COMPANY AGREEMENT
OF
Elf Fork Capital LLC
A TEXAS LIMITED LIABILITY COMPANY
EFFECTIVE AS OF JANUARY 26, 2007
THE MEMBERSHIP INTERESTS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES ACTS. SUCH INTERESTS ARE
BEING ACQUIRED FOR INVESTMENT ONLY, AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED,
DONATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
UNDER SUCH ACTS OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED WITH RESPECT TO THE PROPOSED DISPOSITION THEREOF
AND THAT SUCH DISPOSITION WILL NOT CAUSE THE LOSS OF THE EXEMPTION UPON WHICH
THE ISSUER RELIED IN SELLING THESE MEMBERSHIP INTERESTS TO THE ORIGINAL
PURCHASER THEREOF.
THE MEMBERSHIP INTERESTS AND THE TRANSFER THEREOF ARE SUBJECT TO QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS SET FORTH IN THIS COMPANY AGREEMENT, AND THE
MEMBERSHIP INTERESTS SHALL NOT BE TRANSFERRED UPON THE BOOKS OF THE COMPANY
UNTIL THE TERMS AND CONDITIONS OF THIS AGREEMENT HAVE BEEN FULLY COMPLIED WITH.
TABLE OF CONTENTS
ARTICLE I. FORMATION..........................................................1
1.1. FORMATION...........................................................1
1.2. PRINCIPAL PLACE OF BUSINESS.........................................1
1.3. REGISTERED AGENT OFFICE.............................................1
1.4. TERM................................................................1
1.5. PURPOSE.............................................................1
ARTICLE II. RIGHTS AND DUTIES OF MANAGERS.....................................2
2.1. MANAGEMENT OF COMPANY VESTED IN THE MANAGERS........................2
2.2. CERTAIN POWERS OF MANAGERS..........................................2
2.3. LIABILITY FOR CERTAIN ACTS..........................................2
2.4. MEMBERS AND MANAGERS HAVE NO EXCLUSIVE DUTY TO COMPANY..............3
2.5. AUTHORITY OF MANAGERS TO DEAL WITH AFFILIATES.......................3
2.6. RESIGNATION AND REMOVAL OF MANAGERS.................................3
2.7. COMPENSATION AND FEES...............................................3
ARTICLE III. RIGHTS AND OBLIGATIONS OF MEMBERS................................3
3.1. LIMITATION OF MEMBERS' LIABILITIES..................................3
3.2. NO CONTROL OF BUSINESS OR RIGHT TO ACT FOR COMPANY..................4
3.3. PRIORITY AND RETURN OF CAPITAL......................................4
3.4. MEETINGS OF THE COMPANY; VOTING RIGHTS..............................4
3.5. POWERS RESERVED TO THE MEMBERS......................................5
ARTICLE IV. COMPANY BOOKS AND RECORDS; AMENDMENT OF AGREEMENT;
POWER OF ATTORNEY.................................................6
4.1. AMENDMENT OF AGREEMENT..............................................6
4.2. BOOKS AND RECORDS, ACCOUNTING, REPORTS, TAX ELECTIONS...............6
ARTICLE V. CONTRIBUTIONS TO THE COMPANY; CAPITAL ACCOUNTS;
SECURITIES MATTERS.................................................7
5.1. INITIAL CAPITAL CONTRIBUTIONS.......................................7
5.2. ADDITIONAL CONTRIBUTIONS; ADDITIONAL UNITS; PREEMPTIVE RIGHTS.......7
5.3. FAILURE TO CONTRIBUTE ADDITIONAL CONTRIBUTIONS......................8
5.4. CAPITAL ACCOUNTS....................................................8
5.5. SECURITIES MATTERS..................................................8
ARTICLE VI. ALLOCATIONS, DISTRIBUTIONS........................................8
6.1. ALLOCATIONS OF PROFITS AND LOSSES...................................8
6.2. SPECIAL ALLOCATIONS.................................................9
6.3. DISTRIBUTIONS......................................................11
ARTICLE VII. TRANSFERABILITY.................................................11
7.1. GENERAL............................................................11
7.2. TRANSFERS NOT REQUIRING PRIOR CONSENT..............................11
7.3. VOLUNTARY TRANSFER PROCEDURE.......................................12
7.4. PURCHASE PRICE.....................................................13
7.5. REMEDIES...........................................................13
7.6. EFFECT OF TRANSFER OF INTEREST.....................................13
ARTICLE VIII. ADMISSION AND WITHDRAWAL OF MEMBERS............................14
8.1. ADMISSION OF MEMBERS...............................................14
8.2. WITHDRAWAL OF MEMBERS..............................................14
ARTICLE IX. WINDING UP AND TERMINATION.......................................14
9.1. EVENTS REQUIRING WINDING UP........................................14
i
9.2. WINDING UP, LIQUIDATION AND DISTRIBUTION OF ASSETS.................15
9.3 RETURN OF CONTRIBUTION NONRECOURSE TO MEMBERS......................15
ARTICLE X. MISCELLANEOUS.....................................................16
10.1. NOTICE.............................................................16
10.2. WAIVER OF NOTICE...................................................16
10.3. AUTHORITY TO BIND THE COMPANY......................................16
10.4. WAIVER OF ACTION FOR PARTITION.....................................16
10.5. INDEMNIFICATION BY COMPANY.........................................16
10.6. CONSTRUCTION.......................................................16
10.7. ARTICLES AND OTHER HEADINGS........................................16
10.8. SEVERABILITY.......................................................17
10.9. APPLICATION OF TEXAS LAW...........................................17
10.10. DISREGARDED ENTITY TAX TREATMENT INTENDED IF ONE MEMBER............17
10.11. PARTNERSHIP TAX TREATMENT INTENDED IF MORE THAN ONE MEMBER;
TAX ADMINISTRATIVE MATTERS.........................................17
10.12. NO PARTNERSHIP INTENDED FOR NON-TAX PURPOSES.......................17
CERTIFICATION.................................................................18
EXHIBIT A MEMBER CAPITAL CONTRIBUTIONS................................19
EXHIBIT B LIST OF ASSETS..............................................20
EXHIBIT C SERVICING AGREEMENT..........................................21
ii
This Company Agreement of ELF FORK CAPITAL LLC is adopted by the Managers
and the undersigned Members, for the purpose of forming and operating ELF FORK
CAPITAL LLC as a Texas limited liability company, and the undersigned Managers
and Members do each mutually acknowledge and agree as follows:
DEFINITIONS
The following terms used in this Company Agreement shall have the following
meanings unless otherwise expressly provided herein:
(i) "Agreement" shall mean this Company Agreement, as originally
executed, and as amended from time to time in writing, including all
exhibits and schedules hereto, which concerns the conduct of the business
of the Company.
(ii) "Capital Account" shall mean the Capital Account maintained for
each Member in accordance with Section 5.4.
(iii) "Capital Contribution" shall mean any contribution to the
capital of the Company in cash or property by a Member whenever made.
(iv) "Certificate of Formation" shall mean the Certificate of
Formation filed with the Texas Secretary of State for the purpose of
organizing the Company, as the same may be amended or restated from time to
time.
(v) "Code" shall mean the Internal Revenue Code of 1986, as amended,
or corresponding provisions of subsequent superseding federal revenue laws.
(vi) "Company" shall mean Elf Fork Capital LLC, the Company organized
pursuant to the Certificate of Formation and this Agreement.
(vii) "Deficit Capital Account" shall mean with respect to any Member,
the deficit balance, if any, in such Member's Capital Account as of the end
of the taxable year, after giving effect to the following adjustments:
(a) credit to such Capital Account any amount which such Member
is obligated to restore under Section 1.704-1(b)(2)(ii)(c) of the
Treasury Regulations, as well as any addition thereto pursuant to the
next to last sentence of Sections 1.704-2(g)(1) and (i)(5) of the
Treasury Regulations, after taking into account thereunder any changes
during such year in company minimum gain (as determined in accordance
with Section 1.704-2(d) of the Treasury Regulations) and in the
minimum gain attributable to any member nonrecourse debt (as
determined under Section 1.704-2(i)(3) of the Treasury Regulations);
and
(b) debit to such Capital Account the items described in Sections
1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Treasury Regulations.
iii
This definition of Deficit Capital Account is intended to comply with the
provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and 1.704-2, and
will be interpreted consistently with those provisions.
(viii) "Distributable Cash" shall mean all cash, revenues and funds
received by the Company from Company operations, including from the sale of
any asset to the extent not reinvested in replacement assets, less the sum
of the following to the extent paid or set aside by the Company: (a) all
principal and interest payments on indebtedness of the Company and all
other sums paid to lenders; (b) all cash expenditures incurred incident to
the purchase or sale of any asset and the normal operation of the Company's
business; (c) reimbursement of expenses and payment of compensation to any
Manager; and (d) such Reserves as the Managers deem reasonably necessary to
the proper operation of the Company's business.
(ix) "Entity" shall mean any general partnership, limited partnership,
limited liability company, corporation, joint venture, trust, business
trust, cooperative or association.
