effective rent for
each such vacant space, and projected costs of tenant improvements and tenant
allowances for each such vacant space (collectively, the “Leasing Guidelines”);
(xi) a description of the terms and conditions proposed with respect to
material contracts relating to the Company Property for the forthcoming Fiscal
Year; (xii) a description of the minimum insurance coverage to be maintained
with respect to the Company Property for the forthcoming Fiscal Year; and
(xiii) and such other information as may be reasonably requested by the Board.
With respect to Company Properties that are build-to-suit or other new
development projects, the Annual Operating Budget shall also include the
Investment Report for such Company Property, including all development budgets
and construction schedules included therein, together with a narrative report
describing the status of such project and any realized or projected variances
from the development budget and construction schedule pertaining thereto
together with the Officer’s recommendations for mitigation of any negative
variances. In addition, the Officers shall provide to the Board such other
financial data and other information as may be reasonably requested by the Board.
All Annual Operating Budgets and other reports prepared pursuant to this
Section 6.9 shall be prepared in accordance with United States generally
accepted accounting principles consistently applied (“GAAP”) unless otherwise
requested by the Board.

 

Section 6.10                            Reporting
Requirements.  The Officers shall do
the following:

 

(A)                              Within
seven (7) Business Days after the end of each month, prepare and deliver to
CalEast such monthly reports as CalEast may reasonably request;

 

(B)                                Within
twenty-five (25) days after the end of CalEast’s fiscal quarter (based upon a
July 1 to June 30 fiscal year), prepare and deliver to CalEast such
quarterly reports as CalEast may reasonably request;

 

(C)                                Within
forty-five (45) days after the end of CalEast’s fiscal year, deliver to CalEast
such tax information with respect to such year as is necessary for inclusion in
CalEast’s federal and state income tax and other tax returns;

 

(D)                               Within
forty-five (45) days of the end of CalEast’s fiscal year, deliver to CalEast
(i) the balance sheet of the Company as of the end of such year and statement
of income (loss), equity and statement of cash flow of the Company for such
year, and (ii) a statement of Cash Available for Distribution (defined in the
CalEast operating agreement) and actual cash distributions for such year, all
of which shall be audited;

 

(E)                                 Within
five (5) Business Days of the occurrence of such a default, give notice to
CalEast of (i) any default under any financing or breach of or default under
any other material agreement of which the Company is a party, and (ii) any
default in the payment of property taxes 

 

44

 

with respect to a Company
Property, or any matter which could result in a substantial and material loss (i.e.,
greater than $250,000) to the Company; and

 

(F)                                 Promptly
deliver to CalEast such additional information regarding the Company as CalEast
may reasonably request from time to time.

 

(G)                                All
of the above reports, balance sheets or other financial statements shall be
prepared in accordance with GAAP. For each Business Day that any of the above
reports is late, the Company shall pay CalEast One Hundred Dollars ($100).
Furthermore, the Company shall reimburse CalEast for the actual costs incurred
by CalEast in correcting any error in the reports and financial information
submitted to CalEast under the Company Agreement. CalEast may, from time to
time, at its sole cost and expense, perform or cause to be performed an audit
or appraisal of the Company and its operations, and the Company shall
reasonably cooperate in such appraisal.

 

ARTICLE VII

EXCULPATION AND INDEMNIFICATION

 

Section 7.1                                   Performance
of Duties: No Liability of Officers. No Member shall have any duty to the
Company or any Member of the Company except as expressly set forth herein or in
other written agreements. No Member, member of the Board or Officer of the
Company shall be liable to the Company or to any Member for any loss or damage
sustained by the Company or to any Member, unless the loss or damage shall have
been the result of gross negligence, fraud or intentional misconduct by the
Member, member of the Board or Officer in question or, in the case of an
Officer, breach of such Person’s duties pursuant to Section 6.2( c). In
performing his or her duties, each such Person shall be entitled to rely in
good faith on the provisions of this Agreement and on information, opinions,
reports or statements (including financial statements and information,
opinions, reports or statements as to the value or amount of the assets,
liabilities, profits or losses of the Company or any facts pertinent to the
existence and amount of assets from which distributions to Members might
properly be paid) of the following other Persons or groups: one or more Officers
of the Company, any attorney, independent accountant, appraiser or other expert
or professional employed or engaged by or on behalf of the Company or the
Board; or any other Person who has been selected with reasonable care by or on
behalf of the Company, or the Board in each case as to matters which such
relying Person reasonably believes to be within such other Person’s competence.
The preceding sentence shall in no way limit any Person’s right to rely on
information to the extent provided in Section 18-406 of the Act. No
Member, member of the Board or Officer of the Company shall be personally
liable under any judgment of a court, or in any other manner, for any debt,
obligation or liability of the Company, whether that liability or obligation
arises in contract, tort or otherwise, solely by reason of being a Member,
member of the Board or Officer of the Company or any combination of the
foregoing.

 

Section 7.2                                   [Intentionally
Deleted]

 

Section 7.3                                   Confidential
Information.  Without limiting the
applicability of any other agreement to which any Member may be subject, no
Member or member of the Board shall, directly or indirectly disclose or use at
any time, either during his, her or its association or employment with the
Company or thereafter, any Confidential Information of which such 

 

45

 

Member is or becomes
aware. Each Member and member of the Board in possession of Confidential
Information shall take all appropriate steps to safeguard such information and
to protect it against disclosure, misuse, espionage, loss and theft.
Notwithstanding the above, a Member or member of the Board may disclose
Confidential Information to the extent (i) the disclosure is necessary for the
Member, member of the Board and/or the Company’s agents, representatives, and
advisors to fulfill their duties to the Company pursuant to this Agreement
and/or other written agreements, (ii) the disclosure is required by law or a
court order, and (iii) to the extent necessary to enforce rights hereunder.

 

Section 7.4                                   Transactions
Between the Company and the Members. 
Notwithstanding that it may constitute a conflict of interest, the
Members, the members of the Board or their Affiliates may engage in any
transaction (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service with the Company) so
long as such transaction is at arm’s length and approved by a majority of the
disinterested members the Board.

 

Section 7.5                                   Right to
Indemnification.  Subject to the
limitations and conditions provided in this Article VII, each
Person who was or is made a party or is threatened to be made a party to or is
involved in any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or arbitrative (hereinafter, a
“Proceeding”), or any appeal in such a Proceeding or any inquiry or
investigation that could lead to such a Proceeding, by reason of the fact that
such Person, or a Person of which such Person is the legal representative, is
or was a Member, a member of the Board or Officer shall be indemnified by the
Company to the fullest extent permitted by applicable law, as the same exists
or may hereafter be amended (but, in the case of any such amendment, only to
the extent that such amendment penalties the Company to provide broader
indemnification rights than said law permitted the Company to provide prior to
such amendment) against judgments, penalties (including excise and similar
taxes and punitive damages), fines, settlements and reasonable expenses
(including, without limitation, reasonable attorneys’ and experts’ fees)
actually incurred by such Person in connection with such Proceeding, appeal,
inquiry or investigation (each a “Loss”), unless such Loss shall have been the
result of gross negligence, fraud or intentional misconduct by such Person, in
which case such indemnification shall not cover such Loss to the extent
resulting from such gross negligence, fraud or intentional misconduct.
Indemnification under this Article VII shall continue as to a Person who
has ceased to serve in the capacity which initially entitled such Person to
indemnity hereunder. The rights granted pursuant to this Article VII shall
be deemed contract rights, and no amendment, modification or repeal of this
Article VII shall have the effect of limiting or denying any such rights
with respect to actions taken or Proceedings, appeals, inquiries or
investigations arising prior to any amendment, modification or repeal.

