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Exhibit 10.35
LIMITED LIABILITY COMPANY
AGREEMENT
OF
HDMF-I LLC
Dated as of July 11, 2001
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LIMITED LIABILITY COMPANY AGREEMENT dated as of July 11, 2001 (as amended,
modified or supplemented from time to time, the "Agreement") by and among the
members listed on Schedule A hereto (the "Members"). Certain capitalized terms
used herein shall have the meanings ascribed to such terms in Schedule I hereto.
RECITALS
A. Each of the Members desires to form the Company (as defined herein) for
the purpose of acquiring in one or more transactions certain pools (the "Pools")
of primarily sub-performing and non-performing one-to-four family residential
mortgage loans (collectively, the "Assets"). The Company will manage the Assets
and manage any property acquired in respect of the Assets or otherwise acquired
by the Company with the objective of ultimately re-selling or otherwise
disposing of the Assets in a manner that maximizes the economic return to the
Members and will engage in any activities necessary, convenient or incidental to
the foregoing.
B. Each of the Members desires to provide that Hanover Capital Mortgage
Holdings, Inc. (the "Manager") will manage the business and affairs of the
Company.
C. The Company intends to enter into an asset management agreement (the
"Asset Management Agreement") with Hanover Capital Partners Ltd., as asset
manager (the "Asset Manager"), in substantially the form annexed hereto as
Exhibit B. Pursuant to the Asset Management Agreement, the Company will
authorize the Asset Manager to exercise substantial authority and responsibility
to oversee the management and assist in the sale of the Assets.
D. The Company intends to enter into a non-exclusive special servicing
agreement (the "Servicing Agreement" and, together with each other agreement
entered into by the Company from time to time relating to the servicing of one
or more Pools, the "Servicing Agreements") with The Provident Bank. Pursuant to
the Servicing Agreements, the Company will authorize a Servicer to exercise
substantial authority and responsibility to service the Assets of one or more
Pools. Each of the Members desires to confirm, as among themselves, the power of
the Manager (acting at the direction of the Required Members) to select and
replace the Servicers under the Servicing Agreements.
E. Each of the parties also desires to provide for certain limitations on
the sale, assignment, transfer, gift, pledge, hypothecation or encumbrance of
interests in the Company, or the permission or sufferance of the attachment of a
security interest in such interests (collectively, a "Transfer," with the term
"Transfer" used as a verb having a correlative meaning).
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AGREEMENT
Each of the Members agrees as follows:
ARTICLE I
GENERAL
1.1 FORMATION OF LIMITED LIABILITY COMPANY. The Members hereby agree
to form this limited liability company (this "Company") under and pursuant to
the Delaware Limited Liability Company Act, 6 DEL. ▇.▇▇.▇▇. 18-101, ET SEQ., as
amended from time to time, and any successor to that act (the "Delaware Act").
Upon their execution of this Agreement, each of the Members is hereby admitted
to the Company as a member of the Company.
1.2 NAME. The name of the Company is HDMF-I LLC.
1.3 PURPOSE. (a) Subject to Section 1.3(d) below, the Company is
organized for the principal objects and purposes of (i) purchasing, holding,
owning, financing, servicing and disposing of the Assets and the related
collateral for the Assets, (ii) selecting and monitoring the performance of the
Asset Manager under the Asset Management Agreement, (iii) selecting and
monitoring the performance of the Servicers under the Servicing Agreements and
(iv) engaging in any activities necessary, convenient or incidental to the
foregoing.
(b) Subject to Section 1.3(d) below, the Company may, and the
foregoing shall not limit the Company's authority and power to:
(i) organize one or more corporations, limited partnerships,
memberships, limited liability companies, business trusts or other entities
or arrangements for the purpose of purchasing, owning, financing, managing,
operating, disposing of or otherwise dealing with any of the assets,
liabilities, business and affairs of the Company;
(ii) borrow money for Company purposes, with or without recourse to
the Company (which borrowings may be made from one or more Members, their
respective Affiliates or from institutional or other third-party lenders),
but in no event with recourse to any Member, and pledge, mortgage or
encumber the interest of the Company in any or all of the Assets and the
other assets of the Company to one or more lenders as security for such
borrowings; and
(iii) enter into, execute, deliver and perform all obligations,
agreements and other instruments and do all other acts and things necessary
or incidental to or desirable for the accomplishment of the foregoing or
otherwise contemplated in this Agreement.
(c) Notwithstanding anything in this Agreement to the contrary, but
subject to Section 1.3(d) and Article II below, the execution and delivery by
the Company of, and the exercise by the Company of its rights and powers and the
performance by the Company of its obliga-
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tions under the following agreements, documents and instruments, and any
assumptions, amendments or amendment and restatements thereof, are hereby
expressly authorized, approved, ratified and confirmed in all respects and do
not and will be deemed not to conflict with, contravene, violate or constitute a
breach of or a default under any provision of or any duty under this Agreement:
(i) the Asset Management Agreement;
(ii) the Servicing Agreements;
(iii) all such agreements, documents and instruments as may be
required in connection with the acquisition, holding, owning, financing,
servicing and disposition of the Assets;
(iv) all such agreements, documents and instruments as may be executed
in accordance with the terms of this Agreement and required in connection
with the secured or unsecured financing and refinancing of the Company's
acquisition, holding, owning, servicing and disposition of the Assets
(collectively, the "Loan Pool Documentation"); and
(v) such other agreements, documents and instruments relating thereto
or contemplated thereby that, in accordance with the terms of this
Agreement, the Company may execute, enter into or agree to be bound by, or
by which it may cause any of its assets or property to be bound.
(d) Notwithstanding anything to the contrary contained in this
Agreement, including, without limitation, Section 1.3(a)-(c) and Section 2.1
hereof, or the Asset Management Agreement, the Company, and the Manager, the
Members, and any employee or agent of the Company or of the Manager or any
Member, shall not engage in any activity (i) that would result in a violation of
federal or state banking law, including, without limitation, laws applicable to
FDIC insured depository institutions and the rules, regulations and
interpretations of the FDIC, with respect to any Member, or (ii) without
obtaining any Governmental Authorization of or from any applicable Governmental
Body that is required pursuant to any Legal Requirement for the conduct of such
activity.
1.4 TERM. The term of the Company shall commence on the date that the
Certificate of Formation of the Company shall be filed with the Secretary of
State of the State of Delaware and shall continue until dissolved as provided in
Article VIII.
1.5 PLACE OF BUSINESS. The principal place of business of the Company
is ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or such other place or
places as may be determined from time to time by the Manager upon notice to the
Members. The Company may also maintain additional offices in such other places
as may be determined from time to time by the Manager.
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1.6 REGISTERED OFFICE AND REGISTERED AGENT. The registered office of
the Company in the State of Delaware is c/o The Corporation Trust Company,
Corporation Trust Center, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The registered agent for service of process on the Company in
the State of Delaware at that address is The Corporation Trust Company.
1.7 QUALIFICATION. The Manager shall cause the Company to continue to
be qualified and existing as a limited liability company under the Delaware Act
and shall cause it to be qualified and registered as such in other jurisdictions
if the Manager shall determine that it is appropriate for the Company to be so
qualified or to be so registered.
ARTICLE II
DUTIES, POWERS AND LIABILITY OF
MANAGER AND MEMBERS; CONFLICTS
OF INTEREST; INDEMNIFICATION
2.1 POWERS OF MANAGER. (a) Except as otherwise specifically set forth
in this Agreement, including, without limitation, Section 1.3(d) and Section 2.8
hereof, the Manager shall have full and complete charge of all affairs of the
Company, and management and control of the operations of the Company shall be
vested exclusively in the Manager, which shall have the power, on behalf of and
in the name of the Company, to carry out any and all of the purposes of the
Company and to perform all acts and enter into and perform all contracts and
other undertakings which the Manager may deem necessary or advisable in
furtherance thereof or incidental thereto. Without limiting the foregoing, the
Company shall be empowered, and the Manager is hereby authorized and empowered
on behalf of the Company, without obtaining the prior consent of any Member
except as specifically required under any other provision of this Agreement
(including, without limitation, Section 2.8 hereof), to:
(i) execute and deliver on behalf of the Company such proposals, bids,
agreements in principle, definitive agreements and other documents of any
character, and amendments to any of the foregoing, and to take such other
actions, in each case as it deems appropriate with respect to the purchase
of Pools of Assets and in accordance with Sections 2.8 and 4.2(b) hereof;
(ii) execute and deliver on behalf of the Company such agreements,
instruments, and other documents of any character, and to take such other
actions, in each case as it deems appropriate with respect to the sale or
other disposition of the assets of the Company, including, but not limited
to, the assignment, transfer or other disposition of any Pool of Assets;
(iii) execute and deliver on behalf of the Company obligations,
agreements, instruments and other documents of any character relating to
the business and affairs of the Company, including, without limitation,
certificates and other documents in connection with the registration and
qualification of the Company in any jurisdiction,
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certificates and other documents in connection with the organization,
registration and qualification in any jurisdiction of any corporation or
other entity formed for the purpose of purchasing, owning, financing,
managing, operating, disposing of or otherwise dealing with any of the
assets, liabilities and operations of the Company, mortgages, notes, deeds,
trust indentures and assignments and powers of attorney, consents, waivers
and other documents of any character and pleadings in connection with any
proceedings before any court, administrative board or agency of any
governmental authority affecting the Company or any of its assets, in each
case on such terms as the Manager shall approve;
(iv) execute and deliver on behalf of the Company the Asset Management
Agreement and one or more Servicing Agreements;
(v) invest and reinvest funds of the Company in certificates of
deposit, commercial paper and other instruments evidencing short-term
indebtedness, pending the application thereof in accordance with this
Agreement;
(vi) execute and deliver on behalf of the Company and act on behalf of
the Company in connection with all matters relating to the financing or
refinancing of the Company's acquisition of any Pool and the exercise of
the Company's rights and the performance of the Company's obligations under
any Loan Pool Documentation;
(vii) open, maintain and close bank accounts and to sign checks, such
approval to be conclusively, but not exclusively, evidenced by the
execution and delivery of any related agreements, instruments or other
documents by the Manager;
(viii) vote, give assent and otherwise to exercise all rights, powers,
privileges and other incidents of ownership or possession with respect to
the Assets or other assets of the Company, and to execute and deliver
powers of attorney or proxies to such persons as the Manager shall deem
proper, granting to such persons such power and discretion with relation to
the Assets or other assets as the Manager shall deem proper;
(ix) subject to the terms of Section 5.6, institute, prosecute,
defend, settle, compromise or otherwise adjust all claims and litigation
arising out of the conduct of the affairs of the Company or in the
enforcement of obligations due the Company, including all rights of appeal;
(x) employ or consult with such agents or independent contractors as
the Manager may deem necessary or advisable, including, without limitation,
brokers, auditors, counsel, consultants or managers or specialists in any
field of endeavor whatsoever, including such persons, firms or companies as
may be Members or Affiliates of any Member;
(xi) determine and pay or cause to be paid out of the capital or
income of the Company, as the Manager sees fit, all expenses, fees,
charges, taxes and liabilities incurred or arising in connection with the
conduct of the affairs of the Company, including, but not limited to,
expenses and charges for the services of consultants, auditors,
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counsel, custodians, and such other agents or independent contractors and
such other expenses and charges as the Manager may deem necessary or proper
to incur, and in general to make all accounting, tax and financial
determinations and decisions;
(xii) make allocations and distributions to the Members pursuant to
the terms of this Agreement;
(xiii) borrow money and to make, issue, accept, endorse and execute
promissory notes, drafts, bills of exchange and other instruments and
evidences of indebtedness, and to secure the payment thereof by mortgage,
pledge or assignment of, or security interest in, all or any part of the
Assets and other property then owned or thereafter acquired by the Company;
(xiv) enter, make and perform such other contracts, agreements and
other undertakings as may be necessary or advisable or incidental to the
carrying out of any of the foregoing powers, objects or purposes; and
(xv) execute all other instruments of any kind or character and take
all action of any kind or character that the Manager may in its sole
discretion determine to be necessary or appropriate in connection with the
business of the Company.
