Document:

ttii8kx10_01.htm

/Letterhead/

Confidential

TREE TOP INDUSTRIES, INC.

TO

GEOGREEN BIOFUELS, INC.

Bridge Term Loan Sheet

_____________________________________

GEOGREEN BIOFUELS, INC. (“GeoGreen”) STOCK:

 

	
  
	
1.
	
Current Capitalization:

        A.    Authorized.........................40,000,000 shares of common stock, $ .01 par value per share (“Geo Stock”).

                B.     Issued/outstanding..............Approximately 34,200,000 shares of Geo Stock.

	
  
	
2.
	
Paid-in-Capital:

	
  
	
A.
	
Approximate net of $6,000,000.

	
  
	
B.
	
$2.1 million of additional debt.

	
  
	
GEOGREEN REQUIREMENTS:

	
  
	
1.
	
Cash Requirements:

        A.    Immediate Cash Requirement:     $95,657.00 per month (see attachment).

        B.    Subsequent Capital Requirement (approx):   $5,000,000.00

                C.    The forgoing amounts referenced in 1(A) are to be advanced by TTI biweekly, and any portion of such budgeted amount not so advanced for the specific purpose at such time may be reapplied to other commitments 

                        of GeoGreen as GeoGreen shall determine to be appropriate, subject only to the reasonable consent of TTI, which shall not be unreasonably withheld.

 

1

 

	
  
	
2.
	
GeoGreen Board Actions to be Taken:

	
  
	
A.
	
Resolution to issue a secured promissory note (the “Note”) to Tree Top Industries, Inc. (“TTI”) in the amount of Three Hundred Eighty Four Thousand Dollars ($384,000), plus 10% interest accruing quarterly on so much of the amount as may then have been advanced from time to time (first payment March 31, 2010).  The Note shall be due and payable upon the earlier of (i) Four (4) months from the date
of issuance of the Note or (ii) the consolidation, merger or sale of all or substantially all of the assets or equity of GeoGreen or sale of Treasury stock of the Corporation.  The Note shall be secured by all of the assets of GeoGreen (the “Collateral”).   The Note shall be junior to an existing secured loan from Go4zGelt, LLC.  In the event GeoGreen requires additional funds not provided for in the attached budget, GeoGreen, with TTI’s agreement, may amend
the Note in order to increase the principal.  Any and all increases in the principal shall also be secured by the Collateral. Such amendment shall occur only upon the advance of additional funds to GeoGreen by TTI (each, an “Additional Advance”). An Additional Advance, if any, shall be only with the joint agreement of TTI and GeoGreen and shall be for the purpose of covering additional expenses of GeoGreen that are not provided for in the attached budget or as TTI and GeoGreen shall have
otherwise agreed in writing.

	
  
	
B.
	
Resolution to authorize and hire new corporate counsel for the Company (“Counsel”), subject to the approval of TTI.  Until the Note, as amended, has been paid in full by GeoGreen, the work done by Counsel shall be only done with the prior approval of GeoGreen and TTI.  TTI will advance the cost of services performed by Counsel.  All such advances shall be treated as Additional Advances,
as described above (unless otherwise paid for from the recovery in that action as set forth in Section 2(D).

 

	
  
	
C.
	
Resolution to grant TTI a right of first refusal to acquire GeoGreen in the event GeoGreen positions itself for acquisition. GeoGreen shall provide written notice ("Notice") to IITT upon its receipt of a bona fide purchase

	
  
	
 
	
offer from a third party (including any Board member) for all or substantially all of its assets or outstanding capital (an “Offer”). Such notice shall be placed in the mail within five (5) days.  The Notice shall include the material terms of the Offer and shall incorporate documentation of the financial ability of the applicable third party to complete the Offer.  The Notice shall be delivered to
TTI by US Mail-RRR.  Upon receipt of the Notice, TTI shall have fifteen (15) days to exercise its right of first refusal on the terms described in the Notice (the “Exercise”).  TTI shall inform GeoGreen in writing, within the said fifteen-day period, regarding its Exercise and at the same time shall provide documentation of its financial ability to complete the Offer.  The period in which the Offer is to be closed with TTI, as described in the Notice may be extended by
joint agreement of TTI and GeoGreen. The right of first refusal shall extend until the repayment in full of the Note, or the entry into a transaction by GeoGreen and TTI, as a result of which the Note will be paid at closing.

 

 

2

 

	
  
	
D.
	
Resolution to cause management to instruct Counsel, with the consent of TTI, to initiate immediate litigation against all of the parties who have defaulted in their performance of various agreements they have entered into with GeoGreen, including, but not limited to, Simbiotec, Green Horizons, SRS Engineering and SMC Grease. The proceeds of each lawsuit shall go first to pay any outstanding legal fees and costs associated
with it, with any remaining balance to be deposited into the existing GeoGreen general account.

	
  
	
E.
	
Resolution to authorize Greg Forrest to raise capital in an amount of up to Five Million Dollars ($5,000,000), in conjunction with TTI (the “Raise”).  Ninety percent (90%) of the proceeds of the Raise shall be for the purpose of completing construction of the final plant and pretreatment facility (the “Facility”), funding the initial six (6) months of operation of the Facility and the
pretreatment facility.  The remaining ten percent (10%) of the proceeds of the Raise shall be used for the development of BioEnergy Applied Technologies Inc.’s technology by TTI. All costs and expenses provided for in this respect shall be apportioned pro-rata accordingly.

	
  
	
F.
	
Resolution to authorize an independent third party evaluation of the Facility and the requirements for its completion by a recognized expert in the field.

 

 

 

3

 

 

	
  
	
G.
	
Resolution to authorize the hiring of Eric Lauzon by Director Fred Baumann for a period of one month as his independent contractor, to perform an analysis of the current state and condition of the Facility and the specific requirements needed to fulfill the business plan as it currently exists. A copy of the final report of Mr. Lauzon’s findings, along with all the related documents, shall be provided to all of
GeoGreen’s Directors and TTI immediately upon its completion. At the conclusion of the one-month period, Mr. Baumann shall have no further obligation to retain Mr. Lauzon on behalf of GeoGreen, or to provide any further reports beyond what has been prepared by Mr. Lauzon at the conclusion of that period. GeoGreen shall give good faith consideration to retaining Mr. Lauzon after this period.

 

 

        3. GeoGreen Shareholder Actions to be taken:

                A.      Each of the major shareholders present at the meeting of the Board shall execute an agreement that prohibits the sale by such shareholder of any shares of their GeoGreen until April 1, 2010, provided that TTI is 

                           not in default of any obligations under this Agreement.

 

                B.      Notwithstanding Section 3.A. above, Greg Forest shall be permitted to sell up to 500,000 shares of GeoGreen Stock.  Such sale shall be subject to a right of first refusal by TTI in the form described in Section

                          2.C. above, except that the notice period shall be reduced to forty-eight (48) hours.

        4. GeoGreen Rights and Restrictions

                A.      GeoGreen shall retain the right to independently raise capital.   However, any such capital raise by GeoGreen that involves the issuance of GeoGreen Stock shall be subject to a right of first refusal by TTI, in the form 

                          described in Section 2.C. above.

 

 

4

 

                B.      GeoGreen may accept a third party stock-for-stock exchange offer for substantially all of the outstanding shares of GeoGreen (an “Exchange”).  If GeoGreen agrees to enter into an Exchange on or before April 1, 2010, 

                          then TTI shall be entitled to:

 

                           1-Provided that TTI shall have in escrow at that time the sum of $5,000,000 as provided herein, reimbursement of actual expenses or obligations incurred by TTI related to the transactions contemplated herein up to a 

                           total aggregate amount of $500,000.00. If not in escrow, then TTI shall be entitled to up to $100,000.00 in reimbursement. TTI shall be required to produce documentation of the actual loss or obligation to GeoGreen, 

                           including, without limitation, receipts, purchase orders, contracts, or other documents reflecting the expense or obligation.

 

                           2-An additional 15 days of time to exercise its right of first refusal as described in Section 2.C. above.

 

                           3-TTI shall be held harmless against liability arising from TTI’s good faith actions as the authorized agent of GeoGreen for the purpose of renegotiating the debts or obligations of GeoGreen.

 

                 C.      Subject to the applicable laws of the State of California and the United States, the Board shall not voluntarily elect to place GeoGreen into bankruptcy or any similar proceeding prior to April 1, 2010.

        5. Temporary Operational Requirements

 

                 A.      RavenPaul shall provide accounting and administrative assistance to GeoGreen.
Such assistance shall be provided without charge by Raven Beeso, except where she is required to use the services of other employees of 

                           her accounting firm, which shall be charged at their published hourly rates. A new checking account shall be established at Chase Bank, for the purpose of
receiving advances from TTI, upon which only R.A. Beeso 

                           shall be authorized, and issue checks.

 

 

 

5

 

 

                 B.       GeoGreen’s staff will be reduced in number and aggregate compensation, as
shown in the attached budget.

                 C.       TTI and GeoGreen will take all reasonably necessary actions in order
to complete to the Raise and to carry out the purposes of this Agreement. Including without limitation the signing of such documents as may be 

                            required to carry out the intentions of the Agreement.

                 D.       GeoGreen shall continue to service existing accounts and attempt to obtain
new accounts.

 

Respectfully submitted this 11th day of January, 2010, and effective as of December 1, 2009

TREE TOP INDUSTRIES, INC.

By:______________________________         By:______________________________

     David I. Reichman, Chairman & CEO               Kathy M. Griffin, President

The Board of Directors of Geo Green Biofuels having met this day, unanimously Agreed and consented to this 11th day of January, 2010.

GEO GREEN BIOFUELS, Inc.

By:___________________________           By:_________________________________

     Greg Forrest, Chairman & CEO.                     Fred Baumann, Director

By:___________________________          By:_______________________________

       Ned Kasouff, Director                                    Raven Beeso, Director

By:___________________________

       Peter Castro, Director

Witnesseth:__________________________

                      William Nelson, Esq

  

6Unassociated Document

      Exhibit 4.1

    
     

    RESTATED
OPERATING AGREEMENT

    OF

    IMH
SECURED LOAN FUND, LLC

    A
DELAWARE LIMITED LIABILITY COMPANY

    

    THIS OPERATING AGREEMENT (this
“Agreement”) was made and entered into as of the 15th day of
May, 2003, as restated as of the 30th day of
March, 2006, by and among Investors Mortgage Holdings, Inc., an Arizona
corporation (the “Manager” and, in its capacity as a member of the Company, the
“Initial Member”), and all Persons who may become members of the Company from
time to time in accordance herewith, (the “Members”), and IMH Secured Loan Fund,
LLC, a Delaware limited liability company (the “Company”).

    

    WITNESSETH

    

    WHEREAS, the Company was formed
pursuant to a Certificate of Formation, which was executed by the Manager and
filed in the office of the Secretary of State of the State of Delaware on May
14, 2003, and an Operating Agreement, dated May 15, 2003;

    

    WHEREAS,
pursuant to Section 15.4 of the Operating Agreement, the Manager possesses the
power to amend the Operating Agreement provided such amendment does not
adversely affect the rights of the Members; and

    

    WHEREAS,
the Manager deems it advisable to restate the Operating Agreement in accordance
with the terms and conditions set forth herein;

    

    NOW, WHEREFORE, in consideration for
the mutual agreements, covenants and premises set forth herein, the Operating
Agreement is hereby adopted:

    

    ARTICLE
1

    ORGANIZATION
OF THE LIMITED LIABILITY COMPANY

    

    1.1  Formation. The Initial
Member caused the formation of the Company on May 14, 2003 under the provisions
of the Delaware Statutes.

