Exhibit 10.7

 

OPERATING AGREEMENT

 

OF

 

MANHATTAN CAPITAL MARKETS LLC

 

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TABLE OF CONTENTS

 

 

 

Page

 

 

 

ARTICLE I          TERMS AND CONDITIONS

1

 

 

 

1.1

Name

1

1.2

Term

1

1.3

Principal Office and Agent

1

1.4

Business of the Company

1

1.5

Limitation of Liability

1

1.6

Treatment of Company

1

1.7

Certain Definitions

2

 

 

 

ARTICLE II          CAPITAL CONTRIBUTIONS

2

 

 

 

2.1

Capital Contributions

2

2.2

Capital Accounts

4

2.3

No Interest

4

2.4

Loans from Members

5

2.5

Repurchase of Class A and Class B Membership Units of Management Company

5

 

 

 

ARTICLE III          MEMBERSHIP; CONVERSION RIGHT OF MANAGEMENT COMPANY

5

 

 

 

3.1

Admission of Additional Members

5

3.2

Representations and Warranties

6

3.3

Withdrawals

6

3.4

Lack of Authority

6

3.5

Membership Meetings

6

3.6

Merger of Management Company and MB

6

 

 

 

ARTICLE IV          TRANSFER AND ASSIGNMENT OF INTERESTS

9

 

 

 

4.1

Restrictions on Transfer

9

4.2

Tag-Along Rights

9

4.3

Drag-Along Rights

9

4.4

Change in Control of MB

10

4.5

Substitution of Members

12

4.6

Ownership of Management Company

13

 

 

 

ARTICLE V          MANAGEMENT AND CONTROL OF THE COMPANY

14

 

 

 

5.1

Board of Directors

14

5.2

Members

15

5.3

Officers

15

5.4

Matters Affecting Directors and Officers

17

5.5

Indemnification

18

5.6

Consent and Voting Rights of Members

18

 

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TABLE OF CONTENTS

(continued)

 

 

 

Page

 

 

 

 

 

 

ARTICLE VI          ALLOCATIONS OF NET INCOME AND NET LOSS AND DISTRIBUTIONS

18

 

 

 

6.1

Allocations of Net Income and Net Loss

18

6.2

Distributions

19

6.3

Transferred Interests

19

6.4

Code Section 704(b) Allocations

20

6.5

Code Section 704(c) Allocations

21

6.6

Tax Matters Member

22

 

 

 

ARTICLE VII          BOOKS AND RECORDS

23

 

 

 

7.1

Accounting Principles

23

7.2

Records and Reports

23

7.3

Returns and Other Elections

24

7.4

Bank Accounts

24

 

 

 

ARTICLE VIII          DISSOLUTION AND WINDING UP

24

 

 

 

8.1

Dissolution

24

8.2

Winding-up

24

8.3

Distribution of Assets on Dissolution

24

8.4

Distributions in Kind

25

8.5

Distributions to Trust

25

8.6

Certificates of Dissolution and Cancellation

25

8.7

Company Name

25

 

 

 

ARTICLE IX          DEFINITIONS

25

 

 

 

ARTICLE X          MISCELLANEOUS PROVISIONS

35

 

 

 

10.1

Notices

35

10.2

Application of Law

35

10.3

No Action for Partition

36

10.4

Headings and Sections

36

10.5

Amendments

36

10.6

Number and Gender

36

10.7

Binding Effect

36

10.8

Counterparts

36

10.9

Severability

36

10.10

Entire Agreement

36

10.11

Insurance

36

10.12

Consultation Rights

37

10.13

Expenses

37

10.14

Arbitration Agreement

37

10.15

CPP

38

 

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OPERATING AGREEMENT
OF MANHATTAN CAPITAL MARKETS LLC

 

This Operating Agreement (the “Operating Agreement”) of Manhattan Capital
Markets LLC, a California limited liability company (the “Company”) is made as
of July 30, 2010, by and among each of the Persons whose name is set forth on
Exhibit A to this Operating Agreement, as it may be amended from time to time
(each such party a “Member” and collectively, the “Members”).

 

WHEREAS, the Articles of Organization (the “Articles”) of the Company were filed
in the Office of the Secretary of State of California on June 22, 2010; and

 

WHEREAS, the Members desire to enter into this Agreement to set forth their
respective ownership interests in the Company and the principles by which it
will be operated and governed.

 

NOW, THEREFORE, in consideration of the mutual covenants and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Members hereby agree as follows:

 

ARTICLE I
TERMS AND CONDITIONS

 

1.1           Name.  The name of the Company is Manhattan Capital Markets LLC. 
The Company may conduct business under that name or any other name as decided by
the Board.

 

1.2           Term.  The term of existence of the Company will be perpetual,
unless the Company is earlier dissolved in accordance with this Operating
Agreement, the Articles, or the Act.

 

1.3           Principal Office and Agent.  The principal office of the Company
will be located at 2141 Rosecrans Avenue, Suite 1160, El Segundo, California
90245 or such other location as the Board may select from time to time.  The
agent of the Company is the initial agent named in the Articles or another
Person selected by the Board from time to time.

 

1.4           Business of the Company.  The Company shall engage in the
Business, and any other business as may be approved by the Board that may be
conducted by a California limited liability company.  The Company shall have any
and all lawful powers necessary or desirable to carry out the purposes and
business of the Company.

 

1.5           Limitation of Liability.  To the fullest extent permitted by
current and future applicable law, no Member is liable for the debts,
obligations or liabilities of the Company, including under a judgment, decree,
or order of a court.

 

1.6           Treatment of Company.  The Members intend that the Company be
treated as a partnership, rather than as an association taxable as a
corporation, for federal income tax purposes.  No Member, Director or Officer
may cause the Company to elect to be taxed as an

 

1

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association taxable as a corporation under Treasury Regulations
Section 301.7701-3(c) or otherwise take any action that would result in the
Company not being treated as a partnership for federal income tax purposes
without the unanimous approval of the Members.

 

1.7           Certain Definitions.  When used in this Operating Agreement, the
capitalized terms not defined elsewhere will have the meanings set forth within
Article IX of this Operating Agreement.

 

ARTICLE II
CAPITAL CONTRIBUTIONS

 

2.1           Capital Contributions.

 

(a)           Each Member will make initial Capital Contributions to the Company
in the amounts and in the manner shown opposite the Member’s name on Exhibit A
to this Operating Agreement when requested by the Board.  No Member will be
required to make any additional Capital Contributions to the Company except as
expressly provided herein.  However, the Members may make additional Capital
Contributions if approved by the Board in its sole and absolute discretion on
such terms as may be approved by the Board upon compliance with the provisions
of Section 2(c) hereof.

 

(b)           The Company shall have such classes (“Classes”) or series
(“Series”) thereof, issued in units (“Units”), as are described in this
Section 2.1(b) or as may be established from time to time by the Board under
Section 2.1.  The following rules govern the Classes for all purposes of this
Operating Agreement at all times:  (a) each Member of a Class has the same
rights and obligations hereunder as any other Member of the same Class;
(b) Members of one Class have different rights and obligations from those of
another Class only to the extent expressly provided in this Operating Agreement;
and (c) a Person may own Units of different Classes at the same time, and in
that case shall be deemed to be a Member of one Class to the extent of the
amount of Units of such Class owned by such Person and a Member of another
Class to the extent of the amount of Units of such other Class owned by such
Person.  Initially, the Company shall have two Classes of Interests, the
“Class A Membership Units” and the “Class B Membership Units”.

 

(i)            The Company shall have 1,000,000 authorized Class A Membership
Units.  A total of 700,000 Class A Membership Units will be issued to MB
pursuant to the Contribution Agreement, and 300,000 Class A Membership Units
will be issued to Management Company pursuant to the Contribution Agreement. 
Prior to the EBITDA Trigger Date and satisfaction of the Minimum EBITDA
Threshold, the Class A Membership Units shall have the sole right to vote or to
participate in the management of the Company.

 

(ii)           The Company shall have 166,667 authorized Class B Membership
Units, all of which shall be issued to Management Company pursuant to the
Contribution Agreement.  Prior to the EBITDA Trigger Date and satisfaction of
the Minimum EBITDA Threshold, the Class B Membership Units shall have no right
to vote or to participate in the management of the Company, or any right to
share in allocations of Net Income or Net Loss, or to any distributions
hereunder other than distributions upon dissolution of the Company under

 

2

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Section 8.3(c).  On and after the EBITDA Trigger Date upon satisfaction of the
Minimum EBITDA Threshold, or upon such quarter-end date occurring prior to the
EBITDA Trigger Date as the Company shall have achieved cumulative consolidated
EBITDA of not less than $20,000,000, excluding revenue related to mortgage
banking, the Ownership Percentages will be recalculated such that the Class B
Membership Units shall have the right to vote and participate in the management
of the Company, and the right to share in all allocations of Net Income or Net
Loss and to receive distributions hereunder at the same per Unit rate as the
Class A Membership Units.

 

(iii)          The “EBITDA Trigger Date” shall mean December 31, 2011.  The
“EBITDA Measurement Period” shall mean the period commencing on the Initial Date
and ending on the EBITDA Trigger Date.  The “Initial Date” shall be October 1,
2009.  The “Minimum EBITDA Threshold” shall mean cumulative consolidated EBITDA
for the Company and its wholly owned subsidiaries for the EBITDA Measurement
Period, excluding any revenue related to mortgage banking, of not less than
$20,000,000.  If on the EBITDA Trigger Date, the Minimum EBITDA Threshold has
not been satisfied, the Class B Membership Units shall be cancelled and redeemed
by the Company for $0.01.

 

(c)           Should the Board determine, in its reasonable discretion, that
additional capital is required in connection with the Business, the Board may
call for additional Capital Contributions (“Additional Capital Contributions”)
from the Members.

 

(i)            The Board shall give written notice to the Members of the total
amount of Additional Capital Contributions requested and the reasons for such
Additional Capital Contributions and shall provide the Members with not less
than 45 days to provide the total Additional Capital Contributions requested in
proportion to their ownership of (A) the Class A Membership Units prior to the
EBITDA Trigger Date and (B) all Class A and Class B Membership Units after the
EBITDA Trigger Date.

 

(ii)           In the event the Members fail to contribute all of the Additional
Capital Contributions requested by the Board under Section 2.1(c)(i), the Board
may cause Interests respecting such Additional Capital Contributions to be
issued to such Persons, including the Members, as the Board may determine, and
to admit such purchasers as Members.  Such additional Interests shall have such
terms as the Board may determine, which terms may be superior to the terms of
the Units or other Interests previously issued to the Members; provided, that if
the Board proposes to issue such additional Interests, such Interests shall
first be offered for a period of not less than fifteen (15) days from the date
of delivery of written notice thereof to the Members before being issued to any
other Person.  If more than one Member elects to purchase the additional
interests, the Board shall resolve all disputes, including the respective pro
rata share based on the relative Ownership Percentage of each electing Member or
on the amount of the purchase of the additional Interests of each electing
Member, as best as the Board reasonably can, and the Board’s determination
thereof shall be final and binding on all Members.  Any additional Interests not
sold to the existing Members may then be offered and sold to other Persons on
the same terms as offered to the Members.

 

3

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2.2           Capital Accounts.  The Company will establish an individual
capital account (the “Capital Account”) for each Member.  The Company will
determine and maintain each Capital Account in accordance with the following
provisions:

 

(a)           To each Member’s Capital Account there shall be credited: 
(i) such Member’s Capital Contributions (including Additional Capital
Contributions, if any), (ii) such Member’s distributive share of Net Income and
any items in the nature of income or gain which are specially allocated pursuant
to Sections 6.1(b) or 6.4 hereof, and (iii) the amount of any Company
liabilities assumed by such Member or which are secured by any Company property
distributed to such Member.

 

(b)           To each Member’s Capital Account there shall be debited (i) the
amount of cash and the Gross Asset Value of any Property distributed to such
Member pursuant to any provision of this Agreement, (ii) such Member’s
distributive share of Net Losses and any items in the nature of expenses or
losses which are specially allocated pursuant to Sections 6.1(b) or 6.4 hereof,
and (iii) the amount of any liabilities of such Member assumed by the Company or
which are secured by any property contributed by such Member to the Company.

 

(c)           In the event all or a portion of a Member’s Interest is
transferred in accordance with the terms of this Agreement, the transferee shall
succeed to the Capital Account of the transferor to the extent it relates to the
transferred interest; and

 

(d)           In determining the amount of any liability for purposes of
subparagraphs (a) and (b) above, there shall be taken into account Code
Section 752(c) and any other applicable provisions of the Code and Treasury
Regulations.

 

The foregoing provisions and the other provisions of this Agreement relating to
the maintenance of Capital Accounts are intended to comply with Treasury
Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner
consistent therewith.  In the event the Board shall determine that it is prudent
to modify the manner in which the Capital Accounts, or any debits or credits
thereto (including, without limitation, debits or credits relating to
liabilities which are secured by contributed or distributed property or which
are assumed by the Company or the Members), are computed in order to comply with
Treasury Regulations Section 1.704-1(b), the Board may make such modification,
provided that it is not likely to have a material effect on the amounts
distributable to any Member pursuant to this Agreement hereof upon the
dissolution of the Company.  The Board also shall (i) make any adjustments that
are necessary or appropriate to maintain equality between the Capital Accounts
of the Members and the amount of Company capital reflected on the Company’s
balance sheet, as computed for book purposes, in accordance with Treasury
Regulations Section 1.704-1(b)(2)(iv)(q), and (ii) make any appropriate
modifications in the event unanticipated events might otherwise cause this
Agreement not to comply with Treasury Regulations Section 1.704-1(b), provided
that, to the extent that any such adjustment is inconsistent with other
provisions of this Agreement and would have a material adverse effect on any
Member, such adjustment shall require the consent of such Members.

 

2.3           No Interest.  The Company will not pay any interest on Capital
Contributions.

 

4

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2.4           Loans from Members.  Loans may be made by the Members to the
Company on such terms as may be agreed upon by the Board and such Members.