For the purposes of this Agreement, an "Affiliate" of a person means any other
person that directly or indirectly controls, is controlled by or is under common
control with, such person or any of its subsidiaries. Control (including with
correlative meanings the terms "controlling", "controlled by" and "under common
control with") means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a person, whether
through the ownership of voting securities, by contract or otherwise.
(b) To the extent permitted by law, the Manager may delegate to any
person (including, without limitation, the Asset Manager) the power to act in
the name and on behalf of the Manager in connection with any particular matter
affecting the Company, other than the Manager's right to approve or disapprove
Transfers and substitutions of Members in accordance with the terms of Article
VII. No delegation of any power pursuant to this Section 2.1(b) shall be deemed
to relieve the Manager from any of its duties and obligations to the Company.
(c) Persons dealing with the Company may rely conclusively upon the
authority of the Manager under the Delaware Act and as set forth in this
Agreement.
2.2 POWERS OF MEMBERS. Except as specifically set forth in this
Agreement, none of the Members in their capacities as such shall have the
obligation or the right, power or authority to participate in the management,
operation or control of the business and affairs of the Company, to transact any
business on account thereof, to bind the Company in any way or to sign any
obligation, agreement, instrument or any other document for or on behalf of the
Company; PROVIDED, HOWEVER, that a Member, an Affiliate of a Member or a
principal, member, partner, stockholder, officer, director, agent,
representative or employee of a Member or such Affiliate may also be an
employee, agent, representative, stockholder, director or officer of, or
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may contract to render services to, one or both of the Company and the Manager
so long as any such arrangement is on terms no less favorable to the Company
than would prevail in a comparable arm's length arrangement with a third party.
2.3 LIMITATION ON MANAGER'S LIABILITY. None of the Manager, its
Affiliates or their respective principals, members, partners, stockholders,
officers, directors, agents representatives, and employees (each, an "Exonerated
Person") shall be liable or accountable to the Company or any Member under any
circumstances, whether for the return of the capital contributions of a Member
or otherwise, except for losses suffered by a Member as a result of the bad
faith, fraud, gross negligence or willful misconduct of such Exonerated Person.
Without limiting the generality of the foregoing, no Exonerated Person shall be
liable or accountable to the Company or a Member for anything done, suffered or
omitted in good faith by him or it in accordance with the advice or opinion of
any legal counsel or accountant retained by the Company (which may be a legal
counsel or accountant for the Manager, its principals, partners or stockholders
or their respective Affiliates). In the absence of bad faith, fraud, gross
negligence or willful misconduct by an Exonerated Person, such Exonerated Person
shall not be liable to the Company or any Member for any act or omission of any
independent contractor, employee or agent retained, engaged or employed by the
Manager, on behalf of the Manager or the Company, if the Manager exercised
reasonable care in the selection of the independent contractor, employee or
agent.
2.4 LIMITATION ON MEMBER'S LIABILITY. Except as otherwise expressly
provided by law, a Member, including the Manager, in its capacity as a Member,
shall have no liability in excess of the amounts contributed by it to the
Company under Article IV of this Agreement, its share of any assets and
undistributed profits of the Company and its obligation to make other payments
provided for in this Agreement (subject to the obligation, if any, of a Member,
including the Manager, to repay funds wrongfully distributed to it).
2.5 COMPENSATION OF MANAGER. Except for distributions made pursuant to
Sections 5.7 or 8.3(d)(iii), the Manager shall not be entitled to any
compensation, directly or indirectly, from the Company for its services
hereunder in connection with the management of the business and affairs of the
Company. Hanover Capital Partners Ltd. will be entitled to receive the Asset
Management Fee (as defined in the Asset Management Agreement) as compensation
for its services as Asset Manager under the Asset Management Agreement.
2.6 CONFLICTS OF INTEREST. (a) A Member and its Affiliates and their
respective principals, members, partners, stockholders, officers, directors,
agents, representatives and employees and all other persons directly or
indirectly related to the Member or its Affiliates may engage for their own
account in, or possess an interest in, other activities, ventures or memberships
similar or dissimilar to the business of the Company (including, without
limitation, those that compete with the Company or its business), and neither
the Company nor any other Member shall have any right in or to such activities,
ventures or memberships or the income or profits derived therefrom and the
pursuit of any such activities, ventures or memberships shall not be deemed to
be improper; PROVIDED, HOWEVER, that until such time as the Company shall have
drawn down the Maximum Capital Contributions, the Manager agrees to direct to
the Company all investment opportunities available to it and/or of which it
becomes aware, in each
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case relating to sub-performing or non-performing one-to-four family residential
mortgage loans. Subject to Section 2.6(b), a Member or any Affiliate of a Member
may lend money to and transact other business with the Company and, to the
fullest extent permitted by law, shall have the same rights and obligations with
respect thereto as a person or entity who is not a Member or an Affiliate of a
Member.
(b) Except with respect to the Asset Management Agreement, for which
provision is made in Section 3.1, and the Servicing Agreements, for which
provision is made in Section 3.2, any transaction between the Company, on the
one part, and any Member and its Affiliates, on the other part, shall be on such
terms and conditions as are, on the whole, not less favorable or advantageous to
the Company than those available to the Company from reputable, experienced and
unrelated persons.
2.7 INDEMNIFICATION OF MANAGER. To the fullest extent permitted by
law, the Company shall indemnify the Manager, its Affiliates and the principals,
members, directors, officers, partners, stockholders, agents, representatives
and employees of the Manager and its Affiliates, and the independent contractors
and agents retained, engaged or employed by the Manager who have acted or are
acting on behalf of the Company against, and hold each of them harmless from,
any and all damages, losses, liabilities, fines, penalties, amounts paid in
settlement, costs and expenses (including attorneys' fees and expenses) actually
and reasonably incurred by the indemnified person in connection with any
threatened, pending or completed demand, claim, action, suit or proceeding,
whether civil, criminal, administrative or investigative, which is or was
brought or threatened against any indemnified person by reason of or in
connection with actions taken or omitted to be taken by any indemnified person
on behalf of the Company in the absence of bad faith, fraud, gross negligence or
willful misconduct. Notwithstanding the foregoing, nothing in this Section 2.7
shall be construed to confer upon the Asset Manager or the Servicers or any
other person any rights to indemnification by the Company pursuant to the Asset
Management Agreement or the Servicing Agreement, respectively, that are not
expressly provided thereby. Any indemnity under this Section 2.7 shall be
provided out of and to the extent of Company assets only, and no Member shall
have any personal liability with respect to the payment of such indemnification
obligation.
2.8 LIMITS ON MANAGER'S POWERS. Anything in this Agreement to the
contrary notwithstanding, the Manager shall not, without the written consent of
all the Members, cause or permit the Company to:
(a) do any act which would make it impossible to carry on the ordinary
business of the Company;
(b) make any loans to the Manager or its Affiliates;
(c) perform any act that would subject any Member to liability for the
obligations of the Company in any jurisdiction;
(d) do business in any jurisdiction which does not recognize the
limited liability status of members of a limited liability company;
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(e) perform any act that would cause the Company to be taxable as a
corporation for federal income tax purposes;
(f) bid on any pool originated by any lender identified by the Manager
in a Bid Summary Sheet as having, or otherwise believed by the Manager or
any Member to have, engaged in predatory lending practices;
(g) distribute any assets of the Company (other than cash) to the
Members in-kind unless such assets are Freely Tradable securities or such
distribution is made in connection with a liquidation and dissolution of
the Company pursuant to Article VIII hereof;
(h) make any bid to purchase or otherwise acquire any Pool or other
asset; or
(i) make any bid for, or purchase, any assets that are not
sub-performing or non-performing residential mortgage loans.
