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AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
ROUNDTABLE PARTNERS, L.L.C.
This AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT of
Roundtable Partners, L.L.C. (the "Agreement") is made and entered into as of
March ___, 1995 by and among the Members.
FOR AND IN CONSIDERATION OF and reliance upon the mutual covenants,
rights and obligations set forth herein, the benefits to be derived therefrom
and the relationship of trust, confidence, fair dealing and utmost good faith
created hereby, and other good and valuable consideration, the receipt and
the sufficiency of which each Member acknowledges and confesses, the Members
agree that the Agreement shall be the limited liability company agreement of
the Company and shall replace in its entirety the limited liability company
agreement, dated October 1, 1994, entered into by Xxxxxx Xxxxxx and Xxxxxxx
Xxxxxxxxx (a copy of which is attached as Exhibit 1 hereto), which shall be
of no further force and effect, and further agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. As used herein, the following terms shall have the
respective meanings set forth below:
ACT - the Delaware Limited Liability Company Act and any
successor statute, as amended from time to time.
ADJUSTED CAPITAL ACCOUNT - the Capital Account maintained for each
Member as of the end of each fiscal year of the Company (a) increased by (i)
the
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amount of any unpaid capital contributions, if any, unconditionally agreed to
be contributed by such Member under Article IV of this Agreement, (ii) an
amount equal to the sum of such Member's allocable share of the Company's
Minimum Gain attributable to Company Nonrecourse Liabilities and such
Member's allocable share of the Company's Minimum Gain attributable to Member
Nonrecourse Debt, in each case as computed on the last day of such fiscal
year in accordance with applicable Treasury Regulations, and (iii) the amount
of Company liabilities allocable to such Member under Section 752 of the Code
with respect to which such Member bears the Economic Risk of Loss to the
extent such liabilities do not constitute "Member Nonrecourse Debt" and (b)
reduced by all reasonably expected adjustments, allocations and distributions
described in Treas. Reg. Section 1.704-1(b) (2) (ii) (d) (4), (5) and (6).
For purposes of this definition of "Adjusted Capital Account," any recourse
debt for which no Member bears the Economic Risk of Loss shall be treated as
a Company Nonrecourse Liability.
ADJUSTED PROPERTY - means any property, the Carrying Value of which
has been adjusted pursuant to Section 4.3(d) (i) or 4.3 (d) (ii). Once an
Adjusted Property is deemed distributed by, and recontributed to, the Company
for federal income tax purposes upon a termination thereof pursuant to
Section 708 of the Code, such property shall thereafter constitute
Contributed Property until the Carrying Value of such property is thereafter
adjusted pursuant to Section 4.3(d) (i) or 4.3 (d) (ii).
ADVISORY COMMITTEE - as defined in Section 6.2(a).
AFFILIATE - (a) with respect to any Person who is a natural person,
(i) each Entity that such Person controls and (ii) each member of such
Person's immediate family and (b) with respect to any Entity, (i) each Entity
that such Entity controls, (ii) each Person that controls such Entity and
(iii) each Entity that is under common control with such Entity. For the
purposes of the preceding sentence, the term "control" shall mean the
possession, directly or indirectly, through one or more intermediaries, of
the power or authority, through ownership of voting securities, by Contract
or otherwise, to direct the management, activities or policies of the Entity.
With respect to the Company, an Affiliate thereof shall be deemed to include
an Entity that is controlled by the Company.
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AGREED VALUE - of any Contributed Property means the fair market
value of such property or other consideration at the time of contribution,
as determined by the Advisory Committee using such reasonable method of
valuation as it may adopt; PROVIDED, however, that the Agreed Value of any
property deemed contributed to the Company for federal income tax purposes
upon termination and reconstitution thereof pursuant to Section 708 of the
Code shall be determined in accordance with Section 4.3(c). Subject to
Section 4.3(c), the Advisory Committee shall, in its sole discretion, use
such method as it deems reasonable and appropriate to allocate the aggregate
Agreed Value of Contributed Properties contributed to the Company in a single
or integrated transaction among each separate property on a basis
proportional to the fair market value of each Contributed Property.
BANKRUPT MEMBER - any Member (a) that (i) makes an assignment for
the benefit of creditors, (ii) files a voluntary petition in bankruptcy,
(iii) is adjudged bankrupt or insolvent or has entered against the Member an
order for relief in any bankruptcy or insolvency proceeding, (iv) files a
petition or answer seeking for the Member a reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under
any statute, law or regulation, (v) files an answer or other pleading
admitting or failing to contest the material allegations of a petition filed
against the Member in a proceeding of the type described in subclauses (i)
through (iv) of this clause (a), or (vi) seeks, consents to, or acquiesces in
the appointment of a trustee, receiver or liquidator of the Member or of all
or any substantial part of the Member's properties or (b) against which a
proceeding seeking reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any statute, law or
regulation has been commenced and 120 days have expired without dismissal or
stay thereof or with respect to which, without the Member's consent or
acquiescence, a trustee, receiver or liquidator of the Member or of all or
any substantial part of the Member's properties has been appointed and 90
days have expired without the decree or order making such appointment having
been vacated or stayed, or 90 days have expired after the date of expiration
of a stay, if the appointment has not previously been vacated.
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BOOK-TAX DISPARITIES - means with respect to any item of Contributed
Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or
Adjusted Property and the adjusted basis thereof for federal income tax
purposes as of such date. A Member's share of the Company Book-Tax
Disparities in all of its Contributed Property and Adjusted Property will be
reflected by the difference between such Member's Capital Account balance as
maintained pursuant to Section 4.3 and the hypothetical balance of such
Member's Capital Account computed as if it had been maintained strictly in
accordance with federal income tax accounting principles.
BROKER CALL RATE - means as of any particular date the publicly
announced broker call rate of Citibank, N.A., New York, in effect on the last
day of the last month ending prior to such date, and means with respect to
any period the average of the publicly announced broker call rates of
Citibank, N.A., New York in effect on the last day of each month ending
during such period.
BUSINESS - the business, anywhere in the world, of acting as a
wholesale over-the-counter market maker and/or a third-market broker dealer
and any other business functionally interrelated to or incidental to either
of the foregoing.
BUSINESS DAY - any day other than a Saturday, a Sunday or a holiday
on which national banking associations in New York City, are required or
permitted by law to be closed.
CAPITAL ACCOUNT - the capital account maintained for a Member
pursuant to Section 4.3.
CAPITAL CONTRIBUTION - any contribution by a Member to the capital
of the Company.
CARRYING VALUE - (a) with respect to a Contributed Property, the
Agreed Value of such property reduced (but not below zero) by all depreciation,
amortization and cost recovery deductions charged to the Members' Capital
Accounts in respect of such Contributed Property, and (b) with respect to any
other Company property, the adjusted basis of such property for federal income
tax
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purposes, all as of the time of determination. The Carrying Value of any
property shall be adjusted from time to time in accordance with Sections
4.3(d) (i) and 4.3(d) (ii) and to reflect changes, additions or other
adjustments to the Carrying Value for dispositions and acquisitions of
Company properties, as deemed appropriate by the Advisory Committee.
CERTIFICATE - as defined in Section 2.1.
CHAIRMAN - as defined in Section 6.3(c).
CODE - the Internal Revenue Code of 1986, as amended from time to
time.
COMMON INTEREST - the common limited liability company interest
(expressed as a percentage) of a Member in the Company, including rights as a
Common Unit holder to distributions (liquidating or otherwise), allocations
of Net Income and Net Loss, information and to consent or approve. The
Common Interest of each Member shall be determined from time to time by
dividing the number of Common Units held by such Member at that time by the
aggregate number of Common Units then outstanding; provided, that no Member
shall have a Common Interest in excess of 20 percent; provided further, that
any Common Interest which would have been held by a Member but for the
preceding proviso shall be allocated among the other Members in accordance
with their respective Common Interests. As of the Effective Date, the Common
Interest of each Member is as set forth on Schedule A hereto.
COMMON UNITS - units of the Company designated as common, which in
the aggregate constitute 100 percent of the Common Interest. As of the
Effective Date, the number of Common Units held by each Member is as set
forth on Schedule A hereto.
COMPANY - Roundtable Partners, L.L.C., a Delaware limited liability
company.
COMPANY NONRECOURSE DEDUCTIONS - with respect to Company Nonrecourse
Liabilities, the amount of deductions, losses and expenses equal to the net
increase
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during the year in Minimum Gain attributable to Company Nonrecourse
Liabilities, reduced (but not below zero) by proceeds of Company Nonrecourse
Liabilities allocated to an increase in Minimum Gain distributed during the
year, as determined in accordance with applicable Treasury Regulations.
COMPANY NONRECOURSE LIABILITIES - nonrecourse liabilities (or
portions thereof) of the Company for which no Member bears the Economic Risk
of Loss.
CONTRIBUTED PROPERTY - each property or other asset, in such form as
may be permitted by the Act (but excluding cash and any property or other
assets treated as sold to the Company pursuant to Section 707(a) of the Code
including, without limitation, the Trimark Interest), contributed to the
Company (or deemed contributed to the Company on termination and
reconstitution thereof pursuant to Section 708 of the Code). Once the
Carrying Value of a Contributed Property is adjusted pursuant to Section
4.3(d), such property shall no longer constitute a Contributed Property, but
shall be deemed an Adjusted Property.
CONTRACT - any contract, agreement, lease, license, easement,
servitude, right-of-way, mortgage, bond, note or other instrument.
CURATIVE ALLOCATION - any allocation of an item of income, gain,
deduction, loss or credit pursuant to the provisions of Section 5.1(c) (vi).
DISPOSE, DISPOSING or DISPOSITION - a sale, lease, assignment,
transfer, exchange, mortgage, pledge, grant of a security interest or other
disposition or encumbrance (including by operation of law) or the acts
thereof.
ECONOMIC RISK OF LOSS - as defined in Treasury Regulation Section
1.752-2(a).
EFFECTIVE DATE - as defined in Section 3.1.
ENTITY - any corporation, limited liability company, partnership,
limited partnership, venture, trust, estate, governmental entity or other
entity.
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FINANCIAL STATEMENTS - the annual financial statements of the
Company.
GAAP - generally accepted accounting principles consistently applied.
KNIGHT ORDER FLOW PERCENTAGE - with respect to each Member, for any
taxable period of the Company, the amount obtained by multiplying (a) the
excess of 100 percent over the aggregate Common Interests of all the
Management Investors at that time by (b) the product obtained by dividing (i)
the total amount of rebates for order flow received by such Member (or a
percentage (not to exceed 100%, in the aggregate, with respect to any one
entity) of order flow provided by an entity related to such Member as
indicated on Exhibit 1.1 hereto) from Knight Securities during such taxable
period by (ii) the total amount of rebates for order flow received by all
Members (other than Management Investors) from Knight Securities during such
taxable period; provided, that with respect to each Management Investor the
Knight Order Flow Percentage at any time shall equal the Common Interest of
such Management Investor at that time.
KNIGHT SECURITIES - Knight Securities, L.P., a New York limited
partnership.
MANAGEMENT INVESTORS - Xxxxxx Xxxxxx, Xxxxxxx Xxxxxxxxx, Xxxxxx
Xxxxxxxxxx and Xxxxxx Xxxxxxxx, in each case so long as such individual is a
Member.
MEMBER - any Person executing this Agreement as of the date hereof
as a member or hereafter admitted to the Company as a member as provided in
this Agreement, but excluding any Person who has ceased to be a Member in the
Company. As the context may require, in connection with the allocation of
any item of income, gain, loss, deduction, profit or distribution, but not
otherwise, the term "Member" shall include unadmitted transferees of Members
who are treated as partners of the Company for federal income tax purposes.
MEMBER NONRECOURSE DEBT - any nonrecourse debt of the Company for
which any Member bears the Economic Risk of Loss.
