Exhibit 10.3

 

 

 

 

 

 

 

 

LIMITED LIABILITY COMPANY AGREEMENT

OF

GGT PATTERSON PLACE NC VENTURE, LLC

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LIMITED LIABILITY

COMPANY AGREEMENT OF

GGT PATTERSON PLACE NC 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

     10   

2.3

  

Purpose of Company

     10   

2.4

  

Principal and Registered Office

     10   

2.5

  

Further Assurances

     10   

2.6

  

Expenses of Formation and Syndication

     10   

2.7

  

No Individual Authority

     11   

2.8

  

Business Opportunities.

     11   

2.9

  

Neither Responsible for Other’s Commitments

     12   

2.10

  

Affiliates

     12   

2.11

  

Operations in Accordance With the Act: Ownership

     12   

ARTICLE 3. TERM

     12   

3.1

  

Term

     12   

ARTICLE 4. CAPITAL CONTRIBUTIONS OF THE MEMBERS

     13   

4.1

  

Capital Contributions of the Members

     13   

4.2

  

No Other Contributions

     13   

4.3

  

No Interest Payable

     13   

4.4

  

No Withdrawals

     13   

4.5

  

Additional Capital Contributions.

     13   

ARTICLE 5. MEMBER LOANS

     16   

5.1

  

Member Loans

     16   

5.2

  

Payment of Member Loans

     16   

ARTICLE 6. MANAGEMENT OF THE COMPANY

     16   

6.1

  

Management.

     16   

6.2

  

Major Decisions.

     20   

6.3

  

Bank Accounts

     24   

6.4

  

Annual Budgets

     24   

6.5

  

Insurance

     25   

6.6

  

Consultation Regarding the Project

     25   

 

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6.7

 

Termination of Delegation of Authority to Bainbridge as Operating Member.

     26   

6.8

 

Development

     28   

6.9

 

Property Management Agreement

     29   

6.10

 

Contracts with Affiliates

     29   

6.11

 

Indemnification of Managing Member and Operating Member

     29   

6.12

 

Leasing Guidelines

     29   

6.13

 

General Contractor

     30   

6.14

 

Danziger Property Option

     30   

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

     30   

7.1

 

Books; Statements

     30   

7.2

 

Where Maintained

     32   

7.3

 

Audits

     32   

7.4

 

Objections to Statements

     32   

7.5

 

Tax Returns

     32   

7.6

 

Tax Matters Partner

     32   

7.7

 

Tax Policy

     33   

7.8

 

Section 754 Election

     33   

7.9

 

Capital Accounts

     33   

ARTICLE 8. ALLOCATIONS

     33   

8.1

 

Allocation of Net Income and Net Loss

     33   

8.2

 

Loss Limitation

     34   

8.3

 

Minimum Gain Chargebacks and Nonrecourse Deductions

     34   

8.4

 

Qualified Income Offset

     35   

8.5

 

Curative Allocations

     35   

8.6

 

Code Section 704(b) Allocations

     35   

8.7

 

Other Allocation Provisions

     35   

8.8

 

Distributions of Nonrecourse Liability Proceeds

     35   

8.9

 

Information as to Allocation of Debt

     36   

8.10

 

Taxable Year; Fiscal Year

     36   

ARTICLE 9. DISTRIBUTIONS AND ALLOCATIONS

     36   

9.1

 

Percentage Interests in Company

     36   

9.2

 

Certain Definitions

     36   

9.3

 

Operating Cash Flow Distributions

     38   

9.4

 

Extraordinary Cash Flow Distributions

     38   

9.5

 

Loss of Promoted Interest

     38   

9.6

 

Tax Distributions

     39   

ARTICLE 10. ASSIGNMENT AND OFFER TO PURCHASE

     39   

10.1

 

Transfers

     39   

10.2

 

Permitted Transfers

     39   

10.3

 

Assumption by Assignee

     40   

10.4

 

Amendment of Certificate of Formation

     40   

10.5

 

Other Assignments Void.

     41   

 

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10.6

 

Rights of a Transferee

     41   

10.7

 

Buy-Sell.

     41   

10.8

 

Provisions Generally Applicable to Sales

     43   

10.9

 

[Intentionally Omitted]

     46   

10.10

 

Right to Market the Property.

     46   

ARTICLE 11. DISSOLUTION OR BANKRUPTCY OF A MEMBER

     48   

11.1

 

Dissolution or Merger

     48   

11.2

 

Bankruptcy, etc

     48   

11.3

 

Reconstitution

     49   

ARTICLE 12. CROSS-DEFAULT

     49   

ARTICLE 13. DISSOLUTION

     49   

13.1

 

Winding Up by Members

     49   

13.2

 

Winding Up by Liquidating Member.

     49   

13.3

 

Offset for Damages

     51   

13.4

 

Distributions of Operating Cash Flow

     51   

13.5

 

Distributions of Proceeds of Liquidation

     51   

13.6

 

Orderly Liquidation

     51   

13.7

 

Financial Statements

     52   

13.8

 

Restoration of Deficit Capital Accounts

     52   

ARTICLE 14. MEMBERS

     52   

14.1

 

Liability

     52   

ARTICLE 15. NOTICES

     52   

15.1

 

In Writing; Address

     52   

15.2

 

Copies

     53   

ARTICLE 16. MISCELLANEOUS

     53   

16.1

 

Additional Documents and Acts

     53   

16.2

 

Interpretation

     53   

16.3

 

Entire Agreement

     54   

16.4

 

References to this Agreement

     54   

16.5

 

Headings

     54   

16.6

 

Binding Effect

     54   

16.7

 

Counterparts

     54   

16.8

 

Confidentiality

     54   

16.9

 

Amendments

     54   

16.10

 

Exhibits

     55   

16.11

 

Severability

     55   

16.12

 

Qualification in Other States

     55   

16.13

 

Forum

     55   

16.14

 

No Brokerage

     55   

16.15

 

Dispute Resolution.

     55   

16.16

 

Partition

     57   

 

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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 [Intentionally Omitted]

 

Exhibit F [Intentionally Omitted]

 

Exhibit G Project Budget

 

Exhibit H Pre-Development Costs

 

Exhibit I Property Management Agreement

 

Exhibit J Construction Contract

 

Exhibit K Danziger Property

 

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LIMITED LIABILITY COMPANY AGREEMENT

OF

GGT PATTERSON PLACE NC VENTURE, LLC

This Limited Liability Company Agreement of GGT PATTERSON PLACE NC VENTURE, LLC
(this “Agreement”) is entered into and shall be effective as of the 25th day of
June, 2013, by and between BAINBRIDGE PATTERSON PLACE, LLC, a Florida limited
liability company (“Bainbridge”), and GGT PATTERSON PLACE HOLDINGS, LLC, a
Delaware limited liability company (“CNL”), pursuant to the provisions of the
Delaware Limited Liability Company Act (the “Act”). Bainbridge 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 Patterson Place NC Venture, LLC (the “Company”) was formed on
May 31, 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 Purchase and Sale Agreement
with an effective date of March 5, 2012, by and between Bainbridge Communities
Acquisition I, LLC, a Florida limited liability company, as purchaser
(“Purchaser”), and Boulevard Forest & Trees LLC, a North Carolina limited
liability company, as seller (“Property Seller”) (as the same may have been
amended, modified or supplemented, the “Land Contract”), whereby Purchaser has
agreed to purchase from Property Seller, and Property Seller has agreed to sell
to Purchaser, inter alia, the real property located off of Southwest Durham
Drive in Durham, Durham County, North Carolina (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 322 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.

WHEREAS, contemporaneously with the execution of this Agreement, Purchaser has
assigned its interest under the Land Contract with regard to the acquisition of
the Property under the Land Contract to the Company.

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:

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 the Initial Capital Contributions funded under Section 4.1
and the Additional Initial Capital funded under Section 4.5(a), but including
any amounts funded under Section 4.5(b). “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.

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

Allowable Development Costs.  As defined in Development Agreement.

 

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

Assumed Tax Liability. As described in Section 9.6.

Bainbridge.  As described in the first paragraph above.

Bainbridge Principals. Means, collectively, Richard Schechter and Thomas J.
Keady.

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

Bainbridge’s Maximum Initial Capital.  As described in Section 4.1.

Budgeted Costs.  As described in Section 4.5(a).

Business Day.  Any weekday that is not an official holiday in the State of
Florida.

Buy-Sell Price.  As described in Section 10.8(a).

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.

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 Decision.  As defined in Section 6.2(b).

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

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

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

Code.  The Internal Revenue Code of 1986, as amended from time to time, any
successor thereto and, to the extent applicable, regulations promulgated
thereunder.

Company.    GGT Patterson Place NC Venture, LLC, a Delaware limited liability
company.

 

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Company Election Date.  As defined in Section 6.14.

Company Financing.  Financing that is provided to the Company.

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

Competing Property Area.  The geographic area which is the straight-line radius
of three (3) miles from the center of the Property.

Completion.  As defined in the Development Agreement.

Completion Date.  As defined in the Development Agreement.

Construction Contract.  As defined in the Development Agreement.

Construction Cost Overruns.  As defined in the Development Agreement.

Construction Loan.    As defined in the Development Agreement, which
Construction Loan, and the terms thereof, are hereby approved by the Members.

Danziger Property.  As defined in Section 6.14.

Developer.  Bainbridge Development Company LLC, a Florida limited liability
company, acting in such capacity pursuant to Section 6.8 and the Development
Agreement, or any successor thereto selected by Member Consent, or to the extent
a Member has the unilateral right to select such successor pursuant to this
Agreement, as selected by such Member.

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.

Disposition Election.  As defined in Section 10.10(a).

