OPERATING AGREEMENT FOR MINISTRY PARTNERS INVESTMENT COMPANY, LLC A MANAGER- MANAGED CALIFORNIA LIMITED LIABILITY COMPANY
EXHIBIT 2.3
FOR
MINISTRY
PARTNERS INVESTMENT COMPANY, LLC
A
MANAGER-MANAGED
CALIFORNIA
LIMITED LIABILITY COMPANY
TABLE OF
CONTENTS
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Article
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Page
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FORMATION,
PURPOSES AND BUSINESS OFFICES
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3
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MEMBERSHIP
INTERESTS
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5
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CAPITAL
STRUCTURE
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8
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MANAGEMENT
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10
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CAPITAL
CONTRIBUTIONS
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15
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ALLOCATIONS
AND DISTRIBUTIONS
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16
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TAXES
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19
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MEMBERS
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20
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TRANSFERS
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23
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BOOKS
AND RECORDS
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25
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INDEMNITY
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26
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DISSOLUTION
AND WINDING UP
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27
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MISCELLANEOUS
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29
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EXHIBITS
Exhibit “A” -
Members
Exhibit “B” -
Definitions
Exhibit “C” - Series
A Preferred Units Certificate
Exhibit “D” - Special
Tax Rules
MINISTRY
PARTNERS INVESTMENT COMPANY, LLC
(A
Manager-Managed California Limited Liability Company)
Operating Agreement (the “Agreement”) dated as of
December ____, 2008 by and among MINISTRY PARTNERS INVESTMENT COMPANY, LLC, a
California limited liability company (the “Company”) and each person that
signs a counterpart signature page of this Agreement and appears on Exhibit
“A” attached hereto, as such exhibit may be amended from time to time
(each a “Member” and
collectively, the “Members”).
BACKGROUND
INFORMATION
The Company was organized as a
California corporation pursuant to Articles of Incorporation filed with the
California Secretary of State on October 22, 1991. Pursuant to
Articles of Organization filed with the California Secretary of State on
December ___, 2008, and a Plan of Conversion adopted by the Company’s
shareholders, the Company converted from a California corporation to a
California limited liability company under the provisions of Sections 1151-1153
of the California Corporations Code.
Under its
Articles of Organization, the Company is authorized to engage in any lawful act
or activity for which a limited liability company may be organized under the
Xxxxxxx Xxxxxx Limited Liability Company Act (the “Act”), and to carry on such
other business as it, from time to time, may determine to
undertake. The Members own all of the equity ownership interests in
the Company, and in that capacity have determined to adopt this Agreement,
pursuant to the Act, in order to set forth the basis upon which the business
activities and other affairs of the Company and the relationships of multiple
Members in their dealings with each other will hereafter be
governed. Unless otherwise define herein, capitalized words and
phrases used in this Agreement are defined on attached Exhibit
“B”. In
addition, this Agreement incorporates by reference the definitions set forth in
Section 17001 of the Act. Accordingly, the Members agree as
follows:
OPERATIVE
PROVISIONS
ARTICLE
I
FORMATION, PURPOSES AND
BUSINESS OFFICES
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1.1
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Formation.
|
1.1.1 This
Company was formed as a California limited liability company on
December ____, 2008 by the filing of Articles of Organization with the
California Secretary of State pursuant to the laws of the State of California
and the Act. Unless the Act expressly provides that it supersedes
any provision contained in this Agreement, the terms of this Agreement will
apply. This Agreement shall be deemed effective as of the date
hereof.
-3-
1.1.2 The
Company will be a manager-managed entity under the Act with managers to be
designated pursuant to the terms hereof (each a “Manager” or collectively the
“Managers”). The
initial Managers shall be as follows:
|
Name
|
Business
Address
|
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Xxxx
X. Xxxxxxxx
|
000
Xxxx Xxxxxxxx Xxxxxxx
Xxxx,
XX 00000
|
|
Xxxx
X. Xxxxxxx
|
000
Xxxx Xxxxxxxx Xxxxxxx
Xxxx,
XX 00000
|
|
Van
X. Xxxxxxx
|
0000-X
Xxxxxxx Xxxxxx
Xx
Xxxxx, XX 00000
|
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Xxxxxx
X. Xxxxx
|
0000
Xxxx Xxxxxx
Xxxxxxxxx,
XX 00000
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|
Juli
Xxxx X. Xxxxxx
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0000
Xxxxxx Xxxxxx
Xxxxx
Xxxxx, XX 00000
|
|
Xxxxxxx
X. Xxxxxxxxx
|
000
Xxxxx Xxxxxxxxx Xxxxxx
Xxxxxx,
XX 00000
|
|
Xxxxxxx
X. Xxxxxxx
|
0000
Xxxx Xxxxxx
Xxxxxx,
XX 00000
|
|
Xxxxx
X. Xxxxxxxxxxx
|
000
Xxxx Xxxxxxxx Xxxxxxx
Xxxx,
XX 00000
|
|
Xxxxxxxx
X. Xxxxxxx
|
00000
Xxxxxxxx Xxxxxxxxx
Xxxxxxxxx,
XX 00000
|
|
R.
Xxxxxxx Xxx
|
0000
Xxxxxx Xxxxxxx
Xxxxxxxxxxx,
XX 00000
|
1.1.3 The
Members hereby adopt this Agreement as the operating agreement for the
Company. This Agreement supersedes all prior agreements of any
nature, written or oral, express or implied, with respect to the operation of
the Company.
1.2 Name. The
name of the Company is “MINISTRY PARTNERS INVESTMENT COMPANY,
LLC” and all business of the Company will be conducted under this
name.
1.3 Purpose. The
initial purpose of the Company is to provide capital funding to churches and
ministry organizations through the acquisition of and origination of mortgage
loans, to serve as a credit union service organization that will invest in loans
originated by other credit unions, and to pursue such other purposes and take
such actions as permitted by the Act. The Company is expressly
authorized to issue investor debt securities, notes and debt obligations to
finance its operations on such terms and conditions as it may
determine from time to time. In addition, the Company hereby confirms
that it has assumed all debt and investor note obligations of the Company that
existed as of the effective date of the conversion pursuant to the Plan of
Conversion which was adopted on September 18, 2008.
-4-
1.4 Term. The
Company’s existence as a limited liability company will commence on the
effective date of the Company’s existence under the Act and shall continue in
perpetual existence, unless sooner terminated as provided under this Agreement
or the Act.
1.5 Partnership
for Tax Purposes; Priority of Agreement. The Members intend
the Company to be a limited liability company under the Act, classified as a
partnership for federal and, to the maximum extent possible, state income taxes.
The rights and liabilities of the Members and Managers will be determined under
the Act and this Agreement. To the extent that the rights or obligations of any
Member or Manager are different because of any provision of this Agreement than
those rights and obligations would be in the absence of that provision, this
Agreement will control to the extent permitted by the Act. Neither
the Managers nor any Member will take any action inconsistent with the express
intent of the parties to this Agreement.
1.6 Restrictions
on Membership. Since the Company has been formed for the
specific purpose of operating as a credit union service organization that will
acquire and originate mortgage loans made to churches and ministry organizations
and to pursue such other purposes as are authorized under the Act, membership
privileges will be restricted to credit union institutions, unless otherwise
permitted by the Managers under the provisions of this Agreement.
1.7 Place of
Business. The Company’s principal place of business will be
000 Xxxx Xxxxxxxx Xxxxxxx, Xxxx, Xxxxxxxxxx 00000, or such other location as may
hereafter be determined by the Managers.
1.8 Registered
Agent and Registered Office. The Company’s registered office
in California is located at 000 Xxxx Xxxxxxxx Xxxxxxx, Xxxx, Xxxxxxxxxx 00000,
and its registered agent at that office is Xxxxx X. Xxxxxx. The
Company may change its registered agent or office at any time.
ARTICLE
II
MEMBERSHIP
INTERESTS
2.1. Equity
Ownership Interests. The equity interests to be issued by the
Company are collectively referred to as the “Membership Interests” and each
incremental Membership Interest shall be referred to as a “Unit.” The Managers
shall, from time to time, determine the classes or series of equity interests to
be issued by the Company. The Managers and Members, by executing this
Agreement, have initially authorized the issuance of 1,000,000 common units
which shall constitute the Company’s entire common equity ownership (“Common Units”). In
addition, up to 2,000,000 preferred units may be issued in one or more series,
each with such rights, privileges and preferences as the Managers shall, in
their sole discretion, determine (“Preferred
Units”).
The
Members have initially authorized the creation of two classes of common equity
interests, which classes are hereby divided into Class A and Class B Units (the
“Class A Units” and the
“Class B
Units”). The Managers have set aside and reserved a maximum of
100,000 shares of Class B Units for issuance to officers, Managers and key
employees of the Company. Except as otherwise required under Section
17103(b) of the Act (or any successor section thereto), all Class B Units shall
be non-voting Units. No Class B Units may be issued without the
approval of the Managers. Except as otherwise required under the Act,
only the holders of a Class A Unit are entitled to exercise voting rights to
elect the Managers of the Company and vote on any other matters presented for
consideration by the holders of Common
Units. For purposes of this Agreement, Members owning the Class A
Units shall be referred to as the “Class A Members” and Members
owning the Class B Units shall be referred to as the “Class B
Members”.
-5-
Each Unit
shall represent an ownership interest in the Company, including any and all
benefits to which the holder of such Unit may be entitled, as
provided in this Agreement. Although the number of authorized Common
Units and Preferred Units may be increased only with the affirmative vote or
written consent of the Class A Members, the Managers shall be authorized to
approve the issuance of additional Class A or Class B Units and Preferred Units
up to the maximum number of Common and Preferred Units authorized for issuance
under this Agreement and to determine or alter the rights, preferences,
privileges and restrictions granted to or imposed upon any wholly unissued
series of Preferred Units. The Managers are also authorized to amend
this Agreement without obtaining the affirmative vote or written consent of the
Class A Members in order to create one or more series of Preferred Units and
establish the rights, privileges and preferences of such classes or series of
Preferred Units; provided, however, that the Managers may not amend this
Agreement so as to affect adversely the rights, preferences and limitations for
any series of Preferred Units authorized under this Agreement unless the
Managers obtain the approval of a two-thirds majority vote of the affected
series of Preferred Units.
2.2. Preferred
Units. Unless otherwise amended and approved by the Class A
Members, the authorized number of Preferred Units that may be issued by the
Company is limited to 2,000,000 Units, and the Managers are entitled to
designate one or more series of Preferred Units with such rights, preferences
and privileges as the Managers shall determine. The Managers have
adopted the Series A Certificate pursuant to which up to a maximum of 1,000,000
Series A Preferred Units (the “Series A Units”) have
been reserved for issuance by the Company, each with a stated value as the
Managers deem appropriate. The Series A Units are subject to the
rights, preferences and terms of the Series A Certificate. Each
Series A Unit, when issued, shall be fully paid and non-assessable. A
copy of the Series A Certificate is attached hereto as Exhibit
“C”.
2.3. Additional
Units. The Company may authorize and issue additional Units
(whether Common or Preferred Units), for such consideration, as deemed
appropriate by the Managers; subject, however, to the terms and conditions of
the Series A Certificate. So long as any class of Series A Units is
outstanding, the Company may not authorize or issue, or increase the authorized
amount of, any additional class or series of Units which rank senior to, or on a
parity with the Series A Units as to dividends or as to distributions upon
liquidation or dissolution unless the holders of two-thirds of the Series A
Units then outstanding approve the action. Membership Interests can
only be issued by the Company with the approval of the Managers.