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MEMBER NONRECOURSE DEDUCTIONS - with respect to a Member Nonrecourse
Debt, the amount of deductions, losses and expenses equal to the net increase
during the year in Minimum Gain attributable to Member Nonrecourse Debt,
reduced (but not below zero) by proceeds of such Member Nonrecourse Debt
allocated to an increase in Minimum Gain attributable to Member Nonrecourse
Debt distributed during the year to the Members who bear the Economic Risk of
Loss for such debt, as determined in accordance with applicable Treasury
Regulations.
MEMBERSHIP INTEREST - the aggregate, with respect to any Member, of
its Common Interest, its Preferred A Interest and its Preferred B Interest.
MINIMUM GAIN - (a) with respect to Company Nonrecourse Liabilities,
the amount of gain that would be realized by the Company if it Disposed of
(in a taxable transaction) all Company properties that are subject to Company
Nonrecourse Liabilities in full satisfaction of such liabilities, computed in
accordance with applicable Treasury Regulations or (b) with respect to Member
Nonrecourse Debt, the amount of gain that would be realized by the Company if
it Disposed of (in a taxable transaction) the Company property that is
subject to such Member Nonrecourse Debt in full satisfaction of such debt,
computed in accordance with applicable Treasury Regulations.
NET AGREED VALUE - (a) in the case of any Contributed Property, the
Agreed Value of such property reduced by any liabilities either assumed by
the Company upon such contribution or to which such property is subject when
contributed, and (b) in the case of any property distributed to a Member by
the Company, the Company's Carrying Value of such property (as adjusted
pursuant to Section 4.3(d) (ii)) at the time such property is distributed,
reduced by any indebtedness either assumed by such Member upon such
distribution or to which such property is subject at the time of
distribution, in either case, as determined under Section 752 of the Code.
NET CAPITAL REQUIREMENTS - the requirements as to maintenance of net
capital prescribed by Rule 15c3-1 (and the appendices thereto) and Rule 15c3-3
under the Securities Exchange Act of 1934, as now in effect and as from time to
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time amended, or the rules dealing with the same subject matter as those
rules of any governmental authority or self-regulatory organization having
jurisdiction over the Company, Trimark and/or Knight Securities, whichever
shall from time to time be the more restrictive.
NET INCOME - for any taxable period, the excess, if any, of the
Company's items of income and gain for such taxable period over the Company's
items of loss and deduction for such taxable period. The items included in
the calculation of Net Income shall be determined in accordance with Section
4.3(b) and shall not include any items specially allocated under Section
5.1(c). If an item of income, gain, loss or deduction that has been included
in the initial computation of Net Income is subsequently subjected to a
Required Allocation or a Curative Allocation, Net Income or Net Loss,
whichever the case may be, shall be recomputed without regard to such item.
NET LOSS - for any taxable period, the excess, if any, of the
Company's items of loss and deduction for such taxable period over the
Company's items of income and gain for such taxable period. The items
included in the calculation of Net Loss shall be determined in accordance
with Section 4.3(b) and shall not include any items specially allocated under
Section 5.1(c). If an item of income, gain, loss or deduction that has been
included in the initial computation of Net Loss is subsequently subjected to
a Required Allocation or a Curative Allocation, Net Income, or Net Loss,
whichever the case may be, shall be recomputed without regard to such item.
NONRECOURSE BUILT-IN GAIN - with respect to any Contributed
Properties or Adjusted Properties that are subject to a mortgage or pledge
securing a Company Nonrecourse Liability, the amount of any taxable gain that
would be allocated to the Members pursuant to Sections 5.2(b) (i) (A) or
5.2(b) (ii) (A) if such properties were Disposed of in a taxable transaction
in full satisfaction of such liabilities and for no other consideration.
OFFICER - as defined in Section 6.9(a).
PERSON - any natural person or Entity.
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PREFERRED A HOLDER - any Member holding Preferred A Units.
PREFERRED A HOLDER'S PREFERENCE AMOUNT - with respect to each
Preferred A Holder, for each period an amount equal to (i) the average
balance of the Preferred A Holder's Unrecovered Preferred Capital Amount
during that period, multiplied by (ii) the Broker Call Rate (prorated for any
period, consisting of less than 365 days).
PREFERRED A HOLDER'S PREFERRED CAPITAL AMOUNT - with respect to each
Preferred A Holder, an amount equal to (i) six-sevenths (6/7) of all amounts
contributed by the Preferred A Holder under Section 4.1 minus (ii) the sum
of (A) any distributions to the Preferred A Holder under Section 5.3(a)(iv)
plus (B) the product of $10 multiplied by the number of Preferred A Units
converted by such Preferred A Holder into Common Units pursuant to Section
11.1.
PREFERRED A HOLDER'S AGGREGATE PREFERENCE AMOUNT - with respect to
each Preferred A Holder, on any given date, an amount equal to (i) the
aggregate amount of the Preferred A Holder's Preference Amounts through such
date, minus (ii) the aggregate amount of distributions made to the Preferred
A Holder under Section 5.3(a)(i).
PREFERRED A HOLDER'S UNRECOVERED PREFERRED CAPITAL AMOUNT - with
respect to each Preferred A Holder, on any given date, an amount equal to (i)
the Preferred A Holder's Preferred Capital Amount, plus (ii) the Preferred A
Holder's Aggregate Preference Amount (determined without taking into account
the Preferred A Holder's Preference Amount for the taxable period in which
such date falls).
PREFERRED A HOLDER'S UNTAXED PREFERENCE AMOUNT - with respect to
each Preferred A Holder, on any given date, an amount equal to (i) the
aggregate amount of the Preferred A Holder's Preference Amounts through such
date, minus (ii) the aggregate amount of Net Income previously allocated to
the Preferred A Holder under Section 5.1(a)(i).
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PREFERRED A INTEREST - the series A preferred limited liability
company interest (expressed as a percentage of all Preferred A Interests) of
a Member in the Company, including rights to distributions (liquidating or
otherwise), allocations and information. As of the Effective Date, the
Preferred A Interest of each Member is as set forth on Schedule A hereto.
PREFERRED A UNITS - units of the Company designated as Series A
Preferred, which in the aggregate constitute 100 percent of the Preferred A
Interest. As of the Effective Date, the number of Preferred A Units held by
each Member is as set forth on Schedule A hereto.
PREFERRED B HOLDER - any Member holding Preferred B Units.
PREFERRED B HOLDER'S PREFERENCE AMOUNT - for each period an amount
equal to (i) the average balance of the Preferred B Holder's Unrecovered
Preferred Capital Amount during that period, multiplied by (ii) the Broker
Call Rate (prorated for any period, consisting of less than 365 days).
PREFERRED B HOLDER'S PREFERRED CAPITAL AMOUNT - an amount equal to
(i) Fifteen Million Dollars ($15,000,000) minus (ii) any distributions to the
Preferred B Holder under Section 5.3(a)(v).
PREFERRED B HOLDER'S AGGREGATE PREFERENCE AMOUNT - on any given
date, an amount equal to (i) the aggregate amount of the Preferred B Holder's
Preference Amounts through such date, minus (ii) the aggregate amount of
distributions made to the Preferred B Holder under Section 5.3(a)(ii).
PREFERRED B HOLDER'S UNRECOVERED PREFERRED CAPITAL AMOUNT - on any
given date, an amount equal to (i) the Preferred B Holder's Preferred Capital
Amount, plus (ii) the Preferred B Holder's Aggregate Preference Amount
(determined without taking into account the Preferred B Holder's Preference
Amount for the taxable period in which such date falls).
PREFERRED B HOLDER'S UNTAXED PREFERENCE AMOUNT - on any given date,
an amount equal to (i) the aggregate amount of the Preferred B Holder's
Preference
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Amounts through such date, minus (ii) the aggregate amount of Net Income
previously allocated to the Preferred B Holder under Section 5.1(a)(ii).
PREFERRED B INTEREST - the series B preferred limited liability
company interest (expressed as a percentage of all Preferred B Interests) of
a Member in the Company, including rights to distributions (liquidating or
otherwise), allocations and information. As of the Effective Date, the
Preferred B Interest of each Member is as set forth on Schedule A hereto.
PREFERRED B UNITS - units of the Company designated as Series B
Preferred, which in the aggregate constitute 100 percent of the Preferred B
Interest. As of the Effective Date, the number of Preferred B Units held by
each Member is as set forth on Schedule A hereto.
PREFERRED INTEREST - with respect to any Member, the percentage
obtained by dividing (a) the sum of all Preferred A Units and Preferred B
Units held by such Member by (b) the sum of all Preferred A Units and all
Preferred B Units then held by all the Members.
RECAPTURE INCOME - any gain recognized by the Company (computed
without regard to any adjustment required by Section 734 or 743 of the Code)
upon the Disposition of any property or asset of the Company, which gain is
characterized as ordinary income because it represents the recapture of
deductions previously taken with respect to such property or asset.
REPRESENTATIVE - as defined in Section 6.2(a).
REQUIRED ALLOCATIONS - any allocation (or limitation imposed on any
allocation) of an item of income, gain, deduction or loss pursuant to
Sections 5.1(c) (i) - (v), such allocations (or limitations thereon) being
directly or indirectly required by the Treasury regulations promulgated under
Section 704(b) of the Code.
RESIDUAL GAIN or RESIDUAL LOSS - any item of gain or loss, as the
case may be, of the Company recognized for federal income tax purposes
resulting from a
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Disposition of a Contributed Property or Adjusted Property, to the extent
such item of gain or loss is not allocated pursuant to Sections 5.2(b) (i)
(A) or 5.2(b) (ii) (A), respectively, to eliminate Book-Tax Disparities.
RESIGNING MEMBER - as defined in Section 10.1
SECRETARY OF STATE - the Secretary of State of the State of Delaware.
TRANSFER AGREEMENT - the Master Contribution, Assignment and
Assumption Agreement dated concurrently herewith by and between Trimark
Securities, Inc. and the Company.
TRIMARK - Trimark Securities L.P., a New York limited partnership.
TRIMARK INCOME PERCENTAGE - with respect to any taxable period of
the Company, a fraction, the numerator of which is the excess, if any, of
Trimark's items of income and gain for such taxable period over Trimark's
items of loss and deduction for such taxable period and the denominator of
which is the Net Income for such taxable period.
TRIMARK INTEREST - the 99.99% general partnership interest in
Trimark being transferred to the Company as of the Effective Date pursuant to
the Transfer Agreement.
TRIMARK ORDER FLOW PERCENTAGE - with respect to each Member, for any
taxable period of the Company, the amount obtained by multiplying (a) the
excess of 100 percent over the aggregate Common Interests of all the
Management Investors at that time by (b) the product obtained by dividing (i)
the total amount of rebates for order flow received by such Member (or a
percentage (not to exceed 100%, in the aggregate, with respect to any one
entity) of order flow provided by an Entity related to such Member as
indicated on Exhibit 1.1 hereto) from Trimark during such taxable period by
(ii) the total amount of rebates for order flow received by all Members
(other than Management Investors) from Trimark during such taxable period;
provided, that with respect to each Management Investor, the
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Trimark Order Flow Percentage at any time shall equal the Common Interest of
such Management Investor at that time.
UNREALIZED GAIN - attributable to any item of Company property
means, as of any date of determination, the excess, if any, of (a) the fair
market value of such property as of such date (as determined under Section
4.3(d)) over (b) the Carrying Value of such property as of such date (prior
to any adjustment to be made pursuant to Section 4.3(d) as of such date).
UNREALIZED LOSS - attributable to any item of Company property
means, as of any date of determination, the excess, if any, of (a) the
Carrying Value of such property as of such date (prior to any adjustment to
be made pursuant to Section 4.3(d) as of such date) over (b) the fair market
value of such property as of such date (as determined under Section 4.3(d)).