ARTICLE III
ASSET MANAGEMENT AND SERVICING
3.1 ASSET MANAGEMENT AGREEMENT. The Company hereby selects Hanover
Capital Partners Ltd. as the Asset Manager pursuant to, and in accordance with,
the terms and conditions of the Asset Management Agreement. The Members hereby
approve such selection. The Manager, on behalf of the Company, shall have the
right to direct the Asset Manager in connection with the performance of its
duties under the Asset Management Agreement. If any "Event of Default" under and
as defined in Section 5.1(a) of the Asset Management shall occur, the Manager
shall promptly notify each Member and take such actions with respect thereto
(including, but not limited to, removing and replacing the Asset Manager) as
directed by the Required Members.
3.2 SERVICING AGREEMENTS. Initially, the Manager intends to select The
Provident Bank to act as the Servicer for one or more Pools. The Manager may
select other Servicers for one or more Pools with the consent of the Required
Members. The Manager, on behalf of the Company, shall have the right to
terminate the engagement of any Servicer as Servicer under the applicable
Servicing Agreement and appoint a successor Servicer thereunder (or to terminate
the Servicing Agreement and cause the Company to enter into a successor
servicing agreement with a successor servicer), and in each case shall take such
actions from time to time as directed by the Required Members.
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ARTICLE IV
CAPITAL CONTRIBUTIONS; INCOME NOTES;
CAPITAL ACCOUNTS
4.1 MEMBERSHIP INTERESTS. A Member's "Membership Interest" shall mean
the entire ownership interest of such Member in the Company, including its
limited liability company interest in the Company and any and all rights, powers
and benefits accorded to a Member under this Agreement and the duties and
obligations of such Member hereunder. A Member's Membership Interest shall
entitle such Member to a Sharing Percentage with respect to the income and
losses in respect of each Pool. A Member's Sharing Percentage with respect to
any Pool shall mean, at any time, the ratio (expressed as a percentage) of (1)
such Member's Capital Contributions allocable to such Pool at such date to (2)
the total Capital Contributions of all Members allocable to such Pool at such
date.
4.2 CAPITAL CONTRIBUTIONS. (a) Simultaneously with the execution of
this Agreement, each Member will make an initial Capital Contribution to the
Company of cash in the amount set forth under "Initial Capital Contribution"
opposite such Member's name in Exhibit A hereto.
(b) The Manager will notify each Member within two (2) business days
following the date on which it becomes aware of any prospective Pool available
for bid. At least three (3) business days prior to the date of any bid by the
Company in respect of a Pool, the Manager shall deliver to each Member a bid
summary sheet ("Bid Summary Sheet"), which sets forth the reasoning,
methodology, calculations and due diligence findings (which findings shall
include a determination of (i) whether the acquisition of such prospective Pool
would require the Company to obtain any Governmental Authorization of or from
any applicable Governmental Body that is required pursuant to any Legal
Requirement, and, (ii) if determined to be applicable by any Member in its sole
discretion, whether the seller of such prospective Pool has failed to obtain any
Governmental Authorization of or from any applicable Governmental Body that is
required pursuant to any Legal Requirement, or is or at any time was otherwise
in violation of any applicable Legal Requirement, that in either case would
result in potential liability or loss for the purchaser of such Pool) of the
Asset Manager and the Manager in respect of such bid and, if applicable, shall
include a notification to the Member if the Manager has knowledge, or otherwise
believes, that the originator of any assets in such Pool has engaged in
predatory lending practices. Each Member shall have the right, but not the duty
to inspect, inquire, comment on and participate in such bid analysis. Each
Member shall have the right to elect to participate or not to participate in any
Pool proposed to be acquired by the Company in such Member's sole discretion.
Each Member shall be required to notify the Manager of its election to
participate or not participate in any Pool not later than 3:00 p.m. (New York
time) on the business day proceeding the bid deadline date for such Pool. In
connection with and not later than the date of each closing of the Company's
acquisition of a Pool, the Members that have elected to participate in such Pool
shall make additional Capital Contributions to fund such purchase and any costs
and expenses relating to such purchase by acquiring from the Company income
notes, which shall be in the form of Exhibit C hereto (the "Income Notes"). The
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aggregate purchase price payable by the Members for the Income Notes relating to
any Pool will be equal to the purchase price payable by the Company for such
Pool, together with any costs and expenses of the Company relating to such Pool,
less the amount of any third party financing arranged by the Manager in respect
of the acquisition of such Pool. Such aggregate Income Note purchase price shall
be paid in cash by the Members that have elected to participate in such Pool PRO
RATA based upon (a) if all of the Members have elected to participate in such
Pool, their respective Percentage Interests (which are set forth on Exhibit A
hereto) or (b) if less than all of the Members have elected to participate in
such Pool, the ratio of (x) the Percentage Interest of each such Member that has
elected to participate in such Pool to (y) the aggregate Percentage Interests of
all such Members who have elected to participate in such Pool. No Member shall
be required to purchase Income Notes relating to, or otherwise make a Capital
Contribution to fund the purchase price of, any Pool as to which such Member has
not elected to participate. No Member shall be required to purchase Income
Notes, or otherwise make a Capital Contribution to fund the purchase price of
any Pool, subsequent to the expiration of the Investment Period.
(c) Subject to the Maximum Capital Contribution limit of each Member,
the Manager may require the Members from time to time to contribute additional
capital to the Company pursuant to this Section 4.2(c) in such aggregate amounts
as in each case the Manager shall determine, for payment of, or reimbursement to
the Manager for, the costs, expenses, liabilities and other obligations referred
to in Section 6.1 (including, but not limited to, payments of principal and
interest under the Loan Pool Documentation). The Members shall make such
additional Capital Contributions in cash in proportion to each such Member's
Percentage Interest; PROVIDED that if any such cost, expense or liability is
allocable to a particular Pool and not to the Company generally, such additional
Capital Contributions shall be made in proportion to each Member's Sharing
Percentage in respect of such Pool.
(d) The Manager may require the Members to make Capital Contributions
pursuant to this Section 4.2 by giving notice to the Members by telephonic,
facsimile or other electronic communication, with written confirmation to follow
promptly thereafter. The notice shall specify (i) the place at which the Capital
Contributions are to be made, (ii) the aggregate amount of the Capital
Contributions to be made by all Members and the amount of the Capital
Contribution to be made by each Member in accordance with Sections 4.2(a), (b)
or (c) above, as applicable, (iii) the time at which the Capital Contributions
are to be made, which time shall not be earlier than 9:00 a.m., New York time,
on the third business day after the initial giving of the notice and (iv) the
use or uses to which the Manager proposes to apply the Capital Contributions.
(e) Except as provided in this Section 4.2, no Member shall have an
obligation to make any Capital Contribution to the Company, including, without
limitation, any obligation to eliminate any deficit in the Member's Capital
Account. No person other than the Manager (including, without limitation, any of
the other Members and the creditors of the Company or the Members) shall have
any right to cause any Member to contribute any capital to the Company pursuant
to this Section 4.2 or otherwise. A Member shall not be required to lend any
funds to the Company.
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(f) As used herein, "Capital Contribution" shall mean, with respect to
any Member, the cash or other property contributed by such Member from time to
time to the capital of the Company, including in any event the purchase price of
any Income Notes acquired by such Member in connection with the acquisition of
any Pool. No Member shall be required to make aggregate Capital Contributions
hereunder in excess of such Member's Maximum Capital Contribution.
(g) It is the intent of the Company, the Manager and each Member that,
for Federal, state and local income tax purposes, the Income Notes will evidence
an equity or ownership interest in the Company and will not evidence
indebtedness of the Company. Each Member, by its execution of this Agreement and
acceptance of an Income Note, agrees to treat such Income Note for purposes of
Federal, state and local income taxes, and any other tax imposed on or measured
by income, as an equity or ownership interest in the Company.
4.3 INTEREST ON CAPITAL. No interest shall be paid on any capital
contributed to the Company.
4.4 RETURN OF CAPITAL CONTRIBUTION. Except as otherwise expressly
provided in this Agreement (including, but not limited to, as provided in
Section 5.7 hereof), no Member shall have the right to demand the return of all
or any part of any Capital Contribution until the Company has been dissolved and
then only to the extent provided in Article VIII hereof, and no Member shall
have the right to demand or receive property other than cash in return for its
Capital Contribution or to have priority over another Member, either as to the
return of Capital Contributions or as to profits, losses or distributions, or as
to compensation by way of income.
