Document:

Exhibit 10.1
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Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) is the type of information that the registrant treats as private or confidential. Double asterisks denote omissions.
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (as the same may from time to time be amended, modified, supplemented or restated, this “Agreement”) dated as of May 4, 2021 (the “Effective Date”) among OXFORD FINANCE LLC, a Delaware limited liability company with an office located at 115 South Union Street, Suite 300, Alexandria, VA  22314 (“Oxford”), as collateral agent (in such capacity, “Collateral Agent”), the Lenders listed on Schedule 1.1 hereof or otherwise a party hereto from time to time including Oxford in its capacity as a Lender (each a “Lender” and collectively, the “Lenders”), and KALA PHARMACEUTICALS, INC., a Delaware corporation with offices located at 490 Arsenal Way, Suite 120, Watertown, MA 02472 (“Borrower”), provides the terms on which the Lenders shall lend to Borrower and Borrower shall repay the Lenders.  The parties agree as follows:
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1.ACCOUNTING AND OTHER TERMS
1.1Accounting terms not defined in this Agreement shall be construed in accordance with GAAP.  Calculations and determinations must be made in accordance with GAAP.  Capitalized terms not otherwise defined in this Agreement shall have the meanings set forth in Section 13.  All other terms contained in this Agreement, unless otherwise indicated, shall have the meaning provided by the Code to the extent such terms are defined therein.  All references to “Dollars” or “$” are United States Dollars, unless otherwise noted.
2.LOANS AND TERMS OF PAYMENT
2.1Promise to Pay.  Borrower hereby unconditionally promises to pay each Lender, the outstanding principal amount of all Term Loans advanced to Borrower by such Lender and accrued and unpaid interest thereon and any other amounts due hereunder as and when due in accordance with this Agreement.
2.2Term Loans.
(a)Availability. (i) Subject to the terms and conditions of this Agreement, the Lenders agree, severally and not jointly, to make term loans to Borrower on the Effective Date in an aggregate amount of Eighty Million Dollars ($80,000,000.00) according to each Lender’s Term A Loan Commitment as set forth on Schedule 1.1 hereto (such term loans are hereinafter referred to singly as a “Term A Loan”, and collectively as the “Term A Loans”).  After repayment, no Term A Loan may be re-borrowed.
(ii)Subject to the terms and conditions of this Agreement, the Lenders agree, severally and not jointly, during the Second Draw Period, to make term loans to Borrower in an aggregate amount up to Twenty Million Dollars ($20,000,000.00) according to each Lender’s Term B Loan Commitment as set forth on Schedule 1.1 hereto (such term loans are hereinafter referred to singly as a “Term B Loan”, and collectively as the “Term B Loans”).  After repayment, no Term B Loan may be re-borrowed.
(iii)Subject to the terms and conditions of this Agreement, the Lenders agree, severally and not jointly, during the Third Draw Period, to make term loans to Borrower in an aggregate amount up to Twenty Five Million Dollars ($25,000,000.00) according to each Lender’s Term C Loan Commitment as set forth on Schedule 1.1 hereto (such term loans are hereinafter referred to singly as a “Term C Loan”, and collectively as the “Term C Loans”; each Term A Loan, Term B Loan or Term C Loan is hereinafter referred to singly as a “Term Loan” and the Term A Loans, Term B Loans and the Term C Loans are hereinafter referred to collectively as the “Term Loans”).  After repayment, no Term C Loan may be re-borrowed.
(b)Repayment.  Borrower shall make monthly payments of interest only commencing on the first (1st) Payment Date following the Funding Date of each Term Loan, and continuing on the Payment Date of each successive month thereafter through and including the Payment Date immediately preceding the Amortization Date.  Borrower agrees to pay, on the Funding Date of each Term Loan, any initial partial interest payment otherwise due for the period between the Funding Date of such Term Loan and the first Payment Date thereof.  Commencing on the Amortization Date, and continuing on the Payment Date of each month thereafter, Borrower shall make consecutive equal monthly payments of principal, together with applicable interest, in arrears, to each Lender, as calculated by Collateral Agent (which calculations shall be deemed correct absent manifest error) based upon: (1) the amount of
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such Lender’s Term Loan, (2) the effective rate of interest, as determined in Section 2.3(a), and (3) a repayment schedule equal to (i) eighteen (18) months, if neither the Term B Loans nor the Term C Loans are made hereunder and (ii) twelve (12) months, if either the Term B Loans or the Term C Loans are made hereunder.  All unpaid principal and accrued and unpaid interest with respect to each Term Loan is due and payable in full on the Maturity Date.  Each Term Loan may only be prepaid in accordance with Sections 2.2(c) and 2.2(d).
(c)Mandatory Prepayments.  If the Term Loans are accelerated following the occurrence of an Event of Default, Borrower shall immediately pay to Lenders, payable to each Lender in accordance with its respective Pro Rata Share, an amount equal to the sum of: (i) all outstanding principal of the Term Loans plus accrued and unpaid interest thereon through the prepayment date, (ii) the Final Payment, (iii) the Prepayment Fee, plus (iv) all other Obligations that are due and payable, including Lenders’ Expenses and interest at the Default Rate with respect to any past due amounts. Notwithstanding (but without duplication with) the foregoing, on the Maturity Date, if the Final Payment had not previously been paid in full in connection with the prepayment of the Term Loans in full, Borrower shall pay to Collateral Agent, for payment to each Lender in accordance with its respective Pro Rata Share, the Final Payment in respect of the Term Loan(s).
(d)Permitted Prepayment of Term Loans.
(i)Borrower shall have the option to prepay at any time all, but not less than all, of the Term Loans advanced by the Lenders under this Agreement, provided Borrower (i) provides written notice to Collateral Agent of its election to prepay the Term Loans at least ten (10) Business Days prior to such prepayment, and (ii) pays to the Lenders on the date of such prepayment, payable to each Lender in accordance with its respective Pro Rata Share, an amount equal to the sum of (A) all outstanding principal of the Term Loans plus accrued and unpaid interest thereon through the prepayment date, (B) the Final Payment, (C) the Prepayment Fee, plus (D) all other Obligations that are due and payable, including Lenders’ Expenses and interest at the Default Rate with respect to any past due amounts.
(ii)Notwithstanding anything to the contrary contained in this Agreement, Borrower may rescind any notice of prepayment if such prepayment would have resulted from a refinancing of all or a portion of the Term Loans, which refinancing or transaction shall not be consummated or shall otherwise be delayed.
2.3Payment of Interest on the Credit Extensions.
(a)Interest Rate.  Subject to Section 2.3(b), the principal amount outstanding under the Term Loans shall accrue interest at a floating per annum rate equal to the Basic Rate, determined by Collateral Agent on the Funding Date of the applicable Term Loan, and then monthly thereafter, which interest shall be payable monthly in arrears in accordance with Sections 2.2(b) and 2.3(e).  Interest shall accrue on each Term Loan commencing on, and including, the Funding Date of such Term Loan, and shall accrue on the principal amount outstanding under such Term Loan through and including the day on which such Term Loan is paid in full.
(b)Default Rate. Immediately upon the occurrence and during the continuance of an Event of Default, Obligations shall accrue interest at a floating per annum rate equal to the rate that is otherwise applicable thereto plus five percentage points (5.00%) (the “Default Rate”).  Payment or acceptance of the increased interest rate provided in this Section 2.3(b) is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Collateral Agent.
(c)360-Day Year.  Interest shall be computed on the basis of a three hundred sixty (360) day year, and the actual number of days elapsed.
(d)Debit of Accounts.  Collateral Agent and each Lender may debit (or ACH) the Designated Deposit Account, and second, any other deposit accounts maintained by Borrower or a Guarantor, including the Designated Deposit Account, for principal and interest payments or any other amounts Borrower owes the Lenders under the Loan Documents when due.  Any such debits (or ACH activity) shall not constitute a set-off.  Without limiting the foregoing, Collateral Agent and each Lender shall use commercially reasonable efforts to notify Borrower for the reasons of debiting of any amounts (other than principal and interest payments) debited from Borrower's deposit
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accounts in respect of this Agreement 10 days prior to such debit is to be made so long as no Event of Default has occurred and is continuing; provided, however, failure to provide such notice shall not be considered a breach of any provision hereof by Collateral Agent or any Lender.
(e)Payments.  Except as otherwise expressly provided herein, all payments by Borrower under the Loan Documents shall be made to the respective Lender to which such payments are owed, at such Lender’s office in immediately available funds on the date specified herein. Unless otherwise provided, interest is payable monthly on the Payment Date of each month.  Payments of principal and/or interest received after 2:00 p.m. Eastern time are considered received at the opening of business on the next Business Day.  When a payment is due on a day that is not a Business Day, the payment is due the next Business Day and additional fees or interest, as applicable, shall continue to accrue until paid. All payments to be made by Borrower hereunder or under any other Loan Document, including payments of principal and interest, and all fees, expenses, indemnities and reimbursements, shall be made without set-off, recoupment or counterclaim, in lawful money of the United States and in immediately available funds.
2.4Secured Promissory Notes.  The Term Loans shall be evidenced by a Secured Promissory Note or Notes in the form attached as Exhibit D hereto (each a “Secured Promissory Note”), and shall be repayable as set forth in this Agreement.  Borrower irrevocably authorizes each Lender to make or cause to be made, on or about the Funding Date of any Term Loan or at the time of receipt of any payment of principal on such Lender’s Secured Promissory Note, an appropriate notation on such Lender’s Secured Promissory Note Record reflecting the making of such Term Loan or (as the case may be) the receipt of such payment.  The outstanding amount of each Term Loan set forth on such Lender’s Secured Promissory Note Record shall be prima facie evidence of the principal amount thereof owing and unpaid to such Lender, but the failure to record, or any error in so recording, any such amount on such Lender’s Secured Promissory Note Record shall not limit or otherwise affect the obligations of Borrower under any Secured Promissory Note or any other Loan Document to make payments of principal of or interest on any Secured Promissory Note when due.  Upon receipt of an affidavit of an officer of a Lender as to the loss, theft, destruction, or mutilation of its Secured Promissory Note, Borrower shall issue, in lieu thereof, a replacement Secured Promissory Note in the same principal amount thereof and of like tenor.
2.5Fees.  Borrower shall pay to Collateral Agent:
(a)Good Faith Deposit. An amount of [**] Dollars ($[**]) has been received by Collateral Agent as a good faith deposit from Borrower on or about April 20, 2021, which amount shall be applied towards the Lenders’ Expenses due under Section 2.5(e) that have been incurred through the Effective Date, with the balance, if any, towards the facility fee due under Section 2.5(b).  For the purposes of clarity, Borrower shall be responsible for the entire documented amount of the Lenders’ Expenses payable under Section 2.5(e) and for the entire amount of facility fee due under Section 2.5(b).
(b)Facility Fee.  A non-refundable facility fee of Six Hundred Twenty Five Thousand Dollars ($625,000.00) to be shared between the Lenders pursuant to their respective Commitment Percentages payable as follows: (i) Four Hundred Thousand Dollars ($400,000.00) of the facility fee shall be fully earned, due and payable on the Effective Date, (ii) One Hundred Thousand Dollars ($100,000.00) of the facility fee shall be fully earned, due and payable on the Funding Date of the Term B Loan and (iii) the remaining One Hundred Twenty Five Thousand Dollars ($125,000.00) of the facility fee shall be fully earned, due and payable on the Funding Date of the Term C Loan;
(c)Final Payment.  The Final Payment, when due hereunder, to be shared between the Lenders in accordance with their respective Pro Rata Shares;
(d)Prepayment Fee.  The Prepayment Fee, when due hereunder, to be shared between the Lenders in accordance with their respective Pro Rata Shares; and
(e)Lenders’ Expenses.  All Lenders’ Expenses (including reasonable and documented out-of-pocket attorneys’ fees and expenses for documentation and negotiation of this Agreement) incurred through and after the Effective Date, when due.
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2.6Withholding.  Payments received by the Lenders from Borrower hereunder will be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any governmental authority (including any interest, additions to tax or penalties applicable thereto, collectively, “Taxes”).  Specifically, however, if at any time any Governmental Authority, applicable law, regulation or international agreement requires Borrower to make any withholding or deduction from any such payment or other sum payable hereunder to the Lenders, Borrower hereby covenants and agrees that the amount due from Borrower with respect to such payment or other sum payable hereunder will be increased to the extent necessary to ensure that, after the making of such required withholding or deduction, each Lender receives a net sum equal to the sum which it would have received had no withholding or deduction been required and Borrower shall pay the full amount withheld or deducted to the relevant Governmental Authority.  Borrower will, upon request, furnish the Lenders with proof reasonably satisfactory to the Lenders indicating that Borrower has made such withholding payment; provided, however, that Borrower need not make any withholding payment if the amount or validity of such withholding payment is contested in good faith by appropriate and timely proceedings and as to which payment in full is bonded or reserved against by Borrower.  The agreements and obligations of Borrower contained in this Section 2.6 shall survive the termination of this Agreement.
On the date of this Agreement, each Lender shall deliver to Borrower a complete and properly executed IRS Form W-9.  If any assignee of a Lender’s rights under Section 12.1 of this Agreement is not a “United States Person” as defined in Section 7701(a)(30) of the U.S. Internal Revenue Code (“Non-U.S. Lender”), such Non-U.S. Lender shall, upon becoming party to this Agreement, deliver to Borrower a complete and properly executed IRS Form W-8BEN-E (or W-8BEN, as applicable), W-8ECI or W-8IMY, as appropriate, or any successor form prescribed by the IRS, certifying that such Non-U.S. Lender is entitled to an exemption from U.S. withholding tax on interest and other amounts payable under this Agreement.  Notwithstanding the foregoing, (i) Borrower shall not be required to pay any additional amount to any Non-U.S. Lender hereunder if such Non-U.S. Lender fails or is unable to deliver the forms, certificates or other evidence described in the preceding sentence, unless such Non-U.S. Lender’s failure or inability to deliver such forms is the result of any change in any applicable law, treaty or governmental rule, or any change in the interpretation thereof after such Non-U.S. Lender became a party to this Agreement and (ii) Borrower shall not be required to pay any additional amount to any Non-U.S. Lender hereunder with respect to taxes imposed under Sections 1471 through 1474 of the U.S. Internal Revenue Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with) and any current or future regulations or official interpretations thereof.
3.CONDITIONS OF LOANS
3.1Conditions Precedent to Initial Credit Extension.  Each Lender’s obligation to make a Term A Loan is subject to the condition precedent that Collateral Agent and each Lender shall consent to or shall have received, in form and substance satisfactory to Collateral Agent and each Lender, such documents, and completion of such other matters, as Collateral Agent and each Lender may reasonably deem necessary or appropriate, including, without limitation:
(a)original Loan Documents, each duly executed by Borrower and each Subsidiary, as applicable;
(b)duly executed original Control Agreements with respect to any Collateral Accounts maintained by Borrower which require a Control Agreement pursuant to Section 6.6;
(c)duly executed original Secured Promissory Notes in favor of each Lender according to its Term A Loan Commitment Percentage;
(d)the certificate(s) for the Shares, together with Assignment(s) Separate from Certificate, duly executed in blank;
(e)the Operating Documents and good standing certificates of Borrower and its Subsidiaries certified by the Secretary of State (or equivalent agency) of Borrower’s and such Subsidiaries’ jurisdiction of organization or formation and each jurisdiction in which Borrower and each Subsidiary is qualified to conduct business, each as of a date no earlier than thirty (30) days prior to the Effective Date;
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(f)a completed Perfection Certificate for Borrower and each of its Subsidiaries;
(g)the Annual Projections, for the current calendar year;
(h)duly executed original officer’s certificate for Borrower and each Subsidiary that is a party to the Loan Documents, relating to the Operating Documents, corporate authorizations and other matters, in a form acceptable to Collateral Agent and the Lenders;
(i)certified copies, dated as of date no earlier than thirty (30) days prior to the Effective Date, of financing statement searches, as Collateral Agent shall request, accompanied by written evidence (including any UCC termination statements) that the Liens indicated in any such financing statements either constitute Permitted Liens or have been or, in connection with the initial Credit Extension, will be terminated or released;
(j)a landlord’s consent executed in favor of Collateral Agent in respect of each of Borrower’s leased locations to the extent that such location is either the chief executive office of the Borrower or the Collateral at such leased location is valued in excess of Five Hundred Thousand ($500,000.00) in the aggregate;
(k)a bailee waiver executed in favor of Collateral Agent in respect of each third party bailee where Borrower maintains Collateral to the extent such such third party bailee possesses Collateral with an aggregate value exceeding $500,000;
(l)a duly executed legal opinion of counsel to Borrower dated as of the Effective Date;
(m)evidence satisfactory to Collateral Agent and the Lenders that the insurance policies required by Section 6.5 hereof are in full force and effect, together with appropriate evidence showing loss payable and/or additional insured clauses or endorsements in favor of Collateral Agent, for the ratable benefit of the Lenders; and
(n) a payoff letter from Athyrium Opportunities III Acquisition LP, in respect of the Existing Indebtedness;
(o)evidence that (i) the Liens securing the Existing Indebtedness will be terminated and (ii) the documents and/or filings evidencing the perfection of such Liens, including without limitation any financing statements and/or control agreements, have or will, concurrently with the initial Credit Extension, be terminated; and
(p)payment of the fees and Lenders’ Expenses then due as specified in Section 2.5 hereof.
3.2Conditions Precedent to all Credit Extensions.  The obligation of each Lender to make each Credit Extension, including the initial Credit Extension, is subject to the following conditions precedent:
(a)receipt by Collateral Agent of an executed Disbursement Letter in the form of Exhibit B attached hereto;
(b)the representations and warranties in Section 5 hereof shall be true, accurate and complete in all material respects on the date of the Disbursement Letter and on the Funding Date of each Credit Extension; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, and no Event of Default shall have occurred and be continuing or result from the Credit Extension.  Each Credit Extension is Borrower’s representation and warranty on that date that the representations and warranties in Section 5 hereof are true, accurate and complete in all material respects; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date;
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(c)in such Lender’s sole but reasonable discretion, there has not been any Material Adverse Change;
(d)to the extent not delivered at the Effective Date, duly executed original Secured Promissory Notes, in number, form and content acceptable to each Lender, and in favor of each Lender according to its Commitment Percentage, with respect to each Credit Extension made by such Lender after the Effective Date; and
(e)payment of the fees and Lenders’ Expenses then due as specified in Section 2.5 hereof.
3.3Covenant to Deliver.  Borrower agrees to deliver to Collateral Agent and the Lenders each item required to be delivered to Collateral Agent under this Agreement as a condition precedent to any Credit Extension.  Borrower expressly agrees that a Credit Extension made prior to the receipt by Collateral Agent or any Lender of any such item shall not constitute a waiver by Collateral Agent or any Lender of Borrower’s obligation to deliver such item, and any such Credit Extension in the absence of a required item shall be made in each Lender’s sole discretion.
3.4Procedures for Borrowing.  Subject to the prior satisfaction of all other applicable conditions to the making of a Term Loan set forth in this Agreement, to obtain a Term Loan, Borrower shall notify the Lenders (which notice shall be irrevocable) by electronic mail, facsimile, or telephone by 2:00 p.m. Eastern time five (5) Business Days prior to the date the Term Loan is to be made (or such shorter period as Collateral Agent may allow in its discretion).  Together with any such electronic, facsimile or telephonic notification, Borrower shall deliver to the Lenders by electronic mail or facsimile a completed Disbursement Letter executed by a Responsible Officer or his or her designee.  The Lenders may rely on any telephone notice given by a person whom a Lender reasonably believes is a Responsible Officer or designee.  On the Funding Date, each Lender shall credit and/or transfer (as applicable) to the Designated Deposit Account, an amount equal to its Term Loan Commitment.
4.CREATION OF SECURITY INTEREST
4.1Grant of Security Interest.  Borrower hereby grants Collateral Agent, for the ratable benefit of the Lenders, to secure the payment and performance in full of all of the Obligations, a continuing security interest in, and pledges to Collateral Agent, for the ratable benefit of the Lenders, the Collateral, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof.  Borrower represents, warrants, and covenants that the security interest granted herein is and shall at all times continue to be a first priority perfected security interest in the Collateral, subject only to Permitted Liens that are permitted by the terms of this Agreement to have priority to Collateral Agent’s Lien.  If Borrower shall acquire a commercial tort claim (as defined in the Code) with a value in excess of One Hundred Thousand Dollars ($100,000.00), Borrower, shall promptly notify Collateral Agent in a writing signed by Borrower, as the case may be, of the general details thereof (and further details as may be required by Collateral Agent) and grant to Collateral Agent, for the ratable benefit of the Lenders, in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to Collateral Agent.
If this Agreement is terminated, Collateral Agent’s Lien in the Collateral shall continue until the Obligations (other than inchoate indemnity obligations and any other obligations which, by their terms, are to survive the termination of this Agreement) are repaid in full in cash.  Upon payment in full in cash of the Obligations (other than inchoate indemnity obligations and any other obligations which, by their terms, are to survive the termination of this Agreement) and at such time as the Lenders’ obligation to make Credit Extensions has terminated, Collateral Agent shall, at the sole cost and expense of Borrower, release its Liens in the Collateral and all rights therein shall revert to Borrower.
4.2Authorization to File Financing Statements.  Borrower hereby authorizes Collateral Agent to file financing statements or take any other action required to perfect Collateral Agent’s security interests in the Collateral, without notice to Borrower, with all appropriate jurisdictions to perfect or protect Collateral Agent’s interest or rights under the Loan Documents, including a notice that any disposition of the Collateral, except to the extent permitted by the terms of this Agreement, by Borrower, or any other Person, shall be deemed to violate the rights of Collateral Agent under the Code.
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4.3Pledge of Collateral.  Borrower hereby pledges, assigns and grants to Collateral Agent, for the ratable benefit of the Lenders, a security interest in all the Shares, together with all proceeds and substitutions thereof, all cash, stock and other moneys and property paid thereon, all rights to subscribe for securities declared or granted in connection therewith, and all other cash and noncash proceeds of the foregoing, as security for the performance of the Obligations.  On the Effective Date, or, to the extent not certificated as of the Effective Date, within ten (10) days of the certification of any Shares, the certificate or certificates for the Shares will be delivered to Collateral Agent, accompanied by an instrument of assignment duly executed in blank by Borrower.  To the extent required by the terms and conditions governing the Shares, Borrower shall cause the books of each entity whose Shares are part of the Collateral and any transfer agent to reflect the pledge of the Shares.  Upon the occurrence and during the continuance of an Event of Default hereunder, Collateral Agent may effect the transfer of any securities included in the Collateral (including but not limited to the Shares) into the name of Collateral Agent and cause new (as applicable) certificates representing such securities to be issued in the name of Collateral Agent or its transferee.  Borrower will execute and deliver such documents, and take or cause to be taken such actions, as Collateral Agent may reasonably request to perfect or continue the perfection of Collateral Agent’s security interest in the Shares.  Unless an Event of Default shall have occurred and be continuing, Borrower shall be entitled to exercise any voting rights with respect to the Shares and to give consents, waivers and ratifications in respect thereof, provided that no vote shall be cast or consent, waiver or ratification given or action taken which would be inconsistent with any of the terms of this Agreement or which would constitute or create any violation of any of such terms.  All such rights to vote and give consents, waivers and ratifications shall terminate upon the occurrence and continuance of an Event of Default.
5.REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Collateral Agent and the Lenders as follows:
5.1Due Organization, Authorization: Power and Authority.  Borrower and each of its Subsidiaries is duly existing and in good standing as a Registered Organization in its jurisdictions of organization or formation and Borrower and each of its Subsidiaries is qualified and licensed to do business and is in good standing in any jurisdiction in which the conduct of its businesses or its ownership of property requires that it  be qualified except where the failure to do so could not reasonably be expected to have a Material Adverse Change.  In connection with this Agreement, Borrower and each of its Subsidiaries has delivered to Collateral Agent a completed perfection certificate signed by an officer of Borrower or such Subsidiary (as the same may be updated from time to time in accordance with this Agreement, each a “Perfection Certificate” and collectively, the “Perfection Certificates”).  Borrower represents and warrants that (a) Borrower and each of its Subsidiaries’ exact legal name is that which is indicated on its respective Perfection Certificate and, as of the date such Loan Document was executed and delivered, on the signature page of each Loan Document to which it is a party; (b) Borrower and each of its Subsidiaries is an organization of the type and is organized in the jurisdiction set forth on its respective Perfection Certificate; (c) each Perfection Certificate accurately sets forth each of Borrower’s and its Subsidiaries’ organizational identification number or accurately states that Borrower or such Subsidiary has none; (d) each Perfection Certificate accurately sets forth Borrower’s and each of its Subsidiaries’ place of business, or, if more than one, its chief executive office as well as Borrower’s and each of its Subsidiaries’ mailing address (if different than its chief executive office); (e) except as may be set forth on its  Perfection Certificate, Borrower and each of its Subsidiaries (and each of its respective predecessors) have not, in the past five (5) years, changed its jurisdiction of organization, organizational structure or type, or any organizational number assigned by its jurisdiction; and (f) all other information set forth on the Perfection Certificates pertaining to Borrower and each of its Subsidiaries, is accurate and complete in all material respects (it being understood and agreed that (i) Borrower and each of its Subsidiaries may from time to time update certain information in the Perfection Certificates (including the information set forth in clause (d) above) after the Effective Date to the extent that such updates result from actions not prohibited by any provisions of this Agreement or any other Loan Document, (ii) any such information reported by Borrower on the Compliance Certificate from time to time shall be deemed to update such information on the Perfection Certificate after the Effective Date and (iii) the Borrower shall not be in breach of this Agreement for any changes that are reported in the next Reporting Date following such change to the extent such updates are resulting from actions, transactions, circumstances or events not prohibited by the terms of this Agreement or any other Loan Document); such updated Perfection Certificates subject to the review and approval of Collateral Agent unless such facts, events or circumstances being updated first arose or occurred after the Effective Date and do not constitute a breach, default, or Event of Default under this Agreement or any other Loan Document.  If Borrower or any of its Subsidiaries is not now a Registered Organization but later becomes one, Borrower shall notify Collateral
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Agent of such occurrence and provide Collateral Agent with such Person’s organizational identification number within five (5) Business Days of receiving such organizational identification number.
The execution, delivery and performance by Borrower and each of its Subsidiaries of the Loan Documents to which it is a party have been duly authorized, and do not (i) conflict with any of Borrower’s or such Subsidiaries’ organizational documents, including its respective Operating Documents, (ii) contravene, conflict with, constitute a default under or violate any material Requirement of Law applicable thereto, (iii) contravene, conflict or violate any applicable order, writ, judgment, injunction, decree, determination or award of any Governmental Authority by which Borrower or such Subsidiary, or any of their property or assets may be bound or affected, (iv) require any action by, filing, registration, or qualification with, or Governmental Approval from, any Governmental Authority (except for filings with the Securities and Exchange Commission which do not require any consent by any Governmental Authority, such Governmental Approvals which have already been obtained and are in full force and effect or are being obtained pursuant to Section 6.1(b), or filings required to perfect the security interest granted herein, or (v) constitute an event of default under any material agreement by which Borrower or any of such Subsidiaries, or their respective properties, is bound.  Neither Borrower nor any of its Subsidiaries is in default under any agreement to which it is a party or by which it or any of its assets is bound in which such default could reasonably be expected to have a Material Adverse Change.
5.2Collateral.
(a)Borrower and each its Subsidiaries have good title to, have rights in, and the power to transfer each item of the Collateral upon which it purports to grant a Lien under the Loan Documents, free and clear of any and all Liens except Permitted Liens, and neither Borrower nor any of its Subsidiaries have any Deposit Accounts, Securities Accounts, Commodity Accounts or other investment accounts other than the Collateral Accounts or the other investment accounts, if any, described in the Perfection Certificates delivered to Collateral Agent in connection herewith with respect of which Borrower or such Subsidiary has given Collateral Agent notice and taken such actions as necessary to give Collateral Agent a perfected security interest therein to the extent required under this Agreement. The Accounts are bona fide, existing obligations of the Account Debtors.
(b)On the Effective Date, and except as disclosed on the Perfection Certificate (i) the Collateral (other than (1) Marketing Samples, (2) inventory in transit and (3) laptops and mobile phones) is not in the possession of a third party bailee (such as a warehouse) and (ii) no such third party bailee possesses Collateral with an aggregate value exceeding $500,000.  None of the components of the Collateral (other than (1) Marketing Samples, (2) inventory in transit, and (3) laptops and mobile phones) shall be maintained at locations other than as disclosed in the Perfection Certificates on the Effective Date or as permitted pursuant to Section 6.11.
(c)All unexpired Inventory is in all material respects of good and marketable quality, free from material defects.
(d)Borrower and each of its Subsidiaries is the sole owner of the Intellectual Property each respectively purports to own, free and clear of all Liens other than Permitted Liens.  (i) Each of Borrower’s and its Subsidiaries’ material Patents is valid and enforceable and no part of Borrower’s or its Subsidiaries’ material Intellectual Property has been judged invalid or unenforceable, in whole or in part, and (ii) to the best of Borrower’s knowledge, no claim has been made that any part of the Intellectual Property or any practice by Borrower or its Subsidiaries violates the rights of any third party except to the extent such claim could not reasonably be expected to have a Material Adverse Change.  Except as noted on the Perfection Certificates, neither Borrower nor any of its Subsidiaries is a party to, nor is bound by, any material license or other material agreement with respect to which Borrower or such Subsidiary is the licensee that (i) prohibits or otherwise restricts Borrower or its Subsidiaries from granting a security interest in Borrower’s or such Subsidiaries’ interest in such material license or other material agreement or any other property, or (ii) for which a default under or termination of could interfere with Collateral Agent’s or any Lender’s right to sell any Collateral.  Borrower shall provide written notice to Collateral Agent and each Lender within ten (10) Business Days of Borrower or any of its Subsidiaries entering into or becoming bound by any material license or other material agreement with respect to which Borrower or any Subsidiary is the licensee (other than over-the-counter software that is commercially available to the public).
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5.3Litigation.  Except as disclosed (i) on the Perfection Certificates, or (ii) in accordance with Section 6.9 hereof, there are no actions, suits, investigations, or proceedings pending or, to the knowledge of the Responsible Officers, threatened in writing by or against Borrower or any of its Subsidiaries involving more than Five Hundred Thousand Dollars ($500,000.00).
5.4No Material Deterioration in Financial Condition; Financial Statements.  All consolidated financial statements for Borrower and its Subsidiaries, delivered to Collateral Agent fairly present, in conformity with GAAP, in all material respects the consolidated financial condition of Borrower and its Subsidiaries, and the consolidated results of operations of Borrower and its Subsidiaries (subject to year-end adjustments to reflect any merger consolidation adjustments and the noncash impact of accounting for stock compensation or other non-cash equity items, and the absence of footnotes) as of the dates and for the periods presented.  There has not been any material deterioration in the consolidated financial condition of Borrower and its Subsidiaries since the date of the most recent financial statements submitted to any Lender.
5.5Solvency.  Borrower is Solvent and Borrower and its Subsidiaries, taken as a whole, are Solvent.
5.6Regulatory Compliance.  Neither Borrower nor any of its Subsidiaries is an “investment company” or a company “controlled” by an “investment company” under the Investment Company Act of 1940, as amended.  Neither Borrower nor any of its Subsidiaries is engaged as one of its important activities in extending credit for margin stock (under Regulations X, T and U of the Federal Reserve Board of Governors).  Borrower and each of its Subsidiaries has complied in all material respects with the Federal Fair Labor Standards Act.  Neither Borrower nor any of its Subsidiaries is a “holding company” or an “affiliate” of a “holding company” or a “subsidiary company” of a “holding company” as each term is defined and used in the Public Utility Holding Company Act of 2005.  Neither Borrower nor any of its Subsidiaries has violated any laws, ordinances or rules, the violation of which could reasonably be expected to have a Material Adverse Change.  Neither Borrower’s nor any of its Subsidiaries’ properties or assets has been used by Borrower or such Subsidiary or, to Borrower’s knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than in material compliance with applicable laws.  Borrower and each of its Subsidiaries has obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all Governmental Authorities that are necessary to continue their respective businesses as currently conducted.
None of Borrower, any of its Subsidiaries, or any of Borrower’s or its Subsidiaries’ Affiliates or any of their respective agents acting or benefiting in any capacity in connection with the transactions contemplated by this Agreement is (i) in violation of any Anti-Terrorism Law, (ii) engaging in or conspiring to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law, or (iii) is a Blocked Person.  None of Borrower, any of its Subsidiaries, or to the knowledge of Borrower and any of their Affiliates or agents, acting or benefiting in any capacity in connection with the transactions contemplated by this Agreement, (x) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Blocked Person, or (y) deals in, or otherwise engages in any transaction relating to, any property or interest in property blocked pursuant to Executive Order No. 13224, any similar executive order or other Anti-Terrorism Law.
5.7Investments.  Neither Borrower nor any of its Subsidiaries owns any stock, shares, partnership interests or other equity securities except for Permitted Investments.
5.8Tax Returns and Payments; Pension Contributions.  Borrower and each of its Subsidiaries has timely filed or have timely obtained extensions for filing all required tax returns and reports, and Borrower and each of its Subsidiaries, has timely paid all foreign, federal, state, and local Taxes owed by Borrower and such Subsidiaries, in all jurisdictions in which Borrower or any such Subsidiary is subject to Taxes, including the United States, unless such Taxes are being contested in accordance with the following sentence or do not, individually or in the aggregate, exceed One Hundred Thousand Dollars ($100,000.00).  Borrower and each of its Subsidiaries, may defer payment of any contested taxes, provided that Borrower or such Subsidiary, (a) in good faith contests its obligation to pay the taxes by appropriate proceedings promptly and diligently instituted and conducted, (b) notifies Collateral Agent in writing of the commencement of, and any material development in, any proceedings involving in the aggregate more than One Hundred Thousand Dollars ($100,000.00) and (c) posts bonds or takes any other steps required to prevent the Governmental Authority levying such contested taxes from obtaining a Lien upon any of the Collateral that is
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other than a “Permitted Lien.”  Neither Borrower nor any of its Subsidiaries is aware of any claims or adjustments proposed for any of Borrower’s or such Subsidiaries’, prior tax years which could result in additional taxes becoming due and payable by Borrower or its Subsidiaries in excess of One Hundred Thousand Dollars ($100,000.00), except to the extent that such taxes are being contested in accordance with the immediately preceding sentence.  Borrower and each of its Subsidiaries have paid all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms, and neither Borrower nor any of its Subsidiaries have, withdrawn from participation in, and have not permitted partial or complete termination of, or permitted the occurrence of any other event with respect to, any such plan which could reasonably be expected to result in any liability of Borrower or its Subsidiaries, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other Governmental Authority.
5.9Use of Proceeds.  Borrower shall use the proceeds of the Credit Extensions solely as working capital and to fund its general business requirements in accordance with the provisions of this Agreement, and not for personal, family, household or agricultural purposes. A portion of the proceeds of the Term A Loans shall be used by Borrower to repay the Existing Indebtedness in full on the Effective Date.
5.10Shares.  Borrower has full power and authority to create a first lien on the Shares and no disability or contractual obligation exists that would prohibit Borrower from pledging the Shares pursuant to this Agreement.  To Borrower’s knowledge, there are no subscriptions, warrants, rights of first refusal or other restrictions on transfer relative to, or options exercisable with respect to the Shares.  The Shares have been and will be duly authorized and validly issued, and are fully paid and non-assessable.  To Borrower’s knowledge, the Shares are not the subject of any present or threatened suit, action, arbitration, administrative or other proceeding, and Borrower knows of no reasonable grounds for the institution of any such proceedings.
5.11Full Disclosure.  No written representation, warranty or other statement of Borrower or any of its Subsidiaries in any certificate or written statement given to Collateral Agent or any Lender, as of the date such representation, warranty, or other statement was made, taken together with all such written certificates and written statements given to Collateral Agent or any Lender, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained in the certificates or statements not misleading in light of the circumstances under which they were made (it being recognized that the projections and forecasts provided by Borrower in good faith and based upon reasonable assumptions are not viewed as facts and that actual results during the period or periods covered by such projections and forecasts may differ from the projected or forecasted results).
5.12Definition of “Knowledge.”  For purposes of the Loan Documents, whenever a representation or warranty is made to Borrower’s knowledge or awareness, to the “best of” Borrower’s knowledge, or with a similar qualification, knowledge or awareness means the actual knowledge, after reasonable investigation, of the Responsible Officers.
6.AFFIRMATIVE COVENANTS
Borrower shall, and shall cause each of its Subsidiaries to, do all of the following:
6.1Government Compliance.
(a)Maintain its and all its Subsidiaries’ legal existence and good standing in their respective jurisdictions of organization and maintain qualification in each jurisdiction in which the failure to so qualify could reasonably be expected to have a Material Adverse Change.  Comply with all laws, ordinances and regulations to which Borrower or any of its Subsidiaries is subject, the noncompliance with which could reasonably be expected to have a Material Adverse Change.
(b)Obtain and keep in full force and effect, all of the material Governmental Approvals necessary for the performance by Borrower and its Subsidiaries of their respective businesses and obligations under the Loan Documents and the grant of a security interest to Collateral Agent for the ratable benefit of the Lenders, in all of the Collateral.  Borrower shall promptly notify Collateral Agent of any material Governmental Approvals
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obtained by Borrower or any of its Subsidiaries and unless otherwise requested by Collateral Agent, on or before the next Reporting Date, provide copies to Collateral Agent of such material Governmental Approvals.
6.2Financial Statements, Reports, Certificates.
(a)Deliver to each Lender:
(i)as soon as available, but no later than forty five (45) days after the last day of each quarter, a company prepared consolidated and consolidating balance sheet, income statement and cash flow statement covering the consolidated operations of Borrower and its Subsidiaries for such quarter certified by a Responsible Officer and in a form reasonably acceptable to Collateral Agent;
(ii)as soon as available, but no later than the earlier of (x) ninety (90) days after the last day of Borrower’s fiscal year or (y) within five (5) days of filing with the SEC, audited consolidated financial statements prepared under GAAP, consistently applied, together with an unqualified opinion (other than with respect to going concern so long as no Event of Default has occurred and is continuing) on the financial statements from Deloitte & Touche LLP or another independent certified public accounting firm acceptable to Collateral Agent in its reasonable discretion;
(iii)as soon as available after approval thereof by Borrower’s Board of Directors, but no later than sixty (60) days after the last day of each of Borrower’s fiscal years, Borrower’s annual financial projections for the entire current fiscal year as approved by Borrower’s Board of Directors, which such annual financial projections shall be set forth in a quarter-by-quarter format (such annual financial projections as originally delivered to Collateral Agent and the Lenders are referred to herein as the “Annual Projections”; provided that, any revisions of the Annual Projections approved by Borrower’s Board of Directors shall be delivered to Collateral Agent and the Lenders no later than seven (7) days after such approval);
(iv)within five (5) Business Days of delivery, copies of all statements, reports and notices made available to Borrower’s security holders or holders of Subordinated Debt;
(v)within five (5) Business Days of filing, all reports on Form 10-K, 10-Q and 8-K filed with the Securities and Exchange Commission,
(vi)prompt notice of any amendments of or other changes to the Operating Documents of Borrower or any of its Subsidiaries, together with any copies reflecting such amendments or changes with respect thereto;
(vii)(A) prompt (and in any event on or before the next Reporting Date) notice of (1) any material change in the composition of the Intellectual Property and (2) the registration of any copyright, including any subsequent ownership right of Borrower or any of its Subsidiaries in or to any copyright, patent or trademark, including a copy of any such registration and (B) prompt notice of any event that could reasonably be expected to materially and adversely affect the value of the Intellectual Property;
(viii)as soon as available, but no later than the next Reporting Date after the last day of each quarter, copies of the quarter-end account statements for each Collateral Account maintained by Borrower or its Subsidiaries, which statements may be provided to Collateral Agent and each Lender by Borrower or directly from the applicable institution(s), and
(ix)other information as reasonably requested by Collateral Agent or any Lender.
Notwithstanding the foregoing, notices or documents required to be delivered pursuant to the terms of this Section 6.2(a) (to the extent any such information or documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which Borrower posts such documents, or provides a link thereto, on Borrower’s website on the internet at Borrower’s website address or (ii) on which such documents are posted on Borrower’s behalf on the website of the SEC or any
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other Internet or intranet website, if any, to which each Lender and the Collateral Agent have access and of which each Lender and the Collateral Agent has been notified in advance (whether a commercial, third-party website or whether sponsored by the Collateral Agent).  The Collateral Agent and each Lender have been notified that Borrower will be delivering such notices and documents that are included in materials otherwise filed with the SEC by providing a link to such filings on its website found at https://investors.kalarx.com/sec-filings.
