Building Quality For A Lifetime

OPERATING AGREEMENT
OF WILLIAMS REAL ESTATE OPPORTUNITY FUND I, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY

OPERATING AGREEMENT OF WILLIAMS REAL ESTATE OPPORTUNITY FUND I, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY

THE SECURITIES REPRESENTED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 NOR REGISTERED NOR QUALIFIED UNDER ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE, TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS QUALIFIED AND REGISTERED UNDER APPLICABLE STATE AND FEDERAL SECURITIES LAWS OR UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, SUCH QUALIFICATION AND REGISTRATION IS NOT REQUIRED. ANY TRANSFER OF THE SECURITIES REPRESENTED BY THIS AGREEMENT IS FURTHER SUBJECT TO OTHER RESTRICTIONS, TERMS AND CONDITIONS WHICH ARE SET FORTH HEREIN.

#421466

TABLE OF CONTENTS ARTICLE I 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10 1.11 1.12 1.13 1.14 1.15 1.16 1.17 1.17 1.19 1.20 1.21 1.22 1.23 1.24 1.25 1.26 1.27 1.28 1.29 1.30 1.31 1.32 1.33 1.34 1.35 1.36 1.37 1.38 1.39 1.40 1.41 1.17
#421466

DEFINITIONS ................................................................................................. 1 "Act ................................................................................................................. 1 "Adjusted Capital Account Deficit................................................................. 1 "Affiliate.......................................................................................................... 2 "Agreement ..................................................................................................... 2 "Articles .......................................................................................................... 2 "Asset Management Fee ................................................................................. 2 "Assignee......................................................................................................... 2 "Bankruptcy ................................................................................................... 2 "Capital Account ............................................................................................ 2 "Capital Call ................................................................................................... 2 "Capital Call Notice........................................................................................ 2 "Capital Contribution .................................................................................... 2 "Capital Receipts ............................................................................................ 3 "Code............................................................................................................... 3 "Company ....................................................................................................... 3 "Company Accounting Year .......................................................................... 3 "Company Minimum Gain............................................................................. 3 "Company Minimum Gain............................................................................. 3 "Default Loan ................................................................................................. 3 "Defaulting Member....................................................................................... 3 "Delinquent Contribution .............................................................................. 3 "Dilution Percentage....................................................................................... 3 "Disposition..................................................................................................... 3 "Dissolution Event ......................................................................................... 3 "Economic Interest ......................................................................................... 3 "Effective Date ............................................................................................... 3 "Environmental Laws..................................................................................... 4 "Excess Tax Liability...................................................................................... 4 "Expenses ........................................................................................................ 4 "Family Member............................................................................................ 4 "First Preference Amount .............................................................................. 4 "Former Member ........................................................................................... 4 "Former Member's Interest ........................................................................... 4 "Funding Date................................................................................................. 4 "Gain" or "Loss on Disposition ..................................................................... 5 "Gross Asset Value ......................................................................................... 5 "Hazardous Substances .................................................................................. 5 "Improvements ............................................................................................... 5 "Initial Contribution....................................................................................... 5 "Invested Capital ............................................................................................ 5 "Investment Period......................................................................................... 5 "Company Minimum Gain............................................................................. 5 i

1.43 1.44 1.45 1.46 1.47 1.48 1.49 1.51 1.51 1.52 1.53 1.54 1.55 1.56 1.57 1.58 1.59 1.60 1.61 1.62 1.63 1.64 1.65 1.66 1.67 1.69 1.69 1.70 1.71 1.72 1.73 1.74 1.70 1.70 1.77 1.78 1.79 1.80 1.81 1.82 1.83 1.84

"Manager ........................................................................................................ 6 "Manager Loan............................................................................................... 6 "Member ......................................................................................................... 6 "Member Non-recourse Debt ......................................................................... 6 "Member Non-recourse Debt Minimum Gain .............................................. 6 "Member Non-recourse Deduction................................................................ 6 "Membership Interest .................................................................................... 6 "Net Available Cash ....................................................................................... 6 "Net Available Cash ....................................................................................... 6 "Net Mortgage Proceeds................................................................................. 6 "Non-recourse Deductions.............................................................................. 6 "Non-recourse Liability.................................................................................. 6 "Operating Costs ............................................................................................ 6 Optional Purchase Event ............................................................................ 7 "Organizational Costs .................................................................................... 7 "Percentage Interest ....................................................................................... 7 "Permitted Transfer ....................................................................................... 7 "Person............................................................................................................ 7 "Preferred Return .......................................................................................... 7 "Prime Rate .................................................................................................... 7 "Profit" or "Loss ............................................................................................ 7 "Project ........................................................................................................... 8 "Project Company .......................................................................................... 8 "Project Company Agreement ....................................................................... 8 "Project Company Interest ............................................................................ 8 "Project Company Recourse Agreements ..................................................... 8 "Project Company Recourse Agreements ..................................................... 8 "Property ........................................................................................................ 8 "Purchase Notice............................................................................................. 8 "Recipient Member ........................................................................................ 8 "Regulations" or "Income Tax Regulations.................................................. 8 "Remaining Members..................................................................................... 8 "Property ........................................................................................................ 8 "Property ........................................................................................................ 8 "Tax Draw....................................................................................................... 8 "Tax Liability.................................................................................................. 8 "Tax Matters Partner..................................................................................... 9 "Total Preference Amount ............................................................................. 9 "Transfer......................................................................................................... 9 "Undistributed Preferred Return .................................................................. 9 "WHI............................................................................................................... 9 "Working Capital Deficits.............................................................................. 9

ARTICLE II ORGANIZATIONAL MATTERS................................................................. 9 2.1 Formation........................................................................................................ 9 2.2 Name................................................................................................................ 9 ii

#421466

2.3 2.4 2.5 2.6 2.7 2.8 2.9

Term .............................................................................................................. 10 Office and Agent ........................................................................................... 10 Principal Place of Business ........................................................................... 10 Member and Manager Information............................................................. 10 Purpose and Business of the Company ........................................................ 10 Tax Classification ........................................................................................ 11 No State-Law Partnership........................................................................... 12

ARTICLE III CAPITAL CONTRIBUTIONS .................................................................. 12 3.1 Capital Contributions ................................................................................... 12 3.2 Additional Capital Contributions................................................................. 17 3.4 No Interest .................................................................................................... 18 3.4 No Interest .................................................................................................... 18 3.5 Manager and Member Loans ....................................................................... 18 3.6 Project Company ......................................................................................... 19 ARTICLE IV MEMBERS.................................................................................................. 19 4.1 Limited Liability ........................................................................................... 19 4.2 Admission of Additional Members............................................................... 19 4.3 Withdrawals, Resignations or Retirements ................................................. 20 4.4 Termination of Membership Interest........................................................... 20 4.5 Competing Activities..................................................................................... 20 4.6 Transactions With The Company ................................................................ 20 4.7 Remuneration To Members.......................................................................... 20 4.8 Members Are Not Agents ............................................................................. 21 4.9 Voting Rights ................................................................................................ 21 4.10 Member Meetings......................................................................................... 21 ARTICLE V 5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9 5.10 5.11 MANAGEMENT AND CONTROL OF THE COMPANY........................ 22 Management of the Company by the Manager ........................................... 22 Election of the Manager................................................................................ 22 Powers of the Manager ................................................................................. 23 Performance of Duties; Liability of Manager.............................................. 25 Devotion of Time........................................................................................... 25 Competing Activities..................................................................................... 25 Transactions Between the Company and the Manager............................... 25 Payments to the Manager ............................................................................. 26 Expenses ........................................................................................................ 28 Limitation of Liability .................................................................................. 29 Membership Interest of the Manager .......................................................... 29

ARTICLE VI INCOME TAX ALLOCATIONS............................................................... 29 6.1 Establishment and Maintenance of Capital Accounts................................. 29 6.2 Profit and Loss Allocations........................................................................... 29 6.3 Allocations of Gain or Loss on Disposition .................................................. 30 6.4. Minimum Gain Chargeback and Qualified Income Offset......................... 32 6.5 Other Tax Allocation Provisions .................................................................. 32 iii
#421466

6.6 6.7 6.8 6.9 6.10

Curative Allocations ..................................................................................... 35 Basis Elections............................................................................................... 35 General Allocation Rules .............................................................................. 36 Sharing of Company Non-recourse Debt..................................................... 36 Adjustment of Gross Asset Value................................................................. 36

ARTICLE VII DISTRIBUTIONS...................................................................................... 37 7.1 Net Available Cash from Operations ........................................................... 37 7.2 Net Mortgage Proceeds and Capital Receipts from Disposition or Refinancing ................................................................................................... 37 7.3 Proceeds and Distribution in Liquidation.................................................... 38 7.4 General Distribution Rules........................................................................... 38 7.5 Tax Draw....................................................................................................... 39 7.6 Source of Distributions ................................................................................. 39 7.7 Restriction on Distributions.......................................................................... 39 7.8 Return of Distributions ............................................................................... 40 7.9 Tax Withholding ............................................ Error! Bookmark not defined. ARTICLE VIII TRANSFER AND ASSIGNMENT OF MEMBERSHIP INTERESTS . 41 8.1 Transfer and Assignment of Membership Interest...................................... 41 8.2 Further Restrictions on Transfer of Interests.............................................. 41 8.3 Substitution of Members .............................................................................. 41 8.4 Permitted Transfers...................................................................................... 41 8.5 Effective Date of Transfers........................................................................... 42 8.6 Rights of Legal Representatives ................................................................... 42 8.7 No Effect to Transfers in Violation of Agreement ....................................... 42 8.8 Right of First Negotiation ........................................................................... 43 8.9 Right of First Refusal .................................................................................. 43 ARTICLE IX OPTIONAL PURCHASE EVENTS AND TERMINATION OF MEMBERSHIP INTERESTS.................................................................................. 44 9.1 Optional Purchase Event Defined ................................................................ 45 9.2 Optional Purchase Event.............................................................................. 45 9.3 Purchase Price............................................................................................... 45 9.4 Notice of Intent to Purchase ......................................................................... 46 9.5 Election to Purchase Less Than All of the Former Members Interest ...... 46 9.6 Payment of Purchase Price........................................................................... 46 9.7 Closing of Purchase of Former Members Interest ..................................... 46 9.8 Purchase Terms Varied by Agreement........................................................ 47 ARTICLE X 10.1 10.2 10.3 10.4 10.5
#421466

DISSOLUTION AND WINDING UP.......................................................... 47 Dissolution..................................................................................................... 47 Winding Up ................................................................................................... 48 Distributions in Kind .................................................................................... 48 Compliance with Certain Requirement of Regulations; Deficit Capital Accounts ........................................................................................................ 48 Certificate of Dissolution .............................................................................. 48 iv

10.6 10.7 10.8

Limitations on Payments Made in Dissolution.......................................... 48 Certificate of Cancellation .......................................................................... 49 No Action for Dissolution ............................................................................. 49

ARTICLE XI ACCOUNTING, RECORDS, REPORTING BY MEMBERS.................. 49 11.1 Books and Records........................................................................................ 49 11.2 Delivery to Members and Inspection ........................................................... 50 11.3 Annual Statements........................................................................................ 51 11.4 Financial and Other Information................................................................. 51 11.5 Filings ............................................................................................................ 51 11.6 Bank Accounts .............................................................................................. 52 11.7 Accounting Decisions and Reliance on Others............................................. 52 11.8 Tax Matters for the Company Handled by the Manager and Tax Matters Partner .......................................................................................................... 52 ARTICLE XII INDEMNIFICATION AND INSURANCE .............................................. 52 12.1 Indemnification of Manager......................................................................... 52 12.2 Insurance....................................................................................................... 54 ARTICLE XIII INVESTMENT REPRESENTATIONS .................................................. 54 13.1 Pre-existing Relationship or Experience...................................................... 54 13.2 No Advertising .............................................................................................. 54 13.3 Investment Intent.......................................................................................... 54 13.4 Accredited Investor....................................................................................... 54 13.5 Purpose of Entity .......................................................................................... 55 13.6 Economic Risk............................................................................................... 55 13.7 No Registration of Membership Interest ..................................................... 55 13.8 Membership Interest in Restricted Security................................................ 55 13.9 No Obligation to Register ............................................................................. 55 13.10 No Disposition in Violation of Law .............................................................. 55 13.11 Legends.......................................................................................................... 56 13.12 Investment Risk ............................................................................................ 56 13.13 Investment Experience.................................................................................. 56 13.14 Restrictions on Transferability..................................................................... 56 13.15 Information Reviewed .................................................................................. 56 13.16 No Representations by Company ................................................................. 57 13.17 Consultation with Attorney .......................................................................... 57 13.18 Tax Consequences......................................................................................... 57 13.19 No Assurance of Tax Benefits....................................................................... 57 13.20 Indemnity ...................................................................................................... 57 ARTICLE XIV SPECIAL POWER OF ATTORNEY...................................................... 58 14.1 Attorney in Fact ............................................................................................ 58 14.2 Nature of a Special Power............................................................................. 58 14.3 Signatures...................................................................................................... 59

v
#421466

ARTICLE XV MISCELLANEOUS................................................................................... 59 15.1 Counsel to the Company .............................................................................. 59 15.2 Tax Withholding ........................................................................................... 59 15.3 Interest for Services ...................................................................................... 60 15.4 Complete Agreement .................................................................................... 60 15.5 Binding Effect ............................................................................................... 60 15.6 Parties in Interest.......................................................................................... 61 15.7 Pronouns; Statutory References................................................................... 61 15.8 Headings........................................................................................................ 61 15.9 Interpretation................................................................................................ 61 15.10 References to this Agreement ....................................................................... 61 15.11 Governing Law; Jurisdiction........................................................................ 61 15.12 Exhibits.......................................................................................................... 61 15.13 Severability.................................................................................................... 61 15.14 Specific Performance .................................................................................... 62 15.15 Additional Documents and Acts................................................................... 62 15.16 Notices ........................................................................................................... 62 15.17 Amendments ................................................................................................. 62 15.18 Reliance on Authority of Person Signing Agreement.................................. 62 15.19 No Interest in Company Property; Waiver of Action for Partition............ 62 15.20 Multiple Counterparts.................................................................................. 63 15.21 Attorneys Fees ............................................................................................. 63 15.22 Remedies Cumulative ................................................................................... 63 15.23 Waiver........................................................................................................... 63 15.24 Confidentiality ............................................................................................. 63

vi
#421466

OPERATING AGREEMENT FOR WILLIAMS REAL ESTATE OPPORTUNITY FUND I, LLC A CALIFORNIA LIMITED LIABILITY COMPANY

THIS OPERATING AGREEMENT (this Agreement) is entered into and shall be effective as of May 28, 2009 (the Effective Date), by and among WREOF I MANAGEMENT, LLC, a California limited liability company, as the Manager, and the Persons whose names are set forth on Exhibit A attached hereto and incorporated by reference herein, as Members, with reference to the following facts: A. On May 28, 2009, the Articles of Organization for WILLIAMS REAL ESTATE OPPORTUNITY FUND I, LLC (the "Company"), a limited liability company organized under the laws of the State of California, were filed with the California Secretary of State. B. The parties desire to adopt and approve an operating agreement for the Company.

NOW, THEREFORE, in consideration of the mutual promises, covenants and undertakings herein specified and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, with the intent to be obligated legally and equitably, the parties hereto agree as follows: ARTICLE I DEFINITIONS Capitalized terms used in this Agreement shall have the meanings specified below or elsewhere in this Agreement and when not so defined shall have the meanings specified in California Corporations Code Section 17001 (such terms are equally applicable to both the singular and plural derivations of the terms defined): 1.1 "Act" shall mean the Beverly-Killea Limited Liability Company Act, codified in the California Corporations Code, Section 17000 et seq., as the same may be amended from time to time. 1.2 "Adjusted Capital Account Deficit" shall mean with respect to any Member, the deficit balance, if any, in such Member's Capital Account as of the end of the relevant Company Accounting Year, after giving effect to the following adjustments: A. Credit to such Capital Account any amounts which such Member is obligated to restore or is deemed to be obligated to restore to the Company pursuant to the penultimate sentences of Regulations Section 1.704-2(g)(1) and 1.704-2(i)(5); and B. Debit to such Capital Account the items described in Sections 1.7041(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6) of the Regulations. 1
#421466

1.3 "Affiliate" of a Member or Manager shall mean any Person, directly or indirectly, through one or more intermediaries, controlling, controlled by, or under common control with a Member or Manager, as applicable. The term "control," as used in the immediately preceding sentence, shall mean with respect to a corporation or limited liability company the right to exercise, directly or indirectly, more than fifty percent (50%) of the voting rights attributable to the controlled corporation or limited liability company, and, with respect to any individual, partnership, trust, other entity or association, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of the controlled entity. 1.4 "Agreement" shall mean this Operating Agreement, as originally executed and as amended from time to time. 1.5 "Articles" shall mean the Articles of Organization for the Company originally filed with the California Secretary of State and as amended from time to time. 1.6 "Asset Management Fee" is defined in Section 5.8A.

1.7 "Assignee" shall mean the owner of an Economic Interest who has not been admitted as a substitute Member in accordance with Article VIII. 1.8 "Bankruptcy" shall mean: (a) the filing of an application by a Member for, or his or her consent to, the appointment of a trustee, receiver, or custodian of his or her other assets; (b) the entry of an order for relief with respect to a Member in proceedings under the United States Bankruptcy Code, as amended or superseded from time to time; (c) the making by a Member of a general assignment for the benefit of creditors; (d) the entry of an order, judgment, or decree by any court of competent jurisdiction appointing a trustee, receiver, or custodian of the assets of a Member unless the proceedings and the person appointed are dismissed within ninety (90) days; or (e) the failure by a Member generally to pay his or her debts as the debts become due within the meaning of Section 303(h)(1) of the United States Bankruptcy Code, as determined by the Bankruptcy Court, or the admission in writing of his or her inability to pay his or her debts as they become due. 1.9 "Capital Account" shall mean, with respect to any Member, the Capital Account maintained for such Member in accordance with the provisions of Section 6.1. 1.10 1.11 "Capital Call" is defined in Section 3.1D(i). "Capital Call Notice" is defined in Section 3.1D(i).

1.12 "Capital Contribution" shall mean the total amount of cash and the net fair market value of any property contributed to the capital of the Company by the Members pursuant to this Agreement. The term "Capital Contributions" with respect to a Member shall include the contributions of such Member made pursuant to Sections 3.1 and 3.2. 2
#421466

1.13 "Capital Receipts" shall mean (i) the sum of the proceeds received by the Company from the sale, exchange or any other disposition of all or any portion of any Project or any other asset of the Company reduced by (ii) the sum of (a) all expenditures made by the Company in connection with such sale, exchange or other disposition, plus (b) loan repayments made from such proceeds as approved by the Manager, plus (c) amounts set aside as reserves therefrom for disbursement by the Company reasonably expected by the Manager to occur. 1.14 "Code" shall mean the Internal Revenue Code of 1986, as amended and in effect from time to time (or any corresponding provision of succeeding law), and to the extent applicable, the Regulations. 1.15 "Company" shall mean Williams Real Estate Opportunity Fund I, LLC, a California limited liability company. 1.16 "Company Accounting Year" shall mean and refer to the accounting year of the Company ending December 31 of each calendar year or such shorter fiscal period during such year for which a relevant determination is being made under this Agreement. 1.17 "Company Minimum Gain" is defined in Section 6.5.5A hereof.

1.18 "Corporations Code" shall mean the California Corporations Code, as amended from time to time, and the provisions of succeeding law. 1.19 1.20 1.21 1.22 1.23 "Default Loan" is defined in Section 3.1E(ii). "Defaulting Member" is defined in Section 3.1E. "Delinquent Contribution" is defined in Section 3.1E. "Dilution Percentage" is defined in Section 3.1E(v). "Disposition" is defined in the definition of "Gain or Loss on Disposition".

