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CC – Item 5A – Staff Report – Consideration of Membership in Greater San Gabriel Valley Economic Development Cooperation E M P e ;v. stat f,eport TO: HONORABLE MAYOR AND MEMBERS ROSEMEAD CITY COUNCIL FROM: FRANK G. TRIPEPI, CITY MANAGER _71C DATE: FEBRUARY 4, 1998 RE: CONSIDERATION OF MEMBERSHIP IN THE GREATER SAN GABRIEL VALLEY ECONOMIC DEVELOPMENT CORPORATION The City Council considered this item at the February 11, 1997 Council Meeting and took no action. Since that time, eight cities have become members of the Corporation. They include Alhambra, Arcadia, Covina, Irwindale,Montebello, Monterey Park, San Gabriel, and most recently,the City of Walnut. The first annual meeting of the Corporation is scheduled for February 10, 1998 at 11:00 a.m. at Almansor Court. The first loans are expected to be approved sixty days later. The purpose of the Corporation is to promote economic development by offering financing to small entrepreneurs who are unable to qualify for conventional loans. The benefit of the Corporation is that the risk is spread among the bank members of the Corporation and at the same time enables them to meet the requirements of the Community Reinvestment Act. The goal is to help program recipients progress to conventional loans. The Corporation is requesting a one time grant to help pay for initial administration and marketing costs. All member cities have contributed either $5,000 or $10,000 to the Corporation for a total of$65,000. Cities contributing $10,000 will receive priority in so far as having loan funds available within the city that are equal to, or greater than, the amount of their contribution. The grant is an eligible expenditure of CDBG funds. City funds will be used for marketing the program. On the private sector side, the Corporation has raised $240,000 in capital and $470,000 in loan commitments. City representatives are eligible, and encouraged, to become members of the Advisory Board_ Attached are copies of informational materials on the Corporation, the Investment Proposal, Articles of Incorporation, and Bylaws. • • COUNCIL. AGENDA FEB I 0 1998 I ITEM No. "C. 4- - page two February 4, 1998 Greater San Gabriel Valley Community Development Corporation RECOMMENDATION It is recommended that the Rosemead City Council approve membership in the Greater San Gabriel Valley Community Development Corporation and authorize a one time expenditure of $10,000 in CDBG funds. o1fgsgvole COMMUNITY DEVELOPMENT CORPORATIONS What is a Community Development Corporation (CDC)? CDCs were established by Congress as a vehicle for promoting economic development. Typically, CDCs are a subsidiary of municipalities, large corporations, or financial institutions. In recent years CDCs have gained popularity in multi-investor situations,spreading the risk among many interested entities. Specifically, financial institutions have been using them as a method of granting credit to borrowers who are not "bankable by ordinary standards," yet deserving of financial assistance. CDCs are able to offer credit to participating financial institutions in all three tests of the revised Community Reinvestment Act (CRA). All State and Federal Banking Regulators encourage participation in Community Development Loans and CDCs. What are the benefits to the community? CDCs provide an additional source of small business assistance to entrepreneurs who, for a variety of reasons, are unable to obtain credit or financial guidance from an institution. They are excellent "incubators" for learning how to obtain credit, manage a business, and expand the local economy. Many CDC clients "graduate" into conventional or State/Federal Loan Guaranty programs. In many cases, the technical assistance received is more important than any credit obtained. With strict lending guidelines, and the potential for "Lender Liability," financial institutions are unable to meet this demand from the small business community. What are the benefits of a multi-investor CDC? By spreading the risk of loss exposure among several "investors," small business lending becomes more palatable, especially when an effective technical assistance program is incorporated. It also spreads the cost of administering and servicing small loans, making it more economically feasible. A CDC is also a very flexible entity, allowing for creative approaches not allowed in financial institutions. CDCs can include affordable housing programs as well as equity investments. CDCs are separate corporations and are not regulated by the FDIC. Office of the Comptroller of Currency, State Banking Department, Federal Reserve Bank, or the Office of Thrift Supervision. Loans are not scrutinised, rated, criticized, or written off by regulators. Individual loans are not caned on ;he books of a financial institution; the total amount of investment and financial commitment is either carried as "Other Assets" on each investors books, or as a Community Development Loan. Many existing CDCs are administered by third party contractors, yet managed by a Board of Directors representing investors, allowing complete control without having to oversee the day-to-day operations. Regulations now allow non financial investors to share in the risktreward aspects, effectively spreading the "Spirit of CRA" to the entire community. Current CRA regulations emphasize the results of an institutions community programs, not just efforts. CDCs provide an excellent solution to this requirement GREATER SAN GABRIEL VALLEY COMMUNITY DEVELOPMENT CORPORATION PROGRAM HIGHIJGHTS. MISSION: Fund "nearly bankable" loans to qualified borrowers and to provide technical assistance to participating businesses TARC ET: Businesses in low-moderate income areas of the Greater San Gabriel Valley who are not quite "bankable" due to: 1) Length of time in business 2) Lack of sufficient collateral 3) Small amount of loan request LGA,' S: Parameters: $5,000 to $50,000, up to 5 years amortization Interest Rates: Commensurate with risk BOAF D OF DIRE' "TORS: 75% Bank Shareholders 25% Community representatives MAN.'tGEMENT: Third party non-profit administrator SERVICING: Administration/bank shareholder TECF. VICAL ASSh TANCE: Existing providers in target area (i.e. Small Business Development Centers, USC's BAN, SCORE) PROJ ICTED OPEN DATE: 1st Quarter 1998 � - - - -- 7 \ f \ \ \ \ � \/ 7 : le � ® eIn ms ^ / . . . . . . . � . :( \ k) - ƒ ` j E6OC } ] % ƒ *«) . . a0 CP0'd00k \ \ k \ \ ƒ 7 \ -c 4 � � \ ' � a y } : 00 0000000000000 ; o (2 ! « & % % & ( a < « « < « aasg ■ § � . � NHe N - seem ` & ` : $ 7 Q 5 ) \ i ( / \§ >° u \ _ a. Iil )\ 2Z �] } cd k] � \ � � ] �f ) j { l \ jQ \ . } °{ } k ; } A ! 9 | i | i � „ ! § � k ] 22 § \ \ ! ; 7 )® § | ) ) § ® 2 { ) \ + / $$ >= uu = � « : � , aH nsE- GREATER SAN GABRIEL VALLEY COMMUNITY DEVELOPMENT • CORPORATION (In Organization) NON-BINDING EXPRESSION OF INTEREST The undersigned expresses interest in the successful formation and operation of a Community Development Corporation dedicated to promoting economic growth throughout the Greater San Gabriel Valley. Any municipal grant or other form of participation is subject to all the necessary approvals and appropriations. However, at this time, to ensure the timely formation of such organization, we pledge to seek approval for the following: (please check one option) 1) We support your efforts by seeking approval for a one-time grant of$5,000. In return, we understand that the Greater San Gabriel Valley Community Development Corporation will provide the following: • Continuous marketing to all financial institutions • Distribution of all brochures and application forms to local Chamber of Commerce and City offices • Presentations to business groups and service clubs • Participation with Economic Development agencies in seminars and trade shows ■ Publicize city as a sponsoring agency 2) We support your efforts by seeking approval for a one-time grant of 510,000 or more. In return, we understand that the Greater San Gabriel Valley Community Development Corporation will provide the following: • Continuous marketing to all financial institutions • Distribution of all brochures and application forms to local Chamber of Commerce and City offices • Presentations to business groups and service clubs • Participation with Economic Development agencies in seminars and trade shows • Publicize city as a sponsoring agency • Loan funds available within City to be equal or greater than commitment level of any grant within a two year period Name: Title: City: Telephone & Fax r: THIS IS NOT A SOLICITATION OF FUNDS AT THIS TIME. THIS IS AN EXPRESSION OF INTENT TO SEEK FORMAL APPROVAL. _1. cc gas EN fre >7. 1 ' I .; ;. 7g.4„ ri � �¢ a SQ 'E. te. 