(x) "Fair Market Value" shall mean, on the date such Fair Market Value
is to be determined, the excess of the value of all of the Company's assets
minus all of the Company's liabilities. For purposes of determining Fair
Market Value, (a) no value shall be placed on the goodwill or name of the
Company or the office records, files, statistical data or any similar
intangible assets of the Company not normally reflected in the Company's
accounting records, (b) there shall be taken into consideration any related
items of income earned but not received, expenses incurred but not yet
paid, liabilities fixed or contingent, prepaid expenses to the extent not
otherwise reflected in the books of account, and the value of options or
commitments to purchase securities pursuant to agreements entered into on
or prior to the valuation date, (c) determination of value of any
publicly-traded security or bond, shall be the most recent closing sale
price quoted for such security on the exchange on which it is traded, (d)
determination of the value of other securities shall be based on all
relevant factors, including without limitation, type of security,
marketability, restrictions on disposition, and current financial position
and operating results, (e) the value of real estate shall be deemed to be
the most recent fair market value of such real estate as determined by a
real estate appraiser selected by the Managers; and (f) as to the
liabilities and any other assets of the Company, the book value carried on
the books of the Company in accordance with Generally Accepted Accounting
Principles, consistent with the Company's past practice.
(xi) "Fiscal Year" shall mean the Company's fiscal year, which shall
end on December 31, of each year.
(xii) "Initial Capital Contribution" shall mean the initial
contribution to the capital of the Company pursuant to this Agreement.
(xiii) "Manager" and "Managers" As used in this Agreement the term
"Manager" shall mean each individual Manager of the Company from time to
time. The term "Managers" shall refer (i) to the Manager of the Company at
any time when the Company has one (1) Manager and (ii) collectively, to all
iv
of the Managers of the Company at any time when the Company has multiple
Managers. Initially, the Company shall have one Manager, which shall be
Mortgage Assistance Corp., a Texas corporation.
(xiv) "Member" shall mean any person that signs in person or by an
attorney-in-fact, or otherwise is a party to the Agreement at the time that
the Company is formed and is identified as a Member in the Agreement and
any Person who is subsequently admitted as a Member in the Company in
accordance with the Texas Act and the Agreement, until such time as such
Person withdraws, is removed, or is otherwise no longer a Member of the
Company.
(xv) "Membership Interest" shall mean a Member's entire interest in
the Company, including such Member's right to participate in the decisions
of the Members, as reflected by the ratio of such Member's Units to the
aggregate of the Units of all Members.
(xvi) "Net Profits" and "Net Losses" shall mean the income, gain,
loss, deductions and credits of the Company in the aggregate or separately
stated, as appropriate, determined under the Company's adopted method of
accounting at the close of each Fiscal Year.
(xvii) "Offer" shall have the meaning ascribed to such term in Section
7.3 hereof.
(xviii) "Offered Interest" shall have the meaning ascribed to such
term in Section 7.3 hereof.
(xix) "Percentage of Interest" means, for a Member, the percentage
equivalent of a fraction, the numerator of which is the number of Units
owned by such Member and the denominator of which is the total number of
Units owned by all Members.
(xx) "Persons" shall mean any individuals, partnerships, limited
liability companies, corporations, trusts, business trusts, real estate
investment trusts, estates and other associations or business entities.
(xxi) "Reserves" shall mean, with respect to any fiscal period, funds
set aside or amounts allocated during such period to reserves which shall
be maintained in amounts deemed sufficient by the Managers for working
capital and to pay taxes, insurance, debt service or other costs or
expenses incident to the ownership or operation of the Company's business.
(xxii) "Securities Acts" shall mean the Securities Act of 1933 or any
other applicable state securities laws.
(xxiii) "Selling Member" shall mean any Member who sells, assigns, or
otherwise transfers for consideration, all or any portion of a Membership
Interest.
(xiv) "Texas Act" shall mean the Texas Limited Liability Company Law,
part of the Texas Business Organizations Code, as amended.
(xxv) A "Transfer" of all or any part of a Membership Interest means
any type of disposition of any right, title or interest whatsoever in such
v
Membership Interest, voluntarily or involuntarily, directly or indirectly,
including without limitation any sale, exchange, assignment, encumbrance,
grant of security interest, pledge, hypothecation, gift, transfer by trust,
transfer by will or intestate succession, or other disposition whatsoever.
(xxvi) "Transferring Person" shall have the meaning ascribed to such
term in Section 7.3.
(xxvii) "Treasury Regulations" shall mean the proposed, temporary and
final regulations promulgated under the Code in effect as of the date of
filing the Certificate of Formation and the corresponding sections of any
regulations subsequently issued that amend or supersede such regulations.
(xxviii) "Units" shall mean equity ownership in the Company
represented by membership units ("Units"). The Company may issue such total
number of Units as the Managers shall determine, and may issue partial
Units.
ARTICLE I. FORMATION
1.1. Formation. On January 26, 2007, the Company was organized as a Texas
limited liability company by execution and delivery of Certificate of Formation
to the Texas Secretary of State in accordance with the Texas Act.
1.2. Principal Place Of Business. The principal place of business of the
Company shall be located 2614 Main Street, Dallas, Texas 75226. The Company at
any time may change the location of such principal office and may have such
other offices, either within or without the State of Texas, as the Members may
designate or as the business of the Company may require.
1.3. Registered Agent Office. The initial registered agent is Mortgage
Assistance Corporation and the address of the initial registered agent office of
the Company is 2614 Main Street, Dallas, Texas 75226. The registered agent
office and the registered agent may be changed from time to time by the
Managers, with the consent of the Members, filing the prescribed form with the
Texas Secretary of State.
1.4. Term. The existence of the Company shall be perpetual, unless
terminated or dissolved as set forth herein.
1.5. Purpose. The Company may conduct or promote any lawful businesses or
purposes for which limited liability companies may be organized under the Texas
Act. The Company shall possess and may exercise all the powers and privileges
necessary or convenient to the conduct, promotion, or attainment of the
businesses or purposes of the Company.
1
ARTICLE II. RIGHTS AND DUTIES OF MANAGERS
2.1. Management of Company Vested in the Managers. The business and affairs
of the Company shall be managed by the Managers. The consent of a majority in
number of the Managers then-serving shall be the act of the Managers. The
Managers shall direct, manage and control the business of the Company to the
best of their ability. Except for situations in which the approval of the
Members is expressly required herein and as specifically provided in Section
3.5, the Managers shall have full and complete authority, power and discretion
to: (i) manage and control the business, affairs and property of the Company;
(ii) make all decisions regarding the business, affairs and property of the
Company; and (iii) perform any and all other acts incident to the management of
the Company's business subject to the provisions of this Agreement. Subject to
the limitations in the preceding sentence, the right, power, and authority of
the Managers pursuant to this Agreement shall be liberally construed to
encompass all acts and activities in which a Company may engage under the Texas
Act.
2.2. Certain Powers of Managers. Without limiting the generality of the
provisions set forth in Section 2.1 above, the Managers shall have the power to
act on behalf of the Company:
(a) To enter into and execute, on behalf of the Company, all agreements,
contracts, instruments and related documents in connection with the
Company's business, on such terms as the Managers, in their reasonable
discretion, deem to be in the best interests of the Company.
(b) To carry out the business of the Company.
(c) To acquire and enter into, on behalf of the Company, any contract of
insurance, which the Managers reasonably deem necessary and proper for
the protection of the Company, for the conservation of its property,
or for any purpose beneficial to the Company.
(d) To employ persons (including affiliates of any Manager, subject to the
restrictions on compensation to such affiliates set forth in this
Agreement) in the operation of the Company, on such terms and for such
compensation as the Managers shall reasonably determine.
(e) To employ attorneys, accountants, consultants, brokers, and other
outside entities or individuals (including affiliates of any Manager,
subject to the restrictions on compensation to such affiliates set
forth in this Agreement) on behalf of the Company.
(f) To pay, collect, compromise, arbitrate, resort to legal action for or
otherwise adjust claims or demands of or against the Company.
(g) To sell assets to another investor as well as maintain servicing
and/or obtain other incentives as deemed in the best interest of the
company.
2.3. Liability for Certain Acts. Each Manager shall perform its duties as a
Manager in good faith, in a manner reasonably believed to be in the best
interest of the Company, and with such care as an ordinarily prudent person in a
2
like position would use under similar circumstances. If any Manager so performs
the duties as a Manager, it shall not have any liability by reason of being or
having been a Manager. No Manager shall be liable to the Company or to any
Member for any loss or damage sustained by the Company or any Member, unless the
loss or damage shall have been the result of fraud, deceit, gross negligence,
willful misconduct or a wrongful taking by such Manager.
2.4. Members and Managers Have No Exclusive Duty to Company. The Managers,
and affiliates of the Managers, shall not be required to manage the Company as
their sole and exclusive function and each Member and Manager and their
affiliates may have other business interests and may engage in other activities
in addition to those relating to the Company, including business interests or
other activities that directly compete with the business of the Company.