2.4. Ownership
Interests of Members. Each of the Members is the owner of the
number of Units of Membership Interest and the class of Membership Interest, as
set forth on Exhibit A. Each Member’s Membership Interests shall be
represented by Units of Membership Interests. The Managers shall
cause the officers of the Company to amend Exhibit A hereto from time to time to
reflect the admission of additional Members, the making of additional capital
contributions, the transfer of Units and issuance of additional
Units.
2.5. Admission
of New Members. The Company shall not admit a new Member
to the Company without the prior approval of the Managers. In order
to admit a new Member of the Company pursuant to the issuance of a new Unit or a
transfer of a Unit as otherwise approved in accordance with this Agreement, the
new Member shall have delivered in a form acceptable to the Company a written
undertaking to be bound by the terms and conditions of this Agreement and shall
have delivered such documents and instruments as the Company reasonably
determines to be necessary or appropriate in connection with the issuance of
such Unit to such person or the transfer of a Membership Interest to such person
or to effect such person’s admission as a Member. Thereafter, the Secretary of
the Company shall amend
Exhibit A without the further vote, act or consent of the Members to reflect
such new Member and shall make available for review a copy of such amended
Exhibit A to each Member. Upon the delivery of such documents and instruments,
such person shall be admitted as a Member and deemed listed as such on the books
and records of the Company and thereupon shall be issued a Membership Interest,
including any Units that correspond to and are part of such Membership
Interest. Each Member and any substitute or additional Members are
restricted from transferring, directly or indirectly, any of their Units of
Membership Interest unless they comply with the provisions set forth in Article
IX of this Agreement.
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2.6. No
Additional Contributions. Except as otherwise provided in this
Agreement, no Member shall be required to contribute additional capital to the
Company. No Member will be subject to assessment in an amount in
excess of the Member’s initial capital contribution, nor be liable for any of
the debts, obligations or liabilities of the Company.
2.7. Priority
Regarding Distributions. Subject to the provisions of the
Series A Certificate, the terms of any subsequent series of Preferred Units
established by the Managers, or provisions of this Agreement, no Member shall
have priority over any other Member, including additional members admitted to
the Company, either as to the return of a capital contribution or as to
distributions.
2.8. No Third
Party Rights. The provisions of
this Agreement are not for the benefit of any creditor or other person other
than a Member to whom any debts, liabilities, or obligations are owed by, or who
otherwise has any claim against, the Company or any Member. No
creditor or other person shall obtain any rights under Article II of this
Agreement, or shall be able to make any claim in respect of any debts,
liabilities, or obligations against the Company or any Member.
2.9. Lack of
Authority; No Fiduciary Duties. No Member has the authority or
power to act for or on behalf of the Company, to do any act that would be
binding on the Company, or to incur any expenditures on behalf of the Company;
provided that this Section 2.9 shall not limit the rights of
any Manager who is also an affiliate of, related party thereto or an
authorized representative of a Member, to act in such Member’s capacity as a
Manager. No Member shall undertake or accept fiduciary duties on
behalf of the Company or to any Member solely by reason of becoming a
Member.
2.10. Certificates. The Units to be
issued by the Company to its Members shall be evidenced by a certificate (the
"Certificate"), in such
form and shall contain such recitals and signatures as required by law or, to
the extent not in conflict therewith, as may be determined by the
Managers. In addition, each Certificate shall be stamped with a
legend substantially in the following form:
“TRANSFER OR CONTINUED OWNERSHIP OF
ANY UNITS REPRESENTED BY THIS CERTIFICATE IS RESTRICTED BY AND MADE SUBJECT TO
THE TERMS OF THE COMPANY’S OPERATING AGREEMENT, DATED DECEMBER ____, 2008, A
COPY OF WHICH IS ON FILE AT THE OFFICE OF THE COMPANY.
THE
SECURITIES REPRESENTED BY THIS LIMITED LIABILITY COMPANY OPERATING AGREEMENT
HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY STATE
SECURITIES LAWS AND, AS SUCH, THEY MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED
AFTER SALE, TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS THE SECURITIES HAVE
BEEN QUALIFIED AND REGISTERED UNDER
APPLICABLE STATE AND FEDERAL SECURITIES LAWS OR UNLESS SUCH QUALIFICATION AND
REGISTRATION IS NOT LEGALLY REQUIRED.”
-7-
Every
Member shall be entitled to receive a Certificate representing the number of
Units owned once such Units are fully paid for.
2.11. Issuance
of Substitute Certificates. A new Certificate
may be issued in lieu of any Certificate previously issued which has been
defaced or mutilated, upon surrender or cancellation of a part of the old
Certificate sufficient, in the opinion of the Managers, to protect the Company
against loss or liability. A new Certificate may also be issued in
lieu of any Certificate then not in the possession of the holder of record if
such holder shall by written affirmation, under oath, state the circumstances of
its absence and satisfy any other reasonable requirements which the Managers may
impose.
2.12. Withdrawal
of Capital Contributions. A Member will not be entitled to
withdraw any part of the Member’s capital contribution or to receive any
distributions, whether money or property, from the Company except as provided in
this Agreement.
ARTICLE
III
CAPITAL
STRUCTURE
3.1. Issued
and Outstanding Membership Interests. As of the date hereof
and after giving effect to the transactions contemplated hereby, there shall be
authorized (i) 1,000,000 Common Units; and (ii) 2,000,000 Preferred Units, of
which 146,522 Class A Units and 119,000 Series A Units will be issued and
outstanding, as more particularly described in Exhibit A attached
hereto.
3.2. Common
Units. Except as otherwise provided herein, all Common Units
shall be identical and shall entitle the holders thereof to the same rights and
privileges.
(a) Distribution
of Earnings. Holders of Common Units shall be entitled to receive ratably
on a per Unit basis a distribution of earnings as may be declared by the
Managers.
(b) Voting
Rights of Common Units. Except as otherwise provided for in
this Agreement, the holders of Class A Units shall have the general right to
vote for all purposes, including the election of Managers of the Company, as
provided by applicable law. Each holder of Class A Units shall be entitled to
one vote for each Unit held; however, there shall be no cumulative
voting. The Class B Units have no voting rights, except as to matters
relating to the amendment of the Company’s Articles of Organization, the
dissolution, reorganization or merger of the Company or as otherwise required
under the Act.
(c) Distribution
of Assets. In the event of the voluntary or involuntary liquidation,
dissolution or winding up of the Company, holders of Common Units shall be
entitled to receive all of the remaining assets of the Company available for
distribution to its Members after all amounts to which the holders of Preferred
Units are entitled have been paid or set aside in cash for payment.
3.3 Preferred
Units. The Managers shall be authorized to amend this
Agreement without the affirmative vote or written consent of the Members in
order to memorialize the creation of one or more classes of Preferred Units and
establish the rights, privileges and preferences of such one or more
series of
Preferred Units. Any increase in the authorized number of Preferred
Units under this Agreement must be approved by the Class A
Members. By executing this Agreement, the Members hereby authorize
the creation of the Series A Units and reserve up to 1,000,000 Units for
issuance thereunder and have agreed to establish the relative rights, privileges
and interests of such series, as memorialized in the Series A Certificate,
a copy of which is attached as Exhibit C hereto.
-8-
Except
for the following matters, the holders of Preferred Units will not hold any
voting rights:
(i)
the amendment of the Articles of Organization of the Company;
(ii)
the dissolution or liquidation of the Company;
(iii) the
merger, conversion or reorganization of the Company under the provisions of
Section 17600 of the California Corporations Code;
(iv)
the authorization of, issuance or increase in Units which rank senior to, or on
a parity with the Series A Units as to distribution of earnings or as a
liquidation preference; or
(v) altering
the relative rights, privileges and preferences of the Series A Units or taking
Company action otherwise requiring approval of the holders of Preferred Units
under a certificate authorized by the Managers.
3.4 Reinvestment
of Distribution. The holders of Common Units may elect to (i)
receive all or a portion of any year end cash distributions from the Company in
the amount of that Member’s share of net profits approved for distribution; (ii)
allow his, her or its distributions of earnings to be reinvested to increase its
capital account balance; or (iii) some combination of (i) and
(ii). The Managers shall be authorized to establish an earnings
reinvestment program for its Class A and Class B Members that sets forth the
procedures for electing to reinvest any earnings payable to such Members as an
additional capital contribution. If no election is made, any year end
distributions of net profits will be paid to a Member as a cash
distribution. Any distributions that are reinvested by Members who
make a reinvestment election will be used by the Company to purchase or
originate mortgage loans, provide equity capital or for any other proper Company
purpose.
3.5 Preemptive
Rights. Subject to the terms and conditions contained in this
Agreement, each Class A Member shall have the preemptive right to purchase its
pro rata portion of any newly issued Common Units that the Company may, from
time to time, propose to sell and issue (the “Preemptive
Right”). Any portion of such newly issued Common Units not
purchased pursuant to the Preemptive Right may be sold to other Members or to
other purchasers.
Each
Class A Member shall have ten (10) business days following approval of the newly
issued Common Units, and receiving written notice thereof, to agree to purchase
up to its pro rata portion of the newly issued Common Units, for the price and
upon the terms specified in the approval of such newly issued Common Units, by
giving written notice to the Managers and stating therein the quantity of newly
issued Units to be purchased. Upon exercise of the Preemptive Right,
the Company and the relevant Member shall be legally obligated to consummate the
purchase contemplated thereby and shall use their reasonable best efforts to
secure any approvals required in connection therewith.
In the
event a Member fails to exercise its Preemptive Right within said ten (10)
business day period, the Company shall have a period of one year thereafter to
sell or enter into an agreement to sell the newly issued Common Units not
elected to be purchased by such Class A Member. In the event the
Company has not entered into an agreement to sell such Common Units within said
one year period, the Company
shall not thereafter issue or sell any newly issued Common Units without first
offering such Common Units to the Class A Members as provided in this Section
3.5.
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ARTICLE
IV
MANAGEMENT
4.1. Management
of the Company. The business and affairs of the Company shall
be managed by the Managers. Under the provisions of this Agreement,
the Members have agreed to provide for a representative form of management
structure in which the Managers will carry out their duties similar to the
oversight provided to a corporation by its board of
directors. Operating like a board of directors, the Managers shall
have full, exclusive, and complete discretion, power and authority, subject in
all cases to the other provisions of this Agreement and the requirements of
applicable law, to manage, control, administer and operate the business and
affairs of the Company for the purposes herein stated and to make all decisions
affecting such business and affairs including, without limitation, the power to
execute and deliver, for and on behalf of the Company, any and all documents and
instruments that may be necessary or desirable to carry on the business of the
Company, any and all deeds, assignments, purchase agreements, contracts, leases,
mortgages, deeds of trust, promissory notes, security agreements and financing
statements pertaining to the Company's assets or obligations. No
Member and no Manager, in its capacity as such, shall have any right or
authority to act for or bind the Company except as permitted in this Agreement
or as required by the Act.
