Common use of Limitations on Powers of the Managers Clause in Contracts

Limitations on Powers of the Managers. Without the affirmative vote, written consent or written ratification by all Members, the Managers shall have no authority to do any act prohibited by law or to admit a person as a Member other than in accordance with the terms of this Agreement. The Managers shall observe the following policies in connection with Company operations: (a) The Company may not invest in or make Loans on any one property that would exceed, in the aggregate, an amount equal to 10% of the then total gross Offering proceeds. The Company may not invest in or make Loans to or from any one borrower that would exceed, in the aggregate, an amount greater than 10% of the then total gross Offering proceeds. The Company shall not invest in or make a Loan secured by unimproved Real Property (other than construction Loans as described below), except in amounts and upon terms which can be financed by the Offering proceeds or from cash flow and provided investment in Loans secured by such unimproved Real Property shall not exceed 10% of the then total gross Offering proceeds. Properties shall not be considered unimproved if they are expected to produce income within a reasonable period of time after their acquisition, and for purposes hereof, two years shall be deemed to be presumptively reasonable. The Company shall not invest in or make a construction Loan if it would cause the aggregate outstanding principal balance of all of the Company’s construction Loans to exceed 10% of the Company’s total loan portfolio. The Company shall not invest in or make a rehabilitation Loan if it would cause the aggregate outstanding principal balance of all of the Company’s rehabilitation Loans to exceed 15% of the Company’s total loan portfolio. The Company ordinarily shall not make or invest in a Loan secured by a property if, at the time of the acquisition of the Loan, the sum of the Company’s investment in the Loan plus the outstanding principal balance of all loans that are secured by mortgages senior to the Company’s Deed of Trust would exceed the following applicable percentage of the appraised value of the property, as determined by an independent appraisal: for residential property – 80%; for commercial property – 75%; and for unimproved land – 50%; provided however, except in the case of construction loans, the foregoing loan-to-value ratios may be exceeded if the Manager determines that substantial justification exists because of the presence of other underwriting criteria. For purposes of the foregoing, in the case of construction and rehabilitation loans, the appraised value shall mean the projected completed value of the subject property upon completion of the improvements. The Company is permitted to borrow money when it has taken over the operation of a property in order to prevent defaults under existing loans, or there otherwise is a need for additional capital with respect to such a property. (b) Each Loan must be supported by an appraisal of the property that secures the Loan, which shall be prepared by a competent, independent appraiser. The appraisal shall be maintained in the Company’s records for at least five (5) years and shall be available for inspection and duplication by any Member. A mortgagee’s or owner’s title insurance policy or commitment as to the priority of a mortgage or the condition of title shall also be obtained with respect to each property that secures a Loan made by the Company or in which the Company holds a participation interest; in addition, Company Loans may be supported by a pledge of all ownership interests of the borrower. (c) The Company shall not invest in real estate contracts of sale unless such contracts of sale are in recordable form and are appropriately recorded in the chain of title. (d) The Manager shall not have the authority to incur indebtedness which is secured by properties or assets of the Company, except as specifically authorized in this Agreement. (e) The Company may not at any time incur any indebtedness in excess of 50% of Members’ capital. (f) The Company shall not reinvest Cash Flow (other than (i) any proceeds from the repayment or prepayment of a Loan or sale of Company property after foreclosure or other disposition of the Loan and (ii) proceeds from the sale of Units pursuant to Articles 4 or 9 hereof, all of which may be reinvested up to 36 months prior to final liquidation of the Company, provided that the Company is in compliance with Section 5.6 of this Agreement). At any time, any Member may elect to receive its pro rata share of any Loan principal repayments received by the Company after the seven year anniversary of the date that the Registration Statement filed on November 18, 2008 (File No. 333-155428) is declared effective by the Securities and Exchange Commission by providing written notice to the Company of such election, and that Member’s Percentage Interest of any Loan principal repayments received by the Company after its receipt of such notice shall be distributed to such electing Member in redemption of Units held by that Member but only so long as there are no unfulfilled Redemption Requests from other Members under Article 8 hereof. (g) The Company shall maintain reasonable reserves for Company properties, in such amounts as the Manager in its sole and absolute discretion determines from time to time to be adequate, appropriate or advisable in connection with the operations of the Company, subject to compliance with applicable regulations and guidelines. Normally, not less than 1.0% of the offering proceeds will be considered adequate. (h) The funds of the Company shall not be commingled with the funds of any other Person; provided, however, that the foregoing shall not prohibit the Managers from establishing a master fiduciary or trust account for the benefit of affiliated Programs and other Persons for purposes of loan funding and loan servicing in accordance with applicable law, if Company funds are protected from claims of such other Programs and/or creditors. The foregoing prohibition shall not apply to investments described in Section 11.17. (i) The Managers shall not be authorized to enter into or effect any Roll-Up unless such Roll-Up complies with the following terms and conditions: (i) An appraisal of all assets of the Company shall be obtained from a Competent Independent Expert. If the appraisal will be included in a prospectus used to offer the securities of a Roll-Up Entity, the appraisal shall be filed with the Securities and Exchange Commission and the applicable states as an exhibit to the registration statement for the offering. The assets of the Company shall be appraised on a consistent basis. The appraisal shall be based on an evaluation of all relevant information and shall indicate the value of the Company’s assets as of a date immediately prior to the announcement of the proposed Roll-Up. The appraisal shall assume an orderly liquidation of the Company’s assets over a twelve (12) month period. The terms of the engagement of the Competent Independent Expert shall clearly state that the engagement is for the benefit of the Company and its Members. A summary of the independent appraisal, indicating all