Exhibit 10.40
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BERKADIA LLC,
A DELAWARE LIMITED LIABILITY COMPANY
SECOND AMENDED AND RESTATED OPERATING AGREEMENT
December 2, 2002
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SECOND AMENDED AND RESTATED OPERATING AGREEMENT
OF
BERKADIA LLC
This SECOND AMENDED AND RESTATED OPERATING AGREEMENT, amending and
restating in its entirety that certain First Amended and Restated Operating
Agreement of Berkadia LLC, as amended by that certain First Amendment to the
First Amended and Restated Operating Agreement of Berkadia LLC, is entered into
by and between BH Finance LLC, a Nebraska limited liability company ("BH
Finance"), and WMAC Investment Corporation, a Wisconsin corporation ("WMAC"), as
the sole Members of the Company. This Agreement shall be effective as of
December 2, 2002.
SECTION 1
THE COMPANY
1.1 Formation.
The Company has been formed as a limited liability company under and
pursuant to the provisions of the Act and upon the terms and conditions set
forth in this Agreement. The rights and liabilities of the Members shall be as
provided under the Act, the Certificate (as defined herein) and this Agreement.
1.2 Name.
The name of the Company shall be "Berkadia LLC" and all business of the
Company shall be conducted in such name or such other name as is agreed by the
Members.
1.3 Purpose; Powers.
The Company has previously (i) obtained approximately $6 billion principal
amount of debt financing for the purpose of funding the Company's activities
(the "Outside Financing"); (ii) negotiated, executed and delivered such loan or
credit agreements, notes, security agreements, pledge agreements, certificates,
and other agreements, documents and/or instruments as were necessary or
desirable in connection with the Outside Financing (the "Outside Financing
Documents"); (iii) negotiated, executed, delivered and accepted the credit
agreement relating to a loan to FCC on a senior secured basis (the "Senior
Loan") contemplated by the plan of reorganization of FNV and its subsidiaries as
confirmed by the bankruptcy court in August 2001; (iv) negotiated, executed,
delivered and accepted notes, security agreements, pledge agreements,
guarantees, certificates and other agreements, documents and/or instruments as
were necessary or desirable in connection with the Senior Loan (including the
credit agreement, the "Senior Loan Documents"); and (v) utilized the proceeds of
the Outside Financing to fund the Senior Loan.
The purposes of the Company are:
(a) to amend, modify, restate, waive, or enforce any terms and
conditions of the Outside Financing Documents; and to repay, prepay, refinance,
extend, renew, redeem, substitute and/or replace the Outside Financing from time
to time;
(b) to hold collateral, assets, securities, instruments, contracts,
rights and other property of FCC, FNV, Affiliates of FCC or FNV or other persons
or entities (the "Collateral") as security for, or in full or partial
fulfillment of, the obligations of any party to the Senior Loan Documents; to
amend, modify, restate, waive or enforce any terms and conditions of the Senior
Loan Documents; to acquire title to or possession of, hold, transfer, sell or
dispose of Collateral and other property pursuant to the terms of the Senior
Loan Documents;
(c) to make such additional investments and engage in such additional
investment activities as the Members may approve; and
(d) to engage in any and all activities related or incidental to the
foregoing purposes.
(The activities described in clauses (a) through (d) above shall be
referred to as the "Business.")
The Company shall have the power to do any and all acts necessary,
appropriate, proper, advisable, incidental or convenient to or in furtherance of
such purposes.
1.4 Principal Place of Business.
The principal place of business of the Company shall be at such location
within or without the State of Delaware as the Members may agree.
1.5 Term.
The term of the Company commenced on February 26, 2001 (the "Formation
Date"), the date the certificate of formation of the Company (as such
certificate may be amended, modified, supplemented or restated from time to
time, the "Certificate") was filed in the office of the Secretary of State of
the State of Delaware in accordance with the Act, and shall continue until the
winding up and liquidation of the Company pursuant to Section 10 hereof.
1.6 Filings; Agent for Service of Process.
(a) The Certificate has been filed in the office of the Secretary of
State of the State of Delaware in accordance with the Act. The Members shall
take any and all other actions reasonably necessary to perfect and maintain the
status of the Company as a limited liability company under the laws of the State
of Delaware, including the preparation and filing of such amendments to the
Certificate and such other assumed name certificates, documents, instruments and
publications as may be required by law.
(b) The Members shall execute and cause to be filed original or
amended certificates and shall take any and all other actions as may be
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reasonably necessary to perfect and maintain the status of the Company as a
limited liability company or similar type of entity under the laws of any other
jurisdictions in which the Company engages in business.
(c) As of the date hereof, the name and address of the Company's
designated agent and registered office for service of process on the Company in
the State of Delaware is Corporation Service Company, 0000 Xxxxxxxxxxx Xxxx,
Xxxxx 000, Xxxxxxxxxx, Xxxxxxxx 00000.
1.7 Definitions.
(a) Capitalized words and phrases used in this Agreement have the
following meanings:
"Act" means the Delaware Limited Liability Company Act, 6 Del.
C.ss.18-101, et seq., as amended from time to time (or any corresponding
provisions of succeeding law).
"Additional Capital Contributions" means, with respect to each Member, the
Capital Contributions, if any, made by such Member pursuant to Section 2.4
hereof.
"Adjusted Capital Account Deficit" means, with respect to any Member, the
deficit balance, if any, in such Member's Capital Account as of the end of the
relevant Allocation Year, after giving effect to the following adjustments:
(i) Credit to such Capital Account any amounts which such Member
is deemed to be obligated to restore pursuant to Section 1.704-1(b)(2)(ii)(c) or
the penultimate sentences in Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the
Regulations; and
(ii) Debit to such Capital Account the items described in
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and
1.704-1(b)(2)(ii)(d)(6) of the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations
and shall be interpreted consistently therewith.
"Affiliate" means, with respect to any Person, any other Person who,
directly or indirectly, controls, is controlled by, or is under common control
with, such Person.
"Affiliated Member" has the meaning set forth in Section 9.2 of this
Agreement.
"Agreement" means this Second Amended and Restated Operating Agreement of
Berkadia LLC, including any appendix attached hereto, as amended from time to
time. Words such as "herein," "hereinafter," "hereof," "hereto" and "hereunder"
refer to this Agreement as a whole, unless the context otherwise requires.
"Allocation Year" means (i) the period that commenced on the Formation
Date and ends on December 31, 2001, (ii) any subsequent twelve (12) month period
commencing on January 1 and ending on December 31 or (iii) any portion of the
period described in clauses (i) or (ii) for which the Company is required to
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allocate Profits, Losses and other items of Company income, gain, loss or
deduction pursuant to Section 3 hereof and Appendix B hereto.
"Available Cash" means the amount of cash that the Members deem available
for distribution, taking into account all debts, liabilities, and obligations of
the Company then due or soon to come due, including, without limitation,
payments of principal and interest on, and fees and expenses with respect to,
the Outside Financing, and working capital and other amounts and reserves that
the Members deem necessary or advisable in connection with the operation of the
Company's Business and the payment of principal and interest on, and fees and
expenses with respect to, the Outside Financing; provided, however, that
Available Cash shall be determined without regard to any Net Interest Savings
and any management or similar fees described in Section 11.1.
"Berkshire" means Berkshire Hathaway Inc., a Delaware corporation.
"BH Finance" has the meaning set forth in the initial paragraph of this
Agreement.
"Capital Account" means, with respect to any Member, the Capital Account
maintained for such Member in accordance with the following provisions:
(i) To each Member's Capital Account there shall be credited (A)
such Member's Capital Contributions actually (or deemed) made, (B) such Member's
distributive share of Profits and any items in the nature of income or gain
which are specially allocated pursuant to Section 3 hereof or Paragraph 1, 2 or
3 of Appendix B hereto, and (C) the amount of any Company liabilities assumed by
such Member or which are secured by any property distributed to such Member;
(ii) To each Member's Capital Account there shall be debited (A)
the amount of money and the Gross Asset Value of any property distributed (or
deemed distributed) to such Member pursuant to Section 2.3(d), 4, 5.4 or 10
hereof, (B) such Member's distributive share of Losses and any items in the
nature of expenses or losses which are specially allocated pursuant to Section 3
hereof or Paragraph 1, 2 or 3 of Appendix B hereto, and (C) the amount of any
liabilities of such Member assumed by the Company or which are secured by any
property contributed by such Member to the Company; and
(iii) In the event an Interest is Transferred in accordance with
the terms of this Agreement, the transferee shall succeed to the Capital Account
of the transferor to the extent it relates to the Interest.
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner
consistent with such Regulations.
"Capital Contributions" means, with respect to any Member, the amount of
money and the initial Gross Asset Value of any property (other than money)
contributed or required to be contributed to the Company by such Member pursuant
to Section 2, Section 10.2 or Section 12.2 hereof, including Required Capital
Contributions and Additional Capital Contributions.
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"Certificate" has the meaning set forth in Section 1.5 of this Agreement.
"Certificate of Cancellation" means a certificate filed in accordance with
Section 18-203 of the Act.
"Code" means the United States Internal Revenue Code of 1986, as amended
from time to time.
