Exhibit 10.3

 

LIMITED LIABILITY COMPANY AGREEMENT

OF

GGT AHC FAIRFIELD TX, LLC

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LIMITED LIABILITY

COMPANY AGREEMENT OF

GGT AHC FAIRFIELD TX, LLC

A DELAWARE LIMITED LIABILITY COMPANY

TABLE OF CONTENTS

 

          Page  

ARTICLE 1. DEFINITIONS

     2                1.1   

Definitions

     2                1.2   

Other Defined Terms

     8                1.3   

Exhibits

     9    ARTICLE 2. THE COMPANY      9                2.1   

Organization

     9                2.2   

Name of Company

     9                2.3   

Purpose of Company

     9                2.4   

Principal and Registered Office

     9                2.5   

Further Assurances

     9                2.6   

Expenses of Formation and Syndication

     9                2.7   

No Individual Authority

     10                2.8   

Business Opportunities

     10                2.9   

Neither Responsible for Other’s Commitments

     10                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      11   
            4.1   

Capital Contributions of the Members

     11                4.2   

No Other Contributions

     12                4.3   

No Interest Payable

     12                4.4   

No Withdrawals

     12                4.5   

Additional Capital Contributions.

     12    ARTICLE 5. MEMBER LOANS      14                5.1   

Member Loans

     14                5.2   

Payment of Member Loans

     15    ARTICLE 6. MANAGEMENT OF THE COMPANY      15                6.1   

Management

     15                6.2   

Major Decisions

     18                6.3   

Bank Accounts

     22                6.4   

Annual Budgets

     22                6.5   

Insurance

     23                6.6   

Consultation Regarding the Project

     23                6.7   

Termination of Delegation of Authority to AHC as Operating Member

     23                6.8   

Development

     25   

 

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            6.9   

Management Agreement

     25                6.10   

Contracts with Affiliates

     25                6.11   

Indemnification of Managing Member and Operating Member

     25                6.12   

Leasing Guidelines

     26    ARTICLE 7. BOOKS AND RECORDS, AUDITS, TAXES, ETC.      26   
            7.1   

Books; Statements

     26                7.2   

Where Maintained

     27                7.3   

Audits

     27                7.4   

Objections to Statements

     27                7.5   

Tax Returns

     27                7.6   

Tax Matters Partner

     28                7.7   

Tax Policy

     28                7.8   

Section 754 Election

     28                7.9   

Capital Accounts

     28    ARTICLE 8. ALLOCATIONS      29                8.1   

Allocation of Net Income and Net Loss

     29                8.2   

Loss Limitation

     29                8.3   

Minimum Gain Chargebacks and Nonrecourse Deductions

     29                8.4   

Qualified Income Offset

     30                8.5   

Curative Allocations

     30                8.6   

Code Section 704(b) Allocations

     31                8.7   

Other Allocation Provisions

     31                8.8   

Distributions of Nonrecourse Liability Proceeds

     31                8.9   

Information as to Allocation of Debt

     31                8.10   

Taxable Year; Fiscal Year

     31    ARTICLE 9. DISTRIBUTIONS AND ALLOCATIONS      31                9.1
  

Percentage Interests in Company

     31                9.2   

Certain Definitions

     31                9.3   

Operating Cash Flow Distributions

     33                9.4   

Extraordinary Cash Flow Distributions

     34                9.5   

Loss of Promoted Interest

     34    ARTICLE 10. ASSIGNMENT AND OFFER TO PURCHASE      35   
            10.1   

Transfers

     35                10.2   

Permitted Transfers

     35                10.3   

Assumption by Assignee

     35                10.4   

Amendment of Certificate of Formation

     36                10.5   

Other Assignments Void

     36                10.6   

Intentionally Deleted

     36                10.7   

Buy-Sell

     36                10.8   

Provisions Generally Applicable to Sales

     37                10.9   

Intentionally Deleted

     40    ARTICLE 11. DISSOLUTION OR BANKRUPTCY OF A MEMBER      40   
            11.1   

Dissolution or Merger

     40                11.2   

Bankruptcy, etc.

     40   

 

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            11.3   

Reconstitution

     41    ARTICLE 12. CROSS-DEFAULT      41    ARTICLE 13. DISSOLUTION      41
               13.1   

Winding Up by Members

     41                13.2   

Winding Up by Liquidating Member.

     42                13.3   

Offset for Damages

     43                13.4   

Distributions of Operating Cash Flow

     43                13.5   

Distributions of Proceeds of Liquidation

     43                13.6   

Orderly Liquidation

     44                13.7   

Financial Statements

     44                13.8   

Restoration of Deficit Capital Accounts

     44    ARTICLE 14. MEMBERS      44                14.1   

Liability

     44    ARTICLE 15. NOTICES      44                15.1   

In Writing; Address

     44                15.2   

Copies

     45    ARTICLE 16. MISCELLANEOUS      46                16.1   

Additional Documents and Acts

     46                16.2   

Interpretation

     46                16.3   

Entire Agreement

     46                16.4   

References to this Agreement

     46                16.5   

Headings

     46                16.6   

Binding Effect

     46                16.7   

Counterparts

     46                16.8   

Confidentiality

     46                16.9   

Amendments

     47                16.10   

Exhibits

     47                16.11   

Severability

     47                16.12   

Qualification in Other States

     47                16.13   

Forum

     47                16.14   

No Brokerage

     47   

 

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TABLE OF EXHIBITS

 

Exhibit A        

  

Members’ Percentage Interests

Exhibit B

  

Description of Land

Exhibit C

  

Development Agreement

Exhibit D

  

Project Budget

Exhibit E

  

Pre-Development Costs

 

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LIMITED LIABILITY COMPANY AGREEMENT

OF

GGT AHC FAIRFIELD TX, LLC

This Limited Liability Company Agreement of GGT AHC FAIRFIELD TX, LLC (this
“Agreement”) is entered into and shall be effective as of the 24th day of
September, 2013, by and between AHC FAIRFIELD OPERATOR, LLC, a Texas limited
liability company (“AHC”), and GGT FAIRFIELD TX HOLDINGS, LLC, a Delaware
limited liability company (“CNL”), pursuant to the provisions of the Delaware
Limited Liability Company Act (the “Act”). AHC and CNL are sometimes referred to
herein, collectively, as the Members and individually as a Member.

R E C I T A L S

WHEREAS, GGT AHC FAIRFIELD TX, LLC (the “Company”) was formed on August 8, 2013,
pursuant to the Delaware Limited Liability Company Act by filing a Certificate
of Formation filed with the Secretary of State of the State of Delaware (the
“Certificate of Formation”).

WHEREAS, reference is hereby made to that certain Purchase and Sale Agreement
with an effective date of March 4, 2013, by and between Allen Harrison
Development, LLC, a Texas limited liability company, as purchaser (“Purchaser”),
and CPG Houston Holdings, L.P., 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, inter
alia, the real property located off of Cypresswood Drive and Mason Road in
Cypress, Harris County, Texas (together with all personal property, fixtures,
rights and intangibles associated therewith, the “Property”), as more
particularly described in Exhibit B hereto.

WHEREAS, the Members desire to form the Company for the purposes of acquiring
the Property and constructing a Class A rental apartment community on the
Property with two hundred ninety-four (294) units, together with all amenities
and related improvements (the “Project”), and leasing and managing the Project,
but in any case the Property is intended to be held by the Company for
investment and/or held for appreciation and subsequent sale.