1.24 "Dissolution Event" shall have the meaning ascribed to that term in Section 10.1. 1.25 "Economic Interest" shall mean the right to receive distributions of the Company's assets and allocations of income, gain, loss, deduction, credit and similar items, including without limitation, Profit, Loss, Gain or Loss on Disposition, from the Company pursuant to this Agreement and the Act, but shall not include any other rights of a Member, including, without limitation, the right to vote or participate in the management of the Company, or except as provided in Section 17106 of the Corporations Code, any right to information concerning the business and affairs of the Company. 1.26 "Effective Date" shall have the meaning ascribed to that term in the introductory paragraph of this Agreement. 3
#421466

1.27 "Environmental Laws" shall mean any federal, state, or local statute, code, ordinance, rule, regulation, permit, consent, approval, license, judgment, order, writ, judicial decision, common law rule, decree, agency interpretation, injunction, or other authorization or requirement whenever promulgated, issued, or modified, including the requirement to register underground storage tanks, relating to: (i) emissions, discharges, spills, releases or threatened releases of pollutants, contaminants, Hazardous Substances (as hereinafter defined), materials containing Hazardous Substances, or hazardous or toxic materials or wastes into ambient air, surface water, groundwater, watercourses, publicly or privately owned treatment works, drains, sewer systems, wetlands, septic systems or onto land; (ii) the use, treatment, storage, disposal, handling, manufacturing, transportation, or shipment of Hazardous Substances, materials containing Hazardous Substances or hazardous and/or toxic wastes, material, products, or by-products (or of equipment or apparatus containing Hazardous Substances) as defined in or regulated under the following statutes and their implementing regulations: the Hazardous Materials Transportation Act, 49 U.S.C 1801 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. 6901 et seq., the Comprehensive Environmental Response, Compensation and Liability Act, as amended by the Superfund Amendments and Reauthorization Act, 42 U.S.C. 9601 et seq., and/or the Toxic Substances Control Act, 15 U.S.C. 2601 et seq., each as amended from time to time; or (iii) pollution or the protection of human health or the environment. 1.28 1.29 "Excess Tax Liability" is defined in Section 7.5. "Expenses" is defined in Section 5.9.

1.30 "Family Member" shall mean (a) with respect to any individual, such individual's spouse, parent, sibling, in-law, child or grandchild (whether natural, adopted or in the process of adoption), any trust all of the beneficial interests of which are owned by any such individuals or by any such individuals together with any organization described in Code Section 501(c)(3), the estate of any such individual, and any corporate, association, partnership or limited liability company all of the equity interest of which are owned by those above-described individuals, trust or organizations, and (b) with respect to any trust, the owners of the beneficial interests of such trust. 1.31 1.32 1.33 9.2. 1.34 "Funding Date" is defined in Section 3.1D(ii). 4
#421466

"First Preference Amount" is defined in Section 6.3.1B. "Former Member" shall have the meaning ascribed to it in Section 9.2. "Former Member's Interest" shall have the meaning ascribed to it in Section

1.35 "Gain" or "Loss on Disposition" shall mean the gain or loss (as the case may be) of the Company for federal income tax purposes arising from a sale, exchange or other taxable disposition (including casualty or condemnation) ("Disposition") of all or a portion of any Project. 1.36 "Gross Asset Value" shall mean, with respect to any asset, the adjusted basis of the asset for federal income tax purposes, adjusted as provided in Section 6.10. 1.37 "Hazardous Substances" shall mean (i) hazardous materials, hazardous wastes, and hazardous substances as those terms are defined under the following statutes and their implementing regulations as they may be amended from time to time: the Hazardous Materials Transportation Act, 49 U.S.C. 1801 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. 6901 et seq., the Comprehensive Environmental Response, Compensation and Liability Act, as amended by the Superfund Amendments and Reauthorization Act, 42 U.S.C. 9601 et seq., the Clean Water Act, 33 U.S.C. 1251 et seq., the Toxic Substances Control Act, 15 U.S.C. 2601 et seq., the Clean Air Act, 42 U.S.C. 7401 et seq., (ii) petroleum and petroleum products including crude oil and any fractions thereof, (iii) natural gas, synthetic gas, and any mixtures thereof, (iv) asbestos and/or any material which contains any hydrated mineral silicate, including but not limited to chrysolite, amosite, crocidolite, tremolite, anthophylite and/or actinolite, whether friable or non-friable, (v) PCBs, or PCB-containing materials or fluids, (vi) radon, (vii) any other hazardous radioactive, toxic or noxious substance, material, pollutant, or solid, liquid, or gaseous waste, and (viii) any substance with respect to which a federal, state, or local agency requires environmental investigation, monitoring, or remediation. 1.38 1.39 "Improvements" shall have the meaning ascribed to that term in Section 2.7. "Initial Contribution" is defined in Section 3.1B.

1.40 "Invested Capital" shall mean with respect to each Member the Capital Contributions made by such Member, reduced by any distributions previously made to such Member pursuant to Section 7.2B. If at any time during the term of the Company, the "Invested Capital" of any Member shall have been reduced to zero, "Invested Capital" thereafter shall be calculated with respect to such Member only by considering such Member's subsequent Capital Contributions and subsequent distributions pursuant to Section 7.2B. 1.41 "Investment Period" shall mean the time period commencing as of the Effective Date and terminating on the four (4)-year anniversary of such date, inclusive of such dates; provided, however, that the Manager may, in its sole and absolute discretion, elect to extend the term of the Investment Period for two (2) additional one (1)-year periods by delivering written notice to the Members. In addition, if both of the foregoing one (1) year extensions have occurred, the Manager may, with the affirmative vote or written consent of a Majority Interest, elect to extend the Investment Period for a further two (2) year period. 1.42 "Majority Interest" shall mean those Members who hold a majority of the Percentage Interests which all Members hold. 5
#421466

1.43 "Manager" shall mean WREOF I Management, LLC, a California limited liability company, or any other Person that succeeds it as a manager of the Company. 1.44 "Manager Loan" is defined in Section 3.5A.

1.45 "Member" shall mean shall mean each Person who (a) is an initial signatory to this Agreement, has been admitted to the Company as a Member in accordance with the Articles or this Agreement or is an Assignee who has become a Member in accordance with Article VIII, and (b) has not ceased to be a Member in accordance with Article IX or for any other reason. 1.46 1.47 1.48 "Member Non-recourse Debt" is defined in Section 6.5.5B. "Member Non-recourse Debt Minimum Gain" is defined in Section 6.5.5C. "Member Non-recourse Deduction" is defined in Section 6.5.5D.

1.49 "Membership Interest" shall mean a Member's entire interest in the Company including the Member's Economic Interest, the right to vote on or participate in the management, and the right to receive information concerning the business and affairs, of the Company. 1.50 "Minimum Asset Management Fee" shall mean the amount of One Hundred Thousand and No/100 Dollars ($100,000.00), which shall be payable pursuant to Section 5.8A. 1.51 "Net Available Cash" with respect to any Company Accounting Year, shall mean (i) the sum of all cash receipts of the Company during such year from all sources (including Capital Contributions, cash on hand at the beginning of the Company Accounting Year to the extent not held in reserves and any funds released during such Company Accounting Year from cash reserves previously established), minus (ii) the sum of (a) Capital Receipts, (b) Net Mortgage Proceeds, and (c) Operating Costs. 1.52 "Net Mortgage Proceeds" shall mean (i) the sum of (a) the proceeds of any loan made to the Company and the proceeds from refinancing any such loan, plus (b) any amount released from cash escrow accounts established under any loan to the Company, reduced by (ii) the sum of (a) any amounts required to fund the Company's capital expenditures that are permitted to be withheld from such amounts for such purpose under this Agreement, (b) any and all expenses incurred by the Company in connection with such loan or refinancing, (c) amounts used as permitted under this Agreement to repay other indebtedness of the Company, and (d) amounts thereof retained as reserves under this Agreement for disbursements by the Company reasonably expected by the Manager to occur. 1.53 1.54 "Non-recourse Deductions" is defined in Section 6.5.5E. "Non-recourse Liability" is defined in Section 6.5.5F.

1.55 "Operating Costs" shall mean the sum of (i) all cash expenditures of the Company made during the Company Accounting Year for current costs and expenses (except to 6
#421466

the extent constituting a reduction in computing Net Mortgage Proceeds or Capital Receipts for such Company Accounting Year), including payments of interest and principal or other monetary obligations due under any loan made to the Company; accounting, legal and auditing fees; taxes payable by the Company; public or private utility charges; sales, use, payroll taxes and withholding taxes related thereto; and all other operating costs, expenses and capital expenditures actually paid with respect to the Company's business or reimbursed to Members, plus (ii) such reserves established from time to time during the Company Accounting Year for disbursements by the Company reasonably expected by the Manager to occur (except to the extent constituting a reduction in computing Net Mortgage Proceeds or Capital Receipts for such Company Accounting Year). 1.56 1.57 Optional Purchase Event shall have the meaning ascribed to it in Section 9.1. "Organizational Costs" is defined in Section 5.9.

1.58 "Percentage Interest" shall mean the percentage of a Member set forth opposite the name of such Member under the column "Member's Percentage Interest" in Exhibit A attached hereto, as such percentage may be adjusted from time to time pursuant to the terms of this Agreement. 1.59 8.4. 1.60 "Person" shall mean an individual, partnership, limited partnership, limited liability company, corporation, trust, estate, association or any other entity. 1.61 "Preferred Return" shall mean an amount equal to twelve percent (12%) per annum, on a calendar year basis, for the actual number of days for which the Preferred Return is being determined, cumulative and compounded annually, based on the Invested Capital of each of the Members, commencing on the date each Member's Capital Contribution was made. 1.62 "Prime Rate" as of a particular date shall mean the prime rate of interest as published on that date in The Wall Street Journal, and generally defined therein as "the base rate on corporate loans posted by at least 75% of the nation's 30 largest banks." If The Wall Street Journal is not published on a date for which the Prime Rate must be determined, the Prime Rate shall be the prime rate published in The Wall Street Journal on the nearestpreceding date on which The Wall Street Journal was published. 1.63 "Profit" or "Loss" shall mean, for each Company Accounting Year, an amount equal to the Company's net taxable income or loss for such Company Accounting Year (determined without regard to any items of income, gain or deduction taken into account in computing the Company's Gain or Loss on Disposition for such Company Accounting Year), determined in accordance with the method of accounting at the close of each Company Accounting Year on the Company's information tax return filed for federal income tax purposes (for this purpose, all items of income, gain loss, deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in computing such taxable income or loss). 7
#421466

"Permitted Transfer" shall have the meaning ascribed to that term in Section

1.64 1.65 1.66 Section 2.7. 1.67 Section 2.7.

"Project" shall have the meaning ascribed to that term in Section 2.7. "Project Company" shall have the meaning ascribed to that term in Section 2.7. "Project Company Agreement" shall have the meaning ascribed to that term in "Project Company Interest" shall have the meaning ascribed to that term in

1.68 "Project Company Mortgage" means a loan secured by one or more Projects. In no event shall the Company enter into any new financing for a Project if the amount of such financing would, when added to all other financings of such Project, result in financing of such Project in excess of seventy-five percent (75%) of the then-appraised value (as determined by the Manager) of such Project. 1.69 1.70 1.71 1.72 "Project Company Recourse Agreements" is defined in Section 3.6. "Property" shall have the meaning ascribed to that term in Section 2.7. "Purchase Notice" is defined in Section 3.1E(iv). "Recipient Member" is defined in Section 7.5.

1.73 "Regulations" or "Income Tax Regulations" shall, unless the context clearly indicates otherwise, mean the regulations in force as final or temporary that have been issued by the U.S. Department of Treasury pursuant to its authority under the Code, and any successor regulations. 1.74 9.2. 1.75 1.76 1.77 "REO Property" shall have the meaning ascribed to that term in Section 2.7. "Secured Debt" shall have the meaning ascribed to that term in Section 2.7. "Tax Draw" is defined in Section 7.5. "Remaining Members" shall have the meaning ascribed to that term in Section

1.78 "Tax Liability" shall mean, with respect to each Member, for any relevant fiscal year of the Company, an amount equal to the sum of the maximum U.S. federal and state tax rates applicable to a Member multiplied by the distributive share of taxable income of the Company allocated to such Member for such fiscal year (inclusive of any income or gain allocated to such Member under Section 704(c) of the Code), as reflected on the Company's Form 1065, U.S. partnership return.

8
#421466

1.79 "Tax Matters Partner" (as defined in Code Section 6231) shall be WREOF I Management, LLC, a California limited liability company, or its successor as designated pursuant to Section 11.8. 1.80 "Total Preference Amount" is defined in Section 6.3.1C.

1.81 "Transfer" "Transfer" or "Transferred" shall mean any sale, assignment, transfer, conveyance, pledge, hypothecation, or other disposition voluntarily or involuntarily, by operation of law, with or without consideration, or otherwise (including, without limitation, by way of intestacy, will, gift, bankruptcy, receivership, levy, execution, charging order or other similar sale or seizure by legal process) of all or any portion of any Membership Interest. Without limiting the generality of the foregoing, the sale or exchange of at least fifty percent (50%) of the voting stock of a Member, if a Member is a corporation, or the Transfer of an interest or interests of at least fifty percent (50%) in the capital or profits of a Member (whether accomplished by the sale or exchange of interests or by the admission of new partners or members), if a Member is a partnership or limited liability company, or the cumulative Transfer of such interests in a Member which effectively equal the foregoing (including Transfer of interests followed by the incorporation of a Member and subsequent stock Transfers, or Transfers of stock followed by the liquidation of a Member and subsequent Transfers of interests) will be deemed to constitute a Transfer of the Member's entire Membership Interest. 1.82 "Undistributed Preferred Return" shall mean an amount equal to the Preferred Return of each Member accrued for all periods to the date the Undistributed Preferred Return is being determined, less all distributions made to such Member pursuant to Sections 7.1 and 7.2. 1.83 1.84 "WHI" is defined in Section 5.8B. "Working Capital Deficits" is defined at Section 3.2. ARTICLE II ORGANIZATIONAL MATTERS 2.1 Formation. The Members have formed a California limited liability company under the laws of the State of California by filing the Articles with the California Secretary of State and entering into this Agreement, which Agreement shall be deemed effective as of the date the Articles were so filed. The rights and liabilities of the Members shall be determined pursuant to the Act and this Agreement. To the extent that the rights or obligations of any Member are different because of any provision of this Agreement than those rights or obligations would be in the absence of such provision, this Agreement shall control to the extent permitted by the Act. 2.2 Name. The name of the Company shall be "Williams Real Estate Opportunity Fund I, LLC." The business of the Company may be conducted under that name or, upon compliance with applicable laws, any other name that the Manager deems appropriate or 9
#421466

advisable. The Manager shall file any fictitious name certificates and similar filings, and any amendments thereto, that the Manager considers appropriate or advisable. 2.3 Term. The term of this Agreement commenced on the filing of the Articles and shall continue until May 27, 2013, except that the Manager may elect to extend the term of this Agreement for up to two (2) additional one (1)-year periods, unless terminated sooner as hereinafter provided. In addition, if both of the foregoing one (1) year extensions have occurred, the Manager may, with the affirmative vote or written consent of a Majority Interest, elect to extend the term of this Agreement for a further two (2) year period. 2.4 Office and Agent. The Company shall continuously maintain a registered office ("Office") and registered agent ("Agent") in the State of California. The Office shall be that of the Agent. The Agent shall be as stated in the Articles or as otherwise determined by the Manager. If the Agent ceases to act as such for any reason or the Company changes the Office's location, the Manager shall designate promptly a replacement Agent and/or notify the Secretary of State of the new Office location on the form prescribed by the Secretary of State ("Notification"). If the Manager fails to designate a replacement Agent or notify the Secretary of State of the new Office location, a Majority Interest may file the Notification with the Secretary of State specifying the Agent and/or Office, as the case may be. 2.5 Principal Place of Business. The Company's principal place of business shall be 21080 Centre Pointe Parkway, Suite 101, Santa Clarita, California 91350, or as the Manager may determine. The Company may also have such offices, anywhere within and without the State of California, as the Manager may determine from time to time, or the business of the Company may require. 2.6 Member and Manager Information. The name, address, taxpayer identification number and Percentage Interest of each Member and Manager are set forth in Exhibit A attached hereto. A Member may change his or her address in the Company's books and records upon notice thereof to the Manager. 2.7 Purpose and Business of the Company. The purpose of the Company is to engage in any lawful activity for which a limited liability company may be organized under the Act. Notwithstanding the foregoing, without the consent of a Majority Interest, the Company shall not engage in any business other than the following: A. To acquire one (1) or more ownership interests (individually, a "Project Company Interest" and collectively, the "Project Company Interests") as a member, partner (general or limited), venturer, shareholder and/or owner in one (1) or more limited liability companies, partnerships (general or limited), joint ventures, corporations and/or other entities (individually, a "Project Company" and collectively, the "Project Companies") to be formed and/or entered into by the Company (and/or an Affiliate of the Company); B. To own, operate, manage, maintain, market, lease, finance, refinance, hold for investment, sell and otherwise realize the economic benefit from the Project Company Interests; 10
#421466

C. To enforce the Company's rights in and to, and to discharge the Company's duties and obligations under, the limited liability company agreements, partnership agreements, joint venture agreements, shareholder agreements and/or other entity organizational documentation and/or other agreements governing the Project Companies (individually, a "Project Company Agreement" and collectively, the "Project Company Agreements"); and D. To conduct such other activities with respect to the Company, the Project Company Interests, the Project Companies and the Project Company Agreements as are necessary and/or appropriate to accomplish the foregoing purposes and to do all things incidental to or in furtherance of the above-enumerated purposes. Without limiting the generality of the foregoing, the Company may acquire a direct and/or indirect ownership interest in any Project Company and/or invest (or co-invest) with one (1) or more other Persons in any Project Company. The express, limited and only purposes for which each Project Company is to exist shall be (i) to acquire, directly and/or indirectly through an ownership interest in one (1) or more of the other Project Companies, one (1) or more improved and/or unimproved real properties (individually, a "Property" and collectively, the "Properties"), (ii) to develop and construct improvements upon one (1) or more of the Properties, which will typically consist of infrastructure for the development of single-family or multifamily dwellings, and single-family or multifamily dwellings, including without limitation, residential condominium complexes (collectively, the "Improvements"), (iii) to own, improve, operate, manage, maintain, market, lease, hold for investment, sell, exchange, dispose of and otherwise realize the economic benefit from each Property and the Improvements related thereto (individually, a "Project" and collectively, the "Projects"), (iv) to acquire, directly and/or indirectly through an ownership interest in one (1) or more of the other Project Companies, performing and non-performing loans (individually, a "Secured Debt" and collectively, the "Secured Debts") secured by one (1) or more improved and/or unimproved real properties and/or Improvements thereon, (v) to own, manage, market, hold for investment, sell, exchange, dispose of and otherwise realize the economic benefit from each Secured Debt, and in appropriate circumstances, through foreclosure, deed in lieu of foreclosure or otherwise, to acquire, develop, construct Improvements upon, own, improve, operate, manage, maintain, market, lease, hold for investment, sell, exchange, dispose of and otherwise realize the economic benefit from any one (1) or more improved and/or unimproved real properties and/or improvements thereon secured by such Secured Debt (individually, "REO Property" and collectively, the "REO Properties"), and (vi) to conduct such other activities with respect to the Projects and the Secured Debts as are necessary and/or appropriate to carrying out the foregoing purposes and to do all things incidental to or in furtherance of the above-enumerated purposes. From and after the acquisition of an REO Property, the improved and/or real properties comprising such REO Property shall be a "Property," the improvements constructed thereon and/or to be constructed thereon shall be "Improvements," and such REO Property shall be a "Project." 2.8 Tax Classification. The Members acknowledge that pursuant to Regulation Section 301.7701-3, the Company shall be classified as a partnership for federal income tax 11
#421466

purposes until the effective date of any election ("Election") to change its classification on IRS Form 8832, Entity Classification Election. 2.9 No State-Law Partnership. The Company's classification as a partnership will apply only for federal (and, as appropriate, state and local) income tax purposes. This characterization does not create or imply a general partnership, limited partnership or joint venture among the Members for state law or any other purpose. Instead, the Members acknowledge the Company's status as a limited liability company formed under the Act. ARTICLE III CAPITAL CONTRIBUTIONS 3.1 Capital Contributions.

A. Manager. Concurrently with the execution and delivery of this Agreement, the Manager or its principals shall commit to contribute, as a Member, a minimum of Five Hundred Thousand Dollars ($500,000), in cash, to the capital of the Company which shall be credited to the Capital Account of the Manager as and when such contribution is made. Except as otherwise required by mandatory provisions of applicable state law, the Manager, in its capacity as Manager, shall at no time be required to make any Capital Contributions to the Company. B. Members. During the Investment Period, each Member shall be obligated to make aggregate Capital Contributions in an amount equal to the amount set forth opposite each such Member's name on Exhibit A attached hereto under the heading labeled "Capital Contribution". Concurrently with the execution and delivery of this Agreement, each Member shall be required to fund five percent (5%) of its Capital Contribution (the "Initial Contribution") in an amount equal to the amount set forth opposite each such Member's name on Exhibit A attached hereto under the heading labeled "Initial Contribution." Exhibit A shall be revised to reflect any additional contributions made in accordance with Section 3.2. C. Application of Capital Contributions. The Capital Contributions of the Members may be used to pay the Company's expenses (including, without limitation, the Asset Management Fee), to provide funds with respect to the Project Companies, to reimburse the Manager and/or to repay any Member loans, all as determined in the sole and absolute discretion of the Manager. D. Capital Calls.