1.2 DIRECTLY OR INDIRECTLY; WITHOUT LIMITATION. Where any provision in
this Agreement refers to action to be taken by any Person, or which such
Person is prohibited from taking, such provision shall be applicable whether
such action is taken directly or indirectly by such Person, including actions
taken by or on behalf of any Affiliate of such Person. Throughout this
Agreement, the term "including" and words to the same or similar effect shall
be interpreted and construed to mean "including without limitation."
1.3 REFERENCES. All references herein to one gender shall include the
others and the singular shall include the plural and vice versa as
appropriate. All references to an Entity shall be deemed to include its
successors and assigns, to the extent succession or assignment is not
restricted by this Agreement. Unless otherwise expressly provided, all
references to "Articles" or "Sections" are to Articles or Sections of this
Agreement and all references to "Exhibits" are to the exhibits attached
hereto, each of which is made a part hereof for all purposes.
1.4 CONSENTS, APPROVALS, ETC. All references herein to the consent,
approval or agreement of the Advisory Committee shall mean, unless otherwise
expressly provided in this Agreement, the consent, approval or agreement of a
majority of the Representatives then elected.
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ARTICLE II
ORGANIZATION
2.1 ORGANIZATION. Effective as of October 5, 1994, the Company was
organized as a Delaware limited liability company by the filing of the
Certificate of Formation attached hereto as Exhibit 2.1 (the "Certificate")
in the office of the Secretary of State under and pursuant to the Act.
2.2. NAME. The name of the Company is "Roundtable Partners, L.L.C." and
all Company business shall be conducted under such name or such other name or
names that comply with applicable law and as the Advisory Committee may
designate from time to time.
2.3 REGISTERED OFFICE; REGISTERED AGENT; PRINCIPAL OFFICE IN THE UNITED
STATES; OTHER OFFICES. The registered office of the Company in the State of
Delaware shall be the initial registered office designated in the Certificate
or such other office (which need not be a place of business of the Company)
as the Advisory Committee may designate from time to time in the manner
provided by law. The registered agent of the Company in the State of
Delaware shall be the initial registered agent designated in the Certificate
or such other Person or Persons as the Advisory Committee may designate from
time to time in the manner provided by law. The principal office of the
Company in the United States of America shall be in Jersey City, New Jersey
or such other place (which need not be within the State of Delaware) as the
Advisory Committee may designate from time to time. The Company shall have
such other offices (which need not be within the State of Delaware) as the
Advisory Committee may determine to be appropriate.
2.4 PURPOSES. The purpose of the company is to engage in and operate
the Business, either directly, or indirectly as a holding company holding
interests in one or more Entities engaged in and operating the Business;
provided, however, that the Company shall under no circumstances engage in
any activity that is forbidden by the law of any jurisdiction in which the
Company or its Affiliates engages in business.
2.5 FOREIGN QUALIFICATION. Prior to the Company conducting business in
any jurisdiction other than the State of Delaware, the Advisory Committee
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shall cause the Company to comply, to the extent procedures are available,
with all requirements necessary to qualify the Company as a foreign limited
liability company in such jurisdiction. Each Member shall execute,
acknowledge, swear to and deliver all certificates and other instruments
conforming to this Agreement that are necessary or appropriate to qualify,
or, as appropriate, to continue or terminate such qualification of, the
Company as a foreign limited liability company in all such jurisdictions in
which the Company may conduct business.
2.6 TERM. The Company commenced on the date the Certificate was filed
with the Secretary of State and shall continue in existence until the date
fixed in the Certificate as the latest date on which the Company is to
dissolve or such earlier time as may be specified in or pursuant to this
Agreement; provided, however, that the Members may, with the consent of
Members holding not less than a majority of the Common Interests held by all
Members, extend the term of the Company beyond such period for a specified
period of time that complies with the Act.
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ARTICLE III
MEMBERS; DISPOSITIONS OF INTERESTS
3.1 MEMBERS. The Members of the Company are those Persons set forth on
Schedule A, each of which was admitted to the Company as a Member at the time
the Company was formed or is admitted to the Company as a Member on the date
hereof (the "Effective Date").
3.2 REPRESENTATIONS AND WARRANTIES. Each Member hereby represents and
warrants to the Company and each other Member that: (a) if such Member is an
Entity, it is duly organized, validly existing and in good standing under the
law of the jurisdiction of its organization and is duly qualified and in good
standing in the jurisdiction of its principal place of business (if not
organized therein); (b) such member has full corporate, or other applicable
power and authority to execute and agree to this Agreement and to perform its
obligations hereunder and all necessary actions by the board of directors,
shareholders, members, or other Persons necessary for the due authorization,
execution, delivery and performance of this Agreement by that Member have
been duly taken; (c) such Member has duly executed and delivered this
Agreement; (d) such Member's authorization, execution, delivery and
performance of this Agreement do not conflict with any other agreement or
arrangement to which that Member is a party or by which it is bound or with
any law or regulation to which that Member is subject; (e) such Member is
acquiring its Membership Interest for its own account and not with a view to
a sale or distribution thereof in violation of any securities laws and such
Member has received, or has had access to, all information which it considers
necessary or advisable to that Member's decision concerning its acquisition
of the Membership Interest; (f) such Member has not entered into and will not
enter into, at any time, any oral or written agreement or understanding with
any other Member to act in concert with any other Member with respect to the
management and operation of the Company, including any voting of such
Member's Common Interests as may occur from time to time; and (g) this
Agreement constitutes a valid, binding and enforceable agreement of that
Member, subject to general equitable principles and except as the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general application
relating to creditors' rights; PROVIDED, HOWEVER, that the representation and
warranty in clause (f) of this Section 3.2 shall apply only to Members which
are also members or member organizations of a national securities exchange.
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3.3 DISPOSITION OF INTERESTS.
(a) Except as otherwise permitted by Section 4.3 and Article X, no
Member shall, directly or indirectly, Dispose of all or any part of its
Membership Interest (including any right to receive distributions from the
Company) to any Person (including an Affiliate of such Member) without first
(x) obtaining the consent of that number of the other Members who are not
members or member organizations of a national securities exchange (unless
such member has obtained the unconditional written consent, or a consent
subject to such conditions as are acceptable to a majority of the Management
Investors, of the applicable securities exchange) who hold Common Interests
at least equal to the majority of Common Interests held by all Members other
than the Member proposing such Disposition (which consent may be given or
withheld in such other Members' sole judgment) and (y) complying with the
provisions of Sections 3.3(b).
(b) If, in connection with the Disposition of a Membership
Interest, a Member purports to grant any Person (including an Affiliate of
such Member) the right to be admitted as a Member of the Company, such Person
shall have the right to be so admitted as a Member only if: (i) that number
of the other Members who are not members or member organizations of a
national securities exchange (unless such member has obtained the
unconditional written consent, or a consent subject to such conditions as are
acceptable to a majority of the Management Investors, of the applicable
securities exchange) who hold Common Interests at least equal to the majority
of Common Interests held by all Members other than the Member proposing such
Disposition consent to such admission (which consent may be given or withheld
in the sole judgment of such other Members) and (ii) the other Members
receive a document (A) executed by both the Member effecting such Disposition
and the Person to which such Interest is Disposed, (B) including the notice
and payment address and facsimile number of the Person to be admitted to the
Company as a Member and the written acceptance by such Person of all the
terms and provisions of this Agreement and agreement by such Person to
perform and discharge timely all of the obligations and liabilities in
respect of the interest being obtained, (C) setting forth the Common
Interest, Preferred A Interests, Preferred B Interests and Capital Accounts
of each of the Member effecting such Disposition and the Person to which such
interest is Disposed after such Disposition, which together shall total the
Common Interest, Preferred A Interest, Preferred B Interest and Capital
Account, respectively, of the Member effecting such Disposition prior
thereto, (D) containing a
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representation and warranty by the Member effecting such Disposition and the
Person to which such interest is Disposed to the effect that such Disposition
was made in accordance with all laws and regulations, including securities
laws, applicable to such Member or Person, as appropriate, (E) containing
representations and warranties by the Person to which such interest is
Disposed that are substantially equivalent to those contained in Section 3.2
hereof, and (F) setting forth the effective date thereof.
(c) Any attempted Disposition of an interest or right, or any part
thereof, in or in respect of any Membership Interest (including any right to
receive distributions from the Company) other than in accordance with this
Section 3.3 shall be, and hereby is declared, null and void AB INITIO.
(d) Notwithstanding any provision in this Agreement to the
contrary, in no event shall any Member have the right or power to pledge or
otherwise grant (or cause to be pledged or otherwise granted) a mortgage
covering or a security interest in any other Member's Membership Interest or
any portion thereof (and the Advisory Committee shall not have the right or
power to pledge or otherwise grant (or cause to be pledged or otherwise
granted) a mortgage covering or a security interest in any Member's
Membership Interest or any portion thereof).
3.4 ADDITIONAL INTERESTS. Additional Membership Interests may be
issued, and additional Persons may be admitted as Members, only with the
consent of the Advisory Committee, provided, that any such additional
Membership Interests shall be issued for cash, or other contributed Property
having an Agreed Value at least equal to the lesser of (i) the fair market
value of the Membership Interest proposed to be issued and (ii) the price
that would have been paid for such Membership Interest by a Person who became
a Member on the Effective Date. Such admitted Members shall have such rights
as determined by the Advisory Committee.
3.5 LIABILITY TO THIRD PARTIES. No Member, Representative or Officer
shall have any personal obligation for any liabilities of the Company,
whether such liabilities arise in contract, tort or otherwise, except to the
extent that any such liabilities are expressly assumed in writing by such
Member, Representative or Officer; PROVIDED, HOWEVER, that nothing in this
Section 3.5 shall be construed as an agreement by the Company to indemnify or
hold harmless any Member, Representative or Officer.
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3.6 REMOVAL. A Member may not be removed or expelled as a Member of the
Company, except as expressly set forth in Article X.
3.7 REGISTRATION RIGHTS. The Members shall have the registration rights
set forth in Exhibit 3.7 hereto.
ARTICLE IV
CAPITAL CONTRIBUTIONS
4.1 CAPITAL CONTRIBUTIONS.
(a) Effective as of the Effective Date, each of the Members (other
than Trimark Securities) has contributed the amount of cash set forth next to
such Member's name on Schedule A hereto to the Company as a Capital
Contribution and Trimark Securities shall be treated as having sold, and not
contributed as a Capital Contribution, the Trimark Interest to the Company.
(b) No Member shall have any obligation to make any capital
contribution other than the capital contribution referred to in section
4.1(a), except that each Management Investor shall, upon the admission of any
additional Members, be required to contribute capital in exchange for Common
Units such that the Common Interest of such Management Investor immediately
after the admission of such new Members is not less than the Common Interest
of such Management Investor immediately before such admission; provided that
this obligation of each Management Investor shall expire at such time as such
Management Investor shall, in the aggregate, have made capital contributions
to the Company of $3 million.
4.2 RETURN OF CONTRIBUTIONS. A Member is not entitled (except as
otherwise expressly provided by other provisions of this Agreement) to the
return of any part of its Capital Contributions or to be paid interest in
respect of either its Capital Account or its Capital Contributions. An
unrepaid Capital Contribution is not a liability of the Company or of the
other Members. A Member is not required to contribute or to lend any cash or
property to the Company to enable the Company to return any other Members'
Capital Contributions.
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4.3 CAPITAL ACCOUNTS.
