Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing of Proposed Rule Change Relating to the Formation of a Joint Venture Between the Exchange, Its Ultimate Parent NYSE Euronext, and Seven Other Entities To Operate an Electronic Trading Facility for Options Contracts, 18591-18613 [2011-7935]
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Federal Register / Vol. 76, No. 64 / Monday, April 4, 2011 / Notices
Finally, NASDAQ is proposing to reestablish an Opening Cross to be
executed upon the termination of a
trading halt.5 Having operated NOM for
almost two years, NASDAQ has
determined in its experience that an
auction will provide a more orderly
opening of the market after a halt. This
is particularly true because NOM has
attracted significantly higher levels of
liquidity, an important ingredient for a
successful cross. Accordingly, NASDAQ
is proposing to modify Chapter V,
Section 4 (Resumption of Trading After
a Halt) and various subsections of
Chapter VI, Section 8. The Opening
Cross will operate in the same manner
following a trading halt as it operates at
the start of the trading day, including
dissemination of the Order Imbalance
Indicator, matching algorithm, and
posing or routing of interest that
remains unexecuted following
execution of the opening cross. The
Opening Cross for halted options will
differ only in the time at which it occurs
and the fact that that time is determined
pursuant to Chapter V, Section 4.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act 6 in general, and furthers the
objectives of Section 6(b)(5) of the Act 7
in particular, in that it is designed to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general to protect
investors and the public interest.
Nasdaq believes that the proposal is
consistent with this standard because
the proposed rule change is designed to
improve execution quality at the critical
opening of the market both at the start
of the trading day and following a
trading halt.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
Emcdonald on DSK2BSOYB1PROD with NOTICES
Nasdaq does not believe that the
proposed rule change will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act, as amended.
5 When Nasdaq first proposed its options trading
rules, it planned to resume trading by operating a
‘‘Halt Cross,’’ which it originally described in
Chapter VI, Section 8. Nasdaq later amended the
proposed rules to remove the Halt Cross. See
Securities Exchange Act Release Nos. 57478 (March
12, 2008), 73 FR 14521 (March 18, 2008) (SR–
NASDAQ–2007–004 and SR–NASDAQ–2007–080)
(approval order regarding NOM Rules including
Chapters III and XIV).
6 15 U.S.C. 78f(b).
7 15 U.S.C. 78f(b)(5).
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C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the self-regulatory
organization consents, the Commission
will:
A. By order approve or disapprove
such proposed rule change, or
B. institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change, as amended, is consistent with
the Act. Comments may be submitted by
any of the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NASDAQ–2011–037 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–NASDAQ–2011–037. This
file number should be included on the
subject line if e-mail is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
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18591
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room on official business
days between the hours of 10 a.m. and
3 p.m. Copies of such filing also will be
available for inspection and copying at
the principal offices of the Exchange.
All comments received will be posted
without change; the Commission does
not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number SR–NASDAQ–2011–037, and
should be submitted on or before April
25, 2011.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.8
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011–7836 Filed 4–1–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–64144; File No. SR–
NYSEAmex-2011–18]
Self-Regulatory Organizations; NYSE
Amex LLC; Notice of Filing of
Proposed Rule Change Relating to the
Formation of a Joint Venture Between
the Exchange, Its Ultimate Parent
NYSE Euronext, and Seven Other
Entities To Operate an Electronic
Trading Facility for Options Contracts
March 29, 2011.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on March
23, 2011, NYSE Amex LLC (the
‘‘Exchange’’ or ‘‘NYSE Amex’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’ or
‘‘SEC’’) the proposed rule change as
described in Items I and II below, which
Items have been prepared by the selfregulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
8 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 76, No. 64 / Monday, April 4, 2011 / Notices
Emcdonald on DSK2BSOYB1PROD with NOTICES
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to form a joint
venture between the Exchange, its
ultimate parent NYSE Euronext, a
Delaware corporation, and the following
entities (each, a ‘‘Founding Firm’’):
Citadel Securities LLC (‘‘Citadel’’);
Goldman, Sachs & Co. (‘‘Goldman
Sachs’’); Banc of America Strategic
Investments Corporation (‘‘BAML’’);
Citigroup Financial Strategies, Inc.
(‘‘Citigroup’’); Datek Online Management
Corp. (‘‘TD Ameritrade’’); UBS Americas
Inc. (‘‘UBS’’); and Barclays Electronic
Commerce Holdings Inc. (‘‘Barclays’’).
The joint venture will operate an
electronic trading facility (the ‘‘Options
Exchange’’) that will engage in the
business of listing for trading options
contracts permitted to be listed on a
national securities exchange (or facility
thereof) and related activities. The
Options Exchange will be operated as a
‘‘facility’’ (as such term is defined in
Section 3(a)(2) of the Securities
Exchange Act of 1934 (the ‘‘Act’’)) of the
Exchange, which will act as the selfregulatory organization (‘‘SRO’’) for the
Options Exchange. The Options
Exchange will be operated by NYSE
Amex Options LLC (the ‘‘Company’’), a
Delaware limited liability company
formed by NYSE Euronext, the
Exchange and the Founding Firms and
jointly owned by the Exchange and the
Founding Firms. The text of the
proposed rule change, consisting of the
proposed Limited Liability Company
Agreement of the Company (the ‘‘LLC
Agreement’’) and a proposed Members
Agreement of the Company setting forth
certain additional terms (the ‘‘Members
Agreement’’), is available at the
Exchange, the Commission’s Public
Reference Room, on the Commission’s
Web site at
https://www.sec.gov, and on https://
www.nyse.com. The LLC Agreement is
the source of the Company’s governance
and operating authority and, therefore,
functions in a similar manner as articles
of incorporation and by-laws function
for a corporation.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
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The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange is submitting this
Proposed Rule Change to the
Commission in connection with the
proposed formation of a joint venture
between the Exchange, its ultimate
parent NYSE Euronext and the
Founding Firms. The joint venture will
operate an electronic trading facility, the
Options Exchange, that will engage in
the business of listing for trading
options contracts permitted to be listed
on a national securities exchange (or
facility thereof) and related activities.4
The Options Exchange will be operated
as a ‘‘facility’’ (as such term is defined
in Section 3(a)(2) of the Act) of the
Exchange, which will act as the SRO for
the Options Exchange. The Options
Exchange will be operated by the
Company, the Exchange and the
Founding Firms and jointly owned by
the Exchange and the Founding Firms.
The Exchange will have regulatory
responsibility for the activities of the
Options Exchange. The Exchange
represents that it has adequate funds to
discharge all regulatory functions
related to the Options Exchange.
The LLC Agreement is the source of
the Company’s governance and
operating authority and, therefore,
functions in a similar manner as articles
of incorporation and by-laws function
for a corporation. No changes to the
Exchange’s existing rules will be
necessary in connection with the
establishment of the Company and the
operation of the Options Exchange.
Summary
This section contains a summary of
certain provisions in the operative
documents of the Company. The
provisions are more fully described in
the sections following the summary.
Structure of the Company
As a limited liability company,
ownership of the Company is
represented by limited liability
company interests in the Company
(‘‘Interests’’). The holders of interests are
referred to as the members of the
Company (the ‘‘Members’’). The Interests
represent equity interests in the
4 The activities of the Options Exchange are
further described in Section 3.1(b) of the LLC
Agreement.
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Company and entitle the holders thereof
to participate in the Company’s
allocations and distributions. Initially,
NYSE Amex will own 100% of the
preferred non-voting Interests
(‘‘Preferred Interests’’) and 47.2% of the
Common Interests,5 as Class A Common
Interests. The Founding Firms will own
the remaining 52.8% of the Common
Interests, as Class B Common Interests,
and no single Founding Firm (including
its affiliates) will own Class B Common
Interests comprising more than 19.9% of
the issued and outstanding Common
Interests. The 52.8% ownership of Class
B Common Interests will initially be
allocated as follows: 14.95% to each of
Citadel and Goldman Sachs; 5.0% to
each of BAML, Citigroup and TD
Ameritrade; 4.9% to UBS; and 3.0% to
Barclays.6
Capital Contributions
Members may be subject to both
voluntary and mandatory capital calls.
Mandatory capital calls may be issued
by the board of directors of the
Company (the ‘‘Board’’), up to a cap, if
the Company requires funds to maintain
its status as a facility of an SRO or for
other regulatory compliance purposes.
In addition, during the first two years
after the Company is formed, the Board,
with the approval of a simple majority
vote of the Board, may solicit voluntary
capital calls up to a cap. In addition, a
Supermajority Vote of the Board 7 will
be able to approve: (i) Any voluntary
capital call during the first two years
5 Common Interests consist of Class A Common
Interests and Class B Common Interests.
6 Following the effective date of this Proposed
Rule Change, additional Class B Common Interests
will be issued to the Founding Firms based, in part,
on each Founding Firm’s contribution to the annual
volume of the Options Exchange from October 1,
2009 to December 31, 2010, as described further
under the heading ‘‘Volume-Based Equity Plan’’.
The Exchange represents that this issuance of
shares to the Founding Firms will not result in any
Member (alone or together with its affiliates) other
than NYSE Amex exceeding the 19.9% Maximum
Percentage (as defined below).
7 A ‘‘Supermajority Vote,’’ as defined in the LLC
Agreement, means, with respect to matters
submitted to the Board at a validly called and
validly noticed meeting, (x) for so long as NYSE
Amex’s percentage ownership of Common Interests
equals or exceeds fifteen percent (15%), (A) the
affirmative vote of more than fifty percent (50%) of
the directors designated by NYSE Amex entitled to
vote thereon and present in person or by proxy and
(B) the affirmative vote of more than fifty percent
(50%) of those directors designated by Founding
Firms entitled to vote thereon and present in person
or by proxy, and (y) for so long as NYSE Amex’s
percentage ownership of Common Interests is less
than fifteen percent (15%), the affirmative vote of
more than fifty percent (50%) of all directors
entitled to vote thereon and present in person or by
proxy (which excess of fifty percent (50%) must
include more than two-thirds (2⁄3) of those directors
designated by Founding Firms and NYSE Amex in
the aggregate entitled to vote thereon and present
in person or by proxy).
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Federal Register / Vol. 76, No. 64 / Monday, April 4, 2011 / Notices
after the Company is formed in excess
of the cap, (ii) any voluntary capital call
after the two-year anniversary of the
formation of the Company, and (iii) any
voluntary capital call that is necessary
for the Company to maintain its status
as a facility of an SRO or any other
regulatory compliance purposes and
that is in excess of the cap for
mandatory capital calls. Any Member
that fails to participate in a mandatory
capital call may be subject to certain
customary sanctions. Any Member that
fails to participate in a voluntary capital
call will be diluted in its equity
holdings.
Term and Termination
The Company will continue in
perpetual existence until dissolved
pursuant to the LLC Agreement or the
Delaware Limited Liability Company
Act, as amended (the ‘‘Delaware LLC
Act’’). The LLC Agreement includes
customary provisions for the dissolution
of the Company and an orderly
liquidation of its business.
Emcdonald on DSK2BSOYB1PROD with NOTICES
Ownership Limitations
No Member, other than NYSE Amex,
will be permitted to hold Common
Interests in excess of nineteen and ninetenths percent (19.9%) of the issued and
outstanding Common Interests or any
lower percentage that may be imposed
under applicable law. Any Member that
holds Common Interests in excess of
19.9% will be required to dispose of
their excess Common Interests following
a procedure outlined below under the
heading ‘‘Ownership Limitations’’. In
addition, any such excess interests will
be deemed non-voting until they are
transferred to a Member or another
person or entity in whose hands they
would not be in excess of 19.9% of the
issued and outstanding Common
Interests and who may vote such
Common Interests under applicable law.
Members and Membership
Members will be required to comply
with Federal securities laws (to the
extent such laws relate to the Company)
and cooperate with the SEC and NYSE
Amex, pursuant to NYSE Amex’s
regulatory authority. As explained more
fully in the description of Section 7.6 of
the LLC Agreement under the heading
‘‘Members and Membership’’ below, the
Members may, upon the affirmative
written consent of NYSE Amex (in its
capacity as SRO) and a Supermajority
Vote of the Board (excluding the vote of
the director designated by the Member
subject to sanction), suspend or
terminate a Member’s voting privileges
in the event: (i) The Member has
materially violated a Regulatory Matters
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Provision (as defined below) in the LLC
Agreement or any applicable law;
(ii) the Member is subject to any
applicable ‘‘statutory disqualification’’
(within the meaning of Section 3(a)(39)
of the Act); or (iii) such action is
necessary or appropriate in the public
interest or for the protection of
investors.
Persons or entities may become
Members by acquiring Common
Interests from an existing Member either
pursuant to the transfer provisions
described below or with approval by a
Supermajority Vote.
A Member may seek to be treated as
a ‘‘Restricted Member’’ to comply with
any legal restrictions applicable to its
holdings of Common Interests. A
Restricted Member will be subject to
restrictions on the distributions it
receives and its Common Interests may
be deemed non-voting. This election
may be reversed in certain
circumstances.
Governance
Day-to-day operations of the Company
and the management of its business and
affairs will be delegated to the
Company’s officers and to NYSE Group,
Inc. (‘‘NYSE Group’’), a subsidiary of
NYSE Euronext, in accordance with a
services agreement (the ‘‘NYSE Euronext
Agreement’’) between NYSE Group and
the Company. Under the NYSE
Euronext Agreement, NYSE Group will
agree to provide the Options Exchange
with a broad range of operational and
support services.
The Board will be responsible for the
oversight of the Company’s officers and
of NYSE Group’s performance under the
NYSE Euronext Agreement. The Board
will consist of thirteen members. Each
Founding Firm so authorized pursuant
to the LLC Agreement will have the
right to designate one director to the
Board—for a total of six directors
designated by Founding Firms—and
NYSE Amex will have the right to
designate the remaining seven directors.
The LLC Agreement outlines the basic
qualifications of the directors and
specifies grounds for their removal.
Most decisions of the Board will be
taken by a simple majority vote;
however, a specified list of actions will
require the approval of a Supermajority
Vote. An action requiring a simple
majority vote of the Board may be taken
even if none of the directors appointed
by Founding Firms have voted in favor
of such an action. Most matters subject
to a Supermajority Vote will be
essentially commercial and business
issues, such as the offering of additional
equity to new investors, certain capital
calls and other dilutive measures, or the
PO 00000
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18593
sale or liquidation of the business.
Matters relating to market governance,
surveillance, discipline, regulatory
compliance, and similar oversight issues
will not be subject to Supermajority
Vote.
In the event that there are two or
fewer directors designated by Founding
Firms or in the event that Founding
Firms cease to own, in the aggregate, at
least twenty percent (20%) of the
outstanding Common Interests, most of
the matters subject to a Supermajority
Vote will cease to require approval by
a simple majority of Founding Firms,
and will instead require only a simple
majority of the Board. In addition, in the
event that the Founding Firms cease to
own, in the aggregate, at least fifteen
percent (15%) of the outstanding
Common Interests, only actions that
would have a materially and
disproportionally disadvantageous
effect on the Founding Firms will
require a Supermajority Vote.
If NYSE Amex’s equity interest falls
below fifteen percent (15%), NYSE
Amex will lose the right to appoint one
(or more) directors (as necessary to
result in a board evenly split between
NYSE Amex and Founding Firms). A
Founding Firm may also lose its right to
appoint a director under a variety of
circumstances.
The Company will have a Founding
Firm Advisory Committee (the
‘‘Advisory Committee’’), which will
advise the Board on certain matters,
including new products and market
structure.
Transfers of Interests
Transfers of Common Interests will be
governed by customary provisions and
subject to certain restrictions. In
particular, Founding Firms wishing to
transfer their Common Interests will be
subject to certain limitations on the
amount of Common Interests they may
transfer in each year. NYSE Amex will
have an initial right of first offer to
purchase Common Interests that a
Founding Firm intends to transfer, at a
price at least equal to their fair market
value. In the event NYSE Amex does not
exercise its right of first offer, the
transferring Founding Firm will have
the right, subject to certain conditions,
to sell its Common Interests to NYSE
Amex at a price equal to their fair
market value or to sell its Common
Interests to a third party. In addition,
following the tenth anniversary of the
formation of the Company, NYSE Amex
will have the right to buy some or all of
the Class B Common Interests from the
Founding Firms at a price equal to their
fair market value.
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In the event NYSE Amex intends to
transfer any of its Common Interests, the
Founding Firms will have certain rights
of first offer to purchase these Common
Interests. However, no Founding Firm
will be able to acquire Common
Interests in this way if such acquisition
would result in the Founding Firm’s
equity holdings exceeding nineteen and
nine tenths percent (19.9%) of the total
equity of the Company.
In the event that NYSE Amex acquires
any Class B Common Interests, such
Class B Common Interests will
automatically be converted into Class A
Common Interests. Similarly, in the
event any Founding Firms acquire Class
A Common Interests, such Class A
Common Interests will be automatically
converted into Class B Common
Interests.
Subject to certain conditions,
Members will be obligated to transfer
their Common Interests where another
Member, acting along or together with
other Members, intends to make a
transfer of 75% of the then-outstanding
Common Interests and the Board, by
Supermajority Vote, approves the sale of
the Company to a person or entity who
is not an affiliate of the Company.
Redemptions of Interests
Emcdonald on DSK2BSOYB1PROD with NOTICES
The Board may, by Majority Vote,8
redeem the equity interests of a
Founding Firm under specified
circumstances, such as (i) a transfer of
equity interests by such Founding Firm
to certain entities specified in the LLC
Agreement, (ii) such Founding Firm’s
failure to satisfy a certain minimum
volume threshold in connection with
the Plan (as defined below) during
certain twelve-month periods or (iii)
such Founding Firm’s entry into certain
economic arrangements as further
detailed below under the heading
‘‘Redemption of Interests’’ coupled with
such Founding Firm’s failure to satisfy
a certain minimum volume threshold in
connection with the Plan during certain
three-month periods.
8 A ‘‘Majority Vote’’ is defined as (i) with respect
to matters submitted to the Board at a validly called
meeting, the affirmative vote by those directors
representing greater than fifty percent (50%) of the
directors entitled to vote thereon and present in
person or by proxy at such meeting, including, in
the event that NYSE Amex’s percentage ownership
of Common Interests exceeds fifteen percent (15%),
the affirmative vote of directors representing greater
than fifty percent (50%) of the NYSE Amex
directors that are present in person or by proxy at
the meeting and (ii) with respect to matters
submitted to Members at a validly called meeting,
the affirmative vote of those Members holding
greater than fifty percent (50%) of the Common
Interests entitled to vote thereon and present in
person or by proxy at such meeting.
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Certain Regulatory and Compliance
Matters
The LLC Agreement includes
regulatory provisions that govern the
actions of the Company, the Member,
NYSE Group, NYSE Euronext, NYSE
Amex, as SRO for the Options
Exchange, and the employees and
directors of each of these entities. The
Company, NYSE Euronext, NYSE
Group, each Member and the officers,
directors, agents and employees of each
of these entities will be required to
comply with Federal securities laws and
cooperate with the SEC and NYSE
Amex, pursuant to NYSE Amex’s
regulatory authority. In addition, the
Board will adopt corporate compliance
policies that will govern the conduct of
employees.
NYSE Amex, as SRO for the Options
Exchange, will have broad authority to
direct any action that it deems necessary
or appropriate to fulfill its obligations as
an SRO.
Volume-Based Equity Plan
A volume-based equity plan (the
‘‘Plan’’) will be in place for an initial
period of five (5) years and three (3)
months following the formation of the
Company, pursuant to which each
Founding Firm will be entitled to
receive, for no additional consideration,
a predetermined amount of new Class B
Common Interests (‘‘Annual Incentive
Shares’’) based on the degree to which
such Founding Firm has satisfied
certain minimum volume requirements.
The Plan may reallocate the equity
interests of the Founding Firms among
each other. However, the Plan will not
affect the equity holdings of NYSE
Amex and the Plan will not increase or
decrease the aggregate equity interest of
the Founding Firms relative to NYSE
Amex. The Company will not allocate
Annual Incentive Shares to a Founding
Firm if such allocation would result in
the Founding Firm holding Common
Interests representing in excess of
nineteen and nine tenths percent
(19.9%) of the total equity of the
Company, or any lower percentage that
may be imposed under applicable law.
Confidentiality
Members will be subject to customary
confidentiality obligations with respect
to information relating to the Company
or any Member. Customary exceptions
to these obligations will allow
disclosure of information to the SEC or
to NYSE Amex in its capacity as an
SRO.
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Capital Contributions
Regulatory Capital Contributions
At any time, and from time to time,
the Board may require each of the
Members to participate on a pro rata
basis in accordance with each Member’s
Common Interests in calls for additional
capital contributions to the Company
that may be necessary for the Company
to ensure that the Options Exchange
maintains, and complies with any
regulatory requirements applicable to,
its status as a facility of an SRO
pursuant to the Act or to satisfy any
other regulatory obligation (any such
capital call, a ‘‘Regulatory Capital Call’’,
and each such contribution, a
‘‘Regulatory Capital Contribution’’). The
Board must provide each Member with
not less than thirty (30) days written
notice of such Regulatory Capital Call,
which notice shall specify (i) the
aggregate dollar amount of the
Regulatory Capital Call and the
individual dollar amount required to be
contributed by such Member; (ii) the
date by which the Regulatory Capital
Contribution must be made; (iii) such
Member’s percentage ownership of the
Common Interests as of the date of the
notice; and (iv) the reason for the
Regulatory Capital Call.9
Voluntary Capital Contributions
At any time during the period
commencing on the effective date of the
LLC Agreement, and ending on the
second anniversary of that effective
date, the Board may solicit the Members
to make one or more additional capital
contributions to the Company (each
such solicitation, a ‘‘Voluntary Capital
Call’’, and each such contribution, a
‘‘Voluntary Capital Contribution’’) for
the benefit of the Company, up to an
amount not to exceed $5,000,000 in the
aggregate in any twelve (12) month
period following the effective date of the
LLC Agreement (the ‘‘Voluntary Capital
Call Cap’’). Notwithstanding the
foregoing, however, the Board may, by
Supermajority Vote, among other things,
solicit Voluntary Capital Contributions
at any time, if such Voluntary Capital
Contribution is necessary for the
Company to ensure that the Options
Exchange maintains, and complies with
any regulatory requirements applicable
to, its status as a facility of an SRO
pursuant to the Act or to satisfy any
other regulatory obligation, to the extent
of any amount exceeding the Regulatory
9 Regulatory Capital Contributions required to be
made to the Company by the Members cannot
exceed $5,000,000 in the aggregate in any thirty-six
(36)-month period following the effective date of
the LLC Agreement (the ‘‘Regulatory Capital Call
Cap’’).
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Emcdonald on DSK2BSOYB1PROD with NOTICES
Capital Call Cap. No Member shall have
any obligation at any time to make any
Voluntary Capital Contribution.
Non-Funding Members
Any Member that fails to make its
Regulatory Capital Contribution on or
before the payment due date or any
Member that elects to participate in a
Voluntary Capital Call but subsequently
fails to make its Voluntary Capital
Contribution on or before the payment
due date, as applicable, will be
considered a ‘‘Non-Funding Member.’’
The unpaid subscription amount will
bear interest payable to the Company
equal to a specified default interest rate,
from and after the applicable payment
due date and until such non-payment
has been cured by the Non-Funding
Member or the Non-Funded Interest (as
defined below) has been purchased by
another Member or other person or
entity as described in the following
paragraph. No such interest paid by a
Non-Funding Member to the Company
will be treated as a capital contribution
but will be treated as interest income of
the Company.
In addition to the foregoing, upon
thirty (30) days written notice by the
Company to any Member that becomes
a Non-Funding Member (and provided
that such non-payment has not been
cured by the Non-Funding Member
within such 30-day period), the Board,
in its sole discretion, may (i) sell to any
of the other Members, on a pro rata
basis, all or any portion of (A) in the
case of a Voluntary Capital Call, the
Common Interests that the Non-Funding
Member would have received had the
amount requested been paid in full and
(B) in the case of a Regulatory Capital
Call, the amount of Common Interests
corresponding to the amount requested
(in both cases, ‘‘Non-Funded Interests’’);
or (ii) in the event that the entire
amount of Non-Funded Interests of the
Non-Funding Member is not acquired
by the Members pursuant to clause (i)
above, so notify the Members and
designate one or more persons or
entities (subject to the agreement of
such persons or entities), which may
include Members, to acquire all or any
portion of the Non-Funding Member’s
Non-Funded Interests not so acquired;
provided that (A) any purchase of such
Non-Funded Interest by any Member, in
whole or in part, shall result in a
corresponding increase to such
Member’s Common Interest and (B) any
purchase of such Non-Funded Interest
by a party that is not a Member shall be
treated as a transfer by the Non-Funding
Member to such person and shall be
subject to conditions and limitations in
the LLC Agreement relating to
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admission of Members and transfers of
Interests.
