Document:

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                                                                   EXHIBIT 10.17

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                               OPERATING AGREEMENT

                                       OF

                      PAN PACIFIC (RANCHO LAS PALMAS), LLC

                       A Nevada limited liability company

                        Dated as of September 23, 1999

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                                TABLE OF CONTENTS

<TABLE>
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<S>      <C>      <C>               <C>                                                                         <C>
ARTICLE 1.
         DEFINED TERMS............................................................................................2
                  Section 1.1       Definitions...................................................................2

ARTICLE 2.
         ORGANIZATIONAL MATTERS..................................................................................17
                  Section 2.1       Formation....................................................................17
                  Section 2.2       Name.........................................................................17
                  Section 2.3       Registered Office and Agent; Principal Place of Business;
                                      Other Places of Business...................................................17
                  Section 2.4       Power of Attorney............................................................18
                  Section 2.5       Term.........................................................................19

ARTICLE 3.
         PURPOSE.................................................................................................19
                  Section 3.1       Purpose and Business.........................................................19
                  Section 3.2       Powers.......................................................................19
                  Section 3.3       Specified Purposes...........................................................20
                  Section 3.4       Representations, Warranties and Covenants of the Members; Disclaimer of
                                      Certain Representations....................................................20

ARTICLE 4.
         CAPITAL CONTRIBUTIONS AND LOANS.........................................................................22
                  Section 4.1       Capital Contributions of the Initial Members.................................22
                  Section 4.2       Additional Members...........................................................23
                  Section 4.3       Loans by Third Parties.......................................................23
                  Section 4.4       Additional Funding and Capital Contributions.................................23
                  Section 4.5       No Interest; No Return.......................................................24
                  Section 4.6       Additional Capital Contributions by Managing Member..........................24

ARTICLE 5.
         DISTRIBUTIONS...........................................................................................24
                  Section 5.1       Requirement and Characterization of Distributions............................24
                  Section 5.2       Distributions in Kind........................................................25
                  Section 5.3       Amounts Withheld.............................................................25
                  Section 5.4       Distributions Upon Liquidation...............................................26
                  Section 5.5       Restricted Distributions.....................................................26
                  Section 5.6       Distributions of Proceeds from Sale of Properties............................26

ARTICLE 6.
         ALLOCATIONS.............................................................................................27
                  Section 6.1       Timing and Amount of Allocations of Net Income and Net Loss..................27
                  Section 6.2       General Allocations..........................................................27
                  Section 6.3       Additional Allocation Provisions.............................................29
                  Section 6.4       Tax Allocations..............................................................30
                  Section 6.5       Other Provisions.............................................................31
                  Section 6.6       Amendments to Allocation to Reflect Issuance of
                                      Additional Membership Interests............................................31
</TABLE>

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<TABLE>
<S>      <C>      <C>               <C>                                                                         <C>
ARTICLE 7.
         MANAGEMENT AND OPERATIONS OF BUSINESS...................................................................31
                  Section 7.1       Management by Managing Members...............................................31
                  Section 7.2       Articles of Organization.....................................................35
                  Section 7.3       Restrictions on Managing Members' Authority..................................35
                  Section 7.4       Compensation of the Managing Members.........................................38
                  Section 7.5       Other Business of Managing Members...........................................39
                  Section 7.6       Contracts with Affiliates....................................................39
                  Section 7.7       Indemnification..............................................................40
                  Section 7.8       Liability of the Managing Members............................................41
                  Section 7.9       Other Matters Concerning the Managing Members................................42
                  Section 7.10      Title to Company Assets......................................................43
                  Section 7.11      Reliance by Third Parties....................................................43

ARTICLE 8.
         RIGHTS AND OBLIGATIONS OF MEMBERS.......................................................................43
                  Section 8.1       Limitation of Liability......................................................43
                  Section 8.2       Managing of Business.........................................................43
                  Section 8.3       Outside Activities of Members................................................44
                  Section 8.4       Return of Capital............................................................44
                  Section 8.5       Rights of Non-Managing Members Relating to the Company.......................44
                  Section 8.6       Exchange Rights..............................................................45

ARTICLE 9.
         BOOKS, RECORDS, ACCOUNTING, AND REPORTS.................................................................47
                  Section 9.1       Records and Accounting.......................................................47
                  Section 9.2       Fiscal Year..................................................................48
                  Section 9.3       Reports......................................................................48

ARTICLE 10.
         TAX MATTERS.............................................................................................48
                  Section 10.1      Preparation of Tax Returns...................................................48
                  Section 10.2      Tax Elections................................................................48
                  Section 10.3      Tax Matters Member...........................................................48
                  Section 10.4      Organizational Expenses......................................................49
                  SECTION 10.5      SECTION 754 ELECTION.........................................................49

ARTICLE 11.
         TRANSFERS AND WITHDRAWALS...............................................................................49
                  Section 11.1      Transfer.....................................................................49
                  Section 11.2      Transfer of PPRP's Membership Interest.......................................49
                  Section 11.3      Non-Managing Members' Rights to Transfer.....................................50
                  Section 11.4      Substituted Members..........................................................51
                  Section 11.5      Assignees....................................................................52
                  Section 11.6      General Provisions...........................................................52

ARTICLE 12.
         ADMISSION OF MEMBERS....................................................................................54
                  Section 12.1      Admission of Successor Managing Members......................................54
                  Section 12.2      Admission of Additional Members..............................................55
                  Section 12.3      Amendment of Agreement and Articles..........................................55
                  Section 12.4      Limitation on Admission of Members...........................................56
</TABLE>

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<TABLE>
<S>      <C>      <C>               <C>                                                                         <C>
ARTICLE 13.
         DISSOLUTION, LIQUIDATION, AND TERMINATION...............................................................56
                  Section 13.1      Dissolution..................................................................56
                  Section 13.2      Winding Up...................................................................57
                  Section 13.3      Deemed Distribution and Recontribution.......................................58
                  Section 13.4      Rights of Members............................................................58
                  Section 13.5      Notice of Dissolution........................................................58
                  Section 13.6      Cancellation of Articles.....................................................59
                  Section 13.7      Reasonable Time for Winding-Up...............................................59
                  Section 13.8      Liability of Liquidator......................................................59

ARTICLE 14.
         PROCEDURES FOR ACTIONS AND CONSENTSOF MEMBERS; AMENDMENTS; MEETINGS.....................................59
                  Section 14.1      Procedures for Actions and Consents of Members...............................59
                  Section 14.2      Amendments...................................................................59
                  Section 14.3      Meetings of the Members......................................................60

ARTICLE 15.
         SPECIAL CONDITIONS......................................................................................61
                  Section 15.1      Special Conditions...........................................................61
                  Section 15.2      Limitation on Bankruptcy Actions.............................................62
                  Section 15.3      Limitations on Mergers and Reorganizations...................................62

ARTICLE 16.
         GENERAL PROVISIONS......................................................................................62
                  Section 16.1      Addresses and Notice.........................................................62
                  Section 16.2      Titles and Captions..........................................................63
                  Section 16.3      Pronouns and Plurals.........................................................63
                  Section 16.4      Further Action...............................................................63
                  Section 16.5      Binding Effect...............................................................63
                  Section 16.6      Creditors....................................................................63
                  Section 16.7      Waiver.......................................................................63
                  Section 16.8      Counterparts.................................................................63
                  Section 16.9      Applicable Law...............................................................63
                  Section 16.10     Entire Agreement.............................................................63
                  Section 16.11     Invalidity of Provisions.....................................................63
                  Section 16.12     Limitation to Preserve REIT Status...........................................64
                  Section 16.14     Non-Managing Member Representative...........................................65
                  Section 16.15     Conditions Precedent.........................................................66
</TABLE>

Exhibit A         Members' Capital Contributions
Exhibit B         Real Property
Exhibit C         Notice of Exchange

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                               OPERATING AGREEMENT
                                       OF
                      PAN PACIFIC (RANCHO LAS PALMAS), LLC

                  THIS OPERATING AGREEMENT (this "Agreement") of Pan Pacific
(Rancho Las Palmas), LLC, a Nevada limited liability company (the "Company") is
made and entered into as of the 23rd day of September, 1999, by and among Pan
Pacific Retail Properties, Inc., a Maryland corporation (the "Managing Member"),
Pan Pacific (RLP), Inc., a California corporation (the "Executive Managing
Member"), and the Persons whose names are set forth on Exhibit A as attached
hereto (the "Non-Managing Members" and together with the Managing Member, the
"Members"), together with any other Persons who become Members in the Company as
provided in this Agreement.

                  WHEREAS, the Company was formed on the 23rd day of September,
1999, by filing Articles of Organization of the Company with the Nevada
Secretary of State;

                  WHEREAS, immediately prior in time on the Effective Date of
this Agreement, Rancho Las Palmas Center Associates, a California Limited
Partnership (the "Partnership) was the sole owner of the Real Property which is
subject to the Loan;

                  WHEREAS, immediately prior in time on the Effective Date of
this Agreement the Partnership contributed the Real Property to the Company
pursuant to the Contribution Agreement and received in exchange therefore all of
the Managing Member Units and all of the Non-Managing Member Units in accordance
with the Contribution Agreement;

                  WHEREAS, immediately subsequent to the foregoing exchange, the
Partnership distributed all of the Managing Member Units it received in the
exchange to Stanley W. Gribble ("Gribble") as Trustee of the Stanley W. Gribble
Trust under trust agreement dated September 24, 1991, as amended ("The Gribble
Trust"), and all of the Non-Managing Member Units to Ronald C. Waranch as
Trustee of the Ronald Charles Waranch Intervivos Trust under trust agreement
dated July 6, 1995 (the "Waranch Trust");

                  WHEREAS, immediately following the distribution of the
Managing Member Units to the Gribble Trust, the Gribble Trust sold, transferred
and conveyed all of its right, title and interest in and to such Managing Member
Units to the Managing Member and the Executive Managing Member pursuant to the
Member's Interest Purchase Agreement, and upon the consummation of such sale,
transfer, and conveyance, the Gribble Trust no longer had any interest in the
Company and withdrew with the consent of the other Members as a Member in the
Company;

                  WHEREAS, the Managing Member and the Executive Managing
Member, as the owners, both legally and beneficially, of all the Managing Member
Units in the Company, and the Waranch Trust, as the owner, both legally and
beneficially, of all the Non-Managing Member Units in the Company, wish to
memorialize their mutual understanding and agreement regarding the governance
and operations of the Company and their respective rights, duties and
liabilities with respect thereto and their respective economic interests in the
Company;

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

                                   ARTICLE 1.

                                  DEFINED TERMS

         SECTION 1.1 DEFINITIONS. The following definitions shall be for all
purposes, unless otherwise clearly indicated to the contrary, applied to the
terms used in this Agreement.

                  "ACT" means Chapter 86 of the Nevada Revised Statutes (the
Nevada Limited Liability Company Act), as it may be amended from time to time,
and any successor to such chapter.

                  "ACTIONS" has the meaning set forth in Section 7.7 hereof.

                  "ADDITIONAL FUNDS" has the meaning set forth in Section 4.4.A
hereof.

                  "ADDITIONAL MEMBER" means a Person admitted to the Company as
a Member pursuant to Section 4.2 and Section 12.2 hereof and who is shown as
such on the books and records of the Company.

                  "ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to any
Member, the deficit balance, if any, in such Member's Capital Account as of the
end of the relevant Fiscal Year, after giving effect to the following
adjustments:

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

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

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

                  "ADJUSTMENT FACTOR" means 1.0; provided, however, that in the
event that: the Managing Member (i) declares or pays a dividend on its
outstanding REIT Shares in REIT Shares

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or makes a distribution to all holders of its outstanding REIT Shares in REIT
Shares, (ii) splits or subdivides its outstanding REIT Shares or (iii) effects a
reverse stock split or otherwise combines its outstanding REIT Shares into a
smaller number of REIT Shares, the Adjustment Factor shall be adjusted by
multiplying the Adjustment Factor in effect immediately prior to such adjustment
by a fraction, (1) the numerator of which shall be the number of REIT Shares
issued and outstanding on the record date for such dividend, distribution,
split, subdivision, reverse split or combination (assuming for such purposes
that such dividend, distribution, split, subdivision, reverse split or
combination has occurred as of such time) and (2) the denominator of which shall
be the actual number of REIT Shares issued and outstanding on the record date
for such dividend, distribution, split, subdivision, reverse split or
combination (assuming for such purposes that such dividend, distribution, split,
subdivision, reverse split or combination has not occurred as of such time). Any
adjustments to the Adjustment Factor shall become effective immediately after
the effective date of such event, retroactive to the record date, if any, for
such event.

                  "AFFILIATE" means, with respect to any Person, any Person
directly or indirectly Controlling or Controlled by or under common Control with
such Person.

                  "AGREEMENT" means this Operating Agreement of Pan Pacific
(Rancho Las Palmas), LLC, as it may be amended, supplemented or restated from
time to time.

                  "APPRAISAL" means, with respect to any assets, the written
opinion of an independent third party experienced in the valuation of similar
assets in the general location of the property being appraised, selected by the
Managing Member in good faith. Such opinion may be in the form of an opinion by
such independent third party that the value for such property or asset as set by
the Managing Member is fair, from a financial point of view, to the Company.

                  "APPRAISED VALUE" means, with respect to any asset, including
any Contributed Assets, the value of such assets as determined by Appraisal.

                  "ARTICLES" means the Articles of Organization of the Company
filed in the office of the Secretary of State of the State of Nevada, as amended
from time to time in accordance with the terms hereof and the Act.

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

                  "AVAILABLE CASH" means, with respect to any period for which
such calculation is being made:

                  A.       the sum, without duplication, of:

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

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                           (2) Depreciation and all other noncash charges to the
         extent deducted in determining net income or net loss for such period
         pursuant to the foregoing clause (a)(1),

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

                           (4) all other cash received (including amounts
         previously accrued as net income and amounts of deferred income but
         excluding any net amounts borrowed by the Company for such period) that
         was not included in determining net income or net loss for such period
         pursuant to the foregoing clause (a)(1);

                  B.       less the sum, without duplication, of:

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

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

                           (3) all other expenditures and payments not deducted
         in determining net income or net loss for such period pursuant to the
         foregoing clause (a)(1) (including amounts paid in respect of expenses
         previously accrued),

                           (4) any amount included in determining net income or
         net loss for such period pursuant to the foregoing clause (a)(1) that
         was not received by the Company during such period, and

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

Notwithstanding the foregoing, Available Cash shall not include (i) any cash
received or reductions in reserves, or take into account any disbursements made,
or reserves established, after dissolution and the commencement of the
liquidation and winding up of the Company, (ii) any Capital Contributions,
whenever received, (iii) any of the items described in the foregoing clauses (a)
or (b) arising out of or resulting from the taxable disposition of any of the
Real Property or (iv) the proceeds of Refinancing Debt.

                  "BANKRUPTCY LAW" means Title II, U.S. Code or any similar
federal or state law for the relief of debtors.

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

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                  "BUSINESS DAY" means any day except a Saturday, Sunday or
other day on which commercial banks in Los Angeles, California are authorized or
required by law to close.

                  "CALL NOTICE" means a written notice to the Non-Managing
Members informing them of the Managing Member's election to call their
Non-Managing Member Units pursuant to Section 8.6.E hereof, which Call Notice
shall be given as far in advance of the consummation of the transaction it
relates to as is reasonably possible under the circumstances.

                  "CAPITAL ACCOUNT" means, with respect to any Member, the
Capital Account maintained for such Member on the Company's books and records in
accordance with the following provisions:

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

                  B. From each Member's Capital Account, there shall be
subtracted the amount of cash and the Gross Asset Value of any property
distributed to such Member pursuant to any provision of this Agreement, such
Member's allocable share of Net Loss and any items of loss or deductions
specially allocated pursuant to Section 6.3 hereof, and the principal amount of
any liabilities of such Member assumed by the Company or that are secured by any
property contributed by such Member to the Company.

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

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

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

                                        5

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                  "CAPITAL CONTRIBUTION" means, with respect to any Member, the
amount of money and the initial Gross Asset Value of any Contributed Assets that
such Member contributes to the Company pursuant to Section 4.1, Section 4.2 or
Section 4.4 hereof.

                  "CASH AMOUNT" means an amount of cash equal to the product of
(a) the Value of a REIT Share and (b) the REIT Shares Amount determined as of
the applicable Valuation Date.

                  "CHARTER" means the Articles of Incorporation of the Managing
Member, as amended, supplemented or restated from time to time. In the case of a
successor Managing Member, "Charter" shall mean such Person's charter document.

                  "CLOSING PRICE" means (i) the closing price of a REIT Share on
the principal exchange on which REIT Shares are then trading, if any, or (ii) if
REIT Shares are not traded on an exchange but are quoted on NASDAQ or a
successor quotation system, (1) the last sales price (if the REIT Shares are
then listed as a National Market Issue under the NASD National Market System) or
(2) the mean between the closing representative bid and asked prices (in all
other cases) for a REIT Share are as reported by NASDAQ or such successor
quotation system, (iii) if the REIT Shares are not publicly traded on an
exchange and not quoted on NASDAQ or a successor quotation system, the mean
between the closing bid and asked prices for a REIT Share as reported by a
reliable quotation service designated by the Managing Member, or (iv) if there
are no publicly available closing bid and asked prices, the price of a REIT
Share determined by the Managing Member acting in good faith on the basis of
information which it considers, in its reasonable judgment, to be appropriate.

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

                  "COMPANY" means the limited liability company formed under the
Act and pursuant to this Agreement, and any successor thereto.

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

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

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

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<PAGE>   11

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

                  "CONTRIBUTION AGREEMENT" means the Contribution Agreement and
Escrow Instructions (Rancho Las Palmas Shopping Center) by and between Rancho
Las Palmas Center Associates, a California limited partnership, and Pan Pacific
Retail Properties, Inc., set forth on Exhibit B attached hereto which provide
for the contribution of certain assets to, and the acquisition of certain
interests in, the Company by the parties thereto.

                  "CONTRIBUTED ASSETS" means the Real Property and any other
assets or property contributed directly to the Company pursuant to the
Contribution Agreement.

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

                  "CUSTODIAN" means any receiver, trustee, assignee, liquidator
or other similar official under any Bankruptcy Law.

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

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

                                        7

<PAGE>   12

                  "DISPOSITION PROCEEDS" means the net proceeds to be received
by the Company upon the taxable disposition of some, but not all, of the Real
Property or other Properties of the Company.

                  "EFFECTIVE DATE" means, as to each Initial Non-Managing
Member, the date on which the conditions precedent to the effectiveness of this
Agreement as set forth in Section 15.15 are satisfied with respect to the
contributions to be made by such Initial Non-Managing Member as of that date. If
the contributions under any Contribution Agreement are not consummated, then no
party hereto shall have any obligation hereunder with respect to such
Contribution Agreement. With respect to any future contributions, the Effective
Date shall be the date that such contributions are completed.

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

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

                  "EXCHANGE" has the meaning set forth in Section 8.6.A hereof.

                  "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.

                  "EXECUTIVE MANAGING MEMBER" means Pan Pacific (Rancho Las
Palmas), Inc., a California corporation.

                  "FAMILY MEMBERS" means, as to a Person that is an individual,
(a) such Person's spouse, (b) such Person's ancestors, (c) such Person's
descendants (whether by blood or by adoption) and their respective spouses, (d)
such Person's brothers and sisters and their respective spouses, (e) inter vivos
or testamentary trusts of which only such Person or his spouse, ancestors,
descendants (whether by blood or by adoption), brothers or sisters or their
respective spouses are beneficiaries and (f) any partnership or limited
liability company all of whose partners or members consist of such Person or his
spouse, ancestors, descendants (whether by blood or by adoption), brothers or
sisters or inter vivos or testamentary trusts of which only such Person or his
spouse, ancestors, descendants (whether by blood or by adoption), brothers or
sisters are beneficiaries.

                  "FISCAL YEAR" means the fiscal year of the Company, which
shall be the calendar year.

                  "GP" means a payment that is a guaranteed payment pursuant to
Section 707(c) of the Code. All payments to Waranch, except for a return of its
initial Capital Contribution following a Liquidating Event, shall be reported by
Waranch and the Company as GPs.

                  "GROSS ASSET VALUE" means, with respect to any asset, the
asset's adjusted basis for federal income tax purposes, except as follows:

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<PAGE>   13

                  A. The initial Gross Asset Value of any asset contributed by a
Member to the Company shall be its fair market value, as agreed to by such
Member and the Managing Member, and set forth on Exhibit A with respect to that
Member.

                  B. The Gross Asset Values of all Company assets immediately
prior to the occurrence of any event described in clause (1), clause (2), clause
(3), or clause (4) hereof shall be adjusted to equal their respective gross fair
market values, as determined by the Managing Member using such reasonable method
of valuation as it may adopt, as of the following times:

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

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

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

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

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

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

                  E. If the Gross Asset Value of a Company asset has been
determined or adjusted pursuant to subsection (a), subsection (b) or subsection
(d) above, such Gross Asset Value shall

                                        9

<PAGE>   14

thereafter be adjusted by the Depreciation taken into account with respect to
such asset for purposes of computing Net Income and Net Loss.

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

                  "INCAPACITY" or "INCAPACITATED" means, (i) as to any Member
who is an individual, death, total physical disability or entry by a court of
competent jurisdiction adjudicating such Member incompetent to manage his or her
person or his or her estate; (ii) as to any Member that is a corporation or
limited liability company, the filing of a certificate of dissolution, or its
equivalent, for the corporation or limited liability company or the revocation
of its charter; (iii) as to any Member that is a partnership, the dissolution
and commencement of winding up of the partnership; (iv) as to any Member that is
an estate, the distribution by the fiduciary of the estate's entire interest in
the Company; (v) as to any trustee of a trust that is a Member, the termination
of the trust (but not the substitution of a new trustee); or (vi) as to any
Member, the bankruptcy of such Member. For purposes of this definition,
bankruptcy of a Member shall be deemed to have occurred when (a) the Member
commences a voluntary proceeding seeking liquidation, reorganization or other
relief of or against such Member under any bankruptcy, insolvency or other
similar law now or hereafter in effect, (b) the Member is adjudged as bankrupt
or insolvent, or a final and non-appealable order for relief under any
bankruptcy, insolvency or similar law now or hereafter in effect has been
entered against the Member, (c) the Member executes and delivers a general
assignment for the benefit of the Member's creditors, (d) the Member files an
answer or other pleading admitting or failing to contest the material
allegations of a petition filed against the Member in any proceeding of the
nature described in clause (b) above, (e) the Member seeks, consents to or
acquiesces in the appointment of a trustee, receiver or liquidator for the
Member or for all or any substantial part of the Member's properties, (f) any
proceeding seeking liquidation, reorganization or other relief under any
bankruptcy, insolvency or other similar law now or hereafter in effect has not
been dismissed within 120 days after the commencement thereof, (g) the
appointment without the Member's consent or acquiescence of a trustee, receiver
or liquidator has not been vacated or stayed within 90 days of such appointment,
or (h) an appointment referred to in clause (g) above is not vacated within 90
days after the expiration of any such stay.

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

                                       10

<PAGE>   15

                  "INITIAL NON-MANAGING MEMBERS" means the Non-Managing Members
(or successors in interest thereof) who acquired their Non-Managing Member Units
in exchange for the Contributed Assets on the applicable Effective Date.

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

                  "LIQUIDATING EVENT" has the meaning set forth in Section 13.1
hereof.

                  "LIQUIDATOR" has the meaning set forth in Section 13.2.A
hereof.

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

                  "LLC RECORD DATE" means the record date established by the
Managing Member for the distribution of Available Cash pursuant to Section 5.1
hereof, which record date shall be the same as the record date established by
the Managing Member for a dividend to holders of REIT Shares.

                  "LLC UNITS" means the Managing Member Units and the
Non-Managing Member Units, collectively.

                  "LOAN" means the loan in the approximate unpaid balance of
$12,500,000 encumbering the Real Property.

                  "MAJORITY IN INTEREST OF THE MEMBERS" means the Members
holding in the aggregate more than 50% of the aggregate outstanding LLC Units.

                  "MAJORITY IN INTEREST OF THE NON-MANAGING MEMBERS" means those
Non-Managing Members holding in the aggregate more than 50% of the aggregate
outstanding Non-Managing Member Units.

                  "MAJORITY OF REMAINING MEMBERS" means Non-Managing Members
owning a majority of the Non-Managing Member Units held by Non-Managing Members.

                  "MANAGING MEMBERS" means Pan Pacific Retail Properties, Inc.,
a Maryland corporation, and Pan Pacific (RLP), Inc., a California corporation,
in their respective capacities as Members, or any successor Managing Members
designated pursuant to the terms of this Agreement. The term "Managing Member"
is synonymous with the term "Manager" under the Act.

                  "MANAGING MEMBER UNIT" means a single unit of Membership
Interest of the Managing Members issued pursuant to Article 4 hereof, as the
same may be modified from time to time as provided in this Agreement. The
ownership of Managing Member Units may (but need not

                                       11

<PAGE>   16

in the sole and absolute discretion of the Managing Members) be evidenced in the
form of a certificate for Managing Member Units.

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

                  "MEMBER NONRECOURSE DEBT" has the meaning set forth in
Regulations Section 1.704-2(b) (4) for the phrase "partner nonrecourse debt."

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

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

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

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

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

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

                  C. In the event that the Gross Asset Value of any Company
asset is adjusted pursuant to subsection (b) or subsection (c) of the definition
of "Gross Asset Value," the amount of

                                       12

<PAGE>   17

such adjustment shall be taken into account as gain or loss from the disposition
of such asset for purposes of computing Net Income or Net Loss;

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

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

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

                  "NON-MANAGING MEMBER" means any Member other than the Managing
Member (except to the extent the Managing Member holds Non-Managing Member
Units).

                  "NON-MANAGING MEMBER REPRESENTATIVE" means Ronald C. Waranch
until a successor Non-Managing Member Representative shall have been appointed
pursuant to Section 15.14 hereof and, thereafter, shall mean the person
appointed and then acting as the Non-Managing Member Representative hereunder.

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

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

                  "NONRECOURSE LIABILITY" has the meaning set forth in
Regulations Section 1.752-1(a)(2).

                  "NOTICE OF EXCHANGE" means the Notice of Exchange
substantially in the form of Exhibit D attached to this Agreement.

                  "OWNERSHIP LIMIT" means 6.25% of the number or value
(whichever is more restrictive) of the outstanding REIT Shares or such other
percentage that may be set forth from time

                                       13

<PAGE>   18

to time in the Charter. The number and value of REIT Shares shall be determined
by the Board of Directors of the Managing Member, in good faith, which
determination shall be conclusive for all purposes hereof.

                  "PAYMENT QUARTER" has the meaning set forth in Section 5.1.A
hereof.

                  "PERCENTAGE INTEREST" means, as to a Member holding a
Membership Interest, its interest in the Company as specified in Exhibit A
attached hereto, as such Exhibit may be amended from time to time.

                  "PERSON" means an individual or a corporation, partnership,
trust, unincorporated organization, association, limited liability company or
other entity.

                  "PPRP" means Pan Pacific Retail Properties, Inc., a Maryland
corporation.

                  "PREFERRED RETURN PER UNIT" means with respect to each
Non-Managing Member Unit outstanding on a LLC Record Date an amount initially
equal to the product of (i) the cash dividend per REIT Share declared by the
Managing Members for holders of REIT Shares on that LLC Record Date, multiplied
by (ii) the Adjustment Factor in effect on that LLC Record Date; provided,
however, that the first increase that shall occur in accordance with the
foregoing shall be on the LLC Record Date corresponding to the next calendar
quarter ending subsequent to the Effective Date and shall be in an amount equal
to the foregoing product of (i) and (ii) above multiplied by a fraction, the
numerator of which shall be the number of days from the Effective Date to that
quarter end, and the denominator of which shall be the total number of days in
that quarter.

                  "PREFERRED RETURN SHORTFALL" means, for the holders of
Non-Managing Member Units, as of the particular LLC Record Date, the amount (if
any) by which (i) the Preferred Return Per Unit with respect to all Non-Managing
Member Units held by such holders exceeds the aggregate amount of Available Cash
to be distributed with respect to such Non-Managing Member Units pursuant to
Section 5.1.A(1) prior to any Additional Capital Contributions by the Managing
Member pursuant to Section 4.6.