All decisions concerning the management
of the Company’s business and approval of Company actions, agreements, contracts
and obligations will be made by a vote of a majority, by number, of the
Managers. No person dealing with the Managers need inquire into the
validity or propriety of any document or instrument executed in the name of the
Company by the Managers, or as to the authority of the Managers in executing the
same; provided that the contract, instrument, agreement or statement is signed
by at least two managers and such third party has no knowledge of any
restriction on the authority of such managers in undertaking such action as
provided in Section 17157(d) of the Act.
4.2. Number
and Qualification of Managers. The authorized number of the
Managers of the Company shall not be less than six (6) nor more than eleven
(11). The exact number of the Managers shall initially be ten (10),
which number may be changed, from time to time, within the foregoing limits by
the approval of the Managers and shall be changed, as necessary, to seat
additional Managers as may be elected by the holders of the Company’s Series A
Units, in accordance with their right to do so, as specified in the Series A
Certificate adopted by the Managers governing such Units. A Manager
need not be a Member or an officer, authorized agent or representative of a
Member.
4.3. Delegation
of Authority; Fiduciary Duties. The Managers shall not be
obligated and shall not be expected to devote all of their time or business
efforts to the affairs of the Company. Accordingly, the Managers
shall have the power and authority to delegate to one or more persons the
Managers’ rights and power to manage and control the business and affairs of the
Company. While the Managers shall have fiduciary responsibilities in
performing their duties, they will not be liable to the Company or any Member
for any act undertaken in good faith to promote the Company’s best interests,
unless the act or omission constitutes gross negligence, intentional misconduct
or a knowing violation of law. In performing their duties, the
Managers shall be entitled to rely on the Company’s books and records maintained
in good faith and on information, opinions, consultations, reports, materials
and analyses received that they reasonably believe were delivered or furnished
within the expertise or competence of the person furnishing such
information.
-10-
4.4. Duties of
Managers. The Managers may authorize any person (including,
without limitation, any Member, officer or Manager) to enter into any document
on behalf of the Company and perform the obligations of the Company thereunder.
Notwithstanding the foregoing, the Managers shall not have the power and
authority to delegate any rights or powers customarily requiring the approval of
the directors of a corporation and no officer or other person shall be
authorized or empowered to act on behalf of the Company in any way beyond the
customary rights and powers of an officer of a corporation.
It shall
be the responsibility of the Managers to provide advice and direction to the
Company’s executive officers regarding the overall operation and direction of
the Company. The function of the Managers shall be similar to the oversight
typically provided to a corporation by its board of directors. The executive
officers of the Company shall, at all times, retain final responsibility for the
day-to-day management, operation, and control of the Company, subject to the
supervision and direction of the Managers.
The
Managers may, from time to time, designate one or more committees, each
committee to consist of one or more Managers. Any such committee shall have such
powers and authority as provided in the enabling resolution of the Company with
respect thereto. At every meeting of any such committee, the presence of a
majority of such committee members shall constitute a quorum and the affirmative
vote of a majority of all members shall be necessary for the adoption of any
resolution. The Managers shall have the authority to lower the number
of committee members so required to constitute a quorum so long as such number
is at least a majority of the total number of members, and to lower the number
of committee members whose affirmative vote is so required to adopt a resolution
so long as such number is at least a majority of the committee members present
at any meeting at which a quorum is present. The Managers may dissolve any
committee at any time, unless otherwise provided in this Agreement.
A Manager
shall, in the performance of such Manager’s duties, be fully protected in
relying in good faith upon the records of the Company and upon such information,
opinions, reports or statements presented to the Company by the Manager and any
of the Company’s officers or employees or committees established by the
Managers, or by any other person as to matters the Manager reasonably believes
are within such other person’s professional or expert competence and who has
been selected with reasonable care by or on behalf of the Company.
4.5. Prohibited
Acts. No Manager shall take or authorize any of the following
actions on behalf of the Company unless a majority in interest of the Members
consent to such actions:
(a) amend
the Articles of Organization of the Company;
(b) the
dissolution or liquidation of the Company; or
(c) the
merger, conversion, or reorganization of the Company under the provisions of
Section 17600 of the California Corporations Code.
4.6. Election
and Term. At the first annual meeting of the Class A Members
and at each annual meeting thereafter, the Managers shall be elected to a one
year term expiring at the conclusion of the next succeeding annual meeting of
the Company's Class A Members. Until such meeting occurs, the
identity of the Managers shall be as specified in Section 1.1.2. Each
Manager shall hold office for the term for which he or she is elected and until
his or her successor shall have been elected and qualified or until his or her
earlier resignation, removal from office, death or disability.
4.7. Vacancy. Except
for any vacancy caused by the removal of a Manager by the Class A Members, any
vacancy occurring as a result of the resignation, removal, death or disability
of a Manager shall be
filled by the affirmative vote of a majority of the remaining Managers at a
meeting duly noticed and held or, alternatively, pursuant to written consent or
approval as authorized under the Act. Any vacancy caused by the
removal of a Manager shall be filled by the Class A Members.
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4.8. Removal. At
a regular meeting or special meeting of Class A Members called expressly for
that purpose, any Manager may be removed, with or without cause, by a vote of
the holders of a majority in interest of the Class A Units then entitled to vote
at an election of the Managers. Any vacancy in the position of
Manager caused by the removal of a Manager shall be filled by a majority vote in
interest of the Class A Members.
4.9. Authority
to Engage in Other Activities. No
Manager shall be required to manage the Company as his or its sole and exclusive
function, and a Manager may have other business interests and may engage in
other activities that are related to, directly or indirectly, the business
activities engaged in by the Company and need not account to the Company and the
Members for such activities. Each Manager shall be free to undertake
activities that are customary for an officer, director or key employee of a
credit union financial institution or other financial institution that may
engage in activities that involve the lending of funds, gathering of deposits,
and the origination, acquisition and servicing of mortgage loans.
Under the
terms of this Agreement, the Members expressly authorize the Managers to
continue to undertake such activities on behalf of another credit union, credit
union service organization or financial institution in their capacity as an
officer, director, employee or consultant to such entity. In
addition, to the extent that any Manager engages in, becomes aware of a business
opportunity that will serve the interests of such other credit union, credit
union service organization, financial institution, or other business interest,
the Manager need not offer the business opportunity first to the Company and the
Company shall have no right to any income derived by such other financial
institution or entity from those activities. Each Manager will devote
as much time to the conduct of the business of the Company as the Manager, in
the Manager’s own good faith and discretion, deems necessary.
4.10. Meetings
of Managers. The annual meeting of the Managers shall be held
without further notice immediately following the annual meeting of the Class A
Members, and at the same place, unless otherwise approved by the
Managers. Special meetings of the Managers may be called by the
Chairman designated by the Managers, the President, the Secretary or any two (2)
Managers. Any and all business may be transacted at any meeting
without specification of such business in the notice. Notice shall be
provided to each Manager at least forty-eight (48) hours in advance of the
special meeting if notice is by personal service, facsimile copier, electronic
transmission (as that term is defined in the Act) or in person and at least four
(4) days in advance if notice is by means of mail, email, telegram or
cablegram. Any meeting may be held using the meeting procedures set
forth in Section 17104 of the Act.
4.11. Specific
Transactions; Related Party Agreements. In addition to the
transactions expressly permitted by this Agreement, the Manager and any entity
or institution in which he or she serves as an officer, employee, director or
consultant, may enter into business transactions with the Company if (i) the
terms of the transaction are no less favorable to the Company than those of a
similar transaction with an independent third party; (ii) the Manager promptly
discloses the material terms of such arrangement; and (iii) the agreement is
approved by the Managers in accordance with any applicable Related Party Policy
that may be adopted from time to time by the Managers. Without
limiting the generality of the foregoing, it is acknowledged and agreed that the
following transactions may be undertaken in accordance with the provisions of
this section:
(a) the
leasing of facilities, buildings, equipment, staff and systems;
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(b) the
purchase of mortgage and other business loans;
(c) entering
into a servicing agreement for the servicing of loans originated by or acquired
by the Company;
(d) borrowing
funds from an entity under a credit line, loan agreement or other credit
facility; or
(e) issuing
to an investor a debt instrument, note obligation, or equity interest in the
Company’s Common or Preferred Units.
In each
instance, the transaction may be entered into if the Managers approve the
transaction in accordance with the provisions of this Section.
4.12. Waiver of
Notice. Notice of a meeting, although otherwise required, need
not be given to any Manager who (a) either before or after the meeting signs a
waiver of notice or a consent to holding the meeting without being given notice;
(b) signs an approval of the minutes of the meeting; or (c) attends the meeting
without protesting the lack of notice before or at the beginning of the
meeting. Waivers of notice or consents need not specify the purpose
of the meeting. All waivers, consents, and approvals of the minutes
shall be filed with the Company records or made a part of the minutes of the
meeting.
4.13. Quorum
and Action. A majority of the whole group of Managers shall
constitute a quorum except when a vacancy or vacancies prevents such majority,
whereupon a majority of the Managers in office shall constitute a quorum,
provided that such majority shall constitute at least one-third of the whole
group of Managers. A majority of the Managers present, whether or not
a quorum is present, may adjourn a meeting to another time and
place. Except as herein otherwise provided, and except as otherwise
provided by the Act, the vote of the majority of the Managers present at a
meeting at which a quorum is present shall be the act of the
Managers. The quorum and voting provisions herein stated which govern
a meeting of the Managers held to fill vacancies and newly created positions as
a Manager shall not be construed as conflicting with any provisions of the Act
and this Agreement.
4.14. Vote
Necessary to Act and Participation by Telephone
Conference. The vote of the majority of the Managers present
at a meeting at which a quorum is present shall be the act of the Managers,
except as may otherwise be provided by law, the Articles of Organization or this
Agreement. Participation in a meeting by conference telephone or
similar means by which all participating Managers can hear each other shall
constitute presence in person at such meeting.
4.15. Committees. The
Managers may designate one or more committees. Such committees, to
the extent provided in the resolution or resolutions creating them, shall have
such functions and may exercise such powers of the Managers as can be lawfully
delegated by the Managers.
4.16. Compensation. The
Managers shall fix the compensation of Managers, if any.
4.17. Rules of
Procedure. Subject to applicable law, the Articles of
Organization and this Agreement, the Managers shall fix its own rules of
procedure and conduct from time to time.
4.18. Action
Without Meeting. Any action permitted or required to be taken
by the Managers may be taken without a meeting by written consent signed by a
majority of the Managers, unless otherwise prohibited under the
Act. An executed copy of the written consent shall be filed with the
minutes of proceedings of the Managers.
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4.19. Officers. The
Managers shall elect a President, Secretary and Treasurer (by those or any other
functionally equivalent executive titles) and may elect a Chief Executive
Officer, Chief Financial Officer and one or more executive
officers. The Chief Executive Officer need not be an
employee of the Company; provided, however, that such person is a
Manager. In addition, the Managers may elect a Chairman, a
Vice-Chairman, and such other executive officers with such titles as the
resolution of the Managers choosing them shall designate. All
executive officers of this Company shall be chosen by the vote of a majority of
the Managers present at a meeting at which a quorum is present or by written
consent pursuant to applicable statutory law. No officer need be a
Member.
4.20. Number Of
Offices. Any number of offices may be held by the same
person.
4.21. Chief
Executive Officer. If appointed, the Chief Executive Officer
shall be the principal executive officer of the Company, and, subject to the
control of the Managers, shall generally supervise and control all of the
business and affairs of the Company.
