TABLE OF CONTENTS

Exhibit 10.3

LIMITED LIABILITY COMPANY AGREEMENT

OF

GGT SPRING TOWN TX, LLC

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TABLE OF CONTENTS

LIMITED LIABILITY

COMPANY AGREEMENT OF

GGT SPRING TOWN TX, LLC,

A DELAWARE LIMITED LIABILITY COMPANY

TABLE OF CONTENTS

 

     Page  

ARTICLE 1. DEFINITIONS

     1   

1.1 Definitions

     1   

1.2 Other Defined Terms

     9   

1.3 Exhibits

     9   

ARTICLE 2. THE COMPANY

     9   

2.1 Organization

     9   

2.2 Name of Company

     9   

2.3 Purpose of Company

     9   

2.4 Places of Business; Registered Office

     9   

2.5 Further Assurances

     10   

2.6 Expenses of Formation

     10   

2.7 No Individual Authority

     10   

2.8 Business Opportunities

     10   

2.9 Neither Responsible for Other’s Commitments

     11   

2.10 Affiliates

     11   

2.11 Operations in Accordance With the Act; Ownership

     11   

ARTICLE 3. TERM

     11   

3.1 Term

     11   

ARTICLE 4. CAPITAL CONTRIBUTIONS OF THE MEMBERS

     12   

4.1 Capital Contributions of the Members

     12   

4.2 No Other Contributions or Advances

     12   

4.3 No Interest Payable

     12   

4.4 No Withdrawals

     12   

4.5 Additional Capital Contributions

     13   

ARTICLE 5. MEMBER LOANS

     15   

5.1 Member Loans

     15   

5.2 Payment of Member Loans

     16   

ARTICLE 6. MANAGEMENT OF THE COMPANY

     16   

6.1 Management

     16   

6.2 Major Decisions

     19   

6.3 Bank Accounts

     23   

6.4 Annual Budgets

     23   

6.5 Insurance

     23   

6.6 Consultation Regarding the Project

     24   

 

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6.7 Termination of Delegation of Authority to MCR as Operating Member

     24   

6.8 Development

     25   

6.9 Management Agreement

     26   

6.10 Contracts with Affiliates

     26   

6.11 Indemnification of Members; Exculpation

     26   

6.12 Leasing Guidelines

     27   

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

     27   

7.1 Books; Statements

     27   

7.2 Where Maintained

     28   

7.3 Audits

     28   

7.4 Objections to Statements

     28   

7.5 Tax Returns

     28   

7.6 Tax Matters Partner

     29   

7.7 Tax Policy

     29   

7.8 Section 754 Election

     29   

7.9 Capital Accounts

     29   

ARTICLE 8. ALLOCATIONS

     30   

8.1 Allocation of Net Income and Net Loss

     30   

8.2 Loss Limitation

     30   

8.3 Minimum Gain Chargebacks and Nonrecourse Deductions

     31   

8.4 Qualified Income Offset

     31   

8.5 Code Section 704(b) Allocations

     31   

8.6 Other Allocation Provisions

     32   

8.7 Distributions of Nonrecourse Liability Proceeds

     32   

8.8 Taxable Year; Fiscal Year

     32   

8.9 Recapture

     32   

ARTICLE 9. DISTRIBUTIONS

     32   

9.1 Percentage Interests in Company

     32   

9.2 Certain Definitions

     33   

9.3 Operating Cash Flow Distributions

     35   

9.4 Extraordinary Cash Flow Distributions

     36   

9.5 Loss of Promoted Interest

     37   

9.6 No Distributions In Kind

     37   

ARTICLE 10. ASSIGNMENT AND OFFER TO PURCHASE

     37   

10.1 Transfers

     37   

10.2 Assumption by Assignee

     38   

10.3 Miscellaneous Provisions Related to Transfers

     38   

10.4 Amendment of Certificate of Formation

     39   

10.5 Upstream Transfers

     40   

10.6 Right to Cause Sale of Project

     40   

10.7 Buy-Sell

     42   

10.8 Provisions Generally Applicable to Sales

     43   

10.9 Compliance with ERISA

     46   

 

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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

     50   

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

     51   

13.8 Restoration of Deficit Capital Accounts

     51   

ARTICLE 14. NOTICES

     52   

14.1 In Writing; Address

     52   

14.2 IRS Notices

     53   

14.3 Copies

     53   

ARTICLE 15. MISCELLANEOUS

     53   

15.1 Additional Documents and Acts

     53   

15.2 Interpretation

     53   

15.3 Entire Agreement

     53   

15.4 References to this Agreement

     54   

15.5 Headings

     54   

15.6 Binding Effect

     54   

15.7 Counterparts

     54   

15.8 Confidentiality

     54   

15.9 Amendments

     54   

15.10 Exhibits

     54   

15.11 Severability

     54   

15.12 Qualification in Other States

     54   

15.13 Forum

     54   

15.14 No Brokerage

     55   

15.15 Tax Compliance

     55   

15.16 Waiver of Partition and Certain Other Rights

     55   

15.17 Creditors Not Benefitted

     55   

 

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EXHIBITS

 

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

 

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LIMITED LIABILITY COMPANY AGREEMENT

OF

GGT SPRING TOWN TX, LLC

This Limited Liability Company Agreement of GGT Spring Town TX, LLC (this
“Agreement”) is entered into and shall be effective as of December 20, 2013, by
and between MCRT Spring Town LLC, a Delaware limited liability company (“MCR”),
and GGT Spring Town Holdings, LLC, a Delaware limited liability company (“CNL”),
pursuant to the provisions of the Act (as herein defined).

R E C I T A L S

WHEREAS, GGT Spring Town TX, LLC (the “Company”) was formed on October 18, 2013,
pursuant to the Act by filing a Certificate of Formation with the Secretary of
State of the State of Delaware (the “Certificate of Formation”).

WHEREAS, reference is hereby made to that certain Real Estate Purchase Agreement
with an effective date of March 18, 2013, by and between MCRT Investments, LLC,
a Delaware limited liability company, as purchaser (“Purchaser”), and
Grand-Kuykendahl, Ltd., a Texas limited partnership, 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, the real property located on
the corner of Northcrest and Spring Stuebner Roads in Harris County, Texas, as
more particularly described in Exhibit B hereto, together with certain
appurtenances associated therewith (collectively, the “Property”).

WHEREAS, CNL and MCR desire to form the Company for the purposes of acquiring
the Property and constructing a Class A rental apartment community on the
Property with 396 units, together with amenities and related improvements (the
“Project”), and leasing and managing the Project, but in any case the Project 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 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, CNL and MCR hereby
covenant and agree as follows:

ARTICLE 1. DEFINITIONS

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

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

 

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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 MCR’s Initial Capital, CNL’s Initial Capital and Additional
Initial Capital. Additional Capital shall not include any Member Loan.

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

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

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

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

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

Adjusted Capital Account. As defined in Section 8.2.

Affiliate. As to any person (i) any person directly or indirectly controlling,
controlled by, or under common control with such person and (ii) any holder of
more than fifty percent (50%) of the voting interest of such person. 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 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.

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

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

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

Buy-Sell Deposit. As described in Section 10.7(b).

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
capital of the Company by such Member pursuant to Article IV hereof.

 

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Cause. As defined in Section 6.7.

Certificate of Formation. As described in the Recitals above.

CFG. As defined in Section 10.1.

CGP. 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 Maximum Initial Capital. As defined in Section 4.1.

CNL Price. As defined in Section 10.6(c).

CNL Sale Deposit. As described in Section 10.6(c).

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

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

Code Compliance Changes. As defined in the Development Agreement.

Company. GGT Spring Town TX, LLC, a Delaware limited liability company.

Company Financing. Financing that is provided to the Company.

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

Completion. As defined in the Development Agreement.

Construction Contract. The guaranteed maximum price construction contract for
construction of the Project entered into between the Company and the General
Contractor.

Construction Lender. Synovus Bank, a Georgia state banking corporation.

Construction Loan. That certain loan in the original principal amount of
$32,060,000 provided by Construction Lender to finance the costs of acquisition
of the Property and construction of the Project.

 

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Development Agreement. That certain Development Agreement dated of even date
herewith by and between the Company and MCR providing for the development of the
Project on the Property.

Development Fee. As described in Section 6.8.

Disproportionate Capital. As described in Section 9.2(g).

Effective Date. The date this Agreement shall be signed by CNL and MCR, as
stated in the first paragraph above.

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

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

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

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

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

Fair Market Value. As described in Section 13.2(c).

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

Initial Capital Contributions. As defined in Section 4.1.

IRR. With respect to all Capital Contributions of a Member, the internal rate of
return or discount factor that, when applied to the cash flow stream consisting
of all distributions by the Company to such Member, makes the present value of
such distributions equal the present value (determined using the same discount
factor) of all Capital Contributions of such Member to the Company. The IRR
shall be determined taking into account the exact dates any applicable Capital
Contributions are made to the Company by the Member and the exact dates any
applicable distributions are made by the Company to such Member. The IRR to a
Member shall be computed using the XIRR function in Microsoft Excel or a
functional equivalent using actual dates of cash flows and based on annual
compounding.

Land Contract. As defined in the Recitals above.

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

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

Loan Closing. The closing of the Construction Loan.

 

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Loan Request Notice. As defined in Section 5.1.

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 not made as part of a sale including the Property; (ii) placement and
funding of any indebtedness of the Company with respect to borrowed money,
whether or not secured by some or all of its assets, excluding unsecured
borrowing (including trade payables) in the ordinary course of business;
(iii) condemnation of all or any material part of, or any interest in, the
Property or the Project through the exercise of the power of eminent domain; or
(iv) receipt of insurance proceeds as a result of any loss of Company property
or any part thereof or interest therein by casualty, failure of title or
otherwise.

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

Management Agreement. As set forth in Section 6.9.

Managing Member. CNL.

MCR. As described in the first paragraph above.

MCR Guarantor. MCRT West Assurance XIX LLC, a Delaware limited liability
company.

MCR Maximum Initial Capital. As defined in Section 4.1.

MCR Principals. Means, collectively, William C. MacDonald, Darren Schackman, Jeb
Cox and Alan E. Kolar.

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

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

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

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

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

Members. The parties to this Agreement and any Person subsequently admitted to
the Company as a substitute or additional Member in accordance with the terms of
this Agreement. Member means any of the Members. The initial Members are CNL and
MCR.

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.

Mill Creek. As defined in Section 10.1.

 

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Minor Field Changes. As defined in the Development Agreement.

Net Income and Net Loss. For any period, an amount equal to the Company’s items
of taxable income or loss, respectively, for the period, determined in
accordance with Section 703 of the Code, with the following adjustments:

(i) Any income of the Company that is exempt from federal income tax and not
otherwise taken into account as an item of Net Income or Net Loss pursuant to
this definition will be added to taxable income or taxable loss.

(ii) Any expenditure of the Company described in Section 705(a)(2)(B) of the
Code, or treated as a Section 705(a)(2)(B) expenditure pursuant to Treasury
Regulation Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account as
an item of Net Income or Net Loss pursuant to this definition will be subtracted
from taxable income or taxable loss.

(iii) Gain or loss resulting from transfer of Company property with respect to
which gain or loss is recognized for federal income tax purposes will be
computed by reference to the book values (as maintained by the Company pursuant
to the capital account maintenance provisions of Treasury Regulations
Section 1.704-1(b)(2)(iv)) of the property, notwithstanding that the adjusted
tax basis of the property differs from its book value.

(iv) Any increase or decrease to Capital Accounts as a result of an adjustment
to the book values (as maintained by the Company pursuant to the capital account
maintenance provisions of Treasury Regulations Section 1.704-1(b)(2)(iv)) of
Company property pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(f)
will be an item of Net Income or Net Loss, as appropriate.

(v) If the basis of Company property is adjusted pursuant to Treasury Regulation
Section 1.704-1(b)(2)(iv), depreciation computed in accordance with Treasury
Regulation Section 1.704-1(b)(2)(iv)(g) will be taken into account in lieu of
the depreciation, amortization and other cost recovery deductions otherwise
allowed in computing taxable income or taxable loss.

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

Nonrecourse Deductions. As described in Section 8.3(b)

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

Operating Budget. As described in Section 6.4.

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

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

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

 

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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) for such period
exceed or are expected to exceed the gross receipts for such period of the
Company plus available cash reserves, and the Company therefore is expected to
suffer, or has suffered, a cash flow deficit.

Opportunity. As defined in Section 2.8(b).

Out-of-Pocket Costs. Any costs or expenses incurred by the Managing Member or
Operating 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 and are consistent with the
Project Budget or the then effective Operating Budget.