Economic Capital Account.    With respect to any Member, such Member’s Capital
Account as of the date of determination, after crediting to such Capital Account
any amounts that the Member is 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 and all unpaid Member Loans made by such Member.

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

 

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Excess Allocation.  As described in Section 9.6.

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.

GC Fee.  As defined in Section 6.13.

General Contractor.    Bainbridge Mid-Atlantic Construction, LLC, a Florida
limited liability company, acting in such capacity pursuant to the Construction
Contract.

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 a cash flow stream consisting
of all distributions by the Company to such Member, makes the present value of
such distributions equal the present value (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 set forth in the
Property Management Agreement and any amendments thereto made in accordance with
Section 6.12 and the Property Management Agreement.

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).

 

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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).

Managing Member.  CNL.

Market Sale Notice.  As defined in Section 10.10(a).

Market Sale Offering Member.  As defined in Section 10.10(a).

Market Sale Recipient Member.  As defined in Section 10.10(a).

Market Sale Right.  As defined in Section 10.10(a).

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

Member Loan.  Any loan made by any Member to the Company pursuant to Article V.

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

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. The initial Members are CNL and Bainbridge.

Member Sale Election.  As defined in Section 10.10(a).

Member Sale Closing Date.  As defined in Section 10.10(c).

Member Sale Purchaser.  As defined in Section 10.10(c).

Member Sale Seller.  As defined in Section 10.10(c).

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.

 

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Minor Field Changes.  As defined in the Development Agreement.

Necessary Expenses.  As described in Section 6.4.

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.    Bainbridge, subject to CNL’s right to terminate
Bainbridge’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).

Option.  As defined in Section 6.14.

Option Agreement.  As defined in Section 6.14.

Option Election.  As defined in Section 6.14.

Option Payments.  As defined in Section 6.14.

Option Purchase Price.  As defined in Section 6.14.

Out-of-Pocket Costs.    Any unbudgeted reasonable out-of-pocket 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.

Outside Purchaser.  As defined in Section 10.10(a).

 

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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.

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

Pre-Development Costs.    Those certain costs and expenses incurred by
Bainbridge 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 Bainbridge 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 Management Agreement.  As defined in Section 6.9.

Property Manager.    Bainbridge Management Group, LLC, a Florida limited
liability company, 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).

Recipient Member’s Market Sale Deposit.  As defined in Section 10.10(a).

Requirements.  (a) All laws, ordinances, rules, regulations, codes,
requirements, permits, licenses and approvals of, in each case, all state,
federal and local governmental authorities, (b) the obligations and requirements
of the Company under all restrictions, easements and other arrangements of
record affecting all or any portion of the Property and (c) all obligations and
requirements of the Company under the Construction Loan and other Company
Financings.

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

 

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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 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
(after the payment of all actual Company indebtedness, and any other liabilities
related to the Company’s assets, limited, in the case of nonrecourse
liabilities, to the collateral securing or otherwise available to satisfy such
liabilities).

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).

Unbudgeted Costs.  As described in Section 4.5(a).

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

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,”.

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.

 

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2.2      Name of Company.  The name of the Company will be “GGT Patterson Place
NC Venture, LLC”, and the Company’s business will be conducted under the name
“REALM Patterson Place”. The Managing Member may change the name of the Company
at any time, and may change the name under which the Company’s business is
conducted with Member Consent, provided, that Bainbridge shall have the right to
approve the use of any name that includes the word “Bainbridge” or any variation
thereof, and provided any required consents of lenders to the Company have been
obtained.

2.3      Purpose of Company.  The purpose of the Company is to directly or
indirectly carry on the business of acquiring, owning, developing, 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. Subject to the
provisions of this Agreement, 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 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.

 

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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
(a) 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 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.

(b)      Bainbridge covenants and agrees that for so long as it is a Member, in
the event it proposes to initiate as principal developer the new construction of
any apartment complex located within the Competing Property Area (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 pursuant
to, and in accordance with, the terms of this Section 2.8(b). If an Opportunity
arises, then Bainbridge shall first submit such Opportunity to CNL for
investment consideration prior to submitting such Opportunity to a third party
for investment consideration (any such submission to be accompanied by such
financial and other information regarding such Opportunity reasonably available
to Bainbridge and reasonably necessary in order for CNL to consider investing in
such Opportunity. Within fifteen (15) Business Days after receipt of any such
notice (the “ROFO Investment Response Period”), CNL (on behalf of the CNL
Entities) shall deliver a response (the “ROFO Investment Response Notice”)
stating either (x) that the CNL Entities elect to waive their right to invest in
any such Opportunity (the “Waiver Election”) or (y) that one or more of the CNL
Entities desire to co-invest with Bainbridge in such Opportunity upon terms and
conditions substantially similar to the terms and conditions contained in this
Agreement with respect to the Property, to the extent such terms and conditions
may be applicable to the Opportunity (the “Acceptance Election”), and the
identity of such one or more CNL Entities which desires to co-invest as
aforesaid. If CNL fails to deliver a ROFO Investment Response Notice within such
fifteen (15) Business Days period, CNL shall be deemed to have made the Waiver
Election. If CNL makes, or is deemed to have made, the Waiver Election,
Bainbridge shall thereafter have the right to pursue such Opportunity for its
own account without the participation of the CNL Entities and, at Bainbridge’s
option, with any other third party participation on such terms as it shall
elect. If CNL delivers a ROFO Investment Response Notice exercising the
Acceptance Election, Bainbridge and the CNL

 

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Entities identified in such ROFO Investment Response Notice shall use
commercially reasonable efforts to promptly execute and deliver a definitive
joint venture agreement governing the terms of such investment in such
Opportunity, which terms shall be substantially similar to those terms and
conditions contained in this Agreement with respect to the Property, to the
extent such terms and conditions may be applicable to the Opportunity. If such
definitive joint venture agreement is not executed and delivered within thirty
(30) days of receipt by Bainbridge of notice of the exercise by CNL of the
Acceptance Election, then CNL shall automatically be deemed to have made the
Waiver Election and Bainbridge may proceed as if the Waiver Election had
initially been made by CNL.

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 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.

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
Bainbridge hereunder may be performed by officers or employees of one or more
Affiliates of Bainbridge, provided that all actions taken by such persons on
behalf of Bainbridge in connection with this Agreement shall be binding upon
Bainbridge.

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, 2061;

(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;

(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.

 

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ARTICLE 4. CAPITAL CONTRIBUTIONS OF THE MEMBERS

4.1      Capital Contributions of the Members.  Upon the execution of this
Agreement, CNL and Bainbridge 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 Bainbridge 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 Bainbridge shall constitute a
portion of “Bainbridge’s Initial Capital”. Bainbridge’s Initial Capital and
CNL’s Initial Capital shall collectively be called the “Initial Capital
Contributions.” Such Initial Capital 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 contributions, including
contributions of Additional Initial Capital as required pursuant to
Section 4.5(a). In no event shall the aggregate amount of CNL’s Initial Capital
exceed Ten Million Eight Hundred Thirty-Six Thousand Nine Hundred Three Dollars
($10,836,903) without the express written approval of CNL (the “CNL Maximum
Initial Capital”), and in no event shall Bainbridge’s Initial Capital exceed One
Million Two Hundred Four Thousand One Hundred Dollars ($1,204,100) without the
express written approval of Bainbridge (the “Bainbridge Maximum Initial
Capital”). Any Construction Cost Overruns funded by Developer shall not be
treated as a contribution by Developer or Bainbridge to the Company or in any
manner construed so as to increase Bainbridge’s Capital Account or Bainbridge’s
Initial Capital under this Agreement, shall not be treated as Additional Capital
of Bainbridge under this Agreement, shall not be treated as a Member Loan by
Bainbridge to the Company, and, except to the extent set forth in the
Development Agreement, shall not entitle Developer or Bainbridge 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 or
loan to the Company nor to otherwise 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.

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 (i) 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 (“Budgeted Costs”) or (ii) costs
of development or construction of the Project in excess of the Project Budget
which do not constitute Construction Cost Overruns

 

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(“Unbudgeted Costs” and, together with Budgeted Costs, 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 Bainbridge pursuant to this Section 4.5(a) shall constitute a
portion of Bainbridge’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”), Bainbridge and CNL shall contribute to the Company, in proportion to
their Percentage Interests, as Additional Initial Capital, the amount so
required, up to the Bainbridge Maximum Initial Capital, in the case of
Bainbridge, and up to the CNL Maximum Initial Capital, in the case of CNL.

(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 Bainbridge
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 Bainbridge pursuant to
this Section 4.5(b) shall constitute a portion of Bainbridge’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 Bainbridge shall contribute to the Company, in proportion to their
respective Percentage Interests, as Additional Capital, the amount so required.
Any amounts funded pursuant this Section 4.5(b) shall constitute Additional
Capital.

(c)      Any and all funds contributed by the Members pursuant to Section 4.1 or
this Section 4.5 shall be credited to their Capital Accounts in the Company and
shall constitute Additional Capital (in the case of the contribution of
Additional Capital) or Additional Initial Capital (in the case of the
contribution of Additional Initial Capital), as the case may be, for all
purposes of this Agreement.