Term and Termination
Pursuant to Section 2.3 of the LLC
Agreement, the Company shall continue
in perpetual existence until dissolved
pursuant to the LLC Agreement or the
Delaware LLC Act. However, Section
12.1 of the LLC Agreement provides that
the Company may be dissolved in the
event of (i) a Supermajority Vote by the
Board to that effect, (ii) the sale or other
disposition of all or substantially all of
the Company’s assets and the receipt of
all consideration therefrom, or (iii) the
entry of a decree of judicial dissolution
under Section 18–802 of the Delaware
LLC Act (involving a situation where it
is not reasonably practicable to carry on
the business in conformity with a
limited liability company agreement);
provided that no Member may make an
application for the dissolution of the
Company pursuant to Section 18–802 of
the Delaware LLC Act without approval
by a Supermajority Vote of the Board.
The dissolution of the Company will be
effective as of the day on which the
event occurs giving rise to the
dissolution, but the Company will not
terminate until the winding up of the
Company has been completed, the
assets of the Company have been
distributed as provided in Section 12.2
of the LLC Agreement (see following
paragraph) and the Certificate of
Formation of the Company has been
canceled.
Section 12.2 of the LLC Agreement
provides that, upon the termination and
dissolution of the Company, the Board
must take all steps necessary and proper
to effect an orderly liquidation of the
Company’s business and shall apply
and distribute the net proceeds of such
liquidation in the following order of
priority: (a) First, to creditors, including
Members who are creditors (but
excluding liabilities to Members for
distributions under Section 18–606 of
the Delaware LLC Act), to the extent
otherwise permitted by applicable law,
in satisfaction of liabilities of the
Company (other than contingent,
conditional or unmatured liabilities for
which reserves are established by the
Board), whether by payment or the
making of reasonable provision for
payment thereof, (b) second, to the
establishment of any reserves
determined by the Board to be
reasonably necessary or appropriate to
provide for any contingent, conditional
or unmatured Company liabilities and
obligations (which reserves may be paid
over to a bank or trust company, as
escrow agent, to be held by such escrow
agent for the purpose of disbursing such
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18595
reserves in payment of the referenced
liabilities and obligations) and, at the
expiration of such period as the Board
shall deem advisable, to pay over the
balance thereafter remaining for
distribution, (c) third, to the holder of
Preferred Interests, to the extent of the
Priority Claim (as defined below), and
(d) finally, subject to such other
arrangements as the Members may
agree, to the Members, pro rata, in
accordance with their percentage
ownership of Common Interests; subject
to any applicable limitations imposed
by a Member’s maximum percentage of
distributions as provided in Section 7.5
of the LLC Agreement or such other
arrangements as the Members may
agree. In the latter situation, any
distribution so limited shall be made to
the other Members in proportion to their
respective percentage ownership of
Common Interests.
The ‘‘Priority Claim’’ is the right of the
Preferred Interest holder, upon any
liquidation, dissolution or sale of the
Company or other similar event, to
receive the sum of (i) the amount of the
non-cash capital contribution for the
Preferred Interests identified on
Schedule A–1 to the Amended and
Restated Contribution Agreement dated
as of February 22, 2011, by and among
NYSE Euronext, the Company and the
Members (the ‘‘Contribution
Agreement’’), reduced by the amount(s)
paid by the Company (x) in respect of
any redemptions of Preferred Interests
pursuant to Section 11.5(a) of the LLC
Agreement as described herein under
‘‘Redemption of Interests’’ or (y)
pursuant to Section 3.2(i) of the
Members Agreement relating to certain
redemptions of Class B Common
Interests plus (ii) any unpaid amount
that has accrued on the Preferred
Interests. In any winding up and
dissolution of the Company, NYSE
Amex may elect to receive Company
property-in-kind, provided that the fair
market value of such property-in-kind
will be determined by a Supermajority
Vote of the Board or, if the Board is
unable to so agree, pursuant to an
appraisal thereof by an independent
valuation firm approved by a
Supermajority Vote of the Board. To the
extent the fair market value of the
Company property distributed to NYSE
Amex is in excess of the amount it
would otherwise receive under Section
12.2 of the LLC Agreement, it shall
make a cash payment to the Company
in the amount of the difference, with the
proceeds to be distributed, pro rata, to
all the Members other than NYSE Amex.
Section 12.4 of the LLC Agreement
establishes that, upon the occurrence of
an event of dissolution as described
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above, the Company shall be dissolved
unless, within fifteen (15) days of such
event, those Members representing
greater than fifty percent (50%) of the
Common Interests agree in writing to
continue the business of the Company.
Emcdonald on DSK2BSOYB1PROD with NOTICES
Ownership Limitations
Section 4.9 of the LLC Agreement
provides that no Member (other than
NYSE Amex alone or, subject to receipt
of SEC approval pursuant to the rule
filing process under Section 19(b) of the
Act, together with its Permitted
Transferees 10) shall be permitted to
own or vote (alone or together with its
affiliates), directly or indirectly,
Common Interests in excess of the lower
of (x) nineteen and nine-tenths percent
(19.9%) of the then issued and
outstanding Common Interests (the
‘‘19.9% Maximum Percentage’’) or (y)
the maximum amount of Common
Interests such Member (alone or
together with its affiliates) may own or
vote under applicable law and without
subjecting the Company to material
regulatory obligations or material
liabilities or a reasonable likelihood of
material regulatory obligations or
material liabilities arising as a result of
the extent of such ownership or voting
interest (such maximum Common
Interests a Member (alone or together
with its affiliates) may own or vote
under this clause (y), the ‘‘Alternate
Maximum Percentage’’, and the amount
in excess thereof or in excess of the
19.9% Maximum Percentage, as
applicable, ‘‘Excess Interests’’).
In the event that the Company
believes that a Member other than NYSE
Amex (alone or together with its
affiliates) has or may, as a result of thencontemplated events, in the near future,
have Excess Interests (other than as a
result of exceeding the 19.9% Maximum
Percentage), the Company shall provide
such Member with notice of this belief,
setting forth the basis for the Company’s
position, and the Company and such
Member shall discuss in good faith the
proposed determination. If the Company
and such Member agree that such
Member (alone or together with its
10 A ‘‘Permitted Transfer’’ is defined in the LLC
Agreement as (i) any transfer of Interests by any
Member among any of its affiliates, (ii) any transfer
by merger, consolidation or similar business
combination or through the acquisition of
substantially all of the assets and liabilities of the
transferring party (except for a transfer to a person
or entity whose assets subsequent to the transfer
would be comprised principally of Interests) or (iii)
any transfer required under, or effected to enable a
Member to be in compliance with, applicable law
or the requirements of a governmental authority or
any SRO. Any transferee under clauses (i) and (ii)
of the previous sentence is a ‘‘Permitted Transferee,’’
and any transferee under clause (iii) of the previous
sentence is a ‘‘Required Transferee.’’
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affiliates) holds Excess Interests (other
than as a result of exceeding the 19.9%
Maximum Percentage), the Member
must, within a reasonable period after
such agreement is reached, implement
remedial measures including those
described in the paragraph immediately
below. If the Company and a Member
fail to reach agreement as to whether the
Member (alone or together with its
affiliates) holds Excess Interests (other
than as a result of exceeding the 19.9%
Maximum Percentage), the Company
shall be entitled to bring a dispute
resolution proceeding in accordance
with the dispute resolution provisions
in Article XV of the LLC Agreement to
resolve the dispute; and in the event the
Company prevails in any such dispute
resolution proceeding, the applicable
Interests shall be deemed to be Excess
Interests for purposes of the remedial
measures described in the paragraph
immediately below. In the event a
Member (alone or together with its
affiliates) holds Excess Interests as a
result of exceeding the 19.9% Maximum
Percentage, the Member shall, subject to
applicable law, implement the remedial
measures described in the paragraph
immediately below and such Excess
Interests shall automatically and
immediately constitute Non-voting
Common Interests 11 as described in and
subject to the paragraph immediately
below.
A Member (alone or together with its
affiliates) that (x) holds Excess Interests
as a result of exceeding the 19.9%
Maximum Percentage or (y) pursuant to
the paragraph immediately above,
agrees that it holds or is found to hold
Excess Interests as a result of exceeding
the applicable Alternate Maximum
Percentage shall promptly implement
the following remedial measures
accordingly and in a manner consistent
with the LLC Agreement and applicable
law: (i) the offer of such Excess Interests
at a price equal to the pro rata portion
of the fair market value of the Member’s
(or its affiliates’, if applicable) Common
Interests attributable to the Excess
Interests: first, to the remaining
Members (other than NYSE Amex) pro
rata in accordance with their relative
Common Interests; second, if the
remaining Members do not purchase all
such Excess Interests, to NYSE Amex;
and third, if NYSE Amex does not
purchase all such Excess Interests, to
11 ‘‘Non-voting Common Interests’’ are defined in
the LLC Agreement as Class B Common Interests (i)
designated as non-voting at the time of issuance; (ii)
deemed to be non-voting pursuant to Section 7.5(b)
or Section 7.5(d) of the LLC Agreement; or (iii) held
by a Member, constituting Common Interests in
excess of the 19.9% Maximum Percentage, absent
SEC approval.
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any other person or entity approved by
NYSE Amex (which approval must not
be unreasonably withheld, conditioned
or delayed), subject to the conditions
and limitations in the LLC Agreement
on the admission of Members, (ii)
subject to applicable law, retention of
the Excess Interests as Non-voting
Common Interests, pursuant to the
provisions of Section 7.5 of the LLC
Agreement on Restricted Members (as
defined and discussed below), or (iii)
except in the case of Excess Interests
arising as a result of such Member
(alone or together with its affiliates)
exceeding the 19.9% Maximum
Percentage, any other remedial action
discussed in good faith by the Member
and the Company, in each case, as
determined by the relevant Member to
be least burdensome. A Member’s
Excess Interests arising as a result of
such Member (alone or together with its
affiliates) exceeding the 19.9%
Maximum Percentage shall
automatically and immediately
constitute, absent regulatory approval
(including SEC approval pursuant to the
rule filing process under Section 19(b)
of the Act) to the contrary, Non-voting
Common Interests and the Aggregate
Class A Voting Allocation and Aggregate
Class B Voting Allocation (each as
defined below) shall be adjusted
accordingly. Such an adjustment may
have the effect of concentrating the
Common Interest Percentages of the
other Members. The requirements of
this provision shall be applied
iteratively in the event that any such
adjustment would result in any Member
(alone or together with its affiliates)
exceeding the 19.9% Maximum
Percentage. Subject to applicable law,
Excess Interests of a Member that
constitute Non-voting Common Interests
solely as a result of such Member (alone
or together with its affiliates) exceeding
the 19.9% Maximum Percentage shall
cease to constitute Non-voting Common
Interests (and the Aggregate Class A
Voting Allocation and Aggregate Class B
Voting Allocation shall be adjusted
accordingly) in the event that, and to the
extent that, (I) such Member (or, if
applicable, its affiliates) transfers, in
accordance with Article XI (Transfers)
of the LLC Agreement, such Excess
Interests to another Member or third
party that (taking into account such
Excess Interests then being transferred)
does not hold Common Interests that
would constitute Excess Interests in the
hands of such transferee Member or
third party due to such transferee
Member or third party (in each case,
alone or together with its affiliates)
exceeding the 19.9% Maximum
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Percentage or (II) such Excess Interests
cease to be Excess Interests (due to such
Member (alone or together with its
affiliates) exceeding the 19.9%
Maximum Percentage) because of a
reduction in such Member’s Common
Interest Percentage.12 Notwithstanding
the foregoing, nothing in Section 4.9 of
the LLC Agreement limits Section 7.5 of
the LLC Agreement (Restricted
Members) or the ability of a Member to
make a Restricted Member Election (as
defined below), which shall impose
separate and additional limitations with
respect to Common Interests covered
thereby. NYSE Amex may assign to one
of its affiliates the right to purchase
Excess Interests pursuant to clause (i) of
this paragraph, subject to providing
notice to, and receiving approval from,
the SEC under Section 19(b) of the Act.
In the event that material regulatory
obligations or material liabilities of the
Company arise as a result of a Member
(alone or together with its affiliates)
holding Excess Interests (other than as
a result of exceeding the 19.9%
Maximum Percentage) and such
material obligations or liabilities may be
mitigated by the Member becoming a
Restricted Member pursuant to Section
7.5(a) of the LLC Agreement, the
Member will be deemed to have elected
to become a Restricted Member upon
such obligation or liability arising;
provided that, to the extent permitted
under applicable law and consistent
with the proviso in Section 7.5(a)(iii) of
the LLC Agreement relating to the
reversal of an election to be treated as
a Restricted Member, the Member may
revoke such election to be a Restricted
Member in connection with either
(i) the sale of such Member’s Interests or
(ii) any other remedial action taken by
such Member, each as described in the
preceding paragraph.
Interest Percentage’’ is defined in the
LLC Agreement as (i) with respect to NYSE Amex
or a transferee of Class A Common Interests, the
product of (w) the Aggregate Class A Economic
Allocation multiplied by (x) a fraction, (A) the
numerator of which shall be the number of Class
A Common Interests then held by NYSE Amex or
the transferee and (B) the denominator of which
shall be the number of Class A Common Interests
then held NYSE Amex and all such transferees, and
(ii) with respect to any Founding Firm or a
transferee of Class B Common Interests, the product
of (y) the Aggregate Class B Economic Allocation
multiplied by (z) a fraction, (A) the numerator of
which shall be the number of Class B Common
Interests then held by such Founding Firm or the
transferee, including, for the purpose of
determining any economic entitlement or
entitlement to designate a director, any Non-voting
Common Interests and (B) the denominator of
which shall be the number of Class B Common
Interests then held by all Founding Firms and all
such transferees, including, for the purpose of
determining any economic entitlement or
entitlement to designate a director, any Non-voting
Common Interests.
Emcdonald on DSK2BSOYB1PROD with NOTICES
12 ‘‘Common
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Members and Membership
Section 7.3 of the LLC Agreement
provides that, except as otherwise
provided in Article XI (Transfers) of the
LLC Agreement (discussed below),
persons or entities that acquire Common
Interests or Preferred Interests in
accordance with the terms of, and
subject to the restrictions provided in,
the LLC Agreement may be admitted
from time to time as new Members by
Supermajority Vote of the Board, subject
to the following: (a) Any new Member
must make a capital contribution in
such amount and on such terms as the
Board deems appropriate based upon
the needs of the Company, the net value
of its assets, the Company’s financial
condition, and the benefits anticipated
to be realized by such additional
Member; and (b) the additional Member
must agree to be bound by the terms of
the LLC Agreement and the Members
Agreement. In addition, pursuant to
Section 7.4 of the LLC Agreement, each
Member must maintain commercially
reasonable policies and procedures,
taking into account the structure and
organization of its operations, to prevent
disclosure of confidential information of
the Company by any director, alternate
director, observer to the Board or any
committee of the Board or member of
the Advisory Committee (as defined
below) to any other individual
appointed by such Member to perform
a similar role with respect to, or who is
an officer or employee of, a Specified
Entity.13 Any individual designated to
13 ‘‘Specified Entity’’ is defined in the LLC
Agreement as (i) any U.S. securities option
exchange (or facility thereof) or U.S. alternative
trading system on which securities option contracts
are executed (other than NYSE Amex or any of its
affiliates) that lists for trading any option contract
that competes with a contract listed for trading on
the Options Exchange or a contract that is
contemplated by the then-current business plan of
the Company to be listed for trading by the Options
Exchange within ninety (90) days of such date, (ii)
any person or entity that owns or controls a U.S.
securities option exchange or U.S. alternative
trading system described in clause (i), and (iii) any
affiliate of a person or entity described in clause (i)
or (ii) above; provided that, in the event of a change
in applicable law permitting the execution of
transactions in exchange-listed securities options
otherwise than on a national securities exchange or
facility thereof (including, but not limited to,
internalization of orders for exchange-listed
securities options or the execution of such orders
on an alternative trading system), (x) a system
operated by or on behalf of a Founding Firm or its
affiliates for purposes of the internalization or
crossing of: (i) Orders of customers of such
Founding Firm or its affiliates, (ii) orders of such
Founding Firm or its affiliates or (iii) orders routed
from a retail broker-dealer or retail brokerage unit,
shall not be considered a Specified Entity and (y)
in addition to the matters covered in clause (x),
NYSE Amex and the Founding Firms will negotiate
in good faith the terms of an exception from the
definition of Specified Entity for any alternative
trading system owned solely by an individual
PO 00000
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18597
be a director, alternate director, observer
to the Board or any committee of the
Board, or member of the Advisory
Committee may be required to
acknowledge in writing the foregoing
requirements.
As referenced above, the number of
Class A Common Interests and Class B
Common Interests that will be issued
and outstanding to the initial Members
will result in (i) the percentage of the
aggregate number of Common Interests
represented by the Class A Common
Interests (the ‘‘Aggregate Class A
Economic Allocation’’) initially being
equal to 47.2% and (ii) the percentage
of the aggregate number of Common
Interests represented by the Class B
Common Interests (the ‘‘Aggregate Class
B Economic Allocation’’) initially being
equal to 52.8%. The Class A Common
Interests will also initially represent
47.2% of the aggregate number of
Common Interests entitled to vote (such
percentage, the ‘‘Aggregate Class A
Voting Allocation’’ and together with the
Aggregate Class A Economic Allocation,
the ‘‘Aggregate Class A Allocation’’),
while the Class B Common Interests will
initially represent 52.8% of the
aggregate number of Common Interests
entitled to vote (such percentage, the
‘‘Aggregate Class B Voting Allocation’’
and together with the Aggregate Class B
Economic Allocation, the ‘‘Aggregate
Class B Allocation’’). From time to time,
the Aggregate Class A Economic
Allocation and the Aggregate Class A
Voting Allocation shall be separately or
together subject to adjustment upwards
or downwards, as applicable, in
accordance with the provisions of the
LLC Agreement and/or the Members
Agreement, as will the Aggregate Class
B Economic Allocation and the
Aggregate Class B Voting Allocation.
Restricted Members
Section 7.5 of the LLC Agreement
provides that each Member (other than
NYSE Amex alone or together with its
Permitted Transferees) then owning
(alone or together with its affiliates) any
Excess Interests (other than as a result
of exceeding the 19.9% Maximum
Percentage) or then owning an Interest
entitling that Member to distributions in
excess of the Member’s Maximum
Percentage (as defined below) of the
distributions (the ‘‘Capped Distribution
Amount’’) then being made to all
Members may from time to time make
an irrevocable election (‘‘Restricted
Member Election’’) (but subject to
Founding Firm or its affiliates that performs order
crossing in a manner that does not substantially
compete with the Options Exchange in terms of
market share and other relevant factors.
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reversal under certain specific
circumstances), by written notice to the
Company, to be treated for purposes of
the LLC Agreement as a ‘‘Restricted
Member,’’ solely with respect to such
Excess Interests or Capped Distribution
Amount. ‘‘Maximum Percentage’’ means,
for a Member, the lesser of the 19.9%
Maximum Percentage and such
Member’s Alternate Maximum
Percentage, if any. With respect to each
Restricted Member, for so long as the
election to be a Restricted Member
remains in effect:
(i) In the event of any distribution of
Class B Common Interests, at the request
of that Restricted Member by written
notice to the Company, the Restricted
Member will receive in lieu of Class B
Common Interests, at the Company’s
sole option based on a Majority Vote of
the disinterested directors, either (x) the
cash equivalent of such distribution to
be paid by the Company within ninety
(90) days of the date such distribution
would have otherwise been made, and
the allocations of net profits and losses
shall be adjusted accordingly to reflect
each Member’s share of such
distribution or (y) a promissory note
from the Company (i) in a principal
amount equivalent to the amount of
such distribution; (ii) having a maturity
determined by Supermajority Vote of
the disinterested directors not to exceed
5 years; and (iii) having additional
commercially reasonable terms to be
determined by Supermajority Vote of
the disinterested directors that are
consistent with customary market
practice (provided that the Company
shall not enter into any contractual
restrictions that specifically and directly
limit the Company’s ability to repay or
redeem such promissory note except as
required under applicable law), and the
allocations of net profits and losses shall
be adjusted accordingly to reflect each
Member’s share of such distribution;
(ii) In the event of any distribution
that is not a distribution of Class B
Common Interests, and if such
Restricted Member has so elected, then
the amount of any distribution that
would otherwise be made to the
Restricted Member in excess of the
Capped Distribution Amount shall be
distributed to all other Members who
are entitled to participate in such
distribution on a pro rata basis with
respect to the Common Interests held by
such Members and the allocations of net
profits and losses shall be adjusted
accordingly to reflect each Member’s
share of such distribution; provided that
with respect to any Restricted Member,
including in the event that such
distribution permits any Member to
elect to be treated as a Restricted
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Member and such Member so elects, the
distributions to any such Restricted
Member shall not exceed the Capped
Distribution Amount; and
(iii) Such Restricted Member agrees to
transfer the proceeds of any transfer of
Common Interests by that Restricted
Member (taking into account any
proceeds received by the Restricted
Member for previous transfers) in excess
of the Restricted Member’s Maximum
Percentage of the proceeds of such
transfer of Common Interests to all other
Members who are not Restricted
Members on a pro rata basis with
respect to the number of Common
Interests held by such Members;
provided that with respect to any
Restricted Member, including in the
event that such transfer permits any
Member to elect to be treated as a
Restricted Member and such Member so
elects, the amount transferred to any
such Restricted Member shall be limited
so as to not cause the Restricted
Member’s total ownership interest to
exceed the Restricted Member’s
Maximum Percentage or the Capped
Distribution Amount, as applicable.
An election to become a Restricted
Member will be binding upon the
Restricted Member and its direct and
indirect transferees, provided, however,
that the Restricted Member, in its
capacity as a Member and a Restricted
Member, may (x) upon written notice to
the Company at any time and without
precondition, reverse its election with
respect to paragraph (ii) above and (y)
only under the following circumstances,
reverse its election to be treated as a
Restricted Member upon written notice
to the Company:
(A) The Restricted Member owns such
Restricted Member’s Maximum
Percentage or less of the Common
Interests then issued and outstanding
(in which case such reversal may occur
without any further consent of the
Board or any other condition
precedent);
(B) With the written approval of the
Board granted in the sole discretion of
the majority of the disinterested
directors; or
(C) The Restricted Member provides
the Board with appropriate written
notice that such Common Interests have
been transferred to the extent
permissible under the LLC Agreement
(1) as part of a widespread public or
private offering where no single
transferee (together with its affiliates)
acquires more than 2% of the total
Common Interests, (2) to an underwriter
for the purpose of underwriting a
widely distributed public or private
offering, (3) in one or more open market
transactions effected on a stock
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exchange, electronic communication
network or similar execution system, or
in the over-the-counter market (which
may include a sale to one or more
broker-dealers acting as market makers
or otherwise intending to resell the
Common Interests sold to them in
accordance with their normal business
practices), (4) to an acquirer which has
acquired control of a majority of the
total Common Interests, or (5) with the
written approval of the U.S. Board of
Governors of the Federal Reserve
System or its staff.
Common Interests with a voting
interest in excess of the Maximum
Percentage of the then issued and
outstanding Common Interests of each
Member who elects to be treated as a
Restricted Member will be deemed Nonvoting Common Interests, and the
Aggregate Class A Voting Allocation and
Aggregate Class B Voting Allocation will
be adjusted accordingly. Non-voting
Common Interests will not be included
in determining whether the requisite
percentage in interest of the Members
have consented to, approved, adopted or
taken any action pursuant to the LLC
Agreement. Except as provided in this
paragraph, Non-voting Common
Interests will be identical in all regards
to all other Common Interests held by
Members.
A Member may elect to become a
Restricted Member with respect to any
of its Class B Common Interests, even if
such Class B Common Interests do not
constitute Excess Interests. Upon such
election, such Class B Common Interests
shall be deemed Non-voting Common
Interests and the provisions of the
preceding paragraph will apply with
respect to such Member, provided that
such Member may only reverse such
election under the circumstances
described in subparagraph (C) above.
