EXHIBIT 2
________________________________________________________________________________
BERKADIA EQUITY HOLDINGS LLC,
a Delaware Limited Liability Company
OPERATING AGREEMENT
July 31, 2002
________________________________________________________________________________
OPERATING AGREEMENT
OF
BERKADIA EQUITY HOLDINGS LLC
This OPERATING AGREEMENT shall be effective as of the 31/st/ day of July,
2002, by and between BHF Berkadia Member Inc., a Delaware corporation ("B-Sub"),
and WMAC Investors, Inc., a Delaware corporation ("L-Sub"), as the sole Members
of the Company.
RECITALS
A. Each of the Members is a member of Berkadia LLC, a Delaware limited
liability company ("Berkadia").
B. Pursuant to that certain Division Agreement of Berkadia LLC, effective as
of the date hereof, by and among Berkadia and each of its members, the parties
thereto determined to divide Berkadia into two separate entities, for the
reasons set forth therein, through the establishment of the Company and the
distribution of interests in the Company to B-Sub and L-Sub.
C. The parties now desire to set forth an operating agreement for the
Company to govern such matters as are set forth herein, all on the terms and
conditions set forth below.
SECTION 1
THE COMPANY
1.1 Formation.
The Company has been formed as a limited liability company under and
pursuant to the provisions of the Act and upon the terms and conditions set
forth in this Agreement. The rights and liabilities of the Members shall be as
provided under the Act, the Certificate (as defined herein) and this Agreement.
1.2 Name.
The name of the Company shall be "Berkadia Equity Holdings LLC" and all
business of the Company shall be conducted in such name or such other name as is
agreed by the Members.
1.3 Purpose; Powers.
(a) The purpose of the Company is to hold and deal with the FNV
Stock (such activity, the "Business"), separate and apart from the Members'
other activities.
(b) 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 purpose.
1.4 Principal Place of Business.
The principal place of business of the Company shall be at such location
within or without the State of Delaware as the Members may agree.
1.5 Term.
The term of the Company commenced on the date the certificate of formation
of the Company (as such certificate may be amended, modified, supplemented or
restated from time to time, the "Certificate") was filed in the office of the
Secretary of State of the State of Delaware in accordance with the Act and shall
continue until the winding up and liquidation of the Company pursuant to Section
10 hereof.
1.6 Filings; Agent for Service of Process.
(a) The Members have caused the Certificate to be filed in the
office of the Secretary of State of the State of Delaware in accordance with the
Act. The Members shall take any and all other actions reasonably necessary to
perfect and maintain the status of the Company as a limited liability company
under the laws of the State of Delaware, including the preparation and filing of
such amendments to the Certificate and such other assumed name certificates,
documents, instruments and publications as may be required by law.
(b) The Members shall execute and cause to be filed original or
amended certificates and shall take any and all other actions as may be
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.
(a) Capitalized words and phrases used in this Agreement have the
following meanings:
"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 succeeding law).
"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
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(ii) Debit to such Capital Account the items described in
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and
1.704-1(b)(2)(ii)(d)(6) of the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations
and shall be interpreted consistently therewith.
"Affiliate" means, with respect to any Person, any other Person who,
directly or indirectly, controls, is controlled by, or is under common control
with, such Person.
"Affiliated Member" has the meaning set forth in Section 9.2 of this
Agreement.
"Agreement" means this Operating Agreement of Berkadia Equity Holdings
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 Effective
Date and ends on December 31, 2002, (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 Members deem
available for distribution, taking into account all debts, liabilities, and
obligations of the Company then due or soon to come due, including, without
limitation, working capital and other amounts and reserves that the Members deem
necessary or advisable in connection with the operation of the Company's
Business.
"Berkadia" has the meaning set forth in the Recitals to this Agreement.
"Berkshire" means Berkshire Hathaway Inc., a Delaware corporation.
"B-Sub" has the meaning set forth in the initial paragraph of this
Agreement.
"Capital Account" means, with respect to any Member, the Capital
Account maintained for such Member in accordance with the following provisions:
(i) To each Member's Capital Account there shall be credited
(A) such Member's Capital Contributions actually (or deemed) made, (B) such
Member's distributive share of Profits and any items in the nature of income or
gain which are specially allocated pursuant to Section 3 hereof or 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 to
such Member
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pursuant to Section 4.1 or Section 10.2 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 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 to the Company by such Member pursuant to Section 2 or Section 12.2
hereof.
"Certificate" has the meaning set forth in Section 1.5 of this
Agreement.
"Certificate of Cancellation" means a certificate filed in accordance
with Section 18-203 of the Act.
"Code" means the United States Internal Revenue Code of 1986, as
amended from time to time.
"Company" means the limited liability company formed pursuant to the
Certificate and continued pursuant to this Agreement.
