Exhibit 10.21
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BERKADIA LLC,
A DELAWARE LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
February 26, 2001
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NY2:\1018718\03\L%1Q03!.DOC\76830.0246
OPERATING AGREEMENT
OF
BERKADIA LLC
This OPERATING AGREEMENT is entered into and shall be effective as of
the 26th day of February, 2001, by and between Berkshire Hathaway Inc., a
Delaware corporation ("Berkshire"), and Leucadia National Corporation, a New
York corporation ("Leucadia"), as the sole Members of the Company.
SECTION 1
THE COMPANY
1.1 Formation.
The Members hereby agree to form the Company 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 Operating Agreement.
1.2 Name.
The name of the Company shall be "Berkadia LLC" and all business of
the Company shall be conducted in such name or such other name as is agreed by
the Members.
1.3 Purpose; Powers.
The 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
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,
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 execute and deliver a commitment letter of even date herewith
by and among the Company, its Members, Finova Capital Corporation ("FCC") and
The Finova Group Inc. ("FNV") (the "Commitment") relating to a loan to FCC on a
senior secured basis (the "Senior Loan"); to negotiate, execute, deliver and
accept loan or credit agreements, 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 (the "Senior Loan
Documents"); to utilize the proceeds of the Outside Financing 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
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 of a chapter 11 plan for FNV
and its subsidiaries;
(d) to make such additional investments and engage in such additional
activities as the Members may approve; 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.")
The Company shall have the power to do any and all acts necessary,
appropriate, proper, advisable, incidental or convenient to or in furtherance of
such purposes.
1.4 Principal Place of Business.
The principal place of business of the Company shall be at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ or such other 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
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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, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
1.7 Definitions.
(a) Capitalized words and phrases used in this Agreement have the
following meanings:
"Act" means the Delaware Limited Liability Company Act, 6 Del.
C.ss.18-101, et seq., as amended from time to time (or any corresponding
provisions of succeeding law).
"Additional Capital Contributions" means, with respect to each
Member, the Capital Contributions, if any, made or required to be made by such
Member pursuant to Section 2.4 hereof.
"Adjusted Capital Account Deficit" means, with respect to any Member,
the deficit balance, if any, in such Member's Capital Account as of the end of
the relevant Allocation Year, after giving effect to the following adjustments:
(i) Credit to such Capital Account any amounts which such Member is
deemed to be obligated to restore pursuant to Section 1.704-1(b)(2)(ii)(c) or
the penultimate sentences in Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the
Regulations; and
(ii) Debit to such Capital Account the items described in Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of
the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations
and shall be interpreted consistently therewith.
"Affiliate" means, with respect to any Person, any other Person who,
directly or indirectly, controls, is controlled by, or is under common control
with, such Person.
"Agreement" or "Operating Agreement" means this 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 commencing on the Effective
Date and ending 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
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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, payments of principal and interest on, and fees and expenses with
respect to, the Outside Financing, and working capital and other amounts and
reserves that the Members deem necessary or advisable in connection with the
operation of the Company's Business and the payment of principal and interest
on, and fees and expenses with respect to, the Outside Financing.
"Capital Account" means, with respect to any Member, the Capital
Account maintained for such Member in accordance with the following provisions:
(iii) To each Member's Capital Account there shall be credited (A)
such Member's Capital Contributions actually 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;
(iv) 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 pursuant to Section 4, Section 10, or to the extent relating to
reimbursement of a cost or expense paid by the Member in accordance with Section
2.3(b) or Section 5.4(c) 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
(v) 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 or Section 12.2 hereof, including Required Capital Contributions
and Additional Capital Contributions.
"Certificate of Cancellation" means a certificate filed in accordance
with Section 18-203 of the Act.
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"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 this
Agreement and the Certificate.
"Company Minimum Gain" has the same meaning as the term "partnership
minimum gain" in Section 1.704-2(b)(2) and 1.704-2(d) of the Regulations.