material assumptions underlying the appraisal, shall be included in a report to the Members in connection with the proposed Roll-Up. (ii) In connection with the proposed Roll-Up, the Person sponsoring the Roll-Up shall provide to Dissenting Members the choice of: (A) accepting the securities of the Roll-Up Entity offered in the proposed Roll-Up; or (B) one of the following: (I) remaining as Members in the Company and preserving their interests therein on the same terms and conditions as existed previously, or (II) receiving cash in an amount equal to the Members’ pro rata share of the appraised value of the net assets of the Company. (iii) The Company may not participate in any proposed Roll-Up which would result in the Members having democracy rights in the Roll-Up Entity which are less than those provided for under Section VII.A. and B. of the NASAA Mortgage Guidelines. If the Roll-Up Entity is a corporation, the voting rights shall correspond to the voting rights provided for in the NASAA Mortgage Guidelines to the greatest extent possible. (iv) The Company may not participate in any proposed Roll-Up which includes provisions which would operate to materially impede or frustrate the accumulation of shares by any purchaser of the securities of the Roll-Up Entity (except to the minimum extent necessary to preserve the tax status of the Roll-Up Entity). The Company may not participate in any proposed Roll-Up which would limit the ability of a Member to exercise the voting rights of his securities in the Roll-Up Entity on the basis of the membership or partnership interests or other indicia of ownership held by that Member. (v) The Company may not participate in any proposed Roll-Up in which the Members’ rights of access to the records of the Roll-Up Entity will be less than those provided for under Section VII.D. of the NASAA Mortgage Guidelines. (j) The Company may not participate in any proposed Roll-Up in which any of the costs of the transaction would be borne by the Company if the proposed Roll-Up is not approved by a Majority of the Members. (k) The Company shall not give a Manager an exclusive right or employment to sell or otherwise dispose of Loans or other assets of the Company. (l) The Company shall not make or acquire Loans to Programs formed by or affiliated with the Company.

Limitations on Powers of the Managers. Without the affirmative vote, written consent or written ratification by all Members, the Managers shall have no authority to do any act prohibited by law or to admit a person as a Member other than in accordance with the terms of this Agreement. The Managers shall observe the following policies in connection with Company operations: (a) The Company may not invest in or make Loans on any one property that would exceed, in the aggregate, an amount equal to 10% of the then total gross Offering proceeds. The Company may not invest in or make Loans to or from any one borrower that would exceed, in the aggregate, an amount greater than 10% of the then total gross Offering proceeds. The Company shall not invest in or make a Loan secured by unimproved Real Property (other than construction Loans as described below)Property, except in amounts and upon terms which can be financed by the Offering proceeds or from cash flow and provided investment in Loans secured by such unimproved Real Property shall not exceed 10% of the then total gross Offering proceeds. Properties shall not be considered unimproved if they are expected to produce income within a reasonable period of time after their acquisition, and for purposes hereof, two years shall be deemed to be presumptively reasonable. The Company shall not invest in or make a construction Loan if it would cause the aggregate outstanding principal balance of all of the Company’s construction Loans to exceed 10% of the Company’s total loan portfolio. The Company shall not invest in or make a rehabilitation Loan if it would cause the aggregate outstanding principal balance of all of the Company’s rehabilitation Loans to exceed 15% of the Company’s total loan portfolio. The Company ordinarily shall not make or invest in a Loan secured by a property if, at the time of the acquisition of the Loan, the sum of the Company’s investment in the Loan plus the outstanding principal balance of all loans that are secured by mortgages senior to the Company’s Deed of Trust would exceed the following applicable percentage of the appraised value of the property, as determined by an independent appraisal: for residential property – 80%; for commercial property – 75%; and for unimproved land – 50%; provided however, except in the case of construction loans, the foregoing loan-to-value ratios may be exceeded if the Manager determines that substantial justification exists because of the presence of other underwriting criteria. For purposes of the foregoing, in the case of construction and rehabilitation loans, the appraised value shall mean the projected completed value of the subject property upon completion of the improvements. The Company is permitted to borrow money when it has taken over the operation of a property in order to prevent defaults under existing loans, or there otherwise is a need for additional capital with respect to such a property. (b) Each Loan All Loans must be supported by an appraisal of the property that which secures the Loanloan, which shall be prepared by a competent, independent appraiser. The appraisal shall be maintained in the Company’s records for at least five (5) years and shall be available for inspection and duplication by any Member. A mortgagee’s or owner’s title insurance policy or commitment as to the priority of a mortgage or the condition of title shall also be obtained with respect to each property that secures a Loan made by the Company or in which the Company holds a participation interest; in addition, Company Loans may be supported by a pledge of all ownership interests of the borrower. (c) The Company shall not invest in real estate contracts of sale unless such contracts of sale are in recordable form and are appropriately recorded in the chain of title. (d) The Manager shall not have the authority to incur indebtedness which is secured by properties or assets of the Company, except as specifically authorized in this Agreement. (e) The Company may not at any time incur any indebtedness in excess of 50% of Members’ capital. (f) The Company shall not reinvest Cash Flow cash flow (other than (i) any proceeds from the repayment or prepayment of a Loan or sale of Company property after foreclosure or other disposition of the Loan and (ii) proceeds from the sale of Units pursuant to Articles 4 or 9 hereof, all of which may be reinvested up to 36 months prior to final liquidation of the Company, provided that the Company is in compliance with Section 5.6 of this AgreementLoan). At any time, any Member may elect to receive its pro rata share of any Loan principal repayments received by the Company after the seven year anniversary of the date that the Registration Statement filed on November 18, 2008 (File No. 333-155428) is declared effective by the Securities and Exchange Commission by providing written notice to the Company of such election, and that Member’s Percentage Interest a portion of any Loan