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Financing Programs 4 IV. ivestment Structure 5 Funding 5 Credit and Security Agreement 6 Loan Syndication Agreement 6 t. Shareholders' Transfer Restriction Agreement 7 V. .administrator of the Program 7 VL ISGVCDC Organization 7 . .. Introduction 7 1'. Capitalization 8 '. Board of Directors g I. Loan Committee g , Loan and Investment Policies 8 1.. Management and Operations 9 Marketing 9 1:. Administration 9 ] Loans 10 VII. ; ummary 10 A-2 Investment Proposal Greater San Gabriel Valley Community Development Corporation I. SI dement of Purpose T e Greater San Gabriel Valley Community Development Corporation ("GSGVCDC") has been formed by a consortium of entities as a for-profit organization for the purpose of providini commercial financing and technical assistance to small businesses in the Greater San Gabriel "alley that are unable to obtain traditional bank credit. T GSGVCDC will be capitalized with equity investments from various financial institutio s and other subscribers doing business in the target area, together with grants from municiprlities and local governmental agencies located within the target area. In addition to their equ ty investments, investors will commit to make loans to GSGVCDC, and GSGVCDC will use these loan funds to provide financing to small businesses. Representatives of this consortia n of investors and the targeted communities will sit on the Board of Directors. F irmation of the GSGVCDC is the result of research into the unmet needs of the business community in the targeted area. With assistance from the City of Monterey Park during the organizational phase, the program will provide loans of from $5,000 to $50,000 (Micro I Dans) and letters of credit to assist applicants in qualifying for State of California and Small Bt;iness Administration guaranteed loans (Equity Gap Guaranties). The GSGVCDC will primaril; target applicants located in low- to moderate-income census tracts and in Enterprise Zones, a well as make loans that will produce or retain permanent jobs for low-and moderate- income ersons. Emphasis will be placed on outreach to applicants owned by women and minoritit s. 'I to day-to-day management of the program will be contracted to a third party Adminis rator, who will provide an Executive Director responsible for the successful impleme:.ttation of the GSGVCDC's mission. D. 1 arget Area i.. Description 1 he target area for the proposed GSGVCDC is the incorporated cities of the Greater San Gabriel Valley of Los Angeles County, California, as determined by the Board of Directors. More sl ecifically, these cities include (in alphabetical order) Alhambra, Arcadia, Azusa, Baldwin Park, City of Industry, Covina, Duarte, El Monte, Glendora, Irwindale, La Canada, Flintridl ;, La Puente, Montebello, Monterey Park, Monrovia, Pasadena, Rosemead, San Gabriel, San Marino, Sierra Madre, South El Monte, South Pasadena, Temple City, Walnut and West C vina. This area is approximately 210 square miles, and portions of four major freeway run along, or near, the borders of the area: 1-210 on the North and East; Highway 57 on the Fast; Highway 60 on the South; and 1-710 on the West. =:¢dw,mc Cama<mn.A A-3 I. Demographics Ile 1995 San Gabriel Valley Report, published by the San Gabriel Valley Economic Council and the San Gabriel Valley Commerce & Cities Consortium, reveals the following informa:ion about the target area: ' he population is approximately 1,101,473, represented primarily by four distinct ethnic groups, as follows: Hispanic 40.1% Asian 18.7% African-American 4.6% Caucasian 36.4% Other .2% Total 100.0% • ' he median income for the target area is $35,955. III. I.SGVCDC Background I.. Introduction 1.I June 1995, a group of representatives from financial institutions doing business in the Greater 4an Gabriel Valley, as well as community representatives and City of Monterey Park governn :nt officials, completed a study and made recommendations regarding ways to better service i ie small business community. The result has been a commitment to form a Community Develop Tent Corporation to serve undercapitalized and "nearly bankable" business owners, particul:-ly those located in low- and moderate-income areas and those owned by women and minorities. Technical assistance from qualified, existing providers will also be available to applican s to the program. Steering Committee composed of the above-referenced representatives was formed, comprisi ng nine financial institutions, along with government officials from the City of Monterey Park. ' he following persons have contributed time and effort on behalf of the Steering Commit :e: GSGVCDC Steering Committee Wing Wong, Chair United National Bank Din K. Lai Standard Savings Bank Chris Jeffers, City Manager City of Monterey Park William Chu East-West Bank Kelvin Tainatongo City of Monterey Park Graham Mitchell City of Monterey Park w. Jay Virata City of Monterey Park Alma Williams Community Bank r:,eswalma :u.,,e..mh.n A-4 Wilson Ngai United National Bank J. Parker Williams East-West Bank Erma Ramientos CenFed Bank David Tang Trust Bank Frank Chen Cathay Bank David Chang United Pacific Bank Marta Stern CRA Consultant Lee Fenn GSGVCDC Consultant 1 Credit Needs Assessment ' veral financial institutions represented on the Steering Committee have documented focus gr alp discussions with various local community leaders and small business owners. A random urvey of small business owners was conducted throughout the targeted area from lists provide< by local Chambers of Commerce. Over 100 surveys were sent in three languages (Spanish. Chinese and English)to accommodate the major ethnic groups represented. Responses received indicated the following: 1. Length of time in business ranged from six months to 25 years. 2. All respondents were in the "retail" sector, mostly in service-related businesses. 3. All but three respondents had applied for traditional bank credit within the p 1st 12 months with negative results. The reasons for declination were primarily due to: a. A lack of equity in real estate; b. Lack of collateral in general; or c. Short time in business (less than three years). 4. The most important need for credit was "working capital," although some di scribed the need as "payroll' or paying for supplies. The second most important need w s listed as "equipment;" the third was "inventory." 5. The need for credit of up to $25,000 was the most requested, from $; 5,000 to $40,000 next and over $40,000 was last. 6. The desire for additional services other than credit elicited responses for "r-:payment options" and related longer terms for loans, which have been addressed by th Steering Committee. TiTo supplement the above referenced surveys, a telephone survey was performed by various s aff members at local Chambers of Commerce. Respondents were polled using the same que.tions as the mail survey, with very similar answers. The consensus was that, other ..w.....mm•s..a,me.n. A_5 than cn dit card access (which is denied to many), access to credit was the most difficult item. Telepht se conversations with representatives from the San Gabriel Valley Economic Development Council, the San Gabriel Valley Commerce & Cities Consortium and the Los Angele: County Economic Development Agency also indicated that a lack of knowledge about various small business programs contributed to the overall lack of access by many small entreprt teurs. These concerns will be addressed in the Marketing Plan. Financing Programs 1. Micro Loans • The GSGVCDC will make small loans ("Micro Loans") of from $5,000 to 50,000 to under-capitalized businesses for terms up to 5 years. Loans will be targeted I small businesses located in low- and moderate-income areas and Enterprise Zones 1 rated within the target area, as well as loans that will produce or retain permanent jobs 1 it low- and moderate-income persons. In general, loans will be limited to businesses t at have been in operation for at least one year and can demonstrate a positive cash flow t service the debt. While actual pricing will be determined by the GSGVCDC, and no a,surances are made regarding actual yields or terms, it is expected that loans will be iced as follows: Interest Rate : 14% Fixed Interest Rate, up to 60 month term Fees $50.00 application fee $300.00 processing fee 4% loan fee (to be financed) Technical Assistance Will be available for each applicant and provided by local, existing agencies. 