Exhibit 11
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BERKADIA LLC,
a Delaware Limited Liability Company
FIRST AMENDED AND RESTATED OPERATING AGREEMENT
August 21, 2001
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FIRST AMENDED AND RESTATED OPERATING AGREEMENT
OF
BERKADIA LLC
This FIRST AMENDED AND RESTATED OPERATING AGREEMENT is entered into by and
among BHF Berkadia Member Inc., a Delaware corporation ("B-Sub"), WMAC
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Investors, Inc., a Delaware corporation ("L-Sub"), and Berkadia Management LLC,
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a Delaware limited liability company ("Berkadia-Management"), as the sole
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Members of the Company. This Agreement shall be effective as of February 26,
2001.
RECITALS
A. Berkshire Hathaway Inc., a Delaware corporation (the "Original Berkshire
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Member"), and Leucadia National Corporation, a New York corporation (the
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"Original Leucadia Member"), entered into that certain Operating Agreement of
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Berkadia LLC (the "Original Agreement"), effective as of February 26, 2001.
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B. The Original Leucadia Member assigned its interests in the Company to WMAC
Investment Corporation, a Wisconsin corporation ("WMAC"), effective as of
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February 26, 2001.
C. The Original Berkshire Member assigned its interests in the Company to BH
Finance LLC, a Nebraska limited liability company ("BH Finance"), effective as
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of March 2, 2001.
D. In order to consolidate management of the business and affairs of the
Company through a single entity (i) concurrently herewith (A) WMAC is
contributing a portion of its interest in the Company to L-Sub, its wholly owned
subsidiary, and (B) BH Finance is contributing a portion of its interest in the
Company to B-Sub, its wholly owned subsidiary, and (ii) each of WMAC and BH
Finance is simultaneously contributing the remainder of its interest in the
Company to Berkadia-Management.
E. The parties now desire to amend and restate the Original Agreement to
provide for, among other things, (i) the admission of B-Sub, L-Sub and Berkadia-
Management as Members of the Company, (ii) the appointment of Berkadia-
Management as Manager of the Company, (iii) the consolidation of management of
the business and affairs of the Company in the Manager, (iv) the ownership by
the Company of the FNV Stock, (v) the allocation of the economic benefits
relating to the FNV Stock among the Members, (vi) the exercise of control with
respect to the FNV Stock, and (vii) such other matters as are set forth herein,
all on the terms and conditions set forth below.
SECTION 1
THE COMPANY
1.1 Formation.
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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.
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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 determined by
the Manager.
1.3 Purpose; Powers.
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The purposes of the Company are:
(a) to seek to obtain approximately $6 billion principal amount of
loans or debt financing to fund the Company's activities and to obtain such debt
financing on acceptable terms and conditions (the "Outside Financing"); to
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negotiate, execute and deliver such loan or credit agreements, notes, security
agreements, pledge agreements, certificates, and other agreements, documents
and/or instruments as are necessary or desirable in connection with the Outside
Financing (the "Outside Financing Documents"); to amend, modify, restate, waive,
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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 negotiate, execute, deliver and accept the credit agreement
contemplated by the commitment letter dated February 26, 2001 by and among the
Company, the Original Berkshire Member, the Original Leucadia Member, FCC and
FNV (as amended and supplemented, the "Commitment") relating to a loan to FCC on
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a senior secured basis (the "Senior Loan"); to negotiate, execute,
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deliver and accept notes, security agreements, pledge agreements, guarantees,
certificates and other agreements, documents and/or instruments as are necessary
or desirable in connection with the Senior Loan (including the credit agreement,
the "Senior Loan Documents"); to utilize the proceeds of the Outside Financing
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or, if not obtained, capital contributed by the Members to fund the Senior Loan;
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
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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 participate in the formulation and implementation of a chapter
11 plan for FNV and its subsidiaries;
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(d) to make such additional investments and engage in such additional
investment activities as the Manager may determine; and
(e) to engage in any and all activities related or incidental to the
foregoing purposes.
(The activities described in clauses (a) through (e) above shall be
referred to as the "Business.")
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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.