 

2.5           Repurchase of Class A and Class B Membership Units of Management
Company.

 

(a)           All or a portion of the Class A Membership Units and Class B
Membership Units issued to the Management Company shall be repurchased by the
Company under the circumstances set forth in this Section 2.5 for a price equal
to $0.01 per Unit, unless the Board elects in writing to waive such repurchase
in whole or in part.  In the event the Management Condition is not satisfied at
any time during the period commencing on July 30, 2010 and ending on the first
anniversary of the Initial Date, a percentage amount of Class A Membership Units
and Class B Membership Units owned by the Management Company equal to that
percentage of shares of common stock of the Management Company owned by the
Management Principals shall be repurchased.  In the event the Management
Condition is not satisfied at any time during the second year following the
Initial Date, two-thirds of that percentage amount of Class A Membership Units
and Class B Membership Units owned by the Management Company equal to that
percentage of shares of common stock of the Management Company owned by the
Management Principals shall be repurchased.  In the event the Management
Condition is not satisfied at any time during the third year following the
Initial Date, one-third of that percentage amount of Class A Membership Units
and Class B Membership Units owned by the Management Company equal to that
percentage of shares of common stock of the Management Company owned by the
Management Principals shall be repurchased, unless the Minimum EBITDA Threshold
shall have been satisfied for the EBITDA Measurement Period as of the EBITDA
Trigger Date.  Notwithstanding the foregoing, upon a Change in Control the
Class A Membership Units and Class B Membership Units shall no longer be subject
to repurchase under this Section 2.5(a).

 

(b)           The “Management Condition” is the continued full-time employment
of at least two of the Management Principals by the Company, any of the
Company’s wholly-owned subsidiaries, or BOM Capital, LLC, except where a
Management Principal is terminated by the Company, any of the Company’s
wholly-owned subsidiaries, or BOM Capital, LLC without Cause or resigns for Good
Reason (as defined in such Management Principal’s employment agreement with the
Company, any of the Company’s wholly-owned subsidiaries, or BOM Capital, LLC).

 

ARTICLE III
MEMBERSHIP; CONVERSION RIGHT OF MANAGEMENT COMPANY

 

3.1           Admission of Additional Members.  Subject to
Section 2.1(c) hereof, the terms of admission or issuance of Interests to new
Members shall be determined by the Board.  The Board will reflect the creation
of any new Class or Series in an amendment to this Operating Agreement and/or
adoption of an Admission Agreement indicating the different rights, powers and
duties.  All Members must agree in writing to be bound by the terms of this
Operating Agreement and must deliver to the Company such additional
documentation as the Board may require.

 

5

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3.2           Representations and Warranties.  Each Member hereby represents and
warrants to the Company and to each other Member that (a) the Member has full
power and authority to execute and agree to this Operating Agreement and to
perform his or her obligations under this Operating Agreement, and that all
actions necessary for the due authorization, execution, delivery and performance
of this Operating Agreement have been duly taken; (b) the Member has duly
executed and delivered this Operating Agreement; and (c) the Member’s
authorization, execution, delivery and performance of this Operating Agreement
does not conflict with any other agreement or arrangement to which the Member is
a party or by which the Member is bound.

 

3.3           Withdrawals.  No Member has the right voluntarily to withdraw from
the Company as a Member, or to receive any portion of any Capital Contribution,
except upon dissolution of the Company.

 

3.4           Lack of Authority.  No Member (other than a Member that is a duly
appointed Officer) has the authority or power to act for or on behalf of the
Company, to do any act that would be binding on the Company or to incur any
expenditure on behalf of the Company.

 

3.5           Membership Meetings.  No annual or regular meetings of the Members
are required to be held.  However, if such meetings are held, such meetings will
be noticed, held, and conducted pursuant to the Act.  In any instance in which
the approval of the Members is required under this Operating Agreement or the
Act, such approval may be obtained in any manner permitted by the Act.

 

3.6           Merger of Management Company and MB.

 

(a)           In the event that all of the Merger Conditions are satisfied,
Management Company shall have the right to elect to cause Management Company to
be merged with and into MB with MB surviving (the “Merger”), in which event all,
but not less than all, of the shareholders of the Management Company shall
exchange all of their shares in the Management Company for shares of Common
stock of Manhattan Bancorp resulting in the Company becoming a wholly-owned
subsidiary of MB.  The Members intend for the Merger to qualify as a tax-free
reorganization within the meaning of Section 368 of the Code and the Members
agree to adjust the structure of the Merger as necessary to accomplish this
intent.  Such election (“Merger Election”) shall be delivered in writing to MB
not later than March 31, 2012.

 

(b)           The “Merger Conditions” are the following:

 

(i)            The Company and its wholly owned subsidiaries shall have
consolidated EBITDA of not less than $20,000,000 for the EBITDA Measurement
Period.

 

(ii)           MB shall conclude that the Manhattan Bancorp shares may be issued
to Management Company shareholders in the Merger without registration or
qualification under the Securities Act of 1933 (“Securities Act”) or state
securities laws, and Management Company shall provide MB with such agreements
and understandings as MB or Manhattan Bancorp may reasonably require to
establish such exemptions.

 

6

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(iii)          The Merger may be effected as a tax-free reorganization within
the meaning of Section 368 of the Code, and MB and the Management Company shall
have received such assurances respecting such tax-free treatment as they may
reasonably require.

 

(iv)          All liabilities of the Management Company shall have been paid or
provided for in a manner satisfactory to MB, the assets of Management Company
shall be unencumbered and not subject to any rights of any third party, and
there shall be no material pending or threatened litigation or claim of any kind
against Management Company (except for litigation or claims brought by Manhattan
Bancorp or any Affiliate thereof); provided, however, that trades may be
outstanding provided such are within normal parameters for the operations of the
Company.  The Management Principals shall indemnify and hold harmless MB from
and against any and all liabilities, whether absolute or contingent, of the
Management Company, and shall execute such reasonable indemnity agreements as MB
may require reflecting such indemnity.

 

(v)           The Management Company and MB shall enter into an agreement and
plan of merger reflecting the terms set forth in this Section 3.6 and containing
such representations, warranties, covenants, conditions and other terms
customary for transactions like the Merger.

 

(vi)          All regulatory and other third-party approvals required in
connection with the completion of the Merger shall be received without the
imposition of any condition that would be materially burdensome to the Company,
MB or Manhattan Bancorp.

 

(vii)         The Management Condition is satisfied.

 

(c)           The aggregate maximum number of shares of Manhattan Bancorp common
stock to be issued in the Merger upon conversion of the shares of Management
Company shall be equal to the lesser of (i) 20,000 shares for each percentage
point of Net Income or Net Loss included in the Ownership Percentage in all Net
Income and Net Loss of the Company then represented by the Class A and Class B
Membership Units owned by Management Company, pro rated for any portion less
than a full percentage point, and (ii) 800,000.

 

(d)           If the outstanding shares of the stock of Manhattan Bancorp are
increased, decreased, or changed into, or exchanged for a different number or
class of shares or securities of Manhattan Bancorp, without receipt of
consideration by Manhattan Bancorp, through reorganization, merger,
recapitalization, reclassification, stock split-up, stock dividend, stock
consolidation, or otherwise, an appropriate and proportionate adjustment shall
be made in the number and class of shares to be exchanged for the shares of
Management Company in the Merger.

 

(e)           The closing of the Merger will take place not later than the last
to occur of (i) the date sixty (60) days following the date of delivery of the
Election Notice, and five (5) business days following receipt of any necessary
third-party approvals.  The closing shall be contingent upon the continued
satisfaction of the Merger Conditions at the time of closing.

 

7

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Management Company and its shareholders will execute and deliver such documents
as may be reasonably required by MB to complete the transaction.

 

(f)            All of the shares of Manhattan Bancorp issued to the Management
Company shareholders in connection with the Merger shall not be released at the
closing to such shareholders, but in four tranches subject to satisfaction of
the Release Condition on each Release Date as to each such holder.  Pending
release MB shall hold such shares in escrow.  The “Release Condition” is that
such recipient shareholder at the effective time of the Merger shall remain
employed by the Company, any of the Company’s wholly-owned subsidiaries, or BOM
Capital, LLC unless employment has been terminated by death, disability, or by
the Company, any of the Company’s wholly-owned subsidiaries, or BOM Capital, LLC
without Cause (as such terms are defined herein or, if defined in a written
employment agreement between the Company, any of the Company’s wholly-owned
subsidiaries, or BOM Capital, LLC and such recipient, the definition set forth
in the written employment agreement between such recipient and the Company, any
of the Company’s wholly-owned subsidiaries, or BOM Capital, LLC), or by such
individual due to material breach by the Company, any of the Company’s
wholly-owned subsidiaries, or BOM Capital, LLC of its financial obligations to
such Person under any employment agreement or for Good Reason (as defined and to
the extent provided for in a written employment agreement between the Company,
any of the Company’s wholly-owned subsidiaries, or BOM Capital, LLC and such
recipient).  Twenty five percent (25%) of the shares shall be released on the
closing date of the Merger.  The remaining Manhattan Bancorp shares issued to an
individual Management Company shareholder in the Merger shall be released by MB
to former Management Company shareholders in installments of twenty five percent
(25%) each on each of June 26, 2012, June 26, 2013 and June 26, 2014 if the
Release Condition is satisfied on such dates (a “Release Date”) as to such
shareholder.  At such time as a former Management Company shareholder fails to
satisfy the Release Condition, all shares that would be otherwise issuable to
such shareholder on all future Release Dates shall be cancelled without payment
and released to Manhattan Bancorp.  Notwithstanding the foregoing all shares not
previously released will be released upon occurrence of a Change in Control or
sale by MB of a majority interest in the Company or by Manhattan Bancorp of a
majority interest in MB; provided the Non-Competition Agreements are delivered
to MB by each of the Management Principals who are to receive shares.  While
Manhattan Bancorp shares are escrowed, former Management Company shareholders
who may become entitled to such shares shall be entitled to exercise all voting
rights and to receive all dividends and other distributions payable in respect
of such shares (other than stock dividends).  The holding of any shares of
Manhattan Bancorp in escrow pursuant to this Section 3.6(f) is intended to
comply with the guidelines set forth for escrowed shares in Revenue Procedure
84-42, 1984-1 C.B. 521 and Rev. Proc. 77-37, 1977-2 C.B. 568.  This
Section 3.6(f) shall be interpreted consistent with and, if necessary, adjusted
to comply with that intent.

 

(g)           The Management Company shareholders will comply with all federal
and state securities laws in connection with any sale or other disposition of
shares of Manhattan Bancorp.  Manhattan Bancorp will be under no obligation to
register or qualify such shares under any such law, or to satisfy the conditions
of Rule 144 under the Securities Act.

 

8

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ARTICLE IV
TRANSFER AND ASSIGNMENT OF INTERESTS

 

4.1           Restrictions on Transfer.  No Member may Transfer such Member’s
Interest in the Company, in whole or in part, or enter into any agreement as a
result of which any Person will become interested in such Member’s Interest in
the Company, without the prior written consent of the Board (which consent may
be withheld in the Board’s sole and absolute discretion).  Any contrary right is
hereby waived.  Any attempted Transfer by a Person without such prior written
consent is null and void ab initio.  The Board may condition its consent to a
transfer of an Interest on such terms as it may determine, including requiring
that such Interest first be offered for sale to the Company or its Members.  The
foregoing restrictions shall not apply to any Transfer by MB of its Interest in
the Company.

 

4.2           Tag-Along Rights.  In the event MB elects to sell all or a portion
of its Interests in the Company, such that the Person or the Affiliates of the
Person acquiring such Interests would acquire an Ownership Percentage of more
than 50% in the Net Loss and Net Income of the Company, in an arm’s length
transaction (i) to a purchaser for cash and/or deferred payments, or (ii) in
exchange for equity interests in another entity (other than an entity controlled
by or under common control with the Company) pursuant to merger or other
business combination (each a “Transaction”), Management Company shall have the
right to participate (a “Tag-along Right”) in such Transaction.  MB shall not
complete such a Transaction unless notice of the proposed terms of such
transaction is first given to Management Company of its right to be included in
such sale (the “Transaction Notice”).  Within 15 days of the date of the
Transaction Notice, Management Company may advise the Board and MB in writing of
Management Company’s acceptance of the terms of the Transaction and any Class A
Membership Units (prior to the EBITDA Trigger Date) or Class A and Class B
Membership Units (after the EBITDA Trigger Date if the Minimum EBITDA Threshold
has been satisfied for the EBITDA Measurement Period) Management Company desires
to include in the Transaction.  The “Proportionate Share” of Management Company
shall be equal to the aggregate Ownership Percentage represented by the Units
proposed to be sold by MB in the Transaction multiplied by the percentage of the
total Ownership Percentage represented by issued and outstanding Class A
Membership Units (prior to the EBITDA Trigger Date) or Class A and Class B
Membership Units (after the EBITDA Trigger Date if the Minimum EBITDA Threshold
has been satisfied for the EBITDA Measurement Period) of the Company owned by
Management Company.  To the extent the purchaser in the Transaction is unwilling
to increase the total amount of Interests to be purchased to include the Units
proposed to be transferred by Management Company and all Units elected to be
sold by MB, the number of Units to be sold by MB shall be reduced accordingly so
as to permit Management Company to sell to the purchaser up to that percentage
of the total Units equal to its Proportionate Share.  Management Company agrees
to execute any purchase agreements or other documents required by the purchaser
and to cause the Non-Competition Agreements to be executed and delivered by the
Management Principals to MB if the transaction includes all Units then owned by
Management Company, as a condition to its right to participate in the
Transaction.

