Operating Agreement For Federal Holding LLC

EXHIBIT G


OPERATING AGREEMENT


FOR


FEDERAL HOLDINGS L.L.C.


Dated: June 12,1995



INDEX Page No.


Article 1 Definitions Article 2 Formation Article 3 Principal Office Article 4 Term and Duration Article 5 Purpose Article 6 Capital Contributions by the Members Article 7 Additional Capital Contributions Article 8 Distributions of Net Proceeds Article 9 Tax Allocations and Distributions Article 10 Rights, Powers and Representations of the Investment
Manager and Administrative Manager; Management Fee Article 11 Books, Records and Reports Article 12 Indemnification Article 13- Tax Matters Article 14- Death, Dissolution or Bankruptcy of A Member Article 15- Assignability, Transfer or Pledge of
Interests; Resignation of A Member Article 16- Admission of Substituted Members;
Incapacity; Further Condition Article 17 Liquidation Article 18 Miscellaneous


Schedule A - Members' Percentage Interests and Capital
Contributions


OPERATING AGREEMENT


FOR


FEDERAL HOLDINGS L.L.C.


AGREEMENT made June 12,1995 by and among the members listed on Schedule A annexed hereto (individually, a "Member" and collectively, the "Members").


W I T N E S S E T H:


WHEREAS, the Members desire to form a limited liability company pursuant to the New York Limited Liability Company Law (the "Law") and adopt this Agreement in connection therewith; and


WHEREAS, by executing this Agreement, each Member represents that it has sufficient right and authority to execute this 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:


"Account": As defined in Section 10.4


"Additional Member": Means any person or entity other than the Members of the Company as of the date hereof who acquires an interest in the Company.


"Administrative Manager': Kevin Moore.


"Advance": As defined in Section 7.2.


"Agreement": This Operating Agreement as originally executed and as amended, modified, supplemented or restated from time to time.


"Articles of Organization": The Articles of Organization of the Company filed with the Secretary of State of the State of New York, pursuant to the Law to form the Company, as originally executed and as amended, modified, supplemented or restated from time to time.


"Capital Account" or "Capital Accounts": As defined in Section 6.4.


"Capital Contributions": The respective capital contributions, including any additional Capital Contribution,of each Member to the Company.


"Capital Transaction" or "Capital Transactions": Any transaction which, in accordance with generally accepted accounting principles consistently applied, is treated as a capital transaction including, without limitation, any sale of all or substantially all of the assets of the Company.


"Closing Price": As defined in Section 16.4


"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": FEDERAL HOLDINGS L.L.C., a New York limited liability company.


"Contributing Member": A Member which has made its additional Capital Contribution.


"Current Market Value": As defined in Section 16.4.


"Fair Market Value": As defined in Section 16.4.


"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.


"Interest": The respective percentage interest of each Member as set forth on Schedule A.


"Investment Manager": Shall mean Lawrence Seidman, subject to the provisions of Section 10.5.


"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.


"Management Fee": As defined in Section 10.2.


"Member": Means each of the parties who has executed this Agreement and any party who may hereafter become an Additional Member or a Substitute Member pursuant to this Agreement.


"Net Proceeds": As defined in Section 8.1.


"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 specially allocated to Members. In the event there is a revaluation of Company assets and the Capital Accounts are adjusted pursuant to Section 704(b) of the Code and applicable regulations promulgated thereunder, Net Profits and Net Losses shall be computed by reference to the "book items" and not corresponding "tax items".


"Preferred Return": With respect to a Member, an amount equal to 7.5% per annum simple interest (prorated for any partial year) on the amount of such Member's Unrecovered Capital Contribution, from time to time, calculated from the date a Capital Contribution is made.


"Substitute Member": Any transferee of a Member's Interests who is admitted as a Member in the Company pursuant to Article 15 or 16.


"Trading Day": As defined in Section 16.4.


"Unrecovered Capital Contribution": For any Member, the aggregate amount of capital contributed by such Member reduced by the aggregate amount of capital theretofore distributed to such Member pursuant to Articles 16 and 17.


"Unrecovered Preferred Return": For any Member an amount equal to the Preferred Return reduced by the aggregate amount of distributions theretofore made to such Member pursuant to Section 8.1(b)(i).


"Unrecovered 20% IM Fee": An amount equal to 20% of the aggregate annual Preferred Return for all Members divided by .8, reduced by the aggregate amount of distributions of Net Proceeds theretofore made pursuant to Section 8.1(b) (ii).


