STRUCTURING AN EQUITY INVESTMENT IN REAL ESTATE

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1 STRUCTURING AN EQUITY INVESTMENT IN REAL ESTATE Live Replay: September 22, 2016 First Run Broadcast: January 12, :30 p.m. E.T./1:30 p.m. C.T./12:30 p.m. M.T./11:30 a.m. P.T. (60 minutes) Strength in the real estate market has caused the balance of negotiating power (and expectations) of equity investors, developers and promoters to shift again. Investors eager to participate in certain transactions are somewhat more accommodating in accepting developer terms. Developers, sensing there s more capital chasing deals, are somewhat more emboldened to press their terms. Thus, the form of ownership interest or profit participation by the investor and guarantees and/or preferential returns from the developer are very highly negotiated. Investors, mindful that the uptrend cannot continue forever, are still eager to secure their investments. This program will provide you with a detailed discussion of structuring and drafting an equity investment in real estate, including forms of profit participation, related security and guarantee issues, information and control rights, and withdrawal or sale rights. Structuring equity investments in real estate and drafting tips Forms and timing of initial investment capital or land and subsequent capital calls Preferential return of initial capital and preferred claim on profits Security interests, guarantees, and other default protection Relationship of form of equity interest to choice of entity in the deal Information rights, management rights, right to take control on certain events Withdrawal, sale or liquidation rights for the equity investor Speakers: Manuel A. Fernandez is partner in the Miami office of Akerman, LLP, where he has an extensive real estate practice representing commercial mortgage lenders, developers, and institutional and non-institutional investors in connection with the acquisition, development, financing, leasing and management of commercial and residential real estate assets and distressed real estate transactions. He also represents hedge funds, pension funds, and other real estate opportunity funds in connection with joint ventures. Mr. Fernandez received his B.A., cum laude, from the University of Miami and his J.D., magna cum laude, from the University of Miami School of Law. Richard R. Goldberg is a retired partner, resident in the Philadelphia office of Ballard Spahr, LLP, where he established an extensive real estate practice, including development, financing, leasing, and acquisition. Earlier in his career, he served as vice president and associate general counsel of The Rouse Company for 23 years. He is past president of the American College of Real Estate Lawyers, past chair of the Anglo-American Real Property Institute, and past chair of the International Council of Shopping Centers Law Conference. Mr. Goldberg is currently a Fellow of the American College of Mortgage Attorneys and is a member of the American Law Institute. Mr. Goldberg received his B.A. from Pennsylvania State University and his LL.B. from the University of Maryland School of Law.

2 VT Bar Association Continuing Legal Education Registration Form Please complete all of the requested information, print this application, and fax with credit info or mail it with payment to: Vermont Bar Association, PO Box 100, Montpelier, VT Fax: (802) PLEASE USE ONE REGISTRATION FORM PER PERSON. First Name Middle Initial Last Name Firm/Organization Address City State ZIP Code Phone # Fax # Address Structuring an Equity Investment in Real Estate Teleseminar September 22, :00PM 2:00PM 1.0 MCLE GENERAL CREDITS VBA Members $75 Non-VBA Members $115 NO REFUNDS AFTER September 15, 2016 PAYMENT METHOD: Check enclosed (made payable to Vermont Bar Association) Amount: Credit Card (American Express, Discover, Visa or Mastercard) Credit Card # Exp. Date Cardholder:

3 Vermont Bar Association CERTIFICATE OF ATTENDANCE Please note: This form is for your records in the event you are audited Sponsor: Vermont Bar Association Date: September 22, 2016 Seminar Title: Location: Credits: Program Minutes: Structuring an Equity Investment in Real Estate Teleseminar - LIVE 1.0 MCLE General Credit 60 General Luncheon addresses, business meetings, receptions are not to be included in the computation of credit. This form denotes full attendance. If you arrive late or leave prior to the program ending time, it is your responsibility to adjust CLE hours accordingly.

4 ARTICLE I CAPITAL Section 1.1. Initial Capital Contributions. (a) Developer Member's Initial Capital Contribution. Contemporaneously with the execution of this Agreement, Developer Member shall make the Developer Member's Initial Capital Contribution in accordance with the terms and conditions of the Contribution Agreement. (b) Investor Member's Initial Capital Contribution. Contemporaneously with the execution of this Agreement, Investor Member shall make the Investor Member's Initial Capital Contribution in accordance with the terms and conditions of the Contribution Agreement. (c) No Right to Return of Capital. No Member shall have the right to withdraw any capital from the Company or be repaid its Capital Contribution except as provided in this Agreement. Section 1.2. Required Additional Capital Contributions. (a) If at any time or from time to time Required Additional Capital Contributions are required for the payment of any Shortfall 1 or Required Project Equity, 2 then the Managing Member shall promptly notify each Member of such Required Additional Capital Contribution ("Required Additional Capital Contributions"), then the Managing Member shall promptly notify each Member of such Required Additional Capital Contribution (a Required Additional Capital Contribution Notice ) identifying the amount of such Required Additional Capital Contribution (the Required Additional Capital Contribution Amount ) and the reasons therefor, in reasonable detail. The Managing Member shall consult with the other Member within a reasonable period of time prior to delivering any Required Additional Capital Contribution Notice. Any Member may direct the Managing Member to provide (and the Managing Member shall provide) a Required Additional Capital Contribution Notice if such Member determines that a Required Additional Capital Contribution is needed or, in lieu thereof, such Member shall have the right to deliver Required Additional Capital Contribution Notices. The Managing Member shall use its reasonable efforts to not deliver a Required Additional Capital Contribution Notice more than once per month unless Investor Member has given its prior consent in each instance. Each Required Additional Capital Contribution Notice with respect to a Shortfall shall (i) describe in reasonable detail the anticipated capital requirements for such month or other applicable period with reference to the Annual Budget and Business Plan, to be allocated among the specified 1 A "Shortfall" would typically be defined as a shortfall in the amount required to pay the operating expenses of the Company. 2 "Required Project Equity" would typically be defined as capital required for the construction of a project that is not provided by the construction lender. { ;2}

