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                                                                   EXHIBIT 10.20

                          PLEDGE AND SECURITY AGREEMENT

      This PLEDGE AND SECURITY AGREEMENT (this "SECURITY AGREEMENT") is executed
as of April 25, 2005, by TALEO CORPORATION, a Delaware corporation ("PLEDGOR"),
whose address is 575 Market Street, 8th Floor; San Francisco, CA 94105, and
GOLDMAN SACHS SPECIALTY LENDING GROUP, L.P., as Collateral Agent for the Lenders
described below ("COLLATERAL AGENT"), whose address is 600 Las Colinas
Boulevard, Suite 400, Irving, Texas 75039.

                                    RECITALS:

      A. WHEREAS, Pledgor, RECRUITFORCE.COM, INC., as guarantor, the Lenders
party thereto from time to time, and Collateral Agent have entered into a Credit
and Guaranty Agreement dated as of April 25, 2005 (as amended, modified,
supplemented, or restated from time to time, the "CREDIT AGREEMENT").

      B. WHEREAS, this Security Agreement is integral to the transactions
contemplated by the Credit Documents, and the execution and delivery hereof are
conditions precedent to any Lender's obligations to extend credit under the
Credit Documents.

      C. WHEREAS, the Collateral Agent was appointed as Collateral Agent under
the Credit Agreement, for the benefit of Lenders.

      ACCORDINGLY, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Pledgor and Collateral Agent hereby agree as follows:

      1. REFERENCE TO CREDIT AGREEMENT. The terms, conditions, and provisions of
the Credit Agreement are incorporated herein by reference, the same as if set
forth herein verbatim, which terms, conditions, and provisions shall continue to
be in full force and effect hereunder until the Obligations are paid and
performed in full. This Pledge and Security Agreement is one of the "Collateral
Documents" referred to in the Credit Agreement.

      2. CERTAIN DEFINITIONS. Unless otherwise defined herein, or the context
hereof otherwise requires, each term defined in either of the Credit Agreement
or in the UCC is used in this Security Agreement with the same meaning; provided
that, if the definition given to such term in the Credit Agreement conflicts
with the definition given to such term in the UCC, the Credit Agreement
definition shall control to the extent legally allowable; and if any definition
given to such term in Chapter 9 of the UCC conflicts with the definition given
to such term in any other chapter of the UCC, the Chapter 9 definition shall
prevail. As used herein, the following terms have the meanings indicated:

      "ADDITIONAL PROPRIETARY RIGHTS" has the meaning set forth in SECTION 4
hereof.

      "COLLATERAL" has the meaning set forth in SECTION 4 hereof.

      "COLLATERAL NOTES" has the meaning set forth in SECTION 4 hereof.

      "COLLATERAL NOTE SECURITY" has the meaning set forth in SECTION 4 hereof.

      "COLLATERAL OBLIGOR" means any Person obligated with respect to any of the
Collateral, whether as an account debtor, obligor on an instrument, issuer of
securities, or otherwise.

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      "CONTROL AGREEMENT" means, with respect to any Collateral consisting of
investment property, Deposit Accounts, electronic chattel paper, and
letter-of-credit rights, an agreement evidencing that Collateral Agent has
"control" (as defined in the UCC) of such Collateral.

      "COPYRIGHTS" has the meaning set forth in SECTION 4 hereof.

      "DEPOSIT ACCOUNTS" has the meaning set forth in SECTION 4 hereof.

      "FOREIGN SUBSIDIARY" means each Subsidiary of Pledgor that is organized or
incorporated under the Law of any jurisdiction other than the jurisdiction of
the United States or a state thereof, and that is in existence on the Closing
date.

      "GOVERNMENT AUTHORITY" means the government of the United States or any
other nation, or of any political subdivision thereof, whether state or local,
and any agency, authority, instrumentality, regulatory body, court, any other
entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government (including any
supra-national bodies such as the European Union or the European Central Bank),
or solely for purposes of SECTION 3, any central bank.

      "INTELLECTUAL PROPERTY" has the meaning set forth in SECTION 4 hereof.

      "LAW" means, collectively, all international, foreign, Federal, state and
local statutes, treaties, rules, guidelines, regulations, ordinances, codes and
administrative or judicial precedents or authorities, including the
interpretation or administration thereof by any Government Authority charged
with the enforcement, interpretation or administration thereof, and all
applicable administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental Authority,
in each case whether or not having the force of law.

      "OBLIGATIONS" means, collectively, (a) the "Obligations" as defined in the
Credit Agreement, and (b) all indebtedness, liabilities, and obligations of
Pledgor arising under this Security Agreement or any Guaranty assuring payment
of the Obligations; it being the intention and contemplation of Pledgor and
Collateral Agent that Pledgor may guarantee (or otherwise become directly or
contingently obligated with respect to) the obligations of others to Collateral
Agent, that from time to time overdrafts of Pledgor's accounts with Collateral
Agent may occur, and that Collateral Agent may from time to time acquire from
others obligations of Pledgor to such others, and that payment and repayment of
all of the foregoing are intended to and shall be part of the Obligations
secured hereby. The Obligations shall include, without limitation, future, as
well as existing, advances, indebtedness, liabilities, and obligations owed by
Pledgor to Collateral Agent arising under the Credit Documents or otherwise.

      "PARTNERSHIPS" shall mean (a) those partnerships and limited liability
companies, if any, listed on EXHIBIT B-1 attached hereto and incorporated herein
by reference, as such partnerships or limited liability companies exist or may
hereinafter be restated, amended, or restructured, (b) any partnership, joint
venture, or limited liability company in which Pledgor shall, at any time,
become a limited or general partner, venturer, or member, or (c) any
partnership, joint venture, or corporation formed as a result of the
restructure, reorganization, or amendment of the Partnerships.

      "PARTNERSHIP AGREEMENTS" shall mean (a) those agreements, if any, listed
on EXHIBIT B-1 attached hereto and incorporated herein by reference (together
with any modifications, amendments, or restatements thereof), and (b)
partnership agreements, joint venture agreements, or organizational agreements
for any of the partnerships, joint ventures, or limited liability companies
described in CLAUSE

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(b) of the definition of "Partnerships" above (together with any modifications,
amendments or restatements thereof), and "PARTNERSHIP AGREEMENT" means any one
of the Partnership Agreements.

      "PARTNERSHIP INTERESTS" shall mean all of Pledgor's right, title, and
interest now or hereafter accruing under the Partnership Agreements with respect
to all distributions, allocations, proceeds, fees, preferences, payments, or
other benefits, which Pledgor now is or may hereafter become entitled to receive
with respect to such interests in the Partnerships and with respect to the
repayment of all loans now or hereafter made by Pledgor to the Partnerships.

      "PATENTS" has the meaning set forth in SECTION 4 hereof.

      "PLEDGED SECURITIES" means, collectively, the Pledged Shares and any other
Collateral constituting securities.

      "PLEDGED SHARES" has the meaning set forth in SECTION 4 hereof.

      "SECURITY INTEREST" means the security interest granted and the pledge
made under SECTION 3 hereof.

      "TAXES" means, for any Person, taxes, assessments, duties, levies,
imposts, deductions, charges, or withholdings, or other governmental charges or
levies, imposed upon such Person, its income, or any of its properties,
franchises, or assets.

      "TRADEMARKS" has the meaning set forth in SECTION 4 hereof.

      "UCC" means the Uniform Commercial Code, including each such provision as
it may subsequently be renumbered, as enacted in the State of Texas or other
applicable jurisdiction, as amended at the time in question.

      3. SECURITY INTEREST. In order to secure the full and complete payment and
performance of the Obligations when due, Pledgor hereby grants to Collateral
Agent a Security Interest in all of Pledgor's rights, titles, and interests in
and to the Collateral and pledges the Collateral to Collateral Agent, all upon
and subject to the terms and conditions of this Security Agreement. Such
Security Interest is granted and pledge is made as security only and shall not
subject Collateral Agent to, or transfer or in any way affect or modify, any
obligation of Pledgor with respect to any of the Collateral or any transaction
involving or giving rise thereto. If the grant or pledge of any specific item of
the Collateral is expressly prohibited by any contract, then the Security
Interest created hereby nonetheless remains effective to the extent allowed by
the UCC or other applicable Law, but is otherwise limited by that prohibition.

      4. COLLATERAL. As used herein, the term "COLLATERAL" means the following
items and types of property, wherever located, now owned or in the future
existing or acquired by Pledgor, and all proceeds and products thereof, and any
substitutes or replacements therefor:

            (a) All personal property and fixture property of every kind and
      nature including, without limitation, all accounts, chattel paper (whether
      tangible or electronic), goods (including inventory, equipment, and any
      accessions thereto), software, instruments, investment property,
      documents, deposit accounts, money, commercial tort claims, letters of
      credit or letter-of-credit rights, supporting obligations, Tax refunds,
      and general intangibles (including payment intangibles);

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            (b) All rights, titles, and interests of Pledgor in and to all
      outstanding stock, equity, or other investment securities owned directly
      by Pledgor, including without limitation, all such stock, equity, or other
      investment securities set forth on EXHIBIT B-1 (the "PLEDGED SHARES");

            (c) All rights, titles, and interests of Pledgor in and to all
      promissory notes and other instruments payable to Pledgor, including,
      without limitation, all inter-company notes from Subsidiaries and those
      set forth on EXHIBIT B-1 ("COLLATERAL NOTES") and all rights, titles,
      interests, and Liens Pledgor may have, be, or become entitled to under all
      present and future loan agreements, security agreements, pledge
      agreements, deeds of trust, mortgages, guarantees, or other documents
      assuring or securing payment of or otherwise evidencing the Collateral
      Notes, including, without limitation, those set forth on EXHIBIT B-1
      ("COLLATERAL NOTE SECURITY");

            (d) The Partnership Interests and all rights of Pledgor with respect
      thereto, including, without limitation, all Partnership Interests, if any,
      set forth on EXHIBIT B-1 and all of Pledgor's distribution rights, income
      rights, liquidation interest, accounts, contract rights, general
      intangibles, notes, instruments, drafts, and documents relating to the
      Partnership Interests;

            (e) (i) All copyrights (whether statutory or common law, registered
      or unregistered), works protectable by copyright, copyright registrations,
      copyright licenses, and copyright applications of Pledgor, including,
      without limitation, all of Pledgor's right, title, and interest in and to
      all copyrights registered in the United States Copyright Office or
      anywhere else in the world and also including, without limitation, the
      copyrights set forth on EXHIBIT B-2; (ii) all renewals, extensions, and
      modifications thereof; (iii) all income, licenses, royalties, damages,
      profits, and payments relating to or payable under any of the foregoing;
      (iv) the right to sue for past, present, or future infringements of any of
      the foregoing; and (v) all other rights and benefits relating to any of
      the foregoing throughout the world; in each case, whether now owned or
      hereafter acquired by Pledgor ("COPYRIGHTS");

            (f) (i) All patents, patent applications, patent licenses, and
      patentable inventions of Pledgor, including, without limitation,
      registrations, recordings, and applications thereof in the United States
      Patent and Trademark Office or in any similar office or agency of the
      United States, any state thereof or any other country or any political
      subdivision thereof, including, without limitation, those set forth on
      EXHIBIT B-2, and all of the inventions and improvements described and
      claimed therein; (ii) all continuations, divisions, renewals, extensions,
      modifications, substitutions, reexaminations, continuations-in-part, or
      reissues of any of the foregoing; (iii) all income, royalties, profits,
      damages, awards, and payments relating to or payable under any of the
      foregoing; (iv) the right to sue for past, present, and future
      infringements of any of the foregoing; and (v) all other rights and
      benefits relating to any of the foregoing throughout the world; in each
      case, whether now owned or hereafter acquired by Pledgor ("PATENTS");

            (g) (i) All trademarks, trade dress, trade names, corporate names,
      company names, business names, fictitious business names, trade styles,
      service marks, certification marks, collective marks, logos, other
      business identifiers, all registrations, recordings, and applications
      thereof, including, without limitation, registrations, recordings, and
      applications in the United States Patent and Trademark Office or in any
      similar office or agency of the United States, any state thereof or any
      other country or any political subdivision thereof, including, without
      limitation, those set forth on EXHIBIT B-2; (ii) all licenses to any of
      the foregoing; (iii) all reissues, extensions, and renewals of any of the
      foregoing; (iv) all income, royalties, damages, and payments now or
      hereafter relating to or payable under any of the foregoing, including,
      without limitation, damages or payments for past or future infringements
      of any of the foregoing; (v) the right to sue for past, present, and
      future infringements of any of the foregoing; (vi) all rights

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      corresponding to any of the foregoing throughout the world; and (vii) all
      goodwill associated with and symbolized by any of the foregoing, in each
      case, whether now owned or hereafter acquired by Pledgor ("TRADEMARKS");

            (h) (i) All trade secrets, maskwork rights, database rights and
      other intellectual property rights however described, all registrations,
      recordings, and applications thereof, including, without limitation,
      registrations, recordings, and applications in the United States Patent
      and Trademark Office or in any similar office or agency of the United
      States, any state thereof or any other country or any political
      subdivision thereof; (ii) all licenses to any of the foregoing; (iii) all
      reissues, extensions, and renewals of any of the foregoing; (iv) all
      income, royalties, damages, and payments now or hereafter relating to or
      payable under any of the foregoing, including, without limitation, damages
      or payments for past or future infringements of any of the foregoing; and
      (v) the right to sue for past, present, and future infringements of any of
      the foregoing ("ADDITIONAL PROPRIETARY RIGHTS", and collectively with the
      Copyrights, Patents and the Trademarks, the "INTELLECTUAL PROPERTY");

            (i) (a) All of Pledgor's rights, titles, and interests in, to, and
      under the Material Contracts including, without limitation, all rights of
      Pledgor to receive moneys due and to become due under or pursuant to the
      Material Contracts, (b) all rights of Pledgor to receive proceeds of any
      insurance, indemnity, warranty, or guaranty with respect to the Material
      Contracts, (c) all claims of Pledgor for damages arising out of or for
      breach of or default under the Material Contracts, and (d) all rights of
      Pledgor to compel performance and otherwise exercise all rights and
      remedies under the Material Contracts;

            (j) All present and future automobiles, trucks, truck tractors,
      trailers, semi-trailers, or other motor vehicles or rolling stock, now
      owned or hereafter acquired by such Pledgor (collectively, the
      "VEHICLES");

            (k) Any and all material deposit accounts, bank accounts, investment
      accounts, or securities accounts, now owned or hereafter acquired or
      opened by Pledgor, including, without limitation, any such accounts set
      forth on EXHIBIT B-1, and any account which is a replacement or substitute
      for any of such accounts, together with all monies, instruments,
      certificates, checks, drafts, wire transfer receipts, and other property
      deposited therein and all balances therein (the "DEPOSIT ACCOUNTS");

            (l) (i) Account represented by account number 1885036799 maintained
      by Goldman Sachs Trust, acting directly or through its transfer agent
      Goldman Sachs & Co. (together with successors and assigns, "ISSUER") in
      the name of Collateral Agent, for the benefit of Pledgor, as a collateral
      account of Collateral Agent for Pledgor, and all successor and replacement
      accounts, regardless of the numbers of such accounts or the offices at
      which such accounts are maintained or by the affiliate of Issuer
      maintaining such account, and any account held at any clearing broker for
      any such account (collectively, the "ACCOUNTS") and all rights of Pledgor
      against the Issuer or any clearing broker in connection with the Accounts,
      and (ii) all investment property, security entitlements, financial assets,
      certificated securities, uncertificated securities, money, deposit
      accounts, instruments, general intangibles and all other investments or
      property of any sort now or hereafter held or maintained in, or credited
      to, the Accounts or delivered to Collateral Agent or to Issuer for the
      benefit of or as a collateral account for Collateral Agent, including
      without limitation, any beneficial interests in Issuer, mutual fund
      shares, financial assets, securities or investment property;

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            (m) All present and future distributions, income, increases,
      profits, combinations, reclassifications, improvements, and products of,
      accessions, attachments, and other additions to, tools, parts, and
      equipment used in connection with, and substitutes and replacements for,
      all or part of the Collateral described above;

            (n) All present and future accounts, contract rights, general
      intangibles, chattel paper, documents, instruments, cash and noncash
      proceeds, and other rights arising from or by virtue of, or from the
      voluntary or involuntary sale or other disposition of, or collections with
      respect to, or insurance proceeds payable with respect to, or proceeds
      payable by virtue of warranty or other claims against the manufacturer of,
      or claims against any other Person with respect to, all or any part of the
      Collateral heretofore described in this clause or otherwise; and

            (o) All present and future security for the payment to Pledgor of
      any of the Collateral described above and goods which gave or will give
      rise to any such Collateral or are evidenced, identified, or represented
      therein or thereby.

Notwithstanding anything to the contrary contained in this Security Agreement or
the Credit Agreement, the term "Collateral" shall not include, and Collateral
Agent shall have no rights with respect to, (i) more than 66% of the outstanding
equity of any Foreign Subsidiary directly held by Pledgor, and any shares held
by Collateral Agent in excess of 66% shall be held in trust for the benefit of
Pledgor, (ii) any outstanding equity of any Foreign Subsidiary owned by another
Foreign Subsidiary, (iii) any tangible asset financed as a Capital Lease or by
purchase money Indebtedness (including, in each case, any Indebtedness acquired
in connection with a Permitted Acquisition) to the extent the terms of such
financing prohibit the grant of a security interest hereunder provided, any such
Indebtedness is secured only to such asset acquired, and provided further, such
Indebtedness is permitted under the Credit Agreement, and Collateral Agent
agrees to execute and deliver to Pledgor all documents needed to effect the
foregoing and (iv) Deposit Account Numbers 53650036-0365 and 323-187218 held at
JPMorgan Chase Bank, N.A., except with respect to any proceeds of other
Collateral which may be deposited in such deposit accounts.

The description of the Collateral contained in this SECTION 4 shall not be
deemed to permit any action prohibited by this Security Agreement or by the
terms incorporated in this Security Agreement. Furthermore, notwithstanding any
contrary provision, Pledgor agrees that, if, but for the application of this
paragraph, granting a Security Interest in the Collateral would constitute a
fraudulent conveyance under 11 U.S.C. Section 548 or a fraudulent conveyance or
transfer under any state fraudulent conveyance, fraudulent transfer, or similar
Laws in effect from time to time (each a "FRAUDULENT CONVEYANCE"), then the
Security Interest remains enforceable to the maximum extent possible without
causing such Security Interest to be a fraudulent conveyance, and this Security
Agreement is automatically amended to carry out the intent of this paragraph.

      5. REPRESENTATIONS AND WARRANTIES. Pledgor represents and warrants to
Collateral Agent that:

            (a) Credit Agreement. Certain representations and warranties in the
      Credit Agreement are applicable to it or its assets or operations, and
      each such representation and warranty is true and correct as of the date
      made.

            (b) Binding Obligations/ Perfection. This Security Agreement creates
      a legal, valid, and binding Lien in and to the Collateral in favor of
      Collateral Agent and enforceable against Pledgor. Subject to the following
      sentence, once UCC-1 financing statements have been properly filed in the
      jurisdictions described on EXHIBIT A hereto, the Security Interest in the
      Collateral

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      described in such financing statements will be fully perfected to the
      extent a security interest in such Collateral may be perfected by the
      filing of a UCC-1 financing statement and the Security Interest will
      constitute a first-priority Lien on such Collateral, subject only to
      Permitted Liens. With respect to Collateral consisting of investment
      property (other than Pledged Securities covered by SECTION 5(j)), Deposit
      Accounts, electronic chattel paper, letter-of-credit rights, and
      instruments, upon the delivery of such Collateral to Collateral Agent or
      delivery of an executed Control Agreement with respect to such Collateral,
      the Security Interest in that Collateral will be fully perfected to the
      extent a security interest in such Collateral may be perfected by such
      delivery or such Control Agreement, as applicable, and the Security
      Interest will constitute a first-priority Lien on such Collateral, subject
      only to Permitted Liens. None of the Collateral currently is in the
      possession of any other Person, nor does any other Person have control
      over any of the Collateral. Without limiting the foregoing, Collateral
      Agent has a perfected, first-priority security interest and lien in the
      Copyrights and all other Intellectual Property. Other than the Financing
      Statements and Control Agreements with respect to this Security Agreement,
      there are no other financing statements or control agreements covering any
      Collateral, other than those evidencing Permitted Liens. The creation of
      the Security Interest does not require the consent of any Person that has
      not been obtained.

            (c) Pledgor Information. Pledgor's exact legal name, mailing
      address, jurisdiction of organization, type of entity, and state issued
      organizational identification number are as set forth on EXHIBIT A hereto,
      except as subsequently set forth in any notice delivered to Collateral
      Agent pursuant to SECTION 6(e) of this Security Agreement.

            (d) Location/ Fixtures. (i) Pledgor's place of business and chief
      executive office is where Pledgor is entitled to receive notices
      hereunder; the present and foreseeable location of Pledgor's books and
      records concerning any of the Collateral that is accounts is as set forth
      on EXHIBIT A hereto, and the location of all other Collateral, including,
      without limitation, Pledgor's inventory and equipment is as set forth on
      EXHIBIT A hereto; and, except as noted on EXHIBIT A hereto, all such
      books, records, and Collateral are in Pledgor's possession, and (ii) none
      of the Collateral is or shall become fixtures.

            (e) Governmental Authority. No Authorization, approval, or other
      action by, and no notice to or filing with, any Governmental Authority is
      required either (i) for the pledge by Pledgor of the Collateral pursuant
      to this Security Agreement or for the execution, delivery, or performance
      of this Security Agreement by Pledgor, or (ii) for the exercise by
      Collateral Agent of the voting or other rights provided for in this
      Security Agreement or the remedies in respect of the Collateral pursuant
      to this Security Agreement (except as may be required in connection with
      the disposition of the Pledged Securities by Law affecting the offering
      and sale of securities generally).

            (f) Maintenance of Collateral. All tangible Collateral which is
      useful in and necessary to Pledgor's business is in good repair and
      condition, ordinary wear and tear excepted, and none thereof is a fixture.

            (g) Liens. Pledgor owns all presently existing Collateral, and will
      acquire all hereafter-acquired Collateral, free and clear of all Liens,
      except Permitted Liens.

            (h) Collateral. EXHIBIT B-1 accurately lists all Collateral Notes,
      Collateral Note Security, Pledged Shares, Partnership Interests,
      commercial tort claims, Material Contracts, and Deposit Accounts in which
      Pledgor has any rights, titles, or interest (but such failure of such
      description to be accurate or complete shall not impair the Security
      Interest in such Collateral).

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            (i) Instruments, Chattel Paper, Collateral Notes, and Collateral
      Note Security. All instruments and chattel paper, including, without
      limitation, the Collateral Notes, have been delivered to Collateral Agent,
      together with corresponding endorsements duly executed by Pledgor in favor
      of Collateral Agent, and such endorsements have been duly and validly
      executed and are binding and enforceable against Pledgor in accordance
      with their terms. Each Collateral Note and the documents evidencing the
      Collateral Note Security are in full force and effect; there have been no
      renewals or extensions of, or amendments, modifications, or supplements
      to, any thereof about which the Collateral Agent has not been advised in
      writing; and no "default" has occurred and is continuing under any such
      Collateral Note or documents evidencing the Collateral Note Security,
      except as disclosed on EXHIBIT C hereto. Pledgor has good title to the
      Collateral Notes and Collateral Note Security, and such Collateral Notes
      and Collateral Note Security are free from any claim for credit,
      deduction, or allowance of a Collateral Obligor and free from any defense,
      condition, dispute, setoff, or counterclaim, and there is no extension or
      indulgence with respect thereto. Pledgor's claims under the Collateral
      Note of any Guarantor are subordinated to the obligations of such
      Guarantor under the Guaranty of such Guarantor, as provided in Section
      8(m).

            (j) Pledged Securities; Pledged Shares. All Collateral that is
      Pledged Shares is duly authorized, validly issued, fully paid, and
      non-assessable, and the transfer thereof is not subject to any
      restrictions, other than restrictions imposed by applicable securities and
      corporate Law. Pledgor has good title to the Pledged Securities, free and
      clear of all Liens and encumbrances thereon (except for the Security
      Interest created hereby), and has delivered to Collateral Agent (i) all
      stock certificates, or other instruments or documents representing or
      evidencing the Pledged Securities, together with corresponding assignment
      or transfer powers duly executed in blank by Pledgor, and such powers have
      been duly and validly executed and are binding and enforceable against
      Pledgor in accordance with their terms or (ii) to the extent such Pledged
      Securities are uncertificated, an executed Control Agreement with respect
      to such Pledged Securities. The pledge of the Pledged Securities in
      accordance with the terms hereof creates a valid first priority security
      interest in the Pledged Securities securing payment of the Obligations.

            (k) Accounts. All Collateral that is accounts, contract rights,
      chattel paper, instruments, payment intangibles, or general intangibles is
      free from any claim for credit, deduction, or allowance of a Collateral
      Obligor and free from any defense, condition, dispute, setoff, or
      counterclaim, and there is no extension or indulgence with respect
      thereto, except for such defenses, conditions, disputes, setoffs or
      counterclaims that arise in the ordinary course of Pledgor's software
      business, and do not, in the aggregate, create a Material Adverse Effect.

            (l) Material Contracts. All Material Contracts to which Pledgor is a
      party are set forth on SCHEDULE 4.16 to the Credit Agreement. Each
      Material Contract is in full force and effect; there have been no
      amendments, modifications, or supplements to any Material Contract of
      which Collateral Agent has not been advised in writing; and no default or
      breach which could reasonably be expected to result in a Material Adverse
      Effect has occurred and is continuing under any Material Contract, except
      as disclosed on EXHIBIT C hereto.

            (m) Deposit Accounts. With respect to the Deposit Accounts, (i)
      Pledgor maintains each Deposit Account with the banks listed on EXHIBIT
      B-1 hereto, (ii) Pledgor shall cause each such bank to acknowledge to
      Collateral Agent that Collateral Agent shall have "control" (as defined in
      the UCC) over such Deposit Account, and (iii) Pledgor has the legal right
      to pledge to Collateral Agent the funds deposited and to be deposited in
      each such Deposit Account.

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            (n) Intellectual Property.

                  (i) All of the Intellectual Property is valid and enforceable.
            All issued Patents, Patent applications, registered Trademarks,
            Trademark applications, registered Copyrights, and Copyright
            applications of Pledgor are identified on EXHIBIT B-2 hereto, and
            all of the information contained on EXHIBIT B-2 is true, correct,
            and complete.

                  (ii) Pledgor is the sole and exclusive owner of the entire and
            unencumbered right, title, and interest in and to the Intellectual
            Property free and clear of any Liens, including, without limitation,
            any pledges, assignments, licenses, user agreements, and covenants
            not to sue, other than Permitted Liens or licenses permitted by
            SECTION 8(c).