 

4.3           Drag-Along Rights.  In the event MB elects to complete a
Transaction, MB may elect to cause Management Company to participate in such
Transaction (a “Drag-Along Right”).  MB shall notify Management Company of the
terms thereof and the Units to be sold by

 

9

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Management Company (the “Drag-Along Notice”) at least thirty (30) days prior to
the anticipated date set for the closing of the Transaction, together with a
statement including the material terms of the transaction and the identity of
the parties.  For a period of twenty (20) days from the date of delivery of such
Drag-Along Notice, Management Company shall have the right by giving written
notice to MB (a “Drag-Along Election”) to elect to (a) participate in the
transaction by including Units owned by Management Company in an amount equal to
its Designated Percentage according to the terms of the Drag-Along Notice, or
(b) sell its Designated Percentage of its Units to MB or such party as MB may
designate for cash equal to the amount that Management Company would receive in
its capacity as a Member of the Company in respect of the Designated Percentage
of its Units if the assets of the Company were sold at a cash price equal to
their Fair Market Value (determined in the manner provided for under
Section 4.4) and the cash proceeds of such sale were distributed after payment
or provision for all Company liabilities.  Notwithstanding the foregoing, if a
Drag-Along Notice is delivered to Management Company in connection with a
Transaction that could reasonably be expected to be completed prior to the
EBITDA Trigger Date, Management Company may deliver the Drag-Along Election
within fifteen (15) days of receipt of a copy of the Appraiser’s determination
of Fair Market Value to either (y) sell the Designated Percentage of its Units
for the cash amount determined based on such appraisal, or (z) require the Board
to cause the Company to be liquidated and dissolved.  Management Company shall
transfer in the Transaction its Designated Percentage as determined below.  The
“Designated Percentage” of Management Company included by MB in the Transaction
shall be equal to the total of all Ownership Percentages represented by Units
proposed to be sold in the Transaction multiplied by the Ownership Percentage of
the total issued and outstanding Class A Membership Units (prior to the EBITDA
Trigger Date) or Class A and Class B Membership Units (after the EBITDA Trigger
Date if the Minimum EBITDA Threshold has been satisfied for the EBITDA
Measurement Period) of the Company represented by the Units owned by the
Management Company, unless otherwise agreed by MB and Management Company.
 Management Company agrees to execute any purchase agreements or other documents
required by the purchaser in connection with the Transaction and to cause
Non-Competition Agreements to be executed and delivered by the Management
Principals if the Transaction includes all Class A Membership Units then owned
by the Management Company, as a condition to its participation therein.

 

4.4           Change in Control of MB.  In the event a Change in Control of MB
or Manhattan Bancorp shall occur prior to the Merger, MB shall give Management
Company not less than thirty (30) days prior notice of the anticipated closing
date of the transaction and a statement including the material terms of the
transaction and identity of the parties (“Control Notice”).  For a period of
twenty (20) days from the date of delivery of such notice, Management Company
shall have the right by giving written notice to MB (an “Election Notice”) to
elect to sell all, but not less than all, of its Units to MB or such party as MB
may designate for cash equal to the amount that Management Company would receive
in its capacity as a Member if the assets of the Company were sold at a cash
price equal to their Fair Market Value and the cash proceeds of such sale were
distributed after payment or provision for all Company liabilities.  If the
Election Notice is timely delivered, the Fair Market Value shall be determined. 
The “Fair Market Value” shall be the value as determined by a recognized
valuation, appraisal or investment banking firm selected by the board
(“Appraiser”), and the determining of Fair Market Value by the Appraiser shall
be binding on the parties.  The Appraiser shall determine the Fair Market Value
of the Company’s assets as of the time of the giving of the Control Notice
subject to

 

10

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subsection (c) below.  Should the Appraiser express the Fair Market Value as a
range, the midpoint of such range shall be used to calculate the Fair Market
Value herein.  In arriving at the Fair Market Value of the Company’s assets, the
appraisers shall use the going concern concept, without any discounts for
minority interest or lack of marketability, and observe the following bases for
valuation, but shall not be limited to them in computing the Fair Market Value
of the Company’s assets:

 

(i)            In determining the Fair Market Value, the existence of a willing
purchaser shall be assumed;

 

(ii)           Past, present and prospective earnings or market conditions,
including economic risk attendant thereto and existing and prospective economic
conditions in the businesses in which the Company is engaged, including
availability of third party financing for the Company’s products, shall be
considered in arriving at a valuation figure; and

 

(iii)          The Appraiser shall assume that the existing employment
agreements between the Company and the Management Principals them employed by
the Company remain in effect and all potential severance, change in control and
other benefits thereunder are paid by the Company, and reduce the value of the
Company by the present value of any additional compensation to be paid to all
employees of the Company, including the Management Principals, above the
compensation earned by them at the time of the Control Notice.

 

(b)           Notwithstanding the foregoing, if a Control Notice is delivered to
Management Company in connection with a Change in Control transaction that could
reasonably be expected to be completed prior to the EBITDA Trigger Date,
Management Company may deliver the Election Notice within fifteen (15) days of
receipt of a copy of the Appraiser’s determination of Fair Market Value elect,
in its sole discretion, to either (i) waive its right to have its shares
purchased hereunder in connection with such Change in Control, (ii) sell all
Units for the cash amount determined based on such appraisal as provided above
in this Section 4.4, or (iii) require the Board to cause the Company to be
liquidated and dissolved.

 

(c)           Management Company agrees to execute any purchase agreements or
other documents required by the purchaser of any Units hereunder and to cause
the Non-Competition Agreements to be executed and delivered by the Management
Principals, as a condition to its right to sell its Units hereunder.

 

(d)           A “Change in Control” of MB, Manhattan Bancorp or the Company
occurs upon the effective date of the first to occur of the following events:

 

(i)            Merger, Consolidation, and Other Transactions.  Any (A) merger
where the Company or MB or Manhattan Bancorp, or a corporation in which the
Company’s or MB’s or Manhattan Bancorp’s shareholders (or in the case of the
Company, its voting membership interest holders) as constituted immediately
prior to the merger do not own, directly or indirectly, at least 50% of such
entity’s common stock or voting membership interests or 50% of the common stock
or voting membership interests of the parent of such corporation or entity (or
an equivalent economic interest in the case of an entity that is not a
corporation or limited

 

11

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liability company) following such merger in the same proportions as their
ownership interests in the Company or MB or Manhattan Bancorp prior to such
transaction, is not the surviving corporation; (B) a transfer of all or a
substantial portion (more than 50%) of the assets of the Company or MB or
Manhattan Bancorp to another corporation or other person in which the Company’s
or MB’s or Manhattan Bancorp’s shareholders or voting membership interest
holders as constituted immediately prior to such transfer do not own, directly
or indirectly, at least 50% of the common stock or voting membership interests
or 50% of the common stock or voting membership interests of the parent of such
corporation or entity (or an equivalent economic interest in the case of a
transferee that is not a corporation or limited liability company) following
such transfer in the same proportions as their ownership interests in the
Company or MB or Manhattan Bancorp prior to such transaction; or (C) the
liquidation or dissolution of the Company or MB or Manhattan Bancorp, except for
a liquidation or dissolution in which the assets and liabilities of the Company
or MB or Manhattan Bancorp are transferred to a transferee in which the owners
of the Company’s or MB’s or Manhattan Bancorp’s common stock or voting
membership interests as constituted immediately prior to the transaction own,
directly or indirectly, at least 50% of the common stock or voting membership
interests or 50% of the common stock or voting membership interests of the
parent of the transferee (or an equivalent economic interest in the case of a
transferee that is not a corporation or limited liability company) following
such liquidation or dissolution in the same proportions as their ownership
interests in the Company or MB or Manhattan Bancorp prior to such transaction;
or

 

(ii)           Majority Stockholder.  Any person (as such term is used in
Section 13(d) of the securities Exchange Act of 1934, as amended (the “Exchange
Act”)), together with its Affiliates (but excluding MB, Manhattan Bancorp,
Management Company, the Company’s or MB’s or Manhattan Bancorp’s employee
benefit plans, and the individuals who were the Company’s or MB’s or Manhattan
Bancorp’s officers or directors on the date of this Agreement, or direct or
indirect owners or a group of affiliated owners of in excess of 20% of the
shares or voting membership interests of MB or the Company on the date of this
Agreement or their respective Affiliates), becomes the beneficial owner (within
the meaning of Rule 13(d)(3) under the Exchange Act) of more than 50% of the
outstanding Units of the Company or MB’s or Manhattan Bancorp’s outstanding
common stock.

 

(iii)          Regulatory Exception.  Notwithstanding anything else to the
contrary set forth herein, a “Change in Control” shall not include any sale of
Units, Interests, stock or other securities, merger, transfer of assets,
consolidation, liquidation, reorganization or other transaction instituted by or
at the request of FINRA, the Securities Exchange Commission, the Office of the
Comptroller of the Currency, Federal Reserve Board, the Federal Deposit
Insurance Corporation or any other regulatory agency to resolve any supervisory
concerns respecting MB, Manhattan Bancorp or any of its banking subsidiaries,
Management Company or the Company.

 

(e)           MB agrees to provide the Company with reasonable notice respecting
any regulatory concerns that could reasonably be expected to adversely impact
the rights of Management Company under Section 4.4(c) hereof.

 

4.5           Substitution of Members.  A transferee of an Interest will have
the right to become a substitute Member only if (a) consent of the Board is
given in accordance with

 

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Section 4.1, (b) such person executes an instrument satisfactory to the Board
accepting and adopting the terms and provisions of this Operating Agreement, and
(c) such person pays any reasonable expenses in connection with his or her
admission as a new Member.  The admission of a substitute Member will not result
in the release of a Member who assigned his Interest from any liability that
such Member may have to the Company unless the transferee is a transferee of MB
that expressly agrees to assume such liability.

 

4.6           Ownership of Management Company.

 

(a)           Management Company will not be permitted to have any shareholders
other than shareholders reasonably approved by the Board who are full-time
employees of the Company or any of its subsidiaries, provided, that nothing
herein shall restrict a member of Management Company from (i) transferring
shares in Management Company to an inter vivos trust of which the approved
equity holder is a settler and, together with such settlor’s spouse, is the life
beneficiary; or (ii) transferring shares in Management Company by will or law of
intestate succession.  Each of the Management Principals will initially own no
more than 23% of the outstanding equity interests of Management Company and
shall, at all times, own at least 10% of the outstanding equity interests of
Management Company individually, unless such requirement is waived by the
Board.  In the event that the employment of a Management Principal ceases for
any reason prior to a Change in Control, the Company shall redeem from the
Management Company, at a price of $0.01 per Unit, a percentage of the total
Class A Membership Units and Class B Membership Units then owned by the
Management Company in the event such Management Principal’s total percentage
ownership in the Management Company (the “Management Principal Percentage
Interest”) exceeds 15% of the total outstanding Management Company shares or
other equity interests.  The amount of Class A Membership Units and Class B
Membership Units to be redeemed shall equal the result obtained by multiplying
(i) the Management Principal Percentage Interest minus 15%, by (ii) the number
of Class A Membership Units and Class B Membership Units then owned by the
Management Company.  The foregoing repurchase rights of the Company shall be in
addition to, and not in lieu of, any repurchase of Units under Section 2.5
hereof, and shall be determined and concluded after any repurchase under
Section 2.5 has been concluded.

 

(b)           Management Company agrees that neither its outstanding shares, nor
its Interests in the Company will be pledged, hypothecated or subject to any
security interest otherwise transferred except as provided herein or in
accordance with the Management Company Shareholders’ Agreement.  Management
Company also agrees to cause all of its shareholders to provide services
exclusively to Company and its subsidiaries.  At no time will Management Company
engage in any business other than owning Units in the Company.  A copy of the
executed Management Company Buy-Sell Agreement is attached hereto as Exhibit C,
and no material changes or amendments thereto will be made without approval of
the Board, and no shares or other rights shall be issued to any Person not
executing a copy thereof and becoming a party thereto.

 

(c)           In order to ensure compliance with various laws and regulations
including, without limitation, those relating to banking, the payment system,
money laundering and fund transfers, as well as to ensure compliance with
certain obligations that are or may hereafter be imposed under the terms of any
processing or other third party agreement relating to operation of

 

13

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the business of the Company, Management Company agrees to comply with all
commercially reasonable requests for any documentation or other information
concerning Management Company shareholders (“Indirect Investors”), and their
respective Affiliates, and to provide such written assurances as may be
reasonably requested from time to time by the Company or MB.

 

(d)           In the event that the Board or MB reasonably determines that the
continued association with the Company of any Indirect Investor in Management
Company will have a material adverse effect on the Company’s or MB’s ability to
conduct business (a “Licensing Issue”), Management Company agrees, upon thirty
(30) days advance written notice, to take such remedial action as may be
reasonably requested by the Board in order to rectify such Licensing Issue
including, but not limited to, taking commercially reasonable steps to redeem
the Indirect Investor’s interest in Management Company if the Licensing Issue
relates to such Indirect Investor’s interest in Management Company.

 

ARTICLE V
MANAGEMENT AND CONTROL OF THE COMPANY

 

5.1           Board of Directors.

 

(a)           Subject to the limitations set forth in this Agreement, the
business and affairs of the Company shall be managed and all Company powers
shall be exercised by or under the direction of a board of directors (each a
“Director” and collectively the “Board” or “Board of Directors”) who shall be
designated by the Members as set forth herein and who shall constitute the, and
have all the powers of, “managers” of the Company within the meaning of the
Act.  The Board shall initially consist of seven Directors until changed by a
vote of the Board, including a majority of both the Management Company Directors
and MB Directors.

 

(b)           (i)            Three directors shall be appointed and may be
removed or replaced by Management Company (the “Management Company Directors”)
and four directors shall be appointed and may be removed or replaced by MB (the
“MB Directors”).  The initial Management Company Directors shall be Harold
Hermelee, Tad Dahlke and Greg Jacobson.  At MB’s option it may elect to appoint
less than four MB Directors, in which event the votes of the MB Directors in
office shall be weighted so as to constitute four-sevenths of the total votes. 
For example, if there are only two MB Directors in office, then each such MB
Director shall have two votes on all matters submitted to the Board.

 

(ii)           A member of the Board may be removed at any time and for any
reason by the Member appointing such Director.  Any vacancy in the Board
occurring because of death, resignation or removal of a Director may be filled
by the Member entitled to appoint such Director.

 

(iii)          Any action taken by the Board shall be duly authorized if
approved by a number of Directors equal to a majority of the authorized
Directors (subject to the last two sentences of Section 5.1(b)(i).

 

(c)           Regular meetings of the Board are not required.  The Directors
shall confer and vote according to written procedures to which they may agree
from time to time,

 

14

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which procedures shall be part of the Company’s books and records.  Directors
may vote by proxy until such time as the Board shall elect to discontinue such
procedure.  Any proxy shall be in writing, shall be valid only for the specific
meeting or actions identified therein, and shall be delivered to the Chairman of
the Board.  Any matter relating to voting and meeting procedures of the Board
not otherwise addressed by this Agreement or by written procedures under the
foregoing sentence shall be governed by those provisions of the California
General Corporation Law applicable to meeting and voting procedures for the
board of directors of a corporation, with such changes as are necessary or
appropriate to apply such provisions to meetings of managers of a limited
liability company.

