LIMITED LIABILITY COMPANY AGREEMENT OF COPPERHEAD VENTURES, LLC
Exhibit
10.1
CONFIDENTIAL
TREATMENT REQUESTED
Confidential
material has been separately filed with the Securities and Exchange Commission
under an application for confidential treatment. Terms, for which confidential
treatment has been requested, have been omitted and marked as
redacted.
OF
COPPERHEAD
VENTURES, LLC
THIS
LIMITED LIABILITY COMPANY AGREEMENT OF COPPERHEAD VENTURES, LLC (this
“Agreement”) is made as of the 8th day of September, 2006, by and among ISSUED
HOLDINGS CAPITAL CORPORATION, a Virginia corporation (“IHCC”), DBAH CAPITAL,
LLC, a Delaware limited liability company (“DBAH”), and DARTMOUTH INVESTMENTS,
LLP (“Advisors”), a Texas limited liability partnership, which agree to form a
limited liability company upon the following terms and conditions:
1. FORMATION
AND TERM.
| 1.1. |
Formation.
|
The
Company was formed upon the filing of its certificate of formation with the
Delaware Secretary of State on July 24, 2006.
| 1.2. |
Term.
|
The
term
of the Company shall begin on the date of the filing of the certificate of
formation and the Company shall continue until dissolved and wound up in
accordance with this Agreement.
| 1.3. |
Name.
|
The
name
of the Company is Copperhead Ventures, LLC. The business of the Company may
be
conducted under such trade or fictitious names as the Directors may determine.
| 1.4. |
Principal
Office.
|
The
principal office of the Company, at which the records required to be maintained
by the Act are to kept, shall be at ▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇, or such other place as the Directors may determine. The
Directors shall give notice to the Members of any change of the principal
office.
Registered
Agent.
The
Company’s agent for service of process shall be Capitol Services, Inc. or such
other person as the Directors may designate.
| 2. |
DEFINITIONS.
|
The
following terms used in this Agreement shall (unless otherwise expressly
provided herein or unless the context otherwise requires) have the following
respective meanings:
Act.
The
Delaware Limited Liability Company Act, as it may be amended or superseded
from
time to time.
Advisors.
Dartmouth
Investments, LLP.
Advisors
Note.
The
Promissory Note issued by Advisors to the Company as provided in
Section 5.2(c).
Affiliate.
When
used
with reference to a specified Person:
| (i) |
any
Person directly or indirectly Controlling, Controlled by, or under
common
Control with, the specified Person;
|
| (ii) |
any
Person owning or Controlling fifteen percent (15%) or
more of the outstanding voting securities of the specified
Person;
|
| (iii) |
any
Person that is an officer, director, partner or trustee of, or serves
in a
similar capacity with respect to the specified Person, or of which
the
specified Person is an officer, director, partner or trustee;
and
|
| (iv) |
any
relative or spouse of the specified
Person.
|
Annual
Business Plan.
The
annual business plan of the Company described in Section 8.7.
Approved
Investment.
An
investment approved by the Board as provided in
Section 8.3(b)(i).
2
Auditor.
BDO
▇▇▇▇▇▇▇ LLP or another nationally recognized accounting firm agreed upon by
the
Board, as provided in Section 8.3(b), to serve as the independent auditors
for
the Company.
Available
Surplus.
All
amounts, if any, able to be released to Commercial Capital on a Payment Date
from the surplus account for the CCAO Series 2 Trust Collateralized Bonds
pursuant to Sections 9(xiii) and (xiv) of the Series 2 Supplement with respect
to that Payment Date, other than amounts related to the Series 2 Excluded
Assets.
Bankruptcy.
| (i) |
The
entry of an order for relief with respect to a Member in proceedings
under
the United States Bankruptcy Code, as amended or superseded from time
to
time;
|
| (ii) |
The
filing of an application by a Member for, or its consent to, the
appointment of a trustee, receiver or custodian of its
assets;
|
| (iii) |
The
making by a Member of a general assignment for the benefit of
creditors;
|
| (iv) |
The
entry of an order, judgment or decree by any court of competent
jurisdiction appointing a trustee, receiver or custodian of the assets
of
a Member unless the proceedings and the person appointed are dismissed
within ninety (90) days;
|
| (v) |
The
failure by a Member generally to pay its debts as the debts become
due
within the meaning of Section 303(h)(1) of the United States Bankruptcy
Code or the admission in writing of its inability to pay its debts
as they
become due; or
|
| (vi) |
A
Member’s Interest becoming subject to the enforcement of any rights of a
creditor of a Member, whether arising out of an attempted charge upon
such
Member’s Interest by judicial process or otherwise, if such Member shall
fail to obtain the release of those enforcement rights, whether by
legal
process, bonding, or otherwise, within ninety (90) days after actual
notice of such creditor’s action.
|
Bankrupt
Member.
A
Member
that is the subject of Bankruptcy.
Base
Indenture.
3
The
Indenture dated as of November 1, 1993, as amended, between Commercial Capital
and the Trustee.
Board.
The
Board
of Directors described in Section 8.1.
Capital
Account.
As
of any
date, with respect to any Member, the capital account maintained for such Member
as determined under Section 5.5.
Capital
Contribution.
The
total
amount of money and the agreed upon fair market value of any property
contributed to the Company by a Member or its predecessor in interest on the
date of contribution.
Cash
Determination Date.
The
last
day of the six (6) consecutive calendar month period described in Section
7.3.
Cash
Percentage.
As
of the
last day of any calendar month, the percentage of the Company’s Net Assets
represented by cash, cash equivalents and short term instruments with original
maturities of ninety (90) days or fewer.
Cause.
Cause
for
removal of the Manager as defined in Section 8.6(e).
CCAO
Series 2 Trust Collateralized Bonds
The
bonds
issued by Commercial Capital pursuant to the Base Indenture and the Series
2
Supplement.
CCAO
Series 3 Trust Collateralized Bonds
The
bonds
issued by Commercial Capital pursuant to the Base Indenture and the Series
3
Supplement.
CCAO
Series 2 Assets.
The
benefits of the Derivative Payments Agreement contributed to the Company by
IHCC
as described in Sections 5.2(b)(iii).
4
CCAO
Series 3 Assets.
The
security and redemption rights contributed to the Company by IHCC as described
in Sections 5.2(b)(i) and (ii).
Change
in Control Notice.
A
notice
from IHCC delivered pursuant to Section 15.3.
Change
in Control Transaction.
A
transaction or series of transactions in which a party that is not an Affiliate
of Dynex Capital will acquire more than twenty-five percent (25%) of the voting
securities of Dynex Capital to be outstanding after that transaction or series
of transactions.
Code.
The
United States Internal Revenue Code of 1986, as amended, and any successor
statute thereto.
Commercial
Capital.
Commercial
Capital Access One, Inc., a Virginia corporation, together with its successors
and assigns.
Company.
Copperhead
Ventures, LLC.
Company
Business.
The
business of the Company described in Section 4.
Company
Minimum Gain.
As
of any
date, the amount determined under Regulations Sections 1.704-2(b)(2) and
1.704-2(d).
Company
Nonrecourse Deductions.
The
amount of deductions of the Company calculated under Regulations Section
1.704-2(c).
Company
Revenues.
5
All
cash
revenue from the operation of the Company Business, interest income received
during the year, and reserves set aside in prior years and no longer deemed
necessary for the Company Business, as determined by the Board.
Control.
The
possession by any person or related group of persons, directly or indirectly,
of
the power to direct or cause the direction of the management and policies of
a
Person, whether through ownership of voting securities or partnership interests,
by contract or otherwise.
Controlled.
To
be
under the Control of the specified Person.
Controls
or Controlling.
The
possession of Control.
DBAH
Directors.
The
Directors designated by DBAH.
Debt
Service.
As
the
context requires, the amounts, including principal and interest, paid, payable
or due with respect to any loans to the Company, or to which the property or
assets of the Company are subject.
Derivative
Payments Agreement.
The
Derivative Payments Agreement in the form of Exhibit
B
between
the Company and IHCC.
Director.
Any
individual designated by a Voting Member to serve on the Board.
Disposition.
The
sale,
assignment, transfer or other disposition, in any manner, whether voluntarily
or
involuntarily, by operation of law or otherwise.
Dynex
Capital
Dynex
Capital, Inc., a Virginia corporation.
6
Dynex
Entity.
Each
of
Dynex Capital, Inc. and its Affiliates.
Dynex
Special Withdrawal Notice.
A
notice
from IHCC delivered pursuant to Sections 15.3(b) or (c).
Election
Notice.
A
notice
delivered by a Non-Withdrawing Member pursuant to Section 13.5(b).
Gain
or Loss from Sale.
Any
gain
or loss for federal income tax purposes resulting from the sale or other
disposition of any or all of the Company’s assets not in the ordinary course of
business, except that for purposes of Capital Account adjustments, such gain
or
loss shall be computed by reference to the value on the books of the Company
(determined in accordance with Regulations Sections 1.704-1(b)(2)(iv)(g) and
1.704-3(d)) as of the date of sale or other disposition rather than by reference
to the adjusted tax basis of such property as of that date.
IHCC
Directors.
The
Directors designated by IHCC.
Interest.
The
ownership interest of a Member in the Company at any particular time, including
the right of the Member to any and all benefits to which the Member is entitled
and the obligations to which the Member is subject under this Agreement. The
initial Interests of the Members, expressed as a percentage, are set forth
on
Exhibit
A.
Limited
Guaranty
The
Guaranty and Indemnification Agreement dated as of October 30, 1997, as defined
in the Series 2 Supplement.
Loan
Notice.
The
notice described in Section 5.3(a)(ii) of a Member’s intent to lend to the
Company under Section 5.3(a)(i), which shall specify the amount of the proposed
loan and the purposes therefor.
Management
Fee.
The
Management Fee provided for in Section 9.1(b).
7
Manager.
Dynex
Capital or another person designated as manager in accordance with Section
8.6.
Mandatory
Excess Cash Distribution.
A
distribution required by Section 7.3.
Measuring
Date.
See
Section 13.5.
Members.
IHCC,
DBAH, Advisors and any additions or successors thereto that are admitted as
Members.
Member
Nonrecourse Debt.
A
nonrecourse debt of the Company as described in Regulations Section
1.704-2(b)(4).
Member
Nonrecourse Debt Minimum Gain.
As
of any
date, the amount determined under Regulations Section
l.704-2(i)(3).
Member
Nonrecourse Deductions.
With
respect to a Member Nonrecourse Debt, the items of loss, deduction, and
expenditure attributable to such Member Nonrecourse Debt under Regulations
Section 1.704-2(i)(2).
Modified
Negative Capital Account.
The
deficit balance of a Capital Account in excess of the amount of the deficit,
if
any, a Member is obligated to contribute to the Company under the Agreement
or
is deemed obligated to restore pursuant to the Code Section 704(b)
Regulations.
Net
Assets
The
total
assets of the Company less any loans to the Company, or other obligations of
the
Company incurred to fund the purchase of investments.
Net
Cash from Operations.
For
any
taxable year, the excess of Company Revenues over the sum of (1) Operating
Expenses of the Company paid in cash during the year, (2) Debt Service,
(3) the cost of
8
any
Approved Investments made during the year plus any reserves established by
the
Board for the making of Approved Investments, and (4) any reasonable reserves,
as determined by the Board or in accordance with the Annual Business Plan,
for
Operating Expenses in succeeding years, for the repair, replacement or
preservation during the current or subsequent years of any Company asset, for
Debt Service, or for contingencies and unanticipated obligations.
Net
Income or Net Loss.
For
each
taxable year, the Company’s taxable income or taxable loss for such year, as
determined under Section 703(a) of the Code, and Regulations Section 1.703-1,
but with the following adjustments:
| (i) |
Any
tax exempt income, as described in Section 705(a)(1)(B) of the Code,
realized by the Company during such year and not otherwise taken into
account in computing Net Income or Net Loss shall be included as an
item
of gross income;
|
| (ii) |
Any
expenditures of the Company described in Section 705(a)(2)(B) of the
Code
for such Fiscal Year or treated as being so described in Regulations
Section 1.704-1(b)(2)(iv)(i) and not otherwise taken into account in
this
subsection shall be subtracted from such taxable income or taxable
loss;
and
|
| (iii) |
Notwithstanding
any other provision of this definition, any items that are specially
or
curatively allocated pursuant to Section 7 shall not be taken into
account
in computing Net Income or Net Loss.
|
Net
Proceeds from Financing.
Net
cash
realized by the Company from borrowing by the Company or refinancing of
indebtedness of the Company, reduced by (1) all expenses related to the
borrowing or refinancing, (2) the amount applied, as determined by the Board,
toward the payment of any indebtedness of the Company or other expenditures
on
behalf of the Company, (3) the cost of any Approved Investments to be made
with the proceeds plus any reserves established by the Board for the making
of
Approved Investments, and (4) reasonable reserves, as determined by the Board,
to satisfy other obligations of the Company or anticipated
expenditures.
Non-Withdrawing
Member.
A
Voting
Member that receives a Withdrawal Notice.
Operating
Expenses.
All
costs
and expenses of ownership and operation of the Company’s assets and the Company
Business, including, but not limited to, payroll costs, costs of materials,
taxes,
9
insurance
premiums, utility costs, costs of repairs and maintenance, costs for general,
administrative and overhead, audit expenses, and any other expenses incurred
in
the ordinary course of operating the Company Business.
Opposing
Member.
A
Voting
Member that receives a Sale Notice as provided in Section 13.7.
Payment
Date.
A
Payment
Date as defined for the purposes of the Series 2 Supplement.
Permitted
Transferees.