                  (iii) To Pledgor's knowledge, no third party is infringing, or
            in Pledgor's reasonable business judgment, may be infringing, any of
            Pledgor's rights under the Intellectual Property.

                  (iv) Pledgor has performed and will continue to perform all
            acts and has paid and will continue to pay all required fees and
            Taxes to maintain each and every item of the Intellectual Property
            in full force and effect throughout the world, as applicable unless
            in Pledgor's reasonable business judgment it is in the best interest
            of Pledgor not to maintain certain Intellectual Property that is no
            longer used or useful in Pledgor's business.

                  (v) Each of the Patents and Trademarks identified on EXHIBIT
            B-2 hereto has been properly registered with the United States
            Patent and Trademark Office and in corresponding offices throughout
            the world (where appropriate) and each of the Copyrights identified
            on EXHIBIT B-2 hereto has been properly registered with the United
            States Copyright Office and in corresponding offices throughout the
            world (where appropriate).

                  (vi) To Pledgor's knowledge, no claims with respect to the
            Intellectual Property have been asserted and are pending (i) to the
            effect that the sale, licensing, pledge, or use of any of the
            products or services of Pledgor's business infringes any other
            party's valid patent, copyright, trademark, service mark, trade
            secret, or other intellectual property right, (ii) against the use
            by Pledgor of any Intellectual Property used in the Pledgor's
            business as currently conducted, or (iii) challenging the ownership
            or use by Pledgor of any of the Intellectual Property that Pledgor
            purports to own or use, nor, to Pledgor's knowledge, is there a
            valid basis for such a claim described in this SECTION 5(o)(vi)
            except as disclosed to Collateral Agent by Pledgor pursuant to
            SECTION 4.11 of the Credit Agreement and except such other claims
            that may be asserted after the Closing Date and that do not
            adversely affect Pledgor's right and ability to conduct its business
            or otherwise would reasonably be expected to result in a Material
            Adverse Effect.

                  (vii) Except as identified on EXHIBIT B-2 hereto, Pledgor has
            filed no copyright applications in the United States Copyright
            Office or in any other jurisdiction.

                  (viii) EXHIBIT B-3 hereto contains a list of all licenses to
            third party intellectual property rights, including, without
            limitation, all third party software, necessary for the conduct of
            the Pledgor's business.

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                  (ix) The source code for all software used or useful in
            Pledgor's business contains sufficient in-line and other
            documentation so as to enable a programmer reasonably skilled in the
            programming language in which such application is written to
            maintain and enhance the application without undue effort.

The foregoing representations and warranties will be true and correct in all
respects with respect to: 1) any additional Collateral or additional specific
descriptions of certain Collateral delivered to Collateral Agent in the future
by Pledgor; and 2) for purposes of SECTION 5(n) only, the Intellectual Property
("Subsidiary Intellectual Property") of each of Pledgor's Subsidiaries, and for
purposes of the definition of "Subsidiary Intellectual Property" the term
"Intellectual Property", and all defined terms used within such definition,
shall include intellectual property, rights, and assets of or owned by any such
Subsidiary. The failure of any of these representations or warranties or any
description of Collateral therein to be accurate or complete shall not impair
the Security Interest in any such Collateral.

      6. COVENANTS. So long as Collateral Agent is committed to extend credit to
Pledgor under the Credit Agreement and thereafter until the Obligations (other
than inchoate indemnity obligations) are paid and performed in full, Pledgor
covenants and agrees with Collateral Agent that Pledgor will:

            (a) Credit Agreement. (i) Comply with, perform, and be bound by all
      covenants and agreements in the Credit Agreement that are applicable to
      it, its assets, or its operations, each of which is hereby ratified and
      confirmed (INCLUDING, WITHOUT LIMITATION, THE INDEMNIFICATION AND RELATED
      PROVISIONS IN SECTION 10.3 OF THE CREDIT AGREEMENT); AND (ii) CONSENT TO
      AND APPROVE THE VENUE, SERVICE OF PROCESS, AND WAIVER OF JURY TRIAL
      PROVISIONS OF SECTION 10.16 OF THE CREDIT AGREEMENT.

            (b) Information/Record of Collateral. Maintain, at the place where
      Pledgor is entitled to receive notices under the Credit Documents, a
      current record of where all Collateral is located, permit representatives
      of Collateral Agent at any time (but not more than three (3) times during
      a twelve (12) month period, prior to the occurrence of an Event of
      Default) during normal business hours to inspect and make abstracts from
      such records, and furnish to Collateral Agent, at such intervals as
      Collateral Agent may request, such documents, lists, descriptions,
      certificates, and other information as may be necessary or proper to keep
      Collateral Agent informed with respect to the identity, location, status,
      condition, and value of the Collateral. In addition, from time to time at
      the request of Collateral Agent deliver to Collateral Agent such
      information regarding Pledgor as Collateral Agent may reasonably request.

            (c) Exhibits. Promptly provide notice to Collateral Agent if any
      information therein shall become inaccurate or incomplete. Notwithstanding
      any other provision herein, Pledgor's failure to describe any Collateral
      required to be listed on any annex hereto shall not impair Collateral
      Agent's Security Interest in the Collateral.

            (d) Perform Obligations. Fully perform all of Pledgor's duties under
      and in connection with each transaction to which the Collateral, or any
      part thereof, relates. Furthermore, notwithstanding anything to the
      contrary contained herein, (i) Pledgor shall remain liable under the
      contracts, agreements, documents, and instruments included in the
      Collateral to the extent set forth therein to perform all of its duties
      and obligations thereunder to the same extent as if this Security
      Agreement had not been executed, (ii) the exercise by Collateral Agent of
      any of its rights or remedies hereunder shall not release Pledgor from any
      of its duties or obligations under the contracts, agreements, documents,
      and instruments included in the

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      Collateral, and (iii) Collateral Agent shall not have any indebtedness,
      liability, or obligation under any of the contracts, agreements,
      documents, and instruments included in the Collateral by reason of this
      Security Agreement, and Collateral Agent shall not be obligated to perform
      any of the obligations or duties of Pledgor thereunder or to take any
      action to collect or enforce any claim for payment assigned hereunder.

            (e) Notices. (i) Except as may be otherwise expressly permitted
      under the terms of the Credit Agreement, promptly notify Collateral Agent
      of (A) any material change (which shall include, without limitation, any
      change that adversely affects the validity, perfection or priority of
      Collateral Agent's security interests) in any fact or circumstances
      represented or warranted by Pledgor with respect to any of the Collateral
      or Obligations, (B) any claim, action, or proceeding affecting title to
      all or any of the Collateral or the Security Interest and, at the request
      of Collateral Agent, appear in and defend, at Pledgor's expense, any such
      action or proceeding, (C) any material change in the nature of the
      Collateral, (D) any material damage to or loss of Collateral, and (E) the
      occurrence of any other event or condition (including, without limitation,
      matters as to Lien priority) that could have a material adverse effect on
      the Collateral (taken as a whole) or the Security Interest created
      hereunder; and (ii) give Collateral Agent thirty (30) days written notice
      before any proposed (A) relocation of its principal place of business or
      chief executive office, (B) change of its name, identity, or corporate
      structure, (C) relocation of the place where its books and records
      concerning its accounts are kept, (D) relocation of any Collateral (other
      than delivery of inventory in the ordinary course of business to third
      party contractors for processing and sales of inventory in the ordinary
      course of business or transactions otherwise permitted by the Credit
      Agreement) to a location not described on the attached EXHIBIT A, as
      supplemented by any notices of relocation provided in accordance with this
      Section, and (E) change of its jurisdiction of organization or
      organizational identification number, as applicable. Prior to making any
      of the changes contemplated in clause (ii) preceding, Pledgor shall
      execute and deliver all such additional documents and perform all
      additional acts as Collateral Agent, in its sole discretion, may request
      in order to continue or maintain the existence and priority of the
      Security Interests in all of the Collateral.

            (f) Collateral in Trust. Hold in trust (and not commingle with other
      assets of Pledgor) for Collateral Agent all Collateral that is chattel
      paper, instruments, Collateral Notes, Pledged Securities, or documents at
      any time received by Pledgor, and promptly deliver same to Collateral
      Agent, unless Collateral Agent at its option (which may be evidenced only
      by a writing signed by Collateral Agent stating that Collateral Agent
      elects to permit Pledgor to so retain) permits Pledgor to retain the same,
      but any chattel paper, instruments, Collateral Notes, Pledged Securities,
      or documents so retained shall be marked to state that they are pledged to
      Collateral Agent; each such instrument shall be endorsed to the order of
      Collateral Agent (but the failure of same to be so marked or endorsed
      shall not impair the Security Interest thereon).

            (g) Control. Execute all documents and take any action reasonably
      required by Collateral Agent in order for Collateral Agent to obtain
      "control" (as defined in the UCC) with respect to Collateral consisting of
      Deposit Accounts, investment property, uncertificated Pledged Securities,
      and letter-of-credit rights. If Pledgor at any time holds or acquires an
      interest in any electronic chattel paper or any "transferable record," as
      that term is defined in the federal Electronic Signatures in Global and
      National Commerce Act, or in the Uniform Electronic Transactions Act as in
      effect in any relevant jurisdiction, promptly notify Collateral Agent
      thereof and, at the request of Collateral Agent, take such action as
      Collateral Agent may reasonably request to vest in Collateral Agent
      control under the UCC of such electronic chattel paper or control under
      the federal Electronic Signatures in Global and National Commerce Act or,
      as the

PLEDGE AND SECURITY AGREEMENT                                                 D-

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<PAGE>

      case may be, the Uniform Electronic Transactions Act, as so in effect in
      such jurisdiction, of such transferable record.

            (h) Further Assurances. At Pledgor's expense and Collateral Agent's
      request, before or after a Default or Event of Default, (i) file or cause
      to be filed such applications and take such other actions as Collateral
      Agent may request to obtain the consent or approval of any Governmental
      Authority to Collateral Agent's rights hereunder, including, without
      limitation, the right to sell all the Collateral upon a Default or Event
      of Default without additional consent or approval from such Governmental
      Authority (and, because Pledgor agrees that Collateral Agent's remedies at
      law for failure of Pledgor to comply with this provision would be
      inadequate and that such failure would not be adequately compensable in
      damages, Pledgor agrees that its covenants in this provision may be
      specifically enforced); (ii) from time to time promptly execute and
      deliver to Collateral Agent all such other certificates, supplemental
      documents, and financing statements, and do all other acts or things as
      Collateral Agent may reasonably request in order to more fully create,
      evidence, perfect, continue, and preserve the priority of the Security
      Interest and to carry out the provisions of this Security Agreement;
      without limiting the foregoing, such additional documents and actions may
      include those required more fully to evidence, record, and perfect
      Collateral Agent's pledge and security interests in the stock of Foreign
      Subsidiaries; and (iii) pay all filing fees in connection with any
      financing, continuation, or termination statement or other instrument with
      respect to the Security Interests.

            (i) Encumbrances. Not create, permit, or suffer to exist, and shall
      defend the Collateral against, any Lien or other encumbrance on the
      Collateral, and shall defend Pledgor's rights in the Collateral and
      Collateral Agent's Security Interest in, the Collateral against the claims
      and demands of all Persons except those holding or claiming Permitted
      Liens. Unless otherwise specifically permitted under this Security
      Agreement or the Credit Agreement, Pledgor shall do nothing to impair the
      rights of Collateral Agent in the Collateral.

            (j) Estoppel and Other Agreements and Matters. Upon the reasonable
      request of Collateral Agent, either (i) use commercially reasonable
      efforts to cause the landlord or lessor for each location where any of its
      inventory or equipment is maintained to execute and deliver to Collateral
      Agent an estoppel and subordination agreement in such form as may be
      reasonably acceptable to Collateral Agent and its counsel, or (ii) deliver
      to Collateral Agent a legal opinion or other evidence (in each case that
      is reasonably satisfactory to Collateral Agent and it counsel) that
      neither the applicable lease nor the Law of the jurisdiction in which that
      location is situated provide for contractual, common law, or statutory
      landlord's Liens that is senior to or pari passu with the Security
      Interest.

            (k) Fixtures. Not permit any Collateral to be or become a fixture.

            (l) Certificates of Title. Upon the request of Collateral Agent, if
      certificates of title are issued or outstanding with respect to any of the
      Vehicles or other Collateral, cause the Security Interest to be properly
      noted thereon.

            (m) Warehouse Receipts Non-Negotiable. If any warehouse receipt or
      receipt in the nature of a warehouse receipt is issued in respect of any
      of the Collateral, agree that such warehouse receipt or receipt in the
      nature thereof shall not be "negotiable" (as such term is used in Section
      7-104 of the UCC) unless such warehouse receipt or receipt in the nature
      thereof is delivered to Collateral Agent.

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<PAGE>

            (n) Impairment of Collateral. Not use any of the Collateral, or
      permit the same to be used, for any unlawful purpose, in any manner that
      is reasonably likely to adversely impair the value or usefulness of the
      Collateral, or in any manner inconsistent with the provisions or
      requirements of any policy of insurance thereon.

            (o) Collateral Notes and Collateral Note Security. Without the prior
      written consent of Collateral Agent not (i) modify or substitute, or
      permit the modification or substitution of, any Collateral Note or any
      document evidencing the Collateral Note Security or (ii) release any
      Collateral Note Security unless specifically required by the terms
      thereof.

            (p) Securities. Except as permitted by the Credit Agreement, not
      sell, exchange, or otherwise dispose of, or grant any option, warrant, or
      other right with respect to, any of the Pledged Securities; to the extent
      any issuer of any Pledged Securities is controlled by Pledgor and/or its
      Affiliates, not permit such issuer to issue any additional shares of stock
      or other securities in addition to or in substitution for the Pledged
      Securities, except issuances to Pledgor on terms acceptable to Collateral
      Agent; pledge hereunder, immediately upon Pledgor's acquisition (directly
      or indirectly) thereof, any and all additional shares of stock or other
      securities of each Subsidiary of Pledgor; and take any action necessary,
      required, or requested by Collateral Agent to allow Collateral Agent to
      fully enforce its Security Interest in the Pledged Securities, including,
      without limitation, the filing of any claims with any court, liquidator,
      trustee, custodian, receiver, or other like person or party.

            (q) Partnerships and Partnership Interests. (i) Promptly perform,
      observe, and otherwise comply with each and every covenant, agreement,
      requirement, and condition set forth in the contracts and agreements
      creating or relating to any Partnership; (ii) do or cause to be done all
      things necessary or appropriate to keep the Partnerships in full force and
      effect and the rights of Pledgor and Collateral Agent thereunder
      unimpaired; (iii) except as expressly permitted by the Credit Agreement,
      not consent to any Partnership selling, leasing, or disposing of
      substantially all of its assets in a single transaction or a series of
      transactions; (iv) notify Collateral Agent of the occurrence of any
      default or breach or default or breach under any contract or agreement
      creating or relating to the Partnerships; (v) not consent to the
      amendment, modification, surrender, impairment, forfeiture, cancellation,
      dissolution, or termination of any Partnership, or material contract
      relating thereto; (vi) except as permitted by the Credit Agreement, not
      transfer, sell, or assign any of the Partnership Interests or any part
      thereof; (vii) to the extent any Partnership is controlled by Pledgor
      and/or its Affiliates, cause such Partnership to refrain from granting any
      Partnership Interests in addition to or in substitution for the
      Partnership Interests granted by the Partnerships, except to Pledgor;
      (viii) pledge hereunder, immediately upon Pledgor's acquisition (directly
      or indirectly) thereof, any and all additional Partnership Interests of
      any Partnership granted to Pledgor; and any and all additional shares of
      stock or other securities of each; (ix) deliver to Collateral Agent a
      fully-executed Acknowledgment of Pledge, substantially in the form of
      EXHIBIT D, for each Partnership Interest; and (x) take any action
      necessary, required, or requested by Collateral Agent to allow Collateral
      Agent to fully enforce its Security Interest in the Partnership Interests,
      including, without limitation, the filing of any claims with any court,
      liquidator, trustee, custodian, receiver, or other like person or party.

            (r) Material Contracts. (i) Promptly perform, observe, and otherwise
      comply with each and every covenant, agreement, requirement, and condition
      set forth in the Material Contracts; (ii) do or cause to be done all
      things necessary or appropriate to keep the Material Contracts in full
      force and effect and the rights of Pledgor and Collateral Agent thereunder
      unimpaired; (iii) notify Collateral Agent of the occurrence of any default
      or breach or default or breach under any Material Contract; and (iv)
      without the prior written consent of Collateral

PLEDGE AND SECURITY AGREEMENT                                                 D-

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<PAGE>

      Agent, not consent to the amendment, modification, surrender, impairment,
      forfeiture, cancellation, dissolution, or termination of any Material
      Contract, which could adversely affect the rights or interests of Pledgor
      or Collateral Agent.

            (s) Depository Bank. With respect to any Deposit Accounts, (i)
      maintain the Deposit Accounts at the banks (a "DEPOSITORY BANK") described
      on EXHIBIT B-1 or such additional depository banks as have complied with
      ITEM (iv) hereof; (ii) obtain a control agreement with each depository
      bank granting Collateral Agent "control" (as defined in the UCC) over such
      Deposit Account; (iii) deliver to Collateral Agent all certificates or
      instruments, if any, now or hereafter representing or evidencing the
      Deposit Accounts, accompanied by duly executed instruments of transfer or
      assignment in blank, all in form and substance reasonably satisfactory to
      Collateral Agent; and (iv) notify Collateral Agent prior to establishing
      any additional Deposit Accounts and, at the request of Collateral Agent,
      obtain from such depository bank an executed letter substantially in the
      form of Exhibit J to the Credit Agreement and deliver the same to
      Collateral Agent.

            (t) Marking of Chattel Paper. At the request of Collateral Agent,
      not create any chattel paper without placing a legend on the chattel paper
      acceptable to Collateral Agent indicating that Collateral Agent has a
      security interest in the chattel paper.

            (u) Modification of Accounts. In accordance with prudent business
      practices, endeavor to collect or cause to be collected from each account
      Pledgor under its accounts, as and when due, any and all amounts owing
      under such accounts. Except in the ordinary course of business consistent
      with prudent business practices and industry standards, without the prior
      written consent of Collateral Agent, Pledgor shall not (i) grant any
      extension of time for any payment with respect to any of the accounts,
      (ii) compromise, compound, or settle any of the accounts for less than the
      full amount thereof, (iii) release, in whole or in part, any Person liable
      for payment of any of the accounts, (iv) allow any credit or discount for
      payment with respect to any account other than trade discounts granted in
      the ordinary course of business, or (v) release any Lien or guaranty
      securing any account.

            (v) Intellectual Property.

                  (i) Except to the extent not required in Pledgor's reasonable
            business judgment, prosecute diligently all applications in respect
            of Intellectual Property, now or hereafter pending;

                  (ii) Except to the extent not required in Pledgor's reasonable
            business judgment, make federal applications on all of its
            unpatented but patentable inventions and all of its registrable but
            unregistered Copyrights and Trademarks; provided that Pledgor shall
            provide Collateral Agent with at least fifteen (15) Business Days
            written notice prior to filing any such application, including with
            such notice all information necessary for Collateral Agent to
            prepare appropriate documents to file along with such application in
            order to record the Security Interest, and Pledgor shall file, along
            with such application, all documents required by Collateral Agent to
            record the Security Interest;

                  (iii) Preserve and maintain all of its material rights in
            Intellectual Property and protect the material Intellectual Property
            (which for this purpose shall include Intellectual Property actually
            used in Pledgor's business) from infringement, unfair competition,
            cancellation, or dilution by all appropriate action necessary in
            Pledgor's reasonable business judgment, including, without
            limitation, (A) the commencement and

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<PAGE>

            prosecution of legal proceedings to recover damages for infringement
            and to defend and preserve its rights in the Intellectual Property
            and (B) requiring each employee, agent, and independent contractor
            who develops, programs, or creates, or assists the development,
            programming, or creation of, programs, code, software, Copyrights,
            inventions, Patents, or other Intellectual Property, to execute and
            deliver on a timely basis an agreement that assigns to Pledgor, and
            acknowledges Pledgor's ownership of, all such programs, code,
            software, Copyrights, inventions, Patents, or other Intellectual
            Property;

                  (iv) Not abandon any of the Intellectual Property necessary to
            the conduct of its business in the exercise of Pledgor's reasonable
            business judgment;

                  (v) Except as permitted under the Credit Agreement, (A)
            without the prior written consent of Collateral Agent, not sell or
            assign any of its interest in any of the Intellectual Property; (B)
            not grant any license or sublicense with respect to any of the
            Intellectual Property other than (x) as permitted by SECTION 8(c)
            hereof, and (y) non-exclusive licenses to Pledgor's software,
            granted in the ordinary course of business and consistent with
            Pledgor's current business practices; and (C) maintain the quality
            of any and all products and services with respect to which the
            Intellectual Property is used;

                  (vi) Give Collateral Agent prompt written notice if Pledgor
            shall obtain rights to or become entitled to the benefit of any
            Intellectual Property not identified on EXHIBIT B-2 hereto;

                  (vii) If a Default or Event of Default exists, use its
            reasonable efforts to obtain any consents, waivers, or agreements
            necessary to enable Collateral Agent to exercise its rights and
            remedies with respect to the Intellectual Property;

                  (viii) Use its commercially reasonable efforts to negotiate
            licenses, both with its third party providers and Pledgor's
            customers, that enable the assignment of such licenses in the Event
            of Default to Collateral Agent and any subsequent assignee;

                  (ix) Ensure that the source code for the Pledgor's software
            contains sufficient in-line and other documentation so as to enable
            a programmer reasonably skilled in the programming language in which
            such application is written to maintain and enhance the application
            without undue effort;

                  (x) So long as Collateral Agent is committed to extend credit
            to Pledgor under the Credit Agreement and thereafter until the
            Obligations are paid and performed in full, Collateral Agent shall
            deposit, with an escrow agent reasonably acceptable to Collateral
            Agent, the source code to the Pledgor's software, including, without
            limitation, all related documentation and other materials necessary
            for Collateral Agent to exercise its rights under this Agreement.
            The original deposit shall occur within ten (10) days of the Closing
            Date and upon each major release of such application, but no less
            frequently than once per calendar quarter. Subject to SECTION 7(g),
            the source code shall be released to Collateral Agent upon
            Collateral Agent giving written notice to the escrow agent that an
            Event of Default has occurred;

                  (xi) At all times maintain in full force and effect, comply
            with, and cause each of its Subsidiaries to comply with, a valid and
            effective assignment and transfer agreement between Pledgor and each
            such subsidiary, pursuant to which such subsidiary has validly
            transferred and assigned to Pledgor, and shall continue to transfer
            and assign

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            to Pledgor, all Copyrights, software, and other Intellectual
            Property that previously has been developed, owned or acquired, or
            hereafter shall be developed, owned or acquired, by such subsidiary
            (including Intellectual Property developed for such subsidiary by
            its employees, independent contractors, sub-contractors, and
            agents); and, without limiting the foregoing, at all times maintain
            in full force and effect an agreement containing substantially
            similar terms with respect to assignment and ownership of
            Intellectual Property as those contained in that certain
            Intercompany License and Acknowledgement Agreement dated as of
            January 1, 2002, between Taleo (Canada) Inc., a Quebec Corporation
            and Pledgor; and

                  (xii) Cause each of its Subsidiaries to comply with each of
            the foregoing covenants in clauses (i), (ii), (iii), (iv), and (v),
            as if all references to "Intellectual Property" referred instead to
            "Subsidiary Intellectual Property" and all references to "Pledgor"
            instead referred to such Subsidiary.

      7. DEFAULT; REMEDIES. If an Event of Default exists, Collateral Agent may,
at its election (but subject to the terms and conditions of the Credit
Agreement), exercise any and all rights available to a secured party under the
UCC, in addition to any and all other rights afforded by the Credit Documents,
at law, in equity, or otherwise, including, without limitation, (a) requiring
Pledgor to assemble all or part of the Collateral and make it available to
Collateral Agent at a place to be designated by Collateral Agent which is
reasonably convenient to Pledgor and Collateral Agent, (b) surrendering any
policies of insurance on all or part of the Collateral and receiving and
applying the unearned premiums as a credit on the Obligations, (c) applying by
appropriate judicial proceedings for appointment of a receiver for all or part
of the Collateral (and Pledgor hereby consents to any such appointment), and (d)
applying to the Obligations any cash held by Collateral Agent under this
Security Agreement, including, without limitation, any cash in the Cash
Collateral Account (defined in SECTION 8(h)).

            During the existence of an Event of Default:

            (a) Notice. Reasonable notification of the time and place of any
      public sale of the Collateral, or reasonable notification of the time
      after which any private sale or other intended disposition of the
      Collateral is to be made, shall be sent to Pledgor and to any other Person
      entitled to notice under the UCC; provided that, if any of the Collateral
      threatens to decline speedily in value or is of the type customarily sold
      on a recognized market, Collateral Agent may sell or otherwise dispose of
      the Collateral without notification, advertisement, or other notice of any
      kind. It is agreed that notice sent or given not less than ten (10)
      Business Days prior to the taking of the action to which the notice
      relates is reasonable notification and notice for the purposes of this
      subparagraph.

            (b) Condition of Collateral; Warranties. Collateral Agent has no
      obligation to clean-up or otherwise prepare the Collateral for sale.
      Collateral Agent may sell the Collateral without giving any warranties as
      to the Collateral. Collateral Agent may specifically disclaim any
      warranties of title or the like. This procedure will not be considered
      adversely to affect the commercial reasonableness of any sale of the
      Collateral.

            (c) Compliance with Other Laws. Collateral Agent may comply with any
      applicable state or federal Law in connection with a disposition of the
      Collateral and compliance will not be considered to adversely affect the
      commercial reasonableness of any sale of the Collateral.

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<PAGE>

            (d) Sales of Pledged Securities.

                  (i) Pledgor agrees that, because of the Securities Act of
            1933, as amended, or the rules and regulations promulgated
            thereunder (collectively, the "SECURITIES ACT"), or any other Law,
            and for other reasons, there may be legal or practical restrictions
            or limitations affecting Collateral Agent in any attempts to dispose
            of certain portions of the Pledged Securities and for the
            enforcement of its rights. For these reasons, Collateral Agent is
            hereby authorized by Pledgor, but not obligated, upon the occurrence
            and during the continuation of an Event of Default, to sell all or
            any part of the Pledged Securities at private sale, subject to
            investment letter or in any other manner which will not require the
            Pledged Securities, or any part thereof, to be registered in
            accordance with the Securities Act or any other Law, at a reasonable
            price at such private sale or other distribution in the manner
            mentioned above. Pledgor understands that Collateral Agent may in
            its discretion approach a limited number of potential purchasers and
            that a sale under such circumstances may yield a lower price for the
            Pledged Securities, or any part thereof, than would otherwise be
            obtainable if such Collateral were either afforded to a larger
            number or potential purchasers, registered under the Securities Act,
            or sold in the open market. Pledgor agrees that any such private
            sale made under this SECTION 7(d) shall be deemed to have been made
            in a commercially reasonable manner, and that Collateral Agent has
            no obligation to delay the sale of any Pledged Securities to permit
            the issuer thereof to register it for public sale under any
            applicable federal or state securities Law.