 

Section 7.6                                   Advance
Payment.  The right to
indemnification conferred in this Article VII shall include the right to
be paid or reimbursed by the Company the reasonable expenses incurred by a
Person (other than an Officer of the Company or any of its Subsidiaries thereof
in respect of claims by the Company or any of its subsidiaries thereof against
such Officer in such Officer’s capacity as such) entitled to be indemnified
under Section 7.5 who was, is or is threatened to be made a named
defendant or respondent in a Proceeding in advance of the final disposition of
the Proceeding and without any determination as to the Person’s ultimate
entitlement to indemnification; provided, however, that the payment of such
expenses incurred by any such Person in advance of the final disposition of a
Proceeding shall be made only upon 

 

46

 

delivery to the Company
of a written affirmation by such Person of his or her good faith belief that he
has met the standard of conduct necessary for indemnification under
Article VII and a written undertaking, by or on behalf of such Person, to
repay all amounts so advanced if it shall ultimately be determined that such
indemnified Person is not entitled to be indemnified under this Article VII
or otherwise.

 

Section 7.7                                   Indemnification
of Agents.  The Company, at the
direction of the Board, may indemnify and advance expenses to an agent of the
Company to the same extent and subject to the same conditions under which it
may indemnify and advance expenses under Sections 7.5 and 7.6.

 

Section 7.8                                   Appearance
as a Witness.  Notwithstanding any
other provision of this Article VII, the Company may pay or reimburse
reasonable out-of-pocket expenses incurred by an Officer or agent in connection
with his or her appearance as a witness or other participation in a Proceeding
at a time when he is not a named defendant or respondent in the Proceeding.

 

Section 7.9                                   Nonexclusivity
of Rights.  The right to
indemnification and the advancement and payment of expenses conferred in this
Article VII shall not be exclusive of any other right that a Member,
member of the Board, Officer or other Person indemnified pursuant to this
Article VII may have or hereafter acquire under any law (common or
statutory) or provision of this Agreement.

 

Section 7.10                            Insurance.  The Company shall obtain and maintain, at
its expense, insurance to protect itself and any Member, member of the Board,
Officer or agent of the Company who is or was serving at the request of the
Company as a manager, representative, director, officer, partner, venturer,
proprietor, trustee, agent or similar functionary of another foreign or
domestic limited liability company, corporation, Company, sole proprietorship,
trust or other enterprise against any expense, liability or loss, whether or
not the Company would have the power to indemnify such Person against such
expense, liability or loss under this Article VII .

 

Section 7.11                            Savings
Clause.  If this Article VII or
any portion hereof shall be invalidated on any ground by any court of competent
jurisdiction, then the Company shall nevertheless indemnify and hold harmless
each Person indemnified pursuant to this Article VII as to costs, charges
and expenses (including reasonable attorneys’ fees), judgments, fines and amounts
paid in settlement with respect to any such Proceeding, appeal, inquiry or
investigation to the full extent permitted by any applicable portion of this
Article VII that shall not have been invalidated and to the fullest extent
permitted by applicable law.

 

Section 7.12                            Limited
Liability.  Except as otherwise
provided by the Act, the debts, obligations and liabilities of the Company,
whether arising in contract, tort or otherwise, shall be solely the debts,
obligations and liabilities of the Company, and no Member, member of the Board
or Officer of the Company shall be obligated personally for any such debt,
obligation or liability of the Company solely by reason of being a Member,
member of the Board or Officer of the Company. Neither the Members nor any
member of the Board shall be required to lend any funds to the Company. Each of
the Members shall only be liable to make payment of its respective Member
Commitment as and when due hereunder and other payments as expressly provided
in this Agreement. If and to the extent a Member’s Member Commitment shall be
fully 

 

47

 

paid, such Member shall
not, except as required by the express provisions of the Act regarding
repayment of sums wrongfully distributed to Members, be required to make any
further contributions. No Member in his or her capacity as a Member shall have
any power to represent, act for, sign for or bind the members of the Board or
the Company, and the Members hereby consent to the exercise by the Board and
Officers of the Company of the powers conferred on them by law and this
Agreement.

 

ARTICLE VIII

TAXES

 

Section 8.1                                   Tax
Returns.  The President shall cause
to be prepared and filed all necessary federal and state income tax returns for
the Company, and shall make any elections and filings it may deem appropriate
and in the best interests of the Members. Each Member shall furnish to the
Company all pertinent information in its possession relating to Company
operations that is necessary to enable the Company’s income tax returns to be
prepared and filed. The Company shall furnish all pertinent information to the
Members that is necessary to determine amounts includable on their tax returns
with respect to the Company (including Schedule K-1) not later than 75
days after the end of the Taxable Year or any extension period granted by the
relevant authority having jurisdiction over such matters.

 

Section 8.2                                   Tax
Matters Partner.  The Board shall
designate any Member to serve as a tax matters partner (subject to replacement)
as and when required pursuant to Section 6231(a)(7) of the Code (the “Tax
Matters Partner”), and such Tax Matters Partner shall also be the “notice
partner” within the meaning of Section 6223 of the Code. The Tax Matters Partner
may, in its sole discretion, make or revoke any election under the Code or the
Treasury Regulations issued thereunder (including for this purpose any new or
amended Treasury Regulations issued after the Formation Date). The Tax Matters
Partner is authorized to represent the Company before the Internal Revenue
Service and any other governmental agency with jurisdiction, and to sign such
consents and to enter into settlements and other agreements with such agencies
as the Board deems necessary or advisable. Promptly following the written
request of the Tax Matters Partner, the Company shall, to the fullest extent
permitted by law, reimburse and indemnify the Tax Matters Partner for all
reasonable expenses, including reasonable legal and accounting fees, claims, liabilities,
losses and damages incurred by the Tax Matters Partner in connection with any
administrative or judicial proceeding (i) with respect to the tax liability of
the Company and/or (ii) with respect to the tax liability of the Members in
connection with the operations of the Company. The provisions of this
Section 8.2 shall survive the termination of the Company or the
termination of any Member’s interest in the Company and shall remain binding on
the Members for as long a period of time as is necessary to resolve with the
Internal Revenue Service any and all matters regarding the Federal income
taxation of the Company or the Members.

 

Section 8.3                                   Reserves.  The Board may from time to time establish
such reasonable cash reserves as it shall reasonably determine.

 

48

 

ARTICLE IX

TRANSFERS AND OTHER EVENTS

 

Section 9.1                                   Transfer
of Interest.  Except as provided in
this Article IX, no Member shall have the right to sell, assign, transfer
or otherwise dispose of, whether voluntarily or involuntarily or by operation
of law, all or any portion of its, his or her Membership Interest (a
“Transfer”) in the Company to any Person (an “Assignee”) without the prior
Approval of the Board.

 

Section 9.2                                   Permitted
Transfer.  Subject to the conditions
and restrictions of Sections 9.3 and 9.4, the Approval of the Board shall not
be required for any Transfer by any Member of all of any portion of its
Membership Interests to any Affiliate of such Member, unless the Transferring Member
(as defined below) seeks to be released or in any manner avoid further
obligations to fund the unfunded portion of its Member Commitment as a result
of such Transfer.

