UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 15, 2009

 

 

COHEN & COMPANY INC.

(Exact name of registrant as specified in its charter)

 

 

 

Maryland   1-32026   16-1685692

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification Number)

 

Cira Centre

2929 Arch Street, 17th Floor

Philadelphia, Pennsylvania

  19104
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: (215) 701-9555

Alesco Financial Inc.

(Former name or former address, if changed since last report.)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 1.01 Entry into a Material Definitive Agreement.

Credit Facility

The information set forth under Item 2.03, “Creation of a Direct Financial Obligation or an Obligation Under an Off-Balance Sheet Arrangement of a Registrant” is incorporated herein by reference.

Cohen Brothers, LLC Amended and Restated Limited Liability Company Agreement

As a result of the Business Combination, described under Item 2.01 below, Alesco Financial Inc. (now Cohen & Company Inc.) (the “Company”) acquired a majority of the membership units in Cohen Brothers, LLC (“Cohen Brothers”) and, on December 16, 2009, entered into the Cohen Brothers Amended and Restated Limited Liability Company Agreement (“LLC Agreement”). Information regarding the LLC Agreement is set forth in the proxy statement/prospectus filed by the Company on Form S-4/A (File No. 333-159661) with the Securities and Exchange Commission (“SEC”) on November 4, 2009 (the “Proxy Statement/Prospectus”) under the heading “The Merger Agreement – Terms of Other Agreements – Limited Liability Company Agreement of Cohen Post-Business Combination” beginning on page 131, which information is incorporated herein by reference. The description of the LLC Agreement is qualified in its entirety by reference to the LLC Agreement, a copy of which is filed as Exhibit 10.1 hereto and is incorporated herein by reference.

 

Item 2.01 Completion of Acquisition or Disposition of Assets.

Agreement and Plan of Merger

On December 16, 2009, the Company completed its business combination with Cohen Brothers in accordance with the terms of the Agreement and Plan of Merger among the Company, Alesco Financial Holdings, LLC, a wholly owned subsidiary of the Company (“Merger Sub”), and Cohen Brothers, dated as of February 20, 2009 and amended on June 1, 2009, August 20, 2009 and September 30, 2009 (the “Merger Agreement”), pursuant to which Merger Sub merged with and into Cohen Brothers, with Cohen Brothers as the surviving entity and a majority owned subsidiary of the Company (the “Business Combination”).

Prior to the Business Combination, the Company was a holding company that held its consolidated assets and conducted its operations primarily through its majority-owned subsidiaries. In compliance with the Merger Agreement, the Company contributed to Merger Sub substantially all of its assets and certain of its liabilities not already owned, directly or indirectly, by Merger Sub and the Company retained obligations under its outstanding convertible senior debt and junior subordinated notes. As of December 16, 2009, the Company had outstanding $26.2 million principal amount of convertible senior debt and $48.1 million principal amount of junior subordinated notes. The Company continues to be a holding company and will conduct its operations primarily through its majority-owned subsidiary, Cohen Brothers, in which the Company owns approximately 66.2% of the outstanding Cohen Brothers membership units.

On December 16, 2009, in connection with the Business Combination, the Company filed Articles of Amendment to its charter to effectuate a 1-for-10 reverse stock split of its outstanding common stock, followed by Articles of Amendment to its charter to set the par value of the Company’s stock at $0.001 per share. All conversion ratios and calculations provided herein reflect the effectuation of the 1-for-10 reverse stock split. Also on December 16, 2009, the Company filed Articles of Amendment to its charter to change its name to “Cohen & Company Inc.,” moved the listing of its

 

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common stock to the NYSE Amex and changed its ticker symbol to “COHN” as discussed in Item 3.01 below, which is incorporated herein by reference.

Pursuant to the Merger Agreement, each holder of a Cohen Brothers Class A membership unit, together with one Cohen Brothers Class B membership unit, either, with respect to such membership units, (1) received 0.57372 shares of the Company’s common stock, or (2) retained 0.57372 new membership units in Cohen Brothers. In exchange for all of his Cohen Brothers Class C membership units, Daniel G. Cohen, through Cohen Bros. Financial, LLC (“Cohen Bros. Financial”), received one share of the Company’s Series A Voting Convertible Preferred Stock (“Series A Preferred Stock”), which has no economic rights but gives Mr. Cohen the right to nominate and elect a number equal to at least one-third (but less than a majority) of the total number of directors on the Company’s board of directors.

After October 1, 2010, Mr. Cohen may convert the share of Series A Preferred Stock into 4,983,557 shares of the Company’s Series B Voting Non-Convertible Preferred Stock (“Series B Preferred Stock”), which will have no economic rights but will entitle the holder thereof to vote the Series B Preferred Stock. Each share of the Series B Preferred Stock will be entitled to one vote and will vote together with other Company stockholders on all matters presented to the Company’s stockholders. The holder of the Series B Preferred Stock will be able to exercise approximately 31.9% of the voting power of the Company’s common stock based on the outstanding number of shares of the Company common stock on the date hereof and after giving effect to the Business Combination. The Series A Preferred Stock and the Series B Preferred Stock will be automatically redeemed for par value on December 31, 2012.

On December 16, 2009, the Company filed Articles Supplementary to its charter setting forth the terms of the one share of Series A Preferred Stock and the 4,983,557 shares of Series B Preferred Stock.

Each Cohen Brothers’ long term incentive profit unit (“LTIP unit”) was, immediately prior to the effective time of the Business Combination, automatically converted into one Cohen Brothers Class A membership unit together with one Cohen Brothers Class B membership unit and, in the Business Combination, each such Cohen Brothers Class A membership unit and Cohen Brothers Class B membership unit received the same treatment as the other Cohen Brothers Class A membership units and Cohen Brothers Class B membership units.

Immediately prior to the completion of the Business Combination, Cohen Brothers had outstanding 16,753,309 Class A membership units and an identical number of Class B membership units (including Class A membership units and Class B membership units issued upon conversion of the LTIPs). Immediately following the completion of the Business Combination, the pre-Business Combination stockholders of the Company owned in the aggregate approximately 58.2% of the issued and outstanding shares of the Company’s common stock and pre-Business Combination Cohen Brothers members and holders of LTIP units owned the remaining 41.8% of such shares in the Company. The issuance of the Company common stock to Cohen Brothers members and the share of Series A Preferred Stock issued to Daniel G. Cohen through Cohen Bros. Financial in the Business Combination was registered on the Proxy Statement/Prospectus.

The information in the Proxy Statement/Prospectus includes information about the nature and amount of consideration paid by the Company for the assets acquired in the Business Combination and the manner in which the amount of such consideration was determined, which is set forth in the Proxy Statement/Prospectus under the heading “The Merger Agreement – Terms of the Merger Agreement – Consideration to be Received in the Business Combination” beginning on page 115, which information is incorporated herein by reference. Information with respect to the interests of the Company’s affiliates, officers and directors in the transaction, which is set forth in the Proxy Statement/Prospectus under the

 

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heading “The Transactions – Interests of Board Members and Executive Officers in the Business Combination” beginning on page 101, is incorporated herein by reference.

The information regarding the Initial Amendments identified in this Item 2.01 and Item 3.03, “Material Modification to Rights of Security Holders” is hereby incorporated by reference.

 

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

On June 1, 2009, Cohen Brothers entered into an amended and restated credit facility with TD Bank, N.A. (“TD Bank”), which was amended on September 30, 2009 and was further amended by the Omnibus Joinder and Amendment to Loan Documents (the “Joinder”) on December 16, 2009 in connection with the completion of the Business Combination (as amended, the “2009 Credit Facility”). Except for the changes to the 2009 Credit Facility described below, additional information regarding the 2009 Credit Facility can be found in the Proxy Statement/Prospectus under the heading “Information Regarding Cohen Brothers, LLC — Management’s Discussion and Analysis of Financial Condition and Results of Operations of Cohen Brothers, LLC — Liquidity and Capital Resources — Amended and Restated Credit Facility” beginning on page 281, which information is incorporated herein by reference.

Pursuant to the Joinder, certain pre-Business Combination Company subsidiaries executed joinders to existing security and pledge agreements whereby such subsidiaries granted TD Bank a security interest in all of their assets pursuant to the terms of the 2009 Credit Facility. The effect of the 2009 Credit Facility and the related security and pledge agreements is that Cohen Brothers has granted TD Bank a security interest in substantially all of its assets and substantially all of its asset management agreements with the exception of certain assets held in subsidiaries that do not guarantee the 2009 Credit Facility (the “Non-Guaranteeing Subsidiaries”). However, Cohen Brothers is limited in the amount of capital it can invest and have at any point in time in the Non-Guaranteeing Subsidiaries.

In addition, the Joinder amended certain terms of the 2009 Credit Facility, including increasing the level of consolidated net worth, as defined in the 2009 Credit Facility, Cohen Brothers is required to maintain from not less than $30 million to not less than $40 million. In addition, the $15 million minimum liquidity requirement was changed to a minimum amount equal to outstanding advances (including letters of credit) under the 2009 Credit Facility. Finally, Cohen & Company Securities, LLC’s ability to provide credit enhancements increased from $5 million in the aggregate at any time to $45 million.

The 2009 Credit Facility provides for available borrowings of the lesser of the maximum revolving credit amount, which is currently $28.0 million, or a calculation that is based upon the present value of certain of Cohen Brothers’ collateralized debt obligation management fees plus a percentage of the estimated value of certain other investments Cohen Brothers has pledged as collateral. As of December 16, 2009, $24.95 million was drawn, $1.29 million was committed for two letters of credit and $1.76 million is available for borrowing under the 2009 Credit Facility.

 

Item 3.01 Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing.

On December 14, 2009, the NYSE Amex (“NYSE Amex”) informed the Company that the NYSE Amex had authorized the listing of the Company’s common stock on the NYSE Amex. The Company’s common stock ceased trading on the New York Stock Exchange (the “NYSE”) on December

 

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16, 2009 and will commence trading on the NYSE Amex on December 17, 2009 under the ticker symbol “COHN”.

The transfer of the listing of the Company’s common stock from the NYSE to the NYSE Amex was authorized by the Company’s board of directors on February 20, 2009.

 

Item 3.03 Material Modification to Rights of Security Holders.

Immediately prior to the consummation of the Business Combination, the Company filed Articles of Amendment with the State of Maryland for the purpose of effectuating a 1-for-10 reverse stock split of its outstanding shares of common stock and Articles of Amendment for the purpose of resetting the par value per share of such common stock at $0.001 following the reverse stock split (collectively, the “Initial Amendments”). Following the reverse stock split, but prior to the Business Combination, the Company had 6,015,194 shares of common stock outstanding. As a result of the Business Combination, an additional 4,328,138 shares of the Company’s common stock were issued.

In connection with the Business Combination, the Company filed Articles Supplementary with the State of Maryland that reclassified one authorized and unissued share of preferred stock into one share of Series A Preferred Stock and 4,983,557 authorized and unissued shares of preferred stock into 4,983,557 shares of Series B Preferred Stock (collectively, the “Preferred Articles Supplementary”). The single share of Series A Preferred Stock was issued to Daniel G. Cohen, through Cohen Bros. Financial, in exchange for all of his Class C Cohen Brothers membership units.

The Preferred Articles Supplementary provide the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions for redemption as established by the board of directors of the Company for the Series A Preferred Stock and the Series B Preferred Stock, respectively.

Additional information regarding the reverse stock split and the Preferred Articles Supplementary can be found in the Proxy Statement/Prospectus under the heading “Description of AFN’s Capital Stock” beginning on page 365 and under the heading “The Merger Agreement – Terms of the Merger Agreement – Consideration to be Received in the Business Combination” beginning on page 115, which information is incorporated herein by reference.

The description of the Initial Amendments is qualified in its entirety by reference to each set of the Articles of Amendment, copies of which are filed herewith as Exhibits 3.1 and 3.2, respectively, and are incorporated herein by reference.

The description of the Articles Supplementary is qualified in its entirety by reference to the Alesco Financial Inc. Articles Supplementary Series A Voting Convertible Preferred Stock and the Alesco Financial Inc. Articles Supplementary Series B Voting Non-Convertible Preferred Stock, copies of which are filed herewith as Exhibits 3.3 and 3.4, respectively, and are incorporated herein by reference.

The 2009 Credit Facility and the LLC Agreement contain working capital restrictions and other limitations on the payment of dividends. Reference is made to the disclosure set forth under Item 2.03, “Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant” concerning the 2009 Credit Facility and the disclosure set forth under Item 1.01, “Entry into a Material Definitive Agreement” concerning the LLC Agreement, which are incorporated herein by reference

 

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Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Officer and Director Resignation

In accordance with the terms of the Merger Agreement: (1) effective simultaneously with the completion of the Business Combination on December 16, 2009, James J. McEntee, III resigned as the President and Chief Executive Officer of the Company and effective immediately following the completion of the Business Combination, James J. McEntee, III resigned as a director of the Company; (2) effective immediately following the completion of the Business Combination, John J. Longino will no longer serve as Chief Financial Officer and Treasurer of the Company; and (3) effective immediately following the completion of the Business Combination, Christian Carr will no longer serve as Chief Accounting Officer of the Company. Messrs. Longino and Carr have agreed to stay with the Company for a period of time following the Business Combination to assist with post-closing transition matters.

Appointment and Election of Directors

At the Company’s annual meeting of stockholders on December 15, 2009, the Company’s stockholders elected the following nine directors: Rodney E. Bennett, Marc Chayette, Daniel G. Cohen,

 

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Thomas P. Costello, G. Steven Dawson, Jack Haraburda, James J. McEntee, III, Lance Ullom, and Charles W. Wolcott.

On December 15, 2009, in accordance with the Merger Agreement and effective upon the completion of the Business Combination, the number of directors on the Company’s board of directors was increased by the Company’s board of directors from nine directors to ten directors, and Joseph M. Donovan and Walter Beach were appointed by the Company’s board of directors to fill the open director positions. Upon joining the Company as its new Directors, Messrs. Donovan and Beach entered into the Company’s standard indemnification agreement, the form of which was filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on October 20, 2006.

Joseph M. Donovan , age 54, is currently retired. Prior to his retirement in February 2007, Mr. Donovan was chairman of Credit Suisse’s ABS and debt financing group, which he led since March 2000. Prior to that, Mr. Donovan was a managing director and head of asset finance at Prudential Securities from 1998 to 2000 and at Smith Barney from 1995 to 1997. Mr. Donovan began his banking career at The First Boston Corporation in 1983, ultimately becoming a managing director at CS First Boston, where he served as Chief Operating Officer of the Investment Banking Department from 1992 to 1995. Mr. Donovan received his MBA from The Wharton School and has a degree in Accountancy from the University of Notre Dame. Mr. Donovan is the Lead Independent Director and Chairman of the Audit Committee of Babcock & Brown Air Limited (NYSE: FLY), an aircraft leasing company headquartered in Dublin, Ireland, and is a director of RAM Holdings, Ltd. (NASDAQ: RAMR), a Bermuda-based provider of financial guaranty reinsurance, and First Again, LLC, a consumer finance company in San Diego, California.

Walter T. Beach , age 42, has been a director of Resource Capital Corp. (NYSE: RSO) since March 2005. Mr. Beach has been Managing Director of Beach Investment Counsel, Inc., an investment management firm, since 1997. From 1993 to 1997, Mr. Beach was a Senior Analyst and Director of Research at Widmann, Siff and Co., Inc., an investment management firm where, beginning in 1994, he was responsible for the firm’s investment decisions for its principal equity product. Before that, he was an associate and financial analyst at Essex Financial Group, a consulting and merchant banking firm, and an analyst at Industry Analysis Group, an industry and economic consulting firm. Mr. Beach has served as a director of The Bancorp, Inc., a publicly traded (NASDAQ: TBBK) Delaware bank holding company, and its subsidiary bank, The Bancorp Bank, since 1999.

Appointment of Officers

Pursuant to the Merger Agreement and effective upon the completion of the Business Combination, the Company appointed new executive officers as follows:

 

Name

  

Office(s)

Daniel G. Cohen    Chief Executive Officer and Chief Investment Officer of the Company
Christopher Ricciardi    President of the Company and Chief Executive Officer of Cohen & Company Securities, LLC (the Company’s broker-dealer subsidiary)
Joseph W. Pooler, Jr.    Executive Vice President, Chief Financial Officer and Treasurer
Douglas Listman    Chief Accounting Officer and Assistant Treasurer

 

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Daniel G. Cohen , age 40, has served as the Chairman of the board of directors since October 6, 2006 and as the executive Chairman of the Company since October 18, 2006. He previously served as Chief Executive Officer of RAIT Financial Trust (NYSE: RAS), a real estate finance company focused on the commercial real estate industry, from December 2006 when it merged with Taberna Realty Finance Trust to February 2009, and continues to serve as trustee. Mr. Cohen was Chairman of the board of trustees of Taberna Realty Finance Trust from its inception in March 2005 until December 2006 and its Chief Executive Officer from March 2005 to December 2006. In addition, Mr. Cohen has served as the Chairman of the board of managers of Cohen Brothers since 2001 and as the Chief Investment Officer of Cohen Brothers since October 2008. Mr. Cohen has served as Chairman of Cohen Financial Group, Inc. since its inception in April 2007. Mr. Cohen is currently a director of Star Asia Finance Limited, a joint venture investing in Asian commercial real estate, and a director of Muni Funding Company of America, LLC, a company investing in middle-market non-profit organizations. Mr. Cohen was the Chief Executive Officer of Cohen Brothers and its subsidiary, Cohen & Company Securities, LLC, a securities brokerage firm, from September 2001 until February 2006. Since 2000, Mr. Cohen has been the Chairman of the board of directors of The Bancorp, Inc. (NASDAQ: TBBK), a holding company for The Bancorp Bank, which provides various commercial and retail banking products and services to small and mid-size businesses and their principals in the United States. He also served as the Chairman of the board of Dekania Acquisition Corp. (NYSE Amex: DEK), a publicly held business combination company focused on acquiring businesses that operate within the insurance industry, from its inception in February 2006 until December 2006, and is a member of its board until its dissolution, which was approved in February 2009. Mr. Cohen served as a member of the board of directors of TRM Corporation (OTC:TRMM), a publicly held consumer services company, from 2000 to September 2006 and as its Chairman from 2003 to September 2006.

Christopher Ricciardi, age 41, has served as Cohen Brothers’ President and Chief Executive Officer and as a member of Cohen Brothers’ board of managers since February 2006. He has served as Chief Executive Officer and as a director of Cohen Financial Group, Inc. since its inception in April 2007. Mr. Ricciardi has held various positions with Dekania Acquisition Corp., Muni Funding Comapy of America, LLC, the Strategos Deep Value Hedge Fund entities and the Brigadier Hedge Fund entities. Prior to joining Cohen Brothers, Mr. Ricciardi was a Managing Director and Global Head of Structured Credit Products for Merrill Lynch. Prior to joining Merrill Lynch in April 2003, Mr. Ricciardi was a Managing Director and Head of U.S. Structured Credit Products at CSFB. Mr. Ricciardi began his career at Prudential Securities. He earned a B.A. from the University of Richmond and an M.B.A. from the Wharton School at the University of Pennsylvania and completed one term at the London School of Economics. He is also a CFA charterholder.

A description of Mr. Ricciardi’s employment agreement with Cohen Brothers is set forth in the Proxy Statement/Prospectus under the heading “Cohen Special Meeting – Cohen Executive Compensation – Employment Agreements – Christopher Ricciardi, Chief Executive Officer” beginning on page 339, which description is incorporated herein by reference.

Joseph W. Pooler, Jr., age 44, has served as Cohen Brothers’ Chief Financial Officer since November 2007 and as Chief Administrative Officer since May 2007. From July 2006 through November 2007, he also served as Senior Vice President of Finance of Cohen Brothers. From November 2007 through March 2009, Mr. Pooler also served as Chief Financial Officer of Muni Funding Company of America, LLC, a company investing in middle-market non-profit organizations. Prior to joining Cohen Brothers, from 1999 through 2005, Mr. Pooler held key management positions at Pegasus Communications Corporation (now known as Xanadoo Company (OTC: XAND)), which operated in the direct broadcast satellite television and broadcast television station segments. While at Pegasus, Mr. Pooler held various positions including Chief Financial Officer, Principal Accounting Officer, and Senior Vice President of Finance. From 1993 through 1999, Mr. Pooler held various management

 

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positions with MEDIQ, Incorporated, including Corporate Controller, Director of Operations, and Director of Sales Support. Mr. Pooler holds a B.A. from Ursinus College, an M.B.A. from Drexel University, and was a Certified Public Accountant in the Commonwealth of Pennsylvania (license lapsed).