"Company Minimum Gain" has the same meaning as the term "partnership
minimum gain" in Section 1.704-2(b)(2) and 1.704-2(d) of the Regulations.
"Covered Loss" means all losses, liabilities, expenses or damages
(including reasonable attorneys' fees and expenses) paid by a Member to any
Person other than the Company, a Member, or any Affiliate of the foregoing, for
claims or legal actions arising by reason of (i) the fact that the Member was or
is a Member of the Company or (ii) any act performed or omitted to be performed
by such Member in connection with the conduct of the affairs of the Company or
otherwise in connection with this Agreement or the matters contemplated herein,
unless it is determined by a court of competent jurisdiction in a final
determination that such Member acted fraudulently or with gross negligence, bad
faith or in knowing violation of law.
"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
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such beginning adjusted tax basis; provided, however, that if the adjusted basis
for federal income tax purposes of an asset at the beginning of such Allocation
Year is zero, Depreciation shall be determined with reference to such beginning
Gross Asset Value using any reasonable method selected by the Members.
"Effective Date" means the date hereof.
"Fiscal Year" means (i) the period commencing on the Effective Date and
ending on December 31, 2002, (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" means, at any time, the common stock of FNV held
beneficially or of record by the Company at that time.
"Gross Asset Value" means with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset contributed
by a Member to the Company shall be the gross fair market value of such asset at
the time of contribution, as determined by the Members;
(ii) The Gross Asset Values of all Company assets shall be
adjusted to equal their respective gross fair market values (taking Code Section
7701(g) into account), as determined by the Members as of the following times:
(A) the acquisition of an additional interest in the Company by any new or
existing Member in exchange for more than a de minimis Capital Contribution; (B)
the distribution by the Company to a Member of more than a de minimis amount of
Company property as consideration for an interest in the Company; and (C) the
liquidation of the Company within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g); provided that an adjustment at the times described in
clauses (A) and (B) of this paragraph shall be made only if the Members
determine that such adjustment is necessary to reflect the relative economic
interests of the Members in the Company;
(iii) The Gross Asset Value of any item of Company assets
distributed to any Member shall be adjusted to equal the gross fair market value
(taking Code Section 7701(g) into account) of such asset on the date of
distribution as determined by the Members; and
(iv) The Gross Asset Values of Company assets shall be
increased (or decreased) to reflect any adjustments to the adjusted basis of
such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to
the extent that such adjustments are taken into account in determining Capital
Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m) and subparagraph
(vi) of the definition of "Profits" and "Losses" or Paragraph 1(g) of Appendix B
hereto; provided, however, that Gross Asset Values shall not be
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adjusted pursuant to this subparagraph (iv) to the extent that an adjustment
pursuant to subparagraph (ii) is required in connection with a transaction that
would otherwise result in an adjustment pursuant to this subparagraph (iv).
If the Gross Asset Value of an asset has been determined or adjusted pursuant to
subparagraph (ii) or (iv), such Gross Asset Value shall thereafter be adjusted
by the Depreciation taken into account with respect to such asset, for purposes
of computing Profits and Losses.
"Interest" means an ownership interest in the Company, including any
and all benefits to which the holder of such Interest may be entitled as
provided in this Agreement, together with all obligations of such Person to
comply with the terms and provisions of this Agreement.
"Leucadia" means Leucadia National Corporation, a New York corporation.
"Losses" has the meaning set forth in the definition of "Profits" and
"Losses."
"L-Sub" has the meaning set forth in the initial paragraph of this
Agreement.
"Member" means any Person (i) who is referred to as such on Appendix A
hereto, or who has become a substituted Member pursuant to the terms of this
Agreement and (ii) who has not ceased to be a Member.
"Member Nonrecourse Debt" has the same meaning as the term "partner
nonrecourse debt" in Section 1.704-2(b)(4) of the Regulations.
"Member Nonrecourse Debt Minimum Gain" means an amount, with respect to
each Member Nonrecourse Debt, equal to the Company Minimum Gain that would
result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Section 1.704-2(i)(3) of the Regulations.
"Member Nonrecourse Deductions" has the same meaning as the term
"partner nonrecourse deductions" in Sections 1.704-2(i)(1) and 1.704-2(i)(2) of
the Regulations.
"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.
"Percentage Interest" means, with respect to any Member, such Member's
Percentage Interest as set forth in Appendix A hereto.
"Person" means any individual, partnership (whether general or
limited), limited liability company, corporation, trust, estate, association,
nominee or other entity.