4.5 CAPITAL ACCOUNTS. A separate capital account ("Capital Account")
shall be maintained for each Member in accordance with Treasury Regulations
Section 1.704-1(b)(2). Without limiting the foregoing, each Member's Capital
Account shall be credited with the sum of (i) the amount of money and fair
market value of property contributed by such Member to the Company, including
the purchase price of any Income Notes acquired pursuant to Section 4.2(b), but
net of liabilities assumed by the Company or which such property is taken
subject to, (ii) allocations to such Member of its allocable share of Net Income
and (iii) the amount of income or profits, if any, allocated to such Member not
otherwise taken into account in this Section 4.5. Each Member's Capital Account
shall be decreased by the sum of (x) the amount of money distributed to such
Member and the fair market value of property distributed to such Member (net of
liabilities assumed by such Member or which such property is taken subject to),
(y) allocations to such Member of its allocable share of Net Losses and (z) the
amount of expenses or losses, if any, allocated to such Member not otherwise
taken into account in this Section 4.5. If any property other than cash is
distributed to a Member, the Capital Accounts of the Members shall be adjusted
as if the property had instead been sold by the Company for a price equal to its
Gross Asset Value and the proceeds distributed. Upon liquidation and dissolution
of the Company, any unsold Company property shall be valued at its fair market
value to determine the gain or loss which would result if such property were
sold at the time of such liquidation. The Capital Accounts of the Members shall
be adjusted to reflect how any such gain or loss would have been allocated under
Article V if such property had been sold at the
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assigned values. The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to comply
with the provisions of Treasury Regulations Section 1.704-1(b)(2) and shall be
interpreted in a manner consistent with such Treasury Regulations. The Capital
Accounts of the Members shall be increased or decreased in accordance with
Regulations Section 1.704-1(b)(2)(iv)(f) to reflect a revaluation of the
property of the Company on the Company's books at the times set forth in
paragraph (b) of the definition of "Gross Asset Value." The Capital Account of
any Member shall carry over to the transferee of any Member in proportion to the
Membership Interest transferred.
ARTICLE V
ALLOCATIONS; DISTRIBUTIONS
5.1 ALLOCATIONS OF NET INCOME AND LOSSES. Except as otherwise provided
in this Agreement, Net Income and Net Losses of the Company for each Fiscal Year
shall be allocated among the Members in a manner such that, as of the end of
such Fiscal Year and taking into account all prior allocations of Net Income and
Net Losses of the Company and all distributions made by the Company through such
date, the Capital Account of each Member is, as nearly as possible, equal to the
distributions that would be made to such Member pursuant to Section 5.7(a) if
the Company were dissolved, its affairs wound up and assets sold for cash equal
to their value, all Company liabilities were satisfied, and the net assets of
the Company were distributed in accordance with Section 5.7(a) immediately after
such allocation.
5.2 LIMITATION ON LOSS ALLOCATION. Losses allocated to a Member
pursuant to Section 5.1 shall not exceed the maximum amount of losses that can
be allocated without causing a Member to have an Adjusted Capital Account
Deficit at the end of any Fiscal Year. In the event that any Member would have
an Adjusted Capital Account Deficit as a consequence of an allocation of losses
pursuant to Section 5.1, the amount of losses that would be allocated to such
Member but for the application of this Section 5.2 shall be allocated to the
other Members to the extent that such allocations would not cause such Members
to have an Adjusted Capital Account Deficit and allocated among such Members in
proportion to their total Capital Contributions. Any allocation of items of loss
pursuant to this Section 5.2 shall be taken into account in computing subsequent
allocations pursuant to Section 5.1, and prior to any allocation of items in
such Section so that the net amount of any items allocated to each Member
pursuant to Section 5.1 and this Section 5.2 shall, to the maximum extent
practicable, be equal to the net amount that would have been allocated to each
Member pursuant to the provisions of Section 5.1 and this Section 5.2 if such
allocation under this Section 5.2 had not occurred.
5.3 SPECIAL ALLOCATIONS. Notwithstanding any of the provisions set
forth above in this Article V to the contrary, the following special allocations
shall be made in the following order:
(a) MINIMUM GAIN CHARGEBACK. If there is a net decrease in Company
Minimum Gain during any Fiscal Year, each Member shall be specially allocated
items of Company income and gain for such Fiscal Year (and, if necessary,
subsequent Fiscal Years) in an amount
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equal to such Member's share of the net decrease in Company Minimum Gain,
determined in accordance with Treasury Regulations ss. 1.704-2(g). Allocations
pursuant to the previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Member pursuant thereto. The items to
be so allocated shall be determined in accordance with Treasury Regulations ss.
1.704-2(f)(6) and ss. 1.704-2(j)(2). This Section 5.3(a) is intended to comply
with the minimum gain chargeback requirement in Treasury Regulations ss.
1.704-2(f) and shall be interpreted consistently therewith. To the extent
permitted by such Treasury Regulations and for purposes of this Section 5.3(a)
only, each Member's net decrease in Company Minimum Gain shall be determined
prior to any other allocations pursuant to this Article V with respect to such
Fiscal Year.
(b) MEMBER MINIMUM GAIN CHARGEBACK. Notwithstanding any other
provision of this Article V, except Section 5.3(a), if there is a net decrease
in Member Minimum Gain attributable to Member Nonrecourse Debt during any Fiscal
Year, each Member which has a share of the Member Minimum Gain attributable to
such Member Nonrecourse Debt, determined in accordance with Treasury Regulations
ss. 1.704-2(i)(5), shall be specially allocated items of Company income and gain
for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount
equal to such Member's share of the net decrease in Member Minimum Gain
attributable to such Member Nonrecourse Debt, determined in accordance with
Treasury Regulations ss. 1.704-2(i)(4). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be
allocated to each Member pursuant thereto. The items to be so allocated shall be
determined in accordance with Treasury Regulations ss. 1.704-2(i)(4) and ss.
1.704-2(j)(2)(ii). This Section 5.3(b) is intended to comply with the minimum
gain chargeback requirement in Treasury Regulations ss. 1.704-2(i)(4) and shall
be interpreted consistently therewith. Solely for purposes of this Section
5.3(b), each Member's net decrease in Member Minimum Gain shall be determined
prior to any other allocations pursuant to this Article V with respect to such
Fiscal Year, other than allocations pursuant to Section 5.3(a).
(c) QUALIFIED INCOME OFFSET. In the event that any Member unexpectedly
receives any adjustments, allocations or distributions described in Treasury
Regulations ss. 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Company income and
gain shall be specifically allocated to each such Member in an amount and manner
sufficient to eliminate, to the extent required by the Treasury Regulations, the
Adjusted Capital Account Deficit of such Member as quickly as possible, provided
that an allocation pursuant to this Section 5.3(c) shall be made if and only to
the extent that such Member would have an Adjusted Capital Account Deficit after
all other allocations provided for in this Article V have been tentatively made
as if this Section 5.3(c) were not in this Agreement. The foregoing provision is
intended to comply with Treasury Regulations ss. 1.704-1(b)(2)(ii)(d) and shall
be interpreted and applied in a manner consistent with such Treasury
Regulations.
(d) GROSS INCOME ALLOCATION. In the event that any Member has an
Adjusted Capital Account Deficit at the end of any Fiscal Year, then each such
Member shall be specially allocated items of Company income and gain as quickly
as possible, provided that an allocation pursuant to this Section 5.3(d) shall
be made only if and to the extent that such Member would
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have an Adjusted Capital Account Deficit after all other allocations provided
for in this Article V have been tentatively made as if this Section 5.3(d) were
not in this Agreement.
(e) NONRECOURSE DEDUCTIONS. Nonrecourse Deductions for any Fiscal Year
will be allocated to the Members in the same manner in which such items would
have been allocated pursuant to Section 5.1(b).
(f) MEMBER NONRECOURSE DEDUCTIONS. Any Member Nonrecourse Deductions
for any Fiscal Year or other period shall be specially allocated to the Member
who bears the economic risk of loss with respect to the Member Nonrecourse Debt
to which such Member Nonrecourse Deductions are attributable in accordance with
Treasury Regulations ss. 1.704-2(i).
(g) CODE SECTION 754 ADJUSTMENT. To the extent an adjustment to the
adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Code
Section 743(b) is required, pursuant to Treasury Regulations ss.
1.704-1(b)(2)(iv)(m)(2) or Treasury Regulations ss. 1.704-1(b)(2)(iv)(m)(4), to
be taken into account in determining Capital Accounts as the result of a
distribution to a Member in complete liquidation of its interest in the Company,
the amount of such adjustment to the Capital Accounts shall be treated as an
item of gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases such basis) and such gain or loss shall be specially
allocated to the Members in a manner consistent with the manner in which their
Capital Accounts are required to be adjusted pursuant to such Treasury
Regulations Section.
(h) CURATIVE ALLOCATIONS. It is the intent of the Members that, to the
extent possible, the allocations set forth in the foregoing provisions of this
Section 5.3 will be offset with special allocations of other items of Company
income, gain, loss, and deduction pursuant to this Section 5.3(h). Therefore,
notwithstanding any other provision of this Article V (other than Section 5.3
hereof), the Manager shall make such offsetting special allocations of Company
income, gain, loss, or deduction in whatever manner the Manager determines to be
appropriate so that, after such offsetting allocations are made, each Member's
Capital Account balance is, to the extent possible, equal to the Capital Account
balance such Member would have had if the allocations set forth in the foregoing
provisions of this Section 5.3 were not part of this Agreement. In exercising
its discretion under this Section 5.3(h), the Manager shall take into account
future allocations under Sections 5.3(a) and 5.3(b) that, although not yet made,
are likely to offset other allocations previously made under Sections 5.3(e) and
5.3(f).
5.4 TAX INCIDENTS. It is intended that the Company will be treated as
a pass-through entity for tax purposes. Subject to Section 704(c) of the Code,
for U.S. federal and state income tax purposes, all items of Company income,
gain, loss, deduction, credit and any other allocations not otherwise provided
for shall be allocated among the Members in the same manner as the corresponding
item of income, gain, loss or deduction was allocated pursuant to the preceding
Sections of this Article V.
5.5 SECTION 704(c) ALLOCATIONS. In accordance with Section 704(c) of
the Code and the Treasury Regulations thereunder, income, gain, loss and
deduction with respect to any property contributed to the capital of the Company
shall, solely for tax purposes, be allocated among the Members so as to take
account of any variation between the adjusted tax basis of such
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property to the Company for federal income tax purposes and its fair market
value at the time of contribution. Any elections or decisions relating to such
allocations shall be made by the Tax Matters Member in a manner that reasonably
reflects the purpose and intention of this Agreement. Allocations pursuant to
this Section 5.5 are solely for purposes of federal, state and local taxes and
shall not affect, or in any way be taken into account in computing, any Member's
Capital Account or share of Net Income, Net Losses or other items or
distributions pursuant to any provision of this Agreement.
