SIEBERT, BRANDFORD, SHANK & CO., LLC
OPERATING AGREEMENT
Dated as of March 10, 1997
TABLE OF CONTENTS
Page
ARTICLE I
Definitions................................................. 1
SECTION 1.1 Definitions............................................................................... 1
ARTICLE II
Organization................................................. 7
SECTION 2.1 Formation................................................................................. 7
SECTION 2.2 Name...................................................................................... 7
SECTION 2.3 Principal Place of Business............................................................... 7
SECTION 2.4 Term...................................................................................... 7
SECTION 2.5 Purposes and Powers....................................................................... 7
SECTION 2.6 Title to Property......................................................................... 7
SECTION 2.7 Certificates of Interest.................................................................. 7
SECTION 2.8 General Rights............................................................................ 8
SECTION 2.9 General Protective Provisions............................................................. 9
ARTICLE III
Members................................................... 9
SECTION 3.1 Names and Addresses....................................................................... 9
SECTION 3.2 Initial Contributions..................................................................... 9
SECTION 3.3 Additional Contributions.................................................................. 9
SECTION 3.4 Withdrawal of Capital..................................................................... 9
SECTION 3.5 No Interest on Capital.................................................................... 10
SECTION 3.6 Admission of Members...................................................................... 10
SECTION 3.7 Resignation of Member..................................................................... 10
SECTION 3.8 Outside Business.......................................................................... 10
SECTION 3.9 Representation and Warranties............................................................. 10
SECTION 3.10 Power of Attorney........................................................................ 10
ARTICLE IV
Meetings of Members............................................. 11
SECTION 4.1 Annual Meeting............................................................................ 11
SECTION 4.2 Special Meetings.......................................................................... 11
SECTION 4.3 Place of Meetings......................................................................... 11
SECTION 4.4 Notice of Meetings........................................................................ 11
SECTION 4.5 Record Date............................................................................... 11
SECTION 4.6 Waiver of Notice.......................................................................... 12
SECTION 4.7 Number of Votes........................................................................... 12
SECTION 4.8 Quorum.................................................................................... 12
SECTION 4.9 Manner of Acting.......................................................................... 12
SECTION 4.10 Action by Members Without a Meeting...................................................... 12
SECTION 4.11 Action by Communication Equipment........................................................ 13
ARTICLE V
Board of Managers.............................................. 13
SECTION 5.1 General Powers............................................................................ 13
SECTION 5.2 Binding Authority......................................................................... 13
SECTION 5.3 Number and Term of Office................................................................. 14
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SECTION 5.4 Resignation and Vacancies................................................................. 14
SECTION 5.5 Meetings.................................................................................. 14
SECTION 5.6 Compensation; Expenses.................................................................... 16
SECTION 5.7 Fiduciary Duty............................................................................ 16
SECTION 5.8 Certain Matters Requiring Approval........................................................ 16
ARTICLE VI
Chairpersons and Officers.......................................... 18
SECTION 6.1 Chairperson............................................................................... 18
SECTION 6.2 Election, Appointment and Term of Office.................................................. 18
SECTION 6.3 Resignation, Removal and Vacancies........................................................ 19
SECTION 6.4 Duties and Functions...................................................................... 19
SECTION 6.5 Committees................................................................................ 20
SECTION 6.6 Powers and Duties of Committees........................................................... 20
ARTICLE VII
Books and Records; Right of Inspection; Tax Matters............................. 21
SECTION 7.1 Books and Records......................................................................... 21
SECTION 7.2 Information............................................................................... 21
SECTION 7.3 Tax Returns............................................................................... 21
SECTION 7.4 Tax Elections............................................................................. 21
SECTION 7.5 Tax Matters Partner....................................................................... 21
SECTION 7.6 No Partnership............................................................................ 22
ARTICLE VIII
Capital Accounts............................................... 22
SECTION 8.1 Maintenance............................................................................... 22
SECTION 8.2 Adjustments............................................................................... 22
SECTION 8.3 Market Value Adjustments.................................................................. 23
SECTION 8.4 Transfer.................................................................................. 23
ARTICLE IX
Allocations and Accounting Method...................................... 23
SECTION 9.1 Determination............................................................................. 23
SECTION 9.2 Allocations of Net Profits, Net Losses,
and Other Items........................................................................... 23
SECTION 9.3 Allocations in the Event of Property
Distribution.............................................................................. 24
SECTION 9.4 Special Rules............................................................................. 24
SECTION 9.5 Tax Allocations........................................................................... 27
ARTICLE X
Distributions................................................ 28
SECTION 10.1 Distributions............................................................................ 28
SECTION 10.2 Withholding.............................................................................. 28
SECTION 10.3 Offset................................................................................... 28
SECTION 10.4 Limitation Upon Distributions............................................................ 28
SECTION 10.5 Accounting Period and Method............................................................. 29
SECTION 10.6 Tax Distributions........................................................................ 29
ARTICLE XI
Indemnification............................................... 29
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SECTION 11.1 Indemnification.......................................................................... 29
SECTION 11.2 Indemnification Not Exclusive............................................................ 30
ARTICLE XII
Dissolution................................................. 30
SECTION 12.1 Dissolution.............................................................................. 30
SECTION 12.2 Event of Withdrawal...................................................................... 31
SECTION 12.3 Bankruptcy............................................................................... 31
SECTION 12.4 Continuation............................................................................. 31
ARTICLE XIII
Liquidation................................................. 32
SECTION 13.1 Liquidation.............................................................................. 32
SECTION 13.2 Priority of Payment...................................................................... 32
SECTION 13.3 Timing................................................................................... 32
SECTION 13.4 Liquidating Reports...................................................................... 33
SECTION 13.5 Certificate of Cancellation.............................................................. 33
SECTION 13.6 Deficit Capital Account.................................................................. 33
SECTION 13.7 Nonrecourse to Other Members............................................................. 33
ARTICLE XIV
Transferability............................................... 33
SECTION 14.1 General.................................................................................. 33
SECTION 14.2 First Refusal Rights..................................................................... 34
SECTION 14.3 Right to Compel Sale..................................................................... 36
SECTION 14.4 Right to Purchase........................................................................ 37
SECTION 14.5 Call Right............................................................................... 38
SECTION 14.6 Transferee Rights........................................................................ 39
SECTION 14.7 Effective Date........................................................................... 40
SECTION 14.8 Secured Party............................................................................ 40
ARTICLE XV
General Provisions.............................................. 40
SECTION 15.1 Waiver of Dissolution Rights............................................................. 40
SECTION 15.2 Waiver of Partition Right................................................................ 40
SECTION 15.3 Waivers Generally........................................................................ 40
SECTION 15.4 Equitable Relief......................................................................... 41
SECTION 15.5 Remedies for Breach...................................................................... 41
SECTION 15.6 Costs.................................................................................... 41
SECTION 15.7 Counterparts............................................................................. 41
SECTION 15.8 Notice................................................................................... 41
SECTION 15.9 Date of Performance...................................................................... 42
SECTION 15.10 Limited Liability....................................................................... 42
SECTION 15.11 Partial Invalidity...................................................................... 42
SECTION 15.12 Entire Agreement........................................................................ 42
SECTION 15.14 Benefit................................................................................. 43
SECTION 15.15 Binding Effect.......................................................................... 43
SECTION 15.16 Further Assurances...................................................................... 43
SECTION 15.17 Headings................................................................................ 43
SECTION 15.18 Terms................................................................................... 43
SECTION 15.19 Conversion.............................................................................. 43
SECTION 15.20 Governing Law; Consent to Jurisdiction.................................................. 44
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SIEBERT, BRANDFORD, SHANK & CO., LLC
OPERATING AGREEMENT
This Operating Agreement (the "Agreement"), dated as of March 10, 1997, is
entered into by and among Siebert, Brandford, Shank & Co., LLC, a Delaware
limited liability company (the "Company"), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co., Inc., a
Delaware corporation ("▇▇▇▇▇▇▇"), ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ III, an individual having
an address as set forth in Schedule I attached hereto ("▇▇▇▇▇▇▇▇▇"), and ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇, an individual having an address as set forth on Schedule I attached
hereto ("Shank").
WHEREAS, the Persons signing this Agreement desire to establish their
respective rights and obligations pursuant to the Delaware Limited Liability
Company Act in connection with forming and operating the Company.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the Persons signing this Agreement below
agree as follows:
ARTICLE I
Definitions
SECTION 1.1 Definitions. In this Agreement, the following terms shall have
the meanings set forth below:
(a) "Act" means the Delaware Limited Liability Company Act, as amended
from time to time including any amendatory or successor provisions thereto.
(b) "Adjusted Capital Account" means, with respect to any Member, the
balance in such Member's Capital Account as of the end of the relevant Fiscal
Year, after giving effect to the following adjustments:
(i) such Capital Account shall be deemed to be increased by any
amounts that such Member is obligated to restore to the Company (pursuant to
this Agreement or otherwise) or is deemed to be obligated to restore pursuant to
(A) the penultimate sentence of section 1.704-2(g)(1) of the Regulations, or (B)
the penultimate sentence of section 1.704-2(i)(5) of the Regulations; and
(ii) such Capital Account shall be deemed to be decreased by the
items described in sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the
Regulations.
The foregoing definition of Adjusted Capital Account is intended to comply
with the provisions of section 1.704-1(b)(2)(ii)(d) of the Regulations and shall
be interpreted and applied consistently therewith.
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(c) "Affiliate" of a party means any entity which directly or
indirectly controls, is controlled by or is under the common control with such
party. The term "control", with respect to an entity, means the power to direct
the affairs of such entity by reason of ownership of equity securities,
contract, or otherwise.
(d) "Available Cash" means, with respect to any fiscal quarter, all
cash receipts of the Company from any source (excluding Capital Contributions)
during such quarter plus cash available from any reduction in the amount of any
reserves of the Company during such quarter less the sum of the following to the
extent made from such cash receipts or reserves:
(i) all cash expenditures of the Company made during such quarter
(except Distributions), including expenses and costs incurred in the
acquisition, ownership, or management of the Company's property including
amounts paid for office space as well as salary and bonuses; and
(ii) funds set aside by the Board of Managers as reasonable
reserves for contingencies, working capital, debt service, taxes, insurance or
other costs or expenses incident to the conduct of the Company's business in the
next succeeding fiscal quarter.
(e) "Bankruptcy" shall have the meaning ascribed to it in Section
12.3.
(f) "Board of Managers" shall mean a committee of Managers comprised
in accordance with this Agreement and having the powers set forth herein.
(g) "Book Value" means, with respect to any asset of the Company, the
adjusted basis of such asset as of the relevant date for federal income tax
purposes; provided, however, that (1) the initial Book Value of any asset
contributed by a Member to the Company shall be such asset's Fair Market Value
on the date of contribution; (2) the Book Value of all Company assets shall be
adjusted in accordance with Regulations sections 1.704- 1(b)(2)(iv)(d) and (f);
and (3) if the Book Value of the Company's assets is adjusted as provided in (1)
and (2) above, the Members' Capital Accounts shall be adjusted in accordance
with Regulations section 1.704-1(b)(2)(iv)(g) for allocations to the Members of
Depreciation and gain or loss with respect to such property. This definition is
intended to comply with the provisions of Section 1.704-1(b)(2)(iv) of the
Regulations and shall be interpreted and applied consistently therewith.
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(h) "Business Day" means any day other than Saturday or Sunday and any
other day on which banks in Wilmington, Delaware or New York, New York are not
open for business.
(i) "Capital Account" shall have the meaning ascribed to such
term in Section 8.1.
(j) "Capital Contribution" means the amount of cash and the Fair
Market Value of property (net of liabilities secured by such property that the
Company is considered to assume or take subject to under Code section 752)
contributed to the capital of the Company by a Member and any Company
liabilities assumed by a Member within the meaning of Regulations section 1.704-
1(b)(2)(iv)(c). The contributions made to the capital of the Company by the
Members as of the date hereof are set forth in Schedule I.
(k) "Certificate of Formation" means the Certificate of Formation of
the Company filed or to be filed with the Office of the Secretary of State of
the State of Delaware, as the same may from time to time be amended.
(l) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, or any superseding federal revenue statute.
(m) "Combined Marginal Rate" means, for any Fiscal Year, the sum of
(i) the highest marginal federal income tax rate assessable for such year on the
ordinary income of individual taxpayers and (ii) the highest combined marginal
state and local income tax rate assessable for such year on the ordinary income
of individual taxpayers among the various states and localities in which holders
of Units shall be required to file income tax returns after giving effect to the
federal income tax benefit derived from such state and local taxes based on the
rate determined in the preceding clause (i), as certified to the Company by the
Members on or before April 1 of the immediately succeeding Fiscal Year.