ARTICLE 2


FORMATION


2.1 The parties hereto do hereby form the Company under the name of FEDERAL HOLDINGS L.L.C. pursuant to the Law.


In order to maintain the Company as a limited liability company under the laws of the State of New York, the Company shall from time to time take appropriate action, including the preparation and filing of such amendments to the Articles of Organization 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 Articles of Organization;


(iii) a correction of false or erroneous statements in the Articles of Organization 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 Articles of Organization and in this Agreement.


2.2 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 Agreement, to preserve the Company as a limited liability company under the Law 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 York shall be at 30 Wall Street, Ninth Floor, New York, New York. The Company's registered agent who is a resident of New York is Jonathan A. Bernstein, Esq. whose business address is Pryor, Cashman, Sherman & Flynn, 410 Park Avenue, New York, New York 10022. 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 30 Wall Street, Ninth Floor, New York, New York. 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 Articles of Organization, and shall continue in full force and effect until April 30, 2045; 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 all of the Members to dissolve the Company;


(b) The divestiture or distribution of all or substantially all of the assets of 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);


(c) The entry of a decree of judicial dissolution under Section 702 of the Law; or


(d) The happening of any other prior event which pursuant to the terms and provisions of this Agreement shall cause a dissolution or termination of the Company.


4.2 Upon any dissolution of the Company, the liquidation of the Company's assets and the winding up of its affairs shall be concluded in accordance with Article 17 of this Agreement.


ARTICLE 5


PURPOSE


5.1 The purpose of the Company is to legally or beneficially acquire, own, sell, transfer, hold and vote shares of common stock, preferred stock, convertible or exchangeable securities of any bank, bank holding company, savings and loan association or trust company (hereinafter referred to as "Stock") and to enter into any contracts or commitments, assume any obligation, execute any documents and do any and all other acts and things, either directly or in conjunction with others through corporations, joint ventures, partnerships, trusts, limited liability companies or otherwise, which may be necessary, incidental or convenient to carry on the business of the Company as contemplated by this Agreement. The Company may also sell covered calls, repurchase such calls and buy puts, but the Company shall not sell uncovered calls or puts.


5.2 The purpose of the Company shall also be for any other lawful purpose for which the Members shall herewith agree in writing by amendment to this Agreement.


ARTICLE 6


CAPITAL CONTRIBUTIONS BY THE MEMBERS


6.1 Each Member shall contribute to the capital of the Company the amounts set forth on Schedule A.


6.2 No Member shall have the right to withdraw any part of his Capital Contribution or receive any distribution, except in accordance with the provisions of this Agreement. No interest shall be paid on any Capital Contribution other than the Preferred Return.


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.


6.5 To the extent not inconsistent with the foregoing, the following shall apply:


(a) The Capital Account of each Member shall be credited with (1) an amount equal to such Member's cash contributions and the fair market value of property contributed to the Company by such Member (net of liabilities securing such contributed property that the Company is considered to assume or take subject to under Section 752 of the Code) and (2) such Member's share of the Company's Net Proceeds (or items thereof) and Gain from a Capital Transaction. The Capital Account of each Member shall be debited by (1) the amount of cash distributions to such Member and the fair market value of property distributed to such Member (net of liabilities assumed by such Member and liabilities to which such distributed property is subject) and (2) such Member's share of the Company's Net Losses (or items thereof) and Loss from a Capital Transaction.


(b) Upon the transfer of an Interest in the Company after the date of this Agreement, (x) if such transfer does not cause a termination of the Company within the meaning of Section 708 (b) (1) (B) of the Code, the Capital Account of the transferor Member that is attributable to the transferred Interest will be carried over to the transferee Member but, if the Company has a Section 754 election in effect, the Capital Account will not be adjusted to reflect any adjustment under Section 743 of the Code, or (y) if such transfer causes a termination of the Company within the meaning of Section 708 (b) (1) (B) of the Code, the income tax consequences of the deemed distribution of the property and of the deemed immediate contribution of the property to a new Company (which for all other purposes continues to be the Company) shall be governed by the relevant provisions of Subchapter K of Chapter 1 of the Code and the regulations promulgated thereunder, and the initial Capital Accounts of the Members in the new Company shall be determined in accordance with Treasury Regulation Sections 1.704-1(b) (2) (iv) (d, (e), (f), (g), and (i) and thereafter in accordance with Section 6.5 (a).