"Company" means the limited liability company formed pursuant to the
Certificate and continued pursuant to this Agreement.
"Company Minimum Gain" has the same meaning as the term "partnership
minimum gain" in Section 1.704-2(b)(2) and 1.704-2(d) of the Regulations.
"Covered Losses" means all losses, liabilities, expenses or damages
(including reasonable attorneys' fees and expenses) paid to any Third Party
Claimant for claims or legal actions arising out of the Senior Loan or the
Management Agreement or the performance of responsibilities, or taking of
actions or decisions pursuant to either, but shall not include claims or actions
to collect or enforce the Outside Financing or any other contractual obligation
of the Company.
"Debt Percentage" means, with respect to any Member, such Member's Debt
Percentage as set forth in Appendix A hereto.
"Depreciation" means, for each Allocation Year, an amount equal to the
depreciation, amortization, or other cost recovery deduction allowable with
respect to an asset for such Allocation Year, except that if the Gross Asset
Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such Allocation Year, Depreciation shall be an
amount which bears the same ratio to such beginning Gross Asset Value as the
federal income tax depreciation, amortization, or other cost recovery deduction
for such Allocation Year bears to such beginning adjusted tax basis; provided,
however, that if the adjusted basis for federal income tax purposes of an asset
at the beginning of such Allocation Year is zero, Depreciation shall be
determined with reference to such beginning Gross Asset Value using any
reasonable method selected by the Members.
"FCC" means Finova Capital Corporation.
"Fiscal Year" means (i) the period that commenced on the Formation Date
and ends on December 31, 2001, (ii) any subsequent twelve-month period
commencing on January 1 and ending on December 31 and (iii) the period
commencing on the immediately preceding January 1 and ending on the date on
which all property is distributed to the Members pursuant to Section 10 hereof.
"FNV" means The Finova Group Inc.
"Formation Date" has the meaning set forth in Section 1.5 of this
Agreement.
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"Gross Asset Value" means with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset contributed by a
Member to the Company shall be the gross fair market value of such asset at the
time of contribution, as determined by the Members;
(ii) The Gross Asset Values of all Company assets shall be
adjusted to equal their respective gross fair market values (taking Code Section
7701(g) into account), as determined by the Members as of the following times:
(A) the acquisition of an additional interest in the Company by any new or
existing Member in exchange for more than a de minimis Capital Contribution; (B)
the distribution by the Company to a Member of more than a de minimis amount of
Company property as consideration for an interest in the Company; and (C) the
liquidation of the Company within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g); provided that an adjustment at the times described in
clauses (A) and (B) of this paragraph shall be made only if the Members
determine that such adjustment is necessary to reflect the relative economic
interests of the Members in the Company;
(iii) The Gross Asset Value of any item of Company assets
distributed to any Member shall be adjusted to equal the gross fair market value
(taking Code Section 7701(g) into account) of such asset on the date of
distribution as determined by the Members; and
(iv) The Gross Asset Values of Company assets shall be increased
(or decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent
that such adjustments are taken into account in determining Capital Accounts
pursuant to Regulations Section 1.704-1(b)(2)(iv)(m) and subparagraph (vi) of
the definition of "Profits" and "Losses" or Paragraph 1(g) of Appendix B hereto;
provided, however, that Gross Asset Values shall not be adjusted pursuant to
this subparagraph (iv) to the extent that an adjustment pursuant to subparagraph
(ii) is required in connection with a transaction that would otherwise result in
an adjustment pursuant to this subparagraph (iv).
If the Gross Asset Value of an asset has been determined or adjusted pursuant to
subparagraph (ii) or (iv), such Gross Asset Value shall thereafter be adjusted
by the Depreciation taken into account with respect to such asset, for purposes
of computing Profits and Losses.
"Gross Profit" shall mean the sum of (a) the amounts distributed to a
Member pursuant to Section 4.1 or Section 10.2 of this Agreement, (b) in the
case of WMAC, the fees paid to WMAC or any of its Affiliates pursuant to the
Management Agreement (net of amounts, if any, paid over to BH Finance or its
Affiliates pursuant to Section 11.1 hereof), and (c) in the case of BH Finance,
the amounts, if any, paid over to BH Finance or its Affiliates pursuant to
Section 11.1 hereof, in each case, from the Formation Date to the date of the
Covered Loss.
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"Interest" means an ownership interest in the Company, including any and
all benefits to which the holder of such Interest may be entitled as provided in
this Agreement, together with all obligations of such Person to comply with the
terms and provisions of this Agreement.
"Leucadia" means Leucadia National Corporation, a New York corporation.
"Losses" has the meaning set forth in the definition of "Profits" and
"Losses."
"Management Agreement" means that certain Second Amended and Restated
Management Services Agreement by and among Leucadia, Leucadia International
Corporation and FNV, dated as of June 10, 2001 (and prior to June 10, 2001, the
predecessor Management Services Agreement dated February 26, 2001, and the First
Amended and Restated Management Services Agreement dated April 3, 2001), or any
similar agreement.
"Member" means any Person (i) who is referred to as such on Appendix A
hereto, or who has become a substituted Member pursuant to the terms of this
Agreement and (ii) who has not ceased to be a Member.
"Member Nonrecourse Debt" has the same meaning as the term "partner
nonrecourse debt" in Section 1.704-2(b)(4) of the Regulations.
"Member Nonrecourse Debt Minimum Gain" means an amount, with respect to
each Member Nonrecourse Debt, equal to the Company Minimum Gain that would
result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Section 1.704-2(i)(3) of the Regulations.
"Member Nonrecourse Deductions" has the same meaning as the term "partner
nonrecourse deductions" in Sections 1.704-2(i)(1) and 1.704-2(i)(2) of the
Regulations.
"Net Interest Savings" means the amounts, if any, received by the Company
from FNV pursuant to that certain letter agreement dated August 14, 2002
(relating to the proposed repurchase by FNV of certain of its 7.5% Senior
Secured Notes Maturing 2009 with Contingent Interest due 2016), as well as any
amounts derived by the Company therefrom.
"Nonrecourse Deductions" has the meaning set forth in Section
1.704-2(b)(1) of the Regulations.
"Nonrecourse Liability" has the meaning set forth in Section 1.704-2(b)(3)
of the Regulations.
"Outside Financing" has the meaning set forth in Section 1.3 of this
Agreement.
"Outside Financing Documents" has the meaning set forth in Section 1.3 of
this Agreement.
"Person" means any individual, partnership (whether general or limited),
limited liability company, corporation, trust, estate, association, nominee or
other entity.
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"Profits" and "Losses" mean, for each Allocation Year, an amount equal to
the Company's taxable income or loss for such Allocation Year, determined in
accordance with Code Section 703(a) (for this purpose, all items of income,
gain, loss, or deduction required to be stated separately pursuant to Code
Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments (without duplication):
(i) Any income of the Company that is exempt from federal income
tax and not otherwise taken into account in computing Profits or Losses pursuant
to this definition of "Profits" and "Losses" shall be added to such taxable
income or loss;
(ii) Any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account
in computing Profits or Losses pursuant to this definition of "Profits" and
"Losses" shall be subtracted from such taxable income or loss;
(iii) In the event the Gross Asset Value of any Company asset is
adjusted pursuant to subparagraphs (ii) or (iii) of the definition of Gross
Asset Value, the amount of such adjustment shall be treated as an item of gain
(if the adjustment increases the Gross Asset Value of the asset) or an item of
loss (if the adjustment decreases the Gross Asset Value of the asset) from the
disposition of such asset and shall be taken into account for purposes of
computing Profits or Losses;
(iv) Gain or loss resulting from any disposition of property with
respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Gross Asset Value of the property disposed
of, notwithstanding that the adjusted tax basis of such property differs from
its Gross Asset Value;
(v) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such Allocation Year,
computed in accordance with the definition of Depreciation;
(vi) To the extent an adjustment to the adjusted tax basis of any
Company asset pursuant to Code Section 734(b) is required, pursuant to
Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in
determining Capital Accounts as a result of a distribution other than in
liquidation of a Member's Interest, the amount of such adjustment shall be
treated as an item of gain (if the adjustment increases the basis of the asset)
or loss (if the adjustment decreases such basis) from the disposition of such
asset and shall be taken into account for purposes of computing Profits or
Losses; and
(vii) Notwithstanding any other provision of this definition, any
items which are specially allocated pursuant to Section 3.1(a) hereof or
Paragraph 1, 2 or 3 of Appendix B hereto shall not be taken into account in
computing Profits or Losses.
The amounts of the items of Company income, gain, loss or deduction available to
be specially allocated pursuant to Section 3.1(a) hereof and Paragraphs 1, 2 or
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3 of Appendix B hereto shall be determined by applying rules analogous to those
set forth in subparagraphs (i) through (vi) above.
"Proportionate Share" for any Member shall mean the product of (x) the
quotient obtained by dividing (I) the Gross Profit of such Member by (II) the
aggregate Gross Profit of all Members multiplied by (y) the amount of the
Covered Loss.
"Regulations" means the Income Tax Regulations, including Temporary
Regulations, promulgated under the Code, as such regulations are amended from
time to time.