5 line item(s); (ii) indicate the amounts expended by the Company to date in connection with the Project among the specified line item(s) of the Annual Budget and Business Plan; (iii) describe the portion of expenditures for such month or other applicable period anticipated to be funded from available Company funds; (iv) describe the portion of expenditures for such month or other applicable period which is to be funded by Required Additional Capital Contributions; (v) set forth each Member s Percentage Interest of the Required Additional Capital Contribution Amount on account of such Shortfall; and (vi) be accompanied by such documentation and information as a Member receiving such Required Additional Capital Contribution Notice may reasonably require. If there is a dispute as to the Required Additional Capital Contribution Amount which cannot be resolved by the Members in good faith within ten (10) days after receipt of a Required Additional Capital Contribution Notice, such dispute shall be settled by the Accountant and the determination of the Accountant shall be binding and conclusive. The Members agree to promptly provide the Accountant with all information necessary to resolve such dispute and shall instruct the Accountant to resolve such dispute as expeditiously as possible. (b) Each Required Project Equity Notice shall be accompanied by: (i) a completed, executed request for an Additional Capital Contribution in the form of AIA Form G702, certified by the Managing Member as to, among other things, that the work and materials for which payment is requested have been performed or delivered, along with evidence of all expenses, and that the Project is being or has been constructed in accordance with the Plans and Specifications or detailed description of any variance therefrom and pursuant to the Development Budget and that no amounts requested represent Cost Overruns; (ii) a written certification from the Development Consultant indicating the status of construction, compliance with the Plans and Specifications and the Development Budget, and approval of the disbursement request; and (iii) a copy of the construction lender s draw request package for such draw, if any, accompanied by a certification from the Managing Member that the applicable Financing is in full force and effect, there is no default thereunder, and that the draw request package is true and correct and complete. (c) Each Required Project Equity Request shall constitute a representation by the Managing Member that, except as provided in such notice, (1) all funds previously received from prior Required Project Equity Requests have been expended in accordance with such Required Project Equity Requests, (2) none of the labor, materials, overhead or other items of expense specified in the current Required Project Equity Request were the basis of any prior Required Project Equity Requests, (3) all funds to be contributed pursuant to the current Required Project Equity Request will be used solely for the purpose of paying the items specified in the current Required { ;2}

6 Project Equity Request, (4) no funds requested by any Required Project Equity Request for the purpose of disbursement to any party have been or will at any time be returned to the Managing Member or any Affiliate of the Managing Member (other than the Company), as a rebate, refund or otherwise (except for payment in accordance with the Development Management Agreement), (5) no event shall have occurred and be continuing on the date of such Required Project Equity Request which, with the passage of time or the giving of notice or both, would constitute a material default under the Financing Documents and (6) no funds requested by any Required Project Equity Request shall be used to pay for Cost Overruns that are due and payable by Development Manager pursuant to the terms of the Development Management Agreement. Notwithstanding anything to the contrary contained in this Agreement, Developer Member acknowledges and agrees that any Cost Overruns paid by Development Manager pursuant to the terms of the Development Management Agreement shall not be considered Additional Capital Contributions by Developer Member and shall not be credited to Developer Member s Capital Account. (d) Each Member shall make an Additional Capital Contribution to the Company in an amount equal to its Percentage Interest of the Required Additional Capital Contribution, on or before the Due Date. As used in this Agreement, Due Date shall mean (i) with respect to a Required Additional Capital Contribution that is expressly approved by the Members, the tenth (10th) day following the approval by the Members of such Required Additional Capital Contribution (or such earlier or later date as may be expressly agreed upon by the Members) or, if such approval is obtained prior to the date such Required Additional Capital Contribution shall be required by the Company (as a result of approval of a budget or otherwise), the tenth (10th) day following receipt of the Required Additional Capital Contribution Notice, and (ii) with respect to Required Additional Contributions necessary to eliminate Shortfalls, if there is no dispute as to the Required Additional Capital Contribution Amount, the tenth (10th) day following the delivery of a Required Additional Capital Contribution Notice, together with all information required pursuant to this Section 1.2 or, if there is a dispute as to the Required Additional Contribution Amount, the tenth (10th) day following resolution by the Accountant of such dispute in accordance with subsection 1.2(a), and (iii) with respect to a Required Additional Capital Contribution approved or required by the Members in respect of leasing, operation, maintenance, repair, renovation or development of the Project or any portion thereof, the tenth (10th) day following receipt of a notice from a Member to make such Required Additional Capital Contribution, and (iv) with respect to a Required Additional Capital Contribution that is Required Project Equity, if there is no dispute as to the Required Additional Capital Contribution Amount, the tenth (10th) day following receipt of the Required Additional Capital Contribution Notice together with all information required pursuant to Section 1.2 or, if there is a dispute as to the Required Additional Capital Contribution Amount, the tenth (10th) day following resolution by the Accountant of such dispute in accordance with subsection 1.2(a). (e) Additional Capital Contributions shall be credited to the Capital Account of the Members making such Additional Capital Contributions. Except as provided in this Section 1.2 with respect to Required Additional Capital Contributions, no { ;2}