The LLC Agreement specifies that,
absent SEC approval, the Excess
Interests of a Member (other than NYSE
Amex alone or together with its
affiliates) arising as a result of such
Member (alone or together with its
affiliates) exceeding the 19.9%
Maximum Percentage shall immediately
and automatically constitute Non-voting
Common Interests.
Section 7.6 of the LLC Agreement
provides that the Company and, to the
extent it relates to the Company, each
Member, agrees to comply with the
Federal securities laws and the rules
and regulations promulgated thereunder
and to cooperate with NYSE Amex
pursuant to its regulatory authority and
with the SEC. Furthermore, each
Member must take into consideration
whether its actions would cause the
Options Exchange or the Company to
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engage in conduct that fosters and does
not interfere with NYSE Amex’s or the
Company’s ability to carry out their
respective responsibilities under the Act
and to prevent fraudulent and
manipulative acts and practices,
promote just and equitable principles of
trade, foster cooperation and
coordination with persons engaged in
regulating, clearing, settling, processing
information with respect to, and
facilitating transactions in securities,
remove impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, protect investors and the public
interest. The Members may, upon (A)
the affirmative written consent of NYSE
Amex (in its capacity as SRO) and (B)
a Supermajority Vote of the Board
(excluding the vote of the director
designated by the Member subject to
sanction), suspend or terminate a
Member’s voting privileges, including
the ability to designate directors
pursuant to Section 8.1(d) of the LLC
Agreement in the event: (i) The Member
has materially violated any ‘‘Regulatory
Matters Provision’’ 14 or any applicable
law; (ii) the Member is subject to any
applicable ‘‘statutory disqualification’’
(within the meaning of Section 3(a)(39)
of the Act); or (iii) such action is
necessary or appropriate in the public
interest or for the protection of
investors. Prior to any suspension or
14 A ‘‘Regulatory Matters Provision’’ is defined in
the LLC Agreement as any of Section 4.9 of the LLC
Agreement with respect to provisions related to the
19.9% Maximum Percentage; Section 7.6 of the LLC
Agreement relating to Member compliance with the
federal securities laws and cooperation with NYSE
Amex pursuant to its regulatory authority and with
the SEC; Section 8.1(d)(i) of the LLC Agreement
relating to designation of directors to the Board;
Sections 8.1(e)(ii) and 8.1(e)(iii) of the LLC
Agreement relating to a director’s suspension or
removal in certain circumstances; Section 8.1(h) of
the LLC Agreement relating to the qualification of
directors; Section 8.1(m) of the LLC Agreement
relating to director compliance with the federal
securities laws and cooperation with NYSE Amex
pursuant to its regulatory authority and with the
SEC; Section 9.3 of the LLC Agreement prohibiting
Members from entering voting trust agreements
with respect to their Common Interests; Section
11.8 of the LLC Agreement relating to (i) notice and
rule filing requirements to the SEC on any
acquisition of Interests that results in a Member’s
ownership of Common Interests reaching certain
threshold levels and (ii) requirements regarding
direct and indirect ownership of the Company;
Section 13.2(c) of the LLC Agreement granting
NYSE Amex and the SEC access to the books and
records of the Company; Section 14.1(j) of the LLC
Agreement providing for the confidentiality of
Confidential Information (as defined below)
pertaining to the self-regulatory functions of NYSE
Amex; Section 14.1(k) of the LLC Agreement
granting NYSE Amex and the SEC access to
confidential information; Section 16.1 of the LLC
Agreement relating to regulatory approvals and
compliance; or Section 16.10 of the LLC Agreement
relating to amendments to the LLC Agreement and
the requirement to file such amendments with the
SEC.
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termination, (x) the Company will
deliver to the Member a written notice
specifying in reasonable detail the basis
for such proposed suspension or
termination and (y) representatives of
the Member will be given an
opportunity to address the Board
regarding such proposed suspension or
termination prior to the Board voting
thereon. In the event of a suspension or
termination, the director (if any)
designated by such Member will
immediately cease to be a director and
the authorized number of directors will
be reduced accordingly.
Article IX of the LLC Agreement
provides that meetings of the Members
may be called by (i) the Board or (ii) by
a Member or Members holding not less
than thirty-five percent (35%) of the
then issued and outstanding Common
Interests. Written or printed notice
stating the place, day and hour of the
meeting and, in the case of a special
meeting of the Members, describing the
purposes for which the meeting is called
shall be delivered not fewer than ten
(10) days, but not more than sixty (60)
days, before the date of the meeting.
Such notice must include an agenda
specifying in reasonable detail the
matters to be discussed at the meeting
and identifying any specific items to be
considered that require a Supermajority
Vote. Except as otherwise provided in
the LLC Agreement or under applicable
law, Members which both (x) represent
greater than forty-five percent (45%) of
the Common Interests outstanding and
are entitled to vote at such time and (y)
constitute an absolute majority of
Members entitled to vote at such time,
represented in person or by proxy, shall
constitute a quorum of Members for
purposes of conducting business. Except
as otherwise required by the LLC
Agreement or applicable law,
resolutions of the Members at any
meeting of Members shall be adopted by
Majority Vote of the Members at such
meeting at which a quorum is present.
Section 9.3 of the LLC Agreement
prohibits Members from entering into
voting trust agreements with respect to
their Common Interests.
Governance of the Company
Section 8.1(a) of the LLC Agreement
establishes the Board, which will be a
‘‘manager’’ of the Company within the
meaning of the Delaware LLC Act. Each
director shall be entitled to one vote.
Section 8.1(b) of the LLC Agreement
provides that the Board shall delegate
the day-to-day operation of the
Company and the management of the
business and affairs of the Company to
the officers of the Company and NYSE
Group, a wholly-owned subsidiary of
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18599
NYSE Euronext, in accordance with the
NYSE Euronext Agreement pursuant to
which NYSE Group will perform certain
information technology, operational,
financial, compliance, management and
other general corporate support services
for the Company (except as otherwise
provided in the LLC Agreement). The
Board shall oversee the conduct and
performance of the duties so delegated.
Pursuant to Section 8.1(c) of the LLC
Agreement, the authorized number of
directors is thirteen (13) as of the
effective date of the LLC Agreement.
The Board may be expanded by
Supermajority Vote of the Board to
include any number of independent
directors as may be required by
applicable law, provided that in the
event the Board is so expanded, the
Board shall determine, by Supermajority
Vote, applicable independence criteria
in accordance with, among other
appropriate considerations, the
requirements of applicable law which
shall include, for this purpose, SEC
guidelines, if any, regarding such
criteria. The directors shall be
appointed by the Members as described
in the immediately following
paragraphs and shall hold office until
their respective successors are elected
and qualified or until their earlier death,
resignation or removal. In the event that
the Company is not required to appoint
independent directors, the Company
will authorize one individual to be
designated by NYSE Amex to
participate as a non-voting observer in
meetings of the Board, so long as the
Options Exchange is operated as a
facility of NYSE Amex.
Under Section 8.1(d) of the LLC
Agreement, each Member agrees that it
shall vote all of such Member’s
Common Interests and any other voting
equity securities of the Company over
which that Member has voting control
and shall take all other actions
reasonably necessary or desirable within
that Member’s control (whether in the
Member’s capacity as a Member,
director, member of a Board committee
or officer or otherwise, and including
attendance at meetings in person or by
proxy for purposes of obtaining a
quorum and execution of written
consents in lieu of meetings), and the
Company shall take all necessary and
desirable actions within its control
(including calling special Board and
Member meetings), so that the following
persons shall be elected to the Board:
(i) Up to seven (7) representatives
designated by NYSE Amex who shall
initially be as specified in the LLC
Agreement and, after the effective date
of the LLC Agreement, such other
persons who are designated by NYSE
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Amex from time to time pursuant to this
clause (i), one of whom may, in NYSE
Amex’s sole discretion, be the chief
executive officer of the Company;
provided that (x) upon any expansion of
the Board to include any independent
directors as described above, for so long
as NYSE Amex’s percentage ownership
of Common Interests equals or exceeds
fifteen percent (15%), NYSE Amex shall
have the right to designate a number of
additional directors equal to the
aggregate number of independent
directors added to the Board pursuant to
Section 8.1(c) of the LLC Agreement or,
if fewer, the largest number of
additional directors allowable under
applicable law, and the authorized
number of directors shall be
correspondingly increased and (y) upon
any expansion of the Board to include
any additional directors appointed by
Members other than NYSE Amex
pursuant to the LLC Agreement, NYSE
Amex shall have the right to designate
a number of additional directors equal
to the aggregate number of directors so
added to the Board and the authorized
number of directors shall be
correspondingly increased; provided,
further, that each individual designated
by NYSE Amex to serve as a director
shall be reasonably acceptable to the
Founding Firms; and provided, further,
that NYSE Amex will appoint at least
such number (not to exceed seven (7)
directors) as is necessary to ensure that
no single Founding Firm’s designees to
the Board constitute twenty percent
(20%) or a greater percentage of the total
number of directors on the Board; and
(ii) One (1) representative designated
by each Founding Firm authorized to
designate a representative pursuant to
Section 8.1(d)(ii) of the LLC Agreement,
who shall initially be as specified in the
LLC Agreement and, after the effective
date of the LLC Agreement, such other
person who is designated by such
Founding Firm from time to time
pursuant to this clause (ii); provided
that each individual designated by the
Founding Firms to serve as a director
shall be reasonably acceptable to NYSE
Amex; provided, further, that if such
Founding Firm’s percentage ownership
of Common Interests falls below, in the
case of Goldman Sachs and Citadel, five
percent (5%), and in all other cases,
three percent (3%), the individual
designated by such Founding Firm shall
immediately cease to be a director, such
Founding Firm shall cease to be
authorized to designate a director, and
the authorized number of directors shall
be reduced accordingly; provided,
further, that if such Founding Firm’s
Class B Common Interests are subject to
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redemption, the Board (A) may require
the individual designated by such
Founding Firm to resign, (B) may
permanently, or for such shorter period
as the Board may designate, disqualify
such Founding Firm from designating
representatives to the Board pursuant to
this clause (ii), and (C) pursuant to
subclause (A) or (B) above, reduce the
authorized number of directors
accordingly; provided that the affected
director shall not be authorized to
participate in any such decision by the
Board;
(iii) In the event the Board is
expanded to include independent
directors as described above and NYSE
Amex’s percentage ownership of
Common Interests equals or exceeds
fifteen percent (15%), NYSE Amex shall
designate one-half of the total number of
independent directors to be so included,
in consultation with the Founding
Firms, and the Founding Firms shall
designate one-half of the total number of
independent directors to be so included,
in consultation with NYSE Amex;
provided that if the number of
independent directors to be so included
is odd, NYSE Amex shall designate a
number of independent directors that is
equal to the number of independent
directors designated by the Founding
Firms plus one; provided further that if
(A) two or fewer Members have the right
to designate a director pursuant to
clause (ii) above or (B) the aggregate
Common Interests held by all Founding
Firms, excluding any Non-voting
Common Interests, falls below fifteen
percent (15%) of the then issued and
outstanding Common Interests, NYSE
Amex shall have the exclusive right to
designate all of the independent
directors. The independent directors
designated by NYSE Amex and the
Founding Firms shall be subject to
approval by a Supermajority Vote of the
Board. In the event that NYSE Amex’s
percentage ownership of Common
Interests is less than fifteen percent
(15%), the independent directors shall
be appointed by mutual agreement of
NYSE Amex and a majority of the
Founding Firms; and
(iv) If and for so long as NYSE Amex’s
then-current percentage ownership of
Common Interests is less than fifteen
percent (15%), the number of directors
designated by NYSE Amex shall be
decreased to a number equal to the thencurrent number of directors designated
by Founding Firms, the aggregate
number of representatives of the Board
to be designated by NYSE Amex shall be
decreased accordingly, and the number
of directors shall be reduced
accordingly, until such time as either (x)
one or more Founding Firms become
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eligible to designate a director, in which
case the aggregate number of
representatives of the Board to be
designated by NYSE Amex shall
simultaneously be increased to a
number equal to the number of directors
designated by Founding Firms or (y)
NYSE Amex’s then-current percentage
ownership of Common Interests again
equals or exceeds fifteen percent (15%),
in which case the aggregate number of
representatives of the Board to be
designated by NYSE Amex shall be
increased to a number equal to the
number of directors designated by
Founding Firms plus one (1) and, in
each case, the number of directors shall
be increased accordingly.
Section 8.1(e)(i) of the LLC Agreement
provides that a director may be removed
as a director at any time and for any
reason by the Board, pursuant to the
written request of the person(s) or
entit(ies) entitled to designate such
director as discussed above. A director
may also be removed for cause (as
defined in the LLC Agreement) by
Majority Vote of the Board; provided
that (i) representatives of the Member
entitled to designate such director shall
be given the opportunity to speak to the
Board regarding such proposed removal
prior to the Board voting on the removal
of such director and (ii) the affected
director shall not be authorized to
participate in any such decision by the
Board. In the event that a director
designated by a Founding Firm fails to
attend a majority of Board meetings
during any 12-month period, the Board
may require that Founding Firm to
designate a replacement director.
In addition, Section 8.1(e)(ii) of the
LLC Agreement provides that the Board
may, by Supermajority Vote (excluding
the vote of the directors designated by
the Member subject to sanction),
suspend or terminate a director’s service
as such to the Company in the event: (A)
the director has materially violated any
Regulatory Matters Provision or any
applicable law or (B) such action is
necessary or appropriate in the public
interest or for the protection of
investors. Prior to any such suspension
or termination, (x) the Board shall
deliver to the Founding Firm that
appointed the director a written notice
specifying in reasonable detail the basis
for the proposed suspension or
termination and (y) representatives of
the Founding Firm shall be given an
opportunity to address the Board
regarding such proposed suspension or
termination prior to the Board voting
thereon. In the event of such suspension
or termination, the individual
designated by the Founding Firm shall
immediately cease to be a director and
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the resulting vacancy shall be filled
pursuant to Section 8.1(f) of the LLC
Agreement (as discussed below).
Section 8.1(e)(iii) of the LLC
Agreement provides that any director
who becomes subject to any applicable
‘‘statutory disqualification’’ (within the
meaning of Section 3(a)(39) of the Act)
shall be deemed to have automatically
resigned from the Board.
Pursuant to Section 8.1(f) of the LLC
Agreement, in the event that any
director designated pursuant to the
terms of the LLC Agreement for any
reason ceases to serve as a director
during his or her term of office, the
resulting vacancy shall be filled by a
representative designated by the person
or persons entitled to designate such
director.
Pursuant to Section 8.1(g) of the LLC
Agreement, each Founding Firm will be
permitted to appoint an alternate
director, who will have the right to
serve, act and vote as the director
designated by that Founding Firm in the
absence of the principal director from
time to time in cases of necessity. The
alternate will be permitted to attend all
meetings of the Board even if the
principal director is present at such
meetings (it being understood that in
such case the alternate will attend as an
observer and shall not have the right to
act or vote as a director at any such
meeting). In the event a director is
removed pursuant to Section 8.1(e)(ii) of
the LLC Agreement as described above,
the then-appointed alternate to such
director shall immediately cease to be
an alternate and shall, instead, become
a director (unless the related Founding
Firm appoints another person as its
director, in which case the alternate
shall remain an alternate). In the event
a director is removed pursuant to
Section 8.1(d)(ii) of the LLC Agreement
as described above, any alternate to
such director will immediately cease to
be an alternate and will not become a
director. To the extent a Founding Firm
lacks representation on the Board, that
Founding Firm shall have the right to
appoint a non-voting observer to the
Board.
Section 8.1(h) of the LLC Agreement
outlines the basic qualifications of
directors and alternate directors. Each
individual designated to the Board as a
director or as an alternate, prior to
serving on the Board, must certify in
writing to the Company that he or she
is not subject to a ‘‘statutory
disqualification’’ within the meaning of
Section 3(a)(39) of the Act. Each
Founding Firm, prior to designating an
individual to the Board (as a director,
alternate or observer) must certify in
writing to the Company that such
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individual is not then a director (or an
alternate director or observer to the
board or any committee of the board),
officer or employee of a ‘‘Specified
Entity,’’ which is defined, as of any date,
as (i) any U.S. securities option
exchange (or facility thereof) or U.S.
alternative trading system on which
securities option contracts are executed
(other than NYSE Amex or any of its
affiliates) that lists for trading any
option contract that competes with a
contract listed for trading on the
Options Exchange or a contract that is
contemplated by the then-current
business plan of the Company to be
listed for trading by the Options
Exchange within ninety (90) days of
such date, (ii) any person or entity that
owns or controls a U.S. securities option
exchange or U.S. alternative trading
system described in clause (i), and (iii)
any affiliate of a person or entity
described in clause (i) or (ii) above;
provided that, in the event of a change
in applicable law permitting the
execution of transactions in exchangelisted securities options otherwise than
on a national securities exchange or
facility thereof (including, but not
limited to, internalization of orders for
exchange-listed securities options or the
execution of such orders on an
alternative trading system), (x) a system
operated by or on behalf of a Founding
Firm or its affiliates for purposes of the
internalization or crossing of: (i) orders
of customers of such Founding Firm or
its affiliates, (ii) orders of such
Founding Firm or its affiliates or (iii)
orders routed from a retail broker-dealer
or retail brokerage unit, shall not be
considered a Specified Entity and (y) in
addition to the matters covered in
clause (x), NYSE Amex and the
Founding Firms will negotiate in good
faith the terms of an exception from the
definition of Specified Entity for any
alternative trading system owned solely
by an individual Founding Firm or its
affiliates that performs order crossing in
a manner that does not substantially
compete with the Options Exchange in
terms of market share and other relevant
factors. In the event an individual
designated by a Founding Firm or
appointed as an alternate becomes a
member of the board of directors or
similar governing body of a Specified
Entity, that individual shall
immediately cease to be a director,
alternate or observer, as applicable, and
the resulting vacancy shall be filled
pursuant to the applicable procedures
described above.
As provided in Section 8.1(i) of the
LLC Agreement, a quorum of the Board
for purposes of conducting business
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18601
consists of a combination of the
directors representing greater than fifty
percent (50%) of the votes of all
directors who are elected and entitled to
vote on such matter under the LLC
Agreement, including, in the case of any
matter subject to a Supermajority Vote,
a combination of directors representing
greater than fifty percent (50%) of the
votes of all directors designated by
Founding Firms. At all times when the
Board is conducting business at a
meeting of the Board, a quorum must be
present at such meeting. If a quorum
shall not be present at any meeting of
the Board, then the directors present at
the meeting may adjourn the meeting
from time to time, without notice other
than announcement at the meeting,
until a quorum is present, provided that
if, at any duly called meeting wherein
a matter subject to a Supermajority Vote
is being considered, a quorum is not met
solely due to the fact that a requisite
number of Founding Firm directors are
not present, such meeting shall be
rescheduled on, absent exigent
circumstances, at least three (3) business
days’ prior written notice of such
rescheduled meeting and, for purposes
of such rescheduled meeting, the
absence of the requisite number of
Founding Firm directors shall not
prevent the Board from taking action by
Supermajority Vote. A director may vote
or be present at a meeting either in
person or by proxy.
The matters specified on Schedule
8.1(i)(v) of the LLC Agreement may only
be taken (whether by the Company or
any subsidiary) with approval by a
Supermajority Vote of the Board;
provided that any matter excepted from
that schedule by any item on the
schedule shall be deemed to be
excepted from all items on the schedule
except where expressly covered by
another item on such schedule. Certain
matters specified in Schedule 8.1(i)(v) of
the LLC Agreement do not require a
Supermajority Vote where NYSE Amex,
acting in its capacity as an SRO,
requires that such action be taken.
These matters are (i) material
amendments to the LLC Agreement or
any other governing document of the
Company or any subsidiary; (ii)
approval of a capital expenditure (other
than those approved in connection with
the annual budget) that in the aggregate
would exceed $3 million, (iii) entering
into, amending in any material respect
or terminating any material contract and
(iv) any material change to fees charged
by the Options Exchange. In the event
that at any given time, (A) two or fewer
Founding Firms have the right to
designate a director or (B) the aggregate
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number of Class B Common Interests
held by all Founding Firms, excluding
Non-voting Common Interests, falls
below twenty percent (20%) of the then
issued and outstanding Common
Interests, the list of matters that may be
taken only with approval by a
Supermajority Vote of the Board shall
include only those actions specified in
items 8, 12, 15, 16, 24 and 25 on
Schedule 8.1(i)(v) of the LLC
Agreement,15 provided that in the event
that the aggregate number of Class B
Common Interests held by all Founding
Firms, excluding Non-voting Common
Interests, falls below fifteen percent
(15%) of the then issued and
outstanding Common Interests, a
Supermajority Vote of the Board on
such actions shall only be required to
the extent that any such action would
have a materially and
disproportionately disadvantageous
effect on the economic or voting rights
of the Founding Firms; provided further
that a material change to the pricing of
the NYSE Euronext Agreement, subject
to the provisions therein, that is not in
good faith consideration of (i)
documented additional or enhanced
services (subject to such additional or
enhanced services being provided at
15 The six specified items are (1) material
amendments to or termination of any of the NYSE
Euronext Agreement; (2) material amendments to
the LLC Agreement or any other governing
document of the Company or any subsidiary
(including to increase/decrease the number or
makeup of the directors) other than any amendment
directed by NYSE Amex in its capacity as an SRO
in accordance with Section 16.1(a) of the LLC
Agreement; (3) approval of any material related
party transactions except (i) any transaction or
arrangement that has been approved pursuant to a
different item on Schedule 8.1(i)(v) of the LLC
Agreement or explicitly excluded from approval by
any item on that schedule, (ii) participation in any
cash pooling program of NYSE Euronext and any
of its affiliates, or (iii) any transaction or
arrangement that requires the Company or any
subsidiary to receive services under the NYSE
Euronext Agreement; (4) approval of any dividend
policy and any declaration, allocation or
distributions of profits or capital other than a tax
distribution and other than pursuant to the terms
of the LLC Agreement or a Board adopted (by
Supermajority Vote) dividend policy (and for the
avoidance of doubt, other than the payment of the
annual coupon on the Preferred Interest); (5) any
action that would be likely to result in material
change in the legal or tax structure of the Company
or any subsidiary or entering into any new business
that would subject the Options Exchange to a
regulatory regime that previously it was not subject
to and that would impose on Members, in their
capacity as members, material additional regulatory
obligations; and (6) any material change to fees
charged by the Options Exchange other than any
amendment directed by NYSE Amex in its capacity
as an SRO in accordance with Section 16.1(a) of the
LLC Agreement, to fund the operations and/or the
regulation of the Options Exchange. An action
directed by NYSE Amex in accordance with Section
16.1(a) of the LLC Agreement includes any action
NYSE Amex deems necessary or appropriate to
fulfill its obligations as an SRO and is not limited
to those actions required by applicable law.
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cost) or (ii) a documented increase in
the aggregate cost of the services
provided thereunder (net of any
reductions in other costs of services
provided thereunder) will per se be
deemed to have a materially and
disproportionately disadvantageous
effect on the economic rights of
Founding Firms.
Pursuant to Section 8.3 of the LLC
Agreement, the Board will establish on
the effective date of the LLC Agreement
the Advisory Committee comprised of
natural persons having the capacity to
provide advice to the Board, which
advice the Board will consider in good
faith but shall not be bound by, with
respect to subjects identified by the
Board from time to time, including new
products and market structure.
The authorized number of Advisory
Committee members is initially nine (9),
but may be increased or decreased by
Majority Vote of the Board; provided,
that at all times each Founding Firm
shall be entitled to have one (1)
representative on the Advisory
Committee (except as otherwise
provided in the LLC Agreement). The
Advisory Committee members shall be
appointed by the Members as follows:
two (2) Advisory Committee members
appointed by NYSE Amex and one (1)
Advisory Committee member appointed
by each Founding Firm. Advisory
Committee members shall hold office
until their respective successors are
appointed or until their earlier death,
resignation or removal.
Any Advisory Committee member
may resign at any time and may be
removed at any time and for any reason
by the Board, at the request of the
Member entitled to appoint such
Advisory Committee member. In the
event that any Advisory Committee
member for any reason ceases to serve
as an Advisory Committee member
during his or her term of office, the
resulting vacancy shall be filled by the
Member entitled to appoint such
Advisory Committee member.