 

5.2           Members.  Members shall only have the right to vote on the
election or removal of Directors in accordance with Section 5.1.  Except as
otherwise specifically provided herein, all other matters shall be determined by
the Board.

 

(a)           Whenever this Agreement requires a vote, approval or consent by
the Members, except as expressly provided otherwise in this Agreement, such
vote, approval or consent shall be by a Majority in Interest of the Members.

 

(b)           The Members shall confer and vote according to such written
procedures as they may approve from time to time, which procedures shall be part
of the Company’s books and records.  Any matter relating to voting and meeting
procedures of the Members not otherwise addressed by this Agreement or by
written procedures under the foregoing sentence shall be governed by those
provisions of the Act applicable to meeting and voting procedures for members of
a limited liability company.  Notwithstanding anything to the contrary in this
Section 5.2(b),

 

(i)            in no event shall annual or other regular meetings of the Members
be required;

 

(ii)           on any matter that is to be voted on by the Members, the Members
may take such action without a meeting, without prior notice and without a vote,
if a consent or consents in writing, setting forth the action so taken, shall be
signed by those Members having not less than the minimum number of votes that
would be necessary to authorize or take such action at a meeting at which all
Interests entitled to vote thereon were present and voted; provided, that the
Members signing such consent shall promptly give copies of the same to the Board
and the other Members; and

 

(iii)          on any matter that is to be voted on by Members, the Members may
vote in person or by proxy.

 

5.3           Officers.

 

(a)           The Board shall delegate such duties and responsibilities
necessary to operate the business of the Company to one or more officers of the
Company (each an “Officer” and collectively the “Officers”) as the Board
determines from time to time and are consistent with this Agreement.  The
Officers shall include a President, three Senior Managing Directors (which shall
be the most senior position in the Company other than President or Chief
Executive Officer), and may include a Secretary, a Chief Financial Officer, and
in addition thereto and at

 

15

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the discretion of the Board, a Chairman of the Board, a Treasurer, one or more
Vice Presidents, one or more Assistant Secretaries, one or more Assistant
Treasurers, and such other Officers as may be elected or appointed by the
Board.  One person may hold two or more offices.  The initial President, Chief
Executive Officer and Senior Managing Director of the Company shall be Greg
Jacobson.  Harold Hermelee and Tad Dahlke shall each be Senior Managing
Directors as long as they are employed by the Company on a full-time basis.  The
Company shall have an executive committee (“Executive Committee”) that shall
have such authority as is specified herein or as granted from time-to-time by
the Board.  Greg Jacobson, Harold Hermelee and Tad Dahlke shall constitute the
initial members of the Executive Committee and shall be members of the Executive
Committee as long as they are employed by the Company on a full-time basis.  The
Executive Committee shall prepare an annual operating budget at least three
months’ prior to the beginning of each 12 months of operations of the Company
for approval by the Board (the “Annual Budget”).

 

(b)           Subject to the authority of the Board and the provisions of this
Agreement and such policies as may be adopted by the Board in the future, the
Officers shall have the responsibility and the authority to make all day to day
decisions respecting the Business.  Notwithstanding the foregoing, without the
consent of the Board, the Officers, including the Executive Committee, shall
not:

 

(i)            take any action that would conflict with any provision of this
Agreement;

 

(ii)           make any distributions of property or cash to any Member;

 

(iii)          incur any indebtedness other than indebtedness not exceeding
$10,000 other than funds borrowed from MB or its Affiliates;

 

(iv)          make any expenditures of capital in excess of $15,000 in any
single transaction or series of related transactions;

 

(v)           create or cause to be created any liens against any of the
Company’s assets or properties, including, without limitation, the Company’s
cash flow;

 

(vi)          commence any Bankruptcy Action;

 

(vii)         institute or settle any litigation or arbitration;

 

(viii)        sell any material Company assets or engage in any transaction
outside the ordinary course of business;

 

(ix)           exceed the approved expenditures in any Annual Budget line item
by more than 10%, or 6% respecting the total Annual Budget;

 

(x)            engage in any business other than the Business;

 

(xi)           enter into any merger, joint venture, partnership, operating or
similar arrangement;

 

16

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(xii)          hire any employees on terms not approved by the Board or the
Board Designee;

 

(xiii)         increase the commissions, pay or benefits payable by the Company
to any shareholders of the Management Company;

 

(xiv)        enter into any lease of real property; or

 

(xv)         enter into any vendor contract, license or other agreement with any
early termination charge or cancellation fee in excess of $25,000.

 

Notwithstanding the foregoing, if a specific action described in clauses (iii),
(iv) or (xii) is contemplated by the then current approved Annual Budget, and is
otherwise implemented in a manner consistent with this Operating Agreement and
the written policies of the Company, the Officers may implement such action
without further Board approval.  With respect to hiring matters under
Section 5.3(b)(xii) the initial “Board Designee” shall be Jeffrey Watson, or, if
Mr. Watson is unavailable to act or unable to act within two (2) business days
of a request for approval to hire a Company employee, Rick Sowers.  The Board
may change the Board Designee upon written notice to the Executive Committee at
any time.  The employment of all Company employees shall be subject to a
satisfactory prior background check, including a credit report, litigation, lien
and regulatory enforcement searches.

 

5.4           Matters Affecting Directors and Officers.

 

(a)           Notwithstanding any provision of the Act to the contrary, no
Director shall have the authority to execute any note, mortgage, evidence of
indebtedness, contract, conveyance, or other instrument (or any assignment or
endorsement thereof) in the name of the Company, or otherwise bind the Company
with respect to such instrument.  Any such instruments may be signed by any
person or persons and in such manner as from time to time shall be determined by
the President or the Board and, unless so authorized by the President or the
Board, no Director, Officer, agent, or employee other than Senior Managing
Directors shall have any power or authority to bind the Company by any contract
or engagement or to pledge its credit or to render it liable for any purpose or
amount.

 

(b)           Each Director and Officer shall at all times be under a duty to
(a) discharge such person’s duties in good faith, with the care an ordinarily
prudent person in a like position would exercise under similar circumstances,
and in a manner such person reasonably believes to be in the best interests of
the Company; (b) take all actions that may be necessary or appropriate for the
continuation of the Company as a limited liability company under California law,
the protection of the Members from personal liability for the debts and
liabilities of the Company, and the accomplishment of the Company’s purposes;
and (c) devote such time to the Company as the Board shall determine shall be
necessary to manage the Company’s business; and each such person shall use such
Person’s reasonable efforts to conduct the affairs of the Company in a manner
such Person believes to be in the best interests of the Company, including the
safekeeping and use of all of the Company property for the exclusive benefit of
the Company.  In discharging the duties hereunder, a Director or Officer may
rely on information

 

17

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received from other persons if such reliance is consistent with such Officer’s
duties under this Section 5.4(b).

 

5.5           Indemnification.  To the fullest extent permitted by applicable
law, each of the Members, Directors and Officers of the Company (each an
“Indemnitee”) will be indemnified and held harmless by the Company, including
advancement of expenses, but only to the extent that the assets of the Company
are sufficient therefor, from and against all claims, liabilities, and expenses
arising out of any management of the affairs of the Company, subject to all
limitations and requirements imposed by the Act.  These indemnification rights
are in addition to any rights that the Indemnitee may have against third
parties.

 

5.6           Consent and Voting Rights of Members.  The actions listed in this
Article V and specifically identified elsewhere in this Agreement as requiring
the consent of one or more Members constitute the only matters of the Company
upon which Members will have a right to consent or vote in their capacities as
Members, notwithstanding any provision of the Act, including specifically any
right to vote on any reorganization or the right to exercise dissenters’ rights
under Chapter 13 of the Act.

 

ARTICLE VI
ALLOCATIONS OF NET INCOME AND NET LOSS AND DISTRIBUTIONS

 

6.1           Allocations of Net Income and Net Loss.  After giving effect to
the special allocations set forth in Section 6.4 hereof, of Net Income, Net Loss
or items thereof required by Code Section 704(b) and the Treasury Regulations
promulgated thereunder, Net Income and Net Loss shall be allocated to the
Members in the following priority and manner:

 

(a)           Net Income shall be allocated to the Members in the following
order of priority:

 

(i)            First, to any Member allocated Net Loss under Section 6.1(b) that
could not be allocated to another Member due to the limitations contained in the
proviso in Section 6.1(b), an amount equal to the amount of such Net Loss;

 

(ii)           Thereafter, to the Members, pro rata, in proportion to their
respective Ownership Percentages, subject, in the case of the Class B Membership
Units, to the provisions of Section 2.1(b)(ii).

 

(b)           Net Loss shall be allocated to the Members pro rata, in proportion
to their respective Ownership Percentages, subject, in the case of the Class B
Membership Units, to the provisions of Section 2.1(b)(ii), provided, however,
any allocations of Net Loss which would cause a Member to have an Adjusted
Capital Account Deficit shall be applied proportionally to the other Members so
as to allocate the maximum amount of Net Loss to such Members without causing
any Member to have an Adjusted Capital Account Deficit.

 

(c)           For purposes of this Agreement, “Adjusted Capital Account Deficit”
shall mean, with respect to any Member, the deficit balance, if any, in such
Member’s Capital Account as of the end of the relevant Fiscal Year, after giving
effect to the following adjustments:  (i) credit to such Capital Account any
amounts which such Member is obligated to

 

18

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restore pursuant to any provision of this Agreement or is deemed to be obligated
to restore pursuant to the penultimate sentence of Treasury Regulations Sections
1.704-2(g)(1) and 1.704-2(i)(5); and (ii) debit to such Capital Account the
items described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6).  The foregoing definition
of Adjusted Capital Account Deficit is intended to comply with the provisions of
Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted
consistently therewith.

 

6.2           Distributions.  Except upon the liquidation of the Company under
Section 8.3 hereof (in which case distributions shall be made in the manner and
at the time provided in Section 8.5 hereof) the Company shall make distributions
of Available Cash according to this Section 6.2.

 

(a)           No distribution shall be made under this Section 6.2 to the extent
it would, in the reasonable determination of the Board, cause the Company to
have insufficient cash flow to operate its business in a reasonable manner or to
be in default under any net worth, debt-to-equity ratio, asset base, or similar
financial test or covenant contained in, or otherwise violate or accelerate, any
financing arrangement, promissory note, loan or credit agreement, security
agreement, indenture, or other instrument to which the Company is a party (other
than an instrument under or with respect to which a Member or Affiliate thereof
is the applicable creditor).

 

(b)           Subject to the Company having Available Cash, the Company shall
make minimum distributions in cash to the Members in an aggregate amount with
respect to each Fiscal Year, no later than the date occurring ninety (90) days
after the end of such Fiscal Year, in an amount at least equal to 40% of its
taxable Net Income with respect to such Fiscal Year other than any Net Income
allocated to offset Net Loss previously allocated to a Member.  Distributions of
Available Cash to the Members pursuant to this Section 6.2(b) shall be subject
to the provisions of Section 6.2(a).

 

(c)           The Board is hereby authorized to withhold from distributions, or
with respect to allocations, to the Members and to pay over any federal, state,
local, or foreign government any amounts required to be so withheld pursuant to
the Code or any provisions of any other federal, state, or local law and shall
allocate such amounts to the Members with respect to which such amount was
withheld.  Distributions shall be deemed made to a Member in such amounts that
the Company withholds or pays over to a taxing authority on account of amounts
allocable to a Member pursuant to any requirement of the Code or of foreign,
state or local tax law.

 

(d)           Subject to the distribution provisions of Section 8.2 governing
distributions upon dissolution, Available Cash shall thereafter be distributed
in such amounts and at such times as the Board shall determine, in its
discretion after due consideration to the interests of all Members, to the
Members in accordance with their respective Ownership Percentages after
accounting for any prior distributions made under Section 6.2(b).

 

6.3           Transferred Interests.  If any Interest is transferred, or is
increased or decreased by reason of the admission of a new Member, or otherwise,
during any Fiscal Year of the

 

19

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Company, each item of income, gain, loss, deduction, or credit of the Company
for such Fiscal Year allocable, and cash or Company property which is
distributable, to the holder of such Interest for such Fiscal Year shall be
allocated and distributed based on a method consistent with Section 706(d) of
the Code.  All requirements of the Code and Treasury Regulations (including
Section 752 and related Treasury Regulations) shall be applied in any reasonable
manner approved by the President after consultation with the Company’s
accountants.

 

6.4           Code Section 704(b) Allocations.  The following special
allocations shall be made in the following order and priority:

 

(a)           Minimum Gain Chargeback.  Except as otherwise provided in Treasury
Regulations Section 1.704-2(f), notwithstanding any other provision of this
Agreement, if there is a net decrease in Company Minimum Gain during any Fiscal
Year, each Member shall be specially allocated items of Company income and gain
for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount
equal to such Member’s share of the net decrease in Company Minimum Gain,
determined in accordance with Treasury Regulations Section 1.704-2(g). 
Allocations pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Member pursuant thereto. 
The items to be so allocated shall be determined in accordance with Treasury
Regulations Sections 1.704-2(f)(6) and 1.704-2(j)(2).  This Section 6.4(a) is
intended to comply with the minimum gain chargeback requirement in Treasury
Regulations Section 1.704-2(f) and shall be interpreted consistently therewith.

 

(b)           Member Nonrecourse Debt Minimum Gain Chargeback.  Except as
otherwise provided in Treasury Regulations Section 1.704-2(i)(4),
notwithstanding any other provision of this Agreement, if there is a net
decrease in Member Nonrecourse Debt Minimum Gain attributable to a Member
Nonrecourse Debt during any Fiscal Year, each Member who has a share of the
Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse
Debt, determined in accordance with Treasury Regulations Section 1.704-2(i)(5),
shall be specially allocated items of Company income and gain for such Fiscal
Year (and, if necessary, subsequent Fiscal Years) in an amount equal to such
Member’s share of the net decrease in Member Nonrecourse Debt Minimum Gain
attributable to such Member Nonrecourse Debt, determined in accordance with
Treasury Regulations Section 1.704-2(i)(4).  Allocations pursuant to the
previous sentence shall be made in proportion to the respective amounts required
to be allocated to each Member pursuant thereto.  The items to be so allocated
shall be determined in accordance with Treasury Regulations Sections
1.704-2(i)(4) and 1.704-2(j)(2).  This Section 6.4(b) is intended to comply with
the partner nonrecourse debt minimum gain chargeback requirement in Treasury
Regulations Section 1.704-2(i)(4) and shall be interpreted consistently
therewith.