2. Equity Gap Guarantees The GSGVCDC will also provide "Equity Gap Guarantees" for small SBA 7(a) ar d State of California guaranteed loans made by banks and other other lenders to b.'rrowers who lack sufficient equity in their businesses to meet required underwriting st mdards, but who otherwise qualify for the loans. The guarantees will be for up to a in aimum of 50% of the required equity, not to exceed $25,000, and will be in the form of non-hank Standby Letters of Credit issued by the GSGVCDC in favor of the lender. For example, on a $100,000 financing request, SBA and State of California ur derwriting guidelines typically require that the applicant have a minimum equity in the bt:;iness equal to one-third of the loan amount, $33,000. Under the proposed program, th GSGVCDC would provide a guarantee in an amount up to 50% of this minimum eq.iity, or up to $16,667, in the form of a Standby Letter of Credit in favor of the lei der, payable in the event of the borrower's default. The lending institution would m: ke the $100,000 loan, which would be partially guaranteed by the SBA or State of Cl ifornia and partially guaranteed by the GSGVCDC's Standby Letter of Credit. The mc.n..x.mc<.LnO.emn A A-6 t GSGVCDC would establish a reserve in the amount of the guarantee, using funds from t loan pool. Fees for this program are expected to be two percent of the Letter of Credit a nount per year, plus the application and processing fees described above. These fees, iI most cases, will be financed by the lending institution. The maximum term of the I ii.tter of Credit will be three years, with a note from the borrower in favor of the C SGVCDC for the borrower's reimbursement obligation, should the Letter of Credit be d awn. IV. Divestment Structure T lie GSGVCDC shareholder/investors will consist of various commercial banks, thrifts and othe financial institutions that are active in the target area. At the discretion of the Board of Direton, non-financial institutions may also be accepted as investors. Farh shareholi er/investor will make an investment in common stock to capitalize the corporation, together aith a commitment toward the loan pool. For financial institutions, the investment and loan poo commitment will be based on a formula using total deposits held within the target area as of Deg ober 31, t996. Non-financial institution investors will make an investment and loan commitn'int based on a formula determined by the Board of Directors. A Funding C Ammon Stock of the GSGVCDC will be offered at an initial price of$10.00 per share. The Stee. ing Committee expects the initial capitalization of GSGVCDC from the sale of stock and from grants from municipal and other public agencies to be a minimum of$300,000, which will be sad to support overhead and operations in the initial phases of the program. In complian e with California finance lender regulations, a minimum of $25,000 in shareholder equity ca'vital will be maintained at all times. Future operating expenses will be supported by interest a ,d fees from the loan portfolio. TI e Steering Committee expects to raise a minimum of$4[0,(00 for the initial loan pool, which wi I be available for both the Micro Loan and Equity Gap Guarantee programs. Fi iancial institutions with deposits within the target area will invest in the GSGVCDC under the following formula: I. n.y.nn[D1 9w0.L6.RA A-7 • • Total Deposits in• Capital Contribution Loan Pool Commitment arget Area as of• per Financial Institution per Financial Institution 12/31/96 (Minimum) (Minimum) 1_ess Than $50 Million $ 5,000 $15,000 $50 to 100 Million 10,000 20,000 $100 to 250 Million 15,000 30 000 Over $250 Million 20,000 40,000 1 re Steering Committee will encourage higher than minimum contributions through a special d:signation as "Premier Founding Shareholder." This designation will be given to those investor: who increase their respective contributions to capital and the loan pool by an additional $5,000 t: more. B. Credit and Security Agreement Any institution which purchases stock is also required to become a party to both the Credit ar d Security Agreement and the Loan Syndication Agreement. The loan pool available to the G; GVCDC will be documented by the Credit and Security Agreement between each of the contr rating lenders and the GSGVCDC. Each contributing lender shall be responsible for funding t pro rata amount of the outstanding commitment to the GSGVCDC at the time of each advance. AU contributing lenders will be jointly and severally liable for the aggregate commit❑ent amount, based on the size of the loan pool. Each contributing lender will hold an undivided pro rata interest in all of the collateral pledged by the GSGVCDC, in the form of the loans male by the GSGVCDC. The loan pool will be fixed in amount and will not be a revolving credit facility. Therefore, multiple loan pools are envisioned, each to be governed by a Credit :.nd Security Agreement. The maturity or termination date of each loan pool shall be determine I on a case by case basis by the Board of Directors. G meraily, the terms of the Credit and Security Agreement provide for a loan from each contribut eg lender at the Wall Street Journal Prime Rate minus four percent until such time that the Boar( of Directors deems otherwise. It is generally expected that any increased rate of return on loan pool funds will begin after the GSGVCDC has reached self sufficiency from a cash floe standpoint, which is anticipated to take approximately three years. Principal and interest u :der the Credit and Security Agreement shall be payable quarterly in an amount equal to the pri •cipal payments received on borrower loans and at maturity of those borrower loans. Each len( er will receive a pro rata portion of principal payments when made. Please refer to the Credi and Security Agreement for additional terms that apply. • C. Loan Syndication Agreement TI.; Loan Syndication Agreement will govern the terms and conditions under which participar ng lenders fund loan advances, how they are administered and how collections will be disbursed lack to lenders. The Agent bank will administer the credit with the GSGVCDC under F Afar p et....COI t..a.orc.,A A.g • the tent it of this Agreement. The identity of the Agent bank will be determined prior to solicitati in of shareholder lenders. The Agent bank will notify each contributing lender of its pro rata tare of an advance to be made to the GSGVCDC, which advance shall be deposited into a de wsit account on or before the next business day for access by the Agent bank through ACH de it. The failure of a contributing lender to make a contribution will require that the remainin lenders make a supplemental contribution on a pro rata basis. Collections received by Agen bank will be distributed to contributing lenders based on their pro rata percentage of total out tanding credit. A "Loan Loss Reserve" will be set up in advance as dictated by the Board of Directors; any losses beyond that Reserve account will be shared by all lenders on a pro rata basis. A contributing lender may withdraw or decrease its commitment only if one or more other coi tributing lenders have agreed to assume that lender's commitment, or a third party approved by all remaining lenders shall have agreed to assume such commitment. D Shareholders' Transfer Restriction Agreement Tie Shareholders' Transfer Restriction Agreement will govern the transfer of shares of stock rep esenting the capital investment in the GSGVCDC. If an institution owning shares in the GSG'i CDC wishes to sell its interest in the corporation, the shareholder must first offer the shares fa- sale to the corporation, or if not purchased by the corporation, then to the other shareholc ears in the GSGVCDC. If neither the corporation or the other shareholders purchase the sellin r, shareholder's interest in the GSGVCDC, then the selling shareholder is entitled to sell the slues to a third party. Any sale of shares.in the GSGVCDC must occur at a price to be detern fined under the Shareholders' Transfer Restriction Agreement. No transfer, sale or pledge of the shares of the GSGVCDC may be made except upon the terms of this Agreement. V. Ai Iministrator of the Program TI a Executive Director will manage the day-to-day affairs of the GSGVCDC under the direction if the GSGVCDC Board of Directors and in accordance with the terms and conditions of the Lc.m Syndication Agreement and the Credit and Security Agreement. The Executive Director Evill also obtain assistance and guidance from a third-party Administrator of the program nder an Administrative Agreement. VI. G,IGVCDCOrganization A. Introduction T1 GSGVCDC is organized as a multi-bank/thrift Community Development Corporation to be ma traged by an Executive Director, provided through an Administrative Agreement between t e GSGVCDC and the Administrator. Non-financial institutions may also invest in the GSGVCE C upon the approval of the Board of Directors. The Executive Director will be under the direct on of the GSGVCDC Board of Directors, which represents both the shareholder investors nd the community at large. The GSGVCDC will obtain a Finance Lenders License or its equ valent as directed by the California Department of Corporations. F.