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The principal place of business of the Company shall be at 0000 Xxxxxx
Xxxxx, Xxxxx, Xxxxxxxx 00000 or such other location within or without the State
of Delaware as the Manager may determine.
1.5 Term.
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The term of the Company commenced on February 26, 2001 (the "Formation
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Date"), the date the certificate of formation of the Company (as such
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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
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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.
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(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 Manager 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 Manager shall execute and cause to be filed original or
amended certificates and shall take any and all other actions as may be
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 Effective Date, 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.
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(a) Capitalized words and phrases used in this Agreement have the
following meanings:
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"Act" means the Delaware Limited Liability Company Act, 6 Del. C. (S)18-
101, et seq., as amended from time to time (or any corresponding provisions of
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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-
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1(b)(2)(ii)(d)(6) of the Regulations.
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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
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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 First 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
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 Manager deems 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 Manager deems 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
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Available Cash shall be determined without regard to the Finova Fees or the
Stock Proceeds.
"Berkadia-Management" has the meaning set forth in the initial paragraph of
this Agreement.
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"BH Finance" has the meaning set forth in the Recitals to this Agreement.
"B-Sub" has the meaning set forth in the Recitals to 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.
"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.
"Commitment" has the meaning set forth in Section 1.3(b) of this Agreement.
"Company" means the limited liability company formed pursuant to the
Certificate and continued pursuant to this Agreement.
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"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,
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however, that if the adjusted basis for federal income tax purposes of an asset
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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 Manager.
"Effective Date" means the date hereof.
"FCC" means Finova Capital Corporation.
"Fee Percentage" means, with respect to any Member, such Member's Fee
Percentage as set forth in Appendix A hereto.
"Finova Fees" means the fees paid by FCC or FNV to the Company in
connection with the establishment of the Commitment, the origination or funding
of the Senior Loan and/or the termination of the Commitment, pursuant to the
terms of the Commitment or the Senior Loan Documents, including, without
limitation, any commitment fee, funding fee, origination fee, and termination
fee, as well as any amounts derived by the Company therefrom, but shall not
include any Reimbursement Fees as defined in the Commitment.
"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.
"FNV Stock" has the meaning set forth in Section 11.2 of this Agreement.
"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 Manager and the contributing
Member;
(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 Manager 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)
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the distribution by the Company to a Member of more than a de minimis amount
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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
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(A) and (B) of this paragraph shall be made only if the Manager determines 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 Manager; 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
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(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
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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 L-Sub, the fees paid to L-Sub or any of its Affiliates pursuant to the
Management Agreement (net of amounts, if any, paid over to B-Sub or its
Affiliates pursuant to Section 11.1 of the Operating Agreement of Berkadia-
Management), and (c) in the case of B-Sub, the amounts, if any, paid over to B-
Sub or its Affiliates pursuant to Section 11.1 of the Operating Agreement of
Berkadia-Management, in each case, from the Formation Date to the date of the
Covered Loss.
"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.
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"Losses" has the meaning set forth in the definition of "Profits" and
"Losses."
"L-Sub" has the meaning set forth in the Recitals to this Agreement.
"Management Agreement" means that certain Second Amended and Restated
Management Services Agreement by and among the Original Leucadia Member,
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.
"Manager" means Berkadia-Management, or any Person (whether or not a
Member) appointed as successor manager of the Company in accordance with Section
5.9 hereof.
"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.
"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.
"Original Agreement" has the meaning set forth in the Recitals to this
Agreement.
"Original Berkshire Member" has the meaning set forth in the Recitals to
this Agreement.
"Original Leucadia Member" has the meaning set forth in the Recitals to
this Agreement.
"Outside Financing" has the meaning set forth in Section 1.3(a) of this
Agreement.
"Outside Financing Documents" has the meaning set forth in Section 1.3(a)
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
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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
3 of Appendix B hereto shall
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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(b) of this
Agreement.
"Senior Loan Documents" has the meaning set forth in Section 1.3(b) of this
Agreement.
"Stock Percentage" means, with respect to any Member, such Member's Stock
Percentage as set forth in Appendix A hereto.
"Stock Proceeds" means any dividends, distributions, proceeds received upon
disposition, or other amounts received by the Company for or with respect to the
FNV Stock, as well as any amounts derived by the Company therefrom.