4.22. President. The
President of the Company shall, subject to the control of the Managers, have
responsibility for the management of the business and operations of the Company
and shall see that all directives and resolutions of the Managers are carried
out. The President shall have such other powers and duties as may be
prescribed by the Managers, including the right to appoint, promote or discharge
non-executive Company officers. In the event of death or inability to
serve of the Chief Executive Officer, or during the vacancy in the office of
Chief Executive Officer, the President shall act as the principal executive
officer of the Company. At the request of the Chief Executive
Officer, the President shall preside at any meeting of the Members.
4.23. Chief
Financial Officer. If appointed, the Chief Financial Officer
shall be the principal financial officer of the Company, and, subject to the
control of the Managers and Chief Executive Officer or President, shall
generally supervise and control all of the financial affairs of the
Company.
4.24. Vice
Presidents. In the absence of any appointed President or in
the event of his death or inability or refusal to act, the most senior appointed
Vice President, if any, shall be vested with the powers and duties of the
President. A Vice President may be designated as an Executive Vice
President, a Senior Vice President or Vice President with a functional title and
shall perform such other duties as from time to time may be assigned to him or
her by the President or Managers.
4.25. Secretary. Any
appointed Secretary shall keep, or cause to be kept, at the Company’s principal
office or such other location as the Managers may designate, a current
membership record book, identifying the name of each Member and his or her
address, the number, class and series of each Unit of equity interest held by
the Member, the number and date of each Certificate issued for the same, and the
number and date of cancellation of every Certificate surrendered for
cancellation. The Secretary shall separately keep a record of all
meetings conducted by the Managers which record shall include the time and place
of holding the meeting, whether regular or special, and, if special, how
authorized, the notice thereof given, the names of those present, the number of
Units of equity interest present or represented at Member meetings, and the
substance of the proceedings undertaken. The Secretary shall also
give, or cause to be given, notice of each meeting of the Members and of the
Managers required by this Agreement or by law to be given; shall keep and affix,
as appropriate, any seal of the Company; and shall have such other powers and
perform such other duties as may be prescribed by the Managers, the President or
this Agreement.
4.26. Treasurer. Any
appointed Treasurer shall have custody of all Company funds, securities,
valuable papers and financial records; shall keep full and accurate accounts of
receipts and disbursements and render accounts thereof at the annual membership
meeting and at such other times as requested
by the Managers or President; and shall perform such other duties as may be
prescribed by the Managers or President.
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4.27. Terms. The
officers of the Company shall hold office until their successors are chosen and
qualify or until their earlier resignation or removal. Any executive
officer chosen or appointed by the Managers may resign at any time by written
notice to the Company and may be removed immediately, either with or without
cause, at any time, by affirmative vote of a majority of the total authorized
number, or whole group of Managers. If the position of any executive
officer becomes vacant for any reason, the vacancy may be filled by the Managers
in the same manner as any executive officer of this Company is
chosen.
4.28. Duties of
the Executive Officers. All officers of the Company shall have
such authority and perform such duties in the management and operation of the
Company as shall be prescribed in the resolutions of the Managers designating
and choosing such officers and prescribing their authority and duties, and shall
have such additional authority and duties as are incident to their office except
to the extent that such resolutions may be inconsistent therewith.
ARTICLE
V
CAPITAL
CONTRIBUTIONS
5.1 General. Each
Member shall make or shall have made a capital contribution as provided for in
this Article V. The term “Capital Contribution” means
any contribution by a Member to the capital of the Company; provided that upon
the admission of a new Member after the date hereof, the capital account of each
Member shall be deemed equal to the capital account of such Member as revalued
pursuant to this Agreement. The Company was organized as a California
corporation on October 22, 1991 and pursuant to a Plan of Conversion will be
converted from a California corporation to a California limited liability
company. As a result, the initial Members of the Company will have a
capital contribution that will be determined based upon the Member’s equity
interest in the Company determined as of the date that the conversion becomes
effective. Within ninety (90) days after the effective date of the
conversion, the Company will cause to be prepared a statement of each Member’s
initial capital account, as certified by a Company officer, and will mail the
statement to each Member.
5.2 Additional
Capital Contributions. No Member shall be required to make any
additional Capital Contributions to the Company or to restore any deficit in
such Member’s capital account. No interest will be paid by the
Company on any capital account maintained for a Member or on any Capital
Contribution and no Member is entitled to the return of any part of its Capital
Contribution unless approved by the Managers. Any unrepaid Capital
Contribution is not a liability of the Company, a Manager, an officer or any
Member.
5.3 Purchase
of Notes; Member Loans. Except as otherwise provided for in
this Agreement, or in accordance with the terms set forth in a separate
securities investment purchase agreement, any Company note or indebtedness
incurred under a borrowing arrangement entered into with a Member will
constitute a loan from the Member and will not be characterized as a Capital
Contribution. The repayment of such loans and investment notes,
including accrued interest, shall have preference over all cash distributions to
the Members until such loans and accrued interest have been fully
repaid.
5.4 Capital
Account. A capital account shall be established and maintained
for each Member. Such accounts shall be adjusted from time to time,
shall be maintained in accordance with the Internal Revenue Code of 1986 (the
“Code”) and the Act and
shall be subject to revaluation in accordance with Treasury Regulations §
1.704-1(b)(2)(iv)(f) at such time as the Managers shall determine.
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5.5 Adjustment
to Capital Accounts. Each Member’s capital account shall
be:
(a) increased
by the amount of cash and the fair market value of property assets contributed
by such Member to the capital of the Company (net of liabilities secured by such
contributed property that the Company is considered to assume or take subject to
under Section 752 of the Code);
(b) increased
by any allocations of income and gain allocated to that Member;
(c) reduced
by the amount of cash and fair market value of property assets distributed to
such Member (net of liabilities secured by such distributed property that such
Member is considered to assume or take subject to under Section 752 of the
Code); and
(d) decreased
by the amount of losses and deductions allocated to such Member.
All
matters concerning the computation of capital accounts, the allocation of net
profit and net losses, the allocation of Company income, gain, loss, deduction
and expense for tax purposes and the adoption of accounting procedures not
otherwise specified in this Agreement shall be determined by the Managers and
the Company’s executive officers.
5.6 Maintenance
of Capital Accounts. The manner in which capital accounts are
maintained under this Article V is intended to comply with the requirements of
Section 704(b) of the Code. If, in the reasonable, good faith opinion
of the Company’s accountants, the manner in which capital accounts are to be
maintained are required to be modified to comply with the provisions of Section
704(b) of the Code and Treasury Regulations promulgated thereunder or otherwise
comply with the distribution provisions of the Series A Certificate, the Company
is authorized to modify the methods in which capital accounts are maintained to
the minimum extent necessary to comply with the Code and the Treasury
Regulations. The Company shall have no authority, however, to change
the method of maintaining capital accounts if such a revision would materially
alter the economic agreement and arrangements among the Members.
5.7 Transferred
Capital Account. In the event of a transfer of all or part of
a Membership Interest, the capital account of the transferring Member shall
become the capital account of the transferee to the extent it relates to the
transferred Membership Interest in accordance with the provisions of Treasury
Regulations § 1.074-1(b)(2)(iv)(l).
5.8 Liquidation
Distributions. In the event that the Company is liquidated or
dissolved, or when any Member’s interest is liquidated, all items of income and
loss will first be allocated to the Members’ capital accounts under Article V
and VI of this Agreement, and other credits and deductions to the Members’
capital accounts will be made before the final distribution is
made. The final distribution to the Members will be made as provided
in Section 12.4 of this Agreement.
ARTICLE
VI
ALLOCATIONS AND
DISTRIBUTIONS
6.1 Profit. After
giving effect to the special allocations and tax rules set forth in Exhibit
“D” hereto, net profits for any fiscal year or other period will be
allocated to the Members as follows:
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(a) first,
to each Member, if any, with a negative capital account balance, in proportion
to such negative balance, until such negative balances have been
eliminated;
(b) second,
to the Series A Members, if any, in proportion to the amount of any outstanding
preferred returns payable under the Series A Certificate; in each case, to the
extent that such amounts are outstanding at the time of the distribution and to
each Series A Member pro rata in accordance with such amounts;
(c) with
respect to the holders of Common Units, if the positive balances in the capital
accounts of such Members are not in proportion to their relative Membership
Interests, then to the holders of Common Units in such a manner so as to cause
such positive balances to be in proportion to such Membership Interests;
and
(d) the
balance, if any, to all holders of Common Units in proportion to their
Membership Interests.
If the
capital account of a Member is at any time less than what the Member should be
entitled to receive in the event of a liquidation of the Company, income shall
first be allocated to the holders of Preferred Units until their capital
accounts are adjusted for any preferred returns that are payable to such holders
of Preferred Units.
6.2 Losses. After
giving effect to the special allocations and tax rules set forth in Exhibit D
hereto, all items of loss and deductions of the Company shall be
allocated:
(a) first,
if the capital accounts of the holders of Common Units are not in proportion to
their relative Membership Interests, then to the holders of the Common Units in
such manner so as to cause such positive balances (after taking into account all
allocations made under this Article VI) to be in proportion to such Membership
Interests;
(b) second,
with respect to holders of Common Units in proportion to the positive balances
in their capital accounts until such balances have been reduced to
zero;
(c) third,
to the Series A Members in proportion to the positive balances in their capital
accounts until such balances have been reduced to zero; and
(d) the
balance, if any, to the holders of the Common Units in proportion to their
Membership Interests.
6.3 Distributions. Except
as provided in Article XII below, an amount equal to the net cash flow of the
Company shall be distributed at such time and in such amounts as the Managers
determine. In determining the amount of net cash flow of the Company
available for distribution, the Managers shall be authorized to set aside
reserves for working capital, loan loss reserves, past or future expenses and
capital expenditures. No Member shall be entitled to claim any right
or entitlement to receive a distribution based upon the Company’s net cash flow
for any period. For purposes of this Article VI, the term “Net Cash Flow” shall be
defined as Company funds that have been obtained from operating income, capital
contributions, borrowings and disposition of the Company assets less (i)
operating expenses; (ii) debts or loans to the extent required to be paid
(including to any Member); and (iii) reserves established to meet current or
reasonably expected obligations of the Company as the Managers determines in
their sole discretion. If approved by the Managers, distributions of
Net Cash Flow shall be made as follows:
(a) first,
if the Company shall have any outstanding interest due or repayment of principal
obligations due under any debt obligations to its Members, then to such Member
in repayment of such debt;
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(b) second,
if the Company shall have outstanding amounts owed to the Series A Members for
unpaid preferred returns as set forth in the Series A Certificate for any prior
years, then to the extent such amounts are outstanding at the time of
distribution and to each Series A Member pro rata in accordance with such
amounts;
(c) third,
to the Series A Members (for any preferred returns as provided for in the
Series A Certificate) for such year in proportion to their Series A
Units;
(d) fourth,
to the holders of Common Units in proportion to their respective Capital
Contributions made with respect to Common Units up to the amount of such Capital
Contribution less distributions previously made to such holders pursuant to this
Section 6.3; and
(e) then,
with respect to the holders of Common Units, to all such Members in proportion
to their Membership Interests.
