Document:

Exhibit 10.1

 

 

 

AMENDED AND RESTATED

 

LIMITED LIABILITY COMPANY AGREEMENT

OF

HCP DR CALIFORNIA, LLC,

a Delaware limited liability company

 

 

Dated as of July 22, 2005

 

 

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I. DEFINED TERMS

  	
  1

  
	
   

  	
   

  	
   

  
	
  ARTICLE II. ORGANIZATIONAL MATTERS

  	
  20

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  Formation

  	
  20

  
	
  2.2

  	
  Name

  	
  20

  
	
  2.3

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

  	
  20

  
	
  2.4

  	
  Power of Attorney

  	
  21

  
	
  2.5

  	
  Term

  	
  22

  
	
   

  	
   

  	
   

  
	
  ARTICLE III. PURPOSE

  	
  22

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  Purpose and Business

  	
  22

  
	
  3.2

  	
  Powers

  	
  22

  
	
  3.3

  	
  Specified Purposes

  	
  23

  
	
  3.4

  	
  Representations and
  Warranties by the Members; Disclaimer of Certain Representations

  	
  23

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV. CAPITAL CONTRIBUTIONS

  	
  25

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Capital Contributions
  of the Initial Members

  	
  25

  
	
  4.2

  	
  Additional Members

  	
  25

  
	
  4.3

  	
  Loans and Incurrence
  and Payment of Debt

  	
  25

  
	
  4.4

  	
  Additional Funding and
  Capital Contributions

  	
  26

  
	
  4.5

  	
  No Interest; No Return

  	
  26

  
	
   

  	
   

  	
   

  
	
  ARTICLE V. DISTRIBUTIONS

  	
  27

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  Requirement and
  Characterization of Distributions

  	
  27

  
	
  5.2

  	
  Distributions in Kind

  	
  28

  
	
  5.3

  	
  Amounts Withheld

  	
  28

  
	
  5.4

  	
  Distributions Upon
  Liquidation

  	
  28

  
	
  5.5

  	
  Restricted
  Distributions

  	
  29

  
	
  5.6

  	
  Distributions of
  Proceeds from Sale of Properties and Refinancing Debt

  	
  29

  
	
  5.7

  	
  Distributions Following
  Redemption

  	
  31

  
	
  5.8

  	
  Offsets

  	
  31

  
	
  5.9

  	
  Special Managing Member
  Distribution Calculation

  	
  31

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI. ALLOCATIONS

  	
  31

  
	
   

  	
   

  	
   

  
	
  6.1

  	
  Timing and Amount of
  Allocations of Net Income and Net Loss

  	
  31

  
	
  6.2

  	
  General Allocations

  	
  31

  
	
  6.3

  	
  Additional Allocation
  Provisions

  	
  33

  
	
  6.4

  	
  Tax Allocations

  	
  35

  
	
  6.5

  	
  Other Provisions

  	
  35

  
				

 

i

 

	
  6.6

  	
  Amendments to
  Allocation to Reflect Issuance of Additional Membership Interests

  	
  36

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII. MANAGEMENT AND OPERATION OF BUSINESS

  	
  36

  
	
   

  	
   

  	
   

  
	
  7.1

  	
  Management

  	
  36

  
	
  7.2

  	
  Certificate of
  Formation

  	
  40

  
	
  7.3

  	
  Restrictions on
  Managing Member’s Authority

  	
  41

  
	
  7.4

  	
  Compensation of the
  Managing Member

  	
  47

  
	
  7.5

  	
  Other Business of
  Managing Member

  	
  48

  
	
  7.6

  	
  Contracts with
  Affiliates

  	
  48

  
	
  7.7

  	
  Indemnification

  	
  48

  
	
  7.8

  	
  Liability of the
  Managing Member

  	
  50

  
	
  7.9

  	
  Other Matters
  Concerning the Managing Member

  	
  51

  
	
  7.10

  	
  Title to Company Assets

  	
  52

  
	
  7.11

  	
  Reliance by Third
  Parties

  	
  52

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII. RIGHTS AND OBLIGATIONS OF MEMBERS

  	
  52

  
	
   

  	
   

  	
   

  
	
  8.1

  	
  Limitation of Liability

  	
  52

  
	
  8.2

  	
  Managing of Business

  	
  52

  
	
  8.3

  	
  Outside Activities of
  Members

  	
  53

  
	
  8.4

  	
  Return of Capital

  	
  53

  
	
  8.5

  	
  Rights of Non-Managing
  Members Relating to the Company

  	
  53

  
	
  8.6

  	
  Redemption Rights

  	
  54

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX. BOOKS, RECORDS, ACCOUNTING AND REPORTS

  	
  57

  
	
   

  	
   

  	
   

  
	
  9.1

  	
  Records and Accounting

  	
  57

  
	
  9.2

  	
  Fiscal Year

  	
  57

  
	
  9.3

  	
  Reports

  	
  57

  
	
  9.4

  	
  Cooperation Regarding
  Tax Matters Relating to Contributed Properties

  	
  57

  
	
   

  	
   

  	
   

  
	
  ARTICLE X. TAX MATTERS

  	
  59

  
	
   

  	
   

  	
   

  
	
  10.1

  	
  Preparation of Tax
  Returns

  	
  59

  
	
  10.2

  	
  Tax Elections

  	
  59

  
	
  10.3

  	
  Tax Matters Partner

  	
  59

  
	
  10.4

  	
  Organizational Expenses

  	
  59

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI. TRANSFERS AND WITHDRAWALS

  	
  59

  
	
   

  	
   

  	
   

  
	
  11.1

  	
  Transfer

  	
  59

  
	
  11.2

  	
  Transfer of Managing
  Member’s Membership Interest

  	
  60

  
	
  11.3

  	
  Non-Managing Members’
  Rights to Transfer

  	
  61

  
	
  11.4

  	
  Substituted Members

  	
  62

  
	
  11.5

  	
  Assignees

  	
  63

  
	
  11.6

  	
  General Provisions

  	
  63

  
	
   

  	
   

  	
   

  
	
  ARTICLE XII. ADMISSION OF MEMBERS

  	
  65

  
	
   

  	
   

  	
   

  
	
  12.1

  	
  Admission of Initial
  Non-Managing Members

  	
  65

  

 

ii

 

	
  12.2

  	
  Admission of Successor
  Managing Member

  	
  65

  
	
  12.3

  	
  Admission of Additional
  Members

  	
  66

  
	
  12.4

  	
  Amendment of Agreement
  and Certificate

  	
  66

  
	
  12.5

  	
  Limitation on Admission
  of Members

  	
  67

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIII. DISSOLUTION, LIQUIDATION AND TERMINATION

  	
  67

  
	
   

  	
   

  	
   

  
	
  13.1

  	
  Dissolution

  	
  67

  
	
  13.2

  	
  Redemption of
  Non-Managing Member Units

  	
  68

  
	
  13.3

  	
  Winding Up

  	
  68

  
	
  13.4

  	
  Deemed Contribution and
  Distribution

  	
  69

  
	
  13.5

  	
  Rights of Members

  	
  70

  
	
  13.6

  	
  Notice of Dissolution

  	
  70

  
	
  13.7

  	
  Cancellation of
  Certificate

  	
  70

  
	
  13.8

  	
  Reasonable Time for
  Winding-Up

  	
  70

  
	
  13.9

  	
  Liability of Liquidator

  	
  70

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIV. PROCEDURES FOR ACTIONS AND CONSENTS OF MEMBERS;
  AMENDMENTS; MEETINGS

  	
  71

  
	
   

  	
   

  	
   

  
	
  14.1

  	
  Procedures for Actions
  and Consents of Members

  	
  71

  
	
  14.2

  	
  Amendments

  	
  71

  
	
  14.3

  	
  Meetings of the Members

  	
  71

  
	
   

  	
   

  	
   

  
	
  ARTICLE XV. GENERAL PROVISIONS

  	
  72

  
	
   

  	
   

  	
   

  
	
  15.1

  	
  Addresses and Notice

  	
  72

  
	
  15.2

  	
  Titles and Captions

  	
  72

  
	
  15.3

  	
  Pronouns and Plurals

  	
  72

  
	
  15.4

  	
  Further Action

  	
  73

  
	
  15.5

  	
  Binding Effect

  	
  73

  
	
  15.6

  	
  Creditors

  	
  73

  
	
  15.7

  	
  Waiver

  	
  73

  
	
  15.8

  	
  Counterparts

  	
  73

  
	
  15.9

  	
  Applicable Law

  	
  73

  
	
  15.10

  	
  Entire Agreement

  	
  73

  
	
  15.11

  	
  Invalidity of
  Provisions

  	
  74

  
	
  15.12

  	
  No Partition

  	
  74

  
	
  15.13

  	
  Non-Managing Member
  Representative

  	
  74

  
	
  15.14

  	
  Uniform Commercial
  Code Article 8 (Opt-In)

  	
  74

  
	
   

  	
   

  	
   

  
	
  Exhibit A

  	
  Member
  Information

  	
  A-1

  
	
  Exhibit B

  	
  Notice of
  Redemption

  	
  B-1

  
	
  Exhibit C

  	
  Form of
  Joinder Agreement

  	
  C-1

  
	
  Exhibit D

  	
  Example of
  Certain Calculations Pursuant to Section 5.6.C

  	
  D-1

  
	
  Exhibit E

  	
  Form of
  Bottom Dollar Guarantee

  	
  E-1

  
				

 

iii

 

AMENDED
AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

OF

HCP DR CALIFORNIA, LLC

 

THIS LIMITED LIABILITY COMPANY AGREEMENT
(this “Agreement”)
is made and entered into as of July 22, 2005, by and among Health Care
Property Investors, Inc., a Maryland corporation (the “Managing Member”), and the
Persons whose names are set forth on Exhibit A attached hereto as “Non-Managing Members” (collectively, the “Non-Managing Members,” and together with Managing Member,
the “Members”),
for the purpose of forming HCP DR CALIFORNIA, LLC, a Delaware limited liability
company (the “Company”).

 

RECITALS

 

A.                                   Managing
Member, the Company, Aegis Assisted Living, LLC (“Aegis”),
Oakmont Senior Living, LLC (“Oakmont”) and
each of the parties identified on the signature page thereto as a “Transferor”
(each, a “Contributor”)
entered into that certain Contribution and Purchase and Sale Agreement and
Joint Escrow Instructions dated as of July 22,  2005 (the “Contribution Agreement”),
providing, among other things, for the contribution of certain assets to, and
the acquisition of certain interests in, the Company;

 

B.                                     Each
Contributor may, in accordance with the limited
liability company operating agreement, partnership agreement or other
organizational documents of such Contributor and subject to the terms of the
Contribution Agreement, concurrent with the Effective Date distribute or
otherwise assign to its constituent members, partners, equity holders or
certain affiliates thereof its right to receive Non-Managing Member Units
pursuant to Section 4 hereof;

 

C.                                     It
is a condition to the closing of the transactions contemplated by the
Contribution Agreement that the parties hereto enter into this Agreement;

 

AGREEMENT

 

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

 

ARTICLE I.

DEFINED TERMS

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Adjustment Factor”
means 1.0; provided, however, that in the event
that: (a) the Managing Member (i) declares or pays a dividend on its
outstanding REIT Shares in REIT Shares or makes a distribution to all holders
of its outstanding REIT Shares in REIT Shares, (ii) splits or subdivides
its outstanding REIT Shares or (iii) effects a reverse stock split or
otherwise combines its outstanding REIT Shares into a smaller number of REIT
Shares, the Adjustment Factor shall be adjusted by multiplying the Adjustment
Factor in effect immediately prior to such adjustment by a fraction, (1) the
numerator of which shall be the number of REIT Shares issued and outstanding on
the record date for such dividend, distribution, split, subdivision, reverse
split or combination (assuming for such purposes that such dividend,
distribution, split, subdivision, reverse split or combination has occurred as
of such time) and (2) the denominator of which shall be the actual number
of REIT Shares issued and outstanding on the record date for such dividend,
distribution, split, subdivision, reverse split or combination (assuming for
such purposes that such dividend, distribution, split, subdivision, reverse
split or combination has not occurred as of such time); (b) the Managing Member distributes any rights, options or
warrants to all holders of its REIT Shares to subscribe for or to purchase or
to otherwise acquire REIT Shares (or other securities or rights convertible
into, exchangeable for or exercisable for REIT Shares) at a price per share
less than the Value of a REIT Share on the record date for such distribution
(each a “Distributed Right”),
then the Adjustment Factor shall be adjusted by multiplying the
Adjustment Factor previously in effect by a fraction, (i) the numerator of
which shall be the number of REIT Shares issued and outstanding on the record
date plus the maximum number of REIT Shares purchasable under such Distributed
Rights and (ii) the denominator of which shall be the number of REIT
Shares issued and outstanding on the record date plus a fraction, (1) the numerator of which is the
maximum number of REIT Shares

 

2

 

purchasable under such
Distributed Rights times the minimum purchase price per REIT Share under such
Distributed Rights and (2) the
denominator of which is the Value of a REIT Share as of the record date; provided, however, that, if any
such Distributed Rights expire or become no longer exercisable, then the
Adjustment Factor shall be adjusted, effective retroactive to the date of
distribution of the Distributed Rights, to reflect a reduced maximum number of
REIT Shares or any change in the minimum purchase price for the purposes of the
above fractions; and (c) the Managing Member shall, by dividend or
otherwise, distribute to all holders of its REIT Shares evidences of its
indebtedness or assets (including securities, but excluding any dividend or
distribution referred to in subsection (a) above), which evidences of
indebtedness or assets relate to assets not received by the Managing Member
pursuant to a pro rata
distribution by the Company, then the Adjustment Factor shall be adjusted to
equal the amount determined by multiplying the Adjustment Factor in effect
immediately prior to the close of business on the date fixed for determination
of shareholders entitled to receive such distribution by a fraction, (i) the
numerator shall be such Value of a REIT Share on the date fixed for such
determination and (ii) the denominator shall be the Value of a REIT Share
on the dated fixed for such determination less the then fair market value (as
reasonably determined by the Managing Member) of the portion of the evidences
of indebtedness or assets so distributed applicable to one REIT Share. Any
adjustments to the Adjustment Factor shall become effective immediately after
the effective date of such event, retroactive to the record date, if any, for
such event.

 

“Aegis” has
the meaning set forth in Recital A hereof.

 

“Affiliate”
means, with respect to any Person, any Person directly or indirectly
Controlling or Controlled by or under common Control with such Person.

 

“Aggregate Sharing Amount” means, with respect to
any taxable disposition of a Contributed Property or Successor Property, an
amount equal to the excess, if any, of (i) the Property Appreciation with
respect to all Contributed Properties or Successor Properties being sold or
previously sold by the Company, over (ii) the Unit Appreciation with
respect to all Contributed Properties or Successor Properties being sold or previously
sold by the Company.

 

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

 

“Applicable Contributor”
means with respect to any Non-Managing Member, a Contributor that distributed
or otherwise assigned its right to receive Non-Managing Member Units pursuant
to Section 4 hereof and the Contribution Agreement.

 

“Applicable Parent”
means with respect to any Contributor, (i) Aegis, if Aegis prior to the Effective
Date owned a direct or indirect interest in such Contributor or (ii) Oakmont,
if Oakmont prior to the Effective Date owned a direct or indirect interest in
such Contributor.

 

“Appraisal”
means, with respect to any assets, the written opinion of an independent third
party experienced in the valuation of similar assets in the general location of
the property being appraised, selected by the Managing Member in good faith. Such
opinion

 

3

 

may be in the form of an opinion by such
independent third party that the value for such property or asset as set by the
Managing Member is fair, from a financial point of view, to the Company.

 

“Appraised Value”
means, with respect to any asset, including any Contributed Property, the value
of such asset as determined by an Appraisal.

 

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

 

“Available Cash”
means, with respect to any period for which such calculation is being made:

 

(a)                                  the sum, without duplication, of:

 

(i)                                     the Company’s net income or net loss
(as the case may be) for such period determined in accordance with GAAP,

 

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

 

(iii)                               the amount of any reduction in reserves
of the Company (including, without limitation, reductions resulting because the
Managing Member determines such amounts are no longer necessary), and

 

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

 

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

 

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

 

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

 

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

 

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

 

4

 

(v)                                 the amount of any increase in
reserves (including, without limitation, working capital reserves) established
during such period that the Managing Member determines are necessary or
appropriate in its sole and absolute discretion.

 

Notwithstanding the foregoing, Available Cash shall
not include (i) any cash received or reductions in reserves, or take into
account any disbursements made, or reserves established, after dissolution and
the commencement of the liquidation and winding up of the Company, (ii) any
Capital Contributions, whenever received, (iii) any Disposition Proceeds
or (iii) any Refinancing Debt Proceeds. 

 

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

 

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

 

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

 

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

 

“Calendar Quarter”
means each of the following periods of each year:  January 1 through and including March 31;
April 1 through and including June 30; July 1 through and
including September 30; and October 1 through and including December 31.

 

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

 

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

 

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

 

(b)                                 From each Member’s Capital Account,
there shall be subtracted the amount of cash and the Gross Asset Value of any
property distributed to such Member pursuant

 

5

 

to any provision of this Agreement,
such Member’s allocable share of Net Loss and any items of loss or deductions
specially allocated pursuant to Section 6.3 hereof, and the amount
of any liabilities of such Member assumed by the Company or that are secured by
any property contributed by such Member to the Company.

 

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

 

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

 

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

 

“Capital Contribution”
means, with respect to any Member, the amount of money and the initial Gross
Asset Value of any Property (including, without limitation, any Contributed
Property) that such Member contributes to the Company pursuant to Sections 4.1,
4.2 or 4.4 hereof.

 

“Cash Amount”
means an amount of cash per LLC Unit equal to the product of (i) the Value
of a REIT Share and (ii) the REIT Shares Amount determined as of the
applicable Valuation Date.

 

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

 

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

 

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

 

6

 

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

 

“Company”
means the limited liability company formed under the Act and pursuant to this
Agreement, and any successor thereto.

 

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

 

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

 

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

 

“Constructive Ownership”
means ownership of REIT Shares, or any other interest in an entity, by a Person
who is or would be treated as an owner thereof either actually or
constructively through the application of Section 318 of the Code, as
modified by Section 856(d)(5) of the Code. The terms “Constructively
Own,” “Constructively Owned,” “Constructively Owns” and “Constructive Owner”
shall have the correlative meanings.

 

“Contributed Properties” means the “Properties” as that
term is defined in the Contribution Agreement (each, a “Contributed Property”).
In no event shall “Contributed Properties” include any properties contributed
by Managing Member.

 

 “Contribution Agreement”
shall have the meaning given to such term in Recital A above.

 

“Contributor”
shall have the meaning given to such term in Recital A above.

 

“Contributor’s Contribution
Liability” means with respect to any Contributor, any
amounts owing or otherwise alleged to be owing by such Contributor to the
Company or the Managing Member pursuant to the Contribution Agreement,
including any such amounts for which such Contributor or such Contributor’s
Applicable Parent is otherwise liable pursuant and subject to the provisions of
Article XII (Indemnification) thereof.

 

“Contributor’s Members”
means, as to any Contributor, the constituent members, partners, other equity
holders or certain affiliates of such Contributor to whom such Contributor has
distributed or otherwise assigned, in accordance with the limited liability
company agreement, partnership agreement or other organizational documents of
such Contributor and

 

7

 

subject to the terms of the Contribution Agreement,
the right of such Contributor to receive Non-Managing Member Units pursuant to Section 4.1
hereof.

 

“Control”
means, when used with respect to any Person, the possession directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities, by
contract or otherwise, and the terms “controlling”
and “controlled” have correlative meanings.

 

“Custodian”
means any receiver, trustee, assignee, liquidator or other similar official
under any Bankruptcy Law.

 

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

 

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

 

“Disposition Proceeds”
means the net proceeds (i.e., after the repayment of any Debt and the payment
of all costs related to the disposition) received by the Company upon the
taxable disposition of one or more, but not all, of the Contributed Properties
or Successor Properties.

 

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

 

“Effective Price”
as defined in the Contribution Agreement.

 

8

 

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

 

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

 

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

 

“Existing Indebtedness”
has the meaning set forth in Section 7.3.E(3).

 

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

 

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

 

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

 

(a)                                  The initial Gross Asset Value of any
asset contributed by a Member to the Company shall be its fair market value, as
agreed to by such Member and the Managing Member, and set forth on Exhibit A with respect to that
Member; provided, however, that the initial
Gross Asset Value of any asset contributed by the Managing Member or an
Affiliate of Managing Member to the Company shall be its fair market value as
reasonably and in good faith determined by the Managing Member.

 

(b)                                 The Gross Asset Values of all
Company assets immediately prior to the occurrence of any event described in
clause (i), clause (ii), clause (iii), or clause (iv) hereof shall be
adjusted to equal their respective gross fair market values, as determined by
the Managing Member using such reasonable and good faith method of valuation as
it may adopt, as of the following times:

 

(i)                                     the acquisition of an additional
interest in the Company (other than in connection with the execution of this
Agreement but including, without limitation, acquisitions pursuant to Section 4.2
hereof or contributions or deemed contributions by the Managing Member pursuant
to Section 4.4 hereof) by a new or existing Member in exchange for
more than a de minimis Capital Contribution, if the
Managing Member reasonably determines that such adjustment is necessary or
appropriate to reflect the relative economic interests of the Members in the
Company;

 

9

 

(ii)                                  the distribution by the Company to a
Member of more than a de minimis
amount of Company property as consideration for an interest in the Company, if
the Managing Member reasonably determines that such adjustment is necessary or
appropriate to reflect the relative economic interests of the Members in the
Company;

 

(iii)                               the liquidation of the Company
within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g); and

 

(iv)                              at such other times as the Managing
Member shall reasonably determine necessary or advisable in order to comply
with Regulations Sections 1.704-1(b) and 1.704-2.

 

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

 

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

 

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

 

“Guarantee Opportunity”
has the meaning set forth in Section 7.3.E(4).

 

“Holdback Amount”
has the meaning set forth in the Contribution Agreement.