"Required Capital Contributions" means, with respect to each Member, the
Capital Contributions, if any, made or required to be made by such Member
pursuant to Section 2.3 or 12.2 hereof.
"Senior Loan" has the meaning set forth in Section 1.3 of this Agreement.
"Senior Loan Documents" has the meaning set forth in Section 1.3 of this
Agreement.
"Senior Loan Shortfall Amount" means the lesser of (i) the unamortized
original issue discount, if any, with respect to the Senior Loan as determined
for federal income tax purposes or (ii) the excess, if any, of the outstanding
balance of the Senior Loan over the proceeds received by the Company upon a
disposition of the Senior Loan in liquidation.
"Shortfall Percentage" means, with respect to any Member, such Member's
Shortfall Percentage as set forth in Appendix A hereto.
"Third Party Claimant" means a Person other than the Company, a Member,
FCC, FNV, any lender or other party to any of the Outside Financing Documents,
or any Affiliate of any of the foregoing; provided, however, that a Third Party
Claimant shall include the shareholders or debtholders of FNV (other than a
Member or an Affiliate of a Member) whether making a claim directly or in a
derivative form of action.
"Transfer" means, as a noun, any voluntary or involuntary transfer, sale,
pledge or hypothecation or other disposition and, as a verb, voluntarily or
involuntarily to transfer, sell, pledge or hypothecate or otherwise dispose of.
"WMAC" has the meaning set forth in the initial paragraph of this
Agreement.
SECTION 2
FINANCING; CAPITAL CONTRIBUTIONS
2.1 Initial Capital Contributions.
The Members have not made, and shall not be required to make, any initial
Capital Contributions to the Company.
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2.2 Outside Financing; Guarantees.
The terms of the Outside Financing include (i) a primary guarantee by
Berkshire of 90 percent of the Company's obligations under such Outside
Financing, and (ii) a primary guarantee by Leucadia of the remaining 10 percent
of the Company's obligations under such Outside Financing, as well as a
secondary guaranty by Berkshire of such remaining 10 percent of the Company's
obligations under such Outside Financing. All other matters relating to the
Outside Financing, including, without limitation, the timing, terms and
conditions thereof, as well as all matters related to the administration of the
Outside Financing, shall be determined by BH Finance after consultation with
WMAC.
2.3 Required Capital Contributions.
(a) If any payment, including any amount of principal, interest or
similar item, or any amount attributable to indemnification obligations of the
Company under the Outside Financing Documents, is due to be paid to the lenders
who have provided the Outside Financing and the Company does not have sufficient
funds to make such payment (apart from any Net Interest Savings), then on or
before the date such funds are required to be paid, the Members shall fund to
the Company, pro rata in accordance with their Debt Percentages, an amount of
Capital Contributions that is sufficient to pay the amounts required to be paid
(without drawing upon such Net Interest Savings, which shall not be applied by
the Company to satisfy such Company payment and shall retain their status as
such for all purposes of this Agreement, including for purposes of applying
Section 4.1 hereof). Consistent with the preceding sentence, and pursuant to
Section 18-303(b) of the Act, BH Finance hereby agrees to be liable for 90
percent of the Company's obligations under the Outside Financing and WMAC hereby
agrees to be liable for 10 percent of the Company's obligations under the
Outside Financing.
(b) If the Company incurs costs or expenses, other than those set
forth in Section 2.3(a) above, and does not have sufficient funds to pay such
expenses (apart from any Net Interest Savings), upon demand by the Company or by
either Member, the Members shall promptly make Capital Contributions sufficient
to pay such costs and expenses (without drawing upon such Net Interest Savings,
which shall not be applied by the Company to satisfy such Company payment and
shall retain their status as such for all purposes of this Agreement, including
for purposes of applying Section 4.1 hereof) in accordance with their Debt
Percentages; provided, however, that Section 12.2 shall control Capital
Contributions required to fund costs and expenses that constitute Covered
Losses.
(c) Berkshire agrees to contribute (or cause to be contributed) to BH
Finance, and Leucadia agrees to contribute (or cause to be contributed) to WMAC,
an amount sufficient in each case for such Member to fund its Required Capital
Contributions as and when required under this Section 2.3.
(d) If BH Finance or WMAC (the "defaulting Member") fails to fund its
Required Capital Contributions as and when required, whether pursuant to this
Section 2.3, Section 12.2, or otherwise, the non-defaulting Member shall have a
direct claim against the defaulting Member for breach of contract hereunder, and
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the non-defaulting Member and the Company (at the sole direction of the
non-defaulting Member) shall have all remedies available to either of them in
law or equity with respect to such failure by the defaulting Member. Without
limiting the foregoing, (i) interest shall accrue on a defaulting Member's
unfunded Capital Contributions from the date required to be made at a per annum
rate equal to the "prime rate" (as specified in the Wall Street Journal or
similar national publication) plus two percentage points ("prime plus two"),
compounded annually, (ii) the non-defaulting Member shall be entitled to
contribute to the Company the amount of such unfunded Capital Contributions, and
(iii) to the extent the non-defaulting Member has funded in place of the
defaulting Member, amounts otherwise distributable to the defaulting Member
under this Agreement, whether pursuant to Section 4.1, upon liquidation of the
Company pursuant to Section 10.2, or otherwise, shall be distributed by the
Company to the non-defaulting Member, but deemed for all purposes of this
Agreement as distributed to the defaulting Member and immediately recontributed
to the Company as Required Capital Contributions, until such time as the
non-defaulting Member has received from the Company on account of such
distributions a return of the amount, if any, funded in place of the defaulting
Member, plus interest thereon from the date funded at prime plus two, compounded
annually. To the extent the non-defaulting Member has not funded in place of the
defaulting Member, amounts otherwise distributable to the defaulting Member
shall be retained by the Company, but deemed for all purposes of this Agreement
as distributed to the defaulting Member and immediately recontributed to the
Company as Required Capital Contributions, until such time as the Company has
retained an amount of such distributions equal to the amount not funded by the
defaulting Member (or by the non-defaulting Member pursuant to the immediately
preceding sentence), plus interest thereon from the date required to be made at
prime plus two, compounded annually. A defaulting Member shall remain in default
hereunder until it has contributed, or is deemed to have contributed, to the
Company, all amounts required to be contributed under this Section 2.3(d),
including interest. Beginning on the date that is 10 days after the receipt of
written notice from the Company or the non-defaulting Member that the recipient
Member is in default hereunder, the defaulting Member shall not have any voting,
consent or appointment rights as a Member, or any other rights to direct the
Company in any manner, during the continuation of such default.
2.4 Additional Capital Contributions.
The Members may make additional Capital Contributions (in addition to
those required by Section 2.3 hereof) with the written consent of both Members,
in which event the Company shall adjust the Members' interests hereunder in the
manner unanimously agreed by the Members.
SECTION 3
ALLOCATIONS
3.1 Profits and Losses.
(a) After giving effect to the special allocations set forth in
Paragraphs 1, 2 and 3 of Appendix B hereto, (i) income constituting original
issue discount with respect to the Senior Loan for any Allocation Year, as well
as all original issue discount-related adjustments, shall be allocated 50
percent to each Member and (ii) items of Company income and gain for such
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Allocation Year attributable to any Net Interest Savings shall be allocated 70
percent to BH Finance and 30 percent to WMAC.
(b) After giving effect to the special allocations set forth in
Paragraphs 1, 2 and 3 of Appendix B hereto, and the additional special
allocations set forth in Section 3.1(a) above, the Company shall allocate
Profits, Losses and any items of Company income, gain, loss or deduction for any
Allocation Year to the Members as follows:
(i) Losses and any items of Company expense or deduction for such
Allocation Year shall be allocated (x) first, to those Members with positive
Capital Account balances in proportion to such positive Capital Account
balances, until the Capital Accounts of such Members have been reduced to zero,
(y) second, to the Members in accordance with their Shortfall Percentages, until
an amount equal to the Senior Loan Shortfall Amount has been allocated pursuant
to this clause (y), and (z) thereafter, to the Members in accordance with their
Debt Percentages.
(ii) Profits and any items of Company income or gain for such
Allocation Year shall be allocated (x) first, to reverse any Losses (or items
thereof) allocated to the Members pursuant to Section 3.1(b)(i) in the reverse
of the order in which they were previously allocated, and (y) thereafter, to the
Members pro rata in accordance with their Debt Percentages.
3.2 Additional Allocations.
Additional provisions respecting allocations are set forth in Appendix B
hereto and are incorporated by reference herein.
SECTION 4
DISTRIBUTIONS
4.1 Distributions.
Subject to Section 2.3(d) hereof:
(a) Net Interest Savings, if any, shall be distributed to the Members
at such times as the Members shall determine, 70 percent to BH Finance and 30
percent to WMAC; and
(b) Available Cash, if any, shall be distributed to the Members at
such times as the Members shall determine in proportion to their Debt
Percentages.
4.2 Return of Distributions.
Except as required by law, no Member shall be required to restore to the
Company any funds properly distributed to it pursuant to this Section 4 or
Section 10 hereof; provided, however, that nothing herein shall affect the
obligation to make any Required Capital Contributions.