 

Section 9.3                                   Right
of First Offer-Membership Interest. 
Before any Member (the “Transferring Member”) transfers all or any
portion of its Membership Interest (the “Transferred Interest”) to any Person
other than an Affiliate of the Transferring Member, the Transferring Member
shall notify the Board in writing of such intended Transfer, which notice (the
“Transfer Notice”) shall contain the terms of the proposed Transfer (including,
the price at which the Transferring Member is seeking to Transfer the
Transferred Interest). The Board shall provide all Members with a copy of the
Transfer Notice within five (5) business days after receiving such notice. Each
Non-Defaulting Member shall have thirty (30) days (such period the “Election
Period”) from the Board’s delivery of the Transfer Notice to notify the Board
in writing of its election to acquire all or a portion of the Transferred
Interest and the percentage of the Transferred Interest that such
Non-Defaulting Member (and “Electing Member”) proposes to acquire (such notice
by an Electing Member, an “Election Notice”). The Board shall provide a copy of
each Election Notice it receives to all other Members within five (5) business
days after receiving such Election Notice. If at the end of the Election
Period, the aggregate percentage of the Transferred Interest specified by the
Electing Partners in Election Notices is equal to or greater than 100%, then
the Transferring Member shall transfer the Transferred Interest to such
Electing Members on a prorata basis in accordance with the percentages of the
Transferred Interest set forth in their respective Election Notices, and in
accordance with all other terms set forth in the Transfer Notice. If, at the
end of the Election Period no Members deliver an Election Notice, or the
aggregate percentage of the Transferred Interest specified by the Electing
Members in Election Notices is less than 100%, then the Transferring Member
shall have the right, subject to the terms and conditions of Section 9.4,
to Transfer the Transferred Interest to any Person, for an amount not less than
98% of the price specified in the Transfer Notice and otherwise on
substantially identical terms as the terms specified in the Transfer Notice,
within ninety (90) days of the expiration of the Election Period. If the
Transferring Member fails to Transfer the Transferred Interest within such
ninety (90) day period, or materially deviates from the terms of the Transfer
Notice other than the variance in price allowed pursuant to this
Section 9.3, the Transferring Member shall be required to re-offer the
Transferred Interest to the other Members in accordance the above procedure. If
a Transferring Member shall Transfer all or any portion of its interest in the
Company to one or more Members, in accordance with this Section 9.3, then
the Transferring Member shall be released from any further obligations under
this Agreement to the extent of such Transferred Interest. Notwithstanding the
foregoing provisions 

 

49

 

of this Section 9.3,
and without limiting the authority of the Board to grant or withhold Approval
to any proposed Transfer to any party who is not a Member or an Affiliate of a
Member, the Board may withhold Approval to any proposed Transfer that the Board
determines, based upon the advice of counsel, would (i) violate applicable federal,
state or foreign securities laws, (ii) increase the number of Persons who
beneficially own an interest in the Company for purposes of determining whether
the Company must register as an investment company under the Investment Company
Act of 1940, as amended, (iii) create a material risk of adverse tax
consequences to any Member (other than the Transferring Member), including
without limitation material risk that the Company shall be treated as a
“publicly traded partnership” under Section 7704 of the Code or shall fail
to qualify for any safe harbor, exemption or other favorable treatment under
Section 7704 of the Code, the regulations thereunder, and any
administrative rulings or policies with respect thereto, (iv) threaten or
result in a liquidation of the Company, or (v) violate the terms of any
existing financing of Company Properties.

 

Section 9.4                                   Assignments
Generally Substituted Member. 
Without limiting the provisions of Sections 9.1 through 9.3, a Transfer
shall be valid hereunder only if:

 

(A)                              the
transferring Member and the recipient (the “Assignee”) each execute and deliver
to the Company such documents and instruments of conveyance as may be
reasonably requested by the Board to effect such Transfer and to confirm the
agreement of the Assignee to be bound by the provisions of this Agreement;

 

(B)                                the
Transferring Member and Assignee provide to the Board the Assignee’s taxpayer
identification number and any other information reasonably necessary to permit
the Company to file all required federal and state tax returns and other
legally required information statements or returns. Without limiting the
generality of the foregoing, the Company shall not be required to make any
distribution otherwise provided for in this Agreement with respect to any
interest Transferred until the Board has received such information;

 

(C)                                the
Transferring Member furnishes to the Company (unless waived by the Board) an
opinion of counsel, which counsel and opinion shall be reasonably satisfactory
to the Board, that (i) the Transfer will not cause the Company to be deemed to
be an “investment company” under the Investment Company Act of 1940, as
amended, (ii) the Transfer will not cause the Company to be taxed as a
corporation pursuant to Section 7704 of the Code and (iii) either the
interest Transferred has been registered under the Securities Act and any
applicable state securities laws or the Transfer is exempt from all applicable
registration requirements and will not violate any applicable laws regulating
the Transfer of securities; and

 

(D)                               the
Transferring Member reimburses the Company for all costs and expenses that the
Company reasonably incurs in connection with the Transfer.

 

Section 9.5                                   Rights
and Obligations of Assignees and Transferring Members.

 

(A)                              A
Transfer by a Member or other person shall not itself dissolve the Company or
entitle the Assignee to become a Member or exercise any rights of a Member.

 

(B)                                A
Transfer by a Member shall eliminate the Member’s power and right to vote (in
proportion to the extent of the interest Transferred) on any matter submitted
to the Members, 

 

50

 

and, for voting purposes,
such interest shall not be counted as outstanding in proportion to the extent
of the interest Transferred. A Transfer shall not otherwise eliminate the
Member’s entitlement to any rights associated with the Member’s remaining
interest, including, without limitation, rights to information, and shall not
cause the Member to be released from any liability to the Company solely as a
result of the Transfer.

 

(C)                                An
Assignee that is not admitted as a Member pursuant to Section 9.3 and 9.4
shall be entitled only to the Economic Interest with respect to the Transferred
Interest and shall have no other rights (including, without limitation, rights
to any information or accounting of the affairs of the Company or to inspect
the books or records of the Company) with respect to the Transferred Interest.
The Assignee shall nevertheless be subject to all of the obligations applicable
to a Member under this Article IX. If the Assignee becomes a Member, the
voting and other rights associated with the interest held by the Assignee shall
be restored and be held by the Member along with all other rights with respect
to the Transferred Interest. The Assignee shall have no liability as a Member
solely as a result of the Transfer.

 

Section 9.6                                   Effect
of Admission of Member on Transferring: Member and Company. Notwithstanding
the admission of an Assignee as a Member, the Transferring Member shall not be
released from any obligations to the Company existing as of the date of the
transfer (other than obligations of the Transferring Member to make future
capital contributions), but such admission shall cause Transferring Member to
cease to be a Member with respect to the interest Transferred when the Assignee
becomes a Member. In any such case, the admission of the Assignee as a Member
shall constitute the requisite consent of the Members to continue the business
of the Company notwithstanding that such admission will cause the termination
of the membership of the Transferring Member with respect to the interest
Transferred.

 

Section 9.7                                   Distributions
and Allocations Regarding: Transferred Interests.  Upon any Transfer during any Fiscal Year of the Company made in
compliance with the provisions of this Article IX, profits, losses, each
item thereof and all other items attributable to such interest for such Fiscal
Year shall be divided and allocated between the Transferring Member and the Assignee
by taking into account their varying interests during such Fiscal Year, using
any conventions permitted by law and selected by the Board. All distributions
on or before the date of such Transfer shall be made to the Transferring Member
and all distributions thereafter shall be made to the Assignee. Solely for
purposes of making such allocations and distributions, the Company shall
recognize such Transfer not later than the end of the calendar month during
which it is given notice of such Transfer; provided that, if the Company is
given notice of a Transfer at least 10 business days prior to the Transfer, the
Company shall recognize such Transfer as the date of such Transfer, and
provided, further, that, if the Company does not receive a notice stating the
date such interest was Transferred and such other information as the Board may
reasonably require within 30 days after the end of the Fiscal Year during which
the Transfer occurs, then all such items shall be allocated, and all
distributions shall be made, to the Member that, according to the books and
records of the Company, was the owner of the interest on the last day of the
Fiscal Year during which the Transfer occurs. Neither the Company nor the Board
shall incur any liability for making allocations and distributions in
accordance with the provisions of this Section 9.2(e), whether or not the
Company or the Board has knowledge of any Transfer of any interest.

 

51

 

Section 9.8                                   Required
Amendments: Continuation.  If and to
the extent any Assignee is admitted as a Member pursuant to Section 9.6,
this Agreement shall be amended to admit such Assignee as a Member and to
reflect the elimination of the Transferring Member (or the reduction of such
Membership Interest) and (if and to the extent then required by the Act) a
certificate of amendment to the Certificate reflecting such admission and
elimination (or reduction) shall be filed in accordance with the Act. The
admission of any substitute Member pursuant to this Article IX shall be
deemed effective on the effective date of such amendment to this Agreement.

