CLASS A-1 NOTE
SUBORDINATION AGREEMENT
THIS AGREEMENT is dated on and as of the date last shown below
between EVANGELICAL CHRISTIAN CREDIT UNION (the "Lender") and MINISTRY
PARTNERS INVESTMENT CORPORATION (the "Company").
Section I. SUBORDINATION OF CREDIT LINE
The Lender hereby agrees to subordinate to the payment of the
Company's Class A Notes and Class A-1 Notes, as set forth herein, the
repayment of loans by Lender under that certain Business Loan Agreement
dated, June 1, 1994, as it has or may be extended, renewed or modified and
any other loans as the Lender may from the date hereof, continue, or in the
future make, to the Company (together herein referred to as the "Credit
Line"). Pursuant to the Credit Line, and subject to the terms and
conditions set forth therein, the Company shall repay to the Lender any
amounts loaned under the Credit Line, including interest and such other
charges provided for therein (the "Advances") on such dates as therein set
forth or on such other times as the Company may choose and the Lender may
accept (any of which dates shall be referred to as a "Payment Date"). The
Lender and the Company hereby irrevocably agree that up to an aggregate of
$2,100,000 of any Advances by the Lender to the Company under the Credit
Line shall be subject to this Agreement.
Any Advance by the Lender to the Company under the Credit Line shall
be used and dealt with by the Company as part of its capital and shall be
subject to the risks of its business. The Company shall have the right to
deposit any cash proceeds of any Advance in an account or accounts in its
own name in any financial institution, including the Lender.
The obligations of the Company under the Credit Line with respect to
the repayment to the Lender of, and with respect to, any payment in
connection therewith (a "Payment") shall, as provided herein, be and is
subordinate in right of payment and subject to the prior payment or
provision for payment in full of all claims of all other present and future
holders of the Company's Class A-1 Notes , as such class may be authorized
from time to time by the Board of Directors of the Company, arising out of
any occurrence prior to the date on which a Payment is, or is to be, made.
For the purposes of this Agreement, however, Class A-1 Notes shall not
include any such notes then held by the Lender, or the officers or
directors of the Lender or of the Company.
Section II. PERMISSIVE PREPAYMENTS
The Company may make a Payment of its obligation under the Credit
Line only after the first (1st) day and before the sixteenth (16th) day of
a calendar month and only if after giving effect thereto (and to all
payments under any other subordination agreements then outstanding, the
maturity or accelerated maturity of which are scheduled to fall due within
30 days after the date such Payment is to occur), without reference to any
projected profit or loss of the Company, the Tangible Net Worth of the
Company would not be less than two million, one hundred thousand dollars
($2,100,000) or sixteen and sixty-seven one-hundredths percent (16.67%) of
the Company's Tangible Net Worth, whichever is less, as shown on the
balance sheet of the Company prepared by the Company in its customary
manner on a consistent basis according to the generally accepted accounting
principles applied by the Company's independent auditors in connection with
the preparation of the Company's year-end audited financial statements,
dated as of the last day of the month immediately preceding the month in
which the Payment is sought to be made. For the purposes of this
Agreement, "Tangible Net Worth" shall mean the greater amount thereof
within the meaning set forth in the Loan and Standby Trust Agreement
relating to the Class A Notes or the Class A-1 Notes (the "Loan
Agreement").
Section III. SUSPENDED PAYMENTS
In the event the foregoing conditions in Section II cannot be
satisfied, the Payment shall be suspended. The Company agrees that if its
obligation to make a Payment is Suspended in whole or in part for a period
of two years, the Company will, unless otherwise directed in writing by the
Lender, thereupon commence a rapid and orderly complete liquidation of its
business. The date on which the liquidation commences shall be the
maturity date for the balance owed on the Credit Line.
Section IV. LENDER'S RIGHT TO ACCELERATE THE MATURITY OF THE PAYMENT
OBLIGATION (OPTIONAL)
By written notice to the Company at its principal office, the Lender
may accelerate maturity of the balance owed under the Credit Line in
accordance with the terms thereof. However, the right of the Lender to
receive payment together with accrued interest or compensation shall remain
subordinate as required by the provisions hereof.
In the event of the appointment of a receiver or trustee of the
Company or in the event of its insolvency, liquidation pursuant to
bankruptcy, assignment for the benefit of creditors, reorganization whether
or not pursuant to bankruptcy laws, or any other marshaling of the assets
and liabilities of the Company, all amounts owed under the Credit Line
shall mature, and the holder thereof shall not be entitled to participate
or share, ratably or otherwise, in the distribution of the assets of the
Company until all claims of all holders of the Class A Notes and the Class
A-1 Notes, whose claims are senior hereto, have been fully satisfied.
Section V. ACCELERATED MATURITY UPON THE OCCURRENCE OF AN EVENT OF DEFAULT
If the liquidation of the business of the Company has not already
commenced, the amounts owed under the Credit Line shall mature, together
with accrued interest or compensation upon the occurrence of an Event of
Default, as hereinafter defined. Further, if liquidation of the business
of the Company has not already commenced, the rapid and orderly liquidation
of the business of the Company shall then commence upon the happening of an
Event of Default, and the date of said Event of Default shall be the date
on which such obligations of the Company with respect to all other
subordination agreements then outstanding shall mature. Events of Default
which may be included shall be limited to:
(a) Default on more than 35% of the outstanding principal balance
of the Class A Notes or the Class A-1 Notes for a continuous period of
fifteen (15) days or more; or
(b) Receivership, insolvency, liquidation pursuant to bankruptcy,
assignment for the benefit of creditors reorganization whether or not
pursuant to bankruptcy laws, or any other marshaling of the assets and
liabilities of the Company.
Section VI. MISCELLANEOUS
This Agreement shall not be subject to cancellation by either the
Lender or the Company, nor may this Agreement be terminated, rescinded or
modified by mutual consent or otherwise except as may be required of Lender
in order to continue its activities as a credit union in good standing
under federal and applicable state laws or as may be approved by a Majority
Vote of the Holders of the Class A-1 Notes.
The provisions of this Agreement shall be binding upon the Lender,
its administrators, successors and assigns. This instrument embodies the
entire agreement between the Company and Lender and no other evidence of
such agreement has been or will be executed. This Agreement shall be
deemed to have been made under, and shall be governed by, the laws of the
State of California in all respects.
IN WITNESS WHEREOF, the parties have executed this Agreement on this
19th day of November, 1997.
"LENDER"
EVANGELICAL CHRISTIAN CREDIT UNION
By: /s/ Xxxx X. Xxxxxxxx
Xxxx X. Xxxxxxxx,
President/CEO
"COMPANY"
MINISTRY PARTNERS INVESTMENT CORPORATION
By: /s/ Xxxx X. Xxxxx
Xxxx X. Xxxxx,
President
