SECOND AMENDED AND RESTATED
LIMITED LIABILITY COMPANY OPERATING AGREEMENT
OF
CHARTER EQUIPMENT LEASE 1999-1 LLC
as of August 8, 1999
LIMITED LIABILITY COMPANY OPERATING AGREEMENT
OF
CHARTER EQUIPMENT LEASE 1999-1 LLC
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS.........................................................1
1. Act.................................................................1
2. Additional Member...................................................1
3. Admission Agreement.................................................1
4. Affiliate...........................................................1
5. Assignee............................................................1
6. Bankrupt Member.....................................................2
7. Business Day........................................................2
8. Capital Account.....................................................2
9. Capital Contribution................................................2
10. Certificate of Formation............................................2
11. Code................................................................2
12. Commitment..........................................................2
13. Company.............................................................2
14. Company Liability...................................................2
15. Company Minimum Gain................................................2
16. Company Nonrecourse Deductions......................................3
17. Company Nonrecourse Liability.......................................3
18. Company Property....................................................3
19. Contributing Members................................................3
20. Control Party.......................................................4
21. Default Interest Rate...............................................4
22. Delinquent Member...................................................4
23. Disposition (Dispose)...............................................4
24. Dissolution Event...................................................4
25. Distribution........................................................4
26. Effective Date......................................................4
27. GAAP Capital Account................................................4
28. Independent Director................................................4
29. Indenture...........................................................5
30. Indenture Trustee...................................................5
31. Initial Capital Contribution........................................5
32. Initial Member......................................................5
33. Management Right....................................................5
34. Managing Member.....................................................5
35. Member..............................................................5
36. Member Minimum Gain.................................................5
i
37. Member Nonrecourse Deductions.......................................6
38. Member Nonrecourse Liability........................................6
39. Membership Interest.................................................6
40. Money...............................................................6
41. Net Losses..........................................................7
42. Net Profits.........................................................7
43. Non-Consolidatable Entity...........................................7
44. Nonrecourse Liabilities.............................................7
46. Notice..............................................................7
47. Offsettable Decrease................................................7
48. Operating Agreement.................................................8
49. Organization........................................................8
50. Organization Expenses...............................................8
51. Person..............................................................8
52. Principal Office....................................................8
53. Proceeding..........................................................8
54. Property............................................................8
55. Regulations.........................................................8
56. Related Agreements..................................................9
57. Related Company.....................................................9
58. Related Person......................................................9
59. Securities..........................................................9
60. Sharing Ratio.......................................................9
61. State...............................................................9
62. Substitute Member...................................................9
63. Taxable Year........................................................9
64. Taxing Jurisdiction.................................................9
ARTICLE II FORMATION.........................................................10
1. Organization.......................................................10
2. Agreement..........................................................10
3. Name...............................................................10
4. Effective Date.....................................................10
5. Term...............................................................10
6. Resident Agent and Office..........................................11
7. Principal Office...................................................11
ARTICLE III NATURE OF BUSINESS...............................................11
1. Purposes...........................................................11
2. Limitations........................................................11
ARTICLE IV ACCOUNTING AND RECORDS............................................14
1. Records to be Maintained...........................................14
2. Accounts...........................................................14
ii
ARTICLE V NAMES AND ADDRESSES OF MEMBERS.....................................14
ARTICLE VI RIGHTS AND DUTIES OF MEMBERS......................................15
1. Management Rights..................................................15
2. Liability of Members...............................................15
3. Indemnification....................................................15
4. Representations and Warranties.....................................15
5. Conflicts of Interest..............................................16
ARTICLE VII MANAGEMENT.......................................................16
1. Management of the Company..........................................16
2. Authority of Managing Member to Bind the Company...................17
3. Actions of the Managing Member.....................................18
4. Compensation of Managing Member....................................18
5. Managing Member's Standard of Care.................................18
6. Resignation........................................................18
ARTICLE VIII CONTRIBUTIONS AND CAPITAL ACCOUNTS..............................19
1. Capital Contributions..............................................19
2. Additional Contributions...........................................19
3. Enforcement of Commitments.........................................19
4. Maintenance of Capital Accounts....................................20
5. Contribution of Assets.............................................20
6. Sale or Exchange of Interest.......................................20
7. Compliance with Section 704(b) of the Code.........................21
8. Maintenance of GAAP Capital Accounts...............................21
ARTICLE IX ALLOCATIONS AND DISTRIBUTIONS.....................................21
1. Allocations of Net Profits and Net Losses from Operations..........21
2. Company Minimum Gain Chargeback....................................22
3. Member Minimum Gain Chargeback.....................................22
4. Qualified Income Offset............................................22
5. Interim Distributions..............................................23
6. Limitations on Distributions.......................................23
iii
ARTICLE X TAXES..............................................................23
1. Tax Characterization of the Company................................23
2. Elections..........................................................24
3. Taxes of Taxing Jurisdictions......................................24
4. Tax Matters Member.................................................24
5. Method of Accounting...............................................24
ARTICLE XI DISPOSITION OF MEMBERSHIP INTERESTS...............................24
1. Disposition........................................................24
2. Dispositions Not in Compliance with this Article Void..............25
ARTICLE XII ADMISSION OF ASSIGNEES AND ADDITIONAL MEMBERS....................25
1. Rights of Assignees................................................25
2. Admission or Substitute Members....................................25
3. Admission of Additional Members....................................25
4. Forbidden Transfers and Assignments................................26
ARTICLE XIII DISSOLUTION AND WINDING UP......................................26
1. Dissolution........................................................26
2. Effect of Dissolution..............................................26
3. Distribution of Assets on Dissolution..............................26
4. Winding Up and Certificate of Dissolution..........................26
5. Resignation of Member..............................................27
ARTICLE XIV AMENDMENT........................................................27
1. Operating Agreement may be Modified................................27
2. Amendment or Modification of Operating Agreement...................27
ARTICLE XV MISCELLANEOUS PROVISIONS..........................................27
1. Entire Agreement...................................................27
2. No Partnership Intended for Non-tax Purposes.......................27
3. Rights of Creditors and Third Parties Under Operating Agreement....28
EXHIBIT A INITIAL MEMBER
iv
SECOND AMENDED AND RESTATED
LIMITED LIABILITY COMPANY OPERATING AGREEMENT
OF
CHARTER EQUIPMENT LEASE 1999-1 LLC
This Limited Liability Company Operating Agreement of CHARTER EQUIPMENT
LEASE 1999-1 LLC, a limited liability company organized pursuant to the Delaware
Limited Liability Company Act, is entered into and shall be effective as of the
September 21, 1998, by and among the Company and the entities executing this
Operating Agreement as Members, as amended and restated hereby as of August 8,
1999.
ARTICLE I
DEFINITIONS
For purposes of this Operating Agreement (as defined below), unless the
context clearly indicates otherwise, the following terms shall have the
following meanings:
1. Act. The Delaware Limited Liability Company Act and all amendments to
the Act.
2. Additional Member. A Member other than the Initial Member or a
Substitute Member who has acquired a Membership Interest from the Company.
3. Admission Agreement. The Agreement between an Additional Member and the
Company described in Article XII.
