Exhibit 10.2

LIMITED LIABILITY COMPANY AGREEMENT

OF

GGT CRESCENT GATEWAY FL VENTURE, LLC,

a Delaware limited liability company

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LIMITED LIABILITY

COMPANY AGREEMENT OF

GGT CRESCENT GATEWAY FL VENTURE, LLC

A DELAWARE LIMITED LIABILITY COMPANY

TABLE OF CONTENTS

 

     Page  

ARTICLE 1. DEFINITIONS

     2   

1.1         Definitions

     2   

1.2         Other Defined Terms

     9   

1.3         Exhibits

     9   

ARTICLE 2. THE COMPANY

     9   

2.1         Organization

     9   

2.2         Name of Company

     9   

2.3         Purpose of Company

     9   

2.4         Principal and Registered Office

     9   

2.5         Further Assurances

     10   

2.6         Expenses of Formation and Syndication

     10   

2.7         No Individual Authority

     10   

2.8         Business Opportunities

     10   

2.9         Neither Responsible for Other’s Commitments

     11   

2.10       Affiliates

     11   

2.11       Operations in Accordance With the Act: Ownership

     11   

ARTICLE 3. TERM

     11   

3.1         Term

     11   

ARTICLE 4. CAPITAL CONTRIBUTIONS OF THE MEMBERS

     12   

4.1         Capital Contributions of the Members

     12   

4.2         No Other Contributions

     12   

4.3         No Interest Payable

     12   

4.4         No Withdrawals

     13   

4.5         Additional Capital Contributions

     13   

ARTICLE 5. MEMBER LOANS

     15   

5.1         Member Loans

     15   

5.2         Payment of Member Loans

     15   

ARTICLE 6. MANAGEMENT OF THE COMPANY

     16   

6.1         Management

     16   

6.2         Major Decisions

     18   

6.3         Bank Accounts

     22   

6.4         Annual Budgets

     22   

6.5         Insurance

     23   

 

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6.6         Consultation Regarding the Project

     23   

6.7         Termination of Delegation of Authority to Crescent as Operating
Member

     24   

6.8         Development

     25   

6.9         Management Agreement

     25   

6.10       Contracts with Affiliates

     26   

6.11       Indemnification of Managing Member and Operating Member

     26   

6.12       Leasing Guidelines

     26   

ARTICLE 7. BOOKS AND RECORDS, AUDITS, TAXES, ETC.

     26   

7.1         Books; Statements

     26   

7.2         Where Maintained

     28   

7.3         Audits

     28   

7.4         Objections to Statements

     28   

7.5         Tax Returns

     28   

7.6         Tax Matters Partner

     29   

7.7         Tax Policy

     29   

7.8         Section 754 Election

     29   

7.9         Capital Accounts

     29   

ARTICLE 8. ALLOCATIONS

     30   

8.1         Allocation of Net Income and Net Loss

     30   

8.2         Loss Limitation

     30   

8.3         Minimum Gain Chargebacks and Nonrecourse Deductions

     30   

8.4         Qualified Income Offset

     31   

8.5         Code Section 704(b) Allocations

     31   

8.6         Other Allocation Provisions

     31   

8.7         Distributions of Nonrecourse Liability Proceeds

     31   

8.8         Information as to Allocation of Debt

     32   

8.9         Taxable Year; Fiscal Year

     32   

ARTICLE 9. DISTRIBUTIONS AND ALLOCATIONS

     32   

9.1         Percentage Interests in Company

     32   

9.2         Certain Definitions

     32   

9.3         Operating Cash Flow Distributions

     34   

9.4         Extraordinary Cash Flow Distributions

     34   

9.5         Loss of Promoted Interest

     36   

9.6         Distributions Upon Liquidation

     36   

ARTICLE 10. ASSIGNMENT AND OFFER TO PURCHASE

     37   

10.1        Transfers

     37   

10.2        Intentionally Deleted

     37   

10.3        Assumption by Assignee

     37   

10.4        Amendment of Certificate of Formation

     38   

10.5        Other Assignments Void

     38   

10.6        Intentionally Deleted

     38   

10.7        Buy-Sell

     38   

 

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10.8         Provisions Generally Applicable to Sales

     39   

10.9         Compliance with ERISA and State Statutes on Governmental Plans

     42   

ARTICLE 11. DISSOLUTION OR BANKRUPTCY OF A MEMBER

     43   

11.1         Dissolution or Merger

     43   

11.2         Bankruptcy, etc

     44   

11.3         Reconstitution

     44   

ARTICLE 12. CROSS-DEFAULT

     45   

ARTICLE 13. DISSOLUTION

     45   

13.1         Winding Up by Members

     45   

13.2         Winding Up by Liquidating Member

     45   

13.3         Offset for Damages

     46   

13.4         Distributions of Operating Cash Flow

     47   

13.5         Distributions of Proceeds of Liquidation

     47   

13.6         Orderly Liquidation

     47   

13.7         Financial Statements

     47   

13.8         Restoration of Deficit Capital Accounts

     48   

ARTICLE 14. MEMBERS

     48   

14.1         Liability

     48   

ARTICLE 15. NOTICES

     48   

15.1         In Writing; Address

     48   

15.2         Copies

     49   

ARTICLE 16. MISCELLANEOUS

     49   

16.1         Additional Documents and Acts

     49   

16.2         Interpretation

     49   

16.3         Entire Agreement

     50   

16.4         References to this Agreement

     50   

16.5         Headings

     50   

16.6         Binding Effect

     50   

16.7         Counterparts

     50   

16.8         Confidentiality

     50   

16.9         Amendments

     51   

16.10       Exhibits

     51   

16.11       Severability

     51   

16.12       Qualification in Other States

     51   

16.13       Forum

     51   

16.14       No Brokerage

     52   

16.15       Tax Compliance

     52   

 

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Exhibits

 

Exhibit A    Members’ Percentage Interests Exhibit B    Description of Land
Exhibit C    Development Agreement Exhibit D    Insurance Certificates Exhibit E
   Member’s ERISA Certificate Exhibit F    CNL’s ERISA Certificate Exhibit G   
Project Budget Exhibit H    Pre-Development Costs

 

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LIMITED LIABILITY COMPANY AGREEMENT

OF

GGT CRESCENT GATEWAY FL VENTURE, LLC

THIS LIMITED LIABILITY COMPANY AGREEMENT OF GGT CRESCENT GATEWAY FL VENTURE, LLC
(this “Agreement”) is entered into and shall be effective as of the 31st day of
January, 2014, by and between CRESCENT GATEWAY VENTURE, LLC, a Georgia limited
liability company (“Crescent”), and GGT CRESCENT GATEWAY HOLDINGS, LLC, a
Delaware limited liability company (“CNL”), pursuant to the provisions of the
Delaware Limited Liability Company Act (the “Act”). Crescent and CNL are
sometimes referred to herein, collectively, as the Members and individually as a
Member.

R E C I T A L S

WHEREAS, GGT Crescent Gateway FL Venture, LLC (the “Company”) was formed on
December 9, 2013, pursuant to the Delaware Limited Liability Company Act by
filing a Certificate of Formation filed with the Secretary of State of the State
of Delaware (the “Certificate of Formation”).

WHEREAS, reference is hereby made to that certain Sales Contract with an
effective date of even date herewith, by and between the Company, as purchaser,
and Crescent Communities, LLC, a Georgia limited liability company, as Seller
(“Property Seller”) (as the same may have been amended, modified or
supplemented, the “Land Contract”), whereby the Company has agreed to purchase
from Property Seller, and Property Seller has agreed to sell to the Company,
inter alia, the real property comprising approximately 8.44 acres, located in
Altamonte Springs, Seminole County, Florida (together with all personal
property, fixtures, rights and intangibles associated therewith, the
“Property”), as more particularly described in Exhibit B hereto.

WHEREAS, the Members desire to form the Company for the purposes of acquiring
the Property and constructing a Class A rental apartment community on the
Property with 249 units, together with all amenities and related improvements
(the “Project”), and leasing and managing the Project, but in any case the
Property is intended to be held by the Company for investment and/or held for
appreciation and subsequent sale.

NOW, THEREFORE, in order to carry out their intent as expressed above and in
consideration of the mutual agreements and covenants hereinafter contained, the
receipt and sufficiency of which are hereby acknowledged, the Members hereby
covenant and agree as follows:

 

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ARTICLE 1. DEFINITIONS

1.1 Definitions. The following terms shall have the following meanings when used
herein:

10.7 Offer. As defined in Section 10.8(a).

Acceptable Person. Any person who or which is not (i) a tax exempt organization
as defined in Section 501(c) of the Code, (ii) a person whose direct or indirect
participation in the Company would result in a Plan Violation or (iii) in
default or in breach, beyond any applicable grace period, of its obligations
under any material written agreement with CNL or any of its Affiliates.

Act. The Delaware Limited Liability Company Act, 6 Delaware Code, Section 18-101
et. seq. (or any corresponding provisions of succeeding law), as in effect at
the time of the initial filing of the Certificate, and as thereafter amended
from time to time.

Additional Capital. For a Member, except as otherwise provided in this
Agreement, the sum of all capital contributions made by such Member under this
Agreement other than Crescent’s Initial Capital and CNL’s Initial Capital.
“Additional Capital” shall not include any Member Loan.

Additional Capital Request Date. As described in Section 4.5(b).

Additional Funding Notice. As defined in Section 4.5(b).

Additional Initial Capital. As described in Section 4.5(a).

Additional Initial Capital Funding Notice. As described in Section 4.5(a).

Additional Initial Capital Request Date. As described in Section 4.5(a).

Adjusted Capital Account. As defined in Section 8.2.

Affiliate. An “Affiliate” of a person is (a) any officer, director, general
partner, shareholder, member, manager or trustee of such person, (b) any person
directly or indirectly controlling, controlled by, or under common control with
such person, and (c) any officer, director, general partner, shareholder,
member, manager, trustee or holder of fifty percent (50%) or more of the voting
interest of any person described in clause (a) or (b) of this sentence. For the
purpose of this definition, “control” (including, with correlative meanings, the
terms “controlling,” “controlled by” and “under common control with”), as used
with respect to any person, means any of the following: (i) having, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such person, whether through the ownership of voting securities, by
contract or otherwise; (ii) holding fifty percent (50%) or more of the
outstanding voting securities of such person, (iii) having the right to receive
fifty percent (50%) or more of the profits of such person; (iv) having the right
to receive fifty percent (50%) or more of the assets of such person upon
dissolution; or (v) having the contractual power to designate fifty percent
(50%) or more of the directors of such person or individuals exercising similar
functions.

 

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Agreement. This Limited Liability Company Agreement, including all Exhibits and
Schedules attached hereto, as it may be amended from time to time.

Appraisal Notice. As described in Section 13.2(b)(i).

Business Day. Any weekday that is not an official holiday in Orlando, Florida.

Capital Account. As described in Section 7.9.

Capital Budget. As described in Section 6.4.

Capital Contribution. For each Member, the aggregate of sums contributed to the
Company by such Member pursuant to Article IV hereof.

Cash Flow. As described in Section 9.2(h).

Cause. As defined in Section 6.7.

Certificate of Formation. As described in the Recitals above.

CFG. As defined in Section 10.1.

CNL. As described in the first paragraph above.

CNL Consent. The written consent of CNL.

CNL Entities. As defined in Section 2.8(b).

CNL Maximum Initial Capital. As defined in Section 4.1.

CNL’s Initial Capital. As described in Section 4.1.

Code. The Internal Revenue Code of 1986, as amended from time to time, and any
successor thereto.

Company. GGT Crescent Gateway FL Venture, LLC, a Delaware limited liability
company.

Company Financing. Financing that is provided to the Company.

Company Minimum Gain. As described in Section 8.3(a).

Completion. As defined in the Development Agreement.

Construction Contract. As defined in the Development Agreement.

Construction Loan. As defined in the Development Agreement.

Construction Loan Documents. As defined in the Development Agreement.

 

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Crescent. As described in the first paragraph to this Agreement.

Crescent Parent. Crescent Multifamily Holdings, LLC, a Delaware limited
liability company.

Developer. Crescent Development, LLC, a Delaware limited liability company,
acting in such capacity pursuant to Section 6.8.

Development Agreement. That certain Development Agreement dated of even date
herewith by and between the Company and Developer providing for the development
of the Project on the Property, a copy of which is attached hereto as Exhibit C
and incorporated herein by reference.

Development Fee. As described in Section 6.8.

Economic Capital Account. With respect to any Member, such Member’s Capital
Account as of the date of determination, increased by any amounts that the
Member is actually obligated to contribute to the Company and/or deemed
obligated to restore under Treasury Regulations Section 1.704-2.

Effective Date. The date this Agreement shall be signed by all the Members.

Electing Member. As described in Section 13.2(b)(i).

Entire Interest. Means, for each Member, such Member’s entire equity interest in
the Company (which shall include any and all interests in the Company held by
persons that acquired their interests from such Member) and all unpaid Member
Loans made by such Member.

ERISA. The Employee Income Security Act of 1974, as amended.

Extraordinary Cash Flow. As described in Section 9.2(b).

Failing Member. As described in Section 4.5(d).

Failing Member Loan. As described in Section 4.5(d).

Fair Market Value. As described in Section 13.2(b)(ii).

GAAP. United States generally accepted accounting principles applied on a
consistent basis.

Governmental Plan. As defined in Section 3(32) of ERISA.

Initial Capital Contributions. As defined in Section 4.1.

IRR. With respect to all Capital Contributions of a Member, the internal rate of
return or discount factor that, when applied to the cash flow stream consisting
of all distributions by the Company to such Member, makes the present value of
such distributions equal the present value

 

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(determined using the same discount factor) of all Capital Contributions of such
Member to the Company. The IRR shall be determined taking into account the exact
dates any applicable Capital Contributions are made to the Company by the Member
and the exact dates any applicable distributions are made by the Company to such
Member. The IRR to a Member shall be computed using the XIRR function in
Microsoft Excel or a functional equivalent using actual dates of cash flows and
based on annual compounding.

Land Contract. As defined in the Recitals above.

Leasing Guidelines. The leasing guidelines for the Project as approved (and
amended) by the Members in accordance with Section 6.12.

LIBOR. The average rate (rounded upward to the nearest 1/16th) at which deposits
in U.S. dollars of comparable amounts and for a period of one month are offered
in the London Interbank Market at approximately 11:00 am (London time) on the
day that the capital contribution or loan is made, as reasonably determined by
Member Consent, or if London Interbank Market is no longer published, LIBOR
shall be a rate as published in a publication of national circulation approved
by Member Consent.

Liquidating Member. The Member in sole charge of winding up the Company and
having the powers described in Section 13.2.

List. As described in Section 13.2(b)(ii).

Loan Closing. The closing of the Construction Loan.

Major Capital Event. One or more of the following: (i) sale of all or any part
of, or any interest in, Company property (including the Project and the
Property), exclusive of sales or other dispositions of tangible personal
property in the ordinary course of business; (ii) placement and funding of any
indebtedness of the Company secured by some or all of its assets with respect to
borrowed money, excluding short term borrowing in the ordinary course of
business; (iii) condemnation of all or any material part of, or any interest in,
the Property through the exercise of the power of eminent domain; or (iv) any
unrestored material loss of Company property or any part thereof or interest
therein by casualty, failure of title or otherwise.

Major Decision. As defined in Section 6.2(a).

Management Agreement. As set forth in Section 6.9.

Managing Member. CNL.

Member Consent. The written consent of each of CNL and Crescent.

Member Loan. Any loan made by any Member or any Affiliate of a Member to the
Company pursuant to Article V.

Member Nonrecourse Debt. As described in Section 8.3(c).

 

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Member Nonrecourse Debt Minimum Gain. As described in Section 8.3(c).

Members. The parties to this Agreement, any Person to whom the parties to this
Agreement may convey an interest in the Company pursuant to Article 10, and any
Person subsequently admitted to the Company as a substitute or additional Member
in accordance with the terms of this Agreement, and “Member” means any of the
Members; provided, however, that for purposes of calculating cumulative
contributions by, or allocations or distributions to, a Member, references to
such Member shall be deemed to include all predecessors-in-interest with respect
to such Member’s interest(s) in the Company. The initial Members are CNL and
Crescent.

Membership Interest. The entire ownership interest of a Member in the Company,
including the Member’s Capital Account, interest in profits and losses, the
right to receive distributions from the Company and the rights, if any, to
participate in the management of the Company or consent to any actions by the
Company as set forth in this Agreement.

Minor Field Changes. As defined in the Development Agreement.

Non-Failing Member. As described in Section 4.5(d).

Nonrecourse Deductions. As described in Section 8.3(b)

Notice Date. As described in Section 10.8(b).