(n) "Company" shall have the meaning set forth in the preamble of this
Agreement.
(o) "Company Minimum Gain" means the aggregate amount of gain (of
whatever character), determined for each Nonrecourse Liability of the Company,
that would be realized by the Company if it disposed of the Company property
subject to such liability in a taxable transaction in full satisfaction thereof
(and for no other consideration) and by aggregating the amounts so computed,
determined in accordance with sections 1.704-2(d) and (k) of the Regulations.
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(p) "Depreciation" means, for each Fiscal Year or part thereof, an
amount equal to the depreciation, amortization or other cost recovery deduction
allowable for federal income tax purposes with respect to an asset for such
Fiscal Year or part thereof, except that if the Book Value of an asset differs
from its adjusted basis for federal income tax purposes at the beginning of such
Fiscal Year, the depreciation, amortization or other cost recovery deduction for
such Fiscal Year or part thereof shall be an amount which bears the same ratio
to such Book Value as the federal income tax depreciation, amortization or other
cost recovery deduction for such Fiscal Year or part thereof bears to such
adjusted tax basis.
(q) "Disability" means, with respect to Brandford, Shank, or any other
Member who is also an employee or officer of the Company, the incapacity of such
Member due to physical or mental illness or injury to perform adequately his or
her duties under his or her employment arrangement with the Company for one
hundred twenty (120) days in any twelve (12) month period; provided, however,
that for purposes of this definition, pregnancy shall not be considered a
"Disability" and neither maternity leave nor time spent working productively
from home shall be counted as part of any one hundred twenty (120) day period
provided herein.
(r) "Distribution" means any money and the Fair Market Value of any
property (net of liabilities secured by such property that the Member is deemed
to assume or take pursuant to Section 752 of the Code) distributed by the
Company to the Members in accordance with this Agreement.
(s) "Dissolution" means the happening of any of the events set forth
in Section 12.1.
(t) "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
(u) "Event of Withdrawal" means, with respect to any Member the
occurrence of such Member's death, insanity, Bankruptcy, retirement,
resignation, expulsion, adjudication of incompetency, or any other event that
terminates the continued membership of such Person in the Company by operation
of law (including the dissolution of any Member that is not an individual).
(v) "Exchange Act Rule" means a rule promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934.
(w) "Fair Market Value" means, with respect to any property, the value
that would be obtained in an arm's length transaction for ownership of such
property for cash between an informed and willing seller and an informed and
willing purchaser, each with an adequate understanding of the facts and under no
compulsion to buy or sell.
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(x) "Fiscal Year" means the fiscal year of the Company, which shall be
each year ending December 31.
(y) "Liquidation" means the process of winding up the Company after
its Dissolution.
(z) "Manager" shall have the meaning set forth in Section 5.1.
(aa) "Member" means each Person who or which executes a counterpart of
this Agreement and is admitted to the Company as a Member in accordance with
this Agreement.
(ab) "Member Minimum Gain" means the aggregate amount of gain (of
whatever character), determined for each Member Nonrecourse Debt, that would be
realized by the Company if it disposed of the Company property subject to such
Member Nonrecourse Debt in a taxable transaction in full satisfaction thereof
(and for no other consideration), determined in accordance with the provisions
of sections 1.704-2(i)(3) and (k) of the Regulations for determining such
Member's share of minimum gain attributable to a Member Nonrecourse Debt.
(ac) "Member Nonrecourse Debt" has the meaning specified for "partner
nonrecourse debt" in section 1.704-2(b)(4) of the Regulations.
(y) "Member Nonrecourse Deductions" has the meaning ascribed to the
term "partner nonrecourse deductions" in section 1.704-2(i)(2) of the
Regulations.
(ad) "Net Losses" means, with respect to any Fiscal Year, or part
thereof, of the Company, the net losses of the Company for such period computed
using Book Values and applying the methods and principles of accounting used for
federal income tax purposes, including, as appropriate, each item of income,
gain, loss, deduction or credit entering into such determination, as determined
by the accountants of the Company. The determination of Net Losses shall take
into account all items of income and deduction including income exempt from
taxation and related deductions.
(ae) "Net Profits" means, with respect to any Fiscal Year, or part
thereof, of the Company, the net profits of the Company for such period computed
using Book Values and applying the methods and principles of accounting used for
federal income tax purposes, including, as appropriate, each item of income,
gain, loss, deduction or credit entering into such determination, as determined
5
by the accountants of the Company. The determination of Net Profits shall take
into account all items of income and deduction including income exempt from
taxation and related deductions.
(af) "Nonrecourse Liability" means any Company liability (or portion
thereof) for which no Member bears the economic risk of loss for such liability
under section 1.752-2 of the Regulations.
(ag) "Person" means any individual, corporation, governmental
authority, limited liability company, partnership, trust, estate, unincorporated
association, or other entity.
(ah) "Pre-Formation Expenses" shall mean any expenses, budgeted or
unbudgeted, incurred directly or indirectly by ▇▇▇▇▇▇▇ in excess of revenues
received by ▇▇▇▇▇▇▇ prior to the formation of the Company with respect to the
business of the Company including, without limitation, payroll, payroll tax,
employment insurance, commissions, rent, telephone, quotes, travel and
entertainment, postage, printing, office supplies, dues, donations and the like
from and after October 1, 1996 through the date hereof. Such expenses for the
period from October 1, 1996 through the most recent available date are set forth
on Annex B hereto. Any such expenses from and after such date shall be submitted
to ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ for their review and approval.
(ai) "Proportionate Share" shall mean the percentage of the total
number of Units that a Member is entitled to purchase pursuant to an option or
right set forth in this Agreement equal to the number of Units then owned by a
Member divided by the aggregate number of Units then owned by such Member and
all other Members who are entitled to participate in such option or right.
(aj) "Regulations" means all proposed, temporary and final regulations
promulgated and in effect under the Code, as the same may be amended from time
to time.
(ak) "Regulatory Allocations" shall have the meaning set forth in
Section 9.4(a)(vi).
(al) "ss.704(b) Regulations" shall have the meaning ascribed to such
term in Section 8.1.
(am) "Tax Matters Partner" shall have the meaning ascribed to such
term in Section 7.5.
(an) "Transfer" means a sale, exchange, assignment, transfer, pledge,
hypothecation or other disposition of a Unit, or portion thereof, (whether
voluntary or involuntary) other than by operation of law or to an immediate
family member of a Member who is alive as of the date hereof.
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(ao) "Unit" means an interest in the Company having the rights and
characteristics set forth herein.
ARTICLE II
Organization
SECTION 2.1 Formation. An organizer shall form the Company as a limited
liability company by preparing, executing and filing with the Secretary of State
of Delaware the Certificate of Formation pursuant to Section 18-201 of the Act.
SECTION 2.2 Name. The name of the Company is Siebert, Brandford, Shank &
Co., LLC.
SECTION 2.3 Principal Place of Business. The principal place of business of
the Company shall be ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ such other
location as the Board of Managers may, from time to time, select, provided that
no such changes of location shall be made without giving at least fifteen (15)
days prior written notice thereof to the Members.
SECTION 2.4 Term. The Company shall continue in existence from the date of
filing of the Certificate of Formation through the twentieth (20th) anniversary
of the date thereof, unless the Company is dissolved sooner pursuant to this
Agreement or the Act; provided, however, that the Board of Managers shall in its
sole discretion have the right to extend the term of the Company for a period of
up to three (3) years.
SECTION 2.5 Purposes and Powers. The purpose of the Company shall initially
be to provide investment banking, sales and trading and financial advisory
services to clients across the country focusing on municipal finance; and
thereafter to conduct such other lawful activities as the Members may agree from
time to time. In connection therewith, the Company shall have all the powers
permitted to a limited liability company under the Act or which are necessary,
convenient or advisable and lawful in order for it to conduct its business.
SECTION 2.6 Title to Property. Title to, and all right and interest in, the
Company's assets shall be acquired in the name of and held by the Company, or,
if acquired in any other name, be held for the benefit of the Company.
SECTION 2.7 Certificates of Interest. Every holder of record of a Unit
shall be entitled to have a certificate certifying the number of Units owned by
such Person in the Company. Each certificate evidencing ownership of Units shall
bear and be subject to the following legend:
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"THE UNITS EVIDENCED HEREBY ARE SUBJECT TO AN OPERATING
AGREEMENT DATED AS OF MARCH 10, 1997 (A COPY OF WHICH MAY BE
OBTAINED FROM THE ISSUER). SUCH OPERATING AGREEMENT RESTRICTS
THE SALE, PLEDGE, HYPOTHECATION AND TRANSFER OF THE UNITS AND
THE INTEREST REPRESENTED HEREBY AND CONTAINS PROVISIONS
GOVERNING THE VOTING OF THE UNITS. BY ACCEPTING ANY INTEREST
IN SUCH UNITS, THE PERSON ACCEPTING SUCH UNITS SHALL BE DEEMED
TO AGREE TO, AND SHALL BECOME BOUND BY, ALL THE PROVISIONS OF
SUCH OPERATING AGREEMENT.
NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION OF THE UNITS EVIDENCED BY THIS CERTIFICATE MAY BE
MADE EXCEPT AS OTHERWISE PROVIDED IN SUCH OPERATING AGREEMENT
AND (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), ANY
APPLICABLE STATE SECURITIES AND "BLUE SKY" LAWS OR (B) IF NOT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, THEN ONLY
WHEN THE ISSUER HAS BEEN FURNISHED WITH AN OPINION OF COUNSEL
FOR THE HOLDER, WHICH OPINION AND COUNSEL SHALL BE REASONABLY
SATISFACTORY TO THE ISSUER, TO THE EFFECT THAT SUCH TRANSFER,
SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION
IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF THE ACT AND THE
RULES AND REGULATIONS IN EFFECT THEREUNDER AND SUCH STATE
SECURITIES AND "BLUE SKY" LAWS."
Each such certificate shall be signed by, or in the name of the Company by, the
Chairperson, President, or a Vice President, and the Treasurer, or Secretary of
the Company. In case any officer who has signed or whose facsimile signature has
been placed upon a certificate while such officer was an officer of the Company
but such officer shall have ceased to be an officer before such certificate is
issued, it may nevertheless be issued by the Company with the same effect as if
such individual were an officer at the date of issue.
SECTION 2.8 General Rights. Units shall not have a stated value or any
rights to Distributions unless the Board of Managers, pursuant to the terms
hereof, shall have declared such a Distribution out of funds legally available
therefor. Except as expressly provided herein, no Member holding any class of
8
Units shall have priority over any other Member holding any other class of
Units, and in no event shall any Member holding any class of Units have priority
over any other Member holding that same class of Units, whether for the return
of a Capital Contribution or for Net Profits, Net Losses or a Distribution;
provided, however, that the foregoing shall not apply to loans, advances or
other indebtedness (as distinguished from a Capital Contribution) made by a
Member to the Company.
SECTION 2.9 General Protective Provisions. Notwithstanding anything else to
the contrary contained herein, the Company shall not, without first obtaining
the approval of those Members holding of record at least a two-thirds of all of
the votes permitted hereunder:
(a) cause or permit the sale of all or substantially all of the
Company's assets;
(b) cause or permit the merger or consolidation of the Company into or
with another Person;
(c) cause or permit the conversion of the Company into another form of
business entity; or
(d) cause or permit to be undertaken by the Company any other material
transactions or other activities not in the ordinary course of the Company's
business.
ARTICLE III
Members
SECTION 3.1 Names and Addresses. The names and addresses of the Members are
as set forth in Schedule I to this Agreement.
SECTION 3.2 Initial Contributions. Each of the Members has agreed to make a
contribution to the Company in the amount set forth opposite such Member's name
on Schedule I hereto in exchange for the number of Units also set forth opposite
such Member's name on Schedule I hereto.
SECTION 3.3 Additional Contributions. Except as provided in the Act and
Section 3.2 hereof, no Member will be required to make any additional Capital
Contributions or restore any deficit to its Capital Account.
SECTION 3.4 Withdrawal of Capital. Except as specifically provided in this
Agreement, no Member will be entitled to withdraw all or any part of such
Person's Capital Account from the Company prior to the Company's Dissolution and
Liquidation or to demand a Distribution of property or money.
9
SECTION 3.5 No Interest on Capital. No Member will be entitled to receive
interest on such Person's Capital Account or any Capital Contribution.
SECTION 3.6 Admission of Members. A Person may be admitted as a Member
after the date of this Agreement only upon the unanimous consent of the Board of
Managers.
SECTION 3.7 Resignation of Member. No Member may be permitted to resign
without the consent of the Board of Managers.