 

Section 9.9                                   Resignation.  No Member shall have the right to resign or
withdraw as a Member without the prior written Approval of the Board, which may
be given or withheld in its sole and absolute discretion. Any Member that
resigns without the Approval of the Board in contravention of this
Section 9.9 shall be liable to the Company for all damages (including all
lost profits and special, indirect and consequential damages) directly or
indirectly caused by the resignation of such Member, and such Member shall be
entitled to receive the fair value of his, her or its Membership Interest as of
the date of his, her or its resignation (or, if less, the fair value of his,
her or its interest as of the winding-up of the Company), as conclusively
determined by the Board, only following the occurrence of the winding-up of the
Company.

 

Section 9.10                            No
Appraisal Rights.  No Member shall
be entitled to any appraisal rights with respect to such Member’s Membership
Interest, whether individually or as part of any class or group of Members, in
the event of a merger, consolidation, or other transaction involving the
Company or its securities unless such rights are expressly provided herein or
by the agreement of merger, agreement of consolidation or other document
effectuating such transaction.

 

Section 9.11                            Void
Assignment.  Any Transfer by any
Member in contravention of this Agreement shall be void and ineffectual and shall
not bind or be recognized by the Company or any other party. In the event of
any Transfer in contravention of this Agreement, the purported transferee shall
have no right to any profits, losses or distributions of the Company or any
other rights of a Member.

 

ARTICLE X

DISSOLUTION, LIQUIDATION AND TERMINATION

 

Section 10.1                            Dissolution.

 

(A)                              The
Company shall be dissolved and its affairs shall be wound up on the first to
occur of the following:

 

(i)                                     the
Approval of the Board;

 

(ii)                                  (ii)
the entry of a decree of judicial dissolution of the Company under
Section 18-802 of the Act;

 

(iii)                               a
Termination Event; and

 

(iv)                              the
Termination Date.

 

52

 

The death, retirement,
resignation, expulsion, incapacity, bankruptcy or dissolution of a Member, or
the occurrence of any other event that terminates the continued membership of a
Member in the Company, shall not cause a dissolution of the Company, and the
Company shall continue in existence subject to the terminates and conditions of
this Agreement.

 

(B)                                Notwithstanding
anything to the contrary contained in Sections 6.3(B) or 6.3(C), the Company
shall be dissolved if so elected by the Member specified below following the
occurrence of any of the following (each, a “Termination Event”):

 

(i)                                     by
CalEast, at any time after the date which is two years after the Effective
Date, if;

 

(1)                                  CalEast
is not then in default under this Agreement; and

 

(2)                                  CRS
fails to present to the Company at least $200,000,000 of Proposed Investments
which conform to the Investment Criteria during the two-year period commencing
on the Effective Date; or

 

(ii)                                  by
CalEast, at any time following expiration of the Commitment Period, provided
that CalEast is not then in default under this Agreement; or

 

(iii)                               by
CRS, at any time after the date which is two years after the Effective Date,
if:

 

(1)                                  CRS
is not then in default under this Agreement; and

 

(2)                                  CRS
has offered to the Company at least $200,000,000 in Proposed Investments which
conform to the Investment Criteria during the two-year period commencing on the
Effective Date, and the Company shall have failed to approve at least
$100,000,000 (the “Rejection Threshold”) of the Proposed Investments for
acquisition; provided, however, that Proposed Investments which are not within
the CalEast Territory and are rejected by the Company shall not count toward
the Rejection Threshold, unless: (i) such Proposed Investment is a
build-to-suit project for an existing tenant of CNT or the Company; or (ii)
such Proposed Investment is part of a larger portfolio of Proposed Investments
the majority of which (determined on the basis of gross rentable area) are
located within the CalEast Territory.

 

Section 10.2                            Liquidation
and Termination.  On dissolution of
the Company, the Board shall act as liquidator or may appoint one or more
Officers as liquidator. The liquidators shall proceed diligently to wind up the
affairs of the Company and make final distributions as provided herein and in
the Act. The costs of liquidation shall be borne as a Company expense. Until
final distribution, the liquidators shall continue to operate the Company’s
Officers Properties with all of the power and authority of the Board. The steps
to be accomplished by the liquidators are as follows:

 

(A)                              As
promptly as possible after dissolution and again after final liquidation, the
liquidator(s) shall cause a proper accounting to be made by a recognized firm
of certified public accountants of the Company’s assets, liabilities and
operations through the last day of the 

 

53

 

calendar month in which
the dissolution occurs or the final liquidation is completed, as applicable.

 

(B)                                The
liquidator(s) shall cause the notice described in the Act to be mailed to each
known creditor of and claimant against the Company in the manner described
thereunder.

 

(C)                                The
liquidator(s) shall pay, satisfy or discharge from Company funds all of the
debts, liabilities and obligations of the Company (including, without limitation,
all expenses incurred in liquidation) or otherwise make adequate provision for
payment and discharge thereof (including, without limitation, the establishment
of a cash fund for contingent liabilities in such amount and for such term as
the liquidator may reasonably determine).

 

(D)                               The
balance, if any, of the Company’s remaining assets shall be distributed to the
Members in accordance with Section 5.2. Notwithstanding the provisions of
Section 5.5, items of income, gain, deduction and loss for the final
Taxable Year of the Company shall be allocated to the Members’ Capital Accounts
in such a manner that the Members’ positive Capital Account balances shall be,
immediately prior to the distribution pursuant to Section 10.2(D), in such
proportion. Distributions pursuant to this Section 10.2(D) shall be made
by the end of the Taxable Year of the Company during which the liquidation
occurs (or, if later, 90 days after the date of the liquidation).

 

The liquidator(s) shall
cause only cash, evidences of indebtedness and other securities to be
distributed in any liquidation. The distribution of cash and/or property to a
Member in accordance with the provisions of this Section 10.2 constitutes
a complete return to such Member of its Capital Contributions and a complete
distribution to the Member of its interest in the Company and all the Company’s
property and constitutes a compromise to which all Members have consented
within the meaning of the Act. The distribution of cash and/or property to an
Assignee who is not a Member in accordance with the provisions of this
Section 10.2 constitutes a complete distribution to such Assignee of its
interest in the Company and all the Company’s property and constitutes a
compromise to which all Members have consented within the meaning of the Act.
To the extent that a Member returns funds to the Company, it has no claim
against any other Member for those funds.

 

Section 10.3                            Deemed
Distribution and Recontribution. 
Notwithstanding any other provision of this Article X, in the event
the Company is “liquidated” within the meaning of Treasury Regulation
section 1.704-1 (b )(2)(ii)(g), the Company’s assets shall not be
liquidated, the Company’s liabilities shall not be paid or discharged, and the
Company’s affairs shall not be wound up. Instead, the Company shall be deemed
to have contributed its assets to a newly-created limited liability company in
exchange for such company’s assumption of the Company’s liabilities and equity
interests in such new company. Immediately thereafter, the Company shall be
deemed to have distributed the new limited liability company equity interests
to the Members in accordance with their Capital Accounts.

 

Section 10.4                            Deficit
Capital Accounts.  Notwithstanding
any custom or rule of law to the contrary, to the extent that any Member has a
deficit Capital Account balance, upon dissolution of the Company such deficit
shall not be an asset of the Company and such Members 

 

54

 

shall not be obligated to
contribute such amount to the Company to bring the balance of such Member’s
Capital Account to zero.

 

Section 10.5                            Cancellation
of Certificate.  On completion of
the distribution of Company assets as provided herein, the Company is
terminated, and shall file a certificate of cancellation with the Secretary of
State of the State of Delaware, cancel any other filings made pursuant to
Section 2.1 and take such other actions as may be necessary to terminate
the Company.