 

“Incapacity”
or “Incapacitated” means, (i) as
to any Member who is an individual, death, total physical disability or entry
by a court of competent jurisdiction adjudicating such Member incompetent to
manage his or her person or his or her estate; (ii) as to any Member that
is a corporation or limited liability company, the filing of a certificate of
dissolution, or its equivalent, for the corporation or limited liability
company or the revocation of its charter; (iii) as to any Member that is a
partnership, the dissolution and commencement of winding up of the partnership;
(iv) as to any Member that is an estate, the distribution by the fiduciary
of the estate’s entire interest in the Company; (v) as to any trustee of a
trust that is a Member, the termination of the trust (but not the substitution
of a new trustee); or (vi) as to any Member, the bankruptcy of such Member.
For purposes of this definition, bankruptcy of a Member shall be deemed to have
occurred when (a) the Member commences a voluntary

 

10

 

proceeding seeking liquidation, reorganization or
other relief of or against such Member under any bankruptcy, insolvency or
other similar law now or hereafter in effect, (b) the Member is adjudged
as bankrupt or insolvent, or a final and non-appealable order for relief under
any bankruptcy, insolvency or similar law now or hereafter in effect has been
entered against the Member, (c) the Member executes and delivers a general
assignment for the benefit of the Member’s creditors, (d) the Member files
an answer or other pleading admitting or failing to contest the material
allegations of a petition filed against the Member in any proceeding of the
nature described in clause (b) above, (e) the Member seeks, consents
to or acquiesces in the appointment of a trustee, receiver or liquidator for
the Member or for all or any substantial part of the Member’s properties, (f) any
proceeding seeking liquidation, reorganization or other relief under any
bankruptcy, insolvency or other similar law now or hereafter in effect has not
been dismissed within 120 days after the commencement thereof, (g) the
appointment without the Member’s consent or acquiescence of a trustee, receiver
or liquidator has not been vacated or stayed within 90 days of such
appointment, or (h) an appointment referred to in clause (g) above is
not vacated within 90 days after the expiration of any such stay.

 

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

 

“Initial Non-Managing Members”
means the Non-Managing Members (or successors in interest thereof) who acquired
their Non-Managing Member Units in exchange for the Contributed Properties on
the Effective Date, but excluding Managing Member to the extent of any “Tendered
Non-Managing Member Units” (as defined in the Contribution Agreement) redeemed
by the Company and acquired by Managing Member on the Effective Date.

 

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

 

“Joinder Agreement”
means a Joinder Agreement in substantially the form attached hereto as Exhibit C.

 

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

 

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

 

“LLC Distribution Date”
means the date established by the Managing Member for the payment of actual
distributions declared by the Managing Member pursuant to Sections 5.1
and 5.2, which date shall be the same as the date established by the
Managing Member for the payment of dividends to holders of REIT Shares. 

 

“LLC Record Date”
means the record date established by the Managing Member for the distribution
of Available Cash pursuant to Section 5.1 hereof, which record date
shall be

 

11

 

the same as the record date established by the
Managing Member for a dividend to holders of REIT Shares.

 

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

 

“Loan-to-Value Ratio”
shall mean the ratio, as of the date of incurrence of any Debt incurred by
the Company, in which the numerator is equal to the outstanding principal
balance of all Debt of the Company and the denominator is equal to the fair
market value of the Contributed Properties and Successor Properties, as
reasonably and in good faith determined by the Managing Member.

 

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

 

“Majority of Remaining Members”
means Non-Managing Members owning a majority of the Non-Managing Member Units
held by Non-Managing Members.

 

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

 

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

 

“Managing Member Guarantee”
has the meaning set forth in Section 11.2.A.

 

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

 

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

 

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

 

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

 

“Member Nonrecourse Deductions”
has the meaning set forth in Regulations Section 1.704-2(i)(2) for
the phrase “partner nonrecourse deductions,”
and the amount of Member Nonrecourse Deductions with respect to a Member
Nonrecourse Debt for a Fiscal Year shall be determined in accordance with the rules of
Regulations Section 1.704-2(i)(2).

 

12

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(e)                                  To the extent that an adjustment to
the adjusted tax basis of any Company asset pursuant to Code Section 734(b) or
Code Section 743(b) is required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to
be taken into account in determining Capital Accounts as a result of a
distribution other than in liquidation of a Member’s interest in the Company,
the amount of such adjustment shall be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment decreases the
basis of the asset) from the disposition of the asset and shall be taken into
account for purposes of computing Net Income or Net Loss; and

 

13

 

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

 

“NMM Sharing Amount”
means, with respect to any taxable disposition of a Contributed Property or
Successor Property, the product equal to (a) the Sharing Amount multiplied
by (b) the NMM Sharing Percentage.

 

“NMM Sharing Percentage”
means a percentage equal to 1% multiplied by a fraction with the numerator
equal to the number of Non-Managing Member Units then outstanding and the
denominator equal to the number of Non-Managing Member Units issued by the
Company to all Non-Managing Members; provided, however,
any NMM Units reduced pursuant to Section 5.6.C hereof shall be
subtracted from the denominator of such fraction.

 

“Non-Managing Member”
means any Member other than the Managing Member (except to the extent the
Managing Member holds Non-Managing Member Units).

 

“Non-Managing Member Representative”
means William P. Gallaher until a successor Non-Managing Member Representative
shall have been appointed pursuant to Section 15.13 hereof and,
thereafter, shall mean the person appointed and then acting as the Non-Managing
Member Representative hereunder.

 

“Non-Managing Member Unit”
means a single unit of Membership Interest issued to a Non-Managing Member
pursuant to Section 4.1 hereof, as the same may be modified
from time to time as provided in this Agreement. The ownership of Non-Managing
Member Units shall be evidenced in the form of a certificate for
Non-Managing Member Units.

 

“Nonrecourse Deductions”
has the meaning set forth in Regulations Section 1.704-2(b)(1), and the
amount of Nonrecourse Deductions for a Fiscal Year shall be determined in
accordance with the rules of Regulations Section 1.704-2(c).

 

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

 

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

 

“Oakmont”
has the meaning set forth in Recital A hereof.

 

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

 

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

 

14

 

“Payment Quarter”
has the meaning set forth in Section 5.1.A hereof.

 

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

 

“Permitted
Non-Managing Member Assignment” has the meaning set forth
in Section 11.3.A hereof.

 

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

 

“Preferred Return Per Unit”
means with respect to each Non-Managing Member Unit outstanding on a LLC Record
Date an amount initially equal to zero, and increased cumulatively on each LLC
Record Date by an amount equal to the product of (i) the cash dividend per
REIT Share declared by the Managing Member for holders of REIT Shares on that
LLC Record Date, multiplied by (ii) the Adjustment Factor in effect on
that LLC Record Date; provided, however,
that the increase that shall occur in accordance with the foregoing on the
first LLC Record Date subsequent to the Effective Date shall be the foregoing
product of (i) and (ii) above multiplied by a fraction, the numerator
of which shall be the number of days in the period commencing on the Effective
Date and ending on the first LLC Record Date following the Effective Date, and
the denominator of which shall be the number of days in the period commencing
on May 5, 2005 and ending on the first LLC Record Date following the
Effective Date.

 

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

 

“Preferred Return Shortfall Per
Unit” means, for any holder of Non-Managing Member Units,
the amount equal to the quotient of (a) such Non-Managing Member’s
Preferred Return Shortfall divided by (b) the number of Non-Managing
Member Units held by such Non-Managing Member immediately prior to the day on
which such Non-Managing Member delivers a Notice of Redemption pursuant to Section 8.6
hereof or Managing Member delivers a Call Notice pursuant to Section 13.2
hereof.

 

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

 

15

 

New York to be used for the purpose of calculating the
Prime Rate hereunder (which rate shall be subject to limitation by all
applicable usury laws).

 

“Profit Participation
Amount” means with
respect to any Member the sum of (a) cumulative distributions to such
Member (including its predecessors, if any) pursuant to Section 5.6.A(2) to
the extent such distributions did not result in a reduction in LLC Units
pursuant to Section 5.6.C; and (b) the remaining amount of the
cumulative distributions to such Member (including its predecessors, if any) pursuant
to Section 5.6.A(2) multiplied by a fraction, the numerator of
which is the excess (if any) of (i) the weighted average of the Values on
each of the Reduction Dates over (ii) the Effective Price, and the
denominator of which is the weighted average of the Values on each of the Reduction
Dates. Exhibit D sets forth an
example of the calculation of Profit Participation Amount.

 

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

 

“Property Appreciation”
means, with respect to a taxable disposition of a Contributed Property or
Successor Property, the excess of the sales price paid in such disposition
(including amounts paid through the assumption of debt) over the initial Gross
Asset Value of such Contributed Property (or if the disposition was of a
Successor Property, the initial Gross Asset Value of the related Contributed Property
to the extent it relates to the Successor Property).

 

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

 

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

 

“Reduction”
has the meaning set forth in Section 5.6.C hereof. 

 

“Reduction Date”
has the meaning set forth in Section 5.6.C hereof.

 

“Reduction Units”
has the meaning set forth in Section 5.6.C hereof.

 

“Refinancing Debt”
means any Debt (other than indebtedness to the Managing Member or any Affiliate
of the Managing Member), the repayment of which is secured by all or any
portion of the Properties.

 

“Refinancing Debt Proceeds”
means the net proceeds from any Refinancing Debt incurred by the Company which
remain after the repayment of any Debt with proceeds of the Refinancing Debt
and the payment of all costs related to the Refinancing Debt.

 

“Registration Rights Agreement”
with respect to each Initial Non-Managing Member, a Registration Rights
Agreement in substantially the form of Exhibit F
to the Contribution Agreement to be entered into between such Initial Managing Member
and Managing Member concurrent with the Effective Date.

 

16

 

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

 

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

 

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

 

“REIT Member”
means a Member or Assignee that is, or has made an election to qualify as, a
REIT.

 

“REIT Requirements”
has the meaning set forth in Section 5.1.B hereof.

 

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

 

“REIT Shares Amount”
means a number of REIT Shares equal to the sum of (a) the product of (i) the
number of Tendered Units and (ii) the Adjustment Factor plus (b) the
quotient of (i) the product of (x) the number of Tendered Units and
(y) Preferred Return Shortfall Per Unit divided by (ii) the Value of
a REIT Share as of the applicable Valuation Date.

 

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

 

“Replacement Indebtedness”
has the meaning set forth in Section 7.3.E(3) hereof.

 

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

 

“SEC” means
the Securities and Exchange Commission.

 

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

 

“Sharing Amount”
means, with respect to any taxable disposition of a Contributed Property or
Successor Property, the excess, if any, of the Aggregate Sharing Amount over
the Sharing Amounts, if any, previously used for purposes of calculating
Reduction Units pursuant to Section 5.6.C.

 

“Sharing Percentage”
means, with respect to a Non-Managing Member (including the Managing Member
with respect to any Non-Managing Member Units held by the Managing Member) or
Assignee, its share of the NMM Sharing Percentage based on its share of

 

17

 

the Non-Managing Member Units and, with respect to the
Managing Member (in its capacity as the Managing Member), one hundred percent
(100%) minus the NMM Sharing Percentage.

 

“Specified Redemption Date”
means (A) in the case of a Redemption pursuant to Section 8.6.A
hereof and subject to the terms thereof, the twentieth (20th)
calendar day (or, if such day is not a Business Day, the next following
Business Day) after the receipt by the Managing Member of a Notice of
Redemption; provided, however, that notwithstanding
any provisions set forth herein to the contrary, in no event shall the Specified
Redemption Date with respect to any LLC Unit occur prior to the first (1st)
anniversary of the Effective Date; provided, further, that the Specified
Redemption Date, as well as the closing of a Redemption on any Specified
Redemption Date, may be deferred, in the Managing Member’s sole and
absolute discretion, for such time (but in any event not more than 90 days in
the aggregate) as may reasonably be required to effect, as applicable, (i) necessary
funding arrangements, (ii) compliance with the Securities Act or other law
(including, but not limited to, (a) state “blue sky” or other securities
laws and (b) the expiration or termination of the applicable working
period, if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended), and (iii) satisfaction or waiver of other commercially
reasonable and customary closing conditions and requirements for a transaction
of such nature, and (B) in the case of the delivery of a Call Notice
pursuant to Section 13.2, the tenth (10th) calendar day
(or, if such day is not a Business Day, the next following Business Day) after
the mailing to the applicable Non-Managing Members of a Call Notice.

 

“Subsequent Threshold
Test” means a test which will be satisfied on the date on
which eighty percent (80%) of the LLC Units issued by the Company to the
Initial Non-Managing Members have been disposed of pursuant to a Taxable
Disposition or Series of Taxable Dispositions.

 

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

 

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

 

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

 

18

 

“Taxable Dispositions” means a
transaction in which an LLC Unit has either (a) been disposed of to the
extent such disposition is a taxable transaction (including, without
limitation, a Redemption or exchange pursuant to Section 8.6.A
hereof) or (b) otherwise received a “step-up” in tax basis to
its Fair Market Value at the time of such “step-up” (e.g., as a
result of the death of a holder of LLC Units who is an individual).

 

“Tax-Free Disposition”
means the disposition of property in a transaction that is not subject to tax
under the Code, including, without limitation, by virtue of the provisions of Section 1031
of the Code.

 

“Tax Items”
has the meaning set forth in Section 6.1 hereof.

 

“Tax Protection Period”
means the period of time beginning on the Effective Date and ending on the
first to occur of (i) the tenth (10th) anniversary of the
Effective Date or (ii) the date on which the Subsequent Threshold Test has
been satisfied.

 

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

 

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

 

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

 

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

 

“Total Required Debt Amount”
means Thirty One Million Dollars ($31,000,000.00).

 

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

 

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

 

“Unit Amount”
means, with respect to a taxable disposition of a Contributed Property or
Successor Property, a number of LLC Units equal to the product of (i) the
number of LLC Units outstanding at the time of such disposition, and (ii) the
Unit Portion.

 

“Unit Appreciation”
means, with respect to any taxable disposition of a Contributed Property or
Successor Property, the product of the (i) Unit Amount and (ii) excess
of the Value at the time of such disposition over the Effective Price.

 

“Unit Portion”
means, with respect to a taxable disposition of a Contributed Property or
Successor Property, a number determined by dividing (i) the net cash flow
(ignoring

 

19

 

payments made by the Company under any Debt related to
such Property) produced by such Contributed Property or Successor Property for
the twelve month period immediately prior to such disposition, by (ii) the
net cash flow (ignoring payments made by the Company under any Debt related to
all Contributed Properties or Successor Properties) produced by all Contributed
Properties or Successor Properties held by the Company for the twelve month
period immediately prior to such disposition.

 

“Valuation Date”
means (a) in the case of a tender of LLC Units for Redemption, the date of
the receipt by the Managing Member of the Notice of Redemption with respect to
those LLC Units or, if such date is not a Business Day, the immediately
preceding Business Day or (b) for purposes of Section 5.6.C
hereof, the Reduction Date or, if the Reduction Date is not a Business Day, the
immediately preceding Business Day, (c) for purposes of Section 13.2
the date the Call Notice is delivered or, if such day is not a Business Day,
the immediately preceding Business Day, or (d) in any other case, the date
specified in this Agreement or, if such date is not a Business Day, the
immediately preceding Business Day.

 

“Value”
means, on any Valuation Date, the average of the Closing Prices for the twenty
(20) consecutive trading days ending on the second trading day immediately
prior to the Valuation Date.

 

“Welfare Structure”
has the meaning set forth in Section 7.1.A(25) hereof

 

ARTICLE II.

ORGANIZATIONAL MATTERS

 

2.1                               Formation

 

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

 

2.2                               Name

 

The name of the Company is HCP DR CALIFORNIA, LLC. The
Company’s business may be conducted under any other name or names deemed
advisable by the Managing Member, including the name of the Managing Member or
any Affiliate thereof. The Managing Member in its sole and absolute discretion may change
the name of the Company at any time and from time to time in accordance with
applicable law and shall notify the Members of such change in the next regular
communication to the Members. 

 

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

 

The address of the registered office of the Company in
the State of Delaware is located at c/o Corporation Service Company, 2711
Centerville, Suite 400, Newcastle County, Wilmington, Delaware 19808, and
the registered agent for service of process on the Company in the State of
Delaware at such registered office is Corporation Service Company, 2711

 

20

 

Centerville, Suite 400, Newcastle County,
Wilmington, Delaware 19808. The principal office of the Company is located at 3760
Kilroy Airport Way, Suite 300, Long Beach, California 90806, or such other
place as the Managing Member may from time to time designate by notice to
the Members. The Company may maintain offices at such other place or
places within or outside the State of Delaware as the Managing Member deems
advisable.

 

2.4                               Power of Attorney

 

A.                                   Each Member (other than the Managing
Member) and each Assignee hereby irrevocably constitutes and appoints the
Managing Member, any Liquidator, and authorized officers and attorneys in fact
of each, and each of those acting singly, in each case with full power of
substitution, as its true and lawful agent and attorney-in-fact, with full
power and authority in its name, place and stead to:  

 

(1)                                  execute, swear to, acknowledge,
deliver, file and record in the appropriate public offices (a) all
certificates, documents and other instruments (including, without limitation,
this Agreement and the Certificate and all amendments or restatements thereof)
that the Managing Member or any Liquidator deems appropriate or necessary to
form, qualify or continue the existence or qualification of the Company as a
limited liability company in the State of Delaware and in all other
jurisdictions in which the Company may conduct business or own property; (b) all
instruments that the Managing Member or any Liquidator deems appropriate or
necessary to reflect any amendment, change, modification or restatement of this
Agreement in accordance with its terms; (c) all conveyances and other
instruments or documents that the Managing Member or any Liquidator deems
appropriate or necessary to reflect the dissolution and liquidation of the
Company pursuant to the terms of this Agreement, including, without limitation,
a certificate of cancellation; (d) all instruments relating to the
admission, withdrawal, removal or substitution of any Member pursuant to, or
other events described in, Articles 11, 12 or 13 hereof or the Capital
Contribution of any Member; and (e) all certificates, documents and other
instruments relating to the determination of the rights, preferences and
privileges of Membership Interests; and 

 

(2)                                  execute, swear to, acknowledge and
file all ballots, consents, approvals, waivers, certificates and other
instruments appropriate or necessary, in the sole and absolute discretion of
the Managing Member or any Liquidator, to make, evidence, give, confirm or
ratify any vote, consent, approval, agreement or other action which is made or
given by the Members hereunder or is consistent with the terms of this
Agreement or appropriate or necessary, in the sole discretion of the Managing
Member or any Liquidator, to effectuate the terms or intent of this Agreement. 

 

Nothing contained in this Section 2.4
shall be construed as authorizing the Managing Member or any Liquidator to
amend this Agreement except in accordance with Article 14 hereof or
as may be otherwise expressly provided for in this Agreement.

 

B.                                     The foregoing power of attorney is
hereby declared to be irrevocable and a special power coupled with an interest,
in recognition of the fact that each of the Members and Assignees will be
relying upon the power of the Managing Member to act as contemplated by

 

21

 

this Agreement, and it shall survive
and not be affected by the subsequent Incapacity of any Member or Assignee and
the Transfer of all or any portion of such Member’s or Assignee’s LLC Units or
Membership Interest and shall extend to such Member’s or Assignee’s heirs,
successors, assigns and personal representatives. Each such Member or Assignee
hereby agrees to be bound by any representation made by the Managing Member or
any Liquidator, acting in good faith pursuant to such power of attorney; and
each such Member or Assignee hereby waives any and all defenses which may be
available to contest, negate or disaffirm the action of the Managing Member or
any Liquidator, taken in good faith under such power of attorney. Each Member
or Assignee shall execute and deliver to the Managing Member or any Liquidator,
within 15 days after receipt of the Managing Member’s or Liquidator’s request
therefor, such further designation, powers of attorney and other instruments as
the Managing Member or the Liquidator, as the case may be, deems necessary
to effectuate this Agreement and the purposes of the Company. 

 

2.5                               Term

 

The term of the Company commenced on July 6, 2005,
the date that the original Certificate was filed in the office of the Secretary
of State of Delaware in accordance with the Act, and shall continue until
terminated pursuant the provisions of Article 13 hereof or as
otherwise provided by law.

 

ARTICLE III.

PURPOSE

 

3.1                               Purpose and Business

 

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

 

3.2                               Powers

 

The Company is empowered to do any and all acts and
things necessary, appropriate, proper, advisable, incidental to or convenient
for the furtherance and accomplishment of the purposes and business described
herein and for the protection and benefit of the Company including, without
limitation, full power and authority, directly or through its ownership
interest in other entities, to enter into, perform and carry out contracts
of any kind, borrow money and issue evidences of indebtedness, whether or not
secured by mortgage, deed of trust, pledge or other lien, acquire, own, manage,
improve and develop real property, and lease, sell, transfer and dispose of
real property; provided, however, that
notwithstanding any other provision in this Agreement, but subject to Sections 7.3.E,
7.3.F, and 7.3.G, the Managing

 

22

 

Member may cause the Company to take any action
to avoid a result that, or refrain from taking any action that, in the reasonable
judgment of the Managing Member, (i) could adversely affect the ability of
the Managing Member to continue to qualify as a REIT, (ii) could subject
the Managing Member to any additional taxes under Code Section 857 or Code
Section 4981, or (iii) could violate any law or regulation of any
governmental body or agency having jurisdiction over the Managing Member, its
securities or the Company, unless such action (or inaction) under clause (i),
clause (ii) or clause (iii) above shall have been specifically
consented to by the Managing Member in writing.

 

3.3                               Specified Purposes

 

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

 

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

 

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

 

B.                                     Each Member that is not an
individual (including, without limitation, each Additional Member or
Substituted Member as a condition to becoming an Additional Member or a
Substituted Member) represents and warrants to the Company, the Managing Member
and each other Member that (i) all transactions contemplated by this
Agreement to be performed by it have been duly authorized by all necessary
action, including, without limitation, that of its managing member(s) (or, if
there is no managing member, a majority in interest of all members),
committee(s), trustee(s), general partner(s), beneficiaries, directors and
shareholder(s), as the

 

23

 

case may be, as required, (ii) the
consummation of such transactions will not result in a breach or violation of,
or a default under, its partnership or operating agreement, trust agreement,
charter or bylaws, as the case may be, any material agreement by which
such Member or any of such Member’s properties or any of its partners, members,
beneficiaries, trustees or shareholders, as the case may be, is or are
bound, or any statute, regulation, order or other law to which such Member or
any of its partners, members, trustees, beneficiaries or shareholders, as the
case may be, is or are subject, (iii) such Member is neither a “foreign person”
within the meaning of Code Section 1445(f) nor a “foreign partner” within the
meaning of Code Section 1446(e), and (iv) this Agreement is binding
upon, and enforceable against, such Member in accordance with its terms.

 

C.                                     Each Member (including, without limitation,
each Additional Member or Substituted Member as a condition to becoming an
Additional Member or a Substituted Member) represents, warrants and agrees that
it has acquired and continues to hold its interest in the Company for its own
account for investment only and not for the purpose of, or with a view toward,
the resale or distribution of all or any part thereof, nor with a view
toward selling or otherwise distributing such interest or any part thereof
at any particular time or under any predetermined circumstances. Each Member
further represents and warrants that it is an “accredited investor” as defined
in Rule 501(a) promulgated under the Securities Act and is a
sophisticated investor, able and accustomed to handling sophisticated financial
matters for itself, particularly real estate investments, and that it has a
sufficiently high net worth that it does not anticipate a need for the funds
that it has invested in the Company in what it understands to be a highly
speculative and illiquid investment.

 

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

 

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

 

24

 

ARTICLE IV.