(i) Unfunded Capital Contributions. At any time during the Investment Period upon fourteen (14) days prior written notice ("Capital Call Notice"), the Manager may notify each Member that a capital call ("Capital Call") is being made with respect to such Member's unfunded Capital Contribution. With respect to any Capital Call made pursuant to this Section 3.1D(i), Capital Contributions shall be made by the Members in proportion to their respective unfunded Capital Contributions. 12
#421466

(ii) Capital Call Notices. Each Capital Call Notice shall specify the amount of the Capital Contribution required to be made by such Member, a date ("Funding Date") upon which each Member shall be obligated to make such Capital Contribution and the bank account to which the Capital Contribution is required to be wired (including wiring and routing information). Each Member agrees to comply with the terms set forth in each Capital Call Notice. Notwithstanding the foregoing, the Manager shall not be permitted to make a Capital Call after the expiration of the Investment Period for any unfunded Capital Contributions. E. Remedies for Failure to Contribute Capital. If any Member (the "Defaulting Member") fails to contribute all or any portion of any Capital Contribution required to be made by such Member pursuant to Section 3.1D ("Delinquent Contribution"), then the Manager shall have the right, but not the obligation, in its sole and absolute discretion, to select one (1) or more of the following options in the manner set forth below in this Section 3.1E: (i) Legal or Equitable Proceedings. The Manager shall have the right, but not the obligation, in its sole and absolute discretion, to cause the Company to commence legal and/or equitable proceedings against the Defaulting Member to compel the contribution of the Delinquent Contribution, with interest thereon at the Prime Rate plus three (3) percentage points from the applicable Funding Date, together with any and all costs and expenses of collection including, without limitation, attorneys' fees and costs, and consequential damages. Any such amounts collected in excess of the Delinquent Contribution shall be deemed for all purposes of this Agreement to be income of, or a reimbursement to, the Company, as appropriate, and (i) shall not be treated as a Capital Contribution by the Defaulting Member, and (ii) shall not be credited to the Capital Account of such Member. (ii) Default Loan. The Manager shall have the right, but not the obligation, in its sole and absolute discretion, to advance to the Company, in cash within ninety (90) days following the Funding Date, all or any portion of the Delinquent Contribution, and such advance shall be treated as a recourse loan ("Default Loan") by the Manager to the Defaulting Member bearing interest at the Prime Rate, plus six (6) percentage points, compounded monthly. Each Default Loan shall be due and payable six (6) months from the date such loan was advanced or as otherwise determined by the Manager (or, if earlier, upon the dissolution of the Company). As of the effective date of any advance of a Default Loan, the Defaulting Member shall be deemed to have contributed an amount equal to the principal amount of such Default Loan to the capital of the Company and the Capital Account of the Defaulting Member shall be credited with a like amount. Notwithstanding the provisions of Articles VII and X hereof, until any and all Default Loans advanced to a Defaulting Member are repaid in full, such Defaulting Member shall draw no further distributions from the Company, and all cash or property otherwise distributable with respect to such Defaulting Member's Membership Interest shall be distributed to the Manager as a reduction of the outstanding balance of (together with all accrued, unpaid interest on) any and all such Default Loans, with such funds being applied first to reduce any and all interest accrued on such Default Loan(s) and then to reduce the principal 13
#421466

amount thereof. Any amounts so applied shall be treated, for all purposes under this Agreement, as having actually been distributed to the Defaulting Member and applied by such Defaulting Member to repay such outstanding Default Loan(s). In order to secure the repayment of any and all Default Loans made on behalf of a Defaulting Member, such Defaulting Member hereby grants a security interest in favor of the Manager in and to such Defaulting Member's entire Membership Interest in the Company. The Members acknowledge and agree that the Manager (or its designee) may use the power of attorney granted herein to execute on behalf of the Defaulting Member any and all documents, instruments and/or agreements memorializing and/or securing such Default Loans including, without limitation, such Uniform Commercial Code financing and continuation statements, mortgages, pledge agreements and other security instruments as may be reasonably appropriate to perfect and continue the security interest in favor of the Manager. If, upon the maturity of a Default Loan (taking into account any agreed upon extensions thereof), any principal thereof and/or accrued interest thereon remains outstanding, the Manager may elect any one (1) of the following options: (i) to renew such Default Loan (or portion thereof) pursuant to the terms and provisions of this Section 3.1E(ii) for an additional term of six (6) months; (ii) to institute legal or equitable proceedings to collect the outstanding balance of such Default Loan (including any accrued, unpaid interest thereon), together with any and all costs of collection including, without limitation, attorneys' fees and costs, and consequential damages; or (iii) to exercise any of the other remedies set forth in this Section 3.1E as if the outstanding balance of such Default Loan (together with all accrued, unpaid interest thereon) were treated as a Delinquent Contribution. The Manager may elect any of the options set forth in the immediately preceding sentence, in the Manager's sole and absolute discretion, by giving written notice of such election to such Defaulting Member within thirty (30) calendar days following such maturity date. Failure of the Manager to timely give such written notice to such Defaulting Member shall be deemed to constitute an election to renew such Default Loan for an additional term of six (6) months on the terms set forth herein. (iii) Freeze Investment. The Manager shall have the right, but not the obligation, in its sole and absolute discretion, to cause the Capital Account of the Defaulting Member to be frozen at its amount immediately prior to the applicable Funding Date by delivering written notice to the Defaulting Member. Notwithstanding any other provision contained in this Agreement, if the Manager makes such election, then (i) the Defaulting Member shall continue to be allocated Losses in accordance with the provisions of Article VI but shall not be entitled to be allocated any further Profits, (ii) the Defaulting Member shall not be entitled to any further distributions from the Company until the liquidation of the Company and upon the liquidation of the Company the Defaulting Member shall only be entitled to receive the balance standing in such Member's Capital Account (less the Delinquent Contribution, together with interest accrued thereon at the Prime Rate plus three (3) percentage points, and the costs and expenses (including attorneys' fees and costs) incurred by the Company in enforcing and instituting the remedies set forth in this Section 3.1E) in proportion to, and to the extent of, any amounts that are distributed to the Members pursuant to Section 7.2B, and (iii) from and after the applicable Funding Date, no Preferred Return shall accrue with respect to the Invested Capital of the Defaulting Member. 14
#421466

(iv) Purchase of the Defaulting Member's Membership Interest. The Manager (or its designee) shall have the right, but not the obligation, in its sole and absolute discretion, by delivering written notice (the "Purchase Notice") to the Defaulting Member to purchase and/or to permit any other Member to purchase the entire Membership Interest of the Defaulting Member for a purchase price equal to ninety percent (90%) of the positive balance, if any, standing in the Defaulting Member's Capital Account as of the applicable Funding Date. The purchase price shall be reduced by the outstanding balance of the Default Loan (if any), together with all accrued unpaid interest thereon and the costs (including attorneys' fees and costs) incurred by the Company in connection with instituting and enforcing the remedies set forth in this Section 3.1E. If the balance standing in the Defaulting Member's Capital Account is equal to or less than zero (0), then the purchase price for the Defaulting Member's Membership Interest shall equal zero (0). The Defaulting Member shall be obligated to pay any and all costs and expenses incurred by the Manager and/or the Company in connection with the purchase of the Defaulting Member's Membership Interest (including, without limitation, attorneys' fees and costs) pursuant to this Section 3.1E(iv) and the Manager may elect to offset and reduce the purchase price otherwise payable to the Defaulting Member by the amount of any such costs and/or expenses. The closing of any purchase and sale pursuant to this Section 3.1E(iv) shall be held at the principal executive office of the Company on a business day designated by the Manager within ninety (90) days following the effective date of the Purchase Notice. The purchase price for the Defaulting Member's Membership Interest shall be paid at the closing by delivery by the Manager (or its designee) of (i) an amount equal to twenty percent (20%) (or more if the Manager (or its designee) elects) of the purchase price of the Defaulting Member's Membership Interest, in cash, and (ii) a non-recourse promissory note in a principal amount equal to the remaining balance of the purchase price of the Defaulting Member's Membership Interest. In addition, at the closing the Defaulting Member shall transfer its Membership Interest to the Manager (or its designee), free and clear of all liens, security interest, and competing claims, and shall deliver to the Manager (or its designee) such instruments of transfers and such evidence of due authorization, execution, and delivery, and of the absence of any such liens, security interests, or competing claims, as the Manager (or its designee) may request in its sole and absolute discretion. Concurrently with the closing of any purchase pursuant to this Section 3.1E(iv), the Defaulting Member shall fully and completely withdraw as a member of the Company. Any promissory note delivered by the Manager (or its designee) pursuant to this Section 3.1E(iv) shall bear interest at the Prime Rate and shall provide for equal quarterly payments of interest only, in arrears. The entire principal balance of any such promissory note, together with any accrued and unpaid interest thereon, shall be due and payable on the second (2nd) anniversary of the closing of the purchase and sale of the Defaulting Member's Membership Interest. The Members acknowledge and agree that the Manager (or its designee) may use the power of attorney granted herein to execute on behalf of the Defaulting Member any and all documents that may be necessary to effectuate the purchase of the Defaulting Member's Membership Interest and/or the withdrawal of such Defaulting Member as a member of the Company. (v) Dilution. The Manager may contribute to the capital of the Company, in cash, within ninety (90) days following the Funding Date, an amount equal to the Delinquent Contribution, and the Manager's Capital Account shall be credited with the respective 15
#421466

amounts so contributed by the Manager. Upon the maturity of a Default Loan that is not fully repaid on or before the maturity thereof, the Manager also may contribute to the capital of the Company, in accordance with the provisions of Section 3.1E(ii) above, all or any portion of the outstanding principal of and/or accrued, unpaid interest on such Default Loan (or portion thereof) previously advanced by the Manager that is not repaid prior to the maturity thereof, and (a) the amount of such outstanding principal and/or interest so contributed shall be deemed repaid and satisfied, (b) the Defaulting Member shall be deemed to have received a distribution equal to the amount of such outstanding principal so contributed and the Capital Account of the Defaulting Member shall be reduced by such amount, (c) the Capital Account of the Manager shall be increased by the amount of the reduction to the Defaulting Member's Capital Account pursuant to clause (b) set forth immediately above, and (d) the Manager shall succeed to the Preferred Return of the Defaulting Member that accrued on any Capital Contributions of the Defaulting Member funded with the proceeds of the Default Loan. Upon any contribution by the Manager pursuant to the foregoing provisions of this Section 3.1E(v), the Percentage Interest of the Defaulting Member shall be decreased by the Dilution Percentage and the Percentage Interest of the Manager shall be increased by the Dilution Percentage. The "Dilution Percentage" shall equal the amount expressed in percentage points calculated based upon the following formula:
Delinquent Contribution (or the outstanding balance of any Default Loan contributed Dilution Percentage = 150% ' by the Manager on behalf of the Defaulting Member)

& Aggregate amount of the balances standing # $ ! $ in all of the Members' respective Capital ! $ ! Accounts (including the Capital $ ! Contributions contributed by the $ ! $ contributing Members and the Delinquent ! $ ! $ Contribution or the outstanding balance of ! $ ! $ any Default Loan contributed by the ! $ ! Manager) % "

Any and all adjustments to the Members' respective Percentage Interests pursuant to this Section 3.1E(v) shall be rounded to the nearest one one-hundredth of one percentage point (.01%) and the Manager shall not succeed to all or any portion of the Capital Account of the Defaulting Member as the result of any such adjustment. In addition, notwithstanding any other provision of this Section 3.1E(v), the Defaulting Member's Percentage Interest shall in no event be reduced below 1/100th percent (.01%) by operation of this Section 3.1E(v). The application of the provisions of this Section 3.1E(v) are illustrated by the following example: assume that (i) the aggregate outstanding balance of the Capital 16
#421466

Accounts of all of the Members was equal to Twelve Million Dollars ($12,000,000), (ii) a Capital Contribution of Three Million Dollars ($3,000,000) was required to be contributed by the Members to the capital of the Company, (iii) a Member with a Percentage Interest of ten percent (10%) failed to contribute its share of such contribution of Three Hundred Thousand Dollars ($300,000) (i.e., $3,000,000 x 10%) = $300,000), and (iv) the Manager had a Percentage Interest of fifty percent (50%) and made the Delinquent Contribution of Three Hundred Thousand Dollars ($300,000) to the capital of the Company on behalf of such Defaulting Member pursuant to this Section 3.1E(v). By operation of this Section 3.1E(v), the Dilution Percentage would be equal to three (3) percentage points as calculated in accordance with the following formula:

3% = 150% !

$300,000 $15,000,000

The Percentage Interest of the Defaulting Member would therefore be reduced by three (3) percentage points from ten percent (10%) to seven percent (7%), and the Percentage Interest of the Manager would be increased by a like amount of percentage points from fifty percent (50%) to fifty-three percent (53%). (vi) Loss of Voting Rights. Regardless of whether the Manager elects to exercise any or all of the other remedies set forth in this Section 3.1E, from and after the applicable Funding Date, the Defaulting Member shall not be entitled to vote upon any of the items set forth in Sections 4.10 and 5.3B and the rights of the Defaulting Member shall be limited solely to inspecting the books and records of the Company (at such Member's sole cost and expense) and to sharing in any allocations of and/or distributions of income, gain, loss, deduction, credit and similar items, including without limitation, Profit, Loss, Gain or Loss on Disposition and liquidating distributions to which such Members are entitled to receive under this Agreement. 3.2 Additional Capital Contributions. Except for the amounts set forth on Exhibit A, no Member shall be required to make any additional Capital Contributions. Funds in excess of Net Available Cash may be required from time to time during the term of the Company for the purpose of funding Working Capital Deficits, as hereinafter defined. To finance such working capital needs, the Manager may enter into loans, on either a secured or unsecured basis, with such financial institutions or individuals (including the Manager or any Member) and under such terms as the Manager deems reasonably appropriate. If the Manager is unable or unwilling to finance such working capital needs with a loan, then, to the extent approved by the Manager and a Majority Interest, from time to time, the Members may be permitted to make additional Capital Contributions if and to the extent they so desire, and if the Manager determines that such additional Capital Contributions are necessary or appropriate for the conduct of the Company's business, including without limitation, expansion or diversification. In that event, the Members shall have the opportunity, but not the obligation, to participate in such additional Capital Contributions on a pro rata basis in accordance with their Percentage Interests. Each Member shall receive a credit to his or her Capital Account in the amount of any additional capital which he or she contributes to the Company. Immediately following such Capital Contributions, the Percentage Interests shall be adjusted by the Manager to reflect the new relative proportions of the Capital Accounts of the Members. "Working Capital Deficits" means the excess of 17
#421466

Operating Costs over the sum of all cash receipts of the Company from all sources (including Capital Contributions, cash on hand, including amounts held in cash reserves previously established). 3.3 Withdrawals and Return of Capital. No Member shall be entitled to withdraw or to demand the return of any or all of that Member's Capital Contribution, except as specifically provided in this Agreement. 3.4 No Interest. No Member shall be entitled to receive interest on that Member's Capital Contributions or the balance of that Member's Capital Account without the Manager's prior written consent. 3.5 Manager and Member Loans.

A. If the Manager determines, in the Manager's sole and absolute discretion, that additional funds are necessary for the Company to meet its current or projected financial requirements, then in lieu of and/or in addition to, making a Capital Call pursuant to Section 3.1D, the Manager or an Affiliate of the Manager shall have the right, but not the obligation, to advance to the Company, in cash, an amount equal to such necessary funds. Any and all advances made by the Manager to the Company pursuant to this Section 3.5 shall be treated as a loan ("Manager Loan") with recourse only to the assets of the Company (and without recourse to the assets of any Member). Any and all Manager Loans made pursuant to this Section 3.5 shall bear interest at the Prime Rate plus three (3) percentage points, compounded annually and adjusted concurrently with the adjustments to any such Prime Rate and such loan(s) shall be due and payable upon the liquidation of the Company. The repayment of any Manager Loans shall be made prior to any other distributions of Net Available Cash or other cash proceeds to the Members, but shall be subordinate to any fees and/or reimbursements required to be made pursuant to Article V. Accordingly, notwithstanding the provisions of Article VII, but subject to any fees and/or reimbursements required to be made pursuant to Article V, until any and all Manager Loans are repaid in full, the Members shall draw no further distributions from the Company and all cash or property otherwise distributable with respect to the Membership Interests of the Members (except for any such fees and/or reimbursements) shall be paid to the Manager as a reduction of the outstanding balance(s) of any such loan(s), with such funds being applied first to reduce any interest accrued thereon, and then to reduce the principal amount thereof. B. Any Member or an Affiliate of a Member may lend money to the Company with the Managers prior written consent. The loan shall not be treated as a Capital Contribution by that Member or entitle the Member to an increase in that Member's Percentage Interest. The loan amount shall be a debt due from the Company, repayable out of the Company's assets, and bear interest at a rate equal to the greater of (i) the Prime Rate or (ii) if the money lent to the Company was borrowed by the Member, the interest rate at which the Member borrowed the money, but in either case no greater than the maximum rate permitted by law. Notwithstanding the foregoing, no Member shall be required to make any loans to the Company. C. The Members acknowledge that any Member, Manager or Affiliate of a Member or Manager (each, a "Lender") who loans money to the Company pursuant to this Section 3.5 shall have rights ("Rights"), the exercise of which may be in conflict with the Company's best interests. In that regard, the Members hereby authorize, agree and consent to the 18
#421466

Lender's exercise of any of Lender's Rights under any promissory note, security agreement or other loan document, even though the Lender's exercise of those rights may be detrimental to the Company or the Company's business. Further, the Members agree that any Lender's proper exercise of the Rights shall not be deemed a breach of that Lender's fiduciary duties (if any) to the Company. 3.6 Project Company Recourse Agreements. The parties hereto hereby acknowledge and agree that the Manager (and/or one (1) or more of its Affiliates) may be required to provide one (1) or more repayment guaranties, completion guaranties, environmental indemnities and/or other guaranties, documents or other agreements that may impose recourse liability upon the Manager (and/or its Affiliates) in connection with construction and/or other financing obtained by one (1) or more of the Project Companies (collectively, the "Project Company Recourse Agreements"). Any amounts paid by the Manager (or its Affiliates) under any Project Company Recourse Agreement shall not be treated as Manager Loans or otherwise be required to be reimbursed by the Company to the Manager (or such Affiliates). Notwithstanding the foregoing, it is anticipated that any amounts paid by the Manager (or its Affiliates) under the Project Company Recourse Agreements will be treated as loans made by the Manager (or such Affiliates) to the applicable Project Company in accordance with its Project Company Agreement on terms and conditions similar to the terms and conditions of Manager Loans. ARTICLE IV MEMBERS 4.1 Limited Liability. Except as expressly set forth in this Agreement or required by law, no Member shall be personally liable for any debt, obligation, or liability of the Company, whether that liability or obligation arises in contract, tort, or otherwise. 4.2 Admission of Additional Members. The Manager may admit to the Company additional Members, from time to time, subject to the following: A. The Manager must consent to the admission;

B. The additional Member shall make a Capital Contribution in such amount and on such terms as the Manager determines to be appropriate based upon the needs of the Company, the net value of the Company's assets, the Company's financial condition, and the benefits anticipated to be realized by the additional Member; C. No additional Member shall be admitted if the effect of such admission would be to terminate the Company within the meaning of Code Section 708(b); and D. Agreement. Notwithstanding the foregoing, Assignees may only be admitted as substitute Members in accordance with Article VIII. The Manager shall amend Exhibit A attached hereto 19
#421466

The additional Member agrees to be bound by the terms of this

on the admission of additional Members to set forth the Members' names, addresses, Capital Contributions and Percentage Interests. 4.3 Withdrawals, Resignations or Retirements. No Member may withdraw, resign or retire from the Company. 4.4 Termination of Membership Interest. Upon (a) the Transfer of a Member's Membership Interest in violation of Article VIII, (b) the occurrence of an Optional Purchase Event as to such Member, or (c) the withdrawal, resignation or retirement of a Member in violation of Section 4.3, the Membership Interest of a Member shall be terminated by the Manager and thereafter that Member shall be an Assignee only unless such Membership Interest shall be purchased by the Company and/or the remaining Members as provided in Article IX. Each Member acknowledges and agrees that such termination or purchase of a Membership Interest upon the occurrence of any of the foregoing events is not unreasonable under the circumstances existing as of the date hereof. 4.5 Competing Activities. The Members and their officers, directors, shareholders, partners, members, managers, agents, employees and Affiliates may engage or invest in, independently or with others, any business activity of any type or description, including without limitation those that might be the same as or similar to the Company's business and that might be in direct or indirect competition with the Company. Neither the Company nor any Member shall have any right in or to such other ventures or activities or to the income or proceeds derived therefrom. The Members shall not be obligated to present any investment opportunity or prospective economic advantage to the Company, even if the opportunity is of the character that, if presented to the Company, could be taken by the Company. The Members shall have the right to hold any investment opportunity or prospective economic advantage for their own account or to recommend such opportunity to Persons other than the Company. Each Member acknowledges that the other Members and their Affiliates own and/or manage other businesses, including businesses that may compete with the Company and for the Members' time. Each Member hereby waives any and all rights and claims which they may otherwise have against the other Members and their officers, directors, shareholders, partners, members, managers, agents, employees and Affiliates as a result of any of such activities. 4.6 Transactions With The Company. Subject to any limitations set forth in this Agreement and with the prior approval of the Manager, a Member or an Affiliate of a Member may transact business with the Company so long as the transaction is not expressly prohibited by this Agreement and so long as the terms and conditions of such transaction, on an overall basis, are fair and reasonable to the Company and are at least as favorable to the Company as those terms and conditions that are generally available in similar transactions from Persons operating at arm's length and, in the case of services, from Persons capable of performing similar services. Subject to other applicable laws, such Member has the same rights and obligations with respect thereto as a Person who is not a Member. 4.7 Remuneration To Members. Except as otherwise specifically provided in this Agreement or pursuant to a transaction permitted by Section 4.6, no Member or an Affiliate of a 20
#421466