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 the
Project’s operations as an apartment community.

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

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

Plans and Specifications. As defined in the Development Agreement.

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

Project. As described in the third paragraph of the Recitals. The Project
includes the Property unless the context otherwise requires.

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

Project Value. As described in Section 10.7(a).

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.

 

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

Proposer. As described in Section 10.7(a).

Regulatory Allocations. As described in Section 8.5.

Requirements. All state, federal and local laws, ordinances, rules, regulations,
codes, requirements of governmental authorities, permits, licenses, approvals,
and the terms of all restrictions, easements and other arrangements of record in
the real property records, in each case to the extent affecting all or any
portion of the Project.

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

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

Sale Notice. As defined in Section 10.6(c).

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

Stabilization Date. The later of (i) the last day of the first three consecutive
calendar month period during which Operating Cash Flow (calculated without
reduction for debt service) is at least equal to the debt service on all Company
Financing or (ii) Completion.

Stated Price. As defined in Section 10.6(c).

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 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 Sections 4.5(d) and 9.4, after the
payment of all actual Company indebtedness, including Member Loans, and any
other liabilities related to the Company’s assets, limited, in the case of
nonrecourse liabilities, to the book values of the collateral securing or
otherwise available to satisfy such liabilities.

Tax Matters Partner. As described in Section 7.6.

Transfer. As described in Section 10.1.

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).

 

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

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

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

Value. As described in Section 10.7(e).

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 this Agreement and, to the extent not supplanted by this
Agreement, the Act. The terms and provisions hereof will be construed and
interpreted in accordance with the Act. The provisions of this Agreement will
supersede the provisions of the Act to the maximum extent permitted by the Act,
it being the intent of the Members that the Company will be governed by this
Agreement rather than the Act to the maximum extent that the Act allows. In the
event of a conflict between this Agreement and the Act, this Agreement will
control except as to matters that, under the terms of the Act, may not be
changed by a written agreement among the Members.

2.2 Name of Company. The name of the Company will be “GGT Spring Town TX, LLC”.
The Managing Member may change the name of the Company at any time; provided,
however, that MCR shall have the right to approve the use of any name that
includes the word “MCR” or “Mill Creek” or any variation thereof.

2.3 Purpose of Company. The purpose of the Company is to directly or indirectly
carry on the business of acquiring, owning, operating, managing, improving,
repairing, renting, mortgaging, refinancing, selling, conveying and otherwise
dealing with the Project 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. The Company is authorized to take any legal measures
which will assist it in accomplishing its purpose or benefit the Company.

2.4 Places of Business; Registered Office. The Company may maintain offices and
places of business in such locations as selected by the Managing Member and, to
the extent required by law and/or deemed necessary or desirable by the Managing
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Member shall qualify the Company as a foreign limited liability company in any
jurisdiction in which it conducts business. The name and address of the
registered agent of the Company 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 office may be changed by
the Managing Member in compliance with the relevant requirements of the Act.
Notification of any change in the Company’s registered agent or registered
office shall be given to the other Member.

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. The expenses incurred by each of CNL and MCR 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 to the extent set forth in the Project Budget and approved by
Member Consent. The Members hereby approve payment of the expenses included in
Exhibit H. A Member will not unreasonably withhold its approval of additional
expenses so long as the expenses are within the Project Budget.

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 the Company.
No Member, acting alone, shall have any authority to act for, undertake or
assume any obligations or responsibility on behalf of any other Member.

2.8 Business Opportunities.

(a) Subject to the provisions of, and except as set forth in, subsection (b) of
this Section 2.8, nothing prohibits any Member or any Affiliate or any firm or
corporation controlled by or controlling a 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, or otherwise
competing with the Company. Each Member agrees that any other Member, any
Affiliate of another Member or any director, officer, employee, partner or other
person or entity related to another Member or any of its Affiliates 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 competition
with the Company, and neither the Company nor the other Member shall have any
rights by virtue of this Agreement or their relationship through the Company in
and to such independent ventures or to the income or profits derived therefrom.
To the fullest extent permitted by applicable law, the Members hereby waive any
obligation or duty which might otherwise be imposed or implied under any
so-called “business opportunity doctrine” or similar theory.

 

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(b) MCR covenants and agrees that, until Completion, in the event it proposes to
undertake any additional apartment development opportunities within a one
(1) mile radius of the Property (each an “Opportunity”), other than developments
existing as of the Effective Date, CNL and Affiliates of CNL Financial Group,
LLC (collectively, “CNL Entities”) shall have the right of first offer to
participate in any such Opportunity. To the extent that no CNL Entity responds
to an Opportunity within seven (7) days after such Opportunity is identified to
CNL by MCR, or to the extent a CNL Entity has not reached agreement with MCR
(satisfactory to MCR) on the terms for participation in an Opportunity within
thirty (30) days after such Opportunity is identified to CNL by MCR, MCR shall
not be required to continue to offer any CNL Entity the right to participate to
any extent in such Opportunity and MCR (or an Affiliate of MCR) may proceed with
the Opportunity, either alone or with other participants, on terms that MCR
finds acceptable.

2.9 Neither Responsible for Other’s Commitments. The Company shall not 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 responsibilities, liabilities, debts or obligations designated pursuant to
the terms of this Agreement. A Member shall not be responsible or liable for any
indebtedness or obligation of another Member incurred either before or after the
execution of this Agreement. Each Member indemnifies and agrees to hold the
other Member and the Company harmless from such personal obligations and debts
of the indemnifying Member, 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
MCR hereunder may be performed by officers or employees of one or more
Affiliates of MCR, provided that all actions taken by such persons on behalf of
MCR in connection with this Agreement shall be binding upon MCR.

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, 2063;

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

 

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

(d) The entry of a decree of judicial dissolution of the Company under the Act.

ARTICLE 4. CAPITAL CONTRIBUTIONS OF THE MEMBERS

4.1 Capital Contributions of the Members. Upon or following the execution of
this Agreement, CNL and MCR 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 MCR for its Pre-Development Costs and costs to be reimbursed pursuant
to Section 2.6. Such initial capital contribution by CNL shall constitute a
portion of “CNL’s Initial Capital”. Such initial capital contribution by MCR
shall constitute a portion of “MCR’s Initial Capital”. MCR’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. The amount of cash and the fair market value, as agreed to by
Member Consent, of other property contributed by a Member (whether as Initial
Capital Contributions or otherwise) shall be credited to such Member’s Capital
Account. Without the express written approval of CNL, in no event shall the
aggregate amount of CNL’s Initial Capital exceed Thirteen Million Fifty-Three
Thousand Dollars ($13,053,000) plus any increase to such amount as is approved
by CNL (such amount being referred to herein as the “CNL Maximum Initial
Capital”), and, without the express written approval of MCR, in no event shall
the aggregate amount of MCR’s Initial Capital exceed Six Hundred Eighty-Seven
Thousand Dollars ($687,000) plus any increase to such amount as is approved by
MCR (such amount being referred to herein as the “MCR Maximum Initial Capital”).
Any Construction Cost Overruns (as defined in the Development Agreement) funded
by MCR shall not be treated as a contribution by MCR to the Company or in any
manner construed so as to increase MCR’s Capital Account or MCR’s Initial
Capital under this Agreement, shall not be treated as Additional Capital of MCR
under this Agreement, shall not be treated as a Member Loan by MCR to the
Company and shall not entitle MCR to any interest on or, except as provided in
the Development Agreement, any refund of any amounts so advanced and, except as
provided in the Development Agreement, shall not entitle MCR or to any other
rights or remedies against the Company or any Member.

4.2 No Other Contributions or Advances. Except as expressly required by this
Article 4, neither Member shall have any obligation to make any capital
contribution to the Company nor to advance any funds to the Company. Except as
expressly provided in this Agreement, neither Member shall have any right to
make any capital contribution or advance of funds to the Company.

4.3 No Interest Payable. No Member shall receive any interest on any of its
Capital Contributions. The Operating Return shall not be deemed interest.

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

 

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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 for which Capital Contributions have not been previously made by
the Members and that are not being paid for out of Company Financing or
(ii) costs of development or construction of the Project in excess of the
Project Budget, which costs have been approved by Member Consent (and for which
each of CNL and MCR has approved an increase in the CNL Maximum Initial Capital
and the MCR Maximum Initial Capital, respectively, as provided in Section 4.1)
(collectively, the “Additional Initial Capital”), then the Operating Member
shall cause notice to be delivered to the Members setting forth the purposes and
amounts of such Additional Initial Capital. Each such notice delivered to the
Members shall constitute an “Additional Initial Capital Funding Notice” pursuant
to this Section 4.5(a). All amounts funded by MCR pursuant to this
Section 4.5(a) shall constitute a portion of MCR’s Initial Capital. All amounts
funded by CNL pursuant to this Section 4.5(a) shall constitute a portion of
CNL’s Initial Capital. Within ten (10) Business Days following the date of
delivery of an Additional Initial Capital Funding Notice (in each case, the
“Additional Initial Capital Request Date”), CNL and MCR shall contribute to the
Company, in proportion to their Percentage Interests, as Additional Initial
Capital, the amount so required, up to the CNL Maximum Initial Capital, in the
case of CNL, and up to the MCR Maximum Initial Capital, in the case of MCR. If a
Member fails to fund any of its Additional Initial Capital when and as required
by this Section 4.5(a), the Non-Failing Member shall have an option to purchase
the Failing Member’s Entire Interest for a purchase price equal to the Failing
Member’s Unreturned Initial Capital and the outstanding principal balance of any
Member Loans and Failing Member Loans made by the Failing Member by providing
the Failing Member not less than ten (10) days’ prior, written notice of intent
to exercise such option. If the Failing Member fails to cure such failure prior
to the expiration of such ten (10)-day notice period, and the Non-Failing Member
exercises such option, the Failing Member will cease to have any interest in the
Company or the Project, its Membership Interest in the Company thereafter
representing only the right to receive the purchase price due it, and the
Failing Member shall deliver its Entire Interest to the Non-Failing Member
within ten (10) days against payment by the Non-Failing Member of the purchase
price for the Failing Member’s Entire Interest.

(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 MCR is
responsible for such Out-of-Pocket Costs under the Development Agreement), or to
pay other debts, liabilities or obligations of the Company (other than items
related to or arising out of the development and construction of the Project to
the extent MCR is responsible for such items under the Development Agreement),
or to repay or pay down Company Financing when and as required by the terms
thereof, 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 MCR pursuant to
this Section 4.5(b) shall constitute a portion of MCR’s Additional Capital.
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Additional Funding Notice (in each case, the “Additional Capital Request Date”),
each of CNL and MCR may (but shall have no obligation to) contribute to the
Company, in proportion to its Percentage Interest, as Additional Capital, its
share of the amount so required.