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

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

 

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ARTICLE 1. DEFINITIONS

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

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

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

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

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

 

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

AHC. As described in the first paragraph above.

AHC Maximum Initial Capital. As defined in Section 4.1.

AHC Principals. Means, collectively, Paul Forbes and Will Harper

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

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

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

Capital Account. As described in Section 7.9.

Capital Budget. As described in Section 6.4.

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

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

Cause. As defined in Section 6.7.

Certificate of Formation. As described in the Recitals above.

CFG. As defined in Section 10.1.

CNL. As described in the first paragraph above.

CNL Consent. The written consent of CNL.

CNL Decision. As defined in Section 6.2(b).

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

CNL 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(d)(ii).

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

 

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

Company. GGT AHC Fairfield 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. As defined in the Development Agreement.

Construction Loan. As defined in the Development Agreement.

Construction Management Fee. As described in Section 6.8.

Developer. Allen Harrison Development, LLC, a Texas limited liability company,
acting in such capacity pursuant to Section 6.8.

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

Development Fee. As described in Section 6.8.

Economic Capital Account. With respect to any Member, such Member’s Capital
Account as of the date of determination, after crediting to such Capital Account
any amounts that the Member is deemed obligated to restore under Treasury
Regulations Section 1.704-2.

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

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

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

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

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

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

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

 

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

Land Contract. As defined in the Recitals above.

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

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

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

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

Loan Closing. The closing of the Construction Loan.

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

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

Management Agreement. As set forth in Section 6.9.

Managing Member. CNL.

 

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

Member Loan. Any loan made by any Member or any Affiliate of a Member to the
Company pursuant to Article 5.

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

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

Members. The parties to this Agreement, any Person to whom the parties to this
Agreement may convey an interest in the Company pursuant to Article 10, and any
Person subsequently admitted to the Company as a substitute or additional Member
in accordance with the terms of this Agreement, and “Member” means any of the
Members. The initial Members are CNL and AHC.

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

Minor Field Changes. As defined in the Development Agreement.

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

Nonrecourse Deductions. As described in Section 8.3(b)

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

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

Operating Budget. As described in Section 6.4.

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

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

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

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

Opportunity. As defined in Section 2.8(b).

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

 

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Percentage Interest. As described in Section 9.1.

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

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

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

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

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

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

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

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

Property Management Agreement. As described in Section 6.9.

Property Manager. Allen Harrison Property Management, LLC, a Texas limited
liability company, and any successor thereto selected by Member Consent or, to
the extent a Member has the unilateral right pursuant to this Agreement to
select such successor, as selected by such Member.

Proposer. As described in Section 10.7(a).

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

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

 

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

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

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

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

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

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 for purposes of, and as
maintained pursuant to, the capital account maintenance provisions of Treasury
Regulations Sections 1.704-1(b)(2)(iv)); and (ii) the distribution of the net
proceeds computed under clause (i) above to the Members pursuant to Section 9.4
(after the payment of all actual Company indebtedness, and any other liabilities
related to the Company’s assets, limited, in the case of nonrecourse
liabilities, to the book value of the collateral securing or otherwise available
to satisfy such liabilities).

Tax Matters Partner. As described in Section 7.6.

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

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

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

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

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

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

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

 

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

ARTICLE 2. THE COMPANY

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

2.2       Name of Company. The name of the Company will be “GGT AHC Fairfield
TX, LLC”, and the Company’s business will be conducted under the name “The
Remington Fairfield”. The Managing Member may change the name of the Company or
the name under which the Company’s business is conducted at any time, provided
that AHC shall have the right to approve the use of any name that includes the
word “AHC”, “Allen”, “Harrison” 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, developing, operating,
managing, improving, repairing, renting, mortgaging, refinancing, selling,
conveying and otherwise dealing with the Property and all activities reasonably
related thereto. In furtherance of such purpose, the Company shall have all such
powers as may be exercised by a limited liability company under the laws of the
State of Delaware. Except as permitted by this Section 2.3, the Company shall
not engage in any other business. The Company is authorized to take any legal
measures which will assist it in accomplishing its purpose or benefit the
Company.

2.4       Principal and Registered Office. The principal office of the Company
shall be 450 South Orange Avenue, Orlando, Florida 32801, or such other place as
the Managing Member may from time to time determine. Notification of any change
in the Company’s principal place of business or principal office shall be given
to the other Members. The Company may change its principal office and or may
maintain additional offices and places of business in other locations selected
by the Managing Member and, to the extent required by law and/or deemed
necessary or desirable by the Managing Member, the Company shall qualify as a
foreign limited liability company in any other jurisdiction in which it conducts
business. The name and address of the registered agent of the Company for
service of process in the State of Delaware is National Registered Agents, Inc.,
160 Greentree Drive, Suite 101, Dover, Delaware 19904. The Company’s registered
agent and the Company’s registered and principal offices may be changed by the
Managing Member in compliance with the relevant requirements of the Act.

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

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

 

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

2.8       Business Opportunities.

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

(b)       AHC covenants and agrees that for so long as it is a Member, in the
event it proposes to undertake any additional apartment development
opportunities within a three (3) miles radius of the Project (each an
“Opportunity”), CNL and Affiliates of CNL Financial Group, LLC (collectively,
“CNL Entities”) shall have the right of first offer to participate in any such
Opportunity. AHC shall provide CNL with not less than thirty (30) days prior
written notice of any such Opportunity. AHC and the CNL Entities shall have
sixty (60) days to negotiate in good faith the terms of such participation, and
to the extent that the CNL Entities decline or fail to respond to such
Opportunity within thirty (30) days after written notice thereof or the CNL
Entities and AHC fail to come to agreement as to the terms of such participation
within sixty (60) days after such Opportunity is offered to CNL, utilizing such
forms of limited liability company agreement and development agreement as
previously agreed upon by and between AHC and CNL, but not including the
economic terms thereof, AHC shall not be required to continue to offer any CNL
Entity the right to participate to any extent in such Opportunity.

2.9       Neither Responsible for Other’s Commitments. Neither the Members nor
the Company shall be responsible or liable for any indebtedness or obligation of
a particular Member incurred either before or after the execution of this
Agreement, except as to those joint responsibilities, liabilities, debts or
obligations incurred pursuant to the terms of this Agreement, and each Member
indemnifies and agrees to hold the other Member and the Company harmless from
such personal obligations and debts, except as aforesaid.