Each individual designated to the
Advisory Committee, prior to serving on
the Advisory Committee, shall certify in
writing to the Company that he or she
is not subject to a ‘‘statutory
disqualification’’ within the meaning of
Section 3(a)(39) of the Act. Each
Founding Firm, prior to designating an
individual to the Advisory Committee
shall certify in writing to the Company
that such individual is not then a
director (or an alternate director or
observer to the board or any committee
of the board), officer or employee of a
Specified Entity. In the event an
individual designated to the Advisory
Committee becomes a member of the
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board of directors or similar governing
body of a Specified Entity, such
individual shall immediately cease to be
an Advisory Committee member and the
resulting vacancy shall be filled as
described above.
Transfers of Interests
Article XI of the LLC Agreement and
Article III of the Members Agreement
contain numerous requirements and
restrictions relating to transfers of
Interests by a Member. Section 11.1 of
the LLC Agreement provides that the
admission of any substitute Member
will not become effective until (i) the
Board gives its written consent, which
shall be deemed given with respect to
transfers made in accordance with
Section 4.9 of the LLC Agreement
relating to ownership limitations and
Sections 11.3 and/or 11.4 of the LLC
Agreement (whose provisions are
discussed below) and/or Sections 3.2,
3.3 and/or 3.4 of the Members
Agreement (whose provisions are
discussed below) and (ii) such
substitute Member and the withdrawing
Member and/or the transferor Member,
as the case may be, shall have executed,
acknowledged and delivered such
instruments as are required by the
Board. Pursuant to Section 11.1 of the
LLC Agreement, the additional or
substitute Member shall thereafter have
all of the rights and obligations of a
Member and may, in the sole discretion
of the Board, be deemed a Founding
Firm and granted all of the rights and
obligations of a Founding Firm. Further,
unless approved by the Board, no
transfer of Common Interests shall be
permitted, nor shall any transferee
become a beneficial owner of Common
Interests pursuant to a transfer, if that
transfer (i) could cause the Company to
be treated as a publicly traded
partnership within the meaning of
Section 7704 of the Internal Revenue
Code of 1986, as amended (the ‘‘Code’’);
or (ii) would result in the sale or
exchange of fifty percent (50%) or more
of the total Interests in the Company’s
capital and profits in one or more
transactions in the aggregate within a
12-month period. No transfer of shares
to any person or entity that is a
Sanctioned Person will be permitted. A
‘‘Sanctioned Person’’ is a person or
entity that the United States, the United
Nations, Switzerland or the European
Union (or any of its member states) has
subjected to economic sanctions such as
(i) blocking of assets, (ii) prohibiting any
transactions with or involving such
person or entity or (iii) any other
regulatory action that restricts the
ability of another person or entity
lawfully to engage in business with,
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make payments or distributions to, or
receive payments or contributions from,
such person or entity.
Section 11.2 of the LLC Agreement
and Section 3.1 of the Members
Agreement provide that no Member, or
any assignee or successor in interest of
any Member, will be permitted to sell,
assign or otherwise transfer any
Common Interests to any third party
except, (i) in the case of a transfer of
Class A Common Interests or Class B
Common Interests, as applicable,
pursuant to Section 4.9 of the LLC
Agreement relating to ownership
limitations or Sections 11.3, 11.4 or 11.6
of the LLC Agreement (whose
provisions are discussed below) or
Sections 3.3 or 3.4 of the Members
Agreement (whose provisions are
discussed below) or (ii) in the case of a
transfer of Class B Common Interests,
subject to Section 3.2 of the Members
Agreement (whose provisions are
discussed below), with the prior written
consent of directors representing a
Majority Vote of the Board without
regard to the directors appointed by the
Member or Members seeking such
consent (which consent (a) may be
withheld with or without cause in the
Board’s sole discretion in the case of a
transferee that is not a Qualified
Transferee 16 and (b) may not be
unreasonably withheld, conditioned or
delayed in the case of a transferee that
is a Qualified Transferee); provided, in
each case, that no such transfer may be
made to any person or entity whose
affiliation with the Company would, as
reasonably determined by NYSE Amex,
cause reputational damage to NYSE
Amex or any of its affiliates. In addition,
also subject to Section 11.3 of the LLC
16 A ‘‘Qualified Transferee’’ is defined as (i) with
respect to a transfer of Class B Common Interests
pursuant to Section 3.2 of the Members Agreement,
any person or entity that meets all of the following
criteria: (a) such person or entity is not a Specified
Entity, (b) the affiliation of such person or entity
with the Company would not, as reasonably
determined by NYSE Amex, cause reputational
damage to NYSE Amex or any of its affiliates, and
(c)(I) such person or entity can reasonably be
expected to provide either (A) material liquidity to
the Options Exchange or (B) other material
commercial or strategic support to the Company or
(II) NYSE Amex provides its prior written waiver
to satisfaction of the conditions specified in clause
(c)(I) of this definition, which waiver shall not be
unreasonably withheld, conditioned or delayed or
(ii) with respect to a transfer of Class A Common
Interests pursuant to Section 3.3(a)(ii) of the
Members Agreement, any person or entity that
meets all of the following criteria: (a) the affiliation
of such person or entity with the Company would
not, as reasonably determined by NYSE Amex,
cause reputational damage to the Members or the
Company, and (b) such person or entity can
reasonably be expected to provide either (A)
material liquidity to the Options Exchange or (B)
other material commercial or strategic support to
the Company.
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Agreement, no transfers of Class B
Common Interests shall be permitted to
a Specified Entity; provided, subject to
the provisions of Section 11.4(c) of the
LLC Agreement relating to such
transfers, Class B Common Interests may
be transferred to a Specified Entity if
such transfer is a Permitted Transfer. No
equity securities of the Company may be
pledged except on terms and conditions
satisfactory to the Board.
Following any transfer of Class A
Common Interests or Class B Common
Interests (including redemptions of the
latter by the Company), the Aggregate
Class A Allocation, the Aggregate Class
B Allocation and each Member’s
percentage ownership of the Common
Interests will be adjusted as provided in
Section 11.2(b) of the LLC Agreement.
Upon any transfer of Class A Common
Interests to the Founding Firms or Class
B Common Interests to NYSE Amex or
its affiliates, as applicable, such Class A
Common Interests or Class B Common
Interests, as applicable, shall cease to be
Class A Common Interests or Class B
Common Interests, as applicable, and
shall instead become Class B Common
Interests or Class A Common Interests,
respectively. Unless waived at the
discretion of the Board, an opinion of
counsel will be required in connection
with the transfer of Interests by a
Member stating that the transfer would
not violate any Federal securities laws
or any State or provincial securities or
‘‘blue sky’’ laws (including any investor
suitability standards) applicable to the
Company or the Interest to be
transferred, or cause the Company to be
required to register as an investment
company under the Investment
Company Act of 1940, as amended, or
cause the Company to become a
publicly traded partnership under
Section 7704 of the Code.
Section 11.3 of the LLC Agreement
provides for ‘‘drag-along rights’’ with
respect to Common Interests being sold
under certain circumstances.
Specifically, if (i) a Member (the
‘‘Selling Member’’), acting alone or
together with any other Members,
intends to make a transfer of seventyfive percent (75%) or more of the thenoutstanding Common Interests (other
than by a public offering or a transfer to
a Permitted Transferee), and (ii) the
Board, by Supermajority Vote, approves
a sale of the Company to a person or
entity that is not an affiliate of the
Company (any such transfer of Common
Interests, an ‘‘Approved Sale’’), then (x)
the Selling Member or the Board (as
applicable) may deliver written notice
to the Members notifying them of the
exercise of the provisions described in
Section 11.3 of the LLC Agreement, and
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18603
(y) all the Members (other than the
Selling Member(s)) shall be obligated to
participate in such transfer on a pro rata
basis and/or to consent to, vote in favor
of and raise no objections against the
sale of the Company, as applicable.
Additional provisions of Section 11.3 of
the LLC Agreement require each
Member to take certain affirmative
actions in connection with an Approved
Sale, such as making certain
representations and warranties and to
enter into certain indemnification
obligations. Further, each holder of
Common Interests shall, to the extent
requested by the Company, pay such
holder’s pro rata portion of the expenses
incurred by the holders in connection
with an Approved Sale.
Section 11.4(a) of the LLC Agreement
provides that the restrictions on
transfers of Interests specified in Article
XI of the LLC Agreement do not apply
to Permitted Transfers (other than those
restrictions in Section 11.1(c)(ii) relating
to the admission of substitute Members,
those in Section 11.1(d) relating to
transfers that could cause the Company
to be treated as a publicly traded
partnership or would result in the sale
or exchange of 50% or more of the total
Interests in the Company’s capital and
profits within a 12-month period, those
in Section 11.2(d) relating to potential
violations of Federal, State or local
securities laws or transfers that could
cause the Company to be required to
register as an investment company,
those in Section 11.8 relating to (i)
notice and rule filing requirements to
the SEC on any acquisition of Interests
that results in a Member’s ownership of
Common Interests exceeding certain
thresholds and (ii) requirements
regarding direct and indirect ownership
of the Company and the rights triggered
by Section 11.5(b) relating to the
Company’s right to redeem any or all of
a Member’s Class B Common Interests).
In the case of a transfer required under,
or effected to enable a Member to be in
compliance with, applicable law or the
requirements of a governmental
authority or any SRO, any Founding
Firm that is so required to make any
such transfer shall submit the names of
any potential transferees to the Board
along with any information reasonably
requested by the Board, and the Board
shall identify which, if any, of the rights
and obligations of a Founding Firm such
potential transferees would have and
any reasonable and conforming
amendments to the LLC Agreement that
would be appropriate as a result thereof
and, in the event one of such transferees
actually becomes a transferee pursuant
to such transfer, then that transferee
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shall have the rights and obligations of
a Founding Firm so determined by the
Board, provided that (x) the Board shall
not unreasonably withhold, condition or
delay its consent to granting such
Required Transferee the rights of a
Founding Firm, and (y) the transferring
Founding Firm shall not have an
obligation to be responsible for the
performance of such Required
Transferee under the LLC Agreement.
Pursuant to Section 11.4(c) of the LLC
Agreement, in the event of a Permitted
Transfer to a Specified Entity by a
Founding Firm, the Board may:
(i) Require any individual, alternate or
observer appointed by or representing
such Founding Firm to the Board or
individual appointed by such Founding
Firm to the Advisory Committee to
resign; (ii) disqualify such Specified
Entity from voting for individuals to
serve on the Board or the Advisory
Committee (permanently or for such
shorter period as the Board may
designate), and (iii) redeem such
Specified Entity’s Interests pursuant to
Section 11.5(b)(iii) of the LLC
Agreement.
Section 3.2(a) of the Members
Agreement provides that, each year,
Founding Firms will be able to transfer,
outside of a Public Offering, a certain
amount of Class B Common Interests
during a the 3-week period commencing
on the day that NYSE Euronext files its
Form 10–K with the SEC (such period,
the ‘‘Sale Period’’). This provision does
not restrict Permitted Transfers.
Pursuant to Section 3.2(b) of the
Members Agreement, NYSE Amex will
deliver to the Founding Firms relevant
financial information for purposes of
determining the pro rata portion of fair
market value (over the twelve-calendarmonth period ended at the end of the
immediately preceding month)
represented by such Class B Common
Interests the Founding Firms seek to
transfer. Any Founding Firm that
wishes to transfer any of its transferrable
Class B Common Interests will disclose,
by written notice to NYSE Amex and
the other Founding Firms, the amount
of Common Interests it intends to
transfer. NYSE Amex may, by written
notice to the transferring Founding
Firm, elect to offer to purchase such
Common Interests at a price equal to or
greater than the pro rata portion of fair
market value (over the twelve-calendarmonth period ended at the end of the
immediately preceding month)
represented by such Class B Common
Interests. NYSE Amex may, in lieu of
consummating the transfer
contemplated hereunder, cause the
Company to redeem any or all of such
Common Interests at the same price and
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on the same terms and conditions as
were negotiated by NYSE Amex and the
transferring Founding Firm. Any
redemption by the Company pursuant to
this provision shall be funded
exclusively by the Redemption Reserve
(as defined below) until the Redemption
Reserve is exhausted, and thereafter no
redemption pursuant to this provision
may be made by the Company.
Pursuant to Section 3.2(c) of the
Members Agreement, in the event that
the transferring Founding Firm elects to
reject NYSE Amex’s offer, NYSE Amex
elects not to make an offer, or the
transfer has not occurred within the
specified time period, the transferring
Founding Firm may:
(i) Transfer such Common Interests to
a third party; provided that no transferee
under this provision, shall acquire the
Founding Firm Right (as defined below)
unless, in such transfer, such transferee
acquires all of the Class B Common
Interests of the transferring Founding
Firm;
or
(ii) Require that NYSE Amex acquire
such Common Interests at a price equal
to the pro rata portion of fair market
value (over the twelve-calendar-month
period ended at the end of the
immediately preceding month)
represented by such Class B Common
Interests (this right to require NYSE
Amex to acquire the Common Interests,
the ‘‘Founding Firm Right’’). NYSE
Amex may cause the Company to
redeem any or all of such Common
Interests at the same price and on the
same terms and conditions (as
applicable) as were negotiated by NYSE
Amex and the transferring Founding
Firm. Any such redemption by the
Company pursuant to this provision
shall be funded exclusively by the
Redemption Reserve (as defined below)
until the Redemption Reserve shall be
exhausted, and no other funds of the
Company may be used to fund any
redemption by the Company pursuant to
this provision. Subject to Section 4.9 of
the LLC Agreement, which governs
ownership limitations, NYSE Amex may
assign to one of its affiliates the
obligation to purchase Common
Interests pursuant to the Founding Firm
Right. Upon the acquisition of any Class
B Common Interests by an affiliate
pursuant to such an assignment, such
Class B Common Interests will instead
become Class A Common Interests in
accordance with Section 11.2 of the LLC
Agreement.
Pursuant to Section 3.2(d) of Members
Agreement, if (x) a transferring
Founding Firm desires to exercise a
Founding Firm Right and (y) prior to
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Sfmt 4703
notifying NYSE Amex of its Founding
Firm Right, NYSE Amex has notified in
writing such transferring Founding Firm
that it has identified one or more bona
fide third party purchasers to which
such Common Interests could be
transferred pursuant to Section 3.1 of
the Members Agreement and that are
interested in purchasing all of such
transferring Founding Firm’s Common
Interests (such sale, an ‘‘Alternative
Sale’’), then such transferring Founding
Firm shall engage in good faith
discussions and negotiations with
respect to the sale of the Common
Interests; provided that (A) the
transferring Founding Firm shall not be
obligated to transfer its Common
Interests at a price less than the fair
market value of such Common Interests
(nor will it insist on a higher price than
such fair market value) and (B) such
transfer shall be on terms no less
favorable to the transferring Founding
Firm than the terms agreed to between
NYSE Amex and such transferring
Founding Firm.
Section 3.2(e) of the Members
Agreement provides that the transferring
Founding Firm must notify the
Company of its intent to either pursue
the Alternate Sale or exercise the
Founding Firm Right, provided that if
such transferring Founding Firm
determines to pursue an Alternate Sale,
such transferring Founding Firm shall
forfeit the right to exercise the Founding
Firm Right with respect to the
applicable Sale Period.
Section 3.2(f) of the Members
Agreement provides that NYSE Amex
may elect to acquire any of the Class B
Common Interests to be purchased by it
pursuant to Section 3.2 of the Members
Agreement by installment payments:
one-third of the purchase price payable
upon tender and the remainder in equal
payments made on each of the two
succeeding calendar year anniversaries
of such date of tender, with the unpaid
portion of the purchase price bearing
interest at a specified rate, reset daily
and payable on each payment date.
Notwithstanding any installment
payment, NYSE Amex shall become the
owner of the entirety of such Class B
Common Interests and the transferring
Founding Firm shall cease to be a
Member of the Company with respect to
such Class B Common Interests upon
tender and payment by NYSE Amex of
the first installment payment. In the
event that NYSE Amex causes the
Company to redeem such Class B
Common Interests pursuant to Sections
3.2(b)(iii) or 3.2(c)(ii) of the Members
Agreement, the Company shall not be
entitled to acquire such Class B
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Common Interests by installment
payments.
Section 3.2(h) of the Members
Agreement provides that, in the event
that the financial information regarding
the Company delivered pursuant to
Section 3.2(b) of the Members
Agreement is not provided at least five
(5) business days prior to end of the Sale
Period, NYSE Amex shall have the right
to rescind its offer to purchase the
Common Interests or the transferring
Founding Firm shall have the right to
rescind its election to exercise its
Founding Firm Right, if the initial
determination of the pro rata portion of
fair market value (over the twelvecalendar-month period ended at the end
of the immediately preceding month)
represented by the Class B Common
Interests the Founding Firms seek to
transfer differs by more than an agreed
percent from the final determination.
A redemption of Class B Common
Interests by the Company under
Sections 3.2(b)(iii) or 3.2(c)(ii) of the
Members Agreement is required to be
funded by the Redemption Reserve
(originally funded by NYSE Amex).
Pursuant to Section 3.2(i) of the
Members Agreement, NYSE Amex has
the right to determine the size of the
increase in the Aggregate Class A
Allocation (and corresponding decrease
in the Aggregate Class B Allocation)
and, thereby, (x) cause the Company to
treat such a redemption as if it were a
purchase of Class B Common Interests
by NYSE Amex, by directing an increase
in the Aggregate Class A Allocation (and
a corresponding decrease in the
Aggregate Class B Allocation) equal to
the entire percentage represented by the
Class B Common Interests so redeemed;
(y) cause the Company to treat such a
redemption as an ordinary redemption,
by directing only a pro rata increase in
the Aggregate Class A Allocation (and a
corresponding decrease in the Aggregate
Class B Allocation) proportional to the
aggregate Class A and Class B
allocations; or (z) cause the Company to
treat such a redemption as a hybrid
purchase and redemption, by directing
a disproportional increase in the
Aggregate Class A Allocation (and a
corresponding decrease in the Aggregate
Class B Allocation) that is less than the
entire percentage represented by the
redeemed Class B Common Interests.17
17 Consider, by way of example, an Aggregate
Class A Allocation of 60% and an Aggregate Class
B Allocation of 40% prior to a redemption of Class
B Common Interests corresponding to 10% of the
aggregate number of Common Interests. If NYSE
Amex elected to treat such a redemption as though
it were a purchase of these Class B Common
Interests by NYSE Amex, it could direct an increase
in the Class A Allocation equal to the entire 10%
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If NYSE Amex elects to receive an
upward adjustment of the Aggregate
Class A Allocation Percentage described
above, the Priority Claim of NYSE Amex
will be reduced by the amount paid by
the Company that is attributable to the
excess of such allocation over the
allocation NYSE Amex would have
received on a pro rata basis.
The Company is required to update
and distribute to each Member a revised
Members’ Schedule reflecting the
adjustments made pursuant to Section
3.2(i) of the Members Agreement. Any
Member that would exceed the 19.9%
Maximum Percentage as a result of these
adjustments will be subject to the
provisions of Section 4.9(c) of the LLC
Agreement.
Section 3.2(j) of the Member’s
Agreement provides that, in the event
that the effective date of the LLC
Agreement occurs on or after March 11,
2011 and before June 30, 2011, then,
solely with respect to the Sale Period
occurring in 2011, (i) the phrase ‘‘during
any Sale Period’’ in Section 3.2(a) of the
Members Agreement shall be deemed to
be a reference to ‘‘during the 10 day
period following the later of (x) effective
date of the LLC Agreement and (y) the
day on which NYSE Euronext files its
Form 10–K with the SEC,’’ (ii) NYSE
Amex and the Company shall deliver on
the effective date of the LLC Agreement
the financial information specified in
Section 3.2(b)(i) of the Members
Agreement and required to be delivered
by NYSE Amex and the Company,
respectively, prior to or concurrent with
the start of the Sale Period, (iii) any
disputes referred to in Section 3.2(b)(i)
of the Members Agreement shall be
resolved as promptly as practicable
following the effective date of the LLC
Agreement, and (iv) the reference to
‘‘end of the Sale Period’’ in Section
3.2(h) of the Members Agreement shall
represented by the redeemed Class B Common
Interests. The result would be an Aggregate Class
A Allocation of 70% and an Aggregate Class B
Allocation of 30%.
Alternatively, if NYSE Amex elected to treat such
a redemption as an ordinary redemption, the 10%
represented by the redeemed Class B Shares would
effectively cease to exist and the Aggregate Class A
Allocation would increase to (60/90)% or 66.6%
(and the Aggregate Class B Allocation would
decrease to (30/90)% or 33.3%). NYSE Amex could
cause this result by directing a pro rata increase to
the Aggregate Class A Allocation (and
corresponding decrease in the Aggregate Class B
Allocation), proportional to the aggregate Class A
and Class B allocations.
Finally, if NYSE Amex elected a hybrid
treatment, it could direct that the Aggregate Class
A Allocation be increased to a value between 66.6%
and 70% (and that the Aggregate Class B Allocation
be correspondingly decreased). As further described
below, such a direction would reduce the Priority
Claim by the amount paid in respect of the
allocation in excess of 66.6%.
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18605
be deemed to be a reference to the end
of the period referred to in clause (i) of
this paragraph.
Section 3.3 of the Members
Agreement provides for a limited ‘‘right
of first offer’’ exercisable by each
Founding Firm with respect to any
Common Interests NYSE Amex
proposes to transfer. Pursuant to Section
4.9 of the LLC Agreement, no Founding
Firm will be permitted to so acquire
Common Interests if such acquisition
would result in the Founding Firm
holding Excess Interests.
Pursuant to Section 3.3(a) of the
Members Agreement, in the event that
NYSE Amex intends to transfer any
Class A Common Interests (other than
by a Public Offering or a transfer to a
Permitted Transferee), NYSE Amex
shall deliver a written notice to the
Founding Firms disclosing the amount
of Class A Common Interests proposed
to be transferred and the identity of the
prospective transferee, which transferee
shall be an NYSE Amex Qualified
Transferee.
Pursuant to Section 3.3(b) of the
Members Agreement, each Founding
Firm may elect to offer to purchase
(each such Founding Firm, an ‘‘Offering
Founding Firm’’), by written notice to
NYSE Amex, its pro rata portion of the
Class A Common Interests proposed to
be so transferred. If the Founding Firms
have not elected to fully purchase all of
the Interests proposed to be transferred,
NYSE Amex shall provide written
notice to all Offering Founding Firms
specifying the number of remaining
Class A Common Interests, and each
Offering Founding Firm may elect to
purchase such remaining Class A
Common Interests by written notice to
NYSE Amex; provided that if the
Offering Founding Firms collectively
elect to purchase more than the
remaining number of Class A Common
Interests, each Offering Founding Firm
shall be entitled to purchase its pro rata
portion thereof (with such pro rata
portion determined solely by reference
to the Offering Founding Firms’
respective percentage of Common
Interests). The Founding Firms’ right to
purchase Class A Common Interests
pursuant to this provision shall be
contingent on the purchase by one or
more Founding Firms of all of the Class
A Common Interests proposed to be
transferred by NYSE Amex. The
Offering Founding Firms shall
collectively determine the proposed
price and such other terms and
conditions of the proposed transfer. If
NYSE Amex rejects the offer(s) of the
Founding Firm(s), NYSE Amex may
transfer such Class A Common Interests
to the prospective transferee identified
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by NYSE Amex in its notice at a price
greater than the price offered by the
Offering Founding Firms and on other
terms and conditions no more favorable
to the transferee(s) thereof than the
terms offered by the Founding Firms. In
the event that the Founding Firms elect
not to make an offer, NYSE Amex may
transfer such Class A Common Interests
to the prospective transferee identified
by NYSE Amex at a price and on other
terms and conditions as determined by
NYSE Amex.