 

(c)           Qualified Income Offset.  In the event any Member unexpectedly
receives any adjustments, allocations, or distributions described in Treasury
Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or
1.704-1(b)(2)(ii)(d)(6), items of Company income and gain shall be specially
allocated to each such Member in an amount and manner sufficient to eliminate,
to the extent required by the Treasury Regulations, the Adjusted Capital Account
Deficit of such Member as quickly as possible, provided that an allocation
pursuant to this Section 6.4(c) shall be made only if and to the extent that the
Member would have an Adjusted

 

20

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Capital Deficit after all other allocations provided for in this Agreement have
been tentatively made as if this Section 6.4(c) were not in this Agreement. 
This Section 6.4(c) is intended to comply with the qualified income offset
requirement in Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.

 

(d)           Gross Income Allocation.  In the event any Member has an Adjusted
Capital Account Deficit at the end of any Fiscal Year, such Member shall be
specially allocated items of Company income and gain in the amount of such
excess as quickly as possible, provided that an allocation pursuant to this
Section 6.4(d) shall be made only if and to the extent that such Member would
have an Adjusted Capital Account Deficit in excess of such sum after all other
allocations provided for in this Agreement have been made as if
Section 6.4(c) hereof and this Section 6.4(d) were not in this Agreement.

 

(e)           Nonrecourse Deductions.  Nonrecourse Deductions for any Fiscal
Year shall be specially allocated to the Members in proportion to their
respective Ownership Percentages.

 

(f)            Member Nonrecourse Deductions.  Member Nonrecourse Deductions for
any Fiscal Year shall specially 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 Treasury
Regulations Section 1.704-2(i)(1); provided, however, that if more than one
Member bears the economic risk of loss for such debt, the Member Nonrecourse
Deductions attributable to such Member Nonrecourse Debt shall be allocated to
and among the Member in the same proportion that they bear the economic risk of
loss for such Member Nonrecourse Debt.  This Section 6.4(f) is intended to
comply with the provision of Treasury Regulations Section and shall be
interpreted consistently therewith.

 

(g)           Curative Allocations.  The allocations set forth in Sections
6.4(a) through (f) (the “Regulatory Allocations”) are intended to comply with
certain requirements of the Treasury Regulations.  It is the intent of the
Members that, to the extent possible, all Regulatory Allocations shall be offset
either with other Regulatory Allocations or with special allocations of other
items of Company income, gain, loss or deduction pursuant to this
Section 6.4(g).  Therefore, notwithstanding any other provision of this
Agreement (other than the Regulatory Allocations), the Board shall make such
offsetting allocations of Company income, gain, loss, or deduction in whatever
manner it determines appropriate so that, after such offsetting allocations are
made, each Member’s Capital Account balance is, to the extent possible, equal to
the Capital Account balance such Member would have had if the Regulatory
Allocations were not part of this Agreement.

 

6.5           Code Section 704(c) Allocations.  Notwithstanding any other
provision in this Article VI, in accordance with Code Section 704(c) and the
Treasury Regulations promulgated thereunder, income, gain, loss, and deduction
with respect to any property contributed to the capital of the Company shall,
solely for tax purposes, be allocated among the Members so as to take account of
any variation between the adjusted basis of such property to the Company for
federal income tax purposes and its Gross Asset Value (computed in accordance
with subparagraph (a) of the definition of Gross Asset Value) on the date of
contribution.  In the event the Gross Asset Value of any property is adjusted
pursuant to subparagraph (b) of the definition

 

21

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of Gross Asset Value, subsequent allocations of income, gain, loss, and
deduction with respect to such asset shall take account of any variation between
the adjusted basis of such asset for federal income tax purposes and its Gross
Asset Value in the same manner as under Code Section 704(c) and the Treasury
Regulations thereunder.  Allocations pursuant to this Section 6.5 are solely for
purposes of federal, state and local taxes.  As such, they shall not affect or
in any way be taken into account in computing a Member’s Capital Account or
share of Net Income, Net Loss, or other items or distributions pursuant to any
provisions of this Agreement.  Any elections or other decisions relating to such
allocations shall be made by the Board in any manner that reasonably reflects
the purpose and intention of this Agreement.

 

6.6           Tax Matters Member.

 

(a)           The Board shall designate one Member to be the “tax matters
partner” of the Company pursuant to Code Section 6231(a)(7) (the “Tax Matters
Member”), or, if the Board fails to designate a Member, then the Tax Matters
Member shall be that Member that has the largest Ownership Percentage at the
close of the applicable taxable year.

 

(b)           The Tax Matters Member shall take no action in such capacity
without the consent of the Board (not to be unreasonably withheld or delayed)
other than such action as the Tax Matters Member may be required to take by
law.  In complying with the responsibilities outlined in Code Sections 6222
through 6231, the Tax Matters Member shall incur no liability to the other
Members provided that the Tax Matters Member was not grossly negligent in
complying with its responsibilities.  The Tax Matters Member shall not be
required to incur any expenses for the preparation for or pursuance of
administrative or judicial proceedings unless the Board agrees on a method for
sharing such expenses, or the Company may pay for such expenses.

 

(c)           The Tax Matters Member shall not enter into any extension of the
period of limitations for making assessments on behalf of the other Members
without first obtaining the consent of the Board.

 

(d)           No Member shall file, pursuant to Code Section 6227, a request for
an administrative adjustment of items for any Company taxable year without first
notifying the Board.  If the Board agrees with the requested adjustment, then
the Tax Matters Member shall file the request for administrative adjustment on
behalf of the requesting Member.  If such consent is not obtained within thirty
(30) calendar days from such notice, or within the period required to timely
file the request for administrative adjustment, if shorter, any Member,
including the Tax Matters Member, may file a request for administrative
adjustment on its own behalf.

 

(e)           Any Member intending to file a petition under Code Sections 6226,
6228 or other Section with respect to any item or other matter involving the
Company shall notify the Board of such intention and the nature of the
contemplated proceeding.  In the case where the Tax Matters Member is the Member
intending to file such petition on behalf of the Company, such notice shall be
given within a reasonable period of time to allow the other Members to
participate in the choosing of the forum in which such petition will be filed. 
If any Member intends to seek review of any court decision rendered as a result
of a proceeding instituted under

 

22

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the preceding provisions of this Section 6.6, then such Member shall notify the
Board of such intended action.

 

(f)            The Tax Matters Member shall not bind the Members to a settlement
agreement without obtaining the consent of the Board.  For purposes of this
Section 6.6, the term “settlement agreement” shall include a settlement
agreement at either an administrative or judicial level.  Any Member who enters
into a settlement agreement with respect to any Company items (within the
meaning of Code Section 6231(a)(3)) shall notify the Board of such settlement
agreement and its terms within ninety (90) calendar days from the date of
settlement.  Under no circumstances shall the Tax Matters Member enter into a
settlement agreement without the prior consent of the Board.

 

(g)           The provisions of this Section 6.6 shall survive the termination
of the Company or the termination of any Member’s Interest in the Company and
shall remain binding on the Members for a period of time necessary to resolve
with the IRS, the United States Department of the Treasury or any state taxation
authority with jurisdiction over the Company any and all matters regarding the
United States Federal or any state income taxation of the Company.

 

(h)           If any Member intends to file a notice of inconsistent treatment
under Code Section 6222(b), such Member shall give reasonable notice under the
circumstances to the Board of such intent and the manner in which the Member’s
intended treatment of an item is (or may be) inconsistent with the treatment of
that item by the other Members.

 

ARTICLE VII
BOOKS AND RECORDS

 

7.1           Accounting Principles.  The Net Income and Losses of the Company
shall be determined in accordance with accounting principles applied on a
consistent basis under such method of accounting as may be approved by the
Board.

 

7.2           Records and Reports.  At the expense of the Company, the Company
will maintain records and accounts of all operations and expenditures of the
Company.  At a minimum, the Company will keep at its principal place of business
the following records:

 

(a)           A current list that states:  (i) the name and mailing address of
each Member and (ii) the Interests owned by each Member;

 

(b)           Copies of the federal, state and local information or income tax
returns for each of the Company’s three (3) most recent tax:  years (or such
shorter period that the Company has been in existence);

 

(c)           A copy of the Articles and this Operating Agreement, all
amendments or restatements thereof, executed copies of any powers of attorney,
and copies of any document that creates, in the manner provided by the Articles
or this Agreement, classes or groups of Members;

 

(d)           Correct and complete books and records of account of the Company;
and

 

23

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(e)           Any other books, records or documents required by this Operating
Agreement, the Articles, the Act or other applicable law.

 

7.3           Returns and Other Elections.  The Board will cause the preparation
and timely filing of all tax returns required to be filed by the Company
pursuant to the Code and all other tax returns deemed necessary and required in
each jurisdiction in which the Company does business.  Copies of the returns, or
pertinent information therefrom, shall be furnished to the Members within one
hundred twenty (120) days after the end of each Fiscal Year.  All elections
permitted to be made by the Company under federal or state laws will be made by
the Board.

 

7.4           Bank Accounts.  All funds of the Company will be deposited in its
name in an account maintained in a commercial financial institution, which shall
be Bank of Manhattan unless otherwise determined by the Board.  The funds of the
Company shall not be commingled with the funds of any other Person.  Checks may
be drawn on the Company account or accounts only for the purposes of the Company
and may be signed by one or more of the Board or a designated Officer or
Officers.

 

ARTICLE VIII
DISSOLUTION AND WINDING UP

 

8.1           Dissolution.  The Company will be dissolved and its affairs will
be wound up upon the first to occur of the following:

 

(a)           On the election of the Board to dissolve the Company;

 

(b)           The sale or other disposition of all of the Company’s assets for

 

(c)           The election of Management Company as permitted under Sections 4.3
or 4.4(d) hereof.

 

8.2           Winding-up.

 

(a)           On dissolution of the Company, the business and affairs of the
Company will terminate, the assets of the Company will be liquidated, and the
Company’s affairs will be wound up under this Article VIII.

 

(b)           Dissolution of the Company is effective as of the day on which the
event giving rise to the dissolution occurs, but the Company shall not terminate
until there has been a winding up of the Company’s business and affairs and the
Company’s assets have been distributed as provided in Section 8.3.

 

(c)           On dissolution of the Company, the Board (or an agent approved by
the Board, who may be an Officer) may cause any part or all of the assets of the
Company to be sold or distributed in kind in the manner approved by the Board
(or an agent approved for such purpose).

 

8.3           Distribution of Assets on Dissolution.  In settling accounts after
dissolution, the assets of the Company will be paid in the following order:

 

24

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(a)           First, to creditors, including Members, in the order of priority
as provided by law, except those to Members of the Company on account of their
Capital Contributions;

 

(b)           Second, amounts necessary to establish such cash reserves that the
Board deems reasonably necessary for any contingent or unforeseen liabilities or
obligations of the Company; and

 

(c)           Third, to the Members, pro rata, in proportion to and in an amount
equal to the positive balances in their respective Capital Accounts (after
making all allocations required by Article VI).

 

8.4           Distributions in Kind.  Assets of the Company may be distributed
to the Members entitled thereto individually or as tenants-in-common in the same
proportions as the Members would have been entitled to cash distributions if the
property had been sold for cash and the net proceeds distributed to the
Members.  If distributions in kind are made to the Members on dissolution and
winding up of the Company, the Capital Account balances of those Members will be
adjusted to reflect the Members’ allocable share of gain or loss that would have
resulted if the distributed property had been sold at its fair market value.

 

8.5           Distributions to Trust.  Distributions pursuant to Section 8.3 may
be made to a trust established for the benefit of the Members for the purposes
of liquidating Company assets, collecting amounts owed to the Company, and
paying contingent or unforeseen liabilities or obligations of the Company.  The
assets of any such trust will be distributed to the Members from time to time,
subject to the approval of the Board (or an agent approved for such purpose) in
the same proportions as the amounts distributed to the trust by the Company
would otherwise have been distributed to the Members pursuant to this Agreement.

 

8.6           Certificates of Dissolution and Cancellation.  When all
liabilities and obligations of the Company have been paid or discharged or
adequate provision has been made therefor, and all of the remaining property and
assets of the Company have been distributed to the Members according to their
respective rights and interests, a certificate of dissolution and a certificate
of cancellation shall be executed on behalf of the Company by the President, a
Senior Managing Director or another authorized Officer and shall be filed with
the Office of the Secretary of State of the State of California, and the
Officers, Directors and/or Members shall execute, acknowledge and file any and
all other instruments necessary or appropriate to reflect the dissolution and
the completion of the winding up of the Company.

 

8.7           Company Name.  In the event of termination of the Company or its
sale to any other Person, the Company or its acquiror shall have no further
right to use the name “Manhattan Capital” or any derivation thereof without the
consent of MB.

 

ARTICLE IX
DEFINITIONS

 

The following terms used in the Operating Agreement will have the meanings set
forth below, unless the context otherwise requires:

 

25

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AAA

 

“AAA” shall have the meaning set forth in Section 10.14(b).

 

 

 

AAA Commercial Arbitration Rules

 

“AAA Commercial Arbitration Rules” shall have the meaning set forth in
Section 10.14(b).

 

 

 

Act

 

The California Limited Liability Company Act, as amended.

 

 

 

Additional Capital Contribution

 

“Additional Capital Contribution” shall have the meaning set forth in
Section 2.1(c)

 

 

 

Adjusted Capital Account Deficit

 

“Adjusted Capital Account Deficit” shall have the meaning set forth in
Section 6.1(c).

 

 

 

Admission Agreement

 

An agreement between the Company and any Member pursuant to which such Member is
issued an Interest in the Company.

 

 

 

Affiliate

 

With respect to a Person, any other Person controlled by, controlling or under
common control with such Person.

 

 

 

Annual Budget

 

“Annual Budget” shall have the meaning set forth in Section 5.3(a).

 

 

 

Appraiser

 

“Appraiser” shall have the meaning set forth in Section 4.4(a).

 

 

 

Articles

 

“Articles” shall have the meaning set forth in the Preamble.