                  "PRIME RATE" means on any date, a rate equal to the annual
rate on such date announced by the Bank of New York to be its prime, base or
reference rate for 90-day unsecured loans to its corporate borrowers of the
highest credit standing but in no event greater than the maximum rate then
permitted under applicable law. If the Bank of New York discontinues its use of
such prime, base or reference rate or ceases to exist, the Managing Member shall
designate the prime, base or reference rate of another state or federally
chartered bank based in New York to be used for the purpose of calculating the
Prime Rate hereunder (which rate shall be subject to limitation by all
applicable usury laws).

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

                                       14

<PAGE>   19

                  "QUALIFIED TRANSFEREE" means an "accredited investor" as such
term is defined in Rule 501 of Regulation D promulgated under the Securities
Act.

                  "REAL PROPERTY" means the shopping center listed on Exhibit C
attached hereto which has been contributed to the Company pursuant to the
Contribution Agreement by the direct transfer of such shopping center to the
Company.

                  "REDUCTION DATE" has the meaning set forth in Section 5.6.B
hereof.

                  "REDUCTION UNITS" has the meaning set forth in Section 5.6.B
hereof.

                  "REFINANCING DEBT" means any Debt (other than indebtedness to
the Managing Member or any Affiliate of the Managing Member), the repayment of
which is secured by all or any portion of the Real Property.

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

                  "REGULATORY ALLOCATIONS" has the meaning set forth in Section
6.3.A(7) hereof.

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

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

                  "REIT PAYMENT" has the meaning set forth in Section 15.12
hereof.

                  "REIT REQUIREMENTS" has the meaning set forth in Section 5.1.B
hereof.

                  "REIT SHARE" means a share of the Common Stock of the Managing
Member.

                  "REIT SHARES AMOUNT" means a number of REIT Shares equal to
the product of (a) the number of Tendered Units and (b) the Adjustment Factor;
provided, however, that, in the event that the Managing Member issues Rights to
all holders of REIT Shares as of a certain record date, with the record date for
such Rights issuance falling within the period starting on the date of the
Notice of Exchange and ending on the day immediately preceding the Specified
Exchange Date, which Rights will not be distributed before the relevant
Specified Exchange Date, then the REIT Shares Amount shall also include such
Rights that a holder of that number of REIT Shares would be entitled to receive,
expressed, where relevant hereunder, in a number of REIT Shares determined by
the Managing Member in good faith.

                  "RELATED PARTY" means, with respect to any Person, any other
Person whose actual ownership, Beneficial Ownership or Constructive Ownership of
shares of the Managing Member's capital stock would be attributed to the first
such Person under either (i) Code Section 544 (as

                                       15

<PAGE>   20

modified by Code Section 856(h)(1)(b) ) or (ii) Code Section 318 (as modified by
Code Section 856(d)(5)).

                  "RIGHTS" means rights, options, warrants or convertible or
exchangeable securities entitling the Managing Member's shareholders to
subscribe for or purchase REIT Shares, or any other securities or property.

                  "SEC" means the Securities and Exchange Commission.

                  "SECURITIES ACT" means the Securities Act of 1933, as amended,
and the rules and regulations of the SEC promulgated thereunder.

                  "SPECIFIED EXCHANGE DATE" means (A) in the case of an Exchange
pursuant to Section 8.6.A, the 30th calendar day (or, if such day is not a
Business Day, the next following Business Day) after the receipt by the Managing
Member of a Notice of Exchange; provided, however, that no Specified Exchange
Date with respect to an Exchange of a Member's LLC Units shall occur prior to
the first anniversary of the Effective Date applicable to such LLC Units;
provided, further, that the Specified Exchange Date, as well as the closing of
an Exchange on any Specified Exchange Date, may be deferred, in the Managing
Member's sole and absolute discretion, for such time (but in any event not more
than 150 days in the aggregate) as may reasonably be required to effect, as
applicable, (i) necessary funding arrangements, (ii) compliance with the
Securities Act or other law (including, but not limited to, (a) state "blue sky"
or other securities laws and (b) the expiration or termination of the applicable
waiting period, if any, under the Hart Scott Rodino Antitrust Improvements Act
of 1976, as amended) and (iii) satisfaction or waiver of other commercially
reasonable and customary closing conditions and requirements for a transaction
of such nature, and (B) in the case of a Call pursuant to Section 8.6.E, the
10th calendar day (or, if such day is not a Business Day, the next following
Business Day) after the mailing to the applicable Non-Managing Members of a
Call Notice; provided, however, that no Specified Exchange Date with respect to
a Call of a Member's LLC Units by the Managing Member shall occur prior to the
fifth anniversary of the Effective Date applicable to such LLC Units.

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

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

                                       16

<PAGE>   21

Member's status as a REIT, in which event the term "Subsidiary" shall include
the corporation or other entity which is the subject of such opinion or ruling.

                  "TAX ITEMS" has the meaning set forth in Section 6.1 hereof.

                  "TENDERED UNITS" has the meaning set forth in Section 8.6.A
hereof.

                  "TENDERING PARTY" has the meaning set forth in Section 8.6.A
hereof.

                  "TERMINATING CAPITAL TRANSACTION" means any sale or other
disposition of all or substantially all of the assets of the Company or a
related series of transactions that, taken together, result in the sale or other
disposition of all or substantially all of the assets of the Company.

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

                  "VALUATION DATE" means (a) in the case of a tender of LLC
Units for Exchange, the date of the receipt by the Managing Member of the Notice
of Exchange with respect to those LLC Units or, if such date is not a Business
Day, the immediately preceding Business Day, (b) for purposes of Section 5.6.B,
the Reduction Date or, if the Reduction Date is not a Business Day, the
immediately preceding Business Day, (c) for purposes of Section 8.6.E, the Call
Date or, if the Call Date is not a Business Day, the immediately preceding
Business Day, or (d) in any other case, the date specified in this Agreement or,
if such date is not a Business Day, the immediately preceding Business Day.

                  "VALUE" means, on any Valuation Date, the average of the
Closing Prices for the ten (10) consecutive trading days ending on the third
trading day immediately prior to the Valuation Date.

                                   ARTICLE 2.

                             ORGANIZATIONAL MATTERS

         SECTION 2.1 FORMATION. The Company is a limited liability company
formed pursuant to the provisions of the Act for the purposes and upon the terms
and subject to the conditions set forth in this Agreement. Except as expressly
provided herein, the rights and obligations of the Members and the
administration and termination of the Company shall be governed by the Act.

         SECTION 2.2 NAME. The name of the Company is Pan Pacific (Rancho Las
Palmas), LLC. The Company's business may be conducted under any other name or
names deemed advisable by the Managing Members, including the name of either of
the Managing Members or any Affiliate thereof. The Managing Members in their
sole and absolute discretion may change the name of the

                                       17

<PAGE>   22

Company at any time and from time to time in accordance with applicable law and
shall notify the Members of such change in the next regular communication to the
Members.

         SECTION 2.3 REGISTERED OFFICE AND AGENT; PRINCIPAL PLACE OF BUSINESS;
OTHER PLACES OF BUSINESS. The address of the registered office of the Company in
the State of Nevada is located at Hale Lane Peek Dennison Howard and Anderson,
100 W. Liberty Street, Tenth Floor, Reno, Nevada 89501, and the registered agent
for service of process on the Company in the State of Nevada at such registered
office is James L. Kelly, Esq. The principal office of the Company is located at
1621-B South Melrose Drive, Vista, California 92083, or such other place as the
Managing Member may from time to time designate by notice to the Members. The
Company may maintain offices at such other place or places within or outside the
State of Nevada as the Managing Member deems advisable.

         SECTION 2.4 POWER OF ATTORNEY.

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

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

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

                                       18

<PAGE>   23

         appropriate or necessary, in the sole and absolute discretion of the
         Managing Members or any Liquidator, to effectuate the terms or intent
         of this Agreement; and

                           (3) execute, swear to, acknowledge and deliver any
         written consent required of the Members by any third party in
         connection with any financing transactions involving the Company or
         other actions taken by the Managing Member as permitted pursuant to
         this Agreement.

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

                  B. The foregoing power of attorney is hereby declared to be
irrevocable and a special power coupled with an interest, in recognition of the
fact that each of the Members and Assignees will be relying upon the power of
the Managing Members to act as contemplated by this Agreement, and it shall
survive and not be affected by the subsequent Incapacity of any Member or
Assignee and the Transfer of all or any portion of such Member's or Assignee's
LLC Units or Membership Interest and shall extend to such Member's or Assignee's
heirs, successors, assigns and personal representatives. Each such Member or
Assignee hereby agrees to be bound by any representation made by the Managing
Members or any Liquidator, acting in good faith pursuant to such power of
attorney; and each such Member or Assignee hereby waives any and all defenses
which may be available to contest, negate or disaffirm the action of the
Managing Members or any Liquidator, taken in good faith under such power of
attorney. Each Member or Assignee shall execute and deliver to the Managing
Members or any Liquidator, within 15 days after receipt of the Managing Members'
or Liquidator's request therefor, such further designation, powers of attorney
and other instruments as the Managing Members or the Liquidator, as the case may
be, deems necessary to effectuate this Agreement and the purposes of the
Company.

         SECTION 2.5 TERM. The term of the Company commenced on the date that
the original Articles were filed in the office of the Secretary of State of
Nevada in accordance with the Act, and shall continue in perpetuity unless
earlier terminated pursuant the provisions of Article 13 hereof or as otherwise
provided by law.

                                   ARTICLE 3.

                                     PURPOSE

         SECTION 3.1 PURPOSE AND BUSINESS. The purpose and nature of the
business to be conducted by the Company is (i) to conduct any business that may
be lawfully conducted by a limited liability company organized pursuant to the
Act, provided, however, that such business shall be limited to and conducted in
such manner as to permit PPRP at all times to be classified as a REIT for
federal income tax purposes, unless PPRP ceases to qualify as a REIT for reasons
other than the conduct of the business of the Company, (ii) to enter into any
partnership, joint venture, limited liability company or other similar
arrangement to engage in any business described in the foregoing clause (i) or
to own interests in any entity engaged, directly or indirectly, in any such
business, and

                                       19

<PAGE>   24

(iii) to do anything necessary or incidental to the foregoing. In connection
with the foregoing, and without limiting PPRP's right in its sole and absolute
discretion to cease qualifying as a REIT, the Members acknowledge that PPRP's
current status as a REIT inures to the benefit of all the Members and not solely
PPRP or its Affiliates. The foregoing notwithstanding, so long as the Loan is
outstanding, the purpose of the Company shall be limited to acquiring, owning,
leasing, and holding for resale, the Real Property, and doing such things as are
incidental, beneficial, necessary, or appropriate thereto.

         SECTION 3.2 POWERS. The Company is empowered to do any and all acts and
things necessary, appropriate, proper, advisable, incidental to or convenient
for the furtherance and accomplishment of the purposes and business described
herein and for the protection and benefit of the Company including, without
limitation, full power and authority, directly or through its ownership interest
in other entities, to enter into, perform and carry out contracts of any kind,
borrow money and issue evidences of indebtedness, whether or not secured by
mortgage, deed of trust, pledge or other lien, acquire, own, manage, improve and
develop real property, and lease, sell, transfer and dispose of real property;
provided, however, that notwithstanding any other provision in this Agreement,
the Managing Members may cause the Company not to take, or to refrain from
taking, any action that, in the judgment of the Managing Members, in their sole
and absolute discretion, (i) could adversely affect the ability of PPRP to
continue to qualify as a REIT, (ii) could subject PPRP to any additional taxes
under Code Section 857 or Code Section 4981 or (iii) could violate any law or
regulation of any governmental body or agency having jurisdiction over PPRP, its
securities or the Company, unless such action (or inaction) under clause (i),
clause (ii) or clause (iii) above shall have been specifically consented to by
the Managing Members in writing.

         SECTION 3.3 SPECIFIED PURPOSES. The Company shall be a limited
liability company only for the purposes specified in Section 3.1 hereof, and
this Agreement shall not be deemed to create a company, venture or partnership
between or among the Members with respect to any activities whatsoever other
than the activities within the purposes of the Company as specified in Section
3.1 hereof. Except as otherwise provided in this Agreement, no Member shall have
any authority to act for, bind, commit or assume any obligation or
responsibility on behalf of the Company, its properties or any other Member. No
Member, in its capacity as a Member under this Agreement, shall be responsible
or liable for any indebtedness or obligation of another Member, nor shall the
Company be responsible or liable for any indebtedness or obligation of any
Member, incurred either before or after the execution and delivery of this
Agreement by such Member, except as to those responsibilities, liabilities,
indebtedness or obligations incurred pursuant to and as limited by the terms of
this Agreement and the Act.

         SECTION 3.4 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE MEMBERS;
DISCLAIMER OF CERTAIN REPRESENTATIONS.

                  A. Each Member that is an individual (including, without
limitation, each Additional Member or Substituted Member as a condition to
becoming an Additional Member or a Substituted Member) represents and warrants
to the Company, the Managing Members and each other Member that (i) such Member
has the legal capacity to enter into this Agreement and perform such Member's
obligations hereunder, (ii) the consummation of the transactions contemplated by

                                       20

<PAGE>   25

this Agreement to be performed by such Member will not result in a breach or
violation of, or a default under, any material agreement by which such Member or
any of such Member's property is bound, or any statute, regulation, order or
other law to which such Member is subject, (iii) such Member is neither a
"foreign person" within the meaning of Code Section 1445(f) nor a "foreign
partner" within the meaning of Code Section 1446(e), (iv) such Member (other
than the Managing Members) either (a) does not own, actually or constructively
under Code Section 318 (as modified by Code Section 856(d)(5)), more than 25% of
the interests in capital or profits of the Company or (b) does not own, actually
or constructively under Code Section 318 (as modified by Code Section
856(d)(5)), any interest in any entity that is a tenant of the Managing Members,
the Company or any partnership, venture or limited liability company of which
either of the Managing Members or the Company is a member, and (v) this
Agreement is binding upon, and enforceable against, such Member in accordance
with its terms, except as the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and equitable principles regardless of whether
such enforceability is considered in a proceeding at law or in equity.

                  B. Each Member that is not an individual (including, without
limitation, each Additional Member or Substituted Member as a condition to
becoming an Additional Member or a Substituted Member) represents and warrants
to the Company, the Managing Members and each other Member that (i) all
transactions contemplated by this Agreement to be performed by it have been duly
authorized by all necessary action, including, without limitation, that of its
managing member(s) (or, if there is no managing member, a majority in interest
of all members), committee(s), trustee(s), general partner(s), beneficiaries,
directors and shareholder(s), as the case may be, as required, (ii) the
consummation of such transactions will not result in a breach or violation of,
or a default under, its partnership or operating agreement, trust agreement,
articles of incorporation or bylaws, as the case may be, any material agreement
by which such Member or any of such Member's properties or any of its partners,
members, beneficiaries, trustees or shareholders, as the case may be, is or are
bound, or any statute, regulation, order or other law to which such Member or
any of its partners, members, trustees, beneficiaries or shareholders, as the
case may be, is or are subject, (iii) such Member is neither a "foreign person"
within the meaning of Code Section 1445(f) nor a "foreign partner" within the
meaning of Code Section 1446(e), (iv) such Member (other than the Managing
Member) either (a) does not own, actually or constructively under Code Section
318 (as modified by Code Section 856(d)(5)), more than 25% of the interests in
capital or profits of the Company or (b) does not own, actually or
constructively under Code Section 318 (as modified by Code Section 856(d)(5)),
any interest in any entity that is a tenant of the Managing Members, the Company
or any partnership, venture or limited liability company of which the Managing
Members or the Company is a member, (v) this Agreement is binding upon, and
enforceable against, such Member in accordance with its terms, except as the
same may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and equitable principles regardless of whether such enforceability is
considered in a proceeding at law or in equity.

                  C. Each Member (including, without limitation, each Additional
Member or Substituted Member as a condition to becoming an Additional Member or
a Substituted Member) represents, warrants and agrees that it has acquired and
continues to hold its interest in the Company

                                       21

<PAGE>   26

for its own account for investment only and not for the purpose of, or with a
view toward, the resale or distribution of all or any part thereof, nor with a
view toward selling or otherwise distributing such interest or any part thereof
at any particular time or under any predetermined circumstances. Each Member
further represents and warrants that it is an "accredited investor" as defined
in Rule 501 promulgated under the Securities Act and is a sophisticated
investor, able and accustomed to handling sophisticated financial matters for
itself, particularly real estate investments, and that it has a sufficiently
high net worth that it does not anticipate a need for the funds that it has
invested in the Company in what it understands to be a speculative and illiquid
investment.

                  D. Each Member who is not a natural person shall notify the
Company in writing promptly upon any change in the identity or number of its
direct or indirect Partners (as defined below) from the date of such Member's
admission to the Company, and shall provide such information as the Company may
reasonably request with respect to any such change. Each Member shall use its
best efforts to secure the compliance of any Flow-Through Entities (as such term
is defined in Section 11.6.E(k)) and the Partners of such entities that hold
direct or indirect interests in such Member with the requirements of Section
11.6.E(k) as if such requirements applied directly to such entities. For
purposes of this Agreement, the term "Partners" means, collectively, with
respect to an entity, the holders of all beneficial or other direct or indirect
ownership interests in such entity, including, without limitation, all partners,
members, and beneficiaries and, to the extent any such partner, member, or
beneficiary is not a natural person, the holders of all beneficial other direct
or indirect ownership interests in such partner, member, or beneficiary. Each
Member acknowledges that the provisions of Section 11.6.E(k) are imposed to aid
the Company in avoiding taxation as a "publicly traded partnership" for federal
income tax purposes, agrees that monetary damages may be insufficient to remedy
the potential harm caused by any breach of the provisions of Section 11.6.E(k),
and agrees that injunctive relief, including specific performance or other
equitable remedy, would be an appropriate remedy.

                  E. Each Member represents and warrants to the Company that it
is not and has never been a "publicly traded partnership" (as such term is
defined in Section 469(k)(2) or Section 7704(b) of the Code).

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

                  G. Each Member (including, without limitation, each Additional
Member or Substituted Member as a condition to becoming an Additional Member or
a Substituted Member) hereby represents that it has consulted and been advised
by its legal counsel and tax advisor in connection with, and acknowledges that
no representations as to potential profit, tax consequences of any sort
(including, without limitation, the tax consequences resulting from forming or
operating the Company, conducting the business of the Company, executing this
Agreement, consummating the transaction provided for in or contemplated by the
Contribution Agreement, making a Capital Contribution, being admitted to the
Company, receiving or not receiving distributions from the

                                       22

<PAGE>   27

Company, exchanging LLC Units or being allocated Tax Items), cash flows, funds
from operations or yield, if any, in respect of the Company or the Managing
Members have been made by the Company, any Member or any employee or
representative or Affiliate of the Company or any Member, and that projections
and any other information, including, without limitation, financial and
descriptive information and documentation, that may have been in any manner
submitted to such Member shall not constitute any representation or warranty of
any kind or nature, express or implied.

                                   ARTICLE 4.

                         CAPITAL CONTRIBUTIONS AND LOANS

         SECTION 4.1 CAPITAL CONTRIBUTIONS OF THE INITIAL MEMBERS. As a
consequence of the contribution of the Real Property in exchange for all the
Units in the Company and the other transactions described in the recitals of
this Agreement, each Member shall have an initial Capital Account balance as set
forth adjacent to its name in Exhibit A to this Agreement. The Members shall own
Managing Member Units and Non-Managing Member Units, as applicable, in the
amounts set forth on Exhibit A. Except as required by law or as otherwise
provided in Sections 4.1, 4.2, 4.4, and 4.6 no Member shall be required or
permitted to make any additional Capital Contributions or loans to the Company.

         SECTION 4.2 ADDITIONAL MEMBERS. The Managing Members are authorized to
admit one or more Additional Members to the Company from time to time, in
accordance with the provisions of Article 12 hereof, on terms and conditions and
for such Capital Contributions as may be established by the Managing Members in
their reasonable discretion. The consent of the Non-Managing Members, which
consent may be granted or withheld in their sole and absolute discretion, shall
be required in connection with the admission of any Additional Members. Subject
to the foregoing and provided that the acquisition will not result in a default
under the Loan referred to in Section 7.3.D(2), the Company may acquire in the
future additional Properties by means of Capital Contributions by the Managing
Members or other Persons, which Capital Contributions shall be set forth in
Exhibit A. As a condition to being admitted to the Company, each Additional
Member shall execute an agreement to be bound by the terms and conditions of
this Agreement.

         SECTION 4.3 LOANS BY THIRD PARTIES. Subject to the provisions of
Section 4.4 hereof, the Company may incur or assume Debt, or enter into other
similar credit, guarantee, financing or refinancing arrangements, for any
purpose (including, without limitation, in connection with any further
acquisition of Properties from any Person), upon such terms as the Managing
Members determine appropriate; provided, however, that any Debt shall be
nonrecourse to the Managing Members unless the Managing Members otherwise agree.

         SECTION 4.4 ADDITIONAL FUNDING AND CAPITAL CONTRIBUTIONS.

                  A. General. The Managing Members may, at any time and from
time to time, determine that the Company requires additional funds ("Additional
Funds") for the operation of the Company. Additional Funds may be raised by the
Company in accordance with the terms of this Section 4.4 or the terms of Section
4.3 hereof. No Person, including, without limitation, any

                                       23

<PAGE>   28

Member or Assignee, shall have any preemptive, preferential, participation or
similar right or rights to subscribe for or acquire any Membership Interest.

                  B. Managing Member Loans. The Managing Members may loan any
required Additional Funds to the Company (a "Managing Member Loan").
Notwithstanding the foregoing, all Managing Member Loans made pursuant to this
Section 4.4 shall be on terms and conditions no less favorable to the Company
than would be available to the Company from any third party.

                  C. Additional Contributions. The Managing Members on behalf of
the Company may raise all or any portion of the Additional Funds by making
additional Capital Contributions. Subject to the terms of this Section 4.4 and
to the definition of "Gross Asset Value," the Managing Members shall determine
in good faith the amount, terms and conditions of such additional Capital
Contributions. In addition, the Managing Members may make additional Capital
Contributions to the Company in amounts sufficient to fund all capital
additions, tenant improvements and leasing commissions relating to the Real
Property that are deemed necessary by the Managing Members in their sole and
absolute discretion. The Managing Members shall receive that number of
additional Managing Member Units in consideration for additional Capital
Contributions made by the Managing Members equal to the initial Gross Asset
Value of their respective additional Capital Contributions (or, in the event of
a contribution of cash, the amount of cash so contributed) divided by the Value
as of the date of such Capital Contribution.

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

         SECTION 4.5 NO INTEREST; NO RETURN. Except as provided herein, no
Member shall be entitled to interest on its Capital Contribution or on such
Member's Capital Account. Except as provided herein or by law, no Member shall
have any right to demand or receive the return of its Capital Contribution from
the Company.

         SECTION 4.6 ADDITIONAL CAPITAL CONTRIBUTIONS BY MANAGING MEMBER. If the
Available Cash generated by the Company during any quarter prior to such
quarter's LLC Distribution Date (the "Payment Quarter" ) is insufficient to
provide each Non-Managing Member with its Preferred Return Per Unit such that
there would be a Preferred Return Shortfall for such Payment Quarter, then the
Managing Members, or either of them, prior to the LLC Distribution Date, shall
contribute to the Company cash sufficient to reduce the aggregate of all
Preferred Return Shortfalls for such Payment Quarter to zero. Notwithstanding
any other provision of this Agreement to the contrary, the Company shall be
obligated to pay in full, as of the LLC Distribution Date for each Payment
Quarter, the Non-Managing Member's Preferred Return Per Unit prior to all other
payments and/or distributions, as if the Company's obligations to make such
other payments and/or distributions were

                                       24

<PAGE>   29

subordinate to the Company's obligation to pay the Non-Managing Member's
Preferred Return Per Unit.

                                   ARTICLE 5.

                                  DISTRIBUTIONS

         SECTION 5.1 REQUIREMENT AND CHARACTERIZATION OF DISTRIBUTIONS.

                  A. The Managing Members shall cause the Company to distribute
quarterly on the LLC Distribution Date all Available Cash generated by the
Company during the quarter most recently ended prior to the LLC Distribution
Date (the "Payment Quarter") plus the amount of any Additional Capital
Contributions required to be made pursuant to Section 4.6 as follows:

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

                           (2) Second, all Available Cash remaining after the
         distribution provided for in Section 5.1.A(1) above shall be
         distributed to the Managing Members in proportion to the number of
         Managing Member Units owned by the particular Managing Member at the
         time of the distribution bears to the total number of Managing Member
         Units issued and outstanding at the time of such distribution.

                           (3) Third, the remaining balance, if any, to the
Managing Members

                  B. The Managing Members shall take such reasonable efforts, as
determined by them in their sole and absolute discretion and consistent with
PPRP's qualification as a REIT, to cause the Company to distribute sufficient
amounts to enable PPRP to pay stockholder dividends that will (a) satisfy the
requirements for qualifying as a REIT under the Code and Regulations ("REIT
Requirements"), and (b) except to the extent the Managing Members elect, in
their sole and absolute discretion, not to make such distributions, avoid any
federal income or excise tax liability of PPRP.

         SECTION 5.2 DISTRIBUTIONS IN KIND. No right is given to any Member to
demand and receive property other than cash. The Managing Member may determine,
in their sole and absolute

                                       25

<PAGE>   30

discretion, to make a distribution in kind to the Members of Company assets, and
such assets shall be distributed in such a fashion as to ensure that the fair
market value is distributed and allocated in accordance with Articles 5 and 6
hereof.

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

         SECTION 5.4 DISTRIBUTIONS UPON LIQUIDATION. Notwithstanding the other
provisions of this Article 5, net proceeds from a Terminating Capital
Transaction and any other cash received or reductions in reserves made after
commencement of the liquidation of the Company shall be distributed to the
Members in accordance with Section 13.2 hereof.

         SECTION 5.5 RESTRICTED DISTRIBUTIONS. Notwithstanding any provision to
the contrary contained in this Agreement, neither the Company nor the Managing
Members, on behalf of the Company, shall make a distribution to any Member on
account of its Membership Interest or interest in LLC Units if such distribution
would violate Section 86.343 of the Act or other applicable law.

         SECTION 5.6 DISTRIBUTIONS OF PROCEEDS FROM SALE OF PROPERTIES. Subject
to the provisions contained in Section 7.3.D(1):

                                       26

<PAGE>   31

                  A. In the event of a taxable disposition of some, but not all,
of the Properties, the Managing Members shall cause the Company to (i) reinvest
the Disposition Proceeds to the extent the Managing Members elect to do so and
in the amount determined by the Managing Member to be appropriate (and to hold
the Disposition Proceeds in an interest bearing account pending such
reinvestment) and (ii) distribute the balance of the Disposition Proceeds not so
reinvested, to the extent thereof, as follows:

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

                           (2) Second, to the holders of LLC Units pro rata to
         their holdings of LLC Units until the number of LLC Units held by the
         Non-Managing Members has been reduced to zero; and

                           (3) Third, the remaining balance, if any, to the
Managing Members.

                  B. The number of LLC Units outstanding on the date of a
distribution pursuant to Section 5.6.A(2) above will be reduced on the date of
the distribution (the "Reduction Date") by the aggregate number of LLC Units
(the "Total Units") determined by dividing the aggregate amount of the
distributions so made pursuant to Section 5.6.A.(2) by the Value on the
Reduction Date. The Non-Managing Member Units shall be reduced by a number of
LLC Units (rounded down to the nearest whole unit) (the "Reduction Units")
determined by multiplying the number of Total Units by a fraction, the numerator
of which is the total number of Non-Managing Member Units outstanding and the
denominator of which is the total number of Non-Managing Member Units and
Managing Member Units outstanding. The Reduction Units shall be allocated (as
closely as practicable in whole units) among the holders of Non-Managing Member
Units in accordance with their respective holdings of Non-Managing Member Units.
The Managing Member Units shall be reduced by a number of Managing Member Units
equal to the difference between the number of Total Units and the number of
Reduction Units. To reflect the foregoing reduction, each Member shall return to
the Managing Members the certificate evidencing the Reduction Units allocated to
him or it or the Managing Member Units so reduced which will be canceled and a
new certificate evidencing the reduced number of Managing Member Units or
Non-Managing Member Units shall be immediately issued to such Member by the
Managing Members on behalf of the Company.