\CansnOL01 v..awa.n♦ A-9 Capitalization " he Steering Committee anticipates that financial institution investors and other investors doing bi siness within the target area will make capital investments in varying amounts based on the fort ula described in section IV of this Investment Proposal. Initial capitalization is expected to be a r iinimum of$300,000 from the sale of common stock to investors and from grants from municip it and other public agencies. The exact amount to be raised by the sale of common stock wi I be determined by the Board of Directors prior to the commencement of the offering. Investor will also make loan commitments to the GSGVCDC based upon the formula described in sectic l IV, A. above, which loans will fund the loan pool that the GSGVCDC will use to provide ;he Micro, Loan and Equity Gap Guarantee programs. The Steering Committee anticipat s receiving loan commitments aggregating a minimum of$400,000 for the initial loan pool- Board of Directors A n 11-member Board of Directors will be responsible for the business and affairs of the proposed corporation. They will meet on a regular basis, no less than monthly unless otherwise determin .d by the Board of Directors, to set investment policies, review activities of the corporati in and provide guidance and direction for the Administrator and the Executive Director. Commits es will be organized as needed to ensure that all affairs are conducted in a professional manner insistent with the Articles of Incorporation and corporate Bylaws and in a timely fashion. No less than 25% of the Board members shall be represented by qualified non-bank "Commu pity Representatives," who shall be chosen among the targeted beneficiaries, municipa ities and public agencies. All Directors will be elected at the annual meeting of the sharehok ors, with each member having equal voting rights. The Bylaws of the corporation will require that at least one member of the Board will have sma business financing experience obtained via ownership of a small business, at least one member gill be from a targeted beneficiary and at least one member will be from the public sector. D Loan Committee A Loan Committee will be appointed by the Board of Directors and will have primary responsib lity for all credit decisions relating to applicants/borrowers. To achieve consistency, a compre pensive 'Loan Policy" has been drafted for use by the Loan Committee as a guideline for qualit and fairness in underwriting. The Committee will meet on a regular basis and report activities n the Board of Directors on a monthly basis. E. Loan and Investment Policies A! stated, a comprehensive "Loan Policy" has been drafted for use by the Loan Committe the policy will be reviewed as necessary to ensure that underwriting remains consistent with the goals of the corporation and any changes in the economic environment. i..a.ba.ee A-10 • Ilm GSGVCDC loan policy will include, but not be limited to, providing financing to qualifie: applicants who can not obtain conventional financing because they are not "bankable by ordinary standards" due to lack of collateral, insufficient equity or less than AAA credit. Whenes,:r possible, the GSGVCDC will leverage loan funds from other existing sources in order to maxi-size the benefit to the borrower and the corporation, such as provided in the "Equity Gap Gu rantee" program described in Section III.C.2. above. Other programs may be added as the r',d becomes evident and the corporation has the ability to manage the risk without jeopardi.ing the original goals of the program. 1 Management and Operations 1 he day-to-day affairs of the GSGVCDC will be run by the Executive Director. Under the term : of the Administrative Agreement, the third-party Administrator will be responsible for providin assistance in marketing the GSGVCDC's programs to small businesses in the target area thrc ugh its employees and offices. The Administrator will assist in marketing the program to all fin amcial institutions within the target area, whether or not they are shareholders. It will assist the GSGVCDC in identifying possible applicants, assembling the appropriate financial package s directed by the Board of the GSGVCDC, and presenting qualified financial packages to the al propriate Loan Committee, and will provide general administrative support services, including loan documentation, disbursement, monitoring and collection. The GSGVCDC will occupy c lice space within the offices of the Administrator and other locations as directed by the Bean I of Directors. G. Marketing A Marketing Plan for outreach to targeted beneficiaries has been drawn by the Steering Committ a and will be implemented by the Board of Directors, an Advisory Board of Directors, the Exam tive Director of the program and the Administrator. Brochures describing the services to be offi red will be approved by the Board of Directors and used in the Marketing Plan. The Beard of Directors, the Executive Director and the Administrator will assist each other in training ippropriate individuals, the shareholder investors, the Advisory Board, the small business technical assistance providers and various economic development agencies located within th target area. It is anticipated that a broad based group of interested individuals will make up to Advisory Board of Directors, who will be expected to provide necessary marketing to the taxi-eted beneficiaries that they represent and communicate the results of the program back to the Bo:rd of Directors. H Administration 0 ganizational costs and the initial administrative expenses will be paid with private capital ra;ed through a private placement stock offering and anticipated financial commitments from othr r entities in the target area. This will provide the financial strength to ensure longevity and main :tin the minimum capital requirements of the California Department of Corporations. There wig I be no compensation for the Board of Directors or corporate officers at this time. A five-year, pro-forma budget has been adopted by the Steering Committee as the initial budget; it will be reviewed and updated on an annual basis by the third-party Administrator and the GSGVCL C Board of Directors. .ec.e...¢o''tante,t..A A-11 Loans can advances by shareholders to the GSGVCDC will be governed by the terms and conditic ns of the Credit and Security Agreement. The Agent bank will make advances to the GSGV(DC only as projects are identified, packaged, approved and closed by the GSGVCDC. The aB1-egate advances by the Agent bank will not exceed the aggregate commitments of all invertin shareholders. All necessary loan documents will be housed by the Agent for the Syndica ion. hareholders will receive a security interest in loans made by the GSGVCDC and will receive m assignment of any collateral securing those loans. I unding for all loans will be disbursed as directed by the Loan Committee at loan docume:it closing, or as milestones are achieved by the borrower. All Letters of Credit for the Equity t;ap program will be disbursed after an SBA or State of California guaranteed loan has officiall• defaulted and after the respective lender calls on the GSGVCDC for payment under that inst ument and according to the terms and conditions. ommary 1 re Greater San Gabriel Valley Community Development Corporation has been conceive d by a group of committed financial institutions within the target area to address some of the w met needs of the business community, targeting those entrepreneurs who traditionally have bets unable to access traditional sources. The main goal of the corporation is to offer credit to 'Horthy entrepreneurs who are not yet "bankable by ordinary standards," but who, with the help of the GSGVCDC, may become "bankable" in the near future. The organizational structure presented has been devised to accomplish this goal by joining financial institutions together -.o spread the risk, cost and concentration of loans among many shareholders. The assistant of local cities has been instrumental in organizing and motivating the Steering Commie e to form an organization that should be a "win-win-win" situation for the shareholi iers, the cities and the ultimate borrowers, in the spirit of the Community Reinvestment Act. r,ms....meo s..o.e,e.nn A-12 ia ix �i �gp �r� S i .2,4;11;1Y 1 1 1 i t I ty �, t la �II'I�i?u�at r 1� , 2004902 Ytl f 1 p r _ .....,/ A.,..„, „A., ,;.,_ SECRETARY OF STATE I, BILL JONES, Secretary of State of the State of California, her !by certify: fhat the annexed transcript has been compared with the corporate record on file in this office, of which it pur >orts to be a copy, and that same is full, true and cor: ect. IN WITNESS WHEREOF, I execute this certificate and affix the Great Seal of the State of California this M4d 2 0 199) f ^6u ,`TyF . n 1 ' a%,, M 1. I � �3i hi ,g . II ,d/ r ",?,.:1 I I F O at` = Secretary of State &%WHIT G ...... ....