A description of Mr. Pooler’s employment agreement with Cohen Brothers is set forth in the Proxy Statement/Prospectus under the heading “Cohen Special Meeting – Cohen Executive Compensation – Employment Agreements – Joseph W. Pooler, Jr., Chief Financial Officer” beginning on page 339, which description is incorporated herein by reference.

Douglas Listman , age 39, has served as the Chief Accounting Officer of Cohen Brothers since 2006. From 2004 to 2006, Mr. Listman served as an associate for Resources Global Professionals (a world wide accounting services consulting firm). From 1992 to 2003, Mr. Listman served in various accounting and finance positions including: senior accountant with KPMG; Assistant Corporate Controller of Integrated Health Services (a publicly traded provider of skilled nursing services; NYSE: IHS); Controller of Integrated Living Communities (a publicly traded provider of assisted living services; NASDAQ: ILCC); Chief Financial Officer of Senior Lifestyles Corporation (a private owned provider of assisted living services); and Chief Financial Officer of Monarch Properties (a privately owned health care facility real estate investment company). Mr. Listman is a Certified Public Accountant and graduated from the University of Delaware with a B.S. in accounting.

Upon joining the Company as its new officers, Messrs. Cohen, Ricciardi, Pooler and Listman entered into the Company’s standard indemnification agreement, the form of which was filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on October 20, 2006.

Compensatory Arrangements of Certain Officers

At the Company’s annual meeting of stockholders held on December 15, 2009, the Company’s stockholders approved the Alesco Financial Inc. performance-based Cash Bonus Plan (the “AFN Cash Bonus Plan”). Messrs. Cohen, Ricciardi, Pooler and Listman are eligible to receive cash bonuses pursuant to the AFN Cash Bonus Plan. The description of the AFN Cash Bonus Plan is included in the Proxy Statement/Prospectus under the heading “AFN Annual Meeting – Proposal 2 – Approval of the AFN Cash Bonus Plan” beginning on page 305, which description is incorporated herein by reference.

On December 15, 2009, the Company board of directors approved the Cohen Brothers, LLC 2009 Equity Award Plan. A description of the 2009 Equity Award Plan can be found in the Proxy Statement/Prospectus under the heading “Cohen Executive Compensation – Compensation Discussion and Analysis – Elements of Compensation – 2009 Equity Award Plan” beginning on page 338, which description is incorporated herein by reference.

Related Party Transactions

Prior to the closing of the Business Combination, Daniel G. Cohen owned 51% of each of the Cohen Brothers Class A membership units and Class B membership units and all of the Cohen Brothers Class C membership units; Christopher Ricciardi owned 14% of each of the Cohen Brothers Class A membership units and Class B membership units; James J. McEntee, III owned 6% of each of the Cohen Brothers Class A membership units and Class B membership units; Joseph W. Pooler, Jr. owned less than 1% of the Cohen Brothers Class A membership units, Class B membership units and LTIP units, collectively; and Douglas Listman did not own any Cohen Brothers Class A membership units, Class B membership units or LTIP units.

 

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Following the Business Combination, the Company owns 66.2% of the reclassified Cohen Brothers membership units; Daniel G. Cohen owns 31.9% of the reclassified Cohen Brothers membership units, 3.5% of the issued and outstanding shares of Company common stock and one share of Series A Preferred Stock; Christopher Ricciardi owns 1.7% of the reclassified Cohen Brothers membership units and 14.2% of the issued and outstanding shares of Company common stock; James J. McEntee, III does not own any reclassified Cohen Brothers membership units and 6.2% of the issued and outstanding shares of Company common stock; Joseph W. Pooler Jr. does not own any Cohen Brothers membership units and less than 1% of the issued and outstanding shares of Company common stock; and Douglas Listman does not own any Cohen Brothers membership units or shares of Company common stock.

Information regarding related party transactions contained in the Proxy Statement/Prospectus under the heading “Certain Relationships and Related Party Transactions” beginning on page 290, which information is incorporated herein by reference. In addition, the disclosure set forth under the headings “Certain Relationships and Related Party Transactions – Transactions Between Cohen and its Managers and Officers and Certain Members – Limited Liability Company Agreement” and “Certain Relationships and Related Party Transactions – Transactions Between Cohen and its Managers and Officers and Certain Members – Subordinated Notes” is supplemented by the information set forth below.

Limited Liability Company Agreement

Information regarding the LLC Agreement is set forth in the Proxy Statement/Prospectus under the heading “The Merger Agreement – Terms of Other Agreements – Limited Liability Company Agreement of Cohen Post-Business Combination” beginning on page 131, which information is incorporated herein by reference. The description of the LLC Agreement is qualified in its entirety by reference to the LLC Agreement, a copy of which is filed as Exhibit 10.1 hereto and is incorporated herein by reference.

Subordinated Notes

On June 25, 2008, Cohen Brothers issued a subordinated note to Cohen Financial Group, Inc. (“CFG”) with an original principal amount of $6.0 million, and an outstanding principal amount as of the completion of the Business Combination of $6.2 million (the “Original Cohen Brothers Note”). In connection with the dissolution of CFG that occurred prior to the completion of the Business Combination, Cohen Brothers issued new subordinated notes (the “New Cohen Brothers Notes”) to each stockholder of CFG evidencing Cohen Brothers’ obligation to pay to each such stockholder the stockholder’s pro rata share of the Original Cohen Brothers Note. The New Cohen Brothers Notes have substantially the same terms and provisions as contained in the Original Cohen Brothers Note. Messrs. Cohen and Ricciardi were stockholders of CFG and received New Cohen Brothers Notes in the original principal amount of $0.5 million and $0.1 million, respectively.

The New Cohen Brothers Notes mature on June 20, 2013 and bear interest at an annual rate of 12%. A portion of this interest, 9%, is payable in cash semiannually on May 1 and November 1 of each year commencing on May 1, 2010. The remaining portion, 3%, is payable in-kind at an annual rate of 3%, which is also payable semiannually. All accrued in-kind interest will be added to the unpaid principal balance of the New Cohen Brothers Notes on each May 1 and November 1 and thereafter, the increased principal balance shall accrue interest at the annual rate of 12%. The New Cohen Brothers Notes are unsecured obligations of Cohen Brothers, and payments of principal and interest on the notes are subordinated to Cohen Brothers’ senior debt. The interest expense (both cash and in-kind) on the Original Cohen Brothers Note totaled approximately $0.2 million and $0.5 million for the three and nine months ended September 30, 2009 and $0.4 million for the fiscal year ended December 31, 2008.

 

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Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

In connection with the completion of the Business Combination, the Company filed the Initial Amendments and Preferred Articles Supplementary as set forth in Item 3.03, “Material Modification to Rights of Security Holders,” which section is incorporated herein by reference.

In addition, effective upon the completion of the Business Combination, the Company filed Articles of Amendment to its charter to change its name to “Cohen & Company Inc.” The description of this amendment is qualified in its entirety by reference to such Articles of Amendment, a copy of which is filed as Exhibit 3.5 hereto and is incorporated herein by reference.

 

Item 8.01 Other Events.

On December 15, 2009, the Company issued a press release announcing, among other things, that at its annual meeting of stockholders held on December 15, 2009, its stockholders approved the Company’s issuance of shares of common stock and Series A Voting Convertible Preferred Stock that were proposed to be issued in connection with the Business Combination. A copy of the Company’s press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

On December 16, 2009, the Company issued a press release with respect to the completion of the Business Combination. A copy of the Company’s press release is attached hereto as Exhibit 99.2 and is incorporated herein by reference.

The information contained in this Item 8.01 and Exhibits 99.1 and 99.2 to this Current Report on Form 8-K shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section, or be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, unless it is specifically incorporated by reference.

 

Item 9.01 Financial Statements and Exhibits

 

(a) Financial statements of businesses acquired

The financial statements required by this item have not been filed on this initial Current Report on Form 8-K, but will be filed by amendment to this report in accordance with the requirements of Item 9.01(a)(4) of Form 8-K.

 

(b) Pro forma financial information.

The pro forma financial information required by this item has not been filed on this initial Current Report on Form 8-K but will be filed by amendment to this report in accordance with the requirements of Item 9.01(b)(2) of Form 8-K.

 

(d) Exhibits.

 

Exhibit No.

  

Exhibit Description

  3.1    Alesco Financial Inc. Articles of Amendment to Effectuate the Reverse Stock Split*
  3.2    Alesco Financial Inc. Articles of Amendment to Set Par Value*
  3.3    Alesco Financial Inc. Articles Supplementary Series A Voting Convertible Preferred Stock*

 

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  3.4    Alesco Financial Inc. Articles Supplementary Series B Voting Non-Convertible Preferred Stock*
  3.5    Alesco Financial Inc. Articles of Amendment to Change Name to Cohen & Company Inc.*
10.1    Amended and Restated Limited Liability Company Agreement of Cohen Brothers, LLC*
99.1    December 15, 2009 Press Release Regarding Stockholder Approval*
99.2    December 16, 2009 Press Release Regarding Completion of Merger*
* Filed herewith.

CAUTIONARY INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

This Current Report on Form 8-K contains “forward-looking statements” (as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended) by the Company that are subject to risks and uncertainties. The words “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “may,” “should,” “could,” “might,” “will,” “continue” and similar expressions are intended to identify such statements. All statements other than statements of historical fact included in this Current Report on Form 8-K are forward-looking statements and are based on various underlying assumptions and expectations and are subject to known and unknown risks, uncertainties and assumptions, and may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. These statements are based on our current expectations and projections about future events. There are important factors that could cause the Company’s actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied in the forward-looking statements. These factors include, but are not limited to, those discussed under the heading “Risk Factors” in the Proxy Statement / Prospectus filed with the SEC on Form S-4 on November 4, 2009, including the following: (a) a decline in general economic conditions or the global financial markets, (b) losses caused by financial or other problems experienced by third parties, (c) losses due to unidentified or unanticipated risks, (d) a lack of liquidity, i.e., ready access to funds for use in our businesses, and (e) competitive pressure. As a result, there can be no assurance that the forward-looking statements included in this Current Report on Form 8-K will prove to be accurate. In light of these risks, uncertainties and assumptions, the future performance or events described in the forward-looking statements in this presentation might not occur. Accordingly, you should not rely upon forward-looking statements as a prediction of actual results. We do not undertake any obligation to, and will not, update any forward-looking statements, whether as a result of new information, future events or otherwise.

 

12


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  COHEN & COMPANY INC.
Date: December 16, 2009   By:  

/ S /    J OSEPH W. P OOLER , J R .        

   

Joseph W. Pooler, Jr.

Executive Vice President, Chief Financial Officer and Treasurer

 

13

EXHIBIT 3.1

ALESCO FINANCIAL INC.

ARTICLES OF AMENDMENT

THIS IS TO CERTIFY THAT:

FIRST : The charter of Alesco Financial Inc., a Maryland corporation (the “ Corporation ”), is hereby amended to provide that every ten shares of the common stock, $0.001 par value per share (the “ Common Stock ”), of the Corporation, which were issued and outstanding immediately prior to the filing of these Articles of Amendment shall be combined into one issued and outstanding share of Common Stock, $0.01 par value per share, and that no fractional shares of Common Stock of the Corporation will be or remain issued upon such amendment and each stockholder otherwise entitled to a fractional share shall be entitled to receive in lieu thereof cash, without interest, upon the surrender of such stockholder’s fractional shares, in an amount equal to the proceeds attributable to the sale of such fractional shares following the aggregation and sale by the Corporation’s exchange agent of all fractional shares otherwise issuable.

SECOND : The amendment to the charter of the Corporation as set forth above has been duly approved by a majority of the Board of Directors of the Corporation as required by the Maryland General Corporation Law (the “ MGCL ”). Pursuant to Section 2-309(e)(2) of the MGCL, no stockholder approval was required.

THIRD : There has been no increase in the authorized stock of the Corporation effected by the amendment to the charter of the Corporation as set forth above.

FOURTH : The undersigned Chief Executive Officer and President acknowledges these Articles of Amendment to be the corporate act of the Corporation and, as to all matters or facts required to be verified under oath, the undersigned Chief Executive Officer and President acknowledges that to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury.

FIFTH : These Articles of Amendment shall become effective at 4:10 p.m. on December 16, 2009.

[SIGNATURE PAGE FOLLOWS]


IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment to be executed in its name and on its behalf by its Chief Executive Officer and President and attested to by its Chief Financial Officer and Treasurer on this 16th day of December, 2009.

 

ALESCO FINANCIAL INC.
By:  

/s/ JAMES J. McENTEE, III

  Name: James J. McEntee, III
  Title: Chief Executive Officer and President

 

ATTEST:
By:  

/s/ JOHN J. LONGINO

  Name: John J. Longino
  Title: Chief Financial Officer and Treasurer

EXHIBIT 3.2

ALESCO FINANCIAL INC.

ARTICLES OF AMENDMENT

THIS IS TO CERTIFY THAT:

FIRST : The charter of Alesco Financial Inc., a Maryland corporation (the “ Corporation ”), is hereby amended to decrease the par value of the shares of common stock of the Corporation issued and outstanding immediately prior to the filing of these Articles of Amendment from $0.01 per share to $0.001 per share.

SECOND : The amendment to the charter of the Corporation as set forth above has been duly approved by a majority of the entire Board of Directors of the Corporation as required by law. The amendment set forth herein is limited to a change expressly authorized by Section 2-605(a)(2) of the Maryland General Corporation Law to be made without action by the stockholders of the Corporation.

THIRD : There has been no increase in the authorized stock of the Corporation effected by the amendment to the charter of the Corporation as set forth above.

FOURTH : The undersigned Chief Executive Officer and President acknowledges these Articles of Amendment to be the corporate act of the Corporation and, as to all matters or facts required to be verified under oath, the undersigned Chief Executive Officer and President acknowledges that to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury.

FIFTH: These Articles of Amendment shall become effective at 4:15 p.m. on December 16, 2009.

[SIGNATURE PAGE FOLLOWS]


IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment to be executed in its name and on its behalf by its Chief Executive Officer and President and attested to by its Chief Financial Officer and Treasurer on this 16th day of December, 2009.

 

ALESCO FINANCIAL INC.
By:  

/s/ JAMES J. McENTEE, III

  Name: James J. McEntee, III
  Title: Chief Executive Officer and President

 

ATTEST:
By:  

/s/ JOHN J. LONGINO

  Name: John J. Longino
  Title: Chief Financial Officer and Treasurer

EXHIBIT 3.3

ALESCO FINANCIAL INC.

ARTICLES SUPPLEMENTARY

SERIES A VOTING CONVERTIBLE

PREFERRED STOCK

(PAR VALUE $.001 PER SHARE)

ALESCO FINANCIAL INC. (the “Corporation”), a Maryland corporation, hereby certifies to the State Department of Assessments and Taxation of Maryland that:

FIRST: Pursuant to the authority vested in the Board of Directors of the Corporation (the “Board of Directors”) by the charter of the corporation (the “Articles”), the Board of Directors has duly reclassified one (1) authorized but unissued share of the Preferred Stock, par value $.001 per share, of the Corporation as a series of Preferred Stock designated as “Series A Voting Convertible Preferred Stock.”

SECOND: The preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions for redemption, as established by the Board of Directors of the Corporation for such Series A Voting Convertible Preferred Stock, which, upon any restatement of the Articles, shall become part of Article IV of the Articles, with any necessary or appropriate renumbering or relettering of the sections or subsections hereof, are as follows:

As used in this Article SECOND, the following terms have the following meanings (with terms defined in the singular having comparable meanings when used in the plural and vice versa):

Business Day ” means any day, except a Saturday, Sunday or legal holiday on which banking institutions in The City of New York are authorized or obligated by Law or executive order to close.

Common Stock ” has the meaning assigned to it in Section 4.1 of the Articles.

Holders ” means the Person(s) that hold shares of the Series A Preferred Stock.

Law ” means any statute, law, ordinance, regulation, rule, code, executive order, injunction, judgment, decree or other order issued or promulgated by any national, supranational, state, federal, provincial, local or municipal government or any administrative or regulatory body.

Person ” means any individual, corporation, partnership, limited liability company or partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government (including any agency or political subdivision thereof) or other entity.

Preferred Stock ” means all preferred stock of the Corporation, par value $0.001 per share, regardless of series.


Series A Director ” has the meaning assigned to it in Section 3(a)(i).

Series A Preferred Stock ” has the meaning assigned to it in Section 1.

Series B Preferred Stock ” means the Series B Voting Non-Convertible Preferred Stock, par value $.001 per share, of the Corporation.

Stock ” means any and all shares, interests, participations or other equivalents (however designated) of stock of the Corporation.

Section 1. Designation and Number of Shares . One (1) share of the Preferred Stock of the Corporation is classified as a series of Preferred Stock designated as “Series A Voting Convertible Preferred Stock” (hereinafter referred to as the “Series A Preferred Stock”). The Corporation may not issue fractional shares of Series A Preferred Stock.

Section 2. Dividends and Distributions . Holders of the Series A Preferred Stock shall not be entitled to receive any dividends or other distributions (whether in cash, stock or property of the Corporation).

Section 3. Voting Rights .

(a) Standard Voting Rights . The Series A Preferred Stock shall have no voting rights except as follows:

(i) Voting for the Election of Series A Directors . The Series A Preferred Stock, voting separately as a class at each annual meeting, shall be entitled to nominate and elect a number of directors equal to one-third of the total number of directorships (each director entitled to be elected by the Series A Preferred Stock, a “Series A Director”). If one-third of the total number of directorships is a fraction, the Series A Preferred Stock shall be entitled to elect the whole number of directors that results from rounding up, unless the result obtained by rounding up would be a majority of the total number of directors, in which case the fractional result will be rounded down to the nearest whole number. To the fullest extent permitted by Law, the Series A Preferred Stock, voting separately as a class at any time, shall also have the right to remove at any time any Series A Director by the affirmative vote of the Holders entitled to cast a majority of the votes entitled to be cast in the election of Series A Directors, generally, and to replace any such removed Series A Director with a new Series A Director.

(ii) Approval Rights . The affirmative vote of Holders entitled to cast a majority of the votes entitled to be cast by holders of outstanding shares of Series A Preferred Stock, voting separately as a class, shall be necessary to: (A) approve any amendment, alteration or repeal of any of the provisions of the Articles, whether by merger, consolidation or otherwise, that would adversely affect or cause to be terminated the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption of the Series A Preferred Stock; provided, however , that neither the increase in the number of authorized or outstanding shares of Common Stock nor the classification or issuance or any shares of any class or series of Stock other than Series A Preferred Stock or Series B Preferred Stock shall be

 

2


deemed to adversely affect or terminate the rights, preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption of the Series A Preferred Stock, and the Holders shall have no right to vote thereon; and provided further , that the amendment, alteration or repeal of any provision of the Articles in connection with any merger, consolidation or other event shall not be deemed to adversely affect or terminate the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption of the Series A Preferred Stock, and the Holders shall have no right to vote thereon, if, following such merger, consolidation or other event, the Series A Preferred Stock remains outstanding with the terms thereof materially unchanged or the Holders receive equity securities of the successor or survivor of such merger, consolidation or other event with preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption that are substantially identical to those of the Series A Preferred Stock, taking into account that, upon the occurrence of such merger, consolidation or other event, the Corporation may not be the surviving entity and the surviving entity may not be a corporation; (B) following the initial issuance of the share of Series A Preferred Stock, classify, reclassify or issue any additional shares of Series A Preferred Stock; or (C) classify, reclassify or issue any shares of Series B Preferred Stock (other than upon conversion of the Series A Preferred Stock).

(b) Special Voting Rights of the Series A Directors . Notwithstanding any other provision herein or in the Articles or the Bylaws of the Corporation to the contrary, any vacancies on the Board of Directors resulting from the death, resignation, retirement, disqualification or removal of any of the Series A Directors, and any vacancies among the directorships to be filled by Series A Directors resulting from an increase in the size of the Board of Directors, may be filled only by the holders of Series A Preferred Stock pursuant to Section 3(i) above or by the affirmative vote of a majority of the Series A Directors then in office. The affirmative vote of a majority of the Series A Directors is required to increase the size of the Board of Directors. Any director elected pursuant to this Section 3(b) to fill a vacancy among the Series A Directors shall be considered a Series A Director for all purposes.