(a) The Company shall maintain for each Member owning a Membership
Interest a single, separate Capital Account with respect to such Membership
Interest in accordance with the rules of Treasury Regulation Section
1.704-1(b)(2)(iv). Such Capital Account shall be increased by (i) the amount
of cash and the Net Agreed Value of all property transferred to the Company
as Capital Contributions with respect to such Membership Interest pursuant to
this Agreement and (ii) all items of Company income and gain (including,
without limitation, income and gain exempt from tax) computed in accordance
with Section 4.3(b) and allocated to such Membership Interest pursuant to
Section 5.1, and decreased by (x) the amount of cash and the Net Agreed Value
of all actual and deemed distributions of cash or property made with respect
to such Membership Interest pursuant to this Agreement and (y) all items of
Company deduction and loss computed in accordance with Section 4.3(b) and
allocated to such Membership Interest pursuant to Section 5.1.
(b) For purposes of computing the amount of any item of income,
gain, loss or deduction to be reflected in the Members' Capital Accounts, the
determination, recognition and classification of any such item shall be the
same as its determination, recognition and classification for federal income
tax purposes (including, without limitation, any method of depreciation, cost
recovery or amortization used for that purpose), provided, that:
(i) Except as otherwise provided in Treasury Regulation
Section 1.704-1(b)(2)(iv)(m), the computation of all items of income,
gain, loss and deduction shall be made without regard to any election
under Section 754 of the Code which may be made by the Company and, as
to those items described in Section 705(a)(1)(B) or 705(a)(2)(B) of the
Code, without regard to the fact that such items are not includable in
gross income or are neither currently deductible nor capitalized for
federal income tax purposes.
(ii) Any income, gain or loss attributable to the taxable
Disposition of any Company property shall be determined as if the
adjusted basis of such property as of such date of Disposition were
equal in amount to the Company's Carrying Value with respect to such
property as of such date.
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(iii) In accordance with the requirements of Section 704(b)
of the Code, any deductions for depreciation, cost recovery or
amortization attributable to any Contributed Property shall be
determined as if the adjusted tax basis of such property on the date it
was acquired by the Company were equal to the Agreed Value of such
property. Upon an adjustment pursuant to Section 4.3(d) to the
Carrying Value of any Company property subject to depreciation, cost
recovery or amortization, any further deductions for such depreciation,
cost recovery or amortization attributable to such property shall be
determined (A) as if the adjusted tax basis of such property were equal
to the Carrying Value of such property immediately following such
adjustment and (B) using a rate of depreciation, cost recovery or
amortization derived from the same method and useful life (or, if
applicable, the remaining useful life) as if applied for federal income
tax purposes; provided, however, that if the asset has a zero adjusted
basis for federal income tax purposes, depreciation, cost recovery or
amortization deductions shall be determined using any reasonable method
that the Advisory Committee may adopt.
(c) A transferee of a Membership Interest shall succeed to a pro rata
portion of the Capital Account of the transferor relating to the Membership
Interest so transferred; provided, however, that, if the transfer causes a
termination of the Company under Section 708(b)(1)(B) of the Code, the Company's
properties shall be deemed to have been distributed in liquidation of the
Company to the Members (including any transferee of a Membership Interest that
is a party to the transfer causing such termination) pursuant to Section 12.2
and recontributed by such Members in reconstitution of the Company. Any such
deemed distribution shall be treated as an actual distribution for purposes of
this Section 4.3. In such event, the Carrying Values of the Company properties
shall be adjusted immediately prior to such deemed distribution pursuant to
Section 4.3(d)(ii) and such Carrying Values shall then constitute the Agreed
Values of such properties upon such deemed contribution to the reconstituted
Company. The Capital Accounts of such reconstituted Company shall be maintained
in accordance with the principles of this Section 4.3.
(d) (i) Consistent with the provisions of Treasury Regulation
Section 1.704-1(b)(2)(iv)(f), on an issuance of additional Common Units
for cash or Contributed Property, the Capital Accounts of all Members
and the Carrying Value
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of each Company property immediately prior to such issuance shall be
adjusted upward or downward to reflect any Unrealized Gain or
Unrealized Loss attributable to such Company property, as if such
Unrealized Gain or Unrealized Loss had been recognized on an actual
sale of each such property immediately prior to such issuance and had
been allocated to the Members at such time pursuant to Section 5.1. In
determining such Unrealized Gain or Unrealized Loss, the aggregate cash
amount and fair market value of all Company assets (including, without
limitation, cash or cash equivalents) immediately prior to the issuance
of additional Membership Interests shall be determined by the Advisory
Committee using such reasonable method of valuation as it may adopt;
provided, however, the Advisory Committee, in arriving at such
valuation, must take fully into account the fair market value of the
Membership Interests of all Members at such time. The Advisory
Committee shall allocate such aggregate value among the assets of the
Company (in such manner as it determines in its sole discretion to be
reasonable) to arrive at a fair market value for individual properties.
(ii) In accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(f), immediately prior to any actual or deemed
distribution to a Member of any Company property (other than (A) a
distribution of cash that is not in redemption or retirement of any
portion of a Membership Interest or (B) a distribution that is in
redemption of a Preferred A Interest or a Preferred B Interest), the
Capital Accounts of all Members and the Carrying Value of such Company
property shall be adjusted upward or downward to reflect any Unrealized
Gain or Unrealized Loss attributable to such Company property, as if
such Unrealized Gain or Unrealized Loss had been recognized in a sale
of such property immediately prior to such distribution for an amount
equal to its fair market value, and had been allocated to the Members,
at such time, pursuant to Section 5.1. In determining such Unrealized
Gain or Unrealized Loss the aggregate cash amount and fair market value
of all Company assets (including, without limitation, cash or cash
equivalents) immediately prior to a distribution shall (A) in the case
of a deemed distribution occurring as a result of a termination of the
Company pursuant to Section 708 of the Code, be determined and
allocated in the same manner as that provided in Section 4.3(d)(i) or
(B) in the case of a liquidating distribution pursuant to Section 12.2
be determined and allocated by the liquidator using such reasonable
method of valuation as it may adopt.
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(e) Capital Accounts shall be adjusted, in a manner consistent with
this Section 4.3, to reflect any adjustments in items of the Company's income,
gain, loss or deduction that result from amended returns filed by the Company or
pursuant to an agreement by the Company with the Internal Revenue Service or a
final court decision.
4.4 ADVANCES BY MEMBERS. Except as approved by the Advisory Committee, or
provided for specifically herein, no Member may advance any money or other
property to, or contribute any money or property to, the Company.
ARTICLE V
ALLOCATIONS AND DISTRIBUTIONS
5.1 ALLOCATIONS FOR CAPITAL ACCOUNT PURPOSES. For purposes of maintaining
the Capital Accounts and in determining the rights of the Members among
themselves, the Company's items of income, gain, loss and deduction (computed in
accordance with Section 4.3(b)) shall be allocated among the Members in each
taxable year (or portion thereof) as provided herein below.
(a) After giving effect to the special allocations set forth in
Section 5.1(c), Net Income for each taxable period and all items of income and
gain taken into account in computing Net Income for such taxable period shall be
allocated to the Members in the following order and priority:
(i) first, to each Preferred A Holder in an amount equal to
the Preferred A Holder's Untaxed Preference Amount;
(ii) second, to each Preferred B Holder in an amount equal to the
Preferred B Holder's Untaxed Preference Amount;
(iii) third, to each Member in an amount equal to the excess, if
any, of Net Losses allocated to such Member under Section 5.1(b)(v)
over Net Income previously allocated to such Member under this Section
5.1.(a)(iii).
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(iv) fourth, to each Member in an amount equal to the excess of Net
Losses allocated to such Member under Section 5.1(b)(iv) over Net
Income previously allocated to such Member under this Section
5.1(a)(iv). For purposes of this Section 5.1(a)(iv), Net Income shall
be allocated among the Members in a manner that "unwinds" the
allocation of Net Losses set forth in Section 5.1(b)(iv), I.E., taking
into account allocations made under the second sentence of Section
5.1(b)(iv) before taking into account allocations made under the first
sentence of Section 5.1(b)(iv).
(v) fifth, in accordance with their respective Trimark Order Flow
Percentages, in an aggregate amount equal to the result obtained by
multiplying (A) 50 percent of the Net Income which was not allocated
pursuant to Section 5.1(a)(i), (ii) (iii) and (iv) by (B) the Trimark
Income Percentage for such taxable period.
(vi) sixth, in accordance with their respective Knight Order Flow
Percentages, in an aggregate amount equal to the excess of
(A) 50 percent of the Net Income which was not allocated pursuant to
Sections 5.1(a)(i), (ii), (iii) and (iv) over (B) the Net Income
allocated pursuant to Section 5.1(a)(v).
(vii) seventh, in accordance with their respective Common Interests.
(b) After giving effect to the special allocations set forth in
Section 5.1(a), Net Loss for each taxable period and all items of loss and
deduction taken into account in computing Net Loss for such taxable period shall
be allocated to the Members in the following order and priority:
(i) first, with respect to any Preferred A Units converted
pursuant to Section 11.1, to each Preferred A Holder to the extent of
the excess, if any, of (A) allocations made with respect to any such
converted Preferred A Units pursuant to Section 5.1(a)(i) over (B) the sum
of (1) distributions made with respect to any such converted Preferred A
Units pursuant to
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Section 5.3(a)(ii) and (2) any Net Loss previously allocated to such
Preferred A Holder pursuant to this Section 5.1(b)(i).
(ii) [intentionally omitted].
(iii) third, to all the Members in accordance with their respective
Common Interests, but only to the extent such amount when so allocated
would not result in, or cause an increase in, a deficit balance in any
Member's Adjusted Capital Account.
(iv) fourth, to the Members that (after the application of Sections
5.1(b)(i)-(iii)) do not have an Adjusted Capital Account with a deficit
balance in accordance with their respective Common Interests; but only
to the extent such amount when so allocated would not result in, or
cause an increase in, a deficit balance in any Member's Adjusted
Capital Account. This Section 5.1(b)(iv) shall be applied, MUTATIS
MUTANDIS, until the allocation of Net Losses would cause each of the
Members to have a deficit balance in such member's Adjusted Capital
Account.
(v) fifth, to each Member in proportion to its respective Common
Interest.
(c) Notwithstanding any other provision of this Section 5.1, the
following special allocations shall be made for each taxable period:
(i) MINIMUM GAIN CHARGEBACK. If, at any time during any Company
taxable period, there is a net decrease in Minimum Gain attributable to
Company Nonrecourse Liabilities, then to the extent of such decrease
items of Company income and gain for such period (and, if necessary,
subsequent periods) shall be specially allocated as quickly as possible
to each Member having a share of the Minimum Gain attributable to
Company Nonrecourse Liabilities, in proportion to, and to the extent
of, the portion of such Member's share of the net decrease during such
period in Minimum Gain attributable to Company Nonrecourse Liabilities.
The items to be so allocated shall be determined in accordance with
Treasury
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Regulations Sections 1.704-2(f)(6) and 1.704-2(j)(2). This Section
5.1(c)(i) is intended to comply with the minimum gain chargeback
requirement in Treasury Regulations Section 1.704-2(f) and shall be
interpreted consistently therewith.
(ii) MEMBER MINIMUM GAIN CHARGEBACK. If, at any time during any
Company taxable period, there is a net decrease in the Minimum Gain
attributable to Member Nonrecourse Debt, then to the extent of such
decrease items of Company income and gain for such period (and, if
necessary, subsequent periods) shall be specially allocated as quickly
as possible to each Member having a share of the Minimum Gain
attributable to Member Nonrecourse Debt in proportion to, and to the
extent of, the portion of such Member's share of the net decrease
during such period in Minimum Gain attributable to Member Nonrecourse
Debt. The items to be so allocated shall be determined in accordance
with Treasury Regulations Sections 1.704-2(i)(4) and 1.704-2(j)(2).
This Section 5.1(c)(ii) is intended to comply with the partner minimum
gain chargeback requirement in the foregoing section of the Treasury
Regulations and shall be interpreted consistently therewith.