                                   ARTICLE 6.

                                   ALLOCATIONS

         SECTION 6.1 TIMING AND AMOUNT OF ALLOCATIONS OF NET INCOME AND NET
LOSS. Net Income and Net Loss of the Company shall be determined and allocated
with respect to each Fiscal Year of the Company as of the end of each such year.
Except as otherwise provided in this Article 6, an allocation to a Member of a
share of Net Income or Net Loss shall be treated as an allocation of the same
share of each item of income, gain, loss or deduction (collectively "Tax Items")
that is taken into account in computing Net Income or Net Loss.

                                       27

<PAGE>   32

         SECTION 6.2 GENERAL ALLOCATIONS. Except as otherwise provided in
Sections 6.2.B, 6.2.C or 6.3:

                           (1) Net Income, other than Net Income attributable to
         a disposition of any or all of the Real Property, and other than Net
         Income attributable to a Liquidating Event, shall first be allocated to
         each Non-Managing Member or Assignee in an amount equal to the
         cumulative distributions received by such Member or Assignee pursuant
         to Section 5.1.A(1) or Section 5.6.A(1) for the current and all prior
         Fiscal Years, less any amounts of Net Income previously allocated to
         such Member or Assignee pursuant to this Section 6.2.A(1) or Section
         6.2.B(2)(b).

                           (2) All remaining Net Income and Net Loss, other than
         Net Income or Net Loss attributable to a disposition of any or all of
         the Real Property, and other than Net Income or Net Loss attributable
         to a Liquidating Event, shall be allocated to the Managing Members in
         proportion to the number of Managing Member Units owned by the
         particular Managing Member at the time of the distribution bears to the
         total number of Managing Member Units issued and outstanding at the
         time of such distribution.

The foregoing notwithstanding, no allocations shall be made with respect to any
distribution that is a GP.

                  B. NET INCOME AND NET LOSS FROM THE DISPOSITION OF PROPERTIES.
Except as otherwise provided in Sections 6.2.C or 6.3:

                           (1) Net Loss attributable to a disposition of any or
all of the Properties shall be allocated to each Member or Assignee pro rata to
such Member's or Assignee's Percentage Interest.

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

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

                                    (b) Second, after taking into account any
         allocations described in Section 6.2.A(1) for such Fiscal Year, to each
         Non-Managing Member or Assignee in an amount equal to the cumulative
         distributions received by such Member or Assignee pursuant to Section
         5.1.A(1) or Section 5.6.A(1) for the current and all prior Fiscal Years
         less any amounts of Net Income previously allocated to such Member or
         Assignee pursuant to Section 6.2.A(1) or this Section 6.2(B)(2)(b); and

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

                                       28

<PAGE>   33

                  C. NET INCOME AND NET LOSS UPON LIQUIDATION. If a Liquidating
Event occurs in a Fiscal Year, or if the number of LLC Units held by the
Non-Managing Members has been reduced (pursuant to Section 5.6.B or otherwise)
to zero, the provisions of this Section 6.2.C shall apply, and Net Income or Net
Loss (or, if necessary, separate items of income, gain, loss and deduction) for
such Fiscal Year and any Fiscal Years thereafter shall, subject to Section 6.3,
be allocated among the Members, as follows:

                           (1) First, to holders of Non-Managing Member Units,
         pro rata to their Percentage Interests, in such amounts as will cause,
         to the greatest extent possible, each such holder's Capital Account per
         Non-Managing Member Unit (if any) to be equal to the product of (i) the
         Value of a REIT Share (with the date of the liquidation being the
         Valuation Date), and (ii) the Adjustment Factor; and

                           (2) Thereafter, to the Managing Members in proportion
         to the number of Managing Member Units owned by the particular Managing
         Member at the time of the distribution bears to the total number of
         Managing Member Units issued and outstanding at the time of such
         distribution.

         SECTION 6.3 ADDITIONAL ALLOCATION PROVISIONS.

                  A. Regulatory Allocations.

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

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

                                       29

<PAGE>   34

         allocated to each Member pursuant thereto. The items to be so allocated
         shall be determined in accordance with Regulations Sections
         1.704-2(i)(4) and 1.704-2(j)(2). This Section 6.3.A(2) is intended to
         qualify as a "chargeback of partner nonrecourse debt minimum gain"
         within the meaning of Regulations Section 1.704-2(i) and shall be
         interpreted consistently therewith.

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

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

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

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

                           (7) Curative Allocations. The allocations set forth
         in Sections 6.3.A(1) through (6) hereof (the "Regulatory Allocations")
         are intended to comply with certain regulatory requirements, including
         the requirements of Regulations Sections 1.704-1(b) and

                                       30

<PAGE>   35

         1.704-2. Notwithstanding the provisions of Sections 6.1 and 6.2 hereof,
         the Regulatory Allocations shall be taken into account in allocating
         other items of income, gain, loss and deduction among the Members so
         that, to the extent possible without violating the requirements giving
         rise to the Regulatory Allocations, the net amount of such allocations
         of other items and the Regulatory Allocations to each Member shall be
         equal to the net amount that would have been allocated to each such
         Member if the Regulatory Allocations had not occurred.

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

         SECTION 6.4 TAX ALLOCATIONS

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

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

         SECTION 6.5 OTHER PROVISIONS

                  A. Other Allocations. In the event that (i) any modifications
are made to the Code or any Regulations or (ii) any changes occur in any case
law or IRS Revenue Rulings applying or interpreting the Code or any Regulations,
which, in each case, either (a) requires allocations of items of income, gain,
loss, deduction or credit or (b) requires reporting of any of the transactions
contemplated by this Agreement in a manner different from that set forth in this
Article 6, the Managing Member is hereby authorized to make new allocations or
report any such transactions (as the case may be) in reliance of the foregoing,
and such new allocations and reporting shall be deemed to be made pursuant to
the fiduciary duty of the Managing Members to the Company and the other Members,
and no such new allocation or reporting shall give rise to any claim or cause of
action by any Member.

                                       31

<PAGE>   36

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

         SECTION 6.6 AMENDMENTS TO ALLOCATION TO REFLECT ISSUANCE OF ADDITIONAL
MEMBERSHIP INTERESTS. In the event that the Company issues additional Membership
Interests to the Managing Members or any Additional Member pursuant to Article 4
hereof, the Managing Members shall make such revisions to this Article 6 as it
determines are necessary to reflect the terms of the issuance of such additional
Membership Interests, including making preferential allocations to certain
classes of Membership Interests.

                                   ARTICLE 7.

                      MANAGEMENT AND OPERATIONS OF BUSINESS

         SECTION 7.1 MANAGEMENT BY MANAGING MEMBERS.

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

                           (1) the making of any expenditures, the lending or
         borrowing of money (including, without limitation, making prepayments
         on loans and borrowing money to permit the Company to make
         distributions to its Members in such amounts as will permit the
         Managing Members (so long as PPRP qualifies as a REIT) to avoid the
         payment of any federal income tax (including, for this purpose, any
         excise tax pursuant to Code Section 4981) and to make distributions to
         its shareholders sufficient to permit PPRP to maintain

                                       32

<PAGE>   37

         REIT status or otherwise to satisfy the REIT Requirements), the
         assumption or guarantee of, or other contracting for, indebtedness and
         other liabilities, the issuance of evidences of indebtedness (including
         the securing of same by deed to secure debt, mortgage, deed of trust or
         other lien or encumbrance on the Company's assets) and the incurring of
         any obligations that it deems necessary for the conduct of the
         activities of the Company;

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

                           (3) except as restricted pursuant to Section 7.3.D.
         hereof, the acquisition, sale, transfer, exchange or other disposition
         of any assets of the Company (including, but not limited to, the
         exercise or grant of any conversion, option, privilege or subscription
         right or any other right available in connection with any assets at any
         time held by the Company);

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

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

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

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

                                       33

<PAGE>   38

         cash and other assets of the Company, and the collection and receipt of
         revenues, rents and income of the Company;

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

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

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

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

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

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

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

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

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

                                       34

<PAGE>   39

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

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

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

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

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

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

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

                           (23) institute any proceeding for bankruptcy on
         behalf of the Company; and

                           (24) confess a judgment against the Company.

                  B. Each of the Non-Managing Members agrees that, except as
provided in Section 7.3 hereof, the Managing Members are authorized to execute,
deliver and perform the above-mentioned agreements and transactions on behalf
of the Company without any further act, approval or vote of the Non-Managing
Members, notwithstanding any other provision of this Agreement (except as
provided in Section 7.3 hereof), the Act or any applicable law, rule or
regulation. The execution, delivery or performance by the Managing Members or
the Company of any agreement authorized or permitted under this Agreement shall
not constitute a breach by the Managing Members of any duty that the Managing
Members may owe the Company or the Members or any other Persons under this
Agreement or of any duty stated or implied by law or equity.

                  C. In exercising their permitted authority under this
Agreement, the Managing Members may, but shall be under no obligation to, take
into account the tax consequences to any

                                       35

<PAGE>   40

Members (including the Managing Members) of any action taken by them. The
Managing Members and the Company shall not have liability to a Member under any
circumstances as a result of an income tax liability incurred by such Member as
a result of an action (or inaction) by the Managing Members pursuant to their
authority under this Agreement so long as the action or inaction is taken in
good faith.

         SECTION 7.2 ARTICLES OF ORGANIZATION. To the extent that such action is
determined by the Managing Members to be reasonable and necessary or
appropriate, the Managing Members shall file amendments to and restatements of
the Articles and do all the things to maintain the Company as a limited
liability company under the laws of the State of Nevada and each other state,
the District of Columbia or any other jurisdiction in which the Company may
elect to do business or own property. Subject to the terms of Section 8.5.A(4)
hereof, the Managing Members shall not be required, before or after filing, to
deliver or mail a copy of the Articles or any amendment thereto to any Member.
The Managing Members shall use all reasonable efforts to cause to be filed such
other certificates or documents as may be reasonable and necessary or
appropriate for the formation, continuation, qualification and operation of a
limited liability company in the State of Nevada and any other state, or the
District of Columbia or other jurisdiction in which the Company may elect to do
business or own property.

         SECTION 7.3 RESTRICTIONS ON MANAGING MEMBERS' AUTHORITY

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

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

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

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

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

                  B. The Managing Members shall have the exclusive power to
amend this Agreement as may be required to facilitate or implement any of the
following purposes:

                                       36

<PAGE>   41

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

                           (2) to reflect the issuance of additional Membership
         Interests pursuant to Section 4.2 and Section 4.4, to reflect the
         admission, substitution, termination, or withdrawal of Members in
         accordance with this Agreement and to amend Exhibit A in connection
         therewith and to reflect the redemption or other reduction in the
         number of LLC Units outstanding pursuant to Section 5.6 hereof and as
         otherwise permitted by this Agreement;

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

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

                           (5) to reflect such changes as are reasonably
         necessary for PPRP to maintain its status as a REIT or to satisfy the
         REIT Requirements; and

                           (6) to modify, as set forth in the definition of
         "Capital Account," the manner in which Capital Accounts are computed.

The Managing Members will provide at least ten (10) days' prior notice to the
Non-Managing Member Representative of any action to be taken under this Section
7.3.B before the action is taken.

                  C. Notwithstanding Section 7.3.B hereof, this Agreement shall
not be amended with respect to any Member adversely affected, and no action may
be taken by the Managing Members, without the Consent of such Member adversely
affected if such amendment or action would (i) convert a Non-Managing Member's
interest in the Company into a Managing Member's interest, (ii) modify the
limited liability of a Non-Managing Member, (iii) alter rights of the Member to
receive distributions pursuant to Article 5 or Section 13.2.A(4), or the
allocations specified in Article 6 (except as permitted pursuant to Section 4.2,
Section 4.4 and Section 7.3.B(3) hereof), (iv) materially alter or modify the
rights to an Exchange as set forth in Section 8.6, and related definitions
hereof or (v) amend this Section 7.3.C. Further, no amendment may alter the
restrictions on the Managing Members' authority set forth elsewhere in this
Section 7.3 without the Consent specified in such section. Any such amendment or
action consented to by any Member shall be effective as to that Member,
notwithstanding the absence of such consent by any other Member.

                  D. The Managing Members shall not, on behalf of the Company,
take any of the following actions without the prior Consent of the Non-Managing
Members:

                                       37

<PAGE>   42

                           (1) except in connection with a Termination
         Transaction (as defined in Section 11.2.B.) or a nontaxable
         transaction, sell, dispose, convey or otherwise transfer any of the
         Real Property until the earlier to occur of (i) the fifth anniversary
         of the date such Real Property was contributed to the Company, or (ii)
         the date on which ninety percent (90%) of the LLC Units held by the
         Initial Non-Managing Members have been (a) redeemed, sold or otherwise
         disposed of in a taxable disposition or (b) "stepped-up" in tax basis
         to their fair market value at the time of the "step-up" (the "Tax
         Protection Period"), unless the Managing Members reasonably determine
         in good faith that the proceeds from the sale of the Real Property will
         be less than or equal to the tax basis in that Real Property of the
         Non-Managing Members credited with its contribution to the Company and
         the Managing Members so notify such Non-Managing Members prior to
         consummating such sale. The foregoing notwithstanding, the Company
         shall not sell, dispose, convey, or otherwise transfer any of the Real
         Property during the Tax Protection Period without the consent of the
         affected Non-Managing Member if such sale, disposition, conveyance, or
         other transfer will directly result in an increase in such Non-Managing
         Members income tax liability unless the Managing Members agree to pay
         when due to the Non-Managing Member an amount equal to the increase in
         such Non-Managing Member's income tax liability as a direct result of
         such disposition plus the increase in the tax liability as a result of
         the payment referred to in this sentence, in which case no consent of
         the Non-Managing Member shall be required;

                           (2) prior to the expiration of the Tax Protection
         Period (except with respect to the repayment by the Company of the
         encumbering the Real Property commonly known as Rancho Las Palmas
         Shopping Center as of the Effective Date corresponding to the date of
         contribution of such Real Property to the Company), (i) permit the
         Company to refinance the Loan (each such loan being a "New Loan") that
         is secured by the Real Property for an amount that is less than the
         outstanding principal balance of the Loan immediately prior to the
         Effective Date corresponding to the date of contribution of such Real
         Property to the Company, reduced from time to time by scheduled
         payments of principal pursuant to the documents governing the Loan;
         (ii) permit the Company to make any prepayments of principal due under
         the Loan; or (iii) permit the Company to guarantee or otherwise assume
         the economic risk of loss (within the meaning of Sections 704 and 752
         of the Code and the Regulations promulgated thereunder) with respect to
         the Loan, unless (x) prior to taking any action described in (i), (ii)
         or (iii) above, the applicable Initial Non-Managing Member is first
         offered the opportunity to guarantee or otherwise assume the economic
         risk of loss (within the meaning of Sections 704 and 752 of the Code
         and the Regulations promulgated thereunder) with respect to any amount
         of indebtedness (up to the full amount of the then outstanding
         principal balance of the Loan) desired by the applicable Initial
         Non-Managing Members; provided, however, that no Initial Non-Managing
         Member shall be offered the opportunity to guarantee or otherwise
         assume the economic risk of loss of an amount of indebtedness that
         would result in an overall increase in the amount of Company
         liabilities allocable to such Member pursuant to Code Section 752, as
         compared with the amount of liabilities allocable to such Member prior
         to the action described in (i), (ii) or (iii) above or (y) the actions
         described in (i), (ii) or (iii) above are otherwise structured so as to
         not result in the reduction of the federal income tax basis of the
         Initial Non-Managing Members in

                                       38

<PAGE>   43

         their LLC Units from their federal income tax basis in such LLC Units
         immediately prior to the occurrence of such actions. If the Initial
         Non-Managing Member accepts the opportunity to guarantee or otherwise
         assume the economic is risk of loss with respect to any New Loan, the
         Managing Members will negotiate in good faith to obtain from the lender
         a form of guarantee that requires the lender to exhaust its security
         and any other guarantees in favor of the Lender before proceeding
         against its Initial Non-Managing Member's guarantee, but the foregoing
         shall not, in any way, be deemed to be a condition to the Company
         obtaining such New Loan.

         SECTION 7.4 COMPENSATION OF THE MANAGING MEMBERS.

                  A. The Managing Members may, at their election, be compensated
for their services as the managers of the Company by charging a fee of 1% of
gross operating income. Distributions, payments and allocations to which the
Managing Members may be entitled in their capacities as the Managing Members
shall not constitute compensation for services rendered by the Managing Members
as provided in this Agreement (including the provisions of Articles 5 and 6
hereof).

                  B. Subject to Sections 7.4.B and 15.12 hereof, the Company
shall be liable, and shall reimburse the Managing Members on a monthly basis (or
such other basis as the Managing Members may determine in their sole and
absolute discretion), for all sums expended in connection with the Company's
business. Any such reimbursements shall be in addition to any reimbursement of
the Managing Members as a result of indemnification pursuant to Section 7.7
hereof.

                  C. To the extent practicable, Company expenses shall be billed
directly to and paid by the Company. Subject to Section 15.12 hereof,
reimbursements to the Managing Members or any of their Affiliates by the Company
shall be allowed, however, for the actual cost to the Managing Members or any of
their Affiliates of operating and other expenses of the Company, including,
without limitation, the actual cost of goods, materials and administrative
services related to (i) Company operations, (ii) company accounting, (iii)
communications with Members, (iv) legal services, (v) tax services, (vi)
computer services, (vii) risk management, (viii) mileage and travel expenses,
(ix) the management fee contemplated in Section 7.4.B, and (x) such other
related operational and administrative expenses as are necessary for the prudent
organization and operation of the Company.

                  D. The Managing Members shall also be reimbursed for all
expenses they incur relating to any issuance of additional Membership Interests,
Debt of the Company, or rights, options, warrants or convertible or exchangeable
securities of the Company pursuant to Article VIII hereof (including, without
limitation, all costs, expenses, damages and other payments resulting from or
arising in connection with litigation related to any of the foregoing), all of
such expenses are considered by the Members to constitute expenses of, and for
the benefit of, the Company.

                  To the extent that reimbursements to the Managing Members or
any of their Affiliates by the Company pursuant to this Section 7.4 would
constitute gross income to the Managing

                                       39

<PAGE>   44

Members for purposes of Code Section 856(c)(2) or 856(c)(3), then such amounts
shall be treated as "guaranteed payments" within the meaning of Code Section
707(c).

         SECTION 7.5 OTHER BUSINESS OF MANAGING MEMBERS. The Managing Members
shall devote to the Company such time as may be necessary for the performance of
their duties as Managing Members, but the Managing Members are not required, and
are not expected, to devote their full time to the performance of such duties.
The Managing Members may engage independently or with others in other business
ventures of every nature and description, including, without limitation, the
ownership of other properties and the making or management of other investments.
Nothing in this Agreement shall be deemed to prohibit the Managing Members or
any Affiliate of the Managing Members from dealing, or otherwise engaging in
business with, Persons transacting business with the Company, or from providing
services related to the purchase, sale, financing, management, development or
operation of real or personal property and receiving compensation therefor, not
involving any rebate or reciprocal arrangement that would have the effect of
circumventing any restriction set forth herein upon dealings with the Managing
Members or any Affiliate of the Managing Members. Neither the Company nor any
Member shall have any right by virtue of this Agreement or the relationship
created hereby in or to such other ventures or activities or to the income or
proceeds derived therefrom, and the pursuit of such ventures, even if
competitive with the business of the Company, shall not be deemed wrongful or
improper.

         SECTION 7.6 CONTRACTS WITH AFFILIATES.

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

                  B. Except as expressly permitted by this Agreement, neither
the Managing Members nor any of their Affiliates, directly or indirectly, shall
sell, transfer or convey any property to, or purchase any property from, or
borrow funds from, or lend funds to, the Company or engage in any other
transaction with the Company, except upon terms determined by the Managing
Members in good faith to be fair and reasonable and comparable to terms that
could be obtained from an unaffiliated party in an arm's length transaction.

         SECTION 7.7 INDEMNIFICATION.

                  A. To the fullest extent permitted by applicable law, the
Company shall indemnify each Indemnitee from and against any and all losses,
claims, damages, liabilities, joint or several, expenses (including, without
limitation, attorney's fees and other legal fees and expenses), judgments,
fines, settlements and other amounts arising from any and all claims, demands,
actions, suits or proceedings, civil, criminal, administrative or investigative,
that relate to the operations of the Company ("Actions") as set forth in this
Agreement in which such Indemnitee may be involved, or is threatened to be
involved, as a party or otherwise unless it is established that: (i) the act or
omission of the Indemnitee was material to the matter giving rise to the
proceeding and either was committed in bad faith or was the result of active and
deliberate dishonesty; (ii) the

                                       40

<PAGE>   45

Indemnitee actually received an improper personal benefit in money, property or
services; or (iii) in the case of any criminal proceeding, the Indemnitee had
reasonable cause to believe that the act or omission was unlawful. Without
limitation the foregoing indemnity shall extend to any liability of any
Indemnitee, pursuant to a loan guaranty or otherwise, for any indebtedness of
the Company or any Subsidiary of the Company (including, without limitation, any
indebtedness which the Company or any Subsidiary of the Company has assumed or
taken subject to), and the Managing Members are hereby authorized and empowered,
on behalf of the Company, to enter into one or more indemnity agreements
consistent with the provisions of this Section 7.7 in favor of any Indemnitee
having or potentially having liability for any such indebtedness. The
termination of any proceeding by judgment, order or settlement does not create a
presumption that the Indemnitee did not meet the requisite standard of conduct
set forth in this Section 7.7.A. The termination of any proceeding by conviction
or upon a plea of nolo contendere or its equivalent, or an entry of an order of
probation prior to judgment, creates a rebuttable presumption that the
Indemnitee acted in a manner contrary to that specified in this Section 7.7.A
with respect to the subject matter of such proceeding. Any indemnification
pursuant to this Section 7.7 shall be made only out of the assets of the
Company, and any insurance proceeds from the liability policy covering the
Managing Member and any Indemnitees, and neither the Managing Members nor any
Non-Managing Member shall have any obligation to contribute to the capital of
the Company or otherwise provide funds to enable the Company to fund its
obligations under this Section 7.7.

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

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

                  D. The Company may, but shall not be obligated to, purchase
and maintain insurance, on behalf of any of the Indemnitees and such other
Persons as the Managing Members shall determine, against any liability that may
be asserted against or expenses that may be incurred by such Person in
connection with the Company's activities, regardless of whether the Company
would have the power to indemnify such Person against such liability under the
provisions of this Agreement.

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

                                       41

<PAGE>   46

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

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

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

         SECTION 7.8 LIABILITY OF THE MANAGING MEMBERS.

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

                  B. The Non-Managing Members expressly acknowledge that the
Managing Members are acting for the benefit of the Company, the Members and the
Managing Members' shareholders collectively, that the Managing Members are under
no obligation to give priority to the separate interests of the Members or the
Managing Members' shareholders (including, without limitation, the tax
consequences to Members, Assignees or the Managing Members' shareholders) in
deciding whether to cause the Company to take (or decline to take) any actions
and that the Managing Members shall not be liable to the Company or to any
Member for monetary damages for losses sustained, liabilities incurred, or
benefits not derived by Non-Managing Members in connection with such decisions.

                  C. Subject to its obligations and duties as Managing Members
set forth in Section 7.1.A hereof, the Managing Members may exercise any of the
powers granted to them by this Agreement and perform any of the duties imposed
upon them hereunder either directly or by or through its employees or agents.
The Managing Members shall not be responsible for any misconduct or negligence
on the part of any such agent appointed by it in good faith. Except as otherwise
provided in Section 12.3 of this Agreement, the rights, duties, and obligations
of the "Managing Members" may be fulfilled or performed by either Managing
Member acting

                                       42

<PAGE>   47

independently of the other, as if such Managing Member were the only Managing
Member in the office.

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

         SECTION 7.9 OTHER MATTERS CONCERNING THE MANAGING MEMBERS.

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

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

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

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

         SECTION 7.10 TITLE TO COMPANY ASSETS. Title to Company assets, whether
real, personal or mixed and whether tangible or intangible, shall be deemed to
be owned by the Company as an entity, and no Member, individually or
collectively with other Members or Persons, shall have any ownership interest in
such Company assets or any portion thereof. All Company assets shall be recorded
as the property of the Company in its books and records, irrespective of the
name in which legal title to such Company assets is held.

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<PAGE>   48

         SECTION 7.11 RELIANCE BY THIRD PARTIES. Notwithstanding anything to the
contrary in this Agreement, any Person dealing with the Company shall be
entitled to assume that the Managing Members have full power and authority,
without the consent or approval of any other Member or Person, to encumber, sell
or otherwise use in any manner any and all assets of the Company and to enter
into any contracts on behalf of the Company, and take any and all actions on
behalf of the Company, and such Person shall be entitled to deal with the
Managing Members as if they were the Company's sole party in interest, both
legally and beneficially. Each Non-Managing Member hereby waives any and all
defenses or other remedies that may be available against such Person to contest,
negate or disaffirm any action of the Managing Members in connection with any
such dealing. In no event shall any Person dealing with the Managing Members or
their representatives be obligated to ascertain that the terms of this Agreement
have been complied with or to inquire into the necessity or expediency of any
act or action of the Managing Members or their representatives. Each and every
certificate, document or other instrument executed on behalf of the Company by
the Managing Members or their representatives shall be conclusive evidence in
favor of any and every Person relying thereon or claiming thereunder that (i) at
the time of the execution and delivery of such certificate, document or
instrument, this Agreement was in full force and effect, (ii) the Person
executing and delivering such certificate, document or instrument was duly
authorized and empowered to do so for and on behalf of the Company and (iii)
such certificate, document or instrument was duly executed and delivered in
accordance with the terms and provisions of this Agreement and is binding upon
the Company.

                                   ARTICLE 8.

                        RIGHTS AND OBLIGATIONS OF MEMBERS

         SECTION 8.1 LIMITATION OF LIABILITY. The Non-Managing Members shall
have no liability under this Agreement except as expressly provided in this
Agreement or under the Act.

         SECTION 8.2 MANAGING OF BUSINESS. No Non-Managing Members or Assignee
(other than the Managing Members, any of their Affiliates or any officer,
director, employee, partner, agent or trustee of any Managing Member, the
Company or any of their Affiliates, in their capacity as such) shall take part
in the operations, management or control (within the meaning of the Act) of the
Company's business transact any business in the Company's name or have the power
to sign documents for or otherwise bind the Company. The transaction of any such
business by the Managing Members, any of their Affiliates or any officer,
director, employee, partner, agent or trustee of any Managing Member, the
Company or any of their Affiliates, in their capacity as such, shall not affect,
impair or eliminate the limitations on the liability of the Non-Managing Members
or Assignees under this Agreement.

         SECTION 8.3 OUTSIDE ACTIVITIES OF MEMBERS. Subject to any agreements
entered into by a Member or its Affiliates with the Managing Members, the
Company or a Subsidiary (including, without limitation, any employment
agreement), any Member and any Assignee, officer, director, employee, agent,
trustee, Affiliate or shareholder of any Member shall be entitled to and may
have business interests and engage in business activities in addition to those
relating to the Company, including business interests and activities that are in
direct or indirect competition with the Company

                                       44

<PAGE>   49

or that are enhanced by the activities of the Company. Neither the Company nor
any Member shall have any rights by virtue of this Agreement in any business
ventures of any Member or Assignee. Subject to such agreements, none of the
Members nor any other Person shall have any rights by virtue of this Agreement
or the relationship established hereby in any business ventures of any other
Person (other than the Managing Members, to the extent expressly provided
herein), and such Person shall have no obligation pursuant to this Agreement,
subject to any agreements entered into by a Member or its Affiliates with the
Managing Members, the Company or a Subsidiary, to offer any interest in any such
business ventures to the Company, any Member or any such other Person, even if
such opportunity is of a character that, if presented to the Company, any Member
or such other Person, could be taken by such Person.

         SECTION 8.4 RETURN OF CAPITAL. Except pursuant to the rights of
Exchange set forth in Section 8.6 hereof, no Member shall be entitled to the
withdrawal or return of its Capital Contribution, except to the extent of
distributions made pursuant to this Agreement or upon termination of the Company
as provided herein. Except to the extent provided in Article 5, Article 6 and
Article 13 hereof or otherwise expressly provided in this Agreement, no Member
or Assignee shall have priority over any other Member or Assignee either as to
the return of Capital Contributions or as to profits, losses, distributions or
credits.