principal repayments received by the Company after its receipt of such notice that are required to be distributed to such electing Member shall be distributed to such electing Member in redemption of Units held by that Member but only so long as there are no unfulfilled Redemption Requests from other Members under Article 8 hereofMember. (g) The Company shall maintain reasonable reserves for Company properties, in such amounts as the Manager in its sole and absolute discretion determines from time to time to be adequate, appropriate or advisable in connection with the operations of the Company, subject to compliance with applicable regulations and guidelines. Normally, not less than 1.0% of the offering proceeds will be considered adequate. (h) The funds of the Company shall not be commingled with the funds of any other Person; provided, however, that the foregoing shall not prohibit the Managers from establishing a master fiduciary or trust account pursuant to which separate subtrust accounts are established for the benefit of affiliated Programs and other Persons for purposes of loan funding and loan servicing in accordance with applicable lawAffiliated Programs, if Company funds are protected from claims of such other Programs and/or creditors. The foregoing prohibition shall not apply to investments described in Section 11.17. (i) The Managers shall not be authorized to enter into or effect affect any Roll-Up unless such Roll-Up complies with the following terms and conditions: (i) An appraisal of all assets of the Company shall be obtained from a Competent Independent Expert. If the appraisal will be included in a prospectus used to offer the securities of a Roll-Up Entity, the appraisal shall be filed with the Securities and Exchange Commission and the applicable states as an exhibit to the registration statement for the offering. The assets of the Company shall be appraised on a consistent basis. The appraisal shall be based on an evaluation of all relevant information and shall indicate the value of the Company’s assets as of a date immediately prior to the announcement of the proposed Roll-Up. The appraisal shall assume an orderly liquidation of the Company’s assets over a twelve (12) month period. The terms of the engagement of the Competent Independent Expert shall clearly state that the engagement is for the benefit of the Company and its Members. A summary of the independent appraisal, indicating all material assumptions underlying the appraisal, shall be included in a report to the Members in connection with the proposed Roll-Up. (ii) In connection with the proposed Roll-Up, the Person sponsoring the Roll-Up shall provide to Dissenting Members the choice of: (A) accepting the securities of the Roll-Up Entity offered in the proposed Roll-Up; or (B) one of the following: (I) remaining as Members in the Company and preserving their interests therein on the same terms and conditions as existed previously, or (II) receiving cash in an amount equal to the Members’ pro rata share of the appraised value of the net assets of the Company. (iii) The Company may not participate in any proposed Roll-Up which would result in the Members having democracy rights in the Roll-Up Entity which are less than those provided for under Section VII.A. and B. of the NASAA Mortgage Guidelines. If the Roll-Up Entity is a corporation, the voting rights shall correspond to the voting rights provided for in the NASAA Mortgage Guidelines to the greatest extent possible. (iv) The Company may not participate in any proposed Roll-Up which includes provisions which would operate to materially impede or frustrate the accumulation of shares by any purchaser of the securities of the Roll-Up Entity (except to the minimum extent necessary to preserve the tax status of the Roll-Up Entity). The Company may not participate in any proposed Roll-Up which would limit the ability of a Member to exercise the voting rights of his securities in the Roll-Up Entity on the basis of the membership or partnership interests or other indicia of ownership held by that Member. (v) The Company may not participate in any proposed Roll-Up in which the Members’ rights of access to the records of the Roll-Up Entity will be less than those provided for under Section VII.D. of the NASAA Mortgage Guidelines. (j) The Company may not participate in any proposed Roll-Up in which any of the costs of the transaction would be borne by the Company if the proposed Roll-Up is not approved by a Majority of the Members. (k) The Company shall not give a Manager an exclusive right or employment to sell or otherwise dispose of Loans or other assets of the Company. (lk) The Company shall not make or acquire provide Loans to Programs formed by or affiliated with the Company.

Limitations on Powers of the Managers. Without the affirmative vote, written consent or written ratification by all Members, the Managers shall have no authority to do any act prohibited by law or to admit a person as a Member other than in accordance with the terms of this Agreement. The Managers shall observe the following policies in connection with Company operations: (a) The Company may not invest in or make Loans on any one property that would exceed, in the aggregate, an amount equal to 10% of the then total gross Offering proceeds. The Company may not invest in or make Loans to or from any one borrower that would exceed, in the aggregate, an amount greater than 10% of the then total gross Offering proceeds. The Company shall not invest in or make a Loan secured by unimproved Real Property (other than construction Loans as described below)Property, except in amounts and upon terms which can be financed by the Offering proceeds or from cash flow and provided investment in Loans secured by such unimproved Real Property shall not exceed 10% of the then total gross Offering proceeds. Properties shall not be considered unimproved if they are expected to produce income within a reasonable period of time after their acquisition, and for purposes hereof, two years shall be deemed to be presumptively reasonable. The Company shall not invest in or make a construction Loan if it would cause the aggregate outstanding principal balance of all of the Company’s construction Loans to exceed 10% of the Company’s total loan portfolio. The Company shall not invest in or make a rehabilitation Loan if it would cause the aggregate outstanding principal balance of all of the Company’s rehabilitation Loans to exceed 15% of the Company’s total loan portfolio. The Company ordinarily shall not make or invest in a Loan secured by a property if, at the time of the acquisition of the Loan, the sum of the Company’s investment in the Loan plus the outstanding principal balance of all loans that are secured by mortgages senior to the Company’s Deed of Trust would exceed the following applicable percentage of the appraised value of the property, as determined by an independent appraisal: for residential property – 80%; for commercial property – 75%; and for unimproved land – 50%; provided however, except in the case of construction loans, the foregoing loan-to-value ratios may be exceeded if the Manager determines that substantial justification exists because of the presence of other underwriting criteria. For