The
Persons described in Section 13.3.
Person.
Any
individual, corporation, partnership, limited liability company, firm, joint
venture, association, trust or unincorporated organization, a government, or
any
agency, authority or political subdivision thereof, or any other
entity.
Prime
Rate.
The
annual prime rate (or base rate) reported in the “Money Rates” column or section
of The
Wall Street Journal
as being
the base rate on corporate loans at larger U.S. Money Center commercial banks
on
the first date on which The
Wall Street Journal
is
published in each month. In the event The Wall Street Journal ceases publication
of the Prime Rate, then the “Prime Rate” shall mean the “prime rate” or “base
rate” announced by Bank of America, N.A. or the successor to substantially all
of its assets and business (whether or not such rate has actually been charged
by that bank). In the event that bank discontinues the practice of announcing
that rate, Prime Rate shall mean the highest rate charged by that bank on
short-term, unsecured loans to its most credit-worthy large corporate
borrowers.
Proportionate
Share.
The
share
equal to the Member’s Interest.
Regulations.
Regulations
issued under the Code by the Department of the Treasury, as amended from time
to
time.
Regulatory
Notice.
A
notice
delivered pursuant to Section 15.4.
10
Rules.
The
American Arbitration Association rules described in Section 20.1.
Sale
Notice.
A
notice
delivered pursuant to Section 13.7.
Selling
Member.
A
Voting
Member that delivers a Sale Notice as provided in Section 13.7.
Series
2 Collateralized Bonds.
CCAO
Trust Collateralized Bonds, Series 2, Class E, Class F and Class
G.
Series
2 Excluded Assets
Amounts
included in and to be distributed to Commercial Capital in accordance with
Section 9(xiv) of the Series 2 Supplement that result from the net purchase
proceeds received from the purchase of defaulted loans by SunAmerica or its
designee pursuant to the Limited Guaranty.
Series
2 Supplement.
Series
Supplement dated as of October 1, 1997 to the Base Indenture between Commercial
Capital, as Issuer, and the Trustee.
Series
3 Collateralized Bonds.
CCAO
Trust Collateralized Bonds, Series 3, Class F, Class G and Class
H.
Series
3 Excluded Assets
The
Class
3R, representing the residual certificate for pursuant to the Series 3
Supplement, and all accumulated and unpaid interest on the Series 3
Collateralized Bonds.
Series
3 Supplement.
Series
Supplement dated as of December 1, 1998 to the Base Indenture between Commercial
Capital, as Issuer, and the Trustee.
Trustee.
11
JPMorgan
Chase Bank, National Association (formerly known as The Chase Manhattan Bank
and
successor by merger to Chase Bank of Texas, National Association (formerly
known
as Texas Commerce Bank National Association)), as Trustee.
Successor
in Interest.
The
Person who succeeds to an Interest upon the Bankruptcy of a Member.
United
States Bankruptcy Code.
Title
11
of the United States Code, as amended from time to time.
Voting
Members.
IHCC
and
DBAH, and any successor to their Interests that are admitted as
Members.
Withdrawal
Notice.
A
notice
of withdrawal delivered pursuant to Section 13.5(a).
Withdrawing
Member.
A
Voting
Member that delivers a Withdrawal Notice.
| 3. |
NAME
AND PLACE OF BUSINESS.
|
| 3.1. |
Name.
|
No
Member
shall have the right to use, and each Member agrees not to use, any trade or
service names, marks, emblems or logos owned by or licensed to the Company
other
than on behalf of the Company.
| 3.2. |
Place
of Business.
|
The
principal place of business of the Company shall be ▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇, or such other place as the Board may
determine.
| 4. |
BUSINESS
OF COMPANY.
|
The
Company Business shall consist of the ownership and management of a portfolio
of
residential mortgage backed debt securities, commercial mortgage backed debt
securities, asset-backed debt securities, and other similar financial
instruments, including derivative securities, and equity securities. The Company
will seek to diversify its investments and allocation of the Company’s capital.
The Company shall not engage in any other business or activity without the
mutual consent of the Voting Members, which consent may be withheld in the
sole
discretion of either Voting Member. Notwithstanding anything contained herein
to
the contrary, each investment made by the Company must
12
comply
with DBAH’s Anti-Money Laundering and Compliance requirements (which shall be
consistent with the requirements applicable to Affiliates of DBAH), and, unless
otherwise approved by DBAH, all securities trading activity by the Company
must
be completed through a registered broker-dealer.
| 5. |
MEMBERS
AND CAPITAL CONTRIBUTIONS.
|
| 5.1. |
Members.
|
Each
Member has entered into this Agreement in reliance upon the unique knowledge,
experience and expertise of the Voting Members in the development and operation
of the Company Business. Accordingly, no Member shall be required to accept
performance under this Agreement from any Person other than a Member or a Person
to whom a Member is permitted to make a Disposition of its Interest, except
as
otherwise specifically provided in this Agreement.
| 5.2. |
Initial
Capital Contributions.
|
| (a) |
All
Capital Contributions shall be made by the close of business on
September 15, 2006, to be deemed made effective September 16,
2006.
|
| (b) |
IHCC
will contribute (or cause to be contributed) the following assets to
the
Company as Capital Contributions:
|
| (i) |
Its
ownership interests in the Series 3 Collateralized
Bonds;
|
| (ii) |
IHCC
will cause Commercial Capital to assign its optional right to redeem
all
of the outstanding CCAO Series 3 Trust Collateralized Bonds;
and
|
| (iii) |
IHCC
will deliver an executed copy of the Derivative Payments Agreement
with
the Company in the form of Exhibit
B
pursuant to which IHCC will agree to pay to the Company amounts equal
to
(A) the cash flow received by Commercial Capital with respect to the
Available Surplus and (B) the cash flow received by IHCC with respect
to
the Series 2 Collateralized Bonds.
|
The
Members hereby agree that the IHCC capital contribution pursuant to this Section
5.2 is not intended to include the Series 2 Excluded Assets and the Series
3
Excluded Assets.
The
Members agree that the value of the Capital Contributions of IHCC described
above are deemed to be Thirty Six Million Five Hundred Thousand Dollars
($36,500,000.00), consisting of [REDACTED
PURSUANT TO CONFIDENTIAL TREATMENT REQUEST]
with
respect to the assets described in subparagraphs (i) and (ii), and [REDACTED
PURSUANT TO CONFIDENTIAL TREATMENT REQUEST]
with
respect to the assets described in subparagraph (iii).
13
| (c) |
(i)Advisors
will contribute $184,000 to the Company as a Capital Contribution in
the
form of a promissory note in that principal amount (the “Advisors Note”)
bearing interest at a rate equal to the Prime Rate in the form attached
as
Exhibit
C.
|
| (ii) The Company will forgive the remaining principal balance of the Advisors Note on March 15, 2009; provided that on that date Advisor remains a Member of the Company. |
| (d) |
DBAH
will contribute to the Company as a Capital Contribution cash in an
amount
equal to Thirty Six Million Five Hundred Thousand Dollars
($36,500,000.00).
|
| 5.3. |
Additional
Capital.
|
| (a) |
(i)If
the Board determines that additional capital, in excess of that which
the
Members are obligated to contribute to the Company pursuant to
Section 5.2, is
needed by the Company to avoid a default by the Company with respect
to
Debt Service or other Company obligations incurred in accordance with
this
Agreement, to carry out the Business Plan or to protect and preserve
the
value of the Company’s assets or property, the Board shall notify the
Members of the additional required capital. A Member may, but shall
not be
required to, lend money to the Company, which loan shall bear interest
at
a fluctuating rate equal to two (2) percentage points above the Prime
Rate
(but in no event at an interest rate higher than the maximum rate legally
permitted). Any such loan shall be repaid in full before any distributions
are made under Section 7.
|
|
|
(ii)If
any Member proposes to lend to the Company under
Section 5.3(a)(i), that
Member shall give a Loan Notice to the other Members. The other Members
shall have the right to lend to the Company their respective Proportionate
Shares of the loan amount, by giving notice to the first Member within
fifteen (15) days
after the Loan Notice is given, and such loan to the Company shall
be made
within that time period.
|
| 5.4. |
Guaranty
of Company Indebtedness.
|
The
Members shall not be obligated to guarantee Company indebtedness unless all
Voting Members agree to do so.
| 5.5. |
Additional
General Provisions on Capital and Obligations of
Members.
|
| (a) |
(i)A
Capital Account shall be established and maintained for each Member.
A
Member shall have a single Capital
Account,
|
14
| (b) |
regardless
of the time or manner in which any portions of the Member’s Interest were
acquired. If an Interest is transferred in accordance with this Agreement,
the transferee shall succeed to the Capital Account of the transferor
to
the extent it relates to the transferred Interest.
|
|
(c)
|
In
accordance with Regulations Section 1.704-1(b)(2)(iv),
a Member’s Capital Account shall consist of (A) the sum of (1) its Capital
Contributions, (2)
allocations to it of Net Income and Gain from Sale (or items thereof)
(other than gain under Section 6.6) including income and gain exempt
from
tax, and (3) the amount of any Company liabilities assumed by that
Member
or which are secured by any Company assets distributed to that Member
(to
the extent of the value of the securing assets), minus
(B) the sum of (1) the cash and fair market value of property distributed
to it by the Company, (2) the amount of any liabilities of that Member
assumed by the Company or secured by any property contributed by
that
Member to the Company, (3) allocations to it of expenditures of the
Company described in Section 705(a)(2)(B) of the Code or treated
as such
expenditures under the Regulations, and (4) allocations
to it of Net Loss and Loss from Sale (or items
thereof).
|
| (iii) |
(A)In
accordance with Regulations Section 1.704-1(b)(2)(iv)(f), the book
value
of the Company’s assets shall be revalued and the Capital Account of each
Member shall be adjusted to reflect a revaluation of the Company’s assets
upon the occurrence of the following
events:
|
| (1) |
The
contribution of money or other property (other than a de minimis
amount) to the Company by a new or existing Member as consideration
for an
Interest;
|
| (2) |
The
distribution of money or other property (other than a de minimis
amount) by the Company to a retiring or continuing Member as consideration
for an Interest; or
|
| (3) |
The
liquidation of the Company within the meaning of Regulation Section
1
.704-1(b)(2)(ii)(g).
|
|
(B)
|
The
adjustment shall be based on the fair market value of Company property
(taking Section 7701(g) of the Code into account) on the date of
adjustment, and shall reflect the manner in which the unrealized
income,
gain, loss or deduction inherent in the property (that has not previously
been reflected in the Capital Accounts) would have
been
|
15
allocated
among the Members if there had been a taxable disposition of the property for
fair market value on that date.
| (iv) |
If,
pursuant to Regulations Section 1.704-1(b)(2)(iv)(d) or
1.704-1(b)(2)(iv)(f), any Company asset has a book value that differs
from
the adjusted tax basis of that asset, then the Capital Accounts shall
be
adjusted in accordance with Regulation Sections 1.704-1(b)(2)(iv)(g)
and
for allocations of depreciation, depletion, amortization and gain or
loss
computed for book purposes rather than tax purposes, with respect to
such
asset.
|
| (v) |
If
there is any basis adjustment pursuant to an election under Section
754 of
the Code, then the Capital Accounts shall be adjusted to the extent
required by the Regulations.
|
| (vi) |
The
principles in this Agreement governing the adjustments of Capital Accounts
are intended to satisfy the capital account maintenance requirements
of
Regulation Section 1 .704-l(b)(2)(iv) and shall be construed consistently
therewith.
|
| (b) |
No
Member gives up any of its rights to be repaid its Capital Contribution
in
favor of the other Members.
|
| (c) |
No
Member shall be paid interest on its Capital
Account.
|
| (d) |
No
Member shall have the right to demand and receive any distribution
from
the Company in any form other than cash, regardless of the nature of
its
Capital Contribution.
|
| (e) |
Except
as otherwise provided in this Agreement, no Member shall have the right
to
demand and receive property of the Company in return of its Capital
Contribution or in respect of its Interest until the termination of
the
Company.
|
| (f) |
The
liability of each Member to the Company or the other Members for the
losses, debts, liabilities and obligations of the Company shall be
limited
to paying its Capital Contributions when due under the Agreement, its
share of any undistributed assets of the Company, and (only to the
extent
required by the Act or other applicable law) any amounts previously
distributed to it from the Company.
|
| 5.6. |
No
Third Party Beneficiaries.
|
The
foregoing provisions of this Section are not intended to be for the benefit
of
any creditor or other person to which any debts, liabilities or obligations
are
owed by (or that otherwise has any claim against) the Company or any of the
Members; and no creditor or other person shall obtain any right under any of
the
foregoing
16
provisions
or shall by reason of any of the foregoing provisions make any claim in respect
of any debt, liability or obligation (or otherwise) against the Company or
any
of the Members.
| 6. |
ALLOCATIONS.
|
| 6.1. |
Net
Income, Net Loss and Credits.
|
Subject
to Sections 6.5 through 6.8, Net Income, Net Loss and tax credits shall be
allocated among the Members in proportion to their respective
Interests.
| 6.2. |
Gain
from Sale.
|
|
Subject
to Sections 6.5 through 6.8, Gain from Sale shall be allocated among
the
Members in proportion to their respective
Interests.
|
| 6.3. |
Loss
from Sale.
|
Subject
to Sections 6.6 and 6.8, Loss from Sale shall be allocated among the Members
in
proportion to their respective Interests.
| 6.4. |
Mid-Year
Transfers.