SECTION 3.8 Outside Business. Any Manager or any Member may engage in or
possess an interest in other business ventures of any nature or description,
independently or with others, except business ventures which are competitive
with the business of the Company or which detracts from such Manager's or
Member's handling of the Company's business. The Company and the Members shall
have no rights by virtue of this Agreement in and to such independent ventures
or the income or profits derived therefrom, and the pursuit of any such venture
shall not be deemed wrongful or improper.
SECTION 3.9 Representation and Warranties. Each Member, hereby represents
and warrants to the Company and each other Member that: (a) if that Member is an
organization, that it is duly organized, validly existing, and in good standing
under the law of its state of organization and that it has full organizational
power to execute and agree to this Agreement and to perform its obligations
hereunder; (b) that the Member is acquiring its Units for the Member's own
account as an investment and without an intent to distribute the Units; (c) the
Member acknowledges that the Units have not been registered under the Securities
Act of 1933, as amended, or any state securities laws, and may not be resold or
transferred by the Member without appropriate registration or the availability
of an exemption from such requirements.
SECTION 3.10 Power of Attorney. (a) Each Member hereby appoints the Board
of Managers, and any officer duly appointed thereby, acting individually, with
power of substitution, as its true and lawful representative and
attorney-in-fact, in its name, place and stead to make, execute, sign,
acknowledge, swear to and file: (i) any and all instruments, certificates, and
other documents that may be deemed necessary or desirable to effect the
Dissolution or Liquidation of the Company, provided that such action has been
approved in accordance with this Agreement; (ii) any business certificate,
fictitious name certificate, or amendment thereto, or required by any applicable
federal, state or local law; and (iii) all amendments or modifications to this
Agreement, provided that such amendment or modification has been approved in
accordance with Section 15.13.
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(b) The power of attorney hereby granted by each Member is coupled
with an interest, is irrevocable, and shall survive, and shall not be affected
by, the subsequent death, disability, incapacity, incompetency, termination,
Bankruptcy or insolvency of such Member.
ARTICLE IV
Meetings of Members
SECTION 4.1 Annual Meeting. A meeting of the Members shall be held annually
for the transaction of business as may properly come before the Members at such
meeting. The annual meeting of the Members shall be held on the third Tuesday in
March or at such other time as shall be determined by the vote or written
consent of the Board of Managers and the Members holding a majority of the votes
permitted hereunder, except that no annual meeting need be held if all actions
required by this Agreement to be taken at an annual meeting of Members are taken
by written consent in lieu of a meeting pursuant to Section 4.10.
SECTION 4.2 Special Meetings. Special meetings of the Members, for any
purpose, may be called by any Member or Members holding not less than twenty
five percent (25%) of the votes permitted hereunder, or by the Board of
Managers.
SECTION 4.3 Place of Meetings. Meetings of the Members may be held at any
place, within or outside the State of Delaware. If no such designation is made,
the place of any such meeting shall be the principal office of the Company.
SECTION 4.4 Notice of Meetings. Written notice stating the place, day and
time of the meeting, the purpose or purposes for which the meeting is called,
and by whom the meeting was called, shall be delivered no fewer than ten (10) or
more than sixty (60) days before the date of the meeting.
SECTION 4.5 Record Date. For the purpose of determining the Members
entitled to notice of or to vote at any meeting of Members or any adjournment of
such meeting, or Members entitled to receive payment of any Distribution, or to
make a determination of Members for any other purpose, the date five (5) days
prior to the date on which notice of the meeting is mailed or the date on which
the resolution declaring the Distribution is adopted or the date of
determination of Members for any other purpose, as the case may be, shall be the
record date for making such a determination. When a determination of Members
entitled to vote at any meeting of Members has been made pursuant to this
Section 4.5, the determination shall apply to any adjournment of the meeting.
For the purpose of determining the Members for any other purpose (excluding
entitlement to Distributions which shall be governed by the provision contained
in Section 10.1), the date established by the Board of Managers as the record
date for making such determination shall be deemed to be the record date for
making such a determination.
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SECTION 4.6 Waiver of Notice. Notice of a meeting need not be given to any
Member who submits a signed waiver of notice, in person or by proxy, whether
before or after the meeting. The attendance of any Member at a meeting, in
person or by proxy, without protesting prior to the conclusion of the meeting
the lack of notice of such meeting, shall constitute a waiver of notice by him
or her.
SECTION 4.7 Number of Votes. With respect to all matters requiring their
vote, each Member shall be entitled to one vote in person or by proxy for each
one Unit such Member holds.
SECTION 4.8 Quorum. At each meeting of the Members, except as otherwise
required by the Act, Members holding not less than a majority of all of the
votes permitted hereunder, represented in person or by proxy, shall constitute a
quorum for the transaction of business. In the absence of a quorum at any
meeting of Members, Members holding a majority of the votes so represented may
adjourn the meeting for a period not to exceed ten (10) days without further
notice. If the adjournment is for more than ten (10) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each Member of record entitled to vote
at such meeting. At a rescheduled meeting at which a quorum shall be present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed. The Members present at a meeting may continue
to transact business until adjournment, notwithstanding the withdrawal during
the meeting of a Person or Persons holding votes whose absence results in less
than a quorum being present.
SECTION 4.9 Manner of Acting. If a quorum is present at any meeting, the
vote or written consent of Members holding not less than a majority of the votes
permitted hereunder shall be the act of the Members, unless the vote of a
greater or lesser proportion or number is otherwise required by the Act, the
Certificate of Formation or this Agreement.
SECTION 4.10 Action by Members Without a Meeting. Any action required or
permitted to be taken at any annual or special meeting of the Members may be
taken without a meeting, without prior notice and without a vote if a consent or
consents in writing, setting forth the action so taken, shall be signed by the
Members who hold of record the minimum number of votes that would be necessary
to authorize or to take such action at a meeting at which all the Members
entitled to vote thereon were present and voted and shall be delivered to the
officer or individual of the Company who shall have charge of its records.
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Every consent must be signed and dated by the Member or the Member's
attorney-in-fact. Any consent given under a power-of- attorney shall be
presented together with the executed, dated and notarized document granting such
power upon the Person claiming the same. No consent shall be valid after the
expiration of thirty (30) days from the date thereof. Every consent shall be
revocable at the pleasure of the Member executing it. In the event of
conflicting consents, the later dated consent shall govern.
SECTION 4.11 Action by Communication Equipment. The Members may participate
in a meeting of Members by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear or otherwise interactively communicate with each other, and
such participation shall constitute presence in person at such meeting.
ARTICLE V
Board of Managers
SECTION 5.1 General Powers. (a) Subject to the rights expressly granted to
the Members under this Agreement, the Board of Managers and the authorized
officers of the Company appointed by the Board of Managers shall have the
exclusive authority and responsibility to manage the business of the Company.
(b) The members of the Board of Managers (the "Managers") shall be
"managers" within the meaning of the Act. Except as set forth in this Agreement,
the Board of Managers shall have power and authority, on behalf of the Company,
to take any and all lawful acts that the Board of Managers considers necessary,
advisable, or in the best interests of the Company in connection with any
business of the Company, including, without limitation: (i) to authorize the
purchase, lease or other acquisition, or the sale, lease or other disposition,
of any property; (ii) to open, maintain and close bank accounts, draw checks or
other orders for the payment of moneys and invest the funds of the Company;
(iii) to authorize the purchase of insurance on the business and assets of the
Company; (iv) to commence lawsuits and other proceedings; (v) to authorize the
Company to enter into any agreement, instrument or other writing; (vi) to retain
accountants, attorneys, consultants, appraisers or other agents or advisors;
(vii) to appoint and remove officers of the Company; and (viii) to hire
employees and establish base salaries and award discretionary bonuses with the
recommendation of ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇.
SECTION 5.2 Binding Authority. Unless specifically authorized to do so by
this Agreement, no Member or other Person shall have any power or authority to
bind the Company, unless such Member or other Person has been authorized by the
Board of Managers to act on behalf of the Company.
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SECTION 5.3 Number and Term of Office. The number of Managers constituting
the Board of Managers shall be three (3). Each of ▇▇▇▇▇▇▇▇▇ and Shank shall be a
Manager as well as one person designated by ▇▇▇▇▇▇▇ who initially shall be
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇. Such persons shall hold offices until their successors shall
have been appointed and shall have qualified.
SECTION 5.4 Resignation and Vacancies. (a) Any Manager may resign at any
time by giving written notice of his resignation to the Chairperson, the
President, or the Secretary of the Company. Any such resignation shall take
effect at the time specified therein, or, if the time when it shall become
effective shall not be specified therein, when accepted by action of the Board
of Managers. Except as aforesaid, the acceptance of such resignation shall not
be necessary to make it effective.
(b) Any vacancy which shall occur on the Board of Managers, whether by
resignation, death, or otherwise, shall be filled by a designee of the Member
whose seat is being vacated.
SECTION 5.5 Meetings.
-------------
(a) Annual Meetings. As soon as practicable after each annual meeting
of Members, the Board of Managers shall meet for the purpose of organization and
the transaction of other business.
(b) Regular Meetings. Regular meetings of the Board of Managers shall
be held at such times as the Board of Managers shall from time to time
determine.
(c) Special Meetings. Special meetings of the Board of Managers shall
be held whenever called by the Chairperson, the President or any Manager at the
time in office. Any and all business may be transacted at a special meeting that
may be transacted at a regular meeting of the Board of Managers.
(d) Place of Meeting. The Board of Managers may hold its meetings at
such place or places within or without the State of Delaware as the Board of
Managers may from time to time by resolution determine or as shall be designated
in the respective notices or waivers of notice thereof.
(e) Notice of Meetings. Notice of any regular, special, or adjourned
meeting of the Board of Managers shall be mailed by the Secretary or an
Assistant Secretary of the Company to each Manager, addressed to such Person at
such Person's residence or usual place of business, so as to be received at
least two (2) calendar days before the day on which such meeting is to be held,
14
or shall be sent to such Person by telecopy, telegraph, cable or other form of
recorded communication or be delivered personally not later than the close of
business one (1) calendar day before the day on which such meeting is to be
held. Such notice shall include the time and place of such meeting. However,
notice of any such meeting need not be given to any Manager if waived in writing
or by telecopy, telegraph, cable or other form of recorded communication,
whether before or after such meeting shall be held or if such Person shall be
present at such meeting.
(f) Quorum and Manner of Acting. Except as otherwise provided by law
or this Agreement, at least two-thirds (2/3) of the total number of Managers
shall be present at any meeting of the Board of Managers in order to constitute
a quorum for the transaction of business at such meeting. In the absence of a
quorum for any such meeting, the Manager present thereat shall adjourn such
meeting from time to time until a quorum shall be present thereat. Each Manager
shall, with respect to all matters requiring a vote of the Board of Managers, be
entitled to one vote. At all meetings of the Board of Managers, all matters,
except as otherwise provided by law or in this Agreement, shall be decided by
the vote of a majority of the entire Board of Managers.
(g) Action by Communication Equipment. The Managers may participate in
a meeting of the Board of Managers and members of a committee of the Board of
Managers may participate in a meeting of such committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation shall
constitute presence in person at such meeting.
(h) Action by Consent. Any action required or permitted to be taken by
the Managers or members of a committee of the Board of Managers, as the case may
be, may be taken without a meeting if the number of Managers that would be
necessary to authorize or take such action at a meeting of the Board of
Managers, or the number of members of a committee that would be necessary to
authorize or take such action at a meeting of the committee, as the case may be,
consent thereto in writing and such writing is filed with the minutes of the
proceedings of the Board of Managers or of the committee, as the case may be.
(i) Organization. At each meeting of the Board of Managers, in the
absence of the Chairperson, one of the following shall act as chairman of the
meeting and preside thereat, in the following order of precedence: (i) the
President, and (ii) any Manager chosen by a majority of the Managers present.
The Secretary or, in case of the Secretary's absence, any person (who shall be
an Assistant Secretary, if an Assistant Secretary shall be present thereat) whom
the Chairperson shall appoint, shall act as secretary of such meeting and keep
the minutes thereof.
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SECTION 5.6 Compensation; Expenses. (a) Managers, as such, shall not
receive any stated salary for their services, but by resolution of the Board of
Managers may receive a fixed sum for expenses incurred in performing the
functions of Manager, and such additional, reasonable compensation as the Board
of Managers may award from time to time. Nothing herein contained shall be
construed so as to preclude any Manager from serving the Company in any other
capacity and receiving compensation therefor.
(b) The Company shall be responsible for paying, and the Board of
Managers shall pay directly out of Company funds, all ordinary and necessary
costs and expenses incurred in connection with the business of the Company,
including, without limitation, any such expenses incurred by the Managers,
liability and other insurance premiums, expenses in the preparation of reports
to the Members and legal, accounting and other professional fees and expenses.