CAPITAL CONTRIBUTIONS

 

4.1                               Capital Contributions of the Initial
Members

 

At the time of their respective execution of this
Agreement, the Members (or, in the event a Member shall be one of a Contributor’s
Members, the Contributor) shall make Capital Contributions as set forth in Exhibit A to
this Agreement. The Members (including, without limitation, each of Contributor’s
Members, if applicable) shall own Managing Member Units and Non-Managing Member
Units, as applicable, in the amounts set forth on Exhibit A; provided, however, that it is acknowledged
that any “Tendered Non-Managing Member Units” (as defined in the Contribution
Agreement) redeemed by the Company and acquired by Managing Member in
accordance with the terms of the Contribution Agreement shall be owned by
Managing Member and reflected on Exhibit A. Except as required by
law or as otherwise provided in Sections 4.1, 4.2 and 4.4, no
Member shall be required or permitted to make any additional Capital
Contributions or loans to the Company.

 

4.2                               Additional Members

 

The Managing Member is authorized to admit one or more
Additional Members to the Company from time to time, in accordance with the
provisions of Section 12.3 hereof, on terms and conditions and for
such Capital Contributions as may be established by the Managing Member in
its reasonable discretion except as provided in Section 12.3. The
provisions of Section 12.3 shall govern the acquisition by the
Company in the future of additional Properties by means of Capital
Contributions by other Persons, which Capital Contributions shall be set forth
in Exhibit A. As a condition to
being admitted to the Company, each Additional Member shall execute a Joinder
Agreement. 

 

4.3                               Loans and Incurrence and Payment of
Debt

 

A.                                   Subject to the provisions of Sections
4.4, 7.3.E(3) and 7.3.E.(4) hereof, the Company may incur
or assume Debt, or enter into other similar credit, guarantee, financing
(including, without limitation, the encumbrance of the Properties for the debt
of Affiliates of HCP pursuant to so-called cross-collateralized loans, or
otherwise) or refinancing arrangements, repay or prepay Debt, for any purpose
(including, without limitation, in connection with any further acquisition of
Properties from any Person), upon such terms as the Managing Member determines
appropriate; provided, however, that any Debt
shall be nonrecourse to the Managing Member unless the Managing Member
otherwise agrees; provided, further, that except as
otherwise required for the Managing Member in order to avoid an obligation to
make a Make-Whole Payment pursuant to Sections 7.3.E(3) or 7.3.E(4),
at the time of incurrence of any such Debt, the Loan-to-Value Ratio shall not
exceed Sixty-Five Percent (65%).

 

B.                                     Without limiting the foregoing, subject
to the provisions of Section 7.3.E, the Managing Member is
authorized, in its sole and absolute discretion, to cause the Company to repay
or prepay any Debt.

 

25

 

4.4                               Additional Funding and Capital
Contributions

 

A.                                   General. The Managing Member may, at any
time and from time to time, determine that the Company requires additional
funds (“Additional Funds”)
for the operation of the Company. Additional Funds may be raised by the
Company in accordance with the terms of Sections 4.2 or 4.3 hereof or
pursuant to the terms of this Section 4.4; provided,
however, that in no event shall any Non-Managing Member be required
to make additional Capital Contributions.  No Person, including, without limitation, any
Member or Assignee, shall have any preemptive, preferential, participation or
similar right or rights to subscribe for or acquire any Membership Interest.

 

B.                                     Additional Contributions. The Managing Member on behalf of
the Company may raise all or any portion of the Additional Funds by making
additional Capital Contributions. Subject to the definition of “Gross Asset Value,”
the Managing Member shall determine in good faith the amount, terms and
conditions of such additional Capital Contributions. The Managing Member shall
receive that number of additional Managing Member Units in consideration for
additional Capital Contributions made by the Managing Member that represents
the same percentage of the total outstanding LLC Units (including the newly
issued LLC Units) as the initial Gross Asset Value of the additional Capital
Contribution (net of the amount of liabilities of the Managing Member assumed
by the Company or that are secured by the property contributed to the Company)
(or, in the event of a contribution of cash, the amount of cash so contributed)
represents of the Gross Asset Value of the assets of the Company (including the
additional Capital Contributions) as of the date of such contribution; provided, however, that Managing Member shall receive
Managing Member Units (i.e., in addition to the initial Managing Member Units
set forth on Exhibit A), equal to all
cash Capital Contributions made by the Managing Member to fund any Holdback
Amount payable by the Company under the Contribution Agreement equal to such cash
Capital Contributions on account thereof divided by the Effective Price under
the Contribution Agreement. In addition to the foregoing, Managing Member shall
also be permitted to make additional Capital Contributions of cash or other
property to the Company in accordance with the terms set forth herein for any
lawful purpose. 

 

C.                                     Timing of Additional Capital
Contributions.
If additional Capital Contributions are made by a Member on any day other than
the first (1st) day of a Fiscal Year, then Net Income, Net Loss,
each item thereof and all other items of income, gain, loss, deduction and
credit allocable among Members for such Fiscal Year, if necessary, shall be
allocated among such Members by taking into account their varying interests
during the Fiscal Year in accordance with Code Section 706(d), using the “interim closing of the books”
or “daily proration”
method or another permissible method selected by the Managing Member. 

 

4.5                               No Interest; No Return

 

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

 

26

 

ARTICLE V.

DISTRIBUTIONS

 

5.1                               Requirement and Characterization of
Distributions

 

A.                                   Subject to the provisions of Sections 5.7
and 5.8 hereof, the Managing Member shall cause the Company to
distribute quarterly on the LLC Distribution Date all Available Cash generated
by the Company during the quarter most recently ended prior to the LLC
Distribution Date (the “Payment Quarter”)
as follows:

 

(1)                                  First, to the holders of the
Non-Managing Member Units, in accordance with their relative Preferred Return
Shortfalls at the end of the Payment Quarter, until the Preferred Return
Shortfall for each holder of Non-Managing Member Units at the end of the
Payment Quarter is zero, provided, however,
that in the event a Reduction Date occurs during any Payment Quarter, a
distribution shall be made under this Section 5.1.A(1) on the
LLC Distribution Date associated with such Payment Quarter to the holder or
holders of the Reduction Units in an amount determined by multiplying the
amount that would have been distributed on the LLC Distribution Date under Section 5.1.A(1) in
respect of the Reduction Units had they been outstanding on the last day of
such Payment Quarter by a fraction, the numerator of which shall be the number
of days beginning on the first day of the Payment Quarter relating to the LLC
Distribution Date and ending on the Reduction Date and the denominator of which
shall be the number of days in the Payment Quarter in which the Reduction Date
occurs.

 

(2)                                  Second, to the Managing Member until
the Managing Member has received an amount equal to the excess (the “Managing Member Shortfall”),
if any, of (A) the amount of cash that must be distributed to the Managing
Member such that aggregate distributions of cash pursuant to Sections
5.1.A(1), 5.1.A(2), 5.6.A(1) and 5.6.B(1) shall
have been made to all Members pro rata to the
Members’ Percentage Interests, over (B) the sum of all prior distributions
to the Managing Member pursuant to this Section 5.1.A(2) and Sections
5.6.A(1) and 5.6.B(1).

 

(3)                                  Thereafter, the Managing Member may,
in its sole discretion, cause the Company to distribute all Available Cash
remaining after the distributions provided for in Section 5.1.A(1) and
5.1.A.(2) above to the Members in proportion to their Sharing
Percentages.

 

B.                                     The Managing Member may take
such reasonable efforts, as determined by it in its sole and absolute
discretion and consistent with its qualification as a REIT, to cause the
Company to distribute sufficient amounts to enable the Managing Member to pay
stockholder dividends that will (a) satisfy the requirements for
qualifying as a REIT under the Code and Regulations (“REIT Requirements”), and (b) except to the extent
the Managing Member elects, in its sole discretion, not to make such
distributions, avoid any federal income or excise tax liability of the Managing
Member.

 

27

 

5.2          Distributions in Kind

 

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

 

5.3          Amounts Withheld

 

Each Member hereby authorizes the Company to withhold
from or pay on behalf of or with respect to such Member any amount of federal,
state, local or foreign taxes that the Managing Member determines that the
Company is required to withhold or pay with respect to any amount distributable
or allocable to such Member pursuant to this Agreement, including, without
limitation, any taxes required to be withheld or paid by the Company pursuant
to Code Section 1441, Code Section 1442, Code Section 1445 or
Code Section 1446. Any amount paid on behalf of or with respect to a
Member shall constitute a loan by the Company to such Member, which loan shall
be repaid by such Member within 15 days after notice from the Managing Member
that such payment must be made unless (i) the Company withholds such
payment from a distribution that would otherwise be made to the Member or (ii) the
Managing Member determines that such payment may be satisfied out of the
Available Cash of the Company that would, but for such payment, be distributed
to the Member. Any amounts withheld pursuant to the foregoing clauses (i) or
(ii) shall be treated as having been distributed to such Member. Each
Member hereby unconditionally and irrevocably grants to the Company a security
interest in such Member’s Membership Interest to secure such Member’s obligation
to pay to the Company any amounts required to be paid pursuant to this Section 5.3.
In the event that a Member fails to pay any amounts owed to the Company
pursuant to this Section 5.3 when due, the Managing Member may, in
its sole and absolute discretion, elect to make the payment to the Company,
either directly or through an Affiliate, on behalf of such defaulting Member,
and in such event shall be deemed to have loaned such amount to such defaulting
Member and shall succeed to all rights and remedies of the Company as against
such defaulting Member (including, without limitation, the right to receive
distributions). Any amounts payable by a Member hereunder shall bear interest
at the base rate on corporate loans at large United States money center commercial
banks, as published from time to time in the Wall Street Journal, plus
four (4) percentage points (but not higher than the maximum lawful rate)
from the date such amount is due (i.e., 15 days
after demand) until such amount is paid in full. Each Member shall take such
actions as the Company or the Managing Member shall request in order to perfect
or enforce the security interest created hereunder.

 

5.4          Distributions Upon Liquidation

 

Notwithstanding the other provisions of this Article 5,
net proceeds from a Terminating Capital Transaction and any other cash received
or reductions in reserves made after

 

28

 

commencement of the liquidation of the Company shall
be distributed to the Members in accordance with Section 13.3
hereof.

 

5.5          Restricted Distributions

 

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

 

5.6          Distributions of Proceeds from Sale
of Properties and Refinancing Debt

 

A.            Subject to the provisions of Sections
5.7 and 5.8 below, in the event of a taxable disposition of some,
but not all, of the Properties, the Managing Member shall cause the Company to (i) reinvest
(including by making loans pursuant to the terms of this Agreement) the
Disposition Proceeds to the extent the Managing Member elects to do so and in
the amount determined by the Managing Member to be appropriate (and to hold the
Disposition Proceeds in an interest bearing account pending such reinvestment),
in its sole discretion, and (ii) if the Managing Member elects, in its
sole discretion, to distribute all or any portion of the Disposition Proceeds,
distribute such portions of the Disposition Proceeds, to the extent thereof, as
follows:

 

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

 

(2)           Second, to the holders of LLC Units pro rata to their
holdings of LLC Units but only to the extent that such distribution would not
cause the number of LLC Units held by the Non-Managing Members to be reduced
below zero pursuant to the provisions of Section 5.6.C hereof; and 

 

(3)           Third, the remaining balance of the Disposition
Proceeds, if any, to the Managing Member.

 

B.            Subject to the provisions of Section 5.7,
upon the incurrence of Refinancing Debt, the Managing Member shall cause the
Company to (i) reinvest (including by making loans pursuant to the terms
of this Agreement) the Refinancing Debt Proceeds to the extent the Managing
Member elects to do so and in the amount determined by the Managing Member to
be appropriate (and to hold the Refinancing Debt Proceeds in an interest
bearing account pending such reinvestment), in its sole discretion, and (ii) if
the Managing Member elects, in its sole discretion,  to distribute all or any portion of the
Refinancing Debt Proceeds, distribute such portion of the Refinancing Debt
Proceeds, to the extent thereof, as follows:

 

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

 

29

 

(2)           Second, the remaining balance of the Refinancing Debt
Proceeds, if any, to the Members in proportion to their Sharing Percentages.

 

C.            The number of LLC Units outstanding on the date of a
distribution pursuant to Section 5.6.A(2) hereof will be
reduced (each such reduction a “Reduction”) by a number of LLC Units (rounded down to
the nearest whole unit) (the “Reduction Units”) on the date
of the distribution (the “Reduction Date”) by the
aggregate number of LLC Units (the “Total Units”) as follows:

 

(1)           The Non-Managing Member Units shall
be reduced by a number of LLC Units (rounded down to the nearest whole unit)
(the “Non-Managing
Member Reduction Units”) determined by dividing (i) the
excess of (a) the aggregate amount of distributions made on the Reduction
Date to Non-Managing Members and Assignees pursuant to Sections 5.6.A(2) and
5.6.B(2), over (b) the NMM Sharing Amount by (ii) the product
obtained by multiplying (a) Value on the Reduction Date by (b) the
Adjustment Factor. The Non-Managing Member Reduction Units shall be allocated
(as closely as practicable in whole units) among the holders of Non-Managing
Member Units in accordance with their respective holdings of Non-Managing
Member Units. 

 

(2)           The Managing Member Units shall be
reduced by a number of Managing Member Units (by a number of LLC Units (rounded
down to the nearest whole unit) (the “Managing Member Reduction Units”)
equal to the product of (i) the Reduction Units with respect to the
Non-Managing Members divided by the aggregate Percentage Interest of the
Non-Managing Members immediately prior to the Reduction Date, times (ii) the Percentage Interest of the Managing
Member immediately prior to such Reduction Date, provided the Managing Member
Units shall not be reduced to less than 1 LLC Unit.

 

To reflect the foregoing reduction, each Member shall
return to the Managing Member the certificate evidencing the Reduction Units
allocated to him or it or the Managing Member Units so reduced which will be
canceled and a new certificate evidencing the reduced number of Managing Member
Units or Non-Managing Member Units shall be immediately issued to such Member
by the Managing Member on behalf of the Company. In the event the number of
outstanding Non-Managing Member Units held by a Non-Managing Member or Assignee
is reduced (pursuant to this Section 5.6.C or otherwise) to zero,
such Non-Managing Member or Assignee shall cease to have an interest in the
Company (other than the right to receive final distributions and allocations
resulting from the liquidation of their interest). Exhibit D sets
forth an example of a Reduction in Non-Managing Member Units and Managing
Member Units pursuant to this Section 5.6.C. 

 

D.            The Managing Member shall have no obligation to incur
Refinancing Debt for the purpose of making distributions pursuant to this Section 5.6
or for any other purpose, except as provided in Sections 7.3.E(3) and
7.3.E(4).

 

30

 

5.7          Distributions Following Redemption

 

Notwithstanding anything to
the contrary contained herein, a Non-Managing Member shall not be entitled to
any distribution pursuant to this Article V with respect to any Tendered Units
if the next LLC Record Date is on or after the Specified Exchange Date for such
Tendered Unit(s).

 

5.8          Offsets

 

Without in any way limiting any other right or remedy
at law or otherwise, Managing Member shall be entitled to offset against any
distribution payable to a Non-Managing Member pursuant to this Article V
and Article XIII hereof any amounts owing or otherwise alleged to
be owing to the Company or the Managing Member by (i) such Non-Managing
Member, including, without limitation, pursuant to any applicable Registration
Rights Agreement or (ii) by such Non-Managing Member’s Applicable Contributor
on account of such Contributor’s Contribution Liability. Any amounts so offset
pursuant to the foregoing shall be deemed for all purposes to have been distributed
or paid to such Non-Managing Member as required by this Agreement.

 

5.9          Special Managing Member Distribution
Calculation

 

Notwithstanding anything to the contrary in this
Agreement, for purposes of determining the Managing Member Shortfall distributions
payable to the Managing Member pursuant to Sections 5.1A(2), 5.6A(1) and
5.6B(1) as of any LLC Distribution Date pursuant to Section 5.1
or as of the date of distribution of any Disposition Proceeds or Refinancing
Proceeds pursuant to Section 5.6, the Managing Member shall be
treated as holding that number of Managing Member Units equal to the product of
(x) the total number of Managing Member Units held by the Managing Member as of
such date, times (y) 1.20.

 

ARTICLE VI.

ALLOCATIONS

 

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

 

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

 

6.2          General Allocations

 

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

 

(1)           Net Loss with respect to any Fiscal
Year of the Company, other than Net Loss attributable to a disposition of any
or all of the Real Properties, and other than

 

31

 

Net Loss attributable to a
Liquidating Event, shall be allocated to the Members and Assignees in
proportion to their Sharing Percentages.

 

(2)           Net Income with respect to any
Fiscal Year of the Company, other than Net Income attributable to a disposition
of any or all of the Real Properties, and other than Net Income attributable to
a Liquidating Event, shall be allocated as follows:

 

(a)           First, to each Member or Assignee in
proportion to, and to the extent of, the amount that cumulative Net Loss
previously allocated to such Member or Assignee pursuant to Section 6.2.A(1) exceeds
the cumulative amount of Net Income previously allocated to such Member or
Assignee pursuant to this Section 6.2.A(2)(a); and

 

(b)           Second, to each Member or Assignee
in an amount that will cause such allocation, together with the amount of all
previous allocations of Net Income under this Section 6.2.A(2)(b) and
Section 6.2.B(2)(b) to be in proportion to and to the extent
of the cumulative distributions received by such Member or Assignee pursuant to
Sections 5.1.A, 5.6.A(1), 5.6(A)(2) (but only to the
extent of the Profit Participation Amount) and 5.6.B(1) for the
current and all prior Fiscal Years; and

 

(c)           Thereafter, to each Member or
Assignee pro rata to such Member’s or Assignee’s Sharing Percentage.

 

B.            Net Income and Net Loss from the Disposition of
Properties. Except
as otherwise provided in Sections 6.2.C or 6.3:

 

(1)           Net Loss attributable to a
disposition of any or all of the Properties shall be allocated to the Members
and Assignees in proportion to their Sharing Percentages.

 

(2)           Net Income attributable to a
disposition of any or all of the Properties shall be allocated as follows:

 

(a)           First, to each Member or Assignee in
proportion to, and to the extent of, the amount that cumulative Net Loss
previously allocated to such Member or Assignee pursuant to Section 6.2.B(1) exceeds
the cumulative amount of Net Income previously allocated to such Member or
Assignee pursuant to this Section 6.2.B(2)(a);

 

(b)           Second, to each Member or Assignee
in an amount that will cause such allocation, together with the amount of all
previous allocations of Net Income under this Section 6.2.B(2)(b) and
Section 6.2.A(2)(b) to be in proportion to and to the extent
of the cumulative distributions received by such Member or Assignee pursuant to
Sections 5.1.A, 5.6.A(1), 5.6(A)(2) (but only to the
extent of the Profit Participation Amount) and 5.6.B(1) for the current
and all prior Fiscal Years; and

 

32

 

(c)           Thereafter, to each Member or
Assignee pro rata to such Member’s or Assignee’s Sharing Percentage.

 

C.            Net Income and Net Loss Upon Liquidation. If a Liquidating Event occurs in a
Fiscal Year, or if the number of LLC Units held by the Non-Managing Members
have been reduced (pursuant to Section 5.6.C or otherwise) to zero,
Net Income or Net Loss (or, if necessary, separate items of income, gain, loss
and deduction) for such Fiscal Year and any Fiscal Years thereafter shall,
subject to Section 6.3, be allocated among the Members, as follows:

 

(1)           First, to holders of Non-Managing
Member Units, pro rata to their Percentage Interests, in such amounts as will
cause, to the greatest extent possible, each such holder’s Capital Account per
Non-Managing Member Unit (if any) to be equal to the sum of (a) such
holder’s Preferred Return Shortfall per unit, (b) the product of (i) the
Value of a REIT Share (with the date of the liquidating distribution being the
Valuation Date), and (ii) the Adjustment Factor (with the product set
forth in (b) being equal to zero if the number of outstanding Non-Managing
Member Units has been reduced (pursuant to Section 5.6.C, or
otherwise) to zero), and (c) an amount equal to (x) the NMM Sharing
Amount, calculated as if all of the Properties then owned by the Company were
sold in a taxable transaction at their fair market values, divided by (y) the
total number of Non-Managing Member Units then outstanding; and

 

(2)           Thereafter, to the Managing Member.

 

6.3          Additional Allocation Provisions

 

A.            Regulatory Allocations.

 

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

 

(2)           Member Minimum Gain Chargeback. Except as otherwise provided in
Regulations Section 1.704-2(i)(4) or in Section 6.3.A(1) hereof,
if there is a net decrease in Member Minimum Gain attributable to a Member
Nonrecourse Debt during any Fiscal Year, each Member who has a share of the
Member Minimum Gain attributable to such Member Nonrecourse Debt, determined in
accordance with Regulations Section 1.704-2(i)(5), shall be specially
allocated items of Company income and gain for such year (and, if necessary,
subsequent years) in an amount equal to such

 

33

 

Member’s
share of the net decrease in Member Minimum Gain attributable to such Member
Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(4).
Allocations pursuant to the previous sentence shall be made in proportion to
the respective amounts required to be allocated to each Member pursuant thereto.
The items to be so allocated shall be determined in accordance with Regulations
Sections 1.704-2(i)(4) and 1.704-2(j)(2). This Section 6.3.A(2) is
intended to qualify as a “chargeback of partner
nonrecourse debt minimum gain” within the meaning of Regulations Section 1.704-2(i) and
shall be interpreted consistently therewith.

 

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

 

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

 

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

 

(6)           Section 754 Adjustment. To the extent that an adjustment
to the adjusted tax basis of any Company asset pursuant to Code Section 734(b) or
Code Section 743(b) is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(2) or
Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts
as the result of a distribution to a Member in complete liquidation of its
interest in the Company, the amount of such adjustment to the Capital Accounts
shall be treated as an item of gain (if the adjustment increases the basis of
the asset) or loss (if the adjustment decreases such basis), and such gain or
loss shall be specially allocated to the Members in accordance with their LLC
Units in the event that Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies,
or to the Members to whom such distribution was made in the event that
Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.

 

34

 

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

 

B.            Allocation of Excess Nonrecourse Liabilities. For purposes of determining a Member’s
proportional share of the “excess nonrecourse
liabilities” of the Company within the meaning of Regulations Section 1.752-3(a)(3),
each Member’s interest in Company profits shall be such Member’s Percentage
Interest.

 

6.4          Tax Allocations

 

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

 

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

 

6.5          Other Provisions

 

A.            Other Allocations. In the event that (i) any
modifications are made to the Code or any Regulations, (ii) any changes
occur in any case law applying or interpreting the Code or any Regulations, (iii) the
IRS changes or clarifies the manner in which it applies or interprets the Code
or any Regulations or any case law applying or interpreting the Code or any
Regulations or (iv) the IRS adjusts the reporting of any of the
transactions contemplated by this Agreement which, in each case as reasonably and
in good faith determined by the Managing Member, either (a) requires
allocations of items of income, gain, loss, deduction or credit or (b) requires
reporting of any of the transactions contemplated by this Agreement in a manner
different from that set forth in this Article 6, the Managing Member is
hereby authorized to make

 

35

 

new allocations or report any such
transactions (as the case may be) in reliance of the foregoing, and such
new allocations and reporting shall be deemed to be made pursuant to the
fiduciary duty of the Managing Member to the Company and the other Members, and
no such new allocation or reporting shall give rise to any claim or cause of
action by any Member.