(iii) QUALIFIED INCOME OFFSET. If, at any time during any
Company taxable period any Member unexpectedly receives any
adjustments, allocations or distributions described in Treasury
Regulations Section 1.704-l(b)(2)(ii)(d)(4), (5) or (6), and if such
adjustment, allocation or distribution would result in or increase a
deficit balance in the Adjusted Capital Account of such Member as of
the end of a Company taxable year, then items of Company income and
gain shall be specially allocated to such Member in an amount and
manner sufficient to eliminate (to the extent required by the foregoing
Treasury Regulations) such deficit as quickly as possible, provided
that an allocation pursuant to this Section 5.1(c)(iii) shall be made
only if and to the extent that such Member would have a deficit balance
in its Adjusted Capital Account after all other allocations provided
for in this Article 5 have been tentatively made as if this Section
5.1(c)(iii) were not in this Agreement.
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(iv) MEMBER NONRECOURSE DEDUCTIONS. The Member Nonrecourse
Deductions for any taxable period shall be specially allocated in
accordance with Treasury Regulations Section 1.704-(2)(i)(1) among the
Members bearing the Economic Risk of Loss with respect to the Member
Nonrecourse Debt to which such Member Nonrecourse Deductions are
attributable.
(v) CODE SECTION 754 ADJUSTMENTS. To the extent that an
adjustment to the adjusted tax basis of any asset of the Company under
Sections 734(b) or 743(b) of the Code is required to be taken into
account in determining Capital Accounts pursuant to Treasury
Regulations Section 1.704-1(b)(2)(iv)(m), the amount of such adjustment
to the Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis), and such gain or loss shall be specially
allocated to the Members in a manner consistent with the manner in
which their Capital Accounts are required to be adjusted pursuant to
such Treasury Regulations.
(vi) CURATIVE ALLOCATIONS. Notwithstanding any other provisions of
this Section 5.1, the Required Allocations, if any, made pursuant to
this Section 5.1(c) shall be taken into account in allocating other Net
Income, Net Loss and items of Company income, gain, loss and deduction
for the Company taxable year in which such Required Allocation occurs
and each subsequent Company taxable year among the Members so that, to
the extent possible, the net amount of income, gain, loss, deduction
and other items allocated to each Member shall be equal to the net
amount that would have been allocated to each such Member if the
Required Allocations had not been made. Notwithstanding the preceding
sentence, (i) allocations of Member Nonrecourse Deductions shall not be
taken into account hereunder except to the extent that there has been a
net decrease in Minimum Gain attributable to Member Nonrecourse Debt
and (ii) allocations of Company Nonrecourse Deductions shall not be
taken into account hereunder except to the extent there has been a net
decrease in Minimum Gain attributable to Company Nonrecourse
Liabilities.
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(vii) EXCESS NONRECOURSE LIABILITIES. Solely for purposes of
determining each Member's proportionate share of the "excess
nonrecourse liabilities" of the Company within the meaning of Treasury
Regulation Section 1.752-3(a)(3), each Member's interest in the Net
Income of the Membership shall be its Common Interest, as adjusted from
time to time.
(viii) ALLOCATIONS GREATER THAN 20 PERCENT. No allocation of Net
Income or Net Loss shall be made to any Member if such allocation would
cause such Member to have allocated to it an amount in excess, in any
taxable year, of greater than 20 percent of the Company's Net Income or
Net Loss for such year; provided any Net Income or Net Loss not
allocated pursuant to this Section 5.1(c)(viii) shall be allocated
among the other Members in accordance with their respective Common
Interests (which allocation shall again be subject to the limitation
contained in this Section 5.1(c)(viii)).
5.2 ALLOCATIONS FOR TAX PURPOSES
(a) Except as otherwise provided herein, for federal income tax
purposes, (i) each item of income, gain, loss and deduction shall be allocated
among the Members in the same manner as its correlative items of "book" income,
gain, loss or deduction is allocated pursuant to Section 5.1, and (ii) each tax
credit shall be allocated to the Members in the same manner as the receipt or
expenditure giving rise to such credit is allocated pursuant to Section 5.1.
(b) In an attempt to eliminate Book-Tax Disparities attributable to a
Contributed Property or Adjusted Property, items of income, gain, loss,
depreciation, amortization and cost recovery deductions shall be allocated for
federal income tax purposes among the Members as follows:
(i) (A) In the case of a Contributed Property, such items
attributable thereto shall be allocated among the Members in the manner
provided under Section 704(c) of the Code that takes into account the
variation between the Agreed Value of such property and its adjusted
tax basis at the time of contribution; and (B) any item of Residual
Gain or
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Residual Loss attributable to a Contributed Property shall be allocated
among the Members in the same manner as its correlative item of "book"
gain or loss is allocated pursuant to Section 5.1.
(ii) (A) In the case of an Adjusted Property, such items shall (1)
first, be allocated among the Members in a manner consistent with the
principles of Section 704(c) of the Code to take into account the
Unrealized Gain or Unrealized Loss attributable to such property and
the allocations thereof pursuant to Section 4.3(d)(i) or (ii), and (2)
second, in the event such property was originally a Contributed
Property, be allocated among the Members in a manner consistent with
Section 5.2(b)(i)(A); and (B) any item of Residual Gain or Residual
Loss attributable to an Adjusted Property shall be allocated among the
Members in the same manner as its correlative item of "book" gain or
loss is allocated pursuant to Section 5.1.
(iii) To correct distortions created by the "Ceiling rule" of
Treasury Regulation Section 1.704-3(b)(1), to the extent permitted or
required by Treasury Regulations, the Company may make curative
allocations of Company tax items (other than those with respect to
property which is subject to the allocations contained in clauses (i)
and (ii) above) so that allocations of tax items be made to effect the
purposes of Code Sections 704(b) and 704(c) by allocating the tax
consequences of precontribution gain or loss to a contributing Member.
(c) Any gain allocated to the Members upon the sale or other taxable
Disposition of any Company asset shall, to the extent possible, after taking
into account other required allocations of gain pursuant to this Section 5.2, be
characterized as Recapture Income in the same proportions and to the same extent
as such Members (or their predecessors in interest) have been allocated any
deductions directly or indirectly giving rise to the treatment of such gains as
Recapture Income.
(d) All items of income, gain, loss, deduction and credit recognized
by the Company for federal income tax purposes and allocated to the Members in
accordance with the provisions hereof shall be determined without regard to any
election under Section 754 of the Code which may be made by the Company;
provided, however, that
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such allocations, once made, shall be adjusted as necessary or appropriate to
take into account those adjustments permitted or required by Sections 734 and
743 of the Code.
(e) For federal income tax purposes, the Trimark Interest shall be
treated as having been sold, and not contributed, to the Company pursuant to
Section 707 of the Code.
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5.3 DISTRIBUTIONS.
(a) The Company shall distribute cash or other property to the
Members as set forth below:
(i) first, on the last day of each calendar quarter in each
Company taxable year, the Company shall distribute to each Preferred A
Holder the Preferred A Holder's Aggregate Preference Amount;
(ii) second, on the last day of each calendar quarter in each
Company taxable Year, the Company shall distribute to each Preferred B
Holder the Preferred B Holder's Aggregate Preference Amount;
(iii) third, no less than three days prior to April 15 of each
year, the Company shall distribute to the Members (the "April
Distribution") (pro rata, in proportion to the amount of Net Income
allocated to the Members pursuant to Sections 5.1(a)(iii) through (vii)
with respect to the preceding taxable year), an amount equal to 50
percent of the excess of (A) the Net Income of the Company for the
preceding taxable year over (B) the amounts allocated pursuant to
Sections 5.1(a)(i) and (ii) with respect to such preceding taxable
year, plus if the Company's Net Income for any year is increased above
the amount used to compute the April Distribution as a result of an
adjustment deemed necessary by the Company or as the result of a tax
audit, the Company shall make an additional distribution in such amount
as the Advisory Committee shall determine is appropriate, in its good
faith discretion, taking into account the respective additional
federal, state and local tax liability of the Members as a result of
such increase and any related penalties and interest;
(iv) fourth, on April 15 of each Company Year, the Company shall
distribute to each Preferred A Holder a pro rata portion of fifty
percent (or such higher percentage as may be determined by the Advisory
Committee) of the excess of the Net Income for the immediately
preceding Company taxable year over the sum of (a) the aggregate amount
of the distributions with respect to such year required by Section
5.3(a)(iii) plus (b) fifty percent
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of the aggregate amount of the distributions with respect to such year
required by Sections 5.3(a)(i) and (ii); provided, that any
distributions made pursuant to this Section 5.3(a)(iv) shall be in
redemption of that number of Preferred A Units equal to one-tenth of
the dollar amount of the distribution made pursuant to this Section
5.3(a)(iv); provided further, that no distribution shall be made under
this Section 5.3(a)(iv) in excess of the aggregate for all Preferred A
Holders of the Preferred A Holder's Preferred Capital Amounts
immediately before such distribution;
(v) fifth, on April 15 of each Company Year occurring after the date
on which all of the Preferred A Units have been either redeemed
pursuant to Section 5.3(a)(iv) or converted pursuant to Section 11.1,
the Company shall distribute to each Preferred B Holder a pro rata
portion of fifty percent of the excess of Net Income for such taxable
year over the sum of (a) the aggregate amount of the distributions with
respect to such taxable year required by Section 5.3(a)(iii) plus (b)
fifty percent of the aggregate amount of the distributions with respect
to such year required by Section 5.3(a)(i) and (ii); provided, that any
distributions made pursuant to this Section 5.3(a)(v) shall be in
redemption of that number of Preferred B Units equal to one-tenth of
the dollar amount of the distribution made pursuant to this Section
5.3(a)(v); provided further, that no distribution shall be made under
this Section 5.3(a)(v) in excess of the Preferred B Holder's Preferred
Capital Amount immediately before such distribution; and
(vi) sixth, the Company shall periodically make distributions to the
Members in accordance with their respective Capital Accounts (after
reduction for the amount of any such Capital Account attributable to
the acquisition of Preferred A Units or Preferred B Units and any
allocations and distributions made as a result of the ownership of
Preferred A Units or Preferred B Units), with the timing and aggregate
amount of each distribution, if any, to be determined by the Advisory
Committee.
(b) Notwithstanding the foregoing:
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(i) the Company may make distributions for the payment of
taxes at such times as any Member would be required to pay federal
estimated taxes in an amount not in excess of the Company's good faith
estimate of the aggregate tax liability of the Members for the period
to which such estimated taxes relate as a result of allocations of Net
Income pursuant to section 5.1(a)(iii)-(vii); provided, any such
distribution under this Section 5.3(b)(i) shall reduce any distribution
under Section 5.3(a)(iii) which is computed with respect to the same
taxable year;
(ii) no distribution shall be made to any Member if such Member, as
a result thereof, would receive distributions in excess of 20 percent
of the Company's Net Income for the taxable year to which the
distribution relates; provided any amounts not distributed pursuant to
this Section 5.3(b)(ii) shall be distributed to the other Members in
accordance with their respective Common Interests (which distribution
shall again be subject to the limitation contained in this Section
5.3(b)(ii));
(iii) no distributions shall be made under Section 5.3(a) if
either the Company (including for this purpose its subsidiaries) is
prohibited from making any such distribution by regulatory
restrictions, including, without limitation, Net Capital Requirements;
provided in the event the Company is prevented from making a
distribution pursuant to Section 5.3(a)(i), (ii), (iii), (iv) or (v)
because of the provisions of this Section 5.3(b)(i), such shortfalls
shall be made up as the Company has sufficient available cash such that
such restrictions are no longer applicable;
(iv) no distributions shall be made under Section 5.3(a)(vi) for any
period until after the redemptions of the Preferred A Units and/or
Preferred B Units required to be made with respect to such period by
Section 5.3(a)(iv) or 5.3(a)(v) hereof have been made and/or such
Preferred A Units have been converted in accordance with Section 11.1
or 11.2; and
(v) any distribution required to be made to a Preferred B Holder
may, at the Company's sole discretion, be made by offsetting against
such obligation any amount which such Preferred B Holder is required to
pay to
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the Company pursuant to Section 6.1 of the Contribution, Assignment and
Assumption Agreement, of even date herewith, by and among the Company,
Trimark Securities, Inc., a Delaware corporation, Xxxxxx Xxxxxxxxxx,
Xxxxx Xxxxxxxx and Xxxxxx Xxxxxxxx.