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

(d) If a Member (the “Failing Member”) fails to contribute an amount equal to
the entire amount requested of 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 requested contribution within such applicable
time period pursuant to Section 4.5(a) or 4.5(b) and, thereafter, so notifies
any Failing Member of its intention as to the election by the Non-Failing Member
to exercise one of its options set forth in this Section 4.5(d) (the “Notice of
Intention”), and such Failing Member fails to fully remedy its failure to
contribute such requested capital within ten (10) days after the giving of such
Notice of Intention, then one or more of the following may occur, at the option
and election of the Non-Failing Member, which election shall be specified
prospectively in the Notice of Intention: (i) the Non-Failing Member may require
the Company to repay immediately to the Non-Failing Member the Capital
Contribution it made pursuant to Section 4.5(a) or 4.5(b); (ii) the Non-Failing
Member may, but need not, make an additional Capital Contribution to the Company
not in excess of the amount such Failing Member failed to contribute pursuant to
Section 4.5(a) or 4.5(b), in which case (A) the balance of the Non-Failing
Member’s Capital Account and Unreturned Additional Capital or Unreturned Initial
Capital, as applicable, shall be increased by $1.15 for each $1.00 not funded by
such Failing Member in response to the applicable Additional Capital Funding
Notice or Additional Initial Capital Funding Notice and funded by the
Non-Failing Member in accordance with the terms of this Section 4.5 (which
adjustment shall be treated as a further amount of Additional Capital or
Additional Initial Capital, as applicable, contributed by such Non-Failing
Member), (B) each of such Failing Member’s distribution percentages pursuant to
Sections 9.4(g), 9.4(h) and 9.4(i) (other than the percentages for MCR’s
promoted interest) shall be reduced by one percent (1%) for every $20,000 of
Additional Capital or Additional Initial Capital such Failing Member failed to
contribute to the Company pursuant to this Section 4.5 and Unreturned the
Non-Failing Member Unreturned in accordance with the terms of this Section 4.5
and, in turn, each of the Non-Failing Member’s distribution percentages under
Sections 9.4(g), 9.4(h) and 9.4(i) (other than the percentages for MCR’s
promoted interest) shall be increased by the equivalent percentage, and (C) any
adjustments to the Members’ Capital Account balances to give effect to the
foregoing shall be treated as liquidated damages for tax purposes; (iii) the
Non-Failing Member may cause the Company to be dissolved, in which case such
Non-Failing Member will be the Liquidating Member and will have the right to
cause the Project 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 Additional Capital or Additional
Initial Capital, as applicable, contributed to the Company by such Failing
Member, an amount equal to the amount such Failing Member failed to contribute
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or 4.5(b), which Failing Member Loan made by the Non-Failing Member to the
Failing Member shall bear interest at a rate of 18% per annum (compounded
annually) from the date of the advance until such Failing Member Loan is paid to
the Non-Failing Member in full. Payments with respect to such Failing Member
Loan shall be made to the Non-Failing Member out of distributions or proceeds
from purchase of the Failing Member’s Membership Interest in the Company 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 made to replace
Additional Capital shall be nonrecourse to such Failing Member, shall be secured
by such Failing Member’s Membership Interest in the Company and proceeds
thereof, and shall be satisfied only out of distributions in respect of the
Failing Member’s Membership Interest in the Company and proceeds from purchase
of the Failing Member’s Membership Interest in the Company as provided above in
this Section 4.5(d). Any such Failing Member Loan made to replace Additional
Initial Capital shall be recourse to such Failing Member, shall be secured by
such Failing Member’s Membership Interest in the Company and proceeds thereof
and shall be payable out of distributions in respect of the Failing Member’s
Membership Interest in the Company and proceeds from purchase of the Failing
Member’s Membership Interest in the Company as provided above in this
Section 4.5(d), but satisfaction of such Failing Member Loan shall not be
limited to distributions in respect of the Failing Member’s Membership Interest
in the Company or proceeds from purchase of the Failing Member’s Membership
Interest in the Company, and the Non-Failing Member shall retain all rights
available at law of in equity to collect such Failing Member Loan. A Failing
Member Loan is prepayable at any time or from time to time. If not sooner paid
in full, a Failing Member Loan made to replace Additional Capital shall mature
upon the liquidation of the Company; if not sooner paid in full, a Failing
Member Loan made to replace Additional Initial Capital shall mature upon the
earlier of liquidation of the Company or demand of the Non-Failing Member that
holds such Failing Member Loan. The rights under this Section 4.5(d) shall
constitute the sole and exclusive remedies of the Company and the other Member
in the event of a failure of any Member to fund a request for Additional
Capital. In the event of a failure of any Member to fund a request for
Additional Initial Capital, the Company and the other Member shall have, in
addition to the rights under this Section 4.5(d), all other rights and remedies
available at law of in equity to compel funding of such Additional Initial
Capital.

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 Member within forty-five (45) days of receipt of the Loan Request Notice
from the Operating Member or by such earlier date as shall have been determined
to be appropriate by the Operating Member, as set forth in the Loan Request
Notice. If any of the Members does not lend the full amount set forth for it in
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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, and 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. Unless the terms of the Member Loans
provide otherwise, if more than one of the Members have outstanding Member
Loans, amounts paid in respect of Member Loans shall be paid pro rata to the
Members in accordance with the total principal and interest amounts of Member
Loans then outstanding. All amounts received on Member Loans made by a
particular Member shall be applied to repay those Member Loans in the
chronological order in which they were made.

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 managing member of the
Company, subject to and in accordance with the terms hereof. The Members hereby
appoint CNL as the initial Managing Member of the Company.

(b) Subject to approval by Member Consent of Major Decisions under
Section 6.2(a) and other matters requiring Member Consent hereunder, approval by
CNL Consent of CNL Decisions under Section 6.2(b), and the other restrictions on
authority and express approval rights otherwise provided in this Agreement, the
Managing Member shall have full and complete authority, power and discretion to
manage and control the day-to-day affairs and business of the Company and shall
have such power as is necessary, convenient or appropriate to carry out the
purposes of the Company and to conduct the day-to-day business of the Company
consistent with the terms of this Agreement. Except as otherwise expressly
provided in this Agreement, any Member acting alone (other than Managing Member
acting in its capacity as managing member of the Company in accordance with and
subject to the terms of this Agreement or Operating Member acting in accordance
with the authority delegated to Operating Member in accordance with and 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
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conduct the business and affairs of the Company (i) in accordance with the then
effective Project Budget or Operating Budget and Capital Budget, as the case may
be, (ii) following Completion, in a first-class and prudent manner, and (iii) in
compliance in all material respects with all Company Financing, all material
agreements affecting the Project or the Company, all applicable Requirements and
any court orders. Subject to Section 6.2 and other provisions of this Agreement
requiring Member Consent or CNL Consent, as applicable, and the other
restrictions on authority and express approval rights otherwise provided in this
Agreement, 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, and as
may be required for REIT purposes, maintaining tax books and tax records and all
other financial statements and records;

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

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

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

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

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

(vii) oversight and management of litigation filed on behalf of or against the
Company as set forth in this Agreement

(viii) 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 Company
Financing;

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

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

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

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

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

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

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

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

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

(xix) maintaining a system of internal controls necessary for CNL to complete
CNL’s Sarbanes-Oxley certifications, as requested by CNL; provided, however,
that to the extent the testing of the Company’s internal controls or the
implementation of internal controls as a result of such testing causes the
Company to incur non de minimus expenses, CNL shall bear the responsibility for
such expenses.

(c) The Managing Member shall have the right to delegate any of the above
responsibilities and authority to any other Member of the Company, subject to
the acceptance by such Member of such delegation. The Managing Member hereby
designates MCR as Operating Member and delegates to MCR, subject to the right of
the Managing Member to terminate such delegation in accordance with Section 6.7,
the foregoing authority of the Managing Member described in subparagraphs
(ii) through (xviii) of Section 6.1(b). Until termination of such delegation of
authority, MCR shall have full authority, power, responsibility and discretion
to operate the Company in accordance with such delegated authority,
responsibilities and duties. MCR hereby accepts such delegation by CNL as
Managing Member and agrees that it shall perform as Operating Member the
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authority, power and discretion delegated to it as part of such delegation in
accordance with the standard of care required under Section 6.1 of this
Agreement as if it was the Managing Member of the Company. CNL acknowledges that
MCR shall have no responsibilities or obligations to perform the duties of
Managing Member of the Company (including any of the functions enumerated in
subparagraphs (ii) through (xviii) of Section 6.1(b)) except to the extent
expressly set forth in other provisions of this Agreement.

6.2 Major Decisions.

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

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

(ii) Enter into any contract or transaction with, or pay any amount to, a Member
or any Affiliate of a Member, except as expressly provided in this Agreement,
the Development Agreement or the Construction Contract;

(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 real property other than the Project and easements and similar
interests necessary for the Project;

(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 (A) the sale of
personal property which is not necessary for the operation of the Project (or if
necessary, which is replaced by sufficient substitute property) for a sales
price of not more than $25,000, (B) Permitted Leases, (C) easements and similar
encumbrances necessary to provide services to the Project or (D) liens for a
replacement Company Financing proposed by MCR in accordance with paragraph
(x) below;

(v) Modify the Project Budget, other than to reallocate demonstrated line item
savings to demonstrated line item overruns or to provide for use of amounts from
the contingency line item, so long as each Member shall be given notice thereof
promptly following such action;

(vi) Voluntarily dissolve or liquidate the Company, except as provided for in
this Agreement;

(vii) Authorize or effect a merger or consolidation of the Company with or into
one or more entities, redomicile the Company, or convert the form of the Company
to other than a limited liability company;

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

(x) Except for the Construction Loan, cause the Company to incur any Company
Financing or modify, supplement or refinance any Company Financing; provided,
however, that not earlier than thirty (30) days before the maturity of the
Construction Loan or any other then-existing Company Financing that has been
guaranteed in whole or in part by MCR or any of its Affiliates (including the
MCR Guarantor), if new Company Financing, the proceeds of which will be used to
repay the Construction Loan or such other matured Company Financing, has been
presented, in good faith, by MCR and is not approved by Member Consent, then MCR
shall be authorized, without Member Consent, to close on such replacement
Company Financing presented by MCR, in an amount not more than the
then-outstanding balance of the Construction Loan or other matured Company
Financing plus transaction costs to complete the closing on the new Company
Financing, and to encumber any or all of the Company’s property (including the
Project) as security for such new Company Financing, unless within thirty
(30) days after MCR presents the proposed replacement Company Financing, CNL
provides the Company with a commitment for replacement Company Financing for at
least as great a principal amount as the replacement Company Financing proposed
by MCR, with no requirement for a guaranty by MCR or its Affiliates (other than
a guaranty on terms no more onerous to MCR or its Affiliates than proposed by
MCR as part of the replacement Company Financing proposed by MCR) and otherwise
on terms at least as favorable to the Company as the replacement Company
Financing proposed by MCR;

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

(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 of
obligations of another Person;

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

(xv) Modify the Development Fee or otherwise amend, modify, supplement, assign
or grant any material consents or waivers under the Development Agreement;
provided, however, that if MCR is in default beyond any applicable cure period
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of the Development Agreement, only the consent of CNL shall be required to
terminate the Development Agreement, replace or permit the replacement of MCR as
developer under the Development Agreement or otherwise amend, modify, supplement
or grant any material consents or waivers under the terms of the Development
Agreement;

(xvi) Terminate the Construction Contract or otherwise amend, modify,
supplement, assign or grant any material consents or waivers requiring owner
consent under the Construction Contract; provided, however, that if MCR is in
default beyond any applicable cure period under the terms of the Construction
Contract, only the consent of CNL shall be required to terminate the
Construction Contract, replace or permit the replacement of MCR as the General
Contractor under the Construction Contract or otherwise amend, modify,
supplement or grant any material consents or waivers requiring owner consent
under the terms of the Construction Contract;

(xvii) Amend this Agreement or the Certificate of Formation;

(xviii) Issue any Membership Interest in the Company or admit any Person as an
additional member in the Company, except as expressly permitted by Article 10;

(xix) After Completion, determine whether and to what extent the Project should
be repaired or restored following casualty or condemnation, other than as
required by Company Financing;

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

(xxi) Threaten, file or settle any claim involving the Company, other than
(A) eviction proceedings in the ordinary course of business, (B) claims that are
insured (subject to any applicable deductible) and claims involving amounts less
than $25,000, individually or in the aggregate for related claims and (C) in the
case of action by MCR, during the construction period, claims related to
development or construction of the Project that are within the scope of MCR’s
Construction Cost Overrun responsibility under the Development Agreement;
provided that MCR shall provide CNL prior written notice of any such claim and
MCR’s proposed response thereto;

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

(xxiii) hire any employee for the Company; or

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

(b) Notwithstanding anything to the contrary, without prior CNL Consent in each
instance, the Company, the Managing Member and the Operating Member shall not do
any of the following (each, a “CNL Decision”):

(i) Adopt an Operating Budget or a Capital Budget or, except as expressly
provided in another provision of this Agreement, cause the Company to pay or
incur any expense not provided for in the Project Budget, an Operating Budget or
a Capital Budget; provided, however, that CNL shall not unreasonably withhold
its consent to any proposed expenditure that MCR has advised CNL that MCR
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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 (A) $5,000
and (B) ten percent (10%) of the line item and that, when taken together with
all other variances in the Operating Budget in such fiscal year, do not increase
the total amount provided in the applicable Operating Budget by more than ten
percent (10%) in the aggregate;

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

(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 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 greater Houston, Texas market.

CNL will use good faith efforts to consult with MCR on matters constituting CNL
Decisions; provided, however, that CNL shall have no obligation to implement or
otherwise be subject to any information or input offered by MCR in connection
therewith, except as otherwise provided by this Agreement.

(c) Each Member shall use good faith efforts to provide the other Member with
not less than thirty (30) days’ advance notice of any proposed decision that
requires the approval of such other Member under Section 6.2(a) or 6.2(b);
provided, however, that in the event of an emergency or other circumstance that
does not reasonably permit such advance notice, a Member may call upon the other
Member to respond within a shorter, reasonable period of time (but in no event
less than two (2) Business Days’ advance notice). Member Consent or CNL Consent,
as applicable, may be by written consent or may occur pursuant to a meeting or
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 the Members at meetings to consider Major
Decisions and/or CNL Decisions and shall deliver a copy thereof to each of the
Members within seven (7) days after the date of the meeting.