 

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

 

6.6          Amendments to Allocation to Reflect
Issuance of Additional Membership Interests

 

In the event that the Company issues additional
Membership Interests to the Managing or any Additional Member pursuant to Article 4
hereof, the Managing Member shall make such revisions to this Article 6
as it determines are necessary to reflect the terms of the issuance of such
additional Membership Interests, including making preferential allocations to
certain classes of Membership Interests.

 

ARTICLE VII.

MANAGEMENT AND OPERATION OF BUSINESS

 

7.1          Management

 

A.            Except as otherwise expressly provided in this
Agreement, the Managing Member, in its capacity as a Managing Member of the
Company under the Act, shall have sole and complete charge and management over
the business and affairs of the Company, in all respects and in all matters. The
Managing Member shall at all times act in good faith in exercising its powers
hereunder. The Managing Member shall be an agent of the Company’s business, and
the actions of the Managing Member taken in such capacity and in accordance
with this Agreement shall bind the Company. The Managing Member shall at all
times be a Member of the Company. Except as otherwise expressly provided in
this Agreement or required by any non-waivable provisions of applicable law,
the Non-Managing Members shall not participate in the control of the Company,
shall have no right, power or authority to act for or on behalf of, or
otherwise bind, the Company and shall have no right to vote on or consent to
any other matter, act, decision or document involving the Company or its
business. The Managing Member may not be removed by the Members
with or without cause, except with the consent of the Managing Member. In
addition to the powers now or hereafter granted a manager of a limited
liability company under applicable law or that are granted to the Managing
Member under any other provision of this Agreement, the Managing Member,
subject to the other provisions hereof including the limitations on the
authority of the Managing Member set forth in Sections 4.3A and 7.3 hereof,
shall have full power and authority to do all things deemed necessary or
desirable by it to conduct the business of the Company, to exercise all powers
set forth in Section 3.2 hereof and to effectuate the purposes set
forth in Section 3.1 hereof, including, without limitation:

 

36

 

(1)           except as restricted in this
Agreement, the making of any expenditures, the lending or borrowing of money
(including loans to the Managing Member), the assumption or guarantee of, or
other contracting for, indebtedness and other liabilities, the issuance of
evidences of indebtedness (including the securing of the same by deed to secure
debt, mortgage, deed of trust or other lien or encumbrance on the Company’s
assets) and the incurring of any obligations that it deems necessary for the
conduct of the activities of the Company;

 

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

 

(3)           except as restricted in this
Agreement, the acquisition, sale, transfer, exchange or other disposition of
any assets of the Company (including, but not limited to, the exercise or grant
of any conversion, option, privilege or subscription right or any other right
available in connection with any assets at any time held by the Company);

 

(4)           except as restricted in this
Agreement, the mortgage, pledge, encumbrance or hypothecation of any assets of
the Company (including, without limitation, any Property), the use of the
assets of the Company (including, without limitation, cash on hand) for any
purpose consistent with the terms of this Agreement which the Managing Member
believes will directly benefit the Company and on any terms that the Managing
Member sees fit, including, without limitation, the financing of the conduct or
the operations of the Company, the lending of funds to other Persons
(including, without limitation, the Managing Member (if necessary to permit the
financing or capitalization of a Subsidiary of the Managing Member or the
Company)) and the repayment of obligations of the Company;

 

(5)           the management, operation, leasing,
landscaping, repair, alteration, demolition, replacement or improvement of any
Property, including, without limitation, any Property, or other asset of the
Company or any Subsidiary of the Company;

 

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

 

(7)           the distribution of Company cash or
other Company assets in accordance with this Agreement, the holding,
management, investment and reinvestment

 

37

 

of
cash and other assets of the Company consistent with established investment
policies of the Managing Member, and the collection and receipt of revenues,
rents and income of the Company;

 

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

 

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

 

(10)         the control of any matters affecting
the rights and obligations of the Company, including the settlement,
compromise, submission to arbitration or any other form of dispute
resolution, or abandonment, of any claim, cause of action, liability, debt or
damages, due or owing to or from the Company, the commencement or defense of
suits, legal proceedings, administrative proceedings, arbitrations or other
forms of dispute resolution, and the representation of the Company in all suits
or legal proceedings, administrative proceedings, arbitrations or other forms
of dispute resolution, the incurring of legal expense, and the indemnification
of any Person against liabilities and contingencies to the extent permitted by
law;

 

(11)         subject to the provisions of Section 5.2
hereof, the determination of the fair market value of any Company property
distributed in kind using such reasonable method of valuation as it may adopt;
provided that such methods are otherwise
consistent with the requirements of this Agreement;

 

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

 

(13)         holding, managing, investing and
reinvesting cash and other assets of the Company;

 

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

 

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

 

(16)         the exercise of any of the powers of
the Managing Member enumerated in this Agreement on behalf of or in connection
with any Subsidiary of the

 

38

 

Company
or any other Person in which the Company has a direct or indirect interest, or
jointly with any such Subsidiary or other Person;

 

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

 

(18)         the maintenance of working capital
and other reserves in such amounts as the Managing Member deems appropriate and
reasonable from time to time;

 

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

 

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

 

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

 

(22)         admit into the Company any
Additional or Substituted Managing Member in accordance with Section 12.2
hereof;

 

(23)         admit into the Company any
Additional Member in accordance with Section 12.3 hereof;

 

(24)         the transfer of any Property to any
wholly-owned Subsidiary of Company for financing or other purposes deemed
appropriate by the Managing Member; and

 

(25)         without in any way limiting the
generality of Section 7.1A(24), the transfer of any Property to a limited
partnership, limited liability company or other form of business entity (a
“Welfare Structure”), other than an
association taxable as a corporation for federal income tax purposes, for the
purpose of owning title to a Property in order to attempt to establish or
maintain the right to receive a welfare property tax exemption. In connection
with such Welfare Structure, it is acknowledged that the managing general
partner, managing member or other Person controlling of the Welfare Structure
shall be a 501(c)(3) corporation or other permitted entity formed under
applicable law and will hold no more than 0.1% managing general partner,
managing member or other equity interest in and to such Welfare Structure, and
the co-managing

 

39

 

general
partner, co-managing member or co-controlling Person shall be the Company (or a
Subsidiary of the Company) and will own at least a 0.9% co-managing general
partner, managing member interest or controlling interest and a 99% limited
partner, non-managing member or non-controlling interest in and to such Welfare
Structure. All organizational documents for such Welfare Structure shall be
satisfactory to the Managing Member.

 

B.            Each of the Non-Managing Members agrees that, except
as provided in this Agreement, the Managing Member is authorized to execute,
deliver and perform the above-mentioned agreements and transactions on
behalf of the Company without any further act, approval or vote of the
Non-Managing Members, notwithstanding any other provision the Act or any
applicable law, rule or regulation. The execution, delivery or performance
by the Managing Member or the Company of any agreement authorized or permitted
under this Agreement shall not constitute a breach by the Managing Member of
any duty that the Managing Member may owe the Company or the Members or
any other Persons under this Agreement or of any duty stated or implied by law
or equity.

 

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

 

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

 

7.2          Certificate of Formation

 

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

 

40

 

7.3          Restrictions on Managing Member’s
Authority

 

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

 

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

 

(2)           possess Company property, or assign
any rights in specific Company property, for other than a Company purpose
except as otherwise provided in this Agreement;

 

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

 

(4)           enter into any contract, mortgage,
loan or other agreement that expressly prohibits or restricts, or has the
effect of prohibiting or restricting, the ability of (a) the Managing
Member or the Company from satisfying its obligations under Section 8.6
hereof in full or (b) a Member from exercising its rights to a Redemption
in full, except, in either case, with the written consent of such Member
affected by the prohibition.

 

B.            Subject to the provisions of Section 11.2
hereof, the Managing Member shall not, without the prior Consent of the
Non-Managing Members undertake or have the authority to do or undertake, on
behalf of the Company, any of the following actions or enter into any
transaction which would have the effect of such transactions:

 

(1)           except as provided in Section 7.3.C
and except in connection with a dissolution or termination of the Company permitted
by Section 7.3.E, amend, modify or terminate this Agreement other
than to reflect the admission, substitution, termination or withdrawal of
Members pursuant to Article 11 or Article 12 hereof;

 

(2)           except as provided in Section 11.2
hereof, approve or acquiesce to the Transfer of the Membership Interest of the
Managing Member to any Person other than the Company;

 

(3)           except as provided in Section 12.3
hereof, admit into the Company any Additional Member;

 

(4)           make a general assignment for the
benefit of creditors or appoint or acquiesce in the appointment of a Custodian
for all or any part of the assets of the Company;

 

(5)           institute any proceeding for bankruptcy
on behalf of the Company; or

 

41

 

(6)           acquire any Properties other than
the Contributed Properties and any Successor Properties and any assets or other
Property subsequently acquired that are directly related to the Contributed
Properties or any Successor Properties;

 

(7)           incur any Debt in violation of the
provisions of Section 4.3A hereof.

 

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

 

(1)           to reflect the issuance of
additional Membership Interests pursuant to Section 4.4, to reflect
the admission, substitution, termination, or withdrawal of Members in
accordance with this Agreement and to amend Exhibit A
in connection therewith and to reflect the redemption or other reduction in the
number of LLC Units outstanding pursuant to Section 5.6 hereof and
as otherwise permitted by this Agreement;

 

(2)           to reflect a change that is of an
inconsequential nature and does not adversely affect the Non-Managing Members
in any material respect, or to cure any ambiguity, correct or supplement any
provision in this Agreement not inconsistent with law or with other provisions,
or make other changes with respect to matters arising under this Agreement that
will not be inconsistent with law or with the provisions of this Agreement; 

 

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

 

(4)           to reflect such changes as are
reasonably necessary for the Managing Member to maintain its status as a REIT
or to satisfy the REIT Requirements;

 

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

 

(6)           to add to the obligations of the
Managing Member or surrender any right or power granted to the Managing Member
or any Affiliate of the Managing Member for the benefit of the Non-Managing
Member.

 

D.            Notwithstanding Section 7.3.B and 7.3.C
hereof, this Agreement shall not be amended with respect to any Member
adversely affected, and no action may be taken by the Managing Member,
without the Consent of such Member adversely affected if such amendment or
action would (i) convert a Non-Managing Member’s interest in the Company
into a Managing Member’s interest, (ii) modify the limited liability of a
Non-Managing Member, (iii) alter rights of the Member to receive
distributions pursuant to Article 5 or Section 13.3.A(4),
or the allocations specified in Article 6 (except as permitted
pursuant to Sections 4.2, 4.3 and 4.4 and Section 7.3.C(1) hereof),
(iv) materially alter or modify the rights to a Redemption as set forth in
Section 8.6, or the rights to a Make-Whole Payment as set forth in Sections 7.3.E,
7.3.F, 7.3.G and 7.3.H hereof, and related definitions
hereof, (v) amend this Section 7.3.D or (vi) alter or
modify Section 11.2A. Further, no amendment may alter the
restrictions on the Managing

 

42

 

Member’s authority set forth
elsewhere in this Section 7.3 without the Consent specified in such
section. Any such amendment or action consented to by any Member shall be
effective as to that Member, notwithstanding the absence of such consent by any
other Member.

 

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

 

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

 

(2)           sell, dispose, convey or otherwise
transfer any of the Contributed Properties or Successor Properties, in a
transaction that causes holders of Non-Managing Member Units to recognize
taxable income under the Code on account of a Built-in Gain, other than (i) a
casualty loss, (ii) taking by eminent domain (other than a disposition
resulting from the mere threat of eminent domain); or (iii) pursuant to
the exercise of a purchase right by any other Person pursuant to which such
Person has the right to purchase one or more Contributed Properties, which
purchase right was granted pursuant to any document or instrument executed in
accordance with the Contribution Agreement or in effect at the time such
Contributed Properties were contributed to the Company; provided that the
Company has first used commercially reasonable efforts to structure such
disposition as either a tax-free like-kind exchange under Section 1031 of
the Code or as a tax-free investment under Section 1033 of the Code; or

 

(3)           (A) replaces or refinances any
Debt set forth on Schedule 7.3 encumbering the Contributed
Properties (“Existing Indebtedness”), unless such Debt is replaced or
refinanced with other Debt satisfying the requirements set forth below (“Replacement
Indebtedness”), or (B) prepay the Existing Indebtedness or any Replacement
Indebtedness, including Replacement Indebtedness assumed or taken subject to in
a transaction qualifying under Code Section 1031; provided, however, the
above limitations shall not prevent (i) regularly scheduled periodic
principal payments on Existing Indebtedness or Replacement Indebtedness
(including full payment at maturity) and (ii) the replacement, prepayment,
or refinancing of the Existing Indebtedness or any Replacement Indebtedness,
provided such replacement, prepayment, or refinancing shall be made with
Replacement Indebtedness. Any Replacement Indebtedness shall:

 

(a)           not require principal repayments
during such period that would cause the principal balance of such Replacement
Indebtedness to be less than the principal balance of the Existing Indebtedness
or Replacement Indebtedness replaced by such debt, at any time during the Tax
Protection Period;

 

43

 

(b)           be either (i) provided by a
lender that does not have an interest in the Company and is not related to the
Company in any manner (other than as a lender), or (ii) of a nature and
source such that it would not disqualify the guarantee of such indebtedness
from preventing the recapture pursuant to Section 465(e) of the Code
of losses claimed by a Non-Managing Member prior to the Closing Date (with the
Company permitted to assume for this purpose that a guarantee is effective to
make the guarantor “at risk” for purposes of Section 465 of the Code with
respect to debt that otherwise satisfies the requirements of Section 465);

 

(c)           satisfy either of the following
requirements (i) the fair market value of the collateral against which the
lender has recourse with respect to such Debt as of the time the guarantee
would be entered into is not less than 133% of the sum of (x) the aggregate
amount of the guarantees to be provided under clause (4) below with
respect to the debt, plus (y) the dollar amount of any other indebtedness that
is senior to or pari passu with such Debt and as to which the lender thereunder
has recourse against property that is collateral for the Company Debt that will
be guaranteed, plus (z) the aggregate amounts of any other guarantees that are
pari passu with, or at a lower level of risk than, the guarantees provided by
Non-Managing Members pursuant to clause (4) below, or (ii) the Debt
is a general recourse liability of the Company under which the lender is not
limited in its recourse to the assets of the Company; and

 

(d)           either (i) not be subject to a
guarantee, reimbursement or indemnity agreement provided by any Person other
than the Company or a Non-Managing Member that is executing such an agreement
pursuant to clause (4), or other than a customary nonrecourse carve-out
guarantee, environmental indemnity or similar guarantee or indemnity given by
the Managing Member or its affiliates, or (ii) not have any Person who
might be considered to “bear the economic risk of loss”  or to be “at risk” with respect to such Debt
unless such Person is the Managing Member or one of its affiliates and the
Initial Non-Managing Members are permitted to enter into an indemnity agreement
with such Person on terms reasonably satisfactory to such Non-Managing Members
so as to cause the Initial Non-Managing Members to “bear the economic risk of
loss”  or to be “at risk” with respect to
such debt vis-a-vis such Person.

 

(4)           fails to provide each Non-Managing
Member with the ongoing opportunity during the Tax Protection Period to
guarantee the Existing Indebtedness or Replacement Indebtedness of the Company
(or enter into a reimbursement agreement with respect to such Debt) in an
amount up to its share of the Total Debt Amount as determined by the
Non-Managing Member Representative, provided that the aggregate amount to be
guaranteed shall not exceed the Total Debt Amount. If a Non-Managing Member
elects to guarantee debt as described in this Section 7.3.E(4), the
Company, the Managing Member, and such Non-Managing Member agree to enter into
a reimbursement or bottom dollar guarantee agreement substantially in the form attached
hereto as Exhibit E or in such
other form as may be reasonably acceptable to the lender and such
Non-Managing Member. Subject to the limitations in Section 7.3.E(3), if the

 

44

 

Company
intends to repay, in whole or in part, or to substitute other Debt for, Debt of
the Company that one or more Non-Managing Members has guaranteed (or with
respect to which one or more Non-Managing Members has entered into a
reimbursement or bottom dollar guarantee agreement) in accordance with this Section 7.3.E(4),
the Company shall provide written notice, together with an opportunity for each
such Non-Managing Member to guarantee the Replacement Indebtedness on the terms
described above, to the Non-Managing Member Representative prior to such
repayment or substitution and such additional information as the Non-Managing
Member Representative shall reasonably request to permit such Non-Managing Member(s)
to decide whether or not to enter into different and/or additional guarantees
or reimbursement agreements (as the case may be). The notice described in
the immediately preceding sentence shall be deemed to have been satisfied so
long as the Company provides notice to the Non-Managing Member Representative
at least fifteen (15) calendar days prior to any such repayment or substitution
of Debt.

 

In the event that the prior Consent of the
Non-Managing Members is not required for the Managing Member, on behalf of the
Company, to take or engage in any of the actions described in the foregoing
subparagraphs (1) and (2), the Managing Member may take such
action only after providing the Non-Managing Members with not less than fifteen
(15) days notice of its intention to do so. 

 

F.             The Company shall pay to the Non-Managing Members the
Make-Whole Payment as provided below if the Company takes any action to
dissolve or otherwise terminate the Company during the Tax Protection Period. In
addition, a Non-Managing Member shall be entitled to the Make Whole Payment in
the event of the exercise of such Non-Managing Member’s right to a Redemption
under Section 8.6.A after receipt by such Non-Managing Member of a
written notice of a Liquidating Event provided by the Company to the same
extent such Non-Managing Member would have been entitled to such Make Whole
Payment had such Non-Managing Member not have been redeemed pursuant to such
Redemption. In the event the Managing Member intends to dissolve or otherwise
terminate the Company following the Tax Protection Period, it shall give not
less than fifteen (15) days notice to that effect to the Non-Managing Members
prior to taking any such action in furtherance of such intent.

 

G.            Any event in Sections 7.3.E and 7.3.F that
triggers the obligation of the Company to make a Make-Whole Payment (as defined
below) is called a “Triggering Event.”  The Company shall
pay to each Non-Managing Member an amount (the “Make-Whole
Payment”) equal to the aggregate federal, state and local income
taxes, if any, incurred by the Non-Managing Member as a result of a Triggering
Event. Any such federal, state and local income taxes shall be deemed to be the
amount of Built-in Gain recognized by the Non-Managing Members multiplied by
the then highest rate or rates applicable to such Built-in Gain for the year in
which such Built-in Gain is recognized grossed up to include any federal, state
and local income taxes incurred by the Non-Managing Member by reason of the
receipt of the payment from the Company. No effect shall be given, in
determining the amount of the Make-Whole Payment, to a Non-Managing Member’s
taxable income, tax deductions, tax credits, tax carry forwards nor to any
other of their tax benefits or tax attributes (except that state and local
taxes paid on account of the Make Whole Payment shall be deducted in
determining federal income taxes for purposes of determining the Make Whole
Payment). The Make-Whole

 

45

 

Payment shall be made within a
reasonable period of time after the Triggering Event, but in no event later
than: (i) April 10 of the year in which the Triggering Event occurs
if the Triggering Event occurs prior to April 1 of such year; (ii) June 10
of the year in which the Triggering Event occurs if the Triggering Event occurs
after March 31 but prior to June 1 of such year; (iii) September 10
of the year in which the Triggering Event occurs if the Triggering Event occurs
after May 31 but prior to September 1 of such year; and (iv) January 10
of the year immediately following the year in which the Triggering Event occurs
if the Triggering Event occurs after August 31 of such year. In addition
to any other rights available under law or equity, in the event that the
Company fails to pay any amounts owed pursuant to this Section 7.3
when due, the Non-Managing Member to whom such payment is owed shall be deemed
to have loaned such amount to the Company. Any amounts payable to a
Non-Managing Member shall be increased by an amount equal to the greater of (x)
interest accrued on such amount at the Prime Rate from the date such amount is
due until such amount is paid in full and (y) actual interest and penalties
accrued by the relevant taxing authorities with respect to such amounts plus any
penalties actually imposed thereon by the relevant taxing authorities. In the
event that any Member becomes entitled to a Make Whole Payment and the Company,
for any reason, fails to satisfy such obligation, then the Managing Member
shall make the Make Whole Payment promptly following such failure by the
Company to make such Make Whole Payment. The Make Whole Payment shall be in
addition to, and shall not in any manner reduce, the amounts distributable or
payable to the Non-Managing Members pursuant to the other provisions of this
Agreement (calculated as if there had been no Make Whole Payment). In the event
that any Non-Managing Member becomes entitled to a Make Whole Payment, then, on
or before the date on which such Make Whole Payment is payable to the
Non-Managing Member, the Managing Member shall make a capital contribution to
the Company of cash in an amount equal to said Make Whole Payment.

 

H.            The parties agree that the sole and exclusive rights
and remedies to which the Non-Managing Members may be entitled at law or
in equity in connection with any Triggering Event shall be for payment of the
Make-Whole Payment pursuant to Section 7.3.G, and no Non-Managing
Member shall be entitled to enjoin or otherwise object to any transactions that
would result in a taxable event or pursue any other claim with respect to a
Triggering Event. If any Non-Managing Member notifies the Company of a claim
that the Company owes a Make-Whole Payment, the Managing Member, on behalf of
the Company, and the Non-Managing Member shall negotiate in good faith to
resolve any disagreements regarding any such Triggering Event. If any such
disagreement cannot be resolved by the parties within thirty (30) days after
the receipt by the Company of the notice in accordance with the preceding
sentence, the Managing Member, on behalf of the Company, and the Non-Managing
Member shall jointly retain a nationally recognized independent public
accounting firm (an “Accounting Firm”) to act as
an arbitrator to resolve as expeditiously as possible all points of any such
disagreement (including, without limitation, whether a Triggering Event has
occurred and, if so, the amount of the applicable Make-Whole Payment that the
Non-Managing Member is entitled to as a result thereof, determined as set forth
in Section 7.3.G). If the parties cannot agree on an Accounting
Firm, each of the Managing Member, on behalf of the Company, and the
Non-Managing Member shall retain an Accounting Firm, and the Accounting Firms
selected shall jointly retain a third Accounting Firm. If the two Accounting
Firms cannot agree upon a third Accounting Firm within thirty (30) days, such
matter shall be referred to a court of competent jurisdiction to select the
third Accounting Firm. The Accounting Firms shall be instructed to resolve as
expeditiously

 

46

 

as possible all points of any such
disagreement (including, without limitation, whether a Triggering Event has
occurred and, if so, the amount of the applicable Make-Whole Payment that the
Non-Managing Member is entitled to as a result thereof, determined as set forth
in Section 7.3.G). All determinations made by the Accounting Firm
or the Accounting Firms, as the case may be, with respect to the
resolution of whether a Triggering Event has occurred shall be final,
conclusive and binding on the Company and the Non-Managing Member. The fees and
expenses of any Accounting Firms incurred in connection with any such
determination shall be shared equally by the Company and the Non-Managing
Member.