4. Affiliate. An "affiliate" of, or a Person, "affiliated" with, a
specified Person, is (a) a Person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, the specified Person, (b) a Person owning or controlling ten percent or
more of the outstanding voting securities of such specified Person, (c) any
officer, director, partner or general trustee of such specified Person and (d)
if such other Person is an officer, director or partner, any company for which
such Person acts in any such capacity.
5. Assignee. A transferee of a Membership Interest who has not been
admitted as a Substituted Member.
6. Bankrupt Member. A Member who: (1) has become the subject of an Order
for Relief under the United States Bankruptcy Code, or (2) has initiated, either
in an original Proceeding or by way of answer in any state insolvency or
receivership proceeding, an action for liquidation arrangement, composition,
readjustment, dissolution, or similar relief.
7. Business Day. Any day other than Saturday, Sunday or any legal holiday
observed in the State.
8. Capital Account. The account maintained for a Member or Assignee
determined in accordance with Article VIII.
9. Capital Contribution. Any contribution of Property, services or the
obligation to contribute Property or services made by or on behalf of a Member
or Assignee.
10. Certificate of Formation. The Certificate of Formation as properly
adopted and amended from time to time by the Members and filed with the
Secretary of State.
11. Code. The Internal Revenue Code of 1986, as amended from time to time.
12. Commitment. The Capital Contributions that a Member or Assignee is
obligated to make.
13. Company. Charter Equipment Lease 1999-1 LLC, a limited liability
company formed under the laws of the State of Delaware, and any successor
limited liability company.
14. Company Liability. Any enforceable debt or obligation for which the
Company is liable or which is secured by any Company Property.
15. Company Minimum Gain. An amount determined by first computing for each
Company Nonrecourse Liability any gain the Company would realize if it disposed
of the Company Property subject to that liability for no consideration other
than full satisfaction of the liability, and then aggregating the separately
computed gains. The amount of Company Minimum Gain includes such minimum gain
arising from a conversion, refinancing, or other change to a debt instrument,
only to the extent a Member is allocated a share of that minimum gain. For any
Taxable Year, the net increase or decrease in Company Minimum Gain is determined
by comparing the Company Minimum Gain on the last day of the immediately
preceding Taxable Year with the Minimum Gain on the last day of the current
Taxable Year. Notwithstanding any provision to the contrary contained herein,
Company Minimum Gain and increases and decreases in Company Minimum Gain are
intended to be computed in accordance with ss. 704 of the Code and the
Regulations issued thereunder, as the same may be issued and interpreted from
time to time. A Member's share of Company Minimum Gain at the end of any Taxable
Year equals: the sum of Company Nonrecourse Deductions allocated to that Member
(and to that Member's predecessors-in-interest) up to that time and the
distribution made to that Member (and to that Member's predecessors-in-interest)
up to that time of proceeds of a Company Nonrecourse Liability allocable to an
increase in Company Minimum Gain minus the sum of that Member's (and that
Member's predecessors-in-interest) aggregate share of the net decreases in
Company Minimum Gain plus their aggregate share of decreases resulting from
reevaluations of Company Property subject to one or more Company Nonrecourse
Liabilities.
2
16. Company Nonrecourse Deductions. The net increase if any, in the amount
of Company Minimum Gain during the Taxable Year. The Company Nonrecourse
Deductions shall consist first of depreciation or cost recovery deductions with
respect to each item of Company Property to the extent of the increase in
Company Minimum Gain attributable to Company Nonrecourse Liabilities secured by
such Company Property, with the remainder of any Company Nonrecourse Deductions
made up of a pro rata portion of the Company's other items of deduction, loss
and nondeductible expenditures (to the extent that such nondeductible
expenditures reduce Capital Accounts). Company Nonrecourse Deductions shall be
further determined in accordance with Regulation ss. 1.704-2(c) and any
subsequent rule or regulation governing the determination of Company Nonrecourse
Deductions.
17. Company Nonrecourse Liability. A Company Liability to the extent that
no Member or Related Person bears the economic risk of loss (as defined in ss.
1.752-2 of the Regulations) with respect to the liability.
18. Company Property. Any Property owned by the Company.
19. Contributing Members. Those Members making contributions as a result of
the failure of a Delinquent Member to make the contributions required by the
Commitment as described in Article VIII.
20. Control Party. The person so designated as such in a Related Agreement,
or, if no such person is so designated, then the trustee, or if there is no
trustee, then any "agent" for the lenders thereunder.
21. Default Interest Rate. The higher of the legal rate or the then-current
prime rate quoted by the largest commercial bank in the jurisdiction of the
Principal Office plus three percent.
22. Delinquent Member. A Member or Assignee who has failed to meet the
Commitment of that Member or Assignee.
23. Disposition (Dispose). Any sale, assignment, transfer, exchange,
mortgage, pledge, grant, hypothecation, or other transfer, absolute or as
security or encumbrance (including dispositions by operation of law).
24. Dissolution Event. An event, the occurrence of which will result in the
dissolution of the Company under Article XIII.
25. Distribution. A transfer of Property to a Member on account of a
Membership Interest as described in Article IX.
26. Effective Date. As defined in Article II, Section 4 hereof.
27. GAAP Capital Account. The capital account maintained by the Company for
each of the Members in accordance with generally accepted accounting principles.
3
28. Independent Director. A director of the Managing Member, not less than
one in number, who shall not be, and for the five-year period prior to such
individual's appointment as director shall not have been, and during the
continuation of his or her service as Independent Director is not: (A) an
employee, director, stockholder, partner or officer of the Company or any of its
affiliates; (B) a customer, supplier or other person that derives any of its
revenues from the Company or any of its affiliates; (C) a person or entity
controlling or under common control with any such employee, director,
stockholder, partner, officer, attorney, customer or supplier, or other person
or (D) any member of the immediate family of a person described (A), (B) or (C);
provided, however, that no individual shall be excluded from qualifying as an
"Independent Director" by virtue of serving as an Independent Director of one or
more other affiliates of the Managing Member that are special purpose,
bankruptcy remote entities.
29. Indenture. As defined in Article III hereof.
30. Indenture Trustee. As defined in Article III hereof.
31. Initial Capital Contribution. The Capital Contribution agreed to be
made by the Initial Member as described in Article VIII.
32. Initial Member. The person identified on Exhibit A attached hereto and
made a part hereof by this reference who has executed this Operating Agreement.
33. Management Right. The right of a Member to participate in the
management of the Company, including the rights to information and to consent or
approve actions of the Company.
34. Managing Member. As defined in Article VII hereof.
35. Member. Initial Member, Substituted Member or Additional Member, and,
unless the context expressly indicates to the contrary, includes Assignees.
36. Member Minimum Gain. An amount determined by first computing for each
Member Nonrecourse Liability any gain the Company would realize if it disposed
of the Company Property subject to that liability for no consideration other
than full satisfaction of the liability, and then aggregating the separately
computed gains. The amount of Member Minimum Gain includes such minimum gain
arising from a conversion, refinancing, or other change to a debt instrument,
only to the extent a Member is allocated a share of that minimum gain. For any
Taxable Year, the net increase or decrease in Member Minimum Gain is determined
by comparing the Member Minimum Gain on the last day of the immediately
preceding Taxable Year with the Minimum Gain on the last day of the current
Taxable Year. Notwithstanding any provision to the contrary contained herein,
Member Minimum Gain and increases and decreases in Member Minimum Gain are
intended to be computed in accordance with ss. 704 of the Code and the
Regulations issued thereunder, as the same may be issued and interpreted from
time to time. A Member's share of Member Minimum Gain at the end of any Taxable
Year equals: the sum of Member Nonrecourse Deductions allocated to that Member
(and to that Member's predecessors-in-interest) up to that time and the
4
distribution made to that Member (and to that Member's predecessors-in-interest)
up to that time of proceeds of a Member Nonrecourse Liability allocable to an
increase in Company Minimum Gain minus the sum of that Member's (and that
Member's predecessors-in-interest) aggregate share of the net decreases in
Member Minimum Gain plus their aggregate share of decreases resulting from
reevaluations of Company Property subject to one or more Member Nonrecourse
Liabilities.