 

 

 

Available Cash

 

Available Cash means, with respect to any fiscal period, such portion of the
cash in the Company’s bank accounts that, in the sole discretion of the Board,
is available for distribution to the Members after a reasonable provision has
been made for reserves.

 

 

 

Bankruptcy Action

 

Bankruptcy Action means:

 

 

 

 

 

(a)     The commencement of any voluntary proceedings under federal or state
bankruptcy laws;

 

 

 

 

 

(b)     The failure to terminate any involuntary proceedings under federal or
state bankruptcy laws within thirty (30) days after the commencement thereof;

 

 

 

 

 

(c)     A general assignment for the benefit of creditors; or

 

 

 

 

 

(d)     The issuance of a charging order against the interest of any person
without the removal thereof within thirty (30) days after issuance.

 

 

 

Board or Board of Directors

 

“Board” or “Board of Director” has the meaning set forth in Section 5.1(a).

 

26

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Business

 

The Business of the Company shall consist of (a) holding shares of stock in
Manhattan Advisory Services Inc., and (bc) related or incidental activities and
such other activities as may be approved by the Board, including both a majority
of the MB Directors and Management Company Directors.

 

 

 

Business Day

 

Any day other than a Saturday, a Sunday, or a day on which banks are closed in
Los Angeles, California.

 

 

 

Capital Account

 

The account established for each Member maintained in a manner that the Board
determines is in accordance with Treasury Regulations
Section 1.704-1(b)(2)(iv) and Section 2.2 hereof.

 

 

 

Capital Contribution

 

The total amount of cash and the fair market value of other property, net of
liabilities securing such property contributed to the Company by any Member (or
the predecessor holder or holders of the Interests of any Member).

 

 

 

Cause

 

Cause shall mean termination of employment for personal dishonesty,
incompetence, willful misconduct, any breach of fiduciary duty involving
personal profit, intentional failure to perform stated duties, willful violation
of any law, rule or regulation (other than traffic violations or similar
offenses) or cease-and-desist or other order of any banking or other regulatory
agency or material breach of any provision of this Agreement. For purposes of
this Operating Agreement, no act, or the failure to act, on an employee’s part
shall be considered “willful” unless done, or omitted to be done, not in good
faith and without reasonable belief that the action or omission was in the best
interests of Company, MB or Manhattan Bancorp, and any banking subsidiary
thereof.

 

 

 

Change in Control

 

“Change in Control” shall have the meaning set forth in Section 4.4(d).

 

 

 

Class

 

“Class” shall have the meaning set forth in Section 2.1(b).

 

 

 

Class A Membership Units

 

“Class A Membership Units” shall have the meaning set forth in Section 2.1(b).

 

 

 

Class B Membership Units

 

“Class B Membership Units” shall have the meaning set forth in Section 2.1(b).

 

 

 

CPP

 

“CPP” shall have the meaning set forth in Section 10.15.

 

 

 

Code

 

The Internal Revenue Code of 1986, as amended (or any corresponding provision of
succeeding law).

 

27

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Company

 

Manhattan Capital Markets LLC, a California limited liability company.

 

 

 

Company Minimum Gain

 

“Company Minimum Gain” has the same meaning as “partnership minimum gain” set
forth in Treasury Regulations Sections 1.704-2(b)(2) and 1.704-2(d).

 

 

 

Contribution Agreement

 

That certain Contribution Agreement dated as of July 30, 2010, by and among the
Company, Bodi Investors, Inc. and MBFS Holdings, Inc.

 

 

 

Depreciation

 

“Deprecation” means, for each Fiscal Year, an amount equal to the depreciation,
amortization, or other cost recovery deduction allowable for federal income tax
purposes with respect to an asset for such Fiscal Year, except that if the Gross
Asset Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such Fiscal Year, Depreciation shall be an amount
which bears the same ratio to such beginning Gross Asset Value as the federal
income tax depreciation, amortization, or other cost recovery deduction for such
Fiscal Year bears to such beginning adjusted tax basis; provided, however, that
if the federal income tax depreciation, amortization, or other cost recovery
deduction for such Fiscal Year is zero, Depreciation shall be determined with
reference to such beginning Gross Asset Value using any reasonable method
selected by the Board.

 

 

 

Designated Percentage

 

“Designated Percentage” shall have the meaning set forth in Section 4.3.

 

 

 

Director

 

Director shall have the meaning set forth in Section 5.1(a).  Notwithstanding
any other provisions hereof, no individual shall serve as a Director if the
Office of the Comptroller of the Currency, Federal Reserve Board, or any other
regulatory agency shall object to such individual’s service.

 

 

 

Dispute

 

“Dispute” shall have the meaning set forth in Section 10.14(a).

 

 

 

Drag-Along Election

 

“Drag-Along Election” shall have the meaning set forth in Section 4.3.

 

 

 

Drag-Along Notice

 

“Drag-Along Notice” shall have the meaning set forth in Section 4.3.

 

 

 

Drag-Along Rights

 

“Drag-Along Rights” shall have the meaning set forth in Section 4.3.

 

 

 

EBITDA

 

EBITDA shall mean, for any period, the consolidated earnings (or loss) of the
Company for such period (excluding extraordinary items) before (a) income tax
expense, (b) net interest expense, (c) amortization expense, and
(d) depreciation, and with all charges,

 

28

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 reserves and accruals determined in accordance with generally accepted
accounting principles and reflected on the Company’s financial statements.

 

 

 

EBITDA Measurement Period

 

“EBITDA Measurement Period” shall have the meaning set forth in
Section 2.1(b)(iii).

 

 

 

EBITDA Trigger Date

 

“EBITDA Trigger Date” shall have the meaning set forth in Section 2.1(b)(iii).

 

 

 

EESA

 

“EESA” shall have the meaning set forth in Section 10.15.

 

 

 

Election Notice

 

“Election Notice” shall have the meaning set forth in Section 4.4(a).

 

 

 

Exchange Act

 

“Exchange Act” shall have the meaning set forth in Section 4.4(d)(ii).

 

 

 

Executive Committee

 

“Executive Committee” shall have the meaning set forth in Section 5.3.

 

 

 

Fair Market Value

 

“Fair Market Value” shall have the meaning set forth in Section 4.4(a).

 

 

 

Fiscal Year

 

The period of January 1 to and including December 31.

 

 

 

Gross Asset Value

 

“Gross Asset Value” means, with respect to any asset, the asset’s adjusted basis
in the hands of the Company for federal income tax purposes, except as follows:

 

 

 

 

 

(a)            The initial Gross Asset Value of any asset contributed by a
Member to the Company shall be the gross fair market value of such asset, as
reasonably determined by the contributing Member and the Board;

 

 

 

 

 

(b)           The Gross Asset Values of all Company assets shall be adjusted to
equal their respective gross fair market values (taking Code
Section 7701(g) into account), as reasonably determined by the Board, as of the
following times:  (i) the acquisition of an additional interest in the Company
by any new or existing Member in exchange for more than a de minimis Capital
Contribution; (ii) the distribution by the Company to a Member of more than a de
minimis amount of Company property as consideration for an interest in the
Company; (iii) the liquidation of the Company within the meaning of Treasury
Regulations Section 1.704-1(b)(2)(ii)(g); and (iv) in connection with the grant
of an interest in the Company (other than a de minimus interest) as
consideration for the provision to or for the benefit of the Company by an
existing Member acting in a member capacity, or by a new

 

29

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Member acting in a Member capacity in anticipation of being a Member; provided,
however, that adjustments pursuant to clauses (i), (ii) and (iv) above shall be
made only if the Board reasonably determines that such adjustments are necessary
or appropriate to reflect the relative economic interests of the Members in the
Company;

 

 

 

 

 

(c)            The Gross Asset Value of any Company asset distributed to any
Member shall be adjusted to equal the gross fair market value (taking into
account Code Section 7701(g) into account) of such asset on the date of
distribution as reasonably determined by the Board; and

 

 

 

 

 

(d)           The Gross Asset Values of Company assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent
that such adjustments are taken into account in determining Capital Accounts
pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m) and subparagraph
(f) of the definition of “Net Losses,” and “Net Income” and
Section 6.4(g) hereof; provided, however, that Gross Asset Values shall not be
adjusted pursuant to this subparagraph (d) to the extent the Board determines
that an adjustment pursuant to subparagraph (b) hereof is necessary or
appropriate in connection with a transaction that would otherwise result in an
adjustment pursuant to this subparagraph (d).

 

If the Gross Asset Value of an asset has been determined or adjusted pursuant to
subparagraphs (a), (b) or (d) hereof, such Gross Asset Value shall thereafter be
adjusted by the Depreciation taken into account with respect to such asset for
purposes of computing Net Loss and Net Income.

 

 

 

Indemnitee

 

“Indemnitee” shall have the meaning set forth in Section 5.5.

 

 

 

Indirect Interests

 

“Indirect Interests” shall have the meaning set forth in Section 4.6(c).

 

 

 

Initial Date

 

“Initial Date” shall have the meaning set forth in Section 2.1(b)(iii).

 

 

 

Initial Employee Equity Schedule

 

The schedule set forth as Exhibit B to this Agreement setting forth the names of
all employees of the Company who are shareholders of the Management Company as
of the date hereof, together with a description of the total number of shares
held by such person in the Management Company.

 

 

 

Interests

 

Units representing the entire ownership interest of all Members of the

 

30

--------------------------------------------------------------------------------

 

 

 

Company, and all rights and liabilities associated therewith, at any particular
time, including, without limitation, rights to distributions (liquidating or
otherwise), allocations, information, and consent or approval rights.  Units may
be issued in one or more Classes or Series as provided herein.

 

 

 

Licensing Issue

 

“Licensing Issue” shall have the meaning set forth in Section 4.6(d).

 

 

 

Majority in Interest

 

That number of Members or class of Members, as the case may be, whose Ownership
Percentages equal more than 50% of the aggregate Ownership Percentages of all
Members or class of Members, as the case may be.

 

 

 

Management Company:

 

Bodi Advisors Inc., a California corporation.

 

 

 

Management Company Directors

 

“Management Company Directors” shall have the meaning set forth in
Section 5.1(b)(i).

 

 

 

Management Condition

 

“Management Condition” shall have the meaning set forth in Section 2.5(b).

 

 

 

Management Principal Percentage Interest

 

“Management Principal Percentage Interest” shall have the meaning set forth in
Section 4.6(a).

 

 

 

Management Principals

 

Management Principals means Greg Jacobson, Tad Dahlke and Harold Hermelee.

 

 

 

Manhattan Bancorp

 

Manhattan Bancorp, a California corporation and the parent of MB.

 

 

 

MB

 

MB Financial Services, Inc., a California corporation.

 

 

 

MB Directors

 

“MB Directors” shall have the meaning set forth in Section 5.1(b)(i).

 

 

 

Member

 

Each Person designated as a Member on Exhibit A, and each Person hereinafter
admitted to the Company as a Member, as provided in this Operating Agreement,
but does not include a Person who has ceased to be a Member.

 

 

 

Member Nonrecourse Debt

 

“Member Nonrecourse Debt” has the same meaning as the term “partner nonrecourse
debt” set forth in Treasury Regulations Section 1.704-2(b)(4).

 

 

 

Member Nonrecourse Debt Minimum Gain

 

“Member Nonrecourse Debt Minimum Gain” means an amount, with respect to each
Member Nonrecourse Debt, equal to the Company Minimum Gain that would result if
such Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined
in accordance with Treasury Regulations Section 1.704-2(i)(3).  In the case of
Member Nonrecourse Debt for which the creditor’s recourse against

 

31

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the Company is not limited to particular assets of the Company, until such time
as there is regulatory guidance on the determination of minimum gain with
respect to such liabilities, all such liabilities of the Company shall be
treated as a single liability and allocated to the Company’s assets using any
reasonable basis selected by the Board.

 

 

 

Member Nonrecourse Deductions

 

“Member Nonrecourse Deductions” has the same meaning as the term “partner
nonrecourse deductions” set forth in Treasury Regulations Section 1.704-2(i).

 

 

 

Merger  

 

“Merger” shall have the meaning set forth in Section 3.6(a).

 

 

 

Merger Conditions

 

“Merger Conditions” shall have the meaning set forth in Section 3.6(a).

 

 

 

Merger Election

 

“Merger Election” shall have the meaning set forth in Section 3.6(a).

 

 

 

Minimum EBITDA Threshold

 

“Minimum EBITDA Threshold” shall have the meaning set forth in
Section 2.1(b)(iii).

 

 

 

Mortgage Banking Condition

 

Mortgage Banking Condition means the election, at its sole option, of Bank of
Manhattan, a subsidiary of Manhattan Bancorp, to enter the mortgage banking
business and the execution by such bank and the Company of a mortgage services
agreement under which the bank may elect to fund loans originated through
Mortgage Broker and to compensate Mortgage Broker for services rendered in
connection with such activities.

 

 

 

Mortgage Broker

 

A subsidiary of Company which may be formed to engage in the residential
mortgage brokerage business.

 

 

 

Mortgage Broker Revenue

 

Amounts received by Company or Mortgage Broker for the origination, placement,
marketing and/or sale of mortgage loans (including net gain on the sale of
assets in excess of their cost basis) by Company or Mortgage Broker, less any
adjustment for loan loss provisions (including reserves and actual losses)
adopted by the Board of Directors of Company or Mortgage Broker and reflected in
the Company’s or Mortgage Broker’s financial statements.