"Third Party Claimant" means a person or entity 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 Recitals to this Agreement.
SECTION 2
FINANCING; CAPITAL CONTRIBUTIONS
2.1 Initial Capital Contributions.
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The Members have not made, and shall not be required to make, any initial
Capital Contributions to the Company.
2.2 Outside Financing; Guarantees.
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(a) Except as otherwise agreed by the Members, the final terms of the
Outside Financing shall include (i) a primary guarantee by the Original
Berkshire Member of 90 percent
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of the Company's obligations under such Outside Financing, and (ii) a primary
guarantee by the Original Leucadia Member of the remaining 10 percent of the
Company's obligations under such Outside Financing, as well as a secondary
guaranty by the Original Berkshire Member of such remaining 10 percent of the
Company's obligations under such Outside Financing, in the case of each of
clause (i) and (ii), on standard terms and conditions.
(b) All other matters relating to the Outside Financing, including,
without limitation, the timing, terms and conditions thereof, as well as whether
to consummate the Outside Financing and all matters related to the
administration of the Outside Financing, shall be determined by the Manager.
2.3 Required Capital Contributions.
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(a) If the Outside Financing cannot be obtained on terms and
conditions acceptable to the Manager, but the Company is required to advance
funds to FCC pursuant to the terms of the Commitment, then on or before the date
such funds are required to be advanced, Berkadia-Management shall fund to the
Company an amount of Capital Contributions that, when combined with the Outside
Financing actually obtained, is sufficient to satisfy the Company's obligations
under the Commitment.
(b) 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 Finova Fees, Stock Proceeds or the FNV
Stock), then on or before the date such funds are required to be paid, Berkadia-
Management shall fund to the Company an amount of Capital Contributions that is
sufficient to pay the amounts required to be paid (without drawing upon such
Finova Fees, Stock Proceeds or the FNV Stock, which assets shall not be applied
by the Company to satisfy such Company obligations, and shall retain their
status as such items 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, Berkadia-Management hereby agrees to
be liable for all of the Company's obligations under the Outside Financing, and
no other Member shall bear any responsibility or liability for any portion of
such Company obligations.
(c) If the Company incurs costs or expenses, other than those set
forth in Section 2.3(a) or (b) above, and does not have sufficient funds to pay
such expenses (apart from Finova Fees, Stock Proceeds or the FNV Stock), 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 Finova Fees, Stock Proceeds or the FNV Stock, which assets shall not
be applied by the Company to satisfy such Company expenses, and shall retain
their status as such items for all purposes of this Agreement, including for
purposes of applying Section 4.1 hereof) in accordance with the following:
(i) with respect to costs and expenses incurred in the
operation of the Company's Business from the Formation Date through the date of,
and after giving effect to, the funding of the Senior Loan, the Members shall
make such Capital Contributions in accordance
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with their Fee Percentages; provided, however, that with respect to any
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origination, commitment or similar up-front fees payable in connection with the
Outside Financing, the Members shall make such Capital Contributions in
accordance with their Debt Percentages;
(ii) with respect to costs and expenses incurred in the
operation of the Company's Business following the date of, and after giving
effect to, the funding of the Senior Loan, the Members shall make such Capital
Contributions in accordance with their Debt Percentages; provided, however, that
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the Members shall make such Capital Contributions in accordance with their Stock
Percentages with respect to costs and expenses attributable to the ownership of
the FNV Stock;
(iii) the Original Berkshire Member agrees to contribute (or
cause to be contributed) to B-Sub, and the Original Leucadia Member agrees to
contribute (or cause to be contributed) to L-Sub, an amount sufficient in each
case for such Member to fund its Required Capital Contributions as and when
required under this Section 2.3(c); and
(iv) notwithstanding (i) - (iii) above, Section 12.2 shall
control Capital Contributions required to fund costs and expenses that
constitute Covered Losses.
(d) If B-Sub or L-Sub (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 (other than
Berkadia-Management) shall have a direct claim against the defaulting Member for
breach of contract hereunder, and 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
12
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) as approved by the Manager, in which event the
Company shall adjust the Members' Debt Percentages, Fee Percentages and/or Stock
Percentages in the manner reasonably determined by the Manager.
