EXHIBIT 4.1
CLASS ALPHA 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 Alpha Notes, as set forth herein, the repayment of loans
by Lender under that certain Business Loan Agreement dated, May 14, 2001, 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 Alpha 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 Alpha 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 Alpha 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 Alpha 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 Alpha 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 Alpha 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 set their hands and seal this 14th day
of May, 2001.
"LENDER"
EVANGELICAL CHRISTIAN CREDIT UNION
By: ____________________________________
"COMPANY"
MINISTRY PARTNERS INVESTMENT CORPORATION
By: ____________________________________