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SECTION 5
MANAGEMENT
5.1 Management by Members.
(a) All powers to control and manage the Business and affairs of the
Company shall be exclusively vested in the Members and the Members may exercise
all powers of the Company and do all such lawful acts as are not by statute, the
Certificate or this Agreement prohibited, and in so doing shall have the right
and authority to take all actions which the Members deem necessary, useful or
appropriate for the management and conduct of the Business.
(b) Except as otherwise provided in this Agreement, including,
without limitation, Section 2.3(d) (relating to a defaulting Member's loss of
voting, consent and other rights) and Section 5.5 (relating to BH Finance's
control of matters relating to the Senior Loan), or as required by the Act, all
matters requiring approval of the Members or relating to the management of the
Business and affairs of the Company shall require the consent of both Members
and the Company shall act only by the affirmative vote of both Members.
(c) The Members shall have the power to delegate authority to such
officers, employees, agents and representatives of the Company as it may from
time to time deem appropriate. Any delegation of authority to take any action
must be approved in the same manner as would be required to approve such action
directly.
5.2 Meetings of the Members; Approval; Expedited Decision.
(a) The Members shall meet at such times as they may agree.
(b) For all matters under this Agreement or under the Act for which
the consent, approval or affirmative vote of a Member is required, such Member's
consent, approval or affirmative vote may be given (i) at a physical meeting of
the Members or (ii) at a meeting held by means through which all persons
participating in the meeting can hear and respond to each other, provided that a
summary of such other meeting is promptly delivered to the Members in writing,
followed, in the case of a facsimile transmission, by hard copy sent by
recognized overnight delivery service or U.S. mail, postage and charges prepaid,
addressed as described in Section 12.1 hereof, or to such other address as a
Member may from time to time specify by notice to the other Member.
(c) Notwithstanding anything to the contrary in this Section 5.2, the
Members may take any action without a meeting that may be taken by the Members
under this Agreement if such action is approved by the written consent of both
Members.
(d) In addition to the methods set forth above, a Member may solicit
the expedited decision of the other Member with respect to any matter under this
Agreement by having its Designated Representative contact, by telephone,
facsimile or other agreed means, the other Member's Designated Representative.
"Designated Representative" shall mean, in the case of a Member, its authorized
representative as identified by such Member in a written notice to the other
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Member. Upon receipt of a request for an expedited decision by a Member's
Designated Representative, the recipient Member's Designated Representative
shall use reasonable efforts to deliver a written decision, consent, approval,
disapproval or other relevant response to the request within 48 hours following
receipt from the requesting Member (or otherwise) of all available information
reasonably required to reach such a decision. The failure of a Member's
Designated Representative to timely respond in writing to such a request shall
be treated as such Member's disapproval or decision not to consent with respect
to the matter involved. Any expedited decision reached in accordance with this
paragraph shall be valid only if the relevant communication is delivered in
writing, followed, in the case of a facsimile transmission, by hard copy sent by
recognized overnight delivery service or U.S. mail, postage and charges prepaid,
addressed as described in Section 12.1 hereof, or to such other address as a
Member may from time to time specify by notice to the other Member.
5.3 Duties and Obligations of the Members.
(a) The Members shall cause the Company to conduct its Business and
operations separate and apart from that of any Member or its Affiliates,
including, without limitation, (i) segregating Company assets and not allowing
funds or other assets of the Company to be commingled with the funds or other
assets of, held by, or registered in the name of, any Member or its Affiliates,
(ii) maintaining books and financial records of the Company separate from the
books and financial records of any Member or its Affiliates, and observing all
Company procedures and formalities, including, without limitation, maintaining
minutes of Company meetings and acting on behalf of the Company only pursuant to
due authorization of the Members, (iii) causing the Company to pay its
liabilities from assets of the Company, and (iv) causing the Company to conduct
its dealings with third parties in its own name and as a separate and
independent entity.
(b) The Members shall take all actions which may be necessary or
appropriate (i) for the continuation of the Company's valid existence as a
limited liability company under the laws of the State of Delaware and of each
other jurisdiction in which such existence is necessary to protect the limited
liability of the Members or to enable the Company to conduct the business in
which it is engaged and (ii) for the accomplishment of the Company's purposes,
in accordance with the provisions of this Agreement and applicable laws and
regulations.
(c) A Member shall not have any duties, fiduciary or otherwise, to
the Company or the other Member, other than the contractual obligations of such
Member set forth herein.
5.4 Reimbursements.
(a) Except as otherwise specified in this Agreement, and subject to
reimbursement by FNV or FCC pursuant to the Senior Loan and the Senior Loan
Documents, each Member shall pay its own costs and expenses incurred and paid by
such Member in the conduct of the Company's Business. Without limiting the
generality of the foregoing, the Company shall not be responsible for the costs
and expenses resulting from the performance by Leucadia or any Affiliate thereof
of its obligations under the Management Agreement.
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(b) Notwithstanding the foregoing, the Members intend that all costs
and expenses incurred in the operation of the Company's Business (other than
Covered Losses) shall be borne by the Company; provided, however, that direct
costs and expenses of a Member, such as salaries or benefits of its employees or
travel expenses, shall not be treated as expenses of, or paid by, the Company,
and such Member shall not be entitled to any reimbursement hereunder with
respect thereto.
(c) To the extent that any costs or expenses of the Members or the
Company are reimbursed to the Company by FCC or FNV pursuant to the terms of the
Senior Loan Documents or otherwise, such amounts shall promptly be distributed
to the Members who (or whose predecessors) bore such costs or expenses (if costs
or expenses paid by a Member or its predecessors are being reimbursed), or to
the Members pro rata in accordance with the percentage of such cost or expense
paid by the Members in accordance with Section 2.3(b) (if costs or expenses paid
by the Company are being reimbursed).
5.5 BH Finance Control of Senior Loan.
Notwithstanding any other provision of this Agreement, and without
limiting the generality of Section 5.1, decisions by the Company relating to any
act taken or not taken by the Company with respect to the Senior Loan,
including, without limitation, any decisions relating to the documentation or
administration of such Senior Loan or arising out of any default, decisions
relating to enforcement or to the waiver of any covenants or requirements with
respect to the Senior Loan, and the control of any contest related thereto,
shall be made by BH Finance on behalf of the Company in its sole and absolute
discretion, after consultation with WMAC. The Company shall promptly reimburse
BH Finance for its reasonable costs and expenses, including attorneys fees,
incurred in connection with any investigation or dispute arising out of any such
occurrence. Without limiting the foregoing, so long as the Senior Loan is
outstanding, decisions of the Company in connection with requests by FNV or its
subsidiaries to repurchase any 7.5% Senior Secured Notes Maturing 2009 with
Contingent Interest due 2016 of FNV shall be made by BH Finance on behalf of the
Company after consultation with WMAC.
5.6 Withdrawal.
Except as otherwise provided in Sections 4, 5.4(c) and 10 hereof, no
Member shall demand or receive a return on or of its Capital Contributions or
withdraw or resign from the Company without the consent of the other Member.
Under circumstances requiring a return of any Capital Contributions, no Member
has the right to receive property other than cash except as may be specifically
provided herein.
5.7 Member Compensation.
No Member shall receive any interest, salary or drawing with respect to
its Capital Contributions or its Capital Account or for services rendered on
behalf of the Company, or otherwise, in its capacity as a Member, except as
otherwise provided in this Agreement.
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5.8 Member Liability.
Subject to Section 2.3(a), no Member shall be liable to any third party
under a judgment, decree or order of a court, or in any other manner for the
debts or any other obligations or liabilities of the Company. Except as required
by applicable law or this Agreement, a Member shall be liable only to make its
Capital Contributions and shall not be required to restore a deficit balance in
its Capital Account or to lend any funds to the Company or, apart from its
Capital Contributions, to make any additional contributions, assessments or
payments to the Company.
SECTION 6
REPRESENTATIONS AND WARRANTIES
6.1 In General.
As of the date hereof, each Member hereby makes each of the
representations and warranties applicable to such Member as set forth in Section
6.2 hereof, and such warranties and representations shall survive the execution
of this Agreement.
6.2 Representations and Warranties.
Each Member hereby represents and warrants that:
(a) Due Incorporation or Formation; Authorization of Agreement. Such
Member is a corporation or limited liability company duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation or formation and has the company power and authority to own its
property and carry on its business as owned and carried on at the date hereof
and as contemplated hereby. Such Member is duly licensed or qualified to do
business and in good standing in each of the jurisdictions in which the failure
to be so licensed or qualified would have a material adverse effect on its
financial condition or its ability to perform its obligations hereunder. Such
Member has the company power and authority to execute and deliver this Agreement
and to perform its obligations hereunder and the execution, delivery, and
performance of this Agreement has been duly authorized by all necessary company
action. This Agreement constitutes the legal, valid, and binding obligation of
such Member.