         SECTION 8.5 RIGHTS OF NON-MANAGING MEMBERS RELATING TO THE COMPANY.

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

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

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

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

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

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

                                       45

<PAGE>   50

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

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

         SECTION 8.6 EXCHANGE RIGHTS.

                  A. On or after the date one year after the applicable
Effective Date, each Non-Managing Member shall have the right (subject to the
terms and conditions set forth herein) to require PPRP to acquire all or a
portion of the Non-Managing Member Units held by such Non-Managing Member (such
Non-Managing Member Units being hereafter called "Tendered Units") in exchange
(an "Exchange") for, at the election of and in the sole and absolute discretion
of PPRP, either the Cash Amount or a number of REIT Shares equal to the REIT
Shares Amount payable on the Specified Exchange Date. Any Exchange shall be
exercised pursuant to a Notice of Exchange delivered to PPRP by the Non-Managing
Member exercising the Exchange right (the "Tendering Party"). On the Specified
Exchange Date, the Tendering Party shall sell the Tendered Units to PPRP in
exchange for, at the election of and in the sole and absolute discretion of
PPRP, either the Cash Amount or a number of REIT Shares equal to the REIT Shares
Amount; provided, however, that if PPRP elects to exchange the Tendered Units
for REIT Shares, such REIT Shares shall on the Specified Exchange Date be
registered for issuance by PPRP, or resale by the Tendering Party, by a current
and effective registration statement under the Securities Act; otherwise, PPRP
shall be obligated to exchange the Tendered Units for the Cash Amount. In the
event that on the LLC Distribution Date most recently preceding the Specified
Exchange Date there shall have been a Preferred Return Shortfall remaining in
respect of the Tendered Units following the payments made on such LLC
Distribution Date pursuant to Section 5.1 hereof, PPRP shall pay the Tendering
Party in cash on the Specified Exchange Date the amount of such Preferred Return
Shortfall remaining on such LLC Distribution Date in respect of the Tendered
Units. Any Tendered Units so acquired by PPRP pursuant to this Section 8.6.A
shall be held by the Managing Member as Non-Managing Member Units with all the
rights and preferences relating thereto as provided in this Agreement. The
Tendering Party shall submit (i) such information, certification or affidavit as
PPRP may reasonably require in connection with the Ownership Limit and (ii) in
the event the REIT Shares issuable upon such Exchange are not registered for
issuance under the Securities Act, such written representations, investment
letters, legal opinions or other instruments necessary, in PPRP's view, to
effect compliance with the Securities Act. If a Cash Amount is to be delivered
upon the Exchange, the Cash Amount shall be delivered as a certified check
payable to the Tendering Party or, in PPRP's sole and absolute discretion, in
immediately available funds. If REIT Shares are to be delivered upon the
Exchange, the REIT Shares Amount shall be delivered by PPRP as duly authorized,
validly issued, fully paid and nonassessable REIT Shares (and, if applicable,
Rights), free of any pledge,

                                       46

<PAGE>   51

lien, encumbrance or restriction, other than the Ownership Limit and other
restrictions provided in the Charter or the Bylaws of PPRP, the Securities Act
and relevant state securities or "blue sky" laws. The Tendering Party shall be
deemed the owner of such REIT Shares and Rights for all purposes, including,
without limitation, rights to vote or consent, receive dividends, and exercise
rights, as of the Specified Exchange Date. REIT Shares issued upon an
acquisition of the Tendered Units by PPRP pursuant to this Section 8.6.A may
contain such legends regarding restrictions on transfer or ownership to protect
PPRP's tax status as a REIT and in the event the REIT Shares issuable upon such
Exchange are not registered for such Exchange under the Securities Act,
restrictions under the Securities Act and applicable state securities laws as
PPRP in good faith determines to be necessary or advisable in order to ensure
compliance with such laws.

                  B. Notwithstanding the provisions of Section 8.6.A hereof, no
Non-Managing Member shall have any right to tender for Exchange (whether for the
REIT Shares Amount or the Cash Amount) any Excess LLC Units held by such
Non-Managing Member. The Managing Member shall have no obligation to acquire
Excess LLC Units, whether for the REIT Shares Amount or the Cash Amount.

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

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

                           (2) Each Tendering Party shall continue to own all
         LLC Units subject to any Exchange, and be treated as a Member with
         respect to such LLC Units for all purposes of this Agreement, until
         such LLC Units are transferred to PPRP and paid for or exchanged on the
         Specified Exchange Date. Until a Specified Exchange Date and an
         acquisition of the Tendered Units by PPRP pursuant to Section 8.6.A
         hereof, the Tendering Party shall have no rights as a shareholder of
         PPRP with respect to the REIT Shares issuable in connection with such
         acquisition.

                  D. In connection with an exercise of Exchange rights pursuant
to this Section 8.6, the Tendering Party shall submit the following to PPRP, in
addition to the Notice of Exchange:

                           (1) A written affidavit, dated the same date as, and
         accompanying, the Notice of Exchange, (a) disclosing the actual and
         constructive ownership, as determined for purposes of Code Sections
         856(a)(6), 856(h), 856(d)(2)(b) and 856(d)(5), of REIT Shares by (i)
         such Tendering Party and (ii) any Related Party and (b) representing
         that, after giving effect to the Exchange, neither the Tendering Party
         nor any Related Party will actually or Constructively own REIT Shares
         in excess of the Ownership Limit;

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

                                       47

<PAGE>   52

                           (3) An undertaking to certify, at and as a condition
         to the closing of the Exchange that either (a) the actual and
         constructive ownership of REIT Shares by the Tendering Party and any
         Related Party remain unchanged from that disclosed in the affidavit
         required by Section 8.6.D(1) or (b) after giving effect to the
         Exchange, neither the Tendering Party nor any Related Party shall
         actually or Constructively own REIT Shares in violation of the
         Ownership Limit.

                  E. Notwithstanding anything in this Agreement to the contrary,
on or after the date five years after the Effective Date corresponding to the
date of Initial Non-Managing Member's initial admission to the Company, if PPRP,
in its sole and absolute discretion, determines that any Non-Managing Member's
ownership of its Non-Managing Member Units is an impediment to or inconsistent
with the Company's or PPRP's business plans, objectives or any pending
transaction to be entered into by the Company or PPRP, PPRP may require such
Non-Managing Member (by delivering a Call Notice to such Non-Managing Member) to
tender all or a portion of its Non-Managing Member Units to PPRP (a "Call") in
exchange for, at the election of and in the sole and absolute discretion of
PPRP, either the Cash Amount or a number of REIT Shares equal to the REIT Shares
Amount payable on the Specified Exchange Date and otherwise in accordance with
the procedures and provisions set forth in Section 8.6.A.

                                   ARTICLE 9.

                     BOOKS, RECORDS, ACCOUNTING, AND REPORTS

         SECTION 9.1 RECORDS AND ACCOUNTING.

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

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

         SECTION 9.2 FISCAL YEAR. The Fiscal Year of the Company shall be the
calendar year.

         SECTION 9.3 REPORTS. As soon as practicable, but in no event later than
90 days after the close of each calendar quarter and only if the Non-Managing
Member Representative so requests

                                       48

<PAGE>   53

in writing prior to the end of such calendar quarter, the Managing Members shall
cause to be mailed to each Member of record as of the last day of the calendar
quarter, a copy of the general ledger of the Company covering that calendar
quarter. As soon as practicable, but in no event later than 120 days after the
close of each calendar year and only if the Non-Managing Member Representative
so requests in writing prior to the end of such calendar year, the Managing
Members shall cause to be mailed to each Member of record as of the last day of
the calendar year, a copy of the balance sheet, profit and loss statement, and
general ledger of the Company covering that calendar year. In addition, the
Managing Member shall distribute to each of the Non-Managing Members copies of
all communications sent to PPRP's shareholders.

                                   ARTICLE 10.

                                   TAX MATTERS

         SECTION 10.1 PREPARATION OF TAX RETURNS. The Managing Members shall
arrange for the preparation and timely filing of all returns with respect to
Company income, gains, deductions, losses and other items required of the
Company for federal and state income tax purposes and shall use all reasonable
efforts to furnish, within 90 days following the close of each taxable year, the
tax information reasonably required by Members for federal and state income tax
reporting purposes.

         SECTION 10.2 TAX ELECTIONS. Except as otherwise provided herein, the
Managing Members shall, in their sole and absolute discretion, determine whether
to make any available election pursuant to the Code, including, without
limitation, the election under Section 754 of the Code. The Managing Members
shall have the right to seek to revoke any such election (including, without
limitation, any election under Code Sections 754) upon the Managing Members'
determination in their sole and absolute discretion that such revocation is in
the best interests of the Members.

         SECTION 10.3 TAX MATTERS MEMBER

                  A. PPRP shall be designated and shall operate as "Tax Matters
Partner" (as defined in Code Section 6231), to oversee or handle matters
relating to the taxation of the Company.

                  B. The Member designated as "Tax Matters Partner" may make all
elections for federal income and all other tax purposes (including, without
limitation, pursuant to Code Section 754).

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

         SECTION 10.4 ORGANIZATIONAL EXPENSES. The Company shall elect to deduct
expenses, if any, incurred by it in organizing the Company ratably over a
60-month period as provided in Code Section 709.

         SECTION 10.5 SECTION 754 ELECTION. The Company shall duly file an
election pursuant to Section 754 of the Code with the Company's tax return for
its first taxable year.

                                       49

<PAGE>   54

                                   ARTICLE 11.

                            TRANSFERS AND WITHDRAWALS

         SECTION 11.1 TRANSFER

                  A. No part of the interest of a Member shall be subject to the
claims of any creditor, to any spouse for alimony or support, or to legal
process, and may not be voluntarily or involuntarily alienated or encumbered
except as may be specifically provided for in this Agreement.

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

         SECTION 11.2 TRANSFER OF PPRP'S MEMBERSHIP INTEREST.

                  A. Except in connection with a transaction described in
Section 11.2.B, PPRP shall not withdraw from the Company and shall not Transfer
all or any portion of its interest in the Company without the Consent of a
Majority in Interest of the Non-Managing Members, which may be given or withheld
by each Non-Managing Member in its sole and absolute discretion. Upon any
Transfer of the Membership Interest of PPRP in accordance with the provisions of
this Section 11.2, the transferee shall become a Substitute Managing Member for
all purposes herein, and shall be vested with the powers and rights of PPRP, and
shall be liable for all obligations and responsible for all duties of PPRP, once
such transferee has executed such instruments as may be necessary to effectuate
such admission and to confirm the agreement of such transferee to be bound by
all the terms and provisions of this Agreement with respect to the Membership
Interest so acquired. It is a condition to any Transfer otherwise permitted
hereunder that the transferee assumes, by operation of law or express agreement,
all of the obligations of PPRP under this Agreement with respect to such
transferred Membership Interest, including, without limitation, PPRP's
obligation to exchange any Tendered Units pursuant to Section 8.6 hereof, and
such Transfer shall relieve PPRP of its obligations under this Agreement
accruing subsequent to the date of such Transfer. In the event PPRP withdraws
from the Company, in violation of this Agreement or otherwise, or otherwise
dissolves or terminates, or upon the Incapacity of PPRP, all of the remaining
Members may elect to continue the Company business by selecting a Substitute
Managing Member in accordance with the Act.

                  B. PPRP shall not engage in any merger, consolidation or other
combination with or into another person, sale of all or substantially all of its
assets or any reclassification, or change of its outstanding equity interests (a
"Termination Transaction"), unless either (i) the Termination Transaction has
been approved by the Consent of the Non-Managing Members or (ii) in connection
with the Termination Transaction, all holders of LLC Units (other than the
Managing Member) either will receive, or will have the right to elect to
receive, for each LLC Unit an amount of cash, securities, or other property
equal to the amount that would have been paid to the holder had the LLC Unit
been Exchanged for REIT Shares pursuant to Section 8.6 hereof immediately prior
to the

                                       50

<PAGE>   55

consummation of the Termination Transaction; provided, however, that, if, in
connection with the Termination Transaction, a purchase, tender or exchange
offer shall have been made to and accepted by the holders of more than fifty
percent (50%) of the outstanding REIT Shares, each Member shall receive, or
shall have the right to elect to receive, the greatest amount of cash,
securities, or other property which such Member would have received had it
exchanged its LLC Units for REIT Shares pursuant to Section 8.6 immediately
prior to the expiration of such purchase, tender or exchange offer and had
thereupon accepted such purchase, tender or exchange offer.

         SECTION 11.3 NON-MANAGING MEMBERS' RIGHTS TO TRANSFER.

                  A. General. No Non-Managing Member shall Transfer all or any
portion of its Membership Interest, or any of such Non-Managing Member's
economic rights as a Non-Managing Member, to any transferee without first
offering such Membership Interest to the Managing Members or otherwise obtaining
the consent of the Managing Members, which consent may be withheld in their sole
and absolute discretion; provided, however, that, subject to all of the
provisions of this Section 11.3, any Non-Managing Member may, at any time,
without the consent of the Managing Members, Transfer all or part of its
Membership Interest (i) in the case of a Member which is an individual, to any
Family Member, any trust (whether or not revocable) of which such Non-Managing
Member or such Non-Managing Member's Family Members are the sole beneficiaries,
or (ii) pursuant to the applicable laws of descent or distribution. In the case
of any proposed Transfer other than a Transfer permitted pursuant to the proviso
of the preceding sentence, the transferring Member shall solicit the Managing
Members' consent by giving written notice of the proposed Transfer to the
Managing Members, which notice shall state (i) the identity of the proposed
transferee, and (ii) the amount and type of consideration proposed to be
received for the transferred LLC Units. PPRP shall have ten (10) days upon which
to give the transferring Member notice of its election to acquire the LLC Units
on the proposed terms. If PPRP so elects, it shall purchase the LLC Units on
such terms within ten (10) days after giving notice of such election. If PPRP
does not so elect but otherwise consents to the proposed Transfer, the
transferring Member may transfer such LLC Units to a third party, on economic
terms no more favorable to the transferee than the proposed terms, subject to
the other conditions of this Section 11.3 and Section 11.6.

                  B. Conditions to Transfer. It is a condition to any Transfer
otherwise permitted hereunder that the transferee assume by operation of law or
express agreement all of the obligations of the transferor Member under this
Agreement with respect to such Transferred Membership Interest. Notwithstanding
the foregoing, any transferee of any Transferred Membership Interest shall be
subject to the Ownership Limit and any and all other ownership limitations
contained in the Articles and the representations in Section 3.4 hereof. Any
transferee, whether or not admitted as a Substituted Member, shall take subject
to the obligations of the transferor hereunder. Unless admitted as a Substituted
Member, no transferee, whether by a voluntary Transfer, by operation of law or
otherwise, shall have any rights hereunder, other than the rights of an Assignee
as provided in Section 11.5 hereof. The foregoing notwithstanding, no Transfer
shall be prohibited solely because such transfer could result in a termination
of the Company for federal tax purposes under Section 708 of the Code.

                                       51

<PAGE>   56

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

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

                  E. Adverse Tax Consequences. Notwithstanding any other
provision of this Agreement or of any other agreements among the Members,
without the consent of the Managing Members, which may be given or withheld in
their sole and absolute discretion, no Transfer by a Member of its Membership
Interests (including any Exchange pursuant to Section 8.6) may be made to any
Person if, as determined in the sole and absolute discretion of the Managing
Members, (i) it could result in the Company being treated as an association
taxable as a corporation for federal income tax or for state income or franchise
tax purposes, (ii) it could adversely affect the ability of PPRP to continue to
qualify as a REIT or would subject PPRP to any additional taxes under Code
Section 857 or Code Section 4981 or (iii) such Transfer could be treated as
having been effectuated through an "established securities market" or a
"secondary market (or the substantial equivalent thereof)" within the meaning of
Code Section 7704 or such Transfer fails to satisfy a "safe-harbor" from such
treatment (as set forth in Treasury Regulations under Code Section 7704 or any
successor provisions).

                  F. Transfers to Lenders. No Transfer of any LLC Units may be
made to a lender to the Company or any Person who is related (within the meaning
of Section 1.752-4(b) of the Regulations) to any lender to the Company whose
loan constitutes a Nonrecourse Liability, without the consent of the Managing
Members, in their sole and absolute discretion.

         SECTION 11.4 SUBSTITUTED MEMBERS.

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

                                       52

<PAGE>   57

Members' failure or refusal to permit a transferee of any such interests to
become a Substituted Member shall not give rise to any cause of action against
the Company or any Member.

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

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

         SECTION 11.5 ASSIGNEES. If the Managing Members, in their sole and
absolute discretion, do not consent to the admission of any permitted transferee
under Section 11.3 hereof as a Substituted Member, as described in Section 11.4
hereof, such transferee shall be considered an Assignee for purposes of this
Agreement. An Assignee shall be entitled to all the rights of an assignee of a
limited liability company interest under the Act, including the right to receive
distributions from the Company and the share of Net Income, Net Loss and other
items of income, gain, loss, deduction and credit of the Company attributable to
the LLC Units assigned to such transferee, the rights to Transfer the LLC Units
provided in this Article 11, and the right of Exchange provided in Section 8.6,
but shall not be deemed to be a holder of LLC Units for any other purpose under
this Agreement, and shall not be entitled to effect a Consent or vote with
respect to such LLC Units on any matter presented to the Members for approval
(such right to Consent or vote, to the extent provided in this Agreement or
under the Act, fully remaining with the transferor Member). In the event that
any such transferee desires to make a further assignment of any such LLC Units,
such transferee shall be subject to all the provisions of this Article 11 to the
same extent and in the same manner as any Members desiring to make an assignment
of LLC Units. The Managing Members shall have no liability under any
circumstance with respect to any Assignee as to which they do not have notice.

         SECTION 11.6 GENERAL PROVISIONS.

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

                  B. Any Non-Managing Member who shall Transfer all of its LLC
Units in a Transfer (i) permitted pursuant to this Article 11 where such
transferee was admitted as a Substituted Member or (ii) pursuant to the exercise
of its rights to effect an Exchange of all of its LLC Units

                                       53

<PAGE>   58

under Section 8.6 hereof, shall cease to be a Member. In addition, if the number
of LLC Units held by a Non-Managing member has been reduced to zero, such
Non-Managing Member shall cease to be a Member.

                  C. Transfers pursuant to this Article 11 may only be made on
the first day of a fiscal quarter of the Company, unless the Managing Members
otherwise agree.

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

                  E. Notwithstanding anything to the contrary set forth herein
or in the Contribution Agreement, in addition to any other restrictions on
Transfer contained herein or in the Contribution Agreement, in no event may any
Transfer or assignment of a Membership Interest by any Member (including any
Exchange or any other acquisition of LLC Units by the Company) be made without
the consent of the Managing Members, which may be given or withheld in their
sole and absolute discretion:

                           (1) prior to the first anniversary of the Effective
         Date corresponding to the date of such Member's initial admission to
         the Company (except in the case of Transfers permitted pursuant to the
         proviso of the first sentence of Section 11.3.A);

                           (2) to any person or entity who is not a Qualified
         Transferee;

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

                           (4) in violation of applicable law;

                           (5) if such Transfer would, in the opinion of counsel
         to the Company or the Managing Members, cause an increased tax
         liability to any other Member or Assignee as a result of the
         termination of the Company, in either case for federal or state income
         or franchise tax purposes (except in the case of a Termination
         Transaction or as a result of the Exchange of all LLC Units held by all
         Members);

                           (6) if such Transfer would, in the opinion of legal
         counsel to the Company, cause the Company either (i) to cease to be
         classified as a partnership or (ii) to be classified as a publicly
         traded partnership, in either case for federal or state income tax
         purposes (except as a result of the Exchange of all LLC Units held by
         all Members);

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

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<PAGE>   59

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

                           (9) if such Transfer causes the Company (as opposed
         to PPRP) to become a reporting company under the Exchange Act;

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

                           (11) if such Transfer would result in the Company
         having more than one hundred (100) Members (including as a Member any
         person (a "Beneficial Owner") owning an interest in a partnership, a
         limited liability company, a grantor trust, or an S corporation (a
         "Flow-Through Entity") that would own, directly or through other
         Flow-Through Entities, an interest in the Company where substantially
         all of the value of the Beneficial Owner's interest in the Flow-Through
         Entity would be attributable to the Flow-Through Entity's interest
         (direct or indirect) in the Company; provided, however, that the
         Managing Member shall not permit the admission of more than sixty-five
         (65) Members who are not Initial Non-Managing Members or permitted
         assignees of Initial Non-Managing Members unless the total number of
         Members permitted pursuant to this Section 11.6.E.(k) is increased to
         the same extent that the number of Members admitted by the Managing
         Members exceeds sixty-five (65).

The foregoing notwithstanding, no Transfer shall be prohibited solely because
such Transfer could result in a termination of the Company for federal tax
purposes under Section 708 of the Code.

                                   ARTICLE 12.

                              ADMISSION OF MEMBERS

         SECTION 12.1 ADMISSION OF SUCCESSOR MANAGING MEMBERS. A successor to
all of the Managing Member's Membership Interest pursuant to Section 11.2 hereof
who is proposed to be admitted as a successor Managing Member shall be admitted
to the Company as a Managing Member, effective immediately upon such Transfer.
Any such successor shall carry on the business of the Company without
dissolution. In each case, the admission shall be subject to the successor
Managing Member executing and delivering to the Company an acceptance of all of
the terms, conditions and applicable obligations of this Agreement and such
other documents or instruments as may be required to effect the admission.

The foregoing not withstanding, no Transfer shall be prohibited solely because
such Transfer could result in a termination of the Company for Federal tax
purposes under Section 708 of the Code.

                                       55

<PAGE>   60

         SECTION 12.2 ADMISSION OF ADDITIONAL MEMBERS.

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

                  B. Notwithstanding anything to the contrary in this Section
12.2, and subject to the consent of the Non-Managing Member required pursuant to
Section 4.2, no Person shall be admitted as an Additional Member without the
consent of the Managing Members, which consent may be given or withheld in the
Managing Members' sole and absolute discretion. The admission of any Person as
an Additional Member shall become effective on the date upon which the name of
such Person is recorded on the books and records of the Company, following the
consent of the Managing Members to such admission.

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

                  D. Notwithstanding anything to the contrary in this Section
12.2, no Person shall be admitted as an Additional Member if, as a direct
consequence of the admission of such Person as an Additional Member, any
Non-Managing Member would suffer an increase in its federal or state income tax
liability for the taxable year in which such Person is to be admitted, unless
such Non-Managing Member consents to the admission of such Person as an
Additional Member.

         SECTION 12.3 AMENDMENT OF AGREEMENT AND ARTICLES. For the admission to
the Company of any Member, the Managing Members shall take all steps necessary
and appropriate under the Act to amend the records of the Company and, if
necessary, to prepare as soon as practical an amendment of this Agreement
(including an amendment of Exhibit A) and, if required by law, shall prepare and
file an amendment to the Articles of Organization and may for this purpose
exercise the power of attorney granted pursuant to Section 2.4 hereof. The
foregoing notwithstanding, Section 3.1, this Section 12.3, and Article 15 of
this Agreement (the "Restricted Sections") shall not be

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<PAGE>   61

amended without the unanimous affirmative vote of both Managing Members
(including the unanimous affirmative vote of the Board of Directors of Pan
Pacific (RLP), Inc., which shall include the affirmative vote of the Independent
Director thereof).

         SECTION 12.4 LIMITATION ON ADMISSION OF MEMBERS. No Person shall be
admitted to the Company as a Substituted Member or an Additional Member if, in
the opinion of legal counsel for the Company, it would result in the Company
being treated as a corporation for federal income tax purposes or otherwise
cause the Company to become a reporting company under the Exchange Act.

                                   ARTICLE 13.

                    DISSOLUTION, LIQUIDATION, AND TERMINATION

                  SECTION 13.1 DISSOLUTION. The Company shall not be dissolved
by the admission of Substituted Members or Additional Members or by the
admission of a successor to PPRP as a Managing Member in accordance with the
terms of this Agreement. Upon the withdrawal of PPRP, any successor Managing
Member shall continue the business of the Company without dissolution. However,
the Company shall dissolve, and its affairs shall be wound up, upon the first to
occur of any of the following (each a "Liquidating Event"):

                  A. an election to dissolve the Company may be made by the
Managing Members; provided, however, that no such election shall be permitted
prior to the fifth anniversary of the date on which all of the transactions
contemplated pursuant to the Contribution Agreement have either been consummated
or terminated without the prior Consent of the Non-Managing Members and
provided, further, that the Managing Members shall give the Non-Managing Member
Representative not less than thirty (30) days prior written notice of its
election to dissolve the Company and permit the Non-Managing Members to Exchange
their LLC Units pursuant to Section 8.6.A on or prior to the date indicated in
such notice for the dissolution of the Company;

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

                  C. the sale of all or substantially all of the assets and
properties of the Company;

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

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

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<PAGE>   62

                  F. the Exchange of all LLC Units (other than those held by the
Managing Members); or

                  G. the written consent of all the Members to dissolve the
Company.

         SECTION 13.2 WINDING UP.

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

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

                           (2) Second, to the satisfaction of all of the
         Company's debts and liabilities to the Managing Members (whether by
         payment or the making of reasonable provision for payment thereof);

                           (3) Third, to the satisfaction of all of the
         Company's debts and liabilities to the other Members and any Assignees
         incurred with the consent of the Managing Members (whether by payment
         or the making of reasonable provision for payment thereof), pro rata
         based upon the amount of the debts and liabilities owing to the
         respective Member or Assignee; and

                           (4) The balance, if any, to the Members and any
         Assignees in accordance with and proportion to their positive Capital
         Account balances, after giving effect to all contributions,
         distributions and allocations for all periods, but in no event shall
         the Non-Managing Member receive a distribution in excess of its
         initial Capital Contribution.

                  B. Notwithstanding the provisions of Section 13.2.A hereof
that require liquidation of the assets of the Company, but subject to the order
of priorities set forth therein, if prior to or upon dissolution of the Company
the Liquidator determines that an immediate sale of part or all of the Company's
assets would be impractical or would cause undue loss to the Members, the
Liquidator may, in its sole and absolute discretion, defer for a reasonable time
the liquidation of any assets except those necessary to satisfy liabilities of
the Company (including to those Members as creditors) and/or distribute to the
Members, in lieu of cash, as tenants in common and in accordance

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<PAGE>   63

with the provisions of Section 13.2.A hereof, undivided interests in such
Company assets as the Liquidator deems not suitable for liquidation. Any such
distributions in kind shall be made only if, in the good faith judgment of the
Liquidator, such distributions in kind are in the best interests of the Members,
and shall be subject to such conditions relating to the disposition and
management of such properties as the Liquidator deems reasonable and equitable
and to any agreements governing the operation of such properties at such time.
The Liquidator shall determine the fair market value of any property distributed
in kind using such reasonable method of valuation as it may adopt.

                  C. In the event that the Company is "liquidated" within the
meaning of Regulations Section 1.704-1(b) (2)(ii)(g), distributions shall be
made pursuant to this Article 13 to the Members and Assignees that have positive
Capital Accounts in compliance with Regulations Section 1.704-1(b) (2)(ii)(b)
(2) to the extent of, and in proportion to, their positive Capital Account
balances. If any Member has a deficit balance in its Capital Account (after
giving effect to all contributions, distributions and allocations for all
taxable years, including the year during which such liquidation occurs), such
Member shall have no obligation to make any contribution to the capital of the
Company with respect to such deficit, and such deficit shall not be considered a
debt owed to the Company or to any other Person for any purpose whatsoever. In
the sole and absolute discretion of the Managing Members or the Liquidator, a
pro rata portion of the distributions that would otherwise be made to the
Members pursuant to this Article 13 may be withheld or escrowed to provide a
reasonable reserve for Company liabilities (contingent or otherwise) and to
reflect the unrealized portion of any installment obligations owed to the
Company, provided that such withheld or escrowed amounts shall be distributed to
the Members in the manner and order of priority set forth in Section 13.2.A
hereof as soon as practicable.