purposes of the foregoing, in the case of construction and rehabilitation loans, the appraised value shall mean the projected completed value of the subject property upon completion of the improvements. The Company is permitted to borrow money when it has taken over the operation of a property in order to prevent defaults under existing loans, or there otherwise is a need for additional capital with respect to such a property. (b) Each Loan All Loans must be supported by an appraisal of the property that which secures the Loanloan, which shall be prepared by a competent, independent appraiser. The appraisal shall be maintained in the Company’s records for at least five (5) years and shall be available for inspection and duplication by any Member. A mortgagee’s or owner’s title insurance policy or commitment as to the priority of a mortgage or the condition of title shall also be obtained with respect to each property that secures a Loan made by the Company or in which the Company holds a participation interest; in addition, Company Loans may be supported by a pledge of all ownership interests of the borrower. (c) The Company shall not invest in real estate contracts of sale unless such contracts of sale are in recordable form and are appropriately recorded in the chain of title. (d) The Manager shall not have the authority to incur indebtedness which is secured by properties or assets of the Company, except as specifically authorized in this Agreement. (e) The Company may not at any time incur any indebtedness in excess of 50% of Members’ capitalthe aggregate fair market value of all Loans that it holds. (f) The Company shall not reinvest Cash Flow cash flow (other than (i) any proceeds from the repayment or prepayment of a Loan or sale of Company property after foreclosure or other disposition of the Loan and (ii) proceeds from the sale of Units pursuant to Articles 4 or 9 hereof, all of which may be reinvested up to 36 months prior to final liquidation of the Company, provided that the Company is in compliance with Section 5.6 of this AgreementLoan). At any time, any Member may elect to receive its pro rata share of any Loan principal repayments received by the Company after the seven year anniversary of the date that the Registration Statement filed on November 18, 2008 (File No. 333-155428) is declared effective by the Securities and Exchange Commission by providing written notice to the Company of such election, and that Member’s Percentage Interest a portion of any Loan principal repayments received by the Company after its receipt of such notice that are required to be distributed to such electing Member shall be distributed to such electing Member in redemption of Units held by that Member but only so long as there are no unfulfilled Redemption Requests from other Members under Article 8 hereofMember. (g) The Company shall maintain reasonable reserves for Company properties, in such amounts as the Manager in its sole and absolute discretion determines from time to time to be adequate, appropriate or advisable in connection with the operations of the Company, subject to compliance with applicable regulations and guidelines. Normally, not less than 1.0% of the offering proceeds will be considered adequate. (h) The funds of the Company shall not be commingled with the funds of any other Person; provided, however, that the foregoing shall not prohibit the Managers from establishing a master fiduciary or trust account pursuant to which separate subtrust accounts are established for the benefit of affiliated Programs and other Persons for purposes of loan funding and loan servicing in accordance with applicable lawAffiliated Programs, if Company funds are protected from claims of such other Programs and/or creditors. The foregoing prohibition shall not apply to investments described in Section 11.17. (i) The Managers shall not be authorized to enter into or effect affect any Roll-Up unless such Roll-Up complies with the following terms and conditions: (i) An appraisal of all assets of the Company shall be obtained from a Competent Independent Expert. If the appraisal will be included in a prospectus used to offer the securities of a Roll-Up Entity, the appraisal shall be filed with the Securities and Exchange Commission and the applicable states as an exhibit to the registration statement for the offering. The assets of the Company shall be appraised on a consistent basis. The appraisal shall be based on an evaluation of all relevant information and shall indicate the value of the Company’s assets as of a date immediately prior to the announcement of the proposed Roll-Up. The appraisal shall assume an orderly liquidation of the Company’s assets over a twelve (12) month period. The terms of the engagement of the Competent Independent Expert shall clearly state that the engagement is for the benefit of the Company and its Members. A summary of the independent appraisal, indicating all material assumptions underlying the appraisal, shall be included in a report to the Members in connection with the proposed Roll-Up. (ii) In connection with the proposed Roll-Up, the Person sponsoring the Roll-Up shall provide to Dissenting Members the choice of: (A) accepting the securities of the Roll-Up Entity offered in the proposed Roll-Up; or (B) one of the following: (I) remaining as Members in the Company and preserving their interests therein on the same terms and conditions as existed previously, or (II) receiving cash in an amount equal to the Members’ pro rata share of the appraised value of the net assets of the Company. (iii) The Company may not participate in any proposed Roll-Up which would result in the Members having democracy rights in the Roll-Up Entity which are less than those provided for under Section VII.A. and B. of the NASAA Mortgage Guidelines. If the Roll-Up Entity is a corporation, the voting rights shall correspond to the voting rights provided for in the NASAA Mortgage Guidelines to the greatest extent possible. (iv) The Company may not participate in any proposed Roll-Up which includes provisions which would operate to materially impede or frustrate the accumulation of shares by any purchaser of the securities of the Roll-Up Entity (except to the minimum extent necessary to preserve the tax status of the Roll-Up Entity). The Company may not participate in any proposed Roll-Up which would limit the ability of a Member to exercise the voting rights of his securities in the Roll-Up Entity on the basis of the membership or partnership interests or other indicia of ownership held by that Member. (v) The Company may not participate in any proposed Roll-Up in which the Members’ rights of access to the records of the Roll-Up Entity will be less than those provided for under Section VII.D. of the NASAA Mortgage Guidelines. (j) The Company may not participate in any proposed Roll-Up in which any of the costs of the transaction would be borne by the Company if the proposed Roll-Up is not approved by a Majority of the Members. (k) The Company shall not give a Manager an exclusive right or employment to sell or otherwise dispose of Loans or other assets of the Company. (lk) The Company shall not make or acquire provide Loans to Programs formed by or affiliated with the Company.