"Covered Losses" means all losses, liabilities, expenses or damages
(including reasonable attorneys' fees and expenses) paid to any Third Party
Claimant for claims or legal actions arising out of the Senior Loan or the
Management Agreement or the performance of responsibilities, or taking of
actions or decisions pursuant to either, but shall not include claims or actions
to collect or enforce the Outside Financing or any other contractual obligation
of the Company.
"Debt Percentage" means, with respect to any Member, such Member's
Debt Percentage as set forth in Appendix A hereto.
"Depreciation" means, for each Allocation Year, an amount equal to
the depreciation, amortization, or other cost recovery deduction allowable with
respect to an asset for such Allocation Year, except that if the Gross Asset
Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such Allocation Year, Depreciation shall be an
amount which bears the same ratio to such beginning Gross Asset Value as the
federal income tax depreciation, amortization, or other cost recovery deduction
for such Allocation Year bears to such beginning adjusted tax basis; provided,
however, that if the adjusted basis for federal income tax purposes of an asset
at the beginning of such Allocation Year is zero, Depreciation shall be
determined with reference to such beginning Gross Asset Value using any
reasonable method selected by the Members.
"Effective Date" means the date hereof.
"Facility Fee Percentage" means, with respect to any Member, such
Member's Facility Fee Percentage as set forth in Appendix A hereto.
"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, but shall not include any Reimbursement Fees or Facility Fees as defined in
the Commitment.
"Fiscal Year" means (i) the period commencing on the Effective Date
and ending on December 31, 2001, (ii) any subsequent twelve-month period
commencing on January 1 and ending on December 31 and (iii) the period
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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.
"Gross Asset Value" means with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(vi) 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;
(vii) 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;
(viii) 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
(ix) The Gross Asset Values of Company assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent
that such adjustments are taken into account in determining Capital Accounts
pursuant to Regulations Section 1.704-1(b)(2)(iv)(m) and subparagraph (vi) of
the definition of "Profits" and "Losses" or Paragraph 1(g) of Appendix B hereto;
provided, however, that Gross Asset Values shall not be adjusted pursuant to
this subparagraph (iv) to the extent that an adjustment pursuant to subparagraph
(ii) is required in connection with a transaction that would otherwise result in
an adjustment pursuant to this subparagraph (iv).
If the Gross Asset Value of an asset has been determined or adjusted pursuant to
subparagraph (ii) or (iv), such Gross Asset Value shall thereafter be adjusted
by the Depreciation taken into account with respect to such asset, for purposes
of computing Profits and Losses.
"Gross Profit" shall mean the sum of (a) the amounts distributed to a
Member pursuant to Section 4.1 or Section 10.2 of this Agreement, (b) in the
case of Leucadia, the fees paid to Leucadia or any of its affiliates pursuant to
the Management Agreement (net of amounts paid to Berkshire pursuant to Section
11.1 hereof), and (c) in the case of Berkshire, the amounts paid to Berkshire
pursuant to Section 11.1 hereof, in each case, from the Effective Date to the
date of the Covered Loss.
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"Interest" means an ownership interest in the Company, including any
and all benefits to which the holder of such Interest may be entitled as
provided in this Agreement, together with all obligations of such Person to
comply with the terms and provisions of this Agreement.
"Leucadia Member" has the meaning set forth in Section 9.2 of this
Agreement.
"Losses" has the meaning set forth in the definition of "Profits" and
"Losses."
"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.
"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 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;
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(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 Paragraph 1 or 2 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 Paragraphs 1 and 2 of Appendix B hereto shall
be determined by applying rules analogous to those set forth in subparagraphs
(i) through (vi) above.
"Proportionate Share" for any Member shall mean the product of (x)
the quotient obtained by dividing (I) the Gross Profit of such Member by (II)
the Gross Profit of both 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 Section 12.2 hereof.
"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,
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however, that a Third Party Claimant shall include the shareholders 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.
SECTION 2
FINANCING; CAPITAL CONTRIBUTIONS
2.1 Initial Capital Contributions.
The Members shall not be required to make any initial Capital
Contributions to the Company.