 

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

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
Property, other than to a nominee or trustee of the Company for financial or
other business purposes;

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

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

ARTICLE 4. CAPITAL CONTRIBUTIONS OF THE MEMBERS

4.1       Capital Contributions of the Members. Upon or following the execution
of this Agreement, CNL and AHC 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 AHC or Developer for its Pre-Development Costs. Such
initial capital contribution by CNL shall constitute a portion of “CNL’s Initial
Capital”. Such initial capital contribution by AHC (against which AHC may credit
any portion of the Development Fee that is assigned by Developer to AHC in
accordance with the Development Agreement) shall constitute a portion of “AHC’s
Initial Capital”. AHC’s Initial Capital and CNL’s Initial Capital shall
collectively be called the “Initial Capital Contributions”. Such contributions
are reflected on Exhibit A attached hereto and shall be updated from time to
time to reflect modifications to the Initial Capital Contributions and any
additional capital contributions, including contributions of Additional Initial
Capital as required pursuant to Section 4.5(a). The amount of cash and the fair
market value, as agreed to by

 

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Member Consent, of other property contributed by a Member shall be credited to
such Member’s Capital Account. In no event shall the aggregate amount of CNL’s
Initial Capital exceed $8,806,000 without the express written approval of CNL
(the “CNL Maximum Initial Capital”), and in no event shall AHC’s Initial Capital
exceed $2,201,500 without the express written approval of AHC (the “AHC Maximum
Initial Capital”). The Members expressly agree that, to the extent the amount of
the final Project Budget is hereafter reduced due to savings in the Construction
Contract’s guaranteed maximum price, the Initial Capital Contributions of CNL
and AHC shall be reduced on a pro rata basis. Any Construction Cost Overruns (as
defined in the Development Agreement) funded by Developer (a) shall not be
treated as a contribution by Developer or AHC to the Company or in any manner
construed so as to increase AHC’s Capital Account or AHC’s Initial Capital under
this Agreement, (b) shall not be treated as Additional Capital of AHC under this
Agreement, (c) shall not be treated as a Member Loan by AHC to the Company, and
(d) shall not entitle Developer or AHC to any interest on or refund of any
amounts so advanced or to any other rights or remedies against the Company or
any Member.

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

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

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

4.5       Additional Capital Contributions.

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

(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 required by the Company to fund any Operating
Shortfall or reimburse the Members or their

 

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Affiliates for their 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 AHC is responsible for such Out of
Pocket Costs under the Development Agreement), then Operating Member shall cause
notice to be delivered to the Members setting forth the purposes and amounts of
such additional funds. Each such notice delivered to the Members shall
constitute an “Additional Funding Notice”. All amounts funded by CNL pursuant to
this Section 4.5(b) shall constitute a portion of CNL’s Additional Capital, and
all amounts funded by AHC pursuant to this Section 4.5(b) shall constitute a
portion of AHC’s Additional Capital. Within ten (10) Business Days following the
date of delivery of an Additional Funding Notice (in each case, the “Additional
Capital Request Date”), CNL and AHC shall contribute to the Company, in
proportion to their respective Percentage Interests, as Additional Capital, the
amount so required.

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

(d)       If a Member (the “Failing Member”) fails to contribute an amount equal
to the entire amount required to be contributed by it pursuant to Section 4.5(a)
or 4.5(b) within the applicable period after the Additional Initial Capital
Request Date or the Additional Capital Request Date, as applicable, and if any
other Member (the “Non-Failing Member”) makes its required contribution within
such applicable time period pursuant to Section 4.5(a) or 4.5(b) and so notifies
any Failing Member (the “Notice of Intention”), and such Failing Member fails to
fully remedy its failure to contribute such required capital within ten
(10) days after receiving such Notice of Intention, then one or more of the
following may occur, at the option and election of the Non-Failing Member, which
election shall be specified prospectively in the Notice of Intention: (i) the
Non-Failing Member may require the Company to repay immediately to the
Non-Failing Member the Capital Contribution(s), if any, it made pursuant to
Section 4.5(a) or 4.5(b) pursuant to the same notice; (ii) the Non-Failing
Member may, but need not, make an additional Capital Contribution to the Company
not in excess of the amount such Failing Member failed to contribute pursuant to
Section 4.5(a) or 4.5(b), in which case (y) the balance of the Non-Failing
Member’s Capital Account shall be increased by $1.15 for each $1.00 not funded
by such Failing Member in accordance with the terms of this Section 4.5 in
response to the applicable Additional Capital Funding Notice or Additional
Initial Capital Funding Notice (which adjustment shall be treated as Additional
Capital contributed by such Non-Failing Member), as applicable and (z) each of
such Failing Member’s distribution percentages pursuant to Sections 9.4(e) and
9.4(f) shall be reduced by one percent (1%) for every $20,000 of Additional
Capital or Additional Initial Capital such Failing Member failed to contribute
to the Company pursuant to this Section 4.5 and in turn, each of the Non-Failing
Member’s Percentage Interest and the Non-Failing Member’s distribution
percentages under Sections 9.4(e) and 9.4(f), respectively, shall be increased
by the equivalent percentage; (iii) the Non-Failing Member may cause the Company
to be dissolved, in which case such Non-Failing Member will be the Liquidating
Member and will have the right to cause the Property and other Company assets to
be sold or otherwise liquidated in accordance with Section 13.2; or (iv) the
Non-Failing Member may elect to loan to such Failing Member (“Failing Member
Loan”), which Failing Member Loan shall be disbursed to the Company and treated
as an additional Capital Contribution to the Company made by such Failing
Member, an amount equal to the amount such Failing Member

 

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failed to contribute pursuant to Section 4.5(a) or 4.5(b), which Failing Member
Loan made by the Non-Failing Member to the Failing Member shall bear interest at
an annual rate (compounded annually) of one thousand basis points (1,000 bps)
above one month LIBOR from the date of the advance until such Failing Member
Loan is paid to the Non-Failing Member in full. Payments with respect to such
Failing Member Loan shall be made to the Non-Failing Member out of distributions
that would otherwise have been payable to such Failing Member under this
Agreement until fully repaid (which payments will be applied first to accrued
interest on the outstanding principal balance and then to the outstanding
principal balance of such Failing Member Loan). Any such Failing Member Loan
shall be nonrecourse to such Failing Member, secured by such Failing Member’s
entire interest in the Company, and shall be satisfied only out of distributions
as provided above in this Section 4.5(d). Such Failing Member Loan may be
prepayable at any time or from time to time and, if not sooner paid in full,
shall mature upon the earlier of (A) the liquidation of the Company and (B) the
fifth anniversary thereof. Each Non-Failing Member shall have the right, but not
the obligation, to make a portion of any additional Capital Contribution (as
contemplated by Section 4.5(d)(ii)) or Failing Member Loan (as contemplated by
Section 4.5(d)(iv)) in an amount proportionate to its respective Percentage
Interest.

(e)       The Members acknowledge and agree that, to the extent Developer
assigns any portion of the Development Fee or Construction Management Fee to AHC
in accordance with the Development Agreement, AHC may credit such assigned
portion of the Development Fee or Construction Management Fee against the
amounts of AHC’s Additional Capital, Additional Initial Capital or any
Additional Capital that AHC is required to contribute to the Company from time
to time. The Members further acknowledge and agree that the Company shall not
actually pay any such credited portion of the Development Fee or Construction
Management Fee to Developer or AHC, and the credit given to AHC shall be deemed
payment of such portion of the Development Fee or Construction Management Fee.

ARTICLE 5. MEMBER LOANS

5.1       Member Loans. No Member shall be obligated to lend any money to the
Company. If the Members determine that it is necessary or appropriate for the
Company to borrow money from any of the Members, then the Operating Member shall
cause notice (a “Loan Request Notice”) to be sent to each of the Members,
setting forth the amount proposed to be borrowed from the Members and the
purpose of the proposed Member Loan. Each of the Members shall have the right,
but not the obligation, to lend to the Company the amount to be borrowed as set
forth in such Loan Request Notice, multiplied by its respective Percentage
Interest, which shall be exercisable by notice given to the Company and the
other Members within 45 days of receipt of the Loan Request Notice from the
Operating Member or by such earlier date as shall have been determined to be
appropriate by the Operating Member, as set forth in the Loan Request Notice. If
any of the Members does not lend the full amount set forth for it in the Loan
Request Notice, the other Members shall have the option to lend the balance. If
any Member(s) shall lend any money to the Company, such Member Loan shall not
constitute a Capital Contribution by such Member(s) or entitle it to any
increase in its share of the distributions of the Company. Each Member Loan
shall be an obligation of the Company, provided that no Member shall be
personally obligated to repay the Member Loan and the Member Loan shall be
payable or collectible only out of the assets of the Company. All such

 

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Member Loans shall be on commercially reasonable terms as determined by Member
Consent and shall bear interest at a rate of 2% per annum above the prime rate
(or the average thereof if published as a range) (in each case as published from
time to time in The Wall Street Journal (or if The Wall Street Journal is no
longer published, the prime rate as published in a publication of national
circulation selected by Member Consent)), compounded annually, adjusted as of
the date of each prime rate change published, but in no event shall the rate of
interest exceed the highest rate permitted by law for the obligor which, if
exceeded, could subject the lending Member to penalties or forfeiture of all or
any part of the interest or principal associated with such Member Loan.