Limitations on Powers of the Managers. Without the affirmative vote, written consent or written ratification by all Members, the Managers shall have no authority to do any act prohibited by law or to admit a person as a Member other than in accordance with the terms of this Agreement. The Managers shall observe the following policies in connection with Company operations: (a) The Company may not invest in or make Loans on any one property that would exceed, in the aggregate, an amount equal to 10% of the then total gross Offering proceeds. The Company may not invest in or make Loans to or from any one borrower that would exceed, in the aggregate, an amount greater than 10% of the then total gross Offering proceeds. The Company shall not invest in or make a Loan secured by unimproved Real Property (other than construction Loans as described below)Property, except in amounts and upon terms which can be financed by the Offering proceeds or from cash flow and provided investment in Loans secured by such unimproved Real Property shall not exceed 10% of the then total gross Offering proceeds. Properties shall not be considered unimproved if they are expected to produce income within a reasonable period of time after their acquisition, and for purposes hereof, two years shall be deemed to be presumptively reasonable. The Company shall not invest in or make a construction Loan if it would cause the aggregate outstanding principal balance of all of the Company’s construction Loans to exceed 10% of the Company’s total loan portfolio. The Company shall not invest in or make a rehabilitation Loan if it would cause the aggregate outstanding principal balance of all of the Company’s rehabilitation Loans to exceed 15% of the Company’s total loan portfolio. The Company ordinarily shall not make or invest in a Loan secured by a property if, at the time of the acquisition of the Loan, the sum of the Company’s investment in the Loan plus the outstanding principal balance of all loans that are secured by mortgages senior to the Company’s Deed of Trust would exceed the following applicable percentage of the appraised value of the property, as determined by an independent appraisal: for residential property – 80%; for commercial property – 75%; and for unimproved land – 50%; provided however, except in the case of construction loans, the foregoing loan-to-value ratios may be exceeded if the Manager determines that substantial justification exists because of the presence of other underwriting criteria. For purposes of the foregoing, in the case of construction and rehabilitation loans, the appraised value shall mean the projected completed value of the subject property upon completion of the improvements. The Company is permitted to borrow money when it has taken over the operation of a property in order to prevent defaults under existing loans, or there otherwise is a need for additional capital with respect to such a property. (b) Each Loan All Loans must be supported by an appraisal of the property that which secures the Loanloan, which shall be prepared by a competent, independent appraiser. The appraisal shall be maintained in the Company’s records for at least five (5) years and shall be available for inspection and duplication by any Member. A mortgagee’s or owner’s title insurance policy or commitment as to the priority of a mortgage or the condition of title shall also be obtained with respect to each property that secures a Loan made by the Company or in which the Company holds a participation interest; in addition, Company Loans may be supported by a pledge of all ownership interests of the borrower. (c) The Company shall not invest in real estate contracts of sale unless such contracts of sale are in recordable form and are appropriately recorded in the chain of title. (d) The Manager shall not have the authority to incur indebtedness which is secured by properties or assets of the Company, except as specifically authorized in this Agreement. (e) The Company may not at any time incur any indebtedness in excess of 50% of Membersmembers’ capital. (f) The Company shall not reinvest Cash Flow cash flow (other than (i) any proceeds from the repayment or prepayment of a Loan or sale of Company property after foreclosure or other disposition of the Loan and (ii) proceeds from the sale of Units pursuant to Articles 4 or 9 hereof, all of which may be reinvested up to 36 months prior to final liquidation of the Company, provided that the Company is in compliance with Section 5.6 of this AgreementLoan). At any time, any Member may elect to receive its pro rata share of any Loan principal repayments received by the Company after the seven year anniversary of the date that the Registration Statement filed on November 18, 2008 (File No. 333-155428) is declared effective by the Securities and Exchange Commission by providing written notice to the Company of such election, and that Member’s Percentage Interest a portion of any Loan principal repayments received by the Company after its receipt of such notice that are required to be distributed to such electing Member shall be distributed to such electing Member in redemption of Units held by that Member but only so long as there are no unfulfilled Redemption Requests from other Members under Article 8 hereofMember. (g) The Company shall maintain reasonable reserves for Company properties, in such amounts as the Manager in its sole and absolute discretion determines from time to time to be adequate, appropriate or advisable in connection with the operations of the Company, subject to compliance with applicable regulations and guidelines. Normally, not less than 1.0% of the offering proceeds will be considered adequate. (h) The funds of the Company shall not be commingled with the funds of any other Person; provided, however, that the foregoing shall not prohibit the Managers from establishing a master fiduciary or trust account pursuant to which separate subtrust accounts are established for the benefit of affiliated Programs and other Persons for purposes of loan funding and loan servicing in accordance with applicable lawAffiliated Programs, if Company funds are protected from claims of such other Programs and/or creditors. The foregoing prohibition shall not apply to investments described in Section 11.17. (i) The Managers shall not be authorized to enter into or effect affect any Roll-Up unless such Roll-Up complies with the following terms and conditions: (i) An appraisal of all assets of the Company shall be obtained from a Competent Independent Expert. If the appraisal will be included in a prospectus used to offer the securities of a Roll-Up Entity, the appraisal shall be filed with the Securities and Exchange Commission and the applicable states as an exhibit to the registration statement for the offering. The assets of the Company shall be appraised on a consistent basis. The appraisal shall be based on an evaluation of all relevant information and shall indicate the value of the Company’s assets as of a date immediately prior to the announcement of the proposed Roll-Up. The appraisal shall assume an orderly liquidation of the Company’s assets over a twelve (12) month period. The terms of the engagement of the Competent Independent Expert shall clearly state that the engagement is for the benefit of the Company and its Members. A summary of the