2.2 Outside Financing; Guarantees.
Following the Effective Date, the Company shall seek to obtain a
commitment for the Outside Financing. Except as otherwise agreed by the Members,
the terms of the Outside Financing shall include (i) a primary guarantee by
Berkshire of 90 percent of the Company's obligations under such Outside
Financing, and (ii) a primary guarantee by Leucadia of the remaining 10 percent
of the Company's obligations under such Outside Financing, as well as a
secondary guaranty by Berkshire of such remaining 10 percent of the Company's
obligations under such Outside Financing, in the case of each of clause (i) and
(ii), on standard terms and conditions. The timing for obtaining a commitment
with respect to the Outside Financing, as well as the terms and conditions for
the Outside Financing, and whether to consummate the Outside Financing, shall be
determined by Berkshire after consultation with Leucadia.
2.3 Required Capital Contributions.
(a) If (i) the Outside Financing cannot be obtained on terms and
conditions reasonably acceptable to the Members, but the Company is required to
advance funds to FCC and/or FNV pursuant to the terms of the Commitment, or (ii)
any amount of principal or interest or otherwise 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, then on or before the date such funds are
required to be advanced or paid, the Members shall fund to the Company, pro rata
in accordance with their Debt Percentages, an amount of Capital Contributions
that, (x) in the case of clause (i) of this sentence, when combined with the
Outside Financing actually obtained, is sufficient to satisfy the Company's
obligations under the Commitment, or (y) in the case of clause (ii) of this
sentence, is sufficient to pay the amounts required to be paid. If Outstanding
Financing is not obtained in full, and Leucadia elects to seek financing to fund
any or all of its Required Capital Contribution under Section 2.3(a)(i),
Berkshire agrees that it shall provide to the lender or lenders to Leucadia a
primary guarantee of Leucadia's payment obligations under such financing, on
standard terms and conditions, limited to the amount of such Required Capital
Contribution.
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(b) If the Company incurs costs or expenses, other than those set
forth in Section 2.3(a) above, and does not have sufficient funds to pay such
expenses, upon demand by the Company or by either Member, the Members shall
promptly make Capital Contributions sufficient to pay such costs and expenses in
accordance with the following:
(i) with respect to costs and expenses incurred in the operation of
the Company's Business from the Effective 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 with their Fee Percentages; provided,
however, that with respect to any 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; and
(iii) notwithstanding (i) and (ii) above, Section 12.2 shall control
Capital Contributions required to fund costs and expenses that constitute
Covered Losses.
(c) If one Member (the "defaulting Member") fails to fund its
required Capital Contributions as and when required, the non-defaulting Member
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.
2.4 Additional Capital Contributions.
The Members may make additional Capital Contributions (in addition to
those required by Section 2.3 hereof) with the written consent of all Members,
in which event the Company shall adjust the Members' Debt Percentages and/or Fee
Percentages 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
Paragraphs 1, 2 and 3 of 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 in a manner such that their Capital Accounts
immediately following such allocation equal, as nearly as possible, the amounts
that would be distributable to them if the Company's Business and affairs were
wound up and its remaining assets were distributed (at Gross Asset Value) in
accordance with Section 4 hereof.
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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.
(a) The Finova Fees shall be distributed to the Members as soon as
reasonably practicable following receipt by the Company thereof in proportion to
their Fee Percentages and the Facility Fee (as defined in the Commitment) shall
be distributed to the Members as soon as reasonably practicable following
receipt by the Company thereof in proportion to their respective Facility Fee
Percentages; and
(b) Except as otherwise provided in Section 10.2 hereof, Available
Cash, if any, shall be distributed as soon as reasonably practicable following
receipt by the Company to the Members 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 Members.
(a) All powers to control and manage the Business and affairs of the
Company shall be exclusively vested in the Members and the Members may exercise
all powers of the Company and do all such lawful acts as are not by statute, the
Certificate or this Agreement prohibited, and in so doing shall have the right
and authority to take all actions which the Members deem necessary, useful or
appropriate for the management and conduct of the Business.
(b) Except as otherwise provided in this Agreement, including,
without limitation, Section 5.5 hereof (relating to Berkshire's control of
matters relating to the Senior Loan), all matters 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
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time to time deem appropriate. Any delegation of authority to take any action
must be approved in the same manner as would be required for the Members to
approve such action directly.