(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 to the extent applicable, 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 amount of the Capital Contribution(s),
if

 

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any, made by the Non-Failing Member pursuant to Section 4.5(a) or 4.5(b) in
response to the applicable Additional Funding Notice or Additional Initial
Capital Funding Notice; (ii) the Non-Failing Member may, but need not, make an
Additional Capital Contribution to the Company not in excess of the amount that
such Failing Member failed to contribute pursuant to Section 4.5(a) or 4.5(b) in
response to the applicable Additional Funding Notice or Additional Initial
Capital Funding Notice, 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 that is funded by the Non-Failing Member in accordance
with the terms of this Section 4.5 in response to the applicable Additional
Funding Notice or Additional Initial Capital Funding Notice (which adjustment
shall be treated as Additional Capital contributed by such Non-Failing Member
and shall cause a corresponding adjustment in each Member’s Percentage
Interest), as applicable and (z) subject to the provisions of Section 6.7(c) in
which event this subclause (z) shall not apply, in the event that Bainbridge has
been removed as the Operating Member without Cause and elects not to make any
additional Capital Contributions as provided in Section 6.7(c), such Failing
Member’s distribution percentages under Sections 9.4(d), 9.4(e) and 9.4(f) shall
be reduced by one percent (1%) for every $10,000 of Additional Capital or
Additional Initial Capital that such Failing Member failed to contribute to the
Company pursuant to this Section 4.5 in response to the applicable Additional
Funding Notice or Additional Initial Capital Funding Notice to the extent
contributed by the Non-Failing Member and in turn, the Non-Failing Member’s
distribution percentages under Sections 9.4(d), 9.4(e) and 9.4(f), 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) solely with respect to a
failure to contribute under Section 4.5(a) by the Failing Member and not with
respect to any failure to contribute under Section 4.5(b), 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 or
Additional Initial Capital, as applicable, to the Company made by such Failing
Member, an amount equal to the amount that such Failing Member failed to
contribute pursuant to Section 4.5(a) or 4.5(b) in response to the applicable
Additional Funding Notice or Additional Initial Capital Funding Notice, 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, provided,
however, in no event shall the rate of interest exceed the highest rate
permitted by law for the obligor which, if exceeded, could subject the
Non-Failing Member who made such Failing Member Loan to penalties or forfeiture
of all or any part of the interest or principal associated with such Failing
Member Loan. 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

 

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prepayable at any time or from time to time and, if not sooner paid in 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.

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
a Member does not lend the full amount of its proportionate share of the amount
proposed to be borrowed from the Members, as set forth 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.

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.

 

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(b)      Subject to (A) approval by Member Consent of Major Decisions under
Section 6.2(a) and other matters requiring Member Consent hereunder,
(B) approval by CNL Consent of CNL Decisions under Section 6.2(b) and the other
restrictions on authority and express approval rights of CNL otherwise provided
in this Agreement and (C) the provisions of Section 6.1(c), 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 material agreements affecting the
Property or the Company, all applicable Requirements and any court orders.
Subject to Section 6.1(c), Section 6.2 and other provisions of this Agreement
requiring Member Consent or CNL Consent, as applicable, 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)    subject to the provisions of Section 6.2(b)(iv), entering into contracts
and agreements necessary in order to conduct the business and affairs of the
Company and operate the Property as set forth in this Agreement;

(v)     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;

 

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(vi)       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;

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

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

(ix)       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;

(x)        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;

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

(xii)      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;

(xiii)     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;

(xiv)     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;

(xv)      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 Property Management Agreement;

(xvi)     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 rent payments
and the making of debt service payments);

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

 

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(xviii)  implementation of Major Decisions and CNL Decisions as approved and on
the terms set forth by Member Consent with respect to Major Decisions and CNL
Consent with respect to CNL Decisions;

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

(xx)     maintaining a system of internal controls necessary for CNL
Sarbanes-Oxley certifications, including delivering or causing to be delivered a
SAS 70 Type II report for the Property as requested by CNL, or such other
documentation and testing of internal controls as is deemed necessary by CNL;
and

(xxi)    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 Bainbridge as Operating Member and,
subject to the right of the Managing Member to terminate such delegation in
accordance with Section 6.7, delegates to Bainbridge the foregoing
responsibilities, duties and authority of the Managing Member described in
Section 6.1(b), including those described in subparagraphs (ii) through (xx) of
Section 6.1(b), but specifically excluding those described in subparagraph (i)
of Section 6.1(b), with the intent that until termination of such delegation in
accordance with Section 6.7, Bainbridge shall have full and exclusive authority,
power, responsibility and discretion to operate the Company in accordance with
such delegated responsibilities, duties and authority. Bainbridge hereby accepts
such delegation by CNL as Managing Member and agrees that it shall perform as
Operating Member the responsibilities and obligations and shall exercise the
authority, power and discretion delegated to it 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 Bainbridge
shall have no responsibilities or obligations to perform the duties of Managing
Member of the Company except to the extent set forth in this Section 6.1(c).

Notwithstanding anything to the contrary contained herein, in no event shall any
action taken by CNL in connection with the activities described in
subparagraph 6.1(b)(i) result in an obligation on the part of Bainbridge to fund
Additional Initial Capital or Additional Capital or make a Member Loan or
increase the exposure or liability, whether contingent or not, of Bainbridge or
any of its Affiliates, under any guaranty given by Bainbridge or any of its
Affiliates in connection with the Construction Loan or any other Company
Financing. In addition, any expenses incurred by the Company which are
attributable to the preservation of the REIT status of CNL or which are
otherwise necessary or desirable to CNL due to its REIT status, including,
without limitation, in connection with the activities described in subparagraphs
6.1(b)(i) and 6.1(b)(x), shall be paid for entirely by CNL to the extent such
expenses exceed the expenses which the Company would have otherwise incurred if
CNL was not a REIT.

 

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6.2      Major Decisions.

(a)      Notwithstanding anything to the contrary set forth herein, without
prior written Member Consent in each instance (each, a “Major Decision”), none
of the Company, the Managing Member or the Operating Member shall:

(i)       adopt, modify or supplement the Plans and Specifications, except to
the extent permitted without the Company’s consent under the Development
Agreement including, without limitation, Section 2.15 of 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;

(v)      modify the Project Budget, provided it shall not be a Major Decision to
(i) reallocate amounts to the extent permitted under the Development Agreement
and under the loan documents relating to the Construction Loan without having to
obtain the lender’s consent. Notwithstanding the foregoing, it shall be a Major
Decision to reallocate any savings in the Project Budget line item for CNL’s or
Bainbridge’s legal and third party costs and expenses, for marketing and initial
leasing 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)     terminate the Property Management Agreement or replace the Property
Manager or amend, modify, supplement, assign or grant any material consents or
waivers under the Property Management Agreement or any other property management
agreement for the Property; provided, however, that if the Property Manager is
Bainbridge or an Affiliate of Bainbridge and is in default beyond any applicable
cure period under the terms of the Property Management Agreement, only the
consent of CNL shall be required to terminate the Property Management Agreement
or replace the Property Manager or otherwise amend, modify, supplement or grant
any material consents or waivers under the terms of the Property Management
Agreement;

 

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(x)      cause the Company to incur any Company Financing except for the
Construction Loan or modify, supplement or refinance the Construction Loan or
any other 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 (whether at its stated maturity, upon acceleration or
otherwise) of the Construction Loan or any other then-existing Company Financing
that has been guaranteed in whole or in part by Bainbridge or any of the
Bainbridge Principals, 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, so long as the Operating Member is
Bainbridge, the Operating Member shall be authorized, without Member Consent, to
obtain 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
favorable to the Company. It is understood that non-recourse financing which
would neither adversely affect the Company’s ability to dispose of the Property
nor require the Company to pay a prepayment premium shall be deemed most
favorable, and financing which would neither adversely affect the Company’s
ability to dispose of the Property nor require the Company to pay a prepayment
premium and which requires guaranties solely from the Operating Member and/or
any of the principals of the Operating Member shall also be deemed favorable, it
being agreed by the Members that the foregoing shall not be the only terms which
constitute financing that is favorable to the Company;

(xi)     confess a judgment against the Company in excess of $50,000, file or
fail to contest any bankruptcy, seek or determine not to contest 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;

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

(xv)    terminate the Development Agreement or replace the Developer, modify the
Development Fee or otherwise amend, modify, supplement, assign or grant any
material consents or waivers under the Development Agreement or any other
development agreement for the Property; provided, however, that if the Developer
is Bainbridge or an Affiliate of Bainbridge and is in default beyond any
applicable cure period under the terms of the Development Agreement, only the
consent of CNL shall be required to terminate the Development Agreement, replace
or permit the replacement of the Developer or otherwise amend, modify,
supplement or grant any material consents or waivers under the terms of the
Development Agreement;

 

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(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 the Members may effectuate any
direct or indirect sale, assignment, gift, pledge, hypothecation, encumbrance or
other transfer of its interest in the Company to the extent permitted in
Section 10.1 or Section 10.2;

(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)      fail to carry insurance required by this Agreement, the Construction
Loan or any other Company Financing, or modify any such insurance in any
material and adverse respect;

(xx)       threaten in writing, 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;

(xxi)      remove or appoint accountants in connection with any Company
business;

(xxii)     determine any actions to be taken to cure any material default under,
or material violation of, any Requirement or material agreement to which the
Company is party, other than a default under this Agreement;

(xxiii)    designate a bank other than First-Citizens Bank & Trust Company, a
North Carolina banking corporation, for the deposit of funds of the Company;

(xxiv)    change the name under which the Company conducts its business; or

(xxv)     determine whether the Company shall exercise the Option.

(b)      Notwithstanding anything to the contrary contained herein, without
prior CNL Consent in each instance (each, a “CNL Decision”), none of the
Company, the Managing Member or the Operating Member shall:

(i)          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 an Operating Budget or a Capital Budget;

 

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(ii)      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 in the aggregate, 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,
provided that the foregoing limitations shall not be applicable if the same are
required to be exceeded in order to pay Necessary Expenses;

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

(iv)     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) and 6.2(b), 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 Durham, North Carolina market.