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

ARTICLE 6. MANAGEMENT OF THE COMPANY

6.1       Management.

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

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

(i)       managing the Company’s operations so as to preserve the REIT status of
the CNL owner and/or prevent the imposition of a prohibited transaction tax;
provided, however, that to the extent that managing the Company’s operations in
such manner causes the Company to incur additional non de minimus expenses, CNL
shall bear responsibility for such expenses;

 

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

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

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

(v)       intentionally deleted;

(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; including providing to the other
Members any notices received by the Managing Member or its Affiliates regarding
any violations of Requirements and any notices received with respect to the
Construction Loan or any other third party loan;

(viii)       maintenance of all accounting and tax records for the Company as
set forth in this Agreement, including maintaining all tax books, tax records
and all other financial statements and records in accordance with GAAP;
provided, however, that in the event accounting and tax records are maintained
in a manner necessary for REIT purposes and to the extent that maintaining the
accounting and tax records in such manner causes the Company to incur additional
non de minimus expenses, CNL shall bear responsibility for such expenses;

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

(x)       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;

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

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

 

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

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

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

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

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

(xviii)     maintaining a system of internal controls necessary for
Sarbanes-Oxley certifications, including delivering or causing to be delivered a
SAS 70 Type II report for the Property, or such other documentation and testing
of internal controls as is deemed necessary by the Managing Member; provided,
however, that to the extent that the requirements of this provision causes the
Company to incur additional non de minimus expenses, CNL shall bear
responsibility for such expenses; and

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

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

 

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6.2       Major Decisions.

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

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

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

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

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

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

(vi)       Voluntarily dissolve or liquidate the Company;

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

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

(ix)       Terminate the Property Management Agreement or replace the Property
Manager or amend, modify, supplement, assign or grant any material consents or
waivers under the Property Management Agreement or any other property management
agreement for the Property; provided, however, that if the Property Manager is
AHC or an Affiliate of AHC and is in default beyond any applicable cure period
under the terms of the Property Management Agreement, only the consent of CNL
shall be required to terminate the Property Management Agreement or replace the
Property Manager or otherwise amend, modify, supplement or grant any material
consents or waivers under the terms of the Property Management Agreement.

 

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(x) Except for the Construction Loan, cause the Company to incur any Company
Financing or modify, supplement or refinance any Company Financing, provided
that when the Construction Loan matures (whether at its stated maturity, upon
acceleration or otherwise), the Operating Member with Member Consent shall have
the authority to affirmatively cause the Company to obtain or attempt to obtain
replacement financing in at least the amount of the outstanding balance of the
Construction Loan; provided, however that upon the maturity of the Construction
Loan or any other then-existing Company Financing that has been guaranteed in
whole or in part by AHC or any of the AHC Principals or any Affiliate thereof,
if new Company Financing, the proceeds of which will be used to repay the
Construction Loan or such other guaranteed matured Company Financing in full,
has been presented, in good faith, by the Operating Member and is not approved
by Member Consent, then the Operating Member shall be authorized, without Member
Consent, to pursue from a third-party lender such replacement Company Financing,
in an amount equal to the then-outstanding principal of the Construction Loan or
other matured Company Financing, on commercially reasonable prevailing market
terms favorable to the Company. It is understood that non-recourse financing
which would neither adversely affect the Company’s ability to dispose of the
Property nor require the Company to pay a prepayment premium shall be deemed
most favorable, and financing which would neither adversely affect the Company’s
ability to dispose of the Property nor require the Company to pay a prepayment
premium and which requires guaranties solely from AHC and/or any of the AHC
Principals shall also be deemed favorable;

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

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

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

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

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

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

 

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

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

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

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

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

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

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

(xxiv)   Designate a bank for the deposit of funds of the Company, except as
required under the Construction Loan; or

(xxv)     Formation of a subsidiary as may be necessary for the prudent
development of the Project and the operation and Management of the Company’s
business and affairs.

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

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

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

 

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(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 only with non-Affiliate third parties in the ordinary
course of business of operating the Project as an apartment community on such
terms as are commercially reasonable in the context of a “Class A” garden
apartment community in the Cypress, Texas market.

CNL will use good faith efforts to consult with AHC 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 AHC in connection
therewith.

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

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

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

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

 

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

6.3       Bank Accounts. For so long as the Construction Loan remains
outstanding, the Company will maintain a separate bank account or accounts with
the bank making the Construction Loan for the deposit and disbursement of all
funds of the Company. Subject to the foregoing, the Company may thereafter
maintain separate bank accounts in such banks as the Members by Member Consent
may designate or any Lender of the Company may require exclusively for the
deposit and disbursement of all funds of the Company. All funds of the Company
shall be promptly deposited in such accounts. The Operating Member may designate
representatives of Operating Member to be authorized signatories for such
accounts from time to time, provided that a representative of AHC shall at all
times be an authorized signatory on all Company bank accounts without the
requirement of any co-signatory for such accounts and all such signatories shall
not authorize any expenditures from such accounts with respect to the Project
that are not in accordance with the Project Budget and, if reasonably determined
to be prudent by CNL, all such signatories shall be insured by fidelity bonds 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 Property, for CNL’s review and approval, a proposed operating budget and
a proposed capital budget, each for the following fiscal year of the Company (or
portion thereof if Completion does not occur on January 1) in a form reasonably
satisfactory to CNL. The Operating Member shall consult with CNL with respect to
such proposed operating budget and proposed capital budget. Once approved by
CNL, the applicable final proposed operating budget shall become the “Operating
Budget” hereunder, and, once approved by CNL, the applicable final proposed
capital budget shall become the “Capital Budget” hereunder. Thereafter, no later
than November 1st of each year, the Operating Member shall prepare or cause to
be prepared by the Property Manager for the Property, for CNL’s review and
approval, a proposed operating budget and a proposed capital budget for the
upcoming calendar year. The Operating Member shall consult with CNL with respect
to such proposed operating budget and proposed capital budget with the goal that
CNL and AHC agree on each such proposed budget on or before December 1st of each
year. If approved by CNL, the final proposed operating budget for such
subsequent year shall become the then operative “Operating Budget” hereunder. If
approved by CNL, the final proposed capital budget for such subsequent year
shall become the then operative “Capital Budget” hereunder. If, as of the
commencement of any Fiscal Year, all or any portion of a proposed Operating
Budget has not been approved by CNL, the Operating Member shall be authorized to
operate the Company in accordance with those portions of the prior Fiscal Year’s
Operating Budget that pertain to the portions of the proposed Operating Budget
that have not been so approved. Notwithstanding the foregoing, until a new
Operating Budget for a Fiscal Year is approved by CNL, the Operating Member may
make expenditures for real estate taxes, scheduled debt service payments,
insurance premiums for insurance maintained in accordance with the terms of this
Agreement, common area expenses (if any), fulfillment of obligations to tenants
under Permitted Leases, amounts required to be paid in accordance with contracts
binding on the Company which have been entered into in accordance with this
Agreement, emergencies which present an immediate risk of harm to property or
persons and utilities, regardless of the amounts permitted therefore in the
prior Fiscal Year’s Operating Budget.