                  (ii) Collateral Agent is authorized, in connection with any
            such sale, (A) to restrict the prospective bidders on or purchasers
            of any of the Pledged Securities to a limited number of
            sophisticated investors who will represent and agree that they are
            purchasing for their own account for investment and not with a view
            to the distribution or sale of any of such Pledged Securities, and
            (B) to impose such other limitations or conditions in connection
            with any such sale as Collateral Agent reasonably deems necessary in
            order to comply with applicable Law. Pledgor covenants and agrees
            that it will execute and deliver such documents and take such other
            action as Collateral Agent reasonably deems necessary in order that
            any such sale may be made in compliance with applicable Law. Upon
            any such sale Collateral Agent shall have the right to deliver,
            assign, and transfer to the purchaser thereof the Pledged Securities
            so sold. Each purchaser at any such sale shall hold the Pledged
            Securities so sold absolutely free from any claim or right of
            Pledgor of whatsoever kind, including any equity or right of
            redemption of Pledgor. Pledgor, to the extent permitted by
            applicable Law, hereby specifically waives all rights of redemption,
            stay, or appraisal which it has or may have under any Law now
            existing or hereafter enacted.

                  (iii) Pledgor agrees that ten (10) days' written notice from
            Collateral Agent to Pledgor of Collateral Agent's intention to make
            any such public or private sale or sale at a broker's board or on a
            securities exchange shall constitute reasonable notice under the
            UCC. Such notice shall (A) in case of a public sale, state the time
            and place fixed for such sale, (B) in case of sale at a broker's
            board or on a securities exchange, state the board or exchange at
            which such a sale is to be made and the day on which the Pledged
            Securities, or the portion thereof so being sold, will first be
            offered to sale at such board or exchange, and (C) in the case of a
            private sale, state the day after which such sale may be
            consummated. Any such public sale shall be held at such time or
            times within ordinary business hours and at such place or places as
            Collateral Agent may fix in the notice of such sale. At any such
            sale, the Pledged Securities may be sold in one lot as an entirety
            or in separate parcels, as Collateral Agent may reasonably
            determine. Collateral

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            Agent shall not be obligated to make any such sale pursuant to any
            such notice. Collateral Agent may, without notice or publication,
            adjourn any public or private sale or cause the same to be adjourned
            from time to time by announcement at the time and place fixed for
            the sale, and such sale may be made at any time or place to which
            the same may be so adjourned.

                  (iv) In case of any sale of all or any part of the Pledged
            Securities on credit or for future delivery, the Pledged Securities
            so sold may be retained by Collateral Agent until the selling price
            is paid by the purchaser thereof, but Collateral Agent shall not
            incur any liability in case of the failure of such purchaser to take
            up and pay for the Pledged Securities so sold and in case of any
            such failure, such Pledged Securities may again be sold upon like
            notice. Collateral Agent, instead of exercising the power of sale
            herein conferred upon it, may proceed by a suit or suits at law or
            in equity to foreclose the Security Interests and sell the Pledged
            Securities, or any portion thereof, under a judgment or decree of a
            court or courts of competent jurisdiction.

                  (v) Without limiting the foregoing, or imposing upon
            Collateral Agent any obligations or duties not required by
            applicable Law, Pledgor acknowledges and agrees that, in foreclosing
            upon any of the Pledged Securities, or exercising any other rights
            or remedies provided Collateral Agent hereunder or under applicable
            Law, Collateral Agent may, but shall not be required to, (A) qualify
            or restrict prospective purchasers of the Pledged Securities by
            requiring evidence of sophistication or creditworthiness, and
            requiring the execution and delivery of confidentiality agreements
            or other documents and agreements as a condition to such prospective
            purchasers' receipt of information regarding the Pledged Securities
            or participation in any public or private foreclosure sale process,
            (B) provide to prospective purchasers business and financial
            information regarding Pledgor or the Companies available in the
            files of Collateral Agent at the time of commencing the foreclosure
            process, without the requirement that Collateral Agent obtain, or
            seek to obtain, any updated business or financial information or
            verify, or certify to prospective purchasers, the accuracy of any
            such business or financial information, or (C) offer for sale and
            sell the Pledged Securities with, or without, first employing an
            appraiser, investment banker, or broker with respect to the
            evaluation of the Pledged Securities, the solicitation of purchasers
            for Pledged Securities, or the manner of sale of Pledged Securities.

            (e) Application of Proceeds. Collateral Agent shall apply the
      proceeds of any sale or other disposition of the Collateral under this
      SECTION 7 in the following order: first, to the payment of all expenses
      incurred in retaking, holding, and preparing any of the Collateral for
      sale(s) or other disposition, in arranging for such sale(s) or other
      disposition, and in actually selling or disposing of the same (all of
      which are part of the Obligations); second, toward repayment of amounts
      expended by Collateral Agent under SECTION 8; and third, toward payment of
      the balance of the Obligations in the order and manner as Collateral Agent
      determines in its sole discretion. Any surplus remaining shall be
      delivered to Pledgor or as a court of competent jurisdiction may direct.
      If the proceeds are insufficient to pay the Obligations in full, then
      Pledgor shall remain liable for any deficiency.

            (f) Sales on Credit. If Collateral Agent sells any of the Collateral
      upon credit, Pledgor will be credited only with payments actually made by
      the purchaser, received by the Collateral Agent, and applied to the
      indebtedness of the purchaser. In the event the purchaser fails to pay for
      the Collateral, Collateral Agent may resell the Collateral and Pledgor
      shall be credited with the proceeds of the sale.

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            (g) Source Code Escrow Arrangements. Collateral Agent shall not send
      a notice exercising any rights under any escrow agreements pursuant to
      which Pledgor's software or other technology is being held in escrow
      unless such notice is sent in connection with a foreclosure (including
      preparation for an intended foreclosure, even if such foreclosure does not
      ultimately occur) by Collateral Agent on all or part of the Collateral
      after an Event of Default has occurred and is continuing. After any
      release from escrow and subject to Collateral Agent's rights under this
      Agreement, Collateral Agent shall use such software or other technology
      solely in connection with (i) the preservation of, foreclosure on, or
      transfer of title in, such software or other technology or in the
      continuation of Pledgor's business; and (ii) the exercise of the rights
      granted under SECTION 8(c). In the event Collateral Agent exercises any
      rights under any escrow agreements pursuant to which Pledgor's software or
      other technology is being held in escrow while in preparation for an
      intended foreclosure, Collateral Agent shall redeposit any materials
      released from escrow within thirty (30) days after the abandonment of any
      intended foreclosure, and shall not retain any copy of any such materials.

      8. OTHER RIGHTS OF LENDER.

            (a) Performance. If Pledgor fails to keep the Collateral in good
      repair, working order, and condition, as required by the Credit Documents,
      or fails to pay when due all Taxes on any of the Collateral in the manner
      required by the Credit Documents, or fails to preserve the priority of the
      Security Interest in any of the Collateral, or fails to keep the
      Collateral insured as required by the Credit Documents, or otherwise fails
      to perform any of its obligations under the Credit Documents with respect
      to the Collateral, then Collateral Agent may, at its option, but without
      being required to do so, make such repairs, pay such Taxes, prosecute or
      defend any suits in relation to the Collateral, or insure and keep insured
      the Collateral in any amount deemed appropriate by Collateral Agent, or
      take all other action which Pledgor is required, but has failed or
      refused, to take under the Credit Documents. Any sum which may be expended
      or paid by Collateral Agent under this subparagraph (including, without
      limitation, court costs and reasonable attorneys' fees) shall bear
      interest from the dates of expenditure or payment at the Default Rate
      until paid and, together with such interest, shall be payable by Pledgor
      to Collateral Agent upon demand and shall be part of the Obligations.

            (b) Collection. If an Event of Default exists and upon notice from
      Collateral Agent, each Collateral Obligor with respect to any payments on
      any of the Collateral (including, without limitation, dividends and other
      Distributions with respect to the Pledged Securities and Partnership
      Interests, payments on Collateral Notes, insurance proceeds payable by
      reason of loss or damage to any of the Collateral, or payments or
      distributions with respect to Deposit Accounts) is hereby authorized and
      directed by Pledgor to make payment directly to Collateral Agent,
      regardless of whether Pledgor was previously making collections thereon.
      Until such notice is given, Pledgor is authorized to retain and expend all
      payments made on Collateral. If an Event of Default exists, Collateral
      Agent shall have the right in its own name or in the name of Pledgor to
      compromise or extend time of payment with respect to all or any portion of
      the Collateral for such amounts and upon such terms as Collateral Agent
      may determine; to demand, collect, receive, receipt for, sue for,
      compound, and give acquittances for any and all amounts due or to become
      due with respect to Collateral; to take control of cash and other proceeds
      of any Collateral; to endorse the name of Pledgor on any notes,
      acceptances, checks, drafts, money orders, or other evidences of payment
      on Collateral that may come into the possession of Collateral Agent; to
      sign the name of Pledgor on any invoice or bill of lading relating to any
      Collateral, on any drafts against Collateral Obligors or other Persons
      making payment with respect to Collateral, on assignments and
      verifications of accounts or other Collateral and on

PLEDGE AND SECURITY AGREEMENT                                                 D-

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      notices to Collateral Obligors making payment with respect to Collateral;
      to send requests for verification of obligations to any Collateral
      Obligor; and to do all other acts and things necessary to carry out the
      intent of this Security Agreement. If an Event of Default exists and any
      Collateral Obligor fails or refuses to make payment on any Collateral when
      due, Collateral Agent is authorized, in its sole discretion, either in its
      own name or in the name of Pledgor, to take such action as Collateral
      Agent shall deem appropriate for the collection of any amounts owed with
      respect to Collateral or upon which a delinquency exists. Regardless of
      any other provision hereof, however, Collateral Agent shall never be
      liable for its failure to collect, or for its failure to exercise
      diligence in the collection of, any amounts owed with respect to
      Collateral, nor shall it be under any duty whatsoever to anyone except
      Pledgor to account for funds that it shall actually receive hereunder.
      Without limiting the generality of the foregoing, Collateral Agent shall
      have no responsibility for ascertaining any maturities, calls,
      conversions, exchanges, offers, tenders, or similar matters relating to
      any Collateral, or for informing Pledgor with respect to any of such
      matters (irrespective of whether Collateral Agent actually has, or may be
      deemed to have, knowledge thereof). The receipt of Collateral Agent to any
      Collateral Obligor shall be a full and complete release, discharge, and
      acquittance to such Collateral Obligor, to the extent of any amount so
      paid to Collateral Agent.

            (c) Intellectual Property. For purposes of enabling Collateral Agent
      to exercise its rights and remedies under this Security Agreement and
      enabling Collateral Agent and its successors and assigns to enjoy the full
      benefits of the Collateral, Pledgor hereby grants to Collateral Agent an
      irrevocable, nonexclusive license (exercisable without payment of royalty
      or other compensation to Pledgor) to make, have made, use, sell, import,
      reproduce, distribute, create derivative works, perform and display and
      otherwise exploit the Intellectual Property, and the right to license, or
      sublicense any of the foregoing rights provided that Collateral Agent
      agrees not to exercise this license until an Event of Default occurs and
      is continuing. Pledgor shall provide Collateral Agent with reasonable
      access to all media in which any of the Intellectual Property may be
      recorded or stored and all computer programs used for the completion or
      printout thereof. This license shall also inure to the benefit of all
      successors, assigns, and transferees of Collateral Agent. Upon the
      occurrence and during the continuance of an Event of Default, Collateral
      Agent may require that Pledgor assign all of its right, title, and
      interest in and to the Intellectual Property or any part thereof to
      Collateral Agent or such other Person as Collateral Agent may designate
      pursuant to documents satisfactory to Collateral Agent. Notwithstanding
      anything to the contrary in this Agreement, Collateral Agent shall not
      exercise any rights under this SECTION 8(c) except in connection with a
      foreclosure (including preparation for an intended foreclosure, even if
      such foreclosure does not ultimately occur) by Collateral Agent on all or
      part of the Collateral after an Event of Default has occurred and is
      continuing.

            (d) Record Ownership of Securities. If an Event of Default exists,
      Collateral Agent at any time may have any Collateral that is Pledged
      Securities and that is in the possession of Collateral Agent, or its
      nominee or nominees, registered in its name, or in the name of its nominee
      or nominees, as Collateral Agent; and, as to any Collateral that is
      Pledged Securities so registered, Collateral Agent shall execute and
      deliver (or cause to be executed and delivered) to Pledgor all such
      proxies, powers of attorney, dividend coupons or orders, and other
      documents as Pledgor may reasonably request for the purpose of enabling
      Pledgor to exercise the voting rights and powers which it is entitled to
      exercise under this Security Agreement or to receive the dividends and
      other Distributions and payments in respect of such Collateral that is
      Pledged Securities or proceeds thereof which it is authorized to receive
      and retain under this Security Agreement.

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            (e) Voting of Securities. As long as no Event of Default exists,
      Pledgor is entitled to exercise all voting rights pertaining to any
      Pledged Securities and Partnership Interests; provided, however, that no
      vote shall be cast or consent, waiver, or ratification given or action
      taken without the prior written consent of Collateral Agent which would
      (x) be inconsistent with or violate any provision of this Security
      Agreement or any other Loan Document or (y) amend, modify, or waive any
      term, provision or condition of the certificate of incorporation, bylaws,
      certificate of formation, or other charter document, or other agreement
      relating to, evidencing, providing for the issuance of, or securing any
      Collateral in any manner which would adversely affect Collateral Agent or
      the value of Collateral; and provided further that Pledgor shall give
      Collateral Agent at least five Business Days' prior written notice in the
      form of an officers' certificate of the manner in which it intends to
      exercise, or the reasons for refraining from exercising, any voting or
      other consensual rights pertaining to the Collateral or any part thereof
      which could reasonably be expected to have a material adverse effect on
      the value of the Collateral or any part thereof. If an Event of Default
      exists and if Collateral Agent elects to exercise such right, the right to
      vote any Pledged Securities shall be vested exclusively in Collateral
      Agent. To this end, Pledgor hereby irrevocably constitutes and appoints
      Collateral Agent the proxy and attorney-in-fact of Pledgor, with full
      power of substitution, to vote, and to act with respect to, any and all
      Collateral that is Pledged Securities standing in the name of Pledgor or
      with respect to which Pledgor is entitled to vote and act, subject to the
      understanding that such proxy may not be exercised unless an Event of
      Default exists. The proxy herein granted is coupled with an interest, is
      irrevocable, and shall continue so long as Collateral Agent is obligated
      to extend credit under the Credit Agreement and thereafter until the
      Obligations are paid and performed in full.

            (f) Certain Proceeds. Notwithstanding any contrary provision herein,
      any and all

                  (i) dividends, interest, or other Distributions paid or
            payable other than in cash in respect of, and instruments and other
            property received, receivable, or otherwise distributed in respect
            of, or in exchange for, any Collateral;

                  (ii) dividends, interest, or other Distributions hereafter
            paid or payable in cash in respect of any Collateral in connection
            with a partial or total liquidation or dissolution, or in connection
            with a reduction of capital, capital surplus, or paid-in-surplus;

                  (iii) cash paid, payable, or otherwise distributed in
            redemption of, or in exchange for, any Collateral; and

                  (iv) dividends, interest, or other Distributions paid or
            payable in violation of the Credit Documents,

      shall be part of the Collateral hereunder, and shall, if received by
      Pledgor, be held in trust for the benefit of Collateral Agent, and shall
      forthwith be delivered to Collateral Agent (accompanied by proper
      instruments of assignment and/or stock and/or bond powers executed by
      Pledgor in accordance with Collateral Agent's instructions) to be held
      subject to the terms of this Security Agreement. Any cash proceeds of
      Collateral which come into the possession of Collateral Agent on and after
      the occurrence of an Event of Default (including, without limitation,
      insurance proceeds) may, at Collateral Agent's option, be applied in whole
      or in part to the Obligations (to the extent then due), be released in
      whole or in part to or on the written instructions of Pledgor for any
      general or specific purpose, or be retained in whole or in part by
      Collateral Agent as additional Collateral. Any cash Collateral in the
      possession of Collateral Agent may be invested

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<PAGE>

      by Collateral Agent in certificates of deposit issued by Collateral Agent
      (if Collateral Agent issues such certificates) or by any state or national
      bank having combined capital and surplus greater than $100,000,000 with a
      rating from Moody's and S&P of P-1 and A-1+, respectively, or in
      securities issued or guaranteed by the United States of America or any
      agency thereof. Collateral Agent shall never be obligated to make any such
      investment and shall never have any liability to Pledgor for any loss
      which may result therefrom. All interest and other amounts earned from any
      investment of Collateral may be dealt with by Collateral Agent in the same
      manner as other cash Collateral. The provisions of this SECTION 8(f) are
      applicable whether or not a Default or Event of Default exists.

            (g) Use and Operation of Collateral. Should any Collateral come into
      the possession of Collateral Agent, during the existence of an Event of
      Default Collateral Agent may use or operate such Collateral for the
      purpose of preserving it or its value pursuant to the order of a court of
      appropriate jurisdiction or in accordance with any other rights held by
      Collateral Agent in respect of such Collateral. Pledgor covenants to
      promptly reimburse and pay to Collateral Agent, at Collateral Agent's
      request, the amount of all reasonable expenses (including, without
      limitation, the cost of any insurance and payment of Taxes or other
      charges) incurred by Collateral Agent in connection with its custody and
      preservation of Collateral, and all such expenses, costs, Taxes, and other
      charges shall bear interest at the Default Rate until repaid and, together
      with such interest, shall be payable by Pledgor to Collateral Agent upon
      demand and shall become part of the Obligations. However, the risk of
      accidental loss or damage to, or diminution in value of, Collateral is on
      Pledgor, and Collateral Agent shall have no liability whatever for failure
      to obtain or maintain insurance, nor to determine whether any insurance
      ever in force is adequate as to amount or as to the risks insured. With
      respect to Collateral that is in the possession of Collateral Agent,
      Collateral Agent shall have no duty to fix or preserve rights against
      prior parties to such Collateral and shall never be liable for any failure
      to use diligence to collect any amount payable in respect of such
      Collateral, but shall be liable only to account to Pledgor for what it may
      actually collect or receive thereon.

            (h) Cash Collateral Account. If an Event of Default exists, then
      Collateral Agent shall have, and Pledgor hereby grants to Collateral
      Agent, the right and authority to transfer all funds on deposit in the
      Deposit Accounts to a CASH COLLATERAL ACCOUNT (herein so called)
      maintained with a depository institution acceptable to Collateral Agent
      and subject to the exclusive direction, domain, and control of Collateral
      Agent, and no disbursements or withdrawals shall be permitted to be made
      by Pledgor from such Cash Collateral Account. Such Cash Collateral Account
      shall be subject to the Security Interest and Liens in favor of Collateral
      Agent herein created, and Pledgor hereby grants a security interest to
      Collateral Agent in and to, such Cash Collateral Account and all checks,
      drafts, and other items ever received by Pledgor for deposit therein.
      Furthermore, if an Event of Default exists, then Collateral Agent shall
      have the right, at any time in its discretion without notice to Pledgor,
      (i) to transfer to or to register in the name of Collateral Agent or any
      nominee any certificates of deposit or deposit instruments constituting
      Deposit Accounts and shall have the right to exchange such certificates or
      instruments representing Deposit Accounts for certificates or instruments
      of smaller or larger denominations and (ii) to take and apply against the
      Obligations any and all funds then or thereafter on deposit in the Cash
      Collateral Account or otherwise constituting Deposit Accounts.

            (i) Power of Attorney. Pledgor hereby irrevocably constitutes and
      appoints Collateral Agent and any officer or agent thereof, with full
      power of substitution, as its true and lawful attorney-in-fact with full
      irrevocable power and authority in the name of Pledgor or in its own name,
      to take while an Event of Default exists, any and all action and to
      execute any and all documents and instruments which Collateral Agent at
      any time and from time to time deems

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<PAGE>

      necessary or desirable to accomplish the purposes of this Security
      Agreement and, without limiting the generality of the foregoing, Pledgor
      hereby gives Collateral Agent the power and right on behalf of Pledgor and
      in its own name to do any of the following while an Event of Default
      exists, without notice to or the consent of Pledgor:

                  (i) to transfer any and all funds on deposit in the Deposit
            Accounts to the Cash Collateral Account as set forth in herein;

                  (ii) to receive, endorse, and collect any drafts or other
            instruments or documents in connection with CLAUSE (b) above and
            this CLAUSE (i);

                  (iii) to use the Intellectual Property or to grant or issue
            any exclusive or non-exclusive license under the Intellectual
            Property to anyone else, and to perform any act necessary for the
            Collateral Agent to assign, pledge, convey, or otherwise transfer
            title in or dispose of the Intellectual Property to any other
            Person;

                  (iv) to demand, sue for, collect, or receive, in the name of
            Pledgor or in its own name, any money or property at any time
            payable or receivable on account of or in exchange for any of the
            Collateral and, in connection therewith, endorse checks, notes,
            drafts, acceptances, money orders, documents of title or any other
            instruments for the payment of money under the Collateral or any
            policy of insurance;

                  (v) to pay or discharge taxes, Liens, or other encumbrances
            levied or placed on or threatened against the Collateral;

                  (vi) to notify post office authorities to change the address
            for delivery of Pledgor to an address designated by Collateral Agent
            and to receive, open, and dispose of mail addressed to Pledgor; and

                  (vii) (A) to direct account debtors and any other parties
            liable for any payment under any of the Collateral to make payment
            of any and all monies due and to become due thereunder directly to
            Collateral Agent or as Collateral Agent shall direct; (B) to receive
            payment of and receipt for any and all monies, claims, and other
            amounts due and to become due at any time in respect of or arising
            out of any Collateral; (C) to sign and endorse any invoices, freight
            or express bills, bills of lading, storage or warehouse receipts,
            drafts against debtors, assignments, proxies, stock powers,
            verifications, and notices in connection with accounts and other
            documents relating to the Collateral; (D) to commence and prosecute
            any suit, action, or proceeding at law or in equity in any court of
            competent jurisdiction to collect the Collateral or any part thereof
            and to enforce any other right in respect of any Collateral; (E) to
            defend any suit, action, or proceeding brought against Pledgor with
            respect to any Collateral; (F) to settle, compromise, or adjust any
            suit, action, or proceeding described above and, in connection
            therewith, to give such discharges or releases as Collateral Agent
            may deem appropriate; (G) to exchange any of the Collateral for
            other property upon any merger, consolidation, reorganization,
            recapitalization, or other readjustment of the issuer thereof and,
            in connection therewith, deposit any of the Collateral with any
            committee, depositary, transfer agent, registrar, or other
            designated agency upon such terms as Collateral Agent may determine;
            (H) to add or release any guarantor, indorser, surety, or other
            party to any of the Collateral; (I) to renew, extend, or otherwise
            change the terms and conditions of any of the Collateral; (J) to
            endorse Pledgor's name on all applications, documents, papers, and
            instruments necessary or desirable in order for Collateral Agent to
            use or

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<PAGE>

            maintain any of the Intellectual Property; (K) to make, settle,
            compromise or adjust any claims under or pertaining to any of the
            Collateral (including claims under any policy of insurance); (L) to
            execute on behalf of Pledgor any financing statements or
            continuation statements with respect to the Security Interests
            created hereby, and to do any and all acts and things to protect and
            preserve the Collateral, including, without limitation, the
            protection and prosecution of all rights included in the Collateral;
            and (M) to sell, transfer, pledge, convey, make any agreement with
            respect to or otherwise deal with any of the Collateral as fully and
            completely as though Collateral Agent were the absolute owner
            thereof for all purposes, and to do, at Collateral Agent's option
            and Pledgor's expense, at any time, or from time to time, all acts
            and things which Collateral Agent deems necessary to protect,
            preserve, maintain, or realize upon the Collateral and Collateral
            Agent's security interest therein.

            In addition, whether or not an Event of Default exists, Pledgor
            hereby irrevocably constitutes and appoints Collateral Agent and any
            officer or agent thereof, with full power of substitution, as its
            true and lawful attorney in fact with full irrevocable power and
            authority in name of Pledgor or in its own name, to file and record
            in the United States Copyright Office, the Canadian Copyright
            Office, and any other or similar office or registry of any
            Governmental Authority or jurisdiction, all notices, security
            agreements, and other documents as Collateral Agent may deem
            appropriate, for the purpose of creating, evidencing or perfecting
            Collateral Agent's security interests and Liens in the Copyrights,
            or any of them.

      This power of attorney is a power coupled with an interest and shall be
      irrevocable. Collateral Agent shall be under no duty to exercise or
      withhold the exercise of any of the rights, powers, privileges, and
      options expressly or implicitly granted to Collateral Agent in this
      Security Agreement, and shall not be liable for any failure to do so or
      any delay in doing so. Neither Collateral Agent nor any Person designated
      by Collateral Agent shall be liable for any act or omission or for any
      error of judgment or any mistake of fact or law. This power of attorney is
      conferred on Collateral Agent solely to protect, preserve, maintain, and
      realize upon its Security Interest in the Collateral. Collateral Agent
      shall not be responsible for any decline in the value of the Collateral
      and shall not be required to take any steps to preserve rights against
      prior parties or to protect, preserve, or maintain any Lien given to
      secure the Collateral.

            (j) Purchase Money Collateral. To the extent that Collateral Agent
      has advanced or will advance funds to or for the account of Pledgor to
      enable Pledgor to purchase or otherwise acquire rights in Collateral,
      Collateral Agent, at its option, may pay such funds (i) directly to the
      Person from whom Pledgor will make such purchase or acquire such rights,
      or (ii) to Pledgor, in which case Pledgor covenants to promptly pay the
      same to such Person, and forthwith furnish to Collateral Agent evidence
      satisfactory to Collateral Agent that such payment has been made from the
      funds so provided.

            (k) Subrogation. If any of the Obligations are given in renewal or
      extension or applied toward the payment of indebtedness secured by any
      Lien, then Collateral Agent shall be, and is hereby, subrogated to all of
      the rights, titles, interests, and Liens securing the indebtedness so
      renewed, extended, or paid.