2.5. Authority of Managers to Deal with Affiliates. Any Manager may, on
behalf of the Company, contract with any person, firm or corporation, including,
without limitation, any of the Members, any entity in which any of the Members
or any Manager has a direct or indirect interest and any affiliated or related
corporation or other entity, for the performance of any and all services which
may at any time be necessary, proper, convenient or advisable to carry on the
business of the Company; provided that any such transaction shall be effected
only on terms competitive with those that may be obtained from unaffiliated
persons. Any goods or services provided by affiliates to the Company shall be
pursuant to a written contract which sets forth the goods and services to be
provided and the compensation to be paid.
2.6. Resignation and Removal of Managers. Any Manager may resign by giving
thirty (30) days prior written notice to the Members. Any Manager may be removed
by the unanimous vote of all of the Members. The Members shall by the unanimous
vote of all Members then elect a successor Manager to begin serving
simultaneously with the resignation or removal of any Manager. The Members may
increase or decrease (but not below one (1)) the number of Managers constituting
all of the Managers of the Company.
2.7. Compensation and Fees. Each Manager shall be reimbursed by the Company
for all out of pocket expenses incurred by such Manager in furtherance of
performing its obligations to the Company as Manager. Except as specifically
provided in the Servicing Agreement (as described in Section 3.5(c) herein),
Manager shall receive no compensation other than reimbursement of out-of-pocket
expenses incurred by Manager in furtherance of the business of the Company. No
Manager shall receive any additional compensation except as the Members shall
decide.
ARTICLE III. RIGHTS AND OBLIGATIONS OF MEMBERS
3.1. Limitation of Members' Liabilities. Based on the Texas Act, a Member
shall not be bound by, or be personally liable for, the expenses, liabilities or
obligations of the Company or the Manager, and such Member's liability shall be
limited solely to the amount of its Capital Contributions, whether or not
returned to such Member, together with the undistributed share of the profits of
the Company from time to time credited to such Member's Capital Account and any
3
money or other property wrongfully paid or conveyed to such Member on account of
its Capital Contribution, including but not limited to money or property to
which creditors were legally entitled, paid or conveyed to a Member, and, under
certain circumstances, interest on returned capital.
3.2. No Control of Business or Right to Act for Company. No Member shall
have any right or authority to act for or bind the Company or to vote on matters
other than the matters set forth in this Agreement, except as specifically
required by applicable law.
3.3. Priority and Return of Capital. Except as provided herein, no Member
shall have priority over any other Member, as to the return of Capital
Contributions, Net Profits, Net Losses or distributions.
3.4. Meetings of the Company; Voting Rights.
(a) Meetings of the Company may be called by the Managers and shall be
called by it upon the written request of Members with the authority to
vote an aggregate of not less than 49% Percentage of Interest. Upon
receipt of such a written request, stating the purpose of the proposed
meeting, the Managers shall provide each Member, within ten (10) days
of such request, with written notification of a meeting and the
purpose of such meeting. Such meetings shall be held not less than
fifteen (15) days or more than sixty (60) days after the receipt of
such request and shall be held at the principal place of business or
principal executive office of the Company or such other place as the
Members shall unanimously decide.
(b) At all meetings of the Company, any decision, determination, consent,
approval or action by or of the Members shall be affected by the
favorable vote of all of the Members of the Company, unless the vote
of a greater or lesser number is otherwise required by the Act, the
Certificate of Formation or this Agreement.
(c) At all meetings of the Company, a Member may vote by proxy executed in
writing by the Member or by a duly authorized attorney-in-fact. Such
proxy shall be filed with the Company at least one (1) day before the
meeting. Unless otherwise provided in the proxy, no proxy shall be
effective after eleven (11) months after the date of its execution.
(d) Action required or permitted to be taken at a meeting of Members may
be taken without a meeting if the action is evidenced by one or more
written consents describing the action taken, signed by each Member
entitled to vote, and delivered to a Manager for inclusion in the
minutes or for filing with the Company records. Action taken under
this section is effective when all Members entitled to vote have
signed a consent, unless the consent specifies a different effective
date.
(e) When any notice is required to be given to any Member, a waiver of the
notice in writing signed by the person entitled to the notice, whether
before, at, or after the time stated therein, shall be equivalent to
the giving of the notice.
4
3.5. Powers Reserved to the Members. Each of the following actions on
behalf of the Company shall require the unanimous approval of the Members:
(a) the acquisition of any real property in excess of $100,000 per parcel
of real estate;
(b) the acquisition of any loan or portfolio of loans in excess of
$100,000 per loan;
(c) the execution, on behalf of the Company, of a servicing agreement in
the form of Exhibit B, attached hereto and incorporated herein by this
reference, or any amendment thereto, to service the Initial Loan
Portfolio (as defined in Section 5.6 herein) and an additional
portfolio of loans owned by the Company (hereinafter referred to as a
"Servicing Agreement").
(d) the sale, exchange or other disposition of substantially all of the
assets of the Company;
(e) the filing by the Company of any voluntary petition in bankruptcy or
delivery of any assignment for the benefit of creditors;
(f) the lending of Company funds to any person (except as otherwise set
forth herein), or obligating the Company as surety, guarantor or
accommodation party, except that the Company shall be able to
guarantee credit accounts with suppliers in the ordinary course of
business;
(g) the incurrence of any debt on behalf of the Company, other than trade
debt incurred in the ordinary course of the Company's business;
(h) the investment or participation by the Company in any other entity;
(i) the merger or consolidation of the Company;
(j) the admission of new Members of the Company, except as specifically
provided in Section 8.1; or
(k) the establishment of reserves to help meet anticipated Company
expenses and the investment of such reserves pending utilization.
5
ARTICLE IV. COMPANY BOOKS AND RECORDS;
AMENDMENT OF AGREEMENT; POWER OF ATTORNEY
4.1. Amendment of Agreement.
(a) Amendment. Any amendment to this Agreement must be approved in writing
by all of the Members and by the Managers.
(b) Recording of Amendment. In making any amendments, there shall be
prepared and filed for recordation by the Managers such documents and
certificates, if any, as shall be required to be prepared and filed
under the Texas Act and under the laws of the other jurisdictions in
which the Company is then formed or qualified.
4.2. Books and Records, Accounting, Reports, Tax Elections.
(a) Availability. At all times during the existence of the Company, the
Managers shall keep or cause to be kept full and true books and
records of account. Such books and records of account shall be
maintained at the principal place of business of the Company or such
other place or places as may be determined by the Managers from time
to time. In addition, the Company shall maintain at its principal
office (i) a current list of the full name and last known business
address of each Member set forth in alphabetical order, (ii) a copy of
this Agreement and all amendments thereto, together with executed
copies of any powers of attorney pursuant to which this Agreement or
any amendment has been executed, (iii) copies of the Company's
federal, state and local tax returns and reports, if any, for the
three (3) most recent years, and (iv) accounting records of the
Company. Any Member or his, her or its duly authorized representative
shall have the right to inspect and copy the books and records of the
Company upon reasonable notice during business hours.
(b) Financial Reports. The Managers shall cause to be prepared and
delivered to each Member, at the expense of the Company, such
financial reports as shall be decided by the Members.
(c) Income Tax Information. The Managers shall cause income tax returns
for the Company to be prepared by the Company's accountant and filed
with the appropriate authorities and shall furnish to each Member
within ninety (90) days after the close of the taxable year of the
Company, all tax information with respect to the Company as may be
required by the Member for the preparation of his, her or its
individual federal and state tax returns, at the expense of the
Company.
(d) Accounting Principles. The Company's books shall be maintained in
accordance with generally accepted accounting principles determined by
the Company's accountants, which accounting principles shall be
consistently applied.
(e) Bank Accounts. The Managers are authorized to open a bank or
investment account for the Company and withdraw funds or sign checks
withdrawing funds from such bank or investment account for the sole
purpose of paying all ordinary and necessary charges and expenses
6
incident to or arising out of the operations of the Company in the
ordinary course of business (including expenses arising out of a
Servicing Agreement provided said Servicing Agreement has been
approved by the Members as required herein), and that such banks and
investment companies be, and hereby are, authorized and directed to
honor, pay and charge to the account of this Company all checks and
orders for the payment of money so drawn when so signed. The Managers
are authorized to certify to any bank or other investment company a
copy of this Section 4.2(e) and the names and signatures of the
Company's Managers authorized to sign checks as provided in this
Section 4.2(e), and such bank or other investment company is hereby
authorized to rely upon such certificate until formally advised of any
changes therein.
ARTICLE V. CONTRIBUTIONS TO THE COMPANY; CAPITAL ACCOUNTS; SECURITIES MATTERS
5.1. Initial Capital Contributions. Each Member shall contribute the amount
set forth for such Member in Exhibit A, attached hereto and incorporated herein,
as his, her or its Initial Capital Contribution. Exhibit A shall be revised from
time to time as necessary to record all Capital Contributions and all changes in
the Company and ownership of the Company effected in accordance with this
Agreement, and Exhibit A as so revised shall be furnished to each Member.