"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
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Code Section 703(a) (for this purpose, all items of income, gain, loss, or
deduction required to be stated separately pursuant to Code Section 703(a)(1)
shall be included in taxable income or loss), with the following adjustments
(without duplication):
(i) Any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Profits or Losses
pursuant to this definition of "Profits" and "Losses" shall be added to such
taxable income or loss;
(ii) Any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account
in computing Profits or Losses pursuant to this definition of "Profits" and
"Losses" shall be subtracted from such taxable income or loss;
(iii) In the event the Gross Asset Value of any Company asset is
adjusted pursuant to subparagraphs (ii) or (iii) of the definition of Gross
Asset Value, the amount of such adjustment shall be treated as an item of gain
(if the adjustment increases the Gross Asset Value of the asset) or an item of
loss (if the adjustment decreases the Gross Asset Value of the asset) from the
disposition of such asset and shall be taken into account for purposes of
computing Profits or Losses;
(iv) Gain or loss resulting from any disposition of property
with respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Gross Asset Value of the property disposed
of, notwithstanding that the adjusted tax basis of such property differs from
its Gross Asset Value;
(v) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such Allocation Year,
computed in accordance with the definition of Depreciation;
(vi) To the extent an adjustment to the adjusted tax basis of
any Company asset pursuant to Code Section 734(b) is required, pursuant to
Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in
determining Capital Accounts as a result of a distribution other than in
liquidation of a Member's Interest, the amount of such adjustment shall be
treated as an item of gain (if the adjustment increases the basis of the asset)
or loss (if the adjustment decreases such basis) from the disposition of such
asset and shall be taken into account for purposes of computing Profits or
Losses; and
(vii) Notwithstanding any other provision of this definition, any
items which are specially allocated pursuant to Section 3 hereof or 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 hereof and Appendix B hereto shall
be determined by applying rules analogous to those set forth in subparagraphs
(i) through (vi) above.
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"Regulations" means the Income Tax Regulations, including Temporary
Regulations, promulgated under the Code, as such regulations are amended from
time to time.
"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.
SECTION 2
FINANCING; CAPITAL CONTRIBUTIONS
2.1 No Required Capital Contributions.
Except as otherwise required by Section 12.2, no Member shall be
required to make any Capital Contributions to the Company.
2.2 Voluntary Capital Contributions.
The Members may make Capital Contributions to the Company with the
written consent of both Members, in which event the Company shall adjust the
Members' Percentage Interests in the manner unanimously agreed by the Members.
SECTION 3
ALLOCATIONS
3.1 Profits and Losses.
After giving effect to the special allocations set forth in Appendix B
hereto, the Company shall allocate Profits, Losses and any items of Company
income, gain, loss or deduction for any Allocation Year to the Members pro rata
in accordance with their Percentage Interests.
3.2 Additional Allocations.
Additional provisions respecting allocations are set forth in Appendix
B hereto and are incorporated by reference herein.
SECTION 4
DISTRIBUTIONS
4.1 Distributions.
Available Cash, if any, shall be distributed to the Members in
proportion to their Percentage Interests at such times as the Members shall
determine. Any other non-liquidating distributions shall be made only with the
unanimous consent of the Members.
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.
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SECTION 5
MANAGEMENT
5.1 Management by Members.
(a) All powers to control and manage the Business and affairs of the
Company shall be exclusively vested in the Members and the Members may exercise
all powers of the Company and do all such lawful acts as are not by statute, the
Certificate or this Agreement prohibited, and in so doing shall have the right
and authority to take all actions which the Members deem necessary, useful or
appropriate for the management and conduct of the Business.
(b) Except as otherwise provided in this Agreement or as required by
the Act, all matters requiring approval of the Members or relating to the
management of the Business and affairs of the Company, shall require the consent
of both Members and the Company shall act only by the affirmative vote of both
Members.
(c) The Members shall have the power to delegate authority to such
officers, employees, agents and representatives of the Company as it may from
time to time deem appropriate. Any delegation of authority to take any action
must be approved in the same manner as would be required to approve such action
directly.
5.2 Meetings of the Members; Approval; Expedited Decision.
(a) The Members shall meet at such times as they may agree.
(b) For all matters under this Agreement or under the Act for which
the consent, approval or affirmative vote of a Member is required, such Member's
consent, approval or affirmative vote may be given (i) at a physical meeting of
the Members or (ii) at a meeting held by means through which all persons
participating in the meeting can hear and respond to each other, provided that a
summary of such other meeting is promptly delivered to the Members in writing,
followed, in the case of a facsimile transmission, by hard copy sent by
recognized overnight delivery service or U.S. mail, postage and charges prepaid,
addressed as described in Section 12.1 hereof, or to such other address as a
Member may from time to time specify by notice to the other Member.
(c) Notwithstanding anything to the contrary in this Section 5.2, the
Members may take any action without a meeting that may be taken by the Members
under this Agreement if such action is approved by the written consent of all
Members.
(d) In addition to the methods set forth above, a Member may solicit
the expedited decision of the other Member with respect to any matter under this
Agreement by having its Designated Representative contact, by telephone,
facsimile or other agreed means, the other Member's Designated Representative.