(b)Concurrently with the delivery of the financial statements specified in Section 6.2(a)(i) above but no later than forty five (45) days after the last day of each quarter, deliver to each Lender, a duly completed Compliance Certificate signed by a Responsible Officer.
(c)Keep proper books of record and account in accordance with GAAP in all material respects, in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities.  Borrower shall, and shall cause each of its Subsidiaries to, allow, at the sole cost of Borrower, once in any given fiscal year unless an Event of Default has occurred and is continuing, Collateral Agent or any Lender, during regular business hours upon reasonable prior notice (provided that no notice shall be required when an Event of Default has occurred and is continuing), to visit and inspect any of its properties, to examine and make abstracts or copies from any of its books and records, and to conduct a collateral audit and analysis of its operations and the Collateral.  Such audits shall be conducted no more often than once every year unless (and more frequently if) an Event of Default has occurred and is continuing.
6.3Inventory; Returns.  Keep all unexpired Inventory in good and marketable condition, free from material defects; provided that the Pre-Clinical and Clinical Trial Supplies may not be “marketable” for purposes of this Section 6.3.  Returns and allowances between Borrower, or any of its Subsidiaries, and their respective Account Debtors shall follow Borrower’s, or such Subsidiary’s, customary practices as they exist at the Effective Date.  Borrower must promptly notify Collateral Agent and the Lenders of all returns, recoveries, disputes and claims that involve, individually or in the aggregate in any calendar year, more than the greater of (i) Five Hundred Thousand Dollars ($500,000.00) and (ii) one percent (1.00%) of the aggregate revenue of Borrower for such calendar year; provided, however, once the aggregate returns, recoveries, disputes and claims in any given calendar year have exceeded the greater of (i) Five Hundred Thousand Dollars ($500,000.00) and (ii) one percent (1.00%) of the aggregate revenue of Borrower for such calendar year, and Borrower has notified the Collateral Agent and Lenders of the same, Borrower shall notify Collateral Agent and Lenders every time additional returns, recoveries, disputes and claims in such calendar year (that Borrower has not previously notified Collateral Agent and Borrower of) in the aggregate exceed Two Hundred Thousand Dollars ($200,000.00).
6.4Taxes; Pensions.  Timely file or obtain extensions for filing and require each of its Subsidiaries to timely file, all required tax returns and reports and timely pay, and require each of its Subsidiaries to timely file, all foreign, federal, state, and local Taxes owed by Borrower or its Subsidiaries, except for (x) to the extent such returns, reports and Taxes do not, individually or in the aggregate, exceed One Hundred Thousand Dollars ($100,000.00), or (y) Taxes that are being deferred payment of any taxes contested pursuant to the terms of Section 5.8 hereof, and shall deliver to Lenders, on demand, appropriate certificates attesting to such payments, and pay all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with the terms of such plans.
6.5Insurance.  Keep Borrower’s and its Subsidiaries’ business and the Collateral insured for risks and in amounts standard for companies in Borrower’s and its Subsidiaries’ industry and location and as Collateral Agent may reasonably request.  Insurance policies shall be in a form, with companies, and in amounts that are reasonably satisfactory to Collateral Agent and Lenders.  All property policies shall have a lender’s loss payable endorsement showing Collateral Agent as lender loss payee and waive subrogation against Collateral Agent, and all liability policies shall show, or have endorsements showing, Collateral Agent, as additional insured.  The Collateral Agent shall be named as lender loss payee and/or additional insured with respect to any such insurance providing coverage in respect of any Collateral, and each provider of any such insurance shall agree by endorsement upon the policy or policies issued by it or by independent instruments furnished to the Collateral Agent, that it will give the Collateral Agent thirty (30) days (or, ten (10) days, in the event of cancellation for non-payment of premiums) prior written notice before any such policy or policies shall be materially altered or canceled.  At Collateral Agent’s request, Borrower shall deliver certified copies of policies and evidence of all premium payments.  Proceeds payable under any policy shall, at Collateral Agent’s option, be payable to Collateral Agent, for the ratable benefit of the Lenders, on account of the Obligations.  Notwithstanding the foregoing, (a) so long as no Event of Default has occurred and is continuing,
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Borrower shall have the option of applying the proceeds of any casualty policy up to Five Hundred Thousand Dollars ($500,000.00) with respect to any loss, but not exceeding Five Hundred Thousand Dollars ($500,000.00), in the aggregate for all losses under all casualty policies in any one year, toward the replacement or repair of destroyed or damaged property; provided that any such replaced or repaired property (i) shall be of equal or like value as the replaced or repaired Collateral and (ii) shall be deemed Collateral in which Collateral Agent has been granted a first priority security interest, and (b) after the occurrence and during the continuance of an Event of Default, all proceeds payable under such casualty policy shall, at the option of Collateral Agent, be payable to Collateral Agent, for the ratable benefit of the Lenders, on account of the Obligations.  If Borrower or any of its Subsidiaries fails to obtain insurance as required under this Section 6.5 or to pay any amount or furnish any required proof of payment to third persons, Collateral Agent and/or any Lender may make, at Borrower’s expense, all or part of such payment or obtain such insurance policies required in this Section 6.5, and take any action under the policies Collateral Agent or such Lender deems prudent.
6.6Operating Accounts.
(a)Except as contemplated in Section 6.6(b), maintain all of Borrower’s and its Subsidiaries’ Collateral Accounts in accounts which are subject to a Control Agreement in favor of Collateral Agent.
(b)Borrower shall provide Collateral Agent five (5) days’ prior written notice before Borrower or any of its Subsidiaries establishes any Collateral Account.  In addition, for each Collateral Account that Borrower or any of its Subsidiaries, at any time maintains, Borrower or such Subsidiary shall cause the applicable bank or financial institution at or with which such Collateral Account is maintained to execute and deliver a Control Agreement or other appropriate instrument with respect to such Collateral Account to perfect Collateral Agent’s Lien in such Collateral Account in accordance with the terms hereunder prior to the establishment of such Collateral Account, which Control Agreement may not be terminated without prior written consent of Collateral Agent.  The provisions of the previous sentence shall not apply to (i) deposit accounts exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of Borrower’s, or any of its Subsidiaries’, employees, (ii) subject to Section 6.6(d), any deposit or securities account of the Securities Corporation and (iii) accounts subject to Liens permitted by clauses (k) and (m) of “Permitted Liens;” provided, however, the aggregate amount of deposits in such accounts shall not exceed the amounts then required to be deposited in connection with such Permitted Liens (other than as a result of accrued interest); provided, however, that each of the accounts described in (i) – (iii) shall be identified in the Perfection Certificates delivered in accordance with this Agreement.
(c)Neither Borrower nor any of its Subsidiaries shall maintain any Collateral Accounts except Collateral Accounts maintained in accordance with Sections 6.6(a) and (b).
(d)Notwithstanding anything herein to the contrary, Borrower shall, at all such times when the Securities Corporation is a Subsidiary of Borrower and holds any cash or Cash Equivalents (or investments maintained in accordance with Borrower’s investment policy that has been approved by its Board of Directors and do not cause the Securities Corporation to lose its classification as a “security corporation” by the Massachusetts Department of Revenue), maintain unrestricted cash balance in one or more Control Accounts subject to Control Agreements in favor of Collateral Agent in an aggregate amount of not less than an amount equal to the lesser of (i) the aggregate principal amount of outstanding Obligations and (ii) the amount of Borrower’s and all of its Subsidiaries’ (including the Securities Corporation) aggregate consolidated cash and Cash Equivalent assets and investments maintained in accordance with Borrower’s investment policy that has been approved by its Board of Directors and do not cause the Securities Corporation to lose its classification as a “security corporation” by the Massachusetts Department of Revenue (the “Securities Corporation Investment Condition”).
6.7Protection of Intellectual Property Rights.  Borrower and each of its Subsidiaries shall: (a) use commercially reasonable efforts to protect, defend and maintain the validity and enforceability of its Intellectual Property that is material to Borrower’s business; (b) promptly advise Collateral Agent in writing of becoming aware of any material infringement by a third party of its Intellectual Property; and (c) not allow any Intellectual Property material to Borrower’s business to be abandoned, forfeited or dedicated to the public without Collateral Agent’s prior written consent.  If Borrower or any of its Subsidiaries (i) obtains any patent, registered trademark or servicemark, registered copyright, registered mask work, or any pending application for any of the foregoing, whether as owner, licensee or otherwise, or (ii) applies for any patent or the registration of any trademark or servicemark, then Borrower
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or such Subsidiary shall promptly (and in any event on or prior to the next Reporting Date) provide written notice thereof to Collateral Agent and each Lender and shall execute such intellectual property security agreements and other documents and take such other actions as Collateral Agent shall reasonably request in its good faith business judgment to perfect and maintain a first priority perfected security interest in favor of Collateral Agent, for the ratable benefit of the Lenders, in such property.  If Borrower or any of its Subsidiaries decides to register any copyrights or mask works in the United States Copyright Office, Borrower or such Subsidiary shall: (x) provide Collateral Agent and each Lender with at least fifteen (15) days prior written notice of Borrower’s or such Subsidiary’s intent to register such copyrights or mask works together with a copy of the application it intends to file with the United States Copyright Office (excluding exhibits thereto); (y) execute an intellectual property security agreement and such other documents and take such other actions as Collateral Agent may reasonably request in its good faith business judgment to perfect and maintain a first priority perfected security interest in favor of Collateral Agent, for the ratable benefit of the Lenders, in the copyrights or mask works intended to be registered with the United States Copyright Office; and (z) record such intellectual property security agreement with the United States Copyright Office contemporaneously with filing the copyright or mask work application(s) with the United States Copyright Office.  Borrower or such Subsidiary shall promptly provide to Collateral Agent and each Lender with evidence of the recording of the intellectual property security agreement necessary for Collateral Agent to perfect and maintain a first priority perfected security interest in such property.
6.8Litigation Cooperation.  Commencing on the Effective Date and continuing through the termination of this Agreement, make available to Collateral Agent and the Lenders, without expense to Collateral Agent or the Lenders, Borrower and each of Borrower’s officers, employees and agents and Borrower’s Books, to the extent that Collateral Agent or any Lender may reasonably deem them necessary to prosecute or defend any third-party suit or proceeding instituted by or against Collateral Agent or any Lender with respect to any Collateral or relating to Borrower.
6.9Notices of Litigation and Default.  Borrower will give prompt written notice to Collateral Agent and the Lenders of any litigation or governmental proceedings pending or threatened (in writing) against Borrower or any of its Subsidiaries, which could reasonably be expected to result in damages or costs to Borrower or any of its Subsidiaries of Five Hundred Thousand Dollars ($500,000.00) or more or which could reasonably be expected to have a Material Adverse Change.  Without limiting or contradicting any other more specific provision of this Agreement, promptly (and in any event within three (3) Business Days) upon Borrower becoming aware of the existence of any Event of Default or event which, with the giving of notice or passage of time, or both, would constitute an Event of Default, Borrower shall give written notice to Collateral Agent and the Lenders of such occurrence, which such notice shall include a reasonably detailed description of such Event of Default or event which, with the giving of notice or passage of time, or both, would constitute an Event of Default.
6.10Financial Covenant. After the Funding Date of the Term B Loans and prior to the Funding Date of the Term C Loans, as tested as of the last date of each quarter for the six-month period then ended, Borrower shall achieve consolidated revenues from the sale and distribution of Borrower’s products equal to at least [**] Dollars ($[**]) until the Term C Loans have been made.  After the Funding Date of the Term C Loans, as tested as of the last date of each quarter for the six-month period then ended, Borrower shall achieve consolidated revenues from the sale and distribution of Borrower’s products equal to at least [**] Dollars ($[**]).
6.11Landlord Waivers; Bailee Waivers.  In the event that Borrower or any of its Subsidiaries, after the Effective Date, intends to add any new offices or business locations, including warehouses, or otherwise store any portion of the Collateral with, or deliver any portion of the Collateral to, a bailee, in each case pursuant to Section 7.2, then Borrower or such Subsidiary will provide written notice thereof to Collateral Agent and, in the event that the new location is the chief executive office of the Borrower or such Subsidiary or the Collateral at any such new location is valued in excess of Five Hundred Thousand ($500,000.00) in the aggregate, such bailee or landlord, as applicable, must execute and deliver a bailee waiver or landlord waiver, as applicable, in form and substance reasonably satisfactory to Collateral Agent prior to the addition of any new offices or business locations, or any such storage with or delivery to any such bailee, as the case may be.
6.12Creation/Acquisition of Subsidiaries.  In the event Borrower, or any of its Subsidiaries creates or acquires any Subsidiary after the Effective Date, Borrower shall provide prior written notice to Collateral Agent and each Lender of the creation or acquisition of such new Subsidiary and take all such action as may be reasonably
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required by Collateral Agent or any Lender to cause each such Subsidiary to become a co-Borrower hereunder or to guarantee the Obligations of Borrower under the Loan Documents and, in each case, grant a continuing pledge and security interest in and to the assets of such Subsidiary (substantially as described on Exhibit A hereto); and Borrower (or its Subsidiary, as applicable) shall grant and pledge to Collateral Agent, for the ratable benefit of the Lenders, a perfected security interest in the Shares of each such newly created Subsidiary.
6.13Further Assurances.
(a)Execute any further instruments and take further action as Collateral Agent or any Lender reasonably requests to perfect or continue Collateral Agent’s Lien in the Collateral or to effect the purposes of this Agreement.
(b)Deliver to Collateral Agent and Lenders, within five (5) days after the same are sent or received, copies of all material correspondence, reports, documents and other filings with any Governmental Authority that could reasonably be expected to have a material adverse effect on any of the Governmental Approvals material to Borrower’s business or otherwise could reasonably be expected to have a Material Adverse Change.
7.NEGATIVE COVENANTS
Borrower shall not, and shall not permit any of its Subsidiaries to, do any of the following without the prior written consent of the Required Lenders:
7.1Dispositions.  Convey, sell, lease, transfer, assign, or otherwise dispose of (collectively, “Transfer”), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, except for Transfers (a) of Inventory in the ordinary course of business; (b) of worn out, surplus or obsolete Equipment; (c) in connection with Permitted Liens, Permitted Investments and Permitted Licenses; (d) from any Subsidiary of Borrower to Borrower; (e) of cash and Cash Equivalents in connection with transactions in the ordinary course of business that (A) are approved by Borrower’s board of directors (to the extent Board approval is required by Borrower’s policies or other organizational documents) and (B) not otherwise prohibited hereunder; and (f) other Transfers of property, other than Intellectual Property, having a book value not exceeding Five Hundred Thousand Dollars ($500,000.00) in the aggregate during any fiscal year.
7.2Changes in Business, Management, Ownership, or Business Locations.  (a) Engage in or permit any of its Subsidiaries to engage in any business other than the businesses engaged in by Borrower as of the Effective Date or reasonably related thereto; (b) liquidate or dissolve; or (c) (i) any Key Person shall cease to be actively engaged in the management of Borrower unless written notice thereof (including by the filing of a Form 8-K in accordance with the provisions set forth in Section 6.2) is provided to Collateral Agent within five (5) days of such change, or (ii)  consummate any transaction or series of related transactions in which the stockholders of Borrower who were not stockholders immediately prior to the first such transaction own fifty percent (50%) or more of the voting power of Borrower immediately after giving effect to such transaction or related series of such transactions (other than by the sale of Borrower’s equity securities in a public offering, a private placement of public equity or to venture capital investors so long as Borrower identifies to Collateral Agent the venture capital investors prior to the closing of the transaction).  Borrower shall not, without at least fifteen (15) days’ prior written notice to Collateral Agent: (A) change its jurisdiction of organization, (B) change its organizational structure or type, (C) change its legal name, or (D) change any organizational number (if any) assigned by its jurisdiction of organization.
7.3Mergers or Acquisitions.  Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with any other Person, or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock, shares or property of another Person other than in connection with a Permitted Acquisition. In addition, a Subsidiary may merge or consolidate into another Subsidiary (provided such surviving Subsidiary is a “co-Borrower” hereunder or has provided a secured Guaranty of Borrower’s Obligations hereunder) or with (or into) Borrower provided Borrower is the surviving legal entity, and as long as no Event of Default is occurring prior thereto or arises as a result therefrom.
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7.4Indebtedness.  Create, incur, assume, or be liable for any Indebtedness, or permit any Subsidiary to do so, other than Permitted Indebtedness.
7.5Encumbrance.  Create, incur, allow, or suffer any Lien on any of its property, or assign or convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries to do so, except for Permitted Liens, or permit any Collateral not to be subject to the first priority security interest granted herein (except for Permitted Liens that are permitted by the terms of this Agreement to have priority over Collateral Agent’s Lien), or enter into any agreement, document, instrument or other arrangement (except with or in favor of Collateral Agent, for the ratable benefit of the Lenders) with any Person which directly or indirectly prohibits or has the effect of prohibiting Borrower, or any of its Subsidiaries, from assigning, mortgaging, pledging, granting a security interest in or upon, or encumbering any of Borrower’s or such Subsidiary’s Intellectual Property, except as is otherwise permitted in Section 7.1 hereof and the definition of “Permitted Liens” herein.
7.6Maintenance of Collateral Accounts.  Maintain any Collateral Account except pursuant to the terms of Section 6.6 hereof.
7.7Distributions; Investments. (a) Pay any dividends (other than dividends payable solely in capital stock) or make any distribution or payment in respect of or redeem, retire or purchase any capital stock (other than (i) repurchases pursuant to the terms of employee stock purchase plans, employee restricted stock agreements, stockholder rights plans, director or consultant stock option plans, or similar plans, (ii) any payment of cash in lieu of a fractional share in accordance with the terms of any indenture governing Permitted Subordinated Debt (provided, however, the aggregate payment pursuant to (i) and (ii) shall not exceed Two Hundred Fifty Thousand Dollars ($250,000.00) in any given year) and (iii) each Subsidiary may make dividends to the Borrower), or (b) directly or indirectly make any Investment other than Permitted Investments, or permit any of its Subsidiaries to do so.
7.8Transactions with Affiliates.  Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of Borrower or any of its Subsidiaries, except for (a) transactions that are in the ordinary course of Borrower’s or such Subsidiary’s business, upon fair and reasonable terms that are no less favorable to Borrower or such Subsidiary than would be obtained in an arm’s length transaction with a non-affiliated Person, (b) intercompany transactions expressly permitted by Sections 7.1, 7.3, 7.4 and 7.7 of  this Agreement, (c) normal and reasonable compensation and reimbursement of expenses of officers and directors in the ordinary course of business and approved by Borrower’s Board of Directors to the extent required by Borrower’s organizational documents, and (d) Subordinated Debt or equity investments by Borrower’s investors in Borrower.
7.9Subordinated Debt.  (a) Make or permit any payment on any Subordinated Debt, except under the terms of the subordination, intercreditor, or other similar agreement to which such Subordinated Debt is subject (including, subject to the terms of the subordination, intercreditor, or other similar agreement, (i) regularly scheduled interest payments as and when due in accordance with the terms governing Permitted Subordinated Debt, (ii) deal related expenses to be paid at closing of the applicable Permitted Subordinated Debt from the proceeds of such Permitted Subordinated Debt and (iii) normal course fees in connection with Permitted Subordinated Debt not to exceed $100,000 per year or such other amount that Collateral Agent shall approve after the Closing Date in its discretion), or (b) amend any provision in any document relating to the Subordinated Debt which would increase the amount thereof or adversely affect the subordination thereof to Obligations owed to the Lenders.
7.10Compliance.  Become an “investment company” or a company controlled by an “investment company”, under the Investment Company Act of 1940, as amended, or undertake as one of its important activities extending credit to purchase or carry margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System), or use the proceeds of any Credit Extension for that purpose; fail to meet the minimum funding requirements of ERISA if it could reasonably be expected to result in any material liability of Borrower or any of its Subsidiaries, permit a Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair Labor Standards Act or violate any other law or regulation, if the violation could reasonably be expected to have a Material Adverse Change, or permit any of its Subsidiaries to do so; withdraw or permit any Subsidiary to withdraw from participation in, permit partial or complete termination of, or permit the occurrence of any other event with respect to, any present pension, profit sharing and deferred compensation plan which could reasonably be expected to result in any material liability of Borrower or any of its Subsidiaries, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other Governmental Authority.
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7.11Compliance with Anti-Terrorism Laws.  Collateral Agent hereby notifies Borrower and each of its Subsidiaries that pursuant to the requirements of Anti-Terrorism Laws, and Collateral Agent’s policies and practices, Collateral Agent is required to obtain, verify and record certain information and documentation that identifies Borrower and each of its Subsidiaries and their principals, which information includes the name and address of Borrower and each of its Subsidiaries and their principals and such other information that will allow Collateral Agent to identify such party in accordance with Anti-Terrorism Laws.  Neither Borrower nor any of its Subsidiaries shall, nor shall Borrower or any of its Subsidiaries permit any Affiliate to, directly or indirectly, knowingly enter into any documents, instruments, agreements or contracts with any Person listed on the OFAC Lists.  Borrower and each of its Subsidiaries shall immediately notify Collateral Agent if Borrower or such Subsidiary has knowledge that Borrower, or any Subsidiary or Affiliate of Borrower, is listed on the OFAC Lists or (a) is convicted on, (b) pleads nolo contendere to, (c) is indicted on, or (d) is arraigned and held over on charges involving money laundering or predicate crimes to money laundering.  Neither Borrower nor any of its Subsidiaries shall, nor shall Borrower or any of its Subsidiaries, permit any Affiliate to, directly or indirectly, (i) conduct any business or engage in any transaction or dealing with any Blocked Person, including, without limitation, the making or receiving of any contribution of funds, goods or services to or for the benefit of any Blocked Person, (ii) deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to Executive Order No. 13224 or any similar executive order or other Anti-Terrorism Law, or (iii) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in Executive Order No. 13224 or other Anti-Terrorism Law.
8.EVENTS OF DEFAULT
Any one of the following shall constitute an event of default (an “Event of Default”) under this Agreement:
8.1Payment Default.  Borrower fails to (a) make any payment of principal or interest on any Credit Extension on its due date, or (b) pay any other Obligations within three (3) Business Days after such Obligations are due and payable (which three (3) Business Day grace period shall not apply to payments due on the Maturity Date or the date of acceleration pursuant to Section 9.1 (a) hereof).  During the cure period, the failure to cure the payment default is not an Event of Default (but no Credit Extension will be made during the cure period);
8.2Covenant Default.
(a)Borrower or any of its Subsidiaries fails or neglects to perform any obligation in Sections 6.2 (Financial Statements, Reports, Certificates), 6.4 (Taxes), 6.5 (Insurance), 6.6 (Operating Accounts), 6.7 (Protection of Intellectual Property Rights), 6.9 (Notice of Litigation and Default), 6.10 (Financial Covenant), 6.11 (Landlord Waivers; Bailee Waivers) or 6.12 (Creation/Acquisition of Subsidiaries) or Borrower violates any covenant in Section 7; or
(b)Borrower, or any of its Subsidiaries, fails or neglects to perform, keep, or observe any other term, provision, condition, covenant or agreement contained in this Agreement or any Loan Documents, and as to any default (other than those specified in this Section 8) under such other term, provision, condition, covenant or agreement that can be cured, has failed to cure the default within twenty (20) days after the occurrence thereof; provided, however, that if the default cannot by its nature be cured within the twenty (20) day period or cannot after diligent attempts by Borrower be cured within such twenty (20) day period, and such default is likely to be cured within a reasonable time, then Borrower shall have an additional period (which shall not in any case exceed thirty (30) days) to attempt to cure such default, and within such reasonable time period the failure to cure the default shall not be deemed an Event of Default (but no Credit Extensions shall be made during such cure period).  Grace periods provided under this Section shall not apply, among other things, to financial covenants or any other covenants set forth in subsection (a) above;
8.3Material Adverse Change.  A Material Adverse Change occurs;
8.4Attachment; Levy; Restraint on Business.
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(a)(i) The service of process seeking to attach, by trustee or similar process, any funds of Borrower or any of its Subsidiaries or of any entity under control of Borrower or its Subsidiaries on deposit with any Lender or any Lender’s Affiliate or any bank or other institution at which Borrower or any of its Subsidiaries maintains a Collateral Account, or (ii) a notice of lien, levy, or assessment is filed against Borrower or any of its Subsidiaries or their respective assets by any government agency, and the same under subclauses (i) and (ii) hereof are not, within ten (10) days after the occurrence thereof, discharged or stayed (whether through the posting of a bond or otherwise); provided, however, no Credit Extensions shall be made during any ten (10) day cure period; and
(b)(i) any material portion of Borrower’s or any of its Subsidiaries’ assets is attached, seized, levied on, or comes into possession of a trustee or receiver, or (ii) any court order enjoins, restrains, or prevents Borrower or any of its Subsidiaries from conducting any part of its business;
8.5Insolvency.  (a) Borrower or any of its Subsidiaries is or becomes Insolvent; (b) Borrower or any of its Subsidiaries begins an Insolvency Proceeding; or (c) an Insolvency Proceeding is begun against Borrower or any of its Subsidiaries and not dismissed or stayed within forty-five (45) days (but no Credit Extensions shall be made while Borrower or any Subsidiary is Insolvent and/or until any Insolvency Proceeding is dismissed);
8.6Other Agreements.  There is a default in any agreement to which Borrower or any of its Subsidiaries is a party with a third party or parties resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount in excess of Five Hundred Thousand Dollars ($500,000.00) or that could reasonably be expected to have a Material Adverse Change;
8.7Judgments.  One or more judgments, orders, or decrees for the payment of money in an amount, individually or in the aggregate, of at least Five Hundred Thousand Dollars ($500,000.00) (not covered by independent third-party insurance as to which liability has been accepted by such insurance carrier) shall be rendered against Borrower or any of its Subsidiaries and shall remain unsatisfied, unvacated, or unstayed for a period of twenty (20) days after the entry thereof (provided that no Credit Extensions will be made prior to the satisfaction, vacation, or stay of such judgment, order or decree);
8.8Misrepresentations.  Borrower or any of its Subsidiaries or any Person acting for Borrower or any of its Subsidiaries makes any representation, warranty, or other statement now or later in this Agreement, any Loan Document or in any writing delivered to Collateral Agent and/or Lenders or to induce Collateral Agent and/or the Lenders to enter this Agreement or any Loan Document, and such representation, warranty, or other statement is incorrect in any material respect when made;
8.9Subordinated Debt.  A default or breach occurs under any agreement between Borrower or any of its Subsidiaries and any creditor of Borrower or any of its Subsidiaries that signed a subordination, intercreditor, or other similar agreement with Collateral Agent or the Lenders, or any creditor that has signed such an agreement with Collateral Agent or the Lenders breaches any terms of such agreement;
8.10Guaranty.  (a) Any Guaranty terminates or ceases for any reason to be in full force and effect; (b) any Guarantor does not perform any obligation or covenant under any Guaranty; (c) any circumstance described in Sections 8.3, 8.4, 8.5, 8.7, or 8.8 occurs with respect to any Guarantor, (d) the liquidation, winding up, or termination of existence of any Guarantor;
8.11Governmental Approvals.  Any Governmental Approval shall have been revoked, rescinded, suspended, modified in an adverse manner, or not renewed in the ordinary course for a full term and such revocation, rescission, suspension, modification or non-renewal has resulted in or could reasonably be expected to result in a Material Adverse Change; or
8.12Lien Priority.  Any Lien created hereunder or by any other Loan Document shall at any time fail to constitute a valid and perfected Lien on any of the Collateral purported to be secured thereby, subject to no prior or equal Lien, other than Permitted Liens which are permitted to have priority in accordance with the terms of this Agreement; provided that such circumstance is not due to Collateral Agent’s failure to file an appropriate continuation financing statement, amendment financing statement or initial financing statement.
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8.13Delisting. The shares of common stock of Borrower are delisted after their initial public offering from Nasdaq Global Select Market because of failure to comply with continued listing standards thereof or due to a voluntary delisting which results in such shares not being listed on any other nationally recognized stock exchange in the United States having listing standards at least as restrictive as the Nasdaq Global Select Market.
9.RIGHTS AND REMEDIES
9.1Rights and Remedies.
(a)Upon the occurrence and during the continuance of an Event of Default, Collateral Agent may, and at the written direction of Required Lenders shall, without notice or demand, do any or all of the following: (i) deliver notice of the Event of Default to Borrower, (ii) by notice to Borrower declare all Obligations immediately due and payable (but if an Event of Default described in Section 8.5 occurs all Obligations shall be immediately due and payable without any action by Collateral Agent or the Lenders) or (iii) by notice to Borrower suspend or terminate the obligations, if any, of the Lenders to advance money or extend credit for Borrower’s benefit under this Agreement or under any other agreement between Borrower and Collateral Agent and/or the Lenders (but if an Event of Default described in Section 8.5 occurs all obligations, if any, of the Lenders to advance money or extend credit for Borrower’s benefit under this Agreement or under any other agreement between Borrower and Collateral Agent and/or the Lenders shall be immediately terminated without any action by Collateral Agent or the Lenders).
(b)Without limiting the rights of Collateral Agent and the Lenders set forth in Section 9.1(a) above, upon the occurrence and during the continuance of an Event of Default, Collateral Agent shall have the right, without notice or demand, to do any or all of the following:
(i)foreclose upon and/or sell or otherwise liquidate, the Collateral;
(ii)apply to the Obligations any (a) balances and deposits of Borrower that Collateral Agent or any Lender holds or controls, or (b) any amount held or controlled by Collateral Agent or any Lender owing to or for the credit or the account of Borrower; and/or
(iii)commence and prosecute an Insolvency Proceeding or consent to Borrower commencing any Insolvency Proceeding.
(c)Without limiting the rights of Collateral Agent and the Lenders set forth in Sections 9.1(a) and (b) above, upon the occurrence and during the continuance of an Event of Default, Collateral Agent shall have the right, without notice or demand, to do any or all of the following:
(i)settle or adjust disputes and claims directly with Account Debtors for amounts on terms and in any order that Collateral Agent considers advisable, notify any Person owing Borrower money of Collateral Agent’s security interest in such funds, and verify the amount of such account;
(ii)make any payments and do any acts it considers necessary or reasonable to protect the Collateral and/or its security interest in the Collateral.  Borrower shall assemble the Collateral if Collateral Agent requests and make it available in a location as Collateral Agent reasonably designates.  Collateral Agent may enter premises where the Collateral is located, take and maintain possession of any part of the Collateral, and pay, purchase, contest, or compromise any Lien which appears to be prior or superior to its security interest and pay all expenses incurred. Borrower grants Collateral Agent a license to enter and occupy any of its premises, without charge, to exercise any of Collateral Agent’s rights or remedies;
(iii)ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, and/or advertise for sale, the Collateral.  Collateral Agent is hereby granted a non-exclusive, royalty-free license or other right to use, without charge, Borrower’s and each of its Subsidiaries’ labels, patents, copyrights, mask works, rights of use of any name, trade secrets, trade names, trademarks, service marks, and advertising matter, or any similar property as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral
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and, in connection with Collateral Agent’s exercise of its rights under this Section 9.1, Borrower’s and each of its Subsidiaries’ rights under all licenses and all franchise agreements inure to Collateral Agent, for the benefit of the Lenders;
(iv)place a “hold” on any account maintained with Collateral Agent or the Lenders and/or deliver a notice of exclusive control, any entitlement order, or other directions or instructions pursuant to any Control Agreement or similar agreements providing control of any Collateral;
(v)demand and receive possession of Borrower’s Books;
(vi)appoint a receiver to seize, manage and realize any of the Collateral, and such receiver shall have any right and authority as any competent court will grant or authorize in accordance with any applicable law, including any power or authority to manage the business of Borrower or any of its Subsidiaries; and
(vii)subject to clauses 9.1(a) and (b), exercise all rights and remedies available to Collateral Agent and each Lender under the Loan Documents or at law or equity, including all remedies provided under the Code (including disposal of the Collateral pursuant to the terms thereof).
Notwithstanding any provision of this Section 9.1 to the contrary, upon the occurrence of any Event of Default, Collateral Agent shall have the right to exercise any and all remedies referenced in this Section 9.1 without the written consent of Required Lenders following the occurrence of an Exigent Circumstance.  As used in the immediately preceding sentence, “Exigent Circumstance” means any event or circumstance that, in the reasonable judgment of Collateral Agent, imminently threatens the ability of Collateral Agent to realize upon all or any material portion of the Collateral, such as, without limitation, fraudulent removal, concealment, or abscondment thereof, destruction or material waste thereof, or failure of Borrower or any of its Subsidiaries after reasonable demand to maintain or reinstate adequate casualty insurance coverage, or which, in the judgment of Collateral Agent, could reasonably be expected to result in a material diminution in value of the Collateral.
9.2Power of Attorney.  Borrower hereby irrevocably appoints Collateral Agent as its lawful attorney-in-fact, exercisable upon the occurrence and during the continuance of an Event of Default, to: (a) endorse Borrower’s or any of its Subsidiaries’ name on any checks or other forms of payment or security; (b) sign Borrower’s or any of its Subsidiaries’ name on any invoice or bill of lading for any Account or drafts against Account Debtors; (c) settle and adjust disputes and claims about the Accounts directly with Account Debtors, for amounts and on terms Collateral Agent determines reasonable; (d) make, settle, and adjust all claims under Borrower’s insurance policies; (e) pay, contest or settle any Lien, charge, encumbrance, security interest, and adverse claim in or to the Collateral, or any judgment based thereon, or otherwise take any action to terminate or discharge the same; and (f) transfer the Collateral into the name of Collateral Agent or a third party as the Code or any applicable law permits.  Borrower hereby appoints Collateral Agent as its lawful attorney-in-fact to sign Borrower’s or any of its Subsidiaries’ name on any documents necessary to perfect or continue the perfection of Collateral Agent’s security interest in the Collateral regardless of whether an Event of Default has occurred until all Obligations (other than inchoate indemnity obligations and any other obligations which, by their terms, are to survive the termination of this Agreement) have been satisfied in full and Collateral Agent and the Lenders are under no further obligation to make Credit Extensions hereunder.  Collateral Agent’s foregoing appointment as Borrower’s or any of its Subsidiaries’ attorney in fact, and all of Collateral Agent’s rights and powers, coupled with an interest, are irrevocable until all Obligations (other than inchoate indemnity obligations and any other obligations which, by their terms, are to survive the termination of this Agreement) have been fully repaid and performed and Collateral Agent’s and the Lenders’ obligation to provide Credit Extensions terminates.
9.3Protective Payments.  If Borrower or any of its Subsidiaries fail to obtain the insurance called for by Section 6.5 or fails to pay any premium thereon or fails to pay any other amount which Borrower or any of its Subsidiaries is obligated to pay under this Agreement or any other Loan Document, Collateral Agent may obtain such insurance or make such payment, and all amounts so paid by Collateral Agent are Lenders’ Expenses and immediately due and payable, bearing interest at the Default Rate, and secured by the Collateral.  Collateral Agent will make reasonable efforts to provide Borrower with notice of Collateral Agent obtaining such insurance or making such payment at the time it is obtained or paid or within a reasonable time thereafter.  No such payments by Collateral
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Agent are deemed an agreement to make similar payments in the future or Collateral Agent’s waiver of any Event of Default.
9.4Application of Payments and Proceeds.  Notwithstanding anything to the contrary contained in this Agreement, upon the occurrence and during the continuance of an Event of Default, (a) Borrower irrevocably waives the right to direct the application of any and all payments at any time or times thereafter received by Collateral Agent from or on behalf of Borrower or any of its Subsidiaries of all or any part of the Obligations, and, as between Borrower on the one hand and Collateral Agent and Lenders on the other, Collateral Agent shall have the continuing and exclusive right to apply and to reapply any and all payments received against the Obligations in such manner as Collateral Agent may deem advisable notwithstanding any previous application by Collateral Agent, and (b) the proceeds of any sale of, or other realization upon all or any part of the Collateral shall be applied: first, to the Lenders’ Expenses; second, to accrued and unpaid interest on the Obligations (including any interest which, but for the provisions of the United States Bankruptcy Code, would have accrued on such amounts); third, to the principal amount of the Obligations outstanding; and fourth, to any other indebtedness or obligations of Borrower owing to Collateral Agent or any Lender under the Loan Documents.  Any balance remaining shall be delivered to Borrower or to whoever may be lawfully entitled to receive such balance or as a court of competent jurisdiction may direct.  In carrying out the foregoing, (x) amounts received shall be applied in the numerical order provided until exhausted prior to the application to the next succeeding category, and (y) each of the Persons entitled to receive a payment in any particular category shall receive an amount equal to its pro rata share of amounts available to be applied pursuant thereto for such category.  Any reference in this Agreement to an allocation between or sharing by the Lenders of any right, interest or obligation “ratably,” “proportionally” or in similar terms shall refer to Pro Rata Share unless expressly provided otherwise.  Collateral Agent, or if applicable, each Lender, shall promptly remit to the other Lenders such sums as may be necessary to ensure the ratable repayment of each Lender’s portion of any Term Loan and the ratable distribution of interest, fees and reimbursements paid or made by Borrower.  Notwithstanding the foregoing, a Lender receiving a scheduled payment shall not be responsible for determining whether the other Lenders also received their scheduled payment on such date; provided, however, if it is later determined that a Lender received more than its ratable share of scheduled payments made on any date or dates, then such Lender shall remit to Collateral Agent or other Lenders such sums as may be necessary to ensure the ratable payment of such scheduled payments, as instructed by Collateral Agent.  If any payment or distribution of any kind or character, whether in cash, properties or securities, shall be received by a Lender in excess of its ratable share, then the portion of such payment or distribution in excess of such Lender’s ratable share shall be received by such Lender in trust for and shall be promptly paid over to the other Lender for application to the payments of amounts due on the other Lenders’ claims.  To the extent any payment for the account of Borrower is required to be returned as a voidable transfer or otherwise, the Lenders shall contribute to one another as is necessary to ensure that such return of payment is on a pro rata basis.  If any Lender shall obtain possession of any Collateral, it shall hold such Collateral for itself and as agent and bailee for Collateral Agent and other Lenders for purposes of perfecting Collateral Agent’s security interest therein.
9.5Liability for Collateral.  So long as Collateral Agent and the Lenders comply with reasonable banking practices regarding the safekeeping of the Collateral in the possession or under the control of Collateral Agent and the Lenders, Collateral Agent and the Lenders shall not be liable or responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or other Person.  Borrower bears all risk of loss, damage or destruction of the Collateral.
9.6No Waiver; Remedies Cumulative.  Failure by Collateral Agent or any Lender, at any time or times, to require strict performance by Borrower of any provision of this Agreement or any other Loan Document shall not waive, affect, or diminish any right of Collateral Agent or any Lender thereafter to demand strict performance and compliance herewith or therewith.  No waiver hereunder shall be effective unless signed by Collateral Agent and the Required Lenders and then is only effective for the specific instance and purpose for which it is given.  The rights and remedies of Collateral Agent and the Lenders under this Agreement and the other Loan Documents are cumulative.  Collateral Agent and the Lenders have all rights and remedies provided under the Code, any applicable law, by law, or in equity.  The exercise by Collateral Agent or any Lender of one right or remedy is not an election, and Collateral Agent’s or any Lender’s waiver of any Event of Default is not a continuing waiver.  Collateral Agent’s or any Lender’s delay in exercising any remedy is not a waiver, election, or acquiescence.
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9.7Demand Waiver.  Borrower waives, to the fullest extent permitted by law, demand, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees held by Collateral Agent or any Lender on which Borrower or any Subsidiary is liable.
10.NOTICES
All notices, consents, requests, approvals, demands, or other communication (collectively, “Communication”) by any party to this Agreement or any other Loan Document must be in writing and shall be deemed to have been validly served, given, or delivered: (a) upon the earlier of actual receipt and three (3) Business Days after deposit in the U.S. mail, first class, registered or certified mail return receipt requested, with proper postage prepaid; (b) upon transmission, when sent by facsimile or electronic mail transmission; (c) one (1) Business Day after deposit with a reputable overnight courier with all charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed to the party to be notified and sent to the address, facsimile number, or email address indicated below.  Any of Collateral Agent, Lender or Borrower may change its mailing address, facsimile number, or email address by giving the other party written notice thereof in accordance with the terms of this Section 10.
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	If to Borrower:
	KALA PHARMACEUTICALS, INC.
490 Arsenal Way
Suite 120
Watertown, MA  02472
Attn: Mary Reumuth, Chief Financial Officer
Email: mary.reumuth@kalarx.com