<< >. G-I . ENDORSED•FILED In the office of tilt$ecteltryol Stitt of lie State of talrtomit FEB 251997 Sectbele ARTICLES OF INCORPORATION , � itnal OF GREATER SAN GABRIEL VALLEY COMMUNITY DEVELOPMENT CORPORATION Article I 'Ilia name of the corporation is: Greater San Gabriel Valley Community Development Corporation Article II Tie purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other ft an the banking business, the trust company business or the practice of a professi in permitted to be incorporated by the California Corporations Code. T-ie specific purposes for which the corporation is organized are to: A Promote, develop and improve the economic conditions of people in the Greater San Gabriel Valley, California. B Encourage and assist by loans, investments, development services and other transactions, the condition of small businesses, primarily the unmet credit needs of small businesses in low to moderate income neighborhoods in the Greater San Gabriel Valley, California. C Improve. through the cooperative efforts of financial institutions or other entities which may become shareholders of this corporation, economic conditions in the Greater San Gabriel Valley California. Any such act or activity engaged in by the corporation shall be legally permissible for a Community Development Corporation consistent with the policies established by the Office of the Comptroller of the Currency and other relevant regulatory authorities, including but not limited to 12 United States Code (U.S.C.) 24 and 12 Code of Federal Regulations (C.F.R.) Part 24, as applicable. G-2 Article III 'he name and address in this state of the corporation's initial agent for service of pros ass are: Wing Wong UNITED NATIONAL BANK • 631 S. Olive Street Los Angeles, CA 90014 Article IV i.. The corporation shall have the authority to issue only one class of shares of stock, which shall be designated common stock. The total number of shares that the corporation is authorized to issue is 100,000 shares. The holders of the common stock shall have the right to elect the Directors of the corporation. At least 25% of the Directors of the corporation must be elected from the community at-large ("Community Representatives"). B The Community Representatives will be nominated to meet the requirements of the Office of the Comptroller of the Currency relating to the corporation'sactivities being designed primarily to promote the public welfare, including but not limited to 12 C.F,R: Part 24. Article V A A majority of the Board of Directors shall constitute a quorum, but less than a quorum may adjourn a meeting to a fixed time and place. © Each director shall have one vote, and the act of a majority of Directors present at a meeting at which a quorum is present shall be the act of the Board of Directors, except for approval of the following: 1 . Adoption or amendment of Bylaws requires the vote of 66 2/3% of Directors present at the meeting. 2, Approval of contracts (other than approval of investment or disposition of assets) requires the vote of 66 2/3% of Directors present at the meeting. G-3 The Board of Directors shall have the authority to amend the Articles of Incorporation or the Bylaws as authorized by the California Corporations Code, as limited by Paragraph V.B. above. Article VI 'Jo holder of any stock of the corporation shall be entitled as a matter of right to pun hase or subscribe for any part of any stock of the corporation authorized by these Articles or of any additional stock of any class to be issued by reason of any increa1 ; of the authorized stock of the corporation, or.of any bonds. certificates of indebn dness, debentures, warrants, options, or other securities convertible into any class ci stock of the corporation, but any stock authorized by these Articles or any such al ditional authorized stock or securities convertible into any stock may be issued and di: Dosed of by the Board of Directors to such persons, firms, corporation, or associt lions for such consideration and upon such terms and in such manner as the Board t f Directors may in its discretion determine without offering any thereof on the same t -rms or on any terms to the shareholders then of record or to any class of shareholders, provided only that such issuance may not be inconsistent with any provisic n of law or with any of the provisions of these Articles. Article VII The liability of the Directors of the corporation for monetary damages shall be eliminariad to the fullest extent permissible under California law. Article VIII T ie corporation is authorized to provide indemnification of agents (as defined in Sect on 317 of the California Corporations Code) for breach of duty to the corpora ion and its stockholders through Bylaw provisions or through agreements with the agents, or both, in excess of the indemnification otherwise permitted by Section 317 of he Corporations Code, subject to the limits on such excess indemnification set ford in Section 204 of the Corporations Code. Ir witness whereof, I have hereunto set my hand: Dated: February 12 , 1997 Wing W�: g, Inco G-4 EXHIBIT H BYLAWS OF GREATER SAN GABRIEL VALLEY COMMUNITY DEVELOPMENT CORPORATION ("GSGVCDC") Article I, Offices Section I. The principal office shall be located in the City of Monterey Park, California. Section t. The corporation may also have offices at such other places within the State of California as the Board of Directors may from time to time determine, or es the business of the corporation may require. Article ll. Purpose T'.e purpose or purposes for which the corporation is organized are to: A Provide needed financing for growth and expansion of small businesses who cannot qualify for conventional financing within the Greater San Gabriel Valley, primarily the low to moderate income areas thereof. B Promote, encourage, and assist those businesses located in economically challenged areas of the Greater San Gabriel Valley. C Design proper and appropriate capital funding vehicles, augmented by appropriate technical assistance targeted to qualified businesses to provide creation of job opportunities and promote economic growth. D Improve through the cooperative efforts of the entities which may become shareholders of this corporation, the economic well being of small businesses with the goal of preparing them for traditional financing sources within a three year period. In -order to carry out the nature of this corporation's business and its purposes. it shall have all the powers to engage in and transact any or all lawful business for which corporati :ns may be incorporated under the statutes of California; provided, however, that any such act or activity shall be legally permissible for a Community Development Corporation consister is with the policies established by the Office of the Comptroller of the Currency, the Federal R-serve Board, the Federal Deposit Insurance Corporation, the California Department of Bankir j, the Office of Thrift Supervision and other relevant regulatory agencies. Article Ill. Contributions By Shareholders he corporation may from time to time issue stock on such terms, for such conside•ation and bearing such rights and preferences. determined by the Board of Directors. as ma, be permitted by law, the Articles of Incorporation and these Bylaws. Each sharehclder's minimum capital investment in the'stock of the corporation and commitment toward ,1 loan pool shall be determined according to a formula approved by the Board of Director 1 or otherwise as approved by the Board of Directors. For shareholders that ere banks, savings associations or other depository financial institutions, the minimum capital investm int and loan pool commitment will be according to a formula based upon the shareho der's total deposits in the target area. The target area will be determined by the Board o Directors and may change at its discretion; however the primary focus will be the Greater lien Gabriel Valley of Los Angeles County. 1 he corporation shall at all times maintain a $25.000 capital base. E ich shareholder shall contribute to the loan pool as determined by the Board of Director.. The amount of the loan pool and the mechanisms for such contributions shall be determir ad by the Board of Directors. Article IV. Meetings of Shareholders Section . Meetings of the shareholders shall be held at such place within the State of California as shall be specified in the notice of the meeting or in a waiver thereof. Section An annual meeting of the shareholders, commencing in the year 1997, Shall be held on the second 12nd) Tuesday in the month of April each year, unless otherwise directed by the Board of Directors. If such day falls on a legal holiday, such.meeting shall be held at the specified time on the first business day thereafter which is not a legal holiday. At such meeting the holders of shares entitled to vote in the election of Directors shall elect a Board of Directors as set forth in Section 1 of Article V, and may transact such other business as may properly be brought before the meeting. Section ; . Special meetings of the shareholders may be called: (1) by the Chairman of the Board of Directors, the President, the Board of Directors, or (2) by the holders of at least ten percent (10%) of all the shares entitled to vote at the proposed special meeting. The record date for determining shareholders entitled to call a special meeting is the date the first shareholder signs the notice of that meeting. Section c Only business within the purpose or purposes described in the notice of any special meeting of shareholders may be conducted et such special meeting. race.wacc,c ..na,r.ne H-2 Section 5. A quorum shalt be present at a meeting of shareholders if the holders of a majority of the shares of each class or series of stock entitled to vote are represented at the meeting in person or by proxy. Unless otherwise provided in the Articles of Incorporation, once a quorum is present at a meeting of shareholders,the shareholders represented in person or by proxy at the meeting may conduct such business as may be properly brought before the meeting until it i5 adjourned, and the subsequent withdrawal