         SECTION 13.3 DEEMED DISTRIBUTION AND RECONTRIBUTION. Notwithstanding
any other provision of this Article 13, in the event that the Company is
liquidated within the meaning of Regulations Section 1.704-1(b) (2)(ii)(g), but
no Liquidating Event has occurred, the Company's Property shall not be
liquidated, the Company's liabilities shall not be paid or discharged and the
Company's affairs shall not be wound up. Instead, for federal and state income
tax purposes, the Company shall be deemed to have contributed all of its assets
and liabilities to a new company in exchange for an interest in the new company;
and immediately thereafter, the terminated limited liability company distributes
interests in the new limited liability company to the purchasing Member and the
other remaining Members in proportion to their respective interests in the
terminated limited liability company in liquidation of it.

         SECTION 13.4 RIGHTS OF MEMBERS. Except as otherwise provided in this
Agreement, (a) each Member shall look solely to the assets of the Company for
the return of its Capital Contribution, (b) no Member shall have the right or
power to demand or receive property other than cash from the Company and (c)
except as provided in this Agreement, no Member shall have priority over any
other Member as to the return of its Capital Contributions, distributions or
allocations.

         SECTION 13.5 NOTICE OF DISSOLUTION. In the event that a Liquidating
Event occurs or an event occurs that would, but for an election or objection by
one or more Members pursuant to Section 13.1 hereof, result in a dissolution of
the Company, the Managing Members shall, within 30 days thereafter, provide
written notice thereof to each of the Members and, in the Managing

                                       59

<PAGE>   64

Members' sole and absolute discretion or as required by the Act, to all other
parties with whom the Company regularly conducts business (as determined in the
sole and absolute discretion of the Managing Members), and the Managing Members
may, or, if required by the Act, shall, publish notice thereof in a newspaper of
general circulation in each place in which the Company regularly conduct
business (as determined in the sole and absolute discretion of the Managing
Members).

         SECTION 13.6 CANCELLATION OF ARTICLES. Upon the completion of the
liquidation of the Company's cash and property as provided in Section 13.2
hereof, the Company shall be terminated and the Articles of Organization and all
qualifications of the Company as a foreign limited liability company in
jurisdictions other than the State of Nevada shall be canceled and such other
actions as may be necessary to terminate the Company shall be taken.

         SECTION 13.7 REASONABLE TIME FOR WINDING-UP. A reasonable time shall be
allowed for the orderly winding-up of the business and affairs of the Company
and the liquidation of its assets pursuant to Section 13.2 hereof, in order to
minimize any losses otherwise attendant upon such winding-up, and the provisions
of this Agreement shall remain in effect between the Members during the period
of liquidation.

         SECTION 13.8 LIABILITY OF LIQUIDATOR. The Liquidator shall be
indemnified and held harmless by the Company from and against any and all
claims, liabilities, costs, damages, and causes of action of any nature
whatsoever arising out of or incidental to the Liquidator's taking of any action
authorized under or within the scope of this Agreement; provided, however, that
the Liquidator shall not be entitled to indemnification, and shall not be held
harmless, where the claim, demand, liability, cost, damage or cause of action at
issue arises out of (i) a matter entirely unrelated to the Liquidator's action
or conduct pursuant to the provisions of this Agreement or (ii) the proven
willful misconduct or gross negligence of the Liquidator.

                                   ARTICLE 14.
                       PROCEDURES FOR ACTIONS AND CONSENTS
                        OF MEMBERS; AMENDMENTS; MEETINGS

         SECTION 14.1 PROCEDURES FOR ACTIONS AND CONSENTS OF MEMBERS. The
actions requiring consent or approval of Non-Managing Members pursuant to this
Agreement, including Section 7.3 hereof, or otherwise pursuant to applicable
law, are subject to the procedures set forth in this Article 14.

         SECTION 14.2 AMENDMENTS. Except for amendments to Exhibit A as provided
in Sections 7.3.B, 11.4.C and 12.3 hereof and amendments to Exhibit A, Exhibit B
and Exhibit C as provided in the definitions of Contribution Agreement, Gross
Asset Value and Real Property in Article 1 hereof, amendments to this Agreement
may be proposed by the Managing Members or by a Majority in Interest of the
Non-Managing Members. Following such proposal, the Managing Members shall submit
any proposed amendment to the Members. The Managing Members shall seek the
written Consent of the Members on the proposed amendment or shall call a meeting
to vote thereon and to transact any other business that the Managing Members may
deem appropriate. The affirmative vote or consent, as applicable, of the holders
of a majority of the outstanding LLC Units

                                       60

<PAGE>   65

is required for the approval of a proposed amendment; provided, however, that
the affirmative vote or consent, as applicable, of the holders of three-fourths
of the outstanding LLC Units is required for the approval of a proposed
amendment to Sections 5.1.A, 7.3.D or 8.6.A hereof. For purposes of obtaining a
written consent, the Managing Members may require a response within a reasonable
specified time, but not less than 15 days, and failure to respond in such time
period shall constitute a consent that is consistent with the Managing Members'
recommendation with respect to the proposal; provided, however, that an action
shall become effective at such time as requisite consents are received even if
prior to such specified time.

         SECTION 14.3 MEETINGS OF THE MEMBERS.

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

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

                  C. Each Member may authorize any Person or Persons to act for
it by proxy on all matters in which a Member is entitled to participate,
including waiving notice of any meeting, or voting or participating at a
meeting. Every proxy must be signed by the Member or its attorney-in-fact. No
proxy shall be valid after the expiration of 6 months from the date thereof.
Every proxy shall be revocable at the pleasure of the Member executing it, such
revocation to be effective upon the Company's receipt of written notice of such
revocation from the Member executing such proxy.

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

                                       61

<PAGE>   66

                                   ARTICLE 15.

                               SPECIAL CONDITIONS

         SECTION 15.1 SPECIAL CONDITIONS. So long as the Loan remains unpaid and
for a period of 367 days immediately following such time as the Loan is repaid
in full:

                  A. The Company shall not commingle its funds and other assets
with those of any other individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust, unincorporated organization,
or government or any agency or political subdivision thereof.

                  B. The Company shall not hold itself out as being liable for
the debts of any other party, and shall not guarantee the debt of any other
party.

                  C. The Company shall not form, or cause to be formed, any
subsidiaries or acquire any interest as a general or limited partner in any
partnership.

                  D. The Company shall act solely in its limited liability
company name and through its duly authorized officers or agents in the conduct
of its business, and shall conduct its business so as not to mislead others as
to the identity of the entity with which they are concerned.

                  E. The Company shall maintain its own records and books of
account and shall not commingle its records and books of account with the
records and books of account of any other entity.

                  F. The Company shall establish and maintain an office through
which its activities shall be conducted separate and apart from those of its
Members or any Affiliate.

                  G. The Managing Members and/or Members shall hold appropriate
meetings (or act by consent) to authorize all appropriate actions, and in
authorizing such actions, shall observe all necessary formalities.

                  H. The Company shall maintain separate financial statements.

                  I. The Company shall pay its own liabilities out of its own
funds.

                  J. The Company shall maintain an arm's length relationship
with its Affiliates.

                  K. The Company shall pay the salaries of its own employees and
maintain a sufficient number of employees in light of its contemplated
activities.

                  L. The Company shall use separate stationery, invoices and
checks.

                  M. The Company shall not guarantee any obligation of any
Person, including any Affiliate.

                                       62

<PAGE>   67

                  N. The Company shall not engage, directly or indirectly, in
any business other than that arising out of actions required or permitted to be
performed under Section 3.1, the Loan documents, or this Section 15.1.

                  O. The Company shall not incur, create, or assume any
indebtedness except as otherwise expressly permitted under the Loan documents or
this Agreement.

                  P. The Company shall not form, acquire, or hold any subsidiary
(whether corporate, partnership, limited liability company, or other).

         SECTION 15.2 LIMITATION ON BANKRUPTCY ACTIONS. So long as the Loan
remains unpaid, the Company shall not without the unanimous affirmative vote of
the Managing Members (including the unanimous affirmative vote of the board of
directors of Pan Pacific (RLP), Inc., including the Independent Director): (i)
institute proceedings to have the Company adjudicated a bankrupt or insolvent;
(ii) consent to the institution of bankruptcy or insolvency proceedings against
the Company; (iii) file a petition or consent to a petition seeking
reorganization or relief on behalf of the Company under any applicable federal
or state law relating to bankruptcy; (iv) consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or any similar official)
of the Company or a substantial portion of its property; (v) make any assignment
for the benefit of the Company's creditors; (vi) cause the Company to admit in
writing its inability to pay its debts generally as they become due; or (vii)
take any action, or cause the Company to take any action, in furtherance of any
of the foregoing (any of the above foregoing actions, a "Bankruptcy Action"). No
Member, Manager, officer, or agent of the Company shall be liable to the Company
on account of such Member's, Manager's, officer's, or agent's good faith
reliance on the provisions of this Section 15.2, and neither the Company nor any
Member shall have any claim for breach of fiduciary duty or otherwise against
any Member, Manager, officer, or agent for failing to take any Bankruptcy
Action.

         SECTION 15.3 LIMITATIONS ON MERGERS AND REORGANIZATIONS. So long as the
Loan remains unpaid, the Company shall not consolidate, merge or enter into any
form of combination with or into any other entity, nor convey, transfer or lease
its assets substantially as an entirety to any entity, nor permit any entity to
consolidate, merge or enter into any form of combination with or into the
Company, nor convey, transfer or lease its assets substantially as an entirety
to any person unless such action is approved by the unanimous affirmative vote
of the Managing Members (including the unanimous affirmative vote of the board
of directors of PPRP).

                                   ARTICLE 16.

                               GENERAL PROVISIONS

         SECTION 16.1 ADDRESSES AND NOTICE. Any notice, demand, request or
report required or permitted to be given or made to a Member or Assignee under
this Agreement shall be in writing and shall be deemed given or made when
delivered in person or when sent by first class United States mail or by other
means of written communication (including by telecopy, facsimile, or commercial
courier service) (i) in the case of a Member, to that Member at the address set
forth in Exhibit A or

                                       63

<PAGE>   68

such other address of which the Member shall notify the Managing Members in
writing and (ii) in the case of an Assignee, to the address of which such
Assignee shall notify the Managing Members in writing.

         SECTION 16.2 TITLES AND CAPTIONS. All article or section titles or
captions in this Agreement are for convenience only. They shall not be deemed
part of this Agreement and in no way define, limit, extend or describe the scope
or intent of any provisions hereof. Except as specifically provided otherwise,
references to "Articles" or "Sections" are to Articles and Sections of this
Agreement.

         SECTION 16.3 PRONOUNS AND PLURALS. Whenever the context may require,
any pronouns used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa.

         SECTION 16.4 FURTHER ACTION. The parties shall execute and deliver all
documents, provide all information and take or refrain from taking action as may
be necessary or appropriate to achieve the purposes of this Agreement.

         SECTION 16.5 BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their heirs, executors,
administrators, successors, legal representatives and permitted assigns.

         SECTION 16.6 CREDITORS. Other than as expressly set forth herein with
respect to Indemnities, none of the provisions of this Agreement shall be for
the benefit of, or shall be enforceable by, any creditor of the Company.

         SECTION 16.7 WAIVER. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach or any other covenant, duty, agreement or
condition.

         SECTION 16.8 COUNTERPARTS. This Agreement may be executed in
counterparts, all of which together shall constitute one agreement binding on
all the parties hereto, notwithstanding that all such parties are not
signatories to the original or the same counterpart.

         SECTION 16.9 APPLICABLE LAW. This Agreement shall be construed and
enforced in accordance with and governed by the laws of the State of Nevada,
without regard to the principles of conflicts of law. In the event of a conflict
between any provision of this Agreement and any non-mandatory provision of the
Act, the provisions of this Agreement shall control and take precedence.

         SECTION 16.10 ENTIRE AGREEMENT. This Agreement, the Contribution
Agreements and the other agreements executed on each of the Effective Dates
corresponding to the closing dates of the transactions contemplated in each of
the Contribution Agreements as required therein contain all of the
understandings and agreements between and among the Members with respect to the
subject matter of this Agreement and the rights, interests and obligations of
the Members with respect to the Company.

                                       64

<PAGE>   69

         SECTION 16.11 INVALIDITY OF PROVISIONS. If any provision of this
Agreement is or becomes invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not be affected thereby.

         SECTION 16.12 LIMITATION TO PRESERVE REIT STATUS. To the extent that
the amount paid, credited, or reimbursed by the Company to, for or with respect
to any REIT Member or its officers, directors, employees or agents, whether as a
reimbursement, fee, expense or indemnity (a "REIT Payment"), would constitute
gross income to the REIT Member for purposes of Sections 856(c)(2) or 856(c)(3)
of the Code, then, notwithstanding any other provision of this Agreement, the
amount of such REIT Payments, as selected by PPRP in its discretion from among
items of potential reimbursement, fees, expenses and indemnities, shall be
reduced for any Fiscal Year so that the REIT Payments, as so reduced, to, for or
with respect to such REIT Member shall not exceed the lesser of:

                  A. an amount equal to the excess, if any, of (i) 4.17% of the
REIT Member's total gross income (but not including the amount of any REIT
Payments) for the Fiscal Year that is described in subsections (A) through (H)
of Section 856(c)(2) of the Code over (ii) the amount of gross income (within
the meaning of Section 856(c)(2) of the Code) derived by the REIT Member from
sources other than those described in subsections (A) through (H) of Section
856(c)(2) of the Code (but not including the amount of any REIT Payments); or

                  B. an amount equal to the excess, if any, of (i) 25% of the
REIT Member's total gross income (but not including the amount of any REIT
Payments) for the Fiscal Year that is described in subsections (A) through (I)
of Section 856(c)(3) of the Code over (ii) the amount of gross income (within
the meaning of Section 856(c)(3)) of the Code derived by the REIT Member from
sources other than those described in subsections (A) through (I) of Section
856(c)(3) of the Code (but not including the amount of any REIT Payments);

provided, however, that REIT Payments in excess of the amounts set forth in
subparagraphs (i) and (ii) above may be made if PPRP, as a condition precedent,
obtains an opinion of tax counsel that the receipt of such excess amounts would
not adversely affect the REIT Member's ability to qualify as a REIT. To the
extent that REIT Payments may not be made in a Fiscal Year as a consequence of
the limitations set forth in this Section 15.12, such REIT Payments shall carry
over and be treated as arising in the following Fiscal Year. The purpose of the
limitations contained in this Section 15.12 is to prevent any REIT Member from
failing to qualify as a REIT under the Code by reason of such REIT Member's
share of items, including reimbursements, fees, expenses or indemnities,
receivable directly or indirectly from the Company, and this Section 15.12 shall
be interpreted and applied to effectuate such purpose; provided, however, that
such amount shall not carry over for more than five years, and if not paid
within such five year period, shall expire; provided further, that (a) as REIT
Payments are made, such payments shall be applied first to carry over amounts
outstanding, if any, and (b) with respect to carry over amounts for more than
one Fiscal Year, such payments shall be applied to the earliest Fiscal Year
first.

         SECTION 16.13 NO PARTITION. No Member nor any successor-in-interest to
a Member shall have the right while this Agreement remains in effect to have any
property of the Company

                                       65

<PAGE>   70

partitioned, or to file a complaint or institute to any proceeding at law or in
equity to have such property of the Company partitioned, and each Member, on
behalf of itself and its successors and assigns hereby waives any such right. It
is the intention of the Members that the rights of the parties hereto and their
successors-in-interest to Company property, as among themselves, shall be
governed by the terms of this Agreement, and that the rights of the Members and
their successors-in-interest shall be subject to the limitations and
restrictions as set forth in this Agreement.

         SECTION 16.14     NON-MANAGING MEMBER REPRESENTATIVE.

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

                  B. The holders of a majority of the outstanding Non-Managing
Members Units shall be entitled to replace the Non-Managing Member
Representative by delivering to the Managing Members a written notice signed by
the holders of a majority of the outstanding Non-Managing Members Units stating
(i) that the notice is being provided to the Managing Members pursuant to this
Section 15.14.B, (ii) that the Members signing the notice own of record on the
books of the Company a majority of the outstanding Non-Managing Members Units,
(iii) that the Members signing the notice desire to replace the person then
serving as the Non-Managing Member Representative with the person named in the
notice, and (iv) specifying the date on which the appointment of the named
individual to replace the then serving Non-Managing Member Representative shall
be effective (which shall be a date not earlier than the fourteenth day after
the date on which the notice shall have been delivered to the Managing Member).
The appointment of the new Non-Managing Member Representative specified in the
notice shall be effective on the date specified in the notice and upon
effectiveness, the individual previously serving as the Non-Managing Member
Representative shall cease to be entitled to act in that capacity under this
Agreement.

                 [THE REMAINDER OF THIS PAGE INTENTIALLY BLANK]

                                       66

<PAGE>   71

         SECTION 16.15 CONDITIONS PRECEDENT. Notwithstanding the prior execution
of this Agreement by the parties hereto, this Agreement shall become effective
as to any party hereto only upon the date of closing of the transactions
contemplated pursuant to the Contribution Agreement(s) to which any party hereto
is a party.

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

MANAGING MEMBER                         NON-MANAGING MEMBER

PAN PACIFIC RETAIL PROPERTIES, INC.,    RONALD CHARLES WARANCH TRUST
A MARYLAND CORPORATION                  UNDER TRUST AGREEMENT DATED JULY 6, 1995

By: /s/ STUART A. TANZ                   By: /s/ RONALD C. WARANCH
    -------------------------------         ------------------------------------
    Stuart A. Tanz                          Ronald C. Waranch, Trustee
    President and Chief Executive
    Officer

MANAGING MEMBER

PAN PACIFIC (RLP), INC.
A CALIFORNIA CORPORATION

By: /s/ STUART A. TANZ
    -------------------------------
    Stuart A. Tanz
    President

                                       67<PAGE>   1
                                                                   EXHIBIT 10.18

                             CONTRIBUTION AGREEMENT
                             AND ESCROW INSTRUCTIONS
                       (Rancho Las Palmas Shopping Center)

                                 By and Between

                      RANCHO LAS PALMAS CENTER ASSOCIATES,
                        a California limited partnership,

                                       and

                      PAN PACIFIC RETAIL PROPERTIES, INC.,
                             a Maryland corporation

                       Dated for Reference Purposes As Of
                                August 13, 1999

<PAGE>   2

                             CONTRIBUTION AGREEMENT
                            AND ESCROW INSTRUCTIONS
                      (Rancho Las Palmas Shopping Center)

        This CONTRIBUTION AGREEMENT AND ESCROW INSTRUCTIONS (this "Agreement")
is dated for reference purposes only as of August 13, 1999, and is made to be
effective as of the Effective Date (as hereafter defined), by and between RANCHO
LAS PALMAS CENTER ASSOCIATES, A CALIFORNIA LIMITED PARTNERSHIP ("Contributor"),
and PAN PACIFIC RETAIL PROPERTIES, INC., A MARYLAND CORPORATION ("Company").

                                R E C I T A L S :

        A. Contributor is the owner of the Property (as hereafter defined),
which consists of a shopping center project containing approximately 168,000
square feet of improvements located at the intersection of Highway 111 and Bob
Hope Drive in Rancho Mirage, California, as more particularly described in
EXHIBIT A.

        B. RONALD C. WARANCH, AS TRUSTEE OF THE RONALD C. WARANCH TRUST
("Waranch") and STANLEY W. GRIBBLE, AS TRUSTEE OF THE STANLEY W. GRIBBLE TRUST
("Gribble"), are the sole limited partners of Contributor, and are the sole
shareholders of RLP ASSOCIATES, INC., A CALIFORNIA CORPORATION, the sole general
partner of Contributor.

        C. PAN PACIFIC (RANCHO MIRAGE), LLC (the "DownREIT LLC"), a limited
liability company qualified under the Internal Revenue Code of 1986, as amended
(the "Code"), will be formed as a real estate investment trust subsidiary.

        D. Upon the formation of the DownREIT LLC, PAN PACIFIC RETAIL
PROPERTIES, INC. will assign all of its rights and delegate all of its
obligations under and pursuant to this Agreement as "Company" to the DownREIT
LLC, which will issue and deliver to Contributor Units in exchange for
Contributor's conveyance of the Property to the DownREIT LLC, all as more fully
and particularly below set forth. Upon such assignment and delegation, all
references to Company herein shall refer to the DownREIT LLC.

                                A G R E E M E N T

        NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Contributor and
Company hereby agree as follows:

                                       1.
<PAGE>   3

                                    ARTICLE I

                                 EFFECTIVE DATE

        This Agreement shall be effective on the day (the "EFFECTIVE DATE") when
a fully executed copy of this Agreement (or a fully executed copy in
counterparts) is deposited with Escrow Holder (as hereafter defined). Escrow
Holder is hereby instructed to immediately notify each party to this Agreement
of the Effective Date.

                                   ARTICLE II

                                   DEFINITIONS

        The following terms and references shall have the meanings indicated
below (such meanings to be equally applicable to both the singular and plural
forms of the terms defined and to verbs of any tense):

        (a) "ADDITIONAL RENTS" means amounts tenants may be obligated to pay as
additional rent, including certain percentage rent, certain escalations in base
rent, and certain pass-throughs of operating and similar expenses.

        (b) "BILL OF SALE" means a bill of sale as defined in Article III(c).

        (c) "BUSINESS DAY" means any day other than a Saturday, Sunday or a
Holiday.

        (d) "CLOSING" means the consummation of the transactions contemplated by
this Agreement.

        (e) "CLOSING DATE" means the date which is three (3) days after Lender
advises Company that the Assumption has been approved and that Lender is ready
to close the Assumption.

        (f) "CLTA POLICY" means a standard coverage owner's policy of title
insurance.

        (g) "CONTRIBUTION CONSIDERATION" shall have the meaning set forth in
Section 4.1.

        (h) "CONTRACTS" shall have the meaning set forth in Article III(d).

        (i) "CONTRACT ASSIGNMENT" shall have the meaning set forth in Article
III(d).

        (j) "CONTRIBUTOR'S EQUITY" shall mean the equity, at Closing, of
Contributor in the Property determined by (x) subtracting from the amount of
Twenty Million Two

                                       2.
<PAGE>   4

Hundred Thousand and No/100ths Dollars ($20,200,000.00) the principal balance,
at Closing, of the loan made by Column Financial, Inc., a Delaware Corporation,
to Contributor, which is secured by a first deed of trust encumbering the
Property (the "Column Financial Deed of Trust"), and (y) adjusting such
difference pursuant to Sections 9.7 and 9.8 below.

        (k) "CONTRIBUTOR'S NON-FOREIGN AFFIDAVIT" shall have the meaning set
forth in Section 7.5.

        (l) "DEED" shall have the meaning set forth in Article III(a).

        (m) "DEPOSIT" shall have the meaning set forth in Section 4.2(a).

        (n) "DIMINUTION THRESHOLD" shall have the meaning set forth in Section
13.1(a)(i).

        (o) "DOCUMENTS" means the transfer documents attached as Exhibits to
this Agreement.

        (p) "EFFECTIVE DATE" shall have the meaning set forth in Article I.

        (q) "ENVIRONMENTAL LAWS" shall mean any and all presently existing
federal, state and local laws (whether under common law, statute, rule,
regulation or otherwise), requirements under permits issued with respect
thereto, and other requirements of any federal, state or local governmental
agency, court, board, bureau or other authority having jurisdiction with respect
to or relating to the environment, to any Hazardous Substance or to any activity
involving Hazardous Substances, and shall include, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C.
Section 9601, et seq.), the Federal Resource Conservation and Recovery Act (42
U.S.C. Section 6901, et seq.) and all amendments thereto in effect as of the
Closing Date.

        (r) "ESCROW HOLDER" means the company where escrow shall be established,
whose address for this transaction shall be:

               Transnation Title Insurance Company
               2200 US Bancorp Tower
               111 S.W. 5th Avenue
               Portland, Oregon 97201

               Attn:  Theresa Kilmer

               Telephone No: (503) 222-9931
               Facsimile No: (503) 228-4276

                                       3.
<PAGE>   5

        (s) "ESCROW PERIOD" means the period from and after the Effective Date
through the Closing Date or any earlier termination of this Agreement.

        (t) "EXCHANGE CONSIDERATION" shall have the meaning set forth in Section
4.3(b).

        (u) "FF&E" means furniture, fixtures, equipment, machinery, appliances,
fittings, and other removable articles of personal property of every kind and
nature that are owned by Contributor and used in the operation of the Property,
including, without limitation, (i) furnishings, furniture, and equipment, (ii)
art work and other decorative items, (iii) built-in appliances, and (iv) office
furniture and equipment.

        (v) "GENERAL INTANGIBLES" means the Offsite Rights, the Permits, the
Repair Warranties, and other intangible personal property rights of whatever
nature (other than the rights evidenced by the Contracts) owned by Contributor
and used in the operation and maintenance of the Property.

        (w) "HAZARDOUS MATERIALS" shall mean and include any chemical, compound,
material, mixture, waste or substance that is now or hereafter defined or listed
in, or otherwise classified pursuant to, any Environmental Laws as a "hazardous
substance," "hazardous material," "hazardous waste," "extremely hazardous
waste," "infectious waste," "toxic substance," "toxic pollutant" or any other
formulation intended to define, list, or classify substances by reason of
deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, or toxicity including any petroleum, natural gas, natural gas
liquids, liquefied natural gas, or synthetic gas usable for fuel (or mixture of
natural gas and such synthetic gas). "Hazardous Materials" shall include,
without limitation, any hazardous or toxic substance, material or waste or any
chemical, compound or mixture which is (i) asbestos, (ii) motor oil, gasoline,
petroleum or any petroleum by-product, (iii) designated as a "hazardous
substance" pursuant to Section 1317 of the Federal Water Pollution Control Act
(33 U.S.C. Section 1251 et seq.), (iv) defined as a "hazardous waste" pursuant
to Section 6903 of the Federal Resource Conservation and Recovery Act, (42
U.S.C. Section 6901 et seq., (v) defined as "hazardous substances" pursuant to
Section 9601 of the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. Section 9601 et seq.), or (vi) listed in the United
States Department of Transportation Table (49 CFR 172.101) or by the
Environmental Protection Agency as hazardous substances (40 CFR part 302); or in
any and all amendments thereto in effect as of the Closing Date; or such
chemicals, compounds, mixtures, substances, materials or wastes otherwise
regulated under any applicable local, state or federal Environmental Laws.

        (x) "HOLIDAY" means any day on which banking institutions in the State
of California are authorized or obligated by law or executive order to close.

        (y) "IMPROVEMENTS" shall have the meaning set forth in Article III(b).

                                       4.
<PAGE>   6

        (z) "INFORMATION" means all documents, reports, studies, and other
information or materials (including, without limitation, the Records) delivered
or disclosed to Company by Contributor or its agents.

        (aa) "INSPECTION PERIOD" means the period from and after the Effective
Date and ending at 5:00 p.m., Pacific Time, on August 16, 1999.

        (ab) "INVENTORY" means the stock of supplies and other consumables of
every kind and nature that are owned by Contributor and used exclusively in the
operation and maintenance of the Property in the ordinary course of business.

        (ac) "LAND" shall have the meaning set forth in Article III(a).

        (ad) "LEASE" means any lease, sublease, license, or other agreement for
the occupancy, possession, or use of any space within the Property (including,
without limitation, any storage space, containers, or other facilities),
including, without limitation, those leases described on EXHIBIT H attached
hereto.

        (ae) "LEASE ASSIGNMENT" shall have the meaning set forth in Article
III(e).

        (af) "OFFSITE RIGHTS" means any lease, license, or other agreement
(other than a recorded easement) providing for the use of another's real
property in conjunction with the operation of the Property (as, by way of
illustration and not limitation, use for vehicular parking and/or access).

        (ag) "OWNER'S TITLE POLICY" means a CLTA Policy in the amount of Twenty
Million Two Hundred Thousand and No/100ths Dollars ($20,200,000.00), with
extended coverage if Company so elects.

        (ah) "PERMIT" means any permit, certificate, license, or other form of
authorization or approval issued by a governmental agency or authority and
legally required for the proper operation and use of the Property (including,
without limitation, any certificates of occupancy with respect to the
Improvements, elevator permits, conditional use permits, and zoning variances)
to the extent held and assignable by Contributor or otherwise transferable with
the Property.

        (ai) "PERMITTED EXCEPTIONS" shall have the meaning set forth in Section
5.1.

        (aj) "PERSONAL PROPERTY" shall have the meaning set forth in Article
III(c).

