EXHIBIT 10.35
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY
AGREEMENT
OF
HDMF-I LLC
Dated as of November 21, 2002
This AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
(this "Agreement") is made as of this 21st day of November, 2002 by and among
BTD 2001 HDMF-1 Corp. ("BTD"), Hanover Capital Mortgage Holdings, Inc. ("HCMH")
and Provident Financial Group, Inc. ("Provident"). BTD, HCMH and Provident are
each individually referred to as a "Member" of HDMF-I LLC (the "Company"), and
may collectively be described as the "Members."
RECITALS
A. This Agreement amends and restates the Limited Liability
Company Agreement dated August 1, 2001 by and among the Members (the "Original
Agreement").
B. Pursuant to the Original Agreement and the Certificate of
Formation dated March 29, 2001 filed with the Delaware Secretary of State on
March 29, 2001 (the "Certificate of Formation"), the Members formed the Company
for the purpose of acquiring in one or more transactions certain pools (the
"Pools") of primarily sub-performing and non-performing one-to-four family
residential mortgage loans.
C. Pursuant to the Original Agreement, the Members agreed that
Hanover Capital Mortgage Holdings, Inc. (the "Manager") would manage the
business and affairs of the Company.
D. Pursuant to the Original Agreement, the Company entered
into an asset management agreement dated August 1, 2001 (the "Asset Management
Agreement") with Hanover Capital Partners Ltd. as asset manager (the "Asset
Manager ") pursuant to which the Asset Manager, on behalf of the Company, shall
exercise substantial authority and responsibility to oversee the management of,
and assist in the sale of, the Assets. A copy of the Asset Management Agreement,
as amended, is attached hereto as Exhibit B.
E. The Company has and intends from time to time to enter into
a non-exclusive special servicing agreement (the "Servicing Agreement" and,
together with each other agreement entered into by the Company from time to time
relating to the servicing of one or more Pools, the "Servicing Agreements") with
The Provident Bank and other Servicers. Pursuant to the Servicing Agreements,
the Company has authorized The Provident Bank or will authorize other Servicers
to exercise substantial authority and responsibility to service the Assets of
one or more Pools. Each of the Members desires to confirm, as among themselves,
the power of the Manager (acting at the direction of the Required Members) to
select and replace the Servicers under the Servicing Agreements.
F. The Members desire to amend and restate the Original
Agreement to, among other things, (i) expand the definition of "Assets" (as
defined in the Original Agreement) to include sub-performing and non-performing
(a) five-to-eight family residential and mixed use property mortgage loans and
(b) cooperative loans, and thereby expand the purpose of the Company, and (ii)
extend the "Investment Period" (as defined in the Original Agreement) to one (1)
year after the date of this Agreement.
G. Certain capitalized terms used herein shall have the
meanings ascribed to such terms in Schedule I hereto.
AGREEMENT
Each of the Members agrees as follows:
ARTICLE I
GENERAL
1.1 Formation of Limited Liability Company. The Members have
formed the Company under and pursuant to the Delaware Limited Liability Company
Act, 6 Del. C. Sections 18-101, et seq. (as such may be amended from time to
time, and any successor to that act, the "Delaware Act"). Upon their execution
of the Original Agreement, each of the Members was admitted to the Company as a
member of the Company.
1.2 Name. The name of the Company is HDMF-I LLC.
1.3 Purpose. (a) Subject to Section 1.3(d) below, the Company
is organized for the principal objects and purposes of (i) purchasing, holding,
owning, financing, servicing and disposing of the Assets and the related
collateral for the Assets, (ii) selecting and monitoring the performance of the
Asset Manager under the Asset Management Agreement, (iii) selecting and
monitoring the performance of the Servicers under the Servicing Agreements and
(iv) engaging in any activities necessary, convenient or incidental to the
foregoing.
(b) Subject to Section 1.3(d) below, the Company may, and the
foregoing shall not limit the Company's authority and power to:
(i) organize one or more corporations, limited partnerships,
memberships, limited liability companies, business trusts or other
entities or arrangements for the purpose of purchasing, owning,
financing, managing, operating, disposing of or otherwise dealing with
any of the assets, liabilities, business and affairs of the Company, or
any subsidiary thereof;
(ii) borrow money for Company purposes, with or without recourse
to the Company (which borrowings may be made from one or more Members,
their respective Affiliates or from institutional or other third-party
lenders), but in no event with recourse to any Member, and pledge,
mortgage or encumber the interest of the Company in any or all of the
Assets and the other assets of the Company to one or more lenders as
security for such borrowings; and
(iii) enter into, execute, deliver and perform all obligations,
agreements and other instruments and do all other acts and things
necessary or incidental to or desirable for the accomplishment of the
foregoing or otherwise contemplated in this Agreement.
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(c) Notwithstanding anything in this Agreement to the
contrary, but subject to Section 1.3(d) and Article II below, the execution and
delivery by the Company of, and the exercise by the Company of its rights and
powers and the performance by the Company of its obligations under the following
agreements, documents and instruments, and any assumptions, amendments or
amendment and restatements thereof, are hereby expressly authorized, approved,
ratified and confirmed in all respects and do not and will be deemed not to
conflict with, contravene, violate or constitute a breach of or a default under
any provision of or any duty under this Agreement:
(i) the Asset Management Agreement;
(ii) the Servicing Agreements;
(iii) all such agreements, documents and instruments as may be
required in connection with the acquisition, holding, owning,
financing, servicing and disposition of the Assets;
(iv) all such agreements, documents and instruments as may be
executed in accordance with the terms of this Agreement and required in
connection with the secured or unsecured financing and refinancing of
the Company's acquisition, holding, owning, servicing and disposition
of the Assets (collectively, the "Loan Pool Documentation"); and
(v) such other agreements, documents and instruments relating
thereto or contemplated thereby that, in accordance with the terms of
this Agreement, the Company may execute, enter into or agree to be
bound by, or by which it may cause any of its assets or property to be
bound.
(d) Notwithstanding anything to the contrary contained in this
Agreement, including, without limitation, Sections 1.3(a)-(c) and Section 2.1
hereof, or the Asset Management Agreement, the Company, and the Manager, the
Members, and any employee or agent of the Company or of the Manager or any
Member, shall not engage in any activity (i) that would result in a violation of
federal or state banking law, including, without limitation, laws applicable to
FDIC insured depository institutions and the rules, regulations and
interpretations of the FDIC, with respect to any Member, or (ii) without
obtaining any Governmental Authorization of or from any applicable Governmental
Body that is required pursuant to any Legal Requirement for the conduct of such
activity.
1.4 Term. The term of the Company commenced on the date that
the Certificate of Formation of the Company was filed with the Secretary of
State of the State of Delaware and shall continue until dissolved as provided in
Article VIII.
1.5 Place of Business. The principal place of business of the
Company is 00 Xxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000, or such other
place or places as may be determined from time to time by the Manager upon
notice to the Members. The Company may
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also maintain additional offices in such other places as may be determined from
time to time by the Manager.
1.6 Registered Office and Registered Agent. The registered
office of the Company in the State of Delaware is c/o The Corporation Trust
Company, Corporation Trust Center, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000. The registered agent for service of process on the
Company in the State of Delaware at that address is The Corporation Trust
Company.
1.7 Qualification. The Manager shall cause the Company to
continue to be qualified and existing as a limited liability company under the
Delaware Act and shall cause it to be qualified and registered as such in other
jurisdictions if the Manager shall determine that it is appropriate for the
Company to be so qualified or to be so registered.