5.2. Additional Contributions; Additional Units; Preemptive Rights.
(a) Unless approved by all of the Members, no additional Capital
Contributions shall be required from any Members. Upon such approval,
the Managers shall give written notice to each Member of the amount of
any required additional Capital Contributions, and each Member shall
deliver to the Company his, her or its pro rata share thereof based
upon such Member's Percentage of Interest no later than thirty (30)
days following the date such notice is given.
(b) Unless approved by the Members, the Company shall not offer additional
Units or any other interest in the Company for sale to third parties.
If authorized by the Members, the purchase price for which additional
Units shall be offered shall be determined by the Members. Purchasers
of additional Units pursuant to this paragraph who are not already
Members shall be admitted to the Company as Members in accordance with
Section 8.1 hereof. The Managers are authorized to adjust the
Percentages of Interest of the Members as appropriate to reflect the
issuance of additional Units. Exhibit A shall be revised from time to
time as necessary to record all changes in the ownership of the
Company affected in accordance with this section, and Exhibit A as so
revised shall be furnished to each Member.
7
5.3. Failure to Contribute Additional Contributions. In the event that a
Member does not contribute his, her or its portion of the additional Capital
Contribution provided for in Section 5.2(a) when due, then such Member's
Membership Interest shall be reduced pro-rata by the proportion of the unpaid
additional Capital Contribution of such Member to the aggregate of all Capital
Contributions actually made by such Member pursuant to Section 5.1 and 5.2.
5.4. Capital Accounts.
(a) A Capital Account will be maintained for each Member in accordance
with Section 1.704-1(b)(2)(iv) of the Treasury Regulations. Each
Member's Capital Account will be increased by: (i) the amount of money
or the fair market value of property contributed by such Member to the
Company; (ii) allocations to each Member of Net Profits; and (iii)
allocations to each Member of income described in Code Section
705(a)(1)(B). Each Member's Capital Account will be decreased by: (a)
the amount of money distributed to each Member by the Company; (b) the
Fair Market Value of property distributed to each Member by the
Company, net of liabilities secured by such distributed property that
such Member is considered to assume or take subject to, pursuant to
Code Section 752; (c) allocations to the Member for expenditures
described in Code Section 705(a)(2)(B); (d) allocations to each Member
of Net Losses; and (e) allocations to the account of such Member of
other Company losses and deductions as set forth in the Treasury
Regulations.
(b) In the event of a permitted sale or exchange of a Membership Interest
in the Company, the Capital Account of the transferor shall become the
Capital Account of the transferee to the extent it relates to the
transferred Membership Interest in accordance with Treasury
Regulations Section 1.704-1(b)(2)(iv).
(c) A Member shall not receive out of the Company's property any part of
its Capital Contribution until all liabilities of the Company, except
liabilities to Members on account of their Capital Contributions, have
been paid or there remains property of the Company sufficient to pay
them.
5.5. Securities Matters. The undersigned Members understand: (i) that the
Membership Interests evidenced by this Agreement have not been, and will not be,
registered under the Securities Acts because the Company is issuing these
Membership Interests in reliance upon the exemptions from the registration
requirements of the Securities Acts; (ii) that the Company has relied upon the
fact that the Membership Interests are to be held by each Member for investment;
and (iii) that exemption from registrations under the Securities Acts would not
be available if the Membership Interests were acquired by a Member with a view
to distribution.
ARTICLE VI. ALLOCATIONS, DISTRIBUTIONS
6.1. Allocations of Profits and Losses.
(a) Except as provided in Section 6.2, Net Profits of the Company for each
Fiscal Year shall be allocated to each Member in proportion to their
Percentage of Interests.
8
(b) Except as provided in Section 6.2, Net Losses of the Company for each
Fiscal Year shall be allocated to the Members in proportion to their
Percentage of Interests.
6.2. Special Allocations.
Notwithstanding any other provisions of this Agreement to the contrary:
(a) No allocation of loss, deduction, and/or expenditures described in
Code Section 705(a)(2)(B) shall be charged to the Capital Account of
any Member if such allocation would cause such Member to have a
Deficit Capital Account. The amount of the loss, deduction and/or
expenditure which would have caused a Member to have a Deficit Capital
Account shall instead be charged to the Capital Account of each Member
who would not have a Deficit Capital Account as a result of the
allocation, in proportion to their respective Capital Contributions.
(b) In the event any Member unexpectedly receives any adjustments,
allocations, or distributions described in Treasury Regulation Section
1.704-1(b)(2)(ii)(d)(4),(5), or (6), which create or increase a
Deficit Capital Account of such Member, then items of Company income
and gain (consisting of a pro rata portion of each item of Company
income, including gross income, and gain for such year and, if
necessary, for subsequent years) shall be specially credited to the
Capital Account of such Member in an amount and manner sufficient to
eliminate, to the extent required by the Treasury Regulations, the
Deficit Capital Account so created as quickly as possible. This
provision is intended to constitute a "qualified income offset" within
the meaning of Treasury Regulation Section l.704-1(b)(2)(ii)(d)(3) and
shall be applied and interpreted consistent therewith.
(c) In the event any Member would have a Deficit Capital Account at the
end of any Fiscal Year which is in excess of the sum of any amount
that such Member is obligated to restore to the Company under Treasury
Regulations Section 1.704-l(b)(2)(ii)(c) and such Member's share of
minimum gain as defined in Treasury Regulation Section 1.704-2(g)(1),
the Capital Account of such Member shall be specially credited with
items of Company income (including gross income) and gain in the
amount of such excess as quickly as possible.
(d) Notwithstanding any other provision of this section 6.2, if there is a
net decrease in the Company's minimum gain as defined in Treasury
Regulation Section 1.704-2(d) during a taxable year of the Company,
then each Member shall be allocated items of income (including gross
income) and gain for such year (and if necessary for subsequent years)
equal to that Member's share of the net decrease in Company minimum
gain. This section 6.2(d) is intended to comply with the minimum gain
chargeback requirement of Treasury Regulation Section 1.704-2(f) and
shall be interpreted consistently therewith. If in any taxable year
that the Company has a net decrease in the Company's minimum gain, the
minimum gain chargeback requirement would cause a distortion in the
economic arrangement among the Members and it is not expected that the
Company will have sufficient other income to correct that distortion,
the Managers may in their discretion (and shall, if requested to do so
by a Member) seek to have the Internal Revenue Service waive the
minimum gain chargeback requirements in accordance with Treasury
Regulation Section 1.704-2(f)(4).
9
(e) Items of Company loss, deduction and expenditures described in Code
Section 705(a)(2)(B) which are attributable to any nonrecourse debt of
the Company and are characterized as member nonrecourse deductions
under Treasury Regulation Section 1.704-2(i) shall be allocated to the
Members' Capital Accounts in accordance with Treasury Regulation
Section 1.704-2(i).
(f) Beginning in the first taxable year in which there are allocations of
"nonrecourse deductions," as described in Treasury Regulation Section
1.704-2(b), such deductions shall be allocated to the Members in
accordance with, and as a part of, the allocations of Company Net
Profit or Net Loss for such period.
(g) In connection with a Capital Contribution by a new or existing Member
as consideration for one or more Units, or in connection with the
liquidation of the Company or a distribution of money or other
property (other than a de minimis amount) by the Company to a retiring
Member as consideration for one or more Units, the Capital Accounts of
the Members shall be adjusted to reflect a revaluation of Company
property including intangible assets in accordance with Treasury
Regulation Section 1.704-1(b)(2)(iv)(f). If under Treasury Regulation
Section 1.704-1(b)(2)(iv)(f) Company property that has been revalued
is properly reflected in the Capital Accounts and on the books of the
Company at a book value that differs from the adjusted tax basis of
such property, then depreciation, depletion, amortization and gain or
loss with respect to such property shall be shared among the Members
in a manner that takes account of the variation between the adjusted
tax basis of such property and its book value, in the same manner as
variations between the adjusted tax basis and Fair Market Value of
property contributed to the Company are taken into account in
determining the Members' shares of tax items under Code Section
704(c).
(h) All recapture of income tax deductions resulting from sale or
disposition of Company property shall be allocated to the Members to
whom the deduction that gave rise to such recapture was allocated
hereunder to the extent that such Member is allocated any gain from
the sale or other disposition of such Company property.
(i) Any credit or charge to the Capital Accounts of the Members under this
section 6.2 shall be taken into account in computing subsequent
allocations of profits and losses, so that the net amount of any items
charged or credited to Capital Accounts shall be equal to the net
amount that would have been allocated to the Capital Account of each
Member pursuant to the provisions of this Article if the special
allocations required by this Section 6.2 had not occurred.
(j) In accordance with Code Section 704(c)(1)(A) and Treasury Regulation
Section 1.704-3, if a Member contributes property with a fair market
value that differs from its adjusted basis at the time of
contribution, income, gain, loss and deductions with respect to the
property shall, solely for federal income tax purposes, be allocated
among the Members so as to take account of any variation between the
adjusted basis of such property to the Company and its fair market
value at the time of contribution.