    

    1.2  Name. The name of the
Company is IMH Secured Loan Fund, LLC.

    

    1.3  Place of Business. The
principal place of business of the Company is located at 4900 N. Scottsdale
Road, Suite 5000, Scottsdale, AZ 85251, until the Manager changes it after
giving the Members notice. In addition, the Company may maintain such other
offices and places of business in the United States as the Manager may deem
advisable. The Manager will file all necessary or desirable documents to permit
the Company to conduct its business lawfully in any state or territory of the
United States.

    

    1.4  Purpose. The primary
purpose of the Company is to generate earnings and cash flow and to distribute
the same to the Members. The Company will invest in or purchase Mortgage
Investments, and do all things reasonably related thereto, including developing,
managing and either holding for investment or disposing of real property
acquired through foreclosure or by other means, either directly or through
general partnerships or other joint ventures, all as further provided for in
this Agreement.

    

    1.5  Certificate of
Formation. The Company’s Certificate of Formation, has been duly executed,
acknowledged and filed with the Office of the Secretary of State of the State of
Delaware under the provisions of the Delaware Statutes. The Manager is
authorized to execute and cause to be filed additional Certificates of Amendment
of the Certificate of Formation whenever required by the Delaware Statutes or
this Agreement.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
 

    1.6  Term of Existence. The
Company’s existence began on May 14, 2003 and is perpetual, unless earlier
terminated under the provisions of this Agreement or by operation of
law.

    

    1.7  Power of Attorney. Each
of the Members irrevocably constitutes and appoints the Manager as his true and
lawful attorney-in-fact, with full power and authority for him, and in his name,
place and stead, to execute, acknowledge, publish and file:

    

    
      	
               
      

            	
              1.7.1

            	
              This
      Agreement, the Certificate of Formation, as well as any and all amendments
      thereto required under the laws of the State of Delaware or of any other
      state, or which the Manager deems advisable to prepare, execute and
      file;

            

    

    

    
      	
               
      

            	
              1.7.2

            	
              Any
      certificates, instruments and documents, including, without limitation,
      fictitious business name statements, as may be required to be filed by the
      Company by any governmental agency or by the laws of any state or other
      jurisdiction in which the Company is doing or intends to do business, or
      which the Manager deems advisable to file;
and

            

    

    

    
      	
               
      

            	
              1.7.3

            	
              Any
      documents which may be required to effect the continuation of the Company,
      the admission of an additional or substituted Member, or the dissolution
      and termination of the Company, provided that the continuation, admission,
      substitution or dissolution or termination, as applicable, is in
      accordance with the terms of this
Agreement.

            

    

    

    1.8  Nature of Power of
Attorney. The grant of authority in Section 1.7:

    

    
      	
               
      

            	
              1.8.1

            	
              Is
      a Special Power of Attorney coupled with an interest, is irrevocable,
      survives the death of the Member and shall not be affected by the
      subsequent incapacity of the
Member;

            

    

    

    
      	
               
      

            	
              1.8.2

            	
              May
      be exercised by the Manager for each member by a facsimile signature of or
      on behalf of the Manager or by listing all of the members and by executing
      any instrument with a single signature of or on behalf of the Manager,
      acting as attorney-in-fact for all of them;
and

            

    

    

    
      	
               
      

            	
              1.8.3

            	
              Shall
      survive the delivery of an assignment by a Member of the whole or any
      portion of his Interests; except that where the assignee thereof has been
      approved by the Manager for admission to the Company as a substituted
      Member, the Special Power of Attorney shall survive the delivery of the
      assignment for the sole purpose of enabling the person to execute,
      acknowledge, and file any instrument necessary to effect the
      substitution.

            

    

    
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    ARTICLE
2

    DEFINITIONS

    

    The terms set forth in this Article 2
shall, for all purposes of this Agreement, have the following
meanings:

    

    2.1  Acquisition and
Investment Evaluation Expenses means expenses including but not limited to legal
fees and related expenses, travel, communication, appraisal, accounting fees and
expenses, title company charges, and other expenses related to the evaluation,
selection and acquisition of Mortgage Investments, whether or not
acquired.

    

    2.2  Acquisition and
Investment Evaluation Fees means the total of all fees and commissions paid by
any Person when purchasing or investing in Mortgage Investments. Included in the
computation of these fees or commissions shall be any selection fee, mortgage
placement fee, non-recurring management fee, and any evaluation fee, loan fee,
or points paid by borrowers to the Manager, or any fee of a similar nature,
however designated.

    

    2.3  Administrator means the
agency or official administering the securities law of a state in which units
are registered or qualified for offer and sale.

    

    2.4  Affiliate means, with
respect to any Person, (a) any person directly or indirectly controlling,
controlled by or under common control with the Person, (b) any other Person
owning or controlling ten percent (10%) or more of the outstanding voting
securities of the Person, (c) any officer, director or Member of the Person, or
(d) if the other Person is an officer, director or Manager, any company for
which the Person acts in any similar capacity.

    

    2.5  Agreement means this
Operating Agreement, as amended from time to time.

    

    2.6  Capital Account means,
for any Member, the Capital Account maintained for the Member in accordance with
the following provisions:

    

    
      	
            	
              2.6.1

            	
              The
      Manager shall credit to each Member’s Capital Account the Member’s Capital
      Contribution, the Member’s distributive share of Profits (Net
      Distributable Earnings), any items in the nature of income or
      gain  that are specially allocated to a Member, and the amount
      of any Company liabilities that are assumed by the Member or that are
      secured by any Company property distributed to the
  Member.

            

    

    

    
      	
               
      

            	
              2.6.2

            	
              The
      Manager shall debit from each Member’s Capital Account the amount of cash
      and the Gross Asset Value of any Company property distributed to the
      Member under any provision of this Agreement, the Member’s distributive
      share of Losses, and any items in the nature of expenses or losses that
      are specially allocated to a Member and the amount of any liabilities of
      the Member that are assumed by the Company or that are secured by any
      property contributed by the Member to the
  Company.

            

    

    

    If the Gross Asset Value of a Company
asset is adjusted as a result of a Writedown, the Manager shall concurrently
adjust the Capital Accounts of all Members to reflect the aggregate net
adjustment that would have occurred if the Company had recognized Losses equal
to the Writedown Amount and the Losses were allocated under Article
7.

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    If any interest in the Company is
transferred in accordance with Section 10.2 of this Agreement, the transferee
shall succeed to the Capital Account of the transferor to the extent it relates
to the transferred interest.

    

    The foregoing provisions and the other
provisions of this Agreement relating to the maintenance of Capital Accounts are
intended to comply with Regulation Section 1.704-1(b), and shall be interpreted
and applied in a manner consistent with the Regulation. If the Manager
determines that it is prudent to modify the manner in which the Capital
Accounts, or any debits or credits thereto, are computed in order to comply with
the then existing Regulations, the Manager may make the modification, provided
that it is not likely to have a material effect on the amounts distributable to
any Member under Articles 7 and 12 of this Agreement. The Manager shall adjust
the amounts debited or credited to Capital Accounts for (a) any property
contributed to the Company or distributed to the Manager, and (b) any
liabilities that are secured by the contributed or distributed property or that
are assumed by the Company or the Manager, if the Manager determines the
adjustments are necessary or appropriate under Regulation 1.704-1(b)(2)(iv). The
Manager shall make any appropriate modification if unanticipated events might
otherwise cause this Agreement not to comply with Regulation 1.704-1(b) as
provided for in Sections 7.7 and 15.4.

    

    2.7  Capital Contribution
means the total contributions to the capital of the Company made by a Member (i)
in cash, or (ii) by way of automatic reinvestment of Company distributions (or
deemed distributions). “Initial Capital Contribution” means the amount paid in
cash by each Member with his original subscription for an acquisition of units
of the Company under the Memorandum plus, in the case of the Manager, any amount
contributed pursuant to Section 5.1.

    

    2.8  Capital Transaction
means (i) the repayment of principal or prepayment of a Mortgage Investment,
including deemed repayments of Mortgage Investments or other dispositions
thereof, to the extent classified as a return of capital under the Code, (ii)
the foreclosure, sale, exchange, condemnation, eminent domain taking or other
disposition under the Code of a Mortgage Investment or Real Property subject to
a Mortgage Investment, or (iii) the payment of insurance or a guarantee for a
Mortgage Investment.

    

    2.9  Code means the Internal
Revenue Code of 1986, as amended from time to time, and corresponding provisions
of subsequent revenue laws.

    

    2.10  Company means IMH
Secured Loan Fund, LLC, the Delaware limited liability company to which this
Agreement pertains.

    

    2.11  Deed(s) of Trust means
the lien(s) created on the Real Property of borrowers securing their respective
obligations to the Company to repay Mortgage Investments, whether in the form of
a deed of trust, mortgage or otherwise.

    

    2.12
Delaware Statutes means the Delaware laws with respect to limited liability
companies, as amended from time to time, unless indicated to the contrary by the
context.

    

    2.13
Direct Expenses means IMH management fees, activity in the loan loss reserve
account, and costs associated with defaulted loans, foreclosure activities, and
property we have acquired through foreclosure.

    

    2.14
Earning Asset Base means the Mortgage Investments held by the Fund and property
acquired through foreclosure, upon which income is being accrued under generally
accepted accounting principles.

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
 

    2.15  Fiscal Year means,
subject to the provisions of Section 706 of the Code and Section 9.5.1, (i) the
period commencing on the date of formation of the Company and ending on December
31, 2003 (ii) any subsequent 12-month period on January 1 and ending on December
31 and (iii) the period commencing January 1 and ending on the date on which all
Company assets are distributed to the Members under Article 12.

    

    2.16  Front-End Fees means
any fees and expenses paid by any party for any services rendered to organize
the Company and to acquire assets for the Company, including Organization and
Offering Expenses, Acquisition and Investment Evaluation Expenses and
Acquisition and Investment Evaluation Fees, and any other similar fees, however
designated by the Company.

    

    2.17  Gross Asset Value
means, for any Company asset, the following:

    

    
      	
               
      

            	
              2.17.1

            	
              The
      initial Gross Asset Value of any Company asset at the time that it is
      contributed by a Member to the capital of the Company shall be an amount
      equal to the fair market value of the Company asset (without regard to
      Code Section 7701(g)), as determined by the contributing Member and the
      Manager;

            

    

    

    
      	
               
      

            	
              2.17.2

            	
              The
      Gross Asset Value of any Company asset acquired other than by being
      contributed by a Member shall be the amount paid or invested by the
      Company in exchange for the asset;

            

    

    

    
      	
               
      

            	
              2.17.3

            	
              The
      Gross Asset Values of all Company assets distributed to a Member shall be
      adjusted, as determined by the distributee Member and the Manager, to
      equal their respective fair market values upon the distribution to a
      Member by the Company of more than a de minimis amount of Company assets
      (other than money), unless all Members simultaneously receive
      distributions of undivided interests in the distributed Company assets in
      proportion to their respective Capital
Accounts;

            

    

    

    
      	
               
      

            	
              2.17.4

            	
              The
      Gross Asset Values of all Company assets shall be adjusted to equal their
      respective fair market values (as determined by the Manager, in its
      reasonable discretion) upon the termination of the Company for Federal
      income tax purposes under Code Section 708(b)(1)(B);
  and

            

    

    

    
      	
               
      

            	
              2.17.5

            	
              The
      Gross Asset Value of a Company asset shall be adjusted in the case of a
      Writedown of the Company asset in accordance with Sections 2.45, 2.46 and
      7.8.

            

    

    

    2.18  Independent Expert
means a Person with no material current or prior business or personal
relationship with the Manager, who is engaged to a substantial extent in the
business of rendering opinions regarding the value of assets of the type held by
the Company, and who is qualified to perform the services.

    

    2.19  Interests means the
interests of a Member in the Company as a member, representing such Member’s
rights, powers and privileges as specified in this Agreement. A Member’s
Interests may be expressed as a number of Units.

    

    2.20  Majority means any
group of Members who together hold more than 50% of the total outstanding
Interests of the Company as of a particular date (or if no date is specified, as
of the beginning of the first day of the then current calendar
month).