(b) No Conflict with Restrictions; No Default. Neither the execution,
delivery, and performance of this Agreement, nor the consummation by such Member
of the transactions contemplated hereby (i) will conflict with, violate, or
result in a breach of any of the terms, conditions, or provisions of any law,
regulation, order, writ, injunction, decree, determination, or award of any
court, any governmental department, board, agency, or instrumentality, domestic
or foreign, or any arbitrator, applicable to such Member, (ii) will conflict
with, violate, result in a breach of, or constitute a default under any of the
terms, conditions, or provisions of the articles of incorporation or bylaws of
such Member, or of any material agreement or instrument to which such Member is
a party or by which such Member is or may be bound or to which any of its
material properties or assets is subject, (iii) will conflict with, violate,
result in a breach of, constitute a default under (whether with notice or lapse
of time or both), accelerate or permit the acceleration of the performance
required by, give to others any material interests or rights, or require any
16
consent, authorization, or approval under any indenture, mortgage, lease
agreement, or instrument to which such Member is a party or by which such Member
is or may be bound, or (iv) will result in the creation or imposition of any
lien upon any of the material properties or assets of such Member.
(c) Governmental Authorizations. Any registration, declaration, or
filing with, or consent, approval, license, permit, or other authorization or
order by, any governmental or regulatory authority, domestic or foreign, that is
required in connection with the valid execution, delivery, acceptance and
performance by such Member under this Agreement, or the consummation by such
Member of any transaction contemplated hereby has been completed, made, or
obtained on or before the date hereof.
(d) Litigation. There are no actions, suits, proceedings, or
investigations pending or, to the knowledge of such Member threatened against or
affecting such Member or any of its wholly-owned Affiliates or any of their
properties, assets, or businesses in any court or before or by any governmental
department, board, agency, or instrumentality, domestic or foreign, or any
arbitrator which could, if adversely determined (or, in the case of an
investigation could lead to any action, suit, or proceeding, which if adversely
determined could) reasonably be expected to materially impair such Member's
ability to perform its obligations under this Agreement, and such Member has not
received any currently effective notice of any default, and such Member is not
in default, under any applicable order, writ, injunction, decree, permit,
determination, or award of any court, any governmental department, board,
agency, or instrumentality, domestic or foreign, or any arbitrator which could
reasonably be expected to materially impair such Member's ability to perform its
obligations under this Agreement.
SECTION 7
ACCOUNTING, BOOKS AND RECORDS
7.1 Accounting, Books and Records.
The Company shall keep on site at its principal place of business such
books and records relating to the Company and its affairs as it reasonably deems
appropriate, and any Member or its designated representative shall have the
right to have reasonable access to and inspect and copy the contents of such
books or records, subject to compliance by such Member with the safety, security
and confidentiality procedures and guidelines of the Company, as such procedures
and guidelines may be established from time to time.
7.2 Reports.
The Company shall cause to be delivered to each Member such periodic
reports and financial statements as may be reasonably requested by a Member from
time to time.
7.3 Tax Matters.
Subject to the agreement of both Members, the Tax Matters Member (as
defined below) shall make on behalf of the Company any and all elections for
federal, state, local, and foreign tax purposes that it determines appropriate,
and shall represent the Company and the Members before taxing authorities or
courts of competent jurisdiction in tax matters affecting the Company or the
Members in their capacities as Members, and file any tax returns and execute any
17
agreements or other documents relating to or affecting such tax matters,
including agreements or other documents that bind the Members with respect to
such tax matters or otherwise affect the rights of the Company and the Members.
BH Finance is specifically authorized to act as the "Tax Matters Member" under
the Code and in any similar capacity under state or local law.
SECTION 8
AMENDMENTS
8.1 Amendments.
This Agreement may be amended or modified only by a written instrument
signed by each Member.
SECTION 9
TRANSFERS
9.1 Restrictions on Transfers.
Except as otherwise permitted by this Agreement, no Member shall Transfer
all or any portion of its Interest.
9.2 Permitted Transfers.
Subject to the conditions and restrictions set forth in Section 9.3
hereof, a Member may at any time Transfer all, but not less than all, of its
Interest to (a) any other Member or wholly-owned Affiliate of another Member,
(b) any wholly-owned Affiliate of the transferor (or of Berkshire or Leucadia),
or (c) any other Person, subject to receipt, in the case of clause (c), of the
prior written consent of the other Member in its absolute discretion if the
Senior Loan has not then been paid in full (any such Transfer pursuant to
clauses (a), (b) or (c) being referred to in this Agreement as a "Permitted
Transfer"). Notwithstanding the foregoing, a Member may transfer less than all
of its Interests to one or more wholly-owned Affiliates (or wholly-owned
Affiliates of Berkshire, in the case of BH Finance, or of Leucadia, in the case
of WMAC) (each, an "Affiliated Member"); provided, however, that for purposes
hereof, all of a Member's Affiliated Members shall be deemed to constitute one
and the same Member and any action or consent required hereunder with respect to
BH Finance's or WMAC's Affiliated Members shall be given solely through the
action or consent of BH Finance or WMAC, as agent for all BH Finance or WMAC
Affiliated Members, as applicable. Any distribution or allocation to be made
hereunder shall be made as if neither BH Finance nor WMAC had any Affiliated
Members, shall be made as BH Finance or WMAC directs to one Member as agent for
all BH Finance or WMAC Affiliated Members, as applicable, and thereafter BH
Finance or WMAC, as applicable, shall be responsible for apportioning such
distribution among their respective Affiliated Members, if any, according to
their respective Interests. A Transfer to an Affiliated Member shall not relieve
the transferor of its obligations hereunder.
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9.3 Conditions to Permitted Transfers.
A Transfer shall not be treated as a Permitted Transfer under Section 9.2
hereof unless and until the following conditions are satisfied:
(a) The transferor and transferee shall execute and deliver to the
Company such documents and instruments of conveyance as may be necessary or
appropriate in the opinion of counsel to the Company to effect such Transfer.
The Company shall be reimbursed by the transferor and/or transferee for all
costs and expenses that it reasonably incurs in connection with such Transfer.
(b) The transferor and transferee shall furnish the Company with the
transferee's taxpayer identification number, sufficient information to determine
the transferee's initial tax basis in the Interest transferred, and any other
information reasonably necessary to permit the Company to file all required
federal and state tax returns and other legally required information statements
or returns. Without limiting the generality of the foregoing, the Company shall
not be required to make any distribution otherwise provided for in this
Agreement with respect to any transferred Interest until it has received such
information.
(c) The transferee of Interests (other than, with respect to clauses
(i) and (ii) below, a transferee that was a Member prior to the Transfer) shall,
by written instrument in form and substance reasonably satisfactory to the
nontransferring Member (and, in the case of clause (iii) below, the transferor
Member), (i) make representations and warranties to the nontransferring Member
equivalent to those set forth in Section 6, (ii) accept and adopt the terms and
provisions of this Agreement, including, without limitation, this Section 9 and
Section 11, and (iii) assume the obligations of the transferor Member under this
Agreement with respect to the transferred Interest.
(d) The transferor shall not be relieved of its obligations
hereunder.
9.4 Prohibited Transfers.
(a) Any purported Transfer of an Interest that is neither a Permitted
Transfer nor a Transfer of less than all of a Member's Interests to one or more
Affiliated Members in compliance with Section 9.2, shall be null and void and of
no force or effect whatever; provided, however, that if the Company is required
by law to recognize a Transfer that is not a Permitted Transfer, the Interest
Transferred shall be strictly limited to the transferor's rights to allocations
and distributions as provided by this Agreement with respect to the transferred
Interest, which allocations and distributions may be applied (without limiting
any other legal or equitable rights of the Company) to satisfy any debts,
obligations, or liabilities for damages that the transferor or transferee of
such Interest may have to the Company, and such transferee shall not become a
Member of the Company.
(b) In the case of a Transfer or attempted Transfer of an Interest
that is neither a Permitted Transfer nor a Transfer of less than all of a
Member's Interests to one or more Affiliated Members in compliance with Section
9.2, the parties engaging or attempting to engage in such Transfer shall be
19
liable to indemnify and hold harmless the Company and the other Members from all
cost, liability, and damage that any of such indemnified Members may incur
(including, without limitation, incremental tax liabilities, lawyers' fees and
expenses) as a result of such Transfer or attempted Transfer and efforts to
enforce the indemnity granted hereby.
9.5 Rights of Unadmitted Assignees.
A Person who acquires an Interest but who is not admitted as a substituted
Member pursuant to Section 9.6 hereof shall be entitled only to allocations and
distributions with respect to such Interest in accordance with this Agreement,
and shall have no right to any information or accounting of the affairs of the
Company, shall not be entitled to inspect the books or records of the Company,
and shall not have any of the rights of a Member under the Act or this
Agreement.
9.6 Admission of Substituted Members.
Subject to the other provisions of this Section 9, a transferee of an
Interest in a Permitted Transfer shall be admitted to the Company as a
substituted Member.
9.7 Distributions and Allocations in Respect of Transferred Interest.
If any Interests are Transferred during any Allocation Year in compliance
with the provisions of this Section 9, Profits, Losses, each item thereof, and
all other items attributable to the Transferred Interest for such Allocation
Year shall be divided and allocated between the transferor and the transferee by
taking into account their varying Percentage Interests during the Fiscal Year in
accordance with Code Section 706(d), using any conventions permitted by law and
selected by the Members. All distributions on or before the date of such
Transfer shall be made to the transferor, and all distributions thereafter shall
be made to the transferee.