 

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6.5       Insurance. The Operating Member shall cause the Company to obtain and
maintain all such insurance as and when required under the Construction Loan and
any other Company Financing. The Operating Member shall cause the Company to
maintain such insurance coverages as are necessary to protect the completed
Project improvements and the interest of all of the Members and at no time shall
insurance maintained by the Company be less than the applicable amount required
under applicable law or any loan documents relating to the Construction Loan or
any other Company Financing.

6.6       Consultation Regarding the Project. CNL, as Managing Member, directly
or through its agents or Affiliates, notwithstanding the delegation of authority
granted to the Operating Member, shall have the right to consult with and
provide comments to the Operating Member on significant issues relating to the
management and business of the Company and development of the Project, and, if
requested by CNL, each of the Company and the Operating Member will make
available its officers and representatives of its accountants to meet with CNL
or its agents or Affiliates from time to time during each year at mutually
agreeable times for such consultation, to review the management, progress and
conditions (financial and otherwise) of the Project and the management of the
Company. Notwithstanding anything to the contrary in this Agreement, the rights
of CNL to provide such consultation shall include: (a) the right to discuss, 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 AHC as Operating Member.

(a)       CNL shall have the right, without the concurrence of AHC, to terminate
the delegation of authority of, and remove AHC as, Operating Member at any time
with or without Cause. Solely in the event of termination by CNL and removal of
AHC as Operating

 

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Member for Cause, AHC shall cease to have any rights to approve or consent to
any matters under this Agreement. For the avoidance of doubt, any termination by
CNL and removal of AHC as Operating Member without Cause shall not affect AHC’s
rights as a Member under this Agreement.

(b)       For purposes of this Agreement, termination of AHC as Operating Member
for “Cause” shall mean termination due to any one or more of the following:
(a) any material breach or default by AHC in its obligations as Operating Member
as delegated by the Managing Member under this Agreement, which breach, default
or misrepresentation, if the same may be cured by the payment of money, has not
been cured within five (5) days after written notice to AHC, or if the same may
not be cured by the payment of money, has not been cured within twenty (20) days
after written notice to AHC (provided, however, that (i) if the breach or
default has a material adverse effect on the company, the Property or CNL, AHC
shall have an additional thirty (30) days to cure such breach if such breach is
not curable within such twenty (20) day period, so long as AHC has commenced
cure within such initial twenty (20) day period and continues to prosecute to
completion with diligence and continuity the curing thereof within such
additional thirty (30) day period, and (ii) if the breach or default does not
have a material adverse effect on the Company, the Project or CNL and if AHC has
commenced and continues to prosecute to completion with diligence and continuity
the cure thereof within such initial twenty (20) day period, then AHC shall have
as much time as is commercially reasonable for curing such breach or default,
provided, however, that in no event shall AHC have greater than one hundred
twenty (120) days in the aggregate from such written notice to so cure); (b) any
act by AHC beyond the scope of its authority under this Agreement; or (c) in the
event of any fraud, gross negligence or willful misconduct by AHC against CNL or
the Company; provided, however, that prior to Completion, CNL shall also have
the sole and exclusive right, without the concurrence of AHC, to terminate the
delegation of authority of, and remove AHC as, Operating Member if (i) in CNL’s
reasonable business judgment, the Project will not be completed within thirty
(30) days after the Completion Date (as defined in the Development Agreement)
(except in the case of an Event of Force Majeure as defined in the Development
Agreement) or (ii) Developer is terminated as developer pursuant to the terms of
the Development Agreement, each of which shall constitute additional grounds for
termination for Cause. Such removal and termination of authority shall be
effective upon delivery of written notice thereof to AHC, and CNL shall have the
right to become, directly or through an Affiliate, or to appoint and delegate
authority to, a substitute Operating Member who shall have such rights and
obligations of the Operating Member as may be delegated by the Managing Member.
Following removal of AHC as Operating Member for Cause, AHC shall cease to have
any rights to approve or consent to any matters under this Agreement.

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

 

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6.8       Development. The Company shall retain Developer as the developer for
the Project, to act as the Company’s sole and exclusive agent to coordinate and
supervise the management and administration of the development of the Project
and the construction of the improvements comprising the Project. On the date
hereof, the Company and Developer shall enter into a Development Agreement in
substantially the form set forth as Exhibit C attached hereto. The Developer
will cause Completion of the Project for a price set forth in the Development
Agreement. The Developer, or a creditworthy entity acceptable to CNL, shall
provide all guaranties required in connection with the Construction Loan,
including a completion guaranty, cost guaranty and/or construction warranty as
required by CNL or the lender pursuant to the Construction Loan. As compensation
for the Developer’s property development services, Company agrees to pay the
Developer a development fee (the “Development Fee”) as set forth in the
Development Agreement.

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

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

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

 

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

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

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

Following the Effective Date:

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

(b)       no later than the seventh (7th) day after each month-end, Operating
Member shall prepare and submit or cause to be prepared and submitted to each
Member, an unaudited balance sheet of the Company dated as of the end of the
preceding month, together with a profit and loss statement and statement of cash
flows as of the end of such month and for the portion of the fiscal year then
ended and a statement of change in each Member’s capital for the month;

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

(d)       As soon as practicable following the end of each fiscal year of the
Company, an annual audit shall be conducted by independent certified public
accountants of recognized standing, selected by CNL in accordance with
Section 7.6 and retained by the Company, which accounting and/or audit shall
cover the assets, properties, liabilities and net worth of the Company, and its
dealings, transactions and operations during such fiscal year, and all matters
and things customarily included in such accountings and audits, and a full,
detailed certified statement shall be furnished to each Member within sixty
(60) days after the end of such fiscal year, showing on an accrual basis the
assets, liabilities, properties, net worth, profits,

 

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losses, net income, Operating Cash Flow, changes in the financial condition of
the Company for such fiscal year and each Member’s capital in the Company, and,
if applicable, a full and complete report of the audit scope and audit findings
in the form of a management audit report with an internal control memorandum.

In its preparation of the financial statements set forth in this Section 7.1,
the Operating Member shall maintain a system of internal controls necessary to
enable CNL to complete CNL’s Sarbanes-Oxley certifications, and shall deliver or
cause to be delivered a SSAE 16 report for the Property if requested by CNL, or
shall provide such other certification and documentation and testing of internal
controls as is deemed necessary by CNL; provided, however, that to the extent
the preparation of SSAE 16 reports, or such other required certifications and
documentation and testing of the Company’s internal controls or the
implementation of such additional or alternative internal controls of such
testing causes the Company to incur additional non de minimus expenses, CNL
shall bear responsibility for such expenses.