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
 

    2.21  Manager means Investors
Mortgage Holdings, Inc., an Arizona corporation, in that capacity, or any Person
replacing Investors Mortgage Holdings, Inc. under this Agreement. Investors
Mortgage Holdings, Inc., in its capacity as the Initial Member, is a distinct
entity from the Manager for purposes of this Agreement unless the context should
indicate to the contrary.

    

    2.22
Member means an owner of units in the Company who has acquired the units and
become a member or substitute member pursuant to Section 5.2 or Article 10 of
this Agreement, or as the Initial Member.

    

    2.23
Members’ Equity means the excess of total assets over total liabilities as
determined by generally accepted accounting principles.

    

    2.24  Memorandum means the
May 2003 Private Placement Memorandum of the Company offering the units for
sale, or as updated from time to time.

    

    2.25  Mortgage Investment(s)
means the Mortgage Loan(s) or an interest in the Mortgage Loans.

    

    2.26  Mortgage Loans means
notes, bonds and other evidences of indebtedness or obligations that are
negotiable or non-negotiable and secured or collateralized by Deeds of Trust on
Real Property.

    

    2.27  NASAA Guidelines means
the Mortgage Program Guidelines of the North American Securities Administrators
Association, Inc. adopted on September 10, 1996, as amended from time to time
unless indicated to the contrary by the context.

    

    2.28  Net
Distributable Earnings means net income computed in accordance with generally
accepted accounting principles, adjusted for activity in the loan loss reserve
account.

    

    2.29  Net Proceeds means the
net cash proceeds (or deemed net proceeds) from any Capital
Transaction. 

    

    2.30  Offering means the
offer and sale of units of the Company made under the Memorandum.

    

    2.31  Organization and
Offering Expenses means those expenses incurred in connection with the Offering
of units in the Company pursuant to the Memorandum and paid or owed to a
non-related third party. Such Organization and Offering Expenses include fees
paid to attorneys, brokers, accountants, and any other charges incurred in
connection with the Offering pursuant to the Memorandum and will be paid by the
Manager.

    

    2.32
Person means any natural person, partnership, corporation, unincorporated
association or other legal entity.

    

    2.33 Plan
means the Reinvestment Plan described in Article 8 of this
Agreement.

    

    2.34  Profits and Losses
mean, for each Fiscal Year or any other period, an amount equal to the Company’s
taxable income or loss for the Fiscal Year or other given period, determined in
accordance with Code Section 703(a) (for this purpose, all items of income,
gain, loss, or deduction required to be stated separately under Code Section
703(a)(1) shall be included in taxable income or loss), with the following
adjustments (without duplication):

    

    
      	
               
      

            	
              2.34.1

            	
              Any
      income of the Company that is exempt from federal income tax and not
      otherwise taken into account in computing Profits or Losses under this
      section shall be added to the taxable income or
  loss;

            

    

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
 

    
      	
               
      

            	
              2.34.2

            	
              Any
      expenditures of the Company described in Section 705(a)(2)(B) of the Code
      or treated as Section 705(a)(2)(B) of the Code expenditures under
      Regulation 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in
      computing Profits or Losses under this section, shall be subtracted from
      the taxable income or loss.

            

    

    

    
      	
               
      

            	
              2.34.3

            	
              In
      the event the Gross Asset Value of any Company asset is adjusted as
      required by the definition of Gross Asset Value, the amount of that
      adjustment shall be taken into account as gain or loss from the
      disposition of that asset (assuming the asset was disposed of just prior
      to the adjustment) for purposes of computing Profits or Losses in the
      Fiscal Year of adjustment;

            

    

    

    
      	
               
      

            	
              2.34.4

            	
              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 Basis of that property may differ
      from its Gross Asset Value;

            

    

    

    
      	
               
      

            	
              2.34.5

            	
              Depreciation,
      amortization and other cost recovery deductions taken into account in
      computing the taxable income or loss shall be based on the Gross Asset
      Value of an asset; and

            

    

    

    
      	
               
      

            	
              2.34.6

            	
              Any
      items of income, gain, loss or deduction that are specially allocated
      pursuant to Sections 7.5.1 through 7.5.5 hereof shall not be taken into
      account in computing Profits or
Losses.

            

    

    

    2.35  Program means a limited
or general partnership, limited liability company, limited liability
partnership, trust, joint venture, unincorporated association or similar
organization other than a corporation formed and operated for the primary
purpose of investing in mortgage loans.

    

    2.36  Purchase Price means
the price paid upon or in connection with the purchase of a mortgage, but
excludes points and prepaid interest.

    

    2.37  Real Property means and
includes (a) land and any buildings, structures, and improvements, and (b) all
fixtures, whether in the form of equipment or other personal property, that is
located on or used as part of land. Real Property does not include Deeds of
Trust, mortgage loans or interests therein.

    

    2.38  Regulations means,
except where the context indicates otherwise, the permanent, temporary,
proposed, or proposed and temporary regulations of the U.S. Department of the
Treasury under the Code, as the regulations may be lawfully changed from time to
time.

    

    2.39  Reinvested
Distributions means units purchased under the Company’s Plan (as defined in
Article 8 of this Agreement).

    

    2.40  Roll-Up means a
transaction involving the acquisition, merger, conversion, or consolidation,
either directly or indirectly, of the Company and the issuance of securities of
a Roll-Up Entity. “Roll-Up” does not include a transaction involving (i)
securities of the Company, if any, listed on a national securities exchange or
quoted on the Nasdaq National Market for 12 months or (ii) conversion to
corporate, trust, limited liability company, or association form of only the
Company if, as a consequence of the transaction, there will be no significant
adverse change in any of the following: (a) Members’ voting rights; (b) the term
of existence of the Company; (c) Manager compensation; (d) the Company’s
investment objectives.

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
 

    2.41  Roll-Up Entity means a
company, real estate investment trust, corporation, limited liability company,
limited or general partnership or other entity that would be created or would
survive after the successful completion of a proposed Roll-Up.

    

    2.42  Sponsor means any
Person (a) directly or indirectly instrumental in organizing, wholly or in part,
a Program, or a Person who will manage or participate in the management of a
Program, and any Affiliate of any Person, but does not include a Person whose
only relation with a Program is that of an independent property manager or other
provider of services (such as attorneys, accountants or underwriters), whose
only compensation is received in that capacity, or (b) is a “Sponsor” as
otherwise defined in the NASAA Guidelines.

    

    2.43  Subscription Agreement
means the document that is an exhibit to and part of the Memorandum that every
Person who buys Units of the Company must execute and deliver with full payment
for the Units and which, among other provisions, contains the written consent of
each Member to the adoption of this Agreement.

    

    2.44  Units mean the units of
equity in the Company evidencing the Company’s Interests that are (a) issued to
Members upon their admission to the Company under the Subscription Agreement and
the Memorandum; or (b) issued to Members under the Company’s Plan; or (c)
transferred to those who become substituted Members under Section 10.2 hereof.
The Manager may purchase Units on the same basis as other Members.

    

    2.45  Writedown means a
determination by the Manager for a particular Company asset that under generally
accepted accounting principles the asset on the Company’s books is impaired and
the carrying value of the asset exceeds the net realizable value of the asset at
the time the determination is made.

    

    2.46  Writedown Amount means
the amount by which, at the time that a Writedown is determined, the carrying
amount of an asset exceeds its net realizable value.

     

    ARTICLE
3

    THE
MANAGER

    

    3.1  Control by Manager.
Subject to the provisions of Section 3.2 and except as otherwise expressly
stated elsewhere in this Agreement, the Manager has exclusive control over the
business of the Company (with all acts and decisions being in its sole
discretion except as specifically set forth in this Agreement), including the
power to assign duties, to determine how to invest the Company’s assets, to sign
bills of sale, title documents, leases, notes, security agreements, Mortgage
Investments and contracts, and to assume direction of the business operations.
As Manager of the Company and its business, the Manager has all duties generally
associated with that position, including dealing with Members, being responsible
for all accounting, tax and legal matters, performing internal reviews of the
Company’s investments and loans, determining how and when to invest the
Company’s capital, and determining the course of action to take for Company
loans that are in default. The Manager also has all of these powers for
ancillary matters. Without limiting the generality of the foregoing, the powers
include the right (except as specifically set forth in this Agreement, including
under Section 3.2):

    

    
      	
               
      

            	
              3.1.1

            	
              To
      evaluate potential Company investments and to expend the capital of the
      Company in furtherance of the Company’s
  business;

            

    

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
 

    
      	
               
      

            	
              3.1.2

            	
              To
      acquire, hold, lease, sell, trade, exchange, or otherwise dispose of all
      or any portion of Company property or any interest therein at a price and
      upon the terms and conditions as the Manager may deem
    proper;

            

    

    

    
      	
               
      

            	
              3.1.3

            	
              To
      cause the Company to become a joint venturer, general or limited partner
      or member of an entity formed to own, develop, operate and dispose of
      properties owned or co-owned by the Company acquired through foreclosure
      of a Mortgage Loan or by other
means;

            

    

    

    
      	
               
      

            	
              3.1.4

            	
              To
      manage, operate and develop Company property, or to employ and supervise a
      property manager who may, or may not, be an Affiliate of the
      Manager;

            

    

    

    
      	
               
      

            	
              3.1.5

            	
              To
      repay in whole or in part, refinance, increase, modify, or extend, any
      obligation, affecting the Company;

            

    

    

    
      	
               
      

            	
              3.1.6

            	
              To
      employ from time to time, at the expense of the Company, persons,
      including the Manager or its Affiliates, required for the operation of the
      Company’s business, including employees, agents, independent contractors,
      brokers, accountants, attorneys, and others; to enter into agreements and
      contracts with persons on terms and for compensation that the Manager
      determines to be reasonable; and to give receipts, releases, and
      discharges for all of the foregoing and any matters incident thereto as
      the Manager may deem advisable or appropriate; provided, however, that any
      agreement or contract between the Company and the Manager or between the
      Company and an Affiliate of the Manager shall contain a provision that the
      agreement or contract may be terminated by the Company without penalty on
      sixty (60) days’ written notice and without advance notice if the Manager
      or Affiliate who is a party to the contract or agreement resigns or is
      removed under the terms of this
Agreement;

            

    

    

    
      	
               
      

            	
              3.1.7

            	
              To
      maintain, at the expense of the Company, adequate records and accounts of
      all operations and expenditures and furnish the Members with annual
      statements of account as of the end of each calendar year, together with
      all necessary tax-reporting
information;

            

    

    

    
      	
               
      

            	
              3.1.8

            	
              To
      purchase, at the expense of the Company, liability and other insurance to
      protect the property of the Company and its
  business;

            

    

    

    
      	
               
      

            	
              3.1.9

            	
              To
      refinance, recast, modify, consolidate, extend, purchase at a discount or
      permit the assumption of any Mortgage Loan or other investment owned by
      the Company;

            

    

    

    
      	
               
      

            	
              3.1.10

            	
              To
      pay all expenses incurred in the operation of the
  Company;

            

    

    

    
      	
               
      

            	
              3.1.11

            	
              To
      lend money to the Company in accordance with the conditions set forth in
      Section 5.4;

            

    

    

    
      	
               
      

            	
              3.1.12

            	
              To
      file tax returns on behalf of the Company and to make any and all
      elections available under the Code;

            

    

    

    
      	
               
      

            	
              3.1.13

            	
              To
      modify, delete, add to or correct from time to time any provision of this
      Agreement as permitted under Section 15.4
  hereof.