10
6.3. Distributions.
(a) Notwithstanding anything herein to the contrary, the Managers may
distribute available funds on an asset by asset basis or quarterly
basis. If the managing member elects to distribute when an asset is
sold, then a distribution will be made the following month. The
priority for "distribution of proceeds" is as follows:
1) Costs to third parties or Managers expenses and servicing fees
(for all assets)
2) Return of capital contribution in proportion to members'
contribution for the sold assets.
3) Excess proceeds (or profit) in proportion to the Members'
Percentage of Interest.
(b) The Company shall make a distribution to any Member from Distributable
Cash to the extent that such Member is allocated income pursuant to
Section 6.1 or Section 6.2 in excess of distributions received
pursuant to Section 6.3(a), in an amount sufficient to defray federal,
state and local tax liabilities of such Member with respect to such
excess for the Fiscal Year, based upon the then-current highest
marginal federal tax rate plus the then-current highest marginal state
tax rate for the State of Texas.
ARTICLE VII. TRANSFERABILITY
7.1. General. Except as provided herein or as otherwise consented to in
writing by the Members, a Member shall not Transfer all or any part of a
Membership Interest. Any purported or attempted Transfer of all or any part of a
Membership Interest in violation of this Article 7 shall be null and void and
the purported transferee of such invalid Transfer shall not be entitled to have
any interest in the Company transferred to such purported transferee on the
books of the Company.
7.2. Transfers Not Requiring Prior Consent.
(a) A Member may, without first obtaining the written consents required in
Section 7.1 above, Transfer by sale or gift all or any undivided share
of its Membership Interest to any one or more of the following: (i) a
partnership, limited liability company or corporation in which fifty
percent (50%) or more of the capital and profit interests (in the case
of a partnership or a limited liability company) or in which fifty
percent (50%) or more of the capital stock (in the case of a
corporation) is owned by or for the benefit of the Member; (ii) the
Member's partners (if the Member is a partnership), the Member's
members (if the Member is a limited liability company) or the Member's
shareholders (if the Member is a corporation); (iii) the Company; and
(iv) a Member or Members; provided any such transferee shall agree in
writing to be bound by the terms and conditions of this Agreement as
they applied to the transferring Member on the date of execution of
this Agreement in the same manner as if the transferring Member had
retained ownership of its Membership Interest (upon meeting the
foregoing requirements, such transferee shall be referred to as a
"Permitted Transferee").
11
(b) The Managing Member may, without first obtaining the written consents
required in Section 7.1, transfer by sale, assignment or gift all or
any undivided share over and above its fifty percent Membership
Interest to a third party.
7.3. Voluntary Transfer Procedure.
(a) A Member who desires to Transfer all or any portion of a Membership
Interest (the "Transferring Person") to a third party, except as
permitted under Section 7.2, shall obtain from such third party a bona
fide written offer to purchase such Membership Interest (the "Offered
Interest"), stating the terms and conditions upon which the purchase
is to be made and the consideration offered therefore (the "Offer").
The Transferring Person shall give written notification to the
Managers and each of the Members, by certified mail or personal
delivery, of his, her or its intention to Transfer the Offered
Interest, furnishing to the Managers and each Member a copy of the
Offer.
(b) Upon receipt of the written notice required under paragraph (a) above,
the Company and the Members shall comply with the following procedure:
(i) The Company shall have thirty (30) days from the date of
delivery of the notice required by paragraph (a) above to notify the
Transferring Person in writing of the Company's election to redeem all
or a part of the Offered Interest at the purchase price set forth in
Section 7.4 of this Agreement, which decision of the Company shall be
made by an affirmative vote of all of the Members.
(ii) If the Company does not elect to redeem all of the Offered
Interest, the other Members shall have the right, within thirty (30)
days of the date of the notice of nonelection by the Company or
election as to less than all of the Offered Interest, to elect to
purchase the remaining Offered Interest, and the Transferring Person
shall sell such interest to the other Members at the purchase price
set forth in Section 7.4 of this Agreement. Any Member desiring to
acquire any or all of the Offered Interest shall deliver to the
Managers and each of the Members a written election to purchase the
Offered Interest.
(iii) If two or more Members of the Company elect to exercise the
option to purchase the Offered Interest then, in the absence of an
agreement between them, each Member shall have priority to purchase
such proportion of the available interest that such Member's
Percentage of Interest bears to the total Percentage of Interests held
by all other Members electing to purchase. The portion of the Offered
Interest not purchased on such a priority basis shall be allocated in
one or more successive allocations to those Members electing to
purchase more than the proportion of the Percentage of Interest to
which they have a priority right, up to the proportion of the Offered
Interest specified in their respective notices, in the proportion that
the Percentage of Interests held by each of them bears to the total
Percentage of Interest held by all of them.
(iv) If the Company and the Members do not exercise their rights
to redeem or purchase, as the case may be, all of the Offered Interest
pursuant to the terms set forth in Section 7.3(b)(i) and Section
12
7.3(b)(ii) above, then the Transferring Person shall be free to
Transfer the remaining part of the Offered Interest to the bona fide
purchaser set forth in the Offer under the terms of the Offer, subject
to the restrictions on such Transfer imposed by this Agreement or any
other agreement or by law.
(v) If the Company exercises its right to redeem all or a part of
the Offered Interest in accordance with Section 7.3(b)(i) above, the
Transferring Person shall be obligated to sell such Offered Interest
to the Company. If any or all of the Members exercise their rights to
purchase all or a part of the Offered Interest in accordance with
Section 7.3(b)(ii) above, the Transferring Person shall be obligated
to sell such Offered Interest to such exercising Members. The closing
of the Transfer of the Offered Interest from the Transferring Person
to the Company or any Members pursuant to this Section shall be held
at the principal offices of the Company not later than ninety (90)
days after receipt of notice required by paragraph (a) above.
(c) In the event of the Transfer of all or any part of any Offered
Interest by a Transferring Person to any third party, and as a
condition to recognizing the effectiveness and binding nature of any
such Transfer, the Company may require the Transferring Person or
Transferring Person and the third party, as the case may be, to
execute, acknowledge and deliver to the Members or Managers such
instruments of transfer, assignment and assumption and such other
certificates, representations and documents, and to perform all such
other acts which the Managers deem necessary or desirable.
7.4. Purchase Price. The purchase price to be paid to a Transferring Person
for all or any part of such Transferring Person's Membership Interest redeemed
by the Company or purchased by a Member under Section 7.3(b) shall be the lower
of (i) the purchase price set forth in the Offer for such Membership Interest,
or (ii) the product of (A) the Percentage of Interest represented by the Offered
Interest multiplied by (B) the Fair Market Value of the Company as of the date
of such redemption or purchase.
7.5. Remedies. The Members agree that a violation by any of them of this
Article 7 will cause such damage to the Company and to the other Members as will
be irreparable and the exact amount of which will be impossible to ascertain.
For this reason, the Members agree that the Company shall be entitled as a
matter of right to a decree of specific performance of the terms of this Article
7 or for temporary or permanent injunctive relief from any court of competent
jurisdiction restraining any attempted or purported Transfer of interest in the
Company in violation of this Article 7. In addition, any Member attempting or
purporting to Transfer an interest in the Company in violation of this Article 7
and the purported transferee participating in the attempted or purported
Transfer, shall be jointly and severally liable to reimburse and pay the Company
for any and all costs, fees and expenses including without limitation any
attorneys', accountants', and other professional fees and expenses actually
expended or incurred by the Company in connection with any such violation,
whether or not litigation ensues. The remedies set forth in this Section 7.6
shall be cumulative and in addition to whatever other rights and remedies the
Company and the Members may have to protect their respective rights in the event
of a violation of the provisions of this Article 7, including without limitation
the right to recover damages including actual, compensatory, consequential,
incidental and punitive damages.
13
7.6. Effect of Transfer of Interest. Upon the Transfer of any interest in
the Company in accordance with the provisions of this Article 7, the transferee
of such interest shall own and hold such interest in the Company as a
transferee, subject to all the terms, conditions, and limitations of this
Agreement, including without limitation restriction on any further Transfer of
such interest as provided in this Article 7. Consent to such Transfer shall not
constitute consent to the admission of the transferee as a Member of the
Company. A transferee may become a Member only in accordance with the provisions
of Section 8.1. Unless a transferee is admitted to the Company as a Member in
accordance with the provisions of Section 8.1, such transferee shall not be
entitled to any of the rights or benefits of a Member hereunder except the right
to the share of profits and losses and distributions of assets based on the
transferee's Percentage of Interest. Without limiting the generality of the
preceding sentence, such transferee shall have no right (i) to vote upon,
approve, or consent to, any matter requiring the vote, approval or consent of
the Members, or (ii) to receive any information from the Company of the kind to
which Members are entitled, or any other information.