 

Section 10.6                            Tax
Deferral.  If so requested in writing
by CRS, CalEast shall cooperate with CRS in facilitating one or more tax
deferred exchanges pursuant to § 1031 of the Code or other tax deferred
transaction or transactions by CRS in connection with the sale of any Company
Property and the winding-up and liquidation of the Company, provided, however,
that CalEast shall not be required hereby to: (i) incur costs or liabilities
other than costs and liabilities incurred in a sale of the Company Property or
Properties in question for cash in the ordinary course; or (ii) accept as
consideration for such sale or other disposition any medium of payment other
than cash; or (iii) materially delay receipt of its consideration as a result
of its cooperation.

 

ARTICLE XI

GENERAL/MISCELLANEOUS PRO VISIONS

 

Section 11.1                            Offset.  Whenever the Company is to pay any sum to
any Member, any amounts that such Member owes to the Company may be deducted
from that sum before payment; provided that the full amount that would
otherwise be distributed shall be debited from the Member’s Capital Account
pursuant to Section 4.1.

 

Section 11.2                            Waiver
of Certain Rights.  Each Member
irrevocably waives any right it may have to demand any distributions or
withdrawal of property from the Company or to maintain any action for
dissolution (except pursuant to Section 18-802 of the Act) of the Company
or for partition of the property of the Company.

 

Section 11.3                            Indemnification
and Reimbursement for Payments on Behalf of a Member.  If the Company is obligated to pay any
amount to a governmental agency (or otherwise makes a payment) because of a
Member’s status or otherwise specifically attributable to a Member (including,
without limitation, federal, state or local withholding taxes imposed with
respect to any issuance of Membership Interests to a Member or any payments to
a Member, federal withholding taxes with respect to foreign Persons, state
personal property taxes, state personal property replacement taxes, state
unincorporated business taxes, etc.), then such Member (the “Indemnifying Member”)
shall indemnify the Company in full for the entire amount paid (including,
without limitation, any interest, penalties and expenses associated with such
payments). At the option of the Board, either:

 

(A)                              promptly
upon notification of an obligation to indemnify the Company, the Indemnifying
Member shall make a cash payment to the Company equal to the full amount to be
indemnified (provided that the amount paid shall not be treated as a Capital
Contribution); or

 

(B)                                the
Company shall reduce distributions that would otherwise be made to the
Indemnifying Member, until the Company has recovered the amount to be
indemnified (provided 

 

55

 

that the amount of such
reduction shall be deemed to have been distributed for all purposes of this
Agreement).

 

An Indemnifying Member’s
obligation to make contributions to the Company under this Section 11.3
shall survive the termination, dissolution, liquidation and winding up of the
Company and, for purposes of this Section 11.3, the Company shall be
treated as continuing in existence. The Company may pursue and enforce all
rights and remedies it may have against each Indemnifying Member under this
Section 11.3, including instituting a lawsuit to collect such contribution
with interest calculated at Prime Rate plus five percentage points per annum
(but not in excess of the highest rate per annum permitted by law).

 

Section 11.4                            Notices.  Except as expressly set forth to the
contrary in this Agreement, all notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement must
be in writing and shall be deemed delivered: (i) upon delivery if delivered in
person; (ii) if mailed by deposit in the United States mail, addressed to the
recipient, postage paid, and registered or certified with return receipt
requested, or upon the date indicated in such return receipt; (iii) upon
transmission if sent via telecopier, with a confirmation copy sent via
overnight mail, provided that confirmation of such overnight delivery is
received; or (iv) one (1) business day after deposit with a national overnight
courier provided that confirmation of such overnight delivery is received. All
notices, requests and consents to be sent to a Member must be sent to or made
at the address (or facsimile number) given for that Member on Schedule A,
or such other address (or facsimile number) as that Member may specify by
notice to the other Members, Any notice, request or consent to the Company or
the Board must be given to the Board or, if appointed, the secretary of the
Company at the Company’s chief executive offices. Whenever any notice is
required to be given by law or this Agreement, a written waiver thereof, signed
by the Person entitled to notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice.

 

Section 11.5                            Public
Announcements.  No Member shall make
any public announcement or filing with respect to the transactions provided for
herein without the prior Approval of the Board, unless such party has been
advised by counsel such disclosure is required by applicable law. To the extent
reasonably feasible, any press release or other announcement or notice
regarding the transactions contemplated by this Agreement shall be made by the
Board or any other party designated by the Board.

 

Section 11.6                            Entire
Agreement.  This Agreement and other
written agreements among the Members and their Affiliates relating to the
Company of even date herewith constitute the entire agreement among the Members
relating to the Company and supersedes all prior contracts or agreements with
respect to the Company, whether oral or written.

 

Section 11.7                            Effect
of Waiver or Consent.  A waiver or
consent, express or implied, to or of any breach or default by any Person in
the performance by that Person of its obligations hereunder or with respect to
the Company is not a consent or waiver to or of any other breach or default in
the performance by that Person of the same or any other obligations of that
Person hereunder or with respect to the Company. Failure on the part of a
Person to complain of any act of any Person or to declare any Person in default
hereunder or with respect to the Company, 

 

56

 

irrespective of how long
that failure continues, does not constitute a waiver by that Person of its
rights with respect to that default until the applicable statute-of-limitations
period has run.

 

Section 11.8                            Amendment
or Modification.  This Agreement and
any provision hereof may be amended or modified from time to time only by a
written instrument Approved by the Board; provided, however, that an amendment
or modification reducing the required interest for any consent or vote in this
Agreement shall be effective only with the consent or vote of Members having
the interest theretofore required. Notwithstanding the preceding sentence, the
Board may amend and modify the provisions of this Agreement (including
Article V) and Schedule A hereto to the extent necessary to reflect
the admission or substitution of any Member permitted under this Agreement.

 

Section 11.9                            Severability.  Should any provision of this Agreement be
held to be enforceable only if modified, such holding shall not affect the
validity of the remainder of this Agreement, the balance of which shall
continue to be binding upon each Member with any such modification to become a
part hereof and treated as though originally set forth in this Agreement. The
Members further agree that any court or arbitrator is expressly authorized to
modify any such unenforceable provision of this Agreement in lieu of severing
such unenforceable provision from this Agreement in its entirety, whether by
rewriting the offending provision, deleting any or all of the offending
provision, adding additional language to this Agreement, or by making such
other modifications as it deems warranted to carry out the intent and agreement
of the Members as embodied herein to the maximum extent permitted by law. The
Members expressly agree that this Agreement as so modified shall be binding
upon and enforceable against each of them. In any event, should one or more of
the provisions of this Agreement be held to be invalid, illegal or
unenforceable in any respect under applicable law or rule in any jurisdiction,
such invalidity, illegality or unenforceability shall not affect any other
provision hereof, and if such provision or provisions are not modified as
provided above, this Agreement shall be construed as if such invalid, illegal
or unenforceable provisions had never been set forth herein.

 

Section 11.10                     Successors
and Assigns.  Except as otherwise
provided herein, this Agreement is binding on and shall inure to the benefit of
the parties hereto and their respective heirs, legal representatives,
administrators, executors, successors and permitted assigns.

 

Section 11.11                     Further
Assurances.  In connection with this
Agreement and the transactions contemplated hereby, each Member shall execute
and deliver any additional documents and instruments and perform any additional
acts that may be necessary or appropriate to effectuate and perform the
provisions of this Agreement and those transactions.

 

Section 11.12                     Notice
to Members of Provisions.  By
executing this Agreement, each Member acknowledges that it has actual notice of
(a) all of the provisions hereof (including, without limitation, the
restrictions on the transfer set forth in Article IX) and (b) all of the
provisions of the Certificate.

 

Section 11.13                     Remedies.  The Company and the Members shall be
entitled to enforce their rights under this Agreement specifically, to recover
damages by reason of any breach of any provision of this Agreement (including
costs of enforcement) and to exercise any and all other rights at law or at
equity existing in their favor. The parties hereto agree and acknowledge that 

 

57

 

money damages may not be
an adequate remedy for any breach of the provisions of this Agreement (and thus
waive as defense that there is an adequate remedy at law), and that the Company
or any Member may in his, her or its sole discretion apply to any court of law
or equity of competent jurisdiction for specific performance or injunctive
relief (without posting a bond or other security) in order to enforce or
prevent any violation or threatened violation of the provisions of this
Agreement.