SECTION 5.7 Fiduciary Duty. Each Manager shall perform his duties as a
Manager in good faith and with that degree of care that an ordinarily prudent
person in a like position would use under similar circumstances. In performing
his duties, each Manager shall be entitled to rely on information, opinions,
reports or statements, including financial statements and other financial data,
in each case prepared or presented by: (i) one or more agents or employees of
the Company; (ii) counsel, public accountants or other persons as to matters
that such Manager reasonably believes to be within such person's professional or
expert competence; or (iii) any other Manager duly designated in accordance with
this Agreement, as to matters within his designated authority, which the Manager
believes to merit confidence, so long as in so relying he shall be acting in
good faith and with such degree of care that an ordinarily prudent person in a
like position would use under similar circumstances; provided, however, that a
Manager shall not be considered to be acting in good faith if he has knowledge
concerning the matter in question that would cause reliance on any of the
Persons listed above to be unwarranted. The provisions of this Agreement, to the
extent they restrict the duties and liabilities of a Manager otherwise existing
at law or in equity, are agreed by the parties hereto to replace such other
duties and liabilities of such Manager.
SECTION 5.8 Certain Matters Requiring Approval. Notwithstanding anything to
the contrary contained herein, the Managers may not take or approve any of the
following actions, and none of the following matters may be acted upon,
authorized or caused to occur by the Managers, unless all of the Managers (or
their designated deputies who are reasonably acceptable to the other Managers
16
which initially, in the case of ▇▇. ▇▇▇▇▇▇▇, shall be ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and
▇.▇. ▇▇▇▇▇▇▇ and, in the case of ▇▇. ▇▇▇▇▇▇▇▇▇, shall be V. McCanley and, in the
case of ▇▇. ▇▇▇▇▇, shall be ▇. ▇▇▇▇▇▇▇▇) agree to any such action or to act on
any such matter:
(a) the admission of additional Members;
(b) the making of calls by the Managers for capital contributions;
(c) the making of any capital expenditure or the purchase of any
capital asset (except in accordance with the business plan);
(d) the determination of any plan for winding up the business and
affairs of the Company or liquidating the assets of the Company after
dissolution;
(e) the approval of the sale of all or substantially all of the assets
of the Company;
(f) amendment of this Agreement or the Articles of Formation of the
Company;
(g) the sale, lease, exchange, mortgage, assignment, pledge or other
transfer of, or guarantee of a security interest in, all or
substantially all of the Company's property and assets except in the
liquidation and winding up of the business of the Company upon its
termination or dissolution;
(h) the approval of the annual business plan of the Company or any
deviation from the budget for the 1996- 1997 fiscal year as set forth
in Annex A hereto;
(i) any contract, agreement or undertaking between the Company and any
of its Members or Managers or any material contract with any third
party other than contracts for municipal bond underwritings which are
in accordance with the Company's written guidelines with respect
thereto;
(j) any amendments to or changes in the Company's written guidelines
with respect to municipal bond underwritings;
(k) the entry of the Company into any new lines of business or any
other material transactions or other activities not in the ordinary
course of the Company's business;
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(l) the filing by the Company of a petition in bankruptcy or the
taking of any other action by the Company in relief from creditors or
under any bankruptcy or insolvency law; and
(m) the merger or consolidation of the Company with or into any other
Person, the dissolution of the Company or the conversion of the
Company into another form of business entity.
ARTICLE VI
Chairpersons and Officers
SECTION 6.1 Chairperson and Vice Chairperson. (a) The Chairperson shall be
the Chairperson of the Board of Managers and the Chairperson shall preside at
all meetings of the Members and at all meetings of the Board of Managers and
shall perform such other duties and exercise such other powers as may from time
to time be prescribed by the Board of Managers. At each annual meeting of the
Board of Managers at which a quorum is present, the Manager or an individual
designated by a Manager receiving the greatest number of votes shall be
Chairperson until his successor is elected at the next annual Board of Managers
meeting or until his resignation or removal in accordance with Section 5.3
hereof in which event his replacement shall become Chairperson for the remainder
of his term. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ III initially shall serve as the Chairperson.
(b) The Vice Chairperson shall be the Vice Chairperson the Board of
Managers and the Vice Chairperson, in the absence of the Chairperson, shall
preside at all meetings of the Members and at all meetings of the Board of
Managers and shall perform such other duties and exercise such other powers as
may from time to time be prescribed by the Board of Managers. At each annual
meeting of the Board of Managers at which a quorum is present, the Manager or an
individual designated by a Manager receiving the greatest number of votes shall
be Vice Chairperson until his successor is elected at the next annual Board of
Managers meeting or until his resignation or removal in accordance with Section
5.3 hereof in which event his replacement shall become Vice Chairperson for the
remainder of his term. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ initially shall serve as the
Chairperson.
SECTION 6.2 Election, Appointment and Term of Office.
-----------------------------------------
(a) The officers of the Company shall be a President, Treasurer and
Secretary who shall be chosen by and hold office at the pleasure of the Board of
Managers. Any two (2) or more offices may be held by the same person. Each
officer shall hold office until the next annual meeting of the Board of Managers
and until his successor is appointed or until his earlier death, or his earlier
resignation or removal in the manner hereinafter provided. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
initially shall serve as the President.
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(b) The Board of Managers may appoint such other officers as it deems
necessary, including one or more Vice Presidents, Assistant Vice Presidents,
Assistant Treasurers and Assistant Secretaries. Each such officer shall have
such authority and shall perform such duties as may be provided herein or as the
Board of Managers may prescribe.
(c) If additional officers are elected or appointed during the year,
each of them shall hold office until the next annual meeting of the Board of
Managers and until his successor is appointed or until his earlier death,
resignation or removal.
SECTION 6.3 Resignation, Removal and Vacancies.
-----------------------------------
(a) Any officer may resign at any time by giving written notice to the
Chairperson, the President or the Secretary of the Company, and such resignation
shall take effect at the time specified therein or, if the time when it shall
become effective shall not be specified therein, when accepted by action of the
Board of Managers. Except as aforesaid, the acceptance of such resignation shall
not be necessary to make it effective.
(b) All officers and agents elected or appointed by the Board of
Managers shall be subject to removal at any time by the Board of Managers, with
or without cause.
(c) A vacancy in any office may be filled for the unexpired portion of
the term in the same manner as provided for election or appointment to such
office.
SECTION 6.4 Duties and Functions.
---------------------
(a) President. The President shall be the chief executive officer of
the Company and shall have the supervision and control over, and responsibility
for, the day-to-day management of the operations of the Company, subject to the
general policy directions of the Chairperson and the Board of Managers, and
shall see that all orders and resolutions of the Board of Managers are carried
out and put into effect.
(b) Treasurer. The Treasurer shall keep and maintain, or cause to be
kept and maintained, adequate and correct accounts of the properties and
business transactions of the Company, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, surplus and Units.
The Treasurer shall disburse the funds of the Company as may be ordered by the
Chairperson, the Board of Managers or the President, taking proper vouchers for
such disbursements and shall render to the Chairperson, the Board of Managers
19
and the President, whenever they shall so request, an account of all of his
transactions as Treasurer and of the financial condition of the Company.
(c) Secretary. The Secretary shall give or cause to be given notice of
all meetings of the Board of Managers and the Members and keep the records of
all meetings of the Board of Managers and the Members. The Secretary shall be
custodian of all contracts, deeds, documents and all other indicia of title to
properties owned by the Company and of its other records and in general shall
have all powers incident to the office of Secretary and perform such duties as
may be prescribed by the Board of Managers or the President, under whose
supervision he shall be.
SECTION 6.5 Committees of Managers. The Board of Managers may, by
resolution or resolutions passed by a majority of the whole Board, designate one
or more committees, each committee to consist of one or more of the Managers of
the Company.
Except as herein provided, vacancies in membership of any committee
shall be filled by the vote of a majority of the whole Board of Managers. The
Board of Managers may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee. In the absence or disqualification of any member of a
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Managers to act at the
meeting in the place of any such absent or disqualified member. Members of a
committee shall hold office for such period as may be fixed by a resolution
adopted by a majority of the whole Board of Managers, subject, however, to
removal at any time by the vote of a majority of the whole Board of Managers.
SECTION 6.6 Powers and Duties of Committees. Any committee, to the extent
provided in the resolution or resolutions creating such committee, shall have
and may exercise the powers of the Board of Managers in the management of the
business and affairs of the Company and may authorize the seal of the Company to
be affixed to all papers which may require it. No such committee shall have the
power or authority with regard to amending the Certificate of Formation,
adopting an agreement of merger or consolidation, recommending to the Members
the sale, lease or exchange of all or substantially all of the Company's
property and assets, recommending to the Members a dissolution of the Company or
a revocation of a dissolution or amending this Agreement.
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ARTICLE VII
Books and Records; Right of Inspection; Tax Matters
SECTION 7.1 Books and Records. The Company will keep accurate books and
records relating to transactions with respect to the assets of the Company based
on Book Values using federal income tax accounting principles. The Company will
also keep the following books and records at the Company's principal office: (i)
a current list of the full name and last known business, residence or mailing
address of each Member, (ii) a copy of the Certificate of Formation and of this
Agreement, (as well as any signed powers of attorney pursuant to which any such
document was executed); (iii) a copy of the Company's federal, state and local
income tax returns and reports, and annual financial statements of the Company,
for all Fiscal Years; and (iv) minutes, or minutes of action (or written consent
without a meeting), of every meeting of the Members or the Board of Managers.
SECTION 7.2 Information. Each Member has the right upon reasonable notice
to obtain from the Company: (i) a current list of the full name and last known
business, residence or mailing address of each Member; (ii) a copy of the
Certificate of Formation and of this Agreement (as well as any signed powers of
attorney pursuant to which any such document was executed); (iii) a copy of the
Company's federal, state and local income tax returns and reports, and annual
financial statements of the Company, for all Fiscal Years; (iv) minutes (or
written consents without a meeting) of every meeting (or action taken by
consent) of the Members or the Board of Managers; and (v) such other information
as the Company shall be required to make available to the Members pursuant to
Section 18-305 of the Act.
SECTION 7.3 Tax Returns. The Company, at its expense, will cause the
preparation and timely filing (including extensions) of all tax returns required
to be filed by the Company pursuant to the Code as well as all other required
state and local tax returns in each jurisdiction in which the Company is
required to file by applicable law. Within ninety (90) days following the end of
each Fiscal Year, the Company will provide each Member with all necessary tax
reporting information, a copy of the Company's informational federal income tax
return for such Fiscal Year and such other information as is reasonably
necessary to enable the Members to comply with their tax reporting requirements.
SECTION 7.4 Tax Elections. The Company shall make and revoke such tax
elections as the Board of Managers may from time to time determine.
SECTION 7.5 Tax Matters Partner. The Members by a two-thirds vote of all
votes permitted hereunder shall designate one Member to be the tax matters
partner (the "Tax Matters Partner") under ss. 6231(a)(7) of the Code. Until
further action by the Company, ▇▇▇▇▇▇▇ is hereby designated as the Tax Matters
Partner.
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SECTION 7.6 No Partnership. The classification of the Company as a
partnership will apply only for federal (and, as appropriate, state and local)
income tax purposes. This characterization, solely for tax purposes, does not
create or imply a general partnership among the Members for state law or any
other purpose. Instead, the Members acknowledge the status of the Company as a
limited liability company formed under the Act.
ARTICLE VIII
Capital Accounts
SECTION 8.1 Maintenance. Each Member agrees that a single capital account
(each a "Capital Account") will be established and maintained for each Member
and will be credited, charged and otherwise adjusted as provided in this Article
VIII and as required by the regulations promulgated under ss.704(b) of the Code
(the "ss.704(b) Regulations"). The initial Capital Account balance for each
Member is the contribution amount set forth in Schedule I to this Agreement. The
Capital Account of each Member will be:
(a) credited with (i) each Capital Contribution made by such Member,
(ii) such Member's allocable share of Net Profits, including items of income and
gain exempt from tax, and (iii) all other items properly charged to the Capital
Account of such Member as required by the ss.704(b) Regulations; and
(b) charged with (i) each Distribution made to such Member by the
Company, (ii) such Member's allocable share of Net Losses, and (iii) all other
items properly charged to the Capital Account of such Member as required by the
ss.704(b) Regulations.
SECTION 8.2 Adjustments. The Members intend to comply with the ss.704(b)
Regulations in all respects, and agree to adjust their Capital Accounts to the
full extent that the ss.704(b) Regulations may apply (including, without
limitation, applying the concepts of the minimum gain chargebacks and qualified
income offsets). To this end, each Member agrees to make any Capital Account
adjustment that, in the opinion of tax counsel selected by the Board of
Managers, is necessary or appropriate to maintain equality between the aggregate
Capital Accounts of the Members and the amount of capital of the Company
reflected on its balance sheet (as computed for book purposes), as long as such
adjustments are consistent with the underlying economic arrangement of the
Members and, wherever practicable, are based on and consistent with federal tax
accounting principles.