"Designated Representative" shall mean, in the case of a Member, its authorized
representative as identified by such Member in a written notice to the other
Member. Upon receipt of a request for an expedited decision by a Member's
Designated Representative, the recipient Member's Designated Representative
shall use
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reasonable efforts to deliver a written decision, consent, approval, disapproval
or other relevant response to the request within 48 hours following receipt from
the requesting Member (or otherwise) of all available information reasonably
required to reach such a decision. The failure of a Member's Designated
Representative to timely respond in writing to such a request shall be treated
as such Member's disapproval or decision not to consent with respect to the
matter involved. Any expedited decision reached in accordance with this
paragraph shall be valid only if the relevant communication is delivered in
writing, followed, in the case of a facsimile transmission, by hard copy sent by
recognized overnight delivery service or U.S. mail, postage and charges prepaid,
addressed as described in Section 12.1 hereof, or to such other address as a
Member may from time to time specify by notice to the other Member.
5.3 Duties and Obligations of the Members.
(a) The Members shall cause the Company to conduct its Business and
operations separate and apart from that of any Member or its Affiliates,
including, without limitation, (i) segregating Company assets and not allowing
funds or other assets of the Company to be commingled with the funds or other
assets of, held by, or registered in the name of, any Member or its Affiliates,
(ii) maintaining books and financial records of the Company separate from the
books and financial records of any Member or its Affiliates, and observing all
Company procedures and formalities, including, without limitation, maintaining
minutes of Company meetings and acting on behalf of the Company only pursuant to
due authorization of the Members, (iii) causing the Company to pay its
liabilities from assets of the Company, and (iv) causing the Company to conduct
its dealings with third parties in its own name and as a separate and
independent entity.
(b) The Members shall take all actions which may be necessary or
appropriate (i) for the continuation of the Company's valid existence as a
limited liability company under the laws of the State of Delaware and of each
other jurisdiction in which such existence is necessary to protect the limited
liability of the Members or to enable the Company to conduct the business in
which it is engaged and (ii) for the accomplishment of the Company's purposes,
in accordance with the provisions of this Agreement and applicable laws and
regulations.
(c) A Member shall not have any duties, fiduciary or otherwise, to the
Company or the other Member, other than the contractual obligations of such
Member set forth herein.
5.4 Reimbursements.
(a) Except as otherwise specified in this Agreement, each Member shall
pay its own costs and expenses incurred and paid by such Member in the conduct
of the Company's Business. Without limiting the generality of the foregoing, the
Company shall not be responsible for the costs and expenses resulting from the
performance by Leucadia or any Affiliate thereof of its obligations under any
management services agreement or similar agreement entered into by such party
with FNV or any other Person.
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(b) Notwithstanding the foregoing, the Members intend that all costs
and expenses incurred after the Effective Date in the operation of the Company's
Business (other than Covered Losses) shall be paid by the Company; provided,
however, that direct costs and expenses of a Member, such as salaries or
benefits of its employees or travel expenses, shall not be treated as expenses
of, or paid by, the Company, and such Member shall not be entitled to any
reimbursement hereunder with respect thereto.
5.5 Withdrawal.
Except as otherwise provided in Sections 4 and 10 hereof, no Member shall
demand or receive a return on or of its Capital Contributions or withdraw or
resign from the Company without the consent of the other Member. Under
circumstances requiring a return of any Capital Contributions, no Member has the
right to receive property other than cash except as may be specifically provided
herein.
5.6 Member Compensation.
No Member shall receive any interest, salary or drawing with respect to
its Capital Contributions or its Capital Account or for services rendered on
behalf of the Company, or otherwise, in its capacity as a Member, except as
otherwise provided in this Agreement.
5.7 Member Liability.
No Member shall be liable to any third party under a judgment, decree or
order of a court, or in any other manner for the debts or any other obligations
or liabilities of the Company. Except as required by applicable law or this
Agreement, a Member shall not be required to restore a deficit balance in its
Capital Account or to lend any funds to the Company or, except as unanimously
agreed by the Members, to make any additional contributions, assessments or
payments to the Company.
SECTION 6
REPRESENTATIONS AND WARRANTIES
6.1 In General.
As of the date hereof, each Member hereby makes each of the
representations and warranties applicable to such Member as set forth in Section
6.2 hereof, and such warranties and representations shall survive the execution
of this Agreement.
6.2 Representations and Warranties.
Each Member hereby represents and warrants that:
(a) Due Incorporation or Formation; Authorization of Agreement. Such
Member is a corporation or limited liability company duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation or formation and has the company power and authority to own its
property and carry on its business as owned and carried
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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 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.