(d) The authority of both the Managing Member and the Operating Member to
designate a bank for the deposit of Company funds shall be subject to
Section 6.3 below.

 

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6.3 Bank Accounts. The Company will maintain separate bank accounts in such
banks as the Members by Member Consent may designate or any lender of the
Company may require, which accounts shall be exclusively for the deposit and
disbursement of 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 MCR shall at all times be an authorized
signatory on all Company bank accounts without the requirement of any
co-signatory for such accounts. All signatories shall be insured by fidelity
bonds or employee dishonesty insurance on terms reasonably acceptable to CNL.

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 Project, for CNL’s review and approval, a proposed operating budget and
a proposed capital budget, each for the portion of the then-current calendar
year remaining after Completion, 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 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
calendar year, the Operating Member shall prepare or cause to be prepared by the
Property Manager for the Project, 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 and MCR
agree on each such proposed budget on or before December 1st of each calendar
year. If approved by CNL, the final proposed operating budget for such
subsequent calendar year shall become the then operative “Operating Budget”
hereunder for such calendar year. If approved by CNL, the final proposed capital
budget for such subsequent calendar year shall become the then operative
“Capital Budget” hereunder for such calendar year. If, as of the commencement of
any calendar 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 those portions of the prior calendar 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 calendar 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, fulfillment of obligations to tenants under
Permitted Leases and utilities, regardless of the amounts permitted therefore in
the prior calendar year’s Operating Budget.

6.5 Insurance. The Operating Member shall cause the Company to obtain and
maintain all insurance described on Exhibit D to the extent that such required
coverages are available on commercially reasonable terms. If the Operating
Member determines that any of such insurance coverages are not available on
commercially reasonable terms, then the Operating Member shall notify the
Members and, subject to the last sentence of this Section 6.5, the Members shall
agree upon the coverages to be maintained and the means of placing the related
insurance. Nothing in this Section 6.5 requires the Operating Member to obtain
insurance coverage that it is unable to arrange on commercially reasonable
terms. CNL will have the right to place any insurance coverage listed in Exhibit
D that the Operating Member advises it is unable to obtain so long as the cost
and terms for such coverage arranged by CNL are commercially reasonable.

 

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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 and to review the management, progress and
conditions (financial and otherwise) of the Project and the management of the
Company. Notwithstanding anything to the contrary in this Agreement, the rights
of CNL to provide such consultation shall include: (a) the right to discuss, and
provide advice with respect to, the Company’s business (including the management
of the Project) with the Operating Member and the Company’s officers, employees,
managers and agents and the right to consult with and advise the Operating
Member on matters materially affecting the Company (including the Project);
(b) the right to submit business proposals or suggestions relating to the
Company (including the Project) to the Operating Member and the Company’s
management from time to time with the requirement that one or more members of
the Operating Member’s management discuss such proposals or suggestions with CNL
or its agent or Affiliate, as applicable, within a reasonable period after such
submission and the right to call a meeting with the Operating Member’s
management in order to discuss such proposals or suggestions; and (c) the right
(i) to visit the Company’s business premises and the Project during normal
business hours, (ii) to receive financial statements, operating reports, budgets
or other financial reports of the Company (including those relating to the
Project) on a regular basis describing the financial performance, significant
proposals and other material aspects of the Company (including the Project),
(iii) to examine the books and records of the Company (including those relating
to the Project) and (iv) to request such other information relating to the
Company (including the Project) at reasonable times and intervals in light of
the Company’s normal business operations concerning the general status of the
Company’s business, financial condition and operations (including the Project)
but only to the extent such information is reasonably available to the Company
and in a format consistent with how the Company maintains such information.

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

(a) CNL shall have the right, without the concurrence of MCR, to terminate the
delegation of authority to MCR as Operating Member, and remove MCR as Operating
Member, (i) before Completion, if Cause exists or (ii) after Completion, at any
time with or without Cause. For the avoidance of doubt, any termination by CNL
and removal of MCR as Operating Member shall not affect MCR’s right to approve
Major Decisions or any other matters requiring Member Consent under this
Agreement.

(b) For purposes of this Agreement, termination of MCR as Operating Member for
“Cause” shall mean termination due to any one or more of the following: (i) any
material breach or default by MCR in its obligations as Operating Member as
delegated by the Managing Member under this Agreement, which breach or default,
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the payment of money, has not been cured within fifteen (15) days after written
notice to MCR, 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 MCR (provided,
however, that MCR shall have an additional ninety (90) days to cure such breach
if such breach is not curable within such thirty (30) day period, so long as MCR
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 ninety (90) day period); (ii) any act by MCR that MCR knows to
be beyond the scope of its authority under this Agreement when the act is taken;
(iii) in the event of any fraud, gross negligence or willful misconduct by MCR
against CNL or the Company in connection with MCR’s activities as Operating
Member; (iv) the Project not Completed by the date required under the
Development Agreement (except in the case of an Event of Force Majeure as
defined in the Development Agreement); (v) MCR’s termination as developer
pursuant to the terms of the Development Agreement prior to Completion; and
(vi) prior to Completion, none of the MCR Principals (or a replacement
individual reasonably acceptable to CNL) is involved in management of the
day-to-day operations of MCR. Such removal and termination of authority shall be
effective upon delivery of written notice thereof to MCR and, upon MCR’s removal
and termination, CNL shall have the right to become the substitute Operating
Member, directly or through an Affiliate, or, if termination of MCR is for
Cause, to appoint and delegate authority to another person as substitute
Operating Member, who shall have such rights and obligations of the Operating
Member as may be delegated by the Managing Member.

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

6.8 Development. The Company shall retain MCR as the developer for the Project,
to act as the Company’s sole and exclusive agent to coordinate and supervise the
management and administration of the development of the Project and the
construction of the improvements comprising the Project. The Company and MCR are
simultaneously with execution of this Agreement entering into the Development
Agreement. MCR will cause Completion of the Project for a cost not to exceed the
Guaranteed Price (as defined in the Development Agreement). MCR shall cause MCR
Guarantor to provide all guaranties required in connection with the Construction
Loan, including any completion guaranty, cost guaranty and/or construction
warranty as required by the Construction Lender. As compensation for MCR’s
development services, the Company agrees to pay MCR a development fee (the
“Development Fee”) equal to three percent (3%) of the aggregate costs in the
Project Budget.

 

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6.9 Management Agreement. The Company will enter into a management agreement
(the “Management Agreement”) with the Property Manager to manage the Project,
pursuant to which, as compensation for the services described therein, Property
Manager shall be paid a property management fee as set forth in the Management
Agreement. The initial Property Manager will be an Affiliate of MCR designated
by MCR, which initial Property Manager shall be paid a property management fee
of 2.50% of gross receipts from the Project with a monthly floor of $8,000. The
Members shall negotiate the terms of the Management Agreement with the initial
Property Manager in good faith. The MCR Affiliated Property Manager shall not be
terminated by the Company unless (i) MCR is removed as the Operating Member in
accordance with Section 6.7 or (ii) the MCR Affiliated Property Manager is in
default under the Management Agreement beyond any applicable cure periods.
Should the Management Agreement with the initial Property Manager terminate for
any reason, the Company will enter into a replacement Management Agreement for
management of the Project 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 authority to enforce the remedies of the Company, and the sole
and exclusive right to grant any waiver of performance, under any contract with
MCR or an Affiliate of MCR, including the Development Agreement, the
Construction Contract and the Management Agreement with the initial Property
Manager pursuant to Section 6.8.

6.11 Indemnification of Members; Exculpation. The Company shall hold harmless,
indemnify and defend each of the Managing Member and the Operating Member and
each of their respective Affiliates from and against any and all claims, suits,
actions, and other proceedings, and all loss, cost, damage, expense or liability
(including fees and expenses of attorneys and other professional advisors and
court costs) arising out of or relating to (i) the status as a Member of the
Company or its relationship with the Company or, to the extent related to the
Company, another Member or (ii) 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, as to any Member or its
Affiliates provided that such decision or action taken, omitted or suffered by
such Managing Member or Operating Member, as applicable, was done so 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 such Managing Member or
Operating Member, as applicable and did not involve or result from (x) fraud,
bad faith, gross negligence or willful misconduct on the part of the Member or
any of its Affiliates, (y) the breach of any covenant, agreement or obligation
of the Member or its Affiliates contained in this Agreement or, in the case of
MCR, the Development Agreement, the Construction Contract or the Management
Agreement with MCR’s Affiliated Property Manager or (z) the knowing breach of
any representation or warranty made by the Member in this Agreement. A Member
will not be liable or accountable, in damages or otherwise, to the Company or
the other Member for anything the Member may do or refrain from doing in
managing the business, properties and affairs of the Company provided that such
decision or action taken, omitted or suffered by such Member was done so in the
reasonable and good faith belief that such decision or action was in the best
interest of the Company and did not involve or result from (a) fraud, bad faith,
gross negligence or willful misconduct on the part of the Member or (b) actions
that the Member knows to be outside the scope of its authority as allowed by
this Agreement when taken. MCR’s responsibility in respect of design and
construction of the Project is as provided in the Development Agreement, and MCR
will have no greater responsibility solely in respect of design and construction
of the Project than as provided in the Development Agreement.

 

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

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

7.1 Books; Statements.

(a) 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 necessary, as
determined by the Managing Member. All financial statements of the Company
provided for below shall be prepared in accordance with GAAP, consistently
applied.

(b) Following the Effective Date:

(i) following a tenant’s occupancy of 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 month for which 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 month;

(ii) 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 such month,
together with a profit and loss statement and statement of cash flows for 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; and

(iii) 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 a profit and loss
statement for the calendar quarter immediately preceding with a cumulative
fiscal year accrual basis profit and loss statement to date and a statement of
change in each Member’s capital for the quarter and the fiscal year to date; and

(c) 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 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
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shall be furnished to each Member within sixty (60) days after the end of such
fiscal year, showing on an accrual basis in accordance with GAAP the financial
condition of the Company at the end of such fiscal year and the results of
operations of the Company for such fiscal year 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.

(d) 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 for CNL to complete CNL’s Sarbanes-Oxley certifications, as requested
by CNL; provided, however, that to the extent the testing of the Company’s
internal controls or the implementation of internal controls to satisfy CNL’s
standards causes the Company or the Operating Member to incur non de minimus
expenses, CNL shall bear the responsibility for such expenses. CNL shall from
time to time advise the Operating Member of the requirements necessary to meet
CNL’s Sarbanes-Oxley standards so as to allow the Operating Member to implement
appropriate internal controls.

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

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

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

7.5 Tax Returns. The Company shall elect to be treated and shall file its tax
returns as a partnership for federal and, to the maximum extent allowed, state,
municipal and other governmental income tax purposes. The Company shall prepare
or cause to be prepared, on an accrual basis, all federal, state, municipal and
other governmental partnership income 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 (i) 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 (ii) final returns to each Member for
review and approval no later than five and one-half (5 1⁄2) months after the
close of the Company’s taxable year. Each Member shall notify the other
Member(s) upon receipt of any notice of tax examination of the Company by
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7.6 Tax Matters Partner. CNL is hereby appointed the “Tax Matters Partner” of
the Company for all purposes pursuant to Sections 6221-6231 of the Code, with
respect to operations conducted by the Company during the period that CNL is a
Member. The Tax Matters Partner shall comply with the requirements of
Section 6221 through 6232 of the Code. The Tax Matters Partner shall have the
authority, in its reasonable discretion, to select and appoint, from time to
time, independent certified public accountants to prepare tax returns and annual
audited financial statements for the Company, the expense of which shall be
borne by the Company. Notwithstanding the foregoing, the Tax Matters Partner
shall have no authority to bind the Company or any other Member.

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

7.8 Section 754 Election. At the request of a Member, the Company shall make and
file a timely election under Section 754 of the Code (and a corresponding
election under applicable state or local law) in the event of a transfer of a
Membership 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 Member or transferee
shall reimburse such expenses with respect to adjustments under Section 743 of
the Code in the proportion which the interest of each Member or transferee bears
to the sum of the interests of all such Members or 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
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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
for a taxable year (or other period for which the Treasury Regulations requires
an allocation to be made) shall be allocated among the Members and to their
Capital Accounts as may be required to cause the balances of the Members’
Capital Accounts (in the case of each Member, increased by (i) 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 (ii) the share of Company Minimum
Gain and Member Nonrecourse Debt Minimum Gain allocable to the Member, as
determined pursuant to Treasury Regulation Section 1.704-2) to be as nearly
equal to their Target Balances as possible, consistent with the provisions of
Section 8.5. To the extent the allocation of Net Income or Net Loss does not
cause the Capital Account of each Member (as so adjusted) to equal its Target
Balance, items of income or gain (including items of gross income) will be
reallocated to any Member with a Capital Account (as so adjusted) which is less
than its Target Balance, and items of loss, deduction or expense will be
reallocated to any Member with a Capital Account (as so adjusted) that is
greater than its Target Balance, in each case in such manner as to reduce, to
the greatest extent possible, the aggregate differences between Target Balances
and Capital Accounts (as so adjusted).