37. Member Nonrecourse Deductions. The net increase, if any, in the amount
of Member Minimum Gain during the Taxable Year. The Member Nonrecourse
Deductions shall consist first of depreciation or cost recovery deductions with
respect to each item of Company Property to the extent of the increase in Member
Minimum Gain attributable to Member Nonrecourse Liabilities secured by such
Company Property, with the remainder of any Member Nonrecourse Deductions made
up of a pro rata portion of the Company's other items of deduction, loss and
nondeductible expenditures (to the extent that such nondeductible expenditures
reduce Capital Accounts). Member Nonrecourse Deductions shall be further
determined in accordance with Regulation ss. 1.70422-(i)(2) and any subsequent
rule or regulation governing the determination of Member Nonrecourse Deductions.
38. Member Nonrecourse Liability. Any Company Liability to the extent the
liability is nonrecourse under state law, and on which a Member or Related
Person bears the economic risk of loss under ss. 1.752-2 of the Regulations
because, for example, the Member or Related Person is the creditor or a
guarantor.
39. Membership Interest. The rights of a Member or, in the case of an
Assignee, the rights of the assigning Member in Distributions (liquidating or
otherwise) and allocations of the profits, losses, gains, deductions, and
credits of the Company.
40. Money. Cash or other legal tender of the United States, or any
obligation that is immediately reducible to legal tender without delay or
discount. Money shall be considered to have a fair market value equal to its
face amount.
41. Net Losses. The loss and deductions of the Company determined in
accordance with accounting principles consistently applied from year to year
employed under the method of accounting adopted by the Company and as reported
separately or in the aggregate, as appropriate, on the tax return of the Company
filed for federal income tax purposes.
42. Net Profits. The income and gains of the Company determined in
accordance with accounting principles consistently applied from year to year
employed under the method of accounting adopted by the Company and as reported
separately or in the aggregate, as appropriate, on the tax return of the Company
filed for federal income tax purposes.
43. Non-Consolidatable Entity. Any Person with respect to which nationally
recognized bankruptcy counsel has delivered its opinion to the effect that such
Person's "estate", as defined under Section 541(c) of the United States
Bankruptcy Code, would
5
not be consolidated with the "estate" of Charter Financial, Inc. in a bankruptcy
proceeding involving Charter Financial, Inc.
44. Nonrecourse Liabilities. Nonrecourse Liabilities include Company
Nonrecourse Liabilities and Member Nonrecourse Liabilities.
As defined in Article III hereof.
46. Notice. Notice shall be in writing. Notice to the Company shall be
considered given when mailed by first-class mail, postage prepaid, addressed to
the Managing Member in care of the Company at the address of Principal Office.
Notice as to a Member shall be considered given when mailed by first-class mail,
postage prepaid, addressed to the Member at the address reflected in this
Operating Agreement unless the Member has given the Company a Notice of a
different address.
47. Offsettable Decrease. Any allocation that unexpectedly causes or
increases a deficit in the Member's Capital Account as of the end of the taxable
year to which the allocation relates attributable to depletion allowances under
ss. 1.704-1(b)-(2)(iv)(k) of the Regulations, allocations of loss and deductions
under xx.xx. 704(a)(2) or 706 of the Code or under ss. 1.751-1 of the
Regulations, or distributions that, as of the end of the year are reasonably
expected to be made to the extent they exceed the offsetting increases to such
Member's Capital Account that reasonably are expected to occur during or (prior
to) the taxable years in which such distributions are expected to be made (other
than increases pursuant to a Minimum Gain Chargeback).
48. Operating Agreement. This Amended and Restated Limited Liability
Company Operating Agreement including all Admission Agreements and amendments
adopted in accordance with this Operating Agreement and the Act.
49. Organization. A Person other than a natural person. Organization
includes, without limitation, corporations (both non-profit and other
corporations), partnerships (both limited and general), joint ventures, limited
liability companies, and unincorporated associations, but the item does not
include joint tenancies and tenancies by the entirety.
50. Organization Expenses. Those expenses incurred in the organization of
the Company including the costs of preparation of this Operating Agreement and
the Certificate of Formation.
51. Person. An individual, trust, estate, or any incorporated or
unincorporated organization permitted to be a member of a limited liability
company under the laws of the State.
52. Principal Office. The office set forth in Article II, Section 7 of this
Operating Agreement.
6
53. Proceeding. Any administrative, judicial, or other adversary
proceeding, including, without limitation, litigation, arbitration,
administrative adjudication, mediation, and appeal or review of any of the
foregoing.
54. Property. Any property, real or personal, tangible or intangible,
including money and any legal or equitable interest in such property, but
excluding services and promises to perform services in the future.
55. Regulations. Except where the context indicates otherwise, the
permanent, temporary, proposed, or proposed and temporary regulations of the
Department of the Treasury under the Code as such regulations may be lawfully
changed from time to time.
56. Related Agreements. Shall have the meaning set forth in Article III of
this Operating Agreement.
57. Related Company. Any Member of the Company other than a
Non-Consolidated Entity or any entity other than the Company or a
Non-Consolidated Entity now or hereafter controlled directly or indirectly by,
or under direct or indirect common control with, Charter Financial, Inc.
58. Related Person. A person having a relationship to a Member that is
described in ss. 1.752-4(b) of the Regulations.
59. Securities. Shall have the meaning set forth in Article III of this
Operating Agreement.
60. Sharing Ratio. With respect to any Member, a fraction (expressed as a
percentage), the numerator of which is the total of the Member's initial Capital
Account and the denominator is the total of all initial Capital Accounts of all
Members and Assignees.
61. State. The State of Delaware.
62. Substitute Member. An Assignee who has been admitted to all of the
rights of membership pursuant to this Operating Agreement.
63. Taxable Year. The taxable year of the Company as determined pursuant
toss. 706 of the Code.
64. Taxing Jurisdiction. Any state, local, or foreign government that
collects tax, interest or penalties, however designated, on any Member's share
of the income or gain attributable to the Company.
7
ARTICLE II
FORMATION
1. Organization. The Members hereby organize the Company as a Delaware
limited liability company pursuant to the provisions of the Act.