SECTION 10
DISSOLUTION AND WINDING UP
10.1 Dissolution Events.
Except as otherwise unanimously agreed to by the Members, the Company
shall dissolve and shall commence winding up and liquidating upon the first to
occur of any of the following (each a "Dissolution Event"):
(a) The unanimous vote of the Members to dissolve, wind up, and
liquidate the Company;
(b) A judicial determination that an event has occurred that makes it
unlawful, impossible or impractical to carry on the Business;
(c) The dissolution or liquidation of a Member or the taking of any
action by its directors or a majority of its stockholders looking to the
dissolution or liquidation of such Member, unless substantially all assets of
such Member are transferred or are to be transferred to a wholly-owned Affiliate
of such Member (or of Berkshire or Leucadia);
20
(d) The bankruptcy or insolvency of a Member or the occurrence of any
other event which would permit a trustee or receiver to acquire control of the
affairs or assets of a Member; or
(e) The payment in full of each of the Senior Loan and the Outside
Financing, unless waived by both Members.
The Members hereby agree that, notwithstanding any provision of the Act, the
Company shall not dissolve prior to the occurrence of a Dissolution Event.
10.2 Winding Up.
Upon the occurrence of a Dissolution Event, the Company shall continue
solely for the purposes of winding up its affairs in an orderly manner,
liquidating its assets, and satisfying the claims of its creditors and Members,
and no Member shall take any action that is inconsistent with, or not necessary
to or appropriate for, the winding up of the Company's Business and affairs;
provided, that all covenants contained in this Agreement and obligations
provided for in this Agreement shall continue to be fully binding upon the
Members until such time as the Company's property has been distributed pursuant
to this Section 10.2 and the Certificate has been canceled pursuant to the Act.
The Liquidator shall be responsible for overseeing the winding up and
dissolution of the Company, which winding up and dissolution shall be completed
within one (1) year of the occurrence of the Dissolution Event. The Liquidator
shall take full account of the Company's liabilities and property and shall
cause the property or the proceeds from the sale thereof, to the extent
sufficient therefor, to be applied and distributed, to the maximum extent
permitted by law, in the following order:
(a) First, to creditors (including Members who are creditors, to the
extent otherwise permitted by law) in satisfaction of all of the Company's debts
and other liabilities (whether by payment or the making of reasonable provision
for payment thereof); and
(b) The balance, if any, to the Members in accordance with Section
4.1 hereof, by the end of the taxable year of the Company during which the
liquidation of the Company occurs (or, if later, by 90 days after the date of
liquidation).
Except as provided in the next sentence, if any Member has a deficit
balance in its Capital Account (after giving effect to all contributions,
distributions and allocations for all periods), such Member shall have no
obligation to make any contribution to the capital of the Company with respect
to such deficit, and such deficit shall not be considered a debt owed to the
Company or to any other Person for any purpose whatsoever. Notwithstanding the
foregoing, in connection with the liquidation of the Company, and prior to the
application and distribution of Company assets pursuant to clauses (a) and (b)
above, each Member shall contribute to the Company an amount equal to any
portion of its Required Capital Contributions that has not previously been
contributed (or deemed contributed), including interest thereon to the extent
required by Section 2.3(d); provided, however, that notwithstanding anything to
the contrary set forth in Section 2.3(a) hereof, but subject to Section 2.3(d),
the amount, if any, required to be contributed by the Members pursuant to
Section 2.3(a) at the time of any such liquidation of the Company shall be
21
contributed as follows: (i) first, pro rata in accordance with the Members'
respective Shortfall Percentages, until the Members have contributed an amount
pursuant to this clause (i) equal to the Senior Loan Shortfall Amount, if any,
at the time of such liquidation; (ii) second, 100 percent by BH Finance, until
all contributions made under Section 2.3(a) (including contributions paid or
deemed paid under Section 2.3(d), other than any interest component thereof) or
clause (i) or (ii) hereof during the life of the Company have been made 90
percent by BH Finance and 10 percent by WMAC; and (iii) thereafter, pro rata in
accordance with the Members' respective Debt Percentages.
No Member shall receive additional compensation for any services performed
pursuant to this Section 10.
10.3 Rights of Members.
Except as otherwise provided in this Agreement, each Member shall look
solely to the Company's property for the return of its Capital Contribution and
has no right or power to demand or receive property other than cash from the
Company, and if the assets of the Company remaining after payment or discharge
of the debts or liabilities of the Company are insufficient to return such
Capital Contribution, a Member shall have no recourse against the Company or the
other Member.
10.4 Termination.
Upon completion of the distribution of the Company's property as provided
in this Section 10, the Company shall be terminated, and the Liquidator shall
cause the filing of the Certificate of Cancellation pursuant to Section 18-203
of the Act and shall take all such other actions as may be necessary to
terminate the Company.
10.5 Allocations During Period of Liquidation.
During the period commencing on the first day of the Fiscal Year during
which a Dissolution Event occurs and ending on the date on which all of the
assets of the Company have been distributed to the Members pursuant to Section
10.2 hereof (the "Liquidation Period"), the Members shall continue to share
Profits, Losses, and other items of Company income, gain, loss or deduction in
the manner provided in Section 3 hereof and Appendix B hereto.
10.6 The Liquidator.
(a) The "Liquidator" shall mean a Person appointed by the Members to
oversee the liquidation of the Company. The Liquidator may be an officer, a
Member or any other Person.
(b) The Company is authorized to pay a reasonable fee to the
Liquidator for its services performed pursuant to this Section 10 and to
reimburse the Liquidator for its reasonable costs and expenses incurred in
performing those services.
(c) The Company shall indemnify, save harmless, and pay all judgments
and claims against such Liquidator or any officers, directors, agents or
employees of the Liquidator relating to any liability or damage incurred by
22
reason of any act performed or omitted to be performed by the Liquidator, or any
officers, directors, agents or employees of the Liquidator in connection with
the liquidation of the Company, including reasonable attorneys' fees incurred by
the Liquidator, officer, director, agent or employee in connection with the
defense of any action based on any such act or omission, which attorneys' fees
may be paid as incurred, except to the extent such liability or damage is caused
by the fraud, gross negligence, intentional misconduct of, or a knowing
violation of the laws by the Liquidator which was material to the cause of
action.
10.7 Form of Liquidating Distributions.
For purposes of making distributions required by Section 10.2 hereof, the
Liquidator may determine whether to distribute all or any portion of the
property in-kind or to sell all or any portion of the property and distribute
the proceeds therefrom; provided, however, that no Member shall be required to
accept property in-kind in lieu of cash if cash is being delivered to another
Member.
SECTION 11
AGREEMENTS RELATING TO DEALINGS WITH FNV
11.1 Treatment of Management Fees.
The Members hereby acknowledge and agree that all management and other
services to be provided by Leucadia or its Affiliates pursuant to the terms of
the Management Agreement are activities conducted on behalf of the Company, and
that any management or similar fees received by Leucadia, Leucadia International
or any of their Affiliates under the Management Agreement are received as a
Member and that such fees are income of the Company to be shared evenly between
the Members. Consequently, WMAC and Leucadia shall promptly pay over (or cause
to be paid over) to BH Finance 50 percent of any such fee paid directly to
Leucadia, Leucadia International or any of their Affiliates. Any such payment to
BH Finance shall not be treated as a contribution to the Company. In the event
that any such fee is paid by FNV or an Affiliate directly to the Company, such
fee shall be distributed 50 percent to each Member. Leucadia and the Members
hereby agree that this Section 11.1 shall survive any dissolution and winding up
of the Company pursuant to Section 10.
11.2 Cooperation; Provision of Information.
The Members, Berkshire and Leucadia shall keep one another fully and
promptly informed of developments in FNV's or its Affiliates' business or
relationships with or affecting its creditors, including any notices from its
lenders, suppliers or advisors or any notices from any third party related to
its creditors, in each case whether such information is obtained from FNV or its
Affiliates pursuant to the terms of the Management Agreement or otherwise. The
Company shall take the following actions only if first approved by each Member:
(i) file any pleading with, or take any legal and/or factual position or action
in the Bankruptcy Court; (ii) approve the terms or form of any pleading,
including any plan of reorganization, disclosure statement or related proposed
bankruptcy court order; or (iii) subject to Section 5.5, waive a term or
condition of any agreement, plan of reorganization or bankruptcy court order.
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11.3 Designation of Observers Pursuant to Management Agreement.
BH Finance shall be entitled to designate at least one (1) of the three
(3) persons that Leucadia is entitled to designate to the Board of Directors of
FNV pursuant to the terms of the Management Agreement, and Leucadia shall cause
such BH Finance designee to be so designated.
11.4 Exercise of Management Agreement Approval Rights.
Leucadia shall not, nor shall it permit any of its Affiliates to, provide
its consent or approval with respect to any act or omission by FNV or its
Affiliates for which Leucadia's (or any Affiliate's) consent or approval is
required under the terms of the Management Agreement or otherwise, without the
written consent of BH Finance, which decision regarding consent shall be made
promptly (in light of its circumstances) after receipt of notice seeking such
consent. Without limiting the generality of the foregoing, without the written
consent of BH Finance, Leucadia shall not, nor shall it permit any of its
Affiliates to, agree to any amendment or cancellation of, or waiver of any of
its rights or FNV's obligations under, the Management Agreement.