|
In
the
case of an Interest that has been transferred during the year, unless otherwise
agreed by the parties to the transfer:
| (a) |
All
Net Income and Loss allocable to the Interest shall be allocated between
the transferor and the transferee in the ratio of the number of days
in
the year before and after the effective date of the transfer without
regard to the dates during the year on which income was earned, losses
were incurred or Net Cash from Operations was
distributed.
|
| (b) |
Tax
credits, if any, shall be allocated among the Members at the time the
property with respect to which the credit is claimed is placed in
service.
|
| (c) |
All
Gain or Loss from Sale shall be allocated to the holder of the Interest
as
of the date on which the Company recognizes that Gain or Loss from
Sale.
|
| 6.5. |
Minimum
Gain Chargeback.
|
| (a) |
Notwithstanding
anything to the contrary in this Agreement, if there is a net decrease
in
the Company Minimum Gain during a fiscal year, then there shall be
allocated to the Members items of Company income and gain in accordance
with the Minimum Gain chargeback requirements of Regulations Section
1.704-2(f).
|
| (b) |
Notwithstanding
anything to the contrary in this Agreement, if there is a net decrease
in
Member Nonrecourse Debt Minimum Gain during a
fiscal
|
17
| (c) |
year,
there shall be allocated to any Member with a share of that Member
Nonrecourse Debt Minimum Gain items of income and gain in accordance
with
the requirements of Regulations Section 1
.704-2(i)(4).
|
| 6.6. |
Allocations
to Reflect Book Value/Tax Disparity.
|
In
accordance with Section 704(c) of the Code and the 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 into account any variation between the adjusted basis
of such property to the Company for federal income tax purposes and its agreed
upon fair market value at the time of contribution, such that any unrealized
gain or loss associated with such property at the time of the contribution
is
allocated to the Member that contributed the property; and any additional gain
or loss associated with such property is allocated among the Members in
accordance with their respective Interests. In addition, if Company property
is
revalued and the Capital Accounts are adjusted, then subsequent allocations
of
income, gain, loss and deduction for tax purposes with respect to the revalued
property shall take into account the variation between the property’s adjusted
tax basis and book value in the same manner as under Section 704(c) of the
Code
and Regulations.
| 6.7. |
Qualified
Income Offset.
|
If
a
Member unexpectedly receives an adjustment, allocation, or distribution
described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) that
creates or increases a Modified Negative Capital Account, then items of income
or gain (consisting of a pro rata portion of each item of Company income,
including gross income and gain for such year) shall be allocated to that Member
in an amount and manner sufficient to eliminate, to the extent required by
the
Regulations, the Modified Negative Capital Account created or increased by
the
adjustments, allocations or distributions as quickly as possible. For purposes
of this Section 6.7, in determining whether a Member has a Modified
Negative Capital Account, there shall be taken into account those adjustments,
allocations and distributions that, as of the end of the year, are reasonably
expected to be made.
| 6.8. |
Member
Nonrecourse Deductions.
|
Any
Member Nonrecourse Deductions for any fiscal year shall be 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 Regulations Section 1.704-2(i)(1).
18
DISTRIBUTIONS.
| 6.9. |
Net
Cash from Operations.
|
Net
Cash
from Operations for any year shall be distributed to the Members at such time
as
the Board shall determine, but not less than annually, in proportion to their
respective Interests.
| 6.10. |
Net
Proceeds from Financing.
|
Net
Proceeds from Financing shall be distributed to the Members (at such time as
the
Board shall determine) in proportion to their respective Interests.
| 6.11. |
Mandatory
Excess Cash Distribution.
|
If
for
any period greater than six (6) consecutive calendar months beginning with
the
fourth (4th)
calendar month next commencing after the date of this Agreement, the Company’s
Cash Percentage, as calculated as of the last day of each calendar month for
the
purposes of Section 9.1(b), exceeds thirty percent (30%), then unless otherwise
directed by the Board, the Company shall distribute to the Members within thirty
(30) days following the last day of the applicable six (6) consecutive calendar
month period (the "Cash Determination Date") an amount of cash sufficient to
cause the Cash Percentage to be ten percent (10%) or less as of the Cash
Determination Date. Each Mandatory Excess Cash Distribution made pursuant to
this Section 7.3 shall be distributed to the Members in proportion to their
respective Interests.
| 6.12. |
Mid-Year
Transfers.
|
In
the
case of an Interest that has been transferred during the year, unless otherwise
agreed by the parties to the transfer:
| (a) |
Net
Cash from Operations shall be distributed to the holder of the Interest
on
the date of distribution.
|
| (b) |
Net
Proceeds from Financing allocable to the Interest shall be distributed
to
the holder of the Interest on the date of
distribution.
|
| 6.13. |
Outstanding
Loans to Company.
|
Notwithstanding
anything to the contrary contained in this Section 7 or in Section 5.2(c)
and except as provided below, no distributions shall be made to any Member
until
all loans, together with interest accrued thereon, owed by that Member to the
Company have been repaid in full. Any distribution due to Advisors while any
of
the principal or interest under the Advisors Note remains outstanding shall
be
applied first to repay accrued and unpaid interest and then to any unpaid
principal of the Advisors Note. Advisors shall not receive any cash
19
distribution
until the principal of and any interest accrued on the Advisors Note have been
repaid in full.
| 6.14. |
Other
Payments to Advisors.
|
| (a) |
The
Members will negotiate in good faith with respect to the payment of
additional fees to Advisors in the event that Advisors is engaged by
the
Company to and successfully facilitates the early redemption of the
Series
2 Collateralized Bonds and/or the Series 3 Collateralized Bonds. To
the
extent Advisors does not receive such fees in cash, the Members will
negotiate in good faith to adjust the distributions and allocations
otherwise provided for in this Section 7 and in Section 6.
|
| (b) |
Advisors
shall receive a one-time fee, payable upon the repayment, maturity,
sale
or other liquidation of an investment of the Company, equal to one
percent
(1.0%) of the purchase price of any investment made by the Company
that
was introduced to the Company by Advisors. The fee payable to Advisors
pursuant to this subsection shall only be payable after the Company
recovers its basis in such investment plus a profit equal to the one-month
London Interbank Offered Rate compounded on a monthly basis from the
inception of the investment.
|
| 7. |
MANAGEMENT.
|
| 7.1. |
Board
of Directors.
|
| (a) |
The
Company Business shall be managed by a Board that shall consist initially
of two Directors, with the Voting Members each having the right to
designate one Director.
|
| (b) |
The
Board shall, subject to the approval rights and other requirements
in
Section 4 and the approval rights reserved to the Voting Members in
Sections 5.4, 16 and 17, and subject to Section 8.8, have exclusive
authority and full discretion with respect to the management of the
Company Business.
|
| (c) |
The
Board shall act by resolution duly adopted at a meeting of the Board
or by
consent in writing of all Directors. Directors may vote or give their
consent in person or by proxy.
|
| (d) |
No
action may be taken by the Board without the affirmative vote of at
least
two Directors.
|
| 7.2. |
Appointment
and Removal of Directors.
|
| (a) |
Each
Voting Member shall promptly designate its Director so that the Board
shall at all times consist of two
Directors.
|
20
| (b) |
Either
Voting Member may at any time, by notice to the other Members, remove
any
or all of its Directors, with or without cause, and substitute new
Directors to serve in their stead. No Director shall be removed from
office, with or without cause, without the consent of the Voting Member
that designated him.
|
| (c) |
If
any Director is unwilling or unable to serve or is removed from office
by
the Voting Member that designated him, the Voting Member that designated
him shall designate the successor to that
Director.
|
| (d) |
The
notice of a Voting Member appointing a Director shall in each case
set
forth that Director’s business and residence addresses and business
telephone number.
|
| (e) |
Each
Voting Member shall promptly give notice to the other Voting Member
of any
change in the business or residence address or business telephone number
of any of its Directors.
|
| 7.3. |
Exercise
of Authority Granted to the Board.
|
| (a) |
Subject
to the limitations of Section 8.3(b), the Board may delegate such general
or specific authority to the officers of the Company as it from time
to
time considers desirable, and the officers of the Company may, subject
to
any restraints or limitations imposed by the Board, exercise the authority
granted to them.
|
| (b) |
Notwithstanding
anything contained herein to the contrary, the authority to determine
the
following matters with respect to the Company shall be retained by
the
Board (subject to Section 8.6) and any action with respect thereto
may be
taken by the officers of the Company (within such general or specific
limits as may be determined by the Board) only after the Board has
approved the action in question in accordance with this
Section:
|
| (i) |
Investing
the assets of the Company (provided that the Manager may invest assets
of
the Company in short term instruments with original maturities of ninety
(90) days or fewer and that are rated the equivalent of AAA by two
of the
three national ratings agencies, without the approval of the Board);
|
| (ii) |
Take
any action that would have the effect of causing the Company not to
cause
the redemption of the CCAO Series 3 Trust Collateralized Bonds issued
pursuant to the Series 3 Supplement in February
2009;
|
| (iii) |
Appointing
or removing the Manager, subject to Section
8.6(e);
|
| (iv) |
Determining
the amount and necessity for loans pursuant to Section
5.3(a);
|
21
| (v) |
Determining
the amount and timing of distributions to the
Members;
|
| (vi) |
Entering
into any transaction between the Company and any Member or any Affiliate
of a Member, other than a loan pursuant to Section
5.3(a);
|
| (vii) |
Acquiring
or starting up any new business activity within the Company
Business;
|
| (viii) |
Except
as provided in Section 5.3(a), borrowing money, other than trade debt
in
the ordinary course of the Company Business or as provided for in the
Annual Business Plan then in effect;
|
| (ix) |
Pledging,
placing in trust, assigning or otherwise encumbering any existing
property, now owned or hereafter acquired by the Company, excluding
accounts receivable from trade creditors, as collateral or security
for
any borrowing or other obligation of the Company, except for pledges
or
deposits under workmen’s compensation, unemployment insurance and social
security laws or to secure the performance of bids, tenders, contracts
(other than for the repayment of money), or leases, or to secure statutory
obligations or surety or appeal bonds or to secure indemnity, performance
or similar bonds used in the ordinary course of
business;
|
| (x) |
Selling
or otherwise disposing of, or contracting to sell or otherwise dispose
of,
any of the Company’s assets in any one transaction or in any series of
transactions out of the ordinary course of the Company Business, other
than as contemplated by the Annual Business Plan then in
effect;
|
| (xi) |
Causing
the Company to be merged, pooled or combined with any other business
or
enterprise;
|
| (xii) |
Adopting
overall financial policies for the Company including, without limitation,
adopting or changing significant tax or accounting principles or policies,
adopting the initial and subsequent Annual Business Plans or any
amendments thereto, or any change in the amount of any reserves to
be
maintained by the Company;
|
| (xiii) |
Assuming,
guaranteeing (other than credit card obligations for employees), endorsing
or otherwise becoming liable for the obligations of any Person except
by
endorsement for purposes of discount or collection of notes or other
instruments received by the Company from customers in the ordinary
course
of business;
|
| (xiv) |
Commencing
or entering into the resolution of any actual or threatened litigation
involving the Company with respect to which the aggregate amount in
controversy exceeds $10,000 or that is otherwise material or seeking
injunctive relief against or on behalf of the
Company;
|
| (xv) |
Making
loans or advances to any party, excluding advances for travel
expenses;
|
| (xvi) |
Entering
into any contract or commitment obligating the Company to make aggregate
expenditures of more than $25,000;
|
| (xvii) |
Dissolving
the Company except as otherwise provided in
Section 14.1(a)(i);
|
| (xviii) |
Selecting
or changing the Auditor;
|
22
| (xix) |
Changing
the fiscal year of the Company or any accounting policy or procedure
of
the Company, except as required by law;
|
| (xx) |
Entering
into any collective bargaining agreement;
|
| (xxi) |
Amending
or modifying any contract, agreement or arrangement required to be
approved by the Board pursuant to this Section 8.2(b);
|
| (xxii) |
Declaring
bankruptcy of the Company; and
|
| (xxiii) |
Making
any other decision material to the Company’s operations, management,
business or financial condition.
|
| 7.4. |
Chairman
of the Board.
|
| (a) |
The
Chairman of the Board, who shall be one of the Directors, shall be
selected by each Voting Member on a rotating basis for a one (1) year
term. The initial Chairman of the Board shall be designated by
DBAH.
|
| (b) |
The
Chairman of the Board shall preside at Board meetings.
|
| 7.5. |
Meetings
of the Board.
|
| (a) |
The
Directors shall hold not less than four (4) regular meetings each year
on
such dates and at such times as may be designated by the
Board.
|
| (b) |
Special
meetings of the Board may be held at any time, upon call of the Manager
or
any Director.
|
| (c) |
Unless
waived in writing by all of the Directors (before or after a meeting),
at
least two (2) business days’ prior notice of any meeting
shall
|
23
| (d) |
be
given to each Director. Such notice shall, in the case of a special
meeting, state the purpose for which such meeting has been called.
No
business can be conducted or action taken at such meeting that is not
provided for in such notice. Except as otherwise determined by the
Board,
the locations of all meetings of the Board shall be alternated between
locations within the United States (unless otherwise agreed by the
Voting
Members) designated by each Voting Member. Meetings of the Board shall
be
conducted in accordance with ▇▇▇▇▇▇▇ Rules of
Order.
|
| (e) |
A
quorum for any meeting of the Board shall be at least two (2) of the
Directors then in office.
|
| (f) |
The
Board shall cause to be kept a book of minutes of all of its meetings
in
which there shall be recorded the time and place of such meeting, whether
regular or special, and if special, by whom such meeting was called,
the
notice thereof given, the names of those present, and the proceedings
thereof. Copies of any consents in writing shall also be filed in such
minute book.
|
| (g) |
Members
of the Board may participate in a meeting of the Board by means of
conference telephone or similar communications equipment by means of
which
all persons participating in the meeting can hear each other, and such
participation shall constitute presence in person at such meeting.