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	with a copy (which shall not constitute notice) to:
	Wilmer Cutler Pickering Hale and Dorr, LLP
1225 Seventeenth St., Suite 2600
Denver, CO 80202 USA
Attn: Chalyse Robinson
Fax:  (720) 274-3133
Email: chalyse.robinson@wilmerhale.com

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	If to Collateral Agent:
	OXFORD FINANCE LLC
115 South Union Street
Suite 300
Alexandria, VA  22314
Fax: (703) 519-5225
Email: LegalDepartment@oxfordfinance.com

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	with a copy (which shall not constitute notice) to:
	Greenberg Traurig, LLP
One International Place
Boston, MA 02110
Attn: Abdullah Malik
Fax: (617) 897-0983
Email: malikab@gtlaw.com

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11.CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
New York law governs the Loan Documents without regard to principles of conflicts of law.  Borrower, Lenders and Collateral Agent each submit to the exclusive jurisdiction of the State and Federal courts in the City of New York, Borough of Manhattan.  NOTWITHSTANDING THE FOREGOING, COLLATERAL AGENT AND THE LENDERS SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER
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OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH COLLATERAL AGENT AND THE LENDERS (IN ACCORDANCE WITH THE PROVISIONS OF SECTION 9.1) DEEM NECESSARY OR APPROPRIATE TO REALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCE COLLATERAL AGENT’S AND THE LENDERS’ RIGHTS AGAINST BORROWER OR ITS PROPERTY.  Borrower expressly submits and consents in advance to such jurisdiction in any action or suit commenced in any such court, and Borrower hereby waives any objection that it may have based upon lack of personal jurisdiction, improper venue, or forum non conveniens and hereby consents to the granting of such legal or equitable relief as is deemed appropriate by such court.  Borrower hereby waives personal service of the summons, complaints, and other process issued in such action or suit and agrees that service of such summons, complaints, and other process may be made by registered or certified mail addressed to Borrower at the address set forth in, or subsequently provided by Borrower in accordance with, Section 10 of this Agreement and that service so made shall be deemed completed upon the earlier to occur of Borrower’s actual receipt thereof or three (3) days after deposit in the U.S. mails, first class, registered or certified mail return receipt requested, proper postage prepaid.
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER, COLLATERAL AGENT, AND THE LENDERS EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR EACH PARTY TO ENTER INTO THIS AGREEMENT.  EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
12.GENERAL PROVISIONS
12.1Successors and Assigns. This Agreement binds and is for the benefit of the successors and permitted assigns of each party.  Borrower may not transfer, pledge or assign this Agreement or any rights or obligations under it without Collateral Agent’s and each Lender’s prior written consent (which may be granted or withheld in Collateral Agent’s and each Lender’s discretion, subject to Section 12.6).  The Lenders have the right, without the consent of or notice to Borrower, to sell, transfer, assign, pledge, negotiate, or grant participation in (any such sale, transfer, assignment, negotiation, or grant of a participation, a “Lender Transfer”) all or any part of, or any interest in, the Lenders’ obligations, rights, and benefits under this Agreement and the other Loan Documents; provided, however, that any such Lender Transfer (other than a transfer, pledge, sale or assignment to an Eligible Assignee) of its obligations, rights, and benefits under this Agreement and the other Loan Documents shall require the prior written consent of the Required Lenders (such approved assignee, an “Approved Lender”).  Borrower and Collateral Agent shall be entitled to continue to deal solely and directly with such Lender in connection with the interests so assigned until Collateral Agent shall have received and accepted an effective assignment agreement in form satisfactory to Collateral Agent executed, delivered and fully completed by the applicable parties thereto, and shall have received such other information regarding such Eligible Assignee or Approved Lender as Collateral Agent reasonably shall require.  Notwithstanding anything to the contrary contained herein, so long as no Event of Default has occurred and is continuing, no Lender Transfer (other than a Lender Transfer in connection with (x) assignments by a Lender due to a forced divestiture at the request of any regulatory agency; or (y) upon the occurrence of a default, event of default or similar occurrence with respect to a Lender’s own financing or securitization transactions) shall be permitted, without Borrower’s consent, to any Person which is an Affiliate or Subsidiary of Borrower, a direct competitor of Borrower or a vulture hedge fund, each as determined by Collateral Agent.
12.2Indemnification.  Borrower agrees to indemnify, defend and hold Collateral Agent and the Lenders and their respective directors, officers, employees, agents, attorneys, or any other Person affiliated with or representing Collateral Agent or the Lenders (each, an “Indemnified Person”) harmless against:  (a) all obligations, demands, claims, and liabilities (collectively, “Claims”) asserted by any other party in connection with; related to; following; or arising from, out of or under, the transactions contemplated by the Loan Documents; and (b) all losses or Lenders’ Expenses incurred, or paid by Indemnified Person in connection with; related to; following; or arising from, out of or under, the transactions contemplated by the Loan Documents between Collateral Agent, and/or the Lenders and Borrower (including reasonable and documented out-of-pocket attorneys’ fees and expenses), except for Claims and/or losses directly caused by such Indemnified Person’s  gross negligence or willful misconduct.  Borrower hereby further indemnifies, defends and holds each Indemnified Person harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any
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kind or nature whatsoever (including the fees and disbursements of counsel for such Indemnified Person) in connection with any investigative, response, remedial, administrative or judicial matter or proceeding, whether or not such Indemnified Person shall be designated a party thereto and including any such proceeding initiated by or on behalf of Borrower, and the reasonable expenses of investigation by engineers, environmental consultants and similar technical personnel and any commission, fee or compensation claimed by any broker (other than any broker retained by Collateral Agent or Lenders) asserting any right to payment for the transactions contemplated hereby which may be imposed on, incurred by or asserted against such Indemnified Person as a result of or in connection with the transactions contemplated hereby and the use or intended use of the proceeds of the loan proceeds except for liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements directly caused by such Indemnified Person’s gross negligence or willful misconduct.
12.3Time of Essence.  Time is of the essence for the performance of all Obligations in this Agreement.
12.4Severability of Provisions.  Each provision of this Agreement is severable from every other provision in determining the enforceability of any provision.
12.5Correction of Loan Documents.  Collateral Agent and the Lenders may correct patent errors and fill in any blanks in this Agreement and the other Loan Documents consistent with the agreement of the parties so long as Collateral Agent provides Borrower with written notice of such correction and allows Borrower at least ten (10) days to object to such correction.  In the event of such objection, such correction shall not be made except by an amendment signed by both Collateral Agent and Borrower.
12.6Amendments in Writing; Integration.  (a) No amendment, modification, termination or waiver of any provision of this Agreement or any other Loan Document, no approval or consent thereunder, or any consent to any departure by Borrower or any of its Subsidiaries therefrom, shall in any event be effective unless the same shall be in writing and signed by Borrower, Collateral Agent and the Required Lenders provided that:
(i)no such amendment, waiver or other modification that would have the effect of increasing or reducing a Lender’s Term Loan Commitment or Commitment Percentage shall be effective as to such Lender without such Lender’s written consent;
(ii)no such amendment, waiver or modification that would affect the rights and duties of Collateral Agent shall be effective without Collateral Agent’s written consent or signature;
(iii)no such amendment, waiver or other modification shall, unless signed by all the Lenders directly affected thereby, (A) reduce the principal of, rate of interest on or any fees with respect to any Term Loan or forgive any principal, interest (other than default interest) or fees (other than late charges) with respect to any Term Loan (B) postpone the date fixed for, or waive, any payment of principal of any Term Loan or of interest on any Term Loan (other than default interest) or any fees provided for hereunder (other than late charges or for any termination of any commitment); (C) change the definition of the term “Required Lenders” or the percentage of Lenders which shall be required for the Lenders to take any action hereunder; (D) release all or substantially all of any material portion of the Collateral, authorize Borrower to sell or otherwise dispose of all or substantially all or any material portion of the Collateral or release any Guarantor of all or any portion of the Obligations or its guaranty obligations with respect thereto, except, in each case with respect to this clause (D), as otherwise may be expressly permitted under this Agreement or the other Loan Documents (including in connection with any disposition permitted hereunder); (E) amend, waive or otherwise modify this Section 12.6 or the definitions of the terms used in this Section 12.6 insofar as the definitions affect the substance of this Section 12.6; (F) consent to the assignment, delegation or other transfer by Borrower of any of its rights and obligations under any Loan Document or release Borrower of its payment obligations under any Loan Document, except, in each case with respect to this clause (F), pursuant to a merger or consolidation permitted pursuant to this Agreement; (G) amend any of the provisions of Section 9.4 or amend any of the definitions of Pro Rata Share, Term Loan Commitment, Commitment Percentage or that provide for the Lenders to receive their Pro Rata Shares of any fees, payments, setoffs or proceeds of Collateral hereunder; (H) subordinate the Liens granted in favor of Collateral Agent securing the Obligations; or (I) amend any of the provisions of Section 12.10.  It is hereby understood and agreed that all Lenders shall be deemed directly affected by an amendment, waiver or other modification of the type described in the preceding clauses (C), (D), (E), (F), (G) and (H) of the preceding sentence;
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(iv)the provisions of the foregoing clauses (i), (ii) and (iii) are subject to the provisions of any interlender or agency agreement among the Lenders and Collateral Agent pursuant to which any Lender may agree to give its consent in connection with any amendment, waiver or modification of the Loan Documents only in the event of the unanimous agreement of all Lenders.
(b)Other than as expressly provided for in Section 12.6(a)(i)-(iii), Collateral Agent may, if requested by the Required Lenders, from time to time designate covenants in this Agreement less restrictive by notification to a representative of Borrower.
(c)This Agreement and the Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements.  All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of this Agreement and the Loan Documents merge into this Agreement and the Loan Documents.
12.7Counterparts.  This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, is an original, and all taken together, constitute one Agreement.
12.8Survival.  All covenants, representations and warranties made in this Agreement continue in full force and effect until this Agreement has terminated pursuant to its terms and all Obligations (other than inchoate indemnity obligations and any other obligations which, by their terms, are to survive the termination of this Agreement) have been satisfied.  The obligation of Borrower in Section 12.2 to indemnify each Lender and Collateral Agent, as well as the confidentiality provisions in Section 12.9 below, shall survive until the statute of limitations with respect to such claim or cause of action shall have run.
12.9Confidentiality.  In handling any confidential information of Borrower and its Subsidiaries, the Lenders and Collateral Agent shall exercise the same degree of care that it exercises for their own proprietary information, but disclosure of information may be made: (a) subject to the terms and conditions of this Agreement, to the Lenders’ and Collateral Agent’s Subsidiaries or Affiliates, or in connection with a Lender’s own financing or securitization transactions and upon the occurrence of a default, event of default or similar occurrence with respect to such financing or securitization transaction; (b) to prospective transferees (other than those identified in (a) above) or purchasers of any interest in the Credit Extensions (provided, however, the Lenders and Collateral Agent shall, except upon the occurrence and during the continuance of an Event of Default, obtain such prospective transferee’s or purchaser’s agreement to the terms of this provision or to similar confidentiality terms); (c) as required by law, regulation, subpoena, or other order; (d) to Lenders’ or Collateral Agent’s regulators or as otherwise required in connection with an examination or audit; (e) as Collateral Agent reasonably considers appropriate in exercising remedies under the Loan Documents; and (f) to third party service providers of the Lenders and/or Collateral Agent so long as such service providers have executed a confidentiality agreement with the Lenders and Collateral Agent with terms no less restrictive than those contained herein. Confidential information does not include information that either: (i) is in the public domain or in the Lenders’ and/or Collateral Agent’s possession when disclosed to the Lenders and/or Collateral Agent, or becomes part of the public domain after disclosure to the Lenders and/or Collateral Agent; or (ii) is disclosed to the Lenders and/or Collateral Agent by a third party, if the Lenders and/or Collateral Agent does not know that the third party is prohibited from disclosing the information.  Collateral Agent and the Lenders may use confidential information for any purpose relating to the administration of this Agreement, including, without limitation, for the development of client databases, reporting purposes, and market analysis, in each case on an aggregated basis without any identifying information regarding the Borrower or its Subsidiaries.  The provisions of the immediately preceding sentence shall survive the termination of this Agreement.  The agreements provided under this Section 12.9 supersede all prior agreements, understanding, representations, warranties, and negotiations between the parties about the subject matter of this Section 12.9.
12.10Public Announcement.  Notwithstanding anything else herein to the contrary, Borrower hereby agrees that Collateral Agent and each Lender may, at any time after the announcement of the transactions by the Borrower and in consultation with Borrower, make a public announcement of the transactions contemplated by this Agreement, and may publicize the same on its company website, in marketing materials, newspapers and other publications, and otherwise, and in connection therewith may use Borrower’s name, tradenames, logos and any information related to the transactions to the extent such information is not confidential.
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12.11Right of Set Off.  Borrower hereby grants to Collateral Agent and to each Lender, a lien, security interest and right of set off as security for all Obligations to Collateral Agent and each Lender hereunder, whether now existing or hereafter arising upon and against all deposits, credits, collateral and property, now or hereafter in the possession, custody, safekeeping or control of Collateral Agent or the Lenders or any entity under the control of Collateral Agent or the Lenders (including a Collateral Agent affiliate) or in transit to any of them.  At any time after the occurrence and during the continuance of an Event of Default, without demand or notice, Collateral Agent or the Lenders may set off the same or any part thereof and apply the same to any liability or obligation of Borrower even though unmatured and regardless of the adequacy of any other collateral securing the Obligations.  ANY AND ALL RIGHTS TO REQUIRE COLLATERAL AGENT TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
12.12Cooperation of Borrower.  If necessary, Borrower agrees to (i) execute any documents (including new Secured Promissory Notes) reasonably required to effectuate and acknowledge each assignment of a Term Loan Commitment or Loan to an assignee in accordance with Section 12.1, (ii) make Borrower’s management available to meet with Collateral Agent and prospective participants and assignees of Term Loan Commitments or Credit Extensions (which meetings shall be conducted during normal business hours and upon reasonable prior written notice no more often than twice every twelve months unless an Event of Default has occurred and is continuing), and (iii) use commercially reasonable efforts to assist Collateral Agent or the Lenders in the preparation of information relating to the financial affairs of Borrower as any prospective participant or assignee of a Term Loan Commitment or Term Loan reasonably may request. Subject to the provisions of Section 12.9, Borrower authorizes each Lender to disclose to any prospective participant or assignee of a Term Loan Commitment (other than, in the absence of the occurrence and continuance of an Event of Default, a direct competitor of Borrower or a vulture hedge fund, each as determined by Collateral Agent), any and all information in such Lender’s possession concerning Borrower and its financial affairs which has been delivered to such Lender by or on behalf of Borrower pursuant to this Agreement, or which has been delivered to such Lender by or on behalf of Borrower in connection with such Lender’s credit evaluation of Borrower prior to entering into this Agreement.
13.DEFINITIONS
13.1Definitions.  As used in this Agreement, the following terms have the following meanings:
“Account” is any “account” as defined in the Code with such additions to such term as may hereafter be made, and includes, without limitation, all accounts receivable and other sums owing to Borrower.
“Account Debtor” is any “account debtor” as defined in the Code with such additions to such term as may hereafter be made.
“Affiliate” of any Person is a Person that owns or controls directly or indirectly the Person, any Person that controls or is controlled by or is under common control with the Person, and each of that Person’s senior executive officers, directors, partners and, for any Person that is a limited liability company, that Person’s managers and members.
“Agreement” is defined in the preamble hereof.
 “Amortization Date” is, (i) December 1, 2024, if neither the Term B Loans nor the Term C Loans are made hereunder, and (ii) June 1, 2025, if either the Term B Loans or the Term C Loans are made hereunder.
“Annual Projections” is defined in Section 6.2(a).
“Anti-Terrorism Laws” are any laws relating to terrorism or money laundering, including Executive Order No. 13224 (effective September 24, 2001), the USA PATRIOT Act, the laws comprising or implementing the Bank Secrecy Act, and the laws administered by OFAC.
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“Approved Fund” is any (i) investment company, fund, trust, securitization vehicle or conduit that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business or (ii) any Person (other than a natural person) which temporarily warehouses loans for any Lender or any entity described in the preceding clause (i) and that, with respect to each of the preceding clauses (i) and (ii), is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) a Person (other than a natural person) or an Affiliate of a Person (other than a natural person) that administers or manages a Lender.
“Approved Lender” is defined in Section 12.1.
“Basic Rate” is with respect to each Term Loan, the per annum rate of interest (based on a year of three hundred sixty (360) days) equal to the sum of (i) the greater of (A) the thirty (30) day U.S. Dollar LIBOR rate reported in The Wall Street Journal on the last Business Day of the month that immediately precedes the month in which the interest will accrue and (B) Eleven hundredths percent (0.11%), plus (ii) Seven and Eighty-Nine hundredths percent (7.89%).  Notwithstanding the foregoing, the Basic Rate for the Term Loan for the period from the Effective Date through and including May 31, 2021 shall be 8.00013%.  Notwithstanding anything to the contrary herein or in any other Loan Document, upon the occurrence of a LIBOR Transition Event, Collateral Agent may amend this Agreement to replace the Basic Rate with a LIBOR Replacement Rate. Any such amendment with respect to a LIBOR Transition Event will become effective at 5:00 p.m. (Eastern Standard Time) on the third Business Day after Collateral Agent has notified Borrower of such amendment.  Any determination, decision or election that may be made by Collateral Agent pursuant hereto will be conclusive and binding absent manifest error and may be made in Collateral Agent’s sole discretion and without consent from any other party.
“Blocked Person” is any Person:  (a) listed in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224, (b) a Person owned or controlled by, or acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224, (c) a Person with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law, (d) a Person that commits, threatens or conspires to commit or supports “terrorism” as defined in Executive Order No. 13224, or (e) a Person that is named a “specially designated national” or “blocked person” on the most current list published by OFAC or other similar list.
“Borrower” is defined in the preamble hereof.
“Borrower’s Books” are Borrower’s or any of its Subsidiaries’ books and records including ledgers, federal, and state tax returns, records regarding Borrower’s or its Subsidiaries’ assets or liabilities, the Collateral, business operations or financial condition, and all computer programs or storage or any equipment containing such information.
“Business Day” is any day that is not a Saturday, Sunday or a day on which Collateral Agent is closed.
“Cash Burn” means, (i) with respect to Borrower and its Subsidiaries, as of any date of determination, an amount equal to the average negative monthly net change in the total cash and Cash Equivalents balance (excluding any positive cash flow resulting from Borrower’s financing activities) of Borrower and its Subsidiaries for the immediately preceding six (6) month period and (ii) with respect to any other Person (or, if applicable, with respect to a business line, unit or division of such Person), as of any date of determination, an amount equal to the average negative monthly net change in the total cash and Cash Equivalents balance (excluding any positive cash flow resulting from such Person’s financing activities) of such Person and its subsidiaries (or, if applicable, of the applicable business line, unit or division of such Person) for the immediately preceding six (6) month period.
“Cash Equivalents” are (a) marketable direct obligations issued or unconditionally guaranteed by the United States or any agency or any State thereof having maturities of not more than one (1) year from the date of acquisition; (b) commercial paper maturing no more than one (1) year after its creation and having the highest rating from either Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc., (c) certificates of deposit maturing no more than one (1) year after issue provided that the account in which any such certificate of deposit is maintained is subject to a Control Agreement in favor of Collateral Agent and (d) money market funds at least ninety-five percent (95.00%) of the assets of which constitute Cash Equivalents of the kinds described in clauses (a) through (c) of this definition.  For the avoidance of doubt, the direct purchase by Borrower or any of its Subsidiaries of any Auction Rate Securities,
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or purchasing participations in, or entering into any type of swap or other derivative transaction, or otherwise holding or engaging in any ownership interest in any type of Auction Rate Security by Borrower or any of its Subsidiaries shall be conclusively determined by the Lenders as an ineligible Cash Equivalent, and any such transaction shall expressly violate each other provision of this Agreement governing Permitted Investments.  Notwithstanding the foregoing, Cash Equivalents does not include and Borrower, and each of its Subsidiaries, are prohibited from purchasing, purchasing participations in, entering into any type of swap or other equivalent derivative transaction, or otherwise holding or engaging in any ownership interest in any type of debt instrument, including, without limitation, any corporate or municipal bonds, with a long-term nominal maturity for which the interest rate is reset through a dutch auction and more commonly referred to as an auction rate security (each, an “Auction Rate Security”).
“Claims” are defined in Section 12.2.
“Code” is the Uniform Commercial Code, as the same may, from time to time, be enacted and in effect in the State of New York; provided, that, to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of the Code, the definition of such term contained in Article or Division 9 shall govern; provided further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, or priority of, or remedies with respect to, Collateral Agent’s Lien on any Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other than the State of New York, the term “Code” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies and for purposes of definitions relating to such provisions.
“Collateral” is any and all properties, rights and assets of Borrower described on Exhibit A.
“Collateral Account” is any Deposit Account, Securities Account, or Commodity Account, or any other bank account maintained by Borrower or any Subsidiary at any time.
“Collateral Agent” is, Oxford, not in its individual capacity, but solely in its capacity as agent on behalf of and for the benefit of the Lenders.
“Commitment Percentage” is set forth in Schedule 1.1, as amended from time to time.
“Commodity Account” is any “commodity account” as defined in the Code with such additions to such term as may hereafter be made.
“Communication” is defined in Section 10.
“Compliance Certificate” is that certain certificate in the form attached hereto as Exhibit C.
“Contingent Obligation” is, for any Person, any direct or indirect liability, contingent or not, of that Person for (a) any indebtedness, lease, dividend, letter of credit or other obligation of another such as an obligation directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by that Person, or for which that Person is directly or indirectly liable; (b) any obligations for undrawn letters of credit for the account of that Person; and (c) all obligations from any interest rate, currency or commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; but “Contingent Obligation” does not include endorsements in the ordinary course of business.  The amount of a Contingent Obligation is the stated or determined amount of the primary obligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated liability for it determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under any guarantee or other support arrangement.
“Control Agreement” is any control agreement entered into among the depository institution at which Borrower or any of its Subsidiaries maintains a Deposit Account or the securities intermediary or commodity intermediary at which Borrower or any of its Subsidiaries maintains a Securities Account or a Commodity Account, Borrower and such Subsidiary, and Collateral Agent pursuant to which Collateral Agent obtains control (within the
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meaning of the Code) for the benefit of the Lenders over such Deposit Account, Securities Account, or Commodity Account.
“Copyrights” are any and all copyright rights, copyright applications, copyright registrations and like protections in each work or authorship and derivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret.
“Credit Extension” is any Term Loan or any other extension of credit by Collateral Agent or Lenders for Borrower’s benefit.
“Default Rate” is defined in Section 2.3(b).
“Deposit Account” is any “deposit account” as defined in the Code with such additions to such term as may hereafter be made.
“Designated Deposit Account” is Borrower’s deposit account, account number [**].
“Disbursement Letter” is that certain form attached hereto as Exhibit B.
 “Dollars,” “dollars” and “$” each mean lawful money of the United States.
“Effective Date” is defined in the preamble of this Agreement.
“Eligible Assignee” is (i) a Lender, (ii) an Affiliate of a Lender, (iii) an Approved Fund and (iv) any commercial bank, savings and loan association or savings bank or any other entity which is an “accredited investor” (as defined in Regulation D under the Securities Act of 1933, as amended) and which extends credit or buys loans as one of its businesses, including insurance companies, mutual funds, lease financing companies and commercial finance companies, in each case, which either (A) has a rating of BBB or higher from Standard & Poor’s Rating Group and a rating of Baa2 or higher from Moody’s Investors Service, Inc. at the date that it becomes a Lender or (B) has total assets in excess of Five Billion Dollars ($5,000,000,000.00), and in each case of clauses (i) through (iv), which, through its applicable lending office, is capable of lending to Borrower without the imposition of any withholding or similar taxes; provided that notwithstanding the foregoing, “Eligible Assignee” shall not include, unless an Event of Default has occurred and is continuing, (i) Borrower or any of Borrower’s Affiliates or Subsidiaries or (ii) a direct competitor of Borrower or a vulture hedge fund, each as determined by Collateral Agent.  Notwithstanding the foregoing, (x) in connection with assignments by a Lender due to a forced divestiture at the request of any regulatory agency, the restrictions set forth herein shall not apply and Eligible Assignee shall mean any Person or party and (y) in connection with a Lender’s own financing or securitization transactions, the restrictions set forth herein shall not apply and Eligible Assignee shall mean any Person or party providing such financing or formed to undertake such securitization transaction and any transferee of such Person or party upon the occurrence of a default, event of default or similar occurrence with respect to such financing or securitization transaction; provided that no such sale, transfer, pledge or assignment under this clause (y) shall release such Lender from any of its obligations hereunder or substitute any such Person or party for such Lender as a party hereto until Collateral Agent shall have received and accepted an effective assignment agreement from such Person or party in form satisfactory to Collateral Agent executed, delivered and fully completed by the applicable parties thereto, and shall have received such other information regarding such Eligible Assignee as Collateral Agent reasonably shall require.
“Equipment” is all “equipment” as defined in the Code with such additions to such term as may hereafter be made, and includes without limitation all machinery, fixtures, goods, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing.
“ERISA” is the Employee Retirement Income Security Act of 1974, as amended, and its regulations.
“Existing Indebtedness” is the indebtedness of Borrower to Athyrium Opportunities III Acquisition LP in the aggregate principal outstanding amount as of the Effective Date of approximately Seventy Five Million Dollars
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($75,000,000.00) pursuant to that certain Credit Agreement, dated October 1, 2018, entered into by and between Athyrium Opportunities III Acquisition LP, other lenders party thereto from time to time and Borrower.
“Event of Default” is defined in Section 8.
“Federal Reserve Bank of New York’s Website” means the website of the Federal Reserve Bank of New York at http://www.newyorkfed.org, or any successor source.
“Final Payment” is a payment (in addition to and not a substitution for the regular monthly payments of principal plus accrued interest) due on the earliest to occur of (a) the Maturity Date, or (b) the acceleration of any Term Loan, or (c) the prepayment of a Term Loan pursuant to Section 2.2(c) or (d), equal to the original principal amount of any funded Term Loan being repaid, multiplied by the Final Payment Percentage, payable to Lenders in accordance with their respective Pro Rata Shares.
“Final Payment Percentage” is seven percent (7.00%).
“First Revenue Event” is the achievement by Borrower for the first time after the Effective Date of consolidated revenues from the sale and distribution of Borrower’s products equal to at least Seventy Five Million Dollars ($75,000,000.00) at the end of any fiscal month of Borrower for the six-month period then ended, based upon evidence reasonably satisfactory to Collateral Agent.
“Foreign Subsidiary” is a Subsidiary that is not an entity organized under the laws of the United States or any territory thereof.
“Funding Date” is any date on which a Credit Extension is made to or on account of Borrower which shall be a Business Day.
“GAAP” is generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other Person as may be approved by a significant segment of the accounting profession in the United States, which are applicable to the circumstances as of the date of determination.
“General Intangibles” are all “general intangibles” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation, all copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work, whether published or unpublished, any patents, trademarks, service marks and, to the extent permitted under applicable law, any applications therefor, whether registered or not, any trade secret rights, including any rights to unpatented inventions, payment intangibles, royalties, contract rights, goodwill, franchise agreements, purchase orders, customer lists, route lists, telephone numbers, domain names, claims, income and other tax refunds, security and other deposits, options to purchase or sell real or personal property, rights in all litigation presently or hereafter pending (whether in contract, tort or otherwise), insurance policies (including without limitation key man, property damage, and business interruption insurance), payments of insurance and rights to payment of any kind.
“Governmental Approval” is any consent, authorization, approval, order, license, franchise, permit, certificate, accreditation, registration, filing or notice, of, issued by, from or to, or other act by or in respect of, any Governmental Authority.
“Governmental Authority” is any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization.
“Guarantor” is any Person providing a Guaranty in favor of Collateral Agent. As of the Effective Date, there are no Guarantors.
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“Guaranty” is any guarantee of all or any part of the Obligations, as the same may from time to time be amended, restated, modified or otherwise supplemented.
“Indebtedness” is (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and other obligations for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease obligations, and (d) Contingent Obligations.
“Indemnified Person” is defined in Section 12.2.
“Insolvency Proceeding” is any proceeding by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.
“Insolvent” means not Solvent.
“Intellectual Property” means all of Borrower’s or any Subsidiary’s right, title and interest in and to the following:
(a)its Copyrights, Trademarks and Patents;
(b)any and all trade secrets and trade secret rights, including, without limitation, any rights to unpatented inventions, know-how, operating manuals;
(c)any and all source code;
(d)any and all design rights which may be available to Borrower;
(e)any and all claims for damages by way of past, present and future infringement of any of the foregoing, with the right, but not the obligation, to sue for and collect such damages for said use or infringement of the Intellectual Property rights identified above; and
(f)all amendments, renewals and extensions of any of the Copyrights, Trademarks or Patents.
“Inventory” is all “inventory” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products, including without limitation such inventory as is temporarily out of any Person’s custody or possession or in transit and including any returned goods and any documents of title representing any of the above.
“Investment” is any beneficial ownership interest in any Person (including stock, partnership interest or other securities), and any loan, advance, payment or capital contribution to any Person.
“IP Agreement” is that certain Intellectual Property Security Agreement entered into by and between Borrower and Collateral Agent dated as of the Effective Date, as such may be amended, supplemented or otherwise modified from time to time.
“Key Person” is each of Borrower’s (i) Chief Executive Officer, who is Mark Iwicki as of the Effective Date, (ii) Chief Financial Officer, who is Mary Reumuth as of the Effective Date and (iii) Chief Operating Officer, who is Todd Bazemore as of the Effective Date.
“Lender” is any one of the Lenders.
“Lenders” are the Persons identified on Schedule 1.1 hereto and each assignee that becomes a party to this Agreement pursuant to Section 12.1.
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“Lenders’ Expenses” are all audit fees and expenses, costs, and expenses (including reasonable and documented out-of-pocket attorneys’ fees and expenses, as well as appraisal fees, fees incurred on account of lien searches, inspection fees, and filing fees) for preparing, amending, negotiating, administering, defending and enforcing the Loan Documents (including, without limitation, those incurred in connection with appeals or Insolvency Proceedings) or otherwise incurred by Collateral Agent and/or the Lenders in connection with the Loan Documents.
“LIBOR Replacement Rate” means the sum of: (a) the alternate benchmark rate (which may include SOFR) that has been selected by Collateral Agent giving due consideration to (i) any selection or recommendation of a replacement rate or the mechanism for determining such a rate by the Relevant Governmental Body or (ii) any evolving or then-prevailing market convention for determining a rate of interest as a replacement to the LIBOR rate for U.S. dollar-denominated syndicated credit facilities and (b) the LIBOR Replacement Spread; provided that, if the LIBOR Replacement Rate as so determined would be less than zero, the LIBOR Replacement Rate will be deemed to be zero for the purposes of this Agreement.
“LIBOR Replacement Spread” means, with respect to any replacement of the Basic Rate, the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected by Collateral Agent giving due consideration to (i) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of the LIBOR rate by the Relevant Governmental Body or (ii) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of the LIBOR rate for U.S. dollar-denominated syndicated credit facilities at such time.
“LIBOR Transition Event” means the occurrence of one or more of the following events with respect to the LIBOR rate:
(1)    a public statement or publication of information by or on behalf of the administrator of the LIBOR rate announcing that such administrator has ceased or will cease to provide the LIBOR rate, permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the LIBOR rate;
(2)   a public statement or publication of information by the regulatory supervisor for the administrator of the LIBOR rate, the U.S. Federal Reserve System, an insolvency official with jurisdiction over the administrator for the LIBOR rate, a resolution authority with jurisdiction over the administrator for the LIBOR rate or a court or an entity with similar insolvency or resolution authority over the administrator for the LIBOR rate, which states that the administrator of the LIBOR rate has ceased or will cease to provide the LIBOR rate permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the LIBOR rate; or
(3)   a public statement or publication of information by the regulatory supervisor for the administrator of the LIBOR rate announcing that the LIBOR rate is no longer representative.
“Lien” is a claim, mortgage, deed of trust, levy, charge, pledge, security interest, or other encumbrance of any kind, whether voluntarily incurred or arising by operation of law or otherwise against any property.
“Loan Documents” are, collectively, this Agreement, the Perfection Certificates, each Compliance Certificate, each Disbursement Letter, the IP Agreement, any subordination agreements, any note, or notes or guaranties executed by Borrower or any other Person, and any other present or future agreement entered into by Borrower, any Guarantor or any other Person for the benefit of the Lenders and Collateral Agent in connection with this Agreement; all as amended, restated, or otherwise modified.
“Marketing Samples” means finished products used in connection with marketing efforts, including trade shows that are intended by Borrower to be given away without consideration.
“Material Adverse Change” is (a) a material impairment in the perfection or priority of Collateral Agent’s Lien in the Collateral or in the value of such Collateral; (b) a material adverse change in the business, operations or
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condition (financial or otherwise) of Borrower or of Borrower and its Subsidiaries, taken as a whole; or (c) a material impairment of the prospect of repayment of any portion of the Obligations.
“Maturity Date” is May 1, 2026.
“Obligations” are all of Borrower’s obligations to pay when due any debts, principal, interest, Lenders’ Expenses, the Prepayment Fee, the Final Payment, and other amounts Borrower owes the Lenders now or later, in connection with, related to, following, or arising from, out of or under, this Agreement or, the other Loan Documents, or otherwise, and including interest accruing after Insolvency Proceedings begin (whether or not allowed) and debts, liabilities, or obligations of Borrower assigned to the Lenders and/or Collateral Agent, and the performance of Borrower’s duties under the Loan Documents.
“OFAC” is the U.S. Department of Treasury Office of Foreign Assets Control.
“OFAC Lists” are, collectively, the Specially Designated Nationals and Blocked Persons List maintained by OFAC pursuant to Executive Order No. 13224, 66 Fed. Reg. 49079 (Sept. 25, 2001) and/or any other list of terrorists or other restricted Persons maintained pursuant to any of the rules and regulations of OFAC or pursuant to any other applicable Executive Orders.
“Operating Documents” are, for any Person, such Person’s formation documents, as certified by the Secretary of State (or equivalent agency) of such Person’s jurisdiction of organization on a date that is no earlier than thirty (30) days prior to the Effective Date, and, (a) if such Person is a corporation, its bylaws in current form, (b) if such Person is a limited liability company, its limited liability company agreement (or similar agreement), and (c) if such Person is a partnership, its partnership agreement (or similar agreement), each of the foregoing with all current amendments or modifications thereto.
“Patents” means all patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same.
“Payment Date” is the first (1st) calendar day of each calendar month, commencing on July 1, 2021.
“Perfection Certificate” and “Perfection Certificates” is defined in Section 5.1.
“Permitted Acquisition” is any transaction or series of related transactions resulting in the acquisition by Borrower, whether by purchase, merger or otherwise, of all or substantially all of the assets of, all of the equity interests of, or a business line or unit or a division of, any Person, provided that:
(a)immediately prior to, and after giving effect thereto, no Event of Default shall have occurred and be continuing or would result therefrom;
(b)all transactions in connection therewith shall be consummated in accordance with applicable law;
(c)upfront cash consideration (to be paid substantially concurrently with the closing of the applicable transactions, and excluding amounts paid pursuant to clause (d) below) for all Permitted Acquisitions shall not exceed [**] Dollars ($[**]) in the aggregate over the term of this Agreement;  provided, however, notwithstanding the foregoing or the limitation in clause (d) below, Borrower may pay any consideration amounts in connection with a Permitted Acquisition (whether up-front or contingent) in the form of its equity securities so long as the aggregate amount of such equity securities issued in connection with any given Permitted Acquisition does not constitute more than [**]% of the voting stock of Borrower and the issuance of such equity securities is not prohibited by Section 7.2 of this Agreement, or from the proceeds of the sale and issuance of its equity securities it receives in contemplation of a Permitted Acquisition;
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(d)subject to the proviso in clause (c) above, earn-out, milestone or other delayed or contingent cash payments for all Permitted Acquisitions shall not exceed [**] Dollars ($[**]) annually in the aggregate over the term of this Agreement;
(e)in the case of the purchase or other acquisition of equity interests, all of the equity interests acquired or otherwise issued by such Person or any newly formed Subsidiary in connection with such acquisition shall be wholly owned by Borrower;
(f)in connection with such acquisition, Borrower (including for this purpose, the target of the acquisition) shall not acquire or be subject to any Indebtedness or Liens that are not otherwise permitted hereunder;
(g)Borrower shall have delivered to the Collateral Agent and Lenders at least ten (10) Business Days (or such shorter period as may be acceptable to Collateral Agent and Lenders) prior to such proposed acquisition (i) a copy of the draft purchase agreement related to the proposed acquisition (and any related documents reasonably requested by the Collateral Agent and Lenders) or the executed term sheet, (ii) a general description of the acquired assets or acquired business line or unit or division and the competitive position of such business line or unit or division within the industry, (iii) the sources and uses of funds to finance the proposed acquisition and (iv) to the extent available, quarterly and annual audited financial statements of the Person whose equity interests or assets are being acquired for the twelve (12) month period immediately prior to such proposed acquisition;
(h)such Permitted Acquisition shall only comprise a business, or those assets of a business, in substantially the same business or lines of business in which Borrower is engaged or reasonably related thereto;
(i)such Permitted Acquisition shall only involve assets located in the United States or the United Kingdom;
(j)Collateral Agent and the Lenders have received a certificate from a Responsible Officer (i) certifying and setting forth in reasonable detail that Borrower has enough cash on hand to pay its respective projected expenses and all debt service when due for a period of twelve (12) months after the consummation of such transaction (after giving effect to such transaction) based on projections that are provided with such certificate to Collateral Agent and Lenders and (ii) certifying and setting forth in reasonable detail that Borrower has enough cash on hand to pay its respective projected expenses and all debt service when due for a period of twelve (12) months after the consummation of such transaction (after giving effect to such transaction) based upon the Cash Burn of Borrower and its Subsidiaries and the Cash Burn of such Person and its subsidiaries (or, if applicable, of such Person’s applicable business line or unit or  division, if only such business line, unit or division is the subject of the Permitted Acquisition) (i.e., the projected expenses must assume that such Cash Burn will continue for the following twelve (12) months period); and
(k)such Permitted Acquisition shall be non-hostile and shall have been approved by the target’s board of directors.
Notwithstanding anything to the contrary contained herein, in order for any acquisition of Shares or assets of another Person to constitute a Permitted Acquisition, Borrower must comply with all of the following: (a) contemporaneously the closing of such Permitted Acquisition, Borrower (or Subsidiary) making such Permitted Acquisition and the target shall have executed such documents and taken such actions as may be required under Section 6.12; (b) Borrower shall have delivered to Collateral Agent and Lenders, such other financial information, financial analysis, documentation or other information relating to such Permitted Acquisition and the pro forma certifications required by clause (c) below, in each case, as Collateral Agent and Lenders shall reasonably request (to the extent available); (c) on or prior to the date of such Permitted Acquisition, the Collateral Agent and Lenders shall have received, in form and substance reasonably satisfactory to the Collateral Agent and Lenders, a certificate of the chief financial officer of Borrower certifying compliance with the requirements contained in this definition of “Permitted Acquisition” and with the other terms of the Loan Documents (before and after giving effect to such Permitted Acquisition); and (d) Borrower shall provide to the Collateral Agent and Lenders as soon as available but in any event not later than the day of the execution thereof, a copy of the executed purchase agreement or similar agreement with respect to any such acquisition
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“Permitted Indebtedness” is:
(a)Borrower’s Indebtedness to the Lenders and Collateral Agent under this Agreement and the other Loan Documents;
(b)Indebtedness existing on the Effective Date and disclosed on the Perfection Certificate(s);
(c)Permitted Subordinated Debt;
(d)unsecured Indebtedness to trade creditors incurred in the ordinary course of business;
(e)Indebtedness consisting of capitalized lease obligations and purchase money Indebtedness, in each case incurred by Borrower or any of its Subsidiaries to finance the acquisition, repair, improvement or construction of fixed or capital assets of such person, provided that (i) the aggregate outstanding principal amount of all such Indebtedness does not exceed [**] Dollars ($[**]) at any time and (ii) the principal amount of such Indebtedness does not exceed the lower of the cost or fair market value of the property so acquired or built or of such repairs or improvements financed with such Indebtedness (each measured at the time of such acquisition, repair, improvement or construction is made); furthermore, notwithstanding anything to the contrary herein and strictly for the purposes of this clause (e) of the definition of Permitted Indebtedness and for no other purpose, any obligations of a Person that are or would have been treated as operating leases or capital leases for purposes of GAAP prior to the issuance by the Financial Accounting Standards Board on February 25, 2016 of an Accounting Standards Update (Topic 842) (the “ASU”) shall continue to be accounted for as operating leases or capital leases (whether or not such operating lease obligations or capital lease obligations, as applicable, were in effect on such date) notwithstanding the fact that such obligations are required in accordance with the ASU (on a prospective or retroactive basis or otherwise) to be treated as capitalized lease obligations in accordance with GAAP;
(f)Indebtedness of Borrower with respect to corporate credit cards in an aggregate outstanding amount not to exceed [**] Dollars ($[**]) at any given time;
(g)Indebtedness incurred as a result of endorsing negotiable instruments received in the ordinary course of Borrower’s business;
(h)Indebtedness with respect to outstanding letters of credit, banker’s acceptances or similar instruments in an aggregate outstanding amount not to exceed [**] Dollars ($[**]) at any given time (including, without limitation, any letters of credit issued to secure the Permitted Indebtedness described in clause (f) above);
(i)intercompany Indebtedness permitted under Section 7.7;
(j)Indebtedness relating to insurance premium financing arrangements relating to Borrower’s directors and officers policy in the ordinary course of business so long as such Indebtedness shall not be in excess of the amount of the unpaid cost of, and shall be incurred only to defer the cost of, unpaid premiums for such insurance for the annual period in which such Indebtedness is incurred; provided, however, the aggregate amount of such Indebtedness outstanding at any given time shall not exceed [**] Dollars ($[**]);
(k)obligations (contingent or otherwise) of the Borrower or any Subsidiary existing or arising under any Swap Contract, provided that, such obligations are (or were) entered into by Borrower in the ordinary course of business for the purpose of directly mitigating risks associated with the interest rate on the Obligations, and not for purposes of speculation or taking a “market view”; provided, however, the aggregate amount of such Indebtedness outstanding at any given time shall not exceed [**] Dollars ($[**]);
(l)unsecured Indebtedness constituting earn-out, milestone or other delayed or contingent cash payments permitted by the definition of Permitted Acquisition, in each case under the agreements used to consummate a Permitted Acquisition;
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(m)other unsecured Indebtedness not to exceed $[**] in the aggregate at any one time outstanding; and
(n)extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness (a) through (m) above, provided that the principal amount thereof is not increased or the terms thereof are not modified to impose materially more burdensome terms upon Borrower, or its Subsidiary, as the case may be.
“Permitted Investments” are:
(a)Investments disclosed on the Perfection Certificate(s) and existing on the Effective Date;
(b)Investments consisting of cash and Cash Equivalents held in Borrower’s or any Subsidiary’s Collateral Accounts that are maintained in accordance with Section 6.6 of this Agreement;
(c)Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of Borrower;
(d)Investments consisting of Collateral Accounts in which Collateral Agent has a perfected security interest to the extent required by Section 6.6 of this Agreement;
(e)Investments in connection with Transfers permitted by Section 7.1;
(f)Investments consisting of (i) travel advances and employee relocation loans and other employee loans and advances in the ordinary course of business, and (ii) loans to employees, officers or directors relating to the purchase of equity securities of Borrower or its Subsidiaries pursuant to employee stock purchase plans or agreements approved by Borrower’s Board of Directors; not to exceed [**] Dollars ($[**]) in the aggregate for (i) and (ii) in any fiscal year;
(g)Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of business;
(h)Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not Affiliates, in the ordinary course of business; provided that this paragraph (h) shall not apply to Investments of Borrower in any Subsidiary;
(i)Investments consisting of Permitted Acquisitions;
(j)non-cash Investments in joint ventures or strategic alliances in the ordinary course of Borrower’s business consisting of the non-exclusive licensing of technology, the development of technology or the providing of technical support;
(k)Investments (i) in the Securities Corporation, so long as an Event of Default does not exist at the time of such Investment and would not exist after giving effect to such Investment and provided that Borrower is, at all times, in compliance with the Securities Corporation Investment Condition and (ii) by any Borrower in another Borrower; and
(l)other Investments not exceeding [**] Dollars ($[**]) in the aggregate in any given year; provided, that, no Investment otherwise permitted by this clause (l) shall be permitted to be made if any Event of Default has occurred and is continuing or would result therefrom.
“Permitted Licenses” are (A) licenses of over-the-counter software that is commercially available to the public, and (B) non-exclusive and exclusive licenses for the use of the Intellectual Property of Borrower or any of its Subsidiaries entered into in the ordinary course of business, provided, that, with respect to each such license described
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in clause (B), (i) no Event of Default has occurred or is continuing at the time of such license; (ii) the license constitutes an arms-length transaction, the terms of which, on their face, do not provide for a sale or assignment of any Intellectual Property and do not restrict the ability of Borrower or any of its Subsidiaries, as applicable, to pledge, grant a security interest in or lien on, or assign or otherwise Transfer any Intellectual Property; (iii) in the case of any exclusive license, (x) Borrower delivers ten (10) days’ prior written notice and a brief summary of the terms of the proposed license to Collateral Agent and the Lenders and delivers to Collateral Agent and the Lenders copies of the final executed licensing documents in connection with the exclusive license promptly upon consummation thereof, and (y) any such license could not result in a legal transfer of title of the licensed property but may be exclusive in respects other than territory and may be exclusive as to territory only as to discrete geographical areas outside of the United States; and (iv) all upfront payments, royalties, milestone payments or other proceeds arising from the licensing agreement that are payable to Borrower or any of its Subsidiaries are paid to a Deposit Account that is governed by a Control Agreement.
“Permitted Liens” are:
(a)Liens existing on the Effective Date and disclosed on the Perfection Certificates or arising under this Agreement and the other Loan Documents;
(b)Liens for taxes, fees, assessments or other government charges or levies, either (i) not due and payable or (ii) being contested in good faith and for which Borrower maintains adequate reserves on its Books, provided that no notice of any such Lien has been filed or recorded under the Internal Revenue Code of 1986, as amended, and the Treasury Regulations adopted thereunder;
(c)liens securing Indebtedness permitted under clause (e) of the definition of “Permitted Indebtedness,” provided that (i) such liens exist prior to the acquisition of, or attach substantially simultaneous with, or within twenty (20) days after the, acquisition, lease, repair, improvement or construction of, such property financed or leased by such Indebtedness and (ii) such liens do not extend to any property of Borrower other than the property (and proceeds thereof) acquired, leased or built, or the improvements or repairs, financed by such Indebtedness;
(d)Liens of materialmen, mechanics, carriers, warehousemen, suppliers, landlords or other Persons arising in the ordinary course of business so long as such Liens attach only to Inventory, securing liabilities in the aggregate amount not to exceed [**] Dollars ($[**]) in case of landlords and suppliers who have not entered into landlord consents or bailee waivers in favor of Collateral Agent pursuant to this Agreement, and which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings which proceedings have the effect of preventing the forfeiture or sale of the property subject thereto;
(e)Liens to secure payment of workers’ compensation, employment insurance, old-age pensions, social security and other like obligations incurred in the ordinary course of business (other than Liens imposed by ERISA);
(f)Liens incurred in the extension, renewal or refinancing of the indebtedness secured by Liens described in (a) through (c), but any extension, renewal or replacement Lien must be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness may not increase;
(g)leases or subleases of real property granted in the ordinary course of Borrower’s business (or, if referring to another Person, in the ordinary course of such Person’s business), and leases, subleases, non-exclusive licenses or sublicenses of personal property (other than Intellectual Property) granted in the ordinary course of Borrower’s business (or, if referring to another Person, in the ordinary course of such Person’s business);
(h)banker’s liens, rights of setoff and Liens in favor of financial institutions incurred in the ordinary course of business arising in connection with Borrower’s deposit accounts or securities accounts held at such institutions solely to secure payment of fees and similar costs and expenses; provided such accounts are maintained in compliance with Section 6.6 hereof;
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(i)Liens arising from judgments (or appeal or other surety bonds relating to such judgments), decrees or attachments in circumstances not constituting an Event of Default under Section 8.4 or 8.7;
(j)Liens consisting of Permitted Licenses;
(k)Liens solely on cash collateral pledged to secure Indebtedness in respect of corporate credit cards permitted pursuant to clause (f) of the definition of “Permitted Indebtedness,” the aggregate outstanding amount of which Indebtedness secured by such Liens may not exceed the amount equal to (i) [**] Dollars ($[**]) minus (ii) the amount of Indebtedness then outstanding  at under clause (h) of  the definition of “Permitted Indebtedness” that has been incurred to secure such Indebtedness in respect of corporate credit cards;
(l)deposits to secure the performance of leases entered into in the ordinary course of business and not representing an obligation for borrowed money so long as each such deposit is made at the commencement of a lease or its renewal when there is no underlying default under such lease and the aggregate amount of such deposits at any given time does not exceed [**] Dollars ($[**]);
(m)Liens solely on cash and Cash Equivalents securing Indebtedness permitted under clause (h) of the definition of “Permitted Indebtedness,”  the aggregate outstanding amount of which may not exceed [**] Dollars ($[**]) at any given time;
(n)Liens in favor of customs and revenue authorities in the ordinary course of business, to secure payment of customs duties in connection with the importation of goods; provided, however, the aggregate amount of such payments so secured at any given time shall not exceed [**] Dollars ($[**]) and such Liens shall be restricted to the goods imported in connection with which such payments;
(o)Liens granted in the ordinary course of business securing the financing of insurance premiums securing Indebtedness permitted by clause (j) of the definition of “Permitted Indebtedness”; and
(p)easements, rights-of-way, restrictions and other similar encumbrances affecting real property which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the applicable Person;
(q)Liens incurred or deposits made in the ordinary course of Borrower's or a Subsidiary's business, securing liabilities to secure the performance of tenders, statutory obligations, surety, bid and appeal bonds, bids, leases, government contracts, trade contracts, performance and return-of money bonds and other similar obligations; provided, however, the aggregate amount of liabilities so secured at any given time shall not exceed [**] Dollars ($[**]) at any given time; and
(r)other Liens securing Indebtedness or other obligations permitted hereunder, in an aggregate amount at any time outstanding not to exceed [**] Dollars ($[**]).
“Permitted Subordinated Debt” means convertible unsecured subordinated debt issued by the Borrower, that is convertible into a fixed number of shares (subject to customary anti-dilution adjustments, “make-whole” increases and the other customary changes thereto) of common stock of the Borrower, cash or any combination thereof and cash in lieu of fractional shares of common stock of the Borrower; provided that the Indebtedness thereunder must satisfy each of the following conditions (and any agreements providing for such Indebtedness may only be amended, restated, supplemented or modified from time to time if each of the following conditions (i), (ii) and (iv) through (vii) remains satisfied): (i) both immediately prior to and after giving effect (including pro forma effect) thereto, no Event of Default shall exist or result therefrom, (ii) such Indebtedness has a stated maturity that is after the date that is six (6) months after the Maturity Date and prior to that date, does not provide for or require any payments of principal or any other payments with the exception of interest payments and other payments permitted by Section 7.9, (iii) Borrower’s market capitalization, as of the close of the regular trading session for the Borrower’s common stock on the last Business Day prior to the incurrence of any such Indebtedness, is not less than the [**] Dollars ($[**]), (iv) the aggregate amount of such Indebtedness outstanding at any given time is not more than [**] Dollars ($[**]), (v)
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such Indebtedness shall be unsecured at all times, (vi) such Indebtedness shall not bear a cash interest rate of more than the greater of (x) seven percent (7.00%) per annum and (y) such cash interest rate as the Collateral Agent shall approve after the Closing Date in its discretion, and the terms, conditions and covenants of such Indebtedness must be customary for convertible Indebtedness as of such time, (vii) the aggregate outstanding amount of such Indebtedness on the date of incurrence (and after giving effect to the incurrence) of any such Indebtedness is not more than [**] percent ([**]%) of Borrower’s market capitalization as of the close of the regular trading session for the Borrower’s common stock on last Business Day prior to such date, (viii) such Indebtedness is not guaranteed by any Subsidiary of Borrower that does not also guarantee the Obligations and (ix) such Indebtedness shall be subordinated to all Obligations on terms and conditions reasonably satisfactory to Collateral Agent.
“Person” is any individual, sole proprietorship, partnership, limited liability company, joint venture, company, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or government agency.
“Pre-Clinical and Clinical Trial Supplies” means active pharmaceutical ingredients, other raw materials, finished product, formulation components and concomitant medication; in each case, intended for use and used in Borrower’s and its Subsidiaries’ pre-clinical and clinical trials, pre-clinical research and research discovery efforts.
“Prepayment Fee” is, with respect to any Term Loan subject to prepayment prior to the Maturity Date, whether by mandatory or voluntary prepayment, acceleration or otherwise, an additional fee payable to the Lenders in amount equal to:
(i)for a prepayment made on or after the Funding Date of such Term Loan through and including the first anniversary of the Funding Date of such Term Loan, three percent (3.00%) of the principal amount of such Term Loan prepaid;
(ii)for a prepayment made after the date which is after the first anniversary of the Funding Date of such Term Loan through and including the second anniversary of the Funding Date of such Term Loan, two percent (2.00%) of the principal amount of the Term Loans prepaid;
(iii)for a prepayment made after the date which is after the second anniversary of the Funding Date of such Term Loan and prior to the Maturity Date, one percent (1.00%) of the principal amount of the Term Loans prepaid.
“Pro Rata Share” is, as of any date of determination, with respect to each Lender, a percentage (expressed as a decimal, rounded to the ninth decimal place) determined by dividing the outstanding principal amount of Term Loans held by such Lender by the aggregate outstanding principal amount of all Term Loans.
“Registered Organization” is any “registered organization” as defined in the Code with such additions to such term as may hereafter be made.
“Relevant Governmental Body” means the Federal Reserve Board and/or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Federal Reserve Board and/or the Federal Reserve Bank of New York or any successor thereto.
“Reporting Date” means the date of the next Compliance Certificate is delivered or required to delivered pursuant to Section 6.2(b).
“Required Lenders” means (i) for so long as all of the Persons that are Lenders on the Effective Date (each an “Original Lender”) have not assigned or transferred any of their interests in their Term Loan, Lenders holding one hundred percent (100%) of the aggregate outstanding principal balance of the Term Loan, or (ii) at any time from and after any Original Lender has assigned or transferred any interest in its Term Loan, Lenders holding at least sixty six percent (66%) of the aggregate outstanding principal balance of the Term Loan and, in respect of this clause (ii), (A) each Original Lender that has not assigned or transferred any portion of its Term Loan, (B) each assignee or transferee of an Original Lender’s interest in the Term Loan, but only to the extent that such assignee or transferee is
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an Affiliate or Approved Fund of such Original Lender, and (C) any Person providing financing to any Person described in clauses (A) and (B) above; provided, however, that this clause (C) shall only apply upon the occurrence of a default, event of default or similar occurrence with respect to such financing.
“Requirement of Law” is as to any Person, the organizational or governing documents of such Person, and any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.
“Responsible Officer” is any of the President, Chief Executive Officer, or Chief Financial Officer of Borrower acting alone.
“Second Draw Period” is the period commencing on the date of the occurrence of the First Revenue Event and ending on the earliest of (i) the date that is ninety (90) days after the occurrence of the First Revenue Event, (ii) June 30, 2023 and (iii) the occurrence of an Event of Default; provided, however, that the Second Draw Period shall not commence if on the date of the occurrence of the First Revenue Event an Event of Default has occurred and is continuing.
“Second Revenue Event” is the achievement by Borrower for the first time after the Effective Date of consolidated revenues from the sale and distribution of Borrower’s products equal to at least One Hundred Million Dollars ($100,000,000.00) at the end of any fiscal month of Borrower for the six-month period then ended, based upon evidence reasonably satisfactory to Collateral Agent.
“Secured Promissory Note” is defined in Section 2.4.
“Secured Promissory Note Record” is a record maintained by each Lender with respect to the outstanding Obligations owed by Borrower to Lender and credits made thereto.
“Securities Account” is any “securities account” as defined in the Code with such additions to such term as may hereafter be made.
“Securities Corporation” is Kala Securities Corporation, a wholly owned Subsidiary of Borrower.
“Securities Corporation Investment Condition” is defined in Section 6.6.
“Shares” is one hundred percent (100%) of the issued and outstanding capital stock, membership units or other securities owned or held of record by Borrower or Borrower’s Subsidiary, in any Subsidiary; provided that, in the event Borrower, demonstrates to Collateral Agent’s reasonable satisfaction, that a pledge of more than sixty five percent (65%) of the Shares of such Subsidiary which is a Foreign Subsidiary, creates a present and existing adverse tax consequence to Borrower under the U.S. Internal Revenue Code, “Shares” shall mean sixty-five percent (65%) of the issued and outstanding capital stock, membership units or other securities owned or held of record by Borrower or its Subsidiary in such Foreign Subsidiary.
“SOFR” with respect to any day means the secured overnight financing rate published for such day by the Federal Reserve Bank of New York, as the administrator of the benchmark, (or a successor administrator) on the Federal Reserve Bank of New York’s Website.
“Solvent” is, with respect to any Person: the fair salable value of such Person’s consolidated assets (including goodwill minus disposition costs) exceeds the fair value of such Person’s liabilities; such Person is not left with unreasonably small capital after the transactions in this Agreement; and such Person is able to pay its debts (including trade debts) as they mature.
“Subordinated Debt” is indebtedness incurred by Borrower or any of its Subsidiaries subordinated to all Indebtedness of Borrower and/or its Subsidiaries to the Lenders (pursuant to a subordination, intercreditor, or other similar agreement in form and substance satisfactory to Collateral Agent and the Lenders entered into between
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Collateral Agent, Borrower, and/or any of its Subsidiaries, and the other creditor), on terms acceptable to Collateral Agent and the Lenders.
“Subsidiary” is, with respect to any Person, any Person of which more than fifty percent (50%) of the voting stock or other equity interests (in the case of Persons other than corporations) is owned or controlled, directly or indirectly, by such Person or through one or more intermediaries.
“Swap Contract” means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement.
“Term Loan” is defined in Section 2.2(a)(iii) hereof.
“Term A Loan” is defined in Section 2.2(a)(i) hereof.
“Term B Loan” is defined in Section 2.2(a)(ii) hereof.
“Term C Loan” is defined in Section 2.2(a)(iii) hereof.
“Term Loan Commitment” is, for any Lender, the obligation of such Lender to make a Term Loan, up to the principal amount shown on Schedule 1.1.  “Term Loan Commitments” means the aggregate amount of such commitments of all Lenders.
“Third Draw Period” is the period commencing on the date of the occurrence of the Second Revenue Event and ending on the earliest of (i) the date that is ninety (90) days after the occurrence of the Second Revenue Event, (ii) December 31, 2023 and (iii) the occurrence of an Event of Default; provided, however, that the Second Draw Period shall not commence if on the date of the occurrence of the Second Revenue Event an Event of Default has occurred and is continuing.
“Trademarks” means any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections, and the entire goodwill of the business of Borrower connected with and symbolized by such trademarks.
“Transfer” is defined in Section 7.1.
[Balance of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the Effective Date.
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	BORROWER:
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	KALA PHARMACEUTICALS, INC.
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	By
	/s/ Mary Reumuth
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	Name:
	Mary Reumuth
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	Title:
	Chief Financial Officer
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	​
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	COLLATERAL AGENT AND LENDER:
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	OXFORD FINANCE LLC
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	​
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	By
	/s/ Collette H. Featherly
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	Name:
	Collette H. Featherly
	​