6.4 Restrictions
on Distributions. No distribution shall be made if, after
giving effect to the distribution:
(i) the
Company would not be able to pay its debts as they become due in the usual
course of business; or
(ii) the
Company’s total assets would be less than the sum of its total liabilities plus,
unless the Agreement provides otherwise, the amount that would be needed, if the
Company were to be dissolved at the time of the distribution, to satisfy the
preferential rights of other Members, if any, upon dissolution that are superior
to the rights of the Member receiving the distribution.
6.5 Return of
Distributions. Except for those distributions made in
violation of the Act or this Agreement, no Member shall be obligated to return
any distribution to the Company or pay the amount of any distribution for the
account of the Company or to any creditor.
6.6 Transfer
of Interest. If a transfer of a Membership Interest should
occur as permitted herein during any accounting period, profit and loss and all
other items attributable to such Membership Interest for such period will be
divided and allocated between the transferor and the transferee by taking into
account their varying interests during the period in accordance with Section
706(d) of the Code, using any conventions permitted by law and selected by the
Managers. All distributions on or before the date of a transfer of a
Membership Interest as permitted herein will be made to the transferor, and all
distributions thereafter will be made to the transferee. Solely for
purposes of making such allocations and distributions, the Company will
recognize a transfer of a Membership Interest no later than the end of the
calendar month during which it is given notice thereof, provided that if the
Company does not receive a notice stating the date such Membership Interest was
transferred and such other information as the Managers may reasonably require
within thirty (30) days after the end of the accounting period during which the
transfer of a Membership Interest occurs, or if a transfer of a Membership
Interest has not been permitted as provided herein, then all of such items will
be allocated, and all distributions will be made, to the person who, according
to the books and records of the Company, on the last day of the accounting
period during which the transfer occurs, was the owner of the Membership
Interest.
6.7 Third
Party Rights. The provisions in this Article VI regarding
distributions to the Members are not intended to benefit any creditor or other
person (other than a person in its capacity as a Member) to whom any debts,
liabilities or obligations are owed by (or who otherwise has any claim against)
the Company or any of the Members. Moreover, notwithstanding anything
contained in this Agreement, including, without limitation, the provisions in
this Article VI regarding distributions to the Members, no such
creditor or other person may obtain any rights under this Agreement or, by
reason of this Agreement, make any claim in respect of any debt, liability or
obligation (or otherwise) against the Company or any Member.
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ARTICLE
VII
TAXES
7.1 Tax
Returns. The Managers shall cause the Company to prepare and
file all necessary U.S. Federal, state and local tax returns. Each
Member shall furnish to the Company all pertinent information in its possession
to enable the Company’s tax return to be prepared and filed.
7.2 Tax
Elections. To the extent permitted by applicable tax law and
regulations, the Company shall adopt the accrual method of accounting and keep
the Company’s books and records on the accrual basis method. The
Company has also adopted a fiscal year ended December 31 as the Company’s
taxable year pursuant to Section 444 of the Code and make any required tax
payments pursuant to Section 7519 of the Code. The Managers shall be
authorized to make any elections for the Company allowed under the Code or the
tax laws of any state or other jurisdiction having taxing jurisdiction over the
Company that is in the best interests of the Members.
Neither
the Company nor any Manager, officer or Member may make an election for the
Company to be excluded from the application of the partnership tax law
provisions of subchapter K of the Code without the approval of the
Managers. To the extent the Company constitutes the single member of
a limited liability company subsidiary, the Company will cause such subsidiary
to timely make all appropriate disregarded entity elections on IRS Form 8832,
unless otherwise directed by the Managers.
7.3 Tax
Reports. As soon as reasonably practicable after the close of
each fiscal year, the Managers shall cause the Company to prepare and send to
each Member an Internal Revenue Service Form K-1, Form 5471 and any other
required reports for the filing of state and local income tax returns for such
Member for such fiscal year, which forms will duly reflect the allocation of
income, gain, loss and deductions set forth in Article VI of this
Agreement. Except as otherwise provided for under the Act, the
Company shall furnish such tax reports to its Members within one hundred twenty
(120) days after the end of the Company’s fiscal year.
7.4 Partnership
for Tax Purposes. Until the Company makes an affirmative
election to be treated as a corporation for U.S. Federal income tax purposes or
prior to the time the Company is converted to a corporation under California law
or any other state law, whether by merger, operation of law or otherwise, the
Members agree to treat the Company as a partnership solely for U.S. tax law
purposes and to treat all Units as interests in such partnership and no Member
shall take any position inconsistent with this characterization on any tax
return or otherwise.
7.5 Tax
Matters Partner. The Managers have designated the President to
act as the “Tax Matters
Partner“ (as defined in Section 6231(a)(7) of the Code) in accordance
with Sections 6221 through 6233 of the Code. Upon such designation, the Tax
Matters Partner shall be authorized and required to represent the Company (at
the Company’s expense) in connection with all examinations of the Company’s
affairs by tax authorities, including resulting administrative and judicial
proceedings, and to expend Company funds for professional services and costs
associated therewith; provided that, the Tax Matters Partner may be removed and
replaced by, and shall act in such capacity at the direction of, the Managers.
Each Member agrees to cooperate with the Tax Matters Partner and to do or
refrain from doing any or all things reasonably requested by the Tax Matters
Partner with respect to the conduct of such proceedings.
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Subject
to the foregoing proviso, the Tax Matters Partner will have reasonable
discretion to determine whether the Company (either on its own behalf or on
behalf of the Members) will contest or continue to contest any tax deficiencies
assessed or proposed to be assessed by any taxing authority. Any deficiency for
taxes imposed on any Member (including penalties, additions to tax or interest
imposed with respect to such taxes) will be paid by such Member, and if paid by
the Company, will be recoverable from such Member (including by offset against
distributions otherwise payable to such Member). Each Manager will be
provided with a copy of all tax returns filed by the Company and the Tax Matters
Partner will consult with and keep the Managers fully informed about the status
of all material tax examinations, controversies and proceedings.
ARTICLE
VIII
MEMBERS
8.1 Members’
Membership Interests. The Units to be issued by the Company to
its Members may but need not be evidenced by one or more Certificates, in such
form and with such recitals and signatures as may be determined by the
Managers.
8.2 Meetings
of the Members and Voting Rights.
8.2.1 The
annual meeting of the Class A Members of the Company shall be held on a date and
at a time designated by the Managers. At the annual meeting, the
Class A Members, by vote of the holders of a majority of the Class A Units
represented, shall elect the Managers, consider reports of the affairs of the
Company and transact such other business as is properly brought before the
meeting.
8.2.2 Special
meetings of the Members will be held when requested by the Managers or
Class A Members representing more than 10% of the interests of the Class A
Members.
8.2.3 Meetings
of Members may be held within or without the State of California and may be held
pursuant to video screen communication or by electronic transmissions pursuant
to Section 17104 of the Act. If the Managers choose to permit a
meeting of the Members to be conducted, in whole or in part, by electronic
transmission or by electronic video screen communication, the Company agrees (1)
to implement reasonable measures to provide Members (in person or by proxy) a
reasonable opportunity to participate in the meeting and to vote on matters
submitted to the Members, including an opportunity to read or hear the
proceedings of the meeting substantially concurrently with those proceedings,
and (2) if any Member votes or takes other action at the meeting by means of
electronic transmission to the Company or electronic video screen communication,
to maintain a record of that vote or action.
8.2.4 Each
Member waives notice if, before or after the meeting, the Member signs a waiver
of the notice which is filed with the records of Members’ meetings, or is
present at the meeting in person or by proxy, except when the person objects, at
the beginning of the meeting to the transaction of any business because the
meeting was not lawfully called or convened. Unless provided
otherwise herein, at a meeting of Members, the presence in person or by proxy of
Class A Members holding not less than fifty-one percent (51%) of the Units
then held by Class A Members constitutes a quorum.
8.2.5 When
a meeting is adjourned to another time or place, it will not be necessary to
give any notice of the adjourned meeting if the time and place to which the
meeting is adjourned are announced at the meeting at which the adjournment is
taken, and at the adjourned meeting any business
may be transacted that might have been transacted on the original date of the
meeting. If the adjournment is for more than forty-five
(45) days or, if a new record date is set for the meeting, a notice of the
adjourned meeting must be sent to each Member of record entitled to
vote at the meeting.
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8.2.6 The
affirmative vote of the holders of a majority of the Class A Units will be the
act of the Company, except as expressly provided herein.
8.3 Notice. Written
notice stating the location, day and hour of each meeting of the Members and, in
the case of a special meeting, the nature of the business to be transacted,
shall be delivered to each Class A Member of record not less than ten (10)
business days prior to the date of such meeting, nor more than sixty (60)
calendar days prior to such meeting, unless such notice is waived by any Class A
Member. The record date for determining the Members entitled to
receive notice of any meeting, to vote or exercise any right in respect of any
lawful action, will be the date set by the Managers or Members; provided that
the record date will be not more than sixty (60), or less than ten (10),
calendar days before the date of the meeting and not more than sixty (60)
calendar days before any other action. In the absence of any action
establishing a record date, the record date will be determined in accordance
with Section 17104(k) of the Act. When a meeting is adjourned for
forty-five (45) days or more, notice of the adjourned meeting shall be given as
in the case of the original meeting; otherwise no notice of the adjournment or
of the business to be transacted at a reconvention of the adjourned meeting need
be given other than by way of an announcement made at the meeting at which such
adjournment is taken.
8.4 Voting
List. As of the record date determined in accordance with the
provisions of Section 17104(k) of the Act, the Company shall cause there to
be prepared a list of the Members entitled to vote at each meeting of the
Members or any adjournment thereof, including the address of and number of Units
held by each Member. For a period of five (5) days prior to the
meeting, any such required list shall be kept at the Company's principal place
of business where any Member shall be entitled to inspect it during usual
business hours. The list shall also be made available and subject to
inspection by any Class A Member at any time during the subject
meeting.
8.5 Meeting
Quorum. The holders of a majority of the Class A Units,
present in person or represented by proxy, shall constitute a quorum at all
meetings of the Members, unless otherwise provided by law, but a lesser interest
may adjourn any meeting from time to time until the requisite amount of Unit
holders shall be present.
8.6 Voting
Rights. Each outstanding Unit shall entitle the holder of
record thereof to cast one vote with respect to each matter presented to the
Members for their consideration or as to which each such Member shall have the
right to vote. An affirmative vote of a majority of the Class A Units
represented at each meeting shall decide any question brought before it, unless
the question is one upon which, by express provision of law, the Company's
Articles of Organization or this Agreement, a larger or different vote is
required, in which case such express provision shall govern the decision of such
question. No holder of solely an Economic Interest in the Company, as
defined in the Act, will be entitled to exercise any voting or other rights as
an owner of an Economic Interest.
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Except
for those actions requiring approval of the Members as provided for in Section
17103(b) of the Act, the Class B Members will have no voting rights under this
Agreement. With respect to the holders of Series A Units or any other
holder of a Preferred Unit, the holders will be entitled to exercise
those voting rights set forth in the Series A Certificate or any other
certificate approved by the Managers. For any actions required to be
approved by the holders of such Series A Units or Preferred Units, the
provisions of this Article VIII concerning voting, notice, record date,
quorum, proxies, and meeting procedures
will govern the consideration of such actions, unless otherwise provided for in
the Series A Certificate.