(c) 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 or property 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 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 of the Company which is not sold in connection with such event shall be valued at its then "agreed value". Such "agreed value" shall be used to determine both the amount of gain or loss which would have been recognized by the Company if the property had been sold for its agreed value (subject to any debt secured by the property) at such time, and the amount of Net Proceeds, as the case may be, which would have been distributable by the Company pursuant to Section 9.2 if the property had been sold at such time for said 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 Section 9.1. 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 Section 1.704 1(b) (2) (iv) (g) and 1.704-1(b) (4) (i).


(d) For purposes of this Section 6.5, (i) the term "liquidation of the Company" shall mean (A) a termination of the Company effected in accordance with this Agreement, which shall be deemed to occur, for purposes of this 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 Administrative Manager determines that the Company shall need additional funds for any Company purpose, including, without limitation, (a) those purposes set forth in Article 5, or (b) cash in excess of Net Proceeds in order to satisfy any obligations and liabilities of the Company, then within fifteen (15) days of notice of such requirement, each Member may, but shall not be obligated to, contribute to the Company his pro rata share.


If a Member elects to make an additional Capital Contribution and another Member forgoes contributing additional capital, the Company shall, for purposes of distributions and allocations, recompute each Member's percentage Interest in the Company in proportion to the total capital contributed to the Company such that thereafter each Member's Interest shall be equal to the percentage that such Member's aggregate Capital Contribution theretofore made to the Company bears to the total Capital Contributions theretofore made by all the Members.


7.2 A Member may from time to time, upon the consent of the Administrative Manager but without the consent of a majority in interest of the Members,


advance additional monies (an "Advance") to or for the benefit of the Company, and such advances shall not be treated as Capital Contributions but shall be considered as loans to be repaid upon demand together with annual interest at a rate not less than the lowest applicable federal rate of interest which allows for the avoidance of imputed or unstated interest, for federal income tax purposes. Such loans shall be evidenced by a promissory note executed and delivered by the Company to the Member making such Advance.


ARTICLE 8


DISTRIBUTIONS OF NET PROCEEDS


8.1 (a) Net Proceeds shall be computed and distributed by the Company once, on an aggregated basis of all stocks in which the Company has traded, at the earlier of (i) a determination by the Investment Manager in his sole discretion, (ii) the resignation or other termination of the Investment Manager, (iii) the liquidation or winding up of the Company or (iv) the end of the Management Term. "Net Proceeds" shall be defined as dividends received, interest income, all net trading profits (i.e. proceeds from the sale of Stock less the Company's basis in the Stock) less all expenses (including but not limited to brokerage commissions, the Management Fee and other applicable accounting or professional fees but not including the Unrecovered 20% IM Fee) all as computed in accordance with generally accepted accounting principles.


(b) Net Proceeds shall be distributed as follows:


(i) first, to the Members, pro rata, an amount equal to each Member's cumulative Unrecovered Preferred Return in proportion to their Unrecovered Preferred Return until the Preferred Return shall be paid in full;


(ii) second, to the Investment Manager an amount equal to the Unrecovered 20% IM Fee; and


(iii) the balance, if any, shall be paid 80% to the Members in proportion to their Interests and 20% to the Investment Manager.


(c) If Stock cannot be readily sold because of the lack of its liquidity in the market or if the Administrative Manager elects not to sell the Stock at the time of a distribution of Net Proceeds, the Company shall calculate the fair market value of the Stock by averaging the closing sale prices (or if there is no sale on a particular day, the average closing bid and ask prices) for the five consecutive trading days preceding the date of computation. Thereafter, based


upon its valuation, the Company shall calculate the amount of Net Proceeds that would be distributed if the Stock had actually been sold for its fair market value (including all applicable commissions). The Company shall then distribute the Stock in kind in accordance with Section 8.1(b) as if the Stock were Net Proceeds.


(d) Notwithstanding Section 8.1(c), if the Investment Manager makes a determination to distribute Net Proceeds in accordance with Section 8.1(a)(i) and the Stock cannot be readily sold because of its lack of liquidity in the market, the Investment Manager shall liquidate the Stock in an orderly fashion over a six (6) month period. Thereafter, Net Proceeds shall be distributed in accordance with Section 8.1(b).