            (l) Indemnification. Pledgor hereby assumes all liability for the
      Collateral, for the Security Interest, and for any use, possession,
      maintenance, and management of, all or any of the Collateral, including,
      without limitation, any Taxes arising as a result of, or in connection
      with, the transactions contemplated herein, and agrees to assume liability
      for, and to indemnify and

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                                       24
<PAGE>

      hold Collateral Agent harmless from and against, any and all claims,
      causes of action, or liability, for injuries to or deaths of Persons and
      damage to property, howsoever arising from or incident to such use,
      possession, maintenance, and management, whether such Persons be agents or
      employees of Pledgor or of third parties, or such damage be to property of
      Pledgor or of others. Pledgor agrees to indemnify, save, and hold
      Collateral Agent harmless from and against, and covenants to defend
      Collateral Agent against, any and all losses, damages, claims, costs,
      penalties, liabilities, and expenses (collectively, "CLAIMS"), including,
      without limitation, court costs and attorneys' fees, AND ANY OF THE
      FOREGOING ARISING FROM THE NEGLIGENCE OF COLLATERAL AGENT, OR ANY OF ITS
      OFFICERS, EMPLOYEES, AGENTS, ADVISORS, EMPLOYEES, OR REPRESENTATIVES,
      howsoever arising or incurred because of, incident to, or with respect to
      Collateral or any use, possession, maintenance, or management thereof;
      provided, however, that the indemnity set forth in this SECTION 8(l) will
      not apply to Claims caused by the gross negligence or willful misconduct
      of Collateral Agent.

            (m) Subordination. Pledgor hereby fully subordinates all claims that
      it now or hereafter may have under the Collateral Notes executed by any
      Guarantor, to the prior payment in full of Lenders' claims against such
      Guarantor under such Guarantor's Guaranty, and agrees that Lenders shall
      be entitled to payment in full of their claims against such Guarantor,
      before Pledgor is entitled to demand, sue for, collect , or receive any
      payments of or on account of such Collateral Notes.

      9. MISCELLANEOUS.

            (a) Continuing Security Interest. This Security Agreement creates a
      continuing security interest in the Collateral and shall (i) remain in
      full force and effect so long as Collateral Agent is obligated to extend
      credit under the Credit Agreement and thereafter until the Obligations
      (other than inchoate indemnity obligations) are paid and performed in
      full; and (ii) inure to the benefit of and be enforceable by Collateral
      Agent and its successors, transferees, and assigns. Without limiting the
      generality of the foregoing CLAUSE (ii), Collateral Agent may assign or
      otherwise transfer any of their respective rights under this Security
      Agreement to any other Person in accordance with the terms and provisions
      of the Credit Agreement, and to the extent of such assignment or transfer
      such Person shall thereupon become vested with all the rights and benefits
      in respect thereof granted herein or otherwise to Collateral Agent. Upon
      payment in full of the Obligations (other than inchoate indemnity
      obligations) and the termination of the commitment of Collateral Agent to
      extend credit under the Credit Documents, Pledgor shall be entitled to the
      prompt return, at its expense, of such of the Collateral as shall not have
      been sold or otherwise applied pursuant to the terms hereof.

            Upon any sale or other transfer by Pledgor of any Collateral that is
      expressly permitted under the Credit Agreement to any Person that is not a
      Credit Party, or upon the effectiveness of any written consent by
      Collateral Agent to the release of the security interest granted hereby in
      any Collateral, the security interest in such Collateral shall be
      automatically released.

            In connection with any termination or release pursuant to this
      Section 9(a), Collateral Agent shall execute and deliver to Pledgor, at
      Pledgor's expense, all documents needed to evidence such termination or
      release.

            (b) Actions Not Releases. The Security Interest and Pledgor's
      obligations and Collateral Agent's rights hereunder shall not be released,
      diminished, impaired, or adversely affected by the occurrence of any one
      or more of the following events: (i) the taking or accepting of any other
      security or assurance for any or all of the Obligations; (ii) any release,
      surrender,

PLEDGE AND SECURITY AGREEMENT                                                 D-

                                       25
<PAGE>

      exchange, subordination, or loss of any security or assurance at any time
      existing in connection with any or all of the Obligations; (iii) the
      modification of, amendment to, or waiver of compliance with any terms of
      any of the other Credit Documents without the notification or consent of
      Pledgor, (the right to such notification or consent being herein
      specifically waived by Pledgor) except as required therein; (iv) the
      insolvency, bankruptcy, or lack of corporate or trust power of any party
      at any time liable for the payment of any or all of the Obligations,
      whether now existing or hereafter occurring; (v) any renewal, extension,
      or rearrangement of the payment of any or all of the Obligations, either
      with or without notice to or consent of Pledgor, or any adjustment,
      indulgence, forbearance, or compromise that may be granted or given by
      Collateral Agent to Pledgor; (vi) any neglect, delay, omission, failure,
      or refusal of Collateral Agent to take or prosecute any action in
      connection with any other agreement, document, guaranty, or instrument
      evidencing, securing, or assuring the payment of all or any of the
      Obligations; (vii) any failure of Collateral Agent to notify Pledgor of
      any renewal, extension, or assignment of the Obligations or any part
      thereof, or the release of any Collateral or other security, or of any
      other action taken or refrained from being taken by Collateral Agent
      against Pledgor or any new agreement between or among Collateral Agent and
      Pledgor, it being understood that except as expressly provided herein,
      Collateral Agent shall not be required to give Pledgor any notice of any
      kind under any circumstances whatsoever with respect to or in connection
      with the Obligations, including, without limitation, notice of acceptance
      of this Security Agreement or any Collateral ever delivered to or for the
      account of Collateral Agent hereunder; (viii) the illegality, invalidity,
      or unenforceability of all or any part of the Obligations against any
      party obligated with respect thereto by reason of the fact that the
      Obligations, or the interest paid or payable with respect thereto, exceeds
      the amount permitted by applicable Law, the act of creating the
      Obligations, or any part thereof, is ultra vires, or the officers,
      partners, or trustees creating same acted in excess of their authority, or
      for any other reason; or (ix) if any payment by any party obligated with
      respect thereto is held to constitute a preference under applicable Law or
      for any other reason Collateral Agent is required to refund such payment
      or pay the amount thereof to someone else.

            (c) Waivers. Except to the extent expressly otherwise provided
      herein or in other Credit Documents and to the fullest extent permitted by
      applicable Law, Pledgor waives (i) any right to require Collateral Agent
      to proceed against any other Person, to exhaust its rights in Collateral,
      or to pursue any other right which Collateral Agent may have; (ii) with
      respect to the Obligations, presentment and demand for payment, protest,
      notice of protest and nonpayment, and notice of the intention to
      accelerate; and (iii) all rights of marshaling in respect of any and all
      of the Collateral.

            (d) Financing Statement; Authorization. Collateral Agent shall be
      entitled at any time to file this Security Agreement or a carbon,
      photographic, or other reproduction of this Security Agreement, as a
      financing statement, but the failure of Collateral Agent to do so shall
      not impair the validity or enforceability of this Security Agreement.
      Pledgor hereby irrevocably authorizes Collateral Agent at any time and
      from time to time to file in any UCC jurisdiction any initial financing
      statements and amendments thereto (without the requirement for Pledgor's
      signature thereon) that (i) indicate the Collateral (A) as all assets of
      Pledgor or words of similar effect, regardless of whether any particular
      asset comprised in the Collateral falls within the scope of Article 9 of
      the UCC of the state or such jurisdiction or whether such assets are
      included in the Collateral hereunder, or (B) as being of an equal or
      lesser scope or with greater detail, and (ii) contain any other
      information required by Article 9 of the UCC of the state or such
      jurisdiction for the sufficiency or filing office acceptance of any
      financing statement or amendment, including whether the Pledgor is an
      organization, the type of organization, and any organization

PLEDGE AND SECURITY AGREEMENT                                                 D-

                                       26
<PAGE>

      identification number issued to Pledgor. Pledgor agrees to furnish any
      such information to Collateral Agent promptly upon request.

            (e) Amendments. This Security Agreement may be amended only by an
      instrument in writing executed jointly by Pledgor and Collateral Agent,
      and supplemented only by documents delivered or to be delivered in
      accordance with the express terms hereof.

            (f) Multiple Counterparts. This Security Agreement has been executed
      in a number of identical counterparts, each of which shall be deemed an
      original for all purposes and all of which constitute, collectively, one
      agreement; but, in making proof of this Security Agreement, it shall not
      be necessary to produce or account for more than one such counterpart.

            (g) Parties Bound; Assignment. This Security Agreement shall be
      binding on Pledgor and Pledgor's heirs, legal representatives, successors,
      and assigns and shall inure to the benefit of Collateral Agent and
      Collateral Agent's successors and assigns; provided that Pledgor may not,
      without the prior written consent of Collateral Agent, assign any rights,
      duties, or obligations hereunder.

            (H) GOVERNING LAW. THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK
      APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH
      STATE, EXCEPT TO THE EXTENT THE LAWS OF ANOTHER JURISDICTION GOVERN THE
      CREATION, PERFECTION, VALIDITY, OR ENFORCEMENT OF LIENS UNDER THIS
      SECURITY AGREEMENT, AND THE APPLICABLE FEDERAL LAWS OF THE UNITED STATES
      OF AMERICA, SHALL GOVERN THE VALIDITY, CONSTRUCTION, ENFORCEMENT AND
      INTERPRETATION OF THIS SECURITY AGREEMENT AND ALL OF THE OTHER CREDIT
      DOCUMENTS.

                     REMAINDER OF PAGE INTENTIONALLY BLANK.
                             SIGNATURE PAGE FOLLOWS.

PLEDGE AND SECURITY AGREEMENT                                                 D-

                                       27
<PAGE>

  EXECUTED as of the date first stated in this Pledge and Security Agreement.

                                     PLEDGOR:

                                     TALEO CORPORATION

                                     By: /s/ Jean Lavigueur
                                         _______________________________________
                                         Name: Jean Lavigueur
                                              __________________________________
                                         Title: Chief Financial Officer
                                               _________________________________

                                     COLLATERAL AGENT:

                                     GOLDMAN SACHS SPECIALTY LENDING GROUP, L.P.

                                     By: /s/ Todd B. Foust
                                         _______________________________________
                                         Name: Todd B. Foust
                                              __________________________________
                                         Title: Vice President
                                               _________________________________

                         PLEDGE AND SECURITY AGREEMENT
                                 SIGNATURE PAGE

<PAGE>

                         PLEDGE AND SECURITY AGREEMENT
                                 SIGNATURE PAGE

<PAGE>

                                    EXHIBIT A

                 PLEDGOR INFORMATION AND LOCATION OF COLLATERAL

A.    Exact Legal Name of Pledgor: Taleo Corporation

B.    Mailing Address of Pledgor: 575 Market Street, 8th Floor, San Francisco CA
      94105

C.    Type of Entity: Corporation

D.    Jurisdiction of Organization: Delaware

E.    State Issued Organizational Identification Number: 3042240

F.    Location of Books and Records: 575 Market Street, 8th Floor, San Francisco
                                     CA 94105 1010 Northern Boulevard, Suite
                                     328, Great Neck, NY 11021 330
                                     St-Vallier East, Suite 400, Quebec,
                                     QC G1K 9C5

G.    Location of Collateral: 575 Market Street, 8th Floor, San Francisco CA
                              94105 90 Washington Valley Road, Bedminster NJ
                              07921 1010 Northern Boulevard, Suite 328,
                              Great Neck, NY 11021 One Energy Center, 40
                              Shuman Boulevard, Naperville IL 60563 Hosting
                              Facility operated by Internap Network Services
                              Corporation Hosting Facility operated by IBM

H.    Location of Real Property: None

I.    Jurisdiction(s) for Filing Financing Statements: Delaware

                                       30
<PAGE>

                                   EXHIBIT B-1

                             COLLATERAL DESCRIPTIONS

A.    Collateral Notes and Collateral Note Security

1.    Note made by Taleo (Europe) B.V., for One Million, Four Hundred Sixty
Thousand, Two Hundred and Ninety-Two Euros (Euro(Euro) 1,460,292).

2.    Note made by Taleo (France) SAS, for One Million, Three Hundred
Twenty-Eight Thousand, Three Hundred and Fifty-Seven Euros ((Euro(Euro)
1,328,357).

3.    Note made by Recruitsoft (Asia Pacific) Pte Ltd., for One Million, Seven
Hundred Thirty Four Thousand, Two Hundred and Ninety Singapore Dollars
(SGD$ 1,734,290).

4.    Note made by Taleo (Australia) Pty Ltd., for Nine Hundred and Sixty One
Thousand, Nine Hundred and Ninety Australian dollars (AUD$ 961,990).

5.    Note made by Taleo (UK) Ltd., for Twelve Thousand and Seventy-One United
Kingdom Pounds (GBP(Pound) 12,701).

6.    Note made by Taleo (Canada) Inc., for Twelve Million, One Hundred Seventy
Five Thousand, Six Hundred and Twenty Four Canadian Dollars (CDA$
12,175,624).

B.    Pledged Shares not to exceed 66% of the outstanding equity for existing
      Foreign Subsidiaries

1.    One thousand (1,000) Common Shares, of Butterfly Acquisition Corporation.

2.    66/100ths Ordinary Shares of Taleo (Australia) Pty Limited.

3.    Six Hundred and Sixty (660) Class A Common Shares of 9090-5415 Quebec
Inc., (formerly Viasite Inc.).

C.    Partnership Interests

None.

D.    Commercial Tort Claims

None.

E.    Material Contracts:

See Schedule 4.16 to the Credit Agreement

F.    Deposit Accounts (including name of bank, address, and account number)

JP Morgan Chase Bank N.A., 395 N. Service Road, Melville NY 11747, 904-949214
JP Morgan Chase Bank N.A., 395 N. Service Road, Melville NY 11747, 957044151

Goldman Sachs Trust, through Goldman Sachs & Co., 4900 Sears Tower, 51st Floor,
Chicago, IL 60606, 1885036799

<PAGE>

                                   EXHIBIT B-2

A.    Registered Copyrights and Copyright Applications

Recruitsoft, Inc.          Symbol            Canada / Copyright Registration No.
                                             1011350

B.    Issued Patents and Patent Applications

None.

C.    Registered Trademarks and Trademark Applications

<TABLE>
<CAPTION>
                                          COUNTRY/SERIAL
OWNER              TRADEMARK         NUMBER/REGISTRATION NUMBER
-----              ---------         --------------------------
<S>                <C>               <C>
Recruitsoft, Inc.  Recruiter WebTop  United States / 76044,909

Recruitsoft, Inc.  Recruitsoft       United States / 75724,581 /
                                     2,513,172

Recruitsoft, Inc.  Symbol            Canada / Trademark Application

Recruitsoft, Inc.  Symbol            United States / Trademark
                                     Application 76506,400

Recruitsoft, Inc.  RECRUITSOFT       European Union / Application No.
                                     003309291 / TM80536EU00

Recruitsoft, Inc.  RECRUITSOFT       Australia
</TABLE>

<PAGE>

                                   EXHIBIT B-3

                                    LICENSES

TALEO CORPORATION - THIRD-PARTY SOFTWARE INVENTORY
PREPARED APRIL 19, 2005

TALEO ENTERPRISE SOLUTION

<TABLE>
<CAPTION>
                                   Operating Systems
       Components                      Description                 Licensing
------------------------      ----------------------------    -------------------
<S>                           <C>                             <C>
Red Hat Linux Enterprise           Operating System                 License
HP-UX                              Operating System                 License
Sun Solaris                        Operating System                 License
</TABLE>

<TABLE>
<CAPTION>
                              Operating Systems Components
       Components                      Description                 Licensing
------------------------      ----------------------------    -------------------
<S>                           <C>                             <C>
OpenSSH                            Secure Shell Access            Open Source
Syslog-NG                          System Logging Tool            Open Source
CIS Security                       Security Tool                  Open Source
Net-SNMP                           Network Management Tool        Open Source
NTP Client                         Network Time Protocol          Open Source
RSA Secure ID                      Access Management              License
Zenworks Linux Management          Package Management             License
Postfix                            Email Server                   Open Source
</TABLE>

<TABLE>
<CAPTION>
                                   Taleo Web Servers
       Components                      Description                 Licensing
------------------------      ----------------------------    -------------------
<S>                           <C>                             <C>
Apache                             Web Server                      Open Source
</TABLE>

<TABLE>
<CAPTION>
                               Taleo Application Servers
       Components                      Description                 Licensing
------------------------      ----------------------------    -------------------
<S>                           <C>                             <C>
Sun JDK                            Sun Java Virtual Machine       Open Source
Apache Jserv                       Application Server             Open Source
WhereOn Earth Geozip               Location Tool                  License
WinterTree                         Spelling Server                License
</TABLE>

<TABLE>
<CAPTION>
                                 Taleo Database Servers
       Components                      Description                 Licensing
------------------------      ----------------------------    -------------------
<S>                           <C>                             <C>
Polyserve                          Clustering Software              License
Oracle Enterprise Manager          Database Management              License
Oracle Enterprise Edition          Database Server                  License
Stellent "Outside In"              PDF File Filter                  License
</TABLE>

<TABLE>
<CAPTION>
                                Taleo Reporting Servers
       Components                      Description                 Licensing
------------------------      ----------------------------    -------------------
<S>                             <C>                           <C>
Business Objects                      Reporting Server               License
WebIntelligence                       Reporting Software             License
Tomcat                                Servlet/JSP Engine             Open Source
</TABLE>

<PAGE>

                                  EXHIBIT B-3

                              LICENSES - CONTINUED

<TABLE>
<CAPTION>
                                Taleo Autonomy Servers
         Components                        Description                 Licensing
----------------------------    ---------------------------------   ---------------
<S>                             <C>                                 <C>
Autonomy                              Conceptual Search Engine         License
Tomcat                                Servlet/JSP Engine               Open Source
Resume Mirror                         Server Parsing Engine            License
</TABLE>

<TABLE>
<CAPTION>
                                Taleo Integration Servers
         Components                        Description                 Licensing
----------------------------    ---------------------------------   ---------------
<S>                             <C>                                 <C>
WebMethods                            B2B Integration application      License
Squid                                 Proxy Server                     Open Source
ProFTPd                               FTP Server                       Open Source
Ftp-GW                                FTP Proxy                        Open Source
WebMethods Proxy                      B2B Integration proxy            License
</TABLE>

<TABLE>
<CAPTION>
                                Taleo Monitoring Servers
         Components                        Description                 Licensing
----------------------------    ---------------------------------   ---------------
<S>                             <C>                                 <C>
HP Openview Operations                Monitoring Tool                  License
HP Network Node Manager               Monitoring Tool                  License
Cacti                                 Monitoring Tool                  Open Source
Nagios                                Monitoring Tool                  Open Source
Nessus                                Monitoring Tool                  Open Source
HP Insight Manager                    Monitoring Tool                  License
</TABLE>

<TABLE>
<CAPTION>
                                  Taleo Backup Servers
         Components                        Description                 Licensing
----------------------------    ---------------------------------   ---------------
<S>                             <C>                                 <C>
Veritas NetBackup                     Backup Management                 License
</TABLE>

<TABLE>
<CAPTION>
                                Taleo Anti-Virus Servers
         Components                        Description                 Licensing
----------------------------    ---------------------------------   ---------------
<S>                             <C>                                 <C>
McAfee Webshield                      Anti-Virus Software              License
</TABLE>

<TABLE>
<CAPTION>
                                    Taleo DNS Servers
         Components                        Description                 Licensing
----------------------------    ---------------------------------   ---------------
<S>                             <C>                                 <C>
Bind                                  DNS Server                       Open Source
</TABLE>

<TABLE>
<CAPTION>
                                     Taleo Appliance
         Components                        Description                 Licensing
----------------------------    ---------------------------------   ---------------
<S>                             <C>                                 <C>
IOS                                   Cisco Management Tool             License
Sonic Wall                            Crypto Devices                    License
F5 Big-Ip                             Load Balancers                    License
</TABLE>

<PAGE>

                                  EXHIBIT B-3

                              LICENSES - CONTINUED

<TABLE>
<CAPTION>
                                  Taleo Storage Management
         Components                        Description                 Licensing
----------------------------    ---------------------------------   ---------------
<S>                             <C>                                 <C>
Hitachi Storage Navigator               Storage Management              License
Damp                                    Storage Management              License
Sommet                                  Storage Management              License
HP Command View                         Storage Management              License
HP Array Control Unit                   Storage Management              License
Htachi Hi-Track                         Storage Management              License
Hitachi Graph-Track                     Storage Management              License
Veritas Foundation Suite                Storage Management              License
</TABLE>

<TABLE>
<CAPTION>
                                  Taleo Performance Servers
         Components                        Description                 Licensing
----------------------------    ---------------------------------   ---------------
<S>                             <C>                                 <C>
Loadrunner                              Performance Monitoring Tool      License
</TABLE>

<TABLE>
<CAPTION>
                                              Taleo Development
         Components                        Description                 Licensing
----------------------------    ---------------------------------   ---------------
<S>                             <C>                                 <C>
Mercury LoadRunner                      Load Testing Tool            License in process
YourKit Memory Profiler                 Memory Leak Detection        License
JProfiler                               Code Optimization            Under evaluation
Oracle TopLink Mapping Workbench        Data Entity Mapping          Development License
Eclipse SDK                             Java Code Development        Open Source
Checkstyle                              Code Review Tool             Open Source
Xdoclet                                 Code Generation Tool         Open Source
JBoss-IDE                               Code Generation Tool         Open Source
JBoss                                   Application Server           Open Source
JAD                                     Decompiler                   Open Source
Apache Jmeter                           Load Testing Tool            Open Source
Apache Ant                              Script Building Tool         Open Source
XML-Spy License                         XML Editor                   License
MediaWiki                               Collaboration Software       Open Source
Borland StarTeam                        Source Code Management
</TABLE>

<PAGE>

                                   EXHIBIT B-3

                              LICENSES - CONTINUED

TALEO CORPORATION - THIRD-PARTY SOFTWARE INVENTORY
PREPARED APRIL 19, 2005

TALEO CONTINGENT SOLUTION

<TABLE>
<CAPTION>
                       Contingent Development Environments
            Components               Description             Licensing
----------------------------    ----------------------    --------------
<S>                             <C>                       <C>
Windows XP                      OS                        License
Adobe Acrobat                   Document creation         ?
Adobe Reader                    Document reader           Free
Ultra Edit                      Text file editor          License
Ad-aware SE personal            Spyware removal           Free
Trend Micro Office Scan         Virus protection          License
Test Track Pro                  Bug tracker               License
XML Spy 5                       XML file editor           License
Eclipse                         Java IDE                  Open source
MySQL                           Database                  Open source
Star Team                       Source code archival      License
MS Office suite                                           License
Putty                           SSH telnet                Free
Copernic Desktop Search         Indexing                  Free
FlashFXP                        FTP client                Trial
MSN Messenger                   Instant messaging         Free
Yahoo Messenger                 Instant messaging         Free
Real VNC                        Remote desktop            Free
Apache Ant                      Automation                Open source
Jakarta Jmeter                  Profiler                  Open source
Jboss                           Application Server        Open source
Apache Web Server               Web Server                Open source
Oracle 9i                       Database                  License
</TABLE>

<PAGE>

                                   EXHIBIT B-3

                              LICENSES - CONTINUED

<TABLE>
<CAPTION>
                      Contingent QA and Release Management
           Components                     Description                  Licensing
--------------------------------  ------------------------------  -----------------
<S>                               <C>                             <C>
MAC OS                            Operating System                License
Cisco VPN 4.0.3                   Remote connection               License
VSClient 5.1                      Remote connection               License
FSecure SSH Client 5.1            Remote connection               License
Microsoft Office 2003             Office suite                    License
MS Office Visio                   Charting software               License
MS Project                        Project software                License
MSN Messenger 6.2                 Instant Messaging               Free
WebEX                             Web Meeting software            License
Adobe Acrobat Reader 6.02         Document reader                 Free
Mozilla Firefox                   Web Browser                     Free
Netscape                          Web Browser                     Free
Internet Explorer                 Web Browser                     Free
Lotus Notes 5.0.11                Development environment         License
Team Studio 2.10                  Source code archival            License
Oracle Client 9.2                 Database                        License
TOAD Professional 7.6             SQL access                      License
StarTeam 5.3                      Source code archival            License
Java SDK 1.4.2_05                 Java library                    Open Source
IBM Websphere Studio Application
Developer 4.03                    Development environment         License
Eclipse 3.0                       Development environment         Open Source
JBoss 4.0                         Application Server              Open Source
Apache                            Web Server                      Open Source
Testtrack                         Defect tracking                 License
Webmethods Developer              Development environment         License
Testlog V1.7                      QA testcases                    License
SnagIt                            Screenshots                     License
Remote Desktop Connection         Remote desktop                  License
Ad Aware 6.0                      Popup blocker                   License
Loadrunner                        Performance Monitoring Tool     License
UltraEdit-32                      Data File editor                License
IBM XDE Tester                    Automated Functional Test Tool  License
CruiseControl                     Continuous Integration          Open Source
Datapool Editor                   Data Provision                  Taleo Developed
</TABLE>

<PAGE>

                                   EXHIBIT B-3

                              LICENSES - CONTINUED

<TABLE>
<CAPTION>
                                           Contingent Production & ASP
                Components                             Description                Licensing
------------------------------------------  ----------------------------------  ------------
<S>                                         <C>                                 <C>
Crystal Decisions' Crystal Reports 9        Report Development                  License
Edify                                       Integrated Voice Recognition (IVR)  License
XML Convert 1.0
Oracle's LSX Domino-Oracle Connector        Domino Oracle connectivity          Freeware

Domino Designer 5.0.11                      Domino Development                  License
Macromedia Dreamweaver                      UI Design and Development           License
Computer Associates' Erwin 3.5.2            Database Modeling                   License
Mercury Interactive's LoadRunner,           Load Testing                        License
WinRunner
Teamstudio's Ciao! For Domino/Lotus         Domino Source Control               License
Notes, Edition 15a
Microsoft Visual C++ - Visual Studio        C++ Software Development            License
..NET 2003 Version
Java KavaChart Applet Library               Web Integrated Charts               Shareware
Sun Solaris                                 Operating System                    License
Red Hat's Linux 7.0                         Operating System                    License
Microsoft Windows 2000 Server               Operating System                    License
Lotus Domino                                Domino App Server                   License
Lotus Notes                                 Notes Server                        License
Oracle 8i (8.1.6)                           Database                            License
Microsoft SQL*Server 2000                   Database                            License
Candle IntelliWatch for Domino
CiscoWorks
Quest Software's Quest Instance for Oracle
Oracle Enterprise & Capacity managers
Cisco IDS
File compare Utility                        Comparing files and directories     Free
Roxio                                       CD Burner                           License
Instance Monitor                            Monitoring of Oracle Databases      License
</TABLE>

<PAGE>

                                    EXHIBIT C

      DEFAULTS OR DEFAULTS UNDER ANY COLLATERAL NOTE, DOCUMENTS EVIDENCING
        THE COLLATERAL NOTE SECURITY, PARTNERSHIP AGREEMENTS, OR MATERIAL
                                   CONTRACTS

None.