	Title:
	Senior Vice President
	​

​

​ex1048mrc4llc

Exhibit 10.48 1282772.07/OC 373745.00003 LIMITED LIABILITY COMPANY AGREEMENT OF TRC-MRC 4, LLC THIS LIMITED LIABILITY COMPANY AGREEMENT OF TRC-MRC 4, LLC is  entered into effective as of March ___, 2021 (the "Effective Date"), by and between TEJON  INDUSTRIAL CORP., a California corporation ("Tejon"), and MAJESTIC TEJON IV, LLC, a  Delaware limited liability company ("Majestic").  The capitalized terms used herein shall have  the respective meanings assigned to such terms in Article XIV. ARTICLE I FORMATION 1.01 Formation The Members hereby form a Delaware limited liability company pursuant to the provisions  of the Delaware Act and this Agreement.  In connection therewith, the Administrative Member,  as an authorized person of the Company, shall execute (i) a Certificate of Formation for the  Company in accordance with the Delaware Act, which shall be duly filed with the Office of the  Delaware Secretary of State, and (ii) an Application to Register a Foreign Limited Liability  Company (Form LLC-5), which shall be duly filed with the Office of the California Secretary of  State.  The Administrative Member shall also execute, acknowledge and/or verify such other  documents and/or instruments as may be necessary and/or appropriate to form the Company under  the Delaware Act, to continue its existence in accordance with the provisions of the Delaware Act  and/or to register, qualify to do business and/or operate its business in California as a foreign  limited liability company in accordance with the provisions of the California Act. 1.02 Names and Addresses The name of the Company is "TRC-MRC 4, LLC."  The registered office of the Company  in the State of Delaware shall be at 850 New Burton Road, Suite 201, Dover, Delaware 19904.   The name and address of the registered agent for the Company in the State of Delaware shall be  National Corporate Research, Ltd., 850 New Burton Road, Suite 201, Dover, Delaware 19904.   The name and address of the registered agent for the Company in the State of California shall be  Michael Durham, c/o Majestic Realty Co., 13191 Crossroads Parkway North, 6th Floor, City of  Industry, California 91746-3497.  The principal office of the Company shall be at  13191 Crossroads Parkway North, 6th Floor, City of Industry, California 91746-3497.  The names  and addresses of the Members are set forth on Exhibit "A" attached hereto. 1.03 Nature of Business The express, limited and only purposes for which the Company is to exist are (i) to acquire  from Tejon that certain real property consisting of approximately thirty-seven and 5/10ths (37.5)  acres of land located within the Tejon Ranch Commerce Center in the County of Kern, State of  California, and described more particularly on Exhibit "B" attached hereto (the "Property"), (ii) to  develop and construct upon the Property an approximately six hundred twenty-nine thousand two  hundred seventy-four (629,274) square foot industrial building, together with parking and any and  

 

1282772.07/OC 373745.00003 -2- all related on-site and off-site improvements appurtenant thereto (collectively, the  "Improvements"), (iii) to own, lease, maintain, manage, finance, refinance, hold for long-term  investment, market, sell, exchange, transfer and otherwise realize the economic benefit from the  Property and the Improvements (collectively, the "Project"), and (iv) to conduct such other  activities with respect to the Project as are necessary and/or appropriate to carrying out the  foregoing purposes and to do all things incidental to or in furtherance of the above enumerated  purposes. In furtherance of the foregoing terms of this Section 1.03, each Member shall make the  contributions to the capital of the Company provided for in Section 3.01.  Such contributions  shall be applied (A) to reimburse each Member (and its Affiliates) for any costs paid by such  Member (or Affiliate) to the extent provided in this Agreement, and (B) to pay directly the costs  and expenses incurred by the Company after the Effective Date that are set forth on Exhibit “C”  as the Pre-Development Costs (as defined in Section 2.06).  Any third-party reports, studies or  other work product paid for, or reimbursed by, the Company shall be the property of the Company  (regardless of whether such reports, studies or other work product was prepared prior to the  formation of the Company). 1.04 Term of Company The term of the Company shall commence on the date the Certificate of Formation for the  Company is filed with the Office of the Delaware Secretary of State, and shall continue in  perpetuity, unless dissolved sooner pursuant to Section 12.01.  The existence of the Company as  a separate legal entity shall continue until the cancellation of the Company's Certificate of  Formation. ARTICLE II MANAGEMENT OF THE COMPANY 2.01 Formation of Executive Committee (a) Executive Committee Matters.  Any matter requiring the consent or  approval of the Members under this Agreement shall be made by the Members acting  through an executive committee (the "Executive Committee") in accordance with the  provisions of this Section 2.01 and Section 2.02.  The Executive Committee shall also be  responsible for establishing the policies and procedures to be followed by the  Administrative Member. (b) Composition of the Executive Committee.  The Executive Committee  shall be composed of four (4) representatives (individually, a "Representative" and  collectively, the "Representatives").  Each Member shall appoint two (2)  Representatives to the Executive Committee.  Tejon hereby appoints Gregory S. Bielli  and Allen Lyda ("Lyda") as its initial Representatives.  Majestic hereby appoints Brett  Tremaine and Thomas Simmons as its initial Representatives.  If the initial or replacement  Representative of any Member ceases to serve, then such Member shall replace its  Representative with a new Representative.  Any replacement Representative appointed  by a Member pursuant to the preceding sentence shall be subject to the approval of the  

 

1282772.07/OC 373745.00003 -3- other Member, which approval shall not be unreasonably withheld, conditioned or delayed.   The authorized number of Representatives on the Executive Committee may be increased  or decreased only with the prior written approval of both Members. 2.02 Committee Procedures (a) Quorum.  A "Quorum" for the Executive Committee shall be the  presence of at least one (1) Representative of each Member.  In the absence of a Quorum,  the Representative(s) of the Executive Committee so present may adjourn the meeting until  a Quorum is present.  The Executive Committee shall meet at least quarterly on a day  designated by the Administrative Member.  The Executive Committee shall hold such  other regularly scheduled meetings as are determined by the Administrative Member.   Meetings shall be held on a Business Day at the principal office of the Company during  normal business hours, unless otherwise agreed to by the Executive Committee.  Notice  of any regularly scheduled meeting of the Executive Committee shall be given by the  Administrative Member to all of the Representatives no fewer than ten (10) days and no  more than thirty (30) days prior to the date of any such meeting.  Any Representative may  participate telephonically in any regular meeting of the Executive Committee.  The  attendance of a Representative of the Executive Committee at a regularly scheduled  meeting of the Executive Committee (either in person or telephonically) shall constitute a  waiver of notice of such meeting, except where a Representative of the Executive  Committee attends a meeting for the express purpose of objecting to the transaction of any  business because the meeting was not properly called or convened.  Minutes of the  Executive Committee shall not be required to be prepared or maintained.  Resolutions of  the Executive Committee, when signed by a Quorum present at the applicable meeting,  shall be binding and conclusive evidence of the decisions reflected therein and any  authorization granted thereby. (b) Decisions of the Executive Committee.  Subject to Section 2.02(f), all  decisions and actions of the Executive Committee shall require the affirmative vote of (i) a  majority of the Representatives present at such meeting, and (ii) at least one (1)  Representative appointed by each Member at a meeting at which a Quorum is present. (c) Special Meetings.  Special meetings of the Executive Committee may be  called by or at the request of any Representative and shall be held on a Business Day at the  principal office of the Company.  Notice of any such special meeting of the Executive  Committee shall be given by the calling Representative specifying the time of the meeting  to all of the other Representatives no fewer than two (2) Business Days and no more than  ten (10) days prior to the date of such meeting.  Any Representative may participate  telephonically in any special meeting of the Executive Committee.  The attendance of a  Representative of the Executive Committee at a special meeting of the Executive  Committee (either in person or telephonically) shall constitute a waiver of notice of such  meeting, except where a Representative of the Executive Committee attends a meeting for  the express purpose of objecting to the transaction of any business because the meeting  was not properly called or convened.  The business to be transacted at, and the purpose  of, any special meeting of the Executive Committee need not be specified in the notice or  

 

1282772.07/OC 373745.00003 -4- waiver of notice of such meeting.  Notice of any special meeting may be waived by each  Representative of the Executive Committee. (d) Telephonic Participation.  Representatives of the Executive Committee  may participate in any meetings of the Executive Committee telephonically or through  other similar communications equipment provided that all of the Representatives  participating in such meeting can hear each another.  Participation in a meeting pursuant  to the preceding sentence shall constitute presence in person at such meeting for all  purposes of this Agreement. (e) Transaction of Business.  Provided that notice of a meeting has been  given in the manner set forth herein, a Quorum shall be entitled to transact business at any  meeting of the Executive Committee. (f) Actions Without Meetings.  Any decision or action required or permitted  to be taken at a meeting of the Executive Committee or any other decision or action that  may be taken at a meeting of the Executive Committee may be taken without a meeting if  a consent in writing, setting forth the action so taken, is signed by at least one (1)  Representative of each Member, which shall have the same effect as an act taken at a  properly called and constituted meeting with a Quorum of the Executive Committee at  which all of the Representatives of the Executive Committee were present and voting. (g) Proxies.  Each Representative may authorize one (1) or more individuals  to act for him or her by proxy, but no such proxy shall be voted or acted upon after  sixty (60) days from its date, unless the proxy provides for a longer period.  A proxy shall  be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with  an interest sufficient in law to support an irrevocable power.  A Representative may  revoke any proxy which is not irrevocable by attending the meeting and voting in person  or by filing an instrument in writing revoking the proxy or by delivering a proxy in  accordance with applicable law bearing a later date to the Administrative Member. (h) Limitations on Authority.  None of the Members, Representatives or  Officers, without the prior written consent of the Executive Committee, may take any  action on behalf of or in the name of the Company, or enter into any commitment or  obligation binding upon the Company, except for (i) actions expressly authorized by this  Agreement, and (ii) actions by any Member (or Representative or Officer) within the scope  of such Member's (or Representative's or Officer's) authority granted under this  Agreement. (i) Compensation.  Except as otherwise approved by the Executive  Committee, no Representative shall be entitled to receive any salary, remuneration or  reimbursement from the Company for his or her services as a Representative. (j) Involvement of the Representatives.  Each Member shall cause each  Representative appointed by such Member to devote such time as is reasonably necessary  to carry out such individual's duties and obligations as a Representative of the Executive  Committee. 

 

1282772.07/OC 373745.00003 -5- (k) Resolving Deadlocks.  If the Executive Committee is deadlocked on any  Major Decision (as defined in Section 2.04), then the Representatives shall consult with  one another in a good faith attempt to resolve such deadlock for a period of sixty (60) days  (or such longer period as is unanimously agreed to by the Representatives).  The failure  of the Representatives to resolve any such impasse for any reason prior to the expiration of  such sixty (60)-day period shall constitute an "Impasse Event" under this Agreement (so  long as the deadlock that resulted in such impasse remains unresolved).  Prior to the  expiration of such sixty (60)-day period (or such longer period as is unanimously agreed  to by the Representatives), neither Member may elect to commence the buy/sell procedure  set forth in Article VIII as result of any Impasse Event. 2.03 Administrative Member The Members hereby initially designate Majestic as the "Administrative Member" of the  Company.  The Administrative Member shall serve as the Administrative Member, unless and  until it resigns as provided in Section 2.16(b), is removed pursuant to Section 2.16(c) or ceases to  be a member of the Company.  The Administrative Member hereby agrees to use its  commercially reasonable efforts to carry out the business and affairs of the Company and to devote  such time to the Company as is necessary, in the reasonable discretion of the Administrative  Member, for the efficient operation of the business and affairs of the Company.  Subject to the  terms of this Agreement (including Sections 2.04, 2.11, 2.12, 2.13 and 2.14, which assign certain  obligations or decision-making authority to Tejon or the Executive Committee), the  Administrative Member shall be responsible for (i) preparing and implementing each Approved  Business Plan (including, without limitation, each Development Plan, Development Budget,  Operating Budget and Marketing Plan contained therein), (ii) implementing the decisions of the  Executive Committee, (iii) reporting to the Executive Committee as to the status of the business  and affairs of the Company, (iv) managing, supervising, and conducting the day-to-day business  and affairs of the Company, (v) managing the accounting and the contract and lease administration  for the Project including, without limitation, enforcing the Company's rights and benefits, and  causing the Company to perform its duties and obligations, under each lease for space in the  Project, and (vi) performing such other services delegated to the Administrative Member under  this Agreement including, without limitation, (A) the development and construction management  services delegated to the Administrative Member under Section 2.11, (B) the marketing and  leasing management services delegated to the Administrative Member under Section 2.13, (C) the  property management services delegated to the Administrative Member under Section 2.14, and  (D) the reporting and accounting functions delegated to the Administrative Member under  Article XI.  The Administrative Member may not assign or delegate its duties or obligations  under this Agreement without the prior written consent of the Executive Committee. 2.04 Approval of Major Decisions Notwithstanding any other provision contained in this Agreement, neither the  Administrative Member nor the other Member may cause the Company to undertake, and the prior  approval of the Executive Committee shall be required for, any and all of the following matters  (collectively, the "Major Decisions"), unless and to the extent such matters have been specifically  approved in the applicable Approved Business Plan: 

 

1282772.07/OC 373745.00003 -6- (a) Approved Business Plans.  The approval of each business plan for the  Company (and any material amendment, modification, revision or update thereof)  including each Development Plan, Development Budget, Operating Budget and Marketing  Plan contained therein; (b) Construction of Improvements.  The development and/or construction of  any improvements including, without limitation, any vertical, horizontal, tenant or other  improvements; (c) Sale of Project.  The sale, exchange, transfer or other disposition of all  or any portion of the Project (exclusive of any lease of any portion of the Project); (d) Lease of the Project.  The form and execution of any lease for all or any  portion of the Project including any applicable tenant improvements or any amendment,  modification, extension or termination of any lease for all or any portion of the Project  including any applicable tenant improvements; (e) Financing.  The procurement of any financing or refinancing (including,  without limitation, any acquisition, development, construction, interim and long-term  financing or refinancing in connection with the Project or the entering into of any  modification, amendment or other agreement of any financing or refinancing); (f) Plans and Specifications.  Except as previously approved in the  Approved Business Plan, or any change order within the limits of Section 2.04(i), the  approval of any material amendment or material modification to the plans and  specifications for the Improvements and the approval of the plans and specifications for  any tenant improvements (and any material amendment or material modification thereof); (g) Selection and Retention of Architect and Engineer.  Except for  Commerce Construction Co., L.P., a California limited partnership ("Commerce"), in its  capacity as architect and structural engineer and any architect or structural engineer  retained by Tejon for the Property prior to the Effective Date, the selection and/or retention  by the Company of any other architect or structural engineer in connection with the  construction of any tenant improvements or the Improvements and the terms of any  contract entered into by and between the Company and any such architect or engineer  including, without limitation, any contract entered into by the Company with Commerce  (and any amendment, modification or termination of any contract entered into by the  Company with any architect or engineer); (h) Construction Contract.  The selection and/or retention by the Company  of any general contractor (other than Commerce) and the execution or delivery by the  Company of any construction contract and any amendment, modification or termination of  any construction contract, but excluding any amendment or modification to the  Construction Contract (as defined in Section 2.10) resulting from any change order  previously approved under Section 2.04(i) below; (i) Change Orders.  The approval by the Company of any change order  relating to the construction of any tenant improvements or the Improvements if (i) such  

 

1282772.07/OC 373745.00003 -7- change order would cause a material change in the quality of the Improvements, (ii) the  cost of any such change order exceeds Twenty-Five Thousand Dollars ($25,000), or  (iii) the aggregate cost of the change order under consideration, together with all prior  change orders, exceeds One Hundred Thousand Dollars ($100,000); (j) Selection and Retention of Replacement Property Manager.  The  selection and/or retention by the Company of any property manager that will replace either  the Administrative Member or Tejon as a property manager for the Project and the  execution or delivery by the Company of any property management agreement with any  such replacement property manager and any amendment, modification, extension or  termination of any such property management agreement entered into with any such  replacement property manager; (k) Selection and Retention of Attorneys.  The selection and/or retention of  any attorney by the Company; (l) Expenditures Outside of Budgets.  The making of any expenditure by the  Company that is not specifically included or contemplated under any Approved Business  Plan for the Company, other than as permitted under Section 2.08 and/or Section 2.09; (m) Contracts with Affiliates.  Except as provided in Sections 2.10, 2.11,  2.12, 2.13, 2.14 and 2.15, the entry into by the Company of any contract with or otherwise  making any payment to any Member or any Affiliate of any Member and with respect to  any such contract, the making of any material amendment, modification, extension and/or  rescission thereof; the declaration of a default thereunder; the institution, settlement and/or  compromise of a claim with respect thereto; the waiver of any rights of the Company  against the other party(ies) thereto; or the consent to the assignment of any rights and/or  the delegation of any duties by the other party(ies) thereto; (n) Material Agreements.  Except as provided in the Approved Business  Plan, the execution or delivery by the Company of any agreement obligating the Company  to pay an amount of more than One Hundred Thousand Dollars ($100,000) and any  amendment, modification, extension or termination of any such agreement, including,  without limitation, any agreement providing for the payment of any commission, fee or  other compensation payable in connection with the sale of all or any portion of the Project; (o) Rebuild.  The election to rebuild all or any portion of the Project  following a casualty in any case where the Company has the right to elect whether or not  to rebuild under the applicable agreements to which the Company is a party; (p) Press Release.  The making of any press release for any purpose relating  to the Company or the Project; (q) Employees.  The hiring of any employee by the Company; (r) Taxes and Accounting.  The selection or changing of the Company's  depreciation or other tax accounting methods or elections, changing the Fiscal Year or  taxable year of the Company, or making any other material decisions with respect to the  

 

1282772.07/OC 373745.00003 -8- treatment of various transactions for accounting or tax purposes that may adversely affect  the Members; (s) Confess Judgments.  The confession of a judgment against the Company  for an amount that exceeds Fifty Thousand Dollars ($50,000); the payment, compromise,  settlement or other adjustment of any claims against the Company for an amount that  exceeds Fifty Thousand Dollars ($50,000); or the commencement or settlement of any legal  actions or proceedings brought by or against the Company if the amount in dispute with  respect to such action or proceeding exceeds Fifty Thousand Dollars ($50,000); (t) Loans.  The lending of any funds by the Company to any Member or any  Affiliate thereof or to any third party, or the extension by the Company of credit to any  Person on behalf of the Company; (u) Guaranty.  The execution or delivery of any document or agreement that  would cause the Company to become a surety, guarantor, endorser, or accommodation  endorser for any Person, except to the extent such guaranty or endorsement is included in  the then applicable Approved Business Plan; (v) Bankruptcy.  Any of the following:  (i) the filing of any voluntary  petition in bankruptcy on behalf of the Company; (ii) the consenting to the filing of any  involuntary petition in bankruptcy against the Company; (iii) the filing by the Company of  any petition seeking, or consenting to, the reorganization or relief under any applicable  federal or state law relating to bankruptcy or insolvency; (iv) the consenting to the  appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar  official) of the Company or a substantial part of the Company's property; (v) the making  of any assignment by the Company for the benefit of creditors; (vi) the admission in writing  of the Company's inability to pay its debts generally as they become due; or (vii) the taking  of any action by the Company in furtherance of any such action; (w) Admission and Withdrawals.  Except as permitted pursuant to  Article VI, Article VII and Article VIII, the admission or withdrawal of any Member into  or from the Company; (x) Merger or Consolidation.  The entry into by the Company of any merger,  consolidation or other material corporate transaction; (y) Acquisition of Property.  The acquisition of any property by the  Company (other than the Property) and the terms and conditions for any such acquisition; (z) Purpose.  The modification or change in the business purpose of the  Company; (aa) Amendments to the Agreement.  Any amendment to this Agreement  (other than amendment reflecting the admission or withdrawal of a Member in accordance  with the provisions of Articles VI, Article VII and Article VIII); 

 

1282772.07/OC 373745.00003 -9- (bb) Engaging in Other Businesses.  The engagement of the Company in any  business or activity outside the scope of the Company's business set forth in this  Agreement; (cc) Dissolution.  Except as required by this Agreement, the dissolution or  Liquidation of the Company; (dd) Acts in Contravention.  Any act in contravention of this Agreement; and (ee) Other Matters.  Any other decision or matter described as a Major  Decision in this Agreement. Without limiting the generality of the foregoing provisions of this Section 2.04, neither the  Administrative Member nor the other Member shall undertake any action, expend any sum, make  any decision, give any consent, approval or authorization or incur any obligation with respect to  any of the foregoing Major Decisions, unless and until such matter has been approved by the  Executive Committee (or such matter has been specifically approved in the then applicable  Approved Business Plan).  Each Representative of the Executive Committee may withhold its  approval of any Major Decision in such Representative's sole and absolute discretion, except for  the Major Decisions described in Sections 2.04(a), (d), (e), (f), (g), (i) and (j) (for which such  approval shall not be unreasonably withheld, delayed or conditioned). Notwithstanding anything to the contrary in this Agreement, either Member may, without  prior approval of the Executive Committee, take any action reasonably necessary to protect life or  property, in the event of an emergency where it is impractical to obtain such prior approval;  provided that the Member taking the action shall use its best efforts to advise the Representatives  as soon as possible of the nature of the emergency and the emergency actions taken. 2.05 Consents and Approvals Either Member may seek the approval of the Executive Committee with respect to any  proposed matter set forth in Section 2.04 by delivering written notice to the Representatives  describing such proposed action in sufficient detail so as to enable the Representatives to exercise  an informed judgment with respect thereto.  Such notice shall constitute a call for a special  meeting of the Executive Committee as provided in Section 2.02(c) and shall specify a time for  the meeting and shall be deemed a notice by the requesting Member's Representatives for purposes  of Section 2.02(c).  The Executive Committee shall then meet and either approve or disapprove  the proposed action.  The Representative(s) of the other Member shall set forth their reasons if  they disapprove such action, or may approve the requested action without a meeting as provided  in Section 2.02(f).  If the Executive Committee fails to meet or otherwise approve the requested  action (as provided herein) on or before the expiration of the Response Period, then it shall be  conclusively presumed to have disapproved such action.  The term "Response Period" means  (i) if a response time is expressly set forth in this Agreement, then the period of time during which  the Member is required to respond, or (ii) if no response time period is expressly set forth in this  Agreement, then five (5) Business Days following the effective date of the written notice  describing any proposed action requiring the consent or approval of such Member. 

 

1282772.07/OC 373745.00003 -10- 2.06 Pre-Development Costs The Members have incurred certain pre-development costs, which are included in the  approved costs and expenses set forth on Exhibit "C" attached hereto (collectively, the "Pre- Development Costs").  The Pre-Development Costs include the pre-development costs and  expenses incurred by the Members prior to the Effective Date and the projected pre-development  costs to be incurred by the Company after the Effective Date that have been approved by the  Members.  The Pre-Development Costs include the costs and expenses incurred by the Members  for the due diligence investigation and review of the Property and costs and expenses to obtain the  approvals necessary to prepare the Development Plan and Development Budget, including,  without limitation, the full set of working drawings and construction documents and other Property  reports and investigations, including relevant due diligence materials, and permit fees and the like,  all paid by the Members prior to the Effective Date, as further detailed on Exhibit "C" attached  hereto.  The Administrative Member shall not cause the Company to incur any costs or expenses  in connection with the pre-development of the Project, unless such costs and expenses are Pre- Development Costs (or the Executive Committee otherwise approves such costs or expenses in its  sole and absolute discretion).  In addition, no Member shall be reimbursed by the Company for  any costs or expenses incurred in connection with the pre-development of the Project, except to  the extent provided in Section 2.19 (or the Executive Committee otherwise approves the  reimbursement of such costs or expenses in its sole and absolute discretion).  The Pre- Development Costs previously incurred by each Member shall be credited to such Member's  Capital Account and Unreturned Contribution Account pursuant to Section 3.01(b)(ii) in the case  of Tejon and Section 3.01(c)(ii) in the case of Majestic. 2.07 Approved Business Plan Majestic shall use its commercially reasonable efforts to prepare and submit to the  Executive Committee on or before May 10, 2021, for its review and approval the annual business  plan for the Company's first Business Plan Period.  If Majestic does not deliver the annual  business plan for the first Business Plan Period to the Executive Committee on or before May 10,  2021 (or such later date that is approved by Tejon in its sole and absolute discretion), then Tejon  shall have the right, in its sole and absolute discretion, at any time thereafter, to elect to dissolve  the Company by delivering written notice of such election to Majestic in accordance with the terms  of Section 12.01(a) (provided such right shall terminate if and when the Executive Committee  approves the initial business plan for the Company).  If Majestic timely delivers the annual  business plan to the Executive Committee for the Company's first Business Plan Period, but the  Executive Committee does not approve such business plan for any reason within five (5) days  following the submission of such plan to the Executive Committee, then each Member shall have  the right, in its sole and absolute discretion, at any time thereafter, to elect to dissolve the Company  by delivering written notice of such election to the other Member in accordance with the terms of  Section 12.01(b) (provided such right shall terminate if and when the Executive Committee  approves the initial annual business plan).  Within three (3) Business Days following the approval  of the annual business plan for the first Business Plan Period, the Company and Tejon shall execute  and deliver to the escrow for the Construction Loan that certain Contribution Agreement and Joint  Escrow Instructions in the form attached hereto as Exhibit "D" (the "Contribution Agreement")  (which shall be effective concurrently with the closing of the Construction Loan). 

 

1282772.07/OC 373745.00003 -11- On or before the Applicable ABP Date (as defined below), the Administrative Member  shall submit a new annual business plan for each ensuing Business Plan Period to the Executive  Committee for its review and approval.  Each annual business plan shall include, without  limitation, (i) a narrative description of the proposed objectives and goals for the Company, which  shall include a description of any major transaction to be undertaken by the Company for such  Business Plan Period (or other period); (ii) for the first Business Plan Period, a Development Plan  and Development Budget as described in Section 2.08 for the Improvements; (iii) for the second  Business Plan Period, the status of the construction of the Improvements; (iv) following the Project  Stabilization Date (as reasonably determined by the Administrative Member), a revised Operating  Budget, as more particularly described in Section 2.09 below; (v) a Marketing Plan as described  in Section 2.13 for the Improvements; and (vi) such other items as are reasonably requested by  either Member.  The term "Applicable ABP Date" means (A) with respect to the Company's  second Business Plan Period, thirty (30) days after the start of such second Business Plan Period;  (B) with respect to the Company’s third Business Plan Period, the later of (1) thirty (30) days after  the start of the Company’s second Business Plan Period, or (2) ninety (90) days prior to the start  of such third Business Plan Period; and (C) with respect to all subsequent Business Plan Periods,  ninety (90) days prior to the start of each such Business Plan Period. Each new annual business plan shall be subject to the review and approval of the Executive  Committee.  The annual business plan for the applicable Business Plan Period (or other period)  that is hereafter approved by the Executive Committee is referred to as the "Approved Business  Plan."  The Company shall pay all reasonable third-party out-of-pocket costs incurred by either  Member after the Effective Date or directly by the Company in preparing each proposed annual  business plan, including any costs of doing the investigations and obtaining necessary approvals  for construction of the Improvements called for in the Development Plan to the extent set forth on  Exhibit “C” as Pre-Development Costs. 2.08 Development and Construction of Improvements The Approved Business Plan for the Company's first Business Plan Period shall include a  plan for the development and construction of the Improvements (the "Development Plan") and a  development/construction budget (the "Development Budget") setting forth the projected costs  and expenses (including any Pre-Development Costs) estimated to be incurred by the Company in  connection with the development and construction of the Improvements.  The Development Plan  for the Improvements shall include, without limitation, the architectural design for the  Improvements, the plans and specifications for such Improvements, a development and  construction schedule for the Improvements, the projected dates for the commencement and  completion for the Improvements and any fees that the Members (and/or any Affiliates or  representatives thereof) are entitled to receive as consideration for providing services to the  Company in connection with the development and construction of the Improvements. The Development Budget shall set forth on an itemized basis all of (i) the estimated hard  and soft construction costs to be incurred by the Company in developing and constructing the  Improvements pursuant to the Development Plan, and (ii) a projection setting forth the estimated  revenues, expenses and net operating income (or loss) for the Project for the period commencing  as of the substantial completion of the Project through the Project Stabilization Date.  The  Administrative Member shall have the right, power and authority without the consent of the other  

 

1282772.07/OC 373745.00003 -12- Member (A) to apply up to fifty percent (50%) of the contingency line item and any line item cost  savings to other line items, and (B) to cause the Company to incur expenditures in excess of any  line item, provided that any such expenditure does not exceed, in the case of a change order, the  limit specified in Section 2.04(i), or otherwise such line item by more than the lesser of (1) ten  percent (10%) of such line item, or (2) Twenty-Five Thousand Dollars ($25,000), after the  application of any contingency line item and/or cost savings.  The Administrative Member shall  also have the right, power and authority to incur actual expenditures on behalf of the Company  (with Company funds) for (a) any of the items set forth in any approved Development Budget, as  the same may be adjusted in accordance with the foregoing provisions of this Section 2.08, and  (b) any items outside of an approved Development Budget provided such item does not exceed  Twenty-Five Thousand Dollars ($25,000) alone or all of such expenditures do not exceed One  Hundred Thousand Dollars ($100,000) in the aggregate, without the further consent of the other  Member. 2.09 Operating Budget Within thirty (30) days after the Project Stabilization Date, the Administrative Member  shall prepare an operating budget ("Operating Budget"), which shall include, without limitation,  on a detailed itemized basis for the Project and the Company, (i) all anticipated receipts projected  for the period of such Operating Budget and all anticipated expenses, by category, for the Company  (including, without limitation, all repairs and capital expenditures projected by the Administrative  Member to be incurred during such period), (ii) the anticipated Cash Flow reserves projected to be  required for such period, and (iii) a projection setting forth the estimated annual revenues,  expenses and net operating income (or loss) expected to be incurred for the ensuing Business Plan  Period, which shall be updated to compare the actual results to the projected results set forth in the  prior Operating Budget.  The Operating Budget shall also include a detailed description of such  other information, contracts, agreements and other matters reasonably necessary to inform the  Members of all matters relevant to the operation, management, maintenance, leasing and sale of  the Project (or any portion thereof) or as may be reasonably requested by any Member.  The  Administrative Member shall have the right, power and authority without the consent of the other  Member (A) to apply up to fifty percent (50%) of the contingency line item and any line item cost  savings to other line items, and (B) to cause the Company to incur expenditures in excess of any  line item, provided that any such expenditure does not exceed such line item by more than ten  percent (10%), after the application of any contingency line item or cost savings.  The  Administrative Member shall also have the right, power and authority to incur actual expenditures  on behalf of the Company (with Company funds) for (1) any of the items set forth in any approved  Operating Budget, as the same may be adjusted in accordance with the foregoing provisions of  this Section 2.09, and (2) any items outside of an approved Operating Budget provided such item  does not exceed Fifty Thousand Dollars ($50,000) alone or in the aggregate, without the further  consent of the other Member. 2.10 Construction Contract The Company shall hire Commerce, which is an Affiliate of Majestic, to act as the design  builder for the construction of the Improvements (the "Design-Builder") pursuant to a guaranteed  maximum price construction contract to be entered into by and between the Company and the  Design-Builder substantially in the form attached hereto as Exhibit "E" (the "Construction  

 

1282772.07/OC 373745.00003 -13- Contract").  Within three (3) Business Days following the approval of the annual business plan  for the first Business Plan Period by the Executive Committee pursuant to Section 2.07, the  Company and Commerce shall execute and deliver the Construction Contract to the escrow for the  Construction Loan (which shall be effective concurrently with the closing of the Construction  Loan).  Majestic hereby agrees to use it commercially reasonable efforts to cause Commerce to  commence the construction of the Improvements promptly following the closing of the  Construction Loan.  All major subcontractors hired for the construction of the Improvements  shall be subject to the approval of the Executive Committee, which approval shall not be  unreasonably withheld, delayed or conditioned.  Majestic shall provide Tejon with a copy of each  bid received from each subcontractor on the date Majestic provides Tejon the final construction  pricing. Pursuant to the terms of the Construction Contract, the Company shall pay to the Design- Builder a fee equal to (A) three percent (3%) of the total Applicable Construction Costs incurred  by the Company in connection with the construction of any Improvements that are both designed  and constructed by the Design-Builder, and (B) five percent (5%) of the total Applicable  Construction Costs as compensation for rendering the builder and other services described in the  Construction Contract.  The term "Applicable Construction Costs" means the actual "hard" and  "soft" costs actually incurred by the Design-Builder in connection with the construction of the  Improvements, subject to the guaranteed maximum price. Notwithstanding anything to the contrary herein, Tejon and Majestic acknowledge and  agree that only certain of the Improvements will be designed and constructed by the Design- Builder, such as the following which are subject to three percent (3%) fee described above in  Section 2.10(A):  fire sprinkler system, fire alarm system, future tenant improvement work at the  Project, and mechanical, plumbing, electrical, and civil engineering work, if and to the extent  converted as part of the design builder services.  Tejon and Majestic further acknowledge and  agree that certain of the Improvements will be constructed (but not designed ) by the Design- Builder, such as the following: architectural, structural, mechanical, electrical, plumbing, civil  engineering and landscape work for the shell and site work.  For the avoidance of doubt, the three  percent (3%) fee described above in Section 2.10(A) shall only be paid with respect to the total  Applicable Construction Costs that are incurred by the Company for those Improvements that are  both designed and constructed by the Design-Builder. 2.11 Development and Construction Management Services Prior to the Effective Date, Tejon retained one (1) or more environmental consultants,  architects, soil engineers, civil engineers and/or other consultants, specialists and experts  (collectively, the "Consultants") to provide various services in connection with the development  and construction of the Improvements.  The contracts entered into by Tejon with the Consultants  (collectively, the "Service Contracts") will be assigned by Tejon to the Company and the  Company shall assume all of Tejon's duties and obligations under the Service Contracts in  accordance with the terms of the Contribution Agreement described in Section 2.07.  The  Administrative Member shall be responsible for (A) interviewing and recommending any  Consultants to be hired by the Company to render services after the Effective Date at the  Company's cost in connection with the development and construction of the Improvements,  (B) reviewing and evaluating proposed contracts to be entered into between the Company and each  

 

1282772.07/OC 373745.00003 -14- Consultant after the Effective Date, and (C) negotiating such proposed contracts to be entered into  after the Effective Date (it being understood that all such contracts shall be required to be approved  by the Executive Committee and executed by the Company).  Notwithstanding the foregoing, the  Company shall use its reasonable efforts to hire from among those Consultants identified on  Exhibit "F" attached hereto to provide the services that such Consultants have historically provided  for the Property (with the final decision on which Consultants to hire being reasonably determined  by the Executive Committee).  The Administrative Member shall be responsible for coordinating  and supervising the services to be provided by each such Consultant(including, without limitation,  any Consultant hired by Tejon prior to the Effective Date that will be rendering services after such  date).  Without limiting the generality of the foregoing, the Administrative Member shall work  closely with the architects hired by the Company or Tejon prior to the Effective Date to prepare  and process any revisions to the plans and specifications for the Improvements.  In addition to  the above services, the Administrative Member shall also supervise the development and  construction of the Improvements. Tejon shall assist in the general construction oversight activities and will coordinate with  Commerce to address any construction related issues and matters.  In addition, Tejon will take  the lead role in meeting with Kern County and other municipalities and local authorities/agencies  to obtain any necessary permits, entitlements, consents and other approvals necessary to construct  the Improvements on the Property. As consideration for providing the development services described in this Section 2.11, the  Company shall pay to the Members a development fee ("Development Fee") equal to four percent  (4%) of the "hard costs" actually incurred in connection with the development and construction of  the Improvements.  The Development Fee shall be paid and earned on the first day of each  calendar month based upon the "hard costs" incurred by the Company in the preceding calendar  month.  The Administrative Member shall be entitled to receive seventy-five percent (75%) of  the Development Fee and Tejon shall be entitled to receive twenty-five percent (25%) of the  Development Fee.  As consideration for providing the construction management services  described in this Section 2.11, the Company shall pay to Tejon a construction management fee  equal to one percent (1%) of the Applicable Construction Costs incurred in connection with the  development and construction of such Improvements. 2.12 Master Developer Work Tejon shall be obligated to perform in accordance with the Development Plan the work  described on Exhibit "G" attached hereto (the "Master Developer Work"), at Tejon's sole cost  and expense, in connection with the contribution of the Property to the Company, to the extent  reasonably necessary for the development of the Improvements.  Prior to commencing the Master  Developer Work, (i) the Executive Committee shall reasonably agree upon the location of all  utility connections and the ingress and/or egress improvements to be constructed as part of the  Master Developer Work, and (ii) Tejon shall provide Majestic with a copy of the plans and  specifications for any ingress and/or egress improvements to be constructed as part of the Master  Developer Work for the review and input of Majestic; provided, however, the Executive  Committee shall have the right to approve such plans and specifications (which approval shall not  be unreasonably withheld, delayed or conditioned).  Subject to any delays permitted by  Section 13.23, Tejon shall be obligated (A) to perform the Master Developer Work in a  

 

1282772.07/OC 373745.00003 -15- coordinated manner consistent with the schedule in the Development Plan such that the Project  can be completed in accordance with the Development Plan by the Project's scheduled completion  date, and (B) in compliance with all required permits from the local government authority.  Tejon  shall provide Majestic with monthly updates of the Master Developer Work, which has been  performed or is contemplated to be performed in the future. 2.13 Marketing and Leasing Management The Administrative Member shall be responsible for preparing a marketing plan for the  Project and negotiating leases for the Project with the assistance of, and in coordination with, the  other Member.  The marketing plan shall be submitted by the Administrative Member to the  Executive Committee (as part of the annual business plan for the Company's first Business Plan  Period) for its review and approval, which approval shall not be unreasonably withheld, delayed  or conditioned.  Each marketing plan that is approved by the Executive Committee is hereinafter  referred to as the "Marketing Plan."  The Marketing Plan shall describe in reasonable detail  (i) the types of proposed users and buyers for the Project, (ii) the marketing, leasing and sales  objectives and a timeline for accomplishing such objectives, and (iii) such other information  regarding the marketing of the Project as is reasonably requested by the Executive Committee.   The Administrative Member shall be responsible for implementing each Marketing Plan on behalf  of the Company (provided the Company shall pay all third-party out-of-pocket costs and expenses  incurred in connection with the implementation of each such Marketing Plan).  The Marketing  Plan shall be updated by the Administrative Member on a quarterly basis and submitted to the  Executive Committee for its review and approval, which approval shall not be unreasonably  withheld, delayed or conditioned.  Notwithstanding the foregoing, if the Project is fully leased,  then the Administrative Member shall not be required to update the Marketing Plan prior to the  date that is one (1) year prior to the expiration of the earliest of such leases to expire (unless  otherwise requested to do so by the other Member). 2.14 Property Management The Administrative Member and the other Member shall jointly act as the property  manager for the Project.  In its capacity as a property manager for the Project, the Administrative  Member shall be responsible for managing the accounting and the contract and lease  administration for the Project including, without limitation, enforcing the Company's rights and  benefits, and causing the Company to perform its duties and obligations, under each lease entered  into with respect to the Project.  In its capacity as a property manager for the Project, Tejon shall  be responsible for the repair and maintenance of the Project and customer service.  Tejon may  not assign or delegate its duties or obligations under this Section 2.14 without the prior written  consent of the Executive Committee.  As compensation for rendering the services described in  this Section 2.14, (i) each Member shall be reimbursed for the reasonable third-party out-of-pocket  costs incurred by such Member in rendering such services, and (ii) the Company shall pay to each  Member a fee (the "Property Management Fee") equal to one and 5/10ths percent (1.5%) of the  gross receipts received by the Company from the operation of the Project.  The Property  Management Fee shall be earned as the management services are rendered and paid on the first  day of each calendar month based upon the gross receipts received by the Company in the  preceding calendar month.  If the Administrative Member ceases to provide the property  management services it is required to render under this Section 2.14 and Tejon thereafter provides  

 

1282772.07/OC 373745.00003 -16- such services, then the Property Management Fee that is otherwise payable to Majestic for the  rendering of such services shall thereafter be paid to Tejon.  If Tejon ceases to provide the  property management services it is required to render under this Section 2.14 and Majestic  thereafter provides such services, then the Property Management Fee that is otherwise payable to  Tejon for the rendering of such services shall thereafter be paid to Majestic. 2.15 Authority with Respect to the Affiliate Agreements Notwithstanding any other provision of this Agreement including, without limitation,  Sections 2.01, 2.02, 2.03 and 2.04, Tejon or Majestic, as the case may be, shall have the sole right,  power and authority, in its sole and absolute discretion and without the consent or approval of the  other Member (the "Affiliated Member"), (i) to cause the Company to enforce its rights under  any contract or other agreement entered into by the Company with the Affiliated Member and/or  any Affiliate thereof (collectively, the "Affiliate Agreements") following any breach by the  Affiliated Member and/or any Affiliate thereof under any such Affiliate Agreement, (ii) to make  all decisions on behalf of the Company with respect to any amendment, modification, rescission,  extension, and/or termination under any Affiliate Agreement, (iii) to determine the existence of  any default under any Affiliate Agreement and to cause the Company to declare any such default  following any breach by the Affiliated Member and/or any Affiliate thereof under such Affiliate  Agreement, (iv) to cause the Company to institute, settle and/or compromise any claim under any  Affiliate Agreement against the Affiliated Member and/or any Affiliate thereof, (v) to cause the  Company to waive any rights of the Company against the Affiliated Member and/or any Affiliate  thereof under any Affiliate Agreement, and (vi) to cause the Company to consent to the assignment  of any rights and/or the delegation of any duties by the Affiliated Member and/or any Affiliate  thereof under any Affiliate Agreement.  Majestic or Tejon, as the case may be, shall cooperate in  good faith with the other Member in the exercise by the other Member of the foregoing rights and  actions under the Affiliate Agreements.  For the avoidance of any doubt, the Members  acknowledge that the Construction Contract to be entered into by the Company and Commerce  constitutes an Affiliate Agreement under this Agreement (as a result of Commerce being an  Affiliate of Majestic). 2.16 Election, Resignation, Removal of the Administrative Member (a) Number, Term and Qualifications.  The Company shall have one (1)  Administrative Member.  Unless it resigns (pursuant to the terms of this Agreement), is  removed or ceases to be a member of the Company, the Administrative Member shall hold  office until a successor shall have been elected and qualified.  Unless the Administrative  Member resigns or is removed pursuant to Section 2.16(c), a new Administrative Member  may not be appointed without the approval of the Executive Committee. (b) Resignation.  The Administrative Member may resign upon no less than  one hundred twenty (120) days prior written notice to the other Member.  Except as set  forth below in Section 2.16(d), any resignation of the Administrative Member in  accordance with the terms of this Section 2.16(b) shall not affect the Administrative  Member's rights as a member of the Company, and shall not constitute a withdrawal of the  Administrative Member as a member of the Company. 