Either
Voting Member may permit its employees or employees of its Affiliates
to
attend Board meetings as non-voting
observers.
|
| 7.6. |
Manager.
|
| (a) |
The
Manager shall act as agent of the Company and shall have such powers
as
are usually exercised by officers of a Delaware corporation and shall
have
the power to bind the Company through the exercise of such powers,
to the
extent consistent with the terms hereof.
|
| (b) |
The
initial Manager of the Company shall be Dynex
Capital.
|
| (c) |
Unless
the Board otherwise approves as provided in Section 8.3(b)(ii), the
Manager shall take all actions necessary to cause the Company to exercise
the rights assigned to it by Commercial Capital to redeem the CCAO
Series
3 Assets in February 2009 in accordance with the terms of the Base
Indenture and the Series 3 Supplement or any other documents governing
those securities.
|
| (d) |
Unless
the Board otherwise directs, the Manager shall take all actions necessary
to enforce, on behalf of the Company, the obligation of IHCC under
the
Derivative Payments Agreement to cause the redemption of the CCAO Series
2
Trust Collateralized Bonds at the earliest possible date that those
bonds
may be redeemed.
|
24
| (e) |
The
Manager may be removed for "Cause" (as defined below) by either Voting
Member, by the DBAH Directors or by the IHCC Directors. In the event
of
removal, a new Manager reasonably acceptable to each Voting Member
shall
be appointed by the Board. There shall be Cause to remove the Manager
if
the Manager or any Affiliate of the Manager: (i) intentionally engages
in
dishonest conduct in connection with the Manager's performance of services
for the Company; (ii) is convicted of, or pleads guilty or nolo
contendere
to, a felony or any crime involving moral turpitude; (iii) willfully
fails
or refuses to perform the Manager's material obligations under any
agreement with the Company; (iv) breaches in any material respect any
fiduciary duties to the Company; or (v) willfully breaches or violates
in
a material respect any law, rule or regulation in connection with the
Manager's performance of services for the
Company.
|
| 7.7. |
Annual
Business Plan.
|
| (a) |
The
Manager shall, on or before December 31 of each year, propose an
annual budget (collectively, the “Annual Business Plan”) for the Company
for the next fiscal year and submit that budget to the Board for its
approval. The budget shall include a profit and loss statement, a cash
flow statement and a balance sheet for the next fiscal year, as of
year
end, and proposals for deployment of the Company's assets.
|
| (b) |
The
Board shall consider the adoption of the Annual Business Plan at a
meeting
called for that purpose and may modify or adjust the Annual Business
Plan
or any aspect thereof in such manner as it deems appropriate. The Company
Business shall be carried on in accordance with the Annual Business
Plan
as adopted by the Board.
|
| 7.8. |
Limitation
on Other Members’ Powers.
|
Except
for designating and removing Directors pursuant to Sections 8.1(a) and 8.2,
adopting a plan of liquidation and directing the Manager in winding up the
affairs of the Company after the dissolution of the Company pursuant to
Section 14.1(a)(i), as provided in Section 15.2, and executing certificates
and amendments thereof as described in Section 19; no Member acting alone shall,
without the consent of the Voting Members, have any right or authority, either
express or implied, to act for or bind the Company.
| 7.9. |
Execution
of Documents.
|
| (a) |
Any
deed, deed of trust, ▇▇▇▇ of sale, lease agreement, security agreement,
financing statement, contract of sale or other contract or instrument
purporting to bind the Company or to convey or encumber any of the
assets
of the Company in the ordinary course of business, may be signed by
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ in his capacity as an executive officer of the
Manager, or by another executive officer of the Manager, after
obtaining
|
25
| (b) |
the
approval required by this Agreement, and no other signature shall be
required. For the purposes of this Agreement, “executive officer” shall
have the same meaning given that term under Rule 3b-7 promulgated by
the
Securities and Exchange Commission under the Securities Exchange Act
of
1934.
|
| (c) |
Any
Person dealing with the Company shall be entitled to rely on a certificate
of the Manager, as conclusive evidence of the incumbency of the Manager
and its authority to take action on behalf of the Company and shall
be
entitled to rely on a copy of any resolution or other action taken
by the
Board and certified by the Manager, as conclusive evidence of such
action
and of the authority of the Manager to bind the Company to the extent
set
forth therein.
|
| 8. |
COMPENSATION
AND REIMBURSEMENT OF MEMBERS.
|
| 8.1. |
Compensation
of Members.
|
| (a) |
Except
as provided in Section 10 or as the Board may otherwise determine,
no
Member shall receive any compensation for its services to the
Company.
|
| (b) |
If
the Manager is a Member or an Affiliate of any Member, the Manager
will
not be entitled to receive any compensation from the Company for its
services. If the Manager is not a Member or an Affiliate of a Member,
the
Manager will be entitled to receive from the Company a quarterly
Management Fee equal to 0.017% of the value of the Net Assets in the
Company's portfolio as of the last business day of each calendar quarter.
The Company shall pay the Management Fee for the preceding calendar
quarter to the Manager not later than the tenth (10th)
day of each calendar quarter. The value of the Net Assets in the Company’s
portfolio as of the last business day of each calendar quarter shall
be
determined by reference to the financial statements of the Company
prepared in accordance with generally accepted accounting
principles.
|
| 8.2. |
Reimbursement
Restrictions.
|
| (a) |
No
Member shall, without Board approval, be entitled to be reimbursed
for any
expenses incurred by that Member in its capacity as Member including,
without limitation, direct out-of-pocket expenses, overhead or
administrative expenses or any allocated expenses of employees or
staff.
|
| (b) |
Except
with respect to travel and related expenses incurred by the Directors
in
conjunction with attendance at meetings of the Board, no compensation
of,
or expenses incurred by, the Directors incident to their duties and
responsibilities as Directors (as contrasted with expenses incurred
by the
Manager) under this Agreement shall be paid by, or charged to, the
Company.
|
26
| (c) |
AUTHORITY
OF THE MEMBERS AND AFFILIATES TO DEAL WITH THE COMPANY, COMPETE WITH
THE
COMPANY AND COMPETE WITH EACH OTHER.
|
| 8.3. |
General
Authority.
|
The
Company may, in the Board’s discretion, (a) engage any Person in which any
Member, or any Affiliate of a Member, may have an interest, for the performance
of any and all services or purchase of goods or other property that may at
time
be necessary, proper, convenient, or advisable in carrying on the Company
Business, or (b) transact the Company Business with, or sell or all of the
Company’s assets to, any Person in which a Member, or any Affiliate, may have an
interest if the compensation or price therefor does not materially and adversely
differ from that prevailing in arm’s length transactions by others rendering or
receiving similar services or purchasing similar goods or other property in
comparable transactions as an on-going activity in the same geographical area
where such business is transacted.
| 8.4. |
Competition
with the Company.
|
| (a) |
Except
as expressly limited by this Section 10.2(a), any of the Members and
any
Affiliate of a Member may engage in and possess an interest in any
business venture of any nature and description, independently or with
others; and neither the Company nor the other Members shall, except
as
otherwise provided in this Section 10.2(a), have any right by virtue
of
this Agreement in and to any such independent ventures or to the income
or
profits derived therefrom. Neither a Member nor any Affiliate of a
Member
shall be obligated to present any particular investment opportunity
to the
Company even if such opportunity is of a character which, if presented
to
the Company, could be taken by the Company, and each of them shall
have
the right to take for its own account (individually or as a trustee)
or to
recommend to others any such particular investment opportunity.
|
|
(b)
|
Notwithstanding
the provisions of Section 10.2(a), Advisors shall not intentionally
engage
in willful misconduct that Advisors reasonably knows or should know
will
have a material adverse effect on the Company or its business, operations
or reputation.
|
| 8.5. |
Redemption
of Bonds.
|
No
Member
will take, and each Member will use reasonable efforts to cause its Affiliates
not to take, any action that would impair the ability of the Company to redeem
the Series 2 Collaterized Bonds and/or the Series 3 Collaterized
Bonds.
27
ACCOUNTS,
BOOKS, RECORDS, ACCOUNTING REPORTS AND TAX MATTERS.
| 8.6. |
Bank
Accounts.
|
All
funds
of the Company shall be deposited in accounts of the Company at such financial
institutions as the Board may designate. Withdrawals from any such account
shall
be made only in the regular course of the Company Business. All withdrawals
shall be made upon the signature of such individual or individuals as the Board
shall designate.
| 8.7. |
Maintenance
of Books.
|
The
Company shall keep or cause to be kept complete and accurate books of account,
in which shall be entered fully and accurately each and every transaction of
the
Company. The Company’s books shall be maintained at the principal place of
business of the Company or at such other place as the Board may from time to
time designate; and each Member shall have access to the books at all reasonable
times and the right to inspect and copy such books either directly or through
a
person designated by it.
| 8.8. |
Method
of Accounting.
|
All
books
and records of the Company shall be kept in accordance with generally accepted
accounting principles, with such exceptions as the Board may determine from
time
to time, with an annual accounting period ending in December, except for the
final accounting period, which shall end on the date of termination of the
Company. Any reference in this Agreement to a “fiscal year” shall be to such
annual accounting period.
| 8.9. |
Financial
Reports.
|
| (a) |
The
Company shall prepare or cause to be prepared and shall provide to
each
Member, within ten (10) business days after the end of each month,
a
statement of profit and loss, a cash flow statement for such month
showing
variations from the budgeted amount for such month and the year to
date,
and a balance sheet as of the end of such month, all on a consolidated
basis and separately for each reporting
unit.
|
| (b) |
The
Company shall also cause to be prepared and shall send to each Member
within ninety (90) days after the end of each fiscal year, audited
financial statements and a statement of profit and loss approved by
the
Auditors.
|
| (c) |
In
addition, the Company shall cause to be prepared and shall send to
each
Member within ninety (90) days after the end of each fiscal year, a
report
stating each Member’s distributive share of each class of income, gain,
loss or deduction, including tax preference items, for the
year.
|
28
| (d) |
Tax
Returns and Information.
|
| (e) |
It
is intended that the Company be characterized and treated as a partnership
for, and solely for, federal, state and local income tax purposes.
For
such purpose, the Company shall be subject to all of the provisions
of
subchapter K of chapter 1 of subtitle A of the Code, and all references
to
a “Partner,” to “Partners” and to the “Partnership” in the provisions of
the Code and Regulations cited in this Agreement shall be deemed to
refer
to a Member, the Members and the Company,
respectively.
|
| (f) |
The
Company shall cause to be prepared and timely filed annually the federal,
state and local tax returns of the Company. Drafts of the tax returns
shall be submitted to each Member for review at least thirty (30) days
before the earlier of (a) the proposed filing date or (b) the due date
for
filing, including extensions that have been granted. The Company shall
cause to be delivered to each Member (i) the tax information required
to
enable the Members to prepare and file their tax returns in a timely
manner, and (ii) copies of all tax returns and amendments thereto filed
by
the Company.
|
| 8.10. |
Tax
Matters Partner.
|
| (a) |
IHCC
is designated as the Tax Matters Partner for purposes of the
Code.
|
| (b) |
(i)The
Tax Matters Partner shall keep the other Members informed of all
administrative and judicial proceedings and shall promptly provide
the
other Members with copies of all notices and other communications to
and
from the Internal Revenue Service or other federal, state or local
administrative agency pertaining to any tax or similar return filed
by the
Company.
|
| (ii) |
The
Tax Matters Partner shall promptly give notice to the other Members
of the
time and place of meetings with representatives of the Internal Revenue
Service or other federal, state or local administrative agency pertaining
to any tax or similar return filed by the Company, and DBAH shall be
given
the opportunity to have a representative attend any such
meeting.
|
| (iii) |
If
any matter concerning the Company is in litigation, the Tax Matters
Partner shall keep the other Members informed of the progress of the
litigation and shall afford DBAH, through its representative, the
opportunity to attend all meetings and hearings pertaining to such
litigation.
|
| (iv) |
The
Tax Matters Partner shall provide the other Members with copies of
all
pleadings, notices or other material documents or communications relating
to such litigation.
|
29
| (v) |
Notwithstanding
any right or power that may be granted to the Tax Matters Partner under
the Code or any other provision of law, the Tax Matters Partner shall
not,
without the approval of the Board or an individual designated by each
Voting Member for such purpose:
|
| (vi) |
extend
the statute of limitations on behalf of the
Company;
|
| (vii) |
determine
the Company’s choice of the forum for the litigation of any matter
pertaining to the treatment of items of income, deduction or
credit;
|
| (viii) |
determine
whether to appeal or not appeal any administrative or judicial
determination;
|
| (ix) |
enter
into any settlement agreement with the Internal Revenue Service which
purports to bind a Member other than the Tax Matters Partner; or
|
| (x) |
file
any request for an administrative adjustment under Section 6227 of
the
Code.
|
| 8.11. |
Fair
Value Information.
|
From
time
to time upon request by the Manager, DBAH will use reasonable efforts to provide
the Company with information regarding the fair market value of the assets
of
the Company.
| 9. |
EXCULPATION
AND INDEMNIFICATION OF THE MEMBERS.
|
| 9.1. |
Exculpation.
|
No
Member
or Manager, nor any Director of the Company, shall be liable to the Company
or
to any Member for or as a result of any act, omission or error in judgment
that
was taken, omitted or made by it in the exercise of its judgment in good faith
pursuant to the authorization granted to it under this Agreement or delegated
to
it pursuant to this Agreement that does not constitute gross negligence, willful
misconduct or a knowing violation of law, or a transaction from which the
Member, Manager or Director derived an improper personal benefit.