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SECTION 8.3 Market Value Adjustments. Each Member agrees that the Company
shall make appropriate adjustments to the Capital Account of such Member upon
any Transfer of all or any portion of a Unit, including those that apply upon
the constructive liquidation of the Company under ss. 708(b)(1) of the Code or
the liquidation of a Member's Units, all in accordance with the ss. 704(b)
Regulations.
SECTION 8.4 Transfer. Each Member agrees that, if all or any part of its
Units is transferred in accordance with this Agreement, except to the extent
otherwise provided in the ss.704(b) Regulations, upon admission of the
transferee as a Member, the Capital Account of the transferor that is
attributable to the transferred Units will carry over to the transferee.
ARTICLE IX
Allocations and Accounting Method
SECTION 9.1 Determination. Each Member agrees that for each Fiscal Year,
Net Profits and Net Losses, and all other items of income, gain, loss and
deduction of the Company, will be determined based upon Book Values in
accordance with federal income tax accounting principles consistently applied
(including the ss.704(b) Regulations).
SECTION 9.2 Allocations of Net Profits, Net Losses, and Other Items. Each
Member agrees that:
(a) the Net Profits of the Company for each Fiscal Year shall be
allocated (i) first, to ▇▇▇▇▇▇▇ until the aggregate amount of all Net Profits
allocated pursuant to this Section 9.2(a)(i) for all Fiscal Years equals the
Pre-Formation Expenses; (ii) next, pro rata among the Members in accordance with
any Net Losses allocated to such Members pursuant to Section 9.2(b) until the
aggregate amount of Net Profits allocated pursuant to this Section 9.2(a)(ii)
equals the aggregate amount of Net Losses allocated to such Members for all
prior Fiscal Years pursuant to Section 9.2(b); and (iii) thereafter, in
proportion to the Members' holdings of Units registered on the Company's books
on the last day of the Fiscal Year (subject to Section 9.4(b));
(b) the Net Losses of the Company for each Fiscal Year shall be
allocated in proportion to the Members' holdings of Units registered on the
Company's books on the last day of the Company's Fiscal Year (subject to Section
9.4(b)); and
(c) notwithstanding Sections 9.2(a) and 9.2(b), expenses or deductions
attributable to Pre-Formation Expenses to the extent otherwise includible in the
determination of Net Profit or Net Losses for such Fiscal Year shall be
23
allocated to ▇▇▇▇▇▇▇ and the Net Profits and Net Losses allocable pursuant to
Section 9.2(a) or 9.2(b), as the case may be, for the period that includes such
deductions or expenses attributable to Pre- Formation Expenses shall be
determined without regard to such deductions or expenses.
SECTION 9.3 Allocations in the Event of Property Distribution. In the event
that property other than cash is distributed to any Member, such property shall
be deemed sold at its Fair Market Value immediately prior to its Distribution,
and any gain or loss resulting from such deemed sale shall be allocated among
the Members in accordance with Section 9.2. Similarly, in accordance with the
ss.704(b) Regulations and Section 9.1(b)(iii), the Capital Account of any Member
receiving a Distribution of such property shall be charged based on the Fair
Market Value (as determined in the preceding sentence) of the property
distributed to such Member.
SECTION 9.4 Special Rules. Notwithstanding the general allocation rules set
forth in Section 9.2 or the allocation rules set forth in Section 9.3, the
following special allocation rules shall apply under the circumstances
described.
(a) Deficit Capital Account and Nonrecourse Debt Rules.
(i) Limitation on Loss Allocations. The Net Losses allocated to
any Member pursuant to Section 9.2 with respect to any Fiscal Year shall not
exceed the maximum amount of Net Losses that can be so allocated without causing
such Member to have a deficit in its Adjusted Capital Account at the end of such
Fiscal Year. All Net Losses in excess of the limitation set forth in the
preceding sentence of this Section 9.4(a)(i) shall be allocated (1) first, to
the maximum extent permitted by the Code and the Regulations, pro rata among the
Members having positive balances in their Adjusted Capital Accounts (after
giving effect to the allocations required by Section 9.2 in the ratio obtained
by dividing (x) each such Member's Capital Account balance by (y) the sum of all
such Members' Capital Account balances and (2) second, any remaining amount to
the Members in the manner required by the Code and the Regulations.
(ii) Qualified Income Offset. If in any Fiscal Year a Member
unexpectedly receives an adjustment, allocation or distribution described in
sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Regulations, and such
adjustment, allocation or distribution causes or increases a deficit in the
Adjusted Capital Account for such Member, then, before any other allocations are
made under this Agreement or otherwise, such Member shall be allocated items of
income and gain (consisting of a pro rata portion of each item of income,
including gross income and gain) in an amount and manner sufficient to eliminate
such deficit in the Adjusted Capital Account as quickly as possible.
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(iii) Company Minimum Gain Chargeback. If there is a net decrease
in Company Minimum Gain during any Fiscal Year, each Member shall be allocated
items of income and gain for such Fiscal Year (and, if necessary, for subsequent
Fiscal Years) in proportion to, and to the extent of, an amount equal to the
portion of such Member's share of the net decrease in Company Minimum Gain
during such Fiscal Year, subject to the exceptions set forth in sections
1.704-2(f)(2), (3) and (5) of the Regulations; provided that, if the Company has
any discretion as to an exception set forth in section 1.704-2(f)(5), the Tax
Matters Partner shall exercise such discretion on behalf of the Company. The Tax
Matters Partner shall, if the application of this Section 9.4(a)(iii) would
cause a distortion in the economic arrangement among the Members, ask the
Commissioner of the Internal Revenue Service to waive the Company Minimum Gain
chargeback requirements pursuant to section 1.704-2(f)(4) of the Regulations. To
the extent that this Section is inconsistent with section 1.704-2(f) or
1.704-2(k) of the Regulations or incomplete with respect to such sections of the
Regulations, the Company Minimum Gain chargeback provided for herein shall be
applied and interpreted in accordance with such sections of the Regulations.
(iv) Member Minimum Gain Chargeback. If there is a net decrease
in Member Minimum Gain during any Fiscal Year, each Member with a share of such
Member Minimum Gain shall be allocated items of income and gain for such Fiscal
Year (and, if necessary, for subsequent Fiscal Years) in proportion to, and to
the extent of, an amount equal to such Member's share of the net decrease in
Member Minimum Gain during such Fiscal Year, subject to the exceptions set forth
in sections 1.704-2(f)(2),(3), and (5) of the Regulations as referenced by
section 1.704-2(i)(4) of the Regulations. The Tax Matters Partner shall, if the
application of this Section 9.4(a)(iv) would cause a distortion in the economic
arrangement among the Members, ask the Commissioner of the Internal Revenue
Service to waive the Member Minimum Gain chargeback requirement pursuant to
section 1.704- 2(i)(4) of the Regulations. To the extent that this Section
9.4(a)(iv) is inconsistent with sections 1.704-2(i)(4) or 1.704- 2(k) of the
Regulations or incomplete with respect to such sections of the Regulations, the
Member Minimum Gain chargeback provided for herein shall be applied and
interpreted in accordance with such sections of the Regulations.
(v) Member Nonrecourse Deductions. Member Nonrecourse Deductions
shall be allocated among the Members in accordance with the ratios in which the
Members share the economic risk of loss for the Member Nonrecourse Debt that
gave rise to those deductions as determined under section 1.752-2 of the
Regulations. This allocation is intended to comply with the requirements of
section 1.704-2(i) of the Regulations and shall be interpreted and applied
consistent therewith.
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(vi) Limited Effect and Interpretation. The special rules set
forth in Sections 9.4(a)(i), (ii), (iii), (iv) and (v) (the "Regulatory
Allocations") shall be applied only to the extent required by applicable
Regulations for the resulting allocations provided for in this Section 9.4,
taking into account such Regulatory Allocations, to be respected for federal
income tax purposes. The Regulatory Allocations are intended to comply with the
requirements of sections 1.704-1(b), 1.704-2 and 1.752-1 through 1.752-5 of the
Regulations and shall be interpreted and applied consistently therewith.
(vii) Curative Allocations. The Regulatory Allocations may not be
consistent with the manner in which the Members intend to divide the Net
Profits, Net Losses and similar items. Accordingly, Net Profits, Net Losses and
other items will be reallocated among the Members in a manner consistent with
section 1.704-1(b) and 1.704-2 of the Regulations so as to negate as rapidly as
possible any deviation from the manner in which Net Profits, Net Losses and
other items are intended to be allocated among the Members pursuant to Section
9.2 that is caused by the Regulatory Allocations.
(viii) Change in Regulations. If the Regulations incorporating
the Regulatory Allocations are hereafter changed or if new Regulations are
hereafter adopted, and such changed or new Regulations, in the opinion of
independent tax counsel for the Company, make it necessary to revise the
Regulatory Allocations or provide further special allocation rules in order to
avoid a significant risk that a material portion of any allocation set forth in
this Article IX would not be respected for federal income tax purposes, the
Members shall make such reasonable amendments to this Agreement as, in the
opinion of such counsel, are necessary or desirable, taking into account the
interests of the Members as a whole and all other relevant factors, to avoid or
reduce significantly such risk to the extent possible without materially
changing the amounts allocable and distributable to any Member pursuant to this
Agreement.
(b) Change in Member's Interests. If there is a change in any Member's
share of the Net Profits, Net Losses or other items of the Company during any
Fiscal Year, allocations among the Members shall be made in accordance with
their interests in the Company from time to time during such Fiscal Year in
accordance with section 706 of the Code, using the closing-of-the-books method,
except that Depreciation, amortization and similar items shall be deemed to
accrue ratably on a daily basis over the entire Fiscal Year during which the
corresponding asset is owned by the Company if such asset is placed in service
prior to or during the Fiscal Year.
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SECTION 9.5 Tax Allocations.
----------------
(a) In General. Except as set forth in Section 9.5(b), allocations for
tax purposes of items of income, gain, loss and deduction, and credits and basis
therefor, shall be made in the same manner as allocations for book purposes as
set forth in Section 9.2. Allocations pursuant to this Section 9.5 are solely
for purposes of federal, state and local income taxes and shall not affect, or
in any way be taken into account in computing, any Member's Capital Account or
share of Net Profits, Net Losses, other items or distributions pursuant to any
provision of this Agreement.
(b) Special Rules.
--------------
(i) Elimination of Book/Tax Disparities. In determining a
Member's allocable share of the Company's taxable income, the Member's allocable
share of each item of Net Profits and Net Losses shall be properly adjusted to
reflect the difference between such Member's share of the adjusted tax basis and
the Book Value of the Company's assets used in determining such item. With
respect to depreciation, in determining the taxable income allocable to such
Member, Net Profits and Net Losses allocable to such Member shall be adjusted by
eliminating Depreciation allocable to such Member and substituting therefor tax
depreciation allocable to such Member determined by reference to such Member's
share of the tax basis of the Company's assets. This provision is intended to
comply with the requirements of section 704(c) of the Code and section
1.704-1(b)(2)(iv)(f) of the Regulations and shall be interpreted and applied
consistently therewith.
(ii) Allocation of Items Among Members. Except as otherwise
provided in Section 9.5(b)(i), each item of income, gain, loss and deduction and
all other items governed by section 702(a) of the Code shall be allocated among
the Members in proportion to the allocation of Net Profits and Net Losses set
forth in Section 9.2, provided that any gain recognized from any disposition of
a Company asset that is treated as ordinary income because it is attributable to
the recapture of any depreciation or amortization shall be allocated among the
Members in the same ratio as the prior allocations of Net Profits, Net Losses or
other items that included such depreciation or amortization, but not in excess
of the gain otherwise allocable to each Member.
(iii) Tax Credits. All tax credits shall be allocated among the
Members in accordance with applicable law.
(c) Conformity of Reporting. The Members are aware of the income tax
consequences of the allocations made by this Section 9.5 and hereby agree to be
bound by the provisions of this Section 9.5 in reporting their shares of the
Company's profits, gains, income, losses, deductions, credits and other items
for income tax purposes.
27
ARTICLE X
Distributions
SECTION 10.1 Distributions. Distributions of Available Cash, if any, shall
be made at such time and in such amounts as the Board of Managers shall
determine. Notwithstanding anything else to the contrary contained herein,
Distributions in each Fiscal Year shall be made first to satisfy the
Distributions required by Section 10.6 hereof and thereafter as follows:
(a) to ▇▇▇▇▇▇▇ until the aggregate amount of the Distributions made
pursuant to this Section 10.1(a) for all Fiscal Years is equal to the
Pre-Formation Expenses; and
(b) thereafter all Distributions shall be made to all Members
(including ▇▇▇▇▇▇▇) pro rata in accordance with the Units held as of the record
date(s) set for such Distributions.