from the meeting of any shareholder or the refusal of any shareholder represented in person or by proxy to vote shall net affect the presence of a quorum at the meeting. Unless otherwise provided in the Articles of Incorporation, the shareholders represented in person or by proxy at a meeting of shareholders at which a quorum is not present may adjourn the meeting until such time and to such place as may be determined by a vote of the holders of a majority of the shares represented in person or by proxy at that meeting. Section With respect to any matter, other than the election of Directors or a matter for which the affirmative vote of the holders of a specified portion of the shares entitled to vote is required by law, the affirmative vote of the holders of a majority of the shares of common stock entitled to vote and represented in person or by proxy at a meeting of shareholders at which a quorum is present shall be the act of the shareholders unless otherwise provided in the Articles of Incorporation. Section '. . At each election of Directors, every shareholder entitled to vote at such election shall have the right to vote, in person or by proxy, the number of shares owned by such shareholder, No shareholder may cumulate votes-for election of . Directors. Section F Any shareholder entitled to vote may vote in person or by proxy executed in writing by the shareholder. A telegram, telex, cablegram, or similar transmission by the shareholder, or by a photographic, facsimile, or similar reproduction of a writing executed by the shareholder, shall be treated as an execution in writing for purposes of this Section 8. Section <, The Secretary or other agent having charge of the stock transfer books shall make, at least ten (10) days before each meeting of shareholders, a complete list of the shareholders entitled to vote a such meeting or any adjournment • thereof, arranged in alphabetical order, with the address of and the number of shares held by each, which list, for a period of ten (10) days prior to such meeting, shall be kept on file at the registered office or principal place of business of the corporation, and shall be subject to inspection by any shareholder at any such time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting, and shall be subject to the inspection of any shareholder during the whole time of the meeting. The original stock transfer books shall be prima facie evidence as to who are the shareholders entitled to examine such list or transfer books or to vote at any such meeting of shareholders. ..aa,r.1,.a H.3 Section 10. Any action required by statute to be taken at any annual or special meeting of the shareholders, or any action which may be taken at any annual or special meeting of shareholders, may be taken without a meeting, without prior notice, and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holder or holders of two-thirds (2/3) of the shares entitled to vote on the action, unless a greater percentage of affirmative votes is required by law. Prompt notice of the taking of any action by shareholders without a meeting by less than unanimous written consent shall be given to those shareholders who did not consent in writing to the action. Section 1. The Board may select any person to preside as Chairman of any meeting of shareholders, and if such person shall be absent from the meeting, or fail or be unable to preside, the Board may name any other person in substitution therefor as Chairman. In the absence of an express selection by the Board of a Chairman or substitute therefor, the Chairman of the Board shall preside as Chairman. If the Chairman of the Board shall be absent, fail or be unable to preside, the President shall preside. If the President shall be absent, fail or be unable to preside, the Vice President or Vice Presidents in order of their rank as fixed by the Board, the Secretary, or the Chief Financial Officer, shall preside as Chairman, in that order. The Chairman of the meeting shall designate a secretary for such meeting, who shall take and keep or cause to be taken and kept minutes of the proceedings thereof. The conduct of all shareholders' meetings shall at all times be within the discretion of the Chairman of the meeting and shall be conducted under such rules as he may prescribe. The Chairman shall have the right and power to adjourn any meeting at any time, without a vote of the shares present in person or represented by proxy, if the Chairman shall determine such action to be in the best interests of the corporation and its shareholders. Section 1 2. In advance of any meeting of shareholders, the Board may appoint any persons other than nominees for office es inspectors of election to act at the meeting and any adjournment thereof. tf inspectors of election are not so appointed, or if any such persons fail to appear or refuse to act, the Chairman of any such meeting may, and on the request of any shareholder or his proxy shall, make such appointment at the meeting. The number of inspectors shall be either one or three. If appointed at a meeting on the request of one or more shareholders or proxies, the majority of shares present in person or by proxy shall determine whether one or three inspectors are to be appointed. The inspectors of election shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, the authenticity, validity and effect of proxies, receive votes, ballots or consents. hear and determine all challenges and questions in any way arising in connection with the right to vote, count and tabulate all votes or consents, determine when the polls shall close, determine the result and do such acts as may be proper to conduct the election or vote with fairness to all shareholders. em.o>nmoo v,-Oa .e j H-4 If there are three inspectors of election, the decision, act or certificate of a majority is effective in all respects as the decision, act or certificate of all. Article V. Directors Section I. The number of Directors of the corporation shall initially be fixed at seven (7). At such time that the initial stock offering is completed and the first annual meeting of shareholders has been conducted, the number of Directors shall be fixed at eleven (111. These eleven Directors shall be elected at large by the holders of the Common Stock of the corporation at the annual meeting of shareholders. At least 25% of the eleven Directors shall be "Community Representatives." None of the Community Representatives shall be loan applicants of the corporation or bank directors, officers or employees at any time during their term as Director. At least one (1) of the Community Representatives will have experience with small business financing programs and at least one 11) will represent the beneficiary minority community in the target area. In addition. one (1) of the Community Representatives will be a representative of the public sector. Also, one (1) of the Community Representatives may be a representative of a Municipality which has contributed financial support for the benefit of the Corporation. Each Director elected shall hold office for the term for which he or she is elected and until his or her successor shall have been elected and qualified. Directors need not be shareholders of the corporation, Section : Any Director or the entire Board of Directors may be removed, with or without cause, by a vote of the holders of a majority of the shares then entitled to vote at an election of Directors at which a quorum is present; provided, that the proposed removal is stated in the notice of the meeting. Section : . In no event shell more than one Director be elected who is employed by a single shareholder or multiple entities which are affiliated through ownership by the same holding company or related holding companies. Should a currently serving Director, as a result of a merger, consolidation or similar reason, become affiliated with an entity or holding company exceed the limit of one (1) Director, such Director shall be permitted to serve until the expiration of such Director's current term but shall not be eligible for re-election thereafter as long as such affiliated entities have one 11) Director. The restrictions in this Section 3 shall not come into effect until such time as the corporation shall have issued stock and the shareholders of the corporation shall have elected the Board of Directors for the first time. Section a Directorships to be filled by reason of an increase in the number of Directors may be filled by a vote of the Directors then in office. Such newly elected Directors shall serve for a term of office continuing only until the next annual meeting of the shareholders. :¢.e.mcoc ..e.ea.ne H-5 Sectior 5, Any vacancy in the office of a Director shall be filled by a vote at the Directors then in office. A Director elected to fill a vacancy shall be elected for the unexpired term of his or her predecessor in office. Section 6. The powers of the corporation shall be exercised by or under the authority of, and the business and affairs of the corporation shell be managed under the direction of, the Board of Directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the Articles of Incorporation or by these Bylaws directed or required to be exercised or done by the shareholders. Section if. Meetings of the Board of Directors, regular or special, will be held within the State of California. Section 1- The first meeting of each newly elected Board of Directors shall be held at such time and place as shall be fixed by the vote of the shareholders at the annual meeting, and no notice of such meeting shall be necessary to the newly elected Directors in order legally to constitute the meeting, providing a quorum shall be present. In the event of the failure of the shareholders to fix the time and place of such first meeting of the newly elected Board of Directors, or in the event such meeting is not held at the time and place so fixed by the shareholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors, or as shall be specified in a written waiver signed by all of the Directors. -Section !I. Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by resolution of the Board. Section D. Special meetings of the Board of Directors may be called by the Chairman of the Board of Directors or the President, and shall be called by the Secretary on the written request of two 12) Directors. Written notice of special meetings of the Board of Directors shall be given to each Director at least three 13) days before the date of the meeting. Neither the business to be transacted at, nor the purpose of. any regular or special meeting of the Board of Directors need by specified in the notice or waiver of notice of such meeting. Section ' 1. A majority of the number of Directors shall constitute a quorum f or the transaction of business, and the act of the majority of the Directors present at a meeting at which a quorum is present shall be the act of the Board of Directors, unless the act of a greater number is required by law, the Articles of Incorporation, or elsewhere in these Bylaws. If a quorum shall not be present at any meeting of the Board of Directors, the Directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 1 2. Any action required or permitted to be taken at a meeting of the Board of Directors or any committee may be taken without a meeting if a consent in r.,C....,,CoC ..o.n�e,,e H-6 writing, setting forth the action so taken, is signed by all the members of the Board of Directors or committee, as the case may be, Sectior 13. No person other than a Director may attend any meeting of the Board of Directors without the consent by a majority of the Directors present; provided, however, that a representative of legal counsel for the corporation and a representative of the independent certified public accountant for the corporation may attend any such meeting upon the invitation of any Director. Article VI. Notices Section 1 . Written or printed notice to shareholders stating the place, day and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered ten 1101 days before the date of the meeting either personally or by mail, by or at the direction of the President, the Secretary, or the officer or person calling the meeting, to each shareholder entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at his address as it appears on the share transfer records of the corporation, with postage thereon prepaid. Section 11. Notices to Directors shall be in writing, shall specify the time and place of the meeting and shall be delivered personally or mailed to the Directors at their address appearing on the records of the corporation. Notice by mail shall be deemed to be delivered when deposited in the United States mail with postage prepaid. Notice to Directors may also be given by telegram. Section :I. Whenever any notice is required to be given to any shareholder or Director under the provision of the statutes or of the Articles of Incorporation or of these Bylaws, a waiver thereof in writing, signed by the person or persons entitled to such notice whether before or after the time stated therein, shall be equivalent to the giving of such notice. Section • . Attendance of a Director at a meeting shall constitute a waiver of notice of such meeting, except where a Director attends a meeting for the express purpose of objection to the transaction of any business on the ground that the meeting is not lawfully called or convened. Article VII. Officers Section 1 . The officers of the corporation shall consist of a President, a Secretary, and a Treasurer and may include one or more Vice Presidents and a Chairman of the Board, each of whom shall be elected by the Board of Directors. Any two or more offices may be held by the same person, • r,ca,..,st CPC--e o.et+ts 1-1-7 Section 2. The Board of Directors. at its first meeting after each annual meeting of shareholders, shall choose a President, a Secretary, and a Treasurer and may choose or more Vice Presidents, none of whom need be a member of the Board, and may appoint one of their number Chairman of the Board. Section 3. Such other officers and assistant officers and agents as may be deemed necessary may be elected or appointed by the Board of Directors. Section 4. The salaries of all officers and agents of the corporation shall be fixed by the Board of Directors. Section The officers of the corporation shall hold office until their successors are chosen end qualified. Any officer or agent or member of a committee selected or appointed by the Board of Directors may be removed by the Board of Directors whenever in its judgment the best interests of the corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Any vacancy occurring in any office of the corporation by death, resignation, removal or otherwise shall be filled by the Board of Directors. Section U. The Board of Directors may designate whether the Chairman of the Board, if such an officer shell have been appointed, or the President, shall be the chief executive officer of the corporation. In the absence of a contrary designation, the President shall be the chief executive officer. The chief executive officer shell preside at all meetings of the shareholders and the Board of Directors, and shall have such other powers and duties as usually pertain to such office or as may be delegated by the Board of Directors. The President shall have such powers and duties as usually pertain to such office, except as the same may be modified by the Board of Directors. Unless the Board of Directors shall otherwise delegate such duties, the President shall have general and active management of the business of the corporation, and shall see that all orders and resolutions of the Board of Directors are carried into effect. Section i. The President shall execute bonds, mortgages end other contracts, except where required or permitted by law to be otherwise signed and executed, and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the corporation. Section B The Vice Presidents, if any such officers shall have been appointed, in the order of their seniority, unless otherwise determined by the Board of Directors, shall, in the absence or disability of the President, perform the duties and exercise the powers of President. They shall perform such other duties and have such other powers as the Board of Directors shall prescribe. Section 9 The Secretary shall attend all meetings of the Board of Directors and all meetings of the shareholders, and record all the proceedings of the meetings of the corporation and of the Board of Directors in a book to be kept for that purpose. He or she shall give, or cause to be given, notice of all meetings of the mc.,w.ncocn ..c.e¢r..e H-S shareholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or President, under whose supervision he or she shall be. The Secretary shall keep in safe custody the seal of the corporation, if any, and, when authorized by the Board of Directors, affix the same to any instrument requiring it, end, when so affixed, it shall be attested by the Secretary's signature or by the signature of the Treasurer, an Assistant Secretary, or an Assistant Treasurer. Section 10. The Assistant Secretaries,if any such officers shall have been appointed, in the order of their seniority, unless otherwise determined by the Board of Directors, shell, in the absence or disability of the Secretary, perform the duties and exercise the power of the Secretary. They shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. Section 11. The Treasurer shall have responsibility for safeguarding the corporate funds and securities, and shall be responsible for causing a full and accurate account of receipts and disbursements to be kept in books belonging to the corporation, and shall be responsible for seeing that all moneys end other valuable effects in the name and to the credit of the corporation are kept in such depositories as may be designated by the Board of Directors. Section 2. The Treasurer shall cause funds of the corporation to be disbursed as may be ordered by the Board of Directors, and with proper vouchers being taken for such disbursements, and shall render to the President and the Board