        (ak) "PLANS AND SPECIFICATIONS" shall have the meaning set forth in
Section 7.2(a).

        (al) "PROPERTY" shall have the meaning set forth in Article III.

                                       5.
<PAGE>   7

        (am) "PRORATIONS" shall have the meaning set forth in Section 8.7(a).

        (an) "PTR" means a current preliminary title report concerning the Real
Property issued by the Title Company.

        (ao) "REAL PROPERTY" shall have the meaning set forth in Article III(a).

        (ap) "RECORDS" means all books, records, correspondence, and other files
that have been received or generated and maintained in the course of operating
the Property that are in Contributor's possession or control.

        (aq) "REPAIR WARRANTIES" means any written guaranties, warranties, or
other obligations of any contractor, manufacturer, or vendor for the repair or
maintenance of any of the Improvements or FF&E, to the extent assignable by
Contributor.

        (ar) "REVENUES" shall have the meaning set forth in Section 8.7(a).

        (as) "SERVICE CONTRACT" means any contract or other arrangement, written
or oral, for the continuing provision of services relating to the improvement,
maintenance, repair, protection, or operation of the Property.

        (at) "TENANT" means the tenant and occupant of, and any other holder of
a possessory right in, all or any portion of the Property pursuant to a Lease.

        (au) "TENANT ESTOPPEL CERTIFICATES" means estoppel certificates to be
executed and delivered by each Tenant to Company as provided by Section 7.6.

        (av) "TENANT NOTICES" means notices to the Tenants in the form of
EXHIBIT G.

        (aw) "TITLE COMPANY" means Lawyer's Title Insurance Company.

        (ax) "UNIT" means the representative measurement of ownership interest
in the DownREIT LLC, whether or not so denominated in the Operating Agreement of
the DownREIT LLC.

                                   ARTICLE III

                          PROPERTY SUBJECT TO AGREEMENT

        Contributor hereby agrees to contribute to the DownREIT LLC, and
Company, as the managing member of the DownREIT LLC, hereby agrees to accept
from Contributor, subject to the terms and conditions set forth herein, all of
Contributor's right, title, and interest in the following (collectively, the
"PROPERTY"):

                                       6.
<PAGE>   8

        (a) LAND - that certain land described in EXHIBIT A, and all appurtenant
rights, privileges, and easements thereto owned by Contributor (collectively,
the "LAND"). The Land and the Improvements (collectively, the "REAL PROPERTY")
shall be contributed by Contributor to Company pursuant to a Grant Deed ("DEED")
substantially in the form of EXHIBIT B attached hereto.

        (b) IMPROVEMENTS - all buildings, structures, fixtures, and other
improvements located on the Land (collectively, the "IMPROVEMENTS").

        (c) PERSONAL PROPERTY - all personal property, if any, owned by
Contributor and used by Contributor exclusively in the operation, maintenance,
and management of the Real Property as of the Closing Date, including, without
limitation, the FF&E, the Inventory, the Records, and the General Intangibles
(collectively, the "PERSONAL PROPERTY"). The Personal Property shall be
contributed by Contributor to Company pursuant to a Bill of Sale (the "BILL OF
SALE") substantially in the form of EXHIBIT C.

        (d) CONTRACTS - all contracts and agreements in effect on the Closing
Date, if any, including, without limitation, the Service Contracts
(collectively, the "CONTRACTS"). Contributor's interest in the Contracts shall
be contributed to Company pursuant to an Assignment and Assumption of Contracts,
Permits and Other Rights (the "CONTRACT ASSIGNMENT") substantially in the form
of EXHIBIT D.

        (e) LEASES - Contributor's interest in the Leases shall be contributed
to Company pursuant to an Absolute Assignment and Assumption of Leases (the
"LEASE ASSIGNMENT") substantially in the form of EXHIBIT E.

                                   ARTICLE IV

                           CONTRIBUTION CONSIDERATION
                             AND LIQUIDATED DAMAGES

        4.1 CONTRIBUTION CONSIDERATION. The total consideration to be given by
Company for Contributor's contribution of the Property (the "Contribution
Consideration") shall consist of (i) the assumption by Company of the Existing
Loan (below defined) and (ii) delivery of the Exchange Consideration (below
defined), all as more particularly set forth below in this Article IV.

        4.2 DEPOSIT.

                                       7.
<PAGE>   9

               (a) Upon the full execution of this Agreement by Company and
        Contributor, Company shall tender to Escrow Holder an earnest money
        deposit in the amount of Two Hundred Thousand and No/100ths Dollars
        ($200,000.00) (the "DEPOSIT"). The Deposit shall be tendered by
        certified check or cashier's check made payable to Escrow Holder or by
        wire transfer of current federal funds received and credited to the
        account of Escrow Holder;

               (b) Provided that Company does not terminate this Agreement
        pursuant to Article 7, within one (1) Business Day following expiration
        of the Inspection Period, Company shall tender to the Escrow Holder an
        additional earnest money deposit in the amount of Three Hundred Thousand
        and No/100ths Dollars ($300,000.00), which shall become a part of the
        Deposit from and after the date of tender. Upon the satisfaction, or
        waiver by Company of all of Company's conditions precedent to closing as
        set forth in this Agreement, the Deposit shall become non-refundable to
        Company, except upon a failure of Contributor to consummate the
        transactions contemplated by this Agreement in accordance with the terms
        and provisions hereof, or the failure, unless waived in writing by
        Company, of any other condition provided for in this Agreement for the
        benefit of Company. Any balance of the Deposit remaining after payment
        of Company's share of closing costs pursuant to Section 9.8 shall be
        refunded immediately to Company.

        4.3 DELIVERY OF CONTRIBUTION CONSIDERATION. The Contribution
Consideration shall be delivered by Company as below set forth:

               (a) ASSUMPTION OF LIABILITIES. The Real Property is presently
        encumbered by the Column Financial Deed of Trust securing a loan in the
        original principal amount of $12,750,000 with a principal balance of
        $12,661,554.14 as of June 11, 1999 (the "Existing Loan"). The Existing
        Loan is held presently by LaSalle National Bank, as Trustee ("Lender").
        Contributor hereby represents and warrants to Company with respect to
        the Existing Loan that:

                      (i) Subject to the terms and conditions set forth in the
               Column Financial Deed of Trust, the Existing Loan is assumable
               with the prior written consent of Lender and the payment to
               Lender of an assumption fee of one percent (1%) of the then
               existing principal balance;

                      (ii) The Existing Loan is in full force and effect and
               there is no event of default existing thereunder or any event
               which with the passage of time or notice, or both, would
               constitute an event of default either by Contributor, or to the
               actual knowledge of Contributor, or Lender; and

                                       8.
<PAGE>   10

                      (iii) As of the Closing, all payments and the performance
               of all other obligations of Contributor pursuant to the terms and
               provisions of the Existing Loan will be fully current.

               Within ten (10) days after the Effective Date, Company, with the
        full cooperation of Contributor, shall apply to Lender to assume the
        Existing Loan. Subject to the further provisions of this Agreement,
        Company shall assume the Existing Loan at Closing (the "Assumption").
        While not a condition to Contributor's obligations hereunder,
        Contributor and Company shall endeavor to secure Contributor's release
        from its obligations under the Existing Loan; but if Contributor is not
        released from its obligations under the Existing Loan pursuant to
        Company's assumption thereof, then Company shall defend, indemnify and
        hold Contributor and its partners harmless from and against any and all
        liability for the performance of such obligations arising from and after
        the Closing. In any event, Company shall defend, indemnify and hold
        Waranch harmless from and against any and all liability for the
        performance of any environmental indemnity obligation or "non-recourse
        carve-out" guaranty obligation undertaken by Waranch, individually, in
        connection with the Assumption, but only to the extent such performance
        is required because of environmental or recourse events occurring after
        the Closing.

               (b) EXCHANGE CONSIDERATION. Subject to the terms and conditions
        of this Agreement, Contributor agrees to accept Units as the remainder
        of the consideration to be given for its contribution of the Property
        (the "EXCHANGE CONSIDERATION"), which shall be issued to Contributor in
        an amount which shall be determined by dividing Contributor's Equity by
        Twenty-one Dollars and Twelve and One-Half Cents ($21.125) and rounding
        to the nearest whole Unit. The parties intend that this exchange of
        Contributor's Equity for Units shall be treated as a contribution under
        Section 721(a) of the Internal Revenue Code of 1986, as amended. Sixteen
        percent (16%) of the Units issued as the Exchange Consideration shall be
        managing Units, and eighty-four percent (84%) shall be non-managing
        Units.

        4.4 ADDITIONAL CONSIDERATION. In addition to the Contribution
Consideration, Contributor shall receive additional consideration (the
"Additional Consideration") in an amount which shall be determined as follows:
(x) determine the amount of the difference, if any, between (a) eighty-four
percent (84%) of Contributor's Equity and (b) the product of (i) the current
price of stock in Pan Pacific Retail Properties, Inc., multiplied by (ii) the
number of non-managing Units issued to Contributor pursuant to Section 4.3(b)
above, and (y) divide such difference by the current price of stock in Pan
Pacific Retail Properties, Inc.; provided, however, that in no event shall the
Additional Consideration exceed the number of non-managing Units determined by
dividing 500,000 by the current price of stock in Pan Pacific Retail Properties,
Inc.

                                       9.
<PAGE>   11

        The "current price" of stock in Pan Pacific Retail Properties, Inc.
shall be determined by taking the ten (10) day average public trade/selling
price of stock in Pan Pacific Retail Properties, Inc. for the immediate ten (10)
trade days prior to the date which is five (5) days prior to the Closing Date.

        4.5 INVESTMENT OF DEPOSIT. Escrow Holder shall place the Deposit in an
interest-bearing account with a bank or savings association, the deposits of
which are federally insured (up to the amount of One Hundred Thousand and
No/100ths Dollars ($100,000.00), as directed in writing by Company, with notice
to Contributor. All references in this Agreement to the Deposit shall include
the interest thereon.

        4.6 DEPOSIT AS LIQUIDATED DAMAGES. IF THE SALE OF THE PROPERTY AS
CONTEMPLATED HEREUNDER IS NOT CONSUMMATED BECAUSE OF A DEFAULT UNDER THIS
AGREEMENT ON THE PART OF COMPANY, ESCROW HOLDER, WITHOUT ANY FURTHER INSTRUCTION
FROM EITHER CONTRIBUTOR OR COMPANY, SHALL PAY TO CONTRIBUTOR THE DEPOSIT AND
CONTRIBUTOR SHALL RETAIN THE DEPOSIT AND ALL INTEREST EARNED THEREON AS
LIQUIDATED DAMAGES. THE PARTIES ACKNOWLEDGE THAT CONTRIBUTOR'S ACTUAL DAMAGES IN
THE EVENT OF A DEFAULT BY COMPANY WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE
TO DETERMINE. THEREFORE, BY PLACING THEIR SIGNATURES BELOW, THE PARTIES
EXPRESSLY AGREE AND ACKNOWLEDGE THAT THE DEPOSIT HAS BEEN AGREED UPON, AFTER
NEGOTIATION, AS THE PARTIES' REASONABLE ESTIMATE OF CONTRIBUTOR'S DAMAGES. THE
PARTIES FURTHER ACKNOWLEDGE THAT CONTRIBUTOR'S RETENTION OF THE DEPOSIT AND ALL
INTEREST EARNED THEREON HAS BEEN AGREED UPON AS CONTRIBUTOR'S EXCLUSIVE REMEDY
AGAINST COMPANY IN THE EVENT OF A DEFAULT ON THE PART OF COMPANY, OTHER THAN THE
ADDITIONAL AND SEPARATE OBLIGATIONS OF COMPANY UNDER SECTIONS 5.3, 5.5, 15.2,
AND 15.10 HEREOF, WHICH OBLIGATIONS SHALL SURVIVE THE TERMINATION OF THIS
AGREEMENT. IN ADDITION, COMPANY SHALL PAY ALL TITLE AND ESCROW CANCELLATION
CHARGES IN THE EVENT OF A DEFAULT BY COMPANY.

"Contributor"                           "Company"

RANCHO LAS PALMAS CENTER ASSOCIATES,    PAN PACIFIC RETAIL PROPERTIES, INC.,
A CALIFORNIA LIMITED PARTNERSHIP        A MARYLAND CORPORATION

By:  RLP ASSOCIATES, INC.
Its: GENERAL PARTNER

     ________________________________
                                        By:  STUART A. TANZ
     ________________________________   Its: PRESIDENT & CHIEF EXECUTIVE OFFICER

                                      10.
<PAGE>   12

        By:
        Its:

                                    ARTICLE V

                                   INSPECTION

        5.1 DUE DILIGENCE REVIEW. Company, at its sole cost and expense, shall
have the right to a Due Diligence Review in accordance with the following terms
and conditions. A "DUE DILIGENCE REVIEW" means (a) an inspection, examination
and evaluation of the Information, and (b) the conduct of physical tests,
inspections and other investigations on the Property and all portions thereof
leased by Tenants ("INSPECTION STUDIES"), all in order that Company may
determine, in its sole and absolute judgment and discretion, whether the
Property is acceptable to Company.

        5.2 RIGHT TO TERMINATE. Notwithstanding anything to the contrary in this
Agreement, Company may terminate this Agreement by giving notice of termination
to Contributor on or before the termination of the Inspection Period. If Company
duly exercises that right, then Escrow Agent is hereby instructed to return the
Deposit to Company without further instruction from either Company or
Contributor. If Company does not give the notice of termination, then Company
shall be deemed to have approved the Property with respect to the matters set
forth in Sections 5.1 and 7.2, and provided Company makes the additional earnest
money deposit pursuant to Section 4.2 (b) hereof, this Agreement shall continue
in full force and effect, subject, however, to Company's other termination
rights hereunder. Contributor acknowledges that Company may, but is not
obligated to, expend time, money, and other resources in connection with the Due
Diligence Review of the Property, and that, notwithstanding the fact that this
Agreement may terminate pursuant to this Section 5.2 and other applicable
provisions of this Agreement, such time, money, and other resources that may be
expended constitute adequate consideration for Contributor's execution of and
entry into this Agreement.

        5.3 ACCESS & INQUIRIES.

                                      11.
<PAGE>   13

               (a) Company and its representatives, agents and contractors shall
        have reasonable access to the Property, including all areas leased to
        Tenants, for the purpose of causing any necessary update of an ALTA
        survey of the Land and Improvements prepared previously and which
        Contributor will make available to Company, and conducting
        architectural, engineering, geotechnical, and environmental inspections
        and tests (including intrusive inspection and sampling), feasibility
        studies, and any other inspections, studies, or tests reasonably
        required by Company; provided, however, that Company shall not undertake
        any intrusive inspection or sampling without first obtaining the written
        consent of Contributor, which consent shall not be withheld
        unreasonably. Company shall keep the Property free and clear of any
        liens as a result of any entry on the Property pursuant to this Section
        5.3(a).

               (b) During the pendency of this Agreement, Contributor shall make
        available to Company, and Company and its representatives, agents and
        contractors shall have a continuing right of reasonable access to and
        the right to examine and make copies of, all books and records;
        construction plans; correspondence; documents; contracts; agreements;
        Leases, as well as Lease files with histories; and other materials
        relating to the Property in Contributor's possession or control,
        including, without limitation, the right to conduct a "walk-through" of
        the Property prior to the Closing upon appropriate notice to Tenants and
        subject to the rights of all Tenants under their Leases.

               (c) In the course of its Due Diligence Review, Company may make
        inquiries to third parties including, without limitation, Tenants,
        lenders, contractors, property managers, parties to the Information and
        Contracts, and municipal, local, and other government officials and
        representatives, and Contributor consents to such inquiries.

        5.4 NEW AGREEMENTS. During the period from the Effective Date until the
Closing Date, and as a condition to Company's obligations to purchase the
Property, Contributor shall comply with the following:

               (a) During the period from the Effective Date until the Closing
        Date, and as a condition to Company's obligations to purchase the
        Property, Contributor, without the prior written consent of Company,
        such consent not to be unreasonably withheld or delayed, shall not (i)
        amend or terminate any Lease, tenancy, license or other right of
        occupancy or use for any portion of the Property or any assignment or
        sublet thereunder, (ii) consent to the assignment of any Leases or
        subleasing of any of the Property, or (iii) enter into any new Lease of
        the Property or any portion thereof. In the event Contributor elects to
        seek Company's approval of any such matters, then Contributor shall so
        notify Company, and if Company fails to notify Contributor, within five
        (5) Business Days after Company's receipt of such notice, of any
        objection Company has

                                      12.
<PAGE>   14

        hereunder to any action described therein, then Company shall be deemed
        to have consented to such action.

               (b) Contributor shall not, without the prior written consent of
        Company in each instance (such consent not to be unreasonably withheld),
        enter into any commitment, contract, option or other agreement of any
        kind with respect to the repair, maintenance or operation of the
        Property, unless such contracts, etc. have terms that expire prior to
        Closing.

        5.5 CONDUCT OF INSPECTIONS.

               (a) Any entry by Company onto the Property shall be subject to,
        and conducted in accordance with, all applicable laws, statutes, rules
        and regulations and the terms of any Leases so as to avoid any material
        interference with the operations and occupancy of the Property and to
        avoid any material disturbance of any of the Tenants or the possessory
        rights of any of the Tenants. Company shall promptly restore the
        Property to its previous condition before any such inspections, studies,
        or tests were performed.

               (b) Company or its agents may undertake borings or other
        disturbances of the soil with Contributor's prior written approval (not
        to be unreasonably withheld), provided that the soil borings and other
        disturbances shall be sealed and closed using materials and techniques
        that conform with all applicable laws, statutes, rules and regulations
        and industry and governmental standards, and the soil shall be
        recompacted to the condition immediately before any such borings were
        undertaken.

               (c) Notwithstanding any general liability or other insurance that
        may be maintained by Company, Company hereby agrees to indemnify, defend
        and hold harmless Contributor and its partners and its and their
        partners, shareholders, directors, officers, employees, and agents and
        all Tenants from and against any claims, losses or damages (including
        attorneys' fees and costs) arising from or in connection with the due
        diligence and inspection activities conducted on the Property by Company
        and or its agents, including, without limitation, any damages to the
        Property or any property of any Tenant arising from or relating to any
        inspections, studies or tests performed by Company or its agents. The
        foregoing indemnification obligation of Company shall survive any
        termination of this Agreement or the delivery of the Deed, and the
        transfer of title to the Property. If this Agreement is terminated,
        Company shall deliver to Contributor, within ten (10) Business Days of
        such termination, the results and copies of any and all surveys,
        reports, tests or studies made by or for Company with respect to the
        Property.

                                   ARTICLE VI

                                TITLE TO PROPERTY

                                      13.
<PAGE>   15

        6.1 TITLE. At the Closing, Contributor shall convey to Company title to
the Real Property by execution and delivery of the Deed. The Owner's Title
Policy shall show title as subject to no exceptions other than the following
(collectively, the "PERMITTED EXCEPTIONS"):

               (a) The lien for real estate taxes and assessments not yet
        delinquent;

               (b) Interests of Tenants pursuant to the Leases;

               (c) The Column Financial Deed of Trust; and

               (d) Such other exceptions to title as may be approved in writing
        by Company pursuant to Section 7.1 hereof.

        6.2 TITLE INSURANCE. Company's obligation to purchase the Property shall
be subject to the irrevocable commitment of the Title Company to issue the
Owner's Title Policy upon payment of its normal premium on the Closing Date. In
addition, and provided Company satisfies any requirements of the Title Company
therefor prior to the Closing Date, the Owner's Title Policy shall be issued
together with such endorsements thereto as Company may request; provided,
however, that if any such endorsements are required to change an exception to
title to which Company has objected, and which Contributor has agreed to cure,
into a Permitted Exception, then the cost of such endorsement shall be paid by
Contributor.

        6.3 PERSONAL PROPERTY AND CONTRACTS. At the Closing, Contributor shall
transfer to Company title to the Personal Property and Contributor's interest in
the Contracts by execution and delivery of the Bill of Sale and the Contract
Assignment. Company shall assume the performance of all of Contributor's
obligations under the Contracts arising after the Closing Date, but only as to
those Contracts listed on Schedule I to the Contract Assignment.

                                   ARTICLE VII

              COMPANY'S ADDITIONAL CONDITIONS PRECEDENT TO CLOSING

        Company's obligation to accept the Property shall be conditioned upon
the fulfillment of each of the following conditions precedent:

        7.1 APPROVAL OF TITLE.

               (a) Company shall have reviewed and approved, within the time
        period and in the manner provided below, the PTR, including copies of
        all documents referred to in the PTR (other than encumbrances to be
        discharged by Contributor on or before Closing).

                                      14.
<PAGE>   16

               (b) Contributor shall cause the PTR and all supporting materials,
        including copies of all documents referred to in the PTR to be delivered
        to Company by 4:00 p.m., Pacific time, on or before the fifth (5th)
        Business Day after the Effective Date (the "Title Delivery Date"). On or
        before the seventh (7th) Business Day from and after delivery to Company
        of the PTR and all supporting materials, Company shall notify
        Contributor and Escrow Holder in writing which exceptions to title shown
        in the PTR, if any, will not be accepted by Company (collectively, the
        "DISAPPROVED TITLE MATTERS"); all other matters and exceptions to title
        shown in the PTR shall be deemed approved by Company. If Company fails
        to notify Contributor and Escrow Holder within the required time period
        of any Disapproved Title Matters, Company shall be deemed to have
        approved the condition to the Real Property as to such title and survey
        matters. If Company notifies Contributor of any Disapproved Title
        Matters, Contributor shall have until 5:00 p.m., Pacific time, on the
        third (3rd) Business Day after Contributor's receipt of such notice to
        notify Company and Escrow Holder in writing that:

                      (i) Contributor shall use its reasonable efforts to either
               (A) cause any Disapproved Title Matters to be removed by the
               Closing, or (B) obtain, at Contributor's expense, an endorsement
               or other curative effect acceptable to Company in Company's sole
               and absolute discretion; or

                      (ii) Contributor elects not to cause any such Disapproved
               Title Matters to be removed.

               (c) If Contributor gives Company and Escrow Holder notice under
        subsection (b)(ii) above, Company shall have until 5:00 p.m., Pacific
        time, on the third (3rd) Business Day after Company's receipt of such
        notice to notify Contributor and Escrow Holder that (i) Company revokes
        its disapproval of such exceptions(s) and will proceed with the purchase
        without any reduction in the Contribution Consideration and take title
        to the Property subject to such exception(s), or (ii) Company will
        terminate this Agreement, in which case the terms and provisions of
        Section 7.11 shall apply. The foregoing procedure shall also be
        applicable to any new matters which are disclosed in any updates,
        supplements or amendment to the PTR or Survey.

        7.2    APPROVAL OF OTHER MATTERS.

               (a) By 5:00 p.m., Pacific time, on or before the third (3rd)
        Business Day after the Effective Date, Contributor will deliver to
        Company, or allow Company reasonable access to, at the Property, at
        Contributor's place of business, or at such other location as
        Contributor may reasonably indicate, during reasonable times agreed upon
        in advance by Company and Contributor, the following, expressly subject
        to such items being in the possession of or reasonably available to
        Contributor or its manager for the Property:

                                      15.
<PAGE>   17

                      (i) a current rent roll and copies of all Leases disclosed
               thereon, together with all amendments thereto;

                      (ii) copies of all Contracts;

                      (iii) a schedule of all Personal Property;

                      (iv) copies of the most recent property tax bills for the
               Property;

                      (v) operating statements for Contributor's fiscal years
               1997, 1998 and 1999 year to date;

                      (vi) plans and specifications (as-builts, if available)
               for construction of the Improvements (the "PLANS AND
               SPECIFICATIONS");

                      (vii) copies of certificate(s) of occupancy, and any
               governmental licenses and permits regarding the Property;

                      (viii) financial statements for the Tenants;

                      (ix) a schedule of filed litigation regarding or
               affecting, directly or indirectly, the Property;

                      (x) an aged receivables report current as of the Effective
               Date;

                      (xi) copies of environmental reports, studies and
               assessments within Contributor's possession or control covering
               the Property;

                      (xii) copies of all CC&R's affecting the Property;

                      (xiii) copies of all soil reports and analyses within
               Contributor's possession or control pertaining to the soils,
               seismological, geological and drainable conditions of the
               Property;

                      (xiv) copies of construction and equipment warranties
               within Contributor's possession; and

                      (xvi) all other material, non-proprietary materials,
               reports and information relevant to the Property.

               (b) On or before the expiration of the Inspection Period, Company
        shall notify Contributor and Escrow Holder in writing if Company objects
        to any of the matters referred to above or to Company's own inspection
        of the Property

                                      16.
<PAGE>   18

        described in Section 5.1 hereof, and Company's failure to notify
        Contributor of any such objection shall be deemed to be Company's
        approval of such matters.

        7.3 COMPLIANCE BY CONTRIBUTOR. Contributor shall have complied with each
and every material covenant, undertaking and agreement to be kept or performed
by Contributor as provided in this Agreement; and each representation and
warranty made in this Agreement by Contributor shall remain true and accurate in
all material respects both at the time made and on the Closing Date.

        7.4 NO MATERIAL ADVERSE CHANGE IN PHYSICAL CONDITION. As of the Closing
Date, there shall have been no material adverse change in the condition of the
Property or any material portion thereof, excepting any event(s) of destruction,
damage, or condemnation described in Section 13.1 or 13.2.

        7.5 NO INSOLVENCY. Contributor (i) shall not be in receivership or
dissolution, (ii) shall not have made an assignment for the benefit of creditors
or admitted in writing its inability to pay its debts as they mature, or (iii)
shall not have been adjudicated a bankrupt or filed a petition in voluntary
bankruptcy or a petition or answer seeking reorganization or an arrangement with
creditors under the Federal bankruptcy law or any other similar law or statute
of the United States or any jurisdiction and no such petition shall have been
filed against Company or any of its general partner(s), if any.

        7.6 TENANT ESTOPPELS. Company shall have received a Tenant Estoppel
Certificate for all Tenants whose leasable square footage under their respective
Leases is greater than 4,000 square feet, and from eighty percent (80%) of all
remaining Tenants, which Estoppel Certificates shall be in substantially the
same form as EXHIBIT H attached hereto, or in such other form as is acceptable
to Company in the reasonable exercise of its discretion; and otherwise as to
each such Tenant Estoppel Certificate in such content as is acceptable to
Company. Company shall have five (5) Business Days from receipt of such Tenant
Estoppel Certificates to advise Contributor in writing of its approval or
disapproval of same, which approval will not be withheld unreasonably. If
necessary, at Company's election the Closing Date shall be extended so as to
allow such five (5) day inspection period. In the event Company disapproves of
any of such Tenant Estoppel Certificates, Company may terminate this Agreement
as provided in Section 7.11 below. In the event Contributor is unable through
diligent efforts to obtain any of the Tenant Estoppel Certificates, Company may,
but will not be obligated to, accept in lieu thereof an estoppel certificate
from Contributor (a "Contributor's Estoppel") in substantially the form of
Exhibit "H" attached hereto, or in such other form and content acceptable to
Company in the reasonable exercise of its discretion.

        7.7 APPROVAL OF ASSUMPTION DOCUMENTS. Company shall have reviewed and
approved, which approval shall not be withheld unreasonably, the form and
content of each of the documents, instruments, schedules and any and all other
writings required by Lender to be executed and delivered by Company in order for
Company to assume the Existing Loan (collectively, the "Assumption Documents").

                                      17.
<PAGE>   19

        7.8 LEASE PAYMENTS AND RENTS. Contributor shall have paid fully, or
Company shall receive a credit against the Contribution Consideration, for any
and all rent concessions, leasing commissions and tenant improvement costs, and
all other amounts payable by Contributor as provided in this Agreement with
respect to such Lease and the premises leased thereunder.

        7.9 CONSTRUCTION COSTS. Contributor shall have paid fully for the
construction and all other costs for all Improvements relative to the Property,
such Improvements shall have been substantially completed, notices of completion
shall have been recorded for such Improvements, and final certificates of
occupancy issued therefor.

        7.10 DOWNREIT LLC; DISTRIBUTION OF UNITS; OPERATING AGREEMENT. The
DownREIT LLC shall have been formed under and pursuant to the laws of the State
of Nevada, fully qualified to transact business in the State of California, all
on such terms as are mutually agreeable to Pan Pacific Retail Properties, Inc.,
and Contributor through good faith and diligent negotiations; and all of Pan
Pacific Retail Properties, Inc.'s, rights and obligations hereunder shall have
been assigned and delegated to the DownREIT LLC.