SECTION 10.2 Withholding. (a) If required by the Code or by state or local
law, the Company will withhold any required amount from Distributions to a
Member for payment to the appropriate taxing authority. Any amount so withheld
from a Member will be treated as a Distribution by the Company to such Member.
Each Member agrees to timely file any document that is required by any taxing
authority in order to avoid or reduce any withholding obligation that would
otherwise be imposed on the Company.
(b) To the extent any amount is required to be withheld with respect
to a Member and paid over to an appropriate taxing authority which amount is in
excess of the amounts distributed to such Member in respect of such withholding,
the amounts paid to the taxing authority in respect of such withholding shall be
treated as a Distribution to such Member and a corresponding Distribution shall
be made to each other Member in proportion to the Capital Account registered on
the Company's books in such Member's name. To the extent that cash is not
available to make any of the Distributions required under this Section 10.2(b),
such Distribution shall be delayed and paid out of the next Available Cash.
SECTION 10.3 Offset. The Company may offset all amounts owing to the
Company by a Member against any Distribution to be made to such Member.
SECTION 10.4 Limitation Upon Distributions. No Distribution shall be
declared and paid to the extent that, at the time of the Distribution, after
giving effect to the Distribution, all liabilities of the Company (other than
28
liabilities to Members on account of their interest in the Company and
liabilities for which recourse of creditors is limited to specified property of
the Company) exceed the Fair Market Value of the assets of the Company (except
that the Fair Market Value of property that is subject to a liability for which
the recourse of creditors is limited shall be included in the assets of the
Company only to the extent that the Fair Market Value of such property exceeds
such liability). To the extent that any Distribution made pursuant to Sections
10.1 and 10.2 would be limited by reason of this Section 10.4, the aggregate
Distributions under Sections 10.1 and 10.2 which includes such Distribution
shall be repayable to extent provided in Section 18- 607 of the Act.
SECTION 10.5 Accounting Period and Method. The accounting period of the
Company shall be the Fiscal Year. For income tax and financial accounting
purposes, the Company will use the accrual method of accounting.
SECTION 10.6 Tax Distributions. Notwithstanding Section 10.1, on or before
April 1 of each Fiscal Year, the Company shall distribute to each Member an
amount in cash of Available Cash, if any, equal to the product of (i) the Net
Profits allocated to such Member for the preceding Fiscal Year, and (ii) the
Combined Marginal Rate for such preceding Fiscal Year.
ARTICLE XI
Indemnification
SECTION 11.1 Indemnification. (a) The Managers and each officer
(collectively, the "Indemnified Party") shall, in accordance with this Article
XI, be indemnified and held harmless by the Company from and against any and all
losses, claims, damages, liabilities, costs, expenses (including legal and other
professional fees and disbursements), judgments, fines, settlements, and other
amounts (collectively, the "Indemnification Obligations") arising from any and
all claims, demands, actions, suits or proceedings (civil, criminal,
administrative or investigative), actual or threatened, in which such
Indemnified Party may be involved, as a party or otherwise, by reason of such
Indemnified Party's service to, or on behalf of, or management of the affairs
of, the Company, or rendering of advice or consultation with respect thereto, or
which relate to the Company, its properties, business or affairs, whether or not
the Indemnified Party continues to be a Manager or officer at the time any such
Indemnification Obligation is paid or incurred, provided that such
Indemnification Obligation resulted from a mistake of judgment, or from action
or inaction of such Indemnified Party that did not constitute gross negligence,
willful misconduct or bad faith. The Company shall also indemnify and hold
29
harmless any Indemnified Party from and against any Indemnification Obligation
suffered or sustained by such Indemnified Party by reason of any action or
inaction of any employee, broker or other agent of such Indemnified Party,
provided, that such employee, broker or agent was selected, engaged or retained
by such Indemnified Party with reasonable care. The termination of a proceeding
by judgment, order, settlement, conviction or upon a plea of nolo contendere, or
its equivalent, shall not, of itself, create a presumption that such
Indemnification Obligation resulted from the gross negligence, willful
misconduct or bad faith of such Indemnified Party. Expenses (including legal and
other professional fees and disbursements) incurred in any proceeding will be
paid by the Company, as incurred, in advance of the final disposition of such
proceeding upon receipt of an undertaking by or on behalf of such Indemnified
Party to repay such amount if it shall ultimately be determined that such
Indemnified Party is not entitled to be indemnified by the Company as authorized
hereunder.
(b) To the fullest extent permitted by applicable law, expenses
(including reasonable legal fees) incurred by an Indemnified Party in defending
any claim, demand, action, suit or proceeding relating to Section 11.1(a) shall,
from time to time, be advanced by the Company prior to the final disposition of
such claim, demand, action, suit or proceeding upon receipt by the Company of an
undertaking by or on behalf of the Indemnified Party to repay such amount if it
shall be determined by a court of competent jurisdiction having final or
unappealed dispositive authority over such matter that the Indemnified Party is
not entitled to be indemnified as authorized in this Article XI.
SECTION 11.2 Indemnification Not Exclusive. The indemnification provided by
this Article XI shall not be deemed to be exclusive of any other rights to which
each Indemnified Party may be entitled under any agreement, or as a matter of
law, or otherwise, both as to action in such Indemnified Party's official
capacity and to action in another capacity, and shall continue as to such
Indemnified Party who has ceased to have an official capacity for acts or
omissions during such official capacity or otherwise when acting at the request
of the Board of Managers, or any Person granted authority thereby, and shall
inure to the benefit of the heirs, successors and administrators of such
Indemnified Party.
ARTICLE XII
Dissolution
SECTION 12.1 Dissolution. Dissolution of the Company will occur upon the
happening of any of the following events: (a) an Event of Withdrawal of a
Member, unless, after giving effect to the Event of Withdrawal, the Company is
continued as provided in Section 12.4; (b) the unanimous consent of all of the
Members; (c) the conversion of the Company into a corporation or other Person;
(d) the expiration of the term set forth in Section 2.4 hereof; or (e) the entry
of a decree of judicial dissolution pursuant to Section 18-802 of the Act.
30
SECTION 12.2 Event of Withdrawal. Within ten (10) days after the occurrence
of an Event of Withdrawal with respect to any Member, such Member (or such
Member's legal representative or other successor in interest) shall give notice
to the Company of the occurrence of such Event of Withdrawal. Except for the
Bankruptcy of a Member, which shall result in an immediate Event of Withdrawal
of such Member, any other Event of Withdrawal shall, in the absence of formal
notice of such Event of Withdrawal as required in the preceding sentence, be
deemed to occur upon the first date any other Member has actual notice of such
Event of Withdrawal.
SECTION 12.3 Bankruptcy. The bankruptcy or insolvency ("Bankruptcy") of a
Member will be deemed to occur when (a) such Person shall commence any case,
proceeding or other action (i) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, conservatorship or relief of debtors seeking to have an order
for relief entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or its
debts, or (ii) seeking appointment of a receiver, trustee, custodian,
conservator or other similar official for it or for all or any substantial part
of its assets, or such Person shall make a general assignment for the benefit of
its creditors; (b) there shall be commenced against such Person any case,
proceeding or other action of a nature referred to in clause (a) above that (i)
results in the entry of an order for relief or any such adjudication or
appointment or (ii) remains undismissed, undischarged or unbonded for a period
of sixty (60) days; or (c) there shall be commenced against such Person any
case, proceeding or other action seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or any substantial part of
its assets that results in the entry of an order for any such relief that shall
not have been vacated, discharged, or stayed or bonded pending appeal within
sixty (60) days from the entry thereof.
SECTION 12.4 Continuation. Upon the occurrence of an Event of Withdrawal
with respect to any Member, the Company will be continued if, within ninety (90)
days following such event, the remaining Member or Members holding a majority of
the remaining votes permitted hereunder consent(s) in writing to continue the
Company's business as a limited liability company under the Act and this
Agreement. If the business of the Company is so continued, an Event of
Withdrawal of one or more Members will not cause the Dissolution of the Company.
31
ARTICLE XIII
Liquidation
SECTION 13.1 Liquidation. Upon Dissolution of the Company, the Company will
immediately proceed to wind up its affairs and liquidate. The Liquidation of the
Company will be accomplished in a businesslike manner by such Person or Persons
designated by the Board of Managers, which Person(s) shall be entitled to
reasonable compensation therefore. A reasonable time will be allowed for the
orderly Liquidation of the Company and the discharge of liabilities to creditors
so as to enable the Company to minimize any losses attendant upon Liquidation.
Any gain or loss on disposition of any Company assets in Liquidation will be
allocated among the Members and credited or charged to Capital Accounts in
accordance with the provisions of this Agreement. Until the filing of the
certificate of cancellation under Section 13.5 and without affecting the
liability of Members and without imposing liability on the liquidating trustee,
the Person or Persons conducting the liquidation may settle and close the
Company's business, prosecute and defend suits, dispose of its property,
discharge or make provision for its liabilities, and make Distributions in
accordance with the priorities set forth in Section 13.2.
SECTION 13.2 Priority of Payment. The assets of the Company will be
distributed in Liquidation in the following order:
(a) to creditors, including Members who are creditors, by the payment
or provision for payment of the debts and liabilities of the Company and the
expenses of Liquidation;
(b) to the setting up of any reserves that are reasonably necessary
for any contingent or unforeseen liabilities or obligations of the Company; and
(c) to the Members pro rata in proportion to the balances in their
Capital Accounts.
SECTION 13.3 Timing. Final Distributions in Liquidation will be made by the
end of the Company's Fiscal Year in which such actual Liquidation occurs (or, if
later, within ninety (90) days after such event) in the manner required to
comply with the ss.704(b) Regulations. Payments of Distributions in Liquidation
may be made to a liquidating trust established by the Company for the benefit of
those entitled to payments under Section 13.2 in any manner consistent with this
Agreement and the ss.704(b) Regulations.
32
SECTION 13.4 Liquidating Reports. A report will be submitted with each
liquidating Distribution to the Members, showing the collections, disbursements
and Distributions during the period which is subsequent to any previous report.
A final report, showing cumulative collections, disbursements and Distributions,
will be submitted upon completion of the liquidation process.
SECTION 13.5 Certificate of Cancellation. Within ninety (90) days following
the Dissolution of the Company and the commencement of winding up of its
business, or at any other time there are no Members, the Company will file a
certificate of cancellation (to cancel the Certificate of Formation) with the
Secretary of State of the State of Delaware pursuant to the Act. At such time,
the Company will also file an application for withdrawal of its certificate of
authority in any jurisdiction where it is then qualified to do business.
SECTION 13.6 Deficit Capital Account. Upon a liquidation of the Company
within the meaning of section 1.704-1(b)(2)(ii)(g) of the Regulations, if any
Member has a negative Capital Account (after giving effect to all contributions,
distributions, allocations and other adjustments for all Fiscal Years, including
the Fiscal Year in which such liquidation occurs), the Member shall have no
obligation to make any Capital Contribution, and the negative balance of any
Capital Account shall not be considered a debt owed by the Member to the Company
or to any other person for any purpose.
SECTION 13.7 Nonrecourse to Other Members. Except as provided by applicable
law or as expressly provided in this Agreement, upon Dissolution, each Member
shall receive a return of his Capital Contribution solely from the assets of the
Company. If the assets of the Company remaining after the payment or discharge
of the debts and liabilities of the Company is insufficient to return any
Capital Contribution of any Member, such Member shall have no recourse against
any other Member.