2. Agreement. For and in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Members executing this
Operating Agreement hereby agree to the terms and conditions of this Operating
Agreement, as it may from time to time be amended according to its terms. It is
the express intention of the Members that this Operating Agreement shall be the
sole source of agreement of the parties, and, except to the extent a provision
of this Operating Agreement expressly incorporates federal income tax rules by
reference to sections of the Code or Regulations or is expressly prohibited or
ineffective under the Act, this Operating Agreement shall govern, even when
inconsistent with, or different than, the provisions of the Act or any other law
or rule. To the extent any provision of this Operating Agreement is prohibited
or ineffective under the Act, this Operating Agreement shall be considered
amended to the smallest degree possible in order to make this Operating
Agreement effective under the Act. In the event the Act is subsequently amended
or interpreted in such a way to make any provision of this Operating Agreement
that was formerly invalid valid, such provision shall be considered to be valid
from the effective date of such interpretation or amendment.
3. Name. The name of the Company is Charter Equipment Lease 1999-1 LLC, and
all business of the Company shall be conducted under that name or under any
other name, but in any case, only to the extent permitted by applicable law.
4. Effective Date. This Operating Agreement shall become effective on
September 21, 1998, the date of filing of the Certificate of Formation of
Charter Equipment Lease 1999-1 LLC with the Secretary of State of the State.
5. Term. The Company shall be dissolved and its affairs wound up in
accordance with the Act and this Operating Agreement on December 31, 2050 unless
the term shall be extended by amendment to this Operating Agreement and the
Certificate of Formation, or unless the Company shall be sooner dissolved and
its affairs wound up in accordance with the Act or this Operating Agreement.
6. Resident Agent and Office. The resident agent for the service of process
and the registered office in the State shall be that Person and location
reflected in the Certificate of Formation as filed in the office of the
Secretary of State of the State. The Managing Member may, from time to time,
change the resident agent or office through appropriate filings with the
Secretary of State of the State. In the event the resident agent ceases to act
as such for any reason or the registered office shall change, the Managing
Member shall promptly designate a replacement resident agent or file a notice of
change of address as the case may be. If the Managing Member shall fail to
designate a
8
replacement resident agent or change of address of the registered office, any
Member may designate a replacement resident agent or file a notice of change of
address.
7. Principal Office. The Principal Office of the Company shall be located
at 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, XX 00000 until July 5, 1999, and 000 Xxxxx
Xxxxxx, Xxx Xxxx, XX 00000 on or after July 5, 1999.
ARTICLE III
NATURE OF BUSINESS
1. Purposes. The business in which the Company may engage and the powers
which the Company may exercise are restricted exclusively to the following:
1.1. to issue, authorize, sell and deliver the Charter Equipment Lease
1999-1 LLC Receivables-Backed Notes (the "Notes");
1.2. to hold and enjoy all of the rights and privileges of the Notes;
1.3. to distribute to the Members such of the Company's assets as each
are entitled to in accordance with the terms hereof and the terms of the
Indenture;
1.4. to do such other things and carry on any other activities which
the Managing Member determines to be necessary, convenient or incidental to
any of the foregoing purposes, including, without limitation, to accept
additional contributions of equity that are not subject to the lien of the
Indenture, and have and exercise all of the power and rights conferred upon
limited liability companies formed pursuant to the Act that are necessary,
convenient or incidental to any of the foregoing purposes in subsections
1.1 - 1.3 above.
2. Limitations.
2.1. Notwithstanding any other provision of this Operating Agreement
and any provision of law that otherwise so empowers the Company, the
Company shall not, without the prior written consent of the Indenture
Trustee and each nationally recognized statistical rating agency rating any
of the Company's issued and outstanding Notes, do any of the following:
(i) dissolve or liquidate, in whole or in part;
(ii) create any subsidiaries;
(iii) consolidate or merge with or into any other entity or
convey or transfer all or substantially all of its properties and
assets to any entity (other than pursuant to the Indenture);
9
(iv) incur, assume or guarantee any indebtedness, or pledge its
assets to secure any indebtedness or hold its assets out to be
available to satisfy the obligations of any other Person (other than
pursuant to the Indenture or the Certificate Purchase Agreement) or
make any loans or monetary advances to any other Person;
(v) amend, alter, change or repeal Article III, VII, XI, XIII or
XIV of this Operating Agreement; or
(vi) engage in any other business activity not contemplated by
this Operating Agreement.
2.2. The Company shall conduct its affairs in such a manner that its
assets and liabilities would not be substantively consolidated with those
of any other Person in the event of a bankruptcy or insolvency of such
Person, and in such regard, the Company shall conduct its affairs in
accordance with the following provisions:
(i) it shall not engage in any business or activity other than as
permitted by Article III hereof;
(ii) it shall maintain separate records, financial statements
(showing its assets and liabilities separate and apart from that of
any other Person) and books of account from those of any direct or
ultimate parent of any Related Company and any other Person; provided,
however, that if in addition to such separate financial statements,
the Company's financial statements are included as a part of the
consolidated financial statements of its parent institution, any of
its affiliates and any other Person, such consolidated financial
statements shall contain a footnote to the effect that the Company has
assets and liabilities separate and apart from those of such Person
and those separate assets and liabilities are shown on the separate
financial statements of the Company;
(iii) it shall not commingle the Company's assets with those of
any Related Company and shall hold all of its assets in its own name;
(iv) its Members shall hold meetings, as appropriate to authorize
all action on behalf of the Company and observe all other
organizational formalities of the Company;
(v) it shall not become involved in the day to day management of
any Related Company;
(vi) it shall operate so as not to be substantively consolidated
with any Related Company;
(vii) it shall maintain its assets separately from those of any
Related Company or any other Person (including through the maintenance
of a separate bank account);
10
(viii) it shall hold itself out as a separate entity from any
Related Company and shall conduct business in its own name on its own
stationary;
(ix) it shall correct any misunderstanding known to it regarding
its separate identity from any Related Company;
(x) it shall not act as the agent of any Related Company;
(xi) it shall pay its own expenses from its own funds, including
its employees' salaries, and shall fairly allocate expenses shared
with an affiliate including reasonably and fairly allocating overhead
for shared office space;
(xii) it shall maintain adequate capital and a sufficient number
of employees in light of its contemplated business activities;
(xiii) it shall insure that any financial transaction and all
other aspects of the relationship between the Company and any of its
affiliates shall be on commercially reasonable terms; and
(xiv) it shall maintain its own office;
(xv) it shall not guarantee or assume, or make its credit
available to pay the obligations of any other Person;
(xvi) it shall not acquire any of its members' obligations or
securities; and
(xvii) it shall not purchase or hold debt issued by any other
Person (other than cash, investment-grade securities or Eligible
Investments (as defined in the Indenture).
2.3. The Company shall not, without the affirmative vote of 100% of
the Board of Directors of the Managing Member of the Company (including an
affirmative vote of each Independent Director of the Managing Member) and
the affirmative vote of the other Members of the Company, make an
assignment for the benefit of creditors, file a petition in bankruptcy on
behalf of itself, petition or apply to any tribunal for the appointment of
a custodian, receiver or any trustee for the Company or for a substantial
part of the Company's property, commence any proceeding under any
bankruptcy, reorganization, arrangement, readjustment of debt, dissolution
or liquidation law or statute of any jurisdiction, whether now or
hereinafter in effect, with respect to the Company, consent or acquiesce to
the entry of an order for relief, or in the filing of any such petition,
application, proceeding or appointment of or taking possession by the
custodian, receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Company or any substantial part of the Company's
property, or admit the Company's inability to pay its respective debts
generally as they become due or authorize any of the foregoing or any
action in furtherance of the foregoing, to be done or taken on behalf of
the Company.