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 shall be
allocated in its entirety to Berkadia-Management and (ii) each Member shall be
specially allocated items of Company income and gain for such Allocation Year in
an amount equal to such Member's share of income or gain attributable to Finova
Fees or Stock Proceeds, determined in accordance with such Member's Fee
Percentage and Stock Percentage, respectively.
(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,
and (y) thereafter, 100 percent to Berkadia-Management.
(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.
13
SECTION 4
DISTRIBUTIONS
4.1 Distributions.
-------------
Subject to Section 2.3(d) hereof:
(a) The Finova Fees shall be distributed to the Members at such times
as the Manager shall determine in proportion to their Fee Percentages;
(b) Any Stock Proceeds shall be distributed to the Members at such
times as the Manager shall determine in proportion to their Stock Percentages;
and
(c) Available Cash, if any, shall be distributed to the Members at
such times as the Manager 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.
SECTION 5
MANAGEMENT
5.1 Management by the Manager.
-------------------------
(a) Except as otherwise provided in this Agreement, the Manager shall
act as "manager" of the Company within the meaning of (S)18-101(10) of the Act.
(b) All powers to control and manage the Business and affairs of the
Company shall be exclusively vested in the Manager and the Manager 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 Manager deems necessary, useful or
appropriate for the management and conduct of the Business.
(c) Except as otherwise provided in this Agreement or as required by
the Act, no matter relating to the management of the Business and affairs of the
Company shall require the consent of any Member of the Company (other than the
Manager, if the Manager is a Member).
(d) The Manager 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.
14
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 all
Members.
(d) In addition to the methods set forth above, a Member may solicit
the expedited decision of the other Members with respect to any matter under
this Agreement by having its Designated Representative contact, by telephone,
facsimile or other agreed means, the other Members' Designated Representatives.
"Designated Representative" shall mean, in the case of each Member, such
-------------------------
authorized representative as identified by such Member in a written notice to
the other Members. Upon receipt of a request for an expedited decision by a
Member's Designated Representative, a 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
Members.
5.3 Duties and Obligations of Manager and Other Members.
---------------------------------------------------
(a) The Manager 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, (iii) causing the Company to pay its liabilities from assets
of the Company, and (iv) causing the
15
Company to conduct its dealings with third parties in its own name and as a
separate and independent entity.
(b) The Manager and 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) Neither the Manager, nor any Member shall have any duties,
fiduciary or otherwise, to the Company or the other Members, other than the
contractual obligations 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 Commitment and the Annexes thereto,
each Member shall pay its own costs and expenses incurred and paid by such
person in the conduct of the Company's Business, including, without limitation,
any and all costs and expenses incurred in negotiating and documenting the
Commitment and the Management Agreement, and participating in the formulation of
the chapter 11 plan for FNV and its subsidiaries. Without limiting the
generality of the foregoing, neither the Company nor the Original Berkshire
Member nor any Affiliate thereof shall be responsible for the costs and expenses
resulting from the performance by the Original Leucadia Member or any Affiliate
thereof of its obligations under the Management Agreement.
(b) Notwithstanding the foregoing, the Members intend that all costs
and expenses incurred after the Formation Date in negotiating and documenting
the Outside Financing and the Senior Loan, and any other 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 hereunder to any reimbursement 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
Commitment, 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(c) (if
costs or expenses paid by the Company are being reimbursed).
5.5 Manager Control of Commitment and Senior Loan.
---------------------------------------------
Notwithstanding any other provision of this Agreement, and without limiting
the generality of Section 5.1, decisions relating to any act taken or not taken
by the Company with
16
respect to the Commitment or 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 Commitment or the Senior
Loan, and the control of any contest related thereto, shall be made by the
Manager on behalf of the Company in its sole and absolute discretion. The
Company shall promptly reimburse the Manager for its reasonable costs and
expenses, including attorneys fees, incurred in connection with any
investigation or dispute arising out of any such occurrence.
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 Manager. 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 Compensation.
------------
Neither the Manager, nor any 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
Manager or as a Member, except as otherwise provided in this Agreement.