<PAGE>

                                    EXHIBIT D

                            ACKNOWLEDGMENT OF PLEDGE

PARTNERSHIP: _______________                INTEREST OWNER:_____________________

      BY THIS ACKNOWLEDGMENT OF PLEDGE, dated as of ______________________ ,
2005, (the "PARTNERSHIP") hereby acknowledges the pledge in favor of Goldman
Sachs Specialty Lending, L.P. ("PLEDGEE"), as Collateral Agent under that
certain Pledge and Security Agreement dated as of _____________, 2005 (as
amended, modified, supplemented, or restated from time to time, the "SECURITY
AGREEMENT"), against, and a security interest in favor of Pledgee in, all of
_____________`s (the "INTEREST OWNER") rights in connection with any partnership
interest in the Partnership now and hereafter owned by the Interest Owner
("PARTNERSHIP INTEREST").

      A. Pledge Records. The Partnership has identified Pledgee's interest in
all of the Interest Owner's right, title, and interest in and to all of the
Interest Owner's Partnership Interest as subject to a pledge and security
interest in favor of Pledgee in the Partnership Records.

      B. Partnership Distributions, Accounts, and Correspondence. The
Partnership hereby acknowledges that (i) all proceeds, distributions, and other
amounts payable to the Interest Owner, including, without limitation, upon the
termination, liquidation, and dissolution of the Partnership shall be paid and
remitted to the Pledgee upon demand, (ii) all funds in deposit accounts shall be
held for the benefit of Pledgee, and (iii) all future correspondence,
accountings of distributions, and tax returns of the Partnership shall be
provided to the Pledgee. The Partnership acknowledges and accepts such direction
and hereby agrees that it shall, upon the written demand by Collateral Agent,
pay directly to Collateral Agent at such address any and all distributions,
income, and cash flow arising from the Partnership Interests whether payable in
cash, property or otherwise, subject to and in accordance with the terms and
conditions of the Partnership. The Pledgee may from time to time notify the
Partnership of any change of address to which such amounts are to be paid.

                     REMAINDER OF PAGE INTENTIONALLY BLANK.
                            SIGNATURE PAGE TO FOLLOW.

<PAGE>

     EXECUTED as of the date first stated in this Acknowledgment of Pledge.

                                            By: ________________________________
                                                Name: __________________________
                                                Title:__________________________

                                            [PARTNERSHIP]

                                            By: _______________________________,
                                                as General Partner

                                                By: ____________________________
                                                    Name: ______________________
                                                    Title: _____________________

                           ACKNOWLEDGEMENT OF PLEDGE
                                 SIGNATURE PAGE<PAGE>

                                                                    EXHIBIT 10.1

                              OPERATING AGREEMENT OF
                              NNN 2003 VALUE FUND, LLC

THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, NOR APPROVED OR DISAPPROVED BY THE UNITED STATES SECURITIES
AND EXCHANGE COMMISSION NOR BY THE SECURITIES REGULATORY AUTHORITY OF ANY STATE,
NOR HAS ANY COMMISSION OR AUTHORITY PASSED UPON OR ENDORSED THE MERITS OF THIS
OFFERING OR THE ACCURACY OR ADEQUACY OF ANY DISCLOSURE MADE IN CONNECTION
THEREWITH. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE
SECURITIES OFFERED HEREBY MAY NOT BE RESOLD WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS OR
EXEMPTION THEREFROM.

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                               OPERATING AGREEMENT
                                       OF
                            NNN 2003 VALUE FUND, LLC

      This Operating Agreement is entered into by and among Triple Net
Properties, LLC, a Virginia limited liability company, as the Manager, Triple
Net Properties, LLC, as the Initial Member, and Triple Net Properties Realty,
Inc, a California corporation, as the Special Member (the "Special Member")
pursuant to the Act on the following terms and conditions.

1.    Organization.

      1.1   Formation. The Certificate of Formation has been filed with the
Secretary of State in accordance with and pursuant to the Act. Lara D. Coleman
is hereby designated as an "authorized person" within the meaning of the Act,
and has executed, delivered and filed the Certificate of Formation with the
Secretary of State. Upon the filing of the Certificate with the Secretary of
State, the powers of Lara D Coleman as an "authorized person" shall
automatically cease, and the Manager thereupon shall become the sole "authorized
person" within the meaning of the Act.

      1.2   Name and Place of 'Business. The name of the Company shall be NNN
2003 Value Fund, LLC, and its principal place of business shall be 1551 N.
Tustin Avenue, Suite 200, Santa Ana, California 92705. The Manager may change
such name, place of business or establish additional places of business for the
Company as the Manager, in its sole and absolute discretion, may determine to be
necessary or desirable

      1.3   Business and Purpose of the Company. The sole purpose of the Company
is to acquire, own, hold, operate whole or undivided tenant in common interests
in, dispose of, and manage the Company's Interests in the Properties, together
with such other activities as may be necessary, incidental, or appropriate in
connection therewith as determined by the Manager, in its sole and absolute. The
Company shall not hold or acquire, directly or indirectly, any ownership
interest (legal or equitable) in any real or personal property other than the
Interests, or become a shareholder of, or member or partner in, any entity which
acquires or holds any property other than the Interests.

      1.4   Term. This Agreement shall remain in full force and effect until the
Company is terminated in accordance with Section 13 of this Agreement.

      1.5   Required Filings. The Manager shall execute, acknowledge, file,
record and/or publish such certificates and documents as may be required by this
Agreement or by law in connection with the formation and operation of the
Company.

      1.6   Registered Office and Registered Agent. The Company's initial
registered office and initial registered agent shall be as provided in the
Certificate of Formation. The registered office and registered agent may be
changed from time to time by the Manager, it its sole and absolute discretion,
as provided by the Act.

      1.7   Certain Transactions. Notwithstanding any other duty existing at law
or in equity, any Manager, Member, Economic Interest Owner, or any Affiliate, or
any shareholder, officer, director, employee, partner, member, manager or any
person owning an interest therein, may engage in or possess an interest in any
other business or venture of any nature or description, whether or not
competitive with the Company, including, but not limited to, the acquisition,
syndication, ownership, financing, leasing, operation, maintenance, management,
brokerage, construction and development of property similar to the

<PAGE>

Properties and no Manager, Member or other person or entity shall have any
interest in such other business or venture as a result of their ownership of
Investor Units in the Company.

      1.8   Prohibition Against Dissolution. Notwithstanding anything to the
contrary contained in this Agreement, the Company, Manager and Members, to the
fullest extent permitted by law, hereby waive their right to dissolve or
terminate (and waive their right to consent to the dissolution or termination
of) the Company or this Agreement, and shall not take any action towards that
end, so long as any obligation exists under any Loan, except upon the express
prior written consent of each Lender which has prohibited such activities in the
Loan Documents without obtaining the Lender's prior consent. Any amendments to
this Section 1.8, Section 1.3 ("Business and Purpose of the Company"), Article
13 ("Termination and Dissolution of the Company"), or the Certificate of
Formation of the Company (other than as required by law) shall require the prior
written consent of each Lender which has prohibited such activities in the Loan
Documents without obtaining the Lender's prior consent. This paragraph shall
cease to be of further force or effect if the Company has no outstanding
indebtedness or other obligation of any kind whatsoever owing or due any Lender.

2.    Definitions. Definitions for this Agreement are set forth on Exhibit A and
are incorporated herein.

3.    Capitalization and Financing.

      3.1   Members' Capital Contributions.

            3.1.1 Initial Member. The Initial Member shall contribute the sum
of $100 in cash to the Company, but shall not receive any Investor Units
therefor. On the first business day following the admission of additional
Members, the Initial Member's $100 Capital Contribution shall be returned, and
it shall cease to be a Member. The Members hereby consent to the Initial
Member's withdrawal of its Capital Contribution and waive any right, claim or
action they may have against the Manager by reason of its having been a Member.

            3.1.2 Investor Units. The Company is hereby authorized to sell and
issue not more than 10,000 Investor Units pursuant to the Memorandum at a
purchase price of $5,000 per Investor Unit, which number of Units may be
adjusted by the Manager, in its sole and absolute discretion, and to admit as
Members each Person who acquires Investor Units, provided that the Manager has
accepted at least $5,000,000 of aggregate subscriptions for Investor Units. The
Offering shall terminate on the Offering Termination Date.

            3.1.3 Payment of Purchase Price. The purchase price of each Investor
Unit shall be paid in full, in cash, at the time of execution of the
Subscription Agreement. Payment of the purchase price for an Investor Unit shall
constitute the Member's Capital Contribution.

            3.1.4 Subscription Agreement. Each person desiring to acquire
Investor Units and become a Member shall tender to the Company a Subscription
Agreement for the number of Investor Units desired, together with the full
Subscription Payment for the Investor Units so subscribed. The Company shall
accept or reject each Subscription Agreement within 30 days of receipt (and the
failure by the Company to accept a Subscription Agreement within said 30 days
shall constitute a rejection thereof). Acceptance of a Subscription Agreement
shall be evidenced by written confirmation from the Manager. Upon the acceptance
of a Subscription Agreement, the accompanying Subscription Payment shall become
a Capital Contribution by such subscriber. The Company may accept subscriptions
from "benefit plans" (as defined by ERISA); provided, however, that at all times
benefit plans must own, in the aggregate, less than twenty-five (25%) of the
total value of the Investor Units then outstanding.

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            3.1.5 Depository Account. Upon acceptance by the Company of each
Subscription Agreement, the accompanying Subscription Payment shall be placed in
an interest-bearing escrow account ("Depository Account") at a bank or financial
institution selected by the Manager, in its sole and absolute discretion, and
held there until such time ("Impound Release Date") as $5,000,000 in the
aggregate of collected Subscription Payments have been deposited. Upon receipt
of at least $5,000,000 of collected funds from accepted Subscription Agreements,
funds in the Depository Account shall be released to the Company. After the
Impound Release Date, any additional Subscription Payments received for Investor
Units shall be sent directly to, and retained by, the Company. Each Subscriber
Investor Unit shall be admitted to the Company on the first day of the calendar
month following the month in which the Company accepts such subscriber's
Subscription Agreement, unless admitted earlier by the Manager, in its sole and
absolute discretion. All subscriptions shall be accepted or rejected by the
Company within 30 days of their actual receipt by the Company. If rejected, all
Subscription Payments shall be returned to the subscriber.

            3.1.6 Cancellation of Offering If the Company has not accepted
Subscription Payments for a sufficient number of Investor Units on or before
the Offering Termination Date, the Offering shall be canceled and all
Subscription Payments received shall be promptly refunded to the subscribers.

            3.1.7 Interest from Depository Account. Within 45 days after any
Subscription Payment for Investor Units is released from the Depository Account
or upon cancellation of the Offering as provided in Section 3.1.6, an allocable
share of the interest earned by the Depository Account while the Subscription
Payment was deposited therein shall be paid to each subscriber, based on the
actual number of days such Subscription Payment was deposited in the Depository
Account and the actual amount of interest earned during such period on funds in
the Depository Account,

            3.1.8 Manager as Member. The Manager and/or Affiliates may purchase
Investor Units for the same price and upon the same terms and conditions, as all
other purchasers thereof, net of selling commissions and expenses and certain
other items as described in the Memorandum. As a result, the Manager or
Affiliates shall be admitted to the Company as Members with respect to such
Investor Units and shall be entitled to all rights as Members appurtenant
thereto, including but not limited to, the right to vote on certain Company
matters as provided for in this Agreement, and to receive Distributions and
allocations attributable to the Investor Units so purchased.

            3.1.9 Admission of a Member. To the extent required by law, the
Manager shall amend this Agreement and take such other action as the Manager
deems necessary or appropriate promptly after receipt of the Members' Capital
Contributions to reflect the admission of those persons as Members of the
Company.

            3.1.10 Liabilities of Members. Except as specifically provided in
this Agreement or as required by law, neither the Manager nor any Member shall
be required to make any additional Capital Contributions to the Company and no
Manager or Member shall be liable for the debts, liabilities, contracts, or any
other obligations of the Company solely by reason of being a Manager or Member
of the Company, nor shall the Manager or the Members be required to lend any
funds to the Company or to repay to the Company, any Member, any creditor of the
Company or any other person, any portion or all of any deficit balance in a
Member's Capital Account.

      3.2   Affiliate Loans. Cunningham Lending Group, LLC, an Affiliate of the
Initial Member, may, but will have no obligation to, make loans to the Company
to acquire the Properties, pay operating expenses or for any other business
purpose. Notwithstanding the foregoing, for so long as the Mortgage

                                       3
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Lien exists on all or any of the Properties, the Company shall not incur,
assume, or guaranty any indebtedness, including but not limited to any Affiliate
loans as otherwise permitted under this Section 3.2, other than any Loan and
trade payables relating to the operation of the Properties as permitted by the
Loan Documents.

      3.3   Company Loans. The Company shall have no authority to borrow money
or incur indebtedness on behalf of the Company (other than normal trade accounts
payable, lease obligations in the ordinary course of business, or loans from the
Manager, Affiliates of the Manager or Cunningham Lending Group, LLC or otherwise
permitted by the Loan Documents) or grant consensual liens on the Company's
property; provided, however, that notwithstanding anything herein to the
contrary, the Company is authorized to borrow pursuant to each Loan, and the
Manager is hereby authorized to execute and deliver the Loan Documents and the
Tenants in Common Agreement but may not incur any other indebtedness except as
expressly permitted in this Section 33.

      3.4   Third Party Beneficiaries. The parties to this Agreement shall be
entitled to all of the privileges, benefits and rights contained herein; no
other party shall be a third party beneficiary or have any rights hereunder or
be able to enforce any provision contained herein.

4.    Allocation of Tax Items.

      4.1   Generally. After giving effect to the special allocations contained
in Section 4.2, Net Income and Net Loss shall be allocated to the Members'
Capital Accounts in such manner as to cause each Member's Capital Account to
equal the amount that such Member would receive from the Company pursuant to
Section 5.2 hereof if on the last day of such year (a) all of the Company's
assets that are then secured by nonrecourse debt were sold for an amount equal
to such debt, (b) all of the Company's other assets were sold for an amount
equal to their Book Value, (c) all of the Company's liabilities were satisfied
and (d) all remaining sale proceeds were distributed to the Members in
accordance with Section 5.2 hereof To the extent necessary to produce target
Capital Account balances provided above, items of gross income and gain or
deduction shall consist of a proportionate amount of each item of Company gross
income and gain or deduction, as the case may be, for such year.

      4.2   Special Allocations.

                  (a)   Qualified Income Offset. Except as provided in Section
4.2(c), in the event any Member unexpectedly receives any adjustments,
allocations, or distributions described in Treasury Regulations Sections
1.704-l(b)(2)(ii)(d)(4), 1.704-1 (b)(2)(ii)(d)(5), or 1.704-l(b)(2)(ii)(d)(6),
items of Company income and gain shall be specially allocated to such Member in
an amount and manner sufficient to eliminate, to the extent required by the
Treasury Regulations, the Adjusted Capital Account Deficit created by such
adjustment, allocation or distribution as quickly as possible.

                  (b)   Gross Income Allocation. Net Loss shall not be allocated
to any Member to the extent such allocation would cause any Member to have an
Adjusted Capital Account Deficit at the end of a fiscal year. In the event any
Member has an Adjusted Capital Account Deficit at the end of any fiscal year,
each such Member shall be specially allocated items of Company gross income and
gain in the amount of such Adjusted Capital Account Deficit as quickly as
possible.

                  (c)   Company Minimum Gain Chargeback. Notwithstanding any
other provision of this Section 4, if there is a net decrease in Company Minimum
Gain during any Company fiscal year, each Member shall be specially allocated
items of Company income and gain for such year (and, if necessary, subsequent
years) in an amount equal to such Member's share of the net decrease in Company
Minimum Gain, determined in accordance with Treasury Regulations Section
1.704-2(g)(2)

                                      4
<PAGE>

This Section 4.2(c) is intended to comply with the partnership minimum gain
chargeback requirement in the Treasury Regulations and shall be interpreted
consistently therewith. This provision shall not apply to the extent the
Member's share of net decrease in Company Minimum Gain is caused by a guaranty,
refinancing, or other change in the debt instrument causing it to become
partially or wholly recourse debt or Member Nonrecourse Debt, and such Member
bears the economic risk of loss (within the meaning of Treasury Regulations
Section 1.752-2 for the newly guaranteed, refinanced or otherwise changed debt
or to the extent the Member contributes cash to the capital of the Company that
is used to repay the Nonrecourse Debt, and the Member's share of the net
decrease in Company Minimum Gain results from the repayment.

                  (d)   Member Minimum Gain Chargeback. Notwithstanding any
other provision of this Section 4, except Section 4.2(c), if there is a net
decrease in Member Minimum Gain, any Member with a share of that Member Minimum
Gain (as determined under Treasury Regulations Section 1.704-2(i)(5)) as of the
beginning of the year shall be allocated items of Company income and gain for
such year (and, if necessary, subsequent years) in an amount equal to such
Member's share of the net decrease in Member Minimum Gain, determined in
accordance with Treasury Regulations Section 1.704-2(g)(2). This Section shall
not apply to the extent the net decrease in Member Minimum Gain arises because
the liability ceases to be Member Nonrecourse Debt due to conversion,
refinancing or other change in a debt instrument that causes it to become
partially or wholly a Nonrecourse Debt. This Section is intended to comply with
the partner minimum gain chargeback requirements in the Treasury Regulations and
shall be interpreted consistently therewith and applied with the restrictions
attributable thereto.

                  (e)   Nonrecourse Deductions. Nonrecourse Deductions for any
fiscal year or other period shall be allocated 100% to the Investor Units.

                  (f)   Member Nonrecourse Deductions. Member Nonrecourse
Deductions for any fiscal year shall be allocated to the Member who bears the
economic risk of loss as set forth in Treasury Regulations Section 1.752-2 with
respect to the Member Nonrecourse Debt. If more than one Member bears the
economic risk of loss for a Member Nonrecourse Debt, any Member Nonrecourse
Deductions attributable to that Member Nonrecourse Debt shall be allocated among
the Members according to the ratio in which they bear the economic risk of loss.

                  (g)   Code Section 754 Adjustments. To the extent an
adjustment to the adjusted tax basis of any Company asset pursuant to Code
Section 734(b) or Code Section 743(b) is required, pursuant to Treasury
Regulations Section l.704-l(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 such
gain or loss shall be specially allocated to the Members in a manner consistent
with the manner in which their Capital Accounts are required to be adjusted
pursuant to such section of the Treasury Regulations.

      4.3   Curative Allocations. Notwithstanding any other provision of this
Agreement, the Regulatory Allocations shall be taken into account in allocating
items of income, gain, loss and deduction among the Members so that, to the
extent possible, the net amount of such allocations of other items and the
Regulatory Allocations to each Member shall be equal to the net amount that
would have been allocated to each such Member if the Regulatory Allocations had
not occurred.

      4.4   Contributed Properties. Notwithstanding any other provision of this
Agreement, the Members shall cause depreciation and/or cost recovery deductions
and gain or loss attributable to property contributed by a Member or revalued by
the Company to be allocated among the Members for

                                      5
<PAGE>

income tax purposes in accordance with Section 704(c) of the Code and the
Treasury Regulations promulgated thereunder.

      4.5   Recapture Income. The portion of each Member's distributive share of
Company Net Income that is characterized as ordinary income pursuant to Section
1245 or 1250 of the Code shall be proportionate to the amount of Net Income or
Net Loss which included the corresponding depreciation deductions that were
allocated to such Member as compared with the amount of depreciation deductions
allocated to all Members.

      4.6   Allocation Among Investor Units. Except as otherwise provided in
this Agreement, all Distributions and allocations made to the Investor Units
shall be in the ratio of the number of Investor Units held by each such Member
on the date of such allocation (which allocation date shall be deemed to be the
last day of each month) to the total outstanding Investor Units as of such date,
and, except as otherwise provided in this Agreement without regard to the number
of days during such month that the Investor Units were held by each Member. For
purposes of this Section 4, an Economic Interest Owner shall be treated as a
Member. Members who purchase Investor Units at different times during the
Company tax year shall be allocated Net Income and Net Loss using the monthly
convention set forth in Section 4.7.

      4.7   Allocation of Company Items. Except as otherwise provided herein,
whenever a proportionate part of Net Income or Net Loss is allocated to a
Member, every item of income, gain, loss or deduction entering into the
computation of such Net Income or Net Loss, and every item of credit or tax
preference related to such allocation and applicable to the period during which
such Net Income or Net Loss was realized shall be allocated to the Owner in the
same proportion.

      4.8   Assignment.

            4.8.1 In the event of the assignment of an Investor Unit, the Net
Income and Net Loss shall be apportioned as between the Member and his assignee
based upon the number of months of their respective ownership during the year in
which the assignment occurs, without regard to the results of the Company's
operations during the period before or after such assignment. Distributions
shall be made to the holder of record of the Investor Units as of the date of
the Distribution. An assignee who receives Investor Units during the first 15
days of a month will receive any allocations relative to such month. An assignee
who acquires Investor Units on or after the sixteenth day of a month will be
treated as acquiring his Investor Units on the first day of the following month.

           4.8.2 In the event of the assignment of the Manager's interest, the
allocations of Net Income or Net Loss shall be as agreed between the Manager and
its assignee. In the absence of an agreement, the Net Income, Net Loss and
Distributions shall be allocated in a manner similar to that provided in Section
4.7.

      4.9   Power of Manager to Vary Allocations. It is the intent of the
Members that each Member's share of Net Income and Net Loss be determined and
allocated in accordance with Section 704(b) and Section 514(c)(9) of the Code,
and the provisions of this Agreement shall be so interpreted.
Therefore, if the Company is advised by the Company's legal counsel that the
allocations provided in this Section 4 are unlikely to be respected for federal
income tax purposes, the Manager is hereby granted the power to amend the
allocation provisions of this Agreement to the minimum extent necessary to
comply with Section 704(b) and Section 514(c)(9) of the Code and effect the plan
of allocations and distributions provided for in this Agreement.

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      4.10  Consent of Members. The allocation methods of Net Income and Net
Loss are hereby expressly approved to by each Member as a condition of becoming
a Member.

      4.11  Withholding Obligations.

            4.11.1 If the Company is required (as determined in good faith by
the Manager) to make a payment ("Tax Payment") with respect to any Member to
discharge any legal obligation of the Company or the Manager to make payments to
any governmental authority with respect to any federal, foreign, state or local
tax liability of such Member arising as a result of such Member's interest in
the Company, then, notwithstanding any other provision of this Agreement to the
contrary, the amount of any such Tax Payment shall be deemed to be a loan by the
Company to such Member, which loan shall bear interest at the Prime Rate and be
payable upon demand or by offset to any Distribution which otherwise would be
made to such Member.

            4.11.2 If and to the extent the Company is required to make any Tax
Payment with respect to any Member, or elects to make payment on any loan
described in Section 4.11.1 by offset to a Distribution to a Member, either (a)
such Member's proportionate share of such Distribution shall be reduced by the
amount of such Tax Payment, or (b) such Member shall pay to the Company prior to
such Distribution an amount of cash equal to such Tax Payment. In the event a
portion of a Distribution in kind is retained by the Company pursuant to clause
(a) above, such retained property may, in the discretion of the Manager, either
(i) be distributed to the other Members, or (ii) be sold by the Company to
generate the cash necessary to satisfy such Tax Payment. If interests in the
Properties are sold, then for purposes of income tax allocations only under this
Agreement, any gain or loss from such sale or exchange shall be allocated to the
Member to whom the Tax Payment relates. If the interest in the Properties is
sold at a gain, and the Company is required to make any Tax Payment on such
gain, the Member to whom the gain is allocated shall pay the Company prior to
the due date of Tax Payment an amount of cash equal to such Tax Payment.

            4.11.3 The Manager shall be entitled to hold back any Distribution
to any Member to the extent the Manager believes in good faith that a Tax
Payment will be requited with respect to such Member in the future and the
Manager believes that there will not be sufficient subsequent Distributions to
make such Tax Payment.

5.    Distributions.

      5.1   Cash from Operations. Cash from Operations will be distributed as
follows: (i) 100% to the Members until the Members have received their Priority
Return; and (ii) the balance, to be shared by the Members and the Manager in
proportion to the Residuary Sharing Ratio.

      5.2   Cash from Capital Transactions. Cash from Capital Transactions will
be distributed as follows: (i) first, to the Members, an amount equal to their
Unrecovered Equity; (ii) second, to the Members, an amount equal to their
Priority Return; and (iii) the balance, to be shared by the Members and the
Manager in proportion to the Residuary Sharing Ratio.

      5.3   Restrictions. The Company intends to make periodic distributions of
substantially all cash determined by the Manager to be distributable, subject to
the following: (a) Distributions may be restricted or suspended for periods when
the Manager determines in its reasonable discretion that it is in the best
interest of the Company to do so; and (b) all Distributions are subject to the
payment, and the maintenance of reasonable reserves for payment, of Company
obligations. Notwithstanding any provision to the contrary contained herein, the
Company shall not be required to make a distribution to

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<PAGE>
any Member on account of his interest in the Company if such distribution would
violate Section 18-607 of the Act or any other applicable law.

6.    Compensation to the Manager and Affiliates.

      6.1   Manager's and Affiliates' Compensation. The Manager and its
Affiliates shall receive compensation from the Company for services rendered or
to be rendered only as specified in this Agreement and the Management Agreement,
a copy of which is attached as Exhibit B. If any provision of the Management
Agreement is inconsistent with any provision contained in this Agreement, then
the provision contained in the Management Agreement shall control and the
inconsistent provision herein shall be of no force or effect.

            6.1.1 Property Management Fee. The Management Agreement provides
that the Property Manager or an Affiliate will receive a monthly property
management fee ("Property Management Fee") for managing the Properties equal to
6% of Gross Revenues (as defined in the Management Agreement).

            6.1.2 Leasing Commission. The Management Agreement provides that the
Property Manager or an Affiliate will receive a leasing commission ("Leasing
Commission") equal to six percent (6%) of the value of any lease entered into
during the term of this Agreement and three percent (3%) with respect to any
renewals. Any leasing fees due outside leasing agents or brokers will be paid by
the Manager from these commissions. The value of the lease shall be calculated
by totaling the minimum monthly rent (or similar rent) for the term of the
lease. The term of the lease shall not exceed five (5) years for purposes of the
foregoing computation and shall be exclusive of option periods. If another
broker represents the tenant, then the Property Manager may cooperate with that
broker on terms and conditions acceptable to the Property Manager with
commissions to the other broker to be paid by the Tenants in Common. The Manager
may use outside leasing agents, provided that the Manager pays any commissions
that may be due.

            6.1.3 Construction Management Fee. The Management Agreement provides
that the Property Manager or an Affiliate will receive a construction management
fee ("Construction Management Fee") equal to 5% of any amount (including
professional services) up to $25,000, 4% of any amount over $25,000 but less
than $50,000 and 3% of any amount in excess of $50,000, which is expended in any
calendar year for construction, tenant improvements or repair of the Properties;
provided, however, that this fee shall only be applicable in the event outside
contractors are used.