7 Member shall have the obligation to make additional Capital Contributions to the Company. Investor Member shall not be obligated to make any Required Additional Capital Contribution that is Required Project Equity unless Managing Member shall have provided to Investor Member the information set forth in subsection 1.2(c). Section 1.3. Failure to Make Required Additional Capital Contributions. (a) If any Member shall fail to advance any Required Additional Capital Contribution pursuant to Section 1.2 hereof by 5:00 p.m. Eastern Standard Time on the Due Date thereof (a Defaulting Member ), then the portion thereof not contributed by such Defaulting Member shall be hereinafter referred to as the Deficiency. In such event, the non-defaulting Member, may, in its sole and absolute discretion, elect by notice to the Defaulting Member to make a Default Loan to the Defaulting Member in accordance with the provisions of clause (b) below. (b) Default Loans. (i) A non-defaulting Member that does not have an outstanding Default Loan made to it hereunder (a Lending Eligible Member ) may deliver a notice (a Default Loan Notice ) to the Defaulting Member which shall include the following statement set forth in all capital letters NOTE: YOU HAVE FAILED TO MAKE A REQUIRED ADDITIONAL CAPITAL CONTRIBUTION TO [, LLC] IN THE AMOUNT OF $[ ], AND THE UNDERSIGNED CAN ELECT TO FUND THE SAME AS A DEFAULT LOAN AS DEFINED IN SECTION 1.3 OF THE LIMITED LIABILITY COMPANY AGREEMENT OF[, LLC]. IF SUCH REQUIRED ADDITIONAL CAPITAL CONTRIBUTION IS NOT MADE BY YOU ON OR BEFORE TEN (10) DAYS FOLLOWING THE DATE HEREOF. The Lending Eligible Member shall have the right, but not the obligation, to make a loan (a Default Loan ) to such Defaulting Member in an amount equal to the Deficiency at any time after the tenth (10th) day following the delivery of a Default Loan Notice provided that such Defaulting Member has not made such Required Additional Capital Contribution prior to the making of such Default Loan. If a Default Loan(s) shall be made in accordance with this subsection 1.3(b), the Company shall notify the Defaulting Member of the amount and date of the Default Loan(s), and the Capital Account of the Defaulting Member shall be credited to reflect the payment of the proceeds of the Default Loan to the Company. Each Default Loan shall be deemed to be made to the Defaulting Member, with the proceeds of each Default Loan being delivered to the Company by the Lending Eligible Member making same in immediately available funds on such Defaulting Member s behalf. A Default Loan shall be deemed to have been advanced on the date actually advanced. Default Loans shall earn interest on the outstanding principal amount thereof at a rate equal to the lesser of (i) the Default Loan Rate or (ii) the Maximum Rate, from the date actually advanced until the same is repaid in full. { ;2}

8 (ii) Default Loans shall be secured as provided in subsection 1.3(b)(iii) and shall have a term of one hundred eighty (180) days. A Lending Eligible Member making a Default Loan (a Lending Member ) may, in the exercise of such Member s sole and absolute discretion, extend the term of a Default Loan for a period(s) to be determined by such Member. If a Default Loan has been made, the Defaulting Member shall not receive any distributions of Net Cash Flow or Net Proceeds of a Capital Transaction or any proceeds from the transfer of all or any part of its Company Interest while the Default Loan, including all interest thereon remains unpaid. Instead, the Defaulting Member s share of Net Cash Flow and Net Proceeds of a Capital Transaction or such other proceeds shall first be paid to the Lending Member until all Default Loans to such Defaulting Member, including all accrued and unpaid interest thereon shall have been repaid in full. Such payments shall be applied first to the payment of then accrued interest on such Default Loans and then to the repayment of the principal amounts thereof, but shall be considered, for all other purposes of this Agreement, to have been distributed to the Defaulting Member. Distributions of Net Cash Flow and Net Proceeds of a Capital Transaction to such Defaulting Member shall be immediately reinstated prospectively upon the full repayment of a Default Loan (including all accrued and unpaid interest thereon), to the Lending Member. The Defaulting Member shall be liable for the reasonable fees and expenses incurred by the Lending Member (including, without limitation, reasonable attorneys fees and disbursements) in connection with any enforcement or foreclosure upon any Default Loan and such costs shall, to the extent enforceable under applicable law, be added to the principal amount of the applicable Default Loan. In addition, at any time during the term of such Default Loan, the Defaulting Member shall have the right to repay, in full or in part, the Default Loan (including interest and any other charges). (iii) If a Member makes a Default Loan, the Defaulting Member shall be deemed to have pledged to the Lending Member, and granted to such Lending Member, a continuing first priority security interest in all of the Defaulting Member s Company Interest to secure the payment of the principal of, and interest on, any Default Loans made in accordance with the provisions hereof, and for such purpose this Agreement shall constitute a security agreement. The Lending Member is authorized to immediately file one or more UCC financing statements in order to perfect such security interest. In addition, the Defaulting Member shall promptly execute, acknowledge and deliver such financing statements, continuation documents and other documents and take such other actions as the Lending Member shall request in order to perfect or continue the perfection of such security interest; and, if the Defaulting Member shall fail to do so within seven (7) days after demand therefor, the Lending Member is hereby appointed the attorney-in-fact of, and is hereby authorized on behalf of, the Defaulting Member, to execute, acknowledge and deliver all { ;2}