5.2 Meetings of the Members; Approval; Expedited Decision.
(a) The Members shall meet at such times as they may agree.
(b) For all matters under this Agreement or under the Act for which
the consent, approval or affirmative vote of a Member is required, such Member's
consent, approval or affirmative vote may be given (i) at a physical meeting of
the Members or (ii) at a meeting held by means through which all persons
participating in the meeting can hear and respond to each other, provided that a
summary of such other meeting is promptly delivered to the Members in writing,
followed, in the case of a facsimile transmission, by hard copy sent by
recognized overnight delivery service or U.S. mail, postage and charges prepaid,
addressed as described in Section 12.1 hereof, or to such other address as a
Member may from time to time specify by notice to the other Member.
(c) Notwithstanding anything to the contrary in this Section 5.2, the
Members may take any action without a meeting that may be taken by the Members
under this Agreement if such action is approved by the written consent of both
Members.
(d) In addition to the methods set forth above, a Member may solicit
the expedited decision of the other Member with respect to any matter under this
Agreement by having its Designated Representative contact, by telephone,
facsimile or other agreed means, the other Member's Designated Representative.
"Designated Representative" shall mean, in the case of Berkshire, its Chief
Executive Officer, Chief Financial Officer or other authorized representative as
identified by Berkshire in a written notice to Leucadia, and in the case of
Leucadia, its Chairman, President or other authorized representative as
identified by Leucadia in a written notice to Berkshire. Upon receipt of a
request for an expedited decision by a Member's Designated Representative, the
recipient Member's Designated Representative shall use reasonable efforts to
deliver its written decision, consent, approval, disapproval or other relevant
response to the request within 48 hours following such recipient's 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
12
assets of, held by, or registered in the name of, any Member or its Affiliates,
(ii) maintaining books and financial records of the Company separate from the
books and financial records of any Member or its Affiliates, and observing all
Company procedures and formalities, including, without limitation, maintaining
minutes of Company meetings and acting on behalf of the Company only pursuant to
due authorization of the Members, (iii) causing the Company to pay its
liabilities from assets of the Company, and (iv) causing the Company to conduct
its dealings with third parties in its own name and as a separate and
independent entity.
(b) The Members shall take all actions which may be necessary or
appropriate (i) for the continuation of the Company's valid existence as a
limited liability company under the laws of the State of Delaware and of each
other jurisdiction in which such existence is necessary to protect the limited
liability of the Members or to enable the Company to conduct the business in
which it is engaged and (ii) for the accomplishment of the Company's purposes,
in accordance with the provisions of this Agreement and applicable laws and
regulations.
(c) A Member shall not have any duties, fiduciary or otherwise, to
the Company or the other Member, other than the contractual obligations of such
Member set forth herein.
5.4 Reimbursements.
(a) Except as otherwise specified in this Agreement, and subject to
reimbursement by FNV or FCC pursuant to the Commitment and the Annexes thereto,
each Member shall pay its own costs and expenses incurred and paid by such
Member 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, and Leucadia shall pay the
costs and expenses resulting from its performance of its obligations under the
Management Agreement.
(b) Notwithstanding the foregoing, the Members intend that all costs
and expenses incurred after the Effective 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 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 bore such costs or expenses (if costs or
expenses paid by a Member are being reimbursed), or to the Members pro rata in
accordance with the percentage of such cost or expense paid by the Members in
accordance with Section 2.3(b) (if costs or expenses paid by the Company are
being reimbursed).
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5.5 Berkshire Control of Commitment and Senior Loan.
Notwithstanding any other provision of this Agreement, decisions
relating to any act taken or not taken by the Company with respect to the
Commitment or the Senior Loan, including, without limitation, any decisions
relative to the documentation 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 Berkshire on behalf of the
Company in its sole and absolute discretion, after consultation with Leucadia.
The Company shall promptly reimburse Berkshire 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 other Member.
Under circumstances requiring a return of any Capital Contributions, no Member
has the right to receive property other than cash except as may be specifically
provided herein.