 

7.4          Compensation of the Managing Member

 

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

 

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

 

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

 

D.            In addition to any reimbursements to which Managing
Member is entitled pursuant to Sections 8.6 and 11.3 hereof
and Section 3.4 or elsewhere in each Registration Rights Agreement,
the Managing Member shall also be reimbursed for all expenses it incurs
relating to any issuance of additional Membership Interests, Debt of the
Company, or rights, options, warrants or convertible or exchangeable securities
of the Company pursuant to Article VIII

 

47

 

hereof (including, without
limitation, all costs, expenses, damages and other payments resulting from or
arising in connection with litigation related to any of the foregoing), all of
such expenses are considered by the Members to constitute expenses of, and for
the benefit of, the Company.

 

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

 

7.5          Other Business of Managing Member

 

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

 

7.6          Contracts with Affiliates

 

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

 

B.            The Managing Member or any of its Affiliates, directly
or indirectly, shall be permitted to sell, transfer or convey any property to,
or purchase any property from, or borrow funds from, or lend funds to, the
Company or engage in any other transaction with the Company, but only upon
terms determined by the Managing Member in good faith to be fair and reasonable
and comparable to terms that could be obtained from an unaffiliated party in an
arm’s length transaction, except as otherwise expressly permitted by this
Agreement.

 

7.7          Indemnification

 

A.            To the fullest extent permitted by applicable law, the
Company shall indemnify each Indemnitee from and against any and all losses,
claims, damages, liabilities, joint or several, expenses (including, without
limitation, attorney’s fees and other legal fees and

 

48

 

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

 

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

 

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

 

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

 

49

 

Company would have the power to
indemnify such Person against such liability under the provisions of this
Agreement.

 

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

 

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

 

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

 

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

 

7.8          Liability of the Managing Member

 

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

 

B.            The Non-Managing Members expressly acknowledge that
the Managing Member is acting for the benefit of the Company, the Members and
the Managing Member’s shareholders collectively, that the Managing Member is
under no obligation to give priority to the separate interests of the Members
or the Managing Member’s shareholders (including, without limitation, the tax consequences
to Members, Assignees or the Managing Member’s shareholders) in deciding
whether to cause the Company to take (or decline to take) any actions and that
the Managing Member shall not be liable to the Company or to any Member for
monetary damages for losses sustained, liabilities incurred, or benefits not
derived by Non-Managing Members in connection with such decisions, provided that the Managing Member has acted in good faith
and has not breached its express covenants set forth in this Agreement. 

 

50

 

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

 

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

 

7.9          Other Matters Concerning the
Managing Member

 

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

 

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

 

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

 

D.            Notwithstanding any other provisions of this Agreement
or the Act, any action of the Managing Member on behalf of the Company or any
decision of the Managing Member to refrain from acting on behalf of the Company
undertaken in the good faith belief that such action or omission is necessary
or advisable in order (i) to protect the ability of the Managing Member to
continue to qualify as a REIT, (ii) for the Managing Member otherwise to
satisfy the REIT Requirements or (iii) to allow the Managing Member to
avoid incurring any liability for taxes under Section 857 or Section 4981
of the Code, is expressly authorized under this Agreement and is deemed
approved by all of the Non-Managing Members. If in the opinion of the Managing
Member any such action or omission shall adversely affect the rights of a
Non-Managing Member hereunder, the Managing Member shall give the Non-Managing
Member Representative notice of such intended action or omission.

 

51

 

7.10        Title to Company Assets

 

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

 

7.11        Reliance by Third Parties

 

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

 

ARTICLE VIII.

RIGHTS AND OBLIGATIONS OF MEMBERS

 

8.1          Limitation of Liability

 

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

 

8.2          Managing of Business

 

No Non-Managing Member or Assignee (other than the
Managing Member, any of its Affiliates or any officer, director, employee,
partner, agent or trustee of the Managing Member, the Company or any of their
Affiliates, in their capacity as such) shall take part in the operations,
management or control (within the meaning of the Act) of the Company’s business
transact any business in the Company’s name or have the power to sign documents
for or otherwise bind the Company. The transaction of any such business by the
Managing Member,

 

52

 

any of its Affiliates or any officer, director,
employee, partner, agent or trustee of the Managing Member, the Company or any
of their Affiliates, in their capacity as such, shall not affect, impair or
eliminate the limitations on the liability of the Non-Managing Members or
Assignees under this Agreement.

 

8.3          Outside Activities of Members

 

Subject to any agreements entered into by a Member or
its Affiliates with the Managing Member, the Company or a Subsidiary
(including, without limitation, any employment agreement), any Member and any
Assignee, officer, director, employee, agent, trustee, Affiliate or shareholder
of any Member shall be entitled to and may have business interests and
engage in business activities in addition to those relating to the Company,
including business interests and activities that are in direct or indirect
competition with the Company or that are enhanced by the activities of the
Company. Neither the Company nor any Member shall have any rights by virtue of
this Agreement in any business ventures of any Member or Assignee. Subject to
such agreements, none of the Members nor any other Person shall have any rights
by virtue of this Agreement or the relationship established hereby in any
business ventures of any other Person (other than the Managing Member, to the
extent expressly provided herein), and such Person shall have no obligation
pursuant to this Agreement, subject to any agreements entered into by a Member
or its Affiliates with the Managing Member, the Company or a Subsidiary, to offer
any interest in any such business ventures to the Company, any Member or any
such other Person, even if such opportunity is of a character that, if
presented to the Company, any Member or such other Person, could be taken by
such Person.

 

8.4          Return of Capital

 

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

 

8.5          Rights of Non-Managing Members
Relating to the Company

 

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

 

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

 

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

 

53

 

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

 

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

 

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

 

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

 

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

 

8.6          Redemption Rights

 

A.            On or after the first (1st) year
anniversary of the Effective Date, each Non-Managing Member shall have the
right (the “Redemption Right”) (subject
to the terms and conditions set forth herein) to require the Company to redeem
all or a portion of the Non-Managing Member Units held by such Non-Managing
Member (all such Non-Managing Member Units being hereafter called “Tendered Units “) for the Cash
Amount payable on the Specified Redemption Date (the “Redemption
“); provided, however, that at the election
of and in the sole and absolute discretion of the Managing Member, the Managing
Member may elect to assume the Company’s obligation with respect to the
Redemption (though such assumption shall not relieve the Company from such
obligation in the event the Managing Member fails to fulfill such obligation)
and, at the election of and in the sole and absolute discretion of the Managing
Member, to satisfy the Redemption by (i) paying either the Cash Amount
payable on the Specified Redemption Date or (ii) delivering a number of
REIT Shares equal to the REIT Shares Amount payable on the Specified Redemption
Date.  

 

B.            Any Redemption shall be exercised pursuant to a Notice
of Redemption delivered to the Company by the Non-Managing Member exercising
the Redemption Right (the “Tendering Party”).
On the Specified Redemption Date, the Tendering Party shall sell the Tendered
Units to the Company or the Managing Member, as the case may be, in accordance
with this Section 8.6. Any Tendered Units assumed by the Managing
Member pursuant to this Section 8.6 shall be held by the Managing
Member as Non-Managing Member Units with all the

 

54

 

rights and preferences relating
thereto as provided in this Agreement. The Tendering Party shall submit (i) such
information, certification or affidavit as the Company may reasonably
require in connection with the Ownership Limit and (ii) in the event the
REIT Shares issuable upon such Redemption are not registered for resale under
the Securities Act, such written representations, investment letters, legal
opinions or other instruments necessary, in the Company’s view, to effect
compliance with the Securities Act. If a Cash Amount is to be delivered upon
the Redemption, the Cash Amount shall be delivered as a certified check payable
to the Tendering Party or, in the Company’s or Managing Member’s sole
discretion, as the case may be, in immediately available funds via wire
transfer to an account or account(s) specified by the Tendering Party. If REIT
Shares are to be delivered upon the Redemption, the REIT Shares Amount shall be
delivered by the Managing Member as duly authorized, validly issued, fully paid
and nonassessable REIT Shares (and, if applicable, Rights), free of any pledge,
lien, encumbrance or restriction, other than the Ownership Limit, and other
restrictions provided in the Charter or the Bylaws of the Managing Member in
the event the REIT Shares issuable upon such Redemption are not registered for
resale under the Securities Act, the Securities Act and relevant state
securities or “blue sky” laws. The Tendering Party shall be deemed the owner of
such REIT Shares and Rights for all purposes, including, without limitation,
rights to vote or consent, receive dividends, and exercise rights, as of the
Specified Redemption Date. REIT Shares issued upon an acquisition of the
Tendered Units by the Managing Member pursuant to this Section 8.6 may contain
such legends regarding restrictions on Transfer or ownership to protect the
Managing Member’s tax status as a REIT and in the event the REIT Shares
issuable upon such Redemption are not registered for resale under the
Securities Act, restrictions under the Securities Act and applicable state
securities laws as the Managing Member in good faith determines to be necessary
or advisable in order to ensure compliance with such laws.

 

C.            Notwithstanding the provisions of Sections 8.6.A
and B hereof, the following shall apply:

 

(1)           no Non-Managing Member, Assignee of
a Non-Managing Member or any Substituted Member of a Non-Managing Member shall
have any right to tender for Redemption (whether for the REIT Shares Amount or
the Cash Amount) any Excess LLC Units held by such Non-Managing Member. The
Managing Member shall have no obligation to acquire Excess LLC Units, whether
for the REIT Shares Amount or the Cash Amount;

 

(2)           No Non-Managing Member, Assignee or
Substituted Member or any Substituted Member of a Non-Managing Member may exercise
the Redemption Rights pursuant to Section 8.6.A and B hereof
more than one (1) time during any Calendar Quarter. In determining whether
such limit has been reached during any calendar year with respect to any
Non-Managing Member or Substituted Member, it is understood and agree that the
exercise of the Redemption rights by any Assignee of such Non-Managing Member
or Substituted Member shall be counted for all purposes as the exercise of such
Redemption Rights by the Non-Managing Member or Substituted Member assignor. Notwithstanding
the foregoing, each Non-Managing Member may exercise the Redemption Rights
after the receipt of a notice of a Liquidating Event;

 

55

 

(3)           No Tendering Party may exercise
the Redemption Rights pursuant to Sections 8.6.A and B as to
fewer than 3,000 Non-Managing Member Units (unless they constitute all of the
Non-Managing Member Units held by such Tendering Party);

 

(4)           No Tendering Party may deliver
a Notice of Redemption during the period from December 1 of any year
through January 1 of the following year, nor shall any Specified
Redemption Date occur during the period from December 21 of any year
through January 22 of the following year; and

 

(5)           Each Tendering Party shall pay to
the Managing Member the sum of $1,500 as the stipulated and agreed upon
reimbursement cost for the Managing Member’s administrative overhead and
out-of-pocket costs in connection with such Redemption pursuant to Sections
8.6.A and B.

 

D.            Notwithstanding anything herein to the contrary, with
respect to any Redemption pursuant to this Section 8.6:

 

(1)           each Tendering Party shall continue
to own all LLC Units subject to any Redemption, and be treated as a Member with
respect to such LLC Units for all purposes of this Agreement, until such LLC
Units are Transferred to the Company or Managing Member, as the case may be,
and paid for or exchanged on the Specified Redemption Date; subject, however,
to the provisions of Section 5.7. Until a Specified Redemption Date
and an acquisition of the Tendered Units by the Managing Member, if it so
elects, pursuant to Sections 8.6.A and B hereof, the
Tendering Party shall have no rights as a shareholder of the Managing Member
with respect to the REIT Shares issuable in connection with such Redemption;
and

 

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

 

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

 

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

 

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

 

56

 

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

 

ARTICLE IX.

BOOKS, RECORDS, ACCOUNTING AND REPORTS

 

9.1          Records and Accounting

 

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

 

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

 

9.2          Fiscal Year

 

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

 

9.3          Reports

 

As soon as practicable, but in no event later than 90
days after the close of each Calendar Quarter, the Managing Member shall cause
to be mailed to each Member of record as of the last day of the Calendar
Quarter, a copy of the general ledger of the Company covering the Calendar
Quarter.

 

9.4          Cooperation Regarding Tax Matters
Relating to Contributed Properties

 

A.            In connection with the issuance of Non-Managing Member
Units to any Contributor or any of such Contributor’s Members, including the
issuance of Non-Managing Member Units to the Initial Non-Managing Members upon
the contributions of the Contributed Properties to the Company pursuant to the
Contribution Agreement, the Non-Managing Member Representative shall deliver,
or cause to be delivered, to the Company at or prior to the effective

 

57

 

date of such issuance, at the
Non-Managing Members’ or the Contributors’ sole cost and expense, the following
information prepared as of the date of such anticipated contribution.

 

(1)           depreciation and amortization
schedules for the assets constituting the Contributed Properties, as kept for
both book and tax purposes, showing original basis and accumulated depreciation
or amortization;

 

(2)           basis information (computed for both
book and tax purposes, if different) for the Contributed Properties and all
assets that are components of such Contributed Properties;

 

(3)           the adjusted basis of each
Contributor and any constituent partners or members of each Contributor in its
interest in the Company; and 

 

(4)           calculations of the estimated
amounts of gain to be realized and recognized (if any) by each Contributor, as
a result of the transactions involving the Contributed Properties in accordance
with this Agreement and showing the method by which such amounts are
calculated.

 

B.            The Company shall be permitted to rely on the
information provided or to be provided to it under this Section 9.4
as to the adjusted tax basis of the Contributed Properties and the relevant
depreciation schedules thereto in determining the amount of Built-in Gain on a
going forward basis.

 

C.            The Non-Managing Member Representative shall provide
or cause each Contributor and each of such Contributor’s Members to provide
reasonable assistance to the Company to enable the Company and the Managing
Member to determine the Built-in Gain or to prepare their tax returns. The
Non-Managing Member Representative shall deliver as promptly as practicable to
the Company copies of each Contributor’s final federal, state and local tax
returns (including information returns), including associated Schedules K-1,
for the tax year in which the contribution of the Contributed Properties
occurs, including any amendments thereto, and to notify the Company, in
writing, of any audits of such return, or of any audits for other tax years
that could affect the amounts shown on the returns for the tax year in which
the Closing occurs. Copies of such returns shall be provided to the Company in
draft form at least ten (10) days before they are filed, and in final
form upon filing. The Non-Managing Member Representative shall also
provide, or cause each Contributor to provide, to the Company, promptly upon
receipt, any notice that it receives from any of its direct or indirect
constituent partners or members (including such Contributor’s Members) that
such partner(s) or member(s) intends to prepare its tax returns in a manner
inconsistent with the returns filed by such Contributor. The Non-Managing
Member Representative understands and agrees that he shall cause the tax
returns filed by each Contributor and each of such Contributor’s Members to be
substantially consistent with the information provided to the Company pursuant
to this Section 9.4.

 

58

 

ARTICLE X.

TAX MATTERS

 

10.1                        Preparation of Tax Returns

 

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

 

10.2                        Tax Elections

 

Except as otherwise provided herein, the Managing
Member shall (i) determine whether to make any available election pursuant
to the Code, including, without limitation, the election under Section 754
of the Code and (ii) also determine whether to revoke any such election
(including, without limitation, any election under Code Sections 754); provided, however, that any such determination by the
Managing Member pursuant to this Section 10.2 made prior to the
Subsequent Threshold Date shall be made in good faith based upon the best
interests of the Members in the aggregate and after the Subsequent Threshold
Date in the Managing Member’s sole and absolute discretion.

 

10.3                        Tax Matters Partner

 

A.                                   The Managing Member shall be
designated and shall operate as “Tax Matters Partner” (as defined
in Code Section 6231), to oversee or handle matters relating to the
taxation of the Company; provided, however, that prior to the Subsequent
Threshold Date, the approval of the Non-Managing Member Representative (which
approval or disapproval shall not be unreasonably withheld or delayed) shall be
shall be required to settle any administrative proceeding or institute or
settle any litigation with respect to tax issues if such action (a) is
reasonably likely to materially and adversely affect the Non-Managing Members
in the aggregate, and (b) does not relate to the Managing Member’s tax
status as a REIT.

 

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

 

10.4                        Organizational Expenses

 

The Company shall elect to deduct expenses, if any,
incurred by it in organizing the Company ratably as provided in Code Section 709.

 

ARTICLE XI.

TRANSFERS AND WITHDRAWALS

 

11.1                        Transfer

 

A.                                   No part of the interest of a
Member shall be subject to the claims of any creditor, to any spouse for
alimony or support, or to legal process, and may not be voluntarily or

 

59

 

involuntarily alienated or encumbered
except as may be specifically provided for in this Agreement.

 

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

 

11.2                        Transfer of Managing Member’s
Membership Interest

 

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

 

B.                                     The Managing Member shall not engage
in any merger, consolidation or other combination with or into another person,
sale of all or substantially all of its assets or any reclassification, or
change of its outstanding equity interests through a restructuring,
recapitalization, reclassification or otherwise (a “Termination Transaction”), unless
either (i) the Termination Transaction has been approved by the Consent of
the Non-Managing Members or (ii) in connection with the Termination
Transaction, all holders of LLC Units (other than the Managing Member) either
will receive for each LLC Unit, or will be entitled to receive, for each LLC
Unit (in lieu of the REIT Shares Amount) upon a Redemption of the LLC Unit
pursuant to Section 8.6 hereof, an amount of cash, securities, or
other property equal to the amount that would have been paid to the holder had
the LLC Unit been redeemed for REIT Shares pursuant to Section 8.6
hereof immediately prior to the consummation of the Termination Transaction
subject, in the event of a Redemption of the LLC Unit pursuant to Section 8.6
hereof subsequent to the consummation of the Termination Transaction, to
further adjustment to the

 

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extent provided in this Agreement to
compensate for such effect of certain transactions described herein; provided, however, that, if, in connection with the
Termination Transaction, a purchase, tender or exchange offer shall have been
made to and accepted by the holders of more than fifty percent (50%) of the
outstanding REIT Shares, each Member shall receive, or shall have the right to
elect to receive, the greatest amount of cash, securities, or other property
which such Member would have received had Redeemed its LLC Units for REIT
Shares pursuant to Section 8.6 immediately prior to the expiration
of such purchase, tender or exchange offer and had thereupon accepted such
purchase, tender or exchange offer. No provision of this Agreement, including,
without limitation, the provisions of Section 7.3.B hereof, shall
prohibit the consummation of any Termination Transaction permitted by the
provisions of this Section 11.2.B.

 

11.3                        Non-Managing Members’ Rights to
Transfer

 

A.                                   General. No Non-Managing Member shall
Transfer all or any portion of its Membership Interest, or any of such
Non-Managing Member’s economic rights as a Non-Managing Member, to any
transferee without first offering such Membership Interest to the Managing
Member or otherwise obtaining the consent of the Managing Member, which consent
may be withheld in its sole and absolute discretion; provided,
however, that notwithstanding the foregoing or any other provisions
of this Agreement, any Non-Managing Member may, without the consent of the
Managing Member, (x) pledge all or any portion of its Membership Interest to a
lender to such Member to secure indebtedness to such lender and Transfer such
Membership Interest to such lender upon foreclosure of the debt secured by such
Membership Interest, so long as any such pledge or other Transfer would not
otherwise violate the provisions of this Agreement, (y) transfer all or any portion
of its Membership Interest or economic rights as a Non-Managing Member to a
partner in such Non-Managing Member in liquidation of such partner’s interest
in such Non-Managing Member, to a family member of such Non-Managing Member, a
trust all of the beneficiaries of which are such Non-Managing Member and family
members of such Non-Managing Member, a corporation, general or limited
partnership or limited liability company all of the owners of which are such
Non-Managing Member and family members of such Non-Managing Member or to an
organization described in Sections 170(b)(1)(A), 170(c)(2) or 501(c)(3) of
the Code, so long as any such Transfer would not otherwise violate the
provisions of this Agreement (herein, a “Permitted Non-Managing Member Assignment”),
and in connection with any Permitted Non-Managing Member Assignment, such
Non-Managing shall reimburse to Managing Member all actual out-of-pocket costs
and expenses in connection with such Permitted Non-Managing Member Assignment,
including, without limitation, attorneys’ fees and costs and any other expenses
incurred by Managing Member, including the costs of filing any amendment or
prospectus supplement to any registration statement or prospectus as necessary
to reflect such Transfer. In addition, it is understood and agreed that the
transferee pursuant to any Permitted Non-Managing Member Assignment shall only
become an Assignee and not a Substituted Member, unless otherwise consented to
by the Managing Member in its sole and absolute discretion.

 

B.                                     Conditions to Transfer. It is a condition to any Transfer
otherwise permitted hereunder that the transferee assume by operation of law or
express agreement all of the obligations of the transferor Member under this
Agreement with respect to such Transferred Membership Interest, and that the
Managing Member be reimbursed for all actual out-of-pocket

 

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costs and expenses incurred by the
Managing Member in connection with such Transfer, including, without limitation,
attorneys’ fees and costs and any other expenses incurred by Managing Member,
including the costs of filing any amendment or prospectus supplement to any
registration statement or prospectus as necessary to reflect such Transfer. Notwithstanding
the foregoing, any transferee of any Transferred Membership Interest shall be
subject to the Ownership Limits and any and all ownership limitations contained
in the Charter. Any transferee, whether or not admitted as a Substituted
Member, shall take subject to the obligations of the transferor hereunder. Unless
admitted as a Substituted Member, no transferee, whether by a voluntary
Transfer, by operation of law or otherwise, shall have any rights hereunder,
other than the rights of an Assignee as provided in Section 11.5
hereof.

 

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

 

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

 

E.                                      Transfers to Lenders. No Transfer of any LLC Units may be
made to a lender to the Company or any Person who is related (within the
meaning of Section 1.752-4(b) of the Regulations) to any lender to
the Company whose loan constitutes a Nonrecourse Liability, without the consent
of the Managing Member, in its sole and absolute discretion; provided that, as a
condition to such consent, the lender will be required to enter into an
arrangement with the Company and the Managing Member to redeem or exchange for
the REIT Shares Amount any LLC Units in which a security interest is held
simultaneously with the time at which such lender would be deemed to be a
member in the Company for purposes of allocating liabilities to such lender
under Code Section 752.