Member is entitled to remuneration for services rendered or goods provided to, or on behalf of, the Company. 4.8 Members Are Not Agents. Pursuant to Section 5.1 and the Articles, the management of the Company is vested in the Manager. Other than the Manager, the Members shall have no power to participate in the management of the Company except as expressly authorized by this Agreement or the Articles and except as expressly required by the Act. No Member, acting solely in the capacity of a Member, is an agent of the Company nor does any Member, unless expressly and duly authorized in writing to do so by the Manage, have any power or authority to (a) bind or act on behalf of the Company in any way, (b) pledge its credit, (c) execute any instrument on its behalf, or (d) render it liable for any purpose. Each Member shall indemnify, defend and hold harmless the Company and the other Members from and against any and all loss, cost, expense, liability or damage arising from or relating to any action by such Member in contravention of this Section 4.8. 4.9 Voting Rights. Except as expressly provided in this Agreement, the Articles or required by law, Members shall have no voting, approval or consent rights and, to the extent permitted by applicable law, each Member waives that Member's right to vote on any matters other than those set forth in this Section 4.9. A. Unanimous Approval. The affirmative vote of all Members (not including for such purposes the Percentage Interests held by Members who are the subject of an Optional Purchase Event or an assignor of a Membership Interest) shall be required for: (i) Any amendment of the Articles; and

(ii) A decision to compromise the obligation of a Member to make a Capital Contribution or return money or property paid or distributed in violation of the Act. B. Approval by Members Holding a Majority Interest. Except as set forth in Section 5.3B, in all other matters in which a vote, approval or consent of the Members is required, a vote, consent or approval of a Majority Interest (or, in instances in which there are defaulting or remaining members, non-defaulting or remaining Members who hold a majority of the Percentage Interests held by all non-defaulting or remaining Members) shall be sufficient to authorize or approve such act. 4.10 Member Meetings. No annual or regular meetings of the Members are required. However, if such meetings are held, meeting notices and procedures shall be in accordance with Corporations Code Section 17104 or any applicable successor statue, except that Corporations Code Section 17104(h)(2) shall not apply to any meetings of the Members. Any action that may be taken by Members under this Agreement may be taken by a written consent executed by Members having not less than the aggregate Percentage Interests that would be necessary to take that action at a meeting at which all Members entitled to vote thereon were present and voted. Written consent shall be governed by Corporations Code Section 17104(1), except that notwithstanding anything to the contrary in Corporations Code Section 17104(1), action taken by 21
#421466

written consent shall be effective as of the date set forth in the consent. ARTICLE V MANAGEMENT AND CONTROL OF THE COMPANY 5.1 Management of the Company by the Manager.

A. Exclusive Management by the Manager. Subject to Section 5.3B, the business, property and affairs of the Company shall be managed exclusively by the Manager. Except for situations in which the approval of the Members is expressly required by this Agreement, the Manager shall have full, complete and exclusive authority, power, and discretion to manage and control the business, property and affairs of the Company, to make all decisions regarding those matters and to perform any and all other acts or activities customary or incident to the management of the Company's business, property and affairs. B. Agency Authority of the Manager. Subject to Section 5.3B, the Manager acting alone is authorized to endorse checks, drafts, and other evidence of indebtedness made payable to the order of the Company, and the Manager acting alone may sign any checks, drafts, and other instruments obligating the Company to pay money, and may sign contracts and obligations on behalf of the Company. 5.2 Election of the Manager.

A. Number, Term, and Qualifications. The Company shall initially have one (1) Manager who shall be WREOF I Management, LLC. Unless he, she or it resigns or is removed, the Manager shall hold office until a successor shall have been elected and qualified. A Manager need not be a Member, an individual, a resident of the State of California, or a citizen of the United States. B. Resignation. The Manager may resign at any time by giving written notice to the Members without prejudice to the rights, if any, of the Company under any contract to which the Manager is a party. The resignation of the Manager, if the Manager is also a Member, shall not (i) affect the Manager's rights as a Member; (ii) constitute a withdrawal of a Member; or (iii) affect any rights the Manager or the Manager's Affiliate may have under any written agreement with the Company. C. Removal. The Manager may be removed at any time, with cause, by the affirmative vote of a Majority Interest, at a meeting called expressly for that purpose, or by the written consent of a Majority Interest. Any removal shall be without prejudice to the rights, if any, of the Manager under any employment contract and, if the Manager is also a Member, shall not affect the Manager's rights as a Member or constitute a withdrawal of a Member. For purposes of this Section, "cause" shall mean fraud, gross negligence, willful misconduct or embezzlement. 22
#421466

A Manager also may be removed by the affirmative vote or written consent of a Majority Interest if such Manager becomes incapable of fulfilling his or her obligations under this Agreement because of injury or physical or mental illness and such incapacity shall exist for thirty (30) working days in the aggregate during any consecutive six (6) month period. D. Vacancies. If any vacancy shall occurring for any reason in the position of the Manager, such position may be filled by the affirmative vote of a Majority Interest. 5.3 Powers of the Manager.

A. Powers of the Manager. Without limiting the generality of Section 5.1, but subject to Section 5.3B and to the express limitations set forth elsewhere in this Agreement, the Manager shall have all necessary powers to manage and carry out the purposes, business, property, and affairs of the Company, including, without limitation, the power to exercise on behalf and in the name of the Company all of the powers described in Corporations Code Section 17003, including, without limitation, the power to: (i) Acquire, purchase, renovate, improve, alter, rebuild, demolish, replace, and own real property and any other property or assets, including without limitation, Secured Debt or other indebtedness secured by real property, that the Manager determines is necessary or appropriate or in the interest of the business of the Company, and to acquire options for the purchase of any such property; (ii) Sell, exchange, lease, or otherwise dispose of the real property and other property and assets owned by the Company, or any part thereof, or any interest therein; (iii) Borrow money from any party, including the Manager and its Affiliates, issue evidences of indebtedness in connection therewith, refinance, increase the amount of, modify, amend, or change the terms of, or extend the time for the payment of any indebtedness or obligation of the Company, secure such indebtedness by mortgage, deed of trust, pledge, security interest, or other lien on Company assets; (iv) Guarantee the payment of money or the performance of any contract or obligation of any Person; (v) Sue on, defend, or compromise any and all claims or liabilities in favor of or against the Company, including without limitation, pursuing judicial foreclosure, non-judicial foreclosure or other appropriate proceedings or otherwise exercise such rights as may be deemed necessary by the Manager in order to realize the benefits with respect to any Secured Debt or other indebtedness secured by real property; submit any or all such claims or liabilities to arbitration; and confess a judgment against the Company in connection with any litigation in which the Company is involved;

23
#421466

(vi) Retain legal counsel, auditors, and other professionals in connection with the Company business and to pay therefor such remuneration as the Manager may determine; (vii) Cause the Company to form one (1) or more Project Companies and to acquire a direct and/or indirect ownership interest therein; and (viii) Do any and all acts on behalf of the Company, and exercise all the rights, duties and obligations of the Company, with respect to the Project Companies including, without limitation, (i) causing the Project Companies to undertake any of the actions that the Manager may cause the Company to undertake as described above in this Section 5.3 (including, but not limited to, the sale or financing of all or any portion of any Project Companies' assets), (ii) electing whether to cause the Company to make any debt advances and/or any equity contributions to the Project Companies, and (iii) exercising any and all other rights, duties and obligations of the Company with respect to the Project Companies, including, but not limited to, voting, participating in management and making any and all decisions required or permitted to be made by the Company in connection with the Project Companies, all on such terms and conditions as are determined in the sole and absolute discretion of the Manager. B. Limitations on Power of the Manager. The Manager shall not have authority hereunder to cause the Company to engage in the following transactions without first obtaining the affirmative vote or written consent of a Majority Interest (or such greater Percentage Interest set forth below) of the Members: (i) Except with respect to the Project Companies, the merger of the Company with another limited liability company; provided in no event shall a Member be required to become a general partner in a merger with a limited partnership without his express written consent or unless the agreement of merger provides each Member with the dissenter's rights described in the Act; (ii) Except with respect to the Project Companies, the merger of the Company with a corporation or a general partnership or other Person shall require the affirmative vote or written consent of all Members; (iii) (iv) as set forth in Section 2.7; (v) business of the Company; The establishment of different classes of Members; An alteration of the primary purpose or business of the Company Any act which would make it impossible to carry on the ordinary

(vi) Any other transaction described in this Agreement as requiring the vote, consent, or approval of the Members.

24
#421466

5.4 Performance of Duties; Liability of Manager. The Manager shall not be liable to the Company or to any Member for any loss or damage sustained by the Company or any Member, unless the loss or damage shall have been the result of fraud, deceit, gross negligence, reckless or intentional misconduct, or a knowing violation of law by the Manager. In performing its duties, the Manager shall be entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, of the following persons or groups unless they have knowledge concerning the matter in question that would cause such reliance to be unwarranted and provided that the Manager acts in good faith and after reasonable inquiry when the need therefor is indicated by the circumstances: A. One or more officers, employees or other agents of the Company whom the Manager reasonably believes to be reliable and competent in the matters presented; B. Any attorney, independent accountant, or other person as to matters which the Manager reasonably believes to be within such person's professional or expert competence; or C. A committee upon which the Manager does not serve, duly designated in accordance with a provision of the Articles or this Agreement, as to matters within its designated authority, which committee the Manager reasonably believes to merit competence. 5.5 Devotion of Time. The Manager is not obligated to devote all of its time or business efforts to the affairs of the Company. The Manager shall devote whatever time, effort, and skill as it deems appropriate for the operation of the Company. 5.6 Competing Activities. The Manager and its agents, employees and Affiliates may engage or invest in, independently or with others, any business activity of any type or description, including without limitation those that might be the same as or similar to the Company's business and that might be in direct or indirect competition with the Company. Neither the Company nor any Member shall have any right in or to such other ventures or activities or to the income or proceeds derived therefrom. The Manager shall not be obligated to present any investment opportunity or prospective economic advantage to the Company or any Member, even if the opportunity is of the character that, if presented to the Company or such Member, could be taken by the Company or such Member. The Manager shall have the right to hold any investment opportunity or prospective economic advantage for its own account or to recommend such opportunity to Persons other than the Company. The Members acknowledge that the Manager and its Affiliates own and/or manage other businesses, including businesses that may compete with the Company and for the Managers and its principals' time. The Members hereby waive any and all rights and claims which they may otherwise have against the Manager and its officers, directors, shareholders, partners, members, managers, agents, employees, and Affiliates as a result of any of such activities. 5.7 Transactions Between the Company and the Manager. Notwithstanding that it may constitute a conflict of interest, the Manager may, and may cause its Affiliates to, engage in any transaction (including, without limitation, the purchase, sale, lease, or exchange of any 25
#421466

property or the rendering of any service, or the establishment of any salary, other compensation, or other terms of employment) with the Company so long as such transaction is not expressly prohibited by this Agreement and so long as the terms and conditions of such transaction, on an overall basis, are fair and reasonable to the Company and are at least as favorable to the Company as those terms and conditions that are generally available in similar transactions from Persons operating at arms length and, in the case of services, from Persons capable of performing similar services. A transaction between the Manager and/or its Affiliates, on the one hand, and the Company, on the other hand, shall be conclusively determined to constitute a transaction on terms and conditions, on an overall basis, fair and reasonable to the Company and at least as favorable to the Company as those generally available in a similar transaction between parties operating at arm's length if a Majority Interest of the Members having no interest in such transaction (other than their interests as Members) affirmatively vote or consent in writing to approve the transaction. Notwithstanding the foregoing, the Manager shall not have any obligation, in connection with any such transaction between the Company and the Manager or an Affiliate of the Manager, to seek the consent of the Members. 5.8 Payments to the Manager. Except as specified in this Agreement, no Manager or Affiliate of a Manager is entitled to remuneration for services rendered or goods provided to the Company. In addition to the distributions of cash and other Property and allocations of Profit, Loss, Gain or Loss on Disposition and other items provided for in this Agreement, the Manager and its Affiliates shall receive only the following payments: A. Asset Management Fee. As consideration for providing various management services to the Company, the Company shall be required to pay an annual asset management fee ("Asset Management Fee") to the Manager equal to the greater of (i) one percent (1%) of the total acquisition and development costs incurred with respect to the Projects (including, without limitation, the amount of any Project Company Mortgages) and the Secured Debt and (ii) the Minimum Asset Management Fee. The Asset Management Fee will be paid in monthly installments equal to the greater of (x) the product of 8,333/100,000ths percent (0.08333%) and the average acquisition and development costs incurred with respect to each Project (including, without limitation, the amount of any Project Company Mortgages) and Secured Debt for each month or (y) one twelfth of the Minimum Asset Management Fee, as applicable. The average acquisition and development costs for any particular calendar month shall be calculated by dividing (i) the sum of (A) the total amount of such costs incurred as of the first day of the applicable month, plus (B) the total amount of such costs incurred as of the last day of the applicable month, by (ii) two (2)). The Asset Management Fee shall be paid in arrears on or before the tenth (10th) day of each calendar month with respect to all of the Projects and the Secured Debts held by the Project Companies during the previous month. For purposes of the foregoing calculation, any Projects or Secured Debts acquired or disposed of by any Project Company on any day other than the first day of any calendar month shall be deemed to be acquired or disposed of on the last day of such calendar month. The Asset Management Fee for any calendar month shall be deemed to be earned on the last day of the calendar month for which the acquisitions and development costs are incurred. For any partial months of the Company, the 26
#421466

Asset Management Fee shall be prorated on a daily basis and shall be payable in all events upon the dissolution of the Company. The Members acknowledge and agree that the Manager may require the Members to make Capital Contributions to pay for the Asset Management Fee and any Member that fails to make any such Capital Contribution shall be subject to the remedies set forth in Section 3.1E. For financial and income tax reporting purposes, the Asset Management Fee shall be treated as an expense of the Company and as a guaranteed payment within the meaning of Section 707(c) of the Code. To the extent all or any portion of such fee is not paid in full prior to the liquidation of the Company, such unpaid portion of such fee shall constitute a debt of the Company payable upon such liquidation. B. Developer Promote. The Members acknowledge and agree that Williams Homes, Inc., a California corporation ("WHI"), which is an Affiliate of the Manager, may be retained to perform certain development services for one (1) or more of the Project Companies. As consideration for rendering such services, the Manager shall make certain distributions and/or payments to WHI from its own funds in such amounts and at such time as is determined in the sole and absolute discretion of the Manager. C. Fees Paid by Project Companies. The Project Companies will pay to WHI and/or other Affiliates of the Manager, normal and customary fees for development, general contracting, construction management, warranty, disposition, acquisition, sales and marketing, brokerage, property management services and general and administrative services provided in connection with some or all of the Projects (only to the extent that those specific services are provided). The combined construction management and general and administrative services fees to be paid to WHI and/or other Affiliates of the Manager with respect to each Project shall equal the product of (i) three and one-half percent (3.5%) and (ii) the full gross proceeds anticipated to be realized by the applicable Project Company from the sale, exchange or other disposition of the applicable Project, without deduction for any costs or expenses associated with such sale, exchange or disposition. The combined construction management and general and administrative services fees shall be paid as follows: (a) The Manager shall estimate in good faith (1) the estimated full gross proceeds anticipated to be realized by the applicable Project Company from the sale, exchange or other disposition of the applicable Project, and (2) the anticipated time period, in months, from the acquisition of the applicable Project through and including the anticipated sale, exchange or other disposition of the applicable Project; and (b) each month, an amount equal to the product of (1) a fraction, the numerator of which is one (1) and the denominator of which is the number of months determined pursuant to clause (2) of the preceding subparagraph (a), and (2) the amount determined pursuant to clause (1) of the preceding subparagraph (a). Upon the sale, exchange or disposition of the applicable Project, the actual amount of the combined construction management and general and administrative services fees payable to WHI and/or other Affiliates of the Manager with respect to such Project shall be calculated. In the event that the actual amount of the combined construction management and general and administrative services fees payable to WHI and/or other Affiliates of the Manager with respect to such Project exceed the amounts theretofore paid based on the Manager's good faith estimates, the excess shall be paid in connection with the closing of the sale, exchange or disposition of the applicable Project. In the event that the amount of the combined construction 27
#421466

management and general and administrative services fees paid to WHI and/or other Affiliates of the Manager with respect to a Project based on the Manager's good faith estimates exceed the actual amount of the combined construction management and general and administrative services fees payable with respect to such Project, WHI and/or such Affiliates of the Manager shall return such excess to the applicable Project Company not more than fifteen (15) days after the closing of the sale, exchange or disposition of the applicable Project. Any brokerage fees paid to WHI and/or other Affiliates of the Manager shall not exceed one and one-half percent (1.5%) of the full gross proceeds realized by the applicable Project Company from the sale, exchange or other disposition of the applicable Project; provided, that the total brokerage fees paid in connection with the sale, exchange or other disposition of a Project, including to third parties, shall be on market terms and conditions. A warranty services fee shall be paid to WHI and/or other Affiliates of the Manager with respect to each Project in an amount equal to the product of (i) one percent (1%) and (ii) the full gross proceeds realized by the applicable Project Company from the sale, exchange or other disposition of the applicable Project, without deduction for any costs or expenses associated with such sale, exchange or disposition. The warranty services fee shall be paid at the time of sale, exchange or other disposition of the applicable Project. Any and all fees paid by any Project Company to WHI or the Manager (and/or their respective Affiliates), including, without limitation, the fees described above in this Section 5.8, shall constitute the sole and exclusive property of WHI and/or the Manager (and/or their respective Affiliates), as applicable, and neither the Company nor any Member shall have any right in or to any such fees. 5.9 Expenses. The Manager is authorized to cause the Company to pay and/or to reimburse the Manager (and/or its Affiliates) all costs and expenses incurred in connection with the organization, operation and liquidation of the Company (collectively, "Expenses"), including, without limitation: (i) costs and expenses associated with the organization, formation, operation, dissolution, winding up and termination of the Company; (ii) legal, accounting, audit, registration, licensing, financial, custodial, consulting and other professional fees incurred by the Company; (iii) banking, brokerage, broken-deal, registration, qualification, finder's, depository and similar costs, fees or commissions incurred by the Company; (iv) transfer, capital and other taxes, duties and costs incurred by the Company in acquiring, holding, selling or otherwise disposing of the Projects, the Secured Debts and the Project Company Interests; (v) insurance premiums, indemnifications, costs of litigation and other extraordinary expenses incurred by the Company; (vi) costs of financial statements and other reports to the Members (exclusive of any costs incurred by the Manager in preparing such statements and/or reports), as well as costs of all governmental returns, reports, tax returns and other filings for the Company; (vii) costs of meetings of the Members (excluding travel and other out-of-pocket costs incurred by the Members in attending such meetings); (viii) interest expenses incurred by the Company; (ix) amounts paid to or for the benefit of the Company, any Project, any Secured Debt and/or any Project Company, including, without limitation, any deposits, due diligence, pre-development and any other costs incurred with respect to any Project or Secured Debt acquired by any Project Company; (x) all costs associated with the liquidation of the Company and/or the Project Companies; (xi) the Asset Management Fee payable to the Manager; (xii) advertising and public 28
#421466

notice costs incurred by the Company; and (xii) any other direct reasonable out-of-pocket expenses incurred by the Manager (and/or its Affiliates) on behalf of the Company. The Manager (and its Affiliates) shall be reimbursed, without reduction to the Manager's Capital Account by the Company for any reasonable out-of-pocket costs and expenses incurred by the Manager (and/or its Affiliates) on behalf of the Company, including, without limitation, any Organization Costs that do not exceed the limitation set forth above. 5.10 Limitation of Liability.