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, pursuant to Section 8.1 (subject to
the limit in this Section 8.2), until the Adjusted Capital Account of each such
other Member is zero.

 

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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 taxable year (or other period for which the
Treasury Regulations requires an allocation to be made), 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. Subject to Section 8.2, Nonrecourse Deductions shall
be allocated to the Members pro rata in accordance with their Percentage
Interests. For purposes of this Agreement, the term “Nonrecourse Deductions”
shall have the meaning set forth in Treasury Regulations Section 1.704-2(b)(1).
This Section 8.3(b) is intended to comply with Treasury Regulations
Section 1.704-2(e) and shall be interpreted and applied in a manner consistent
therewith.

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

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

8.5 Code Section 704(b) Allocations. The allocations set forth in Sections
8.3(a), 8.3(b), 8.3(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
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Allocation is made, income, gain, loss and deduction shall thereafter 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
as closely as possible the net aggregate amount of such items that would have
been allocated to each 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,
distortions that would otherwise occur as a consequence of the Regulatory
Allocations in the absence of this Section 8.5.

8.6 Other Allocation Provisions. The Managing Member shall make all applicable
elections, determinations and other decisions under the Code and applicable
Treasury Regulations (including, without limitation, the deductibility of a
particular item of expenses and the positions to be taken on the Company’s tax
return).

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

8.8 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 calendar year unless
the Members determine otherwise by Member Consent.

8.9 Recapture. Any recapture of depreciation, amortization and other cost
recovery deductions shall be allocated among the Members in proportion to the
respective amounts of depreciation, amortization and cost recovery deductions
allocated to each Member; provided, however, that this provision addresses only
the character of the Net Income allocated to a Member, and the recapture amount
allocated to any Member shall not exceed the total Net Income allocated to such
Member for the applicable period.

ARTICLE 9. DISTRIBUTIONS

9.1 Percentage Interests in Company. The percentage interest of the respective
Members in the Company (“Percentage Interest”) shall be:

 

CNL:

     95 % 

MCR:

     5 % 

The Percentage Interest of each Member is subject to the preferred and priority
rights provided for herein and adjustment pursuant to the terms of
Section 4.5(d).

 

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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 net loss
of the Company for such period, 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
net loss, without duplication, the following items: (1) the amount charged for
depreciation, amortization or any other deduction not involving a cash
expenditure during such period, (2) the amount of Capital Contributions to the
Company during such period, (3) the proceeds of short-term borrowings of the
Company in the ordinary course of business (including Member Loans) received
during such period, (4) interest received during such period on non-cash
consideration received by the Company pursuant to a Major Capital Event, (5) any
amount by which cash reserves, which were previously established prior to the
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 Project, have been reduced during such period (other than
through the payment of expenses), (6) the proceeds of business interruption
insurance received during such period to the extent not otherwise included in
determining net income or net loss, (7) cash expenditures paid out of cash
reserves during such period to the extent such expenditures were deducted in
determining net income or net loss, (8) rental receipts, collection of
receivables and other cash receipts received during such period which were
included (whether or not received) in determining net income or net loss in a
prior period, (9) the costs and expenses incurred by the Company during such
period in connection with a Major Capital Event to the extent deducted in the
determination of net income or net loss, except to the extent that net receipts
of the Company from such Major Capital Event were insufficient to pay such costs
and expenses, and (10) expenditures during such period for items deducted in
determining net income or net loss of the Company, to the extent paid from
proceeds of a Major Capital Event.

(ii) Deductions. There shall be subtracted from such net income or added to such
net loss, without duplication, the following items: (1) the amount of payments
made during such period on account of principal upon mortgage loans secured by
Company property and any other loans made to the Company, including Member
Loans, in each case, to the extent not paid from the proceeds of a Major Capital
Event, (2) funds disbursed during such period for capital expenditures, leasing
commissions, tenant finish or any other expenses not deducted in determining net
income or net loss of the Company, except to the extent paid from proceeds of a
Major Capital Event that were not included in the determination of net income or
net loss, (3) any amount to establish or increase cash reserves during such
period 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 Project, (4) any amount
included in net income or net loss but not received in cash by the Company
during such period, (5) the proceeds during such period of a Major Capital Event
to the extent included in determining net income or loss, (6) any amounts
distributed during such period to the Members in payment of any guaranteed
payment within the meaning of Section 707(c) of the Code, and any amounts
distributed to a Member during such period for services rendered other than in
its capacity as a member of the Company within the meaning of Section 707(a) of
the Code, to the extent not previously taken into account as a deduction in
determining net income or net loss, and (7) the costs and expenses incurred by
the Company during such period in connection with a Major Capital Event to the
extent that net receipts of the Company from such Major Capital Event were
insufficient to pay such costs and expenses and such costs and expenses were not
deducted in determining net income or loss.

 

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(b) “Extraordinary Cash Flow” shall mean the cash receipts of the Company from a
Major Capital Event as reduced (to the extent not deducted in determining
Operating Cash Flow (or deducted in determining Operating Cash Flow but added
back pursuant to paragraph (a)(1) above)) by (i) 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, (ii) funds deposited in
reserves pursuant to a determination by Member Consent that such reserves and
the amount thereof are required or appropriate to provide for actual or
contingent obligations of the Company or improvements to the Project,
(iii) funds applied to pay or prepay any indebtedness of the Company ((including
interest and principal payable on Member Loans in accordance with their terms)
in connection with such Major Capital Event and (iv) any portion of such cash
receipts spent on reconstruction or repair. To the extent that any amount
received pursuant to a Major Capital Event has been set aside as a reserve
pursuant to item (ii) 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.

(c) “Operating Return” shall mean a cumulative return, compounded monthly, equal
to ten percent (10%) per annum on each Member’s Unreturned Additional Capital
and/or Unreturned Initial Capital, as the case may be. 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 Additional Capital” shall mean, for each Member, its Additional
Capital, reduced by (i) any distributions of Extraordinary Cash Flow made to
such Member pursuant to Section 9.4(f) hereof and (ii) to the extent that such
distributions exceed the amount of such Member’s Disproportionate Capital
attributable to Unreturned Initial Capital at the time, any distributions of
Extraordinary Cash Flow made to such Member pursuant to Section 9.4(f) hereof.

(e) “Unreturned Operating Return” shall mean, for each Member, its Operating
Return computed with respect to Unreturned Initial Capital or Unreturned
Additional Capital, as the case may be, reduced as follows:

(i) in the case of the Operating Return computed with respect to Unreturned
Initial Capital, by (A) distributions of Operating Return made to such Member
pursuant to Sections 9.3(a) and 9.4(a) hereof and (B) distributions of
Extraordinary Cash Flow made to such Member pursuant to Sections 9.4(f) and
9.4(f) hereof to the extent that such distributions do not exceed the amount of
such Member’s Operating Return on Unreturned Initial Capital that is
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(ii) in the case of the Operating Return computed with respect to Unreturned
Additional Capital, by (A) distributions of Operating Return pursuant to
Sections 9.3(d) and 9.4(d) hereof and (B) to the extent that such distributions
exceed the amount of such Member’s Operating Return on Unreturned Initial
Capital that is attributable to Disproportionate Capital, any distributions of
Extraordinary Cash Flow made to such Member pursuant to Sections 9.4(f) and
9.4(f) hereof.

(f) “Unreturned Initial Capital” shall mean, for each Member, its Initial
Capital Contributions, reduced by (i) any distributions of Extraordinary Cash
Flow made to such Member pursuant to Section 9.4(e) hereof and
(ii) distributions of Extraordinary Cash Flow made to such Member pursuant to
Section 9.4(f) hereof to the extent that such distributions do not exceed the
amount of such Member’s Disproportionate Capital attributable to Unreturned
Initial Capital at the time.

(g) “Disproportionate Capital” shall mean, as to any Member at any time, the
amount by which (i) the aggregate Unreturned Additional Capital and Unreturned
Initial Capital of the Member at the time exceeds (ii) the Member’s
proportionate share (based on Percentage Interests) of the aggregate Unreturned
Additional Capital and Unreturned Initial Capital of all Members at the time.

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

(a) First, if any Member has Disproportionate Capital, to the Members with
Disproportionate Capital, pari passu, in accordance with the respective
outstanding balance of Disproportionate Capital of each Member, until each
Member’s Disproportionate Capital has been reduced to zero;

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

(d) Fourth, to the Members, pari passu, in accordance with the outstanding
balances of the Members’ respective Unreturned Operating Return on Unreturned
Additional Capital, until each Member’s Unreturned Operating Return balance on
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(e) Thereafter, to the Members pro rata in accordance with their respective
Percentage Interests.

Notwithstanding the foregoing, no Operating Cash Flow will be distributed by the
Company before the Stabilization Date unless both Members concludes that there
is adequate sources of funds from which the Company may satisfy its obligations
and liabilities without a call for Additional Capital. Any Operating Cash Flow
accumulated pursuant to the preceding sentence may be used to satisfy any
obligation or liability of the Company. After the Stabilization Date or at such
earlier time as both Members conclude that adequate funds are available to
satisfy the Company’s obligations and liabilities, the Company will distribute
in accordance with this Section 9.3 all accumulated Operating Cash Flow that has
not been expended for other Company purposes prior to such time.

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

(a) First, if any Member has Disproportionate Capital, to the Members with
Disproportionate Capital, pari passu, in accordance with the respective
outstanding balance of Disproportionate Capital of each Members, until each
Member’s Disproportionate Capital has been reduced to zero;

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

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

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

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

 

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(g) Seventh, eighty percent (80%) to the Members, pari passu, in proportion to
their respective Percentage Interests, and twenty percent (20%) to MCR, until
CNL achieves a 15% IRR on its aggregate Capital Contributions;

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

(i) Thereafter, Forty percent (40%) to the Members, pari passu, in proportion to
their respective Percentage Interests and sixty percent (60%) to MCR.

9.5 Loss of Promoted Interest. Notwithstanding the provisions of Section 9.4,
MCR shall no longer have the right to distributions with respect to its
so-called “promoted interest” (i.e. the portion of distributions allocated
specifically to MCR, as opposed to all Members in accordance with their
Percentage Interests), as such distributions are set forth in Sections 9.4(g),
9.4(h) and 9.4(i), in the event that MCR is terminated as developer pursuant to
the terms of the Development Agreement prior to Completion of the Project. Upon
the loss of MCR’s promoted interests set forth in Sections 9.4(g), 9.4(h) and
9.4(i), such Sections 9. 9.4(g), 9.4(h) and 9.4(i) shall be deemed revised to
provide that all distributions thereunder shall be made to the Members
(including MCR) pro rata in accordance with their Percentage Interests, and MCR
shall no longer be entitled to any distributions under Section 9.4(g), 9.4(h)
and 9.4(i) in excess of a distribution based on its Percentage Interest. Without
limiting the foregoing, if CNL terminates and removes MCR as the Operating
Member in accordance with Section 6.7 other than as a result of MCR’s
termination as developer pursuant to the terms of the Development Agreement,
such termination and removal shall not cause MCR to lose the promoted interests
set forth in Sections 9.4(g), 9.4(h) and 9.4(i); provided, however, that such
promoted interest shall remain subject to dilution as provided in
Section 4.5(d).

9.6 No Distributions In Kind. A Member may require that all distributions be
made in cash, and no Member shall be obligated to accept any distribution in
kind from the Company.