CNL will use good faith efforts to consult with Bainbridge on matters
constituting CNL Decisions. Notwithstanding anything to the contrary contained
herein, in no event shall any CNL Decision, if made without Bainbridge Consent,
or other action that is taken without Bainbridge Consent, (A) result in an
obligation on the part of Bainbridge to fund Additional Initial Capital or
Additional Capital or make a Member Loan or (B) increase the exposure or
liability, whether contingent or not, of Bainbridge or any of its Affiliates,
under any guaranty given by Bainbridge of any of its Affiliates in connection
with the Construction Loan or any other Company Financing.

(c)      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 or CNL 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). Any Member that does not respond within the applicable time
period required to respond to a proposed Major Decision or CNL Decision by
granting or withholding its consent to such proposed Major Decision, or, with
respect to CNL, such proposed CNL Decision, described in such advance notice
shall be deemed to not have given its consent to such proposed Major Decision or
CNL Decision. Member Consent or CNL Consent, as applicable, shall be made 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 or CNL
Consent, as applicable, 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.

 

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(d)      Notwithstanding anything to the contrary set forth herein, the
Operating Member shall have the authority to cause the following Major Decisions
to occur and be implemented without the consent of any Member, provided such
authority shall be limited as follows:

(i)       With respect to Section 6.2(a)(xix), 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.

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

(iii)     With respect to Section 6.2(a)(xxiii), 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 (it being understood that First-Citizens Bank & Trust Company is
hereby deemed designated and approved by Member Consent) 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 Bainbridge 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 or otherwise permitted under this Agreement.

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 CNL’s review and approval, 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 CNL. The Operating Member shall consult with CNL with respect to
such proposed operating budget and proposed capital budget. Once approved by
CNL, the applicable final proposed operating budget shall become the “Operating

 

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Budget” hereunder, and, once approved by CNL, 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 CNL’s review and
approval, a proposed operating budget and a proposed capital budget for the
upcoming calendar year. The Operating Member shall consult with CNL with respect
to such proposed operating budget and proposed capital budget with the goal that
CNL agree on each such proposed budget on or before December 1st of each year.
If approved by CNL, the final proposed operating budget for such subsequent year
shall become the then operative “Operating Budget” hereunder. If approved by
CNL, 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 by CNL, the Operating Member shall be authorized to operate the Company
in accordance with the approved portions of such Operating Budget, if any, and
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 by CNL, 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
(if any), fulfillment of obligations to tenants under Permitted Leases, amounts
required to be paid in accordance with contracts binding on the Company which
have been entered into in accordance with this Agreement and utilities
(collectively, “Necessary Expenses”), regardless of the amounts permitted
therefore in the prior Fiscal Year’s Operating Budget. The Operating Member
shall prepare for CNL’s review and approval any proposed modifications to any
approved Operating Budget or approved Capital Budget and shall consult with CNL
with respect to any such modifications; provided, however, such review and
approval rights of CNL shall not otherwise limit the ability of the Operating
Member to make expenditures for Necessary Expenses or otherwise in excess of an
operative, approved Operating Budget or Capital Budget to the extent otherwise
permitted under this Agreement.

6.5      Insurance.    Certificates for all insurance maintained by the Company
as of the date hereof are 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 any 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 or any loan documents relating to the
Construction Loan or other Company Financing.

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,

 

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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 agents or Affiliates, 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 and on reasonable notice subject to the rights of any tenants of
the Project, (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 performance, significant proposals
and other material aspects of the Company (including the Project) to the extent
required under this Agreement, (iii) to, at its own cost and expense, examine
the books and records of the Company (including those relating to the Project)
at reasonable times and upon reasonable advance notice to the Operating Member
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. If, at any time,
Bainbridge is not acting as the Operating Member under this Agreement,
Bainbridge shall have the same rights of consultation as those given to CNL
pursuant to this Section 6.6.

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

(a)      CNL shall have the right, without the concurrence of Bainbridge, to
terminate the delegation of authority of, and remove Bainbridge as, Operating
Member at any time with or without Cause, subject to the provisions of this
Section 6.7. In the event of the termination of the delegation of authority of,
and removal of Bainbridge as, Operating Member with or without Cause, there
shall no longer be an Operating Member and CNL as 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, subject to such consent rights of the Members as may be
required pursuant to this Agreement. Solely in the event of termination by CNL
and removal of Bainbridge as Operating Member for Cause, Bainbridge 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 Bainbridge as
Operating Member without Cause shall not affect Bainbridge’s right to approve
any Major Decisions or any other matters requiring Member Consent under this
Agreement.

(b)      For purposes of this Agreement, termination of Bainbridge as Operating
Member for “Cause” shall mean termination due to any one or more of the
following, subject to the notice and cure periods set forth below:

(i)      any material breach or default by Bainbridge in its obligations as
Operating Member as delegated by the Managing Member under this Agreement which
specific material breach or default has occurred more than two (2) times;

 

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

(iii)      in the event of any fraud, gross negligence or willful misconduct by
Bainbridge against CNL or the Company; or

(iv)      if Developer is terminated as developer for the Project due to an
Event of Default under the Development Agreement.

provided (x) with respect to any breach, default, act or event under (i),
(ii) or (iii) above, which breach, default, act or event if the same may be
cured by the payment of money, has not been cured within ten (10) days after
written notice to Bainbridge, 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
Bainbridge (provided, however, that Bainbridge shall have an additional sixty
(60) days to cure such breach, default, act or event if the same is not curable
within the initial thirty (30) day period, so long as Bainbridge 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 sixty (60) day period, and (y) with respect to any breach, default,
act or event under (i), (ii) or (iii) above, if such breach, default, act or
event does not have a material adverse effect on the Company, the Project or CNL
and if Bainbridge has commenced and continues to prosecute to completion with
diligence and continuity the cure thereof within such initial thirty (30) day
period, then Bainbridge shall have as much time as is commercially reasonable
for curing such breach, default, act or event, provided, however, that in no
event shall Bainbridge have greater than one hundred twenty (120) days in the
aggregate from such written notice to so cure). Without limiting the notice and
cure rights set forth above, it is understood and agreed that if any such Cause
events are caused by the fraud, misappropriation or theft by a Bainbridge
employee(s) below the level of senior management without complicity or approval
of senior management, then such fraud, misappropriation or theft shall be
considered cured for purposes of this Section 6.7 and shall not constitute a
Cause event under this Section 6.7 if (A) Bainbridge cures such fraud,
misappropriation or theft within the cure periods provided above after becoming
aware of the same (provided, that, if Bainbridge is diligently pursuing an
insurance claim with respect to such fraud, theft or misappropriation of funds,
then such cure periods shall be extended until the date which is five
(5) Business Days after such claim has been finally rejected) and (B) within the
cure periods set forth above, Bainbridge causes, or commences the process of
causing, the immediate termination (at the sole expense of Bainbridge) of all
Persons engaged in such fraud, theft or misappropriation from all involvement
with the Bainbridge and/or Property. Any removal and termination of the
delegation of authority of Bainbridge as Operating Member for Cause pursuant to
this Section 6.7 shall only be effective if the breach, default, act or event
which constitutes Cause has not been cured within the periods provided above
and, if notice to Bainbridge is required hereinabove, upon delivery of written
notice thereof to Bainbridge. Following removal of Bainbridge as Operating
Member for Cause, Bainbridge shall cease to have any rights to approve or
consent to any matters under this Agreement.

 

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(c)      As a condition to terminating the delegation of authority of, and
removing Bainbridge as, Operating Member without Cause, (i) CNL must cause the
Construction Loan and any other Company Financing for which Bainbridge or any
Affiliate of Bainbridge has given any guaranty or otherwise has any personal
liability to be paid in full and satisfied from its own funds or the funds of
its Affiliate or the funds from a refinancing of such Company Financing and
obtain a full release of Bainbridge and its Affiliates under any guaranty
previously given; and (ii) such removal shall in no form or fashion affect
Bainbridge’s economic interest as a Member of the Company pursuant to this
Agreement except as set forth in this Section 6.7, or the right of Developer to
receive the Development Fee to the extent provided in the Development Agreement
or the right of the General Contractor to receive the GC Fee to the extent
provided in the Construction Contract. Furthermore, in the event of removal of
Bainbridge as Operating Member for Cause, such removal shall (A) be conditioned
on obtaining a release of Bainbridge or any Affiliate of Bainbridge from any
guaranty or other personal liability in connection with the Construction Loan
and any other Company Financing and (B) not in any form or fashion affect
Bainbridge’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 6.7(b) of this Agreement, and then the economic interest of
Bainbridge as a Member of the Company shall be effected by such removal only to
the extent provided in Section 9.5 below. If Bainbridge is removed as Operating
Member with or without Cause, then Bainbridge may elect under Article 4 or
Article 5 not to fund any capital to the Company (including any Additional
Initial Capital) or make any loans to the Company, or to fund any additional
amounts under this Agreement. If (i) Bainbridge elects not to fund a capital
contribution requested under the provisions of Section 4.5 following removal of
Bainbridge as Operating Member without Cause, then the adjustments provided in
Section 4.5 (d)(ii) to the distribution percentages set forth in Sections
9.4(d), 9.4(e) and 9.4(f), respectively, of Bainbridge and of CNL, as the
Failing Member and the Non-Failing Member, respectively shall not apply and the
distribution percentages of Bainbridge and CNL under Sections 9.4(d), 9.4(e) and
9.4(f), respectively, shall continue to apply as set forth therein and (ii) if
Bainbridge elects not to fund a capital contribution as requested under the
provisions of Section 4.5 following removal of Bainbridge as Operating Member
for Cause, then the provisions of Section 4.5(d) shall apply. Additionally if
Bainbridge is removed as Operating Member with or without Cause, Bainbridge
shall be relieved and shall no longer be obligated to deliver any guaranties
with respect to any Company Financing.