ARTICLE VI
MANAGEMENT PROVISIONS
6.1 MANAGEMENT BY MEMBERS. The business and affairs of the Company shall
be managed under the direction of an Advisory Committee, as hereinafter
provided. The Members recognize and acknowledge that Representatives, Officers,
employees of the Company or other Persons are not "Managers" as defined in
Section 18-101(9) of the Act. Except for the authority to control and manage
the day-to-day business and affairs of the Company, which authority is expressly
delegated to the Officers of the Company, as provided in Section 6.9(d), or as
otherwise provided in this Agreement, the Advisory Committee shall have full
authority to manage and supervise the business, affairs and properties of the
Company, to make all other decisions regarding the same and to perform any and
all other lawful act or activities customary or incident to the management of
the Company's business.
6.2 ADVISORY COMMITTEE.
(a) The Advisory Committee of the Company (the "Advisory Committee")
shall be composed of eleven members (collectively, the "Representatives");
PROVIDED, that the number of Representatives may be increased up to a total of
18 with the written consent of Members holding at least a majority of the
Common Units then outstanding. Each Member shall act only through the
Representatives. The initial Representatives shall be nominated by the
Management Investors and shall be elected by a majority vote of all of the
Members voting in accordance with their respective Common Interests, which
voting shall not be cumulative. Representatives need not be residents of the
State of Delaware. Except with the unconditioned written consent of the
applicable securities exchange (or with the written consent subject to such
conditions as are acceptable to a majority of the Management Investors), no
Person which is a member, a member organization, an allied member, an approved
person, a Person "associated with" a member,
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member organization, allied member or approved person, or having similar
status, of a securities exchange shall be a Representative. Each
Representative shall have the obligations to the Members of a partner of a
general partnership but such obligations shall not be a limitation on Section
3.5. For purposes of this Agreement, a Person shall be deemed to be
"associated with" another Person if such first Person is a partner, officer,
director, branch manager or employee of such second Person (or any person
occupying a similar status or performing similar functions), or directly or
indirectly controls, is controlled by, or is under common control with such
second person.
(b) Each Representative shall be entitled to hold office until death,
resignation or removal. Any Representative may be removed, with or without
cause, only by a majority vote of all Members voting in accordance with their
respective Common Interests, and the right of removal may be exercised at any
time. In the event the position of a Representative becomes vacant (including
as a result of an increase in the number of Representatives) a replacement shall
be nominated by agreement of the Advisory Committee and shall be elected by a
majority vote of all the Members voting in accordance with their respective
Common Interests.
6.3 ADVISORY COMMITTEE -- MANNER OF ACTING
(a) Attendance of a Representative at a meeting shall constitute a
waiver of notice of such meeting, except where a Representative attends a
meeting for the express purpose of objecting, at the beginning of such meeting,
to the transaction of any business on the ground that the meeting is not
lawfully called or convened. Minutes of all meetings of the Advisory Committee
shall be kept and retained in the records of the Company.
(b) Any action permitted or required by applicable law or this
Agreement to be taken at a meeting of the Advisory Committee may be taken
without a meeting if a consent in writing, setting forth the action to be taken,
is signed by each of the Representatives. Such consent shall have the same
force and effect as a vote at a meeting and may be stated as such in any
document or instrument filed with the Secretary of State, and the execution of
such consent shall constitute attendance or presence in person at a meeting of
the Advisory Committee. Subject to the requirements of this Agreement for
notices of special meetings, Representatives may participate in and hold a
meeting of the
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Advisory Committee, by means of a conference telephone or similar
communications equipment by means of which all Representatives participating
in the meeting can hear and speak to each other, and participation in such
meeting shall constitute attendance and presence in person at such meeting,
except where a Representative participates in the meeting for the express
purpose of objecting, at the beginning of such meeting, to the transaction of
any business on the ground that the meeting is not lawfully called or
convened.
(c) The Advisory Committee shall be entitled to appoint the Chairman
of the Advisory Committee (the "Chairman"). The first Chairman shall be Xxxxxx
Xxxxxx. The Chairman shall preside over all meetings of the Advisory Committee
and shall have such other powers, authority and responsibility as the Advisory
Committee may, from time to time, delegate to such Chairman. The Chairman shall
(subject to the right of the Advisory Committee to designate the Chairman as
provided above) be entitled to hold office until death, resignation or removal.
The person who is serving as Chairman may be removed as Chairman, with or
without cause, only by the Advisory Committee and the right of removal may be
exercised at any time.
6.4 ANNUAL AND REGULAR MEETINGS. The Advisory Committee shall hold an
annual meeting, and may hold regular meetings, at such time and place (which
need not be in the State of Delaware) as such committee determines by resolution
but in any event the Advisory Committee shall, unless the Members otherwise
agree, hold regular meetings at the offices of the Company in Jersey City, New
Jersey at intervals determined by the Advisory Committee, but in any event at
least once each fiscal year.
6.5 SPECIAL MEETINGS. Special meetings of the Advisory Committee may be
called by any Representative or by Members holding at least 50 percent of the
Common Units.
6.6 NOTICE OF MEETINGS; PARTICIPATION. All Representatives shall be
entitled to receive required notices and agendas of upcoming Advisory Committee
meetings, attend all Advisory Committee meetings, participate in all discussions
and receive minutes from previous Advisory Committee meetings. Notice of
regular meetings established by resolution of the Advisory Committee shall not
be required. Special meetings of the Advisory Committee may be called on at
least five Business Days advance notice to each
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other Representative. Such notice shall state the purpose or the business to
be transacted at such meeting. Any notice of a meeting required hereunder may
be waived in writing.
6.7 NATURE OF RELATIONSHIP. No Member shall take, or cause or permit its,
or its Affiliates', officers, employees or agents (including Representatives) to
take, any action that would bind or obligate the Company in any manner not
expressly authorized by this Agreement or by the Advisory Committee. The
Members of the Company recognize and acknowledge that the relationship of trust
between the Members was material to their respective decisions to become
Members, and shall, hereby and agree to, at all times exercise utmost good faith
and fair dealing in all aspects of the transactions relating to the Company.
6.8 COMPENSATION OF MEMBERS. Except to the extent provided for in a
separate employment agreement entered into with the Company, no Representative
or the Chairman shall be entitled to any compensation from the Company solely in
such person's capacity as a Representative or Chairman.
6.9 OFFICERS.
(a) The Company shall have agents, referred to as "Officers" of the
Company. These agents (whose authority is limited pursuant to the following
sentence) shall be appointed in the manner specified below, and shall have the
titles and authority specified in this section 6.9. Each Officer shall have
only the authority specified below and shall not be a general agent of the
Company.
(b) The Officers of the Company shall be the Chairman,
two-Co-Presidents, (who shall also be Co-Chief Executive Officers), the Chief
Financial Officer (who shall also be the Treasurer), any and all Vice
Presidents, the Secretary, the Treasurer, and any and all Assistant
Secretaries and Assistance Treasurers. Any person may hold two or more
offices, except that the offices of Co-President and Secretary may not be
held by the same person.
(c) The Officers shall be elected annually by the Advisory Committee
at the first Advisory Committee meeting each calendar year; provided that
Officers identified in Exhibit 6.9(c) are hereby installed and authorized to act
as the initial officers until their
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successors are duly appointed and qualified. Any Officer may be removed, with
or without cause, only by the Advisory Committee. Vacancies in any office
may be filled only by the Advisory Committee. If the Advisory Committee
fails to elect any Officer or fill any vacancy, the responsibilities of such
Officer shall be carried out by the Advisory Committee or, at the election of
the Advisory Committee, another Officer. Except with the unconditioned
written consent of the applicable securities exchange (or with the written
consent subject to such conditions as are acceptable to a majority of the
Management Investors), no Person which is a member, a member organization, an
allied member, an approved person, a Person "associated with" a member,
member organization, allied member or approved person, or having similar
status, of a securities exchange shall be an Officer.
(d) Subject to the limitations imposed by this Agreement, any
employment agreement, any employee plan or any resolution of the Advisory
Committee, the Co-Presidents shall report to the Chairman and be the Co-Chief
Executive Officers of the Company and, as such, shall be responsible for the
management and direction of the day-to-day business and affairs of the
Company, its Officers, employees and agents, shall supervise generally the
affairs of the Company and shall have full authority to execute all documents
and take all actions that the Company may legally take. The Co-Presidents
shall exercise such other powers and perform such other duties as may be
assigned to them by this Agreement, or the Advisory Committee, including the
duties and any powers stated in any employment agreement. Notwithstanding
anything to the contrary, without specific written authorization by the
Advisory Committee, the Co-Presidents (and each of the other Officers) shall
have no power or authority to take or cause the Company to take any action,
or engage or cause the Company to engage in any activity, which is outside
the ordinary course of business of the Company or is otherwise subject to
Article VI.
(e) In the absence of both of the Co-Presidents, the Chief Financial
Officer and the Vice Presidents designated by the Advisory Committee shall,
except as hereinafter provided, have all of the powers and duties conferred upon
the Co-Presidents. Each such designated officer shall have the same power as
the Co-Presidents, to sign certificates and Contracts of the Company. Any such
designated Officer shall perform such other duties and may exercise such other
powers as may from time to time be assigned to him by this Agreement, the
Advisory Committee or the Co-Presidents.
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(f) The Secretary shall record or cause to be recorded in books
provided for that purpose the minutes of the meetings or actions of the members
and the meetings or actions of the Advisory Committee or any other
subcommittees, shall see that all notices are duly given in accordance with the
provisions of this Agreement and as required by law, shall be custodian of all
records (other than financial), shall see that the books, reports, statements,
certificates and all other documents and records required by law are properly
kept and filed, and, in general, shall perform all duties incident to the office
of the Secretary and such other duties as may, from time to time, be assigned to
him by this Agreement, the Advisory Committee or the Co-Presidents. The
assistant Secretaries shall exercise the powers of the Secretary during that
Officer's absence or inability or refusal to act. Each of the Assistant
Secretaries shall possess the same power as the Secretary to sign certificates
and Contracts of the Company.
(g) The Chief Financial Officer shall keep or cause to be kept the
books of account of the Company and shall render statements of the financial
affairs of the Company in such form and as often as required by this Agreement,
the Advisory Committee or the Co-Presidents. The Chief Financial Officer,
subject to the order of the Advisory Committee, shall have the custody of all
funds and securities of the Company. The Chief Financial Officer shall perform
all other duties commonly incident to his office and shall perform such other
duties and have such other powers as this Agreement, the Advisory Committee or
the Co-Presidents shall designate from time to time. The Assistant Treasurers
shall exercise the power of the Chief Financial Officer during that Officer's
absence or inability or refusal to act. Each of the Assistant Treasurers shall
possess the same power as the Chief Financial Officer to sign all certificates,
contracts, obligations and other instruments of the Company.
(h) Officers shall conduct the affairs of the Company in the best
interests of the Company and the mutual best interests of the Members,
including, the safekeeping and use of all Company funds and assets and the use
thereof for the benefit of the Company.