 

11.4                        Substituted Members

 

A.                                   No Member shall have the right to
substitute a transferee (including any transferees pursuant to Transfers
permitted by Section 11.3 hereof) as a Member in its place. The
Managing Member shall, however, have the right to consent to the admission of a
transferee of the interest of a Member pursuant to this Section 11.4
as a Substituted Member, which consent may be given or withheld by the
Managing Member in its sole and absolute discretion. The Managing Member’s
failure or refusal to permit a transferee of any such interests to become a

 

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Substituted Member shall not give
rise to any cause of action against the Company or any Member.

 

B.                                     A transferee who has been admitted
as a Substituted Member in accordance with this Article 11 shall
have all the rights and powers and be subject to all the restrictions and
liabilities of a Member under this Agreement. The admission of any transferee
as a Substituted Member shall be subject to the transferee executing and
delivering to the Company an acceptance of all of the terms and conditions of
this Agreement (including without limitation, the provisions of Section 2.4
and such other documents or instruments as may be required to effect the
admission).

 

C.                                     Upon the admission of a Substituted
Member, the Managing Member shall amend Exhibit A
to reflect the name, address, Capital Account, number of LLC Units and
Percentage Interest of such Substituted Member and to eliminate or adjust, if
necessary, the name, address, Capital Account, number of LLC Units and
Percentage Interest of the predecessor of such Substituted Member (and any
other Member, as necessary). 

 

11.5                        Assignees

 

If the Managing Member, in its sole and absolute
discretion, does not consent to the admission of any permitted transferee under
Section 11.3 hereof as a Substituted Member, as described in Section 11.4
hereof, such transferee shall be considered an Assignee for purposes of this
Agreement. An Assignee shall be entitled to all the rights of an assignee of a
limited liability company interest under the Act, including the right to receive
distributions from the Company and the share of Net Income, Net Loss and other
items of income, gain, loss, deduction and credit of the Company attributable
to the LLC Units assigned to such transferee, the rights to Transfer the LLC
Units provided in this Article 11, and the right of Redemption
provided in Section 8.6, but shall not be deemed to be a Member of
LLC Units for any other purpose under this Agreement, and shall not be entitled
to effect a Consent or vote with respect to such LLC Units on any matter
presented to the Members for approval (such right to Consent or vote, to the
extent provided in this Agreement or under the Act, fully remaining with the
transferor Member). In the event that any such transferee desires to make a
further assignment of any such LLC Units, such transferee shall be subject to
all the provisions of this Article 11 to the same extent and in the
same manner as any Members desiring to make an assignment of LLC Units. The
Managing Member shall have no liability under any circumstance with respect to
any Assignee as to which it does not have notice.

 

11.6                        General Provisions

 

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

 

B.                                     Any Non-Managing Member who shall
Transfer all of its LLC Units in a Transfer (i) permitted pursuant to this
Article 11 where such transferee was admitted as a

 

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Substituted Member; (ii) pursuant
to the exercise of its rights to effect a Redemption of all of its LLC Units
under Section 8.6 hereof; (iii) pursuant to a Reduction; or (iv) pursuant
to a combination of Transfers of the types specified in the foregoing (i) - (iii),
shall cease to be a Member.

 

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

 

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

 

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

 

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

 

(2)                                  in violation of applicable law;

 

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

 

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

 

(5)                                  if such Transfer could cause the
Company to become, with respect to any employee benefit plan subject to Title I
of ERISA, a “party-in-interest”
(as defined in ERISA Section 3(14)) or a “disqualified person” (as defined
in Code Section 4975(c));

 

64

 

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

 

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

 

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

 

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

 

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

 

ARTICLE XII.

ADMISSION OF MEMBERS

 

12.1                        Admission of Initial Non-Managing
Members

 

Upon the contribution of the Contributed Properties to
the Company, each Contributor, to the extent it receives Non-Managing Member
Units, shall be admitted to the Company as an Initial Non-Managing Member. Each
Contributor, in lieu of receiving the number of Non-Managing Member Units
otherwise issuable to it pursuant to the Contribution Agreement, may instruct
the Managing Member to issue the Non-Managing Member Units to Contributor’s
Members so long as (i) Contributor certifies to the Managing Member that
the Contributor’s right to receive the Non-Managing Member Units has been
distributed to the Contributor’s Members in accordance with the limited liability company, partnership agreement
or other organizational documents of the Contributor, (ii) each of
the Contributor’s Members executes (A) a Joinder Agreement as a
Non-Managing Member, (B) an Accredited Investor Certificate in form and
substance reasonably acceptable to the Managing Member or as otherwise required
by the Contribution Agreement; and (C) a Registration Rights Agreement. 

 

12.2                        Admission of Successor Managing
Member

 

A successor to all of the Managing Member’s Membership
Interest pursuant to Section 11.2 hereof who is proposed to be
admitted as a successor Managing Member shall be admitted to the Company as the
Managing Member, effective immediately upon such Transfer. Any such successor
shall carry on the business of the Company without dissolution. In each case,
the admission shall be subject to the successor Managing Member executing and
delivering

 

65

 

to the Company an acceptance of all of the terms,
conditions and applicable obligations of this Agreement and such other documents
or instruments as may be required to effect the admission in Section 11.2.C
hereof.

 

12.3                        Admission of Additional Members

 

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

 

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

 

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

 

12.4                        Amendment of Agreement and
Certificate

 

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

 

66

 

12.5                        Limitation on Admission of Members

 

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

 

ARTICLE XIII.

DISSOLUTION, LIQUIDATION AND TERMINATION

 

13.1                        Dissolution

 

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

 

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

 

B.                                     subject to the provisions of Sections 7.3.E
and 7.3H hereof, an election to dissolve the Company made by the
Managing Member;

 

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

 

D.                                    subject to the provisions of Sections 7.3.E
and 7.3H hereof, the sale of all or substantially all of the assets and
properties of the Company;

 

E.                                      subject to the provisions of Sections 7.3.E
and 7.3H hereof, a final and non-appealable judgment is entered by a
court of competent jurisdiction ruling that the Managing Member is bankrupt or
insolvent, or a final and non-appealable order for relief is entered by a court
with appropriate jurisdiction against the Managing Member, in each case under
any Bankruptcy Law as now or hereafter in effect, unless prior to or within 90
days after the entry of such order or judgment a Majority of Remaining Members
Consent in writing to continue the business of the Company and to the
appointment, effective as of a date prior to the date of such order or
judgment, of a substitute Managing Member;

 

F.                                      the Incapacity of the Managing
Member, unless prior to or within 90 days after such Incapacity a Majority of
Remaining Members agree in writing to continue the business of the Company and
to the appointment, effective as of a date prior to the date of such
Incapacity, of a substitute Managing Member; or

 

67

 

G.                                     the Redemption of all LLC Units
(other than those held by the Managing Member).

 

13.2                        Redemption of Non-Managing Member
Units

 

Notwithstanding anything in this Agreement to the
contrary, on or after such time as the Managing Member has the right to
dissolve the Company, or at any time with respect to Members that are an organization
described in Sections 170(b)(1)(A), 170(c)(2) or 501(c)(3) of the
Code, the Managing Member may, in its sole and absolute discretion, require
each Non-Managing Member (by delivering a Call Notice to such Non-Managing
Member) to tender all of its Non-Managing Member Units to the Managing Member
in exchange for, at the election of and in the sole and absolute discretion of
the Managing Member, either (i) an amount of cash equal to the sum of (a) the
Cash Amount and (b) the NMM Sharing Amount, calculated as if all of the
Contributed Property then owned by the Company were sold in a taxable
transaction at their fair market values, or (ii) a number of REIT Shares
equal to the sum of (a) the REIT Shares Amount payable on the Specified
Redemption Date and otherwise in accordance with the procedures and provisions
set forth in Sections 8.6.A and B, and (b) a number of
REIT Shares with a value equal to the amount set forth in Section 13.2(i)(b).

 

13.3                        Winding Up

 

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

 

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

 

(2)                                  Second, to the satisfaction of all
of the Company’s debts and liabilities to the Members, including, but not
limited to, any loan made to the Company by a Member in accordance with the
terms of this Agreement (whether by payment or the making of reasonable
provision for payment thereof);

 

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

 

68

 

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

 

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

 

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

 

13.4                        Deemed Contribution and Distribution

 

Notwithstanding any other provision of this Article 13,
in the event that the Company is liquidated within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), but no Liquidating Event has occurred, the Company’s
Property shall not be liquidated, the Company’s liabilities shall not be paid
or discharged and the Company’s affairs shall not be wound up. Instead, for
federal and state income tax purposes, the Company shall be deemed to have contributed
its assets and liabilities to a new limited liability company in exchange for
an interest in such new limited liability company and, immediately thereafter,
the Company will be deemed to liquidate by distributing interests in the new
limited liability company to the Members.

 

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13.5                        Rights of Members

 

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

 

13.6                        Notice of Dissolution

 

In the event that a Liquidating Event occurs or an
event occurs that would, but for an election or objection by one or more
Members pursuant to Section 13.1 hereof, result in a dissolution of
the Company, the Managing Member shall, within 30 days thereafter, provide
written notice thereof to each of the Members and, in the Managing Member’s
sole and absolute discretion or as required by the Act, to all other parties
with whom the Company regularly conducts business (as determined in the sole
and absolute discretion of the Managing Member), and the Managing Member may,
or, if required by the Act, shall, publish notice thereof in a newspaper of
general circulation in each place in which the Company regularly conduct
business (as determined in the sole and absolute discretion of the Managing
Member).

 

13.7                        Cancellation of Certificate

 

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

 

13.8                        Reasonable Time for Winding-Up

 

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

 

13.9                        Liability of Liquidator

 

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

 

70

 

ARTICLE XIV.

PROCEDURES FOR ACTIONS AND CONSENTS

OF MEMBERS; AMENDMENTS; MEETINGS

 

14.1                        Procedures for Actions and Consents
of Members

 

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

 

14.2                        Amendments

 

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

 

14.3                        Meetings of the Members

 

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

 

B.                                     Any action required or permitted to
be taken at a meeting of the Members may be taken without a meeting if a
written consent setting forth the action so taken is signed by Members holding
a majority of the LLC Units (or such other percentage as is expressly required
by this Agreement for the action in question). Such consent may be in one
instrument or in several instruments, and shall have the same force and effect
as a vote of Members holding a majority of the LLC Units (or such other
percentage as is expressly required by this Agreement).

 

71

 

Such consent shall be filed with the
Managing Member. An action so taken shall be deemed to have been taken at a
meeting held on the effective date so certified.

 

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

 

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

 

ARTICLE XV.

GENERAL PROVISIONS

 

15.1                        Addresses and Notice

 

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

 

15.2                        Titles and Captions

 

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

 

15.3                        Pronouns and Plurals

 

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

 

72

 

15.4                        Further Action

 

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

 

15.5                        Binding Effect

 

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

 

15.6                        Creditors

 

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

 

15.7                        Waiver

 

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

 

15.8                        Counterparts

 

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

 

15.9                        Applicable Law

 

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

 

15.10                 Entire Agreement

 

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

 

73

 

15.11                 Invalidity of Provisions

 

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

 

15.12                 No Partition

 

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

 

15.13                 Non-Managing Member Representative

 

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

 

B.                                     The holders of a majority of the
outstanding Non-Managing Members Units shall be entitled to replace the
Non-Managing Member Representative by delivering to the Managing Member a
written notice signed by the holders of a majority of the outstanding Non-Managing
Members Units stating (i) that the notice is being provided to the
Managing Member pursuant to this Section 15.13.B, (ii) that
the Members signing the notice own of record on the books of the Company a
majority of the outstanding Non-Managing Members Units, (iii) that the
Members signing the notice desire to replace the person then serving as the
Non-Managing Member Representative with the person named in the notice, and (iv) specifying
the date on which the appointment of the named individual to replace the then
serving Non-Managing Member Representative shall be effective (which shall be a
date not earlier than the fourteenth day after the date on which the notice
shall have been delivered to the Managing Member). The appointment of the new
Non-Managing Member Representative specified in the notice shall be effective
on the date specified in the notice and upon effectiveness, the individual
previously serving as the Non-Managing Member Representative shall cease to be
entitled to act in that capacity under this Agreement.

 

15.14                 Uniform Commercial Code Article 8
(Opt-In)

 

The Company hereby irrevocably elects that all LLC
Units shall be securities governed by Article 8 of the Uniform Commercial
Code as in effect in the State of Delaware and each other applicable
jurisdiction. Each certificate evidencing LLC Units in the Company shall

 

74

 

bear the following legend:  “This certificate evidences an interest in
HCP DR California, LLC and shall be a security governed by Article 8 of
the Uniform Commercial Code as in effect in the State of Delaware and, to
the extent permitted by applicable law, each other applicable jurisdiction.”  This provision shall not be amended, and any
purported amendment to this provision shall be null and void.

 

[Signatures
appear on following page]

 

75

 

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

 

	
  MANAGING MEMBER:

  	
  HEALTH CARE
  PROPERTY INVESTORS, INC., a

  Maryland corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stephen R. Maulbetsch

  	
   

  
	
   

  	
  Name:

  	
  Stephen R. Maulbetsch

  	
   

  
	
   

  	
  Title:

  	
  Executive Vice
  President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  NON-MANAGING
  MEMBERS:

  	
  HEALTH CARE
  PROPERTY INVESTORS, INC., a 

  Maryland corporation 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stephen R. Maulbetsch

  	
   

  
	
   

  	
  Name:

  	
  Stephen R. Maulbetsch

  	
   

  
	
   

  	
  Title:

  	
  Executive Vice
  President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ William P. Gallaher

  	
   

  
	
   

  	
  William P. Gallaher,
  Trustee for the 

  William P. & Cynthia J. Gallaher Trust

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Dwayne J. Clark

  	
   

  
	
   

  	
  Dwayne J. Clark, an individual

  
	
   

  	
   

  
	
   

  	
   

  
	
   [See Additional
  Signature Pages of

  Non-Managing Members Attached hereto]

  	
   

  
								

 

S-1

 

[Additional Signatures of Non-Managing Members to

Amended and Restated Limited Liability
Company Agreement

of HCP DR California, LLC]

 

POWER OF ATTORNEY

 

This
Agreement has been signed by each of the following persons as a Non-Managing
Member in the capacities and on the dates indicated:

 

	
  Signature

  	
   

  	
  Title

  	
   

  	
  Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   *

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Patrick R. Gallaher, Trustee for the

  Patrick R. & Cynthia M. Gallaher Trust

  	
   

  	
  Trustee

  	
   

  	
  July 22, 2005

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   *

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Jeffrey D. Civian, Trustee for the

  Jeffrey D. Civian Trust

  dated August 8, 1986

  	
   

  	
  Trustee

  	
   

  	
  July 22, 2005

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   *

  	
   

  	
  Individual

  	
   

  	
  July 22, 2005

  	
   

  
	
  Jeffrey Meyer

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   *

  	
   

  	
  Individual

  	
   

  	
  July 22, 2005

  	
   

  
	
  Steven L. Gallaher

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   *

  	
   

  	
  Individual

  	
   

  	
  July 22, 2005

  	
   

  
	
  Richard Coombs

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   *

  	
   

  	
  Individual

  	
   

  	
  July 22, 2005

  	
   

  
	
  Larry L. Wasem

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   *

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Joseph H. Ward, Jr., Trustee for the

  Joseph H. Ward, Jr. and

  Pamela K. Ward Trust

  	
   

  	
  Trustee

  	
   

  	
  July 22, 2005

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   *

  	
   

  	
  Individual

  	
   

  	
  July 22, 2005

  	
   

  
	
  Borue H. O’Brien

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   *

  	
   

  	
  Individual

  	
   

  	
  July 22, 2005

  	
   

  
	
  William R. Mabry

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   *

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Charles N. Elsbree, Trustee for the

  Charles N. Elsbree Jr. Living Trust

  dated February 14, 2002

  	
   

  	
  Trustee

  	
   

  	
  July 22, 2005

  	
   

  

 

S-2

 

	
  Signature

  	
   

  	
  Title

  	
   

  	
  Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   * 

  	
   

  	
  Individual

  	
   

  	
  July 22, 2005

  	
   

  
	
  Gary A. Robinson

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   * 

  	
   

  	
  Trustee

  	
   

  	
  July 22, 2005

  	
   

  
	
  Thomas H. Persons, Trustee for the

  Persons Family Revocable Trust

  under trust dated February 15, 2005

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   * 

  	
   

  	
  Individual

  	
   

  	
  July 22, 2005

  	
   

  
	
  Glen Hammel

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   * 

  	
   

  	
  Individual

  	
   

  	
  July 22, 2005

  	
   

  
	
  Marilyn E. Montero

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   * 

  	
   

  	
  Trustee

  	
   

  	
  July 22, 2005

  	
   

  
	
  Joseph G. Lin, Trustee for the

  Lin Revocable Living Trust

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   * 

  	
   

  	
  Individual

  	
   

  	
  July 22, 2005

  	
   

  
	
  Ned B. Stein

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   * 

  	
   

  	
  Trustee

  	
   

  	
  July 22, 2005

  	
   

  
	
  John Gladstein, Trustee for the

  John & Andrea Gladstein Family Trust

  dated February 11, 2003

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   * 

  	
   

  	
  Trustee

  	
   

  	
  July 22, 2005

  	
   

  
	
  Francis Connelly, Trustee for the

  Francis J. & Shannon A. Connelly Trust

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   * 

  	
   

  	
  Trustee

  	
   

  	
  July 22, 2005

  	
   

  
	
  Al Coppin, Trustee for the

  Al Coppin Trust

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   * 

  	
   

  	
  Trustee

  	
   

  	
  July 22, 2005

  	
   

  
	
  Stephen B. McCullagh, Trustee for the

  Stephen B. & Pamela McCullagh Trust

  dated October 22, 2001

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   * 

  	
   

  	
  Trustee

  	
   

  	
  July 22, 2005

  	
   

  
	
  Larry L. Wasem – SEP IRA

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   *By:

  	
       /s/ William P. Gallaher

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  William P. Gallaher

  Attorney-in-fact

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

S-3

 

EXHIBIT A

 

MEMBERS
CAPITAL CONTRIBUTIONS

 

 

[See Pages A-2
and A-3 attached hereto]

 

A-1

 

EXHIBIT A-2

CONTRIBUTOR CONTRIBUTIONS

 

Part I:
Contributors

 

	
  Contributor

  	
   

  	
  Contributed

  Properties

  	
   

  	
  Gross Asset

  Value of

  Contribution

  	
   

  	
  Net Asset

  Value of

  Contribution

  	
   

  	
  Unit Value

  	
   

  	
  Number of

  Non-Managing

  Member Units

  (1)

  	
   

  
	
  Aegis of Pleasant Hill LLC

  	
   

  	
  Aegis of
  Pleasant Hill

  	
   

  	
  $

  	
  20,000,000

  	
   

  	
  $

  	
  4,335,801

  	
   

  	
  $

  	
  27.30

  	
   

  	
  158,821

  	
   

  
	
  Aegis of Dana Point LLC

  	
   

  	
  Aegis of Dana
  Point

  	
   

  	
  $

  	
  18,800,000

  	
   

  	
  $

  	
  3,827,378

  	
   

  	
  $

  	
  27.30

  	
   

  	
  140,197

  	
   

  
	
  Aegis of Granada Hills LLC

  	
   

  	
  Aegis of Granada
  Hills

  	
   

  	
  $

  	
  21,500,000

  	
   

  	
  $

  	
  7,874,908

  	
   

  	
  $

  	
  27.30

  	
   

  	
  288,458

  	
   

  
	
  OakmontSL of Concord, L.P.

  	
   

  	
  Aegis of Concord

  	
   

  	
  $

  	
  37,900,709

  	
   

  	
  $

  	
  8,488,494

  	
   

  	
  $

  	
  27.30

  	
   

  	
  310,934

  	
   

  
	
  Total

  	
   

  	
   

  	
   

  	
  $

  	
  98,200,709

  	
   

  	
  $

  	
  24,526,581

  	
   

  	
  $

  	
  27.30

  	
   

  	
  898,410

  	
   

  

 

(1) See Part II
(Exhibit A-3) for a breakout by individual Non-Managing Members and their
respective allocations

 

 

Exhibit A-3

LLC Units (Non-Managing Member and Managing
Member)

 

Non-Managing Member Units

 

	
   

  	
   

  	
   

  	
   

  	
  Aegis of Pleasant Hill

  	
   

  	
  Aegis of Dana Point

  	
   

  	
  Aegis of Granada Hills

  	
   

  	
  Aegis of Concord

  	
   

  	
  Total

  	
   

  
	
  Name

  	
   

  	
  Address

  	
   

  	
  % Interest

  	
   

  	
  # of Units

  	
   

  	
  % Interest

  	
   

  	
  # of Units

  	
   

  	
  % Interest

  	
   

  	
  # of Units

  	
   

  	
  % Interest

  	
   

  	
  # of Units

  	
   

  	
  # of Units

  	
   

  
	
  William P.
  Gallaher, Trustee for the William P. & Cynthia J.

  	
   

  	
  220 Concourse Blvd. Santa Rosa, CA 95403

  	
   

  	
  23.944

  	
  %

  	
  38,027

  	
   

  	
  23.944

  	
  %

  	
  33,569

  	
   

  	
  23.944

  	
  %

  	
  69,068

  	
   

  	
  39.705

  	
  %

  	
  123,455

  	
   

  	
  264,119

  	
   

  
	
  Dwayne J. Clark

  	
   

  	
  18200 NE Union
  Hill Rd. Suite 110 Redmond, WA 98052

  	
   

  	
  6.868

  	
  %

  	
  10,908

  	
   

  	
  6.868

  	
  %

  	
  9,629

  	
   

  	
  6.868

  	
  %

  	
  19,812

  	
   

  	
   

  	
   

  	
  —

  	
   

  	
  40,349

  	
   

  
	
  Patrick R.
  Gallaher, Trustee for the Patrick R. & Cynthia M.

