OPERATING AGREEMENT
FOR
SEIDMAN AND ASSOCIATES II, L.L.C.
Dated: February , 1996
INDEX
Page No. Article 1 - Definitions 1 Article 2 - Formation 5 Article 3 - Principal Office 5 Article 4 - Term and Duration 6 Article 5 - Purpose 7 Article 6 - Capital Contributions by the Member 7 Article 7 - Additional Capital Contributions 9 Article 8 - Cash Contributions 10 Article 9 - Tax Allocations 11 Article 10 - Rights, Powers and Representation of
the Members 15 Article 11 - Managing Member 17 Article 12 - Books, Records and Reports 19 Article 13 - Bank Accounts 20 Article 14 - Rights and Duties of Members 20 Article 15 - Tax Matters 21 Article 16 - Bankruptcy 21 Article 17 - Assignability or Transfer of I 22 Article 18 - Admission of Substituted Members; Death
or Incapacity; Further Conditions 24 Article 19 - Liquidation 25 Article 20 - Gender 26 Article 21 - Further Assurances 26 Article 22 - Covenant Against Partition 26 Article 23 - Notices 26 Article 24 - Applicable Law 27 Article 25 - Captions 27 Article 26 - Counterparts 27 Article 27 - Binding Effect 27 Article 28 - Partial Invalidity 27 Article 29 - Integration 28
Exhibit A - Property Description Exhibit B - Contract of Sale Schedule A - Members' Percentage Interests Schedule B - Example of the Operation of Section 8.3
OPERATING AGREEMENT
FOR
SEIDMAN AND ASSOCIATES II, L.L.C.
AGREEMENT made February , 1996 by and between SONIA SEIDMAN ("Seidman"), having an address at 19 Veteri Place, Wayne, New Jersey 07470; and SEIDCAL ASSOCIATES L.L.C. ("Seidcal"), a New Jersey limited liability company having an address c/o Cali Realty Corporation, 11 Commerce Drive, Cranford, New Jersey 07016 (hereinafter Seidman and Seidcal may sometimes be referred to individually as a "Member" and collectively as the "Members").
WITNESSETH:
WHEREAS, the Members desire to form a limited liability company (the "Company") pursuant to the New Jersey Limited Liability Company Act (the"Act") and adopt this Operating Agreement in connection therewith; and
WHEREAS, the purpose of the Company shall be to purchase stock in private and public companies and manage and invest the funds of others for these purposes and for any and all other purposes permitted pursuant to the Act; and
WHEREAS, the Members wish to set forth the terms and conditions as to the manner in which the Company shall be operated and to set forth the rights, obligations and duties of the Members to each other and to the Company; and
WHEREAS, by executing this Operating Agreement, each Member represents that she has sufficient right and authority to execute this Operating Agreement and is not acting on behalf of any undisclosed or partially disclosed principal.
NOW, THEREFORE, in consideration of ten ($10) dollars and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows effective as of the date first written above.
ARTICLE 1
DEFINITIONS
1.1 For purposes of this Agreement, the following terms shall have the definitions set forth below:
"Additional Contribution": Each Member's pro-rata portion of a Required Amount, determined by multiplying the Required Amount by each Member's Interest.
"Additional Member": Any person or entity who acquires an additional interest in the Company.
"Adjusted Capital Account": As defined in Section 9.4(h).
"Capital Account" or "Capital Accounts": As defined in Section 6.4.
"Capital Contributions": The respective capital contributions, including any Additional Contribution,of each Member to the Company.
"Capital Transaction" or "Capital Transactions": Sale, transfer, assignment or exchange of stock purchases or other investments made by the Company or other similar transactions which, in accordance with generally accepted principles, are treated as a capital transaction.
"Certificate of Formation": The Certificate of Formation of the Company filed with the Secretary of State of the State of New Jersey pursuant to the Act to form the Company, as originally executed and as amended, modified, supplemented or restated from time to time, as the context requires.
"Code": The Internal Revenue Code of 1986, as amended, and any reference to a particular section of the Code shall be deemed to include any successor section to such section.
"Company": Seidman and Associates II, L.L.C.