ARTICLE XIV
Transferability
SECTION 14.1 General. Except for a Transfer of some or all of its Units by
▇▇▇▇▇▇▇ to an Affiliate or a Transfer of any Unit or portion of a Unit by any
Member pursuant to Sections 14.2, 14.3. 14.4, or 14.5 hereof, no Member shall
Transfer to another Person any portion of a Unit without the prior written
consent of the Board of Managers and the Member or Members holding fifty percent
(50%) of the votes permitted hereunder. Notwithstanding anything else to the
contrary contained herein, no Unit, or any portion thereof, may be Transferred
unless the transferee executes and delivers to the Board of Managers an
instrument pursuant to which it agrees to be bound by the terms of this
Agreement. No Transfer of a Unit, or Transfer of an indirect interest in the
Company, or any portion of either thereof, shall be made if such Transfer would:
33
(a) result by itself, or in combination with any other previous
Transfers, in the termination of the Company as a partnership for federal income
tax purposes;
(b) result in the violation of the Securities Act of 1933, as amended,
or any other applicable federal or state laws;
(c) be a violation of or a default (or an event that, with notice or
the lapse of time or both, would constitute a default) under, or result in an
acceleration of any indebtedness under, any note, mortgage, loan agreement or
similar instrument or document to which the Company is a party;
(d) result in or create a "prohibited transaction" or cause the
Company or a Member to be or become a "party in interest", as such terms are
defined in section 3(3) of ERISA, or a "disqualified person", as defined in
section 4975 of the Code, with respect to any "plan", as defined in section
3(14) of ERISA and/or section 4975 of the Code; or result in or cause the
Company or any Member to be liable for tax under Chapter 42 of the Code;
(e) be a Transfer to an individual who is not legally competent or who
has not achieved his or her majority under the law of the state (excluding
trusts for the benefit of minors);
(f) cause the Company or any Member (other than the transferee) to be
subject to any excise tax pursuant to Chapter 42A of Subtitle D of the Code; or
(g) be a Transfer to a "tax-exempt entity" or a "tax-exempt controlled
entity" within the meaning of sections 168(h)(2) and 168(h)(6)(F)(iii),
respectively, of the Code.
The Company shall not transfer on its books any Unit or issue any document
representing any interest in the Company unless, in the opinion of counsel to
the Company, there has been compliance with all of the material conditions
hereof and any such attempted Transfer in violation of this Agreement shall be
void and of no effect.
SECTION 14.2 First Refusal Rights. (a) If Siebert, Brandford, Shank, or any
other holder of Units receives a bona fide offer or enters or intends to enter
into an agreement (the "Offer") for the sale of one or more of the Units held of
record by such holder to a third party (the "Outside Party"), such holder (the
"Selling Holder") shall have the Offer reduced to writing and shall
34
give notice (the "Option Notice") to the Company and the other Members
containing the name and address of the Outside Party, which notice shall be
accompanied by a copy of the Offer. The Units subject to the Offer are referred
to herein as the "Offered Units".
(b) Upon the giving of the Option Notice, ▇▇▇▇▇▇▇ shall have the
right, if ▇▇▇▇▇▇▇▇▇ and/or Shank are the Selling Holder(s), and ▇▇▇▇▇▇▇▇▇ and
▇▇▇▇▇ shall have the right, if ▇▇▇▇▇▇▇ is the Selling Holder, but not the
obligation (the "First Right") to purchase, at the price, on the terms and
subject to the conditions specified in the Offer, all or part of the Offered
Units covered by the Option Notice. Within thirty (30) days after the date of
the Option Notice, the other Member(s) as specified above shall notify the
Selling Holder(s) and all of the other Members (the "First Notice") whether and
to what extent it intends to exercise the First Right. Failure to deliver the
First Notice within such period shall constitute a waiver of the First Right.
(c) In the event that the other Members specified in paragraph (b)
above do not exercise the First Right as to all of the Offered Units, each of
the other Members shall have the right, but not the obligation (the "Member
Right") to purchase, at the price, on the terms and subject to the conditions
specified in the Offer, such Member's Proportionate Share of the Offered Units
by notifying the Selling Holder, the other Members and the Company in writing
(the "Member Notice") within forty (40) days after the date of the Option Notice
whether and to what extent such Member intends to exercise the Member Right. If
any Member fails to exercise the Member Right as to all of its Proportionate
Share of the Offered Units, then any of the other Members shall have the right
to purchase all or part of the Offered Units that such Member has elected not to
purchase by amending its respective Member Notice within five (5) days after the
date that it receives notice that any other Member has so declined to exercise
the Member Right in full. Failure to deliver the Member Notice within the
applicable periods shall constitute a waiver of such Member's purchase right as
to the Offered Units.
(d) The Selling Holder(s) shall have the obligation to sell to the
other Members such portion of the Offered Units as are covered by the First
Notice and the Member Notice, and the Selling Holder(s) may sell the balance of
the Offered Units (or all of the Offered Units if no such notices have been
given) to the Outside Party on terms not more favorable to such Outside Party
than those contained in the Offer. In the event that such terms are more
favorable or if such sale to the Outside Party is not consummated within the
time period specified herein, the Offered Units shall again be subject to the
restrictions contained in this Agreement.
35
(e) The closing for any purchase of Offered Units by any of the
Members or the Outside Party pursuant to this Section 14.2 shall be held at
10:00 A.M. (local time) at the offices of the Company on the sixtieth (60th) day
after the date of the Option Notice or at such other time and place as the
parties shall agree. At the closing, the applicable Members and/or the Outside
Party, as the case may be, shall pay for the Offered Units in accordance with
the terms of the Offer. At any closing pursuant to this Section 14.2, the
Selling Holder(s) shall deliver certificates representing the Units being
Transferred, free and clear of all liens, charges and encumbrances and properly
endorsed for Transfer.
SECTION 14.3 Right to Compel Sale. (a) If ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ (the
"transferring party") proposes to sell all of the Units then owned by him, her
or it to a third party in an arms-length transaction in which the consideration
to be received for such Units consists of cash and/or marketable securities,
then ▇▇▇▇▇▇▇ may require ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ and any other Member or Unit holder to
sell, and ▇▇▇▇▇▇▇▇▇ and/or Shank may require ▇▇▇▇▇▇▇ and any other Member of
Unit holder to sell, all of the Units owned by him, her or it (the "Designated
Units") to the third party for the same consideration per Unit and otherwise on
the same terms and conditions upon which such Member is selling its Units
pursuant to the provisions set forth in this Section 14.3.
(b) ▇▇▇▇▇▇▇ shall send written notice of the exercise of such rights
pursuant to this Section 14.3 to Brandford, Shank, and any other Member or Unit
holder, and ▇▇▇▇▇▇▇▇▇ and/or Shank shall send written notice of the exercise of
such rights pursuant to this Section 14.3 to ▇▇▇▇▇▇▇ and any other Member or
Unit holder, setting forth the consideration per Unit to be paid by the third
party and the other terms and conditions of such transaction. Within twenty (20)
days following the date of the notice, Siebert, Brandford, Shank, and any other
Member or Unit holder shall deliver to the transferring party certificates
representing the Units held by him, her, or it duly endorsed, together with all
other transfer documents reasonably required to be executed in connection with
such transaction. In the event that Brandford, Shank, or any other Member or
Unit holder should fail to deliver such certificates to the transferring party,
the Company shall cause the books and records of the Company to show that such
Units are bound by the provisions of this Section 14.3 and that such Units shall
be transferred only to the third party upon surrender for transfer by the holder
thereof.
(c) If, within ninety (90) days after the transferring party gives
such notice, the sale of all Units in accordance herewith has not been
completed, the transferring party shall return to ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ or ▇▇▇▇▇,
and any other Member or Unit holder all certificates representing Units that
Siebert,Brandford, Shank, or any Member or Unit holder delivered for sale, and
all the restrictions on sale or other disposition contained in this Agreement
with respect to Units owned by all Persons shall again be in effect.
36
(d) Simultaneously with the consummation of the sale of the Units of
all Members pursuant to this Section 14.3, the transferring party shall notify
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ or ▇▇▇▇▇, and any other Member or Unit holder of the
consummation of the sale, and shall: (i) cause the purchaser to remit directly
to ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ or Shank, and any other Member or Unit holder the total
sales price for such Person's Units sold or otherwise disposed of pursuant
hereto, and (ii) furnish such other evidence of the completion and time of
completion of such sale or other disposition and the terms thereof as may be
reasonably requested by any Member or Unit holder.
SECTION 14.4 Right to Purchase. (a) Upon (i) the death or Disability of
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ or any other Member who is also an employee or officer of the
Company, directly or indirectly, or (ii) the termination of any such Person's
employment directly or indirectly with the Company for any reason (the deceased,
disabled or terminated Member being known as the "Affected Member"), the Company
shall send a notice in writing to all Members informing them of such occurrence
(the "Purchase Notice").
(b) Upon the giving of the Purchase Notice, whichever of ▇▇▇▇▇▇▇▇▇ or
Shank who has not died, become disabled or been terminated (the "Non-Affected
Member") shall have the right, but not the obligation, to purchase, and the
Affected Member (or his duly appointed legal representative) shall sell, any or
all of the Units owned by the Affected Member for the purchase price and in
accordance with the procedures set forth in this Section 14.4. Within thirty
(30) days after the date of the Purchase Notice, the Non-Affected Member shall
notify the Affected Member or his duly appointed legal representative and all of
the other Members whether and to what extent he intends to exercise his rights
under this Section 14.4. Failure to deliver such notice within such period shall
constitute a waiver of the Non-Affected Member's rights under this Section 14.4.
(c) In the event that the Non-Affected Member does not exercise his
purchase option as to all of the Affected Member's Units, ▇▇▇▇▇▇▇ and each of
the other Members shall have the right, but not the obligation (the "▇▇▇▇▇▇▇
Right"), to purchase, at the price set forth in this Section 14.4, such Member's
Proportionate Share of the Affected Member's Units not claimed by the
Non-Affected Member by notifying the Affected Member or his duly appointed legal
representative, the other Members and the Company in writing (the "▇▇▇▇▇▇▇
Notice") within forty (40) days after the date of the Purchase Notice whether
and to what extent such Member intends to exercise its rights under this Section
37
14.4. If any Member fails to exercise its rights as to all of its Proportionate
Share of the Affected Member's Units, then any of the other Members shall have
the right to purchase all or part of the Affected Member's Units that such
Member has elected not to purchase by amending its respective notice within five
(5) days after the date that it receives notice that any other Member has so
declined to exercise its rights in full. Failure to deliver any notice required
under this Section 14.4 within the applicable periods shall constitute a waiver
of such Member's purchase rights as to the Affected Member's Units.
(d) The purchase price for the Units purchased pursuant to this
Section 14.4 shall be the Book Value of the Units owned by the Affected Member
(as determined by the Company's independent certified public accountants in
accordance with generally accepted accounting principles consistently applied
and valued) on the date of the Affected Member's death, disablement, or
termination of employment; provided, however, that if:
(i) the Affected Member's employment is terminated by the Company
due to the Affected Member's death, Disability or termination of employment; AND
(ii) the Book Value of the Affected Member's Units on the date of
determination is less than the Fair Market Value of the Units on such date as
determined in good faith by the Board of Managers; THEN
(iii) the purchase price for the Affected Member's Units
purchased pursuant to this Section 14.4 shall be such Fair Market Value of the
Affected Member's Units.
(e) The closing for any purchase of Units by the Non- Affected Member,
▇▇▇▇▇▇▇ and/or any other Members pursuant to this Section 14.4 shall be held at
10:00 A.M. (local time) at the offices of the Company on the sixtieth (60th) day
after the date of the Purchase Notice or at such other time and place as the
parties shall agree. At the closing, the Non-Affected Member, ▇▇▇▇▇▇▇ and/or the
other Members, as the case may be, shall pay for the Affected Member's Units in
accordance with the price determined in Section 14.4(d) above. At any closing,
the Affected Member shall deliver certificates representing the Units being
Transferred, free and clear of all liens, charges and encumbrances and properly
endorsed for Transfer.
SECTION 14.5 Call Right. (a) In the event that at any time the aggregate
Net Losses for all Fiscal Years shall exceed the aggregate Net Profits for all
Fiscal Years by One Million Dollars ($1,000,000) or more (such excess being the
"Deficit" and such event being the "Triggering Event"), ▇▇▇▇▇▇▇ shall be
entitled to purchase from each of ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ twenty percent (20%) of
all the Units held by such Person (the "▇▇▇▇▇▇▇ Call Right") and ▇▇▇▇▇▇▇▇▇ and
▇▇▇▇▇ shall sell such Units to ▇▇▇▇▇▇▇ at the price and in accordance with the
procedures set forth in this Section 14.5 unless ▇▇▇▇▇▇▇▇▇ and/or Shank elect to
contribute to the Company the amount of the Deficit in cash.
38
(b) Within thirty (30) days after the date of the Triggering Event,
▇▇▇▇▇▇▇ shall notify ▇▇▇▇▇▇▇▇▇ and Shank in writing (the "▇▇▇▇▇▇▇ Call Notice")
whether and to what extent it intends to exercise the ▇▇▇▇▇▇▇ Call Right.
Failure to deliver the ▇▇▇▇▇▇▇ Call Notice within such period shall constitute a
waiver of the ▇▇▇▇▇▇▇ Call Right. Within thirty (30) days after the ▇▇▇▇▇▇▇ Call
Notice, ▇▇▇▇▇▇▇▇▇ and Shank shall have notify ▇▇▇▇▇▇▇ whether they intend to
contribute to the Company the amount of the Deficit in cash. If they do not so
elect, ▇▇▇▇▇▇▇ shall be entitled to purchase the Units described in paragraph
(a) above. If they do so elect, they shall have thirty (30) days to do so. If
they fail to do so, ▇▇▇▇▇▇▇ shall again be entitled to purchase the Units
described in paragraph (a) above.