11
ARTICLE IV
ACCOUNTING AND RECORDS
1. Records to be Maintained. The Company shall maintain the following
records at its registered office:
1.1. A current list of the full name and last known business address
of each Member, separately identifying the Members in alphabetical order;
1.2. A copy of the Certificate of Formation and all amendments
thereto, together with executed copies of any powers of attorney pursuant
to which the Certificate of Formation have been executed;
1.3. Copies of this Operating Agreement, including all amendments
thereto;
2. Accounts. The Managing Member shall maintain a record of Capital Account
for each Member in accordance with Article VIII.
ARTICLE V
NAMES AND ADDRESSES OF MEMBERS
The name and address of the Initial Member are as reflected on Exhibit A
attached hereto and by this reference made a part hereof as if set forth fully
herein.
ARTICLE VI
RIGHTS AND DUTIES OF MEMBERS
1. Management Rights. (a) All Members (other than Assignees) who have not
resigned shall be entitled to vote on any matter submitted to a vote of the
Members. Notwithstanding the foregoing, the following actions require the
unanimous consent of the Members:
1.1. any amendment to this Operating Agreement;
1.2. the admission of Assignees to Management Rights; and
1.3. the continuation of the Company after a Dissolution Event.
(b) Upon the insolvency of a Member, the affirmative vote of a majority in
interest of the remaining Members is required to continue the LLC's existence.
However, if the affirmative vote of a majority in interest of the remaining
Members is not obtained, the Company shall not liquidate any collateral of the
holders of
12
rated securities without such holders' consent. The securityholders shall
continue to exercise all their rights under security agreements and shall have
the ability to retain the collateral until the rated securities have been paid
in full or discharged completely.
2. Liability of Members. Subject to Article XV hereof, no Member shall be
liable as such for the liabilities of the Company or any obligations of another
Member. The failure of a limited liability company to observe any formalities or
requirements relating to the exercise of its powers or management of its
business or affairs under this agreement or the Act shall not be grounds for
imposing personal liability on the Members or Managing Member for liabilities of
the limited liability company.
3. Indemnification. The Company shall indemnify the Members and agents for
all costs, losses, liabilities, and damages paid or accrued by such Member or
agent in connection with the business of the Company, as provided in the
Certificate of Formation and to the fullest extent provided or allowed by the
laws of the State.
4. Representations and Warranties. Each Member, and in the case of an
Organization, the Person(s) executing this Operating Agreement on behalf of the
Organization, hereby represents and warrants to the Company and each other
Member that: (a) it is duly organized, validly existing, and in good standing
under the laws of its state of organization and that it has full organizational
power to execute and agree to this Operating Agreement and to perform its
obligations hereunder; (b) that the Member is acquiring its interest in the
Company for the Member's own account as an investment and without an intent to
distribute the interest; (c) the Member acknowledges that the interests have not
been registered under the Securities Act of 1933, as amended, or any state
securities laws, and may not be resold or transferred by the Member without
appropriate registration or the availability of an exemption from such
requirements,
5. Conflicts of Interest.
5.1. A Member shall be entitled to enter into transactions that may be
considered to be competitive with, or a business opportunity that may be
beneficial to, the Company, it being expressly understood that some of the
Members may enter into transactions that are similar to the transactions
into which the Company may enter. Notwithstanding the foregoing, Members
shall account to the Company and hold as trustee for it any property,
profit, or benefit derived by the Member, without the consent of the other
Members, in the conduct and winding up of the Company business or from a
use or appropriation by the Member of Company property including
information developed exclusively for the Company and opportunities
expressly offered to the Company.
5.2. (a) A Member does not violate a duty or obligation to the Company
merely because the Member's conduct furthers the Member's own interest. A
Member may lend money to and transact other business with the Company. The
rights and obligations of a Member who lends money to or transacts business
with the Company are the same as those of a person who is not a Member,
subject to other applicable law. No transaction with the Company shall be
voidable solely because a Member has a direct or
13
indirect interest in the transaction if either the transaction is fair to
the Company or the disinterested Members, knowing the material facts of the
transaction and the Member's interest, authorize, approve, or ratify the
transaction.
(b) The Members of the Company must take into consideration the
interests of the Company's creditors in connection with all corporate
actions.
ARTICLE VII
MANAGEMENT
1. Management of the Company.
1.1. The Initial Member shall be the managing member of the Company
(the "Managing Member") and, in such capacity, shall manage the Company in
accordance with this Operating Agreement. The Managing Member is an agent
of the Company in accordance with this Operating Agreement. The Managing
Member is an agent of the Company's business, and the actions of the
Managing Member taken in such capacity and in accordance with this
Operating Agreement shall bind the Company.
1.2. The Managing Member shall have full, exclusive and complete
discretion to manage and control the business and affairs of the Company,
to make all decisions affecting the business and affairs of the Company and
to take all such actions as it deems necessary or appropriate to accomplish
the purpose of the Company as set forth herein. The Managing Member shall
be the sole person or entity with the power to bind the Company, except and
to the extent that such power is expressly delegated to any other person or
entity by the Managing Member, and such delegation shall not cause the
Managing Member to cease to be the Managing Member. There shall not be a
"manager" (within the meaning of the Act) of the Company.
1.3. The Managing Member may appoint individuals with or without such
titles as it may elect, including the titles of President, Vice President,
Treasurer, Secretary, and Assistant Secretary, to act on behalf of the
Company with such power and authority as the Managing Member may delegate
in writing to any such persons.
2. Authority of Managing Member to Bind the Company. Only the Managing
Member and authorized agents of the Company shall have the authority to bind the
Company. Subject to Article III hereof, the Managing Member has the power, on
behalf of the Company, to do all things necessary or convenient to carry out the
business and affairs of the Company (as described in Article III), including,
without limitation:
2.1. the institution, prosecution and defense of any Proceeding in the
Company's name;
2.2. the entering into contracts;
14
2.3. investment and reinvestment of the Company's funds, and receipt
and holding of Property as security for repayment;
2.4. the conduct of the Company's business, the establishment of
Company offices, and the exercise of the powers of the Company;
2.5. the appointment of employees and agents of the Company, the
defining of their duties and the establishment of their compensation, and
the dealing with tradespeople, accountants and attorneys, on such terms as
the Managing Member shall determine;
2.6. the indemnification of any Person; and
2.7. the making of such elections under the Code and Tax Regulations
and other relevant tax laws as to the treatment of items of Company income,
gain, loss, deduction and credit, and as to all other relevant matters as
the Managing Member deems necessary or appropriate, including, without
limitation, elections referred to in Section 754 of the Code, the
determination of which items of cash outlay shall be capitalized or treated
as current expenses, and the selection of the method of accounting and
bookkeeping procedures to be used by the Company.
3. Actions of the Managing Member. The Managing Member has the power to
bind the Company as provided in this Article VII. No Person dealing with the
Company shall have any obligation to inquire into the power or authority of the
Managing Member acting on behalf of the Company.
4. Compensation of Managing Member. The Managing Member shall be reimbursed
for all reasonable expenses incurred in managing the Company and shall be
entitled to compensation, in an amount to be determined from time to time by
consent of the Member, in its sole discretion. The Managing Member shall not be
required to devote full time to the management of the Company business, but only
so much time as shall be necessary or appropriate for the proper management of
such business.