ARTICLE II
DUTIES, POWERS AND LIABILITY OF
MANAGER AND MEMBERS; CONFLICTS
OF INTEREST; INDEMNIFICATION
2.1 Powers of Manager. (a) Except as otherwise specifically
set forth in this Agreement, including, without limitation, Section 1.3(d) and
Section 2.8 hereof, the Manager shall have full and complete charge of all
affairs of the Company, and management and control of the operations of the
Company shall be vested exclusively in the Manager, which shall have the power,
on behalf of and in the name of the Company, to carry out any and all of the
purposes of the Company and to perform all acts and enter into and perform all
contracts and other undertakings which the Manager may deem necessary or
advisable in furtherance thereof or incidental thereto. Without limiting the
foregoing, the Company is empowered, and the Manager is hereby authorized and
empowered on behalf of the Company, without obtaining the prior consent of any
Member except as specifically required under any other provision of this
Agreement (including, without limitation, Section 2.8 hereof), to:
(i) execute and deliver on behalf of the Company such
proposals, bids, agreements in principle, definitive agreements and
other documents of any character, and amendments to any of the
foregoing, and to take such other actions in each case as it deems
appropriate with respect to the purchase of Pools of Assets, including
the making of any bid to purchase or otherwise acquire any Pool or
other Asset, in accordance with Sections 2.8 and 4.2(b) hereof;
(ii) execute and deliver on behalf of the Company such
agreements, instruments, and other documents of any character, and to
take such other actions, in each case as it deems appropriate with
respect to the sale or other disposition of the assets of the Company,
including, but not limited to, the assignment, transfer or other
disposition of any Pool of Assets;
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(iii) execute and deliver on behalf of the Company obligations,
agreements, instruments and other documents of any character relating
to the business and affairs of the Company, including, without
limitation, certificates and other documents in connection with the
registration and qualification of the Company in any jurisdiction;
certificates and other documents in connection with the incorporation,
organization, formation, registration and qualification in any
jurisdiction of any corporation or other entity, or any subsidiaries
thereof, formed for the purpose of purchasing, owning, financing,
managing, operating, disposing of or otherwise dealing with any of the
assets, liabilities and operations of the Company, or any subsidiary
thereof, provided the Manager does not permit such corporation or other
entity to take any action described in Section 2.8 without the prior
written consent of all the Members; mortgages, notes, deeds, trust
indentures and assignments and powers of attorney, consents, waivers
and other documents of any character; and pleadings in connection with
any proceedings before any court, administrative board or agency of any
governmental authority affecting the Company or any of its assets, in
each case on such terms as the Manager shall approve;
(iv) execute and deliver on behalf of the Company the Asset
Management Agreement and one or more Servicing Agreements;
(v) invest and reinvest funds of the Company in certificates of
deposit, commercial paper and other instruments evidencing short-term
indebtedness, pending the application thereof in accordance with this
Agreement;
(vi) execute and deliver agreements on behalf of the Company,
and otherwise act on behalf of the Company in connection with all
matters relating to the financing or refinancing of the Company's
acquisition of any Pool and the exercise of the Company's rights and
the performance of the Company's obligations under any Loan Pool
Documentation;
(vii) open, maintain and close bank accounts and to sign checks,
such approval to be conclusively, but not exclusively, evidenced by the
execution and delivery of any related agreements, instruments or other
documents by the Manager;
(viii) vote, give assent and otherwise to exercise all rights,
powers, privileges and other incidents of ownership or possession with
respect to the Assets or other assets of the Company, and to execute
and deliver powers of attorney or proxies to such persons as the
Manager shall deem proper, granting to such persons such power and
discretion with relation to the Assets or other assets as the Manager
shall deem proper;
(ix) subject to the terms of Section 5.6, institute, prosecute,
defend, settle, compromise or otherwise adjust all claims and
litigation arising out of the conduct of the affairs of the Company or
in the enforcement of obligations due the Company, including all rights
of appeal;
(x) employ or consult with such agents or independent
contractors as the Manager may deem necessary or advisable, including,
without limitation, brokers, audi-
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tors, counsel, consultants or managers or specialists in any field of
endeavor whatsoever, including such persons, firms or companies as may
be Members or Affiliates of any Member;
(xi) determine and pay or cause to be paid out of the capital or
income of the Company, as the Manager sees fit, all expenses, fees,
charges, taxes and liabilities incurred or arising in connection with
the conduct of the affairs of the Company, including, but not limited
to, expenses and charges for the services of consultants, auditors,
counsel, custodians, and such other agents or independent contractors
and such other expenses and charges as the Manager may deem necessary
or proper to incur, and in general to make all accounting, tax and
financial determinations and decisions;
(xii) make allocations and distributions to the Members pursuant
to the terms of this Agreement;
(xiii) borrow money and to make, issue, accept, endorse and
execute promissory notes, drafts, bills of exchange and other
instruments and evidences of indebtedness, and to secure the payment
thereof by mortgage, pledge or assignment of, or security interest in,
all or any part of the Assets and other property then owned or
thereafter acquired by the Company;
(xiv) enter, make and perform such other contracts, agreements
and other undertakings as may be necessary or advisable or incidental
to the carrying out of any of the foregoing powers, objects or
purposes; and
(xv) execute all other instruments of any kind or character and
take all action of any kind or character that the Manager may in its
sole discretion determine to be necessary or appropriate in connection
with the business of the Company.
For the purposes of this Agreement, an "Affiliate" of a person means any other
person that directly or indirectly controls, is controlled by or is under common
control with, such person or any of its subsidiaries. "Control" (including with
correlative meanings the terms "controlling", "controlled by" and "under common
control with") means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a person, whether
through the ownership of voting securities, by contract or otherwise.
(b) To the extent permitted by law, the Manager may delegate
to any person (including, without limitation, the Asset Manager) the power to
act in the name and on behalf of the Manager in connection with any particular
matter affecting the Company, other than the Manager's right to approve or
disapprove Transfers and substitutions of Members in accordance with the terms
of Article VII. No delegation of any power pursuant to this Section 2.1(b) shall
be deemed to relieve the Manager from any of its duties and obligations to the
Company.
(c) Persons dealing with the Company may rely conclusively
upon the authority of the Manager under the Delaware Act and as set forth in
this Agreement.
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2.2 Powers of Members. Except as specifically set forth in
this Agreement, none of the Members in their capacities as such shall have the
obligation or the right, power or authority to participate in the management,
operation or control of the business and affairs of the Company, to transact any
business on account thereof, to bind the Company in any way or to sign any
obligation, agreement, instrument or any other document for or on behalf of the
Company; provided, however, that a Member, an Affiliate of a Member or a
principal, member, partner, stockholder, officer, director, agent,
representative or employee of a Member or such Affiliate may also be an
employee, agent, representative, stockholder, director or officer of, or may
contract to render services to, one or both of the Company and the Manager so
long as any such arrangement is on terms no less favorable to the Company than
would prevail in a comparable arm's length arrangement with a third party.
2.3 Limitation on Manager's Liability. None of the Manager,
its Affiliates or their respective principals, members, partners, stockholders,
officers, directors, agents representatives, and employees (each, an "Exonerated
Person") shall be liable or accountable to the Company or any Member under any
circumstances, whether for the return of the capital contributions of a Member
or otherwise, except for losses suffered by a Member as a result of the bad
faith, fraud, gross negligence or willful misconduct of such Exonerated Person.
Without limiting the generality of the foregoing, no Exonerated Person shall be
liable or accountable to the Company or a Member for anything done, suffered or
omitted in good faith by him or it in accordance with the advice or opinion of
any legal counsel or accountant retained by the Company (which may be a legal
counsel or accountant for the Manager, its principals, partners or stockholders
or their respective Affiliates). In the absence of bad faith, fraud, gross
negligence or willful misconduct by an Exonerated Person, such Exonerated Person
shall not be liable to the Company or any Member for any act or omission of any
independent contractor, employee or agent retained, engaged or employed by the
Manager, on behalf of the Manager or the Company, if the Manager exercised
reasonable care in the selection of the independent contractor, employee or
agent.
2.4 Limitation on Member's Liability. Except as otherwise
expressly provided by law, a Member, including the Manager, in its capacity as a
Member, shall have no liability in excess of the amounts contributed by it to
the Company under Article IV of this Agreement, its share of any assets and
undistributed profits of the Company and its obligation to make other payments
provided for in this Agreement (subject to the obligation, if any, of a Member,
including the Manager, to repay funds wrongfully distributed to it).
2.5 Compensation of Manager. Except for distributions made
pursuant to Sections 5.7 or 8.3(d)(iii), the Manager shall not be entitled to
any compensation, directly or indirectly, from the Company for its services
hereunder in connection with the management of the business and affairs of the
Company. Hanover Capital Partners Ltd. will be entitled to receive the Asset
Management Fee (as defined in the Asset Management Agreement) as compensation
for its services as Asset Manager under the Asset Management Agreement.
2.6 Conflicts of Interest. (a) A Member and its Affiliates and
their respective principals, members, partners, stockholders, officers,
directors, agents, representatives and employees and all other persons directly
or indirectly related to the Member or its Affiliates may engage for their own
account in, or possess an interest in, other activities, ventures or
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memberships similar or dissimilar to the business of the Company (including,
without limitation, those that compete with the Company or its business), and
neither the Company nor any other Member shall have any right in or to such
activities, ventures or memberships or the income or profits derived therefrom
and the pursuit of any such activities, ventures or memberships shall not be
deemed to be improper; provided, however, that until such time as the Company
shall have drawn down the Maximum Capital Contributions, the Manager agrees to
direct to the Company all investment opportunities available to it and/or of
which it becomes aware, in each case relating to sub-performing and
non-performing mortgage loans on one-to-four family dwellings and/or
five-to-eight family residential and mixed use properties and cooperative loans.
Subject to Section 2.6(b), a Member or any Affiliate of a Member may lend money
to and transact other business with the Company and, to the fullest extent
permitted by law, shall have the same rights and obligations with respect
thereto as a person or entity who is not a Member or an Affiliate of a Member.
(b) Except with respect to the Asset Management Agreement, for
which provision is made in Section 3.1, and the Servicing Agreements, for which
provision is made in Section 3.2, any transaction between the Company, on the
one part, and any Member and its Affiliates, on the other part, shall be on such
terms and conditions as are, on the whole, not less favorable or advantageous to
the Company than those available to the Company from reputable, experienced and
unrelated persons.
2.7 Indemnification of Manager. To the fullest extent
permitted by law, the Company shall indemnify the Manager, its Affiliates and
the principals, members, directors, officers, partners, stockholders, agents,
representatives and employees of the Manager and its Affiliates, and the
independent contractors and agents retained, engaged or employed by the Manager
who have acted or are acting on behalf of the Company against, and hold each of
them harmless from, any and all damages, losses, liabilities, fines, penalties,
amounts paid in settlement, costs and expenses (including attorneys' fees and
expenses) actually and reasonably incurred by the indemnified person in
connection with any threatened, pending or completed demand, claim, action, suit
or proceeding, whether civil, criminal, administrative or investigative, which
is or was brought or threatened against any indemnified person by reason of or
in connection with actions taken or omitted to be taken by any indemnified
person on behalf of the Company in the absence of bad faith, fraud, gross
negligence or willful misconduct. Notwithstanding the foregoing, nothing in this
Section 2.7 shall be construed to confer upon the Asset Manager or the Servicers
or any other person any rights to indemnification by the Company pursuant to the
Asset Management Agreement or the Servicing Agreement, respectively, that are
not expressly provided thereby. Any indemnity under this Section 2.7 shall be
provided out of and to the extent of Company assets only, and no Member shall
have any personal liability with respect to the payment of such indemnification
obligation.