(c) The purchase price for the Units purchased pursuant to this
Section 14.5 shall be the Book Value of the Units as determined by the Company's
independent certified public accountants in accordance with generally accepted
accounting principles consistently applied and valued on the date of the
occurrence of the Triggering Event.
(d) The closing for any purchase of Units pursuant to this Section
14.5 shall be held at 10:00 a.m. at the offices of the Corporation on the
sixtieth (60th) day after the date of the ▇▇▇▇▇▇▇ Call Notice or at such other
time and place as the parties shall agree. At the closing, ▇▇▇▇▇▇▇ shall pay for
the Units and ▇▇▇▇▇▇▇▇▇ and Shank shall deliver certificates representing the
Units free and clear of all liens, charges and encumbrances and properly
endorsed for transfer.
SECTION 14.6 Transferee Rights. Any transferee of a Unit who is not
admitted as a Member in accordance with Section 3.6 of this Agreement has no
right (i) to participate or interfere in the management or administration of the
Company's business or affairs or (ii) to vote or agree on any matter affecting
the Company or any Member. The only rights of a transferee of a Unit who is not
admitted as a Member in accordance with Section 3.6 of this Agreement is to
receive the Distributions to which the transferor would otherwise be entitled
(to the extent of the Unit transferred) and to obtain such information
concerning the Company's books and financial affairs as provided herein.
However, each transferee will be subject to all of the obligations, restrictions
and other terms contained in this Agreement as if such transferee were a Member.
To the extent of any Unit transferred, the transferor Member shall not possess
any right or power as a Member or under the terms of this Agreement and may not
exercise any such right or power directly or indirectly on behalf of the
transferee.
39
SECTION 14.7 Effective Date. Any sale of a Member's Units or admission of a
Member pursuant to this Article XIV shall be deemed effective as of the last day
of the calendar month in which such sale or admission occurs.
SECTION 14.8 Secured Party. The pledge or hypothecation of, or the granting
of any security interest in, or other lien or encumbrance against, a Unit by any
Person shall be made only in accordance with this Agreement and will not cause
the occurrence of an Event of Withdrawal of such Member from the Company. In no
event will the Company have any liability or obligation to any Person by reason
of the Company's payment of a Distribution to any secured party as long as the
Company makes such payment in reliance upon written instructions from the holder
of record on whose behalf such Distributions are payable. Any secured party will
be entitled, with respect to the security interest granted, only to the
Distributions to which the holder of record granting the security interest is
entitled under this Agreement, and only if, as and when such Distribution is
made by the Company. Upon any foreclosure or other Transfer in lieu of
foreclosure of a Unit to any secured party, the Transfer will be subject to the
other provisions of this Agreement.
ARTICLE XV
General Provisions
SECTION 15.1 Waiver of Dissolution Rights. The Members agree that
irreparable damage would occur if any Member should bring an action for judicial
dissolution of the Company. Accordingly, each Member accepts the provisions
under this Agreement as such Member's sole entitlement on Dissolution of the
Company and waives and renounces such Member's right to seek a court decree of
dissolution or to seek the appointment by a court of a liquidator for the
Company. Each Member further waives and renounces any alternative rights which
might otherwise be provided by law upon the withdrawal or resignation of such
Member and accepts the provisions under this Agreement as such Member's sole
entitlement upon the happening of such event.
SECTION 15.2 Waiver of Partition Right. Each Member waives and renounces
any right that it may have prior to Dissolution and Liquidation to institute or
maintain any action for partition with respect to any property of the Company.
SECTION 15.3 Waivers Generally. No course of performance or other conduct
subsequently pursued or acquiesced in, and no oral agreement or representation
subsequently made, by the Members, whether or not relied or acted upon, and no
usage of trade, whether or not relied or acted upon, shall amend this Agreement
or impair or otherwise affect any Member's obligations pursuant to this
Agreement or any rights and remedies of a Member pursuant to this Agreement. No
delay in the exercise of any right will operate as a waiver of such right. No
40
single or partial exercise of any right will preclude its further exercise. A
waiver of any right on any one occasion will not be construed as a bar to, or
waiver of, any such right on any other occasion.
SECTION 15.4 Equitable Relief. If any Member proposes to Transfer all or
any part of its Units in violation of the terms of this Agreement, the Company
or any Member may apply to any court of competent jurisdiction for an injunctive
order prohibiting such proposed Transfer except upon compliance with the terms
of this Agreement, and the Company or any Member may institute and maintain any
action or proceeding against the Person proposing to make such Transfer to
compel the specific performance of this Agreement. Any attempted Transfer in
violation of this Agreement is null and void, and of no force and effect. The
Person against whom such action or proceeding is brought waives the claim or
defense that an adequate remedy at law exists, and such Person will not urge in
any such action or proceeding the claim or defense that such remedy at law
exists.
SECTION 15.5 Remedies for Breach. Unless otherwise set forth herein, the
rights and remedies of the Members set forth in this Agreement are neither
mutually exclusive nor exclusive of any right or remedy provided by law, in
equity or otherwise. The Members agree that all legal remedies (such as monetary
damages) as well as all equitable remedies (such as specific performance) will
be available for any breach or threatened breach of any provision of this
Agreement.
SECTION 15.6 Costs. If the Company or any Member retains counsel for the
purpose of enforcing or preventing the breach or any threatened breach of any
provision of this Agreement or for any other remedy relating to it, then the
prevailing party will be entitled to be reimbursed by the nonprevailing party
for all costs and expenses so incurred (including reasonable attorney's fees,
costs of bonds, and fees and expenses for expert witnesses).
SECTION 15.7 Counterparts. This Agreement may be signed in multiple
counterparts. Each counterpart will be considered an original, but all of them
in the aggregate will constitute one instrument.
SECTION 15.8 Notice. All notices under this Agreement will be in writing
and will be delivered or sent to a Member at the address or telecopier number
listed on Schedule I hereto, or at such other address or fax number as a Member
may give by notice to the Company and all other Members. Any notices given to
any Member in accordance with this Agreement will be deemed to have been duly
given: (a) on the date of receipt if personally delivered, (b) five (5) days
after being sent by mail, postage prepaid, (c) the date of receipt, if sent by
registered or certified mail, postage prepaid, (d) when sent by confirmed
41
facsimile or telecopier transmission, or (e) one (1) Business Day after having
been sent by a recognized overnight courier service.
SECTION 15.9 Date of Performance. Whenever this Agreement provides for any
action to be taken on a day which is not a Business Day, such action shall be
taken on the next following Business Day.
SECTION 15.10 Limited Liability. (a) The liability of each Member, holder
of any interest herein who is not a Member, officer or agent of the Company
shall be limited as set forth in this Agreement, the Act and other applicable
law. No Member, holder of any interest herein who is not a Member, Manager,
officer or agent of the Company is liable for any debts, obligations or
liabilities of the Company or each other, whether arising in tort, contract or
otherwise, solely by reason of being a Member, holder of interest herein who is
not a Member, officer or agent of the Company, or acting (or omitting to act) in
such capacities or participating (as an employee, consultant, contractor or
otherwise) in the conduct of the business of the Company, except that a holder
of any interest herein shall remain personally liable for the payment of such
holder's Capital Contribution and as otherwise set forth in this Agreement, the
Act and other applicable law.
(b) Notwithstanding the foregoing, a Manager shall perform such
Manager's duties in accordance with the provisions hereof. A Manager who so
performs such duties shall not have any liability by reason of being or having
been a Manager. No Manager shall be liable to the Company or any holder of any
interest herein for any loss or damage sustained by the Company or any holder of
any interest herein, unless a judgment or other final adjudication adverse to
such Manager establishes that such Manager's acts or omissions were in bad faith
or involved intentional misconduct or a knowing violation of law. Without
limiting the generality of the preceding sentence, a Manager does not in any way
guaranty the return of any Capital Contribution to a holder of any interest
herein or a profit for the holders of any interest herein from the operations of
the Company.
SECTION 15.11 Partial Invalidity. Wherever possible, each provision of this
Agreement will be interpreted in such a manner as to be effective and valid
under applicable law. However, if for any reason any one or more of the
provisions of this Agreement are held to be invalid, illegal or unenforceable in
any respect, such action will not affect any other provision of this Agreement.
In such event this Agreement will be construed as if such invalid, illegal or
unenforceable provision had never been contained in it.
SECTION 15.12 Entire Agreement. This Agreement contains the entire
agreement among the Members with respect to the subject matter of this
Agreement, and supersedes each course of conduct previously pursued or
acquiesced in, and each oral agreement and representation previously made, by
the Members and the Company with respect thereto, whether or not relied or acted
upon.
42
SECTION 15.13 Amendments. No course of performance or other conduct
subsequently pursued or acquiesced in, and no oral agreement or representation
subsequently made, by the Members, whether or not relied or acted upon, and no
usage of trade, whether or not relied or acted upon, shall amend this Agreement
or impair or otherwise affect any Member's obligations pursuant to this
Agreement or any rights and remedies of a Member pursuant to this Agreement. No
amendment to this Agreement shall be effective unless made in a writing duly
executed by all of the Members and specifically referring to each provision of
this Agreement being amended.
SECTION 15.14 Benefit. The contribution obligations of each Member will
inure solely to the benefit of the other Members and the Company, without
conferring on any other Person any rights of enforcement or other rights.
SECTION 15.15 Binding Effect. This Agreement is binding upon, and inures to
the benefit of, the Members and their transferees, successor and assigns,
provided that, any transferee will have only the rights specified in Section
14.6 unless admitted as an additional Member in accordance with this Agreement.
SECTION 15.16 Further Assurances. Each Member agrees, without further
consideration, to sign and deliver such other documents of further assurance as
may reasonably be necessary to effectuate the provisions of this Agreement.
SECTION 15.17 Headings. Article and section titles have been inserted for
convenience of reference only. They are not intended to affect the meaning or
interpretation of this Agreement.
SECTION 15.18 Terms. Terms used with initial capital letters will have the
meanings specified, applicable to both singular and plural forms, for all
purposes of this Agreement. All pronouns (and any variation) will be deemed to
refer to the masculine, feminine or neuter, as the identity of the Person may
require. The singular or plural includes the other, as the context requires or
permits. The word include (and any variation) is used in an illustrative sense
rather than in a limiting sense. The word "day" means a calendar day, unless
otherwise specified. Unless otherwise indicated herein, the term "section"
refers to Sections of this Agreement.
SECTION 15.19 Conversion. If the Net Profits of the Company warrant in the
opinion of ▇▇▇▇▇▇▇ Financial Corp., each of ▇▇▇▇▇▇▇▇▇ and Shank shall each be
entitled to exchange 20% of their Units for stock of ▇▇▇▇▇▇▇ Financial Corp., a
New York corporation, on a basis to be determined by ▇▇▇▇▇▇▇ Financial Corp. at
the time.
43
SECTION 15.20 Governing Law; Consent to Jurisdiction. This Agreement will
be governed by, and construed in accordance with, the laws of the State of
Delaware (without giving effect to Delaware choice of law provisions). Any
conflict or apparent conflict between this Agreement and the Act will be
resolved in favor of this Agreement except as otherwise required by the Act. In
any action or proceeding arising out of, related to, or in connection with this
Agreement, the parties consent to be subject to the jurisdiction and venue of
(a) the Superior Court of the State of California in and for the County of San
Francisco located in the City of San Francisco, and (b) the United States
District Court for the Northern District of California. Each of the parties
consents to the service of process in any action commenced hereunder by
certified or registered mail, return receipt requested, or by any other method
or service acceptable under federal law or the laws of the State of California.
IN THE EVENT THAT AN ACTION IS COMMENCED IN THE STATE OF CALIFORNIA, THE PARTIES
HEREBY AGREE TO WAIVE THEIR RIGHTS TO A TRIAL BY JURY.
[This Page Intentionally Ends Here]
44
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
SIEBERT, BRANDFORD, SHANK & CO., LLC
By: /S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Member, President
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & CO., INC.
By: /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------------
Name:
Title:
/S/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ III
----------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ III
/S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
45
SCHEDULE I
Name of Member Total Contribution Number of Units
-------------- ------------------ ---------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co., Inc. Three Hundred Ninety-Two 490 ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Thousand Dollars and No
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ III Two Hundred Four Thousand 255 ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Dollars and No Cents.
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Two Hundred Four Thousand 255 Units
100 Renaissance Center Dollars and No Cents.
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
46