Pursuant to Section 3.3(c) of the
Members Agreement, prior to, and
subject to the completion by NYSE
Amex of a transfer of Class A Common
Interests that would result in NYSE
Amex and its affiliates, in the aggregate,
ceasing to own at least an agreed
percent of the Aggregate Class A
Allocation (such transfer a ‘‘Complete
Transfer’’) (other than pursuant to
Section 3.3(d) of the Members
Agreement described below), the
Members and NYSE Euronext shall,
acting reasonably and in good faith,
consider and implement any applicable
and necessary amendments to the
Members Agreement and the LLC
Agreement. Until such time as NYSE
Amex has completed a Complete
Transfer, NYSE Euronext shall provide
to or procure services for the Company
materially similar to those provided by
NYSE Group pursuant to the NYSE
Euronext Agreement and on the pricing
terms and other terms provided in the
NYSE Euronext Agreement. Upon a
Complete Transfer, at NYSE Euronext’s
discretion, the NYSE Euronext
Agreement may be terminated or
assigned and the NYSE Amex Qualified
Transferee shall agree to provide to or
procure services for the Company or
NYSE Euronext shall agree to continue
to provide such services pursuant to
such terms. NYSE Amex shall
reasonably compensate the Company to
the extent the NYSE Amex Qualified
Transferee agrees to provide or procure
services on pricing terms less favorable
to the Company or on other terms which
are materially more disadvantageous to
the Company than those provided for by
the NYSE Euronext Agreement. NYSE
Amex shall continue to provide services
or compensate the Company as
described above for a period of time
equal to the lesser of (x) four years from
the time of such transfer and (y) the
minimum time necessary, at the time of
such transfer, for all Founding Firms to
transfer their Class B Common Interests
in accordance with the limitations of
Section 3.2(a) of the Members
Agreement, assuming such Founding
Firms transfer the maximum amount of
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Class B Common Interests permitted
thereunder as quickly as permitted
thereunder. Following such period, to
the extent not previously terminated or
assigned, the NYSE Euronext Agreement
shall terminate.
Section 3.3(d) of the Members
Agreement provides that, in the event of
a Complete Transfer by NYSE Amex to
one of its affiliates, such transferee shall
be deemed to be NYSE Amex for all
purposes under the Members Agreement
and the LLC Agreement and be subject
to the same rights and obligations as
NYSE Amex thereunder, except in
respect to NYSE Amex’s rights and
obligations as the SRO of the Options
Exchange, which rights and obligations
shall remain with NYSE Amex
irrespective of any such Complete
Transfer.
Section 3.4 of the Members
Agreement provides for a ‘‘call option’’
exercisable by NYSE Amex.
Specifically, the Members grant NYSE
Amex, the right and the option to
require the Members (other than NYSE
Amex) (and a transferee of a Member or
a transferee of a transferee) collectively
to transfer to NYSE Amex any or all of
the aggregate Class B Common Interests
held by all Members (other than NYSE
Amex) (and such transferees) at a price
equal to the pro rata portion of the fair
market value (over the twelve-calendarmonth period ended at the end of the
immediately preceding month)
represented by such Class B Common
Interests (such right, the ‘‘Call Option’’).
NYSE Amex shall have the right, but not
the obligation, to exercise the Call
Option, in whole or in part, in its sole
discretion at any time on or after the
tenth anniversary of the effective date of
the LLC Agreement. Each Member
(other than NYSE Amex) (and each such
transferee, if any) shall tender to NYSE
Amex such person’s pro rata portion of
the Class B Common Interests NYSE
Amex desires to purchase and NYSE
Amex shall pay to each such Member
(other than NYSE Amex) (and
transferee) the purchase price. Subject
to Section 4.9 of the LLC Agreement,
which governs ownership limitations,
NYSE Amex may assign to one of its
affiliates the right to purchase Class B
Common Interests pursuant to the Call
Option. Upon the acquisition of any
Class B Common Interests by an affiliate
pursuant to such an assignment, such
Class B Common Interests will instead
become Class A Common Interests in
accordance with Section 11.2 of the LLC
Agreement.
Redemption of Interests
Section 11.5(a) of the LLC Agreement
provides that the Company may, by
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Majority Vote of the Board, redeem any
or all of the Preferred Interests at any
time; provided that only such funds as
are available in the Redemption Reserve
may be used to fund any such
redemption. The ‘‘Redemption Reserve’’
is an independent cash reserve
established by the Board as of the
effective date of the LLC Agreement and
which will be designated for the sole
purpose of funding any redemptions of
(i) Preferred Interests (at any time, by
Majority Vote of the Board) or (ii) Class
B Common Interests, and shall not be
used for any other purpose. The amount
of the Redemption Reserve will be
agreed upon by the Members and will
be increased to the extent of any amount
accrued and unpaid on the unpaid
Priority Claim.
With respect to the Class B Common
Interests, Section 11.5(b) of the LLC
Agreement provides that the Company
shall have the right, by Majority Vote of
the Board, to redeem any or all of a
Member’s Class B Common Interests, at
a redemption price equal to the lower of
(x) the balance of that Member’s capital
account (subject to certain adjustments)
with respect to the Class B Common
Interests so redeemed and (y) the pro
rata portion of fair market value (over
the twelve-calendar-month period
ended at the end of the immediately
preceding month) represented by such
Class B Common Interests:
(i) If that Member fails to make a
Regulatory Capital Contribution on or
before the payment date identified in
the relevant written notice and fails to
timely cure such non-payment;
(ii) If that Member directly or
indirectly acquires a controlling interest
in or becomes the direct or indirect
beneficial owner of a controlling interest
in, grants a controlling interest to or
becomes directly or indirectly
beneficially owned by, or comes under
common control with, a Specified Entity
(for purposes hereof, ‘‘controlling
interest’’ means greater than fifty percent
(50%) of the voting equity of the
applicable entity) and, in the event such
Member becomes directly or indirectly
beneficially owned by or comes under
common control with a Specified Entity,
has not cured such event within a
specified time period;
(iii) If such Member makes a
Permitted Transfer to a Specified Entity;
or
(iv) Pursuant to Section 2.1(i) of the
Members Agreement (as described
below).
In connection with the Plan, Section
2.1(i) of the Members Agreement
provides that the Company also has the
right, by Majority Vote of the Board, to
redeem on the same terms as above any
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or all of the Class B Common Interests
of a Founding Firm that, as of a
quarterly determination date, (i) has
failed to satisfy a minimum volume
threshold during the preceding 12month period or (ii) has (A) failed to
satisfy a minimum volume threshold
during the preceding three-month
period and (B) entered into an
agreement or economic arrangement
with (i) a Specified Entity or (ii) an
affiliate of NYSE Amex that is a U.S.
securities option exchange (or facility
thereof) or U.S. alternative trading
system on which securities option
contracts are executed (an ‘‘Affiliate
Exchange’’) under which such Founding
Firm receives equity (whether provided
through a primary issuance or a
secondary sale) or equity-like
consideration in exchange for market
making or the provision of liquidity,
order flow or volume (except under any
volume-based fee discount or rebate
program or any program or arrangement
open to market participants generally)
in any contract that competes with a
contract that is then listed for trading by
the Options Exchange or that is
contemplated by the then current
business plan of the Company to be
listed for trading by the Options
Exchange within ninety (90) days
following the date on which such
Founding Firm has entered into the
agreement with the Specified Entity or
an Affiliate Exchange, subject to certain
exceptions.
The Redemption Reserve shall not be
used to fund any purchase of Class B
Common Interests pursuant to Section
11.5(b) of the LLC Agreement or Section
2.1(i) of the Members Agreement.
Section 11.5(c) of the LLC Agreement
provides that in the event a Founding
Firm (A) determines that (x) a Member
has become a Sanctioned Person and (y)
regulatory or other requirements
necessitate such Member’s withdrawal
as a Member if such Founding Firm
were to remain a Member and (B)
provides notice of such determination to
the Company, the Company may redeem
all Common Interests owned by the
Sanctioned Person by Supermajority
Vote of the Board (excluding the vote of
the affected Member), at a redemption
price equal to the lower of (I) the
balance of the Member’s capital account
(subject to certain adjustments) and (II)
the fair market value of the Sanctioned
Person’s Common Interests; provided
that if the Company fails to redeem the
Sanctioned Member’s Common
Interests, such Founding Firm shall
have the right to put its Common
Interests to the Company at a price
equal to one dollar ($1).
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Section 11.5(f) of the LLC Agreement
provides that all redemptions of Class B
Common Interests by the Company
pursuant to Section 11.5 of the LLC
Agreement shall be subject to applicable
restrictions contained in the Delaware
LLC Act and in the Company’s debt
financing agreements, and if any such
restrictions prohibit the redemption of
Class B Common Interests pursuant to
Section 11.5 of the LLC Agreement
which the Company is otherwise
entitled or required to make, the time
periods provided in Section 11.5(e) of
the LLC Agreement will be suspended,
and the Company may make such
redemptions as soon as any applicable
restrictions allow; provided that the
price at which such redemption is made
shall be fixed as of the date such
redemption would have occurred had
there not existed any restrictions on
such redemption. Furthermore, nothing
shall require the Company to segregate
or set aside any funds or other property
for the purpose of making any payment
or distribution pursuant to Section 11.5
of the LLC Agreement. The right of any
Member or beneficiary thereof to receive
any payment or distribution under those
provisions will be an unsecured claim
against the general assets of the
Company. Notwithstanding anything to
the contrary in the LLC Agreement, if
the application of the restrictions in
Section 11.5(f) described in this
paragraph prohibits the redemption of
the Class B Common Interests of a
Sanctioned Person, the Company must
redeem such Class B Common Interests
by providing the Sanctioned Person a
promissory note, the terms of which
will be determined by the Majority Vote
of disinterested directors, in a principal
amount equal to the lower of (I) the
balance of that Member’s capital
account (subject to certain adjustments)
and (II) the fair market value of the
Sanctioned Person’s Common Interests,
in each case, determined as of the date
the Company determines to redeem the
Sanctioned Person’s Common Interests,
payable at such time as any applicable
restrictions allow, and the Company
shall become the owner of such Class B
Common Interests upon tender of the
promissory note.
In the event the Company elects not
to exercise its option to redeem all or
any portion of the Class B Common
Interests under Section 11.5(b) of the
LLC Agreement as discussed above,
NYSE Amex shall have the right, but not
the obligation, within thirty (30) days of
the event triggering such right, to
require the applicable Founding Firm to
transfer any or all of such unredeemed
Class B Common Interests to NYSE
PO 00000
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18607
Amex at a price equal to the pro rata
portion of fair market value (over the
twelve-calendar-month period ended at
the end of the immediately preceding
calendar month) represented by such
Class B Common Interests. NYSE Amex
may assign to an affiliate the right to
purchase Class B Common Interests
pursuant to this paragraph.
Section 11.6 of the LLC Agreement
provides the requirements for an initial
public offering of the Company’s
securities, whether primary or
secondary, pursuant to a registration
statement filed under the Securities Act
of 1933, as amended (the ‘‘Securities
Act’’). At any time upon the
determination of the Board that an
initial public offering is in the best
interests of the Company and the
Members, and upon approval by a
Supermajority Vote of the Board if such
initial public offering does not
constitute a Qualified Public Offering
(defined as giving rise to at least
$175,000,000 in gross proceeds and
resulting in an implied valuation for the
equity securities of the Company as a
whole that will be no less than
$550,000,000), subject to applicable law
and receipt of applicable regulatory
approvals, either (a) the Company shall
be required to contribute all or a
specified portion of the assets of the
Company to a corporation newly formed
under the laws of the State of Delaware
(the ‘‘New Company’’), or (b) the
Members shall be required to contribute
their Interests to the New Company, in
each case in exchange for shares of the
New Company’s stock having
substantially the same equity interests
and voting rights as the Interests being
contributed (the ‘‘New Company
Shares’’), and the Company shall cause
the New Company to file and use its
best efforts to have declared effective a
registration statement under the
Securities Act for an initial public
offering, and to cause the New Company
and its officers and employees to use
their best efforts to market the New
Company Shares, subject to all
applicable Securities Act restrictions.
To the extent required by the
underwriters managing a registered
public offering of the New Company
Shares, each Member agrees to complete
and execute all customary
questionnaires and similar documents
so required under the terms of such
underwriting agreements. Upon the
consummation of an initial public
offering, certain specified portions of
the LLC Agreement and such other
provisions as the Board may determine,
including the LLC Agreement in its
entirety, shall terminate automatically
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and be of no further force and effect.
Notwithstanding anything to the
contrary in the LLC Agreement, as a
condition to an initial public offering,
the Company or any successor thereto
shall enter into a registration rights
agreement, upon commercially
reasonable terms, with any Member
requesting such agreement with respect
to the registration of its equity securities
with customary terms and conditions
and in form and substance reasonably
satisfactory to the Board and such
Member; provided that such registration
rights agreement shall include (i)
demand registration rights that apply
(A) equally to all Members, (B) only
after an initial public offering, and (C)
subject to customary minimum
thresholds and (ii) piggyback
registration rights for all Members on a
pro rata basis in proportion with their
relative common equity interests.
Certain Regulatory and Compliance
Matters
As provided in Section 8.1(m) of the
LLC Agreement, (A) the Board in
carrying out its duties and without
limitation on its other obligations under
applicable law or otherwise and
(B) each director, in carrying out his or
her duties and without limitation on his
or her other obligations under
applicable law or otherwise (but subject
to the waiver of fiduciary duties
otherwise provided for in the LLC
Agreement), shall be obligated to
(x) comply with the Federal securities
laws and the rules and regulations
promulgated thereunder and
(y) cooperate with NYSE Amex
pursuant to its regulatory authority and
the provisions of the LLC Agreement
and with the SEC. Furthermore, each
director must take into consideration
whether his or her actions would cause
the Options Exchange or the Company
to engage in conduct that fosters and
does not interfere with NYSE Amex’s or
the Company’s ability to carry out their
respective responsibilities under the Act
and to prevent fraudulent and
manipulative acts and practices,
promote just and equitable principles of
trade, foster cooperation and
coordination with persons engaged in
regulating, clearing, settling, processing
information with respect to, and
facilitating transactions in securities,
remove impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, protect investors and the public
interest.
As further provided in Section 8.1(m)
of the LLC Agreement, NYSE Amex
must receive notice of planned or
proposed changes to the Company (but
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not to include changes relating solely to
non-market matters) or the Options
Exchange and NYSE Amex must not
object affirmatively to such changes
prior to implementation, not
inconsistent with the LLC Agreement.
NYSE Amex, in the performance of its
obligations as the SRO for the Options
Exchange, shall following receipt of
such notice and without undue delay,
notify the Company whether or not it
has any objection to such a change
based on the potential for such change
to give rise to a Regulatory Deficiency
(as defined below). In the event that
NYSE Amex, in its sole discretion,
determines that such planned or
proposed changes to the Company or
the Options Exchange could cause a
Regulatory Deficiency if implemented,
NYSE Amex may direct the Company
to, and the Company shall, modify the
planned or proposed changes as
necessary to ensure that it does not
cause a Regulatory Deficiency. In the
event that NYSE Amex, in its sole
discretion, determines that a Regulatory
Deficiency exists or is planned, NYSE
Amex may direct the Company to, and
the Company shall, undertake such
modifications to the Company (other
than as to non-market matters) as are
necessary or appropriate to eliminate or
prevent the Regulatory Deficiency and
allow NYSE Amex to perform and fulfill
its regulatory responsibilities under the
Act.
A ‘‘Regulatory Deficiency’’ is defined
in the LLC Agreement as the operation
of the Options Exchange or the
Company (in connection with matters
other than non-market matters) in a
manner that is not consistent with any
Regulatory Matters Provision, the rules
of NYSE Amex, as amended from time
to time, or the Federal securities laws
and the rules and regulations
promulgated thereunder, applicable to
the Exchange or NYSE Amex options
trading permit holders, or that otherwise
impedes NYSE Amex’s ability to
regulate the Options Exchange or NYSE
Amex options trading permit holders or
to fulfill its obligations under the Act as
a SRO.
Section 8.1(n) of the LLC Agreement
states that NYSE Euronext has
developed corporate compliance
policies that govern the conduct of its
employees, officers, and directors and
the employees, officers, and directors of
its affiliates. The Board will adopt these
policies on the effective date of the LLC
Agreement, but these policies shall not
apply to directors, alternate directors or
observers to the Board appointed by a
Founding Firm except as described in
Sections 8.1(n)(ii) and 8.1(n)(iii) of the
LLC Agreement (as described below).
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These policies (except for their
application to directors, alternate
directors or observers to the Board
appointed by a Founding Firm) may be
revised from time to time by NYSE
Euronext, provided that the personal
trading policy referred to in Section
8.1(n)(ii) of the LLC Agreement, as it
applies to directors, alternate directors
and observers to the Board appointed by
a Founding Firm, may only apply to
stock and other securities issued by
NYSE Euronext and its affiliates. Any
such revised policies will be promptly
provided to the Company. Subject to
applicable law, all employees, officers,
and directors (other than directors,
alternate directors and observers to the
Board appointed by a Founding Firm) of
the Company or its affiliates will be
expected to comply with these policies,
except as described in Sections 8.1(n)(ii)
and 8.1(n)(iii) of the LLC Agreement.
Section 8.1(n)(ii) of the LLC Agreement
provides that the personal trading
policy of NYSE Euronext, including any
modifications or revisions thereto, shall
apply to directors, alternate directors,
and observers to the Board appointed by
the Founding Firms solely in their
personal capacities and not in such a
director’s capacity as an employee of
any Founding Firm. Section 8.1(n)(iii) of
the LLC Agreement provides for a
representation by NYSE Euronext that it
has obtained a waiver by the audit
committee of the board of directors of
NYSE Euronext exempting the directors,
alternate directors and observers to the
Board appointed by the Founding Firms
from all of its corporate compliance
policies (other than its personal trading
policy, as and to the extent described in
Section 8.1(n)(ii)).
Section 8.1(o) of the LLC Agreement
provides that NYSE Euronext or one of
its affiliates has the right to conduct
audits of all operations of the Company.
The NYSE Euronext internal audit
group will have access to all records and
employees of the Company and will
determine which audits to conduct and
the timetable for such work. Any such
audit will be considered in a manner
consistent with the NYSE Euronext
audit group charter, which mandates the
independent role of the group and
which is approved by the NYSE
Euronext Audit Committee. If the
Company engages an external party to
conduct an audit, the NYSE Euronext
audit group will have the right to review
with the external party the nature and
extent of the work and any resulting
report and supporting written work
product. NYSE Euronext will bear all of
the costs and expenses incurred by the
Company and its representatives related
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to the exercise of its rights pursuant to
this paragraph.
Pursuant to Section 11.8(a) of the LLC
Agreement, beginning after SEC
approval of the LLC Agreement, the
Company shall provide the SEC with
written notice ten (10) days prior to the
closing date of any acquisition of an
Interest by a person or entity that results
in a Member’s ownership of Common
Interests, alone or together with any
affiliate, meeting or crossing the
threshold level of five percent (5%) or
the successive five percent (5%)
ownership levels of ten percent (10%)
and fifteen percent (15%) of the
aggregate Common Interests.
Section 11.8(b) of the LLC Agreement
establishes certain requirements
regarding direct ownership of the
Company. Beginning after SEC approval
of the LLC Agreement, no person or
entity that is not a Member as of the
effective date of the LLC Agreement,
either alone or together with its
affiliates, at any time, may directly own
Common Interests that would result in
such person or entity having ownership
of Common Interests representing more
than the 19.9% Maximum Percentage or
any successive five percent (5%)
ownership threshold (i.e., 24.9%,
29.9%, etc) (the ‘‘Concentration
Limitation’’). The Concentration
Limitation shall apply to each person or
entity (other than NYSE Amex alone or
together with its affiliates, as applicable)
unless and until: (A) Such person or
entity has delivered to the Board a
notice in writing, not less than forty-five
(45) days (or such shorter period as the
Board shall expressly consent to) prior
to the acquisition of any Common
Interests that would cause such person
or entity (either alone or together with
its affiliates) to exceed the
Concentration Limitation, of such
person or entity’s intention to acquire
such Common Interests; (B) such notice
has been filed with, and approved by,
the SEC under Section 19(b) of the Act
and has become effective thereunder;
and (C) the Board has not determined to
oppose such person or entity’s
acquisition of such Common Interests.
Pursuant to Section 11.8(b)(iii) of the
LLC Agreement, the Board shall oppose
an ownership of Common Interests by a
person or entity if the Board shall have
determined, in its sole discretion, that
(A) such ownership of Common
Interests by the person or entity, either
alone or together with its affiliates, will
impair the ability of the Company and
the Board to carry out their functions
and responsibilities, including but not
limited to, under the Act, or is
otherwise not in the best interests of the
Company; (B) such ownership of
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Common Interests by the person or
entity, either alone or together with its
affiliates, will impair the ability of the
SEC to enforce the Act; (C) the person
or entity or its affiliates are subject to
any applicable ‘‘statutory
disqualification’’ (within the meaning of
Section 3(a)(39) of the Act); or (D) if
such Common Interests would result in
the person or entity (alone or together
with its affiliates) having an ownership
interest of more than twenty percent
(20%) of the aggregate Common
Interests and the person or entity or one
of its affiliates is either a ‘‘member’’ or
‘‘member organization’’ of NYSE Amex
(as defined in the rules of NYSE Amex,
as such rules may be in effect from time
to time). In making a determination
pursuant to clause (C) of the preceding
paragraph, the Board may impose such
conditions and restrictions on the
person or entity and its affiliates owning
any Common Interests as the Board may
in its sole discretion deem necessary,
appropriate or desirable in furtherance
of the objectives of the Act and the
governance of the Company.
Section 11.8(c) of the LLC Agreement
establishes certain requirements
regarding NYSE Amex’s ownership of
the Company. Beginning after SEC
approval of the LLC Agreement, the
aggregate percentage of Common
Interests held by NYSE Amex and its
affiliates, as applicable, shall not
decline below fifteen percent (15%)
unless and until: (A) NYSE Amex has
delivered to the Board a notice in
writing, not less than forty-five (45) days
(or such shorter period as the Board
shall expressly consent to) prior to the
transfer of any Common Interests that
would result in such a decline, of NYSE
Amex’s intention to transfer such
Common Interests; and (B) such notice
has been filed with, and approved by,
the SEC under Section 19(b) of the Act
and has become effective thereunder.
Section 11.8(d) of the LLC Agreement
establishes certain requirements
regarding indirect ownership of the
Company. Except as described in the
last sentence of this paragraph, a
‘‘Controlling Person’’ (defined as a
person or entity that, alone or together
with any affiliate, owns a Controlling
Interest in a Member, where a
‘‘Controlling Interest’’ means the direct
or indirect ownership of 25% or more
of the total voting power of that Member
by any person or entity, alone or
together with any affiliate) will be
required to execute, and the relevant
Member shall take such action as is
necessary to ensure that each of its
Controlling Persons executes, an
amendment to the LLC Agreement upon
establishing a Controlling Interest in any
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18609
Member that, alone or together with any
affiliate, holds an ownership interest in
the Company equal to or greater than
20% of the aggregate Common Interests.
In such an amendment, the Controlling
Person must agree (A) to become a party
to the LLC Agreement and (B) to abide
by all the provisions of the LLC
Agreement relating to regulatory
matters. Notwithstanding the foregoing,
a person or entity will not be required
to execute an amendment to the LLC
Agreement pursuant to Section 11.8(d)
of the LLC Agreement if the person or
entity does not, directly or indirectly,
hold any interest in a Member.
Beginning after SEC approval of the
LLC Agreement, any amendment to the
LLC Agreement executed pursuant to
Section 11.8(d) of the LLC Agreement is
subject to the rule filing process
pursuant to Section 19 of the Act. The
non-economic rights and privileges,
including all voting rights, of the
Member in which a Controlling Interest
is held under the LLC Agreement and
the Act will be suspended until such
time as the amendment executed
pursuant to Section 11.8(d) of the LLC
Agreement has become effective
pursuant to Section 19 of the Act or the
Controlling Person no longer holds a
Controlling Interest in the Member.
Section 13.2(c) of the LLC Agreement
requires the books and records of the
Company to be subject at all times to
inspection and copying by the SEC and
NYSE Amex at no additional charge to
the SEC or NYSE Amex. The books,
records, premises, officers, directors,
agents and employees of the Company
shall be deemed the books, records,
premises, officers, directors, agents and
employees of NYSE Amex for purposes
of and subject to oversight pursuant to
the Act. To the extent related to the
Company’s business, the books, records,
premises, officers, directors, agents and
employees of each Member will be
deemed the books, records, premises,
officers, directors, agents and employees
of NYSE Amex for purposes of and
subject to oversight pursuant to the Act.
Section 16.1 of the LLC Agreement
provides requirements regarding
regulatory approvals and compliance.