A. Liability of Manager Limited to Managers Membership Interest Under no circumstances will any director, officer, shareholder, member, manager, partner, employee, agent or Affiliate of the Manager have any personal responsibility for any liability or obligation of the Manager (whether on a theory of alter ego, piercing the corporate veil, or otherwise), and any recourse permitted under this Agreement or otherwise of the Members or any former Member or the Company against the Manager will be limited to the Membership Interest of the Manager. B. Limited Liability. No Person who is a Manager of the Company shall be personally liable under any judgment of a court, or in any other manner, for any debt, obligation, or liability of the Company, whether that liability or obligation arises in contract, tort, or otherwise, solely by reason of being a Manager. 5.11 Membership Interest of the Manager. Except as otherwise provided in this Agreement, Membership Interest held by the Manager as a Member shall entitle the Manager to all the rights of a Member, including without limitation, the economic, voting, information and inspection rights of a Member. ARTICLE VI INCOME TAX ALLOCATIONS 6.1 Establishment and Maintenance of Capital Accounts. The Manager shall establish and maintain a single Capital Account for each Member which reflects each Member's Capital Contributions to the Company. Each Capital Account shall also reflect the allocations and distributions made pursuant to Articles VI and VII and otherwise be adjusted in accordance with Code Section 704 and the principles set forth in Regulations Sections 1.704-1(b) and 1.7042. The Members intend that the Company be treated as a partnership for tax purposes. On the Transfer of all or any part of a Member's Membership Interest as permitted by this Agreement, the Capital Account of the transferor, or portion thereof that is attributable to the Transferred interest, shall carry over to the transferee as prescribed in Regulations Section 1.704-1(b)(2)(iv). 6.2 Profit and Loss Allocations.

6.2.1 Operating Loss. For each Company Accounting Year, Loss from Company operations shall be allocated among the Members in the following order of priority 29
#421466

(for purposes of determining Capital Accounts under this Section 6.2.1 and Section 6.2.2: (i) Capital Accounts shall first be reduced by distributions other than distributions of Capital Receipts with respect to such Company Accounting year and (ii) a Member's Capital Account balance shall be deemed to be increased by such Member's share of Company Minimum Gain and Member Non-recourse Debt Minimum Gain determined as of the end of such Company Accounting Year): A. First, among the Members as necessary to cause each Member's Capital Account balance to equal such Member's Total Preference Amount (as defined in Section 6.3.1C); B. Second, after giving effect to the allocations made pursuant to Section 6.2.1A, among the Members as necessary to cause the Capital Account balance of each Member to at least equal such Member's First Preference Amount (as defined in Section 6.3.1B); C. Third, after giving effect to the allocations made pursuant to Sections 6.2.1A and 6.2.1B, among the Members as necessary to cause the Capital Account balance of each Member to equal zero; and D. Fourth, any balance, fifty percent (50%) to the Members, pro rata, in proportion to their respective Percentage Interests, and fifty percent (50%) to the Manager. 6.2.2 Operating Profit. For each Company Accounting Year, Profit from Company operations shall be allocated among the Members in the following order of priority: A. First, among the Members as necessary to increase each Member's Capital Account to at least equal such Member's First Preference Amount; B. Second, after giving effect to the allocations made pursuant to Section 6.2.2A, among the Members as necessary to cause the Capital Account balance of each Member to at least equal such Member's Total Preference Amount; C. Third, after giving effect to the allocations made pursuant to Sections 6.2.2A and 6.2.2B, among the Members as necessary to cause the portion of each Member's Capital Account balance exceeding such Member's Total Preference Amount to be in proportion to their respective Percentage Interests; and D. Fourth, any balance remaining after giving effect to the allocations made pursuant to Sections 6.2.2A through 6.2.2C, fifty percent (50%) to the Members, pro rata, in proportion to their respective Percentage Interests, and fifty percent (50%) to the Manager. 6.3 Allocations of Gain or Loss on Disposition. For purposes of determining allocations to the Member's Capital Accounts under this Section 6.3, Gain or Loss on Disposition shall be allocated prior to reducing such Capital Accounts by the distributions of Capital Receipts from the Disposition. 30
#421466

6.3.1 Gain on Disposition. Gain on Disposition shall be allocated among the Members in the following order of priority: A. First, to the Members in proportion to, and to the extent of, any deficits in their respective Capital Accounts until all such Capital Accounts have been restored to zero; B. Second, after giving effect to the allocations made pursuant to Section 6.3.1A, among the Members as necessary to cause the Capital Account balance of each Member to at least equal such Member's Undistributed Preferred Return ("First Preference Amount"); C. Third, after giving effect to the allocations made pursuant to Sections 6.3.1A and 6.3.1B, among the Members as necessary to cause the Capital Account balance of each Member to at least equal the sum of (i) such Member's First Preference Amount plus (ii) such Member's Invested Capital (each Member's "Total Preference Amount"); D. Fourth, after giving effect to the allocations made pursuant to Sections 6.3.1A through 6.3.1C, among the Members as necessary to cause the portion of each Member's Capital Account balance exceeding such Member's Total Preference Amount to be in proportion to their respective Percentage Interests; and E. Fifth, fifty percent (50%) to the Members, pro rata, in proportion to their respective Percentage Interests, and fifty percent (50%) to the Manager. 6.3.2. Loss on Disposition. Loss on Disposition shall be allocated among the Members in the following order of priority: A. First, among the Members as necessary to cause each Member's Capital Account balance to equal such Member's Total Preference Amount; B. Second, after giving effect to the allocations made pursuant to Section 6.3.2A, among the Members as necessary to cause the Capital Account balance of each Member to at least equal such Member's First Preference Amount; C. Third, after giving effect to the allocations made pursuant to Sections 6.3.2A and 6.3.2B, among the Members as necessary to cause the Capital Account balance of each Member to equal zero; and D. Fifth, fifty percent (50%) to the Members, pro rata, in proportion to their respective Percentage Interests, and fifty percent (50%) to the Manager. 6.3.3. Rules of Construction. A. For purposes of applying Section 6.3 as a result of a Disposition occurring with respect to part (but less than all) of any capital asset of the Company, a Member's 31
#421466

Capital Account balance shall be deemed to be increased by such Member's share of Company Minimum Gain and Member Non-recourse Debt Minimum Gain remaining after such Disposition as determined in accordance with the Regulations under Section 704(b). B. If there is insufficient Profit, Loss or Gain or Loss on Disposition to allocate to the Members pursuant to any subsection of Section 6.2 or 6.3 to cause every Member's Capital Account balance to equal the entire Capital Account balance described in such subsection with respect to such Member, the Profit, Loss or Gain or Loss on Disposition available to be allocated among the Members pursuant to said subsection shall be allocated in proportion to the amounts thereof that would have been allocated to each Member pursuant to such subsection if there had been sufficient amounts thereof to fully satisfy the requirements of such subsection with respect to every Member. C. Except as otherwise provided in this Article VI, an allocation of Company taxable income or taxable loss to a Member shall be treated as an allocation to such Member of the same share of each item of income, gain, loss and deduction that has been taken into account in computing such taxable income or taxable loss. 6.4. Minimum Gain Chargeback and Qualified Income Offset.

6.4.1 No Impermissible Deficits. Notwithstanding any other provision of this Agreement, taxable loss (or items of deductions) shall not be allocated to a Member to the extent that the Member has or would have, as a result of such allocations, an Adjusted Capital Account Deficit. Any taxable loss (or items of deduction) which otherwise would be allocated to a Member, but which cannot be allocated to such Member because of the application of the immediately preceding sentence, shall instead be allocated to the other Members. 6.4.2 Qualified Income Offset. In order to comply with the "qualified income offset" requirement of the Regulations under Code Section 704(b), and notwithstanding any other provision of this Agreement to the contrary except Section 6.4.3 below, in the event a Member for any reason (whether or not expected) has an Adjusted Capital Account Deficit, items of Profit and Gain on Disposition (consisting of a pro rata portion of each item of income comprising the Company's Profit and Gain on Disposition, including both gross income and gain for the taxable year) shall be allocated to such Member in an amount and manner sufficient to eliminate as quickly as possible the Adjusted Capital Account Deficit. 6.4.3 Minimum Gain Chargeback. In order to comply with the "minimum gain chargeback" requirements of Regulations Sections 1.704-2(f)(1) and 1.704-2(i)(4), and notwithstanding any other provision of this Agreement to the contrary, in the event there is a net decrease in a Member's share of Company Minimum Gain and/or Member Non-recourse Debt Minimum Gain during a Company Accounting Year, such Member shall be allocated items of income and gain for that year (and if necessary, other years) as required by and in accordance with Regulations Sections 1.704-2(f)(1) and 1.704-2(i)(4) before any other allocation is made. 6.5 Other Tax Allocation Provisions. 32
#421466

6.5.1 Income Characterization. For purposes of determining the character (as ordinary income or capital gain) of any Gain on Disposition allocated to the Members pursuant to Section 6.3 or 6.4, such portion of the taxable income of the Company allocated pursuant to Section 6.3 which is treated as ordinary income attributable to the recapture of depreciation shall, to the extent possible, be allocated among the Members in the proportion which (i) the amount of depreciation previously allocated to each Member bears to (ii) the total of such depreciation allocated to all Members. This Section 6.5.1 shall not alter the amount of allocations among the Members pursuant to Section 6.3 but merely the character of income so allocated. 6.5.2 Allocation of Profits, Losses and Distributions in Respect of a Transferred Interest. Notwithstanding the foregoing, in the event that any Members Percentage Interest changes during a Company Accounting Year for any reason, including the transfer of any Economic Interest in the Company or an adjustment of the Members Percentage Interests hereunder, the allocations of taxable income or loss under this Article VI, and distributions, shall be adjusted as necessary to reflect the varying interests of the Members during such year using an interim closing of the books method as of the date of such change or such other method as is approved by the Manager. However, for the purpose of accounting convenience and simplicity, the Company shall treat a transfer of, or an increase or decrease in, an Economic Interest which occurs at any time during a semi-monthly period (commencing with the semi-monthly period including the date hereof) as having been consummated on the last day of such semi-monthly period, regardless of when during such semi-monthly period such transfer, increase, or decrease actually occurs (i.e., sales and dispositions made during the first fifteen (15) days of any month will be deemed to have been made on the 15th day of the month). 6.5.3 Mandatory Allocations - Section 704(c) and Member Non-recourse Debt. A. Notwithstanding the foregoing, (i) in the event Code Section 704(c) or Code Section 704(c) principles applicable under Regulations Section 1.704-1(b)(2)(iv) require allocations of income or loss of the Company in a manner different than that set forth above, the provisions of Section 704(c) and the regulations thereunder shall control such allocations among the Members; and (ii) all tax deductions and taxable losses of the Company that, pursuant to Regulations Section 1.704-2(i), are attributable to a Member Non-recourse Debt for which a Member (or a Person related to such Member under Treasury Regulations Section 1.752-4(b)) bears the economic risk of loss (within the meaning of Regulations Section 1.752-2 shall be allocated to such Member as required by Regulations Section 1.704-2(c). B. Any item of income, gain, loss and deduction with respect to any property (other than cash) that has been contributed by a Member to the capital of the Company or which has been revalued for Capital Account purposes pursuant to Regulations Section 1.7041(b)(2)(iv) and which is required or permitted to be allocated to such Member for income tax purposes under Section 704(c) of the Code so as to take into account the variation between the tax basis of such property and its fair market value at the time of its contribution shall be allocated solely for income tax purposes in the manner so required or permitted under Code 33
#421466

Section 704(c) using the "traditional method" described in Regulation Section 1.704-3(b) (or any successor Regulation), such allocations to be made as shall be reasonably determined by the Manager; provided, however, that curative allocations consisting of the special allocation of gain or loss upon the sale or other disposition of the contributed property shall be made in accordance with Regulations Section 1.704-3(c) to the extent necessary to eliminate any disparity, to the extent possible, between the Members' book and tax Capital Accounts attributable to such property; and further provided, however, that any other method allowable under applicable Regulations may be used in connection with any contribution of property or following any revaluation pursuant to Section 6.10 as shall be determined by the Manager. Any elections or other decisions relating to allocations under this Section 6.5.3B will be made in any manner that the Manager reasonably determines to reflect the purpose and intention of this Agreement. Allocations under this Section 6.5.3B are solely for purposes of federal, state and local taxes and shall not affect, or in any way be taken into account in computing, any Member's Capital Account or share of Profit, Loss, Gain or Loss on Disposition or other items or distributions under any provision of this Agreement. 6.5.4 References to Regulations. Any reference in this Agreement to a provision of final, proposed and/or temporary Regulations shall, in the event such provision is modified or renumbered, be deemed to refer to the successor provision as so modified or renumbered, but only to the extent such successor provision applies to the Company under the effective date rules applicable to such successor provision or the Manager otherwise so elects under applicable elections contained in such Regulations. 6.5.5 Tax Definitions. A. "Company Minimum Gain" has the meaning ascribed to the term "Partnership Minimum Gain" in Regulations Section 1.704-2(d)(1) (and includes the Company's Share of the Company Minimum Gain of any subsidiary). B. "Member Non-recourse Debt" has the meaning for the term "Partner Non-recourse Debt" set forth in Regulations Sections 1.704-2(b)(4). C. "Member Non-recourse Debt Minimum Gain" means an amount, with respect to each Member Non-recourse Debt, equal to the Company Minimum Gain that would result if such Member Non-recourse Debt were treated as a Non-recourse Liability, determined in accordance with Regulations Section 1.704-2(i)(2). D. "Member Non-recourse Deductions" has the meaning for the term "Partner Non-recourse Deductions" set forth in Regulations Section 1.704-2(i). The amount of Member Non-recourse Deductions with respect to a Member Non-recourse Debt for a Company Account Year equals the excess, if any, (i) of the net increase, if any, in the amount of the Company Minimum Gain attributable to such Member Non-recourse Debt during such Company Accounting Year, over (ii) the aggregate amount of any distributions during such year to the Member that bears the economic risk of loss for such Member Non-recourse Debt to the extent such distributions are from proceeds of such Member Non-recourse Debt and are allocable 34
#421466

to an increase in Member Non-recourse Debt Minimum Gain attributable to such Member Nonrecourse Debt, determined according to the provisions of Regulations Section 1.704-2(i). E. "Non-recourse Deductions" has the meaning set forth in Regulations Section 1.704-2(c). The amount of Non-recourse Deductions for a Company Accounting Year equals the excess, if any, of the net increase, if any, in the amount of Company Minimum Gain during that Company Accounting Year, over the aggregate amount of any distributions during that Company Accounting Year of proceeds of a Non-recourse Liability that are allocable to an increase in Company Minimum Gain, determined according to the provisions of Regulations Section 1.704-2(c). F. "Non-recourse Liability" has the meaning set forth in Regulations Section 1.704-2(b)(3). 6.6 Curative Allocations. The parties intend that the foregoing tax allocation provisions of this Article VI shall produce final Capital Account balances of the Members that will permit liquidating distributions that are made in accordance with final Capital Account balances under Section 7.3C hereof to be made (after unpaid loans and interest thereon, including those owed to Members have been paid) in a manner identical to the order of priorities set forth in Section 7.2. To the extent that the tax allocation provisions of this Article VI would fail to produce such final Capital Account balances, (i) such provisions shall be amended by the Manager if and to the extent necessary to produce such result and (ii) taxable income and taxable loss of the Company for prior open years (or items of gross income and deduction of the Company for such years) shall be reallocated by the Manager among the Members to the extent it is not possible to achieve such result with allocations of items of income (including gross income) and deduction for the current year and future years, as Approved by the Manager. This Section 6.6 shall control notwithstanding any reallocation or adjustment of taxable income, taxable loss, or items thereof by the Internal Revenue Service or any other taxing authority. The Manager shall have the power to amend this Agreement without the consent of the other Members, as it reasonably considers advisable, to make the allocations and adjustments described in this Section 6.6. To the extent that the allocations and adjustments described in this Section 6.6 result in a reduction in the distributions that any Member will receive under this Agreement compared to the amount of the distributions such Member would receive if all such distributions were made pursuant to the order of priority set forth in Section 7.2, the Company may make a guaranteed payment (within the meaning of Section 707(c) of the Code) to such Member (to be made at the time such Member would otherwise receive the distributions that have been reduced) to the extent such payment does not violate the requirements of Sections 704(b) and 514(c)(9)(E) of the Code or may take such other action as reasonably determined by the Manager to offset such reduction. 6.7 Basis Elections. In the event of a transfer of all or any part of a Member's interest in the Company, the Company shall elect to adjust the basis of the Company's assets under Code Section 754 if approved by the Manager. The transferor or transferee of a Company interest shall pay all costs of preparing and filing all instruments or documents necessary to effectuate such election if made. 35
#421466

6.8 General Allocation Rules. All Profit and Loss of the Company and Gain or Loss on Disposition shall be allocated with respect to each Company Accounting Year (or part thereof) as of the end of, and within ninety (90) days after the end of, such year, or as soon thereafter as if practically possible. All Profit and Loss and Gain or Loss on Disposition shall be allocated to the Members shown on the records of the Company to have been Members as of the last day of the Company Accounting Year for which such allocation is to be made, except that, if a Member sells or exchanges its interest in the Company or otherwise admitted as a substituted Member, the Profit or Loss and Gain or Loss on Disposition shall be allocated between the transferor and the transferee by taking into account their varying interests during the Company Accounting Year in accordance with Code Section 706(d), using the interim closing of the books method or such other method as shall be approved by the Manager. 6.9 Sharing of Company Non-recourse Debt. Throughout the term of the Company, the non-recourse debt of the Company (other than Member Non-recourse Debt) shall be allocated for tax purposes among the Members in accordance with their then respective Percentage Interests. To the extent that any Member's share of such non-recourse debt as so specified exceeds the amounts referred to in Regulations Sections 1.752-3(a)(1) and (2), it is intended that the foregoing shares shall be viewed and treated as reasonably consistent with allocations (which have substantial economic effect) of some significant item of partnership income or gain within the meaning of Regulations Section 1.752-3(a)(3). 6.10 Adjustment of Gross Asset Value. Gross Asset Value, with respect to any asset, is the adjusted basis for federal income tax purposes of that asset, except as follows: 6.10.1 The initial Gross Asset Value of any asset contributed (or deemed contributed under Regulations Section 1.708-1(b)(1)(iv)) by a Member to the Company will be the fair market value of the asset on the date of the contribution, as reasonably determined by the Manager. 6.10.2 The Gross Asset Values of all Company assets will be adjusted to equal the respective fair market values of the assets, as reasonably determined by the Manager: A. If the Manager determines that an adjustment is necessary or appropriate to reflect the relative economic interests of the Members of the Company, as a result of (1) the acquisition of an additional interest in the Company by any new or existing Member in exchange for more than a de minimis capital contribution; or (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; and B. As of the liquidation of the Company within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g). 6.10.3 The Gross Asset Value of any Company asset distributed to any Member will be the gross fair market value of the asset on the date of distribution as reasonably determined by the Manager. 36
#421466

6.10.4 The Gross Asset Values of Company assets will be increased or decreased to reflect any adjustment to the adjusted basis of the assets under Code Section 734(b) or 743(b), but only to the extent that the adjustment is taken into account in determining Capital Accounts under Regulations Section 1.704-1(b)(2)(iv)(m), provided that Gross Asset Values will not be adjusted under this Section 6.10.4 to the extent that the Manager determines that an adjustment under Section 6.10.2 is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment under this Section 6.10.4. After the Gross Asset Value of any asset has been determined or adjusted under Section 6.10.1, 6.10.2 or 6.10.4, Gross Asset Value will be adjusted by the depreciation taken into account with respect to the asset for purposes of computing Profit or Loss. ARTICLE VII DISTRIBUTIONS 7.1 Net Available Cash from Operations. The Manager shall, at the end of each quarter (or such other period, at the Manager's discretion), determine the amount of Net Available Cash from operations, if any, and apply or distribute Net Available Cash, as set forth below within thirty (30) days after the end of each such quarter (or such other period, at the Manager's discretion), subject to the terms of Section 7.4, in the following order and priority: A. First, to the Members, pro rata in proportion to the respective Undistributed Preferred Return of each Member, until each Member has received distributions pursuant to this Section 7.1A in an amount equal to such Member's Undistributed Preferred Return; B. Second, to the Members, pro rata in proportion to the respective Invested Capital of each Member, until each Member has received distributions pursuant to this Section 7.1B in an amount equal to such Member's Invested Capital; and C. The balance, if any, fifty percent (50%) to the Members, pro rata, in proportion to their respective Percentage Interests, and fifty percent (50%) to the Manager. 7.2 Net Mortgage Proceeds and Capital Receipts from Disposition or Refinancing. The Manager shall upon the occurrence of any event giving rise to Net Mortgage Proceeds or Capital Receipts, determine the amount of Net Mortgage Proceeds and Capital Receipts, if any, and apply or distribute (as applicable) Net Mortgage Proceeds and Capital Receipts as set forth below within fifteen (15) days after receipt thereof by the Company, subject to the terms of Section 7.4, in the following order and priority: A. First, to the Members, pro rata in proportion to the respective Undistributed Preferred Return of each Member, until each Member has received distributions pursuant to this Section 7.2A in an amount equal to such Member's Undistributed Preferred Return; 37
#421466