| 9.2. |
General
Indemnification.
|
| (a) |
To
the extent that a corporation is permitted to indemnify its directors
under the Delaware General Corporation Law, the Company shall indemnify
and hold harmless the Members, the Manager and the Directors from and
against all costs, loss, damage and expense, including reasonable
attorney’s fees, arising out of or resulting from any act performed by
such Member, Manager or Director, within the scope of the authority
conferred
|
30
| (b) |
upon
it by this Agreement or delegated to it pursuant to this Agreement,
except
for (i) acts of gross negligence, fraud, willful misconduct or knowing
violations of law by such Member, Manager or Director, or (ii) damages
arising from a transaction from which such Member, Manager or Director
derived an improper personal benefit.
|
| (c) |
Each
Member shall indemnify and hold harmless the Company and the other
Members
from and against all costs, loss, damage and expense, including reasonable
attorney’s fees, arising out of or resulting from any act performed by the
indemnifying Member beyond the scope of authority conferred upon the
indemnifying Member by this Agreement or by reason of any act of fraud,
bad faith, gross negligence, willful misconduct, knowing violation
of law,
or arising from a transaction from which the Member derived an improper
personal benefit.
|
| 10. |
TRANSFER
OF INTERESTS AND WITHDRAWAL.
|
| 10.1. |
No
Right to Resign or Withdraw.
|
Except
as
provided below, no Member shall have any right to voluntarily resign or
otherwise withdraw from the Company without the written consent of all Voting
Members.
| 10.2. |
Transfer
of Interest.
|
No
Member
shall, directly or indirectly, make a Disposition of all or any part of the
Interest now owned or subsequently acquired by it, other than as provided in
this Agreement. Any Disposition without full compliance with this Agreement
shall be void.
| 10.3. |
Permitted
Transfers.
|
| (a) |
Notwithstanding
the above, a Member may transfer all or any portion of its Interest
at any
time to any of the following (the "Permitted
Transferees"):
|
| (i) |
Other
Members (subject to Section 13.4 with respect to the Interest of
Advisors);
|
| (ii) |
A
Member’s Affiliate.
|
Provided,
however,
that
the transferee, as a condition of becoming a Permitted Transferee, expressly
consents in writing to be bound by all the terms and conditions of this
Agreement then in effect; and provided further that no Permitted Transferee
shall become a substitute Member without compliance with the terms of
Section 13.6.
31
Notwithstanding
the provisions of Section 13.3(a), no Member may sell or exchange more than
twenty five percent (25%) of its Interest within any twelve (12) month period
unless either (i) the selling or exchanging Member obtains the prior written
consent of the Voting Members or (ii) in the opinion of counsel for the Company,
if Section 708 of the Code applies to such a sale or exchange, then the effects
of Section 708 of the Code would not have a substantial adverse effect on the
other Members. Moreover, no Disposition by any Member may be made if the
Disposition (either considered alone or in the aggregate with prior Dispositions
by other Members) would result in the Company being classified as a “publicly
traded partnership” within the meaning of Section 7704(b) of the Code.
| (b) |
For
the purposes of this Agreement, if a Voting Member transfers all or
any
portion of its Interest to a Permitted Transferee, and the Permitted
Transferee is admitted as a substitute Member pursuant to Section 13.5,
then all references to a Voting Member or Voting Members in this Agreement
shall be deemed to refer collectively to such Voting Member and its
Permitted Transferees that have become Members. For the purposes of
any
action to be taken or vote or approval to be made or given under this
Agreement, an action shall be deemed to have been taken, vote shall
be
deemed to have been made, and/or approval deemed to have been given
or
withheld if such vote, action or approval (or withholding of approval)
is
authorized by a majority in Interest of the Members comprising that
Voting
Member.
|
| 10.4. |
Disposition
by Advisors.
|
| (a) |
Except
as provided in this Section 13.4, Advisors shall have no right to
voluntarily resign or otherwise withdraw from the Company without the
written consent of all Voting Members, and may not make a Disposition
of
all or any part of the Interest now or subsequently acquired by it
other
than to a Permitted Transferee.
|
| (b) |
If
Advisors desires to transfer all or any portion of its Interest to
a
Voting Member that has agreed to purchase all or a portion of that
Interest, Advisors may transfer that Interest only after first offering
the Interest to the other Voting Member by providing the other Voting
Member a notice that includes a copy of the agreement to purchase the
Interest with the purchasing Voting Member. This notice shall specify
the
portion of the Interest proposed to be purchased by the other Voting
Member, the proposed price for the Interest and the other terms of
the
proposed transfer. Within sixty (60) days following this notice, the
other
Voting Member shall have the right to purchase its pro rata share of
the
Interest being sold by Advisors. The purchase price for such Interest
shall be the proportionate amount of the price offered to be paid by
the
other Voting Member, and the other terms of the purchase shall be
identical to the terms agreed to with the other Voting
Member.
|
32
| (c) |
Advisors
shall have the right, exercisable by written notice to the Company,
to
request that the Company redeem its Interest, which request may be
acted
upon by the Company in its sole discretion, at a purchase price equal
to
the amount of Advisors’ Capital Contribution or such other purchase price
as may be mutually agreed to by Advisors and the
Company.
|
| 10.5. |
Withdrawal
by Voting Member.
|
| (a) |
A
Voting Member may elect to withdraw from the Company by giving a
Withdrawal Notice to the other Voting Members during the term of this
Agreement. Upon the receipt of a Withdrawal Notice, the other Voting
Members shall be entitled to take any of the following actions (which
shall not be deemed applicable to a Change in Control Notice, Dynex
Special Withdrawal Notice or Regulatory
Notice):
|
| (i) |
Elect
the dissolution of the Company as provided in Section
15.1;
|
| (ii) |
Cause
the Company to redeem the Interest of the Withdrawing Member as provided
in this Section 13.5; or
|
| (iii) |
Purchase
the interest of the Withdrawing Member as provided in this Section
13.5.
|
| (b) |
Upon
receipt of a Withdrawal Notice, the Non-Withdrawing Member shall deliver
an Election Notice to the Withdrawing Member within thirty (30) days
following receipt of the Withdrawal Notice, specifying the election
it has
made pursuant to Section 13.5(a).
|
| (c) |
If
the Non-Withdrawing Member has elected to cause the dissolution of
the
Company, then the Company shall be dissolved as provided in Section
15.1(b), provided that the distribution to be received by the Withdrawing
Member pursuant to Section 15.1(b) shall be reduced by ten percent
(10%)
if the Withdrawal Notice is given on or prior to September 15, 2007,
and shall be reduced by four percent (4%) if the Withdrawal Notice
is
given on or prior to September 15, 2008. If the Non-Withdrawing
Member elects to cause the Company to redeem the Interest of the
Withdrawing Member or to purchase the Interest of the Withdrawing Member,
then the redemption or purchase shall take place in accordance with
provisions of Section 13.5(d).
|
| (d) |
(i)Closing
for the Purchase of a Withdrawing Member’s Interest shall take place
within thirty (30) days following the date of delivery of the Withdrawal
Notice; provided, however, that if the Election Notice includes a
statement to the effect that the Company or the Non-Withdrawing Member
requires financing in order to complete the redemption or purchase
of the
Withdrawing Member’s Interest, the Non-Withdrawing Member shall have the
option to postpone
|
33
| (e) |
the
closing for the redemption or purchase of the Non-Withdrawing Member’s
Interest until a date that is no later than ninety (90) days following
the
date of the Withdrawal Notice, unless the Withdrawal Notice contained
an
offer by the Withdrawing Member to finance the redemption or purchase
of
the Withdrawing Member’s Interest that complies with the terms described
in Section 13.5(e). Unless the Voting Members agree otherwise, if the
Non-Withdrawing Member or the Company, as the case may be, is unable
to
obtain financing within the ninety (90) day period following the
Withdrawal Notice, the Company shall be dissolved in accordance with
Section 15.
|
| (i) |
The
purchase price for the redemption or purchase of the Withdrawing Member’s
Interest shall be such price as is mutually agreed to by the Withdrawing
Member and the Non-Withdrawing Member. If the Withdrawing Member and
the
Non-Withdrawing Member cannot mutually agree upon the purchase price
within ten (10) business days after receipt of the Election Notice
by the
Withdrawing Member, the purchase price shall be the lower of (A) the
value
of the Capital Account of the Withdrawing Member as of the last day
of the
calendar month next preceding the date of closing (the "Measuring Date"),
or (B) as of the Measuring Date, the Withdrawing Member’s Proportionate
Share multiplied by (x) the amount of cash and cash equivalents of
the
Company, plus (y) the fair market value of the assets of the Company
other
than cash and cash equivalents, which shall be determined by obtaining
a
third party valuations from a qualified investment banker that is not
an
Affiliate of any Member for each of the assets of the Company other
than
cash or cash equivalents. If the Withdrawing Member and the
Non-Withdrawing Member cannot agree on the investment banker selected
to
provide the valuations, then each of them shall select a qualified
investment banker that is not an Affiliate of any Member to provide
the
valuations. If the higher aggregate valuation amount for the assets
of the
Company received from one of the investment bankers is no more than
ten
percent (10%) greater than the aggregate valuation amount received
from
the second investment banker, then the aggregate valuation amount shall
be
deemed to be the average of the aggregate valuation amounts received
from
the two investment bankers. However, if the higher aggregate valuation
amount exceeds the lesser aggregate valuation amount by more than ten
percent (10%), then the two investment bankers shall jointly select
a
third investment banker to provide valuations. If the aggregate valuation
amount provided by the third investment banker is between the aggregate
valuation amounts provided by the other two investment bankers, then
the
aggregate valuation amount shall be deemed to be the aggregate valuation
amount provided by the third appraiser. If the
aggregate
|
34
| (ii) |
valuation
amount provided by the third appraiser is greater than the highest
aggregate valuation amount provided by the first two appraisers, or
less
than the lowest aggregate valuation amount provided by the first two
appraisers, then the aggregate valuation amount shall be deemed to
be the
aggregate valuation amount received from the one of the first two
appraisers whose aggregate valuation amount is closest to the aggregate
valuation amount provided by the third appraiser. The aggregate valuation
amount shall be adjusted for any applicable discount as provided in
the
next sentence. Any valuation of the assets of the Company shall be
discounted by ten percent (10%) if the Withdrawal Notice is delivered
on
or prior to the first anniversary of the date of this Agreement, and
shall
be discounted by four percent (4%) if the Withdrawal Notice is delivered
after the first anniversary of the date of this Agreement but on or
prior
to the second anniversary of the date of this
Agreement.
|
| (f) |
If
the Withdrawing Member has provided in the Withdrawal Notice that it
is
willing to finance the purchase or redemption of its Interest, then
such
financing shall satisfy the condition provided for in Section 13.5(d)
if the financing provides for a term of not less than one year and
interest rates consistent with the interest costs made available to
a
typical counterparty of DBAH’s Affiliates under reverse repurchase
agreements.
|
| 10.6. |
Additional
or Substituted Member.
|
| (a) |
A
transferee of a Member’s Interest may become an additional or substituted
Member in place of its transferor only if all of the following conditions
are satisfied:
|
| (i) |
The
requirements of Section 13.3 have been
fulfilled.
|
| (ii) |
The
instrument of assignment sets forth the intention of the assignor that
the
assignee shall succeed to the assignor’s Interest as an additional or
substituted Member.
|
| (iii) |
The
assignor and assignee shall have executed such other instruments as
the
Board may reasonably require, including written acceptance by the assignee
of this Agreement and any ancillary agreements to which the Members
are
parties.
|
| (iv) |
The
assignee shall have paid all reasonable fees and costs incurred by
the
Company in connection with its addition or substitution as a Member
as
determined by the Board, including all costs of amending this Agreement
and any ancillary agreements to which the Members are parties in order
to
accommodate the assignee’s addition or substitution as a
Member.
|
35
| (v) |
Unless
named in this Agreement or admitted to the Company as provided in Sections
13.6, 14.1(a)(iii), or 16, no Person shall be considered a Member,
and the
Company, each Member, and any other Person having business with the
Company need deal only with Members so named and so admitted. Neither
the
Company, another Member or any other Person having business with the
Company shall be required to deal with any other Person by reason of
any
Disposition by a Member or by reason of the dissolution of a Member,
except as otherwise provided in this Agreement. In the absence of
substitution of a Member for an assigning or dissolved Member, any
payment
to such Member, or to its successors, shall release the Company of
all
liability to any other Person who may be interested in such payment
by
reason of an assignment by the Member or by reason of its
dissolution.
|
| 10.7. |
Deadlock
Regarding a Sale of Assets.
|
At
any
time after good faith efforts fail to resolve a deadlock of the Board or Voting
Members that has a duration of at least ninety (90) days, measured from the
date
of the meeting of the Board at which the deadlock first occurred, with respect
to the sale of any asset of the Company in which the Company has a basis of
at
least $10 million (except with respect to any of the CCAO Series 2 Assets,
including any rights of the Company under the Derivative Payments Agreement,
or
the CCAO Series 3 Assets), the Voting Member that is in favor of the sale of
the
asset (the “Selling Member”) shall have the right to cause the Company to offer,
by written notice (a “Sale Notice”) to the Voting Member opposing such sale (the
“Opposing Member”), to sell the asset to the Opposing Member at the price
specified in the Sale Notice. The Opposing Member may elect, by written notice
to the Company within ten (10) business days after the Opposing Member receives
the Sale Notice, to purchase the asset at the price specified in the Sale
Notice, and the Opposing Member shall have thirty (30) days to complete such
purchase. If the Opposing Member does not notify the Company of its election
to
purchase the asset or fails to complete the purchase of the asset within the
time periods prescribed above, then the Selling Member shall have the right,
for
a period of ten (10) business days after the deadline for the Opposing Member
to
provide notice of its intent to purchase the asset or to complete the purchase
of such asset, as the case may be, to cause the Company to sell the asset to
a
third party purchaser at a sale price equal to or greater than the price
specified in the Sale Notice. If the sale to such third party is not completed
within ten (10) business days after the Selling Member acquires the right to
cause the Company to sell the asset to a third party, then the Company shall
not
sell such asset unless it first re-offers to sell the asset to the Opposing
Member in accordance with the procedures specified above.