5. Managing Member's Standard of Care. The Managing Member shall discharge
its duties to the Company in good faith and with that degree of care that an
ordinarily prudent person in a similar position would use under similar
circumstances. In discharging its duties, the Managing Member shall be fully
protected in relying in good faith upon the records required to be maintained
under Article IV and upon such information, opinions, reports or statements by
any Person as to matters the Managing Member reasonably believes are within such
other Person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Company, including information, opinions,
reports or statements as to the value of the assets, liabilities, profits or
losses of the Company or any other facts pertinent to the existence and amount
of assets from which Distributions to the Member might properly be paid. The
Company shall indemnify and hold harmless the Managing Member against any loss,
damage or expense (including attorneys' fees) incurred by the Managing Member as
a result of any act performed or omitted on behalf of the Company or in
15
furtherance of the Company's interests without, however, relieving the Managing
Member of liability for failure to perform his or her duties in accordance with
the standards set forth herein. The satisfaction of any indemnification and any
holding harmless shall be from and limited to Company Property. Such right of
indemnification shall be subordinate and junior in right of payment to the
payment of other debts of the Company.
6. Resignation. The Managing Member shall not resign, dissociate or
withdraw from the Company at any time.
ARTICLE VIII
CONTRIBUTIONS AND CAPITAL ACCOUNTS
1. Capital Contributions. The Initial Member shall make the Capital
Contribution described for that Member on Exhibit A at the time and on the terms
specified on Exhibit A and shall perform that Member's Commitment. If no time
for contribution is specified, the Capital Contributions shall be made upon the
filing of the Certificate of Formation. The value of the Capital Contributions
shall be as set forth on Exhibit A. No interest shall accrue on any Capital
Contribution and no Member shall have the right to withdraw or be repaid any
Capital Contribution except as provided in this Operating Agreement. Each
Additional Member shall make the Initial Capital Contribution described in the
Admission Agreement. The value of the Additional Member's Initial Capital
Contribution and the time for making such contribution shall be set forth in the
Admission Agreement.
2. Additional Contributions. In addition to the Initial Capital
Contributions and Commitments, the Managing Member may determine from time to
time that additional contributions are needed to enable the Company to conduct
its business. Upon making such a determination, the Managing Member shall give
Notice to all Members in writing at least two Business Days prior to the date on
which such contribution is due. Such Notice shall set forth the amount of
additional contribution needed, the purpose for which the contribution is
needed, and the date by which the Members should contribute. Each Member shall
be entitled to contribute a proportionate share of such additional contribution.
Except to the extent of a Member's unpaid Commitment, no Member shall be
obligated to make any such additional contributions. In the event any one or
more Members do not make their additional contribution, the other members shall
be given the opportunity to make the contributions. Each Additional Member shall
make the Capital Contribution to which such Member has agreed, at the time or
times, and upon the terms to which the Managing Member and the Additional Member
agree.
3. Enforcement of Commitments. In the event any Member (a Delinquent
Member) fails to perform the Delinquent Member's Commitment, the Managing Member
shall give the Delinquent Member a Notice of the failure to meet the Commitment.
If the Delinquent Member fails to perform the Commitment (including any costs
associated with the failure to demand compliance with the Commitment and
interest on such
16
obligation at the Default Interest Rate) within ten Business Days of the giving
of Notice, the Managing Member may take such action, including, but not limited
to, enforcing the Commitment in the court of appropriate jurisdiction in the
state in which the Principal Office is located or the state of the Delinquent
Member's address as reflected in this Operating Agreement. Each Member expressly
agrees to the jurisdiction of such courts but only for the enforcement of
Commitments. The Managing Member may elect to allow the other Members to
contribute the amount of the Commitment in proportion to such Members' sharing
ratios, with those Members who contribute (Contributing Members) to contribute
additional amounts equal to any amount of the Commitment not contributed. The
Contributing Members shall be entitled to treat the amounts contributed pursuant
to this section as a loan from the Contributing Members bearing interest at the
Default Interest Rate secured by the Delinquent Member's interest in the
Company. Until they are fully repaid, the Contributing Members shall be entitled
to all Distributions to which the Delinquent Member would have been entitled.
Notwithstanding the foregoing, no Commitment or other obligation to make an
additional contribution may be enforced by a creditor of the Company unless the
Member expressly consents to such enforcement or to the assignment of the
obligation to such creditor.
4. Maintenance of Capital Accounts. The Company shall establish and
maintain Capital Accounts for each Member and Assignee. Each Member's Capital
Account shall be increased by (1) the amount of any Money actually contributed
by the Member to the capital of the Company, (2) the fair market value of any
Property contributed, as determined by the Company and the contributing Member
at arm's-length at the time of contribution (net of liabilities assumed by the
Company or subject to which the Company takes such Property, within the meaning
of ss. 752 of the Code), and (3) the Member's share of Net Profits and of any
separately allocated items of income or gain except adjustments of the Code
(including any gain and income from unrealized income with respect to accounts
receivable allocated to the Member to reflect the difference between the book
value and tax basis of assets contributed by the Member). Each Member's Capital
Account shall be decreased by (1) the amount of any money actually distributed
by the Company to the Member, (2) the fair market value of any Property
distributed to the Member, as determined by the Company and the contributing
Member at arm's-length at the time of contribution (net of liabilities of the
Company assumed by the Member or subject to which the Member takes such
Property, within the meaning of ss. 752 of the Code), and (3) the Member's share
of Net Losses and of any separately allocated items of deduction or loss
(including any loss or deduction allocated to the Member to reflect the
difference between the book value and tax basis of assets contributed by the
Member).
5. Contribution of Assets. If the Company at any time distributes any of
its assets in-kind to any Member, the Capital Account of each Member shall be
adjusted to account for that Member's allocable share (as determined under
Article IX below) of the Net Profits or Net Losses that would have been realized
by the Company had it sold the assets that were distributed at their respective
fair market values immediately prior to the distribution.
6. Sale or Exchange of Interest. In the event of a transfer of some or all
of a Membership Interest, the Capital Account of the transferring Member shall
become the
17
Capital Account of the Assignee, to the extent it relates to the portion of the
Interest transferred, provided that if the transfer causes a termination of the
Company pursuant to Code ss. 708(b)(1)(B), the Capital Accounts for all Persons,
including the transferee, shall be redetermined as of the date of such
termination. In such event, each Person's Capital Account shall be equal to the
net fair market value of his Membership Interest as of such date. Subsequent to
such redetermination, allocations of depreciation, cost recovery deductions,
gain and loss with respect to assets held by the Company on the date of such
determination shall be governed by the principles set forth in Code ss. 704(c)
and the Regulations thereunder.