8.7 Proxies. Every
Member entitled to vote for the election of the Managers or on any other matter
shall have the right to do so either in person or by one or more agents
authorized by a written proxy signed by the Member and filed with the Secretary
of the Company. A proxy shall be deemed signed if the Member’s name
is placed on the proxy (whether by manual signature, typewriting, telegraphic
transmission, or otherwise) by the Member or the Member’s attorney in
fact. A validly executed proxy which does not state that it is
irrevocable shall continue in full force and effect unless (i) revoked by the
Member executing it, before the vote pursuant to that proxy, by a writing
delivered to the Company stating that the proxy is revoked, or by attendance at
the meeting and voting in person by the Member executing the proxy or by a
subsequent proxy executed by the same Member and presented at the meeting; or
(ii) written notice of the death or incapacity of the maker of that proxy is
received by the Company before the vote pursuant to that proxy is counted;
provided, however, that no proxy shall be valid after the expiration of eleven
(11) months from the date of the proxy, unless otherwise provided in the
proxy. The revocability of the proxy that states on its face that it
is irrevocable shall be governed by the provisions of Section 17104 of the
Act.
8.8 Written
Consents; Other Action. The actions taken at any meeting of
Members, however called and noticed, and wherever held, have the same validity
as if taken at a meeting duly held after regular call and notice, if a quorum is
present either in person or by proxy, and if, either before or after the
meeting, each of the Members entitled to vote, not present in person or by
proxy, provides a waiver of notice or consents to the holding of the meeting or
approves the minutes of the meeting in writing. All waivers,
consents, and approvals shall be filed with the Company records or made a part
of the minutes of the meeting after conversion to the form in which those
records or minutes are kept. Any action that may be taken at any
meeting of the Members may be taken without a meeting if a consent in writing,
setting forth the action so taken, is signed and delivered to the Company within
sixty (60) days of the record date for that action by Members having not less
than the minimum number of votes that would be necessary to authorize or take
that action at a meeting at which all Members entitled to vote thereon were
present and voted and notice of the matter to be voted on is furnished to such
Members. Prompt notification of the action taken will be given to all
Members who have not consented to the action.
8.9 Telephone
Conference or Video Screen Meeting. Members may participate in
a meeting of the Company through the use of conference telephones or electronic
video screen communication, as long as all Members participating in the meeting
can hear one another, or by electronic transmission by and to the Company
pursuant to paragraphs (1) and (2) of subdivision (o) of Section 17001 of
the Act. Participation in a meeting pursuant to this provision
constitutes presence in person at that meeting.
8.10 Approval
of Merger; Amendment of Articles of Organization; Dissolution or
Merger. Notwithstanding anything in this Agreement to the
contrary, no amendment to the Articles of Organization may be adopted unless a
majority in interest of the Members approve the amendment. In the
event of a proposed merger, conversion, reorganization, consolidation of, or
dissolution of the Company, a majority in interest of the Members shall be
required to approve such merger, consolidation or dissolution of the
Company. In addition to the voting rights that a Member shall have
under the provisions of Section 17005 of the Act, the Company’s Managers, from
time to time, may establish one or more series of Preferred Units that will have
certain voting rights specified in a certificate of such series of Preferred
Units.
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ARTICLE
IX
TRANSFERS
9.1 General
Restrictions on Transfer. The Company and its Members intend
that the Company’s Units be held only by persons who agree with and have
interests consistent with the Company’s mission, values and
goals. Accordingly, except for Permitted Transfers (defined below),
no Member may sell, assign or otherwise transfer (all referred to as a “Transfer”) the Company’s Units
or any part of the Member’s Membership units in the Company therein unless the
proposed Transfer is first approved in writing by the Managers, which approval
may be withheld by the Managers in their sole discretion. No Member
may encumber or permit a lien to be placed on all or any portion of the Member’s
Membership Interest in the Company unless the encumbrance is approved by the
Managers. Transfers in violation of this Section 9.1 shall be null
and void ab initio. After the consummation of any Transfer of Units,
such Units shall continue to be subject to the provisions of this Agreement and
any further Transfers of such Units shall be required to comply with all of the
provisions of this Agreement. Each Member acknowledges the
reasonableness of these restrictions in view of the purposes of the
Company.
9.2 Permitted
Transfers. A Member may Transfer all or any interest in its
Units to an entity of which the Member has management and economic control or in
trust for the benefit of the Member (and its family, if the Member should be an
individual), or to an individual Member’s spouse, children, grandchildren or
siblings, or any combination thereof, provided the Member is a trustee or
co-trustee of the trust (“Permitted
Transfer”). No Transfer will be permitted if it alone or in
combination with another Transfer would result in the termination of the Company
as a limited liability company for Federal income tax purposes.
Except in
the case of a Transfer of a transferring Member's Membership Interest at death
or involuntarily by operation of law, the transferring Member and transferee
shall execute and deliver to the Company such documents and instruments of
conveyance as may be necessary or appropriate in the opinion of counsel to the
Company to effect such Transfer and to confirm the agreement of the transferee
to be bound by the provisions of this Agreement. In the case of a
Transfer of a Membership Interest at death or involuntarily by operation of law,
the Transfer shall be confirmed by presentation to the Company of legal evidence
of such Transfer, in form and substance satisfactory to counsel to the
Company. In all cases, the Company shall be reimbursed by the
transferring Member and/or transferee for all costs and expenses that it
reasonably incurs in connection with such Transfer.
The
transferring Member and transferee shall furnish the Company with the
transferee's taxpayer identification number, sufficient information to determine
the transferee's initial tax basis in the transferred interest in the Company,
and any other information reasonably necessary to permit the Company to file all
required federal and state tax returns and other legally required information
statements or returns. Without limiting the generality of the
foregoing, the Company shall not be required to make any distribution otherwise
provided for in this Operating Agreement with respect to any Transfer until it
has received such information.
9.3 Withdrawal. A
Member may withdraw from the Company at any time by giving notice of withdrawal
to the Managers at least one hundred and eighty (180) calendar days before the
effective date of withdrawal. Any withdrawal will not release a
Member from any obligations incurred under the Agreement that were accrued or
incurred prior to the withdrawal date. No withdrawal may be made
unless the written consent of the Managers has been obtained.
If a Member withdraws from the Company
with the consent of the Managers, the Member will be divested of the Member’s
entire Membership Interest, but will retain rights as a holder of an “Economic Interest” in the Company, as
defined in Section 17001 of the Act. Unless the Managers consent to
the withdrawal, the withdrawing Member will not be entitled to receive a return
of its Capital Contribution in the Company until the Company’s dissolution or
liquidation.
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9.4 Option to
Purchase on the Proposed Transfer. If a Member proposes to
Transfer all or any portion of a Member’s interest for consideration, whether
tangible or intangible, all or any portion of such Member’s Units, the Company
shall have an option to purchase all, but not part, of the Units proposed to be
transferred in accordance with the procedures set forth below.
9.4.1 Notice of
Sale. The Member proposing to Transfer all or any part of its
Units (the “Offeror”)
shall give written notice (the “Offer Notice”), by registered
or certified mail, to the Secretary of the Company. The Offer Notice
shall set forth in reasonable detail the class, series and number of Units
proposed to be transferred, the identity of each prospective transferee, and the
price, terms and conditions of the proposed Transfer.
9.4.2 Election
by Company to Purchase. Immediately upon receipt of the Offer
Notice, the Secretary shall advise the Managers of the Company of the contents
of said Notice. The Company may elect to purchase all, but not part,
of the Units offered in accordance with the terms specified in the Offer Notice
within sixty (60) days from the date the Offer Notice was delivered to the
Secretary (the “Offer
Period”).
9.4.3 Notice of
Election to Purchase. By the end of the Offer Period, the
Secretary shall forthwith advise the Offeror in writing, by registered or
certified mail, whether the Company has exercised its option to purchase the
Units.
9.4.4 Transfer
Upon Failure to Exercise Option. If the Company does not
exercise its option to purchase all of the Units offered, such Units may be
transferred to the transferee named in the Offer Notice at any time within
ninety (90) days following the end of the Offer Period, provided that such
transferee shall be approved by the Managers and the Transfer shall otherwise
meet the requirements of Section 9.1.
9.5 Unauthorized
Transfers. In the event that
any of the following triggering events occurs (each a “Triggering Event”), the
Company and other Members will have the option to purchase the Membership
Interest of the Member at the price and on the terms provided in Section 9.6 of
this Agreement:
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(a)
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the
occurrence of an unauthorized Transfer in violation of this Agreement;
or
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(b)
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the
bankruptcy, winding up, dissolution or liquidation of a corporate
Member.
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9.6 Notice of
Triggering Event; Option to Purchase. Upon receipt of
the notice of any Triggering Event, the Managers shall promptly furnish notice
of such Triggering Event to all Members and the Company shall have the option to
purchase such interest for the “Fair Market Value” (as defined
below) of such interest and in accordance with the terms set forth below during
the period that ends thirty (30) calendar days following the determination of
the Fair Market Value of such interest. If the Company chooses not to
purchase the Membership Interest, the Company will promptly send notice of such
Triggering Event to all Members and the Members shall have the option for a
period of thirty (30) days after notice thereof is sent to such Members to
purchase such Membership Interest at the price and on the terms made available
first to the Company, pro rata in accordance with their prior Membership
Interests. If the Membership Interest is not purchased either by the
Company or the Members, the transferee or assignee of such interest will hold
such Membership Interests in the Company subject to all of the provisions of
this Agreement.
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For purposes of this Agreement, the
term “Fair Market Value”
means with respect to the Company as a whole, the price at which a willing
seller under no compulsion to sell would sell, and a willing buyer under no
compulsion to purchase would purchase, 100% of the Membership Interests of the
Company. Any determination of Fair Market Value shall first be
determined by each of the selling party and purchasing party using their best
efforts to mutually agree on a sale price. If the parties are unable
to agree on the Fair Market Value of such Membership Interest within thirty (30)
days after notice of the Triggering Event shall have been sent, the Company will
select a valuation firm to determine the Fair Market Value of such Membership
Interest. The determination of Fair Market Value made pursuant to
this Section will be final, binding and conclusive upon the Member and the
Company.
9.7 Waiver of
Option. The option to purchase Units described in Sections 9.4
and 9.6 may be waived with respect to a particular Transfer by filing, on behalf
of the Company and any Member, with the Secretary of the Company a written
consent describing the Transfer as approved by the Managers and
Members.
9.8 Non-Member
Transferee. If a Member seeks to Transfer a Membership
Interest without complying with the provisions of this Agreement, the transferee
will have no membership rights, including to vote on any matter presented to the
Members and will not been entitled to receive information concerning the
Company’s affairs or inspect the Company’s books and records. Any
assignee of a Membership Interest will be deemed to be the owner solely of an
Economic Interest in the Company until the prospective assignee has been
admitted as a substitute Member by the Managers. The assignee may not
be admitted as a Member until the Managers approve the assignee as a substituted
Member and the prospective Member executes a counterpart signature page to this
Agreement. Except as otherwise provided for in the Act, the assignee
will be entitled only to receive allocations and distributions as the holder of
an Economic Interest and will have no rights to vote or exercise any other
rights as a Member until the assignee has become a substituted
Member. In that event, the assigning Member will continue to be a
Member of the Company and hold all voting and membership rights in the
Company.