"Contributing Member": A Member which has made its Additional Contribution.
"Default Loan": A loan to the Company of an amount equal to the Additional Contribution not made by a Defaulting Member.
"Defaulting Member": A Member which fails to make her Additional Contribution as required herein.
"Default Rate": A floating rate equal to the lesser of (a) ten (10%) percent per annum in excess of the rate of interest announced from time to time in The Wall Street Journal as the "prime rate" or "base rate" charged by institutional commercial lenders from time to time, or (b) the maximum rate of interest then permitted according to the laws of the State of New Jersey or according to Federal law, to the extent applicable.
"Gain from a Capital Transaction": The gain recognized by the Company attributable to a Capital Transaction, determined in accordance with the method of accounting used by the Company for federal income tax purposes. In the event there is a revaluation of Company property and the Capital Accounts are adjusted pursuant to Section 6.4(c), Gain from a Capital Transaction shall be computed by reference to the "book items" and not the corresponding "tax items".
"Income": Net Proceeds and all other income or amounts, however characterized, received by the Company.
"Interest": The respective percentage interest of each Member as set forth on Schedule A.
"Loss from a Capital Transaction": The loss recognized by the Company attributable to a Capital Transaction, determined in accordance with the method of accounting used by the Company for federal income tax purposes. In the event there is a revaluation of the Company property and the Capital Accounts are adjusted pursuant to Section 6.4(c), Loss from a Capital Transaction shall be computed by reference to the "book items" and not the corresponding "tax items".
"Manager": Lawrence B. Seidman, or such successor appointed by a majority in interest of the Members.
"Member": Each of the parties who has executed this Operating Agreement and any party who may hereafter become an Additional Member or a Substitute Member pursuant to this Operating Agreement.
"Member Nonrecourse Debt": Any nonrecourse debt of the Company for which a Member bears the economicrisk of loss, determined in accordance with Treasury Regulation Section 1.704-2(b) (4).
"Member Nonrecourse Debt Deductions": With regard to any Member Nonrecourse Debt, the amount of the net increase during any taxable year to the Company in the amount of Minimum Gain Attributable to Member Nonrecourse Debt, over the aggregate amount of any distributions during such year to the Member who bears the economic risk of loss for such debt of proceeds of such debt that are allocable to an increase in the Minimum Gain Attributable to such Member Nonrecourse Debt. Such amounts shall be determined in accordance with Treasury Regulation Section 1.704-2(I) (2).
"Minimum Gain": The amount of gain which would be recognized to the Company for federal income tax purposes if all Company property secured by Nonrecourse Liability were transferred to the creditor of such debt in satisfaction thereof (and for no other consideration) in a taxable transaction. The amount of such gain shall be determined and calculated in accordance with Treasury Regulation Section 1.704--2(g) (I).
"Minimum Gain Attributable to Member Nonrecourse Debt": The amount of gain which would be recognized by the Company for federal income tax purposes if all Company property secured by Member Nonrecourse Debt were transferred to the creditor of such debt in satisfaction thereof (and for no other consideration) in a taxable transaction. The amount of such gain shall be determined and calculated in accordance with Treasury Regulation Section 1.704-2(f) (I) (4).
"Net Proceeds": The net proceeds available to the Company from a Capital Transaction after deducting (I) all costs and expenses incurred in connection therewith, (ii) any liens or other indebtedness which is satisfied or refinanced as a result of such Capital Transaction, and (iii) reasonable reserves established by the Company from time to time for working capital and other purposes.
"Net Profit" and "Net Loss": The net income (including income exempt from tax) and net loss (including expenditures that can neither be capitalized nor deducted), respectively, of the Company, determined in accordance with the method of accounting used by the Company for federal income tax purposes, but computed without regard for Gain from Capital Transactions, Loss from Capital Transactions and items of income or loss, if any, that are specifically allocated to Members. In the event there is a revaluation of Company property and the Capital Accounts are adjusted pursuant to Section 6.4(c), Net Profits and Net Losses shall be computed by reference to the "book items" and not corresponding "tax items".
"Nonrecourse Liability": Any Company debt for which no Member has any economic risk of loss, determined in accordance with Treasury Regulation Section 1.704-2(b) (3).