7. Compliance with Section 704(b) of the Code. The provisions of this
Article VIII as they relate to the maintenance of Capital Accounts are intended,
and shall be construed, and, if necessary, modified to cause the allocations of
profits, losses, income, gain and credit pursuant to Article IX to have
substantial economic effect under the Regulations promulgated under ss. 704(b)
of the Code, in light of the distributions made pursuant to Articles IX and XII
and the Capital Contributions made pursuant to this Article VIII. In the event
the Managing Member determines that it is prudent to modify the manner in which
the Capital Accounts, or any debits or credits thereto, are computed in order to
comply with such Regulations, the Managing Member may make such modification,
provided that it is not likely to have a material effect on the amounts
distributable to the Members and Assignees pursuant to Article XIII upon the
dissolution of the Company. The Managing Member shall adjust the amount debited
or credited to Capital Accounts with respect to (a) any Property contributed to
the Company or distributed to the Members and Assignees, and (b) any liabilities
which are secured by such contributed or distributed Property or which are
assumed by the Company or the Members and Assigns, in the event the Managing
Member shall determine such adjustments are necessary or appropriate pursuant to
Regulation ss. 1.704-1(b)(2)(iv). The Managing Member also shall make any
appropriate modifications in the event unanticipated events might otherwise
cause this Operating Agreement not to comply with Regulation ss. 1.704-1(b).
Notwithstanding anything herein to the contrary, this Operating Agreement shall
not be construed as creating a deficit restoration obligation or otherwise
personally obligating any Member to make a Capital Contribution in excess of the
Initial Contribution.
8. Maintenance of GAAP Capital Accounts. In addition to the Capital
Accounts required to be maintained pursuant to Section IV, the Company shall
establish and maintain GAAP Capital Accounts.
ARTICLE IX
ALLOCATIONS AND DISTRIBUTIONS
1. Allocations of Net Profits and Net Losses from Operations. Except as may
be required by ss. 704(c) of the Code and Sections 2, 3 and 4 of this Article
IX, Net Profits, Net Losses, and other items of income, gain, loss, deduction
and credit shall be apportioned among the Members in proportion to their Sharing
Ratios.
18
2. Company Minimum Gain Chargeback. If there is a net decrease in Company
Minimum Gain for Taxable Year, each Member must be allocated items of income and
gain for that Taxable Year equal to that Member's share of the net decrease in
Company Minimum Gain. A Member's share of the net decrease in Company Minimum
Gain is the amount of the total net decrease multiplied by the Member's
percentage share of the Company Minimum Gain at the end of the immediately
preceding Taxable Year. A Member's share of any decrease in Company Minimum Gain
resulting from a revaluation of Company Property equals the increase in the
Member's Capital Account attributable to the revaluation to the extent the
reduction in minimum gain is caused by the revaluation. A Member is not subject
to the Company Minimum Gain Chargeback Requirement to the extent the Member's
share of the net decrease in Company Minimum Gain is caused by a guarantee,
refinancing, or other change in the debt instrument causing it to become
partially or wholly a recourse liability or a Member Nonrecourse Liability, and
the Member bears the economic risk of loss (within the meaning of ss. 1.752-2 of
the Regulations) for the newly guaranteed, refinanced, or otherwise changed
liability.
3. Member Minimum Gain Chargeback. If during a Taxable Year there is a net
decrease in Member Minimum Gain, any Member with a share of that Member Minimum
Gain (as determined under ss. 1.704-2(i)(5) of the Regulations) as of the
beginning of that Taxable Year must be allocated items of income and gain for
that Taxable Year (and, if necessary, for succeeding Taxable Years) equal to
that Member's share of the net decrease in the Company Minimum Gain. A Member's
share of the net decrease in Member Minimum Gain is determined in accordance
with the Regulations. A Member is not subject to this Member Minimum Gain
Chargeback, however, to the extent the net decrease in Member Minimum Gain
arises because the liability ceases to be Member Nonrecourse Liability due to a
conversion, refinancing, or other change in the debt instrument that causes it
to become partially or wholly a Company Nonrecourse Liability. The amount that
would otherwise be subject to the Member Minimum Gain Chargeback is added to the
Member's share of Company Minimum Gain. In addition, rules consistent with those
applicable to Company Minimum Gain shall be applied to determine the shares of
Member Minimum Gain and Member Minimum Gain Chargeback to the extent provided
under the Regulations issued pursuant to ss. 704(b) of the Code.
4. Qualified Income Offset. In the event any Member, in such capacity,
unexpectedly receives an Offsettable Decrease, such Member will be allocated
items of income and gain (consisting of a pro rata portion of each item of
partnership income and gain for such year) in an amount and manner sufficient to
offset such Offsettable Decrease as quickly as possible. Any special allocations
of items of income or gain pursuant to this Section 4 shall be taken into
account in computing subsequent allocations of Net Profits pursuant to this
Section 4, so that the net amount of the Net Profits, Net Losses and all other
items allocated to each Member and Assignee pursuant to this Section 4 shall, to
the extent possible, be equal to the net amount that would have been allocated
to each Member and Assignee pursuant to the provisions of this Section 4 if such
adjustments, allocations or distributions had not occurred.
5. Interim Distributions. From time to time, the Managing Member shall
determine in its reasonable judgment to what extent, if any, the Company's cash
on hand
19
exceeds the current and anticipated needs, including, without limitation, needs
for operating expenses, debt service, acquisitions, reserves, and mandatory
Distributions, if any. To the extent such excess exists, the Managing Member may
make Distributions to the Members in accordance with their Sharing Ratios. Such
Distributions shall be in cash or Property (which need not be distributed
proportionately) or partly in both, as determined by the Managing Member.
6. Limitations on Distributions. No Distribution shall be declared and paid
unless, after the distribution is made, the assets of the Company are in excess
of all liabilities of the Company, except liabilities to Members on account of
their Capital Accounts.
ARTICLE X
TAXES
1. Tax Characterization of the Company. For so long as the Company has a
single owner for federal income tax purposes, it will, pursuant to Treasury
Regulations promulgated under section 7701 of the Code, be disregarded as an
entity distinct from the Member for all federal income tax purposes, and all
provisions in this Operating Agreement regarding treatment of the Company as a
partnership for federal income tax purposes should be ignored. Accordingly, for
federal income tax purposes, the Member will be treated as (i) owning all assets
owned by the Company, (ii) having incurred all liabilities incurred by the
Company, and (iii) all transactions between the Company and the Member will be
disregarded. In the event that the Company has two equity owners for federal
income tax purposes, the Company will be treated as a partnership. At any such
time that the Company has two equity owners, all relevant provisions in this
Operating Agreement regarding the treatment of the Company as a partnership for
federal income tax purposes will apply. Moreover, at any such time that the
Company has two equity owners, this Operating Agreement may need to be amended,
in accordance with Article XIV herein, and additional provisions may need to be
added so as to provide for treatment of the Company as a partnership.
2. Elections. The Managing Member may make any tax elections for the
Company allowed under the Code or the tax laws of any state or other
jurisdiction having taxing jurisdiction over the Company.
3. Taxes of Taxing Jurisdictions. To the extent that the laws of any Taxing
Jurisdiction requires, each Member requested to do so by the Managing Member
will submit an agreement indicating that the Member will make timely income tax
payments to the Taxing Jurisdiction and that the Member accepts personal
jurisdiction of the Taxing Jurisdiction with regard to the collection of income
taxes attributable to the Member's income, and interest, and penalties assessed
on such income. If the Member fails to provide such agreement, the Company may
withhold and pay over to such Taxing Jurisdiction the amount of the penalty and
interest determined under the laws of the Taxing Jurisdiction with respect to
such income. Any such payments with respect to the
20
income of a Member shall be treated as a distribution for purposes of Article
IX. The Managing Member may, where permitted by the rules of any Taxing
Jurisdiction, file a composite, combined or aggregate tax return reflecting the
income of the Company and pay the tax, interest and penalties of some or all of
the Members on such income to the Taxing Jurisdiction, in which case the Company
shall inform the Members of the amount of such tax, interest and penalties so
paid.