 

Section 11.14                     Third
Parties.  Nothing herein expressed
or implied is intended or shall be construed to confer upon or give to any
person or entity, other than the parties to this Agreement and their respective
successors and permitted assigns, any rights or remedies under or by reason of
this Agreement.

 

Section 11.15                     Governing
Law.  THIS AGREEMENT IS GOVERNED BY
AND SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE
EXCLUDING ANY CONFLICT-OF-LAWS RULE OR PRINCIPLE THAT MIGHT REFER THE
GOVERNANCE OR THE CONSTRUCTION OF THIS AGREEMENT TO THE LAW OF ANOTHER
JURISDICTION. In the event of a direct conflict between the provisions of this
Agreement and any provision of the Certificate or any mandatory provision of
the Act, the applicable provision of the Certificate or the Act shall control.
If any provision of this Agreement or the application thereof to any Person or
circumstance is held invalid or unenforceable to any extent, the remainder of
this Agreement and the application of that provision to other Persons or
circumstances is not affected thereby and that provision shall be enforced to
the greatest extent permitted by law.

 

Section 11.16                     Waiver
of Jury Trial.  The parties to this
Agreement each hereby waives, to the fullest extent permitted by law, any right
to trial of any claim, demand, action, or cause of action (i) arising under
this Agreement or (ii) in any way connected with or related or incidental to
the dealings of the parties hereto in respect of this Agreement or any of the
transactions related hereto, in each case whether now existing or hereafter
arising, and whether in contract, tort, equity, or otherwise. The parties to
this Agreement each hereby agrees and consents that any such claim, demand,
action, or cause of action shall be decided by court trial without a jury and
that the parties to this Agreement may file an original counterpart of a copy
of this Agreement with any court as written evidence of the consent of the
parties hereto to the waiver of their right to trial by jury.

 

Section 11.17                     Waiver
of Certain Rights.  Each Member
irrevocably waives any right it may have to demand any distributions or
withdrawal of property from the Company or to maintain any action for
dissolution (except pursuant to Section 18-802 of the Act) of the Company
or for partition of the property of the Company.

 

Section 11.18                     Counterparts.  This Agreement may be executed in multiple
counterparts with the same effect as if all signing parties had signed the same
document. All counterparts shall be construed together and constitute the same
instrument.

 

Section 11.19                     Descriptive
Headings.  The descriptive headings of
this Agreement are inserted for convenience only and do not constitute a
substantive part of this Agreement.

 

58

 

Section 11.20                     Conflicts.  In the event of a direct conflict between
the provision of this Agreement and any provision of the Certificate or any
mandatory provision of the Act, the applicable provision of the Certificate or
the Act shall control. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect the
validity, legality or enforceability of any other provision of this Agreement
in such jurisdiction or affect the validity, legality or enforceability of any
provision in any other jurisdiction, but this Agreement shall be reformed,
construed and enforced in such jurisdiction as if such invalid, illegal or
unenforceable provision had never been contained herein.

 

Section 11.21                     Time
of the Essence Computation of Time. 
Time is of the essence for each and every provision of this Agreement.
Whenever the last day for the exercise of any privilege or the discharge or any
duty hereunder shall fall upon a Saturday, Sunday, or any date on which banks
in Chicago, Illinois are authorized to be closed, the party having such
privilege or duty may exercise such privilege or discharge such duty on the
next succeeding day which is a regular business day.

 

Section 11.22                     No
Strict Construction.  The parties
hereto have participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the parties
hereto, and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement.

 

Section 11.23                     Organizational
Expenses.  The Company shall pay to
the Person entitled to such payment all fees and expenses incurred by the
Company, CNT, CRS and CalEast in connection with the organization and formation
of the Company, including, but not limited to, all legal, accounting, and
similar fees and expenses of the Company, CNT, CRS and CalEast, but excluding
any fees and expenses owing to Lehman Brothers incurred by CNT, CRS and the
Company in connection with the formation of the Company.

 

Section 11.24                     Discount
Rate.  As used in this Agreement,
all calculations of net present value shall apply a discount rate often percent
(10%) per annum.

 

*   *   *  
*   *   *  
*

 

59

 

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

 

	
   

  	
  CENTERPOINT
  REALTY SERVICES

  CORPORATION,

  
	
   

  	
  an Illinois
  corporation,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  Paul S. Fisher

  	
   

  
	
   

  	
  Name:

  	
  Paul S. Fisher

  	
   

  
	
   

  	
  Its:

  	
  President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  Michael M. Mullen

  	
   

  
	
   

  	
  Name:

  	
  Michael M. Mullen

  	
   

  
	
   

  	
  Its:

  	
  Vice - President

  	
   

  
	
   

  	
   

  
	
   

  	
  CALEAST
  INDUSTRIAL INVESTORS,

  
	
   

  	
  LLC, California
  limited liability company,

  
	
   

  	
   

  
	
   

  	
  By:  La Salle Investment Management, Inc.,
 its Manager

  
	
   

  	
  By:

  	
  /s/  Ernie Fiorante

  	
   

  
	
   

  	
  Name:

  	
  Ernie Fiorante

  	
   

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  	
   

  
																	

 

60

 

SCHEDULE 3.2

 

Capital
Contribution of Members

 

	
  Member

  	
   

  	
  Member

  Commitment

  	
   

  	
  Capital

  Contributions

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  CenterPoint
  Realty Services Corporation

  	
   

  	
  $

  	
  66,670,000.00

  	
   

  	
  $

  	
  12,625,577.13

  	
   

  
	
  1808
  Swift Drive

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Oak
  Brook, IL 60523

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  CalEast
  Industrial Investors, LLC

  	
   

  	
  $

  	
  200,000,000.00

  	
   

  	
  $

  	
  37,876,731.42

  	
   

  
	
  200
  East Randolph Drive

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Chicago,
  IL 60601

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

61Exhibit
10.82

 

Priceline Mortgage

Company, L.L.C.

 

Financial
Statements for the Years

Ended
December 31, 2003 and 2002

and
Independent Auditors’ Report

 

 

PRICELINE
MORTGAGE COMPANY, L.L.C.

 

TABLE OF
CONTENTS

 

	
  INDEPENDENT AUDITORS’
  REPORT

  	
   

  
	
   

  	
   

  
	
  FINANCIAL
  STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002:

  	
   

  
	
   

  	
   

  
	
  Balance Sheets

  	
   

  
	
   

  	
   

  
	
  Statements
  of Income

  	
   

  
	
   

  	
   

  
	
  Statements of
  Changes in Members’ Equity

  	
   

  
	
   

  	
   

  
	
  Statements of Cash Flows

  	
   

  
	
   

  	
   

  
	
  Notes to Financial
  Statements

  	
   

  

 

 

INDEPENDENT AUDITORS’ REPORT

 

To the Members 

Priceline Mortgage Company, L.L.C.

Jacksonville, Florida

 

We have audited the
accompanying balance sheets of Priceline Mortgage Company, L.L.C.
(the ”Company”) (formerly National Mortgage Center, L.L.C.) as of
December 31, 2003 and 2002 and the related statements of income, changes
in members’ equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

 

We conducted our audits
in accordance with auditing standards generally accepted in the United States
of America. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

 

In our opinion, such
financial statements present fairly, in all material respects, the financial
position of Priceline Mortgage Company, L.L.C. at December 31, 2003 and
2002 and the results of its operations and its cash flows for the years then
ended in conformity with accounting principles generally accepted in the United
States of America.

 

 

	
  /s/ Deloitte &
  Touche LLP

  	
   

  
	
  Jacksonville, Florida

  
	
   

  
	
  February 25, 2004

  
	
  (September 22,
  2004 as to Note 4)

  

 

 

PRICELINE MORTGAGE COMPANY, L.L.C.