"Operating Agreement": This Operating Agreement as originally executed and as amended, modified,supplemented or restated from time to time.
"Required Amount": The amount of cash required by the Company as determined by a majority in interest of the Members.
"Substitute Member": Any transferee of a Member's Interests who is admitted as a Member in the Company pursuant to Article 17 or 18.
"Unrecovered Additional Contributions": The aggregate amount of Additional Contribution made by a Member pursuant to Section 7.1 hereof less prior distributions to such Member of Income which is distributed to repay outstanding Additional Contributions and any interest on any Default Loan specially allocated to such Member.
ARTICLE 2
FORMATION
2.1 The parties hereto do hereby form the Company under the name of SEIDMAN AND ASSOCIATES II, L.L.C. pursuant to the Act. Pursuant to the provisions of the Act, the formation of the Company shall be effective upon the filing of the Certificate of Formation.
In order to maintain the Company as a limited liability company under the laws of the State of New Jersey, the Company shall from time to time take appropriate action, including the preparation and filing of such amendments to the Certificate of Formation and such other assumed name certificates, documents, instruments and publications as may be required by law, including, without limitation, action to reflect:
(I) a change in the Company name;
(ii) a correction of a defectively or erroneously executed Certificate of Formation;
(iii) a correction of false or erroneous statements in the
Certificate of Formation or the desire of the Members
to make a change in any statement therein in order
that it shall accurately represent the agreement
among the Members; or
(iv) a change in the time for dissolution of the Company as stated in the Certificate of Formation and in this Agreement.
Section 2.2 Other Instruments. Each Member hereby agrees to execute and deliver to the Company within five (5) days after receipt of a written request therefor, such other and further documents and instruments, statements of interest and holdings, designations, powers of attorney and other instruments and to take such other action as the Company deems necessary, useful or appropriate to comply with any laws, rules or regulations as may be necessary to enable the Company to fulfill its responsibilities under this Operating Agreement, to preserve the Company as a limited liability company under the Act and to enable the Company to be taxed as a partnership for federal and state income tax purposes.
ARTICLE 3
PRINCIPAL OFFICE
3.1 The Company's registered office in New Jersey shall be at 19 Veteri Place, Wayne, New Jersey 07470. The Company's registered agent who is a resident of New Jersey is Lawrence B. Seidman, whose address is 19 Veteri Place, Wayne, New Jersey 07470. At any time, the Company may designate another registered agent and/or office.
3.2 The principal place of business of the Company shall be at 19 Veteri Place, Wayne, New Jersey 07470. At any time, the Company may change the location of its principal place of business and may establish additional offices.
ARTICLE 4
TERM AND DURATION
4.1 The Company shall commence upon the filing of the Certificate of Formation, and shall continue in full force and effect until May 1, 2024, provided, however, that the Company shall be dissolved prior to such date upon the happening of any of the following events:
(a) The mutual written consent of the Members to dissolve the Company.
(b) The sale or other divestiture of all or substantially all of the assets of the Company and the distribution of the proceeds thereof to the Members, including real estate or interests held or owned by the Company (other than a transfer to a nominee of the Company for any Company purpose, which event shall not be construed as an event of termination); provided, however, that (I) if the Company receives a purchase money mortgage or other collateral security in connection with such sale, the Company shall continue (A) until such mortgage or security interest is paid in full or otherwise disposed of, or (B) in the event of foreclosure of such mortgage, or security interest provided the Company retains title therein; and (ii) the Company shall continue if the assets of the Company are exchanged under Section 1031 of the Code.
(c) Upon the death, retirement, expulsion, bankruptcy or dissolution of a Member or occurrence of any other event that terminates the continued membership of a Member in the Company (a "Dissolution Event") unless the business of the Company is continued by the unanimous consent of the remaining Member(s) within ninety (90) days following the Dissolution Event.
(d) The entry of a decree of judicial dissolution under Section 49 of the Act.
(e) The happening of any other prior event which pursuant to the terms and provisions of this Operating Agreement shall cause a dissolution or termination of the Company.