 

 

 

Net Loss or Net Income

 

For any Fiscal Year, an amount equal to the Company’s taxable income or loss for
such Fiscal Year, determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss, or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss), with the following adjustments (without duplication):

 

 

 

 

 

(a)           Any income of the Company that is exempt from federal income tax
and not otherwise taken into account in computing Net Loss or Net

 

32

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Income pursuant to this definition of “Net Loss” and “Net Income” shall be added
to such taxable income or loss;

 

 

 

 

 

(b)           Any expenditures of the Company described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures
pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise
taken into account in computing Profits or Losses pursuant to this definition of
“Net Loss” and “Net Income” shall be subtracted from such taxable income or
loss;

 

 

 

 

 

(c)           In the event the Gross Asset Value of any Company property is
adjusted pursuant to subparagraphs (b) or (c) of the definition of “Gross Asset
Value” hereof, the amount of such adjustment shall be treated as an item of gain
(if the adjustment increases the Gross Asset Value of the asset) or an item of
loss (if the adjustment decreases the Gross Asset Value of the asset) from the
disposition of such asset and shall be taken into account for purposes of
computing Net Loss or Net Income;

 

 

 

 

 

(d)           Gain or loss resulting from any disposition of Company property
with respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Gross Asset Value of the property disposed
of, notwithstanding that the adjusted tax basis of such property differs from
its Gross Asset Value;

 

 

 

 

 

(e)           In lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account Depreciation for such Fiscal Year, computed in
accordance with the definition of “Depreciation”;

 

 

 

 

 

(f)            To the extent an adjustment to the adjusted tax basis of any
Company asset pursuant to Code Section 734(b) or Code Section 743(b) is required
pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be taken
into account in determining Capital Accounts as a result of a distribution other
than in complete liquidation of a Member’s interest in the Company, the amount
of such adjustment shall be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment decreases such
basis) from the disposition of such asset and shall be taken into account for
purposes of computing Net Loss or Net Income; and

 

 

 

 

 

(g)           Any items which are specially allocated pursuant to Sections 6.4
or 6.5 hereof shall not be taken into account in computing Net Loss or Net
Income.

 

33

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Non-Competition Agreement

 

Non-Competition and Non-Solicitation Agreements in the form of Exhibit E to be
executed by the Management Principals as provided herein.

 

 

 

Nonrecourse Deductions

 

“Nonrecourse Deductions” has the meaning set forth in Treasury Regulations
Sections 1.704-2(b)(1) and 1.704-2(c).  The amount of Nonrecourse Deductions for
a Fiscal Year shall generally equal the net increase, if any, in the amount of
Company Minimum Gain for that Fiscal Year, reduced (but not below zero) by the
aggregate distributions during the year of proceeds of Nonrecourse Liabilities
that are allocable to an increase in Company Minimum Gain, with such other
modifications as provided in Treasury Regulations Section 1.704-2(c).

 

 

 

Nonrecourse Liability

 

“Nonrecourse Liability” has the meaning set forth in Treasury Regulations
Section 1.704-2(b)(3).

 

 

 

Officer

 

Officers shall have the meaning set forth in Section 5.3(a).

 

 

 

Operating Agreement

 

This Operating Agreement, as it may be amended from time to time.

 

 

 

Ownership Percentage

 

The ownership percentage represented by a Unit in each item of Net Income, Net
Loss and distributions expressed as a percentage of all outstanding Class A
Membership Units.

 

 

 

Person

 

An individual, corporation, partnership, limited liability company, association,
joint-stock company, trust, unincorporated organization, or a government or
political subdivision thereof.

 

 

 

Prime Rate

 

The prime or reference rate charged by major U.S. money center banks as listed
in the Money Rates column of The Wall Street Journal.

 

 

 

Proportionate Share

 

“Proportionate Share” shall have the meaning set forth in Section 4.2.

 

 

 

Regulatory Allocations

 

“Regulatory Allocations” shall have the meaning set forth in Section 6.4(g).

 

 

 

Release Condition

 

“Release Condition” shall have the meaning set forth in Section 3.6(f).

 

 

 

Release Date

 

“Release Date” shall have the meaning set forth in Section 3.6(f).

 

 

 

Securities Act

 

“Securities Act” shall have the meaning set forth in Section 3.6(b)(ii).

 

 

 

Series

 

“Series” shall have the meaning set forth in Section 2.1(b).

 

34

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Tag-Along Right

 

“Tag-Along Right” shall have the meaning set forth in Section 4.2.

 

 

 

Tax Matters Member

 

“Tax Matters Member” shall have the meaning set forth in Section 6.6(a).

 

 

 

Transaction

 

“Transaction” shall have the meaning set forth in Section 4.2.

 

 

 

Transaction Notice

 

“Transaction Notice” shall have the meaning set forth in Section 4.2.

 

 

 

Transfer

 

Or derivations thereof of an Interest means the sale, assignment, exchange,
pledge, hypothecation, or other disposition of an Interest.

 

 

 

Treasury Regulations

 

The Income Tax Regulations, including Temporary Regulations, promulgated under
the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations.

 

 

 

Units

 

“Units” shall have the meaning set forth in Section 2.1.  Except as otherwise
provided herein, each Unit shall share equally in all allocations of Net Income
and Net Loss and distributions.

 

 

 

UST

 

“UST” shall have the meaning set forth in Section 10.15.

 

ARTICLE X
MISCELLANEOUS PROVISIONS

 

10.1         Notices.

 

(a)           Any notice, notification, demand or request provided or permitted
to be given under this Operating Agreement must be in writing and will have been
deemed to have been properly given, unless explicitly stated otherwise, if sent
by (i) Federal Express or other comparable overnight courier, (ii) registered or
certified mail, postage prepaid, return receipt requested, or (iii) emailed to
the president of the recipient with confirmation of delivery.

 

(b)           For purposes of all notices, the addresses of the Members are set
forth on Exhibit A.

 

(c)           All notices, notifications, demands or requests so given will be
deemed given and received (i) if mailed, seven (7) days after being deposited in
the mail; (ii) if sent via overnight courier, the next Business Day after being
deposited; or (iii) if sent by email, the next Business Day after being emailed.

 

10.2         Application of Law.  This Operating Agreement and the application
or interpretation hereof, shall be governed exclusively by the laws of the State
of California, and specifically the Act.

 

35

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10.3         No Action for Partition.  No Member may maintain any action for
partition with respect to the property of the Company.

 

10.4         Headings and Sections.  The headings in this Operating Agreement
are inserted for convenience only and do not describe, interpret, define or
limit the scope, extent or intent of this Operating Agreement or any provision
hereof.  Unless the context requires otherwise, all references in this Operating
Agreement to Sections or Articles will be deemed to mean and refer to Sections
or Articles of this Operating Agreement.

 

10.5         Amendments.  Notwithstanding anything else contained in this
Operating Agreement, the Articles and this Operating Agreement may be amended,
supplemented or restated by approval of the Board; provided, however, that no
amendment may be adopted without the consent of all affected Members if the
amendment would (a) dilute the economic interests of the Member of any Class or
Series other than on a basis that is proportional to all Members of such
Class or Series, (b) obligate any Member to contribute additional capital beyond
the Capital Contributions provided herein without the consent of the
contributing member, or (c) change the Company to a general partnership.

 

10.6         Number and Gender.  Where the context so indicates, the masculine
includes the feminine and the neuter, the neuter includes the masculine and
feminine, and the singular includes the plural.

 

10.7         Binding Effect.  Except as herein otherwise provided to the
contrary, this Operating Agreement will be binding upon and inure to the-
benefit of the Members, their distributees, heirs, legal representatives,
executors, administrators, successors and assigns.

 

10.8         Counterparts.  This Operating Agreement may be executed in multiple
counterparts, each of which is considered an original and will be binding upon
the Member who executed the same, but all of such counterparts will constitute
the same agreement.

 

10.9         Severability.  If any provision of this Operating Agreement is held
to be illegal, invalid or unenforceable under present or future laws effective
during the term hereof, the legality, validity, and enforceability of the
remaining provisions of this Operating Agreement shall not be affected thereby,
and in lieu of such illegal, invalid, or unenforceable provision, there shall be
added automatically as a part of this Operating Agreement a provision as similar
in terms to such illegal, invalid, or unenforceable provision as may be legal,
valid, and enforceable.

 

10.10       Entire Agreement.  The Articles and this Operating Agreement
(a) constitute the entire agreement between the parties relating to the subject
matter hereof, and (b) supersede all previous contracts and agreements between
the parties hereto, both oral and written.  Neither this Operating Agreement nor
any Admission Agreement shall be construed to be a contract between the Company
and a Member regarding employment, the provision of services to the Company or
any other subject other than the terms set forth in this Operating Agreement or
any such Allocation Agreement.

 

10.11       Insurance.  The Company may purchase and maintain insurance on
behalf of any Person who is or was a Director, Officer, employee or agent of the
Company or who is or was

 

36

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serving at the request of the Company as a director, officer, partner, venturer,
proprietor, trustee, employee, manager, agent or similar functionary or another
Person against any liability.

 

10.12       Consultation Rights.  For as long as the Management Principals
continue to be employed on a full-time basis by the Company, and Management
Company is not in default of its obligations hereunder, the Management Company
shall have reasonable consultation rights with respect to Manhattan Bancorp
concerning matters affecting the Business and its development, including
reasonable access by the Management Principals to senior management of Manhattan
Bancorp and the ability to report directly to and consult with the board of
directors of Manhattan Bancorp at each regular meeting thereof.

 

10.13       Expenses.  The Company will pay all expenses and costs, including
reasonable attorneys’ and filing fees, incurred by Management Company, the
Management Principals, MB and Manhattan Bancorp in connection with the
negotiation and preparation of this Operating Agreement and the formation and
capitalization of the Company.

 

10.14       Arbitration Agreement.

 

(a)           Binding Arbitration.  Upon the request of either of the parties
hereto, whether made before or after the institution of any legal proceeding,
any action, dispute, claim or controversy of any kind (for example, whether in
contract or in tort, under statutory or common law, or legal or equitable), now
existing or hereafter arising between or among the parties in any way arising
out of, pertaining to or in connection with the Agreement, shall be resolved by
mandatory and binding arbitration in accordance with the terms of this
Section 10.14.  The occurrence of any of the foregoing matters shall be referred
to as a “Dispute.”  Any party to this Agreement may bring by summary proceedings
(for example, a plea in abatement or motion to stay further proceedings) an
action in court to compel arbitration of any Dispute.

 

(b)           Governing Rules.  All Disputes between the parties shall be
resolved by mandatory and binding arbitration administered by the American
Arbitration Association (“AAA”) pursuant to the Federal Arbitration Act (Title 9
of the United States Code) in accordance with this Agreement and the AAA’s
published Commercial Arbitration Rules, in effect on the date of this Agreement
(“AAA Commercial Arbitration Rules”).  If Title 9 of the United States Code is
inapplicable to any such claim or controversy for any reason, such arbitration
shall be conducted pursuant to the laws of the State of California and in
accordance with this Agreement and the AAA’s Commercial Rules.  To the extent
that any inconsistency exists between this Agreement and such rules, this
Agreement shall control.  Judgment upon the award rendered by the
arbitrator(s) may be entered in and enforced by any court having jurisdiction
and in accordance with the practice of such court.

 

(c)           No Waiver; Preservation of Remedies; No Punitive Damages;
Attorney’s Fees.  The institution and maintenance of an action for judicial
relief, pursuit of provisional or ancillary remedies, or exercise of self-help
remedies shall not constitute a waiver of the right of any party, including
without limitation the plaintiff, to submit any Dispute to arbitration nor
render inapplicable the compulsory arbitration provisions hereof.  Neither the
arbitrator nor any court shall have the authority to award punitive damages or
any other damages not measured by actual damages.  In Disputes each party agrees
that a party may proceed against all liable

 

37

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persons, or against one or more of them, being less than all, without impairing
rights against other liable persons.  A party may release or settle with one or
more liable persons as the party deems fit without releasing or impairing rights
to proceed against any persons not so released except to the extent that such
settlement eliminates or reduces the amount a party may recover from persons not
released by reason of the absence of several liability of the person not
released, the reduction in the amount of the loss suffered by the claimant as a
result of any recovery received in any settlement, or any other offset
recognized in law or equity.  The prevailing party in any arbitration proceeding
is entitled to the recovery of reasonable attorney’s fees and costs, including
without limitation arbitration filing fees, arbitrator’s fees and other
arbitration fees.  As used herein, “prevailing party” shall be that party which
the arbitrator has determined has successfully established its claim or defense
to a claim.

 

(d)           Arbitration Proceeding.  Except as otherwise provided for herein,
the laws of the State of California, including but not limited to the
confidentiality of communications in alternate dispute resolution proceedings,
that would otherwise be applicable shall apply in any arbitration proceeding. 
Any attorney-client privilege and other protection against a disclosure of
confidential information, including without limitation any protection afforded
the work-product of any attorney, that could otherwise be claimed by any party
shall be available to and may be claimed by any such party in any arbitration
proceeding.  No party waives any attorney-client privilege or any other
protection against disclosure of confidential information by reason of anything
contained in or done pursuant to or in connection with this Agreement.  Any
arbitration proceeding shall be conducted in Los Angeles, California, before a
single arbitrator.  If the parties cannot agree on an arbitrator to conduct the
arbitration proceeding within 30 calendar days of the date of the AAA’s notice
to the respondent of the filing of an arbitration proceeding under this
Agreement, then the arbitrator shall be selected pursuant to the provisions for
appointment of an arbitrator in the AAA’s Commercial Rules subject to the
qualifications and experience set forth herein, provided that the arbitrator
shall be required to be an attorney who has a minimum of fifteen years of
private practice experience in corporate law, including mergers and
acquisitions.

 

(e)           Confidentiality.  Any arbitration proceedings conducted pursuant
to this Agreement shall be confidential.  Without the written consent of all
parties to the arbitration, or unless otherwise required by law, no party
participant or the arbitrator may disclose the existence, content, or result of
any arbitration, including any information about the evidence adduced by any
other party in the arbitration proceeding or about documents produced by any
other party, except in the course of another judicial, regulatory, or
arbitration proceeding, or as may be requested by a Governmental Authority. 
Before making any disclosure permitted by the preceding sentence, the party
shall give the other party reasonable written notice of the intended disclosure
and afford the other party opportunity to protect its interests.  The
arbitrator, expert witnesses, and stenographic reporters shall sign appropriate
nondisclosure agreements.

 

10.15       CPP.  The Members acknowledge that Manhattan Bancorp is a
participant in the Troubled Assets Relief Program Capital Purchase Program
(“CPP”) established under the Emergency Economic Stabilization Act of 2008
(“EESA”).  Under EESA Manhattan Bancorp and its Affiliates, including the
Company, may be subject to certain limitations on their activities, including
the amounts which may be paid as compensation to certain senior executives and
other employees, and the structure of compensation plans and incentives. 
Additional

 

38

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requirements may be imposed under EESA by the U.S. Treasury Department (“UST”)
or subsequent legislation or regulations applicable to CPP participants at any
time.  The Company shall operate at all times in full compliance with EESA and
subsequent legislation or regulations applicable to CPP participants and the
regulations and guidance issued by the UST pursuant thereto to the extent they
apply to the Company, and the Members agree to comply and to cause any Indirect
Investors in the Company to comply with all requirements thereof to the extent
they apply to the Members or such Indirect Investors.