of Directors et its regular meetings, or when the Board of Directors so requires, an account of all transactions as Treasurer, end of the financial condition of the corporation. Section 1 3. The Treasurer and any other officer or employee of the corporation, if required by the Board of Directors, shall give the corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of such office. Article VIII. Management Services Section 1 The corporation may contract far the performance of management services. including executive, administrative, technical, recordkeeping, secretarial and other required operational and developmental requirements, by an independent agency or agencies. Any such contract shall be in writing, shall set forth the term thereof, the powers and duties and applicable compensation of such agency,and other appropriate conditions of the contract,and such contract and any amendments or supplements thereto shall only become effective when approved by two-thirds (213) of the Directors present and voting at any regular or special meeting of the Board of Directors. •cn.acon ..an,t.n.e 11-9 Article IX. Committees of the Board Section 1, The Board of Directors, by resolution adopted by a majority of the full Board, may designate from among its members one or more committees, each of which, to the extent provided in such resolution, shall he comprised of one or more of its members, and may designate one or more of its members as alternate members of any committee, who may, subject to any limitations imposed by the Board of Directors, replace absent or disqualified members at any meeting of that committee. Vacancies in the membership of any such committee shall be filled by the Board of Directors at a regular or special meeting of the Board of Directors. The committees shall keep regular minutes of their proceedings and report the same to the Board when required. The designation of a committee of the Board of Directors end the delegation thereto of authority shall not operate to relieve the Board of Directors- or any member thereof, of any responsibility imposed upon it or him or her by law. Section : The Board of Directors may designate one or more Loan Committees to serve as the committees responsible for day-to-day management of the corporation and all loan decisions relating to individual loans. At least 25% of the members of any Loan Committee shall be "Community Representatives." None of the Community Representatives shall be loan applicants of the corporation at any time during their term on the Loan Committee. At least one of the Community Representatives will have experience with small business financing programs. In addition, the Board of Directors may designate such other committees as may be necessary for the management of the corporation. The Board of Directors may specify the duties and responsibilities of the Loan Committees and any other committees authorized under this section. The action and decisions of the Loan Committees with respect to investments and management of the corporation shall be designed to meet the broad purposes of the Board of Directors, as well as the investment guidelines of the Office of the Comptroller of the Currency, the Federal Reserve Board,the Office of Thrift Supervision, the State of California Department of Banking or any and all other government regulatory entities with jurisdiction over the corporation and its investments end business. Article X, Advisory Board Th• Board of Directors may appoint an Advisory Board whose responsibility will be to make roc immendations to the Board of Directors on credit policies and performance. In addition, •he Advisory Board shall assist in marketing the programs of the corporation. The Advisory (board shall consist of representatives of the target groups so that the Board of Directors 'ray serve the target groups more beneficially. nco.....ncocu,..G.mt,..e H-10 Article XI. Certificate for Shares Section 1. The corporation shall deliver certificates representing all shares to which shareholders are entitled; and such certificates shall be signed by the President, a Vice President. the Secretary or an Assistant Secretary of the Corporation, and may be sealed with the seal of the corporation or a facsimile thereof. Shares may not be issued until the full amount of the consideration, fixed as provided by law, has been paid. Each certificate representing shares shall state upon the face thereof that the corporation is organized under the laws of the State of California, the name of the person to whom issued, the number and class of shares and the designation of the series, if any, which such certificate represents, and the par value of each share represented by such certificate or a statement that the shares are without par value. Section i. The signature of the President, Vice President. Secretary or Assistant Secretary, as the case may be, upon a certificate may be facsimiles. SectionThe Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost or destroyed, upon the making of an affidavit of the fact by the person claiming the certificate of stock to be lost or destroyed. Section r . Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Section E. Unless otherwise provided by statute, the corporation may regard the person in whose name any shares issued by the corporation are registered in the share transfer records of the corporation at any particular time as the owner of those shares at that time for purposes of voting those shares, receiving distributions thereon or notices in respect thereof, transferring those shares, exercising rights of dissent with respect to those shares or giving proxies with respect to those shares. Neither the corporation nor any of its officers, Directors, employees or agents shall be liable for regarding that person as the owner of those shares at that time for those purposes, regardless of whether that person does not possess a certificate for those shares. Section 6 The corporation shall be entitled to recognize the exclusive rights of a person registered on its share transfer records as the owner of shares to receive distributions or share dividends, end to vote as such owner. and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of California or these Bylaws. +c«o=sacoar,..a.mr.n I N-11 Article XII. Indemnification of Corporate Agents • he Corporation is authorized to provide indemnification of its agents (as defined in Section 317 (a) of the California Corporations Code) through bylaw provisions, agreements with its agents, vote of the shareholders or disinterested Directors, or Otherwise, in excess of the i •damnification otherwise permitted by Section 317 of the California Corporations Code, si ibject to the limits set forth in Section 204 of the California Corporations Code with respect o actions for breach of duty to the corporation or its shareholders. This corporation is furtht • authorized to provide insurance for agents as set forth in Section 317 of the California Corporations Code. Any repeal or modification of the foregoing provisions by the sharehol lers of this corporation shall not adversely affect any right or protection of an agent of this c :rpOration existing at the time of such repeal or modification. Article XIII. Liability of Directors The liability of the Directors of the corporation for monetary damages shell be eliminate Ito the fullest extent permissible under California law. Article XIV. General Provisions Section 1 The Board of Directors may authorize and the corporation may: (1) make distributions, or (2) pay share dividends, subject to any restrictions in its Articles of Incorporation and to the limitations set forth in the appropriate California statutes. Section 2 The Board of Directors may by resolution create a reserve or reserves out of its surplus or designate or allocate any part or all of surplus in any manner for any proper purpose or purposes, and may increase, decrease or abolish any such reserve, designation or allocation in the same manner. Section 3 The Board of Directors must. when requested by the holders of at least one- third (Val of the outstanding shares of the corporation, present written reports of the status and amount of business of the corporation. Section 4 All checks Cr demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. Section 5 The fiscal year of the corporation shall be fixed by resolution of the Board of Directors. Section 6. The corporate seal, if any, shall have inscribed thereon the name of the corporation and may be in such form as the Board of Directors may determine, and may be used by causing it or a facsimile thereof to he impressed or affixed or in any other manner reproduced. ':.c«wmcocna .a.e¢.n.o H-12 Article XV. Amendments or adopt new By aws, unf le d s:of D1'11 the Arrectors ticles of Incorporation ay amend or hr the eCalifornia statut streserves the power t ccluSively to the shareholders in whole or part; or (2) the shareholders in amending, repealin l or adopting a particular bylaw expressly provide that the Board of Directors may not amend Pr repeal that bylaw, r.¢.MrmcDCK w.b%h B H-13