  	
   

  	
  531 Sauvignon
  Place Windsor, CA 95492

  	
   

  	
  13.097

  	
  %

  	
  20,800

  	
   

  	
  13.097

  	
  %

  	
  18,361

  	
   

  	
  13.097

  	
  %

  	
  37,778

  	
   

  	
   

  	
   

  	
  —

  	
   

  	
  76,939

  	
   

  
	
  Jeffrey D.
  Civian, Trustee for the Jeffrey D. Civian Trust

  	
   

  	
  3375 Montecito Lane Santa Rosa, CA 95404

  	
   

  	
  11.614

  	
  %

  	
  18,445

  	
   

  	
  11.614

  	
  %

  	
  16,282

  	
   

  	
  11.614

  	
  %

  	
  33,500

  	
   

  	
   

  	
   

  	
  —

  	
   

  	
  68,227

  	
   

  
	
  Jeffrey Meyer

  	
   

  	
  8335 Starr Rd.
  Windsor, CA 95492

  	
   

  	
  2.846

  	
  %

  	
  4,520

  	
   

  	
  2.866

  	
  %

  	
  4,018

  	
   

  	
  2.866

  	
  %

  	
  8,268

  	
   

  	
   

  	
   

  	
  —

  	
   

  	
  16,806

  	
   

  
	
  Steven L.
  Gallaher

  	
   

  	
  2 Rutland Ct.
  Alameda, CA 94502

  	
   

  	
  3.485

  	
  %

  	
  5,535

  	
   

  	
  3.485

  	
  %

  	
  4,886

  	
   

  	
  3.485

  	
  %

  	
  10,052

  	
   

  	
  3.161

  	
  %

  	
  9,828

  	
   

  	
  30,301

  	
   

  
	
  Richard Coombs

  	
   

  	
  9982 Troon Ct.
  Windsor, CA 95492

  	
   

  	
  4.687

  	
  %

  	
  7,444

  	
   

  	
  4.687

  	
  %

  	
  6,571

  	
   

  	
  4.687

  	
  %

  	
  13,521

  	
   

  	
   

  	
   

  	
  —

  	
   

  	
  27,536

  	
   

  
	
  Larry L. Wasem

  	
   

  	
  414 Aviation Blvd. Santa Rosa, CA 95403

  	
   

  	
  4.365

  	
  %

  	
  6,933

  	
   

  	
  4.365

  	
  %

  	
  6,120

  	
   

  	
  4.365

  	
  %

  	
  12,591

  	
   

  	
   

  	
   

  	
  —

  	
   

  	
  25,644

  	
   

  
	
  Joseph H. Ward,
  Trustee for the Joseph H. Ward, Jr. and

  	
   

  	
  2170 Grace Dr. Santa Rosa, CA 95404

  	
   

  	
  2.612

  	
  %

  	
  4,149

  	
   

  	
  2.612

  	
  %

  	
  3,662

  	
   

  	
  2.612

  	
  %

  	
  7,535

  	
   

  	
   

  	
   

  	
  —

  	
   

  	
  15,346

  	
   

  
	
  Borue H. O’Brien

  	
   

  	
  200 Queens Lane
  Petaluma, CA 94952

  	
   

  	
  2.711

  	
  %

  	
  4,306

  	
   

  	
  2.711

  	
  %

  	
  3,801

  	
   

  	
  2.711

  	
  %

  	
  7,821

  	
   

  	
   

  	
   

  	
  —

  	
   

  	
  15,928

  	
   

  
	
  William R. Mabry

  	
   

  	
  6840 Giovanetti
  Rd. Forestville, CA 95436

  	
   

  	
  0.767

  	
  %

  	
  1,217

  	
   

  	
  0.767

  	
  %

  	
  1,075

  	
   

  	
  0.767

  	
  %

  	
  2,211

  	
   

  	
  1.583

  	
  %

  	
  4,922

  	
   

  	
  9,425

  	
   

  
	
  Charles N.
  Elsbree, Trustee for the Charles N. Elsbree Jr.

  	
   

  	
  P.O. Box 867
  Windsor, CA 95492

  	
   

  	
  1.815

  	
  %

  	
  2,883

  	
   

  	
  1.815

  	
  %

  	
  2,545

  	
   

  	
  1.815

  	
  %

  	
  5,237

  	
   

  	
   

  	
   

  	
  —

  	
   

  	
  10,665

  	
   

  
	
  Gary A. Robinson

  	
   

  	
  6171 Anderson Rd.
  Forestville, CA 95436

  	
   

  	
  1.761

  	
  %

  	
  2,797

  	
   

  	
  1.761

  	
  %

  	
  2,469

  	
   

  	
  1.761

  	
  %

  	
  5,080

  	
   

  	
   

  	
   

  	
  —

  	
   

  	
  10,346

  	
   

  
	
  Thomas H.
  Persons, Trustee for the Persons Family

  	
   

  	
  500 Washington
  St. Suite 700 San Francisco, CA 94111

  	
   

  	
  0.379

  	
  %

  	
  603

  	
   

  	
  0.379

  	
  %

  	
  532

  	
   

  	
  0.379

  	
  %

  	
  1,095

  	
   

  	
   

  	
   

  	
  —

  	
   

  	
  2,230

  	
   

  
	
  Glen Hammel

  	
   

  	
  3540 Mono Place
  Davis, CA 95616

  	
   

  	
  0.690

  	
  %

  	
  1,096

  	
   

  	
  0.690

  	
  %

  	
  967

  	
   

  	
  0.690

  	
  %

  	
  1,991

  	
   

  	
   

  	
   

  	
  —

  	
   

  	
  4,054

  	
   

  
	
  Marilyn E.
  Montero

  	
   

  	
  6171 Anderson Rd.
  Forestville, CA 95436

  	
   

  	
  0.363

  	
  %

  	
  577

  	
   

  	
  0.363

  	
  %

  	
  509

  	
   

  	
  0.363

  	
  %

  	
  1,047

  	
   

  	
   

  	
   

  	
  —

  	
   

  	
  2,133

  	
   

  
	
  Joseph G. Lin,
  Trustee for The Lin Revocable Living Trust

  	
   

  	
  220 Concourse Blvd. Santa Rosa, CA 95403

  	
   

  	
   

  	
   

  	
  —

  	
   

  	
   

  	
   

  	
  —

  	
   

  	
   

  	
   

  	
  —

  	
   

  	
  3.161

  	
  %

  	
  9,828

  	
   

  	
  9,828

  	
   

  
	
  Ned B. Stein

  	
   

  	
  326 Blabcock Rd.
  Houston, TX 77024

  	
   

  	
   

  	
   

  	
  —

  	
   

  	
   

  	
   

  	
  —

  	
   

  	
   

  	
   

  	
  —

  	
   

  	
  8.826

  	
  %

  	
  27,444

  	
   

  	
  27,444

  	
   

  
	
  John Gladstein,
  Trustee for the John & Andrea Gladstein

  	
   

  	
  3350 Calistoga Rd. Santa Rosa, CA 95404

  	
   

  	
   

  	
   

  	
  —

  	
   

  	
   

  	
   

  	
  —

  	
   

  	
   

  	
   

  	
  —

  	
   

  	
  6.175

  	
  %

  	
  19,202

  	
   

  	
  19,202

  	
   

  
	
  Francis Connelly,
  Trustee for The Francis J & Shannon A

  	
   

  	
  P.O. Box 972
  St. Helena, CA 94574

  	
   

  	
   

  	
   

  	
  —

  	
   

  	
   

  	
   

  	
  —

  	
   

  	
   

  	
   

  	
  —

  	
   

  	
  2.646

  	
  %

  	
  8,227

  	
   

  	
  8,227

  	
   

  
	
  Al Coppin,
  Trustee for the Al Coppin Trust

  	
   

  	
  1355 N. Dutton Ave. Santa Rosa, CA 95401

  	
   

  	
   

  	
   

  	
  —

  	
   

  	
   

  	
   

  	
  —

  	
   

  	
   

  	
   

  	
  —

  	
   

  	
  1.767

  	
  %

  	
  5,495

  	
   

  	
  5,495

  	
   

  
	
  Stephen B.
  McCullagh, Trustee for the Stephen B. &

  	
   

  	
  3564 Foxwood Pl. Santa Rosa, CA 95405

  	
   

  	
   

  	
   

  	
  —

  	
   

  	
   

  	
   

  	
  —

  	
   

  	
   

  	
   

  	
  —

  	
   

  	
  1.767

  	
  %

  	
  5,495

  	
   

  	
  5,495

  	
   

  
	
  Larry L. Wasem -
  SEP IRA

  	
   

  	
  414 Aviation Blvd. Santa Rosa, CA 95403

  	
   

  	
  0.632

  	
  %

  	
  1,004

  	
   

  	
  0.632

  	
  %

  	
  887

  	
   

  	
  0.632

  	
  %

  	
  1,824

  	
   

  	
   

  	
   

  	
  —

  	
   

  	
  3,715

  	
   

  
	
  Health Care
  Property Investors, Inc

  	
   

  	
  3760 Kilroy
  Airport Way, Suite 300, Long Beach CA 90806

  	
   

  	
  17.364

  	
  %

  	
  27,577

  	
   

  	
  17.343

  	
  %

  	
  24,314

  	
   

  	
  17.343

  	
  %

  	
  50,027

  	
   

  	
  31.21

  	
  %

  	
  97,038

  	
   

  	
  198,956

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total
  per Contributor and Cumulative Totals

  	
   

  	
  100

  	
  %

  	
  158,821 units

  	
   

  	
  100

  	
  %

  	
  140,197 units

  	
   

  	
  100

  	
  %

  	
  288,458 units

  	
   

  	
  100

  	
  %

  	
  310,934 units

  	
   

  	
  898,410 units

  	
   

  

 

1

 

HCP Managing Member Units

 

	
   

  	
   

  	
   

  	
   

  	
  Aegis of Pleasant

  Hill

  	
   

  	
  Aegis of Dana

  Point

  	
   

  	
  Aegis of Granada

  Hills

  	
   

  	
  Aegis of Concord

  (Fee)

  	
   

  	
  Aegis of

  Concord

  (Leasehold)

  	
   

  	
  Total

  	
   

  
	
  Name

  	
   

  	
  Address

  	
   

  	
  # of Units

  	
   

  	
  # of Units

  	
   

  	
  # of Units

  	
   

  	
  # of Units

  	
   

  	
  # of Units

  	
   

  	
  # of Units

  	
   

  
	
  Health Care Property
  Investors, Inc

  	
   

  	
  3760 Kilroy
  Airport Way, Suite 300, Long Beach CA 90806

  	
   

  	
  346,985

  	
   

  	
  551,338

  	
   

  	
  502,132

  	
   

  	
  166,622

  	
   

  	
  278,362

  	
   

  	
  1,845,439

  	
   

  

 

2

 

EXHIBIT B

NOTICE OF REDEMPTION

 

	
  To:

  	
  HCP DR California, LLC

  
	
   

  	
  c/o Health Care Property Investors, Inc.

  
	
   

  	
  3760 Kilroy Airport Way, Suite 300

  
	
   

  	
  Long Beach, California 90806

  

 

The undersigned Member or Assignee hereby irrevocably
tenders for Redemption                   
LLC Units in HCP DR California, LLC in accordance with the terms of the Amended
and Restated Limited Liability Company Agreement of HCP DR California, LLC,
dated as of July 22, 2005 (the “Agreement”),
and the Redemption Rights referred to therein. The undersigned Member or
Assignee:

 

(a)                                  undertakes
(i) to surrender such LLC Units and any certificate therefor at the
closing of the Redemption and (ii) to furnish to the Managing Member,
prior to the Specified Redemption Date, the documentation, instruments and
information required under Section 8.6.E of the Agreement;

 

(b)                               directs
that, at the sole discretion of the Managing Member, either (i) a
certified check representing the Cash Amount deliverable upon closing of the Redemption
be delivered to the address specified below, after deducting therefrom any costs
or expenses to which the undersigned Member or Assignee is responsible pursuant
to the Agreement, or (ii) a certificate(s) representing the REIT Shares
deliverable upon the closing of such Redemption be delivered to the address
specified below;

 

(c)                                  represents,
warrants, certifies and agrees that: (1) the undersigned Member or
Assignee has, and at the closing of the Redemption will have, good, marketable
and unencumbered title to such LLC Units, free and clear of the rights or
interests of any other person or entity, (2) the undersigned Member or
Assignee has, and at the closing of the Redemption will have, the full right,
power and authority to tender and surrender such LLC Units as provided herein, (3) the
undersigned Member or Assignee has obtained the consent or approval of all
persons and entities, if any, having the right to consent to or approve such
tender and surrender, (4) such Redemption is in compliance with the
provisions of Section 8.6 of the Agreement, and (5) except to
the extent deducted from the Cash Amount pursuant to clause (b)(i) above,
the undersigned Member or Assignee shall, as a condition to receipt of the REIT
Shares, reimburse to Managing Member all costs and expenses for which such
undersigned Member or Assignee is responsible pursuant to the Agreement; and

 

(d)                                 acknowledges
that it will continue to own such LLC Units until and unless such Redemption
transaction closes, subject to the provisions of Section 5.7 of the
Agreement.

 

All capitalized terms used herein and not otherwise
defined shall have the same meaning ascribed to them respectively in the
Agreement.

 

	
  Dated:

  	
   

  	
   

  	
  Name of Member
  or Assignee:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Signature of
  Member or Assignee)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Street Address)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (City)   (State)   (Zip)
  

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Signature Guaranteed
  by:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Issue REIT
  Shares in the name of:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Please insert
  social security or identifying number:

  	
   

  
	
   

  	
   

  	
   

  
						

 

B-1

 

EXHIBIT C

FORM OF JOINDER AGREEMENT

 

JOINDER TO OPERATING AGREEMENT

 

THIS JOINDER TO OPERATING AGREEMENT (the “Joinder”)
effecting a joinder to the Amended and Restated Limited Liability Company
Operating Agreement of HCP DR California, LLC dated as of July 22, 2005
(the “Operating Agreement”) is entered into as of                           ,
2005, by and between HCP DR California, LLC, a Delaware limited liability
company (the “Company”), and                             ,
a                             (the
“New Member”). Capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Operating Agreement.

 

1.                                       New
Member agrees to be bound by, the terms and conditions of the Operating
Agreement, a copy of which is attached hereto as Exhibit A.

 

2.                                       New Member represents to the Company and the
Managing Member that the representations and warranties set forth in Section 3.4
of the Operating Agreement are true and correct as of the date hereof.

 

3.                                       The Company agrees to admit New Member as a
Non-Managing Member of the Company and, in connection therewith, to update and
amend Exhibit A to
the Operating Agreement to reflect the information set forth on Exhibit B attached hereto.

 

4.                                       This
Joinder may be executed in separate counterparts each of which shall be an
original and all of which taken together shall constitute one and the same
agreement.

 

5.                                       This
Joinder shall be governed by and construed in accordance with the internal laws
of the State of Delaware, without giving effect to principles of conflicts of
laws or choice of law of the State of Delaware or any other jurisdiction which
would result in the application of the law of any jurisdiction other than the
State of Delaware.

 

6.                                       The
descriptive headings of this Joinder are inserted for convenience only and do
not constitute a part of this Joinder.

 

7.                                       If
any provision of this Joinder is in conflict with or inconsistent with any
provision of the Operating Agreement, the provision of the Operating Agreement
shall control.

 

C-1

 

IN WITNESS WHEREOF, this Joinder to Operating
Agreement has been duly executed and delivered by the parties as of the date
first above written.

 

	
  COMPANY:

  	
  NEW MEMBER:

  
	
   

  	
   

  	
   

  
	
  HCP DR California, LLC, a Delaware limited

  liability company 

  	
    

  
	
   

  	
  By:

  	
   

  	
   

  
	
  By:

  	
  Health Care
  Property Investors, Inc.,

  	
  Name:

  	
   

  	
   

  
	
   

  	
  a Maryland
  corporation, its Managing

  	
  Title:

  	
   

  	
   

  
	
   

  	
  Member

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  	
   

  
								

 

C-2

 

EXHIBIT D

 

EXAMPLE OF CERTAIN CALCULATIONS PURSUANT TO SECTION 5.6.C

 

Assumptions
for example –

 

(1)  LLC unit
ownership:

 

	
   

  	
   

  	
  Units

  	
   

  	
  Effective Price

  	
   

  	
  Value of

  Interest

  	
   

  	
  Percentage

  Interest

  	
   

  
	
  Managing Member Units (MMUs)

  	
   

  	
  2,400,000

  	
   

  	
  $

  	
  25.

  	
   

  	
  60,000,000

  	
   

  	
  75

  	
  %

  
	
  Non-Managing Member Units (NMMUs)

  	
   

  	
  800,000

  	
   

  	
  $

  	
  25.

  	
   

  	
  20,000,000

  	
   

  	
  25

  	
  %

  
	
  Total

  	
   

  	
  3,200,000

  	
   

  	
   

  	
   

  	
  80,000,000

  	
   

  	
   

  	
   

  

 

(2)  Sale of
property to which distribution pursuant to Sec. 5.6.A(2) relates:

Disposition Proceeds =
$30MM

Initial value = $25MM

Property Appreciation =
$5MM

Portion of Disposition
Proceeds to be distributed = $10MM

 

(3)  Other assumptions:

Value of REIT stock on
Reduction Date = $30

There is no Preferred
Return Shortfall or Managing Member Shortfall

Unit Portion (Net Cash
Flow of property sold/Net Cash Flow of all contributed properties) = .20

There have been no
previous distributions of Disposition Proceeds or Refinancing Debt Proceeds

Adjustment Factor = 1.0

 

Calculation of Reduction:

 

Sec. 5.6.C(1) – NMMU
Reduction = 82,733 Units ($2,482,000 ÷ 30), computed as

(i) excess of

(a) $2.5MM
($10MM distribution * 25% NMM LLC units), over

(b) NMM
Sharing Amount of $18,000

(U)
(.20 Unit Portion * 3.2MM LLC Units Outstanding) = 640,000 = Unit Amount

(V)
640,000 * ($30 Value - $25 Effective Price) = $3.2MM Unit Appreciation

(W)
$5MM Property Appreciation - $3.2MM Unit Appreciation = $1.8MM = Aggregate
Sharing Amount

(X)
$1.8MM Aggregate Sharing Amount - $0 Prior Sharing Amounts = $1.8MM Sharing
Amount

(Y)
$1.8MM * 1% NMM Sharing Percentage = $18,000 NMM Sharing Amount

(Z)
$2.5MM – $18,000 = $2,482,000

Divided by

 

D-1

 

(ii) $30 Value on
Reduction Date

 

Sec. 5.6.C(2) – MMU
Reduction = 248,199 Units, computed as

(i) 82,733 Reduction
Units for NMMs divided by 25% Aggregate Percentage Interests of NMMs before
Reduction, times

(ii) 75% Percentage
Interest of MM before Reduction

 

Calculation of Profit
Participation Amount for NMMs:

 

$431,667, computed as the
sum of

(a) $18,000
(Cumulative distributions pursuant to Sec. 5.6.A(2) that did not result in
a Reduction), and

(b) $413,667
($2,482,000 [$2.5MM cumulative distributions pursuant to sec. 5.6.A(2) –
$18,000]

*
(($30 weighted average Value on each Reduction Date - $25 Effective Price)/$30
weighted average Value on each Reduction Date)

 

D-2

 

EXHIBIT E

 

FORM OF BOTTOM DOLLAR GUARANTEE

 

 

[See Attached]

 

E-1

 

GUARANTY AGREEMENT

 

THIS
GUARANTY AGREEMENT (“Guarantee”), dated as of     , 20  ,
is made by                  (“Guarantor”),
in favor of                            (“Guaranteed
Party”).

 

WHEREAS,
                                 
(“Borrower”), is indebted to the Guaranteed Party pursuant to that certain                          (the
“Credit Document”) by and between Borrower and Guaranteed Party which is secured
by a                                  (the
“Mortgage”) on certain property of the Borrower described on Schedule 1
hereto (the “Property”).

 

WHEREAS, the Guarantor
desires to guarantee collection of a portion of the  amount owing under the Credit Document (the
“Obligations”) not in excess of $                    
(the “Guaranteed Amount”).

 

NOW, THEREFORE, for good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound hereby, Guarantor agrees as
follows:

 

1.                                       Guarantee

 

A.                                   The
Guarantor hereby irrevocably and unconditionally guarantees the collection by
the Guaranteed Party of, and hereby agree to pay to the Guaranteed Party upon
demand (following (1) foreclosure of the Mortgage, exercise of the powers of
sale thereunder and/or acceptance by the Guaranteed Party of a deed to a
Property in lieu of foreclosures, and (2) the exhaustion of the exercise of any
and all remedies available to the Guaranteed Party against Borrower, including,
without limitation and to the extent applicable, realizing upon the assets of
Borrower other than the Property), an amount equal to the excess, if any, of
the Guaranteed Amount over the Borrower Proceeds (as hereinafter defined). The
Guarantor’s obligations as set forth in this Paragraph 1.A. are hereinafter
referred to as the “Guaranteed Obligations.”

 

B.                                     For
the purposes of this Guarantee, the term “Borrower Proceeds” shall mean the
aggregate of the Foreclosure Proceeds (as hereinafter defined) plus all amounts
collected from the Borrower or realized from the sale of assets of the Borrower
other than the Property.

 

C.                                     For
the purposes of this Guarantee, the term “Foreclosure Proceeds” shall have the
applicable meaning set forth below with respect to a Property:

 

1.                                       If
at least one bona fide third party unrelated to the Guaranteed Party (and
including, without limitation, the Guarantor) bids for such Property at a sale
thereof, conducted upon foreclosure of the related Mortgage or exercise of the
power of sale thereunder, Foreclosure

 

E-2

 

Proceeds shall mean the
highest amount bid for such Property by the party that acquires title thereto
(directly or through a nominee) at or pursuant to such sale. For the purposes
of determining such highest bid, amounts bid for the Property by the Guaranteed
Party shall be taken into account notwithstanding the fact that such bids may
constitute credit bids which offset against the amount due to the Guaranteed
Party under the Credit Document.

 

2.                                       If
there is no such unrelated third-party at such sale of the Property so that
only bidder at such sale is the Guaranteed Party or its designee, the
Foreclosure Proceeds shall be deemed to be fair market value (the “Fair Market
Value”) of the Property as of the date of the foreclosure sale, as such Fair
Market Value shall be mutually agreed upon by the Guaranteed Party and the
Guarantor or determined pursuant to subparagraph 1.D.

 

3.                                       If
the Guaranteed Party receives and accepts a deed to the Property in lieu of
foreclosure in partial satisfaction of Borrower’s obligations under the Credit
Document, the Foreclosure Proceeds shall be deemed to be the Fair Market Value
of such Property as of the date of delivery of the deed-in-lieu of foreclosure,
as such Fair Market Value shall be mutually agreed upon by the Guaranteed Party
and the Guarantor or determined pursuant to subparagraph 1.D.