36
Company
Right to Purchase Advisors Interest.
| (a) |
Advisors
hereby grants to the Company the right to purchase, at the Company’s
option, the Interest held by Advisors if Advisors or any of its Affiliates
(i) intentionally engages in willful misconduct that Advisors
reasonably knew or should have known would have a material adverse
effect
on the Company or its business, operations or reputation or (ii) is
convicted of, or pleads guilty or nolo
contendere
to, a felony or any crime involving moral
turpitude.
|
| (b) |
The
Company may exercise the foregoing right to purchase by giving notice
to
Advisors within 60 days after the occurrence of one of the events
specified above. Such notice shall set forth the date, time and place
for
the closing of such purchase. The purchase price for such Interest
shall
be the lesser of (i) the value of the Capital Account of Advisors as
of
the date the Company provides such notice to Advisors or (ii) the
remaining principal balance of the Advisors
Note.
|
| 11. |
CONTINUATION
OF THE COMPANY BUSINESS IN CERTAIN EVENTS.
|
| 11.1. |
Bankruptcy.
|
| (a) |
(i)Upon
the Bankruptcy of a Member, the other Voting Member or Voting Members
shall have the option either to (A) purchase not less than all of the
Interest of the Bankrupt Member and its Affiliates, at a price determined
pursuant to Section 14.1(b), (B) dissolve the Company, or (C) continue
the
business of the Company and allow the Successor in Interest to the
Bankrupt Member to become a Member. The option shall be exercised by
giving notice to the Bankrupt Member and its Successor in Interest
within
ninety (90) days after the determination of value under Section
14.1(b).
|
| (ii) |
If
the option to purchase is exercised, closing shall be within thirty
(30)
days after the giving of notice of exercise or lifting of the automatic
stay, whichever is later. If the option to purchase is exercised, the
business of the Company shall be continued without winding up the
Company’s affairs.
|
| (iii) |
If
the non-Bankrupt Member does not elect to dissolve the Company, the
business of the Company shall continue without winding up the Company’s
affairs, and the Successor in Interest to the Bankrupt Member shall
become
a Member with all the benefits and obligations of its predecessor in
interest and shall be deemed to be a party to this
Agreement.
|
| (b) |
If
the Voting Member or Voting Members having the option to purchase and
the
Successor in Interest to the Bankrupt Member cannot agree
upon
|
37
| (c) |
the
purchase price within thirty (30) days after the first event of
Bankruptcy, then the purchase price shall be based upon the Bankrupt
Member’s Proportionate Share multiplied by (x) the amount of cash and
cash equivalents of the Company, plus (y) the fair market value of
the assets of the Company other than cash and cash equivalents determined
as provided in Section 13.5(d)(ii). Any valuation of the assets of
the Company other than cash or cash equivalents shall be discounted
by a
ten percent (10%) if the event of Bankruptcy occurs on or prior to
June 30, 2007, and shall be discounted by four percent (4%) if the
event of Bankruptcy occurs on or prior to June 30,
2008.
|
| (d) |
If
the option to purchase is exercised, the expenses of all investment
bankers shall be paid by the purchasing Member or Members. If the option
to purchase is not exercised, the expenses of all investment bankers
shall
be paid by the Company.
|
| (e) |
The
purchase price, if the option is exercised, shall be payable as
follows:
|
| (i) |
Twenty
percent (20%) of the purchase price shall be paid at closing in cash;
and
|
| (ii) |
The
balance of the purchase price shall be paid within ninety (90) days
after,
the closing, plus interest on such amount at the Prime Rate plus two
percent (2%) (but in no event at any interest rate higher than the
maximum
rate legally permitted). If not sooner paid, such purchase price balance
and accrued interest thereon shall be payable in full upon sale or
all or
substantially all of the assets of the Company. The Successor in Interest
shall have a continuing lien on the Interest being acquired by the
purchaser to secure the payment of the balance of the purchase price
and
the interest due thereon, which lien may be foreclosed and enforced
under
applicable law. The purchaser will execute and deliver such instruments
as
may be necessary or appropriate to create such
lien.
|
| 12. |
DISSOLUTION.
|
| 12.1. |
Events
Causing Dissolution.
|
The
Company shall be dissolved upon the first to occur of one of the following
events:
| (a) |
The
election by the Board to dissolve the
Company;
|
| (b) |
An
election to dissolve under Section
14.1(a)(i);
|
| (c) |
The
sale or other disposition of all or substantially all of the Company’s
assets;
|
38
| (d) |
The
delivery by IHCC of a Change in Control Notice or Dynex Special Withdrawal
Notice as provided in Section 15.3;
|
| (e) |
The
delivery by a Member of a Regulatory Notice as provided in
Section 15.4;
|
| (f) |
An
election to dissolve by a Non-Withdrawing Member under Section
13.5;
|
| (g) |
The
failure of the Company or the Non-Withdrawing Member to pay the purchase
price for the redemption or purchase of the Withdrawing Member’s Interest
pursuant to Section 13.5(d), unless the Voting Members agree otherwise;
and
|
| (h) |
Unless
the Voting Members otherwise agree, the sixtieth (60th)
day following the redemption of the CCAO Series 3 Trust Collateralized
Bonds (which redemption date is expected to be, as of the date of this
Agreement, on or about February 15,
2009).
|
| 12.2. |
Winding
Up Company Affairs.
|
Upon
the
occurrence of an event specified in Section 15.1, the Manager shall wind up
the
affairs of the Company in accordance with the plan of liquidation adopted by
the
Board. If the Board cannot agree on a plan of liquidation within ninety (90)
days after the occurrence of an event specified in Section 15.1, the Voting
Members shall agree upon and the Company shall engage, within fifteen (15)
days
after the expiration of the ninety (90) day period, an investment banker to
wind
up the affairs of the Company. If the Voting Members are unable to agree upon
an
investment banker within such fifteen (15) day period, then one investment
banker shall be selected by each Voting Member within five (5) days thereafter
and such investment bankers shall jointly appoint within five (5) days of their
selection a nationally recognized investment banker. However, in the event
of an
election to dissolve the Company under Section 14.1(a)(i), the non-Bankrupt
Voting Member or Voting Members shall have the right to adopt the plan of
liquidation and direct the Manager in winding up the affairs of the Company.
After the payment of, or provision for, all debts of the Company, the proceeds
of the sale of the Company assets and/or the Company assets shall be distributed
to the Members in accordance with their Capital Accounts, subject to the
provisions of Section 7.5. IHCC shall have the option, in any dissolution
of the Company, to elect to receive a distribution in kind of the CCAO Series
2
Assets, and to the extent the value of this distribution in kind to IHCC of
the
CCAO Series 2 Assets exceeds the value of the distribution to which IHCC would
otherwise be entitled under this Agreement, IHCC shall contribute to the Company
for distribution to the other Members an amount of cash equal to the excess
of
the value of the CCAO Series 2 Assets over the distribution to which IHCC is
otherwise entitled under this Agreement. If any assets are distributed in kind,
they shall be distributed on the basis of the fair market value thereof
as
39
determined
in accordance with Section 13.5(d)(ii), and shall be deemed to have been sold
at
fair market value for purposes of the allocations under Section 6.
| 12.3. |
Dynex
Withdrawals.
|
| (a) |
On
or before June 30, 2008, IHCC may deliver a Change in Control Notice
to
the other Members. A Change in Control Notice shall specify that the
Board
of Directors of Dynex Capital, Inc. has determined in good faith, after
consultation with its financial advisors and outside legal counsel,
that
it is consistent with its fiduciary duties to cause IHCC to withdraw
from
and cause the dissolution of the Company in order to engage in a Change
in
Control Transaction. The delivery of a Change in Control Notice shall
be
deemed to be an event causing the withdrawal of IHCC as a Member of
the
Company and the dissolution of the Company as provided in Section
15.1(d).
|
| (b) |
IHCC
may deliver a Dynex Special Withdrawal Notice to the other Members
in
either of the following circumstances:
|
| (i) |
IHCC
has determined, in good faith after consultation with its outside legal
counsel, that the transactions contemplated by this Agreement or the
status of IHCC will have the effect of causing the Company, IHCC, Dynex
or
any Affiliate of Dynex to be treated as a company required to register
under the Investment Company Act of 1940.
|
| (ii) |
IHCC
has determined, in good faith after consultation with its outside legal
counsel, that the transactions contemplated by this Agreement or the
status of IHCC will have the effect of causing IHCC to not qualify
as a
qualified REIT subsidiary or to cause Dynex Capital to cease to satisfy
the requirements under the Code and Regulations to continue to be treated
as a “real estate investment trust.”
|
| 12.4. |
Regulatory
Event.
|
Any
Member may deliver a Regulatory Notice to the other Members. A Regulatory Notice
shall specify that the Member has determined in good faith, after consultation
with its outside legal counsel, that such Member and its Affiliates, taken
as a
whole, will experience a material and adverse impact with respect to regulatory,
compliance, tax or accounting requirements if such Member continues to hold
its
Interest in the Company. The delivery of a Regulatory Notice shall be deemed
to
be an event causing the withdrawal of the Member delivering the notice as a
Member of the Company and the dissolution of the Company as provided in Section
15.1(e).
40
Effect
of
Change in Control Notice, Dynex Special Withdrawal Notice or Regulatory
Notice.
| (a) |
If
IHCC delivers a Change in Control Notice on or before June 30, 2007,
IHCC
shall reimburse the Company and DBAH for the reasonable costs of formation
of the Company incurred by the Company or DBAH,
respectively.
|
| (b) |
If
IHCC delivers a Change in Control Notice after June 30, 2007, or delivers
a Dynex Special Withdrawal Notice, or if a Member delivers a Regulatory
Notice, then the party giving the notice shall pay all costs associated
with effecting the withdrawal contemplated by the notice, including
the
costs and expenses of the Company and the other
Members.
|
| 13. |
ADMISSION
OF ADDITIONAL MEMBERS.
|
Except
as
provided in Section 13.6 or 14.1(a)(iii), admission of a new Member shall
require the consent of all Voting Members, which consent may be withheld in
the
sole discretion of any Voting Member. Upon admission, the business of the
Company shall be continued without winding up.
| 14. |
AMENDMENTS.
|
Amendments
to this Agreement shall require the written consent of all Voting Members.
However, if a Voting Member does not execute, within sixty (60) days after
receipt thereof, an amendment which is, in the opinion of counsel for the
Company, necessary to satisfy requirements of the Code or Act with respect
to
partnerships or joint ventures or of any federal or state securities law or
regulations and such amendment would not adversely affect the federal income
tax
treatment to be afforded a Member, adversely affect the liabilities of a Member,
or change the method of allocation of Net Income or Net Loss, Gain or Loss
from
Sale, or the distribution (including, without limitation, the timing of
distributions) of Net Proceeds from Financing or other funds available for
distribution as provided in Section 7, then the Board shall make such amendment
to this Agreement.
| 15. |
NOTICES.
|
| 15.1. |
Form
of Notice.
All notices, requests and other communications required or permitted
to be
given by this Agreement shall be in writing (including telexes,
telecopies, facsimile transmissions, and similar writings) and shall
be
given to a Member or other Person at its address or telecopier or
facsimile number set forth on Exhibit A or such other address or
telecopier facsimile number as such Member or other Person may hereafter
specify for that purpose by notice to the
Members.
|
| 15.2. |
Effective
Date of Notice. Each such notice, request or other communication shall
be
effective (1) if given by telecopier facsimile, when such
telecommunication is transmitted and confirmation of receipt obtained;
provided, however, that if any
|
41
| 15.3. |
notice,
request or other communication so transmitted is received other than
during the regular business hours of the recipient, it shall be deemed
to
have been given on the opening of business on the next business day
of the
recipient, (2) if given by mail, five days after such communication
is
deposited in the mails with first class postage prepaid, addressed
as
aforesaid or (3) if given by any other means, when delivered at the
address specified on Exhibit A.
|
| 16. |
POWER
OF ATTORNEY.
|
| 16.1. |
Appointment
of Members as Attorney-in-Fact.