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 (each a “Transfer,” and
including, where the context so requires, the correlative noun form of such
terms), or permit the Transfer of all or any portion of its Membership Interest
in the Company, or in any Member Loans made by it, whether by operation of law
or otherwise. Any purported Transfer of all or any portion of a Member’s
Membership 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. Subject to compliance with Sections 10.2 and 10.3, a Transfer
by CNL of all or a portion of its Entire Interest to an Affiliate of CNL
Financial Group, LLC (“CFG”) from time to time, or in connection with any
corporate merger, acquisition or other combination CNL Growth Properties, Inc.
(“CGP”) or the sale or transfer of all or substantially all of the assets of
CGP, shall be permitted under this Article 10, and CNL shall not be required to
obtain the consent of any other Member nor offer all or any portion of its
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compliance with Sections 10.2 and 10.3, 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. Subject to
compliance with Sections 10.2 and 10.3, a Transfer by MCR of all or a portion of
its Entire Interest to Mill Creek Residential Trust LLC (“Mill Creek”) or an
Affiliate of Mill Creek from time to time, or in connection with any corporate
merger, acquisition or other combination of Mill Creek or the sale or transfer
of all or substantially all of its assets, shall be permitted under this Article
10, and MCR shall not be required to obtain the consent of any other Member nor
offer all or any portion of its Entire Interest to be so Transferred to any
other Member. Except as otherwise expressly provided herein, no permitted
assignment shall terminate the Company.

10.2 Assumption by Assignee. Any assignment of all or any portion of an Entire
Interest 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 under this Agreement existing or arising at the time of and
subsequent to such assignment to the extent related to the Entire Interest so
transferred. 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 performable after such assignment with
respect to the Entire Interest transferred and, in the case of a transfer of a
100% of a Member’s then existing Membership Interest in the Company, 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 and
assumption of a Member’s obligations shall be delivered to each Member and to
the Company.

10.3 Miscellaneous Provisions Related to Transfers.

(a) The assignee or assignor of an Entire Interest or part thereof shall pay all
expenses incurred by the Company and the other Member in connection with the
Transfer of the Entire Interest or part thereof and in admitting the assignee as
a Member, if applicable.

(b) As a condition to any assignment of all or any portion of an Entire
Interest, the transferor shall obtain such consents as may be required from
third parties, if any, or waivers thereof. The other Member shall use reasonable
efforts to cooperate with the transferor in obtaining such consents or waivers,
so long as the transferor reimburses them for costs that they incur in so doing.

(c) No Member, or any assignee or successor in interest of a Member, may
Transfer an Entire Interest or part thereof if, under the terms of any contract
binding on the Company or on the Property or the Project, such proposed Transfer
would result in a breach or default by the Company or would give any other
person a termination right in respect of the contract or a right of acceleration
in respect of the time for payment or performance of indebtedness or obligations
of the Company, unless the resulting breaches, defaults, terminations and
accelerations (assuming that all rights of termination and acceleration were
exercised) in the aggregate are not material to the business, affairs,
prospects, operations or results of operations of the Company or the proposed
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including by payment of any Company Financing, as is necessary to cause such
breaches, defaults, terminations or accelerations to be immaterial. For such
purposes, “contract” includes bonds, promissory notes, other evidences of
indebtedness, loan agreements, loan commitments, mortgages, deeds of trust,
other security instruments, leases, reciprocal operating agreements, restrictive
covenant, easements and like instruments.

(d) No Member, or any assignee or successor in interest of a Member, may
Transfer an Entire Interest or part thereof unless the sale, assignment, gift,
pledge, hypothecation, encumbrance or transfer is made pursuant to an effective
registration statement or exemption from registration under the Securities Act
of 1933, as amended, and all applicable state securities laws. The Company will
have no obligation to effect the registration of an Entire Interest or part
thereof under the Securities Act of 1933, as amended, or any state securities
laws or, if the Company or an Entire Interest or part thereof is registered
under any securities law (including the Securities Act of 1933, as amended, or
the Securities and Exchange Act of 1934, as amended), to continue such
registration. Each transferor of an Entire Interest or part thereof shall
indemnify, defend and hold harmless the Company, the other Member and the
Affiliates of the other Member against any and all claims, suits and other
proceedings, losses, costs, damages, expenses and liability (including fees and
expenses of attorneys and other professional advisors and court costs) incurred
by any of them by reason of any violation of securities laws (whether by the
transferor, the Company or another person) that occurs in connection with any
Transfer by the transferor of an Entire Interest or part thereof.

(e) No Member, or any assignee or successor in interest of a Member, may
Transfer an Entire Interest or part thereof if (i) the proposed Transfer would
result in termination of the Company for federal income tax purposes under
Section 708 of the Code, (ii) the proposed Transfer would cause the Company to
become subject to the Investment Company Act of 1940, as amended, or require the
Company to file any report under the Securities and Exchange Act of 1934, as
amended, (iii) the proposed Transfer would cause the Company to be treated for
federal income tax purposes as an entity other than a partnership.

(f) None of the Company or the Members will be required to recognize any
Transfer of an Entire Interest or part thereof until all Members have received
written notice of such proposed Transfer from the transferor. None of the
Company or the Members will be required to recognize any Transfer of an Entire
Interest or part thereof in violation of this Article 10.

10.4 Amendment of Certificate of Formation. If an assignment of an Entire
Interest or part thereof 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 filings of the Company and the Company’s
qualification(s) as a foreign limited partnership in states other than Delaware
in order to reflect such change or take such similar action as may be required.

 

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10.5 Upstream Transfers.

(a) Without limiting the terms of Section 10.1, but subject to Section 10.5(c),
any Member that is an incorporated or unincorporated business entity, and any
permitted assignee of all or any portion of an Entire Interest that is an
incorporated or unincorporated business entity, shall not permit, without prior
Member Consent, which consent may be withheld in the sole and uncontrolled
discretion of any Member, the admission of any new equity or other beneficial
interest holder in such entity, or the issuance to any person or entity, who is
not now an equity or other beneficial interest holder in such entity or an
Affiliate of such an equity interest holder, of any kind of ownership interest
whatsoever in such entity.

(b) Without limiting the terms of Section 10.1, but subject to Section 10.5(c),
any Member that is an incorporated or unincorporated business entity, and any
permitted assignee of all or any portion of an Entire Interest that is an
incorporated or unincorporated business entity, shall not permit, without prior
Member Consent, which consent may be withheld in the sole and uncontrolled
discretion of any Member, the issuance or Transfer of any ownership interest in
such entity or in the holder of any direct or indirect equity or other
beneficial interest in such entity, or any instruments convertible into any
ownership interest in such entity or in the holder of any direct or indirect
equity or other beneficial interest in such entity, or any right to vote any
ownership interest in such entity or in the holder of any direct or indirect
equity or other beneficial interest in such entity.

(c) Sections 10.5(a) and 10.5(b) shall not prohibit (i) any Transfer of any
equity or other beneficial interest, to (A) an Affiliate of CFG or any entity
that is a participant in any corporate merger, acquisition or other combination
in which CFG or CGP is a participant or to which CFG or CGP sells or transfers
all or substantially all of its assets, or (B) Mill Creek or an Affiliate of
Mill Creek or any entity that is a participant in any corporate merger,
acquisition or other combination in which Mill Creek is a participant or to
which Mill Creek sells or transfers all or substantially all of its assets,
(ii) any Transfer of any direct or indirect equity or other beneficial interest
in Global Growth, LP or CGP or issuance of any equity or other beneficial
interest in Global Growth, LP or CGP, (iii) any Transfer of any direct or
indirect equity or other beneficial interest in Mill Creek or issuance of any
equity or other beneficial interest in Mill Creek or (iv) so long as after such
transaction, Mill Creek continues to own, directly or indirectly, more than 50%
of the equity or other beneficial interest in such subsidiary, any Transfer of
direct or indirect equity or other beneficial interest in any direct or indirect
subsidiary of Mill Creek (other than MCR) or issuance of any equity or other
beneficial interest in any direct or indirect subsidiary of Mill Creek (other
than MCR).

10.6 Right to Cause Sale of Project.

(a) CNL may, at any time after the date that is twenty-four (24) months after
Completion of the Project, cause the sale by the Company of the Project, subject
to the terms of this Section 10.6. MCR shall cooperate with any such sale.

(b) Prior to the exercise of its right as set forth in Section 10.6(a), CNL must
give notice (the “Sale Notice”) to MCR (i) of CNL’s intention to pursue the sale
of the Project at a specified cash price (the “Stated Price”) and all other
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contemplated sale and (ii) offering to sell its Entire Interest to MCR at a
specified price equal to the amount (the “CNL Price”) that would be
distributable or payable to CNL under Section 4.5(d) and Section 9.4 and in
payment of all Member Loans to the Company from CNL, if the Project were sold
for an amount equal to the Stated Price, all debts, liabilities and expenses
were paid and the remaining amounts were paid out by the Company. CNL shall have
the right to obtain, at the Company’s expense, a tax opinion from recognized tax
counsel as to the federal income tax consequences of any such proposed sale.

(c) If CNL has forwarded a copy of the Sale Notice to MCR, MCR shall, within
forty-five (45) days after receiving a copy of the Sale Notice, elect one of the
following options:

(i) notify CNL in writing that MCR has no objection to CNL marketing the
Project, in which case CNL may cause the Company to market and sell the Project,
provided that (A) the price obtained for the Project is at least the Stated
Price and the sale complies with all other material terms and conditions stated
in the Sale Notice, (B) the contract to acquire the Project is executed within
four (4) months following CNL’s receipt of MCR’s response under this item (i) or
any deemed election not to purchase CNL’s Entire Interest pursuant to item
(ii) below and (C) the outside closing date under such contract is no later than
ninety (90) days after the date of execution of such contract; or

(ii) notify CNL in writing of MCR’s election to purchase CNL’s Entire Interest
for the CNL Price. Such notification shall be accompanied by an escrow deposit
with a nationally recognized title insurance company in an amount equal to two
percent (2%) of the CNL Price (such amount, together with any interest earned
thereon, being hereinafter called the “CNL Sale Deposit”), which amount shall be
non-refundable, unless the purchase and sale pursuant to this
Section 10.6(c)(ii) does not close due to the default of CNL or an event
described in Section 10.8(e). Notice of MCR’s election to purchase shall be
addressed to CNL and shall set forth the place of closing which, unless the
Members shall otherwise agree, shall be at the office of the Company, during
usual business hours on a date specified by MCR within sixty (60) days after the
date of the giving of the applicable notice of election to CNL. The CNL Sale
Deposit shall be credited against the CNL Price. If the closing shall fail to
occur because of a default by MCR, CNL shall have the right to elect, as its
sole and exclusive remedy, (i) to retain the CNL Sale Deposit as liquidated
damages, it being agreed that in such instance CNL’s actual damages would be
difficult, if not impossible, to ascertain or (ii) to exercise its rights under
Section 10.8. If MCR shall not have given notice to CNL of its election to
purchase CNL’s Entire Interest within the forty-five (45) day notice period, MCR
shall be deemed to have exercised the option provided in subsection (i) above.

(d) In connection with the sale of CNL’s Entire Interest to MCR pursuant to this
Section 10.6, the provisions of Section 10.8 shall be applicable to such sale.
Each Member shall pay a portion of any transfer or similar taxes due in
connection with the sale of an Entire Interest under this Section 10.6 in
proportion to their respective Percentage Interest.

(e) If a proposed sale of the Project is not consummated in accordance with the
terms of this Section 10.6, all the provisions of this Section 10.6 shall apply
to any subsequent proposed sale of the Project.

 

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10.7 Buy-Sell.

(a) Any time after the date that is twenty-four (24) months after Completion of
the Project, either MCR or CNL (the initiator being the “Proposer”) may make an
offer to purchase the other Member’s Entire Interest or to sell its Entire
Interest to the other Member for such purchase price (which shall be payable in
cash at the closing of any such transaction) and on such terms as such Proposer
may propose in a notice (the “Sale Proposal”) to the other Member (the
“Responding Member”). The Sale Proposal shall include a statement as to the
total purchase price for the Project (“Property Value”) that formed the basis
for the stated purchase price for each Entire Interest, which purchase price
shall be calculated from the Property Value on the same basis as provided in
Section 10.8(a).

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

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

(ii) that the Responding Member elects to purchase the Entire Interest of the
Proposer at the Reply Price (as defined below) determined in accordance with
Section 10.8(a) and otherwise in accordance with the terms set forth in the Sale
Proposal, as modified in accordance with Section 10.8(a).

Such notification shall be in addressed to the Proposer. Failure of the
Responding Member to respond to the Sale Proposal within the forty-five
(45) period set forth in this Section 10.7(b) shall be deemed an election by the
Responding Member to sell its Entire Interest under Section 10.7(b)(i).

(c) Notification of election by the Responding Member shall be delivered to the
Proposer. Upon delivery of such notification, the Member obligated to purchase
shall, within five (5) days, make an escrow deposit with a nationally recognized
title insurance company in an amount equal to one percent (1%) of the Property
Value (such amount, together with any interest earned thereon, being hereinafter
called the “Buy-Sell Deposit”), which amount shall be non-refundable unless the
purchase and sale pursuant to this Section 10.7 does not close due to the
default of the Member obligated to purchase or an event described in
Section 10.8(h).