independent appraisal, indicating all material assumptions underlying the appraisal, shall be included in a report to the Members in connection with the proposed Roll-Up. (ii) In connection with the proposed Roll-Up, the Person sponsoring the Roll-Up shall provide to Dissenting Members the choice of: (A) accepting the securities of the Roll-Up Entity offered in the proposed Roll-Up; or (B) one of the following: (I) remaining as Members in the Company and preserving their interests therein on the same terms and conditions as existed previously, or (II) receiving cash in an amount equal to the Members’ pro rata share of the appraised value of the net assets of the Company. (iii) The Company may not participate in any proposed Roll-Up which would result in the Members having democracy rights in the Roll-Up Entity which are less than those provided for under Section VII.A. and B. of the NASAA Mortgage Guidelines. If the Roll-Up Entity is a corporation, the voting rights shall correspond to the voting rights provided for in the NASAA Mortgage Guidelines to the greatest extent possible. (iv) The Company may not participate in any proposed Roll-Up which includes provisions which would operate to materially impede or frustrate the accumulation of shares by any purchaser of the securities of the Roll-Up Entity (except to the minimum extent necessary to preserve the tax status of the Roll-Up Entity). The Company may not participate in any proposed Roll-Up which would limit the ability of a Member to exercise the voting rights of his securities in the Roll-Up Entity on the basis of the membership or partnership interests or other indicia of ownership held by that Member. (v) The Company may not participate in any proposed Roll-Up in which the Members’ rights of access to the records of the Roll-Up Entity will be less than those provided for under Section VII.D. of the NASAA Mortgage Guidelines. (j) The Company may not participate in any proposed Roll-Up in which any of the costs of the transaction would be borne by the Company if the proposed Roll-Up is not approved by a Majority of the Members. (k) The Company shall not give a Manager an exclusive right or employment to sell or otherwise dispose of Loans or other assets of the Company. (lk) The Company shall not make or acquire provide Loans to Programs formed by or affiliated with the Company.

Limitations on Powers of the Managers. Without the affirmative vote, written consent or written ratification by all Members, the Managers shall have no authority to do any act prohibited by law or to admit a person as a Member other than in accordance with the terms of this Agreement. The Managers shall observe the following policies in connection with Company operations: (a) The Company may not invest in or make Loans on any one property that would exceed, in the aggregate, an amount equal to 10% of the then total gross Offering proceeds. The Company may not invest in or make Loans to or from any one borrower that would exceed, in the aggregate, an amount greater than 10% of the then total gross Offering proceeds. The Company shall not invest in or make a Loan secured by unimproved Real Property (other than construction Loans as described below)Property, except in amounts and upon terms which can be financed by the Offering proceeds or from cash flow and provided investment in Loans secured by such unimproved Real Property shall not exceed 10% of the then total gross Offering proceeds. Properties shall not be considered unimproved if they are expected to produce income within a reasonable period of time after their acquisition, and for purposes hereof, two years shall be deemed to be presumptively reasonable. The Company shall not invest in or make a construction Loan if it would cause the aggregate outstanding principal balance of all of the Company’s construction Loans to exceed 10% of the Company’s total loan portfolio. The Company shall not invest in or make a rehabilitation Loan if it would cause the aggregate outstanding principal balance of all of the Company’s rehabilitation Loans to exceed 15% of the Company’s total loan portfolio. The Company ordinarily normally shall not make or invest in a Loan secured by a Loans on any one property if, if at the time of the acquisition of the LoanLoan the aggregate amount of all mortgage loans outstanding on the property, including the sum Loans of the Company’s investment in the Loan plus the outstanding principal balance of all loans that are secured by mortgages senior to the Company’s Deed of Trust , would exceed the following applicable percentage an amount equal to 85% of the appraised value of the property, property as determined by an independent appraisal: for residential property – 80%; for commercial property – 75%; and for unimproved land – 50%; provided however, except in the case of construction loans, the foregoing loan-to-value ratios may be exceeded if the Manager determines that unless substantial justification exists because of the presence of other underwriting criteria. For purposes of the foregoing, in the case of construction and rehabilitation loans, the appraised value shall mean the projected completed value of the subject property upon completion of the improvements. The Company is permitted to borrow money when it has taken over the operation of a property in order to prevent defaults under existing loans, or there otherwise is a need for additional capital with respect to such a property. (b) Each Loan All Loans must be supported by an appraisal of the property that which secures the Loanloan, which shall be prepared by a competent, independent appraiser. The appraisal shall be maintained in the Company’s records for at least five (5) years and shall be available for inspection and duplication by any Member. A mortgagee’s or owner’s title insurance policy or commitment as to the priority of a mortgage or the condition of title shall also be obtained with respect to each property that secures a Loan made by the Company or in which the Company holds a participation interest; in addition, Company Loans may be supported by a pledge of all ownership interests of the borrower. (c) The Company shall not invest in real estate contracts of sale unless such contracts of sale are in recordable form and are appropriately recorded in the chain of title. (d) The Manager shall not have the authority to incur indebtedness which is secured by properties or assets of the Company, except as specifically authorized in this Agreement. (e) The Company may not at any time incur any indebtedness in excess of 50% of Members’ capital. (f) The Company shall not reinvest Cash Flow cash flow (other than (i) any proceeds from the repayment or prepayment of a Loan or sale of Company property after foreclosure or other disposition of the Loan and (ii) proceeds from the sale of Units pursuant to Articles 4 or 9 hereof, all of which may be reinvested up to 36 months prior to final liquidation of the Company, provided that the Company is in compliance with Section 5.6 of this AgreementLoan). At any time, any Member may elect to receive its pro rata share of any Loan principal repayments received by the Company after the seven year anniversary of the date that the Registration Statement filed on November 18, 2008 (File No. 333-155428) is declared effective by the Securities and Exchange Commission by providing