4.2 Upon any dissolution of the Company, the distribution of the Company's assets and the winding up of its affairs shall be concluded in accordance with Article 19 of this Operating Agreement.
ARTICLE 5
PURPOSE
5.1 The business of the Company shall be for the purpose of:
(a) Purchasing stock in private and public companies and managing and investing funds of others for these purposes.
(b) Such other activities incident or appropriate to the foregoing, including acting directly or in conjunction with others through joint ventures, partnerships or otherwise.
5.2 The business of the Company shall also be for any lawful purpose.
ARTICLE 6
CAPITAL CONTRIBUTIONS BY THE MEMBERS
6.1 (a) Upon execution hereof, or at such other times as determined by the Manager, each Member shall contribute in cash to the capital of the Company an amount in the aggregate equal to that set forth opposite her/its name on Schedule A attached hereto.
(b) A Member's interest in the Company shall be represented by the percentage interest held by such Member. Each Member's respective initial interest in the Company is set forth opposite her/its name on Exhibit B attached hereto.
6.2 No Member shall have the right to withdraw any part of her/its Capital Contribution or receive any distribution, except in accordance with the provisions of this Operating Agreement. No interest shall be paid on any Capital Contribution.
6.3 No Member shall have any priority over any other Member with respect to the return of Capital Contributions.
6.4 The Company shall maintain a capital account (a "Capital Account") for each Member within the provisions of Treasury Regulation Section 1.704-1 (b) (2) (iv) as such regulation may be amended from time to time. Without limiting the foregoing, the Member's Capital Accounts shall be adjusted as follows:
(a) Subject to the last sentence of Section 6.4 (c), the Capital Account of each Member shall be credited with (I) an amount equal to such Member's initial cash contribution and any additional cash contributions to the Company and the fair market value of property or securities contributed to the Company (net of liabilities secured by such property) if a contribution of property or securities shall be permitted by the Company and (ii) such Member's share of the Company's Net Profits and Gain from Capital Transactions (including income and gain exempt from tax).
(b) Subject to the last sentence of Section 6.4 (c), the Capital Account of each Member shall be debited by (I) the amount of cash distributions to such Member and the fair market value of property and/or securities distributed to the Member (net of liabilities secured by such property and/or securities) and (ii) such Member's share of the Company's Net Loss and Net Loss from Capital Transactions (including expenditures which are not permitted to be capitalized or deducted for tax purposes).
(c) Upon the transfer of an interest in the Company, the Capital Account of the transfer Member (as adjusted, if at all, as required by this Section 6.4) that is attributable to the transferred interest will be carried over to the transferee Member. The Capital Account will not be adjusted to
reflect any adjustment under Section 743 of the Code except as specifically provided in Treasury Regulation Section 1.704-1 (b) (2) (iv) (m). Upon (I) the "liquidation of the Company" (as hereinafter defined), (ii) the "liquidation of a Member's interest in the Company" (as hereinafter defined), (iii) the distribution of money, property or securities to a Member as consideration for an interest in the Company, or (iv) the contribution of money or (if permitted pursuant to (a) above) property and/or securities to the Company by a new or existing Member as consideration for an interest in the Company, or upon any transfer causing a termination of the Company for tax purposes within the meaning of Section 708(b) (1) (B) of the Code, then adjustments shall be made to the Members' Capital Accounts in the following manner: all property and securities of the Company which are not sold in connection with such event shall be valued at their then fair market value; such fair market value shall be used to determine both the amount of gain or loss which would have been recognized by the Company if the property and securities had been sold for its fair market value (subject to any debt secured by the property and securities) at such time, and the amount of Income, which would have been distributable by the Company pursuant to Article 9 if the property and securities had been sold at such time for said fair market value, less the amount of any debt secured by the property; the Capital Accounts of the Members shall be adjusted to reflect the deemed allocation of such hypothetical gain or loss in accordance with Article 10; and the Capital Accounts of the Members (or of a transferee of a Member) shall thereafter be adjusted to reflect "book items" and not "tax items" in accordance with Treasury Regulation Sections 1.704-1 (b) (2) (iv) (g) and 1.704-1 (b) (4) (I).