 

1282772.07/OC 373745.00003 -17- (c) Removal.  The Administrative Member (or any successor administrative  member) may be removed following the occurrence of a Just Cause Event, by written  notice ("Removal Notice") from the other Member to the Administrative Member within  forty-five (45) days following the date such Member first becomes aware of such Just  Cause Event.  The Removal Notice shall specify in reasonable detail the Just Cause Event  giving rise to the removal.  For purposes of this Section 2.16(c), "Just Cause Event" shall  mean: (i) Breach of Agreement.  The breach of any material covenant,  duty or obligation under this Agreement by the Administrative Member if (i) the  Administrative Member has received written notice from the other Member of the  breach describing such breach in reasonable detail, and (ii) (A) the breach is not  reasonably susceptible of being cured, or (B) if the breach is reasonably susceptible  of being cured (1) the Administrative Member has failed to commence the cure or  remedy of the breach within fifteen (15) days following the effective date of the  notice, or (2) failed to complete the cure or remedy within a reasonable period of  time (not to exceed sixty (60) days following the effective date of such notice,  unless the cure or remedy cannot be reasonably completed within such sixty (60)- day period and the Administrative Member fails to diligently proceed with the cure  or remedy to completion within an additional forty-five (45) days following the  expiration of such initial sixty (60)-day period); (ii) Fraud, Willful Misconduct, Gross Negligence, Etc.  The fraud,  willful misconduct, gross negligence or conviction of a crime involving moral  turpitude by the Administrative Member (other than any misappropriation of funds  described in clause (iii) below); or (iii) Misappropriation of Funds.  Any misappropriation of funds by  the Administrative Member provided that if such misappropriation of funds is  committed by an employee of the Administrative Member, then such event shall  not constitute a Just Cause Event if, within ten (10) Business Days after being  notified in writing of such event, the Administrative Member makes full restitution  to the Company of all damages caused by such event and terminates the  employment of such employee. (d) Rights Following Resignation or Removal.  Upon the resignation of an  Administrative Member or the removal of a member as the Administrative Member in  accordance with Section 2.16(c), (i) the resigned or removed Member shall be relieved of  its duties as Administrative Member under this Agreement including, without limitation,  the duty to provide the development management, marketing and property management  services described in Sections 2.11, 2.13 and 2.14, (ii) the other Member shall have the  right, power and authority to designate each replacement Administrative Member (which  may be the other Member (including a member, which previously served as the  Administrative Member), any Affiliate of the other Member and/or any other Person) to  replace the Member that has resigned or been removed as the Administrative Member (or  any replacement Administrative Member) and such replacement Administrative Member  shall have all of the rights, duties and obligations of the Administrative Member under this  

 

1282772.07/OC 373745.00003 -18- Agreement (including, without limitation, the right to receive any fees or other amounts  payable to the Administrative Member under this Agreement following such resignation  or removal for services that are thereafter provided by the replacement Administrative  Member), and (iii) the other Member may terminate any or all of the Affiliate Agreements  entered into with the Administrative Member or any Affiliate thereof and/or hire at the  expense of the Company a new development manager, marketing director and/or property  manager including, without limitation, any Affiliate of such other Member which is  qualified to render the services previously provided by the resigned or removed Member. (e) No Adjustment to Percentage Interests.  Except as provided in  Section 2.16(d), if a Member resigns or is removed as the Administrative Member, then  the Percentage Interests of the Members shall not be adjusted and the removed  Administrative Member shall retain all of its rights, duties and obligations of a member  under this Agreement (other than any rights, duties and/or obligations as the Administrative  Member). 2.17 Officers (a) Appointment of Officers.  The Executive Committee may appoint, and  delegate authority to, officers ("Officers") of the Company at any time.  The Officers of  the Company may include, without limitation, a Chief Executive Officer, President, Chief  Financial Officer, Chief Operating Officer, Senior Vice President, Vice President,  Assistant Vice President, Secretary and Assistant Secretary.  Any individual may hold  any number of offices.  Unless the Executive Committee otherwise determines in its sole  and absolute discretion, (i) if the title assigned to any Officer is one commonly used for  officers of a business corporation formed under the Delaware General Corporation Law,  then the assignment of such title shall constitute the delegation to such person of the rights,  powers, duties, obligations and authority that are normally associated with that office, and  (ii) no Officer shall receive any salary or other compensation for acting as an Officer of the  Company.  Any delegation pursuant to this Section 2.17(a) may be revoked at any time  by the Executive Committee.  The Officers shall serve at the pleasure of the Executive  Committee. (b) Removal of Officers.  Any Officer may be terminated, either with or  without cause, by the Executive Committee at any time.  Any Officer may resign at any  time by giving written notice to the Executive Committee.  Any resignation shall take  effect as of the effective date of any such notice or at any later time specified in such notice;  and, unless otherwise specified in that notice, the acceptance of the resignation shall not be  necessary to make it effective.  A vacancy in any office because of death, incapacity,  resignation, removal, disqualification or any other cause shall be filled, if at all, in the  manner prescribed in this Agreement for regular appointments to that office. 2.18 Treatment of Payments For financial and income tax reporting purposes, any and all fees paid by the Company to  any Member and/or any Affiliate thereof shall be treated as expenses of the Company and, if paid  to any Member, as guaranteed payments within the meaning of Section 707(c) of the Code.  To  

 

1282772.07/OC 373745.00003 -19- the extent all or any portion of any fee is not paid in full prior to the Liquidation of the Company,  such unpaid portion of such fee shall constitute a debt of the Company payable upon such  Liquidation.  The Members acknowledge and agree that any fee paid to any Member (and/or any  Affiliate thereof) in accordance with the terms of this Agreement shall constitute the sole and  exclusive property of such recipient Member (and/or such Affiliate), and the other Member shall  not have any rights thereto or interests therein. 2.19 Reimbursement and Fees Except as expressly provided in this Agreement, the Construction Contract, or otherwise  agreed to in writing by the Executive Committee, including, without limitation, pursuant to the  terms of any Approved Business Plan, none of the Members (or their respective Affiliates and/or  other representatives) shall be paid any compensation for rendering services to the Company or  otherwise be reimbursed for any costs and expenses incurred by such Member (and/or any Affiliate  or representative thereof) on behalf of the Company.  Notwithstanding the foregoing, each  Member shall be promptly reimbursed by the Company for any Pre-Development Costs incurred  by such Member after the Effective Date (subject to providing the supporting documentation  described below in this Section 2.19).  Without limiting the generality of the foregoing provisions  of this Section 2.19, neither Member nor any Affiliate thereof shall be reimbursed for any general  and administrative costs and expenses incurred by such party, and any costs incurred by Tejon in  creating the legal parcel or parcels comprising the Property shall not be subject to reimbursement.   Any request for reimbursement by any Member pursuant to this Section 2.19 shall be accompanied  by supporting documentation and shall be made within forty-five (45) days after the date such  expenses are incurred by such Member.  Any such reimbursements made by the Company to a  Member shall not reduce such Member's Capital Account or Unreturned Contribution Account. 2.20 Insurance The Administrative Member shall cause the Company to purchase and maintain (at the  expense of the Company) a commercial general liability insurance policy, a builder's risk insurance  policy and a property insurance policy in such amounts as are reasonably determined by the  Executive Committee and such other insurance as may be requested from time to time by the  Executive Committee.  The cost of any insurance policies maintained by the Company pursuant  to this Section 2.20 shall be an expense of the Company and shall be included in the Development  Budget or the Operating Budget. ARTICLE III MEMBERS' CONTRIBUTIONS TO COMPANY 3.01 Initial Contributions of the Members The initial capital contributions of the Members shall be made as follows: (a) Initial Cash Contributions.  Concurrently with the execution and  delivery of this Agreement, each of Tejon and Majestic shall make an initial cash  contribution to the capital of the Company in the amount set forth opposite such Member's  name under the column labelled "Inititial Cash Contributuion" on Exhibit "A" attached  hereto to enable the Company to fund the anticipated costs and expenses that will be  

 

1282772.07/OC 373745.00003 -20- incurred by the Company prior to the funding of the Construction Loan described in  Section 3.04.  Each Member’s Capital Account and Unreturned Contribution Account  shall be credited by the amount contributed by such Member pursuant to this  Section 3.01(a) on the date such contribution is made.  (b) Tejon Property and Related Contributions.  Tejon hereby agrees to make  the following contributions: (i) In accordance with the terms of the Contribution Agreement,  Tejon shall assign, transfer and contribute to the capital of the Company on the  Effective Date, Tejon's entire fee interest in and to the Property (subject to all liens,  encumbrances and other permitted exceptions to title approved under the  Contribution Agreement).  The Property shall be contributed by Tejon to the  Company concurrently with the closing of the Construction Loan at an agreed upon  value (net of all such approved liens, encumbrances and permitted exceptions) of  Five Dollars ($5.00) per square foot of the net usable land area, reduced by the lien  for property taxes not yet payable and adjusted for any other prorations in the  manner described below and any other items agreed to by Tejon and Majestic under  the Contribution Agreement (the "Agreed Value").  The Agreed Value shall be  reduced by the amount of any net prorations and credits charged to Tejon under the  Contribution Agreement and increased by the amount of any net prorations and  credits charged to the Company under the Contribution Agreement.  The Agreed  Value of the Property prior to any adjustment for real property taxes not yet  payable, prorations and credits will equal approximately Eight Million One  Hundred Sixty-Seven Thousand Five Hundred Dollars ($8,167,500.00) (i.e., (total  acreage of 37.5 acres x 43,560) x $5.00 = $8,167,500.00).  Tejon's Capital  Account and Unreturned Contribution Account shall each be credited by an amount  equal to the Agreed Value on the date the Property is contributed to the Company.   (ii) Contribution of Work Product.  Effective concurrently with the  closing of the Construction Loan, Tejon herby assigns, transfers and contributes to  the Company the entire right, title and interest of Tejon in and to all reports, studies  and other work product obtained by Tejon prior to the Effective Date that relate to  the Property (collectively, the “Work Product”).  Tejon's Capital Account and  Unreturned Contribution Account shall each be credited on the effective date of  such contribution by an amount equal to the Pre-Development Costs paid by Tejon  prior to the Effective Date set forth on Exhibit "C" attached hereto.  In furtherance  of the foregoing, Tejon hereby represents and warrants that Tejon and/or one (1) or  more of its Affiliates has actually paid the Pre-Development Costs to be credited to  Tejon's Capital Account and Unreturned Contribution Account pursuant to this  Section 3.01(b)(ii). (c) Majestic Balancing Contribution.  Majestic hereby agrees to make the  following contributions: (i) Concurrently with the closing of the Construction Loan (and  through the escrow established for the Construction Loan), Majestic shall  

 

1282772.07/OC 373745.00003 -21- contribute to the capital of the Company, in cash, an amount equal to the sum of  (A) fifty percent (50%) of the the Agreed Value, and (B) the excess of (1) fifty  percent (50%) of the amount of the Pre-Development Costs paid by both Members  (or any Affiliate thereof) prior to the Effective Date, minus (2) the Pre- Development Costs paid by Majestic (or any Affiliate thereof) prior to the Effective  Date.  Majestic's Capital Account and Unreturned Contribution Account shall be  credited by such amount on the date such contribution is made.  Concurrently with  the closing of the Construction Loan, the Company shall distribute the capital  contribution made by Majestic pursuant to this Section 3.01(c)(i) to Tejon, which  distribution shall be debited to Tejon's Capital Account and Unreturned  Contribution Account on the date such distribution is made.  After such  distribution is made, the balance standing in Tejon's Capital Account and  Unreturned Contribution Account shall equal the sum of (x) the capital contributed  by Tejon to the capital of the Company pursuant to Section 3.01(a), (y) fifty percent  (50%) of the Agreed Value, and (z) fifty percent (50%) of the Pre-Development  Costs paid by the Members (and/or any affiliate thereof) prior to the Effective Date  (which will equal the balance standing in Majestic's Capital Account and  Unreturned Contribution Account on the date such distribution is made).  (ii) Contribution of Work Product.  Effective concurrently with the  closing of the Construction Loan, Majestic herby assigns, transfers and contributes  to the Company the entire right, title and interest of Majestic in and to all Work  Product obtained by Majestic prior to the Effective Date that relate to the Property.   Majestic's Capital Account and Unreturned Contribution Account shall each be  credited on the effective date of such contribution by an amount equal to the Pre- Development Costs paid by Majestic prior to the Effective Date set forth on  Exhibit "C" attached hereto.  In furtherance of the foregoing, Majestic hereby  represents and warrants that Majestic and/or one (1) or more of its Affiliates has  actually paid the Pre-Development Costs to be credited to Majestic's Capital  Account and Unreturned Contribution Account pursuant to this Section 3.01(c)(ii). 3.02 Additional Capital Contributions If the Company has insufficient funds to meet its current or projected financial  requirements (a "Shortfall"), then the Administrative Member shall give written notice (the  "Capital Call Notice") of such Shortfall to the other Member.  The Contribution Notice shall  summarize, with reasonable particularity, the Company's actual and projected cash obligations,  cash on hand, projected sources and amounts of future Cash Flow and a contribution date  ("Additional Contribution Date") (which shall not be less than ten (10) Business Days following  the effective date of such notice) upon which each Member shall be obligated to contribute to the  capital of the Company, in cash, such Member's Percentage Interest of the funds necessary to  satisfy such Shortfall.  If the Company has a Shortfall and the Administrative Member fails to  deliver a Capital Call Notice so that the Company may timely satisfy any such Shortfall, then the  other Member may deliver the Capital Call Notice pursuant to this Section 3.02.  Any and all  amounts contributed to the capital of the Company by any Member pursuant to this Section 3.02  shall be credited to such Member's Capital Account and Unreturned Contribution Account on the  date any such contribution is made. 

 

1282772.07/OC 373745.00003 -22- 3.03 Remedy for Failure to Contribute Capital If any Member (the "Non-Contributing Member") fails to contribute timely all or any  portion of the additional capital such Member is required to contribute pursuant to Section 3.02  (the "Delinquent Contribution"), and provided that the other Member (the "Contributing  Member") has timely contributed to the capital of the Company all of the additional capital  required to be contributed by such Contributing Member pursuant to Section 3.02 (with respect to  that particular notice and capital call), then such Contributing Member shall have the right to select  one (1) or more of the following options in accordance with the terms set forth below in this  Section 3.03: (a) Loan Remedy.  The Contributing Member may advance to the  Company, in cash, within thirty (30) days following the Additional Contribution Date, an  amount equal to the Delinquent Contribution, and such advance shall be treated as a  nonrecourse loan ("Default Loan") by the Contributing Member to the Non-Contributing  Member, bearing interest at a rate equal to the lesser of (i) the prevailing prime commercial  lending rate of Wells Fargo Bank plus five (5) percentage points, adjusted concurrently  with any adjustments to such rate and compounded annually, or (ii) the maximum,  nonusurious rate then permitted by law for such loans.  Subject to Sections 7.09 and 8.08,  each Default Loan shall be due and payable in full one hundred twenty (120) days from the  date advanced (or, if earlier, upon the dissolution of the Company). As of the effective date of the advance of any Default Loan, the Capital Account  and the Unreturned Contribution Account of the Non-Contributing Member shall be  credited with an amount equal to the original principal balance of the Default Loan made  by the Contributing Member to the Non-Contributing Member.  Notwithstanding the  provisions of Articles V and XII, until any and all Default Loans made to the Non- Contributing Member are repaid in full, the Non-Contributing Member shall receive no  further distributions from the Company, and all cash or property otherwise distributable  with respect to the Non-Contributing Member's Interest shall be distributed to the  Contributing Member as a reduction of the outstanding balance of (together with all  accrued, unpaid interest thereon) any and all such Default Loans, with such funds being  applied first to reduce any and all interest accrued on such Default Loan(s) and then to  reduce the principal amount thereof.  Any amounts so applied shall be treated, for all  purposes under this Agreement, as having actually been distributed to the Non- Contributing Member pursuant to Section 5.01 and applied by the Non-Contributing  Member to repay such outstanding Default Loan(s). To secure the repayment of any and all Default Loans made to the Non- Contributing Member, such Non-Contributing Member hereby grants a security interest in  favor of the Contributing Member in and to the Non-Contributing Member's entire Interest  in the Company, and hereby irrevocably appoints the Contributing Member, and each of  the Contributing Member's representatives, agents, officers or employees, as the Non- Contributing Member's attorney(s)-in-fact, with full power to prepare, execute,  acknowledge, and deliver, as applicable, all documents, instruments, and/or agreements  memorializing and/or securing such Default Loan(s), including, without limitation, such  Uniform Commercial Code financing and continuation statements, mortgages, pledge  

 

1282772.07/OC 373745.00003 -23- agreements and other security instruments as may be reasonably appropriate to perfect and  continue the security interest in favor of such Contributing Member. The Contributing Member is also authorized to cause the Company to issue  certificates (collectively, the "Certificates") evidencing the Members' respective Interests  in the Company (in such form as is determined in the sole and absolute discretion of the  Contributing Member) and is further authorized to take possession and control of any such  Certificate of the Non-Contributing Member if it has made a Default Loan to the Non- Contributing Member.  Following the issuance of the Certificates, each Interest in the  Company shall constitute a "certificated security" within the meaning of, and be governed  by, (A) Section 8-102(a)(15) of the Uniform Commercial Code as in effect from time to  time in the State of Delaware, and (B) the Uniform Commercial Code of any other  applicable jurisdiction that now or hereafter substantially includes the 1994 revisions to  Article 8 thereof as adopted by the American Law Institute and the National Conference of  Commissioners on Uniform State Laws and approved by the American Bar Association on  February 14, 1995.  Notwithstanding any provision of this Agreement to the contrary, to  the extent any provision of this Agreement is inconsistent with any non-waivable provision  of Article 8 of the Uniform Commercial Code, as in effect in the State of Delaware  (6 Del C. § 8-101, et seq.), such provision of Article 8 of the Uniform Commercial Code  shall control. If, upon the maturity of a Default Loan (taking into account any agreed upon  extensions thereof), any principal thereof and/or accrued interest thereon remains  outstanding, then the Contributing Member may elect any one (1) of the following options:   (1) to renew such Default Loan (or portion thereof) pursuant to the terms and provisions of  this Section 3.03(a) for such additional term as is determined in the sole and absolute  discretion of the Contributing Member; (2) to institute legal (or other) proceedings against  the Non-Contributing Member to collect such loan which may include, without limitation,  foreclosing against the security interest granted above; (3) to contribute all or any portion  of such outstanding principal of, and accrued interest on, such Default Loan (or portion  thereof) to the capital of the Company pursuant to the provisions of Section 3.03(b); or  (4) to implement the default provisions set forth in Article VII in accordance with the  provisions of Section 3.03(c). The Contributing Member may elect any of the options set forth in the immediately  preceding sentence by giving written notice of such election to the Non-Contributing  Member within thirty (30) days following such maturity date.  Failure of the Contributing  Member to timely give such written notice to the Non-Contributing Member shall be  deemed to constitute an election to renew such Default Loan for an additional term of one  hundred twenty (120) days on the terms set forth herein.  If the Contributing Member  elects to foreclose upon the security interest in the Non-Contributing Member's Interest in  the Company granted above, then the Contributing Member is authorized to cancel the  Certificate evidencing the Non-Contributing Member's Interest in the Company and issue  a new Certificate to the Contributing Member that has foreclosed upon such Interest. (b) Dilution Remedy.  The Contributing Member may contribute to the  capital of the Company, in cash, within thirty (30) days following the Additional  

 

1282772.07/OC 373745.00003 -24- Contribution Date an amount equal to the Delinquent Contribution, and such Contributing  Member's Capital Account and Unreturned Contribution Account shall each be credited  with the amount contributed by such Contributing Member.  Further, upon the maturity  of a Default Loan that is not fully repaid on or before the maturity date thereof, the  Contributing Member may contribute to the capital of the Company, in accordance with  the provisions of Section 3.03(a) above, all or any portion of the outstanding principal of  and/or accrued interest on such Default Loan previously advanced by such Contributing  Member that is not repaid prior to the maturity date thereof, and (i) the amount of such  outstanding principal and/or interest so contributed shall be deemed repaid and satisfied;  (ii) the Capital Account and the Unreturned Contribution Account of the Non-Contributing  Member shall be decreased, but not below zero (0), by the amount of such outstanding  principal and/or interest so contributed; and (iii) the Capital Account and the Unreturned  Contribution Account of the Contributing Member shall be increased by the amount of  such outstanding principal and/or interest so contributed. Upon the contribution of the Delinquent Contribution and/or the outstanding  balance of a Default Loan by the Contributing Member pursuant to the foregoing  provisions of this Section 3.03(b), (A) the balance standing in each Member’s Unreturned  Contribution Account and Capital Account shall be decreased in the case of the Non- Contributing Member and increased in the case of the Contributing Member by an amount  equal to the Adjustment Amount, and (B) each Member’s Percentage Interest shall be  decreased in the case of the Non-Contributing Member and increased in the case of the  Contributing Member by the Dilution Percentage.  The "Adjustment Amount" shall  equal fifty percent (50%) of each Delinquent Contribution contributed by the Contributing  Member on behalf of the Non-Contributing Member pursuant to this Section 3.03(b).   The "Dilution Percentage" shall equal the amount expressed in percentage points  calculated based upon the following formula:  Dilution Percentage =  150     ( Delinquent Contribution Total amount of the Members' capital contributions to the Company (including any Delinquent  Contribution contributed by the Contributing Member), not reduced by any distributions under Section 5.01    ) The application of the provisions of this Section 3.03(b) are illustrated by the  following example:  Assume that (1) the aggregate balance standing in each Member's  Unreturned Contribution Account and Capital Account is equal to Two Million Three  Hundred Thousand Dollars ($2,300,000) (i.e., $4,600,000 in the aggregate), (2) a  contribution of Four Hundred Thousand Dollars ($400,000) is required to be contributed  by the Members to the capital of the Company pursuant to Section 3.02, (3) the Non- Contributing Member has a Percentage Interest of fifty percent (50%) and fails to  contribute its share of such contribution equal to Two Hundred Thousand Dollars  ($200,000) (i.e., 50%  $400,000), and (4) the Contributing Member has a Percentage  Interest of fifty percent (50%) and contributes its entire share of such contribution equal to  

 

1282772.07/OC 373745.00003 -25- Two Hundred Thousand Dollars ($200,000) (i.e., 50% x $400,000) and the Delinquent  Contribution of Two Hundred Thousand Dollars ($200,000) to the capital of the Company  on behalf of the Non-Contributing Member pursuant to this Section 3.03(b), which  increases the balance standing in the Contributing Member's Unreturned Contribution  Account and Capital Account (before taking into account the Adjustment Amount) from  Two Million Three Hundred Thousand Dollars ($2,300,000) to Two Million Seven  Hundred Thousand Dollars ($2,700,000) (i.e., $2,300,000 + $400,000 = $2,700,000).  By  operation of this Section 3.03(b), the Adjustment Amount would equal One Hundred  Thousand Dollars ($100,000) (i.e., $200,000 Delinquent Contribution x 50% = $100,000),  and the Dilution Percentage would be equal to six (6) percentage points as calculated in  accordance with the following formula: 6  =   150   $200,000  $ 5,0 00,000     Accordingly, (x) the balance standing in each Member’s Unreturned Contribution  Account and Capital Account would be (AA) decreased in the case of the Non- Contributing Member from Two Million Three Hundred Thousand Dollars ($2,300,000)  to Two Million Two Hundred Thousand Dollars ($2,200,000) (i.e., $2,300,000 - $100,000  Adjustment Amount = $2,200,000), and (BB) increased in the case of the Contributing  Member from Two Million Seven Hundred Thousand Dollars ($2,700,000) to Two Million  Eight Hundred Thousand Dollars ($2,800,000) (i.e., $2,700,000 + $100,000 Adjustment  Amount = $2,800,000), (y) the Percentage Interest of each Member would be  (AA) decreased in the case of the Non-Contributing Member by six (6) percentage points  from fifty percent (50%) to forty-four percent (44%) (i.e., 50% - 6% = 44%), and  (BB) increased in the case of the Contributing Member by six (6) percentage points from  fifty percent (50%) to fifty-six percent (56%) (i.e., 50% + 6% = 56%).  After the foregoing  adjustments, the ratio of the balance standing in each Member’s Unreturned Contribution  Account and Capital Account to the balances standing in both Members’ Unreturned  Contribution Accounts and Capital Accounts would fifty-six percent (56%) in the case of  the Contributing Member (i.e., $2,800,000/$5,00,000 = 56%) and forty-four percent (44%)  in the case of the Non-Contributing Member (i.e., $2,300,00/$5,000,000 = 44%) (which  will the same as each Member’s Percentage Interest in the Company following the dilution  under this example).   (c) Implementation of Default Provisions.  The Contributing Member may  elect to implement the default provisions contained in Article VII by delivery of written  notice of such election to the Non-Contributing Member within ninety (90) days following  the Additional Contribution Date or the maturity date for any Default Loan that is not  repaid prior to the maturity thereof. (d) Election of Remedy.  The Contributing Member shall determine which  of the options set forth in Sections 3.03(a), 3.03(b) and/or 3.03(c) are to be exercised by  the Contributing Member with respect to each Delinquent Contribution.  If the  Contributing Member advances any amount to the Company pursuant to this Section 3.03  but fails to specify which of the foregoing options the Contributing Member has elected  

 

1282772.07/OC 373745.00003 -26- within thirty (30) days after the effective date that the Contributing Member makes such  advance, then such Contributing Member shall be deemed to have elected the option set  forth in Section 3.03(a) above with respect to such advance. (e) Minimum Percentage Interest.  Any and all adjustments to the Members'  respective Percentage Interests pursuant to Section 3.03(b) shall be rounded to the nearest  1/100th of one percentage point (0.01%).  In addition, notwithstanding any provision  contained in this Article III, the Non-Contributing Member's Percentage Interest shall in  no event be reduced below 1/100th of one percent (0.01%) by operation of Section 3.03(b). 3.04 Financing The Administrative Member shall use its commercially reasonable efforts to cause the  Company to procure a construction loan (the "Construction Loan") to finance the development  and construction of the Improvements from one (1) or more independent third-party institutional  lenders selected by the Administrative Member (individually, the "Lender" and collectively, the  "Lenders") upon prevailing market terms and conditions.  The Administrative Member shall also  use its commercially reasonable efforts to obtain a permanent loan (the "Permanent Loan") from  one (1) or more Lenders to refinance the Construction Loan upon prevailing market terms and  conditions (and any other financing thereafter required to refinance the Permanent Loan), which  shall be nonrecourse to the Members (subject to any Nonrecourse Documents described in  Section 3.05 required to be provided to the Lender providing any such Permanent Loan).  The  Construction Loan and the Permanent Loan shall be secured by a deed of trust encumbering the  Project.  Any such financing and/or refinancing obtained by the Administrative Member on  behalf of the Company (collectively, the "Loans") shall require the consent of the Executive  Committee pursuant to Section 2.04(e).  If the Company does not close the Construction Loan  within ten (10) days following the approval of the annual business plan for the Company's first  Business Plan Period pursuant to Section 2.07, then either Member may elect to dissolve the  Company by delivering written notice of such election to the other Member pursuant to  Section 12.01(c) (provided such election is made prior to the date (if any) that the Company closes  the Construction Loan). 3.05 Agreement to Provide Guarantees and Indemnification Each Member and/or one (1) or more of their respective Affiliates or representatives,  including, without limitation, the ultimate parent of each Member if required by the applicable  Lender (collectively, the "Guarantors" and individually, a "Guarantor") shall execute and  deliver to any Lender providing a Construction Loan to the Company (i) any and all repayment or  completion guaranties or similar documents required by such Lender (collectively, the "Recourse  Documents"), and (ii) any and all other environmental indemnities and "bad-boy" carve-out  guaranties required by such Lender (collectively, the "Nonrecourse Documents") provided such  Recourse Documents and Nonrecourse Documents are approved by the Executive Committee in  its reasonable discretion.  In addition, the Guarantors shall execute any Nonrecourse Document  required by any Lender providing a Permanent Loan to the Company provided such Nonrecourse  Documents are approved by the Executive Committee in its reasonable discretion. 

 

1282772.07/OC 373745.00003 -27- The Administrative Member shall use its commercially reasonable efforts to obtain each  Lender's agreement that the obligation of each Guarantor under each Recourse Document and  Nonrecourse Document shall be several (i.e., not joint and several) as between the Members (and  their respective Affiliates) and proportionate to the Percentage Interest of each Member that is an  Affiliate of such Guarantor determined as of the date any liability is incurred under any such  Recourse Document or Nonrecourse Document.  The Members acknowledge and agree that each  Recourse Document and Nonrecourse Document executed by any Guarantor shall be executed  only as an accommodation to the Company and/or the Members.  The Company shall indemnify,  defend, protect and hold each such Guarantor wholly harmless from and against any and all claims,  liabilities, losses, costs, expenses, damages and/or expenses including, without limitation, any  attorneys' and expert witness fees and costs (collectively, "Losses") incurred by any such  Guarantor as a result of such Recourse Document and Nonrecourse Document (or as a result of  the rights of contribution described below) in accordance with the terms of Section 10.02(b).   Either Member may deliver a Capital Call Notice in accordance with the provisions of Section 3.02  to require the Members to make additional contributions to the capital of the Company to enable  the Company to satisfy the indemnity for any Losses described in this Section 3.05. If the Company fails to fully satisfy any indemnification and/or defense obligation owing  to any Member or any Guarantor affiliated with such Member pursuant to the provisions of this  Section 3.05, then such Guarantor ("Contributing Party") shall have a right of contribution  against the other Member and the Guarantor affiliated with such Member (collectively, the "Non- Contributing Party") to the extent the liability incurred by the Contributing Party under any  Recourse Document or Nonrecourse Document (for which it is entitled to be indemnified by the  Company pursuant Section 10.02(b)) exceeds such Contributing Party's Pro Rata Share of the total  liability incurred by all of the Guarantors under all of the Recourse Documents and Nonrecourse  Documents (for which the Guarantors are entitled to be indemnified by the Company pursuant to  Section 10.02(b)).  The term "Pro Rata Share" means (A) with respect to Tejon and its  Guarantors, an amount equal to its then Percentage Interest of the total liability incurred by all of  the Guarantors under all of the Recourse Documents and Nonrecourse Documents (for which the  Guarantors are entitled to be indemnified by the Company pursuant to Section 10.02(b) below),  and (B) with respect to Majestic and its Guarantors, an amount equal to its then Percentage Interest  of the total liability incurred by all of the Guarantors under all of the Recourse Documents and  Nonrecourse Documents (for which the Guarantors are entitled to be indemnified by the Company  pursuant to Section 10.02(b) below). At any time that any Contributing Party has a right of contribution against the Non- Contributing Party under this Section 3.05, the Non-Contributing Party shall be obligated to satisfy  such contribution obligation by paying the required amount, in cash, within ten (10) days following  written notice thereof from the Contributing Party.  If any such payment is not timely and validly  made within such ten (10)-day period, then from and after the date such amount was required to  be paid, such amount shall bear interest at the lesser of (1) the prevailing prime commercial lending  rate of Wells Fargo Bank plus five (5) percentage points, adjusted concurrently with any  adjustments to such rate and compounded annually, or (2) the maximum non-usurious rate allowed  by law.  The Contributing Party shall also be entitled to collect from the Non-Contributing Party  any and all costs and expenses of enforcing such contribution obligation including, without  limitation, reasonable attorneys' and expert witness fees and costs. 

 

1282772.07/OC 373745.00003 -28- The Members acknowledge and agree that each of the Guarantors (that are not Members)  are express third-party beneficiaries of the foregoing provisions of this Section 3.05, and, as such,  all of the Guarantors have the right, power and authority to enforce the provisions of this  Section 3.05.  Each Member further agrees to cause any Guarantor affiliated with such Member  to agree to be bound by the foregoing provisions of this Section 3.05 at the time such Guarantor  executes and delivers any Recourse Document or Non-Recourse Document.   3.06 Capital Contributions in General Except as otherwise expressly provided in this Agreement or as otherwise agreed to in  writing by all of the Members (i) no part of the contributions of any Member to the capital of the  Company may be withdrawn by such Member, (ii) no Member shall be entitled to receive interest  or a return on such Member's contributions to the capital of the Company, (iii) no Member shall  have the right to demand or receive property other than cash in return for such Member's  contribution to the Company, and (iv) no Member shall be required or be entitled to contribute  additional capital to the Company other than as permitted or required by this Article III. ARTICLE IV ALLOCATION OF PROFITS AND LOSSES 4.01 Net Losses After giving effect to the special allocations in Sections 4.03 and 4.04, Net Losses for each  Fiscal Year shall be allocated among the Members so as to reduce, proportionately, the differences  between their respective Target Capital Accounts and Partially Adjusted Capital Accounts for such  Fiscal Year.  No portion of the Net Losses for any taxable year shall be allocated to a Member  whose Partially Adjusted Capital Account is less than or equal to such Member's Target Capital  Account for such Fiscal Year. 4.02 Net Profits After giving effect to the special allocations in Sections 4.03 and 4.04, Net Profits for each  Fiscal Year shall be allocated among the Members so as to reduce, proportionately, the differences  between their respective Target Capital Accounts and Partially Adjusted Capital Accounts for such  Fiscal Year.  No portion of the Net Profits for any taxable year shall be allocated to a Member  whose Partially Adjusted Capital Account is greater than or equal to such Member's Target Capital  Account for such Fiscal Year. 4.03 Special Allocations Notwithstanding any other provisions of this Agreement, no Net Losses or items of  expense, loss or deduction shall be allocated to any Member to the extent such an allocation would  cause or increase a deficit balance standing in such Member's Adjusted Capital Account and any  such Net Losses and items of expense, loss and deduction shall instead be allocated to the Members  in proportion to their respective "interests" in the Company as determined in accordance with  Treasury Regulation Section 1.704-1(b).  In addition, items of income and gain shall be specially  allocated to the Members in accordance with and to the extent required by the qualified income  offset provisions set forth in Treasury Regulation Section 1.704-1(b)(2)(ii)(d).  Notwithstanding  

 

1282772.07/OC 373745.00003 -29- any other provision in this Article IV, (i) any and all "partnership nonrecourse deductions" (as  defined in Treasury Regulation Section 1.704-2(b)(1)) of the Company for any Fiscal Year or other  period shall be allocated to the Members in proportion to their respective Percentage Interests;  (ii) any and all "partner nonrecourse deductions" (as such term is defined in Treasury Regulation  Section 1.704-2(i)(2)) attributable to any "partner nonrecourse debt" (as such term is defined in  Treasury Regulation Section 1.704-2(b)(4)) shall be allocated to the Member that bears the  "economic risk of loss" (as determined under Treasury Regulation Section 1.752-2) for such  "partner nonrecourse debt" in accordance with Treasury Regulation Section 1.704-2(i)(l);  (iii) each Member shall be specially allocated items of Company income and gain in accordance  with the partnership minimum gain chargeback requirements set forth in Treasury Regulation  Sections 1.704-2(f) and 1.704-2(g); and (iv) each Member with a share of minimum gain  attributable to any "partner nonrecourse debt" shall be specially allocated items of Company  income and gain in accordance with the partner minimum gain chargeback requirements of  Treasury Regulation Sections 1.704-2(i)(4) and 1.704-2(i)(5).  Any and all "excess nonrecourse  liabilities" as determined under Treasury Regulation Section 1.752-3(a)(3) shall be allocated to the  Members in proportion to their respective Percentage Interests. 4.04 Curative Allocations The allocations set forth in Section 4.03 (the "Regulatory Allocations") are intended to  comply with certain requirements of the Treasury Regulations.  It is the intent of the Members  that, to the extent possible, all Regulatory Allocations shall be offset either with other Regulatory  Allocations or with special allocations of other items of Company income, gain, loss or deduction  pursuant to this Section 4.04.  Therefore, notwithstanding any other provision of this Article IV  (other than the Regulatory Allocations), the Administrative Member is hereby authorized to make  such offsetting special allocations of Company income, gain, loss or deduction in whatever manner  it reasonably determines appropriate so that, after such offsetting allocations are made, each  Member's Capital Account balance is, to the extent possible, equal to the Capital Account balance  such Member would have had if the Regulatory Allocations were not part of this Agreement and  all Company items were allocated pursuant to Sections 4.01 and 4.02.  In exercising its discretion  under this Section 4.04, the Administrative Member shall take into account future Regulatory  Allocations under Section 4.03, that are likely to offset other Regulatory Allocations previously  made under the provisions of this Section 4.04. 4.05 Differing Tax Basis; Tax Allocation Depreciation and/or cost recovery deductions and gain or loss with respect to each item of  property treated as contributed to the capital of the Company shall be allocated between the  Members for federal income tax purposes in accordance with the principles of Section 704(c) of  the Code and the Treasury Regulations promulgated thereunder, and for state income tax purposes  in accordance with comparable provisions of the California Revenue & Taxation Code, as  amended, and the regulations promulgated thereunder, so as to take into account the variation, if  any, between the adjusted tax basis of such property and its book value (as determined for purposes  of the maintenance of Capital Accounts in accordance with this Agreement and Treasury  Regulation Section 1.704-1(b)(2)(iv)(g)). 

 

1282772.07/OC 373745.00003 -30- ARTICLE V DISTRIBUTION OF CASH FLOW 5.01 Cash Flow Subject to Section 12.02, Cash Flow of the Company shall be determined and distributed  on a quarterly basis (or at such other times as are determined by the Executive Committee), in the  following order of priority: (a) Unreturned Contribution Accounts.  First, to the Members in proportion  to, and to the extent of, the positive balances standing in their respective Unreturned  Contribution Accounts, if any; and (b) Percentage Interests.  Thereafter, to the Members in proportion to their  respective Percentage Interests. 5.02 Limitations on Distributions Notwithstanding any other provision contained in this Agreement, the Company shall not  make a distribution of Cash Flow (or other proceeds) to any Member if such distribution would  violate Section 18-607 of the Delaware Act or other applicable law. 5.03 Withholding If the Company is obligated to withhold and pay any taxes with respect to any Member,  then any tax required to be withheld may be withheld from any distribution otherwise payable to  such Member.  Any such amounts withheld and remitted to the appropriate tax authority shall be  deemed to have been distributed to the applicable Member and applied by such Member in  payment of such tax liability. 5.04 In-Kind Distribution Assets of the Company (other than cash) shall not be distributed in kind to the Members  without the prior written approval of the Members. ARTICLE VI RESTRICTIONS ON TRANSFERS OF COMPANY INTERESTS 6.01 Limitations on Transfer Except as otherwise set forth in Section 3.03, this Article VI, Article VII and Article VIII,  no Member shall be entitled to sell, exchange, assign, transfer, or otherwise dispose of, pledge,  hypothecate, encumber or otherwise grant a security interest in (collectively, the "Transfer"),  directly or indirectly, all or any part of such Member's Interest in the Company or withdraw or  retire from the Company, without the prior written consent of the other Member, which consent  may be withheld in such other Member's sole and absolute discretion.  Any transfer of a direct or  indirect interest in any Member shall be deemed to be a Transfer for purposes of this Agreement,  provided, however, that any transfer of a direct or indirect interest in a Member resulting from the  

 

1282772.07/OC 373745.00003 -31- death of such interest holder, the transfer by such interest holder to a trust of which the interest  holder and/or his or her spouse is/are the sole current income beneficiaries or the termination of a  trust which is an interest holder shall not be deemed a Transfer for purposes of this Agreement.   Any attempted Transfer or withdrawal in violation of the restrictions set forth in this Article VI  shall be null and void ab initio and of no force or effect to the maximum extent allowed by law. 6.02 Permitted Transfers Any Member may Transfer all or any portion of such Member's Interest in the Company  to any of the following (collectively, "Permitted Transferees") without complying with the  provisions of Section 6.01: (a) Affiliates.  In the case of either Member, to any Affiliate of such  Member provided the original transferring Member (that executed this Agreement) or its  direct or indirect owners at all times thereafter own fifty percent (50%) or more of the  voting and beneficial interests in such Affiliate; (b) Stock Transfers.  In the case of any direct and/or indirect owner of any  Member that is a publicly traded corporation (including, without limitation, any  shareholder of Tejon Ranch Co., a Delaware corporation), to any Person; (c) Transfers of Direct or Indirect Interests in Majestic.  Subject to the last  sentence of this Section 6.02(c), (i) any direct or indirect ownership interest in Majestic  may be transferred to any Person provided following such transfer (A) Edward P. Roski,  Jr. ("Roski") (individually and/or in his capacity as trustee of a trust) directly or indirectly  controls Majestic, and (B) Majestic Realty Co., a California corporation ("MRC"), and/or  Roski (individually and/or in his capacity as trustee of a trust) own(s), in the aggregate,  directly or indirectly, at least thirty percent (30%) of Majestic, and (ii) any direct or indirect  ownership interest in Majestic may be transferred to any member of the Roski Family  provided that (A) prior to Roski's death or incapacity, Roski or any one (1) or more other  members of the Roski Family remains (individually and/or in his capacity as trustee of a  trust), directly or indirectly, in control of Majestic, and (B) following Roski's death or  incapacity, one (1) or more members of the Roski Family control Majestic.  The term  "Roski Family" means Roski, his spouse, their lineal descendants and their spouses, any  trust or estate for the benefit of any such party, and any entity owned or controlled  (ownership and voting interests of 50% or more) by such parties.  As used in this  Section 6.02(c), the terms "control," "controls" and "controlling" mean the possession by  any Person, directly or indirectly, of the power to direct or cause the direction of the  management and policies of another Person, whether through the ownership of voting  securities, by contract or otherwise.  Notwithstanding the foregoing, whether or not a  transfer of any direct or indirect ownership interest in Majestic occurs, Majestic shall not  be permitted to allow any Person other than Roski or one (1) or more other members of the  Roski Family (individually and/or in such individual's capacity as trustee of a trust) to  control, directly or indirectly, Majestic; (d) Tejon Ranchcorp Multi-Asset Transfer.  In the case of Tejon, a transfer  of all, but not less than all, of its Interest in the Company as part of a transaction in which  

 

1282772.07/OC 373745.00003 -32- one (1) or more members of the Tejon Group (as defined below) in a single transaction or  series of related transactions transfer five (5) or more of its Real Estate Assets (as defined  below) with a gross asset value of at least Fifty Million Dollars ($50,000,000).  For this  purpose, the term (i) "Tejon Group" means all corporations, partnerships and limited  liability companies in which Tejon Ranchcorp and/or any Affiliate thereof owns, directly  or indirectly, fifty percent (50%) or more of the ownership and voting interests; and  (ii) "Real Estate Assets" means direct or indirect interests in any commercial or industrial  real property of any type, wherever located; (e) Majestic Multi-Asset Transfer.  In the case of Majestic, a transfer of all,  but not less than all, of its Interest in the Company as part of a transaction in which one (1)  or more members of the Majestic Group (as defined below) in a single transaction or series  of related transactions transfer five (5) or more of its Real Estate Assets with a gross asset  value of at least Fifty Million Dollars ($50,000,000).  For this purpose, the term "Majestic  Group" means all corporations, partnerships and limited liability companies in which the  Roski Family owns, directly or indirectly, fifty percent (50%) or more of the ownership  and voting interests; (f) Transfers as a Result of Foreclosure.  In the case of either Member, to  any Person that acquires an Interest in the Company pursuant to Section 6.08 below as the  result of the exercise of any rights or remedies under Section 3.03(a); and (g) Right of First Refusal.  In the case of either Member, to any Person  provided (i) such Transfer is made after the Project Stabilization Date, (ii) such Transfer is  for the transferring Member's entire Interest in the Company, and (iii) the transferring  Member fully complies with the provisions of Exhibit "H." Any such Permitted Transferee shall receive and hold such ownership interest or portion  thereof subject to the terms of this Agreement and to the obligations hereunder of the transferor.   There shall be no further transfer of such ownership interest or portion thereof except to a Person  to whom the original transferor could have transferred such ownership interest in accordance with  this Section 6.02. Notwithstanding any other provision of this Agreement, no transfer described in  Section 6.02 shall be permitted if the consummation of such transfer would result in (i) the  Company being obligated to pay any documentary transfer taxes, unless the transferring Member  promptly reimburses the Company for the payment of all such documentary transfer taxes, or (ii) a  breach or violation of any transfer restrictions contained in the loan documentation (and/or  guaranty) relative to any indebtedness encumbering all or any portion of the Project and/or any  other agreement governing the Company, unless such transfer restrictions are waived by the non- transferring Member, the applicable lender and/or the parties to such agreement, as the case may  be (provided payment by the transferring Partner or its transferee of applicable lender fees and  charges to effect such transfer shall not constitute a violation).  