Notice of Intention. As described in Section 4.5(d).

Offering Party. As defined in Section 10.8(a)

Operating Budget. As described in Section 6.4.

Operating Cash Flow. As described in Section 9.2(a).

Operating Member. Crescent, subject to CNL’s right to terminate Crescent’s
authority as Operating Member in accordance with Section 6.7.

Operating Return. As described in Section 9.2(c).

Operating Shortfall. For any given period after Completion of the Project, if
the operating expenses of the Company in the normal course of business of the
Company (including debt service under any Company Financing) exceed or are
expected to exceed the gross receipts of the Company plus cash reserves for such
period, and the Company therefore is expected to suffer, or has suffered, a cash
flow deficit.

Opportunity. As defined in Section 2.8(b).

Out-of-Pocket Costs. Any costs or expenses incurred by the Managing Member,
Operating Member or other Member or their Affiliates acting within the scope of
their respective authority under this Agreement (including travel costs and
FedEx/mail charges), provided that such costs or expenses are necessary or
beneficial for the Company’s business as described in Section 2.3.

 

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Percentage Interest. As described in Section 9.1.

Permitted Leases. Leases of apartment units within the Project entered into
pursuant to the approved Leasing Guidelines in the ordinary course of operations
as an apartment community.

Person. The term “person” includes individuals, partnerships, limited liability
companies, corporations, trusts, and other associations.

Plan Violation. A transaction, condition or event that would constitute a
nonexempt prohibited transaction under ERISA.

Plans and Specifications. Plans and specifications for the Project approved by
Member Consent.

Pre-Development Costs. Those certain costs and expenses incurred by Crescent or
Developer for the benefit of the Company as set forth on Exhibit H attached
hereto and incorporated herein by reference, which shall be reimbursed to
Crescent or Developer, as applicable, in accordance with Section 4.1.

Project. As described in the third paragraph of the Recitals.

Project Budget. The budget approved by Member Consent for the acquisition,
construction, development, marketing and financing of the Project. The initial
Project Budget is attached hereto as Exhibit G.

Property. As described in the second paragraph of the Recitals.

Property Closing. The closing of the Company’s acquisition of the Property
pursuant to the Land Contract.

Property Manager. The property manager and any successor thereto selected by
Member Consent or, to the extent a Member has the unilateral right pursuant to
this Agreement to select such successor, as selected by such Member.

Proposer. As described in Section 10.7(a).

Reply Price. As described in Section 10.8(a).

Requirements. All state, federal and local laws, ordinances, rules, regulations,
codes, requirements of governmental authorities, permits, licenses, approvals,
the terms of all restrictions, easements and other arrangements of record
affecting all or any portion of the Property, and all contractual obligations of
Developer and the Company (including obligations related to the Construction
Loan and any other third-party financing).

 

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Responding Member. As described in Section 10.7(a).

REIT. A real estate investment trust as defined pursuant to Sections 856 through
860 of the Code and the Treasury Regulations promulgated thereunder.

Responding Member’s Buy-Sell Deposit. As described in Section 10.7(b)(ii).

Sale Proposal. As defined in Section 10.7(a).

Target Balance. With respect to any Member as of the close of any period for
which allocations are made under Article 8, the amount such Member would receive
(or be required to contribute) in a hypothetical liquidation of the Company as
of the close of such period, assuming for purposes of such hypothetical
liquidation: (i) a sale of all of the assets of the Company at prices equal
(subject to the proviso at the end of this sentence) to their then book values
(as maintained by the Company for purposes of, and as maintained pursuant to,
the capital account maintenance provisions of Treasury Regulations Sections
1.704-1(b)(2)(iv)); and (ii) the distribution of the net proceeds computed under
clause (i) above to the Members pursuant to Section 9.4, as such Section has
been adjusted by other provisions hereof (after the payment of all actual
Company indebtedness, and any other liabilities related to the Company’s assets;
provided, however, that when (x) the aggregate book value of assets of the
Company to which the rights of obligees of liabilities of the Company are
limited (including all assets of the Company if such rights are not limited to
particular assets of the Company, and without regard to assets of persons other
than the Company that may be available to such obligees) is exceeded by (y) the
aggregate amount of such liabilities, such assets shall be considered as having
been sold for cash equal to the aggregate amount of such liabilities (without
double-counting).

Tax Matters Partner. As described in Section 7.6.

Treasury Regulations. The Income Tax Regulations, including Temporary
Regulations, promulgated under the Code, as such regulations may be amended from
time to time (including corresponding provisions of succeeding regulations).

Unreturned Additional Capital. As described in Section 9.2(d).

Unreturned Initial Capital. As described in Section 9.2(f).

Unreturned Operating Return. As described in Section 9.2(e).

Value. As described in Section 10.8(a)(i).

The definitions in this Section 1.1 shall apply equally to both the singular and
plural forms of the terms defined. Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms. The words
“include,” “includes” and “including” shall be deemed to be followed by the
phrase “,without limitation,”.

 

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1.2 Other Defined Terms. Capitalized terms not defined in Section 1.1 shall have
the meanings set forth in the other sections of this Agreement.

1.3 Exhibits. The exhibits to this Agreement are incorporated herein by
reference as if fully set forth herein.

ARTICLE 2. THE COMPANY

2.1 Organization. The Members shall operate the Company pursuant to the
provisions of the Act. The terms and provisions hereof will be construed and
interpreted in accordance with the Act.

2.2 Name of Company. The name of the Company will be “GGT Crescent Gateway FL
Venture, LLC”, and the Company’s business will be conducted under the name
“Crescent Gateway”. The Managing Member may change the name of the Company or
the name under which the Company’s business is conducted at any time, provided
that Crescent shall have the right to approve the use of any name that includes
the word “Crescent” or “Circle” or any variation of either name. The Company and
CNL acknowledge and agree that the word “Circle, and the Circle logo are owned
by and proprietary to Crescent and its Affiliates, and that after such time as
Crescent is no longer a Member of the Company or the Company no longer owns the
Project, the names “Circle” and the Circle logo will no longer be used by the
Company or in connection with the Project.

2.3 Purpose of Company. The purpose of the Company is to directly or indirectly
carry on the business of acquiring, owning, operating, managing, improving,
repairing, renting, mortgaging, refinancing, selling, conveying and otherwise
dealing with the Property and all activities reasonably related thereto. In
furtherance of such purpose, the Company shall have all such powers as may be
exercised by a limited liability company under the laws of the State of
Delaware. Except as permitted by this Section 2.3, the Company shall not engage
in any other business. In furtherance of the foregoing purposes, but expressly
subject to the other provisions of this Agreement, the Company is empowered to
enter into contracts containing agreements to arbitrate disputes to the extent
such contracts are approved by Member Consent. The Company is authorized to take
any legal measures which will assist it in accomplishing its purpose or benefit
the Company.

2.4 Principal and Registered Office. The principal office of the Company shall
be 450 South Orange Avenue, Orlando, Florida 32801 or such other place as the
Managing Member may from time to time determine. Notification of any change in
the Company’s principal place of business or principal office shall be given to
the other Members. The Company may change its principal office and or may
maintain additional offices and places of business in other locations selected
by the Managing

 

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Member and, to the extent required by law and/or deemed necessary or desirable
by the Managing Member, the Company shall qualify as a foreign limited liability
company in any other jurisdiction in which it conducts business. The name and
address of the registered agent of the Company for service of process in the
State of Delaware is National Registered Agents, Inc., 160 Greentree Drive,
Suite 101, Dover, Delaware 19904. The Company’s registered agent and the
Company’s registered and principal offices may be changed by the Managing Member
in compliance with the relevant requirements of the Act.

2.5 Further Assurances. The parties hereto will execute whatever certificates
and documents, and will file, record and publish such certificates and
documents, which are required to operate a limited liability company under the
Act. The parties hereto will also execute and file, record and publish, as
required, such certificates and documents as they, upon advice of counsel, may
deem necessary or appropriate to comply with other applicable laws governing the
operation of a limited liability company.

2.6 Expenses of Formation and Syndication. The expenses incurred by each Member
in connection with its consideration of an investment in the Company and its
acquisition of a membership interest in the Company, including the fees of any
attorney, financial advisor or other consultant, shall be paid and/or reimbursed
by the Company as set forth in the Project Budget and approved by Member
Consent.

2.7 No Individual Authority. Except as otherwise expressly provided in this
Agreement, no Member, acting alone, shall have any authority to act for,
undertake or assume any obligations or responsibility on behalf of any other
Member or the Company.

2.8 Business Opportunities.

(a) Subject to the provisions of, and except as set forth in, subsection (b) of
this Section 2.8, nothing contained in this Agreement shall be construed so as
to prohibit any Member or any firm or corporation controlled by or controlling
such Member or any other Affiliate of a Member from owning, operating, or
investing in any real estate or real estate development not owned or operated by
the Company, wherever located. Each Member agrees that any other Member, any
Affiliate or any director, officer, employee, partner or other person or entity
related to either thereof may engage in or possess an interest in another
business venture or ventures of any nature and description, independently or
with others, including the ownership, financing, leasing, operation, management,
syndication, brokerage and development of real property, whether or not such
activities are in direct competition with the Company, and neither the Company
nor the Members shall have any rights by virtue of this Agreement in and to such
independent ventures or to the income or profits derived therefrom. To the
fullest extent permitted by applicable law, the Members hereby waive any
obligation or duty which might otherwise be imposed or implied under any
so-called “business opportunity doctrine” or similar theory.

 

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(b) Crescent covenants and agrees that for so long as it is a Member, in the
event it proposes to undertake any additional apartment development
opportunities within a five (5) mile radius of the Property (each an
“Opportunity”) other than developments existing as of the Effective Date, CNL
and Affiliates of CNL Financial Group, LLC (collectively, “CNL Entities”) shall
have the right of first offer to participate in any such Opportunity, and to the
extent that the CNL Entities decline or fail to respond to such Opportunity
within thirty (30) days after such Opportunity is offered, Crescent shall not be
required to continue to offer any CNL Entity the right to participate to any
extent in such Opportunity.

2.9 Neither Responsible for Other’s Commitments. Neither the Members nor the
Company shall be responsible or liable for any indebtedness or obligation of a
particular Member incurred either before or after the execution of this
Agreement, except (i) as to those joint responsibilities, liabilities, debts or
obligations incurred pursuant to the terms of this Agreement, and each Member
indemnifies and agrees to hold the other Member and the Company harmless from
such personal obligations and debts, except as aforesaid; and (ii) as to the
obligation of CNL to pay off and/or indemnify Crescent pursuant to Section 6.7
(c) of this Agreement, or as otherwise set forth in this Agreement.

2.10 Affiliates. Any and all activities to be performed by CNL hereunder may be
performed by officers or employees of one or more Affiliates of CNL, provided
that all actions taken by such persons on behalf of CNL in connection with this
Agreement shall be binding upon CNL. Any and all activities to be performed by
Crescent hereunder may be performed by officers or employees of one or more
Affiliates of Crescent, provided that all actions taken by such persons on
behalf of Crescent in connection with this Agreement shall be binding upon
Crescent.

2.11 Operations in Accordance With the Act: Ownership. Except as expressly set
forth in this Agreement to the contrary, the rights and obligations of the
Members and the administration, operation and termination of the Company shall
be governed by the Act, as it may be amended. The interest of each Member in the
Company shall be personal property for all purposes. All real and other property
owned by the Company shall be deemed owned by the Company as a company, and no
Member, individually, shall have any ownership interest in such property.

ARTICLE 3. TERM

3.1 Term. Unless extended by Member Consent, the term of the Company shall
continue until the first to occur of the following:

(a) December 31, 2064;

(b) The sale or other disposition of all or substantially all of the Property,
other than to a nominee or trustee of the Company for financial or other
business purposes;

 

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(c) Dissolution of the Company pursuant to the express provisions of
Section 4.5(d)(iii) or Articles 10, 11 or 13; or

(d) The occurrence of any event or circumstance that would cause the entry of a
decree of judicial dissolution of the Company under the Act unless, following a
Member Consent to cure such events, the events giving rise to such judicial
dissolution are cured within the time, if any, set for such cure, and the
Company is reinstated under the Act.

ARTICLE 4. CAPITAL CONTRIBUTIONS OF THE MEMBERS

4.1 Capital Contributions of the Members. No later than the execution of this
Agreement, CNL and Crescent shall contribute their pro rata shares (based upon
their respective Percentage Interests) of all amounts payable by the Company at
the Property Closing and the Loan Closing, including amounts necessary to
reimburse Crescent or Developer for its Pre-Development Costs. Such initial
capital contribution by CNL shall constitute a portion of “CNL’s Initial
Capital”. Such initial capital contribution by Crescent (against which Crescent
may credit any portion of the Development Fee that is assigned by Developer to
Crescent in accordance with the Development Agreement) shall constitute a
portion of “Crescent’s Initial Capital”. Crescent’s Initial Capital and CNL’s
Initial Capital shall collectively be called the “Initial Capital
Contributions”. Such contributions are reflected on Exhibit A attached hereto
and shall be updated from time to time to reflect modifications to the Initial
Capital Contributions and any additional capital contributions, including
contributions of Additional Initial Capital as required pursuant to
Section 4.5(a). The amount of cash and the fair market value, as agreed to by
Member Consent, of other property contributed by a Member shall be credited to
such Member’s Capital Account. In no event shall the aggregate amount of CNL’s
Initial Capital exceed $5,791,701 without the express written approval of CNL
(the “CNL Maximum Initial Capital”), and in no event shall Crescent’s Initial
Capital exceed $3,861,134 without the express written approval of Crescent (the
“Crescent Maximum Initial Capital”). The Members expressly agree that, to the
extent the amount of the final Project Budget is hereafter reduced due to
savings in the Construction Contract’s guaranteed maximum price, the Initial
Capital Contributions of CNL and Crescent shall be reduced on a pro rata basis.
Any Construction Cost Overruns (as defined in the Development Agreement) funded
by Developer shall not be treated as a contribution by Developer or Crescent to
the Company or in any manner construed so as to increase Crescent’s Capital
Account or Crescent’s Initial Capital under this Agreement, shall not be treated
as Additional Capital of Crescent under this Agreement, shall not be treated as
a Member Loan by Crescent to the Company, and shall not entitle Developer or
Crescent to any interest on or refund of any amounts so advanced or to any other
rights or remedies against the Company or any Member.

4.2 No Other Contributions. Except as expressly required by this Article 4,
neither Member shall have any obligation to make any capital contribution to the
Company nor to advance any funds thereto.

4.3 No Interest Payable. No Member shall receive any interest on any of its
Capital Contributions except for such Member’s Operating Return.

 

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4.4 No Withdrawals. No Capital Contribution shall be withdrawn except as
hereinafter expressly stipulated.

4.5 Additional Capital Contributions.

(a) When the Operating Member determines in its good faith business judgment
that capital is needed by the Company to pay for (A) costs provided in the
Project Budget that have not been previously paid by the Members and that are
not being paid for out of Company Financing or (B) costs of development or
construction of the Project in excess of the Project Budget which costs have
been approved by Member Consent (collectively, the “Additional Initial
Capital”), then the Operating Member shall cause notice to be delivered to the
Members setting forth the purposes and amounts of such Additional Initial
Capital. Each such notice delivered to the Members shall constitute an
“Additional Initial Capital Funding Notice” pursuant to this Section 4.5(a). All
amounts funded by Crescent pursuant to this Section 4.5(a) shall constitute a
portion of Crescent’s Initial Capital. All amounts funded by CNL pursuant to
this Section 4.5(a) shall constitute a portion of CNL’s Initial Capital. Within
ten (10) Business Days following the date of delivery of an Additional Initial
Capital Funding Notice (in each case, the “Additional Initial Capital Request
Date”), CNL and Crescent shall contribute to the Company, in proportion to their
Percentage Interests, as Additional Initial Capital, the amount so required, up
to the CNL Maximum Initial Capital Contribution, in the case of CNL, and up to
the Crescent Maximum Initial Capital Contribution, in the case of Crescent.

(b) If the Operating Member determines in its good faith business judgment that
additional funds (other than amounts required to be funded under Section 4.5(a)
above) are needed by the Company to fund any Operating Shortfall or to reimburse
the Members or their Affiliates for Out-of-Pocket Costs incurred on behalf of
the Company (other than Out-of-Pocket Costs related to or arising out of the
development and construction of the Project to the extent Crescent is
responsible for such Out-of-Pocket Costs under the Development Agreement), then
Operating Member shall cause notice to be delivered to the Members setting forth
the purposes and amounts of such additional funds. Each such notice delivered to
the Members shall constitute an “Additional Funding Notice”. All amounts funded
by CNL pursuant to this Section 4.5(b) shall constitute a portion of CNL’s
Additional Capital, and all amounts funded by Crescent pursuant to this
Section 4.5(b) shall constitute a portion of Crescent’s Additional Capital.
Within ten (10) Business Days following the date of delivery of an Additional
Funding Notice (in each case, the “Additional Capital Request Date”), CNL and
Crescent shall contribute to the Company, in proportion to their respective
Percentage Interests, as Additional Capital, the amount so required.