Section 4. Certain Restrictions on Transfer . No Person holding shares of Series A Preferred Stock beneficially or of record may transfer, and the Corporation shall not register the transfer of, such shares of Series A Preferred Stock, whether by sale, assignment, gift, bequest, appointment, operation of Law or otherwise, except for a transfer under the Laws of descent upon the death of a holder of Series A Preferred Stock. Any attempted transfer of all or any Series A Preferred Stock that does not comply with this Section 4 shall be null and void and of no legal effect. Nothing in this Section 4 however, shall affect any conversion pursuant to Section 7(a).

Section 5. Reacquired Shares . Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever, including upon conversion into shares of Series B Preferred Stock, shall become authorized but unissued shares of Preferred Stock, without designation as to series, and may be reissued as part of a new series of Preferred Stock.

 

3


Section 6. Liquidation, Dissolution or Winding-Up . Holders of the Series A Preferred Stock shall not be entitled to receive any distributions upon liquidation, dissolution or winding-up of the Corporation.

Section 7. Conversion Rights . The share of Series A Preferred Stock shall be convertible into shares of Series B Preferred Stock on the following terms and conditions:

(a) Conversion . Upon the terms and in the manner set forth in this Section 7 and subject to adjustment as provided herein, the Holder shall have the right, at any time on or after October 1, 2010, to convert the share of Series A Preferred Stock into 4,983,557 shares of Series B Preferred Stock, without any further act of the Corporation. In order to exercise the conversion right, the Holder of the share of Series A Preferred Stock to be converted shall provide written notice to the Corporation that the Holder elects to convert such Series A Preferred Stock accompanied by the certificate, if any, representing such share, duly endorsed or assigned to the Corporation or in blank, at the office of the transfer agent. Unless the shares issuable on conversion are to be issued in the same name as the name in which such Series A Preferred Stock is registered, each share surrendered for conversion shall be accompanied by instruments of transfer, in form reasonably satisfactory to the Corporation, duly executed by the Holder or such Holder’s duly authorized attorney. As promptly as practicable after the receipt by the Corporation of the written notice of the Holder’s election to convert the Series A Preferred Stock and the surrender of certificates, if any, for Series A Preferred Stock as aforesaid, the Corporation shall issue and shall deliver to such Holder a certificate or certificates for the number of full shares of Series B Preferred Stock issuable upon the conversion of such Series A Preferred Stock in accordance with provisions of this Section 7. Each conversion shall be deemed to have been effected immediately prior to the close of business on the date on which such notice shall have been received by the Corporation and the certificates for the Series A Preferred Stock, if any, shall have been surrendered, and the Person or Persons in whose name or names any certificate or certificates for the Series B Preferred Stock shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the shares represented thereby at such time on such date unless the share transfer books of the Corporation shall be closed on that date, in which event such Person or Persons shall be deemed to have become such holder or holders of record at the close of business on the next succeeding day on which such transfer books are open, provided that such closure of the share transfer books shall not delay the date on which such Person shall become a holder of such shares by more than two Business Days.

(b) Fractional Shares . If any fractional interest in a share of Series B Preferred Stock would be deliverable upon any conversion of the share of Series A Preferred Stock, such fractional share shall be rounded up to the next whole number.

(c) Reservation of Stock Issuable Upon Conversion . The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Series B Preferred Stock such number of shares of Series B Preferred Stock as shall from time to time be sufficient to effect the conversion of the outstanding share of Series A Preferred Stock pursuant to the terms hereof.

 

4


Section 8. Redemption . The shares of Series A Preferred Stock shall be redeemed by the Corporation out of funds legally available on December 31, 2012 in exchange for a payment equal to the aggregate par value of such shares, which payment shall be made in full upon redemption in cash (in U.S. Dollars). Other than as set forth in this Section 8, shares of Series A Preferred Stock are not subject to redemption at the option of the Corporation or subject to any sinking fund or other mandatory right of redemption accruing to the Holders thereof.

Section 9. No Appraisal Rights . Holders of shares of Series A Preferred Stock shall not be entitled to exercise any rights of an objecting stockholder provided for under Title 3, Subtitle 2 of the Maryland General Corporation Law or any successor statute unless the Board of Directors, upon the affirmative vote of a majority of the Board of Directors, shall determine that such rights apply with respect to the Series A Preferred Stock, to one or more transactions occurring after the date of such determination in connection with which holders of such shares would otherwise be entitled to exercise such rights.

THIRD: These Articles Supplementary have been approved by the Board of Directors in the manner and by the vote required by law.

FOURTH: These Articles Supplementary are effective as of December 16, 2009 at 4:15 p.m. Eastern Time.

FIFTH: The undersigned President of the Corporation acknowledges these Articles Supplementary to be the corporate act of the Corporation and, as to all matters or facts required to be verified under oath, the undersigned President acknowledges that, to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties of perjury.

[Signature page follows.]

 

5


IN WITNESS WHEREOF, Alesco Financial Inc. has caused these presents to be signed in its name and on its behalf by its President and attested to by its Secretary this 16 th day of December, 2009.

 

ATTEST:       ALESCO FINANCIAL INC.

/s/ CHRISTIAN CARR

    By:  

/s/ JAMES J. McENTEE, III

(SEAL)   Secretary          

 

6

EXHIBIT 3.4

ALESCO FINANCIAL INC.

ARTICLES SUPPLEMENTARY

SERIES B VOTING NON-CONVERTIBLE

PREFERRED STOCK

(PAR VALUE $.001 PER SHARE)

ALESCO FINANCIAL INC. (the “Corporation”), a Maryland corporation, hereby certifies to the State Department of Assessments and Taxation of Maryland that:

FIRST: Pursuant to the authority vested in the Board of Directors of the Corporation (the “Board of Directors”) by the charter of the Corporation (the “Articles”), the Board of Directors has duly reclassified 4,983,557 authorized but unissued shares of Preferred Stock, par value $.001 per share, of the Corporation as a series of Preferred Stock designated “Series B Voting Non-Convertible Preferred Stock.”

SECOND: The preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions for redemption, as established by the Board of Directors of the Corporation for such Series B Voting Non-Convertible Preferred Stock, which, upon any restatement of the Articles, shall become part of Article IV of the Articles, with any necessary or appropriate renumbering or relettering of the sections or subsections hereof, are as follows:

As used in this Article SECOND, the following terms have the following meanings (with terms defined in the singular having comparable meanings when used in the plural and vice versa):

Common Stock ” has the meaning assigned to it in Section 4.1 of the Articles.

Holders ” means the Person(s) that hold outstanding shares of the Series B Preferred Stock.

Law ” means any statute, law, ordinance, regulation, rule, code, executive order, injunction, judgment, decree or other order issued or promulgated by any national, supranational, state, federal, provincial, local or municipal government or any administrative or regulatory body.

Person ” means any individual, corporation, partnership, limited liability company or partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government (including any agency or political subdivision thereof) or other entity.

Preferred Stock ” means all preferred stock of the Corporation, par value $0.001 per share, regardless of series.

Series A Preferred Stock ” means the Series A Voting Convertible Preferred Stock, par value $.001 per share, of the Corporation.

Series B Preferred Stock ” has the meaning assigned to it in Section 1.


Stock ” means any and all shares, interests, participations or other equivalents (however designated) of stock of the Corporation.

Section 1. Designation and Number of Shares . Four million nine hundred eighty-three thousand five hundred fifty-seven (4,983,557) shares of the Preferred Stock of the Corporation are classified as a series of Preferred Stock designated as “Series B Voting Non-Convertible Preferred Stock” (hereinafter referred to as the “Series B Preferred Stock”). The Corporation may not issue fractional shares of Series B Preferred Stock. If any fractional interest in a share of Series B Preferred Stock would be deliverable upon any conversion of the share of Series A Preferred Stock, such fractional share shall be rounded up to the next whole number.

Section 2. Dividends and Distributions. Holders of the Series B Preferred Stock shall not be entitled to receive any dividends or other distributions (whether in cash, stock or property of the Corporation).

Section 3. Voting Rights .

(a) Except as may be provided herein, the holders of Series B Preferred Stock and Common Stock shall vote together as a single class on all matters with respect to which a vote of the stockholders of the Corporation is required or permitted under applicable Law. Subject to adjustment as set forth in Section 7, each outstanding share of Series B Preferred Stock shall entitle the holder thereof to one vote on each matter properly submitted to the Holders for their vote.

(b) In addition to the voting rights provided to the Series B Preferred Stock by Section 3(a) above, the affirmative vote of Holders entitled to cast a majority of the votes entitled to be cast by holders of outstanding shares of Series B Preferred Stock (if any Series B Preferred Stock is then outstanding), voting separately as a class, shall be necessary to: (i) approve any amendment, alteration or repeal of any of the provisions of the Articles, whether by merger, consolidation or otherwise, that would adversely affect or cause to be terminated the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption of the Series B Preferred Stock; provided, however , that neither the increase in the number of authorized or outstanding shares of Common Stock nor the classification or issuance or any shares of any class or series of Stock other than Series A Preferred Stock or Series B Preferred Stock shall be deemed to adversely affect or terminate the rights, preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption of the Series B Preferred Stock, and the Holders shall have no right to vote thereon; and provided further , that the amendment, alteration or repeal of any provision of the Articles in connection with any merger, consolidation or other event shall not be deemed to adversely affect or terminate the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption of the Series B Preferred Stock, and the Holders shall have no right to vote thereon, if, following such merger, consolidation or other event, the Series A Preferred Stock remains outstanding with the terms thereof materially unchanged or the Holders receive equity securities of the successor or survivor of such merger, consolidation or other event with preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions,

 

2


qualifications and terms and conditions of redemption that are substantially identical to those of the Series B Preferred Stock, taking into account that, upon the occurrence of such merger, consolidation or other event, the Corporation may not be the surviving entity and the surviving entity may not be a corporation; or (ii) classify, reclassify or issue any shares of Series B Preferred Stock (other than upon conversion of the Series A Preferred Stock) or Series A Preferred Stock.

Section 4. Certain Restrictions on Transfer . No Person holding shares of Series B Preferred Stock beneficially or of record may transfer, and the Corporation shall not register the transfer of, such shares of Series B Preferred Stock, whether by sale, assignment, gift, bequest, appointment, operation of Law or otherwise, except for a transfer under the Laws of descent upon the death of a holder of Series B Preferred Stock. Any attempted transfer of all or any Series B Preferred Stock that does not comply with this Section 4 shall be null and void and of no legal effect.

Section 5. Reacquired Shares . Any shares of Series B Preferred Stock redeemed, purchased or otherwise acquired by the Corporation in any manner whatsoever, shall become authorized but unissued shares of Preferred Stock, without designation as to series.

Section 6. Liquidation, Dissolution or Winding-Up . Holders of the Series B Preferred Stock shall not be entitled to receive any distributions upon liquidation, dissolution or winding-up of the Corporation.

Section 7. Adjustments . The voting power of the Series B Preferred Stock shall be subject to adjustment from time to time as follows:

(a) Splits, Subdivisions, Combinations, Dividends or Distributions . If the Corporation at any time effects a split, combination or subdivision of the outstanding shares of Common Stock or declares a dividend or other distribution on the Common Stock payable in additional shares of Common Stock, then, as of the date of such split, dividend or distribution (or, if a record date is established for such a dividend or distribution, as of such record date), the number of votes entitled to be cast by a holder of one share of Series B Preferred Stock (including those issuable on conversion of each share of Series A Preferred Stock) shall be proportionately increased or decreased in the same manner and on the same basis so that the aggregate voting power represented by all of the authorized shares of Series B Preferred Stock (calculated as though all of the authorized shares of Series B Preferred Stock were authorized, outstanding and entitled to vote at such time) immediately following such split, combination, subdivision, dividend or distribution shall bear the same relationship to the number of shares of Common Stock outstanding immediately following such split, combination, subdivision, dividend or distribution as the aggregate voting power represented by all of the authorized shares of Series B Preferred Stock (calculated as though all of the authorized shares of Series B Preferred Stock were authorized, outstanding and entitled to vote at such time) immediately prior to such split, combination, subdivision, dividend or distribution bears to the number of shares of Common Stock outstanding immediately prior to such split, combination, subdivision, dividend or distribution.

 

3


(b) Mergers and Other Transactions . To the fullest extent permitted by Law, the Corporation shall not enter into or undertake any consolidation, merger, combination or other transaction (other than a reclassification described in Section 7(c) below) in which shares of Common Stock are exchanged for or converted into stock or securities having voting rights in the surviving or resulting entity unless each share of Series B Preferred Stock shall be entitled to be exchanged for or converted into a number of shares of a separate class of stock or securities in the surviving or resulting entity (the “Resulting Shares”), which shall entitle the holder of one such Resulting Share to cast a number of votes equal to (i) the number of votes entitled to be cast by the holder of one share of stock or other security into which or for which each share of Common Stock is exchanged or converted multiplied by (ii) the number of votes entitled to be cast by the holder of one share of Series B Preferred Stock immediately prior to such exchange; provided, however , in any such case the Resulting Shares shall have no rights to dividends or other distributions.

(c) Reclassification . If, at any time or from time to time, there shall be a reclassification of the outstanding shares of Common Stock into shares of any other class or series of Stock (other than a split, subdivision or combination provided for elsewhere in this Section 7), then the number of votes entitled to be cast by a holder of one share of Series B Preferred Stock (including those issuable on conversion of each share of Series A Preferred Stock) of the Corporation shall be increased or decreased in proportion to the increase or decrease in the aggregate number of shares of Stock to which a holder of one share of Common Stock is entitled in connection with such reclassification; provided, however, that if the shares of stock issued to the holders of Common Stock in connection with such reclassification have more or less than one vote per share, then the number of votes entitled to be cast by a holder of one share of Series B Preferred Stock (including those issuable on conversion of the share of Series A Preferred Stock) shall be increased or decreased in proportion to the increase or decrease in the aggregate number of votes of stock that a holder of one share of Common Stock is entitled to cast as a result of such reclassification. Following any reclassification in accordance with this Section 7(c), all references to Common Stock herein shall, if and as applicable, refer thereafter to shares of Stock deliverable to the holders of Common Stock upon such reclassification.

(d) Notices to Series B Preferred Stock . In the event of any proposed action by the Corporation that would require an adjustment pursuant to this Section 7, the Corporation shall mail to the holders of outstanding shares of Series A Preferred Stock, if any, and Holders of Series B Preferred Stock, at least twenty (20) days prior to the date of such action, a notice specifying such date and the amount and/or character of such action.

(e) Certain Restrictions; Reservation of Stock Issuable Upon Conversion . The Corporation shall be prohibited from taking any of the actions set forth in Sections 7(a) through (c) if at the effective time of such action the Corporation does not have the number of authorized and unissued shares of Series B Preferred Stock sufficient to effect the conversion of the outstanding shares of Series A Preferred Stock pursuant to the Articles. In addition, the Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Series B Preferred Stock such number of shares of Series B Preferred Stock as shall from time to time be sufficient to effect the conversion of the outstanding share of Series A Preferred Stock pursuant to the Articles.

 

4


Section 8. Redemption . The shares of Series B Preferred Stock shall be redeemed by the Corporation out of funds legally available on December 31, 2012 in exchange for a payment equal to the aggregate par value of such shares, which payment shall be made in full upon redemption in cash (in U.S. Dollars). Other than as set forth in this Section 8, shares of Series B Preferred Stock are not subject to redemption at the option of the Corporation or subject to any sinking fund or other mandatory right of redemption accruing to the Holders thereof.

Section 9. No Appraisal Rights . Holders of shares of Series B Preferred Stock shall not be entitled to exercise any rights of an objecting stockholder provided for under Title 3, Subtitle 2 of the Maryland General Corporation Law or any successor statute unless the Board of Directors, upon the affirmative vote of a majority of the Board of Directors, shall determine that such rights apply with respect to the Series B Preferred Stock, to one or more transactions occurring after the date of such determination in connection with which holders of such shares would otherwise be entitled to exercise such rights.

THIRD: These Articles Supplementary have been approved by the Board of Directors in the manner and by the vote required by law.

FOURTH: These Articles Supplementary are effective as of December 16, 2009 at 4:15 p.m. Eastern Time.

FIFTH: The undersigned President of the Corporation acknowledges these Articles Supplementary to be the corporate act of the Corporation and, as to all matters or facts required to be verified under oath, the undersigned President acknowledges that, to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties of perjury.

[Signature page follows.]

 

5


IN WITNESS WHEREOF, Alesco Financial Inc. has caused these presents to be signed in its name and on its behalf by its President and its corporate seal to be hereunto affixed and attested to by its Secretary this 16 th day of December, 2009.

 

ATTEST:       ALESCO FINANCIAL INC.

/s/ CHRISTIAN CARR

    By:  

/s/ JAMES J. McENTEE, III

(SEAL)   Secretary          

 

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EXHIBIT 3.5

ALESCO FINANCIAL INC.

ARTICLES OF AMENDMENT

(changing its name to Cohen & Company Inc.)

Alesco Financial Inc., a Maryland corporation (the “Corporation”), hereby certifies to the State Department of Assessments and Taxation of Maryland that:

FIRST : Article I of the charter of the Corporation (the “Charter”) is hereby amended to change the name of the Corporation to:

Cohen & Company Inc.

SECOND : The foregoing amendment to the Charter was approved by the Board of Directors of the Corporation and was limited to a change expressly authorized by Section 2-605(a)(1) of the Maryland General Corporation Law without action by the stockholders.

THIRD : These Articles of Amendment are effective as of December 16, 2009 at 4:25 p.m. Eastern Time.

FOURTH : The undersigned President of the Corporation acknowledges these Articles of Amendment to be the corporate act of the Corporation and, as to all matters or facts required to be verified under oath, the undersigned President acknowledges that, to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury.

[Signature page follows.]


IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment to be executed in its name and on its behalf by its President and attested by its Senior Vice President, General Counsel and Secretary as of the 16th day of December, 2009.

 

ATTEST:     ALESCO FINANCIAL INC.

/s/ RACHAEL FINK

   

/s/ CHRISTOPHER RICCIARDI

Rachael Fink     Christopher Ricciardi
Senior Vice President, General Counsel and Secretary     President

 

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EXHIBIT 10.1

COHEN BROTHERS, LLC

AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT

THIS LIMITED LIABILITY COMPANY AGREEMENT of COHEN BROTHERS, LLC, dated as of December 16, 2009, is entered into by and among each of the Members set forth on the signature pages hereto. This Agreement, as it may be amended from time to time, shall be binding on any Person who at the time is a Member regardless of whether the Person has executed this Agreement or any amendment hereto.

Background

Cohen Brothers, LLC, a Delaware limited liability company doing business as Cohen & Company (the “Company”), is a party to an Agreement and Plan of Merger, dated February 20, 2009 and amended June 1, 2009, August 20, 2009 and September 30, 2009 (the “Merger Agreement”), pursuant to which on the date hereof Alesco Financial Holdings, LLC (“Merger Sub”), a Delaware limited liability company and wholly owned subsidiary of Alesco Financial Inc. (“AFN” or “Parent”), merged (the “Merger”) with and into the Company.

Pursuant to the Merger Agreement, the Company is the surviving entity of the Merger and this Agreement is the limited liability company agreement of the Company.

Pursuant to the Merger Agreement, certain Persons who were Members of the Company prior to the Merger had, at the Effective Time (as defined in the Merger Agreement), the right to receive either common stock of AFN or retain recapitalized membership interests in the Company.

Pursuant to the Merger Agreement, prior to or contemporaneously with the Merger, AFN contributed to Merger Sub or a subsidiary of Merger Sub substantially all of the assets of AFN not already owned, directly or indirectly, by Merger Sub (the “Contribution”).

NOW, THEREFORE, intending to be bound hereby, the Members agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1 General Interpretive Principles . For purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires, (i) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular, and the use of any gender herein shall be deemed to include the other genders; (ii) accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles, consistently applied; (iii) references in this Agreement to “Articles,” “Sections,” “subsections,” “paragraphs” and other subdivisions without reference to a document are to designated Articles, Sections, subsections, paragraphs and other subdivisions of this Agreement; (iv) a reference to a subsection without further reference to a Section is a reference to such subsection as contained in the same Section in which the reference


appears, and this rule shall also apply to paragraphs and other subdivisions; (v) the words “herein,” “hereof,” “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular provision; (vi) the word “including” means “including, but not limited to”, (vii) the words “not including” mean “excluding only”, and (viii) the headings in this Agreement are for convenience only and are not intended to describe, interpret, define, or limit the scope, extent, or intent of any of the provisions of this Agreement.