5.7 Member Compensation.
No Member shall receive any interest, salary or drawing with respect
to its Capital Contributions or its Capital Account or for services rendered on
behalf of the Company, or otherwise, in its capacity as a Member, except as
otherwise provided in this Agreement.
5.8 Member Liability.
No Member shall be liable under a judgment, decree or order of a
court, or in any other manner for the debts or any other obligations or
liabilities of the Company. Except as required by applicable law or this
Agreement, a Member shall be liable only to make its Capital Contributions and
shall not be required to restore a deficit balance in its Capital Account or to
lend any funds to the Company or, apart from its Capital Contributions, to make
any additional contributions, assessments or payments to the Company.
SECTION 6
REPRESENTATIONS AND WARRANTIES
6.1 In General.
As of the date hereof, each Member hereby makes each of the
representations and warranties applicable to such Member as set forth in Section
6.2 hereof, and such warranties and representations shall survive the execution
of this Agreement.
6.2 Representations and Warranties.
Each Member hereby represents and warrants that:
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(a) Due Incorporation or Formation; Authorization of Agreement. Such
Member is a corporation duly organized, validly existing, and in good standing
under the laws of the jurisdiction of its incorporation and has the corporate
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 corporate 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 corporate 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
15
reasonably be expected to materially impair such Member's ability to perform its
obligations under this Agreement.
SECTION 7
ACCOUNTING, BOOKS AND RECORDS
7.1 Accounting, Books and Records.
The Company shall keep on site at its principal place of business
such books and records relating to the Company and its affairs as it reasonably
deems appropriate, and any Member or its designated representative shall have
the right to have reasonable access to and inspect and copy the contents of such
books or records, subject to compliance by such Member with the safety, security
and confidentiality procedures and guidelines of the Company, as such procedures
and guidelines may be established from time to time.
7.2 Reports.
The Company shall cause to be delivered to each Member such periodic
reports and financial statements as may be reasonably requested by a Member from
time to time.
7.3 Tax Matters.
Subject to the agreement of both Members, the Tax Matters Member (as
defined below) shall make on behalf of the Company any and all elections for
federal, state, local, and foreign tax purposes that it determines appropriate,
and shall represent the Company and the Members before taxing authorities or
courts of competent jurisdiction in tax matters affecting the Company or the
Members in their capacities as Members, and file any tax returns and execute any
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.
Berkshire 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.
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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 (c) any other Person,
subject to receipt, in the case of clause (c), of the prior written consent of
the other Member in its absolute discretion if the Senior Loan has not then been
paid in full (any such Transfer pursuant to clauses (a), (b) or (c) being
referred to in this Agreement as a "Permitted Transfer"). Notwithstanding the
foregoing, Leucadia may transfer less than all of its Interests to one or more
wholly-owned Affiliates (each, a "Leucadia Member"); provided that for purposes
hereof, all such Leucadia Members shall be deemed to constitute one and the same
Member and any action or consent required hereunder with respect to the Leucadia
Members shall be given solely through the action or consent of Leucadia, as
agent for all Leucadia Members. Any distribution or allocation to be made
hereunder shall be made as if there was only one Leucadia Member, shall be made
as Leucadia directs to one Leucadia Member as agent for all Leucadia Members,
and thereafter Leucadia shall be responsible for apportioning such distribution
among the Leucadia Members according to their respective Interests. Leucadia
will Transfer its Interests in accordance with the provisions of this Agreement
(including compliance with Section 9.3 hereof) to WMAC Investment Corporation, a
wholly-owned subsidiary of Leucadia, immediately following execution of this
Agreement.
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
17
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.
Any purported Transfer of an Interest that is not a Permitted
Transfer shall be null and void and of no force or effect whatever; provided,
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.
In the case of a Transfer or attempted Transfer of an Interest that
is not a Permitted Transfer, 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.
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SECTION 10
DISSOLUTION AND WINDING UP
10.1 Dissolution Events.
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;
(d) The bankruptcy or insolvency of a Member or the occurrence of any
other event which would permit a trustee or receiver to acquire control of the
affairs or assets of a Member; or
(e) The payment in full of each of the Senior Loan and the Outside
Financing, unless waived by both Members.