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

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

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

7.5       Tax Returns. The Company shall be treated and shall file its tax
returns as a partnership for Federal, state, municipal and other governmental
income tax and other tax purposes and shall not take any action (including
filing an election to be classified as a corporation for Federal income tax
purposes) inconsistent with such treatment. The Company shall prepare or cause
to be prepared, on an accrual basis, all Federal, state and municipal
partnership tax returns required to be filed. Unless otherwise determined by
Member Consent, such tax returns shall be prepared by independent certified
public accountants selected pursuant to Section 7.6, who shall sign such returns
as preparers. The Company shall submit (a) draft

 

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returns to each Member for review and approval no later than ninety (90) days
after the close of the Company’s taxable year; and (b) final returns to each
Member for review and approval no later than forty-five (45) days prior to the
extended due date of the returns. Each Member shall notify the other Member(s)
upon receipt of any notice of tax examination of the Company by Federal, state
or local authorities.

7.6       Tax Matters Partner. CNL is hereby appointed the “Tax Matters Partner”
of the Company for all purposes pursuant to Sections 6221-6231 of the Code, with
respect to operations conducted by the Company during the period that CNL is a
Member. The Tax Matters Partner shall comply with the requirements of
Section 6221 through 6232 of the Code. The Tax Matters Partner shall have the
authority, in its reasonable discretion, to select and appoint, from time to
time, independent certified public accountants to prepare tax returns and annual
audited financial statements for the Company, which selection shall be approved
by AHC, the expense of which shall be borne by the Company.

7.7       Tax Policy. The Company shall make any and all tax accounting and
reporting elections and adopt such procedures as shall be approved by Member
Consent. A Member shall be deemed to have consented to any tax elections made by
the Tax Matters Partner if such Member shall not have objected in writing to
such election as reflected in the initial tax return reflecting such election
within fifteen (15) days after such return is received by such Member,
indicating in reasonable detail the objection of such Member and the basis for
such objection. Any disputes over tax elections shall be resolved by Member
Consent.

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

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

 

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

ARTICLE 8. ALLOCATIONS

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

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

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

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

 

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(b)       Nonrecourse Deductions. Nonrecourse Deductions shall be allocated to
the Members pro rata in accordance with their Initial Capital Percentages. For
purposes of this Agreement, the term “Nonrecourse Deductions” shall have the
meaning set forth in Treasury Regulations Section 1.704-2(b)(1). This
Section 8.3(b) is intended to comply with Treasury Regulations
Section 1.704-2(e) and shall be interpreted and applied in a manner consistent
therewith.

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

8.4       Qualified Income Offset. Any Member who unexpectedly receives an
adjustment, allocation or distribution described in Treasury Regulations
Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) that causes or increases a deficit
balance in its Capital Account in excess of any obligation to restore a deficit
balance in its Capital Account (including any deemed deficit restoration
obligation pursuant to the penultimate sentences of Treasury Regulations
Sections 1.704-2(g)(1) and (i)(5), and adjusted as provided in Treasury
Regulations Section 1.704-1(b)(2)(ii)(d)) shall be allocated items of Company
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       Curative Allocations. The allocations set forth in Sections 8.3 (a),
(b) and (c) and 8.4 (the “Regulatory Allocations”) are intended to comply with
the requirements of Treasury Regulations Sections 1.704-1(b) and 1.704-2.
Notwithstanding any other provisions of this Article 8 (other than the
Regulatory Allocations), the Regulatory Allocations shall be taken into account
as provided for in the following two sentences. Income, gain, loss and deduction
shall be reallocated to the extent that such reallocation causes the net
aggregate amount of allocations of income, gain, deduction and loss to each
Member to be equal to or more closely approximate the net aggregate amount of
such items that would have been allocated to each such Member if the Regulatory
Allocations had not occurred. This Section 8.5 shall be interpreted and applied
in such a manner and to such extent as is reasonably necessary to eliminate, as
quickly as possible, permanent economic distortions that would otherwise occur
as a consequence of the Regulatory Allocations in the absence of this
Section 8.5.

 

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

8.7       Other Allocation Provisions. Any elections or decisions relating to
the allocations of Company items of income, gain, loss, deduction or credit
shall be made by the Tax Matters Partner in a manner that, in the Tax Matters
Partner’s discretion, reasonably reflects the arrangement between the Members
pursuant to this Agreement.

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

8.9       Information as to Allocation of Debt. AHC agrees that indebtedness of
the Company shall be allocated among the Members as required under Code
Section 752 and the Treasury Regulations promulgated thereunder.

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

ARTICLE 9. DISTRIBUTIONS AND ALLOCATIONS

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

 

CNL:

     80 %   

AHC:

     20 %   

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

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

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

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

 

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to (A) Section 4.5(d)(ii) and (B) Section 4.5(d)(iv), (3) the proceeds of
short-term borrowings of the Company in the ordinary course of business
(including Member Loans) and interest received on non-cash consideration
received by the Company pursuant to a Major Capital Event, (4) any amount by
which cash reserves, which were previously established pursuant to the Operating
Cash Budget prior to the accounting period in order to retain sufficient working
capital in the Company or to properly reserve for actual or contingent
obligations of the Company or improvements to the Property, have been reduced
(other than through the payment of expenses) and (5) the proceeds of business
interruption insurance.

(ii)       Deductions. There shall be subtracted from such net income or added
to such loss (1) the amount of payments made on account of principal upon
mortgage loans secured by Company property and the amount of current interest
and principal then due and payable with respect to any other loans made to the
Company, including Member Loans, (2) funds disbursed for capital expenditures,
leasing commissions, tenant finish or any other similar expenses that are
required to be capitalized and (3) any amount to establish or increase cash
reserves pursuant to a determination by Member Consent that such reserve and the
amount thereof is necessary or appropriate in order to retain sufficient working
capital in the Company or to properly reserve for other actual or contingent
obligations of the Company or improvements to the Property. Unless the terms of
the Member Loans provide otherwise, amounts paid in respect of Member Loans
shall be paid pro rata to the Members if more than one of the Members have
outstanding Member Loans in accordance with the total principal and interest
amounts of Member Loans then outstanding. Without limiting the foregoing, all
Member Loans made by a particular Member shall be repaid in the chronological
order in which they were made.

(b)       “Extraordinary Cash Flow” shall mean the cash receipts of the Company
from a Major Capital Event as reduced by (A) the costs and expenses incurred by
the Company in connection with such Major Capital Event, including title,
survey, appraisal, recording, escrow, transfer tax and similar costs, brokerage
expense and attorneys, and other professional fees, and amounts spent on
reconstruction or repair, (B) funds deposited in reserves pursuant to a
determination by Member Consent that each such reserve and the amount thereof is
required or appropriate to provide for actual or contingent obligations of the
Company, amounts expected therefrom for capital improvements to the Property,
and (C) funds applied to pay or prepay any indebtedness of the Company
(including interest and principal payable on Member Loans in accordance with
their terms) in connection with such Major Capital Event. Unless the terms of
the Member Loans provide otherwise, amounts paid in respect of Member Loans
shall be paid pro rata to the Members if more than one of the Members have
outstanding Member Loans in accordance with the total principal and interest
amounts of Member Loans then outstanding. Without limiting the foregoing, all
Member Loans made by a particular Member shall be repaid in the chronological
order in which they were made. To the extent that any amount received pursuant
to a Major Capital Event has been set aside as a reserve pursuant to item (B)
above in this definition and the Members thereafter determine by Member Consent
that all or a portion of such amount is not required for such purposes, such
amount shall be included in Extraordinary Cash Flow when the Members determine
by Member Consent that it is no longer necessary or appropriate to retain such
amount as a reserve. Any principal payments on non-cash consideration received
pursuant to a Major Capital Event, including promissory notes or deferred
payment obligations, shall be deemed to be included in Extraordinary Cash Flow
when received in cash by the Company; provided, however, that, notwithstanding
the terms of Section

 

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9.2(a)(i)(3) as determined by Member Consent, such noncash assets may be
distributed in accordance with Percentage Interest in kind to the Members, in
lieu of cash, treating the total fair market value of such non-cash assets at
the date of distribution as Extraordinary Cash Flow.