(i) At the election of the Advisory Committee, the responsibilities
of the Officers may be reduced or eliminated and, upon the exercise of such
election, the responsibilities that were formerly the responsibility of any
Officer shall become the responsibility of the Advisory Committee. At the
election of the Advisory Committee,
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any one or more of the responsibilities of the Advisory Committee may be
delegated, from time to time, to one or more of the Officers.
6.10 INDEMNIFICATION.
(a) To the fullest extent permitted by law, each Member shall
indemnify the Company and the other Members and hold them harmless from and
against any and all losses, costs, liabilities, damages and expenses (including,
costs of suit and reasonable attorney's fees) they may incur on account of any
breach of any provision of this agreement by such Member.
(b) To the fullest extent permitted by law, the Company shall
indemnify and hold harmless any Person from and against any and all losses,
costs, liabilities, damages and expenses (including, costs of suit and
reasonable attorney's fees) they may incur by reason of the fact that such
Person is or was a Member, Representative, Officer or employee of the Company.
ARTICLE VII
INFORMATION
7.1 ACCESS. In addition to the other right specifically set forth in this
Agreement, each Member shall have access to all information to which a Member is
entitled to have access pursuant to the Act and all such other information
regarding the Company, as it may reasonably request from time to time.
7.2 REPORTS AND INFORMATION. The Co-Presidents or other appropriate
Officer shall mail to each Member (a) monthly as promptly as practicable after
the end of each month, an unaudited balance sheet and statement of income, cash
flow and Members' Capital Accounts for the Company, covering the month then
ended, prepared in accordance with GAAP, the provisions of this Agreement and
(to the extent applicable) past practices of the Company; (b) within 120 days
after the end of the fiscal year, Financial Statements of the same type as in
(a) above, covering the fiscal year then ended, audited by a "big six"
accounting firm selected by the Advisory Committee; (c) annually, but not later
than March 1 of each year, sufficient financial information concerning the
results of the
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Company's operations as is necessary for each Member to file its own federal
and state income tax return for the preceding year (including Internal
Revenue Service Form 1065, Schedule K-1); and (d) from time to time as
requested by one or more Members, financial information sufficient to permit
any tax determination or election that a Member may be required or permitted
to make under applicable law (including such information as may be necessary
to enable any Member to make required quarterly estimated tax payments) and
such information regarding the source and/or character of income earned by
the Company, as is reasonably available. All financial reports shall be
prepared by or under the direction of the Chief Financial Officer and the
staff of the Company. The Company's federal income tax return may, at the
direction of the Co-Presidents of the Company, be prepared by the staff of
the Company or other persons retained for such purposes by the Company,
provided, however, that if such return is not prepared by a "big six"
accounting firm, such return shall, prior to filing, be reviewed by a "big
six" accounting firm (which may be the Company's independent auditor).
7.3 REGULATORY REQUIREMENTS. Each Member and their respective Affiliates
shall provide to the Company, Knight Securities or Trimark, as the case may be,
such information as the Company, Knight Securities or Trimark determines is
necessary or desirable to permit the Company, Knight Securities or Trimark to
comply with or respond to any rule, regulation requirement, request, inquiry,
investigation, proceeding or the like, by the SEC, any state securities
regulator or any self-regulatory organization of which Knight Securities or
Trimark is a member.
7.4 CONFIDENTIALITY. Each Member and their respective Affiliates shall
hold in strict confidence any information and data it receives regarding the
Company and its business, whether such information is received from the Company,
any other Member or its Affiliates, a Representative or another Person;
provided, however, that such restrictions shall not apply to: (a) information
that is or becomes available to the public generally without breach of this
Section 7.4; (b) disclosures required to be made by applicable laws and
regulations; (c) disclosures required to be made pursuant to an order, subpoena
or legal process; (d) disclosures to (i) investors in or bona fide potential
investors in or lenders to the Company, or its Affiliates or Members, and such
investors' and lenders' officers, directors or Affiliates, (ii) officers,
directors or Affiliates of such Member (and the officers and directors of such
Affiliates) and (iii) auditors, counsel and other professional advisors to such
Persons or the Company (provided, however, that such
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Persons have been informed of the confidential nature of the information and,
in any event, the Member disclosing such information shall be liable for any
failure by such Person to abide by the provisions of this Section 7.4); (e)
disclosures to the employees of the Members and their Affiliates on a need to
know basis (provided, however, that such Persons have been informed of the
confidential nature of the information, and, in any event, the Member
disclosing such information shall be liable for any failure by such Persons
to abide by the provisions of this Section 7.4), or (f) disclosures in
connection with any litigation or dispute between or with the Members, the
Representatives or the Company. Each Member shall notify the Company
immediately upon becoming aware of any order, subpoena or other legal process
providing for the disclosure or production of information subject to the
provisions of the immediately preceding sentence and, to the extent not
prohibited by applicable law, immediately shall supply the Company with a
copy of any such order, subpoena or other legal process. In addition, each
Member shall notify the Company prior to disclosing or producing any
information subject to the provisions of the immediately preceding sentence
and, to the extent not prohibited by applicable law, shall permit the Company
to seek a protection order protecting the confidentiality of such
information. The obligations of a Member pursuant to this Section 7.4 shall
continue for three years following the time such Person ceases to be a
Member, but thereafter such Person shall not have the right to enforce the
provisions hereof. Each Member acknowledges that disclosure of information
in violation of the provisions of this Section 7.4 may cause irreparable
injury to the Company and the Members for which monetary damages are
inadequate, difficult to compute or both. Accordingly, each Member agrees
that its obligations under this Section 7.4 may be enforced by specific
performance and that breaches or prospective breaches of this Section 7.4 may
be enjoined.
ARTICLE VIII
TAXES
8.1 "TAX MATTERS MEMBER"; TAX RETURNS. Xxxxxx Xxxxxx shall, as long as he
is a Member, be the "tax matters partner" of the Company pursuant to section
6231(a)(7) of the Code. Subject to the provisions of this Section 8.1, the tax
matters partner shall be entitled to take any action or decline to take any
action, all as required by applicable law. The "tax matters partner" shall take
such action as may be necessary to cause the other
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Members to become "notice partners" within the meaning of section 6231(a)(8)
of the Code. The "tax matters partner" shall promptly inform the other
Members of all significant matters that may come to his attention in his
capacity as "tax matters partner" and shall forward to the other Members
copies of all significant written communications he may receive or submit in
such capacity, including, without limitation, any written adjustment by any
taxing authority which would affect any Member's liability for taxes. The
"tax matters partner" shall cause to be prepared and filed all necessary
federal, state and local income tax returns for the Company, including making
the elections described in section 8.2. Each other Member shall furnish to
the "tax matters partner" all pertinent information in its possession
relating to Company operations that is necessary to enable the Company's
income tax returns to be prepared and filed. To the extent permitted by
applicable law, the "tax matters partner" shall determine, in his sole
discretion, whether or not to permit the other Members to participate in the
defense of all pending tax proceedings involving the Company, including,
without limitation, participation in any meeting with the Internal Revenue
Service or other taxing authority. The Company shall reimburse the "tax
matters partner" for any costs and expenses incurred in connection with such
Person serving as the "tax matters partner," including costs and expenses
incurred in the preparation or filing of any such income tax returns and the
defense of any such tax proceedings. The "tax matters partner" shall not
file any tax return (whether federal or state) with respect to the Company
without the approval of the Advisory Committee, which approval shall not be
unreasonably withheld. If the "tax matters partner" proposes that any
adjustment to any tax return be approved, the "tax matters partner" shall not
concede such adjustments without the Advisory Committee's prior written
approval, which will not be unreasonably withheld.
8.2 TAX ELECTIONS. The Company shall make the following elections on the
appropriate tax returns:
(a) To adopt the fiscal year required by Section 706 of the Code;
(b) to adopt the accrual method of accounting and to keep the
Company's books and records on the accrual method;
(c) If a distribution of Company property as described in section 734
of the Code occurs or if a transfer of a Membership Interest as described in
section 743 of the
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Code occurs, upon written request of any Member, to elect, pursuant to
section 754 of the Code, to adjust the basis of Company properties; and
(d) to elect to amortize the organizational expenses of the Company
under Section 709(b) of the Code and the startup expenditures of the Company
under section 195 of the Code, in each case ratably over the shortest period
permitted by applicable law.
It is the intent of the Members that the Company be treated as a partnership for
federal income tax purposes and, to the extent permitted by applicable law, for
state, local and foreign franchise and income tax purposes. Neither the Company
nor any Member may make an election for the Company to be excluded from the
application of the provisions of subchapter K of Chapter 1 of Subtitle A of the
Code or any similar provisions of applicable state or local law, and no
provision of this Agreement shall be construed to sanction or approve such an
election.
ARTICLE IX
BOOKS, RECORDS AND BANK ACCOUNTS
9.1 MAINTENANCE OF BOOKS. The books of account for the Company shall be
maintained on an accrual basis in accordance with the terms of this Agreement.
The fiscal year shall be the accounting year of the Company.
9.2 ACCOUNTING PRINCIPLES. All accounting of the Company (and all other
accounting done pursuant to this Agreement) shall be done in accordance with
GAAP, to the extent applicable, except where GAAP is inconsistent with the
requirements of this Agreement or with regulatory requirements to which the
Company (or any of its subsidiaries) is bound; provided, however, Capital
Accounts shall be maintained in accordance with Section 4.3.
9.3 BANK ACCOUNTS. The Advisory Committee shall cause the Company to
establish, maintain and designate signatories on one or more separate bank and
investment accounts for Company funds in the Company name with such financial
institutions and firms as the Advisory Committee may select and designate
signatories thereon. The Company's funds shall not be commingled with the funds
of any other Person.
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ARTICLE X
RESIGNING MEMBER AND BUY OUT EVENT
10.1 RESIGNING MEMBER. At any time prior to the occurrence of any event
specified in Section 12.1, (i) any Member may, by written notice to the Company
(a "Member Notice"), resign as a Member of the Company, effective as of the date
of the notice (the "Resignation Date") or (ii) the Company (with the consent of
Members holding at least three-fourths of the Common Units then outstanding)
may, by written notice to any Member (a "Company Notice"), require such Member
to resign as a Member of the Company, effective as of the date of the Notice
(the "Buy Out Date"); PROVIDED, HOWEVER, a Preferred B Holder shall not be
permitted to resign pursuant to clause (i) of this Section 10.1 until such time
as there are no Preferred A Units outstanding. As of the Resignation Date or
the Buy Out Date, as applicable, except for the rights set forth in Section 10.2
or expressly set forth in any other agreement (including an employment
agreement) the Member designated in the applicable notice (the "Resigning
Member") (and all Persons claiming by, through or under such Member) shall have
no further rights or interests in and in respect of the Company, including any
Membership Interest, any rights in specific Company property or any rights
against the Company or any Member.
10.2 PURCHASE PRICE.
(a) In consideration of the resignation of the Resigning Member, the
Company shall pay to the Resigning Member a purchase price (the "Purchase
Price") equal to the sum of (i) the product obtained by multiplying $10 times
the number of Preferred A Units and/or Preferred B Units then held by the
resigning Member, plus (ii) the product obtained by multiplying the Company's
Members' equity attributable to Common Units shown on the Company's most recent
financial statement (which may not be as of a date more than 30 days prior to
the Buy Out Date) by the Resigning Member's Common Interest.