9 such documents and take all such other actions as may be required to perfect such security interest. Such appointment and authorization are coupled with an interest and shall be irrevocable. The Lending Member may sell or otherwise dispose of the Defaulting Member s Company Interest in accordance with the UCC, and the Lender Member shall have all the rights and remedies of a secured party under the UCC, all such rights and remedies being cumulative, not exclusive, and enforceable alternatively, successively or concurrently, at such time or times as the Lending Member deems expedient. (iv) If the non-defaulting Member shall elect not to make a Default Loan, the non-defaulting Member may elect, within ten (10) days following receipt of a written notice from Managing Member that the Defaulting Member shall have failed to make the Applicable Capital Contribution, to have the Company return the Additional Capital Contribution advanced by the non-defaulting Member and, promptly following such election, the Company shall return such Additional Capital Contribution to the non-defaulting Member. Section 1.4. No Third Party Beneficiaries. The right of a Member to require an Additional Capital Contribution or to make a Default Loan shall not confer upon any creditor or other third party having dealings with the Company any right, claim or other benefit, including the right to require any such Additional Capital Contribution or Default Loan. Section 1.5. Status. It shall be the duty of the Managing Member to keep all Members informed as to the status of Additional Capital Contributions and/or Default Loans. { ;2}

10 Section 6.1. Management. ARTICLE VI MANAGEMENT (a) Except as otherwise expressly provided in this Agreement, the business and affairs of the Company and the Subsidiary Entity shall be exclusively vested in the Members. The Managing Member shall carry out and implement the day to day affairs of the Company and the Subsidiary Entity within the scope of the authority granted pursuant to this Agreement, provided that the Managing Member shall not be obligated to incur any expenses on behalf of the Company except to the extent that the Company has sufficient funds available to cover such expenses. The Managing Member shall keep the Members informed as to all matters of concern to the Company and the Subsidiary Entity and the Members. The Managing Member agrees to devote to the Company s and the Subsidiary Entity s business such time as reasonably shall be necessary in connection with its duties and responsibilities hereunder. Except as otherwise expressly provided in this Agreement, the Managing Member shall have the authority without the consent of the other Member to: (i) implement all decisions approved by the Members (to the extent such approval is required hereunder); (ii) conduct (or cause to be conducted under its supervision) the day-to-day business and affairs of the Company and the Subsidiary Entity subject to, and in accordance with, this Agreement; (iii) perform or observe all of the specific obligations to be performed by the Managing Member hereunder; (iv) open and maintain bank accounts for funds of the Company and the Subsidiary Entity in the name of the Company and the Subsidiary Entity and designate the persons authorized on behalf of the Company and the Subsidiary Entity to make deposits therein and withdrawals therefrom; (v) employ independent unaffiliated contractors at market rates for the ordinary maintenance and repair of the Project; (vi) cause the Subsidiary Entity to enter into the Development Management Agreement; (vii) cause the Subsidiary Entity to enter into the Leasing and Management Agreement; (viii) sell, lease, transfer, assign, finance, pledge, mortgage or grant a security interest in or otherwise dispose of the Project or the Company Assets, or any portion thereof, including without limitation { ;1}

11 causing the Subsidiary Entity to enter into Construction Loans and other Financings; (ix) pay, extend, renew, modify, adjust, submit to arbitration, prosecute, defend, settle or compromise upon such terms as the Managing Member may determine and upon such evidence as it deems sufficient any obligation, suit, liability, cause of action or claim, either in favor of or against the Company or the Subsidiary Entity; (x) enter into, execute, acknowledge and deliver any and all contracts, agreements or other instruments the Managing Member deems necessary or appropriate in connection with the business or affairs of the Company and/or the Subsidiary Entity; (xi) apply for, file, prosecute, obtain, appeal and challenge any permit, approval, authorization, tax bill, filing or consent with respect to the Company and/or the Subsidiary Entity issued by any governmental authority; (xii) engage in any kind of activity and execute, perform and carry out contracts of any kind necessary, or in connection with or convenient or incidental to any of the Company s purposes as more particularly set forth in subsection 1.3(a) of this Agreement; and (xiii) otherwise take any other action in furtherance of the Company s stated purpose hereunder unless consent of one or more of the Members is otherwise expressly required hereunder. Any third party dealing with the Company may, without any inquiry, rely upon any instrument or agreement executed and delivered by the Managing Member on behalf of the Company as constituting the binding act and deed of the Company. Except to the extent limited by the provisions of Section 6.2 or otherwise in this Agreement, the Managing Member shall have the authority to employ on behalf of the Company and the Subsidiary Entity such agents, employees, managers, accountants, attorneys, consultants and other Persons as the Managing Member may deem necessary and in the best interests of the Company or the Subsidiary Entity. The Managing Member agrees to notify the other Member from time to time of the name, address and telephone number of the person or persons primarily responsible for carrying out Managing Member s obligations hereunder with respect to the day-to-day management of the Project. (b) In addition to and without limiting (except as otherwise set forth in this Section 6.1) the duties and obligations of the Managing Member as set forth above, subject to the consent requirements and limitations set forth in Sections 6.1 and 6.2 and elsewhere in this Agreement, the Managing Member shall cause the Company and the Subsidiary Entity to comply with the following duties: { ;1}