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. On the date
hereof, 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 set forth in the Development
Agreement. The Developer, or a creditworthy entity acceptable to the lender
pursuant to the Construction Loan, shall provide any completion guaranty,
environmental indemnity and/or non-recourse carve-out guaranty (but no other
guaranties or indemnities) required in connection with the Construction Loan by
the lender pursuant to the Construction Loan and CNL shall not be obligated to
provide any such guaranties; provided, however, that CNL hereby agrees to
indemnify, defend and hold harmless Developer or such Affiliate of Bainbridge
which provides any of the aforementioned guaranties to the lender on the
Construction Loan from and against any and all loss, cost, damage, liability ,
cause of action

 

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and/or expense (including, without limitation, court costs and reasonable
attorneys’ fees and disbursements) suffered or incurred by Developer or such
Affiliate under such guaranties to the extent caused by the willful or voluntary
acts or omissions of CNL or its Affiliates. As compensation for the Developer’s
property development services, Company agrees to pay the Developer a development
fee and a development supervision fee (collectively, the “Development Fee”) as
set forth in the Development Agreement.

6.9      Property Management Agreement.   Upon Completion, the Company will
enter into a management agreement with the Property Manager to manage the
Property in substantially the form attached hereto as Exhibit I (the “Property
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 Property Management Agreement. Should the Property 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.

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 in the event of a default by Bainbridge or its Affiliate
under any contract with an Affiliate of Bainbridge, including the Company’s
engagement of the Developer pursuant to Section 6.8. Notwithstanding anything to
the contrary, Bainbridge shall have the sole and exclusive authority to enforce
and/or exercise the rights of the Company in the event of a default by CNL or
its Affiliate, under any contract with CNL or 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
(B) the knowing breach of any representation or warranty made by the Managing
Member or Operating Member in this Agreement.

6.12    Leasing Guidelines.  The Members acknowledge and agree that the initial
Leasing Guidelines for the lease up of the Project as an apartment community
shall be as set forth in the Property Management Agreement. The Members shall
negotiate in good faith to amend the Leasing Guidelines as may be necessary from
time to time. All amendments to the Leasing Guidelines shall be approved by
Member Consent.

 

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6.13    General Contractor.  The Company shall retain General Contractor as the
general contractor for the development of the Project. The Company and General
Contractor shall enter into the Construction Contract in substantially the form
set forth as Exhibit J attached hereto, pursuant to which, as compensation for
the services described therein, General Contractor shall be paid a general
contractor fee (the “GC Fee”) as set forth in the Construction Contract.

6.14    Danziger Property Option.  Pursuant to that certain Option Agreement by
and between TWSR, LLC, a North Carolina limited liability company, Whitney
Waldroup Hovenic, M.D., Robin C. Waldroup, Sheila Stains-Ramp, Marc David
Waldroup, Kristin Maria Ramsden and Boulevard Properties LLLP, a North Carolina
limited liability limited partnership, collectively as grantors, and the
Company, as grantee, dated of even date herewith (the “Option Agreement”), the
Company possesses an option (the “Option”) to purchase certain real property
located in Durham, North Carolina and more particularly described in Exhibit K
hereto (the “Danziger Property”). In consideration of the Option, the Company is
obligated to make periodic option payments (the “Option Payments”) to the
grantors as more fully set forth in the Option Agreement. The Company shall
determine whether it shall elect to exercise the Option no later than the date
that is the earlier of (a) seventeen (17) months from the closing of the
Company’s acquisition of the Property or (b) the date which is ten (10) days
after certificates of occupancy have been obtained for eighty-five percent
(85%) of the rental units of the Project (the “Company Election Date”). In the
event that the Company elects not to exercise the Option (or does not make a
determination as to whether to exercise the Option) on or prior to the Company
Election Date, then either Bainbridge or CNL may, in a written notice (the
“Option Election”) to the other, make an election to purchase the Option and
receive an assignment of the Option Agreement from the Company in exchange for
an amount equal to (i) the total of all such Option Payments paid under the
Option Agreement through the date of the Option Election, plus (ii) any due
diligence (including, without limitation, filing fees and consultants fees and
expenses) and legal expenses incurred by the Company, in respect of the Danziger
Property or the exercise of the Option, plus (iii) any amounts which would be
due by the Company under the Option Agreement prior to the assignment from the
Company to the purchasing Member (the amounts referenced in (i), (ii) and
(iii) being hereafter collectively referred to as the “Option Purchase Price”).
If more than one Member delivers an Option Election, the earlier delivered
notice shall be given effect and the later delivered notice will be void and
without effect. Within five (5) Business Days after receiving a copy of the
Option Election, the Company shall notify the Member making the election of the
Option Purchase Price after which the Member making the timely election shall
tender payment of the Option Purchase Price in exchange for the assignment of
the Option Agreement, which assignment shall be made without representation or
warranty by the Company. Each of Bainbridge and CNL acknowledge that the right
to exercise the Option is subject to certain conditions and that the Option may
not be available to the Company or either Member.

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 Member Consent. 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)      no later than the seventh (7th) day after each month-end, Operating
Member shall prepare and submit or cause to be prepared and submitted to each
Member, 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)      no later than the seventh (7th) day of each January, April, July and
October during the term of this Agreement, Operating Member shall prepare and
submit or cause to be prepared and submitted to each Member, 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.

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, and shall either
deliver or cause to be delivered a SSAE 16 report for the Property to the extent
prepared by the Operating Member in the ordinary course of its business if
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 preparation of SSAE 16 reports, or such other
required certifications and documentation and testing of the Company’s internal
controls or the implementation of such additional or alternative internal
controls of 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 Bainbridge or as otherwise
specified in the Property 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,
provided that any audit with respect to Allowable Development Costs may be
conducted within one hundred twenty (120) days following Completion. 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 be treated and shall file its tax
returns as a partnership for Federal, state, municipal and other governmental
income tax and other tax purposes and shall not take any action (including
filing an election to be classified as a corporation for Federal income tax
purposes) inconsistent with such treatment. 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 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 forty-five (45) days prior to the extended due date of
the returns. 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.

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, which selection shall be approved
by Bainbridge, the expense of which shall be borne by the Company.

 

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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 elections made by
the Tax Matters Partner if such Member shall not have objected in writing to
such election as reflected in the initial tax return reflecting such election
within fifteen (15) days after such return is received by such Member,
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 may 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 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)

 

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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 6.

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.

(b)      Nonrecourse Deductions.  Nonrecourse Deductions shall be allocated to
the Members pro rata in accordance with their Percentage Interest as of the date
hereof as set forth on Exhibit A attached hereto. 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

 

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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 Company
income and gain (consisting of a pro rata portion of each item of income and
gain of the Company) 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      Curative Allocations.  The allocations set forth in Sections 8.3 (a),
(b) and (c) and 8.4 (the “Regulatory Allocations”) are intended to comply with
the requirements of Treasury Regulations Sections 1.704-1(b) and 1.704-2.
Notwithstanding any other provisions of this Article 8 (other than the
Regulatory Allocations), the Regulatory Allocations shall be taken into account
as provided for in the following two sentences. Income, gain, loss and deduction
shall be reallocated to the extent that such reallocation causes the net
aggregate amount of allocations of income, gain, deduction and loss to each
Member to be equal to or more closely approximate the net aggregate amount of
such items that would have been allocated to each such Member if the Regulatory
Allocations had not occurred. This Section 8.5 shall be interpreted and applied
in such a manner and to such extent as is reasonably necessary to eliminate, as
quickly as possible, permanent economic distortions that would otherwise occur
as a consequence of the Regulatory Allocations in the absence of this
Section 8.5.

8.6      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.

8.7      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 the Tax Matters Partner in a manner that, in the Tax Matters
Partner’s discretion, reasonably reflects the arrangement between the Members
pursuant to this Agreement.

8.8      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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8.9      Information as to Allocation of Debt.  Bainbridge agrees that
indebtedness of the Company shall be allocated among the Members under Code
Section 752 and the Tax Matters Partner shall have sole authority, in its
discretion, as to all allocations and/or decisions under Code Section 752, it
being understood that it is the intention of the Members to allocate as much
debt as possible to Members other than CNL to the extent that the Tax Matters
Partner is satisfied that there is an adequate basis for such position under
applicable authority. Managing Member also agrees to provide the Tax Matters
Partner 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 the Tax Matters Partner may
require for purposes of this Article 8.

8.10    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 initial percentage interest of
the respective Members in the Company shall be:

 

    

CNL:

     90 %   

 

Bainbridge:

  

 

 

 

10

 

% 

 

The percentage interest of each Member as may be adjusted pursuant to the terms
of Section 4.5(d)(ii)(y) and the preferred and priority rights provided for
herein, is herein 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 follows
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 pursuant to (A) Section 4.5(d)(ii) and
(B) Section 4.5(d)(iv), (3) the proceeds of short-term borrowings of the Company
in the ordinary course of business (including Member Loans) 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 (other than through the payment of expenses) and
(5) the proceeds of business interruption insurance.

 

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(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 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 and one-half percent (10.5%) per annum on each Member’s Unreturned
Capital. One-twelfth of the annual Operating Return payable for the current
fiscal year of the Company shall accrue at the time of each monthly distribution
of Operating Cash Flow (or at the time that such distribution would be made if
Operating Cash Flow were available for distribution).

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

 

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(e)      “Unreturned Operating Return” shall mean, for each Member, its
Operating Return computed with respect to Unreturned Capital reduced by any
distributions of Operating Return made to such Member pursuant to Section 9.4(c)
hereof.

9.3      Operating Cash Flow Distributions.  Subject to the terms of
Section 4.5(d) and Section 9.6 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 pro rata in
accordance with their respective Percentage Interests.