11.5 Purchase of Additional FNV Securities or Interests or Participations
in Bank Loans.
If, during the term of this Agreement, a Member, or any Affiliate thereof,
desires to acquire additional securities (whether debt or equity) of, or
interests or participations in bank loans of, FNV or its Affiliates, then such
Member or Affiliate may not proceed with such transaction unless such Member
affords the other Member a reasonable opportunity to acquire one-half of such
securities or interests or participations in bank loans on the same terms and
conditions.
SECTION 12
MISCELLANEOUS
12.1 Notices.
Any notice, payment, demand, or communication required or permitted to be
given by any provision of this Agreement shall be in writing and shall be deemed
to have been delivered, given, and received for all purposes (i) if delivered
personally to the Person or to an officer of the Person to whom the same is
directed, or (ii) when the same is actually received, if sent either by
recognized overnight delivery service or registered or certified mail, postage
and charges prepaid, or by facsimile, if such facsimile is followed by a hard
copy of the facsimile communication sent promptly thereafter by recognized
overnight delivery service or registered or certified mail, postage and charges
prepaid, addressed as follows, or to such other address as such Person may from
time to time specify by notice to the Members and the Company:
(a) If to the Company, to the address determined pursuant to Section
1.4 hereof; and
(b) If to a Member, to the address set forth on Appendix A hereto.
24
12.2 Covered Losses.
(a) The Company shall indemnify and hold harmless any Member from any
Covered Loss in excess of such Member's Proportionate Share of such Covered
Loss.
(b) If a Covered Loss is incurred by the Company, or if the Company
indemnifies a Member from a Covered Loss pursuant to Section 12.2(a), each of
the Members shall contribute to the Company as Required Capital Contributions,
upon demand of the Company or any Member, the amount by which such Member's
Proportionate Share exceeds the amount of such Covered Loss paid by such Member
to date either directly or by Required Capital Contributions made to date
pursuant to this Section 12.2(b). Berkshire agrees to contribute (or cause to be
contributed) to BH Finance, and Leucadia agrees to contribute (or cause to be
contributed) to WMAC, an amount sufficient in each case for such Member to fund
its Required Capital Contributions as and when required under this Section
12.2(b).
(c) In the event a Member or the Company becomes aware of a potential
claim, event or state of affairs that could result in a Covered Loss, such
Member or the Company shall promptly notify all of the Members thereof, and
shall provide all Members with copies of all letters, pleadings or other
documents in its possession which could or are alleged to form the material
basis of any such claim or action; provided, that the failure to provide such
notice in a timely fashion shall not affect the parties' respective obligations
hereunder except and only to the extent that any delay in providing such notice
results in actual prejudice to another party. In any case, the Members shall
cooperate with respect to the defense of any such claim or action to the extent
that the Members are not adverse parties or have adverse interests therein. The
Members shall jointly control the defense of any such claim or action.
12.3 Defaults by Berkshire or Leucadia.
If Berkshire or Leucadia fails to fulfill its obligations under Section
2.3(c) or 12.2(b) hereof, then the Member that is not related to such Person
shall have a direct claim against such Person for breach of contract hereunder,
and the unrelated Member and the Company (at the sole direction of the unrelated
Member) shall have all remedies available to either of them in law or equity
with respect to such failure by such Person.
12.4 Binding Effect.
Except as otherwise provided in this Agreement, every covenant, term, and
provision of this Agreement shall be binding upon and inure to the benefit of
the Members and their respective successors, transferees, and assigns.
12.5 Headings.
Section and other headings contained in this Agreement are for reference
purposes only and are not intended to describe, interpret, define, or limit the
scope, extent, or intent of this Agreement or any provision hereof.
25
12.6 Severability.
Except as otherwise provided in the succeeding sentence, every provision
of this Agreement is intended to be severable, and, if any term or provision of
this Agreement is illegal or invalid for any reason whatsoever, such illegality
or invalidity shall not affect the validity or legality of the remainder of this
Agreement. The immediately preceding sentence shall be of no force or effect if
the consequence of enforcing the remainder of this Agreement without such
illegal or invalid term or provision would be to cause any Member to lose the
material benefit of its economic bargain.
12.7 Governing Law.
The laws of the State of Delaware shall govern the validity of this
Agreement, the construction of its terms, and the interpretation of the rights
and duties arising hereunder.
12.8 WAIVER OF JURY TRIAL.
EACH OF THE MEMBERS, BERKSHIRE AND LEUCADIA IRREVOCABLY WAIVES TO THE
EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.
12.9 Arbitration.
All claims, disputes and other matters in question arising out of, or
relating to this Agreement or the performance thereof, including, without
limitation, questions as to whether a matter is governed by this arbitration
clause, shall be subject to arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association (the "AAA Rules") then
pertaining, insofar as the AAA Rules are not inconsistent with the provisions
expressly set forth in this Agreement, unless the parties mutually agree
otherwise, and pursuant to the following procedures: (i) the arbitration shall
take place in Chicago, Illinois, (ii) a single neutral arbitrator having at
least ten (10) years experience in complex commercial arbitration involving
financial and partnership or limited liability company issues shall be appointed
in the manner specified in the AAA Rules; provided, that if the amount at issue
is greater than Twenty-Five Million Dollars ($25,000,000), then a panel of three
(3) such neutral arbitrators shall be appointed in the manner specified in the
AAA Rules; (iii) each party will, upon the written request of the other party,
provide the other with copies of documents relevant to the issues raised by any
claim or counterclaim; (iv) each party shall have the right to take the
deposition of one individual and any expert witness(es) designated by the other
party; (v) other discovery may be ordered by the arbitrator(s) to the extent the
arbitrator(s) deem additional discovery appropriate, and any dispute regarding
discovery, including disputes as to the need therefor or the relevance or the
scope thereof, shall be determined by the arbitrator(s), which determination
shall be conclusive; (vi) the arbitrator(s) shall have sixty (60) days following
their appointment in which to resolve the question at issue, unless the parties
agree in writing to extend such period; (vii) the award rendered by the
arbitrator(s) may grant any remedy or relief that the arbitrator(s) deem just
and equitable within the scope of this Agreement, including, without limitation,
26
damages, specific performance or injunctive relief, but may not include punitive
damages or any remedy or relief that a court having jurisdiction thereof would
not have the power to grant; (viii) judgment on the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof; (ix) all
reasonable out-of-pocket costs and reasonable legal fees incurred by the
prevailing party shall be paid by the nonprevailing party, except in the event
that a non-arbitrated settlement is reached, in which case each party shall pay
its own respective costs and fees incurred thereby; (x) subject to clause (ix),
each party shall pay one-half of the costs and fees charged by the arbitrator(s)
with regard to the submitted dispute; and (xi) the parties shall be entitled to
seek preliminary injunctive relief or other extraordinary remedies in any court
having jurisdiction thereof, to preserve the status quo pending the outcome of
arbitration.
12.10 Counterpart Execution.
This Agreement may be executed in any number of counterparts with the same
effect as if all of the Members had signed the same document. All counterparts
shall be construed together and shall constitute one agreement.
12.11 Specific Performance.
Each Member (as well as, in the case of BH Finance, Berkshire, and in the
case of WMAC, Leucadia) agrees with the other Member that such other Member
would be irreparably damaged if any of the provisions of this Agreement are not
performed in accordance with their specific terms and that monetary damages
would not provide an adequate remedy in such event. Accordingly, it is agreed
that, in addition to any other remedy to which the non-breaching Member may be
entitled, at law or in equity, the non-breaching Member shall be entitled to
injunctive relief to prevent breaches of the provisions of this Agreement and
specifically to enforce the terms and provisions hereof in any action instituted
in any court of the United States or any state thereof having subject matter
jurisdiction thereof.
12.12 Further Assurances.
Each Member covenants and agrees on behalf of itself, its successors and
its assigns, without further consideration, to prepare, execute, acknowledge,
file and deliver such other instruments, documents and statements, and to take
such other action as may be required by law or reasonably necessary to
effectively carry out the purposes of this Agreement.
12.13 Entire Agreement.
This Agreement constitutes the entire agreement between the parties hereto
pertaining to the subject matter hereof and fully supersedes any and all prior
or contemporaneous agreements or understandings between the parties hereto
pertaining to the subject matter hereof.
27
IN WITNESS WHEREOF, the parties have executed and entered into this
Second Amended and Restated Operating Agreement of the Company on November 27,
2002, effective as of the day first above set forth.
BH FINANCE LLC
By: /s/ Xxxx X. Hamburg
--------------------------------------
Name: Xxxx X. Hamburg
Title:
WMAC INVESTMENT CORPORATION
By: /s/ Xxxxxx X. Orlando
--------------------------------------
Name: Xxxxxx X. Orlando
Title:
ACKNOWLEDGED AND AGREED, provided that, except as and to the extent
specifically set forth in this Agreement, the signatories below are not
undertaking to cause or procure the performance of obligations undertaken herein
by the Members.
BERKSHIRE HATHAWAY INC.