ARTICLE VIII. ADMISSION AND WITHDRAWAL OF MEMBERS
8.1. Admission of Members. No additional Member may be admitted to the
Company, except upon the prior written consent of and upon such additional
Member signing, in person or by attorney-in-fact, or otherwise becoming a party
to this Agreement; provided, however, each Permitted Assignee (as defined in
Section 7.1) shall automatically be deemed to be a Member of the Company
regardless of whether or not the Members consented to said transfer. No Member
shall have the power to grant a transferee, and no transferee shall have, the
right to become a Member of the Company except as specifically provided in the
preceding sentence. If a Member who is an individual dies or a court of
competent jurisdiction adjudges him or her to be incompetent to manage person or
property, the Member's executor, administrator, guardian, conservator, or other
legal representative may exercise all of the Member's rights for the purpose of
settling his estate or administering his property and shall have any power the
Member had to give his or her assignee a Percentage of Interest in Net Profits
and Net Losses. Said assignee may not be admitted as a Member of the Company
except upon the prior written consent of the Members.
8.2. Withdrawal of Members. No Member shall have any right to withdraw or
resign as a Member of the Company prior to the dissolution and winding up of the
Company, except upon a Transfer of all of his, her or its interest in the
Company in accordance with the terms and conditions of Article 7. A Member who
resigns or whose Membership Interest is otherwise terminated for any reason,
shall not be entitled to receive any distributions to which such Member would
have been entitled had such Member remained a Member. Damages for breach of this
section 8.2 shall be monetary damages only and not specific performance, and
such damages may be offset against distributions by the Company to which such
Member would otherwise be entitled.
14
ARTICLE IX. WINDING UP AND TERMINATION
9.1. Events Requiring Winding Up. The Company shall be wound up upon the
occurrence of any of the following events:
(a) Unanimous written consent of the Members; or
(b) The consent of a majority in number of the remaining Members to wind
up the Company within ninety (90) days after the Company is wound up
in accordance with the Texas Act.
9.2. Winding Up, Liquidation and Distribution of Assets. If an event
requiring the winding up of the Company occurs, the Managers shall wind up the
business of the Company and shall apply or distribute the assets of the Company,
or shall sell the assets of the Company and apply or distribute proceeds
thereof, as promptly as practicable and in the following order of priority:
(a) First, if there are sufficient assets therefore, to creditors of the
Company, including Members who are creditors, to the extent permitted
by law, in satisfaction of liabilities of the Company (whether by
payment or the making of reasonable provision for payment thereof)
other than liabilities for distributions to Members; and if there are
insufficient assets, such claims and obligations shall be paid or
provided for according to their priority and, among claims and
obligations of equal priority, ratably to the extent of assets
available therefore; and if there is any contingent, conditional, or
unmatured debt, claim, obligation, or liability known to the Company,
a reserve shall be established for it in accordance with law, in an
amount determined by the Managers to be appropriate for such purpose;
(b) Second, to Members in satisfaction of liabilities for distributions;
and
(c) Third, any remaining assets, to the Members in proportion to the
positive balances in their respective Capital Accounts, and after all
Capital Accounts have been reduced to zero, in accordance with their
respective Percentages of Interest. The Company may offset damages for
breach of this Agreement by a Member against the amount otherwise
distributable to such Member hereunder.
(d) At the time final distributions, exclusive of any reserves for
contingent, conditional or unmatured items, are made in accordance
with clause (c) above, the Company shall terminate, but, if at any
time thereafter, any reserve is released because the Managers
determine the need for such reserve is ended, then such reserve shall
be distributed in accordance with clause (c) above.
9.3. Return of Contribution Nonrecourse to Members. Except as provided by
law or as expressly provided in this Agreement, upon winding up, each Member
shall look solely to the assets of the Company for the return of his, her or its
Capital Contribution. If the Company property remaining after the payment or
15
discharge of the debts and liabilities of the Company is insufficient to return
the Capital Contribution of one or more Members, such Member or Members shall
have no recourse against any other Member or the Manager.
ARTICLE X. MISCELLANEOUS
10.1. Notice. Any notice required or permitted to be given pursuant to the
provisions of the Texas Act or this Agreement shall be effective as of the date
personally delivered, delivered via facsimile with electronic confirmation, or
delivered via overnight express mail, or if sent by certified mail, return
receipt requested, three (3) days after being deposited with the United States
Postal Service, prepaid and addressed to the intended recipient at the last
known address as shown in the Company's records.
10.2. Waiver of Notice. Whenever any notice is required to be given under
the provisions of the Texas Act or this Agreement, a waiver thereof, in writing,
signed by the person entitled to such notice shall be deemed equivalent to the
giving of such notice.
10.3. Authority to Bind the Company. Unless authorized to do so by this
Agreement or by the Managers, no attorney-in-fact, employee or other agent of
the Company shall have any power or authority to bind the Company in any way, to
pledge its credit or to render it liable pecuniary for any purpose. No Member
shall have any power or authority to bind the Company unless the Member has been
authorized by the Managers to act as an agent of the Company.
10.4. Waiver of Action For Partition. Each Member irrevocably waives any
right to maintain an action for partition with respect to the property of the
Company during the term of the Company.
10.5. Indemnification By Company. The Company may indemnify any person who
was or is a party defendant or is threatened to be made a party defendant to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, or investigative (other than an action by or in the
right of the Company) by reason of the fact that he is or was a Manager, Member,
employee or agent of the Company, or is or was serving at the request of the
Company, against expenses, including attorney's fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred in connection with
such action, suit or proceeding if the Managers determine that he, she or it
acted in good faith and in a manner reasonably believed to be in the best
interest of the Company, and with respect to any criminal action or proceeding,
had no reasonable cause to believe the conduct was unlawful. The termination of
any action, suit, or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not in itself create a
presumption that the Person did or did not act in good faith and in a manner
which was reasonably believed to be in the best interest of the Company, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe the conduct was unlawful.
10.6. Construction. Whenever the context requires, as used in this
Agreement, the singular shall include the plural and the masculine gender shall
include the feminine and neuter genders, and vice versa.
16
10.7. Articles and Other Headings. The Articles and headings in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation thereof.
10.8. Severability. If any provision of this Agreement is held to be
invalid, illegal or unenforceable, the remainder of this Agreement shall not be
affected.
10.9. Application of Texas Law. This Agreement will be governed by the laws
of the State of Texas, without giving effect to its conflicts of laws
provisions.
10.10. Disregarded Entity Tax Treatment Intended If One Member. At any time
when the Company has only one (1) Member, the parties intend that the provisions
of this Agreement will qualify the Company to be taxed as a disregarded entity
under the Code and not as a corporation, and the Managers and each Member shall
take such action from time to time as may be necessary or desirable to carry out
such intention. The Managers may make any tax elections for the Company allowed
under the Code or the tax laws of any state or other jurisdiction having taxing
jurisdiction over the Company.
10.11. Partnership Tax Treatment Intended If More Than One Member; Tax
Administrative Matters. At any time when there is more than one Member of the
Company, the parties intend that the provisions of this Agreement will qualify
the Company to be taxed as a partnership under the Code and not as a
corporation, and the Managers and Members shall take such action from time to
time as may be necessary or desirable to carry out such intention. The Managers
may make any tax elections for the Company allowed under the Code or the tax
laws of any state or other jurisdiction having taxing jurisdiction over the
Company. The Members hereby designate Mortgage Assistance Corp. as the tax
matters partner of the Company pursuant to Section 6231(a)(7) of the Code. The
person designated tax matters partner shall not take any action contemplated by
Section 6222 through 6232 of the Code without the approval of the Members.
10.12. No Partnership Intended For Non-Tax Purposes. The undersigned
Members have formed the Company under the Texas Act, and as long as there is
more than one Member of the Company such parties expressly do not intend hereby
to form a partnership under either the Revised Uniform Partnership Act of the
State of Texas nor the Revised Uniform Limited Partnership Act of the State of
Texas. The Members do not intend to be partners one to another, or partners as
to any third party. To the extent any Member, by word or action, represents to
another person that any other Member is a partner or that the Company is a
partnership, the Member making such wrongful representation shall be liable to
any other Member who incurs personal liability by reason of such wrongful
representation.
[The remainder of this page is intentionally left blank.]
17
CERTIFICATION
THE UNDERSIGNED hereby evidence their adoption and ratification of the
foregoing Company Agreement of Elf Fork Capital LLC as of the date indicated
below.