8.2 Notwithstanding Section 8.1, Net Proceeds from a Capital Transaction which constitutes a liquidation of the Company, together with other funds remaining to be distributed, shall be distributed to the Members no later than the later of (a) the end of the taxable year of the Company in which such liquidation occurs or (b) within ninety (90) days after the date of such liquidation event, after payment of all Company liabilities and expenses (or adequate provision therefor) including the Management Fee, except that in no event shall (x) a distribution be made to any Member if, after giving effect to such distribution, all liabilities of the Company, other than liabilities to Members on account of their Interests and liabilities for which the recourse of creditors of the Company is limited to specified property of the Company, exceed the Fair Market Value (as defined in Section 16.4(c)) of the assets of the Company, except that the Fair Market Value of assets that is subject to a liability for which the recourse of creditors is limited shall be included in the assets of the Company only to the extent that the Fair Market Value of those assets exceeds that liability and (y) the distribution to a Member exceed the positive balance in such Member's Capital Account after giving effect to all allocations to such Member under Article 9 50 that liquidation proceeds shall be distributed in accordance with each Member's positive Capital Account balance (within the meaning of Treasury Regulation Section 1.704-1(b)(2)(ii)(~ as in effect on the date hereof). If a Member shall receive a distribution that should not have been made based upon the provisions of Section 8.2(x), the provisions of Section 508(b) of the Act shall apply. Section 508(c) of the Law shall apply to all distributions made to the Members.


ARTICLE 9


TAX ALLOCATIONS AND DISTRIBUTIONS


9.1 The Net Profits of the Company for each fiscal year shall be allocated among the Members as follows:


(a) First to the Members in an amount equal to, and in proportion to, the aggregate amount of Net Losses theretofore allocated to each Member; and


(b) Thereafter, in proportion to their respective Interests in the Company


Any credit available for income tax purposes shall be allocated among the Members in proportion to their respective Interests in the Company.


9.2 Gain from a Capital Transaction shall be allocated in the following order:


(a) There shall first be allocated to those Members, if any, who have deficit balances in their Capital Accounts immediately prior to such transaction, an amount of such gain equal to the aggregate amount of such deficit balances, which amount shall be allocated in the same proportion as such deficit balances.


(b) There shall next be allocated to each of the Members, gain equal to the amount by which (x) the aggregate Net Proceeds derived from such transaction distributable to each Member in accordance with the provisions of Section 8.1(b) (i) and (iii), assuming such amounts are distributable, exceeds (y) the positive balance, if any, in such Member's Capital Account after such Member's Capital Account has been adjusted to reflect the gain allocated to such Member pursuant to paragraph (a) above; provided, however, that if there shall be an insufficient amount of gain determined by this paragraph, then the gain shall be allocated to the Members in proportion to the respective amounts determined pursuant to this paragraph.


(c) Any remaining gain shall be allocated among the Members in proportion to their respective Interests in the Company.


(d) If the Company shall realize, upon such transaction, gain which is treated as ordinary income under Section 1245 or 1250 of the Code, such ordinary income shall be allocated to the Members who receive the allocation of the depreciation or cost recovery deduction that generated the ordinary income, which amount shall be allocated in the same proportions as such deductions.


9.3 Net Losses of the Company shall be allocated among the Members as follows:


(a) First, to the Members in proportion to their respective positive Capital Account balances until such balances are reduced to zero; and


(b) The balance shall be allocated to the Members in proportion to their respective Interests in the Company.


9.4 Loss from a Capital Transaction from the sale or other disposition of all or substantially all of the assets shall be allocated in the following order:


(a) First, to those Members, if any, who have positive balances in their Capital Accounts, an amount of such loss equal to the aggregate amount of such positive balances, which amount shall be allocated in the same proportion as such positive balances; and


(b) The balance of such loss shall be allocated to the Members in proportion to their respective Interests in the Company


9.5 Notwithstanding the foregoing provisions of Article 9:


(a) In accordance with Sections 704 (b) and (c) of the Code and the Treasury Regulations thereunder, income, gain, loss and deduction with respect to any property contributed to the capital of the Company (including all or part of any deemed Capital Contribution under Section 708 of the Code) shall, solely for tax purposes, be allocated among the Members so as to take into account any variation between the adjusted basis of such property to the Company and its agreed value. In the event that Capital Accounts are ever adjusted pursuant to Treasury Regulation Section 1.704-1(b) (2) to reflect the fair market value of any Company property, subsequent allocations of income, gain, loss and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset and its value as adjusted in the same manner ...