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SECTION 7
ACCOUNTING, BOOKS AND RECORDS
7.1 Accounting, Books and Records.
The Company shall keep on site at its principal place of business such
books and records relating to the Company and its affairs as it reasonably deems
appropriate, and any Member or its designated representative shall have the
right to have reasonable access to and inspect and copy the contents of such
books or records, subject to compliance by such Member with the safety, security
and confidentiality procedures and guidelines of the Company, as such procedures
and guidelines may be established from time to time.
7.2 Reports.
The Company shall cause to be delivered to each Member such periodic
reports and financial statements as may be reasonably requested by a Member from
time to time.
7.3 Tax Matters.
Subject to the agreement of both Members, the Tax Matters Member (as
defined below) shall make on behalf of the Company any and all elections for
federal, state, local, and foreign tax purposes that it determines appropriate,
and shall represent the Company and the Members before taxing authorities or
courts of competent jurisdiction in tax matters affecting the Company or the
Members in their capacities as Members, and file any tax returns and execute any
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.
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-
13
owned Affiliate of another Member, (b) any wholly-owned Affiliate of the
transferor (or of Berkshire or Leucadia), or (c) any other Person, subject to
receipt, in the case of clause (c), of the prior written consent of the other
Member, not to be unreasonably withheld (any such Transfer pursuant to clauses
(a), (b) or (c) being referred to in this Agreement as a "Permitted Transfer").
Notwithstanding the foregoing, a Member may transfer less than all of its
Interests to one or more wholly-owned Affiliates (or wholly-owned Affiliates of
Berkshire, in the case of B-Sub, or of Leucadia, 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 by the transferor and/or transferee for all
costs and expenses that it reasonably incurs in connection with such Transfer.
(b) The transferor and transferee shall furnish the Company with the
transferee's taxpayer identification number, sufficient information to determine
the transferee's initial tax basis in the Interest transferred, and any other
information reasonably necessary to permit the Company to file all required
federal and state tax returns and other legally required information statements
or returns. Without limiting the generality of the foregoing, the Company shall
not be required to make any distribution otherwise provided for in this
Agreement with respect to any transferred Interest until it has received such
information.
(c) The transferee of Interests (other than, with respect to clauses
(i) and (ii) below, a transferee that was a Member prior to the Transfer) shall,
by written instrument in form and substance reasonably satisfactory to the
nontransferring Member (and, in the case of clause (iii) below, the transferor
Member), (i) make representations and warranties to the nontransferring Member
equivalent to those set forth in Section 6, (ii) accept and adopt the terms and
provisions of this Agreement, including, without limitation, this Section 9 and
Section 11, and (iii) assume the obligations of the transferor Member under this
Agreement with respect to the transferred Interest.
14
(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 accounting of the affairs of the
Company, shall not be entitled to inspect the books or records of the Company,
and shall not have any of the rights of a Member under the Act or this
Agreement.
9.6 Admission of Substituted Members.
Subject to the other provisions of this Section 9, a transferee of an
Interest in a Permitted Transfer shall be admitted to the Company as a
substituted Member.
9.7 Distributions and Allocations in Respect of Transferred Interest.
If any Interests are Transferred during any Allocation Year in compliance
with the provisions of this Section 9, Profits, Losses, each item thereof, and
all other items attributable to the Transferred Interest for such Allocation
Year shall be divided and allocated between the transferor and the transferee by
taking into account their varying Percentage Interests during the Fiscal Year in
accordance with Code Section 706(d), using any conventions permitted by law and
selected by the Members. All distributions on or before the date of such
Transfer shall be made to the transferor, and all distributions thereafter shall
be made to the transferee.
15
SECTION 10
DISSOLUTION AND WINDING UP
10.1 Dissolution Events.
Except as otherwise unanimously agreed to by the Members, the Company shall
dissolve and shall commence winding up and liquidating upon the first to occur
of any of the following (each a "Dissolution Event"):
(a) The unanimous vote of the Members to dissolve, wind up, and
liquidate the Company;
(b) A judicial determination that an event has occurred that makes it
unlawful, impossible or impractical to carry on the Business;
(c) The dissolution or liquidation of a Member or the taking of any
action by its directors or a majority of its stockholders looking to the
dissolution or liquidation of such Member, unless substantially all assets of
such Member are transferred or are to be transferred to a wholly-owned Affiliate
of such Member (or of Berkshire or Leucadia); or
(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.
The Members hereby agree that, notwithstanding any provision of the Act, the
Company shall not dissolve prior to the occurrence of a Dissolution Event.
10.2 Winding Up.
Upon the occurrence of a Dissolution Event, the Company shall continue
solely for the purposes of winding up its affairs in an orderly manner,
liquidating its assets, and satisfying the claims of its creditors and Members,
and no Member shall take any action that is inconsistent with, or not necessary
to or appropriate for, the winding up of the Company's Business and affairs;
provided, that all covenants contained in this Agreement and obligations
provided for in this Agreement shall continue to be fully binding upon the
Members until such time as the Company's property has been distributed pursuant
to this Section 10.2 and the Certificate has been canceled pursuant to the Act.