Mortgage Assistance Corp., as Member and
Manager
Date:______________ By:________________________________
Its:________________________________
Name:______________________________
Strategic Equity Investments, LLC, as Member
Date:______________ By:________________________________
Its:________________________________
Name:______________________________
18
EXHIBIT A
MEMBER CAPITAL CONTRIBUTIONS
REVISED AS OF MARCH 14, 2007
================================================ =============================== ========== ============================
MEMBER CAPITAL CONTRIBUTION UNITS PERCENTAGE OF INTEREST
- ------------------------------------------------ ------------------------------- ---------- ----------------------------
Mortgage Assistance Corp., a Texas Corporation
2614 Main Street None 50%
Dallas, TX 75226 50
- ------------------------------------------------ ------------------------------- ---------- ----------------------------
Strategic Equity Investments, LLC
11000 N. Scottsdale Rd $770,000.00 50 50%
Suite 121
Scottsdale, AZ 85254-6168
- ------------------------------------------------ ------------------------------- ---------- ----------------------------
- ------------------------------------------------ ------------------------------- ---------- ----------------------------
Total $770,000.00 100 100%
================================================ =============================== ========== ============================
19
EXHIBIT B
ASSET LIST
- ---------------------- ----------------- ------ --------- ----------------------
Elf Fork
Address City State Zip Purchase Price
- ---------------------- ----------------- ------ --------- ----------------------
11426 Robson Street DETROIT MI 48227 $ 42,770.03
- ---------------------- ----------------- ------ --------- ----------------------
11945 W. Outer Dr. DETROIT MI 48223 $ 38,121.11
- ---------------------- ----------------- ------ --------- ----------------------
14161 Sussex DETROIT MI 48207 $ 41,840.25
- ---------------------- ----------------- ------ --------- ----------------------
14285 Corbett DETROIT MI 48213 $ 34,866.87
- ---------------------- ----------------- ------ --------- ----------------------
14434 Edmore Drive DETROIT MI 48205 $ 37,191.33
- ---------------------- ----------------- ------ --------- ----------------------
14975 Manning Street DETROIT MI 48205 $ 24,639.26
- ---------------------- ----------------- ------ --------- ----------------------
16840 Vaughan Street DETROIT MI 48219 $ 43,234.92
- ---------------------- ----------------- ------ --------- ----------------------
19307 FenmoreSt DETROIT MI 48235 $ 31,612.63
- ---------------------- ----------------- ------ --------- ----------------------
19467 Westbrook DETROIT MI 48219 $ 32,542.41
- ---------------------- ----------------- ------ --------- ----------------------
19975 Westphalia St DETROIT MI 48205 $ 24,639.26
- ---------------------- ----------------- ------ --------- ----------------------
20040 Wexford St DETROIT MI 48234 $ 34,866.87
- ---------------------- ----------------- ------ --------- ----------------------
20134 Carrie Street DETROIT MI 48234 $ 9,297.83
- ---------------------- ----------------- ------ --------- ----------------------
2503 Lawndale St. DETROIT MI 48209 $ 32,542.41
- ---------------------- ----------------- ------ --------- ----------------------
303 Maplelawn St Se GRAND RAPIDS MI 49548 $ 32,495.92
- ---------------------- ----------------- ------ --------- ----------------------
436 Barker Ave NW GRAND RAPIDS MI 49504 $ 27,847.01
- ---------------------- ----------------- ------ --------- ----------------------
6700 Forrer Street DETROIT MI 48228 $ 32,077.52
- ---------------------- ----------------- ------ --------- ----------------------
7724 Plainview DETROIT MI 48228 $ 37,191.33
- ---------------------- ----------------- ------ --------- ----------------------
5331 W Court St FLINT MI 48532 $ 25,569.04
- ---------------------- ----------------- ------ --------- ----------------------
7836 Mansfield St DETROIT MI 48228 $ 20,920.12
- ---------------------- ----------------- ------ --------- ----------------------
815 Edison Avenue LANSING MI 48910 $ 25,336.59
- ---------------------- ----------------- ------ --------- ----------------------
9225 Vaughan Street DETROIT MI 48228 $ 34,866.87
- ---------------------- ----------------- ------ --------- ----------------------
9388 Burnette St DETROIT MI 48204 $ 22,779.69
- ---------------------- ----------------- ------ --------- ----------------------
9401 Mendota St DETROIT MI 48204 $ 25,569.04
- ---------------------- ----------------- ------ --------- ----------------------
9553 Westwood DETROIT MI 48228 $ 36,261.55
- ---------------------- ----------------- ------ --------- ----------------------
957 N Pinecrest Ave WICHITA KS 67208 $ 20,920.12
- ---------------------- ----------------- ------ --------- ----------------------
$ 770,000.00
----------------------
20
EXHIBIT C
SERVICING AGREEMENT
Owner: Elf Fork Capital, LLC.
Owner's Address: 2614 Main Street, Dallas, TX 75226
Servicer: Mortgage Assistance Corporation
Servicer Address: 2614 Main Street, Dallas, TX 75226
Notes and/or REOs: Attachment A
This servicing agreement was made and entered into this _____ day of __________,
2007, between SERVICER and OWNER.
OWNER shall initial below where appropriate.
Section 1. Servicing of Notes
Note Servicing: OWNER hereby authorizes and instructs SERVICER, and SERVICER
agrees to service the "NOTES" and in that connection, to do the following:
A. To receive any and all payments due OWNER on the NOTES, which includes but
is not limited to all monthly payments, all late payments and all payoffs
in full or in part. SERVICER is authorized to direct any payment to be made
payable to SERVICER's Trust Account;
B. To endorse to SERVICER's Trust Account any checks or money orders payable
to OWNER and to immediately deposit same in SERVICER's Trust Account which
is to be maintained in accordance with such laws and rules applicable
thereto and as to which SERVICER will not commingle its assets;
C. To transmit OWNER's portion of such payments of principal and interest as
required by laws, rules and regulations which are applicable. There is a
seven day hold on all checks to allow for clearing with the bank. Good
funds are delivered to OWNER without a hold at the address shown herein.
SERVICER will not use such payment for any other transaction other than the
transaction for which the funds are received;
D. To provide periodic reporting on the OWNER's NOTES that SERVICER is
servicing per this contract.
E. If the source of payment is not the maker of the NOTES, to so inform OWNER;
F. To cause SERVICER's Trust Account utilized for this transaction to be
inspected as required by such laws, rules and regulations as are applicable
thereto;
21
G. To take any other action which SERVICER deems necessary or convenient to
the collection and servicing of the NOTES including but not limited to
instituting foreclosure proceedings in the event of default or making such
payments for OWNER's account or taking such other action as SERVICER deems
necessary or desirable to protect the security of the Security Agreement or
the priority thereof;
H. To execute and deliver on OWNER's behalf and in OWNER's name any documents
necessary or convenient for the exercise of any rights or duties which
OWNER may have under the NOTES, including but not limited to Request for
Reconveyance, Payoff Demands, Beneficiary Statements, Declarations and
Notices of Default, bidding authorizations and other instructions to the
Trustee of the NOTES;
I. To receive Notices of Default of prior encumbrances and to promptly notifiy
OWNER of any default upon the Notes and any prior encumbrances;
J. To grant such extensions or loan modifications as SERVICER deems reasonably
appropriate;
K. OWNER may terminate SERVICER's authority hereunder only with 30 days
written notice and upon repayment and/or payment of the following:
1. Any outstanding payments made by SERVICER on OWNER's behalf;
2. Any accrued expenses incurred by SERVICER in connection with servicing
the NOTES;
L. THE FOLLOWING PROVISIONS (1) & (2) APPLY ONLY TO LOANS IN WHICH OWNER HOLDS
AN UNDIVIDED FRACTIONAL INTEREST IN THE NOTES:
1. A default upon any interest in the NOTES shall constitute a default
upon all interests. A simple majority in interest of lenders may
determine and direct the actions to be taken on behalf of all lenders
in the event of default or with respect to other matters requiring the
direction or approval of lenders, and such majority may designate the
SERVICER to so act in their behalf.
2. SERVICER shall furnish to OWNER a list of names and addresses of all
lenders holding an interest in the NOTES upon five (5) days written
notice.
M. Fees will be according to the attached Fee Schedule.
Section 2 - Servicing of REOs
I. REO Servicing: OWNER hereby authorizes and instructs SERVICER, and SERVICER
agrees to service the "REOs" and in that connection, to do the following:
A. Authorize SERVICER to act on behalf of OWNER as landlord to the REOs, where
applicable;
B. Authorize SERVICER to manage, operate, control, rent and lease OWNER'S
REOs.
22
C. Authorize SERVICER to contract for or undertake the making of all necessary
repairs and the performance of all other necessary work for the benefit of
the REOs including all required alterations to properly carry out this
agreement. SERVICER agrees to secure prior written approval of the OWNER on
expenditures in excess of $1,000 except emergency repairs in excess of the
maximum if, in the opinion of SERVICER, such repairs are necessary to
protect the property from damage, prevent damage to life or to the property
of others;
D. To collect any and all payments due OWNER, which includes but is not
limited to, all monthly RENT payments and all LATE payments. SERVICER is
authorized to direct any payment to be made payable to SERVICER's Trust
Account. There is a seven day hold on all checks to allow for clearing with
the bank. Good funds are delivered to OWNER without a hold at the address
shown herein. SERVICER will not use such payment for any other transaction
other than the transaction for which the funds are received;
E. Any trust account SERVICER maintains under this agreement may be an
interest-bearing or income producing account. SERVICER may retain any
interest or income from such account as compensation under this agreement.
F. To hold security deposits from tenants in escrow or trust account until the
end of tenancy.