        Concurrently with the Closing (i) Contributor shall have distributed to
Waranch the non-managing Units issued to Contributor, and the managing Units to
Gribble (ii) Gribble and Pan Pacific Retail Properties, Inc. shall have
consummated the transaction contemplated pursuant to the Membership Interest
Purchase Agreement ("Related Agreement") entered into of even date herewith by
and between Pan Pacific Retail Properties, Inc. and Gribble and (iii) Waranch
and Pan Pacific Retail Properties, Inc. shall have entered into an operating
agreement with respect to the DownREIT LLC on such terms as are mutually
agreeable to each party through good faith and diligent negotiations.

        7.11 WAIVER; TERMINATION.

               (a) At any time or times on or before the Closing, at Company's
        election, Company may waive any of the foregoing conditions by written
        notice to Contributor. Other than Company's closing the transaction
        contemplated by this Agreement which shall waive all such unfulfilled
        conditions, no waiver shall be effective unless made in writing specific
        as to the conditions or matters so waived. Except as expressly provided
        otherwise herein, no such waiver shall be inferred or implied by any act
        or conduct of Company or reduce the rights or remedies of Company
        arising from any breach of any undertaking, agreement, covenant,
        warranty, or representation of Contributor under this Agreement.

               (b) If any of the foregoing conditions are neither fulfilled,
        waived, nor deemed to have been approved or waived as herein provided,
        Company, at its election by written notice to Contributor, may terminate
        this Agreement and be

                                      18.
<PAGE>   20

        released from all obligations under this Agreement (other than those
        described in this Section 7.11 and Sections 5.3, 5.5, 15.2 and 15.10
        hereof). In the event of such termination by Company, the Deposit and
        all interest accrued thereon shall be returned immediately to Company,
        all documents deposited in Escrow by Company or Contributor shall be
        returned to the depositing party, the costs of the Title Company and
        Escrow Holder shall be borne equally by Company and Contributor, and,
        except as otherwise set forth in this Article VII, each party hereto
        shall bear its own costs incurred herewith. If any non-fulfilled
        conditions also constitute a breach by Contributor of its obligations
        under this Agreement, then Company may proceed also under Section
        9.12(a) below.

                                  ARTICLE VIII

                  CONTRIBUTOR'S CONDITIONS PRECEDENT TO CLOSING

        Contributor's obligation to contribute the Property shall be conditioned
upon the fulfillment of each of the following conditions precedent:

        8.1 COMPLIANCE BY COMPANY. Company shall have complied with each and
every covenant, undertaking and agreement to be kept or performed by Company as
provided in this Agreement; and each representation and warranty made in this
Agreement by Company shall remain true and accurate in all material respects
both at the time made and on the Closing Date.

        8.2 CURRENT PRICE. The current price of Pan Pacific Retail Properties,
Inc.'s stock shall not be below Eighteen and 50/100ths Dollars ($18.50).

        8.3 DOWNREIT LLC; DISTRIBUTION OF UNITS; OPERATING AGREEMENT. The
DownREIT LLC shall have been formed on such terms as are mutually agreeable to
Contributor and Pan Pacific Retail Properties, Inc. through good faith and
diligent negotiations; and all of Pan Pacific Retail Properties, Inc.'s rights
and obligations hereunder shall have been assigned and delegated to the DownREIT
LLC.

        Concurrently with the Closing (i) Contributor shall have distributed to
Waranch the non-managing Units issued to Contributor, and the managing Units to
Gribble (ii) Gribble and Pan Pacific Retail Properties, Inc. shall have
consummated the transaction contemplated pursuant to the Related Agreement and
(iii) Waranch and Pan Pacific Retail Properties, Inc. shall have entered into an
operating agreement with respect to the DownREIT LLC on such terms as are
mutually agreeable to each party through good faith and diligent negotiations.

        8.4 NO MATERIAL ADVERSE CHANGE. Except as provided in Section 7.2 above,
there shall have been no material adverse change in the business, financial
condition or results of operations of Company. For purposes of the foregoing
sentence, the parties

                                      19.
<PAGE>   21

acknowledge that variations in the share price of Company's capital stock on the
New York Stock Exchange shall not be considered in making such determination.

        8.5 TERMINATION. If any of the foregoing conditions are neither
fulfilled nor waived by Contributor, Contributor shall have the option to
terminate this Agreement by delivering to Company and Escrow Holder written
notice of such termination; provided, however, that Contributor may not
terminate this Agreement under this Section 8.5 unless Company fails to cause
any non-fulfilled condition(s) to be satisfied within three (3) days after
written notice thereof from Contributor. If any non-fulfilled condition(s) also
constitute a breach by Company of its obligations under this Agreement,
Contributor shall have the right to proceed under Section 9.12(b) below. If
Contributor elects to terminate this Agreement, Escrow Holder, without any
further instruction from either Company or Contributor, shall pay to Contributor
the Deposit if the condition that was not satisfied is the condition set forth
in Section 8.1, or if Company fails to make the additional earnest money deposit
required by Section 4.2(b) following Company's approval or deemed approval
pursuant to Sections 7.1 and Section 7.2. Thereafter, this Agreement shall be
null and void and of no further force or effect and, except as provided in this
Section 8.5 and Sections 5.3, 5.5, 15.2 and 15.10 hereof, neither party shall
have any further rights or obligations hereunder, other than those rights and
obligations that, by their terms survive the termination of this Agreement. In
the event of such termination by Contributor, all documents deposited in Escrow
by Company or Contributor shall be returned to the depositing party, the costs
of the Title Company and Escrow Holder shall be borne equally by Company and
Contributor and each party hereto shall bear its own costs incurred herewith.

                                   ARTICLE IX

                               ESCROW AND CLOSING

        9.1 DEPOSIT WITH ESCROW HOLDER AND ESCROW INSTRUCTIONS. Escrow herein
(the "ESCROW") shall be established with Escrow Holder, at the address set forth
above. Upon execution of this Agreement, the parties shall deposit an executed
copy of this Agreement with Escrow Holder. This Agreement shall serve as the
instructions to Escrow Holder to consummate the transaction contemplated hereby.

        9.2 CLOSING.

               (a) Except as may be provided otherwise herein, the Closing shall
        occur on the Closing Date, unless the parties hereto agree in writing to
        an earlier or later date.

               (b) If either party has complied with the terms and conditions of
        this Agreement before the scheduled Closing Date and the other party is
        not in a position to close by the scheduled Closing Date (other than for
        reasons beyond such party's control), the defaulting party shall be
        deemed to be in material

                                      20.
<PAGE>   22

        breach of this Agreement. The party who has fully complied may terminate
        this Agreement and, whether or not this Agreement is terminated, Company
        may exercise all remedies available to it at law or in equity, and
        Contributor's remedies shall be limited to the provisions for liquidated
        damages set forth in Section 4.6 hereof.

        9.3 DELIVERIES BY CONTRIBUTOR. At least one (1) Business Day prior to
the Closing Date, Contributor shall deliver or cause to be delivered to Escrow
Holder the following:

               (a) the Deed, duly executed and acknowledged by Contributor and
        in recordable form;

               (b) the Assumption Documents executed by Contributor as required
        by Lender, if at all;

               (c) Contributor's Non-Foreign Affidavit, if required, in the form
        of EXHIBIT F attached hereto, duly executed and acknowledged by
        Contributor;

               (d) any other documents, or instruments called for hereunder to
        be paid, executed, or delivered by Contributor that have not previously
        been delivered by Contributor to Escrow Holder; and

               (e) such articles of incorporation, agreements or certificates of
        partnership, resolutions, authorizations, bylaws, certifications or
        other corporate, partnership or trust documents or agreements or other
        reasonable proof of authority relating to Contributor as Company or
        Escrow Holder shall reasonably require in connection with this
        transaction.

        9.4 DELIVERIES BY COMPANY. At least one Business Day prior to the
Closing Date, Company shall deliver or cause to be delivered to Escrow Holder
the following:

               (a) immediately available funds sufficient to pay Company's
        portion of the closing costs, and any other amounts payable by Company
        in order to permit Escrow Holder to close the Escrow;

               (b) the Assumption Documents executed by Company;

               (c) Units sufficient to satisfy the Exchange Consideration, and
        the Additional Consideration, if any; and

               (d) any other cash, documents or instruments called for hereunder
        to be paid, executed or delivered by Company or that are required for
        the Closing hereunder that have not been previously delivered by Company
        to Escrow Holder.

                                      21.
<PAGE>   23

        9.5 ADDITIONAL DELIVERIES BY COMPANY AND CONTRIBUTOR. At least one (1)
business day prior to the Closing Date, Contributor and Company also shall
deliver or cause to be delivered to Escrow Holder, the following documents:

               (a) the Bill of Sale, duly executed and acknowledged by
        Contributor;

               (b) the Contract Assignment, duly executed and acknowledged by
        Contributor and Company;

               (c) the Lease Assignment, duly executed and acknowledged by
        Contributor and Company and in recordable form; and

               (d) a closing statement prepared by Escrow Holder and approved by
        Company and approved by Contributor.

        9.6 OTHER INSTRUMENTS. Contributor shall execute and deliver all Tenant
Notices to Tenants concurrently with the Closing, and shall provide copies of
same for Company's review not later than two (2) days prior to the Closing Date.
Contributor and Company each shall deposit any other documents or instruments
that may be reasonably required by the other party and/or Escrow Holder, or that
are otherwise required to close the Escrow and consummate the purchase and sale
of the Property in accordance with the terms hereof.

        9.7 PRORATIONS AND APPORTIONMENTS.

               (a) All revenues from the Property and all expenses of the
        Property shall be prorated and apportioned as of 12:01 a.m., Pacific
        time, on the Closing Date (the "PRORATIONS"). Taxes shall be prorated as
        of the Closing Date, based on a 365-day year. Contributor shall be
        charged and credited for such Prorations up to the Closing Date and
        Company shall be charged and credited (or, at Contributor's option, paid
        by check for unused security or other deposits) for all of the same on
        and after the Closing Date. Prior to the Closing, Company and
        Contributor shall review and approve the Prorations. If the actual
        amounts to be prorated are not then known, or if any additional expenses
        are incurred or income received after the date the Prorations are made,
        the Prorations shall be made on the basis of the best evidence then
        available. When actual figures are later received, a cash settlement
        will be made between Contributor and Company. To the extent possible,
        Contributor shall have all metered utilities read by the applicable
        utility provider as of the Closing Date. As to each utility which is so
        read, Contributor shall have the responsibility to pay at Closing each
        bill therefore, and Company shall be responsible for all subsequent
        charges for such utilities. To the extent such utilities may not be read
        as of the Closing, such utility bills shall be prorated when the last
        bill incurred by Contributor is received. No Prorations shall be made
        for rents, license payments, receivables or accounts

                                      22.
<PAGE>   24

        ("REVENUES") delinquent as of the Closing Date, and no credit shall be
        given to Contributor for any Revenues delinquent as of the Closing Date.
        As used in the immediately preceding sentence, the term "delinquent"
        shall mean, with respect to any Revenue, that the Revenue in question
        accrued at any time prior to the then-current calendar month.
        Nevertheless, if Company collects any Revenues that were delinquent on
        or before the Closing, such Revenues shall be attributed first to the
        current Revenues and then to the portion that was delinquent on or
        before the Closing and Company shall promptly remit to Contributor the
        portion of such Revenues collected, if any, attributable to the period
        of time prior to the Closing Date; provided, however, that Contributor
        shall not be entitled to commence any legal proceeding or alternative
        proceedings seeking to evict any Tenant because of such Tenant's failure
        to pay delinquent rents or amounts claimed to be owing by Contributor.

               (b) Tenants may be obligated to pay Additional Rents. Contributor
        shall estimate a "true-up" of Additional Rents as of the Closing Date,
        and Additional Rents shall be prorated as of the Closing on the basis of
        such estimated true-up. Contributor and Company shall re-prorate
        Additional Rents (including any portions thereof that may be required to
        be refunded to Tenants) at the time that such estimated true-up is
        actually adjusted and/or reconciled. Any amounts that may be due from
        Contributor as a result of such re-prorations shall be paid by
        Contributor to Company promptly after written request therefor is
        delivered to Contributor by Company (together with evidence reasonably
        satisfactory to Contributor of the amounts due the Tenants). Any amounts
        that may be due to Contributor as a result of such re-prorations shall
        be paid by Company to Contributor promptly following such re-prorations.
        Notwithstanding the foregoing, Contributor shall have reconciled fully,
        and made all necessary adjustments with Tenants, Additional Rents for
        all prior years through 1998, prior to the Closing Date; and Contributor
        shall be responsible for reconciling with Tenants all Additional Rents
        for the period January 1, 1999 to the Closing Date within ninety (90)
        days following the Closing Date. Contributor shall be responsible for
        reimbursing to Tenants, and may collect from Tenants, as applicable, all
        Additional Rents required pursuant to such reconciliation; Contributor
        shall not be entitled to commence any legal proceeding or alternative
        proceedings seeking to evict any Tenant because of such Tenant's failure
        to pay delinquent rents or amounts claimed to be owing to Contributor.
        If Contributor is not entitled under the applicable Leases to collect
        from Tenants any underpayments in Additional Rents at the time
        Contributor completes such reconciliation, Company shall pay to
        Contributor the amount of such underpayments at the time that estimates
        are adjusted and/or reconciled in accordance with the Leases, but only
        to the extent such payments are actually made by such Tenants to
        Company. Company agrees to cooperate with Contributor in sending bills
        for such underpayments to the applicable Tenants.

                                      23.
<PAGE>   25

               (c) Contributor shall be responsible for the payment of all
        leasing commissions earned prior to the Effective Date, and Company
        shall be responsible for the payment of any leasing commissions earned
        from and after the Effective Date, regardless of when any such leasing
        commissions become due, provided that such commissions have been
        disclosed to and approved by Company prior to expiration of the
        Inspection Period. Each party to this Agreement shall indemnify the
        other party against and hold the other party harmless (using counsel
        reasonably satisfactory to such other party) from and against any and
        all damages, liabilities, costs, expenses and losses (including, but not
        limited to attorneys' fees and costs) arising out of any action for the
        collection of leasing commissions that are such party's responsibility
        pursuant to this subsection.

               (d) The provisions of this Section shall survive the Closing.

        9.8    COSTS AND EXPENSES; CREDITS.

               (a) Company and Contributor shall pay equally all costs and fees
        charged by Lender in accordance with the terms and provisions of the
        Existing Loan with respect to Company's assumption of the Existing Loan,
        including the assumption fee. Contributor shall pay for that portion of
        the premium for the Owner's Title Policy in the amount of the
        Contribution Consideration attributable to standard coverage, and
        Company shall pay the portion attributable to extended coverage.
        Contributor shall pay the cost of any city and/or county transfer taxes
        applicable to the transfer of the Property to Company, all recording
        charges for the Deed, and the cost, if any, to record any corrective
        instruments. If Company elects to obtain endorsements for the Owner's
        Title Policy, in addition to those necessary to cure title objections as
        provided for in Section 6.2, Company shall pay all the premiums for such
        additional endorsements. Company shall also pay any special sales, gross
        receipts or transaction taxes imposed on Company in connection with the
        purchase and sale of the Property. Costs and charges of the Escrow shall
        be borne equally by Contributor and Company. All other taxes, costs, and
        charges for the sale of the Property shall be paid by Contributor and/or
        Company, as the case may be, in accordance with the usual customs and
        practices in the county in which the Real Property is located.

               All costs, prorations or adjustments not known as of Closing
        shall be handled after Closing in cash or other mutually agreeable
        medium.

               (b) If at Closing the Property has greater than 8,000 square feet
        of vacant leaseable space, Contributor shall credit Company through
        Escrow an amount equal to one year's base rent and estimated triple net
        charges on all such vacancy over 8,000 square feet. The lease rate to be
        applied shall be Eleven and no/100ths Dollars ($11.00) per square foot.
        In addition, Company

                                      24.
<PAGE>   26

        shall receive a credit through Escrow at the rate of Fifteen and
        No/100ths Dollars ($15.00) per square foot for such vacancy over 8,000
        square feet to compensate Company for anticipated tenant improvements
        and commissions. If at the Closing the Property has greater than 8,000
        square feet of vacant leasable space, but Contributor, with the consent
        and approval of Company as herein provided, has entered into a binding
        Lease with a Tenant for a portion or all of such vacant space, then the
        amount to be credited Company for such leased but vacant space shall be
        based on the actual tenant improvement allowance and commission, if any,
        for which the landlord is to be responsible with respect to such
        Lease(s), and the credit for one year's base rent for such Lease(s)
        shall be limited to that portion of the first (1st) full calendar year
        from and after Closing for which such Tenant(s) is not required to pay
        base rent; provided, however, that Company shall be credited fully for
        all rent concessions applicable to such period.

               If Contributor and Company agree to proceed with the proposed
        Applebee's ground lease, Contributor shall be responsible for all costs
        associated with such leasing, including, without limitation, all site
        work, tenant improvement allowances and commissions. In addition,
        Company will receive a credit through Escrow for an amount equal to the
        monthly rent for the period of time from close of Escrow until
        Applebee's is obligated to start paying rent pursuant to its Lease. If
        Contributor proceeds with another mutually acceptable tenant at a ground
        rent higher than $65,000.00 per year, the Contribution Consideration
        will be increased by the amount of rent over $65,000.00 divided by ten
        percent (10%). The total amount of such increase, if any, to the
        Contribution Consideration shall be payable in Units in the same manner
        as provided for the Exchange Consideration. Contributor shall be
        responsible for all costs to put a tenant other than Applebee's in place
        in the same manner as above provided. If a lease is not consummated with
        Applebee's or any other tenant for this pad location, the existing pad
        building will be factored into the maximum vacancy calculation noted in
        the immediately preceding paragraph.

        9.9 INSURANCE; UTILITIES. Company acknowledges that Contributor will
cause its policies of casualty and liability insurance to be terminated with
respect to the Property as of the Closing Date. Company shall be responsible for
obtaining its own insurance as of the Closing Date and thereafter. Any deposits
for utilities made by Contributor shall be refunded to Contributor and Company
shall arrange for any required replacements therefor and Company shall be
responsible for obtaining its own utilities as of the Closing Date and
thereafter.

        9.10 CLOSE OF ESCROW. Provided that (i) Escrow Holder has received the
documents and funds described in Sections 9.3, 9.4, and 9.5 hereof; (ii) Escrow
Holder has not received prior written notice from either party to the effect
that an agreement of either party made hereunder has not been performed or to
the effect that any condition set forth herein has not been satisfied or waived;
(iii) Company has not elected to terminate its rights and obligations hereunder
pursuant to Article VII; and (iv) the Title

                                      25.
<PAGE>   27

Company has issued or is unconditionally prepared and committed to issue the
Owner's Title Policy to Company, Escrow Holder is authorized and instructed on
the Closing Date to:

               (a) cause the Deed to be recorded, in that order, in the Official
        Records of the appropriate county;

               (b) deliver the Exchange Consideration and the Additional
        Consideration, if any, in the manner specified by Contributor in
        separate instructions to Escrow Holder;

               (c) deliver the Assumption Documents to Lender or in accordance
        with Lender's instructions;

               (d) deliver to Company an original of each of the Bill of Sale,
        the Lease Assignment and the Contract Assignment, (1) as-recorded
        conformed copy of the Deed, and a copy of the fully executed Assumption
        Documents; and deliver to Contributor a copy of the fully executed Bill
        and Sale, the Lease Assignment, the Contract Assignment, and (1)
        as-recorded conformed copy of the Deed, and a copy of the fully executed
        Assumption Documents; and

               (e) deliver Contributor's Non-Foreign Affidavit to Company.

        9.11 NOTIFICATION; CLOSING STATEMENTS. If Escrow Holder cannot comply
with the instructions herein (or as may be provided later), Escrow Holder is not
authorized to cause the recording of any of the Documents. If Escrow Holder is
unable to cause the recording, Escrow Holder shall notify the parties without
delay. Immediately after the Closing, Escrow Holder shall deliver to Company and
Contributor, respectively, at their addresses listed in Section 15.1 hereof, a
true, correct and complete copy of the Contributor's and Company's Closing
Statements, in forms customarily prepared by Escrow Holder, as well as all other
instruments and documents to be delivered to Company and Contributor.

        9.12   DEFAULT AND REMEDIES.

                                      26.
<PAGE>   28

               (a) If prior to or at Closing, Contributor shall have failed to
        perform in any material respects any of the covenants and/or agreements
        contained herein which are to be performed by Contributor, or if any
        warranty or representation made by Contributor herein is not true and
        correct in all material respects, Company may seek specific performance
        of this Agreement or may bring suit for damages against Contributor;
        provided, however, that any suit for damages brought by Company shall be
        limited to recovery of Company's actual out of pocket costs and expenses
        incurred by Company in pursuit of the transactions contemplated hereby.
        Any such suit for specific performance or damages must be filed within
        the earlier of (i) ninety (90) days from and after the date Company has
        actual knowledge of any material misrepresentation or failure of
        warranty and (ii) one (1) year following Contributor's breach or shall
        be deemed waived for all purposes. Notwithstanding the foregoing, absent
        independent arrangements between Company and Contributor, Company shall
        not be entitled to seek redress against Contributor following the
        Closing for breaches of representations and warranties that occurred
        prior to or at Closing, if such breach(es) or the facts underlying such
        breach(es) were known at the time of Closing by Company.

               With respect to any breach of a representation or warranty of and
        by Contributor which is not known by Company at Closing, Company shall
        be entitled, in addition to the foregoing remedies, to be indemnified
        and held harmless from and against the aggregate of all expenses,
        losses, costs, deficiencies, liabilities and damages (including, without
        limitation, related counsel and paralegal fees and expenses) incurred by
        Company and resulting from or arising out of such breach of a
        representation or warranty made by Contributor in or pursuant to this
        Agreement.

               (b) If prior to or at Closing, Company shall have failed to
        perform in any material respect any of the covenants and/or agreements
        contained herein which are to be performed by Company or if any warranty
        or representation made by Company herein is not true and correct in all
        material respects, then Contributor shall be entitled, after providing
        Company with written notice thereof and the same remaining uncured for
        at least three (3) days thereafter, to exercise the remedies set forth
        in Section 4.6, which shall be Contributor's sole and exclusive remedies
        in such event.

                                    ARTICLE X

                    REPRESENTATIONS, WARRANTIES AND COVENANTS

        10.1 COMPANY'S REPRESENTATIONS AND WARRANTIES. Company represents and
warrants to Contributor as follows:

               (a) Pan Pacific Retail Properties, Inc. is a corporation duly
        organized, validly existing, and in good standing under the laws of the
        State of Maryland,

                                      27.
<PAGE>   29

        with full right, power, and authority to take title to the Property, and
        to enter into and otherwise perform and comply with the terms of this
        Agreement;

               (b) As of Company's assignment and delegation of its rights and
        remedies hereunder, the DownREIT LLC will be a limited liability company
        duly organized, validly existing, and in good standing under the laws of
        the State of Nevada, and qualified to do business in the State of
        California, with full right, power and authority to take title to the
        Property, and to enter into and otherwise perform and comply with the
        terms of this Agreement;

               (c) This Agreement and all documents executed by Company that are
        to be delivered to Contributor at the Closing are, or at the time of
        Closing will be, duly authorized, executed and delivered by Company; and

               (d) This Agreement and all documents executed by Company that are
        to be delivered to Contributor at the Closing are, or at the Closing
        will be, legal, valid and binding obligations of Company, and do not,
        and at the time of Closing will not, violate any provisions of any
        agreement or judicial order to which Company is a party or to which
        Company is subject.

        10.2 CONTRIBUTOR'S REPRESENTATIONS AND WARRANTIES. Contributor
represents and warrants to Company as follows:

               (a) Contributor is a limited partnership duly organized, validly
        existing, and in good standing under the laws of the State of
        California, with full right, power, and authority to convey to Company
        all of Contributor's right, title and interest in and to the Property,
        and to enter into and otherwise perform and comply with the terms of
        this Agreement.

               (b) This Agreement and all documents executed by Contributor that
        are to be delivered to Company at the Closing are, or at the time of
        Closing will be, duly authorized, executed and delivered by Contributor.

               (c) This Agreement and all documents executed by Contributor that
        are to be delivered to Company at Closing are, or at the time of Closing
        will be, legal, valid and binding obligations of Contributor, and do
        not, and at the time of Closing will not, violate any provisions of any
        agreement or judicial order to which Contributor is a party or to which
        Contributor or the Property is subject.

               (d) To the best of Contributor's knowledge, other than the
        Property, there are no items, tangible or intangible, real or personal,
        owned by the Contributor or any affiliate of Contributor as of now or at
        any time heretofore and used in conjunction with the Property or any
        portion thereof.

                                      28.
<PAGE>   30

               (e) Contributor has received no notice that the Property, and the
        existing uses of the Property, are not in compliance with all applicable
        laws, ordinances, rules, regulations, and requirements of all
        governmental authorities having jurisdiction thereof, including, without
        limitation thereto, those pertaining to zoning, land use, subdivision,
        building, safety, fire and health.

               (f) Contributor has not received any notice that there is any
        action, suit, proceeding or investigation pending, nor to Contributor's
        knowledge is any of the foregoing threatened, before any agency, court,
        or other governmental authority which relates to the Contributor or the
        ownership, maintenance, or operation of the Property.

               (g) Contributor has not received any notice that there is any
        condemnation or eminent domain proceeding affecting the Property or any
        portion thereof currently pending nor, to Contributor's knowledge, is
        any such proceeding threatened.

               (h) Contributor has received no notice of any failure of the
        Contributor to comply with any applicable governmental requirements in
        respect of the use, occupation and construction of the Property,
        including but not limited to environmental, zoning, platting and other
        land use requirements which have not been heretofore corrected to the
        satisfaction of the appropriate governmental authority, and Contributor
        has received no notice of and has no knowledge of any violations or
        investigations relating to any such governmental requirement.

               (i) Contributor has received no notice of any default or breach
        by the Contributor under any covenants, conditions, restrictions,
        rights-of-way, or easements which may effect the Contributor in respect
        to the Property or may effect the Property or any portion thereof, and
        no such default or breach now exists.

               (j) To the best of Contributor's knowledge, there has been no
        material default or any claim of material default, and no event has
        occurred which with notice or lapse of time or both would constitute a
        material default, under any Lease, and to Contributor's knowledge no
        Tenant has asserted or has any defense, set off, or claim with regard to
        his tenancy pursuant to his Lease, any law or otherwise.

               (k) To Contributor's actual knowledge, the heating, ventilation,
        air conditioning, mechanical, electrical and other systems and equipment
        forming a part of or used in connection with the Property are operative
        and in good working condition, normal wear and tear excepted, and in
        compliance with all applicable laws, ordinances, regulations and
        requirements.

                                      29.
<PAGE>   31

               (l) Contributor is not a foreign person as defined in Section
        1445(f)(3) of the Internal Revenue Code of 1986, as amended.

               (m) Contributor has not received any notice or complaint from any
        authority or person that the Property does not comply with all
        applicable requirements of the Equal Opportunity for Individuals Act
        (ADA), 42 U.S.C. 12101 and the regulations promulgated and set forth at
        28 CFR 36.401 et seq.

               (n) To the best of Contributor's knowledge, the survey,
        mechanical and structural plans and specifications, soils reports,
        certificates of occupancy, warranties, operating statements, income and
        expense reports and all other books and records relating to or affecting
        the Property, and all other contracts or documents delivered to Company
        pursuant to this Agreement or in connection with the execution hereof
        are and at the time of Closing will be true and correct copies, are and
        at the time of Closing will be in full force and effect and contain no
        material inaccuracies or misstatements of fact, and all such documents
        in Contributor's possession or control relating to or affecting the
        Property have been or will be delivered to Company pursuant to this
        Agreement.

               (o) To the best of Contributor's knowledge, no representation,
        warranty or statement of Contributor in this Agreement or in any
        certificate, exhibit or schedule furnished or to be furnished to Company
        pursuant to this Agreement or in connection with the transactions
        contemplated hereby contains or will contain any untrue statement of a
        material fact or omits or will omit to state a material fact necessary
        to make the statements or facts contained therein misleading.