 

BALANCE SHEETS

DECEMBER 31, 2003 AND 2002

 

	
   

  	
   

  	
  2003

  	
   

  	
  2002

  	
   

  
	
  ASSETS

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ASSETS:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash
  and cash equivalents

  	
   

  	
  $

  	
  4,038,766

  	
   

  	
  $

  	
  7,092,422

  	
   

  
	
  Loans
  held for sale

  	
   

  	
  13,500,167

  	
   

  	
  2,323,586

  	
   

  
	
  Due
  from affiliates, net

  	
   

  	
  —

  	
   

  	
  1,537,495

  	
   

  
	
  Prepaid
  expenses and other assets

  	
   

  	
  97,942

  	
   

  	
  60,799

  	
   

  
	
  Premises
  and equipment, net

  	
   

  	
  844,109

  	
   

  	
  1,210,885

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOTAL
  ASSETS

  	
   

  	
  $

  	
  18,480,984

  	
   

  	
  $

  	
  12,225,187

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LIABILITIES AND MEMBERS’ EQUITY

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LIABILITIES:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Accounts
  payable and accrued expenses

  	
   

  	
  $

  	
  1,407,293

  	
   

  	
  $

  	
  3,492,631

  	
   

  
	
  Due
  to affiliates, net

  	
   

  	
  78,722

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total
  liabilities

  	
   

  	
  1,486,015

  	
   

  	
  3,492,631

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  COMMITMENTS
  AND CONTINGENCIES (see Note 4)

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MEMBERS’
  EQUITY

  	
   

  	
  16,994,969

  	
   

  	
  8,732,556

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOTAL
  LIABILITIES AND MEMBERS’ EQUITY

  	
   

  	
  $

  	
  18,480,984

  	
   

  	
  $

  	
  12,225,187

  	
   

  

 

See notes to financial
statements.

 

2

 

PRICELINE MORTGAGE COMPANY, L.L.C.

 

STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31, 2003 AND 2002

 

	
   

  	
   

  	
  2003

  	
   

  	
  2002

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  INTEREST INCOME:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Interest income

  	
   

  	
  $

  	
  796,054

  	
   

  	
  $

  	
  482,635

  	
   

  
	
  Interest expense

  	
   

  	
  (2,783

  	
  )

  	
  (4,044

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net interest income

  	
   

  	
  793,271

  	
   

  	
  478,591

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NON-INTEREST INCOME:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Gain on sale of loans, net of commitment fees

  	
   

  	
  13,523,357

  	
   

  	
  9,882,002

  	
   

  
	
  Loan production revenue, net

  	
   

  	
  10,301,923

  	
   

  	
  9,475,171

  	
   

  
	
  Other

  	
   

  	
  118,906

  	
   

  	
  249,794

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total non-interest income

  	
   

  	
  23,944,186

  	
   

  	
  19,606,967

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NON-INTEREST EXPENSES:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Salaries, commissions and other employee benefits

  	
   

  	
  10,326,230

  	
   

  	
  8,465,906

  	
   

  
	
  Occupancy and equipment

  	
   

  	
  1,174,278

  	
   

  	
  1,251,970

  	
   

  
	
  General and administrative

  	
   

  	
  4,974,536

  	
   

  	
  5,895,796

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total non-interest expenses

  	
   

  	
  16,475,044

  	
   

  	
  15,613,672

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NET INCOME

  	
   

  	
  $

  	
  8,262,413

  	
   

  	
  $

  	
  4,471,886

  	
   

  

 

See
notes to financial statements.

 

3

 

PRICELINE MORTGAGE COMPANY, L.L.C.

 

STATEMENTS OF CHANGES IN
MEMBERS’ EQUITY

YEARS ENDED DECEMBER 31, 2003 AND 2002

 

	
   

  	
   

  	
  Capital

  	
   

  	
  Accumulated

  Earnings

  (Deficit)

  	
   

  	
  Total

  Members’

  Equity

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BALANCE—December 31, 2001

  	
   

  	
  $

  	
  7,934,472

  	
   

  	
  $

  	
  (3,673,802

  	
  )

  	
  $

  	
  4,260,670

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net income

  	
   

  	
   

  	
   

  	
  4,471,886

  	
   

  	
  4,471,886

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BALANCE—December 31, 2002

  	
   

  	
  7,934,472

  	
   

  	
  798,084

  	
   

  	
  8,732,556

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net income

  	
   

  	
   

  	
   

  	
  8,262,413

  	
   

  	
  8,262,413

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BALANCE—December 31, 2003

  	
   

  	
  $

  	
  7,934,472

  	
   

  	
  $

  	
  9,060,497

  	
   

  	
  $

  	
  16,994,969

  	
   

  

 

See
notes to financial statements.

 

4

 

PRICELINE MORTGAGE COMPANY, L.L.C.

 

STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2003 AND 2002

 

	
   

  	
   

  	
  2003

  	
   

  	
  2002

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  OPERATING ACTIVITIES:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net income

  	
   

  	
  $

  	
  8,262,413

  	
   

  	
  $

  	
  4,471,886

  	
   

  
	
  Adjustments to reconcile net income to net cash
  (used in) provided by operating activities:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Depreciation expense

  	
   

  	
  408,935

  	
   

  	
  419,243

  	
   

  
	
  Loss on disposal of fixed assets

  	
   

  	
  —

  	
   

  	
  920

  	
   

  
	
  Change in operating assets and liabilities:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (Increase) decrease in loans held for sale

  	
   

  	
  (11,176,581

  	
  )

  	
  93,921

  	
   

  
	
  Decrease (increase) in due to affiliates, net

  	
   

  	
  1,616,217

  	
   

  	
  (1,831,291

  	
  )

  
	
  (Increase) decrease in prepaid expenses and other
  assets

  	
   

  	
  (37,143

  	
  )

  	
  806,731

  	
   

  
	
  (Decrease) increase in accounts payable and
  accrued expenses

  	
   

  	
  (2,085,338

  	
  )

  	
  2,477,684

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net cash (used in) provided by operating
  activities

  	
   

  	
  (3,011,497

  	
  )

  	
  6,439,094

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  INVESTING ACTIVITIES:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Purchase of premises and equipment

  	
   

  	
  (42,159

  	
  )

  	
  (839,373

  	
  )

  
	
  Net cash used in investing activities

  	
   

  	
  (42,159

  	
  )

  	
  (839,373

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NET (DECREASE) INCREASE IN CASH AND CASH
  EQUIVALENTS

  	
   

  	
  (3,053,656

  	
  )

  	
  5,599,721

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  CASH AND CASH EQUIVALENTS:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Beginning of year

  	
   

  	
  7,092,422

  	
   

  	
  1,492,701

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  End of year

  	
   

  	
  $

  	
  4,038,766

  	
   

  	
  $

  	
  7,092,422

  	
   

  

 

See
notes to financial statements.

 

5

 

PRICELINE
MORTGAGE COMPANY, L.L.C.

 

NOTES TO FINANCIAL STATEMENTS

YEARS
ENDED DECEMBER 31, 2003 AND 2002

 

1.                                      ORGANIZATION
AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Organization—Priceline Mortgage
Company, L.L.C., formerly known as National Mortgage Center, L.L.C., (the
“Company”), engages in the origination of real estate mortgage loans using the
internet. The Company is 51% owned by EverBank (formerly First Alliance Bank,
FSB) and 49% owned by a wholly owned subsidiary of Priceline.com and is doing
business as pricelinemortgage.com.

 

Basis of Presentation—The financial
statements are presented in accordance with accounting principles generally
accepted in the United States of America, which require management to make
estimates that affect the reported amounts and disclosures of contingencies in
the financial statements. Estimates, by their nature, are based on judgment and
available information. Therefore, actual results could differ from those
estimates and could have a material impact on the financial statements, and it
is possible that such change could occur in the near term.

 

Cash and Cash Equivalents—Cash
represents amounts held on deposit with various banks.

 

Loans Held for Sale—Loans held for
sale are residential mortgage loans originated by the Company which management
intends to sell at some point in the future. Loans held for sale are reported
at the lower of cost or estimated market value determined on an aggregate
basis.