Section 1.2 Defined Terms . As used in this Agreement, the following terms shall have the following respective meanings (unless otherwise expressly provided herein):

Act ”: The Delaware Limited Liability Company Act in its present form or as amended from time to time.

Adjusted Basis ”: The basis for determining gain or loss for federal income tax purposes from the sale or other disposition of property, as defined in Section 1011 of the Code.

Adjusted Capital Account Deficit ”: With respect to any Member, the deficit balance, if any, in such Member’s Capital Account as of the end of the relevant Fiscal Year, after increasing such Capital Account by any amounts which such Member is obligated to contribute to the Company (pursuant to the terms of this Agreement or otherwise) or is deemed obligated to contribute to the Company pursuant to Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5) and reducing such Capital Account by the amount of the items described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6).

Affiliate ”: When used with reference to any Person, any Person that, directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with, the specified Person (the term “control” for this purpose, shall mean the ability, whether by the ownership of shares or other equity interests, by contract or otherwise, to elect a majority of the directors of a corporation, independently to select the managing partner of a partnership or the manager of a limited liability company, or otherwise to have the power independently to remove and then select a majority of those Persons exercising governing authority over an entity, and control shall be conclusively presumed in the case of the direct or indirect ownership of 50% or more of the equity interests).

Agreement ”: This Limited Liability Company Agreement in its present form or as amended, supplemented or restated from time to time in accordance with the terms hereof.

Assignee ”: A Person to whom a Membership Interest has been Transferred and who has not been admitted as a Member.

Available Cash from Operations ”: For each applicable period, an amount equal (a) to all cash revenues received by the Company during the applicable period from any source (including proceeds of business interruption or other insurance, but excluding funds received as Capital Contributions and the proceeds of a Capital Transaction), (b) less the amount of any cash reserves that is necessary or appropriate in the reasonable discretion of the Board of Managers to (i) provide for the proper conduct of the business of the Company (including reserves for future capital expenditures and for anticipated future credit needs of the Company subsequent to such period), or (ii) comply with applicable law or any loan agreement, security agreement, mortgage,

 

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debt instrument or other agreement or obligation to which the Company is a party or by which it is bound or its assets are subject; and (c) plus any such reserves previously established and not applied and no longer necessary for the purposes of such reserve.

Available Cash from Capital Transactions ”: All cash receipts of the Company arising from a Capital Transaction (including principal and interest received on a debt obligation received as consideration, in whole or in part, on a sale of assets and the net proceeds of refinancing of any indebtedness of the Company), less all expenses incurred and reserves determined by the Board of Managers to be necessary in connection with the Capital Transaction.

Business Day ”: Any day other than a Saturday, a Sunday or a day on which national banks in Delaware are not open for business or are authorized by law to close.

Capital Account ”: The capital account of a Member maintained in accordance with Section 4.6.

Cash Amount ”: Means, with respect to a Tendering Member, an amount of cash equal to the product of (A) the Value of a Common Share and (B) such Tendering Member’s Common Shares Amount determined as of the date of receipt by Parent of such Tendering Member’s Notice of Redemption or, if such date is not a Business Day, the immediately preceding Business Day.

Capital Contribution ”: With respect to any Member, the amount of money and the Carrying Value of any asset that such Member has contributed or is deemed to have contributed to the Company.

Capital Transaction ”: A transaction in which the Company or any Subsidiary borrows money, sells, exchanges or otherwise disposes of all or any part of its property, including a sale or other disposition pursuant to a condemnation, receives the proceeds of property damage insurance, or any other transaction that, in accordance with generally accepted accounting principles, is considered capital in nature.

Carrying Value ”: Carrying Values means with respect to any asset, the Adjusted Basis of the asset, except as follows:

(i) the initial Carrying Value of an asset contributed by a Member to the Company shall be the gross fair market value of the asset, as determined by the Board of Managers at the time the asset is contributed;

(ii) the Carrying Values of the Company’s assets shall be adjusted in accordance with Regulations Section 1.704-1(b)(iv)(f) as of the following times: (a) upon the acquisition of any other additional interest in the Company by any new or existing Assignee or Member in exchange for more than a de minimis Capital Contribution or upon the acquisition of more than a de minimis profit interest in the Company; (b) the distribution by the Company to a Member or an Assignee of more than a de minimis amount of property as consideration for all or part of a Membership Interest; and (c) the liquidation of the Company within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g); but adjustments pursuant to clauses (a) and (b) above

 

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shall be made only if the Board of Managers reasonably determines that such adjustments are necessary or appropriate to reflect the relative economic interests of the Members in the Company;

(iii) the Carrying Value of an asset of the Company distributed to a Member shall be adjusted to equal the gross fair market value of the asset on the date of distribution as determined by the Board of Managers; and

(iv) the Carrying Values of the Company’s assets shall be increased (or decreased) to reflect any adjustments to the Adjusted Basis of those assets pursuant to Sections 734(b) or 743(b) of the Code, but only to the extent that those adjustments are taken into account in determining Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m); but the Carrying Values shall not be adjusted pursuant to this clause (iv) to the extent the Board of Managers determines that an adjustment pursuant to clause (ii) above is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this clause (iv).

If the Carrying Value of an asset is determined or adjusted pursuant to clauses (i), (ii) or (iv), such Carrying Value shall thereafter be adjusted by the Depreciation taken into account with respect to the asset for purposes of computing Profit and Loss. For purposes of the definition of Carrying Value, the assets and property of the Subsidiary shall be treated as if they were the assets and property of the Company.

Certificate ”: The Certificate of Formation of the Company filed with the Secretary of State, as amended and restated from time to time in accordance with the Act and this Agreement.

Common Shares ”: Shares of Common Stock, par value $.001 per share, of Parent.

Common Shares Amount ”: Means a number of Common Shares equal to the product of (a) the number of Tendered Units and (b) the Exchange Ratio in effect on the Specified Redemption Date with respect to such Tendered Units; provided , however , that, in the event that Parent issues to all holders of Common Shares as of a certain record date rights, options, warrants or convertible or exchangeable securities entitling Parent’s stockholders to subscribe for or purchase Common Shares, or any other securities or property (collectively, the “ Rights ”), with the record date for such Rights issuance falling within the period starting on the date of the Notice of Redemption and ending on the day immediately preceding the Specified Redemption Date, which Rights will not be distributed before the relevant Specified Redemption Date, then the Common Shares Amount shall also include such Rights that a holder of that number of Common Shares would be entitled to receive, expressed, where relevant hereunder, in a number of Common Shares determined by Parent in good faith.

Company ”: Cohen Brothers, LLC, a Delaware limited liability company, and any successor limited liability company which continues the business thereof and is a reformation or reconstitution thereof, in each case in accordance with the terms of this Agreement.

Company Change of Control ”: The earliest to occur of the following events: (i) the consummation of a plan or other arrangement pursuant to which the Company will be dissolved or liquidated, or (ii) the consummation of a sale or other disposition of all or substantially all of

 

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the assets of the Company, or (iii) the consummation of a merger or consolidation of the Company with or into a corporation, limited liability company or other business entity, or (iv) the date any entity, person or group (within the meaning of Section 13(d)(3) of the Exchange Act), other than Parent or Daniel G. Cohen and his affiliates, shall have become the beneficial owner (as defined in the Exchange Act) of, or shall have obtained voting control over, more than 15% of the outstanding Units. For purposes of this definition, “affiliate” shall mean a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the referenced person.

Company Security ”: Any class or series of equity interest in the Company (but excluding any options, rights, warrants and appreciation rights relating to an equity interest in the Company).

Contingent Convertible Notes ”: The 7.625% Contingent Convertible Senior Notes Due 2027 issued by Parent on May 15, 2007 and June 13, 2007 (pursuant to that certain Indenture, dated as of May 15, 2007, by and between Parent and U.S. Bank National Association).

Conversion ”: As defined in Section 12.3(a).

Debt Service Distribution(s) ”: Other than Voluntary Debt Service Distributions, the following amounts:

(a) An amount equal to the payments required to be made by Parent in accordance with the Contingent Convertible Notes. Parent shall provide the Company with the calculation of any payments due in accordance with the Contingent Convertible Notes at least two (2) Business Days prior to the date on which any payment on the Contingent Convertible Notes is due and payable; and

(b) An amount equal to the payments required to be made by Parent in accordance with the Junior Subordinated Notes. Parent shall provide the Company with a calculation of any payments due in accordance with the Junior Subordinated Notes at least two (2) Business Days prior to the date on which any payment on the Junior Subordinated Notes is due and payable.

Depreciation ”: For each Fiscal Year, an amount equal to the depreciation, amortization or other cost recovery deduction allowable with respect to an asset for such Fiscal Year, except that if the Carrying Value of an asset differs from its Adjusted Basis at the beginning of the Fiscal Year, Depreciation shall be an amount which bears the same ratio to the beginning Carrying Value as the federal income tax depreciation, amortization or other cost recovery deduction for the Fiscal Year bears to such beginning Adjusted Basis; but if the Adjusted Basis of an asset at the beginning of a Fiscal Year is zero, Depreciation shall be determined with reference to the beginning Carrying Value using any reasonable method selected by the Board of Managers.

Designated Non-Parent Member ”: Means a Member other than Parent having a Percentage Interest of at least 10%.

 

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Exchange Ratio ”: Shall initially be 1.0. Upon the occurrence of (i) the issuance of additional Common Shares as a dividend or other distribution on outstanding Common Shares, (ii) a subdivision of outstanding Common Shares into a greater number of Common Shares, or (iii) a combination of outstanding Common Shares into a smaller number of Common Shares (any of the foregoing, an “Extraordinary Stock Event”), the Exchange Ratio shall be adjusted by multiplying the Exchange Ratio by a fraction, the numerator of which shall be the number of Common Shares outstanding immediately following such Extraordinary Stock Event, and the denominator of which shall be the number of Common Shares outstanding immediately prior to such Extraordinary Stock Event. The Exchange Ratio, as so adjusted, shall be readjusted in the same manner upon the happening of any successive Extraordinary Stock Event.

Family Group ”: The “Family Group” of any Person shall mean such Person, such Person’s sole member, and such Person’s or such sole member’s spouse, parent, sibling and descendants (whether natural or adopted) and any estate, trust, family limited partnership, limited liability company or other entity wholly owned, directly or indirectly, by such Person or such sole member or such Person’s or sole member’s spouse, parent, sibling and/or descendant that is and remains solely for the benefit of such Person, such sole member and/or such Person’s or such sole member’s spouse, parent, sibling and/or descendants and any self-directed retirement plan for such individual.

First Level Distribution ”: First Level Distribution means, as to any Fiscal Year, an amount equal to: (x) the total of (i) the amount determined by the Board of Managers (in consultation with Parent) as the aggregate federal, state and local income, excise or franchise tax liability of Parent with respect to the Fiscal Year (“Parent Taxes”), but not less than the amount of Parent Taxes as shown on the tax returns filed with respect to the Fiscal Year, plus (ii) the amount of any interest, penalty or additions to tax required to be paid in the Fiscal Year with respect to any other Fiscal Year, minus (iii) the amount of any refunds or credits received or accrued by Parent in the Fiscal Year with respect to any other Fiscal Year, divided by (y) the Percentage Interest of Parent with respect to the Fiscal Year.

Fiscal Year ”: The 12-month period beginning on January 1 of each year and ending on December 31 of such year.

Forced Conversion ”: As defined in Section 12.4(a).

Junior Subordinated Notes ”: The notes issued by Parent to (x) Alesco Capital Trust I pursuant to that certain Junior Subordinated Indenture, dated as of June 25, 2007, by and between Parent and Wells Fargo Bank, N.A., and (y) Sunset Financial Statutory Trust I pursuant to that certain Junior Subordinated Indenture, dated as of March 15, 2005, between Sunset Financial Resources, Inc. and Bank of New York Mellon (as successor to JPMorgan Chase Bank, National Association).

Liens ”: Any and all liens, charges, security interests, options, claims, mortgages, pledges, proxies, voting trusts or agreements, obligations, understandings or arrangements or other restrictions on title or transfer of any nature whatsoever.

Loss ”: As defined in Section 5.2.

 

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Market Price ”: Has the meaning set forth in the definition of “ Value .”

Majority Vote ”: The written consent of, or an affirmative vote by, more than 50% of the voting power of the Units.

Managers ”: Any Person serving at the time as a manager of the Company as provided in this Agreement. The Managers collectively constitute the Board of Managers.

Members ”: Any Person who at the time is a record holder or record owner of a Company Security.

Member Nonrecourse Deductions ”: Has the same meaning as partner nonrecourse deductions in Regulations Sections 1.704-2(i)(1) and 1.704-2(i)(2).

Membership Interest ”: A Member’s entire interest in the Company, as represented by such Member’s Units.

Minimum Gain on Nonrecourse Liability ”: The aggregate amount of gain, if any, that would be realized by the Company if, in a taxable transaction, it disposed of all Company property subject to Nonrecourse Liabilities of the Company (as defined in Regulations Section 1.704-2(b)(3)) in full satisfaction thereof (and for no other consideration). The Members intend that Minimum Gain on Nonrecourse Liability shall be determined in accordance with the provisions of Regulations Section 1.704-2(d)(1).

Minimum Gain on Member Nonrecourse Debt ”: The aggregate amount of gain, if any, that would be realized by the Company if, in a taxable transaction, it disposed of all Company property subject to Member Nonrecourse Debt of the Company (i.e., a nonrecourse debt for which one or more of the Members bears the economic risk of loss, and defined in Regulations Section 1.704-2(b)(4)), in full satisfaction thereof (and for no other consideration). The Members intend that Minimum Gain on Member Nonrecourse Debt shall be determined in accordance with the provisions of Regulations Section 1.704-2(i)(3).

Non-Parent Members ”: The Members other than Parent.

Nonrecourse Deductions ”: As defined in Regulations Section 1.704-2(b)(1).

Notice of Redemption ”: Means the Notice of Redemption substantially in the form of Exhibit “A” attached to this Agreement.

Notice of Conversion ”: Means the Notice of Conversion substantially in the form of Exhibit “B” attached to this Agreement.

Notice of Forced Conversion ”: Means the Notice of Forced Conversion substantially in the form of Exhibit “C” attached to this Agreement.

Other Securities ”: As defined in Section 6.10.

 

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Organization Expenses ”: The expenses incurred in the organization of the Company, including the costs of preparing this Agreement and preparing and filing the Certificate.

Parent Change of Control ”: The earliest to occur of the following: (i) the consummation of a plan or other arrangement pursuant to which Parent will be dissolved or liquidated, or (ii) the consummation of a sale or other disposition of all or substantially all of the assets of Parent to a Person other than one or more wholly owned subsidiaries of the Company, or (iii) the consummation of a merger or consolidation of the Company with or into another corporation or other business entity, other than, in either case, a merger or consolidation of Parent in which holders of shares of the Common Stock immediately prior to the merger or consolidation will hold at least a majority of the ownership of common stock or equity interests of the surviving corporation or surviving entity (and, if one class of common stock or equity interests is not the only class of voting securities or equity interests entitled to vote on the election of directors of the surviving corporation, a majority of the voting power of the surviving corporation’s or entity’s voting securities) immediately after the merger or consolidation.

Percentage Interest ”: The percentage of Units held by a Member.

Person ”: An individual, corporation, trust, association, unincorporated association, estate, partnership, joint venture, limited liability company or other legal entity, including a governmental entity.

Plan ”: The Cohen Brothers, LLC 2009 Equity Award Plan, as may be amended from time to time.

Plan Common Shares Conversion Amount ”: Means a number of Common Shares equal to the product of (a) the number of Plan Units subject to a Conversion or Forced Conversion and (b) the Exchange Ratio in effect on the Specified Conversion Date with respect to such Plan Units; provided , however , that, in the event that Parent issues to all holders of Common Shares as of a certain record date Rights, with the record date for such Rights issuance falling within the period starting on the date of the Notice of Conversion or Notice of Forced Conversion, as applicable, and ending on the day immediately preceding the Specified Conversion Date, which Rights will not be distributed before the relevant Specified Conversion Date, then the Plan Common Shares Conversion Amount shall also include such Rights that a holder of that number of Common Shares would be entitled to receive, expressed, where relevant hereunder, in a number of Common Shares determined by Parent in good faith.

Plan Units ”: The Units issued, pursuant to the Plan, to an employee of the Company upon vesting of a Restricted Unit (as defined in the Plan).

Profit ”: As defined in Section 5.2.

Proceeding ”: As defined in Section 7.12(b).

Publicly Traded ”: Means listed or admitted to trading on the New York Stock Exchange, the NYSE Amex or another national securities exchange or designated for quotation on the NASDAQ National Market, or any successor to the foregoing.

 

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Redemption ”: As defined in Section 12.2(a).

Redemption Date ”: As defined in Section 12.2(a).

Registration Statement ”: As defined in Section 12.2(i).

Regulatory Allocations ”: As defined in Section 5.9(g).

Regulations ”: The permanent and temporary regulations, and all amendments, modifications and supplements thereof, from time to time promulgated by the Department of the Treasury under the Code.

Secretary of State ”: The Secretary of State of the State of Delaware.

Securities Act ”: The Securities Act of 1933, as amended.

Series A Preferred Stock ”: The Series A Voting Convertible Preferred Stock, par value $0.001 per share, of Parent.

Series B Preferred Stock ”: The Series B Voting Non-Convertible Preferred Stock, par value $0.001 per share, of Parent.

Specified Redemption Date ”: Means the 10 th Business Day following receipt by Parent of a Notice of Redemption; provided that, if the Common Shares are not Publicly Traded, the Specified Redemption Date means the 30 th Business Day following receipt by Parent of Redemption.

Specified Conversion Date ”: Means the 10 th Business Day following the date of a Notice of Conversion or Notice of Forced Conversion, as applicable; provided that, if the Common Shares are not Publicly Traded, the Specified Conversion Date means the 30 th Business Day following the Notice of Conversion or Notice of Forced Conversion, as applicable.

Subsidiary ”: With respect to any Person, (a) a corporation of which more than 50% of the voting power of shares entitled (without regard to the occurrence of any contingency) to vote in the election of directors or other governing body of such corporation is owned, directly or indirectly, at the date of determination, by such Person, by one or more Subsidiaries of such Person or a combination thereof, (b) a partnership (whether general or limited) in which such Person or a Subsidiary of such Person is, at the date of determination, a general or limited partner of such partnership, but only if more than 50% of the partnership interests of such partnership (considering all of the partnership interests of the partnership as a single class) is owned, directly or indirectly, at the date of determination, by such Person, by one or more Subsidiaries of such Person, or a combination thereof, or (c) any other Person (other than a corporation or a partnership) in which such Person, one or more Subsidiaries of such Person, or a combination thereof, directly or indirectly, at the date of determination, has at least a majority ownership interest.

Tax Matters Partner ”: As defined in Section 5.11.

 

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Tendered Units ”: As defined in Section 12.2(a).

Tendering Member ”: As defined in Section 12.2(a).

Transfer ” and “ Transferred ”: A sale, assignment, transfer or other disposition (voluntarily or by operation of law) of, or the granting or creating of a lien, encumbrance or security interest in, a Membership Interest; provided, however, the pledge by Cohen Bros. Financial, LLC, a Delaware limited liability company, of its Membership Interests in connection with the Amended and Restated Loan and Security Agreement, and any refinancing thereof, dated June 1, 2009 and amended on September 30, 2009 and the date hereof, by and between Cohen, TD Bank, N.A., a national banking association, and other financial institutions which may be made part of such agreement shall not be deemed a “Transfer” for purposes of this Agreement.

TruPS Subsidiaries ”: Alesco Capital Trust I, a Delaware statutory trust, and Sunset Financial Statutory Trust I, a Delaware statutory trust.

Unit ”: A unit of Membership Interest in the Company.