(c)       “Operating Return” shall mean a cumulative return, compounded monthly,
equal to ten and one-half percent (10.5%) per annum on each Member’s Unreturned
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 any distributions of Extraordinary Cash Flow made
to such Member pursuant to Section 9.4(d) hereof.

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

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

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

9.3       Operating Cash Flow Distributions. Subject to the terms of Sections
4.5(d) and 10.8(d) hereof, the Company shall distribute Operating Cash Flow for
each quarter during the term of the Company in which there is Operating Cash
Flow (such distribution to be made quarterly, within twenty-one (21) days after
the end of each such quarter) to the Members, as follows:

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

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

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

 

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

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

(c)       Third, 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;

(d)       Fourth, 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;

(e)       Fifth, eighty-five percent (85%) to the Members in proportion to their
respective Percentage Interests and fifteen percent (15%) to AHC, until CNL
achieves a twenty percent (20%) IRR on its aggregate Capital Contributions; and

(f)       Thereafter, thirty-five percent (35%) to the Members in proportion to
their respective Percentage Interests and sixty-five percent (65%) to AHC.

9.5       Loss of Promoted Interest. Notwithstanding the provisions of
Section 9.4, AHC shall no longer have the right to distributions with respect to
its so-called “promoted interest” as such distributions are set forth in
Sections 9.4(e) and 9.4(f) (and AHC shall instead receive distributions of
Extraordinary Cash Flow under such Sections based on its Percentage Interest) if
Developer is terminated as developer pursuant to the terms of the Development
Agreement, or upon violation by AHC of any of the restrictions on transfer as
set forth in Section 10.1 (but subject to the permitted transfers as set forth
in Section 10.2); provided that AHC shall have the same notice and cure rights
with respect to such violation as described in Section 6.7(a).

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

 

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ARTICLE 10. ASSIGNMENT AND OFFER TO PURCHASE

10.1       Transfers. Except as expressly provided in this Article 10, no
Member, or any assignee or successor in interest of a Member, may sell, assign,
give, pledge, hypothecate, encumber or otherwise transfer, or permit the
transfer of, all or any portion of its interest in the Company, or in any Member
Loans made by it, or in all or any part of the assets of the Company, directly
or indirectly, whether by operation of law or otherwise. Any purported sale,
assignment, gift, pledge, hypothecation, encumbrance or other transfer of all or
any portion of a Member’s interest in the Company or any Member Loans made by it
not otherwise expressly permitted by this Article 10 shall be null and void and
of no force or effect whatsoever. A sale, assignment, gift, pledge,
hypothecation, encumbrance or other transfer by CNL of all or a portion of its
Entire Interest in the Company to an Affiliate of CNL Financial Group, LLC
(“CFG”) from time to time, or in connection with any corporate merger,
acquisition or other combination or the sale or transfer of all or substantially
all of its assets shall be a transfer permitted under this Article 10, and CNL
shall not be required to obtain the consent of, nor offer all or any portion of
its Entire Interest to be so sold, assigned, given, pledged, hypothecated,
encumbered or transferred to any other Member. No transfers of any direct or
indirect interest in CNL, or of CNL’s interest in the Company among funds
sponsored or advised by CFG or its Affiliates, shall be restricted in any way.
CNL’s right to transfer its Entire Interest as expressly permitted in this
Section 10.1 shall include, without limitation, its Managing Member rights.

10.2       Permitted Transfers. Notwithstanding any other provision of this
Agreement, so long as any one of the AHC Principals owns a controlling voting
equity interest in AHC, then (a) in the event of the death of any individual
member of AHC, such individual’s interest may be transferred to the personal
representative of such individual or as otherwise disposed of pursuant to the
will of such individual or under the laws of intestate succession, and (b) any
individual member of AHC or may freely transfer all or any part of that member’s
interest either (A) to another AHC Principal or (B) to a trust, family limited
liability company, family partnership or similar estate planning or wealth
preservation entity established by the transferring member for the benefit of
such member, such member’s spouse, one or more of such member’s immediate family
or any combination thereof.

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

 

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

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

10.5       Other Assignments Void.

  (a)       Without limiting the terms of Section 10.1, but subject to
Section 10.2, any Member, other than CNL, that is an incorporated or
unincorporated business entity and any permitted assignee of all or any portion
of the Entire Interest of such business entity, shall not permit, without prior
CNL Consent, which consent may be withheld in the sole and uncontrolled
discretion of CNL, the direct or indirect admission of any new equity or other
beneficial interest holder in such entity, or the issuance or assignment to any
Person, who is not now an equity or other beneficial interest holder, or an
Affiliate of such an equity interest holder, in such entity, of any kind of
interest whatsoever in such entity. If a transfer is permitted under this
subsection, such assignee shall pay all expenses incurred by the Company in
connection with the transfer.

  (b)       Further without limiting the terms of Section 10.1, but subject to
Section 10.2, any Member, other than CNL, that is an incorporated or
unincorporated business entity and any permitted assignee of all or any portion
of the Entire Interest of such business entity, shall not permit, without prior
CNL Consent, which consent may be withheld in the sole and uncontrolled
discretion of CNL, the issuance, sale, assignment, gift, pledge, hypothecation
or encumbrance of any interest in such entity or in any equity or other
beneficial interest holder in such entity or any such assignee or any
instruments convertible into any interest in such entity or in any equity or
other beneficial interest holder in such entity or any such assignee or the
transfer of any right to vote any equity or other beneficial interest in such
entity or any such assignee.

10.6       Intentionally Deleted.

10.7       Buy-Sell.

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

 

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

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

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

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

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

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

 

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   (i)       In the event this Section 10.8(a) is triggered in the context of
Section 10.7, there shall be determined the “Value” of the Company, after
payment of debts, liabilities and expenses, which Value shall equal the total
amount of Company assets that would have been required for the Company to
distribute the amount of the 10.7 Offer to the holder of the interest to be
purchased thereunder under Section 9.4, after payment of debts, liabilities and
expenses under Sections 13.5(a) and 13.5(b), if all of the Company’s property,
including the Property, were sold for the price set forth in the Sale Proposal.

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

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

  (c)       On payment of the purchase price for an Entire Interest, the
purchasing Member shall, at its option, either (i) deliver a release of the
selling Members from all liability, direct or contingent, by all holders of all
Company debts, obligations or claims against the Company for which any Member is
or may be personally liable, except for any debts, obligations or claims which
are fully insured by public liability insurer(s) acceptable to the selling
Members, or (ii) cause all such debts, obligations or claims to be paid in full
at the closing, or (iii) deliver to the selling Members an agreement in form and
substance satisfactory to the selling Members to defend, indemnify and save the
selling Members harmless from any actions, claims or loss arising from any debt,
obligation or claim of the Company arising prior to date of sale. The Company
shall provide the Members such tax information and reporting as may be required
by the Members in connection with such sale within a reasonable period following
such sale.