(d) For purposes of this Article 6, (I) the term "liquidation of the Company" shall mean (A) a termination of the Company effected in accordance with this Operating Agreement, which shall be deemed to occur, for purposes of Article 6, on the date upon which the Company ceases to be a going concern and is continued in existence solely to wind-up its affairs, or (B) a termination of the Company pursuant to Section 708(b)(1) of the Code; and (ii) the term "liquidation of a Member's interest in the Company" shall mean the termination of the Member's entire interest in the Company effected by a distribution, or a series of distributions, by the Company to the Member.
ARTICLE 7
ADDITIONAL CAPITAL CONTRIBUTIONS
7.1 No Member shall be obligated to make additional capital contributions to the Company. If the Manager, with the concurrence of Members holding a majority in interest of the Company, shall determine there shall be a Required Amount for any Company purpose, including, without limitation, those purposes set forth in Article 5, then within fifteen (15) days of notice of such requirement, each Member may, but shall not be obligated to, contribute to the Company his Additional Contribution.
7.2 If a Member fails to make his Additional Contribution, in whole or in part, as required in Section 7.1 above (the "Noncontributing Member"), then, so long as any other Member shall make his Additional Contribution as provided herein (each such Member making his Additional Contribution being hereinafter referred to as "Contributing Member"), any Contributing Member shall have the option (a) with the consent of a majority in interest of the Contributing Members (I) to make a capital contribution equal to the Additional Contribution not made by the Noncontributing Member or (ii) to make a Default Loan equal to the Additional Contribution not made by the Noncontributing Member or (b) with the unanimous written consent of each Contributing Member, to declare the Company terminated as a result of the Noncontributing Member's default. In the event that more than one Contributing Member desires to make an Additional Contribution, or is permitted to make a Default Loan, on account of the Noncontributing Member, each such Contributing Member shall be permitted to participate in proportion to their respective Interests. All loans made pursuant to this Section 7.2 shall bear interest at the Default Rate.
7.3 Upon the making of a capital contribution to the Company pursuant to Section 7.2, the Interest of the Noncontributing Member and the Contributing Members shall be adjusted as follows: (a) the Noncontributing Member's Interest shall be decreased (but not below zero) by subtracting therefrom an amount equal to the percentage equivalent of the quotient of (I) the Additional Contribution not made by the Noncontributing Member giving rise to application of this Section 7.3 multiplied by (A) 200% upon the first failure of the Noncontributing Member to make an Additional Contribution, (B) 300% upon the second such failure and (C) 400% upon the third such failure, divided by (ii) the aggregate amount
of all Capital Contributions made by the Members (including the Additional Contributions received by the Company), and (b) the Contributing Members' Interest shall be increased by adding thereto an amount equal to the percentage by which the Noncontributing Member's Interest was decreased pursuant to clause (a) above. Upon the fourth and each subsequent failure of the Noncontributing Member to make an Additional Contribution giving rise to the application of this Section 7.3, a majority-in-interest of the Contributing Members shall have the option, exercisable in their sole discretion, to cause the remaining Interest of the Noncontributing Member to be forfeited and allocated to the Contributing Members or to continue re-allocating the Interests of the Noncontributing Member and Contributing Members as provided in the preceding sentence except that the percentage multiple set forth in clause (I) (c) shall be increased 100% for each failure of the Noncontributing Member to make an Additional Contribution. An example of the operation of this Section 7.3 with respect to a re-allocation of Interests upon the first failure of a Noncontributing Member to make an Additional Contribution, is set forth in Schedule B attached hereto.
7.4 The obligations of the Members contained in this Section 7 are personal and run only to the benefit of the Company and the Members and may not be enforced by any third parties. No creditor of the Company may rely on the foregoing provisions of this Article 7 or any other provision of this Operating Agreement to make any contributions or returns to the Company, notwithstanding any agreement, representation, intention, indication or otherwise to the contrary.
ARTICLE 8
CASH DISTRIBUTIONS
8.1 The Company shall distribute Income to the Members at such times as the Company shall determine (but not less often than quarterly), in the following order of priority:
(a) first, to any Member who made a Default Loan, to the payment of accrued and unpaid interest, and the then outst ...
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