2.8 Limits on Manager's Powers. Anything in this Agreement to
the contrary notwithstanding, the Manager shall not, without the written consent
of all the Members, cause or permit the Company to:
(a) do any act which would make it impossible to carry on the
ordinary business of the Company;
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(b) make any loans to the Manager or its Affiliates;
(c) perform any act that would subject any Member to liability
for the obligations of the Company in any jurisdiction;
(d) do business in any jurisdiction which does not recognize
the limited liability status of members of a limited liability company;
(e) perform any act that would cause the Company to be taxable
as a corporation for federal income tax purposes;
(f) bid on any pool originated by any lender identified by the
Manager in a Bid Summary Sheet as having, or otherwise believed by the
Manager or any Member to have, engaged in predatory lending practices;
(g) distribute any assets of the Company (other than cash) to
the Members in-kind unless such assets are Freely Tradable securities
or such distribution is made in connection with a liquidation and
dissolution of the Company pursuant to Article VIII hereof; or
(h) make any bid for, or purchase, any assets, whether
directly or indirectly through a corporation or other entity formed by
the Manager, that are not sub-performing or non-performing mortgage
loans on one-to-four family dwellings and/or five-to-eight family
residential and mixed use properties or cooperative loans, except that
any corporation or other entity formed by the Manager pursuant to
Section 2.1(a)(iii) may purchase real property through a foreclosure,
power of sale or deed-in-lieu of foreclosure carried out and/or signed
pursuant to the documents securing any loan owned by the Company (or by
any corporation or other entity formed by Manager pursuant to Section
2.1(a)(iii)).
ARTICLE III
ASSET MANAGEMENT AND SERVICING
3.1 Asset Management Agreement. The Company has selected, and
hereby reaffirms the selection of, Hanover Capital Partners Ltd. as the Asset
Manager pursuant to, and in accordance with, the terms and conditions of the
Asset Management Agreement. The Members hereby approve such selection. The
Manager, on behalf of the Company, has the right to direct the Asset Manager in
connection with the performance of its duties under the Asset Management
Agreement. If any "Event of Default" under and as defined in Section 5.1(a) of
the Asset Management shall occur, the Manager shall promptly notify each Member
and take such actions with respect thereto (including, but not limited to,
removing and replacing the Asset Manager) as directed by the Required Members.
3.2 Servicing Agreements. The Manager intends to select The
Provident Bank to act as the Servicer for one or
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more Pools. The Manager may select other Servicers for one or more Pools with
the consent of the Required Members. The Manager, on behalf of the Company,
shall have the right to terminate the engagement of any Servicer as Servicer
under the applicable Servicing Agreement and appoint a successor Servicer
thereunder (or to terminate the Servicing Agreement and cause the Company to
enter into a successor servicing agreement with a successor servicer), and in
each case shall take such actions from time to time as directed by the Required
Members.
ARTICLE IV
CAPITAL CONTRIBUTIONS; INCOME NOTES;
CAPITAL ACCOUNTS
4.1 Membership Interests. A Member's "Membership Interest"
means the entire ownership interest of such Member in the Company, including its
limited liability company interest in the Company and any and all rights, powers
and benefits accorded to a Member under this Agreement and the duties and
obligations of such Member hereunder. A Member's Membership Interest shall
entitle such Member to a Sharing Percentage with respect to the income and
losses in respect of each Pool. A Member's Sharing Percentage with respect to
any Pool shall mean, at any time, the ratio (expressed as a percentage) of (1)
such Member's Capital Contributions allocable to such Pool at such date to (2)
the total Capital Contributions of all Members allocable to such Pool at such
date.
4.2 Capital Contributions. (a) Simultaneously with the
execution of the Original Agreement, each Member made an initial Capital
Contribution to the Company of cash in the amount set forth under "Initial
Capital Contribution" opposite such Member's name in Exhibit A hereto.
(b) The Manager will notify each Member within two (2)
business days following the date on which it becomes aware of any prospective
Pool available for bid. If non-binding indicative bids are requested, the
Manager shall discuss the proposed bid methodology with each Member and request
direction from each such Member regarding whether or not to submit an
indicative, non-binding bid. At least three (3) business days prior to the
submission of any binding bid by the Company in respect of a Pool, the Manager
shall deliver to each Member a bid summary sheet ("Bid Summary Sheet"), which
sets forth the reasoning, methodology, calculations and due diligence findings
(which findings shall include a determination of (i) whether the acquisition of
such prospective Pool would require the Company to obtain any Governmental
Authorization of or from any applicable Governmental Body that is required
pursuant to any Legal Requirement, and, (ii) if determined to be applicable by
any Member in its sole discretion, whether the seller of such prospective Pool
has failed to obtain any Governmental Authorization of or from any applicable
Governmental Body that is required pursuant to any Legal Requirement, or is or
at any time was otherwise in violation of any applicable Legal Requirement, that
in either case would result in potential liability or loss for the purchaser of
such Pool) of the Asset Manager and the Manager in respect of such bid and, if
applicable, shall include a notification to the Member if the Manager has
knowledge, or otherwise believes, that the originator of any assets in such Pool
has engaged in predatory lending practices. Each
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Member shall have the right, but not the duty, to inspect, inquire, comment on
and participate in such bid analysis. Each Member shall have the right to elect
to participate or not to participate in any Pool proposed to be acquired by the
Company in such Member's sole discretion. Each Member shall be required to
notify the Manager of its election to participate or not participate in any Pool
not later than 3:00 p.m. (New York time) on the business day proceeding the bid
deadline date for such Pool. In connection with and not later than the date of
each closing of the Company's acquisition of a Pool, the Members that have
elected to participate in such Pool shall make additional Capital Contributions
to fund such purchase and any costs and expenses relating to such purchase by
acquiring from the Company income notes, which shall be in the form of Exhibit C
hereto (the "Income Notes"). The aggregate purchase price payable by the Members
for the Income Notes relating to any Pool will be equal to the purchase price
payable by the Company for such Pool, together with any costs and expenses of
the Company relating to such Pool, less the amount of any third party financing
arranged by the Manager in respect of the acquisition of such Pool. Such
aggregate Income Note purchase price shall be paid in cash by the Members that
have elected to participate in such Pool pro rata based upon (a) if all of the
Members have elected to participate in such Pool, their respective Percentage
Interests (which are set forth on Exhibit A hereto) or (b) if less than all of
the Members have elected to participate in such Pool, the ratio of (x) the
Percentage Interest of each such Member that has elected to participate in such
Pool to (y) the aggregate Percentage Interests of all such Members who have
elected to participate in such Pool. No Member shall be required to purchase
Income Notes relating to, or otherwise make a Capital Contribution to fund the
purchase price of, any Pool as to which such Member has not elected to
participate. No Member shall be required to purchase Income Notes, or otherwise
make a Capital Contribution to fund the purchase price of any Pool, subsequent
to the expiration of the Investment Period.
(c) Subject to the Maximum Capital Contribution limit of each
Member, the Manager may require the Members from time to time to contribute
additional capital to the Company pursuant to this Section 4.2(c) in such
aggregate amounts as in each case the Manager shall determine, for payment of,
or reimbursement to the Manager for, the costs, expenses, liabilities and other
obligations referred to in Section 6.1 (including, but not limited to, payments
of principal and interest under the Loan Pool Documentation). The Members shall
make such additional Capital Contributions in cash in proportion to each such
Member's Percentage Interest; provided that if any such cost, expense or
liability is allocable to a particular Pool and not to the Company generally,
such additional Capital Contributions shall be made in proportion to each
Member's Sharing Percentage in respect of such Pool.
(d) The Manager may require the Members to make Capital
Contributions pursuant to this Section 4.2 by giving notice to the Members by
telephonic, facsimile or other electronic communication, with written
confirmation to follow promptly thereafter. The notice shall specify (i) the
place at which the Capital Contributions are to be made, (ii) the aggregate
amount of the Capital Contributions to be made by all Members and the amount of
the Capital Contribution to be made by each Member in accordance with Sections
4.2(a), (b) or (c) above, as applicable, (iii) the time at which the Capital
Contributions are to be made, which time shall not be earlier than 9:00 a.m.,
New York time, on the third business day after the initial giving of the notice
and (iv) the use or uses to which the Manager proposes to apply the Capital
Contributions.
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(e) Except as provided in this Section 4.2, no Member shall
have an obligation to make any Capital Contribution to the Company, including,
without limitation, any obligation to eliminate any deficit in the Member's
Capital Account. No person other than the Manager (including, without
limitation, any of the other Members and the creditors of the Company or the
Members) shall have any right to cause any Member to contribute any capital to
the Company pursuant to this Section 4.2 or otherwise. A Member shall not be
required to lend any funds to the Company.
(f) As used herein, "Capital Contribution" shall mean, with
respect to any Member, the cash or other property contributed by such Member
from time to time to the capital of the Company, including in any event the
purchase price of any Income Notes acquired by such Member in connection with
the acquisition of any Pool. No Member shall be required to make Capital
Contributions hereunder in excess of such Member's Maximum Capital Contribution
at any time. The Members agree that Capital Contributions may be advanced, paid
and re-advanced from time to time.
(g) It is the intent of the Company, the Manager and each
Member that, for Federal, state and local income tax purposes, the Income Notes
will evidence an equity or ownership interest in the Company and will not
evidence indebtedness of the Company. Each Member, by its execution of this
Agreement and acceptance of an Income Note, agrees to treat such Income Note for
purposes of Federal, state and local income taxes, and any other tax imposed on
or measured by income, as an equity or ownership interest in the Company.
4.3 Interest on Capital. No interest shall be paid on any
capital contributed to the Company.
4.4 Return of Capital Contribution. Except as otherwise
expressly provided in this Agreement (including, but not limited to, as provided
in Section 5.7 hereof), no Member shall have the right to demand the return of
all or any part of any Capital Contribution until the Company has been dissolved
and then only to the extent provided in Article VIII hereof, and no Member shall
have the right to demand or receive property other than cash in return for its
Capital Contribution or to have priority over another Member, either as to the
return of Capital Contributions or as to profits, losses or distributions, or as
to compensation by way of income.