 

Commitments to Originate Mortgage Loans—The
Company enters into commitments to originate loans whereby the interest rate on
the loan is determined prior to funding (rate lock commitments). Rate lock
commitments on loans that are intended to be sold are considered to be
derivatives and are therefore recorded at fair value with changes in fair value
recorded in earnings. The fair value of rate lock commitments at December 31,
2003 and 2002 recorded in loans held for sale was $43,114 and $207,065,
respectively. The change in fair value recorded in gain on sale for the years
ended December 31, 2003 and 2002 was $(163,951) and $(178,138),
respectively.  Rate lock commitments
expose the Company to interest rate risk.

 

Premises and Equipment—Premises and equipment consist
of leasehold improvements, furniture, and equipment. Premises and equipment are
recorded at cost, less accumulated depreciation. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets ranging
from 3 to 10 years. Leasehold improvements are amortized using the
straight-line method over the shorter of their estimated useful life or the
period the Company expects to occupy the related leased space.

 

Revenue Recognition—Loan production
income represents income earned from the origination of mortgage loans. Gains
and losses on the sale of loans are recorded upon the sale of these assets by
the Company.

 

6

 

Interest income on
mortgage loans is accrued as earned and is computed using the effective
interest method. Loans are placed on non-accrual status when any portion of the
principal or interest is 90 days past due.

 

Income Taxes—For federal and state
income tax purposes the Company is considered a partnership with income taxable
to the ultimate owners of the Company. Thus, the Company does not provide for
federal and state income taxes.

 

Reclassification—Certain
reclassifications have been made to prior year amounts to conform to the
current year presentation.

 

2.                                      PREMISES
AND EQUIPMENT

 

Premises and equipment at
December 31 consist of the following:

 

	
   

  	
   

  	
  2003

  	
   

  	
  2002

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Leasehold improvements

  	
   

  	
  $

  	
  233,874

  	
   

  	
  $

  	
  233,874

  	
   

  
	
  Furniture

  	
   

  	
  543,623

  	
   

  	
  540,748

  	
   

  
	
  Equipment

  	
   

  	
  1,285,252

  	
   

  	
  1,245,968

  	
   

  
	
   

  	
   

  	
  2,062,749

  	
   

  	
  2,020,590

  	
   

  
	
  Less accumulated depreciation

  	
   

  	
  (1,218,640

  	
  )

  	
  (809,705

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  $

  	
  844,109

  	
   

  	
  $

  	
  1,210,885

  	
   

  

 

Depreciation expense for
the years ended December 31, 2003 and 2002 was $408,935 and $419,243,
respectively.

 

3.                                      EMPLOYEE
BENEFIT PLAN

 

The Company participates
in a defined contribution plan sponsored by EverHome Mortgage Company (formerly
Alliance Mortgage Company), an affiliated company, adopted under the Internal
Revenue Code Section 401(k) (the “Profit Sharing and Savings Plan”),
covering substantially all full-time employees meeting the eligibility
requirements. Employees may contribute between 1% and 18% of their pre-tax
compensation to the Profit Sharing and Savings Plan. Company contributions to
the Profit Sharing and Savings Plan are at the discretion of the Company. The
Company made discretionary contributions of $320,500 and $253,000 to the Plan
for the years ended December 31, 2003 and 2002, respectively. The Company
made employer matching contributions of approximately $198,000 and $115,000 in
2003 and 2002, respectively.

 

7

 

4.                                      COMMITMENTS
AND CONTINGENCIES

 

Operating Leases – The Company has
entered into various operating leases for the office space in which it
operates. Rent expense associated with these leases was approximately $284,000
and $347,000 for the years ended December 31, 2003 and 2002, respectively.
The future minimum lease payments for the leases are as follows:

 

	
  2004

  	
   

  	
  $

  	
  465,589

  	
   

  
	
  2005

  	
   

  	
  474,900

  	
   

  
	
  2006

  	
   

  	
  484,398

  	
   

  
	
  2007

  	
   

  	
  494,086

  	
   

  
	
  2008

  	
   

  	
  506,874

  	
   

  
	
  Thereafter

  	
   

  	
  1,286,634

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  $

  	
  3,712,481

  	
   

  

 

Legal Action - On August 24,
2004, the Company was served with a complaint for patent infringement captioned
IMX, Inc. v., LendingTree, Inc.,
priceline.com Inc. and Priceline Mortgage Company LLC. The
August 24, 2004 complaint added the Company as a new defendant to a
previously filed complaint served upon priceline.com, Inc. dated
November 24, 2003. The complaint alleges, among other things, that the
Company has infringed, induced others to infringe and/or committed acts of
contributory infringement of U.S. Patent number 5,995,947 entitled “Interactive
Mortgage and Loan Information and Real-Time Trading Systems.”  The complaint seeks injunctive relief;
unspecified money damages; an order directing defendants to pay IMX’s costs and
attorneys’ fees; and an award of pre-and post-judgment interest.  The Company intends to defend vigorously
against this action.  The Company is
unable at this time to predict the outcome of this suit or reasonably estimate
a range of possible loss, if any.

 

5.                                      RELATED
PARTY TRANSACTIONS

 

At December 31 due
from (to) affiliates includes the following amounts:

 

	
   

  	
   

  	
  2003

  	
   

  	
  2002

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Due from EverHome Mortgage Company, net

  	
   

  	
  $

  	
  40,658

  	
   

  	
  $

  	
  815,408

  	
   

  
	
  Due from BNY Mortgage Company L.L.C.

  	
   

  	
  69

  	
   

  	
  54

  	
   

  
	
  Due (to) from EverBank

  	
   

  	
  (119,449

  	
  )

  	
  722,033

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  $

  	
  (78,722

  	
  )

  	
  $

  	
  1,537,495

  	
   

  

 

Administrative expenses
allocated to the Company from affiliates were $420,000 and $210,000 for the
years ended December 31, 2003 and 2002, respectively. Advertising expenses
paid to an affiliate were $533,935 and $1,752,637 for the years ended
December 31, 2003 and 2002, respectively.

 

The Company participates
in an overall insurance program administered by EverBank Financial, L.P.
(formerly Alliance Capital Partners, L.P.), parent of EverBank. Insurance
expense allocated to the Company totaled $76,176 and $43,813 for the years
ended December 31, 2003 and 2002, respectively.

 

8

 

The Company generally
sells all its originated mortgage loans to affiliates on a right of first
refusal basis. In 2003 and 2002, the Company recognized gains of $13,591,438
and $10,060,156, respectively, on loans sold to affiliates.

 

6.                                      FINANCIAL
INSTRUMENTS

 

Derivative Instruments—In the ordinary course of business,
the Company enters into commitments to originate loans. Inherent in these
transactions is the interest rate risk associated with the movement of interest
rates in the mortgage market. The Company mitigates this risk by obtaining
commitments from investors for the purchase of loans generally at or prior to
the loan origination date. At December 31, 2003 and 2002, the Company had
commitments to originate loans of approximately $96 million and $669 million,
respectively.

 

9

 

As a mortgage banking
entity, the Company underwrites loans and the extension of credit to borrowers
in accordance with the standards prescribed by loan investors. The Company does
not invest in mortgage loans for its own account and, therefore, does not
assume the long-term credit risk associated with mortgage lending. The
Company’s credit risk is generally transferred to the investor upon the sale of
the loans. The Company does not have credit risk concentration, as defined,
with any one financial institution, government agency, government-sponsored
enterprise, or individual investor.

 

Fair Value
Financial Instruments—The following methods and assumptions
were used by the Company to estimate the fair value of each class of financial
instruments:

 

Loans Held for Sale—Fair
value is estimated using the quoted market prices for similar loans, adjusted
for differences in loan characteristics. The estimated fair value of these
financial instruments at December 31, 2003 and 2002 was $13.6 million and
$5.3 million, respectively.

 

******

 

10

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