9.4      Extraordinary Cash Flow Distributions. Subject to the terms of
Section 4.5(d) and Section 9.6 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, to the Members, in amounts necessary to repay (A) compounded 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;

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

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

(d)      fourth, eighty percent (80%) to the Members in proportion to their
respective then Percentage Interests and twenty percent (20%) to Bainbridge,
until CNL achieves a 15% IRR on its aggregate Capital Contributions;

(e)      fifth, seventy-five percent (75%) to the Members in proportion to their
respective then Percentage Interests and twenty-five percent (25%) to
Bainbridge, until CNL achieves a 20% IRR on its aggregate Capital Contributions;
and

(f)      thereafter, fifty percent (50%) to the Members in proportion to their
respective then Percentage Interests and fifty percent (50%) to Bainbridge.

9.5      Loss of Promoted Interest.    Notwithstanding the provisions of
Section 9.4, Bainbridge 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(d), 9.4(e) and 9.4(f) (and Bainbridge shall instead receive
distributions of Extraordinary Cash Flow under such Sections based on its then
Percentage Interest) upon the removal of Bainbridge for Cause as described in
Section 6.7(b).

 

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

9.6      Tax Distributions.  Notwithstanding anything to the contrary in this
Agreement, to the extent that cash is distributed to any Member pursuant to
Article 9, for each fiscal year of the Company in which the amount of net income
allocated to Bainbridge pursuant to Article 8 exceeds ten percent (10%) of the
total net income allocated pursuant to Article 8 (the “Excess Allocation”), cash
shall first be distributed to Bainbridge to pay the Assumed Tax Liability on
such Excess Allocation. The Assumed Tax Liability on such Excess Allocation
shall be forty-five percent (45%) multiplied by the Excess Allocation. Any
distribution made pursuant to this Section 9.6 shall be made quarterly (based
upon the estimated amount of tax due as determined under this Section 9.6 with a
final payment due on or before March 31 of the year following the close of the
fiscal year in question (which payment shall be adjusted to reconcile all of the
quarterly estimated payments made previously for such fiscal year pursuant to
this Section 9.6) and any distribution pursuant to this Section 9.6 shall be
treated as an advance under the relevant provision giving rise to such Excess
Allocation.

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.
CNL’s right to transfer its Entire Interest as expressly permitted in this
Section 10.1 shall include, without limitation, its managing member rights.

10.2    Permitted Transfers.  Notwithstanding any other provision of this
Agreement, so long as one or more of the Bainbridge Principals, individually or
collectively, control the day-to-day decision-making for Bainbridge, then the
following shall be permitted under this Article 10

 

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without obtaining the consent of any other Member, and without Bainbridge being
required to offer to any Member all or any portion of the interest to be sold,
assigned, given, pledged, hypothecated, encumbered or transferred: (a) the
direct or indirect sale, assignment, gift, pledge, hypothecation, encumbrance or
other transfer by Bainbridge of all or a portion of its Entire Interest in the
Company to an Affiliate of Bainbridge, (b) in the event of the death of any
individual member of Bainbridge or any Person that has an indirect interest in
Bainbridge, such individual’s interest may be transferred to the personal
representative of such individual or as otherwise disposed of pursuant to the
will of such individual or under the laws of intestate succession, and (c) any
Person that has a direct or indirect interest in Bainbridge may freely transfer
all or any part of such Person’s direct or indirect interest either (A) to
another Person that has a direct or indirect interest in Bainbridge or (B) to a
trust, family limited liability company, family partnership or similar estate
planning or wealth preservation entity established by the transferring Person
for the benefit of such Person, such Person’s spouse, one or more of such
Person’s immediate family or any combination thereof.

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 assignor
or 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.

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.

 

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10.5    Other Assignments Void.

(a)      Without limiting the terms of Section 10.1, but subject to
Section 10.2, 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, 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, the assignor or such assignee shall pay all expenses incurred by the
Company in connection with the transfer.

(b)      Further without limiting the terms of Section 10.1, but subject to
Section 10.2, 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, respectively, 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.

10.6    Rights of a Transferee.  Any assignee or transferee of less than the
Entire Interest of either Member shall, to the extent of such interest acquired,
be entitled only to the assignor or transferor Member’s rights, if any, in the
profits, losses, income, gains, deductions and distributions of such assignor or
transferor Member pursuant to this Agreement, subject to the liabilities and
obligations of such assignor or transferor Member hereunder; but such assignee
or transferee of less than the Entire Interest of either Member shall have no
right to participate in the management of the business and affairs of the
Company and shall have no decision making authority hereunder and shall be
disregarded in determining whether the approval, consent or any other action has
been given or taken by the Members under this Agreement. In addition, the
transferor Member and any such assignee or transferee of such transferor Member
shall be considered one Member for purposes of Section 10.7.

10.7    Buy-Sell.

(a)      Subject to the terms of this Section 10.7, if (i) the Market Sale Right
is exercised pursuant to Section 10.10, (ii) the Disposition Election is made by
the Recipient Member and (iii) the Property is not sold to an Outside Purchaser
pursuant to the Disposition Election in accordance with Section 10.10, then
either Bainbridge or CNL (in either case, the “Proposer”) may, in a written
notice (the “Sale Proposal”) to the other (in either case, the “Responding
Member”), make an offer to either (x) purchase the Responding Member’s Entire
Interest (“Buy Offer”) or (y) sell its Entire Interest to the Responding Member
(“Sale Offer”) for such purchase price (which shall be payable in cash at the
closing of any such transaction) and on such other terms, in each case as the
Proposer may propose in the Sale Proposal, which other

 

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terms shall be consistent with the provisions of this Section 10.7 and of
Section 10.8. The Sale Proposal shall include the purchase price for Entire
Interest of the Proposer if the Proposer is offering to sell its Entire
Interest, or the purchase price for the Entire Interest of the Responding Member
if the Proposer is offering to purchase the Entire Interest of the Responding
Member, as applicable, together with a statement of the total purchase of all of
the Company’s property, including the Property (“Property Price”), that formed
the basis for determining such stated purchase price for the applicable Entire
Interest. If more than one Member delivers a Sale Proposal, the earlier
delivered notice shall be given effect and the later delivered notice will be
void and without effect.

(b)      Within seventy-five (75) days after receiving a copy of the Sale
Proposal, the Responding Member shall notify the Proposer that:

(i)        the Responding Member elects to sell its Entire Interest to the
Proposer at the purchase price determined in accordance with the provisions of
Section 10.8 (“Reply Price”) if such purchase price was not set forth by
Proposer in the Sale Proposal and otherwise in accordance with the terms set
forth in the Sale Proposal as may be modified by Section 10.8(a), in which case,
the Proposer shall, within ten (10) Business Days thereof, deliver to the
Responding Member a deposit in an amount (such amount, together with any
interest earned thereon, being hereinafter called the “Proposer’s Buy Sell
Deposit”) equal to five percent (5%) of the purchase price payable to the
Responding Member in connection with the Sale Proposal as such purchase price
may be modified as applicable in accordance with the provisions of
Section 10.8(a), which amount shall be non-refundable unless the purchase and
sale pursuant to this Section 10.7(b)(i) does not close due to the default of
the Responding Member; or

(ii)        the Responding Member elects to purchase the Entire Interest of the
Proposer at the Reply Price if the purchase price was not set forth by Proposer
in the Sale Proposal and otherwise in accordance with the terms set forth in the
Sale Proposal, in which case, the Responding Member shall, within ten
(10) Business Days thereof, deliver to the Proposer a deposit in an amount (such
amount, together with any interest earned thereon, being hereinafter called the
“Responding Member’s Buy Sell Deposit”) equal to five percent (5%) of the
purchase price payable to the Proposer in connection with the Sale Proposal as
such purchase price may be modified as applicable in accordance with the
provisions of Section 10.8(a), 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.

(c)      The Responding Member’s notice of election to purchase or sell pursuant
to Section 10.7(b) 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 seventy-five (75) days after
the date of the giving of the notice of election under Section 10.7(b) to the
Proposer. If the Responding Member elects to purchase pursuant to
Section 10.7(b)(ii), the Responding Member’s Buy Sell Deposit shall be credited
against the total purchase price payable by the Responding Member for the Entire
Interest being purchased pursuant thereto; 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

 

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actual damages would be difficult, if not impossible, to ascertain. If the
Responding Member elects to sell pursuant to Section 10.7(b)(i), the Proposer
Buy Sell Deposit shall be credited against the total purchase price payable by
the Proposer for the Entire Interest being purchased pursuant thereto; provided,
however, that, if the closing shall fail to occur because of a default by the
Proposer, subject to the provisions of Section 10.7(b)(i) above concerning
refundability of the deposit, the Responding Member shall have the right to
retain the Proposer’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.

(d)     Failure of the Responding Member to respond to the Sale Proposal within
the seventy-five (75) day period referenced in Section 10.7(b) shall be deemed
an election to sell its Entire Interest under Section 10.7(b)(i).

10.8    Provisions Generally Applicable to Sales. The following provisions shall
be applicable to sales of a Member’s Entire Interest under each of Sections
10.7, 10.10 and 13.2(b) except to the extent indicated below:

(a)      This subparagraph (a) shall be applicable only to a sale of a Member’s
Entire Interest under Section 10.7. If, under the provisions of Section 10.7,
(i) the Proposer has offered to sell its Entire Interest to the Responding
Member and the Responding Member has elected instead to sell its Entire Interest
to the Proposer then the purchase price payable to the Responding Member for its
Entire Interest shall be determined as set forth in this Section 10.8(a), or
(ii) the Proposer has offered to purchase the Entire Interest of the Responding
Member and the Responding Member has elected instead to purchase the Entire
Interest of the Proposer, then the purchase price payable to the Proposer for
its Entire Interest, shall be determined as set forth in this Section 10.8(a).
Each such purchase price is the “Reply Price” and shall be determined as
follows:

(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, which “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 all of the
Company’s property, including the Property, were sold for the Property Price set
forth in the Sale Proposal.