ARTICLE
X
BOOKS AND
RECORDS
10.1 Books. The
Company shall maintain at its registered office in California complete and
accurate books of account of the Company’s affairs and such other materials as
are reasonably necessary showing all costs, expenses, expenditures, assets,
liabilities, profits and losses and including those records required to be
maintained by the Act. The books and records of the Company shall be
open to inspection by each Member or its designated representatives at the
inspecting Member’s expense at any reasonable time during business hours for any
proper purpose provided under the Act. The right to inspect such
books and records are subject to compliance by such Member with the safety,
security and confidentiality procedures and guidelines as may reasonably be
established from time to time by the Managers.
10.2 Company
Funds. All funds of the Company shall (i) be deposited only in
the accounts of the Company in the Company’s name; (ii) not be commingled with
funds of any Member; and (iii) be withdrawn only upon such signature or
signatures as may be designated in writing from time to time by the
Managers.
10.3 Accounting
Method. The Company will account for its financial
transactions, operations and activities using the accrual method of
accounting.
10.4 Financial
Reports. The Company shall cause to be prepared (a) as of the
end of each calendar quarter as appropriate, (b) as of the end of each fiscal
year, (c) as of the date of dissolution of the Company
or (d) as of such additional dates as the Managers may direct, appropriate
financial statements showing the assets, liabilities, capital, profits, losses,
expenses and a statement showing all amounts credited and debited to each
Member’s capital account. In addition, the Company shall prepare for
federal income tax purposes, on an annual basis, a statement of each Member’s
distributive share of items of income, gains, deductions, losses or credits
arising out of the Company’s operations. The Company will complete
and file any annual and periodic reports that it may be required to file under
the Act, the Securities Act of 1933 and the Securities Exchange Act of
1934.
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10.5 Financial
Statements. At the end of each fiscal year, the books and
records of the Company will be closed and examined, statements reflecting the
financial condition of the Company and its profits and losses prepared, and a
report about those matters will be issued by the Company’s certified public
accountants. The Managers shall cause an annual report to be made
available to each Member within one hundred twenty (120) days after the end of
the Company’s fiscal year. The annual report may be sent by
electronic transmission by the Company or made available as a public filing as
an annual report filed with U.S. Securities and Exchange
Commission.
10.6 Retention
of Records. At all times during the term of existence of the
Company, and beyond that term if the Managers deem it necessary, the Managers
will keep or cause to be kept the books of account referred to in Section 10.4,
together with:
(a) a
current list of the full name and last known business or residence address of
each Member, together with the Capital Contribution and the share in profits and
losses of each Member;
(b) a
current list of the full name and business or residence address of each
Manager;
(c) a
copy of the Articles of Organization, as amended;
(d) copies
of the Company’s federal, state, and local income tax or information returns and
reports, if any, for the six most recent taxable years;
(e) an
original executed copy or counterparts of this Agreement, as
amended;
(f) any
powers of attorney under which the Articles of Organization or any amendments to
said articles were executed;
(g) financial
statements of the Company for the six (6) most recent fiscal years;
and
(h) the
books and records of the Company as they relate to the Company’s internal
affairs for the current and past four fiscal years.
If the
Managers deem that any of the foregoing items will be kept beyond the term of
existence of the Company, the repository of those items will be as designated by
the Managers.
ARTICLE
XI
INDEMNITY
11.1 Indemnity. To
the fullest extent permitted by law, the Company will indemnify and hold the
Managers, Members, officers, employees, agents of the Company and any person
serving at the request of the Company as a director, officer, manager, employee
or agent of another limited liability company, corporation, partnership, trust,
joint venture or other affiliated entity harmless from and against all claims,
demands
and expenses whatsoever (including, without limitation, attorneys’ fees and
costs in all trial, appellate and collection proceedings) actually and
reasonably incurred in connection with any proceeding, whether civil or
criminal, in which he or it is a party so long as the Manager, Managers,
officers, employees, agents or the Members were proceeding in good faith to
promote the best interests of the Company and provided that such acts or
omissions do not constitute gross negligence, intentional misconduct or a
knowing violation of law.
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The
Company may purchase and maintain insurance, at the Company’s expense, on behalf
of such indemnitees against any liability that may be asserted against, or any
expense that may be incurred by, the indemnitees in connection with the
activities of the Company and/or such indemnitee’s acts or omissions, regardless
of whether the Company would have the power to indemnify any such indemnitee
against such liability under the provisions of this Agreement or applicable
law. Any indemnification under this Article XI will be satisfied
solely out of the assets of the Company, and no Member, Manager, officer,
employee or agent of the Company will be subject to personal liability or
required to fund or to cause to be funded any obligation by reason of this
Article.
11.2 Exoneration. Notwithstanding
any other provision hereof, and to the fullest extent permitted by law, the
Members and the Company hereby waive and release each Manager, each of the
Members, and any officers, employees and any other person serving at the request
of the Company as a director, officer, manager, employee or agent of another
limited liability company, corporation, partnership, trust, joint venture or
other affiliated entity, from any and all claims and liabilities by reason of
adverse results to the Company or the Members so long as the Manager, officer,
employee, agent or Member was proceeding in good faith to promote the best
interests of the Company and provided that such acts or omissions do not
constitute gross negligence, intentional misconduct or a knowing violation of
law.
ARTICLE
XII
DISSOLUTION AND WINDING
UP
12.1 Dissolution. The
Company will dissolve and commence winding up and liquidating upon the first to
occur of the following:
(a) the
written consent of Members owning a majority in interest of the
Members;
(b) any
event that causes the Company to be ineligible to conduct its activities as a
limited liability company under the Act; or
(c) otherwise
by operation of law or entry of a decree of judicial dissolution of the Company
pursuant to Section 17351 of the Act.
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12.2
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Winding
Up.
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(a) General. Upon
the occurrence of the event expressed in Section 12.1 hereof, the Company will
continue in an orderly manner solely for the purpose of winding up its affairs,
liquidating its assets and satisfying the claims of its creditors and
Members. No Member will take any action that is inconsistent with, or
not necessary to or appropriate for, winding up the Company’s business and
affairs. To the extent not inconsistent with the foregoing, all
covenants and obligations in this Agreement will continue in full force and
effect until such time as the Company’s business has been wound up.
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(b) Appointment
of Liquidator. Upon the Company’s dissolution, the Company’s
principal executive officer (unless unwilling or unable to serve as such) shall
serve as liquidator, and as such will wind up and liquidate the Company in an
orderly, prudent and expeditious manner in accordance with the following
provisions of this Article. While serving as liquidator, the
Company’s principal executive officer shall have the same authority, powers,
duties and compensation as before dissolution, except that the liquidator shall
not acquire any additional assets for the Company, and shall use its best
efforts to liquidate the Company’s existing assets as rapidly as is consistent
with receiving the fair market value thereof. If the Company’s
principal executive officer is unwilling or unable to serve as liquidator, or
has resigned or been removed, the Managers shall elect another person, who may
be a Member, to serve as liquidator.
(c) Management
of Assets. Due to high prevailing interest rates
or other factors, the Company could suffer reduced earnings (losses) if a
substantial portion of its loan portfolio remains and must be liquidated quickly
during the winding up period. Members who sell their Membership
Interests prior to any such liquidation will not be exposed to this
risk. Conversely, if prevailing interest rates have declined at a
time when the loan portfolio must be liquidated, unanticipated profits could be
realized by those Members who remained in the Company until its
termination. Upon dissolution of the Company, the principal executive
officer will wind up the Company’s affairs by liquidating the Company’s assets
as promptly as is consistent with obtaining the fair market value thereof,
either by sale to third parties or by collecting loan payments under the terms
of the loan(s) until a suitable sale can be arranged.
12.3 Survival
of Contracts. Any act or event causing dissolution of the
Company shall in no way affect the validity of, or the term of, any lease,
investment note, deed of trust, mortgage, contract or obligation acquired by the
Company as assignee or any mortgage originated by the Company or any note, debt
instrument or investment debt securities issued by the Company.
12.4 Proceeds
of Liquidation. Subject to the terms of the Series A
Certificate or terms of any later series of Preferred Units established by the
Company, the “Net Liquidation
Proceeds” (as defined below) shall be applied and distributed in the
following order of priority:
(a) first,
to the payment of or provision for debts and liabilities of the Company,
including Members and Managers who are creditors and the expenses of liquidation
in order of priority as provided by law, and to the creation of any reserves
which may be reasonably necessary for any contingent or unforeseen liabilities
or obligations;
(b) second,
to the holders of Series A Units or Preferred Units in an amount equal to such
Member’s liquidation preference, plus accrued and unpaid dividends, under the
Series A Certificate, pro rata in accordance with such amounts; and
(c) third,
to the Members in accordance with their respective positive capital account
balances, as determined after taking into account all capital adjustments for
the fiscal year in which the dissolution occurs, as provided for in Article V of
this Agreement.
12.5 Net
Liquidation Proceeds. The term “Net Liquidation Proceeds”
means the amount of money, the principal amount of any indebtedness due to the
Company and the fair market value of any and all other property distributed to
the Members, reduced by any liabilities of the Company that are assumed by such
Members or which are secured by any property that is distributed by the Company
to such Members.
12.6 Deficit
Capital Accounts. Notwithstanding anything to the contrary
contained in this Agreement, and notwithstanding any custom or rule of law to
the contrary, upon dissolution of the Company, the
deficit, if any, in the capital account of any Member, including any deficit
that results from or is attributable to deductions and losses of the Company
(including non-cash items such as depreciation) or distributions of assets
pursuant to this Agreement to all Members, shall not be an asset of the Company
and such Members shall not be obligated to contribute such amount to the Company
to bring the balance of such Member’s capital account to zero.
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12.7 Required
Filings. The liquidating officer will cause the Company to
file any required certificates with the appropriate Secretary of State office
and file such other statements, instruments and take such other actions, as are
reasonably necessary or appropriate to effectuate and confirm the cessation of
the Company’s existence.
ARTICLE
XIII
MISCELLANEOUS
13.1 Execution
of Agreement. This Agreement may be executed in any number of
counterparts and by different parties to this Agreement on separate
counterparts, each of which, when so executed, will be deemed an original, but
all such counterparts will constitute one and the same agreement. Any
signature delivered by a party by facsimile transmission will be deemed to be an
original signature.
13.2 Notices. All
notices or other communications required or permitted to be given pursuant to
this Agreement shall be in writing and shall be made by: (a) certified mail,
return receipt requested; (b) Federal Express, Express Mail, or similar
overnight delivery or courier service; or (c) delivery (in person or by
facsimile, E-Mail, electronic transmission, as that term is defined in the Act)
to the party to whom it is to be given, to the address appearing elsewhere in
this Agreement or to such other address as any party hereto may have designated
by written notice forwarded to the other party in accordance with the provisions
of this Section 13.2. Any notice or other communication given by
certified mail shall be deemed given three (3) days after the date of
certification thereof. Any notice given by other means permitted by
this Section 13.2 shall be deemed given on the day after the date it was
delivered by the sender.
13.3 Offset. Whenever
the Company is to pay any sum to any Member, any amounts then due and payable
from such Member to the Company may be deducted from that sum before
payment.
13.4 Amendment. Unless
otherwise authorized by this Agreement or the terms of the Series A Certificate,
this Agreement may be amended or modified, or any provision hereof may be
waived, provided that such amendment, modification or waiver is set forth in a
writing executed by (i) the Company and (ii) the Members holding a majority in
interest of the Company’s Membership Interests. No course of dealing
between or among any persons having any interest in this Agreement will be
deemed effective to modify, amend or discharge any part of this Agreement or any
rights or obligations of any person under or by reason of this
Agreement.