            

    

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
 

    3.2  Limitations on Manager’s
Authority. The Manager has no authority to:

    

    
      	
               
      

            	
              3.2.1

            	
              Do
      any act in contravention of this
Agreement;

            

    

    

    
      	
               
      

            	
              3.2.2

            	
              Do
      any act which would make it impossible to carry on the ordinary business
      of the Company;

            

    

    

    
      	
               
      

            	
              3.2.3

            	
              Confess
      a judgment against the Company;

            

    

    

    
      	
               
      

            	
              3.2.4

            	
              Possess
      Company property or assign the rights of the Company in property for other
      than a Company purpose;

            

    

    

    
      	
               
      

            	
              3.2.5

            	
              Admit
      a person as a Manager without the prior affirmative vote or consent of a
      Majority, or any higher vote as may be required by applicable
      law;

            

    

    

    
      	
               
      

            	
              3.2.6

            	
              Voluntarily
      withdraw as Manager without the prior affirmative vote or consent of a
      Majority unless its withdrawal would neither affect the tax status of the
      Company nor materially adversely affect the Members (subject to any delay
      in effectiveness of the withdrawal as set forth elsewhere
      herein);

            

    

    

    
      	
               
      

            	
              3.2.7

            	
              Sell
      all or substantially all of the assets of the Company in one or a series
      of related transactions that is not in the ordinary course of business,
      without the prior affirmative vote or consent of a
    Majority;

            

    

    

    
      	
               
      

            	
              3.2.8

            	
              Amend
      this Agreement without the prior affirmative vote or consent of a
      Majority, except as permitted by Section 15.4 of this
      Agreement;

            

    

    

    
      	
               
      

            	
              3.2.9

            	
              Dissolve
      or terminate the Company without the prior affirmative vote or consent of
      a Majority;

            

    

    

    
      	
               
      

            	
              3.2.10

            	
              Cause
      the merger or other reorganization of the Company without the prior
      affirmative vote or consent of a
Majority;

            

    

    

    
      	
               
      

            	
              3.2.11

            	
              Grant
      to the Manager or any of its Affiliates an exclusive right to sell any
      Company assets;

            

    

    

    
      	
               
      

            	
              3.2.12

            	
              Receive
      or permit the Manager or any Affiliate of the Manager to receive any
      insurance brokerage fee or write any insurance policy covering the Company
      or any Company property;

            

    

    

    
      	
               
      

            	
              3.2.13

            	
              Commingle
      the Company’s assets with those of any other
  Person;

            

    

    

    
      	
               
      

            	
              3.2.14

            	
              Use
      or permit another Person to use the Company’s assets in any manner, except
      for the exclusive benefit of the
Company;

            

    

    

    
      	
               
      

            	
              3.2.15

            	
              Pay
      or award, directly or indirectly, any commissions or other compensation to
      any Person engaged by a potential investor for investment advice as an
      inducement to the advisor to advise the purchase of units; provided,
      however, that this clause shall not prohibit the payment of Sales
      Commissions;

            

    

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
 

    
      	
               
      

            	
              3.2.16

            	
              Make
      loans to the Manager or an Affiliate of the Manager;
  or

            

    

    

    
      	
               
      

            	
              3.2.17

            	
              Pay,
      directly or indirectly, a commission or fee (except as otherwise set forth
      in Article 14 hereof) to the Manager or any Affiliate of the Manager in
      connection with the reinvestment or distribution of the proceeds of a
      Capital Transaction.

            

    

    

    3.3  Right to Purchase
Receivables and Loans. As long as the requirements of Article 4 are met and the
Company adheres to the investment policy described in the Memorandum, the
Manager, in its sole discretion, may at any time, but is not obligated
to:

    

    
      	
               
      

            	
              3.3.1

            	
              Purchase
      from the Company the interest receivable or principal on Mortgage Loans
      held by the Company;

            

    

    

    
      	
               
      

            	
              3.3.2

            	
              Purchase
      from a senior lien holder the interest receivable or principal on mortgage
      loans senior to Mortgage Loans held by the Company;
  and/or

            

    

    

    
      	
               
      

            	
              3.3.3

            	
              Use
      its own monies to cover any other costs associated with Mortgage Loans
      held by the Company such as property taxes, insurance and legal
      expenses.

            

    

    

    3.4  Extent of Manager’s
Obligation and Fiduciary Duty. The Manager shall devote the portion of its time
to the business of the Company as it determines, in good faith, to be reasonably
necessary to conduct the Company’s business. The Manager shall not be bound to
devote all of its business time to the affairs of the Company, and the Manager
and its Affiliates may engage for their own account and for the account of
others in any other business ventures and employments, including ventures and
employments having a business similar or identical or competitive with the
business of the Company. The Manager has fiduciary responsibility for the
safekeeping and use of all funds and assets of the Company, whether or not in
the Manager’s possession or control, and the Manager will not employ, or permit
another to employ the Company’s funds or assets in any manner except for the
exclusive benefit of the Company. The Manager will not allow the assets of the
Company to be commingled with the assets of the Manager or any other Person. The
Company shall not permit a Member to contract away the fiduciary duty owed to
any Member by the Manager under common law. The Manager, for so long as it owns
any units as a Member, hereby waives its right to vote its units and to have
them considered as outstanding in any vote for removal of the Manager or for
amendment of this Agreement (except as provided in Sections 3.1.12 and 15.4) or
otherwise.

    

    3.5  Liability and
Indemnification of Manager. Any right to indemnification hereunder shall be
subject to the following:

    

    
      	
               
      

            	
              3.5.1.

            	
              The
      Company shall not indemnify the Manager for any liability or loss suffered
      by the Manager, nor shall the Manager be held harmless for any loss or
      liability suffered by the Company, unless all of the following conditions
      are met:

            

    

    

    a. the
Manager has determined, in good faith, that the course of conduct which caused
the loss or liability was in the best interest of the Company;

    

    b. the Manager was acting on behalf of
or performing services for the Company;

    

    c. such
liability or loss was not the result of the negligence or misconduct by the
Manager; and

    

    d. such
indemnification or agreement to hold harmless is recoverable only out of the
assets of the Company and not from the Members.

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
 

    
      	
               
      

            	
              3.5.2.

            	
              Notwithstanding
      anything to the contrary contained in Section 3.5.1, the Manager (which
      shall include Affiliates only if such Affiliates are performing services
      on behalf of the Company) and any Person acting as a broker-dealer shall
      not be indemnified for any losses, liabilities or expenses arising from an
      alleged violation of federal or state securities laws unless the following
      conditions are met:

            

    

    

    a. there
has been a successful adjudication on the merits of each count involving alleged
securities law violation as to the particular indemnitee; or

    

    b. such
claims have been dismissed with prejudice on the merits by a court of competent
jurisdiction as to the particular indemnitee; or

    

    c. a
court of competent jurisdiction has approved a settlement of the claims against
a particular indemnitee and has determined that indemnification of the
settlement and related costs should be made; and

    

    d. in the
case of subparagraph c of this paragraph, the court of law considering the
request for indemnification has been advised of the position of the Securities
and Exchange Commission and the position of any state securities regulatory
authority in which securities of the Company were offered or sold as to
indemnification for violations of securities laws; provided that the court need
only be advised of and consider the positions of the securities regulatory
authorities of those states:

    

    (1)           which
are specifically set forth in the Company agreement; and

    

    
      	
               
      

            	
              (2)

            	
              in
      which plaintiffs claim they were offered or sold Company
      Interests.

            

    

     

    
      	
               
      

            	
              3.5.3.

            	
              The
      Company may not incur the cost of that portion of liability insurance
      which insures the Manager for any liability as to which the Manager is
      prohibited from being indemnified under this
  subsection.

            

    

    

    
      	
               
      

            	
              3.5.4.

            	
              Providing
      an advance from Company funds to the Manager or its Affiliates for legal
      expenses and other costs incurred as a result of any legal action is
      permissible if the following conditions are
  satisfied:

            

    

    

    a. the
legal action relates to acts or omissions with respect to the performance of
duties or services on behalf of the Company;

    

    b. the
legal action is initiated by a third party who is not a Member, or the legal
action is initiated by a Member and a court of competent jurisdiction
specifically approves such advancement; and

    

    c. the
Manager or its Affiliates undertake to repay the advanced funds to the Company
in cases in which such Person is not entitled to indemnification under paragraph
1 of this section 3.5.

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
 

    3.6 Payment of Expenses by
Manager.  The Manager may at any time and from time to time pay any
expense of the Company that is chargeable to the Company pursuant to any
provision of this Agreement. The Manager is under no obligation to do so, and
any payment of such expenses at any time does not obligate the Manager to pay
the same or any other expense in the future.

    

    3.7  Assignment by the
Manager. The Manager’s Interests in the Company may be assigned at the
discretion of the Manager, subject to Section 10.1.

    

    3.8  Removal of Manager. The
Manager may be removed upon the following conditions:

    

    
      	
               
      

            	
              3.8.1

            	
              The
      Members may remove the Manager by written consent or vote of a Majority
      (excluding any Interests of the Manager being removed). This removal of
      the Manager, if there is no other Manager, shall not become effective for
      at least 120 days following the consent or vote of the
      Majority.

            

    

    

    
      	
               
      

            	
              3.8.2

            	
              During
      the 120 day period described in Section 3.8.1, the Majority (excluding any
      Interests of the removed Manager) shall have the right to agree in writing
      to continue the business of the Company and, within six months following
      the termination date of the last remaining Manager, elect and admit a new
      Manager(s) who agree(s) to continue the existence of the
      Company.

            

    

    

    
      	
               
      

            	
              3.8.3

            	
              Substitution
      of a new Manager, if any, shall be effective upon written acceptance of
      the duties and responsibilities of a Manager by the new Manager. Upon
      effective substitution of a new Manager, this Agreement shall remain in
      full force and effect, except for the change in the Manager, and business
      of the Company shall be continued by the new Manager. The new Manager
      shall thereupon execute, acknowledge and file a certificate of amendment
      to the Certificate of Formation of the Company in the manner required by
      Section 26.221 of the Delaware Law.

            

    

    

    
      	
               
      

            	
              3.8.4

            	
              Failure
      of a Majority to designate and admit a new Manager within the time
      specified herein shall dissolve the Company, in accordance with the
      provisions of Article 12 of this
Agreement.

            

    

    

    3.9  Right to Rely on
Manager. Any person dealing with the Company may rely (without duty of further
inquiry) upon a certificate signed by the Manager as to:

    

    
      	
               
      

            	
              3.9.1

            	
              The
      identity of the Manager or any
Member;

            

    

    

    
      	
               
      

            	
              3.9.2

            	
              The
      existence or non-existence of any fact or facts which constitute a
      condition precedent to acts by the Manager or which are in any further
      manner germane to the affairs of the
Company;

            

    

    

    
      	
               
      

            	
              3.9.3

            	
              The
      persons who are authorized to execute and deliver any instrument or
      document of the Company; and

            

    

    

    
      	
               
      

            	
              3.9.4

            	
              Any
      act or failure to act by the Company or any other matter whatsoever
      involving the Company or any
Member.

            

    

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
 

    3.10  Transfer
of the Control of the Manager. A sale or transfer of a controlling interest in
the Manager will not terminate the Company or be considered the withdrawal or
resignation of the Manager. By majority vote, the Company may terminate the then
Manager’s interest in the Company by paying an amount equal to the then-present
fair market value of such Manager’s interest in the Company, determined as set
forth in Section 11.5.

    

    3.11  Amendment
to the Manager’s Duties. Any amendment to this Operating Agreement modifying the
rights and/or duties of the Manager shall require the Manager’s written
consent.

    

    ARTICLE
4

    INVESTMENT
AND OPERATING POLICIES

    

    4.1  Commitment of Capital
Contributions. The Manager shall take all reasonable steps to commit
ninety-seven percent (97%) of Capital Contributions to Mortgage Loans. The
Company may invest in or purchase Mortgage Loans of such duration and on such
real property and with such additional security as the Manager in its sole
discretion shall determine, subject to Section 4.2

    

    4.2  Investment Policy. In
making investments, the Manager shall follow the investment policy described in
the Memorandum.