            6.1.4 Selling Commission. The Management Agreement provides that the
Property Manager or an Affiliate will receive to a selling commission (the
"Selling Commission") of up to 5% of the gross sales price of the Properties in
a sale to a third party. In addition, third party brokers or selling agents may
be entitled to up to 4% of the gross sales price with the balance retained by
the Property Manager; provided, however, that the aggregate Properties Selling
Commission payable shall not exceed 5% of the gross sales price of the
Properties. The Properties Selling Commission will not be paid if the Property
Manager is terminated for cause pursuant to Section 10.2 of the Management
Agreement.

            6.1.5 Loan Fee. The Management Agreement provides that the Property
Manager or an Affiliate will receive a loan fee ("Loan Fee") equal to up to 1%
of the principal amount of any loan obtained for the Company at any time;
provided, however, that the fee paid to the Property Manager or an Affiliate and
any loan fee paid to any other person (other than a Lender) as a result of each
loan shall not exceed 1%.

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<PAGE>

            6.1.6 Set Up Fee. The Management Agreement provides that if the
Property Manager is terminated without cause (as defined in Section 10.1 of the
Management Agreement), then the Manager will receive the set up fee described
therein.

            6.1.7 Commissions and Due Diligence Reimbursement. The Memorandum
provides that certain broker-dealers ("Broker-Dealers," collectively the
"Selling Group") who are members of the National Association of Securities
Dealers, Inc. ("NASD") will receive commissions of up to 8% of the gross
proceeds ("Gross Proceeds") of the Offering ("Selling Commissions"). NNN Capital
Corp., an Affiliate of the Initial Member, will receive a nonaccountable
marketing and due diligence allowance in the amount of 1.5% of the Gross
Proceeds, which it may reallow to other members of the Selling Group. In
addition, NNN Capital Corp. will receive a nonaccountable marketing due
diligence expense allowance in the amount of 1% of the Gross Proceeds, which it
will not reallow to other members of the Selling Group on an accountable basis.
The total aggregate amount of commissions, marketing and due diligence expense
reimbursements (collectively, "Selling Commissions and Expenses") will not
exceed 10.5% of the Gross Proceeds.

      6.2   Company Expenses.

            6.2.1 Operating Expenses. Subject to the limitations set forth in
Section 6.2.2, the Company shall pay directly, or reimburse the Manager, as the
case may be, for all of the costs and expenses of the Company's operations,
including, without limitation, the following costs and expenses: (a) all
Organization and Offering Expenses advanced or otherwise paid by the Manager;
(b) all costs of personnel employed by the Company and directly involved in the
Company's business; (c) all compensation due to the Manager or its Affiliates;
(d) all costs of personnel employed by the Manager or its Affiliates and
directly involved in the business of the Company; (e) all costs of borrowed
money, taxes and assessments on its Interests in the Properties and other taxes
applicable to the Company; (f) legal, accounting, audit, brokerage, and other
fees; (g) fees and expenses paid to independent contractors, mortgage bankers,
real estate brokers, and other agents; (h) costs of acquiring, owning,
developing, improving, operating, and disposing of its Interests in the
Properties; (i) expenses incurred in connection with the alteration,
maintenance, repair, remodeling, refurbishment, leasing and operation of its
Interests in the Properties; (j) all expenses incurred in connection with the
maintenance of Company books and records, the preparation and dissemination of
reports, tax returns or other information to Members and the making of
Distributions to the Members; (k) expenses incurred in preparation and filing
reports or other information with appropriate regulatory agencies; (1) expenses
of insurance as required in connection with the business of the Company, other
than any insurance insuring the Manager against losses for which it is not
entitled to be indemnified under Section 7.8; (m) to the fullest extent
permitted by law, costs incurred in connection with any litigation in which the
Company may become involved, or any examination, investigation, or other
proceedings conducted by any regulatory agency, including legal and accounting
fees; (n) the actual costs of goods and materials used by or for the Company;
(o) the costs of services that could be performed directly for the Company by
independent parties such as legal, accounting, secretarial or clerical,
reporting, transfer agent, data processing and duplicating services but which
are in fact performed by the Manager or its Affiliates, but not in excess of the
lesser of: (i) the actual costs to the Manager or its Affiliates of providing
such services; or (ii) the amounts which the Company would otherwise be required
to pay to independent parties for comparable services in the same geographic
locale; (p) expenses of Company administration, accounting, documentation and
reporting; (q) expenses of revising, amending, modifying, or terminating this
Agreement, the Certificate of formation or similar filings; (r) all travel
expenses incurred in connection with the Company's business, including travel to
and from the Properties on a pro rata basis with other tenants in common owners
of the Properties; and (s) all other costs and expenses incurred in connection
with the business of the Company exclusive of those set forth in Section 6.2.2.

                                       9
<PAGE>

            6.2.2 Manager Overhead. The Manager and its Affiliates shall not be
reimbursed for overhead expenses incurred in connection with the Company,
including, but not limited to: (1) rent, depreciation, utilities, capital
equipment, other administrative items, and (2) the following items paid to any
officer of the Manager or any Affiliate: salaries, fringe benefits, travel
expenses and other administrative items not expressly provided in Section
6.2.1.

            6.2.3 Acquisition Expenses. Notwithstanding Section 6.2.2, the
Manager will be reimbursed for all costs and expenses of any kind or description
advanced or otherwise pad by the Manager in connection with conducting due
diligence on prospective Properties and acquisition of the Properties on a pro
rata basis with any other Tenant in Common owners of the Properties, including
by way of illustration, but not limitation, down payments, closing costs, travel
expenses, legal, environmental and other studies, surveys, escrow deposits and
costs, plus interest at the Manager's cost of funds to borrow funds for the
above purposes.

7.    Authority and Responsibilities of the Manager.

      7.1   Number. Tenure and Qualifications. The Company shall have one
Manager, which shall be Triple Net Properties, LLC. The Manager shall hold
office until it is removed, withdraws or resigns.

      7.2   Management. The business and affairs of the Company shall be managed
solely by the Manager. Except as otherwise set forth in this Agreement, the
Manager shall have full and complete authority, power and discretion to manage
and control the business, affairs and all property of the Company, to make all
decisions regarding those matters and to perform any and all other acts or
activities customary or incident to the management of the Company's business,
The Company shall have no other managers or officers.

      7.3   Manager Authority. The Manager shall have all authority, rights and
powers conferred by law (subject only to Section 7.4) and those required for or
appropriate to the management of the Company's business, which include, by way
of illustration, but not limitation, the right, authority and power to cause the
Company to:

            7.3.1 Acquire, hold, develop, lease, rent, operate, sell, exchange,
subdivide and otherwise dispose of all property, including its Interest in one
or more of the Properties;

            7.3.2 Borrow money, and, if security is required therefor, to pledge
or mortgage or subject the Interests and or Properties to any security device,
to obtain replacements of any mortgage or other security device and to prepay,
in whole or in part, refinance, increase, modify, consolidate, or extend any
mortgage or other security device. All of the foregoing shall be on such terms
and in such amounts as the Manager, in its sole and absolute discretion, deems
to be in the best interest of the Company;

            7.3.3 Place record title to, or the right to use its interest in the
Properties in the name or names of a nominee or nominees for any purpose
convenient or beneficial to the Company;

            7.3.4 Enter into such contracts and agreements as the Manager
determines to be reasonably necessary or appropriate in connection with the
Company's business and purpose (including contracts with Affiliates of the
Manager), and any contract of insurance that the Manager deems necessary or
appropriate for the protection of the Company and the Manager, including errors
and omissions insurance, for the conservation of Company assets, or for any
purpose convenient or beneficial to the Company;

                                       10

<PAGE>

            7.3.5 Employ persons, who may be Affiliates of the Manager, in the
operation and management of the business of the Company;

            7.3.6 Prepare or cause to be prepared reports, statements, and other
relevant information for distribution to the Members.

            7.3.7 Open accounts and deposits and maintain funds in the name of
the Company in banks, savings and loan associations, "money market," mutual
funds and other as the Manager, in its sole and absolute discretion may deem to
be necessary or desirable;

            7.3.8 Cause the Company to make or revoke any of the elections
referred to in the Code, provided that the Manager shall have no obligation to
make any such elections;

            7.3.9 Select as its accounting year a calendar or fiscal year as may
be approved by the Internal Revenue Service, provided that the Company initially
intends to adopt the calendar year;

            7.3.10 Determine the appropriate accounting method or methods to be
used by the Company;

            7.3.11 In addition to any amendments otherwise authorized herein,
amend this Agreement without any action on the part of the Members:

                  (a)   To add to the representations, duties, services or
      obligations of the Manager or its Affiliates, for the benefit of the
      Members;

                  (b)   To cure any ambiguity or mistake, to correct or
      supplement any provision herein that may be inconsistent with any other
      provision herein, or to make any other provision with respect to matters
      or questions arising under this Agreement that will not be inconsistent
      with the provisions of this Agreement;

                  (c)   To delete or add any provision of this Agreement
      required to be so deleted or added for the benefit of the Members by the
      staff of the Securities and Exchange Commission or by any state "Blue Sky"
      Commissioner or similar official;

                  (d)   To amend this Agreement to reflect the addition or
      substitution of Members or the reduction of the Capital Accounts upon the
      return of capital to the Members;

                  (e)   To minimize the adverse impact of, or comply with, any
      final regulation of the United States Department of Labor, or other
      federal agency having jurisdiction, defining "plan assets" for ERISA
      purposes;

                  (f)   To reconstitute the Company under the laws of another
      state if beneficial for tax or other purposes;

                  (g)   As required by any lender who has made a Loan secured by
      any of the Properties or as required by a lender in connection with a
      refinancing that has been properly approved by the Company; and

                  (h)   To execute, acknowledge and deliver any and all
      instruments to effectuate the foregoing, including by way of illustration,
      but not limitation, the execution, acknowledgment and delivery of any such
      instrument by the attorney-in-fact for the Manager

                                       11

<PAGE>

      under a special or limited power of attorney, and to take all such actions
      in connection therewith as the Manager, in its sole and absolute
      discretion, shall deem necessary or appropriate with the signature of the
      Manager acting alone.

            7.3.12 Require in any Company contract that the Manager shall not
have any personal liability, but that the person or entity contracting with the
Company is to look solely to the Company and its assets for satisfaction;

            7.3.13 Lease personal property for use by the Company;

            7.3.14 Establish reserves from income in such amounts as the Manager
may deem appropriate;

            7.3.15 Temporarily invest the proceeds from sale of Investor Units
in short-term, highly-liquid investments;

            7.3.16 Make secured or unsecured loans to the Company and receive
interest at the rates set forth herein;

            7.3.17 the right (but not the obligation) to represent the Company
and the Members as "tax matters partner" within the meaning of the Code in
discussions with the Internal Revenue Service regarding the tax treatment of
items of Company income, loss, deduction or credit, or any other matter
reflected in the Company's returns, and, if deemed in the best interest of the
Members, to agree to final Company administrative adjustments or file a petition
for a readjustment of the Company items in question with the applicable court;

            7.3.18 Redeem or repurchase Investor Units on behalf of the Company;

            7.3.19 Hold an election for a successor Manager before the
resignation, expulsion or dissolution of the Manager;

            7.3.20 Initiate legal actions, settle legal actions and defend legal
actions on behalf of the Company;

            7.3.21 Admit itself as a Member;

            7.3.22 Take all actions and make any decision on behalf of the
Company under the Management Agreement;

            7.3.23 Execute and amend the Management Agreement on behalf of the
Company;

            7.3.24 Enter into any transaction with any partnership or venture;

            7.3.25 Place all or a portion of its Interests in the Properties in
a single purpose or bankruptcy remote entity, or otherwise structure or
restructure the Company to accommodate any financing for its Interests in the
Properties and for other good business purposes such as limiting liability;

            7.3.26 Perform any and all other acts which the Manager is obligated
to perform hereunder;

                                       12

<PAGE>

            7.3.27 Subcontract with Affiliates and third parties, in the
Manager's sole and absolute discretion, to perform some or all management
functions set forth herein; and

            7.3.28 Execute, acknowledge and deliver any and all instruments to
effectuate the foregoing and take all such actions in connection therewith as
the Manager may deem necessary or appropriate. Notwithstanding any other
provision of the Agreement, any and all documents or instruments may be executed
on behalf and in the name of the Company by the Manager.

      7.4   Restrictions on Manager's Authority. Neither the Manager nor any
Affiliates shall have authority to:

            7.4.1 Enter into contracts with the Company that would bind the
Company after the expulsion, Event of Insolvency, or other cessation to exist of
the Manager.

            7.4.2 Use or permit any other person to use Company funds or assets
in any manner except for the exclusive benefit of the Company;

            7.4.3 Alter the primary purpose of the Company;

            7.4.4 Receive from the Company any rebate, kick-back or give-up or
participate in connection with the operation of the Company any reciprocal
business arrangements which would enable it or any Affiliate to do so, excluding
the fees and other items set forth in the Management Agreement or described in
the Memorandum;

            7.4.5 Except for its Interests in the Properties, sell or lease to
the Company any real property in which the Manager or any Affiliate has any
interest without a Majority Vote of the Members;

            7.4.6 Admit another person or entity as the Manager, except with a
Majority Vote of the Members as provided in this Agreement;

            7.4.7 Reinvest Cash from Operations in any additional properties
other than the Properties;

            7.4.8 Confess a judgment against the Company in connection with any
threatened or pending legal action;

            7.4.9 Commingle the Company funds with those of any other Person,
except for (i) the temporary deposit of funds in a bank checking account for the
sole purpose of making Distributions immediately thereafter to the Members and
the Manager or (ii) funds attributable to the Properties and held for use in the
management of the operations of the Properties;

            7.4.10 Directly or indirectly pay or award any finder's fees,
commissions or other compensation to any person engaged by a potential investor
for investment advice as an inducement to such advisor to advise the purchaser
regarding the purchase of Investor Units;

            7.4.11 Merge, combine or "roll-up" the Company into a partnership,
limited liability company or other entity or participate in an UPREIT, DOWNKEIT
or similar transaction with a real estate investment trust or other entity; or

            7.4.12 Vote, or permit to be voted, any Membership Interest owned by
the Manager or any Affiliate to remove the Manager in accordance with Section
9.2.

                                       13

<PAGE>

      7.5   Responsibilities of the Manager. The Manager shall:

            7.5.1 Have a fiduciary responsibility similar to that of a corporate
director for the safekeeping and use of all the funds and assets of the Company;

            7.5.2 Devote such of its time and efforts to the business of the
Company as the Manager in its discretion, exercised in good faith, shall
determine to be necessary to conduct the business of the Company;

            7.5.3 File and publish all certificates, statements, or other
instruments required by law for formation, qualification and operation of the
Company and for the conduct of its business in all appropriate jurisdictions;

            7.5.4 Cause the Company to be protected by public liability,
property damage and other insurance determined by the Manager in its discretion
to be appropriate to the business of the Company;

            7.5.5 At all times use its best efforts to meet applicable
requirements for the Company to be taxed as a partnership and not as an
association taxable as a corporation; and

            7.5.6 Amend this Agreement as necessary to reflect the admission of
Members not later than 90 days after the date of admission or substitution of
Members.

      7.6   Administration of the Company. So long as it is the Manager and the
provisions of this Agreement for compensation and reimbursement of expenses of
the Manager are observed, the Manager shall have the responsibility of providing
continuing administrative and executive support, advice, consultation, analysis
and supervision with respect to the functions of the Company, including
decisions regarding the sale or refinancing or other disposition of Properties,
and compliance with federal, state and local regulatory requirements and
procedures. In this regard, the Manager may retain the services of such
Affiliates or unaffiliated parties as the Manager may deem appropriate to
provide management and financial consultation and advice, and may enter into
agreements for the management and operation of Company assets.

      7.7   Tax Matters Partner. The Members hereby appoint the Manager to act
as the "tax matters partner."

      7.8   Indemnification of Manager.

            7.8.1 The Manager, its members, managers, affiliates, officers,
directors, partners, employees, agents and assigns, shall not be liable for, and
shall be indemnified and held harmless (to the full extent of the Company's
assets and to the maximum extent permitted by applicable law) from, any loss or
damage incurred by them, the Company or the Members in connection with the
business of the Company, including by way of illustration, but not limitation,
costs and reasonable attorneys' fees and any amounts expended in the settlement
of any claims of loss or damage resulting from any act or omission performed or
omitted in good faith, which shall not constitute gross negligence or willful
misconduct, pursuant to the authority granted, to promote the interests of the
Company. Moreover, the Manager shall not be liable to the Company or the Members
because any taxing authorities disallow or adjust any deductions or credits in
the Company income tax returns.

                                       14

<PAGE>

            7.8.2 Notwithstanding Section 7.8.1, the Company shall not indemnify
any Manager, or shareholder, director, officer or other employee thereof, for
liability imposed or expenses incurred in connection with any claim arising out
of a violation of the Securities Act of 1933, as amended, or any other federal
or state securities law, with respect to the offer and sale of the Investor
Units. Indemnification will be allowed for settlements and related expenses in
lawsuits alleging securities law violations, and for expenses incurred in
successfully defending such lawsuits, provided that (i) the Manager is
successful in defending the action; (ii) the indemnification is specifically
approved by the court of law which shall have been advised as to the current
position of the Securities and Exchange Commission (as to any claim involving
allegations that the Securities Act of 1933, as amended, was violated) or1 the
applicable state authority (as to any claim involving allegations that the
applicable state's securities laws were violated); or (iii) in the opinion of
counsel for the Company, the right to indemnification has been settled by
controlling precedent.

            7.8.3 Notwithstanding any provision hereof to the contrary, any
indemnification shall be fully subordinated to any obligations respecting the
Properties and shall not constitute a claim against the Company in the event
that cash flow is insufficient to pay such obligations.

      7.9   No Personal Liability for Return of Capital. The Manager shall not
be personally liable or responsible for the return or repayment of all or any
portion of the Capital Contribution of any Member or any loan made by any Member
to the Company solely by reason of being the Manager of the Company, it being
expressly understood that any such return of capital or repayment of any loan
shall be made solely from the assets (which shall not include any right of
contribution from any Member) of the Company.

      7.10  Authority as to Third Persons.

            7.10.1 Notwithstanding any other provision of this Agreement, no
third party dealing with the Company shall be required to investigate the
authority of the Manager or secure the approval or confirmation by any Member of
any act of the Manager in connection with the Company business. No purchaser of
any property or interest owned by the Company shall be required to determine the
right to sell or the authority of the Manager to sign and deliver any instrument
of transfer on behalf of the Company, or to see to the application or
distribution of revenues or proceeds paid or credited in connection therewith.

            7.10.2 The Manager shall have full authority to execute on behalf of
the Company any and all agreements, contracts, conveyances, deeds, mortgages and
other instruments, and the execution thereof by one or more officers of the
Manager, executing on behalf of the Company shall be the only execution
necessary to bind the Company thereto. No signature of any Member shall be
required.

            7.10.3 The Manager shall have the right by separate instrument or
document to authorize one or more individuals or entities to execute leases and
lease-related documents on behalf of the Company and any leases and documents
executed by such agent shall be binding upon the Company as if executed by the
Manager.

      7.11 Authorization. The Company is authorized to borrow the Loan from the
Lender, and from time to time refinance the Loan. In addition, the Manager, on
behalf of the Company, may enter into, deliver and perform the Loan Documents
and all other documents, agreements, certificates or financing statements
contemplated thereby or related thereto, all without any further act, vote or
approval of any Member or other Person, notwithstanding any other provision in
this Agreement, the Act or applicable law, rule or regulation. The foregoing
authorization shall not be deeded a restriction on the powers of the Manager to
enter into other agreements on behalf of the Company.

                                       15
<PAGE>

8.    Rights, Authority and Voting of the Members.

      8.1   Members Are Not Agents. Pursuant to Section 7, the management of the
Company is vested exclusively in the Manager. No Member, acting solely in the
capacity of a Member, is an agent of the Company nor can any Member in such
capacity bind or execute any instrument on behalf of the Company.

      8.2   Voting by a Member. Members who own Investor Units shall be entitled
to cast one vote for each Investor Unit they own. Except as otherwise
specifically provided in this Agreement or any mandatory provision of the Act,
Members who own Investor Units (but not Economic Interest Owners) shall have the
right to vote only upon the following matters:

            8.2.1 Removal of the Manager as provided in this Agreement;

            8.2.2 Amendment of this Agreement;

            8.2.3 Any merger, combination or "roll-up" of the Company;

            8.2.4 Dissolution and winding up of the Company as set forth in
Section 13.1;

            8.2.5 The sale of all of the assets of the Company (but not the sale
of one or more of the Properties); and

            8.2.6 Election to obtain audited financial statements as set forth
in Section 12.3.2.

            8.2.7 Admission of a Manager or election to continue the business of
the Company after a Manager ceases to be a Manager when there is no remaining
Manager.

            8.2.8 Removal of the Property Manager.

      Notwithstanding any provision hereof to the contrary, the following shall
govern: When acting on matters subject to the vote of the Members,
notwithstanding that the Company is not then insolvent, all of the Members
shall, to the fullest extent permitted by law (including Section 18 - 1101(c) of
the Act), take into account the interest of the Company's creditors, as well as
those of the Members.

      8.3   Member Vote; Consent of Manager. Except as expressly provided in
this Agreement, matters upon which the Members may vote shall require a Majority
Vote of the Members to pass and become effective, The following matters shall
also require the consent of the Manager to pass and become effective:

            8.3.1 Any amendment to this Agreement; and

            8.3.2 The admission of an additional or successor Manager when the
current Manager will continue as such.

      8.4   Meetings of the Members.. The Manager1 may at any time call for a
meeting of the Members, or for a vote without a meeting, on matters on which the
Members are entitled to vote. In addition, the Manager shall call for such a
meeting following receipt of a written request therefor of Members holding more
than 10% of the Investor Units entitled to vote as of the record date. Within 20
days after receipt of such request, the Manager shall notify all Members of
record on the record date of

                                       16

<PAGE>

the Company meeting. The Manager shall give notice of all such meetings by
sending the Members written notice by certified U.S. Mail, with return receipt,
by Federal Express or other guaranteed overnight delivery service.

            8.4.1 Notice. Written notice of each meeting shall be given to each
Member entitled to vote, either personally by certified U.S. mail, with return
receipt requested or other comparable means of written communication, charges
prepaid, addressed to such Member at his address appearing on the books of the
Company or given by him to the Company for the purpose of notice or, if no such
address appears or is given, at the principal executive office of the Company,
or by publication of notice at least once in a newspaper of general circulation
in the city or county in which such office is located. All such notices shall be
sent not less than 10, nor more than 60, days before such meeting. The notice
shall specify the place, date and hour of the meeting and the general nature of
business to be transacted, and no other business shall be transacted at the
meeting.

            8.4.2 Adjourned Meeting and Notice Thereof. When a Members' meeting
is adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting, the Company may transact any
business which might have been transacted at the original meeting. If the
adjournment is for more than 45 days or if after the adjournment a new record
date is fixed for the adjourned meeting, a notice of the adjourned meeting shall
be given to each Member of record entitled to vote at the meeting.

            8.4.3 Quorum. The presence in person or by proxy of the persons
entitled to vote a majority of the Investor Units shall constitute a quorum for
the transaction of business. The Members present at a duly called or held
meeting at which a quorum is present may continue to transact business until
adjournment notwithstanding the withdrawal of enough Members to leave less than
a quorum, if any action taken (other than adjournment) is approved by at least a
Majority Vote or such greater vote as may be required by this Agreement or by
law. In the absence of a quorum, any meeting of Members may be adjourned from
time to time by the vote of a majority of the Investor Units represented either
in person or by proxy, but no other business may be transacted, except as
provided above.

            8.4.4 Consent of Absentees. The transactions of any meeting of
Members, however called and noticed and wherever held, are as valid as though
they occurred at a meeting duly held after regular call and notice, if a quorum
is present either in person or by proxy, and if, either before or after the
meeting, each of the persons entitled to vote, not present in person or by
proxy, signs a written waiver of notice, or a consent to the holding of the
meeting or an approval of the minutes thereof. All waivers, consents and
approvals shall be filed with the Company records or made a part of the minutes
of the meeting.

            8.4.5 Action Without Meeting. Except as otherwise provided in this
Agreement, any action which may be taken at any meeting of the Members may be
taken without a meeting if a consent in writing, setting forth the action so
taken, shall be signed by Members having not less than the minimum number of
votes that would be necessary to authorize or take that action at a meeting at
which all entitled to vote thereon were present and voted. In the event the
Members are requested to consent on a matter without a meeting, each Member
shall be given not less than 10, nor more than 60, days notice. In the event the
Manager or Members representing more than 10% of the Investor Units, request a
meeting for the purpose of discussing or voting on the matter, the notice of a
meeting shall be given in the same manner as required by Section 8.4.1 and no
action shall be taken until the meeting is held. Unless delayed as a result of
the preceding sentence, any action taken without a meeting will be effective 5
days after the required minimum number of voters have signed the consent;
however, the action will be effective immediately if the Manager and Members
representing at least 90% of the Investor Units have signed the consent.

                                       17

<PAGE>

            8.4.6 Record Dates. For purposes of determining the Members entitled
to notice of any meeting or to vote or entitled to receive any Distributions or
to exercise any rights in respect of any other lawful matter, the Manager (or
Members representing more than 10% of the Investor Units if the meeting is
being called at their request) may fix in advance a record date, which is not
more than 60 nor less than 10 days prior to the date of the meeting nor more
than 60 days prior to any other action. If no record date is fixed:

                  (a)   The record date for determining Members entitled to
      notice of, or to vote at, a meeting of Members shall be at the close of
      business on the business day next preceding the day on which notice is
      given or, if notice is waived, at the close of business on the business
      day next preceding the day on which the meeting is held;

                  (b)   The record date for determining Members entitled to give
      consent to Company action in writing without a meeting shall be the day on
      which the first written consent is given;

                  (c)   The record date for determining Members for any other
      purpose shall be at the close of business on the day on which the Manager
      adopts it, or the 60th day prior to the date of the other action,
      whichever is later; and

                  (d)   A determination of Members of record entitled to notice
      of, or to vote at, a meeting of Members shall apply to any adjournment of
      the meeting unless the Manager, or the Members who requested the meeting
      fix a new record date for the adjourned meeting, but the Manager, or such
      Members, shall fix a new record date if the meeting is adjourned for more
      than 45 days from the date set for the original meeting.

            8.4.7 Proxies. Every person entitled to vote or execute consents
shall have the right to do so either in person or by one or more agents
authorized by a written proxy executed by such person or his duly authorized
agent and filed with the Manager. No proxy shall be valid after the expiration
of 11 months from the date thereof unless otherwise provided in the proxy. Every
proxy continues in full force and effect until revoked or unless it states that
it is irrevocable. A proxy which states that it is irrevocable is irrevocable
for the period specified therein.