13.5 Binding
Effect. Except as otherwise provided in this Agreement, every
covenant, term, and provision of this Agreement shall be binding upon and inure
to the benefit of the Members and their respective heirs, legatees, legal
representatives, successors, transferees, and assigns.
13.6 Further
Action. Each Member agrees to perform all further acts and
execute, acknowledge, and deliver any documents which may be reasonably
necessary, appropriate, or desirable to carry out the provisions of this
Agreement.
13.7 Power of
Attorney. Each Member appoints the Company’s President,
Secretary and Treasurer, with full power of substitution, as the Member’s
attorney-in-fact to act in the Member’s name to execute
and file (a) all certificates, applications, reports and other instruments
necessary to qualify or maintain the Company as a limited liability company in
the states where the Company conducts its activities, (b) all instruments that
effect on confirm changes or modifications of the Company or its status,
including, without limitation, amendments to the Articles of Organization, and
(c) all instruments of transfer necessary to effect the Company’s dissolution
and termination. The power of attorney granted by this Section is
irrevocable, coupled with an interest and shall survive the death of the
Member.
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13.8 Waiver. No
failure by any Member to insist upon the strict performance of any covenant,
duty, agreement or condition of this Agreement or to exercise any right or
remedy consequent upon a breach hereof will constitute a waiver of any such
breach or of such or any other covenant, agreement, term or
condition. Any Member, by notice pursuant to the terms hereof, may,
but will be under no obligation to, waive any of his rights or any conditions to
his obligations hereunder, or any duty, obligation or covenant of any other
Member. No waiver will affect or alter the remainder of this
Agreement, but each and every covenant, agreement term and condition hereof will
continue in full force and effect with respect to any other then-existing or
subsequent breach.
13.9 Severability. In
the event any term or provision of this Agreement should to any extent be held
to be illegal, invalid or unenforceable, or inoperative as a matter of law, the
remaining terms and provisions of this Agreement will not be affected thereby,
but each such term and provision will be valid and will remain in full force and
effect.
13.10 Entire
Agreement. This Agreement, and any other document referenced
herein, constitute the entire understanding of the parties hereto with respect
to the subject matter hereof, and no amendment, modification or alteration of
the terms hereof shall be binding unless the same be in writing, dated
subsequent to the date hereof and duly approved and executed by each of the
parties hereto.
13.11 Third
Party Beneficiaries. There are no third party beneficiaries of
this Agreement.
13.12
Partition. The
Members agree that the Company assets are not suitable for partition, and each
Member hereby irrevocably waives any and all rights it may have to maintain any
action for partition of the Company assets.
13.13
Not
a Partnership. The Members have formed the Company under the
Act and expressly do not intend to form a partnership under the laws of any
state. Except for applicable tax purposes, the Members do not intend
to be partners to one another or partners to any third party.
13.14 Attorneys’
Fees. In the event of any litigation, arbitration, mediation
or other dispute resolution arising as a result of or by reason of this
Agreement, the prevailing party in any such litigation, arbitration, mediation
or other dispute resolution shall be entitled to, in addition to any other
damages assessed, its reasonable costs and expenses incurred in connection with
the prosecution or defense thereof, including reasonable attorneys’ fees in all
trial, appellate and collection proceedings.
13.15 Construction. Every
provision of this Agreement will be construed simply according to its fair
meaning and not strictly for or against any Member. Whenever the
context requires, the gender of all words used in this Agreement shall include
the masculine, feminine and neuter. Unless otherwise specified, all
references to Articles and Sections refer to articles and sections of this
Agreement, and all references to Exhibits are to Exhibits attached hereto, each
of which is made a part hereof for all purposes. The captions
contained herein are solely for the convenience of the parties and shall not
constitute a part of the substance, intent or terms of this Agreement, nor shall
such captions be considered in the construction of this Agreement.
-30-
13.16 Application
of California Law. This Agreement, and the application or
interpretation thereof, shall be governed exclusively by its terms and by the
laws of the State of California. Venue for all purposes shall be
deemed to lie within Orange County, California.
13.17
Jurisdiction. The
parties agree that, irrespective of any wording that might be construed to be in
conflict with this paragraph, this Agreement is one for performance in
California. The parties to this Agreement agree that they waive any
objection, constitutional, statutory or otherwise, to a California court’s
taking jurisdiction of any dispute between them. By entering into
this Agreement, the parties, and each of them understand that they might be
called upon to answer a claim asserted in a California court.
MEMBERS’
AND MANAGERS’ SIGNATURES ON THE FOLLOWING PAGE(S)
-31-
IN WITNESS WHEREOF, the
Members and Managers have executed and delivered this Agreement as of the
Execution Date.
|
MANAGERS
|
|
|
Xxxx
X. Xxxxxxxx
|
|
|
Xxxx
X. Xxxxxxx
|
|
|
Van
X. Xxxxxxx
|
|
|
Xxxxxx
X. Xxxxx
|
|
|
Xxxx
Xxx X. Xxxxxx
|
|
|
Xxxxxxx
X. Xxxxxxx
|
|
|
Xxxxxxx
X. Xxxxxxxxx
|
|
|
Xxxxx
X. Xxxxxxxxxxx
|
|
|
Xxxxxxxx
X. Xxxxxxx
|
|
|
R.
Xxxxxxx Xxx
|
-32-
Additional
Signature Page(s) for the Operating Agreement of MINISTRY PARTNERS INVESTMENT
COMPANY, LLC
|
CLASS
A MEMBERS:
|
|
-33-
Additional
Signature Page(s) for the Operating Agreement of MINISTRY PARTNERS INVESTMENT
COMPANY, LLC
|
SERIES
A UNIT MEMBERS:
|
|
-34-
EXHIBIT
“A”
MEMBERS
|
NUMBER OF
UNITS
BEFORE
CONVERSION
|
NUMBER OF UNITS AFTER
CONVERSION
|
||||
|
MEMBER:
|
Common
|
Preferred
I
|
Preferred
II
|
Class A*
|
Series
A**
|
|
Credit
Union of Southern California
|
11,900
|
11,900
|
11,900
|
11,900
|
|
|
Evangelical
Christian Credit Union
|
62,000
|
11,578
|
19,000
|
62,000
|
30,578
|
|
Financial
Partners Credit Union
|
12,000
|
12,000
|
12,000
|
12,000
|
|
|
Keypoint
Credit Union
|
8,000
|
8,000
|
8,000
|
8,000
|
|
|
Xxxx
Xxxx Xxxxxx
|
-
|
1,400
|
-
|
1,400
|
|
|
Patelco
Credit Union
|
3,969
|
3,969
|
3,969
|
3,969
|
|
|
Premier
America Credit Union
|
5,000
|
5,000
|
5,000
|
5,000
|
|
|
SAFE
Credit Union
|
3,969
|
3,969
|
3,969
|
3,969
|
|
|
San
Francisco Fire Credit Union
|
3,969
|
3,969
|
3,969
|
3,969
|
|
|
Telesis
Community Credit Union
|
-
|
2,000
|
-
|
2,000
|
|
|
USA
Federal Credit Union
|
11,905
|
11,905
|
11,905
|
11,905
|
|
|
Wescom
Credit Union
|
11,905
|
11,905
|
11,905
|
11,905
|
|
|
Wescorp
Credit Union
|
-
|
500
|
-
|
500
|
|
|
Western
Federal Credit Union
|
11,905
|
11,905
|
11,905
|
11,905
|
|
|
|
|
||||
|
TOTAL
|
146,522
|
100,000
|
19,000
|
146,522
|
119,000
|
*Common
Units
**Series
A Preferred Units
-35-
EXHIBIT
“B”
DEFINITIONS
“Act”
means the Xxxxxxx Xxxxxx Limited Liability Company Act, as amended from time to
time.
“Adjusted
Capital Account Deficit” means the term defined in item 1(i) of Exhibit D
hereto.
“Adjusted
Capital Contribution” means the term defined in item 5(a) of Exhibit D
hereto.
“Agreement”
means this Operating Agreement.
“Capital
Account” means that term as defined in Section 1701(d) of the
Act.
“Capital
Contribution” means the term defined in Section 5.1 hereof.
“Capital
Event” means a sale or disposition of any of the Company’s assets, the
receipt of insurance and other proceeds on account of an involuntary conversion
of Company property, the receipt of proceeds from a refinancing of Company
property, or a similar event with respect to Company property or
assets.
“Certificate”
means the term defined in Section 2.10 hereof.
“Class A
Members” means the term defined in Section 2.1 hereof.
“Class A
Units” means the term defined in Section 2.1 hereof.
“Class B
Members” means the term defined in Section 2.1 hereof.
“Class B
Units” means the term defined in Section 2.1 hereof.
“Code”
means the term defined in Section 5.4 hereof.
“Common
Units” means the term defined in Section 2.1 hereof.
“Company”
means Ministry Partners Investment Company, LLC.
“Economic
Interest” means the term defined in Section 17001 of the
Act.
“Electronic
transmission” means that term as defined in Section 17001(o) of the
Act.
“Fair
Market Value” means the term defined in Section 9.6 hereof.
“Manager(s)”
means the following persons: Xxxx X. Xxxxxxxx; Xxxx X. Xxxxxxx;
Van X. Xxxxxxx; Xxxxxx X. Xxxxx; Xxxx Xxxx X. Xxxxxx; Xxxxxxx X. Xxxxxxxxx;
Xxxxxxx X. Xxxxxxx; Xxxxx X. Xxxxxxxxxxx; Xxxxxxxx X. Xxxxxxx; and R. Xxxxxxx
Xxx. The term also includes any persons that are later appointed or
elected to serve as a Manager.
“Member(s)”
means the person(s) owning a Membership Interest, as designated in Exhibit A
hereto.
-36-
“Membership
Interests” means the term defined in Section 2.1 hereof.
“Net Cash
Flow” means the term defined in Section 6.3 hereof.
“Net
Liquidation Proceeds” means the term defined in Section 12.5
hereof.
“Offer
Notice” means the term defined in Section 9.4.1 hereof.
“Offer
Period” means the term defined in Section 9.4.2 hereof.
“Offeror”
means the term defined in Section 9.4.1 hereof.
“Permitted
Transfer” means the term defined in Section 9.2 hereof.
“Preemptive
Right” means the term defined in Section 3.5 hereof.
“Preferred
Units” means the term defined in Section 2.1 hereof.
“Series A
Certificate” means the certificate attached hereto as Exhibit C that
provides for a series of Preferred Units.
“Series A
Units” means the term defined in Section 2.2 hereof.
“Tax
Matters Partner” means the term defined in Section 7.5
hereof.
“Transfer”
means the term defined in Section 9.1 hereof.
“Treasury
Regulations” means the Income Tax Regulations promulgated under the
Internal Revenue Code, as such regulations may be amended from time to
time.
“Triggering
Event” means the term defined in Section 9.5 hereof.
“Unit”
means the term defined in Section 2.1 hereof.
-37-
EXHIBIT
“C”
SERIES A PREFERRED UNITS
CERTIFICATE
[INTENTIONALLY
OMITTED]
-38-
EXHIBIT
“D”
SPECIAL TAX
RULES
[INTENTIONALLY
OMITTED]
-39-