    

    ARTICLE
5

    CAPITAL
CONTRIBUTIONS; LOANS TO COMPANY

    

    5.1  Capital Contribution by
Manager. The Manager (in its capacity as the Initial Member) shall contribute to
the capital of the Company such amount as it deems appropriate.

    

    5.2  Contributions of Other
Members. Members other than the Manager shall acquire units in accordance with
the terms of the Subscription Agreement or any future subscription materials
approved by the Manager. The names, addresses, date of admissions and Capital
Contributions of the Members shall be set forth in Schedule A maintained by the
Manager. The Manager shall update the Schedule A to reflect the then-current
ownership of units (and Interests) without any further need to obtain the
consent of any Member, and the Schedule A, as revised from time to time by the
Manager, shall be presumed correct absent manifest error. Any member shall have
a right to inspect such schedule upon written request to the
Manager.

    

    5.3  Interest. No interest
shall be paid on, or in respect of, any Capital Contribution by any Member, nor
shall any Member have the right to demand or receive cash or other property in
return for the Member’s Capital Contribution, subject to Article 11
hereof.

    

    5.4  Loans. The Manager or
any of its Affiliates may, or any Member or Affiliate of a Member may, with the
written consent of the Manager, lend or advance money to the Company. If any
such persons shall make any loans to the Company or advance money on its behalf,
the amount of any loan or advance shall not be treated as a contribution to the
capital of the Company, but shall be a debt due from the Company. Any loans made
by the Manager shall conform to NASAA Guidelines. The amount of any loan or
advance by the Manager or its Affiliate, or a Member or an Affiliate of a Member
shall be repayable out of the Company’s cash and shall bear interest at a rate
of not in excess of the lesser of (i) the prime rate published, from time to
time, by The Wall Street Journal, plus five percent (5%) per annum, or (ii) the
maximum rate permitted by applicable law. The inability of the Company to obtain
more favorable loan terms shall be a condition to obtaining such loans from the
Manager or its Affiliate or a Member or Affiliate of a Member. None of the
Members or their Affiliates, nor the Manager or its Affiliates, shall be
obligated to make any loan or advance to the Company. This section shall be
subject to the Company’s Investment Policy as it relates to transactions with
the Manager or its Affiliates.

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
 

    ARTICLE
6

    VOTING
AND OTHER RIGHTS OF MEMBERS

    

    6.1  No Participation in
Management. Except as expressly provided in this Agreement, no Member shall take
part in the conduct or control of the Company’s business or have any right or
authority to act for or bind the Company.

    

    6.2  Rights and Powers of
Members. In addition to the rights of the Members to remove and replace the
Manager pursuant to Section 3.8, and as otherwise provided for in Section 3.2,
the Members shall have the right to vote upon and take any of the following
actions upon the approval of a Majority, without the concurrence of the Manager,
and an affirmative vote of a Majority shall be required to allow or direct the
Manager to:

    

    
      	
               
      

            	
              6.2.1

            	
              Dissolve
      and windup the Company before the expiration of the term of the
      Company;

            

    

    

    
      	
               
      

            	
              6.2.2

            	
              Amend
      this Agreement, subject to the rights to the Manager granted in Section
      15.4 of this Agreement and subject also to the prior consent of the
      Manager if either the distributions due to the Manager or the duties of
      the Manager are affected;

            

    

    

    

    
      	
               
      

            	
              6.2.3

            	
              Merge
      the Company or sell all or substantially all of the assets of the Company,
      otherwise than in the ordinary course of its
  business.

            

    

    

    
      	
               
      

            	
              6.2.4

            	
              Change
      the nature of the Company’s
business;

            

    

    

    
      	
               
      

            	
              6.2.5

            	
              Elect
      to continue the business of the Company other than in the circumstances
      described in Section 3.8 of this
Agreement.

            

    

    

    6.3  Meetings.

    

    
      	
               
      

            	
              6.3.1

            	
              The
      Members may hold meetings of Members within or outside the State of
      Delaware at any place selected by the Person or Persons calling the
      meeting. If no other place is stated, meetings shall be held at the
      Company’s principal place of business as established in accordance with
      Section 1.3 of this Agreement. The Members may approve by written consent
      of a Majority any matter upon which the Members are entitled to vote at a
      duly convened meeting of the Members, which consents will have the same
      effect as a vote held at a duly convened meeting of the
      Members.

            

    

    

    
      	
               
      

            	
              6.3.2

            	
              The
      Manager, or Members representing more than ten percent (10%) of the
      outstanding Interests for any matters on which the Members may vote, may
      call a meeting of the Company. If Members representing the requisite
      Interests present to the Manager a statement requesting a Company meeting,
      or the Manager calls the meeting, the Manager shall fix a date for a
      meeting and shall (within ten (10) days after receipt of a statement, if
      applicable) give personal or mailed notice or notice by any other means of
      written communication, addressed to each Member at the respective address
      of the Member appearing on the books of the Company or given to the
      Company for the purpose of notice, not less than fifteen (15) or more than
      sixty (60) days before the date of the meeting, to all Members of the
      date, place and time of the meeting and the purpose for which it has been
      called. Unless otherwise specified, all meetings of the Company shall be
      held at 2:00 p.m. local time at the principal office of the
      Company.

            

    

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
 

    
      	
               
      

            	
              6.3.3

            	
              Members
      may vote in person or by proxy. A Majority, whether present in person or
      by proxy, shall constitute a quorum at any meeting of Members. Any
      question relating to the Company which may be considered and acted upon by
      the Members may be considered and acted upon by vote at a Company meeting,
      and any vote required to be in writing shall be deemed given if approved
      by a vote by written ballot.

            

    

    

    6.4  Limited Liability of
Members. Units are non-assessable. No Member shall be personally liable for any
of the expenses, liabilities, or obligations of the Company or for any Losses
beyond the amount of the Member’s Capital Contribution to the Company and the
Member’s share of any undistributed net income and gains of the
Company.

    

    6.5  Access to Books and
Records. Upon 5 business days advance written notice to the Manager, the Members
and their designated representatives shall have access to books and records of
the Company during the Company’s normal business hours. An alphabetical list of
the names, addresses and business telephone numbers, to the extent such are
available, of all Members together with the number of units held by each of them
will be maintained as a part of the books and records of the Company. The
Company shall make the list available on request to any Member or his
representative for a stated purpose including, without limitation, matters
relating to Members’ voting rights, tender offers, and the exercise of Members’
rights under federal proxy law. A copy of the Members list shall be mailed to
any Member requesting it within ten business days of the request, although the
Company may charge a reasonable amount for the copy work. The Member list shall
be updated at least quarterly to reflect changes in the information contained
therein.

    

    If the Manager neglects or refuses to
exhibit, produce or mail a copy of the Member list as requested, the Manager
shall be liable to any Member requesting the list for the costs, including
attorney fees, incurred by that Member for compelling the production of the
list, and for actual damages suffered by the Member by reason of the refusal or
neglect. However, the Company need not exhibit, produce or mail a copy of the
Member list if the actual purpose and reason for the request therefor is to
secure the list or other information for the purpose of selling the list or
copies thereof, or of using it for a commercial purpose other than in the
interest of the Person as a Member in the Company. The Manager may require the
Person requesting the list to represent that the list is not requested for any
commercial purpose. The remedies provided hereunder to Members requesting copies
of the list are in addition to, and shall not in any way limit, other remedies
available to Members under federal or Delaware law.

    

    6.6  Representation of
Company. Each of the Members hereby acknowledges and agrees that the attorneys
representing the Company and the Manager and its Affiliates do not represent and
shall not be deemed under the applicable codes of professional responsibility to
have represented or be representing any or all of the Members in any respect at
any time. Each of the Members further acknowledges and agrees that the attorneys
shall have no obligation to furnish the Members with any information or
documents obtained, received or created in connection with the representation of
the Company, the Manager and its Affiliates.

     

    
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    ARTICLE
7

    PROFITS
AND LOSSES; CASH DISTRIBUTIONS

    

    7.1  Allocation of Profits
and Losses. The Manager shall credit all Company Profits to and charge all
Company Losses against the Members in proportion to their respective Interests.
The Manager shall allocate to the Members all Profits and Losses realized by the
Company during any month as of the close of business on the last day of each
calendar month, in accordance with their respective Interests and in proportion
to the number of days during the month that they owned the Interests (i.e., a
weighted average Capital Account), without regard to Profits and Losses realized
for time periods within the month.

    

    7.2  Net Distributable
Earnings . The Company shall distribute Net Distributable Earnings to Members
according to the allocations provided for in Section 7.1, in cash to those
Members who have on file with the Company their written election to receive cash
distributions, as a pro rata share of the total Net Distributable Earnings. The
Company shall make these distributions monthly in proportion to the weighted
average Capital Account of each Member during the preceding calendar
month.

    

    7.3  Net Proceeds. Net
Proceeds may also be distributed to Members in cash at such time or times as the
Manager shall determine, in the Manager’s sole discretion, or be retained by the
Company for other uses as set forth herein. The Company may use Net Proceeds to
make new loans, improve or maintain properties acquired by the Company through
foreclosure or to pay operating expenses. Distributions of Net Proceeds shall be
in accordance with the allocations provided for in Section 7.1
above.

    

    7.4  Cash Distributions Upon
Dissolution. Upon dissolution and winding up of the Company, the Company shall
thereafter distribute Net Distributable Earnings and Net Proceeds available for
distribution, if any, to the Members in accordance with the provisions of
Section 12.3 of this Agreement.

    

    7.5  Special Allocation
Rules.

    

    
      	
               
      

            	
              7.5.1

            	
              Minimum
      Gain Chargeback. Except as otherwise provided in Regulation section
      1.704-2(f), notwithstanding any other provision of this Article 7, 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 Regulation 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 Regulation section 1.704-2(f)(6) and 1.704-2(j)(2). This Section
      7.5.1 is intended to comply with the minimum gain chargeback requirement
      in Regulation section 1.704-2(f) and shall be interpreted consistently
      therewith.

            

    

    

    
      	
               
      

            	
              7.5.2

            	
              Member
      Minimum Gain Chargeback. Except as otherwise provided in Regulation
      section 1.704-2(i)(4), notwithstanding any other provision of this Article
      7, 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 Regulation 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, determined in accordance with
      Regulation 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 Regulation sections 1.704-2(i)(4)
      and 1.704-2(j)(2). This Section 7.5.2 is intended to comply with the
      minimum gain chargeback requirement in Regulation section 1.704-2(i)(4) of
      the Regulations and shall be interpreted consistently
      therewith.

            

    

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
 

    
      	
               
      

            	
              7.5.3

            	
              Nonrecourse
      Deductions. Nonrecourse Deductions for any Fiscal Year shall be specially
      allocated to the Members in proportion to their respective
      Units.

            

    

    

    
      	
               
      

            	
              7.5.4

            	
              Member
      Nonrecourse Deductions. Any Member Nonrecourse Deductions for any Fiscal
      Year shall be specially allocated to the Member who bears the economic
      risk of loss with respect to the Member Nonrecourse Debt to which such
      Member Nonrecourse Deductions are attributable in accordance with
      Regulation section 1.704-2(i)(1).

            

    

    

    
      	
               
      

            	
              7.5.5

            	
              Code
      Section 754 Adjustments. 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 Regulation sections
      1.704-1(b)(2)(iv)(m)(2) or 1.704-1(b)(2)(iv)(m)(4), to be taken into
      account in determining Capital Accounts as the result of a distribution to
      a Member in complete liquidation of such Member’s Interest in the Company,
      the amount of such adjustment to Capital Accounts shall be treated as an
      item of gain (if the adjustment increases the basis of the asset) or loss
      (if the adjustment decreases such basis), and such gain or loss shall be
      specially allocated to the Members in accordance with their interests in
      the Company in the event Regulation section 1.704-1(b)(2)(iv)(m)(2)
      applies, or to the Member to whom such distribution was made in the event
      Regulation section 1.704-1(b)(2)(iv)(m)(4)
  applies.