By: /s/ Xxxx X. Hamburg
--------------------------------------
Name: Xxxx X. Hamburg
Title:
LEUCADIA NATIONAL CORPORATION
By: /s/ Xxxxxx X. Orlando
--------------------------------------
Name:
Title:
Appendix A-4
APPENDIX A
Attached to and Made a Part of
the Second Amended and Restated Operating Agreement of
Berkadia LLC
Members
-------
Name and Address Debt Percentage Shortfall Percentage
---------------- --------------- --------------------
BH Finance LLC 90% 50%
0000 Xxxxxx Xxxxx
Xxxxx, Xxxxxxxx 00000
Attn: Xxxx Xxxxxxx
Facsimile: (000) 000-0000
WMAC Investment Corporation 10% 50%
000 Xxxx Xxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx Xxxxxxxxx
Facsimile: (000) 000-0000
Appendix B-4
APPENDIX B
Attached to and Made a Part of
the Second Amended and Restated Operating Agreement of
Berkadia LLC
Additional Allocations
----------------------
1. Special Allocations.
The following special allocations shall be made in the following order:
(a) Minimum Gain Chargeback. Except as otherwise provided in Section
1.704-2(f) of the Regulations, notwithstanding any other provision of Section 3
of the Agreement and this Appendix B, if there is a net decrease in Company
Minimum Gain during any Allocation Year, each Member shall be specially
allocated items of Company income and gain for such Allocation Year (and, if
necessary, subsequent Allocation Years) in an amount equal to such Member's
share of the net decrease in Company Minimum Gain, determined in accordance with
Regulations Section 1.704-2(g). Allocations pursuant to the previous sentence
shall be made in proportion to the respective amounts required to be allocated
to each Member pursuant thereto. The items to be so allocated shall be
determined in accordance with sections 1.704-2(f)(6) and 1.704-2(j)(2) of the
Regulations. This Paragraph 1(a) is intended to comply with the minimum gain
chargeback requirement in Section 1.704-2(f) of the Regulations and shall be
interpreted consistently therewith.
(b) Member Minimum Gain Chargeback. Except as otherwise provided in
Section 1.704-2(i) (4) of the Regulations, notwithstanding any other provision
of Section 3 of the Agreement and this Appendix B, if there is a net decrease in
Member Nonrecourse Debt Minimum Gain attributable to Member Nonrecourse Debt
during any Allocation Year, each Member who has a share of the Member
Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt,
determined in accordance with Section 1.704-2(i)(5) of the Regulations, shall be
specially allocated items of Company income and gain for such Allocation Year
(and, if necessary, subsequent Allocation Years) in an amount equal to such
Member's share of the net decrease in Member Nonrecourse Debt, determined in
accordance with Regulations Section 1.704-2(i)(4). Allocations pursuant to the
previous sentence shall be made in proportion to the respective amounts required
to be allocated to each Member pursuant thereto. The items to be so allocated
shall be determined in accordance with Sections 1.704-2(i)(4) and 1.704-2(j)(2)
of the Regulations. This Paragraph 1(b) is intended to comply with the minimum
gain chargeback requirement in Section 1.704-2(i)(4) of the Regulations and
shall be interpreted consistently therewith.
(c) Qualified Income Offset. In the event any Member unexpectedly
receives any adjustments, allocations, or distributions described in Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6) of
the Regulations, items of Company income and gain shall be specially allocated
to such Member in an amount and manner sufficient to eliminate, to the extent
required by the Regulations, the Adjusted Capital Account Deficit of the Member
as quickly as possible; provided that an allocation pursuant to this Paragraph
Appendix B-1
1(c) shall be made only if and to the extent that the Member would have an
Adjusted Capital Account Deficit after all other allocations provided for in
Section 3 of the Agreement and this Appendix B have been tentatively made as if
this Paragraph 1(c) were not part of this Appendix B.
(d) Gross Income Allocation. In the event any Member has a deficit
Capital Account at the end of any Allocation Year which is in excess of the sum
of the amount such Member is obligated to restore pursuant to the penultimate
sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such
Member shall be specially allocated items of Company income and gain in the
amount of such excess as quickly as possible; provided that an allocation
pursuant to this Paragraph 1(d) shall be made only if and to the extent that
such Member would have a deficit Capital Account in excess of such sum after all
other allocations provided for in Section 3 of the Agreement and this Appendix B
have been made as if Paragraph 1(c) hereof and this Paragraph 1(d) were not part
of this Appendix B.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any Allocation
Year shall be specially allocated to the Members in proportion to their
respective Debt Percentages.
(f) Member Nonrecourse Deductions. Any Member Nonrecourse Deductions
for any Allocation 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 Regulations
Section 1.704-2(i)(1).
(g) 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 Regulations Section
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
Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Member to whom
such distribution was made in the event Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
2. Curative Allocations.
The allocations set forth in Paragraphs 1(a) through (g) and Paragraph 3
hereof (the "Regulatory Allocations") are intended to comply with certain
requirements of the Regulations. It is the intent of the Members that, to the
extent possible, all Regulatory Allocations shall be offset either with other
Regulatory Allocations or with special allocations of other items of Company
income, gain, loss or deduction pursuant to this Paragraph 2. Therefore,
notwithstanding any other provision of Section 3 of the Agreement and this
Appendix B (other than the Regulatory Allocations), the Company shall make such
offsetting special allocations of Company income, gain, loss or deduction in
whatever manner it determines appropriate so that, after such offsetting
allocations are made, each Member's Capital Account balance is, to the extent
possible, equal to the Capital Account balance such Member would have had if the
Regulatory Allocations were not part of the Agreement and all Company items were
allocated pursuant to Section 3 of the Agreement.
Appendix B-2
3. Loss Limitation.
Losses allocated pursuant to Section 3 of the Agreement shall not exceed
the maximum amount of Losses that can be allocated without causing any Member to
have an Adjusted Capital Account Deficit at the end of any Allocation Year. In
the event some but not all of the Members would have Adjusted Capital Account
Deficits as a consequence of an allocation of Losses pursuant to Section 3 of
the Agreement, the limitation set forth in this Paragraph 3 shall be applied on
a Member by Member basis and Losses not allocable to any Member as a result of
such limitation shall be allocated to the other Members in accordance with the
positive balances in such Member's Capital Accounts so as to allocate the
maximum permissible Losses to each Member under Section 1.704-1(b)(2)(ii)(d) of
the Regulations.
4. Other Allocation Rules.
(a) For purposes of determining the Profits, Losses, or any other
items allocable to any period, Profits, Losses, and any such other items shall
be determined on a daily, monthly, or other basis, as determined by the Members
using any permissible method under Code Section 706 and the Regulations
thereunder.
(b) The Members are aware of the income tax consequences of the
allocations made by Section 3 of the Agreement and this Appendix B and hereby
agree to be bound by such provisions in reporting their shares of Company income
and loss for income tax purposes.
(c) Solely for purposes of determining a Member's proportionate share
of the "excess nonrecourse liabilities" of the Company within the meaning of
Regulations Section 1.752-3(a) (3), the Members' interests in Company profits
are in proportion to their Debt Percentages.
(d) To the extent permitted by Section 1.704-2(h)(3) of the
Regulations, the Company shall endeavor to treat any distributions as having
been made from the proceeds of a Nonrecourse Liability or a Member Nonrecourse
Debt only to the extent that such distributions would cause or increase an
Adjusted Capital Account Deficit for any Member.
5. Tax Allocations; Code Section 704(c).
(a) In accordance with Code Section 704(c) and the Regulations
thereunder, income, gain, loss, and deduction with respect to any property
contributed to the capital of the Company shall, solely for tax purposes, be
allocated among the Members so as to take account of any variation between the
adjusted basis of such property to the Company for federal income tax purposes
and its initial Gross Asset Value (computed in accordance with the definition of
Gross Asset Value).
(b) In the event the Gross Asset Value of any Company asset is
adjusted pursuant to subparagraph (ii) of the definition of Gross Asset Value,
subsequent allocations of income, gain, loss, and deduction with respect to such
asset shall take account of any variation between the adjusted basis of such
asset for federal income tax purposes and its Gross Asset Value in the same
manner as under Code Section 704(c) and the Regulations thereunder.
Appendix B-3
(c) Any elections or other decisions relating to such allocations
shall be made by the Members in any manner that reasonably reflects the purpose
and intention of this Agreement. Allocations pursuant to this Paragraph 5 are
solely for purposes of federal, state, and local taxes and shall not affect, or
in any way be taken into account in computing, any Member's Capital Account or
share of Profits, Losses, other items, or distributions pursuant to any
provision of this Agreement.
(d) The Members shall, for federal income tax purposes, share any
original issue discount recognized by the Company in accordance with their
Shortfall Percentages.
(e) Subject to the foregoing, for federal income tax purposes each
item of income, gain, loss or deduction that corresponds to an item of income,
gain, loss or expense taken into account in calculating Profits or Losses or
specially allocated under Section 3.1(a) of the Agreement or Section 1, 2 or 3
of this Appendix B (a "Book Item") shall be allocated between the Members in the
same proportion as the corresponding Book Item is allocated between the Members.
Appendix b-4