5.6 TAX MATTERS MEMBER; TAX ELECTIONS. The Manager shall be the "tax
matters partner" of the Company as defined in Code Section 6231(a)(7) (the "Tax
Matters Member") and shall have all the powers and obligations of a tax matters
partner pursuant to the Code. All elections, filings and determinations required
or permitted to be made by the Company under the tax laws of the United States,
the several States or any other relevant jurisdiction shall be timely determined
and made by the Manager; provided, that the Manager shall not make any such
election or determination without obtaining the consent of each Member (such
consent not to be unreasonably withheld or delayed).
5.7 DISTRIBUTIONS OF DISTRIBUTABLE CASH. Subject to Section 8.3(d),
Distributable Cash with respect to a Disposition of all or a portion of a Pool
shall be distributed to the Members at such times as the Manager deems
appropriate in its sole discretion but in any event within 10 business days
after receipt thereof by the Company provided that Distributable Cash
representing the scheduled payment of principal or interest on Assets included
in a Pool and/or the payment of interest on temporary investments will be
retained by the Manager and distributed to the Members monthly. Distributable
Cash received by the Company with respect to a Pool shall be distributed in the
following amounts and order of priority among the Members in proportion to their
respective Sharing Percentages (determined at a time immediately prior to such
distribution) with respect to the Pool generating such Distributable Cash:
(i) FIRST, the portion of each Member's Sharing Percentage of such
distribution shall be distributed to such Member to the extent required so
that such Member has been distributed an amount equal to such Member's
unreturned Capital Contributions (determined immediately prior to such
distribution) allocable to such Pool (each such distribution reducing such
Member's unreturned Capital Contributions attributable to such Pool by the
amount so distributed);
(ii) SECOND, the portion of each Member's Sharing Percentage of such
distribution remaining after the application made to such Member pursuant
to clause (i) shall be distributed to such Member to the extent required so
that such Member has been distributed an amount equal to such Member's
unreturned Capital Contributions used to fund any expenses which are not
directly allocable to any Pool;
(iii) THIRD, the portion of each Member's Sharing Percentage of such
distribution remaining after the application made to such Member pursuant
to clauses (i) and (ii) shall be distributed to such Member to the extent
required so that the cumulative amount distributed to such Member under
this clause (iii) in the current Fiscal Year and all prior Fiscal
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Years equals a 13% per annum rate of return on all Capital Contributions
made by such Member allocable to such Pool (or otherwise referred to in
clause (ii)), in each case accruing from the date on which such Member
actually made such Capital Contributions;
(iv) FOURTH, the portion of such Member's Sharing Percentage of such
distribution remaining after the foregoing applications shall be
distributed 70% to the Manager and 30% to such Member until the cumulative
amount distributed to the Manager under this clause (iv) in the current
Fiscal Year and all prior Fiscal Years equals 20% of the sum of (1) the
aggregate amount of all distributions to such Member pursuant to clause
(iii) above and this clause (iv), in each case that are allocable to such
Pool, and (2) the aggregate amount of all distributions to the Manager
pursuant to this clause (iv) that are allocable to such Pool;
(v) FIFTH, any remaining amounts distributable to such Member shall be
distributed 80% to such Member and 20% to the Manager until such time as
the cumulative amount distributed to such Member under this clause (v) and
the foregoing clauses (iii) and (iv) in the current Fiscal Year and all
prior Fiscal Years, in each case allocable to such Pool, equals a 35% per
annum rate of return on all Capital Contributions made by such Member
allocable to such Pool; and
(vi) SIXTH, any remaining amounts distributable to such Member shall
be distributed 75% to such Member and 25% to the Manager.
5.8 DISTRIBUTIONS IN-KIND. It is the intent that all distributions
made under this Agreement be in cash, except as specifically provided herein and
in Section 8.3(d). Except in connection with the dissolution and liquidation of
the Company, the Manager may only make in-kind distributions to the Members that
consist of securities which are Freely Tradable; provided that it will not make
any such distribution to a Member if it has received written notice from such
Member (which may be specific or general) that such Member would violate
existing law applicable to it if it received same. In the event that a
distribution of assets is made, such assets shall be deemed to have been sold at
their Gross Asset Value, and the proceeds of such sale shall be deemed to have
been distributed to the Member as Distributable Cash, for all purposes of this
Agreement. Subject to Section 8.3(d), assets distributed in-kind shall be
distributed in proportion to the aggregate amounts that would be distributed to
each Member pursuant to Section 5.7, and if a distribution consists of both cash
and assets or assets of more than one class, each Member receiving the
distribution shall, except to the extent necessary to avoid fractional
interests, receive the same proportion of cash and assets of each class being
distributed. The Manager may cause certificates evidencing any assets to be
distributed in-kind to be imprinted with legends as to such restrictions on
transfer that it may deem necessary or appropriate, including legends as to
applicable United States or non-U.S. securities laws or other legal or
contractual restrictions, and may require any Member to which assets are to be
distributed in-kind to agree in writing (a) that such assets will not be
transferred except in compliance with such restrictions and (b) to such other
matters as the Manager may deem necessary or appropriate.
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ARTICLE VI
FINANCIAL MANAGEMENT
6.1 COSTS, EXPENSES, LIABILITIES AND OBLIGATIONS. The Company shall
pay, or reimburse the Manager for, all reasonable out-of-pocket costs, expenses,
liabilities and other obligations incurred, suffered or paid in connection with
the formation of the Company (including, without limitation, the negotiation and
preparation of this Agreement, the Asset Management Agreement, the Servicing
Agreements and any Loan Pool Documentation), the purchase of, or bid or
potential bid for (whether or not any such bid is made or accepted), any Assets,
the management and operation of the business and affairs of the Company and the
accomplishment of its purposes in accordance with the terms of this Agreement,
including but not limited to, the payment of amounts owing from time to time to
the Asset Manager under the Asset Management Agreement, the lenders under any
Loan Pool Documentation or any Servicer under the Servicing Agreements. The
Company also may fund a reserve for the payment of the foregoing costs,
expenses, liabilities and other obligations in such amount as the Manager may in
the absence of bad faith determine from time to time. In no event will the
amounts subject to payment or reimbursement by the Company hereunder include the
ordinary course operating costs or expenses of the Manager or the Asset Manager
(e.g. salaries, rent, utilities, data processing expenses, etc.).
6.2 BOOKS AND RECORDS. The Manager shall maintain full and accurate
books of the Company, showing all receipts and expenditures, assets and
liabilities, profits and losses, and all other records necessary for recording
the business and affairs of the Company. The books of the Company shall be kept
on an accrual basis. Such books and records shall be open to the inspection and
examination of the Members and by their duly authorized representatives at
reasonable times.
6.3 FISCAL YEAR. The Fiscal Year of the Company shall be the calendar
year.
6.4 REPORTS. The Manager shall prepare or cause to be prepared and
shall furnish to each Member copies of a balance sheet, a statement of revenue
and expenses and a statement of each Member's share of the Net Income or Losses
of the Company as at the end of and for each of the first three calendar
quarters of each fiscal year of the Company and as at the end of and for each
fiscal year of the Company. Quarterly statements need not be audited and shall
be furnished within 60 days after the end of each calendar quarter; annual
statements shall be audited by a nationally recognized firm of independent
public accountants acceptable to the Manager and shall be furnished within 90
days after the end of each fiscal year of the Company. The Manager shall cause
the Members to receive necessary income tax reporting information by March 30 of
each year. The Manager also shall furnish to a Member such other reports on the
operations and condition of the Company as may be reasonably requested by the
Member, and as may be available to the Manager. All of the costs and expenses of
preparing and furnishing such statements and reports shall be costs and expenses
of the Company and not of the Manager.
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6.5 BANK ACCOUNTS AND INVESTMENT OF FUNDS. All funds of the Company,
pending the application thereof in accordance with this Agreement, shall be
deposited in its name in such checking and savings accounts or shall be invested
in such certificates of deposit, commercial paper and other instruments
evidencing short-term obligations, as shall be designated by the Manager.
6.6 ACCOUNTING DECISIONS. All decisions as to accounting principles
and procedures, except as specifically provided to the contrary herein, shall be
made by the Manager.
6.7 INCOME TAX RETURNS AND ELECTIONS. The Manager, for the Company,
shall file any and all Federal, state, local and foreign tax returns necessary
to be filed by the Company and in such manner as will effectuate the tax
treatment described in this Agreement. Such tax returns shall be prepared by
such nationally recognized firm of independent public accountants as shall be
selected by the Manager from time to time and approved by the Members. Each
Member agrees to report on its own tax returns items pertaining to the Company
in a manner consistent with the terms of this Agreement. All costs incurred in
connection with the activities described in this Section 6.7, including legal
and accounting costs, shall be Company expenses payable pursuant to Section 6.1.
ARTICLE VII
TRANSFERS BY MEMBERS; SUBSTITUTE MEMBERS
7.1 TRANSFERS BY MEMBERS. (a) Without the prior written consent of the
Manager, which consent shall not be unreasonably withheld, no Member may resign
or withdraw from the Company or Transfer all or any portion of its Membership
Interest or any Income Notes held by it unless such Transfer is made to an
Affiliate of such Member. No Transfer of all or any portion of a Membership
Interest or any Income Note shall be made unless the transferee shall have
executed a written acknowledgment to the effect set forth in Section 4.2(g). The
Manager shall register on the books of the Company any permitted Transfer by a
Member of its Membership Interest in the Company pursuant to this Section
7.1(a).