5.8 Member Liability.
----------------
Subject to Section 2.3(b), neither the Manager, nor any 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.
5.9 Removal and Replacement of Manager.
-----------------------------------
The Manager may be removed as Manager of the Company, and replaced with a
successor Manager (which successor need not be a Member of the Company) only
upon the written election of all Members (other than the Manager, if the Manager
is a Member). If the Manager is a Member, then it shall continue as a Member of
the Company notwithstanding its removal and replacement as Manager of the
Company.
17
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
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
18
consummation by such Member of any transaction contemplated hereby has been
completed, made, or obtained on or before the Effective Date.
(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 all 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 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. B-Sub is
specifically authorized to act as the "Tax Matters Member" under the Code and in
------------------
any similar capacity under state or local law.
19
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 the Original Berkshire Member or
the Original Leucadia Member), or (c) any other Person, subject to receipt, in
the case of clause (c), of the prior written consent of the other Members in
their 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, B-Sub or
------------------
L-Sub may transfer less than all of its Interests to one or more wholly-owned
Affiliates (or wholly-owned Affiliates of the Original Berkshire Member, in the
case of B-Sub, or of the Original Leucadia Member, in the case of L-Sub) (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 B-Sub's or
L-Sub's Affiliated Members shall be given solely through the action or consent
of B-Sub or L-Sub, as agent for all B-Sub or L-Sub Affiliated Members, as
applicable. Any distribution or allocation to be made hereunder shall be made
as if neither B-Sub nor L-Sub had any Affiliated Members, shall be made as B-Sub
or L-Sub directs to one Member as agent for all B-Sub or L-Sub Affiliated
Members, as applicable, and thereafter B-Sub or L-Sub, 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.
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
20
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 Members (and, in the case of clause (iii) below, the transferor
Member), (i) make representations and warranties to the nontransferring Members
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
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
21
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 Manager. 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 the Original Berkshire Member or the Original Leucadia
Member);
(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 all 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.
22
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).
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, the
Manager or the other Members.
23
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 the Manager or a Person appointed by
----------
the Manager 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
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; provided, further, that the FNV Stock, if any, shall be distributed in-
-------- -------
kind in accordance with the Members' Stock Percentages.
24
SECTION 11
AGREEMENTS RELATING TO DEALINGS WITH FNV AND THE FNV STOCK
11.1 Cooperation; Provision of Information.
--------------------------------------
The Manager and each Member shall cooperate and coordinate in the drafting
and formulation of FNV's or its Affiliates' chapter 11 plan or plans of
reorganization. Each Member shall be entitled to, at its option and expense,
appear and be heard in the Bankruptcy Court on any matter at issue in the
bankruptcy cases. Without limiting the generality of the foregoing, 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.
11.2 Agreements Relating to the FNV Stock.
------------------------------------
Notwithstanding anything to the contrary set forth in this Agreement, the
following provisions shall govern the ownership and control of the common stock
of FNV acquired by the Company in connection with the FNV plan of reorganization
(the "FNV Stock").
---------
(a) Except in the event of liquidation of the Company pursuant to
Section 10, or as otherwise unanimously agreed to by the Members, the Company,
the Original Berkshire Member, the Original Leucadia Member and the Members
shall cause the FNV Stock to be transferred and delivered to, held directly by,
and not distributed by, the Company.
(b) Without limiting the generality of Section 5.1, the Company
shall vote its FNV Stock in such manner as determined by the Manager, and any
directors that the Company is entitled to, or has the power to, elect or
otherwise nominate or designate to FNV's Board of Directors, shall be elected,
nominated or designated by the Manager.
11.3 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 Members a reasonable opportunity to acquire a proportionate
amount (determined in accordance with Stock Percentages) of such securities or
interests or participations in bank loans on the same terms and conditions.
Notwithstanding the foregoing, L-Sub and its Affiliates and the Manager hereby
waive any opportunity to acquire any portion of the 7.5% Senior Secured Notes
Maturing 2009 with Contingent Interest due 2016 of FNV that B-Sub or its
Affiliates may acquire pursuant to a tender offer in accordance with the plan of
reorganization.