12 (i) directly or through its agents, at all times, use commercially reasonable efforts to perform and comply with and enforce the provisions of each Key Document, lease, management agreement, development agreement, construction contract or other contract, instrument or agreement to which the Company or the Subsidiary Entity is a party or which affects the Project or the operation thereof; (ii) directly or through its agents perform, comply with and enforce the provisions of each Managing Member Affiliate Agreements; (iii) cause the Company to keep and maintain in effect commercially reasonable insurance coverage for the Company and the Subsidiary Entity approved by all of the Members of the Company in accordance with usual and customary standards or as otherwise required under any agreement to which the Company or the Subsidiary Entity is otherwise bound, including, without limitation, policies of Pollution and Remediation Legal Liability Insurance and Public Liability Insurance with such coverages and policy limits as required from time to time by the insurance program available to Affiliates of Investor Member with respect to the Project; (iv) cause the Company to deliver to the Members promptly upon the receipt or sending thereof copies of all material notices, reports and communications (i) between the Company or the Subsidiary Entity and any holder of a security interest, mortgage or deed of trust or other Financing Document or any party to any lease, material operating agreement, development agreement, construction contract or other material contract affecting the Company or all or any portion of the Project which in each case relate to any existing or pending default thereunder or to any financial or operational information requested by such party, or expressly required under this Agreement, and (ii) regarding material violations or material matters affecting the Company, the Subsidiary Entity or the Project; (v) exercise commercially reasonable efforts to not permit the Company or the Subsidiary Entity to operate in such manner as to be classified as an investment company for purposes of the Investment Company Act of 1940, as amended; (vi) if the Company is operated in such manner as to be classified as an investment company, upon the request of any adversely affected Member, cause the Company to cooperate with the adversely affected Member by using its commercially reasonable best efforts to alleviate any adverse consequences to such Member resulting from such classification or failure of classification; { ;1}

13 (vii) cause the Subsidiary Entity to operate in accordance with its Subsidiary Entity Organizational Documents and all other agreements to which the Subsidiary Entity is a party; (viii) cause the Company (a) to operate in such a manner as to be in compliance with all provisions of the Anti-Terrorism Laws applicable to it and not become a Prohibited Person, (b) to the extent required by law, establish policies and procedures designed to prevent and detect money laundering, including processes to meet all applicable anti-money laundering requirements of USA Patriot Act, (c) to the extent required by law, identify the entities with whom it does business and retain all documentation necessary to identify those entities and their sources of funds, (d) not knowingly conduct any business or engage in any transaction or dealing with any Prohibited Person, (e) not knowingly deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to Executive Order 13224, and promptly notify the other Members in the event that it has reason to believe that any of the covenants in clauses (a) through (e) hereinabove are no longer correct; and (ix) cause to be paid any and all Impositions before the same shall become delinquent. (c) Upon reasonable notice from the non-managing Member, the Managing Member shall consult with such non-managing Member with regard to any actions taken pursuant to Section 6.1. Section 6.2. Major Decisions. Notwithstanding the provisions of Section 6.1, but subject to the express terms of Sections 6.3, 6.4, 6.6, 6.8 and 6.9 and Article VIII of this Agreement, without the prior written consent of all Members in each instance (a Major Decision ), the Managing Member shall not allow the Company or the Subsidiary Entity to: (a) except as otherwise expressly permitted by the terms of this Agreement, Transfer the Project or any portion thereof or any other Company Assets (other than personal property at the Project which may be disposed of or replaced due to wear and tear or obsolescence or otherwise in the ordinary course of business) or any part thereof or interest therein, or market or otherwise offer for sale the Project or any other Company Assets or any part thereof or interest therein; (b) acquire any real property, or any interest therein, on behalf of the Company or the Subsidiary Entity, either directly or indirectly; (c) borrow money on behalf of the Company or the Subsidiary Entity, whether on a secured or unsecured basis, prepay in whole or in part, refinance, recast, modify, amend, terminate, extend or compromise any Financing or secure the same by { ;1}