Value ”: Means, on any date of determination with respect to a Common Share, the average of the daily Market Prices for ten consecutive trading days immediately preceding the date of determination; provided , however , that for purposes of Section 12.2, the “date of determination” shall be the date of receipt by Parent of a Notice of Redemption or, if such date is not a Business Day, the immediately preceding Business Day; provided , further , that for purposes of Section 12.3 and 12.4 , the “date of determination” shall be the date of a Notice of Conversion or Notice of Forced Conversion, as applicable, or, if such date is not a Business Day, the immediately preceding Business Day. The term “ Market Price ” on any date shall mean, with respect to any class or series of outstanding Common Shares, the Closing Price for such Common Shares on such date. The “ Closing Price ” on any date shall mean the last sale price for such Common Shares, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, for such Common Shares, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the NYSE Amex or, if such Common Shares are not listed or admitted to trading on the NYSE Amex, as reported on the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which such Common Shares are listed or admitted to trading or, if such Common Shares are not listed or admitted to trading on any national securities exchange, the last quoted price, or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or, if such system is no longer in use, the principal other automated quotation system that may then be in use or, if such Common Shares are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in such Common Shares selected by the Board of Directors of Parent or, in the event that no trading price is available for such Common Shares, the fair market value of the Common Shares, as determined in good faith by the Board of Directors of Parent.

 

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In the event that the Common Shares Amount includes Rights (as defined in the definition of “ Common Shares Amount ”) that a holder of Common Shares would be entitled to receive, then the Value of such Rights shall be determined by Parent acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate.

Voluntary Debt Service Distributions ”: An amount equal to payments contemplated in connection with the voluntary prepayment, repurchase, redemption or retirement by AFN of the Contingent Convertible Notes or Junior Subordinated Notes.

ARTICLE II

FORMATION

Section 2.1 Organization . The Members hereby confirm that the Company has been organized as a Delaware limited liability company pursuant to the Act.

Section 2.2 Agreement; Effect of Inconsistencies with Act . The Members agree to the terms and conditions of this Agreement, as it may from time to time be amended, supplemented or restated according to its terms. The Members intend that this Agreement shall be the sole source of the agreement among the parties, and, except to the extent a provision of this Agreement expressly incorporates federal income tax rules by reference to sections of the Code or Regulations or is expressly prohibited or ineffective under the Act, this Agreement shall govern, even when inconsistent with, or different than, the provisions of the Act or any other law. To the extent any provision of this Agreement is prohibited or ineffective under the Act, this Agreement shall be considered amended to the smallest degree possible in order to make such provision effective under the Act. If the Act is subsequently amended or interpreted in such a way as to validate a provision of this Agreement that was formerly invalid, such provision shall be considered to be valid from the effective date of such interpretation or amendment. Each Member shall be entitled to rely on the provisions of this Agreement, and no Member shall be liable to the Company or to any other Member for any action or refusal to act taken in good faith reliance on this Agreement, except for gross negligence or willful misconduct. The Members and the Company agree that the duties and obligations imposed on the Members and Managers as such shall be limited to those set forth in this Agreement, which is intended to govern the relationship among the Company, the Members and the Managers, notwithstanding any provision of the Act or common law to the contrary, including any fiduciary or similar obligations imposed at law or in equity.

Section 2.3 Name . The name of the Company shall be Cohen Brothers, LLC, and such name shall be used at all times in connection with the conduct of the Company’s business. At the Effective Time (as defined in the Merger Agreement), Article I of the Certificate was amended to read in its entirety: “The name of the company is Cohen Brothers, LLC”.

Section 2.4 Term . The Company shall have perpetual existence until it is dissolved and its affairs wound up in accordance with this Agreement and the Act.

Section 2.5 Filing of Certificate . The Certificate was filed with the Secretary of State pursuant to the Act on February 9, 2006.

 

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Section 2.6 Registered Agent and Office . The Company’s registered agent for service of process and registered office in the State of Delaware shall be that Person and location reflected in the Certificate. The Board of Managers may, from time to time, change the registered agent or office through appropriate filings with the Secretary of State. If the registered agent ceases to act as such for any reason or the registered office shall change, the Board of Managers shall promptly designate a replacement registered agent or file a notice of change of address, as the case may be. If the Board of Managers fails to designate a replacement registered agent or change of address of the registered office, any Member may designate a replacement registered agent or file a notice of change of address.

Section 2.7 Principal Office . The Company’s principal office shall initially be located at 2929 Arch Street, Philadelphia, PA 19104. The Board of Managers may change the location of the Company’s principal office from time to time. The Board of Managers shall make any filing and take any other action required by applicable law in connection with the change and shall give notice to all Members of the new location of the Company’s principal office promptly after the change becomes effective. The Board of Managers may establish and maintain additional offices for the Company.

Section 2.8 Foreign Qualifications . The Company shall qualify to do business as a foreign limited liability company in each jurisdiction, if any, in which the nature of its business requires such qualification. The Board of Managers may select any Person permitted by applicable law to act as registered agent for the Company in each jurisdiction in which it is qualified to do business, and may replace any such Person from time to time.

ARTICLE III

BUSINESS, PURPOSES AND POWERS

Section 3.1 Business and Purposes, . The purpose and business of the Company is to engage in any lawful act or activity for which limited liability companies may be organized under the Act.

Section 3.2 Powers . The Company shall have all powers of a limited liability company under the Act and the power to do all things necessary or convenient to operate its business and accomplish its purposes.

Section 3.3 Issuances to Parent .

(a) No additional Units shall be issued to Parent unless (i) the additional Units are issued to all Members in proportion to their respective Percentage Interests with respect to the class of Units so issued, (ii) (a) the additional Units are issued in connection with an issuance of Common Shares or preferred shares or other interests in Parent, which preferred shares or other interests have designations, preferences and other rights, terms and provisions that are substantially the same as the designations, preferences and other rights, terms and provisions of the additional Units issued to Parent and (b) Parent directly or indirectly contributes or otherwise causes to be transferred to the Company the cash proceeds or other consideration, if any, received in connection with the issuance of such Common Shares, preferred shares or other interests in Parent or (iii) the additional Units are issued upon the conversion, redemption or

 

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exchange of debt, Units or other securities issued by the Company. In the event that the Company issues additional Units pursuant to this section, the Members shall make such revisions to this Agreement as they determine by Majority Vote are necessary to reflect the issuance of such additional Units.

(b) In the event of any issuance of additional Common Shares, preferred shares or other interests by Parent, and the direct or indirect contribution to the Company, by Parent, of the cash proceeds or other consideration received from such issuance, any of Parent’s expenses associated with such issuance shall be considered to be a Company expense, including any underwriting discounts or commissions (it being understood that if the proceeds actually received by Parent are less than the gross proceeds of such issuance as a result of any underwriter’s discount or other expenses paid or incurred by Parent in connection with such issuance, then Parent shall be deemed to have made a Capital Contribution to the Company in the amount of the gross proceeds of such issuance and the Company shall be deemed simultaneously to have reimbursed Parent pursuant to Section 6.11 for the amount of such underwriter’s discount or other expenses).

ARTICLE IV

MEMBERS AND CAPITAL CONTRIBUTIONS

Section 4.1 Members .

(a) The Members individually own the Units and have the corresponding Percentage Interests in the Company as set forth on Schedule A hereto. The Board of Managers shall modify Schedule A from time to time upon the issuance of additional Units or a transfer of Units to reflect the then current Members and their respective Percentage Interests in the Company and such schedule shall be kept at the principal office of the Company.

(b) As of the date of this Agreement, the only Company Security shall be the Units. Subject to Section 7.1 hereof, the Company may issue additional Company Securities and options, rights, warrants and appreciation rights relating to the Company Securities for any Company purpose at any time and from time to time to such Persons for such consideration and on such terms and conditions as shall be established by the Board of Managers upon a Majority Vote of the Members. Subject to Section 7.1 hereof, each additional Company Security authorized to be issued by the Company may be issued in one or more classes, or one or more series of any such classes, with such designations, preferences, rights, powers and duties (which may be senior to existing classes and series of Company Securities) as shall be fixed by the Board of Managers and approved by a Majority Vote of the Members.

(c) A Member shall not have a right to resign as a Member prior to the dissolution and winding up of the Company.

(d) A Member’s Units may be subject to vesting requirements and restrictions on transfer as set forth in separate Vesting Agreements.

Section 4.2 Capital Contributions . The Company shall keep a record of the Capital Contributions made by the Members. The Capital Contribution deemed made by each Member as of the date hereof shall be as set forth in Schedule A . The Members may, but shall not be required to, make additional Capital Contributions to the Company.

 

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Section 4.3 Fair Market Values and Adjusted Tax Basis of Assets . The parties hereto agree that the Company shall determine in good faith the Carrying Values and Adjusted Tax Basis of the assets of the Company immediately following the Contribution and shall deliver a schedule containing such information to each Member by March 31, 2010.

Section 4.4 Company Equity Compensation Plan . The Board of Managers may, subject to Section 7.1, adopt a plan pursuant to which (a) Units or securities derivative of or convertible into Units may be issued from time to time to Persons who provide services to the Company for such consideration, if any, as the Board of Managers may determine to be appropriate, and (b) such Persons may be admitted as Members. The terms and conditions of such plan and the equity securities issuable thereunder shall be as determined by the Board of Managers.

Section 4.5 Record Holders . The Company shall be entitled to treat the Person in whose name any Company Security stands on the books of the Company as the absolute owner thereof, and as a Member of the Company holding the Membership Interest evidenced thereby. The Company shall not be bound to recognize any equitable or other claim to, or interest in, such Company Security on the part of any other Person, whether or not the Company has express or other notice of such claim.

Section 4.6 Capital Accounts .

(a) The Company shall establish and maintain a Capital Account for each Member in accordance with the provisions of Section 704(b) of the Code and the Regulations thereunder.

(b) Each Member’s Capital Account shall be maintained in accordance with the following provisions:

(i) On the date hereof, each Member’s Capital Account shall be credited with the amount of the Capital Contribution it has made or is deemed to have made with respect to such class of Membership Interest pursuant to Section 4.2;

(ii) Each such Capital Account shall thereafter be credited with the amounts of such Member’s Capital Contributions, such Member’s distributive share of Profits and any items in the nature of income or gain which are specially allocated to such Member pursuant to Article V, and the amount of any liabilities of the Company assumed by such Member or which are secured by any property distributed by the Company to such Member;

(iii) Each such Capital Account shall thereafter be charged with the amounts of cash and the Carrying Value of any property distributed by the Company to such Member pursuant to any provision of this Agreement, and charged with such Member’s distributive share of Losses and any items in the nature of expenses or losses which are specially allocated to the Member pursuant to Article V, and the amount of any liabilities of such Member assumed by the Company or which are secured by any property contributed by such Member to the Company;

 

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(iv) If all or a portion of a Member’s Membership Interest is Transferred in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the Transferred Membership Interest; and

(v) In determining the amount of any liability for purposes of this Section, Section 752(c) of the Code and any other applicable provisions of the Code and Regulations shall be taken into account.

This Section and other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner consistent with such Regulations. If the Board of Managers determines that it is prudent to modify the manner in which the Capital Accounts, or any charges or credits thereto (including charges or credits relating to liabilities which are secured by contributions or distributed property or which are assumed by the Company or by Members), are computed in order to comply with such Regulations, the Board of Managers may make such modification. The Board of Managers also shall make any adjustments that may be necessary or appropriate to maintain equality between the Capital Accounts of the Membership Interests and the amount of capital reflected on the Company’s balance sheet, as computed for book purposes, in accordance with Regulations Section 1.704-1(b)(2)(iv)(q), and make any appropriate modifications in the event unanticipated events might otherwise cause this Agreement not to comply with Regulations Section 1.704-1(b).

Section 4.7 No Interest on Capital Contributions . Members shall not be paid interest on their Capital Contributions.

Section 4.8 Return of Capital Contributions . No Member or Assignee shall be entitled to demand the return of the Member’s Capital Account or Capital Contribution at any particular time, except upon dissolution of the Company. No Member or Assignee shall be entitled at any time to demand or receive property other than cash.

Section 4.9 No Third Party Beneficiary Rights . The provisions of this Section are not intended to be for the benefit of any creditor or any other Person (other than a Member in its capacity as such) to whom any debts, liabilities or obligations are owed by (or who otherwise has any claim against) the Company or any of the Members; and no such creditor or other Person shall obtain any right under any of such provisions or shall by reason of any of such provisions make any claim in respect of any debt, liability or obligation (or otherwise) against the Company or any of the Members.

ARTICLE V

DISTRIBUTIONS AND ALLOCATIONS

Section 5.1 Distributions . The amount and timing of all distributions of Available Cash from Operations and Available Cash from Capital Transactions to Members shall be at the discretion of the Board of Managers; provided that, to the extent of Available Cash from

 

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Operations and Available Cash from Capital Transactions, (a) an amount of cash equal to any Debt Service Distribution shall be distributed to Parent, and (b) an amount of cash equal to the First Level Distribution shall be distributed at least annually with respect to each Fiscal Year within ninety (90) days after the end of the Fiscal Year. The Debt Service Distributions and the Voluntary Debt Service Distributions shall be distributed to Parent for the sole purpose of satisfying Parent’s payment obligations under the Contingent Convertible Notes and the Junior Subordinated Notes, as applicable, and no portion of these distributions shall be made to any Member other than Parent. All other distributions of Available Cash from Operations and Available Cash from Capital Transactions, including the First Level Distribution, shall be made to the Members pro rata based on their respective Percentage Interests. Notwithstanding the foregoing, other than distributions provided for in subsections (a) and (b) of this Section 5.1, no distributions shall be made pursuant to this Section 5.1 during the existence of an event of default under the Contingent Convertible Notes or the Junior Subordinated Notes. The Board of Managers may distribute First Level Distributions in quarterly installments on an estimated basis prior to the end of a Fiscal Year, but if the amounts distributed by the Company as estimated quarterly First Level Distributions with respect to a Fiscal Year exceed the greater of (1) the amount of First Level Distributions to which the Members are entitled for such Fiscal Year; or (2) the total amount of distributions to which the Members are entitled in such Fiscal Year; each Member will, within fifteen (15) days after the Member’s federal income tax return for such Fiscal Year is filed, return such excess to the Company and such excess will be treated as a distribution to such Member until it is returned.

Section 5.2 Determination of Profits and Losses . For purposes of this Agreement, the profit (“Profit”) or loss (“Loss”) of the Company for each Fiscal Year or other period shall be the taxable income or loss of the Company for such Fiscal Year or other period as determined for Federal income tax purposes in accordance with Section 703(a)(1) of the Code (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Section 703(a)(1) shall be included in such taxable income or loss), but computed with the following adjustments except to the extent already taken into account in determining taxable income or loss:

(a) by including as an item of gross income any tax-exempt income received by the Company;

(b) by treating as a deductible expense any expenditure of the Company described in Section 705(a)(2)(B) of the Code or treated as described in such Code Section by Regulations Section 1.704-1(b)(2)(iv)(i);

(c) gain or loss resulting from any disposition of Company property shall be computed by reference to the Carrying Value of the property disposed of, rather than its Adjusted Basis, and in lieu of depreciation, amortization or cost recovery deduction, there shall be taken into account the Depreciation, as determined hereunder;

(d) in the event the Carrying Value of an asset of the Company is adjusted pursuant to clauses (ii) or (iii) of the definition thereof, the amount of such adjustment shall be taken into account as gain or loss from the disposition of such asset for purposes of computing Profit or Loss;

 

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(e) to the extent an adjustment to the Adjusted Basis of any asset of the Company pursuant to Sections 734(b) or 743(b) of the Code is required by Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining Capital Accounts as a result of a distribution other than in complete liquidation of a Member’s Membership Interest, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the Adjusted Basis of the asset) or loss (if the adjustment decreases the Adjusted Basis of the asset) from the disposition of the asset and shall be taken into account for purposes of computing Profit or Loss; and

(f) after making the special allocations required by Section 5.9.

Section 5.3 Allocation of Profits . The Profit of the Company for each Fiscal Year in which the Company has a Profit shall be allocated among, and credited to the Capital Accounts of, the Members in accordance with their Percentage Interests.

Section 5.4 Allocation of Losses . The Loss of the Company for each Fiscal Year in which the Company has a Loss shall be allocated among, and charged to the Capital Accounts of, the Members in accordance with their Percentage Interests.

Section 5.5 [Intentionally Omitted] .

Section 5.6 Income Tax Allocations .

(a) Except as otherwise provided in this Section 5.6, for purposes of Sections 702 and 704 of the Code, or the corresponding sections of any future Federal internal revenue law, or any similar tax law of any state or other jurisdiction, the Company’s profits, gains and losses for Federal income tax purposes, and each item of income, gain, loss or deduction entering into the computation thereof; shall be allocated among the Members in the same proportions as the corresponding “book” items are allocated pursuant to this Section.

(b) Notwithstanding Section 5.6(a), each item of taxable income, gain, loss or deduction attributable to any property of the Company or the Subsidiary contributed by a Member, or the Carrying Value of which has been adjusted pursuant to clause (ii) of the definition of Carrying Value, shall be allocated among the Members in accordance with Section 704(c) of the Code, using such method permitted by Section 704(c) of the Code and the Regulations thereunder as may be reasonably selected by the Tax Matters Partner, on the advice of the Company’s independent accountants, so as to take into account the variation, at the time of contribution or adjustment to Carrying Value, between the Adjusted Basis and the Carrying Value of such property, as required by Regulations Section 1.704-1(b)(4)(i) and Section 1.704-3.

(c) If any portion of the Profit from a Capital Transaction allocated among the Members is characterized as ordinary income under the recapture provisions of the Code or is subject to a different rate of tax under the Code, each Member’s distributive share of taxable gain from the sale of the property that gave rise to such Profit (to the extent possible) shall include a proportionate share of the recapture income or income that is subject to a different rate of tax equal to that Member’s share of prior cumulative depreciation deductions with respect to the property that give rise to the recapture income or the income that is subject to a different rate of tax.

 

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Section 5.7 Transfers During Fiscal Year . In the event of the Transfer of all or any part of a Membership Interest (in accordance with the provisions of this Agreement) at any time other than the end of a Fiscal Year, the share of Profit or Loss (in respect of the Membership Interest so Transferred) shall be allocated between the transferor and the transferee in the same ratio as the number of days in the Fiscal Year before and after such Transfer; provided, however, that the Company may elect to allocate Profit and Loss with respect to the Membership Interest so transferred by closing the books of the Company on the date of the Transfer and allocating the Profit and Loss with respect to the Membership Interest so transferred as if the taxable year of the Company consisted of two separate taxable years. This Section shall not apply to Profit or Loss from Capital Transactions or to other extraordinary nonrecurring items. Profit and Loss from Capital Transactions shall be allocated on the basis of the Members’ Percentage Interests on the date of closing of the sale and extraordinary or nonrecurring items of gain or loss shall be allocated on the basis of the Members’ Percentage Interests on the date the gain is realized or the loss incurred, as the case may be.

Section 5.8 Amortization and Allocation of Organization Expenses . The Company elected to amortize over a period of 180 calendar months all Organization Expenses in accordance with the provisions of Section 709(b) of the Code, and all start-up expenses in accordance with the provisions of Section 195 of the Code.

Section 5.9 Special Allocations to Comply with Section 704 Regulations .

(a) Minimum Gain Chargeback - Nonrecourse Liability . Except as otherwise provided in Regulations Section 1.704-2(f), if there is a net decrease in the Minimum Gain on Nonrecourse Liability during any Fiscal Year, the Members shall be allocated items of income and gain for the Fiscal Year, before any other allocation of Company items described in Code Section 704(b) is made for the Fiscal Year (and, if necessary subsequent Fiscal Years), in the amounts and in the proportions required by Regulations Sections 1.704-2(f) and 1.704-2(j)(2)(i). The allocations referred to in this paragraph shall be interpreted and applied to satisfy the requirements of Regulations Section 1.704-2(f).

(b) Minimum Gain Chargeback - Member Nonrecourse Debt . Except as otherwise provided in Regulations Section 1.704-2(i)(4), if there is a decrease in the Minimum Gain on Member Nonrecourse Debt during a Fiscal Year, then any Member who has a share of the Minimum Gain on Member Nonrecourse Debt at the beginning of the Fiscal Year shall be allocated items of income and gain for the Fiscal Year, before any other allocation of Company items described in Code Section 704(b) is made for the Fiscal Year (and, if necessary, subsequent Fiscal Years), in the amounts and in the proportions required by Regulations Sections 1.704-2(i)(4) and 1.704-2(j)(2)(ii). The allocations referred to in this paragraph shall be interpreted and applied to satisfy the requirements of Regulations Section 1.704-2(i)(4).