               (p) The copies of the Leases delivered to Company are true and
        correct copies of all such Leases and are in full force and effect and
        there are no other agreements, written or oral, with respect to the
        tenancies.

               (q) To the best of Contributor's knowledge, the copies of the
        Contracts and all Information previously delivered to Company are true
        and correct copies of all such Contracts and Information and are in full
        force and effect. There are no unpaid amounts due and owing by
        Contributor under any such Contract, except for amounts for which
        Company is to receive full credit through proration at Closing. There
        are no other service or maintenance contracts relating to the Property.

               (r) Except as disclosed in writing to Company, there are no
        commissions, finder's fees or other compensation owing or which may
        become owing to any broker or any other person or entity with respect to
        any Lease or occupancy agreement including, without limitation, any such
        compensation with respect to any future renewals, extensions or
        expansions thereof.

                                      30.
<PAGE>   32

               (s) Contributor is not party to, or otherwise bound by, any
        collective bargaining agreement or multi-employer pension fund covering
        employees who service the Property.

               (t) To the best of Contributor's knowledge, there is no current
        labor dispute with any maintenance or other personnel or employees of
        Contributor or any contracts with respect to the Property which could
        adversely affect the use, operation or value of the Property.

               (u) Contributor knows of no facts nor has Contributor failed to
        disclose to Company any fact which would prevent Company from using and
        operating the Property after Closing in the manner in which the Property
        has been used, leased and operated prior to the date hereof.

               (v) Contributor has not committed nor obligated itself in any
        manner whatsoever to sell the Property to any party other than Company.
        Contributor has not hypothecated or assigned any rents or income from
        the Property in any manner, other than pursuant to any existing mortgage
        financing secured by the Property as of the Effective Date.

               (w) No governmental authority has notified Contributor of the
        need to take corrective action regarding elimination or control of
        Hazardous Materials on or about the Property. Except in accordance with
        applicable laws, neither Contributor nor, to the best of Contributor's
        knowledge, any other tenant, occupant or user of the Property has used,
        generated, manufactured, installed, released, discharged, stored or
        disposed of any Hazardous Materials on, under, in or about the Property,
        or transported any Hazardous Materials to or from the Property, and
        there are no Hazardous Materials or underground storage tanks located
        on, under, in or about the Property.

               (x) Contributor shall hold as confidential all information
        concerning Company or the transaction contemplated hereby disclosed to
        Contributor in connection with said transaction; and Contributor shall
        not, prior to Closing, release any such information to third parties
        without Company's prior written consent, except pursuant to a court
        order requiring such release or as otherwise may be required by law.

        10.3 INVESTMENT REPRESENTATIONS OF CONTRIBUTOR, WARANCH AND GRIBBLE.
Each of Contributor, Waranch and Gribble hereby acknowledges its understanding
that the Units to be acquired pursuant to this Agreement are intended to be
exempt from registration under the Securities Act of 1933, as amended and the
rules and regulations in effect thereunder (the "SECURITIES ACT"). In
furtherance thereof, Contributor, and each of Waranch and Gribble in
contemplation of a distribution of Units to each of them by Contributor, hereby
represents and warrants to the Company as follows:

                                      31.
<PAGE>   33

               (a) Except as herein provided, each is acquiring the Units solely
        for its own account for the purpose of investment and not as a nominee
        or agent for any other person and not with a view to, or with any
        intention of, a distribution or resale thereof, in whole or in part, in
        violation of the Securities Act or state securities or "blue sky" laws.
        Waranch agrees and acknowledges that, except for the exercise of
        redemption rights pursuant to the DownREIT operating agreement, and
        Gribble agrees and acknowledges that, except for the sale contemplated
        to Company pursuant to the Related Agreement, neither will directly or
        indirectly, offer, sell, transfer, assign, pledge, hypothecate or
        otherwise dispose of any of the Units it is issued pursuant to this
        Agreement in the absence of an effective registration statement under
        the Securities Act and qualification or other compliance under
        applicable "blue sky" or state securities laws unless it delivers to the
        Company an opinion of a lawyer experienced in securities matters and
        reasonably satisfactory to the Company, to the effect that the proposed
        sale, transfer, assignment, pledge, hypothecation or other disposition
        may be affected without registration under the Securities Act and under
        applicable "blue sky" or state securities laws. Each understands that
        the Company is under no obligation to register the sale or other
        transfer of the Units.

               (b) Each is knowledgeable, sophisticated and experienced in
        business and financial matters and fully understands the limitations on
        the transfer of restricted securities imposed by the Federal securities
        laws and as described herein. Each is able to bear the economic risk of
        holding the Units for an indefinite period and is able to afford the
        complete loss of its investment in the Units; each has received and
        reviewed all information and documents about or pertaining to the
        Company and the issuance of the Units as each deems necessary or
        desirable, and has been given the opportunity to obtain any additional
        information or documents and to ask questions and receive answers about
        such information and documents, the Company, the business and prospects
        of the Company and the Units which each deems necessary or desirable to
        evaluate the merits and risks related to its investments in the Units;
        and each understands and has taken cognizance of all risk factors
        related to the purchase of the Units.

               (c) Each is an "accredited investor" as such term is defined in
        Rule 501 or Regulation D promulgated under the Securities Act.

               (d) Each certificate representing the Units shall bear the
        following legend:

               "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
               REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
               "ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
               TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
               DISPOSED OF IN THE ABSENCE

                                      32.
<PAGE>   34

               OF SUCH REGISTRATION UNLESS THE COMPANY HAS BEEN FURNISHED WITH
               AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO COMPANY, IN FORM
               AND SUBSTANCE REASONABLY SATISFACTORY TO COMPANY, TO THE EFFECT
               THAT SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR
               OTHER DISPOSITION MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE
               ACT AND UNDER APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS. IN
               ADDITION, THE SECURITIES EVIDENCED BY THIS CERTIFICATE MAY BE
               TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
               DISPOSED OF ONLY IN COMPLIANCE WITH THE RESTRICTIONS ON TRANSFER
               SET FORTH IN THE DownREIT OPERATING AGREEMENT, AS IT MAY BE
               AMENDED AND RESTATED FROM TIME TO TIME (A COPY OF WHICH MAY BE
               OBTAINED FROM COMPANY'S MANAGING MEMBERS AT ITS PRINCIPAL
               EXECUTIVE OFFICES."

               (e) In making the investment in the Units, each has and will rely
        solely upon the advice of its personal tax advisers with respect to the
        federal and/or state tax aspects of an investment in the Units and
        neither the Company nor its managing member, nor any officer, director
        or other person representing the Company, its managing member, or any of
        its affiliates, has made any representation regarding the tax
        consequences of the investments in the Units. The Company shall have no
        responsibility for any adverse tax consequences imposed on any of them.

               (f) Restrictions on and Information Regarding Beneficial
        Ownership of LLC Units; Publicly Traded Partnership Representation.

                      (i) Notwithstanding anything to the contrary contained in
               this Agreement or the DownREIT operating agreement, without the
               consent of the DownREIT LLC, which consent may be given or
               withheld in the DownREIT LLC's sole and absolute discretion, in
               no event shall any of them or any transferees or prospective
               transferees of any of them own or transfer Units such that the
               number of such holders (or such prospective holders) of Units
               would, in the aggregate, exceed thirty-five (35) (including as
               holders any person (a "BENEFICIAL OWNER") owning an interest in a
               partnership, a limited liability company, a grantor trust, or an
               S corporation (a "FLOW-THROUGH ENTITY"), that would own, directly
               or through other Flow-Through Entities, an interest in the
               DownREIT LLC where substantially all the value of the Beneficial
               Owner's interest in the Flow-Through Entity would be attributable
               to the Flow-Through Entity's interest (direct or indirect) in the
               DownREIT LLC (a "SPECIAL PURPOSE FLOW-THROUGH ENTITY"), and
               treating Contributor as a Special Purpose Flow-Through Entity for
               purposes of this paragraph).

                                      33.
<PAGE>   35

                      (ii) From the date of this Agreement until the Closing,
               and then so long as any recipient of Units (each, a "HOLDER" and
               collectively, the "UNIT HOLDERS") who is not a natural person
               holds any Units, such Unit Holder shall notify the DownREIT LLC
               in writing promptly upon any change in the identity or number of
               its direct or indirect Partners (as defined below) as identified
               pursuant to this Agreement, and shall provide such information as
               the DownREIT LLC may reasonably request with respect to any such
               change. Each Unit Holder shall use its best efforts to secure the
               compliance of any Flow-Through Entities that hold direct or
               indirect interests in such Unit Holder with the requirements of
               this Section as if such requirements applied directly to such
               entities. For purposes of this Agreement, the term "Partners"
               means, collectively, with respect to an entity, the holders of
               all beneficial or other direct or indirect ownership interests in
               such entity, including, without limitation, all partners,
               members, and beneficiaries and, to the extent any such partner,
               member, or beneficiary is not a natural person, the holders of
               all beneficial other direct or indirect ownership interests in
               such partner, member, or beneficiary. Each Unit Holder
               acknowledges that the provisions of this Section are imposed to
               aid the DownREIT LLC in avoiding taxation as a "publicly traded
               partnership" for federal income tax purposes, agrees that
               monetary damages may be insufficient to remedy the potential harm
               caused by any breach of the provisions of this Section, and
               agrees that injunctive relief, including specific performance or
               other equitable remedy would be an appropriate remedy. The
               provisions of this Section shall survive the Closing.

                      (iii) Contributor represents and warrants to the DownREIT
               LLC that it is not and has never been a "publicly traded
               partnership" (as such term is defined in Section 469(k)(2) or
               Section 7704(b) of the Internal Revenue Code of 1986, as
               amended).

No examination or investigation of the Property by or on behalf of the Company
prior to the Closing shall in any way modify, affect, or diminish Contributor's
obligation under the representations, warranties, covenants, and agreements
contained in this Agreement.

        10.4 CONTINUATION AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties by the respective parties contained in this
Article 10 are intended to and shall remain true and correct as of the time of
the Closing, shall be deemed to be material, and shall survive the execution and
delivery of this Agreement, the delivery of the Deed and transfer of title to
the Property for a period of one (1) year following the Closing Date.

                                      34.
<PAGE>   36

                                   ARTICLE XI

                                   POSSESSION

        Possession of the Property shall be delivered to Company immediately
following the Closing, subject to the rights of Tenants.

                                   ARTICLE XII

                            OPERATION OF THE PROPERTY

        During the Escrow Period, Contributor shall not accept any payment of
rent (except as a security deposit) or other charges from any tenant of the
Property applicable to a period exceeding one (1) month in advance, nor apply
any security deposit to rent due from any tenant of the Property without in each
case obtaining Company's prior written consent thereto (which consent shall not
be unreasonably withheld or delayed by Company). In addition to the foregoing,
Contributor: (i) shall manage, maintain, operate, and service the Property
consistent with standards in the industry for the first class operation of
similar projects of comparable quality in the same area as the Property is
located, maintaining present services; (ii) shall keep the Property and every
portion thereof in reasonably good working order and repair; (iii) shall
maintain a sufficient inventory of supplies, materials, equipment and other
personal property for the proper management, maintenance, operation and
servicing of the Property; and (iv) shall not, except with Company's prior
written consent (which consent shall not be unreasonably withheld or delayed by
Company), approve, consent to, or otherwise permit any material change in the
operations of the Property during the Escrow Period, including, without
limitation:

        (a) any material alterations to the Improvements except as may be
necessary in order to perform ordinary, scheduled maintenance;

        (b) cancellation of or material reduction in the amount or scope of
coverage under any insurance currently maintained with respect to the Property;

        (c) cancellation or surrender of any existing Permit; and

        (d) any other material variation from Contributor's ordinary course of
business in connection with the Property.

                                  ARTICLE XIII

                  LOSS BY FIRE OR OTHER CASUALTY; CONDEMNATION

        13.1 DAMAGE OR DESTRUCTION.

                                      35.
<PAGE>   37

               (a) Before the Closing, risk of loss with regard to the Property
        shall be borne by Contributor. If, before the Closing, the Improvements
        or the Personal Property are destroyed or materially damaged, Company's
        rights and obligations with respect to the Property shall be as follows:

                      (i) if with respect to the Property the destruction or
               damage involves a diminution in value equal to or less than One
               Hundred Thousand and No/100ths Dollars ($100,000.00) ("DIMINUTION
               THRESHOLD"), Company shall be obligated to proceed to close the
               transaction (subject to satisfaction of the other provisions
               hereof) and, if, but only if, Escrow actually closes, Company
               shall receive a credit against the Contribution Consideration
               equal to the lesser of (A) the cost to repair the damage or
               destruction and (B) the amount of the deductible under
               Contributor's casualty insurance policy; or

                      (ii) if the destruction or damage involves a diminution in
               value of more than the Diminution Threshold, Company shall have
               the option (which must be exercised by Company within fifteen
               (15) calendar days after Company's receipt of written notice from
               Contributor advising of such destruction or damage), to terminate
               this Agreement or proceed with the Closing. If Company elects to
               proceed with Closing, Company shall receive a credit against the
               Contribution Consideration equal to the lesser of (A) the cost to
               repair the damage or destruction and (B) the amount of the
               deductible under Contributor's casualty insurance policy.

               (b) If Company and Contributor cannot agree as to the diminution
        in value, then such diminution in value shall be determined by
        subtracting from the Contribution Consideration the fair market value of
        the Property after the damage, as determined by an M.A.I. appraiser
        appointed by two (2) other M.A.I. appraisers nominated one (1) each by
        Contributor and Company. The expense of the appraiser shall be borne
        equally by Company and Contributor.

               (c) If Company elects to terminate this Agreement under
        subsection (a)(ii) above, this Agreement shall become null and void and
        of no further force or effect as to all unperformed rights and
        obligations of the parties and, except as provided in Sections 5.3, 5.5,
        15.2 and 15.10 hereof, neither Company nor Contributor shall have any
        further rights, duties, liabilities or obligations to the other by
        reason thereof, other than those rights and obligations that, by their
        terms, survive termination of this Agreement. In the event of such
        termination, the costs of the Title Company and Escrow Holder shall be
        borne equally by Company and Contributor. Also, each party shall bear
        its own costs incurred hereunder.

        13.2   CONDEMNATION.

                                      36.
<PAGE>   38

               (a) If, before the Closing, all of the Property shall be taken by
        condemnation or eminent domain, this Agreement shall become null and
        void and of no further force or effect as to all unperformed rights and
        obligations of the parties and, except as provided in Sections 5.3, 5.5,
        15.2 and 15.10 hereof, neither Company nor Contributor shall have any
        further rights, duties, liabilities or obligations to the other by
        reason hereof, other than those rights and obligations that, by their
        terms, survive the termination of this Agreement. In the event of such
        termination, the costs of the Title Company and Escrow Holder shall be
        borne equally by Company and Contributor. Also, each party shall bear
        its own costs incurred hereunder.

               (b) If, before the Closing, (i) less than all of the Property
        shall be taken by condemnation or eminent domain, (ii) there is any
        taking of land lying in the bed of any street, road, highway or avenue,
        open or proposed, in front of or adjoining all or any part of the Land,
        or (iii) there is any change of grade of such street, road, highway or
        avenue, provided such taken or change of grade involves a diminution in
        value of more than the Diminution Threshold, then Company, at Company's
        option, may terminate this Agreement as to that portion of the Property
        attributable to the affected Shopping Center and proceed with the
        Closing as to the remainder of the Property, or to terminate this
        Agreement as to all of the Property. If Company elects to terminate this
        Agreement under this subsection (b), this Agreement shall become null
        and void and of no further force or effect and, except as provided in
        Sections 5.3, 5.5, 15.2 and 15.10 hereof, neither Company nor
        Contributor shall have any further rights, duties, liabilities or
        obligations to the other by reason hereof, other than those rights and
        obligations that, by their terms, survive the termination of this
        Agreement. In the event of such termination, the costs of the Title
        Company and Escrow Holder shall be borne equally by Company and
        Contributor. Also, each party shall bear its own costs incurred
        hereunder.

               (c) If Company and Contributor cannot agree as to the diminution
        in value, then such diminution in value shall be determined by
        subtracting from the Contribution Consideration the fair market value of
        the Property after the taking, as determined by an M.A.I. appraiser
        appointed by two (2) other M.A.I. appraisers nominated one (1) each by
        Contributor and Company. The expense of the appraiser shall be borne
        equally by Company and Contributor.

               (d) If this Agreement is not terminated in accordance with the
        foregoing, or if such taking involves a diminution in value equal to or
        less than the Diminution Threshold, Company shall accept title to the
        Property subject to such taking. In such event, Company shall receive a
        credit against the Contribution Consideration in amount of the
        diminution in value, and the award for such taking shall be paid to
        Contributor.

                                      37.
<PAGE>   39

                                   ARTICLE XIV

                                 AS-IS PURCHASE

        Upon entering into this Agreement, Company represents and warrants that
it has performed or will perform a full range of investigation and inspection of
the Property, and will or has satisfied itself as to the condition of the
Property and its suitability for the purposes intended by Company. Company
acknowledges and agrees that Contributor has made no representations or
warranties with respect to the toxic or hazardous materials or other condition
of the Property whatsoever, express or implied, except as expressly set forth
otherwise in Section 10.2 above, and, otherwise, that Company's purchase of the
Property is "As Is" in its present state and condition, and that any and all
improvements and utilities required within the perimeter of the Property and any
and all improvements, utilities, and utility extensions outside of the perimeter
of the Property required to serve the Property, and all costs and expenses
thereof, shall be the sole responsibility of Company. Except as above provided,
in purchasing the Property Company is relying solely upon its own inspection and
investigation of the Property, and not upon any representation, warranty,
statement, study, report, description, guideline, or other information or
materials made or furnished by Contributor or any of its officers, employees,
agents, brokers, attorneys, or representatives, whether written or oral, express
or implied, of any nature whatsoever.

                                   ARTICLE XV

                                  MISCELLANEOUS

        15.1 NOTICES. Any communication, notice or demand of any kind whatsoever
that either party may be required or may desire to give to or serve upon the
other shall be in writing, addressed to the parties at the addresses set forth
below, and delivered by personal service, by Federal Express or other reputable
overnight delivery service, or by facsimile transmission:

               If to Contributor:   Rancho Las Palmas Center Associates
                                    c/o Bend Properties, Inc.
                                    1920 Main Street, Suite 150
                                    Irvine, California 92614

                                    Attn:   Stan Gribble

                                    Telephone No.: (949) 261-6464
                                    Facsimile No.: (949) 261-6331

                                      38.
<PAGE>   40

               With a copy to:      Solomon, Ward, Seidenwurm & Smith, LLP
                                    401 B Street, Suite 1200
                                    San Diego, California 92101

                                    Attn:   Robert F. LaScala, Esq.

                                    Telephone No.: (619) 231-0303
                                    Facsimile No.: (619) 231-1755

               If to Company:       Pan Pacific Retail Properties, Inc.
                                    1631-B South Melrose Drive
                                    Vista, California 92083

                                    Attention:     Stuart Tanz

                                    Telephone No.: (760) 727-1002
                                    Facsimile No.: (760) 727-1430

               With a copy to:      Hale Lane Peek Dennison Howard and Anderson
                                    100 West Liberty Street, 10th Floor
                                    Reno, Nevada 89501

                                    Attention:     Dave Davis, Esq.

                                    Telephone No.: (775) 327-3000
                                    Facsimile No.: (775) 786-6179

        Any such notice shall be deemed delivered as follows: (a) if personally
delivered, the date of delivery to the address of the person to receive such
notice; (b) if sent by Federal Express or other reputable overnight courier
service, the date of delivery to the address of the person to receive such
notice; or (c) if sent by facsimile transmission, on the Business Day
transmitted to the person to receive such notice if sent by 5:00 p.m.,Pacific
time, on such Business Day, and the next Business Day if sent after 5:00 p.m.,
Pacific time, or on a day other than a Business Day. Any notice sent by
facsimile transmission must be confirmed by sending by Federal Express or other
reputable overnight delivery service a copy of the notice sent by facsimile
transmission. Any party may change its address for notice by written notice
given to the other at least five (5) calendar days before the effective date of
such change in the manner provided in this Section 15.1.

                                      39.
<PAGE>   41

        15.2 BROKERS AND FINDERS. In the event of a claim for broker's fees,
finder's fees, commissions or other similar compensation in connection herewith:
(i) Company, if such claim is based upon any agreement alleged to have been made
by Company, shall indemnify, defend (using counsel reasonably satisfactory to
Contributor) and hold Contributor harmless from and against any and all damages,
liabilities, costs, expenses and losses (including, without limitation,
attorneys' fees and costs) that Contributor sustains or incurs by reason of such
claim; and (ii) Contributor, if such claim is based upon any agreement alleged
to have been made by Contributor, shall indemnify, defend (using counsel
reasonably satisfactory to Company) and hold Company harmless from and against
any and all damages, liabilities, costs, expenses and losses (including, without
limitation, attorneys' fees and costs) that Company sustains or incurs by reason
of such claim. The provisions of this subsection shall survive the termination
of this Agreement or the Closing.

        15.3 SUCCESSORS AND ASSIGNS. Immediately upon the formation of the
DownREIT LLC, Company shall assign and delegate its rights and obligations
hereunder to the DownREIT LLC, and upon such assignment and delegation, the
DownREIT LLC shall be deemed the Company hereunder for all purposes. Other than
such assignment, neither Contributor nor Company may assign its rights hereunder
without the prior written consent of the other party, which consent may be
withheld in such party's sole and absolute discretion; and any attempted or
purported assignment in contravention of the terms and provisions of this
Section 15.3 shall be null and void. This Agreement shall be binding upon, and
inure to the benefit of, the parties hereto and their respective heirs,
administrators and permitted successors and assigns.

        15.4 AMENDMENTS. This Agreement may be amended or modified only by a
written instrument executed by both parties.

        15.5 INTERPRETATION. Words used in the singular shall include the
plural, and vice-versa, and any gender shall be deemed to include the other. The
captions and headings of the Articles and Sections of this Agreement are for
convenience of reference only, and shall not be deemed to define or limit the
provisions hereof. Further, each party hereby acknowledges that such party and
its counsel, after negotiation and consultation, have reviewed and revised this
Agreement. As such, the terms of this Agreement shall be fairly construed and
the usual rule of construction, to the effect that any ambiguities herein should
be resolved against the drafting party, shall not be employed in the
interpretation of this Agreement or any amendments, modifications or exhibits
hereto or thereto.

        15.6 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.

        15.7 MERGER OF PRIOR AGREEMENTS. This Agreement constitutes the entire
understanding of the parties with respect to the subject matter hereof and
supersedes

                                      40.
<PAGE>   42

all prior and contemporaneous oral or written representations, warranties,
statements, documents, understandings and agreements with respect thereto.

        15.8 ATTORNEYS' FEES AND COSTS. If either Company or Contributor brings
any suit or other proceeding with respect to the subject mater or the
enforcement of this Agreement, the prevailing party (as determined by the court,
agency or other authority before which such suit or proceeding is commenced), in
addition to such other relief as may be awarded, shall be entitled to recover
reasonable attorneys' fees, expenses and costs of investigation actually
incurred. The foregoing includes, without limitation, attorneys' fees, expenses
and costs of investigation incurred in appellate proceedings, costs incurred in
establishing the right to indemnification, or in any action or participation in,
or in connection with, any case or proceeding under Chapter 7, 11 or 13 of the
Bankruptcy Code, 11 United States Code Section 101 et seq., or any successor
statutes.

        15.9 TIME OF ESSENCE. Time is of the essence of this Agreement.

        15.10 CONFIDENTIALITY. Company and Contributor agree that, to the extent
reasonably practical, they shall keep the contents of this Agreement and the
contents of any environmental report prepared by or for Company in connection
with this Agreement confidential and that no publicity or press release to the
general public or otherwise with respect to this transaction shall be made by
either party without the prior written consent of the other party (which consent
may be given or denied in the other party's sole and absolute discretion),
except that Company is hereby authorized to prepare and issue a press release to
the general public announcing its purchase of the Property at the Closing.
Otherwise, the confidentiality provisions of this Section 15.10 shall survive
the Closing.

        15.11 NO WAIVER. No waiver of any of the provisions of this Agreement
shall be deemed, or shall constitute, a waiver of any other provision, whether
or not similar, nor shall any waiver constitute a continuing waiver. No waiver
shall be binding unless executed in writing by the party make the waiver.

        15.12 FURTHER ACTS. Each party, at the request of the other, shall
execute, acknowledge (if appropriate) and deliver whatever additional documents,
and do such other additional acts, as may be reasonably required in order to
accomplish the intent and purposes of this Agreement.

        15.13 EXHIBITS. Exhibits A through H, inclusive, and Schedule 1 are
attached hereto and incorporated herein by reference.

        15.14 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original, but all
of which, when taken together, shall constitute one and the same instrument,
with the same effect as if all of the parties to this Agreement had executed the
same counterpart. Any

                                      41.
<PAGE>   43

signature page of any counterpart of this Agreement may be detached and
reattached to any other counterpart of this Agreement.

        15.15 NO INTENT TO BENEFIT THIRD PARTIES. Contributor and Company do not
intend by any provision of this Agreement to confer any right, remedy or benefit
upon any third party, and no third party shall be entitled to enforce, or
otherwise shall acquire any right, remedy or benefit by reason of, any provision
of this Agreement.

        15.16 PERFORMANCE DUE ON DAY OTHER THAN BUSINESS DAY. If the time period
for the performance of any act called for under this Agreement expires on a
Saturday, Sunday or Holiday, the act in question may be performed on the next
succeeding Business Day.

        15.17 JOINT AND SEVERAL OBLIGATIONS. If Company or Contributor is
comprised of more than one person or entity, then all persons or entities that
comprise Company and Contributor, as applicable, shall be jointly and severally
liable for all the covenants, agreements, and obligations of Company or
Contributor, as the case may be, contained in this Agreement.

        15.18 SURVIVAL OF OBLIGATIONS. In addition to terms which by their
express provision are to survive the Closing, all other terms and provisions
which by their nature are to be performed or be applicable after the Closing
shall survive the Closing.

                                      42.
<PAGE>   44

        15.19 AUDIT RESPONSIBILITIES. From time to time, both before and after
Closing, Company may be engaged in financing and other transactions which will
require that both Company and the operation of the Property be audited as to
then current and past operations of the Property, including periods of time
during which Contributor owned the Property. As a material inducement for
Company to enter into this Agreement, Contributor agrees that upon written
request of Company, Contributor shall render its timely and cooperative efforts,
at no additional cost to Contributor, to any such auditors in delivering such
responses to inquiries and information as is within the knowledge or records of
Contributor with respect to the operations of the Property or which is within
the control or reasonable ability of Contributor to obtain, including, without
limitation, operating statements and other financial information relevant to the
Property and its operations. In addition to the foregoing, Contributor shall
sign and deliver to any such auditor, such auditor's standard representation
letter with respect to the foregoing matters, revised by Contributor only to the
extent necessary to make same true and correct as to the matters represented
therein by Contributor.

        IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the dates written below.

                                        "Contributor"

                                        RANCHO LAS PALMAS CENTER ASSOCIATES,
                                        A CALIFORNIA LIMITED PARTNERSHIP

                                        By: RLP ASSOCIATES, INC.
                                        Its: GENERAL PARTNER

                                        /s/ STANLEY W. GRIBBLE
                                        ---------------------------------------
                                        By:   STANLEY W. GRIBBLE
                                        Its:  PRESIDENT

                                        "Company"

                                        PAN PACIFIC RETAIL PROPERTIES, INC.,
                                        A MARYLAND CORPORATION

                                        /s/ STUART A. TANZ
                                        ----------------------------------------
                                        By:  STUART A. TANZ
                                        Its: PRESIDENT & CHIEF EXECUTIVE OFFICER

                                      43.
<PAGE>   45

                        ACCEPTANCE OF ESCROW INSTRUCTIONS

        The undersigned, as Escrow Holder in connection with the purchase and
sale of the Property, hereby acknowledges the terms and conditions of the escrow
instructions set forth in this Agreement and agrees to perform its obligations
in connection therewith.

                                        "ESCROW HOLDER"

                                        By: /s/ THERESA M. KILMER
                                            -----------------------------------

                                        Print Name: Theresa M. Kilmer
                                                    ---------------------------

                                        Print Title:
                                                     --------------------------

                                      44.

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