written notice to the Company of such election, and that Member’s Percentage Interest a portion of any Loan principal repayments received by the Company after its receipt of such notice that are required to be distributed to such electing Member shall be distributed to such electing Member in redemption of Units held by that Member but only so long as there are no unfulfilled Redemption Requests from other Members under Article 8 hereofMember. (g) The Company shall maintain reasonable reserves for Company properties, in such amounts as the Manager in its sole and absolute discretion determines from time to time to be adequate, appropriate or advisable in connection with the operations of the Company, subject to compliance with applicable regulations and guidelines. Normally, not less than 1.0% of the offering proceeds will be considered adequate. (h) The funds of the Company shall not be commingled with the funds of any other Person; provided, however, that the foregoing shall not prohibit the Managers from establishing a master fiduciary or trust account pursuant to which separate subtrust accounts are established for the benefit of affiliated Programs and other Persons for purposes of loan funding and loan servicing in accordance with applicable lawAffiliated Programs, if Company funds are protected from claims of such other Programs and/or creditors. The foregoing prohibition shall not apply to investments described in Section 11.17. (i) The Managers shall not be authorized to enter into or effect affect any Roll-Up unless such Roll-Up complies with the following terms and conditions: (i) An appraisal of all assets of the Company shall be obtained from a Competent Independent Expert. If the appraisal will be included in a prospectus used to offer the securities of a Roll-Up Entity, the appraisal shall be filed with the Securities and Exchange Commission and the applicable states as an exhibit to the registration statement for the offering. The assets of the Company shall be appraised on a consistent basis. The appraisal shall be based on an evaluation of all relevant information and shall indicate the value of the Company’s assets as of a date immediately prior to the announcement of the proposed Roll-Up. The appraisal shall assume an orderly liquidation of the Company’s assets over a twelve (12) month period. The terms of the engagement of the Competent Independent Expert shall clearly state that the engagement is for the benefit of the Company and its Members. A summary of the independent appraisal, indicating all material assumptions underlying the appraisal, shall be included in a report to the Members in connection with the proposed Roll-Up. (ii) In connection with the proposed Roll-Up, the Person sponsoring the Roll-Up shall provide to Dissenting Members the choice of: (A) accepting the securities of the Roll-Up Entity offered in the proposed Roll-Up; or (B) one of the following: (I) remaining as Members in the Company and preserving their interests therein on the same terms and conditions as existed previously, or (II) receiving cash in an amount equal to the Members’ pro rata share of the appraised value of the net assets of the Company. (iii) The Company may not participate in any proposed Roll-Up which would result in the Members having democracy rights in the Roll-Up Entity which are less than those provided for under Section VII.A. and B. of the NASAA Mortgage Guidelines. If the Roll-Up Entity is a corporation, the voting rights shall correspond to the voting rights provided for in the NASAA Mortgage Guidelines to the greatest extent possible. (iv) The Company may not participate in any proposed Roll-Up which includes provisions which would operate to materially impede or frustrate the accumulation of shares by any purchaser of the securities of the Roll-Up Entity (except to the minimum extent necessary to preserve the tax status of the Roll-Up Entity). The Company may not participate in any proposed Roll-Up which would limit the ability of a Member to exercise the voting rights of his securities in the Roll-Up Entity on the basis of the membership or partnership interests or other indicia of ownership held by that Member. (v) The Company may not participate in any proposed Roll-Up in which the Members’ rights of access to the records of the Roll-Up Entity will be less than those provided for under Section VII.D. of the NASAA Mortgage Guidelines. (j) The Company may not participate in any proposed Roll-Up in which any of the costs of the transaction would be borne by the Company if the proposed Roll-Up is not approved by a Majority of the Members. (k) The Company shall not give a Manager an exclusive right or employment to sell or otherwise dispose of Loans or other assets of the Company. (lk) The Company shall not make or acquire provide Loans to Programs formed by or affiliated with the Company.

Limitations on Powers of the Managers. Without the affirmative vote, written consent or written ratification by all Members, the Managers shall have no authority to do any act prohibited by law or to admit a person as a Member other than in accordance with the terms of this Agreement. The Managers shall observe the following policies in connection with Company operations: (a) The Company may not invest in or make Loans on any one property that would exceed, in the aggregate, an amount equal to 10% of the then total gross Offering proceeds. The Company may not invest in or make Loans to or from any one borrower that would exceed, in the aggregate, an amount greater than 10% of the then total gross Offering proceeds. The Company shall not invest in or make a Loan secured by unimproved Real Property (other than construction Loans as described below)Property, except in amounts and upon terms which can be financed by the Offering proceeds or from cash flow and provided investment in Loans secured by such unimproved Real Property shall not exceed 10% of the then total gross Offering proceeds. Properties shall not be considered unimproved if they are expected to produce income within a reasonable period of time after their acquisition, and for purposes hereof, two years shall be deemed to be presumptively reasonable. The Company shall not invest in or make a construction Loan if it would cause the aggregate outstanding principal balance of all of the Company’s construction Loans to exceed 10% of the Company’s total loan portfolio. The Company shall not invest in or make a rehabilitation Loan if it would cause the aggregate outstanding principal balance of all of the Company’s rehabilitation Loans to exceed 15% of the Company’s total loan portfolio. The Company ordinarily normally shall not make or invest in a Loan secured by a Loans on any one property if, if at the time of the acquisition of the LoanLoan the aggregate amount of all mortgage loans outstanding on the property, including the sum Loans of the Company’s investment in the Loan plus the outstanding principal balance of all loans that are secured by mortgages senior to the Company’s Deed of Trust , would exceed the following applicable percentage an amount equal to 85% of the appraised value of the property, property as determined by an independent appraisal: for residential property – 80%; for commercial property – 75%; and for unimproved land – 50%; provided however, except in the case of construction loans, the foregoing