14 mortgages, deeds of trust, security agreements or other similar Financing Documents (or enter into, amend or modify any such Financing Documents); (d) alter, modify, cancel or extend the Development Management Agreement, the Leasing and Management Agreement or any other development, property management, brokerage, leasing, finder s fee or commission agreement; (e) enter into any Managing Member Affiliate Agreement (other than Managing Member Affiliate Agreements approved by the other Member in accordance with the terms hereof) or engage in any transaction between the Company and/or the Subsidiary Entity and the Managing Member, any partner or member of the Managing Member, any Affiliate of the Managing Member or any Affiliate of any partner or member of the Managing Member, or amend, modify or terminate any Managing Member Affiliate Agreement, permit the assignment of any Managing Member Affiliate Agreement, release any party from any liability arising from any Managing Member Affiliate Agreement, waive any material rights or exercise any rights or approve any matter under a Managing Member Affiliate Agreement, if the waiver or exercise of such rights or approval of such matter could reasonably be expected to have a Material Adverse Effect; (f) initiate any development plan, or enter into any development agreement for any development or redevelopment of the Project or, once approved, amend or modify such plans or agreement; (g) enter into or amend, modify, extend, expand or terminate any lease, license or other occupancy agreement with respect to the Project; (h) adopt, amend, modify, alter or change the Annual Budget and Business Plan, the Leasing and Property Guidelines or the standard form of lease for the Project; (i) do any of the following in connection with any construction contract: (i) extend the contract time, (ii) except as contemplated by subsection 6.2(k) hereof, adjust the contract price, contractor s fee or any other sums payable under any construction contract, (iii) accept any non-conforming work, (iv) approve any application for payment, (v) approve a certificate of substantial completion, or (vi) approve a certificate of final completion or (vii) modify the project schedule; (j) name the Project or any portion thereof something different than [ ] Downtown (or change the name of the Project or any portion thereof), change the primary use of the Project or any portion thereof or make or agree to any changes to the subdivision or zoning, or material changes to the site-plan of, the Project or any portion thereof, take any action with respect to the District, develop the Development Parcel or any portion thereof (other than in accordance with the Plans and Specifications), approve the terms or provisions of any material agreements (other than in accordance with the Plans and Specifications and easements for the provision of { ;1}

15 access and utility services for the Project), or other encumbrance on title, and/or any amendments or modifications to any of the foregoing; (k) make any expenditure or incur any cost or obligation which, when added to any other expenditure, cost or obligation of the Company or any Subsidiary Entity exceeds the amount allowed by the Development Budget or Annual Budget and Business Plan with respect to the period when such expenditure is made or cost or obligation is incurred or exceeds any line item specified in such Development Budget or Annual Budget and Business Plan, except that (i) (A) if the undisbursed balance of the Development Budget for any category other than soft cost or land (the hard costs ) exceeds the amounts necessary to complete such item in accordance with the Plans and Specifications, the excess may be reallocated to any such other hard cost line item which is insufficient to complete such item in accordance with the Plans and Specifications (a Hard Cost to Hard Cost Reallocation ), provided such Hard Cost to Hard Cost Reallocation, together with all prior Hard Cost to Hard Cost Reallocations, shall not result in an increase to the original amount of a hard cost category in the Development Budget in an amount greater than the lesser of (x) five percent (5%) of the original amount of such budget category, and (y) $50,000 and (B) Managing Member shall have the right to utilize the line item for hard cost contingency in the Development Budget to cover hard costs line items that exceed the line items therefor set forth in the budget, but only to the extent that for any one such or series of expenditures are for contingency amounts of (1) less than $25,000, if the unapplied contingency balance following such application(s) shall exceed fifty percent (50%) of the relevant contingency amount (i.e., 50% of the original hard cost contingency or 50% of the soft cost contingency, as the case may be) shown in the Development Budget or (2) less than $10,000, if the unapplied contingency balance following such application(s) shall be equal to or less than fifty percent (50%) of the original relevant contingency amount (i.e., 50% of the original hard cost contingency or 50% of the original soft cost contingency, as the case may be) shown in the Development Budget, and (ii) if the undisbursed balance of the Development Budget for any category of soft cost exceeds the amounts necessary to complete such item in accordance with the Plans and Specifications, the excess may be reallocated to any other soft cost line item which is insufficient to complete such item in accordance with the Plans and Specifications (a Soft Cost to Soft Cost Reallocation ), provided such Soft Cost to Soft Cost Reallocation, together with all prior Soft Cost to Soft Cost Reallocations, shall not result in an increase to the original amount of a soft cost budget category in an amount greater than the lesser of (x) five percent (5%) of the original amount of such budget category, or (y) $25,000; (l) approve any plans or specifications for any work or approve any change or modification to any Plans and Specifications that (i) except as contemplated by subsection 6.2(k) above, increases the development or construction costs (whether hard costs or soft costs ) with respect to the Project, (ii) adversely affects the value, use, financeability or scope of the Project, (iii) constitutes a material downgrading of the quality of the materials, equipment or systems of the Project or (iv) materially alters the design or overall appearance of the Project; { ;1}