B. Second, to the Members, pro rata in proportion to the respective Invested Capital of each Member, until each Member has received distributions pursuant to this Section 7.2B in an amount equal to such Member's Invested Capital; and C. The balance, if any, fifty percent (50%) to the Members, pro rata, in proportion to their respective Percentage Interests, and fifty percent (50%) to the Manager. 7.3 Proceeds and Distribution in Liquidation. After determining that all the known debts and liabilities of the Company, including, without limitation, debts and liabilities to Members who are creditors of the Company, have been paid or adequately provided for, the proceeds received by the Company in connection with the liquidation and winding up of the Company shall applied by the Liquidator in the following order of priority: A. First, to the payment of expenses incurred in dissolution and termination;

B. Second, to the payment of creditors of the Company, except secured creditors whose obligations will be assumed or otherwise transferred on a liquidation of the Company property and assets; C. Third, to the Members, pro rata in proportion to the respective Undistributed Preferred Return of each Member, until each Member has received distributions pursuant to this Section 7.3C in an amount equal to such Member's Undistributed Preferred Return; D. Fourth, to the Members, pro rata in proportion to the respective Invested Capital of each Member, until each Member has received distributions pursuant to this Section 7.3D in an amount equal to such Member's Invested Capital; and E. The balance, if any, fifty percent (50%) to the Members, pro rata, in proportion to their respective Percentage Interests, and fifty percent (50%) to the Manager. 7.4 General Distribution Rules. The timing and amount of all distributions shall be in accordance with Sections 7.1, 7.2, 7.3 and 10.2. All distributions of cash shall be made to the Members shown on the records of the Company to have been Members on the date of the distribution. Distributions of Net Available Cash, Net Mortgage Proceeds and Capital Receipts made to a Member with respect to any Company Accounting Year shall be deemed to be advances on account of such Member's share of the distributable amounts thereof. For purposes of this Agreement, the term "distributable" with respect to such distributions shall mean the amount of such distributions as finally determined by the Manager for the Company Accounting Year in respect of which they were made. Any over-distribution thereof to any Member in respect of a Company Accounting Year shall be repaid by such Member to the Company and distributed to the Member(s) which has received an under-distribution on the later to occur of (i) thirty (30) days after the end of such Company Accounting Year, or (ii) thirty (30) days after the Manager has given notice thereof to such Member, which notice shall be given as soon as is practicable after the end of such Company Accounting Year. 38
#421466

7.5 Tax Draw. Notwithstanding the provisions of Sections 6.2 and 6.3 above, if the amount of any cash flow that would otherwise be distributed to any Member for any fiscal year of the Company is less than such Member's Tax Liability for such fiscal year ("Excess Tax Liability"), then such Member may request (by delivering written notice to the Manager within forty-five (45) days following the end of such fiscal year) a distribution of cash flow ("Tax Draw") from the Company in an amount equal to such Member's Excess Tax Liability. If the Manager determines that sufficient cash flow is available to satisfy the requested Tax Draw, then such Tax Draw shall be made to such Member to the extent of such cash flow. If more than one (1) Member requests a Tax Draw to be made to such Member in accordance with the provisions of this Section 7.5, and there is not sufficient cash flow to satisfy the requested Tax Draws of all such requesting Members, then any such cash flow shall be distributed to the requesting Members in proportion to their respective Excess Tax Liabilities. Distributions of Tax Draws shall be made on or before April 10 of the fiscal year following the fiscal year in which the determination of any Excess Tax Liability is made. Notwithstanding the foregoing, no Member shall be obligated to contribute additional capital or otherwise advance any funds to the Company in order to enable the Company to make Tax Draws in accordance with the foregoing provisions of this Section 7.5. Any and all Tax Draws made to any Member in accordance with the foregoing provisions of this Section 7.5 shall be treated as a draw against and repaid from future distributions that the Member receiving such Tax Draw (the "Recipient Member") is otherwise entitled to receive pursuant to this Article VII. If the distributions that would otherwise be made to any Recipient Member are not sufficient to fully repay any Tax Draws made to such Recipient Member, then the Recipient Member shall be obligated to contribute to the capital of the Company, in cash, within ten (10) business days following the liquidation of the Company an amount sufficient to fully repay all such Tax Draws. Any such contributions shall be concurrently distributed to the other Members in such a manner so as to cause the aggregate amount of cash flow and liquidation proceeds distributed to each Member throughout the term hereof to be equal as closely as possible to the cash flow and liquidation proceeds each such Member would have received if Tax Draws had not been made to any Recipient Member. 7.6 Source of Distributions. Each Member shall look solely to the assets of the Company for the return of its Capital Contributions and its share of distributions of the Company and shall have no recourse upon dissolution or otherwise against the Company, the Manager or any other Member. No holder of an interest in the Company shall have any right to receive any distributions except as provided in this Agreement or any right to demand or receive property other than cash upon dissolution and termination of the Company. 7.7 Restriction on Distributions. A. No distribution shall be made if, after giving effect to the distribution:

(i) The Company would not be able to pay its debts as they become due in the usual course of business; or (ii) The Company's total assets would be less than the sum of its total liabilities plus, unless this Agreement provides otherwise, the amount that would be needed, if the Company were to be dissolved at the time of the distribution, to satisfy the preferential rights 39
#421466

of other Members, if any, upon dissolution that are superior to the rights of the Member receiving the distribution. B. The Manager may base a determination that a distribution is not prohibited on any of the following: (i) Financial statements prepared on the basis of accounting practices and principles that are reasonable in the circumstances; (ii) (iii) A fair valuation; or Any other method that is reasonable in the circumstances.

Except as provided in Corporations Code Section 17254(e), the effect of a distribution is measured as of the date the distribution is authorized if the payment occurs within 120 days after the date of authorization, or the date payment is made if it occurs more than 120 days of the date of authorization. C. A Member or a Manager who votes for a distribution in violation of this Agreement or the Act is personally liable to the Company for the amount of the distribution that exceeds what could have been distributed without violating this Agreement or the Act if it is established that the Member or the Manager did not act in compliance with this Section 7.7 or Section 10.2. Any Member or Manager who is so liable shall be entitled to compel contribution from (i) each other Member or Manager who also is so liable and (ii) each Member for the amount the Member received with knowledge of facts indicating that the distribution was made in violation of this Agreement or the Act. 7.8 Return of Distributions. Members and Assignees who receive distributions made in violation of the Act or this Agreement shall return such distributions to the Company. Except for those distributions made in violation of the Act or this Agreement, no Member or Assignee shall be obligated to return any distribution to the Company or pay the amount of any distribution for the account of the Company or to any creditor of the Company. The amount of any distribution returned to the Company by a Member or Assignee or paid by a Member or Assignee for the account of the Company or to a creditor of the Company shall be added to the account or accounts from which it was subtracted when it was distributed to the Member or Assignee. 7.9 Tax Withholding. If any federal, foreign, state or local jurisdiction requires the Company to withhold taxes or other amounts with respect to any Member's allocable share of Profits, taxable income or any portion thereof, or with respect to distributions, the Company shall withhold from distributions or other amounts then due to such Member (or shall pay to the relevant taxing authority with respect to amounts allocable to such Member) an amount necessary to satisfy the withholding responsibility. In such a case, the Member for whom the Company has paid the withholding tax shall be deemed to have received the withheld distribution or other amount so paid, and to have paid the withholding tax directly. 40
#421466

ARTICLE VIII TRANSFER AND ASSIGNMENT OF MEMBERSHIP INTERESTS 8.1 Transfer and Assignment of Membership Interest. No Member (other than the Manager) shall Transfer all or any part of that Members Membership Interest except with the prior written consent of the Manager, which consent may be given or withheld, conditioned or delayed (as allowed by this Agreement or the Act), as the Manager may determine in its sole and absolute discretion. The Manager shall not be entitled to Transfer all or any part of its Membership Interest except with the prior written consent of a Majority Interest, which consent shall not be unreasonably withheld, conditioned or delayed. Transfers in violation of this Article VIII shall only be effective to the extent set forth in Section 8.7. After the consummation of any Transfer of any part of a Membership Interest, the Membership Interest so Transferred shall continue to be subject to the terms and provisions of this Agreement and any further Transfers shall be required to comply with all the terms and provisions of this Agreement. 8.2 Further Restrictions on Transfer of Interests.

A. In addition to other restrictions found in this Agreement, no Member shall Transfer all or any portion of that Members Membership Interest: (i) without compliance with applicable securities laws; (ii) if the Transfer would cause the Company's tax termination within the meaning of Code Section 708(b)(1)(B); (iii) if the Transfer would cause the Company to be treated as a "publicly traded partnership" within the meaning of Code Section 7704; or (iv) if the Transfer would cause the Company to be classified as a corporation within the meaning of Code Section 7701(a). B. Unless arrangements concerning withholding are reasonably determined by the non-Transferring Member (if such withholding is required of the Company), no Member shall be permitted to Transfer all or any portion of its interest in the Company to any Person, unless such Person is a United States Person as defined in Code Section 7701(a)(30) and is not subject to withholding of any federal tax. 8.3 Substitution of Members. An Assignee of a Membership Interest shall have the right to become a substitute Member only if (i) the requirements of Sections 8.1 and 8.2 are met; (ii) the Manager has consented to such substitution in its sole and absolute discretion; (iii) the Assignee executes an instrument satisfactory to the Manager accepting and adopting the terms and provisions of this Agreement; and (iv) the Assignee pays any reasonable expenses in connection with such Assignee's admission as a new Member. The admission of an Assignee as a substitute Member shall not result in the release of the Member who assigned the Membership Interest from any liability that such Member may have to the Company. 8.4 Permitted Transfers. Subject to compliance with Section 8.2, a Member may Transfer that Member's Membership Interest as follows (each, a "Permitted Transfer"):

41
#421466

A. to any Affiliate of the Member so long as that Member remains in voting control of the Affiliate, and at such time as the Member is no longer in voting control of such Affiliate, a "Transfer" shall be deemed to have occurred; or B. by inter vivos gift or by testamentary Transfer to any Family Member;

provided, that the transferring Member notifies the Manager of such Transfer and promptly supplies the Manager with any documents or information requested by the Manager regarding such Transfer; it being agreed that, in executing this Agreement, the Manager and the Members have consented to such Transfers. 8.5 Effective Date of Transfers. Any Transfer of all or any portion of an Economic Interest which complies with this Article VIII shall be effective as of the date provided in Section 6.5.2 following the date upon which the requirements of Sections 8.1, 8.2 and 8.3 (collectively, "Transfer Requirements") have been met. The Company shall provide the Members with written notice of such Transfer as promptly as possible after the Transfer Requirements have been met. Any transferee of a Membership Interest shall take subject to the restrictions on Transfer imposed by this Agreement. 8.6 Rights of Legal Representatives. If a Member who is an individual dies or is adjudged by a court of competent jurisdiction to be incompetent to manage the Member's person or property, the Member's executor, administrator, guardian, conservator, or other legal representative may exercise all of the Member's rights for the purpose of settling the Member's estate or administering the Member's property, including any power the Member has under the Articles or this Agreement to give an assignee the right to become a Member. If a Member is a corporation, trust, or other entity and is dissolved or terminated, the powers of that Member may be exercised by his or her legal representative or successor. 8.7 No Effect to Transfers in Violation of Agreement. Upon any Transfer of a Membership Interest in violation of this Article VIII, the transferee shall have no right to vote or participate in the management of the business, property and affairs of the Company or to exercise any rights of a Member. Such transferee shall only be entitled to become an Assignee and thereafter shall only receive the share of one or more of the Company's Profit, Loss, Gain or Loss on Disposition and distributions of the Company's assets to which the transferor of such Economic Interest would otherwise be entitled. Notwithstanding the immediately preceding sentences, if, in the determination of the Company's legal counsel, a Transfer in violation of this Article VIII would cause the Company to (a) be treated as a corporation pursuant to Code Section 7704 or Regulations Section 1.7704-1, or (b) be terminated for tax purposes under IRC Section 708(b)(1)(B), the Transfer shall be null and void and the purported transferee shall not become either a Member or an Assignee. Except as otherwise provided in Section 8.4, on and contemporaneously with any Transfer of a Member's Economic Interest which does not at the same time Transfer the balance of the rights associated with the Membership Interest Transferred by the Member (including, without limitation, the rights of the Member to vote or participate in the management of the business, property and affairs of the Company), the Company shall purchase from the Member, 42
#421466

and the Member shall sell to the Company for a purchase price of $100, all remaining rights and interests retained by the Member (including voting and inspection rights) that immediately before the Transfer were associated with the Transferred Economic Interest. Such purchase and sale shall not, however, result in the release of the Member from any liability to the Company as a Member. Each Member acknowledges and agrees that the right of the Company to purchase such remaining rights and interests from a Member who Transfers a Membership Interest in violation of this Article VIII is not unreasonable under the circumstances existing as of the date hereof. 8.8 Right of First Negotiation. The Company and the other Members shall have a right of first offer on any Membership Interest that a Member desires to Transfer. If any Member desires to Transfer all or any part of his or her Membership Interest, such Member shall notify the Company and the other Members in writing of such desire and, for a period of thirty (30) days thereafter, the Members and the Company shall negotiate with respect to the purchase of such Member's Membership Interest. During such period, the Member desiring to Transfer his or her Membership Interest may not solicit a transferee for such Membership Interest and may not continue any pending negotiations for the sale of the Membership Interest with third parties other than the Company. 8.9 Right of First Refusal. If the period described in Section 8.8 expires without an agreement being reached as to the purchase of the Membership Interest referred to therein, the Member desiring to transfer his or her Membership Interest may solicit transferees. In such event, each time a Member proposes to transfer all or any part of his or her Membership Interest (or as required by operation of law or other involuntary transfer to do so), other than pursuant to Section 8.4, such Member shall first offer such Membership Interest to the Company and the non-transferring Members in accordance with the following provisions: A. Notice of Proposed Transfer. Such Member shall deliver a written notice ("Option Notice") to the Company and the other Members stating (i) such Member's bona fide intention to transfer such Membership Interest; (ii) the Membership Interest to be transferred; (iii) the purchase price and terms of payment for which the Member proposes to transfer such Membership Interest; (iv) the nature of the proposed transfer (e.g., sale or pledge); and (iv) the name and address of the proposed transferee, if any. B. Company Option. Within thirty (30) days after receipt of the Option Notice, the Company shall have the right, but not the obligation, to elect to purchase all or any part of the Membership Interest upon the same price and terms of payment designated in the Option Notice. If the Option Notice provides for the payment of non-cash consideration, the Company may elect to pay the consideration in cash equal to the good faith estimate of the present fair market value of the non-cash consideration offered as determined by the Manager. If the Company exercises such right within such thirty (30) day period, the Manager shall give written notice of that fact to the transferring and non-transferring Members within seven (7) calendar days after the expiration of the thirty (30)-day period. C. Members' Option. If the Company fails to elect to purchase the entire Membership Interest proposed to be transferred within the thirty (30)-day period described in Section 8.9B, the non-transferring Members shall have the right, but not the obligation, to 43
#421466

elect to purchase any remaining share of such Membership Interest upon the same price and terms of payment designated in the Option Notice. If the Option Notice provides for the payment of non-cash consideration, such purchasing Members each may elect to pay the consideration in cash equal to the good faith estimate of the present fair market value of the non-cash consideration offered as determined by the Manager. Within thirty (30) days after receipt of the Option Notice, each non-transferring Member shall notify the Manager in writing of his or her desire to purchase a portion of the Membership Interest proposed to be so transferred. The failure of any Member to submit a notice within the applicable period shall constitute an election on the part of that Member not to purchase any of the Membership Interest, which may be so transferred. Each Member so electing to purchase shall be entitled to purchase a portion of such Membership Interest in the same proportion that the Percentage Interest of such Member bears to the aggregate of the Percentage Interests of all of the Members electing to so purchase the Membership Interest being transferred. In the event any Member elects to purchase none or less than all of his or her pro rata share of such Membership Interest, then the other Members can elect to purchase more than their pro rata share. D. Closing. If the Company and the other Members elect to purchase or obtain any or all of the Membership Interest designated in the Option Notice, then the closing of such purchase shall occur within ninety (90) days after the Company's receipt of the Option Notice. The Transferring Member, the Company and/or the other Members shall execute such documents and instruments and make such deliveries as may be reasonably required to consummate such purchase. E. Failure to Exercise Options. If the Company and the other Members elect not to purchase or obtain, or default in their obligation to purchase or obtain, all of the Membership Interest designated in the Option Notice, then the transferring Member may transfer the portion of the Membership Interest described in the Option Notice not so purchased, to the proposed transferee providing such transfer (i) is completed within thirty (30) days after the expiration of the Company's and the other Members' right to purchase such Membership Interest; (ii) is made on terms no less favorable to the transferring Member than as designated in the Option Notice; and (iii) complies with Sections 8.1, 8.2 and 8.3; it being acknowledged by the Members that compliance with Sections 8.8 and 8.9A-D does not modify any of the transfer restrictions in Article VIII or otherwise entitle a Member to transfer his or her Membership Interest other than in the manner prescribed by Article VIII. If such Membership Interest is not so transferred, the transferring Member must give notice in accordance with this Section prior to any other or subsequent transfer of such Membership Interest. ARTICLE IX OPTIONAL PURCHASE EVENTS AND TERMINATION OF MEMBERSHIP INTERESTS

44
#421466

9.1 Optional Purchase Event Defined. As used in this Article IX, "Optional Purchase Event" means, with respect to any Member, the occurrence of any of the following events: A. The withdrawal, resignation, retirement, insanity, bankruptcy or dissolution of a Member; B. The failure of a Member to make the Member's initial or additional Capital Contribution pursuant to the provisions of Article III of this Agreement; C. The occurrence of any other event that is, or that would cause, a Transfer in contravention of this Agreement; or D. The filing by a Member of an action seeking a decree of judicial dissolution pursuant to Code Section 17351. 9.2 Optional Purchase Event. Upon the occurrence of an Optional Purchase Event that is not a Permitted Transfer, the Company and/or the remaining members ("Remaining Members") shall have the option to (a) terminate at any time upon at least five (5) business days prior written notice the Former Member's Interest (as hereinafter defined), and/or (b) purchase, and if such option is exercised, the Member whose actions or conduct resulted in the Optional Purchase Event ("Former Member") or such Former Member's legal representative shall sell, the Former Member's Membership Interest ("Former Member's Interest") as provided in this Article IX. Each Former Member agrees to give prompt notice of the Optional Purchase Event to the Manager. 9.3 Purchase Price. The purchase price for the Former Members Interest shall be the Capital Account balance of the Former Member as adjusted pursuant to Section 6.1; provided, however, that if the Former Member, such Former Members legal representative or the Company, deems the Capital Account balance to vary from the fair market value of the Former Members Interest by more than ten percent (10%), if such party and the Manager cannot agree upon the fair market value of the Former Members Interest such party shall be entitled to require an appraisal by providing notice of the request for appraisal within thirty (30) days after the determination of the Remaining Members to continue the business of the Company. In such event, the value of the Former Members Interest shall be determined by three (3) independent appraisers, one (1) selected by the Former Member or such Former Members legal representative, one selected by the Company, and one (1) selected by the two (2) appraisers so named. The fair market value of the Former Members Interest shall be the average of the two (2) appraisals closest in amount to each other. In the event the fair market value is determined to vary from the Capital Account balance by less than ten percent (10%), the party requesting such appraisal shall pay all expenses of all the appraisals incurred by the party offering to enter into the transaction at the Capital Account valuation. In all other events, the party requesting the appraisal shall pay one-half of such expense and the other party shall pay one-half of such expense. Notwithstanding the foregoing, if the withdrawal of the Former Member results from a breach of this Agreement by the Former Member, the purchase price shall be reduced by an 45
#421466

amount equal to the damages suffered by the Company or the Remaining Members as a result of such breach. 9.4 Notice of Intent to Purchase. Within thirty (30) days after the Manager has notified the Remaining Members as to the purchase price of the Former Members Interest determined in accordance with Section 9.3, each Remaining Member shall notify the Manager in writing of his or her desire to purchase a portion of the Former Members Interest. The failure of any Remaining Member to submit a notice within the applicable period shall constitute an election on the part of the Member not to purchase any of the Former Members Interest. Each Remaining Member so electing to purchase shall be entitled to purchase a portion of the Former Members Interest in the same proportion that the Percentage Interests of the Remaining Member bears to the aggregate of the Percentage Interests of all of the Remaining Members electing to purchase the Former Members Interest. 9.5 Election to Purchase Less Than All of the Former Members Interest. If any Remaining Member elects to purchase none or less than all of his or her pro rata share of the Former Members Interest, then the Remaining Members may elect to purchase more than their pro rata share. If the Remaining Members fail to purchase all of the Interest of the Former Member, the Company may purchase any remaining share of the Former Members Interest. 9.6 Payment of Purchase Price. The purchase price shall be paid by the Company or the Remaining Members, as the case may be, by either of the following methods, each of which may be selected separately by the Company or the Remaining Members: A. The Company or the Remaining Members shall at the closing pay in cash the total purchase price for the Former Members Interest; or B. The Company or the Remaining Members shall pay at the closing onefifth (1/5) of the purchase price and the balance of the purchase price shall be paid in four equal annual principal installments, plus accrued interest at the Prime Rate, and be payable each year on the anniversary date of the closing. The unpaid principal balance shall accrue interest at the current applicable federal rate as provided in the Code for the month in which the initial payment is made, but the Company and the Remaining Members shall have the right to prepay in full or in part at any time without penalty. The obligation of each purchasing Remaining Member, and the Company, as applicable, to pay its portion of the balance due shall be evidenced by a separate promissory note executed by the respective purchasing Remaining Member or the Company, as applicable. Each such promissory note shall be in an original principal amount equal to the portion owed by the respective purchasing Remaining Member or the Company, as applicable. The promissory note executed by each purchasing Remaining Member shall be secured by a pledge of that portion of the Former Members Interest purchased by such Remaining Member. 9.7 Closing of Purchase of Former Members Interest. The closing for the sale of a Former Members Interest pursuant to this Article IX shall be held at 10:00 a.m. at the principal office of Company no later than sixty (60) days after the determination of the purchase price, except that if the closing date falls on a Saturday, Sunday, or California legal holiday, then the closing shall be held on the next succeeding business day. At the closing, the Former 46
#421466