The Liquidator shall be responsible for overseeing the winding up and
dissolution of the Company, which winding up and dissolution shall be completed
within one (1) year of the occurrence of the Dissolution Event. The Liquidator
shall take full account of the Company's liabilities and property and shall
cause the property or the proceeds from the sale thereof, to the extent
sufficient therefor, to be applied and distributed, to the maximum extent
permitted by law, in the following order:
(a) First, to creditors (including Members who are creditors, to the
extent otherwise permitted by law) in satisfaction of all of the Company's debts
and other liabilities (whether by payment or the making of reasonable provision
for payment thereof); and
16
(b) The balance, if any, to the Members, pro rata in accordance with
their Percentage Interests, 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).
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.
No Member shall receive compensation for any services performed pursuant to
this Section 10.
10.3 Rights of Members.
Except as otherwise provided in this Agreement, each Member shall look
solely to the Company's property for the return of its Capital Contribution and
has no right or power to demand or receive property other than cash from the
Company, and if the assets of the Company remaining after payment or discharge
of the debts or liabilities of the Company are insufficient to return such
Capital Contribution, a Member shall have no recourse against the Company or the
other Member.
10.4 Termination.
Upon completion of the distribution of the Company's property as provided
in this Section 10, the Company shall be terminated, and the Liquidator shall
cause the filing of the Certificate of Cancellation pursuant to Section 18-203
of the Act and shall take all such other actions as may be necessary to
terminate the Company.
10.5 Allocations During Period of Liquidation.
During the period commencing on the first day of the Fiscal Year during
which a Dissolution Event occurs and ending on the date on which all of the
assets of the Company have been distributed to the Members pursuant to Section
10.2 hereof (the "Liquidation Period"), the Members shall continue to share
Profits, Losses, and other items of Company income, gain, loss or deduction in
the manner provided in Section 3 hereof and Appendix B hereto.
10.6 The Liquidator.
(a) The "Liquidator" shall mean a Person appointed by the Members to
oversee the liquidation of the Company. The Liquidator may be an officer, a
Member or any other Person.
(b) The Company is authorized to pay a reasonable fee to the
Liquidator for its services performed pursuant to this Section 10 and to
reimburse the Liquidator for its reasonable costs and expenses incurred in
performing those services.
17
(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 the other
Member.
SECTION 11
AGREEMENTS RELATING TO DEALINGS WITH FNV AND THE FNV STOCK
11.1 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 FNV Stock.
(a) Except in the event of a liquidation of the Company pursuant to
Section 10 of this Agreement, or as otherwise unanimously agreed to by the
Members, the Company shall cause the FNV Stock to be held by, and not sold,
transferred, exchanged or distributed by, the Company.
(b) The Company shall (i) to the extent it has any right to nominate
an even number of directors to FNV's Board of Directors, permit each Member to
designate one-half of the total number of persons that it is choosing to
nominate to such Board of Directors, and (ii) to the extent it has any right to
nominate an odd number of directors, designate one director unanimously agreed
upon by the Members, and of the remaining number of nominees that it is choosing
to nominate, permit each Member to designate one-half.
(c) The Company shall vote its FNV Stock as required by the Voting
Agreement among FNV, Berkadia, Berkshire and Leucadia, and otherwise in such
manner as is unanimously agreed by the Members; provided, however, that if the
Members cannot unanimously agree, then the Company shall vote its FNV Stock in
the manner directed by each Member with respect to that number of the Company's
shares of FNV Stock as is in proportion to such Member's Percentage Interest.
18
11.2 Purchase of Additional FNV Securities or Interests or Participations
in Bank Loans.
If, during the term of this Agreement, a Member, or any Affiliate thereof,
desires to acquire additional securities (whether debt or equity) of, or
interests or participations in bank loans of, FNV or its Affiliates, then such
Member or Affiliate may not proceed with such transaction unless such Member
affords the other Member a reasonable opportunity to acquire one-half of such
securities or interests or participations in bank loans on the same terms and
conditions.
SECTION 12
MISCELLANEOUS
12.1 Notices.
Any notice, payment, demand, or communication required or permitted to be
given by any provision of this Agreement shall be in writing and shall be deemed
to have been delivered, given, and received for all purposes (i) if delivered
personally to the Person or to an officer of the Person to whom the same is
directed, or (ii) when the same is actually received, if sent either by
recognized overnight delivery service or registered or certified mail, postage
and charges prepaid, or by facsimile, if such facsimile is followed by a hard
copy of the facsimile communication sent promptly thereafter by recognized
overnight delivery service or registered or certified mail, postage and charges
prepaid, addressed as follows, or to such other address as such Person may from
time to time specify by notice to the Members and the Company:
(a) If to the Company, to the address determined pursuant to Section
1.4 hereof; and
(b) If to a Member, to the address set forth on Appendix A hereto.