            

    

    

    
      	
               
      

            	
              7.5.6

            	
              No
      allocation of Loss (or items thereof) shall be made to any Member to the
      extent that such allocation would create or increase a deficit in such
      Member’s Capital Account (as determined after debiting such Capital
      Account for the items described in Regulations Section
      1.704-1(b)(2)(ii)(d)(4),(5) and (6) and crediting such Capital Account for
      any amounts that such Partner is obligated to restore or is deemed
      obligated to restore pursuant to Treasury Regulations Section
      1.704-2).

            

    

    

    
      	
               
      

            	
              7.5.7

            	
              For
      purposes of determining the Profits, Losses, Net Distributable Earnings or
      any other items allocable to any period, these other items shall be
      determined on a daily, monthly, or other basis, as determined by the
      Manager using any permissible method under Section 706 of the Code and the
      Regulations thereunder.

            

    

    

    7.6  Code Section 704(c)
Allocations.

    

    
      	
               
      

            	
              7.6.1

            	
              Income,
      gains, losses and deductions, as determined for Federal income tax
      purposes, for any Company asset which has a Gross Asset Value that differs
      from its adjusted basis for Federal income tax purposes shall, solely for
      Federal income tax purposes, be allocated among the Members so as to take
      account of any variation between the adjusted basis of the Company asset
      to the Company for Federal income tax purposes and its initial Gross Asset
      Value in accordance with Code Section 704(c) and the Regulations
      thereunder. In furtherance of the foregoing, it is understood and agreed
      that any income, gain, loss, or deduction attributable to Code Section
      704(c) property shall be allocated to the Members in accordance with the
      traditional method of making Code Section 704(c) allocations, in
      accordance with Regulation
1.704-3(b).

            

    

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
 

    
      	
               
      

            	
              7.6.2

            	
              If
      the Gross Asset Value of any Company asset is adjusted under Section 2.17,
      subsequent allocations of income, gain, losses and deductions, as
      determined for Federal income tax purposes, for the Company asset shall,
      solely for Federal income tax purposes, take account of any variation
      between the adjusted basis of the Company asset for Federal income tax
      purposes and its Gross Asset Value in the same manner as under Code
      Section 704(c) and the Regulations
thereunder.

            

    

    

    
      	
               
      

            	
              7.6.3

            	
              Allocations
      under this Section 7.6 are solely for purposes of Federal, state and local
      income taxes and shall not affect, or in any way be taken into account in
      computing, any Member’s Capital
Account.

            

    

    

    
      	
               
      

            	
              7.6.4

            	
              Except
      as otherwise set forth in this Agreement, any elections or other decisions
      relating to allocations under this Section 7.6 shall be made by the
      Manager, with the review and concurrence of the Company’s accountants, in
      a manner that reasonably reflects the purpose and intention of this
      Agreement.

            

    

    

    7.7  Intent of Allocations.
It is the intent of the Company that this Agreement comply with the safe harbor
test set out in Regulation 1.704-1(b)(2)(ii)(d) and 1.704-2. If, for whatever
reasons, the Company is advised by counsel or its accountants that the
allocation provisions of this Agreement are unlikely to be respected for federal
income tax purposes, the Manager is granted the authority to amend the
allocation provisions of this Agreement, to the minimum extent deemed necessary
by counsel or its accountants to effect the plan of Allocations and
Distributions provided in this Agreement. The Manager shall have the discretion
to adopt and revise rules, conventions and procedures as it believes appropriate
for the admission of Members to reflect Members’ Interests in the Company at the
close of the years.

    

    7.8  Quarterly Review of
Assets. For each of the Company’s Mortgage Investments and other assets, the
Manager shall review the assets as of the end of each calendar quarter and
determine if a Writedown is required with respect thereto. Any Writedown of an
asset resulting from the review shall be effective on the last day of the
calendar quarter for which the determination was made.

    

    ARTICLE
8

    DISTRIBUTION
REINVESTMENT PLAN

    

    8.1  Members’ Reinvested
Distributions. A Member may elect to participate in the Company’s Reinvestment
Plan (the “Plan”) at the time of his purchase of units, by electing to do so in
the Subscription Agreement executed by the Member. If the Member so elects, the
Member’s participation in the Plan commences after the Company has accepted the
Member’s Subscription Agreement. A Member may also elect to participate in the
Plan after executing the Subscription Agreement by sending a notice of such
election to the Manager. Also, a Member may revoke any previous election or make
a new election to participate in the Plan by sending written notice to the
Manager. Any notice of an election to participate or any notice of revocation of
an election to participate shall be effective for the month in which the notice
is received, if received at least ten (10) days before the end of the calendar
month. Otherwise the notice is effective the following month.

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    8.2  Purchase of Additional
Units. Under the Plan, participating Members use distributions to purchase
additional units or fractional units at $10,000 per whole unit or the then
current price for a unit if different from $10,000. The Manager will credit
units purchased under the Plan to the Member’s Capital Account as of the first
day of the month following the month in which the Reinvested Distribution is
made. If a Member revokes a previous election to participate in the Plan,
subsequent to the month in which the Company receives the revocation notice, the
Company shall make distributions in cash to the Member instead of reinvesting
the distributions in additional units.

    

    8.3  Statement of Account.
Within 30 days after the Reinvested Distributions have been credited to Members
participating in the Plan, the Manager will send to participating Members a
statement of account describing the Reinvested Distributions received, the
number of incremental units purchased, the purchase price per unit (if other
than $10,000 per unit), and the total number of units held by the Member. Before
the Members’ reinvestment of distributions in the Company, the Manager will also
send an updated disclosure document to each Member that fully describes the
Plan, including the minimum investment amount, the type or source of proceeds
which may be reinvested and the tax consequences of the reinvestment to the
Members, all to the extent deemed necessary by the Manager.

    

    8.4  Continued Suitability
Requirements. Each Member who is a participant in the Plan must continue to meet
the investor suitability standards described in the Subscription Agreement and
Memorandum (subject to minimum requirements of applicable securities laws) to
continue to participate in reinvestments. It is the responsibility of each
Member to notify the Manager promptly if he no longer meets the suitability
standards set forth in the Memorandum for a purchase of units in the offering.
The Members acknowledge that the Company is relying on this notice in issuing
the units, and each Member shall indemnify the Company if he fails to so notify
the Company and the Company suffers any damages, losses or expenses, or any
action or proceeding is brought against the Company due to the issuance of units
to the Member.

    

    8.5  Changes or Termination
of the Plan. The terms and conditions of the Plan may be amended, supplemented,
suspended or terminated for any reason by the Manager at any time by sending
notice thereof at least thirty (30) days before the effective date of the action
to each participating Member at his last address of record.

    

    ARTICLE
9

    BOOKS
AND RECORDS, REPORTS AND RETURNS

    

    9.1  Books and Records. The
Manager shall cause the Company to keep the following:

    

    
      	
               
      

            	
              9.1.1

            	
              Complete
      books and records of account in which shall be entered fully and
      accurately all transactions and other matters relating to the
      Company;

            

    

    

    
      	
               
      

            	
              9.1.2

            	
              A
      current list setting forth the full name and last known business or
      residence address of the Manager and each Member which shall be listed in
      alphabetical order and stating his respective Capital Contribution to the
      Company and share in Members’
Equity;

            

    

    

    
      	
               
      

            	
              9.1.3

            	
              A
      copy of the filed Certificate of Formation, and all amendments
      thereto;

            

    

    

    
      	
               
      

            	
              9.1.4

            	
              Copies
      of the Company’s federal, state and local income tax returns and reports,
      if any, for the six (6) most recent
years;

            

    

    

    
      	
               
      

            	
              9.1.5

            	
              Copies
      of this Agreement, including all amendments thereto;
  and

            

    

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
 

    
      	
               
      

            	
              9.1.6

            	
              The
      financial statements of the Company for the three (3) most recent
      years.

            

    

    

    All books and records shall be
maintained at the Company’s principal place of business and shall be available
for inspection and copying by, and at the sole expense of, any Member, or any
Member’s duly authorized representatives, during the Company’s normal business
hours and upon five (5) business days prior notice to the Manager.

    

    9.2  Annual
Statements.

    

    
      	
               
      

            	
              9.2.1

            	
              The
      Manager shall cause to be prepared at least annually, at the Company’s
      expense, audited financial statements prepared in accordance with
      generally accepted accounting principles and accompanied by an auditor’s
      report thereon containing an opinion of an independent certified public
      accountant. The financial statements will include: an audited balance
      sheet, statements of income or loss, statement of Members’ Equity, and a
      statement of cash flows. Copies of the financial statements and the
      auditor’s report shall be sent to each Member within 120 days after the
      close of each Fiscal Year of the
Company.

            

    

    

    
      	
               
      

            	
              9.2.2

            	
              The
      Manager shall cause to be prepared and distributed to the Members not
      later than 75 days after the close of each Fiscal Year of the Company all
      Company information necessary in the preparation of the Members’ federal
      income tax returns.

            

    

    

    9.3  Filings. The Manager, at
Company expense, shall cause the income tax returns for the Company to be
prepared and timely filed with the appropriate authorities. The Manager, at
Company expense, shall also cause to be prepared and timely filed with and/or
delivered to appropriate federal and state regulatory and administrative bodies
and/or the Members applicable, all reports required to be filed with or
delivered to those entities or Members under applicable law, including those
described in the Company’s undertakings in any securities filing. The reports
shall be prepared using the accounting or reporting basis required by the
relevant regulatory bodies. The Company will provide a copy of the reports to
each Member who requests one, without expense to the Member. The Manager, at
Company expense, shall file, with the Administrators for the states in which
this Company is registered, as required by these states, a copy of each report
referred to under this Article 9.

    

    9.4  Suitability
Requirements. The Manager, at Company expense, shall maintain for a period of at
least six years a record of the documentation indicating that a Member complies
with the suitability standards set forth in the Memorandum.

    

    9.5  Fiscal
Matters.

    

    
      	
               
      

            	
              9.5.1

            	
              Fiscal
      Year. The Company has previously adopted the Fiscal Year for tax and
      accounting purposes. Subject to the provisions of Section 706 of the Code
      and approval by the Internal Revenue Service and the applicable state
      taxing authorities, in the Manager’s sole discretion and without the
      approval of a Majority, from time to time the Manager may change the
      Company’s fiscal year to a period to be determined by the
      Manager.

            

    

    

    
      	
               
      

            	
              9.5.2

            	
              Method
      of Accounting. The Company shall continue to use the accrual method of
      accounting for both income tax purposes and financial reporting
      purposes.

            

    

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
 

    
      	
               
      

            	
              9.5.3

            	
              Adjustment
      of Tax Basis. Upon the transfer of an interest in the Company, the Company
      may, at the sole discretion of the Manager, elect under Code Section 754,
      to adjust the basis of the Company property as allowed by Sections 734(b)
      and 743(b) thereof.

            

    

    

    
      	
               
      

            	
              9.5.4

            	
              Tax
      Matters Partner. The Manager shall act as the “Tax Matters Partner”
      (“TMP”) and shall have all the powers and duties assigned to the TMP under
      Sections 6221 through 6234 of the Code and the Regulations thereunder. The
      Members agree to perform all acts necessary under Section 6231 of the Code
      and Regulations thereunder to designate the Manager as the
      TMP.

            

    

    

    ARTICLE
10

    TRANSFER
OF COMPANY INTERESTS

    

    10.1  Interests of Manager. A
successor or additional Manager may be admitted to the Company as
follows:

    

    
      	
               
      

            	
              10.1.1

            	
              With
      the consent of all Managers (should there be any manager other than the
      Manager) and a Majority, a manager may at any time designate one or more
      Persons to be a successor to it or to be an additional manager, in each
      case with the participation in the Manager’s Interests as they may agree
      upon, so long as the Company and the Members shall not be adversely
      affected thereby.