(c) Any and all funds contributed by the Members pursuant to this Section 4.5
shall be credited to their Capital Accounts in the Company and shall constitute
Additional Capital (in the case of contribution of Additional Capital) or
Additional Initial Capital (in the case of contribution of Additional Initial
Capital), as the case may be, for all purposes of this Agreement.

 

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(d) If a Member (the “Failing Member”) fails to contribute an amount equal to
the entire amount required to be contributed by it pursuant to Section 4.5(a) or
4.5(b) within the applicable period after the Additional Initial Capital Request
Date or the Additional Capital Request Date, as applicable, and if any other
Member (the “Non-Failing Member”) makes its required contribution within such
applicable time period pursuant to Section 4.5(a) or 4.5(b) and so notifies any
Failing Member (the “Notice of Intention”), and such Failing Member fails to
fully remedy its failure to contribute such required capital within ten
(10) days after the giving of such Notice of Intention, then one or more of the
following may occur, at the option and election of the Non-Failing Member, which
election shall be specified prospectively in the Notice of Intention: (i) the
Non-Failing Member may require the Company to repay immediately to the
Non-Failing Member the Capital Contribution(s), if any, it made pursuant to
Section 4.5(a) or 4.5(b); (ii) the Non-Failing Member may, but need not, make an
additional Capital Contribution to the Company not in excess of the amount such
Failing Member failed to contribute pursuant to Section 4.5(a) or 4.5(b), in
which case (y) the balance of the Non-Failing Member’s Capital Account shall be
increased by $1.15 for each $1.00 not funded by such Failing Member in
accordance with the terms of this Section 4.5 in response to the applicable
Additional Capital Funding Notice or Additional Initial Capital Funding Notice
(which adjustment shall be treated as Additional Capital contributed by such
Non-Failing Member), as applicable and (z) each of such Failing Member’s
distribution percentages pursuant to Sections 9.4(g), 9.4(h), 9.4(j) and 9.4(k)
shall be reduced by one percent (1%) for every $20,000 of Additional Capital or
Additional Initial Capital such Failing Member failed to contribute to the
Company pursuant to this Section 4.5 and in turn, each of the Non-Failing
Member’s Percentage Interest and the Non-Failing Member’s distribution
percentages under Sections 9.4(g), 9.4(h), 9.4(j) and 9.4(k), respectively,
shall be increased by the equivalent percentage, and any such adjustments to the
Members’ Capital Account balances to give effect to the foregoing shall be
treated as liquidated damages for tax purposes; (iii) the Non-Failing Member may
cause the Company to be dissolved, in which case such Non-Failing Member will be
the Liquidating Member and will have the right to cause the Property and other
Company assets to be sold or otherwise liquidated in accordance with
Section 13.2; or (iv) the Non-Failing Member may elect to loan to such Failing
Member (“Failing Member Loan”), which Failing Member Loan shall be disbursed to
the Company and treated as an additional Capital Contribution to the Company
made by such Failing Member, an amount equal to the amount such Failing Member
failed to contribute pursuant to Section 4.5(a) or 4.5(b), which Failing Member
Loan made by the Non-Failing Member to the Failing Member shall bear interest at
an annual rate (compounded annually) of one thousand basis points (1,000 bps)
above one month LIBOR from the date of the advance until such Failing Member
Loan is paid to the Non-Failing Member in full. Payments with respect to such
Failing Member Loan shall be made to the Non-Failing Member out of distributions
that would otherwise have been payable to such Failing Member under this
Agreement until fully repaid (which payments will be applied first to accrued
interest on the outstanding principal balance and then to the outstanding
principal balance of such Failing Member Loan). Any such Failing Member Loan
shall be nonrecourse to such Failing Member, secured by such Failing Member’s
entire interest in the Company, and shall be satisfied only out of distributions
as provided above in this Section 4.5(d). Such Failing Member Loan may be
prepayable at any time or from time to time and, if not sooner paid in

 

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full, shall mature upon the earlier of (A) the liquidation of the Company and
(B) the fifth anniversary thereof. Each Non-Failing Member shall have the right,
but not the obligation, to make a portion of any additional Capital Contribution
(as contemplated by Section 4.5(d)(ii)) or Failing Member Loan (as contemplated
by Section 4.5(d)(iv)) in an amount proportionate to its respective Percentage
Interest.

(e) Intentionally Omitted.

ARTICLE 5. MEMBER LOANS

5.1 Member Loans. No Member shall be obligated to lend any money to the Company.
If the Operating Member determines that it is necessary or appropriate for the
Company to borrow money from any of the Members, then the Operating Member shall
cause notice (a “Loan Request Notice”) to be sent to each of the Members,
setting forth the amount proposed to be borrowed from the Members and the
purpose of the proposed Member Loan. Each of the Members shall have the right,
but not the obligation, to lend to the Company the amount to be borrowed as set
forth in such Loan Request Notice, multiplied by its respective Percentage
Interest, which shall be exercisable by notice given to the Company and the
other Members within 45 days of receipt of the Loan Request Notice from the
Operating Member or by such earlier date as shall have been determined to be
appropriate by the Operating Member, as set forth in the Loan Request Notice. If
any of the Members does not lend the full amount set forth for it in the Loan
Request Notice, the other Members shall have the option to lend the balance. If
any Member(s) shall lend any money to the Company, such Member Loan shall not
constitute a Capital Contribution by such Member(s) or entitle it to any
increase in its share of the distributions of the Company. Each Member Loan
shall be an obligation of the Company, provided that no Member shall be
personally obligated to repay the Member Loan and the Member Loan shall be
payable or collectible only out of the assets of the Company. All such Member
Loans shall be on commercially reasonable terms as determined by Member Consent
and shall bear interest at a rate of 2% per annum above the prime rate (or the
average thereof if published as a range) (in each case as published from time to
time in The Wall Street Journal (or if The Wall Street Journal is no longer
published, the prime rate as published in a publication of national circulation
selected by Member Consent)), compounded annually, adjusted as of the date of
each prime rate change published, but in no event shall the rate of interest
exceed the highest rate permitted by law for the obligor which, if exceeded,
could subject the lending Member to penalties or forfeiture of all or any part
of the interest or principal associated with such Member Loan.

5.2 Payment of Member Loans. Member Loans shall be repaid in accordance with the
terms as agreed to by Member Consent.

 

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ARTICLE 6. MANAGEMENT OF THE COMPANY

6.1 Management.

(a) The day-to-day ordinary and customary business and affairs of the Company
shall be managed by Managing Member in its capacity as manager of the Company,
subject to and in accordance with the terms hereof. The Members hereby appoint
CNL as the initial Managing Member of the Company.

(b) Subject to approval by Member Consent of Major Decisions under
Section 6.2(a) and other matters requiring Member Consent hereunder, and the
other restrictions on authority and express approval rights of CNL otherwise
provided in this Agreement, the Managing Member shall have full and complete
authority, power and discretion to manage and control the day-to-day affairs and
business of the Company and shall have such power as is necessary, convenient or
appropriate to carry out the purposes of the Company and to conduct the
day-to-day business of the Company consistent with the terms of this Agreement.
Except as otherwise expressly provided in this Agreement, the Members (other
than Managing Member acting in its capacity as manager of the Company in
accordance with and subject to the terms of this Agreement or Operating Member
acting in accordance with the authority delegated by Managing Member to
Operating Member subject to the terms of this Agreement) shall have no right,
power or authority to act for or on behalf of, or otherwise bind, the Company.
Managing Member agrees to devote to the Company’s business such time as
reasonably shall be necessary in connection with its duties and responsibilities
hereunder. Managing Member shall at all times conduct the business and affairs
of the Company (i) in accordance with the then effective Project Budget or
Operating Budget and Capital Budget, as the case may be, (ii) following
Completion, in a first-class and prudent manner, and (iii) in compliance in all
material respects with all Company Financing, all material agreements affecting
the Property or the Company, all applicable Requirements and any court orders.
Subject to Section 6.2 and other provisions of this Agreement requiring Member
Consent, the Managing Member shall have the rights and authority to act on
behalf of the Company with respect to:

(i) managing the Company’s operations so as to preserve the REIT status of the
CNL owner and/or prevent the imposition of a prohibited transaction tax;

(ii) the continuation of the Company’s valid existence as a limited liability
company under the laws of State of Delaware;

(iii) the acquisition, development, maintenance, preservation and operation of
the Project in accordance with the provisions of the approved Plans and
Specifications, this Agreement and applicable Requirements;

(iv) procurement of such insurance as may be appropriate or necessary for the
prudent development and operation and management of the Property as set forth in
this Agreement;

(v) formation of subsidiaries as may be necessary for the prudent development of
the Project and the operation and management of the Company’s business and
affairs;

(vi) collection of revenues generated by the Company and payment of all expenses
of the Company;

 

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(vii) establishment, maintenance and drawing upon checking, savings and other
accounts in the name of the Company;

(viii) oversight and management of litigation filed on behalf of or against the
Company as set forth in this Agreement; including providing to the other Members
any notices received by the Managing Member or its Affiliates regarding any
violations of Requirements and any notices received with respect to the
Construction Loan or any other third party loan;

(ix) maintenance of all accounting and tax records for the Company as set forth
in this Agreement, including maintaining all tax books, tax records and all
other financial statements and records in accordance with GAAP and as may be
required for REIT purposes;

(x) preparation or oversight of the Company’s independent accountants in the
preparation of all federal, state and local tax returns of the Company;

(xi) the delivery of the Company financial statements as set forth in this
Agreement, prepared in accordance with GAAP and performance or causing
performance of the Company’s financial reporting requirements as set forth in
this Agreement;

(xii) delivery of, or causing delivery of, to the Company and the members of the
Company of all documentation and calculations necessary for the Company’s
independent accountants to prepare the Company’s federal tax return and K-1’s;

(xiii) monitoring of compliance with all loan and lender requirements and
performing loan covenant testing and loan compliance reporting with respect to
the Construction Loan and other loans made to the Company;

(xiv) monitoring and oversight of the Property Manager, and delivery to the
Members such reports and information as are required of the Property Manager
pursuant to the Management Agreement;

(xv) monitoring and management of Company’s debt compliance, cash management
functions and annual independent audit, including maintenance of a system of
cash management to comply with lender cash management requirements (this
obligation shall include payment of vendors, maintenance of bank accounts,
performance of bank reconciliations, the making of intercompany rents payments
and the making of debt service payments);

(xvi) maintenance of Capital Accounts for the Members of the Company in
accordance with the terms of this Agreement;

(xvii) implementation of Major Decisions as approved and on the terms set forth
by Member Consent;

(xviii) making all distributions of Operating Cash Flow and Extraordinary Cash
Flow in accordance with the terms of this Agreement;

 

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(xix) maintaining a system of internal controls necessary to enable CNL to
complete CNL’s Sarbanes-Oxley certifications, to the extent prepared by
Operating Member in the ordinary course of its business, as requested by CNL, or
such other documentation and testing of internal controls as is deemed necessary
by CNL; provided, however, that to the extent the testing of the Company’s
internal controls or the implementation of additional or alternative internal
controls as a result of any such testing causes the Company to incur non de
minimus expenses, CNL shall bear responsibility for such expenses; and

(xx) any other action that the Managing Member or the Operating Member is
expressly authorized to perform under the other provisions of this Agreement.

(c) The Managing Member shall have the right to delegate any of the above
responsibilities and authority to any other Member of the Company as the
Operating Member, subject to the acceptance by such Member of such delegation.
The Managing Member hereby designates Crescent as Operating Member and delegates
to Crescent, subject to the right of the Managing Member to terminate such
delegation in accordance with Section 6.7, the foregoing responsibilities,
duties and authority of the Managing Member described in subparagraphs
(ii) through (xx) of Section 6.1(b). Crescent hereby accepts such delegation by
CNL as Managing Member and agrees that it shall perform as Operating Member the
responsibilities and obligations delegated as part of such delegation in
accordance with the standard of care required under Section 6.1(b) of this
Agreement as if it was the Managing Member of the Company and had all duties,
responsibilities, authority and rights related to the Company and its Members
associated with such office of Managing Member. CNL acknowledges that Crescent
shall have no responsibilities or obligations to perform the duties of Managing
Member of the Company except to the extent set forth herein.

6.2 Major Decisions.

(a) Notwithstanding anything to the contrary, without prior written Member
Consent in each instance (each, a “Major Decision”), the Company and Managing
Member shall not, and the Managing Member shall not authorize the Operating
Member to:

(i) Adopt, modify or supplement the Plans and Specifications, except for Minor
Field Changes as permitted under the Development Agreement;

(ii) Enter into any contract or transaction with, or pay any amount to, a Member
or any Affiliate of a Member, except for Out-of-Pocket Costs incurred on behalf
of the Company or as expressly provided in this Agreement, the Project Budget,
an Operating Budget or a Capital Budget;

(iii) Authorize or enter into any agreement, transaction or action on behalf of
the Company that is unrelated to its purpose set forth in Section 2.3, including
acquiring any additional real property;

(iv) Subject to the terms of Article 10, sell, lease, encumber, assign, convey,
exchange or otherwise dispose of, in each case directly or indirectly, any
interest in any asset of the Company, except in the case of (i) the sale of
personal property which is not necessary for the operation of the Property (or
if necessary, which is replaced by sufficient substitute property) for a sales
price of not more than $25,000, or (ii) Permitted Leases;

 

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(v) Modify the Project Budget, other than to reallocate demonstrated line item
savings to demonstrated line item overruns, so long as each Member shall be
given notice thereof promptly following such reallocation or allocation of
amounts from the contingency line item. Notwithstanding the foregoing, it shall
be a Major Decision to reallocate any savings in the Project Budget line item
for Crescent’s legal and third party costs and expenses or for loan interest;

(vi) Voluntarily dissolve or liquidate the Company;

(vii) Authorize or effect a merger or consolidation of the Company with or into
one or more entities;

(viii) Make any call for capital contributions from the Members, except as
expressly authorized pursuant to Article IV;

(ix) Select any Property Manager for the management of the Property or, for so
long as the Property Manager is not in default beyond any applicable cure period
under the terms of the Management Agreement, terminate the Management Agreement
or replace the Property Manager or amend, modify, supplement, assign or grant
any material consents or waivers under the Management Agreement; provided,
however, that if the Property Manager is an Affiliate of Crescent and is in
default beyond any applicable cure period under the terms of the Management
Agreement, only the consent of CNL shall be required to terminate the Management
Agreement and replace the Property Manager or otherwise amend, modify,
supplement or grant any material consents or waivers under the terms of the
Management Agreement;

(x) Except for the Construction Loan, cause the Company to incur any Company
Financing or modify, supplement or refinance any Company Financing, provided
that when the Construction Loan matures (whether at its stated maturity, upon
acceleration or otherwise), the Operating Member with Member Consent shall have
the authority to affirmatively cause the Company to obtain or attempt to obtain
replacement financing in at least the amount of the outstanding balance of the
Construction Loan; provided, however that upon the maturity of the Construction
Loan or any other then-existing Company Financing that has been guaranteed in
whole or in part by Crescent or any Crescent Affiliate, if new Company
Financing, the proceeds of which will be used to repay the Construction Loan or
such other guaranteed matured Company Financing in full, has been presented, in
good faith, by the Operating Member and is not approved by Member Consent, then
the Operating Member shall be authorized, without Member Consent, to pursue,
obtain and close and consummate from a third-party lender such replacement
Company Financing, in an amount equal to the then-outstanding principal of the
Construction Loan or other matured Company Financing, on commercially reasonable
prevailing market terms so long as the replacement Company Financing (a) is
non-recourse financing which does not require prepayment penalty in excess of
the greater of yield maintenance or one percent (1%) of the principal amount
outstanding and (b) in respect of which if guaranties are required, such
guaranties are provided by Crescent or a Crescent Affiliate.