 

1282772.07/OC 373745.00003 -33- 6.03 Admission of Substituted Members If any Member transfers such Member's Interest to a transferee in accordance with  Sections 6.01 and/or 6.02 above, then such transferee shall only be entitled to be admitted into the  Company as a substituted member (and this Agreement shall be amended in accordance with the  Delaware Act to reflect such admission), if:  (i) the non-transferring Member reasonably  approves the form and content of the instrument of transfer; (ii) the transferor and transferee named  therein execute and acknowledge such other instruments as the non-transferring Member may  deem reasonably necessary to effectuate such admission; (iii) the transferee in writing accepts and  adopts all of the terms and conditions of this Agreement, as the same may have been amended;  and (iv) the transferor pays, as the non-transferring Member may reasonably determine, all  reasonable expenses incurred in connection with such admission, including, without limitation,  legal fees and costs.  To the maximum extent permitted by law, any assignee of an Interest who  does not become a substituted member shall have no right to require any information or account  of the Company's transactions, to inspect the Company books, or to vote on any of the matters as  to which a member would be entitled to vote under this Agreement.  An assignee shall only be  entitled to share in such Net Profits and Net Losses, to receive such distributions, and to receive  such allocations of income, gain, loss, deduction or credit or similar items to which the assignor  was entitled, to the extent assigned.  A Member that transfers such Member's Interest shall not  cease to be a member of the Company until the admission of the assignee as a substituted member. 6.04 Election; Allocations between Transferor and Transferee Upon the transfer of the Interest of any Member or the distribution of any property of the  Company to a Member, the Company shall file an election in accordance with applicable Treasury  Regulations, to cause the basis of the Company property to be adjusted for federal income tax  purposes as provided by Sections 734 and 743 of the Code.  Upon the transfer of all or any part  of the Interest of a Member as hereinabove provided, Net Profits and Net Losses shall be allocated  between the transferor and transferee on the basis of a computation method that is in conformity  with the methods prescribed by Section 706 of the Code and Treasury Regulation Section 1.706- 1(c)(2)(ii). 6.05 Partition No Member shall have the right to partition any assets of the Company or any interest  therein, nor shall a Member make application or proceeding for a partition thereto and, upon any  breach of the provisions of this Section 6.05 by any Member, the other Member (in addition to all  rights and remedies afforded by law or equity) shall be entitled to a decree or order restraining or  enjoining such application, action or proceeding. 6.06 Waiver of Withdrawal and Purchase Rights Except in connection with any transfer permitted in accordance with this Agreement, no  Member may voluntarily withdraw, resign or retire from the Company without the prior written  consent of the other Member, which consent may be withheld in such other Member's sole and  absolute discretion.  In furtherance of the foregoing, each Member hereby waives any and all  rights such Member may have to withdraw and/or resign from the Company pursuant to  

 

1282772.07/OC 373745.00003 -34- Section 18-603 of the Delaware Act and hereby waives any and all rights such Member may have  to receive the fair value of such Member's Interest in the Company upon such resignation and/or  withdrawal pursuant to Section 18-604 of the Delaware Act. 6.07 No Appraisal Rights Unless otherwise determined by the Members, none of the Members shall have any  appraisal rights with respect to their Interests pursuant to Section 18-210 of the Delaware Act or  otherwise. 6.08 Foreclosure of Interest Notwithstanding any other term of this Agreement, upon a foreclosure, sale or other  transfer of any Interest in the Company pursuant to any security interest granted pursuant to  Section 3.03(a), the holder of such Interest shall, upon the execution of a counterpart to Agreement  (or an amendment thereto), automatically be admitted as a substituted member of the Company  upon such foreclosure, sale or other transfer, with all of the rights and obligations thereof permitted  hereunder.  The Company acknowledges that the pledge of any Interest in the Company pursuant  to Section 3.03(a) shall be a pledge not only of Net Profits and Net Losses of the Company, but  also a pledge of all rights and obligations of the pledgor thereunder.  Upon a foreclosure, sale or  other transfer of any Interest in the Company pursuant to Section 3.03(a), the successor member  may transfer its Interest in the Company in accordance with this Agreement.  Notwithstanding  any provision in the Delaware Act or any other provision contained herein to the contrary, the  pledgor under Section 3.03(a) shall be permitted to pledge and, upon any foreclosure of such  pledge in connection with the admission of the secured party or other holder as a substituted  member, to transfer to the secured party or other holder its rights and obligations to the Company  pursuant to the terms of such pledge agreement. ARTICLE VII MEMBER DEFAULT 7.01 Default Events For purposes of this Article VII, the following shall constitute "Default Events": (a) Breach of Agreement.  The breach of any material covenant, duty or  obligation under this Agreement by any Member (other than a breach described in  Section 7.01(b) or 7.01(c) for which there shall be no cure period) if (i) the breaching  Member has received written notice from the other Member of the breach, and (ii) (A) the  breach is not reasonably susceptible of being cured, or (B) if the breach is reasonably  susceptible of being cured, the breaching Member has failed to commence the cure or  remedy of the breach within fifteen (15) days following the effective date of the notice and  failed to complete the cure or remedy within a reasonable period of time (not to exceed 60  days), unless the cure or remedy cannot be reasonably completed within such sixty (60)- day period and the breaching Member fails to diligently proceed with the cure or remedy  to completion within an additional forty-five (45) days following the expiration of such  initial sixty (60)-day period; 

 

1282772.07/OC 373745.00003 -35- (b) Capital Default.  The failure of a Member to make timely a contribution  required to be made pursuant to Section 3.02, or to timely repay any Default Loan in  accordance with Section 3.03(a), followed by the election of the Contributing Member to  treat such failure as a Default Event pursuant to Section 3.03(c); (c) Prohibited Transfer, Encumbrance or Withdrawal.  A Transfer or  attempted Transfer by a Member of such Member's Interest in the Company (or portion  thereof) or withdrawal or attempted withdrawal by a Member contrary to the provisions of  Article VI; (d) Bankruptcy or Insolvency.  The rendering, by a court with appropriate  jurisdiction, of a decree or order (i) adjudging a Member bankrupt or insolvent, or  (ii) approving as properly filed a petition seeking reorganization, readjustment,  arrangement, composition, or similar relief for a Member under the federal bankruptcy  laws or any other similar applicable law or practice, provided that such decree or order  shall remain in force, undischarged and unstayed, for a period of ninety (90) days; (e) Appointment of Receiver.  The rendering, by a court with appropriate  jurisdiction, of a decree or order (i) for the appointment of a receiver, a liquidator, or a  trustee or assignee in bankruptcy or insolvency of a Member, or for the winding up and  liquidation of such Member's affairs, provided that such decree or order shall have  remained in force undischarged and unstayed for a period of sixty (60) days, or (ii) for the  sequestration or attachment of any property of a Member without its return to the  possession of such Member or its release from such sequestration or attachment within  sixty (60) days thereafter; or (f) Bankruptcy Proceedings.  A Member (i) institutes proceedings to be  adjudicated a voluntary bankrupt or an insolvent, (ii) consents to the filing of a bankruptcy  proceeding against such Member, (iii) files a petition or answer or consent seeking  reorganization, readjustment, arrangement, composition, or similar relief for such Member  under the federal bankruptcy laws or any other similar applicable law or practice,  (iv) consents to the filing of any such petition, or to the appointment of a receiver, a  liquidator, or a trustee or assignee in bankruptcy or insolvency for such Member or a  substantial part of such Member's property, (v) makes an assignment for the benefit of such  Member's creditors, (vi) is unable to or admits in writing such Member's inability to pay  such Member's debts generally as they become due, or (vii) takes any action in furtherance  of any of the aforesaid purposes. For the purposes of implementing the provisions contained in this Article VII, the  "Defaulting Member" shall be:  (i) in the case of the event referenced in Section 7.01(a), the  Member that has breached any material covenant, duty or obligation under this Agreement; (ii) in  the case of the event referenced in Section 7.01(b), the Non-Contributing Member; (iii) in the case  of the occurrence of the event referenced in Section 7.01(c), the Member that has transferred such  Member's rights or interests or withdrawn from the Company contrary to the provisions of  Article VI; and (iv) in the case of the occurrence of any of the events referenced in  Sections 7.01(d), (e) and/or (f), the Member that is the subject of such court decree or order or has  instituted such proceedings or filed such petitions or who is insolvent, etc.  The term "Non- 

 

1282772.07/OC 373745.00003 -36- Defaulting Member" shall mean the Member that is not the Defaulting Member.  For the  avoidance of doubt, any default by an Affiliate of a Member under any agreement between such  Affiliate and the Company shall not constitute a Default Event by the Member under this  Agreement.  A Member shall cease to be a Defaulting Member solely for purposes of this  Article VII following the occurrence of a Default Event with respect to such Member if the Non- Defaulting Member fails to deliver a Default Notice within the sixty (60)-day or ninety (90)-day  periods, as the case may be, set forth in Section 7.02, following the occurrence of such Default  Event. 7.02 Rights Arising From a Default Event Within sixty (60) days after the date that the Non-Defaulting Member is aware of the  occurrence of an uncured Default Event (or ninety (90) days after the occurrence of any default  described in Section 7.01(b)) the Non-Defaulting Member shall have the right, but not the  obligation, to implement the default procedures set forth in this Article VII by delivering written  notice ("Default Notice") thereof to the Defaulting Member.  Failure of a Non-Defaulting  Member to deliver a Default Notice within such sixty (60)-day or ninety (90)-day period shall not  be deemed to be a waiver of the right to deliver a Default Notice upon the occurrence of any  subsequent Default Event. 7.03 Determination of Defaulting Member's Purchase Price Within thirty (30) days after the determination of the Appraised Value of the assets of the  Company, the Accounting Firm shall determine the amount of cash which would be distributed to  each Member if (i) the assets of the Company were sold for the Appraised Value thereof as of the  effective date of the Default Notice; (ii) the liabilities of the Company were liquidated pursuant to  Section 12.02(a); (iii) a reasonable reserve for any contingent, conditional or unmatured liabilities  or obligations of the Company was established by the Non-Defaulting Member pursuant to  Section 12.02(b); and (iv) any remaining amounts (including, without limitation, any cash  proceeds of the Company) were distributed to the Members in accordance with the provisions of  Section 12.02(c).  Upon such determination, the Accounting Firm shall give each Member  written notice ("Accountant's Notice") thereof.  The determination by the Accounting Firm of  such amounts, including all components thereof, shall be deemed conclusive absent any material  computational error.  In the case of a Default Event described in Section 7.01(a), (b) or (c), ninety  percent (90%), and in the case of any other Default Event, one hundred percent (100%), of the  amount which would be distributed to the Defaulting Member pursuant to Section 12.02(c) shall  be deemed the purchase price for the Defaulting Member's Interest (the "Defaulting Member's  Purchase Price") for purposes of this Article VII; subject, however, to adjustment for any Default  Loans as provided in Section 7.09. (a) Determination of Appraised Value.  For purposes of this Article VII, the  appraised value ("Appraised Value") of the assets of the Company shall be determined as  follows:  The Appraised Value shall be determined by one (1) or more independent  qualified M.A.I. appraisers with at least five (5) years' experience appraising industrial real  estate projects.  The Non-Defaulting Member shall select one (1) appraiser and shall  include such selection in the Default Notice.  Within fifteen (15) Business Days following  the effective date of the Default Notice, the Defaulting Member shall either agree to the  

 

1282772.07/OC 373745.00003 -37- appraiser selected by the Non-Defaulting Member or select a second (2nd) appraiser and  give written notice to the Non-Defaulting Member of the person so selected.  If either the  Non-Defaulting Member or the Defaulting Member fails to appoint such an appraiser  within the time period specified and after the expiration of five (5) Business Days following  the effective date of written demand that an appraiser be appointed, then the appraiser duly  appointed by the Member making such demand to appoint such appraiser shall proceed to  make the appraisal as herein set forth, and the determination thereof shall be conclusive on  both of the Members.  If two (2) appraisers are selected, then such selected appraisers  shall thereafter appoint a third (3rd) appraiser.  If the two (2) selected appraisers fail to  appoint a third (3rd) appraiser within ten (10) Business Days following the effective date  of written notice from the Defaulting Member notifying the Non-Defaulting Member of  the selection of the second (2nd) appraiser, then any Member may petition a court of  competent jurisdiction to appoint a third (3rd) appraiser, in the same manner as provided  for the appointment of an arbitrator pursuant to California Code of Civil Procedure  Section 1281.6. The appraiser or three (3) appraisers, as the case may be, shall promptly determine  a date for the completion of the appraisal, which shall not be later than sixty (60) days from  the effective date of the appointment of the last appraiser. The appraiser(s) shall determine the Appraised Value by determining the fair  market value of the assets of the Company, such fair market value being the fairest price  estimated in the terms of money which the Company could obtain if such assets were sold  in the open market allowing a reasonable time to find a purchaser who purchases with  knowledge of the business of the Company at the time of the occurrence of the Default  Event. Upon submission of the appraisals setting forth the opinions as to the Appraised  Value of the assets of the Company, the two (2) such appraisals which are nearest in amount  shall be retained, and the third (3rd) appraisal shall be discarded.  The average of the two  (2) retained appraisals shall constitute the Appraised Value of the assets of the Company  for purposes of this Article VII; unless one (1) appraisal is the mean of the other two (2)  appraisals, in which case such appraisal shall constitute the Appraised Value of the assets  of the Company for purposes of this Article VII. (b) Payment of Costs.  Except as provided below, the Non-Defaulting  Member shall pay for the services of the appraiser appointed by such Member, and the  Defaulting Member shall pay for the services of the appraiser appointed by such Member.   The cost of the services of the third (3rd) appraiser, if any, shall be paid one-half (1⁄2) by  the Non-Defaulting Member, on the one hand, and one-half (1⁄2) by the Defaulting Member,  on the other hand.  The costs of the services of the Accounting Firm and, in the event only  one (1) appraiser is required, the cost of the services of such appraiser, shall be paid one- half (1⁄2) by the Non-Defaulting Member, on the one hand, and one-half (1⁄2) by the  Defaulting Member, on the other hand. 

 

1282772.07/OC 373745.00003 -38- 7.04 Non-Defaulting Members' Option For a period of thirty (30) days after the effective date of the Accountant's Notice, the Non- Defaulting Member shall have the right, but not the obligation, to elect to purchase the entire  Interest of the Defaulting Member for the Defaulting Member's Purchase Price, and on the terms  and conditions set forth in this Article VII by giving written notice of such election to the  Defaulting Member within such thirty (30)-day period.  Failure by the Non-Defaulting Member  to timely give written notice exercising such Member's right to elect to purchase set forth in this  Section 7.04 shall be deemed an election by such Member to waive such right to purchase with  respect to the particular Default Event that triggered the application of the provisions of this  Article VII. 7.05 Closing Adjustments Within five (5) days before the actual date of the closing pursuant to Section 7.06 below,  the Accounting Firm shall recalculate the amount of cash which would be distributed to each  Member pursuant to Section 12.02(c), if such amount were determined as of the closing date under  Section 7.06 (in lieu of the effective date of the Default Notice) taking into account any  contributions and/or distributions made after the effective date of the Default Notice.  Upon such  determination, the Accounting Firm shall give each Member written notice ("Adjusted  Accountant's Notice") thereof.  The Accounting Firm shall reasonably and in good faith adjust  the Defaulting Member's Purchase Price, if and to the extent necessary, to take into account the  adjustments described in the Adjusted Accountant's Notice and to take into account appropriate  prorations that would have been made if there had been an actual sale of the Project to a third party  as of the date of the closing under Section 7.06. 7.06 Closing of Purchase and Sale The closing of a purchase and sale pursuant to this Article VII shall be held at the principal  office of the Company in California on a Business Day designated by the Non-Defaulting Member  that is not later than sixty (60) days after the expiration of the thirty (30)-day period set forth in  Section 7.04.  The Defaulting Member shall transfer to the purchasing Non-Defaulting Member  (or such Member's nominee(s)) the entire Interest of the Defaulting Member free and clear of all  liens, security interests, and competing claims and shall deliver to the Non-Defaulting Member (or  such Member's nominee(s)) such instruments of transfer and such evidence of due authorization,  execution, and delivery, and of the absence of any such liens, security interests, or competing  claims as the Non-Defaulting Member (or such Member's nominee(s)) shall reasonably request. 7.07 Representations and Warranties At the closing, the Defaulting Member shall represent and warrant to the Non-Defaulting  Member that the sale of the Defaulting Member's Interest to the Non-Defaulting Member (or its  nominee) (i) does not violate, conflict with, or result in a breach of any provisions of, or constitute  a material default (or an event which, with notice or lapse of time or both, would constitute a  material default) under any of the terms, conditions or provisions of any note, bond, mortgage,  indenture, deed of trust, security or pledge agreement, license, lease, franchise, permit, agreement  or other instrument or obligation to which the Defaulting Member is a party (exclusive of any such  

 

1282772.07/OC 373745.00003 -39- agreement or other instrument or obligation to which the Company is a party), or (ii) violate any  judgment, ruling, order, writ, injunction, decree, statute, rule or regulation applicable to the  Defaulting Member or any of the other properties or assets of the Defaulting Member.  The  Defaulting Member shall also represent and warrant to the Non-Defaulting Member at such closing  that no notice to, declaration, filing or registration with, or authorization, consent or approval, or  permit from, any domestic or foreign governmental regulatory body or authority, or any Person, is  necessary in connection with the sale of its Interest to the Non-Defaulting Member. 7.08 Payment of Defaulting Member's Purchase Price The Non-Defaulting Member shall pay (or cause to be paid) the entire Defaulting Member's  Purchase Price by delivering at the closing a confirmed wire transfer of readily available funds or  one (1) or more certified or bank cashier's checks made payable to the order of the Defaulting  Member. 7.09 Repayment of Default Loans The Defaulting Member's Purchase Price shall be offset at the closing of such purchase by  the then unpaid principal balance of any and all Default Loan(s) (together with all accrued, unpaid  interest thereon) made by the Non-Defaulting Member to the Defaulting Member.  Such Default  Loan(s) (together with all accrued, unpaid interest thereon) shall be deemed paid to the extent of  such offset, with such deemed payment to be applied first to the accrued interest thereon and  thereafter to the payment of the outstanding principal amount thereof.  If the Defaulting  Member's Purchase Price is insufficient to fully offset the then unpaid principal balance of any and  all Default Loans (together with all accrued, unpaid interest thereon) made by the Non-Defaulting  Member to the Defaulting Member, then the portion of any such Default Loan(s) (and accrued,  unpaid interest thereon) that remains outstanding following such offset shall be required to be paid  by the Defaulting Member at the closing referenced in Section 7.06.  Also, notwithstanding any  other provision of this Agreement, the unpaid balance of any and all Default Loan(s) (including  all outstanding principal amounts thereof and all accrued, unpaid interest thereon) made by the  Defaulting Member to the Non-Defaulting Member be required to be paid by the Non-Defaulting  Member at the closing referenced in Section 7.06. 7.10 Release and Indemnity On or before the closing of a purchase and sale held pursuant to this Article VII, the Non- Defaulting Member shall use such Member's reasonable and good faith efforts to obtain written  releases of the Defaulting Member and the Defaulting Member's Affiliates from all liabilities under  all Recourse Documents and Nonrecourse Documents and all other liabilities of the Company for  which the Defaulting Member and/or its Affiliates may have personal liability, except to the extent  such liabilities arise out of any Bad Acts or Prohibited Transfer (as such terms are defined in  Section 10.02(a) below) of such Defaulting Member or any Affiliate thereof.  To the extent the  Non-Defaulting Member is unable to obtain such releases on or before the closing, the Non- Defaulting Member and an Affiliate of the Non-Defaulting Member with a net worth reasonably  acceptable to the Defaulting Member shall jointly and severally indemnify, defend and hold the  Defaulting Member and its Affiliates wholly harmless from and against all such liabilities and  guaranties, except to the extent such liabilities arise out of any Bad Acts or Prohibited Transfer of  

 

1282772.07/OC 373745.00003 -40- the Defaulting Member or any Affiliate thereof.  For purposes of clarification, the release,  indemnity and related provisions set forth above in this Section 7.10 shall not apply to any Losses  which are incurred by the Defaulting Member or its Affiliates to the extent such liabilities arise  under an Affiliate Agreement. 7.11 Withdrawal of the Defaulting Member If the Interest of the Defaulting Member is purchased by the Non-Defaulting Member (or  its nominee) pursuant to this Article VII, then, effective as of the closing for such purchase, the  Defaulting Member shall withdraw as a member of the Company.  Notwithstanding the  foregoing, any indemnity of the Defaulting Member and its Affiliates provided for under this  Agreement including, without limitation, under Section 10.02(b) shall survive the sale of the  Interest of the Defaulting Member and its withdrawal as a member of the Company. 7.12 Distribution of Reserves Within one (1) year following the closing of the purchase of the entire Interest of the  Defaulting Member in the Company pursuant to this Article VII, the Non-Defaulting Member shall  pay to the Defaulting Member an amount equal to the difference between the Defaulting Member's  Purchase Price determined pursuant to Section 7.03 and the amount that the Defaulting Member's  Purchase Price would have been equal to if (i) no reserves had been established or deducted in  calculating the Defaulting Member's Purchase Price, and (ii) the amount used in determining the  Defaulting Member's Purchase Price under Section 7.03 had been reduced by the aggregate  amount of any contingent, unmatured or conditional liabilities of the Company (for which such  reserve was established) that were actually paid by the Company during such one (1)-year period. ARTICLE VIII ELECTIVE BUY/SELL AGREEMENT 8.01 Buy/Sell Election Either Member that is not a Defaulting Member (the "Electing Member") shall have the  right, but not the obligation, at any time after the Lockout Date or an Impasse Event to elect to  implement the buy/sell procedures set forth in this Article VIII by delivering written notice of such  election ("Election Notice") to the other Member (the "Non-Electing Member").  The term  "Lockout Date" means the earlier of (i) six (6) months after the Project Stabilization Date, or  (ii) three (3) years after the Effective Date.  The Election Notice shall set forth a stated value (the  "Stated Value"), as determined in the sole and absolute discretion of the Electing Member, for all  of the assets of the Company.  For purposes of this Article VIII, a Member shall not be deemed  to be a Defaulting Member after the expiration of the sixty (60)-day or ninety (90)-day period, as  the case may be, set forth in Section 7.02. 8.02 Determination of the Purchase Price Within ten (10) Business Days following the effective date of any Election Notice (or as  soon as reasonably possible thereafter), the Accounting Firm shall determine the aggregate amount  of cash which would be distributed to each Member if (i) the assets of the Company were sold for  their Stated Value as of the effective date of the Election Notice; (ii) the known non-contingent  

 

1282772.07/OC 373745.00003 -41- liabilities of the Company (exclusive of any prepayment penalties payable with respect to any  Loan obtained by the Company) were liquidated pursuant to Section 12.02(a); (iii) a reserve was  not established for any contingent, conditional or unmatured liabilities or obligations of the  Company pursuant to Section 12.02(b); and (iv) any remaining amounts were distributed to the  Members in accordance with the provisions of Section 12.02(c).  Upon such determination, the  Accounting Firm shall give each Member written notice ("Price Determination Notice") thereof.   The determination by the Accounting Firm of such amounts including all components thereof,  shall be deemed conclusive on all of the Members, absent any material computational error.  One  hundred percent (100%) of the amount that would be distributed to each Member pursuant to  Section 12.02(c) shall be deemed the purchase price ("Purchase Price") for such Member's  Interest for purposes of this Article VIII; subject, however, to adjustment for any Default Loans  described in Section 8.08. 8.03 Non-Electing Member's Option For a period of thirty (30) days following the effective date of the Price Determination  Notice, the Non-Electing Member shall have the option to elect by delivering written notice (the  "Purchase Notice") of such election to the Electing Member within such thirty (30)-day period,  either (i) to purchase the Electing Member's entire Interest for the Purchase Price thereof, or (ii) to  sell such Non-Electing Member's entire Interest to the Electing Member for the Purchase Price  thereof.  Failure of the Non-Electing Member to timely and validly make an election in  accordance with this Section 8.03 shall constitute an election by such Non-Electing Member to  sell such Non-Electing Member's entire Interest for the Purchase Price thereof to the Electing  Member. 8.04 Deposit WITHIN FIVE (5) BUSINESS DAYS AFTER THE EXPIRATION OF THE  THIRTY (30)-DAY OPTION PERIOD SET FORTH IN SECTION 8.03, THE BUYING  MEMBER SHALL DEPOSIT INTO AN ESCROW ACCOUNT ESTABLISHED BY THE  BUYING MEMBER WITH A NATIONALLY RECOGNIZED TITLE COMPANY, A DEPOSIT  (THE "DEPOSIT") BY A WIRE TRANSFER OF IMMEDIATELY AVAILABLE FEDERAL  FUNDS IN AN AMOUNT EQUAL TO FIVE PERCENT (5%) OF THE PURCHASE PRICE,  WHICH SHALL BE NON-REFUNDABLE TO THE BUYING MEMBER IF THE CLOSING  OF THE SALE FAILS TO OCCUR AS A RESULT OF THE BUYING MEMBER'S DEFAULT.   UPON THE CLOSING OF THE SALE, THE DEPOSIT SHALL BE A CREDIT AGAINST THE  PURCHASE PRICE.  SUBJECT TO SECTION 8.10, IF THE SALE FAILS TO OCCUR DUE  TO THE BUYING MEMBER'S DEFAULT, THEN THE SELLING MEMBER SHALL RETAIN  THE DEPOSIT OF THE BUYING MEMBER AS LIQUIDATED DAMAGES, AS ITS SOLE  AND EXCLUSIVE REMEDY AT LAW IN CONNECTION WITH SUCH DEFAULT.  THE  MEMBERS ACKNOWLEDGE THAT IT WOULD BE IMPRACTICAL AND EXTREMELY  DIFFICULT TO ESTIMATE THE DAMAGES WHICH THE SELLING MEMBER MAY  SUFFER IN CONNECTION WITH A DEFAULT BY THE BUYING MEMBER UNDER THIS  ARTICLE VIII.  THEREFORE, SUBJECT TO SECTION 8.10, THE MEMBERS HAVE  AGREED THAT A REASONABLE ESTIMATE OF THE TOTAL NET DETRIMENT THAT  THE SELLING MEMBER WOULD SUFFER IN SUCH EVENT IS AND SHALL BE THE  RIGHT OF THE SELLING MEMBER TO RETAIN THE DEPOSIT AS LIQUIDATED  

 

1282772.07/OC 373745.00003 -42- DAMAGES, AS ITS SOLE AND EXCLUSIVE REMEDY AT LAW UNDER THIS  ARTICLE VIII.  THE MEMBERS EXPRESSLY ACKNOWLEDGE AND AGREE THAT  THE RETENTION OF THE DEPOSIT IS NOT INTENDED AS A FORFEITURE OR  PENALTY WITHIN THE MEANING OF DELAWARE LAW (OR CALIFORNIA CIVIL  CODE SECTION 3375 OR 3369 OR UNDER ANY OTHER STATE LAWS TO THE EXTENT  DELAWARE LAW DOES NOT APPLY), BUT IS INTENDED TO CONSTITUTE  LIQUIDATED DAMAGES TO THE SELLING MEMBER PURSUANT TO DELAWARE  LAW (OR CALIFORNIA CIVIL CODE SECTIONS 1671, 1676 AND 1677 OR UNDER ANY  OTHER STATE LAWS TO THE EXTENT DELAWARE LAW DOES NOT APPLY).   NOTHING CONTAINED HEREIN SHALL LIMIT OR OTHERWISE AFFECT ANY RIGHTS  THE SELLING MEMBER MAY HAVE TO OBTAIN SPECIFIC PERFORMANCE AND, TO  THE MAXIMUM EXTENT PERMITTED BY LAW, ANY OTHER EQUITABLE REMEDIES.   THE MEMBERS ACKNOWLEDGE THAT THEY HAVE BEEN ADVISED BY THEIR  COUNSEL WITH RESPECT TO THE FOREGOING PROVISIONS OF THIS SECTION 8.04  AND BY THEIR INITIALS SET FORTH BELOW INDICATE THAT THE FOREGOING  REMEDIES ARE FAIR AND REASONABLE AND AGREE AND COVENANT NOT TO  CONTEST THE VALIDITY OF SUCH REMEDY AS A PENALTY, FORFEITURE OR  OTHERWISE IN ANY COURT OF LAW (AND/OR IN ANY ARBITRATION PROCEEDING).         AL JR                                INITIALS OF TEJON    ER  BT  TS                  INITIALS OF MAJESTIC 8.05 Closing Adjustments Within five (5) days before the actual date of the closing pursuant to Section 8.06 below,  the Accounting Firm shall recalculate the amount of cash which would be distributed to each  Member pursuant to Section 12.02(c) if such amount were determined as of the closing date under  Section 8.06 (in lieu of the effective date of the Election Notice) taking into account any  contributions and/or distributions that occur after the effective date of the Election Notice.  Upon  such determination, the Accounting Firm shall give each Member written notice ("Adjusted Price  Determination Notice") thereof.  The Accounting Firm shall reasonably and in good faith adjust  the Defaulting Member's Purchase Price, if and to the extent necessary, to take into account the  adjustments described in the Adjusted Price Determination Notice and to take into account  appropriate prorations that would have been made if there had been an actual sale of the Project to  a third party. 8.06 Closing of Purchase and Sale The closing of a purchase and sale held pursuant to this Article VIII shall be held at the  principal office of the Company on a Business Day designated by the buying Member within sixty  (60) days following the earlier of (i) the effective date upon which the Non-Electing Member has  delivered the Purchase Notice pursuant to Section 8.03, or (ii) the expiration of the thirty (30)-day  option period set forth in Section 8.03.  The selling Member shall transfer to the buying Member  (or the buying Member's nominee(s)) the entire Interest of the selling Member free and clear of all  liens, security interests, and competing claims and shall deliver to the buying Member (or the  buying Member's nominee(s)) such instruments of transfer and such evidence of due authorization,  execution, and delivery, and of the absence of any such liens, security interests, or competing  

 

1282772.07/OC 373745.00003 -43- claims, as the buying Member (or the buying Member's nominee(s)) shall reasonably request.   The Purchase Price for the selling Member's Interest shall be paid by the buying Member by  delivering at the closing of a confirmed wire transfer of readily available funds or one (1) or more  certified or bank cashier's checks made payable to the selling Member in an amount equal to the  Purchase Price, less the amount of the Deposit paid by the buying Member pursuant to Section 8.04  above (which shall be released to the selling Member at the closing).  Effective as of the closing  for the purchase of the selling Member's Interest, the selling Member shall withdraw as a member  of the Company.  In connection with any such withdrawal, the buying Member may cause any  nominee designated in the sole and absolute discretion of such Member to be admitted as a  substituted member of the Company.  Notwithstanding the foregoing, any indemnity of the  selling Member and its Affiliates provided for under this Agreement including, without limitation,  under Section 10.02(b) shall survive the sale of the Interest of the selling Member and its  withdrawal as a member of the Company. 8.07 Representations and Warranties At the closing, the selling Member shall represent and warrant to the buying Member that  the sale of the selling Member's Interest to the buying Member (or its nominee) (i) does not violate,  conflict with, or result in a breach of any provisions of, or constitute a material default (or an event  which, with notice or lapse of time or both, would constitute a material default) under any of the  terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, security or  pledge agreement, license, lease, franchise, permit, agreement or other instrument or obligation to  which the selling Member is a party (exclusive of any such agreement or other instrument or  obligation to which the Company is a party), or (ii) violate any judgment, ruling, order, writ,  injunction, decree, statute, rule or regulation applicable to the selling Member or any of the other  properties or assets of the selling Member (exclusive of its Interest in the Company).  The selling  Member shall also represent and warrant to the buying Member at such closing that no notice to,  declaration, filing or registration with, or authorization, consent or approval, or permit from, any  domestic or foreign governmental regulatory body or authority, or any Person, is necessary in  connection with the sale of its Interest to the buying Member. 8.08 Repayment of Default Loans The Purchase Price shall be offset at the closing of such purchase by the then unpaid  principal balance of any and all Default Loan(s) (together with all accrued, unpaid interest thereon)  made by the buying Member to the selling Member.  Such Default Loan(s) (together with all  accrued, unpaid interest thereon) shall be deemed paid to the extent of such offset, with such  deemed payment to be applied first to the accrued interest thereon and thereafter to the payment  of the outstanding principal amount thereof.  If the Purchase Price is insufficient to fully offset  the then unpaid principal balance of any and all Default Loan(s) (together with all accrued, unpaid  interest thereon) made by the buying Member to the selling Member, then the portion of any such  Default Loan(s) (and accrued, unpaid interest thereon) that remains outstanding following such  offset shall be required to be paid by the selling Member at the closing referenced in Section 8.06.   Also, notwithstanding any provision of this Agreement to the contrary, the unpaid balance of any  and all Default Loan(s) (including all outstanding principal amounts thereof and all accrued,  unpaid interest thereon) made by the selling Member to the buying Member shall be required to  be paid by the buying Member at the closing referenced in Section 8.06. 

 

1282772.07/OC 373745.00003 -44- 8.09 Release and Indemnity On or before the closing of a purchase and sale held pursuant to this Article VIII, the buying  Member shall use such Member's reasonable and good faith efforts to obtain written releases of  the selling Member and the selling Member's Affiliates from all liabilities under all Recourse  Documents and Nonrecourse Documents and all other liabilities of the Company for which the  selling Member and/or its Affiliates may have personal liability, except to the extent such liabilities  arise out of any Bad Acts or Prohibited Transfer of such selling Member or any Affiliate thereof.   To the extent the buying Member is unable to obtain such releases on or before the closing, the  buying Member and an Affiliate of the buying Member with a net worth reasonably acceptable to  the selling Member shall jointly and severally indemnify, defend and hold the selling Member and  its Affiliates wholly harmless from and against all such liabilities and guaranties, except to the  extent such liabilities arise out of any Bad Acts or Prohibited Transfer of such selling Member or  any Affiliate thereof.  For purposes of clarification, the release, indemnity and related provisions  set forth above in this Section 8.09 shall not apply to any Losses which are incurred by the  Defaulting Member or its Affiliates to the extent such liabilities arise under an Affiliate  Agreement. 8.10 Interim Event of Default If the buying Member breaches its obligation under this Article VIII to timely and validly  close the purchase of the selling Member's Interest, then (i) the buying Member shall not have any  further right to deliver an Election Notice pursuant to Section 8.01 for a period of one (1) year  after the date of such default, and (ii) the selling Member shall have the right, but not the  obligation, to elect to purchase the Interest of the buying Member by delivering a Purchase Notice  to such buying Member within thirty (30) days following such default.  If the selling Member  makes the election described in clause (ii) above, then the Purchase Price for the buying Member's  Interest shall be ninety percent (90%) of the amount that was otherwise determined under  Section 8.02 and such purchase and sale shall otherwise be on the other terms and conditions set  forth in this Article VIII.  If the selling Member delivers a Purchase Notice pursuant to this  Section 8.10, then the selling Member shall not be entitled to retain the Deposit under Section 8.04. 8.11 Application of Provisions The Members acknowledge and agree that if either Member has timely and validly  delivered an Election Notice to the other Member and initiated the buy/sell procedures set forth in  this Article VIII, then such other Member shall be precluded from delivering an Election Notice  unless such buy/sell procedure has been terminated. ARTICLE IX REPRESENTATIONS, WARRANTIES, COVENANTS AND OTHER MATTERS 9.01 Tejon Representations As of the Effective Date, each of the statements in this Section 9.01 shall be a true, accurate  and full disclosure of all facts relevant to the matters contained therein.  Tejon hereby represents  and warrants as follows for the sole and exclusive benefit of Majestic, each of which is material  and is being relied upon by Majestic as of the Effective Date: 

 

1282772.07/OC 373745.00003 -45- (a) Due Formation.  Tejon is a duly organized corporation validly existing  and in good standing under the laws of the State of California and has the requisite power  and authority to enter into and carry out the terms of this Agreement; (b) Required Actions.  All corporate action required to be taken by Tejon to  execute and deliver this Agreement has been taken by Tejon and no further approval of any  member, partner, shareholder, manager, officer, board, court, or other body is necessary to  permit Tejon to execute and deliver this Agreement; (c) Binding Obligation.  This Agreement and all other documents to be  executed and delivered by Tejon pursuant to the terms of this Agreement will on the date  such Agreement and documents are fully executed and delivered constitute legal, valid,  and binding obligations of Tejon, enforceable in accordance with their terms, except as  such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium  or other similar laws now or hereafter in effect affecting generally the enforcement of  creditors' rights, and statutes or rules of equity concerning the enforcement of the remedy  of specific performance (collectively, the "Enforceability Exceptions"); (d) No Consent.  No notice to, declaration, filing or registration with, or  authorization, consent or approval, or permit from, any domestic or foreign governmental  regulatory body or authority, or any Person, is necessary in connection with (i) the  execution and delivery of this Agreement by Tejon, or (ii) the consummation and  performance by Tejon of the transactions contemplated by this Agreement (other than the  usual and customary consents and permits required to be issued in connection with the  development of the Property); (e) Violation of Law.  Neither the execution and delivery of this Agreement  by Tejon, nor the consummation by Tejon of the transactions contemplated hereby, nor  compliance by Tejon with any of the provisions hereof will (i) violate, conflict with, or  result in a breach of any provisions of, or constitute a material default (or an event which,  with notice or lapse of time or both, would constitute a material default) under, any note,  bond, mortgage, indenture, deed of trust, security or pledge agreement, license, lease,  franchise, permit, agreement or other instrument or obligation to which the Company  and/or Tejon is a party as of the Effective Date or to which the Company and/or Tejon or  any of the other properties or assets of the Company and/or Tejon may be subject as of the  Effective Date, or (ii) violate any judgment, ruling, order, writ, injunction, decree, statute,  rule or regulation applicable to the Company and/or Tejon or any of the other properties or  assets of the Company and/or Tejon as of the Effective Date; (f) No Litigation.  To the Actual Knowledge of Tejon, there is no litigation,  arbitration, legal or administrative suit, action, proceeding or investigation of any kind,  pending or threatened in writing (nor any basis therefor), which questions, directly or  indirectly, the validity or enforceability of this Agreement as to Tejon; (g) No Member Obligations.  Tejon has not incurred any other obligations  or liabilities (excluding any obligations or liabilities related to the Property) which could  individually or in the aggregate adversely affect Tejon's ability to perform its obligations  

 

1282772.07/OC 373745.00003 -46- under this Agreement or which would become obligations or liabilities of Majestic or the  Company; (h) Anti-Terrorism.  Neither Tejon, nor any of its Affiliates, nor any of their  respective partners, members, shareholders or other equity owners, and none of their  respective employees, officers or directors, is, nor will they become, a Person with whom  U.S. persons or entities are restricted from doing business under regulations of Office of  Foreign Asset Control ("OFAC") of the Department of the Treasury (including those  named on OFAC's Specially Designated and Blocked Persons List) or under any statute,  executive order (including the September 24, 2001, Executive Order Blocking Property  and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support  Terrorism), or other governmental action and is not and will not engage in any dealings or  transactions or be otherwise associated with such Person; (i) No Plan Assets.  Tejon does not hold the assets of any "employee benefit  plan" as defined by Section 3(3) of the Employee Retirement Income Security Act of 1974,  as amended, any "plan" as described by Section 4975(e)(1) of the Internal Revenue Code  of 1986, as amended, or any Person deemed to hold the plan assets of the foregoing; (j) Financial Statements.  The financial statements previously delivered by  Tejon to Majestic fairly present the financial condition of Tejon as of the date of such  financial statements, and no material adverse change has occurred in the financial condition  of Tejon since such date; (k) Most Knowledgeable Individuals.  Lyda and Joe Rentfro ("Rentfro")  are the individuals employed or affiliated with Tejon that have the most knowledge and  information regarding the representations and warranties made in this Section 9.01; and (l) No Untrue Statements.  To the Actual Knowledge of Tejon, no  representation, warranty or covenant of Tejon in this Agreement contains or will contain  any untrue statement of material facts or omits or will omit to state material facts necessary  to make the statements or facts contained therein not misleading. The term "Actual Knowledge of Tejon" means the actual present knowledge of Lyda and  Rentfro without regard to any imputed or constructive knowledge and without any duty of inquiry  or investigation.  In no event shall Lyda or Rentfro have any liability for the breach of any of the  representations or warranties set forth in this Agreement. 9.02 Majestic Representations As of the Effective Date, each of the statements in this Section 9.02 shall be a true, accurate  and full disclosure of all facts relevant to the matters contained therein.  Majestic hereby  represents and warrants as follows for the sole and exclusive benefit of Tejon, each of which is  material and is being relied upon by Tejon as of the Effective Date: (a) Due Formation.  Majestic is a duly organized limited liability company  validly existing and in good standing under the laws of the State of Delaware and has the  requisite power and authority to enter into and carry out the terms of this Agreement; 

 

1282772.07/OC 373745.00003 -47- (b) Required Actions.  All corporate action required to be taken by Majestic  to execute and deliver this Agreement has been taken and no further approval of any  member, partner, shareholder, manager, officer, board, court, or other body is necessary to  permit Majestic to execute and deliver this Agreement; (c) Binding Obligation.  This Agreement and all other documents to be  executed and delivered by Majestic pursuant to the terms of this Agreement will on the  date such Agreement and documents are fully executed and delivered constitute legal,  valid, and binding obligations of Majestic, enforceable in accordance with their terms,  except as such enforceability may be limited by any Enforceability Exception; (d) No Consent.  No notice to, declaration, filing or registration with, or  authorization, consent or approval, or permit from, any domestic or foreign governmental  regulatory body or authority, or any Person, is necessary in connection with (i) the  execution and delivery of this Agreement, or (ii) the consummation and performance by  Majestic of the transactions contemplated by this Agreement (other than the usual and  customary consents and permits required to be issued in connection with the development  of the Property); (e) Violation of Law.  Neither the execution and delivery of this Agreement,  nor the consummation by Majestic of the transactions contemplated hereby, nor  compliance by Majestic with any of the provisions hereof will (i) violate, conflict with, or  result in a breach of any provisions of, or constitute a material default (or an event which,  with notice or lapse of time or both, would constitute a material default) under, any note,  bond, mortgage, indenture, deed of trust, security or pledge agreement, license, lease,  franchise, permit, agreement or other instrument or obligation to which the Company  and/or Majestic is a party as of the Effective Date or to which the Company and/or Majestic  or any of the other properties or assets of the Company and/or Majestic may be subject as  of the Effective Date, or (ii) violate any judgment, ruling, order, writ, injunction, decree,  statute, rule or regulation applicable to the Company and/or Majestic or any of the other  properties or assets of the Company and/or Majestic as of the Effective Date; (f) No Litigation.  To the Actual Knowledge of Majestic, there is no  litigation, arbitration, legal or administrative suit, action, proceeding or investigation of  any kind, pending or threatened in writing (nor any basis therefor), which questions,  directly or indirectly, the validity or enforceability of this Agreement to Majestic; (g) No Member Obligations.  Majestic has not incurred any obligations or  liabilities which could individually or in the aggregate adversely affect Majestic's ability  to perform its obligations under this Agreement or which would become obligations or  liabilities of Tejon or the Company; (h) Anti-Terrorism.  Neither Majestic, nor any of its Affiliates, nor any of  their respective partners, members, shareholders or other equity owners, and none of their  respective employees, officers or directors, is, nor will they become, a Person with whom  U.S. Persons are restricted from doing business under regulations of OFAC (including  those named on OFAC's Specially Designated and Blocked Persons List) or under any  

 

1282772.07/OC 373745.00003 -48- statute, executive order (including the September 24, 2001, Executive Order Blocking  Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or  Support Terrorism), or other governmental action and is not and will not engage in any  dealings or transactions or be otherwise associated with such Persons; (i) No Plan Assets.  Majestic does not hold the assets of any "employee  benefit plan" as defined by Section 3(3) of the Employee Retirement Income Security Act  of 1974, as amended, any "plan" as described by Section 4975(e)(1) of the Internal  Revenue Code of 1986, as amended, or any entity deemed to hold the plan assets of the  foregoing; (j) Financial Statements.  The financial statements previously delivered by  Tejon to Majestic fairly present the financial condition of Tejon as of the date of such  financial statements, and no material adverse change has occurred in the financial condition  of Tejon since such date; (k) Most Knowledgeable Individuals.  Brett Tremaine and Thomas  Simmons are the individuals employed or affiliated with Majestic that have the most  knowledge and information regarding the representations and warranties made in this  Section 9.02; (l) No Untrue Statements.  To the Actual Knowledge of Majestic, no  representation, warranty or covenant of Majestic in this Agreement contains any untrue  statement of material facts or omits to state material facts necessary to make the statements  or facts contained therein not misleading. The term "Actual Knowledge of Majestic" means the actual present knowledge of Brett  Tremaine and Thomas Simmons without regard to any imputed or constructive knowledge and  without any duty of inquiry or investigation.  In no event shall Brett Tremaine or Thomas  Simmons have any liability for the breach of any of the representations or warranties set forth in  this Agreement. 9.03 Brokerage Fee Representation and Indemnity Each Member hereby represents that such Member has not retained any broker, finder,  agent or the like in connection with this Agreement or the transactions contemplated herein.  Each  Member hereby agrees to indemnify, defend and hold the other Member wholly harmless from  and against all Losses arising out of any claim for brokerage or other commissions relative to this  Agreement, or the transactions contemplated herein insofar as any such claim arises by reason of  services alleged to have been rendered to or at the insistence of such indemnifying Member or any  Affiliate thereof.  No Member shall receive any credit to its Capital Account or Unreturned  Contribution Account or otherwise be reimbursed by the Company for any amounts paid by such  Member pursuant to this Section 9.03. 9.04 Investment Representations Each Member agrees as follows with respect to investment representations: 

 