4.5 Capital Accounts. A separate capital account ("Capital
Account") shall be maintained for each Member in accordance with Treasury
Regulations Section 1.704-1(b)(2). Without limiting the foregoing, each Member's
Capital Account shall be credited with the sum of (i) the amount of money and
fair market value of property contributed by such Member to the Company,
including the purchase price of any Income Notes acquired pursuant to Section
4.2(b), but net of liabilities assumed by the Company or which such property is
taken subject to, (ii) allocations to such Member of its allocable share of Net
Income and (iii) the amount of income or profits, if any, allocated to such
Member not otherwise taken into account in this Section 4.5. Each Member's
Capital Account shall be decreased by the sum of (x) the amount of money
distributed to such Member and the fair market value of property distributed to
such Member (net of liabilities assumed by such Member or which such property is
taken subject to), (y) allocations to such Member of its allocable share of Net
Losses and (z) the amount of
12
expenses or losses, if any, allocated to such Member not otherwise taken into
account in this Section 4.5. If any property other than cash is distributed to a
Member, the Capital Accounts of the Members shall be adjusted as if the property
had instead been sold by the Company for a price equal to its Gross Asset Value
and the proceeds distributed. Upon liquidation and dissolution of the Company,
any unsold Company property shall be valued at its fair market value to
determine the gain or loss which would result if such property were sold at the
time of such liquidation. The Capital Accounts of the Members shall be adjusted
to reflect how any such gain or loss would have been allocated under Article V
if such property had been sold at the assigned values. The foregoing provisions
and the other provisions of this Agreement relating to the maintenance of
Capital Accounts are intended to comply with the provisions of Treasury
Regulations Section 1.704-1(b)(2) and shall be interpreted in a manner
consistent with such Treasury Regulations. The Capital Accounts of the Members
shall be increased or decreased in accordance with Regulations Section
1.704-1(b)(2)(iv)(f) to reflect a revaluation of the property of the Company on
the Company's books at the times set forth in paragraph (b) of the definition of
"Gross Asset Value." The Capital Account of any Member shall carry over to the
transferee of any Member in proportion to the Membership Interest transferred.
ARTICLE V
ALLOCATIONS; DISTRIBUTIONS
5.1 Allocations of Net Income and Losses. Except as otherwise
provided in this Agreement, Net Income and Net Losses of the Company for each
Fiscal Year shall be allocated among the Members in a manner such that, as of
the end of such Fiscal Year and taking into account all prior allocations of Net
Income and Net Losses of the Company and all distributions made by the Company
through such date, the Capital Account of each Member is, as nearly as possible,
equal to the distributions that would be made to such Member pursuant to Section
5.7(a) if the Company were dissolved, its affairs wound up and assets sold for
cash equal to their value, all Company liabilities were satisfied, and the net
assets of the Company were distributed in accordance with Section 5.7(a)
immediately after such allocation.
5.2 Limitation on Loss Allocation. Losses allocated to a
Member pursuant to Section 5.1 shall not exceed the maximum amount of losses
that can be allocated without causing a Member to have an Adjusted Capital
Account Deficit at the end of any Fiscal Year. In the event that any Member
would have an Adjusted Capital Account Deficit as a consequence of an allocation
of losses pursuant to Section 5.1, the amount of losses that would be allocated
to such Member but for the application of this Section 5.2 shall be allocated to
the other Members to the extent that such allocations would not cause such
Members to have an Adjusted Capital Account Deficit and allocated among such
Members in proportion to their total Capital Contributions. Any allocation of
items of loss pursuant to this Section 5.2 shall be taken into account in
computing subsequent allocations pursuant to Section 5.1, and prior to any
allocation of items in such Section so that the net amount of any items
allocated to each Member pursuant to Section 5.1 and this Section 5.2 shall, to
the maximum extent practicable, be equal to the net amount that would have been
allocated to each Member pursuant to the provisions of Section 5.1 and this
Section 5.2 if such allocation under this Section 5.2 had not occurred.
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5.3 Special Allocations. Notwithstanding any of the provisions
set forth above in this Article V to the contrary, the following special
allocations shall be made in the following order:
(a) Minimum Gain Chargeback. If there is a net decrease in
Company Minimum Gain during any Fiscal Year, each Member shall be specially
allocated items of Company income and gain for such Fiscal Year (and, if
necessary, subsequent Fiscal Years) in an amount equal to such Member's share of
the net decrease in Company Minimum Gain, determined in accordance with Treasury
Regulations Section 1.704-2(g). Allocations pursuant to the previous sentence
shall be made in proportion to the respective amounts required to be allocated
to each Member pursuant thereto. The items to be so allocated shall be
determined in accordance with Treasury Regulations Section 1.704-2(f)(6) and
Section 1.704-2(j)(2). This Section 5.3(a) is intended to comply with the
minimum gain chargeback requirement in Treasury Regulations Section 1.704-2(f)
and shall be interpreted consistently therewith. To the extent permitted by such
Treasury Regulations and for purposes of this Section 5.3(a) only, each Member's
net decrease in Company Minimum Gain shall be determined prior to any other
allocations pursuant to this Article V with respect to such Fiscal Year.
(b) Member Minimum Gain Chargeback. Notwithstanding any other
provision of this Article V, except Section 5.3(a), if there is a net decrease
in Member Minimum Gain attributable to Member Nonrecourse Debt during any Fiscal
Year, each Member that has a share of the Member Minimum Gain attributable to
such Member Nonrecourse Debt, determined in accordance with Treasury Regulations
Section 1.704-2(i)(5), shall be specially allocated items of Company income and
gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an
amount equal to such Member's share of the net decrease in Member Minimum Gain
attributable to such Member Nonrecourse Debt, determined in accordance with
Treasury Regulations Section 1.704-2(i)(4). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be
allocated to each Member pursuant thereto. The items to be so allocated shall be
determined in accordance with Treasury Regulations Section 1.704-2(i)(4) and
Section 1.704-2(j)(2)(ii). This Section 5.3(b) is intended to comply with the
minimum gain chargeback requirement in Treasury Regulations Section
1.704-2(i)(4) and shall be interpreted consistently therewith. Solely for
purposes of this Section 5.3(b), each Member's net decrease in Member Minimum
Gain shall be determined prior to any other allocations pursuant to this Article
V with respect to such Fiscal Year, other than allocations pursuant to Section
5.3(a).
(c) Qualified Income Offset. In the event that any Member
unexpectedly receives any adjustments, allocations or distributions described in
Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of
Company income and gain shall be specifically allocated to each such Member in
an amount and manner sufficient to eliminate, to the extent required by the
Treasury Regulations, the Adjusted Capital Account Deficit of such Member as
quickly as possible, provided that an allocation pursuant to this Section 5.3(c)
shall be made if and only to the extent that such Member would have an Adjusted
Capital Account Deficit after all other allocations provided for in this Article
V have been tentatively made as if this Section 5.3(c) were not in this
Agreement. The foregoing provision is intended to comply with Treasury
Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted and applied in
a manner consistent with such Treasury Regulations.
14
(d) Gross Income Allocation. In the event that any Member has
an Adjusted Capital Account Deficit at the end of any Fiscal Year, then each
such Member shall be specially allocated items of Company income and gain as
quickly as possible, provided that an allocation pursuant to this Section 5.3(d)
shall be made only if and to the extent that such Member would have an Adjusted
Capital Account Deficit after all other allocations provided for in this Article
V have been tentatively made as if this Section 5.3(d) were not in this
Agreement.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any
Fiscal Year will be allocated to the Members in the same manner in which such
items would have been allocated pursuant to Section 5.1(b).
(f) Member Nonrecourse Deductions. Any Member Nonrecourse
Deductions for any Fiscal Year or other period shall be specially allocated to
the Member who bears the economic risk of loss with respect to the Member
Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in
accordance with Treasury Regulations Section 1.704-2(i).
(g) Code Section 754 Adjustment. To the extent an adjustment
to the adjusted tax basis of any Company asset pursuant to Code Section 734(b)
or Code Section 743(b) is required, pursuant to Treasury Regulations Section
1.704-1(b)(2)(iv)(m)(2) or Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(4),
to be taken into account in determining Capital Accounts as the result of a
distribution to a Member in complete liquidation of its interest in the Company,
the amount of such adjustment to the Capital Accounts shall be treated as an
item of gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases such basis) and such gain or loss shall be specially
allocated to the Members in a manner consistent with the manner in which their
Capital Accounts are required to be adjusted pursuant to such Treasury
Regulations Section.
(h) Curative Allocations. It is the intent of the Members
that, to the extent possible, the allocations set forth in the foregoing
provisions of this Section 5.3 will be offset with special allocations of other
items of Company income, gain, loss, and deduction pursuant to this Section
5.3(h). Therefore, notwithstanding any other provision of this Article V (other
than Section 5.3 hereof), the Manager shall make such offsetting special
allocations of Company income, gain, loss, or deduction in whatever manner the
Manager determines to be appropriate so that, after such offsetting allocations
are made, each Member's Capital Account balance is, to the extent possible,
equal to the Capital Account balance such Member would have had if the
allocations set forth in the foregoing provisions of this Section 5.3 were not
part of this Agreement. In exercising its discretion under this Section 5.3(h),
the Manager shall take into account future allocations under Sections 5.3(a) and
5.3(b) that, although not yet made, are likely to offset other allocations
previously made under Sections 5.3(e) and 5.3(f).
5.4 Tax Incidents. It is intended that the Company will be
treated as a pass-through entity for tax purposes. Subject to Section 704(c) of
the Code, for U.S. federal and state income tax purposes, all items of Company
income, gain, loss, deduction, credit and any other allocations not otherwise
provided for shall be allocated among the Members in the same manner as the
corresponding item of income, gain, loss or deduction was allocated pursuant to
the preceding Sections of this Article V.
15
5.5 Section 704(c) Allocations. In accordance with Section
704(c) of the Code and the Treasury Regulations thereunder, income, gain, loss
and deduction with respect to any property contributed to the capital of the
Company shall, solely for tax purposes, be allocated among the Members so as to
take account of any variation between the adjusted tax basis of such property to
the Company for federal income tax purposes and its fair market value at the
time of contribution. Any elections or decisions relating to such allocations
shall be made by the Tax Matters Member in a manner that reasonably reflects the
purpose and intention of this Agreement. Allocations pursuant to this Section
5.5 are solely for purposes of federal, state and local taxes and shall not
affect, or in any way be taken into account in computing, any Member's Capital
Account or share of Net Income, Net Losses or other items or distributions
pursuant to any provision of this Agreement.