 

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(xi) Confess a judgment against the Company in excess of $50,000, file or fail
to contest any bankruptcy, seek or permit a receivership, make an assignment for
the benefit of creditors or take any similar action for the benefit of
creditors;

(xii) Possess any Company property or assign the rights of the Company in
specific Company property for other than a Company purpose;

(xiii) Cause the Company to loan funds to any Person or issue any guaranty or
indemnity, except pursuant to Company Financing;

(xiv) Commingle Company funds with the funds of any other Person;

(xv) Modify the Development Fee or otherwise modify or amend the Development
Agreement;

(xvi) Amend this Agreement or the Certificate of Formation, except that the
Certificate of Formation may be amended by the Managing Member to the extent
required by law or to effect changes solely of a ministerial nature which do not
adversely affect the rights or increase the obligations of a Member;

(xvii) Issue any interest in the Company or admit any Person as an additional
member in the Company, provided, that CNL and/or Crescent may effectuate any
sale, assignment, gift, pledge, hypothecation, encumbrance or other transfer of
its interest in the Company as set forth in Section 10.1;

(xviii) Determine whether and to what extent the Property should be repaired or
restored following casualty or condemnation, other than as required by Company
Financing;

(xix) Appoint any substitute Managing Member or delegate any responsibilities of
Managing Member other than as set forth in Section 6.1(b);

(xx) Fail to carry insurance required by this Agreement or modify any such
insurance;

(xxi) Threaten, file or settle any claim involving the Company, other than
eviction proceedings in the ordinary course of business, insured tort claims and
claims involving amounts less than $25,000, individually or in the aggregate for
related claims;

(xxii) Remove or appoint accountants in connection with any Company business;

(xxiii) Determine any actions to be taken to cure any material default under or
material violation of any Requirement other than a default under this Agreement;
or

 

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(xxiv) Designate a bank for the deposit of funds of the Company.

(xxv) Adopt an Operating Budget or a Capital Budget or, except for the
reimbursement of Out-of-Pocket Costs or as expressly provided below in items
(ii) and (iii) immediately below, cause the Company to incur any expense not
provided for in the Project Budget, an Operating Budget or a Capital Budget;

(xxvi) Modify any Operating Budget, except to allow annual variances in line
items that do not exceed in the aggregate in any Fiscal Year the greater of
(i) $50,000, and (ii) ten percent (10%) of the line item and that, when taken
together with all other variances in any Operating Budget in such Fiscal Year,
do not increase the total amount provided in the applicable Operating Budget by
more than one hundred ten percent (110%) in the aggregate;

(xxvii) Modify any Capital Budget, except to allow an annual aggregate variance
not in excess of $50,000 after taking all line item variances into account; and

(xxviii) Enter into any contract or agreement that obligates the Company to pay
more than $50,000 or that is not terminable on no more than thirty (30) days’
notice without penalty or charge; provided, however, that subject to the other
provisions of Section 6.2(a), such restriction shall not restrict the authority
of the Managing Member or the Operating Member to enter into such contracts or
agreements only with non-Affiliate third parties in the ordinary course of
business of operating the Project as an apartment community on such terms as are
commercially reasonable in the context of a “Class A” garden apartment community
in the Orlando, Florida market.

(b) The Operating Member shall use good faith efforts to provide each other
Member with not less than thirty (30) days’ advance notice of any proposed Major
Decision, provided, however, in the event of an emergency or other circumstance
that does not reasonably permit such advance notice, the Operating Member may
call upon the Members to respond within a shorter, reasonable period of time
(but in no event less than two (2) Business Days’ advance notice). Member
Consent may be by written consent or may occur pursuant to a meeting by
conference call with the results confirmed in writing, and such written consent
or written confirmation may be delivered in the form of facsimile, electronic
mail, telex, telecopy or telegraph. An agenda for each meeting shall be prepared
in advance by the Members in consultation with each other. Approval by Member
Consent of the matter being considered shall be binding on the Company and the
Members for all matters. Upon the request of any of the Members, the Operating
Member shall cause written minutes to be prepared of all actions taken by such
members at meetings and shall deliver a copy thereof to each of the Members
within seven (7) days after the date of the meeting.

(c) To the extent that the Operating Member shall have the authority to cause
any Major Decisions to occur and be implemented without the consent of any other
Member, such authority shall be limited as follows:

(i) With respect to Section 6.2(a)(xx), the Operating Member shall have the
authority to modify the insurance carried by the Company but shall not have the
authority to cause the Company to fail to carry any insurance required by this
Agreement, applicable law or any Company Financing, loan document or other
agreement to which the Company is a party.

 

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(ii) With respect to Section 6.2(a)(xxi), neither the Managing Member nor the
Operating Member shall have the authority without the consent of the other
Member to threaten, file or settle any claim involving the other Member, but
each shall have the authority, subject to the provisions of Section 6.2(a)(xxi),
to threaten, file or settle any claim involving such Member that does not
involve the other Member.

(iii) With respect to Section 6.2(a)(xxiv), the Operating Member’s authority to
designate a bank for the deposit of Company funds shall be subject to
Section 6.3 below.

6.3 Bank Accounts. For so long as the Construction Loan remains outstanding, the
Company will maintain a separate bank account or accounts with the bank making
the Construction Loan for the deposit and disbursement of all funds of the
Company. Subject to the foregoing, the Company may thereafter maintain separate
bank accounts in such banks as the Members by Member Consent may designate or
any lender of the Company may require exclusively for the deposit and
disbursement of all funds of the Company. All funds of the Company shall be
promptly deposited in such accounts. The Operating Member may designate
representatives of Operating Member to be authorized signatories for such
accounts from time to time, provided that a representative of Crescent shall at
all times be an authorized signatory on all Company bank accounts without the
requirement of any co-signatory for such accounts and all such signatories shall
be insured by fidelity bonds on terms reasonably acceptable to CNL and shall not
authorize any expenditures from such accounts with respect to the Project that
are not in accordance with the Project Budget.

6.4 Annual Budgets. No later than sixty (60) days before Completion, the
Operating Member shall prepare or cause to be prepared by the Property Manager
for the Property, for the Members review, a proposed operating budget and a
proposed capital budget, each for the following fiscal year of the Company (or
portion thereof if Completion does not occur on January 1) in a form reasonably
satisfactory to the Members. The Operating Member shall consult with the Members
with respect to such proposed operating budget and proposed capital budget. Once
approved as required pursuant to the provisions of Section 6.2(a), the
applicable final proposed operating budget shall become the “Operating Budget”
hereunder, and, once approved pursuant to the provisions of Section 6.2(a), the
applicable final proposed capital budget shall become the “Capital Budget”
hereunder. Thereafter, no later than November 1st of each year, the Operating
Member shall prepare or cause to be prepared by the Property Manager for the
Property, for the Members review, a proposed operating budget and a proposed
capital budget for the upcoming calendar year. The Operating Member shall
consult with the Members with respect to such proposed operating budget and
proposed capital budget with the goal that CNL and Crescent agree on each such
proposed budget on or before December 1st of each year. If approved pursuant to
the provisions of Section 6.2(a), the final proposed operating budget for such

 

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subsequent year shall become the then operative “Operating Budget” hereunder. If
approved by pursuant to the provisions of Section 6.2(a), the final proposed
capital budget for such subsequent year shall become the then operative “Capital
Budget” hereunder. If, as of the commencement of any Fiscal Year, all or any
portion of a proposed Operating Budget has not been approved as required by the
provisions of Section 6.2(a), the Operating Member shall be authorized to
operate the Company in accordance with those portions of the prior Fiscal Year’s
Operating Budget that pertain to the portions of the proposed Operating Budget
that have not been so approved. Notwithstanding the foregoing, until a new
Operating Budget for a Fiscal Year is approved as required by the provisions of
Section 6.2(a), the Operating Member may make expenditures for real estate
taxes, scheduled debt service payments, insurance premiums for insurance
maintained in accordance with the terms of this Agreement, common area expenses,
fulfillment of obligations to tenants under Permitted Leases and utilities,
regardless of the amounts permitted therefore in the prior Fiscal Year’s
Operating Budget.

6.5 Insurance. Certificates for all insurance maintained by the Company shall be
attached hereto collectively as Exhibit D. The Operating Member shall cause the
Company to obtain and maintain all such insurance as and when described on
Exhibit D, and the Operating Member shall attach such additional certificates of
insurance to Exhibit D upon issuance. At no time shall insurance maintained by
the Company be less than the applicable amount required under applicable law.

6.6 Consultation Regarding the Project. CNL, as Managing Member, directly or
through its agents or Affiliates, notwithstanding the delegation of authority
granted to the Operating Member, shall have the right to consult with and
provide comments to the Operating Member on significant issues relating to the
management and business of the Company and development of the Project, and, if
requested by CNL, each of the Company and the Operating Member will make
available its officers and representatives of its accountants to meet with CNL
or its agents or Affiliates from time to time during each year at mutually
agreeable times for such consultation, to review the management, progress and
conditions (financial and otherwise) of the Project and the management of the
Company. Notwithstanding anything to the contrary in this Agreement, the rights
of CNL to provide such consultation shall include: (a) the right to discuss, and
provide advice with respect to, the Company’s business (including the management
of the Project) with the Operating Member and the Company’s officers, employees,
managers and agents and the right to consult with and advise the Operating
Member on matters materially affecting the Company (including the Project);
(b) the right to submit business proposals or suggestions relating to the
Company (including the Project) to the Operating Member and the Company’s
management from time to time with the requirement that one or more members of
the Operating Member’s management discuss such proposals or suggestions with CNL
or its agent or Affiliate, as applicable, within a reasonable period after such
submission and the right to call a meeting with the Operating Member’s
management in order to discuss such proposals or suggestions; and (c) the right
(i) to visit the Company’s business premises and the Project during normal
business hours, (ii) to receive financial statements, operating reports, budgets
or other financial reports of the Company (including those relating to the
Project) on a regular basis describing the financial

 

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performance, significant proposals and other material aspects of the Company
(including the Project), (iii) to examine the books and records of the Company
(including those relating to the Project) and (iv) to request such other
information relating to the Company (including the Project) at reasonable times
and intervals in light of the Company’s normal business operations concerning
the general status of the Company’s business, financial condition and operations
(including the Project) but only to the extent such information is reasonably
available to the Company and in a format consistent with how the Company
maintains such information.

6.7 Termination of Delegation of Authority to Crescent as Operating Member.

(a) CNL shall have the right, without the concurrence of Crescent, to terminate
the delegation of authority of, and remove Crescent as, Operating Member at any
time with or without Cause. Solely in the event of termination by CNL and
removal of Crescent as Operating Member for Cause, Crescent shall cease to have
any rights to approve or consent to any matters under this Agreement. For the
avoidance of doubt, any termination by CNL and removal of Crescent as Operating
Member without Cause shall not affect Crescent’s right to approve Major
Decisions or any other matters requiring Member Consent under this Agreement or
affect in any manner Crescent’s economic interest as a member of the Company
pursuant to this Agreement, or the right of Crescent Development to receive the
Development Fee provided in the Development Agreement.

(b) For purposes of this Agreement, termination of Crescent as Operating Member
for “Cause” shall mean termination due to any one or more of the following:

(i) any material breach or default by Crescent in its obligations as Operating
Member as delegated by the Managing Member under this Agreement, which breach,
default or misrepresentation, if the same may be cured by the payment of money,
has not been cured within ten (10) days after written notice to Crescent, or if
the same may not be cured by the payment of money, has not been cured within
thirty (30) days after written notice to Crescent (provided, however, that
(i) if the breach or default has a material adverse effect on the Company, the
Property or CNL, Crescent shall have an additional thirty (30) days to cure such
breach if such breach is not curable within such initial thirty (30) day period,
so long as Crescent has commenced cure within such initial thirty (30) day
period and continues to prosecute to completion with diligence and continuity
the curing thereof within such additional thirty (30) day period, and (ii) if
the breach or default does not have a material adverse effect on the Company,
the Project or CNL and if Crescent has commenced and continues to prosecute to
completion with diligence and continuity the cure thereof within such initial
thirty (30) day period, then Crescent shall have as much time as is commercially
reasonable for curing such breach or default, provided, however, that in no
event shall Crescent have greater than one hundred twenty (120) days in the
aggregate from such written notice to so cure);

(ii) any act by Crescent beyond the scope of its authority under this Agreement;
or

(iii) in the event of any fraud, gross negligence or willful misconduct by
Crescent against CNL or the Company; provided, however, that prior to
Completion, CNL shall also have the sole and exclusive right, without the
concurrence of Crescent, to terminate the

 

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delegation of authority of, and remove Crescent as, Operating Member if
Developer is terminated as developer pursuant to the terms of the Development
Agreement, which shall constitute additional grounds for termination for Cause.
Such removal and termination of authority shall be effective upon delivery of
written notice thereof to Crescent, and CNL shall have the right to become,
directly or through an Affiliate, or to appoint and delegate authority to, a
substitute Operating Member who shall have such rights and obligations of the
Operating Member as may be delegated by the Managing Member. Following removal
of Crescent as Operating Member for Cause, Crescent shall cease to have any
rights to approve or consent to any matters under this Agreement.

(c) As a condition to terminating the delegation of authority of, and removing
Crescent as, Operating Member without Cause, (i) CNL must cause the Construction
Loan and any other Company Financing for which Crescent or any Crescent
Affiliate has any personal liability to be paid in full and satisfied; and
(ii) such removal shall in no form or fashion affect Crescent’s economic
interest as a Member of the Company pursuant to this Agreement or the right of
the Developer to receive the Development Fee provided in the Development
Agreement. Furthermore, in the event of removal of Crescent as Operating Member
for Cause, such removal shall not in any form or fashion affect Crescent’s
economic interest as a member of the Company pursuant to this Agreement, unless
such removal for Cause is a result of one of the matters specified in
Section 9.5 of this Agreement, and then the economic interest of Crescent as a
Member of the Company shall be affected by such removal, only to the extent
provided in Section 9.5 below.

6.8 Development. The Company shall retain Developer as the developer for the
Project, to act as the Company’s sole and exclusive agent to coordinate and
supervise the management and administration of the development of the Project
and the construction of the improvements comprising the Project. The Company and
Developer shall enter into a Development Agreement in substantially the form set
forth as Exhibit C attached hereto. The Developer will cause Completion of the
Project for a price equal to the lesser of (i) the aggregate cost in the Project
Budget or (ii) the actual and independently audited cost for development and
Completion of the Project. The Developer or another Crescent Affiliate shall
provide all guaranties required in connection with the Construction Loan,
including without limitation, a completion guaranty, cost guaranty and/or
construction warranty as required by the lender for the Construction Loan. As
compensation for the Developer’s property development services, Company agrees
to pay the Developer a total development fee (the “Development Fee”) in an
amount equal to $1,550,000 as more fully set forth in the Development Agreement.

6.9 Management Agreement. Upon Completion, the Company will enter into a
property management agreement with the Property Manager to manage the Property
(the “Management Agreement”), pursuant to which, as compensation for the
services described therein, Property Manager shall be paid a property management
fee as set forth in the Management Agreement. Should the Management Agreement
terminate for any reason, the Company will enter into an agreement or agreements
for management of the Property subject to, and in accordance with, the terms of
Section 6.2.

 

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6.10 Contracts with Affiliates. Notwithstanding anything to the contrary, CNL
shall have the sole and exclusive authority to enforce and/or exercise the
rights of the Company, including consent and approval rights of the Company,
under any contract with an Affiliate of Crescent, including the Company’s
engagement of the Developer pursuant to Section 6.8. Notwithstanding anything to
the contrary, Crescent shall have the sole and exclusive authority to enforce
and/or exercise the rights of the Company, including consent and approval rights
of the Company, under any contract with an Affiliate of CNL.

6.11 Indemnification of Managing Member and Operating Member. The Company shall
hold harmless, indemnify and defend each of the Managing Member and the
Operating Member and their respective Affiliates from and against any and all
claims arising out of or relating to any action taken, omitted or suffered by
the Managing Member or the Operating Member in the performance of their
respective duties as Managing Member or Operating Member hereunder, or otherwise
in their capacity as the Managing Member or Operating Member, provided that such
claim results from a decision or action which (i) was taken, omitted or suffered
by the Managing Member or Operating Member, as applicable, in the reasonable and
good faith belief that such decision or action was in the best interest of the
Company and within the authority of the Managing Member or Operating Member, as
applicable, under this Agreement and (ii) did not involve (A) fraud, bad faith,
gross negligence or willful misconduct on the part of the Managing Member or the
Operating Member, as applicable, or the breach of the fiduciary duties of the
Managing Member or Operating Member or of any covenant, agreement or obligation
of the Managing Member or Operating Member contained in this Agreement or in any
other instrument contemplated by this Agreement as applicable or (B) the knowing
breach of any representation or warranty made by the Managing Member or
Operating Member in this Agreement as applicable.

6.12 Leasing Guidelines. The Members shall negotiate in good faith to develop
and agree upon initial Leasing Guidelines for the lease up of the Project as an
apartment community following the execution of this Agreement and prior to the
execution of any lease within the Project. The Members shall negotiate in good
faith to amend the Leasing Guidelines as may be necessary from time to time. All
Leasing Guidelines shall be approved by Member Consent.