Member or such Former Members legal representative shall deliver to the Company or the Remaining Members an instrument of transfer (containing warranties of title and no encumbrances) conveying the Former Members Interest. The Former Member or such Former Members legal representative, the Company and the Remaining Members shall do all things and execute and deliver all papers as may be necessary fully to consummate such sale and purchase in accordance with the terms and provisions of this Agreement. 9.8 Purchase Terms Varied by Agreement. Nothing contained herein is intended to prohibit Members from agreeing upon other terms and conditions for the purchase by the Company or any Member of the Membership Interest of any Member in the Company desiring to retire, withdraw or resign, in whole or in part, as a Member. ARTICLE X DISSOLUTION AND WINDING UP 10.1 Dissolution. The Company shall be dissolved, its assets shall be disposed of, and its affairs wound up on the first to occur of the following (each a "Dissolution Event"): A. Upon the entry of a decree of judicial dissolution pursuant to Corporations Code Section 17351; B. The expiration of the term of the Company unless such term has been extended in accordance with Section 2.3; C. The retirement, withdrawal, bankruptcy or other cessation to serve by the Manager and the failure of a Majority Interest to select a successor Manager within ninety (90) calendar days thereafter in accordance with Section 5.2; D. E. The vote of the Manager and a Majority Interest; The sale of all or substantially all of the assets of Company;

F. The happening of any event that makes it unlawful or impossible to carry on the business of the Company; or G. Ninety (90) days following any event terminating the continued membership of the last remaining Member of the Company; provided, however that if such Member's trustee, receiver, executor, administrator, committee, guardian, conservator or other legal representative or successor agrees in writing to continue the Company and to admit itself or some other person or entity as a member of the Company effective as of the date of the occurrence of the event that terminated the continued membership such Member, then the Company shall not be dissolved and its affairs shall not be wound up.

47
#421466

The Members hereby agree that, notwithstanding any provision of the Act, the Company shall not dissolve prior to the occurrence of a Dissolution Event. 10.2 Winding Up. Upon the occurrence of a Dissolution Event, the Company shall continue solely for the purpose of winding up its affairs in an orderly manner, liquidating its assets, and satisfying the claims of its creditors. The Manager, if it has not wrongfully dissolved the Company or, if none, the Members (the "Liquidator"), shall be responsible for overseeing the winding up and liquidation of Company, shall take full account of the liabilities of Company and assets, shall either cause its assets to be sold or distributed, and if sold as promptly as is consistent with obtaining the fair market value thereof, shall cause the proceeds therefrom, to the extent sufficient therefor, to be applied and distributed as provided in Section 7.3. The Persons winding up the affairs of the Company shall give written notice of the commencement of winding up by mail to all known creditors and claimants whose addresses appear on the records of the Company. The Manager or Members winding up the affairs of the Company shall be entitled to reasonable compensation for such services. 10.3 Distributions in Kind. Any non-cash asset distributed to one or more Members shall first be valued at its fair market value to determine the Profit or Loss that would have resulted if such asset were sold for such value, such Profit or Loss shall then be allocated pursuant to Article VI, and the Members' Capital Accounts shall be adjusted to reflect such allocations. The amount distributed and charged to the Capital Account of each Member receiving an interest in such distributed asset shall be the fair market value of such interest (net of any liability secured by such asset that such Member assumes or takes subject to). The fair market value of such asset shall be determined by the Manager or by the Members or if any Member objects by an independent appraiser (any such appraiser must be recognized as an expert in valuing the type of asset involved) selected by the Manager or liquidating trustee and approved by the Members. 10.4 Compliance with Certain Requirement of Regulations; Deficit Capital Accounts. In the event the Company is "liquidated" within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), (a) distributions shall be made to the Members who have positive Capital Account balances pursuant to Section 7.3 in a matter that complies with Regulations Section 1.704-1(b)(2)(ii)(b)(2). If any Member has a deficit balance in his Capital Account (after giving effect to all contributions, distributions, and allocations for all Accounting Years, including the Accounting Year during which such liquidation occurs), such Members 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 any other Person for any purpose whatsoever. 10.5 Certificate of Dissolution. As soon as reasonably practicable following the occurrence of a Dissolution Event without an election to continue the business of the Company pursuant to Section 10.1, the Manager, if it has not wrongfully dissolved the Company or, if none, the Members shall execute a Certificate of Dissolution in such form as shall be prescribed by the California Secretary of State and file the Certificate as required by the Act. 10.6
#421466

Limitations on Payments Made in Dissolution. Except as otherwise specifically 48

provided in this Agreement, each Member shall only be entitled to look solely at the assets of the Company for the return of his or her positive Capital Account balance and shall have no recourse for his or her Capital Contribution and/or share of Net Profits (upon dissolution or otherwise) against the Manager or any other Member. 10.7 Certificate of Cancellation. The Manager or Members who filed the Certificate of Dissolution shall cause to be filed in the office of, and on a form prescribed by, the California Secretary of State, a Certificate of Cancellation of the Articles upon the completion of the winding up of the affairs of the Company. 10.8 No Action for Dissolution. Except as expressly permitted in this Agreement, a Member shall not take any voluntary action that directly causes a Liquidation Event. The Members acknowledge that irreparable damage would be done to the goodwill and reputation of the Company if any Member should bring an action in court to dissolve the Company under circumstances where dissolution is not required by Section 10.1. This Agreement has been drawn carefully to provide fair treatment of all parties and equitable payment in liquidation of the Economic Interest. Accordingly, except where the Manager has failed to liquidate the Company as required by this Article X, each Member hereby waives and renounces his or her right to initiate legal action to seek the appointment of a receiver or trustee to liquidate the Company or to seek a decree of judicial dissolution of the Company on the ground that (a) it is not reasonably practicable to carry on the business of the Company in conformity with the Articles or this Agreement, or (b) dissolution is reasonably necessary for the protection of the rights or interests of the complaining Member. Damages for breach of this Section 10.8 shall be monetary damages only (and not specific performance), and the damages may be offset against distributions by the Company to which such Member would otherwise be entitled. ARTICLE XI ACCOUNTING, RECORDS, REPORTING BY MEMBERS 11.1 Books and Records. The accounting records of the Company shall be kept, and the financial position and the results of its operations recorded, in accordance with the accounting methods followed for federal income tax purposes. The books and records of the Company shall reflect all the Company transactions and shall be appropriate and adequate for the Company's business. The Company shall maintain at its principal office in California all of the following: A. A current list of the full name and last known business or residence address of each Member and Assignee set forth in alphabetical order, together with the Capital Contributions, Capital Account and number of Membership Interest of each Member and Assignee; B. Manager; A current list of the full name and business or residence address of each

49
#421466

C. A copy of the Articles and any and all amendments thereto together with executed copies of any powers of attorney pursuant to which the Articles or any amendments thereto have been executed; D. Copies of the Company's federal, state, and local income tax or information returns and reports, if any, for the six (6) most recent taxable years; E. A copy of this Agreement and any and all amendments thereto together with executed copies of any powers of attorney pursuant to which this Agreement or any amendments thereto have been executed; F. Copies of the financial statements of the Company, if any, for the six (6) most recent Company Accounting Years; and G. The Company's books and records as they relate to the internal affairs of the Company for at least the current and past four (4) Company Accounting Years. 11.2 Delivery to Members and Inspection.

A. Upon the request of any Member or Assignee for purposes reasonably related to the interest of that Person as a Member or Assignee, the Manager shall promptly deliver to the requesting Member or Assignee, at the expense of the Company, a copy of the information required to be maintained under Sections 11.1 A, B and D, and a copy of this Agreement. B. Each Member, Manager and Assignee has the right, upon reasonable request for purposes reasonably related to the interest of the Person as Member, Manager or Assignee, to: (i) inspect and copy during normal business hours any of the Company records described in Sections 11.1A through G; and (ii) obtain from the Manager, promptly after their becoming available, a copy of the Company's federal, state, and local income tax or information returns for each Company Accounting Year. C. Members holding at least five percent (5%) of the Membership Interest, or three or more Members, make a written request to the Manager for an income statement of the Company for the initial three-month, six-month, or nine-month period of the current Company Accounting Year ended more than thirty (30) days prior to the date of the request, and a balance sheet of the Company as of the end of that period. Such statement shall be accompanied by the report thereon, if any, of the independent accountants engaged by the Company or, if there is no report, the certificate of the Manager that the statement was prepared without audit from the books and records of the Company. If so requested, the statement shall be delivered or mailed to the Members within 30 days thereafter. 50
#421466

D. Any request, inspection or copying by a Member or Assignee under this Section 11.2 may be made by that Person or that Person's agent or attorney. E. The Manager shall promptly furnish to a Member a copy of any amendment to the Articles or this Agreement executed by the Manager pursuant to a power of attorney from the Member. 11.3 Annual Statements.

A. If the Company has more than thirty-five (35) Members, the Manager shall cause an annual report to be sent to each of the Members not later than one hundred twenty (120) days after the close of the Company Accounting Year. The report shall contain a balance sheet as of the end of the Company Accounting Year and an income statement and statement of changes in financial position for the Company Accounting Year. Such financial statements shall be accompanied by the report thereon, if any, of the independent accountants engaged by the Company or, if there is no report, the certificate of the Manager that the financial statements were prepared without audit from the books and records of the Company. B. The Manager shall cause to be prepared at least annually, at Company expense, information necessary for the preparation of the Members' and Assignees' federal and state income tax returns. The Manager shall send or cause to be sent to each Member or Assignee within ninety (90) days after the end of each taxable year such information as is necessary to complete federal and state income tax or information returns, and, if the Company has thirty-five (35) or fewer Members, a copy of the Company's federal, state, and local income tax or information returns for that year. C. The Manager shall cause to be filed at least annually with the California Secretary of State the statement required under California Corporations Code Section 17060. 11.4 Financial and Other Information. The Manager shall provide such financial and other information relating to the Company or any other Person in which the Company owns, directly or indirectly, an equity interest, as a Member may reasonably request. The Manager shall distribute to the Members, promptly after the preparation or receipt thereof by the Manager, any financial or other information relating to any Person in which the Company owns, directly or indirectly, an equity interest, including any filings by such Person under the Securities Exchange Act of 1934, as amended, that is received by the Company with respect to any equity interest of the Company in such Person. 11.5 Filings. The Manager, at Company expense, shall cause the income tax returns for the Company to be prepared and timely filed with the appropriate authorities. The Manager, at Company expense, shall also cause to be prepared and timely filed, with appropriate federal and state regulatory and administrative bodies, amendments to, or restatements of, the Articles and all reports required to be filed by the Company with those entities under the Act or other then current applicable laws, rules, and regulations. If a Manager required by the Act to execute or file any document fails, after demand, to do so within a reasonable period of time or refuses to 51
#421466

do so, any other Manager or Member may prepare, execute and file that document with the California Secretary of State. 11.6 Bank Accounts. The Manager shall maintain the funds of the Company in one or more separate bank accounts in the name of the Company, and shall not permit the funds of the Company to be commingled in any fashion with the funds of any other Person. 11.7 Accounting Decisions and Reliance on Others. All decisions as to accounting matters, except as otherwise specifically set forth herein, shall be made by the Manager. The Manager may rely upon the advice of their accountants as to whether such decisions are in accordance with accounting methods followed for federal income tax purposes. 11.8 Tax Matters for the Company Handled by the Manager and Tax Matters Partner. The Manager shall from time to time cause the Company to make such tax elections as they deem to be in the best interests of the Company and the Members. The Tax Matters Partner is hereby designated as the "Tax Matters Partner", as such term is defined in Section 6231(a)(7) of the Code, and it shall serve as such at Company expense with all powers granted to a tax matters partner under the Code. The Tax Matters Partner shall represent the Company (at the Company's expense) in connection with all examinations of the Company's affairs by tax authorities, including resulting judicial and administrative proceedings, and shall expend the Company funds for professional services and costs associated therewith. The Tax Matters Partner shall oversee the Company tax affairs in the overall best interests of the Company. Each Member shall give prompt notice to each other Member of any and all notices it receives from the Internal Revenue Service concerning the Company, including any notices of audit, any notice of action with respect to a revenue agent's report, any notice of a 30-day appeal letter and any notice of a deficiency in tax concerning the Company's federal income tax return. The Tax Matters Partner shall furnish each Member with status reports regarding any negotiation between the Internal Revenue Service and the Company. The Manager shall cause the Company's accountants to prepare and deliver, at the Company's expense, to each member on a timely basis an information reporting return (K-1) reflecting each Member's distributive share of all income, gain, loss, deductions, allowances or credits of the Company for each Company Accounting Year. If for any reason the Tax Matters Partner can no longer serve in that capacity or ceases to be a Member or Manager, as the case may be, the Manager may designate another to be Tax Matters Partner. ARTICLE XII INDEMNIFICATION AND INSURANCE 12.1 Indemnification of Manager.

A. The Company, its receiver, or its trustee (in the case of its receiver or trustee, to the extent of Company property) shall indemnify, save harmless, and pay all judgments and claims against each Manager relating to any liability or damage incurred by reason of any act performed or omitted to be performed by such Manager in connection with the business of the Company, including attorneys' fees incurred by such Manager in connection with 52
#421466

the defense of any action based on any such act or omission, which attorneys' fees may be paid as incurred, including all such liabilities under federal and state securities laws (including the Securities Act of 1933, as amended) to the maximum extent permitted by applicable law in effect in the date hereof and to such greater extent as applicable law may hereafter from time to time permit. B. The Company, its receiver, or its trustee (in the case of its receiver or trustee, to the extent of Company assets) shall indemnify and hold harmless, to the maximum extent permitted by law, each Manager and Member from and against any and all liabilities, sums paid in settlement of claims (if such settlement is approved by the Manager), obligations, charges, actions (formal or informal), claims (including, without limitation, claims for personal injury under any theory or for real or personal property damage), liens, taxes, administrative proceedings, losses, damages (including, without limitation, punitive damages), penalties, fines, court costs, administrative service fees, response and remediation costs, stabilization costs, encapsulation costs, treatment, storage or disposal costs, groundwater monitoring or environmental study, sampling or monitoring costs, other causes of action, and any other costs and reasonable expenses (including, without limitation, reasonable attorneys', experts', and consultants' fees and disbursements and investigating, laboratory and data review fees) imposed upon or incurred by any Manager or Member (whether or not indemnified against by any other party) arising from and after the date of this Agreement directly or indirectly out of: (i) the past, present or future treatment, storage, disposal, generation, use, transport, movement, presence, release, threatened release, spill, installation, sale, emission, injection, leaching, dumping, escaping or seeping of any Hazardous Substances, material containing or alleged to contain Hazardous Substances at or from any past, present, or future properties or assets of the Company; and/or (ii) the violation or alleged violation by the Company or any third party of any Environmental Laws with regard to the past, present or future ownership, operation, use, or occupying of any property or asset of the Company. C. In the event of any action by a Member against a Manager, including a Company derivative suit, the Company shall indemnify, save harmless, and pay all expenses of such Manager, including attorneys' fees, incurred in the defense of such action, if such Manager is successful in such action. D. Company shall indemnify, save harmless and pay all expenses, costs, or liabilities of any Manager who for the benefit of the Company makes any deposit, acquires any option, or makes any other similar payment or assumes any obligations in connection with any property proposed to be acquired and/or developed by the Company and who suffers any financial loss as the result of such action. E. Notwithstanding the provisions of Sections 12.1A, 12.1B, 12.1C and 12.1D above, no Manager or Member shall be indemnified from any liability for fraud, bad faith, willful misconduct, or gross negligence. 53
#421466

F. The indemnities provided for under this Article XII shall survive the dissolution of the Company. G. Notwithstanding anything to the contrary in any of Sections 12.1A, 12.1.B, 12.1C and 12.1D above, in the event that any provision in any of such Sections is determined to be invalid in whole or in part, such Section shall be enforced to the maximum extent permitted by law. 12.2 Insurance. The Company shall have the power to purchase and maintain insurance on behalf of any Person who is or was an agent of the Company against any liability asserted against such Person and incurred by such Person in any such capacity, or arising out of such Person's status as an agent, whether or not the Company would have the power to indemnify such Person against such liability under the provisions of Section 12.1 or under applicable law. ARTICLE XIII INVESTMENT REPRESENTATIONS Each Member hereby represents and warrants to, and agrees with, the Manager, the other Members, and the Company as follows: 13.1 Pre-existing Relationship or Experience. (i) He or she has a pre-existing personal or business relationship with the Company or one or more of its officers, the Manager or controlling persons; or (ii) by reason of his or her business or financial experience, or by reason of the business or financial experience of his or her financial advisor who is unaffiliated with and who is not compensated, directly or indirectly, by the Company or any affiliate or selling agent of the Company, he or she is capable of evaluating the risks and merits of an investment in the Membership Interest and of protecting his or her own interests in connection with this investment. 13.2 No Advertising. He or she has not seen, received, been presented with, or been solicited by any leaflet, public promotional meeting, newspaper or magazine article or advertisement, radio or television advertisement, or any other form of advertising or general solicitation with respect to the sale of the Membership Interest. 13.3 Investment Intent. He or she is acquiring the Membership Interest for investment purposes for his or her own account only and not with a view to or for sale in connection with any distribution of all or any part of the Membership Interest. No other person will have any direct or indirect beneficial interest in or right to the Membership Interest. 13.4 Accredited Investor. He or she is an "accredited investor" as defined in Rule 501(a) of Regulation D promulgated by the Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended ("Securities Act").

54
#421466

13.5 Purpose of Entity. If the Member is a corporation, partnership, limited liability company, trust, or other entity, it was not organized for the specific purpose of acquiring the Membership Interest. 13.6 Economic Risk. He or she is financially able to bear the economic risk of an investment in the Membership Interest, including the total loss thereof. 13.7 No Registration of Membership Interest. He or she acknowledges that the Membership Interest has not been registered under the Securities Act of 1933, as amended (the "Securities Act"), or qualified under the California Corporate Securities Law of 1968, as amended, or any other applicable blue sky laws in reliance, in part, on his or her representations, warranties, and agreements herein. 13.8 Membership Interest in Restricted Security. He or she understands that the Membership Interest is a "restricted security" under the Securities Act in that the Membership Interest will be acquired from the Company in a transaction not involving a public offering, and that the Membership Interest may not be resold without registration under the Securities Act except in certain limited circumstances and that otherwise the Membership Interest must be held indefinitely. In this connection, he or she understands the resale limitations imposed by the Securities Act and is familiar with SEC Rule 144, as presently in effect, and the conditions which must be met in order for that Rule to be available for resale of "restricted securities, " including the requirement that the securities must be held for at least two years after purchase thereof from the Company prior to resale (three years in the absence of publicly available information about the Company) and the condition that there be available to the public current information about the Company under certain circumstances. He or she understands that the Company has not made such information available to the public and has no present plans to do so. 13.9 No Obligation to Register. He or she represents, warrants, and agrees that the Company and the Manager are under no obligation to register or qualify the Membership Interest under the Securities Act or under any state securities law, or to assist him or her in complying with any exemption from registration and qualification. 13.10 No Disposition in Violation of Law. Without limiting the representations set forth above, and without limiting Article VIII of this Agreement, he or she will not make any disposition of all or any part of the Membership Interest which will result in the violation by him or her or by the Company of the Securities Act, the California Corporate Securities Law of 1968, or any other applicable securities laws. Without limiting the foregoing, he or she agrees not to make any disposition of all or any part of the Membership Interest unless and until: A. There is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such registration statement and any applicable requirements of state securities laws; or B. (i) He or she has notified the Company of the proposed disposition and has furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition; and (ii) if reasonably requested by the Manager, he or she has furnished the 55
#421466

Company with a written opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration of any securities under the Securities Act or the consent of or a permit from appropriate authorities under any applicable state securities law. 13.11 Legends. He or she understands that the certificates (if any) evidencing the Membership Interest may bear one or all of the following legends: A. "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 NOR REGISTERED NOR QUALIFIED UNDER ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE, TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS QUALIFIED AND REGISTERED UNDER APPLICABLE STATE AND FEDERAL SECURITIES LAWS OR UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, SUCH QUALIFICATION AND REGISTRATION IS NOT REQUIRED. ANY TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS FURTHER SUBJECT TO OTHER RESTRICTIONS, TERMS, AND CONDITIONS WHICH ARE SET FORTH HEREIN IN THE COMPANY'S OPERATING AGREEMENT, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY." B. Any legend required by applicable state securities laws.