12.2 Covered Losses.
(a) The Company shall indemnify and hold harmless any Member from any
Covered Loss.
(b) 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, upon
demand of the Company or any Member, such Member's pro rata share, determined in
accordance with Percentage Interests, of any funds required by the Company to
satisfy its indemnification obligation. Berkshire agrees to contribute (or cause
to be contributed) to B-Sub, and Leucadia agrees to contribute (or cause to be
contributed) to L-Sub, an amount sufficient in each case for such Member to fund
its contributions as and when required under this Section 12.2(b).
(c) In the event a Member or the Company becomes aware of a potential
claim, event or state of affairs that could result in a Covered Loss, such
Member or the Company shall promptly notify all of the Members thereof, and
shall provide all Members with copies of all letters, pleadings or other
documents in its possession which could or are alleged to form the
19
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 Certain Defaults.
If Berkshire or Leucadia fails to fulfill its obligations under Section
12.2(b) hereof, then the Member that is not related to Berkshire or Leucadia, as
the case may be, shall have a direct claim against Berkshire or Leucadia, as the
case may be, 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
Berkshire or Leucadia, as the case may be.
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.
12.8 WAIVER OF JURY TRIAL.
EACH OF THE MEMBERS, BERKSHIRE AND LEUCADIA IRREVOCABLY WAIVES TO THE
EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN
20
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.
21
12.11 Specific Performance.
Each Member (as well as, in the case of B-Sub, Berkshire, and in the case
of L-Sub, Leucadia) agrees with the other Member that such other Member would be
irreparably damaged if any of the provisions of this Agreement are not performed
in accordance with their specific terms and that monetary damages would not
provide an adequate remedy in such event. Accordingly, it is agreed that, in
addition to any other remedy to which the non-breaching Member may be entitled,
at law or in equity, the non-breaching Member shall be entitled to injunctive
relief to prevent breaches of the provisions of this Agreement and specifically
to enforce the terms and provisions hereof in any action instituted in any court
of the United States or any state thereof having subject matter jurisdiction
thereof.
12.12 Further Assurances.
Each Member covenants and agrees on behalf of itself, its successors and
its assigns, without further consideration, to prepare, execute, acknowledge,
file and deliver such other instruments, documents and statements, and to take
such other action as may be required by law or reasonably necessary to
effectively carry out the purposes of this Agreement.
12.13 Entire Agreement.
This Agreement constitutes the entire agreement between the parties hereto
pertaining to the subject matter hereof and fully supersedes any and all prior
or contemporaneous agreements or understandings between the parties hereto
pertaining to the subject matter hereof.
22
IN WITNESS WHEREOF, the parties have executed this Operating Agreement of
the Company on August 23, 2002, 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
ACKNOWLEDGED AND AGREED, provided that, except as and to the extent
specifically set forth in this Operating 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 Operating Agreement of
Berkadia Equity Holdings LLC
Members
Name and Address Percentage Interest
---------------- -------------------
BHF Berkadia Member Inc. 50%
0000 Xxxxxx Xxxxx
Xxxxx, Xxxxxxxx 00000
Attn: Xxxx Xxxxxxx
Facsimile: (000) 000-0000
WMAC Investors, Inc. 50%
000 Xxxx Xxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx Xxxxxxxxx
Facsimile: (000) 000-0000
APPENDIX B
Attached to and Made a Part of
the Operating Agreement of
Berkadia Equity Holdings 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
Appendix B-1
be made only if and to the extent that the Member would have an Adjusted Capital
Account Deficit after all other allocations provided for in Section 3 of the
Agreement and this Appendix B have been tentatively made as if this Paragraph
1(c) were not part of this Appendix B.
(d) Gross Income Allocation. In the event any Member has a deficit Capital
Account at the end of any Allocation Year which is in excess of the sum of the
amount such Member is obligated to restore pursuant to the penultimate sentences
of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such Member shall
be specially allocated items of Company income and gain in the amount of such
excess as quickly as possible; provided that an allocation pursuant to this
Paragraph 1(d) shall be made only if and to the extent that such Member would
have a deficit Capital Account in excess of such sum after all other allocations
provided for in Section 3 of the Agreement and this Appendix B have been made as
if Paragraph 1(c) hereof and this Paragraph 1(d) were not part of this Appendix
B.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any Allocation Year
shall be specially allocated to the Members in proportion to their respective
Debt Percentages.
(f) Member Nonrecourse Deductions. Any Member Nonrecourse Deductions for
any Allocation Year shall be specially allocated to the Member who bears the
economic risk of loss with respect to the Member Nonrecourse Debt to which such
Member Nonrecourse Deductions are attributable in accordance with Regulations
Section 1.704-2(i)(1).