(c) General Rule . If any Member unexpectedly receives any adjustments, allocations or distributions described in clauses (4), (5) or (6) of Regulations Section 1.704-1(b)(2)(ii)(d), items of Company income and gain shall be specially allocated to such Member in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulations, the Adjusted Capital Account Deficit of the Member as quickly as possible. This Section is intended to constitute a “qualified income offset” within the meaning of Regulation Section 1.704-1(b)(2)(ii)(d)(3) and shall be interpreted accordingly.

 

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(d) Member Nonrecourse Debt Deductions . Member Nonrecourse Deductions with respect to Member Nonrecourse Debt shall be specially allocated among the Member or Members who bear the economic risk of loss with respect to such Member Nonrecourse Debt in the amounts and in the proportions required by Regulations Section 1.704(2)(i)(1). The allocations referred to in this subsection shall be interpreted and applied to satisfy the requirements of Regulations Section 1.704-2(i).

(e) Gross Income Allocation . Each Member who has an Adjusted Capital Account Deficit at the end of any Fiscal Year shall be specially allocated items of Company income and gain in the amount of such excess as quickly as possible, provided that an allocation pursuant to this Section shall be made only if and to the extent that such Member would have an Adjusted Capital Account Deficit after all other allocations provided for in this Article V have been made as if this Section were not a part of this Agreement.

(f) Section 754 Adjustments . In any case where an adjustment to the Adjusted Basis of any Company asset pursuant to Sections 734(b) or 743(b) of the Code is required (pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(2) or Regulations 1.704-1(b)(2)(iv)(m)(4)), to be taken into account in determining Capital Accounts because of a distribution to a Member in complete liquidation of the Member’s interest in the Company, the amount of such adjustment to Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis), and such gain or loss shall be specially allocated among the Members in accordance with their interests in the Company in the event that (i) Regulations Section 1.704¬1(b)(2)(iv)(m)(2) applies, or (ii) the Members to whom such distribution was made in the event that Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.

(g) Curative Allocations . The term “Regulatory Allocations” shall mean the allocations set forth in subsections (a) through (e). Offsetting special allocations of Company income, gain, loss or deduction shall be made so that after such offsetting allocations are made, each Member’s Capital Account is, to the extent possible, equal to the Capital Account such Member would have had if the Regulatory Allocations were not included in this Agreement.

(h) Winding Up . Upon the winding up of the Company or upon a “book-up” event resulting in an adjustment to the Carrying Value of assets pursuant to paragraph (ii) or (iii) of the definition of Gross Asset Value, Profits and Losses (or items thereof) shall be allocated among the Members to the extent of and in proportion to the amount necessary to cause each such Member’s Capital Account to equal the amount that would be distributed to such Member if liquidating distributions of the Company were made in accordance with Section 5.1(b).

(i) Allocation with Respect to Debt Service Distribution . Parent shall be specially allocated items of gross income and gain for each Fiscal Year until the cumulative items of gross income and gain allocated pursuant to this Section 5.9(i) for the current Fiscal Year and all prior Fiscal Years equal the cumulative Debt Service Distributions and Voluntary Debt Service Distributions made to Parent for the current Fiscal Year and all prior Fiscal Years. The items allocated pursuant to this Section 5.9(i) shall consist first of ordinary income items to the extent ordinary income items are available to allocate.

 

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(j) Allocations with Respect to the Plan . If any Member or Member(s) surrender Units to fund the issuance of any Plan Units, the deduction attributable to the issuance of such Plan Units shall be allocated among the Member or Members who so funded the issuance in accordance with the percentage of Plan Units funded by such Member or Member(s).

Section 5.10 Intentionally Omitted .

Section 5.11 Tax Matters Partner . Parent shall be the “tax matters partner” of the Company pursuant to Section 6231(a)(7) of the Code (the “Tax Matters Partner”). The Tax Matters Partner shall be authorized and required to approve and sign all federal and state income and other tax returns required to be filed by the Company and to represent the Company (at the expense of the Company) in connection with all matters pertaining to any federal, state or local tax issues, including any examinations or audits of the affairs of the Company or the Subsidiary by any taxing authority and any resulting administrative and judicial proceedings, and to expend funds of the Company for professional services and costs associated therewith. The Tax Matters Partner shall take all actions necessary to preserve the rights of the Members with respect to audits and shall provide all Members with notices of all such proceedings and other information as required by law. The Tax Matters Partner shall not consent to extend the statute of limitations with respect to any partnership items of the Company, enter into any settlement agreement with any taxing authority, or file a petition for the readjustment of partnership items (or other similar appeal) without the express, written consent of all of the Members. Notwithstanding the foregoing, no Member waives, and all Members hereby expressly retain, all rights, powers and privileges allowed to them under Sections 6221-6233 of the Code and the Treasury Regulations thereunder, including but not limited to the right to participate in an administrative proceeding and not to be bound by settlement agreements entered into by the Tax Matter Partner. The Tax Matters Partner shall keep the Members timely informed of its activities under this Section and shall show all material income tax returns to the Members at least ten days prior to filing them. The Tax Matters Partner may prepare and file protests or other appropriate responses to such audits. The Tax Matters Partner shall select counsel to represent the Company in connection with any audit conducted by the Internal Revenue Service or by any state or local authority. All costs incurred in connection with the foregoing activities, including legal and accounting costs, shall be borne by the Company. Each Member agrees to cooperate with the Tax Matters Partner and to do or refrain from doing any or all things reasonably required by the Tax Matters Partner in connection with the conduct of all such proceedings.

Section 5.12 Election to be Taxed as Partnership . The Company shall be treated as a partnership for federal income tax purposes. No Member shall cause the Company to elect to be treated other than as a partnership (or shall cause any Subsidiary to be treated other than as a disregarded entity) for federal income tax purposes in accordance with Regulations Section 301.7701-3(c), unless such election is approved in writing by all Members.

Section 5.13 Tax Withholding Distributions . Each Member hereby authorizes the Company to withhold from or pay on behalf of or with respect to such Member any amount of federal, state, local or foreign taxes that the Company determines it is required to withhold with

 

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respect to any amount distributable or allocable to such Member. In the event that the Company is required to deposit or pay any tax on behalf of a Member with respect to the taxable income of the Company allocable to such Member for any Fiscal Year, such deposit or payment shall be treated as an advance recoverable from future distributions of Available Cash from Operations and Available Cash from Capital Transactions to the Member. To the extent that such advances to a Member for a Fiscal Year exceed the sum of Available Cash from Operations and Available Cash from Capital Transactions distributable to the Member for such Fiscal Year, and have not been recovered from any other distributions of Available Cash from Operations or of Available Cash from Capital Transactions, such advances shall be repaid by the Member to the Company promptly on demand.

ARTICLE VI

RIGHTS AND DUTIES OF MEMBERS

Section 6.1 Voting Rights . Each Unit shall entitle the holder thereof to one vote per Unit on any matter submitted to a vote or for the consent of the Members.

Section 6.2 Annual Meetings . There shall be no annual meeting of the Members.

Section 6.3 Special Meetings . Special meetings of the Members may be called by the Board of Managers, the Chairman of the Board of Managers or by a Majority Vote of the Members on at least one day’s notice.

Section 6.4 Quorum; Acts of Members . At all meetings of the Members the presence in person or by proxy of Units representing a majority of the votes entitled to be cast shall constitute a quorum for the transaction of business. Except as otherwise provided in the Act, the Certificate or this Agreement, the affirmative vote of the majority of the voting power of the Units, taken as a single class, present in person or represented by proxy at a meeting and entitled to vote thereat shall be the act of the Members.

Section 6.5 Action by Written Consent . Any action required or permitted to be taken at a meeting of the Members may be taken without a meeting if, prior or subsequent to the action, a consent or consents thereto signed by Members who would have been entitled to cast the minimum number of votes that would be necessary to approve the action at a meeting at which all Members entitled to vote thereon were present and voting is filed with the Company.

Section 6.6 Liability of Members . No Member shall be obligated to make Capital Contributions to the Company except as provided in Section 4.2. No Member shall have any personal liability with respect to the liabilities or obligations of the Company. The failure of the Company to observe any formalities or requirements relating to the exercise of its powers or the management of its business or affairs under this Agreement or the Act shall not be grounds for imposing personal liability on the Members for liabilities or obligations of the Company.

Section 6.7 Indemnification . To the fullest extent permitted by the laws of the State of Delaware, each Member shall be entitled to indemnity from the Company (but not from any other Member) for any act performed by such Member within the scope of the authority conferred on such Member by this Agreement, except for acts of fraud, gross negligence, misrepresentation, breach of fiduciary duty or willful misconduct.

 

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Section 6.8 Outside Activities . Each Member and any Person who is an Affiliate of a Member may engage or hold interests in other business ventures of every kind and description for the Member’s or the Affiliate’s own account, whether or not such business ventures are in direct or indirect competition with the business of the Company and whether or not the Company has any interest therein. Neither the Company nor any of the Members shall have any rights by virtue of this Agreement in such independent business ventures or to the income or profits derived therefrom.

Section 6.9 Prohibition Against Partition . Each Member irrevocably waives any and all rights the Member may have to maintain an action for partition with respect to any property of the Company.

Section 6.10 Issuance of Securities by Parent . Parent shall not issue any additional Common Shares or preferred shares or other interests convertible into or exercisable for Common Shares or preferred shares of Parent (“Other Securities”) unless Parent contributes directly or indirectly the cash proceeds or other consideration, if any, received from the issuance of such additional Common Shares, preferred shares or Other Securities, as the case may be, to the Company in exchange for (x) in the case of an issuance of Common Shares, Units or (y) in the case of an issuance of preferred shares or other securities, units of the Company with designations, preferences and other rights, terms and provisions that are substantially the same as the designations, preferences and other rights, terms and provisions of such preferred shares; provided, however, that notwithstanding the foregoing, Parent may issue Common Shares, preferred shares or Other Securities (a) pursuant to Parent’s equity compensation plans, (b) pursuant to Section 12.2 hereof, (c) pursuant to a dividend or distribution (including any stock split) of Common Shares, preferred shares or Other Securities to all of the holders of Common Shares, preferred shares or Other Securities, as the case may be, or (d) upon a conversion, redemption or exchange of preferred shares. In the event of any issuance of additional Common Shares, preferred shares or Other Securities by Parent, and the direct or indirect contribution to the Company, by Parent, of the cash proceeds or other consideration received from such issuance, any of Parent’s expenses associated with such issuance shall be considered to be a Company expense, including any underwriting discounts or commissions (it being understood that if the proceeds actually received by Parent are less than the gross proceeds of such issuance as a result of any underwriter’s discount or other expenses paid or incurred by Parent in connection with such issuance, then Parent shall be deemed to have made a Capital Contribution to the Company in the amount of the gross proceeds of such issuance and the Company shall be deemed simultaneously to have reimbursed Parent pursuant to Section 6.11 for the amount of such underwriter’s discount or other expenses).

Section 6.11 Reimbursement of Parent .

(a) The Company shall be responsible for and shall pay all expenses relating to the Company’s and Parent’s organization, the ownership of their assets and their operations. Parent is hereby authorized to pay compensation for accounting, administrative, legal, technical, management and other services rendered to the Company. Except to the extent provided in this Agreement, Parent and its Affiliates shall be reimbursed on a monthly basis, or such other basis as Parent may determine in its sole and absolute discretion, for all expenses that Parent and its Affiliates incur relating to the ownership and operation of, or for the benefit of, the Company

 

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(including, without limitation, administrative expenses); provided, that the amount of any such reimbursement shall be reduced by any interest earned by Parent with respect to bank accounts or other instruments or accounts held by it on behalf of the Company. The Members acknowledge that all such expenses of Parent are deemed to be for the benefit of the Company. Such reimbursement shall be in addition to any reimbursement made as a result of indemnification pursuant to Section 7.12 hereof. In the event that certain expenses are incurred for the benefit of the Company and other entities (including Parent), such expenses will be allocated to the Company and such other entities in such a manner as Parent in its sole and absolute discretion deems fair and reasonable. All payments and reimbursements hereunder shall be characterized for federal income tax purposes as expenses of the Company incurred on its behalf, and not as expenses of Parent.

(b) If Parent shall elect to purchase from its stockholders Common Shares for the purpose of delivering such Common Shares to satisfy an obligation under any dividend reinvestment program adopted by Parent, any employee stock purchase plan adopted by Parent or any similar obligation or arrangement undertaken by Parent in the future or for the purpose of retiring such Common Shares, the purchase price paid by Parent for such Common Shares and any other expenses incurred by Parent in connection with such purchase shall be considered expenses of the Company and shall be advanced to Parent or reimbursed to Parent, subject to the condition that: (1) if such Common Shares subsequently are sold by Parent, Parent shall pay or cause to be paid to the Company any proceeds received by Parent for such Common Shares (which sales proceeds shall include the amount of dividends reinvested under any dividend reinvestment or similar program; provided, that a transfer of Common Shares for Units pursuant to Section 12.2 would not be considered a sale for such purposes); and (2) if such Common Shares are not retransferred by Parent within 30 days after the purchase thereof, or Parent otherwise determines not to retransfer such Common Shares, Parent shall cause the Company to redeem a number of Units held by Parent equal to the number of such Company Shares, as adjusted for stock dividends and distributions, stock splits and subdivisions, reverse stock splits and combinations, distributions of rights, warrants or options, and distributions of evidences of indebtedness or assets relating to assets not received by Parent pursuant to a pro rata distribution by the Company (in which case such advancement or reimbursement of expenses shall be treated as having been made as a distribution in redemption of such number of Units held by Parent).

(c) As set forth in Section 3.3, Parent shall be treated as having made a Capital Contribution in the amount of all expenses that Parent incurs relating to Parent’s offering of Common Shares, preferred shares or Other Securities.

Section 6.12 Outside Activities of Parent . Parent shall not directly or indirectly enter into or conduct any business, other than in connection with (a) the ownership, acquisition and disposition of Units, (b) the management of the business of the Company, (c) financing or refinancing of any type related to the Company or its assets or activities, (d) any of the foregoing activities as they relate to a Subsidiary of the Company, and (e) such activities as are incidental thereto. Nothing contained herein shall be deemed to prohibit Parent from executing guarantees of Company debt.

 

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ARTICLE VII

MANAGEMENT OF THE COMPANY

Section 7.1 Management and Control of Business; Authority of Board of Managers . Management of the business and affairs of the Company and the Subsidiaries shall be vested in the Board of Managers, who may exercise all powers of the Company and perform or authorize the performance of all lawful acts which are not by the Act or this Agreement directed or required to be exercised or performed by the Members. The Board of Managers shall consist of three Managers. The initial Managers shall be Daniel G. Cohen, Christopher Ricciardi and Joseph Pooler. Daniel G. Cohen shall be the initial Chairman of the Board of Managers. A Manager may resign at any time for any reason or for no reason. Upon resignation of a Manager, a new Manager shall be elected by the Members by a Majority Vote. A Manager may be removed by the Company upon a Majority Vote. Notwithstanding any other provision of this Agreement, the Company shall not, without receiving advance approval by Parent and a Majority Vote of the Designated Non-Parent Members, if any, take or permit to be taken any of the following actions:

(a) other than as specifically contemplated by the Merger Agreement and this Agreement, issue any Units or other securities of the Company to any Person other than Parent;

(b) other than as specifically contemplated by the Merger Agreement, enter into or suffer a transaction constituting a Company Change of Control;

(c) other than as specifically contemplated by the Merger Agreement, amend this Agreement or the Certificate;

(d) remove Daniel G. Cohen as a Manager or as Chairman of the Board of Managers other than for cause;

(e) adopt an equity compensation plan pursuant to Section 4.4; or

(f) adopt any plan of liquidation or dissolution, or file a certificate of dissolution.

Section 7.2 Meetings . Meetings of the Board of Managers, or any committee thereof, shall be held at such times and places within or without the State of Delaware as the Board of Managers, or any committee thereof, as appropriate, may from time to time appoint or as may be designated in the notice of the meeting. One or more Managers may participate in any meeting of the Board of Managers, or of any committee thereof, by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear one another. Participation in a meeting by such means shall constitute presence in person at the meeting.

Section 7.3 Special Meetings . Special meetings of the Board of Managers may be called by the Chairman on at least one day’s notice to each Manager, either by telephone or in writing. Special meetings shall be called by the Chairman in like manner and on like notice upon the written request of a majority of the Managers in office.

 

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Section 7.4 Quorum . At all meetings of the Board of Managers a majority of the Managers in office shall constitute a quorum for the transaction of business, and the acts of a majority of the Managers present and voting at a meeting at which a quorum is present shall be the acts of the Board of Managers, except as may be otherwise specifically provided by the Act or by this Agreement. At all committee meetings a majority of the committee members in office shall constitute a quorum for the transaction of business, and the acts of a majority of the committee members present and voting at a meeting at which a quorum is present shall be the acts of the committee except as maybe otherwise specifically provided by the Act, by this Agreement or by the resolution establishing the committee.

Section 7.5 Action by Written Consent . Any action required or permitted to be taken at a meeting of the Board of Managers, or any committee thereof, may be taken without a meeting if, prior or subsequent to the action, a consent or consents thereto signed by all of the Managers, or all of the committee members, as appropriate, is filed with the Company.

Section 7.6 Committees . The Board of Managers may, by resolution adopted by a unanimous vote of the Managers, establish one or more committees consisting of one or more Managers as may be deemed appropriate or desirable by the Board of Managers to serve at the pleasure of the Board. Any such committee, to the extent provided in the resolution of the Board of Managers pursuant to which it was created, shall have and may exercise all of the powers and authority of the Board of Managers.

Section 7.7 Compensation . Managers shall not be entitled to receive a salary or other compensation for their services as such. Managers shall be reimbursed for expenses incurred in connection with attending meetings of the Board or any Committee or otherwise incurred in the performance of their duties.

Section 7.8 Officers .

(a) The Company shall have an officer designated as the Company’s Chief Executive Officer who shall be appointed from time to time by the Board of Managers. The Chief Executive Officer of the Company is hereby delegated the power, authority and responsibility of the day-to-day management, administrative, financial and implementive acts of the Company’s business. The Chief Executive Officer of the Company shall have the right and power to bind the Company and to make the final determination on questions relative to the usual and customary daily business decisions, affairs and acts of the Company. Other primary management functions of the Company shall be assigned by the Board of Managers.

(b) The Board of Managers may appoint such other officers as it may deem advisable from time to time. Each officer of the Company shall hold office at the pleasure of the Board of Managers, and the Board of Managers may remove any officer at any time, with or without cause.

 

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Section 7.9 Power of Attorney .

(a) Each Member hereby constitutes and appoints each of the officers of the Company and the Managers, with full power of substitution, as his true and lawful agent and attorney-in-fact, with full power and authority in his name, place and stead, to:

(i) execute, swear to, acknowledge, deliver, file and record in the appropriate public offices (A) all certificates, documents and other instruments (including this Agreement and the Certificate) that the Board of Managers deems necessary or appropriate to form, qualify or continue the existence or qualification of the Company as a limited liability company in the State of Delaware and in all other jurisdictions in which the Company may conduct business or own property; (B) all certificates, documents and other instruments that the Board of Managers deems necessary or appropriate to reflect, in accordance with its terms, any amendment, change, modification or restatement of this Agreement; (c) all certificates, documents and other instruments (including conveyances and a certificate of cancellation) that the Board of Managers deems necessary or appropriate to reflect the dissolution and liquidation of the Company pursuant to the terms of this Agreement; (D) all certificated, documents and other instruments relating to the admission of any Member pursuant hereto; and (E) all certificates, documents and other instruments relating to the determination of the rights, preferences and privileges of any class or series of Company Securities; and

(ii) execute, swear to, acknowledge, deliver, file and record all ballots, consents, approvals, waivers, certificates, documents and other instruments necessary or appropriate, in the discretion of the Board of Managers, to make, evidence, give, confirm or ratify any vote, consent, approval, agreement or other action that is made or given by the Members hereunder or is consistent with the terms of this Agreement or is necessary or appropriate, in the discretion of the Board of Managers, to effectuate the terms or intent of this Agreement.