The Members hereby agree that, notwithstanding any provision of the Act, the
Company shall not dissolve prior to the occurrence of a Dissolution Event.
10.2 Winding Up.
Upon the occurrence of a Dissolution Event, the Company shall
continue solely for the purposes of winding up its affairs in an orderly manner,
liquidating its assets, and satisfying the claims of its creditors and Members,
and no Member shall take any action that is inconsistent with, or not necessary
to or appropriate for, the winding up of the Company's Business and affairs;
provided, that all covenants contained in this Agreement and obligations
provided for in this Agreement shall continue to be fully binding upon the
Members until such time as the Company's property has been distributed pursuant
to this Section 10.2 and the Certificate has been canceled pursuant to the Act.
The Liquidator shall be responsible for overseeing the winding up and
dissolution of the Company, which winding up and dissolution shall be completed
within one (1) year of the occurrence of the Dissolution Event. The Liquidator
shall take full account of the Company's liabilities and property and shall
cause the property or the proceeds from the sale thereof, to the extent
sufficient therefor, to be applied and distributed, to the maximum extent
permitted by law, in the following order:
19
(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 the
provisions of Section 4 hereof.
If any Member has a deficit balance in his Capital Account (after
giving effect to all contributions, distributions and allocations for all
Allocation Years, including the Allocation Year during which such liquidation
occurs), 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 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. 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.
20
(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 being delivered to the other Member.
SECTION 11
AGREEMENTS RELATING TO DEALINGS WITH FNV AND THE FNV STOCK
11.1 Treatment of Management Fees.
The Members hereby acknowledge and agree that all management and
other services to be provided by Leucadia or its affiliates pursuant to the
terms of that certain Management Services Agreement by and among Leucadia,
Leucadia International Corporation ("Leucadia International") and FNV dated the
date hereof (such agreement, or any similar agreement, the "Management
Agreement") are activities conducted on behalf of the Company, and that any
management or similar fees received by Leucadia, Leucadia International or any
of their affiliates under the Management Agreement are received as a Member and
that such fees are income of the Company to be shared evenly between the
Members. Consequently, Leucadia shall promptly pay over (or cause to be paid
over) to Berkshire 50 percent of any such fee paid directly to Leucadia,
Leucadia International or any of their affiliates. Any such payment to Berkshire
shall not be treated as a contribution to the Company. In the event that any
such fee is paid by FNV or an affiliate directly to the Company, such fee shall
be treated as a Finova Fee for purposes of this Agreement.
11.2 Cooperation; Provision of Information.
Each Member shall cooperate and coordinate in the drafting and
formulation of FNV's or its affiliates' chapter 11 plan or plans of
reorganization. The Members shall keep one another fully and promptly informed
of developments in FNV's or its affiliates' business or relationships with or
21
affecting its creditors, including any notices from its lenders, suppliers or
advisors or any notices from any third party related to its creditors, in each
case whether such information is obtained from FNV or its affiliates pursuant to
the terms of the Management Agreement or otherwise. 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) waive a term or
condition of any agreement, plan of reorganization or bankruptcy court order.
11.3 Designation of FNV Directors.
Berkshire shall be entitled to designate at least one (1) of the
three (3) persons that Leucadia is entitled to designate to the Board of
Directors of FNV (or as an advisory participant in the meetings of such Board of
Directors) pursuant to the terms of the Management Agreement, and Leucadia shall
cause such Berkshire designee to be so designated; provided, however, that from
and after the effective date of FNV's plan of reorganization and the Members'
receipt of the FNV Stock, if the Members are entitled to designate an even
number of directors, then each of the Members shall be entitled to designate
one-half of the total number of persons that the Members are entitled to, or
have the power to, designate or elect to such Board of Directors, and if the
Members are entitled to designate an odd number of directors, then, out of the
number of directors that the Members are entitled to, or have the power to,
designate or elect to such Board of Directors, Leucadia shall be entitled to
designate one more than Berkshire. Berkshire and Leucadia, after their receipt
of FNV Stock, shall each vote the shares of FNV Stock owned by them so as to
carry out the purposes of this Section 11.3.