11.4 Waiver of Certain Fees and Payments.
------------------------------------
Effective upon receipt by the Company of both the Commitment Fee and either
the Funding Fee or the Termination Fee (as such terms are defined in the
Commitment), the Original
25
Leucadia Member shall waive any and all rights it may have to receive the $15
million breakup fee and effective upon receipt by the Original Leucadia Member
(or any Affiliate) of reimbursement for reasonable out of pocket expenses
incurred by the Original Leucadia Member prior to February 1, 2001 and related
to FNV and its subsidiaries, the Original Leucadia Member shall waive any and
all rights it may have to receive liquidated damages, in each case arising from
agreements entered into prior to the Formation Date among the Original Leucadia
Member, on the one hand, and FNV, FCC or any of their Affiliates on the other
hand. The Members hereby acknowledge and agree that any such breakup fee
received by the Original Leucadia Member (or any Affiliate) is income of the
Company to be shared evenly between the Members. Consequently, the Original
Leucadia Member shall promptly pay over (or cause to be paid over) to the
Original Berkshire Member 50 percent of any such breakup fee paid directly to
it.
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.
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). The Original Berkshire Member agrees to
contribute (or cause to be contributed) to B-Sub, and the Original Leucadia
Member agrees to contribute (or cause to be contributed) to L-Sub, 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).
26
(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 Original Members.
----------------------------
If the Original Berkshire Member or the Original Leucadia Member fails to
fulfill its obligations under Section 2.3(c)(iii) or 12.2(b) hereof, then the
Member that is not related to such original member shall have a direct claim
against such original member 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 the original member.
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.
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.
27
12.8 WAIVER OF JURY TRIAL.
--------------------
EACH OF THE MEMBERS, THE ORIGINAL BERKSHIRE MEMBER AND THE ORIGINAL
LEUCADIA MEMBER 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,
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.
28
12.11 Specific Performance.
--------------------
Each Member (as well as, in the case of B-Sub, the Original Berkshire
Member, and in the case of L-Sub, the Original Leucadia Member) agrees with the
other Members that such other Members 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 Members may be entitled, at law or in equity, the non-
breaching Members 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.
29
IN WITNESS WHEREOF, the parties have executed and entered into this First
Amended and Restated Operating Agreement of the Company on August 21, 2001,
effective as of the day first above set forth.
BHF BERKADIA MEMBER INC.
By: /s/ Xxxx X. Hamburg
---------------------------------
Name: Xxxx X. Hamburg
Title: President
WMAC INVESTORS, INC.
By: /s/ Xxxxxx X. Orlando
---------------------------------
Name: Xxxxxx X. Orlando
Title: Vice President
BERKADIA MANAGEMENT LLC
By: /s/ Xxxx X. Hamburg
---------------------------------
Name: Xxxx X. Hamburg
Title: President
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: Vice President and Chief Financial Officer
LEUCADIA NATIONAL CORPORATION
By: /s/ Xxxxxx X. Orlando
---------------------------------
Name: Xxxxxx X. Orlando
Title: Vice President and Chief Financial Officer
APPENDIX A
Attached to and Made a Part of
the First Amended and Restated Operating Agreement of
Berkadia LLC
Members
-------
Name and Address Debt Percentage Fee Percentage Stock Percentage
---------------- --------------- -------------- ----------------
BHF Berkadia Member Inc. 36% 20% 20%
0000 Xxxxxx Xxxxx
Xxxxx, Xxxxxxxx 00000
Attn: Xxxx Xxxxxxx
Facsimile: (000) 000-0000
WMAC Investors, Inc. 4% 20% 20%
000 Xxxx Xxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx Xxxxxxxxx
Facsimile: (000) 000-0000
Berkadia Management LLC 60% 60% 60%
0000 Xxxxxx Xxxxx
Xxxxx, Xxxxxxxx 00000
Attn: Xxxx Xxxxxxx
Facsimile: (000) 000-0000
APPENDIX B
Attached to and Made a Part of
the First 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
--------
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 Manager 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) Any original issue discount recognized by the Company for federal
income tax purposes shall be allocated in its entirety to Berkadia-Management.
(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 among the Members in the same
proportion as the corresponding Book Item is allocated among the Members.
Appendix B-4