5.6 Tax Matters Member; Tax Elections. The Manager shall be
the "tax matters partner" of the Company as defined in Code Section 6231(a)(7)
(the "Tax Matters Member") and has and shall have all the powers and obligations
of a tax matters partner pursuant to the Code. All elections, filings and
determinations required or permitted to be made by the Company under the tax
laws of the United States, the several States or any other relevant jurisdiction
shall be timely determined and made by the Manager; provided, that the Manager
shall not make any such election or determination without obtaining the consent
of each Member (such consent not to be unreasonably withheld or delayed).
5.7 Distributions of Distributable Cash. Subject to Section
8.3(d), Distributable Cash with respect to a Disposition of all or a portion of
a Pool shall be distributed to the Members at such times as the Manager deems
appropriate in its sole discretion but in any event within 10 business days
after receipt thereof by the Company provided that Distributable Cash
representing the scheduled payment of principal or interest on Assets included
in a Pool and/or the payment of interest on temporary investments will be
retained by the Manager and distributed to the Members monthly. Distributable
Cash received by the Company with respect to a Pool shall be distributed in the
following amounts and order of priority among the Members in proportion to their
respective Sharing Percentages (determined at a time immediately prior to such
distribution) with respect to the Pool generating such Distributable Cash:
(i) First, the portion of each Member's Sharing Percentage of
such distribution shall be distributed to such Member to the extent
required so that such Member has been distributed an amount equal to
such Member's unreturned Capital Contributions (determined immediately
prior to such distribution) allocable to such Pool (each such
distribution reducing such Member's unreturned Capital Contributions
attributable to such Pool by the amount so distributed);
(ii) Second, the portion of each Member's Sharing Percentage of
such distribution remaining after the application made to such Member
pursuant to clause (i) shall be distributed to such Member to the
extent required so that such Member has been distributed an amount
equal to such Member's unreturned Capital Contributions used to fund
any expenses which are not directly allocable to any Pool;
16
(iii) Third, the portion of each Member's Sharing Percentage of
such distribution remaining after the application made to such Member
pursuant to clauses (i) and (ii) shall be distributed to such Member to
the extent required so that the cumulative amount distributed to such
Member under this clause (iii) in the current Fiscal Year and all prior
Fiscal Years equals a 13% per annum rate of return on all Capital
Contributions made by such Member allocable to such Pool (or otherwise
referred to in clause (ii)), in each case accruing from the date on
which such Member actually made such Capital Contributions;
(iv) Fourth, the portion of such Member's Sharing Percentage of
such distribution remaining after the foregoing applications shall be
distributed 70% to the Manager and 30% to such Member until the
cumulative amount distributed to the Manager under this clause (iv) in
the current Fiscal Year and all prior Fiscal Years equals 20% of the
sum of (1) the aggregate amount of all distributions to such Member
pursuant to clause (iii) above and this clause (iv), in each case that
are allocable to such Pool, and (2) the aggregate amount of all
distributions to the Manager pursuant to this clause (iv) that are
allocable to such Pool;
(v) Fifth, any remaining amounts distributable to such Member
shall be distributed 80% to such Member and 20% to the Manager until
such time as the cumulative amount distributed to such Member under
this clause (v) and the foregoing clauses (iii) and (iv) in the current
Fiscal Year and all prior Fiscal Years, in each case allocable to such
Pool, equals a 35% per annum rate of return on all Capital
Contributions made by such Member allocable to such Pool; and
(vi) Sixth, any remaining amounts distributable to such Member
shall be distributed 75% to such Member and 25% to the Manager.
5.8 Distributions In-Kind. It is the intent that all
distributions made under this Agreement be in cash, except as specifically
provided herein and in Section 8.3(d). Except in connection with the dissolution
and liquidation of the Company, the Manager may only make in-kind distributions
to the Members that consist of securities which are Freely Tradable; provided
that it will not make any such distribution to a Member if it has received
written notice from such Member (which may be specific or general) that such
Member would violate existing law applicable to it if it received same. In the
event that a distribution of assets is made, such assets shall be deemed to have
been sold at their Gross Asset Value, and the proceeds of such sale shall be
deemed to have been distributed to the Member as Distributable Cash, for all
purposes of this Agreement. Subject to Section 8.3(d), assets distributed
in-kind shall be distributed in proportion to the aggregate amounts that would
be distributed to each Member pursuant to Section 5.7, and if a distribution
consists of both cash and assets or assets of more than one class, each Member
receiving the distribution shall, except to the extent necessary to avoid
fractional interests, receive the same proportion of cash and assets of each
class being distributed. The Manager may cause certificates evidencing any
assets to be distributed in-kind to be imprinted with legends as to such
restrictions on transfer that it may deem necessary or appropriate, including
legends as to applicable United States or non-U.S. securities laws or other
legal or contractual restrictions, and may require any Member to which assets
are to be distributed in-kind to agree in writing (a) that
17
such assets will not be transferred except in compliance with such restrictions
and (b) to such other matters as the Manager may deem necessary or appropriate.
ARTICLE VI
FINANCIAL MANAGEMENT
6.1 Costs, Expenses, Liabilities and Obligations. The Company
shall pay, or reimburse the Manager for, all reasonable out-of-pocket costs,
expenses, liabilities and other obligations incurred, suffered or paid in
connection with the formation of the Company (including, without limitation, the
negotiation and preparation of this Agreement, the Asset Management Agreement,
the Servicing Agreements and any Loan Pool Documentation), the purchase of, or
bid or potential bid for (whether or not any such bid is made or accepted), any
Assets, the management and operation of the business and affairs of the Company
and the accomplishment of its purposes in accordance with the terms of this
Agreement, including but not limited to, the payment of amounts owing from time
to time to the Asset Manager under the Asset Management Agreement, the lenders
under any Loan Pool Documentation or any Servicer under the Servicing
Agreements. The Company also may fund a reserve for the payment of the foregoing
costs, expenses, liabilities and other obligations in such amount as the Manager
may in the absence of bad faith determine from time to time. In no event will
the amounts subject to payment or reimbursement by the Company hereunder include
the ordinary course operating costs or expenses of the Manager or the Asset
Manager (e.g. salaries, rent, utilities, data processing expenses, etc.).
6.2 Books and Records. The Manager shall maintain full and
accurate books of the Company, showing all receipts and expenditures, assets and
liabilities, profits and losses, and all other records necessary for recording
the business and affairs of the Company. The books of the Company shall be kept
on an accrual basis. Such books and records shall be open to the inspection and
examination of the Members and by their duly authorized representatives at
reasonable times.
6.3 Fiscal Year. The Fiscal Year of the Company shall be the
calendar year.
6.4 Reports. The Manager shall prepare or cause to be prepared
and shall furnish to each Member copies of a balance sheet, a statement of
revenue and expenses and a statement of each Member's share of the Net Income or
Losses of the Company as at the end of and for each of the first three calendar
quarters of each fiscal year of the Company and as at the end of and for each
fiscal year of the Company. Quarterly statements need not be audited and shall
be furnished within 60 days after the end of each calendar quarter; annual
statements shall be audited by a nationally recognized firm of independent
public accountants acceptable to the Manager and shall be furnished within 90
days after the end of each fiscal year of the Company. The Manager shall cause
the Members to receive necessary income tax reporting information by March 30 of
each year. The Manager also shall furnish to a Member such other reports on the
operations and condition of the Company as may be reasonably requested by the
Member, and as may be available to the Manager. All of the costs and expenses of
preparing and furnishing such statements and reports shall be costs and expenses
of the Company and not of the Manager.
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6.5 Bank Accounts and Investment of Funds. All funds of the
Company, pending the application thereof in accordance with this Agreement,
shall be deposited in its name in such checking and savings accounts or shall be
invested in such certificates of deposit, commercial paper and other instruments
evidencing short-term obligations, as shall be designated by the Manager.
6.6 Accounting Decisions. All decisions as to accounting
principles and procedures, except as specifically provided to the contrary
herein, shall be made by the Manager.
6.7 Income Tax Returns and Elections. The Manager, for the
Company, shall file any and all Federal, state, local and foreign tax returns
necessary to be filed by the Company and in such manner as will effectuate the
tax treatment described in this Agreement. Such tax returns shall be prepared by
such nationally recognized firm of independent public accountants as shall be
selected by the Manager from time to time and approved by the Members. Each
Member agrees to report on its own tax returns items pertaining to the Company
in a manner consistent with the terms of this Agreement. All costs incurred in
connection with the activities described in this Section 6.7, including legal
and accounting costs, shall be Company expenses payable pursuant to Section 6.1.
ARTICLE VII
TRANSFERS BY MEMBERS; SUBSTITUTE MEMBERS
7.1 Transfers by Members. (a) Without the prior written
consent of the Manager, which consent shall not be unreasonably withheld, no
Member may resign or withdraw from the Company or Transfer all or any portion of
its Membership Interest or any Income Notes held by it unless such Transfer is
made to an Affiliate of such Member. No Transfer of all or any portion of a
Membership Interest or any Income Note shall be made unless the transferee shall
have executed a written acknowledgment to the effect set forth in Section
4.2(g). The Manager shall register on the books of the Company any permitted
Transfer by a Member of its Membership Interest in the Company pursuant to this
Section 7.1(a).
(b) Notwithstanding anything to the contrary contained in this
Agreement, including any provision of this Article VII, a Member may Transfer
all or any portion of its Membership Interest and any Income Notes held by it to
any person or entity, without the consent of the Manager, any other Member, or
any other person or entity, if (i) the Company engages in (A) any activity that
would result in a violation of federal or state banking law, including, without
limitation, laws applicable to FDIC-insured depository institutions and the
rules, regulations and interpretations of the FDIC, with respect to such Member,
or (B) any activity that is not part of, or incidental to, the business of
banking, as determined by the FDIC or the OCC, or (ii) such Member is required
to Transfer all or any portion of its Membership Interest by a competent
regulatory authority having jurisdiction over such Member or any of its
Affiliates or pursuant to any law or regulation applicable to such Member or any
of its Affiliates.