(g) Section 754 Adjustments. To the extent an adjustment to the adjusted
tax basis of any Company asset, pursuant to Code Section 734(b) or Code Section
743(b) is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(2) or
1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital
Accounts as the result of a distribution to a Member in complete liquidation of
such Member's interest in the Company, the amount of such adjustment to Capital
Accounts shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases such basis) and such
gain or loss shall be specially allocated to the Members in accordance with
their interests in the Company in the event Regulations Section
1.704-1(b)(2)(iv)(m)(2) applies, or to the Member to whom such distribution was
made in the event Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.
2. Curative Allocations.
The allocations set forth in Paragraphs 1(a) through (g) and Paragraph 3
hereof (the "Regulatory Allocations") are intended to comply with certain
requirements of the Regulations. It is the intent of the Members that, to the
extent possible, all Regulatory Allocations shall be offset either with other
Regulatory Allocations or with special allocations of other items of Company
income, gain, loss or deduction pursuant to this Paragraph 2. Therefore,
notwithstanding any other provision of Section 3 of the Agreement and this
Appendix B (other than the Regulatory Allocations), the Company shall make such
offsetting special allocations of Company income, gain, loss or deduction in
whatever manner it determines appropriate so that, after such offsetting
allocations are made, each Member's Capital Account balance is, to the extent
possible, equal to the Capital Account balance such Member would have had if the
Regulatory Allocations were not part of the Agreement and all Company items were
allocated pursuant to Section 3 of the Agreement.
Appendix B-2
3. Loss Limitation.
Losses allocated pursuant to Section 3 of the Agreement shall not exceed
the maximum amount of Losses that can be allocated without causing any Member to
have an Adjusted Capital Account Deficit at the end of any Allocation Year. In
the event some but not all of the Members would have Adjusted Capital Account
Deficits as a consequence of an allocation of Losses pursuant to Section 3 of
the Agreement, the limitation set forth in this Paragraph 3 shall be applied on
a Member by Member basis and Losses not allocable to any Member as a result of
such limitation shall be allocated to the other Members in accordance with the
positive balances in such Member's Capital Accounts so as to allocate the
maximum permissible Losses to each Member under Section 1.704-1(b)(2)(ii)(d) of
the Regulations.
4. Other Allocation Rules.
(a) For purposes of determining the Profits, Losses, or any other items
allocable to any period, Profits, Losses, and any such other items shall be
determined on a daily, monthly, or other basis, as determined by the Members
using any permissible method under Code Section 706 and the Regulations
thereunder.
(b) The Members are aware of the income tax consequences of the
allocations made by Section 3 of the Agreement and this Appendix B and hereby
agree to be bound by such provisions in reporting their shares of Company income
and loss for income tax purposes.
(c) Solely for purposes of determining a Member's proportionate share of
the "excess nonrecourse liabilities" of the Company within the meaning of
Regulations Section 1.752-3(a) (3), the Members' interests in Company profits
are in proportion to their Debt Percentages.
(d) To the extent permitted by Section 1.704-2(h)(3) of the Regulations,
the Company shall endeavor to treat any distributions as having been made from
the proceeds of a Nonrecourse Liability or a Member Nonrecourse Debt only to the
extent that such distributions would cause or increase an Adjusted Capital
Account Deficit for any Member.
5. Tax Allocations; Code Section 704(c).
(a) In accordance with Code Section 704(c) and the Regulations thereunder,
income, gain, loss, and deduction with respect to any property contributed to
the capital of the Company shall, solely for tax purposes, be allocated among
the Members so as to take account of any variation between the adjusted basis of
such property to the Company for federal income tax purposes and its initial
Gross Asset Value (computed in accordance with the definition of Gross Asset
Value).
(b) In the event the Gross Asset Value of any Company asset is adjusted
pursuant to subparagraph (ii) of the definition of Gross Asset Value, subsequent
allocations of income, gain, loss, and deduction with respect to such asset
shall take account of any variation between the adjusted basis of such asset for
federal income tax purposes and its Gross Asset Value in the same manner as
under Code Section 704(c) and the Regulations thereunder.
Appendix B-3
(c) Any elections or other decisions relating to such allocations shall be
made by the Members in any manner that reasonably reflects the purpose and
intention of this Agreement. Allocations pursuant to this Paragraph 5 are solely
for purposes of federal, state, and local taxes and shall not affect, or in any
way be taken into account in computing, any Member's Capital Account or share of
Profits, Losses, other items, or distributions pursuant to any provision of this
Agreement.
(d) 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 of the Agreement or this Appendix B (a "Book Item")
shall be allocated between the Members in the same proportion as the
corresponding Book Item is allocated between the Members.
Appendix B-4