1282772.07/OC 373745.00003 -49- (a) Member Understandings.  Each Member understands the following: (i) No Registration.  That the Interests in the Company evidenced  by this Agreement have not been registered under the Securities Act of 1933, 15  U.S.C. § 15b et seq., the Delaware Securities Act, the California Corporate  Securities Law of 1968 or any other state securities laws (the "Securities Acts")  because the Company is issuing Interests in the Company in reliance upon the  exemptions from the registration requirements of the Securities Acts providing for  issuance of securities not involving a public offering; (ii) Reliance by the Company.  That the Company has relied upon  the representation made by each Member that the Interest issued to such Member  is to be held by such Member for investment; and (iii) No Distribution.  That exemption from registration under the  Securities Acts would not be available if any Interest in the Company was acquired  by a Member with a view to distribution.  Each Member agrees that the Company  is under no obligation to register the Interests or to assist the Members in complying  with any exemption from registration under the Securities Acts if the Member  should at a later date wish to dispose of such its Interest in the Company. (b) Acquisition for Own Account.  Each Member hereby represents to the  Company that such Member is acquiring its Interest in the Company for such Member's  own account, for investment and not with a view to resale or distribution. (c) No Public Market.  Each Member recognizes that no public market  exists with respect to the Interests and no representation has been made that such a public  market will exist at a future date. (d) No Advertisement.  Each Member hereby represents that such Member  has not received any advertisement or general solicitation with respect to the sale of the  Interests. (e) Pre-Existing Business Relationship.  Each Member acknowledges that  such Member has a preexisting personal or business relationship with the Company or its  officers, directors, or principal interest holders, or, by reason of such Member's business or  financial experience or the business or financial experience of such Member's financial  advisors (who are not affiliated with the Company), could be reasonably assumed to have  the capacity to protect such Member's own interest in connection with the acquisition of its  Interest.  Each Member further acknowledges that such Member is familiar with the  financial condition and prospects of the Company's business, and has discussed with the  other Member the current activities of the Company.  Each Member believes that the  Interest is a security of the kind such Member wishes to purchase and hold for investment,  and that the nature and amount of the Interest is consistent with such Member's investment  program. (f) Due Investigation.  Before acquiring any Interest in the Company, each  Member has investigated the Company and its business and the Company has made  

 

1282772.07/OC 373745.00003 -50- available to each Member all information necessary for the Member to make an informed  decision to acquire an Interest in the Company.  Each Member considers itself to be a  Person possessing experience and sophistication as an investor adequate for the evaluation  of the merits and risks of the Member's investment in the Company. 9.05 Indemnification Obligations In addition to the indemnity described in Section 9.03 above, each Member hereby  unconditionally and irrevocably covenants and agrees to indemnify, defend and hold harmless the  Company, the other Member and such other Member's partners, members, shareholders, officers,  directors, employees, agents and other representatives (collectively, the "Affiliated Parties") from  and against any and all Losses incurred by the other Member and/or such Affiliated Parties to the  extent such Losses arise out of any material inaccuracy or material breach of any representations  or warranties made by such Member under this Agreement.  No Member shall receive any credit  to its Capital Account or Unreturned Contribution Account or otherwise be reimbursed by the  Company for any amounts paid by such Member pursuant to this Section 9.05. 9.06 Survival of Representations, Warranties and Covenants Each Member understands the meaning and consequences of the representations,  warranties and covenants made by such Member set forth in this Article IX and that the Company  and the other Member have relied upon such representations, warranties and covenants.  All  representations, warranties and covenants contained in this Article IX shall survive the execution  of this Agreement, the formation of the Company, the withdrawal of any Member as a member of  the Company and the Liquidation of the Company. ARTICLE X LIABILITY, EXCULPATION, RESTRICTIONS ON COMPETITION, FIDUCIARY DUTIES AND INDEMNIFICATION 10.01 Liability for Company Claims Except as otherwise provided by this Agreement, the Delaware Act and/or any other  applicable law, the debts, obligations and liabilities of the Company, whether arising in contract,  tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and no  Member shall be obligated personally for any such debt, obligation or liability of the Company  solely by reason of being a member of the Company. 10.02 Exculpation, Indemnity and Reliance on Information The Members hereby agree to the exculpation, indemnity and other provisions set forth  below as follows: (a) Limitation on Covered Person Liability.  No authorized person, Member  or Officer of the Company, or, if designated by the Executive Committee, any Affiliate or  any direct or indirect members, partners, shareholders, directors, officers, managers,  trustees or employees of any Member (collectively, the "Covered Persons") shall be liable  or accountable in damages or otherwise to the Company or to any Member for any error of  

 

1282772.07/OC 373745.00003 -51- judgment or any mistake of fact or law or for anything that such Covered Person may do  or refrain from doing hereafter, except to the extent caused by any Bad Acts or Prohibited  Transfer of such Covered Person or any Affiliate thereof.  As used herein, the term "Bad  Acts" means (i) gross negligence, fraud or willful misconduct, (ii) any act or omission  outside the scope of authority granted under this Agreement resulting in damages or  liability to a Covered Person, (iii) any breach of this Agreement, and (iv) any action  willingly taken by any Guarantor under any Recourse Document for the Project or Non- Recourse Document for the Project without the prior written consent of both Members,  which creates liability under any such Recourse Document or Non-Recourse Document.   The term "Prohibited Transfer" means any transfer of a direct or indirect ownership in  the Company (including, without limitation, any transfer of a direct or indirect ownership  interest in any Member) that results in a Lender declaring a default or breach of or under  any of the loan documents evidencing any Loan obtained by the Company.  For purposes  of this Agreement, the Bad Act or Prohibited Transfer of any Affiliate or employee of any  Person will also be deemed to be the Bad Act or Prohibited Transfer of such Person. The  foregoing is subject to any applicable cure period provided under this Agreement. (b) Indemnity.  To the maximum extent permitted by applicable law as it  presently exists or may hereafter be amended, the Company hereby agrees to indemnify,  defend (with counsel selected by the Executive Committee), protect and hold harmless,  each Covered Person, from and against any and all Losses incurred by such Covered Person  by reason of anything which such Covered Person may do or refrain from doing that arises  out of or relates to the Company to the extent such Losses are not covered by insurance  maintained by or for the benefit of such Covered Person.  The foregoing obligation of the  Company to indemnify, protect, defend and hold harmless each Covered Person shall  extend to any Losses incurred by any Guarantor under any Recourse Document or  Nonrecourse Document (or as a result of the rights of contribution described in  Section 3.05).  Notwithstanding the foregoing terms of this Section 10.02(b), no Covered  Person (including any Guarantor) shall be entitled to be indemnified by the Company to  the extent any such Losses are incurred by such Covered Person by reason of, or in  connection with, any Bad Acts or Prohibited Transfer of such Covered Person.  For the  avoidance of doubt, in no event will the indemnity obligation of the Company extend to  any Losses that may be incurred or that may arise under an Affiliate Agreement. The Administrative Member may cause the Company to pay any costs and/or  expenses incurred by any Covered Person in defending any civil, criminal, administrative  or investigative action, suit or proceeding prior to the final disposition of such action, suit  or proceeding upon receipt of any undertaking by or on behalf of such Covered Person (or,  in the Executive Committee's reasonable discretion, a creditworthy Affiliate thereof) to  repay such amount if it shall ultimately be determined that such Covered Person is not  entitled to be indemnified by the Company as authorized in this Section 10.02(b).  The  obligation of the Company to indemnify, defend, protect and hold harmless each Covered  Person under any provision of this Agreement shall survive the withdrawal of any Member  from the Company and/or the Liquidation of the Company, in each case solely to the extent  such obligation of the Company arose prior to such withdrawal or Liquidation. 

 

1282772.07/OC 373745.00003 -52- If a claim for indemnification or payment of expenses under this Section 10.02(b)  is not paid in full within thirty (30) calendar days after a written claim therefor by the  Covered Person has been received by the Company, then the Covered Person may initiate  an action to recover the unpaid amount of such claim and, if successful in whole or in part,  shall be entitled to be paid the expense of prosecuting such claim.  In any such action, the  Covered Person shall have the burden of proving that the Covered Person was entitled to  the requested indemnification or payment of expenses under applicable law. (c) Reliance upon Information, Opinions, Reports, etc.  A Covered Person  shall be fully protected in relying in good faith upon the records of the Company, any  information received by any Member or the Company with respect to the Project (financial  or otherwise), and upon such information, opinions, reports or statements presented to the  Company by any Person as to matters the Covered Person reasonably believes are within  such other Person's professional or expert competence including, without limitation,  information, opinions, reports or statements as to the value and amount of the assets,  liabilities, profits, losses or cash flow or any other facts pertinent to the existence and  amount of assets from which distributions to Members might properly be paid. 10.03 Limitation on Liability Notwithstanding anything to the contrary contained in this Agreement (and without  limiting any liability a party may have under the Delaware Act or other applicable law to return  any distribution received by such party), no direct or indirect member, manager, partner,  shareholder, officer, director, trustee or employee in or of any Member (collectively, the  "Nonrecourse Parties") shall be personally liable in any manner or to any extent under or in  connection with this Agreement, and neither any Member nor the Company shall have any  recourse to any assets of any of the Nonrecourse Parties.  Neither any Member nor any  Nonrecourse Party shall have any liability for any punitive damages, lost profits, special damages  or consequential damages based on any claim that arises out of or relates to this Agreement and/or  the Company.  The limitations on liability provided in this Section 10.03 is in addition to, and  not in limitation of, any limitation on liability applicable to any Member or Nonrecourse Party  provided by law or by this Agreement or any other contract, agreement or instrument. 10.04 Activities of the Members and Their Affiliates Subject to the terms hereof, each Member and their respective direct and indirect Affiliates,  members, partners, shareholders, directors, managers, officers, employees, agents and trustees  shall only be required to devote so much of their time to the business and affairs of the Company  as is determined in the reasonable discretion of each such party.  Neither Member nor any of its  direct and indirect Affiliates, members, partners, shareholders, directors, officers, managers,  employees, agents or trustees shall be prohibited from engaging in other businesses whether or not  similar to the business of the Company. 

 

1282772.07/OC 373745.00003 -53- 10.05 Intentionally Omitted 10.06 Fiduciary Duties The fiduciary duties otherwise owed by the Members to each other under the Delaware Act  or otherwise are limited as follows: (a) Other Activities.  Except as otherwise provided by this Agreement, to  the maximum extent allowed by law, neither Member shall have any obligations (fiduciary  or otherwise) with respect to the Company or to the other Member insofar as making other  investment opportunities available to the Company or to the other Member.  Except as  otherwise provided in this Agreement, each Member may engage in whatever activities  such Member may choose, whether the same are competitive with the Company or  otherwise, without having or incurring any obligation to offer any interest in such activities  to the Company or to the other Member.  Except as otherwise provided in this Agreement,  neither this Agreement nor any activities undertaken pursuant hereto shall prevent either  Member from engaging in such activities, and to the maximum extent allowed by law, the  fiduciary duties of the Members to each other and to the Company shall be limited solely  to those arising from the business of the Company. EACH MEMBER AGREES THAT THE MODIFICATION AND WAIVER OF  THE FIDUCIARY DUTIES OF EACH MEMBER PURSUANT TO THIS ARTICLE X  ARE FAIR AND REASONABLE AND HAVE BEEN UNDERTAKEN WITH THE  INFORMED CONSENT OF EACH MEMBER.  TO THE MAXIMUM EXTENT  ALLOWED BY LAW, EACH MEMBER AGREES AND COVENANTS NOT TO  CONTEST THE VALIDITY OF THE PROVISIONS OF THIS SECTION IN ANY  COURT OF LAW (AND/OR IN ANY OTHER PROCEEDING). (b) Good Faith and Fair Dealing.  Except as otherwise provided by this  Agreement, each Member intends to limit the standard of care, degree of loyalty and  fiduciary duties to the maximum extent allowed by law; provided, however, the foregoing  shall not eliminate the implied contractual covenant of good faith and fair dealing.   Without limiting the generality of the foregoing, each Member may exercise any of its  rights and remedies under this Agreement without regard to any fiduciary duties that are  owed to the Company or the other Member including, without limitation, the remedies set  forth in Section 3.03 and Articles VII and VIII. 10.07 Non-Exclusivity of Rights Except as otherwise provided in this Agreement, the rights conferred on any Person by this  Article X shall not be exclusive of any other rights which such Person may have or hereafter  acquire under any applicable law. 10.08 Amendment or Repeal Any repeal or modification of the foregoing provisions of this Article X shall not adversely  affect any right or protection hereunder of any Person in respect of any act or omission occurring  prior to the time of such repeal or modification. 

 

1282772.07/OC 373745.00003 -54- 10.09 Insurance The Company may purchase and maintain insurance, to the extent and in such amounts as  are determined by the Executive Committee on behalf of the Covered Persons and such other  Persons as the Executive Committee shall determine in its reasonable discretion, against any  liability or claim that may be asserted against or expenses that may be incurred by any such Person  in connection with the activities of the Company or such indemnities, regardless of whether the  Company would have the power to indemnify such Person against such liability under the  provisions of this Agreement.  The Company may enter into indemnity contracts with Covered  Persons and such other Persons as the Executive Committee shall determine and adopt written  procedures pursuant to which arrangements are made for the advancement of expenses and the  funding of obligations under Section 10.02(b) hereof and containing such other procedures  regarding indemnifications as are appropriate. ARTICLE XI BOOKS AND RECORDS 11.01 Books of Account and Bank Accounts The taxable year of the Company shall be the year ending December 31.  The  Administrative Member shall maintain accurate and complete books of account and records  showing the assets and liabilities, operations, transactions and financial condition of the Company  on an accrual basis in accordance with Generally Accepted Accounting Principles, consistently  applied.  The Administrative Member shall also provide to the other Member within fifteen (15)  days after the end of each calendar month (i) an unaudited monthly net cash flow statement setting  forth the calculation of net cash flow and all disbursements of cash by the Company, and (ii) an  unaudited statement of continuing operations for the Company, including a balance sheet for the  Company, as of the end of the month, and a profit and loss statement for the month.  The  Administrative Member shall also provide to the other Member within fifteen (15) days after the  end of each calendar quarter a detailed description of any material deviations from the Approved  Business Plan during the preceding calendar quarter.  Promptly after written request by the other  Member, the Administrative Member shall deliver such other information as is reasonably  requested by the other Member.  The Administrative Member shall also provide on an annual  basis within thirty (30) calendar days after each calendar year annual unaudited statements of the  operations of the Company including (A) statement of net assets (balance sheet); (B) statement of  operations; (C) statement of cash flows; and (D) statement of changes in Members' capital.  The  annual financial reports shall be delivered together with a written statement by the Administrative  Member that includes (1) a representation by the Administrative Member that such annual  statements fairly represent the financial condition of the Company, and (2) a representation by the  Administrative Member that such financial statements have been prepared in accordance Generally  Accepted Accounting Principles, consistently applied. Upon not less than seventy-two (72) hours prior notice, the Administrative Member shall  cooperate with the other Member, at the Company's sole cost and expense, to conduct an  independent inspection and review of the books and records of the Company.  The other Member  shall have the authority to authorize the preparation of audited financial statements for the  Company at the expense of the requesting party.  The failure by the Administrative Member to  

 

1282772.07/OC 373745.00003 -55- deliver or otherwise cooperate timely with any item to be delivered or request made in accordance  with the requirements of this Section 11.01 shall be considered a material breach of the  Administrative Member's obligations under this Agreement (provided the foregoing shall not limit  any cure rights the Administrative Member may have with respect to such breach under  Section 2.16(c)(i) or 7.01(a) above). During normal business hours at the principal office of the Company, on not less than forty- eight (48) hours prior notice, all of the following shall be made available for inspection and  copying by each Member at its own expense:  (i) all books and records relating to the business  and financial condition of the Company, (ii) a current list of the name and last known business,  residence or mailing address of each Member, (iii) a copy of this Agreement, the Certificate of  Formation for the Company and all amendments thereto, together with executed copies of any  written powers-of-attorney pursuant to which this Agreement, the Certificate of Formation and/or  any amendments thereto have been executed, (iv) the amount of cash and a description and  statement of the agreed value of any other property or services contributed by each Member to the  capital of the Company and which each Member has agreed to contribute in the future, and (v) the  date upon which each Member became a member of the Company. 11.02 Tax Returns The Administrative Member shall cause to be prepared and timely filed and distributed to  each Member, at the expense of the Company (and prepared by an accounting firm approved by  the Executive Committee), all required federal and state tax returns for the Company which shall  be delivered to the Members by no later than March 31 each year.  The failure by the  Administrative Member to deliver timely any tax return in accordance with the requirements of  this Section 11.02 shall be considered a material breach of the Administrative Member's  obligations under this Agreement if (i) such failure is not caused by the other Member's delay in  delivering any information reasonably and timely requested in writing by the Administrative  Member, and (ii) such failure is not caused by the accounting firm's failure to prepare such tax  returns within the estimated timeframe provided by the accounting firm or any failure by the  Executive Committee to agree on any accounting treatment or election (provided the foregoing  shall not limit any cure rights the Administrative Member may have with respect to such breach  under Section 2.16(c)(i) or 7.01(a) above). The Administrative Member is hereby designated as the "partnership representative" of the  Company within the meaning of Section 6223(a) of the Code, as amended by Title XI of the  Bipartisan Budget Act of 2015.  Following any resignation or removal of Majestic as the  Administrative Member of the Company, Tejon shall be the "partnership representative" of the  Company.  The Administrative Member (or Tejon if it has replaced Majestic as the "partnership  representative" of the Company) is specifically directed and authorized to (x) to take whatever  steps may be necessary or desirable to perfect its designation as "partnership representative,"  including filing any forms or documents with the IRS, and (y) to take such other action as may  from time to time be required under the Code and the Regulations.  The "partnership  representative" of the Company shall be entitled to be reimbursed by the Company for all  reasonable third-party out-of-pocket costs and expenses incurred in connection with any tax  proceeding relating to the Company.  Notwithstanding the foregoing, the "partnership  representative" of the Company shall (i) provide the Members with prompt notice and copies of  

 

1282772.07/OC 373745.00003 -56- all communications with the IRS, (ii) reasonably consult with the Members regarding the  resolution of any disputes with the IRS, and (iii) not settle any such dispute, extend the statute of  limitations with respect to such dispute, or take any other material action that would bind the  Company or the Members in connection with any material matter, unless such decision is approved  as a Major Decision.  As the "partnership representative" of the Company, the Administrative  Member will have the right to make an election to treat any "partnership adjustment" as an  adjustment to be taken into account by each Member (and former member) in accordance with  Section 6226 of the Code. ARTICLE XII DISSOLUTION AND WINDING UP OF THE COMPANY 12.01 Events Causing Dissolution of the Company Upon any Member's bankruptcy, resignation, withdrawal, expulsion or other cessation to  serve or the admission of a new member into the Company, the Company shall not dissolve but  the business of the Company shall continue without interruption or break in continuity.  However,  the Company shall be dissolved and its affairs wound up upon the first to occur of any of the  following events: (a) Failure to Deliver Initial Annual Business Plan.  The election of Tejon  to dissolve the Company if Majestic does not deliver the annual business plan for the first  Business Plan Period for any reason to the Executive Committee pursuant to Section 2.07  on or before May 10, 2021 (provided such election is made prior to the date (if any) that  the Executive Committee approves the initial annual business plan for the Company); (b) Failure to Approve Initial Business Plan.  The election of either Member  to dissolve the Company if the Executive Committee for any reason does not approve the  annual business plan for the first Business Plan Period in its sole and absolute discretion  within five (5) days following the submission of such plan to the Executive Committee  pursuant to Section 2.07 (provided such election is made prior to the date (if any) that the  Executive Committee approves the initial annual business plan for the Company); (c) Failure to Timely Close Contruction Loan.  The election of either  Member to dissolve the Company if the Company does not close the Construction Loan  within ten (10) days following the approval of the annual business plan for the first  Business Plan Period by the Executive Committee pursuant to Section 2.07 (provided such  election is made prior to the date (if any) that the Company closes the Construction Loan); (d) Sale of Assets.  The sale, transfer or other disposition by the Company  of all or substantially all of its assets and the collection by the Company of all consideration  received in such transaction (including, without limitation, the collection of any promissory  note received by the Company); (e) Election of Members.  The affirmative election of the Executive  Committee to dissolve the Company; or 

 

1282772.07/OC 373745.00003 -57- (f) Decree of Dissolution.  The entry of a decree of judicial dissolution  pursuant to Section 18-802 of the Delaware Act. Except as provided above in this Section 12.01, neither Member shall have the right to, and  each Member hereby waives to the maximum extent allowed by law the right to, unilaterally seek  to dissolve or cause the dissolution of the Company or to unilaterally seek to cause a partial or  whole distribution or sale of Company assets whether by court action or otherwise, it being agreed  that any actual or attempted dissolution, distribution or sale would cause a substantial hardship to  the Company and the other Member. 12.02 Winding Up of the Company Upon the Liquidation of the Company, the Administrative Member shall proceed to the  winding up of the business and affairs of the Company.  During such winding up process, the Net  Profits, Net Losses and Cash Flow distributions shall continue to be shared by the Members in  accordance with this Agreement.  Subject to Section 12.03, the assets of the Company shall be  liquidated as promptly as consistent with obtaining a fair value therefor, and the proceeds  therefrom, to the extent available, shall be applied and distributed by the Company on or before  the end of the taxable year of such Liquidation or, if later, within ninety (90) days after such  Liquidation, in the following order: (a) Creditors.  First, to creditors of the Company (including Members who  are creditors) in the order of priority as provided by law; (b) Reserves.  Second, to establishing any reserves which the  Administrative Member reasonably determines are necessary for any contingent,  conditional or unmatured liabilities or obligations of the Company; and (c) Remaining Amounts.  Thereafter, to the Members in the order of priority  set forth in Section 5.01. Any reserves withheld pursuant to Section 12.02(b) shall be distributed as soon as  practicable, as determined in the reasonable discretion of the Administrative Member, in the order  of priority set forth in Section 12.02(c). The Members believe and intend that the effect of making any and all liquidating  distributions in accordance with the provisions of Section 12.02(c) shall result in such liquidating  distributions being made to the Members in proportion to the positive balances standing in their  respective Capital Accounts.  If this is not the result, then the Administrative Member, upon the  advice of tax counsel to the Company, is hereby authorized to make such amendments to the  provisions of Article IV that are reasonably approved by the Executive Committee as may be  necessary to cause such allocations to be in compliance with Code Section 704(b) and the Treasury  Regulations promulgated thereunder. 12.03 Distribution of Assets Upon Early Dissolution Event Following the effective date of any notice delivered to dissolve the Company pursuant to  Section 12.01(a), Section 12.01(b) or Section 12.01(c), (i) Tejon shall not have any duty or  

 

1282772.07/OC 373745.00003 -58- obligation to convey (or cause to be conveyed) the Property (or any portion thereof) or any rights  related thereto to the Company, and (ii) neither the Company nor Majestic shall have any rights to  participate in, or otherwise realize any economic benefit from, the Property (or any rights related  thereto).  Following any dissolution pursuant to  Section 12.01(a), Section 12.01(b) or  Section 12.01(c), the Company shall transfer, convey and assign (to the extent assignable) to Tejon  at its written request all or any part of the Work Product owned by the Company that in any way  relates to or benefits the Property.  Tejon shall reimburse the Company for all costs and expenses  reimbursed or paid for by the Company for any portion of the Work Product that is transferred,  conveyed and assigned to Tejon at its request pursuant to this Section 12.03 (and the distribution  of such Work Product to Tejon shall not reduce its Capital Account or Unreturned Contribution  Account).  Any such transfer, conveyance and assignment of any portion of the Work Product to  Tejon shall be made by the Company on an "AS-IS" basis without any representation or warranty  whatsoever from the Company, Majestic and/or any Affiliate thereof.  Any amounts contributed  by Tejon pursuant to this Section 12.03 shall be distributed to the Members in accordance with the  terms of Section 5.01. 12.04 Negative Capital Account Restoration No Member shall have any obligation whatsoever upon the Liquidation of such Member's  Interest, the Liquidation of the Company or in any other event, to contribute all or any portion of  any negative balance standing in such Member's Capital Account to the Company, to the other  Member or to any other Person. ARTICLE XIII MISCELLANEOUS 13.01 Amendments This Agreement may be amended and/or modified only with the written approval of both  Members. 13.02 Waiver of Conflict Interest EACH MEMBER HEREBY ACKNOWLEDGES AND AGREES THAT, IN  CONNECTION WITH THE DRAFTING, PREPARATION AND NEGOTIATION OF THIS  AGREEMENT AND THE CONTRIBUTION AGREEMENT, THE FORMATION OF THE  COMPANY AND ALL OTHER MATTERS RELATED THERETO, (I) ALLEN MATKINS  LECK GAMBLE MALLORY & NATSIS LLP HAS ONLY REPRESENTED THE INTERESTS  OF TEJON, AND NOT THE INTERESTS OF MAJESTIC, THE COMPANY OR ANY OTHER  PARTY, AND (II) SNELL & WILMER LLP HAS ONLY REPRESENTED THE INTERESTS  OF MAJESTIC AND NOT THE INTERESTS OF TEJON, THE COMPANY OR ANY OTHER  PARTY.  THE ATTORNEYS, ACCOUNTANTS AND OTHER EXPERTS WHO PERFORM  SERVICES FOR ANY MEMBER MAY ALSO PERFORM SERVICES FOR THE COMPANY.   TO THE EXTENT THAT THE FOREGOING REPRESENTATION CONSTITUTES A  CONFLICT OF INTEREST, THE COMPANY AND EACH MEMBER HEREBY EXPRESSLY  WAIVES ANY SUCH CONFLICT OF INTEREST.  EACH MEMBER FURTHER  ACKNOWLEDGES THAT THE ATTORNEYS, ACCOUNTANTS AND OTHER EXPERTS  

 

1282772.07/OC 373745.00003 -59- WHO PERFORM SERVICES FOR THE COMPANY SHALL NOT BE DEEMED BY VIRTUE  OF SUCH REPRESENTATION TO HAVE ALSO REPRESENTED ANY OTHER PARTY IN  CONNECTION WITH ANY SUCH MATTERS. 13.03 Partnership Intended Solely for Tax Purposes The Members have formed the Company as a Delaware limited liability company under  the Delaware Act, and do not intend to form a corporation or a general or limited partnership under  Delaware or California law (or any other state law).  The Members intend the Company to be  classified and treated as a partnership solely for federal and state income taxation purposes.  Each  Member agrees to act consistently with the foregoing provisions of this Section 13.03 for all  purposes, including, without limitation, for purposes of reporting the transactions contemplated  herein to the Internal Revenue Service and all state and local taxing authorities. 13.04 Notices All notices or other communications required or permitted hereunder shall be in writing,  and shall be delivered or sent, as the case may be, by any of the following methods:  (i) personal  delivery, (ii) overnight commercial carrier, (iii) registered or certified mail, postage prepaid, return  receipt requested, or (iv) facsimile or email.  Any such notice or other communication shall be  deemed received and effective upon the earlier of (A) if personally delivered, the date of delivery  to the address of the Person to receive such notice; (B) if delivered by overnight commercial  carrier, one (1) day following the receipt of such communication by such carrier from the sender,  as shown on the sender's delivery invoice from such carrier; (C) if mailed, on the date of delivery  as shown by the sender's registry or certification receipt; or (D) if given by facsimile or email,  when sent if received by the intended recipient of such facsimile or email prior to 5:00 p.m. on a  Business Day or on the next Business Day if not received by the recipient of such facsimile prior  to 5:00 p.m. on a Business Day.  Any notice or other communication sent by facsimile or email  must be confirmed within two (2) Business Days by letter mailed or delivered in accordance with  the foregoing to be effective.  Any reference herein to the date of receipt, delivery, or giving or  effective date, as the case may be, of any notice or communication shall refer to the date such  communication becomes effective under the terms of this Section 13.04.  Any such notice or  other communication so delivered shall be addressed to the party to be served at the address for  such party set forth in Section 1.02.  The address for either Member may be changed by giving  written notice to the other Member in the manner set forth in this Section 13.04.  Rejection or  other refusal to accept or the inability to deliver because of changed address of which no notice  was given shall be deemed to constitute receipt of the notice or other communication sent. 13.05 Construction of Agreement The Article and Section headings of this Agreement are used herein for reference purposes  only and shall not govern, limit, or be used in construing this Agreement or any provision hereof.   Each of the Exhibits attached hereto is incorporated herein by reference and expressly made a part  of this Agreement for all purposes.  References to any Exhibit made in this Agreement shall be  deemed to include this reference and incorporation.  Where the context so requires, the use of the  neuter gender shall include the masculine and feminine genders, the masculine gender shall include  the feminine and neuter genders, the feminine gender shall include the masculine and neuter  

 

1282772.07/OC 373745.00003 -60- genders, and the singular number shall include the plural and vice versa.  Each Member  acknowledges that (i) each Member is of equal bargaining strength; (ii) each Member has actively  participated in the drafting, preparation and negotiation of this Agreement; and (iii) any rule of  construction to the effect that ambiguities are to be resolved against the drafting party shall not  apply in the interpretation of this Agreement, any portion hereof, or any Exhibits attached hereto. 13.06 Counterparts This Agreement may be executed and delivered in multiple counterparts including by  facsimile or .pdf file, each of which shall be deemed an original Agreement, but all of which, taken  together, shall constitute one (1) and the same Agreement, binding on the parties hereto.  The  signature of any party hereto to any counterpart hereof shall be deemed a signature to, and may be  appended to, any other counterpart hereof. 13.07 Attorneys' Fees If any lawsuit, arbitration, mediation or other proceeding is commenced by any Member  against any other Member that arises out of, or relates to, this Agreement, then the prevailing  Member in such action shall be entitled to recover reasonable attorneys' fees and costs.  Any  judgment or order entered in any such action shall contain a specific provision providing for the  recovery of all costs and expenses of suit including, without limitation, reasonable attorneys' and  expert witness fees, costs and expenses incurred in connection with (i) enforcing, perfecting and  executing such judgment; (ii) post-judgment motions; (iii) contempt proceedings;  (iv) garnishment, levy, and debtor and third-party examinations; (v) discovery; and  (vi) bankruptcy litigation. 13.08 Approval Standard The consent, approval or determination of any Member or Representative required or  permitted under this Agreement may be withheld in such party's sole and absolute discretion,  unless this Agreement provides that such consent or approval shall not be unreasonably withheld  (or another standard is specifically provided for in this Agreement for such matter). 13.09 Further Acts Each Member covenants, on behalf of such Member and such Member's successors and  assigns, to execute, with acknowledgment, verification, or affidavit, if required, any and all  documents and writings, and to perform any and all other acts, that may be reasonably necessary  or desirable to implement, accomplish, and/or consummate the formation of the Company, the  achievement of the Company's purposes, and any other matter contemplated under this Agreement. 13.10 Preservation of Intent If any provision of this Agreement is determined by any court having jurisdiction to be  illegal or in conflict with any laws of any state or jurisdiction, then the Members agree that such  provision shall be modified to the extent legally possible so that the intent of this Agreement may  be legally carried out.  If any of the provisions contained in this Agreement, or the application  thereof in any circumstances, is held invalid, illegal or unenforceable in any respect or for any  

 

1282772.07/OC 373745.00003 -61- reason, then the validity, legality and enforceability of any such provision in every other respect  and of the remaining provisions of this Agreement shall not be in any way impaired or affected, it  being intended that the Members' rights and privileges described in this Agreement shall be  enforceable to the fullest extent permitted by law. 13.11 Waiver No consent or waiver, express or implied, by a party to or of any breach or default by any  other party in the performance by such other party of such other party's obligations under this  Agreement shall be deemed or construed to be a consent or waiver to or of any other breach or  default in the performance by such other party hereunder.  Failure on the part of a party to  complain of any act or failure to act of any other party or to declare any other party in default,  irrespective of how long such failure continues, shall not constitute a waiver by such non- complaining or non-declaring party of the latter's rights hereunder. 13.12 Entire Agreement This Agreement, together with the Contribution Agreement, contains the entire  understanding among the parties hereto with respect to the subject matter hereof and supersedes  any and all prior or other contemporaneous understanding, correspondence, negotiations or  agreements between them respecting the subject matter hereof. 13.13 Choice of Law Notwithstanding the place where this Agreement may be executed by any of the parties  hereto, the parties expressly acknowledge and agree that all of the terms and provisions of this  Agreement shall be construed under the laws of the State of Delaware (without giving effect to the  conflicts of laws and principles thereof).  In furtherance of the foregoing, and pursuant to  Section 17708.01(a) of the California Act, all rights, duties, obligations and remedies of the  Members shall be governed by the Delaware Act (without giving effect to the conflicts of laws  and principals thereof). 13.14 No Third-Party Beneficiaries Except as otherwise set forth in Section 3.05 and Article X, the provisions of this  Agreement are not intended to be for the benefit of, or enforceable by, any third party and shall  not give rise to a right on the part of any third party (i) to enforce or demand enforcement of a  Member's obligation to contribute capital, obligation to return distributions, or obligation to make  other payments to the Company as set forth in this Agreement, or (ii) to demand that the Company,  the Administrative Member or the other Member obtain financing or issue any capital call. 13.15 Successors and Assigns Subject to the restrictions set forth in Article VI and Section 9.04, this Agreement shall  inure to the benefit of and shall bind the parties hereto and their respective personal representatives,  successors, and assigns. 

 

1282772.07/OC 373745.00003 -62- 13.16 No Usury Notwithstanding any other provision in this Agreement, the rate of interest charged by the  Company or by any Member (and/or any Affiliate thereof) in connection with any obligation under  this Agreement shall not exceed the maximum rate permitted by applicable law.  To the extent  that any interest charged by the Company or by any Member (and/or Affiliate thereof) shall have  been finally adjudicated to exceed the maximum amount permitted by applicable law, such interest  shall be retroactively deemed to have been a required repayment of principal (and any such amount  paid in excess of the outstanding principal amount shall be promptly returned to the payor).  In  furtherance of the foregoing, the Members acknowledge and agree that pursuant to the Delaware  Act, no obligation of a Member to the Company shall be subject to the defense of usury, and no  Member shall impose the defense of usury with respect to any such obligation in any action. 13.17 Venue If any litigation, claim or lawsuit directly or indirectly arising out of this Agreement is not  required to be resolved in accordance with the JAMS procedures provided for under Section 13.18,  then each Member hereby irrevocably consents to the maximum extent allowed by law to the  exclusive jurisdiction of the state and federal courts located in California and to the exclusive  venue of (i) the Eastern District of California for any federal action or proceeding arising out of,  or relating to, this Agreement, and (ii) the Superior Court of California located in Kern County,  California for any state action or proceeding arising out of, or relating to, this Agreement. 13.18 Dispute Resolution Any action to resolve any controversy or claim arising out of, or related to in any way to,  this Agreement (exclusive of any impasse on any Major Decision) or the Contribution Agreement,  including, without limitation, any alleged breach of this Agreement or the Contribution Agreement  and any claim based upon any tort theory, however characterized shall be resolved through a  binding arbitration before an arbitrator in accordance with the terms of this Section 13.18. (a) Binding Arbitration.  Any Member desiring to bring any action under  this Agreement or the Contribution Agreement shall give written notice to the other  Member (the "Arbitration Notice"), which notice shall state with particularity the nature  of the dispute and the demand for relief, making specific reference by Section and title, if  applicable, of the provisions of this Agreement or the Contribution Agreement pertaining  to the dispute.  This arbitration provision and its validity, construction, and performance  shall be governed by the Federal Arbitration Act (the "FAA") and cases decided thereunder  and, to the extent relevant, the laws of the State of California.  Further, the terms and  procedures governing the enforcement of this Section 13.18 shall be governed by and  construed and enforced in accordance with the FAA, and not individual state laws  regarding enforcement of arbitration agreements. (b) Selection of Arbitrator.  The Members shall endeavor to agree, within  thirty (30) days of the Arbitration Notice, upon a mutually acceptable arbitrator to resolve  the dispute.  The arbitrator shall be a single former judge of the Superior Court or the  Court of Appeal of the State of California or a member in good standing with the California  

 

1282772.07/OC 373745.00003 -63- State Bar currently employed by or associated with the office of JAMS/ENDISPUTE  ("JAMS") located in Los Angeles, California.  The arbitrator shall have no direct or  indirect social, political or business relationship of any sort with either of the Members,  their respective legal counsel or any other Person materially involved with the Project.  If  the Members cannot agree upon the arbitrator within such thirty (30)-day period, then  JAMS, in its sole discretion, shall provide a list of three (3) arbitrators with the  qualifications set forth above.  Within ten (10) days of JAMS providing the above- described list, each Member shall be entitled to strike one (1) name from the list and so  notify JAMS.  JAMS, in its sole discretion, thereafter shall select as arbitrator any one (1)  of the persons remaining on the list, and the person so selected shall thereafter serve as  arbitrator.  If for any reason JAMS is unable or unwilling to make such an appointment,  then any Member may apply to the Superior Court of the State of California in and for the  County of Los Angeles for appointment of any former judge of the Superior Court or the  Court of Appeal of the State of California to serve as arbitrator.  The appointment of an  arbitrator, whether by JAMS or by the Superior Court pursuant to the foregoing, shall be  made, and the arbitrator shall serve, without further objection from any Member, except on  the ground of conflict of interest, if any, pursuant to the same rules that would apply if the  arbitrator was serving as an active member of the Superior Court or Court of Appeal. (c) Location of Proceeding.  The proceeding shall take place at a City of Los  Angeles office of JAMS and shall be conducted pursuant to the provisions of JAMS  Comprehensive Arbitration Rules & Procedures in effect on the date of the Arbitration  Notice (the "Rules"); provided that in all events the rules of evidence in such proceeding  shall be governed by the California Evidence Code.  Discovery between the parties prior  to the arbitration hearing shall be limited to the mutual exchange of relevant documents.   Interrogatories and request for admissions shall not be allowed under any circumstance.   Depositions of witnesses shall not be permitted, unless it is shown that the witness will be  otherwise unavailable and it is necessary to preserve his or her testimony for the hearing.   The arbitrator shall have the authority set forth in Section 1282.6 of the California Code of  Civil Procedure to issue subpoenas requiring the attendance at the hearing of witnesses,  and to issue subpoenas duces tecum for the production at the hearing of books, records,  documents and other evidence. (d) Resolution Dispute.  Except as otherwise provided in Section 13.18(c),  the arbitrator shall apply Delaware law in resolving the dispute.  In resolving the dispute,  the arbitrator shall apply the pertinent provisions of this Agreement without departure  therefrom in any respect, and the arbitrator shall not have the power to change any of the  provisions of the Agreement.  The arbitrator shall try all of the issues including, without  limitation, any issues that may be raised concerning whether the dispute is subject to the  provisions of this Section 13.18 and any and all other issues, whether of fact or of law, and  shall hear and decide all motions and matters of any kind.  The arbitrator shall not be  required to prepare a written statement of decision as to any interlocutory decision, but at  the conclusion of the arbitration shall prepare a written statement of decision thereon which  shall be final and binding upon the parties, and upon which judgment may be entered in  accordance with applicable law in any court having jurisdiction thereof.  Any  interlocutory decisions by the arbitrator likewise shall be final and binding, except that the  arbitrator shall have the power to reconsider such decisions for good cause shown.  The  

 

1282772.07/OC 373745.00003 -64- Members shall not have the right to appeal the arbitration award consistent with the JAMS  Optional Arbitration Appeal Procedure in effect at the time or any similar successor rules.   Subject to the limitations in this Section 13.18, the arbitrator shall have the authority to  grant any equitable and legal remedies that would be available in a judicial proceeding.   The arbitrator may award interim and final injunctive relief and other remedies, but may  not award punitive, exemplary, treble or other enhanced damages.  The arbitrator shall  have no power or authority to issue any award or determination that would amend or  modify this Agreement.  Notwithstanding the foregoing, a party shall be permitted to seek  a temporary restraining order or injunctive relief in a court of competent jurisdiction with  regard to any controversy, dispute or claim between them relating to or arising out of this  Agreement, a breach of this Agreement or the termination of the Administrative Member,  where such relief is appropriate; provided that other relief shall be pursued through an  arbitration proceeding pursuant to this Section 13.18.  Each Member shall use reasonable  efforts to expedite the arbitration process, and each Member shall have the right to be  represented by counsel. (e) Award of Fees.  Subject to the obligation of the arbitrator to award such  fees and expenses to the prevailing party as provided in Section 13.07, until the arbitrator  issues his or her final statement of decision, each Member shall pay the fees and expenses  of its attorneys and experts in connection with the adjudication and one-half of the fees and  expenses of the arbitrator; provided, however, that the arbitrator shall have the same power  as a judge pursuant to the California Code of Civil Procedure to award sanctions with  reference to interlocutory matters.  Subject to Section 13.07, the Member shall bear an  equal (pro rata) share of any arbitration costs, including any administrative or hearing fees  charged by the arbitrator or JAMS. (f) Waiver of Jury Trial.  TO THE MAXIMUM EXTENT PERMITTED  BY LAW, EACH MEMBER HEREBY WAIVES EACH SUCH MEMBER'S RIGHT TO  A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION (WHETHER AS  PLAINTIFF, DEFENDANT OR OTHERWISE) BASED UPON OR ARISING OUT OF  OR RELATED TO THE COMPANY, THIS AGREEMENT, THE CONTRIBUTION  AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR  THEREBY, IN ANY ACTION, PROCEEDING, OR OTHER LITIGATION OF ANY  TYPE BROUGHT BY ANY MEMBER AGAINST THE OTHER MEMBER,  WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR  OTHERWISE.  EACH MEMBER AGREES THAT ANY SUCH CLAIM OR CAUSE  OF ACTION SHALL BE TRIED BY AN ARBITRATOR AS PROVIDED ABOVE BUT  THIS WAIVER SHALL BE EFFECTIVE EVEN IF, FOR ANY REASON  WHATSOEVER, SUCH CLAIM OR CAUSE OF ACTION CANNOT BE TRIED BY  SUCH ARBITRATOR.  WITHOUT LIMITING THE FOREGOING, EACH MEMBER  FURTHER AGREES THAT EACH SUCH MEMBER'S RIGHT TO A TRIAL BY JURY  IS WAIVED TO THE MAXIMUM EXTENT ALLOWED BY LAW BY OPERATION  OF THE FOREGOING AS TO ANY ACTION, COUNTERCLAIM OR OTHER  PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE  VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE  CONTRIBUTION AGREEMENT OR ANY PROVISION OF EITHER SUCH  AGREEMENT.  THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT  

 

1282772.07/OC 373745.00003 -65- AMENDMENTS, RENEWALS, SUPPLEMENTS, OR MODIFICATIONS TO THIS  AGREEMENT AND/OR THE CONTRIBUTION AGREEMENT.         AL JR                                INITIALS OF TEJON        ER  BT  TS                  INITIALS OF MAJESTIC (g) Survivability.  The provisions of this Section 13.18 shall survive the  withdrawal of any Member from the Company and the dissolution and liquidation of the  Company. 13.19 Timing All dates and times specified in this Agreement are of the essence and shall be strictly  enforced. 13.20 Remedies for Breach of this Agreement Except as otherwise specifically provided in this Agreement, the remedies set forth in this  Agreement are cumulative and shall not exclude any other remedies to which a Person may be  lawfully entitled. 13.21 Survivability of Representations and Warranties All representations, warranties and covenants contained in this Agreement including,  without limitation, the indemnities contained in Sections 7.10, 8.09, 9.03, 9.05 and 10.02(b) shall  survive the execution of this Agreement, the formation of the Company, the withdrawal of any  Member and the Liquidation of the Company. 13.22 Reasonableness of Rights and Remedies THE RIGHTS AND REMEDIES SET FORTH IN THIS AGREEMENT (INCLUDING,  WITHOUT LIMITATION, SECTION 3.03 AND ARTICLES VI AND VII) ARE A MATERIAL  INDUCEMENT FOR EACH MEMBER TO ENTER INTO THIS AGREEMENT, AND THE  MEMBERS WOULD NOT HAVE AGREED TO ENTER INTO THIS AGREEMENT BUT FOR  THE AGREEMENT OF EACH MEMBER TO BE BOUND BY SUCH REMEDIES.  EACH  MEMBER ACKNOWLEDGES AND AGREES THAT THE FOREGOING REMEDIES ARE  FAIR AND REASONABLE AND HAVE BEEN ENTERED INTO WITH THE INFORMED  CONSENT OF EACH MEMBER.  EACH MEMBER FURTHER ACKNOWLEDGES AND  AGREES THAT IT WOULD BE IMPRACTICABLE AND EXTREMELY DIFFICULT TO  ESTIMATE THE DAMAGES WHICH THE COMPANY AND THE NON-DEFAULTING  MEMBER MAY SUFFER IN CONNECTION WITH THE OCCURRENCE OF ANY OF THE  DEFAULTS DESCRIBED ABOVE.  THEREFORE, EACH MEMBER AGREES THAT THE  REMEDIES SET FORTH ABOVE REASONABLY AND FAIRLY REFLECT THE  DETRIMENT THAT THE COMPANY AND THE NON-DEFAULTING MEMBER WOULD  SUFFER IN SUCH EVENT AND, IN LIGHT OF THE DIFFICULTY IN DETERMINING  ACTUAL DAMAGES, REPRESENT A PRIOR AGREEMENT AMONG THE MEMBERS AS  TO APPROPRIATE LIQUIDATED DAMAGES.  EACH MEMBER ALSO AGREES THAT  THE REMEDIES SET FORTH ABOVE ARE NOT INTENDED AS A FORFEITURE OR  

 

1282772.07/OC 373745.00003 -66- PENALTY UNDER DELAWARE OR ANY OTHER APPLICABLE STATE LAW.  EACH  MEMBER FURTHER COVENANTS NOT TO CONTEST THE VALIDITY OF THE  REMEDIES SET FORTH ABOVE AS A PENALTY, FORFEITURE OR OTHERWISE IN ANY  COURT OF LAW (AND/OR IN ANY ARBITRATION OR MEDIATION). 13.23 Force Majeure The time period for each Member to perform any obligation under this Agreement shall be  extended for the time period such Member (the "Obligated Member") is unable to perform such  obligation as a result of any Force Majeure Delay.  The term "Force Majeure Delay" means any  delay as a result of war, national emergency, strikes (other than strikes or labor disturbances limited  in scope to primarily the employees of the Obligated Member or any Affiliate thereof), riot or civil  unrest, utility failure, acts of God (excluding inclement weather) or other events totally outside the  control of the Obligated Member or any Affiliate thereof.  Notwithstanding the foregoing, no  Force Majeure Delay shall be deemed to exist as a result of (i) the Obligated Member's lack of  funds (other than a temporary lack of funds resulting from any event totally outside the control of  the Obligated Member described in the preceding sentence), or (ii) any delay solely caused by any  act or omission of the Obligated Member or any Affiliate thereof, and in any event, the length of  any Force Majeure Delay shall be reduced by (A) the time period that elapses after the tenth  Business Day following the initial cause of the delay through the date the Obligated Member  notifies the other Member in writing of the delay and the reason for the delay (if the Obligated  Member has previously failed to provide such notice to the other Member on or before the tenth  Business Day following the initial cause of the delay), or (B) the length of any delay caused by the  Obligated Member's failure to promptly exercise and continue to exercise reasonable commercial  efforts to remove or overcome such delay.  All other delays from acts or events are explicitly  excluded from Force Majeure Delays and shall not extend the time period for any Member to  perform any of its obligations under this Agreement. ARTICLE XIV DEFINITIONS 14.01 Accountant's Notice The term "Accountant's Notice" is defined in Section 7.03. 14.02 Accounting Firm The term "Accounting Firm" means Ernst & Young or such other accounting firm as  selected by the Executive Committee. 14.03 Actual Knowledge of Majestic The term "Actual Knowledge of Majestic" is defined in Section 9.02. 14.04 Actual Knowledge of Tejon The term "Actual Knowledge of Tejon" is defined in Section 9.01. 