19
(c) To the fullest extent permitted by law, any purported
Transfer of any Membership Interest or Income Notes in contravention of this
Article VII shall be null and void and of no force and effect whatsoever.
7.2 Substitute Members. (a) An assignee of a Membership
Interest shall become a substitute Member only with the prior written consent of
the Manager, which consent shall not be unreasonably withheld, and the Required
Members; provided that any assignee of all or any portion of a Member's
Membership Interest pursuant to Section 7.1(b) shall be admitted to the Company
as a Substitute Member without the consent of the Manager or any other Person.
(b) An assignee of a Membership Interest in the Company that
is not admitted as a substitute Member shall be entitled only to allocations and
distributions with respect to that Membership Interest in accordance with this
Agreement but shall have no right to any information or accounting of the
affairs of the Company and, except as otherwise agreed by the other Members,
shall not have any of the other rights of a Member under this Agreement.
(c) An assignee of a Membership Interest in the Company shall
be admitted as a substitute Member in accordance with this Section 7.2 at the
time such assignee's admission is reflected in the records of the Company. A
substitute Member admitted to the Company shall succeed to all the rights and be
subject to all the obligations of the assignor Member under this Agreement in
respect of the interest as to which it was substituted and, to the fullest
extent permitted by law, the assignor Member shall be released from its
obligations under this Agreement with respect to such interest.
ARTICLE VIII
DISSOLUTION, LIQUIDATION AND TERMINATION
8.1 Limitations. The Company may be dissolved, liquidated and
terminated pursuant to and only pursuant to the provisions of this Article VIII,
and the parties hereto do hereby irrevocably waive any and all other rights they
may have to cause a dissolution of the Company or a sale or partition of any or
all of the Company's assets.
8.2 Exclusive Causes. The Company shall be dissolved, and
liquidated pursuant to Section 8.3, upon the earliest to occur of (it being
understood that the following events are the only events that can cause the
dissolution and liquidation of the Company):
(a) following the expiration of the Investment Period, upon
the liquidation of all Assets, temporary investments and other assets
of the Company;
(b) the unanimous election by the Members so to dissolve the
Company;
(c) the good faith determination by the Manager that
dissolution is necessary or advisable to avoid violations of the
Investment Company Act or the Employee Retirement Income Security Act
of 1974, as amended ("ERISA");
20
(d) at any time there are no Members of the Company unless the
business of the Company is continued in accordance with the Delaware
Act; or
(e) the entry of a decree of judicial dissolution pursuant to
Section 18-802 of the Delaware Act.
8.3 Liquidation. In all cases of dissolution of the Company,
the business of the Company shall be continued to the extent necessary
to allow an orderly winding up of its affairs, including the
liquidation of the assets of the Company pursuant to the provisions of
this Section, as promptly as practicable thereafter, and each of the
following shall be accomplished:
(a) The Manager shall cause to be prepared a statement setting
forth the assets and liabilities of the Company as of the date of
dissolution, a copy of which statement shall be furnished to all of the
Members.
(b) The property of the Company shall be liquidated or
distributed in kind by the Manager as promptly as possible, but in an
orderly, businesslike and commercially reasonable manner. The Manager
may, in the exercise of his business judgment and if commercially
reasonable, determine (i) to sell all or any portion of the property of
the Company to a Member, provided that the purchase price is not less
than the fair market value of such property as determined in the sole
discretion of the Manager or its designee, or to any other Person or
(ii) not to sell all or any portion of the property of the Company, in
which event such property and assets shall be distributed in kind
pursuant to Section 8.3(d).
(c) Any gain or loss realized by the Company upon the sale of
its property shall be deemed recognized and allocated to the Members in
the manner set forth in Article V. To the extent that an asset is to be
distributed in kind, such asset shall be deemed to have been sold at
its fair market value on the date of distribution, the gain or loss
deemed realized upon such deemed sale shall be allocated in accordance
with Article V and the amount of the distribution shall be considered
to be such fair market value of the asset.
(d) The proceeds of sale and all other assets of the Company
shall be applied and distributed as follows and in the following order
of priority:
(i) to the satisfaction (whether by payment or
reasonable provision for payment) of the debts and liabilities
of the Company and the expenses of liquidation or
distribution;
(ii) the balance, if any, to the Members having
positive Capital Account balances (after all adjustments
thereto otherwise required hereunder) proportionately to their
respective positive Capital Account balances (as so adjusted),
with the intent that such distribution be effected in
accordance with Section 5.7(a).
The Manager may establish any reserves which the Manager shall
determine to be reasonably necessary for contingent conditional or unmatured
liabilities or obligations of the
21
Company. Such reserves may, in the discretion of the Manager, be held by the
Manager or paid over to a bank or trust company selected by it, in either case
to be held by the Manager or such bank or trust company as escrow holder or
liquidating trustee for the purposes of disbursing such reserves to satisfy the
liabilities and obligations described above. Such reserves shall be held for
such period as the Manager shall deem advisable, and upon the expiration of such
period, any remaining balance shall be distributed as provided in clause (ii) of
this subsection.
8.4 Continuation of the Company. Notwithstanding anything to
the contrary contained herein, the death, retirement, resignation, expulsion,
bankruptcy, dissolution or removal of a Member shall not in and of itself cause
the dissolution of the Company, and the Members are expressly authorized to
continue the business of the Company in such event, without any further action
on the part of the Members. The bankruptcy (as defined in the Delaware Act) of a
Member shall not cause a Member to cease to be a member of the Company unless
all Members other than such bankrupt Member otherwise agree in writing at any
time while such bankrupt Member is in bankruptcy (as defined in the Delaware
Act) that such bankrupt Member shall cease to be a member of the Company.
ARTICLE IX
ATTORNEY-IN-FACT
Each Member and its successors and assigns irrevocably
constitutes and appoints the Manager, and each of them, as its true and lawful
attorneys, in its name, place and stead, to make, execute, consent to, swear to,
acknowledge, record and file:
(i) a certificate of formation and the applicable laws of any
other jurisdiction in which the Manager deems such filing to be
necessary or desirable;
(ii) any and all certificates, instruments and other documents
which may be required to be filed by the Company or the Members under
the laws of the State of Delaware or any other jurisdiction to the
extent that the Manager deem such filing to be necessary or desirable
to qualify the Company to engage in its business or otherwise
facilitate the Company's business;
(iii) any and all amendments or modifications of the instruments
described in paragraphs (i) and (ii) above;
(iv) all certificates, instruments and other documents which may
be required to effectuate the dissolution and termination of the
Company pursuant to the provisions of this Agreement;
(v) any and all duly adopted amendments to this Agreement,
including any amendments and other documents deemed, necessary or
desirable by the Manager for the admission of substituted Members, when
consented to hereunder; and
22
(vi) any and all fictitious name certificates or similar
certificates required by law to be filed on behalf of the Company;
and each Member hereby irrevocably constitutes and appoints the Manager as its
true and lawful attorney, in its name, place and stead, to take any and all such
other action as the Manager may deem necessary or desirable fully to carry out
the provisions of this Agreement in accordance with its terms. It is expressly
understood and intended by each Member that the grant of the foregoing power of
attorney is coupled with an interest and shall be irrevocable. The foregoing
power of attorney shall, if a Member shall have assigned its interest, or any
part thereof, in the Company, survive such assignment of such interest or part
thereof.
ARTICLE X
REPRESENTATIONS AND WARRANTIES
10.1 Securities Law Representations. Each Member represents
that:
(a) The Member has acquired its interest in the Company for its
own account and not with a view to the resale or distribution thereof.
(b) The Member is an "accredited investor" as defined in Rule
501(a) under the Securities Act.
(c) The Member understands and acknowledges that its interest
in the Company has not been registered for sale under any Federal or
state securities law and must be held indefinitely unless subsequently
registered or an exemption from such registration is available.
(d) The Member (i) has performed its own due diligence and
business investigations with respect to the Company, (ii) has formed
its own conclusions regarding the conditions and values of the
business, assets, liabilities and prospects of the Company, and is not
relying upon any other Member or other person with respect to the
performance of such investigations or the evaluation of such conditions
or values, (iii) is fully familiar with the nature of the investment in
the Company, the speculative and financial risks thereby assumed, the
uncertainty with respect to the timing and amounts of distributions, if
any, to be made by the Company, (iv) does not desire any further
information which may be available with respect to these matters and
(v) had a sufficient opportunity to review the matters that it believes
to be important in deciding whether to acquire an interest in the
Company.
(e) The Member (i) is not an "investment company" as defined in
the Investment Company Act, (ii) is able to satisfy its obligations
(including its financial obligations) under this Agreement from
existing commitments of the current holders of its equity interests;
and (iii) constitutes a single "beneficial owner" for purposes of the
Investment Company Act.
23
10.2 Other Representations and Warranties. Each Member
represents and warrants that:
(i) If the Member is a corporation, it is duly incorporated,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all necessary corporate power
and authority to execute and deliver this Agreement; if the Member is a
partnership, it is duly and validly organized under the laws of its
jurisdiction and has all necessary partnership power and authority to
execute and deliver this Agreement.
(ii) The execution and delivery by it of this Agreement and the
performance by it of its obligations under this Agreement have been
duly authorized by all necessary corporate or partnership action by it
or on its behalf and do not and will not violate, result in a breach of
or constitute a default under, its articles or certificate of
incorporation or bylaws or its certificate of limited partnership or
agreement of limited partnership or its partnership agreement, as the
case may be.