(d) Unless otherwise agreed by the Members, closing shall be at the office of
the Company, during usual business hours on a date specified by the Member
obligated to purchase within sixty (60) days after the date of the giving of the
notice of election under Section 10.7(b) or, if no such notice is given,
expiration of the forty-five (45) period referenced in Section 10.7(b). The
Buy-Sell Deposit shall be credited against the total purchase price for the
Entire Interest being purchased pursuant to this Section 10.7; provided,
however, that, if the closing shall fail to occur because of a default by the
Member obligated to purchase, subject to the provisions of Section 10.7(b) above
concerning refundability of the deposit, the Member obligated to sell shall have
the right to retain the Buy-Sell Deposit as liquidated damages, it being agreed
that in such instance the actual damages of the Member obligated to sell would
be difficult, if not impossible, to ascertain. The provisions of Section 10.8
shall be applicable to any sale in accordance with this Section 10.7. Each
Member shall pay a portion of any transfer or similar taxes due in connection
with the sale of an Entire Interest under this Section 10.7 in proportion to
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(e) If the Responding Member elects to purchase the Entire Interest of the
Proposer and if the Responding Member subsequently defaults in its obligation to
buy the Entire Interest of the Proposer when and as required by this
Section 10.7, then (i) the Proposer may retain the Buy-Sell Deposit as
liquidated damages (as provided in Section 10.7(d) above), it being agreed that
in such instance the Proposer’s actual damages would be difficult, if not
impossible, to ascertain, and (ii) for a period of up to seven months after such
default, the Proposer may proceed to market the Project for sale on behalf of
the Company. Marketing of the Project shall be conducted in a commercially
reasonable manner (which shall include engaging a third party broker) on the
terms and conditions set forth in the Sale Proposal, to the extent applicable to
a sale to a third party purchaser, and sell the Project for a price not less
than ninety-five percent (95%) of the Property Value, payable only in cash, and
on such terms as were set forth in the Sale Proposal. The Proposer shall obtain
the Responding Member’s prior consent, which consent shall not be unreasonably
withheld to the selection of a third party purchaser to purchase the Project;
provided, however, that if the Responding Member unreasonably withholds its
consent to the selection of the third party purchaser, then the Proposer shall
have the right to purchase the Responding Member’s Entire Interest as if
Responding Member had elected to sell its Entire Interest to the Proposer under
10.7(b)(i), with the closing to occur on a date designated by the Proposer not
later than sixty (60) days after delivery of the notice of the Proposer’s
election to buy. If the foregoing conditions are not met, and the buy-sell
process of this Section 10.7 is again initiated by a Member, such Member shall
be required to comply with the provisions of this Section 10.7.

(f) Notwithstanding anything to the contrary stated herein, if CNL has delivered
a Sale Notice under Section 10.6, no Member shall have the right to deliver a
Sale Proposal under this Section 10.7 unless and until a proposed sale of the
Project is not consummated in accordance with the terms of Section 10.6.

10.8 Provisions Generally Applicable to Sales. The following provisions shall be
applicable to sales under Sections 10.6, 10.7 and/or 13.2, and, with respect to
10.8(c), Section 4.5(a), as indicated:

(a) If under the provisions of Section 10.7, either Party (the “Offering Party”)
makes an offer the (“10.7 Offer”) to the other party (the “Other Party”) to
purchase its Entire Interest, the purchase price (the “Reply Price”) payable by
the Other Party to the Offering Party, if the Other Party exercise its election
to purchase the Entire Interest of the Offering Party, 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, based upon the amount of the 10.7
Offer. The Value shall equal the total amount which would have been available
for distribution and payment by the Company to all of the Members after payment
of debts, liabilities and expenses under Section 13.5 as if the Company was
being liquidated and the Project sold for the Property Value set forth in the
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(ii) After determining the Value, there shall then be determined the amount
which would have been distributable and payable to the Offering Party under
Sections 4.5(d) and 9.4 and in payment of Member Loans made by the selling
Member if the Value had been paid out by the Company to the Members. Such amount
which would have been distributable and/or payable to the Offering Party equals
the Reply Price.

(b) For purposes of any sale of an Entire Interest of a Member, the purchase
price associated with such sale shall be adjusted to reflect (i) assets and
liabilities of the Company reflected in the Company’s financial statements and
not otherwise taken into account in calculation of the purchase price for the
Entire Interest and (ii) assets and liabilities of the Company known to either
Member and not reflected in the Company’s financial statements available to all
Members at the time of closing for transfer of the Entire Interest. 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
selling Member’s account. All prorations of real estate taxes, rents and other
items to be prorated shall be made as of the date of closing of the sale of the
Entire Interest. All title insurance policies, surveys and recording fees shall
be paid for by the party usually charged with such payment under local custom.

(c) On purchase of an Entire Interest, the purchasing Member shall, at its
option, either (i) deliver a release of the selling Member and each of its
Affiliates (including if MCR is the selling Member, the MCR Guarantor) from all
liability, direct or contingent, by all holders of all Company debts,
obligations or claims against the Company for which the Member or any of its
Affiliates is or may be personally liable, except for any debts, obligations or
claims which are fully insured by public liability insurer(s) acceptable to the
selling Member, or (ii) cause all such debts, obligations or claims to be paid
in full at the closing. On purchase of an Entire Interest, including for
purposes of this sentence, a purchase of an Entire Interest pursuant to
Section 4.5(a), the purchasing Member must agree to indemnify, defend and hold
harmless the selling Member and its Affiliates against any claim, suit, action
or other proceeding and all related loss, damages, judgments, settlements,
obligations, liabilities, debts, damages and costs and expenses (including fees
and disbursements of attorneys and other professionals and court costs) incurred
by the selling Member or any of its Affiliates on account of liabilities or
obligations of the Company incurred following the closing (except to the extent
related to or arising from defaults by the seller Member or its Affiliates under
this Agreement, the Construction Contract, the Development Agreement, the
Management Agreement, or other agreements between the Company and such Member or
its Affiliates) and agreements relating to any Company Financing. On purchase of
an Entire Interest, including for the purposes of this sentence, a purchase
pursuant to Section 4.5(a), the selling Member must agree to indemnify, defend
and hold harmless the purchasing Member and its Affiliates and the Company
against any claim, suit, action or other proceeding and all related loss,
damages, judgments, settlements, obligations, liabilities, debts, damages and
costs and expenses (including fees and disbursements of attorneys and other
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of its Affiliates or the Company on account of liabilities or obligations of the
Company incurred prior to the closing of such purchase to the extent related to
or arising from defaults by the seller Member or its Affiliates under this
Agreement, the Construction Contract, the Development Agreement, the Management
Agreement, or other agreements between the Company and such Member or its
Affiliates.

(d) 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.

(e) All Members (including the selling Members) shall be entitled to any
distributions of Operating Cash Flow from the Company accrued through the
closing of the sale of an Entire Interest. The right of a selling Member to
receive Operating Cash Flow (to the extent it is not distributed prior to
transfer of its Entire Interest) will survive transfer of the Entire Interest as
a debt of the Company owed to the selling Member and payable as soon as the
amount due can be calculated.

(f) If the Project 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 Project, and such damage occurs, or such
notice is given, between the date a Sale Notice, a Sale Proposal or an Appraisal
Notice is given and the closing date of the purchase of an Entire Interest, the
following shall apply:

(i) If the Project is damaged by an insured casualty not to exceed $500,000)(or
an uninsured casualty not resulting in damage in excess of $50,000) or if the
taking or acquisition shall not result in a substantial (in excess of two
percent (2%)) reduction in the income producing capacity of the Project, then
the purchasing Member shall be required to complete the transaction.

(ii) If the Project is damaged by an uninsured casualty resulting in damage in
excess of $50,000, or if the taking or acquisition shall result in a substantial
(in excess of two percent (2%)) reduction in the income producing capacity of
the Project, or if there is an insured casualty in excess of $500,000, then the
purchasing Member shall have the option (to be exercised within thirty (30) days
from the date of the occurrence of the casualty or receipt of the notice of
condemnation) to cancel the purchase and, in the case of a transaction under
Section 10.6 or Section 10.7, have the CNL Sale Deposit or the Buy-Sell Deposit,
as applicable, returned.

In the event that the purchase is canceled by the purchasing Member pursuant to
the above provisions, the terms of this Agreement shall remain in effect and
continue to be binding on the parties.

(g) At the closing of the sale of the Entire Interest of a Member, the selling
Member shall execute an assignment of its Membership Interest in the Company and
its interest in all Member Loans and Failing Member Loans made by it, free and
clear of all liens, encumbrances and adverse claims (except those created by
this Agreement and liens in connection with the Company Financing), which
assignment shall be in form and substance reasonably satisfactory to the
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Member shall reasonably require to assign the Entire Interest of the selling
Member to such person or entity as the purchasing Member may designate. For any
sale or transfer under this Article 10 or Section 13.2, the purchasing Member
may designate the assignee of the Entire Interest, which assignee need not be an
Affiliate of the purchasing Member, subject to the other Member’s reasonable
consent.

(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 shall have created or suffered any unauthorized liens,
encumbrances or other adverse interests against either the Project or the
selling Member’s Entire Interest, the purchasing Member shall be entitled either
to an action for specific performance to compel the selling Member 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. In addition, the purchasing Member shall be entitled to recover
all reasonable costs associated with enforcement under this Section 10.8(h).

(i) In the case of a transaction under Section 10.6 or Section 10.7, the
purchase price of an Entire Interest will be decreased by all distributions
(except distributions of Operating Cash Flow) made on or after the date of the
Sale Notice or Sale Proposal, as applicable, to the extent allocable to the
selling Member’s Membership Interest, and increased by all Capital Contributions
made by the selling Member on or after the date of the Sale Notice or Sale
Proposal, as applicable.

(j) Each Member will be responsible for all legal, accounting and similar fees
incurred by it in connection with any transfer of an Entire Interest pursuant to
Section 10.6, 10.7 or 13.2.

(k) Failing Member Loans will be taken into account in setting the CNL Price,
the Reply Price or the price due under Section 13.2, with the consequence that
the amount payable to the selling Member will be increased (up to the amount of
the distributions that would be paid the other Member in the assumed liquidation
calculation) if the selling Member is the holder of any Failing Member Loan or
decreased (up to the amount of distributions in the assumed liquidation
redirected toward repayment of any Failing Member Loan) if the selling Member is
the obligor on any Failing Member Loan.

10.9 Compliance with ERISA.

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

(b) On the closing or consummation of a Member Loan or Failing Member Loan,
(i) MCR shall deliver to CNL a certification in substantially the form of
Exhibit E and (ii) CNL shall deliver to MCR a certification in substantially the
form of Exhibit F.

 

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(c) If there is a proposed sale of the Project pursuant to Section 10.6 and a
Member buys the Project, (i) MCR shall deliver to CNL a certification in
substantially the form of Exhibit E and (ii) CNL shall deliver to MCR a
certification in substantially the form of Exhibit F.

(d) If there is a proposed sale of an Entire Interest pursuant to Section 10.6,
10.7 or 13.2, (i) MCR shall deliver to CNL a certification in substantially the
form of Exhibit E and (ii) CNL shall deliver to MCR a certification in
substantially the form of Exhibit F.

(e) Anything else in this Agreement contained to the contrary notwithstanding,
CNL may, following the receipt by it of a certification by MCR or a proposed
transferee provided for in this Section 10.9, to notify MCR that it has
determined that the proposed transaction would result in a transfer of a
Membership Interest in the Company to a person other than an Acceptable Person
and/or in a Plan Violation. If CNL notifies MCR that any such proposed
transaction would constitute a Plan Violation, then the proposed transaction
shall not be consummated and any attempt to do so shall be void. If CNL notifies
MCR that it has determined that no Plan Violation will result from the proposed
transaction, or if CNL fails to respond within five (5) Business Days, then the
proposed transaction may be consummated; provided, however, that such
transaction must be consummated no later than (i) the twentieth (20th) day after
the delivery to MCR by CNL of a notice that it has determined the proposed
transaction will not result in a Plan Violation or the expiration of such five
(5) Business Days with no response from CNL or (ii) if Section 10.6 is
applicable and provides for a closing that is later than such twenty (20) day
period, the latest day that such Section 10.6 permits such closing to occur.