 

[Signature page follows]

 

39

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The undersigned, being all of the initial Members of the Company, do hereby
ratify, confirm and approve the adoption of this Agreement as the Limited
Liability Company Operating Agreement of the Company, and for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, do
hereby assume and agree to be bound by and to perform all of the terms and
provisions set forth in this Operating Agreement.

 

 

MEMBERS:

 

 

 

MBFS HOLDINGS, INC.,

 

a California corporation

 

 

 

 

 

 

By:

/s/ Deepak Kumar

 

 

Name:

Deepak Kumar

 

 

Title:

President/CEO

 

 

 

 

 

 

BODI ADVISORS INC.,

 

a California corporation

 

 

 

 

 

 

 

By:

/s/ Ted Dahlke

 

 

Name:

Ted Dahlke

 

 

Title:

President

 

40

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EXHIBIT A

 

MEMBERS’ CAPITAL CONTRIBUTIONS

 

Name and Address

 

Capital
Contribution

 

Class A
Membership Units

 

Class B
Membership Units

 

 

 

 

 

 

 

 

 

MBFS Holdings, Inc.
2141 Rosecrans
Avenue, Suite 1160,
El Segundo, CA
90245

 

$

7.00

 

700,000

 

0

 

 

 

 

 

 

 

 

 

Bodi Advisors Inc.
5023 North Parkway
Calabasas,
Calabasas, CA
91302

 

$

3.00

 

300,000

 

166,667

 

 

--------------------------------------------------------------------------------

 

EXHIBIT B

 

INITIAL EMPLOYEE EQUITY SCHEDULE

 

Shareholders

 

Shares

 

 

 

 

 

Greg Jacobson

 

2,340

 

Tad Dahlke

 

1,550

 

Hal Hermelee

 

1,550

 

David Cassan

 

600

 

Kent Usell

 

600

 

Matthew Kennedy

 

600

 

David Smith

 

600

 

Russell Hossain

 

600

 

Peter Harrison

 

600

 

Dan Baruch

 

600

 

Paul Jacob

 

300

 

TOTAL

 

9,940

 

 

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EXHIBIT C

 

MANAGEMENT COMPANY BUY-SELL AGREEMENT

 

--------------------------------------------------------------------------------

 

EXHIBIT D

 

FORM OF NON-COMPETITION AGREEMENT

 

NON-COMPETITION AND NON-SOLICITATION AGREEMENT

 

This Non-Competition and Non-Solicitation Agreement (this “Agreement”) is dated
as of [                ], by and between [              ] (“Shareholder”) and
BODI Advisors, Inc., a California corporation (“Management Company”), Manhattan
Capital Markets LLC, a California limited liability company (“Company”), MBFS
Holdings, Inc., a California corporation formerly named MB Financial
Services, Inc. (“MB”), and Manhattan Bancorp, a California corporation
(“Manhattan Bancorp”).

 

RECITALS

 

A.            Shareholder is a stockholder, director and executive officer of
Management Company and a director and executive officer of Company;

 

B.            Management Company is the owner of a substantial equity interest
in Company (the “Company Interest”).  MB is also the owner of a substantial
equity interest in the Company, and Manhattan Bancorp is the owner of MB;

 

C.            Pursuant to Sections 4.2, 4.3, and 4.4 of the operating agreement
of the Company, dated as of October 1, 2009 (“Company Operating Agreement”),
Management Company has been granted both certain rights and assumed certain
obligations to include the Company Interest in a sale by MB of its interests in
the Company or to have the Company Interest purchased by MB upon a Change in
Control of MB or Manhattan Bancorp (a “Transaction”);

 

D.            Under Section 4.4(c) of the Company Operating Agreement,
Shareholder has agreed to execute and deliver this Agreement, and to perform his
obligations hereunder, upon a Transaction.

 

E.             By virtue of the Transaction, the Company will obtain a
substantial economic benefit.  Substantially all of the assets of the Management
Company consist of the Company Interest.  Shareholder is, in turn, a substantial
shareholder in Management Company and will receive substantial economic benefit
from Management Company’s sale of the Company Interest.

 

F.             In order to induce MB to enter into the Company Operating
Agreement and acquire an interest in the Company, and to induce any acquirer of
MB or Manhattan Bancorp or the Company Interest in connection with the
Transaction, and to minimize the risk that the acquirer will lose the benefit of
the goodwill and other assets being directly or indirectly acquired by it, the
Shareholder has agreed to restrict his activities in accordance with the terms
and conditions of this Agreement;

 

NOW, THEREFORE, in consideration of the promises, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereby

 

1

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agree as follows:

 

AGREEMENT

 

1.             Covenant Not To Compete.  For a period of 18 months from the
later of (a) closing (“Closing”) of a Change in Control (as defined in the
Company Operating Agreement), and (b) termination of Shareholder’s employment by
the Company (the “Non-Compete Period”), the Shareholder shall not, directly or
indirectly, including without limitation as an officer, director, proprietor,
employee, independent contractor, partner, member, investor, guarantor,
consultant, advisor, agent, sales representative or other participant, engage in
or assist with any activity which is the same as, similar to or competitive with
the Company’s Business (as defined in the Company Operating Agreement), in any
state in the United States in which the Company or an affiliate thereof, during
the immediately prior 3-year period, has been or at the time of the Closing is,
engaged, or, in the case of mortgage brokerage activities only, the State of
California.  The Shareholder understands the foregoing restrictions may limit
his abilities to engage in certain business during the Non-Compete Period;
however, Shareholder also acknowledges and agrees that he will receive
sufficiently high remuneration and other benefits under the Operating Agreement
to justify these restrictions.

 

2.             Non-Solicitation.

 

2.1           Employees/Contractors/Consultants.  During the 18 months following
the termination of Shareholder’s employment with the Company, whether during or
after the Non-Compete Period, (the “Post Employment Period”), Shareholder shall
not directly or indirectly induce, solicit, recruit, or encourage or attempt to
induce, solicit, recruit, or encourage any person then employed (whether
part-time or full-time) by the Company or an affiliate (which term shall include
any acquirer of the Company or MB or Manhattan Bancorp or their affiliates)
thereof or any person employed (whether part-time or full-time) by the Company
or an affiliate thereof within the prior year, whether as an officer, employee,
independent contractor, consultant or advisor, to leave such employ of the
Company or an affiliate thereof, to cease providing or otherwise alter the
services then provided to the Company or an affiliate thereof; provided, that
such restriction shall not prevent Shareholder or any business with which
Shareholder is affiliated, from hiring or retaining any such person that
contacts Shareholder respecting employment without having been directly or
indirectly induced, solicited, recruited or encouraged in any way by Shareholder
or any business with which Shareholder is affiliated.

 

2.2           Customers.  During the Post-Employment Period, the Seller and the
Shareholder shall not solicit or encourage any Customer of the Company or an
affiliate thereof to use the facilities or services of any competitor of the
Company or an affiliate thereof.  “Customer” shall mean any person or entity to
whom the Company provides goods or services or any person or entity with whom
the Company has attempted to or is attempting to enter into a business
relationship for the purpose of providing goods or services related to the
Business.

 

3.             Separate Covenants.  The terms and provisions of the covenants
contained in Sections 1 and 2 above are intended to be separate and divisible
provisions and if, for any reason, any one or more of the sections or
subsections are held to be invalid or unenforceable, the validity or the
enforceability of any other provision of this Agreement shall not thereby be

 

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affected.  If, in any judicial proceeding, a court shall refuse to enforce any
of the separate covenants (or any part thereof) contained in Sections 1 and 2
then such unenforceable covenants (or any such part) shall be deemed eliminated
from this Agreement for the purpose of those proceedings to the extent necessary
to permit the remaining separate covenants (or portions thereof) to be enforced.

 

3.1           Reformation.  Each party hereto acknowledges that the potential
restrictions on Shareholder’s future activities imposed by the covenants in
Sections 1 and 2 are reasonable in both duration and scope and in all other
respects.  In the event that the provisions of Sections 1 or 2 should ever be
deemed to exceed the duration or scope permitted by applicable law, then such
provisions shall be reformed to the maximum time, scope or other limitation, as
the case may be, permitted by applicable law, and each party agrees that the
restrictions and prohibitions contained herein shall be effective to the fullest
extent allowed under applicable law in such jurisdiction.

 

3.2           Specific Performance.  Shareholder acknowledges that it would be
impossible to determine the amount of damages that would result from any breach
of any of the provisions of Sections 1 or 2 and that the remedy at law for any
breach, or threatened breach, of any of such provisions would likely be
inadequate and, accordingly, agrees that the Company, MB, Manhattan Bancorp or
an affiliate thereof shall, in addition to any other rights or remedies which
they may have at law or in equity, be entitled to seek such equitable and
injunctive relief as may be available from any court of competent jurisdiction
to restrain the Shareholder from violating any of such provisions of this
Agreement.  In connection with any action or proceeding for such equitable or
injunctive relief, the Shareholder hereby waives any claim or defense that a
remedy at law alone is adequate and agree, to the maximum extent permitted by
law, to have each such provision of Sections 1 and 2 specifically enforced
against Shareholder, without the necessity of posting bond or other security,
and consent to the entry of equitable or injunctive relief against them
enjoining or restraining any breach or threatened breach of any of the
provisions of Sections 1 or 2.

 

4.             Miscellaneous.

 

4.1           Amendment; Waiver.  This Agreement shall not be amended, altered
or modified in any manner whatsoever, except by a written instrument executed by
the parties hereto.  No waiver of any breach or default hereunder shall be
considered valid unless in writing and signed by the party giving such waiver,
and no such waiver shall be deemed a waiver of any subsequent breach of the same
or similar nature.

 

4.2           Governing Law.  This Agreement shall be deemed to be made in and
in all respects shall be interpreted, construed and governed by and in
accordance with the laws of the State of California, without regard to the
conflict of law principles thereof.

 

4.3           Jurisdiction.  Any legal action or proceeding with respect to this
Agreement may be brought in the courts of the State of California in the County
of Los Angeles or of the United States of America for the Central District of
California and, by execution and delivery of this Agreement, each of the parties
hereby accepts for themselves and in respect of their property, generally and
unconditionally, the jurisdiction of the aforesaid courts.  Each of the

 

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parties irrevocably consents to the service of process out of any of the
aforementioned courts in any such action or proceeding by the delivery of notice
as provided in Section 4.4 below, such service to become effective thirty (30)
days after such delivery.

 

4.4           Notices.  Any notice or other communication required or permitted
under this Agreement shall be in writing and shall be deemed to have been given
(i) if personally delivered, when so delivered, (ii) if mailed, one week after
having been placed in the United States mail, registered or certified, postage
prepaid, addressed to the party to whom it is directed at the address listed
below or (iii) if given by facsimile, when the notice is transmitted to the
facsimile number specified below, and the appropriate answerback or telephonic
confirmation is received:

 

If to Shareholder:

 

Greg Jacobson
5023 North Parkway Calabasas, 2nd Floor
Calabasas, California 91302
Facsimile: (818) 876-7394

 

 

 

If to the Company or MB:

 

Manhattan Bancorp
Attention: President
2141 Rosecrans Avenue, Suite 1160
El Segundo, California 90245
Facsimile: (310) 606-8090

 

4.5           Entire Agreement.  This Agreement constitutes the entire agreement
of the parties hereto with reference to the transactions contemplated hereby and
supersede all other prior agreements, understandings, representations and
warranties, both written and oral, between the parties or their respective
representatives, agents or attorneys, with respect to the subject matter hereof.

 

4.6           Parties In Interest.  This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and their respective
successors, assigns, estate, heirs, executors, administrators and other legal
representatives, as the case may be.  Nothing in this Agreement, express or
implied, is intended to confer upon any other person or entity, other than
parties hereto and their respective successors, assigns, estate, heirs,
executors, administrators and other legal representatives, as the case may be,
any rights, remedies, obligations or liabilities under or by reason of this
Agreement.

 

4.7           Assignment.  This Agreement shall not be assignable by law or
otherwise without the prior written consent of the other parties hereto;
provided, however, that the Company or MB or Manhattan Bancorp or an affiliate
thereof may assign any of its rights and obligations hereunder to any of its
affiliates or to any other entity which may acquire all or substantially all of
the assets, shares or business of the Company, MB, Manhattan Bancorp or any of
its affiliates or any entity with or into which the Company or any of their
affiliates may be consolidated or merged.

 

4.8           Compliance.  The failure to insist upon strict compliance with any
provision of this Agreement or the failure to assert any right that any party
may have hereunder

 

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shall not be deemed to be waiver of such provision or right or any other
provision or right of this Agreement.

 

4.9           Advice of Counsel.  EACH OF THE PARTIES ACKNOWLEDGES THAT, IN
EXECUTING THIS AGREEMENT, THEY HAVE HAD THE OPPORTUNITY TO SEEK THE ADVICE OF
INDEPENDENT LEGAL COUNSEL, AND HAVE READ AND UNDERSTOOD ALL OF THE TERMS AND
PROVISIONS OF THIS AGREEMENT.  THIS AGREEMENT SHALL NOT BE CONSTRUED AGAINST ANY
PARTY BY REASON OF THE DRAFTING OR PREPARATION HEREOF.

 

4.10         Headings.  The section headings herein are for convenience of
reference only, do not constitute part of this Agreement and shall not be deemed
to limit or otherwise affect any of the provisions hereof.

 

4.11         Severable Provisions.  The provisions of this Agreement are
separate and distinct, and if any provisions are determined to be unenforceable,
in whole or in part, the remaining provisions, and the enforceable parts of any
partially unenforceable provisions, shall nevertheless be enforceable.

 

4.12         Counterparts.  This Agreement may be executed in one or more
counterparts (including by facsimile), each of which shall be deemed to be an
original, but all of which shall constitute one and the same instrument.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.

 

 

 

 

 

[                          ], Individually

 

 

 

 

 

 

 

BODI ADVISORS, INC.

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

 

MBFS HOLDINGS, INC.

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

MANHATTAN CAPITAL MARKETS, LLC

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

 

MANHATTAN BANCORP

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

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