Shareholder Loan Finance Committee: December 27, 2002





Mad River Glen Coop

Shareholder Loan Finance Committee (SLFC) Meeting

December 27, 2002


Committee meeting called to order by committee chair Jito Coleman at 3:05 PM in the MR Office.


Committee members in attendance: Eric Schoenholz, Bob Rogers, and Deb Steines, MR Treasurer.

Absent – Deri Meier

Shareholders in attendance: none

MRG Staff: Sharon Crawford.




Deb Steines read from a summary of what the committee is required to do as provided by Peter Monte as follows:


The required composition of the shareholder loan finance committee is stated in the loan documents and the trustees’ July 1998 minutes as follows:


1                    The committee shall have from 3 to 9 members.

2                    At least one committee member shall be a non-trustee who is a bondholder.

3                    It is “intended that a majority” of the committee should be non-trustee-bondholders.

4                    At least one member shall be a trustee [who shall be an ex officio member – i.e., that member’s participation on the committee shall end when the member is no longer a trustee].

5                    The committee chair shall be a trustee.

6                    The committee may appoint independent persons who are professionals [investment advisors, attorneys, accountants, etc]. Of course, under the Cooperative’s bylaws, all committee members must be owners of the Cooperative too.


The powers and duties of the committee include:

1                    General supervision of the shareholder bond program [$135 K ± used for the Sunnyside Double rebuild]

2                    Oversight of principal and interest payments including Mad Money vouchers.

3                    Signing papers for partial releases, and to subordinate or discharge the mortgage. [The loan documents allow subordination up to $900 K in senior debt]

4                    The most important routine duty is for the committee to track and confirm payments of principal and interest annually. Annual “audit” of payments by the committee will enable the committee to stand ready on short notice to discharge the bondholders’ mortgage when the shareholder loans are paid in full. This task should be annual to avoid the delays which would result if the evaluation of the entire history of the loans were undertaken at the last minute.

5) If the Cooperative ever defaults, the committee has a duty to enforce the loans and mortgage on behalf of the lending owners.


Computations – Sharon distributed the Bond Exhibit, attached, that details the financials and interest earned. The exhibit was self-explanatory. We briefly reviewed the accounting methods and discuss the various options available to bond holders for interest payments. They are:


6% – if taken in cash

8% – if taken in Mad Money

10% – if taken against the APR


One concern that was raised is over the outstanding interest at the end of every fiscal year. The committee would like to recommend all interest payments be finalized in the fiscal year and not be carried over from one year to another. This is important for people who earn Mad Money and don’t pick it up at the office. The question for Peter (see resolution at the end of these minutes) is this: Sharon would like to notify those individuals that have not claimed their interest payments by March that they must contact her to change their declared method of payment from either Mad Money or APR to cash so she can send them the interest due. If they do not contact her, the interest would expire. Is this legal or must we pay the interest whether they contact her or not. The loan documents do specify payments by 10/1. See addition dated January 8, 2003 below.


Recommendation to the board – The SLFC recommends an account be created on the balance sheet to deposit and hold dollars at the rate of $20,000 a year to pay off the loan in 2008 when it come due. The board agreed to this at the January 11, 2003 board meeting.


Certification – The committee has verified and certified the financial statements as of 9/30/02.


Next Meeting – Friday, December 26, 2003, 3:30 PM in the MR office.


The meeting adjourned at 3:50 PM.



Proposed Resolution added January 8, 2003:



The Coop can, however, solve the existing problem by using a device already built into the loan documents .

Note holders who elected to receive their interest in Mad Money actually elected to receive interest “payable by a voucher redeemable in Mad Money, or directly in Mad Money”. So the Coop can satisfy its obligation to pay interest to these holders by issuing a voucher to the holder rather than by paying the Mad Money itself. By issuing the voucher, the Coop will have effected legal payment of the interest, and that will leave no “uncollected” interest on the books. The Coop can elect to use the voucher only for those who have not collected interest by a convenient date, or it can use the voucher as the universal method of paying Mad Money interest. In either case, the Coop would use a form of voucher which is secure and not subject to copying.

I see no reason why the Coop cannot require that the voucher be redeemed in some reasonable time, for example, within 12 months of its date of issue. The expiration date should allow an indisputably ample time for the holder to collect Mad Money, but some expiration date is probably appropriate to avoid the Coop’s balance sheet being perpetually burdened with a liability for lost or ignored vouchers.

The Coop’s books of account should include a liability account of “Outstanding Mad Money Vouchers “. This account would be increased when a voucher is issued, and would be decreased when an voucher is redeemed. If an expiration date is stated in a voucher, the account would also be decreased when the voucher expires. Unlike the present account for accrued but unpaid interest, the account for Outstanding Mad Money Vouchers will eventually be reduced to zero either by holder’s cashing in the voucher or by the voucher’ s expiration. The board agreed to this at the January 11, 2003 board meeting, and agreed the expiration be 12 months.