(iii) No authorization, consent, approval or waiver of, clearance
by, notice or registration or filing with, or other similar action by
or with any governmental body or other person is required on the part
of the Member for (i) the due execution and delivery by the Member of
this Agreement or (ii) the performance by the Member of its obligations
under this Agreement.
(iv) This Agreement is the legal, valid and binding obligation
of the Member, enforceable against it in accordance with its terms,
except as limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights generally.
(v) There is no action, suit, investigation, complaint or other
proceeding pending, or to its knowledge, threatened against the Member
or to its knowledge any other person that involves any of the
transactions contemplated by this Agreement or that, individually or in
the aggregate, if determined adversely to such Member or the other
person, could materially and adversely affect the ability of the Member
to perform its obligations under this Agreement.
(vi) The Member is not in, nor has it received notice of, a
violation of or default with respect to any law or regulation
applicable to it or its business, properties or operations, which
violation or default, individually or in the aggregate, could
materially and adversely affect the ability of the Member to perform
its obligations under this Agreement.
(vii) The Member is not (i) a "benefit plan investor" within the
meaning of Section 2510.3-101(f)(2) of the United States Department of
Labor Final Regulation Relating to the Definition of Plan Assets 29
C.F.R. Section 2510.3-101, (ii) a pension, profit sharing or other
retirement plan sponsored by the United States or any state,
municipality or other political subdivision or any instrumentality of
any of the foregoing (or any political subdivision administering such
plan), (iii) a benefit plan that would be subject to the ERISA but for
the fact that it meets the requirements of a "church plan" within the
24
meaning of Section 414(e) of the Code and Section 3(33) of ERISA, or
(iv) any other entity any of whose assets constitute under applicable
law assets of any employee benefit plan subject to Part 4 of Title I of
ERISA or of any plan subject to Section 4975 of the Code.
ARTICLE XI
MISCELLANEOUS
11.1 Notices. All notices under this Agreement shall be in
writing, duly signed by the party giving such notice, and transmitted by (i)
personal delivery (effective upon delivery), (ii) postage prepaid registered or
certified mail, return receipt requested, (effective three business days after
posting), (iii) facsimile transmission with electronic confirmation of receipt
(effective the following business day) or (iv) United States Postal Service
Express Mail or a recognized overnight delivery service (effective on the
Business Day following dispatch) and addressed in each case as follows:
(i) given to the Company, at its then principal office;
(ii) if given to the Manager, at 00 Xxxx Xxxxxx, Xxxxx 0000, Xxx
Xxxx, Xxx Xxxx 00000, fax no. (000) 000-0000, Attn: Xxxxx X. Xxxxxxxxx;
and
(iii) if given to a Member, at its address set forth on Exhibit A
hereto.
Any Member may designate any other address to which notices may be sent by a
notice in writing to the Company and the other Members.
11.2 Amendment. This Agreement may not be modified or amended,
except with the written consent of all Members, provided that without the
consent of any Member, (i) the Manager may amend this Agreement to reflect the
admission of substituted Members to which the Members have consented to the
extent such consent is required hereunder, and (ii) the Manager, upon 30 days'
prior notice to the Members, may amend this Agreement as to administrative or
similar matters which do not have any adverse effect on any Member.
11.3 Confidentiality. This Agreement, the terms hereof and the
transactions contemplated hereby shall be kept in strict confidence by the
parties, except that disclosure may be made (i) to the principals, partners,
stockholders, officers, directors, agents and employees of the Members and their
respective professional advisors, (ii) to the extent that disclosure may be
required by the Asset Management Agreement, the Servicing Agreements or other
agreements, instruments or documents to which the Company or the Manager may be
subject or may become subject in connection with the management and operation of
the business and affairs of the Company or the financing or refinancing of the
purchase of the Assets, and (iii) to the extent that disclosure may be required
by law or judicial or regulatory order, or to comply with governmental approvals
or regulations.
25
11.4 Captions. Caption designations in this Agreement are
inserted only as a guide and for reference and in no way define, limit or
describe the scope of this Agreement or the intent of the parties.
11.5 Applicable Law. This Agreement shall be governed by,
interpreted and construed in accordance with the laws of the State of Delaware,
without regard to conflicts of laws rules.
11.6 Counterparts; Effectiveness. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the same
effect as if all signatures were on the same instrument. This Agreement shall
become effective upon execution and delivery of a counterpart hereof by each of
the parties hereto.
11.7 Entire Agreement. This Agreement constitutes the entire
agreement among the parties hereto pertaining to the subject matter hereof and
supersedes all prior agreements and understandings pertaining thereto.
11.8 Regulation. The Members and the Manager agree that the
Company shall be subject to regulation, supervision and examination by any
federal or state bank regulatory authority that has regulatory, supervision or
examination authority over any Member.
11.9 Ratification. Each Member hereby ratifies and approves
all actions taken by Manager prior to the date of this Agreement in connection
with any bid to purchase or otherwise acquire any Pool or other asset, or the
purchase or acquisition of any Pool or other asset, whether or not such Member
participated in the purchase or acquisition of such Pool or other asset pursuant
to Section 4.2 of this Agreement.
[Remainder of page intentionally left blank.]
26
IN WITNESS WHEREOF, the undersigned have executed and
delivered this Agreement as of the day and year first above written.
HANOVER CAPITAL MORTGAGE
HOLDINGS, INC., as Manager and as Member
By
------------------------------------------
Name:
Title:
BTD 2001 HDMF-1 CORP., as Member
By
------------------------------------------
Name:
Title:
PROVIDENT FINANCIAL GROUP, INC., as Member
By
------------------------------------------
Name:
Title:
SCHEDULE 1
DEFINITION OF CERTAIN TERMS
"Adjusted Capital Account Deficit" shall mean, with respect to
any Member, the deficit balance, if any, in such Member's Capital Account as of
the end of the applicable Fiscal Year after (i) crediting thereto any amounts
which such Member is, or is deemed to be, obligated to restore pursuant to
Treasury Regulations Section 1.704-2(g)(1) and Section 1.704-2(i)(5) and (ii)
debiting such Capital Account by the amount of the items described in Treasury
Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6). The foregoing
definition of Adjusted Capital Account Deficit is intended to comply with the
provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
"Affiliate" shall have the meaning set forth in Section 2.1
hereof.
"Assets" shall mean primarily sub-performing and
non-performing (i) mortgage loans on one-to-four family dwelling and
five-to-eight family residential and mixed use properties and (ii) cooperative
loans.
"Asset Management Agreement" shall have the meaning set forth
in the Recitals.
"Asset Manager" shall have the meaning set forth in the
Recitals.
"Bid Summary Sheet" shall have the meaning set forth in
Section 4.2(b) hereof.
"Capital Account" shall have the meaning set forth in Section
4.5 hereof.
"Capital Contribution" shall have the meaning set forth in
Section 4.2(f) hereof.
"Code" shall mean the U.S. Internal Revenue Code of 1986, as
amended from time to time, including the corresponding provisions of any
successor law.
"Company" shall mean HDMF-I LLC, a Delaware limited liability
company.
"Company Minimum Gain" shall have the meaning attributed to
"partnership minimum gain" as set forth in Treasury Regulations Sections
1.704-2(b)(2) and 1.704-2(d).
"Control" shall have the meaning set forth in Section 2.1
hereof.
"Delaware Act" shall have the meaning set forth in Section 1.1
hereof.
"Disposition" shall mean, with respect to a Pool, the sale,
exchange or other disposition by the Company of all or any portion of such Pool
for cash, securities or other property and shall include the receipt by the
Company of (x) the repayment of the principal of and accrued interest on any
indebtedness constituting all or a portion of such Pool or of a liquidating or
other similar payment in respect of such Pool and (y) the proceeds of any
judgment or settlement to the extent made in respect of such Pool (as determined
by the Manager in good faith), it being agreed that all judgment and settlement
proceeds will be allocated by the Manager (acting in good faith) among the
various Assets as applicable.
Schedule 1
Page 2
"Distributable Cash" shall mean, with respect to any Pool, the
excess of the aggregate cash receipts of all kinds received by the Company in
respect of such Pool, reduced by the sum of (i) all Company expenditures
allocable to such Pool (including, without limitation, the payment of principal
of and interest on indebtedness of the Company incurred in connection with the
acquisition or carrying of such Pool, fees and expenses payable to the Asset
Manager and the Servicer relating to such Pool and the payment of other costs,
expenses, liabilities and obligations of the Company relating to such Pool) and
(ii) such reserves as the Manager deems necessary to make reasonable provision
for the discharge of the costs, expenses, liabilities and other obligations of
the Company relating to such Pool.
"ERISA" shall have the meaning set forth in Section 8.2(c)
hereof.
"Exonerated Person" shall have the meaning set forth in
Section 2.3 hereof.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"Final Disposition" with respect to a Pool means the
Disposition of all Assets and other interests in such Pool held by the Company.
"Fiscal Year" shall mean the calendar year.
"Freely Tradable" means securities that are transferable by
(i) a Member pursuant to a then effective registration statement under the
Securities Act (or similar applicable statutory provision in the case of
non-U.S. securities), (ii) the Members who are not Affiliates of the Manager
pursuant to Rule 144(k) under the Securities Act (or similar applicable rule in
the case of non-U.S. securities), (iii) transferable by the Members pursuant to
Rule 144A which shall include a covenant by the issuer of such security to
comply with the reporting and informational requirements under Rule 144A or (iv)
the Members outside the United States pursuant to Regulation S under the
Securities Act (or similar applicable rule in the case of non-U.S. securities).
"Governmental Authorization" shall mean any approval, consent,
ratification, waiver, license, permit or other authorization.
"Governmental Body" shall mean any (i) state, county, city,
town, village, district or other jurisdiction, (ii) federal, state, local,
municipal or other government, or (iii) branch, agency, department, board,
commission or other governmental authority.