16 (m) approve any request for a draw under the Development Management Agreement or any Construction Loan; (n) enter into or modify any architect s, development, engineer s or contractor s agreement related to the construction of the Project; (o) submit the Project or any portion thereof to condominium ownership or take any action in furtherance of the foregoing; (p) enter into or amend, modify or terminate any reciprocal easement agreement affecting all or any portion of the Project; (q) except in accordance with the express provisions of the then current Annual Budget and Business Plan, make any capital expenditures with respect to the Project or any portion thereof; (r) establish any contingency funds or reserves on behalf of the Company or the Subsidiary Entity, except as may be expressly provided for in the Annual Budget and Business Plan, or, except as provided in subsection 6.2(k) above, use or allocate or reallocate or approve the use or allocation of contingency funds or reserves; (s) with respect to any tenant or subtenant at the Project, (X) forgive or write-off any amounts due, (Y) grant any rent relief, or (Z) establish any reserves in respect of any amounts payable; (t) extend credit (except immaterial amounts in the ordinary course of business and except for bonds, cash deposits and letters of credit for governmental permits and approvals required for the development of the Project in accordance with Plans and Specifications as provided in the Development Budget), make loans or become or act as a surety, guarantor, endorser or accommodation endorser (or modify any obligations relating to the foregoing) except in connection with negotiating checks or other instruments received by the Company; (u) adopt any insurance program (or any material modification or termination thereof) for the Company, the Subsidiary Entity or the Project; (v) approve or replace the Company Counsel, the Accountant, any general contractor, project architect, project engineer, a real estate tax consultant or any other professional consultants performing material services for the Company, the Subsidiary Entity or any of their respective successors; (w) select any leasing broker, real estate broker, mortgage broker, investment banker or other third party financial advisor to act on behalf of the Company or the Subsidiary Entity pursuant to an exclusive or co-exclusive or other arrangement; (x) settle or compromise any claim, suit or other adversary proceeding (other than any condemnation action or other eminent domain proceeding) brought by { ;1}

17 any Person against the Company or the Subsidiary Entity other than the settlement of any claim, suit or other adversarial proceeding for personal injury or property damage with respect to the operation of the Project settled in the ordinary course of business for a sum not exceeding $25,000 for any individual claim, suit or other proceeding or series of related claims, suits or other proceedings so long as the amount of such settlement, when added to the amounts of all other settlements made during the Fiscal Year without the prior consent of all Members, does not exceed $100,000, in the aggregate; (y) assert or initiate any claim, suit or other adversary proceeding against any Person (or once asserted or initiated, settle any such claim, suit or proceeding) other than claims, suits or other adversary proceedings asserted or initiated in the ordinary course of business for sums not exceeding $25,000 for any individual claim, suit or other proceeding or series of related claims, suits or other proceedings so long as the amount of the suit, claim or proceeding, when added to the amounts of all other suits, claims and proceedings asserted during the Fiscal Year without the prior consent of all Members, does not exceed $50,000, in the aggregate; proceeding; (z) settle any condemnation action or other eminent domain (aa) take any action in respect of the Project or any portion thereof relating to environmental matters, except such emergency action as may be necessary to secure or protect the Project or to prevent imminent harm to persons or property, provided that Managing Member shall use commercially reasonable efforts to obtain the prior approval of the other Members and shall in any event notify the other Member promptly following the taking of any such emergency action; (bb) make any election with respect to whether to repair or rebuild any material damage to any improvements to the Project resulting from any casualty or condemnation event (except such emergency repairs as may be necessary to secure or protect the Project or to prevent imminent harm to persons or property, provided that Managing Member shall use commercially reasonable efforts to obtain the prior approval of the other Member and shall in any event notify the other Members promptly following the taking of any such emergency action); (cc) execute and deliver documents, agreements or instruments on behalf of the Company or the Subsidiary Entity, except those which (A) are in accordance with the then current Annual Budget and Business Plan, (B) are not Managing Member Affiliate Agreements, (C) do not grant any lien or encumbrance against all or any portion of the Project, (D) are not prohibited under the Delaware Act or this Agreement, (E) are customary for the ordinary day-to-day operations of the Project and which are unlikely to have a Material Adverse Effect, (F) are terminable on thirty (30) days' notice or less without penalty or premium and (G) impose on the Company or the Subsidiary Entity an obligation of less than $100,000; (dd) modify (i) any of the Key Documents or (ii) any other material agreement or contracts (including, without limitation, any construction document) after { ;1}

18 the same has been approved by the Members and executed by the Company or the Subsidiary Entity; (ee) take any action under applicable bankruptcy, insolvency or similar laws with respect to the Company or the Subsidiary Entity; (ff) take any action not in furtherance of the stated purposes or intended business of the Company or the Subsidiary Entity as set forth in this Agreement or in the Subsidiary Entity Organizational Documents; (gg) except as otherwise expressly set forth in this Agreement, permit the admission of a new member of the Company or the Subsidiary Entity or the issuance of additional Company Interests in the Company or the Subsidiary Entity; (hh) merge or consolidate the Company or the Subsidiary Entity with or into another Person (or take any action which has substantially the same effect or commits the Company or the Subsidiary Entity to do any of the foregoing); (ii) hire employees or approve the replacement of key personnel (whether denominated as Key Persons or otherwise) under Managing Member Affiliate Agreements (jj) enter into any joint venture (regardless of the form of the joint venture) with another Person, or agree to merge or consolidate with another Person; (kk) amend, modify or terminate this Agreement, the Subsidiary Entity Organizational Documents or organizational instruments of either the Company or the Subsidiary Entity; (ll) dissolve, terminate or wind up the Company or the Subsidiary Entity (or take any action which has substantially the same effect or commits the Company or the Subsidiary Entity to do any of the foregoing); (mm) take any action in contravention of, amend, modify or waive the provisions of any agreement that the Members would have the right to consent or approve; or (nn) approve any matter which this Agreement specifically provides must be approved by the Company or approved by the Members of the Company or words of similar import. Section 6.3. Development and Financing of Project. (a) The Members intend to cause the Company and/or the Subsidiary Entity to develop the Project in accordance with the Development Budget and the Plans and Specifications once such Development Budget and Plans and Specifications have been adopted by the Company. { ;1}