            

    

    

    
      	
               
      

            	
              10.1.2

            	
              Upon
      any sale or transfer of a Manager’s Interests, if there is an additional
      or successor manager of the Company, the successor manager shall succeed
      to all the powers, rights, duties and obligations of the assigning Manager
      hereunder, and the assigning Manager shall thereupon be irrevocably
      released and discharged from any further liabilities or obligations of or
      to the Company or the Members accruing after the date of the transfer. The
      sale, assignment or transfer of all or any portion of the outstanding
      stock of the Manager, or of any interest therein, or an assignment of the
      Manager’s Interests for security purposes only, shall not be deemed to be
      a sale or transfer of the Manager’s Interests subject to the provisions of
      this Section 10.1.

            

    

    

    10.2  Transfer of Member’s
Interest. To the extent any of the following restrictions is not necessary to
the Company, in the discretion of the Manager reasonably exercised, the Manager
may eliminate or modify any restriction. Subject to the immediately preceding
sentence, no assignee of the whole or any portion of a Member’s Interest in the
Company shall have the right to become a substituted Member in place of his
assignor, unless the following conditions are first met:

    

    
      	
               
      

            	
              10.2.1

            	
              Members
      may transfer fractional units, however, no Member may transfer units
      where, as a result of the transfer, the Member would thereafter own less
      than one unit, except where the transfer occurs by operation of
      law;

            

    

    

    
      	
               
      

            	
              10.2.2

            	
              The
      assignor shall designate its intention in a written instrument of
      assignment, which shall be in a form and substance reasonably satisfactory
      to the Manager;

            

    

    

    
      	
               
      

            	
              10.2.3

            	
              The
      transferring Member shall first obtain written consent of the Manager to
      the substitution. The Manager shall not unreasonably withhold its consent,
      but the Manager will withhold its consent to the extent necessary to
      prohibit transfers that could cause us to be classified as a publicly
      traded partnership. The Manager will also withhold consent if it
      determines that the sale or transfer will otherwise jeopardize the
      continued ability of the Company to qualify as a “partnership” for federal
      income tax purposes or that the sale or transfer may violate any
      applicable securities laws (including any investment suitability
      standards);

            

    

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
 

    
      	
               
      

            	
              10.2.4

            	
              The
      assignor and assignee named therein shall execute and acknowledge any
      other instruments as the Manager may deem necessary or desirable to effect
      the substitution, including, but not limited to, a power of
      attorney;

            

    

    

    
      	
               
      

            	
              10.2.5

            	
              The
      assignee shall accept, adopt and approve in writing all of the terms and
      provisions of this Agreement as the same may have been
      amended;

            

    

    

    
      	
               
      

            	
              10.2.6

            	
              The
      assignee shall pay or, at the election of the Manager, obligate himself to
      pay all reasonable expenses connected with the substitution, including but
      not limited to reasonable attorneys’ fees associated therewith;
      and

            

    

    

    
      	
               
      

            	
              10.2.7

            	
              The
      Company has received, if required by the Manager, a legal opinion
      satisfactory to the Manager that the transfer will not violate the
      registration provisions of the Securities Act of 1933, as amended, or any
      applicable state securities laws, which opinion shall be furnished at the
      Member’s expense.

            

    

    

    Assignments complying with the above
shall be recognized by the Company not later than the last day of the calendar
month in which the written notice of assignment is received by the
Company.

    

    10.3  Further Restrictions on
Transfers. Notwithstanding any provision to the contrary contained in this
Agreement, the following restrictions shall also apply to any and all proposed
sales, assignments and transfer of Interests, and any proposed sale, assignment
or transfer in violation of same shall be void and of no effect:

    

    
      	
               
      

            	
              10.3.1

            	
              No
      Member shall make any transfer or assignment of all or any part of his
      Interests if said transfer or assignment would, when considered with all
      other transfers during the same applicable twelve month period, cause a
      termination of the Company for federal or Delaware state income tax (if
      any) purposes;

            

    

    

    
      	
               
      

            	
              10.3.2

            	
              Appropriate
      legends under applicable securities laws shall be affixed to any
      certificates evidencing the units.

            

    

    

    
      	
               
      

            	
              10.3.3

            	
              No
      Member shall make any transfer or assignment of all or any of his
      Interests if the Manager determines that the transfer or assignment would
      result in the Company being classified as a “publicly traded partnership”
      with the meaning of Section 7704(b) of the Code or Regulations promulgated
      thereunder. To prevent that:

            

    

    

    
      	
               
      

            	
              (a)

            	
              The
      Manager will not permit trading of units on an established securities
      market within the meaning of Section
7704(b);

            

    

    

    
      	
               
      

            	
              (b)

            	
              The
      Manager will prohibit any transfer of units (other than withdrawals) which
      would cause the sum of percentage interest in Company capital or profits
      represented by Interests that are sold or otherwise disposed of during any
      taxable year of the Company to exceed two percent (2%) of the total
      Interests in Company capital or profits;
and

            

    

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
 

    
      	
               
      

            	
              (c)

            	
              The
      Manager will not permit any withdrawal of units except in compliance with
      the provisions of this Agreement.

            

    

    

    ARTICLE
11

    DEATH,
LEGAL INCOMPETENCY, OR WITHDRAWAL OF A MEMBER;

    WITHDRAWAL
OF THE MANAGER

    

    11.1  Effect of Death or
Legal Incompetency of a Member on the Company. The death or legal incompetency
of a Member shall not cause a dissolution of the Company or entitle the Member
or his estate to a return of his Capital Account.

    

    11.2  Rights of Personal
Representative. On the death or legal incompetency of a Member, his personal
representative shall have all the rights of that Member for the purpose of
settling his estate or managing his property, including the rights of assignment
and withdrawal.

    

    11.3  Withdrawal of Members
Other than Managers. With the sole discretion of the Manager reasonably
exercised, the Manager may modify, eliminate or waive any such limitation on the
withdrawal rights of a member as set forth below, on a case by case basis or by
class so long as the modifying, waiving, or elimination of the limitation does
not: (a) adversely affect rights of the other members as a whole; or (b) result
in the Company being classified as a “publicly traded partnership” within the
meaning of Section 7704(b) of the Code or Regulations promulgated thereunder. To
withdraw, or partially withdraw from the Company, a Member must give written
notice thereof to the Manager and may thereafter obtain the return, in cash, of
his Capital Account, or the portion thereof as to which he requests withdrawal,
within sixty (60) to ninety (90) days after written notice of withdrawal is
received by the Manager, subject to the following limitations:

    

    
      	
               
      

            	
              11.3.1

            	
              Except
      with regard to the right of the personal representative of a deceased
      Member under Section 11.2 above, no notice of withdrawal shall be honored
      and no withdrawal made of or for any units until the expiration of at
      least 60 days from the date of purchase of those units in the offering,
      other than purchases by way of automatic reinvestment of Company
      distributions described in Article 8 of this
  Agreement;

            

    

    

    
      	
               
      

            	
              11.3.2

            	
              To
      assure that the payments to a Member or his representative do not impair
      the capital or the operation of the Company, any cash payments in return
      of an outstanding Capital Account shall be made by the Company only to the
      extent that the Manager determines that sufficient cash is
      available;

            

    

    

    
      	
               
      

            	
              11.3.3

            	
              The
      Manager shall not be required to establish a reserve fund for the purpose
      of funding the payments, nor shall the Manager be required to sell or
      otherwise liquidate any portion of the Company’s Mortgage Investments or
      any other asset in order to make a cash distribution of any Capital
      Account under this Section 11.3;

            

    

    

    
      	
               
      

            	
              11.3.4

            	
              Subject
      to the restrictions on withdrawal contained in this Agreement, the amount
      to be distributed to any withdrawing Member shall be an amount equal to
      the amount of the Member’s Capital Account as of the date of the
      distribution, as to which the Member has given a notice of withdrawal
      under this Section 11.3, notwithstanding that the amount may be greater or
      lesser than the Member’s proportionate share of the current fair market
      value of the Company’s net assets;

            

    

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
 

    
      	
               
      

            	
              11.3.5

            	
              Unless
      the Manager determines that any distribution in excess of ten percent
      (10%) will not have an adverse effect on the Fund or the Members, the
      Manager will not permit the withdrawal during any calendar year of total
      amounts from the Capital Accounts of members that exceeds ten percent
      (10%) of the aggregate Interests, except upon the vote of the Members to
      dissolve the Company under this
Agreement;

            

    

    

    
      	
               
      

            	
              11.3.6

            	
              Requests
      by Members for withdrawal will be honored in the order in which they are
      received by the Manager. If any request may not be honored, due to any
      limitations imposed by this Section 11.3 (except the 60 day waiting
      limitation set forth in Subsection 11.3.1), the Manager will so notify the
      requesting Member in writing, whose request, if not withdrawn by the
      Member, will be honored if and when the limitation no longer is imposed;
      and

            

    

    

    
      	
               
      

            	
              11.3.7

            	
              If
      a Member’s Capital Account would have a balance of less than $50,000
      following a requested withdrawal, the Manager, at its discretion, may
      distribute to the Member the entire balance in the
  account.

            

    

    

    11.4  Withdrawal by Manager.
The Manager may withdraw from the Company upon not less than 120 days written
notice of the same to all Members, but only with the affirmative vote or consent
of a Majority, as noted in Section 3.2. The withdrawing Manager shall not be
liable for any debts, obligations or other responsibilities of the Company or
this Agreement arising after the effective date of the withdrawal.

    

    11.5  Payment to Terminated
Manager. If the business of the Company is continued as provided elsewhere in
this Agreement upon the withdrawal, removal, dissolution, or bankruptcy of the
Manager, then the Company shall pay to the Manager a sum equal to all amounts
then accrued and owing to the Manager. The Company may terminate the Manager’s
interest in the Company by paying an amount equal to the then-present fair
market value of the Manager’s interest in the Company, which the Company and
Manager acknowledge is the outstanding Capital Account as of the date of the
removal, withdrawal, dissolution or bankruptcy. If the business of the Company
is not so continued, then the Manager shall receive from the Company the sums it
would have received in the course of dissolving the Company and winding up its
affairs, as provided in Section 12.2 below.

    

    The method of payment to any terminated
Manager must be fair and must protect the solvency and liquidity of the Company.
Where the termination is voluntary, the method of payment will be deemed
presumptively fair where it provides for a non-interest bearing unsecured
promissory note with principal payable, if at all, from distributions which the
terminated Manager otherwise would have received under this Agreement had the
Manager not terminated. Where the termination is involuntary, the method of
payment will be deemed presumptively fair where it provides for an interest
bearing promissory note coming due in no less than five years with equal
installments each year.

    

    In the event the Company and the
Manager disagree as to the then-present fair market value, then the dispute
shall be settled by arbitration in Phoenix, Arizona, in accordance with the then
current rules of the American Arbitration Association.

     

    
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    ARTICLE
12

    DISSOLUTION
OF THE COMPANY

    

    12.1  Events Causing
Dissolution. The Company shall dissolve upon occurrence of the earlier of the
following events:

    

    
      	
               
      

            	
              12.1.1

            	
              Upon
      the affirmative vote or consent of a
Majority;

            

    

    

    
      	
               
      

            	
              12.1.2

            	
              The
      withdrawal, removal, dissolution or bankruptcy of the Manager, unless, if
      there is no remaining manager, a Majority agree in writing to continue the
      business of the Company and, within six months after the last remaining
      manager has ceased to be a manager, admit one or more managers who agree
      to such election and join the Company as
  managers.