ARTICLE 7. BOOKS AND RECORDS, AUDITS, TAXES, ETC.

7.1 Books; Statements. In addition to the establishment and maintenance of
Capital Accounts pursuant to Section 7.9, the Company shall keep all books and
records required under the Act and such other books and records as shall be
determined by the Managing Member. All financial statements of the Company shall
be prepared in accordance with GAAP, consistently applied.

 

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Following the Effective Date:

(a) Following the commencement of at least one lease for any portion of the
Project, Operating Member shall prepare or cause to be prepared a statement
setting forth the calculation of Operating Cash Flow for each period of time,
but not less often than monthly, at the end of which period the Company is to
make periodic distributions of Operating Cash Flow as provided in Section 9.3,
and the Company shall furnish a copy of such cash flow statement to each Member
within twenty-one (21) days after the end of such period;

(b) Operating Member shall use commercially reasonable efforts to prepare and
submit or cause to be prepared and submitted to each Member, as soon as possible
after each month-end, but in no event later than the seventh (7th) Business Day
after each month-end during the term of this Agreement, an unaudited balance
sheet of the Company dated as of the end of the preceding month, together with a
profit and loss statement and statement of cash flows as of the end of such
month and for the portion of the fiscal year then ended and a statement of
change in each Member’s capital for the month;

(c) Operating Member shall use commercially reasonable effort to prepare and
submit or cause to be prepared and submitted to each Member as soon as possible
after each quarter-end, but in no event later than the seventh (7th) Business
Day of each January, April, July and October during the term of this Agreement,
an unaudited balance sheet of the Company dated as of the end of the preceding
month, together with a profit and loss statement for the three calendar month
period next preceding with a cumulative calendar year accrual basis profit and
loss statement to date, and a statement of change in each Member’s capital for
the quarter and year to date; and

(d) As soon as practicable following the end of each fiscal year of the Company,
an annual audit shall be conducted by independent certified public accountants
of recognized standing, selected by CNL in accordance with Section 7.6 and
retained by the Company, which accounting and/or audit shall cover the assets,
properties, liabilities and net worth of the Company, and its dealings,
transactions and operations during such fiscal year, and all matters and things
customarily included in such accountings and audits, and a full, detailed
certified statement shall be furnished to each Member within sixty (60) days
after the end of such fiscal year, showing on an accrual basis the assets,
liabilities, properties, net worth, profits, losses, net income, Operating Cash
Flow, changes in the financial condition of the Company for such fiscal year and
each Member’s capital in the Company, and, if applicable, a full and complete
report of the audit scope and audit findings in the form of a management audit
report with an internal control memorandum.

(e) In its preparation of the financial statements set forth in this
Section 7.1, the Operating Member shall maintain a system of internal controls
necessary to enable CNL to complete CNL’s Sarbanes-Oxley certifications to the
extent prepared by Operating Member in the ordinary course of its business, as
requested by CNL, or shall provide such other certification and documentation
and testing of internal controls as is deemed necessary by CNL; provided,
however, that to the extent the testing of the Company’s internal controls or
the implementation of additional or alternative internal controls as a result of
any such testing causes the Company to incur non de minimus expenses, CNL shall
bear responsibility for such expenses.

 

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7.2 Where Maintained. The books, accounts and records of the Company shall be at
all times maintained at the offices of Crescent or as otherwise specified in the
Management Agreement or any successor management agreement in effect with
respect to the Property from time to time, and available to the other Members
for review and copying.

7.3 Audits. In addition to the annual audit of the Company as required under
Section 7.1(d), any Member may, at its option and at its own expense, conduct
internal audits of the books, records and accounts of the Company. Audits may be
on either a continuous or a periodic basis or both and may be conducted by
employees of any Member, or an Affiliate of any Member, or by independent
auditors retained by any Member.

7.4 Objections to Statements. Following Completion, any Member shall have the
right to object to the statements described in Sections 7.1(a), 7.1(b) and
7.1(c) by giving notice to the other Members within 45 days after such statement
is received by each Member indicating in reasonable detail the objections of
such Member and the basis for such objections. If any Member shall fail to give
such notice within said 45-day period, such statement and the contents thereof
shall, in the absence of fraud or willful misconduct by the other Members or the
independent certified public accountants preparing the statements, be deemed
conclusive and binding upon such party so failing to give such notice subject,
in the case of the statements provided for in Sections 7.1(a) and 7.1(b), to the
audit provided for in Section 7.1(c). Objections to any statement and any
disputes concerning the findings of, and questions raised as the result of,
audits of the Company’s books shall be settled by Member Consent.

7.5 Tax Returns. The Company shall elect to be treated and shall file its tax
returns as a partnership for Federal, state, municipal and other governmental
income tax and other tax purposes. The Company shall prepare or cause to be
prepared, on an accrual basis, all Federal, state and municipal partnership tax
returns required to be filed. Unless otherwise determined by Member Consent,
such tax returns shall be prepared by independent certified public accountants
selected pursuant to Section 7.6, who shall sign such returns as preparers. The
Company shall submit (a) draft returns to each Member for review and approval no
later than thirty (30) days prior to the due date of the returns, but in no
event later than ninety (90) days after the close of the Company’s taxable year;
and (b) final returns to each Member for review and approval no later than
June 15th of each year during the term of this Agreement. Each Member shall
notify the other Member(s) upon receipt of any notice of tax examination of the
Company by Federal, state or local authorities.

 

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7.6 Tax Matters Partner. CNL is hereby appointed the “Tax Matters Partner” of
the Company for all purposes pursuant to Sections 6221-6231 of the Code, with
respect to operations conducted by the Company during the period that CNL is a
Member. The Tax Matters Partner shall comply with the requirements of
Section 6221 through 6232 of the Code. The Tax Matters Partner shall have the
authority, in its reasonable discretion, to select and appoint, from time to
time, independent certified public accountants to prepare tax returns and annual
audited financial statements for the Company, the expense of which shall be
borne by the Company. Notwithstanding the foregoing, the Tax Matters Partner
shall have no authority to bind the Company or any other Member.

7.7 Tax Policy. The Company shall make any and all tax accounting and reporting
elections and adopt such procedures as shall be approved by Member Consent. A
Member shall be deemed to have consented to any tax election made by the Tax
Matters Partner if (a) such election is described in reasonable detail in a
written notice to such Member and (b) such Member shall not have objected in
writing to such election within fifteen (15) days following such Member’s
receipt of such notice, indicating in reasonable detail the objection of such
Member and the basis for such objection. Any disputes over tax elections shall
be resolved by Member Consent.

7.8 Section 754 Election. At the request of a Member, the Company shall make and
file a timely election under Section 754 of the Code (and a corresponding
election under applicable state or local law) in the event of a transfer of an
interest in the Company permitted hereunder or the distribution of property to a
Member to the extent that such election results in a positive basis adjustment
to the Company’s property. Any Member or transferee first requesting an election
hereunder shall reimburse to the Company the reasonable out-of-pocket expenses
incurred by the Company in connection with such election including any legal or
accountants’ fees. Thereafter, each transferee shall reimburse such expenses
with respect to adjustments under Section 743 of the Code in the proportion
which the interest of each transferee bears to the sum of the interests of all
transferees.

7.9 Capital Accounts. A separate capital account (each, a “Capital Account”)
shall be maintained for each Member in accordance with the rules of Treasury
Regulations Section 1.704-1(b)(2)(iv), and this Section 7.9 shall be interpreted
and applied in a manner consistent therewith. Whenever the Company would be
permitted to adjust the Capital Accounts of the Members pursuant to Treasury
Regulations Section 1.704-1(b)(2)(iv)(f) to reflect revaluations of Company
property, the Company shall (unless otherwise determined by Member Consent) so
adjust the Capital Accounts of the Members and the Company shall so adjust the
Capital Accounts of the Members to the extent necessary to comply with the
requirements of Code Section 704(b) and the Treasury Regulations thereunder. In
the event that the Capital Accounts of the Members are adjusted pursuant to
Treasury Regulations Section 1.704-1(b)(2)(iv)(f) to reflect revaluations of
Company property, (i) the Capital Accounts of the Members shall be adjusted in
accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(g) for
allocations of depreciation, depletion, amortization and gain or loss, as
computed for book purposes, with respect to such property, (ii) the Members’
distributive shares of depreciation, depletion, amortization and gain or loss,
as computed for tax purposes, with respect to such property shall be determined
so as to take account of the variation

 

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between the adjusted tax basis and book value of such property in the same
manner as under Code Section 704(c) and (iii) the amount of upward and/or
downward adjustments to the book value of the Company property shall be treated
as income, gain, deduction and/or loss for purposes of applying the allocation
provisions of Article 8. In the event that Code Section 704(c) applies to
Company property, the Capital Accounts of the Members shall be adjusted in
accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(g) for
allocations of depreciation, depletion, amortization and gain and loss, as
computed for book purposes, with respect to such property.

ARTICLE 8. ALLOCATIONS

8.1 Allocation of Net Income and Net Loss. After application of Section 8.3 and
Section 8.4, and subject to Section 8.2, any remaining net income or net loss
(or items thereof) for the fiscal year or portion thereof shall be allocated
among the Members and to their Capital Accounts in such ratio or ratios as may
be required to cause the balances of the Members’ Economic Capital Accounts to
be as nearly equal to their Target Balances as possible, consistent with the
provisions of Section 8.5.

8.2 Loss Limitation. Net loss allocated pursuant to Section 8.1 shall not exceed
the maximum amount of net loss that can be allocated without causing or
increasing a deficit balance in a Member’s Adjusted Capital Account. A Member’s
“Adjusted Capital Account” balance shall mean such Member’s Capital Account
balance increased by such Member’s obligation to restore a deficit balance in
its Capital Account, including any deemed obligation pursuant to the penultimate
sentences of Treasury Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), and
decreased by the amounts described in Treasury Regulations
Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6). In the event that one but not all
of the Members would have a deficit balance in its Adjusted Capital Account as a
consequence of an allocation of net loss pursuant to Section 8.1 in excess of
the amount, if any, permitted under the first sentence of this Section 8.2, the
limitation set forth in this Section 8.2 shall be applied by allocating 100% of
the remaining net loss to the other Members, in proportion to such positive
balances, until the Adjusted Capital Account of such other Member or Members is
zero.

8.3 Minimum Gain Chargebacks and Nonrecourse Deductions. Notwithstanding any
other provision of this Agreement:

(a) Company Minimum Gain Chargeback. In the event there is a net decrease in
Company Minimum Gain during a fiscal year, the Members shall be allocated items
of income and gain in accordance with Treasury Regulations Section 1.704-2(f).
For purposes of this Agreement, the term “Company Minimum Gain” shall have the
meaning for “partnership minimum gain” set forth in Treasury Regulations
Section 1.704-2(b)(2), and any Member’s share of Company Minimum Gain shall be
determined in accordance with Treasury Regulations Section 1.704-2(g)(1). This
Section 8.3(a) is intended to comply with the minimum gain chargeback
requirement of Treasury Regulations Section 1.704-2(f) and shall be interpreted
and applied in a manner consistent therewith.

 

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(b) Nonrecourse Deductions. Nonrecourse Deductions shall be allocated to the
Members to reflect properly their shares of the Company’s non-recourse debt (as
determined under Section 8.8). For purposes of this Agreement, the term
“Nonrecourse Deductions” shall have the meaning set forth in Treasury
Regulations Section 1.704-2(b)(1). This Section 8.3(b) is intended to comply
with Treasury Regulations Section 1.704-2(e) and shall be interpreted and
applied in a manner consistent therewith.

(c) Member Nonrecourse Debt. To the extent required by Treasury Regulations
Section 1.704-2(i), any items of income, gain, loss or deduction of the Company
that are attributable to a nonrecourse debt of the Company that constitutes
Member Nonrecourse Debt (including chargebacks of Member Nonrecourse Debt
Minimum Gain) shall be allocated in accordance with the provisions of Treasury
Regulations Section 1.704-2(i). For purposes of this Agreement, the term “Member
Nonrecourse Debt” shall have the meaning for partner nonrecourse debt set forth
in Treasury Regulations Section 1.704-2(b)(4), and the term “Member Nonrecourse
Debt Minimum Gain” shall have the meaning for partner nonrecourse debt minimum
gain set forth in Treasury Regulations Section 1.704-2(i)(2). This
Section 8.3(c) is intended to satisfy the requirements of Treasury Regulations
Section 1.704-2(i) (including the partner nonrecourse debt minimum gain
chargeback requirement) and shall be interpreted and applied in a manner
consistent therewith.

8.4 Qualified Income Offset. Any Member who unexpectedly receives an adjustment,
allocation or distribution described in Treasury Regulations
Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) that causes or increases a deficit
balance in its Capital Account in excess of any obligation to restore a deficit
balance in its Capital Account (including any deemed deficit restoration
obligation pursuant to the penultimate sentences of Treasury Regulations
Sections 1.704-2(g)(1) and (i)(5), and adjusted as provided in Treasury
Regulations Section 1.704-1(b)(2)(ii)(d)) shall be allocated items of income and
gain in an amount and a manner sufficient to eliminate, to the extent required
by the Treasury Regulations, such deficit balance as quickly as possible. This
Section 8.4 is intended to comply with the alternate test for economic effect
set forth in Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted and applied in a manner consistent therewith.

8.5 Code Section 704(b) Allocations. The allocation provisions contained in this
Article 8 are intended to comply with Code Section 704(b) and the Treasury
Regulations promulgated thereunder.

8.6 Other Allocation Provisions. Any elections or decisions relating to the
allocations of Company items of income, gain, loss, deduction or credit shall be
made by Member Consent.

8.7 Distributions of Nonrecourse Liability Proceeds. If the Company makes a
distribution to any Member that may be allocable to an increase in Company
Minimum Gain pursuant to Treasury Regulations Section 1.704-2(h), then the
Company shall, to the extent permitted by Treasury Regulations
Section 1.704-2(h), minimize the amount of such distribution that is allocable
to an increase in Company Minimum Gain.

 

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8.8 Information as to Allocation of Debt. Crescent agrees that indebtedness of
the Company shall be allocated among the Members under Code Section 752 so that
as much debt as possible is allocated first to Members other than CNL such that
the maximum amount that can be allocated in a manner consistent with the
provisions of Code Section 752 is so allocated. Managing Member also agrees to
provide CNL with all other information, including taxable income and loss of the
Company, the basis of property of the Company, and the highest amount of
acquisition indebtedness in the twelve month period preceding any sale or
disposition of property of the Company, which CNL may reasonably require for
purposes of this Article 8.

8.9 Taxable Year; Fiscal Year. The taxable year of the Company shall be the
calendar year, unless otherwise required by the Code or, subject to obtaining
consent of the Internal Revenue Service, the Members determine otherwise by
Member Consent. The fiscal year of the Company shall be the same as its taxable
year.

ARTICLE 9. DISTRIBUTIONS AND ALLOCATIONS

9.1 Percentage Interests in Company. The percentage interest of the respective
Members in the Company shall be:

CNL:                                         60%

Crescent:                                  40%

The percentage interest of each Member, which is subject to the preferred and
priority rights provided for herein and adjustment pursuant to the terms of
Section 4.5(d), is hereinafter called such Members’ “Percentage Interest.”

9.2 Certain Definitions. The following terms shall have the following meanings
when used herein:

(a) “Operating Cash Flow” shall mean, for any period, the net income or loss of
the Company for such period (excluding Extraordinary Cash Flow), as determined
in accordance with GAAP, consistently applied and adjusted as provided in items
(i) and (ii) below or as otherwise determined by Member Consent:

(i) Additions. There shall be added to such net income or subtracted from such
loss (1) the amount charged for depreciation, amortization or any other
deduction not involving a cash expenditure, (2) the amount of Capital
Contributions to the Company, to the

 

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extent applied to pay items deducted in determining Operating Cash Flow, (3) the
proceeds of short-term borrowings of the Company in the ordinary course of
business (including Member Loans), to the extent applied to pay items deducted
in determining Operating Cash Flow and interest received on non-cash
consideration received by the Company pursuant to a Major Capital Event, (4) any
amount by which cash reserves, which were previously established pursuant to the
Operating Cash Budget prior to the accounting period in order to retain
sufficient working capital in the Company or to properly reserve for actual or
contingent obligations of the Company or improvements to the Property, have been
reduced and (5) the proceeds of business interruption insurance.

(ii) Deductions. There shall be subtracted from such net income or added to such
loss (1) the amount of payments made on account of principal upon mortgage loans
secured by Company property and the amount of current interest (to the extent
not otherwise taken into account as a deduction in determining Operating Cash
Flow) and principal then due and payable with respect to any other loans made to
the Company, including Member Loans, (2) funds disbursed for capital
expenditures, leasing commissions, tenant finish or any other similar expenses
that are required to be capitalized and (3) any amount to establish or increase
cash reserves pursuant to a determination by Member Consent that such reserve
and the amount thereof is necessary or appropriate in order to retain sufficient
working capital in the Company or to properly reserve for other actual or
contingent obligations of the Company or improvements to the Property.