(b) The foregoing power of attorney is hereby declared to be irrevocable and a power coupled with an interest, and it shall survive and, to the maximum extent permitted by law, not be affected by the subsequent death, incompetency, disability, incapacity, dissolution, bankruptcy or termination of any Member and the transfer of all or any portion of such Member’s Membership Interest and shall extend to such Member’s heirs, successors, assigns and personal representatives. Each Member hereby agrees to be bound by any representation made by an officer of the Company or a Manager acting in good faith pursuant to such power of attorney; and each Member, to the maximum extent permitted by law, hereby waives any and all defenses that may be available to contest, negate or disaffirm the action of an officer of the Company or a Manager taken in good faith under such power of attorney. Each Member shall execute and deliver to the Board of Managers, within 15 days after receipt of the request therefor, such further designation, powers of attorney and other instruments as the Board of Managers deems necessary to effectuate this Agreement and the purposes of the Company.

Section 7.10 Dealing with Related Persons . The Board of Managers, on behalf of the Company or its Subsidiaries, may employ a Member, a Manager or an Affiliate of a Member or a Manager to render or perform a service; may contract to buy property from, or sell property to, any such Member, Manager or Affiliate; or may otherwise deal with any such Member, Manager or Affiliate; provided that any such transaction shall comply with any applicable policies of the Company, shall be fully disclosed to all Members, shall be on terms that are fair and equitable to the Company and shall be no less favorable to the Company than the terms, if any, available from unrelated Persons in an arms-length transaction.

 

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Section 7.11 Conflicts of Interest . Each Manager may at any time and from time to time engage in and possess interests in other business ventures of any and every type and description, independently or with others, except ones in competition with the Company, with no obligation to offer to the Company or any Member or Manager the right to participate therein.

Section 7.12 Exculpation and Indemnification .

(a) The Managers and the officers of the Company shall not be held liable to the Company or to any Member for any loss suffered by the Company unless such loss is caused by such Manager’s or such officer’s gross negligence, willful misconduct or violation of law. The Managers and the officers of the Company shall not be liable for errors in judgment or for any acts or omissions that do not constitute gross negligence, willful and wanton misconduct or violation of law. The Board of Managers and the officers of the Company may consult with counsel and accountants in respect of Company affairs and, provided the Board of Managers and the officers act in good faith reliance upon the advice or opinion of such counsel or accountants, the Managers and the officers shall not be liable for any loss suffered by the Company in reliance thereon.

(b) Subject to the limitations and conditions as provided in this Section, each Person who was or is made a party or is threatened to be made a party to or is involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, arbitrative (hereinafter a “Proceeding”), or any appeal in such a Proceeding or any inquiry or investigation that could lead to such a Proceeding, by reason of the fact that he or she is or was a Manager or an officer of the Company, or while a Manager or officer of the Company is or was serving at the request of the Company as an officer, director, partner, venturer, proprietor, trustee, employee, agent, or similar functionary of another foreign or domestic limited liability company, corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise, shall be indemnified by the Company to the fullest extent permitted by the Act, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than such law permitted the Company to provide prior to such amendment) against judgments, penalties (including excise and similar taxes and punitive damages), fines, settlements and reasonable expenses (including attorneys’ fees) actually incurred by such Person in connection with such Proceeding, and indemnification under this Section shall continue as to a Person who has ceased to serve in the capacity which initially entitled such Person to indemnity hereunder. The rights granted pursuant to this Section shall be deemed contract rights, and no amendment, modification or repeal of this Section shall have the effect of limiting or denying any such rights with respect to actions taken or Proceedings arising prior to any amendment, modification or repeal. It is expressly acknowledged that the indemnification provided in this Section could involve indemnification for negligence or under theories of strict liability.

(c) The right to indemnification conferred in this Section shall include the right to be paid or reimbursed by the Company the expenses incurred by a Person of the type entitled to be indemnified hereunder who was, is or is threatened to be made a named defendant or respondent in a Proceeding in advance of the final disposition of the Proceeding and without any determination as to the Person’s ultimate entitlement to indemnification. Upon request, the

 

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Company shall pay such expenses incurred and to be incurred by any such Person in advance of the final disposition of a Proceeding, upon receipt of an undertaking by such Person to repay all amounts so advanced if it shall ultimately be determined that such Person is not entitled to be indemnified under this Section or otherwise.

(d) The right to indemnification and the advancement and payment of expenses conferred in this Section shall not be exclusive of any other right which a Person may have or hereafter acquire under any law (common or statutory), provision of the Certificate or this Agreement, vote of Members or disinterested Managers or otherwise.

(e) The Company shall purchase and maintain insurance, at its expense, to protect itself and any Person who is or was serving as a Manager or officer or agent of the Company or is or was serving at the request of the Company as a director, officer, partner, venturer, proprietor, trustee, employee, agent or similar functionary of another foreign or domestic limited liability company, corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise against any amounts entitled to be indemnified whether or not the Company would have the power to indemnify such Person against such expense, liability or loss under this Section. In addition, the Company shall also have the right to purchase and maintain a reasonable amount of life insurance on the life of the Managers, officers or other agents of the Company as the Board of Managers deems necessary and appropriate.

(f) If this Section or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify and hold harmless each Manager and officer of the Company or any other Person indemnified pursuant to this Section as to any amounts entitled to be indemnified hereunder to the full extent permitted by any applicable portion of this Section that shall not have been invalidated and to the fullest extent permitted by applicable law.

ARTICLE VIII

BOOKS OF ACCOUNT AND REPORTS; ACCESS TO RECORDS

Section 8.1 Books and Records . The Board of Managers shall keep, or cause to be kept by the Company’s accountants, at the principal place of business of the Company (or at such other place of business or office as the Board of Managers may designate) true and correct books of account, in which shall be entered fully and accurately each and every transaction of the Company and the Subsidiaries. Each Member or its designated agent shall have access at the Company’s office (or at the office of the Company’s accountants) to the Company’s books of account and all other information concerning the Company and the Subsidiaries required by the Act to be made available to Members at reasonable times on Business Days, and may make copies thereof. A Member must give the Company written notice of its desire to exercise rights under the preceding sentence at least 5 Business Days in advance. The Company’s books shall be kept on the accrual method of accounting in accordance with federal income tax accounting principles, consistently applied, and for a fiscal period which is the calendar year. Any Member shall have the right to a private audit of the books and records of the Company, provided such audit is made at the office of the Company (or the Company’s accountants) at which such books and records are located and at the expense of the Member desiring it and is made at reasonable times on Business Days, after written notice given to the Company at least 15 Business Days in advance.

 

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Section 8.2 Reports to Members . The Company shall prepare and deliver to each Member, as promptly as practicable and in any event not later than September 15 following the end of each Fiscal Year, the information (including Form K-1) necessary to enable each Member to complete its federal and state income tax returns for such Fiscal Year. The Company shall provide to each Member (a) no more than 90 days following the close of each fiscal year a balance sheet and related statements of income, cash flows and members’ equity for such Fiscal Year, prepared in accordance with generally accepted accounting principles and reported on by the Company’s independent public accountants, and (b) no more than 45 days following the end of each fiscal quarter, an unaudited balance sheet and the related statements of income, cash flows and Members’ equity for each such fiscal quarter, prepared in accordance with generally accepted accounting principles and on a basis consistent with the annual financial statements.

ARTICLE IX

TRANSFERS OF UNITS

Section 9.1 Conditions of Transfer . Subject to Section 12.1 hereof, no Unit shall be Transferred without the approval of the Board of Managers.

Section 9.2 [Intentionally Omitted] .

Section 9.3 [Intentionally Omitted] .

Section 9.4 Transfers to Family Group, etc . Notwithstanding Section 9.1, a Member may Transfer all or any of its Units without the requirement of obtaining the approval of the Board of Managers (a) to the Member’s Family Group, (b) in the case of death of the Member, by will or the laws of descent and distribution, or (c) in accordance with Section 12.2; provided that any transferee pursuant to clauses (a) or (b) above shall automatically be bound by the terms of this Agreement and shall be required as a condition precedent to the consummation of such Transfer to join in and execute and deliver a copy of this Agreement to the Members as a party to this Agreement.

Section 9.5 Non-Complying Transfers Void . Any attempted Transfer of all or any Units that does not comply with this Article IX shall be null and void and of no legal effect.

ARTICLE X

ADMISSION OF ASSIGNEES

Section 10.1 Rights of Assignees . Except as provided in Section 10.2, the Assignee of a Membership Interest has no right to become a Member. The Assignee’s only rights are the economic rights allocable to the Transferred Membership Interest.

Section 10.2 Admission of Assignee as a Member . An Assignee shall be admitted as a Member with all rights of the Member who initially Transferred the Membership Interest to the Assignee, but only if (i) the Member who initially Transferred the Membership Interest so provides in the instrument of Transfer, (ii) except as provided in Section 9.4 hereof, the Board of

 

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Managers consents to the admission of the Assignee as a Member and (iii) the Assignee agrees in writing to be bound by this Agreement. An Assignee who is admitted as a Member shall be a Member of the same class of Member as the Member who initially Transferred the Membership Interest and shall have all the rights and powers and be subject to all the restrictions and liabilities of the Member who originally Transferred the Membership Interest. The admission of the Assignee as a Member, without more, shall not release the Member who originally Transferred the Membership Interest from any liability to the Company that exists before such admission.

ARTICLE XI

DISSOLUTION OF COMPANY

Section 11.1 Events Causing Dissolution . Subject to Section 7.1 hereof, the Company shall be dissolved and its affairs wound up upon the occurrence of any of the following events:

(a) the sale, exchange, or other disposition by the Company of all or substantially all of its assets; or

(b) the vote of Parent and a Majority Vote of the Designated Non-Parent Members to dissolve the Company.

The Company shall not be dissolved by the death, resignation, withdrawal, bankruptcy or dissolution of a Member.

Section 11.2 Winding Up . If the Company is dissolved, then the Board of Managers shall proceed with dispatch and without any unnecessary delay to sell or otherwise liquidate all property of the Company. Any act or event (including the passage of time) causing a dissolution of the Company shall in no way affect the validity of, or shorten the term of, any lease, deed of trust, mortgage, contract or other obligation entered into by or on behalf of the Company. The full rights, powers and authorities of the Board of Managers shall continue so long as appropriate and necessary to complete the process of winding up the business and affairs of the Company.

Section 11.3 Application of Assets in Winding Up . In winding up the Company, after paying or making provision for payment of all of its liabilities and the expenses of winding up, the remaining net proceeds and liquid assets shall be distributed among the Members to the extent of and in proportion to the Members respective positive Capital Account balances (after giving effect to all contributions, distributions and allocations for all periods).

Section 11.4 Negative Capital Accounts . No Member shall be obligated to restore or repay any negative balance in such Member’s Capital Account at any time or for any reason.

Section 11.5 Termination . The Company shall terminate, except for the purpose of suits, other proceedings, and appropriate action as provided in the Act, when all of its property shall have been disposed of and the net proceeds and liquid assets, after satisfaction of liabilities to Company creditors, shall have been distributed among the Members. As soon as practicable after the termination of the Company, the Board of Managers shall cause a certificate of cancellation to be filed with the Secretary of State. The Board of Managers shall have authority to distribute any Company property discovered after dissolution, convey real estate, and take such other action as may be necessary on behalf of and in the name of the Company.

 

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ARTICLE XII

CERTAIN ACTIONS OF PARENT; REDEMPTION OF UNITS

Section 12.1 Actions of Parent . As of the Effective Time (as defined in the Merger Agreement) and until such time as the Series A Preferred Stock is converted into Series B Preferred Stock, if there is any Designated Non-Parent Member, Parent agrees that Parent shall not, without receiving advance approval by a Majority Vote of the Designated Non-Parent Members, take any of the following actions:

(a) other than as specifically contemplated by the Merger Agreement or this Agreement, issue any additional securities of Parent or permit any Subsidiaries of Parent other than the Company and other than Subsidiaries formed to engage in securitization transactions to issue any additional securities;

(b) other than as specifically contemplated by the Merger Agreement, enter into or suffer a transaction constituting a Parent Change of Control;

(c) other than as specifically contemplated by the Merger Agreement, amend Parent’s certificate of incorporation or bylaws in any manner which adversely affects the rights of the Non-Parent Members under Section 12.2;

(d) adopt any plan of liquidation or dissolution, or file a certificate of dissolution; or

(e) directly or indirectly, enter into or conduct any business other than the ownership of Units, the ownership of the TruPS Subsidiaries, the management of the business of the Company, the satisfaction of obligations under the Contingent Convertible Notes or the Junior Subordinated Notes, and such other activities as are reasonably required in connection with the ownership of Units and the management of the business of the Company.

Section 12.2 Redemption of Units .

(a) Subsequent to June 16, 2010 (the “Redemption Date”), each Non-Parent Member shall have the right (subject to the terms and conditions set forth herein) to require the Company to redeem all or a portion of the Units held by such Non-Parent Member (such Units being hereafter referred to as “Tendered Units”) in exchange for the Cash Amount (a “Redemption”); provided, however, if such Member is Daniel G. Cohen, an Affiliate of Daniel G. Cohen or a member of Daniel G. Cohen’s Family Group, such Redemption right shall only be exercisable after December 31, 2012. The tendering Non-Parent Member shall have no right, with respect to any Units so redeemed, to receive any distributions paid on or after the Specified Redemption Date. Any Redemption shall be exercised pursuant to a Notice of Redemption delivered to Parent and the Company by the Non-Parent Member who is exercising the right (the “Tendering Member”). The Cash Amount shall be payable to the Tendering Member on the Specified Redemption Date.

 

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(b) Notwithstanding Section 12.2(a) above, if a Non-Parent Member has delivered to Parent and the Company a Notice of Redemption then the Parent may, in its sole and absolute discretion elect to assume and satisfy the Company’s Redemption obligation and acquire some or all of the Tendered Units from the Tendering Member in exchange for the Common Shares Amount (as of the Specified Redemption Date) and, if Parent so elects, the Tendering Member shall sell the Tendered Units to Parent in exchange for the Common Shares Amount. In such event, the Tendering Member shall have no right to cause the Company to redeem such Tendered Units. Parent shall give such Tendering Member written notice of its election on or before the close of business on the fifth Business Day after its receipt of the Notice of Redemption, and the Tendering Member may elect to withdraw its redemption request at any time prior to the acceptance of the Cash Amount or Common Shares Amount by such Tendering Member.

(c) The Common Shares Amount, if applicable, shall be delivered as duly authorized, validly issued, fully paid and nonassessable Common Shares and, if applicable, free of any pledge, lien, encumbrance or restriction, other than those provided in the charter or the bylaws of Parent, the Securities Act of 1933, as amended, relevant state securities or blue sky laws and any applicable registration rights agreement with respect to such Common Shares entered into by the Tendering Member. Notwithstanding any delay in such delivery (but subject to Section 12.2(e)), the Tendering Member shall be deemed the owner of such Common Shares for all purposes, including without limitation, rights to vote or consent, and receive dividends, as of the Specified Redemption Date.

(d) Each Non-Parent Member covenants and agrees that all Tendered Units shall be delivered free and clear of all liens, claims and encumbrances whatsoever and should any such liens, claims and/or encumbrances exist or arise with respect to such Tendered Units, Parent or the Company, as the case may be, shall be under no obligation to acquire the same. Each Non-Parent Member further agrees that, in the event any state or local property transfer tax is payable as a result of the transfer of its Tendered Units to Parent or the Company, as the case may be, such Non-Parent Member shall assume and pay such transfer tax.

(e) Notwithstanding anything herein to the contrary, with respect to any Redemption or exchange for Common Shares pursuant to this Section 12.2: (i) without the consent of the Board of Managers, each Non-Parent Member may not effect a Redemption for less than 100 Units or, if the Non-Parent Member holds less than 100 Units, less than all of the Units held by such Non-Parent Member; (ii) the consummation of any Redemption or exchange for Common Shares shall be subject to the expiration or termination of the applicable waiting period, if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended; and (vi) each Tendering Member shall continue to own all Units subject to any Redemption or exchange for Common Shares, and be treated as a Non-Parent Member with respect to such Units for all purposes of this Agreement, until such Units are transferred to Parent or the Company, as the case may be, and paid for or exchanged on the Specified Redemption Date. Until a Specified Redemption Date, the Tendering Member shall have no rights as a stockholder of Parent with respect to such Tendering Member’s Units.

(f) In the event that the Company issues additional Units to any Person who is admitted to the Company as a Member pursuant to the terms of this Agreement, the Board of Managers may make such revisions to this Section 12.2 as it determines are necessary to reflect the issuance of such additional Units.

 

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(g) Notwithstanding anything herein to the contrary, upon the occurrence of a Parent Change of Control or Company Change Control, each Non-Parent Member may cause a Redemption immediately prior to such event.

(h) Notwithstanding any other provision of this Section 12.2, Plan Units shall not be subject to the Redemption rights set forth in this Section 12.2.

(i) Resale Registration Statement .

(i) Parent agrees to file with the Securities and Exchange Commission a registration statement on Form S-3 (if and to the extent that Parent is then eligible to use such form) under Rule 415 of the Securities Act (the “Registration Statement”) covering the resale by Non-Parent Members of Common Shares issued by Parent in accordance with this Section 12.2. Parent will use its commercially reasonable efforts to have the Registration Statement declared effective under the Securities Act as soon as practicable following the Redemption Date. From June 1, 2010 through the Redemption Date, each Non-Parent Member shall notify Parent of its request to have any Common Shares that may be issued by Parent in accordance with this Section 12.2 covered by the Registration Statement. If a Non-Parent Member fails to provide such notice, Parent shall have no obligation to include such Common Shares in the Registration Statement. Parent may file one Registration Statement covering the resale of Common Shares issued by it in accordance with this Section 12.2 to more than one Non-Parent Member. Parent further agrees to supplement or make amendments to the Registration Statement, if required by the rules, regulations or instructions applicable to the registration form utilized by Parent or by the Securities Act or rules and regulations thereunder for such Registration Statement.

(ii) Parent shall cause the Common Shares issued by it in accordance with this Section 12.2 to be listed on each securities exchange and trading system on which similar securities issued by Parent are then listed.

(iii) Notwithstanding the foregoing, Parent shall not be required to file any Registration Statement if Parent is not eligible to use Form S-3 for such purpose on the Redemption Date and through the date on which the Registration Statement is declared effective and Parent shall not be required to maintain the effectiveness of the Registration Statement relating to Common Shares issued by Parent in accordance with this Section 12.2 after, in each case, the earlier of (a) first date upon which, in the opinion of counsel to Parent, all of the Common Shares covered thereby could be sold by the holders thereof in any period of three months pursuant to Rule 144 under the Securities Act, or any successor rule thereto, (b) the date on which Parent becomes ineligible to use Form S-3, or (c) December 31, 2010 .

Section 12.3 Member Conversion .

(a) At any time, a Member shall have the right (subject to the terms and conditions set forth herein) to convert all, but not less than all, Plan Units held by such Member for the Plan Common Shares Conversion Amount (a “Conversion”). The Member shall have no right, with respect to any Plan Units so converted, to receive any distributions paid on or after the

 

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Specified Conversion Date. Any Conversion shall be exercised pursuant to a Notice of Conversion delivered to Parent by Member. In connection with a Conversion, Parent shall receive all of the Plan Units from the Member in exchange for the Plan Common Shares Conversion Amount (as of the Specified Conversion Date).

(b) The Plan Common Shares Conversion Amount shall be delivered as duly authorized, validly issued, fully paid and nonassessable Common Shares and, if applicable, free of any pledge, lien, encumbrance or restriction, other than those provided in the charter or the bylaws of Parent, the Securities Act of 1933, as amended, relevant state securities or blue sky laws and any applicable registration rights agreement with respect to such Common Shares entered into by the Member. Notwithstanding any delay in such delivery (but subject to Section 12.3(d)), the Member shall be deemed the owner of such Common Shares for all purposes, including without limitation, rights to vote or consent, and receive dividends, as of the Specified Conversion Date.

(c) Each Member covenants and agrees that all Plan Units shall be delivered free and clear of all liens, claims and encumbrances whatsoever and should any such liens, claims and/or encumbrances exist or arise with respect to such Plan Units, Parent or the Company, as the case may be, shall be under no obligation to acquire the same. Each Member further agrees that, in the event any state or local property transfer tax is payable as a result of the transfer of its Plan Units to Parent, such Member shall assume and pay such transfer tax.