Each Member irrevocably constitutes and appoints, with full power of
substitution, the other Voting Member or Voting Members as its true
and
lawful attorney-in-fact with full power and authority in its name,
place
and stead for the following purposes: to execute, certify, acknowledge,
deliver, swear to, file and record at the appropriate public offices,
(i)
any certificate identifying the Members, their addresses, the address
of
the Company and/or the term of the Company, (ii) any certificate
identifying the name or names under which the Company conducts the
Company
Business, and (iii) any amendment of any certificate described in
subsection (i) or (ii), which may be necessary to qualify, or to continue
the qualification of, the Company to do business in any jurisdiction
or
which may otherwise be required in connection with the Company’s
transaction of business in any
jurisdiction.
|
| 16.2. |
Irrevocable
Appointment. The appointment by each Member of the other Voting Member
or
Voting Members as its attorney-in-fact is irrevocable and shall be
deemed
to be a power coupled with an interest and shall survive the Bankruptcy
or
dissolution of any Voting Member giving such power and the transfer
or
assignment of all or any part of the Interest of such Member; provided,
however, that in the event of the transfer by a Member of all or any
part
of its Interest, this power of attorney of a transferor Member shall
survive such transfer only until such time, if any, as the transferee
shall have been admitted to the Company as a substituted Member and
all
required documents and instruments shall have been duly executed, filed
and recorded to effect such substitution.
|
| 17. |
ARBITRATION.
|
| 17.1. |
Except
as provided in Section 20.3, the Members acknowledge and agree that
any
dispute or controversy arising out of, relating to, or in connection
with
this Agreement, or the interpretation, validity, construction,
performance, breach, or termination thereof, shall be submitted to
binding
arbitration in New York City before a panel of three arbitrators under
the
auspices of the American Arbitration Association, Commercial Arbitration
Rules and Mediation Procedures (the “Rules”). The parties shall be deemed
to have made these Rules, as amended and in effect as of the date of
the
submission of the dispute, a part of their agreement. Each party shall
appoint a single arbitrator and the two party-selected arbitrators
shall
themselves appoint the third arbitrator, who shall serve as the panel
chairman. The arbitrators may grant injunctions or other relief
in
|
42
| 17.2. |
such
dispute or controversy. The decision of the arbitrators shall be final,
conclusive and binding on the parties to the arbitration. Judgment
may be
entered on the arbitrators’ decision in any court having jurisdiction. In
the arbitration, each party shall bear its own attorneys’ fees, and the
Company shall bear the other costs and expenses of the arbitration,
unless
and to the extent the arbitrators shall determine that under the
circumstances such fees, costs and expenses should be paid by one of
the
parties.
|
| 17.3. |
The
arbitrators shall apply Delaware law to the merits of any dispute or
claim, without reference to rules of conflicts of law. Each Member
hereby
consents to the personal jurisdiction of the state and federal courts
located in Virginia and New York for any action or proceeding arising
from
or relating to this Agreement or relating to any arbitration in which
the
parties are participants.
|
| 17.4. |
The
parties may apply to any court of competent jurisdiction for a temporary
restraining order, preliminary injunction, or other interim or
conservatory relief, as necessary, without breach of this arbitration
agreement and without abridgment of the powers of the
arbitrators.
|
| 17.5. |
EACH
MEMBER HEREBY CONFIRMS IT HAS READ AND UNDERSTANDS THIS SECTION 20.4,
WHICH DISCUSSES ARBITRATION, AND UNDERSTANDS THAT BY SIGNING THIS
AGREEMENT, IT AGREES, EXCEPT AS PROVIDED IN SECTION 20.3, TO SUBMIT
ANY
CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT,
OR THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH
OR
TERMINATION THEREOF TO BINDING ARBITRATION, UNLESS OTHERWISE REQUIRED
BY
LAW, AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF ITS RIGHT
TO
A JURY TRIAL.
|
| 18. |
GOVERNING
LAW.
|
This
Agreement and the rights and liabilities of the parties shall be determined
in
accordance with the laws of Delaware.
| 19. |
CAPTIONS.
|
Captions
contained in this Agreement are inserted only as a matter of convenience and
in
no way define, limit, extend or describe the scope of this Agreement or the
intent of any provision hereof.
| 20. |
CONSTRUCTION.
|
Whenever
the context may require, any pronouns used herein shall include the
corresponding masculine, feminine or neuter gender, and the use of nouns and
pronouns in the singular shall include the plural and vice versa. This Agreement
shall not be construed more strictly against one party than the others by virtue
of the fact that it may
43
have
been
prepared by counsel for one of the parties, it being recognized that all of
the
parties have contributed substantially and materially to the preparation of
this
Agreement
| 21. |
SEVERABILITY.
|
Every
provision of this Agreement is intended to be severable. If any term or
provision hereof is illegal or invalid for any reason whatsoever, such
illegality or invalidity shall not affect the validity of the remainder of
this
Agreement.
| 22. |
EXECUTION
AND COUNTERPARTS.
|
This
Agreement and any amendment hereof may be executed in multiple counterparts,
each of which shall be deemed an original and all of which shall constitute
one
agreement. In addition, this Agreement and any amendment hereof may be executed
through the use of counterpart signature pages. The signature of any party
on
any counterpart agreement or signature page shall be deemed to be a signature
to, and may be appended to, any other counterpart.
| 23. |
SUCCESSORS.
|
Subject
to the limits on transferability contained herein, each and all of the
covenants, terms, provisions and agreements herein contained shall be binding
upon and inure to the benefit of the successors and the permitted assigns of
the
respective parties hereto.
| 24. |
ENTIRE
AGREEMENT.
|
This
Agreement, together with the exhibits hereto, constitutes the entire agreement
among the Members and supersedes and cancels any prior agreements,
representations, warranties or communications, whether oral or written, among
the Members relating to the transactions contemplated hereby or the subject
matter hereof.
[SIGNATURE
LINES ON THE FOLLOWING PAGE]
316197_17.DOC
44
IN
WITNESS WHEREOF, the undersigned have each caused this Limited Liability Company
Agreement of Copperhead Ventures, LLC to be executed as of the day and year
first above written.
ISSUED
HOLDINGS CAPITAL CORPORATION
By:
Name:
Title:
DARTMOUTH
INVESTMENTS, LLP
By:
Name:
Title:
DBAH
CAPITAL, LLC
By:
Name:
Title:
By:
Name:
Title:
Dynex
Capital, Inc. hereby acknowledges its rights and obligations in its capacity
as
Manager of the Company.
DYNEX
CAPITAL, INC.
By:___________________________________
Name:
Title:
45
EXHIBIT
A
Percentage
Interests in the Company
|
Member
|
Percentage
Interest
|
|
Issued
Holdings Capital
Corporation
c/o
Dynex Capital, Inc.
▇▇▇▇
▇▇▇ ▇▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Fax: (▇▇▇) ▇▇▇-▇▇▇▇
|
49.875%
|
|
DBAH
Capital, LLC
▇▇
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax:
▇▇▇-▇▇▇-▇▇▇▇
|
49.875%
|
|
Dartmouth
Investments, LLP
▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax:
▇▇▇-▇▇▇-▇▇▇▇
With
a copy to:
▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
|
0.25%
|
46
EXHIBIT
B
Derivative
Payments Agreement
47
EXHIBIT
C
Form
of Advisors Note
48
Exhibit
B to the LLC Agreement
AGREEMENT
This
DERIVATIVE PAYMENTS AGREEMENT (the “Agreement”)
is
made as of September 16, 2006 among ISSUED HOLDINGS CAPITAL CORPORATION, a
Virginia corporation (together with its successors and assigns, “IHCC”)
DYNEX
CAPITAL, INC , a Virginia corporation (together with its successors and assigns,
“Dynex”),
and
COPPERHEAD VENTURES, LLC, a Delaware limited liability company (together with
its successors and assigns, “Copperhead”).
In
consideration of the mutual covenants and agreements set forth in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as
follows:
Section
1.
Definitions.
Capitalized terms used herein and not otherwise defined herein have the meanings
set forth on Exhibit
A.
Section
2. Consideration.
The
parties to this Agreement acknowledge and agree that IHCC has been issued an
interest in and admitted as a member of Copperhead, and that IHCC’s agreements
contained in this Agreement represent an integral portion of its capital
contribution to Copperhead as described in Section 5.2(b) of the Limited
Liability Company Agreement dated as of September 8, 2006 (the “LLC
Agreement”).
Section
3.
Derivative
Payments.
IHCC
shall pay to Copperhead, on each Payment Date, an amount equal to the sum of
the
Available Surplus and the payments due on the Series 2 Collateralized Bonds
for
such Payment Date distributed to IHCC as provided in Section 5. IHCC shall
pay
each such amount in immediately available funds by wire transfer to the
following account (or to such other account as may be specified by Copperhead
in
writing):
Beneficiary: Copperhead
Ventures, LLC
Bank
Name: Wachovia
Bank, NA
Bank
Address: Two
▇▇▇▇▇
Center, 7th Floor
▇▇▇▇
▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Account
Name: Copperhead
Ventures, LLC
ABA
Number: ▇▇▇▇▇▇▇▇▇
Account
Number: 2000034699744
Section
4.
Dynex
Guaranty.
Dynex
shall execute and deliver to Copperhead, on the date of this Agreement, a
Guaranty substantially in the form attached as Exhibit
B.
Section
5.
Additional
Covenants.
(a)
IHCC
will cause Commercial Capital to exercise in full any rights Commercial Capital
may have (it being understood that Commercial Capital may have limited rights
or
no
Ex.
B -
1
such
rights) under the Series 2 Supplement to withdraw or otherwise receive the
Available Surplus and the payments due on the Series 2 Collateralized Bonds
and
will cause Commercial Capital promptly to distribute all Available Surplus
that
it withdraws or otherwise receives, and such payments on the Series 2
Collateralized Bonds, to IHCC. IHCC will cause Commercial Capital not to take
any action that could reasonably be expected to have a material adverse effect
on the Available Surplus, provided,
however
that,
notwithstanding anything in this Agreement to the contrary, IHCC shall be under
no obligation to cause Commercial Capital to take any action or refrain from
taking any action that Commercial Capital determines (based upon opinion of
counsel) would be reasonably likely to constitute a breach of Commercial
Capital’s obligations under the Base Indenture or the Series 2
Supplement.
(b)
IHCC
will cause Commercial Capital to redeem the CCAO Series 2 Trust Collateralized
Bonds on the earliest allowable date such bonds can be redeemed, and will cause
Commercial Capital to pay to Copperhead any “Net Proceeds Available” from such
redemption that might otherwise have not been paid to Copperhead pursuant to
Section 3 of this Agreement. Net Proceeds Available for the purposes of this
Section 5(b) equal the excess of the cash received by Commercial Capital from
(i) the sale of the remaining loans collateralizing the CCAO Series 2 Trust
Collateralized Bonds upon redemption, or (ii) the proceeds from the reissuance
and resale of the CCAO Series 2 Trust Collateralized Bonds subsequent to their
redemption, over the amount paid by Commercial Capital to redeem the CCAO Series
2 Trust Collateralized Bonds.
Section
6. Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
Commonwealth of Virginia without giving effect to any choice of law or conflict
of law provision or rule (whether of the Commonwealth of Virginia or any other
jurisdiction) that would require the application of any other law.
Section
7. Counterparts.
This
Agreement may be executed in one or more counterpart copies, each of which
will
be deemed to be an original copy of this Agreement and all of which, when taken
together, will be deemed to constitute one and the same agreement. The exchange
of copies of this Agreement and of signature pages by facsimile transmission
shall constitute effective execution and delivery of this Agreement as to the
parties and may be used in lieu of the original Agreement for all purposes.
Any
signatures of the parties transmitted by facsimile shall be deemed to be their
original signatures for all purposes.
Section
8. Assignment;
Amendment.
IHCC
and Dynex may not assign any of their rights or delegate any of their
obligations under this Agreement (whether by operation of law or otherwise)
without the prior written consent of Copperhead. Copperhead may assign any
of
its rights or delegate any of its obligations under this Agreement with the
prior written consent of IHCC (which consent shall not be unreasonably
withheld). This Agreement may not be amended or otherwise modified except by
a
written agreement executed by the party to be charged with such amendment or
other modification.
Section
9. Interpretation.
The
parties intend and agree that this Agreement shall constitute a “swap agreement”
within the meaning of ▇▇▇▇▇▇▇ ▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Bankruptcy Code (the
“Code”)
and
that each of IHCC and Copperhead shall constitute a “swap participant” within
the meaning of Section 101 of the Code.
Ex.
B -
2
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
written above.
ISSUED
HOLDINGS CAPITAL CORPORATION
By:
Name: ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
Title: Senior
Vice President
DYNEX
CAPITAL, INC.
By:
Name: ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇
Title: Executive
Vice President,
Chief
Operating Officer
COPPERHEAD
VENTURES, LLC
By
Dynex
Capital, Inc., Manager
By:
Name: ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇
Title: Executive
Vice President,
Chief
Operating Officer
Ex.
B -
3
Exhibit
A
Derivative
Payments Agreement Definitions
“Available
Surplus”
means,
with respect to any Payment Date, all amounts, if any, able to be released
to
Commercial Capital on a Payment Date from the surplus account for the CCAO
Series 2 Trust Collateralized Bonds pursuant to Sections 9(xiii) and (xiv)
of
the Series 2 Supplement with respect to that Payment Date, other than amounts
related to the Series 2 Excluded Assets, as that term is defined in the LLC
Agreement.
“Base
Indenture”
means
the Indenture dated as of November 1, 1993, as amended, between Commercial
Capital and the Trustee.
“CCAO
Series 2 Trust Collateralized Bonds”
means
the bonds issued by Commercial Capital pursuant to the Base Indenture and the
Series 2 Supplement.
“Commercial
Capital”
means
Commercial Capital Access One, Inc., a Virginia corporation, together with
its
successors and assigns.
“Payment
Date”
means
each date specified as a Payment Date for the Series 2 Collateralized Bonds,
commencing with the first such date after the date of this Agreement (it being
understood that, as of the date of this Agreement, the date specified as the
Payment Date for the Series 2 Collateralized Bonds is the 15th day of each
month
(or, if such 15th day is not a Business Day, the next succeeding Business
Day).
“Series
2 Collateralized Bonds” means
Commercial Capital Access One Trust Collateralized Bonds, Series 2, Class
E, Class F and Class G.