 

D.                                    Fair
Market Value of a Property shall be the price at which a willing seller not
compelled to sell would sell such Property, and a willing buyer not compelled
to buy would purchase the Property, free and clear of all mortgages but subject
to all leases and reciprocal easement and operating agreements. If the
Guaranteed Party and Guarantor are unable to agree upon the Fair Market Value
of a Property in accordance with subparagraphs 1.C.2. or 3. above, as
applicable, within twenty (20) days after the date of the foreclosure sale or
the delivery of the deed-in-lieu of foreclosure, as applicable, relating to a Property,
either party may have the Fair Market Value of a Property determined by
appraisal by appointing an appraiser having the qualifications set forth below
to determine the same and by notifying the other party of such appointment
within twenty (20 days after the expiration of such twenty (20) day period. If
the other party shall fail to notify the first party, within twenty (20) days
after its receipt of notice of the appointment by the first party, of the
appointment by the other party of an appraiser having the qualifications set
forth below, the appraiser appointed by the first party shall alone make the
determination of such Fair Market Value. Appraisers appointed by the parties
shall be members of the Appraisal Institute (MAI) and shall have at least ten
years’ experience in the valuation of properties similar to the Property being
valued in the greater metropolitan area in which such Property is located. If
each party shall appoint an appraiser having the aforesaid qualifications and
if such two appraisers cannot, within thirty (30) days after the appointment of
the second appraiser, agree upon the determination hereinabove required, then
they shall select a third 

 

E-3

 

appraiser which third
appraiser shall have the aforesaid qualifications, and if they fail so to do
within forty (40) days after the appointment of the second appraiser they shall
notify the parties hereto, and either party shall thereafter have the right, on
notice to the other, to apply, for the appointment of a third appraiser to the
chapter of the American Arbitration Association or its successor organization
located in the metropolitan area in which the Property is located or to which
the Property is proximate or if no such chapter is located in such metropolitan
area, in the metropolitan area closest to the Property in which such a chapter
is located. Each appraiser shall render its decision as to the Fair Market
Value of the Property in question within thirty (30) days after the appointment
of the third appraiser and shall furnish a copy thereof to the Guaranteed Party
and Guarantor. The Fair Market Value of the Property shall then be calculated
as the average of (i) the Fair Market Value determined by the third appraiser
and (ii) whichever of the Fair Market Values determined by the first two
appraisers is closer to the Fair Market Value determined by the third
appraiser; provided, however, that if the Fair Market Value determined by the
third appraiser is higher or lower than both Fair Market Values determined by
the first two appraiser, such Fair Market Value determined by the third
appraiser shall be disregarded and the Fair Market Value of the Property shall
then be calculated as the average of the Fair Market Value determined by the
first two appraisers. The Fair Market Value of a Property as so determined
shall be binding and conclusive upon the Guaranteed Party and Guarantor. Each
party shall bear the cost of its own appraiser and the cost of appointing, and
the expenses of, the third appraiser shall be shared equally by the Guaranteed
Party and Guarantor.

 

2.                                       Waivers:
Other Agreements.

 

The Guaranteed Party is
hereby authorized, without notice to demand upon Guarantor, which notice or
demand is expressly waived hereby, and without discharging or otherwise
affecting the enforceability of the obligations of the Guarantor hereunder
(which shall remain absolute and unconditional notwithstanding any such action
or omission to act), from time to time to:

 

(i)                                     waive
or otherwise consent to noncompliance with any provision of the Credit Document
or Mortgage, or any part thereof, or any other instrument or agreement in
respect of the Guaranteed Obligations now or hereafter executed by Borrower or
any other person and delivered to the Guaranteed Party, except that Borrower
shall not extend the time for payment of the Guaranteed Obligations by
Borrower;

 

(ii)                                  accept
partial payments on the Guaranteed Obligations by Borrower;

 

(iii)                               receive,
take and hold additional security or collateral for the payment of the
Guaranteed Obligations or for the payment of this Guarantee, or for the payment
of any other guarantees of the Guaranteed 

 

E-4

 

Obligations, and
exchange, enforce, waive, substitute, liquidate, terminate, abandon, fail to
perfect, subordinate, transfer, or otherwise alter or release any such
additional security or collateral;

 

(iv)                              apply
any and all such security or collateral and direct the order or manner of sale
thereof as the Guaranteed Party may determine in its sole discretion;

 

(v)                                 settle,
release, compromise, collect or otherwise liquidate the Guaranteed Obligations
or accept, substitute, release, exchange or otherwise alter, affect or impair
any Mortgage or any other security or collateral for the Guaranteed Obligations
or any other guarantee therefore, in any manner;

 

(vi)                              add,
release or substitute any one or more other guarantor, Borrowers or endorsers
of the Guaranteed Obligations and otherwise deal with Borrower or any other guarantor
as the Guaranteed Party may elect in its sole discretion; and

 

(vii)                           apply
any and all payments or recoveries from Borrower, Guarantor or from any other
guarantor of the Guaranteed Obligations, to such of the Guaranteed Obligations
as the Guaranteed Party in its sole discretion may determine, whether such
Guaranteed Obligations are secured or unsecured or guaranteed or not guaranteed
by others.

 

3.             Independent
Obligations. Except as
expressly set forth in Paragraph 1, the obligations of the Guarantor hereunder
are independent of the obligations of the Borrower, and a separate action or
actions may be brought by the Guaranteed Party against the Guarantor, whether
or not actions are brought against the Borrower. The Guarantor expressly waives
any and all rights of subrogation, reimbursement, indemnity, exoneration,
contribution or any other claim which Guarantor may now or hereafter have
against the Borrower, or any other person directly or contingently liable for
the payment or performance of the obligations under the Credit Document and the
Mortgage arising from the existence or performance of this Guarantee
(including, but not limited to, HCP DR California, LLC, Health Care Property
Investors, Inc., or any other member of HCP DR California, LLC) (except and
only to the extent that Guarantor makes a payment to the Guaranteed Party in
excess of the amount required to be paid under Paragraph 1 and the limitations
set forth therein); provided, however, that nothing herein shall be construed
as a waiver by Guarantor of any right it has now or in the future to obtain
reimbursement from Guarantor’s members (as distributees from Guarantor of
equity interests in HCP DR California, LLC, the owner of the Borrower) for
amounts paid by Guarantor pursuant to this Guaranty Agreement.

 

4.                                       Miscellaneous.

 

A.                                   1.
Subject to the provisions of Section 4.A.2., this Guarantee is irrevocable as
to any and all of the Guaranteed Obligations until the earliest of (i)                                     ,
(ii) the earliest date that, as a result of a repayment, compromise or
adjustment of a principal amount of the Obligations, the total

 

E-5

 

principal amount
outstanding under the Credit Document is reduced by an amount equal to or greater
than $                                ,
(iii) the date upon which the Borrower incurs indebtedness senior to, or pari
passu with the Obligations, and (iv) the earliest date upon which all of the
following have occurred: (A) Guarantor has disposed of all of its equity
interests in the Borrower, excluding, however, any distribution of equity
interests in the Borrower to members of the Guarantor, which members agree to
assume a portion of Guarantor’s obligations hereunder, (B) the fair market
value of the Property exceeds the outstanding balance of the Obligations
(including accrued but unpaid interest) and (C) the Guarantor notifies the
Guaranteed Party that it is terminating its obligations under this Guaranty
Agreement (the “Termination Date”), provided that the obligations of the
Guarantor hereunder shall continue after the Termination Date to the extent of
any claims that are attributable fully and solely to an event or action that
occurred on or before the Termination Date.

 

  2.  The
Guaranteed Party recognizes that Guarantor intends to distribute equity
interests in HCP DR California, LLC, the owner of the Borrower, to its members.
In the event that a member (or a distributee of a member in the case of a
member that is itself a limited liability company, partnership or trust)
disposes of all or any portion of such member’s (or distributee’s) equity
interest in HCP DR California, LLC, the Guaranteed Amount shall be decreased by
an amount equal to the portion of the Guaranteed Amount allocable to the disposed
of equity interest, provided that the condition set forth in clause (iv)(B) of
Section 4.A.1. is satisfied and provided further that the Guarantor notifies
the Guaranteed Party that it is reducing its obligations under this Guaranty
Agreement (a “Reduction Date”), provided that the obligations of the
Guarantor hereunder shall continue after the Reduction Date with respect to the
Guaranteed Amount undiminished by such reduction to the extent of any claims
that are attributable fully and solely to an event or action that occurred on
or before said Reduction Date.

 

B.                                     This
Guarantee is binding on the Guarantor and its successors and assigns, and
inures to the benefit of the Guaranteed Party.

 

C.                                     No
delay on the part of the Guaranteed Party in the exercise of any right or
remedy shall operate as a waiver thereof, and no single or partial exercise or
waiver by the Guaranteed Party of any right or remedy shall preclude any
further exercise thereof, nor shall any modification or waiver of any of the
provisions of this Guarantee be binding upon the Guaranteed Party, except as
expressly set forth in a writing duly signed or delivered by the Guaranteed
Party or on the Guaranteed Party’s behalf by an authorized officer or agent of
the Guaranteed Party. The Guaranteed Party’s failure at any time or times
hereafter to require strict performance by Borrower, Guarantor or any other
person of any of the provisions, warranties, terms and conditions contained in
any security agreement, agreements, guarantee, instrument or document now or at
any time or times hereafter executed by Borrower or Guarantor or delivered to
the Guaranteed Party shall not waive, affect or diminish any

 

E-6

 

 right of the Guaranteed Party at any time or
times hereafter to demand strict performance thereof and such right shall not
be deemed to have been waived by any act or knowledge of the Guaranteed Party,
its agents, officers, or employees, unless such waiver is contained in an
instrument in writing signed by an officer or agent of the Guaranteed Party and
directed to Borrower or Guarantor, or either of them (as the case may be)
specifying such waiver. No waiver by the Guaranteed Party of any default shall
operate as a waiver of any other default or the same default on a future
occasion, and no action by the Guaranteed Party permitted hereunder shall in
any way affect or impair the Guaranteed Party’s rights or the obligations of
Guarantor under this Guarantee.

 

D.                                    This
Guarantee shall be interpreted and the rights and liabilities of the parties
hereto determined in accordance with the laws (other than the conflicts of law
provisions) of the State of New York.

 

E.                                      This
Guarantee contains all the terms and conditions of the agreement between the
Guaranteed Party and Guarantor. The terms and provisions of this Guarantee may
not be waived, altered, modified or amended except in writing duly executed by
the party to be charged thereby.

 

F.                                      Any
notice shall be directed to the parties at the following addresses:

 

If
to Guarantor:

 

 

With
a copy to:

 

 

If
to the Guaranteed Party:

 

 

With
a copy to:

 

E-7

 

COUNTERPART
GUARANTOR SIGNATURE PAGE

ATTACHED
TO AND MADE A PART OF

THAT
CERTAIN GUARANTY AGREEMENT

DATED AS
OF              

 

IN WITNESS WHEREOF, the
undersigned has duly executed this Guarantee as of the date first above
written.

 

 

	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:
   Managing Member

  
						

 

E-8

 

Schedule I to Guaranty Agreement

 

E-9Exhibit
4.6

THIS SUBORDINATED PROMISSORY
NOTE HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”).  IN ADDITION, THIS NOTE HAS NOT BEEN
REGISTERED UNDER APPLICABLE STATE SECURITIES LAWS IN RELIANCE UPON EXEMPTIONS
PROVIDED UNDER SUCH LAWS.  THIS NOTE MAY
NOT BE PLEDGED, SOLD OR TRANSFERRED IN THE ABSENCE OF (1) AN EFFECTIVE
REGISTRATION STATEMENT COVERING THE NOTE FILED UNDER THE ACT, (2) AN OPINION OF
QUALIFIED COUNSEL, WHICH OPINION AND COUNSEL ARE SATISFACTORY TO THE BOARD OF
DIRECTORS, THAT REGISTRATION IS NOT REQUIRED OR (3) OTHER EVIDENCE SATISFACTORY
TO THE BOARD OF DIRECTORS THAT SUCH REGISTRATION IS NOT REQUIRED.

SUBORDINATED PROMISSORY NOTE

	
  $

  	
  July 31, 2006

  

 

For value received
IT&E International Group, Inc., a Delaware corporation (“Payor”), promises to pay to                      (“Holder”), the principal sum of $                   
with simple interest on the outstanding principal amount accruing at the prime
rate of interest set forth in the Wall Street Journal, New York edition (the “Prime Rate”) as of the date hereof and as annually adjusted
hereunder for each calendar year for the term of this Note based on the Prime
Rate set forth on the first day of each such calendar year that the Wall Street
Journal, New York edition publishes a Prime Rate.  Interest shall be computed on the basis of a
year of 365 days for the actual number of days elapsed.

This Subordinated
Promissory Note (this “Note”) is issued
pursuant to that certain Agreement and Plan of Merger dated as of even date
herewith among the Payor, the Holder and the other parties thereto (the “Merger Agreement”), which is incorporated herein by
reference as though fully set forth herein. 
Capitalized terms not otherwise defined herein shall have the meanings
ascribed to them under the Merger Agreement.

1.             Repayment.  The Note shall be due and payable pursuant to
the payment schedule set forth on Schedule “1” to this Note.  Payor may prepay all or any portion of the
outstanding balance of unpaid principal and any accrued but unpaid interest
thereon at any time without penalty, fee or acceleration.

2.             Right
of Offset.

(i)            Each of Holder and Payor hereby
acknowledge and agree that Payor shall be entitled to offset against the
principal amount owed under this Note any amounts to which Payor is entitled
based on Article VII of the Merger Agreement and that the principal amount of
this Note will be appropriately reduced in the event Payor asserts such right
of offset.  Holder agrees to return this
Note to the Payor for cancellation and reissuance to reflect the adjusted
principal amount hereunder and the adjustments to Schedule 1 resulting from
such offset.

 
 

 

(ii)           Notwithstanding the foregoing, the Payor
shall be entitled to pursue any other remedy in law or equity, in addition to
the offset of this Note, for any breach of the Merger Agreement, including,
without limitation, pursuit of damages in excess of the amount offset pursuant
to this Section 2 subject to any limitation contained in those agreements.

3.             Place
of Payment.  All amounts payable
hereunder shall be payable at the address of the Holder in the corporate books
of the Payor, unless another place of payment shall be specified in writing by
the Holder.

4.             Representations
of Payor.  This Note, when
executed and delivered by Payor, shall constitute a valid and binding
obligation of Payor enforceable in accordance with its terms, subject to laws
of general application relating to bankruptcy, insolvency, the relief of
debtors and, with respect to rights to indemnity, subject to federal and state
securities laws.

5.             Default.  Each of the following events shall be an “Event of Default” hereunder:

(i)            Payor fails to pay timely any of the
principal amount or any other amounts due under this Note within five (5) days
after such payment is due;

(ii)           Payor files any petition or action for
relief under any bankruptcy, reorganization, insolvency or moratorium law or
any other law for the relief of, or relating to, debtors, now or hereafter in
effect, or makes any assignment for the benefit of creditors; or

(iii)         An involuntary petition is filed against
Payor (unless such petition is dismissed or discharged within ninety (90) days)
under any bankruptcy statute now or hereafter in effect, or a custodian,
receiver, trustee, assignee for the benefit of creditors (or other similar
official) is appointed to take possession, custody or control of any property
of Payor.

Upon the occurrence of an
Event of Default hereunder, all unpaid principal and accrued but unpaid
interest and other amounts (if any) owing hereunder shall, at the option of the
Holder, be immediately due, payable and collectible by the Holder pursuant to
applicable law.

6.             Transfer;
Assignment.  The terms of this
Note shall apply to, inure to the benefit of, and bind all parties hereto,
their heirs, legatees, devisees, administrators, executors, successors,
assigns.  Notwithstanding any provision
of this Note to the contrary, in addition to complying with applicable
securities laws, the Holder must obtain the written consent of the Payor prior
to assigning this Note.  Upon the
assignment of this Note, the assignee shall acknowledge and accept, in writing
and addressed to Payor, the right of offset set forth in Section 2 of this Note
and the other terms and conditions of this Note.  This Note is registered on the books of the
Payor and is transferable only by surrender thereof at the principal office of
the Payor duly endorsed or accompanied by a written instrument of transfer duly
executed by the registered Holder of this Note or his attorney duly authorized
in writing.  Payor and any and all
successors, assignees, transferees and participants thereof may not assign this
Note without the prior written consent of Holder, which shall not be
unreasonably withheld.

7.             Usury
Exemption.  Notwithstanding any
provision of this Note, Payor shall not and will not be required to pay
interest at a rate or any fee or charge in an amount prohibited by applicable
law.  If interest or any fee or charge
payable on any date would be prohibited, then

 2
 

 
 

 

such interest, fee
or charge will be automatically reduced to the maximum amount that is not
prohibited.  In the event that Holder
receives payment of any interest, fee, or charge that would cause the amount so
received to exceed the maximum amount permitted under applicable law, then, to
the extent that the amount so received exceeds the maximum amount permitted
under applicable law:  (a) in the first
instance, the amount received shall be applied to principal and (b) in the
second instance, in the event that the principal amount of this Note has been
paid in full, the remaining amount so received shall be deemed to be a loan
from Payor to Holder, repayable upon the demand of the Payor with interest at
the legal rate from the date of Holder’s receipt of each payment in excess
interest, fees, or charges.

8.             Subordination.  The Holder of this Note acknowledges and
agrees that the rights of Holder under this Note shall be subordinate and
junior in right and priority to any and all senior institutional lenders (and
any and all successors, assignees, transferees and participants thereof) of
Payor, and Holder hereby agrees to execute and delivery any subordination
agreement that may be required by any such current or future institutional
lender to evidence such subordination. 
The rights of Holder under this Note shall be not be subordinate or
junior in right and priority to subordinated or mezzanine lenders.

9.             Governing
Law.  This Note shall be governed
by and construed under the laws of the State of Delaware, as applied to
agreements among Delaware residents, made and to be performed entirely within
the State of Delaware, without giving effect to conflicts of law principles.

10.          No
Rights as Stockholder.  The
Holder will not be entitled to vote, receive dividends or exercise any of the
rights of the holders of the Payor’s equity securities for any purpose.

11.          Amendments.  This Note may be amended or a provision
hereof waived only in a writing signed by the Payor and the Holder.

[Remainder of Page Intentionally
Left Blank]

 3
 

 
 

 

 

	
  

  	
   

  
	
   

  	
  IT&E INTERNATIONAL GROUP, INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Alastair McEwan

  
	
   

  	
   

  	
  Title:

  	
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Acknowledge and Agreed to:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  [Name]

  
						

 

 

[Signature
Page to Subordinated Promissory Note]

 

 4

 

SCHEDULE
1

PAYMENT
SCHEDULE

The
Prime Rate of Interest at August 1, 2006 is:                 8.25%

 

	
  

  	
   

  	
  Payment

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Due

  	
   

  	
  Principal

  	
   

  	
  Interest

  	
   

  	
  Balance

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8/1/2006

  	
  Beginning

  Balance

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $                   

  	
   

  
	
  9/1/2006

  	
   

  	
   

  	
  $

  	
   

  	
   

  	
  $

  	
  —

  	
   

  	
  $                   

  	
   

  	
  $                   

  	
   

  
	
  10/1/2006

  	
   

  	
   

  	
  $                   

  	
   

  	
  $

  	
  —

  	
   

  	
  $                   

  	
   

  	
  $                   

  	
   

  
	
  11/1/2006

  	
   

  	
   

  	
  $                   

  	
   

  	
  $

  	
  —

  	
   

  	
  $                   

  	
   

  	
  $                   

  	
   

  
	
  12/1/2006

  	
   

  	
   

  	
  $                   

  	
   

  	
  $

  	
   

  	
   

  	
  $                   

  	
   

  	
  $                   

  	
   

  
	
  1/1/2007

  	
   

  	
   

  	
  $                   

  	
   

  	
  $

  	
  —

  	
   

  	
  $                   

  	
   

  	
  $                   

  	
   

  
	
  2/1/2007

  	
   

  	
   

  	
  $                   

  	
   

  	
  $

  	
  —

  	
   

  	
  $                   

  	
   

  	
  $                   

  	
   

  
	
  3/1/2007

  	
   

  	
   

  	
  $                   

  	
   

  	
  $

  	
   

  	
   

  	
  $                   

  	
   

  	
  $                   

  	
   

  
	
  4/1/2007

  	
   

  	
   

  	
  $                   

  	
   

  	
  $

  	
  —

  	
   

  	
  $                   

  	
   

  	
  $                   

  	
   

  
	
  5/1/2007

  	
   

  	
   

  	
  $                   

  	
   

  	
  $

  	
  —

  	
   

  	
  $                   

  	
   

  	
  $                   

  	
   

  
	
  6/1/2007

  	
   

  	
   

  	
  $                   

  	
   

  	
  $

  	
   

  	
   

  	
  $                   

  	
   

  	
  $                   

  	
   

  
	
  7/1/2007

  	
   

  	
   

  	
  $                   

  	
   

  	
  $

  	
  —

  	
   

  	
  $                   

  	
   

  	
  $                   

  	
   

  
	
  8/1/2007

  	
   

  	
   

  	
  $                   

  	
   

  	
  $

  	
  —

  	
   

  	
  $                   

  	
   

  	
  $                   

  	
   

  
	
  9/1/2007

  	
   

  	
   

  	
  $                   

  	
   

  	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  	
  $                   

  	
   

  
	
  10/1/2007

  	
   

  	
   

  	
  $                   

  	
   

  	
  $

  	
   

  	
   

  	
  $                   

  	
   

  	
  $                   

  	
   

  
	
  11/1/2007

  	
   

  	
   

  	
  $                   

  	
   

  	
  $

  	
  —

  	
   

  	
  $                   

  	
   

  	
  $                   

  	
   

  
	
  12/1/2007

  	
   

  	
   

  	
  $                   

  	
   

  	
  $

  	
  —

  	
   

  	
  $                   

  	
   

  	
  $                   

  	
   

  
	
  1/1/2008

  	
   

  	
   

  	
  $                   

  	
   

  	
  $

  	
   

  	
   

  	
  $                   

  	
   

  	
  $                   

  	
   

  
	
  2/1/2008

  	
   

  	
   

  	
  $                   

  	
   

  	
  $

  	
  —

  	
   

  	
  $                   

  	
   

  	
  $                   

  	
   

  
	
  3/1/2008

  	
   

  	
   

  	
  $                   

  	
   

  	
  $

  	
  —

  	
   

  	
  $                   

  	
   

  	
  $                   

  	
   

  
	
  4/1/2008

  	
   

  	
   

  	
  $                   

  	
   

  	
  $

  	
   

  	
   

  	
  $                   

  	
   

  	
  $                   

  	
   

  
	
  5/1/2008

  	
   

  	
   

  	
  $                   

  	
   

  	
  $

  	
  —

  	
   

  	
  $                   

  	
   

  	
  $                   

  	
   

  
	
  6/1/2008

  	
   

  	
   

  	
  $                   

  	
   

  	
  $

  	
  —

  	
   

  	
  $                   

  	
   

  	
  $                   

  	
   

  
	
  7/1/2008

  	
   

  	
   

  	
  $                   

  	
   

  	
  $

  	
   

  	
   

  	
  $                   

  	
   

  	
  $                   

  	
   

  
	
  8/1/2008

  	
   

  	
   

  	
  $                   

  	
   

  	
  $

  	
  —

  	
   

  	
  $                   

  	
   

  	
  $                   

  	
   

  
	
  Payment at

  Maturity Date

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Totals:

  	
   

  	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  

 

[The
above schedule to be completed as follows: IT&E shall pay the principal and
interest on Holder’s amount of Note A Consideration in monthly payments for two
years.]

The above payment
schedule assumes a Prime Rate of interest of  8.25% in effect as of August 1, 2006.  The above payment schedule shall be amended
to reflect the adjusted Prime Rate as soon as practicable but in no event five
(5) Business Days after January 1 of each year during the term of the Note.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00107-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00107-of-00352.parquet"}]]