(ii)        After determining the Value, there shall then be determined the
amounts which would have been distributable and payable to (a) the Proposer and
(b) the Responding Member, in each case, under Section 9.4, if all of the
Company’s property, including the Property, had been sold for an amount equal to
the Property Price and the Company paid all debts, liabilities and expenses of
the Company referenced above. The amount determined under this clause
10.8(a)(ii) which would have been distributable to the Proposer under
Section 9.4 shall be the purchase price payable to the Proposer if the Proposer
will sell its Entire Interest to the Responding Member pursuant to the Sale
Proposal, and the amount determined under this clause 10.8(a)(ii) which would
have been distributable to the Responding Member under Section 9.4 shall be the
purchase price payable to the Responding Member if the Responding Member will
sell its Entire Interest to the Proposer pursuant to the Sale Proposal.

 

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(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 the 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 Member
and its Affiliates from all liability, direct or contingent, by each holder of
such liability, from all Company debts, obligations or claims against the
Company for which the selling Member or its Affiliate is or may be personally
liable, including, without limitation, any guaranties of Company debts or
obligations given by a selling Member or its Affiliates, except for any such
debts, obligations or claims which are fully insured by public liability
insurer(s) acceptable to the selling Members, or (ii) cause all such Company
debts, obligations or claims to be paid in full at the closing, or (iii) deliver
to the selling Member and its Affiliates an agreement in form and substance
satisfactory to the selling Member to defend, indemnify and save the selling
Member and its Affiliates 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, including, without limitation, any guaranties of Company debts or
obligations given by a selling Member or its Affiliates. 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:

(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 a 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 a two percent
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Property, or if there is an insured casualty in excess of five hundred thousand
dollars ($500,000), then the purchasing Member shall have the option (to be
exercised within forty-five (45) 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.

(iii)     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 Bainbridge, 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 Member 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 as the
purchasing Member may designate. For any sale or transfer under Section 10.7
where the Responding Member has made its election pursuant to Section 10.7(b)
and either a Proposer’s Buy Sell Deposit or a Responding Member’s Buy Sell
Deposit, as applicable, has been made pursuant to Section 10.7(b), then the
purchasing Member may designate the assignee of the Entire Interest, which
assignee need not be an Affiliate of the purchasing Member.

(g)      This subparagraph (g) shall be applicable only to a sale of a Member’s
Entire Interest under Section 13.2. 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, unless
the remaining Member elects to continue the Company. 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 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 consistent with the requirements set forth herein in the event of
an election by a Member to purchase the other Member’s Entire Interest within
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the Notice Date; provided, however, failure to execute and deliver a purchase
and sale agreement shall not limit or otherwise affect the obligations of the
Members to consummate such purchase and sale in accordance with the requirements
set forth herein.

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

10.9    [Intentionally Omitted]

10.10  Right to Market the Property.

(a)      Any time after the date that is twenty-four (24) months after
Completion of the Project, each of Bainbridge and CNL (the “Market Sale Offering
Member”) shall have the right to cause the Property to be marketed for sale (the
“Market Sale Right”), as hereinafter provided, by delivering written notice (the
“Market Sale Notice”) to the other Member (the “Market Sale Recipient Member”):
(i) invoking the provisions of this Section 10.10, and (ii) designating the sale
price (which shall be payable only in cash) (the “Sale Price”), and other
material terms and conditions upon which the Market Sale Offering Member desires
to sell the Property. If more than one Member delivers a Market Sale Notice, the
earlier delivered notice shall be given effect and the later delivered notice
will be void and without effect. Upon receipt of an effective Market Sale Notice
given pursuant to this Section 10.10, the Market Sale Recipient Member shall
then be obligated, at the Market Sale Recipient Member’s option and subject to
the provisions of Section 10.10(b) below, either to: (x) elect to authorize the
Market Sale Offering Member, on behalf of the Company, to market the Property
for sale to a third party (i.e., a Person who is not a Member or an Affiliate of
a Member) (an “Outside Purchaser”), for the Sale Price and on the terms and
conditions as set forth in the Market Sale Notice (the “Disposition Election”),
or (y) elect to purchase the Entire Interest of the Market Sale Offering Member
for cash at a price equal to the amount the Market Sale Offering Member would
have received if the Property had been sold for the Sale Price and the Company
paid all of the debts, liabilities and expenses of the Company under
Sections 13.5(a) and 13.5(b) and distributed the balance to the Members in
accordance with the provisions of Section 9.4 hereof (the “Member Sale
Election”). The Market Sale Recipient Member shall give written notice of such
election to the Market Sale Offering Member within forty-five (45) days after
receipt of the Market Sale Notice. If the Market Sale Recipient Member does not
make either of the foregoing elections within such forty-five (45)-day period,
the Market Sale Recipient Member shall be deemed to have elected the Disposition
Election. If the Market Sale Recipient Member elects the Member Sale Election,
then simultaneously with making such election, the Market Sale Recipient Member
shall deliver to the Market Sale Offering Member a deposit in an amount (such
amount, together with any interest earned thereon, being hereinafter called the
“Recipient Member’s Market Sale Deposit”) equal to five percent (5%) of the
purchase price payable to the Market Sale Offering Member as determined in
accordance with the provisions of this Section 10.10 in connection with the sale
of the Entire Interest of the Market Sale Offering Member to the Market Sale
Recipient Member. The Recipient Member’s Market Sale Deposit shall be credited
against the total purchase price payable by the Market Sale Recipient Member for
the Entire Interest being purchased pursuant to this Section 10.10; provided,
however, that, if the closing shall fail to occur because of a default by the
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Offering Member is not in default, the Market Sale Offering Member shall have
the right to (i) retain the Recipient Member’s Market Sale Deposit as liquidated
damages, it being agreed that in such instance the Market Sale Offering Member’s
actual damages would be difficult, if not impossible, to ascertain, and
(ii) market the Property for sale at such price and on such terms as set forth
in the Market Sale Notice and in accordance with the provisions of 10.10(b) as
if the Market Sale Recipient Member had elected the Disposition Election, with
the closing to occur within one hundred eighty (180) days after the date the
right to again market the Property under this subclause (ii) arises.

(b)      If the Market Sale Recipient Member elects or is deemed to have elected
the Disposition Election, the Market Sale Offering Member shall conduct the
marketing of the Property in a commercially reasonable manner (which shall
include engaging a third party broker) and may cause the sale of the Property to
an Outside Purchaser (whose identity will be disclosed to the other Member) on
the terms and conditions as set forth in the Market Sale Notice and for a
purchase price which is payable only in cash, provided that (i) such sale shall
be for a price equal to at least ninety-five percent (95%) of the Sale Price,
(ii) such sale shall close within a period of one hundred eighty (180) days
after the last date upon which the Market Sale Recipient Member could have
elected the Member Sale Election as provided in Section 10.10(a) above and
(iii) the Company (or the Outside Purchaser) shall pay any transfer taxes,
conveyance taxes and/or financing breakage costs in connection such sale.
Further, in the event the Market Sale Recipient Member elects or is deemed to
have elected the Disposition Election, the Market Sale Offering Member shall
obtain each Member’s prior consent, which consent shall not be unreasonably
withheld (a) to the engagement of any financial advisor, broker, placement
agent, finder or agent for the purposes of marketing the Property, and (b) to
the selection of an Outside Purchaser to purchase the Property. If the foregoing
conditions are not met and either Member again desires to cause a sale of the
Property, such Member shall again be required to comply with the provisions of
this Section 10.10.

(c)      If the Market Sale Recipient Member elects the Member Sale Election
(the “Member Sale Purchaser”), (i) it may, at its option, cause the Entire
Interest of the Market Sale Offering Member (the “Member Sale Seller”) to be
acquired by a nominee, assignee or designee; provided, however, such election
shall not relieve the Member Sale Purchaser of any obligation or liability with
respect thereto, (ii) the Member Sale Purchaser shall fix a closing date (the
“Member Sale Closing Date”) not later than ninety (90) days following the date
of the exercise of the Member Sale Election pursuant to Section 10.10(a) above,
and (iii) the closing shall take place on the Member Sale Closing Date during
normal business hours at the principal office of the Company. At the closing
pursuant to a Member Sale Election, any applicable transfer taxes and/or
conveyance taxes payable in connection with such conveyance shall be paid in
accordance with local custom where the Property is located. Each party shall pay
its own costs and expenses, to the extent not otherwise designated herein, in
connection with the conveyance of the Entire Interests of the Member Sale Seller
to the Member Sale Purchaser.

(d)      To the extent not inconsistent with the terms of this Section 10.10,
the provisions of Sections 10.8(b)–(j) shall be applicable with respect to a
closing pursuant to the Member Sale Election.

 

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ARTICLE 11. DISSOLUTION OR BANKRUPTCY OF A MEMBER

11.1    Dissolution or Merger.  If Bainbridge 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 Bainbridge’s election, be a
dissolution of the Company, and Bainbridge shall be the “Liquidating Member” in
the dissolution of the Company.

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;

 

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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 all Members shall 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.

ARTICLE 12. CROSS-DEFAULT

Any termination for Cause by the Managing Member of the delegation of authority
given to Bainbridge 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 due to an Event of Default under the Development Agreement shall give
CNL the right to terminate the delegation of authority given to Bainbridge as
Operating Member for Cause 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 subsection (a) of Section 9.4
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 Section 4.5(d)(iii), 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

 

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(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 thirty (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(d) (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 Electing Member shall have the option, by notice given to the
other Members within sixty (60) 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 in determining the appraised
value. Such option may be exercised by the Electing Member within sixty
(60) 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 within such sixty (60) day period (or
fails to respond within such sixty (60) day period), then the Electing Member
shall have all of its rights under Section 4.5(d) 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
that 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 Bainbridge
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

 

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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 directly
resulting from any such event, only if and as established by a court order.