(b) Notwithstanding anything to the contrary contained in this
Agreement, including any provision of this Article VII, a Member may Transfer
all or any portion of its Membership Interest and any Income Notes held by it to
any person or entity, without the consent of the Manager, any other Member, or
any other person or entity, if (i) the Company engages in (A) any activity that
would result in a violation of federal or state banking law, including, without
limitation, laws applicable to FDIC-insured depository institutions and the
rules, regulations and interpretations of the FDIC, with respect to such Member,
or (B) any activity that is not part of, or incidental to, the business of
banking, as determined by the FDIC or the OCC or (ii) such Member is required to
Transfer all or any portion of its Membership Interest by a competent regulatory
authority having jurisdiction over such Member or any of its Affiliates or
pursuant to any law or regulation applicable to such Member or any of its
Affiliates.
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(c) To the fullest extent permitted by law, any purported Transfer of
any Membership Interest or Income Notes in contravention of this Article VII
shall be null and void and of no force and effect whatsoever.
7.2 SUBSTITUTE MEMBERS. (a) An assignee of a Membership Interest shall
become a substitute Member only with the prior written consent of the Manager,
which consent shall not be unreasonably withheld, and the Required Members;
provided that any assignee of all or any portion of a Member's Membership
Interest pursuant to Section 7.1(b) shall be admitted to the Company as a
Substitute Member without the consent of the Manager or any other Person.
(b) An assignee of a Membership Interest in the Company that is not
admitted as a substitute Member shall be entitled only to allocations and
distributions with respect to that Membership Interest in accordance with this
Agreement but shall have no right to any information or accounting of the
affairs of the Company and, except as otherwise agreed by the other Members,
shall not have any of the other rights of a Member under this Agreement.
(c) An assignee of a Membership Interest in the Company shall be
admitted as a substitute Member in accordance with this Section 7.2 at the time
such assignee's admission is reflected in the records of the Company. A
substitute Member admitted to the Company shall succeed to all the rights and be
subject to all the obligations of the assignor Member under this Agreement in
respect of the interest as to which it was substituted and, to the fullest
extent permitted by law, the assignor Member shall be released from its
obligations under this Agreement with respect to such interest.
ARTICLE VIII
DISSOLUTION, LIQUIDATION AND TERMINATION
8.1 LIMITATIONS. The Company may be dissolved, liquidated and
terminated pursuant to and only pursuant to the provisions of this Article VIII,
and the parties hereto do hereby irrevocably waive any and all other rights they
may have to cause a dissolution of the Company or a sale or partition of any or
all of the Company's assets.
8.2 EXCLUSIVE CAUSES. The Company shall be dissolved, and liquidated
pursuant to Section 8.3, upon the earliest to occur of (it being understood that
the following events are the only events that can cause the dissolution and
liquidation of the Company):
(a) following the expiration of the Investment Period, upon the
liquidation of all Assets, temporary investments and other assets of the
Company;
(b) the unanimous election by the Members so to dissolve the Company;
(c) the good faith determination by the Manager that dissolution is
necessary or advisable to avoid violations of the Investment Company Act or the
Employee Retirement Income Security Act of 1974, as amended ("ERISA");
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(d) at any time there are no Members of the Company unless the
business of the Company is continued in accordance with the Delaware Act; or
(e) the entry of a decree of judicial dissolution pursuant to Section
18-802 of the Delaware Act.
8.3 LIQUIDATION. In all cases of dissolution of the Company, the
business of the Company shall be continued to the extent necessary to allow an
orderly winding up of its affairs, including the liquidation of the assets of
the Company pursuant to the provisions of this Section, as promptly as
practicable thereafter, and each of the following shall be accomplished:
(a) The Manager shall cause to be prepared a statement setting forth
the assets and liabilities of the Company as of the date of dissolution, a copy
of which statement shall be furnished to all of the Members.
(b) The property of the Company shall be liquidated or distributed in
kind by the Manager as promptly as possible, but in an orderly, businesslike and
commercially reasonable manner. The Manager may, in the exercise of his business
judgment and if commercially reasonable, determine (i) to sell all or any
portion of the property of the Company to a Member, provided that the purchase
price is not less than the fair market value of such property as determined in
the sole discretion of the Manager or its designee, or to any other Person or
(ii) not to sell all or any portion of the property of the Company, in which
event such property and assets shall be distributed in kind pursuant to Section
8.3(d).
(c) Any gain or loss realized by the Company upon the sale of its
property shall be deemed recognized and allocated to the Members in the manner
set forth in Article V. To the extent that an asset is to be distributed in
kind, such asset shall be deemed to have been sold at its fair market value on
the date of distribution, the gain or loss deemed realized upon such deemed sale
shall be allocated in accordance with Article V and the amount of the
distribution shall be considered to be such fair market value of the asset.
(d) The proceeds of sale and all other assets of the Company shall be
applied and distributed as follows and in the following order of priority:
(i) to the satisfaction (whether by payment or reasonable
provision for payment) of the debts and liabilities of the Company and the
expenses of liquidation or distribution;
(ii) the balance, if any, to the Members having positive Capital
Account balances (after all adjustments thereto otherwise required
hereunder) proportionately to their respective positive Capital Account
balances (as so adjusted), with the intent that such distribution be
effected in accordance with Section 5.7(a).
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The Manager may establish any reserves which the Manager shall determine to
be reasonably necessary for contingent conditional or unmatured liabilities or
obligations of the Company. Such reserves may, in the discretion of the Manager,
be held by the Manager or paid over to a bank or trust company selected by it,
in either case to be held by the Manager or such bank or trust company as escrow
holder or liquidating trustee for the purposes of disbursing such reserves to
satisfy the liabilities and obligations described above. Such reserves shall be
held for such period as the Manager shall deem advisable, and upon the
expiration of such period, any remaining balance shall be distributed as
provided in clause (ii) of this subsection.
8.4 CONTINUATION OF THE COMPANY. Notwithstanding anything to the
contrary contained herein, the death, retirement, resignation, expulsion,
bankruptcy, dissolution or removal of a Member shall not in and of itself cause
the dissolution of the Company, and the Members are expressly authorized to
continue the business of the Company in such event, without any further action
on the part of the Members. The bankruptcy (as defined in the Delaware Act) of a
Member shall not cause a Member to cease to be a member of the Company unless
all Members other than such bankrupt Member otherwise agree in writing at any
time while such bankrupt Member is in bankruptcy (as defined in the Delaware
Act) that such bankrupt Member shall cease to be a member of the Company.
ARTICLE IX
ATTORNEY-IN-FACT
Each Member and its successors and assigns hereby irrevocably
constitutes and appoints the Manager, and each of them, as its true and lawful
attorneys, in its name, place and stead, to make, execute, consent to, swear to,
acknowledge, record and file:
(i) a certificate of formation and the applicable laws of any other
jurisdiction in which the Manager deem such filing to be necessary or
desirable;
(ii) any and all certificates, instruments and other documents which
may be required to be filed by the Company or the Members under the laws of
the State of Delaware or any other jurisdiction to the extent that the
Manager deem such filing to be necessary or desirable to qualify the
Company to engage in its business or otherwise facilitate the Company's
business;
(iii) any and all amendments or modifications of the instruments
described in paragraphs (i) and (ii) above;
(iv) all certificates, instruments and other documents which may be
required to effectuate the dissolution and termination of the Company
pursuant to the provisions of this Agreement;
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(v) any and all duly adopted amendments to this Agreement, including
any amendments and other documents deemed, necessary or desirable by the
Manager for the admission of substituted Members, when consented to
hereunder;
(vi) any and all fictitious name certificates or similar certificates
required by law to be filed on behalf of the Company;
and each Member hereby irrevocably constitutes and appoints the Manager as its
true and lawful attorney, in its name, place and stead, to take any and all such
other action as the Manager may deem necessary or desirable fully to carry out
the provisions of this Agreement in accordance with its terms. It is expressly
understood and intended by each Member that the grant of the foregoing power of
attorney is coupled with an interest and shall be irrevocable. The foregoing
power of attorney shall, if a Member shall have assigned its interest, or any
part thereof, in the Company, survive such assignment of such interest or part
thereof.
ARTICLE X
REPRESENTATIONS AND WARRANTIES
10.1 SECURITIES LAW REPRESENTATIONS. By the execution of this
Agreement, each Member represents that:
(a) The Member is acquiring its interest in the Company for its own
account and not with a view to the resale or distribution thereof.
(b) The Member is an "accredited investor" as defined in Rule 501(a)
under the Securities Act.
(c) The Member understands and acknowledges that its interest in the
Company has not been registered for sale under any Federal or state securities
law and must be held indefinitely unless subsequently registered or an exemption
from such registration is available.
(d) The Member (i) has performed its own due diligence and business
investigations with respect to the Company, (ii) has formed its own conclusions
regarding the conditions and values of the business, assets, liabilities and
prospects of the Company, and is not relying upon any other Member or other
person with respect to the performance of such investigations or the evaluation
of such conditions or values, (iii) is fully familiar with the nature of the
investment in the Company, the speculative and financial risks thereby assumed,
the uncertainty with respect to the timing and amounts of distributions, if any,
to be made by the Company, (iv) does not desire any further information which
may be available with respect to these matters and (v) has had a sufficient
opportunity to review the matters that it believes to be important in deciding
whether to acquire an interest in the Company.
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(e) The Member (i) is not an "investment company" as defined in the
Investment Company Act, (ii) is able to satisfy its obligations (including its
financial obligations) under this Agreement from existing commitments of the
current holders of its equity interests; and (iii) constitutes a single
"beneficial owner" for purposes of the Investment Company Act.