            

    

    

    12.2  Winding Up. Upon the
occurrence of an event of dissolution, the Company shall immediately be
dissolved, but shall continue until its affairs have been wound up according to
the provisions of the Delaware Statutes. Upon dissolution of the Company, unless
the business of the Company is continued as provided above, the Manager will
wind up the Company’s affairs as follows:

    

    
      	
               
      

            	
              12.2.1

            	
              No
      new Mortgage Investments shall be invested in or
  purchased;

            

    

    

    
      	
               
      

            	
              12.2.2

            	
              The
      Manager(s) shall liquidate the assets of the Company either by sale of the
      assets to third parties or by servicing the Company’s outstanding Mortgage
      Investments in accordance with their
terms;

            

    

    

    
      	
               
      

            	
              12.2.3

            	
              All
      sums of cash owned by the Company as of the date of dissolution, together
      with all sums of cash received by the Company during the winding up
      process from any source whatsoever, shall be distributed in accordance
      with Section 12.3 below.

            

    

    

    12.3  Order of Distribution
of Assets. If the Company is dissolved under Section 12.1 above, the assets of
the Company shall be distributed in accordance with Delaware Statutes Section
18-804.

    

    12.4  No Recourse to Manager.
Upon dissolution and winding up under the Delaware Statutes, each Member shall
look solely to the assets of the Company for the return of his Capital Account,
and if the Company assets remaining after the payment or discharge of the debts
and liabilities of the Company are insufficient to return the amounts of the
Capital Account of Members, Members shall have no recourse against the Manager
or any other Member. The winding-up of the affairs of the Company and the
distribution of its assets shall be conducted exclusively by the Manager. The
Manager is hereby authorized to do any and all acts and things authorized by law
for these purposes. If the Manager becomes insolvent or bankrupt, dissolves,
withdraws or is removed by the Members, the winding-up of the affairs of the
Company and the distribution of its assets shall be conducted by the person or
entity selected by a vote of a Majority, which person or entity is hereby
authorized to do any and all acts and things authorized by law for such
purposes.

    

    
      12.5  Compliance
With Timing Requirements of Regulations. If the Company is “liquidated” within
the meaning of Regulation 1.704-1(b)(2)(ii)(g),distributions shall be made under
this Article 12 (if such liquidation constitutes a dissolution of the Company)
or Article 7 hereof (if it does not) to the Manager and Members who have
positive Capital Accounts in compliance with Regulation
1.704-1(b)(2)(ii)(b)(2).

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    ARTICLE
13

    ROLL-UPS

    

    13.1  Roll-Up Transactions:
Appraisal. If the Company proposes to enter into a Roll-Up transaction, an
appraisal of all Company assets shall be obtained from a competent, Independent
Expert. If the appraisal will be included in a Memorandum to offer the
securities of a Roll-Up entity to the Members, the appraisal shall be filed with
the Securities and Exchange Commission and the states as an exhibit to the
Registration Statement for that offering. The Independent Expert will appraise
the assets of the Company on a consistent basis, and conduct the appraisal based
on an evaluation of the Company’s assets as of a date immediately before the
announcement of the proposed Roll-Up. In performing the appraisal, the
Independent Expert shall assume an orderly liquidation of the Company’s assets
over a 12-month period. The terms of the engagement of the Independent Expert
shall clearly state that the engagement is for the benefit of the Company and
its Members. The Company shall include a summary of the Independent Expert’s
appraisal, indicating all material assumptions underlying the appraisal, in a
report to the Members regarding the proposed Roll-Up.

    

    13.2  Members’ Rights in a
Roll-Up. If a Roll-Up is effected as to the Company, the Roll-Up Entity making
the offer to the Company shall offer to each Member who votes against the
Roll-Up the choice of:

    

    
      	
               
      

            	
              13.2.1

            	
              accepting
      the securities of the Roll-Up Entity that were offered in the proposed
      Roll-Up, or

            

    

    

    
      	
               
      

            	
              13.2.2

            	
              either
      (a) remaining as a Member of the Company and preserving its Interests
      therein unchanged; or (b) receiving cash in an amount equal to the
      Member’s pro-rata share of the appraised Net Asset Value of the
      Company.

            

    

    

    13.3  Limitations on
Roll-Ups. The Company’s ability to participate in a Roll-Up is also subject to
the following:

    

    
      	
               
      

            	
              13.3.1

            	
              The
      Company shall not participate in any proposed Roll-Up which would result
      in Members having voting rights in the Roll-Up Entity which are less than
      those provided in Section 6.2 of this
Agreement.

            

    

    

    
      	
               
      

            	
              13.3.2

            	
              If
      the Roll-Up Entity is a corporation, the voting rights of the Members
      shall correspond to the voting rights provided in this Agreement to the
      extent reasonably possible.

            

    

    

    
      	
               
      

            	
              13.3.3

            	
              The
      Company will not participate in any proposed Roll-Up which includes
      provisions which would operate to materially impede or frustrate the
      accumulation of shares, units or other equity interests, however
      denominated, by any purchaser of the securities of the Roll-Up Entity
      (except to the minimum necessary to preserve the tax status of the Roll-Up
      Entity).

            

    

    

    
      	
               
      

            	
              13.3.4

            	
              The
      Company will not participate in any proposed Roll-Up which would limit the
      ability of a Member to exercise the voting rights of the securities of the
      Roll-Up Entity on the basis of the value of the Interests held by the
      Member.

            

    

    

    
      	
               
      

            	
              13.3.5

            	
              The
      Company will not participate in any proposed Roll-Up in which the Members’
      rights as securities holders to access the records of the Roll-Up Entity
      will be less than those provided for in this Agreement or in which any of
      the costs of the Roll-Up transaction would be borne by the Company if the
      Roll-Up is not approved by necessary vote of the
  Members.

            

    

     

    
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    ARTICLE
14

    COMPENSATION
TO THE MANAGER AND ITS AFFILIATES

    

    The Company shall pay the Manager the
compensation and permit the Manager to charge and collect the fees and other
amounts from borrowers as set forth in the Memorandum. The Company shall pay the
Manager an annual management fee of 0.25% of the Earning Asset Base and shall
pay to the Manager 25% of late fees, penalties or any net proceeds from the sale
of a foreclosed or related asset after payment to the Company of its principal
and the contractual note rate interest due in connection with the loan or asset
associated with the foreclosed asset. Any amendment to this Operating Agreement
modifying the Manager’s compensation or distribution to which the Manager is
entitled shall require the Manager’s consent. No additional reimbursement shall
be paid to the Manager or its Affiliates for any general or administrative
overhead expenses incurred by the Manager or its Affiliates or for any other
expenses they may incur. The Company will pay all direct expenses in connection
with its operations, except for the preparation of financial statements which
will be provided at the Manager’s expense.

    

    ARTICLE
15

    MISCELLANEOUS

    

    15.1  Covenant to Sign
Documents. Each Member covenants, for himself and his successors and assigns, to
execute, with acknowledgment or verification, if required, any and all
certificates, documents and other writings which may be necessary or expedient
to form the Company and to achieve its purposes, including, without limitation,
any amendments to the Certificate of Formation and any filings, records or
publications necessary or appropriate under the laws of any jurisdiction in
which the Company shall conduct its business.

    

    15.2  Notices. Except as
otherwise expressly provided for in this Agreement, all notices which any Member
may desire or may be required to give any other Members shall be in writing and
shall be deemed duly given when delivered personally or when deposited in the
United States mail, first-class postage pre-paid. Notices to Members shall be
addressed to the Members at the last address shown on the Company records.
Notices to the Manager or to the Company shall be delivered to the Company’s
principal place of business, as set forth in Section 1.3 above or as hereafter
changed as provided herein.

    

    15.3  Right to Engage in
Competing Business. Nothing contained in this Agreement shall preclude any
Member from purchasing or lending money upon the security of any other property
or rights therein, or in any manner investing in, participating in, developing
or managing any other venture of any kind, without notice to the other Members,
without participation by the other Members, and without liability to them or any
of them. Each Member waives any right he may have against the Manager for using
for its own benefit information received as a consequence of the Manager’s
management of the affairs of the Company. This Section 15.3 shall be subject in
its entirety to the fiduciary duty of the Manager set forth in Section
3.4.

    

    15.4  Amendment. This
Agreement is subject to amendment by the affirmative vote of a Majority in
accordance with Section 6.2; provided, however, that no amendment shall be
permitted if the effect of such amendment would be to increase the duties or
liabilities of any Member or materially adversely affect any Member’s interest
in Profits, Losses, Company assets, distributions, management rights or voting
rights, except as agreed by that Member. In addition, and notwithstanding
anything to the contrary contained in this Agreement, the Manager shall have the
right to amend this Agreement, without the vote or consent of any of the
Members, if, in the reasonable judgment of the Manager, such amendment does not
adversely affect the rights of the Members, including, without limitation, an
amendment:

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
 

    
      	
               
      

            	
              15.4.1

            	
              to
      grant to Members (and not solely the Manager in its capacity as a Member)
      additional rights, remedies, powers or authority that may lawfully be
      granted to or conferred upon them;

            

    

    

    
      	
               
      

            	
              15.4.2

            	
              to
      cure any ambiguity, to correct or supplement any provision which may be
      inconsistent with any other provision, or to make any other provisions for
      matters or questions arising under this Agreement which will not be
      inconsistent with the provisions of this
  Agreement;

            

    

    

    
      	
               
      

            	
              15.4.3

            	
              to
      conform this Agreement to applicable laws and regulations, including
      without limitation, federal and state securities and tax laws and
      regulations, and the NASAA
Guidelines;

            

    

    

    
      	
               
      

            	
              15.4.4

            	
              in
      the form of a revision to or updating of Schedule A in accordance with
      Section 5.2 hereof; and

            

    

    

    
      	
               
      

            	
              15.4.5

            	
              to
      elect for the Company to be governed by any successor Delaware statute
      governing limited liability
companies.

            

    

    

    The Manager shall notify the Members
within a reasonable time of the adoption of any amendment.

    

    15.5  Entire Agreement. This
Agreement constitutes the entire Agreement between the parties and supersedes
any and all prior agreements and representations, either oral or in writing,
between the parties hereto regarding the subject matter contained
herein.

    

    15.6  Waiver. No waiver by
any party hereto or any breach of, or default under, any provision of this
Agreement by any party shall be construed or deemed a waiver of any breach of or
default under any other provision of this Agreement, and shall not preclude any
party from exercising or asserting any rights under this Agreement for any
future breach or default of the same provision of this Agreement.

    

    15.7  Severability. If any
term, provision, covenant or condition of this Agreement is held by a court of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the provisions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.

    

    15.8  Application of Delaware
Law. This Agreement and the application or interpretation thereof shall be
governed, construed, and enforced exclusively by its terms and by the law of the
State of Delaware.

    

    15.9  Captions. Section
titles or captions contained in this Agreement are inserted only as a matter of
convenience and for reference and in no way define, limit, extend or describe
the scope of this Agreement.

    

    15.10  Number and Gender.
Whenever the singular form is used in this Agreement it includes the plural when
required by the context, and the masculine gender shall include the feminine and
neuter genders.

    

    15.11  Counterparts. This
Agreement may be executed in counterparts, any or all of which may be signed by
Manager on behalf of the Members as their attorney-in-fact.

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
 

    15.12  Waiver of Action for
Partition. Each of the parties hereto irrevocably waives during the term of the
Company any right that it may have to maintain any action for partition for any
property of the Company.

    

    15.13  Defined Terms. All
terms used in this Agreement which are defined in the Memorandum shall have the
meanings assigned to them in said Memorandum, unless this Agreement shall
provide for a specific definition in Article 2.

    

    15.14  Binding on Assignees.
Each and all of the covenants, terms, provisions and agreements herein contained
shall be binding upon and inure to the benefit of the successors and assigns of
the respective parties hereto, subject to the provisions of Section 10.2, which
control the assignment or other transfer of Company Interests.

     

    END OF
DOCUMENT

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