(d) Notwithstanding anything herein to the contrary, with respect to any Conversion pursuant to this Section 12.3, (i) the consummation of any Conversion shall be subject to the expiration or termination of the applicable waiting period, if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended; and (ii) each Member shall continue to own all Plan Units subject to any Conversion, and be treated as a Member with respect to such Plan Units for all purposes of this Agreement, until such Plan Units are transferred to Parent or the Company, as the case may be, and paid for or exchanged on the Specified Conversion Date. Until a Specified Conversion Date, the Member shall have no rights as a stockholder of Parent with respect to such Member’s Plan Units.

Section 12.4 Parent Forced Conversion .

(a) At any time, Parent shall have the right (subject to the terms and conditions set forth herein) to force the conversion of all Plan Units held by a Member in exchange for the Plan Common Shares Conversion Amount (a “Forced Conversion”). The Member shall have no right, with respect to any Plan Units so converted, to receive any distributions paid on or after the Specified Conversion Date. Any Forced Conversion shall be exercised pursuant to a Notice of Forced Conversion delivered to Member by Parent. In connection with a Forced Conversion, Parent shall receive all of the Plan Units from the Member in exchange for the Plan Common Shares Conversion Amount (as of the Specified Conversion Date).

(b) The Plan Common Shares Conversion Amount shall be delivered as duly authorized, validly issued, fully paid and nonassessable Common Shares and, if applicable, free of any pledge, lien, encumbrance or restriction, other than those provided in the charter or the

 

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bylaws of Parent, the Securities Act of 1933, as amended, relevant state securities or blue sky laws and any applicable registration rights agreement with respect to such Common Shares entered into by the Member. Notwithstanding any delay in such delivery (but subject to Section 12.4(d)), the Member shall be deemed the owner of such Common Shares for all purposes, including without limitation, rights to vote or consent, and receive dividends, as of the Specified Conversion Date.

(c) Each Member covenants and agrees that all Plan Units shall be delivered free and clear of all liens, claims and encumbrances whatsoever and should any such liens, claims and/or encumbrances exist or arise with respect to such Plan Units, Parent or the Company, as the case may be, shall be under no obligation to acquire the same. Each Member further agrees that, in the event any state or local property transfer tax is payable as a result of the transfer of its Plan Units to Parent, such Member shall assume and pay such transfer tax.

(d) Notwithstanding anything herein to the contrary, with respect to any Forced Conversion pursuant to this Section 12.4, (i) the consummation of any Forced Conversion shall be subject to the expiration or termination of the applicable waiting period, if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended; and (ii) each Member shall continue to own all Plan Units subject to any Forced Conversion, and be treated as a Member with respect to such Plan Units for all purposes of this Agreement, until such Plan Units are transferred to Parent or the Company, as the case may be, and paid for or exchanged on the Specified Conversion Date. Until a Specified Conversion Date, the Member shall have no rights as a stockholder of Parent with respect to such Member’s Plan Units.

ARTICLE XIII

MISCELLANEOUS PROVISIONS

Section 13.1 Notices .

(a) To Members or Managers . Any notice of a meeting or for any other purpose required to be given to a Manager individually or to a Member under the provisions of this Agreement or by the Act shall be given either personally or by sending a copy thereof:

(i) by first class or express mail, postage prepaid, or courier service, charges prepaid, to the postal address of the Person appearing on the books of the Company or, in the case of Managers, supplied by the Manager to the Company for the purposes of notice. Notice pursuant to this paragraph shall be deemed to have been given to the Person entitled thereto when deposited in the United States mail or with a courier service for delivery to that Person.

(ii) by facsimile transmission, e-mail, or other electronic communication to the Person’s facsimile number or address for e-mail or other electronic communications supplied by the Person to the Company for the purpose of notice. Notice pursuant to this paragraph shall be deemed to have been given to the Person entitled thereto when sent.

 

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Section 13.3 To the Board of Managers or the Company . Any notice to the Company or the Board of Managers must be given to the Board of Managers at the principal place of business of the Company.

Section 13.4 Integration . This Agreement sets forth all (and is intended by all parties hereto to be an integration of all) of the promises, agreements, conditions, understandings, warranties and representations among the parties hereto with respect to the Company, the Company business and the property of the Company, and there are no promises, agreements, conditions, understanding, warranties, or representations, oral or written, express or implied, among them other than as set forth herein or in the agreements noted above. Notwithstanding the foregoing, certain Members are or will be a party to a senior management agreement between the Company and such Member. To the extent that any provisions of this Agreement conflict with such Member’s senior management agreement (including, without limitation, terms relating to the transfer of Units), the terms of such Member’s senior management agreement shall control.

Section 13.5 Governing Law . It is the intention of the parties that all questions with respect to the construction of this Agreement and the rights and liabilities of the parties hereto shall be determined in accordance with the laws of the State of Delaware.

Section 13.6 Binding Effect . This Agreement shall be binding upon, and inure to the benefit of, the parties hereto and their respective personal and legal representatives, successors and assigns.

Section 13.7 Counterparts . This Agreement may be executed in any number of counterparts and it shall not be necessary that each party to this Agreement execute each counterpart. Each counterpart so executed (or, if all parties do not sign on the same counterpart, each group of counterparts signed by all parties) shall be deemed to be an original, but all such counterparts together shall constitute one and the same instrument. In making proof of this Agreement, it shall not be necessary to account for more than one counterpart or group of counterparts signed by all parties.

Section 13.8 Assurances . Each Member shall execute all certificates and other documents and shall do all such filing, recording, publishing, and other acts as the Board of Managers deems appropriate to comply with the requirements of the Act for the formation and operation of the Company and to comply with any laws, rules, and regulations relating to the acquisition, operation, or holding of the property of the Company.

Section 13.9 Jurisdiction and Venue . Any suit involving any dispute or matter arising under this Agreement may only be brought in the Delaware Court of Chancery. All Members hereby consent to the exercise of personal jurisdiction by the Delaware Court of Chancery with respect to any such proceeding.

Section 13.10 Amendments . Subject to Section 7.1 hereof, this Agreement may be amended from time to time by a written instrument that has been agreed upon by each of the Members.

 

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IN WITNESS WHEREOF, the undersigned parties have this Agreement at the foot hereof or on the separate signature pages attached hereto as of the day and year first above written.

 

Cohen & Company Inc.
By:  

/s/ CHRISTOPHER RICCIARDI

Name:   Christopher Ricciardi
Title:   President


Cohen Bros. Financial, LLC
By:  

/s/ DANIEL G. COHEN

Name :   Daniel G. Cohen
Title:   Managing Member


SCHEDULE “A”

Units Ownership Schedule

 

Member Name

   Number of Units    Percentage Interest  

Cohen & Company Inc.

   10,345,283    66.2

Cohen Bros. Financial, LLC

   4,983,557    31.9

The Christopher Ricciardi Irrevocable Retained Annuity Trust

   268,445    1.7

Andrew Hohns

   31,554    0.2
           

Total

   15,628,839    100
           


EXHIBIT “A”

Form Notice of Redemption

 

To:   The Board of Directors of Cohen & Company Inc.
  The Board of Managers of Cohen Brothers, LLC

The undersigned Non-Parent Member hereby tenders (the “ Tendering Member ”) for Redemption an aggregate of              Units in Cohen Brothers, LLC (the “ Company ”) in accordance with the terms of the Amended and Restated Limited Liability Company Agreement, dated as of                  , 2009, as the same may be amended, supplemented and/or restated (the “ Agreement ”), and the redemption rights referred to herein. All capitalized terms used herein and not otherwise defined shall have the same meaning ascribed to them in the Agreement.

The undersigned Tendering Member:

a) undertakes to surrender all rights, title and interest in such Units on the Specified Redemption Date;

b) directs that, pursuant to Section 12.2(b) of the Agreement and at the sole discretion of the Board of Directors of Parent, either (i) a certified check in an amount equal to the Cash Amount, payable on the Specified Redemption Date, be delivered to the name(s) at the address(es) specified below, or (ii) a certificate for Common Shares representing the Common Shares Amount, deliverable on the Specified Redemption Date, be delivered to the name(s) and at the address(es) specified below:

 

Name:  

 

 
Address:  

 

 
 

 

 

c) represents, warrants, certifies and agrees that: (i) the undersigned Tendering Member has, and on the Specified Redemption Date will have, good, marketable and unencumbered title to such Units, free and clear of all liens, claims and encumbrances whatsoever, and (ii) such Redemption is in compliance with the provisions of Section 12.2 in the Agreement;

d) agrees that, in the event any state or local property transfer tax is payable as a result of the transfer of the Units to Parent or the Company, as the case may be, such Tendering Member shall assume and pay such transfer tax; and

e) acknowledges that it will continue to own such Units until the Specified Redemption Date or this Notice of Redemption is withdrawn.

 

Date:  

 

   

 

      Name (Please Print)
     

 

      Signature
      Address:  

 

     

 


EXHIBIT “B”

Form Notice of Conversion

To: Board of Directors of Cohen & Company Inc.

The undersigned hereby elects, effective upon the Specified Conversion Date, to convert              Plan Units of Cohen Brothers, LLC (the “ Company ”), representing all of the undersigned’s Plan Units, in accordance with the terms of the Amended and Restated Limited Liability Company Agreement, dated as of                  , 2009, as the same may be amended, supplemented and/or restated (the “Agreement”), into the Plan Common Shares Conversion Amount pursuant to Section 12.3 of the Agreement. All capitalized terms used herein and not otherwise defined shall have the same meaning ascribed to them in the Agreement.

The undersigned hereby:

a) undertakes to surrender all rights, title and interest in such Plan Units on the Specified Conversion Date;

b) directs that a certificate for Common Shares representing the Plan Common Shares Conversion Amount, deliverable on the Specified Conversion Date, be delivered to the name(s) and at the address(es) specified below:

 

Name:  

 

 
Address:  

 

 
 

 

 

c) represents, warrants, certifies and agrees that: (i) the undersigned has, and on the Specified Conversion Date will have, good, marketable and unencumbered title to such Plan Units, free and clear of all liens, claims and encumbrances whatsoever, and (ii) such Conversion is in compliance with the provisions of Section 12.3 in the Agreement;

d) agrees that, in the event any state or local property transfer tax is payable as a result of the transfer of its Plan Units to Parent, such Member shall assume and pay such transfer tax; and

e) acknowledges that the undersigned will continue to own such Plan Units until the Specified Conversion Date.

 

Date:  

 

   

 

      Name (Please Print)
     

 

      Signature
      Address:  

 

     

 


EXHIBIT “C”

Form Notice of Forced Conversion

To: [INSERT NAME OF MEMBER]

Cohen & Company Inc., a Maryland corporation, hereby exercises its Forced Conversion rights, effective upon the Specified Conversion Date, to convert              Plan Units of Cohen Brothers, LLC (the “ Company ”), representing all of your Plan Units, in accordance with the terms of the Amended and Restated Limited Liability Company Agreement, dated as of                  , 2009, as the same may be amended, supplemented and/or restated (the “Agreement”), into the Plan Common Shares Conversion Amount pursuant to Section 12.4 of the Agreement. All capitalized terms used herein and not otherwise defined shall have the same meaning ascribed to them in the Agreement.

 

Date:  

 

COHEN & COMPANY INC.
By:  

 

Name:  

 

Title:  

 

[ Acknowledgment page follows ]


ACKNOWLEDGEMENT:

The undersigned Member hereby:

a) acknowledges receipt of the Notice of Forced Conversion;

b) undertakes to surrender all rights, title and interest in such Plan Units on the Specified Conversion Date;

c) directs that a certificate for Common Shares representing the Plan Common Shares Conversion Amount, deliverable on the Specified Conversion Date, be delivered to the name(s) and at the address(es) specified below:

 

Name:  

 

 
Address:  

 

 
 

 

 

d) represents, warrants, certifies and agrees that: (i) the undersigned has, and on the Specified Conversion Date will have, good, marketable and unencumbered title to such Plan Units, free and clear of all liens, claims and encumbrances whatsoever, and (ii) such Conversion is in compliance with the provisions of Section 12.3 in the Agreement;

e) agrees that, in the event any state or local property transfer tax is payable as a result of the transfer of its Plan Units to Parent, such Member shall assume and pay such transfer tax; and

f) acknowledges that it will continue to own such Plan Units until the Specified Conversion Date.

 

Date:  

 

   

 

      Name (Please Print)
     

 

      Signature
      Address:  

 

     

 

EXHIBIT 99.1

Alesco Financial Inc. Stockholders Approve Proposed

Transaction with Cohen Brothers, LLC

Philadelphia, PA, December 15, 2009 — Alesco Financial Inc. (NYSE: AFN) today announced that at its annual meeting of stockholders held on December 15, 2009 stockholders approved Alesco’s issuance of shares of common stock and Series A Voting Convertible Preferred Stock that are proposed to be issued in connection with the merger with Cohen Brothers, LLC. In the proposed merger, Alesco Financial Holdings, LLC, a wholly owned subsidiary of Alesco, will merge with and into Cohen Brothers, with Cohen Brothers as the surviving entity and a majority owned subsidiary of Alesco. The merger remains subject to certain closing conditions.

Also at the annual meeting, Alesco stockholders (i) approved a performance-based cash bonus plan, and (ii) elected the following nine directors to serve as members of Alesco’s board of directors until Alesco’s next annual meeting of stockholders and until their successors are duly elected and qualify: Daniel G. Cohen, James J. McEntee, III, Rodney E. Bennett, Marc Chayette, Thomas P. Costello, G. Steven Dawson, Jack Haraburda, Lance Ullom and Charles W. Wolcott.

About Alesco Financial Inc.

Alesco Financial Inc. is a specialty finance REIT headquartered in Philadelphia, Pennsylvania and trades on the New York Stock Exchange under the symbol “AFN”. Alesco is externally managed by Cohen & Company Management, LLC, a subsidiary of Cohen Brothers, a global alternative fixed-income asset manager. For more information, please visit www.alescofinancial.com.

About Cohen & Company

Cohen Brothers, LLC (d/b/a Cohen & Company) is an investment firm specializing in credit related fixed income investments. Through Cohen & Company Securities, LLC, the company also provides institutional broker-dealer services focused on debt securities. With offices in Philadelphia, New York, Chicago, Washington D.C., San Francisco, Boston, Paris, London and Tokyo, Cohen & Company serves a diverse international network of institutional and individual clients. For more information about Cohen & Company, we encourage you to visit www.cohenandcompany.com.

Cautionary Information Regarding Forward-Looking Statements

This press release contains “forward-looking statements” (as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended) by Alesco that are subject to risks and uncertainties. Forward-looking statements are not guarantees and speak only as of the date on which they are made. Alesco does not undertake any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof.

Important Information and Where to Find It

AFN filed with the SEC on November 4, 2009 an amended registration statement on Form S-4, containing a Proxy Statement / Prospectus (“Proxy Statement / Prospectus”) in connection with the proposed merger with Cohen, which was announced on February 20, 2009. Information about AFN’s directors and executive officers and their ownership of AFN’s stock is set forth in the Proxy Statement / Prospectus. INVESTORS ARE URGED TO READ THE PROXY STATEMENT / PROSPECTUS CAREFULLY AND IN ITS ENTIRETY BECAUSE IT CONTAINS IMPORTANT INFORMATION ABOUT AFN, COHEN AND THE PROPOSED MERGER BETWEEN THE TWO COMPANIES. A definitive proxy statement was mailed to AFN’s stockholders. In addition, the Proxy Statement / Prospectus and all other relevant documents filed by AFN with the SEC may be obtained free of charge at the SEC’s website www.sec.gov or from Alesco Financial Inc., Attn: Investor Relations, 2929 Arch Street, 17th Floor, Philadelphia, PA 19104.

Media Inquiries

Joseph Kuo or Michael Herley

Kekst and Company

212-521-4863 or 212-521-4897

joe-kuo@kekst.com or michael-herley@kekst.com

Exhibit 99.2

Alesco Financial Inc. Completes Merger with Cohen Brothers, LLC

Company to Change Name to Cohen & Company Inc.

and Commence Trading on NYSE Amex under “COHN”

Philadelphia, PA, December 16, 2009 — Alesco Financial Inc. (NYSE: AFN) today announced the completion of its merger with Cohen Brothers, LLC, whereby Cohen Brothers became an approximately 66.2% owned subsidiary of Alesco. Prior to the closing of the merger, Alesco completed the previously announced 1-for-10 reverse stock split of the outstanding shares of its common stock. After giving effect to the merger and the 1-for-10 reverse stock split, the total number of company shares outstanding is approximately 10.3 million shares. Upon the closing of the merger transaction, Alesco changed its name to “Cohen & Company Inc.” and its shares are expected to begin trading on the NYSE Amex on December 17, 2009 under the trading symbol “COHN.” The combined company will be a leading investment firm specializing in credit related fixed income investments.

Daniel G. Cohen, Chairman, Chief Executive Officer and Chief Investment Officer of the combined company, stated, “We believe combining Alesco’s capital structure and its public listing with Cohen Brothers’ more diverse revenue sources and operating platform has created a well-capitalized company with increased financial and operational flexibility, an enhanced competitive position, greater opportunities for profitable growth in the future, and a streamlined cost structure.” Christopher Ricciardi, President of the combined company, added, “We believe this merger will provide the combined company with the opportunity to expand its business and pursue growth opportunities in other business areas such as capital markets and asset management.”

Management and Organization

Daniel G. Cohen will serve as Chairman, Chief Executive Officer and Chief Investment Officer of the combined company. In addition, Christopher Ricciardi and Joseph W. Pooler, Jr., both of whom were members of Cohen Brothers’ management team, join the combined company’s management team. Mr. Ricciardi will serve as President of the combined company and Chief Executive Officer of Cohen & Company Securities, LLC, the combined company’s broker-dealer subsidiary. Mr. Pooler will serve as Executive Vice President and Chief Financial Officer of the combined company. The members of the Board of Directors of the combined company will be Walter Beach, Rodney E. Bennett, Marc Chayette, Daniel G. Cohen, Thomas P. Costello, G. Steven Dawson, Joseph Donovan, Jack Haraburda, Lance Ullom and Charles W. Wolcott. Messrs. Beach and Donovan have joined the board as additional independent directors in connection with the completion of the merger. All of the directors other than Mr. Cohen are independent directors.

About the Combined Company

The combined company is a leading investment firm specializing in credit-related fixed income investments and is organized into two primary businesses: Asset Management and Capital Markets. The Asset Management business manages assets through listed and private companies, funds, managed accounts and collateralized debt obligations. As of December 16, 2009, the


combined company managed approximately $16.5 billion in credit-related fixed income assets in a variety of asset classes, including U.S. trust preferred securities, European hybrid capital securities, Asian commercial real estate debt, and mortgage- and asset-backed securities. The Capital Markets business consists of credit-related fixed income sales and trading as well as new issue placements in corporate and securitized products.

Additional Information

Additional information regarding the transaction will be contained in the combined company’s Current Report on Form 8-K to be filed with the Securities and Exchange Commission.

For further information, please visit www.cohenandcompany.com.

Forward Looking Statements

This communication contains certain statements that are “forward-looking statements”. In some cases, forward-looking statements can be identified by the use of forward-looking terminology such as “may,” “might,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negatives thereof or variations thereon or similar terminology. All statements other than statements of historical fact included in this communication are forward-looking statements and are based on various underlying assumptions and expectations and are subject to known and unknown risks, uncertainties and assumptions. These statements are based on our current expectations about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied in our forward-looking statements. These factors include, but are not limited to, those discussed under the heading “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition” in Amendment No. 6 to Alesco’s Registration Statement on Form S-4 as filed with the Securities and Exchange Commission on November 4, 2009. That Form S-4 can be obtained by going to the following web address www.alescofinancial.com/sec-filings. Risk factors include the following: (a) a decline in general economic conditions or the global financial markets, (b) losses caused by financial or other problems experienced by third parties, (c) losses due to unidentified or unanticipated risks, (d) a lack of liquidity, i.e., ready access to funds for use in our businesses, and (e) competitive pressure. As a result, there can be no assurance that the forward-looking statements included in this communication will prove to be accurate or correct. In light of these risks, uncertainties and assumptions, the future performance or events described in the forward-looking statements in this communication might not occur. Accordingly, you should not rely upon forward-looking statements as a prediction of actual results and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. We do not undertake any obligation to, and will not, update any forward-looking statements, whether as a result of new information, future events or otherwise.

 

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Media Inquiries

Joseph Kuo or Michael Herley

Kekst and Company

212-521-4863 or 212-521-4897

joe-kuo@kekst.com or michael-herley@kekst.com

 

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