(b) The payment of the Purchase Price as a result of the resignation
of a Member pursuant to Section 10.1(i) may be paid, at the Company's sole
discretion, by delivery to the Resigning Member of the Company's subordinated
promissory note, in substantially the form of Exhibit 10.2(b) hereto, paying
interest at the Broker Call Rate
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and maturing no later than two years after the Resignation Date or Buy-Out
Date, as applicable. Notwithstanding anything to the contrary contained
herein, no payment shall be made pursuant to this Article X (whether or not
upon the maturation of the Company's subordinated note) except at such time
as such payment is permitted by regulatory requirements (including Net
Capital Requirements) to which the Company or any of its subsidiaries are
subject ("Regulatory Requirements"). If the payment of the Purchase Price as
a result of the resignation of a Member pursuant to Section 10.1(ii) is
restricted by Regulatory Requirements, the Company shall pay such Purchase
Price by delivery to the Resigning Member of the Company's subordinated
promissory note, in substantially the form of Exhibit 10.2(b) hereto, paying
interest at the Broker Call Rate and maturing no later than the date 15 days
after the payment thereon is no longer restricted by Regulatory Requirements,
but subject to the ordering of payments set forth in the next sentence. If
payments with respect to any subordinated notes issued by the Company
pursuant to this Section 10.2(b) are restricted by regulatory requirements,
such payments shall be made when permitted with respect to such notes in
order of their respective issuance dates; PROVIDED, that all notes issued
pursuant to the immediately preceding sentence shall be paid in full before
any payments are made with respect to any notes issued pursuant to the first
sentence of this Section 10.2(b).
10.3 OTHER RESIGNATIONS. No Member shall have any right to, or shall,
resign from the Company as a Member prior to the dissolution and winding up of
the Company, except in accordance with the provisions of this Article X.
ARTICLE XI
CONVERSIONS
11.1 CONVERSION OF PREFERRED A UNITS. On and after the fifth anniversary
of the Effective Date, at the option of any Preferred A Holder, such Member may
elect (by providing written notice thereof to the Company) to convert any
Preferred A Units not previously redeemed pursuant to Section 5.3(a)(iv) and
then held by such Member, into Common Units at the rate of one Common Unit for
each Preferred A Unit converted.
11.2 EFFECTIVE DATE. Any election made pursuant to Section 11.1 shall be
effective as of the close of business on the day the notice of such election is
received by the
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Company. Following a conversion by a Preferred A Holder, such converting
Member shall no longer be treated as a Preferred A Holder for any purpose,
including the right to receive distributions pursuant to Sections 5.3(a)(i)
and (iv) or 12.2(b)(iv).
ARTICLE XII
DISSOLUTION, LIQUIDATION AND TERMINATION
12.1 DISSOLUTION. The Company shall be dissolved and its affairs shall be
wound up upon the first to occur of any of the following:
(a) The written consent of all the Members;
(b) The entry of a decree of judicial dissolution under Section
18-802 of the Act;
(c) If (i) any Member shall dissolve or become a Resigning Member or
Bankrupt Member, or any other event shall occur that terminates the continued
membership of a Member in the Company under Section 18-801(4) of the Act;
PROVIDED, that the Company shall be continued if there are at least two
remaining Members and such remaining Members owning a majority of the profits
interests and the capital interests in the Company agree to continue the
business of the Company within the meaning of Section 18-801(4) of the Act;
(d) The Disposition of all, or substantially all, the Membership
Interests held by all Members or the Disposition of all, or substantially all,
the assets of the Company; or
(e) the date fixed in the Certificate as the latest date on which the
Company is to dissolve.
12.2 LIQUIDATION AND TERMINATION. On dissolution of the Company, unless it
is reconstituted and continued as provided in Section 12.1(c), the Advisory
Committee shall act as liquidator or may appoint one or more other Persons as
liquidator. The liquidator shall proceed diligently to wind up the affairs of
the Company and make final
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distributions as provided herein and in the Act by the end of the taxable
year of the company in which its liquidation (as such term is defined in
Treas. Reg. Section 1.704-1(b)(2)(ii)(g)) occurs or, if later, within 90
Business Days of the date of such liquidation. The costs of liquidation
shall be borne as a Company expense. Until final distribution, the
Liquidator shall continue to operate the Company properties with all of the
power and authority of the Members and the Advisory Committee. The steps to
be accomplished by the Liquidator are as follows:
(a) As promptly as possible after dissolution and again after final
liquidation, the Liquidator shall cause a proper accounting to be made by one of
the "big five" nationally recognized firms of certified public accountants of
the Company's assets, liabilities and operations through the last day of the
calendar month in which the dissolution shall occur or the final liquidation
shall be completed, as applicable;
(b) The Liquidator shall have full power and authority to sell,
assign and encumber any or all of the Company's assets and to wind up and
liquidate the affairs of the Company in an orderly and business-like manner.
All proceeds from liquidation shall be distributed in the following order of
priority:
(i) to the payment of the debts and liabilities of the
Company, to persons other than Members (but, in the case of
nonrecourse debts and liabilities, only to the extent required
under the applicable credit and security agreement) and expenses
of liquidation;
(ii) to the setting up of such reserves as the Liquidator
may reasonably deem necessary for any contingent liability of
the Company;
(iii) to the payment of any debts or liabilities of the
Company to Members;
(iv) to each Preferred A Holder in an amount equal to the
sum of (A) the Preferred A Holder's Unrecovered Preferred
Capital Amount (or a proportionate amount thereof) plus (B) the
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Preferred A Holder's Preference Amount for the taxable period in which
the liquidation occurs;
(v) to each Preferred B Holder in an amount equal to the sum of (A)
the Preferred B Holder's Unrecovered Preferred Capital Amount (or a
proportionate amount thereof) plus (B) the Preferred B Holder's
Preference Amount for the taxable period in which the liquidation
occurs; and
(vi) pro rata to the Members in accordance with the positive
balances in their Capital Accounts (as determined after taking into
account the distributions provided for in Section 12.2(b)(iv) and (v),
and other adjustments required under Treasury Regulation Section
1.704-1(b)(2)(ii)(b)(2)).
(c) Notwithstanding the provisions of this Section 12.2 which require
the liquidation of the assets of the Company, but subject to the order of
priorities set forth above, if prior to or upon dissolution of the Company the
Liquidator determines that an immediate sale of part or all of the Company's
assets would be impractical or would cause undue loss to the Members, the
Liquidator may, in its reasonable discretion, defer for a reasonable time the
liquidation of any assets except those necessary to satisfy liabilities of the
Company (other than those to Members as creditors).
12.3 DISTRIBUTION IN KIND. If the Liquidator shall determine that all or a
portion of the Company's assets should be distributed in kind to the Members,
the Liquidator, on behalf of the Company, shall obtain an independent appraisal
of the fair market value of each such asset as of a date reasonably close to the
date of liquidation. Any unrealized appreciation or depreciation with respect
to such assets shall be allocated among the Members' Capital Accounts (in
accordance with Article V, assuming that the assets of the Company were sold for
such appraised fair market value) and distribution of any such assets in kind to
a Member shall be considered a distribution of an amount equal to the assets'
appraised fair market value for purposes of Section 12.2.
12.4 DEFICIT CAPITAL ACCOUNTS. Notwithstanding any other provision hereof
to the contrary, to the extent that a deficit, if any, exists in the Capital
Account of any Member,
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such deficit shall not be an asset of the Company and such Member shall not
be obligated to contribute such amount to the Company to bring the balance of
such Member's Capital Account to zero.
12.5 CANCELLATION OF FILINGS. Upon completion of the distribution of
Company assets a provided herein, the Company is terminated, and the Liquidator
shall file a certificate of cancellation with the Secretary of State, cancel any
other filings made pursuant to Section 2.5 and take such other actions as may be
necessary to terminate the Company.
ARTICLE XIII
GENERAL PROVISIONS
13.1 OFFSET. Whenever the Company is to pay any sum to any Member, any
amounts that Member owes the Company may be deducted from that sum before
payment.
13.2 NOTICES. All notices and other communications (collectively,
"notices") provided for or permitted to be given under this Agreement shall be
in writing and shall be given by depositing the notice in the United States
mail, addressed to the Person to be notified, postage paid and registered or
certified with return receipt requested, or by such notice being delivered in
person or by facsimile communication to such party. Unless otherwise expressly
set forth herein, notices given or served pursuant hereto shall be effective
upon receipt by the Person to be notified. All notices to be sent to a Member
shall be sent to or made at, and all payments hereunder shall be made at, the
address set forth on Schedule A hereto or such other address as that Member may
specify by notice to the Company. Any notice to the Company or the Advisory
Committee shall be given to all Representatives. The address of a
Representative shall, unless notice to the contrary is given by a Representative
to the Company and the Members, be the same as the address of the Company.
13.3 ENTIRE AGREEMENT; WAIVERS AND MODIFICATIONS.
(a) This Agreement constitutes the entire agreement of the Members
and their Affiliates relating to the Company and supersedes any and all prior
contracts,
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understandings, negotiations and agreements with respect to the Company and
the subject matter hereof, whether oral or written.
(b) This Agreement and the Certificate may be amended or modified
from time to time only by a written instrument executed by Members holding at
least two-thirds of the Common Units then outstanding, except, to the extent
permitted by the Act, for ministerial changes and changes necessitated by the
admission of new Members, in each case as approved by the Advisory Committee;
PROVIDED, HOWEVER, that no amendment to this Agreement shall be permitted which
impacts the rights of any Member with respect to voting, capital contributions,
allocations, distributions or this Section 13.3(b) without the express, prior,
written consent of such Member.
(c) Any waiver or consent, express, implied or deemed, to or of any
breach or default by any Person in the performance by that Person of its
obligations with respect to the Company or any action inconsistent with this
Agreement is not a waiver of or consent to any other breach or default in the
performance by that Person of the same or any other obligations of that Person
with respect to the Company or any other such action. Failure on the part of a
Person to complain of any act of any Person or to declare any Person in default
with respect to the Company, irrespective of how long that failure continues,
does not constitute a waiver by that Person of its rights with respect to that
default until the applicable statute-of-limitations period has run. Except with
respect to the matters described in the first sentence of this Section 13.3(c),
all waivers and consents hereunder shall be in writing and shall be delivered to
the other Members in the manner set forth in Section 13.2.
13.4 BINDING EFFECT; NO THIRD-PARTY BENEFICIARIES. Subject to the
restrictions on Dispositions set forth herein, this Agreement is binding on and
inures to the benefit of the Members and their respective heirs, legal
representatives, successors and assigns. Nothing in this Agreement shall
provide any benefit to any third party or entitle any third party to any claim,
cause of action, remedy or right of any kind, it being the intent of the parties
that this Agreement shall not be construed as a third-party beneficiary
contract.
13.5 GOVERNING LAW. This agreement is governed by and shall be construed
in accordance with the law of the state of Delaware, excluding any
conflict-of-laws rule or principle that might refer the governance or
construction of this agreement to the law of
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another jurisdiction. If any provision of this Agreement or the application
thereof to any Person or circumstance is held invalid or unenforceable to any
extent, the remainder of this Agreement and the application of that provision
shall be enforced to the greatest extent permitted by law.
13.6 FURTHER ASSURANCES. In connection with this Agreement and the
transactions contemplated hereby, each Member shall execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this
Agreement and those transactions.
13.7 WAIVER OF CERTAIN RIGHTS. Each Member irrevocably waives any right
(but not any power) it might have to maintain any action for dissolution of the
company or for partition of the property of the Company. If any Member
maintains any action for such dissolution or partition, such Member shall be
liable to the Company and the other Members for all monetary damages suffered by
them as a result thereof (including, indirect, incidental and consequential
damages).
13.8 MULTIPLE COUNTERPARTS. This Agreement may be executed in multiple
counterparts with the same effect as if each of the signing parties had signed
the same document. All counterparts shall be construed together and constitute
the same instrument.
13.9 SUCCESSOR AND ASSIGNS. Subject to the limitations and restrictions
set forth in this Agreement, this Agreement shall be binding on and insure to
the benefit of the successors and assigns of the Membership Interests of the
parties hereto.
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IN WITNESS WHEREOF, the Members have executed this Agreement as of the date
first set forth above.
__________________________
Name of Entity
By; _______________________
Name:
Title:
Address:
____________________________
____________________________
____________________________