Section 16.1(a) provides that so long as
the Options Exchange is a facility of
NYSE Amex, in the event that NYSE
Amex, in its sole discretion, determines
that any action, transaction or aspect of
an action or transaction, is necessary or
appropriate for, or interferes with, the
performance or fulfillment of NYSE
Amex’s regulatory functions, its
responsibilities under the Act or as
specifically required by the SEC, NYSE
Amex shall have the sole and exclusive
authority to direct that any such
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required, necessary or appropriate
action, as it may determine in its sole
discretion, be taken or transaction be
undertaken by or on behalf of the
Company without regard to the vote, act
or failure to vote or act by any other
party in any capacity.18
Pursuant to Section 16.1(b) of the LLC
Agreement, the Company will use
commercially reasonable efforts to
obtain such regulatory approval(s) as
may be necessary for the Company to
engage in its business on such schedule
as shall be reasonably determined by the
Board to be in the best interests of the
Company. The Founding Firms will
agree to cooperate with the Company as
reasonable and necessary to obtain and
maintain all regulatory approvals.
Section 16.1(d) of the LLC Agreement
provides that the Company, NYSE
Euronext, NYSE Group, each Member,
and the officers, directors, agents, and
employees of the Company, NYSE
Euronext, NYSE Group and each
Member irrevocably submit to the
jurisdiction of the U.S. Federal courts,
the SEC and NYSE Amex (in its capacity
as an SRO) for purposes of any suit,
action or proceeding pursuant to U.S.
Federal securities laws, and the rules
and regulations promulgated
thereunder, arising out of, or relating to,
activities of the Company and agree to
waive, and not to assert by way of
motion, as a defense or otherwise in any
such suit, action or proceeding, any
claims that they are not personally
subject to the jurisdiction of the SEC,
that the suit, action or proceeding is an
inconvenient forum or that the venue of
the suit, action or proceeding is
improper, or that the subject matter
thereof may not be enforced in or by
such courts or agency.
Section 16.1(e) of the LLC Agreement
provides that the Company, NYSE
Euronext, NYSE Group, each Member,
and the officers, directors, agents, and
employees of the Company, NYSE
Euronext, NYSE Group and each
Member agree to comply with the
Federal securities laws and the rules
and regulations promulgated thereunder
and to cooperate with NYSE Amex
pursuant to its regulatory authority and
the provisions of the LLC Agreement
and with the SEC; and to engage in
conduct that fosters and does not
interfere with the Company’s and NYSE
18 Nothing contained in the LLC Agreement or the
Members Agreement limits the ability of NYSE
Amex, in its capacity as an SRO, (i) to take any
action or to direct the taking of any action that it
determines is necessary or appropriate for the
performance or fulfillment of its obligations as an
SRO or (ii) to direct that an action that it determines
interferes with the performance or fulfillment of its
obligations as an SRO not be taken.
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Amex’s ability to prevent fraudulent
and manipulative acts and practices; to
promote just and equitable principles of
trade; to foster cooperation and
coordination with persons engaged in
regulating, clearing, settling, processing
information with respect to, and
facilitating transactions in, securities; to
remove impediments to and perfect the
mechanisms of a free and open market
and a national market system; and, in
general, to protect investors and the
public interest.
Section 16.1(f) of the LLC Agreement
provides that the Company, NYSE
Euronext, NYSE Group and each
Member shall take such action as is
necessary to ensure that the officers,
directors, agents, and employees of the
Company, NYSE Euronext, NYSE Group
and such Member who are involved in
the activities of the Company or the
Options Exchange, with respect to their
activities relating to the Company or the
Options Exchange, consent in writing to
the application to them of Section
13.2(c) of the LLC Agreement relating to
inspection of books and records for
purposes of oversight pursuant to the
Act; Section 16.1(d) of the LLC
Agreement relating to submission to the
jurisdiction of the U.S. Federal courts,
the SEC and NYSE Amex (in its capacity
as an SRO) and waiver of certain legal
claims; Section 16.1(e) of the LLC
Agreement relating to the matters
described in the immediately preceding
paragraph; the last sentence of Section
8.1(d)(iv) of the LLC Agreement and
Section 8.1(m)(i) of the LLC Agreement
relating to each director’s compliance
with Federal securities laws and the
rules and regulations thereunder and
cooperation with NYSE Amex pursuant
to its regulatory authority and with the
SEC; Section 8.1(m)(ii) of the LLC
Agreement relating to NYSE Amex’s
authority and responsibility to eliminate
or prevent Regulatory Deficiencies;
Section 14.1(i) of the LLC Agreement
relating to the prompt return of certain
confidential information to the other
Members who disclosed it; as
applicable, with respect to their
activities relating to the Company upon
the dissolution or termination of the
Company; and Section 14.1(j) of the LLC
Agreement relating to the
confidentiality of all Confidential
Information (as defined below)
pertaining to the self-regulatory function
of NYSE Amex.
Volume-Based Equity Plan 19
Pursuant to Section 2.1 of the
Members Agreement, for an initial
period of five (5) years and three (3)
months, each Founding Firm will have
to satisfy certain minimum volume
requirements. Under the Plan, for each
measurement period, the Company will
issue Annual Incentive Shares. Each
Founding Firm will be entitled to
receive, for no additional consideration,
a portion of the Annual Incentive Shares
such that it dilutes, maintains or
increases its equity interest in the
Company (relative to the other
Founding Firms) based on the degree to
which the Founding Firm has failed to
achieve, achieved or exceeded its
‘‘Individual Target’’ during the
measurement period. A Founding
Firm’s Individual Target will be its pro
rata portion of an aggregate Founding
Firm target contribution to the annual
volume of the Options Exchange. This
pro rata calculation will be performed
once, based on the Founding Firm’s
holdings of Class B Common Interests
relative to the other Founding Firms at
the time the Company is formed and
will not change as a Founding Firm’s
equity holdings fluctuate as a result of
the Plan. The Plan will not affect the
equity holdings of NYSE Amex and the
Plan will not increase or decrease the
aggregate equity interest of the
Founding Firms relative to NYSE Amex.
The Annual Incentive Shares not
allocated to one or more Founding
Firms by virtue of each such Founding
Firm failing to achieve its respective
Individual Target will be either partially
or fully reallocated among those
Founding Firms that exceed their
respective Individual Targets.
The Company will not allocate
Annual Incentive Shares to a Founding
Firm if such allocation would result in
the Founding Firm holding Common
Interests in excess of the 19.9%
Maximum Percentage or the Alternate
Maximum Percentage. Rather, the
Company will allocate such Annual
Incentive Shares at the direction of the
affected Founding Firm or, if the
Founding Firm is prohibited from
directing the allocation of these Annual
Incentive Shares, at the direction of a
Supermajority Vote of the Board.
Pursuant to Section 2.2 of the
Members Agreement, Annual Incentive
Shares that are not allocated
(or reallocated) as described above will
be included in a pool of undistributed
Annual Incentive Shares. The Board
will, in its discretion, determine
whether and how to dispose of this pool
of undistributed Annual Incentive
Shares; provided that (i) NYSE Amex
will work in good faith with Founding
19 It is the Exchange’s view that the Plan does not
constitute a proposed rule change within the
meaning of Section 19(b)(1) of the Act and Rule
19b–4 thereunder.
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Firms that achieve their respective
Individual Targets in determining
whether and how to distribute this pool
and (ii) the Company will be obligated
to dispose of this pool within eighteen
(18) months unless otherwise agreed by
a Supermajority Vote of the Board.
Confidentiality
Article XIV of the LLC Agreement
contains provisions for the protection of
‘‘Confidential Information,’’ which is
defined in Section 14.1(a) of the LLC
Agreement as any confidential
information (i) relating to the Company
or any Member, or the business,
financial structure, financial position or
financial results, clients or affairs of the
Company or any Member or (ii) that is
provided to any Member or the
Company or their representatives or to
which the Company or any Member or
their representatives has access as a
result of the LLC Agreement, activities
conducted pursuant to or in connection
with the LLC Agreement or activities
conducted by the Company or on behalf
of the Company that is either (x) marked
as confidential, (y) the disclosing party
informs the receiving party at or prior to
the time of disclosure is confidential or
(z) should be reasonably understood by
the receiving party to be confidential.
Certain exceptions are provided for
information that is otherwise publicly
available; was previously known to the
receiving party; was received by the
receiving party from a source lawfully
having possession of such information
and the right to disclose it; is released
or disclosed to the public by the
disclosing party; or is independently
developed by the receiving party. When
the Company or any Member or its
representative directly or indirectly
receives Confidential Information, or
access to it, from another person or
entity, Section 14.1(b) of the LLC
Agreement requires that the receiving
party will not directly or indirectly (i)
disclose any of the Confidential
Information to any third party except as
specifically permitted by the LLC
Agreement or (ii) use any of the
Confidential Information for any
purpose except as specifically permitted
by the LLC Agreement or otherwise
required to conduct the activities
contemplated by the LLC Agreement.
Section 14.1(c) of the LLC Agreement
requires the party receiving Confidential
Information to take all reasonable
precautions and actions, which must be
at least the same precautions and
actions as the receiving party takes to
prevent the disclosure of its own
comparable confidential information, to
prevent the disclosure to third parties of
the Confidential Information of the
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18:47 Apr 01, 2011
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disclosing party, or any part of it, and
to ensure that the receiving party’s
representatives comply with Article XIV
of the LLC Agreement.
Notwithstanding the foregoing,
Section 14.1(e) of the LLC Agreement
provides that a receiving party or its
affiliates may provide the Confidential
Information to those third parties who
have a legitimate ‘‘need to know’’ if
specifically permitted by the LLC
Agreement. Other exceptions to nondisclosure requirements are provided in
the case of (i) information that is
required to be filed with any
governmental authority or SRO,
(ii) information that is requested by a
governmental authority or SRO having
regulatory authority over the receiving
party or its affiliates or (iii) a
determination by the receiving party in
its sole discretion that it is necessary or
appropriate to provide such
Confidential Information to a
governmental authority or SRO.
Additional exceptions are provided for
information (a) required by an auditor
for the purpose of an audit,
(b) necessary in connection with any tax
return, (c) provided to a lender,
professional adviser, vendor or service
provider for a bona fide business
purpose (subject to customary
restrictions on further disclosure or
use), (d) provided to a third party to
which the receiving party sells or offers
to sell its Interest or any part thereof (if
the third party has agreed in writing to
be bound by confidentiality obligations
at least as protective of the disclosing
party as the provisions of Article XIV of
the LLC Agreement), or (e) reasonably
necessary in connection with the
enforcement or defense of any rights or
remedies under the LLC Agreement or
arising out of the transactions
contemplated thereby or the related
transaction documents.
Section 14.1(i) of the LLC Agreement
provides that the confidentiality
obligations in Article XIV of the LLC
Agreement will be effective from the
effective date of said agreement and will
continue to apply (A) with respect to the
Company, after dissolution or
termination of the Company pursuant to
Article XII of the LLC Agreement for a
period of three (3) years, (B) with
respect to any Member, for a period of
three (3) years after the date on which
such Member ceases to be a Member of
the Company and (C) with respect to
NYSE Euronext, for a period of three (3)
years after the date on which NYSE
Amex ceases to be a Member of the
Company. Section 14.1(i) also contains
requirements, with exceptions, for the
prompt return of Confidential
Information to the disclosing party upon
PO 00000
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Sfmt 4703
18611
written request, or the prompt
destruction (with prior written consent)
of such Confidential Information by the
party that received it, upon the effective
date of dissolution or termination of the
Company.
Pursuant to Section 14.1(j) of the LLC
Agreement, all Confidential Information
pertaining to the self-regulatory function
of NYSE Amex (including but not
limited to disciplinary matters, trading
data or information about trading
practices and audit information)
contained in the books and records of
the Company shall: (i) Not be made
available to any persons or entities other
than to those officers, directors,
employees and agents of the Company
that have a reasonable need to know the
contents thereof; (ii) be retained in
confidence by the Company and its
officers, directors, employees and
agents; and (iii) not be used for any nonregulatory purposes. This provision
shall not limit a Founding Firm’s ability
to use its own trading data.
Section 14.1(k) of the LLC Agreement
states that nothing in the LLC
Agreement shall be interpreted to limit
or impede the rights of the SEC or NYSE
Amex to access and examine
confidential information of the
Company pursuant to U.S. Federal
securities laws and the rules and
regulations promulgated thereunder, or,
subject to the notice requirements of
Section 14.1 of the LLC Agreement, to
limit or impede the ability of a member
of the Board, Member, officer, director,
agent or employee of a Member or of the
Company to disclose confidential
information of the Company to the SEC
or NYSE Amex.
Amendment
Unless the contrary is otherwise
specifically stated in the LLC
Agreement, the LLC Agreement and the
Members Agreement may be amended
by Supermajority Vote of the Board;
provided, that: (i) Section 8.1(d)(ii) of
the LLC Agreement relating to the
designation of directors by Founding
Firms and Article XIV of the LLC
Agreement relating to confidentiality
may not be materially amended, Section
13.8 of the LLC Agreement relating to
restrictions on foreign operations and
Section 3.1 of the Members Agreement
relating to the transfer of Interests may
not be amended, without the prior
written consent of each Member; (ii) any
amendment that would have a
disproportionate, material and adverse
effect on the rights of one or more
Members (other than amendments of the
type described in clause (iii) below)
shall require such Member’s prior
written consent; (iii) any amendment
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that would have a material adverse
effect on the rights of the Members of a
class of Interests (irrespective of
whether such amendment has a material
adverse effect on the rights of NYSE
Amex) shall require the prior written
consent of Members (other than NYSE
Amex) representing two thirds (2⁄3) of
the Interests held by such Members; (iv)
any amendment that would impose a
new and material obligation or liability
applicable by its terms to any Member
or materially increase any existing
material obligation or liability of any
Member shall require the prior written
consent of such Member and (v) any
matter specified in the LLC Agreement
as subject to agreement by the Members
may be modified by Supermajority Vote
of the Board if so agreed by the
Members, provided that this clause (v)
does not apply to the matters addressed
in clause (i) above and the application
of this clause (v) shall nevertheless be
subject to the application of clauses (ii),
(iii) and (iv) above. Notwithstanding any
of the foregoing, for so long as the
Company operates a facility of NYSE
Amex or a successor of NYSE Amex that
is an SRO, any proposed amendment or
repeal of any provision of the LLC
Agreement or Members Agreement shall
be submitted to the board of directors of
NYSE Amex and, if such amendment or
repeal is required under Section 19 of
the Act and the rules promulgated
thereunder, to be filed with, or filed
with and approved by, the SEC before
such amendment or repeal may be
effective, then such amendment or
repeal shall not be effective until filed
with, or filed with and approved by, the
SEC, as the case may be.
Emcdonald on DSK2BSOYB1PROD with NOTICES
Redactions to the Members Agreement
Certain information in the Members
Agreement has been redacted in order to
preserve the confidentiality of
commercially sensitive information. The
redacted provisions are limited to
(i) numerical dollar amounts and
percentage thresholds, (ii) commercially
sensitive terms and provisions related to
the calculation of ‘‘Fair Market Value’’
and (iii) certain competitive
information.
Regulation
NYSE Regulation, Inc. (‘‘NYSE
Regulation’’), an indirect wholly-owned
subsidiary of NYSE Euronext, and the
Exchange entered into a regulatory
services agreement (an ‘‘RSA’’) dated
October 1, 2008 pursuant to which
NYSE Regulation performs all of the
Exchange’s regulatory functions on the
Exchange’s behalf. However, certain of
these member and market regulatory
functions, which include surveillance,
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18:47 Apr 01, 2011
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examination, investigation and related
disciplinary functions, are performed by
FINRA pursuant to a June 14, 2010 RSA
among FINRA, NYSE Group, Inc., New
York Stock Exchange LLC, NYSE
Regulation, NYSE Arca, Inc. and the
Exchange. FINRA and the Exchange
have also entered into an allocation
agreement pursuant to Section 17(d)(1)
of the Act, and Rule 17d–2 thereunder,
whereby FINRA assumed regulatory
responsibility for specified rules that are
common to FINRA and the Exchange
and for common members. Because the
Options Exchange is a facility of the
Exchange, FINRA performs the
applicable regulatory functions and
responsibilities with respect to activity
on or through the Options Exchange,
including both general regulatory
functions, as noted above, and targeted
regulatory reviews as applicable.
Pursuant to the RSA between NYSE
Regulation and the Exchange, NYSE
Regulation exercises oversight, on
behalf of the Exchange, of FINRA’s
performance of the regulatory functions
performed by FINRA as described
above. NYSE Regulation also has
responsibilities with respect to the
Options Exchange for rule
interpretation, regulatory policy and
participation in rule development.
NYSE Regulation periodically reports
on regulatory matters to the board of
directors of the Exchange, which has
appointed a Chief Regulatory Officer
(‘‘CRO’’) who is also the Chief Executive
Officer of NYSE Regulation. The
Exchange does not have a regulatory
oversight committee of the board, but
the CRO is also an officer of the
Exchange, and in that capacity is
charged with reporting on regulatory
matters to the Exchange board.
Notwithstanding the foregoing, the
Exchange will still retain ultimate legal
responsibility for the performance of all
of its regulatory obligations as an SRO,
including with respect to the Options
Exchange, as well as the ability to take
action as required to meet that
responsibility.
The board of directors of the
Exchange currently consists of five (5)
directors, a majority of whom are
required to be individuals domiciled in
the U.S. who are classified as
independent members of the NYSE
Euronext board of directors. At least
twenty percent of the Exchange’s
directors (currently one individual)
must be ‘‘non-affiliated’’ directors who
are not members of the NYSE Euronext
board of directors and need not be
independent under the independence
requirements of NYSE Euronext. Any
required non-affiliated directors of the
Exchange are nominated and elected
PO 00000
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Fmt 4703
Sfmt 4703
through a process designed to ensure
fair representation of members of the
Exchange on the Exchange’s board. The
Exchange does not have any committees
of its board that perform functions
relating to audit, governance and
compensation. Instead, such functions
are performed for the Exchange by
related committees of the NYSE
Euronext board of directors that are
comprised solely of NYSE Euronext
directors who meet the independence
requirements of NYSE Euronext.
Decisions on the listing of options
that will trade on the Options Exchange
will be made by the business side at the
Exchange in accordance with the
Exchange’s rules. The business side will
also continue to be responsible for new
product development, participation in
rule development, strategic analysis,
administering Exchange programs,
business development and client
outreach.
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with Section
6(b) 20 of the Act,21 in general, and
furthers the objectives of Section
6(b)(1) 22 of the Act, which requires a
national securities exchange to be so
organized and have the capacity to carry
out the purposes of the Act and to
comply, and to enforce compliance by
its members and persons associated
with its members, with the provisions of
the Act. The proposed rule change does
not modify the Option Exchange’s
trading or compliance rules and
preserves the existing mechanisms for
ensuring the Exchange’s compliance
with the Act. The structure of the
proposed joint venture maintains NYSE
Amex’s regulatory control over the
Options Exchange and includes
provisions specifically designed to
ensure the independence of its selfregulatory function and to ensure that
any regulatory determinations by NYSE
Amex, as SRO, are controlling with
respect to the actions and decisions of
the Options Exchange.
Additionally, the LLC Agreement
requires the Company, its Members and
its directors to comply with the Federal
securities laws and the rules and
regulations promulgated thereunder and
to engage in conduct that fosters and
does not interfere with the Exchange’s
or the Company’s ability to carry out its
respective responsibilities under the
Act.
The Exchange believes the proposed
rule change is also consistent with, and
20 15
U.S.C. 78f(b).
U.S.C. 78.
22 15 U.S.C. 78f(b)(1).
21 15
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furthers the objectives of Section
6(b)(5) 23 of the Act, in that it preserves
all of NYSE Amex’s existing rules and
mechanisms to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
facilitating transactions in securities, to
remove impediments to and perfect the
mechanisms of a free and open market
and a national market system and, in
general, to protect investors and the
public interest.
Furthermore, by establishing a new
corporate structure for the Company
that includes new owners and a new
governance structure, the Exchange
believes the proposed rule change will
increases [sic] the breadth of
representation in the governance of the
Options Exchange to include buy side,
principal trading and sell side
representatives. The increased
representation of different market
constituencies in the governance of the
Options Exchange will foster
cooperation and coordination with
persons engaged in facilitating
transactions in securities, will
contribute to the identification of
opportunities for innovation and will
enhance competition.
Finally, the Exchange believes that
the proposed rule change accomplishes
the goals of Section 6(b) of the Act by
improving the quality and depth of the
listed options market. Specifically, with
the approval of this proposed rule
change, Members will have an
incentive, through equity ownership, to
offer an options market that provides
products, services and fees that are
competitive with those of other options
markets. Moreover, given the substantial
options experience and resources of the
Members, the approval of this proposed
rule change will provide the
opportunity for enhanced liquidity and
price discovery for the Options
Exchange, thereby creating the
opportunity for better-priced executions
for options investors. A more
competitive marketplace within the
Options Exchange will also foster
increased competition across all options
markets with concomitant benefits to all
U.S. options investors.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
23 15
U.S.C. 78f(b)(5).
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18:47 Apr 01, 2011
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C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will:
(A) By order approve or disapprove
the proposed rule change, or
(B) Institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NYSEAmex–2011–18 on
the subject line.
18613
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street, NE.,
Washington, DC 20549, on official
business days between the hours of
10 a.m. and 3 p.m. Copies of the filing
will also be available for inspection and
copying at the Exchange’s principal
office. All comments received will be
posted without change; the Commission
does not edit personal identifying
information from submissions. You
should submit only information that
you wish to make publicly available. All
submissions should refer to File
Number SR–NYSEAmex–2011–18 and
should be submitted on or before April
25, 2011.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011–7935 Filed 4–1–11; 8:45 am]
BILLING CODE 8011–01–P
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration #12503 and #12504]
Hawaii Disaster #HI–00022
U.S. Small Business
Administration.
ACTION: Notice.
AGENCY:
This is a notice of an
Administrative declaration of a disaster
for the State of Hawaii dated 03/29/
2011.
Incident: Honshu Tsunami.
Paper Comments
Incident Period: 03/11/2011.
Effective Date: 03/29/2011.
• Send paper comments in triplicate
Physical Loan Application Deadline
to Elizabeth M. Murphy, Secretary,
Date: 05/31/2011.
Securities and Exchange Commission,
Economic Injury (EIDL) Loan
100 F Street, NE., Washington, DC
Application Deadline Date: 12/29/2011.
20549–1090.
ADDRESSES: Submit completed loan
All submissions should refer to File
Number SR–NYSEAmex–2011–18. This applications to: U.S. Small Business
Administration, Processing and
file number should be included on the
subject line if e-mail is used. To help the Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
Commission process and review your
FOR FURTHER INFORMATION CONTACT: A.
comments more efficiently, please use
only one method. The Commission will Escobar, Office of Disaster Assistance,
post all comments on the Commission’s U.S. Small Business Administration,
409 3rd Street, SW., Suite 6050,
Internet Web site (https://www.sec.gov/
Washington, DC 20416.
rules/sro.shtml). Copies of the
submission, all subsequent
SUPPLEMENTARY INFORMATION: Notice is
amendments, all written statements
hereby given that as a result of the
with respect to the proposed rule
Administrator’s disaster declaration,
change that are filed with the
applications for disaster loans may be
Commission, and all written
filed at the address listed above or other
communications relating to the
locally announced locations.
proposed rule change between the
24 17 CFR 200.30–3(a)(12).