11.4 Exercise of Management Agreement Approval Rights.
Leucadia shall not, nor shall it permit any of its affiliates to,
provide its consent or approval with respect to any act or omission by FNV or
its affiliates for which Leucadia's (or any affiliate's) consent or approval is
required under the terms of the Management Agreement or otherwise, without the
written consent of Berkshire, which decision regarding consent shall be made
promptly (in light of its circumstances) after receipt of notice seeking such
consent. Without limiting the generality of the foregoing, without the written
consent of Berkshire, Leucadia shall not, nor shall it permit any of its
affiliates to, (a) agree to any amendment or cancellation of, or waiver of any
of its rights or FNV's obligations under, the Management Agreement, or (b) prior
to the effectiveness of FNV's or its affiliates' chapter 11 plan, consent to or
approve of FNV undertaking, or agreeing or committing to undertake, whether in
writing or otherwise, to any of the matters set forth in Annex A to the
Management Agreement.
11.5 Transfers of FNV Stock.
No Member shall, prior to the payment of the Senior Loan in full,
Transfer all or any part of the common stock or other equity security of FNV
acquired by any Member in connection with the chapter 11 plan (the "FNV Stock"),
without the prior written consent of the other Member; provided, however, that a
Member may at any time Transfer all or any portion of its FNV Stock to any
wholly owned Affiliate of the transferor that agrees, in form and substance
22
reasonably acceptable to the non-transferring Member, to be bound by the
provisions of this Agreement relating to the ownership and voting of the FNV
Stock, including, without limitation, Section 11.3 and this Section 11.5.
11.6 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.
11.7 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), Leucadia shall waive any and all rights it may have to receive the
$15 million breakup fee and effective upon receipt by Leucadia of reimbursement
for reasonable out of pocket expenses incurred by Leucadia prior to February 1,
2001 and related to FNV and its subsidiaries, Leucadia shall waive any and all
rights it may have to receive liquidated damages, in each case arising from
agreements entered into prior to the Effective Date among Leucadia, 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 Leucadia (or
any affiliate) is income of the Company to be shared evenly between the Members.
Consequently, Leucadia shall promptly pay over (or cause to be paid over) to
Berkshire 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.
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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).
(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 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.
12.4 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.
12.5 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.
24
12.6 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.
12.7 WAIVER OF JURY TRIAL.
EACH OF THE MEMBERS 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.
12.8 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.
25
12.9 Counterpart Execution.
This Agreement may be executed in any number of counterparts with the
same effect as if all of the Members had signed the same document. All
counterparts shall be construed together and shall constitute one agreement.
12.10 Specific Performance.
Each Member agrees with the other that the 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.
12.11 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.
12.12 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.
26
IN WITNESS WHEREOF, the parties have executed and entered into this
Operating Agreement of the Company as of the day first above set forth.
BERKSHIRE HATHAWAY INC.
By: /s/ ▇▇▇▇ ▇. Hamburg
--------------------------------------------
Name: ▇▇▇▇ ▇. Hamburg
Title: Vice President
LEUCADIA NATIONAL CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. Orlando
--------------------------------------------
Name: ▇▇▇▇▇▇ ▇. Orlando
Title: Vice President
27
APPENDIX A
Attached to and Made a Part of
the Operating Agreement of
Berkadia LLC
Members
-------
Facility Fee
Name and Address Debt Percentage Fee Percentage Percentage
---------------- --------------- -------------- ----------
Berkshire Hathaway Inc. 90% 50% 70%
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Leucadia National Corporation 10% 50% 30%
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
APPENDIX B
Attached to and Made a Part of
the 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 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).
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) using an allocation method (pursuant to Regulations under
Section 704(c)) approved by the Members.
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
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.
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 1, 2 or 3 of this Appendix B (a "Book Item") shall be
allocated between the Members in the same proportion as the corresponding Book
Item is allocated between the Members under Section 3.1.
Appendix B-4