10.2 OTHER REPRESENTATIONS AND WARRANTIES. Each Member represents and
warrants that:
(i) If the Member is a corporation, it is duly incorporated, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all necessary corporate power and authority to
execute and deliver this Agreement; if the Member is a partnership, it is
duly and validly organized under the laws of its jurisdiction and has all
necessary partnership power and authority to execute and deliver this
Agreement.
(ii) The execution and delivery by it of this Agreement and the
performance by it of its obligations under this Agreement have been duly
authorized by all necessary corporate or partnership action by it or on its
behalf and do not and will not violate, result in a breach of or constitute
a default under, its articles or certificate of incorporation or bylaws or
its certificate of limited partnership or agreement of limited partnership
or its partnership agreement, as the case may be.
(iii) No authorization, consent, approval or waiver of, clearance by,
notice or registration or filing with, or other similar action by or with
any governmental body or other person is required on the part of the Member
for (i) the due execution and delivery by the Member of this Agreement or
(ii) the performance by the Member of its obligations under this Agreement.
(iv) This Agreement is the legal, valid and binding obligation of the
Member, enforceable against it in accordance with its terms, except as
limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights generally.
(v) There is no action, suit, investigation, complaint or other
proceeding pending, or to its knowledge, threatened against the Member or
to its knowledge any other person that involves any of the transactions
contemplated by this Agreement or that, individually or in the aggregate,
if determined adversely to such Member or the other person, could
materially and adversely affect the ability of the Member to perform its
obligations under this Agreement.
(vi) The Member is not in, nor has it received notice of, a violation
of or default with respect to any law or regulation applicable to it or its
business, properties or operations, which violation or default,
individually or in the aggregate, could materially and adversely affect the
ability of the Member to perform its obligations under this Agreement.
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(vii) The Member is not (i) a "benefit plan investor" within the
meaning of Section 2510.3-101(f)(2) of the United States Department of
Labor Final Regulation Relating to the Definition of Plan Assets 29 C.F.R.
ss. 2510.3-101, (ii) a pension, profit sharing or other retirement plan
sponsored by the United States or any state, municipality or other
political subdivision or any instrumentality of any of the foregoing (or
any political subdivision administering such plan), (iii) a benefit plan
that would be subject to the ERISA but for the fact that it meets the
requirements of a "church plan" within the meaning of Section 414(e) of the
Code and Section 3(33) of ERISA, or (iv) any other entity any of whose
assets constitute under applicable law assets of any employee benefit plan
subject to Part 4 of Title I of ERISA or of any plan subject to Section
4975 of the Code.
ARTICLE XI
MISCELLANEOUS
11.1 NOTICES. All notices under this Agreement shall be in writing,
duly signed by the party giving such notice, and transmitted by (i) personal
delivery (effective upon delivery), (ii) postage prepaid registered or certified
mail, return receipt requested, (effective three business days after posting),
(iii) facsimile transmission with electronic confirmation of receipt (effective
the following business day) or (iv) United States Postal Service Express Mail or
a recognized overnight delivery service (effective on the Business Day following
dispatch) and addressed in each case as follows:
(i) given to the Company, at its then principal office;
(ii) if given to the Manager, at ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, fax no. (▇▇▇) ▇▇▇-▇▇▇▇, Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇; and
(iii) if given to a Member, at its address set forth on Exhibit A
hereto.
Any Member may designate any other address to which notices may be sent by a
notice in writing to the Company and the other Members.
11.2 AMENDMENT. This Agreement may not be modified or amended, except
with the written consent of all Members, PROVIDED that without the consent of
any Member, (i) the Manager may, amend this Agreement to reflect the admission
of substituted Members to which the Members have consented to the extent such
consent is required hereunder, and (ii) the Manager, upon 30 days' prior notice
to the Members, may amend this Agreement as to administrative or similar matters
which do not have any adverse effect on any Member.
11.3 CONFIDENTIALITY. This Agreement, the terms hereof and the
transactions contemplated hereby shall be kept in strict confidence by the
parties, except that disclosure may be made (i) to the principals, partners,
stockholders, officers, directors, agents and employees of the Members and their
respective professional advisors, (ii) to the extent that disclosure may be
-25-
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required by the Asset Management Agreement, the Servicing Agreements or other
agreements, instruments or documents to which the Company or the Manager may be
subject or may become subject in connection with the management and operation of
the business and affairs of the Company or the financing or refinancing of the
purchase of the Assets, and (iii) to the extent that disclosure may be required
by law or judicial or regulatory order, or to comply with governmental approvals
or regulations.
11.4 CAPTIONS. Caption designations in this Agreement are inserted
only as a guide and for reference and in no way define, limit or describe the
scope of this Agreement or the intent of the parties.
11.5 APPLICABLE LAW. This Agreement shall be governed by, interpreted
and construed in accordance with the laws of the State of Delaware, without
regard to conflicts of laws rules.
11.6 COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if all signatures were on the same instrument. This Agreement shall become
effective upon execution and delivery of a counterpart hereof by each of the
parties hereto.
11.7 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties hereto pertaining to the subject matter hereof and supersedes
all prior agreements and understandings pertaining thereto.
11.8 REGULATION. The Members and the Manager agree that the Company
shall be subject to regulation, supervision and examination by any federal or
state bank regulatory authority that has regulatory, supervision or examination
authority over any Member.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement as of the day and year first above written.
HANOVER CAPITAL MORTGAGE
HOLDINGS, INC., as Manager and as Member
By _______________________________________
Name:
Title:
as Member
By _______________________________________
Name:
Title:
as Member
By _______________________________________
Name:
Title:
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DEFINITION OF CERTAIN TERMS
---------------------------
"Adjusted Capital Account Deficit" shall mean, with respect to any Member,
the deficit balance, if any, in such Member's Capital Account as of the end of
the applicable Fiscal Year after (i) crediting thereto any amounts which such
Member is, or is deemed to be, obligated to restore pursuant to Treasury
Regulations ss. 1.704-2(g)(1) and ss. 1.704-2(i)(5) and (ii) debiting such
Capital Account by the amount of the items described in Treasury Regulations
▇▇.▇▇. 1.704-1(b)(2)(ii)(d)(4), (5) and (6). The foregoiNg definition of
Adjusted Capital Account Deficit is intended to comply with the provisions of
Treasury Regulations ss. 1.704-1(b)(2)(ii)(d) and shall be interpreted
consistently therewith.
"Affiliate" shall have the meaning set forth in Section 2.1 hereof.
"Assets" shall have the meaning set forth in the Recitals.
"Asset Management Agreement" shall have the meaning set forth in the
Recitals.
"Asset Manager" shall have the meaning set forth in the Recitals.
"Bid Summary Sheet" shall have the meaning set forth in Section 4.2(b)
hereof.
"Capital Account" shall have the meaning set forth in Section 4.5 hereof.
"Capital Contribution" shall have the meaning set forth in Section 4.2(f)
hereof.
"Code" shall mean the U.S. Internal Revenue Code of 1986, as amended from
time to time, including the corresponding provisions of any successor law.
"Company" shall mean HDMF-I LLC, a Delaware limited liability company.
"Company Minimum Gain" shall have the meaning attributed to "partnership
minimum gain" as set forth in Treasury Regulations ▇▇.▇▇. 1.704-2(b)(2) and
1.704-2(d).
"Control" shall have the meaning set forth in Section 2.1 hereof.
"Delaware Act" shall have the meaning set forth in Section 1.1 hereof.
"Disposition" shall mean, with respect to a Pool, the sale, exchange or
other disposition by the Company of all or any portion of such Pool for cash,
securities or other property and shall include the receipt by the Company of (x)
the repayment of the principal of and accrued interest on any indebtedness
constituting all or a portion of such Pool or of a liquidating or other similar
payment in respect of such Pool and (y) the proceeds of any judgment or
settlement to the extent made in respect of such Pool (as determined by the
Manager in good faith), it being agreed that all judgment and settlement
proceeds will be allocated by the Manager (acting in good faith) among the
various Assets as applicable.
(i)
30
"Distributable Cash" shall mean, with respect to any Pool, the excess
of the aggregate cash receipts of all kinds received by the Company in respect
of such Pool, reduced by the sum of (i) all Company expenditures allocable to
such Pool (including, without limitation, the payment of principal of and
interest on indebtedness of the Company incurred in connection with the
acquisition or carrying of such Pool, fees and expenses payable to the Asset
Manager and the Servicer relating to such Pool and the payment of other costs,
expenses, liabilities and obligations of the Company relating to such Pool) and
(ii) such reserves as the Manager deems necessary to make reasonable provision
for the discharge of the costs, expenses, liabilities and other obligations of
the Company relating to such Pool.
"ERISA" shall have the meaning set forth in Section 8.2(c) hereof.
"Exonerated Person" shall have the meaning set forth in Section 2.3
hereof.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"Final Disposition" with respect to a Pool means the Disposition of
all Assets and other interests in such Pool held by the Company.
"Fiscal Year" shall mean the calendar year.
"Freely Tradable" means securities that are transferable by (i) a
Member pursuant to a then effective registration statement under the Securities
Act (or similar applicable statutory provision in the case of non-U.S.
securities), (ii) the Members who are not Affiliates of the Manager pursuant to
Rule 144(k) under the Securities Act (or similar applicable rule in the case of
non-U.S. securities), (iii) transferable by the Members pursuant to Rule 144A
which shall include a covenant by the issuer of such security to comply with the
reporting and informational requirements under Rule 144A or (iv) the Members
outside the United States pursuant to Regulation S under the Securities Act (or
similar applicable rule in the case of non-U.S. securities).
"Governmental Authorization" shall mean any approval, consent,
ratification, waiver, license, permit or other authorization.
"Governmental Body" shall mean any (i) state, county, city, town,
village, district or other jurisdiction, (ii) federal, state, local, municipal
or other government, or (iii) branch, agency, department, board, commission or
other governmental authority.