            8.4.8 Chairman of Meeting. The Manager may select any person to
preside as Chairman of any meeting of the Members, and if such person shall be
absent from the meeting, or fail or be unable to preside, the Manager may name
any other person in substitution therefor as Chairman. In the absence of an
express selection by the Manager of a Chairman or substitute therefor, the
President, Vice President, Secretary, or Chief Financial Officer of the Manager
shall preside as Chairman, in that order. The Chairman of the meeting shall
designate a secretary for such meeting, who shall take and keep or cause to be
taken and kept minutes of the proceedings thereof. The conduct of all Members'
meetings shall at all times be within the discretion of the Chairman of the
meeting and shall be conducted under such rules as he may prescribe. The
Chairman shall have the right and power to adjourn any meeting at any time,
without a vote of the Investor Units present in person or represented by proxy,
if the Chairman shall determine such action to be in the best interests of the
Company.

            8.4.9 Inspectors of Election. In advance of any meeting of Members,
the Manager may appoint any persons other than nominees for Manager or other
office as the inspector of election to act at the meeting and any adjournment
thereof. If an inspector of election is not so appointed, or if any such person
fails to appear or refuses to act, the Chairman of any such meeting may, and on
the request of any Member or his proxy shall, make such appointment at the
meeting. The inspector of election shall

                                       18

<PAGE>

determine the number of Investor Units outstanding and the voting power of each,
the Investor Units represented at the meeting, the existence of a quorum, the
authenticity, validity and effect of proxies, receive votes, ballots or
consents, hear and determine all challenges and questions in any way arising in
connection with the right to vote, count and tabulate all votes or consents,
determine when the polls shall close, determine the result and do such acts as
may be proper to conduct the election or vote with fairness to all Members.

            8.4.10 Record Date and Closing Company Books. When a record date is
fixed, only Members of record on that date are entitled to notice of and to vote
at the meeting or to receive a Distribution, or allotment of rights, or to
exercise the rights, as the case may be, notwithstanding any transfer of any
Investor Units on the books of the Company after the record date.

      8.5   Rights of Members. No Member or Owner shall have the right or power
to: (i) withdraw or reduce his contribution to the capital of the Company,
except as a result of the dissolution of the Company or as otherwise provided in
this Agreement or by law; (ii) to the fullest extent permitted by law bring an
action for partition against the Company; or (iii) demand or receive property
other than cash in return for his Capital Contribution. Except as provided in
this Agreement, no Member or Owner shall have priority over any other Member or
Owner either as to the return of Capital Contributions or as to allocations of
the Net Income, Net Loss or Distributions of the Company. Other than upon the
termination and dissolution of the Company as provided by this Agreement, there
has been no time agreed upon when the contribution of each Member (other than
the Initial Member) or Owner is to be returned.

      8.6   Restrictions on the Member. No Member shall:

            8.6.1 Except as required by law, disclose to any non-Member other
than their lawyers, accountants or consultants and/or commercially exploit any
of the Company's business practices, trade secrets or any other information not
generally known to the business community, including the identity of suppliers
utilized by the Company;

            8.6.2 Do any other act or deed with the intention of harming the
business operations of the Company; or

            8.6.3 Do any act contrary to the Agreement.

      8.7   Return of Capital of Member. In accordance with the Act, an Owner
may, under certain circumstances, be required to return to the Company, for the
benefit of the Company's creditors, amounts previously distributed to the Owner.
If any court of competent jurisdiction holds that any Owner is obligated to make
any such payment, such obligation shall be the obligation of such Owner and not
of the Company, the Manager or any other Owner.

      8.8   Special Member. Upon the occurrence of any event that causes the
last remaining Member to cease to be a member of the Company (other than upon
continuation of the Company without dissolution upon (i) an assignment by the
Member of all of its limited liability company interest in the Company and the
admission of the Substituted Member pursuant to Section 11.2, or (ii) the
resignation of the Member and the admission of an additional member of the
Company pursuant to Section 13.3), the Person executing this Agreement as the
Special Member shall, without any action of such Person and simultaneously with
the last remaining Member ceasing to be a member of the Company, automatically
be admitted to the Company as a Special Member and shall continue the Company
without dissolution. The Special Member may not resign from the Company or
transfer its rights as Special Member unless a successor Special Member has been
admitted to the Company as Special Member by executing a

                                       19
<PAGE>

counterpart to this Agreement; provided, however, the Special Member shall
automatically cease to be a member of the Company upon the admission to the
Company of a substitute Member. The Special Member shall be a member of the
Company that has no interest in the profits, losses and capital of the Company
and has no right to receive any distributions of Company assets. Pursuant to
Section 18-301 of the Act, a Special Member shall not be required to make any
capital contribution to the Company and shall not receive a limited liability
company interest in the Company. A Special Member, in its capacity as Special
Member, may not bind the Company. Except as required by any mandatory provision
of the Act, the Special Member, in its capacity as Special Member, shall have no
right to vote on, approve or otherwise consent to any action by, or matter
relating to, the Company, including, without limitation, the merger,
consolidation or conversion of the Company. In order to implement the admission
to the Company of each Special Member, the person acting as the Special Member
shall execute a counterpart to this Agreement. Prior to admission to the Company
as Special Member, the Person executing this Agreement as the Special Member
shall not be a member of the Company.

9.    Resignation and Termination.

      9.1   Resignation or Withdrawal of Manager. Subject to Section 10, the
Manager shall not resign or withdraw as the Manager or do any act that would
require its resignation or withdrawal.

      9.2   Removal for Cause. The Members by Majority Vote shall have the right
to remove the Manager at any time solely "for cause." For purposes of this
Agreement, removal of the Manager "for cause" shall mean removal due to the (a)
gross negligence or fraud of the Manager, (b) willful misconduct or willful
breach of this Agreement by the Manager, (c) bankruptcy, insolvency or inability
of the Manager to meet its obligations as the same come due, or (d) a conviction
of a felony by Anthony W. Thompson, President of the Manager. If the Manager or
an Affiliate owns any Investor Units, the Manager or the Affiliate, as the case
may be, shall not participate in any vote to remove the Manager.

      9.3   Purchase of Manager's Interest. Upon the removal of the Manager
pursuant to Section 9.2 or resignation of the Manager pursuant to Section 10,
the Manager shall be paid by the Company all fees that have been earned and all
other compensation remaining to be paid under this Agreement.

10.   Assignment of the Manager's Interest.

      10.1  Permitted Assignments. Except as otherwise provided in this
Agreement, the Manager may not sell, assign, hypothecate, encumber or otherwise
transfer any part or all of its interest in the Company except with the consent
of the Members, which consent may be withheld by such Members in their sole and
absolute discretion and without reason or for any reason whatsoever. If the
Members consent to the transfer, the interest may only be sold to the proposed
transferee within the time period approved by the Members, or within 90 days of
such consent on the proposed terms and price, if later. All costs of the
transfer, including reasonable attorneys' fees (if any), shall be borne by the
transferring Manager.

            10.1.1 Any assignment or transfer of the Manager's interest provided
for by this Agreement can be an assignment or transfer of all of its interest or
any portion or part of its interest.

            10.1.2 Any transfer of all or a part of any Manager's interest may
be made only pursuant to the terms and conditions contained in this Section 10.

            10.1.3 Any such assignment shall be by a written instrument of
assignment, the terms of which are not in contravention of any of the provisions
of this Agreement, and which has been duly

                                       20
<PAGE>

executed by the assignor of such Manager's interest and accepted by the Members
pursuant to a Majority Vote.

            10.1.4 The assignor and assignee shall have executed, acknowledged,
and delivered such other instruments as the Members pursuant to a Majority Vote,
may deem necessary or desirable to effect such substitution, which may include
an opinion of counsel regarding the effect and legality of any such proposed
transfer, and which shall include the written acceptance and adoption by the
assignee of the provisions of this Agreement.

            10.1.5 Notwithstanding the foregoing Sections 10.1.1 - 10,1.4, and
anything to the contrary in this Agreement, the Manager or its Affiliates may
sell, assign, hypothecate, encumber or otherwise transfer any part or all of its
interest in the Company received in consideration for funds advanced to the
Company in accordance with Section 3.3, provided that: (a) the Manager, its
Affiliates and/or the transferee are responsible for all transfer costs
including the Company's legal fees and costs; (b) such transferee agrees to be
bound by this Agreement; (c) such transfer complies with all requirements
pursuant to the Act, and all applicable federal and state securities laws; and
(d) such transferee is an Affiliate of the Manager.

      10.2  Substitute Manager. Upon acceptance by the Members of an
assignment by the Manager, any assignee of such Manager's interest in compliance
with this Section 10 shall be substituted as the Manager.

      10.3  Transfer in Violation Not Recognized. Any assignment, sale, exchange
or other transfer in contravention of the provisions of this Section 10 shall,
to the fullest extent permitted by law, be void and ineffectual and shall not
bind or be recognized by the Company.

11.   Assignment of Investor Units.

      11.1  Permitted Assignments. A Member may only sell, assign, hypothecate,
encumber or otherwise transfer all of his or her interest in the Company if the
following requirements are satisfied:

            11.1.1 The Manager consents in writing to the transfer;

            11.1.2 No Member shall transfer, assign or convey or offer to
transfer, assign or convey all or any portion of an Investor Unit to any person
who does not possess the financial qualifications required of all persons who
become Members;

            11.1.3 No Member shall have the right to transfer any Investor Unit
to any minor or to any person who, for any reason, lacks the capacity to
contract for himself under applicable law. Such limitations shall not, however,
restrict the right of any Member to transfer any one or more Investor Units to a
custodian or a trustee for a minor or other person who lacks such contractual
capacity;

            11.1.4 The Manager, with advice of counsel, must determine that such
transfer will not jeopardize the applicability of the exemptions from the
registration requirements under the Securities Act of 1933, as amended, and
registration or qualification under state securities laws relied upon by the
Company and Manager in offering and selling the Investor Units or otherwise
violate any federal or state securities laws;

            11.1.5 The Manager, with advice of counsel, must determine that,
despite such transfer, Investor Units will not be deemed traded on an
established securities market or readily tradable on a secondary market (or the
substantial equivalent thereof) under the provisions applicable to publicly
traded

                                       21
<PAGE>

partnership status; provided, however, in no event may any Member transfer any
Investor Units if such transfer would cause the Company to have more than 100
Owners without the express prior written consent of the Manager, which consent
may be withheld in the Manager's sole and absolute discretion;

            11.1.6 Any such transfer shall be by a written instrument of
assignment, the terms of which are not in contravention of any of the provisions
of this Agreement, and which has been duly executed by the assignor of such
Investor Units and accepted by the Manager in writing. Upon such acceptance by
the Manager, such an assignee shall take subject to all terms of this Agreement
and shall become an Economic Interest Owner; and

            11.1.7 A transfer fee shall be paid by the transferring Member in
such amount as may be required by the Manager to cover all reasonable expenses,
including attorneys' fees, connected with such assignment.

            11.1.8 The transfer would not cause a default or otherwise
accelerate any payment date on any loan obtained by the Company.

            11.1.9 The minimum interest that may be transferred is the lesser of
one Investor Unit or the Member's entire interest in the Company.

      11.2  Substituted Member.

            11.2.1 Conditions to be Satisfied. No Economic Interest Owner shall
have the right to become a Substituted Member unless the Manager shall consent
thereto in accordance with Section 11.2.2 and all of the following conditions
are satisfied:

                  (a)   A duly executed and acknowledged written instrument of
      assignment shall have been filed with the Company, which instrument shall
      specify the number of Investor Units being assigned and set forth the
      intention of the assignor that the assignee succeed to the assignor's
      interest as a Substituted Member in his place;

                  (b)   The assignor and assignee shall have executed,
      acknowledged and delivered such other instruments as the Manager may deem
      necessary or desirable to effect such substitution, which may include an
      opinion of counsel regarding the effect and legality of any such proposed
      transfer, and which shall include: (i) the written acceptance and adoption
      by the Economic Interest Owner of the provisions of this Agreement; and
      (ii)the execution, acknowledgment and delivery to the Manager of a special
      power of attorney, the form and content of which are more fully described
      herein; and

                  (c)   A transfer fee sufficient to cover all reasonable
      expenses connected with such substitution shall have been paid to the
      Company.

                  Notwithstanding the foregoing, so long as any obligation
      pursuant to the Loan Documents remains outstanding, no additional or
      Substituted Member may be admitted unless approved by the mortgagee
      holding the Mortgage Lien.

            11.2.2 Consent of Manager. The consent of the Manager shall be
required to admit an Economic Interest Owner as a Substituted Member. The
granting or withholding of such consent shall be within the sole and absolute
discretion of the Manager.

                                       22
<PAGE>

            11.2.3 Consent of Member. By executing or adopting this Agreement,
each Member hereby consents to the admission of additional or Substituted
Members, and to any Economic Interest Owner becoming a Substituted Member upon
consent of the Manager and in compliance with this Agreement.

      11.3  Rights of Economic Interest Owner. An Economic Interest Owner shall
be entitled to receive Distributions from the Company attributable to the
interest acquired by reason of such assignment from and after the effective date
of the assignment; provided, however, that notwithstanding anything herein to
the contrary, the Company shall be entitled to treat the assignor of such
interest as the absolute owner thereof in all respects, and shall incur no
liability for allocations of Net Income and Net Loss or Distributions, or for
the transmittal of reports or accounting until the written instrument of
assignment has been received by the Company and recorded on its books. The
effective date of such assignment shall be the date on which all of the
requirements of this Section have been complied with, subject to Section 4.8

      11.4  Right to Inspect Books. Economic Interest Owners shall have no right
to inspect the Company's books or records, to vote on Company matters, or to
exercise any other right or privilege as Members, until they are admitted to the
Company as Substituted Members, except as provided in the Act.

      11.5  Assignment of 50% or More of Investor Units. No assignment of any
Investor Units may be made if the Investor Units to be assigned, when added to
the total of all other Investor Units and Manager interests assigned within the
13 immediately preceding months, would, in the opinion of counsel for the
Company, result in the termination of the Company under the Code.

      11.6  Transfer Subject to Law. No assignment, sale, transfer, exchange or
other disposition of any Investor Units may be made except in compliance with
the applicable governmental laws and regulations, including state and federal
securities laws.

      11.7  Termination of Membership Interest. Upon the transfer of an Investor
Unit in violation of this Agreement or the occurrence of a Dissolution Event as
to such Member which does not result in the dissolution of the Company, the
Membership Interest of a Member shall be converted into an Economic Interest or
purchased by the Company as provided herein.

12.   Books, Records, Accounting and Reports.

      12.1  Records, Audits and Reports. The Company shall maintain at its
principal office the Company's records and accounts of all operations and
expenditures of the Company including the following:

            12.1.1 A current list in alphabetical order of the full name and
last known business or resident address of each Owner and Manager, together with
the Capital Contribution and the share in profits and losses of each Owner;

            12.1.2 A copy of the Certificate of Formation and all amendments
thereto, together with any powers of attorney pursuant to this Agreement;

            12.1.3 Copies of the Company's Federal, state, and local income tax
or information returns and reports, if any, for the six most recent taxable
years;

            12.1.4 Copies of this Agreement and any amendments thereto together
with any powers of attorney pursuant to which any written accounting or any
amendments thereto were executed;

                                       23
<PAGE>

            12.1.5 Copies of any financial statements of the Company, if any,
for the six most recent years; and

            12.1.6 The Company's books and records as they relate to the
internal affairs of the Company for at least the current and past four fiscal
years.

      12.2  Delivery to Members and Inspection. Each Member has the right, upon
reasonable written request for purposes related to the interest of that person
as a Member, to receive from the Company:

                  (a)   True and full information regarding the status of the
      business and financial condition of the Company;

                  (b)   Promptly after becoming available, a copy of the
      Company's federal, state and local income tax returns for each year;

                  (c)   A current list of the name and last known business,
      residence or mailing address of each Member and Manager;

                  (d)   A copy of this Agreement and the Certificate of
      Formation and all amendments thereto, together with executed copies of any
      written powers of attorney pursuant to which this Agreement and any
      certificate and all amendments thereto have been executed; and

                  (e)   True and full information regarding the amount of cash
      and description and statement of the agreed value of any property or
      services contributed by each Member and which each Member has agreed to
      contribute in the future, and the date on which each became a Member.

                  (f)   Any information required to be made available to a
      Member pursuant to Section 18-305 of the Act or any other applicable law.

      12.3  Annual Report.

            12.3.1 The Manager will cause the Company, at the Company's expense,
to prepare an unaudited annual report containing a year end balance sheet,
income statement and a statement of changes in financial position. Copies of
such statements shall be distributed to each Member within 75 days after the
close of each fiscal year of the Company.

            12.3.2 Upon the vote of Members who own thirty percent (30%) or more
of the Investor Units (including Investor Units owned or controlled by the
Manager or its Affiliates), the Manager will use its best efforts to obtain in
the future audited financial statements for the Properties' operations. Such
audited financial statements shall be at the Company's sole cost and expense.

      12.4  Tax Information. The Manager' shall cause the Company, at the
Company's expense, to prepare and timely file income tax returns for the Company
with the appropriate authorities, and shall cause all Company information
necessary in the preparation of the Owners' individual income tax returns to be
distributed to the Owners not later than 75 days after the end of the Company's
fiscal year.

                                       24
<PAGE>

13.   Termination and Dissolution of the Company.

      13.1  Dissolution of the Company. The Company shall be dissolved, and its
affairs wound up upon the earliest to occur of the following (each a
"Dissolution Event"):

            13.1.1 A determination by the Manager, with a Majority Vote, to
terminate the Company;

            13.1.2 The sale of the Properties or the receipt of the final
payment on any seller financing provided by the Company on the sale of the
Properties, if later, unless the Company holds securities of another company
which cannot be distributed, in which case the Company will be dissolved as soon
as possible upon such distribution; or

            13.1.3 The termination of the legal existence of the last remaining
member of the Company or the occurrence of any other event which terminates the
continued membership of the last remaining member of the Company in the Company
unless the Company is continued without dissolution in a manner permitted by
this Agreement or the Act; or

            13.1.4 The entry of a decree of judicial dissolution under Section
18-802 of the Act. Upon the occurrence of any event that causes the last
remaining member of the Company to cease to be a member of the Company or that
causes the last remaining Member of the Company to cease to be a member of the
Company (other than upon continuation of the Company without dissolution upon
(i) an assignment by such Member of all of its limited liability company
interest in the Company and the admission of the transferee pursuant to Section
11.2, or (ii) the resignation of such Member and the admission of an additional
member of the Company pursuant to Section 13.3), to the fullest extent permitted
by law, the personal representative of such Member is hereby authorized to, and
shall, within 90 days after the occurrence of the event that terminated the
continued membership of such member in the Company, agree in writing (i) to
continue the Company and (ii) to the admission of the personal representative or
its nominee or designee, as the case may be, as a substitute member of the
Company, effective as of the occurrence of the event that terminated the
continued membership of the last remaining member of the Company or the last
remaining Member in the Company.

      13.2  Events of Dissolution. Notwithstanding any provision hereof to the
contrary to the extent permissible under applicable federal and state tax and
other applicable law, a Majority Vote of the remaining Members is sufficient to
continue the existence of the Company upon the occurrence of either of the
events set forth in Sections 13.1.3 or 13.1.4. If such vote is not obtained, for
so long as the Mortgage Lien exists on the Properties, to the fullest extent
permitted by law, the Company shall not liquidate its interest in the Properties
without first obtaining approval of the Lender. In any event, such holder may,
to the fullest extent provided by law, continue to exercise all of its rights
under the existing security agreements or mortgages until the Loan has been paid
in full or otherwise completely discharged.

      13.3  Restriction on Termination. Notwithstanding any other provision of
this Agreement, the Bankruptcy of a Member or Special Member shall not cause the
dissolution of the Company and upon the occurrence of such an event the Company
shall continue without dissolution. So long as any obligation pursuant to any
Loan is outstanding, the Member may not resign without the prior written
approval of the Lender. If a Member is permitted to resign pursuant to this
Section 13.3, an additional member of the Company shall be admitted to the
Company, subject to the approval of the mortgagee holding the Mortgage Lien,
upon the additional Member's execution of an instrument signifying its agreement
to be bound by the terms and conditions of this Agreement, which instrument may
be a counterpart signature page to this Agreement. Such admission shall be
deemed effective immediately prior to the resignation and, immediately following
such admission, the resigning Member shall cease to be a member of the Company.

                                       25
<PAGE>

      13.4  Termination. The Company shall terminate when (i) all of the assets
of the Company, after payment of or due provision for all debts, liabilities and
obligations of the Company shall have been distributed to the Members in the
manner provided for in this Agreement and (ii) the Certificate of Formation
shall have been canceled in the manner required by the Act. The existence of the
Company as a separate legal entity shall continue until cancellation of the
Certificate of Formation as provided in the Act.

      13.5  Liquidation of Assets. Upon a dissolution of the Company, the
Manager (or in case there is no Manager, the Members or person designated by a
Majority Vote) shall take full account of the Company assets and liabilities,
shall liquidate the assets as promptly as is consistent with obtaining the fair
market value thereof, and shall apply and distribute the proceeds therefrom in
the following order:

            13.5.1 To creditors in satisfaction of the liabilities of the
Company (whether by payment or the making of reasonable provision for payment
thereof); and

            13.5.2 To the Members in accordance with Section 5.2 hereof.

      13.6  Distributions Upon Dissolution. Each Member shall look solely to the
assets of the Company for all Distributions and its Capital Contributions, and
shall have no recourse therefor (upon dissolution or otherwise) against any
Manager or any Member.

      13.7  Liquidation of Member's Interest. If there is a Liquidation of a
Member's interest in the Company, any liquidating Distribution pursuant to such
Liquidation shall be made only to the extent of the positive Capital Account
balance, if any, of such Member for the taxable year during which such
Liquidation occurs after proper adjustments for allocations and Distributions
for such taxable year up to the time of Liquidation. Such Distributions shall be
made by the end of the taxable year of the Company during which such Liquidation
occurs, or if later, within 90 days after such Liquidation.

14.   Special and Limited Power of Attorney.

      14.1  Power of Attorney. Triple Net Properties, LLC shall at all times
during its term as the Manager have a special and limited power of attorney as
the attomey-in-fact for each Member, with power and authority to act in the name
and on behalf of each such Member to execute, acknowledge, and swear to in the
execution, acknowledgment and filing of documents which are not inconsistent
with the provisions of this Agreement and which may include, by way of
illustration but not by limitation, the following:

            14.1.1 This Agreement, as well as any amendments to the foregoing
which, under the laws of the state of Delaware or the laws of any other state,
are required to be filed or which the Manager shall deem it advisable to file;

            14.1.2 Any other instrument or document that may be required to be
filed by the Company under the laws of any state or by any governmental agency
or which the Manager shall deem it advisable to file;

            14.1.3 Any instrument or document that may be required to effect the
continuation of the Company, the admission of Substituted Members, or the
dissolution and termination of the Company (provided such continuation,
admission or dissolution and termination are in accordance with the terms of
this Agreement);

                                       26
<PAGE>

            14.1.4 Any contract for purchase or sale of real estate, and any
deed, deed of trust, mortgage, or other instrument of conveyance or encumbrance,
with respect to Properties; and

            14.1.5 Any and all other instruments as the Manager may deem
necessary or desirable to effect the purposes of this Agreement and carry out
fully its provisions.

      14.2  Provision of Power of Attorney. The special and limited power of
attorney granted to Triple Net Properties, LLC, as Manager:

            14.2.1 A special power of attorney coupled with an interest, is
irrevocable, shall survive the death, incapacity, termination or dissolution of
the granting Member, and is limited to those matters herein set forth;

            14.2.2 May be exercised by Triple Net Properties, LLC in its
capacity as Manager by and through one or more of the officers of Triple Net
Properties, LLC, for each of the Members by the signature of Triple Net
Properties, LLC acting as attorney-in-fact for all of the Members, together with
a list of all Members executing such instrument by their attorney-in-fact or by
such other method as may be required or requested in connection with the
recording or filing of any instrument or other document so executed; and

            14.2.3 Shall survive an assignment by a Member of all or any portion
of his Investor Units except that, where the assignee of the Investor Units
owned by the Member has been approved by the Manager for admission to the
Company as a Substituted Member, the special power of attorney shall survive
such assignment for the sole purpose of enabling Triple Net Properties, LLC, as
Manager, to execute, acknowledge and file any instrument or document necessary
to effect such substitution.

      14.3  Notice to Members. The Manager shall promptly furnish to a Member a
copy of any amendment to the Agreement executed by Triple Net Properties, LLC
pursuant to a power of attorney from the Member.

15.   Relationship of This Agreement to the Act. Many of the terms of this
Agreement are intended to alter or extend provisions of the Act as they may
apply to the Company or the Members. Any failure of this Agreement to mention or
specify the relationship of such terms to provisions of the Act that may affect
the scope or application of such terms shall not be construed to mean that any
of such terms is not intended to be an operating agreement provision authorized
or permitted by the Act or which in whole or in part alters, extends or
supplants provisions of the Act as may be allowed thereby.

16.   Amendment of Agreement.

      16.1  Admission of Member. Amendments to this Agreement for the admission
of any Member or Substitute Member shall not, if in accordance with the terms of
this Agreement, require the consent of any Member.

      16.2  Amendments with Consent of Member. In addition to any amendments
otherwise authorized herein, this Agreement may be amended by the Manager with a
Majority Vote of the Members.

      16.3  Amendments Without Consent of the Members. In addition to the
amendments authorized pursuant to Section 4.9 and Section 7,3.11 or otherwise
authorized herein, the Manager may amend this Agreement, without the consent of
any of the Members, to (i) change the name and/or principal place of business of
the Company, or (ii) decrease the rights and powers of the Manager (so long

                                       27
<PAGE>

as such decrease does not impair the ability of the Manager to manage the
Company and conduct its business and affairs); provided, however, that no
amendment shall be adopted pursuant to this Section 16.3 unless the adoption
thereof (A) is for the benefit of or not adverse to the interests of the
Members, (B) is not inconsistent with Section 7, and (C) does not affect the
limited liability of the Members or the status of the Company as a partnership
for federal income tax purposes.

      16.4  Execution and Recording of Amendments. Any amendment to this
Agreement shall be executed by the Manager and by Triple Net Properties, LLC, as
attorney-in-fact for the Members, pursuant to the power of attorney contained in
Section 14. After the execution of such amendment, the Manager shall also
prepare and record or file any certificate or other document which may be
required to be recorded or filed with respect to such amendment, either under
the Act or under the laws of any other jurisdiction in which the Company holds
any Properties or otherwise does business.

17.   Miscellaneous.

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

      17.2  Successors and Assigns. The terms and provisions of this Agreement
shall be binding upon and shall inure to the benefit of the successors and
assigns of the respective Members.

      17.3  Severability. In the event any sentence or Section of this Agreement
is declared by a court of competent jurisdiction to be void, such sentence or
Section shall be deemed severed from the remainder of this Agreement and the
balance of this Agreement shall remain in full force and effect.