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 the Company’s debts, 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.

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.

 

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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.

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
Bainbridge 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 Patterson Place Holdings, LLC

CNL Center at City Commons

450 South Orange Avenue

Orlando, Florida 32801

Attention: Rosemary Q. Mills, Chief Financial Officer

Facsimile No.: (407) 540-2546

Attention: John McRae

Facsimile No.: (407) 540-7750

with a copy to:

  

GGT Patterson Place Holdings, LLC

CNL Center at City Commons

450 South Orange Avenue

Orlando, Florida 32801

Attention: Holly J. Greer, General Counsel

Facsimile No.: (407) 540-2648

with a copy to:

  

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

450 South Orange Avenue, Suite 800

Orlando, Florida 32801

Attention: Joaquin E. Martinez, Esq.

Facsimile No.: (407) 843-4444

 

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Bainbridge:

  

Bainbridge Patterson Place, LLC

c/o the Bainbridge Companies, LLC

12765 W. Forest Hill Boulevard, Suite 1307

Wellington, Florida 33414

Attention: Mr. Richard Schechter, Chairman and CEO

Facsimile No.: (561) 793-8959

with a copy to:

  

Broad and Cassel

7777 Glades Road, Suite 300

Boca Raton, Florida 33434

Attention: Jeffrey A. Deutch, Esq.

Facsimile No.: (561) 483-7321

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, (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 or
(iv) by facsimile transmission with a hard copy to follow by any of the other
methods above, in which case it will be deemed delivered on the day and at the
time indicated in the sender’s automatic acknowledgment. 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, 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, Bainbridge 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.

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

 

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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 be
qualified to do business 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.

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. The Members further agree to indemnify, defend and hold each 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 such Member’s actions.

16.15  Dispute Resolution.

(a)      Any dispute with respect to the matters described in Section 6.2(a)
under this Agreement shall be determined by binding arbitration proceeding (the
“Arbitration Proceeding”) administered by the American Arbitration Association
(“AAA”) under its Commercial Arbitration Rules and Expedited Procedures, in
effect at the time of the demand for arbitration, provided, however, that to the
extent any provision of this Section 16.15 modifies, adds to, or is inconsistent
with any provisions of those rules and procedures, the provisions of this
Section shall control. Arbitration will be conducted before a single arbitrator
in a venue

 

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selected by the party which did not initiate the Arbitration Proceeding, in its
sole discretion, which shall be binding on both parties. The choice of law
provisions set forth in Section 16.2 shall apply in any such Arbitration
Proceeding. Any dispute, disagreement, or controversy arising out of or relating
to this Agreement for which arbitration is not expressly provided as the means
of resolution may be resolved by litigation as provided in Section 16.13 or by
other lawful means.

(b)      The party desiring arbitration shall provide written notice in
accordance with the requirements of Section 15.1 to the other party (the
“Arbitration Notice”) indicating (i) the matter in controversy and (ii) the
name, contact information and professional resume of the proposed arbitrator
meeting the requirements for a qualified and independent arbitrator set forth in
Section 16.15(c) (“Initial Arbitrator”) to arbitrate such matter in controversy.
If the party receiving the Arbitration Notice rejects the Initial Arbitrator set
forth in the Arbitration Notice it shall object by written notice in accordance
with the requirements of Section 15.1 (“Objection Notice”) delivered to the
other party within seven (7) Business Days of the receipt of the Arbitration
Notice. The Objection Notice shall contain the name, contact information and
professional resume of a different arbitrator meeting the requirements for a
qualified and independent arbitrator set forth in Section 16.15(c) (“Secondary
Arbitrator”) to arbitrate the matter in controversy set forth in the Arbitration
Notice. If the party receiving the Objection Notice rejects the Secondary
Arbitrator, it shall object in writing (“Secondary Objection Notice”) to the
other party within seven (7) Business Days after the receipt of the Objection
Notice. If neither the Initial Arbitrator nor the Secondary Arbitrator is
accepted by the parties, the party which delivered the Arbitration Notice shall
instruct the Initial Arbitrator and the Secondary Arbitrator to agree, within
five (5) Business Days after receipt of the Secondary Objection Notice, upon an
arbitrator (“Appointed Arbitrator”) meeting the requirements for a qualified and
independent arbitrator set forth in Section 16.15(c). If they agree upon an
Appointed Arbitrator who is prepared to act as the Appointed Arbitrator, the
Initial Arbitrator and Secondary Arbitrator shall deliver written notice of the
name, contact information and professional resume of the Appointed Arbitrator to
each party simultaneously. The appointment of the Appointed Arbitrator shall be
a final decision, which shall not be subject to objection by either party,
unless either party to this Agreement within five (5) Business Days after such
selection of an Appointed Arbitrator, gives written notice in accordance with
the requirements of Section 15.1 of this Agreement to the other party, in
writing, that such Appointed Arbitrator fails to meet the requirements for a
qualified and independent arbitrator set forth in Section 16.15(c) and provides
specific information in such written notice as to the reasons why such failure
exists.

(c)      In the event the Initial Arbitrator and the Secondary Arbitrator cannot
agree on an Appointed Arbitrator or if such appointed Arbitrator is unwilling to
act as the Appointed Arbitrator or if either party objects to the Appointed
Arbitrator within five (5) Business Days after the selection of such Appointed
Arbitrator, as permitted in Section 16.15(b), then either party may petition the
AAA (or any successor body of similar function) to appoint an arbitrator within
five (5) Business Days of such petition using the following criteria: such
arbitrator shall be (i) with respect to physical property matters, a licensed
professional engineer or registered architect having at least ten (10) years’
experience in the design or construction of multi-family apartment facilities
similar to the Property in the market place where the Property is located,
(ii) with respect to financial matters, a partner in a “Big Four Accounting
Firm” with at least ten (10) years’ experience with the type of matter in
dispute, (iii) with respect to property

 

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management issues, an individual who shall have had at least ten (10) years’
experience managing similar multi-family apartment facilities in the market
place where the Property is located and (iv) be neutral and shall have had no
prior notice, information or discussions concerning such controversy and shall
not be employed by or associated with either party or any Affiliate of either of
them, or any of their respective agents or affiliates at such time or for the
previous ten (10) years. If the dispute involves more than one type of matter,
then the Appointed Arbitrator must be either (i) an individual with expertise in
the predominate type of matters in dispute for which such Appointed Arbitrator
is being asked to arbitrate or (ii) a retired judge.

(d)      The Arbitration Proceedings shall commence fifteen (15) Business Days
after the engagement or appointment of the arbitrator entitled to serve pursuant
to this Section 16.15. The arbitrator shall make a determination within ten
(10) Business Days after conclusion of the Arbitration Proceeding.

(e)      The costs and expenses of an Arbitration Proceeding including the
administrative fees and costs and the arbitrator’s fees and costs, shall be
shared equally by CNL and Bainbridge, and each party shall bear its own counsel,
witness, expert, administrative fees and other professional fees and expenses
with respect to such Arbitration Proceeding; provided, however, that the
Appointed Arbitrator may (but shall not be required to), in the exercise of
his/her best judgment, assess one party for a part or all of the costs of the
other party, including, without limitation, the costs of the Arbitration
Proceeding.

(f)      Any arbitrator’s final decision and award shall be in writing, shall be
binding on the parties and shall be non-appealable, and counterpart copies
thereof shall be delivered to both parties. A judgment or order based upon such
award may be entered in any court of competent jurisdiction. All actions
necessary to implement the decision of the arbitrator shall be undertaken as
soon as possible, but in no event later than three (3) Business Days after the
rendering of such decision.

16.16  Partition.  The Members hereby agree that no Member nor any
successor-in-interest to any Member shall have the right to have the property of
the Company partitioned, or to file a complaint or institute any proceeding at
law or in equity to have the property of the Company partitioned, and each
Member, on behalf of himself, his successors, representatives, heirs and
assigns, hereby waives any such right.

(Remainder of page intentionally left blank)

 

57

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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.

 

Bainbridge:    

BAINBRIDGE PATTERSON PLACE, LLC,

a Florida limited liability company

   

By:

 

Bainbridge Manager, LLC, a Florida limited liability company, its Manager

   

By:

 

 /S/ Thomas Keady

       

Thomas Keady, Vice President

 

 

Signature Page to Limited Liability Company Agreement of

GGT Patterson Place NC Venture, LLC

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

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

 

CNL:        

GGT PATTERSON PLACE HOLDINGS, LLC,

a Delaware limited liability company

    By:  /S/ Rosemary Mills                                      
Name:  Rosemary Mills                                       
Title:    Executive Vice President                      

 

Signature Page to Limited Liability Company Agreement of

GGT Patterson Place NC Venture, LLC

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EXHIBIT A

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

 

A-1

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EXHIBIT B

DESCRIPTION OF LAND

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

 

B-1

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EXHIBIT C

DEVELOPMENT AGREEMENT

[See Attached Pages]

[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]

 

E-1

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

EXHIBIT E

[Intentionally Omitted]

 

E-1

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

EXHIBIT F

[Intentionally Omitted]

 

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

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

EXHIBIT I

PROPERTY MANAGEMENT AGREEMENT

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

 

I-1

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

EXHIBIT J

CONSTRUCTION CONTRACT

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

 

J-1

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

EXHIBIT K

DANZIGER PROPERTY

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

 

K-1