"Gross Asset Value" shall mean, with respect to any asset, such
asset's adjusted basis for federal income tax purposes, except as follows:
(a) the initial Gross Asset Value of any asset contributed by a Member
to the Company shall be the gross fair market value of such asset, as
agreed to by the contributing Member and the Manager,
(b) the Gross Asset Value of all Company assets shall be adjusted to
equal their respective gross fair market values, as of the following times:
(i) the acquisition of
(ii)
31
an additional interest in the Company by any new or existing Member in
exchange for more than a de minimis Capital Contribution; (ii) the
distribution by the Company to a Member of more than a de minimis amount of
Company assets as consideration for an interest in the Company; and (iii)
the liquidation of the Company within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g); PROVIDED, HOWEVER, that adjustments pursuant to
clause (i) and clause (ii) of this sentence shall be made only if the
Manager reasonably determines that such adjustments are necessary or
appropriate to reflect the relative economic interests of the Members in
the Company; and
(c) the Gross Asset Value of any Company asset distributed to any
Member shall be the gross fair market value of such asset on the date of
distribution, as determined by the Manager in good faith.
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to paragraph (a) or paragraph (b) above, such Gross Asset Value shall
thereafter be adjusted by the depreciation taken into account with respect to
such asset for purposes of computing Net Income and Net Loss.
"Income Notes" shall have the meaning set forth in Section 4.2(b)
hereof.
"Investment Company Act" shall mean the U.S. Investment Company Act of
1940, as amended.
"Investment Period" shall mean the one year period commencing on the
date of this Agreement and ending on the one year anniversary of the date of
this Agreement.
"Legal Requirement" shall mean any federal, state, local or municipal
law, ordinance, code, regulation, statute or principal of common law.
"Loan Pool Documentation" shall have the meaning set forth in Section
1.3(c)(iv) hereof.
"Manager" shall have the meaning set forth in the Recitals.
"Maximum Capital Contribution" shall mean, with respect to a Member,
the maximum amount of Capital Contributions that a Member shall be required to
contribute to the Company pursuant to this Agreement, as set forth on Exhibit A
attached hereto.
"Member Minimum Gain" shall mean an amount, determined in accordance
with Treasury Regulations ss. 1.704-2(i)(3) with respect to each Member
Nonrecourse Debt, equal to the Company Minimum Gain that would result if such
Member Nonrecourse Debt were treated as a Nonrecourse Liability.
"Member Nonrecourse Debt" shall have the meaning attributed to
"partner nonrecourse debt" as set forth in Treasury Regulations ss.
1.704-2(b)(4).
(iii)
32
"Member Nonrecourse Deductions" shall have the meaning attributed to
"partner nonrecourse deductions" as set forth in Treasury Regulations ss.
1.704-2(i).
"Membership Interest" shall have the meaning set forth in Section 4.1
hereof.
"Net Income" and "Net Loss" shall mean, for each Fiscal Year, an
amount equal to the Company's taxable income or loss for such Fiscal Year,
determined in accordance with Section 703(a) of the Code (but including in
taxable income or loss, for this purpose, all items of income, gain, loss or
deduction required to be stated separately pursuant to Section 703(a)(1) of the
Code), with the following adjustments:
(a) any income of the Company exempt from federal income tax and not
otherwise taken into account in computing Net Income or Net Loss pursuant
to this definition shall be added to such taxable income or loss;
(b) any expenditures of the Company described in ss. 705(a)(2)(B) of
the Code (or treated as expenditures described in ss. 705(a)(2)(B) of the
Code pursuant to Treasury Regulations ss. 1.704-1(b)(2)(iv)(i)) and not
otherwise taken into account in computing Net Income or Net Loss pursuant
to this definition shall be subtracted from such taxable income or loss;
(c) in the event the fair market value of any Company asset is
adjusted in accordance with Section 4.5, the amount of such adjustment
shall be taken into account as gain or loss from the disposition of such
asset for purposes of computing Net Income or Net Loss;
(d) gain or loss resulting from any disposition of any asset of the
Company with respect to which gain or loss is recognized for federal income
tax purposes shall be computed by reference to the book value of the asset
disposed of under Treasury Regulations ss. 1.704-1(b)(2)(iv),
notwithstanding that the adjusted tax basis of such asset differs from such
book value; and
(e) notwithstanding any other provision of this definition, any items
which are allocated under Section 5.3 shall not be taken into account in
the computation of "Net Income" or "Net Loss".
"Nonrecourse Deductions" shall have the meaning set forth in Treasury
Regulations ss. 1.704-2(b)(1).
"Nonrecourse Liability" shall have the meaning set forth in Treasury
Regulations ss. 1.704-2(b)(3).
"OCC" shall mean the United States Department of Treasury, Office of
the Comptroller of the Currency.
(iv)
33
"Percentage Interest" shall mean, with respect to each Member, the
percentage set forth opposite such Member's name on Exhibit A hereto.
"Pools" shall have the meaning set forth in the Recitals.
"Required Members" shall mean Members holding at least 50.1% of the
aggregate Capital Contributions to the Company.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Servicer" shall mean The Provident Bank and, if applicable, each
other entity selected to act as a servicer under a Servicing Agreement from time
to time in accordance with the terms of Section 3.2.
"Servicing Agreements" shall have the meaning set forth in the
Recitals.
"Sharing Percentage" shall have the meaning set forth in Section 4.1.
"Tax Matters Member" shall have the meaning set forth in Section 5.6
hereof.
"Transfer" shall have the meaning set forth in the Recitals.
"Treasury Regulations" or "Regulations" shall mean the applicable
provisions of the federal income tax regulations promulgated under the Code, as
amended from time to time, including the corresponding provisions of any
succeeding regulations.
(v)
34
Page
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TABLE OF CONTENTS
ARTICLE I
GENERAL........................................................................................ 2
1.1 Formation of Limited Liability Company.............................................................. 2
1.2 Name ............................................................................................... 2
1.3 Purpose............................................................................................. 2
1.4 Term ............................................................................................... 3
1.5 Place of Business................................................................................... 3
1.6 Registered Office and Registered Agent.............................................................. 4
1.7 Qualification....................................................................................... 4
ARTICLE II
DUTIES, POWERS AND LIABILITY OF MANAGER AND MEMBERS; CONFLICTS
OF INTEREST; INDEMNIFICATION................................................................... 4
2.1 Powers of Manager................................................................................... 4
2.2 Powers of Members................................................................................... 6
2.3 Limitation on Manager's Liability................................................................... 7
2.4 Limitation on Member's Liability.................................................................... 7
2.5 Compensation of Manager............................................................................. 7
2.6 Conflicts of Interest............................................................................... 7
2.7 Indemnification of Manager.......................................................................... 8
2.8 Limits on Manager's Powers.......................................................................... 8
ARTICLE III
ASSET MANAGEMENT AND SERVICING................................................................. 9
3.1 Asset Management Agreement.......................................................................... 9
3.2 Servicing Agreements................................................................................ 9
ARTICLE IV
CAPITAL CONTRIBUTIONS; INCOME NOTES; CAPITAL ACCOUNTS ......................................... 10
4.1 Membership Interests................................................................................ 10
4.2 Capital Contributions............................................................................... 10
4.3 Interest on Capital................................................................................. 12
4.4 Return of Capital Contribution...................................................................... 12
4.5 Capital Accounts.................................................................................... 12
(vi)
35
ARTICLE V
ALLOCATIONS; DISTRIBUTIONS..................................................................... 13
5.1 Allocations of Net Income and Losses................................................................ 13
5.2 Limitation on Loss Allocation....................................................................... 13
5.3 Special Allocations................................................................................. 13
5.4 Tax Incidents....................................................................................... 15
5.5 Section 704(c) Allocations.......................................................................... 15
5.6 Tax Matters Member; Tax Elections................................................................... 16
5.7 Distributions of Distributable Cash................................................................. 16
5.8 Distributions In-Kind............................................................................... 17
ARTICLE VI
FINANCIAL MANAGEMENT........................................................................... 18
6.1 Costs, Expenses, Liabilities and Obligations........................................................ 18
6.2 Books and Records................................................................................... 18
6.3 Fiscal Year......................................................................................... 18
6.4 Reports............................................................................................. 18
6.5 Bank Accounts and Investment of Funds............................................................... 19
6.6 Accounting Decisions................................................................................ 19
6.7 Income Tax Returns and Elections.................................................................... 19
ARTICLE VII
TRANSFERS BY MEMBERS; SUBSTITUTE MEMBERS....................................................... 19
7.1 Transfers by Members................................................................................ 19
7.2 Substitute Members.................................................................................. 20
ARTICLE VIII
DISSOLUTION, LIQUIDATION AND TERMINATION....................................................... 20
8.1 Limitations......................................................................................... 20
8.2 Exclusive Causes.................................................................................... 20
8.3 Liquidation......................................................................................... 21
8.4 Continuation of the Company......................................................................... 22
(vii)
36
ARTICLE IX
ATTORNEY-IN-FACT.............................................................................. 22
ARTICLE X
REPRESENTATIONS AND WARRANTIES................................................................ 23
10.1 Securities Law Representations.................................................................... 23
10.2 Other Representations and Warranties.............................................................. 24
ARTICLE XI
MISCELLANEOUS................................................................................. 25
11.1 Notices........................................................................................... 25
11.2 Amendment......................................................................................... 25
11.3 Confidentiality................................................................................... 25
11.4 Captions.......................................................................................... 26
11.5 Applicable Law.................................................................................... 26
11.6 Counterparts; Effectiveness....................................................................... 26
11.7 Entire Agreement.................................................................................. 26
11.8 Regulation........................................................................................ 26
(viii)