Commission and any person, other than
PO 00000
Frm 00104
Fmt 4703
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SUMMARY:
E:\FR\FM\04APN1.SGM
04APN1
Agencies
[Federal Register Volume 76, Number 64 (Monday, April 4, 2011)]
[Notices]
[Pages 18591-18613]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-7935]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64144; File No. SR-NYSEAmex-2011-18]
Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing of
Proposed Rule Change Relating to the Formation of a Joint Venture
Between the Exchange, Its Ultimate Parent NYSE Euronext, and Seven
Other Entities To Operate an Electronic Trading Facility for Options
Contracts
March 29, 2011.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on March 23, 2011, NYSE Amex LLC (the ``Exchange'' or
``NYSE Amex'') filed with the Securities and Exchange Commission (the
``Commission'' or ``SEC'') the proposed rule change as described in
Items I and II below, which Items have been prepared by the self-
regulatory organization. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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[[Page 18592]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to form a joint venture between the Exchange,
its ultimate parent NYSE Euronext, a Delaware corporation, and the
following entities (each, a ``Founding Firm''): Citadel Securities LLC
(``Citadel''); Goldman, Sachs & Co. (``Goldman Sachs''); Banc of
America Strategic Investments Corporation (``BAML''); Citigroup
Financial Strategies, Inc. (``Citigroup''); Datek Online Management
Corp. (``TD Ameritrade''); UBS Americas Inc. (``UBS''); and Barclays
Electronic Commerce Holdings Inc. (``Barclays''). The joint venture
will operate an electronic trading facility (the ``Options Exchange'')
that will engage in the business of listing for trading options
contracts permitted to be listed on a national securities exchange (or
facility thereof) and related activities. The Options Exchange will be
operated as a ``facility'' (as such term is defined in Section 3(a)(2)
of the Securities Exchange Act of 1934 (the ``Act'')) of the Exchange,
which will act as the self-regulatory organization (``SRO'') for the
Options Exchange. The Options Exchange will be operated by NYSE Amex
Options LLC (the ``Company''), a Delaware limited liability company
formed by NYSE Euronext, the Exchange and the Founding Firms and
jointly owned by the Exchange and the Founding Firms. The text of the
proposed rule change, consisting of the proposed Limited Liability
Company Agreement of the Company (the ``LLC Agreement'') and a proposed
Members Agreement of the Company setting forth certain additional terms
(the ``Members Agreement''), is available at the Exchange, the
Commission's Public Reference Room, on the Commission's Web site at
https://www.sec.gov, and on https://www.nyse.com. The LLC Agreement is
the source of the Company's governance and operating authority and,
therefore, functions in a similar manner as articles of incorporation
and by-laws function for a corporation.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange is submitting this Proposed Rule Change to the
Commission in connection with the proposed formation of a joint venture
between the Exchange, its ultimate parent NYSE Euronext and the
Founding Firms. The joint venture will operate an electronic trading
facility, the Options Exchange, that will engage in the business of
listing for trading options contracts permitted to be listed on a
national securities exchange (or facility thereof) and related
activities.\4\ The Options Exchange will be operated as a ``facility''
(as such term is defined in Section 3(a)(2) of the Act) of the
Exchange, which will act as the SRO for the Options Exchange. The
Options Exchange will be operated by the Company, the Exchange and the
Founding Firms and jointly owned by the Exchange and the Founding
Firms. The Exchange will have regulatory responsibility for the
activities of the Options Exchange. The Exchange represents that it has
adequate funds to discharge all regulatory functions related to the
Options Exchange.
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\4\ The activities of the Options Exchange are further described
in Section 3.1(b) of the LLC Agreement.
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The LLC Agreement is the source of the Company's governance and
operating authority and, therefore, functions in a similar manner as
articles of incorporation and by-laws function for a corporation. No
changes to the Exchange's existing rules will be necessary in
connection with the establishment of the Company and the operation of
the Options Exchange.
Summary
This section contains a summary of certain provisions in the
operative documents of the Company. The provisions are more fully
described in the sections following the summary.
Structure of the Company
As a limited liability company, ownership of the Company is
represented by limited liability company interests in the Company
(``Interests''). The holders of interests are referred to as the
members of the Company (the ``Members''). The Interests represent
equity interests in the Company and entitle the holders thereof to
participate in the Company's allocations and distributions. Initially,
NYSE Amex will own 100% of the preferred non-voting Interests
(``Preferred Interests'') and 47.2% of the Common Interests,\5\ as
Class A Common Interests. The Founding Firms will own the remaining
52.8% of the Common Interests, as Class B Common Interests, and no
single Founding Firm (including its affiliates) will own Class B Common
Interests comprising more than 19.9% of the issued and outstanding
Common Interests. The 52.8% ownership of Class B Common Interests will
initially be allocated as follows: 14.95% to each of Citadel and
Goldman Sachs; 5.0% to each of BAML, Citigroup and TD Ameritrade; 4.9%
to UBS; and 3.0% to Barclays.\6\
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\5\ Common Interests consist of Class A Common Interests and
Class B Common Interests.
\6\ Following the effective date of this Proposed Rule Change,
additional Class B Common Interests will be issued to the Founding
Firms based, in part, on each Founding Firm's contribution to the
annual volume of the Options Exchange from October 1, 2009 to
December 31, 2010, as described further under the heading ``Volume-
Based Equity Plan''. The Exchange represents that this issuance of
shares to the Founding Firms will not result in any Member (alone or
together with its affiliates) other than NYSE Amex exceeding the
19.9% Maximum Percentage (as defined below).
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Capital Contributions
Members may be subject to both voluntary and mandatory capital
calls. Mandatory capital calls may be issued by the board of directors
of the Company (the ``Board''), up to a cap, if the Company requires
funds to maintain its status as a facility of an SRO or for other
regulatory compliance purposes. In addition, during the first two years
after the Company is formed, the Board, with the approval of a simple
majority vote of the Board, may solicit voluntary capital calls up to a
cap. In addition, a Supermajority Vote of the Board \7\ will be able to
approve: (i) Any voluntary capital call during the first two years
[[Page 18593]]
after the Company is formed in excess of the cap, (ii) any voluntary
capital call after the two-year anniversary of the formation of the
Company, and (iii) any voluntary capital call that is necessary for the
Company to maintain its status as a facility of an SRO or any other
regulatory compliance purposes and that is in excess of the cap for
mandatory capital calls. Any Member that fails to participate in a
mandatory capital call may be subject to certain customary sanctions.
Any Member that fails to participate in a voluntary capital call will
be diluted in its equity holdings.
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\7\ A ``Supermajority Vote,'' as defined in the LLC Agreement,
means, with respect to matters submitted to the Board at a validly
called and validly noticed meeting, (x) for so long as NYSE Amex's
percentage ownership of Common Interests equals or exceeds fifteen
percent (15%), (A) the affirmative vote of more than fifty percent
(50%) of the directors designated by NYSE Amex entitled to vote
thereon and present in person or by proxy and (B) the affirmative
vote of more than fifty percent (50%) of those directors designated
by Founding Firms entitled to vote thereon and present in person or
by proxy, and (y) for so long as NYSE Amex's percentage ownership of
Common Interests is less than fifteen percent (15%), the affirmative
vote of more than fifty percent (50%) of all directors entitled to
vote thereon and present in person or by proxy (which excess of
fifty percent (50%) must include more than two-thirds (\2/3\) of
those directors designated by Founding Firms and NYSE Amex in the
aggregate entitled to vote thereon and present in person or by
proxy).
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Term and Termination
The Company will continue in perpetual existence until dissolved
pursuant to the LLC Agreement or the Delaware Limited Liability Company
Act, as amended (the ``Delaware LLC Act''). The LLC Agreement includes
customary provisions for the dissolution of the Company and an orderly
liquidation of its business.
Ownership Limitations
No Member, other than NYSE Amex, will be permitted to hold Common
Interests in excess of nineteen and nine-tenths percent (19.9%) of the
issued and outstanding Common Interests or any lower percentage that
may be imposed under applicable law. Any Member that holds Common
Interests in excess of 19.9% will be required to dispose of their
excess Common Interests following a procedure outlined below under the
heading ``Ownership Limitations''. In addition, any such excess
interests will be deemed non-voting until they are transferred to a
Member or another person or entity in whose hands they would not be in
excess of 19.9% of the issued and outstanding Common Interests and who
may vote such Common Interests under applicable law.
Members and Membership
Members will be required to comply with Federal securities laws (to
the extent such laws relate to the Company) and cooperate with the SEC
and NYSE Amex, pursuant to NYSE Amex's regulatory authority. As
explained more fully in the description of Section 7.6 of the LLC
Agreement under the heading ``Members and Membership'' below, the
Members may, upon the affirmative written consent of NYSE Amex (in its
capacity as SRO) and a Supermajority Vote of the Board (excluding the
vote of the director designated by the Member subject to sanction),
suspend or terminate a Member's voting privileges in the event: (i) The
Member has materially violated a Regulatory Matters Provision (as
defined below) in the LLC Agreement or any applicable law; (ii) the
Member is subject to any applicable ``statutory disqualification''
(within the meaning of Section 3(a)(39) of the Act); or (iii) such
action is necessary or appropriate in the public interest or for the
protection of investors.
Persons or entities may become Members by acquiring Common
Interests from an existing Member either pursuant to the transfer
provisions described below or with approval by a Supermajority Vote.
A Member may seek to be treated as a ``Restricted Member'' to
comply with any legal restrictions applicable to its holdings of Common
Interests. A Restricted Member will be subject to restrictions on the
distributions it receives and its Common Interests may be deemed non-
voting. This election may be reversed in certain circumstances.
Governance
Day-to-day operations of the Company and the management of its
business and affairs will be delegated to the Company's officers and to
NYSE Group, Inc. (``NYSE Group''), a subsidiary of NYSE Euronext, in
accordance with a services agreement (the ``NYSE Euronext Agreement'')
between NYSE Group and the Company. Under the NYSE Euronext Agreement,
NYSE Group will agree to provide the Options Exchange with a broad
range of operational and support services.
The Board will be responsible for the oversight of the Company's
officers and of NYSE Group's performance under the NYSE Euronext
Agreement. The Board will consist of thirteen members. Each Founding
Firm so authorized pursuant to the LLC Agreement will have the right to
designate one director to the Board--for a total of six directors
designated by Founding Firms--and NYSE Amex will have the right to
designate the remaining seven directors. The LLC Agreement outlines the
basic qualifications of the directors and specifies grounds for their
removal.
Most decisions of the Board will be taken by a simple majority
vote; however, a specified list of actions will require the approval of
a Supermajority Vote. An action requiring a simple majority vote of the
Board may be taken even if none of the directors appointed by Founding
Firms have voted in favor of such an action. Most matters subject to a
Supermajority Vote will be essentially commercial and business issues,
such as the offering of additional equity to new investors, certain
capital calls and other dilutive measures, or the sale or liquidation
of the business. Matters relating to market governance, surveillance,
discipline, regulatory compliance, and similar oversight issues will
not be subject to Supermajority Vote.
In the event that there are two or fewer directors designated by
Founding Firms or in the event that Founding Firms cease to own, in the
aggregate, at least twenty percent (20%) of the outstanding Common
Interests, most of the matters subject to a Supermajority Vote will
cease to require approval by a simple majority of Founding Firms, and
will instead require only a simple majority of the Board. In addition,
in the event that the Founding Firms cease to own, in the aggregate, at
least fifteen percent (15%) of the outstanding Common Interests, only
actions that would have a materially and disproportionally
disadvantageous effect on the Founding Firms will require a
Supermajority Vote.
If NYSE Amex's equity interest falls below fifteen percent (15%),
NYSE Amex will lose the right to appoint one (or more) directors (as
necessary to result in a board evenly split between NYSE Amex and
Founding Firms). A Founding Firm may also lose its right to appoint a
director under a variety of circumstances.
The Company will have a Founding Firm Advisory Committee (the
``Advisory Committee''), which will advise the Board on certain
matters, including new products and market structure.
Transfers of Interests
Transfers of Common Interests will be governed by customary
provisions and subject to certain restrictions. In particular, Founding
Firms wishing to transfer their Common Interests will be subject to
certain limitations on the amount of Common Interests they may transfer
in each year. NYSE Amex will have an initial right of first offer to
purchase Common Interests that a Founding Firm intends to transfer, at
a price at least equal to their fair market value. In the event NYSE
Amex does not exercise its right of first offer, the transferring
Founding Firm will have the right, subject to certain conditions, to
sell its Common Interests to NYSE Amex at a price equal to their fair
market value or to sell its Common Interests to a third party. In
addition, following the tenth anniversary of the formation of the
Company, NYSE Amex will have the right to buy some or all of the Class
B Common Interests from the Founding Firms at a price equal to their
fair market value.
[[Page 18594]]
In the event NYSE Amex intends to transfer any of its Common
Interests, the Founding Firms will have certain rights of first offer
to purchase these Common Interests. However, no Founding Firm will be
able to acquire Common Interests in this way if such acquisition would
result in the Founding Firm's equity holdings exceeding nineteen and
nine tenths percent (19.9%) of the total equity of the Company.
In the event that NYSE Amex acquires any Class B Common Interests,
such Class B Common Interests will automatically be converted into
Class A Common Interests. Similarly, in the event any Founding Firms
acquire Class A Common Interests, such Class A Common Interests will be
automatically converted into Class B Common Interests.
Subject to certain conditions, Members will be obligated to
transfer their Common Interests where another Member, acting along or
together with other Members, intends to make a transfer of 75% of the
then-outstanding Common Interests and the Board, by Supermajority Vote,
approves the sale of the Company to a person or entity who is not an
affiliate of the Company.
Redemptions of Interests
The Board may, by Majority Vote,\8\ redeem the equity interests of
a Founding Firm under specified circumstances, such as (i) a transfer
of equity interests by such Founding Firm to certain entities specified
in the LLC Agreement, (ii) such Founding Firm's failure to satisfy a
certain minimum volume threshold in connection with the Plan (as
defined below) during certain twelve-month periods or (iii) such
Founding Firm's entry into certain economic arrangements as further
detailed below under the heading ``Redemption of Interests'' coupled
with such Founding Firm's failure to satisfy a certain minimum volume
threshold in connection with the Plan during certain three-month
periods.
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\8\ A ``Majority Vote'' is defined as (i) with respect to
matters submitted to the Board at a validly called meeting, the
affirmative vote by those directors representing greater than fifty
percent (50%) of the directors entitled to vote thereon and present
in person or by proxy at such meeting, including, in the event that
NYSE Amex's percentage ownership of Common Interests exceeds fifteen
percent (15%), the affirmative vote of directors representing
greater than fifty percent (50%) of the NYSE Amex directors that are
present in person or by proxy at the meeting and (ii) with respect
to matters submitted to Members at a validly called meeting, the
affirmative vote of those Members holding greater than fifty percent
(50%) of the Common Interests entitled to vote thereon and present
in person or by proxy at such meeting.
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Certain Regulatory and Compliance Matters
The LLC Agreement includes regulatory provisions that govern the
actions of the Company, the Member, NYSE Group, NYSE Euronext, NYSE
Amex, as SRO for the Options Exchange, and the employees and directors
of each of these entities. The Company, NYSE Euronext, NYSE Group, each
Member and the officers, directors, agents and employees of each of
these entities will be required to comply with Federal securities laws
and cooperate with the SEC and NYSE Amex, pursuant to NYSE Amex's
regulatory authority. In addition, the Board will adopt corporate
compliance policies that will govern the conduct of employees.
NYSE Amex, as SRO for the Options Exchange, will have broad
authority to direct any action that it deems necessary or appropriate
to fulfill its obligations as an SRO.
Volume-Based Equity Plan
A volume-based equity plan (the ``Plan'') will be in place for an
initial period of five (5) years and three (3) months following the
formation of the Company, pursuant to which each Founding Firm will be
entitled to receive, for no additional consideration, a predetermined
amount of new Class B Common Interests (``Annual Incentive Shares'')
based on the degree to which such Founding Firm has satisfied certain
minimum volume requirements. The Plan may reallocate the equity
interests of the Founding Firms among each other. However, the Plan
will not affect the equity holdings of NYSE Amex and the Plan will not
increase or decrease the aggregate equity interest of the Founding
Firms relative to NYSE Amex. The Company will not allocate Annual
Incentive Shares to a Founding Firm if such allocation would result in
the Founding Firm holding Common Interests representing in excess of
nineteen and nine tenths percent (19.9%) of the total equity of the
Company, or any lower percentage that may be imposed under applicable
law.
Confidentiality
Members will be subject to customary confidentiality obligations
with respect to information relating to the Company or any Member.
Customary exceptions to these obligations will allow disclosure of
information to the SEC or to NYSE Amex in its capacity as an SRO.
Capital Contributions
Regulatory Capital Contributions
At any time, and from time to time, the Board may require each of
the Members to participate on a pro rata basis in accordance with each
Member's Common Interests in calls for additional capital contributions
to the Company that may be necessary for the Company to ensure that the
Options Exchange maintains, and complies with any regulatory
requirements applicable to, its status as a facility of an SRO pursuant
to the Act or to satisfy any other regulatory obligation (any such
capital call, a ``Regulatory Capital Call'', and each such
contribution, a ``Regulatory Capital Contribution''). The Board must
provide each Member with not less than thirty (30) days written notice
of such Regulatory Capital Call, which notice shall specify (i) the
aggregate dollar amount of the Regulatory Capital Call and the
individual dollar amount required to be contributed by such Member;
(ii) the date by which the Regulatory Capital Contribution must be
made; (iii) such Member's percentage ownership of the Common Interests
as of the date of the notice; and (iv) the reason for the Regulatory
Capital Call.\9\
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\9\ Regulatory Capital Contributions required to be made to the
Company by the Members cannot exceed $5,000,000 in the aggregate in
any thirty-six (36)-month period following the effective date of the
LLC Agreement (the ``Regulatory Capital Call Cap'').
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Voluntary Capital Contributions
At any time during the period commencing on the effective date of
the LLC Agreement, and ending on the second anniversary of that
effective date, the Board may solicit the Members to make one or more
additional capital contributions to the Company (each such
solicitation, a ``Voluntary Capital Call'', and each such contribution,
a ``Voluntary Capital Contribution'') for the benefit of the Company,
up to an amount not to exceed $5,000,000 in the aggregate in any twelve
(12) month period following the effective date of the LLC Agreement
(the ``Voluntary Capital Call Cap''). Notwithstanding the foregoing,
however, the Board may, by Supermajority Vote, among other things,
solicit Voluntary Capital Contributions at any time, if such Voluntary
Capital Contribution is necessary for the Company to ensure that the
Options Exchange maintains, and complies with any regulatory
requirements applicable to, its status as a facility of an SRO pursuant
to the Act or to satisfy any other regulatory obligation, to the extent
of any amount exceeding the Regulatory
[[Page 18595]]
Capital Call Cap. No Member shall have any obligation at any time to
make any Voluntary Capital Contribution.
Non-Funding Members
Any Member that fails to make its Regulatory Capital Contribution
on or before the payment due date or any Member that elects to
participate in a Voluntary Capital Call but subsequently fails to make
its Voluntary Capital Contribution on or before the payment due date,
as applicable, will be considered a ``Non-Funding Member.'' The unpaid
subscription amount will bear interest payable to the Company equal to
a specified default interest rate, from and after the applicable
payment due date and until such non-payment has been cured by the Non-
Funding Member or the Non-Funded Interest (as defined below) has been
purchased by another Member or other person or entity as described in
the following paragraph. No such interest paid by a Non-Funding Member
to the Company will be treated as a capital contribution but will be
treated as interest income of the Company.
In addition to the foregoing, upon thirty (30) days written notice
by the Company to any Member that becomes a Non-Funding Member (and
provided that such non-payment has not been cured by the Non-Funding
Member within such 30-day period), the Board, in its sole discretion,
may (i) sell to any of the other Members, on a pro rata basis, all or
any portion of (A) in the case of a Voluntary Capital Call, the Common
Interests that the Non-Funding Member would have received had the
amount requested been paid in full and (B) in the case of a Regulatory
Capital Call, the amount of Common Interests corresponding to the
amount requested (in both cases, ``Non-Funded Interests''); or (ii) in
the event that the entire amount of Non-Funded Interests of the Non-
Funding Member is not acquired by the Members pursuant to clause (i)
above, so notify the Members and designate one or more persons or
entities (subject to the agreement of such persons or entities), which
may include Members, to acquire all or any portion of the Non-Funding
Member's Non-Funded Interests not so acquired; provided that (A) any
purchase of such Non-Funded Interest by any Member, in whole or in
part, shall result in a corresponding increase to such Member's Common
Interest and (B) any purchase of such Non-Funded Interest by a party
that is not a Member shall be treated as a transfer by the Non-Funding
Member to such person and shall be subject to conditions and
limitations in the LLC Agreement relating to admission of Members and
transfers of Interests.
Term and Termination
Pursuant to Section 2.3 of the LLC Agreement, the Company shall
continue in perpetual existence until dissolved pursuant to the LLC
Agreement or the Delaware LLC Act. However, Section 12.1 of the LLC
Agreement provides that the Company may be dissolved in the event of
(i) a Supermajority Vote by the Board to that effect, (ii) the sale or
other disposition of all or substantially all of the Company's assets
and the receipt of all consideration therefrom, or (iii) the entry of a
decree of judicial dissolution under Section 18-802 of the Delaware LLC
Act (involving a situation where it is not reasonably practicable to
carry on the business in conformity with a limited liability company
agreement); provided that no Member may make an application for the
dissolution of the Company pursuant to Section 18-802 of the Delaware
LLC Act without approval by a Supermajority Vote of the Board. The
dissolution of the Company will be effective as of the day on which the
event occurs giving rise to the dissolution, but the Company will not
terminate until the winding up of the Company has been completed, the
assets of the Company have been distributed as provided in Section 12.2
of the LLC Agreement (see following paragraph) and the Certificate of
Formation of the Company has been canceled.
Section 12.2 of the LLC Agreement provides that, upon the
termination and dissolution of the Company, the Board must take all
steps necessary and proper to effect an orderly liquidation of the
Company's business and shall apply and distribute the net proceeds of
such liquidation in the following order of priority: (a) First, to
creditors, including Members who are creditors (but excluding
liabilities to Members for distributions under Section 18-606 of the
Delaware LLC Act), to the extent otherwise permitted by applicable law,
in satisfaction of liabilities of the Company (other than contingent,
conditional or unmatured liabilities for which reserves are established
by the Board), whether by payment or the making of reasonable provision
for payment thereof, (b) second, to the establishment of any reserves
determined by the Board to be reasonably necessary or appropriate to
provide for any contingent, conditional or unmatured Company
liabilities and obligations (which reserves may be paid over to a bank
or trust company, as escrow agent, to be held by such escrow agent for
the purpose of disbursing such reserves in payment of the referenced
liabilities and obligations) and, at the expiration of such period as
the Board shall deem advisable, to pay over the balance thereafter
remaining for distribution, (c) third, to the holder of Preferred
Interests, to the extent of the Priority Claim (as defined below), and
(d) finally, subject to such other arrangements as the Members may
agree, to the Members, pro rata, in accordance with their percentage
ownership of Common Interests; subject to any applicable limitations
imposed by a Member's maximum percentage of distributions as provided
in Section 7.5 of the LLC Agreement or such other arrangements as the
Members may agree. In the latter situation, any distribution so limited
shall be made to the other Members in proportion to their respective
percentage ownership of Common Interests.
The ``Priority Claim'' is the right of the Preferred Interest
holder, upon any liquidation, dissolution or sale of the Company or
other similar event, to receive the sum of (i) the amount of the non-
cash capital contribution for the Preferred Interests identified on
Schedule A-1 to the Amended and Restated Contribution Agreement dated
as of February 22, 2011, by and among NYSE Euronext, the Company and
the Members (the ``Contribution Agreement''), reduced by the amount(s)
paid by the Company (x) in respect of any redemptions of Preferred
Interests pursuant to Section 11.5(a) of the LLC Agreement as described
herein under ``Redemption of Interests'' or (y) pursuant to Section
3.2(i) of the Members Agreement relating to certain redemptions of
Class B Common Interests plus (ii) any unpaid amount that has accrued
on the Preferred Interests. In any winding up and dissolution of the
Company, NYSE Amex may elect to receive Company property-in-kind,
provided that the fair market value of such property-in-kind will be
determined by a Supermajority Vote of the Board or, if the Board is
unable to so agree, pursuant to an appraisal thereof by an independent
valuation firm approved by a Supermajority Vote of the Board. To the
extent the fair market value of the Company property distributed to
NYSE Amex is in excess of the amount it would otherwise receive under
Section 12.2 of the LLC Agreement, it shall make a cash payment to the
Company in the amount of the difference, with the proceeds to be
distributed, pro rata, to all the Members other than NYSE Amex.
Section 12.4 of the LLC Agreement establishes that, upon the
occurrence of an event of dissolution as described
[[Page 18596]]
above, the Company shall be dissolved unless, within fifteen (15) days
of such event, those Members representing greater than fifty percent
(50%) of the Common Interests agree in writing to continue the business
of the Company.
Ownership Limitations
Section 4.9 of the LLC Agreement provides that no Member (other
than NYSE Amex alone or, subject to receipt of SEC approval pursuant to
the rule filing process under Section 19(b) of the Act, together with
its Permitted Transferees \10\) shall be permitted to own or vote
(alone or together with its affiliates), directly or indirectly, Common
Interests in excess of the lower of (x) nineteen and nine-tenths
percent (19.9%) of the then issued and outstanding Common Interests
(the ``19.9% Maximum Percentage'') or (y) the maximum amount of Common
Interests such Member (alone or together with its affiliates) may own
or vote under applicable law and without subjecting the Company to
material regulatory obligations or material liabilities or a reasonable
likelihood of material regulatory obligations or material liabilities
arising as a result of the extent of such ownership or voting interest
(such maximum Common Interests a Member (alone or together with its
affiliates) may own or vote under this clause (y), the ``Alternate
Maximum Percentage'', and the amount in excess thereof or in excess of
the 19.9% Maximum Percentage, as applicable, ``Excess Interests'').