13.12 Investment Risk. He or she acknowledges that the Membership Interest is a speculative investment which involves a substantial degree of risk of loss by him or her of his or her entire investment in the Company, that he or she understands and takes full cognizance of the risk factors related to the purchase of the Membership Interest, and that the Company is newly organized and has no financial or operating history. 13.13 Investment Experience. He or she is an experienced investor in unregistered and restricted securities of limited liability companies or limited partnerships. This representation shall not be applicable to any Person that provides the Manager with such written information as the Manager deems necessary to substantiate that the Member engaged and designated a Professional Advisor to assist the Member in evaluating the risks and merits of an investment in the Company. As used in this Section 13.13, a "Professional Advisor" shall have the meaning ascribed to that term in Corporations Code Section 25009, 10 California Code of Regulations Section 260.102.12(g)(1), or any successor statutes or regulations. 13.14 Restrictions on Transferability. He or she acknowledges that there are substantial restrictions on the transferability of the Membership Interest pursuant to this Agreement, that there is no public market for the Membership Interest and none is expected to develop, and that, accordingly, it may not be possible for him or her to liquidate his or her investment in the Company. 13.15 Information Reviewed. He or she has received and reviewed all information he or she considers necessary or appropriate for deciding whether to purchase the Membership Interest. He or she has had an opportunity to ask questions and receive answers from the 56
#421466

Company and its Manager and employees regarding the terms and conditions of purchase of the Membership Interest and regarding the business, financial affairs, and other aspects of the Company and has further had the opportunity to obtain all information (to the extent the Company possesses or can acquire such information without unreasonable effort or expense) which he or she deems necessary to evaluate the investment and to verify the accuracy of information otherwise provided to him or her. 13.16 No Representations by Company. Neither any Manager, any agent or employee of the Company or of any Manager, or any other Person has at any time expressly or implicitly represented, guaranteed, or warranted to him or her that he or she may freely transfer the Membership Interest, that a percentage of profit and/or amount or type of consideration will be realized as a result of an investment in the Membership Interest, that past performance or experience on the part of the Manager or its Affiliates or any other person in any way indicates the predictable results of the ownership of the Membership Interest or of the overall Company business, that any cash distributions from Company operations or otherwise will be made to the Members by any specific date or will be made at all, or that any specific tax benefits will accrue as a result of an investment in the Company. 13.17 Consultation with Attorney. He or she has been advised to consult with his or her own attorney regarding all legal matters concerning an investment in the Company and the tax consequences of participating in the Company, and has done so, to the extent he or she considers necessary. 13.18 Tax Consequences. He or she acknowledges that the tax consequences to his or her of investing in the Company will depend on his or her particular circumstances, and neither the Company, the Manager, the Members, nor the partners, shareholders, members, managers, agents, officers, directors, employees, Affiliates, or consultants of any of them will be responsible or liable for the tax consequences to him or her of an investment in the Company. He or she will look solely to, and rely upon, his or her own advisers with respect to the tax consequences of this investment. 13.19 No Assurance of Tax Benefits. He or she acknowledges that there can be no assurance that the Code or the Regulations will not be amended or interpreted in the future in such a manner so as to deprive the Company and the Members of some or all of the tax benefits they might now receive, nor that some of the deductions claimed by the Company or the allocations of items of income, gain, loss, deduction, or credit among the Members may not be challenged by the Internal Revenue Service. 13.20 Indemnity. He or she shall defend, indemnify and hold harmless the Company, each and every Manager, each and every other Member, and any officers, directors, shareholders, managers, members, employees, partners, agents, attorneys, registered representatives, and control persons of any such entity who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative, by reason of or arising from any misrepresentation or misstatement of facts or omission to represent or state facts made by him or her including, without limitation, the information in this Agreement, against losses, liabilities, and expenses of 57
#421466

the Company, each and every Manager, each and every other Member, and any officers, directors, shareholders, managers, members, employees, partners, attorneys, accountants, agents, registered representatives, and control persons of any such Person (including attorneys' fees, judgments, fines, and amounts paid in settlement, payable as incurred) incurred by such Person in connection with such action, suit, proceeding, or the like. ARTICLE XIV SPECIAL POWER OF ATTORNEY 14.1 Attorney in Fact. Each Member hereby makes, constitutes, and appoints the Manager and each successor Manager, with full power of substitution and resubstitution, his true and lawful attorney-in-fact for him and in his name, place, and stead and for his use and benefit, to sign, execute, certify, acknowledge, swear to, file, and record (a) all articles of organization of limited liability company, amended name or similar certificates, and other certificates and instruments (including counterparts of this Agreement) which the Manager may deem necessary or appropriate to be filed by the Company under the laws of the State of California; (b) any and all amendments or changes to this Agreement and the instruments described in (a), as now or hereafter amended, which the Manager may deem necessary or appropriate to effect a change or modification of the Company in accordance with the terms of this Agreement, including, without limitation, amendments or changes to reflect (i) the exercise by the Manager of any power granted to it under this Agreement; (ii) any amendments adopted by the Members in accordance with the terms of this Agreement; (iii) assignments of Membership Interest or other documents of transfer to be delivered in connection with the purchase of Membership Interest pursuant to Article VIII or Sections 9.1 or 9.2; (iv) the admission, substitution or withdrawal of any Members or any Assignees as substitute Members; and (v) the disposition by any Member of its interest in the Company; (c) all certificates of cancellation and other instruments which the Manager may deem necessary or appropriate to effect the dissolution and termination of the Company pursuant to the terms of this Agreement; (d) any consent to the representation of the Company by counsel selected by the Manager as described in Section 15.1 and (e) any other instrument which is now or may hereafter be required by law to be filed on behalf of the Company or is deemed necessary or appropriate by the Manager to carry out fully the provisions of this Agreement in accordance with its terms. Each Member authorizes each such attorney-in-fact to take any further action which such attorney-in-fact shall consider necessary or advisable in connection with any of the foregoing, hereby giving each such attorney-in-fact full power and authority to do and perform each and every act or thing whatsoever requisite or advisable to be done in connection with the foregoing as fully as such Member might or could do personally, and hereby ratifying and confirming all that any such attorney-in-fact shall lawfully do or cause to be done by virtue thereof or hereof. Each Member agrees to execute and deliver to the Company, within thirty (30) days after receipt of a written request from the Manager therefor: (A) a separate form of power of attorney granting the same powers described above; and (B) such other and further statements or interest and holdings, designation, powers of attorney and other instruments as the Manager deems necessary or desirable. 14.2 Nature of a Special Power. The power of attorney granted pursuant to this Article XIV: 58
#421466

A.

Is a special power of attorney coupled with an interest and is irrevocable;

B. May be exercised by any such attorney-in-fact by listing the Members executing any agreement, certificate, instrument, or other document with the single signature of any such attorney-in-fact acting as attorney-in-fact for such Member; and C. Shall survive the death, disability, legal incapacity, bankruptcy, insolvency, dissolution, or cessation of existence of a Member and shall survive the delivery of an assignment by a Member of the whole or a portion of his Membership Interest in the Company, except that where the assignment is of such Member's entire interest in the Company and the assignee, with the consent of the Manager, is admitted as a substituted Member, the power of attorney shall survive the delivery of such assignment for the sole purpose of enabling any such attorney-in-fact to effect such substitution. 14.3 Signatures. The Manager may exercise the special power of attorney granted in this Article XIV by a facsimile signature of the Manager. ARTICLE XV MISCELLANEOUS 15.1 Counsel to the Company. Counsel to the Company may also be counsel to the Manager or any Affiliate of the Manager. The Manager may execute on behalf of the Company and the Members any consent to the representation of the Company that counsel may request pursuant to the California Rules of Professional Conduct or similar rules in any other jurisdiction ("Rules"). The Company has initially selected Liner Grode Stein Yankelevitz Sunshine Regenstreif & Taylor LLP ("Company Counsel") as legal counsel to the Company. Each Member acknowledges that Company Counsel does not represent any Member in the absence of a clear and explicit written agreement to such effect between such Member and Company Counsel, and that in the absence of any such agreement Company Counsel shall owe no duties directly to a Member. Notwithstanding any adversity that may develop, in the event any dispute or controversy arises between any Members and the Company, or between any Members or the Company, on the one hand, and the Manager (or Affiliate of the Manager) that Company Counsel represents, on the other hand, then each Member agrees that Company Counsel may represent either the Company or such Manager (or his or her Affiliate), or both, in any such dispute or controversy to the extent permitted by the Rules, and each Member hereby consents to such representation. 15.2 Tax Withholding.

A. The Manager is authorized and directed to cause the Company to withhold from or pay on behalf of any Member of the amount of federal, state, local or foreign taxes that the Manager, after consultation with such Member, reasonably believe the Company is required to withhold or pay with respect to any amount distributable or allocable to such Member pursuant to this Agreement, including, without limitation, any taxes required to be paid by the 59
#421466

Company pursuant to Code Sections 1441, 1442, 1445 or 1446 and any taxes imposed by any state or other taxing jurisdiction. Without limiting the foregoing, the Manager shall cause the Company to withhold (and remit to the appropriate governmental authority), from amounts otherwise distributable to a Member, any taxes that such Member notifies the Manager in writing should be withheld, which notice shall be given by any Member who becomes aware of any withholding obligation to which it is subject and shall specifically set forth, inter alia, the rate at which tax should be withheld and the name and address to which any amounts withheld should be remitted. B. If the Company is required to withhold and pay over to taxing authorities amounts on behalf of a Member exceeding available amounts then remaining to be distributed to such Member, such payment by the Company shall constitute a loan to such Member that is repayable by the Member on demand, together with interest at the applicable federal rate determined from time to time under Code Section 7872(f)(2) or the maximum rate permitted under applicable law, whichever is less, calculated upon the outstanding principal balance of such loan as of the first day of each month. Any such loan shall be repaid to the Company, in whole or in part, as determined by the Manager in its sole discretion, either (i) out of any distributions from the Company which the Member is (or becomes) entitled to receive, or (ii) by the Member in cash upon demand by the Member (said Member bearing all of the Company's costs of collection, including reasonable attorneys' fees, if payment is not remitted promptly by the Member after such a demand for payment). C. Each Member agrees to cooperate fully with all efforts of the Company to comply with its tax withholding and information reporting obligations and agrees to provide the Company with such information as the Manager may reasonably request from time to time in connection with such obligations. 15.3 Interest for Services. The percentage that the number of Membership Interest of any Member bears to the number of Membership Interest held by all Members in excess of such Member's percentage of the capital contributions made by all Members shall be deemed to be a profits interest received in exchange for services rendered or to be rendered to or for the benefit of the Company (such portion of any Member's Membership Interest having no currently predictable distributions). 15.4 Complete Agreement. This Agreement and the Articles constitute the complete and exclusive statement of agreement among the Members and the Manager with respect to the subject matter herein and therein and replace and supersede all prior written and oral agreements or statements by and among the Members and the Manager or any of them. No representation, statement, condition or warranty not contained in this Agreement or the Articles will be binding on the Members or the Manager or have any force or effect whatsoever. To the extent that any provision of the Articles conflict with any provision of this Agreement, the Articles shall control. 15.5 Binding Effect. Subject to the provisions of this Agreement relating to transferability, this Agreement will be binding upon and inure to the benefit of the Members, and their respective successors and assigns. 60
#421466

15.6 Parties in Interest. Except as expressly provided in the Act, nothing in this Agreement shall confer any rights or remedies under or by reason of this Agreement on any Persons other than the Members and the Manager and their respective successors and assigns nor shall anything in this Agreement relieve or discharge the obligation or liability of any third person to any party to this Agreement, nor shall any provision give any third person any right of subrogation or action over or against any party to this Agreement. 15.7 Pronouns; Statutory References. All pronouns and all variations thereof shall be deemed to refer to the masculine, feminine, or neuter, singular or plural, as the context in which they are used may require. Any reference to the Code, the Regulations, the Act, Corporations Code or other statutes or laws will include all amendments, modifications, or replacements of the specific sections and provisions concerned. 15.8 Headings. All headings herein are inserted only for convenience and ease of reference and are not to be considered in the construction or interpretation of any provision of this Agreement. 15.9 Interpretation. In the event any claim is made by any Member relating to any conflict, omission or ambiguity in this Agreement, no presumption or burden of proof or persuasion shall be implied by virtue of the fact that this Agreement was prepared by or at the request of the Company, a particular Member or its, his or her counsel. 15.10 References to this Agreement. Numbered or lettered articles, sections and subsections herein contained refer to articles, sections and subsections of this Agreement unless otherwise expressly stated. 15.11 Governing Law; Jurisdiction. This Agreement is governed by and shall be construed in accordance with the law of the State of California, excluding any conflict-of-laws rule or principle that might refer the governance or the construction of this Agreement to the law of another jurisdiction. Each Member hereby consents to the exclusive jurisdiction of the state and federal courts sitting in California in any action on a claim arising out of, under or in connection with this Agreement or the transactions contemplated by this Agreement. Each Member further agrees that personal jurisdiction over him or her may be effected by service of process by registered or certified mail addressed as provided in Section 15.16 of this Agreement, and that when so made shall be as if served upon him or her personally within the State of California. 15.12 Exhibits. All Exhibits attached to this Agreement are incorporated and shall be treated as if set forth herein in full. 15.13 Severability. If any provision of this Agreement or the application of such provision to any person or circumstance shall be held invalid, the remainder of this Agreement or the application of such provision to persons or circumstances other than those to which it is held invalid shall not be affected thereby.

61
#421466

15.14 Specific Performance. The Members agree that irreparable damage will result if this Agreement is not performed in accordance with its terms, and the Members agree that any damages available at law for a breach of this Agreement would not be an adequate remedy. Therefore, the provisions hereof and the obligations of the Members hereunder shall be enforceable in a court of equity, or other tribunal with jurisdiction, by a decree of specific performance, and appropriate injunctive relief may be applied for and granted in connection therewith. Such remedies and all other remedies provided for in this Agreement shall, however, be cumulative and not exclusive and shall be in addition to any other remedies that a Member may have under this Agreement, at law or in equity. 15.15 Additional Documents and Acts. Each Member agrees to execute and deliver such additional documents and instruments and to perform such additional acts as may be necessary or appropriate to effectuate, carry out and perform all of the terms, provisions, and conditions of this Agreement and the transactions contemplated hereby. 15.16 Notices. Any notice to be given or to be served upon the Company or any party hereto in connection with this Agreement must be in writing (which may include facsimile) and will be deemed to have been given and received when delivered to the address specified by the party to receive the notice. Such notices will be given to a Member or Manager at the address specified in Exhibit A attached hereto. Any party may, at any time by giving five (5) days' prior written notice to the other parties, designate any other address in substitution of the foregoing address to which such notice will be given. 15.17 Amendments. Except as otherwise expressly provided in this Agreement, all amendments to this Agreement will be in writing and require the consent of a Majority Interest. Notwithstanding anything to the contrary in this Agreement, this Agreement may be amended by the Manager without the consent of any Member: (a) to cure any ambiguity, to correct or supplement any provision of this Agreement which may be inconsistent with any other provisions of this Agreement, or to make any other provisions regarding matters or questions arising under this Agreement not inconsistent with the intent of this Agreement; (b) to change any provisions of this Agreement required to be changed by the staff of the Securities and Exchange Commission or other federal or state "Blue Sky" commissioner, a listing agency, or similar official, which change is deemed by the commissioner, agency, or official to be for the benefit or protection of the Members; or (c) to amend Exhibit A attached hereto pursuant to the provisions of Sections 3.2 or 4.2 of this Agreement. 15.18 Reliance on Authority of Person Signing Agreement. If a Member is not a natural person, neither the Company nor any Member will (a) be required to determine the authority of the individual signing this Agreement to make any commitment or undertaking on behalf of such entity or to determine any fact or circumstance bearing upon the existence of the authority of such individual or (b) be responsible for the application or distribution of proceeds paid or credited to individuals signing this Agreement on behalf of such entity. 15.19 No Interest in Company Property; Waiver of Action for Partition. No Member or Assignee has any beneficial interest in specific property of the Company. Without limiting the foregoing, each Member and Assignee irrevocably waives during the term of the 62
#421466

Company any right that he or she may have to maintain any action for partition with respect to the property of the Company. 15.20 Multiple Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. Any counterpart of this Agreement that has attached to it separate signature pages which altogether contain the signatures of the Manager or all Members or their attorneysin fact shall for all purposes be deemed a fully executed instrument. 15.21 Attorneys Fees. In the event that any dispute between the Company and the Members or among the Members should result in litigation or arbitration, the prevailing party in such dispute shall be entitled to recover from the other party all reasonable fees, costs and expenses of enforcing any right of the prevailing party, including without limitation, reasonable attorneys' fees and expenses, all of which shall be deemed to have accrued upon the commencement of such action and shall be paid whether or not such action is prosecuted to judgment. Any judgment or order entered in such action shall contain a specific provision providing for the recovery of attorney fees and costs incurred in enforcing such judgment and an award of prejudgment interest from the date of the breach at the maximum rate of interest allowed by law. For the purposes of this Section: (a) attorney fees shall include, without limitation, fees incurred in the following: (1) postjudgment motions; (2) contempt proceedings; (3) garnishment, levy, and debtor and third party examinations; (4) discovery; and (5) bankruptcy litigation; and (b) prevailing party shall mean the party who is determined in the proceeding to have prevailed or who prevails by dismissal, default or otherwise. 15.22 Remedies Cumulative. The remedies under this Agreement are cumulative and shall not exclude any other remedies to which any person may be lawfully entitled. 15.23 Waiver. No waiver by any party to this Agreement of any breach of, or default under, this Agreement by any other party shall be construed or deemed a waiver of any other breach of or default under this Agreement, and shall not preclude any party from exercising or asserting any rights under the Agreement with respect to any other breach or default. 15.24 Confidentiality. Each Member agrees not to disclose the provisions of this Agreement to any Person not a signatory to this Agreement, except as otherwise approved by the Manager in writing. However, nothing herein shall preclude any Member from (i) complying with any legal or judicial process that compels disclosure of the provisions of this Agreement; (ii) commencing legal action to enforce the provisions of this Agreement; (iii) discussing the Agreement with such Members attorneys, accountants or financial planners, as long as such Member clearly advises and instructs such individual that all information regarding the terms and conditions of the Agreement is disclosed in strict confidence and must not be repeated or disclosed to others; or (iv) complying with the requests of federal, state or local taxing authorities.

63
#421466

IN WITNESS WHEREOF, the parties have entered into this Agreement as of the day first above written. THE MANAGER: WREOF I MANAGEMENT, LLC, a California limited liability company By: Name: Title: MEMBERS: The Members whose names are set forth on Exhibit A hereto: By: WREOF I MANAGEMENT, LLC, a California limited liability company, Attorney-in-fact for such Members By: Authorized Signatory

64
#421466

EXHIBIT A NAMES, ADDRESSES, CAPITAL CONTRIBUTIONS, INITIAL CONTRIBUTIONS AND PERCENTAGE INTERESTS OF MEMBERS AND THE MANAGER AS OF __________ ___, 2009 Member's Name WREOF I Management, LLC Member's Address 21080 Centre Pointe Parkway Santa Clarita, California 91350 Attn: Member's Capital Contribution $500,000 Member's Initial Contribution $25,000 Member's Percentage Interest

TOTAL: Manager's Name WREOF I Management, LLC Manager's Address 21080 Centre Pointe Parkway Santa Clarita, California 91350 Attn:

100%

A-1
#421466