G. To endorse to SERVICER's Trust Account any checks or money orders payable
to OWNER and to immediately deposit same in SERVICER's Trust Account which
is to be maintained in accordance with such laws and rules applicable
thereto and as to which SERVICER will not commingle its assets;
H. To provide periodic reporting on the OWNER's REOs that SERVICER is
servicing per this contract;
I. To cause SERVICER's Trust Account utilized for this transaction to be
inspected as required by such laws, rules and regulations as are applicable
thereto;
J. To take any other action which SERVICER deems necessary or convenient to
the collection and servicing of the REOs including but not limited to
instituting eviction proceedings in the event of default or selling of the
REOs or making such payments for OWNER's account or taking such other
action as SERVICER deems necessary or desirable to protect the OWNER's
interest in the property. To advertise the property and display signs
thereon; to rent and lease the property; to sign, renew and cancel rental
agreements and leases for the property or any part thereof; to sue or
recover for rent and for loss or damage to any part of the property and/or
furnishings thereof; and, when expedient, to compromise, settle and release
any such legal proceedings or lawsuits;
K. To execute and deliver on OWNER's behalf and in OWNER's name any documents
necessary or convenient for the exercise of any rights or duties which
23
OWNER may have as to the REOs, including but not limited to evictions,
listing the property for sale, selling the property, or renting the
property;
L. To pay all operating expenses and such other expenses as requested by the
OWNER from the rents received. This may include the payment of taxes and
insurance;
M. OWNER may terminate SERVICER's authority hereunder only with 30 days
written notice and upon repayment and/or payment of the following:
1. Any outstanding payments made by SERVICER on OWNER's behalf;
2. Any accrued expenses incurred by SERVICER in connection with servicing
the REOs;
N. OWNER hereby agrees to hold SERVICER harmless from any and all claims,
charges, debts, demand and lawsuits, including attorney's fees related to
SERVICER's management of OWNER's REOs, and from any liability for injury on
or about the properties which may be suffered by an employee, tenant or
guest upon the properties.
O. Fees will be according to the attached Fee Schedule.
Section 3 - General Provisions
OWNER represents that all of the persons designated above are over the age of 18
and are competent.
Make OWNER Check Payable To: Elf Fork Capital LLC___________________
Address: 2614 Main Street___________________________________________
City, State, Zip Code: Dallas, Texas 75226__________________________
Tax ID Number: 56-2637442___________________________________________
DEFAULT: A party is in default if the party fails to cure a breach within 10
days after receipt of written demand from the other party. If either party is in
default, the non-defaulting party may: (a) terminate this agreement by providing
at least 10 days written notice; (b) recover all amounts due to the
non-defaulting party under this agreement; (c) recover reasonable collection
costs and attorney's fees; and (d) exercise any other remedy available at law.
SERVICER is also entitled to recover any compensation SERVICER would have been
entitled to receive if Owner did not breach this agreement.
MEDIATION: The parties agree to negotiate in good faith in an effort to resolve
any dispute related to this agreement that may arise between the parties. If the
dispute cannot be resolved by negotiation, the dispute will be submitted to
mediation. The parties to the dispute will choose a mutually acceptable mediator
and will share the cost of mediation equally.
24
ATTORNEY'S FEES: If OWNER or SERVICER is a prevailing party in any legal
proceeding brought as a result of a dispute under this agreement or any
transaction related to or contemplated by this agreement, such party will be
entitled to recover from the non-prevailing party all costs of such proceeding
and reasonable attorney's fees.
SPECIAL PROVISIONS: This Agreement may be amended from time to time by the
parties pursuant to a written agreement or addendum signed by the SERVICER and
the OWNER.
ENTIRE AGREEMENT: This document contains the entire agreement of the parties and
may not be changed except by written agreement.
ASSIGNMENTS: Neither party may assign this agreement without the written consent
of the other party.
BINDING EFFECT: OWNER's obligations to SERVICER under this agreement are binding
upon OWNER and OWNER's heirs, executors, successors, and permitted assignees.
JOINT AND SEVERAL: OWNERS executing this agreement are jointly and severally
liable for the performance of all its terms. Any act or notice to , refund to ,
or signature of, any one or more of the OWNERS regarding any term of this
agreement or its termination is binding on all OWNERS executing this agreement.
GOVERNING LAW: Texas law governs the interpretation, validity, performance, and
enforcement of this agreement.
SEVERABILITY: If a court finds any clause in this agreement invalid or
unenforceable, the remainder of this agreement will not be affected and all
other provisions of this agreement will remain valid and enforceable.
CONTEXT: When the context requires, singular nouns and pronouns include the
plural.
NOTICES: Notices between the parties must be in writing and are effective when
sent to the receiving party's address as stated in this agreement.
OWNER: Elf Fork Capital LLC
Signed: _______________________________ Date _________________
Print Name: ___________________________
Title: ________________________________
SERVICER: Mortgage Assistance Corporation
Signed: _______________________________ Date _________________
Print Name: ___________________________
Title: ________________________________
25
Fee Schedule
1. Note Servicing: (for current notes)
$12.00 per note per month for standard servicing support that includes, but not
limited to item such as monthly mailings of statements and responding to
borrower requests. In addition, Owners will pay any directly related expenses.
1. Default Management Fee: (for non-performing and REO)
$188.00 per Note or REO per month for standard default management support such
as collections, skip tracing, coordinating foreclosures, responding to
bankruptcy claims, and any overhead related to default management plus REO sales
coordination, forced insurance placements, property management and evictions. In
addition, all directly related fees or commissions, internal or outsourced, will
be charged to OWNER's account
26
ATTACHMENT A
- ---------------------- ----------------- ------ --------- ----------------------
Elf Fork
Address City State Zip Purchase Price
- ---------------------- ----------------- ------ --------- ----------------------
11426 Robson Street DETROIT MI 48227 $ 42,770.03
- ---------------------- ----------------- ------ --------- ----------------------
11945 W. Outer Dr. DETROIT MI 48223 $ 38,121.11
- ---------------------- ----------------- ------ --------- ----------------------
14161 Sussex DETROIT MI 48207 $ 41,840.25
- ---------------------- ----------------- ------ --------- ----------------------
14285 Corbett DETROIT MI 48213 $ 34,866.87
- ---------------------- ----------------- ------ --------- ----------------------
14434 Edmore Drive DETROIT MI 48205 $ 37,191.33
- ---------------------- ----------------- ------ --------- ----------------------
14975 Manning Street DETROIT MI 48205 $ 24,639.26
- ---------------------- ----------------- ------ --------- ----------------------
16840 Vaughan Street DETROIT MI 48219 $ 43,234.92
- ---------------------- ----------------- ------ --------- ----------------------
19307 FenmoreSt DETROIT MI 48235 $ 31,612.63
- ---------------------- ----------------- ------ --------- ----------------------
19467 Westbrook DETROIT MI 48219 $ 32,542.41
- ---------------------- ----------------- ------ --------- ----------------------
19975 Westphalia St DETROIT MI 48205 $ 24,639.26
- ---------------------- ----------------- ------ --------- ----------------------
20040 Wexford St DETROIT MI 48234 $ 34,866.87
- ---------------------- ----------------- ------ --------- ----------------------
20134 Carrie Street DETROIT MI 48234 $ 9,297.83
- ---------------------- ----------------- ------ --------- ----------------------
2503 Lawndale St. DETROIT MI 48209 $ 32,542.41
- ---------------------- ----------------- ------ --------- ----------------------
303 Maplelawn St Se GRAND RAPIDS MI 49548 $ 32,495.92
- ---------------------- ----------------- ------ --------- ----------------------
436 Barker Ave NW GRAND RAPIDS MI 49504 $ 27,847.01
- ---------------------- ----------------- ------ --------- ----------------------
6700 Forrer Street DETROIT MI 48228 $ 32,077.52
- ---------------------- ----------------- ------ --------- ----------------------
7724 Plainview DETROIT MI 48228 $ 37,191.33
- ---------------------- ----------------- ------ --------- ----------------------
5331 W Court St FLINT MI 48532 $ 25,569.04
- ---------------------- ----------------- ------ --------- ----------------------
7836 Mansfield St DETROIT MI 48228 $ 20,920.12
- ---------------------- ----------------- ------ --------- ----------------------
815 Edison Avenue LANSING MI 48910 $ 25,336.59
- ---------------------- ----------------- ------ --------- ----------------------
9225 Vaughan Street DETROIT MI 48228 $ 34,866.87
- ---------------------- ----------------- ------ --------- ----------------------
9388 Burnette St DETROIT MI 48204 $ 22,779.69
- ---------------------- ----------------- ------ --------- ----------------------
9401 Mendota St DETROIT MI 48204 $ 25,569.04
- ---------------------- ----------------- ------ --------- ----------------------
9553 Westwood DETROIT MI 48228 $ 36,261.55
- ---------------------- ----------------- ------ --------- ----------------------
957 N Pinecrest Ave WICHITA KS 67208 $ 20,920.12
- ---------------------- ----------------- ------ --------- ----------------------
$ 770,000.00
----------------------
27