      17.4  Notices. All notices under this Agreement shall be in writing and
shall be given to the Member or Economic Interest Owner entitled thereto, by
personal service or by mail, posted to the address maintained by the Company for
such person or at such other address as he may specify in writing.

      17.5  Manager's Address. The name and address of the Manager is as
follows:

            Triple Net Properties, LLC
            1551 N. Tustin Avenue, Suite 200
            Santa Ana, California 92705
            Attn: Anthony W. Thompson, President

      17.6  Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the state of Delaware (without regard to conflict of
laws principles), where this Agreement is made and entered into.

      17.7  Captions. Section titles or captions contained in this Agreement are
inserted only as a matter of convenience and reference. Such titles and captions
in no way define, limit, extend or describe the scope of this Agreement nor the
intent of any provisions hereof.

      17.8  Gender. Whenever required by the context hereof, the singular shall
include the plural, and vice versa, the masculine gender shall include the
feminine and neuter genders, and vice versa.

      17.9  Time. Time is of the essence with respect to this Agreement.

                                       28
<PAGE>

      17.10 Additional Documents. Each Member, upon the request of the Manager,
shall perform any further acts and execute and deliver any documents which may
be reasonably necessary to carry out the provisions of this Agreement,
including, but not limited to, providing acknowledgment before a Notary Public
of any signature made by a Member.

      17.11 Descriptions. All descriptions referred to in this Agreement are
expressly incorporated herein by reference as if set forth in full, whether or
not attached hereto.

      17.12 Binding Arbitration. Any controversy arising out of or related to
this Agreement or the breach thereof or an investment in the Investor Units
shall be settled by arbitration in Orange County, California, in accordance with
the rules of The American Arbitration Association, and judgment entered upon the
award rendered may be enforced by appropriate judicial action. The arbitration
panel shall consist of one member, which shall be the mediator if mediation has
occurred or shall be a person agreed to by each party to the dispute within 30
days following notice by one party that he desires that a matter be arbitrated.
If there was no mediation and the parties are unable within such 30 day period
to agree upon an arbitrator, then the panel shall be one arbitrator selected by
the Orange County California office of The American Arbitration Association,
which arbitrator shall be experienced in the area of real estate and limited
liability companies and who shall be knowledgeable with respect to the subject
matter area of the dispute. The losing party shall bear any fees and expenses of
the arbitrator, other tribunal fees and expenses, reasonable attorney's fees of
both parties, any costs of producing witnesses and any other reasonable costs or
expenses incurred by him or the prevailing party or such costs shall be
allocated by the arbitrator. The arbitration panel shall render a decision
within 30 days following the close of presentation by the parties of their cases
and any rebuttal. The parties shall agree within 30 days following selection of
the arbitrator to any prehearing procedures or further procedures necessary for
the arbitration to proceed, including interrogatories or other discovery;
provided, in any event each Member shall be entitled to discovery. This Section
17.12 shall be construed to the maximum extent possible to comply with the laws
of the state of Delaware, including the Uniform Arbitration Act (10 Del. C.
Section 5701 et seq.) (the "Delaware Arbitration Act"). If, nevertheless, it
shall be determined by a court of competent jurisdiction that any provision or
wording of this Section 17.12, including any rules of the AAA shall be invalid
or unenforceable under the Delaware Arbitration Act or other applicable law,
such invalidity shall not invalidate all of this Section 17.12, In that case,
this Section 17.12 shall be construed so as to limit any term or provision so as
to make it valid or enforceable within the requirements of the Delaware
Arbitration Act or other applicable law, and, in the event such term or
provision cannot be so limited, this Section 17.12 shall be construed to omit
such invalid or unenforceable provision.

      17.13 Venue. Any action relating to or arising out of this Agreement may
be brought in a court of competent jurisdiction located in Orange County,
California.

      17.14 Partition. The Members agree that the assets of the Company are not
and will not be suitable for partition. Accordingly, each of the Members hereby
irrevocably waives (to the fullest extent permitted by law) any and all rights
that he may have, or may obtain, to maintain any action for partition of any of
the assets of the Company.

      17.15 Integrated and Binding Agreement. This Agreement contains the entire
understanding and agreement among the Members with respect to the subject matter
hereof, and there are no other agreements, understandings, representations or
warranties among the Members other than those set forth herein except the
Subscription Documents. This Agreement may be amended only as provided in this
Agreement. Notwithstanding any other provision of this Agreement, the Members
agree that this Agreement constitutes a legal, valid and binding agreement of
the Members, and is enforceable against the Members by the Manager, in
accordance with its terms. In addition, the Manager shall be an intended
beneficiary of this Agreement.

                                       29
<PAGE>

      17.16 Legal Counsel. Each Member acknowledges and agrees that counsel
representing the Company, the Manager and its Affiliates does not represent and
shall not be deemed under the applicable codes of professional responsibility to
have represented or to be representing any or all of the Members, other than the
Manager, in any respect. In addition, each Member consents to the Manager hiring
counsel for the Company which is also counsel to one or more of the Managers.

      17.17 Effective Date. Pursuant to Section 18-201(d) of the Act, this
Agreement shall be effective as of the time of the filing of the Certificate of
Formation with the Office of the Delaware Secretary of State.

18.   Separateness Covenants. Notwithstanding any provision hereof to the
contrary, for so long as any Mortgage Lien exists on the Properties, in order to
preserve and ensure its separate and distinct identity, in addition to the other
provisions set forth in this Agreement, the Company shall:

            (a)   maintain books and records and bank accounts separate from
those of any other Person;

            (b)   maintain its assets in such a manner that it is not costly or
difficult to segregate, identify or ascertain such assets;

            (c)   hold regular meetings, as appropriate, to conduct its business
and observe all other Company formalities;

            (d)   hold itself out to creditors and the public as a legal entity
separate and distinct from any other Person;

            (e)   prepare separate tax returns and financial statements, or if
part of a consolidated group, then the Company will be shown as a separate
member of such group;

            (f)   allocate and charge fairly and reasonably the costs of any
common employee or overhead shared with Affiliates;

            (g)   transact all business with Affiliates on an arm's-length basis
and pursuant to enforceable agreements;

            (h)   conduct business in its own name and use separate stationery,
invoices and checks;

            (i)   not commingle its funds or assets with those of any other
Person;

            (j)   not assume, guarantee or pay the debts of any other Person or
hold out its credit as being available to satisfy the obligations of others;

            (k)   timely pay all of its tax obligations;

            (l)   pay its own liabilities only out of its own funds;

            (m)   not pledge its assets for the benefit of any other Person;

            (n)   pay the salaries of its own employees, if any, and maintain a
sufficient number of employees in light of its contemplated business
operations;

                                       30
<PAGE>

            (o)   correct any known misunderstanding regarding its separate
identity;

            (p)   other than redeeming Investor Units in the Company as allowed
herein, not acquire any obligations or securities of its Members or any
Affiliate;

            (q)   cause the Manager and other representatives of the Company to
act at all times with respect to the Company consistent and in furtherance of
the foregoing and in the best interests of the Company; and

            (r)   maintain adequate capital in light of its contemplated
business purpose, transactions and liabilities.

      Failure of the Company, or any Member on behalf of the Company, to comply
with any of the foregoing covenants or any other covenants in this Agreement
shall not effect the status of the company as a separate legal entity or the
limited liability of the Member.

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                                       31
<PAGE>

      IN WITNESS WHEREOF, the undersigned have set their hands to this Agreement
effective as of the filing of the Certificate of Formation on June 19th, 2003.

MANAGER:                                 TRIPLE NET PROPERTIES, LLC,
                                         a Virginia limited liability company.

                                         By: /s/ Anthony W. Thompson
                                             ___________________________________
                                             Anthony W. Thompson, President

INITIAL MEMBER:                          TRIPLE NET PROPERTIES, LLC,
                                         a Virginia limited liability company

                                         By: /s/ Anthony W. Thompson
                                             ___________________________________
                                             Anthony W. Thompson, President

SPECIAL MEMBER:                          TRIPLE NET PROPERTIES REALTY, INC.,
                                         a California corporation

                                         By: /s/ Anthony W. Thompson
                                             ___________________________________
                                             Anthony W. Thompson, President

                                      32
<PAGE>

                                    EXHIBIT A
                                   DEFINITIONS

      "Act" shall mean the Delaware Limited Liability Company Act, as the same
may be amended from time to time.

      "Adjusted Capital Account Deficit" shall mean, with respect to any
Member, the deficit balance, if any, in such Member's Capital Account as of the
end of the relevant fiscal year, after giving effect to the following
adjustments:

            (i) Credit to such Capital Account any amounts which the Member is
      obligated to restore and the Member's share of Member Minimum Gain and
      Company Minimum Gain and;

            (ii) Debit to such Capital Account the items described in Treasury
      Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and
      1.704-1(b)(2)(ii)(d)(6).

      "Affiliate" shall mean (i) any person directly or indirectly controlling,
controlled by or under common control with another person; (ii) a person owning
or controlling 10% or more of the outstanding voting securities of such other
person; (iii) any officer, director or partner of such other person; and (iv) if
such other person is an officer, director or partner, any company for which such
person acts in any capacity. The term "person" shall include any natural person,
corporation, partnership, trust, unincorporated association or other legal
entity.

      "Agreement" shall mean this Operating Agreement, as amended from time to
time. This Operating Agreement shall constitute a limited liability company
agreement within the meaning of 18-101(7) of the Act.

      "Bankruptcy" means, with respect to any Person, if such Person (i) makes
an assignment for the benefit of creditors, (ii) files a voluntary petition in
bankruptcy, (iii) is adjudged as bankrupt or insolvent, or has entered against
it an order for relief, in any bankruptcy or insolvency proceedings, (iv) files
a petition or answer seeking for itself any reorganization, arrangement,
composition, readjustment, liquidation or similar relief under any statute, law
or regulation, (v) files an answer or other pleading admitting or failing to
contest the material allegations of a petition filed against it in any
proceeding of this nature, (vi) seeks, consents to or acquiesces in the
appointment of a trustee, receiver or liquidator of the Person or of all or any
substantial part of its properties, or (vii) if 120 days after the commencement
of any proceeding against the Person seeking reorganization, arrangement,
composition, readjustment, liquidation or similar relief under any statute, law
or regulation, if the proceeding has not been dismissed, or if within 90 days
after the appointment without such Person's consent or acquiescence of a
trustee, receiver or liquidator of such Person or of all or any substantial part
of its properties, the appointment is not vacated or stayed, or within 90 days
after the expiration of any such stay, the appointment is not vacated,. The
foregoing definition of "Bankruptcy" is intended to replace and shall supersede
and replace the definition of "Bankruptcy" set forth in Sections 18-101(1) and
18-304 of the Act.

      "Book Gain" shall mean the excess, if any, of the fair market value of
property over its adjusted basis for federal income tax purposes at the time a
valuation of property is required under this Agreement or Treasury Regulations
Section 1.704-1(b) for purposes of making adjustments to the Capital Accounts.

      "Book Loss" shall mean the excess, if any, of the adjusted basis of
property for federal income tax purposes over its fair market value at the time
a valuation of property is required under this

                                       A-1
<PAGE>

Agreement or Treasury Regulations Section 1.704-1(b) for purposes of making
adjustments to the Capital Accounts.

      "Book Value" shall mean the adjusted basis of property for federal income
tax purposes increased or decreased by Book Gain, Book Loss, Built-In Gain and
Built-In Loss as reduced by depreciation, amortization or other cost recovery
deductions, or otherwise, based on such Book Value.

      "Built-In Gain (or Loss)" shall mean the amount, if any, by which the
agreed value of contributed property exceeds (or is lesser than) the adjusted
basis of property contributed to the Company by a Member immediately after its
contribution by the Member to the capital of the Company.

      "Capital Account" with respect to any Member (or such Member's assignee)
shall mean such Member's initial Capital Contribution adjusted as follows:

            (i)   A Member's Capital Account shall be increased by:

                  (a)   such Member's share of Net Income;

                  (b)   any income or gain specially allocated to a Member and
      not included in Net Income or Net Loss;

                  (c)   any additional cash Capital Contribution made by such
      Member to the Company; and

                  (d)   the fair market value of any additional Capital
      Contribution consisting of property contributed by such Member to the
      capital of the Company reduced by any liabilities assumed by the Company
      in connection with such contribution or to which the property is subject.

            (ii)  A Member's Capital Account shall be reduced by:

                  (a)   such Member's share of Net Loss;

                  (b)   any deduction specially allocated to a Member and not
      included in Net Income or Net Loss;

                  (c)   any cash Distribution made to such Member; and

                  (d)   the fair market value, as agreed to by the Manager and
      the Members pursuant to a Majority Vote, of any property (reduced by any
      liabilities assumed by the Member in connection with the Distribution or
      to which the distributed property is subject) distributed to such Member;
      provided that, upon liquidation and winding up of the Company, unsold
      property will be valued for Distribution at its fair market value and the
      Capital Account of each Member before such Distribution shall be adjusted
      to reflect the allocation of gain or loss that would have been realized
      had the Company then sold the property for its fair market value. Such
      fair market value shall not be less than the amount of any nonrecourse
      indebtedness that is secured by the property.

      Properties other than money may not be contributed to the Company except
as specifically provided in this Agreement. Properties of the Company may not be
revalued for purposes of calculating Capital Accounts unless the Manager and the
Members pursuant to a Majority Vote agree on the fair

                                       A-2
<PAGE>

market value of the property and the Company complies with the requirements of
Treasury Regulations Section 1.704-1(b)(2)(iv)(f) and (g); provided, however,
for purposes of calculating Book Gain or Book Loss (but not for purposes of
adjusting Capital Accounts to reflect the contribution and distribution of such
property), the fair market value of property shall be deemed to be no less than
the outstanding balance of any nonrecourse indebtedness secured by such
Properties.

      The Capital Account of a Substituted Member shall include the Capital
Account of his transferor. Notwithstanding anything to the contrary in this
Agreement, the Capital Accounts shall be maintained in accordance with Treasury
Regulations Section 1.704-1(b), References in this Agreement to the Treasury
Regulations shall include corresponding subsequent provisions.

      "Capital Contribution" shall mean the gross amount invested in the Company
by a Member and shall be equal in amount to the cash purchase price paid by such
Member for the Investor Units sold to him by the Company. In the plural,
"Capital Contributions" shall mean the aggregate amount invested by all of the
Members in the Company and shall equal, in total, the sum of the amount
attributable to the purchase of Investor Units and the contributions of the
Initial Member.

      "Capital Transaction" shall mean any financing, refinancing, sale,
exchange, or other disposition or condemnation of, or casualty to, the
Properties.

      "Cash from Capital Transactions" shall mean the net cash realized by the
Company from any Capital Transaction after payment of all cash expenditures of
the Company, including, but not limited to, all fees payable to the Manager or
Affiliates, all payments of principal and interest on indebtedness, and such
reserves and retentions as the Manager reasonably determines to be necessary and
desirable in connection therewith.

      "Cash from Operations" shall mean the net cash realized by the Company
from any source other than a Capital Transaction, after payment of all cash
expenditures of the Company, including, but not limited to, all operating
expenses including all fees payable to the Manager or Affiliates, all payments
of principal and interest on indebtedness, expenses for repairs and maintenance,
capital improvements and replacements, and such reserves and retentions as the
Manager reasonably determines to be necessary and desirable in connection with
Company operations with its then existing assets and any anticipated
acquisitions.

      "Certificate of Formation" shall mean the Certificate of Formation of the
Company as filed with the Secretary of State of the state of Delaware as the
same may be amended or restated from time to time.

      "Class A Investor Unit" shall mean an Investor Unit that is subscribed to
in the first $20,000,000 raised in the Offering.

      "Class B Investor Unit" shall mean an Investor Unit that is subscribed to
in the next $16,000,000 raised in the Offering after the fust $20,000,000 has
been raised.

      "Class C Investor Unit" shall mean an Investor Unit that is subscribed to
in the next $24,000,000 raised in the Offering after the first $36,000,000 has
been raised.

      "Code" shall mean the Internal Revenue Code of 1986, as amended, or
corresponding provisions of subsequently enacted federal revenue laws.

      "Company" shall refer to NNN 2003 Value Fund, LLC.

                                A-3
<PAGE>

      "Company Minimum Gain" shall mean "partnership minimum gain" as set forth
in Treasury Regulations Section 1.704-2(d).

      "Cunningham Loan" shall mean loans to the Company to acquire its interest
in the Properties, pay operating expenses or for any other business purpose made
by Cunningham Lending Group, LLC, an Affiliate of the Initial Member. Any such
loan shall bear interest at Cunningham Lending Group, LLC's cost of funds not to
exceed 12% per annum (or, if less, the maximum rate allowed by law).

      "Depository Account" shall have the meaning set forth in Section 3.1.5.

      "Distributable Cash" shall mean Cash from Operations, and Capital
Contributions determined by the Manager to be available for Distribution to the
Members.

      "Distribution" shall refer to any money or other property transferred
without consideration (other than repurchased Investor Units) to Members or
Owners with respect to their Investor Units in the Company, but shall not
include any payments to the Manager pursuant to Section 6.

      "Economic Interest" shall mean an interest in the Net Income, Net Loss and
Distributions of the Company but shall not include any right to vote or to
participate in the management of the Company.

      "Economic Interest Owner" shall mean the owner of an Economic Interest who
is not a Member.

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

      "Impound Release Date" shall have the meaning set forth in Section 3.1.5.

      "Initial Member" shall refer to Triple Net Properties, LLC, in its
capacity as a member of the Company.

      "Interest" or "Interests" shall mean the Company's undivided
tenant-in-common interest in the Properties,

      "Investor Unit" shall represent an interest in the Company entitling the
owner of the Investor Unit if admitted as a Member to the respective voting and
other rights afforded to a Member holding an Investor Unit, and affording to
such Member a share in Net Income, Net Loss and Distributions as provided for in
this Agreement.

      "Lender" means any holder of a Mortgage Lien.

      "Liquidation" means in respect to the Company the earlier of the date upon
which the Company is terminated under Section 708(b)(l) of the Code or the date
upon which the Company ceases to be a going concern (even though it may exist
for purposes of winding up its affairs, paying its debts and distributing any
remaining balance to its Members), and in respect to a Member where the Company
is not in Liquidation means the date upon which occurs the termination of the
Member's entire interest in the Company by means of a distribution or the making
of the last of a series of Distributions (whether or not made in more than one
year) to the Member by the Company.

      "Loan" or "Loans" means the mortgage loans, if any, used to finance from
time to time all or part of the Company's Interests.

                                       A-4
<PAGE>

      "Loan Documents" means the promissory note, mortgage, guaranty, management
agreement, security agreement, assignment, indemnity agreement, escrow
agreement, deed or the functional equivalent of any of the foregoing, and any
and all other documents evidencing or securing any Loan and any and all
documents related thereto.

      "Majority Vote" shall mean the vote of more than 50% of the Investor Units
entitled to vote. Members shall be entitled to cast one vote for each Investor
Unit they own, and a fractional vote for each fractional Unit they own.

      "Management Agreement" shall refer to the Management Agreement between
Property Manager, as property manager, and the Company and other Tenants in
Common, with respect to the management and operation of the Properties, a true
copy of which is attached as Exhibit B.

      "Manager" means the persons designated as managers of the Company from
time to time. The initial manager of the Company is Triple Net Properties, LLC,
a Virginia limited liability company. A Manager is hereby designated as a
"manager" of the Company within the meaning of Section 18-101(10) of the Act.

      "Member" shall mean any holder of an Investor Unit who is admitted to the
Company as a Member, in such Person's capacity as a member of the Company.

      "Member Minimum Gain" shall mean "partner nonrecourse debt minimum gain"
as determined under Treasury Regulations Section 1.704-2(i)(3).

      "Member Nonrecourse Debt" shall mean "partner nonrecourse debt" as set
forth in Treasury Regulations Section 1.704-2(b)(4).

      "Member Nonrecourse Deductions" shall mean "partner nonrecourse
deductions," as set forth in Treasury Regulations Section 1.704-2(i), and the
amount thereof shall be determined as set forth in Treasury Regulations Section
1.704-2(i).

      "Membership Interest" shall mean a Member's entire limited liability
company interest in the Company including such Member's Economic Interest and
such voting and other rights and privileges that the Member may enjoy by being a
Member.

      "Memorandum" shall mean the Company's Confidential Private Placement
Memorandum dated July 11, 200.3, for the sale of the Investor Units, as amended
or supplemented from time to time.

      "Mortgage Lien" shall mean the lien created by that certain deed of
trust/mortgage, executed by Company for the benefit of any Lender, securing any
Loan.

      "Net Capital Contribution" of any Member shall be equal to the excess, if
any, of (i) the aggregate Capital Contributions of such Member based on $5,000
per Unit over (ii) the aggregate Distributions to such Member.

      "Net Income" or "Net Loss" shall mean, respectively, for each taxable year
of the Company the taxable income and taxable loss (exclusive of Built-in Gain
or Loss) of the Company as determined for federal income tax purposes in
accordance with Section 703(a) or the Code (including all items of income, gain,
loss, or deduction required to be separately stated pursuant to Section
703(a)(1) of the Code) (other than any specific item of income, gain (exclusive
of Built-In Gain), loss (exclusive of Built-

                                       A-5
<PAGE>

In Loss), deduction or credit subject to special allocation under this
Agreement), with the following modifications:

            (i)   The amount determined above shall be increased by any income
      exempt from federal income tax;

            (ii)  The amount determined above shall be reduced by any
      expenditures described in Section 705(a)(2)(B) of the Code or expenditures
      treated as such pursuant to Treasury Regulations Section
      1.704-l(b)(2)(iv)(i);

            (iii) Depreciation, amortization and other cost recovery deductions
      shall be computed based on Book Value instead of on the amount determined
      in computing taxable income or loss. Any item of deduction, amortization
      or cost recovery specially allocated to a Member and not included in Net
      Income or Net Loss shall be determined for Capital Account purposes in a
      similar manner; and

            (iv)  For purposes of this Agreement, Book Gain and Book Loss
      attributable to a revaluation of property attributable to unrealized gain
      or loss in such property shall be treated as Net Income and Net Loss.

      "Nonrecourse Debt" shall have the meaning set forth in Treasury
Regulations Section 1.704-2(b)(3).

      "Nonrecourse Deductions" shall have the meaning, and the amount thereof
shall be, as set forth in Treasury Regulations Section l.704-2(c).

      "Note" means any promissory note evidencing a Loan.

      "Offering" shall mean the offering and sale of the Investor Units made in
accordance with the provisions of Section 3.1.2.

      "Offering Termination Date" shall mean the date the Offering of Investor
Units will terminate pursuant to the Memorandum, which is the earliest of (i)
the date all Investor Units are sold or (ii) July 31, 2004, which date can be
extended to July 31, 2005, in the sole and absolute discretion of the Manager.

      "Organization and Offering Expenses" shall mean all expenses incurred in
connection with the organization and formation of the Company, the preparation
of the offering materials, and the marketing and sale of the Investor Units,
including but not limited to legal, accounting, tax planning fees, promotional
fees or expenses, filing and recording fees, market research and surveys,
property inspections and research, engineering services, printing costs,
securities sales commissions, travel expenses and other costs or expenses
incurred in connection therewith.

      "Owner" shall mean a Member or the holder of an Economic Interest.

      "Person" shall mean any natural person or entity, and the heirs,
executors, administrators, legal representatives, successors, and assigns of
such Person where the context so admits.

      "Prime Rate" shall mean the reference rate announced from time-to-time by
the Wall Street Journal, and changes in the Prime Rate shall be deemed to occur
on the date that changes in such rate are announced.

                                       A-6
<PAGE>

      "Priority Return" shall mean: (a) for the holders of Class A Investor
Units, a 10% per annum cumulative (but not compounded) return on their
Unrecovered Equity, on an annualized basis, properly adjusted for any partial
years and/or fractional interests; (b) for the holders of Class B Investor
Units, a 9% per annum cumulative (but not compounded) return on their
Unrecovered Equity, on an annualized basis, properly adjusted for any partial
years and/or fractional interests; and (c) for the holders of Class C Investor
Units, an 8% per annum cumulative (but not compounded) return on their
Unrecovered Equity, on an annualized basis, properly adjusted for any partial
years and/or fractional interests.

      "Property" or "Properties" shall refer to the properties acquired by NNN
2003 Value Fund, LLC, or by special purpose entity of which it is a member, as
described in the Memorandum.

      "Property Manager" shall mean Triple Net Properties Realty, Inc., a
California corporation.

      "Regulatory Allocations" shall mean the allocations set forth in Sections
4,2(a) through (g).

      "Residuary Sharing Ratio" shall mean the sharing ratio with respect to any
amount available as a tier (ii) distribution of Cash from Operations or a tier
(iii) distribution of Cash from Capital Transactions (the "Residue"). Such
sharing ratio shall be determined by first tentatively dividing the Residue
equally among all of the Investor Units so as to establish a per Investor Unit
allocation (the "Per Investor Unit Allocation"); second the Members shall
receive: 85% of the Per Investor Unit Allocation for each Class A Investor Unit
owned; 80% of the Per Investor Unit Allocation for each Class B Investor Unit
owned; 75% for each Class C Investor Unit Owned; and the Manager shall receive
the balance, that is, 15% of the Per Investor Unit Allocation for each Class A
Investor Unit, 20% of the Per Investor Unit Allocation for each Class B Investor
Unit, and 25% of the Per Investor Unit Allocation for each Class C Investor
Unit.

      "Secretary of State" shall mean the Secretary of State of Delaware.

      "Special Member" shall mean, upon such Person's admission to the Company
as a member of the Company, the Person bound by this Agreement as Special Member
in such Person's capacity as a member of the Company. A Special Member shall
only have the rights and duties expressly set forth in this Agreement.

      "Subscription Agreement" means the agreement, in the form as may be
attached to the Memorandum, by which each person desiring to become a Member
shall evidence (i) the number of Investor Units which such person wishes to
acquire and (ii) such person's agreement to become a party to, and be bound by
the provisions of, this Agreement and (iii) certain representations regarding
the person's finances and investment intent.

      "Subscription Payment" shall mean the cash payment that must accompany
each subscription for Investor Units sold through the Offering.

      "Substituted Member" shall mean any person admitted as a substituted
Member pursuant to this Agreement.

      "Tax Payment" shall have the meaning set forth in Section 4.11.1.

      "Tenants in Common" shall mean the Company and the purchasers of
tenant-in-common interests in the Properties.

      "Tenants in Common Agreement" shall mean that certain Tenants in Common
Agreement in the form attached to the Memorandum executed or to be executed by
the Tenants in Common.

                                       A-7

<PAGE>

      "Unrecovered Equity" of a Member as of any date means the amount of a
Member's Capital Contributions to the Company, reduced, but not below zero, by
the cumulative Cash from Capital Transactions amounts distributed to such Member
under Section 5.2 hereof.

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                                       A-8

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