4. Tax Matters Member. The Managing Member shall designate a Member as the
tax matters member of the Company pursuant to ss. 6231(a)(7) of the Code. Any
Member designated as tax matters partner shall take such action as may be
necessary to cause each other Member to become a notice partner within the
meaning of ss. 6223 of the Code. Any Member who is designated tax matters
partner may not take any action contemplated by xx.xx. 6222 through 6232 of the
Code without the consent of the Managing Member.
5. Method of Accounting. The records of the Company shall be maintained in
accordance with the method of accounting selected by the Managing Member.
ARTICLE XI
DISPOSITION OF MEMBERSHIP INTERESTS
1. Disposition. Any Member or Assignee may dispose of all or a portion of
the Member's or Assignee's Membership Interest upon compliance with this Section
1. No Membership Interest shall be Disposed of:
1.1. while any amounts are outstanding under the Notes;
1.2. if such disposition, alone or when combined with other
transactions, would result in a termination of the Company within the
meaning of ss. 708 of the Code;
1.3. without an opinion of counsel satisfactory to the Managing Member
that such assignment is subject to an effective registration under, or
exempt from the registration requirements of, the applicable state and
federal securities laws;
1.4. unless and until the Company receives from the Assignee the
information and agreements that the Managing Member may reasonably require,
including but not limited to any taxpayer identification number and any
agreement that may be required by any Taxing Jurisdiction.
2. Dispositions Not in Compliance with this Article Void. Any attempted
Disposition of a Membership Interest, or any part thereof, not in compliance
with this Article is null and void ab initio.
21
ARTICLE XII
ADMISSION OF ASSIGNEES AND ADDITIONAL MEMBERS
1. Rights of Assignees. The Assignee of a Membership Interest has no
Management Rights or right to participate in the management of the business and
affairs of the Company or to become a Member. The Assignee is only entitled to
receive the Distributions and return of capital, and to be allocated the Net
Profits and Net Losses attributable the Membership Interest.
2. Admission or Substitute Members. An Assignee of a Membership Interest
shall be admitted as a Substitute Member and admitted to all the rights of the
Member who initially assigned the Membership Interest only with the approval of
all Members and upon execution of an Admission Agreement. The Members may grant
or withhold the approval of such admission for any in their sole and absolute
discretion. If so admitted, the Substitute Member has all the rights and powers
and is subject to all the restrictions and liabilities of the Member originally
assigning the Membership Interest. The admission of a Substitute Member, without
more, shall not release the Member originally assigning the Membership Interest
from any liability to Company that may existed prior to the approval.
3. Admission of Additional Members. The Managing Member may permit the
admission of Additional Members and determine the Capital Contributions of such
Members; provided, however, that there may never be more than ninety-nine (99)
Members at any one time.
4. Forbidden Transfers and Assignments. A Membership Interest may not be
transferred or assigned to a Related Company. A Related Company may, however, be
admitted as an Additional Member.
ARTICLE XIII
DISSOLUTION AND WINDING UP
1. Dissolution. The Company shall be dissolved and its affairs wound up,
upon the first to occur of the following events:
1.1. the expiration of the term of the Company; and
1.2. the unanimous written consent of all of the Members and the
Managing Member, by unanimous written consent of the Board of Managing
Member (including the Independent Director); provided, that, the Company
shall not be dissolved so long as any of the Notes are outstanding.
2. Effect of Dissolution. Upon dissolution, the Company shall cease
carrying on as distinguished from the winding up of the Company business, but
the Company is not
22
terminated, but continues until the winding up of the affairs of the Company is
completed and the Certificate of Dissolution has been issued by the Secretary of
State.
3. Distribution of Assets on Dissolution. Upon the winding up of the
Company, the Company Property shall be distributed:
3.1. to creditors, including Members who are creditors, to the extent
permitted by law, in satisfaction of Company Liabilities;
3.2. to Members in accordance with positive Capital Account balances
taking into account all Capital Account adjustments for the Company's
taxable year in which the liquidation occurs. Liquidation proceeds shall be
paid within 60 days of the end of the Company's taxable year or, if later,
within 90 days after the date of liquidation. Such distributions shall be
in cash or Property (which need not be distributed proportionately) or
partly in both, as determined by the Managing Member.
4. Winding Up and Certificate of Dissolution. The winding up of the Company
shall be completed when all debts, liabilities, and obligations of the Company
have been paid and discharged or reasonably adequate provision therefor has been
made, and all of the remaining property and assets of the Company have been
distributed to the members. Upon the completion of winding up of the Company, a
certificate of dissolution shall be delivered to the Secretary of State of the
State for filing. The certificate of dissolution shall set forth the information
required by the Act.
5. Resignation of Member. The resignation, withdrawal, dissociation or
bankruptcy of a Member or Members shall not cause such Member or Members to
cease to be a Member or Members of the Company and upon the occurrence of such
an event, the business of the Company shall continue without dissolution.
ARTICLE XIV
AMENDMENT
1. Operating Agreement may be Modified. This Operating Agreement may be
modified as permitted in this Article XIV (as the same may from time to time be
amended). No Member or Manager shall have any vested rights in this Operating
Agreement which may not be modified through an amendment to this Operating
Agreement.
2. Amendment or Modification of Operating Agreement. This Operating
Agreement may be amended or modified from time to time only by a written
instrument adopted by the unanimous written consent of the Members; provided,
however, that for so long as any of the Notes are outstanding, any amendment or
modification to Article III, Article VII, Article XI, Article XIII or this
Article XIV shall require the prior written consent of the Indenture Trustee and
each nationally recognized statistical rating agency rating any of the Company's
issued and outstanding Notes.
23
ARTICLE XV
MISCELLANEOUS PROVISIONS
1. Entire Agreement. This Operating Agreement represents the entire
agreement among all the Members and between the Members and the Company.
2. No Partnership Intended for Non-tax Purposes. The Members have formed
the Company under the Act, and expressly do not intend hereby to form a
partnership under either the State Uniform Partnership Act nor the State Uniform
Limited Partnership Act.
The Members do not intend to be partners one to another, or partners as to
any third party. To the extent any Member, by word or action, represents to
another person that any other Member is a partner or that the Company is a
partnership, the Member making such wrongful representation shall be liable to
any other Member who incurs personal liability by reason of such wrongful
representation.
3. Rights of Creditors and Third Parties Under Operating Agreement. Except
and only to the extent provided herein or by applicable statue, no such creditor
or third party shall have any rights under this Operating Agreement or any
agreement between the Company and any Member with respect to any Capital
Contribution or otherwise.
24
IN WITNESS WHEREOF, the undersigned has hereunto executed this Operating
Agreement as of May 17, 1999.
CHARTER FUNDING CORPORATION V
By: /s/ Xxxx Xxxx
-------------------------
Name: Xxxx Xxxx
Title: President
25
EXHIBIT A
INITIAL MEMBER
Member Membership Interest Initial Capital Contribution
----------------------------- ------------------- ----------------------------
Charter Funding Corporation V 100% $100
000 Xxxxx Xxxxxx.
Xxx Xxxx, XX 00000