19 (b) Subject to the provisions of Section 6.2 and this Section 6.3, Managing Member shall use its commercially reasonable efforts to obtain on behalf of the Company a Construction Loan to finance the development and construction of the Project not covered by the Capital Contributions and Additional Capital Contributions of the Members. (c) The Members agree to act in good faith and reasonably cooperate with one another in connection with the adoption of the Development Budget and the Plans and Specifications and obtaining a Construction Loan as described in subsection 6.3(b). Without limiting the generality of the foregoing, the Members agree as follows: (i) Investment Member and Developer Member shall designate representatives who shall be responsible for determining which Construction Lenders should be approached for a Construction Loan (the Financing Representatives ); (ii) The Financing Representatives shall gather the term sheets and other proposals from such Construction Lenders and consult with one another regarding which Construction Lender s terms are most favorable to the Company; (iii) The Managing Member shall exercise commercially reasonable efforts to cause the Company and/or the Subsidiary Entity to take such action as may be required in order to close any such Construction Loan as may be approved by the Members in accordance with the provisions of this subsection 6.3(c). (d) Notwithstanding anything to the contrary contained herein, no Member shall be required to approve any Construction Loan that is not a Required Acceptance Construction Loan. Section 6.4. Development Management and Leasing and Management Agreements. (a) Contemporaneously with the execution and delivery of this Agreement, the Company will cause the Subsidiary Entity to enter into the Development Management Agreement with the Development Manager. Except as provided in Section 6.9, the Company shall not, and shall not permit the Subsidiary Entity to, cancel, extend or otherwise modify the Development Management Agreement, enter into another development management agreement or replace the Development Manager as the development manager thereunder without the prior consent of all of the Members. The Managing Member shall supervise and Control the Development Manager and cause the Development Manager to carry out all decisions made by the Company pursuant to the Development Management Agreement. (b) No later than the Completion Date, the Company shall cause the Subsidiary Entity to enter into the Leasing and Management Agreement with the Property Manager. Except as provided in Section 6.9, the Company shall not, and shall { ;1}

20 not permit the Subsidiary Entity to, cancel, extend or otherwise modify the Leasing and Management Agreement, enter into another leasing and management agreement or replace the Property Manager as the property manager thereunder without the prior consent of all of the Members. The Managing Member shall supervise and Control the Property Manager and cause the Property Manager to carry out all decisions made by the Company pursuant to the Leasing and Management Agreement. (c) Investor Member reserves the right to retain a development consultant ( Development Consultant ) as Investor Member s consultant to monitor the progress and completion of the Project. The fees and expenses of the Development Consultant with respect to the Project and any other redevelopment of all or any portion of the Project shall be a Company expense. If the Development Consultant is retained, Managing Member shall cooperate with such Development Consultant, including, without limitation, at Investor Member s reasonable request, providing Development Consultant with copies of information, reports, documents, notices and other materials with respect to the Project. Section 6.5. Duties and Conflicts. (a) The Members, in connection with their respective duties and responsibilities hereunder, shall at all times act in good faith and, except as otherwise expressly set forth herein, any decision or exercise of right of approval, consent, disapproval or deferral of approval by a Member is to be made by such Member pursuant to the terms of this Agreement in good faith, but recognizing that each Member may act in its own economic self-interest and in accordance with such tax and business objectives as it deems appropriate or desirable for such Member. Subject to the terms of subsection 6.8(c) of this Agreement, the Managing Member shall, in the performance of its duties hereunder, act with the care, skill, prudence and diligence that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of like character and with like aims notwithstanding any other duty existing at law or in equity. Except for the duties expressly imposed by this Agreement, Investor Member shall owe no duty of any kind toward the Company or the Managing Member. Except for reimbursement of the Managing Member s reasonable and actual third party out-of-pocket expenses (not including any general office overhead) and as otherwise expressly set forth herein, or as otherwise agreed to in writing by the Members, no Member or any partner, officer, shareholder or employee of any Member shall receive any salary or other remuneration for its services rendered pursuant to this Agreement. Any particular fees payable or expenses or costs reimbursed to Managing Member under this Agreement shall not be paid or reimbursed to Managing Member or any Affiliate of Managing Member under any Managing Member Affiliate Agreement, and any fees payable or expense or cost reimbursed to Managing Member or any Affiliate of Managing Member under any Managing Member Affiliate Agreement shall not be paid or reimbursed to Managing Member under this Agreement, it being the intention and agreement of the parties that Managing Member and its Affiliates shall be reimbursed only once for any particular fee or reimbursable cost or expense. { ;1}