loan-to-value ratios may be exceeded if the Manager determines that unless substantial justification exists because of the presence of other underwriting criteria. For purposes of the foregoing, in the case of construction and rehabilitation loans, the appraised value shall mean the projected completed value of the subject property upon completion of the improvements. The Company is permitted to borrow money when it has taken over the operation of a property in order to prevent defaults under existing loans, or there otherwise is a need for additional capital with respect to such a property. (b) Each Loan All Loans must be supported by an appraisal of the property that which secures the Loanloan, which shall be prepared by a competent, independent appraiser. The appraisal shall be maintained in the Company’s records for at least five (5) years and shall be available for inspection and duplication by any Member. A mortgagee’s or owner’s title insurance policy or commitment as to the priority of a mortgage or the condition of title shall also be obtained with respect to each property that secures a Loan made by the Company or in which the Company holds a participation interest; in addition, Company Loans may be supported by a pledge of all ownership interests of the borrower. (c) The Company shall not invest in real estate contracts of sale unless such contracts of sale are in recordable form and are appropriately recorded in the chain of title. (d) The Manager shall not have the authority to incur indebtedness which is secured by properties or assets of the Company, except as specifically authorized in this Agreement. (e) The Company may not at any time incur any indebtedness in excess of 50% of Members’ capital. (f) The Company shall not reinvest Cash Flow cash flow (other than (i) any proceeds from the repayment or prepayment of a Loan or sale of Company property after foreclosure or other disposition of the Loan and (ii) proceeds from the sale of Units pursuant to Articles 4 or 9 hereof, all of which may be reinvested up to 36 months prior to final liquidation of the Company, provided that the Company is in compliance with Section 5.6 of this AgreementLoan). At any time, any Member may elect to receive its pro rata share of any Loan principal repayments received by the Company after the seven year anniversary of the date that the Registration Statement filed on November 18, 2008 (File No. 333-155428) is declared effective by the Securities and Exchange Commission by providing written notice to the Company of such election, and that Member’s Percentage Interest a portion of any Loan principal repayments received by the Company after its receipt of such notice that are required to be distributed to such electing Member shall be distributed to such electing Member in redemption of Units held by that Member but only so long as there are no unfulfilled Redemption Requests from other Members under Article 8 hereofMember. (g) The Company shall maintain reasonable reserves for Company properties, in such amounts as the Manager in its sole and absolute discretion determines from time to time to be adequate, appropriate or advisable in connection with the operations of the Company, subject to compliance with applicable regulations and guidelines. Normally, not less than 1.0% of the offering proceeds will be considered adequate. (h) The funds of the Company shall not be commingled with the funds of any other Person; provided, however, that the foregoing shall not prohibit the Managers from establishing a master fiduciary or trust account pursuant to which separate subtrust accounts are established for the benefit of affiliated Programs and other Persons for purposes of loan funding and loan servicing in accordance with applicable lawAffiliated Programs, if Company funds are protected from claims of such other Programs and/or creditors. The foregoing prohibition shall not apply to investments described in Section 11.17. (i) The Managers shall not be authorized to enter into or effect any Roll-Up unless such Roll-Up complies with the following terms and conditions: (i) An appraisal of all assets of the Company shall be obtained from a Competent Independent Expert. If the appraisal will be included in a prospectus used to offer the securities of a Roll-Up Entity, the appraisal shall be filed with the Securities and Exchange Commission and the applicable states as an exhibit to the registration statement for the offering. The assets of the Company shall be appraised on a consistent basis. The appraisal shall be based on an evaluation of all relevant information and shall indicate the value of the Company’s assets as of a date immediately prior to the announcement of the proposed Roll-Up. The appraisal shall assume an orderly liquidation of the Company’s assets over a twelve (12) month period. The terms of the engagement of the Competent Independent Expert shall clearly state that the engagement is for the benefit of the Company and its Members. A summary of the independent appraisal, indicating all material assumptions underlying the appraisal, shall be included in a report to the Members in connection with the proposed Roll-Up. (ii) In connection with the proposed Roll-Up, the Person sponsoring the Roll-Up shall provide to Dissenting Members the choice of: (A) accepting the securities of the Roll-Up Entity offered in the proposed Roll-Up; or (B) one of the following: (I) remaining as Members in the Company and preserving their interests therein on the same terms and conditions as existed previously, or (II) receiving cash in an amount equal to the Members’ pro rata share of the appraised value of the net assets of the Company. (iii) The Company may not participate in any proposed Roll-Up which would result in the Members having democracy rights in the Roll-Up Entity which are less than those provided for under Section VII.A. and B. of the NASAA Mortgage Guidelines. If the Roll-Up Entity is a corporation, the voting rights shall correspond to the voting rights provided for in the NASAA Mortgage Guidelines to the greatest extent possible. (iv) The Company may not participate in any proposed Roll-Up which includes provisions which would operate to materially impede or frustrate the accumulation of shares by any purchaser of the securities of the Roll-Up Entity (except to the minimum extent necessary to preserve the tax status of the Roll-Up Entity). The Company may not participate in any proposed Roll-Up which would limit the ability of a Member to exercise the voting rights of his securities in the Roll-Up Entity on the basis of the membership or partnership interests or other indicia of ownership held by that Member. (v) The Company may not participate in any proposed Roll-Up in which the Members’ rights of access to the records of the Roll-Up Entity will be less than those provided for under Section VII.D. of the NASAA Mortgage Guidelines. (j) The Company may not participate in any proposed Roll-Up in which any of the costs of the transaction would be borne by the Company if the proposed Roll-Up is not approved by a Majority of the Members. (k) The Company shall not give a Manager an exclusive right or employment to sell or otherwise dispose of Loans or other assets of the Company. (l) The Company shall not make or acquire provide Loans to Programs formed by or affiliated with the Company.