  (d)       After determining the Value as described above in Section 10.8(a)
above, no distributions of Operating Cash Flow will be made from the Company
prior to the earlier of the closing of the proposed purchase or the termination
of the proposed purchase prior to the closing.

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

 

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

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

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

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

(g)       This subparagraph (g) shall be applicable only to a sale of a Member’s
Entire Interest under Section 13.2. In the event of a purchase and sale pursuant
to Section 13.2, the Company shall be dissolved and terminated as of the closing
date of the sale, and on the closing date the Members shall execute and file a
Certificate of Cancellation of the Company’s Certificate of Formation, unless
the remaining Member elects to continue the Company. The Members shall cooperate
in taking all steps necessary in connection with the dissolution and termination
of the Company.

(h)       It is the intent of the parties to this Agreement that the
requirements or obligations, if any, of one Member to sell its Entire Interest
to another Member shall be enforceable by an action for specific performance of
a contract relating to the purchase of real

 

39

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property or an interest therein. In the event that the selling Member(s) shall
have created or suffered any unauthorized liens, encumbrances or other adverse
interests against either the Property or the selling Member’s interest in the
Company, the purchasing Member shall be entitled either to an action for
specific performance to compel the selling Member(s) to have such defects
removed, in which case the closing shall be adjourned for such purpose, or, at
the purchasing Member’s option, to an appropriate offset against the purchase
price, which offset shall include all reasonable costs associated with
enforcement of this Section.

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

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

10.9       Intentionally Deleted.

ARTICLE 11. DISSOLUTION OR BANKRUPTCY OF A MEMBER

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

11.2       Bankruptcy, etc. In the event:

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

  (b)       a court of competent jurisdiction shall enter an order, judgment or
decree approving a petition filed against any Member seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under the present or any future Federal bankruptcy code or any other
present or future applicable Federal, state or other

 

40

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statute or law relating to bankruptcy, insolvency, or other relief for debtors,
and said Member shall acquiesce in the entry for such order, judgment or decree
(the term “acquiesce” includes but is not limited to the failure to file a
petition or motion to vacate or discharge such order, judgment or decree within
ten (10) days after the entry of the order, judgment or decree) or such order,
judgment or decree shall remain unvacated and unstayed for an aggregate of
ninety (90) days (whether or not consecutive) from the date of entry thereof, or
any trustee, receiver, conservator or liquidator of said Member or of all or any
substantial part of said Member’s property or its interest in the Company shall
be appointed without the consent or acquiescence of said Member and such
appointment shall remain unvacated and unstayed for an aggregate of ninety
(90) days (whether or not consecutive); or

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

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

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

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

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

ARTICLE 12. CROSS-DEFAULT

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

ARTICLE 13. DISSOLUTION

13.1       Winding Up by Members. Upon dissolution of the Company by expiration
of the term hereof, by operation of law, by any provision of this Agreement or
by agreement between the Members, the Company’s business shall be wound up and
all its assets distributed in liquidation. In such dissolution, except as
otherwise expressly provided in Articles 10 or 11, the Members shall be
co-liquidating Members and shall continue to act by Member Consent. In such
event the Members shall have rights acting by Member Consent to wind up the
Company and

 

41

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shall proceed to cause the Company’s property to be sold and to distribute the
proceeds of sale as provided in Section 13.5. Except in respect of (i) all
assets on which a single, non-severable mortgage or other lien will be in effect
after such distribution, and (ii) any assets which the Members shall determine
are not readily severable or distributable in kind, the Members, to the extent
that liquidation of such assets is not required to fulfill the payments, if any,
under subsections (a) and (b) of Section 13.5 and Section 9.4 shall, if they
agree, have the right to distribute, in kind, all or a portion of the assets of
the Company to the Members.

13.2       Winding Up by Liquidating Member.

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

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

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

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

 

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

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

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

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

  (a)       First. To the payment of:

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

    (ii)       expenses of liquidation.

 

43

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

  (c)       Third. Any balance remaining shall be paid and distributed as
provided in Section 9.4; provided, that to the extent there is any balance
remaining after the application of Section 9.4, any distributions made
thereafter shall be made pursuant to the Members in accordance with their
positive Capital Account balances in accordance with Treasury Regulations
Section 1.704-1(b)(2)(ii)(b)(2).

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

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

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

ARTICLE 14. MEMBERS

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

ARTICLE 15. NOTICES

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

 

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CNL:

  

GGT Fairfield TX Holdings, LLC

CNL Center at City Commons

450 South Orange Avenue

Orlando, Florida 32801

Attention: Rosemary Q. Mills, Chief Financial Officer

Attention: Scott Hall

with a copy to:

  

GGT Fairfield TX Holdings, LLC

CNL Center at City Commons

450 South Orange Avenue

Orlando, Florida 32801

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

with a copy to:

  

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

450 South Orange Avenue, Suite 200

Orlando, Florida 32801

Attention: Joaquin E. Martinez, Esq.

AHC:

  

AHC Fairfield Operator, LLC

1800 Augusta Drive, Suite 150

Houston, Texas 77057

Attention: Paul Forbes

with a copy to:

  

Gardere Wynne Sewell, LLP

1601 Elm Street, Suite 3000

Dallas, Texas 75201

Attention: George Dunlap, Esq.

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

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

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

 

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ARTICLE 16. MISCELLANEOUS

16.1     Additional Documents and Acts. In connection with this Agreement, as
well as all transactions contemplated by this Agreement, each Member agrees to
execute and deliver such additional documents and instruments, and to perform
such additional acts, as may be necessary or appropriate to effectuate, carry
out and perform all of the terms, provisions and conditions of this Agreement
and all such transactions. All approvals of either party hereunder shall be in
writing.

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

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

16.4     References to this Agreement. Numbered or lettered articles, sections
and subsections herein contained refer to articles, sections and subsections of
this Agreement unless otherwise expressly stated.

16.5     Headings. All headings herein are inserted only for convenience and
ease of reference and are not to be considered in the construction or
interpretation of any provision of this Agreement.

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

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

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

 

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under the circumstances) and shall consider in good faith all comments provided
by the other Members; provided, however, that CNL shall not be required to
provide copies of disclosures to be made or proposed to be made by CNL in
periodic reports and other filings required by the applicable federal securities
laws.

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

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

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

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

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

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

 

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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.

 

AHC:

   

AHC FAIRFIELD OPERATOR, LLC,

a Texas limited liability company

 

By:   /S/ Paul Forbes                                  

Name:   Paul Forbes                                   

Title:     Manager                                         

CNL:

   

GGT FAIRFIELD TX HOLDINGS, LLC,

a Delaware limited liability company

 

By:   /S/ E.M. Gray                                     

Name:   Erin M. Gray                                 

Title:     Vice President                               

 

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EXHIBIT A

 

Names and Interests                    
of Members                        Percentage
Interest     

Maximum

Initial Capital
Contributions*

GGT Fairfield TX Holdings, LLC

   80%      $8,806,000

AHC Fairfield Operator, LLC

   20%      $2,201,500

TOTALS:

   100%      $11,007,500

 

A-1

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

EXHIBIT B

DESCRIPTION OF LAND

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

 

B-1

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

EXHIBIT C

DEVELOPMENT AGREEMENT

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

 

C-1

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

EXHIBIT D

PROJECT BUDGET

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

 

D-1

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

EXHIBIT E

PRE-DEVELOPMENT COSTS

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

 

E-1