“Series
2 Supplement”
means
the Series 2 Supplement dated as of October 1, 1997 to the Base Indenture
between Commercial Capital, as Issuer, and the Trustee.
“Trustee”
means
JPMorgan Chase Bank, National Association (formerly known as The Chase Manhattan
Bank and successor by merger to Chase Bank of Texas, National Association
(formerly known as Texas Commerce Bank National Association)), as
Trustee.
Ex.
B -
4
Exhibit
B
Form
of Dynex Guaranty
GUARANTY
This
GUARANTY (this “Guaranty”
is
made
as of August 31, 2006 by DYNEX CAPITAL, INC., a Virginia corporation (together
with its successors and assigns, “Dynex”),
in
favor of COPPERHEAD VENTURES, LLC, a Delaware limited liability company
(together with its successors and assigns, “Copperhead”).
Section
1. Guaranty.
To
induce Copperhead to enter into the Derivative Payments Agreement dated as
of
August 31, 2006 (the “Agreement”)
among
Issued Holdings Capital Corporation, a Virginia corporation (together with
its
successors and assigns, “IHCC”),
Dynex
and Copperhead, Dynex irrevocably and unconditionally guarantees to Copperhead,
and its successors and permitted assigns, the prompt payment by IHCC, on demand,
of any amount due and payable to Copperhead under the Agreement (the
“”Obligations”).
Dynex
hereby waives acceptance of this Guaranty, diligence, promptness, presentment,
demand on IHCC for payment, protest of nonpayment and all notices of any kind.
In addition, Dynex’s obligations hereunder shall not be affected by the
existence, validity, enforceability, perfection, or extent of any collateral
therefor. Copperhead shall not be obligated to proceed against IHCC before
claiming under this Guaranty or filing any claim relating to the Obligations
in
the event that IHCC becomes subject to a bankruptcy, reorganization or similar
proceeding, and the failure of Copperhead so to file shall not affect Dynex’s
obligations hereunder. Dynex agrees that its obligations under this Guaranty
constitute a guaranty of payment and not of collection.
Section
2. Consents,
Waivers and Renewals.
Dynex
agrees that Copperhead may, at any time and from time to time, either before
or
after the maturity thereof, without notice to or further consent of Dynex,
extend the time of payment of, exchange or surrender any collateral for, or
renew any of the Obligations, and may also make any agreement with IHCC or
with
any other party to or person liable on any of the Obligations, or interested
therein, for the extension, renewal, payment, compromise, discharge or release
thereof, in whole or in part, or for any modification of the terms thereof
or of
any agreement between Copperhead and IHCC or any such other party or person,
without in any way impairing or affecting this Guaranty. Dynex agrees that
Copperhead may resort to Dynex for payment of any of the Obligations whether
or
not Copperhead shall have resorted to any collateral security or shall have
proceeded against any other obligor principally or secondarily obligated with
respect to any of the Obligations.
Section
3. Expenses.
Dynex
agrees to pay on demand all out-of-pocket expenses (including without limitation
the reasonable fees and disbursements of Copperhead’s counsel) incurred in the
enforcement of the rights of Copperhead hereunder, provided,
however,
that
Dynex shall not be liable for any expenses of Copperhead if no payment under
this Guaranty is due.
Section
4.
Subrogation.
Dynex
will not exercise any rights which it may acquire by way of subrogation until
all of the Obligations shall have been paid in full. If any amount
shall
Ex.
B -
5
be
paid
to Dynex in violation of the preceding sentence, such amount shall be held
for
the benefit of Copperhead and shall forthwith be paid to Copperhead to be
credited and applied to the Obligations, whether matured or unmatured. Subject
to the foregoing, upon payment of all the Obligations, Dynex shall be subrogated
to the rights of Copperhead against IHCC and Copperhead agrees to take at
Dynex’s expense such steps as Dynex may reasonably request to implement such
subrogation.
Section
5. Cumulative
Rights.
No
failure on the part of Copperhead to exercise, and no delay in exercising,
any
right, remedy or power hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise by Copperhead of any right, remedy or power
hereunder preclude any other or future exercise of any right, remedy or power.
Each and every right, remedy and power hereby granted to Copperhead or allowed
it by law or other agreement shall be cumulative and not exclusive of any other,
and may be exercised by Copperhead from time to time.
Section
6. Representations
and Warranties.
Dynex
hereby represents and warrants to Copperhead that: (i) Dynex is a corporation
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia, (ii) Dynex has the absolute and unrestricted right,
power and authority to execute and deliver this Guaranty and to perform its
obligations under this Guaranty, and such action has been duly authorized by
all
necessary corporate action, (iii) this Guaranty constitutes the legal, valid
and
binding obligation of Dynex, enforceable against Dynex in accordance with its
terms, except that such enforcement may be subject to bankruptcy, receivership,
insolvency, moratorium, reorganization, fraudulent transfer or similar laws
affecting the enforcement of the rights of creditors generally and to legal
and
equitable limitations on the enforceability of specific remedies; and (iv)
neither the execution and delivery of this Guaranty nor the performance by
Dynex
of its obligations under this Guaranty will, directly or indirectly (with or
without notice or lapse of time), conflict with or violate any provision of
the
articles of incorporation or bylaws of Dynex or violate any applicable law,
rule
or regulation.
Section
7. Continuing
Guaranty.
This
Guaranty shall remain in full force and effect and be binding upon Dynex and
its
successors and permitted assigns, and inure to the benefit of Copperhead and
its
successors and permitted assigns, until all of the Obligations shall have been
paid in full. In the event that any payment by IHCC in respect of any Obligation
is rescinded or must otherwise be returned for any reason whatsoever, Dynex
shall remain liable hereunder in respect of such Obligation as if such payment
had not been made.
Section
8. Notices.
All
notices in connection with this Guaranty shall be deemed effective, if in
writing and delivered in person or by courier, on the date delivered to the
following address (or such other address which Dynex shall notify Copperhead
of
in writing):
Dynex
Capital, Inc.
▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
Executive Vice President, Chief Operating Officer
Ex.
B -
6
Section
9. Governing
Law.
This
Guaranty shall be governed by and construed in accordance with the laws of
the
Commonwealth of Virginia without giving effect to any choice of law or conflict
of law provision or rule (whether of the Commonwealth of Virginia or any other
jurisdiction) that would require the application of any other law.
IN
WITNESS WHEREOF, Dynex has executed this Guaranty as of the date first written
above.
DYNEX
CAPITAL, INC.
By:
Name: ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇
Title: Executive
Vice President,
Chief
Operating Officer
Ex.
B -
7
Exhibit
C to the LLC Agreement
PROMISSORY
NOTE
$184,000.00 September
16, 2006
FOR
VALUE
RECEIVED, the undersigned, DARTMOUTH
INVESTMENTS, LLP,
a Texas
limited liability partnership, (the “Maker”), promises to pay, without offset,
deduction or abatement, except as provided herein, to the order of COPPERHEAD
VENTURES, LLC,
a
Delaware limited liability company (“Payee”; Payee and any subsequent holder(s)
hereof are hereinafter referred to collectively as “Holder”), at the office of
Payee at ▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇, or at such
other
place as Holder may designate to Maker in writing from time to time, the
principal sum of One Hundred Eighty-Four Thousand Dollars ($184,000), together
with interest on the outstanding principal balance hereof from the date hereof
at the rate described below.
Interest
shall accrue on the outstanding principal balance of this Note at the “Prime
Rate” (as defined below and computed on the basis of a 360-day
year). “Prime
Rate” shall mean the annual prime rate (or base rate) reported in the “Money
Rates” column or section of The
Wall Street Journal
as being
the base rate on corporate loans at larger U.S. Money Center commercial banks
on
the first date on which The
Wall Street Journal
is
published in each month. In the event The Wall Street Journal ceases publication
of the Prime Rate, then the “Prime Rate” shall mean the “prime rate” or “base
rate” announced by Bank of America, N.A. or the successor to substantially all
of its assets and business (whether or not such rate has actually been charged
by that bank). In the event that bank discontinues the practice of announcing
that rate, Prime Rate shall mean the highest rate charged by that bank on
short-term, unsecured loans to its most credit-worthy large corporate
borrowers.
Principal
payments and accrued interest under this Note will be paid to Holder in
accordance with Sections 7.5 and/or 13.8(b) of the Limited Liability Company
Agreement of Copperhead Ventures, LLC of even date herewith (the “LLC
Agreement”), from distributions or payments that would otherwise be made to
Maker under Sections 7.5 or 13.8 of the LCC Agreement, as applicable, until
the
earlier of such time this Note is paid in full or March 15, 2009. Provided
no
Event of Default (as defined below) has occurred and is continuing, effective
as
of March 15, 2009, any remaining principal balance of and accrued interest
under
this Note shall be forgiven by Holder as provided in Section 5.2(c) of the
LLC
Agreement.
All
payments received or otherwise deemed to be made by virtue of the LLC Agreement
shall be applied first to any Late Charge (as defined below) due hereunder,
then
to any accrued but unpaid interest, then the balance of any payment shall be
applied to the outstanding principal balance of this Note. If an Event of
Default occurs, monies may be applied to this Note in any manner or order deemed
appropriate by Holder.
The
indebtedness evidenced hereby may be prepaid in whole or in part, at any time
and from time to time, without premium or penalty. Any such prepayments shall
be
credited first to any Late Charges, then to accrued and unpaid interest and
then
to the outstanding principal balance hereof.
Ex.
C -
1
TIME
IS
OF THE ESSENCE for this Note. It is hereby expressly agreed that in the event
that any default shall occur in the performance of any of Maker’s obligations
hereunder (an “Event of Default”), then, and in such event, the entire
outstanding principal balance of the indebtedness evidenced hereby, together
with any other sums advanced hereunder, and/or under any other instrument or
document now or hereafter evidencing, securing or in any way relating to the
indebtedness evidenced hereby, together with all unpaid interest accrued
thereon, shall, at the option of Holder and without notice to Maker, at once
become due and payable and may be collected forthwith, regardless of the
stipulated date of maturity.
Maker
shall pay without demand a late charge equal to ten percent (10%) of any
principal and/or interest which is not paid within ten (10) days after its
due
date (“Late Charge”). In
the
event this Note is placed in the hands of an attorney for collection, or if
Holder incurs any costs incident to the collection of the indebtedness evidenced
hereby, Maker and any endorsers hereof agree to pay to Holder an amount equal
to
all such costs, including without limitation all reasonable attorneys’ fees
(based on such attorneys’ normal hourly rates and actual time expended) and all
court costs.
Presentment
for payment, demand, protest and notice of demand, protest and nonpayment are
hereby waived by Maker and all other parties hereto. No failure to accelerate
the indebtedness evidenced hereby by reason of an Event of Default hereunder,
acceptance of a past-due installment or other indulgences granted from time
to
time, shall be construed as a novation of this Note or as a waiver of such
right
of acceleration or of the right of Holder thereafter to insist upon strict
compliance with the terms of this Note or to prevent the exercise of such right
of acceleration or any other right granted hereunder or by applicable law.
No
extension of the time for payment of the indebtedness evidenced hereby or any
installment due hereunder, made by agreement with any person now or hereafter
liable for payment of the indebtedness evidenced hereby, shall operate to
release, discharge, modify, change or affect the original liability of Maker
hereunder or that of any other person now or hereafter liable for payment of
the
indebtedness evidenced hereby, either in whole or in part, unless Holder agrees
otherwise in writing. This Note may not be changed orally, but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification or discharge is sought.
This
Note
is intended as a contract under and shall be construed and enforceable in
accordance with the laws of the State of Delaware.
If
Holder
is unable to obtain prompt legal service on Maker at the address shown for
Maker
below, Maker hereby appoints the Secretary of State of the State of Delaware
as
Maker's agent for the acceptance of substituted service of process upon
Maker.
TO
THE
FULLEST EXTENT POSSIBLE, MAKER WAIVES IN FULL THE RIGHT TO A TRIAL BY JURY
IN
REGARD TO ANY DISPUTES, CLAIMS, CAUSES OF ACTION, OBLIGATIONS, DAMAGES,
COMPLAINTS, LITIGATION OR ANY MATTER WHATSOEVER AND OF ANY TYPE OR NATURE,
WHETHER IN CONTRACT, TORT OR OTHERWISE, WHICH MAKER MAY HAVE NOW OR IN THE
FUTURE RELATING TO THIS NOTE. BY EXECUTION OF THISNOTE, MAKER REPRESENTS AND
WARRANTS THAT MAKER IS REPRESENTED BY COMPETENT COUNSEL WHO HAS FULLY AND
COMPLETELY ADVISED MAKER OF THE MEANING AND RAMIFICATIONS OF THE RIGHT OF MAKER
TO A TRIAL BY JURY OR HAD THE FULL AND COMPLETE OPPORTUNITY TO CONSULT SUCH
COUNSEL AND CHOSE NOT TO DO SO, AND, THEREFORE, MAKER FREELY AND VOLUNTARILY
WAIVES SUCH RIGHT TO TRIAL BY JURY.
Ex.
C -
2
Maker
hereby agrees that any dispute with respect to this Note shall be resolved
in
the manner provided in Section 20 of the LLC Agreement.
As
used
herein, the terms “Maker” and “Holder” shall be deemed to include their
respective successors, legal representatives and assigns, whether by voluntary
action of the parties or by operation of law.
MAKER:
Maker's
Address for Notices: DARTMOUTH
INVESTMENTS, LLP
By:
16294
Via
Venetia Name:
▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Title:
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
With
a
copy to:
▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
Ex.
C -
3