 

1282772.07/OC 373745.00003 -67- 14.05 Additional Contribution Date The term "Additional Contribution Date" is defined in Section 3.02. 14.06 Adjusted Accountant's Notice The term "Adjusted Accountant's Notice" is defined in Section 7.05. 14.07 Adjusted Capital Account The term "Adjusted Capital Account" means, with respect to each Member as of the end  of each Fiscal Year of the Company, such Member's Capital Account (i) reduced by any  anticipated allocations, adjustments and distributions described in Treasury Regulation  Section 1.704-1(b)(2)(ii)(d)(4)-(6), and (ii) increased by the amount of any deficit in such  Member's Capital Account that such Member is deemed obligated to restore pursuant to the  penultimate sentences of Treasury Regulation Sections 1.704-2(g)(1) and 1.704-2(i)(5) or under  Section 1.704-1(b)(2)(ii)(c) of the Treasury Regulations at the end of such Fiscal Year. 14.08 Adjusted Price Determination Notice The term "Adjusted Price Determination Notice" is defined in Section 8.05. 14.09 Adjustment Amount The term "Adjustment Amount" is defined in Section 3.03(b). 14.10 Administrative Member The term "Administrative Member" is defined in Section 2.03. 14.11 Affiliate The term "Affiliate" means any Person which, directly or indirectly through one (1) or  more intermediaries, controls or is controlled by or is under common control with another Person.   The term "control" as used herein (including the terms "controlling," "controlled by," and "under  common control with") means the possession, direct or indirect, of the power to (i) vote more than  fifty percent (50%) of the outstanding voting securities of such Person, or (ii) otherwise direct  management policies of such Person by contract or otherwise. 14.12 Affiliate Agreements The term "Affiliate Agreements" is defined in Section 2.15. 14.13 Affiliated Member The term "Affiliated Member" is defined in Section 2.15. 

 

1282772.07/OC 373745.00003 -68- 14.14 Affiliated Parties The term "Affiliated Parties" is defined in Section 9.05. 14.15 Agreed Value The term "Agreed Value" is defined in Section 3.01(b)(i). 14.16 Agreement The term "Agreement" means this Limited Liability Company Agreement of  TRC-MRC 4, LLC. 14.17 Applicable ABP Date The term "Applicable ABP Date" is defined in Section 2.07. 14.18 Applicable Construction Costs The term "Applicable Construction Costs" is defined in Section 2.10. 14.19 Appraised Value The term "Appraised Value" is defined in Section 7.03(a). 14.20 Approved Business Plan The term "Approved Business Plan" is defined in Section 2.07. 14.21 Arbitration Notice The term "Arbitration Notice" is defined in Section 13.18(a). 14.22 Bad Acts The term "Bad Acts" is defined in Section 10.02(a). 14.23 Book Basis The term "Book Basis" means, with respect to any asset of the Company, the Gross Asset  Value (as determined under this Agreement).  The Book Basis of all assets of the Company shall  be adjusted thereafter by depreciation as provided in Treasury Regulation Section 1.704- 1(b)(2)(iv)(g) and any other adjustment to the basis of such assets other than depreciation or  amortization. 

 

1282772.07/OC 373745.00003 -69- 14.24 Business Day The term "Business Day" means any day other than Saturday, Sunday, or other day on  which commercial banks in California are authorized or required to close under the laws of such  state or the United States. 14.25 Business Plan Period The term "Business Plan Period" means the twelve (12)-month period ending  December 31 of each year; provided that the initial Business Plan Period shall be the period  beginning on the date the annual business plan for the Company's first Business Plan Period is  approved by the Executive Committee pursuant to Section 2.07 and ending on the estimated  Project Stabilization Date; and the second Business Plan Period shall be the period beginning on  the day after the Project Stabilization Date and ending on the subsequent December 31. 14.26 California Act The term "California Act" means the California Revised Uniform Limited Liability  Company Act as set forth in Title 2.6, Chapter 1 et seq. of the California Corporations Code, as  hereafter amended from time to time. 14.27 Capital Account The term "Capital Account" means with respect to each Member, the amount of money  contributed by such Member to the capital of the Company, increased by the aggregate fair market  value at the time of contribution (as determined by the Executive Committee) of all property  contributed by such Member to the capital of the Company (net of liabilities secured by such  contributed property that the Company is considered to assume or take subject to under  Section 752 of the Code), the aggregate amount of all Net Profits allocated to such Member, and  any and all items of gross income and gain specially allocated to such Member pursuant to  Sections 4.03 and 4.04, and decreased by the amount of money distributed to such Member by the  Company (exclusive of any guaranteed payment within the meaning of Section 707(c) of the Code  paid to such Member), the aggregate fair market value at the time of distribution (as determined  by the Executive Committee) of all property distributed to such Member by the Company (net of  liabilities secured by such distributed property that such Member is considered to assume or take  subject to under Section 752 of the Code), the amount of any Net Losses allocated to such Member,  and any and all losses and deductions, including, without limitation, any and all partnership and/or  partner "nonrecourse deductions" specially allocated to such Member pursuant to Sections 4.03  and 4.04.  The foregoing Capital Account definition and the other provisions of this Agreement  relating to the maintenance of Capital Accounts are intended to comply with Treasury Regulation  Sections 1.704-1(b) and 1.704-2 and shall be interpreted and applied in a manner consistent with  such Regulations. 14.28 Capital Call Notice The term "Capital Call Notice" is defined in Section 3.02. 

 

1282772.07/OC 373745.00003 -70- 14.29 Cash Flow The term "Cash Flow" means the excess, if any, of all cash receipts of the Company as of  any applicable determination date in excess of the sum of (i) all cash disbursements (inclusive of  any guaranteed payment within the meaning of Section 707(c) of the Code paid to any Member  and any reimbursements made to any Member, but exclusive of distributions to the Members in  their capacities as such) of the Company prior to that date, and (ii) any reserve, reasonably  determined by Administrative Member, for anticipated cash disbursements, including debt service,  that will have to be made before additional cash receipts from third parties will provide the funds  therefor. 14.30 Certificates The term "Certificates" is defined in Section 3.03(a). 14.31 Code The term "Code" means the Internal Revenue Code of 1986, as heretofore and hereafter  amended from time to time (and/or any corresponding provision of any superseding revenue law). 14.32 Commerce The term "Commerce" is defined in Section 2.04(g). 14.33 Company The term "Company" means the limited liability company created pursuant to this  Agreement and the filing of the Certificate of Formation for the Company with the Office of the  Delaware Secretary of State in accordance with the provisions of the Delaware Act. 14.34 Construction Contract The term "Construction Contract" is defined in Section 2.10. 14.35 Construction Loan The term "Construction Loan" is defined in Section 3.04. 14.36 Consultants The term "Consultants" is defined in Section 2.11. 14.37 Contributing Member The term "Contributing Member" is defined in Section 3.03. 14.38 Contributing Party The term "Contributing Party" is defined in Section 3.05. 

 

1282772.07/OC 373745.00003 -71- 14.39 Contribution Agreement The term "Contribution Agreement" is defined in Section 2.07. 14.40 Covered Persons The term "Covered Persons" is defined in Section 10.02(a). 14.41 Default Events The term "Default Events" is defined in Section 7.01. 14.42 Default Loan The term "Default Loan" is defined in Section 3.03(a). 14.43 Default Notice The term "Default Notice" is defined in Section 7.02. 14.44 Defaulting Member The term "Defaulting Member" is defined in Section 7.01. 14.45 Defaulting Member's Purchase Price The term "Defaulting Member's Purchase Price" is defined in Section 7.03. 14.46 Delaware Act The term "Delaware Act" means the Delaware Limited Liability Company Act (6 Del. C.  § 18-101, et seq.), as hereafter amended from time to time. 14.47 Delinquent Contribution The term "Delinquent Contribution" is defined in Section 3.03. 14.48 Deposit The term "Deposit" is defined in Section 8.04. 14.49 Design-Builder The term "Design-Builder" is defined in Section 2.10. 14.50 Development Budget The term "Development Budget" is defined in Section 2.08. 

 

1282772.07/OC 373745.00003 -72- 14.51 Development Fee The term "Development Fee" is defined in Section 2.11. 14.52 Development Plan The term "Development Plan" is defined in Section 2.08. 14.53 Dilution Percentage The term "Dilution Percentage" is defined in Section 3.03(b). 14.54 Effective Date The term "Effective Date" is defined in the Preamble. 14.55 Electing Member The term "Electing Member" is defined in Section 8.01. 14.56 Election Notice The term "Election Notice" is defined in Section 8.01. 14.57 Enforceability Exceptions The term "Enforceability Exceptions" is defined in Section 9.01(c). 14.58 Executive Committee The term "Executive Committee" is defined in Section 2.01(a). 14.59 FAA The term "FAA" is defined in Section 13.18(a). 14.60 Fiscal Year The term "Fiscal Year" means the twelve (12)-month period ending December 31 of each  year; provided that the initial Fiscal Year shall be the period beginning on the Effective Date and  ending on December 31, 2021, and the last Fiscal Year shall be the period beginning on January 1  of the calendar year in which the final liquidation and termination of the Company is completed  and ending on the date such final liquidation and termination is completed.  To the extent any  computation or other provision hereof provides for an action to be taken on a Fiscal Year basis, an  appropriate proration or other adjustment shall be made in respect of the initial and final Fiscal  Years to reflect that such periods are less than full calendar year periods. 

 

1282772.07/OC 373745.00003 -73- 14.61 Force Majeure Delay The term "Force Majeure Delay" is defined in Section 13.23. 14.62 Gross Asset Value The term "Gross Asset Value" means, in respect to any asset of the Company, the asset's  adjusted tax basis for federal income tax purposes; provided, however, that (i) the Gross Asset  Value of any asset contributed or deemed contributed by a Member to the Company or distributed  to a Member by the Company shall be the gross fair market value of such asset (without taking  into account Section 7701(g) of the Code), as determined by the Executive Committee; and (ii) the  Gross Asset Values of all Company assets may be adjusted, by the Executive Committee, to equal  their respective gross fair market values (taking into account Section 7701(g) of the Code), as  reasonably determined by the Executive Committee, as of (A) the date of the acquisition of an  additional interest in the Company by any new or existing member in exchange for more than a de  minimis contribution to the capital of the Company, or (B) upon the Liquidation of the Company  or the distribution by the Company to a retiring or continuing member of more than a de minimis  amount of money or other Company property in reduction of such Member's Interest.  Any  adjustments made to the Gross Asset Value of Company assets pursuant to the foregoing  provisions shall be reflected in the Members' Capital Account balances in the manner set forth in  Treasury Regulation Sections 1.704-1(b) and 1.704-2. 14.63 Guarantor(s) The terms "Guarantor" and "Guarantors" are defined in Section 3.05. 14.64 Hypothetical Distribution The term "Hypothetical Distribution" means, with respect to each Member and any Fiscal  Year, the amount that would be received by such Member (or, in certain cases, reduced as  appropriate by the amount such Member would be obligated to pay) if all Company assets were  sold for cash equal to their Book Basis, all Company liabilities were satisfied to the extent required  by their terms (limited, with respect to each nonrecourse liability to the Book Basis of the assets  securing each such liability), and the net assets of the Company were distributed in full to the  Members pursuant to Section 5.01. 14.65 Impasse Event The term "Impasse Event" is defined in Section 2.02(k). 14.66 Improvements The term "Improvements" is defined in Section 1.03. 14.67 Interest The term "Interest" means with respect to each Member, all of such Member's right, title  and interest in and to the Net Profits, Net Losses, Cash Flow, distributions and capital of the  

 

1282772.07/OC 373745.00003 -74- Company, and any and all other interests therein in accordance with the provisions of this  Agreement and the Delaware Act. 14.68 JAMS The term "JAMS" is defined in Section 13.18(b). 14.69 Just Cause Event The term "Just Cause Event" is defined in Section 2.16(c). 14.70 Lender(s) The terms "Lender" and "Lenders" are defined in Section 3.04. 14.71 Liquidation The term "Liquidation" means, (i) with respect to the Company, the date upon which the  Company ceases to be a going concern (even though it may continue in existence for the purpose  of winding up its affairs, paying its debts and distributing any remaining balance to its Members),  and (ii) with respect to a Member wherein the Company is not in Liquidation, means the  liquidation of a Member's interest in the Company under Treasury Regulation Section 1.761-1(d). 14.72 Loans The term "Loans" is defined in Section 3.04. 14.73 Lockout Date The term "Lockout Date" is defined in Section 8.01. 14.74 Losses The term "Losses" is defined in Section 3.05. 14.75 Lyda The term "Lyda" is defined in Section 2.01(b). 14.76 Majestic The term "Majestic" is defined in the Preamble. 14.77 Majestic Group The term "Majestic Group" is defined in the Section 6.02(e). 

 

1282772.07/OC 373745.00003 -75- 14.78 Major Decisions The term "Major Decisions" is defined in Section 2.04. 14.79 Marketing Plan The term "Marketing Plan" is defined in Section 2.13. 14.80 Master Developer Work The term "Master Developer Work" is defined in Section 2.12. 14.81 Member(s) The term "Members" means Tejon and Majestic, collectively; the term "Member" means  either one (1) of the Members.  14.82 MRC The term "MRC" is defined in Section 6.02(c). 14.83 Net Profits and Net Losses The terms "Net Profits" and "Net Losses" mean, for each Fiscal Year or other period, an  amount equal to the Company's taxable income or loss, as the case may be, for such year or period,  determined in accordance with Section 703(a) of the Code (for this purpose, all items of income,  gain, loss and deduction required to be stated separately pursuant to Section 703(a)(1) of the Code  shall be included in taxable income or loss); provided, however, for purposes of computing such  taxable income or loss, (i) such taxable income or loss shall be adjusted by any and all adjustments  required to be made in order to maintain Capital Account balances in compliance with Treasury  Regulation Sections 1.704-1(b), and (ii) any and all items of gross income, gain, loss and/or  deductions, including, without limitation, any and all partnership and/or partner "nonrecourse  deductions" specially allocated to any Member pursuant to Sections 4.03 and 4.04 shall not be  taken into account in calculating such taxable income or loss. 14.84 Non-Contributing Member The term "Non-Contributing Member" is defined in Section 3.03. 14.85 Non-Contributing Party The term "Non-Contributing Party" is defined in Section 3.05. 14.86 Non-Defaulting Member The term "Non-Defaulting Member" is defined in Section 7.01. 

 

1282772.07/OC 373745.00003 -76- 14.87 Non-Electing Member The term "Non-Electing Member" is defined in Section 8.01. 14.88 Nonrecourse Documents The term "Nonrecourse Documents" is defined in Section 3.05. 14.89 Nonrecourse Parties The term "Nonrecourse Parties" is defined in Section 10.03. 14.90 Obligated Member The term "Obligated Member" is defined in Section 13.23. 14.91 OFAC The term "OFAC" is defined in Section 9.01(h). 14.92 Officers The term "Officers" is defined in Section 2.17(a). 14.93 Operating Budget The term "Operating Budget" is defined in Section 2.09. 14.94 Partially Adjusted Capital Account The term "Partially Adjusted Capital Account" means, with respect to each Member and  taxable year, the Capital Account of such Member at the beginning of such taxable year, adjusted  as set forth in the definition of "Capital Account" for all contributions and distributions during  such year and all special allocations pursuant to Sections 4.03 and 4.04, but before giving effect to  any allocation to Net Profits or Net Losses for such taxable year pursuant to Section 4.01 or 4.02. 14.95 Percentage Interest The term "Percentage Interest" means, with respect to each Member, the percentage set  forth opposite such Member's name on Exhibit "A" attached hereto under the column labeled  "Percentage Interest," subject to any adjustment pursuant to Section 3.03(b). 14.96 Permanent Loan The term "Permanent Loan" is defined in Section 3.04. 14.97 Permitted Transferees The term "Permitted Transferees" is defined in Section 6.02. 

 

1282772.07/OC 373745.00003 -77- 14.98 Person The term "Person" means a natural person, partnership (whether general or limited),  limited liability company, trust, estate, association, corporation, custodian, nominee, or any other  individual or entity, in its own or any representative capacity. 14.99 Pre-Development Costs The term "Pre-Development Costs" is defined in Section 2.06. 14.100 Price Determination Notice The term "Price Determination Notice" is defined in Section 8.02. 14.101 Pro Rata Share The term "Pro Rata Share" is defined in Section 3.05. 14.102 Prohibited Transfer The term "Prohibited Transfer" is defined in Section 10.02(a). 14.103 Project The term "Project" is defined in Section 1.03. 14.104 Project Stabilization Date The term "Project Stabilization Date" means the first date that the Company has under  lease and occupancy by tenants at least ninety-five percent (95%) of the space available for lease  in the Project. 14.105 Property The term "Property" is defined in Section 1.03. 14.106 Property Management Fee The term "Property Management Fee" is defined in Section 2.14. 14.107 Purchase Notice The term "Purchase Notice" is defined in Section 8.03. 14.108 Purchase Price The term "Purchase Price" is defined in Section 8.02. 

 

1282772.07/OC 373745.00003 -78- 14.109 Quorum The term "Quorum" is defined in Section 2.02(a). 14.110 Real Estate Assets The term "Real Estate Assets" is defined in the Section 6.02(d). 14.111 Recourse Documents The term "Recourse Documents" is defined in Section 3.05. 14.112 Regulatory Allocations The term "Regulatory Allocations" is defined in Section 4.04. 14.113 Removal Notice The term "Removal Notice" is defined in Section 2.16(c). 14.114 Rentfro The term "Rentfro" is defined in Section 9.01(k). 14.115 Representative(s) The terms "Representative" and "Representatives" are defined in Section 2.01(b). 14.116 Response Period The term "Response Period" is defined in Section 2.05. 14.117 Roski The term "Roski" is defined in Section 6.02(c). 14.118 Roski Family The term "Roski Family" is defined in Section 6.02(c). 14.119 Rules The term "Rules" is defined in Section 13.18(c). 14.120 Securities Acts The term "Securities Acts" is defined in Section 9.04(a)(i). 

 

1282772.07/OC 373745.00003 -79- 14.121 Service Contracts The term "Service Contracts" is defined in Section 2.11. 14.122 Shortfall The term "Shortfall" is defined in Section 3.02. 14.123 Stated Value The term "Stated Value" is defined in Section 8.01. 14.124 Substantial Completion Date The term "Substantial Completion Date" means the date that Kern County issues a  temporary certificate of occupancy (or its equivalent) for the occupancy of the Project (excepting  therefrom all tenant improvements), pursuant to which the local governing authority generally  acknowledges that the Project and its construction is complete and available for occupancy for its  intended use. 14.125 Target Capital Account The term "Target Capital Account" means, with respect to each Member and any taxable  year, an amount (which may be either a positive or a deficit balance) equal to the Hypothetical  Distribution such Member would receive (or, in certain cases, reduced as appropriate by the  amount such Member would be required to pay), minus the Member's share of Company minimum  gain determined pursuant to Treasury Regulation Section 1.704-2(g), and minus the Member's  share of partner minimum gain determined in accordance with Treasury Regulation  Section 1.704-2(i)(5), all computed immediately prior to the hypothetical sale described in the  definition of "Hypothetical Distribution." 14.126 Tejon The term "Tejon" is defined in the Preamble. 14.127 Tejon Group The term "Tejon Group" is defined in the Section 6.02(d). 14.128 Transfer The term "Transfer" is defined in Section 6.01. 14.129 Treasury Regulation The term "Treasury Regulation" means any proposed, temporary and/or final federal  income tax regulation promulgated by the United States Department of the Treasury as heretofore  and hereafter amended from time to time (and/or any corresponding provisions of any superseding  revenue law and/or regulation). 

 

1282772.07/OC 373745.00003 -80- 14.130 Unreturned Contribution Account The term "Unreturned Contribution Account" means a separate account to be  maintained by the Company for each Member that will be credited by the Agreed Value of the  Property (in the case of Tejon), the agreed value of any other property contributed by such  Member, and the amount of money contributed (or deemed contributed) by such Member to the  capital of the Company and credited to such account pursuant to Sections 3.01(a), 3.01(b)(i),  3.01(b)(ii), 3.01(c)(i), 3.01(c)(ii), 3.02, 3.03(a) or 3.03(b), and decreased by the amount of money  distributed (or deemed distributed) by the Company to such Member pursuant to  Sections 3.03(c)(i), 3.03(b) or 5.01(a), and the fair market value at the time of distribution (as  determined by the Executive Committee) of any property distributed to such Member by the  Company (net of any liabilities secured by such distributed property that such Member is  considered to assume or take subject to under Section 752 of the Code) pursuant to Section 5.01(a). 14.131 Work Product The term "Work Product" is defined in Section 3.01(b)(i). [SIGNATURES ON NEXT PAGE] 

 

1282772.07/OC 373745.00003 -81- IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of  the day and year first above written. "Tejon" TEJON INDUSTRIAL CORP., a California corporation By:/s/ Allen Lyda Name:Allen Lyda Its: Executive Vice President/COO By:/s/ Joe Rentfro Name:Joe Rentfro Its: Executive Vice President "Majestic" MAJESTIC TEJON IV, LLC, a Delaware limited liability company By: Majestic Realty Co., a California corporation Its:  Manager By:/s/ Edward P. Roski, Jr. Name:Edward P. Roski, Jr. Its:President and Chairman of the Board 

 

1282772.07/OC 373745.00003 EXHIBIT "A" -1- EXHIBIT "A" NAMES, ADDRESSES, PERCENTAGE INTERESTS AND INITIAL CASH CONTRIBUTIONS OF THE MEMBERS Member Percentage Interest Initial Cash Contribution Tejon Industrial Corp. P.O. Box 1000 Lebec, CA  93243 Attn.: Allen Lyda and Joe Rentfro 50.0% $100,000 Majestic Tejon IV, LLC 13191 Crossroads Parkway North, 6th Floor City of Industry, CA  91746-3497 Attn.: Edward P. Roski, Jr. and Brett A. Tremaine 50.0% $100,000 Totals ______ 100.0% ________ $200,000 

 

1282772.07/OC 373745.00003 EXHIBIT "B" -1- EXHIBIT "B" LEGAL DESCRIPTION OF THE PROPERTY [To Be Provided] 

 

1282772.07/OC 373745.00003 EXHIBIT "D" -1- EXHIBIT "C" PRE-DEVELOPMENT COSTS Pre-Development Costs Incurred Prior to Effective Date TEJON: [_________________________] [$________] [_________________________] [$________] [_________________________] [$________] Total: [$________] MAJESTIC: [$     -0-      ] 

 

1282772.07/OC 373745.00003 EXHIBIT "D" -2- Estimated Pre-Development Costs to be Incurred After the Effective Date PBLA $  65,555 Survey $  15,000 Lender/Third Party Costs $  50,000 County Fees $  15,000 A&E Fees $  20,000 Contingency $  20,000 Total: $185,000 

 

1282772.07/OC 373745.00003 EXHIBIT "D" -3- EXHIBIT "D" CONTRIBUTION AGREEMENT [To Be Provided] 

 

1282772.07/OC 373745.00003 EXHIBIT "E" -1- EXHIBIT "E" CONSTRUCTION CONTRACT [To Be Provided] 

 

1282772.07/OC 373745.00003 EXHIBIT "F" -1- EXHIBIT "F" LIST OF PRE-APPROVED CONSULTANTS  Architect - HPA o Structural Darin Fong & Associates o Mechanical Engineers, Inc. o Plumbing RPM Engineers, Inc. o Landscape Hunter Landscape o Electrical Engineers, Inc.  Fire - GUFP  Civil Engineer - Psomas/PBLA  Surveying - Psomas/PBLA  Geotech/Soils - SEI  Title - CTT  Phase I - Nova  Permit Fees - County of Kern  Bio & Native Monitor - Joe Simon/Tejon Tribe (TBD)  Pre-Con Survey - Dudek (TBD) 

 

1282772.07/OC 373745.00003 EXHIBIT "G" -1- EXHIBIT "G" MASTER DEVELOPER WORK [To Be Provided] 

 

1282772.07/OC 373745.00003 

 

1282772.07/OC 373745.00003 EXHIBIT "H" -1- EXHIBIT "H" RIGHT OF FIRST REFUSAL Except for transfers permitted by Sections 6.02(a), (b), (c), (d), (e) and (f) each time a  Member (an "Offeror") proposes to voluntarily transfer, assign, convey, sell, or otherwise dispose  of its entire Interest (an "Offered Interest"), such Offeror shall first offer such Offered Interest to  the non-transferring Member in accordance with the following provisions: (a) The Offeror shall deliver a written notice (the "Offer Notice") to the non- transferring Member stating (i) such Offeror's bona fide intention to transfer the Offered Interest,  (ii) the name and address of the proposed transferee, and (iii) the purchase price and terms of  payment for which the Offeror proposes to transfer the Offered Interest.  The Offer Notice shall  constitute a revocable offer by the Offeror to sell the Offered Interest to the other Member on the  terms and conditions set forth in this Exhibit "H." (b) Within thirty (30) days after receipt of the Offer Notice, the non-transferring  Member shall have the right, but not the obligation, to elect to purchase the entire Offered Interest  for the price and upon the terms and conditions set forth in the Offer Notice by delivering written  notice of such election (the "Purchase Election") to the Offeror.  The failure of non-transferring  Member to submit a written notice within such thirty (30) day period shall constitute an irrevocable  rejection of the offer made by the Offeror to sell the Offered Interest to the non-transferring  Member. (c) If the non-transferring Member timely elects to purchase the entire Offered Interest  prior to the Offeror's written revocation of the offer, then the Offered Interest shall be sold to the  non-transferring Member upon the terms and conditions set forth in the Offer Notice including,  without limitation, price, terms of payment and closing date; provided, however, if the terms of  the proposed transfer include the payment by the Offeror of a commission, then the purchase price  shall be reduced by the amount of such commission.  The Offeror and the non-transferring  Member shall execute such documents and instruments and make such deliveries as may be  reasonably required to consummate the transfer.  Notwithstanding any other provisions of this  Exhibit "H," the Offeror shall make the representations and warranties set forth in Section 8.07 of  the Agreement at the closing for the purchase and sale of the Offered Interest. (d) If the non-transferring Member does not timely elect to purchase the entire Offered  Interest (or if the non-transferring Member breaches its obligation to purchase the entire Offered  Interest), then the Offeror may transfer the entire Offered Interest to the proposed transferee  described in the Offer Notice, provided such transfer (i) is completed within ninety (90) days after  the expiration of the non-transferring Member's right to purchase the Offered Interest (or within  90 days following the breach by the non-transferring Member of its obligation to purchase the  entire Offered Interest, if applicable), (ii) is made at the price and on terms and conditions no less  favorable to the Offeror than as described in the Offer Notice, (iii) would not constitute a default  or breach by the Company under any loan agreement or document to which the Company is a party  (unless the lender consents to such transfer), and (iv) the requirements of Section 6.03 are met.  If  the Offered Interest is not so transferred within such ninety (90)-day period, then the Offeror shall  

 

1282772.07/OC 373745.00003 EXHIBIT "H" -2- be required to comply again with the provisions of this Exhibit "H" prior to voluntarily  transferring, assigning, conveying, selling or otherwise disposing of the Offered Interest to any  Person (except for any transfer to any Person permitted by Sections 6.02(a), (b), (c), (d), (e) and  (f) above).  In addition, in the event of a breach by the non-transferring Member of its obligation  to purchase, such non-transferring Member shall not have a right to elect to purchase an Offered  Interest with respect to a transfer of an Interest which is consummated within one (1) year after  such breach. (e) If any transferee purchases an Interest pursuant to the procedure described in this  Exhibit "H," then such transferee shall be admitted to the Company as a substituted member upon  the closing of such purchase and sale and the satisfaction of the requirements of Section 6.03. 

 

1282772.07/OC 373745.00003 LIMITED LIABILITY COMPANY AGREEMENT OF TRC-MRC 4, LLC THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND  EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, 15 U.S.C. § 15b ET  SEQ., AS AMENDED (THE "FEDERAL ACT"), IN RELIANCE UPON ONE (1) OR MORE  EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE FEDERAL ACT.   IN ADDITION, THE ISSUANCE OF THIS SECURITY HAS NOT BEEN QUALIFIED UNDER  THE DELAWARE SECURITIES ACT, THE CALIFORNIA CORPORATE SECURITIES LAW  OF 1968 OR ANY OTHER STATE SECURITIES LAWS (COLLECTIVELY, THE "STATE  ACTS"), IN RELIANCE UPON ONE (1) OR MORE EXEMPTIONS FROM THE  REGISTRATION PROVISIONS OF THE STATE ACTS.  IT IS UNLAWFUL TO  CONSUMMATE A SALE OR OTHER TRANSFER OF THIS SECURITY OR ANY INTEREST  THEREIN TO, OR TO RECEIVE ANY CONSIDERATION THEREFOR FROM, ANY  PERSON OR ENTITY WITHOUT THE OPINION OF COUNSEL FOR THE COMPANY  THAT THE PROPOSED SALE OR OTHER TRANSFER OF THIS SECURITY DOES NOT  AFFECT THE AVAILABILITY TO THE COMPANY OF SUCH EXEMPTIONS FROM  REGISTRATION AND QUALIFICATION, AND THAT SUCH PROPOSED SALE OR OTHER  TRANSFER IS IN COMPLIANCE WITH ALL APPLICABLE STATE AND FEDERAL  SECURITIES LAWS.  THE TRANSFER OF THIS SECURITY IS FURTHER RESTRICTED  UNDER THE TERMS OF THE LIMITED LIABILITY COMPANY AGREEMENT  GOVERNING THE COMPANY, A COPY OF WHICH IS ON FILE WITH THE COMPANY. 

 

TABLE OF CONTENTS Page 1282772.07/OC 373745.00003 (i) ARTICLE I FORMATION .................................................................................................1 1.01 Formation ........................................................................................................1 1.02 Names and Addresses......................................................................................1 1.03 Nature of Business ..........................................................................................1 1.04 Term of Company ...........................................................................................2 ARTICLE II MANAGEMENT OF THE COMPANY ........................................................2 2.01 Formation of Executive Committee ................................................................2 2.02 Committee Procedures ....................................................................................3 2.03 Administrative Member ..................................................................................5 2.04 Approval of Major Decisions..........................................................................5 2.05 Consents and Approvals..................................................................................9 2.06 Pre-Development Costs.................................................................................10 2.07 Approved Business Plan................................................................................10 2.08 Development and Construction of Improvements ........................................11 2.09 Operating Budget ..........................................................................................12 2.10 Construction Contract ...................................................................................12 2.11 Development and Construction Management Services ................................13 2.12 Master Developer Work ................................................................................14 2.13 Marketing and Leasing Management............................................................15 2.14 Property Management ...................................................................................15 2.15 Authority with Respect to the Affiliate Agreements.....................................16 2.16 Election, Resignation, Removal of the Administrative Member ..................16 2.17 Officers..........................................................................................................18 2.18 Treatment of Payments..................................................................................18 2.19 Reimbursement and Fees ..............................................................................19 2.20 Insurance .......................................................................................................19 ARTICLE III MEMBERS' CONTRIBUTIONS TO COMPANY......................................19 3.01 Initial Contributions of the Members ............................................................19 3.02 Additional Capital Contributions ..................................................................21 3.03 Remedy for Failure to Contribute Capital.....................................................22 3.04 Financing.......................................................................................................26 3.05 Agreement to Provide Guarantees and Indemnification ...............................26 3.06 Capital Contributions in General...................................................................28 ARTICLE IV ALLOCATION OF PROFITS AND LOSSES.............................................28 4.01 Net Losses .....................................................................................................28 4.02 Net Profits .....................................................................................................28 4.03 Special Allocations........................................................................................28 4.04 Curative Allocations......................................................................................29 4.05 Differing Tax Basis; Tax Allocation.............................................................29 ARTICLE V DISTRIBUTION OF CASH FLOW.............................................................30 5.01 Cash Flow......................................................................................................30 5.02 Limitations on Distributions .........................................................................30 

 

TABLE OF CONTENTS (cont’d) Page 1282772.07/OC 373745.00003 (ii) 5.03 Withholding...................................................................................................30 5.04 In-Kind Distribution......................................................................................30 ARTICLE VI RESTRICTIONS ON TRANSFERS OF COMPANY INTERESTS...........30 6.01 Limitations on Transfer.................................................................................30 6.02 Permitted Transfers .......................................................................................31 6.03 Admission of Substituted Members ..............................................................33 6.04 Election; Allocations between Transferor and Transferee............................33 6.05 Partition .........................................................................................................33 6.06 Waiver of Withdrawal and Purchase Rights .................................................33 6.07 No Appraisal Rights ......................................................................................34 6.08 Foreclosure of Interest...................................................................................34 ARTICLE VII MEMBER DEFAULT ..................................................................................34 7.01 Default Events ...............................................................................................34 7.02 Rights Arising From a Default Event............................................................36 7.03 Determination of Defaulting Member's Purchase Price................................36 7.04 Non-Defaulting Members' Option.................................................................38 7.05 Closing Adjustments .....................................................................................38 7.06 Closing of Purchase and Sale ........................................................................38 7.07 Representations and Warranties ....................................................................38 7.08 Payment of Defaulting Member's Purchase Price .........................................39 7.09 Repayment of Default Loans.........................................................................39 7.10 Release and Indemnity ..................................................................................39 7.11 Withdrawal of the Defaulting Member .........................................................40 7.12 Distribution of Reserves................................................................................40 ARTICLE VIII ELECTIVE BUY/SELL AGREEMENT......................................................40 8.01 Buy/Sell Election...........................................................................................40 8.02 Determination of the Purchase Price.............................................................40 8.03 Non-Electing Member's Option ....................................................................41 8.04 Deposit ..........................................................................................................41 8.05 Closing Adjustments .....................................................................................42 8.06 Closing of Purchase and Sale ........................................................................42 8.07 Representations and Warranties ....................................................................43 8.08 Repayment of Default Loans.........................................................................43 8.09 Release and Indemnity ..................................................................................44 8.10 Interim Event of Default ...............................................................................44 8.11 Application of Provisions..............................................................................44 ARTICLE IX REPRESENTATIONS, WARRANTIES, COVENANTS AND  OTHER MATTERS......................................................................................44 9.01 Tejon Representations ...................................................................................44 9.02 Majestic Representations...............................................................................46 9.03 Brokerage Fee Representation and Indemnity ..............................................48 

 

TABLE OF CONTENTS (cont’d) Page 1282772.07/OC 373745.00003 (iii) 9.04 Investment Representations...........................................................................48 9.05 Indemnification Obligations..........................................................................50 9.06 Survival of Representations, Warranties and Covenants ..............................50 ARTICLE X LIABILITY, EXCULPATION, RESTRICTIONS ON  COMPETITION, FIDUCIARY DUTIES AND INDEMNIFICATION ......50 10.01 Liability for Company Claims.......................................................................50 10.02 Exculpation, Indemnity and Reliance on Information ..................................50 10.03 Limitation on Liability ..................................................................................52 10.04 Activities of the Members and Their Affiliates ............................................52 10.05 Intentionally Omitted ....................................................................................53 10.06 Fiduciary Duties ............................................................................................53 10.07 Non-Exclusivity of Rights.............................................................................53 10.08 Amendment or Repeal...................................................................................53 10.09 Insurance .......................................................................................................54 ARTICLE XI BOOKS AND RECORDS ............................................................................54 11.01 Books of Account and Bank Accounts .........................................................54 11.02 Tax Returns ...................................................................................................55 ARTICLE XII DISSOLUTION AND WINDING UP OF THE COMPANY......................56 12.01 Events Causing Dissolution of the Company................................................56 12.02 Winding Up of the Company ........................................................................57 12.03 Distribution of Assets Upon Early Dissolution Event ..................................57 12.04 Negative Capital Account Restoration..........................................................58 ARTICLE XIII MISCELLANEOUS .....................................................................................58 13.01 Amendments..................................................................................................58 13.02 Waiver of Conflict Interest............................................................................58 13.03 Partnership Intended Solely for Tax Purposes ..............................................59 13.04 Notices...........................................................................................................59 13.05 Construction of Agreement ...........................................................................59 13.06 Counterparts ..................................................................................................60 13.07 Attorneys' Fees ..............................................................................................60 13.08 Approval Standard.........................................................................................60 13.09 Further Acts...................................................................................................60 13.10 Preservation of Intent ....................................................................................60 13.11 Waiver ...........................................................................................................61 13.12 Entire Agreement ..........................................................................................61 13.13 Choice of Law ...............................................................................................61 13.14 No Third-Party Beneficiaries ........................................................................61 13.15 Successors and Assigns.................................................................................61 13.16 No Usury .......................................................................................................62 13.17 Venue ............................................................................................................62 13.18 Dispute Resolution ........................................................................................62 

 

TABLE OF CONTENTS (cont’d) Page 1282772.07/OC 373745.00003 (iv) 13.19 Timing ...........................................................................................................65 13.20 Remedies for Breach of this Agreement .......................................................65 13.21 Survivability of Representations and Warranties..........................................65 13.22 Reasonableness of Rights and Remedies ......................................................65 13.23 Force Majeure ...............................................................................................66 ARTICLE XIV DEFINITIONS..............................................................................................66 14.01 Accountant's Notice ......................................................................................66 14.02 Accounting Firm ...........................................................................................66 14.03 Actual Knowledge of Majestic......................................................................66 14.04 Actual Knowledge of Tejon ..........................................................................66 14.05 Additional Contribution Date........................................................................67 14.06 Adjusted Accountant's Notice .......................................................................67 14.07 Adjusted Capital Account .............................................................................67 14.08 Adjusted Price Determination Notice ...........................................................67 14.09 Adjustment Amount ......................................................................................67 14.10 Administrative Member ................................................................................67 14.11 Affiliate .........................................................................................................67 14.12 Affiliate Agreements .....................................................................................67 14.13 Affiliated Member.........................................................................................67 14.14 Affiliated Parties ...........................................................................................68 14.15 Agreed Value.................................................................................................68 14.16 Agreement .....................................................................................................68 14.17 Applicable ABP Date ....................................................................................68 14.18 Applicable Construction Costs......................................................................68 14.19 Appraised Value............................................................................................68 14.20 Approved Business Plan................................................................................68 14.21 Arbitration Notice .........................................................................................68 14.22 Bad Acts ........................................................................................................68 14.23 Book Basis ....................................................................................................68 14.24 Business Day.................................................................................................69 14.25 Business Plan Period .....................................................................................69 14.26 California Act................................................................................................69 14.27 Capital Account.............................................................................................69 14.28 Capital Call Notice ........................................................................................69 14.29 Cash Flow......................................................................................................70 14.30 Certificates ....................................................................................................70 14.31 Code ..............................................................................................................70 14.32 Commerce .....................................................................................................70 14.33 Company .......................................................................................................70 14.34 Construction Contract ...................................................................................70 14.35 Construction Loan .........................................................................................70 14.36 Consultants ....................................................................................................70 14.37 Contributing Member....................................................................................70 

 

TABLE OF CONTENTS (cont’d) Page 1282772.07/OC 373745.00003 (v) 14.38 Contributing Party .........................................................................................70 14.39 Contribution Agreement................................................................................71 14.40 Covered Persons............................................................................................71 14.41 Default Events ...............................................................................................71 14.42 Default Loan..................................................................................................71 14.43 Default Notice ...............................................................................................71 14.44 Defaulting Member .......................................................................................71 14.45 Defaulting Member's Purchase Price ............................................................71 14.46 Delaware Act.................................................................................................71 14.47 Delinquent Contribution................................................................................71 14.48 Deposit ..........................................................................................................71 14.49 Design-Builder ..............................................................................................71 14.50 Development Budget.....................................................................................71 14.51 Development Fee...........................................................................................72 14.52 Development Plan .........................................................................................72 14.53 Dilution Percentage .......................................................................................72 14.54 Effective Date................................................................................................72 14.55 Electing Member ...........................................................................................72 14.56 Election Notice..............................................................................................72 14.57 Enforceability Exceptions .............................................................................72 14.58 Executive Committee ....................................................................................72 14.59 FAA...............................................................................................................72 14.60 Fiscal Year.....................................................................................................72 14.61 Force Majeure Delay.....................................................................................73 14.62 Gross Asset Value .........................................................................................73 14.63 Guarantor(s) ..................................................................................................73 14.64 Hypothetical Distribution..............................................................................73 14.65 Impasse Event ...............................................................................................73 14.66 Improvements................................................................................................73 14.67 Interest...........................................................................................................73 14.68 JAMS.............................................................................................................74 14.69 Just Cause Event............................................................................................74 14.70 Lender(s) .......................................................................................................74 14.71 Liquidation ....................................................................................................74 14.72 Loans .............................................................................................................74 14.73 Lockout Date .................................................................................................74 14.74 Losses ............................................................................................................74 14.75 Lyda...............................................................................................................74 14.76 Majestic .........................................................................................................74 14.77 Majestic Group..............................................................................................74 14.78 Major Decisions ............................................................................................75 14.79 Marketing Plan ..............................................................................................75 14.80 Master Developer Work ................................................................................75 14.81 Member(s) .....................................................................................................75 

 

TABLE OF CONTENTS (cont’d) Page 1282772.07/OC 373745.00003 (vi) 14.82 MRC..............................................................................................................75 14.83 Net Profits and Net Losses ............................................................................75 14.84 Non-Contributing Member............................................................................75 14.85 Non-Contributing Party.................................................................................75 14.86 Non-Defaulting Member ...............................................................................75 14.87 Non-Electing Member...................................................................................76 14.88 Nonrecourse Documents ...............................................................................76 14.89 Nonrecourse Parties.......................................................................................76 14.90 Obligated Member.........................................................................................76 14.91 OFAC ............................................................................................................76 14.92 Officers..........................................................................................................76 14.93 Operating Budget ..........................................................................................76 14.94 Partially Adjusted Capital Account...............................................................76 14.95 Percentage Interest ........................................................................................76 14.96 Permanent Loan.............................................................................................76 14.97 Permitted Transferees....................................................................................76 14.98 Person ............................................................................................................77 14.99 Pre-Development Costs.................................................................................77 14.100 Price Determination Notice...........................................................................77 14.101 Pro Rata Share...............................................................................................77 14.102 Prohibited Transfer........................................................................................77 14.103 Project............................................................................................................77 14.104 Project Stabilization Date..............................................................................77 14.105 Property .........................................................................................................77 14.106 Property Management Fee ............................................................................77 14.107 Purchase Notice.............................................................................................77 14.108 Purchase Price ...............................................................................................77 14.109 Quorum..........................................................................................................78 14.110 Real Estate Assets .........................................................................................78 14.111 Recourse Documents.....................................................................................78 14.112 Regulatory Allocations..................................................................................78 14.113 Removal Notice.............................................................................................78 14.114 Rentfro...........................................................................................................78 14.115 Representative(s)...........................................................................................78 14.116 Response Period ............................................................................................78 14.117 Roski .............................................................................................................78 14.118 Roski Family .................................................................................................78 14.119 Rules..............................................................................................................78 14.120 Securities Acts...............................................................................................78 14.121 Service Contracts...........................................................................................79 14.122 Shortfall.........................................................................................................79 14.123 Stated Value ..................................................................................................79 14.124 Substantial Completion Date.........................................................................79 14.125 Target Capital Account .................................................................................79 

 

TABLE OF CONTENTS (cont’d) Page 1282772.07/OC 373745.00003 (vii) 14.126 Tejon..............................................................................................................79 14.127 Tejon Group ..................................................................................................79 14.128 Transfer .........................................................................................................79 14.129 Treasury Regulation ......................................................................................79 14.130 Unreturned Contribution Account.................................................................80 14.131 Work Product ................................................................................................80 EXHIBITS Exhibit "A" Names, Addresses, Percentage Interests and Initial Cash Contributions of the  Members Exhibit "B" Legal Description of the Property Exhibit "C" Pre-Development Costs Exhibit "D" Contribution Agreement Exhibit "E" Construction Contract Exhibit "F" List of Pre-Approved Consultants Exhibit "G" Master Developer Work Exhibit "H" Right of First Refusal

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