"Gross Asset Value" shall mean, with respect to any asset,
such asset's adjusted basis for federal income tax purposes, except as follows:
(a) the initial Gross Asset Value of any asset contributed by
a Member to the Company shall be the gross fair market value of such
asset, as agreed to by the contributing Member and the Manager,
(b) the Gross Asset Value of all Company assets shall be
adjusted to equal their respective gross fair market values, as of the
following times: (i) the acquisition of an additional interest in the
Company by any new or existing Member in exchange for
Schedule 1
Page 3
more than a de minimis Capital Contribution; (ii) the distribution by
the Company to a Member of more than a de minimis amount of Company
assets as consideration for an interest in the Company; and (iii) the
liquidation of the Company within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g); provided, however, that adjustments pursuant to
clause (i) and clause (ii) of this sentence shall be made only if the
Manager reasonably determines that such adjustments are necessary or
appropriate to reflect the relative economic interests of the Members
in the Company; and
(c) the Gross Asset Value of any Company asset distributed to
any Member shall be the gross fair market value of such asset on the
date of distribution, as determined by the Manager in good faith.
If the Gross Asset Value of an asset has been determined or
adjusted pursuant to paragraph (a) or paragraph (b) above, such Gross Asset
Value shall thereafter be adjusted by the depreciation taken into account with
respect to such asset for purposes of computing Net Income and Net Loss.
"Income Notes" shall have the meaning set forth in Section
4.2(b) hereof.
"Investment Company Act" shall mean the U.S. Investment
Company Act of 1940, as amended.
"Investment Period" shall mean the one-year period commencing
on the date of this Amended and Restated Limited Liability Company Agreement and
ending on the first anniversary of the date of this Amended and Restated Limited
Liability Company Agreement.
"Legal Requirement" shall mean any federal, state, local or
municipal law, ordinance, code, regulation, statute or principal of common law.
"Loan Pool Documentation" shall have the meaning set forth in
Section 1.3(c)(iv) hereof.
"Manager" shall have the meaning set forth in the Recitals.
"Maximum Capital Contribution" shall mean, with respect to a
Member, the maximum amount of Capital Contributions that a Member shall be
required to contribute to the Company pursuant to this Agreement, as set forth
on Exhibit A attached hereto.
"Member Minimum Gain" shall mean an amount, determined in
accordance with Treasury Regulations Section 1.704-2(i)(3) with respect to each
Member Nonrecourse Debt, equal to the Company Minimum Gain that would result if
such Member Nonrecourse Debt were treated as a Nonrecourse Liability.
"Member Nonrecourse Debt" shall have the meaning attributed to
"partner nonrecourse debt" as set forth in Treasury Regulations Section
1.704-2(b)(4).
Schedule 1
Page 4
"Member Nonrecourse Deductions" shall have the meaning
attributed to "partner nonrecourse deductions" as set forth in Treasury
Regulations Section 1.704-2(i).
"Membership Interest" shall have the meaning set forth in
Section 4.1 hereof.
"Net Income" and "Net Loss" shall mean, for each Fiscal Year,
an amount equal to the Company's taxable income or loss for such Fiscal Year,
determined in accordance with Section 703(a) of the Code (but including in
taxable income or loss, for this purpose, all items of income, gain, loss or
deduction required to be stated separately pursuant to Section 703(a)(1) of the
Code), with the following adjustments:
(a) any income of the Company exempt from federal income tax
and not otherwise taken into account in computing Net Income or Net
Loss pursuant to this definition shall be added to such taxable income
or loss;
(b) any expenditures of the Company described in Section
705(a)(2)(B) of the Code (or treated as expenditures described in
Section 705(a)(2)(B) of the Code pursuant to Treasury Regulations
Section 1.704-1(b)(2)(iv)(i)) and not otherwise taken into account in
computing Net Income or Net Loss pursuant to this definition shall be
subtracted from such taxable income or loss;
(c) in the event the fair market value of any Company asset is
adjusted in accordance with Section 4.5, the amount of such adjustment
shall be taken into account as gain or loss from the disposition of
such asset for purposes of computing Net Income or Net Loss;
(d) gain or loss resulting from any disposition of any asset
of the Company with respect to which gain or loss is recognized for
federal income tax purposes shall be computed by reference to the book
value of the asset disposed of under Treasury Regulations Section
1.704-1(b)(2)(iv), notwithstanding that the adjusted tax basis of such
asset differs from such book value; and
(e) notwithstanding any other provision of this definition,
any items which are allocated under Section 5.3 shall not be taken into
account in the computation of "Net Income" or "Net Loss".
"Nonrecourse Deductions" shall have the meaning set forth in
Treasury Regulations Section 1.704-2(b)(1).
"Nonrecourse Liability" shall have the meaning set forth in
Treasury Regulations Section 1.704-2(b)(3).
"OCC" shall mean the United States Department of Treasury,
Office of the Comptroller of the Currency.
"Percentage Interest" shall mean, with respect to each Member,
the percentage set forth opposite such Member's name on Exhibit A hereto.
Schedule 1
Page 5
"Pools" shall have the meaning set forth in the Recitals.
"Required Members" shall mean Members holding at least 50.1%
of the aggregate Capital Contributions to the Company.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Servicer" shall mean The Provident Bank and, if applicable,
each other entity selected to act as a servicer under a Servicing Agreement from
time to time pursuant to the terms of this Agreement.
"Servicing Agreements" shall have the meaning set forth in the
Recitals.
"Sharing Percentage" shall have the meaning set forth in
Section 4.1.
"Tax Matters Member" shall have the meaning set forth in
Section 5.6 hereof.
"Transfer" shall have the meaning set forth in the Recitals.
"Treasury Regulations" or "Regulations" shall mean the
applicable provisions of the federal income tax regulations promulgated under
the Code, as amended from time to time, including the corresponding provisions
of any succeeding regulations.
TABLE OF CONTENTS
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ARTICLE I
GENERAL.................................................................................... 2
1.1 Formation of Limited Liability Company............................................................. 2
1.2 Name .............................................................................................. 2
1.3 Purpose ........................................................................................... 2
1.4 Term .............................................................................................. 4
1.5 Place of Business.................................................................................. 4
1.6 Registered Office and Registered Agent............................................................. 4
1.7 Qualification...................................................................................... 4
ARTICLE II
DUTIES, POWERS AND LIABILITY OF
MANAGER AND MEMBERS; CONFLICTS
OF INTEREST; INDEMNIFICATION............................................................... 4
2.1 Powers of Manager.................................................................................. 4
2.2 Powers of Members.................................................................................. 7
2.3 Appointment of Officers............................................................................ 7
2.4 Limitation on Manager's Liability.................................................................. 7
2.5 Limitation on Member's Liability................................................................... 7
2.6 Compensation of Manager............................................................................ 7
2.7 Conflicts of Interest.............................................................................. 8
2.8 Indemnification of Manager......................................................................... 8
2.9 Limits on Manager's Powers......................................................................... 9
ARTICLE III
ASSET MANAGEMENT AND SERVICING............................................................. 9
3.1 Asset Management Agreement......................................................................... 9
3.2 Servicing Agreements............................................................................... 10
ARTICLE IV
CAPITAL CONTRIBUTIONS; INCOME NOTES;
CAPITAL ACCOUNTS .......................................................................... 10
4.1 Membership Interests............................................................................... 10
4.2 Capital Contributions.............................................................................. 10
(i)
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4.3 Interest on Capital................................................................................ 12
4.4 Return of Capital Contribution..................................................................... 12
4.5 Capital Accounts................................................................................... 12
ARTICLE V
ALLOCATIONS; DISTRIBUTIONS................................................................. 13
5.1 Allocations of Net Income and Losses............................................................... 13
5.2 Limitation on Loss Allocation...................................................................... 13
5.3 Special Allocations................................................................................ 14
5.4 Tax Incidents...................................................................................... 16
5.5 Section 704(c) Allocations......................................................................... 16
5.6 Tax Matters Member; Tax Elections.................................................................. 16
5.7 Distributions of Distributable Cash................................................................ 16
5.8 Distributions In-Kind.............................................................................. 17
ARTICLE VI
FINANCIAL MANAGEMENT....................................................................... 18
6.1 Costs, Expenses, Liabilities and Obligations....................................................... 18
6.2 Books and Records.................................................................................. 18
6.3 Fiscal Year........................................................................................ 18
6.4 Reports ........................................................................................... 18
6.5 Bank Accounts and Investment of Funds.............................................................. 19
6.6 Accounting Decisions............................................................................... 19
6.7 Income Tax Returns and Elections................................................................... 19
ARTICLE VII
TRANSFERS BY MEMBERS; SUBSTITUTE MEMBERS................................................... 19
7.1 Transfers by Members............................................................................... 19
7.2 Substitute Members................................................................................. 20
ARTICLE VIII
DISSOLUTION, LIQUIDATION AND TERMINATION................................................... 20
8.1 Limitations........................................................................................ 20
8.2 Exclusive Causes................................................................................... 20
8.3 Liquidation........................................................................................ 21
8.4 Continuation of the Company........................................................................ 22
(ii)
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ARTICLE IX
ATTORNEY-IN-FACT........................................................................... 22
ARTICLE X
REPRESENTATIONS AND WARRANTIES............................................................. 23
10.1 Securities Law Representations.................................................................... 23
10.2 Other Representations and Warranties.............................................................. 24
ARTICLE XI
MISCELLANEOUS.............................................................................. 25
11.1 Notices .......................................................................................... 25
11.2 Amendment......................................................................................... 25
11.3 Confidentiality................................................................................... 26
11.4 Captions.......................................................................................... 26
11.5 Applicable Law.................................................................................... 26
11.6 Counterparts; Effectiveness....................................................................... 26
11.7 Entire Agreement.................................................................................. 26
11.8 Regulation........................................................................................ 26
(iii)
SCHEDULES
Schedule I Definition of Certain Terms
EXHIBITS
Exhibit A Members and Commitments
Exhibit B Asset Management Agreement
Exhibit C Form of Income Note
(i)