(f) MCR shall indemnify CNL and defend and hold CNL harmless from and against
all loss, cost, damage and expense that CNL may incur, directly or indirectly,
as a result of a (i) default by MCR under this Section 10.9, (ii) a breach of a
representation or warranty given by MCR under this Section 10.9, or (iii) any
material misstatement or omission in a certification by MCR or proposed
transferee of MCR which is given to CNL pursuant to this Section 10.9. The
liability, excise taxes, penalties, interest, loss, cost, damage and expense
will include attorney’s fees and costs incurred in the investigation, defense
and settlement of claims and losses incurred in (i) correcting any Plan
Violation, (ii) the sale of a prohibited Company interest, or (ii) obtaining any
individual exemption for a Plan Violation that may be required in CNL’s sole
discretion. This indemnity shall survive (x) the sale of the Project or MCR’s
Entire Interest and (y) termination of this Agreement.

(g) The Company will not enter into any agreement or transaction that CNL
determines, in its reasonable judgment, would result in a Plan Violation. CNL
shall deliver a written notice of each such determination to MCR together with
an explanation of the reasons for the determination.

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

 

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ARTICLE 11. DISSOLUTION OR BANKRUPTCY OF A MEMBER

11.1 Dissolution or Merger. If MCR 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 MCR’s election, be a dissolution of the Company, and MCR 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 Membership 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) any Member shall admit in writing its inability to pay its debts as they
mature;

(c) 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 sixty (60) 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 Membership 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

(d) any Member shall give notice to any governmental body of insolvency, or
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(e) any Member shall make an assignment for the benefit of creditors or take any
other similar action for the protection or benefit of creditors;

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

11.3 Reconstitution. Notwithstanding the provisions of Section 11.1 and 11.2,
the remaining Member may, within ninety (90) days of any event described in this
Article 11, elect to continue the Company. 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 MCR 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 MCR as developer under the Development Agreement, and any termination
of MCR as developer pursuant to the terms of the Development Agreement shall
give CNL the right to terminate the delegation of authority given to MCR as
Operating Member in accordance with Section 6.7 of this Agreement.

ARTICLE 13. DISSOLUTION

13.1 Winding Up by Members. Upon dissolution of the Company by expiration of the
term hereof, by operation of law, by any provision of this Agreement or by
agreement between the Members, the Company’s business shall be wound up and all
its assets distributed in liquidation. In such dissolution, except as otherwise
expressly provided in Section 13.2 or Article 11, the Members shall be
co-liquidating Members and shall 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.

13.2 Winding Up by Liquidating Member.

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

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

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

 

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(b) The Liquidating Member, within thirty (30) days after the commencement of
the dissolution of the Company may give notice (the “Appraisal Notice”) to the
other Member electing to have the Fair Market Value of the Company’s assets
determined by appraisal pursuant to Section 13.2(c). The fees and expenses of
such appraisers shall be borne by the Company. The Liquidating Member shall have
the option, by notice given to the other Member within thirty (30) days after
receipt of the determination of Fair Market Value pursuant to Section 13.2(c),
to purchase the other Member’s Entire Interest at a price equal to the amount
which would have been distributable and payable to the other Member under
Section 4.5(d) and Section 9.4 and in payment of all Member Loans to the Company
made by the other Member if all of the Company’s assets had been sold for an
amount equal to such Fair Market Value, all debts, liabilities and expenses of
the Company were paid and the Company were liquidated. If after the receipt of
the determination of Fair Market Value pursuant to Section 13.2(c), the
Liquidating Member elects not to exercise the option to purchase the other
Member’s Entire Interest pursuant to this Section 13.2(b), then the Liquidating
Member shall have all of its rights under this Agreement 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).

(c) If the fair market value (the “Fair Market Value”) of the assets of the
Company is required for purposes of Section 13.2(b), such Fair Market Value, if
not otherwise agreed upon by the Members, shall be determined as set forth in
this Section 13.2(c). 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 MCR 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 Member. After the selection, each appraiser shall independently determine
the gross fair market value of the assets of the Company and, if they agree on
the Fair Market Value, such decision shall be conclusive and binding on all
Members. 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
and, if they agree on the Fair Market Value, such decision shall be conclusive
and binding on all Members. 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
(10) day period described in the preceding sentence select a third appraiser. In
the absence of such a selection, the third appraiser shall be selected by the
Chapter of the American Institute of Real Estate Appraisers for the state in
which the Property is located on application of either Member. The third
appraiser shall decide which of the two appraisals established by the appraisers
in accordance with this Section 13.3(c) is closer to the gross fair market value
of the assets of the Company, 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 13.2(b),
Section 13.4 or Section 13.5, the amount of damages, including reasonable
attorneys’ fees and disbursements, incurred by the Liquidating Member
proximately resulting from any such event, but only if and as established by a
court order.

 

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13.4 Distributions of Operating Cash Flow. Subject to Section 13.5 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 Net
Income and Net Loss for all tax and other purposes as provided elsewhere in this
Agreement.

13.5 Distributions of Proceeds of Liquidation. 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, including
Member Loans, and (ii) expenses of liquidation.

(b) Second. To the setting up of any reserves which the Liquidating Member or
Members, whichever is in control of the liquidation, may deem necessary for any
contingent or unforeseen liabilities or obligations of the Company. Such
reserves may be deposited by the Company in a bank or trust company acceptable
to the Liquidating Member or Members, whichever is in control of the
liquidation, 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, whichever is in
control of the liquidation, 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.

13.7 Financial Statements. During the period of winding up, all the financial
statements provided for in Section 7.1 shall be prepared and furnished to each
of the Members, until complete liquidation is accomplished.

13.8 Restoration of Deficit Capital Accounts. At no time, including on
dissolution of the Company or liquidation by a Member of its Membership Interest
in 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.

 

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ARTICLE 14. NOTICES

14.1 In Writing; Address. All notices, elections, offers, acceptances and
demands (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 CNL or MCR at the address set forth below or at such other address as
the party may hereafter specify in writing.

 

CNL:

  

GGT Spring Town Holdings, LLC

CNL Center at City Commons

450 South Orange Avenue

Orlando, Florida 32801

Attention: Rosemary Q. Mills, Chief Financial Officer

Attention: Scott Hall

Facsimile No.: (407) 540-2546

E-mail: Rosemary.Mills@cnl.com

   with a copy to each of:   

GGT Spring Town Holdings, LLC

CNL Center at City Commons

450 South Orange Avenue

Orlando, Florida 32801

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

Facsimile No.: (407) 540-2648

E-mail: Holly.Greer@cnl.com

  

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

450 South Orange Avenue, Suite 200

Orlando, Florida 32801

Attention: Joaquin E. Martinez, Esq.

Facsimile No.: (407) 843-4444

E-mail: Joaquin.Martinez@lowndes-law.com

MCR:

  

MCRT Spring Town LLC

5225 Katy Freeway, Suite 103

Houston, TX 77007

Attention: Jeb Cox

Facsimile No.: (713) 888-3933

E-mail: JCox@MCRTrust.com

   with a copy to each of:   

MCRT Spring Town LLC

949 South Coast Drive, Suite 400

Costa Mesa, California 92626

Attention: Eric Lezak

Facsimile No.: (714) 966-79353

E-mail: Elezak@MCRTrust.com

 

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Michael K. Ording

Jones Day

If by USPS: P.O. Box 165017, Columbus, Ohio 43216-5017

Other: 325 John H. McConnell Blvd., Suite 600, Columbus, Ohio 43215

Facsimile No.: (614) 461-4198

E-mail: mkording@jonesday.com

All notices hereunder shall be in writing to be deemed effective and shall be
deemed sufficiently given or served for all purposes (i) if by personal service
or courier service, on the date when signed for or, if refused, when refused at
the address specified in this Section 14.1, (ii) if by nationally-recognized
overnight courier that produces a receipt of delivery, when signed for or, if
refused, when refused at the address specified in this Section 14.1, (iii) if
mailed by United States registered or certified mail, return receipt requested,
postage prepaid, when signed for or, if refused, when refused at the address
specified in this Section 14.1 and (iv) if sent by electronic transmission
(including fax or e-mail), when received. If a notice is sent by electronic
transmission (including fax or e-mail), confirmation of transmission generated
by the sender’s equipment will be prima facie evidence of receipt. For purposes
hereof, notices may be given by the parties hereto or by their attorneys
identified above.

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

14.3 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 Project, shall be delivered by the
receiving Member to the other Member as soon as practicable if such notice,
service of process, or other document is outside the ordinary course of the
Company’s business.

ARTICLE 15. MISCELLANEOUS

15.1 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.

15.2 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.

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

 

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15.4 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.

15.5 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.

15.6 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 permitted successors and assigns.

15.7 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.

15.8 Confidentiality. 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 Member, 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 Member with the form and content of such
public announcement or 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 Member; 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.

15.9 Amendments. This Agreement may not be amended, altered or modified except
by a written instrument signed by all parties.

15.10 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.

15.11 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.

15.12 Qualification in Other States. In the event the business of the Company is
carried on or conducted in any locations in addition to the states of Delaware
and Texas, then the Members agree to execute such other and further documents as
may be required or requested by either Member in order that the Members legally
may qualify the Company in such locations to the extent necessary.

 

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15.13 Forum. Any action by one or more Members or the Company against one or
more of the others which arises under or in any way relates to this Agreement,
or actions taken or failed to be taken or determinations made or failed to be
made by the Members under this Agreement, 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 sitting in
Orange County, 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.

15.14 No Brokerage. Each Member represents and warrants to the other Member that
it has not dealt with any brokers, investment bankers, consultants or other
third parties in the negotiation of this Agreement and the transactions
contemplated herein, except for dealings with Apartment Realty Advisors related
to purchase of the Property. Each Member further agrees to indemnify, defend and
hold the other Member 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, except compensation due Apartment Realty Advisors related to
purchase of the Property.

15.15 Tax Compliance. MCR represents and warrants that (i) MCR is wholly-owned
by MCRT North Florida LLC; (ii) MCR is a disregarded entity for U.S. income tax
purposes, and (iii) for U.S. income tax purposes, MCR’s activities are reported
under U.S. taxpayer identification number 27-2868228. CNL represents and
warrants that (i) CNL is wholly-owned by Global Growth, LP; (ii) CNL is a
disregarded entity for U.S. income tax purposes, and (iii) for U.S. income tax
purposes, CNL’s activities are reported under U.S. taxpayer identification
number 80-0956540.

15.16 Waiver of Partition and Certain Other Rights. Each Member irrevocably
waives any right or power that it might have (i) to cause the Company or any of
its assets to be partitioned, (ii) to compel any transfer of all or any portion
of the assets of the Company, except as expressly authorized by this Agreement,
(iii) to cause the appointment of a receiver for all or any portion of the
assets of the Company, (iv) to cause the dissolution or liquidation of the
Company, except in accordance with Article 13, or (v) to require an accounting
of the Company’s affairs, except in connection with the winding up of the
Company. Each Member has been induced to enter into this Agreement in reliance
upon the waivers set forth in this Section 15.16 and, without those waivers,
none of the Members would have entered into this Agreement.

15.17 Creditors Not Benefitted. Nothing contained in this Agreement will benefit
any creditor of a Member or the Company. No creditor of a Member or the Company
may require a contribution to the capital of the Company to be solicited or a
distribution to be made by the Company, nor may any creditor of a Member or the
Company enforce the obligation of a Member under this Agreement, including any
obligation of a Member to make a contribution to the capital of the Company. A
person extending credit to the Company may never claim that it did so in
reliance on an obligation to contribute capital to the Company within the
meaning of Section 18-502(b) of the Act.

(Remainder of page intentionally left blank)

 

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

 

MCRT SPRING TOWN LLC,

a Delaware limited liability company

By:

 

/s/ Eric Lezak

Name:

 

Eric J. Lezak

Title:

 

Managing Director

GGT SPRING TOWN HOLDINGS, LLC,

a Delaware limited liability company

By:

 

/s/ Andrew Hyltin

Name:

 

Andrew A. Hyltin

Title:

 

President

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EXHIBIT A

MEMBERS’ PERCENTAGE INTEREST

 

Names of Members

   Percentage
Interests     Maximum Initial Capital
Contributions  

GGT Spring Town Holdings, LLC

     95 %    $ 13,053,000   

MCRT Spring Town LLC

     5 %    $ 687,000   

Totals:

     100 %    $ 13,740,000   

 

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EXHIBIT B

DESCRIPTION OF LAND

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

EXHIBIT C

[INTENTIONALLY OMITTED]

EXHIBIT D

INSURANCE

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

EXHIBIT E

MEMBER ERISA CERTIFICATE

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

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EXHIBIT F

CNL ERISA CERTIFICATE

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

EXHIBIT G

PROJECT BUDGET

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