(b) “Extraordinary Cash Flow” shall mean the cash receipts of the Company from a
Major Capital Event as reduced by (A) the costs and expenses incurred by the
Company in connection with such Major Capital Event, including title, survey,
appraisal, recording, escrow, transfer tax and similar costs, brokerage expense
and attorneys, and other professional fees, and amounts spent on reconstruction
or repair, (B) funds deposited in reserves pursuant to a determination by Member
Consent that each such reserve and the amount thereof is required or appropriate
to provide for actual or contingent obligations of the Company, amounts expected
therefrom for capital improvements to the Property, and (C) funds applied to pay
or prepay any indebtedness of the Company (including Member Loans) in connection
with such Major Capital Event. To the extent that any amount received pursuant
to a Major Capital Event has been set aside as a reserve pursuant to item (B)
above in this definition and the Members thereafter determine by Member Consent
that all or a portion of such amount is not required for such purposes, such
amount shall be included in Extraordinary Cash Flow when the Members determine
by Member Consent that it is no longer necessary or appropriate to retain such
amount as a reserve. Any principal payments on non-cash consideration received
pursuant to a Major Capital Event, including promissory notes or deferred
payment obligations, shall be deemed to be included in Extraordinary Cash Flow
when received in cash by the Company; provided, however, that, notwithstanding
the terms of Section 9.2(a)(i)(3) as determined by Member Consent, such noncash
assets may be distributed in accordance with Percentage Interest in kind to the
Members, in lieu of cash, treating the total fair market value of such non-cash
assets at the date of distribution as Extraordinary Cash Flow.

(c) “Operating Return” shall mean a cumulative return, compounded monthly, equal
to ten percent (10%) per annum on each Member’s Unreturned Additional Capital
and/or Unreturned Initial Capital, as the case may be.

 

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(d) “Unreturned Additional Capital” shall mean, for each Member, its Additional
Capital, reduced by any distributions of Extraordinary Cash Flow made to such
Member pursuant to Section 9.4(f) hereof.

(e) “Unreturned Operating Return” shall mean, for each Member, its Operating
Return computed with respect to Unreturned Initial Capital or Unreturned
Additional Capital, as the case may be, reduced, in the case of the Operating
Return computed with respect to Unreturned Initial Capital by distributions of
Operating Return made to such Member pursuant to Sections 9.3(a) and 9.4(c)
hereof and reduced, in the case of the Operating Return computed with respect to
Unreturned Additional Capital, by distributions of Operating Return pursuant to
Sections 9.3(b) and 9.4(d) hereof.

(f) “Unreturned Initial Capital” shall mean, for each Member, its Initial
Capital, reduced by any distributions of Extraordinary Cash Flow made to such
Member pursuant to Section 9.4(e) hereof.

(g) “Cash Flow” shall mean, collectively, Operating Cash Flow and Extraordinary
Cash Flow.

9.3 Operating Cash Flow Distributions. Subject to the terms of Section 4.5(d)
hereof, the Company shall distribute Operating Cash Flow for each month during
the term of the Company in which there is Operating Cash Flow (such distribution
to be made monthly, within twenty-one (21) days after the end of each such
month) to the Members, as follows:

(a) First, to the Members, pari passu, in accordance with the outstanding
balances of the Members’ respective Unreturned Operating Return on Unreturned
Initial Capital, until each Member’s Unreturned Operating Return balance on
Unreturned Initial Capital has been reduced to zero;

(b) Second, to the Members, pari passu, in accordance with the outstanding
balances of the Members’ respective Unreturned Operating Return on Unreturned
Additional Capital, until each Member’s Unreturned Operating Return balance on
Unreturned Additional Capital has been reduced to zero; and

(c) Thereafter, to the Members pro rata in accordance with their respective
Percentage Interests.

9.4 Extraordinary Cash Flow Distributions. Subject to the terms of
Section 4.5(d) hereof, the Company shall distribute Extraordinary Cash Flow
(within five (5) Business Days following a Major Capital Event generating
Extraordinary Cash Flow) to the Members, as follows:

(a) First, in the event that any amount is drawn by the lender of the
Construction Loan under the Letter of Credit (as defined in the Construction
Loan) caused to be deposited with such lender by Crescent in accordance with and
as defined in the

 

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Construction Loan Documents executed by the Company in connection with the
Construction Loan, which amount has not been returned by such lender to Crescent
(that is, the amount drawn under the Letter of Credit is not held only as
additional collateral but is applied against the obligations owing pursuant to
the Construction Loan or if any cash collateral caused by Crescent to be
deposited with such lender of the Construction Loan is so applied against the
obligations owing under the Construction Loan,), to Crescent, the amount so
drawn pursuant to the Letter of Credit or the amount of the cash collateral
retained by the lender, and not returned by the lender to Crescent; provided
that any such amount payable to Crescent under this Section 9.4(a) shall be
offset by any amounts drawn pursuant to the Letter of Credit or retained by
lender from the cash collateral to the extent such amounts were utilized to pay
Construction Cost Overruns (as defined in Section 2.6 of the Development
Agreement) which Construction Cost Overruns have not been paid or reimbursed by
the Developer, Crescent Communities, LLC or an Affiliate of either of them;

(b) Second, to the Members, in amounts necessary to repay (A) compound and
current interest, and thereafter (B) the outstanding principal balance payable,
on Member Loans made by a Member to the Company, which distributions shall be
made pro rata to the Members if more than one of the Members have outstanding
Member Loans in accordance with the total principal and interest amounts of
Member Loans then outstanding. Without limiting the foregoing, all Member Loans
made by a particular Member shall be repaid in the chronological order in which
they were made;

(c) Third, to the Members, pari passu, in accordance with the outstanding
balances of the Members’ respective Unreturned Operating Return on Unreturned
Initial Capital, until each Member’s Unreturned Operating Return balance on
Unreturned Initial Capital has been reduced to zero;

(d) Fourth, to the Members, pari passu, in accordance with the outstanding
balances of the Members’ respective Unreturned Operating Return on Unreturned
Additional Capital, until each Member’s Unreturned Operating Return balance on
Unreturned Additional Capital has been reduced to zero;

(e) Fifth, to the Members, pari passu, in proportion to their respective
Unreturned Initial Capital, until each Member’s Unreturned Initial Capital has
been reduced to zero;

(f) Sixth, to the Members, pari passu, in proportion to their respective
Unreturned Additional Capital, until each Member’s Unreturned Additional Capital
has been reduced to zero;

(g) Seventh, eighty-five percent (85%) to the Members, pari passu, in proportion
to their respective Percentage Interests, and fifteen percent (15%) to Crescent,
until CNL achieves a fifteen percent (15%) IRR on its aggregate Capital
Contributions;

(h) Eighth, seventy-five percent (75%) to the Members, pari passu, in proportion
to their respective Percentage Interests, and twenty-five percent (25%) to
Crescent, until CNL achieves an eighteen percent (18%) IRR on its aggregate
Capital Contributions;

 

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(i) Ninth, one hundred percent (100%) to Crescent, or at its election, to
Crescent Development, LLC, until the Deferred Portion of the Development Fee (as
defined in Section 4.1 of the Development Agreement) has been paid;

(j) Tenth, seventy-five percent (75%) to the Members, pari passu, in proportion
to their respective Percentage Interests, and twenty-five percent (25%) to
Crescent, until CNL achieves a twenty percent (20%) IRR on its aggregate Capital
Contributions; and

(k) Thereafter, fifty-five percent (55%) to the Members, pari passu, in
proportion to their respective Percentage Interests, and forty-five percent
(45%) to Crescent.

9.5 Loss of Promoted Interest. Notwithstanding the provisions of Section 9.4,
Crescent shall no longer have the right to distributions with respect to its
so-called “promoted interest” as such distributions are set forth in Sections
9.4(g), 9.4(h), 9.4(j) and 9.4(k) (and Crescent shall instead receive
distributions of Extraordinary Cash Flow under such Sections based on its
Percentage Interest) upon the occurrence of any of the following prior to
Completion of the Project:

(a) Upon violation by Crescent of any of the restrictions on transfer as set
forth in Section 10.1 (but subject to the permitted transfers as set forth in
Section 10.2); provided that Crescent shall have the same notice and cure rights
with respect to such violation as described in Section 6.7(a); or

(b) In the event that Developer is terminated as developer pursuant to the terms
of the Development Agreement.

Upon the loss of Crescent’s promoted interests set forth in Sections 9.4(g),
9.4(h), 9.4(j) and 9.4(k), such Sections shall be deemed revised to provide that
all distributions thereunder shall be made to the Members pro rata in accordance
with their Percentage Interests, and Crescent shall no longer be entitled to any
distributions under Sections 9.4(g), 9.4(h), 9.4(j) and 9.4(k) in excess of a
distribution based on its Percentage Interest. Without limiting the foregoing,
if CNL terminates and removes Crescent as the Operating Member without Cause in
accordance with Section 6.7, such termination and removal shall not cause
Crescent to lose the promoted interests set forth in Sections 9.4(g), 9.4(h),
9.4(j) and 9.4(k).

9.6 Distributions Upon Liquidation. In the event any Member’s interest in the
Company is “liquidated” within the meaning of Treasury Regulations
Section 1.704-1(b)(2)(ii)(g), then distributions shall be made to such Member in
accordance with his, her, or its positive Capital Account balance in compliance
with Treasury Regulations Section 1.704-1(b)(2)(ii)(b)(2).

 

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ARTICLE 10. ASSIGNMENT AND OFFER TO PURCHASE

10.1 Transfers. Except as expressly provided in this Article 10, no Member, or
any assignee or successor in interest of a Member, may sell, assign, give,
pledge, hypothecate, encumber or otherwise transfer, or permit the transfer of,
all or any portion of its interest in the Company, or in any Member Loans made
by it, or in all or any part of the assets of the Company, directly or
indirectly, whether by operation of law or otherwise. Any purported sale,
assignment, gift, pledge, hypothecation, encumbrance or other transfer of all or
any portion of a Member’s interest in the Company or any Member Loans made by it
not otherwise expressly permitted by this Article 10 shall be null and void and
of no force or effect whatsoever. A sale, assignment, gift, pledge,
hypothecation, encumbrance or other transfer by CNL of all or a portion of its
Entire Interest in the Company to an Affiliate of CNL Financial Group, LLC
(“CFG”) from time to time, or in connection with any corporate merger,
acquisition or other combination or the sale or transfer of all or substantially
all of its assets shall be a transfer permitted under this Article 10, and CNL
shall not be required to obtain the consent of, nor offer all or any portion of
its Entire Interest to be so sold, assigned, given, pledged, hypothecated,
encumbered or transferred to any other Member. No transfers of any direct or
indirect interest in CNL, or of CNL’s interest in the Company among funds
sponsored or advised by CFG or its Affiliates, shall be restricted in any way.
Similarly, a sale, assignment, gift, pledge, hypothecation, encumbrance or other
transfer by Crescent of all or a portion of its Entire Interest in the Company
to an Affiliate of Crescent, from time to time, or in connection with any
corporate merger, acquisition or other combination or the sale or transfer of
all or substantially all of its assets shall be a transfer permitted under this
Article 10, and Crescent shall not be required to obtain the consent of, nor
offer all or any portion of its Entire Interest to be so sold, assigned, given,
pledged, hypothecated, encumbered or transferred to any other Member.

10.2 Intentionally Deleted.

10.3 Assumption by Assignee. Any assignment of all or any portion of an Entire
Interest in the Company permitted under this Article 10 shall be in writing, and
shall be an assignment and transfer of all of the assignor’s rights and
obligations hereunder with respect to the portion of the Entire Interest
transferred, and the assignee shall expressly agree in writing to be bound by
all of the terms of this Agreement and assume and agree to perform all of the
assignor’s agreements and obligations existing or arising at the time of and
subsequent to such assignment. Upon any such permitted assignment of all or any
portion of an Entire Interest, and after such assumption, the assignor shall be
relieved of its agreements and obligations hereunder arising after such
assignment with respect to the interest transferred, and, in the case of a
transfer of an Entire Interest, the assignee shall become a Member in place of
the assignor. An executed counterpart of each such assignment of all or any
portion of an Entire Interest in the Company and assumption of a Member’s
obligations shall be delivered to each Member and to the Company. The assignee
shall pay all expenses incurred by the Company in admitting the assignee as a
Member. Except as otherwise expressly provided herein, no permitted assignment
shall terminate the Company.

As a condition to any assignment of all or any portion of an Entire Interest,
the selling Member shall obtain such consents as may be required from third
parties, if any, or waivers thereof. The other Members shall use reasonable
efforts to cooperate with the selling Member in obtaining such consents or
waivers.

 

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10.4 Amendment of Certificate of Formation. If an assignment of an Entire
Interest in the Company shall take place pursuant to the provisions of this
Article 10, then unless the Company is dissolved by such assignment, the
continuing Members promptly thereafter shall cause to be filed, to the extent
necessary, an amendment to the Company’s Certificate of Formation with all
applicable state authorities, together with any necessary amendments to the
fictitious or assumed name(s) of the Company in order to reflect such change or
take such similar action as may be required.

10.5 Other Assignments Void.

(a) Without limiting the terms of Section 10.1 any Member, other than CNL, that
is an incorporated or unincorporated business entity and any permitted assignee
of all or any portion of the Entire Interest of such business entity, shall not
permit, without prior CNL Consent, which consent may be withheld in the sole and
uncontrolled discretion of CNL, the direct or indirect admission of any new
equity or other beneficial interest holder in such entity, or the issuance or
assignment to any person or entity, who is not now an equity or other beneficial
interest holder, or an Affiliate of such an equity interest holder, in such
entity, of any kind of interest whatsoever in such entity. If a transfer is
permitted under this subsection, such assignee shall pay all expenses incurred
by the Company in connection with the transfer. The foregoing shall not, in any
form or fashion, restrict transfers of ownership interests in Crescent Holdings,
LLC, a Delaware limited liability company.

(b) Further without limiting the terms of Section 10.1 any Member, other than
CNL, that is an incorporated or unincorporated business entity and any permitted
assignee of all or any portion of the Entire Interest of such business entity,
shall not permit, without prior CNL Consent, which consent may be withheld in
the sole and uncontrolled discretion of CNL, the issuance, sale, assignment,
gift, pledge, hypothecation or encumbrance of any interest in such entity or in
any equity or other beneficial interest holder in such entity or any such
assignee or any instruments convertible into any interest in such entity or in
any equity or other beneficial interest holder in such entity or any such
assignee or the transfer of any right to vote any equity or other beneficial
interest in such entity or any such assignee. The foregoing shall not in any
form or fashion, restrict transfers of ownership interests in Crescent Holdings,
LLC, a Delaware limited liability company.

10.6 Intentionally Deleted.

10.7 Buy-Sell.

(a) Any time after Completion of the Project, either Crescent or CNL may make an
offer to purchase the other’s Entire Interest or sell its Entire Interest for
such purchase price (which shall be payable in cash at the closing of any such
transaction) and on such terms as such Member (the “Proposer”) may propose in a
notice (the “Sale Proposal”) to the other Member (the “Responding Member”). The
Sale Proposal shall include a statement as to the total purchase price for the
Property that formed the basis for the stated purchase price for each Entire
Interest.

 

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(b) Within forty-five (45) days after receiving a copy of the Sale Proposal, the
Responding Member shall notify the Proposer:

(i) that the Responding Member is agreeable to the sale of its Entire Interest
to the Proposer in accordance with the terms set forth in the Sale Proposal; or

(ii) that the Responding Member elects to purchase the Entire Interest of the
Proposer at the Reply Price (as defined below) determined in accordance with
Section 10.8 and otherwise in accordance with the terms set forth in the Sale
Proposal, as modified in accordance with Section 10.8(a). Such notification
shall be accompanied by a deposit in an amount equal to five percent (5%) of the
amount payable to the Proposer pursuant to this Section 10.7(b)(ii) (such
amount, together with any interest earned thereon, being hereinafter called the
“Responding Member’s Buy-Sell Deposit”), which amount shall be non-refundable
unless the purchase and sale pursuant to this Section 10.7(b)(ii) does not close
due to the default of the Proposer. Notice of election to purchase shall be
addressed to the Proposer and shall set forth the time and place of closing
which, unless otherwise agreed, shall be at the office of the Company, during
usual business hours within sixty (60) days after the date of the giving of the
notice of election under this Section 10.7(b)(ii) to the Proposer. The
Responding Member’s Buy-Sell Deposit shall be credited against the total
purchase price for the Entire Interest being purchased pursuant to this
Section 10.7(b)(ii); provided, however, that, if the closing shall fail to occur
because of a default by the Responding Member, subject to the provisions of
Section 10.7(b)(ii) above concerning refundability of the deposit, the Proposer
shall have the right to retain the Responding Member’s Buy-Sell Deposit as
liquidated damages, it being agreed that in such instance the Proposer’s actual
damages would be difficult, if not impossible, to ascertain.