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\10\ A ``Permitted Transfer'' is defined in the LLC Agreement as
(i) any transfer of Interests by any Member among any of its
affiliates, (ii) any transfer by merger, consolidation or similar
business combination or through the acquisition of substantially all
of the assets and liabilities of the transferring party (except for
a transfer to a person or entity whose assets subsequent to the
transfer would be comprised principally of Interests) or (iii) any
transfer required under, or effected to enable a Member to be in
compliance with, applicable law or the requirements of a
governmental authority or any SRO. Any transferee under clauses (i)
and (ii) of the previous sentence is a ``Permitted Transferee,'' and
any transferee under clause (iii) of the previous sentence is a
``Required Transferee.''
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In the event that the Company believes that a Member other than
NYSE Amex (alone or together with its affiliates) has or may, as a
result of then-contemplated events, in the near future, have Excess
Interests (other than as a result of exceeding the 19.9% Maximum
Percentage), the Company shall provide such Member with notice of this
belief, setting forth the basis for the Company's position, and the
Company and such Member shall discuss in good faith the proposed
determination. If the Company and such Member agree that such Member
(alone or together with its affiliates) holds Excess Interests (other
than as a result of exceeding the 19.9% Maximum Percentage), the Member
must, within a reasonable period after such agreement is reached,
implement remedial measures including those described in the paragraph
immediately below. If the Company and a Member fail to reach agreement
as to whether the Member (alone or together with its affiliates) holds
Excess Interests (other than as a result of exceeding the 19.9% Maximum
Percentage), the Company shall be entitled to bring a dispute
resolution proceeding in accordance with the dispute resolution
provisions in Article XV of the LLC Agreement to resolve the dispute;
and in the event the Company prevails in any such dispute resolution
proceeding, the applicable Interests shall be deemed to be Excess
Interests for purposes of the remedial measures described in the
paragraph immediately below. In the event a Member (alone or together
with its affiliates) holds Excess Interests as a result of exceeding
the 19.9% Maximum Percentage, the Member shall, subject to applicable
law, implement the remedial measures described in the paragraph
immediately below and such Excess Interests shall automatically and
immediately constitute Non-voting Common Interests \11\ as described in
and subject to the paragraph immediately below.
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\11\ ``Non-voting Common Interests'' are defined in the LLC
Agreement as Class B Common Interests (i) designated as non-voting
at the time of issuance; (ii) deemed to be non-voting pursuant to
Section 7.5(b) or Section 7.5(d) of the LLC Agreement; or (iii) held
by a Member, constituting Common Interests in excess of the 19.9%
Maximum Percentage, absent SEC approval.
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A Member (alone or together with its affiliates) that (x) holds
Excess Interests as a result of exceeding the 19.9% Maximum Percentage
or (y) pursuant to the paragraph immediately above, agrees that it
holds or is found to hold Excess Interests as a result of exceeding the
applicable Alternate Maximum Percentage shall promptly implement the
following remedial measures accordingly and in a manner consistent with
the LLC Agreement and applicable law: (i) the offer of such Excess
Interests at a price equal to the pro rata portion of the fair market
value of the Member's (or its affiliates', if applicable) Common
Interests attributable to the Excess Interests: first, to the remaining
Members (other than NYSE Amex) pro rata in accordance with their
relative Common Interests; second, if the remaining Members do not
purchase all such Excess Interests, to NYSE Amex; and third, if NYSE
Amex does not purchase all such Excess Interests, to any other person
or entity approved by NYSE Amex (which approval must not be
unreasonably withheld, conditioned or delayed), subject to the
conditions and limitations in the LLC Agreement on the admission of
Members, (ii) subject to applicable law, retention of the Excess
Interests as Non-voting Common Interests, pursuant to the provisions of
Section 7.5 of the LLC Agreement on Restricted Members (as defined and
discussed below), or (iii) except in the case of Excess Interests
arising as a result of such Member (alone or together with its
affiliates) exceeding the 19.9% Maximum Percentage, any other remedial
action discussed in good faith by the Member and the Company, in each
case, as determined by the relevant Member to be least burdensome. A
Member's Excess Interests arising as a result of such Member (alone or
together with its affiliates) exceeding the 19.9% Maximum Percentage
shall automatically and immediately constitute, absent regulatory
approval (including SEC approval pursuant to the rule filing process
under Section 19(b) of the Act) to the contrary, Non-voting Common
Interests and the Aggregate Class A Voting Allocation and Aggregate
Class B Voting Allocation (each as defined below) shall be adjusted
accordingly. Such an adjustment may have the effect of concentrating
the Common Interest Percentages of the other Members. The requirements
of this provision shall be applied iteratively in the event that any
such adjustment would result in any Member (alone or together with its
affiliates) exceeding the 19.9% Maximum Percentage. Subject to
applicable law, Excess Interests of a Member that constitute Non-voting
Common Interests solely as a result of such Member (alone or together
with its affiliates) exceeding the 19.9% Maximum Percentage shall cease
to constitute Non-voting Common Interests (and the Aggregate Class A
Voting Allocation and Aggregate Class B Voting Allocation shall be
adjusted accordingly) in the event that, and to the extent that, (I)
such Member (or, if applicable, its affiliates) transfers, in
accordance with Article XI (Transfers) of the LLC Agreement, such
Excess Interests to another Member or third party that (taking into
account such Excess Interests then being transferred) does not hold
Common Interests that would constitute Excess Interests in the hands of
such transferee Member or third party due to such transferee Member or
third party (in each case, alone or together with its affiliates)
exceeding the 19.9% Maximum
[[Page 18597]]
Percentage or (II) such Excess Interests cease to be Excess Interests
(due to such Member (alone or together with its affiliates) exceeding
the 19.9% Maximum Percentage) because of a reduction in such Member's
Common Interest Percentage.\12\ Notwithstanding the foregoing, nothing
in Section 4.9 of the LLC Agreement limits Section 7.5 of the LLC
Agreement (Restricted Members) or the ability of a Member to make a
Restricted Member Election (as defined below), which shall impose
separate and additional limitations with respect to Common Interests
covered thereby. NYSE Amex may assign to one of its affiliates the
right to purchase Excess Interests pursuant to clause (i) of this
paragraph, subject to providing notice to, and receiving approval from,
the SEC under Section 19(b) of the Act.
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\12\ ``Common Interest Percentage'' is defined in the LLC
Agreement as (i) with respect to NYSE Amex or a transferee of Class
A Common Interests, the product of (w) the Aggregate Class A
Economic Allocation multiplied by (x) a fraction, (A) the numerator
of which shall be the number of Class A Common Interests then held
by NYSE Amex or the transferee and (B) the denominator of which
shall be the number of Class A Common Interests then held NYSE Amex
and all such transferees, and (ii) with respect to any Founding Firm
or a transferee of Class B Common Interests, the product of (y) the
Aggregate Class B Economic Allocation multiplied by (z) a fraction,
(A) the numerator of which shall be the number of Class B Common
Interests then held by such Founding Firm or the transferee,
including, for the purpose of determining any economic entitlement
or entitlement to designate a director, any Non-voting Common
Interests and (B) the denominator of which shall be the number of
Class B Common Interests then held by all Founding Firms and all
such transferees, including, for the purpose of determining any
economic entitlement or entitlement to designate a director, any
Non-voting Common Interests.
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In the event that material regulatory obligations or material
liabilities of the Company arise as a result of a Member (alone or
together with its affiliates) holding Excess Interests (other than as a
result of exceeding the 19.9% Maximum Percentage) and such material
obligations or liabilities may be mitigated by the Member becoming a
Restricted Member pursuant to Section 7.5(a) of the LLC Agreement, the
Member will be deemed to have elected to become a Restricted Member
upon such obligation or liability arising; provided that, to the extent
permitted under applicable law and consistent with the proviso in
Section 7.5(a)(iii) of the LLC Agreement relating to the reversal of an
election to be treated as a Restricted Member, the Member may revoke
such election to be a Restricted Member in connection with either (i)
the sale of such Member's Interests or (ii) any other remedial action
taken by such Member, each as described in the preceding paragraph.
Members and Membership
Section 7.3 of the LLC Agreement provides that, except as otherwise
provided in Article XI (Transfers) of the LLC Agreement (discussed
below), persons or entities that acquire Common Interests or Preferred
Interests in accordance with the terms of, and subject to the
restrictions provided in, the LLC Agreement may be admitted from time
to time as new Members by Supermajority Vote of the Board, subject to
the following: (a) Any new Member must make a capital contribution in
such amount and on such terms as the Board deems appropriate based upon
the needs of the Company, the net value of its assets, the Company's
financial condition, and the benefits anticipated to be realized by
such additional Member; and (b) the additional Member must agree to be
bound by the terms of the LLC Agreement and the Members Agreement. In
addition, pursuant to Section 7.4 of the LLC Agreement, each Member
must maintain commercially reasonable policies and procedures, taking
into account the structure and organization of its operations, to
prevent disclosure of confidential information of the Company by any
director, alternate director, observer to the Board or any committee of
the Board or member of the Advisory Committee (as defined below) to any
other individual appointed by such Member to perform a similar role
with respect to, or who is an officer or employee of, a Specified
Entity.\13\ Any individual designated to be a director, alternate
director, observer to the Board or any committee of the Board, or
member of the Advisory Committee may be required to acknowledge in
writing the foregoing requirements.
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\13\ ``Specified Entity'' is defined in the LLC Agreement as (i)
any U.S. securities option exchange (or facility thereof) or U.S.
alternative trading system on which securities option contracts are
executed (other than NYSE Amex or any of its affiliates) that lists
for trading any option contract that competes with a contract listed
for trading on the Options Exchange or a contract that is
contemplated by the then-current business plan of the Company to be
listed for trading by the Options Exchange within ninety (90) days
of such date, (ii) any person or entity that owns or controls a U.S.
securities option exchange or U.S. alternative trading system
described in clause (i), and (iii) any affiliate of a person or
entity described in clause (i) or (ii) above; provided that, in the
event of a change in applicable law permitting the execution of
transactions in exchange-listed securities options otherwise than on
a national securities exchange or facility thereof (including, but
not limited to, internalization of orders for exchange-listed
securities options or the execution of such orders on an alternative
trading system), (x) a system operated by or on behalf of a Founding
Firm or its affiliates for purposes of the internalization or
crossing of: (i) Orders of customers of such Founding Firm or its
affiliates, (ii) orders of such Founding Firm or its affiliates or
(iii) orders routed from a retail broker-dealer or retail brokerage
unit, shall not be considered a Specified Entity and (y) in addition
to the matters covered in clause (x), NYSE Amex and the Founding
Firms will negotiate in good faith the terms of an exception from
the definition of Specified Entity for any alternative trading
system owned solely by an individual Founding Firm or its affiliates
that performs order crossing in a manner that does not substantially
compete with the Options Exchange in terms of market share and other
relevant factors.
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As referenced above, the number of Class A Common Interests and
Class B Common Interests that will be issued and outstanding to the
initial Members will result in (i) the percentage of the aggregate
number of Common Interests represented by the Class A Common Interests
(the ``Aggregate Class A Economic Allocation'') initially being equal
to 47.2% and (ii) the percentage of the aggregate number of Common
Interests represented by the Class B Common Interests (the ``Aggregate
Class B Economic Allocation'') initially being equal to 52.8%. The
Class A Common Interests will also initially represent 47.2% of the
aggregate number of Common Interests entitled to vote (such percentage,
the ``Aggregate Class A Voting Allocation'' and together with the
Aggregate Class A Economic Allocation, the ``Aggregate Class A
Allocation''), while the Class B Common Interests will initially
represent 52.8% of the aggregate number of Common Interests entitled to
vote (such percentage, the ``Aggregate Class B Voting Allocation'' and
together with the Aggregate Class B Economic Allocation, the
``Aggregate Class B Allocation''). From time to time, the Aggregate
Class A Economic Allocation and the Aggregate Class A Voting Allocation
shall be separately or together subject to adjustment upwards or
downwards, as applicable, in accordance with the provisions of the LLC
Agreement and/or the Members Agreement, as will the Aggregate Class B
Economic Allocation and the Aggregate Class B Voting Allocation.
Restricted Members
Section 7.5 of the LLC Agreement provides that each Member (other
than NYSE Amex alone or together with its Permitted Transferees) then
owning (alone or together with its affiliates) any Excess Interests
(other than as a result of exceeding the 19.9% Maximum Percentage) or
then owning an Interest entitling that Member to distributions in
excess of the Member's Maximum Percentage (as defined below) of the
distributions (the ``Capped Distribution Amount'') then being made to
all Members may from time to time make an irrevocable election
(``Restricted Member Election'') (but subject to
[[Page 18598]]
reversal under certain specific circumstances), by written notice to
the Company, to be treated for purposes of the LLC Agreement as a
``Restricted Member,'' solely with respect to such Excess Interests or
Capped Distribution Amount. ``Maximum Percentage'' means, for a Member,
the lesser of the 19.9% Maximum Percentage and such Member's Alternate
Maximum Percentage, if any. With respect to each Restricted Member, for
so long as the election to be a Restricted Member remains in effect:
(i) In the event of any distribution of Class B Common Interests,
at the request of that Restricted Member by written notice to the
Company, the Restricted Member will receive in lieu of Class B Common
Interests, at the Company's sole option based on a Majority Vote of the
disinterested directors, either (x) the cash equivalent of such
distribution to be paid by the Company within ninety (90) days of the
date such distribution would have otherwise been made, and the
allocations of net profits and losses shall be adjusted accordingly to
reflect each Member's share of such distribution or (y) a promissory
note from the Company (i) in a principal amount equivalent to the
amount of such distribution; (ii) having a maturity determined by
Supermajority Vote of the disinterested directors not to exceed 5
years; and (iii) having additional commercially reasonable terms to be
determined by Supermajority Vote of the disinterested directors that
are consistent with customary market practice (provided that the
Company shall not enter into any contractual restrictions that
specifically and directly limit the Company's ability to repay or
redeem such promissory note except as required under applicable law),
and the allocations of net profits and losses shall be adjusted
accordingly to reflect each Member's share of such distribution;
(ii) In the event of any distribution that is not a distribution of
Class B Common Interests, and if such Restricted Member has so elected,
then the amount of any distribution that would otherwise be made to the
Restricted Member in excess of the Capped Distribution Amount shall be
distributed to all other Members who are entitled to participate in
such distribution on a pro rata basis with respect to the Common
Interests held by such Members and the allocations of net profits and
losses shall be adjusted accordingly to reflect each Member's share of
such distribution; provided that with respect to any Restricted Member,
including in the event that such distribution permits any Member to
elect to be treated as a Restricted Member and such Member so elects,
the distributions to any such Restricted Member shall not exceed the
Capped Distribution Amount; and
(iii) Such Restricted Member agrees to transfer the proceeds of any
transfer of Common Interests by that Restricted Member (taking into
account any proceeds received by the Restricted Member for previous
transfers) in excess of the Restricted Member's Maximum Percentage of
the proceeds of such transfer of Common Interests to all other Members
who are not Restricted Members on a pro rata basis with respect to the
number of Common Interests held by such Members; provided that with
respect to any Restricted Member, including in the event that such
transfer permits any Member to elect to be treated as a Restricted
Member and such Member so elects, the amount transferred to any such
Restricted Member shall be limited so as to not cause the Restricted
Member's total ownership interest to exceed the Restricted Member's
Maximum Percentage or the Capped Distribution Amount, as applicable.
An election to become a Restricted Member will be binding upon the
Restricted Member and its direct and indirect transferees, provided,
however, that the Restricted Member, in its capacity as a Member and a
Restricted Member, may (x) upon written notice to the Company at any
time and without precondition, reverse its election with respect to
paragraph (ii) above and (y) only under the following circumstances,
reverse its election to be treated as a Restricted Member upon written
notice to the Company:
(A) The Restricted Member owns such Restricted Member's Maximum
Percentage or less of the Common Interests then issued and outstanding
(in which case such reversal may occur without any further consent of
the Board or any other condition precedent);
(B) With the written approval of the Board granted in the sole
discretion of the majority of the disinterested directors; or
(C) The Restricted Member provides the Board with appropriate
written notice that such Common Interests have been transferred to the
extent permissible under the LLC Agreement (1) as part of a widespread
public or private offering where no single transferee (together with
its affiliates) acquires more than 2% of the total Common Interests,
(2) to an underwriter for the purpose of underwriting a widely
distributed public or private offering, (3) in one or more open market
transactions effected on a stock exchange, electronic communication
network or similar execution system, or in the over-the-counter market
(which may include a sale to one or more broker-dealers acting as
market makers or otherwise intending to resell the Common Interests
sold to them in accordance with their normal business practices), (4)
to an acquirer which has acquired control of a majority of the total
Common Interests, or (5) with the written approval of the U.S. Board of
Governors of the Federal Reserve System or its staff.
Common Interests with a voting interest in excess of the Maximum
Percentage of the then issued and outstanding Common Interests of each
Member who elects to be treated as a Restricted Member will be deemed
Non-voting Common Interests, and the Aggregate Class A Voting
Allocation and Aggregate Class B Voting Allocation will be adjusted
accordingly. Non-voting Common Interests will not be included in
determining whether the requisite percentage in interest of the Members
have consented to, approved, adopted or taken any action pursuant to
the LLC Agreement. Except as provided in this paragraph, Non-voting
Common Interests will be identical in all regards to all other Common
Interests held by Members.
A Member may elect to become a Restricted Member with respect to
any of its Class B Common Interests, even if such Class B Common
Interests do not constitute Excess Interests. Upon such election, such
Class B Common Interests shall be deemed Non-voting Common Interests
and the provisions of the preceding paragraph will apply with respect
to such Member, provided that such Member may only reverse such
election under the circumstances described in subparagraph (C) above.
The LLC Agreement specifies that, absent SEC approval, the Excess
Interests of a Member (other than NYSE Amex alone or together with its
affiliates) arising as a result of such Member (alone or together with
its affiliates) exceeding the 19.9% Maximum Percentage shall
immediately and automatically constitute Non-voting Common Interests.
Section 7.6 of the LLC Agreement provides that the Company and, to
the extent it relates to the Company, each Member, agrees to comply
with the Federal securities laws and the rules and regulations
promulgated thereunder and to cooperate with NYSE Amex pursuant to its
regulatory authority and with the SEC. Furthermore, each Member must
take into consideration whether its actions would cause the Options
Exchange or the Company to
[[Page 18599]]
engage in conduct that fosters and does not interfere with NYSE Amex's
or the Company's ability to carry out their respective responsibilities
under the Act and to prevent fraudulent and manipulative acts and
practices, promote just and equitable principles of trade, foster
cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, protect investors and the public interest. The
Members may, upon (A) the affirmative written consent of NYSE Amex (in
its capacity as SRO) and (B) a Supermajority Vote of the Board
(excluding the vote of the director designated by the Member subject to
sanction), suspend or terminate a Member's voting privileges, including
the ability to designate directors pursuant to Section 8.1(d) of the
LLC Agreement in the event: (i) The Member has materially violated any
``Regulatory Matters Provision'' \14\ or any applicable law; (ii) the
Member is subject to any applicable ``statutory disqualification''
(within the meaning of Section 3(a)(39) of the Act); or (iii) such
action is necessary or appropriate in the public interest or for the
protection of investors. Prior to any suspension or termination, (x)
the Company will deliver to the Member a written notice specifying in
reasonable detail the basis for such proposed suspension or termination
and (y) representatives of the Member will be given an opportunity to
address the Board regarding such proposed suspension or termination
prior to the Board voting thereon. In the event of a suspension or
termination, the director (if any) designated by such Member will
immediately cease to be a director and the authorized number of
directors will be reduced accordingly.
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\14\ A ``Regulatory Matters Provision'' is defined in the LLC
Agreement as any of Section 4.9 of the LLC Agreement with respect to
provisions related to the 19.9% Maximum Percentage; Section 7.6 of
the LLC Agreement relating to Member compliance with the federal
securities laws and cooperation with NYSE Amex pursuant to its
regulatory authority and with the SEC; Section 8.1(d)(i) of the LLC
Agreement relating to designation of directors to the Board;
Sections 8.1(e)(ii) and 8.1(e)(iii) of the LLC Agreement relating to
a director's suspension or removal in certain circumstances; Section
8.1(h) of the LLC Agreement relating to the qualification of
directors; Section 8.1(m) of the LLC Agreement relating to director
compliance with the federal securities laws and cooperation with
NYSE Amex pursuant to its regulatory authority and with the SEC;
Section 9.3 of the LLC Agreement prohibiting Members from entering
voting trust agreements with respect to their Common Interests;
Section 11.8 of the LLC Agreement relating to (i) notice and rule
filing requirements to the SEC on any acquisition of Interests that
results in a Member's ownership of Common Interests reaching certain
threshold levels and (ii) requirements regarding direct and indirect
ownership of the Company; Section 13.2(c) of the LLC Agreement
granting NYSE Amex and the SEC access to the books and records of
the Company; Section 14.1(j) of the LLC Agreement providing for the
confidentiality of Confidential Information (as defined below)
pertaining to the self-regulatory functions of NYSE Amex; Section
14.1(k) of the LLC Agreement granting NYSE Amex and the SEC access
to confidential information; Section 16.1 of the LLC Agreement
relating to regulatory approvals and compliance; or Section 16.10 of
the LLC Agreement relating to amendments to the LLC Agreement and
the requirement to file such amendments with the SEC.
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Article IX of the LLC Agreement provides that meetings of the
Members may be called by (i) the Board or (ii) by a Member or Members
holding not less than thirty-five percent (35%) of the then issued and
outstanding Common Interests. Written or printed notice stating the
place, day and hour of the meeting and, in the case of a special
meeting of the Members, describing the purposes for which the meeting
is called shall be delivered not fewer than ten (10) days, but not more
than sixty (60) days, before the date of the meeting. Such notice must
include an agenda specifying in reasonable detail the matters to be
discussed at the meeting and identifying any specific items to be
considered that require a Supermajority Vote. Except as otherwise
provided in the LLC Agreement or under applicable law, Members which
both (x) represent greater than forty-five percent (45%) of the Common
Interests outstanding and are entitled to vote at such time and (y)
constitute an absolute majority of Members entitled to vote at such
time, represented in person or by proxy, shall constitute a quorum of
Members for purposes of conducting business. Except as otherwise
required by the LLC Agreement or applicable law, resolutions of the
Members at any meeting of Members shall be adopted by Majority Vote of
the Members at such meeting at which a quorum is present.
Section 9.3 of the LLC Agreement prohibits Members from entering
into voting trust agreements with respect to their Common Interests.
Governance of the Company
Section 8.1(a) of the LLC Agreement establishes the Board, which
will be a ``manager'' of the Company within the meaning of the Delaware
LLC Act. Each director shall be entitled to one vote. Section 8.1(b) of
the LLC Agreement provides that the Board shall delegate the day-to-day
operation of the Company and the management of the business and affairs
of the Company to the officers of the Company and NYSE Group, a wholly-
owned subsidiary of NYSE Euronext, in accordance with the NYSE Euronext
Agreement pursuant to which NYSE Group will perform certain information
technology, operational, financial, compliance, management and other
general corporate support services for the Company (except as otherwise
provided in the LLC Agreement). The Board shall oversee the conduct and
performance of the duties so delegated.
Pursuant to Section 8.1(c) of the LLC Agreement, the authorized
number of directors is thirteen (13) as of the effective date of the
LLC Agreement. The Board may be expanded by Supermajority Vote of the
Board to include any number of independent directors as may be required
by applicable law, provided that in the event the Board is so expanded,
the Board shall determine, by Supermajority Vote, applicable
independence criteria in accordance with, among other appropriate
considerations, the requirements of applicable law which shall include,
for this purpose, SEC guidelines, if any, regarding such criteria. The
directors shall be appointed by the Members as described in the
immediately following paragraphs and shall hold office until their
respective successors are elected and qualified or until their earlier
death, resignation or removal. In the event that the Company is not
required to appoint independent directors, the Company will authorize
one individual to be designated by NYSE Amex to participate as a non-
voting observer in meetings of the Board, so long as the Options
Exchange is operated as a facility of NYSE Amex.
Under Section 8.1(d) of the LLC Agree