(c) The purchase and sale pursuant to Section 10.7(b)(i) or (ii) shall take
place within forty-five (45) days following the Responding Member’s election
pursuant to Section 10.7(b). The closing shall take place during normal business
hours at the office of the Company. Failure of the Responding Member to respond
to the Sale Proposal within the forty-five (45) day period referenced in
Section 10.7(b) shall be deemed an election to sell its Entire Interest under
Section 10.7(b)(i). Each Member shall pay a portion of any transfer or similar
taxes due in connection with the sale of an Entire Interest under this
Section 10.7 in proportion to their respective Percentage Interest.

(d) Intentionally Deleted.

10.8 Provisions Generally Applicable to Sales. The following provisions shall be
applicable to sales under Sections 10.7 and/or 13.2, as indicated:

(a) If, under the provisions of Section 10.7, either party (the “Offering
Party”) makes an offer (the “10.7 Offer”) to the other party (the “Other Party”)
to purchase its Entire Interest, the purchase price (the “Reply Price”) payable
by the Other Party to the Offering Party, if the Other Party exercises its
election to purchase the Entire Interest of the Offering Party shall be
determined as follows:

 

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(i) In the event this Section 10.8(a) is triggered in the context of
Section 10.7, there shall be determined the “Value” of the Company, after
payment of debts, liabilities and expenses, based upon the amount of the 10.7
Offer. The Value shall equal the total amount which would have been available
for distribution and payment by the Company to all of the Members under
Section 9.4, after payment of debts, liabilities and expenses under Sections
13.5(a) and 13.5(b), if the Property were sold for the price set forth in the
10.7 Offer.

(ii) After determining the Value, there shall then be determined the amount
which would have been distributable and payable to the Offering Party under
Section 9.4 if all of the Company’s Property had been sold for an amount equal
to the Value, plus all debts, liabilities and expenses of the Company referenced
above. Such amount which would have been distributable to the Offering Party
equals the Reply Price.

(b) For purposes of any sale of an Entire Interest of a Member, the purchase
price associated with such sale shall be adjusted to reflect assets and
liabilities of the Company not reflected in the Company’s financial statements
available to all Members at the time of the notice of election (the “Notice
Date”). The purchase price, as so adjusted, shall be determined ten
(10) Business Days prior to closing and shall be subject to such post-closing
adjustments as the circumstances may require. The purchase price, as so
adjusted, shall be paid, at the selling Member’s option, in cash, by certified
check drawn to the order of the selling Member, or by wire transfer of
immediately available funds to the seller’s account. All prorations of real
estate taxes, rents and other items to be prorated shall be made as of the date
of sale. All transfer taxes, title insurance policies, surveys and recording
fees shall be paid for by the party usually charged with such payment under
local custom.

(c) On payment of the purchase price for an Entire Interest, the purchasing
Member shall, at its option, either (i) deliver a release of the selling Members
from all liability, direct or contingent, by all holders of all Company debts,
obligations or claims against the Company for which any Member is or may be
personally liable, except for any debts, obligations or claims which are fully
insured by public liability insurer(s) acceptable to the selling Members, or
(ii) cause all such debts, obligations or claims to be paid in full at the
closing, or (iii) deliver to the selling Members an agreement in form and
substance satisfactory to the selling Members to defend, indemnify and save the
selling Members harmless from any actions, claims or loss arising from any debt,
obligation or claim of the Company arising prior to or after the date of sale,
or (iv) a combination of the foregoing. The foregoing notwithstanding, in the
event that Crescent is not the purchasing Member, the selling Member must cause
the Construction Loan and any other Company Financing respecting which Crescent
or a Crescent Affiliate has any guaranty liability to be paid in full at the
closing. The Company shall provide the Members such tax information and
reporting as may be required by the Members in connection with such sale within
a reasonable period following such sale.

(d) All Members (including the selling Members) shall be entitled to any
distributions of Operating Cash Flow from the Company made prior to the closing.

(e) If the Property is damaged by fire or other casualty, or if any entity
possessing the right of eminent domain shall give notice of an intention to take
or acquire a substantial part of the Property, and such damage occurs, or such
notice is given, between the Notice Date and the closing date of the purchase of
an Entire Interest in the Company, the following shall apply:

 

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(i) If the Property is damaged by an insured casualty not to exceed five hundred
thousand dollars ($500,000) (or an uninsured casualty not resulting in damage in
excess of fifty thousand dollars ($50,000)) or if the taking or acquisition
shall not result in a substantial (in excess of two percent (2%)) reduction in
the income producing capacity of the Property, then the purchasing Member shall
be required to complete the transaction and accept an assignment of the
insurance or condemnation proceeds.

(ii) If the Property is damaged by an uninsured casualty resulting in damage in
excess of fifty thousand dollars ($50,000), or if the taking or acquisition
shall result in a substantial (in excess of two percent (2%)) reduction in the
income producing capacity of the Property, or if there is an insured casualty in
excess of $500,000, then the purchasing Member shall have the option (to be
exercised within 30 days from the date of the occurrence of the casualty or
receipt of the notice of condemnation) to either (x) accept the Property in an
“as is” condition together with any insurance proceeds, settlements and awards,
or (y) cancel the purchase and have its deposit returned.

In the event that the taking or acquisition shall result in a substantial
reduction in the income producing capacity of the Property, notwithstanding the
election of the purchasing Member pursuant to subparagraph (ii) above, CNL or
Crescent, in its capacity as selling Member, as applicable, shall also have the
right to cancel the purchase within fifteen (15) days from the date of the
receipt of the notice of condemnation. In the event that the purchase is
canceled by either Member pursuant to the above provisions, the terms of this
Agreement shall remain in effect and continue to be binding on the parties.

(f) At the closing of the sale of the Entire Interest of a Member, the selling
Members shall execute an assignment of its interest in the Company, free and
clear of all liens, encumbrances and adverse claims, which assignment shall be
in form and substance reasonably satisfactory to the purchasing Member, and such
other instruments as the purchasing Member shall reasonably require to assign
the Entire Interest of the selling Members to such person or entity as the
purchasing Member may designate. For any sale or transfer under this Article 10,
the purchasing Member may designate the assignee of the Entire Interest, which
assignee need not be an Affiliate of the purchasing Member, subject to the other
Members’ reasonable consent.

(g) In the event of a purchase and sale pursuant to Section 13.2, the Company
shall be dissolved and terminated as of the closing date of the sale, and on the
closing date the Members shall execute and file a Certificate of Cancellation of
the Company’s Certificate of Formation. The Members shall cooperate in taking
all steps necessary in connection with the dissolution and termination of the
Company.

(h) It is the intent of the parties to this Agreement that the requirements or
obligations, if any, of one Member to sell its Entire Interest to another Member
shall be enforceable by an action for specific performance of a contract
relating to the purchase of real property or an interest therein. In the event
that the selling Member(s) shall have created or suffered any unauthorized
liens, encumbrances or other adverse interests against either the

 

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Property or the selling Member’s interest in the Company, the purchasing Member
shall be entitled either to an action for specific performance to compel the
selling Member(s) to have such defects removed, in which case the closing shall
be adjourned for such purpose, or, at the purchasing Member’s option, to an
appropriate offset against the purchase price, which offset shall include all
reasonable costs associated with enforcement of this Section.

(i) Each Member agrees that it will negotiate in good faith a purchase and sale
agreement in the event of an election by a Member to purchase the other Member’s
Entire Interest within ten (10) business days following the Notice Date.

(j) For purposes of this Section 10.8, all references to a “Member” shall mean
Crescent or CNL as the context permits and all references to “the Members” shall
mean Crescent, and/or CNL as the context permits.

10.9 Compliance with ERISA and State Statutes on Governmental Plans.

(a) Not less than five (5) Business Days before each transfer of a direct or
indirect interest in any Member (other than CNL or Crescent Parent), such Member
shall cause the proposed transferee to deliver to CNL a certification in
substantially the form of Exhibit E attached hereto and made a part hereof.

(b) On the closing or consummation of a Member Loan:

(i) Crescent shall deliver to CNL a certification in substantially the form of
Exhibit E; and

(ii) CNL shall deliver to Crescent a certification in substantially the form of
Exhibit F.

(c) Intentionally Deleted.

(d) Anything else in this Agreement contained to the contrary notwithstanding,
CNL shall have up to fifteen (15) days following the receipt by it of a
certification by a Member or a proposed transferee provided for in this
Section 10.9 to notify such Member that it has determined that a proposed
transfer by such Member of its Entire Interest or a proposed transfer of the
Property would result in a transfer to a person other than an Acceptable Person
and/or in a Plan Violation. If CNL notifies such Member that any such proposed
transaction would constitute a Plan Violation, then the proposed transaction
shall not be consummated and any attempt to do so shall be void. If, within such
fifteen (15) day period, CNL notifies such Member that it has determined that no
Plan Violation will result from the proposed transaction, then the proposed
transaction may be consummated; provided, however, that such transaction must be
consummated no later than the twentieth (20th) day after the delivery to such
Member by CNL of a notice that it has determined the proposed transaction will
not result in a Plan Violation or after the expiration of the fifteen (15) day
period referred to in this Section 10.9(d), as the case may be. Additionally, in
the event that any certification by CNL or a Member or a proposed transferee
contains a material misrepresentation or omission, then, in such event,
notwithstanding CNL’s or such Member’s lack of objection or deemed lack of
objection thereto, the proposed transaction shall not be consummated and, if it
is

 

42

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consummated, such transaction shall be void. Each (i) breach of representation
or warranty given in connection with this Section 10.9, and (ii) violation of
this Section 10.9, or of any other provision of this Agreement or the Purchase
Agreement relating to ERISA or Plan Violations will constitute a default
entitling any Member not in such violation to cause the dissolution of the
Company.

(e) Each Member shall indemnify CNL and defend and hold CNL harmless from and
against all loss, cost, damage and expense that CNL may incur, directly or
indirectly, as a result of a (i) default by such Member under this Section 10.9,
(ii) a breach of a representation or warranty given by such Member under this
Section 10.9, or (iii) any material misstatement or omission in a certification
by such Member or proposed transferee of such Member which is given to CNL
pursuant to this Section 10.9. The liability, excise taxes, penalties, interest,
loss, cost, damage and expense will include attorney’s fees and costs incurred
in the investigation, defense and settlement of claims and losses incurred in

(i) correcting any Plan Violation,

(ii) the sale of a prohibited Company interest, or

(iii) obtaining any individual exemption for a Plan Violation that may be
required, in CNL’s sole discretion. This indemnity shall survive (x) the sale of
the Property or of the indemnifying Member’s Entire Interest and (y) termination
of this Agreement.

(f) The Company will not enter into any agreements, or suffer any conditions,
that CNL determines, in its reasonable judgment, would result in a Plan
Violation. At any Member’s request, CNL shall deliver a written notice of each
such determination to such Member together with an explanation of the reasons
for the determination.

(g) Upon any Member’s reasonable request, the Members agree to cooperate with
each other’s efforts to discover and correct Plan Violations.

ARTICLE 11. DISSOLUTION OR BANKRUPTCY OF A MEMBER

11.1 Dissolution or Merger. If Crescent shall be dissolved, or merged with or
consolidated into another corporation or other entity, or if all or
substantially all of its assets shall be sold, or transferred, then unless such
dissolution, merger, consolidation, sale or transfer is expressly permitted
under Article 10, such dissolution, merger, consolidation, sale or transfer
shall, at CNL’s election, be a dissolution of the Company, and CNL shall be the
“Liquidating Member” in the dissolution of the Company. If CNL shall be
dissolved, or merged with or consolidated into another corporation or other
entity, or if all or substantially all of its assets shall be sold, or
transferred, then unless such dissolution, merger, consolidation, sale or
transfer is expressly permitted under Article 10, such dissolution, merger,
consolidation, sale or transfer shall, at Crescent’s election, be a dissolution
of the Company, and Crescent shall be the “Liquidating Member” in the
dissolution of the Company.

 

43

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11.2 Bankruptcy, etc. In the event:

(a) any Member shall file a voluntary petition in bankruptcy or shall be
adjudicated a bankrupt or seek any reorganization, arrangement, composition,
readjustment, liquidation, dissolution, or similar relief for itself under the
present or any future Federal bankruptcy code or any other present or future
applicable Federal, state, or other statute or law relative to bankruptcy,
insolvency, or other relief for debtors, or shall seek or consent to or
acquiesce in the appointment of any trustee, receiver, conservator or liquidator
of said Member or its interest in the Company (the term “acquiesce” includes but
is not limited to the failure to file a petition or motion to vacate or
discharge any order, judgment or decree providing for such appointment within
sixty (60) days after the appointment); or

(b) a court of competent jurisdiction shall enter an order, judgment or decree
approving a petition filed against any Member seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under the present or any future Federal bankruptcy code or any other
present or future applicable Federal, state or other statute or law relating to
bankruptcy, insolvency, or other relief for debtors, and said Member shall
acquiesce in the entry for such order, judgment or decree (the term “acquiesce”
includes but is not limited to the failure to file a petition or motion to
vacate or discharge such order, judgment or decree within ten (10) days after
the entry of the order, judgment or decree) or such order, judgment or decree
shall remain unvacated and unstayed for an aggregate of ninety (90) days
(whether or not consecutive) from the date of entry thereof, or any trustee,
receiver, conservator or liquidator of said Member or of all or any substantial
part of said Member’s property or its interest in the Company shall be appointed
without the consent or acquiescence of said Member and such appointment shall
remain unvacated and unstayed for an aggregate of ninety (90) days (whether or
not consecutive); or

(c) any Member shall admit in writing its inability to pay its debts as they
mature; or

(d) any Member shall give notice to any governmental body of insolvency, or
pending insolvency, or suspension or pending suspension of operations; or

(e) any Member shall make an assignment for the benefit of creditors or take any
other similar action for the protection or benefit of creditors;

then such event shall, at the election of any other Member, cause the
dissolution of the Company and such electing Member shall be the Liquidating
Member.

11.3 Reconstitution. Notwithstanding the provisions of Section 11.1 and 11.2,
the remaining Member may, within ninety (90) days of any event described in this
Article 11, elect to (a) continue the Company or (b) transfer the assets of the
Company to a newly organized entity and accept ownership interests in such
entity in exact proportion to its interests in the Company at the time of
dissolution. An appropriate amendment to or cancellation of the Certificate of
Formation and all other filings required by law shall be made in accordance with
any action taken pursuant to this Section 11.3.

 

44

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ARTICLE 12. CROSS-DEFAULT

Any termination for Cause by the Managing Member of the delegation of authority
given to Crescent as the Operating Member in accordance with Section 6.7 of this
Agreement shall give CNL, in its sole and absolute discretion, the right to
terminate the Developer as developer under the Development Agreement, and any
termination of Developer as developer pursuant to the terms of the Development
Agreement shall give CNL the right to terminate the delegation of authority
given to Crescent as Operating Member in accordance with Section 6.7 of this
Agreement.

ARTICLE 13. DISSOLUTION

13.1 Winding Up by Members. Upon dissolution of the Company by expiration of the
term hereof, by operation of law, by any provision of this Agreement or by
agreement between the Members, the Company’s business shall be wound up and all
its assets distributed in liquidation. In such dissolution, except as otherwise
expressly provided in Articles 10 or 11, the Members shall be co-liquidating
Members and shall continue to act by Member Consent. In such event the Members
shall have rights acting by Member Consent to wind up the Company and shall
proceed to cause the Company’s property to be sold and to distribute the
proceeds of sale as provided in Section 13.5. Except in respect of (i) all
assets on which a single, non-severable mortgage or other lien will be in effect
after such distribution, and (ii) any assets which the Members shall determine
are not readily severable or distributable in kind, the Members, to the extent
that liquidation of such assets is not required to fulfill the payments, if any,
under subsections (a) and (b) of Section 13.5 and Section 9.4(b) shall, if they
agree, have the right to distribute, in kind, all or a portion of the assets of
the Company to the Members.

13.2 Winding Up by Liquidating Member.

(a) In a dissolution pursuant to either Section 4.5(d)(iii) or Articles 10 and
11, the Liquidating Member shall be as therein provided and such Liquidating
Member shall have the right to:

(i) Wind up the Company and cause the Company’s assets to be sold and the
proceeds of sale distributed as provided in Section 13.5; or

(ii) Notwithstanding anything to the contrary contained in this Agreement, cause
the assets of the Company to be appraised in accordance with Section 13.2(b) and
at its option, purchase the Entire Interests of the other Members in accordance
with Section 13.2(b).

(b) (i) The Liquidating Member, within 30 days after the commencement of the
dissolution of the Company, or the Non-Failing Member at any time during the
period set forth in Section 4.5 (such Member giving the notice being referred to
herein as the “Electing Member”) may give notice (the “Appraisal Notice”) to the
other Members electing to have the “Fair Market Value” of the Company’s assets
determined by appraisal pursuant to Section 13.2(b)(ii). The fees and expenses
of such appraisers shall be borne by the Company. The

 

45

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Electing Member shall have the option, by notice given to the other Members
within 30 days after receipt of the determination of “Fair Market Value”
pursuant to Section 13.2(b)(ii), to purchase each other Member’s Entire Interest
at a price equal to the amount which would have been distributable and payable
to the other Member in accordance with the provisions of Section 9.4 if all of
the Company’s assets had been sold for an amount equal to such appraised value
and any debts, liabilities and expenses which would have been payable by the
Company pursuant to Sections 13.5(a), (b) and Section 9.4 out of the proceeds of
such sale were deducted from the appraised value. Such option may be exercised
by the Electing Member within forty-five (45) days after receipt of the
determination of “Fair Market Value” pursuant to Section 13.2(b)(ii) by notice
to the other Members. If after the receipt of the determination of “Fair Market
Value” pursuant to Section 13.2(b)(ii), the Electing Member elects not to
exercise the option to purchase the other Members’ Entire Interests pursuant to
this Section, then the Electing Member shall have all of its rights under
Section 4.5 or this Section 13.2, as applicable, as if the Appraisal Notice had
not been given. All of the provisions of Section 10.8 shall apply to a purchase
under this Section 13.2(b), except that for the purposes of this
Section 13.2(b), any adjustments required pursuant to Section 10.8 shall be
applicable to any events and/or liabilities or income which were not included in
determining the Fair Market Value.

(ii) If the fair market value (the “Fair Market Value”) of the assets of the
Company is required for purposes of Section 13.2(b)(i), such Fair Market Value,
if not otherwise agreed upon by the Members, shall be determined as set forth in
this Section 13.2(b)(ii). All appraisers referred to herein shall be real estate
appraisers which are members of the Chapter of the American Institute of Real
Estate Appraisers for the state in which the Property is located for at least
seven (7) years. As used herein, Fair Market Value is the fair market value of
all the assets of the Company. Each of CNL and Crescent shall select one
(1) appraiser. In the event that either party fails to select an appraiser
within thirty (30) days after notice of the exercise of an option or election
requiring a valuation, then such party’s appraiser shall be selected by the
other party from a list of no fewer than five (5) appraisers compiled and
approved by Member Consent (the “List”). After the selection, each appraiser
shall independently determine the gross fair market value of the assets of the
Company. If the separate appraisals differ, the Members shall have a period of
ten (10) days after receipt of the appraisals to agree on the Fair Market Value.
In the event the Members cannot agree on the Fair Market Value in accordance
with the preceding sentence, the two appraisers referred to therein shall within
ten (10) days after the expiration of the ten day period described in the
preceding sentence select a third appraiser. In the absence of such a selection,
the third appraiser shall be selected by the Chapter of the American Institute
of Real Estate Appraisers for the state in which the Property is located. The
third appraiser shall decide which of the two appraisals established by the
appraisers in accordance with this Section constitutes the Fair Market Value,
and such decision shall be conclusive and binding on all Members.

13.3 Offset for Damages. In the event of dissolution resulting from an event
described in Article 11, the Liquidating Member shall be entitled to deduct from
the amount payable to the other Member pursuant to Section 13.2(a) or (b),
Section 13.4 or Section 13.5, the amount of damages, including reasonable
attorneys’ fees and disbursements, incurred by the Liquidating Member
proximately resulting from any such event, only if and as established by a court
order.

 

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13.4 Distributions of Operating Cash Flow. Subject to Section 13.5 hereof as to
proceeds of liquidation, upon the dissolution of the Company for any reason
during the period of liquidation and until termination of the Company, the
Members shall continue to receive the Operating Cash Flow and to share profits
and losses for all tax and other purposes as provided elsewhere in this
Agreement.

13.5 Distributions of Proceeds of Liquidation. For purposes of this
Section 13.5, “proceeds of liquidation” shall equal cash available for
distribution, net of debts secured by liens on the Property, provided that
neither the Company nor the Members shall be personally liable on, or they shall
be released from, such debts. The proceeds of liquidation shall be applied in
the following order of priority:

(a) First. To the payment of:

(i) debts and liabilities of the Company, except Member Loans, and

(ii) expenses of liquidation.

(b) Second. To the setting up of any reserves which the Liquidating Member or
Members, as the case may be, may deem necessary for any contingent or unforeseen
liabilities or obligations of the Company or of the Members arising out of or in
connection with the Company. Such reserves may be deposited by the Company in a
bank or trust company acceptable to the Liquidating Member or Members, as the
case may be, to be held by it for the purpose of disbursing such reserves in
payment of any of the aforementioned liabilities or obligations, and at the
expiration of such period as the Liquidating Member or Members, as the case may
be, shall deem advisable, distributing the balance, if any, thereafter
remaining, in a manner hereinafter provided.

(c) Third. Any balance remaining shall be paid and distributed as provided in
Section 9.4, as the provisions in Section 9.4 have been adjusted by other
provisions of this Agreement.

13.6 Orderly Liquidation. A reasonable time shall be allowed for the orderly
liquidation of the assets of the Company and the discharge of liabilities to
creditors so as to enable the Members to minimize the losses normally attendant
upon a liquidation.

13.7 Financial Statements. During the period of winding up, the Company’s then
independent certified public accountants shall prepare and furnish to each of
the Members, until complete liquidation is accomplished, all the financial
statements provided for in Section 7.1.

 

47

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13.8 Restoration of Deficit Capital Accounts. At no time during the term of the
Company shall a Member with a deficit balance in its Capital Account have any
obligation to the Company or to another Member or to any other person to restore
such deficit balance.

ARTICLE 14. MEMBERS

14.1 Liability. A Member shall not be personally liable for the debts,
liabilities or obligations of the Company, except to the extent provided in the
Act, including for distributions received in violation of the Act or which are
otherwise required to be returned pursuant to the terms of the Act.

ARTICLE 15. NOTICES

15.1 In Writing; Address. All notices, elections, offers, acceptances, demands,
consents, waivers of condition and reports (collectively “notices”) provided for
in, permitted under, required under or to be effective under, this Agreement
shall be in writing and shall be given to the Company, CNL or Crescent at the
address set forth below or at such other address as the Company or any of the
parties hereto may hereafter specify in writing.

 

CNL:   

GGT Crescent Gateway Holdings, LLC

CNL Center at City Commons

450 South Orange Avenue

Orlando, Florida 32801

Attention: Rosemary Q. Mills, Chief Financial Officer

Facsimile: (407) 540-2546

Attention: Scott Hall

Facsimile: (407) 540-2546

with a copy to:   

GGT Crescent Gateway Holdings, LLC

CNL Center at City Commons

450 South Orange Avenue

Orlando, Florida 32801

Attention: Holly J. Greer, Esq., General Counsel

Facsimile: (407) 540-2648

with a copy to:   

Lowndes, Drosdick, Doster, Kantor & Reed, P.A.

450 South Orange Avenue, Suite 200

Orlando, Florida 32801

Attention: Joaquin E. Martinez, Esq.

Facsimile: (407) 843-4444

 

48

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Crescent:   

Crescent Gateway Venture, LLC

c/o Crescent Communities, LLC

227 W. Trade Street

Suite 1000

Charlotte, NC 28202

Attention: Brian J. Natwick, President—Multifamily Division

Facsimile: (980) 321-6240

with a copy to:               

Holt Ney Zatcoff & Wasserman, LLP

100 Galleria Parkway, Suite 1800

Atlanta, GA 30339

Attention: Sanford H. Zatcoff, Esq.

Facsimile: (770) 988-8580

All notices hereunder shall be in writing to be deemed effective and shall be
deemed sufficiently given or served for all purposes when delivered (i) by
personal service or courier service, and shall be deemed given on the date when
signed for or, if refused, when refused by the person designated as an agent for
receipt of notices, (ii) by nationally-recognized overnight courier that
produces a receipt of delivery and shall be deemed given when placed into the
hands of such courier for delivery on the next business day or (iii) mailed by
United States registered or certified mail, return receipt requested, postage
prepaid, deposited in a United States post office or a depository for the
receipt of mail regularly maintained by the post office and if so mailed, then
such notice or other communication shall be deemed to have been received by the
addressee on the third business day following the date of such mailing. For
purposes hereof, notices may be given by the parties hereto or by their
attorneys identified above.

A copy of any notice or any written communication from the Internal Revenue
Service to the Company shall be given to each Member at the addresses provided
for above.

15.2 Copies. A copy of any notice, service of process, or other document in the
nature thereof, received by either Member from anyone other than the other
Member and pertaining to the Company or the Property, shall be delivered by the
receiving Member to the other Member as soon as practicable.

ARTICLE 16. MISCELLANEOUS

16.1 Additional Documents and Acts. In connection with this Agreement, as well
as all transactions contemplated by this Agreement, 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 all such transactions. All approvals of either party hereunder shall be in
writing.

16.2 Interpretation. This Agreement and the rights and obligations of the
Members hereunder shall be interpreted in accordance with the laws of the State
of Delaware.

 

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16.3 Entire Agreement. This instrument contains all of the understandings and
agreements of whatsoever kind and nature existing between the parties hereto
with respect to this Agreement and the rights, interests, understandings,
agreements and obligations of the respective parties pertaining to the Company.

16.4 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.

16.5 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.

16.6 Binding Effect. Except as herein otherwise expressly stipulated to the
contrary, this Agreement shall be binding upon and inure to the benefit of the
parties signatory hereto, and their respective distributees, successors and
assigns.

16.7 Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall for all purposes constitute one agreement which is binding
on all of the parties hereto.

16.8 Confidentiality. The terms and provisions of this Agreement shall be kept
confidential and shall not, without the other Members’ prior written consent
(which shall not be unreasonably withheld), be disclosed in writing by a Member
or by a Member’s agents, managers, members, representatives and employees to any
person or entity, except to the extent required by law, and to existing or
prospective construction lenders, contractors, tenants, or investors in a
Member, accountants of a Member or CNL therein and other advisors to a Member,
in each case to the extent each of such parties is bound by a confidentiality
obligation substantially on the terms set forth in this Section, and except to
the extent reasonably necessary to accomplish the transaction contemplated
hereby. No publicity, media communications, press releases or other public
announcements concerning the terms and provisions of this Agreement or the
transactions contemplated hereby shall be issued or made by any Member without
the prior written consent of the other Members, which consent shall not be
unreasonably withheld, conditioned or delayed, except if a Member is required to
make a public announcement or disclosure under applicable law, in which case
such Member shall provide the other Members with the form and content of such
disclosure within a reasonable amount of time prior to its release (to the
extent possible under the circumstances) and shall consider in good faith all
comments provided by the other Members; provided, however, that CNL shall not be
required to provide copies of disclosures to be made or proposed to be made by
CNL in periodic reports and other filings required by the applicable federal
securities laws.

 

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16.9 Amendments. This Agreement may not be amended, altered or modified except
by a written instrument signed by all parties, provided, however, that Crescent
and CNL shall agree to any amendments of this Agreement reasonably required by
CNL in order to comply with ERISA or related provisions of the Code which do not
adversely affect the economic or voting interests of the other Members hereunder
and any amendments reasonably required by CNL in order to comply with REIT
requirements; provided, that CNL will pay for all reasonable costs and expenses
(including reasonable attorneys’ fees) of the other Members related to any such
amendments.

16.10 Exhibits. All exhibits and schedules annexed hereto are expressly made a
part of this Agreement, as fully as though completely set forth herein, and all
references to this Agreement herein or in any of such exhibits or schedules
shall be deemed to refer to and include all such exhibits or schedules.

16.11 Severability. Each provision hereof is intended to be severable and the
invalidity or illegality of any portion of this Agreement shall not affect the
validity or legality of the remainder.

16.12 Qualification in Other States. In the event the business of the Company is
carried on or conducted in any locations in addition to the state in which the
Property is located, then the Members agree that the Company shall exist under
the laws of each state or district in which business is actually conducted by
the Company, and they severally agree to execute such other and further
documents as may be required or requested in order that the Members legally may
qualify the Company in such states and districts to the extent possible. A
Company office or principal place of business in any state or district may be
designated from time to time by Member Consent.

16.13 Forum. Any action by one or more Members against the Company or by the
Company against one or more Members which arises under or in any way relates to
this Agreement, actions taken or failed to be taken or determinations made or
failed to be made by the Members or relating to the Company including
transactions permitted hereunder or otherwise related in any way to the Company,
may be brought only in the state courts of the State of Florida or the United
States District Court for the Middle District of Florida. Each Member hereby
consents to the jurisdiction of such courts to decide any and all such actions
and to such venue.

 

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16.14 No Brokerage. The Members represent and warrant to each other that they
have not dealt with any brokers, investment bankers, consultants or other third
parties in the negotiation of this Agreement and the transactions contemplated
herein. Each Member further agrees to indemnify, defend and hold the other
harmless from and against any liability, claim, damage, cost or expense
(including reasonable attorney’s fees) arising out of or in connection with the
claims for commissions or any other fees due in connection with this Agreement
and the transactions contemplated herein arising from the indemnifying Member’s
actions.

16.15 Tax Compliance. Crescent represents and warrants that (i) Crescent is
wholly-owned by Crescent Multifamily Holdings, LLC, a Delaware limited liability
company, the only manager and voting member is Crescent Multifamily Holdings,
LLC; (ii) Crescent is a disregarded entity for Federal income tax purposes, and
(iii) Crescent’s U.S. employer identification number is 46-4228532. Except with
respect to permitted transfers under Section 10.1, Crescent covenants that it
will not take or allow any action (or fail to take any action, as the case may
be) that would cause the representations in this Section 16.15 to fail to be
true throughout the term of this Agreement.

[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]

 

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

 

CRESCENT:  

CRESCENT GATEWAY VENTURE, LLC,

a Georgia limited liability company

  By:  

Crescent Communities, LLC,

a Georgia limited liability company

its Manager

    By:  

/S/ Brian J. Natwick

      Brian J. Natwick,       President-Multifamily Division

CNL:

       

GGT CRESCENT GATEWAY HOLDINGS, LLC,

a Delaware limited liability company

  By:  

/S/ R.Q. Mills

  Name:   Rosemary Q. Mills   Title:   CFO, EVP, Treasurer

 

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EXHIBIT A

MEMBERSHIP INTERESTS

 

Names and Interests

of Members

   Percentage
Interest     Maximum Initial Capital
Contributions  

GGT Crescent Gateway Holdings, LLC

     60 %    $ 5,791,701   

Crescent Gateway Venture, LLC

     40 %    $ 3,861,134   

TOTALS:

     100 %    $ 9,652,835   

 

* The Members agree that to the extent that the amount of the final Project
Budget is reduced from that of the Project’s “concept budget” due to savings in
the Construction Contract’s guaranteed maximum price, the aggregate initial
capital contribution of each of CNL and Crescent will be adjusted downward on a
pro-rata basis to reflect such reduction.

 

A-1

--------------------------------------------------------------------------------

EXHIBIT B

DESCRIPTION OF LAND

[Omitted as not necessary to an understanding of the Agreement]

 

B-1

--------------------------------------------------------------------------------

EXHIBIT C

DEVELOPMENT AGREEMENT

[Omitted as not necessary to an understanding of the Agreement]

 

C-1

--------------------------------------------------------------------------------

EXHIBIT D

INSURANCE CERTIFICATES

[Omitted as not necessary to an understanding of the Agreement]

 

D-1

--------------------------------------------------------------------------------

EXHIBIT E

MEMBER ERISA CERTIFICATE

[Omitted as not necessary to an understanding of the Agreement]

 

E-1

--------------------------------------------------------------------------------

EXHIBIT F

CNL ERISA CERTIFICATE

[Omitted as not necessary to an understanding of the Agreement]

 

F-1

--------------------------------------------------------------------------------

EXHIBIT G

PROJECT BUDGET

[Omitted as not necessary to an understanding of the Agreement]

 

G-1

--------------------------------------------------------------------------------

EXHIBIT H

PRE-DEVELOPMENT COSTS

[Omitted as not necessary to an understanding of the Agreement]

 

H-1